ORIGINAL FILING ON FORM S-1

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date hereof.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o


(1)	Includes shares representing beneficial interests in Macquarie Infrastructure Assets Trust that may be issued upon exercise of the underwriters’ overallotment option.

(2)	Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(3)	The number of LLC interests of Macquarie Infrastructure Assets LLC registered hereunder is equal to the number of shares representing beneficial interests in Macquarie Infrastructure Assets Trust that are registered hereby. Each share representing one beneficial interest in Macquarie Infrastructure Assets Trust corresponds to one underlying LLC interest of Macquarie Infrastructure Assets LLC. If the trust is dissolved, each share representing a beneficial interest in Macquarie Infrastructure Assets Trust will be exchanged for an LLC interest of Macquarie Infrastructure Assets LLC.

(4)	Pursuant to Rule 457(i) under the Securities Act, no registration fee is payable with respect to the LLC interests of Macquarie Infrastructure Assets LLC because no additional consideration will be received by Macquarie Infrastructure Assets Trust upon exchange of the shares representing beneficial interests in Macquarie Infrastructure Assets Trust.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

This is Macquarie Infrastructure Assets Trust’s initial public offering. We are selling shares, each representing one beneficial interest in the trust. The purpose of the trust is to hold 100% of the interests of Macquarie Infrastructure Assets LLC. Each beneficial interest in the trust corresponds to one interest of Macquarie Infrastructure Assets LLC. In addition, Macquarie Infrastructure Management (USA) Inc., our Manager, has agreed to purchase shares (assuming the offering price is at the midpoint of the range) in a separate private transaction concurrently with this offering.

We expect the public offering price to be between $ and $ per share. Currently, no public market exists for the shares. We intend to apply to list the shares on the New York Stock Exchange or to have the shares quoted on the Nasdaq National Market.

Investing in the shares involves risks that are described in the “Risk Factors” section beginning on page 8 of this prospectus.

The underwriters may also purchase up to an additional shares from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover overallotments.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with different information. If anyone provides you with different information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front of this prospectus. Our business, financial conditions, results of operations and prospects may have changed since that date.

In this prospectus, we rely on and refer to information and statistics regarding market data and the industries of our initial businesses and investments obtained from internal surveys, market research, independent industry publications and other publicly available information, including publicly available information regarding listed stock. Although we believe these sources are reliable, we cannot guarantee the accuracy or completeness of the information and have not independently verified it.

Australian banking regulations that govern the operations of Macquarie Bank Limited and all of its subsidiaries, including our Manager, require the following statements. Investments in Macquarie Infrastructure Assets Trust are not deposits with or other liabilities of Macquarie Bank Limited or of any Macquarie Group company and are subject to investment risk, including possible delays in repayment and loss of income and principal invested. Neither Macquarie Bank Limited nor any other member company of the Macquarie Group guarantees the performance of Macquarie Infrastructure Assets Trust or the repayment of capital from Macquarie Infrastructure Assets Trust.

This summary highlights certain information appearing elsewhere in this prospectus. This summary does not contain all of the information you should consider before buying our shares. For a more complete understanding of this offering, you should read the entire prospectus carefully, including the “Risk Factors” section and the pro forma condensed combined financial statements, the financial statements of our initial businesses and the related notes included in this prospectus.

Macquarie Infrastructure Assets Trust, which we refer to as the trust, will acquire and own its initial businesses and investments through a Delaware limited liability company, Macquarie Infrastructure Assets LLC, which we refer to as the company. Except as otherwise specified, “we,” “us” and “our” refer to both the trust and the company and its subsidiaries together. The company will own the businesses located in the United States through a Delaware corporation and those located outside of the United States through a series of Delaware limited liability companies. Our structure is set forth in the diagram on the facing page. Macquarie Infrastructure Management (USA) Inc., which we refer to as our Manager, is part of the Macquarie Group of companies, which we refer to as the Macquarie Group, which comprises Macquarie Bank Limited and its subsidiaries and affiliates worldwide.

We have been formed to own, operate and invest in a diversified group of infrastructure businesses in the United States and other developed countries. We offer investors an opportunity to participate directly in the ownership of infrastructure businesses, which traditionally have been owned by governments or private investors, or have formed part of vertically integrated companies. Our infrastructure businesses provide basic, everyday services, such as parking, roads and water, through long-life physical assets and operate in sectors with limited competition and high barriers to entry. As a result, they have sustainable and growing long-term cash flows. We intend to operate our businesses to maximize these cash flows by optimizing their operations and financing structure. We also intend to make acquisitions complementary to our initial businesses and acquisitions in other attractive infrastructure sectors. Consequently, we expect to be able both to pay regular dividends, most of which we expect will qualify for the lower U.S. federal tax rate currently applicable to qualifying dividends, and to increase the value of our company.

We will use the proceeds of this offering to acquire our initial businesses and investments. Our initial businesses consist of an airport services business, an airport parking business and a 50% interest in a toll road. Our initial investments are in a regulated water utility and a communications infrastructure investment fund. We will acquire our initial businesses and investments for approximately $340 million in cash from the Macquarie Group or from infrastructure investment vehicles managed by the Macquarie Group. We believe that the scale and scope of these initial businesses and investments give us a significant and diversified presence in the infrastructure sector. Going forward, we intend to focus principally on owning, operating and acquiring infrastructure businesses in the United States.

We will engage our Manager to manage our day-to-day operations and affairs. Our Manager is part of the Macquarie Group, a global leader in the acquisition, financing and management of infrastructure businesses. As of March 31, 2004, the Macquarie Group managed over $9 billion worth of equity investments in 60 infrastructure assets in 14 countries. The Macquarie Group has over 330 professionals dedicated to the infrastructure sector around the world, including over 40 in North America.

Airport Services Business. Our wholly owned airport services business, Atlantic, operates fixed base operations, or FBOs, at ten airports. Atlantic is one of the leading FBO operators in the United States, measured by number of FBOs. FBO operations primarily serve the corporate jet segment of the general aviation industry, providing refueling, de-icing, aircraft parking, hangarage and other services. Approximately 74% of Atlantic’s revenues in 2003 were generated by fuel sales. According to the Federal Aviation Administration, or FAA, the consumption of jet fuel by the U.S. general aviation fleet is projected to grow on average at 5.1% per year through 2015. We believe the quality of Atlantic’s

operations, strong marketing programs and experienced management team provide it with a competitive advantage. In addition, Atlantic’s operations enjoy limited competition and significant barriers to entry, including a lack of space at the airports for new competitors. Atlantic operates its FBOs under leases granted by the relevant local authority at each airport that have an average of 17 years to expiration.

Airport Parking Business. Our airport parking business, Macquarie Parking, is the largest provider of off-airport parking services in the United States, measured by number of locations. Macquarie Parking’s 21 facilities comprise over 30,000 parking spaces and over 260 acres at 14 major airports across the United States. Macquarie Parking provides customers with secure 24-hour parking close to airport terminals, as well as transport via shuttle bus to and from their vehicles and the terminal. We expect overall occupancy at airport parking facilities to grow in line with passenger enplanements, which the FAA has projected will grow at an average rate of 3.8% per year through 2015. We believe that Macquarie Parking’s size and nationwide coverage, sophisticated marketing programs and experienced management team provide it with a competitive advantage over other airport parking operators and will allow it to increase market share. In addition, Macquarie Parking’s business enjoys significant barriers to entry, primarily due to a lack of suitable land near airports and zoning requirements. Following our purchase, we will exercise voting control over Macquarie Parking.

Toll Road Business. Our toll road business consists of our 50% ownership of the company that operates Yorkshire Link, a 19-mile highway in the United Kingdom, pursuant to a concession agreement with the U.K. government that terminates in 2026. Under the concession, Yorkshire Link generates revenues from a “shadow” tolling system, under which road users pay no tolls. Instead, the U.K. government pays fees or “shadow tolls” based on the volume and type of user traffic. During the five years in which it has operated, Yorkshire Link’s traffic volumes have fulfilled expectations and have produced stable and predictable revenues. The day-to-day operations of Yorkshire Link are supervised by a small operations team seconded from Balfour Beatty plc, which will be our 50% partner in the toll road business.

Macquarie Communications Infrastructure Group. We will purchase approximately 17% of Macquarie Communications Infrastructure Group, or MCG, a public investment vehicle managed by an affiliate of our Manager. MCG’s only investment at present is its 100% ownership of Broadcast Australia Pty Limited, which operates approximately 600 transmission tower sites, the largest broadcasting tower network in Australia. Most of Broadcast Australia’s revenues are earned under long-term contracts with government-owned broadcasters. These contracts accounted for 87% of MCG’s total revenues in its fiscal year ended June 30, 2003. MCG seeks to provide its investors with sustainable dividend yields and to grow through investments in communications infrastructure businesses globally.

South East Water. We will purchase 17.5% of the holding company that owns South East Water, or SEW, a utility in southeastern England that is the sole provider of water to almost 600,000 households and industrial customers. A U.K. government agency regulates the prices that SEW is allowed to charge for its services. These prices are designed to enable SEW to earn sufficient revenues to recover operating costs, capital infrastructure renewal and taxes, and to generate a return on invested capital, while creating incentives for SEW to operate efficiently. Prices are set every five years for the upcoming five-year period. Under this regulatory system, SEW has stable and predictable profits. A controlling interest in SEW is held by the Macquarie European Infrastructure Fund, which is managed by an affiliate of our Manager.

We intend to focus on the ownership and operation of infrastructure businesses with the following types of long-life physical assets:


	•	“user pays” assets, such as airport-related infrastructure and roads, whose revenues are derived from a per use charge;

	•	contracted assets, such as communications towers and district energy systems, whose revenues are derived from long-term contracts with governments or other businesses; and


	•	regulated assets, such as water, gas and electric utilities, that are the sole or predominant providers of an essential service and whose prices are typically regulated by the government.

By their nature, these businesses have sustainable and growing long-term cash flows due to consistent customer demand for their basic, everyday services and the businesses’ strong competitive position. The strong competitive position of these businesses results from high barriers to entry, including:


	•	high initial development and construction costs;

	•	difficulty in obtaining suitable land;

	•	required government approvals, which may be difficult and time consuming to obtain; and

	•	long-term exclusive concessions and customer contracts.

We will not seek to acquire infrastructure businesses that face significant competition, such as merchant electricity generation facilities.

We have two primary strategic objectives: to improve and expand the operations of our initial businesses; and to acquire businesses in other attractive infrastructure sectors. A key component of our strategy is our association with the Macquarie Group, a leader in the management, acquisition and financing of infrastructure businesses worldwide.

We will rely on the Macquarie Group’s demonstrated expertise and experience in the management of infrastructure businesses to execute our operational strategy. In managing infrastructure businesses, the Macquarie Group (1) leverages talented operational management teams, (2) instills financial management discipline, (3) sources and executes complementary acquisitions and (4) optimizes capital structures.

We plan to increase the cash generated in our initial business through initiatives to grow revenues and improve profit margins, by:


	•	enhancing client services and marketing programs;

	•	making capital expenditures to expand capacity and improve facilities;

	•	strengthening our competitive position through complementary acquisitions in the fragmented airport services and airport parking sectors; and

	•	selectively refinancing existing debt.

We will rely on the Macquarie Group’s acquisition and financing expertise to identify and make attractive acquisitions in the infrastructure sector, in which opportunities often are not widely offered, well understood or properly valued.

We intend to acquire infrastructure businesses and investments in sectors other than those sectors in which our initial businesses operate and where we expect attractive returns. While we intend to focus on the United States, we will also consider opportunities in other developed countries. Generally, we will seek to acquire controlling interests, but we may acquire minority positions in businesses in attractive sectors where those acquisitions generate immediate dividends and where our partners have similar objectives to our own.

We believe that opportunities to acquire these types of infrastructure businesses from private sector owners will increase as vertically integrated owners of infrastructure restructure for competitive, financial or regulatory reasons. We also believe that the continuation of the trend toward the privatization of infrastructure assets will lead to acquisition opportunities.

Management. The company will enter into a management services agreement with our Manager, which will manage our day-to-day operations and affairs and will oversee the management teams of our operating businesses. Neither the trust nor the company will have any employees. Our Manager will second to the company our chief executive officer and chief financial officer and will make other personnel available as required. The services performed for the company will be provided at our Manager’s cost and our Manager will pay the compensation of our seconded officers out of its management fee. Each of our initial businesses has seasoned management teams who have day-to-day responsibility for enhancing the operations of their respective businesses and will be responsible for profitability and internal growth.

Compensation. We will pay our Manager a management fee based primarily on our market capitalization. In addition, to incentivize our Manager to maximize shareholder returns, we will pay performance fees to our Manager equal to 20% of the outperformance, if any, of semiannual total returns to our shareholders compared to a benchmark index, provided that total shareholder returns for the semiannual period are positive.

Our Manager’s Investment. Our Manager has agreed to purchase from us, at the closing of this offering in a separate private placement, up to 10% of the number of shares offered hereby at a per share price equal to the initial public offering price, with a total price not to exceed $35 million. The Manager has agreed with us that it will not sell any of these shares until one year after the closing of this offering. Thereafter, it may sell up to 50% of these shares beginning on the first anniversary of the closing of this offering and the balance beginning on the third anniversary of the closing of this offering. We have agreed to file a shelf registration statement as promptly as practicable following the first anniversary of the closing of this offering to cover these shares, as well as any additional shares purchased by the Manager upon the reinvestment of any of its management fees.

The board of directors of the company will include three independent directors and one director appointed by our Manager. The company, directly or through its wholly owned subsidiaries, will own:


	•	North America Capital Holding Company, or North America Capital, the holding company that indirectly owns Atlantic;

	•	Macquarie Americas Parking Corporation, or MAPC, the holding company that owns a controlling interest in Macquarie Parking;

	•	50% of Connect M1-A1 Holdings Limited, or CHL, the holding company that owns all the capital stock of the holder of the government concession to operate Yorkshire Link;

	•	approximately 17% of MCG; and

	•	17.5% of Macquarie Luxembourg Water SarL, the holding company for SEW.

Macquarie Infrastructure Assets Trust is a Delaware statutory trust formed in April 2004. Macquarie Infrastructure Assets LLC is a Delaware limited liability company formed in April 2004. Our principal executive offices are located at 600 Fifth Avenue, 21st Floor, New York, New York 10020, and our telephone number is (212) 548-6538.

The number of shares outstanding after the offering assumes that our Manager purchases shares and that the underwriters’ overallotment option is not exercised. If the overallotment option is exercised in full, we will issue and sell an additional shares.

The summary financial data for Atlantic at December 31, 2002 and 2003 and for the years then ended were derived from Executive Air Support, Inc.’s audited consolidated financial statements included elsewhere in this prospectus. The summary financial data of Atlantic at March 31, 2004 and for the three months ended March 31, 2003 and 2004 were derived from Executive Air Support, Inc.’s unaudited consolidated condensed financial statements included elsewhere in this prospectus.

The summary financial data for Macquarie Parking for the year ended December 31, 2001 and for the period from January 1, 2002 to December 18, 2002 are derived from the audited consolidated statements of operations of Off-Airport Parking Operations of PCA Parking Company of America, LLC, or the predecessor, included elsewhere in this prospectus. The summary financial data for Macquarie Parking for the period from July 23, 2002 to December 31, 2002 and for the year ended December 31, 2003 and at December 31, 2002 and 2003 are derived from the audited consolidated financial statements of Macquarie Parking, included elsewhere in this prospectus. The summary financial data for Macquarie Parking at March 31, 2004 and for the three months ended March 31, 2003 and 2004 are derived from unaudited condensed consolidated financial statements included elsewhere in this prospectus.

The summary financial data for CHL at March 31, 2003 and December 31, 2003 and for the years ended March 31, 2002 and 2003 were derived from the audited financial statements included elsewhere in this prospectus. The summary financial data of CHL at March 31, 2004 were derived from the unaudited consolidated financial statements, which are not included in this prospectus. The summary financial data of CHL for the combined twelve month period represents an aggregation of financial data for nine months ended December 31, 2003, which was derived from the audited financial statements included elsewhere herein, and financial data for the three months ended March 31, 2004, which was derived from the unaudited financial statements, which are not included in this prospectus. We own indirectly 50% of CHL and accordingly will account for this business under the equity method of accounting.

The summary financial data presented below represent the historical financial information for Atlantic, Macquarie Parking and CHL and do not reflect the accounting for these businesses upon completion of the acquisitions and the operation of the businesses as a consolidated entity. You should read this information with the financial statements and related notes, the unaudited condensed combined pro forma financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

(1) Established on July 23, 2002, operations began December 19, 2002 with the acquisition of the predecessor.


(2)	Includes Avistar, which was acquired on October 1, 2003.

An investment in the shares involves a number of risks. You should carefully consider the following information about these risks, together with the other information contained in this prospectus, before investing in our shares. The risks and uncertainties described below are not the only ones we face. However, these are the risks our management believes are material. Additional risks not presently known to us or that we currently deem immaterial may also impair our business or results of operations. Any of the risks described below could result in a significant or material adverse effect on our results of operations or financial condition and a corresponding decline in the market price of the shares. You could lose all or part of your investment.

This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those forward-looking statements discussed under the heading “Forward-Looking Statements” as a result of certain factors, including the risks described below and elsewhere in this prospectus.

We have no previous operating history and we may not be able to successfully manage our initial businesses on a combined basis.

We were formed in April 2004 and have conducted no operations and have generated no revenues to date. We will use the proceeds of this offering to acquire our initial businesses and investments for cash from the Macquarie Group or infrastructure investment vehicles managed by the Macquarie Group. While all of our initial businesses and investments have historical operations, our initial businesses have not been operated as a combined company. As a result, if we do not develop effective systems and procedures, including accounting and financial reporting systems, to manage our operations, we may not be able to manage the combined enterprise on a profitable basis. In addition, the pro forma condensed combined financial statements of our initial businesses cover periods during which most of our initial businesses were not under common control or management and, therefore, may not be indicative of our future financial condition or operating results.

In the event of the underperformance of our Manager, we may be unable to remove our Manager.

Under the terms of the management services agreement, our Manager must significantly underperform in order for the management services agreement to be terminated. The company’s board of directors cannot remove our Manager unless:


	•	our Manager materially breaches the terms of the management services agreement and such breach continues unremedied for 60 days after notice;

	•	our Manager acts with gross negligence, willful misconduct, bad faith or reckless disregard in carrying out its obligations under the management services agreement, or engages in fraud;

	•	our Manager experiences certain bankruptcy events; or

	•	our shares underperform a benchmark index by more than the greater of 30% in relative terms or 5% in absolute terms in eight out of ten semiannual periods on a rolling basis, and the holders of a minimum of 66 2/3% of the outstanding trust stock (excluding any shares owned by our Manager or any of its affiliates) vote to remove our Manager.

Our Manager’s performance will be measured not only based upon the market price of our shares but also based upon the market performance of our shares against the benchmark index. As a result, even if the absolute performance of the market price of our shares does not meet expectations, the company’s board of directors cannot remove our Manager unless the market performance of our shares also significantly underperforms the benchmark index.

The terms of the acquisition agreements with respect to our initial businesses and investments, the management services agreement and the registration rights agreement with respect to our Manager’s investment were negotiated without independent assessment on our behalf, and may be less advantageous to us than if they had been the subject of arm’s-length negotiations.

The terms and pricing of the agreements with respect to our acquisitions of our initial businesses and investments from the Macquarie Group and investment vehicles managed by the Macquarie Group and the terms of the management services agreement and registration rights agreement which we intend to enter into were negotiated among Macquarie Group affiliated entities in the overall context of this offering. There was no review by unaffiliated third parties, including the company’s independent board members, on our behalf of the pricing or the terms of the agreements which we have entered into or intend to enter into. As a result, provisions of these agreements may be less favorable to the company than they might have been had they been produced by arm’s-length transactions between unaffiliated third parties.

Our Manager can resign on 90 days’ notice and we may not be able to find a suitable replacement within that time.

Our Manager has the right, under the management services agreement, to resign at any time on 90 days’ notice, whether we have found a replacement or not. Australian banking regulations that govern the operations of Macquarie Bank Limited and all of its subsidiaries, including our Manager, require that subsidiaries of Australian banks providing management services have these resignation rights.

If our Manager resigns, we may not be able to find a new external manager or hire internal management with similar expertise within 90 days to provide the same or equivalent services on acceptable terms, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial results will be adversely affected, perhaps materially, and the market price of our shares may decline. In addition, the coordination of our internal management, acquisition activities and supervision of our businesses and investments are likely to suffer if we were unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our Manager and its affiliates.

Furthermore, if our Manager resigns, the trust and the company, as well as each of their direct and indirect subsidiaries, will be required to change their names to remove any reference to “Macquarie.” This may cause the value of the company and the market price of the trust stock to decline.

We intend to pay regular dividends to our shareholders, but our holding company structure may limit our ability to do so because we will rely on distributions both from our subsidiaries and the companies in which we hold investments.

We are a holding company with no operations. Therefore, we will be dependent upon the ability of our initial businesses and investments to generate earnings and cash flows and distribute them to us in the form of dividends and upstream debt payments to pay our expenses and to pay dividends to our shareholders. The ability of our operating subsidiaries and the businesses in which we will hold investments to make distributions to us is subject to limitations under the terms of certain of their debt agreements and the applicable laws of their respective jurisdictions. If, as a consequence of these various limitations and restrictions, we are unable to generate sufficient distributions from our businesses and investments, we may not be able to make or may have to delay or cancel payment of distributions on our shares.

Our initial businesses and the businesses in which we will initially invest have substantial indebtedness, which could inhibit their operating flexibility.

The company will initially have no debt. As of March 31, 2004, on a consolidated pro forma basis, we had total long-term debt of $279 million. All of this debt is at the subsidiary level and has recourse only to the relevant subsidiary. The companies in which we will have initial investments also have debt. The ability of each of our initial businesses and investments to meet their respective debt service


	•	limiting the payment of dividends and distributions to us;

	•	increasing the risk that our subsidiaries and the companies in which we will hold investments might not generate sufficient cash to service their indebtedness;

	•	limiting our ability to use operating cash flow in other areas of our businesses because our subsidiaries or the companies in which we will hold investments must dedicate a substantial portion of their operating cash flow to service their debt;

	•	limiting our and our subsidiaries’ ability to borrow additional amounts for working capital, capital expenditures, debt services requirements, execution of our internal growth strategy, acquisitions or other purposes; and

	•	limiting our ability to capitalize on business opportunities and to react to competitive pressures or adverse changes in government regulation.

If any of our subsidiaries or the companies in which we will hold initial investments is unable to comply with the terms of its respective debt agreements, it may be required to refinance a portion or all of its debt or to obtain additional financing. It may be unable to refinance or obtain additional financing because of its high levels of debt and the debt incurrence restrictions under its debt agreements. It may be forced to default on its debt obligations if cash flow is insufficient and refinancing or additional financing is unavailable, and, as a result, the relevant debt holders may accelerate the maturity of their obligations.

We own a minority interest in our initial investments and may acquire similar minority interests, and consequently cannot exercise significant influence over their business or the level of their distributions to us.

We will own minority positions in the investments in MCG and SEW and have limited legal rights to influence the management of those businesses or any other businesses in which we make minority investments. MCG is managed by an affiliate of our Manager and SEW is majority owned by an entity that is managed by an affiliate of our Manager. These entities may develop different objectives than we have and may not make distributions to us at levels that we anticipate. Our inability to exercise significant influence over the operations, strategies and policies of the businesses in which we will have, or may acquire following this offering, a minority interest means that decisions could be made that could adversely affect our results and our ability to generate cash and distribute dividends.

We have entered into agreements to acquire our initial businesses and investments. The closings of these acquisitions are subject to the receipt of third party consents and the satisfaction of various conditions precedent described under “The Acquisition of Our Initial Businesses and Investments.” Accordingly, we may not be able to consummate the acquisition of some or all of our initial businesses or investments in a timely manner or at all. In the event our acquisitions of some or all of our initial businesses or investments is delayed or does not occur at all, we intend to use the funds that were intended for those acquisitions to buy or invest in other infrastructure businesses in accordance with our acquisition strategy. Pending application of the funds, we plan to invest them in cash or U.S. government obligations. As a consequence, we may not be able to earn a sufficient return on the funds reserved for any such acquisition to replace the anticipated cash flows of those businesses or investments.

A major component of our strategy is to acquire additional infrastructure businesses both within the sectors in which we will initially operate and in sectors where we will initially have no presence.

Acquisitions involve a number of special risks, including failure of the acquired business to achieve expected results, failure to identify material risks or liabilities associated with the acquired business prior to its acquisition, diversion of our management’s attention, and the failure to retain key personnel of the acquired business, some or all of which could have a material adverse effect on our business, cash flow and ability to pay dividends. We expect to face competition for acquisition opportunities, and some of our competitors may have greater financial resources or access to financing on more favorable terms than we will. This competition may limit our acquisition opportunities, may lead to higher acquisition prices or both. While we expect that our relationship with the Macquarie Group will help us in making acquisitions, we cannot assure you that anticipated benefits will be realized.

There is no assurance that we will be able to successfully fund future acquisitions of new infrastructure businesses, a significant element of our business strategy, due to the unavailability of debt or equity financing.

In order to make acquisitions, we will generally require funding from external sources. Since the timing and size of acquisitions cannot be readily predicted, we may need to be able to obtain funding on short notice to benefit fully from attractive opportunities. Debt to fund an acquisition may not be available on short notice or may not be available on terms acceptable to us. In addition, the level of our subsidiary indebtedness will impact our ability to borrow at the holding company level. We intend to fund the balance of the consideration for future acquisitions through the issuance of additional shares. If our shares do not maintain a sufficient market value, issuance of new shares may result in dilution of our then-existing shareholders. Alternatively, we may not be able to complete the issuance of the required amount of shares on short notice or at all due to a lack of investor demand for the shares at prices that we consider to be in the interests of then-existing shareholders. As a result of a lack of funding, we may not be able to pursue our acquisition strategy successfully.

Many of our initial businesses and investments are, and our future businesses and investments may be, operated pursuant to government licenses, leases, concessions or contracts which are generally very complex and may result in a dispute over interpretation or enforceability. Our failure to comply with regulations or concessions could subject us to monetary penalties or result in a revocation of our rights to operate the affected business.

Many of our initial businesses and initial investments (such as our airport services business, our toll road business and SEW) are, and our future businesses and investments may be, subject to substantial regulation by governmental agencies. In addition, their operations do and may rely on government licenses, concessions, leases or contracts that are generally very complex and may result in a dispute over interpretation or enforceability. In addition, if we fail to comply with these regulations or contractual obligations, we could be subject to monetary penalties or we may lose our rights to operate the affected business, or both. Where our ability to operate an infrastructure business is subject to a concession or lease from the government, the concession or lease may restrict our ability to operate the business in a way that maximizes cash flows and profitability. The lease or concession may also contain clauses more favorable to the government counterparty than a typical commercial contract. For instance, the lease or concession may enable the government to terminate the lease or concession in certain circumstances without requiring them to pay adequate compensation. In addition, government counterparties also may have the discretion to change or increase regulation of our operations, or implement laws or regulations affecting our operations, separate from any contractual rights they may have. Governments have considerable discretion in implementing regulations that could impact these businesses, and because our businesses provide basic, everyday services, and face limited competition, governments may be influenced by political considerations and may make decisions that adversely affect our businesses.

Governmental agencies may determine the prices we charge and may be able to restrict our ability to operate our business to maximize profitability.

Where our business is the sole or predominant service provider in its service area and provides services that are essential to the community, such as SEW, it is subject to rate regulation that will determine the prices it may charge. We may be subject to unfavorable price determinations that may be final with no right of appeal or which, despite a right of appeal, as in the case of SEW, could result in our profits being negatively affected. Businesses and investments we acquire in the future may also be subject to rate regulation.

The ownership of businesses and investments located outside of the United States exposes us to currency exchange risks that may result in a decrease in the carrying value of our investments and a decrease in the amount of distributions we receive from our businesses and investments.

Our interests in CHL, MCG and SEW will be subject to risk from fluctuations in currency exchange rates, as the reporting currencies of CHL and SEW are Pounds Sterling, and the reporting currency of MCG is Australian dollars. We expect to receive distributions from CHL, MCG and SEW denominated in these currencies. Fluctuations in the currency exchange rates for Pounds Sterling and Australian dollars against the U.S. dollar resulting in losses from any such fluctuations will be reflected in our results. A strengthening of the U.S. dollar against these currencies would reduce the U.S. dollar amount of the distributions we receive from these foreign operations.

Certain provisions of the management services agreement and the operating agreement of the company make it difficult for third parties to acquire control of the trust and the company and could deprive you of the opportunity to obtain a takeover premium for your shares.

In addition to the limited circumstances in which our Manager can be terminated under the terms of the management services agreement, the management services agreement provides for a substantial termination fee to be paid upon the Manager’s resignation where the trust stock ceases to be listed on a recognized U.S. exchange and an alternate method of calculating the Manager’s fees has not been agreed.

The operating agreement of the company, which we refer to as the LLC agreement, contains a number of provisions that could have the effect of making it more difficult for a third party to acquire, or discourage a third party from acquiring, control of the trust and the company. These provisions include:


	•	restrictions on the company’s ability to enter into certain transactions with our major shareholders, based on the limitation contained in Section 203 of the Delaware General Corporation Law;

	•	allowing only the company’s board of directors to fill vacancies, including newly created directorships and requiring that directors may be removed only for cause and a shareholder vote of 66 2/3%;

	•	requiring that only the company’s board of directors may call a special meeting of our shareholders;

	•	prohibiting shareholders from taking any action by written consent;

	•	establishing advance notice requirements for nominations of candidates for election to the company’s board of directors or for proposing matters that can be acted upon by our shareholders at a shareholders meeting;

	•	having a substantial number of additional shares of authorized but unissued trust stock; and

	•	providing the company’s board of directors with broad authority to amend the LLC agreement.

Our initial businesses and investments have environmental risks that may impact our future profitability.

The operations of our initial businesses and investments are subject to numerous statutes, rules and regulations relating to environmental protection. The operations of our initial businesses involve the handling of a significant amount of hazardous material. There is the possibility of prior or future environmental contamination, including soil and groundwater contamination, as a result of the spillage of hazardous materials or other pollutants.

Under various federal, state, local and foreign environmental statutes, rules and regulations, a current or previous owner or operator of real property may be liable for noncompliance with applicable environmental and health and safety requirements and for the costs of investigation, monitoring, removal or remediation of hazardous materials. These laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of hazardous materials. The presence of these hazardous materials on a property could also result in personal injury or property damage or similar claims by private parties.

Persons who arrange for the disposal or treatment of hazardous materials may also be liable for the costs of removal or remediation of those materials at the disposal or treatment facility, whether or not that facility is or ever was owned or operated by that person.

Any liability resulting from noncompliance or other claims relating to environmental matters could have a material adverse effect on our results of operations, financial condition, liquidity and prospects.

We are dependent on certain key personnel, and the loss of key personnel, or the inability to retain or replace qualified employees, could have an adverse effect on our business, financial condition and results of operations.

We intend to operate our initial businesses on a stand-alone basis, relying on existing management teams for day-to-day operations. Consequently, our operational success, as well as the success of our internal growth strategy, will be dependent on the continued efforts of the management teams of our initial businesses, who have extensive experience in the day-to-day operations of these businesses. Furthermore, we will likely be dependent on the operating management teams of businesses that we may acquire in the future. The loss of key personnel, or the inability to retain or replace qualified employees, could have an adverse effect on our business, financial condition and results of operations.

Shareholders will be required to pay tax on their share of our taxable income, whether or not they receive cash distributions from us.

Shareholders will be required to pay U.S. federal income taxes and, in some cases, state, local, and foreign income taxes on their share of our taxable income, whether or not they receive cash distributions from us. Shareholders may not receive cash distributions equal to their share of our taxable income or even the tax liability that results from that income. In addition, if we invest in the stock of a controlled foreign corporation (or if one of the corporations in which we invest becomes a controlled foreign corporation, an event which we cannot control), we may recognize taxable income, which shareholders will be required to take into account in determining their taxable income, without a corresponding receipt of cash to distribute to them.

If we fail to satisfy the “qualifying income” exception or are required to register under the Investment Company Act of 1940, we will be subject to an entity-level tax in the United States.

The company will be treated as a partnership for U.S. federal income tax purposes provided that it is not characterized as a corporation by virtue of being a “publicly-traded partnership” within the meaning of Section 7704(b) of the Internal Revenue Code of 1986, as amended, or the Code. The company will not be characterized as a corporation under that provision so long as 90% or more of the company’s gross income in each of its taxable years constitutes “qualifying income,” within the meaning of

Section 7704(d) of the Code, and the company is not required to be registered under the Investment Company Act. We anticipate that (1) the company will not be required to be registered under the Investment Company Act and (2) more than 90% of the income recognized by the company during each of its taxable years will consist of dividends, interest and capital gains from stocks or bonds, each of which generally constitutes “qualifying income” within the meaning of Section 7704(d) of the Code. If we fail to satisfy the “qualifying income” exception described above or are required to register under the Investment Company Act, items of income and deduction would not pass through to shareholders and shareholders would be treated for U.S. federal (and certain state and local) income tax purposes as shareholders in a corporation. In addition, the company would likely be liable for state and local income and/or franchise taxes. We would be required to pay income tax at regular corporate rates on its net income. Distributions to shareholders would constitute ordinary dividend income taxable to such shareholders to the extent of the company’s earnings and profits, and the payment of these dividends would not be deductible by the company. Taxation of the company as a corporation would result in a material reduction in a shareholder’s cash flow and after-tax return and thus would likely result in a substantial reduction of the value of the shares.

The current treatment of qualified dividend income and long-term capital gains under current U.S. federal income tax law may be adversely affected, changed or repealed in the future. Further, there is no assurance that the dividends we receive from CHL, MCG and SEW will continue to be treated as qualified dividend income.

Under current law, qualified dividend income and long-term capital gains are taxed to non-corporate investors at a maximum U.S. federal income tax rate of 15%. This tax treatment may be adversely affected, changed or repealed by future changes in tax laws at any time and is currently scheduled to expire for tax years beginning after December 31, 2008. In addition, although we currently believe that a shareholder’s distributive share of dividends we receive from SEW should constitute qualified dividend income, such treatment is not certain and it is possible that the Internal Revenue Service, or the IRS, may take a contrary view under existing law or that regulations or other administrative guidance interpreting the qualified income dividend provisions will prevent dividends received by the company from SEW as constituting qualified dividends. Further, because the ownership and activities of CHL, MCG and SEW will not be within our control, each of such entities could experience a change of ownership or activities that could result in dividends we receive from such corporations no longer being considered qualified dividend income, and we will be unable to stop such a change from occurring.

Pending litigation that may not be adequately covered by insurance or indemnity agreements could have a material adverse effect on our liquidity and financial condition.

Two Atlantic companies, which are part of our airport services business, and one former Atlantic company are defendants in a claim brought by the families of two pilots killed in a plane crash in 2000. The plaintiffs are each seeking $100 million in punitive damages, $100 million for wrongful death and $5 million for pain and suffering. The defendant FBO operating company carries liability insurance for an amount of up to $50 million and the other two defendant companies, the current parent of the Atlantic operating company and its former subsidiary, each hold policies for coverage of up to $1 million. In addition, the sale and purchase agreement for the Atlantic business provides for a $20 million indemnity which would apply in the event of a judgment for damages against the defendant Atlantic companies. However, there is no assurance the selling shareholders of Atlantic will have sufficient resources to meet their indemnity obligation in the event we seek to claim an amount pursuant to this indemnification provision. We are unable at this time to estimate what the ultimate liability may be, and it is possible that we may be required to pay judgments or settlements, and incur expenses, in excess of the insurance coverage or available indemnity in aggregate amounts that would have a material adverse effect on our financial condition, results of operations or liquidity.

Any adverse development in the general aviation industry that results in less air traffic at airports serviced by Atlantic will have a material adverse impact on its FBO business.

A large part of the revenue at FBOs is generated from fuel sales and other services provided to general aviation customers. Air travel and air traffic volume of general aviation customers can be affected by airport-specific occurrences as well as events that have nationwide and industry-wide implications. The events of September 11, 2001 had a significant adverse impact on the aviation industry, particularly in terms of traffic volume due to forced closures, revenue and employment. Immediately following September 11, 2001, thousands of general aviation aircraft were grounded for weeks due to the FAA’s “no-fly zone” restrictions imposed on the operation of aircraft. Airport specific circumstances include situations in which Atlantic’s major customers relocate their home base or preferred fueling stop to alternative locations. Additionally, the general economic conditions of the area where the airport is located will impact the ability of Atlantic’s FBOs to attract general aviation customers. Significant increases in fuel prices also may decrease the demand for services provided by Atlantic, including refueling services, leading to lower operating income and profits.

Changes in the general aviation market as a whole may adversely affect our airport services business. General aviation travel is more expensive than alternative modes of travel. Consequently, during periods of economic downturn, FBO customers may choose to travel by less expensive means, which could impact the earnings of Atlantic’s FBO business. Travel by commercial airlines may become more attractive for general aviation travelers if the cost of commercial airline travel decreases or if the service level improves. Under these circumstances, Atlantic’s FBOs may lose customers to the commercial air travel market, which may decrease our earnings.

Atlantic’s FBO business is subject to a variety of competitive pressures, and the actions of competitors may have a material adverse effect on the revenues of its FBO business.

FBO operators at a particular airport compete based on a number of factors, including location of the facility relative to runways and street access, service, value-added features and reliability and, to a lesser extent, price. Eight of Atlantic’s FBOs compete with one or more FBOs at their respective airports, and, to a much lesser extent, some of Atlantic’s FBOs compete with FBOs at nearby airports. We cannot predict the actions of competitors who may seek to increase local market share. Some present and potential competitors have or may obtain greater financial and marketing resources than we do, which may negatively impact our ability to compete at each airport.

Atlantic’s two sole provider FBOs do not generally have the right to be the sole provider of FBO services at any of Atlantic’s FBO locations. The authority responsible for each airport has the ability to grant other FBO leases at the airport and new competitors could be established at those FBO locations. The addition of new competitors is particularly likely if Atlantic is seen to be earning significant profits from its FBO operations. Any such actions, if successful, may reduce, or impair our ability to increase, the revenues of the FBO business.

The termination for cause or convenience of one or more of the leases for Atlantic’s FBOs would damage our airport services business significantly.

Atlantic’s revenues are derived from long-term FBO leases at airports. If Atlantic defaults on the terms and conditions of its leases, the relevant airport authority may terminate the lease without compensation, and Atlantic would then lose the income from that lease, and would be in default under its loan agreements and be obliged to repay its lenders a portion of its outstanding loan amount. Atlantic’s FBOs at Chicago Midway, Philadelphia, North East Philadelphia and New Orleans International allow the airport authority to terminate the lease for convenience, and may require the airport authority to use reasonable efforts to secure an alternative site for the FBO, or the payment of compensation equal to the net book value of the facility. If the airport authority were to terminate any of those leases for convenience, Atlantic would then lose the income from that lease and be obliged to repay lenders a portion of the then outstanding loan amount.

Occupancy of Macquarie Parking’s parking facilities is dependent on the level of passenger traffic at the airports at which Macquarie Parking operates.

Macquarie Parking’s parking facilities are dependent upon parking traffic primarily generated by commercial airline passengers and are susceptible to competition from other airports and to disruptions in passenger traffic at the airports at which Macquarie Parking operates. For example, the events of September 11, 2001 had a significant impact on the aviation industry and, as a result, negatively impacted occupancy levels at parking facilities. In the first few days following September 11, 2001, revenue from Macquarie Parking’s parking facilities was negligible and did not fully recover until some months after the event. Other events such as wars, outbreaks of disease, such as SARS, and terrorist activities in the United States or overseas may reduce airport traffic and therefore occupancy rates. In addition, traffic at an airport at which Macquarie Parking has facilities may be reduced if airlines reduce the number of flights at that airport.

Our airport parking business is exposed to competition from both on-airport and off-airport parking.

At each of the locations at which Macquarie Parking operates, it competes with both on-airport parking facilities, many of which are located closer to passenger terminals, and other off-airport parking facilities. If an airport expands its parking facilities or if off-airport parking facilities are opened or expanded, customers may be drawn away from Macquarie Parking’s sites or Macquarie Parking may have to reduce its parking rates, or both.

Parking rates charged by Macquarie Parking at each of its locations are set with reference to a number of factors, including prices charged by competitors and quality of service by on-airport and off-airport competitors, the location and quality of the facility and the level of service provided. Additional sources of competition to Macquarie Parking’s operations may come from new or improved transportation to the airports where Macquarie Parking’s parking facilities are located. Improved rail, bus or other services may encourage Macquarie Parking’s customers not to drive to the airport and therefore negatively impact revenue.

Macquarie Parking has a substantial amount of senior debt due to mature in 2006. The inability to extend, refinance or repay this senior debt when due would have a material adverse effect on that business. In addition, if interest rates increase, the cost of servicing any debt that Macquarie Parking raises to refinance the maturing debt will increase, reducing its profitability and its ability to distribute dividends to us.

Macquarie Parking has approximately $126 million of senior debt due in 2006. This loan will have to be extended, refinanced on that date or repaid. We cannot assure you that a replacement loan will be available. If available, a replacement loan may only be available at a substantially higher interest rate or margin or with substantially more restrictive covenants. Either event may limit the operational flexibility of Macquarie Parking and its ability to upstream dividends and distributions. We also cannot assure you that we or the other owners of the business will be able to make capital contributions to repay some or all of the debt if required. If Macquarie Parking is unable to repay its debt when due, it would become insolvent. If interest rates increase, Macquarie Parking will pay higher rates of interest on any debt that it raises to refinance the senior debt, thereby reducing its profitability and, consequently, having an adverse impact on its ability to distribute dividends to us.

Changes in regulation by airport authorities or other governmental bodies governing the transportation of customers to and from the airports at which Macquarie Parking operates may negatively affect our operating results.

Macquarie Parking’s shuttle operations transport customers between the airport terminals and its parking facilities and are regulated by, and are subject to, the rules and policies of the relevant local airport authority, which may be changed at their discretion. Some airport authorities levy fees on off-airport parking operators for the right to transport customers to the terminals. There is a risk that airport

Further, the FAA and the Transportation Security Administration, or TSA, regulate the operations of all the airports at which our airport parking business has locations. The TSA has the authority to restrict access to airports as well as to impose parking and other restrictions around the airports. The TSA could impose more stringent restrictions in the future that would inhibit the ability of customers to use Macquarie Parking’s facilities.

Our toll road business’ revenues may be adversely affected if traffic volumes decline.

Since the shadow toll revenues payable by the U.K. government’s Secretary of State for Transport, or the Transport Secretary, are linked to the volume of traffic using Yorkshire Link, our toll road business’ revenues will be adversely affected if traffic volumes decline. A decline in traffic volume could result from a number of factors, including recession, increases in fuel prices, attractive alternative transport routes or improvements in public transportation.

In addition, the concession provides for a significant reduction in the shadow toll revenues payable by the Transport Secretary from 2014.

The Transport Secretary may terminate the concession without compensation to our toll road business or with insufficient compensation.

If our toll road business defaults on its obligations set out in the concession, the Transport Secretary may terminate the concession without compensation to our toll road business. Even if our toll road business does not default on its obligations under the concession, the Transport Secretary may terminate the concession in the event that:


	•	the performance of the concession becomes impossible without the exercise of a statutory power by the Transport Secretary;

	•	the Transport Secretary chooses not to exercise that power following a request from our toll road business; and

	•	our toll road business and the Transport Secretary fail to agree on an alternative means of performance within a period of 90 days.

We are unable to predict if or when such circumstances might occur. The concession also may be terminated by the Transport Secretary in certain other circumstances, including an event of force majeure. While our toll road business is required to be compensated in such circumstances, the compensation paid may be insufficient for us to recover our full investment in our toll road business. Failure to compensate our toll road business in the event of termination may result in the value of our investment in our toll road business being reduced to nothing since our toll road business would likely default on its debt obligations in these circumstances.

We share control of our toll road business equally with our partner Balfour Beatty and as a result are not in a position to control operations, strategies or financial decisions without the concurrence of Balfour Beatty.

We will hold a 50% interest in our toll road business and the remaining 50% is held by Balfour Beatty. We are not in a position to control operations, strategies or financial decisions without the agreement of Balfour Beatty. Conflicts may arise in the future between our business objectives and those of Balfour Beatty. If this were to occur, decisions to take action necessary, in our view, for the proper management of the business might not be made.

MCG’s sole investment presently relies upon two key customers. If contracts with these customers were terminated and Broadcast Australia was not adequately compensated, or if the contracts were not renewed, MCG’s revenues would be significantly reduced.

MCG’s only investment at present is 100% ownership of Broadcast Australia. Broadcast Australia’s two key customers are the government-owned national broadcasters, the Australian Broadcasting Corporation, or the ABC, and Special Broadcasting Service, or SBS, which together accounted for approximately 87% of Broadcast Australia’s total revenue in its fiscal year ended June 30, 2003. ABC and SBS both currently receive Australian government funding to provide transmission services, but that funding could be reduced or withdrawn. Broadcast Australia has entered into a series of long-term contracts with ABC and SBS, with terms generally ending between 2008 and 2024. If these contracts are terminated and Broadcast Australia is not adequately compensated, or the contracts are not renewed at their expiration, Broadcast Australia’s operations would be materially adversely affected.

SEW’s revenues are subject to regulation and SEW may receive unfavorable treatment from U.K. regulatory authorities.

As the sole water-only supplier in its service areas, prices that SEW charges for its services are subject to review and approval every five years by The Office of Water Services, or Ofwat, the water regulator for England and Wales. SEW’s proposed pricing for the period from April 1, 2005 to March 31, 2010 is currently under review. The outcome of this review and future reviews is uncertain. In the event that Ofwat were to deny recovery of certain operating expenses and/or capital expenditures through the prices that SEW charges for its services, or were to determine that a reduced return on invested capital should be allowed, there would be a negative impact on the future revenues of SEW.

SEW is dependent on the availability of water supplies and, if required to increase supply beyond the expected levels, could incur substantial costs, which, despite the existence of interim pricing review mechanisms, may not be adequately compensated.

SEW requires sufficient water to supply its customer base. The availability of water is subject to, among other things, SEW continuing to benefit from water abstraction licenses, contractual arrangements for the supply of water from neighboring water companies, investment in increasing water resources to match customer growth and short-term issues affecting water supply, such as drought. Ofwat has placed SEW, along with other southern water companies, in the lowest quartile in terms of water security of supply. In the event of water shortage, SEW will be exposed to additional costs and reputational damage. There are significant uncertainties beyond SEW’s control affecting the amount of water resources, including climate change, the amount of annual rainfall, the rate of house building and industrial development in SEW’s service areas and other factors. If SEW is required to increase supply beyond the expected levels, it could incur substantial costs, which, despite the existence of interim pricing review mechanisms, may not be adequately compensated.

There is no public market for the shares and you cannot be certain that an active trading market or a specific share price will be established.

We intend to apply to list the shares on the New York Stock Exchange or to have the shares quoted on the Nasdaq National Market. However, there currently is no public trading market for the shares, and an active trading market may not develop upon completion of this offering or continue to exist if it does develop. The market price of the shares may also decline below the initial public offering price. The initial public offering price per share will be determined by agreement among us and the representatives of the underwriters, and may not be indicative of the market price of the shares after our initial public offering.

We cannot predict what effect, if any, future sales of our shares, or the availability of shares for future sale, will have on the market price of our shares. Sales of substantial amounts of our shares in the public market following our initial public offering, or the perception that such sales could occur, could adversely affect the market price of our shares and may make it more difficult for you to sell your shares at a time and price which you deem appropriate. See “Securities Eligible for Future Sale” for further information regarding circumstances under which additional shares may be sold.

We and our Manager have agreed that, with limited exceptions, we and they will not directly or indirectly, without the prior written consent of Merrill Lynch & Co., on behalf of the underwriters, offer to sell, sell or otherwise dispose of any of our shares for a period of 180 days after the date of this prospectus.

The market price and marketability of our shares may from time to time be significantly affected by numerous factors beyond our control, which may adversely affect our ability to raise capital through future equity financings.

The market price of our shares may fluctuate significantly. Factors, many of which are beyond our control, may significantly affect the market price and marketability of our shares, which may adversely affect our ability to raise capital through equity financings. These factors include the following:


	•	price and volume fluctuations in the stock markets generally;

	•	significant volatility in the market price and trading volume of securities of registered investment companies, business development companies or companies in our sectors, which may not be related to the operating performance of these companies;

	•	changes in our earnings or variations in operating results;

	•	any shortfall in revenue or net income or any increase in losses from levels expected by securities analysts;

	•	changes in regulatory policies or tax guidelines;

	•	operating performance of companies comparable to us;

	•	general economic trends and other external factors; and

	•	loss of a major funding source.

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements. We may, in some cases, use words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” “will,” or “may” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this prospectus are subject to a number of risks and uncertainties, some of which are beyond our control, including, among other things:


	•	our ability to successfully operate the businesses on a combined basis, and to effectively integrate any future acquisitions;

	•	our ability to make and finance future acquisitions, including, but not limited to, the acquisitions described in this prospectus;

	•	our ability to implement our operating and internal growth strategies;

	•	the regulatory environment in which our initial businesses operate, rates implemented by regulators of our businesses, including Ofwat, and our relationships with governmental agencies and authorities;

	•	changes in the current treatment of qualified dividend income and long-term capital gains under current U.S. federal income tax law;

	•	decisions made by persons who control our initial investments and jointly control CHL, including decisions regarding dividend policies;

	•	our holding company structure, which may limit our ability to meet our dividend policy;

	•	extraordinary or force majeure events affecting the facilities of our businesses and investments;

	•	changes in patterns of commercial or general aviation air travel, or automobile usage, including the effects of changes in airplane fuel and gas prices;

	•	foreign exchange fluctuations;

	•	changes in general economic or business conditions or economic or demographic trends in the United States and other countries in which we have a presence, including changes in interest rates and inflation; and

	•	costs and effects of legal and administrative proceedings, settlements, investigations and claims.

Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. A description of known risks that could cause our actual results to differ appears under the caption “Risk Factors” and elsewhere in this prospectus. Additional risks of which we are not currently aware could also cause our actual results to differ.

In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements. The forward-looking events discussed in this prospectus may not occur. These forward-looking statements are made as of the date of this prospectus. We undertake no obligation to publicly update or revise any forward-looking statements after the completion of this offering, whether as a result of new information, future events or otherwise, except as required by law.

We estimate that our net proceeds from the sale of shares in this offering will be approximately $ (approximately $ if the underwriters’ overallotment option is exercised in full) based on the initial public offering price of $ per share and after deducting underwriting discounts and commissions and our estimated offering expenses. In addition, our Manager has agreed to purchase shares at a price equal to the initial offering price per share in a separate, private placement transaction concurrently with, and conditioned upon, the completion of this offering.

We intend to use the net proceeds from this offering to pay the purchase price and related costs of our acquisitions of our initial businesses and investments. The table below summarizes the expected sources and uses of the proceeds from this offering:


(1)	The purchase price of North America Capital Holding Company, which will own Atlantic, is expected to be $117.2 million, increasing at a rate of 15% per year from the date on which North America Capital Holding Company closes the acquisition of Executive Air Support, Inc. until the date on which we close the acquisition of North America Capital Holding Company. For purposes of the table above, we have assumed that the closing date of the acquisition by North America Capital is July 31, 2004 and that the closing of our acquisition occurs on September 30, 2004, resulting in a total purchase price of $120.1 million.

(2)	The purchase price of Macquarie Yorkshire Limited, which owns 50% of CHL, will be £43.3 million if the closing of the acquisition occurs prior to September 30, 2004 and £41.5 million if the closing occurs after September 30, 2004. The purchase price decreases by £9,750 for each day that the closing occurs prior to September 30, 2004 and increases by £9,553 for each day that the closing occurs after September 30, 2004. For purposes of the table above, we have assumed that the purchase price is £43.3 million and that the closing of our acquisition occurs on September 30, 2004. The U.S. dollar amount is based on £0.5440 per $1.00, the noon buying rate as reported by the Federal Reserve Bank of New York on June 2, 2004.

(3)	The purchase price of our interest in SEW will be £19.4 million, increasing at a rate of 12% per year from April 30, 2004 until the date on which the closing of our acquisition occurs. Assuming the closing of the acquisition occurs on September 30, 2004, the total purchase price would be £20.4 million on September 30, 2004. The U.S. dollar amount is based on £0.5440 per $1.00, the noon buying rate as reported by the Federal Reserve Bank of New York on June 2, 2004.

See “Exchange Rates” for the exchange rates for Pounds Sterling and Australian dollars. For more information about our acquisitions of our initial businesses and investments, see “The Acquisition of Our Initial Businesses and Initial Investments.”

Pending application of the net proceeds to purchase our initial businesses and investments as described above, we plan to invest the net proceeds of this offering in cash or U.S. government obligations. In the event that the conditions in respect of the closing of any of our planned purchases of our initial

The table below sets forth the high and low of the following exchange rates for each period based on the noon buying rates as reported by the Federal Reserve Bank of New York.

We initially intend to declare and pay regular quarterly cash distributions on all outstanding shares and we expect the initial quarterly distribution to be approximately $ per share starting with the quarter ending , 2004.

The declaration and payment of this and any other distributions and, if declared, the amount of any such distribution will be subject to the discretion of the company’s board of directors, which will include a majority of independent directors. The company’s board of directors will take into account such matters as general business conditions, our financial condition, results of operations, capital requirements, contractual, legal and regulatory restrictions on the payment of distribution by us to our shareholders or by our subsidiaries to us, and such other factors as the board of directors may deem relevant.

We will use the proceeds of this offering to acquire our initial businesses and investments in separate transactions for cash from the Macquarie Group or from infrastructure investment vehicles managed by the Macquarie Group. When the company entered into the agreements discussed below, there were no independent directors on the company’s board. See “Certain Relationships and Related Party Transactions — Our Relationship with the Macquarie Group.” For purposes of this discussion, we have used a Pounds Sterling to U.S. dollar exchange rate of £0.5440 to $1.00 and an Australian dollar to U.S. dollar exchange rate of AUD$1.4347 to $1.00, both of which are the noon buying rates published by the Federal Reserve Bank of New York on June 2, 2004.

On June 7, 2004 our wholly owned subsidiary, Macquarie Infrastructure Assets Inc., or MIA Inc., entered into a stock purchase agreement with Macquarie Investment Holdings, Inc., a wholly owned indirect subsidiary of Macquarie Bank Limited, to acquire 100% of the ordinary shares in North America Capital. The purchase price is equal to the cost of Macquarie Group’s total equity investment in North America Capital, which is expected to be approximately $117.2 million, and increases over time as discussed below. In addition, MIA Inc. will assume $130 million of senior debt that North America Capital is expected to incur prior to our purchase. The purchase price increases at a rate of 15% per year from the date of closing of the underlying stock purchase agreement for the acquisition by North America Capital of Executive Air Support, Inc., the holding company for Atlantic, until the date of the closing of our acquisition of North America Capital. Under the terms of our stock purchase agreement, North America Capital is prohibited from making distributions during that period.

Macquarie Investment Holdings, Inc. entered into a stock purchase agreement on April 28, 2004 to acquire 100% of the shares of Executive Air Support, Inc. for $217.0 million, with no assumption of debt, and estimated capital expenditure adjustments of $1.4 million and working capital adjustments. Macquarie Investment Holdings, Inc. has assigned this stock purchase agreement to its wholly owned subsidiary, North America Capital. In addition to the purchase price, we expect North America Capital to incur fees and other expenses of $12.0 million in connection with the completion of the acquisition and to contribute adequate cash for debt service reserves, capital expenditures and working capital of $16.8 million. Part of our purchase price covers payment to the Macquarie Group of $7.9 million for expenses incurred in connection with the acquisition by North America Capital of Atlantic, including advisory and debt arranging services, bridge financing and equity underwriting fees.

We expect North America Capital to raise senior debt of $130 million, with recourse only to the operating companies of North America Capital, to partially finance the acquisition. The remaining funds, expected to be $120.1 million, will be paid to the Macquarie Group. The total capital requirement, assuming closing dates of July 31, 2004 and September 30, 2004, respectively, for the transaction is expected to be $250.1 million.

The stock purchase agreement relating to Executive Air Support, Inc. includes an indemnity from the selling shareholders for breaches of representations and warranties, that is limited to $20 million except for breaches of representations and warranties regarding title, capitalization, taxes and any claims based on fraud, wilful misconduct or intentional misrepresentation. The acquisition of Executive Air Support, Inc. is subject to the receipt of necessary approvals from relevant airport authorities.

The stock purchase agreement between MIA Inc. and Macquarie Investment Holdings Inc. contains various provisions customary for transactions of this size and type, including representations and warranties with respect to the conditions and operations of the business and covenants with respect to the conduct of the business, in each case, during the period of Macquarie Investment Holdings Inc.’s ownership. The representations and warranties are subject to certain customary limitations, and the maximum amount of indemnification payable under the agreement is equal to the purchase price.

Completion of our acquisition of North America Capital depends upon a number of conditions being satisfied by March 31, 2005, including customary closing conditions, the successful completion of this offering, the expiration or early termination of any waiting period under the Hart-Scott-Rodino Antitrust Act of 1976, as amended, or the HSR Act, the closing of the underlying stock purchase agreement for the acquisition by North America Capital of Executive Air Support, Inc. and our satisfaction with the amount and terms of senior debt raised by North America Capital to finance its acquisition. In addition, there will need to be a resolution of the fixed base operations and the management contracts conflict between Executive Air Support, Inc. and Macquarie Airports North America Inc., an FBO business owned by a Macquarie Group managed vehicle that is satisfactory to us. For a discussion of this conflict see “Business — Our Airport Services Business — Business — Locations.”

On June 7, 2004, our wholly owned subsidiary MIA Inc., entered into a stock purchase agreement with Macquarie Specialised Asset Management Limited, as Trustee for and on behalf of Macquarie Global Infrastructure Fund A, and Macquarie Specialised Asset Management 2 Limited, as Trustee for and on behalf of Macquarie Global Infrastructure Fund B, to acquire 100% of the ordinary shares in MAPC for cash consideration of $33.0 million, subject to adjustment depending upon the minimum cash balance. The shares of MAPC are currently owned by Macquarie Global Infrastructure Funds A and B, which form a part of an unlisted infrastructure fund managed by the Macquarie Group referred to as GIF.

MAPC owns approximately 83% of the outstanding ordinary membership units in Parking Company of America Airports Holdings LLC, or PCAA Holdings. In turn, PCAA Holdings owns approximately 51.9% of the outstanding ordinary membership units in PCAA Parent LLC, or PCAA Parent. PCAA Parent is the 100% owner of a number of subsidiaries that collectively own and operate the airport parking business.

The stock purchase agreement contains various provisions customary for transactions of this size and type, including representations and warranties with respect to the condition and operation of the business, covenants with respect to the conduct of the business between the signing and closing of the acquisition and indemnities from the vendors for any losses suffered by us as a result of a breach of any representation, warranty or covenant contained within the stock purchase agreement. The representations, warranties and indemnity are subject to certain customary limitations, and the maximum amount payable under the indemnity is $2.4 million, net of insurance proceeds.

The stock purchase agreement also provides that MIA Inc. will offer to purchase the membership interests of the minority investors in PCAA Parent and PCAA Holdings for cash on similar terms to the proposed acquisition of MAPC.

Completion of the acquisition depends upon a number of conditions being satisfied or waived prior to August 15, 2004, including the successful completion of this offering, customary closing conditions and the expiration of any waiting period under the HSR Act.

On June 7, 2004, the company entered into a sale and purchase agreement with Macquarie European Infrastructure plc, or MEIP, an entity that is a member of the Macquarie Infrastructure Group, or MIG, to acquire, either directly or indirectly, 100% of Macquarie Yorkshire Limited, or Macquarie Yorkshire, for £43.3 million ($79.6 million) assuming closing occurs on September 30, 2004. The price will be adjusted downward by £1.8 million ($3.2 million) if closing occurs after September 30, 2004 if a distribution, scheduled for that date in that amount, is received by MEIP before closing occurs. In addition, the price will be increased by £9,553 for each day closing occurs after September 30, 2004 and will be decreased by £9,750 for each day closing occurs before September 30, 2004. MIG is an infrastructure fund managed by the Macquarie Group that is listed on the Australian Stock Exchange.

Macquarie Yorkshire owns 50% of CHL, which in turn owns 100% of Connect M1-A1 Limited. Connect M1-A1 Limited is the holder of the Yorkshire Link concession.

The sale and purchase agreement contains various provisions customary for acquisitions of this size and type, including representations and warranties with respect to the condition and operation of the business and covenants with respect to the conduct of the business between the signing and closing of the acquisition. The representations and warranties are subject to certain customary limitations, and the maximum amount payable in respect thereof is an amount equal to the purchase price.

Completion of the acquisition depends upon a number of conditions being satisfied or waived by March 31, 2005, including the successful completion of this offering and customary closing conditions.

On June 7, 2004, the company entered into a purchase agreement with Macquarie Bank Limited to purchase an as yet undetermined number of stapled securities issued by MCG with an aggregate value of up to $70 million in an at-the-market transaction. The purchase agreement provides that in no circumstances will the acquired interest be in excess of 17.5% of the total outstanding stapled securities of MCG, with the aggregate purchase price and the number of securities being adjusted accordingly. Macquarie Infrastructure Assets LLC has the option to reduce the aggregate value of the stapled securities being purchased to no less than $40 million.

Stapled securities are equity securities comprising securities in two (or more) separate entities that have to be traded as a single stapled security. In MCG’s case, stapled securities comprise a unit in an affiliated Australian trust and a share in an affiliated Australian company. MCG stapled security holders have an equal number of units in the trust and shares in the company.

The number of stapled securities to be purchased and the price per stapled security will be determined at the date on which we enter into the underwriting agreement for this offering. The stapled security price we will pay will be the volume-weighted average trading price over the ten trading days immediately prior to that date, converted into a U.S. dollar price per stapled security using the Australian dollar/US dollar exchange rate on that date. The number of stapled securities we will purchase will be equal to the aggregate purchase price in Australian dollars divided by the determined price per stapled security. Based on an aggregate purchase price of $70 million or AUD 100.4 million, and the MCG stapled security closing price as of June 2, 2004 of AUD 3.49, we would acquire 28.8 million stapled securities, or 17.25% of MCG.

The purchase agreement contains various provisions customary for transactions of this size and type, including representations and warranties with respect to authority, title, qualification and absence of conflict.

Completion of the acquisition depends upon a number of conditions being satisfied, including the successful completion of this offering and customary closing conditions. The purchase agreement will terminate automatically if the company or Macquarie Bank Limited comes into possession of any material, non-public information in relation to MCG from the period beginning one day before the date of printing the preliminary prospectus. The company may also terminate the purchase agreement on the date of the preliminary prospectus if the acquisition would be reasonably likely to have an adverse effect on our ability to pay dividends as contemplated in that preliminary prospectus.

On June 7, 2004, the company and Macquarie Water Luxembourg SarL, or Macquarie Luxembourg, entered into a contribution and subscription agreement pursuant to which the company will subscribe for 17.5% of the ordinary shares and preferred equity certificates, or PECs, of Macquarie Luxembourg for approximately £19.4 million ($35.7 million) subject to certain price adjustments as discussed below. PECs are an income participating debt instrument for Luxembourg legal, accounting and

Macquarie Luxembourg will use the proceeds of the subscription to acquire 9,712,500 shares in Macquarie Water (UK) Limited, or Macquarie Water, to subscribe for loan notes in Macquarie Water with a nominal amount of £9,712,500, to pay certain stamp and capital duty taxes relating to the subscription and to fund a working capital requirement of Macquarie Luxembourg. The shares in Macquarie Water will be acquired from Macquarie Leasing (UK) Limited, or Macquarie Leasing, an affiliate of the Manager and the proceeds from the issuance of the loan notes will be used by Macquarie Water to redeem loan notes of the same nominal amount held by Macquarie Bank Limited, also an affiliate of the Manager. Macquarie Water is the indirect holding company for SEW.

The subscription amount increases at a rate of 12% per year from April 30, 2004 to the date of subscription, reduced by the amount of any cash distributions received by Macquarie Leasing from the shares of Macquarie Water and interest on the notes in Macquarie Water held by Macquarie Bank Limited to be acquired in our transaction, during this period.

The company’s subscription under the contribution and subscription agreement is conditional upon the successful completion of this offering within twelve months of June 7, 2004. In addition, the subsidiaries of Macquarie Water are currently undertaking a refinancing and the company’s subscription is also conditional on the legal and intra-group financing structure of the subsidiaries of Macquarie Luxembourg after such refinancing being acceptable to the company.

Upon subscribing for ordinary shares and PECs in Macquarie Luxembourg, the company is required to enter into a deed of adherence to become a party to the shareholders’ agreement relating to Macquarie Luxembourg. See “Business — Our Investment in South East Water — Legal Matters — Shareholders’ Agreement.”

Pursuant to a sale and purchase agreement dated April 30, 2004 Macquarie Luxembourg acquired an effective 75.1% interest in SEW through the purchase of 41.7 million shares in Macquarie Water from Macquarie Leasing for £41.7 million ($76.6 million) and by subscribing for loan notes in Macquarie Water with a nominal value of £41.7 million, the proceeds of which were used by Macquarie Water to redeem notes with the same nominal value issued to Macquarie Bank Limited.

Macquarie Leasing and Macquarie Bank Limited currently own the remaining 24.9% of the issued share capital and loan notes of Macquarie Water, respectively. Under the sale and purchase agreement discussed above, Macquarie Luxembourg has a call option to acquire the remaining 24.9% interest in Macquarie Water, which it may exercise at any time up to and including December 31, 2004. This call option will be exercised in relation to a 17.5% interest in Macquarie Water to facilitate the company’s investment.

The share purchase agreement contains various provisions customary for acquisitions of this size and type, including representations and warranties with respect to the condition and operation of the water distribution business. These representations and warranties are subject to certain customary limitations set out in the agreement.

Macquarie Leasing and Macquarie Bank Limited subscribed for 100% of the ordinary shares and loan notes of Macquarie Water for £111.0 million in September 2003 to partially fund the purchase by Macquarie Water of 100% of SEW. The balance of the purchase price was funded with debt raised by Macquarie Water. The Macquarie Group was paid £4.0 million in advisory and debt raising fees by Macquarie Water upon closing of the acquisition of SEW.

The following table sets forth our unaudited pro forma capitalization, assuming no exercise of the underwriters’ overallotment option, at the assumed public offering price of $ per share and the application of the estimated net proceeds of such sale (after deducting underwriting and our estimated offering expenses). See “Use of Proceeds” You should read this information with the financial statements and related notes, the unaudited pro forma financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this prospectus.


(1)	Each share of trust stock representing one beneficial interest in the trust.

Macquarie Infrastructure Assets Trust and Macquarie Infrastructure Assets LLC were organized in April 2004 for the purpose of making the acquisitions and investments described below, using the proceeds of this offering. The following unaudited pro forma condensed combined balance sheet as of March 31, 2004 gives effect to:


	•	our acquisition of 100% of the shares of North America Capital, the owner of 100% of the capital stock of Executive Air Support, Inc., which owns Atlantic, for a total purchase price of $120.1 million in cash, and the incurrence by North America Capital of $130 million of senior debt used in the purchase of Executive Air Support Inc. from Atlantic’s existing shareholders, $2.9 million of which represents an increase of the purchase price at a rate of 15% per year from the assumed date of acquisition by North America Capital of Atlantic to our assumed acquisition date of September 30, 2004;

	•	our acquisition of 100% of the shares of MAPC, which owns a controlling interest in Macquarie Parking for a total purchase price of $33.0 million in cash;

	•	our acquisition of 100% of the shares of Macquarie Yorkshire, the owner of 50% of the capital stock of CHL, for a total purchase price of £43.3 million in cash ($79.6 million) as discussed below;

	•	our acquisition of AUD 91.8 million ($70.0 million) of stapled securities issued by MCG in an at-the-market transaction;

	•	our subscription for 17.5% of the ordinary shares and PECs of Macquarie Luxembourg for a total purchase price of £20.4 million ($37.5 million), £1.0 million of which represents an increase of the purchase price at a rate of 12% per year from April 30, 2004 to the assumed closing date of September 30, 2004;” and

	•	the offering of the shares offered hereby and the concurrent private placement to our Manager of $35 million in value of our trust shares,

as if all these transactions had been completed as of March 31, 2004. The purchase prices for certain of these acquisitions and investments are subject to adjustment.

The following unaudited pro forma condensed combined statements of operations for the year ended December 31, 2003 and for the three months ended March 31, 2004 give effect to these transactions as if they all had occurred at the beginning of the respective periods.

We refer to Atlantic and Macquarie Parking as the consolidated businesses, and the following unaudited pro forma condensed combined financial statements, or the pro forma financial statements, have been prepared assuming that our acquisitions of the consolidated businesses will be accounted for under the purchase method of accounting. Under the purchase method of accounting, the assets acquired and the liabilities assumed will be recorded at their respective fair values at the date of acquisition. The total purchase price has been allocated to the assets acquired and liabilities assumed based on estimates of their respective fair values, which are subject to revision.

CHL is the holding company that owns 100% of Connect M1-A1 Limited. Macquarie Yorkshire owns 50% of CHL. Accordingly, the pro forma financial statements have been prepared assuming our investment in CHL will be accounted for under the equity method of accounting. In addition to the investment in CHL, Macquarie Yorkshire has a loan from Connect M1-A1 Limited with an estimated fair value of £10.0 million ($18.4 million at March 31, 2004) and loans to Connect M1-A1 Limited with an estimated fair value of £11.1 million ($20.4 million at March 31, 2004). The difference between the purchase price (less the fair value of the loan from and loans to Connect M1-A1 Limited) and the underlying equity in CHL has been accounted for as if Connect M1-A1 Limited was a consolidated

The pro forma financial statements have been prepared assuming our investments in MCG and Macquarie Luxembourg will be accounted for under the cost method of accounting.

The company has entered into the management services agreement with the Manager, pursuant to which the Manager will provide the day-to-day operational and other management services for a base management fee and a performance fee. We have assumed that there is no debt at the company level and no commitments are outstanding to make future investments and that therefore, the base management fee will be calculated solely with reference to the market capitalization of the trust shares. See “Our Manager — Management Services Agreements — Fees” for a discussion of how the base and performance fees of our Manager are calculated.

The unaudited pro forma condensed combined statements of operations are not necessarily indicative of operating results that would have been achieved had the transactions described above been completed at the beginning of the respective periods and should not be construed as indicative of future operating results.

You should read these unaudited pro forma financial statements in conjunction with the accompanying notes, the financial statements of the consolidated businesses and the consolidated financial statements of CHL, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all included elsewhere in this prospectus.

Pro forma loss from continuing operations per share is based on and weighted average number of shares for the year ended December 31, 2003 and three months ended March 31, 2004, respectively, reflecting the shares issued from this offering as if such shares were outstanding from the beginning of the respective periods.

The selected consolidated financial data for Atlantic at December 31, 2002 and 2003 and for the years then ended were derived from the audited financial statements of Executive Air Support, Inc. included elsewhere in this prospectus. The selected consolidated financial data of Atlantic at March 31, 2004 and for the three months ended March 31, 2003 and 2004 were derived from the unaudited consolidated condensed financial statements of Executive Air Support, Inc. included elsewhere in this prospectus.

The selected consolidated financial data for Macquarie Parking for the year ended December 31, 2001 and for the period from January 1, 2002 to December 18, 2002 are derived from the audited consolidated statements of operations and cash flows of Off-Airport Parking Operations of PCA Parking Company of America, LLC, or the predecessor, included elsewhere in this prospectus. The selected consolidated financial data for Macquarie Parking for the period from July 23, 2002 to December 31, 2002 and for the year ended December 31, 2003 and at December 31, 2002 and 2003 are derived from the audited consolidated financial statements of Macquarie Parking included elsewhere in this prospectus. In respect of the year ended December 31, 2002, we have combined financial information from the consolidated statements of operations and cash flows of the predecessor for the period from January 1, 2002 to December 18, 2002 and from the consolidated financial statements of Macquarie Parking for the period from July 23, 2002 to December 31, 2002 included elsewhere in this prospectus. Presentation of this unaudited combined consolidated financial information is not a recognized presentation under accounting principles generally accepted in the United States and is not necessarily indicative of the actual operating results of Macquarie Parking for the year ended December 31, 2002. We have presented the unaudited combined financial information for the 12 months ended December 31, 2002 under this basis for convenience in comparing results with the results for 2002 and 2003. The selected financial data for Macquarie Parking at March 31, 2004 and for the three months ended March 31, 2003 and 2004 are derived from unaudited condensed consolidated financial statements included elsewhere in this prospectus.

The selected consolidated financial data for CHL at March 31, 2003 and December 31, 2003 and for the years ended March 31, 2002 and 2003 and for the nine months ended December 31, 2003 were derived from the audited financial statements included elsewhere in this prospectus. The selected consolidated financial data of CHL at March 31, 2004 and for the three months ended March 31, 2004 were derived from the unaudited consolidated financial statements, which are not included in this prospectus. We indirectly own 50% of CHL and accordingly will account for CHL under the equity method.

The selected financial data presented below represent the historical financial information for Atlantic, Macquarie Parking and CHL and do not reflect the accounting for these businesses upon completion of the acquisitions and the operation of the businesses as a consolidated entity. You should read this information with the financial statements and related notes, the unaudited condensed combined pro forma financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.


(1)	Established on July 23, 2002, operations commenced on December 19, 2002 with the acquisition of the predecessor.

(2)	Includes Avistar, which was acquired on October 1, 2003.

We are dependent upon cash distributions from our initial businesses and investments to meet our corporate overhead and management fee expenses and to pay dividends. We expect to receive dividends from our airport services business and airport parking business through our directly owned holding company for all of our businesses based in the United States, MIA Inc. We will receive interest and principal on our subordinated loans to Connect M1-A1 Limited and dividends from our toll road business and dividends from our investments in MCG and SEW through directly owned holding companies that we will establish to hold our interest in each business and investment.

Distributions received from our initial businesses and investments by the above-mentioned directly owned subsidiaries of the company, net of any U.S. tax payable by these subsidiaries, will be available first to meet management fees and corporate overhead expenses of these subsidiaries, the company and the trust and then to fund dividend payments by the company to the trust and then to shareholders (see “—Taxation” for a discussion of taxation). Base and performance management fees payable to our Manager will be allocated between the company and the directly owned subsidiaries based on the company’s internal allocation policy.

We intend to pursue a policy of paying a regular dividend per share, which we will seek to grow on a sustainable basis. We also plan to retain minimal cash reserves. As a result, our ability to fund significant acquisitions or capital expenditures from internally generated cash flows will be limited. Therefore, we anticipate that significant acquisitions or capital expenditures will be financed from a combination of equity issuances and/or the issuance of debt on a non-recourse basis at the operating business level, at the MIA Inc. level or, in limited circumstances, at the company level.

We are exposed to currency fluctuations with respect to our toll road business (denominated in Pounds Sterling) and our investment in SEW (denominated in Pounds Sterling) and MCG (denominated in Australian dollars). The impact of currency fluctuations on our earnings and cash flows is discussed under “Quantitative and Qualitative Disclosures about Market Risk.”

Our airport services business operates as Atlantic and will be owned by our indirect wholly owned subsidiary, Executive Air Support, Inc. Atlantic’s business depends upon the level of general aviation activity, in particular jet fuel consumption, at the airports at which Atlantic operates because its primary source of revenues is sales of jet fuel. General aviation activity is in turn a function of economic and demographic growth in the regions serviced by a particular airport and the general rate of economic growth in the United States. According to the FAA, in 2001 and 2002, the number of general aviation fixed wing turbine aircraft in the United States, which are the major consumers of the services of our airport services business, increased by 12.7% and 5.7%, respectively. General aviation jet fuel consumption declined in 2001 by 2.0% and increased in 2002 by 3.3%. The FAA projected that general aviation jet fuel consumption grew by 0.5% in 2003 and will grow by 2.9% in 2004.

Our airports are located near key business centers, for example, New York – Teterboro, Chicago – Midway and Philadelphia. We believe that as a result the growth in fuel consumption and general aviation activity is higher at our airports than the industry average nationwide. We also believe that through providing superior service, demand for our airport services will grow faster than the overall growth expected in the general aviation market.

Fuel revenue is a function of the volume sold at each location and the average per gallon sale price. The average per gallon sale price is a function of our cost of fuel plus, where applicable, fees paid to airports for each gallon sold (Cost of revenue - fuel), plus our margin. Our fuel gross profit (Fuel revenue

Atlantic also earns revenues from activities other than fuel sales (Non-fuel revenue). For example, Atlantic earns revenues from refueling general aviation customers and some commercial airlines on a “pass-through basis” where Atlantic stores fuel owned by customers, receiving a fee, generally on a per gallon basis. In addition, our airport services business earns revenue from aircraft landing and parking fees and by providing general aviation customers with other services, such as de-icing and hangar rental. Atlantic also provides de-icing services to commercial airlines.

In generating non-fuel revenue, our airport services business incurs supply expenses (Cost of revenue - non-fuel), such as de-icing fluid costs and payments to airport authorities, which vary from site to site. Cost of revenue - non-fuel are directly related to the volume of services provided and therefore increase in line with non-fuel revenue.

Atlantic incurs expenses in operating and maintaining each FBO, such as salaries, rent and insurance, which are generally fixed in nature, although the majority will increase over the medium term with the level of activity at the FBO. In addition, Atlantic incurs general and administrative expenses at the head office that include senior management expenses as well as accounting, information technology and other system costs.

Our airport parking business comprises MAPC and its subsidiaries. The revenues of Macquarie Parking are driven by the volume of passengers using the airports at which it operates, its market share at each location and its parking rates. Historically, air passenger numbers have grown over the long term at rates higher than general economic growth. Nevertheless, the impact of the events surrounding September 11, 2001 and the 2001 recession resulted in a decline in enplanements well in excess of the decline in economic growth. According to the FAA, enplanements in the United States declined by 7.6% in 2001 and 8.5% in 2002. Growth in air travel rebounded in 2003 consistent with trends following other severe disruptions to air travel, such as those caused by the Gulf War in 1991. The FAA reported that total enplanements in the United States grew by 2.5% in 2003 over 2002 despite the negative impact of the Iraq War and the SARS epidemic on air travel in 2003, and has forecast growth in total enplanements in the United States in 2004 of 7.1%.

Macquarie Parking aims to grow its revenue at rates higher than enplanement growth by increasing its market share at each location and increasing parking rates. Macquarie Parking competes for market share against other parking facilities (on- and off-airport) and to a lesser extent against alternative modes of transport to the airport, such as trains, taxis, private transport or rental cars. Among other factors, market share is driven by proximity of the parking facility to the airport, quality of service provided and parking rates. Macquarie Parking seeks to increase market share through marketing initiatives to attract air travelers who have not previously used off-airport parking and by improved services.

Macquarie Parking’s customers pay a daily fee for parking at its locations. The parking fees collected constitute the revenue earned by Macquarie Parking. The prices charged are a function of demand, quality of service and competition. Parking rate increases are often led by on-airport parking lots. Most airports have historically increased parking rates rapidly with increases in demand, creating a favorable pricing environment for off-airport competitors. Further, Macquarie Parking seeks to increase parking rates through the addition of services such as car washes.

In providing parking services, Macquarie Parking incurs expenses, such as personnel costs and the costs of leasing, operating and maintaining its shuttle buses. These costs are incurred in providing customers with service at each parking lot as well as in transporting them to and from the airport terminal. Generally, as the level of occupancy, or usage, at each of Macquarie Parking’s locations increases, labor and the other costs related to the operation of each facility increases.

Other costs incurred by Macquarie Parking relate to the provision of the infrastructure that the business requires to operate. These costs include marketing and advertising, rents and other real estate related costs and general and administrative expenses associated with the head office function.

We will own our toll road business through our 50% interest in CHL and share control with our joint venture partner Balfour Beatty. The sole source of revenue of our toll road business is “shadow tolls” received from the U.K. government. These revenues are a function of traffic volume and shadow toll rates. In general, traffic volume is driven by general economic and demographic growth in the region served. Yorkshire Link has been in operation for over five years and traffic volumes have grown continuously over this period. It is typical for a toll road to show strong traffic growth early in its life as drivers switch from congested alternative routes to the new road and then, as the road matures, for growth to trend toward levels that are reflective of overall economic and demographic growth in the region serviced by the road. As Yorkshire Link is a mature toll road, we expect that future traffic growth during the remainder of the concession will be consistent with economic growth rates.

Based on a formula contained in the concession, revenues generally increase with increases in the volume of traffic using Yorkshire Link and the rate of inflation in the U.K., although periodically, a factor is changed in the formula that serves to decrease or increase shadow toll rates. The payment calculations are discussed further in “Our Business — Interest in Yorkshire Link.” The operations of Yorkshire Link are relatively straightforward and currently require limited cash operating expenses since the road is new. For example, expenses, excluding depreciation, comprised only 7% of revenues for the year ended March 31, 2003. The majority of revenues after expenses will be used to service Connect M1-A1 Limited’s debt payments and the remainder will be used to pay distributions to us and our joint venture partner.

Operating expenses comprise two components: a recurring component that reflects the day-to-day cost of operating Yorkshire Link; and periodic maintenance that is necessary to maintain the condition of the road at the standard required by the concession. Day-to-day operating costs can generally be expected to grow at a rate moderately above the rate of inflation. As operating costs are low relative to revenues, significant percentage fluctuations in operating costs do not have a correspondingly significant impact on operating income.

We will account for our toll road business under the equity method of accounting and record profits and losses from our 50% indirect ownership in CHL in the equity in earnings of CHL line of our statement of operations. In addition, we will record interest income from our subordinated loans to Connect M1-A1 Limited in the interest income line of our statement of operations and interest expense on the loan from Connect M1-A1 Limited in the interest expense line.

We will hold a minority interest in MCG and will not have any influence over its operations. Therefore, our interest in MCG will be accounted for as a cost investment and dividends received will be included in our statement of operations. The revenues of MCG are derived mainly from the long-term contracts its investment, Broadcast Australia, has entered into to provide broadcast infrastructure to Australian government-owned television and radio stations. As a result, the revenues of MCG are relatively insensitive to macroeconomic conditions in Australia.

We will hold a minority interest in SEW and will not have significant influence over its operations. Therefore, our interest in SEW will be accounted for as a cost investment and dividends received will be included in our statement of operations. The U.K. water industry regulator determines the prices that SEW can charge its customers. These determinations are undertaken every five years using an approach designed to enable SEW to earn sufficient revenues to recover operating costs, capital infrastructure renewal and taxes and to generate a return on invested capital, while creating incentives for SEW to operate efficiently. As a result of this price determination mechanism and the fact that demand for water is relatively insensitive to economic conditions, SEW’s earnings are stable.

The following section discusses the historical consolidated financial performance of Executive Air Support Inc., the holding company for Atlantic.

The following table summarizes the statement of operations data of Atlantic for the three months ended March 31, 2003 and the three months ended March 31, 2004:

On December 31, 2003, Atlantic acquired two FBOs servicing the New Orleans market. Of the increase in fuel revenue, $1.6 million was attributable to New Orleans. Of the remaining increase, $2.3 million was attributable to an increase in gallons sold. The contribution to fuel gross profit of New Orleans for the three months ended March 31, 2004 was $447,000. The remaining change in fuel gross profit was $1.8 million, primarily due to a 16.2% increase in the volume of fuel sold and a 10.0% increase in the average per gallon margin. We increased the volumes of fuel sold at all but one of our locations due to generally higher levels of general aviation activity.

Of the increase in non-fuel revenue, $1.0 million was attributable to New Orleans. The remaining increase was mostly a result of an increase in general aviation activity. However, non-fuel revenue were negatively affected by the breaking of a hangar rental contract, which Atlantic has only been able to replace in part. The contribution to non-fuel gross profit by the New Orleans facilities in the three months

Of the increase in selling, general and administrative, $1.1 million was directly attributable to the acquisition of the New Orleans FBOs (most of which was attributable to labor costs). The remaining increase was attributable to higher activity levels and to the effect of the New Orleans acquisition on general and administrative costs. Operating income increased due to the acquisition of New Orleans and the increase in general aviation activity.

The net loss in the three months ended March 31, 2004 was directly attributable to the recognition of $5.2 million in other expense attributable to outstanding warrants that will be cancelled in connection with the acquisition of Atlantic.

The table below summarizes the statement of operations of Atlantic for the years ended December 31, 2002 and December 31, 2003:

Of the increase in fuel revenue, $2.9 million was attributable to an increase in gallons sold. Approximately half of the 10.6% increase in fuel gross profit was due to an increase in fuel sales volumes

The increase in non-fuel revenue was primarily due to the addition of a new contract with an operator of a fractional ownership aircraft business to provide refueling services at Teterboro Airport. This contract contributed approximately $800,000 to the increase in non-fuel revenue and to the increase in non-fuel gross profit.

Selling, general and administrative expenses grew by 5.3%, substantially less than the growth in revenues and gross profit.

Operating income increased reflecting increases in fuel volumes sold, fuel margin and the addition of the new contract at Teterboro.

The increase in income from continuing operations is primarily attributable to increases in operating income, decreases in interest expense, reflecting lower average outstanding debt balances, partially offset by an increase in income tax provisions and $1.2 million in warrant expense. In 2002, Atlantic committed to a plan to sell its flight services division, resulting in a loss from discontinued operations (net of applicable income tax provision) of $11.4 million in 2002, and $314,000 in 2003. As a result, Atlantic had a net loss in 2002. This sale was completed in the first quarter of 2003.

The following section discusses the consolidated historical financial performance of Macquarie Parking and its predecessor parking business.

In 2001, the airport parking business was owned by a predecessor and the 2001 results presented are those of the predecessor. On July 23, 2002, Macquarie Parking was established to acquire a controlling interest in the airport parking business, which it acquired on December 19, 2002. The results for the year ended December 31, 2002 reflect the combined results of:


	•	the predecessor’s results between January 1, 2002 to December 18, 2002; and

	•	Macquarie Parking results from December 19, 2002 to December 31, 2003.

Simultaneously with Macquarie Parking’s acquisition of the airport parking business, the business’ senior debt was refinanced with a $59.0 million facility. Also at that time, most of the airport parking business’s management function was contracted out to an affiliate of the predecessor.

On October 1, 2003, Macquarie Parking acquired the assets of Avistar airport parking business in an asset purchase. This increased the number of parking facilities from 10 to 20. The acquisition was partly funded by a new $126.0 million debt facility, which was also used to repay the existing $59.0 million debt facility. At that time, the management contract was terminated and the business reassumed the management of its operations. Although this change has resulted in higher general and administrative expenses, the current management structure allows us to have more direct control of the operations of the business.

The table below summarizes the consolidated statement of operations data for Macquarie Parking for the three months ended March 31, 2003 and the three months ended March 31, 2004.

Revenue in the three months ended March 31, 2004 was higher than in the three months ended March 31, 2003 mainly due to the acquisition of the assets of the Avistar parking business on October 1, 2003. Revenue growth from the pre-existing sites contributed the remaining 21.9% of the total growth. This growth was largely due to the overall increase in air passenger traffic at airports at which the business operates, which led to increased occupancy levels. In addition, in the second half of 2003, the business undertook a thorough review of discount programs offered at each of its locations. Use of discount coupons was rationalized, which led to lower overall discounts given and higher revenues. Macquarie Parking’s management expects that this trend will continue for the remainder of 2004.

Direct expenses increased mainly due to the acquisition of the Avistar parking business. The direct expenses at the pre-existing sites increased by 17.4%, due to an increase in the occupancy levels at the pre-existing sites, resulting in increased staffing and shuttle bus expenses.

Selling, general and administrative expenses increased as a result of a change in the management structure of the airport parking business, as described above.

Depreciation and amortization, increased largely as a result of additional depreciation expense being recognized after the acquisition of the Avistar business.

Operating income was $2.1 million in the three months ended March 31, 2004 compared to $114,000 in the three months ended March 31, 2003.

Interest expense increased significantly due to the additional $67.0 million of debt that was incurred in October 2003 to finance the acquisition of the Avistar business and the $4.8 million of debt

Results of operations improved from a net loss of $556,000 in 2003 to net income of $61,000 in 2004.

The table below summarizes the consolidated statement of operations data for Macquarie Parking for the year ended December 31, 2003 and the year ended December 31, 2002.

The increase in revenue for 2003 was due to the acquisition of the Avistar parking business on October 1, 2003. Revenue from the pre-existing sites was negatively impacted in the first half of 2003 by decreases in air travel due to the war in Iraq and the SARs epidemic. Those effects were offset by the following positive factors in the second half of 2003:


	•	an overall increase in air passenger traffic at airports where the business has operations;

	•	a reduction in the level of discounts given at Macquarie Parking’s locations;

	•	the expansion of the Pittsburgh facility in September 2002, where Macquarie Parking subleased a competing facility; and

	•	the opening of a second parking facility at Oakland in June 2003, which was previously used as a parking facility for employees of a corporation located at the airport.

If our airport parking business had acquired the assets of the Avistar business on January 1, 2003, we estimate that on a pro forma basis our airport parking business’ total revenue in 2003 would have been approximately $45.0 million.

Direct, general and administrative expenses increased due mainly to the acquisition of the Avistar parking business in late 2003. Expenses at pre-existing sites remained constant.

Overall selling, general and administrative expenses were relatively steady between 2002 and 2003. However, during this time the Macquarie Parking management structure underwent the two changes described above. During the time the management contract was in place, the operator was paid a management fee, which accounted for most of the general and administrative expenses of the business. This led to a decrease in general and administrative expenses during the time of the contract. After the termination of the management contract, Macquarie Parking employed all staff involved in the operations directly. This resulted in higher general and administrative expenses in the fourth quarter of 2003. We believe that the management structure change will prove beneficial to Macquarie Parking as it allows us direct control of the operations of the business operations and employees.

The increase in depreciation and amortization resulted from the acquisition of Avistar in October 2003 and the full year effect of the acquisition of PCAA by Macquarie Parking in December in 2002.

Interest expense decreased substantially in 2003 due to the change in the capital structure of the business that occurred at the time MAPC acquired the initial business in December 2002. The 2003 interest expense includes a non-recurring expense of $870,000, which was the result of interest rate swap termination costs incurred at the time of the refinancing of the $59.0 million facility on October 1, 2003. Further, the 2003 interest expense includes amortization of financing costs of $3.4 million capitalized financing costs associated with the $59.0 million facility that was refinanced at the time of the acquisition of Avistar.

If our airport parking business had acquired the Avistar business on January 1, 2003, we estimate that our airport parking business’ net loss in 2003 would have been equal to approximately $5.2 million.

The table below summarizes the consolidated statement of operations data for Macquarie Parking for the year ended December 31, 2002 and the predecessor for the year ended December 31, 2001.

Revenue in 2002 was impacted by significantly lower occupancy levels than in 2001 due to the events of September 11, 2001 and their effect on air travel. Despite this negative impact, the business managed to increase revenue in 2002 by increasing parking rates at some of its locations and by subleasing a facility previously occupied by a competitor at Pittsburgh International Airport. Closing this facility had the effect of increasing the level of occupancy at our existing operation for the last three months of 2002.

Direct expenses decreased in 2002 as a result of a decrease in the level of staffing and shuttle bus utilization in the last quarter of 2001. Staffing and shuttle bus utilizations were reduced reflecting the substantial decrease in occupancy at the parking lots due to the negative impact of the events of September 11, 2001 on passenger volumes. These decreases were largely sustained over the whole of 2002. The increase in general and administrative expenses in 2002 reflects approximately $373,000 of transaction costs incurred by Macquarie Parking in connection with the acquisition of the predecessor’s business and a similar increase in transaction related costs incurred by the predecessor.

At the beginning of 2002, Macquarie Parking’s predecessor partly refinanced its existing debt facilities. The increase in interest expense in 2002 over 2001 was due to the write-off of capitalized financing costs associated with the refinanced loan. Further, prior to Macquarie Parking’s acquisition, a portion of the interest expense on the predecessor’s loan facilities was being capitalized, increasing the level of debt, therefore increasing interest expense.

The following section discusses the historical consolidated financial performance for CHL. The historical statements of operations are denominated in Pounds Sterling and compiled in accordance with U.S. GAAP. We own a 50% interest in CHL through our indirect wholly owned subsidiary Macquarie Yorkshire Limited. CHL has a March 31 fiscal year end. The audited financial statements for the nine months ended December 31, 2003 are included in this prospectus. As a result, we discuss below the statements of operations for the nine months ended December 31, 2003, the unaudited statements of operations for the three months ended March 31, 2004 and the combined 12 months ended March 31, 2004.

The table below summarizes the statement of operations for CHL for the twelve months ended March 31, 2003, the nine months ended December 31, 2003 and the three months ended March 31, 2004 and the combined twelve month period ended March 31, 2004. The 12 month period is an aggregation of the nine month period and the unaudited three month period. The presentation of the unaudited combined period is presented for convenience in comparing results with the annual periods.

The increase in revenue for the combined 12 months ended March 31, 2004 compared to the year ended March 31, 2003 was primarily due to an increase in traffic volumes of 3.6% for other vehicles and 2.7% for heavy goods vehicles, partially offset by the effect of the band structure on shadow toll rates. See “Business — Our Interest in Yorkshire Link — Business — Calculation of Revenue.”

Cost of revenue other than depreciation plus general and administrative expense was £4.1 million for the combined 12 months ended March 31, 2004 compared to £3.1 million for the year ended March 31, 2003. In the 12 months ended March 31, 2004 technical support and director fees of £788,000 paid to the shareholders in CHL under agreements which have been terminated are included. This also

Net interest expense decreased for the combined 12 months ended March 31, 2004, reflecting the repayment of debt over the course of 2003 and 2004.

Income on interest rate swaps for the combined 12 months ended March 31, 2004 increased compared to the year ended March 31, 2003 due to the positive impact of increasing interest rates on the mark to market value of interest rate swaps during 2004. Connect M1-A1 Limited has entered into economic hedges to fix the interest rates on a substantial portion of its floating rate debt.

The table below summarizes the consolidated statement of operations for CHL for the year ended March 31, 2002 and the year ended March 31, 2003.

Revenue decreased for the year ended March 31, 2003 compared to the year ended March 31, 2002 despite a 3.95% increase in other vehicles traffic and 3.55% increase in heavy goods vehicle traffic representing the full year effect of the application of the new factor to the shadow toll rates, thereby reducing such rates.

The decrease in net interest expense for the year ended March 31, 2003 was largely due to the write-off in 2002 of £2.3 million of unamortized financing fees originally incurred and capitalized in 1996 in respect of debt that was replaced in that year. The balance of the reduction was as a result of a decrease in interest costs as a result of lower interest rates.

Overall net income decreased primarily due to the loss on interest rate swaps resulting from the effect of lower interest rates on the mark to market value of interest rate swaps, partially offset by the effect of lower interest rates on CHL’s floating rate debt.

While we do not intend to retain significant cash balances in excess of what is required as prudent reserves and will not initially have in place any credit facilities at company level, we believe that, based on the following factors, we will have sufficient liquidity and capital resources to meet our future liquidity requirements and the requirements of our dividend policy.


	•	All of our businesses and investments generate, and are expected to continue to generate, significant operating cash flow.

	•	The ongoing maintenance capital expenditure associated with our businesses is modest and readily funded from their respective operating cashflow.

	•	All substantial growth capital expenditure for 2004 will be funded with the proceeds of this offering.

	•	CHL also has amortizing debt that it will finance out of its foreseeable cash flow. We expect to have amortizing debt at Atlantic, payments on which also will be funded out of operating cash flow.

	•	Although Atlantic and Macquarie Parking will be required to refinance their existing debt facilities at their respective maturities, we believe that they will be able to either extend or replace the debt facilities when required.

The section below discusses the sources and uses of cash of our businesses and investments. As our businesses and investments have yet to be operated as a single entity, we have not provided historical or pro forma consolidated statements of cash flow for the company.

Going forward, our consolidated statement of cash flows will include the cash flow from operations for Atlantic and Macquarie Parking. In both of these businesses, revenues are mostly derived from cash sales and therefore they do not experience substantial fluctuations in their trade receivables. The cash flow provided by operations for these businesses for the year ended December 31, 2003 and the three months ended March 31, 2004 are summarized in the table below:

While cash flow from operations for the three months ended March 31, 2004 reflected the increased profitability of the business, it also reflected the fact that interest on Atlantic’s existing subordinated debt is payable semiannually in June and December and insurance is payable in the third quarter. As a result, the cash flow from operations for the three months ended March 31, 2004 overstates the cashflow from operations that can be expected on an annualized basis.

For the three months ended March 31, 2004, depreciation and amortization expense was $1.7 million. This accounted for the majority of the difference between net income and cash flow provided by operations during that quarter. The other significant impact on the cash flows from operations during the quarter was the prepayment of insurance premiums and real estate taxes, which resulted in a decrease in cash flows provided by operations of $0.8 million.

In the year ended December 31, 2003, depreciation and amortization expense was $8.7 million. Macquarie Parking’s other receivables increased by $1 million in 2003 due to the increased value of earned, but uncollected, parking revenues, an overpayment of real estate taxes and amounts related to the final adjustment in the purchase price of the assets of the Avistar business.

Going forward, our consolidated statement of cash flows will include the cash flows provided by or used in the investing activities of Atlantic and Macquarie Parking. The cash flow used in investing activities for these businesses for the year ended December 31, 2003 and the three months ended March 31, 2004 are summarized in the table below:

The primary use of cash in investing activities for the 2003 financial year was $3.3 million for the acquisition of the New Orleans facilities in December 2003, which was partially offset by cash proceeds of $2 million related to the sale of discontinued operations. Investing activities related to internal capital expenditures were $3.2 million in 2003, primarily related to the ongoing construction of a hangar at Chicago Midway.

Approximately $1 million was spent on capital expenditure for the three months ended March 31, of 2004, which was attributable to ongoing capital expenditure and the continued construction at Chicago-Midway.

The primary use of cash in investing activities was $67.3 million for the acquisition of the Avistar business in October 2003 and costs associated with that acquisition. In addition, Macquarie Parking also purchased the property at its Chicago facility, which it previously leased. The total cost of this property, excluding transaction costs, was $6.1 million. The majority of other cash used in investing activities related to the purchase by Macquarie Parking of shuttle buses and other equipment used in its operations.

During the three months ended March 31, 2004, Macquarie Parking made some improvements to its existing sites and purchased some additional equipment for approximately $100,000.

Going forward, our consolidated statements of cash flows will include the cash flows provided by or used in the financing activities of Atlantic and Macquarie Parking. The cash flow relating to financing activities for these businesses for the year ended December 31, 2003 and the three months ended March 31, 2004 are summarized in the table below:

Cash used in financing activities for Atlantic was $6.0 million in 2003, primarily to fund principal repayments on the senior and subordinated debt that was in place at the time.

Cash flow used in financial activities was $1.3 million for the first quarter 2004 was used to repay senior debt and $1.0 million was used to reduce a revolving facility that had been used to fund part of the New Orleans acquisition. Atlantic used $2.4 million to repay a note acquired as part of the New Orleans acquisition.

Our Manager is in discussions to put financing in place in connection with the acquisition of Atlantic. This facility will be secured by the assets of Atlantic and will be non-recourse to the company and its other subsidiaries. The facility currently under discussion is a seven-year partially amortizing facility, a portion of which will have to be refinanced at maturity.

In addition to the debt described above, letters of credit are required under the terms of some of the leases held by Atlantic. These are for an immaterial amount and will remain in place when we acquire the business.

Cash flows from financing activities primarily relate to the financing of the acquisition of the Avistar business and the land in Chicago.

On October 1, 2003, Macquarie Parking entered into a loan with GMAC Commercial Mortgage Corporation for $126.0 million, which was used to refinance debt and to partly fund the acquisition of the Avistar business. This new loan is secured by the majority of real estate and other assets of the airport parking business and is recourse only to Macquarie Parking and its subsidiaries. On December 22, 2003, Macquarie Parking entered into another loan agreement with GMAC Commercial Mortgage Corporation for $4.75 million. Macquarie Parking used the proceeds of this loan to partly fund the acquisition of land

Macquarie Parking also has a promissory note facility with Parking Company of America Management LLC, a minority investor, in the amount of $1.3 million. This facility has a fixed interest rate of 9.0% per year repayable March 31, 2005. The proceeds from this loan will be used to develop and operate the new parking facility at Oakland, California. As of the date of this prospectus, approximately $750,000 was drawn.

Macquarie Parking also raised $6.7 million in cash in 2003 by selling new member units in PCAA Parent. This cash was used to partly fund the acquisition of Avistar and the Chicago property. This amount was partly offset by a return of $6.3 million in paid-in capital by Macquarie Parking to its shareholders in early 2003, which resulted from over-funding by the shareholders at the time of Macquarie Parking’s initial investment in PCAA Parent in December 2002.

During 2003, Macquarie Parking did not make any dividend distributions. It utilized the cash it had on hand to partly fund expansion activities, namely the purchase of Avistar and the Chicago property. In addition, Macquarie Parking deposited approximately $2.6 million of its cash flow from investing activity into a debt reserve account as required by its $126 million senior loan facility.

In the three months ended March 31, 2004, Macquarie Parking deposited a further $1.3 million into the debt reserve. The account is now fully funded and Macquarie Parking does not expect to make further significant deposits into this account.

Connect M1-A1 Limited uses its cash flow after funding its operations to make interest and principal payments on its senior debt, to make interest and principal payments on its subordinated debt to Macquarie Yorkshire and Balfour Beatty and then to make dividend payments to CHL. CHL then distributes these dividends to Macquarie Yorkshire and Balfour Beatty.

Cash flow is generated from our toll road business in the form of interest received from Connect M1-A1 Limited on Macquarie Yorkshire’s subordinated loans to Connect M1-A1 Limited. The outstanding amounts, repayment schedule and the interest reflect our 50% interest in the subordinated loans. The terms of these subordinated loans are summarized below:

Interest received from the subordinated debt was £1.0 million for the 12 months ended March 31, 2004, £618,000 for the nine months ended December 31, 2003 and £661,000 for the year ended March 31, 2003. The cash interest paid for the twelve months ended March 31, 2004 was higher than for 2003 due to the deferral of March 2003 interest payments into April 2003 due to a decision by the previous owner to defer an interest payment pending a group restructuring.

Cash flow is also generated from dividends paid to us by CHL. The shareholders’ agreement for CHL between us and Balfour Beatty provides for Connect M1-A1 Limited, subject to the availability of cash and the availability of legally distributable reserves, to distribute all of its net income in the form of semiannual dividends to CHL. CHL in turn distributes the cash dividends received to us and Balfour Beatty. For the year ended March 31, 2004, CHL paid dividends to Macquarie Yorkshire of £1.7 million.

Distributions of dividends and payments of principal and interest on Connect M1-A1 Limited’s subordinated loans from Macquarie Yorkshire are subject to the timely payment of interest and principal and compliance by Connect M1-A1 Limited with covenants contained in the terms of its senior debt described below.

Connect M1-A1 Limited has two non-recourse senior debt facilities both of which are secured by the assets of Connect M1-A1 Limited which are summarized below:

The covenants in respect of the senior debt are tested semiannually for the periods ended March 31 and September 30. In the commercial senior debt facility, the loan life coverage ratio cannot be less than 1.15:1, and the debt service coverage ratio for the preceding and following twelve-month period cannot be less than 1.10:1. In the European Investment Bank facility, the loan life coverage ratio cannot be less than 1.15:1, and the debt service coverage ratio for the preceding and following twelve-month period cannot be less than 1.13:1. The loan life coverage ratio is calculated by reference to the expected cash flows of Connect M1-A1 Limited over the life of the senior debt discounted at the interest rate for the senior debt. If these covenants are not met for any semiannual period, subordinated debt and dividend payments from Connect M1-A1 Limited are required to be suspended until the covenants are complied with. While payments are suspended, excess cash balances are held by Connect M1-A1 Limited and are not required to be paid towards reducing the senior debt. At March 31, 2004, the loan life coverage ratio was 1.3 under the commercial senior debt facility and 1.34 under the European Investment Bank facility and the debt service coverage ratio was 1.2 for the preceding twelve months and projected at 1.156 for the following twelve months.

Going forward, our cash flow from operations will include dividends from our investments in MCG and SEW. Our pro forma dividends for 2003 were $3.2 million and $2.7 million for MCG and SEW, respectively. The dividends we receive from MCG and SEW are dependent on the performance of the underlying businesses and the dividend policies as determined by the board of directors of MCG and SEW. Also, until such time as the acquisition facility put into place in connection with the acquisition by the Macquarie Group of SEW is refinanced, SEW is not permitted to make any distributions. We anticipate that such facility will be refinanced in July 2004.

Atlantic spends approximately $2 million, or $200,000 per FBO, per year on capitalized expenditures. This amount is spent on items such as repainting, replacing equipment as necessary and any ongoing environmental or required regulatory expenditure, such as installing safety equipment. This expenditure is funded from cash flow from operations.

As described in “Business — Our Airport Services Business — Planned Capital Expenditures,” we intend to fund $4.1 million of specific capital expenditure in 2004 from the proceeds of this offering. The construction of the Chicago hangar will be continuing, with completion expected in September 2004. In addition, there are several other minor expansionary capital expenditure opportunities that have been identified. In all, we are expecting to spend approximately $2.6 million in 2004 for these purposes.

In addition, approximately $1.4 million will be spent at the closing of North America Capital’s acquisition of Atlantic to reimburse the prior owner for capital expenditure initiated on the Chicago project prior to the acquisition, but after April 1, 2004.

Macquarie Parking’s operations require relatively low levels of ongoing capital expenditure. Most ongoing capital expenditure spent by Macquarie Parking relates to the purchase of new shuttle buses, which currently cost approximately $50,000 each. Macquarie Parking intends to replace its entire shuttle bus fleet (approximately 120 vehicles as of March 31, 2004) every three to five years, using cash from operations, operating leases or capital leases.

Under the agreement governing its $126.0 million loan, Macquarie Parking is required to undertake certain capital expenditures by September 30, 2004. These capital expenditures are expected to improve the operations of Macquarie Parking and have been fully pre-funded as required by Macquarie Parking’s lender. The amount of this capital expenditure remaining in 2004 is expected to total approximately $430,000, all of which will be funded out of this reserve.

Macquarie Parking is also planning to spend approximately $880,000 in capital expenditure in 2004 from cash to improve Macquarie Parking’s facilities. Macquarie Parking expects that these ongoing improvements will attract new customers and enable the business to increase its parking rates.

Ongoing expenditure is required to maintain the condition of Yorkshire Link at the standard required under the concession on an ongoing basis and to meet the return condition requirements at the end of the concession when the road is transferred to the U.K. government. Connect M1-A1 Limited anticipates spending approximately £30.6 million, at 2003 prices, on periodic maintenance over the remaining life of the concession, with most of this expenditure occurring after 2020. This expenditure generally relates to resurfacing and the maintenance of structures over which Yorkshire Link runs and is in addition to the general day-to-day operating costs of Yorkshire Link.

The following tables summarize the future obligations of the initial businesses, due by period as of December 31, 2003, under their various contractual obligations, off balance sheet arrangements and commitments. Obligations that will not be assumed in connection with the purchases of the initial businesses are not reflected in these tables.


(1)	The long-term debt represents the expected principal obligations to be incurred upon the acquisition of Atlantic by North America Capital. It is anticipated that this debt will be subject to certain debt covenants. Debt payments could be accelerated upon violation of such covenants. We believe the likelihood of a debt covenant violation will be remote.

(2)	This represents the minimum annual rentals required to be paid under non-cancellable operating leases with terms in excess of one year.

(3)	This table does not reflect certain long term obligations, such as deferred taxes, where we are unable to estimate the period in which the obligation will be incurred.


(1)	The long-term debt represents the principal obligations to GMAC Commercial Mortgage Corporation in two facilities maturing between 2006 and 2009. The debt is subject to certain covenants, the violation of which could result in acceleration. We believe the likelihood of a debt covenant violation to be remote.

(2)	Capital lease obligations are for the lease of certain transportation equipment. Such equipment could be subject to repossession upon violation of the terms of the lease agreements. We believe the likelihood of such violation to be remote.

(3)	The company is obligated under non-cancelable operating leases for various parking facilities. This represents the minimum annual rentals required to be paid under such non-cancellable operating leases with terms in excess of one year.

This table also does not reflect obligations of CHL, as they do not have recourse to Macquarie Yorkshire. (CHL has long-term obligations of £319.8 million at December 31, 2003, consisting primarily of long-term debt.)

We intend to file a consolidated U.S. federal tax return for MIA Inc., which is the holding company for all of our U.S. businesses, including Atlantic and Macquarie Parking. As a consequence, Atlantic and Macquarie Parking will pay no federal taxes, and all tax obligations will be incurred by MIA Inc. based on the consolidated federal tax position of the U.S. businesses after taking into account deductions for management fees and corporate overhead expenses allocated to MIA Inc. We anticipate that 75-80% of the total management fees payable to our Manager by us will be payable by MIA Inc. with the balance payable by the company or the other directly owned subsidiaries of the company.

We do not expect that the holding companies for our interests in the toll road business, MCG or SEW will pay any federal taxes in the United States, as each of these entities will elect to be treated as a partnership.

The preparation of our financial statements in conformity with GAAP will require management to adopt accounting policies and make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. Upon the completion of the acquisitions contemplated in the offering, we will base our estimates on historical information and experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions and judgments and uncertainties, and potentially could result in materially different results under different conditions. Our critical accounting policies are discussed below. These policies are generally consistent with the accounting policies followed by the businesses we plan to acquire. These critical accounting policies will be reviewed with our independent auditors and the audit committee of the company’s board of directors.

Our acquisitions of our airport services business and airport parking business and future acquisitions of businesses that we will control will be accounted for under the purchase method of accounting. The amounts assigned to the identifiable assets acquired and liabilities assumed in connection with acquisitions will be based on estimated fair values as of the date of the acquisition, with the remainder, if any, will be recorded as goodwill. The fair values will be determined by our management, taking into consideration information supplied by the management of acquired entities and other relevant information. Such information will include valuations supplied by independent appraisal experts for significant business combinations. The valuations will generally be based upon future cash flow projections for the acquired assets, discounted to present value. The determination of fair values require significant judgment both by management and outside experts engaged to assist in this process.

Significant assets that will be acquired in connection with our acquisition of the airport services business and airport parking business will include contract rights, customer relationships, non-compete agreements, trademarks, domain names, property and equipment and goodwill.

Trademarks and domain names are considered to be indefinite life intangibles. Goodwill represents the excess of the purchase price over the fair value of the assets acquired. Trademarks, domain names and goodwill will not be amortized. However, we will be required to perform impairment reviews at least annually and more frequently in certain circumstances.

The goodwill impairment test is a two-step process, which will require management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of each of our reporting units based on a discounted cash flow model using revenue and profit forecasts and comparing those estimated fair values with the carrying values, which included the allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of a reporting unit’s “implied fair value” of goodwill requires the allocation of the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which will then be compared to its corresponding carrying value. The impairment test for trademarks and domain names requires the determination of the fair value of such assets. If the fair value of the trademarks and domain names is less than their carrying value, an impairment loss will be recognized in an amount equal to the difference. We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill and/or intangible assets. Such events include, but are not limited to strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our customer base, or material negative change in relationship with significant customers.

The “implied fair value” of reporting units will be determined by our management and will generally be based upon future cash flow projections for the reporting unit, discounted to present value. We will use outside valuation experts when management considers that it would be appropriate to do so.

Intangibles subject to amortization, including contract rights, customer relationships, non compete agreements and technology are amortized using the straight-line method over the estimated useful lives of the intangible asset after consideration of historical results and anticipated results based on our current plans. With respect to contract rights in our airport services business, we will take into consideration the history of contract right renewals in determining our assessment of useful life and the corresponding amortization period.

Property and equipment are initially stated at cost. Depreciation on property and equipment will be computed using the straight-line method over the estimated useful lives of the property and equipment after consideration of historical results and anticipated results based on our current plans. Our estimated useful lives represent the period the asset is expected to remain in service assuming normal routine maintenance. We will review the estimated useful lives assigned to property and equipment when our business experience suggest that they may have changed from our initial assessment. Factors that lead to such a conclusion may include physical observation of asset usage, examination of realized gains and losses on asset disposals and consideration of market trends such as technological obsolescence or change in market demand.

We will perform impairment reviews of property and equipment and intangibles subject to amortization, when events or circumstances indicate that the value of the assets may be impaired. Indicators include operating or cash flow losses, significant decreases in market value or changes in the long-lived assets’ physical condition. When indicators of impairment are present, management determines whether the sum of the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets. In this circumstance, the impairment charge is determined based upon the amount by which the carrying value of the assets exceeds their fair value. The estimates of both

The carrying value of our equity method investment will include an additional intangible asset to reflect the difference between the purchase price for our 50% investment in the toll road business and the underlying equity in the net assets of the business. This intangible asset value, which represents the concession based on a preliminary allocation, will be recorded at fair value to be determined by management, taking into consideration information supplied by the management of acquired entities, other relevant information including valuations supplied by independent appraisal experts. The concession will be amortized based on a percentage of usage of the toll road in the period relative to the total estimated usage over the life of the agreement. In addition, any loss in value that is other than temporary as a result of a significant change in the fundamentals or the business will be recognized as an impairment charge.

Our acquisition of shares of MCG will initially be recorded at cost and classified as “available for sale securities” on our consolidated balance sheet. Our intention is to hold MCG for an indeterminate period of time. Since MCG will have a readily determinable market value, we will record this investment at cost with unrealized gains and losses reported as a component of other comprehensive income. Declines in value judged to be other than temporary will be included in investment income (loss). Management will consider MCG’s financial position, results of operations, stock price performance, analyst research reports and other relevant information in determining whether a decline is other than temporary. We intend to evaluate our intentions to hold this investment on an annual basis.

Our initial investment in Macquarie Luxembourg due to our inability to exercise significant influence over the company’s operations will be recorded at cost. As Macquarie Luxembourg will not have a readily determinable market value, we will continue to record the investment at cost. We will perform periodic review of the investment, using information supplied by the management of Macquarie Luxembourg. We will further evaluate Macquarie Luxembourg based on the future cash flow projections, discounted to present value. We will use outside valuation experts when we consider it appropriate to do so.

Fuel revenue from our airport services business will be recorded when fuel is delivered or when services are rendered. Our airport services business will also record hangar rental fees, which will be recognized during the month for which service is provided.

Our airport parking business will record parking revenue as services are performed, net of allowances and local taxes. Revenues for services performed, but not collected as of a reporting date, will be recorded based upon the estimated value of uncollected parking revenues for customer vehicles at each location. Our airport parking business also offers various membership programs for which customers pay an annual membership fee. Such revenue will be recognized rateably over the one-year life of the membership. Fees collected for prepaid parking vouchers that can be redeemed in the future will be deferred and recognized as revenue when parking services are provided and the vouchers are deemed.

With respect to our investments in MCG and SEW, we expect, based on their history of paying dividends, to receive dividends on a periodic basis. We will record such dividends as dividend income at the point where we are entitled to receive the dividend.

Our investment in the toll road business also includes loans receivable from Connect M1-A1 Limited. In connection the purchase of the loans receivable we expect to record a premium over the face value of the loans. The loans receivable pay periodic interest. We will accrue interest income from the loans receivable. We will amortize the premium paid for the loans receivable using an effective interest rate method.

Advertising expenses incurred by our airport parking business will be expensed the first time the advertising takes place. Costs associated with direct response advertising programs may be prepaid and will be charged to expense once the printed materials are distributed to the public.

We will be exposed to currency risk on cash flows we receive from our businesses and investments located outside of the United States and on the translation of earnings. Our current policy is not to hedge the currency risk associated with foreign currency denominated income and cash flows, due to the uncertain size and timing of the distributions we expect to receive.

Our cash flows are exposed to the impact of fluctuations in the Pound Sterling/US dollar exchange rate on the interest income and dividends from CHL. Based on our 2003 pro forma interest income, a hypothetical 1% appreciation in US dollar against the Pound Sterling would reduce our interest income by $6,400 and our dividends from CHL by $17,000 (based on assumed dividends of £1.7 million).

The principal payments we will receive on the subordinated loans are also denominated in Pounds Sterling and fluctuations in the Pound Sterling/U.S. dollar will cause fluctuations in the actual cash we receive in U.S. dollars.

In relation to our investment in SEW, we are exposed to the impact of the Pound Sterling/ U.S. dollar exchange rate on our dividend income. Based on our pro forma dividend income from SEW in 2003, a hypothetical 1% appreciation of the U.S. dollar against the Pound Sterling would reduce our dividend income and cash flows by $26,740 per year.

In relation to our investment in MCG, we are exposed to the impact of the Australian dollar/ U.S. dollar exchange rate on our dividend income. Based on our pro forma dividend income from MCG in 2003, a hypothetical 1% appreciation of the U.S. dollar against the Australian dollar would reduce our dividend income and cash flows by $31,700 per year.

We will be exposed to interest rate risk in relation to the borrowings of our initial businesses. Our current policy is to enter into derivative financial instruments to fix variable rate interest payments covering at least half of the interest rate risk associated with the borrowings of our businesses, subject to the requirements of our lenders.

The anticipated senior debt associated with Atlantic is a partially amortizing $130.0 million floating rate facility maturing in 2011. We expect to enter into derivative financial instruments to fix 50% of the variable rate interest payments associated with this debt.

The impact of a 1% increase in the interest rate on the anticipated Atlantic debt results in a $1.3 million increase in the interest cost per year. A corresponding 1% decrease results in a $1.3 million decrease in interest cost per year.

We expect that Atlantic’s exposure to interest rate changes through the senior debt will be hedged 50%. These proposed hedging arrangements will partially offset any additional interest rate expense incurred as a result of increases in interest rates. However, if interest rates decrease, the value of our hedge instrument will also decrease. A 10% increase in interest rates will result in an increase in the fair market value of the hedge instrument of $3.1 million. A corresponding decrease will result in a $3.5 million decrease in fair market value.

Macquarie Parking has two senior debt facilities: a $126 million non-amortizing floating rate facility maturing in 2006, and a partially amortizing $4.7 million fixed rate facility maturing in 2009. Due to a requirement imposed by our lender we were unable to enter into any interest rate swap agreements in relation to the $126.0 million facility. Instead, we purchased an interest rate cap agreement at a base rate of LIBOR equal to 4.5% for a notional amount of $126.0 million for the term of the loan.

A 1% increase in the interest rate on the $126.0 million facility will increase the interest cost by $1.3 million per year. A 1% decrease in interest rates will result in a $1.3 million decrease in interest cost.

A 10% increase in interest rates will decrease the fair market value of the $4.7 million facility by $229,000. A 10% decrease in interest rates will result in a $247,000 increase in the fair market value.

In relation to the interest rate cap instrument, the 30-day LIBOR rate as at June 2, 2004 was 1.13% compared to our interest rate cap of a LIBOR rate of 4.50%. As interest rates are currently much lower than the interest rate cap, we are not currently receiving any payments under the cap.

We will receive floating rate interest payments from Connect M1-A1 Limited’s senior subordinated loan. A 1% increase in the interest rate on this loan results in a £50,000 increase in the interest received per year. A 1% decrease in the interest rate results in a £50,000 decrease in the interest received per year.

We have an exposure to changes in interest rates through Connect M1-A1 Limited’s junior subordinated loan provided by Macquarie Yorkshire. For a 10% increase in interest rates, the fair market value of this loan will decrease by £178,500. For a 10% decrease in interest rates, the fair market value will increase by £206,500.

Connect M1-A1 Limited has floating rate exposure on its commercial senior debt facility. For a 1% increase in the interest rate the interest cost will increase by £2.0 million per year. A 1% decrease will result in a decrease in the interest cost of £2.0 million per year.

The interest rate exposure of the commercial senior debt facility of Connect M1-A1 Limited has been fixed for 70% of the debt through a combination of five interest rate swaps. These interest swaps will partially offset any additional rate expense incurred as a result of an increase in interest rates. However, if interest rates decrease, the value of our hedging instruments will also decrease. The fair market value of these interest rate swaps will increase by £4.7 million in the event of a 10% increase in interest rates. A 10% decrease in interest rates will result in a £5.0 million decrease in the fair market value of these interest rate swaps.

Connect M1-A1 Limited has a fixed rate exposure on its European Investment Bank facility. A 10% increase in interest rates will result in a £1.8 million decrease in the fair market value of the facility. A 10% decrease in interest rates will result in a £2.0 million increase in the fair market value of the facility.

We have been formed to own, operate and invest in a diversified group of infrastructure businesses in the United States and other developed countries. We offer investors an opportunity to participate directly in the ownership of infrastructure businesses, which traditionally have been owned by governments or private investors, or formed part of vertically integrated companies. Our initial businesses consist of an airport services business, an airport parking business and a toll road. Our initial investments are in a regulated water utility and a communications infrastructure fund. We believe that the Macquarie Group’s demonstrated expertise and experience in the management, acquisition and financing of infrastructure businesses will provide us a significant competitive advantage in pursuing our strategy.

Infrastructure businesses provide basic services that are used everyday, such as roads and water. We intend to focus on the ownership and operation of infrastructure businesses with the following types of long-life physical assets:


	•	“User Pays” Assets. These assets are generally transportation-related infrastructure that depend on a per use system for their main revenue source. Demand for use of these assets is relatively unaffected by macroeconomic conditions because people use these types of assets on an everyday basis. While some “user pays” assets, such as airports and toll roads, are generally owned by government entities in the United States, other types, such as airport- and rail-related infrastructure, are typically owned by the private sector in the United States. Where the private sector owner has been granted a lease or concession by a government entity to operate the business, the business will be subject to any restrictions or provisions contained in the lease or concession.

	•	Contracted Assets. These assets provide or facilitate the delivery of basic services through long-term contracts with other businesses or governments. These contracts typically can be renewed on comparable terms when they expire because there are no or limited providers of comparable services. Contracted assets, such as communications towers, district energy systems and contracted power generation plants, are generally owned by the private sector in the United States. Where the private sector owner has been granted a lease or concession by a government entity to operate the business, the business will be subject to any restrictions or provisions contained in the lease or concession.

	•	Regulated Assets. Businesses that own these assets are the sole or predominant providers of essential services in their service areas and, as a result, are typically regulated by government-entities with reference to the level of revenue earned or charges imposed. Government regulated revenues typically enable the service provider to cover operating costs, depreciation and taxes and achieve an adequate return on debt and equity capital invested. Water utilities and electric and gas distribution and transmission networks are examples of regulated assets. In the United States, regulated assets are generally owned by publicly listed utilities, although some are owned by government entities.

By their nature, these businesses have sustainable and growing long-term cash flows due to consistent customer demand and the businesses’ strong competitive positions. Consistent customer demand is driven by the basic, everyday nature of the services provided. The strong competitive position results from high barriers to entry, including:


	•	high initial development and construction costs, such as the cost to build roads;

	•	difficulty in obtaining suitable land, such as the difficulty in obtaining suitable land near or at airports for parking facilities or FBOs;


	•	required government approvals, which may be difficult or time-consuming to obtain, such as obtaining approvals for a network of communications towers, or approvals to lay water pipes under city streets; and

	•	long-term exclusive concessions and customer contracts, such as contracts to provide broadcasting services to broadcast television companies.

These barriers to entry have the effect of protecting the cash flows generated by the infrastructure assets owned by these businesses. We will not seek to acquire infrastructure businesses that face significant competition, such as merchant electricity generation facilities.

The prices charged for the use of infrastructure assets that are our focus can also generally be expected to keep pace with inflation due to the pricing power generally enjoyed by “user pays” assets, the contractual terms of contracted assets, and for regulated assets the regulatory process that determines revenues and typically provides for an inflation adjustment.

Infrastructure assets, especially newly constructed assets, tend to be long-lived, require minimal maintenance capital expenditure and are generally not subject to major technological change or physical deterioration. This generally means that significant cash flow is often available from infrastructure businesses to service debt, make distributions to shareholders or expand the business, or both. Exceptions exist in relation to much older infrastructure assets, such as SEW’s water network, which due to its age requires significant maintenance capital expenditure.

The sustainable and growing long-term cash flows of infrastructure assets means that infrastructure assets can typically support more debt than other businesses, which can increase returns to shareholders. This indicates the importance of financial structuring and capital optimization in enhancing shareholder returns to owners of infrastructure assets.

We have two primary strategic objectives. First, we intend to pursue revenue growth and profit margin improvement, as well as to optimize the financing structure of our initial businesses. We will also seek to realize synergies and improve our competitive position through complementary acquisitions. Second, we intend to acquire businesses in attractive infrastructure sectors other than those in which our initial businesses and investments currently operate. A key component of our strategy is our association with the Macquarie Group, which is a leader in the management, acquisition and financing of infrastructure businesses worldwide.

We plan to increase the cash generated in our initial businesses through initiatives to increase revenues and improve profit margins. We have in place seasoned management teams at each of our initial businesses who will be supported by the demonstrated infrastructure management expertise and experience of the Macquarie Group in the execution of this strategy.


	Enhance client service and marketing programs. We intend to enhance the client services and the marketing programs offered by our initial businesses. Both Macquarie Parking and Atlantic have established sophisticated marketing programs and we intend to enhance these programs and extend them to any locations that we acquire in the future.

	Make selective capital expenditures. We intend to expand capacity of our existing locations and improve their facilities through selective capital expenditures. Specifically, we will make expenditures that we believe will generate additional revenues in the short term to cover the cost of those expenditures.

	Pursue complementary acquisitions. We intend to acquire and integrate additional FBO and airport parking businesses or facilities. Ownership in these sectors continues to be very fragmented, and, given the desire of existing owners of industry participants for liquidity, we


	believe attractive acquisition opportunities will arise. We expect that combining these complementary acquisitions will enable us to generate revenue, cost and/or financing synergies and will strengthen our competitive position. For example, the Macquarie Group was responsible for successfully expanding our airport parking business, through acquisitions by funds managed by the Macquarie Group, into the largest operator in its sector.

	Optimize debt financing. On an ongoing basis, we will also seek to optimize the debt financing of each of our businesses to maximize returns to our shareholders, for instance by refinancing existing debt where we can better match the changing cash flows and risk profile of the underlying business and to take advantage of favorable market conditions.

We expect our acquisition strategy to benefit from the Macquarie Group’s deep industry knowledge and ongoing identification of acquisition opportunities in the infrastructure sector, where opportunities often are not widely offered, well-understood or properly valued. The Macquarie Group also has significant expertise in the execution of such acquisitions, which can be time-consuming and complex.

We intend to acquire infrastructure businesses and investments in sectors other than those sectors in which our initial businesses operate, where we expect attractive returns and where the Macquarie Group has built relationships and expertise. While our focus is on businesses in the United States, we will also consider opportunities in other developed countries. Generally, we will seek to acquire controlling interests, but we may acquire minority positions in attractive sectors where those acquisitions generate immediate dividends and where our partners have similar objectives to our own. Our acquisitions of SEW and MCG are consistent with this philosophy. We believe that the sectors in which SEW and MCG operate will continue to present attractive acquisition candidates and that partnering with other Macquarie-managed vehicles with experience in those sectors is an appropriate way to pursue opportunities in those sectors. In the United States, we may choose to acquire non-controlling interests in regulated assets, in order to avoid being regulated under the Public Utility Holding Company Act.

Infrastructure sectors that may present attractive acquisition candidates include, in addition to our initial businesses, electricity and gas transmission and distribution networks, water and sewerage networks and communications infrastructure. We expect that acquisition opportunities will arise from two main sources, the private sector and the public (government) sector.


	•	Private sector opportunities. Increasingly, private sector owners of infrastructure assets are choosing to divest these assets for competitive, creditor or regulatory reasons. For instance, vertically integrated electric, gas and telecommunications utilities are increasingly disposing of infrastructure assets because they wish to concentrate on their core customer-focused business rather than the infrastructure supporting it, because they are over-leveraged and wish to pay down debt, because their capital structure and shareholder expectations do not allow them to finance these assets as efficiently as a dedicated owner of the assets, or due to regulatory pressure to unbundle their vertically integrated product offering. For example, over the last several years, the Federal Energy Regulatory Commission has created incentives for vertically integrated electric utilities to sell their electric transmission systems to independent owners. These incentives have led to some sales of electric transmission systems over the past three years, and the Macquarie Group has been very active in this market either as an adviser or as a principal.

	•	Public sector opportunities. Traditionally, governments around the world have financed the provision of infrastructure to the economy with taxation revenues and government borrowings. Over the last few decades, many governments have pursued an alternative model


		for the provision of infrastructure as a result of budgetary pressures. This model generally involves private sector participation to build, own, operate and finance infrastructure, allowing a government to transfer the risks of ownership to those whose business it is to assess and manage those risks and to provide necessary services at the least cost. This trend towards increasing private sector participation in the provision of infrastructure is well established in Australia, Europe and Canada, and it is just beginning in the United States. We believe the level of participation of the private sector in the provision of infrastructure will continue to increase and provide us with attractive investment opportunities over time.

We believe that the Macquarie Group’s extensive global infrastructure expertise and reach, strong relationships with industry participants and strong reputation in the industry will provide us with a significant competitive advantage in pursuing our acquisition strategy. We believe that their industry knowledge allows the Macquarie Group to value acquisition targets more effectively, properly assess risks and benchmark conclusions against experiences in other markets. In addition, the infrastructure industry typically requires in-depth specialist skills and industry knowledge, such as detailed knowledge of regulatory systems, in order to acquire infrastructure businesses effectively. We believe that the Macquarie Group’s expertise and reputation make it an attractive counterparty to asset sellers who wish to minimize transaction completion risk, and regulators who wish to ensure that the potential buyer understands the business to be purchased and will operate it effectively. The Macquarie Group is actively identifying acquisition opportunities in the infrastructure sector, where quality opportunities are often not widely offered, not well understood, or not properly financed or valued by other potential acquirers. Further, the Macquarie Group has significant expertise in the execution of such acquisitions, which can be time-consuming and complex. In respect of such acquisitions, we may engage affiliates of our Manager to provide financial advisory services on an arm’s-length basis on market terms upon approval by our independent directors. Pursuant to the terms of the management services agreement, our Manager will be obligated to present to us certain acquisition opportunities on a priority basis. See “Our Manager — Management Services Agreement — Acquisition Opportunities.”

We expect that we will generally compete with a number of industry and financial participants when seeking to acquire infrastructure businesses or assets. However, while competition may exist in particular infrastructure sectors, we are not aware of any one party that will compete with us across all infrastructure sectors. We believe that we possess some advantages over competing private equity acquirers of infrastructure assets. Private equity investors often have equity return requirements greater than those generally available due to the low risk nature of infrastructure and the performance incentives of private equity firms. In addition, private equity firms generally have a limited investment horizon and will seek to sell their portfolio companies in the near future. Our longer-term, infrastructure-focused strategy may be more appealing to government regulators and authorities and allows us to assess the full, long-term value of acquisition candidates.

When evaluating infrastructure businesses or assets for acquisition, we will undertake a rigorous due diligence process and financial evaluation. Generally, we consider two key principles to be essential to generating value to shareholders from infrastructure investing. First, through comprehensive due diligence, the expected cash flows from the infrastructure asset must be projected accurately. While future performance is always uncertain, the characteristics of infrastructure assets means that, with detailed due diligence, the future cash flows can be more reliably predicted than for many other asset classes. Second, the projected cash flows should generate a higher return on our investment than that which is commensurate to the cash flow risks. A determination of the projected cash flow risks also is an outcome of the detailed due diligence process undertaken. To assist us in identifying material risks and validating key assumptions in our analysis, we will generally engage experts to review key risk areas, including legal, tax, accounting, insurance, environmental and technical and operational matters. We believe the Macquarie

We will also assess the capability of the existing management team, including recent performance, expertise, experience, culture and incentives to perform. A further aspect of acquisition due diligence is a thorough understanding of the regulatory framework and the government objectives under which an infrastructure business operates. Infrastructure businesses are governed under different legislation and by different regulatory authorities depending on the jurisdiction and sector in which they operate. As a result, each business requires a detailed, individual regulatory assessment. We will conduct an in-depth regulatory analysis for each prospective acquisition, drawing on the Macquarie Group’s regulatory expertise in the United States and other jurisdictions.

We expect to fund any acquisitions with a combination of new debt at the company or MIA Inc. level, subsidiary non-recourse debt and issuance of additional shares of trust stock. At the completion of this offering, we will have a relatively low cash balance, and we expect that a significant amount of our cash from operations will be used to support our dividend policy. We therefore expect that in order to fund significant acquisitions, in addition to new debt financing, we will also need to either offer more equity or offer our shares to the sellers of businesses that we wish to acquire.

Our initial businesses and investments have generally been financed with subsidiary non-recourse debt that is repaid solely from the businesses’ revenues. The debt is generally secured by the physical assets, major contracts and agreements, when appropriate, cash accounts and, in certain cases, our ownership interest in that business. This type of financing is referred to as “project financing.” Project financing transactions generally are structured so that all revenues of a project or business are deposited directly with a bank or other financial institution acting as escrow or security deposit agent. These funds are then payable in a specified order of priority set forth in the financing documents to ensure that, to the extent available, they are used first to pay operating expenses, senior debt service and taxes and to fund reserve accounts. Thereafter, subject to satisfying debt service coverage ratios and certain other conditions, available funds may be disbursed for dividends or payments under shareholder loans or subordinated debt, where applicable.

These project financing structures are designed to prevent the lenders from looking to us or to our other businesses for repayment; that is, they are “non-recourse” to us and the other businesses and investments not involved in the specific project or business, unless we specifically agree to assume liability for certain liabilities or contingent obligations. We will have no liability for any liabilities or contingent obligations in relation to any of our initial businesses and investments. This structure effectively results in each of the businesses being isolated from the risks of another business we own or in which we have invested.

We do not currently have any debt at company level, nor is it our current intention to raise debt at that level to fund equity contributions for investments. However, we may in the future seek to raise debt at company level to finance acquisitions pending a subsequent equity offering, for working capital purposes or on a permanent basis. In addition, we may consider incurring debt at MIA Inc. instead of project financing to decrease debt service costs and increase flexibility in managing our consolidated cash flows.

Our Manager is a member of the Macquarie Group, which, together with its associated entities worldwide, is a global investment banking group headquartered in Australia with over 5,000 employees in 18 countries as of March 31, 2004. The Macquarie Group is one of the global leaders in advising on the acquisition, disposition and financing of infrastructure assets and the management of infrastructure investment vehicles on behalf of third-party investors. Macquarie developed its infrastructure expertise in the Australian market in the 1990s, when Australian state and federal governments engaged in significant privatization programs, including privatizations of airports, toll roads, telecommunications, and electric and

gas companies. This resulted in Australian state and federal governments completing the privatization of over $63 billion of assets, the second largest value of privatizations of all countries in the 1990s, according to the Organisation for Economic Co-operation and Development. In contrast, privatization activity in the United States in the 1990s was less than $7 billion. The Macquarie Group has subsequently successfully extended its infrastructure expertise into other markets around the world, and now has over 330 infrastructure professionals in 14 countries.

Our Manager is part of the Macquarie Group’s Infrastructure and Specialised Funds division, which manages over $9 billion of funds as of March 31, 2004 on behalf of retail and institutional investors, invested in infrastructure assets and businesses, including toll roads, airports and airport-related infrastructure, communications, electric and gas systems, water utilities and rail. This division has been operating since 1996 and employed over 110 professionals as of March 31, 2004. The global infrastructure portfolio managed by the Macquarie Group on behalf of its managed funds and institutional investors, as of March 31, 2004, included 60 infrastructure assets in 14 countries, including the United States, Canada, United Kingdom, Australia, Germany, South Korea and Japan.

We expect that the Macquarie Group’s infrastructure advisory division, which employs over 220 professionals globally, including over 40 in North America, will be an important source of acquisition opportunities and financial and acquisitions advice for us. In recognition of the Macquarie Group’s infrastructure advisory expertise, Project Finance International named the Macquarie Group “Global Adviser of the Year” for 2003 and awarded “Infrastructure Deal of the Year for the Americas” to an electric transmission transaction where the Macquarie Group was the adviser. During 2003, the Macquarie Group globally advised on infrastructure transactions valued at more than $11 billion. While the Macquarie Group’s advisory division is separate from its infrastructure management division, historically the Macquarie Group’s advisory group has presented the various infrastructure investment vehicles under its management with a significant number of high quality infrastructure acquisition opportunities, although it has no contractual obligation to do so. We expect that through our Manager we will be presented with similar opportunities. Pursuant to the terms of the management services agreement, our Manager will be obliged to present to us, on a priority basis, acquisition opportunities in the United States that are consistent with our strategy. See “Our Manager — Management Services Agreement — Acquisition Opportunities” for a description of these priorities. The Macquarie Group will also be our preferred financial adviser.

We also believe that our relationship with the Macquarie Group will permit us to take advantage of their expertise and experience in debt financing for infrastructure assets. As infrastructure assets are usually able to support high levels of debt relative to equity, we believe that the ability of our Manager and our preferred financial advisor, the Macquarie Group, to source and structure low-cost project and other debt financing provides us with a significant competitive advantage when acquiring assets and will enable us to maximize returns to shareholders from those assets on an ongoing basis.

Our airport services business consists of Atlantic, which operates FBOs at ten airports, primarily in the northeastern United States. Atlantic principally services the general aviation industry and seeks to distinguish its FBOs through the provision of high quality services. Our airport services business had 2003 revenues of $78.4 million and 2003 operating income of $16.2 million. These results do not include two New Orleans sites that were purchased by Atlantic on December 31, 2003. Atlantic’s FBOs are not dependent on any individual customer for a material amount of their total revenue.

Atlantic was founded by the du Pont family in the 1930s and remained a family owned company until 1997. In April 2004, Macquarie Investment Holdings, Inc., through a wholly owned subsidiary, signed a sale and purchase agreement with the selling shareholders to acquire 100% of the shares in Executive Air Support Inc. (the current parent of the Atlantic operating companies). We have entered into a stock purchase agreement with Macquarie Investment Holdings, Inc. to acquire all its shares in this business. See “— Business — Legal Matters — Sale and Purchase Agreement with Selling Shareholders of Executive Air Support, Inc.” below and “The Acquisition of Our Initial Businesses and Initial Investments” for more detail.

FBOs predominantly service the general aviation industry. General aviation, which includes corporate and leisure flying, pilot training, helicopter, medevac and certain air freight operations, is the largest segment of U.S. civil aviation and represents the largest percentage of the active civil aircraft fleet. General aviation does not include commercial air carriers or military operations. In order to attract independent operators to service general aviation aircraft, local airport authorities grant FBO operators the right to sell fuel. Fuel sales provide most of an FBO’s revenue.

FBOs generally operate in an environment with limited competition and high barriers to entry. Airports have limited physical space for additional FBOs, due in part to safety restrictions that limit construction in the vicinity of runways. Airport authorities generally do not have the incentive to add additional FBOs unless there is a significant demand for capacity, as profitmaking FBOs are more likely to reinvest in the airport and provide a broad range of services, which attracts increased airport traffic. Government approvals and design and construction of a new FBO can also take significant time.

Demand for FBO services is driven by total general aviation aircraft in operation and average flight hours per aircraft. According to the FAA, both factors have recently experienced strong growth. According to the FAA, from 1994 to 2002, the fleet of fixed wing turbine aircraft, which includes jet aircraft but excludes smaller turbine aircraft, increased at an average rate of 8.3% per year. Fixed wing turbine aircraft are the major consumers of FBO services, especially fuel. Over the same period, the general aviation hours flown by fixed wing turbine aircraft have increased at an average rate of 8.6% per year. These factors have contributed to an average annual growth rate in general aviation jet fuel consumption of 9.8% from 1994 to 2002. This growth is and has been driven by a number of factors, in addition to general economic growth over the period, which include the following:


	•	passage of the General Aviation Revitalization Act in 1994, which significantly reduced the liability facing general aviation aircraft manufacturers;

	•	dissatisfaction with the increased inconvenience of commercial airlines and major airports as a result of security-related delays;

	•	growth in programs for the fractional ownership of general aviation aircraft (programs for the time share of aircraft), including NetJets, FlexJet and Flight Options. According to Honeywell’s 2003 Business Aviation Outlook, the number of fractional owners grew at a compound annual growth rate of 54.5% from 1993 to 2002, and growth of 11.2% per year is expected for the next five years; and


	•	a tax package passed by Congress in May 2003, which allows companies to depreciate 50% of the value of new business jets in the first year of ownership if the jets are purchased and owned by the end of 2004.

The FAA is forecasting continued growth in general aviation jet fuel consumption on average of 5.1% per year from 2003 to 2015.

The growth in the general aviation market has driven the demand for services provided by FBOs, especially fuel sales. The general aviation market is serviced by FBOs located throughout the United States at various major and regional airports. According to Aviation International News, there are approximately 4,500 FBOs throughout North America, with generally one to five operators per airport. Most of the FBOs are privately owned by operators with only one or two locations. There are, however, a number of larger industry participants, including Signature Flight Support owned by BBA plc.

However, we believe that the events of September 11, 2001 have increased the level of general aviation activity. We believe that safety concerns for corporate staff combined with increased check-in and security clearance times at many U.S. airports have increased the demand for private and corporate jet travel.

We believe that Atlantic’s FBO business will continue to benefit from the overall growth in the corporate jet market and the demand for services that our business offers. However, we believe that our airport services business is in a position to grow at a rate in excess of this industry growth through our internal growth strategies, marketing and acquisitions.

Internal Growth. We plan to grow revenues and profits by continuing to focus on attracting pilots and passengers who desire full service and quality amenities. Atlantic will continue to develop its staff training to provide a level of service in excess of discount fuel suppliers. In addition, Atlantic will make selective capital expenditures that will increase revenues and reinforce Atlantic’s reputation for service and high quality facilities, potentially allowing Atlantic to increase profits on fuel sales and other services over time.

Marketing. We plan to improve, expand and capitalize on our existing marketing programs, including our proprietary point of sale system and associated customer information database, and our “Atlantic Awards” program. Through our marketing programs we expect to improve revenues and margins by generating greater customer loyalty, encouraging “upselling” of fuel, cross-selling services at additional locations to existing customers, and attracting new customers.

Acquisitions. We will focus on acquisitions at major airports and locations where there is likely to be growth in the general aviation market. We believe we can grow through acquisitions and derive increasing synergies from economies of scale, including revenue and marketing, head office and other cost synergies. We believe the highly fragmented nature of the industry and the desire of owners for liquidity provide attractive acquisition candidates, including both individual facilities and portfolios of facilities. In considering potential acquisitions, we will analyze factors such as capital requirements, the terms and conditions of the lease for the FBO facility, the condition and nature of the physical facilities, the location of the FBO, the size and competitive conditions of the airport and the forecast operating results from the FBO. An example of this is at New Orleans, where Atlantic acquired two FBOs on December 31, 2003. By implementing Atlantic’s marketing programs and service style, these facilities have performed well for the first three months of 2004.

Atlantic has high quality facilities and operations and focuses on attracting customers who desire high quality service and amenities. Fuel sales represented approximately 74% of Atlantic’s revenue in 2003. Other services provided to these customers include de-icing, aircraft parking, hangar services and catering. Atlantic is the operator of fuel farms for the airport at two of its locations. Fuel is stored in fuel farms for Atlantic on its own account or, for a fee, for commercial carriers and other FBOs. Each Atlantic FBO operates refueling vehicles, either owned by the FBO or by the fuel company, and either maintains or has access to fuel storage tanks to support its fueling activities. Other services provided to commercial carriers include refueling from carriers’ own fuel supplies stored in the fuel farm, de-icing and ground and ramp handling services.

The price for fuel is largely dependent on the wholesale market price. Atlantic sells fuel to the users of its FBOs either at a contracted price, at a price negotiated directly with the customer or at the daily fuel price. While fuel prices can be volatile, Atlantic is generally able to pass fuel cost increases through to customers. To a lesser extent, our airport services business provides fueling services to commercial airlines (at New Orleans International and Chicago Midway) and some ground handling services (at New Orleans International).

Atlantic’s FBO facilities operate on long-term leases from airport authorities or local government agencies. Atlantic and its predecessors have a strong history of successfully renewing their leases at their FBOs, and Atlantic has held some of its leases since the 1940s, 1950s and 1960s. The leases have an average length of approximately 17 years.

The airport authority, for each lease, has termination rights under the lease. Standard to most contracts are terms allowing termination if the tenant defaults on the terms and conditions of the lease or abandons the property or if the tenant is insolvent or bankrupt. In addition, Atlantic’s FBOs at Chicago Midway, Philadelphia, Northeast Philadelphia and New Orleans International may be terminated with notice by the airport authority for convenience. In each case, there are compensation agreements or obligations of the authority to make best efforts to relocate the FBO. Most of the leases allow for the lease to be terminated if there are liens filed against the property.

Atlantic operates FBOs at both Republic Airport and Teterboro Airport. The manager of the airport at these sites is AvPorts, a business owned by another Macquarie Group managed vehicle. We have identified this conflict of interest and are working with the appropriate airport authorities to come to a mutually acceptable solution.

Atlantic is planning to undertake significant capital expenditures at some of its locations in the short to medium term. These expenditures are being made due to expected revenue increases or in return for lease extensions or both.

We believe Atlantic has an experienced marketing team and sophisticated marketing programs. Atlantic’s marketing activities support its focus on high quality service and amenities and are intended to generate greater customer loyalty, encourage “upselling” of fuel, cross-sell services at additional locations to existing customers, and attract new customers.

Atlantic has established two key programs. Each utilizes an internally developed point-of-sale system that operates at all locations. This system tracks all aircraft utilizing the airport and records which FBO the aircraft uses. To the extent that the aircraft is a customer of another Atlantic FBO but did not use the FBO at that location, a member of Atlantic’s customer service team will send a letter alerting the pilot or flight department of Atlantic’s presence at that site and inviting them to visit next time they are at that location.

The second key program is the “Atlantic Awards” program. This program operates through the point-of-sale system. For each 100 gallons of fuel purchased, the pilot is given a voucher for five “Atlantic Awards.” The pilot can begin accumulating points after registering the voucher on Atlantic’s website. Once 200 Atlantic Awards have been accumulated, the pilot is sent a pre-funded American Express card, branded with Atlantic’s logo. The card is recharged each time the pilot registers another $100 worth of vouchers on Atlantic’s website. This program has rapidly gained acceptance by pilots and is encouraging “upselling” of fuel, where pilots purchase more fuel than is required to get to the next airport.

Competition in the FBO business exists on a local basis at most of the airports at which Atlantic operates. Two of Atlantic’s FBOs are located at airports that currently allow only one FBO to operate, either because of the lack of suitable space at the airfield, or because the level of demand for FBO services at the airport does not support more than one FBO. The remaining eight Atlantic FBOs have a number of competitors located at the airports. Atlantic positions itself at these airports as a provider of professional service and quality staff. Staff are provided with comprehensive training on an ongoing basis to ensure high and consistent quality of service. Atlantic markets to high net worth individuals and corporate jets for clientele for whom fuel price is of less importance to FBO choice than service and facilities. While each airport is different, there generally are significant barriers to entry preventing new FBO competitors from entering the markets in which Atlantic operates, including limited availability of suitable land and local approvals.

There are several competitors with operations at five or more U.S. airports. These competitors tend to be privately held or owned by much larger companies, such as Signature Flight Support

Corporation, Piedmont Hawthorne Holdings Inc. and Million Air Interlink, Inc. Some present and potential competitors have or may obtain greater financial and marketing resources than we do, which may negatively impact our ability to compete at each airport or to compete for acquisitions. We believe that the airport authorities from which Atlantic leases space are satisfied with the performance of Atlantic’s FBOs and are therefore not seeking to solicit additional service providers.

The aviation industry is overseen by a number of regulatory bodies, the main one being the FAA.

At its FBOs, Atlantic is largely regulated by the local airport authorities through lease contracts with those authorities. Atlantic must comply with federal, state and local environmental statutes and regulations associated in part with numerous underground fuel storage tanks. These requirements include, among other things, tank and pipe testing for tightness, soil sampling for evidence of leaking and remediation of detected leaks and spills. Atlantic’s operations are subject to frequent inspection by federal and local environmental agencies and local fire and airline quality control departments. With respect to environmental and compliance requirements, we do not expect to have to undertake material capital expenditures nor do we expect that compliance and related remediation work will have a material negative impact on earnings or the competitive position of Atlantic. To date, Atlantic has not received any cease and abatement proceeding by any government agency as a result of failure to comply with applicable environmental laws and regulations.

The day-to-day operations management of Atlantic is undertaken by individual site managers. Local managers at each site are responsible for all aspects of the operations at their site. Responsibilities include ensuring that customer requirements are met by the staff employed at their sites and that revenue from the sites is collected, and expenses incurred, in accordance with internal guidelines. In order to maximize the revenue earned at the FBOs, local managers are, within the specified guidelines, empowered to make decisions as to fuel pricing and other services. In this way, Atlantic is able to respond to its customers’ needs efficiently and provide them with high quality service.

Atlantic’s operations are managed and overseen by a group of senior personnel responsible for each business and who, on average, have over 15 years experience in the aviation industry. Most of the business management team members have been employed at Atlantic (or its predecessors) for over 14 years and have established close and effective working relationships and understanding with local authorities, customers, service providers and subcontractors. These teams are responsible for, among other things, overseeing the FBO operations, setting strategic direction and ensuring compliance with all contractual and regulatory obligations.

Atlantic’s head office is in Plano, Texas. The head office provides the business with central management and performs overhead functions such as accounting, information technology, human resources, payroll and insurance arrangements.

As of March 31, 2004, Atlantic employed over 350 employees at its various sites. Approximately 24.9% of its employees are covered by collectively bargaining agreements. We believe that employee relations at Atlantic are good.

Atlantic does not own any real property. Its operations are carried out under various leases as described herein. See “— Business — Locations” above. Atlantic leases office space for its head office in Plano, Texas. The lease expires in 2005. We believe that these facilities are adequate to meet current and foreseeable future needs.

At its FBO sites, Atlantic owns or leases a number of vehicles, including fuel trucks, as well as other equipment needed to service customers. Some phased replacement and routine maintenance is performed on this equipment. We believe that the equipment is generally well maintained and adequate for present operations.

In April 2004, Macquarie Investment Holding, Inc. signed a sale and purchase agreement with the selling shareholders to acquire 100% of the shares in Executive Air Support, Inc., or EAS (the current parent of the Atlantic operating companies). Macquarie Investment Holdings, Inc. has assigned its rights and obligations under this agreement to North America Capital. This acquisition is subject to various conditions precedent, including approvals from various airport authorities, and is expected to close by July 2004. We have entered into a stock purchase agreement with Macquarie Investment Holding, Inc. to acquire all of its shares in North America Capital. By purchasing North America Capital, we will benefit from the protective provisions of the purchase between North America Capital and the selling shareholders of EAS. Pursuant to the sale and purchase agreement between the selling shareholders of EAS and North America Capital, the selling shareholders of EAS will provide Macquarie Investment Holdings, Inc. with standard representations, warranties and indemnities. Specific limitations on these indemnities include that:


	•	there is no liability under the agreement for breaches of representations and warranties or covenants and pending litigation and disputes until the aggregate of claims for such breaches and indemnities exceeds a $1 million deductible, from which point the indemnity is available for all claims. Liability for claims relating to tax and employment matters is not subject to such threshold. Notwithstanding the above, the selling shareholders or EAS will not be liable for individual claims of less than $25,000; and

	•	the selling shareholders’ indemnity is capped at $20 million for most matters covered by the indemnification provisions. Significant exceptions include breaches of key representations and warranties regarding capital stock, capitalization and fraud.

In addition, the sale and purchase agreement provides for a $2.5 million cash escrow account to be established following closing of the acquisition, from which indemnity payments will be able to be drawn. The funds in the escrow account will be released twelve months after closing, unless a claim is outstanding, including the legal proceeding discussed below under “— Legal Proceedings.”

On or about May 15, 2002, the families of two pilots killed in a plane crash in 2000 filed complaints in New York County Supreme Court against a number of parties including EAS and a formerly owned subsidiary, Million Air Interlink, Inc., or Million Air Interlink, asserting claims for punitive damages, wrongful death and pain and suffering. The plaintiffs are each seeking $100 million in punitive damages, $100 million for wrongful death and $5 million for pain and suffering. The plaintiffs’ claim arises out of the facts surrounding a plane crash allegedly caused by one of the aircraft’s engines losing power, which caused the plane to crash, killing all on board. The engine lost power as a result of fuel starvation. The plaintiffs allege this was caused by insufficient fuel or design fault. The plane had last been refueled prior to the accident at the Farmingdale FBO operated by Flightways of Long Island, Inc., or Flightways, on the day of the accident.

EAS and Million Air Interlink moved to dismiss the complaints for lack of jurisdiction because Flightways, rather than EAS or Million Air, was the entity that operated the Farmingdale FBO, and that employed the person who refueled the plane in question. The court denied the motion, permitting discovery to go forward on the jurisdictional issues, and with leave for the defendants to refile the motion if discovery warranted doing so. Flightways was added as a defendant. USAIG, the insurer of Flightways under the primary insurance policy, has assumed the defense on behalf of the three Atlantic defendants,

has denied any liability and is vigorously contesting the claims made. Discovery is proceeding, though not much has been taken in the cases thus far. The Atlantic defendants believe that the risk of a judgment by the court against them for an amount of damages approaching the amounts claimed by the plaintiffs is unlikely. In addition, liability insurance for an amount of up to $50 million is available in the event Flightways is found liable and liability insurance for an amount of up to $1 million to each of EAS and Million Air Interlink in the event either or both companies are found liable. The sale and purchase agreement with EAS provides for an indemnity of $20 million, which would be available in the event of a judgment against any of the Atlantic entities party to the suit. However, there is no assurance the EAS selling shareholders will have sufficient resources to meet their indemnity obligation in the event we seek to claim an amount pursuant to this indemnification provision. The Atlantic defendants believe it is unlikely that a judgment for damages against them will be in excess of the indemnity or the insurance coverage available or both.

Our airport parking business, Macquarie Parking, is the largest provider of off-airport parking services in the United States, measured by number of locations, with 21 facilities comprising over 30,000 spaces and over 260 acres at 14 major airports across the United States, including five of the six largest passenger airports. Our airport parking business, operating generally under the names “PCA” or “Avistar,” provides customers with 24-hour secure parking close to airport terminals, as well as transportation via shuttle bus to and from their vehicles and the terminal. Operations are carried out on either owned or leased land at locations near airports. Operations on owned land or land on which Macquarie Parking has leases longer in term than 35 years (including extension options) account for a majority of operating income. Macquarie Parking had 2003 revenue of $26.3 million and 2003 operating profit of $1.7 million.

In 2002, the Macquarie Global Infrastructure Fund, together with other investors, acquired the ten off-airport parking facilities formerly owned and operated by the PCA Group. That transaction closed in December 2002, and the business commenced operations as Macquarie Parking. In October 2003, Macquarie Parking acquired the ten off-airport parking facilities of Airport Satellite Parking LLC, known as Avistar. Since that acquisition was closed, the two businesses have been operated as one merged business.

Airport parking can be classified as either on-airport (generally owned by the airport and located on airport land) or off-airport (generally owned by private operators). According to the Airports Council International — North America, North American airports collected almost $2 billion in parking revenue in 2002. The off-airport parking industry is relatively new, with the first privately owned parking facilities servicing airports generally only appearing in the last few decades. Industry participants include numerous small, privately held companies as well as on-airport parking owned by airports.

Airports are generally owned by local governments, which often do not operate or market their parking operations as effectively as the privately owned operators, as the parking operations do not form part of the airport’s core function. In many cases, on-airport parking facilities are managed by large parking facility management companies pursuant to cost-plus contracts that do not create incentives to maximize profitability. Most airports have historically increased parking rates rapidly with increases in demand, creating a favorable pricing environment for off-airport competitors.

Airport parking facilities operate as either “self-park” or “valet” parking facilities. Valet parking facilities often utilize “deep-stack” parking methods that allow for a higher number of cars to be parked within the same area than at a self-parking facility of the same size by minimizing space between parked cars. In addition, valet parking provides the customer with superior service, often allowing the parking rates to be higher than at self-park facilities. However, the cost of providing valet parking is generally higher, due to higher labor costs, so self-parking is often more profitable, depending upon how scarce and expensive land is, labor costs and the premium that can be charged for valet service.

Occupancy at off-airport parking facilities has historically been driven by passenger numbers. According to the FAA, passenger enplanements in the United States grew by an average of 3.9% per year between 1990 and 2000. In 2001 and 2002, enplanements decreased by 7.6% and 8.5%, respectively, due to the effects of the events of September 11, 2001. In 2003, enplanements grew by 2.5% despite the effects of the war in Iraq and SARS. The FAA is forecasting continued growth in 2004 of 7.1%, with growth expected to average 3.8% per year from 2003 to 2015.

The substantial increase in use of the internet to purchase air travel through companies such as Expedia, Orbitz and Travelocity, as well as through airlines’ own websites, provides a strong co-marketing opportunity for larger off-airport parking operators that provide broad nationwide coverage at the busiest airports. In addition, we believe the highly fragmented nature of the industry provides strong consolidation

We believe that we can grow our airport parking business by focusing on achieving operating efficiencies and internal growth, expanding marketing efforts and future acquisitions.


	•	increasing the level of services offered to customers, for example, by expanding the offering of free car washes, complimentary beverages, flight information monitors and automated e-ticket check-in services; and

	•	expanding capacity at capacity constrained locations, for example, by maximizing capacity at Macquarie Parking’s existing locations through more efficient utilization of space, seeking additional leases at adjacent or nearby properties to existing locations or providing valet parking and utilizing “deep-stack” parking.

Operating Efficiencies. Macquarie Parking was recently enlarged through the merger of two separate businesses in October 2003. While the two businesses have been integrated since that time and costs have been reduced, we believe there are still economies of scale that can be realized due to the increased size, in areas such as combined marketing programs, vehicles and equipment, employee benefits and insurance.

Marketing. We intend to expand and improve our existing marketing strategy, which includes the development of an Internet reservation capability, opening new distribution channels such as promotional agreements with additional airlines and travel agencies, improving the product offering for corporate accounts and providing personalized web pages and activity reports for corporate accounts.

Acquisitions. We believe we can grow through acquisitions and derive benefits from economies of scale, including revenue and marketing, head office, insurance, shuttle buses and other cost synergies. We believe the highly fragmented nature of the industry, the desire of owners for liquidity and the lingering effects of September 11, 2001 on participants in the off-airport parking industry provide attractive acquisition candidates. Acquiring facilities at major airports where Macquarie Parking does not currently have a facility would allow us to expand Macquarie Parking’s nationwide presence, while opportunities in markets where Macquarie Parking already has a presence should provide increased operating efficiencies and expanded capacity. These acquisitions can take the form of entering into new leases or purchasing land.

We believe the size and nationwide coverage, the sophisticated marketing programs and the experienced management team of Macquarie Parking provide it with a competitive advantage over other airport parking operators. Macquarie Parking aims to centralize its marketing activities and the manner in which it sells its product to customers. Accordingly, individual location operations can focus on service delivery as diverse reservation services and customer and distribution channel relations are managed centrally. Macquarie Parking’s size enables it to mitigate the risk of a downturn or competitive impact in particular locations or markets due to the diversity of its operations. In addition, its size provides it with the ability to take advantage of incremental growth opportunities in any of the markets it serves as it generally has more capital resources than single facility operators to apply toward those opportunities.

The nationwide presence of Macquarie Parking also allows it to provide “one stop shopping” to Internet travel agencies, airlines and major corporations that seek to deal with as few suppliers as possible. The marketing programs of Macquarie Parking and its relationships with national distribution channels are generally more extensive than those of its industry peers. Macquarie Parking markets and provides

Most of Macquarie Parking’s customers fall into two broad categories: business travelers and leisure travelers. Business travelers are typically much less price sensitive and tend to patronize those locations that emphasize service, particularly prompt, consistent and quick shuttle service to and from the airport. Shuttle service is generally provided within five minutes of the customer arriving at the parking facility, or the airport, as the case may be. Leisure travelers often seek the least expensive parking, and Macquarie Parking offers substantial discounts and coupon programs to attract leisure travelers. In addition to reserved parking and shuttle services, Macquarie Parking provides other services at some parking facilities to attract customers to the particular facility and/or to earn additional revenue at the facility, such as car washes or auto repairs, either at no cost to the customer or for a fee.

Macquarie Parking provides off-airport parking services at the following airports. Each airport is ranked according to the number of passenger enplanements (passengers boarding airplanes) sourced from FAA data for 2002.

The Macquarie Parking marketing team develops new products in order to maximize revenue growth, including Internet reservation capability, opening new distribution channels, improving the product offering for corporate accounts and providing personalized web pages and activity reports for corporate accounts. For example, Macquarie Parking’s Express Club provides a premium service and discounts for the highest turnover valet customers in return for an annual membership fee. Further, following the events of September 11, 2001, members of the management team of our airport parking business and others established AirportDiscountParking.com, the first nationwide alliance of off-airport parking businesses which have locations at over fifty airports in the United States. In relation to Avistar, which was at the time a separate entity, revenue generated from internet coupons increased from 9% of revenue in

September 2001 to approximately 25% of revenue by the end of calendar year 2002. Promotional agreements with airlines and traditional and internet travel agencies attracted prospective customers to the AirportDiscountParking.com websites for coupons, maps and directions. Since its inception, we believe AirportDiscountParking.com has accelerated the rate at which new customers are attracted to try Macquarie Parking’s parking services for the first time.

Macquarie Parking’s facilities operate under various trade names. Macquarie Parking uses the Parking Company of America name pursuant to a perpetual trademark licensing agreement.

Competition in our airport parking business exists on a local basis at each of the airports at which Macquarie Parking operates. Generally, airport parking facilities compete on the basis of location (relative to the airport and major access roads), quality of facilities (including whether the facilities are covered or not), type of service provided (self-park or valet), security, service (especially relating to shuttle bus transportation), price and marketing. Macquarie Parking faces direct competition from the on-airport parking facilities owned by each airport owner, many of which are located closer to passenger terminals than Macquarie Parking’s locations. Airports generally have significantly more parking spaces than Macquarie Parking does and provide different parking alternatives, including self-park short-term and long-term, off-airport lots and valet parking options. However, as the airports are government-owned, competitive dynamics of service and pricing are generally different than those experienced with privately owned competitors. The airports generally do not view parking operations as their core function, and their pricing strategy is often driven by the fiscal state of the airport authority, which often leads to sudden high price increases. Macquarie Parking also faces competition from existing off-airport competitors at each airport. While each airport is different, there generally are significant barriers to entry preventing new off-airport competitors from entering the markets in which Macquarie Parking operates, including limited availability of suitable land of adequate size near the airport and major access roads, and zoning restrictions. While competition is local at each of the airports at which Macquarie Parking operates, Macquarie Parking competes with several larger off-airport competitors, including parking management companies such as InterPark Holdings, Inc., Ampco System Parking Inc. and Central Parking Corporation, that have operations at five or more U.S. airports. In each market in which it operates, Macquarie Parking also faces competition from smaller, locally owned independent parking operators, as well as from hotels or rental car companies that have their own parking facilities. Some present and potential competitors have or may obtain greater financial and marketing resources than we do, which may negatively impact our ability to compete at each airport or to compete for acquisitions.

Indirectly, Macquarie Parking faces competition from other modes of transportation to the airports at which it operates, including public transportation, airport rail links, taxis, limousines and drop-offs by friends and family.

Macquarie Parking faces competition from other large off-airport parking providers in gaining access to marketing and distribution channels, including internet travel agencies and airlines.

Our airport parking business is subject to federal, state and local regulation relating to environmental protection. Macquarie Parking owns a parcel of real estate that covers an area of land for which a third party has been identified as a potentially responsible party by the Environmental Protection Agency. Although Macquarie Parking did not own the property at the time the contamination is believed to have occurred, Macquarie Parking has purchased an environmental policy for the property as an added precaution against any future claims. The policy expires in July 2007 and is renewable.

Macquarie Parking transports customers by shuttle bus between the airport terminals and its parking facilities, and its shuttle operations are subject to the rules and policies of the local airport. The airports are able to regulate or control the flow of shuttle buses. Some airport authorities require permits and/or levy fees on off-airport parking operators for every shuttle trip to the terminals. These regulations

The FAA and TSA generally have the authority to restrict access to airports as well as imposing parking and other restrictions near the airport sites. The TSA generally prohibits parking within 300 feet of airport terminals during times of heightened alert. While we believe that existing regulations or the present heightened security alerts at airports may be relaxed in the future, the existing 300 feet rule may be of benefit to Macquarie Parking as in some cases it has prevented its on-airport competitors from using a number of their existing parking spaces.

In addition, municipal and state authorities sometimes directly regulate parking facilities. In addition, Macquarie Parking also may be affected periodically by government condemnation of its properties, in which case it is generally compensated. As a parking facility owner and operator, it is also affected periodically by changes in traffic patterns and roadway systems near its properties. Macquarie Parking is also affected by laws and regulations (such as zoning ordinances) that are common to any business that deals with real estate.

The day-to-day operations of Macquarie Parking are managed by an operating management team located at head offices in Downey, California and Newark, New Jersey. The operating management team has an average of 17 years experience in the parking industry, including an average of ten years with either PCAA or Avistar. Each site is operated by local managers who are responsible for all aspects of the operations at their site. Responsibilities include ensuring that customer requirements are met by the staff employed at their site and that revenue from the sites is collected and expenses incurred in accordance with internal guidelines.

As of March 31, 2004, Macquarie Parking employed approximately 650 individuals. Approximately 17% of its employees are covered by collective bargaining agreements. We believe that employee relations at Macquarie Parking are good.

Macquarie Parking has 21 off-airport parking facilities located at 14 airports throughout the United States. The land on which the facilities are located is either owned or leased by Macquarie Parking. The material leases are generally long-term in nature. The table above under “— Business — Locations” describes the nature of the properties where these facilities are located.

Macquarie Parking also leases office space for its head office in Downey, California. We believe that the leased facility is adequate to meet current and foreseeable future needs.

Macquarie Parking operates a fleet of shuttle buses to transport customers to and from the airports at which it operates. The buses are either owned or leased. The total size of the fleet is approximately 120 shuttle buses. Some routine maintenance is performed by its own mechanics, while Macquarie Parking outsources more significant maintenance. We believe that these vehicles are generally well maintained and adequate for present operations. Macquarie Parking replaces the shuttle fleet approximately every three to five years.

We will own our airport parking business through an 83.2% interest in PCAA Holdings, which owns a 51.9% controlling interest in PCAA Parent, which owns our airport parking business. We will

control all decisions and operations of PCAA Holdings in accordance with its LLC agreement. The affairs of PCAA Parent are governed by its LLC agreement. PCAA Parent has a board of directors, and PCAA Holdings has the right to appoint all members to the board of directors except one. Pursuant to the LLC agreement, most major decisions are referred to the board of directors of PCAA Parent, where decisions are made by majority vote.

Our stock purchase agreement to acquire the shares of MAPC provides that MIA Inc. will offer to purchase the membership interests of the minority investors in PCAA Parent and PCAA Holdings for cash on similar terms to the proposed acquisition of MAPC.

Connect M1-A1 Limited operates the M1-A1 Link Road, or Yorkshire Link, a highway of approximately 19 miles in length that links the M1 and M62 highways south of Leeds and the A1 highway south of Wetherby in England. Connect M1-A1 Limited is responsible under the concession with the Transport Secretary for the design, building, financing and operation of Yorkshire Link, until 2026. Yorkshire Link is part of the U.K. national highway network and provides a major road link for both national and regional traffic. It also serves a local function by providing a bypass around Leeds and access for employment in the East of Leeds area. Connect M1-A1 Limited had revenue of £45.3 million and operating income of £32.6 million during the year ended March 31, 2003.

In return for building and operating Yorkshire Link, Connect M1-A1 Limited receives revenues under a shadow tolling system. Under a shadow tolling system, road users do not pay tolls; instead, the U.K. government pays fees or “shadow tolls” to Yorkshire Link based on the volume of user traffic on Yorkshire Link. Revenue is subject to a predetermined cap, but is protected from reductions in traffic to the extent that projected traffic exceeds the capped revenue level. Traffic has been steadily growing and has been relatively stable and predictable.

We will hold our interest in Yorkshire Link through Macquarie Yorkshire, which in turn owns 50% of CHL, which owns 100% of Connect M1-A1 Limited. The remaining 50% interest in CHL is held by Balfour Beatty, one of the U.K.’s leading construction companies, concession owners, infrastructure service operators and maintenance providers, for whom the U.K. road sector is a core business.

Toll roads exist in almost every developed country in the world. Using “user pays” tolls to finance the development of essential road infrastructure represents an alternative to imposing general tax increases. Governments in various countries, including Australia and the United Kingdom, faced with fiscal pressures and growing needs for new road infrastructure, have since the 1980s and 1990s sought to have the private sector develop new toll roads. This privatization offers several advantages for governments, including allowing a transfer of development risk, including construction time and costs, actual traffic usage and future maintenance costs, to the private sector.

Significant impediments limit new road construction, including required governmental and environmental permits and approvals, scarcity of available land on which to build and significant time and upfront construction costs. For example, construction of Yorkshire Link took approximately three years and cost approximately £300 million to build.

Operational toll roads are generally attractive to owners in that road traffic growth, and therefore revenue growth, has historically been quite resilient. For instance, there has not been a year on year decline in road traffic in the United Kingdom since statistics were first collected in 1955.

The use of shadow toll road programs has an established history of operations in the United Kingdom. Yorkshire Link is one of eight shadow toll road programs implemented by the U.K. government since 1996 and was one of the first road programs procured under the U.K. government’s Private Finance Initiative. As compared to a toll road, the shadow tolling system provides a benefit to owners by not requiring the construction and staffing of tollbooths. Furthermore, the only revenues that need to be accounted for are for payments that are received monthly from the Transport Secretary. Drivers, in turn, do not have to contend with the delays caused by tollbooths.

In March 1996, Connect M1-A1 Limited signed a concession with the Transport Secretary to design, build, finance and operate Yorkshire Link for a 30-year contract term in return for shadow tolling

revenues. Pursuant to the concession, Yorkshire Link must be operated and maintained by Connect M1-A1 Limited throughout the 30-year period. The concession expires in 2026, when Connect M1-A1 Limited will no longer be entitled to receive revenues and will not be responsible for the maintenance of Yorkshire Link.

Construction on Yorkshire Link was completed in 1999, and vehicles began using the road that same year. Yorkshire Link is a mature operational phase road with five years of operational history. Therefore, a base level of traffic has been established, and there is substantial management experience within Connect M1-A1 Limited in operating Yorkshire Link.

Pursuant to the concession, shadow toll revenue paid by the Transport Secretary is based on two factors:


	•	Traffic Volume. The volume of traffic using Yorkshire Link is categorized either as heavy goods vehicles, which are vehicles over 17 feet in length, such as trucks and other vehicles, such as cars and motorcycles. Vehicles are counted by traffic measuring equipment placed along the length of the road. For traffic measurement purposes, the total length of all the sections of Yorkshire Link is 26.3 kilometers (16.4 miles).

	•	Fees. A fee per vehicle-kilometers, or vkms, which varies annually, is determined based upon the type of vehicle and the number of vkms traveled in various “bands,” pursuant to a complicated formula discussed in more detail below.

The amount payable to Connect M1-A1 Limited for each vkm traveled by heavy goods vehicles and other vehicles is determined through the use of bands. Each vehicle category has four traffic volume bands, and different amounts are payable per vkm in each band.

For the concession year ended March 31, 2004, other vehicles traffic was 624.2 million vkms, and revenue calculations were as follows*:

For the concession year ended March 31, 2004, heavy goods vehicles traffic was 144.4 million vkms, and revenue calculations were as follows*:

For the concession year ended March 31, 2003, other vehicles traffic was 602.8 million vkms, and revenue calculations were as follows:

For the concession year ended March 31, 2003, heavy goods vehicles traffic was 140.5 million vkms, and revenue calculations were as follows:

Each year the bands are adjusted and payments per vkm of traffic in the various bands are subject to a series of escalation adjustments as follows:


	•	Band 1 increases in size each year by 2.0% for other vehicles and 2.5% for heavy goods vehicles and Bands 2 and 3 are also increased to maintain a constant width in vkms, and Band 4 has no upper limit. In addition, the payment per vkm of traffic for Band 1 is reduced by an equivalent proportion. The net effect of these changes is that if annual traffic is above Band 1, then the revenue generated from Band 1 remains constant, ignoring the other two revenue adjustments discussed below. The same result applies if annual traffic is above Band 2 and Band 3 — revenue generated from those bands remains constant, ignoring the other two revenue adjustments discussed below;

	•	the payments per vkm of traffic in each of the bands are partially indexed to movement in the U.K. Retail Price Index, a measure of inflation in the United Kingdom. Band 1 payments per vkm are escalated by 38% of the Retail Price Index and Bands 2 and 3 by 40% of the Retail Price Index each year; and

	•	a final global factor, which varies from time to time, is applied to the payment per vkm of traffic in all bands. This global factor remains constant until September 2007, when it decreases by 0.2% and then increases in September 2010 by 8.9%. In March 2014, this global factor has the effect of reducing revenue per vkm significantly, and less significant downward revisions also occur in 2017 and 2020. These global factors were set in 1996 when the concession was signed, the purpose of which was to ensure that revenues generally followed the underlying cost profile of Connect M1-A1 Limited (as originally projected) and, in particular, its debt service obligations. The current debt repayment schedule recognizes and accommodates these revenue reductions in the future.

Adjustments are also made for lane closure charges and certain other matters, if required. Lane closure charges have been very minor to date, and they have been largely passed through to subcontractors responsible for such lane closures. The calculation is made shortly after the end of the concession year when all the required variables have been determined.

Under the concession, the Transport Secretary makes provisional payments to Connect M1-A1 Limited each month, equal to the previous year’s traffic payment divided by twelve. In practice, it may take a few months to agree on the final traffic payment for each concession year, in which case monthly provisional payments continue at the prevailing rate. When the payment due to Connect M1-A1 Limited under the concession has been finally calculated, there is an annual reconciliation so that any under- or over-payment to date is corrected. The traffic payment for the year ended March 31, 2003 was £45.3 million ($83.3 million). As a result, in the concession year ended March 31, 2004, Connect M1-A1 Limited has received provisional payments of £3.8 million ($7.0 million) per month.

We believe that two new road developments will affect future traffic flows on Yorkshire Link. One is the East Leeds Link, a new road connecting an existing junction near the mid-point of Yorkshire Link to Leeds city center. The other development is the A1(M) improvement between Darrington, south of the M62, and Dishforth, about 35 kilometers north of Yorkshire Link. It will result in the whole of the A1 being widened and improved along sections of the route to dual three-lane roadways to allow for higher speed traffic.

We expect that the East Leeds Link will modestly increase traffic on Yorkshire Link when it opens, which is assumed to be in 2006. The second road development, the improvement to the A1(M), is currently under construction and is expected to have two separate effects on Yorkshire Link traffic. While construction work necessary to connect the new section of the A1(M) to the existing road is being completed, speed limits will be imposed on the A1, which is expected to take place from August through November in each of 2004 and 2005. This is expected to increase traffic on Yorkshire Link by a modest amount during these periods. However, once construction has finished and the A1(M) has been widened, which is expected to be by the end of 2006, traffic on Yorkshire Link is expected to decrease by a modest amount.

The West Yorkshire Local Transport Plan, or LTP, published in 2000 sets out the local context for transportation in which Yorkshire Link operates, although Yorkshire Link also carries longer-distance traffic and is less sensitive to local factors than the surrounding more local roads. The LTP includes targets for limiting the rate of growth in the region and lists, among other things, the public transportation programs that are being developed. The target for growth of the total traffic on all roads in West Yorkshire is 5% from 1999 to 2006. This compares with U.K. government forecasts for the region of between 8.5% and 15.2% over the same period. Regional traffic actually decreased by 2% from 1999 to 2002 and 2003. Thus, the growth observed on Yorkshire Link has been achieved in spite of lower-than-expected growth of regional traffic.

The LTP also includes plans for the Leeds Supertram network of three tram lines, which might have a small negative impact on growth of Yorkshire Link traffic. The lines were programmed to be fully operational in 2007, but the project is delayed by a government review of options and will not now be open until 2008 at the earliest.

Under the terms of the concession, Connect M1-A1 Limited is responsible for the operation and maintenance of Yorkshire Link. Connect M1-A1 Limited also is responsible for the lighting and associated energy costs and the communications systems on the road. The police are responsible for managing traffic flow, although Connect M1-A1 Limited is required to provide assistance in the event of accidents.

The operations and maintenance activity and the management of the concession requirements are managed and coordinated by a small operations team consisting of six seconded staff from Balfour Beatty, the cost of which is recovered from Connect M1-A1 Limited based on a cost-plus formula. Operations have been substantially subcontracted under short- to medium-term contracts of varying duration, and there are an additional 14 full-time staff members on site from subcontractor organizations. These

Connect M1-A1 Limited has met the operational requirements of the concession over the five years it has operated and maintained Yorkshire Link. The operations and maintenance requirements of the concession can be described in the following categories:


	•	routine operations and maintenance, including landscape management, cleaning work, replacing faulty lighting, repairing fencing and crash barriers resulting from traffic accidents, maintaining the communications and traffic counting equipment, structural inspections, spreading salt and clearing snow and periodically verifying the traffic counting data; and

	•	periodic maintenance, consisting mainly of repair, resurfacing and reconstruction work that is required from time to time to restore basic qualities, such as skid resistance, to the road pavement, and to extend the life of the road by adding extra strength to cater to increased traffic loadings.

There are penalty point and warning notice provisions in the concession that may be imposed if there are deficiencies in the way Connect M1-A1 Limited manages its operations and maintenance responsibilities. Connect M1-A1 Limited has not received any penalty points or warning notices since Yorkshire Link opened.

Traffic is counted by traffic measurement equipment, which has been installed in accordance with the specifications of the U.K. Highways Agency. Traffic is counted in each direction at nine sites that lie between each junction of Yorkshire Link. At each site, each lane, including the hard shoulder, is equipped with a pair of electromagnetic inductive loops buried in the roadway. The loops detect passing vehicles and are recorded by a counter unit. The loops also enable the length of vehicles to be measured in order to categorize vehicles into heavy goods vehicles and other vehicles. Software in the roadside equipment compares the output from adjacent lanes and automatically allows for the effects of vehicles straddling lanes. Periodic reports are generated from the central computer to form the basis of the annual calculation of vkms on which payment to Connect A1-M1 Limited is based. When data is missed, a patching procedure to which the U.K. Highways Agency has agreed is used to estimate the missed vehicles. In addition, traffic flows are recorded on video and compared with loop data for consistency.

Connect M1-A1 Limited subcontracted the design and building of Yorkshire Link to a construction joint venture consisting of Balfour Beatty CE Ltd. and Skanska Construction U.K. Ltd. In addition to the construction of the new route, the initial construction works included improvements to sections of the existing road.

The construction joint venture is obligated under a twelve-year warranty for latent defects that expires in 2011. The construction joint venture also has extended the warranty to cover defects in the sections of the road that were in existence when its works began. The construction joint venture has indemnified Connect M1-A1 Limited in respect of any consequential losses, except in relation to the sections of the existing road, and any lane closure charges that may be incurred as a result of such defects. The obligations of the construction joint venture partners are joint and several, and they are supported by guarantees from Balfour Beatty and Skanska AB. Cracking defects have been identified on the road surface on certain sections of Yorkshire Link that have required resurfacing repairs to be carried out at the construction joint venture’s expense. Connect M1-A1 Limited believes any further such defects would be the responsibility of the construction joint venture, which is investigating the problem with the help of its consultants. Connect M1-A1 Limited is waiting to receive a proposal from the construction joint venture as to how the joint venture intends to deal with the problem in the longer term.

Connect M1-A1 Limited has no employees. All operational staff are either employed by Balfour Beatty and seconded to Connect M1-A1 Limited or employed by the various subcontractors.

Connect M1-A1 Limited does not own any real estate. It has a license to occupy the land on which Yorkshire Link has been constructed, and it has a lease over the site used as the maintenance compound for the duration of the concession.

Macquarie Yorkshire is party to a shareholders’ agreement with Balfour Beatty that governs the relationship of the shareholders in Connect M1-A1 Holdings Limited (formerly Yorkshire Link (Holdings) Limited) and Connect M1-A1 Limited (formerly Yorkshire Link Limited), a wholly owned subsidiary of CHL. Upon completion of the acquisition of Macquarie Yorkshire, we will become party to the shareholders’ agreement. The shareholders’ agreement effectively requires the consent of Macquarie Yorkshire and Balfour Beatty for any decisions relating to these companies.

Based on current shareholdings, Macquarie Yorkshire and Balfour Beatty are each allowed to appoint three directors to the boards of CHL and Connect M1-A1 Limited. Voting is pro rata with the shareholding being represented. All routine matters are decided by majority vote. Certain matters are reserved and determined on the basis of approval by not less than 90% of total shares. Such matters include amending the shareholders’ agreement or the constitutional documents of CHL or Connect M1-A1 Limited, the winding up of CHL or Connect M1-A1 Limited, acquisitions and disposals of companies by CHL or Connect M1-A1 Limited, and tendering for new work by CHL or Connect M1-A1 Limited. In addition, certain other matters relating to CHL and Connect M1-A1 Limited are reserved, requiring approval of directors appointed by a shareholder holding not less than 49% of the total shares. The shares of CHL and Macquarie Yorkshire are subject to preemption rights, the waiver of which is a condition precedent to our acquisition of Macquarie Yorkshire, and, in CHL’s case, they also are subject to tag-along rights by shareholders owning more than 5% of the total shares.

In addition, the shareholders’ agreement requires all post-tax profits to be paid to shareholders, to the extent permitted by law and subject to making prudent reserves.

Neither Macquarie Yorkshire nor CHL or Connect M1-A1 Limited is currently a party to any material legal proceedings.

MCG is an investment vehicle that has been listed on the Australian Stock Exchange (ASX) since August 2002. MCG’s investment mandate is to acquire investments in communications infrastructure, such as broadcast transmission towers, wireless communications towers and satellite infrastructure, around the world. We are investing in MCG because it seeks to provide investors with sustainable dividend yields and the potential for significant earnings and capital growth through investments in communications infrastructure businesses or assets. Currently, MCG’s only investment is a 100% holding in Broadcast Australia, an Australian television and radio broadcast transmission provider.

Broadcast Australia is the owner and operator of the most extensive broadcasting tower network in Australia and provides transmission services to the Australian Broadcasting Corporation, or ABC, and Special Broadcasting Service Corporation, or SBS, plus other services to regional television and other media, telecommunications and community organizations. Broadcast Australia operates 581 transmission tower sites located across metropolitan, regional and rural Australia. Broadcast Australia owns or operates under leases the majority of its sites.

Broadcast Australia derived approximately 87% of its revenue for the fiscal year ended June 20, 2003 under contracts with ABC and SBS. Generally, the contracts with ABC and SBS are over the long term, often ten to 15 years. ABC and SBS receive most of their funding from the Australian Commonwealth government under a triennial funding arrangement. The funding allocated by the Commonwealth government for the purposes of broadcast transmission cannot be applied to other uses.

Broadcast Australia is in the process of rolling out digital transmission services that it is contracted to introduce under its agreements with ABC and SBS. Under the agreements, as Broadcast Australia rolls out digital transmission services across its sites, it will earn additional revenue from the provision of digital broadcasts. The rollout of digital transmission will require significant capital expenditure, which is expected to be funded through an existing Broadcast Australia debt facility.

It is expected that MCG will make investments in other communications infrastructure businesses or assets in the future, although it will need to raise new equity to fund any significant acquisitions. It is possible that these investments will be partly funded through the issue of new MCG securities. We may have the opportunity to purchase additional MCG securities in such instances; however, we will have no obligation to do so.

MCG is managed by Macquarie Communications Infrastructure Management Limited, a wholly owned subsidiary of Macquarie Bank Limited, which is entitled to a base fee and a performance fee. The base fee is calculated and paid quarterly based on the net investment value (market capitalization plus borrowings and commitments less cash and cash equivalents). The performance fee is paid semiannually based on MCG’s performance above the S&P ASX 200 Industrials Accumulation Index.

As described in “Our Manager — Management Services Agreement,” the base fees payable by us to our Manager will be calculated in such a way that our Manager will not receive fees with respect to its ownership of MCG securities, so that there is no duplication of base management fees with respect to MCG.

The securities of MCG were listed on the ASX on August 13, 2002 at an issue price of AUD 2.00. The price per MCG security we will pay will be determined on the date on which we enter into the underwriting agreement for this offering, and will be based on recent MCG trading prices. The table below outlines the quarterly trading history of MCG securities in Australian dollars from listing through the quarter ended March 31, 2004. Since its inception, MCG has paid distributions of AUD 0.075 on February 12, 2003, AUD 0.08 on August 12, 2003 and AUD 0.112 on February 12, 2004.

South East Water, or SEW, is a regulated utility located in southeastern England that is the sole provider of water to almost 600,000 households and industrial customers. It is the second largest water-only company in England, supplying approximately 105 million gallons of water per day to 1.5 million people across two sub-regions. Its supply area covers approximately 1,390 square miles of Kent, Sussex, Surrey, Hampshire and Berkshire.

We will own 17.5% of SEW through an equivalent holding in Macquarie Luxembourg, which is indirectly the holding company for SEW. We are acquiring this investment because we believe that the cash yields and total returns available from investments in regulated utilities in the United Kingdom are attractive given the mature and transparent regulatory environment. A controlling interest in SEW is held through a controlling interest in Macquarie Luxembourg by the Macquarie European Infrastructure Fund, or MEIF, which is managed by an affiliate of our Manager and which had priority in relation to this investment. MEIF is an unlisted infrastructure investment fund focused on making medium-term investments in infrastructure assets in Europe. We believe MEIF’s approach to the ownership and oversight of SEW is consistent with our approach. Three other institutional investors hold minority interests in SEW through minority interests in Macquarie Luxembourg.

The water sector in England and Wales was privatized by the U.K. government in 1989 and 1990 and consists of ten water and sewerage companies and twelve water-only companies. Water supply activities in England and Wales are principally regulated by the provisions of the Water Industry Act of 1991 and the Water Act of 2003, which we together refer to as the Water Industry Act, and regulations made under the Water Industry Act. Water-only companies are granted a license pursuant to that legislation. The provisions of the Water Industry Act, together with the license, are administered by the Director General of Water Services, who is aided by the Office of Water Services, or Ofwat, which is headed by the Director General. The responsibilities of Ofwat include the setting of limits on allowed water charges and monitoring and enforcing license obligations. In addition, water companies are required to meet drinking water quality standards monitored by the U.K. Drinking Water Inspectorate and general environmental law enforced by the U.K. Environment Agency.

As water and sewage companies and water-only companies are natural monopolies, the prices that they are allowed to charge their customers for water is regulated by Ofwat. Every five years, Ofwat determines prices for the provision of water services for the upcoming five years based on an inflation and efficiency calculation. English and Welsh water-only companies, including SEW, are currently formulating business plans for the next price review period, which will run from April 1, 2005 to March 31, 2010. Ofwat’s price determinations are scheduled for finalization by December 2004. Ofwat has adopted a policy of clearly signaling to the market its intentions for the next price review period in order to minimize regulatory risk. In relation to the next review period, Ofwat has publicly stated that customers should not expect reductions in water prices in real terms.

Currently, approximately 70% of SEW’s water is supplied from boreholes and aquifers, 20% is supplied from rivers and reservoirs and 10% is supplied under bulk supply contracts with Three Valleys Water plc and Southern Water Services Ltd., which are neighboring water utilities. The U.K. Environment Agency has supported a plan, expected to be completed in 2005, to increase SEW’s reservoir capacity through the provision of enhanced bulk supply infrastructure. Based on the known parameters of the categorization, the completion of this project is expected to improve SEW’s security of supply rating from Ofwat, which was D (the second lowest rating) for the year ending March 31, 2003 to B (the second highest rating).

SEW has a sophisticated telemetry-based system for monitoring water quality, flows, pressures and reservoir levels. Each water treatment works has a local monitoring system that checks these variables and relays data to an outstation unit that regulates activity levels at the treatment works and feeds data to a centralized operation center at the Haywards Heath headquarters, which is manned constantly.

SEW balances supply and demand in line with industry best practice and is required to establish a 25-year plan for sustainable water resources acceptable to the U.K. Environment Agency. This plan is a combination of resource development and demand management measures, all of which are assessed on an economic basis before inclusion.

Leakage detection and control continues to play an important role in demand management within SEW. SEW reduced its leakage levels in the year ended March 31, 2002 by more than any other water company. SEW met its leakage targets for March 2003 and 2004 and is on target to reach Ofwat’s economic level of leakage target for March 2005.

In common with other water companies in England and Wales, SEW’s assets vary widely in age (with some over 100 years old), size and type but are generally constructed using industry-standard materials and technology in use at the time of their construction. SEW has developed a sophisticated system for the management and replacement of its assets based principally on the assessed risk and consequences of failure. Overall capital investment levels are targeted at maintaining a constant average level of risk across SEW’s area of supply. Individual programs aim to reduce risk in high risk areas. Water industry assets tend to be long-lived and SEW’s assets are no exception to the industry norm. Major assets are rarely completely replaced; short- to medium-life items (e.g., pumps, electrical switch-gear, instruments) can be replaced several times during the life of a treatment works and a new plant can be fitted into existing buildings. Higher quality standards are often met by incrementally adding new treatment processes. Further capacity can be met by adding additional process streams to existing works.

Ofwat determines the prices that SEW can charge its customers using an approach designed to enable SEW to earn sufficient revenues to recover operating costs, capital infrastructure renewal and taxes and to generate a return on invested capital, while creating incentives for SEW to operate efficiently. The outcome of the regulatory review process is the publication of k-factors by Ofwat for each year in the price review period. The k-factor is the amount that SEW is allowed to adjust its prices for water services for each year relative to inflation. For example, a k-factor of 5% in a given year would mean that SEW is allowed to increase its prices by inflation plus 5% in that year.

The use of the k-factor also is designed to create incentives for water-only companies and water and sewage companies to generate efficiencies that can later be passed on to customers. Performance targets are established by reference to a company’s individual circumstances and its performance relative to other companies in the sector. In the year ended March 31, 2003, Ofwat ranked SEW 12th out of the 22 companies in the water sector in England and Wales across a broad range of performance measures. Over the course of the current price review period, SEW has improved its performance in all of its key performance areas, including customer service, leakage, water quality and operating efficiency.

In determining the annual k-factors, Ofwat is under a statutory duty to consider:


	•	SEW’s ability to properly carry out its functions (including legal obligations such as meeting drinking water quality standards monitored by the Drinking Water Inspectorate);

	•	the revenue SEW will need to finance its functions and earn a reasonable rate of return on its investment needed to meet its legal obligations;

	•	the promotion of efficiency and economy (through rewards and penalties); and

	•	the facilitation of competition.

The following annual k-factors were set for SEW in the 1999 price review for the 2000-2005 price review period:

The reduction in prices for the year to March 31, 2001 reflected the return to customers of efficiencies achieved by SEW in the five years to March 31, 2000, together with a new target for further efficiencies. SEW has to date outperformed this regulatory target. SEW presented its initial proposal for the k-factor for the 2005 to 2010 price review period to Ofwat in August 2003. Its proposal was for an average k-factor over the 2005 to 2010 regulatory period of 4.9% (i.e., SEW is seeking approval to increase prices at an annual rate of inflation plus 4.9%). Ofwat has published a summary of the proposals lodged in 2003 by all water-only companies and water and sewage companies. The submission by SEW is below the industry average of 6.0%. In April 2004, SEW presented its final proposal that included estimates of slightly higher average increases of inflation plus a price increase of 5.8% per year for the five years 2005 to 2010. The increase was due to a revised estimate of future operating costs.

SEW is required to comply with various environmental legislation, including the U.K. Wildlife and Countryside Act of 1981, and the environmental requirements of the Water Industry Act. These obligations are proactively managed pursuant to SEW’s sustainable development policy.

As of March 31, 2004, SEW had 434 employees. A minority of SEW’s employees are members of trade unions.

At December 31, 2003, SEW’s defined benefit plans had assets of £83.7 million ($150.7 million) and a deficit against the actuarial assessment of liabilities of £16.1 million ($29 million). SEW has taken a number of steps to address this deficit, including closing the plan to new members in July 2002, increasing company contributions from 13.8% to 20.0% of pensionable remuneration and increasing employee contributions from 6% to 7% of pensionable remuneration from January 1, 2004.

Recent publications from Ofwat are supportive of increases in prices to fund pension deficits incurred by companies that historically have efficiently managed their defined benefit pension plans. SEW’s business plan for the next price review period assumes that the increased cost of funding pensions will be fully recovered through increased prices.

SEW owns four reservoirs, 92 boreholes, 171 storage towers and 63 treatment plants. As of March 31, 2004, the unaudited book value of SEW’s tangible assets was £457 million ($822.6 million). Its main network extends to some 6,000 miles. A recent review of the condition of SEW’s assets by Ofwat indicated that 87% of SEW’s assets are in average or better than average condition and that their condition is stable.

We will become party to a shareholders’ agreement relating to Macquarie Luxembourg. The other parties to the agreement are MEIF, which will hold 50.1% of Macquarie Luxembourg, and three other minority investors, which will hold a combined 32.4% of Macquarie Luxembourg.

We have no influence over the choice of the board of directors of Macquarie Luxembourg. The board of directors is authorized to make all decisions necessary to manage the affairs of Macquarie Luxembourg, except for certain reserved matters that require approval of 75% of the shareholders and other matters that require approval of all shareholders.

The shareholders’ agreement requires all shareholders to use their powers to cause Macquarie Luxembourg’s directly owned subsidiary to make to the shareholders, the maximum possible distribution each year. This provision cannot be changed without our consent.

The shares of Macquarie Luxembourg are subject to preemption rights; however, these rights do not apply in relation to our purchase of shares of Macquarie Luxembourg. Our ability to transfer our interest in Macquarie Luxembourg is subject to rights of first refusal that are exercisable by MEIF in priority to the other shareholders (with whom we have the right to exercise such rights on the same terms). In the event that MEIF sells all (but not some) of its interest in Macquarie Luxembourg, all other shareholders are required to sell their interests to the same buyer on the same terms. In the event that MEIF sells any of its interest in Macquarie Luxembourg, all other shareholders may sell some or all of their interests on the same terms.

In 2003 and 2004, V.A.S. Ltd., a previous contractor of SEW, contacted SEW, claiming approximately £1.4 million with respect to the alleged incorrect allocation of two contracts during the period from 1997 to 2001, and £5.1 million in lost profits and bid costs with respect to alleged breaches of procurement rules in relation to the award of a contract in 2001.

The directors and officers of the company, and their ages and positions as of June 2, 2004, are set forth below:

The following biographies describe the business experience of the company’s current directors and officers.

Peter Stokes was appointed chief executive officer of the company in April 2004 and currently serves as a director. Prior to being seconded by our Manager to the company, Mr. Stokes was seconded to work for Macquarie Securities (USA) Inc., a NASD registered broker/ dealer, where he served as co-global head of its asset finance practice from 2002 to 2003. Mr. Stokes completed transactions in excess of $11 billion relating to infrastructure businesses in the telecommunications, rail, post, electricity, shipping and air sectors between 1999 and 2003. He joined the Macquarie Group in 1991 and has worked in various asset finance roles in the Sydney and New York offices.

David Mitchell was appointed chief financial officer of the company in April 2004. Prior to being seconded by our Manager to the company, Mr. Mitchell was seconded to work for Macquarie Securities (USA) Inc. From 1998 to 2001, Mr. Mitchell was Director of Investments at Edison Capital, the finance subsidiary of Edison International, where he completed approximately $3 billion in transactions as principal in the telecommunications and power sectors. Before joining Edison Capital, Mr. Mitchell worked in various roles as a business controller and adviser for two major financial institutions and as a certified public accountant for two large public accounting firms.

John Roberts has served as chairman of the company’s board of directors since April 2004. He has been Global Head of Macquarie Bank Limited’s Infrastructure and Specialised Funds division since 2003, with responsibility for over $9 billion in assets under management, over 110 professional staff and operations across Australia, North America, Asia, South Africa and Europe. From 1999 to 2003, Mr. Roberts was based in the Macquarie Group’s London office with varying responsibilities, including leading the European and North American operations of Macquarie Infrastructure Group, and raising funds and acquiring airport assets for the €600 million Macquarie Airports Group. From 2001 to 2003, he assumed the additional regional responsibility for Macquarie Group’s Investment Banking Group’s European and African offices as well as being head of Macquarie Bank Limited’s London office. From 1995 to 1999, Mr. Roberts was based in Sydney where he developed and led Macquarie Group’s regulated assets privatization team. He joined the Macquarie Group in Sydney in 1991 from a banking background in New Zealand that included financial markets trading, corporate lending and structured finance.

Stephen Peet has served as a director since April 2004. He has been a Division Director of Macquarie Bank Limited since 2001 and is currently employed within the Infrastructure and Specialised Funds division. Mr. Peet joined the Macquarie Group in 1993 and has worked in various risk management, structured finance and asset management roles in the Sydney and New York offices.

Prior to completion of this offering, the company’s board of directors will be changed to consist of Mr. Roberts and three independent directors, each of whom will meet the independence requirements of the applicable listing standards. At that time, Messrs. Stokes and Peet will resign from the company’s board of directors.

Pursuant to the management services agreement, our Manager will be permitted to appoint one representative to the board of directors, who will be the chairman, and one alternate for this appointee. The chairman is not required to stand for election by the shareholders. The amended and restated LLC agreement of the company provides that the board of directors must consist at all times after the consummation of this offering of at least four directors, three of whom must be independent if there is one director appointed by our Manager pursuant to the management services agreement. Currently, Australian banking regulations prohibit more than one in four or more than two directors, officers or employees of Macquarie Bank Limited or any of its subsidiaries, including our Manager, from serving as members of the board of directors of any entity managed by Macquarie Bank Limited or any of its subsidiaries with seven or more members. The amended and restated LLC agreement permits the board of directors to increase the size of the board to up to twelve directors. See “Our Manager — Management Services Agreement.”

The amended and restated LLC agreement requires the board of directors of the company to take action by an affirmative vote of a majority of directors. No independent director may be removed from office by our shareholders except for cause with the affirmative vote of the holders of 66 2/3% of the outstanding trust stock of the company’s sole member. All directors will hold office until their successors have been elected and qualified or until their earlier death, resignation or removal. See “Description of Capital Stock — Anti-Takeover Provisions — Anti-Takeover Provisions in the Trust Agreement and the LLC Agreement.”

Currently, our directors are not entitled to compensation. Compensation for each independent director for service on our board and any committees will be determined prior to the appointment of these directors. Our Manager’s appointed representative on the board of directors will receive no director’s fees or other compensation from us for serving as a director or a member of a committee of the board of directors. Directors (including the chairman appointed by our Manager) will be reimbursed for reasonable out-of-pocket expenses incurred in attending meetings of the board of directors or committees and for any expenses reasonably incurred in their capacity as directors.

The company’s board of directors will, prior to consummation of this offering, designate the following standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee. In addition, the board of directors may, from time to time, designate one or more additional committees, which shall have the duties and powers granted to it by the board of directors.

The audit committee will be comprised entirely of the independent directors who will meet all applicable independence requirements and will include at least one “audit committee financial expert,” as that term is used in applicable SEC regulations.


	•	retaining and overseeing our independent accountants;

	•	assisting the company’s board of directors in its oversight of the integrity of our financial statements, the qualifications, independence and performance of our independent auditors and our compliance with legal and regulatory requirements;

	•	reviewing and approving the plan and scope of the annual audit;

	•	pre-approving any non-audit services provided by our independent auditors;

	•	approving the fees to be paid to our independent auditors;

	•	reviewing with our chief executive officer and chief financial officer and independent auditors the adequacy and effectiveness of our internal controls;


	•	preparing the audit committee report to be filed with the SEC; and

	•	reviewing and assessing annually the audit committee’s performance and the adequacy of its charter.

The compensation committee will be comprised entirely of independent directors who meet the independence requirements of the applicable listing standards. In accordance with the compensation committee charter, the members will be outside directors as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, and non-employee directors within the meaning of Section 16 of the Exchange Act. The responsibilities of the compensation committee will include responsibility for monitoring our Manager for compliance with the management services agreement and for reviewing the remuneration of our Manager.

The nominating and corporate governance committee will be comprised entirely of independent directors who will meet the independence requirements of the applicable listing standards. The nominating and corporate governance committee will be responsible for, among other things:


	•	recommending the number of directors to comprise the board of directors;

	•	identifying and evaluating individuals qualified to become members of the board of directors, other than our Manager’s appointed director;

	•	recommending to the board the director nominees for each annual shareholders’ meeting, other than our Manager’s appointed director;

	•	recommending to the board of directors the candidates for filling vacancies that may occur between annual shareholders’ meetings, other than our Manager’s appointed director;

	•	reviewing independent director compensation and board processes, self-evaluations and policies; and

	•	monitoring developments in the law and practice of corporate governance.

None of the company’s executive officers or members of the company’s board of directors has served as a member of a compensation committee (or if no committee performs that function, the board of directors) of any other entity that has an executive officer serving as a member of the company’s board of directors or compensation committee.

No officer receives compensation from the company. All compensation of officers is paid by our Manager.

Our chief executive officer and chief financial officer who will be seconded to us by our Manager will manage our day-to-day operations and affairs. The management teams of each of the separate businesses will report to the company’s board of directors through our chief executive officer and chief financial officer and operate each business and be responsible for its profitability and internal growth. The company’s board of directors and our chief executive officer and chief financial officer will have responsibility for overall corporate strategy, acquisitions, financing and investor relations. Our chief executive officer and chief financial officer will call upon the resources of our Manager to run our business. See “Our Manager — Management Services Agreement — Secondment of Our Chief Executive Officer and Chief Financial Officer.”

The company and its managed subsidiaries intend to enter into a management services agreement with Macquarie Infrastructure Management (USA) Inc., which the company and its managed subsidiaries will appoint as our Manager. Under the management services agreement, the company’s direct, wholly owned subsidiaries are referred to as managed subsidiaries. The key elements of the management services agreement are summarized below. The statements that follow are subject to and are qualified in their entirety by reference to all of the provisions of the management services agreement, a form of which is filed as an exhibit to the registration statement of which this prospectus is a part.

The management services agreement defines our Manager’s duties and responsibilities. Subject to the oversight and supervision of the company’s board of directors, our Manager will manage our day-to-day business and affairs. Neither the trust nor the company will have any employees. Our Manager will second to us our chief executive officer and chief financial officer.

Our Manager has agreed that it will perform the following duties, commencing from the date of consummation of this offering:


	•	cause the carrying out of all of the company’s day-to-day accounting, administrative, liaison, representative and reporting functions and obligations and those of its managed subsidiaries and any such obligations of the company with respect to the trust;

	•	establish and maintain the company’s and managed subsidiaries’ books and records consistent with industry standards and in compliance with the rules and regulations promulgated under the Securities Act and the Exchange Act and with GAAP;

	•	identify, evaluate and recommend, through the company’s officers, acquisitions or investment opportunities, from time to time; if the company’s board of directors approves any acquisition or investment, negotiate and manage such acquisition or investment on the company’s behalf; and thereafter manage those acquisitions or investments, as a part of the company’s business under the management services agreement, on behalf of the company and any relevant managed subsidiary. To the extent acquisition or investment opportunities are offered to our Manager or to the Infrastructure and Specialised Funds division (or any such successor thereto) of Macquarie Bank Limited, our Manager will offer any such acquisition or investment opportunities to the company in accordance with the priority protocol described below unless our chief executive officer notifies our Manager in writing that the acquisition or investment opportunity does not meet the company’s acquisition criteria, as determined by the company’s board of directors from time to time. The company acknowledges and agrees that (i) no affiliate of our Manager, has any obligation to offer any acquisition or investment opportunities to our Manager or to the Infrastructure and Specialised Funds division; (ii) any affiliate of our Manager is permitted to establish further investment vehicles that may seek to invest in infrastructure businesses in the United States, or a new investment vehicle, provided that the rights of the company and the managed subsidiaries pursuant to the management services agreement are preserved; and (iii) in the event that an acquisition or investment opportunity is offered to the company by our Manager and the company determines that it does not wish to pursue the acquisition or investment opportunity in full, any portion of the opportunity which the company does not wish to pursue may be offered to any other person, including a new investment vehicle or any other investment vehicle managed by the Macquarie Group, in the sole discretion of our Manager or any of its affiliates;


	•	attend to all matters necessary to ensure the professional management of any business controlled by the company;

	•	identify, evaluate and recommend the sale of all or any part of the business that the company owns from time to time in accordance with the company’s criteria and policies then in effect and, if such proposed sale is approved by the company’s board of directors and the boards of directors of any relevant managed subsidiary, negotiate and manage the execution of the sale on the company’s behalf and on behalf of the relevant managed subsidiary;

	•	recommend and, if approved by the board of directors of the company, use its reasonable efforts to procure the raising of funds whether by way of debt, equity or otherwise, including the preparation, review, distribution and promotion of any prospectus or offering memorandum in respect thereof, but without any obligation to provide such funds;

	•	recommend changes to the company’s amended and restated LLC agreement to the board of directors of the company;

	•	recommend capital reductions, including repurchases of LLC interests of the company and corresponding trust stock, to the board of directors of the company;

	•	recommend to the board of directors of the company and, as applicable, the boards of directors of the managed subsidiaries the appointment, hiring and dismissal (including all material terms related thereto) of officers, staff and consultants to the company, its managed subsidiaries and any of their subsidiaries, as the case may be;

	•	cause the carrying out of maintenance to, or development of, any part of the business or any asset of the company or any managed subsidiary approved by the board of directors of the company;

	•	when appropriate, recommend to the company’s board of directors nominees of the company as directors of the managed subsidiaries and any of their subsidiaries or companies in which the company, its managed subsidiaries or any of their subsidiaries has made an investment;

	•	recommend to the company’s board of directors the payment of dividends and interim dividends to its members;

	•	prepare all necessary budgets for the company for submission to the company’s board of directors for approval;

	•	make recommendations to the boards of directors of the company and its managed subsidiaries for the appointment of auditors, accountants, legal counsel and other accounting, financial or legal advisers and technical, commercial, marketing or other independent experts;

	•	make recommendations with respect to the exercise of the voting rights to which the company is entitled in respect of its investments;

	•	recommend, and, subject to approval of the company’s board of directors, provide or procure all necessary technical, business management and other resources for the company’s subsidiaries, including the managed subsidiaries, and any other entities in which the company has made an investment;

	•	do all things necessary on its part to enable the company’s and each managed subsidiary’s compliance with:


	•	the requirements of applicable law, including the rules and regulations promulgated under the Securities Act or the Exchange Act or the rules, regulations or procedures of any foreign, federal, state or local governmental, judicial, regulatory or administrative authority, agency or commission; and


	•	any contractual obligations by which the company or its managed subsidiaries are bound;


	•	prepare and, subject to approval of the company’s board of directors, arrange to be filed on the company’s behalf with the SEC, any other regulatory body, the applicable stock exchange or automated quotation system, in a timely manner, all annual, quarterly, current and other reports the company is required to file with the SEC pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act;

	•	attend to all matters necessary for any reorganization, bankruptcy proceedings, dissolution or winding up of the company or any of its managed subsidiaries subject to approval by the relevant board of directors of the company or any such managed subsidiary;

	•	attend to the timely calculation and payment of taxes the company and each of its subsidiaries must pay;

	•	attend to the opening, closing, operation and management of all company and managed subsidiary bank accounts and accounts held with other financial institutions, including making any deposits and withdrawals reasonably necessary for the management of day-to-day operations;

	•	cause the consolidated financial statements of the company and its subsidiaries for each fiscal year to be prepared and quarterly interim financial statements to be prepared in accordance with applicable accounting standards for review and audit as required by law;

	•	recommend the arrangements for the holding and safe custody of the company’s property, including the appointment of custodians or nominees;

	•	manage litigation in which the company or any managed subsidiary is sued or commence litigation after consulting with, and subject to the approval of, the board of directors of the company or such managed subsidiary;

	•	carry out valuations of any of the company’s assets or the assets of any of its subsidiaries or arrange for such valuation to occur as and when our Manager deems necessary or desirable in connection with the performance of its obligations under the management services agreement, or as otherwise approved by the board of directors of the company;

	•	make recommendations in relation to and effect the entry into insurance of the company’s assets, or the assets of any of its managed subsidiaries and their subsidiaries, together with other insurances against other risks, including directors’ and officers’ insurance, as our Manager and the board of directors of the company or any managed subsidiary, as applicable, may from time to time agree; and

	•	provide all such other services as may from time to time be agreed upon with the company, including any and all accounting and investor relations services (such as the preparation and organization of communications with shareholders and shareholder meetings) and all other duties reasonably related to day-to-day operations and the operations of its managed subsidiaries.


	•	obtain professional indemnity insurance and fraud and other insurance and maintain such coverage as is reasonable having regard to the nature and extent of its obligations under the management services agreement;

	•	exercise all due care, skill and diligence in carrying out its duties under the management services agreement as required by applicable law;


	•	provide the board of directors of the company with all information in relation to the performance of our Manager’s obligations under the management services agreement as the company’s board of directors may request;

	•	promptly deposit all amounts payable to the company or the managed subsidiaries, as the case may be, to a bank account held in the company’s name, or in the name of a managed subsidiary, as applicable;

	•	ensure all of the company’s property and that of the managed subsidiaries is clearly identified as such, held separately from property of our Manager and, where applicable, in safe custody;

	•	ensure that all of the company’s property and that of the managed subsidiaries (other than moneys to be deposited to any bank account of the company or of the managed subsidiaries, as the case may be) is transferred to or otherwise held in the company’s name or in the name of a managed subsidiary, as the case may be, or any nominee or custodian appointed by the company or a managed subsidiary, as the case may be;

	•	prepare detailed papers and agendas for scheduled meetings of the company’s board of directors and the boards of directors of the managed subsidiaries that, where applicable, contain such information as is reasonably available to our Manager to enable the boards of directors to base their opinions; and

	•	in conjunction with the papers referred to in the bullet point above, prepare or cause to be prepared reports to be considered by the boards of directors of the company and the managed subsidiaries in accordance with the company’s internal policies and procedures (1) on any acquisition, investment or sale of any part of the business proposed for consideration by any such board of directors, (2) on management of the business and (3) otherwise in respect of the performance of our Manager’s obligations under the management services agreement, in each case that the company may require and in such form that the company and our Manager agree upon or as otherwise reasonably requested by the board of directors of the company.

Pursuant to the terms of the management services agreement and the amended and restated LLC agreement, for so long as the Manager or a Macquarie Group affiliate holds shares of trust stock with an aggregate value of $5 million based on the initial offering price stated on the cover of this prospectus, as adjusted to reflect any stock splits or similar recapitalization, our Manager has the right to appoint one director of the company’s board of directors and an alternate for such appointee, and such director, or alternate if applicable, will serve as the chairman of the board of directors. The company will cause our Manager’s nominee to be appointed as a director and chairman of the board of directors as soon as reasonably practicable after our Manager gives notice of such appointment. Our Manager’s appointee on the company’s board of directors will not be required to stand for election by our shareholders.

Our Manager’s appointee to the company’s board of directors will not receive any compensation (other than out-of-pocket expenses) and will not have any special voting rights. The appointee of our Manager shall not participate in discussions regarding, or vote on, a related party transaction in which the Macquarie Group or its affiliates have an interest. In the case of related party transactions, an independent director will assume the role of chairman.

Our Manager will second to us our chief executive officer and chief financial officer. Our Manager and the company’s board of directors may agree from time to time that our Manager will second to the company one or more additional individuals to serve as officers of the company, upon such terms as our Manager and the company’s board of directors may mutually agree. Although our chief executive officer

and chief financial officer will remain employees of, and be remunerated by, our Manager or an affiliate of our Manager, they will report directly to the company’s board of directors. Our Manager also will allocate an asset manager to each of the company’s separate businesses, who will assist our chief executive officer and chief financial officer in the direction and oversight of each business.

The services performed by our chief executive officer and chief financial officer will be provided at the cost of our Manager or an affiliate of our Manager. In addition, our Manager or an affiliate of our Manager will determine and pay the compensation of our chief executive officer and chief financial officer with input from the company’s board of directors. In establishing the remuneration for our chief executive officer and chief financial officer, our Manager or one of the affiliates of our Manager will take into account the following considerations: the standard remuneration guidelines as adopted by our Manager or an affiliate of our Manager from time to time; assessment by our Manager or one of the affiliates of our Manager of the respective individual’s performance, our Manager’s performance and the company’s performance, financial or otherwise; and assessment by the company’s board of directors of the respective individual’s performance and the performance of our Manager.

After consultation with our Manager, the company’s board of directors may require that our Manager replace any individual seconded to the company.

The company will provide any individuals seconded to the company with adequate indemnities and will maintain directors’ and officers’ insurance in support of the indemnities. Our Manager will reduce our management fees by the amount of any fees that any individual seconded to the company or any staff or employees of our Manager or its affiliates receives as compensation for serving as a director on the boards of directors of the company, any of the company’s subsidiaries or any company in which the company or its subsidiaries has made an investment.

The company has agreed to pay, or reimburse our Manager if incurred by our Manager on the company’s behalf, certain of the company’s expenses as specified in the management services agreement which include:


	•	external tax, legal and audit services;

	•	all costs incurred in connection with the company’s board of directors, including directors’ and officers’ insurance;

	•	listing fees;

	•	the out-of-pocket expenses of our chief executive officer and our chief financial officer; and

	•	subject to the approval of the company’s board of directors and included in the company’s annual budget, due diligence and other transaction expenses of our Manager not recovered in a consummated transaction.

The company’s board of directors may terminate our Manager’s appointment only if:


	•	our shares underperform a benchmark index by more than 30% in relative terms and more than 5% in absolute terms in eight out of ten consecutive semiannual periods on a rolling basis, and the holders of a minimum of 66 2/3% of trust stock (excluding any shares owned by our Manager or any of its affiliates) vote to remove our Manager; or

	•	our Manager materially breaches the terms of the management services agreement and such breach continues unremedied for 60 days after notice; or


	•	our Manager acts with gross negligence, willful misconduct, bad faith or reckless disregard in carrying out its obligations under the management services agreement or engages in fraud; or

	•	our Manager experiences certain bankruptcy events.

The management services agreement permits our Manager to resign at any time with 90 days’ written notice, and this right is not contingent upon our finding a replacement. Australian banking regulations that govern the operations of Macquarie Bank Limited and all of its subsidiaries, including our Manager, require that subsidiaries of Australian banks providing management services have these resignation rights. If our Manager resigns, it is under no obligation to find a replacement before resigning. However, if our Manager resigns, until the date on which the resignation becomes effective, it will, upon request of the company’s board of directors, use reasonable efforts to assist the company’s board of directors to find replacement management.

Upon the resignation of our Manager, the company and its managed subsidiaries will cease to use the Macquarie brand entirely within 90 days of notice of the Manager’s resignation, including changing their names to remove any reference to “Macquarie,” and causing the trust to change its name to remove any reference to “Macquarie.” Similarly, if our Manager’s appointment is terminated, the trust, the company and its managed subsidiaries will cease to use the Macquarie brand entirely within 30 days.

Concurrently with the closing of this offering, we will enter into a registration rights agreement with our Manager. Our execution of the registration rights agreement is a condition to the Manager’s obligation to purchase shares of trust stock in the private placement transaction closing concurrently with this offering.

The registration rights agreement will require us to use our best efforts to file, as soon as possible after the first anniversary of the completion of this offering, a registration statement under the Securities Act relating to the resale of the shares of trust stock purchased by our Manager concurrently with this offering as well as shares purchased by the Manager from time to time through the reinvestment of any of its management fees. We will agree to use our reasonable efforts to have the registration statement declared effective as soon as possible thereafter and to maintain effectiveness (subject to limited exceptions) of the registration statement. We will be obligated to take certain actions as are required to permit resales of the registrable shares. In addition, our Manager may also require us to include its shares in future registration statements that we file, subject to cutback at the option of the underwriters of any such offering. Shares sold pursuant to any of these registration statements will be freely tradable in the public market without restriction.

Our Manager has exclusive responsibility for reviewing and making recommendations to the company’s board of directors with respect to acquisition opportunities and dispositions. In the event that an opportunity is not originated by our Manager, the company’s board of directors must seek a recommendation from our Manager prior to making a decision concerning any acquisition or disposition. Our Manager is not required to offer the company opportunities where an investment vehicle managed by affiliates of our Manager that are part of Macquarie Bank Limited’s Infrastructure and Specialised Funds division has priority to pursue the opportunity.

Our Manager and its affiliates will refer to the company’s board of directors any acquisition opportunities listed below in the U.S. in infrastructure sectors with “user pays”, contracted and regulated assets as described in “Summary” and “Business — General — Industry” that are made available by any source to the Infrastructure and Specialised Funds division of Macquarie Bank Limited and that our chief executive officer pursuant to our acquisition criteria adopted by the company’s board of directors deems to be suitable acquisitions for the company.

The company has acquisition priority, ahead of all current and future entities managed by our Manager or its affiliates that are part of Macquarie Bank Limited’s Infrastructure and Specialised Funds division, in all infrastructure acquisition opportunities within the U.S. greater than AUD 40 million ($27.9 million as of June 2, 2004), as follows:


	With respect to regulated assets (including, but not limited to, electricity and gas transmission and distribution and water services) the company has second priority after Macquarie Essential Assets Partnership, or MEAP, until such time as MEAP has invested a further 45 million Canadian dollars in the U.S. Thereafter, the company will have first priority.

The company has first priority ahead of all current and future entities managed by our Manager or its affiliates in all infrastructure acquisition opportunities originated by a party other than our Manager or affiliates of our Manager where such party offers the opportunity exclusively to the company and not to any other entity managed by our Manager or its affiliates.

The company will compensate our Manager for managing our operations through base management fees and performance fees, which are described below. Upon completion of this offering, the company also will pay our Manager a fee in the amount of $5 million for services provided in preparing the company for the offering.

The company will pay our Manager a base management fee for services provided in the amount of (i) 1.5% per year of net investment value up to $500 million, (ii) $7.5 million per year plus 1.25% per year of net investment value over $500 million and up to $1.5 billion and (iii) $20 million per year plus 1% per year of net investment value over $1.5 billion, less the amount of any fees paid to any individuals seconded to the company or any staff or employees of our Manager or its affiliates receive as compensation for serving as a director on the boards of directors of the company, any of the company’s subsidiaries or any company in which the company or its subsidiaries has made an investment to the extent such fees are not subsequently paid over to the company, a subsidiary of the company or any company in which the company or its subsidiaries has made an investment; less the amount of any base management fees previously paid with respect to any future investment when it is determined that such future investment will not be completed and less the company’s proportionate share of any base management fees paid to the Macquarie Group during the quarter by entities in which the company has invested. The base management fee is payable quarterly in arrears.

For purposes of calculating the base management fees under the management services agreement, net investment value is calculated as follows:


	•	volume-weighted average market capitalization over the last 15 trading days of the quarter (based on the volume-weighted average trading prices and average number of outstanding shares of trust stock);

	•	plus debt with recourse to the company or to its directly owned subsidiaries;

	•	plus firm commitments for future investments; and

	•	less cash and cash equivalents held by the company and its managed subsidiaries.

Base management fees and performance fees are payable in cash. Our Manager may elect to reinvest all or any portion of its fees in shares of trust stock. If our Manager elects to reinvest its fees in shares of trust stock, the price of the shares is based on the volume-weighted average trading price of the outstanding shares over the last 15 trading days of the quarter with respect to base management fees, and of the relevant semiannual period in which the performance fee is calculated. The company will, and will cause the trust to, at all times maintain an ability to issue additional LLC interests and shares of trust stock, respectively, as required to enable our Manager to reinvest the management fees.

The company will pay performance fees to our Manager based on the total returns to shareholders, or the company accumulation index, relative to a benchmark. The benchmark is comprised of a weighted average of the MSCI U.S. IMI/Utilities Index and the MSCI Europe Utilities Index (in U.S. dollars) both calculated on a total return basis. The benchmark may be changed as agreed upon by the company and our Manager. The weighting will be adjusted semiannually in advance to reflect the fair values in U.S. dollars of our U.S. and non-U.S. assets. The first period company accumulation index will be calculated using the offering price to the public in this offering as the starting point.

Performance fees are calculated and payable semiannually in arrears in the amount of 20% of outperformance of the company accumulation index over the benchmark. Performance fees are payable only if there is a positive total return in the company accumulation index. If there is a negative total return in the company accumulation index but the company accumulation index outperforms the benchmark, such outperformance is carried forward and included in the calculation in the subsequent period. Any underperformance of the company accumulation index relative to the benchmark is carried forward and included in the calculation in the subsequent period.

We will use the proceeds from this offering to acquire our initial businesses and investments for cash from the Macquarie Group or from infrastructure investment vehicles managed by the Macquarie Group. See “The Acquisition of Our Initial Businesses and Initial Investments.”

The terms and pricing of the agreements with respect to our acquisitions of our initial businesses and investments from the Macquarie Group and from investment vehicles managed by the Macquarie Group and the terms of our management services agreement and registration rights agreement which we intend to enter into were negotiated among Macquarie Group affiliated entities in the overall context of this offering. There was no review by unaffiliated third parties, including by the company’s independent board members, on our behalf of the pricing or the terms of the agreements which we have entered into or intend to enter into. As a result, provisions of these agreements may be less favorable to the company than they might have been had they been produced by arm’s-length transactions between unaffiliated third parties.

In connection with the acquisition of our initial businesses and investments, financial advisory fees of approximately $7.9 million with respect to Atlantic and a proportionate share of approximately £4 million with respect to SEW paid to affiliates of the Macquarie Group are included in the purchase price. We have agreed that affiliates of the Macquarie Group will have preferred provider status in respect of any financial advisory services to be contracted for by us or our subsidiaries. We will contract for such services on an arm’s-length basis on market terms upon approval by our independent directors. Any fees payable for such financial advisory services are in addition to all fees paid under the management services agreement as described in “Our Manager — Management Services Agreement — Fees.”

The company and its managed subsidiaries intend to enter into a management services agreement, with pursuant to which the company and its managed subsidiaries will appoint Macquarie Infrastructure Management (USA) Inc. as our Manager. See “Our Manager — Management Services Agreement.”

Our Manager has agreed to purchase from us at the closing of this offering in a separate private placement transaction up to 10% of the number of shares offered hereby at a per share price equal to the initial public offering price, with a total price not to exceed $35 million. Our Manager has agreed with us that it will not sell any of these shares until one year after the closing of this offering. Thereafter, it may sell up to 50% of these shares beginning on the first anniversary of the closing of this offering and the balance beginning on the third anniversary of the closing of this offering.

We intend to enter into a registration rights agreement for the sale of shares of trust stock by our Manager. See “Our Manager — Management Services Agreement” for a discussion of this agreement.

The following is a summary of the terms of the shares representing beneficial interests in Macquarie Infrastructure Assets Trust, which we refer to as the trust stock, and the limited liability company interests of Macquarie Infrastructure Assets LLC, which we refer to as the LLC interests. The amended and restated trust agreement, which we refer to as the trust agreement, and the amended and restated LLC agreement, which we refer to as the LLC agreement, provide for the issuance of the trust stock and LLC interests, respectively, and the distributions on and voting rights of the trust stock and the LLC interests, respectively. The following description is subject to the provisions of the Delaware Statutory Trust Act and the Delaware Limited Liability Company Act. Certain provisions of the LLC agreement are intended to be consistent with the Delaware General Corporation Law and generally the powers of the company, the governance processes and the rights of the trust as the holder of the LLC interests are intended to be similar in many respects to those of a Delaware corporation. In some instances, this summary refers to specific differences between the rights of holders of trust stock or LLC interests, on one hand, and the rights of shareholders of a Delaware corporation, on the other hand. Similarly, this summary refers to specific differences between the attributes of shares of trust stock or LLC interests, on one hand, and shares of stock of a Delaware corporation, on the other hand. However, this summary does not contain an exhaustive description of the differences between the terms of the trust stock or LLC interests and the terms of the shares of stock of a Delaware corporation. You should refer to the provisions of each of the trust agreement and the LLC agreement, which we have filed with the SEC as exhibits to the registration statement of which this prospectus forms a part, because those agreements, and not this summary, will govern your rights as a holder of the trust stock or LLC interests, as applicable.

Each share of trust stock represents an undivided beneficial interest in the trust and each share of trust stock corresponds to one underlying LLC interest of the company owned by the trust. Unless the trust is dissolved, it must remain the sole holder of 100% of the LLC interests and at all times the company will have outstanding the identical number of LLC interests as the number of outstanding shares of trust stock. The trust is authorized to issue 500,000,000 shares of trust stock and the company is authorized to issue a corresponding number of LLC interests. Immediately following the completion of this offering, the trust will have shares outstanding, or shares outstanding if the underwriters exercise their overallotment option in full, and the company will have an equal number of corresponding LLC interests outstanding. The trust cannot issue any other class of trust stock, and the company does not intend to issue any other class of LLC interests. All shares and LLC interests will be fully paid and nonassessable upon payment therefor.

The company, acting through its board of directors, is expected to declare and pay dividends on the LLC interests to the trust as the sole holder of those interests. For so long as the trust is the sole member of the company, upon receipt of any dividends declared and paid by the company, the trust will, pursuant to the terms of the trust agreement, distribute the whole amount of those dividends in cash to its shareholders, in proportion to their percentage ownership of the trust, as they appear on the share register on the related record date. The company may declare and pay dividends to the holders of its LLC interests from its net cash flow. “Net cash flow,” for any period, is defined as the gross cash proceeds of the company less the portion used to pay or establish reserves for company expenses, debt payments, capital improvements, replacements and contingencies, all as determined by the board of directors of the company. Net cash flow will not be reduced by depreciation, amortization, cost recovery deductions or similar allowances, but will be increased by any reductions of reserves discussed in the prior sentence.

Each outstanding share of trust stock is entitled to one vote for each share on any matter with respect to which members of the company are entitled to vote, as provided in the LLC agreement and as detailed below. Pursuant to the terms of the LLC agreement and the trust agreement, unless the trust is dissolved, it must remain the sole holder of the LLC interests and, with respect to those matters reserved to the members of the company, the company will act at the direction of the trust. The company, as sponsor of the trust, will provide to the trust, for transmittal to shareholders of the trust, the appropriate form of proxy to enable shareholders of the trust to exercise, in proportion to their percentage ownership of trust stock, the voting rights of the trust, and the trust will vote its LLC interests in a manner that reflects the vote of holders of the trust stock. For the purposes of this summary, the voting rights of members of the company that effectively will be exercised by the shareholders of the trust by proxy will be referred to as the voting rights of the holders of the trust stock.

The LLC agreement provides that the members are entitled, at the annual meeting of members of the company, to vote for the election of all of the directors other than the director appointed by our Manager. Because neither the trust agreement nor the LLC agreement provides for cumulative voting rights, the holders of a plurality of the voting power of the then outstanding shares of the trust, the company’s sole member, represented at a meeting will effectively be able to elect all the directors of the company standing for election.

Right to Bring a Derivative Action and Enforcement of the Provisions of the LLC Agreement by Holders of the Trust Stock

The LLC agreement provides that a holder of trust stock has the right to directly institute a legal proceeding against the company to enforce the provisions of the LLC agreement. In addition, the trust agreement provides that holders of 10% or more of the outstanding shares of trust stock have the right to cause the trust to bring a derivative action in the right of the company under Section 18-1001 of the Delaware Limited Liability Company Act.

The LLC agreement and the trust agreement provide that, if at any time more than 90% of the then outstanding shares of trust stock is held by one person, who we refer to as the acquirer, such acquirer has the right, but not the obligation, to cause the company, as sponsor of the trust, acting through its board of directors, to cause the trust to mandatorily exchange all shares of trust stock then outstanding for an equal number of LLC interests, which we refer to as an acquisition exchange, and dissolve the trust. The company, as sponsor of the trust, acting through its board of directors, will use reasonable efforts to cause the transfer agent of the trust stock to mail a copy of notice of such exchange to the shareholders of the trust at least 30 days prior to the exchange of shares of trust stock for LLC interests. Upon the completion of such acquisition exchange, each holder of shares of trust stock immediately prior to the completion of the acquisition exchange will be admitted to the company as a member in respect of a number of LLC interests equal to the number of shares of trust stock held at such time and the trust will cease to be a member of the company.

Following the exchange, the acquirer has the right to purchase for cash all outstanding LLC interests that the acquirer does not own. The acquirer can exercise its right to effect such purchase by delivering notice, not more than 30 days prior to the date which it selects for the purchase, to the transfer agent for the LLC interests of its election to make the purchase. The company will use reasonable efforts to cause the transfer agent to mail the notice of the purchase to the record holders of the LLC interests.

Upon the acquirer’s exercise of its purchase right, members other than the acquirer shall be required to sell all, but not less than all, of their outstanding LLC interests at the offer price. The offer price will be equal to the average closing price (as described below) per share of trust stock or LLC interest, as applicable, on the 20 trading days immediately prior to, but not including, the date of the acquisition exchange. While this provision of the LLC agreement provides for a fair price requirement, the


	•	the closing sale price (or, if no closing price is reported, the last reported sale price) of a share of trust stock or LLC interest, as applicable (regular way), on the NYSE on such date;

	•	if the shares of trust stock or LLC interests are not listed for trading on the NYSE on any such date, the closing sale price as reported in the composite transactions for the principal U.S. securities exchange on which the shares of trust stock or LLC interests, as applicable, are so listed;

	•	if the shares of trust stock or LLC interests, as applicable, are not so listed on a U.S. national or regional securities exchange, the price as reported by The Nasdaq Stock Market;

	•	if the shares of trust stock or LLC interests, as applicable, are not so reported, the last quoted bid price for the shares of trust stock or LLC interests, as applicable, in the over-the-counter market as reported by the National Quotation Bureau or a similar organization; or

	•	if the shares of trust stock or LLC interests, as applicable, are not so quoted, the average of the mid-point of the last bid and ask prices for the shares of trust stock or LLC interests, as applicable, from at least three nationally recognized investment firms that the company selects for such purpose.

The LLC agreement and the trust agreement provide that in the event that the trust or the company, or both, is, or is reasonably likely to be, treated as a corporation for U.S. federal income tax purposes, the company, as sponsor of the trust, acting through its board of directors, must cause the trust to exchange all shares of trust stock then outstanding for an equal number of LLC interests, which we refer to as a mandatory exchange, and dissolve the trust. The company, as sponsor of the trust, acting through its board of directors, will use reasonable efforts to cause the transfer agent for the trust stock to mail a copy of notice of such exchange to the shareholders of the trust at least 30 days prior to the mandatory exchange of shares of trust stock for LLC interests. Upon the completion of a mandatory exchange, each holder of shares of trust stock immediately prior to the completion of the mandatory exchange will be admitted to the company as a member in respect of a number of LLC interests equal to the number of shares of trust stock held at such time and the trust will cease to be a member of the company.

In addition to the dissolution of the trust upon the occurrence of an acquisition exchange or a mandatory exchange, the LLC agreement provides for the dissolution and winding up of the company upon the occurrence of either (1) the unanimous vote of its members to dissolve, wind up and liquidate the company or (2) a judicial determination that an event has occurred that makes it unlawful, impossible or impractical to carry on the business of the company in accordance with Section 18-802 of the Delaware Limited Liability Company Act. Upon the occurrence of a dissolution event with respect to the company, each share of trust stock will be mandatorily exchanged for an LLC interest and the company will then be liquidated in accordance with the terms of the LLC agreement. Upon liquidation and winding up of the company, the then holders of LLC interests will be entitled to share ratably in the assets of the company legally available for distribution.

Certain provisions of the management services agreement, the trust agreement and the LLC agreement, which will become effective upon the closing of this offering, may make it more difficult for third parties to acquire control of the trust and the company by various means. These provisions could deprive the shareholders of the trust of opportunities to realize a premium on the shares of trust stock owned by them. In addition, these provisions may adversely affect the prevailing market price of the trust stock. These provisions are intended to:


	•	enhance the likelihood of continuity and stability in the composition of the board of directors of the company and in the policies formulated by the board;

	•	discourage certain types of transactions which may involve an actual or threatened change in control of the trust and the company;

	•	discourage certain tactics that may be used in proxy fights;

	•	encourage persons seeking to acquire control of the trust and the company to consult first with the board of directors of the company to negotiate the terms of any proposed business combination or offer; and

	•	reduce the vulnerability of the trust and the company to an unsolicited proposal for a takeover that does not contemplate the acquisition of all of the outstanding shares of trust stock or that is otherwise unfair to shareholders of the trust.

The limited circumstances in which our Manager may be terminated means that it will be very difficult for a potential acquirer of the company to take over the management and operation of our business. Under the terms of the management services agreement, our Manager may only be terminated by the company in the following circumstances:


	•	our shares underperform a benchmark index by more than the greater of 30% in relative terms or 5% in absolute terms in eight out of ten semiannual periods on a rolling basis, and the holders of a minimum of 66 2/3% of trust stock (excluding any shares owned by our Manager or any of its affiliates) vote to remove our Manager;

	•	our Manager materially breaches the terms of the management services agreement and such breach continues unremedied for 60 days after notice;

	•	our Manager acts with gross negligence, willful misconduct, bad faith or reckless disregard in carrying out its obligations under the management services agreements or engages in fraud; or

	•	our Manager experiences certain bankruptcy events.

Furthermore, in the event the management services agreement is terminated upon the resignation or removal of our Manager, the trust and the company, as well as each of their direct and indirect subsidiaries, will be required to change their names to remove any reference to “Macquarie.” This might cause the value of the company and the market price of the trust stock to decline.

A number of provisions of the LLC agreement also could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, control of the trust and the company. The LLC agreement contains a provision based on Section 203 of the Delaware General Corporation Law, which prohibits the company from engaging in a business combination with an interested


	•	the business combination is, or the transaction by which such shareholder became an interested shareholder was previously, approved by the board of directors of the company;

	•	upon consummation of the transaction by which the interested shareholder became an interested shareholder, the interested shareholder owns at least 85% of the outstanding trust stock of the company’s sole member (other than those shares held by directors who are also officers); or

	•	the transaction by which such shareholder became an interested shareholder is subsequently approved by the board of directors of the company and the holders of 66 2/3% of the outstanding trust stock of the company’s sole member (other than those shares held by the interested shareholder).

A “business combination” includes mergers, asset sales and other transaction resulting in a financial benefit to the interested shareholder. Subject to specified exceptions, an “interested shareholder” is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the trust stock.

Subject to the right of our Manager to appoint one director and his or her successor in the event of a vacancy, the LLC agreement authorizes only the board of directors of the company to fill vacancies, including for newly created directorships. This provision could prevent a shareholder of the trust from effectively obtaining an indirect majority representation on the board of directors of the company by permitting the existing board to increase the number of directors and to fill the vacancies with its own nominees. The LLC agreement also provides that directors may be removed only for cause and only by the affirmative vote of holders of 66 2/3% of the outstanding trust stock of the company’s sole member.

The trust agreement does not permit holders of the trust stock to act by written consent. Instead, shareholders may only take action, via proxy, which, when the action relates to the trust’s exercise of its rights as a member of the company, may be presented at duly called annual or special meetings of members of the company and will constitute the vote of the trust. For so long as the trust remains the company’s sole member, the trust may act by written consent, including to vote its LLC interests in a manner that reflects the vote by proxy of the holders of the trust stock. Furthermore, the LLC agreement provides that special meetings of members of the company, with respect to which holders of trust stock may be required to vote by proxy as provided above, may only be called by the chairman of the board of directors of the company or by a majority of the board of directors. The trust agreement and the LLC agreement also provide that members, or holders of trust stock effectively exercising the voting rights of the trust as sole member of the company, as the case may be, seeking to bring business before an annual meeting of members or to nominate candidates for election as directors at an annual meeting of members of the company, must provide notice thereof in writing to the company not less than 90 days and not more than 120 days prior to the date of the annual meeting of the company. In addition, such member must be a member of record on both (1) the date of the giving of the notice and (2) the record date for the determination of members entitled to vote at such meeting. The trust agreement provides that the same requirements are applicable to holders of trust stock seeking to effectively exercise such rights of the trust, as sole member of the company. The LLC agreement and the trust agreement specify certain requirements as to the form and content of a member’s or shareholder’s notice, as the case may be. These provisions may preclude members or holders of trust stock effectively exercising the voting rights of the trust as sole member of the company, as the case may be, from bringing matters before an annual meeting of members or from making nominations for directors at an annual or special meeting of members.

Authorized but unissued shares of trust stock are available for future issuance without approval of the shareholders of the trust. These additional shares of trust stock may be utilized for a variety of purposes, including future public offerings to raise additional capital or to fund acquisitions. The existence

In addition, the board of directors of the company has broad authority to amend the LLC agreement, as discussed below. The board could, in the future, choose to amend the LLC agreement to include other provisions which have the intention or effect of discouraging takeover attempts.

The LLC agreement may be amended by a majority vote of the board of directors of the company, except with respect to the following provisions, which effectively require an affirmative vote of at least a majority of the outstanding shares of trust stock of the company’s sole member:


	•	the purpose or powers of the company;

	•	the provisions regarding mandatory and acquisition exchanges of shares of trust stock for LLC interests described above;

	•	the amount of authorized LLC interests;

	•	the hiring of a replacement manager following the termination of the management services agreement; and

	•	the merger and conversion of the company to a corporation or other type of entity pursuant to Section 18-216 of the Delaware Limited Liability Company Act.

In addition, the consent of our Manager is required to amend the provision entitling it to appoint the director who will serve as the chairman of the board of directors of the company for so long as the management services agreement is in effect.

The transfer agent and registrar for the shares of trust stock and the LLC interests is Wells Fargo Bank, National Association. You may contact the transfer agent and registrar at Shareowner Services, Attention: Manager of Account Administration, 161 North Concord Exchange, South St. Paul, Minnesota 55075-1139.

We intend to apply to list the shares of trust stock on the NYSE or to have the shares quoted on the Nasdaq National Market.

Prior to this offering, no public market for our shares existed. The prevailing market price of our shares could decline because of sales of a large number of shares in the open market following this offering or the perception that those sales may occur. These factors also could impair our ability to raise capital through future offerings of shares.

Upon completion of this offering, we will have outstanding an aggregate of shares, assuming no exercise of the underwriters’ overallotment option, based on shares outstanding as of , 2004. All of the shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for shares, if any, which may be acquired by our “affiliates” as that term is defined in Rule 144 under the Securities Act. Persons who may be deemed to be affiliates generally include individuals or entities that control, are controlled by, or are under common control with, us and may include our directors and officers as well as our significant shareholders, if any.

An aggregate of approximately shares held by our Manager upon completion of this offering are deemed “restricted securities,” as that term is defined in Rule 144 under the Securities Act and may not be resold in the absence of registration under the Securities Act or pursuant to exemptions from such registration, including, among others, the exemptions provided by Rule 144 under the Securities Act.

Our Manager may elect to reinvest the performance fees it receives to buy our shares from us pursuant to the management services agreement. The shares our Manager receives upon reinvestment are also deemed “restricted securities,” as that term is defined in Rule 144 under the Securities Act and may not be resold in the absence of registration under the Securities Act or pursuant to exemptions from such registration, including, among others, the exemptions provided by Rule 144 under the Securities Act.

We and our Manager have agreed to enter into lock-up agreements in favor of the underwriters that prohibit us and our Manager, directly or indirectly, from selling or otherwise disposing of any shares or securities convertible into shares for a period of 180 days from the date of this prospectus, without the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, subject to limited exceptions. Immediately following this offering, persons subject to lock-up agreements will own shares, representing approximately % of the then outstanding shares, or approximately % if the underwriters’ overallotment option is exercised in full.

In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who has beneficially owned restricted securities for at least one year is entitled to sell within any three-month period the number of those restricted securities that does not exceed the greater of:


	•	1% of the total number of shares then outstanding; and

	•	the average weekly trading volume of the shares during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Sales under Rule 144 are also subject to manner-of-sale provisions and notice requirements and to the availability of current public information about us. Under Rule 144(k), a person that has not been one of our affiliates at any time during the three months preceding a sale, and that has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell those shares without regard to the volume, manner of sale or other limitations contained in Rule 144.

Upon completion of this offering, we intend to enter into a registration rights agreement for the sale of shares owned by our Manager upon the request of our Manager. See “Our Manager — Management Services Agreement” for a discussion of this agreement. After these shares are registered, they will be freely tradable without restriction under the Securities Act.

The following discussion describes the material U.S. federal (and certain state and local) income tax considerations associated with the purchase, ownership and disposition of shares as of the date hereof by U.S. holders (as defined below) and non-U.S. holders (as defined below). Except where noted, this discussion deals only with shares held as capital assets by holders who acquired shares upon their original issuance and does not address special situations, such as those of:


	•	dealers in securities or currencies,

	•	financial institutions,

	•	regulated investment companies,

	•	real estate investment trusts,

	•	tax-exempt entities,

	•	insurance companies,

	•	persons holding shares as a part of a hedging, integrated or conversion transaction or a straddle,

	•	traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, or

	•	persons liable for alternative minimum tax.

Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, the Treasury regulations promulgated thereunder, or the Regulations, and administrative and judicial interpretations thereof, all as of the date hereof, and such authorities may be repealed, revoked, modified or subject to differing interpretations, possibly on a retroactive basis, so as to result in U.S. federal income tax consequences different from those described below.

A “U.S. holder” of shares means a beneficial owner of shares that is for U.S. federal income tax purposes:


	•	an individual citizen or resident of the United States,

	•	a corporation (or other entity taxable as a corporation) created or organized in or under the laws of the United States or any state thereof or the District of Columbia,

	•	an estate the income of which is subject to U.S. federal income taxation regardless of its source, or

	•	a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable Regulations to be treated as a U.S. person.

A “non-U.S. holder” of shares means a beneficial owner of shares that is not a U.S. holder.

If a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes holds shares, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding shares, we urge you to consult your own tax adviser.

No statutory, administrative or judicial authority directly addresses the treatment of shares or instruments similar to shares for U.S. federal income tax purposes. As a result, we cannot assure you that the IRS or the courts will agree with the tax consequences described herein. A different treatment from that described below could adversely affect the amount, timing and character of income, gain or loss in respect of an investment in the shares. If you are considering the purchase of shares, we urge you to

Under current law and assuming full compliance with the terms of the trust agreement and based upon certain facts and assumptions, in the opinion of Shearman & Sterling LLP, the trust will be classified a grantor trust for U.S. federal income tax purposes and not as an association taxable as a corporation. As a result, for U.S. federal income tax purposes, you generally will be treated as the beneficial owner of a pro rata portion of the interests in the company held by the trust. You should be aware that an opinion of counsel is not binding on the IRS or the courts. Therefore, there can be no assurance that the IRS will not contend, or that a court will not ultimately hold, that the trust does not constitute a grantor trust for U.S. federal income tax purposes.

The company will be classified as a partnership for U.S. federal income tax purposes, provided that it is not characterized as a corporation by virtue of being a “publicly traded partnership” within the meaning of Section 7704(b) of the Code. The company will not be characterized as a corporation under that provision so long as (1) 90% or more of the company’s gross income during each taxable year constitutes “qualifying income,” within the meaning of Section 7704(d) of the Code, which we refer to as the qualifying income exception, and (2) the company is not required to register under the Investment Company Act. We anticipate that more than 90% of the gross income recognized by the company during each of its taxable years will consist of dividends, interest and capital gains from the sale or other disposition of stocks and bonds and that the Company will not be required to register under the Investment Company Act. Each of these items of gross income generally constitutes “qualifying income” within the meaning of Section 7704(d) of the Code. Whether the company will continue to meet the qualifying income exception is a matter that will be determined by the company’s operations and the facts existing at the time of future determinations. However, the company’s board of directors will use its best efforts to cause the company to operate in such manner as is necessary for the company to continue to meet the qualifying income exception.

There can be no assurance that the IRS will not assert that the company should be treated as a publicly traded partnership taxable as a corporation. No ruling has been or will be sought from the IRS, and the IRS has made no determination, as to the status of the company for U.S. federal income tax purposes or whether the company’s operations generate “qualifying income” under Section 7704 of the Code.

If the company fails to satisfy the “qualifying income” exception described above, other than a failure which is determined by the IRS to be inadvertent and which is cured within a reasonable period of time after the discovery of such failure, or if the company is required to register under the Investment Company Act, the company will be treated as if it had transferred all of its assets, subject to its liabilities, to a newly formed corporation, on the first day of the year in which it failed to satisfy the exception, in return for stock in that corporation, and then distributed that stock to the holders in liquidation of their interests in the company. This contribution and liquidation should be tax-free to holders and the company so long as the company, at that time, does not have liabilities in excess of its tax basis in its assets. Thereafter, the company would be treated as a corporation for U.S. federal income tax purposes. If the company were taxable as a corporation in any taxable year, either as a result of a failure to meet the qualifying income exception described above or otherwise, its items of income, gain, loss and deduction would be reflected only on its tax return rather than being passed through to the holders of shares, and its net income would be taxed to it at the tax rates applicable to domestic corporations. In addition, any distribution made to the trust would be treated as taxable dividend income, to the extent of the company’s current or accumulated earnings and profits, or, in the absence of current or accumulated earnings and profits, a nontaxable return of capital to the extent of each holder’s tax basis in its LLC interests, or

taxable capital gain, after the holder’s tax basis in its LLC interests is reduced to zero. Taxation of the company as a corporation would result in a material reduction in a holder’s cash flow and after-tax return and thus would likely result in a substantial reduction of the value of the shares.

The following discussion assumes that the company will be treated as a partnership for U.S. federal income tax purposes.

A partnership does not incur U.S. federal income tax liability. Instead, each partner of a partnership is required to take into account its share of items of income, gain, loss, deduction and other items of the partnership. Accordingly, each holder will be required to include in income its allocable share of our income, gain, loss, deduction and other items for our taxable year ending with or within its taxable year. Our taxable year will end on December 31 unless otherwise required by law. In computing a partner’s U.S. federal income tax liability, such items must be included, regardless of whether cash distributions are made by the partnership. Thus, holders may be required to include income without a corresponding current receipt of cash if the company generates taxable income but does not make cash distributions.

The company may acquire zero coupon bonds or other securities issued with original issue discount. As a holder of those securities, the company must include in gross income the original issue discount that accrues on such securities during the taxable year, even if it receives no corresponding payment on them during that taxable year.

Under recently enacted amendments to the Code, “qualified dividend income” received by (or allocable to) non-corporate taxpayers, including individuals, from qualified foreign corporations and most domestic corporations generally is subject to tax at the lower rate applicable to long-term capital gain. In general, a “qualified foreign corporation” is a foreign corporation that (1) is incorporated in a possession of the United States, or (2) is eligible for the benefits of a tax treaty that is a “comprehensive income tax treaty” to which the United States is a party. A foreign corporation will also be treated as a “qualified foreign corporation” with respect to any dividend paid by such corporation if the stock with respect to which such dividend is paid is readily tradable on an established securities market in the United States. However, dividends from a foreign personal holding company, or FPHC, a foreign investment company, or FIC, or a passive foreign investment company, or PFIC, will not be treated as qualified dividend income. In addition, for a shareholder to receive qualifying dividend income with respect to dividends paid on common stock, the shareholder generally must hold the stock with respect to which the dividend is paid more than 60 days during the 121-day period beginning 60 days before the ex-dividend date.

Dividends received by the company from U.S. corporations (including MIA Inc.) generally will constitute qualified dividend income. The company also expects that dividends it receives from Yorkshire Link and MCG will constitute qualified dividends, so long as such entities are not PFICs for the taxable year in which such dividends are paid, because such entities are not (and we do not expect them to become) FPHCs or FICs and are eligible for the benefits of comprehensive income tax treaties between the United States and the United Kingdom and Australia, respectively. While it is not entirely clear that SEW will be considered eligible for the benefits of the comprehensive income tax treaty between the United States and the United Kingdom because of its ownership structure, the company believes that SEW should be so considered (because substantially all of its income is derived from an active business in the United Kingdom) and, therefore, that dividends received from SEW should constitute qualified dividends (so long as SEW is not a PFIC for the taxable year in which such dividends are paid) because SEW is not (and we do not expect it to become) an FPHC or a FIC. It is possible, however, that the IRS may take a contrary view under existing law or that Regulations or other administrative guidance interpreting the qualified dividend income provisions will prevent dividends received by the company from SEW from constituting qualified dividend income. Further, because the ownership and activities of Yorkshire Link, MCG and SEW are not within our control, each of such entities could experience a

change of ownership or activities that could result in it no longer being entitled to treaty benefits, and thus no longer considered a qualified foreign corporation for purposes of the qualified dividend income provisions, and we will be unable to stop such a change from occurring. Any dividends received by the company that do not constitute qualified dividend income will be taxed to U.S. holders at the tax rates generally applicable to ordinary income.

We currently believe that neither Yorkshire Link, MCG nor SEW is a PFIC. However, our current conclusion regarding the PFIC status of any of such entities may be incorrect and, because such conclusion is a factual determination that is made annually and because we will not be in complete control of the activities of such entities, one or more of such entities may become PFICs in the future. You are urged to consult your own tax advisors with respect to the PFIC status of Yorkshire Link, MCG and SEW and the effect of the potential PFIC status of such entities on the treatment of dividends to you.

Dividends received by the company from other foreign corporations in which it may own stock from time to time may constitute “qualified dividend income” if such foreign corporations satisfy the definition of a “qualified foreign corporation.” We cannot assure you that dividends from foreign corporations whose stock we subsequently acquire (or, as described above, in which we currently own stock) will constitute qualified dividend income.

Unless Congress enacts legislation providing otherwise, the reduced rates for qualified dividend income will not apply for taxable years beginning after December 31, 2008, and the law as in effect prior to the enactment of the qualified dividend income provisions will apply.

For U.S. federal income tax purposes, a holder’s distributive share of the company’s income, gain, loss, deduction and other items will be determined by the LLC agreement, unless an allocation under the agreement does not have “substantial economic effect,” in which case the allocations will be determined in accordance with the “partners’ interests in the partnership.” The company believes that the allocations pursuant to the LLC agreement should be considered to have substantial economic effect.

If the allocations provided by the LLC agreement were successfully challenged by the IRS, the amount of income or loss allocated to holders for U.S. federal income tax purposes under the agreement could be increased or reduced or the character of the income or loss could be modified.

Distributions of cash by a partnership are generally not taxable to the distributee to the extent the amount of cash does not exceed the distributee’s tax basis in its partnership interest. Thus, any cash distributions made by the company will be taxable to a holder only to the extent such distributions exceed the holder’s tax basis in the LLC interests it is treated as owning (See “— Tax Basis in LLC Interests” below). Any cash distributions in excess of a holder’s tax basis generally will be considered to be gain from the sale or exchange of the shares (See “— Disposition of Shares” below).

If a U.S. holder transfers shares, it will be treated for U.S. federal income tax purposes as transferring its pro rata share of the LLC interests held by the trust. If such transfer is a sale or other taxable disposition, the U.S. holder will generally be required to recognize gain or loss measured by the difference between the amount realized on the sale and the U.S. holder’s adjusted tax basis in the LLC interests deemed sold. The amount realized will include the U.S. holder’s share of the company’s liabilities, as well as any proceeds from the sale. The gain or loss recognized will generally be taxable as capital gain or loss, except that the gain will be ordinary income to the extent attributable to the U.S. holder’s allocable share of unrealized gain or loss in assets of the company to the extent described in Section 751 of the Code (including unremitted earnings of any controlled foreign corporations held, directly or indirectly, by the company). Capital gain of non-corporate U.S. holders is eligible to be taxed

at reduced rates where the LLC interests deemed sold are considered held for more than one year. Capital gain of corporate U.S. holders is taxed at the same rate as ordinary income. Any capital loss recognized by a U.S. holder on a sale of shares will generally be deductible only against capital gains, except that a non-corporate U.S. holder may also offset up to $3,000 per year of ordinary income.

In general, a U.S. holder who is deemed to dispose of an interest in a PFIC may be subject to certain adverse tax consequences unless one of certain specific tax elections (if available) is made. These consequences are generally that (1) any gain derived from the deemed disposition of such stock, as well as any “excess distribution” that is treated as received from the PFIC (i.e., a distribution that exceeds 125% of the average distributions from the shorter of the prior three years and the holder’s holding period), would be treated as ordinary income that was earned ratably over each day in the holder’s holding period for the stock, (2) the portion of such gain or distribution that is allocable to prior taxable years generally would be subject to U.S. federal income tax at the highest rate applicable to ordinary income for the relevant taxable years, regardless of the tax rate otherwise applicable to the U.S. holder, and (3) an interest charge would be imposed on the resulting tax liability as if such liability represented a tax deficiency for the past taxable years.

A U.S. holder would be deemed to dispose of an interest in a PFIC if the company disposes of stock in a PFIC, the company receives an excess distribution from a PFIC or such U.S. holder disposes of shares at a time when the company holds stock in a PFIC. As stated above, while we currently believe that neither Yorkshire Link, MCG nor SEW is a PFIC, our current conclusion regarding the PFIC status of any of such entities may be incorrect and, because such conclusion is a factual determination that is made annually and because we will not be in control of the activities of such entities, one or more of such entities may become a PFIC in the future. You are urged to consult your own tax advisors with respect to the application of the PFIC rules to your particular circumstances.

A U.S. holder’s initial tax basis in the LLC interests it is treated as holding will equal the sum of (a) the amount of cash paid by such U.S. holder for its shares and (b) such U.S. holder’s share of the company’s liabilities. A U.S. holder’s tax basis in the LLC interests it is treated as holding will be increased by (a) the U.S. holder’s share of the company’s taxable income, including capital gain, (b) the U.S. holder’s share of the company’s income, if any, that is exempt from tax, and (c) any increase in the U.S. holder’s share of the company’s liabilities. A U.S. holder’s tax basis in the LLC interests it is treated as holding will be decreased (but not below zero) by (a) the amount of any cash distributed (or deemed distributed) to the U.S. holder, (b) the U.S. holder’s share of the company’s losses and deductions, (c) the U.S. holder’s share of the company’s expenditures that are neither deductible nor properly chargeable to its capital account, and (d) any decrease in the U.S. holder’s share of the company’s liabilities.

A U.S. holder whose shares are loaned to a “short seller” to cover a short sale of shares may be considered as having disposed of those shares. If so, such U.S. holder would no longer be a beneficial owner of a pro rata portion of the LLC interests with respect to those shares during the period of the loan and may recognize gain or loss from the disposition. As a result, during the period of the loan, (1) any of our income, gain, loss, deduction or other items with respect to those shares would not be reported by the U.S. holder, and (2) any cash distributions received by the U.S. holder as to those shares would be fully taxable, likely as ordinary income. Accordingly, U.S. holders who desire to avoid the risk of gain recognition from a loan to a short seller are urged to modify any applicable brokerage account agreements to prohibit their brokers from borrowing their shares.

The deductibility of a non-corporate U.S. holder’s “investment interest expense” is generally limited to the amount of that holder’s “net investment income.” Investment interest expense would generally include interest expense incurred by the company, if any, and investment interest expense incurred by the U.S. holder on any margin account borrowing or other loan incurred to purchase or carry shares. Net investment income includes gross income from property held for investment and amounts treated as portfolio income, such as dividends and interest, under the passive loss rules, less deductible expenses, other than interest, directly connected with the production of investment income. For this purpose, any long-term capital gain or qualifying dividend income that is taxable at long-term capital gains rates is excluded from net investment income unless the U.S. holder elects to pay tax on such gain or dividend income at ordinary income rates.

In general, expenses incurred by us that are considered “miscellaneous itemized deductions” may be deducted by a U.S. holder that is an individual, estate or trust only to the extent that they exceed 2% of the adjusted gross income of such U.S. holder. The Code imposes additional limitations (which are scheduled to be phased out between 2006 and 2010) on the amount of certain itemized deductions allowable to individuals, by reducing the otherwise allowable portion of such deductions by an amount equal to the lesser of:


	•	3% of the individual’s adjusted gross income in excess of certain threshold amounts; or

	•	80% of the amount of certain itemized deductions otherwise allowable for the taxable year.

In addition, these expenses are also not deductible in determining the alternative minimum tax liability of a U.S. holder. The company will report such expenses on a pro rata basis to the holders, and each U.S. holder will determine separately to what extent they are deductible on such U.S. holder’s tax return. A U.S. holder’s inability to deduct all or a portion of such expenses could result in an amount of taxable income to such U.S. holder with respect to the company that exceeds the amount of cash actually distributed to such U.S. holder for the year. We anticipate that management fees the company will pay will constitute miscellaneous itemized deductions. If the IRS were to successfully assert that any portion of the management fees paid by the company to our Manager should have been paid by MIA Inc., such management fees would not be deductible by the company. In contrast, if the IRS were to successfully assert that any portion of the management fees paid by MIA Inc. to our Manager should have been paid by the company, the company likely would recognize a deemed dividend from MIA Inc. and the company would recognize additional deductions for management fees, which would be subject to the limitations described above.

Under Section 709(b) of the Code, amounts paid or incurred to organize a partnership may, at the election of the partnership, be treated as deferred expenses, which are allowed as a deduction ratably over a period of not less than 60 months. The company has not yet determined whether it will make such an election. A U.S. holder’s distributive share of such organizational expenses will constitute miscellaneous itemized deductions. Expenditures in connection with the issuance and marketing of shares (so-called “syndication fees”) are not eligible for the 60-month amortization provision and are not deductible.

The company will make the election permitted by Section 754 of the Code. Such an election is irrevocable without the consent of the IRS. The election will generally permit a purchaser of shares to adjust its proportionate share of the basis in the company’s assets, or the inside basis, pursuant to Section 743(b) of the Code to fair market value (as reflected in the purchase price for the purchaser’s shares), as if it had acquired a direct interest in the company’s assets. The Section 743(b) adjustment is attributed solely to a purchaser of shares and is not added to the bases of the company’s assets associated with all of the other holders.

The calculations under Section 754 of the Code are complex, and there is little legal authority concerning the mechanics of the calculations, particularly in the context of publicly traded partnerships. To help reduce the complexity of those calculations and the resulting administrative costs to the company, the company will apply certain conventions in determining and allocating the Section 743 basis adjustments. It is possible that the IRS will successfully assert that the conventions utilized by the company do not satisfy the technical requirements of the Code or the Regulations and, thus, will require different basis adjustments to be made.

Individuals are subject to certain “passive activity loss” rules under Section 469 of the Code. Under these rules, losses from a passive activity generally may not be used to offset income derived from any source other than passive activities. Losses that cannot be currently used under this rule may generally be carried forward. Upon an individual’s disposition of an interest in the passive activity, the individual’s unused passive losses may generally be used to offset other (i.e., non-passive) income. Under temporary Regulations, income or loss from the company’s investments generally will not constitute income or loss from a passive activity. Therefore, income or gains from the company’s investments will not be available to offset a U.S. holder’s passive losses from other sources.

In general, the company’s taxable income and losses will be determined annually and will be prorated on a monthly basis and apportioned among the holders in proportion to the number of LLC interests treated as owned by each of them as of the close of the last trading day of the preceding month. However, gain or loss realized on a sale or other disposition of the company’s assets other than in the ordinary course of business shall be allocated among the holders as of the close of the last trading day of the month preceding the month in which such gain or loss is recognized for U.S. federal income tax purposes. As a result, a holder transferring its shares may be allocated income, gain, loss and deduction realized after the date of transfer.

Section 706 of the Code generally requires that items of partnership income and deductions be allocated between transferors and transferees of partnership interests on a daily basis. It is possible that transfers of shares could be considered to occur for U.S. federal income tax purposes when the transfer is completed without regard to the company’s convention for allocating income and deductions. In that event, the company’s allocation method might be considered a monthly convention that does not literally comply with that requirement.

If the IRS treats transfers of shares as occurring throughout each month and a monthly convention is not allowed by the Regulations (or only applies to transfers of less than all of a holder’s shares) or if the IRS otherwise does not accept the company’s convention, the IRS may contend that taxable income or losses of the company must be reallocated among the holders. If such a contention were sustained, the holders’ respective tax liabilities would be adjusted to the possible detriment of certain holders. The company’s board of directors is authorized to revise the company’s method of allocation between transferors and transferees (as well as among holders whose interests otherwise vary during a taxable period).

Information returns will be filed with the IRS, as required, with respect to income, gain, loss, deduction and other items derived from the shares. The company will file a partnership return with the IRS and intends to issue a Schedule K-1 to the trustee. The trustee intends to report certain information to you on IRS Forms 1099 or substantially similar forms. If you hold your shares through a nominee (such as a broker), the nominee, and not the trustee, will be required to provide you with such IRS Forms 1099 or substantially similar forms. We note that, given the lack of authority addressing structures similar to that of the trust and the company, it is not certain that the IRS will agree with the manner in which

Any challenge by the IRS to the tax treatment by a partnership of any item must be conducted at the partnership, rather than at the partner, level. A partnership ordinarily designates a “tax matters partner” (as defined under Section 6231 of the Code) as the person to receive notices and to act on its behalf in the conduct of such a challenge or audit by the IRS.

Pursuant to the LLC agreement, our Manager will be appointed the “tax matters partner” of the company for all purposes pursuant to Sections 6221-6231 of the Code. The tax matters partner, which is required by the LLC agreement to notify all U.S. holders of any U.S. federal income tax audit of the company, will have the authority under the LLC agreement to conduct any IRS audits of the company’s tax returns or other tax-related administrative or judicial proceedings and to settle or further contest any issues in such proceedings. The decision in any proceeding initiated by the tax matters partner will be binding on all U.S. holders. As the tax matters partner, our Manager will have the right on behalf of all holders to extend the statute of limitations relating to the holders’ U.S. federal income tax liabilities with respect to company items.

A U.S. federal income tax audit of the company’s information return may result in an audit of the returns of the U.S. holders, which, in turn, could result in adjustments of items of a holder that are unrelated to the company as well as to company-related items. In particular, there can be no assurance that the IRS, upon an audit of an information return of the company or of an income tax return of a U.S. holder, might not take a position that differs from the treatment thereof by the company. A U.S. holder would be liable for interest on any deficiencies that resulted from any adjustments. Potential U.S. holders should also recognize that they might be forced to incur substantial legal and accounting costs in resisting any challenge by the IRS to items in their individual returns, even if the challenge by the IRS should prove unsuccessful.

Subject to generally applicable limitations, U.S. holders will be able to claim foreign tax credits with respect to certain foreign income taxes paid or incurred by us, withheld on payments made to us or paid by us on behalf of holders. If a holder elects to claim a foreign tax credit, it must include in its gross income, for U.S. federal income tax purposes, both its share of the company’s items of income and gain and also its share of the amount which we deem to be the holder’s portion of foreign income taxes paid with respect to, or withheld from, dividends, interest or other income derived by the company. U.S. holders may then subtract from their U.S. federal income tax the amount of such taxes withheld, or else treat such foreign taxes as deductions from gross income; however, as in the case of investors receiving income directly from foreign sources, the above-described tax credit or deduction is subject to certain limitations. The Code imposes a required holding period on stock for U.S. holders to be eligible to claim such credits. Even if the holder is unable to claim a credit, he or she must include all amounts described above in income. In addition, U.S. holders should consult their tax advisors regarding this election and its consequences to them.

Under Subpart F of the Code, certain undistributed earnings and certain passive income of a foreign company constituting a controlled foreign corporation, or CFC, as defined in Section 957 of the Code, are taxed to certain U.S. holders prior to being distributed. We believe, but cannot offer any assurances, that none of the foreign companies that the company currently intends to invest in are CFCs. In addition, no assurances can be given that other foreign companies in which the company may invest in the future will not be CFCs. Even if a foreign corporation in which we invest constitutes a CFC, we will

recognize income in respect of such CFC prior to the receipt of cash distributions only if such CFC recognizes more than a de minimis amount of certain types of income. Distributions made by a foreign company regarded as a CFC could generally constitute “qualified dividend income”; however, the operation of the Subpart F provisions could result in such earnings, when distributed or deemed distributed, not being regarded as “qualified dividend income.” Further, as discussed above in “— Disposition of Shares,” U.S. holders of PFICs may be subject to certain adverse U.S. federal income tax consequences, including a deferred interest charge upon the distribution of previously accumulated earnings.

To the extent that the company receives dividends or interest income denominated in a non-U.S. currency (which we expect to be the case with respect to dividends from SEW, Yorkshire Link and MCG), the company may realize gain or loss attributable to fluctuations in the value of such non-U.S. currencies relative to the value of the dollar. In general, gains or losses of the company on the acquisition and disposition of non-U.S. currency will be treated as ordinary income or loss. In addition, gains or losses attributable to fluctuations in exchange rates that occur between the time that the company accrues interest or expenses denominated in a non-U.S. currency and the time that the company collects the interest or pays the expenses may be treated as ordinary income or loss.

There are circumstances, as set forth by Regulations and revenue procedures, under which certain transactions must be disclosed to the IRS in a disclosure statement attached to a taxpayer’s U.S. federal income tax return (a copy of such statement must also be sent to the IRS Office of Tax Shelter Analysis). In addition, these Regulations impose a requirement on certain “material advisors” to maintain a list of persons participating in such transactions, which list must be furnished to the IRS upon written request. These Regulations can apply to transactions not conventionally considered to involve abusive tax planning. Consequently, it is possible that such disclosure could be required by the company or the holders (1) if a holder incurs a loss (in each case, in excess of a threshold computed without regard to offsetting gains or other income or limitations) from the disposition (including by way of withdrawal) of shares, (2) if the company’s activities result in certain book/tax differences, or (3) possibly in other circumstances. Furthermore, the company’s material advisors could be required to maintain a list of persons investing in the company pursuant to these Regulations. While the tax shelter disclosure regulations generally do not apply to a loss recognized on the disposition of an asset in which the taxpayer has a qualifying basis (generally a basis equal to the amount of cash paid by the taxpayer for such asset), such regulations will apply to a taxpayer recognizing a loss with respect to interests in a pass-through entity (such as the shares) even if its basis in such interests is equal to the amount of cash it paid. U.S. holders should consult their tax advisors regarding the tax shelter disclosure regulations and their possible application to them.

A non-U.S. holder will not be subject to U.S. federal income tax on such holder’s distributive share of the company’s income, provided that such income is not considered to be income of the holder that is “effectively connected with the conduct of a trade or business within the United States.” In the case of an individual non-U.S. holder, such holder will not be subject to U.S. federal income tax on gains on the sale of shares in the company or such holder’s distributive share of gains if such holder is not present in the United States for 183 days or more during a taxable year.

The company will not be treated as “engaged in a trade or business within the United States” and therefore should not realize income that would be treated as effectively connected with the conduct of a trade or business within the United States. If the income from the company is “effectively connected” with a U.S. trade or business carried on by a non-U.S. holder (or, if certain income tax treaties apply, is attributable to a U.S. permanent establishment), then such holder’s share of any income and any gains

realized upon the sale or exchange of shares will be subject to U.S. income tax at the graduated rates applicable to U.S. citizens, residents and domestic corporations. Non-U.S. holders that are corporations may also be subject to a 30% branch profits tax (or lower treaty rate, if applicable) on their effectively connected earnings and profits that are not timely reinvested in a U.S. trade or business.

In addition, gains, if any, allocable to a non-U.S. holder and attributable to a sale by the company of a “U.S. real property interest,” or USRPI (other than such gains subject to tax under the rules discussed above), are generally subject to U.S. federal income tax as if such gains were effectively connected with the conduct by the non-U.S. holder of a U.S. trade or business. Moreover, a withholding tax is imposed with respect to such gain as a means of collecting such tax. For this purpose, a USRPI includes an interest (other than solely as a creditor) in a “U.S. real property holding corporation” (in general, a U.S. corporation, at least 50% of whose real estate and trade or business assets, measured by fair market value, consists of USRPIs), as well as an interest in a partnership that holds USRPIs. This withholding tax would also be creditable against a non-U.S. holder’s actual U.S. federal income tax liability and any excess withholding tax may generally be eligible for refund. Although a non-U.S. holder who is a partner in a partnership that owns USRPIs is generally subject to tax on its sale or other disposition of its partnership interest to the extent attributable to such USRPIs, no withholding tax is generally imposed on the transfer of publicly traded partnership interests, and gain will not be taxable under the USRPI provisions where the non-U.S. holder owns no more than 5% of a publicly traded entity such as the company. A non-U.S. holder that owns more than 5% of the company should consult its tax advisor about the potential application of the USRPI provisions. The company expects that initially none of its assets will constitute a USRPI, but no assurances can be given that one or more of its assets does not or will not represent a USRPI either now or in the future.

A non-U.S. holder generally will be subject to U.S. federal withholding tax at the rate of 30% (or, under certain circumstances, at a reduced rate provided by an income tax treaty, if applicable) in respect of such holder’s distributive share of dividends from U.S. corporations (including MIA Inc.) and certain other types of U.S.-source income realized by the company.

Non-U.S. holders are advised to consult their own tax advisors with respect to the particular tax consequences to them of an investment in the company.

The company is required in certain circumstances to backup withhold on certain payments paid to noncorporate holders of the company’s shares who do not furnish the company with their correct taxpayer identification number (in the case of individuals, their social security number) and certain certifications, or who are otherwise subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld from payments made to you may be refunded or credited against your U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS.

An organization that is otherwise exempt from U.S. federal income tax is nonetheless subject to taxation with respect to its “unrelated business taxable income,” or UBTI, to the extent that its UBTI from all sources exceeds $1,000 in any taxable year. Except as noted below with respect to certain categories of exempt income, UBTI generally includes income or gain derived (either directly or through partnerships) from a trade or business, the conduct of which is substantially unrelated to the exercise or performance of the organization’s exempt purpose or function.

UBTI generally does not include passive investment income, such as dividends, interest and capital gains, whether realized by the organization directly or indirectly through a partnership (such as the company) in which it is a partner. This type of income is exempt, subject to the discussion of “unrelated debt-financed income” below, even if it is realized from securities trading activity that constitutes a trade or business.

UBTI includes not only trade or business income or gain as described above, but also “unrelated debt-financed income.” This latter type of income generally consists of (1) income derived by an exempt organization (directly or through a partnership) from income-producing property with respect to which there is “acquisition indebtedness” at any time during the taxable year, and (2) gains derived by an exempt

The company will incur “acquisition indebtedness” with respect to certain of its transactions. To the extent the company recognizes income in the form of dividends and interest from securities with respect to which there is “acquisition indebtedness” during a taxable year, the percentage of the income that will be treated as UBTI generally will be equal to the amount of the income times a fraction, the numerator of which is the “average acquisition indebtedness” incurred with respect to the securities, and the denominator of which is the “average amount of the adjusted basis” of the securities during the period such securities are held by the company during the taxable year.

To the extent the company recognizes gain from securities with respect to which there is “acquisition indebtedness,” the portion of the gain that will be treated as UBTI will be equal to the amount of the gain times a fraction, the numerator of which is the highest amount of the “acquisition indebtedness” with respect to the securities during the twelve-month period ending with the date of their disposition, and the denominator of which is the “average amount of the adjusted basis” of the securities during the period such securities are held by the company during the taxable year. In determining the unrelated debt-financed income of the company, an allocable portion of deductions directly connected with the company’s debt-financed property will be taken into account. In making such a determination, for instance, a portion of losses from debt-financed securities (determined in the manner described above for evaluating the portion of any gain that would be treated as UBTI) would offset gains treated as UBTI. A charitable remainder trust will not be exempt from U.S. federal income tax under the Code for any year in which it has UBTI; in view of the potential for UBTI, the company is not a suitable investment for a charitable remainder trust.

Prospective holders should consider, in addition to the U.S. federal income tax consequences described, potential state and local tax considerations in investing in the shares.

State and local laws often differ from U.S. federal income tax laws with respect to the treatment of specific items of income, gain, loss, deduction and credit. A holder’s distributive share of the taxable income or loss of the company generally will be required to be included in determining its reportable income for state and local tax purposes in the jurisdiction in which the holder is a resident. The company may conduct business in a jurisdiction that will subject a holder to tax (and require a holder to file an income tax return with the jurisdiction in respect to the holder’s share of the income derived from that business.) A prospective holder should consult its tax advisor with respect to the availability of a credit for such tax in the jurisdiction in which the holder is a resident.

The company should not be subject to the New York City unincorporated business tax because such tax is not imposed on an entity that is primarily engaged in the purchase and sale of securities for its “own account.” By reason of a similar “own account” exemption, it is also expected that a nonresident individual U.S. holder should not be subject to New York State personal income tax with respect to his or her share of income or gain recognized by us. A nonresident individual U.S. holder will not be subject to New York City earnings tax on nonresidents with respect to his or her investment in us. New York State and New York City residents will be subject to New York State and New York City personal income tax on their income recognized in respected of the shares. Because the company may conduct its business, in part, in New York City, corporate U.S. holders generally will be subject to the New York State franchise tax and the New York City general corporation tax by reason of their investment in the company, unless certain exemptions apply. However, pursuant to regulations, the company may qualify as a “portfolio investment partnership.” Accordingly, non-New York corporate U.S. holders not otherwise subject to New York State franchise tax or New York City general corporation tax may not be subject to such tax solely by reason of investing in shares. No ruling from the New York State Department of Taxation and Finance or the New York City Department of Finance has been, or will be, requested regarding such matters.

THIS SUMMARY IS INTENDED TO BE A GENERAL DISCUSSION OF THE MATERIAL U.S. FEDERAL (AND CERTAIN STATE AND LOCAL) INCOME TAX CONSIDERATIONS FOR U.S. HOLDERS OF THE SHARES. U.S. HOLDERS SHOULD BE AWARE, HOWEVER, THAT CERTAIN ASPECTS OF U.S. FEDERAL, STATE AND LOCAL INCOME TAX TREATMENT ARE NOT CLEAR UNDER EXISTING LAW. THUS, U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE TAX CONSEQUENCES OF OWNERSHIP OF THE SHARES IN THEIR PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICATION OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.

Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as representative of the underwriters. Subject to the terms and conditions described in a purchase agreement between us and the underwriters, we have agreed to sell to the underwriters, and the underwriters severally have agreed to purchase from us, the number of shares listed below.

Subject to the terms and conditions in the purchase agreement, the underwriters have agreed to purchase all the shares sold under the purchase agreement if any of these shares are purchased. If an underwriter defaults, the purchase agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreements may be terminated.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreements, such as the receipt by the underwriters of officer’s certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

The representative has advised us that the underwriters propose initially to offer the shares to the public at the initial public offering price on the cover page of this prospectus and to dealers at that price less a concession not in excess of $ per share. The underwriters may allow, and the dealers may reallow, a discount not in excess of $ per share to other dealers. After the initial public offering, the public offering price, concession and discount may be changed.

The following table shows the public offering price, underwriting discount and proceeds before expenses to us. The information assumes either no exercise or full exercise by the underwriters of their overallotment option.

The expenses of the offering, not including the underwriting discount, are estimated at $ and are payable by us.

We have granted options to the underwriters to purchase up to additional shares at the public offering price less the underwriting discount. The underwriters may exercise this option for 30 days from the date of this prospectus solely to cover any overallotments. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the purchase agreement, to purchase a number of additional shares proportionate to that underwriter’s initial amount reflected in the above table.

Our Manager has agreed to purchase from us, at the closing of this offering in a separate private placement, up to 10% of the number of shares offered hereby at a per share price equal to the initial public offering price, with a total price not to exceed $35 million.

We and our executive officers and directors and our Manager have agreed, with exceptions, not to sell or transfer any shares for 180 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch. Specifically, we and these other individuals have agreed not to directly or indirectly:


	•	offer, pledge, sell or contract to sell any shares,

	•	sell any option or contract to purchase any shares,

	•	purchase any option or contract to sell any shares,

	•	grant any option, right or warrant for the sale of any shares,

	•	lend or otherwise dispose of or transfer any shares,

	•	request or demand that we file a registration statement related to the shares, or

	•	enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any shares whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.

This lockup provision applies to shares and to securities convertible into or exchangeable or exercisable for or repayable with shares. It also applies to shares owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition.

Our lock-up does not limit our ability to sell shares to our Manager upon its reinvestment of fees payable under the management services agreement.

We intend to apply to list the shares on the New York Stock Exchange or to have the shares quoted on the Nasdaq National Market.

Before this offering, there has been no public market for our shares. The initial public offering price will be determined through negotiations among us and the representative. In addition to prevailing market conditions, the factors to be considered in determining the initial public offering price are


	•	the valuation multiples of publicly traded companies that the representative believes to be comparable to us,

	•	our financial information,

	•	the history of, and the prospects for, our company and the industries in which we compete,

	•	an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues,

	•	the present state of our development, and

	•	the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.

An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price.

The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.

Until the distribution of the shares is completed, SEC rules may limit the underwriters and selling group members from bidding for and purchasing our shares. However, the representative may engage in transactions that stabilize the price of the shares, such as bids or purchases to peg, fix or maintain that price.

If the underwriters create a short position in the shares in connection with the offering, i.e., if they sell more shares than are listed on the cover of this prospectus, the representative may reduce that short position by purchasing shares in the open market. The representative may also elect to reduce any short position by exercising all or part of the overallotment option described above. Purchases of the shares to stabilize their price or to reduce a short position may cause the price of the shares to be higher than it might be in the absence of such purchases.

The representative may also impose a penalty bid on the underwriters and selling group members. This means that, if the representative purchases shares in the open market to reduce the underwriter’s short position or to stabilize the price of such shares, it may reclaim the amount of the selling concession from the underwriters and selling group members who sold those shares. The imposition of a penalty bid may also affect the price of the shares in that it discourages resales of those shares.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the shares. In addition, neither we nor any of the underwriters make any representation that the representative or the lead manager will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

The validity of the securities offered in this prospectus is being passed upon for us by Potter Anderson & Corroon LLP, Wilmington, Delaware. Certain legal matters in connection with the securities offered hereby will be passed upon for us by Shearman & Sterling LLP, New York, New York. Sidley Austin Brown & Wood LLP, New York, New York is acting as counsel for the underwriters in this offering.

The consolidated financial statements of Macquarie Americas Parking Corporation at December 31, 2003 and 2002, and for the year ended December 31, 2003 and for the period July 23, 2002 to December 31, 2002 and the consolidated statements of operations and cash flows of Off-Airport Parking Operations of PCA Parking Company of America LLC, for the period January 1, 2002 to December 18, 2002 and for the year ended December 31, 2001 appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon appearing elsewhere herein and are included herein in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

The consolidated financial statements of Connect M1-A1 Holdings Limited and Subsidiary as of December 31, 2003 and March 31, 2003 and for the nine months ended December 31, 2003 and the years ended March 31, 2003 and 2002, included in this prospectus have been audited by Deloitte & Touche LLP, independent registered accountants, as stated in their report appearing herein and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

The consolidated financial statements of Executive Air Support, Inc. as of December 31, 2003 and 2002, and for each of the years in the two-year period ended December 31, 2003, have been included herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The audit report covering the December 31, 2003, consolidated financial statements refers to a change in the method of accounting for goodwill and other intangible assets.

We have filed with the SEC a registration statement on Form S-1, which includes exhibits, schedules and amendments, under the Securities Act with respect to this offering of our shares. Although this prospectus, which forms a part of the registration statement, contains all material information included in the registration statement, parts of the registration statement have been omitted as permitted by rules and regulations of the SEC. We refer you to the registration statement and its exhibits for further information about us, our shares and this offering. The registration statement and its exhibits can be inspected and copied at the SEC’s public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549-1004. The public may obtain information about the operation of the public reference room by calling the SEC at 1-800-SEC-0300. In addition, the SEC maintains a website at http://www.sec.gov that contains the Form S-1 and other reports, proxy and information statements and information regarding issuers that file electronically with the SEC.

Following this offering, we will be required to file current reports, quarterly reports, annual reports, proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the SEC’s public reference room or through its Internet website.

We have audited the accompanying consolidated balance sheets of Executive Air Support, Inc., (the Company), a Delaware corporation, and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Executive Air Support, Inc. and subsidiaries as of December 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

As discussed in note 2 to the consolidated financial statements, on January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets.

Executive Air Support, Inc. (the “Company”), a Delaware corporation, and subsidiaries are engaged primarily in the aircraft service and support business. Its activities consist of fueling, hangar leasing and related services. The Company currently operates ten fixed-base operation (“FBO”) sites at airports throughout the United States. See note 13 for current year acquisitions.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions are eliminated in consolidation.

Revenue is recorded when fuel is provided or when services are rendered. Also included in revenue are hangar rental fees, which are recognized during the month for which service is provided.

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses. Actual results could differ from these estimates.

Cash and cash equivalents includes cash and highly liquid investments with original maturity dates of 90 days or less.

Accounts receivable consists primarily of amounts due from corporations and individuals and has been shown net of an allowance for doubtful accounts of $220,000 and $384,000 as of December 31, 2003 and 2002. The Company has no significant credit risk concentration among its diversified customer base.

Property and equipment in the accompanying consolidated balance sheet is stated at cost, net of accumulated depreciation and amortization. For financial reporting purposes, depreciation of machinery and equipment is computed on the straight-line method over the estimated service lives of the respective property, which vary from 5 to 10 years. The cost of leasehold improvements is amortized, on a straight-line basis, over the shorter of the estimated service life of the improvement and the respective term of the lease, generally 20 years. Expenditures for renewals and betterments are capitalized, and expenditures for maintenance and repairs are charged to expense as incurred.

The Company accounts for income taxes using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities

and their respective tax basis and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

On January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets. This accounting standard addresses financial accounting and reporting for goodwill and other intangible assets and requires that goodwill amortization be discontinued and replaced with periodic tests of impairment based on fair value. As a result of these periodic reviews, there have been no adjustments to the carrying value of intangible assets or goodwill in 2002 except for the impairment of goodwill related to the sale of the Flight Services division (note 11).

In conjunction with the adoption of SFAS No. 142, the Company reevaluated the estimated useful lives of its intangible assets and determined that the useful life of the Atlantic Aviation tradename is indefinite and that the useful life of its intangible assets that represent rights to operate at the respective airports should be increased from 20 years to 40 years. The effect of these changes in estimates was a reduction of 2002 amortization expense of approximately $1.5 million.

The changes in the carrying value of goodwill for the years ended December 31, 2003 and 2002 are as follows (in thousands):

Intangible assets as of December 31, 2003 and 2002 are as follows (in thousands):

Amortization expense related to intangible assets totaled $1.4 and $1.5 million for the years ended December 31, 2003 and 2002, respectively. The estimated aggregate future amortization expense for intangible assets remaining as of December 31, 2003 is as follows (in thousands):

The Company applies the intrinsic value-based method of accounting for stock-based employee compensation arrangements. No stock option based employee compensation costs are reflected in the Company’s net income (loss), as all options granted had an exercise price greater than the market value of the Company’s underlying common stock at the date of grant. Had the Company elected to recognize compensation cost based on the fair value of the stock options at the date of grant, such compensation expense would have been insignificant.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, which addresses the consolidation by business enterprises of variable interest entities. This provision had no impact on the consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 100 on Derivative Instruments and Hedging Activities, which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133. This provision had no impact on the Company’s consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This provision had no impact on the Company’s consolidated financial statements.

In December 2003, FASB issued SFAS No. 132 (revised), Employers’ Disclosures about Pensions and Other Postretirement Benefits. Statement 132 (revised) prescribes employers’ disclosures about pension plans and other post retirement benefit plans; it does not change the measurement or recognition of those plans. The statement retains and revises the disclosure requirements contained in the original Statement 132. It also requires additional disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other postretirement benefit plans. See note 6 for revised requirements applicable to the Company for the years ended December 31, 2003 and 2002.

Certain amounts reported in the 2002 audited consolidated financial statements have been reclassified to conform to the 2003 presentation.

Long-term debt at December 31, 2003 and 2002 consists of the following (in thousands):

The Company has two term notes. The first term note (“Term Note A”) is a $20 million note payable to a bank and bears interest at either the bank’s base rate or LIBOR, at the Company’s discretion, and a margin, as defined, which varies from 0.75% to 2.25% for interest based on the bank’s base rate and from 2.25% to 3.75% for interest based on LIBOR (4.15% at December 31, 2003). As of December 31, 2003, the outstanding balance of Term Note A was $9.4 million and is payable as follows: $5.0 million and $4.4 million in 2004 and 2005, respectively.

The second term note (“Term Note B”) is a $10 million note payable to a bank and bears interest at either the bank’s base rate or LIBOR, at the Company’s discretion, and a margin, as defined, which varies from 2.0% to 2.5% for interest based on the bank’s base rate and from 3.5% to 4.0% for interest based on LIBOR (4.65% at December 31, 2003). As of December 31, 2003, the outstanding balance of Term Note B was $8.4 million and is payable as follows: $100,000, $100,000 and $8.2 million in 2004 to 2006, respectively.

The subordinated debt consists of four notes payable aggregating $17.1 million. Two of the subordinated notes, totaling $16.9 million, are payable to two of the Company’s equity investors, bear interest at 13% and are payable in 2007. These notes were issued at a discount of approximately $1.0 million, which is being amortized over the life of the notes. The unamortized discount was $583,000 and $729,000 as of December 31, 2003 and 2002. The remaining two subordinated notes, totaling $0.35 million, bear interest at 6% and are payable in 2005.

The Company has a $10 million revolving credit agreement with a bank subject to certain limitations. As of December 31, 2003, there was $1 million outstanding under the revolving credit agreement and the Company had available borrowing capacity of approximately $3.2 million. Borrowings

bear interest at rates consistent with the interest rate terms of Term Note A. The revolving credit agreement expires on December 21, 2005. The term notes and the revolving credit agreement are secured by substantially all the assets of the Company.

The term notes and subordinated notes contain customary financial covenants that include maintaining or exceeding certain financial ratios, limitations on sales of assets, limitations on capital expenditures, and limitations on additional debt.

During 2001, the Company entered into a $15 million interest rate swap agreement in order to mitigate interest rate risk. Under the terms of the agreement, the Company pays interest based on a fixed rate of 5.74% through January 9, 2006, and receives interest based on a floating rate of LIBOR (1.17% at December 31, 2003). The fair value of the agreement was a liability of approximately $1.1 million and $1.5 million at December 31, 2003 and 2002, respectively, which is included in other long-term liabilities on the accompanying consolidated balance sheets.

Maturities and aggregate principal payments of long-term debt are as follows (in thousands):

The income tax provision (benefit) consisted of the following for the years ended December 31, 2003 and 2002 (in thousands):

The difference between the actual provision for income taxes from continuing operations and the “expected” provision for income taxes computed by applying the U.S. federal corporate tax rate of 34% to income from continuing operations before taxes is attributable to the following (in thousands):

Total deferred tax assets and liabilities as of December 31, 2003 and 2002 are as follows (in thousands):

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. At December 31, 2003 and 2002, respectively, the Company has determined that it is more likely than not that the remaining net deferred tax assets will be realized.

At December 31, 2003 and 2002, the Company had available net operating loss carryforwards of approximately $2.3 million and $4.8 million, respectively, and tax credit carryforwards of $380,000. The federal net operating loss carryforwards available for use are limited, on an annual basis, due to the change in control of the respective subsidiaries in which such losses were incurred. The net operating loss carryforwards expire beginning in 2007 and continuing through 2020; however, the tax credits can be carried forward indefinitely.

The Company’s union employees located at Philadelphia International and Teterboro Airports are covered by the International Association of Machinists National Pension Fund. Contributions payable to the plan during 2003 and 2002 were $204,973 and $185,605, respectively.

The Company also sponsors a retiree medical and life insurance plan available to certain employees for Atlantic Aviation. Currently, the plan is funded as required to pay benefits and, at December 31, 2003 and 2002, the plan had no assets. The Company accounts for postretirement health care and life insurance benefits in accordance with SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions. This Statement requires the accrual of the cost of providing postretirement benefits during the active service period of the employee. The accumulated benefit obligation at December 31, 2003 and 2002, using an assumed discount rate of 6% and 6.75%, was approximately $0.8 million and $0.9 million, respectively, and the net periodic postretirement benefit costs during 2003 and 2002 were $101,854 and $123,921, using an assumed discount rate of 6.75% and 7.25% respectively. The post retirement benefit cost was determined using January 1, 2003 and 2002 data. There have been no changes in plan provisions during 2003 or 2002. For measurement purposes, a 13% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2003 and assumed to decrease gradually to 5% by 2014 and remain at that level thereafter. A one-percentage-point increase (decrease) in the assumed health care cost trend rate would have increased (reduced) the postretirement benefit obligation by $49,397 and ($45,645), respectively. Estimated contributions by the Company in 2004 are approximately $190,000.

The Company has a Savings and Investment Plan (the “Plan”) for Atlantic Aviation that qualifies under Section 401(k) of the Internal Revenue Code. Substantially, all full-time, nonunion employees and, pursuant to union contracts, many union employees are eligible to participate by electing to contribute 1% to 6% of gross pay to the Plan. Under the Plan, the Company is required to make contributions equal to 50% of employee contributions, up to a maximum of 6% of eligible employee compensation. Employees may elect to contribute to the Plan an additional 1% to 9% of gross pay that is not subject to match by the Company. Company matching contributions totaled approximately $120,000 and $172,000 during fiscal 2003 and 2002, respectively. The Company may make discretionary contributions to the plan; however, there were no discretionary contributions made during fiscal 2003 and 2002.

The Company leases hangar and other facilities at several airport locations under operating leases expiring between 2004 and 2020, which are generally renewable, at the Company’s option, for substantial periods at increased rentals. These leases generally restrict their assignability and the use of the premises to activities associated with general aviation. The leases provide for supplemental rentals based on certain sales and other circumstances.

At December 31, 2003, the Company was obligated under the lease agreements to construct certain facilities. The total remaining cost of these projects is estimated to be $3 million.

Minimum annual rentals required to be paid under noncancelable operating leases with terms in excess of one year are as follows (in thousands):

Rent expense charged to operations in 2003 and 2002 was approximately $5 million and $5.1 million, respectively.

The Company is involved in various claims and lawsuits incidental to its business. In the opinion of management, these claims and suits in the aggregate will not have a material adverse effect on the Company’s business, financial condition, or results of operations.

The Company has entered into employment agreements with certain executives. The terms of the agreements provide for compensation levels and termination provisions.

Laws and regulations relating to environmental matters may effect the operations of the Company. The Company believes that its policies and procedures with regard to environmental matters are adequate to prevent unreasonable risk of environmental damage and related financial liability. Some risk of environmental and other damage is, however, inherent in particular operations of the Company. The Company maintains adequate levels of insurance coverage with respect to environmental matters. As of December 31, 2003 and 2002, management does not believe that environmental matters will have a significant effect on the Company’s operations.

The Company issued 699,500 warrants during fiscal 2000 to a shareholder. The warrants have an exercise price of $3.62 per share and are exercisable upon the earlier of August 31, 2010 or the sale of the Company.

On December 21, 2000, the Company issued 1,104,354 warrants to a shareholder (the “Warrant Holder”) in conjunction with the issuance of subordinated debt. The warrants have an exercise price of $0.01 per share and are exercisable at any time through December 21, 2010. Beginning in the first quarter of 2006, the Warrant Holder can sell the warrants to the Company at the then fair value of the warrants, as defined. Beginning in the first quarter of 2007, the Company can buy the warrants from the Warrant Holder at the then fair value of the warrants, as defined. The fair value of the warrants is included in other long-term liabilities in the accompanying consolidated balance sheet. The warrants are reflected at fair value for the reporting period, and subsequent changes in fair value are reflected in the Company’s operating results. As of December 31, 2003 and 2002, the fair value of these warrants was $2,244,000 and $1,025,000, respectively, and has been included in other long-term liabilities. The change in the fair value of the warrants of $1,219,000 between 2003 and 2002 was recorded in other expense on the accompanying consolidated statement of operations.

The Company’s preferred stock is redeemable at any time after March 15, 2005, at the option of the preferred stockholders. Each share of preferred stock automatically converts into shares of common stock at a defined conversion price plus cash of $1.81 per share upon the public sale of the Company’s common stock or upon the sale of the Company’s common stock or assets in excess of a certain value, as defined. Dividends related to the preferred stock are cumulative and accrue at 8% per year. No preferred dividends were declared during 2003 or 2002. Dividends in arrears were approximately $17.5 million and $12.1 million at December 31, 2003 and 2002, respectively. The preferred stock is convertible into shares of the Company’s common stock determined by dividing the conversion price, as defined, by $3.62 per share.

In 2000, the Company adopted a stock option plan whereby the Company may grant incentive stock options or nonqualified stock options to employees to purchase the Company’s common stock, hereinafter referred to as the “Plan.” The incentive stock options or nonqualified options are to be granted at no less than the fair market value of the shares at the date of grant. Under the plan, stock options expire ten years after issuance and generally vest ratably over five years. Activity under the Plan for the years ended December 31, 2003 and 2002 was as follows:

Options exercisable at December 31, 2003 and 2002 were 823,229 and 516,319, respectively, with a weighted average exercise price of $3.62. The weighted average remaining contractual life of the options outstanding at December 31, 2003 and 2002, was 6.7 years and 7.7 years, respectively.

In December of 2001, the Company committed to a plan to sell its MillionAir Interlink subsidiary. In April 2002, the Company sold the subsidiary to a third party for $1.25 million in cash and a $500,000 note receivable. Income from operations of $0 and $91,000 and loss on disposal of $442,000 and $328,000, respectively, were reflected in discontinued operations during 2003 and 2002. During 2003, the Company fully reserved the remaining portion of the note receivable of approximately $442,000 due to uncertainty of collectibility.

During 2002, the Company committed to a plan to sell its Flight Services division. On February 28, 2003, the Company entered into an agreement to sell the division. Based on estimated net proceeds from the sale of $1 million, the Company recorded a loss on disposal of approximately $11.5 million, which included an impairment of goodwill and intangible assets of approximately $11.2 million. The results of operations of $121,000 and $106,000 and the loss on disposal of $170,000 and $11.3 million have been reflected as discontinued operations in the accompanying consolidated statements of operations for 2003 and 2002, respectively. The assets and liabilities for the flight services division have been presented separately in the accompanying consolidated balance sheets for 2003 and 2002. Flight Services revenues for 2003 and 2002 were approximately $2 million and $15 million, respectively.

On December 31, 2003, the Company acquired 100% of the outstanding common shares of General Aviation LLC (“GA”), a fixed base operations facility located in New Orleans. On December 31, 2003, the Company also acquired the net assets of General Aviation New Orleans (“GANO”), another fixed base operations facility in New Orleans. These facilities were acquired under the Member Interests Purchase Agreement which was signed on December 17, 2003. The net assets of these entities have been included in the consolidated financial statements of the Company as of December 31, 2003. The aggregate purchase price was approximately $6.1 million, of which $3.7 million was paid in cash, $0.4 million of cash was acquired and $0.4 million of cash was collected in January 2004 related to the cash surrender value of certain life insurance policies acquired. The remaining consideration consisted of an assumed note payable of $2.4 million, which was paid January 2, 2004. Total tangible net assets acquired were $4.3 million. Of the remaining consideration, $2.9 million was recorded in other intangibles related to airport leases, which will be amortized over 40 years, and $1.1 million was recorded in related deferred tax liabilities. The Company is still in the process of determining allocation of the purchase price, and the purchase price is subject to change. The Company’s unaudited pro forma revenue and net income (loss) would have been $87.2 million and $5.5 million for 2003 and $76.4 million and $(6.7) million for 2002, respectively, had it owned GA and GANO as of January 1, 2002.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands).

In January 2004, the Company entered into an agreement with Talon LLC to build a new hangar and office space at the Farmingdale, New York FBO. Talon will bear all costs of the construction and will make the hangar and office space available to the Company for lease.

On April 29, 2004, the Company entered into an agreement with a third party to sell all of its stock for the sum of approximately $217 million in an all cash transaction. The closing is scheduled to take place on or before July 15, 2004.

Executive Air Support, Inc. (the “Company”), a Delaware corporation, and subsidiaries are engaged primarily in the aircraft service and support business. Its activities consist of fueling, hangar leasing, and related services. The Company currently operates ten fixed-base operation (FBO) sites at airports throughout the United States.

The consolidated interim financial statements included herein have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission and, in the opinion of management, include all adjustments which, except as described elsewhere herein, are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. The results for interim periods are not necessarily indicative of results for the entire year. The financial statements presented herein should be read in connection with the Company’s audited consolidated financial statements for the year ended December 31, 2003.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions are eliminated in consolidation.

Revenue is recorded when fuel is provided or when services are rendered. Also included in revenue are hangar rental fees, which are recognized during the month for which service is provided.

Cash and cash equivalents includes cash and highly liquid investments with original maturity dates of 90 days or less.

Accounts receivable consists primarily of amounts due from corporations and individuals and has been shown net of an allowance for doubtful accounts of $246,000 and $220,000 as of March 31, 2004 and December 31, 2003. The Company has no significant credit risk concentration among its diversified customer base.

Property and equipment in the accompanying consolidated balance sheet is stated at cost, net of accumulated depreciation and amortization. For financial reporting purposes, depreciation of machinery

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

and equipment is computed on the straight-line method over the estimated service lives of the respective property, which vary from 5 to 10 years. The cost of leasehold improvements is amortized, on a straight-line basis, over the shorter of the estimated service life of the improvement and the respective term of the lease, generally 20 years. Expenditures for renewals and betterments are capitalized, and expenditures for maintenance and repairs are charged to expense as incurred.

The Company applies the intrinsic value-based method of accounting for stock-based employee compensation arrangements. No stock option-based employee compensation costs are reflected in the Company’s net income (loss), as all options granted had an exercise price greater than the market value of the Company’s underlying common stock at the date of grant. Had the Company elected to recognize compensation cost based on the fair value of the stock options at the date of grant under SFAS 123, such compensation expense would be insignificant.

Certain amounts reported in the 2003 consolidated financial statements have been reclassified to conform to the 2004 presentation.

The components of property and equipment consist of the following (in thousands):

Long-term debt at March 31, 2004, and December 31, 2003, consists of the following (in thousands):

The Company has a $10 million revolving credit agreement with a bank subject to certain limitations. As of March 31, 2004 and December 31, 2003, there was $0 and $1.0 million outstanding, respectively, under the revolving credit agreement and the Company had available borrowing capacity of

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

approximately $4.2 and $3.2 million respectively. Borrowings bear interest at rates consistent with the interest rate terms of Term Note A. The revolving credit agreement expires on December 21, 2005. The term notes and the revolving credit agreement are secured by substantially all the assets of the Company.

During 2001, the Company entered into a $15 million interest rate swap agreement in order to mitigate interest rate risk. Under the terms of the agreement, the Company pays interest based on a fixed rate of 5.74% through January 9, 2006, and receives interest based on a floating rate of LIBOR (1.34% at March 31, 2004). The fair value of the agreement was a liability of approximately $1.1 million at March 31, 2004 and December 31, 2003, respectively, which is included in other long-term liabilities on the accompanying consolidated balance sheets.

At March 31, 2004, the Company was obligated under the lease agreements to construct certain facilities. The total remaining cost of these projects is estimated to be $2.2 million.

Laws and regulations relating to environmental matters may effect the operations of the Company. The Company believes that its policies and procedures with regard to environmental matters are adequate to prevent unreasonable risk of environmental damage and related financial liability. Some risk of environmental and other damage is, however, inherent in particular operations of the Company. The Company maintains adequate levels of insurance coverage with respect to environmental matters. As of March 31, 2004 and December 31, 2003, management does not believe that environmental matters will have a significant effect on the Company’s operations.

On December 21, 2000, the Company issued 1,104,354 warrants to a shareholder (the “Warrant Holder”) in conjunction with the issuance of subordinated debt. The warrants have an exercise price of $0.01 per share and are exercisable at any time through December 21, 2010. Beginning in the first quarter of 2006, the Warrant Holder can sell the warrants to the Company at the then fair value of the warrants, as defined. Beginning in the first quarter of 2007, the Company can buy the warrants from the Warrant Holder at the then fair value of the warrants, as defined. The fair value of the warrants is included in other long-term liabilities in the accompanying consolidated balance sheet. The warrants are reflected at fair value for the reporting period, and subsequent changes in fair value are reflected in the Company’s operating results. As of March 31, 2004 and December 31, 2003, the fair value of these warrants was approximately $7.45 million and $2.24 million, respectively, and has been included in other long-term liabilities. The change in the fair value of the warrants of approximately $5.20 million between March 31, 2004 and December 31, 2003 was recorded in other expense on the accompanying consolidated statement of operations.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

common stock or upon the sale of the Company’s common stock or assets in excess of a certain value, as defined. Dividends related to the preferred stock are cumulative and accrue at 8% per year. Dividends in arrears were approximately $18.8 million and $17.5 million at March 31, 2004 and December 31, 2003, respectively. The preferred stock is convertible into shares of the Company’s common stock determined by dividing the conversion price, as defined, by $3.62 per share.

Total comprehensive income (loss) was approximately $(1.08) million and $1.05 million for the three months ended March 31, 2004 and 2003 respectively.

During 2002, the Company committed to a plan to sell its Flight Services division. On February 28, 2003 the Company entered into an agreement to sell the division. Based on estimated net proceeds from the sale of $1 million, the Company recorded a loss, during December 2002 on disposal of approximately $11.5 million, which included an impairment of goodwill and intangible assets of approximately $11.2 million. The results of operations of $0 and $.07 million have been reflected as discontinued operations in the accompanying consolidated statements of operations for March 31, 2004 and 2003, respectively. The assets and liabilities for the Flight Services division have been presented separately in the accompanying consolidated balance sheets for March 31, 2004 and December 31, 2003. Flight Services revenues for the three months ended March 31, 2004 and 2003 were approximately $0 million and $2.0 million, respectively.

The Company has recorded a provision (benefit) for income taxes for the three months ended March 31, 2004 and 2003 of $(0.73) million and $0.75 million, respectively, based on its estimate of the effective tax rate for the fiscal year. The effective tax rate differs from the statutory federal income tax rate primarily due to state income taxes.

We have audited the accompanying consolidated balance sheets of Macquarie Americas Parking Corporation as of December 31, 2003 and 2002, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2003 and the period from July 23, 2002 (inception) to December 31, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Macquarie Americas Parking Corporation at December 31, 2003 and 2002, and the consolidated results of its operations and its cash flows for the year ended December 31, 2003 and the period from July 23, 2002 (inception) to December 31, 2002, in conformity with accounting principles generally accepted in the United States.

Macquarie Americas Parking Corporation (the “Company” or “MAPC”), a Delaware corporation, was formed on July 23, 2002 for the purpose of acquiring the off-site airport parking operations of the PCA Group (see note 3). Effective on December 18, 2002 (the “Contribution Date”), the Company and its subsidiaries provide off-site airport parking services, transportation services and airport related hotel transportation services at, or in connection with, off-site airport parking facilities. At December 31, 2003, the Company owns or leases (through its majority owned subsidiary PCAA Parent, LLC) 21 off-airport parking locations in California, Arizona, Colorado, Texas, Georgia, Tennessee, Pennsylvania, Connecticut, New York, New Jersey, and Illinois.

The consolidated financial statements include the accounts of the Company and its subsidiary companies, which include Parking Company of America Airports Holdings, LLC (“Holdings” — 83.2% owned by MAPC); PCAA Parent, LLC (“Parent” — 53.3% owned by Holdings)(formerly Parking Company of America Airports, LLC); and Parent’s 100% owned subsidiaries Parking Company of America Airports, LLC; Parking Company America Airports Phoenix, LLC; PCA Airports, Ltd; PCAA GP, LLC; PCAA LP, LLC and PCAA Chicago, LLC. All significant inter-company profits, transactions and balances have been eliminated in consolidation.

The Company considers cash and cash equivalents to include cash on hand, in banks, and short-term, highly liquid investments with original maturities of three months or less.

Property, improvements and equipment are recorded at cost. Balances at December 31, 2003 and 2002 are as follows:

Depreciation and amortization is computed on the straight-line basis using the following useful lives:

Leasehold improvements are amortized over the shorter of the lease term or estimated useful lives of the assets.

Expenditures for maintenance and repairs are expensed as incurred. During the year ended December 31, 2003 and the period ended December 31, 2002, maintenance and repairs charged to expense were approximately $144,501 and $2,500, respectively. When property is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in income.

In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (SFAS) No. 141, “Business Combinations,” and No. 142, “Goodwill and Other Intangible Assets.” Under these rules, goodwill and other intangible assets deemed to have indefinite lives are not amortized, but instead are subject to annual impairment tests in accordance with these statements. Other intangible assets are amortized over their useful lives.

The Company applied SFAS No. 141 and No. 142, in accounting for goodwill and intangible assets for the year ended December 31, 2003 and period ended December 31, 2002. Goodwill and intangibles assets were recorded on the Contribution Date based on the carryover basis of the assets and the fair market values (see Note 3) and at fair market value on the acquisition date (see Note 4). The Company performed the required impairment tests of goodwill as of December 31, 2003 and 2002, and determined that no event or changes in circumstances indicated impairment of goodwill had occurred since the Contribution Date and acquisition date, respectively.

SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the cost basis of a long-lived asset is greater than the projected future undiscounted net cash flows for such asset (excluding interest), an impairment loss is recognized. Impairment losses are calculated as the difference between the cost basis of an asset and its estimated fair value. The Company adopted SFAS No. 144 during the period ended December 31, 2002.

In the performance of impairment tests on other intangibles, the Company recorded an impairment loss of $992,032 related to certain contract rights during the year ended December 31, 2003 (see Note 6). The Company believes no further provision for impairment losses are necessary. There can be no assurance, however, that market conditions or demand for the Company’s services will not change which could result in impairment charges in the future.

The costs of obtaining financing are capitalized and amortized as interest expense over the term of the respective financing using the straight-line method, which approximates the interest method. Amortization of such costs for the year ended December 31, 2003 and for the period ended December 31, 2002 totaled $3,748,201 and $22,788, respectively. In connection with the debt refinancing that occurred on October 1, 2003, approximately $2,882,731 of debt issuance costs related to the credit facility in place at December 31, 2002 were written off and charged to interest expense (see Note 7).

The Company accounts for operating lease obligations on a straight-line basis. The difference between actual lease payments and straight-line lease expenses over the lease term is included in deferred rent. Deferred rent of $320,916 and $6,003 for existing leases is included in the accompanying consolidated balance sheets at December 31, 2003 and 2002, respectively. Rent expense for all operating leases is recorded in direct expenses.

Parking lot revenue is recorded as services are performed, net of appropriate allowances and local taxes. Revenue for services performed, but not collected as of year end, were recorded in other receivables in the accompanying balance sheet based upon the estimated value of uncollected parking revenues for customer vehicles at each location.

The Company offers various membership programs for which customers pay an annual membership fee. The Company accounts for membership fee revenue on a “deferral basis” whereby membership fee revenue is recognized ratably over the one-year life of the membership. In addition, the Company also sells prepaid parking vouchers which can be redeemed for future parking services. Sales of prepaid vouchers are recorded as “deferred revenue” and recognized as parking revenue when redeemed in the future. The estimated value of unearned membership revenue and prepaid vouchers has been included in deferred revenue in the accompanying balance sheet.

The Company’s policy is to expense advertising the first time the advertising takes place. Costs associated with its direct response programs are prepaid and charged to expense once the printed materials are distributed to the public. As of December 31, 2003, prepaid advertising totaled $19,300. Total advertising and marketing expenses were $1,265,643 and $23,988 for the year ended December 31, 2003 and the period ended December 31, 2002, respectively.

Deferred income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. Due to the Company’s lack of history of earnings, the Company has established a full valuation allowance for its net deferred tax assets.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company’s management to make estimates and assumptions

that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

At December 31, 2003 and 2002, the Company’s financial instruments recorded on the balance sheets include cash equivalents, restricted cash, interest rate swap agreement, interest rate cap agreement, notes payable, capital leases and long-term debt. At December 31, 2003 and 2002, the fair value of the Company’s financial instruments approximated the carrying value.

The Company uses variable rate debt to finance its operations. The debt obligations expose the Company to variability in interest payments due to changes in interest rates. Management believes it is prudent to limit the variability of its interest payments. To meet this objective, the Company enters into various types of derivative instruments to manage fluctuations in cash flows resulting from interest rate risk. These instruments include interest rate swaps and caps. Under its interest rate swap agreements (none at December 31, 2003), the Company receives variable interest rate payments and makes fixed interest rate payments, thereby creating fixed rate debt. The interest rate cap agreement outstanding as of December 31, 2003 protects the Company from increases in interest rates that would result in increased cash interest payments made under its Credit Facility (see Note 7). Under its interest rate cap agreement, the Company has the right to receive cash if interest rates increase above a specified level.

Interest rate differentials to be paid or received as a result of interest rate swap or cap agreements are accrued and recognized as an adjustment of interest expense related to the designated debt. Interest rate cap premiums paid are amortized to interest expense ratably during the life of the agreement. Amounts related to the interest rate swaps and the intrinsic value of terminated cap agreements are deferred and amortized as an adjustment to interest expense over the original period of interest exposure, provided the designated liability continues to exist or is probable of occurring.

Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and for Hedging Activities,” as amended by SFAS No. 138 “Accounting for Certain Derivative Instruments and Certain Hedging Activities — An Amendment of SFAS No. 133,” require the Company to recognize all derivatives on the balance sheet at fair market value. Derivatives that are not designated as hedges must be adjusted to fair value through income. If the derivative is an effective hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.

It is the Company’s policy to enter into interest rate swap and cap contracts only to the extent necessary to reduce exposure to fluctuations in interest rates. The Company does not enter into interest rate swap or cap contracts for speculative purposes. In the unlikely event that a counterparty to a swap or cap agreement fails to meet the terms of an interest rate cap contract as of December 31, 2003, the Company’s exposure is limited to the interest rate differential on the notional amount. The Company does not anticipate nonperformance by the counterparty.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, trade accounts receivable and its interest rate cap agreement. While amounts on deposit with financial institutions may exceed federal insurance limits, the Company places its cash and cash equivalents and restricted cash with high quality credit institutions.

Additionally, the Company performs ongoing credit evaluations of its customers and establishes allowances for doubtful accounts when appropriate. At December 31, 2003 and 2002, no provision for doubtful accounts was considered necessary. The fair value of the instruments, including long-term debt, approximates market at December 31, 2003 and 2002.

As of December 31, 2003, approximately 17% of the Company’s employees are covered by union contracts that will expire between December 31, 2004 and November 15, 2007.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). FIN 46 provides guidance on how to identify a variable interest entity (“VIE”) and determine when the assets, liabilities, non-controlling interests and results of operations of a VIE need to be included in a company’s consolidated financial statements. FIN 46 also requires additional disclosures by primary beneficiaries and other significant variable interest holders. In December 2003, the FASB issued a revision to FIN 46 (“FIN 46R”), which provided additional guidance on the definition of a VIE and delayed the effective date for privately held companies until the beginning of the first reporting period beginning after December 15, 2004, except for entities created after December 31, 2003, which must be accounted for under FIN 46 or FIN 46R upon the initial involvement with the entities. The Company does not expect any effect of this Interpretation’s provisions on its consolidated financial position and results of operations.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, (“SFAS No. 150”), “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 addresses certain financial instruments that, under previous guidance, could be accounted for as equity, but now must be classified as liabilities in statements of financial position. These financial instruments include: (1) mandatory redeemable financial instruments, (2) obligations to repurchase the issuer’s equity shares by transferring assets, and (3) obligations to issue a variable number of shares. With limited exceptions, SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective for the Company in fiscal 2004. The Company does not expect that the adoption of SFAS No. 150 will have a material effect on its consolidated financial position and results of operations.

The Company’s credit facility with its bank requires the maintenance of reserve accounts for various operational purposes. Current restricted cash as of December 31, 2003, totals $603,675, which is required to be maintained for payment of real estate taxes. In addition, the Credit Facility requires additional reserves in the amount of $5,255,792 of which $3,463,289 have been funded at December 31, 2003 for leasehold improvements, insurance and debt service in the event of default and $1,000,000 in a deferred purchase price reserve related to the acquisition of Avistar Satellite Airport Parking, LLC (see Note 4). These additional reserves have been reflected as restricted cash in other assets on the accompanying balance sheet as of December 31, 2003. At December 31, 2002, the then existing credit agreement required that the Company maintain a Senior Debt Reserve Account at a balance sufficient to cover six months of interest payments. The cash held in this account was restricted for the sole purpose of making interest payments in the event of a default and totaled $1,450,691. These amounts have been classified as restricted cash in other assets on the accompanying balance sheets as of December 31, 2002.

On December 18, 2002 (the “Contribution Date”), the Company, Parent and the PCA Group (which includes PCA Parking Company of America, LLC, Parking Company of America Management,

LLC, ARE Holdings, LLC, and Atlas Superpark, Ltd.) entered into a Contribution and Membership Agreement (the “Agreement”). Pursuant to the Agreement, the PCA Group contributed certain assets and Parent assumed certain debt in exchange for 23,000 membership units, with an agreed-upon value of $1,000 per unit. The Company then purchased 11,000 membership units from the PCA Group for an aggregate purchase price of $11,000,000. In addition, the Company purchased an additional 4,999 membership units from Parent for cash at an agreed-upon value of $1,000 per unit. Results of operations have been included in the Statements of Operations since the Contribution Date.

Parent has accounted for a partial step-up in basis of the assets contributed to the extent of the ownership by the Company, of which 4.11% was subsequently sold to another third party, New Wai Holdings, LP. The accounting resulted in a step-up in basis for 57.14% and a carryover of basis for 42.86%. Accordingly, the opening members’ equity of Parent as of December 18, 2002 was computed as follows:

After the adjustment for the step-up and carryover of basis, the allocation of the purchase price (including capitalized transaction costs of $2,118,352) was as follows:

As a result of the partial step-up of basis described above and the resulting negative carryover basis of PCA Group’s members’ interest in Parent, no minority interest was recorded in Parent on the Contribution Date. Instead, the negative carryover basis of $10,626,288 was recorded as additional goodwill in consolidation. In addition, losses attributable to PCA Group’s minority interests in the amount of $1,987,436 and $245,857 for the year ended December 31, 2003 and the period ended December 31, 2002, respectively, were allocated to the Company.

On October 1, 2003, the Company completed the acquisition of the assets and certain liabilities of Airport Satellite Parking, LLC, Airport Satellite Parking Newark, LLC, Airport Satellite Parking Riteway, LLC, Airport Satellite Parking New Jersey, LLC, Airport Satellite Parking Hartford, LLC, and Airport Satellite Parking O’Hare, LLC (collectively “Avistar”) for $58,597,414 ($60 million purchase price less adjustments). Avistar operated off-airport parking services at 10 locations in Connecticut, New York, New Jersey, Pennsylvania and Illinois. In addition, the Company also exercised an option to purchase a separate parcel of land for $4,000,000 as part of the same transaction. The acquisition has been accounted for using the purchase method of accounting and the results of operations for Avistar have been included in the financial statements since the acquisition date. The fair value of the assets acquired as of the acquisition date (including transaction costs of $4,701,343) was as follows:

The net working capital acquired consisted of accounts receivable, prepaid expenses, accounts payable and accrued taxes. The Company allocated $6,400,000 of purchase price to customer relationships in accordance with Emerging Issues Task Force Issue 02-17, “Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination.” The Company will amortize the amount allocated to customer relationships over an eight-year period. The purchase agreement included an incentive provision whereby the seller may receive an additional payment of $1,000,000 based upon the achievement of earnings targets of Avistar for the twelve months ended December 31, 2003. Any amounts owed under this incentive provision will be recorded as goodwill in the period the payment is made. The purchase agreement also includes a provision to adjust the purchase price based on a final accounting for certain working capital items that were funded at the acquisition date.

The following pro forma unaudited information is presented to illustrate the estimated effects of the 2003 Avistar acquisition had the transaction occurred on January 1, 2003 (information for 2002 has not been presented because of the short period):

Income taxes in the Company’s consolidated financial statements represent income taxes attributable to entities in the consolidated group that are subject to taxation. No income tax provision (benefit) has been provided by the Company for income (loss) allocable to minority members of the limited liability subsidiaries, which are not subject to taxation. The taxable income or loss of limited liability subsidiaries are allocated to each of the respective members in accordance with the limited liability company agreements. The following table presents the principal reasons for the difference between the effective tax rate and the federal statutory income tax rate:

The following table presents the federal and state and local provision (benefit) for income taxes on a separate tax return basis:

The Company has a net operating loss carryforward of approximately $3.4 million and 152,000 for federal and state income tax purposes, respectively, at December 31, 2003, which can be carried forward to offset future taxable income. The net operating loss carryforwards begin to expire in 2022 and in 2012 for federal and state purposes, respectively. The Company has established a valuation allowance for deferred tax assets due to the lack of earnings history.

Effective June 1, 2003, the Company agreed to the early termination of the underlying lease related to the contract rights outstanding as of December 31, 2002. The settlement requires the tenant to continue paying the Company for an additional 15 months at the contractual lease rate. As a result of the

settlement, the Company recorded an impairment loss related to the contract rights in the amount of $992,032 in 2003. The amortization expense related to the intangible assets for the year ended December 31, 2003 and the period ended December 31, 2002, was $3,576,693 and $57,429, respectively. The estimated amortization expense for finite-lived intangible assets for the next five years is as follows:

On October 1, 2003, the Company refinanced its long-term debt and entered into a new $126 million credit facility (the “Facility”) with GMAC Commercial Mortgage Corporation. The proceeds of the Facility were used to repay previously outstanding long-term debt and fund the Avistar acquisition (see Note 4). The Facility is secured by all the assets of the PCAA Group. In addition, guarantees in the aggregate amount of $2,000,000 have been made by three members of the Company and the Chief Executive Officer of the Company. The Facility matures on October 1, 2006, but may be extended at the option of the Company for up to two additional years. The Company is required to maintain reserves (see Note 2) and has limitation on the amount of additional borrowings. The Company is in compliance with the covenants as of December 31, 2003. The Facility bears interest at the floating base rate (defined as the one month LIBOR), plus 3.44% and is payable monthly in arrears.

In addition, the Company entered into a separate $4.75 million credit facility (the “O’Hare Facility”) with GMAC Commercial Mortgage Corporation in order to purchase certain property in Chicago, Illinois. The O’Hare Facility is secured by the all the assets of PCAA Chicago, LLC. The O’Hare Facility matures on January 1, 2009 and requires monthly payments of principal and interest in the amount of $28,675.

On October 1, 2003, the Company entered into an interest rate cap agreement with Sumitomo Mutsui Banking Corporation (SMBC). The Company paid $920,000 to obtain the cap which hedges against increases in LIBOR rates through October 1, 2006. The initial notional amount is $126 million and the cap rate is fixed at 4.5% for LIBOR for the entire life of the agreement. The Company has accounted for the interest rate cap as a cash flow hedge. Accordingly, the cost of the interest rate cap was capitalized on October 1, 2003 and adjustments to the fair market value are recorded as an adjustment to other comprehensive loss in the stockholders’ equity section of the balance sheet. The portion of the interest cap determined to have become ineffective due to a change in the time value of the interest cap is being amortized to interest expense.

As of December 31, 2002, the Company had entered into one interest rate swap contract, which originally matured on December 19, 2007. The Company accounted for the interest rate swap as a cash flow hedge and recorded the fair value of the interest rate swap of approximately $679,000 as an increase of its long-term debt and as an accumulated other comprehensive loss in the accompanying balance sheet at December 31, 2002. On October 1, 2003, the Company refinanced the long-term debt for which the interest rate swap was associated. As a result of the early termination of the interest rate swap, the Company paid approximately $847,075 to terminate the interest swap. The cost of terminating the interest rate swap was recorded as additional interest expense for the year ended December 31, 2003.

The Company has entered into notes payable with various finance companies for the purchase of transportation equipment. The notes are secured by the equipment and require monthly payments of principal and interest at rates ranging from 6.33% to 10.11%. The Company also leases certain transportation equipment under capital leases. The following is a summary of the maturities of the notes payable and the future minimum lease payments under capital leases, together with the present value of the minimum lease payments, as of December 31, 2003:

The net book value of equipment under capital lease at December 31, 2003 and 2002 was $836,802 and $0, respectively.

The Limited Liability Agreement for Parent (the “LLC Agreement”), dated September 30, 2003, grants the Company and Holdings a right of first refusal to purchase any or all of the other members’ outstanding units offered for sale. In the event the Company or Holdings elects not to purchase the member units, the member has the right to sell the units at a price that is equal to, or greater than, the previous offer price made available to the Company and Holdings.

The LLC Agreement grants Holdings certain drag-along rights. The drag-along rights include the option to include all non-majority member units in an offer for sale to a third party. The other members’ units are subject to the same terms and conditions as are applicable to the majority member. In the event of a partial sale, each member shall be obligated to participate at the same percentage as that which is offered by the majority member. Under the Members’ Agreement, Holdings is prohibited from exercising its drag-along right prior to December 18, 2004, unless Parent is in material default with its lender.

The LLC Agreement grants each member certain tag-along rights when a member proposes to engage in the sale of at least 10% of Parent’s total outstanding units. The tag-along rights include the option to participate in the sale of member units engaged by any other member. Upon notification by the selling member, each member may offer for sale a percentage of their current member units equal to the percentage of ownership being offered by the other member. Notwithstanding the above, if, prior to December 18, 2005, Holdings elects to sell any part of its member units, such that the sale would terminate Parent pursuant to Internal Revenue Code Section 708(b)(1)(B), then the PCA Group shall be allowed to participate, regardless of the number of units or percentage of Parent’s total outstanding units offered by Holdings. Further, under certain conditions, the PCA Group will be entitled to sell more units than the percentage being offered by Holdings.

Parent’s Members’ Agreement grants the PCA Group certain put rights. For a period of 90 days after December 18, 2010 and 2014, the PCA Group may demand that Holdings purchase all the outstanding units then held by the PCA Group. Holdings will be responsible for determining the fair market value of Parent and the related price per unit. In the event the PCA Group finds the price to be unacceptable, then both parties have agreed to engage an independent investment banker or appraisal firm to determine the fair market value of the member units.

The Company is obligated under non-cancelable operating leases for various parking facilities. These operating leases expire between 2004 and 2020. Certain of the facility leases provide that the Company pay for real estate taxes and insurance and certain leases provide for contingent rents or may have rent escalations and, in certain circumstances provide a purchase option to the Company. Contingent facility rentals are determined on the basis of a percentage of sales in excess of a stipulated minimum for

certain locations as defined in the individual lease agreements. Scheduled future minimum lease payments under such non-cancelable operating leases at December 31, 2003, are as follows:

Rent expense of $3,705,356 and $79,387 is included in direct expenses in the accompanying consolidated statements of operations for the year ended December 31, 2003 and the period ended December 31, 2002, respectively. Most of the leases are subject to renewal under terms similar to existing lease terms.

At December 31, 2003, the Company had purchase commitments under construction contracts totaling approximately $187,500.

The Company owns a parcel of real estate that covers an area of land for which a third party has been identified as a potentially responsible party (“PRP”) by the Environmental Protection Agency. Although the Company did not own the property at the time the contamination was believed to have occurred, the Company has purchased an environmental insurance policy for the property to minimize its risk against any future claims. The policy expires in July 2007 and is renewable.

In connection with the Agreement (see Note 4), Parent entered into an Operations Agreement whereby the Parking Company of America Management, LLC (“PCAM”), an affiliate of the PCA Group, would continue to provide operational management, marketing, accounting, human resources and advisory services on behalf of Parent. The Operations Agreement specified that the management fee was to be calculated based upon 7.5% of earnings before interest, depreciation, amortization, taxes and management fees, less all capital expenditures related to the acquisition of additional shuttle vehicles. The Operations Agreement further provided that Parent advance PCAM an amount equal to $50,000 per month, as an estimate of the annual management fees. The Operations Agreement was originally for a term of 61 months and would have continued through January 17, 2008. However, the Operations Agreement was canceled on October 1, 2003. Parent paid PCAM $214,188 and $9,355 in management fees for the year ended December 31, 2003 and the period ended December 31, 2002, respectively. In addition, the Company entered into a sublease agreement for office space with PCAM. The lease is month to month and requires payments of $8,000 per month. The Company paid PCAM $24,000 in rent during 2003.

Additionally, the Operations Agreement required PCAM to maintain certain shuttle buses at a cost of $650 per bus. Concurrent with the cancellation of the Operations Agreement, the Company entered into a new maintenance agreement with PCAM for its shuttle bus fleet. The new maintenance agreement provides for maintenance to be performed on a time and materials basis. The Company paid PCAM maintenance fees of $124,534 and $2,516 for the year ended December 31, 2003 and the period ended December 31, 2002, respectively.

At December 19, 2002, PCAA was unable to obtain the necessary assignment of one of the transportation contracts held by PCAM. Therefore, PCAA and PCAM agreed to allow PCAM to continue performing the services under the contract in exchange for a reduction in the management fee due PCAM. It was agreed that the management fee would be reduced by the amount of profit realized by PCAM on the contract for as long as the services under the contract were performed by PCAM. On June 1, 2003, the transportation contract was assigned to Parent and all the employees, vehicles and equipment related to the performance of the contract were transferred to Parent. Approximately $93,566 of equipment was transferred to Parent from PCAM in connection with the contract assignment.

The Company has entered into a consulting agreement with one of Parent’s board of directors. The consulting fee is payable monthly at an annual rate of $51,140 per year as of December 31, 2003. The agreement may be terminated by the Company upon 30-days notice. Consulting fees totaled $50,000 and $0 in 2003 and 2002, respectively.

Upon commencement of the off-airport operations business on December 20, 2002, PCAM paid the operating expenses for Parent, until a checking account could be established. In addition, the Agreement called for Parent to reimburse PCAM for any prepaid expenses, deposits or transaction costs that were advanced prior to December 18, 2002. As of December 20, 2002, PCAM had advanced $302,249 with respect to deposits, prepaid expenses and transaction costs. As of December 31, 2003 and 2002, Parent owed PCAM a total of $0 and $381,941, respectively.

Macquarie Americas Parking Corporation (the “Company” or “MAPC”), a Delaware corporation, was formed on July 23, 2002 for the purpose of acquiring the off-site airport parking operations. Effective on December 18, 2002 (the “Contribution Date”) the Company and its subsidiaries provide off-site airport parking services, transportation services and airport related hotel transportation services at, or in connection with, off-site airport parking facilities. The Company currently owns or leases (through its majority owned subsidiary PCAA Parent, LLC) 21 off-airport parking locations in California, Arizona, Colorado, Texas, Georgia, Tennessee, Pennsylvania, Connecticut, New York, New Jersey, and Illinois.

The consolidated financial statements include the accounts of the Company and its subsidiary companies which include Parking Company of America Airports Holdings (“Holdings” — 83.2% owned by MAPC), LLC; PCAA Parent, LLC (“Parent” — 53.3% owned by Holdings)(formerly Parking Company of America Airports, LLC); and Parent’s 100% owned subsidiaries Parking Company of America Airports, LLC; Parking Company America Airports Phoenix, LLC; PCA Airports, Ltd; PCAA GP, LLC; PCAA LP, LLC and PCAA Chicago, LLC. All significant inter-company profits, transactions and balances have been eliminated in consolidation.

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments considered necessary for a fair presentation, consisting only of normal and recurring adjustments. Operating results for the three months ended March 31, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2004. For further information, refer to the Company’s consolidated financial statements and footnotes thereto for the year ended December 31, 2003.

Income taxes for the three months ended March 31, 2004 and 2003 were computed using the effective rate estimated to be applicable for the full fiscal year, which is subject to ongoing review and evaluation by management. The Company has established a full valuation allowance for deferred income tax assets due to the lack of earnings history.

Finite-lived intangible assets consisted of the following at March 31, 2004 and December 31, 2003:

The amortization expense related to the intangible assets for the three months ended March 31, 2004 and March 31, 2003 was $780,549 and $666,434, respectively.

The components of comprehensive loss for the three months ended March 31, 2004 and 2003 are as follows:

On May 3, 2004, PCAA Parent LLC issued 1,000 membership units to certain existing members of PCAA Parent LLC in exchange for $1 million. As a result, Parking Company of America Airports Holdings LLC’s ownership interest in PCAA Parent LLC was reduced from 53.2% to 51.9%.

We have audited the accompanying consolidated statements of operations and cash flows of the Off-Airport Parking Operations of PCA Parking Company of America, LLC (see Note 1) for the period January 1, 2002 to December 18, 2002 and the year ended December 31, 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated statements of operations and cash flows based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated statements of operations and cash flows referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of the Off-Airport Parking Operations of PCA Parking Company of America, LLC for the period January 1, 2002 to December 18, 2002 and the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

As described more fully in Note 1, the Company changed its method of accounting for goodwill and other intangibles.

On December 19, 2002 (“Contribution Date”) the off-airport parking operations of PCA Parking Company of America, LLC (the “Parking Operations” or “Company”), which includes off-airport parking operations of PCA Parking Company of America, LLC, Parking Company of America Management, LLC, ARE Holdings, LLC and Atlas Superpark, Ltd. (collectively referred to as “PCA Group”) were contributed to Parking Company of America Airports, LLC (“PCAA”) pursuant to a Contribution and Membership Agreement (see Note 5). PCAA was formed on August 22, 2002 as a Delaware limited liability company for the purpose of receiving certain assets and liabilities that were contributed by the PCA Group related to its off-airport parking business. On October 1, 2003, the membership units of PCAA were contributed to a new entity, PCAA Parent, LLC, ultimately a subsidiary of Macquarie Americas Parking Corporation.

The consolidated statements of operations and cash flows include the results of operations and cash flows specific to the off-airport parking operations that were contributed by the PCA Group to PCAA on December 19, 2002 for the period from January 1, 2002 to December 18, 2002 and the year ended December 31, 2001. Accordingly, the contributed Parking Operations comprise the 10 owned or leased off-airport parking locations in California, Arizona, Colorado, Texas, Georgia, Tennessee and Pennsylvania. The Parking Operations provide off-site airport parking services, transportation services and airport related hotel transportation services at, or in connection with, these off-site airport parking facilities.

The consolidated statements of operations and cash flows prior to the Contribution Date have been derived from the accounting records of the PCA Group using the historical results of operations and historical basis of the assets and liabilities of the Parking Operations. Management believes the assumptions underlying the preparation of the consolidated statements of operations and cash flows are reasonable. However, the consolidated statements of operations and cash flows included herein may not necessarily reflect the Company’s results of operations, financial position and cash flows in the future or what its results of operations, financial position and cash flows would have been had the Company been a stand-alone business during those periods.

General corporate overhead that could be specifically identified to the Parking Operations was allocated accordingly. Other corporate overhead, primarily salaries and general and administrative expenses for executive management, finance, legal, human resources, information services and professional services was allocated based on the ratio of the Parking Operations’ revenue as a percentage of the PCA Group’s total revenue. This allocated corporate overhead amounted to approximately $1,219,000 and $1,072,000 for the period ended December 18, 2002 and the year ended December 31, 2001, respectively. Subsequent to the Contribution Date, PCAA and its successors are using their own resources or purchased services.

The PCA Group used a centralized approach to cash management and the financing of its Parking Operations, except for certain credit facilities associated with the property of specific parking locations. Cash deposits from the Parking Operations were transferred to the PCA Group on a regular basis and were netted against the PCA Group’s net investment account. As a result, none of PCA Group’s cash and cash equivalents at the corporate level was allocated to the Parking Operations in the consolidated statements of operations and cash flows. Funding required from the PCA Group for working capital, acquisition or capital expenditure requirements, after giving effect to the Parking Operations’

NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS AND CASH FLOWS — (Continued)

transfers to or from the PCA Group of its cash flows from operations, resulted in changes in invested equity, as follows:

The PCA Group had entered into several credit facilities to finance the acquisition of its Parking Operations. The long-term debt and related interest expense was specifically identified and allocated to the Parking Operations for all obligations related to historic property acquisitions, excluding any costs associated with the contribution of the parking operations on December 19, 2002. The balance of the long-term debt, and related interest expense, were allocated on a prorated basis in order to account for the total amount of assumed long-term debt as of December 19, 2002 (see Note 5).

The Company considers cash and cash equivalents to include cash on hand, in banks, and short-term, highly liquid investments with original maturities of three months or less.

Property, improvements and equipment are recorded at cost (or fair market on the date of acquisition). Depreciation and amortization is computed on a straight-line basis using the following useful lives:

Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful lives of the assets.

Expenditures for maintenance and repairs are expensed as incurred. For the period ended December 18, 2002, maintenance and repairs charged to direct costs were approximately $119,000 and for the year ended December 31, 2001 were approximately $75,000. When property is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is recorded in income.

In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combination,” and No. 142, “Goodwill and Other Intangible Assets.” Under these new rules, goodwill and other intangible assets deemed to have indefinite

NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS AND CASH FLOWS — (Continued)

lives are no longer amortized but are subject to annual impairment tests in accordance with these statements. Other intangible assets are amortized over their useful lives.

The Company adopted SFAS No. 141 and No. 142, in accounting for goodwill and intangible assets for the period ended December 18, 2002. Goodwill and intangible assets were recorded on the Contribution Date based on the carryover basis of the assets and the fair market values. The Company performed the required impairment tests of goodwill for the period ended December 18, 2002 and determined that no event or changes in circumstances that indicated impairment of goodwill and other intangible assets had occurred.

On January 1, 2002, the Company adopted SFAS No. 142, which eliminates the amortization of goodwill and requires that the goodwill be tested for impairment. Transitional impairment tests of the goodwill made during the period ended December 18, 2002 did not require adjustment to the carrying value of its goodwill. Amortization expense for the year ended December 31, 2001 was $456,000. Had the Company applied the non-amortization provisions of SFAS No. 142 in 2001, the pro forma results of operations for the year ended December 31, 2001 would have been as follows:

The Parking Operations account for operating lease obligations on a straight-line basis. The difference between actual lease payments and straight-line lease expenses over the lease term is included in deferred rent. Rent expense for all operating leases is recorded in direct expenses.

Parking lot revenue is recorded as services are performed, net of appropriate allowances and local taxes. Revenue for services performed, but not collected are recorded in accounts receivable based upon the estimated value of the ending inventory of customer vehicles at each location. The approximate value of uncollected parking revenues has been included in other receivable.

The Parking Operations also sells prepaid parking vouchers, which can be redeemed for future parking services. Sales of prepaid vouchers are recorded as “deferred revenue” and recognized as parking revenue when redeemed in the future. The estimated amount of deferred income related to prepaid parking vouchers was included in accrued expenses.

The Company had no items of other comprehensive loss, and therefore there is no difference between the reported net loss and the comprehensive loss during the period ended December 18, 2002 and the year ended December 31, 2001.

NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS AND CASH FLOWS — (Continued)

No provision has been made for federal and state income taxes in the accompanying consolidated financial statements. The income or loss of the Parking Operations was allocated to each member in the PCA Group in accordance with the terms of the applicable limited liability company agreement. Each member’s tax status, in turn, determines the appropriate income tax for its allocated share of the Parking Operations’ income or loss.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Parking Operations’ management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Financial instruments that potentially subject the Parking Operations to concentrations of credit risk consist primarily of cash and cash equivalents, trade accounts receivable and amounts due from affiliates. Management performs ongoing credit evaluations of its customers and establishes allowances for doubtful accounts when appropriate. No provision for doubtful accounts was considered necessary as of December 18, 2002 and December 31, 2001.

As of December 18, 2002, the Parking Operations had eight credit facilities related to the PCA Group’s Businesses. The notes payable were secured by substantially all the PCA Group’s assets and were subject to restrictive covenants including, among other things, maintenance of certain financial ratios and limits on capital expenditures. Interest on the various notes ranged from LIBOR (1.38% as of December 18, 2002) plus 3% up to 17% and was payable quarterly in arrears.

In addition, the Parking Operations also issued warrants in conjunction with two of its notes payable. As of December 18, 2002, the Parking Operations had negotiated a buyback of these warrants for approximately $2,140,723. Included in long-term debt was approximately $2,140,723 and $1,681,997 related to the warrants obligations as of December 18, 2002 and December 31, 2001, respectively. The value of the warrants had been amortized to interest expense on a straight-line basis. Interest expense includes $458,726 of amortization for the period ending December 18, 2002 and the year ended December 31, 2001, respectively.

The balance of all long-term debt obligations were assumed by the Parking Operations and subsequently refinanced on December 19, 2002 (see Note 5).

The Parking Operations was obligated under non-cancelable operating leases for various parking facilities. These operating leases expire between 2004 and 2020. The Parking Operations also leases certain vehicles under agreements that meet the criteria for classification as capital leases. Rent expense of $1,965,463 and $2,023,151 is included in direct expenses in the accompanying consolidated statements of operations for the period ended December 18, 2002 and the year ended December 31, 2001, respectively. Most of the leases are subject to renewal under terms similar to the existing lease terms.

NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS AND CASH FLOWS — (Continued)

Effective December 19, 2002, the PCA Group entered into a Contribution and Membership Purchase Agreement (the Contribution Agreement) with Macquarie Americas Parking Corporation (MAPC) to contribute certain assets and liabilities of the Company, primarily the Parking Operations’ airport parking operations, to PCAA, a newly formed limited liability company, in exchange for 23,000 membership units with an agreed upon value of $1,000 per unit for $23,000,000. Concurrently, MAPC, through an escrow agreement, purchased 11,000 of the 23,000 membership units from the PCA Group for an aggregate purchase price of $11,000,000. At the closing of the transaction, $57 million of liabilities were assumed by PCAA.

We have audited the accompanying consolidated balance sheets of Connect M1-A1 Holdings Limited (formerly Yorkshire Link (Holdings) Limited) and its subsidiary as of December 31, 2003 and March 31, 2003, and the related consolidated statements of operations, changes in shareholders’ equity and comprehensive loss, and cash flows for the nine months ended December 31, 2003 and for the years ended March 31, 2003 and 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion the consolidated financial statements present fairly, in all material respects, the financial position of the companies as of December 31, 2003 and March 31, 2003, and the results of their operations and their cash flows for nine months ended December 31, 2003 and for the years ended March 31, 2003 and 2002, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2, effective April 1, 2001 the Company adopted SFAS 133, “Accounting for Derivative Instruments and Hedging Activities.”

The accompanying consolidated financial statements include the accounts of Connect M1-A1 Holdings Limited (“Holdings”), formerly Yorkshire Link (Holdings) Limited, and its wholly owned subsidiary Connect M1-A1 Limited, formerly Yorkshire Link Limited, (“Connect MI-AI”), (collectively referred to as the “Company”). Holdings was established in 1994 as an investment by Balfour Beatty plc (“Balfour Beatty”) and Kvaerner Construction Group Limited (“Kvaerner”). Macquarie Infrastructure (UK) Limited purchased the Kvaerner ownership interest in Holdings in 1999. Balfour Beatty and Macquarie Infrastructure (UK) Limited (collectively known as the “Shareholders”) jointly control Connect M1-A1, a limited liability company incorporated in the United Kingdom that was formed in 1994 to design, build and operate the Yorkshire Link Road around Leeds, England under a 30 year concession agreement (the “Concession Agreement”) with the Secretary of State for Transport (the “Transport Secretary”). All decisions must be approved by both shareholders.

Macquarie Infrastructure (UK) Limited transferred its ownership in Holdings to Macquarie Yorkshire Limited (“MYL”) in April 2003.

The Yorkshire Link Road is a motorway link of almost thirty kilometres in length (nineteen miles) which provides a strategic connection between the M1 and M62 motorways south of Leeds, England and the A1 Trunk Road south of Wetherby, England. Upon the conclusion of the Concession Agreement, the Yorkshire Link Road will transfer to the UK Government. The Company has certain obligations set out in the Concession Agreement, including, for example, a requirement to maintain the road. If the Company defaults on its obligations under the Concession Agreement, the Transport Secretary may terminate the Concession Agreement without compensation to the Company. In addition, the Transport Secretary may terminate the Concession Agreement under other circumstances, including the following:


	•	the performance obligations under the Concession Agreement become impossible without the exercise of a statutory power by the Transport Secretary;

	•	the Transport Secretary chooses not to exercise that power following a request by the Company; and

	•	the Company and the Transport Secretary fail to agree on an alternative means of performance within a period of 90 days.

From March 1996 through February 1999, the Company designed and constructed the Yorkshire Link Road. The Yorkshire Link Road was officially opened to traffic on February 4, 1999. The Company is now maintaining and operating the Yorkshire Link Road for the duration of the Concession Agreement, which expires in March 2026. This Concession Agreement is the sole source of the Company’s revenue and operations and, upon the end of the contract, the Company will be dissolved.

All significant intercompany balances and transactions have been eliminated on consolidation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of

the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are primarily made in relation to revenue recognition for any period less than twelve months.

Cash and cash equivalents are defined as all short-term highly liquid investments with an original maturity of 90 days or less.

Inventories consist primarily of consumable supplies and materials. Inventories are stated at the lower of cost or market value. Cost is determined by the first-in, first-out basis. Market value is determined by the quoted price for comparable supplies and materials.

The Investment in the Concession, the Yorkshire Link Road, is stated at cost less accumulated depreciation. The Company capitalized interest cost incurred by Yorkshire during construction as a component of the Yorkshire Link Road cost of construction. There has been no interest capitalized during any subsequent period.

Depreciation on the Yorkshire Link Road in any period is determined based on a percentage of vehicle usage in that period relative to the total estimated vehicle usage over the life of the Concession Agreement. Depreciation commenced on February 4, 1999.

Maintenance and repair costs are charged to expense as incurred. Major betterments and improvements which extend the useful life of the item are capitalized and depreciated.

The Company has scheduled its maintenance and repairs so as to ensure that the Yorkshire Link Road is in the necessary condition at the date of transfer to the UK Government. The Company may incur additional maintenance and repair costs at the end of the Concession Agreement if the scheduled maintenance and repairs do not achieve that objective.

Property and equipment is stated at cost less accumulated depreciation. Depreciation is recorded on a straight-line basis over the estimated useful lives ranging from three to twenty years.

The cost and accumulated depreciation of property and equipment retired or otherwise disposed of are removed from the related accounts, and any residual values are charged or credited to income.

Finance costs in relation to the Company’s debt are recorded as an asset and amortized over the terms of the loans, using the effective interest rate method. Deferred finance costs relating to debt extinguishments are written off to the statement of operations in that period.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable. These events or changes in circumstances may include a significant deterioration of operating results, changes in business plans, or changes in anticipated future cash flows. If an impairment indicator is present, the

Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the carrying value exceeds such undiscounted cash flows, the impairment recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets. Fair value is generally determined by estimates of discounted cash flows. The discount rate used in any estimate of discounted cash flows would be the rate required for an investment of similar risk.

The Company uses the liability method in accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company’s sole source of revenue is from the Secretary of State through a shadow tolling system that is based on traffic volume, toll rates and vehicle class, as defined in the Concession Agreement. In accordance with the agreement, the Company receives provisional monthly payments based on revenues earned in the prior fiscal year ending March 31. An annual reconciliation is provided shortly after the fiscal year end and any under or overpayment is adjusted. Any difference between the revenue recognized and the revenue billed is recorded as unbilled receivables.

The Concession Agreement provides traffic band rates per vehicle kilometer (vkm) that are the basis for the shadow tolls. The rate per vkm generally decreases based on these bands, as the traffic volumes increase. These bands are based on annual traffic volumes, as defined. The rates per vkm are subject to an indexation factor, as defined by the Concession Agreement, which varies from time to time. Changes to the indexation factor have the general effect of decreasing the rate per vkm in the periods subsequent to any such change.

For annual periods, revenue is calculated based on the actual traffic volume applying the vkm rates for that period. The vkm rates represent the contractual traffic band rate modified for the indexation factor applicable to that period. The annual revenue generated from the concession is subject to a maximum amount. For periods of less than twelve months, the Company determines an expected average rate per vehicle for each vehicle class, based on estimated traffic volume, which is used as the basis for revenue recognition. The Company recognizes revenue based on the actual traffic volumes at the estimated average rate per vehicle.

On April 1, 2001, the Company adopted SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and used for hedging activities. All derivatives, whether designated for hedging relationships or not, are required to be recorded on the balance sheet at fair value. If the derivative is designated as a fair value hedge, all changes in the fair value of the derivative and changes in the fair value of the hedged item attributable to the hedged risk are recognized in the Statement of Operations. If the derivative is designated as a cash flow hedge, the effective portions of the changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the statement of operations when the hedged item affects earnings. The

ineffective portions of both fair value and cash flow hedges are immediately recognized in the Statement of Operations.

Upon adoption of SFAS 133, to the extent that an entity had derivative instruments that were consistent with cash flow hedges, the cumulative effect of adoption was required to be recorded as an adjustment to other comprehensive income and released over the remaining life of the interest rate swaps based on the effective interest rate method. The Company recorded a cumulative effect of adoption, net of tax, of £14,221. This balance is released from other comprehensive income to the statement of operations each period.

Following adoption of SFAS 133, the interest rate swaps are accounted for at fair value with any increase in fair value being reflected in the statement of operations each period.

The Company records non-interest bearing receivables from Shareholders at the discounted value based on an estimated discount rate in place at the date of issuance of the amounts. The difference between the discounted value and the cash value is recorded as a distribution to shareholders. The Company records interest income based on the imputed rate over the life of the loan and increases the amount of the receivable.

In accordance with a restriction in the agreements with the Company’s lending institutions, a certain level of cash is restricted in order to maintain a balance sufficient to cover the anticipated debt service for the following three to six months. In September 2001 the Senior Bank Lenders required an additional £15,000 to be held in the restricted cash account for the purpose of providing security against any liability of the Company to indemnify the Secretary of State for Transport in respect of claims for compensation pursuant to Part 1 of the Land Compensation Act 1973 received by or on behalf of the Secretary of State for Transport in relation to the project plus related costs, whensoever such claims are so received. In June 2002, the Secretary of State for Transport accepted that no such indemnity existed and the Company was released from the requirement to hold the cash in reserve.

In September 2001, Yorkshire repaid certain of its outstanding debt facilities and replaced them with new borrowings. At the same time, the Shareholders purchased the Subordinated Loan from a third

party. As a result, the term of the senior credit facilities were lengthened from thirteen to twenty-three years. In addition, the Company received proceeds from the additional borrowings in excess of its cash requirements and entered into an agreement whereby the Shareholders could borrow the excess cash from the Company (see Note 5). In connection with the refinancing, the Company wrote off £2,337 of deferred financing costs associated with repayment of the debt.

The Senior Bank Loan bears interest at LIBOR plus 0.75% per year in 2004 (and increases to 0.80% per year in 2006 and 0.90% per year in 2020) (4.92% per year as of December 31, 2003) and is repayable in semiannual installments through March 31, 2024.

The EIB Loan is provided by the EIB to companies to contribute towards the integration, balanced development and economic and social cohesion of the European Union member countries. This loan was provided as part of the original financing of the Yorkshire Link Road. A portion of the loan is guaranteed by a commercial letter of credit (£47,500) and a portion of the loan is guaranteed by the European Investment Fund (“EIF”) (£22,500). The guaranteed portion of the loan bears interest at 9.23% per year and the remaining portion bears interest at 9.53% per year. The loan agreement allows the guarantee to be released based on the achievement of certain financial covenants. The loan is repayable in semiannual installments through March 25, 2020. In the event of the early retirement of the EIB facility by the Company, break funding charges would be payable by the Company, the magnitude of which would depend upon the existing interest rate environment at the date of early retirement. As of December 31, 2003, the estimated break funding charges would be approximately £22,000.

The subordinated loan from shareholders was entered into on March 26, 1996. The Junior Subordinated Loan was put in place by the Shareholders to facilitate the construction of the Yorkshire Link Road and to provide the Shareholders with a fixed return. The subordinated loan bears interest at 15% per year and it is repayable in 2020.

The subordinated loan bears interest at LIBOR plus 4% per year (8.17% per year at December 31, 2003), with a minimum interest rate of 6% per year, and is repayable in semi-annual installments from March 31, 2005 through September 30, 2016. The loan, originally with a third party, was purchased equally by the shareholders in 2001. In addition to the annual interest cost, the loan includes a redemption premium of £6,500 that is being accreted based on the effective interest rate over the life the loan.

Certain of the Company’s borrowings contain various restrictive covenants which require the Company to maintain certain financial covenants, including a Debt Service Cover Ratio for the current and forecast twelve month period of 1.13 for the EIB Loan and 1.10 for the Senior Bank Loan and a Loan Life Coverage Ratio for the current and forecast twelve month period of 1.15 for the EIB Loan and the Senior Bank Loan. The Company has been in compliance with all such covenants during the reporting period.

All of the Company’s borrowings contain either a fixed or varying security interest over the assets of the Company, as defined by an intercreditor agreement. All long-term debt facilities would be repaid in advance of other general creditors in the event of the Company becoming insolvent, except as prohibited by any legal restriction.

Future maturities of the long-term debt are as follows: £14,880 in 2004; £16,053 in 2005 (including £260 redemption premium); £15,143 in 2006 (including £260 redemption premium); £18,806 in 2007 (including £390 redemption premium); and £252,350 in 2008 and thereafter (including £5,590 redemption premium).

The Company has agreements with the Shareholders which allow them to each borrow available cash, as defined in the agreements. Under the agreements, each shareholder shall only be entitled to draw an amount if the other shareholder draws the same amount at that time. The shareholders borrowed on these agreements in 2001 and 2002.

These loans are non-interest bearing and repayable between 2016 and 2025. Repayments are deferrable up until the maturity date; however, any deferred repayments attract a penalty interest rate of LIBOR plus 2% per year. Any deferral of payment must be approved by both of the shareholders. The present value of future cash flows, discounted at the long-term zero coupon rate plus 0.75% per year at the date of each drawdown was recorded as the upstream loan. The difference between the discounted value and the future value of the loan is accreted over time through interest income in the statement of operations using the effective interest method.

The borrowing of £14,154 on September 4, 2001 was discounted at 6.23% per year, the borrowing of £21,614 on March 31, 2002 was discounted at 6.16% per year and the borrowing of £15,000 on June 30, 2002 was discounted at 5.97% per year. The gross value of the loans receivable from shareholders as of December 31, 2003 is £50,768 (March 31, 2003: £50,768).

In March 1996 the Company entered into a technical services agreement and a secondment agreement with its shareholders to provide management, staff and technical support services. The technical services agreement was terminated in March 2004. The secondment agreement is an ongoing arrangement for the duration of the Concession Agreement, although Yorkshire can terminate the agreement with ninety days’ notice.

As of December 31, 2003 and March 31, 2003, amounts included in accounts payable from related parties were £40 and £85, respectively. In addition, amounts included in accruals from related

parties as of December 31, 2003 and March 31, 2003 were £75 and £56, respectively. The accrual as at December 31, 2003 relates to a deferred technical service fee which is paid six monthly (March and September) but accrued over the six months.

In 1996, the Company entered into a contract with the Kvaerner/ Balfour Beatty Joint Venture for the construction of the Yorkshire Link Road. The Construction Joint Venture (“CJV”) was formed by Kvaerner Construction Limited, an unrelated party and Balfour Beatty Civil Engineering Limited, a related party member of Balfour Beatty.

As of December 31, 2003 and March 31, 2003 amounts included in accounts payable to the CJV were £0 and £66, respectively. The CJV payable relates to an amount due as a final installment on the construction contract. In addition, amounts due from the CJV included in accounts receivable as of December 31, 2003 and March 31, 2003 were £84 and £416, respectively. The CJV receivable relates to repair work performed by Yorkshire that was considered the responsibility of the CJV and was settled subsequent to December 31, 2003.

The provision for income taxes from continuing operations consists of the following:

The reconciliation of income taxes computed at the UK statutory rate to income tax expense (benefit) is as follows:

Significant components of the Company’s deferred tax assets (liabilities) are as follows:

The unrealized trading losses are not expected to expire prior to the end of the concession. Unrealized trading losses as at December 31, 2003 was £34,511.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that such benefit will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income.

The estimated fair value of the Company’s financial instruments at December 31, 2003 is summarized below. Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown below are not necessarily indicative of the amounts that the Company would realize upon disposal nor do they indicate the Company’s intent or ability to dispose of the financial instrument.

The following methods and assumptions were used to estimate the fair value of each material class of financial instrument:


	•	Loans receivable from Shareholders — The fair value of these loans is determined by discounting future cash flows at the reporting date using the long-term zero coupon rate plus 0.75% per year at the reporting date. As of December 31, 2003 and March 31, 2003, the total discount rates used were 5.67% per year and 5.47% per year.

	•	Long-term debt — The fair value of long-term debt is estimated based on the discounted future cash flows using currently available interest rates for similar instruments. A margin was applied ranging between 0.48% per year for the EIB Loan to 4.57% per year for both of the Subordinated Loans.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of these instruments. The carrying amount of the Company’s senior debt approximates fair value because of the variability of the interest cost associated with the instrument.

The Company also enters into interest swap arrangements related to its bank borrowings to manage its exposure to variability in cash flows associated with floating interest rates. The total swap notional value approximates 70% of the amortizing debt balance over the term of the senior bank loan. As of December 31, 2003, the Company had five outstanding interest rate swap arrangements.


	•	The first arrangement is an interest rate swap, which has a notional amount of £12,308 as of December 31, 2003 and expires on March 31, 2014. Under this agreement, the fixed rate payable is 9.63% per year.

	•	The second arrangement is an interest rate swap, which has a notional amount of £17,709 as of December 31, 2003 and expires on March 31, 2014. Under this agreement, the fixed rate payable is 9.45% per year.

	•	The third arrangement is an interest rate swap, which has a notional amount of £20,409 as of December 31, 2003 and expires on March 31, 2014. Under this agreement, the fixed rate payable is 9.45% per year.

	•	The fourth arrangement is an interest rate swap, which has a notional amount of £20,409 as of December 31, 2003 and expires on March 31, 2014. Under this agreement, the fixed rate payable is 9.45% per year.

	•	The fifth arrangement is an interest rate swap, which has a notional amount of £77,811 as of December 31, 2003 and expires on March 31, 2024. Under this agreement, the fixed rate payable is 5.68% per year.

The estimated fair value of these five swaps is based on quoted market prices. As of December 31, 2003 and March 31, 2003, the fair value was estimated to be a liability of £22 million and £27 million respectively. The change in fair value is reflected in the statement of operations.

As of December 31, 2003, there were no known legal disputes pending against the Company.

The Company has a letter of credit of £47,500 that is in place to guarantee a portion of the EIB Loan. The Company pays a 0.75% per year fee on the letter of credit which expires in 2020 but can be cancelled prior to that date if the Company is released from the guarantee requirement of the EIB Loan.

In addition, the Shareholders have each provided EIB with letters of credit of £1,000 which are callable if the EIB Loan is prepaid and the Company does not pay the prepayment penalties. These letters of credit will reduce based on the achievement of certain release test criteria. These criteria were not met in 2003 but are expected to be met in 2005 on the final release date.

The Company has a guarantee facility with EIF to guarantee £22,500 of the EIB Loan. The Company pays a contractually agreed-upon fee and the guarantee expires in 2014.

On April 1, 2004, the U.K. government introduced Transfer Pricing rules. The new Transfer Pricing rules require all intercompany debt arrangements to be on an arm’s-length basis in order to be respected as loans under UK tax law. This proposed legislation is expected to have an impact on the Public Finance Initiative (“PFI”) and Public Private Partnership (“PPP”) sectors. The Company is reviewing the proposed legislation to determine what impact, if any, the changes will have on its ongoing operations.

Through and including , 2004 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

The estimated expenses payable by us in connection with the offering described in this registration statement (other than the underwriting discount and commissions and the representative’s non-accountable expense allowance) will be as follows:

Certain provisions of our LLC agreement are intended to be consistent with Section 145 of the Delaware General Corporation Law, which provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against amounts paid and expenses incurred in connection with an action or proceedings to which he is, or is threatened to be made, a party by reason of such position, if such person shall have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal proceedings, if such person had no reasonable cause to believe his conduct was unlawful; provided that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the adjudicating court determines that such indemnification is proper under the circumstances.

Our LLC agreement includes a provision that eliminates the personal liability of its directors for monetary damages for breach of fiduciary duty as a director, except for liability:


	•	for any breach of the director’s duty of loyalty to the company or its members;

	•	for acts or omissions not in good faith or a knowing violation of law;

	•	regarding unlawful dividends and stock purchases analogous to Section 174 of the Delaware General Corporation Law; or

	•	for any transaction from which the director derived an improper benefit.


	•	we must indemnify our directors and officers to the equivalent extent permitted by Delaware General Corporation Law;

	•	we may indemnify our other employees and agents to the same extent that we indemnified our officers and directors, unless otherwise determined by the company’s board of directors; and


	•	we must advance expenses, as incurred, to our directors and executive officers in connection with a legal proceeding to the extent permitted by Delaware law and may advance expenses as incurred to our other employees and agents, unless otherwise determined by the company’s board of directors.

The indemnification provisions contained in our LLC agreement are not exclusive of any other rights to which a person may be entitled by law, agreement, vote of members or disinterested directors or otherwise.

In addition, we will maintain insurance on behalf of our directors and executive officers and certain other persons insuring them against any liability asserted against them in their respective capacities or arising out of such status.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this registration statement, we have agreed to indemnify the underwriters and the underwriters have agreed to indemnify us against certain civil liabilities that may be incurred in connection with this offering, including certain liabilities under the Securities Act.


†	Confidential treatment requested as to certain portions, which portions have been separately filed with the Securities and Exchange Commission.

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification by the registrant against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.


	(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

	(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 7th day of June, 2004.

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Peter Stokes and Alan Stephen Peet his true and lawful attorney-in-fact, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments, including post-effective amendments to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.


	By:	/s/ PETER STOKES



	Peter Stokes
	Chief Executive Officer
	(Principal Executive Officer)

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.


†	Confidential treatment requested as to certain portions, which portions have been separately filed with the Securities and Exchange Commission.

EX-3.1 2 y97636exv3w1.txt CERTIFICATE OF TRUST EXHIBIT 3.1 CERTIFICATE OF TRUST OF MACQUARIE INFRASTRUCTURE ASSETS TRUST This Certificate of Trust is being duly executed and filed on behalf of the statutory trust formed hereby by the undersigned, being the initial Trustees of the Trust, to form a statutory trust pursuant to the Delaware Statutory Trust Act (12 Del. C. Sections 3801, et seq.). 1. Name. The name of the statutory trust formed hereby is Macquarie Infrastructure Assets Trust. 2. Delaware Trustee.The name and address of the Trustee of the Trust with a principal place of business in the State of Delaware is Wells Fargo Delaware Trust Company, 919 N. Market Street, Suite 700, Wilmington, DE 19801. 3. Effective Date. This Certificate of Trust shall become effective upon filing in the Office of the Secretary of State of the State of Delaware. IN WITNESS WHEREOF, the undersigned, as initial Trustees, have executed this Certificate of Trust as of this 13th day of April, 2004. WELLS FARGO DELAWARE TRUST COMPANY, not in its individual capacity but solely as Delaware Trustee By: /s/ Edward L. Truitt, Jr. --------------------------------- Name: EDWARD L. TRUITT, JR. ---------------------------- Title: VICE PRESIDENT --------------------------- /s/ Peter Stokes ------------------------------ Name: Peter Stokes Title: Regular Trustee /s/ Alan Stephen Peet ------------------------------ Name: Alan Stephen Peet Title: Regular Trustee EX-3.2 3 y97636exv3w2.txt TRUST AGREEMENT EXHIBIT 3.2 TRUST AGREEMENT TRUST AGREEMENT, dated as of April 13, 2004, is entered into by and between Macquarie Infrastructure Assets LLC, a Delaware limited liability company (the "Sponsor"), Wells Fargo Delaware Trust Company, a Delaware banking corporation (the "Delaware Trustee"), and Peter Stokes and Alan Stephen Peet, as the initial regular trustees (each a "Regular Trustee" and collectively with the Delaware Trustee, the "Trustees"). The Sponsor and the Trustees hereby agree as follows: 1. The trust created hereby shall be known as Macquarie Infrastructure Assets Trust (the "Trust"), in which name the Trustees may, as directed by the Sponsor in writing from time to time, conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. Simultaneously with the execution hereof, the Sponsor hereby issues to the Trust 100 shares of stock of the Sponsor representing all of the presently issued and outstanding limited liability company interests of the Sponsor (the "Sponsor shares"). The Trustees hereby acknowledge receipt of such Sponsor shares in trust from the Sponsor, which shall constitute the initial trust estate. The Trustees hereby declare that they will hold the trust estate in trust for the Sponsor. Upon the formation of the Trust, the Sponsor shall be the sole Sponsor and sole beneficial owner (within the meaning of the Act (as hereinafter defined)) of the Trust. It is the intention of the parties hereto that the Trust created hereby constitute a statutory trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Sections 3801, et seq. (the "Act") and that this document constitute the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State in the form attached hereto as Exhibit A. 3. The purposes of the Trust are to (i) issue Shares represented by certificates in the form attached hereto as Exhibit B, each Share representing an undivided beneficial interest in one underlying Sponsor Share owned by the Trust, in exchange for Sponsor Shares, (ii) own the Sponsor Shares and (iii) engage in such other activities as are necessary, convenient or incidental thereto. Each person or entity in whose name a Share is registered on the books of the Trust shall be a "beneficial owner" within the meaning of the Act. It is the intention that this Trust qualify as a grantor trust under section 301.7701-4 of the Treasury regulations; in accordance therewith, the Trustees shall have no power under this Trust Agreement to vary the investment of the beneficial owners. There shall be no implied duties or obligations of the Trustees hereunder. Any action by the Trustees in accordance with their respective powers shall constitute the act of and serve to bind the Trust. The Delaware Trustee shall be a trustee for purposes of fulfilling the requirements of Section 3807 of the Act. Notwithstanding any other provision of this Trust Agreement, the Delaware Trustee shall not be entitled to exercise any of the powers, nor shall the Delaware Trustee have any of the duties and responsibilities, of the Regular Trustees described in this Trust Agreement. Notwithstanding anything herein to the contrary, the Delaware Trustee shall not be liable for the acts or omissions of the Trust or of the Regular Trustees. 4. The Sponsor and the Trustees will enter into an amended and restated Trust Agreement, satisfactory to each such party, to provide for the contemplated operation of the Trust created hereby. Prior to the execution and delivery of such amended and restated Trust -1- Agreement, the Trustees shall not have any duty or obligation hereunder or with respect to the trust estate, except as the Sponsor may instruct them (i) is required by applicable law, or (ii) as may be necessary to obtain, prior to such execution or delivery, any licenses, consents or approvals required by applicable law or otherwise. 5. The Sponsor is hereby authorized and directed, on behalf of the Trust, (i) to prepare and file with the Securities and Exchange Commission (the "Commission") and execute, in each case on behalf of the Trust, (a) a Registration Statement on Form S-1 (the "1933 Act Registration Statement"), including any pre-effective or post-effective amendments to such Registration Statement, relating to the registration of the Shares under the Securities Act of 1933, as amended, and (b), as applicable, a Registration Statement on Form 8-A (the "1934 Act Registration Statement") (including any pre-effective or post-effective amendments thereto) relating to the registration of the Shares under Section 12(b) or (g) of the Securities Exchange Act of 1934, as amended; (ii) to prepare and file with the New York Stock Exchange and/or any other exchange and execute, in each case on behalf of the Trust, a listing application and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Shares to be listed on the New York Stock Exchange and/or any other exchange; (iii) to prepare and file and execute, in each case on behalf of the Trust, such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as shall be necessary or desirable to register the Shares under the securities or "blue sky" laws of such jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or desirable; (iv) to negotiate the terms of, and execute on behalf of the Trust, any underwriting agreements, purchase agreements or other agreements relating to the public offering or any future issuance of the Shares in exchange for Sponsor shares; (v) to execute and deliver, in each case on behalf of the Trust, such certifications or reports required by the Sarbanes-Oxley Act of 2002 from time to time as may be necessary or proper to the conduct of the business of the Trust; (vi) to execute and deliver, in each case on behalf of the Trust, such agreements, instruments, certificates and documents, and to make filings with or representations on behalf of the Trust, to the City of Chicago as may be necessary in connection with the potential acquisition of Macquarie District Energy Holdings LLC; and (vii) to negotiate the terms of, and execute on behalf of the Trust, such agreements, documents and certificates, and to do such other acts and things as the Sponsor may deem to be necessary or advisable in order to carry out the purpose and intent of the Trust. It is hereby acknowledged and agreed that in connection with any execution, filing or document referred to in clauses (i) - (vii) above, (A) any Regular Trustee (or his or her attorneys in fact and agents or the Sponsor as permitted herein) is authorized on behalf of the Trust to file and execute such document on behalf of the Trust and (B) the Delaware Trustee shall not be required to join in any such filing or execute on behalf of the Trust any such document. In connection with all of the foregoing, the Sponsor and each Regular Trustee, solely in his or her capacity as a trustee of the Trust, hereby constitute and appoint Peter Stokes and David Mitchell and each of them, his, her or its, as the case may be, true and lawful attorneys-in-fact, and agents, with full power of substitution and resubstitution, for the Sponsor and each Regular Trustee and in the Sponsor's and each Regular Trustee's name, place and stead, in any and all capacities to sign and file (i) the 1933 Act Registration Statement and, as applicable, the 1934 Act Registration Statement and any and all amendments (including post-effective amendments) or supplements thereto, with all exhibits thereto, and other documents in connection therewith, and (ii), as applicable, a registration statement and any and all amendments thereto filed pursuant to Rule 462(b) under the Securities Act with the Commission, granting unto said attorneys-in-fact and agents full power and authority to do and -2- perform each and every act and thing and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as the Sponsor or any Regular Trustee might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, shall do or cause to be done by virtue hereof. 6. Except as provided above, the Sponsor hereby acknowledges and agrees that the Trustees are authorized, directed and instructed to act, only as specifically authorized in writing by the Sponsor. Any written instructions, notwithstanding any error in the transmission thereof or that such instructions may not be genuine, shall, as against the Sponsor and in favor of the Trustees, be conclusively deemed to be valid instructions from the Sponsor to the Trustees for the purposes of this Trust Agreement, if reasonably believed by the Trustees to be genuine and if not otherwise insufficient on the face of such written instructions; provided, however, that a Trustee in its discretion may decline to act upon any instructions where they are not received by such Trustee in sufficient time for such Trustee to act upon or in accordance with such instructions, where such Trustee has reasonable grounds for concluding that the same have not been accurately transmitted or are not genuine or where such Trustee believes in good faith that complying with such instructions is contrary to law or might subject such Trustee to any liability. If a Trustee declines to act upon any instructions for any reason set out in the preceding sentence, it shall notify the Sponsor and the other Trustees in writing forthwith after it so declines. 7. The Trustees shall not be liable for any act or omission in the course of or connected with their performance hereunder, except only that each Trustee shall be subject to liability and assume the entire responsibility for direct damages suffered by the Sponsor or any other Person occasioned by such Trustee's own gross negligence or willful misconduct or the gross negligence or willful misconduct of any of such Trustee's directors, officers or employees in the rendering of its performance hereunder, as determined by a court of competent jurisdiction. The Trustees shall incur no liability to anyone in acting upon any document reasonably believed by them to be genuine (which is not insufficient on its face) and to have been signed by the proper Person or Persons. The Trustees may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the manner of ascertainment of which is not specifically prescribed herein, the Trustees may for all purposes hereof rely on a certificate, signed by the Sponsor, as to such fact or matter, and such certificate, if relied upon by the Trustees in good faith, shall constitute full protection to the Trustees for any action taken or omitted to be taken by them in good faith in reliance thereon. In no event shall the Trustees be liable for (A) acting in accordance with instructions from the Sponsor, (B) special or consequential damages or (C) the acts or omissions of their nominees, correspondents, designees, agents or subagents appointed by them in good faith. In the event that the Trustees are unsure of the course of action to be taken -3- by them hereunder, the Trustees may request instructions from the Sponsor and to the extent the Trustees follow such instructions in good faith they shall not be liable to any Person. In the event that no instructions are provided within the time requested by the Trustees, they shall have no duty or liability for their failure to take any action or for any action they take in good faith and in accordance with the terms hereof. 8. The Trustees may resign upon thirty days prior notice to the Sponsor. 9. Legal title to all assets of the Trust shall be vested in the Trust. 10. The Sponsor agrees, to the fullest extent permitted by applicable law, to indemnify and hold harmless (i) the Trustees, (ii) any officer, director, shareholder, employee, representative or agent of the Trustees, and (iii) any employee or agent of the Trust (referred to herein as an "Indemnified Person") from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation or termination of the Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Trust Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence or willful misconduct with respect to such acts or omissions. 11. This Trust Agreement may be amended or restated by, and only by, a written instrument executed by the Trustees and the Sponsor. 12. The Trust shall terminate and be of no further force or effect: (i) upon the filing of a Certificate of Cancellation or its equivalent with respect to the Sponsor or the failure of the Sponsor to revive its charter within ten (10) days following the revocation of the Sponsor's charter; (ii) upon the entry of a decree of judicial dissolution of the Sponsor or the Trust; and (iii) upon the written election of the Sponsor. As soon as is practicable after the occurrence of an event referred to above, the Regular Trustees or any one of them shall file a certificate of cancellation with the Secretary of State of the State of Delaware. This Trust Agreement and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to the principles of conflict of laws; PROVIDED, HOWEVER, THAT THERE SHALL NOT BE APPLICABLE TO THE PARTIES HEREUNDER OR THIS TRUST AGREEMENT ANY PROVISION OF THE LAWS (COMMON OR STATUTORY) OF THE STATE OF DELAWARE PERTAINING TO TRUSTS THAT RELATE TO OR REGULATE, IN A MANNER INCONSISTENT WITH THE TERMS HEREOF, (A) THE FILING WITH ANY COURT OR GOVERNMENTAL BODY OR AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF TRUSTEE FEES AND CHARGES, (B) AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (C) THE NECESSITY FOR OBTAINING COURT OR OTHER GOVERNMENTAL APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF REAL OR PERSONAL PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF RECEIPTS AND EXPENDITURES -4- TO INCOME OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE NATURE, AMOUNT OR CONCENTRATION OF TRUST INVESTMENTS OR REQUIREMENTS RELATING TO THE TITLING, STORAGE OR OTHER MANNER OF HOLDING OR INVESTING TRUST ASSETS OR (G) THE ESTABLISHMENT OF FIDUCIARY OR OTHER STANDARDS OF RESPONSIBILITY OR LIMITATIONS ON THE ACTS OR POWERS OF TRUSTEES THAT ARE INCONSISTENT WITH THE LIMITATIONS OR AUTHORITIES AND POWERS OF THE TRUSTEE HEREUNDER AS SET FORTH OR REFERENCED IN THIS TRUST AGREEMENT. SECTION 3540 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO THE TRUST. 13. If any provision of this Trust Agreement, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Trust Agreement, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. 14. This Trust Agreement may contain one or more counterparts of the signature page. All such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. -5- IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed by their respective officers hereunto duly authorized, as of the day and year first above written. MACQUARIE INFRASTRUCTURE ASSETS LLC as Sponsor By: /s/ Peter Stokes ------------------------------ Name: Peter Stokes Title: Chief Executive Officer WELLS FARGO DELAWARE TRUST COMPANY, not in its individual capacity but solely as Delaware Trustee By: /s/ Edward L. Truitt, Jr. -------------------------------- Name: EDWARD L. TRUITT, JR. -------------------------- Title: VICE PRESIDENT -------------------------- /s/ Peter Stokes ------------------------------- Name: Peter Stokes Title: Regular Trustee /s/ Alan Stephen Peet ------------------------------- Name: Alan Stephen Peet Title: Regular Trustee -6- EXHIBIT A CERTIFICATE OF TRUST OF MACQUARIE INFRASTRUCTURE ASSETS TRUST This Certificate of Trust is being duly executed and filed on behalf of the statutory trust formed hereby by the undersigned, being the initial Trustees of the Trust, to form a statutory trust pursuant to the Delaware Statutory Trust Act (12 Del. C. Sections 3801, et seq.). 1. Name. The name of the statutory trust formed hereby is Macquarie Infrastructure Assets Trust. 2. Delaware Trustee.The name and address of the Trustee of the Trust with a principal place of business in the State of Delaware is Wells Fargo Delaware Trust Company, 919 N. Market Street, Suite 700, Wilmington, DE 19801. 3. Effective Date. This Certificate of Trust shall become effective upon filing in the Office of the Secretary of State of the State of Delaware. IN WITNESS WHEREOF, the undersigned, as initial Trustees, have executed this Certificate of Trust as of this ____ day of April, 2004. WELLS FARGO DELAWARE TRUST COMPANY, not in its individual capacity but solely as Delaware Trustee By:________________________________ Name:___________________________ Title:__________________________ ________________________________ Name: Peter Stokes Title: Regular Trustee ________________________________ Name: Alan Stephen Peet Title: Regular Trustee EX-3.4 4 y97636exv3w4.txt CERTIFICATE OF FORMATION EXHIBIT 3.4 CERTIFICATE OF FORMATION OF MACQUARIE INFRASTRUCTURE ASSETS LLC 1. The name of the limited liability company is Macquarie Infrastructure Assets LLC. 2. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801. The name of its registered agent at such address is The Corporation Trust Company. 3. This Certificate shall become effective upon filing in the office of the Secretary of State of the State of Delaware. IN WITNESS WHEREOF, the undersigned have executed this Certificate of Formation of Macquarie Infrastructure Assets LLC this 13th day of April, 2004. Macquarie Infrastructure Management (USA) Inc. By: /s/ Peter Stokes ------------------------------ Peter Stokes EX-3.5 5 y97636exv3w5.txt OPERATING AGREEMENT EXHIBIT 3.5 OPERATING AGREEMENT OF MACQUARIE INFRASTRUCTURE ASSETS LLC Dated as of April 13, 2004 TABLE OF CONTENTS

i Section 6.1 Initial Board............................................................................... 18 Section 6.2 General Powers.............................................................................. 19 Section 6.3 Duties of Directors......................................................................... 19 Section 6.4 Number, Tenure and Qualifications........................................................... 19 Section 6.5 Election of Directors....................................................................... 19 Section 6.6 Removal..................................................................................... 19 Section 6.7 Resignations................................................................................ 20 Section 6.8 Vacancies and Newly Created Directorships................................................... 20 Section 6.9 Appointment of or Nomination and Election of Chairman....................................... 20 Section 6.10 Chairman of the Board...................................................................... 20 Section 6.11 Regular Meetings........................................................................... 20 Section 6.12 Special Meetings........................................................................... 21 Section 6.13 Notice for Special Meetings................................................................ 21 Section 6.14 Action Without Meeting..................................................................... 21 Section 6.15 Conference Telephone Meetings.............................................................. 21 Section 6.16 Quorum..................................................................................... 21 Section 6.17 Committees................................................................................. 22 Section 6.18 Committee Members.......................................................................... 24 Section 6.19 Committee Secretary........................................................................ 25 Section 6.20 Compensation............................................................................... 25 Section 6.21 Indemnification and Insurance.............................................................. 25 ARTICLE 7 OFFICERS............................................................................................... 27 Section 7.1 General..................................................................................... 27 Section 7.2 Election and Term of Office................................................................. 28 Section 7.3 Chief Executive Officer..................................................................... 28 Section 7.4 Chief Financial Officer..................................................................... 28 Section 7.5 General Counsel............................................................................. 28 Section 7.6 Secretary................................................................................... 29 Section 7.7 Resignations................................................................................ 29 Section 7.8 Vacancies................................................................................... 29 Section 7.9 Limitation of Liability..................................................................... 29 ARTICLE 8 MANAGEMENT............................................................................................. 29 Section 8.1 Duties of the Manager....................................................................... 29 Section 8.2 Replacement Manager......................................................................... 29 ARTICLE 9 THE MEMBERS............................................................................................ 29 Section 9.1 Rights or Powers............................................................................ 29 Section 9.2 Annual Meetings of Members.................................................................. 30 Section 9.3 Special Meetings of Members................................................................. 30 Section 9.4 Place of Meeting............................................................................ 30 Section 9.5 Notice of Meeting........................................................................... 30 Section 9.6 Quorum and Adjournment...................................................................... 31

ii Section 9.7 Proxies..................................................................................... 32 Section 9.8 Notice of Member Business and Nominations................................................... 32 Section 9.9 Procedure for Election of Directors; Voting................................................. 34 Section 9.10 Inspectors of Elections; Opening and Closing the Polls..................................... 34 Section 9.11 Confidential Member Voting................................................................. 35 Section 9.12 Waiver of Notice........................................................................... 35 Section 9.13 Remote Communication....................................................................... 35 Section 9.14 Member Action Without a Meeting............................................................ 35 Section 9.15 Return on Capital Contribution............................................................. 37 Section 9.16 Member Compensation........................................................................ 37 Section 9.17 Member Liability........................................................................... 37 ARTICLE 10 ACCOUNTING, BOOKS AND RECORDS......................................................................... 37 Section 10.1 Accounting, Books and Records.............................................................. 37 Section 10.2 Reports.................................................................................... 38 Section 10.3 Tax Matters................................................................................ 38 ARTICLE 11 AMENDMENTS............................................................................................ 39 Section 11.1 Amendments................................................................................. 39 ARTICLE 12 TRANSFERS............................................................................................. 39 Section 12.1 Distributions and Allocations in Respect of Transferred LLC Interests...................... 39 ARTICLE 13 DISSOLUTION AND WINDING-UP............................................................................ 40 Section 13.1 Dissolution Events......................................................................... 40 Section 13.2 Winding-Up................................................................................. 41 Section 13.3 Compliance with Certain Requirements of Regulations; Deficit Capital Accounts.............. 41 Section 13.4 Deemed Distribution and Recontribution..................................................... 42 Section 13.5 Rights of Members.......................................................................... 42 Section 13.6 Notice of Dissolution/Termination.......................................................... 42 Section 13.7 Allocations During Period of Liquidation................................................... 43 Section 13.8 Character of Liquidating Distributions..................................................... 43 Section 13.9 The Liquidator............................................................................. 43 Section 13.10 Form of Liquidating Distributions......................................................... 43 ARTICLE 14 MISCELLANEOUS......................................................................................... 43 Section 14.1 Notices.................................................................................... 43 Section 14.2 Binding Effect............................................................................. 44 Section 14.3 Construction............................................................................... 44 Section 14.4 Time....................................................................................... 44 Section 14.5 Headings................................................................................... 44 Section 14.6 Severability............................................................................... 44

iii Section 14.7 Incorporation by Reference................................................................. 45 Section 14.8 Variation of Terms......................................................................... 45 Section 14.9 Governing Law and Consent to Jurisdiction/Service of Process............................... 45 Section 14.10 Waiver of Jury Trial...................................................................... 45 Section 14.11 Counterpart Execution..................................................................... 45 Section 14.12 Specific Performance...................................................................... 45 Exhibit A -- Specimen LLC Interest Certificate................................................................... A-1

iv This OPERATING AGREEMENT is entered into and shall be effective as of the 13th day of April, 2004, by Macquarie Infrastructure Assets Trust as a Member pursuant to the provisions of the Act, on the following terms and conditions: ARTICLE 1 THE COMPANY Section 1.1 Formation. The Original Member hereby agrees to form the Company as a limited liability company under and pursuant to the provisions of the Act and upon the terms and conditions set forth in this Agreement. The fact that the Certificate is on file in the office of the Secretary of State of the State of Delaware shall constitute notice that the Company is a limited liability company. Simultaneously with the execution of this Agreement and the formation of the Company, the Original Member shall be admitted as a Member of the Company. The rights and liabilities of the Members shall be as provided under the Act, the Certificate and this Agreement. Macquarie Infrastructure Management (USA) Inc. shall be an "authorized person" within the meaning of the Act for purposes of filing the Certificate with the office of the Secretary of State of the State of Delaware. Section 1.2 Name. The name of the Company shall be Macquarie Infrastructure Assets LLC and all business of the Company shall be conducted in such name. The Board of Directors may change the name of the Company upon ten (10) Business Days' notice to the Members, which name change shall be effective upon the filing of a certificate of amendment with the Secretary of State of the State of Delaware. Section 1.3 Purpose; Powers. (a) The purposes of the Company are (i) to conduct or promote any lawful business or purposes granted to a limited liability company of the State of Delaware as if such limited liability company were a corporation under the General Corporation Law of the State of Delaware, (ii) to make such additional investments and engage in such additional activities as the Board of Directors may approve, and (iii) to engage in any and all activities related or incidental to the purposes set forth in clauses (i) and (ii); provided, however, that the Company is not permitted to engage in any activities that would cause it to become an "investment company" as defined in Section 3(a)(1)(C) of the Investment Company Act of 1940, as amended, as such section may be amended from time to time, or any successor provision thereto. (b) The Company has the power to do any and all acts necessary, appropriate, proper, advisable, incidental or convenient to or in furtherance of the purposes of the Company set forth in this Section 1.3 and has, without limitation, any and all powers that may be exercised on behalf of the Company by the Board of Directors pursuant to Article 6 hereof. Section 1.4 Principal Place of Business. The principal executive offices of the Company shall be at 600 Fifth Avenue, 21st Floor, New York, New York 10020. The Board of Directors may change the principal executive offices of the Company to any other place within or without the State of Delaware upon written notice to the Members. The address of the Company's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. The Company may have such offices, either within or without the State of Delaware, as the Board of Directors may designate or as the business of the Company may from time to time require. Section 1.5 Term. The term of the Company shall commence on the date the Certificate is first filed in the office of the Secretary of State of the State of Delaware in accordance with the Act and shall continue until the winding-up and liquidation of the Company and its business is completed following a Dissolution Event, as provided in Article 13 hereof. Prior to the time that the Certificate is filed, no Person shall represent to third parties the existence of the Company or hold itself out as a Member. Section 1.6 Filings; Agent for Service of Process. (a) The Board of Directors shall take any and all other actions as may be reasonably necessary to perfect and maintain the status of the Company as a limited liability company or similar type of entity under the laws of the State of Delaware and under the laws of any other jurisdictions in which the Company engages in business, including the preparation, execution and filing of such amendments to the Certificate and such other assumed name certificates, documents, instruments and publications as may be required by law, including, without limitation, action to reflect: (i) a change in the Company name; or (ii) a correction of false or erroneous statements in the Certificate to accurately represent the agreement among the Members. (b) The registered agent for service of process on the Company in the State of Delaware shall be The Corporation Trust Company or any successor as appointed by the Board of Directors in accordance with the Act. (c) Upon the dissolution and completion of the winding-up and liquidation of the Company in accordance with Article 13, the Board of Directors shall promptly execute and cause to be filed a certificate of cancellation in accordance with the Act and the laws of any other jurisdictions in which the Board of Directors deems such filing necessary or advisable. Section 1.7 Title to Property. All Property owned by the Company shall be owned by the Company as an entity and no Member shall have any ownership interest in such Property in its individual name, and each Member's interest in the Company shall be personal property for all purposes. At all times after the Effective Date, the Company shall hold title to all of its Property in the name of the Company and not in the name of any Member. Section 1.8 Payments of Individual Obligations. The Company's credit and assets shall be used solely for the benefit of the Company, and no asset of the Company shall be Transferred or encumbered for, or in payment of, any individual obligation of any Member. 2 Section 1.9 Definitions. Capitalized words and phrases used in this Agreement have the following meanings: "ACQUIRER" has the meaning set forth in Section 2.4(a) hereof. "ACQUISITION EXCHANGE" has the meaning set forth in Section 2.4(a) hereof. "ACT" means the Delaware Limited Liability Company Act, 6 Del. C.Section 18-101, et seq., as amended from time to time (or any corresponding provisions of succeeding law). "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant Allocation Year, after giving effect to the following adjustments: (i) Credit to such Capital Account any amounts which such Member is deemed to be obligated to restore pursuant to the penultimate sentence in each of Section 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and (ii) Debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Regulations. The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith. "AFFILIATE" means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any officer, director, general partner, member or trustee of such Person or (iii) any Person who is an officer, director, general partner, member or trustee of any Person described in clause (i) or (ii) of this sentence. For purposes of this definition, the terms "controlling," "controlled by" or "under common control with" shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person or entity, whether through the ownership of voting securities, by contract or otherwise, or the power to elect at least fifty percent (50%) of the directors, managers, general partners, or Persons exercising similar authority with respect to such Person or entity. "AGREEMENT" or "OPERATING AGREEMENT" means this Operating Agreement of Macquarie Infrastructure Assets LLC, including all Exhibits and Schedules attached hereto, as amended from time to time. Words such as "herein," "hereinafter," "hereof," "hereto" and "hereunder" refer to this Agreement as a whole, unless the context otherwise requires. "ALLOCATION YEAR" means (i) the period commencing on the Effective Date and ending on December 31, 2004, (ii) any subsequent twelve (12)-month period commencing on January 1 and ending on December 31 or (iii) any portion of the period described in clause (i) or (ii) above for which the Company is required to allocate Profits, Losses and other items of Company income, gain, loss or deduction pursuant to Article 4 hereof. 3 "BANKRUPTCY" means, with respect to any Person, a "VOLUNTARY BANKRUPTCY" or an "INVOLUNTARY BANKRUPTCY." A "VOLUNTARY BANKRUPTCY" means, with respect to any Person, (i) the inability of such Person generally to pay its debts as such debts become due or an admission in writing by such Person of its inability to pay its debts generally, or a general assignment by such Person for the benefit of creditors; (ii) the filing of any petition or answer by such Person seeking to adjudicate itself as bankrupt or insolvent, or seeking any liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief, or composition of such Person or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking, consenting to, or acquiescing in the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for such Person or for any substantial part of its Property; or (iii) corporate action taken by such Person to authorize any of the actions set forth above. An "INVOLUNTARY BANKRUPTCY" means, with respect to any Person, without the consent or acquiescence of such Person, the entering of an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or the filing of any such petition against such Person which petition shall not be dismissed within ninety (90) days, or without the consent or acquiescence of such Person, the entering of an order appointing a trustee, custodian, receiver or liquidator of such Person or of all or any substantial part of the Property of such Person which order shall not be dismissed within ninety (90) days. It is the intent of the Members that these definitions supersede those set forth in Section 18-304 of the Act. "BOARD" or "BOARD OF DIRECTORS" means, with respect to the Company, the Board of Directors referred to in Article 6. "BUSINESS DAY" means a day of the year on which banks are not required or authorized to close in The City of New York. "CAPITAL ACCOUNT" means, with respect to any Member, the Capital Account established and maintained for such Member by the Company in accordance with the following provisions: (i) to each Member's Capital Account there shall be credited (A) such Member's Capital Contributions and (B) such Member's distributive share of Profits and any items in the nature of income or gain which are specially allocated pursuant to Section 4.3 or Section 4.4 hereof; (ii) to each Member's Capital Account there shall be debited (A) the amount of money and the Gross Asset Value of any Property distributed to such Member pursuant to any provision of this Agreement and (B) such Member's distributive share of Losses and any items in the nature of expenses or losses which are specially allocated pursuant to Section 4.3 or Section 4.4 hereof; (iii) in the event LLC Interests are Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the Transferred LLC Interests; and 4 (iv) in determining the amount of any liability for purposes of subparagraphs (i) and (ii) above, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and the Regulations. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Board of Directors shall determine that it is prudent to modify the manner in which the Capital Accounts or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Company or any Members) are computed in order to comply with such Regulations, the Board of Directors may make such modification, provided that it is not likely to have a material effect on the amounts distributed to any Person pursuant to Article 13 hereof upon the dissolution of the Company. The Board of Directors also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of capital reflected on the Company's balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b). "CAPITAL CONTRIBUTIONS" means, with respect to any Member, the amount of money and the initial Gross Asset Value of any Property (other than money) contributed to the Company with respect to the LLC Interests of the Company held or subscribed for by such Member. "CERTIFICATE" means the certificate of formation filed with the Secretary of State of the State of Delaware pursuant to the Act to form the Company, as originally executed and amended, modified, supplemented or restated from time to time as the context requires. "CERTIFICATE OF CANCELLATION" means a certificate filed in accordance with 6 Del. C. Section 18-203. "CHAIRMAN" means the director appointed or nominated and elected, as the case may be, Chairman of the Board of Directors of the Company, in accordance with Section 6.9, with such powers and duties as set forth in Section 6.10 of this Agreement. "CHIEF EXECUTIVE OFFICER" means the Chief Executive Officer of the Company, including any interim Chief Executive Officer, with such powers and duties as set forth in Section 7.3 of this Agreement. "CHIEF FINANCIAL OFFICER" means the Chief Financial Officer of the Company, including any interim Chief Financial Officer, with such powers and duties as set forth in Section 7.4 of this Agreement. "CODE" means the United States Internal Revenue Code of 1986, as amended and in effect from time to time. Any reference herein to a specific section of the Code shall be deemed to include a reference to any corresponding provision of law in effect in the future. 5 "COMPANY" means the limited liability company formed pursuant to this Agreement and the Certificate. "COMPANY MINIMUM GAIN" has the same meaning as the term "partnership minimum gain" in Section 1.704-2(b)(2) and 1.704-2(d) of the Regulations. "DEBT" means (i) any indebtedness for borrowed money or the deferred purchase price of property as evidenced by a note, bonds or other instruments, (ii) obligations as lessee under capital leases, (iii) obligations secured by any mortgage, pledge, security interest, encumbrance, lien or charge of any kind existing on any asset owned or held by the Company, whether or not the Company has assumed or become liable for the obligations secured thereby, (iv) any obligation under any interest rate swap agreement, (v) accounts payable and (vi) obligations under direct or indirect guarantees of (including obligations, contingent or otherwise, to assure a creditor against loss in respect of) indebtedness or obligations of the kinds referred to in clauses (i), (ii), (iii), (iv) and (v) above, provided that Debt shall not include obligations in respect of any accounts payable that are incurred in the ordinary course of the Company's business and are not delinquent or are being contested in good faith by appropriate proceedings. "DISSOLUTION EVENT" shall have the meaning set forth in Section 13.1 hereof. "EFFECTIVE DATE" means the date hereof. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FISCAL QUARTER" means (i) the period commencing on the Effective Date and ending on June 30, 2004, (ii) any subsequent three (3)-month period commencing on each of July 1, October 1, January 1 and April 1 and ending on the last date before the next such date and (iii) the period commencing on the immediately preceding January 1, April 1, July 1 or October 1, as the case may be, and ending on the date on which all Property is distributed to the Members pursuant to Article 13 hereof. "FISCAL YEAR" means (i) the period commencing on the Effective Date and ending on December 31, 2004, (ii) any subsequent twelve (12)-month period commencing on January 1 and ending on December 31 and (iii) the period commencing on the immediately preceding January 1 and ending on the date on which all Property is distributed to the Members pursuant to Article 13 hereof. "GAAP" means generally accepted accounting principles in effect in the United States of America from time to time. "GENERAL CORPORATION LAW OF THE STATE OF DELAWARE" means Del. C.Sections 101 et seq. and, for the avoidance of any doubt, includes all applicable jurisprudence thereunder. "GENERAL COUNSEL" means the General Counsel of the Company, including any interim General Counsel, with such powers and duties as set forth in Section 7.5 of this Agreement. 6 "GROSS ASSET VALUE" means, with respect to any asset, the asset's adjusted basis for U.S. federal income tax purposes, except as follows: (i) the initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the Board of Directors, provided that the initial Gross Asset Value of the assets contributed to the Company pursuant to Section 3.1 hereof shall be as set forth in such section; (ii) the Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values (taking Code Section 7701(g) into account), as determined by the Board of Directors as of the following times: (A) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution; (B) the distribution by the Company to a Member of more than a de minimis amount of Company property as consideration for an interest in the Company; and (C) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), provided that an adjustment described in clauses (A) and (B) of this paragraph shall be made only if the Board of Directors reasonably determines that such adjustment is necessary to reflect the relative economic interests of the Members in the Company; (iii) the Gross Asset Value of any item of Company assets distributed to any Member shall be adjusted to equal the gross fair market value (taking Code Section 7701(g) into account) of such asset on the date of distribution, as determined by the Board of Directors; and (iv) the Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the definition of "PROFITS" and "LOSSES"; provided, however, that Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to the extent that an adjustment pursuant to subparagraph (ii) is required in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (iv). If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph (ii) or (iv), such Gross Asset Value shall thereafter be adjusted by depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. "INDEPENDENT DIRECTOR" means a director who is not an employee of the Company and was not appointed as a director pursuant to the terms of the Management Services Agreement or, so long as the Management Services Agreement is in effect, affiliated with the Manager or Macquarie Bank Limited and who complies with the independence requirements under the Exchange Act and the NYSE Rules. "INVOLUNTARY BANKRUPTCY" has the meaning set forth in the definition of "BANKRUPTCY." 7 "ISSUANCE ITEMS" has the meaning set forth in Section 4.3(h) hereof. "LIQUIDATION PERIOD" has the meaning set forth in Section 13.7 hereof. "LIQUIDATOR" has the meaning set forth in Section 13.9(a) hereof. "LLC INTEREST" means a limited liability company interest in the Company within the meaning of the Act and includes any and all benefits to which the holder of LLC Interests may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. The holder of each LLC Interest shall have one vote per LLC Interest in accordance with the terms of this Agreement. "LLC INTEREST CERTIFICATE" has the meaning set forth in Section 3.1 hereof. "LOSSES" has the meaning set forth in the definition of "PROFITS" and "LOSSES." "MANAGEMENT SERVICES AGREEMENT" means the Management Services Agreement to be entered into prior to the initial public offering of Trust Stock by the Trust, by and among the Company, certain of its Subsidiaries and the Manager, which will provide the terms on which the Manager will assume its duties with respect to the management of the Company. "MANAGER" means Macquarie Infrastructure Management (USA), Inc., party to the Management Services Agreement. "MANDATORY EXCHANGE" has the meaning set forth in Section 2.3 hereof. "MEMBER" means the Trust (the "ORIGINAL MEMBER") and any successor to the Trust in accordance with the terms of this Agreement. "MEMBERS" means all such Persons. "MEMBER NONRECOURSE DEBT" has the same meaning as the term "partner nonrecourse debt" in Section 1.704-2(b)(4) of the Regulations. "MEMBER NONRECOURSE DEBT MINIMUM GAIN" means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of the Regulations. "MEMBER NONRECOURSE DEDUCTIONS" has the same meaning as the term "partner nonrecourse deductions" in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations. "NET CASH FLOW" means, for any period, the gross cash proceeds of the Company for such period less the portion thereof used to pay or establish reserves for all Company expenses, debt payments, capital improvements, replacements and contingencies, all as determined by the Board of Directors. "Net Cash Flow" shall not be reduced by depreciation, amortization, cost recovery deductions or similar allowances, but shall be increased by any reductions of reserves previously established pursuant to the first sentence of this definition. 8 "NONRECOURSE DEDUCTIONS" has the meaning set forth in Section 1.704-2(b)(1) of the Regulations. "NONRECOURSE LIABILITY" has the meaning set forth in Section 1.704-2(b)(3) of the Regulations. "NYSE" means the New York Stock Exchange. "NYSE RULES" means the rules of the New York Stock Exchange. "PERCENTAGE INTEREST" means, with respect to any Member as of any date, the ratio (expressed as a percentage) of the number of LLC Interests held by such Member on such date to the aggregate number of LLC Interests held by all Members on such date. "PERSON" means any individual, partnership (whether general or limited), limited liability company, corporation, trust, estate, association, nominee or other entity. "PROFITS" and "LOSSES" mean, for each Allocation Year, an amount equal to the Company's taxable income or loss for such Allocation Year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments (without duplication): (i) any income of the Company that is exempt from U.S. federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition of "Profits" and "Losses" shall be added to such taxable income or loss; (ii) any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Profits or Losses pursuant to this definition of "Profits" and "Losses" shall be subtracted from such taxable income or loss; (iii) in the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraph (ii) or (iii) of the definition of Gross Asset Value, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Gross Asset Value of the asset) or an item of loss (if the adjustment decreases the Gross Asset Value of the asset) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses; (iv) gain or loss resulting from any disposition of Property with respect to which gain or loss is recognized for U.S. federal income tax purposes shall be computed by reference to the Gross Asset Value of the Property disposed of, notwithstanding that the adjusted tax basis of such Property differs from its Gross Asset Value; (v) to the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as 9 a result of a distribution other than in liquidation of a Member's interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses; and (vi) notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Section 4.3 or Section 4.4 hereof shall not be taken into account in computing Profits or Losses. The amounts of the items of Company income, gain, loss or deduction available to be specially allocated pursuant to Sections 4.3 and 4.4 hereof shall be determined by applying rules analogous to those set forth in subparagraphs (i) through (v) above. "PROPERTY" means all real and personal property acquired by the Company, including cash, and any improvements thereto, and shall include both tangible and intangible property. "RECONSTITUTION PERIOD" has the meaning set forth in Section 13.1(b) hereof. "REGULAR TRUSTEES" means the regular trustees identified in the Trust Agreement, as amended from time to time. "REGULATIONS" means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations are amended from time to time. "REGULATORY ALLOCATIONS" has the meaning set forth in Section 4.4 hereof. "RULES AND REGULATIONS" means the rules and regulations promulgated under the Exchange Act and the Securities Act. "SECRETARY" means the Secretary of the Company, with such powers and duties as set forth in Section 7.6 of this Agreement. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SUBSIDIARY" means any corporation, partnership, joint venture, limited liability company, association or other entity in which any Person owns, directly or indirectly, fifty percent (50%) or more of the outstanding equity securities or interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such entity. "TAX MATTERS MEMBER" has the meaning set forth in Section 10.3(b) hereof. "TRANSFER" means, as a noun, any voluntary or involuntary transfer, sale, pledge or hypothecation or other disposition and, as a verb, voluntarily or involuntarily to transfer, sell, pledge or hypothecate or otherwise dispose of. 10 "TRANSFER AGENT" means, with respect to the LLC Interests and the Trust Stock, Wells Fargo Bank, National Association, a national banking association, or any successor(s) thereto. "TRUST" means Macquarie Infrastructure Assets Trust. "TRUST AGREEMENT" means the Trust Agreement to be entered into by the Company and Wells Fargo Delaware Trust Company, a Delaware banking corporation, and the Regular Trustees. "TRUST STOCK" means the certificates of beneficial interest issued by the Trust and outstanding at the relevant time of determination. "VOLUNTARY BANKRUPTCY" has the meaning set forth in the definition of "BANKRUPTCY." "WHOLLY OWNED AFFILIATE" of any Person means an Affiliate of such Person (i) one hundred percent (100%) of the voting stock or beneficial ownership of which is owned directly by such Person, or by any Person who, directly or indirectly, owns one hundred percent (100%) of the voting stock or beneficial ownership of such Person, (ii) an Affiliate to such Person who, directly or indirectly, owns one hundred percent (100%) of the voting stock or beneficial ownership of such Person, and (iii) any Wholly Owned Affiliate of any Affiliate described in clause (i) or (ii) above. ARTICLE 2 THE TRUST Section 2.1 Trust to Be Sole Member. Simultaneously with the execution hereof, the Company hereby issues one hundred (100) LLC Interests to the Trust as Original Member which is being admitted to the Company in respect thereof. It is intended that following such issuance the Trust shall be the sole owner of the ownership interests of the Company represented by one hundred percent (100%) of the LLC Interests. For so long as the Trust remains in existence, the Company shall not sell, issue or otherwise transfer any of its LLC Interests to any Person other than the Trust. Every holder of LLC Interest Certificates, by holding and receiving the same, agrees with the Company to be bound by the terms of this Agreement. Section 2.2 Trust Stock to Represent LLC Interests. Each share of Trust Stock will represent an individual beneficial interest in one LLC Interest. At all times, the Company will have outstanding such number of LLC Interests as is equal to the number of shares of Trust Stock that have been issued and are outstanding. Section 2.3 Circumstances Under Which Trust Stock Will Be Exchanged for LLC Interests. In the event that the Trust and/or the Company is treated as a corporation for U.S. federal income tax purposes, the Board of Directors (a) shall deliver a mandatory instruction to the Regular Trustees, together with any opinions of counsel or certificates of officers of the Company as the Regular Trustees may reasonably request, directing the Regular Trustees to 11 (i) deliver one LLC Interest to each holder of a share of Trust Stock in exchange for such outstanding share of Trust Stock (the "MANDATORY EXCHANGE") and (ii) dissolve the Trust and (b) shall deliver to the Transfer Agent notice of such Mandatory Exchange and shall cause the Transfer Agent to mail a copy of such notice to the holders of the Trust Stock at least thirty (30) days prior to the Mandatory Exchange. Simultaneously with the effectiveness of such Mandatory Exchange, each holder of a share of Trust Stock immediately prior to the effectiveness of the Mandatory Exchange shall be admitted to the Company as a Member in respect of one LLC Interest previously held by the Trust and shall be issued an LLC Interest Certificate evidencing the same pursuant to Section 3.1, immediately whereafter the Trust shall be deemed withdrawn from the Company as a Member in respect of such LLC Interest, and the Trust shall tender its LLC Interest Certificates to the Company for cancellation. Section 2.4 Right to Acquire Outstanding LLC Interests. (a) Right to Acquisition Exchange. If at any time more than ninety (90) percent of the then outstanding Trust Stock is held by one Person (the "ACQUIRER"), such Acquirer shall then have the right to direct the Board of Directors to (i) deliver a mandatory instruction to the Regular Trustees directing the Regular Trustees to (A) deliver the LLC Interests to the holders of the Trust Stock, including the Acquirer, in exchange for all of the outstanding shares of Trust Stock (the "ACQUISITION EXCHANGE") and (B) dissolve the Trust and (ii) deliver to the Transfer Agent notice of such Acquisition Exchange and cause the Transfer Agent to mail a copy of such notice to the holders of the Trust Stock at least thirty (30) days prior to the Acquisition Exchange. Simultaneously with the effectiveness of such Acquisition Exchange, each holder of a share of Trust Stock immediately prior to the effectiveness of the Acquisition Exchange shall be admitted to the Company as a Member in respect of one LLC Interest previously held by the Trust and shall be issued an LLC Interest Certificate evidencing the same pursuant to Section 3.1, immediately whereafter the Trust shall be deemed withdrawn from the Company as a Member in respect of such LLC Interest, and the Trust shall tender its LLC Interest Certificates to the Company for cancellation. (b) Right to Acquire LLC Interests of Remaining Holders for Cash. Following an Acquisition Exchange, the Acquirer shall have the right to purchase, solely for cash, and Members other than the Acquirer shall be required to sell, all, but not less than all, of the outstanding LLC Interests not held then by the Acquirer, at the "Offer Price." As used in this Section 2.4, "OFFER PRICE" means the average Closing Price (as defined below) per share of Trust Stock or LLC Interests, as applicable, on the twenty (20) Trading Days (as defined below) immediately prior to, but not including, the date of the Acquisition Exchange. The "CLOSING PRICE" of any security on any date of determination means: (1) the closing sale price (or, if no closing price is reported, the last reported sale price) of a share of Trust Stock or an LLC Interest, as applicable (regular way), on the NYSE on such date, (2) if the Trust Stock or LLC Interests are not listed for trading on the NYSE on any such date, the closing sale price as reported in the composite 12 transactions for the principal U.S. securities exchange on which the Trust Stock or LLC Interests, as applicable, are so listed, (3) if the Trust Stock or LLC Interests, as applicable, are not so listed on a United States national or regional securities exchange, the price as reported by The Nasdaq Stock Market, (4) if the Trust Stock or LLC Interests, as applicable, are not so reported, the last quoted bid price for the Trust Stock or LLC Interests, as applicable, in the over-the-counter market as reported by the National Quotation Bureau or a similar organization, or (5) if the Trust Stock or LLC Interests, as applicable, are not so quoted, the average of the mid-point of the last bid and ask prices for the Trust Stock or LLC Interests, as applicable, from at least three nationally recognized investment firms that the Company selects for such purpose. A "TRADING DAY" means a day on which the Closing Price of the Trust Stock or LLC Interests, as applicable, is being determined and the Trust Stock or LLC Interests, as applicable, (A) are not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business and (B) have traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Trust Stock or LLC Interests, as applicable . ARTICLE 3 ADMISSION OF MEMBERS Section 3.1 LLC Interest Certificates; Admission of Additional Members. The LLC Interests will be represented by certificates in the form attached hereto as Exhibit A (the "LLC INTEREST CERTIFICATES"). The LLC Interest Certificates shall be conclusive evidence of ownership. Every holder of an LLC Interest of the Company shall be entitled to an LLC Interest Certificate. The LLC Interest Certificates of the Company shall be issued under the seal of the Company, or a facsimile thereof, and shall be numbered and shall be entered in the books of the Company as they are issued. Each LLC Interest Certificate shall bear a serial number, shall exhibit the holder's name and the number of LLC Interests evidenced thereby and shall be signed by the Chief Executive Officer or the Chief Financial Officer. Any or all of the signatures on the LLC Interest Certificates may be facsimiles. If any officer, Transfer Agent or registrar who has signed or whose facsimile signature has been placed upon an LLC Interest Certificate shall have ceased to be such officer, Transfer Agent or registrar before such LLC Interest Certificate is issued, the LLC Interest Certificate may be issued by the Company with the same effect as if such Person or entity were such officer, Transfer Agent, or registrar at the date of issue. From the time of the initial public offering of the Trust Stock by the Trust, the Company shall retain the Transfer Agent to maintain a registry of the LLC Interests and cause such Transfer Agent to register the transfer of any LLC Interest Certificates. Transfer of LLC Interests of the Company shall be made on the books of the Company only upon surrender to the Company or its Transfer Agent of the LLC Interest Certificates duly endorsed or accompanied by proper evidence of 13 succession, assignment or authority to transfer; provided, however, that such succession, assignment or transfer is not prohibited by the LLC Interest Certificates, this Agreement, applicable law or contract. Thereupon, the Company shall issue a new LLC Interest Certificate (if requested) to the Person entitled thereto, cancel the old LLC Interest Certificate, and record the transaction upon its books. Section 3.2 Authorized Stock. The Company shall be authorized to issue one class of limited liability company interests to be referred to as "LLC INTERESTS," in an aggregate amount of up to five hundred million (500,000,000) of such LLC Interests. The aggregate number of LLC Interests that are authorized may be increased, from time to time, by the Board of Directors authorized by the affirmative vote of a majority of the LLC Interests present in person or represented by proxy at the meeting of the Members. Section 3.3 Issuance of Additional LLC Interests. The Board of Directors shall have authority to authorize the issuance, from time to time without any vote or other action by the Members, of any or all LLC Interests of the Company at any time authorized. While the Trust remains the sole holder of the LLC Interests, the Company will issue additional LLC Interests to the Trust in exchange for an equal number of shares of Trust Stock which the Company may sell or distribute in any manner, subject to applicable law, that the Board of Directors in its sole discretion deems appropriate and advisable. Section 3.4 Repurchase of LLC Interests by the Company. The Board of Directors shall have authority to cause the Company to conduct a capital reduction, including the repurchase of any number of issued and outstanding LLC Interests. At any time after the closing of the initial public offering of the Trust Stock by the Trust, in the event the Board of Directors determines that the Company shall make an offer to repurchase any number of issued and outstanding LLC Interests, the Board of Directors shall deliver to the Transfer Agent notice of such offer to repurchase and shall cause the Transfer Agent to mail a copy of such notice to the Members at least thirty (30) days prior to such offer to repurchase. Any LLC Interests tendered and repurchased by the Company in accordance with this Section 3.4 shall be deemed to be authorized and issued, but not outstanding, and may subsequently be sold or transferred for due consideration. ARTICLE 4 ALLOCATIONS Section 4.1 Profits. After giving effect to the special allocations set forth in Sections 4.3 and 4.4, Profits for any Allocation Year shall be allocated to the Members in proportion to their Percentage Interests. Section 4.2 Losses. After giving effect to the special allocations set forth in Sections 4.3 and 4.4 and subject to Section 4.5, Losses for any Allocation Year shall be allocated to the Members in proportion to their Percentage Interests. Section 4.3 Special Allocations. The following special allocations shall be made in the following order: 14 (a) Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-2(f) of the Regulations, notwithstanding any other provision of this Article 4, if there is a net decrease in Company Minimum Gain during any Allocation Year, each Member shall be specially allocated items of Company income and gain for such Allocation Year (and, if necessary, subsequent Allocation Years) in an amount equal to such Member's share of the net decrease in Company Minimum Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section 4.3(a) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Regulations and shall be interpreted consistently therewith. (b) Member Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of this Article 4, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Allocation Year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of Company income and gain for such Allocation Year (and, if necessary, subsequent Allocation Years) in an amount equal to such Member's share of the net decrease in Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section 4.3(b) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently therewith. (c) Qualified Income Offset. In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of the Member as quickly as possible, provided that an allocation pursuant to this Section 4.3(c) shall be made only if and to the extent that the Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article 4 have been tentatively made as if this Section 4.3(c) were not in this Agreement. (d) Gross Income Allocation. In the event any Member has a deficit Capital Account at the end of any Allocation Year which is in excess of the sum of (i) the amount such Member is obligated to restore pursuant to the penultimate sentence of each of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 4.3(d) shall be made only if and to the extent that such Member would have a deficit Capital Account in 15 excess of such sum after all other allocations provided for in this Article 4 have been made as if Section 4.3(c) and this Section 4.3(d) were not in the Agreement. (e) Nonrecourse Deductions. Nonrecourse Deductions for any Allocation Year shall be specially allocated to the Members in proportion to their respective Percentage Interests. (f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Allocation Year shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(i)(1). (g) Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Company asset, pursuant to Code Section 734(b) or Code Section 743(b), is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of such Member's interest in the Company, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies or to the Member to whom such distribution was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies. (h) Allocations Relating to Taxable Issuance of Company LLC Interests. Any income, gain, loss or deduction realized as a direct or indirect result of the issuance of LLC Interests by the Company to a Member (the "ISSUANCE ITEMS") shall be allocated among the Members so that, to the extent possible, the net amount of such Issuance Items, together with all other allocations made under this Agreement to each Member, shall be equal to the net amount that would have been allocated to each such Member if the Issuance Items had not been realized. Section 4.4 Curative Allocations. The allocations set forth in Sections 4.3(a), 4.3(b), 4.3(c), 4.3(d), 4.3(e), 4.3(f), 4.3(g) and 4.5 (the "REGULATORY ALLOCATIONS") are intended to comply with certain requirements of the Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 4.4. Therefore, notwithstanding any other provision of this Article 4 (other than the Regulatory Allocations), the Board of Directors shall make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Sections 4.1, 4.2 and 4.3(h). 16 Section 4.5 Loss Limitation. Losses allocated pursuant to Section 4.2 hereof shall not exceed the maximum amount of Losses that can be allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any Allocation Year. In the event some but not all of the Members would have Adjusted Capital Account Deficits as a consequence of an allocation of Losses pursuant to Section 4.2 hereof, the limitation set forth in this Section 4.5 shall be applied on a Member by Member basis and Losses not allocable to any Member as a result of such limitation shall be allocated to the other Members in accordance with the positive balances in such Member's Capital Accounts so as to allocate the maximum permissible Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of the Regulations. Section 4.6 Other Allocation Rules. (a) For purposes of determining the Profits, Losses, or any other items allocable to any period, Profits, Losses, and any other such items shall be determined on a monthly, or other basis, as determined by the Company using any permissible method under Code Section 706 and the Regulations thereunder. (b) The Members are aware of the income tax consequences of the allocations made by this Article 4 and hereby agree to be bound by the provisions of this Article 4 in reporting their shares of Company income and loss for income tax purposes. (c) Solely for purposes of determining a Member's proportionate share of the "excess nonrecourse liabilities" of the Company within the meaning of Regulations Section 1.752-3(a)(3), the Members' interests in Company profits are in proportion to their Percentage Interests. To the extent permitted by Section 1.704-2(h)(3) of the Regulations, the Manager shall endeavor to treat distributions as having been made from the proceeds of a Nonrecourse Liability or a Member Nonrecourse Debt only to the extent that such distributions would cause or increase an Adjusted Capital Account Deficit for any Member. Section 4.7 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss and deduction with respect to any Property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such Property to the Company for U.S. federal income tax purposes and its initial Gross Asset Value (computed in accordance with the definition of Gross Asset Value) using a method, selected in the discretion of the Board of Directors, in accordance with Section 1.704-3 of the Regulations. In the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraph (ii) of the definition of Gross Asset Value, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for U.S. federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder. Any elections or other decisions relating to such allocations shall be made by the Company in any manner that reasonably reflects the purpose and intention of this Agreement. 17 Allocations pursuant to this Section 4.7 are solely for purposes of U.S. federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member's Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement. ARTICLE 5 DIVIDEND DISTRIBUTIONS Section 5.1 Net Cash Flow. Except as otherwise provided in Section 5.3 and Section 13 hereof, the Board of Directors may, in their sole discretion and at any time, declare dividends and make and pay such distributions per LLC Interest from Net Cash Flow, to the Members in proportion to their Percentage Interests. Section 5.2 Amounts Withheld. All amounts withheld pursuant to the Code or any provision of any state, local or foreign tax law with respect to any payment, dividend or other distribution or allocation to the Company or the Members shall be treated as amounts paid, as the case may be, to the Members with respect to which such amount was withheld pursuant to this Article 5.2 for all purposes under this Agreement. The Company is authorized to withhold from payments or with respect to allocations to the Members, and to pay over to any U.S. federal, state and local government or any foreign government, any amounts required to be so withheld pursuant to the Code or any provisions of any other U.S. federal, state or local law or any foreign law, and shall allocate any such amounts to the Members with respect to which such amount was withheld. For so long as the Trust is a Member, all amounts withheld in accordance with this Section 5.2 will be treated as amounts paid, as the case may be, to holders of the Trust Stock and any such amounts shall be allocated to the holders of the Trust Stock in the same amount as any such allocation was made per LLC Interest. Section 5.3 Limitations on Distributions. (a) The Company shall make no dividend or other distributions to the Members except as provided in this Article 5 and Section 13 hereof. (b) A Member may not receive a dividend or other distribution from the Company to the extent such dividend or other distribution is inconsistent with, or in violation of, the Act. ARTICLE 6 BOARD OF DIRECTORS Section 6.1 Initial Board. Initially, the Board of Directors shall be comprised of the following individuals: John Roberts, Peter Stokes and Stephen Peet (the "INITIAL BOARD"). Each member of the Initial Board shall hold office until his successor is elected or appointed and qualified, or until his earlier resignation or removal in accordance with this Article 6. The Initial Board shall have all of the powers and authorities accorded to members of the Board of Directors under the terms of this Agreement. 18 Section 6.2 General Powers. The business and affairs of the Company shall be managed by or under the direction of its Board of Directors. In addition to the powers and authorities expressly conferred upon them by this Agreement, the Board of Directors may exercise all such powers of the Company and do all such lawful acts and things as are not by applicable law, including the Rules and Regulations, or by this Agreement required to be exercised or done by the Members. Without limiting the generality of the foregoing, it shall be the responsibility of the Board of Directors to establish broad objectives and the general course of the business, determine basic policies, appraise the adequacy of overall results, and generally represent and further the interests of the Company's Members. Section 6.3 Duties of Directors. The duties of the members of the Board of Directors are intended to be consistent with the requirements of the General Corporation Law of the State of Delaware applicable to directors of a corporation incorporated under the General Corporation Law of the State of Delaware, as if such members of the Board of Directors were directors of a corporation incorporated under the General Corporation Law of the State of Delaware. The duties of the members of the Board of Directors will be interpreted consistently with the provisions of, and jurisprudence regarding, the General Corporation Law of the State of Delaware. Section 6.4 Number, Tenure and Qualifications. Subject to Section 6.1, the composition of the Board of Directors shall consist, at all times after the initial public offering of the shares of Trust Stock by the Trust, of at least three (3) Independent Directors for every director that is not an Independent Director. Subject to this Section 6.4, the number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by the Board of Directors, but shall consist of not less than four (4) nor more than twelve (12) directors. However, no decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. The term of each director shall be the period from the effective date of such director's election to the next annual meeting of Members at which time such director's successor is duly elected and qualified or until such director's earlier resignation or removal. Directors need not be residents of the State of Delaware or Members. Section 6.5 Election of Directors. Except as provided in Sections 6.1, 6.8 and with respect to any director to be appointed by the Manager to serve as Chairman in accordance with Section 6.9, the directors shall be elected at the annual meeting of Members. At any meeting of Members duly called and held for the election of directors at which a quorum is present, directors shall be elected by a plurality of the voting power of the LLC Interests present in person or represented by proxy at the meeting of Members. Section 6.6 Removal. With the exception of the director appointed by the Manager to serve as the Chairman of the Company pursuant to the Management Services Agreement, any directors may be removed from office, with or without cause, by the affirmative vote of the Members holding a majority of the voting power of the issued and outstanding LLC Interests. If any directors are so removed, new directors may be elected by the Members at the same meeting or by written consent of the Members as set forth in Section 9.14. For so long as the Manager is entitled to appoint the director of the Board of Directors to serve as Chairman pursuant to the terms of the Management Services Agreement, the Manager may, it its sole 19 discretion, remove the Chairman from office, with or without cause. If the Chairman is so removed, a new Chairman shall be appointed in accordance with Section 6.9. Section 6.7 Resignations. Any director, whether elected or appointed, may resign at any time upon notice of such resignation to the Company. Section 6.8 Vacancies and Newly Created Directorships. Subject to Section 6.9, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Unless otherwise provided in this Agreement, when one or more directors, other than a director appointed by the Manager pursuant to Section 6.9 hereof, shall resign from the Board, a majority of directors then in office shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective. For so long as the Manager is entitled to appoint the director of the Board of Directors to serve as Chairman pursuant to the terms of the Management Services Agreement, the Manager shall be entitled to appoint the successor to the Chairman upon resignation or removal by the Manager of any Chairman. Section 6.9 Appointment of or Nomination and Election of Chairman. For so long as the Manager is entitled to appoint the director of the Board of Directors to serve as Chairman pursuant to the terms of the Management Services Agreement, the Manager shall appoint one director of the Board of Directors to serve as Chairman, and one alternate therefor to serve in such capacity in the absence of the appointed Chairman. In all other cases, the nomination of the director of the Board of Directors to serve as Chairman and the election of such director by the Members at a Members' meeting shall be conducted in accordance with Sections 9.8 and 9.9. Section 6.10 Chairman of the Board. The Chairman of the Board shall be a member of the Board of Directors. The Chairman is not required to be an employee of the Company. The Chairman of the Board, if present, shall preside at all meetings of the Board of Directors. In the absence or disability of the Chairman of the Board and any alternate therefor, the duties of the Chairman of the Board shall be performed, and the Chairman of the Board's authority may be exercised, by a director designated for this purpose by the remaining members of the Board of Directors. The Chairman of the Board shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or this Agreement, all in accordance with basic policies as may be established by the Company, and subject to the approval and oversight of the Board of Directors. Section 6.11 Regular Meetings. A regular meeting of the Board of Directors shall be held without any other notice than this Agreement, immediately after, and at the same place (if any) as, each annual meeting of Members. The Board of Directors may, by resolution, provide the time and place (if any) for the holding of additional regular meetings without any other notice than such resolution. Unless otherwise determined by the Board of Directors, the Secretary of the Company shall act as Secretary at all regular meetings of the Board of Directors and in the Secretary's absence a temporary Secretary shall be appointed by the Chairman of the meeting. 20 Section 6.12 Special Meetings. Special meetings of the Board of Directors shall be called at the request of the Chairman of the Board, or a majority of the Board of Directors. The Person or Persons authorized to call special meetings of the Board of Directors may fix the place and time of the meetings. Unless otherwise determined by the Board of Directors, the Secretary of the Company shall act as Secretary at all special meetings of the Board of Directors and in the Secretary's absence a temporary Secretary shall be appointed by the Chairman of the meeting. Section 6.13 Notice for Special Meetings. Notice of any special meeting of the Board of Directors shall be mailed to each director at his business or residence not later than three (3) days before the day on which such meeting is to be held or shall be sent to either of such places by telegraph, express courier service (including, without limitation, Federal Express) or facsimile (directed to the facsimile number to which the director has consented to receive notice) or other electronic transmission (including, but not limited to, an e-mail address at which the director has consented to receive notice), or be communicated to each director personally or by telephone, not later than one (1) day before such day of meeting; provided, however, that if the business to be transacted at such special meeting includes a proposed amendment to this Agreement, notice shall be communicated to each director personally or by telephone, not later than three (3) days before such day of meeting. Except in the case where the business to be transacted at such special meeting includes a proposed amendment to this Agreement, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting. A meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in accordance with Section 9.12 hereof, either before or after such meeting. Section 6.14 Action Without Meeting. Any action required or permitted to be taken at any meeting by the Board of Directors or any committee or subcommittee thereof, as the case may be, may be taken without a meeting if a consent thereto is signed by all members of the Board or of such committee or subcommittee, as the case may be, provided that such consent thereto in writing or by electronic transmission is provided by all of the members of the Board of Directors (or such committee or subcommittee), and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or such committee or subcommittee; provided, however, that such electronic transmission or transmissions must either set forth or be submitted with information from which it can be determined that the electronic transmission or transmissions were authorized by the director. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Section 6.15 Conference Telephone Meetings. Members of the Board of Directors, or any committee or subcommittee thereof, may participate in a meeting of the Board of Directors or such committee or subcommittee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. Section 6.16 Quorum. At all meetings of the Board of Directors, a majority of the then total number of directors (such total number of directors, the "ENTIRE BOARD OF 21 DIRECTORS") shall constitute a quorum for the transaction of business. At all meetings of the committees of the Board of Directors, the presence of a majority of the total number of members (assuming no vacancies) shall constitute a quorum. The act of a majority of the directors or committee members present at any meeting at which there is a quorum shall be the act of the Board of Directors or such committee, as the case may be. If a quorum shall not be present at any meeting of the Board of Directors or any committee, a majority of the directors or members, as the case may be, present thereat may adjourn the meeting from time to time without further notice other than announcement at the meeting. The members of the Board of Directors present at a duly organized meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough members of the Board of Directors to leave less than a quorum. Section 6.17 Committees. (a) Following the election of the successors to each of the members of the Initial Board, the Company shall have three standing committees: the Nominating and Governance Committee, the Audit Committee and the Compensation Committee as set out below. Each of the Nominating and Governance Committee, the Audit Committee and the Compensation Committee shall adopt by resolution a charter to establish the rules and responsibilities of such committee in accordance with applicable law, including the Rules and Regulations and the NYSE Rules. (i) Nominating and Governance Committee. The Board of Directors, by resolution adopted by a majority of the whole Board, will designate a Nominating and Governance Committee comprised of Independent Directors, which Committee shall oversee the Company's commitment to good corporate governance and develop and recommend to the Board a set of corporate governance principles and oversee the evaluation of the Board and the management. In addition, the Committee shall recommend to the Board specific policies or guidelines concerning criteria for Board membership, and shall also recommend to the Board nominees for election to the Board of Directors in connection with any meeting of Members at which directors are to be elected or to fill any Board vacancy which the Board of Directors is authorized under this Agreement to fill, and may also recommend to the Board specific policies or guidelines concerning the structure and composition of Board Committees, the size and composition of the Board and the selection, tenure and retirement of directors and matters related thereto. (ii) Audit Committee. The Board of Directors, by resolution adopted by a majority of the whole Board, will designate not fewer than three (3) nor more than seven (7) Independent Directors, all of whom meet the financial literacy requirements of law and of the NYSE. At least one member of the Committee will meet the accounting or related financial management expertise required to be established by the Board of Directors. The Committee shall review on behalf of the Company and make recommendations to the Board of Directors with respect to: the independence, qualifications and services of the independent public accountants employed by the Company from time to time to audit the books of the Company, the scope of their audits, the adequacy of their audit reports, and recommendations made by them. 22 The Committee shall also make such reviews of internal financial audits and controls as the Committee considers desirable. The Audit Committee, in its capacity as a committee of the Board of Directors, shall be directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged (including resolution of disagreements between management, including the Manager and the auditor regarding financial reporting) for the purposes of preparing or issuing an audit report or performing other audit review, or attest services for the Company, and each such registered public accounting firm must report directly to the Audit Committee. The Audit Committee shall review the Company's financial disclosure documents, significant developments in accounting principles and significant proposed changes in financial statements and any auditor's attestation report on management's assessment of the Company's internal control and financial reporting to be included in the Company's annual report to be filed with the Securities and Exchange Commission in accordance with the Exchange Act and the Rules and Regulations. The Audit Committee shall also review and monitor the Company's codes of conduct to guard against significant conflicts of interest and dishonest, unethical or illegal activities. The Audit Committee shall review periodically the performance of the Company's accounting and financial personnel, and shall review material litigation and regulatory proceedings and other issues relating to potentially significant corporate liability. The Audit Committee will also be designated as and serve as the Qualified Legal Compliance Committee and will be responsible, upon receipt of a report of evidence of a material legal violation, for notifying the Chief Executive Officer or General Counsel of such report; investigating and recommending appropriate measures to the Board of Directors and if the Company does not appropriately respond, taking further appropriate action, including notification to the Securities and Exchange Commission. The Audit Committee shall establish procedures for: (a) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (b) the submission by employees of the Company and others, on a confidential and anonymous basis, of concerns regarding questionable accounting or auditing matters. The Audit Committee shall have the authority to engage independent counsel and other advisors, as it determines necessary to carry out its duties. The Company shall provide appropriate funding, as determined by the Audit Committee, in its capacity as a committee of the Board of Directors for payment of: (A) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company; (B) compensation to independent counsel and other advisors engaged pursuant to the above paragraph; and 23 (C) ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties. (iii) Compensation Committee. The Board of Directors, by resolution adopted by a majority of the whole Board, will designate a Compensation Committee comprised of Independent Directors. The Compensation Committee shall be responsible for monitoring the Manager for compliance with the Management Services Agreement and for evaluating the performance of the Chief Executive Officer, the Chief Financial Officer and the General Counsel and making such recommendations to the Manager with respect to the officers that the Compensation Committee deems appropriate. (b) In addition, the Board of Directors may designate one or more additional committees and subcommittees, with each such committee or subcommittee consisting of such number of directors of the Company and having such powers and authority as shall be determined by resolution of the Board of Directors. (c) All acts done by any committee or subcommittee within the scope of its powers and authority pursuant to this Agreement and the resolutions adopted by the Board of Directors in accordance with the terms hereof shall be deemed to be, and may be certified as being, done or conferred under authority of the Board of Directors. The Secretary is empowered to certify that any resolution duly adopted by any such committee is binding upon the Company and to execute and deliver such certifications from time to time as may be necessary or proper to the conduct of the business of the Company. (d) Regular meetings of committees shall be held at such times as may be determined by resolution of the Board of Directors or the committee or subcommittee in question and no notice shall be required for any regular meeting other than such resolution. A special meeting of any committee or subcommittee shall be called by resolution of the Board of Directors or by the Secretary upon the request of the Chairman or a majority of the members of any committee. Notice of special meetings shall be given to each member of the committee in the same manner as that provided for in Section 6.13 of this Agreement. Section 6.18 Committee Members. (a) Each member of any committee of the Board of Directors shall hold office until such member's successor is elected and has qualified, unless such member sooner dies, resigns or is removed. (b) For so long as the Manager is entitled to appoint the director of the Board of Directors to serve as Chairman pursuant to the terms of the Management Services Agreement, the Manager may designate one director to serve as the Chairman where the appointed Chairman, and any alternate therefor, is unavailable for any reason. In all other cases, the Board of Directors may designate one or more directors as alternate members of any committee to fill any vacancy on a committee and to fill a vacant chairmanship of a committee, occurring as a result of a member or chairman leaving the committee, whether through death, resignation, removal or otherwise. 24 Section 6.19 Committee Secretary. The Secretary of the Company shall act as Secretary of any such committee or subcommittee, unless otherwise provided by the Board of Directors or the committee or subcommittee, as applicable. Section 6.20 Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid compensation as director or chairman of any committee or subcommittee, as the case may be, as determined by the Initial Board or the Compensation Committee, as the case may be. Members of special or standing committees may be allowed like compensation and payment of expenses for attending committee meetings. For so long as the Manager is entitled to appoint the director of the Board of Directors to serve as Chairman pursuant to the terms of the Management Services Agreement, the Chairman shall not receive any compensation from the Company for his or her service as Chairman of the Board, but shall be entitled to the payment of all out-of-pocket expenses incurred in attending regular or special meetings of the Board. Section 6.21 Indemnification and Insurance. (a) Each Person who was or is made a party or is threatened to be made a party to or is involved in any manner in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter, a "PROCEEDING"), by reason of the fact that he, she or a Person of whom he or she is the legal representative who is or was a director or officer of the Company, or is or was serving at the request of the Company as a director or officer of a Subsidiary of the Company, if the Person acted in good faith and in a manner the Person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the Person's conduct was unlawful, shall be indemnified against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the Person in connection with such proceeding, and held harmless by the Company to the fullest extent permitted from time to time by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (but, if permitted by applicable law, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment) or any other applicable laws as presently or hereafter in effect, and such indemnification shall continue as to a Person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that the Company shall indemnify any such Person seeking indemnification in connection with a proceeding (or part thereof) initiated by such Person only if such proceeding (or part thereof) was authorized by the Board of Directors or is a proceeding to enforce such Person's claim to indemnification pursuant to the rights granted by this Agreement. The Company shall pay the expenses (including attorneys' fees) incurred by such Person in defending any such proceeding in advance of its final disposition upon receipt (unless the Company upon authorization of the Board of Directors waives such requirement to the extent permitted by applicable law) of an undertaking by or on behalf of such Person to repay such amount if it shall ultimately be determined by final judicial decision from which there is no further right of appeal that such Person is not entitled to be indemnified by the Company as authorized in this Agreement or otherwise. 25 (b) Any indemnification of a present or former director or officer under this Section 6.21 shall be made by the Company only as authorized in the specific case upon a determination that indemnification of the present or former director or officer is proper in the circumstances because the Person has met the applicable standard of conduct set forth in Section 6.3 and acted in good faith and in a manner the Person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the Person's conduct was unlawful. Such determination shall be made, with respect to a Person who is a director or officer at the time of such determination, (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, (2) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the Members. The indemnification and the advancement of expenses incurred in defending a proceeding prior to its final disposition provided by or granted pursuant to this Agreement shall not be exclusive of any other right which any Person may have or hereafter acquire under any statute, provision of the Certificate, other provision of this Agreement, vote of Members or Disinterested Directors or otherwise. No repeal, modification or amendment of, or adoption of any provision inconsistent with, this Section 6.21, nor to the fullest extent permitted by applicable law, any modification of law, shall adversely affect any right or protection of any Person granted pursuant hereto existing at, or with respect to any events that occurred prior to, the time of such repeal, amendment, adoption or modification. (c) The Company may maintain insurance, at its expense, to protect itself and any Person who is or was a director, officer, partner, member, employee or agent of the Company or a Subsidiary or of another corporation, partnership, limited liability company, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Company would have the power to indemnify such Person against such expense, liability or loss under the General Corporation Law of the State of Delaware. (d) The Company may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Company the expenses incurred in defending any proceeding in advance of its final disposition, to any Person who is or was an employee or agent (other than those Persons indemnified pursuant to clause (a) of this Section 6.21) and to any Person who is or was serving at the request of the Company or a Subsidiary as a director, officer, partner, member, employee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the Company or a Subsidiary, to the fullest extent of the provisions of this Agreement with respect to the indemnification and advancement of expenses of directors and officers of the Company. The payment of any amount to any Person pursuant to this clause (d) shall subrogate the Company to any right such Person may have against any other Person or entity. (e) The indemnification provided in this Section 6.21 is intended to comply (subject to the limitations expressly provided in this Agreement) with the requirements of the General Corporation Law of the State of Delaware as it relates to the indemnification of officers, directors, employees and agents of a Delaware corporation and, as such, should be interpreted 26 consistently with the provisions of, and jurisprudence regarding, the General Corporation Law of the State of Delaware. (f) Any notice, request, or other communications required or permitted to be given to the Company under this Section 6.21 shall be in writing and either delivered in Person or sent by facsimile, telex, telegram, overnight mail or courier service, or certified or registered mail, postage prepaid, return receipt requested, to the General Counsel or the Secretary of the Company and shall be effective only upon receipt by the General Counsel or the Secretary, as the case may be. (g) To the fullest extent permitted by the Law of the State of Delaware, each Member, director and officer of the Company agrees that all actions for the advancement of expenses or indemnification brought under this Section 6.21 or under any vote of Members or Disinterested Directors or otherwise shall be a matter to which Section 18-111 of the Act shall apply and which shall be brought in the Court of Chancery of the State of Delaware. The Court of Chancery may summarily determine the Company's obligations to advance expenses (including attorney's fees). (h) No director shall be liable to the Company or the Members for monetary damages for any breach of fiduciary duty by such director as a director; provided, however, that a director shall be liable to the same extent as if he or she were a director of a Delaware corporation pursuant to the General Corporation Law of the State of Delaware (i) for breach of the directors' duty of loyalty to the Company or its Members, (ii) for acts or omissions not in good faith or a knowing violation of applicable law, (iii) pursuant to Section 174 of the General Corporation Law of the State of Delaware (as if he or she were a director of a Delaware corporation), or (iv) for any transaction for which the director derived an improper benefit. (i) For purposes of this Section 6.21, "DISINTERESTED DIRECTOR" means a director of the Company who is not and was not a party to the proceeding or matter in respect of which indemnification is sought by the claimant. ARTICLE 7 OFFICERS Section 7.1 General. (a) The officers of the Company shall be elected by the Board of Directors. Prior to the election of successors to the Initial Board, the officers of the Company shall consist of a Chief Executive Officer, Chief Financial Officer and Secretary. Thereafter, the officers of the Company shall consist of a Chief Executive Officer, a Chief Financial Officer, a General Counsel and a Secretary and, subject to clause (b) of this Section 7.1, such other officers as in the judgment of the Board of Directors may be necessary or desirable. All officers elected by the Board of Directors shall have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article 7. Such officers shall also have powers and duties as from time to time may be conferred by the Board of Directors or any committee thereof. Any number of offices may be held by the same Person, unless otherwise prohibited by 27 law or this Agreement. The officers of the Company need not be Members or directors of the Company. (b) For so long as the Management Services Agreement is in effect, the Manager shall, subject at all times to the supervision of the Board of Directors, provide and be responsible for the day-to-day management of the Company, including the secondment of personnel nominated to serve as the Chief Executive Officer, Chief Financial Officer, General Counsel and Secretary. In accordance with the terms of the Management Services Agreement, only the Manager will have the right to nominate officers of the Company. The Board of Directors shall elect such nominated personnel as officers of the Company in accordance with this Article 7. In the event that the appointment of the Manager is terminated pursuant to the terms of the Management Services Agreement and no replacement manager is retained, the Board of Directors may accept nominations for officers of the Company from the members of the Board of Directors. Section 7.2 Election and Term of Office. Subject to Section 7.1(b), the elected officers of the Company shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held after each annual meeting of the Members. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as is convenient. Each officer shall hold office until his or her successor shall have been duly elected and qualified or until his or her death or resignation or removal. Section 7.3 Chief Executive Officer. The Chief Executive Officer of the Company shall supervise, coordinate and manage the Company's business and operations, and supervise, coordinate and manage its activities, operating expenses and capital allocation, shall have general authority to exercise all the powers necessary for the Chief Executive Officer of the Company and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or this Agreement, all in accordance with basic policies as may be established by the Board of Directors and subject to the oversight of the Board of Directors. Section 7.4 Chief Financial Officer. The Chief Financial Officer shall have responsibility for the financial affairs of the Company, including the preparation of financial reports, managing financial risk and overseeing accounting and internal control over financial reporting, subject to the responsibilities of the Audit Committee. Prior to the appointment of a General Counsel, the Chief Financial Officer shall be responsible for the performance of the duties of Secretary. The Chief Financial Officer shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or this Agreement, all in accordance with basic policies as may be established by the Board of Directors and subject to the oversight of the Board of Directors and the Chief Executive Officer. Section 7.5 General Counsel. The General Counsel (if any) shall have responsibility for the legal affairs of the Company and for the performance of the duties of the Secretary. The General Counsel shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or this Agreement, all in accordance with basic policies as may be established by the Board of Directors and subject to the oversight of the Board of Directors and the Chairman and Chief Executive Officer. 28 Section 7.6 Secretary. The Secretary shall act as secretary of all meetings of Members, the Board of Directors and any meeting of any committee of the Board of Directors. The Secretary shall prepare and keep or cause to be kept in books provided for the purpose minutes of all meetings of Members, the Board of Directors and any meeting of any committee of the Board of Directors; shall see that all notices are duly given in accordance with the provisions of this Agreement and applicable law and shall perform all duties incident to the office of Secretary and as required by law and such other duties as may be assigned to him or her from time to time by the Board of Directors. Section 7.7 Resignations. Any officer of the Company may resign at any time upon notice of such resignation to the Company. Section 7.8 Vacancies. Except as provided in Section 7.1(b), a newly created office and a vacancy in any office because of death, resignation, or removal may be filled by the Board of Directors for the unexpired portion of the term at any meeting of the Board of Directors. Section 7.9 Limitation of Liability. No officer shall be liable to the Company or the Members for monetary damages for any breach of fiduciary duty by such officer as an officer; provided, however, that an officer shall be liable to the same extent as if such officer were an officer of a corporation incorporated under the General Corporation Law of the State of Delaware for (i) acts or omissions not in good faith or a knowing violation of applicable law or (ii) any transaction for which the officer derived an improper benefit. ARTICLE 8 MANAGEMENT Section 8.1 Duties of the Manager. For so long as the Management Services Agreement is in effect and subject at all times to the oversight of the Board of Directors, the Manager will manage the business of the Company and provide its services to the Company in accordance with the terms of the Management Services Agreement. Section 8.2 Replacement Manager. In the event that the Management Services Agreement is terminated and the Board of Directors determines that a replacement manager should be retained to provide for the management of the Company pursuant to a management services agreement or otherwise, the affirmative vote of a majority of the LLC Interests present in person or represented by proxy at the meeting of Members shall be required to retain such replacement manager. ARTICLE 9 THE MEMBERS Section 9.1 Rights or Powers. The Members shall not have any right or power to take part in the management or control of the Company or its business and affairs or to act for or bind the Company in any way. Notwithstanding the foregoing, the Members have all the rights 29 and powers specifically set forth in this Agreement including those rights and powers set forth in Section 11.1 and, to the extent not inconsistent with this Agreement, in the Act. Section 9.2 Annual Meetings of Members. The annual meeting of the Members of the Company shall be held at such date, at such time, and at such place (if any) within or without the State of Delaware as may be fixed by resolution of the Board of Directors. Section 9.3 Special Meetings of Members. Special meetings of the Members of the Company shall be held on such date, at such time, and at such place (if any) within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Special meetings of the Members may be called at any time only by the Secretary either at the direction of the Board of Directors pursuant to a resolution adopted by the Board of Directors or by the Chairman of the Board. Section 9.4 Place of Meeting. The Board of Directors may designate the place (if any) of meeting for any meeting of the Members. If no designation is made by the Board of Directors, the place of meeting shall be the principal office of the Company. In lieu of holding any meeting of Members at a designated place, the Board of Directors may, in its sole discretion, determine that any meeting of Members may be held solely by means of remote communication. Section 9.5 Notice of Meeting. (a) A notice of meeting, stating the place (if any), day and hour of the meeting, and the means of remote communication, if any, by which Members and proxy holders may be deemed to be present in person and vote at such meeting, shall be prepared and delivered by the Company not less than twenty (20) days and not more than sixty (60) days before the date of the meeting, either personally, by mail, or, to the extent and in the manner permitted by applicable law, electronically, to each Member of record. In the case of special meetings, the notice shall state the purpose or purposes for which such special meeting is called. Such further notice shall be given as may be required by law. Only such business shall be conducted at a special meeting of Members as shall have been brought before the meeting pursuant to the Company's notice of meeting. Any previously scheduled meeting of the Members may be postponed, and (unless this Agreement otherwise provides) any special meeting of the Members may be canceled, by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of Members. (b) Notice to Members may be given by personal delivery, mail or, with the consent of the Member entitled to receive notice, facsimile or other means of electronic transmission. If mailed, such notice shall be delivered by postage prepaid envelope directed to each stockholder at such Member's address as it appears in the records of the Company and shall be deemed given when deposited in the United Sates mail. Notice given by electronic transmission pursuant to this subsection shall be deemed given: (1) if by facsimile telecommunication, when directed to a facsimile telecommunication number at which the Member has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the Member has consented to receive notice; (3) if by posting on an electronic network together with separate notice to the Member of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (4) if by any other 30 form of electronic transmission, when directed to the Member. An affidavit of the Secretary or an assistant Secretary or of the transfer agent or other agent of the Company that the notice has been given by personal delivery, mail or a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein. (c) Notice of any meeting of Members need not be given to any Member if waived by such Member either in a writing signed by such Member or by electronic transmission, whether such waiver is given before or after such meeting is held. If such a waiver is given by electronic transmission, the electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the Member. (d) In order that the Company may determine the Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) or fewer than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. Section 9.6 Quorum and Adjournment. Except as otherwise provided by law or by the Certificate or this Agreement, the Members holding a majority of the voting power of the outstanding LLC Interests of the Company (the "REQUIRED LLC INTERESTS"), represented in person or by proxy, shall constitute a quorum at a meeting of Members. The Chairman of the Board or the holder of a majority of the voting power of the LLC Interests so represented may adjourn the meeting from time to time, whether or not there is such a quorum. Special meetings of the Members may be called at any time only by the Secretary either at the direction of the Board of Directors pursuant to a resolution adopted by the Board of Directors or by the Chairman of the Board. The Members present at a duly organized meeting at which a quorum is present in person or by proxy may continue to transact business until adjournment, notwithstanding the withdrawal of enough Members to leave less than a quorum. When a meeting is adjourned to another time and place, if any, unless otherwise provided by this Agreement, notice need not be given of the reconvened meeting if the date, time and place, if any, thereof and the means of remote communication, if any, by which Members and proxyholders may be deemed to be present in person and vote at such reconvened meeting are announced at the meeting at which the adjournment is taken. At the reconvened meeting, the Members may transact any business that might have been transacted at the original meeting. A determination of Members of record entitled to notice of or to vote at a meeting of Members shall apply to any adjournment of such meeting; provided, however, that the Board of Directors may fix a new record date for the reconvened meeting. If an adjournment is for more than thirty (30) days or if, after an adjournment, a new record date is fixed for the reconvened meeting, a notice of the reconvened meeting shall be given to each Member entitled to vote at the meeting. 31 Section 9.7 Proxies. For so long as the Trust is the sole Member, actions by Members required to be taken hereunder will be taken by the Trust pursuant to instructions given to the Trust by the holders of the Trust Stock in accordance with the Trust Agreement or otherwise pursuant to terms set forth in the Trust Agreement. At all meetings of Members, a Member may vote by proxy as may be permitted by law; provided that no proxy shall be voted after three (3) years from its date, unless the proxy provides for a longer period in accordance with the Trust Agreement. Any proxy to be used at a meeting of Members must be filed with the Secretary of the Company or his or her representative at or before the time of the meeting. Section 9.8 Notice of Member Business and Nominations. (a) Annual Meetings of Members. (i) Except in the case of the Initial Board, nominations of individuals for election to the Board of Directors of the Company, other than the Chairman, for so long as the Manager is entitled to appoint the director of the Board of Directors to serve as Chairman pursuant to the terms of the Management Services Agreement, and the proposal of business to be considered by the Members may be made at an annual meeting of Members (A) pursuant to the Company's notice of meeting delivered pursuant to Section 9.5 of this Agreement, (B) by or at the direction of the Board of Directors or (C) by any Member of the Company who is entitled to vote at the meeting, who complied with the notice procedures set forth in clauses (ii) and (iii) of this Section 9.8(a) and who was a Member of record at the time such notice is delivered to the Secretary of the Company. (ii) For nominations or other business to be properly brought before an annual meeting by a Member pursuant to clause (C) of paragraph (a)(i) of this Section 9.8, the Member must have given timely notice thereof in writing to the Secretary of the Company and, in the case of business other than nominations, such other business must otherwise be a proper matter for Member action. To be timely, a Member's notice shall be delivered to the Secretary at the principal executive offices of the Company not less than ninety (90) days nor more than one hundred and twenty (120) days prior to the first anniversary of the preceding year's annual meeting; provided, however, that, in the case of the first annual meeting of Members of the Company, a Member's notice shall be timely if it is delivered to the Secretary at the principal executive offices of the Company not more than ninety (90) days following the end of the Company's first Fiscal Year; and provided further that, in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than ninety (90) days from such anniversary date, notice by the Member to be timely must be so delivered not earlier than the one hundred and twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement or an adjournment or postponement of an annual meeting commence a new time period for the giving of a Member's notice as described in this Section 9.8(a). Subject to Section 9.8(a)(i), such Member's notice shall set forth: (A) as to each individual whom the Member proposes to nominate for election or reelection as a director, all information relating to such individual that is required to be disclosed in solicitations of proxies 32 for election of directors in an election contest, or is otherwise required, in Regulation 14A under the Exchange Act, including such individual's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (B) as to any other business that the Member proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such Member and the beneficial owner or holder of Shares of Trust Stock, if any, on whose behalf the proposal is made; and (C) as to the Member giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (1) the name and address of such Member as they appear on the Company's books and of such beneficial owner and (2) the number of LLC Interests of the Company which are owned beneficially and of record by such Member and such beneficial owner. (iii) Notwithstanding anything in the second sentence of clause (ii) of this Section 9.8(a) to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Company is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Company at least one hundred (100) days prior to the first anniversary of the preceding year's annual meeting, a Member's notice required by this Section 9.8 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Company not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Company. (b) Special Meeting of Members. Only such business shall be conducted at a special meeting of Members as shall have been brought before the meeting pursuant to the Company's notice of meeting pursuant to Section 9.5 of this Agreement. Nominations of individuals for election to the Board of Directors, other than the Chairman, for so long as the Manager is entitled to appoint the director of the Board of Directors to serve as Chairman pursuant to the terms of the Management Services Agreement, may be made at a special meeting of Members at which directors are to be elected pursuant to the Company's notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any Member of the Company who is entitled to vote at the meeting who complies with the notice procedures set forth in this Section 9.8 and who is a Member of record at the time such notice is delivered to the Secretary of the Company. In the event the Company calls a special meeting of Members for the purpose of electing one or more directors to the Board of Directors, any such Member may nominate such number of individuals for election to such position(s) as are specified in the Company's Notice of Meeting, if the Member's notice as required by clause (ii) of Section 9.8(a) of this Agreement shall be delivered to the Secretary at the principal executive offices of the Company not earlier than the one hundred and twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period for the giving of a Member's notice as described above. 33 (c) General. (i) Only individuals who are nominated in accordance with the procedures set forth in this Section 9.8 shall be eligible to be elected as directors at a meeting of Members and only such business shall be conducted at a meeting of Members as shall have been brought before the meeting in accordance with the procedures set forth in this Section 9.8. Except as otherwise provided by applicable law or this Section 9.8, the Chairman of the Board shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 9.8 and, if any proposed nomination or business is not in compliance with this Section 9.8, to declare that such defective proposal or nomination shall be disregarded. (ii) For purposes of this Section 9.8, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (iii) Notwithstanding the foregoing provisions of this Section 9.8, a Member shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 9.8. Nothing in this Section 9.8 shall be deemed to affect any rights of Members to request inclusion of proposals in the Company's proxy statement pursuant to Rule 14a-8 under the Exchange Act. Section 9.9 Procedure for Election of Directors; Voting. The election of directors submitted to Members at any meeting shall be decided by a plurality of the votes cast thereon. Except as otherwise provided by law or this Agreement, all matters other than the election of directors submitted to the Members at any meeting shall be decided by the affirmative vote of a majority of the LLC Interests present in person or represented by proxy at the meeting of Members. The vote on any matter at a meeting, including the election of directors, shall be by written ballot. Each ballot shall be signed by the Member voting, or by such Member's proxy, and shall state the number of LLC Interests voted. Section 9.10 Inspectors of Elections; Opening and Closing the Polls. (a) If the Trust is not the sole owner of LLC Interests, the Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may not be directors, officers or employees of the Company, to act at the meeting and make a written report thereof. One or more individuals may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been so appointed to act, or if all inspectors or alternates who have been appointed are unable to act, at a meeting of Members, the Chairman of the Board shall appoint one or more inspectors to act at the meeting. Each such inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by the General Corporation Law of the State of Delaware as if the Company were a Delaware corporation. 34 (b) If the Trust is not the sole owner of LLC Interests, the Chairman of the Board shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the Members will vote at the meeting. Section 9.11 Confidential Member Voting. If the Trust is not the sole owner of the LLC Interests, all proxies, ballots and votes, in each case to the extent they disclose the specific vote of an identified Member, shall be tabulated and certified by an independent tabulator, inspector of elections and/or other independent parties and shall not be disclosed to any director, officer or employee of the Company; provided, however, that, notwithstanding the foregoing, any and all proxies, ballots and voting tabulations may be disclosed: (a) as necessary to meet legal requirements or to assist in the pursuit or defense of legal action; (b) if the Company concludes in good faith that a bona fide dispute exists as to the authenticity of one or more proxies, ballots or votes, or as to the accuracy of any tabulation of such proxies, ballots or votes; (c) in the event of a proxy, consent or other solicitation in opposition to the voting recommendation of the Board of Directors; and (d) if the Member requests or consents to disclosure of the Member's vote or writes comments on the Member's proxy card or ballot. Section 9.12 Waiver of Notice. Whenever any notice is required to be given to any Member or director of the Company by the terms of this Agreement, a waiver thereof in writing, signed by the Person or Persons entitled to such notice, or a waiver by electronic transmission by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the Members or any meeting of the Board of Directors or committee thereof need be specified in any written waiver of notice or any waiver by electronic transmission of such meeting. Section 9.13 Remote Communication. For the purposes of this Agreement, if authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board of Directors may adopt, Members and proxyholders may, by means of remote communication: (a) participate in a meeting of Members; and (b) be deemed present in person and vote at a meeting of Members whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the Company shall implement reasonable measures to verify that each Person deemed present and permitted to vote at the meeting by means of remote communication is a Member or proxyholder, (ii) the Company shall implement reasonable measures to provide such Members and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the Members, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any Member or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Company. Section 9.14 Member Action Without a Meeting. 35 (a) Except as otherwise provided by law, this Agreement or the Certificate, any action required to be taken at any meeting of Members, or any action that may be taken at any annual or special meeting of such Members, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the Members holding LLC Interests having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all Members were present and voted and shall be delivered to the Company by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Company having custody of the book or books in which meetings of Members are recorded; provided, however, that delivery made to the Company's registered office in the State of Delaware shall be by hand or by certified mail, return receipt requested. Prompt notice of the taking of action without a meeting by less than unanimous written consent shall be given to those Members who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed, by a sufficient number of the Members to take the action, were delivered to the Company. (b) A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a Member or proxyholder, or by a Person or Persons authorized to act for a Member or proxyholder, shall be deemed to be written, signed and dated for the purposes of this Agreement, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the Company can determine (i) that the telegram, cablegram or other electronic transmission was transmitted by the Member or proxyholder or by a Person or Persons authorized to act for the Member or proxyholder and (ii) the date on which such Member or proxyholder or authorized Person or Persons transmitted such telegram, cablegram or electronic transmission. Any consent by means of telegram, cablegram or other electronic transmission shall be deemed to have been signed on the date on which such telegram, cablegram or electronic transmission was transmitted. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered to the Company by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Company having custody of the book in which proceedings of meetings are recorded. Delivery made to a Company's registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram, or other electronic transmission may be otherwise delivered to the principal place of business of the Company or to an officer or agent of the Company having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent, and in the manner provided by resolution of the Board of Directors of the Company. (c) Any copy, facsimile or other reliable reproduction of a consent in writing (or reproduction in paper form of a consent by telegram, cablegram, or electronic transmission) may be substituted or used in lieu of the original writing (or original reproduction in paper form of a consent by telegram, cablegram, or electronic transmission) for any and all purposes for which the original consent could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing (or original reproduction in paper form of a consent by telegram, cablegram, or electronic transmission). 36 (d) In order to determine the Members entitled to consent to action in writing without a meeting, the Board of Directors may fix a record date. Such record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directions. If no record date has been fixed by the Board of Directors, the record date for determining Members entitled to consent to action in writing without a meeting, when no prior action of the Board of Directors is required by applicable law, the Certificate or this Agreement, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company in the manner set forth in subsections (a) and (b) of this Section 9.14. If no record date has been fixed by the Board of Directors and prior action of the Board of Directors is required by applicable law, the Certificate or this Agreement, the record date for determining Members entitled to consent to action in writing without a meeting shall be the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. Section 9.15 Return on Capital Contribution. Except as otherwise provided in Section 13 hereof, no Member shall demand or receive a return on or of its Capital Contributions or withdraw from the Company. Section 9.16 Member Compensation. No Member shall receive any interest, salary or drawing with respect to its Capital Contributions or its Capital Account or for services rendered on behalf of the Company, or otherwise, in its capacity as a Member, except as otherwise provided in this Agreement. Section 9.17 Member Liability. No Member shall be liable under a judgment, decree or order of a court, or in any other manner, for the Debts or any other obligations or liabilities of the Company. A Member shall be liable only to make its Capital Contributions and shall not be required to restore a deficit balance in its Capital Account or to lend any funds to the Company or, after its Capital Contributions have been made, to make any additional contributions, assessments or payments to the Company, provided that a Member may be required to repay dividend or other distributions made to it as provided in Section 5.3 hereof or Section 18-607 of the Act. The Manager shall not have any personal liability for the repayment of any Capital Contributions of any Member. ARTICLE 10 ACCOUNTING, BOOKS AND RECORDS Section 10.1 Accounting, Books and Records. The Company, other than as provided in the Management Services Agreement, shall keep or cause to be kept at its principal office appropriate books and records with respect to the Company's business, including, without limitation, all books and records necessary to provide to the Members any information, lists and copies of documents required to be provided pursuant to applicable law. Any books and records maintained by or on behalf of the Company in the regular course of its business, including, without limitation, the record of the Members, books of account and records of Company proceedings, may be kept in electronic or any other form, provided that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. 37 The books of the Company shall be maintained, for financial reporting purposes, on an accrual basis in accordance with GAAP. Section 10.2 Reports. (a) In General. The Chief Financial Officer of the Company shall be responsible for causing the preparation of financial reports of the Company and the coordination of financial matters of the Company with the Company's accountants. (b) Periodic and Other Reports. The Company shall cause to be delivered to each Member the financial statements listed in clauses (i) and (ii) below, prepared in each case (other than with respect to Members' Capital Accounts, which shall be prepared in accordance with this Agreement) in accordance with GAAP consistently applied (and, if required by any Member or its Controlled Affiliates for purposes of reporting thereunder, Regulation S-X of the Exchange Act). The monthly and quarterly financial statements referred to in clause (ii) below may be subject to normal year-end audit adjustments. (i) As soon as practicable following the end of each Fiscal Year (and in any event not later than the date on which the Rules and Regulations provide) and at such time as distributions are made to the Members pursuant to Article 13 hereof following the occurrence of a Dissolution Event, a balance sheet of the Company as of the end of such Fiscal Year and the related statements of operations, Members' Capital Accounts and changes therein, and cash flows for such Fiscal Year, together with appropriate notes to such financial statements and supporting schedules, all of which shall be audited and certified by the Company's accountants, and in each case, to the extent the Company was in existence, setting forth in comparative form the corresponding figures for the immediately preceding Fiscal Year end (in the case of the balance sheet) and the two (2) immediately preceding Fiscal Years (in the case of the statements); and (ii) As soon as practicable following the end of each of the first three Fiscal Quarters of each Fiscal Year (and in any event not later than the date on which the Rules and Regulations require), a balance sheet of the Company as of the end of such Fiscal Quarter and the related statements of operations and cash flows for such Fiscal Quarter and for the Fiscal Year to date, in each case, to the extent the Company was in existence, setting forth in comparative form the corresponding figures for the prior Fiscal Year's Fiscal Quarter and the interim period corresponding to the Fiscal Quarter and the interim period just completed. The quarterly or monthly statements described in clause (ii) above shall be accompanied by such written certifications as the Rules and Regulations require. Section 10.3 Tax Matters. (a) Preparation of Tax Returns. The Company on behalf of the Trust shall arrange for the preparation and timely filing of all returns of Company income, gains, deductions, losses and other items required of the Company for U.S. federal and state income tax purposes. The classification, realization and recognition of income, gains, deductions, losses and 38 other items shall be on the accrual method of accounting for U.S. federal income tax purposes. The taxable year of the Company shall be the calendar year. (b) Tax Elections. The Board of Directors shall, without any further consent of the Members being required (except as specifically required herein), make (i) the election to adjust the basis of Property pursuant to Code Sections 754, 734(b) and 743(b), or comparable provisions of state, local or foreign law, in connection with Transfers of LLC Interests and Company dividend or other distributions; and (ii) any and all other elections for U.S. federal, state, local and foreign tax purposes, including, without limitation, any election, if permitted by applicable law: (x) to extend the statute of limitations for assessment of tax deficiencies against the Members with respect to adjustments to the Company's U.S. federal, state, local or foreign tax returns; and (y) to the extent provided in Code Sections 6221 through 6231 and similar provisions of U.S. federal, state, local or foreign law, to represent the Company and the Members before taxing authorities or courts of competent jurisdiction in tax matters affecting the Company or the Members in their capacities as Members, and to file any tax returns and execute any agreements or other documents relating to or affecting such tax matters, including agreements or other documents that bind the Members with respect to such tax matters or otherwise affect the rights of the Company and the Members. Macquarie Infrastructure Management (USA) Inc. is specifically authorized to act as the "TAX MATTERS MEMBER" under the Code and in any similar capacity under state or local law. ARTICLE 11 AMENDMENTS Section 11.1 Amendments. The Board of Directors is authorized to amend the terms of this Agreement at any meeting of the Board of Directors by the affirmative vote of a majority of the number of directors then in office or by consent in accordance with Section 6.13; provided, however, that Sections 1.3, 2.3, 2.4, 3.2, 3.3, 6.21 and 8.2 may not be amended without the affirmative vote of a majority of the LLC Interests present in person or represented by proxy at the meeting of Members. ARTICLE 12 TRANSFERS Section 12.1 Distributions and Allocations in Respect of Transferred LLC Interests. If any LLC Interests are Transferred during any Allocation Year, Profits, Losses, each item thereof and all other items attributable to the Transferred LLC Interests for such Allocation Year shall, for U.S. federal income tax purposes, be determined on an annual basis and prorated on a monthly basis and the pro rata portion for each month shall be allocated to those Persons who are Members as of the close of the New York Stock Exchange on the last day of the preceding month. All dividend or other distributions on or before the date of such Transfer shall be made to the transferor, and all dividend or other distributions thereafter shall be made to the transferee. The Board of Directors may revise, alter or otherwise modify such methods of 39 allocation as it determines necessary, to the extent permitted or required by Code Section 706 and the Regulations or rulings promulgated thereunder. ARTICLE 13 DISSOLUTION AND WINDING-UP Section 13.1 Dissolution Events. (a) Dissolution. The Company shall dissolve and shall commence winding up and liquidating upon the first to occur of any of the following (each a "DISSOLUTION EVENT"): (i) The unanimous vote of the Members to dissolve, wind up and liquidate the Company; or (ii) A judicial determination that an event has occurred that makes it unlawful, impossible or impractical to carry on the business of the Company as then currently operated. The Members hereby agree that, notwithstanding any provision of the Act, the Company shall not dissolve prior to the occurrence of a Dissolution Event. (b) Reconstitution. If it is determined by a court of competent jurisdiction that the Company has dissolved prior to the occurrence of a Dissolution Event, then, within an additional ninety (90) days after such determination (the "RECONSTITUTION PERIOD"), all of the Members may elect to reconstitute the Company and continue its business on the same terms and conditions set forth in this Agreement by forming a new limited liability company on terms identical to those set forth in this Agreement. Unless such an election is made within the Reconstitution Period, the Company shall liquidate and wind up its affairs in accordance with Section 13.2 hereof. If such an election is made within the Reconstitution Period, then: (i) The reconstituted limited liability company shall continue until the occurrence of a Dissolution Event as provided in Section 13.1(a); and (ii) Unless otherwise agreed to by a majority of the Members, the Certificate and this Agreement shall automatically constitute the Certificate and Agreement of such new Company. All of the assets and liabilities of the dissolved Company shall be deemed to have been automatically assigned, assumed, conveyed and transferred to the new Company. No bond, collateral, assumption or release of any Member's or the Company's liabilities shall be required; provided that the right of the Members to select replacement managers and to reconstitute and continue the business shall not exist and may not be exercised unless the Company has received an opinion of counsel that the exercise of such right would not result in the loss of limited liability of any Member and neither the Company nor the reconstituted limited liability company would cease to be treated as a partnership for U.S. federal income tax purposes upon the exercise of such right to continue. 40 Section 13.2 Winding-Up. Upon the occurrence of (i) a Dissolution Event or (ii) the determination by a court of competent jurisdiction that the Company has dissolved prior to the occurrence of a Dissolution Event (unless the Company is reconstituted pursuant to Section 13.1(b) hereof), the Company shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Members, and no Member shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding-up of the Company's business and affairs, provided that all covenants contained in this Agreement and obligations provided for in this Agreement shall continue to be fully binding upon the Members until such time as the Property has been distributed pursuant to this Section 13.2 and the Certificate has been canceled pursuant to the Act. The Liquidator shall be responsible for overseeing the winding-up and dissolution of the Company, which winding-up and dissolution shall be completed within ninety (90) days of the occurrence of the Dissolution Event and within ninety (90) days after the last day on which the Company may be reconstituted pursuant to Section 13.1(b) hereof. The Liquidator shall take full account of the Company's liabilities and Property and shall cause the Property or the proceeds from the sale thereof (as determined pursuant to Section 13.9 hereof), to the extent sufficient therefor, to be applied and distributed, to the maximum extent permitted by law, in the following order: (a) First, to creditors (including the Manager and the Members who are creditors, to the extent otherwise permitted by law) in satisfaction of all of the Company's Debts and other liabilities (whether by payment or the making of reasonable provision for payment thereof), other than liabilities for which reasonable provision for payment has been made and liabilities for distribution to Members under Section 18-601 or 18-604 of the Act; (b) Second, except as provided in this Agreement, to Members and former Members of the Company in satisfaction of liabilities for distribution under Section 18-601 or 18-604 of the Act; and (c) The balance, if any, to the Members in accordance with the positive balance in their Capital Accounts, after giving effect to all contributions, distributions and allocations for all periods. No Member or Manager shall receive additional compensation for any services performed pursuant to this Article 13. Section 13.3 Compliance with Certain Requirements of Regulations; Deficit Capital Accounts. In the event the Company is "liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article 13 to the Members who have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Member has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all Allocation Years, including the Allocation Year during which such liquidation occurs), such Member shall have no obligation to make any contribution to the capital of the Company with respect to such deficit, and such deficit shall not be considered a debt owed to the Company or to any other Person for any purpose 41 whatsoever. In the discretion of the Liquidator, a pro rata portion of the distributions that would otherwise be made to the Members pursuant to this Article 13 may be: (a) Distributed to a trust established for the benefit of the Members for the purposes of liquidating Company assets, collecting amounts owed to the Company, and paying any contingent or unforeseen liabilities or obligations of the Company. The assets of any such trust shall be distributed to the Members from time to time, in the reasonable discretion of the Liquidator, in the same proportions as the amount distributed to such trust by the Company would otherwise have been distributed to the Members pursuant to Section 13.2 hereof; or (b) Withheld to provide a reasonable reserve for Company liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Company, provided that such withheld amounts shall be distributed to the Members as soon as practicable. Section 13.4 Deemed Distribution and Recontribution. Notwithstanding any other provision of this Article 13, in the event the Company is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Dissolution Event has occurred, the Property shall not be liquidated, the Company's Debts and other Liabilities shall not be paid or discharged, and the Company's affairs shall not be wound up. Instead, solely for U.S. federal income tax purposes, the Company shall be deemed to have contributed all its Property and liabilities to a new limited liability company in exchange for an interest in such new company and, immediately thereafter, the Company will be deemed to liquidate by distributing interests in the new company to the Members. Section 13.5 Rights of Members. Except as otherwise provided in this Agreement, each Member shall look solely to the Property of the Company for the return of its Capital Contribution and has no right or power to demand or receive Property other than cash from the Company. If the assets of the Company remaining after payment or discharge of the debts or liabilities of the Company are insufficient to return such Capital Contribution, the Members shall have no recourse against the Company or any other Member or the Manager. Section 13.6 Notice of Dissolution/Termination. (a) In the event a Dissolution Event occurs or an event occurs that would, but for the provisions of Section 13.1, result in a dissolution of the Company, the Board of Directors shall, within thirty (30) days thereafter, provide written notice thereof to each of the Members and to all other parties with whom the Company regularly conducts business (as determined in the discretion of the Board of Directors) and shall publish notice thereof in a newspaper of general circulation in each place in which the Company regularly conducts business (as determined in the discretion of the Board of Directors). (b) Upon completion of the distribution of the Company's Property as provided in this Article 13, the Company shall be terminated, and the Board of Directors shall cause the filing of the Certificate of Cancellation pursuant to Section 18-203 of the Act and shall take all such other actions as may be necessary to terminate the Company. 42 Section 13.7 Allocations During Period of Liquidation. During the period commencing on the first day of the Fiscal Year during which a Dissolution Event occurs and ending on the date on which all of the assets of the Company have been distributed to the Members pursuant to Section 13.2 hereof (the "LIQUIDATION PERIOD"), the Members shall continue to share Profits, Losses, gain, loss and other items of Company income, gain, loss or deduction in the manner provided in Article 4 hereof. Section 13.8 Character of Liquidating Distributions. All payments made in liquidation of the interest of a Member in the Company shall be made in exchange for the interest of such Member in Property pursuant to Section 736(b)(1) of the Code, including the interest of such Member in Company goodwill. Section 13.9 The Liquidator. (a) Definition. The "LIQUIDATOR" shall mean a Person appointed by the Board of Directors to oversee the liquidation of the Company. (b) Fees. The Company is authorized to pay a reasonable fee to the Liquidator for its services performed pursuant to this Article 13 and to reimburse the Liquidator for its reasonable costs and expenses incurred in performing those services. (c) Indemnification. The Company shall indemnify, hold harmless and pay all judgments and claims against the Liquidator or any officers, directors, agents or employees of the Liquidator relating to any liability or damage incurred by reason of any act performed or omitted to be performed by the Liquidator or any officers, directors, agents or employees of the Liquidator in connection with the liquidation of the Company, including reasonable attorneys' fees incurred by the Liquidator, officer, director, agent or employee in connection with the defense of any action based on any such act or omission, which attorneys' fees may be paid as incurred, except to the extent such liability or damage is caused by the fraud or intentional misconduct of, or a knowing violation of the laws by, the Liquidator which was material to the cause of action. Section 13.10 Form of Liquidating Distributions. For purposes of making distributions required by Section 13.2 hereof, the Liquidator may determine whether to distribute all or any portion of the Property in kind or to sell all or any portion of the Property and distribute the proceeds therefrom. ARTICLE 14 MISCELLANEOUS Section 14.1 Notices. Any notice, payment, demand or communication required or permitted to be given by any provision of this Agreement shall be in writing and shall be deemed to have been delivered, given and received for all purposes (i) if delivered personally to the Person or to an officer of the Person to whom the same is directed, or (ii) when the same is actually received, if sent either by registered or certified mail, postage and charges prepaid, or by facsimile, if such facsimile is followed by a hard copy of the facsimile communication sent 43 promptly thereafter by registered or certified mail, postage and charges prepaid, addressed as follows, or to such other address as such Person may from time to time specify by notice to the Members and the Manager: (a) If to the Company: 600 Fifth Avenue, 21st Floor New York, New York 10020 Attention: David Mitchell Facsimile No.: (212) 581-8037; (b) If to the Manager: 600 Fifth Avenue, 21st Floor New York, New York 10020 Attention: David Mitchell Facsimile No.: (212) 581-8037; and (c) If to the Trust: 600 Fifth Avenue, 21st Floor New York, New York 10020 Attention: David Mitchell Facsimile No.: (212) 581-8037. Section 14.2 Binding Effect. Except as otherwise provided in this Agreement, every covenant, term and provision of this Agreement shall be binding upon and inure to the benefit of the Members and their respective successors, transferees and assigns. Section 14.3 Construction. Every covenant, term and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any Member. Section 14.4 Time. In computing any period of time pursuant to this Agreement, the day of the act, event or default from which the designated period of time begins to run shall not be included, but the time shall begin to run on the next succeeding day. The last day of the period so computed shall be included, unless it is a Saturday, Sunday or legal holiday, in which event the period shall run until the end of the next day which is not a Saturday, Sunday or legal holiday. Section 14.5 Headings. Section and other headings contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof. Section 14.6 Severability. Except as otherwise provided in the succeeding sentence, every provision of this Agreement is intended to be severable, and, if any term or provision of this Agreement is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity or legality of the remainder of this Agreement. The 44 preceding sentence of this Section 14.6 shall be of no force or effect if the consequence of enforcing the remainder of this Agreement without such illegal or invalid term or provision would be to cause any Member to lose the material benefit of its economic bargain. Section 14.7 Incorporation by Reference. Every exhibit, schedule and other appendix attached to this Agreement and referred to herein is not incorporated in this Agreement by reference unless this Agreement expressly otherwise provides. Section 14.8 Variation of Terms. All terms and any variations thereof shall be deemed to refer to masculine, feminine or neuter, singular or plural, as the identity of the Person or Persons may require. Section 14.9 Governing Law and Consent to Jurisdiction/Service of Process. The laws of the State of Delaware shall govern the validity of this Agreement, the construction of its terms and the interpretation of the rights and duties arising hereunder. Each party hereto and any Person acquiring an LLC Interest, from time to time, (i) irrevocably submits to the non-exclusive jurisdiction and venue of any Delaware State court or U.S. federal court sitting in Wilmington, Delaware in any action arising out of this Operating Agreement and (ii) consents to the service of process by mail. Nothing herein shall affect the right of any party to serve legal process in any manner permitted by law or affect its right to bring any action in any other court. Section 14.10 Waiver of Jury Trial. Each of the Members irrevocably waives, to the extent permitted by law, all rights to trial by jury and all rights to immunity by sovereignty or otherwise in any action, proceeding or counterclaim arising out of or relating to this Agreement. Section 14.11 Counterpart Execution. This Agreement may be executed in any number of counterparts with the same effect as if all of the Members had signed the same document. All counterparts shall be construed together and shall constitute one agreement. Section 14.12 Specific Performance. Each Member agrees with the other Members that the other Members would be irreparably damaged if any of the provisions of this Agreement were not performed in accordance with their specific terms and that monetary damages would not provide an adequate remedy in such event. Accordingly, it is agreed that, in addition to any other remedy to which the nonbreaching Members may be entitled, at law or in equity, the nonbreaching Members shall be entitled to injunctive relief to prevent breaches of the provisions of this Agreement and specifically to enforce the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction thereof. 45 IN WITNESS WHEREOF, the Original Member has executed and entered into this Operating Agreement of the Company as of the day first above set forth. MACQUARIE INFRASTRUCTURE ASSETS TRUST By: /s/ Peter Stokes ----------------------------------- Name: Peter Stokes Title: Regular Trustee 46 EXHIBIT A SPECIMEN LLC INTEREST CERTIFICATE A-1 NUMBER____ ORGANIZED UNDER THE LAWS ______LLC OF INTERESTS THE STATE OF DELAWARE MACQUARIE INFRASTRUCTURE ASSETS LLC This Certifies that _________________________ is the owner of ___ LLC Interests of the Company with such rights and privileges as are set forth in the Operating Agreement of the Company dated _______________ (the "Operating Agreement"), as it may be amended from time to time. THE LLC INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), THE SECURITIES LAWS OF ANY STATE (THE "STATE ACTS") OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE LLC INTERESTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, BY ANY STATE SECURITIES COMMISSION OR BY ANY OTHER REGULATORY AUTHORITY OF ANY OTHER JURISDICTION. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. NEITHER THE LLC INTERESTS NOR ANY PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OR FOR WHICH SUCH REGISTRATION IS OTHERWISE NOT REQUIRED AND (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER ANY APPLICABLE STATE ACTS OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER SUCH STATE ACTS OR FOR WHICH SUCH REGISTRATION OTHERWISE IS NOT REQUIRED. THE LLC INTERESTS REPRESENTED BY THIS CERTIFICATE EVIDENCE THE PROPORTIONATE PORTION OF SUCH HOLDER'S LIMITED LIABILITY COMPANY INTEREST IN THE COMPANY. THE LLC INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TRANSFER RESTRICTIONS CONTAINED IN SECTION 12 OF THE OPERATING AGREEMENT OF THE COMPANY. EVERY HOLDER OF THIS CERTIFICATE, BY HOLDING AND RECEIVING THE SAME, AGREES WITH THE COMPANY TO BE BOUND BY THE TERMS OF THE OPERATING AGREEMENT OF THE COMPANY. A STATEMENT OF THE RELATIVE RIGHTS AND PREFERENCES OF THE COMPANY'S LLC INTERESTS WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST WITHOUT CHARGE. THERE IS CURRENTLY NO PUBLIC MARKET FOR THE LLC INTERESTS. THEREFORE, RECIPIENTS OF LLC INTERESTS WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. In Witness Whereof, said Company has caused this Certificate to be signed by its Chief Executive Officer this ____ day of ______, A.D. ____. __________________________ AS CHIEF EXECUTIVE OFFICER EX-10.7 6 y97636exv10w7.txt SHAREHOLDERS' AGREEMENT EXHIBIT 10.7 MACQUARIE YORKSHIRE LIMITED and BALFOUR BEATTY PLC and YORKSHIRE LINK (HOLDINGS) LIMITED and YORKSHIRE LINK LIMITED and MACQUARIE EUROPEAN INFRASTRUCTURE PLC _____________________________________ SHAREHOLDERS AGREEMENT relating to YORKSHIRE LINK (HOLDINGS) LIMITED and YORKSHIRE LINK LIMITED _____________________________________ CONTENTS
CLAUSE PAGE 1. INTERPRETATION........................................................... 2 2. WARRANTIES............................................................... 5 3. OBJECTIVES OF THE SHAREHOLDERS, YHL AND YLL.............................. 5 4. NOT USED................................................................. 6 5. MANAGEMENT............................................................... 6 6. RESERVED MATTERS......................................................... 7 7. PERSONNEL................................................................ 8 8. CONTINUING OBLIGATIONS................................................... 9 9. DIVIDEND POLICY.......................................................... 10 10. RESTRICTIVE COVENANTS.................................................... 10 10A. MEANING OF TERMS IN CLAUSES 11, 11A AND 12............................... 11 11. TRANSFER OF SHARES....................................................... 12 11A PRE-EMPTIVE RIGHTS....................................................... 16 12. TRANSFER OF YLL LOAN STOCK AND COMMERCIAL SUBORDINATED LOAN AGREEMENT.... 20 13. DEFAULT.................................................................. 21 14. CONFIDENTIALITY.......................................................... 22 15. DURATION................................................................. 22 16. DISPUTES................................................................. 23 17. TAX AND THE SURRENDER OF LOSSES.......................................... 23 18. ANNOUNCEMENTS............................................................ 31 19. NOTICES AND RECEIPTS..................................................... 31 20. COSTS AND VAT............................................................ 31 21. SEVERABILITY............................................................. 32 22. WHOLE AGREEMENT.......................................................... 32 23. GENERAL.................................................................. 32 24. NOT USED................................................................. 33 25. COUNTER INDEMNITY........................................................ 33 26. GOVERNING LAW............................................................ 33 SCHEDULES SCHEDULE 1 .......................................................................... 34 SCHEDULE 2 .......................................................................... 36 SCHEDULE 3 .......................................................................... 39 SCHEDULE 4 .......................................................................... 40 Signatories ......................................................................... 41
i THIS AGREEMENT is made on 26th March, 1996 as amended and restated on 30 April 2003 BETWEEN: (1) MACQUARIE YORKSHIRE LIMITED (registered number 4712996) whose registered office is at Level 29 and 30, 1 Ropemaker Street, London EC2Y 9HD ("MYL"); (2) BALFOUR BEATTY PLC (registered number 395826) whose registered office is at 130 Wilton Road, London SW1V 1LQ ("BB"); (3) YORKSHIRE LINK (HOLDINGS) LIMITED (registered number 3059235) whose registered office is at Level 29 and 30, 1 Ropemaker Street, London EC2Y 9HD ("YHL"); (4) YORKSHIRE LINK LIMITED (registered number 2999303) whose registered office is at Level 29 and 30, 1 Ropemaker Street, London EC2Y 9HD ("YLL"); and (5) MACQUARIE EUROPEAN INFRASTRUCTURE PLC (registered number 867281) whose registered office is at Level 29 and 30, 1 Ropemaker Street, London EC2Y 9HD ("MEIP"). WHEREAS: (A) YHL is a private company limited by shares short particulars of which are set out in Part 1 of Schedule 1. (B) YLL is a private company limited by shares short particulars of which are set out in Part 2 of Schedule 1. (C) YLL is the wholly owned subsidiary of YHL. (D) The main business of YHL is the making and holding of its investment in YLL. (E) YLL has entered into the DBFO Contract, raised the finance for the Project (under the terms and conditions of the Funding Agreements) and is currently undertaking the Project. (F) MYL and BB are shareholders in YHL. (G) The parties have agreed to enter into this agreement for the purposes of (i) regulating, as between the parties, their relationship with each other as shareholders in YHL and (ii) regulating, as between all of the parties, certain aspects of the affairs of YHL and YLL. IT IS AGREED as follows: 1. INTERPRETATION (1) In this agreement: "AFFILIATE" means in relation to any member, any subsidiary undertaking or parent undertaking or any other subsidiary undertaking of that parent undertaking save that in relation to MYL, it means MEIP and any subsidiary undertaking of MEIP; "ARTICLES" means the articles of association of YHL or YLL (as the case may be); "BF LETTER OF CREDIT" has the meaning given to it in the EIB Facility Agreement (as defined in the Intercreditor Agreement). "BOARD" means the board of Directors for the time being of YHL or YLL (as the case may be); "BUSINESS DAY" means a day (other than a Saturday or Sunday) on which banks are generally open in London for normal business; "COMMERCIAL BANK FACILITY AGREEMENT" means a facility agreement between, amongst others, YLL, the financial institutions described as lenders therein, the arrangers described therein and ABN AMRO Bank NV as agent in relation to certain credit facilities in favour of YLL; "COMMERCIAL SUBORDINATED LOAN AGREEMENT" means a subordinated loan agreement between YLL (as borrower) and MYL and BB (as lenders); "COMPANY" means YHL or YLL, as the case may be; "COMPLETION DATE" means 26 March 1996; "CONSTRUCTION CONTRACT" means the construction contract entered into on 26 March 1996 and made between YLL as employer and each of Balfour Beatty Civil Engineering Limited and Skanska Construction UK Limited as the contractor for the design and construction of the Project; "DBFO CONTRACT" means the concession agreement dated 26 March 1996 between the Secretary of State for Transport and YLL requiring YLL to design, build, finance and operate the M1-A1 Link Road (Lofthouse to Bramham) in return for shadow tolls; "DIRECTOR" means any director for the time being of YHL or YLL as the case may be; "EIB" means European Investment Bank of 100 Boulevard Konrad Adenauer, L-2950 Luxembourg; "EIB FACILITY AGREEMENT" means a facility agreement between YLL and EIB in relation to certain credit facilities in favour of YLL; 2 "FINANCIAL YEAR" means a financial year for the purposes of the Companies Act 1985; "FUNDING AGREEMENT" means each of the Commercial Bank Facility Agreement, the EIB Facility Agreement and (each as defined in the Intercreditor Agreement) the EIF Senior Guarantee Facility Agreement, the Commercial Subordinated Loan Agreement, the YLL Loan Stock Instrument and any guarantees issued thereunder; "GROUP" means in relation to any party, it and its Affiliates; "GUARANTEE" means the deed of guarantee entered into on the Completion Date and amended and restated on the date of amendment and restatement of this agreement, under which MEIP agrees to guarantee the performance of MYL of its obligations under this agreement and the performance by MIUK of its obligations under the Technical Services Agreement and the Secondment Agreement. "INTERCREDITOR AGREEMENT" means an intercreditor agreement between, amongst others, YLL and the lenders under each of the Funding Agreements in relation to, amongst other things, the priority of secured and unsecured claims between such persons; "LC PROVIDER" means MEIP and BB. "MIUK" means Macquarie Infrastructure (UK) Limited, (registered number 1540913) whose registered office is at Level 29 and 30, 1 Ropemaker Street, London EC2Y 9HD; "MYL OWNER" means (i) MEIP; (ii) an Affiliate of MEIP who, together or by themselves own all of the shares in MYL then on issue; "POST-TAX PROFITS" means in respect of any Financial Year the audited post-tax profit of the relevant Company as shown in the audited profit and loss account of that Company or, as the case may be, the audited consolidated profit and loss accounts of YHL and its subsidiaries for that year; "PROJECT" means the designing, building, financing and operating of the M1-A1 Link Road (Lofthouse to Bramham) and various related on and off site facilities in accordance with the terms of the DBFO Contract; "PROJECT BUDGET" means the project budget of YLL; "RELEVANT DATE" means the date on which any party becomes a party to this agreement whether as an original party or by subsequently adhering to its terms in the manner described in this agreement; "RESERVED MATTERS" means each of the matters in Schedule 2; "SECONDMENT AGREEMENT" means the replacement secondment agreement between MIUK, BB and YLL dated on or about the date of the amendment and restatement of this agreement under which MIUK and BB each agree to second personnel to YLL; 3 "SHAREHOLDERS" means MYL and BB and, where the context so admits, any person holding shares in YHL who is party to this agreement; "SHARE PLEDGE AGREEMENT" means a share pledge on 26 March 1996 granted by YHL in favour of the Security Trustee (as defined in the Intercreditor Agreement) as agent and trustee for the lenders under the Funding Agreements in relation to the issued share capital of YLL; "SUBSIDIARY" and "HOLDING COMPANY" shall have the meanings given in section 736 of the Companies Act 1985; "TECHNICAL SERVICES AGREEMENT" means the agreement between YLL, MIUK and BB relating to the provision of technical services to YLL; "ULTIMATE PARENT UNDERTAKING" means, in the case of MYL, MEIP, and, in the case of BB, BB; "YHL AGREEMENTS" means the agreement(s) to be entered into by YHL at Completion as listed in Part 1 of Schedule 4; "YHL ARTICLES" means the articles of association of YHL; "YHL BOARD" means the board of directors of YHL; "YHL MEMORANDUM" means the memorandum of association of YHL; "YHL SHARES" means the ordinary shares in the share capital of YHL; "YLL AGREEMENTS" means the agreements entered into by YLL as listed in Part 2 of Schedule 4; "YLL ARTICLES" means the articles of association of YLL; "YLL BOARD" means the board of directors of YLL; "YLL LOAN STOCK" means the (pound)12,000,000 15 per cent. secured subordinated loan stock of YLL constituted by the YLL Loan Stock Instrument or, as the case may be, the nominal amount thereof for the time being outstanding; "YLL LOAN STOCK INSTRUMENT" means a Loan Stock Instrument dated 26 March 1996 creating (pound)12,000,000 15 per cent. secured subordinated loan stock; "YLL MEMORANDUM" means the memorandum of association of YLL; and "YLL SHARES" means the ordinary shares in the share capital of YLL. 4 (2) Any reference, express or implied, to an enactment includes references to: (a) that enactment as amended, extended or applied by or under any other enactment before or after this agreement; (b) any enactment which that enactment re-enacts (with or without modification); and (c) any subordinate legislation made (before or after this agreement) under any enactment, as amended, extended or applied as described in paragraph (a) above or under any enactment referred to in paragraph (b) above. (3) The singular shall include the plural and vice versa and words denoting a person shall include a body corporate and an unincorporated association of persons and, unless otherwise stated, include that person's successors or assigns. (4) Any reference in this agreement to this agreement, another agreement, deed, instrument or other document shall be construed as a reference to this agreement or that other agreement, deed, instrument or other document as the same may have been, or may from time to time be, amended, varied, supplemented or novated. (5) Subclauses (1) to (4) above apply unless the contrary intention appears. (6) The headings in this agreement do not affect its interpretation. (7) Any annex, appendix or schedule to this agreement shall take effect as if set out in this agreement and references to this agreement shall include its annexes, appendices and schedules. 2. WARRANTIES Each of the Shareholders represents and warrants to the other(s) at the Completion Date that the matters contained in Schedule 3 are true and accurate. 3. OBJECTIVES OF THE SHAREHOLDERS, YHL AND YLL (1) The primary object of YHL is to maximise the value of its investment in YLL in a manner consistent with the YHL Agreements and YHL shall not carry on any other business without the agreement in writing of all the Shareholders who are the parties to this agreement. (2) The primary object of YLL is to undertake and profitably operate the Project in accordance with the YLL Agreements and YLL shall not carry on any other business without the agreement in writing of all the Shareholders who are the parties to this agreement. (3) Subject as otherwise required by law or by the provisions of this agreement, proceedings of YHL shall be conducted in such a way as to maximise profit available for distribution to its shareholders to the extent consistent with good business practice. 5 (4) Subject as otherwise required by law or by the provisions of this agreement, proceedings of YLL shall be conducted in such a way as to maximise profit available for distribution to YHL to the extent consistent with good business practice. (5) Each of YHL and YLL shall deal with the Shareholders and their Affiliates on an arm's length basis and the Shareholders shall endeavour to ensure that any existing or potential conflicts of interest are brought to the attention of YHL or YLL (as the case may be) at the earliest opportunity so that they can be dealt with in accordance with the provisions of this agreement and the relevant Articles. 4. NOT USED 5. MANAGEMENT (1) The composition of the YLL Board shall be identical to that of the YHL Board together with the same voting rights. (2) Other than in relation to matters which legally require the participation of the YHL Board, all business relating to the Project shall be undertaken by the YLL Board. (3) The maximum number of Directors shall be six and the minimum shall be two. (4) Each Shareholder shall be entitled to appoint one Director for every 16.67% of the YHL Shares which that Shareholder holds (together with its Affiliates). Each Shareholder shall be entitled to remove any Director appointed by it and appoint another person as a Director in his place. If a Shareholder's holding of YHL Shares falls below the minimum percentage required to appoint the number of Directors which have been appointed by it, that Shareholder shall reduce its number of Directors accordingly, provided that if such reduction is not performed, the Shareholders shall procure that such removal takes place as soon as practicable and in any event prior to or at the beginning of the next meeting of the relevant Board. (5) The managing director of YHL and YLL from time to time shall be appointed by the relevant Board and shall be a Director of the relevant Company, but shall not be entitled to vote at Board meetings. The managing director shall only be removed or replaced with the unanimous consent of the Shareholders. (6) [Not used] (7) Unless otherwise agreed by all of the Directors, meetings of the YLL Board shall be held at intervals of not more than one month and not less than seven days' written notice shall be given to each of the Directors (and any alternate directors) of all meetings of the Board at the address notified from time to time by each Director to the secretary of the relevant Company. Each such notice shall contain, inter alia, an agenda specifying in reasonable detail the matters to be discussed at the relevant meeting and any relevant papers for discussion at such meeting. 6 (8) Subject to clauses 6(6) and 13(2), the quorum for any meeting of the Board shall be one appointee from each of the Shareholders entitled to appoint a Director under subclause (4). If any meeting is adjourned for want of a quorum, not less than seven days' (or such other period as shall be agreed by all the Directors) written notice of the adjourned meeting shall be given to all the Directors and at the adjourned meeting the quorum shall be one appointee from each of two Shareholders. (9) All or any of the Directors may attend a meeting of the Board by means of a conference telephone or other communication equipment provided that all persons participating in the meeting are able to hear and address each other. Any Director attending a Board Meeting in this way shall be deemed to be present in person at the meeting and shall be entitled to vote and be counted in a quorum accordingly. (10) The current chairman of the Board and of general meetings has been nominated by BB; thereafter the appointment of the chairman shall rotate between the shareholders on every second anniversary of the Completion Date. (11) The chairman shall not be entitled to a second or casting vote either in general meeting or at any meeting of directors of the relevant Company. (12) Fees shall be paid by YHL and YLL to the Directors in the amounts agreed by the relevant Board. (13) Any non-executive Director appointed to the Board shall not be entitled to vote on a resolution of Directors. (14) Other regulations relating to the quorum and proceedings of directors are contained in the Articles. 6. RESERVED MATTERS (1) Each Director or, if a Shareholder has appointed more than one director in accordance with clause 5(4), the Director specified from time to time by that Shareholder by written notice to the Board as being entitled to vote, shall at any meeting of the Board be entitled to cast the number of votes equal to the number of YHL Ordinary Shares registered in the name of the Shareholder (or any of its Affiliates) who appointed that Director (or, as the case may be, those Directors). (2) [Not used]. (3) All matters of the Board (other than those referred to in subclause (5)) shall be decided by majority vote on the basis of the number of votes to which each Director is entitled under subclause (1) above. (4) The Shareholders agree as between themselves that they shall use all reasonable endeavours to procure that, save as specifically contained in the Project Budget, the Board of each of YHL and YLL shall not do any of the things in Part 2 of Schedule 2 (Reserved Matters) without the prior approval (either in writing or at the relevant Board 7 meeting) of all of those Directors appointed by any Shareholder which (together with their Affiliates) hold not less than 49% in nominal value of the YHL Shares for the time being entitled to attend and vote at general meetings. (5) The Shareholders agree, as between themselves, that they shall procure that, save as specifically contained in the Project Budget, neither YHL nor YLL shall do any of the things in Part 1 of Schedule 2 (Reserved Matters) without the prior approval (either in writing or at the relevant general meeting) of Shareholders which (together with their Affiliates) hold not less than 90 per cent. in nominal value of the YHL Shares for the time being entitled to attend and vote at general meetings. (6) Notwithstanding anything to the contrary in the relevant Articles: (a) no Shareholder or Director appointed or nominated by that Shareholder shall be entitled or required to vote on any decision of the relevant Company or the Board relating to the enforcement of rights, disputes, legal proceedings or amendments to any of the YHL Agreements or the YLL Agreements to which it or its Affiliate is a party ("SHAREHOLDER LITIGATION"), provided that where the counterparty or counterparties is an Affiliate of both BB and MYL, each of BB and MYL (as shareholders) and the Directors appointed by them shall be entitled to vote in respect of any such matters; and (b) any meeting of YHL, YLL or the Board of either of them which would be quorate but for the absence of such Shareholder or Director shall be deemed quorate to the extent that the business of such meeting is to discuss, consider or resolve any matter relating to such Shareholder Litigation and any resolution or vote taken at such a meeting which would be valid and carried but for the absence of the vote of such Shareholder or Director shall be deemed to be valid and carried. For the avoidance of doubt, neither MYL, BB nor any Director appointed by them shall be restricted from voting on any decision relating to the enforcement of rights under the Construction Contract and the Technical Services Agreement. 7. PERSONNEL (1) YLL may, in addition to employing personnel, obtain secondees from the Shareholders or their Affiliates and has entered into the Secondment Agreement in relation to such personnel. Such secondees shall be subject to the direction and control of YLL during any such period of secondment. (2) The parties recognise that the Directors of YLL and its employees and secondees owe a primary duty to act in the best interests of YLL which shall take priority over their duties to the Shareholders or their Affiliates to the extent that there is any conflict during any such period of appointment, employment or secondment. 8 8. CONTINUING OBLIGATIONS The Shareholders shall procure that for so long as they are shareholders in YHL and, for so long as YHL is the sole shareholder in YLL, the following obligations are complied with: (a) (i) YHL, its officers and the Shareholders shall observe all the provisions of the YHL Memorandum and the YHL Articles (as amended or replaced from time to time). (ii) YLL, its officers and YHL shall observe all the provisions of the YLL Memorandum and the YLL Articles (as amended or replaced from time to time). (b) Each Shareholder and YHL shall use all reasonable endeavours to procure that YLL complies with the Project Budget and any operating budget set by YHL. If YHL or YLL becomes aware of any material variation during any Financial Year in the Project Budget it shall immediately notify each of the Shareholders. (c) YHL shall provide each Shareholder, being a holder of 16.67 per cent. or more of the YHL Shares, with: (i) monthly accounts and progress reports within three weeks of the end of each month or as otherwise agreed by the Shareholders; (ii) audited accounts of YHL and YLL and audited consolidated accounts of YHL and YLL within six months of the end of each Financial Year and shall lay them before a general meeting of the relevant Company within such period; and (iii) such further information as each Shareholder may from time to time reasonably require as to all matters relating to the businesses or affairs of YHL and YLL or to the financial position of YHL and YLL. (d) YHL and YLL shall keep proper accounting records and in them make true and complete entries of all of its dealings and transactions in relation to its business and procure that its accounting records shall at all reasonable times during normal business hours be available for inspection by each of the Shareholders or the respective Shareholders' duly authorised representatives or agents. (e) YHL and YLL shall provide each of the Shareholders with such certificates (including certificates of auditors) of borrowings, Post-tax Profits and such other matters as each of the Shareholders may reasonably require in the form and furnished at such time as each of the Shareholders shall reasonably require. 9 9. DIVIDEND POLICY Subject always to the terms of the Intercreditor Agreement and the Funding Agreements: (1) YHL shall procure that YLL shall, to the extent permitted by law and subject to making prudent reserves, distribute by way of dividend in respect of each Financial Year 100 per cent. of the Post-tax Profits of YLL for that Financial Year; (2) the Shareholders shall procure that YHL shall, to the extent permitted by law, distribute by way of dividend in respect of each Financial Year 100 per cent. of the Post-tax Profits of YHL for that Financial Year; (3) to the extent that YHL is restricted from paying a dividend under paragraph (2) above, but YLL or any other subsidiary has available distributable reserves, YHL shall take all reasonable steps to maximise profits available for distribution by YHL including, without limitation, procuring the payment of such dividends by YLL or any subsidiary to enable YHL to pay the dividend referred to in paragraph (2) above; (4) YHL, YLL and any of their subsidiaries may declare interim dividends; and (5) the relevant Company shall, to the extent permitted by law, pay any such dividends within 30 days after the date of the holding of the annual general meeting before which the audited accounts of the relevant Company for the Financial Year are laid. 10. RESTRICTIVE COVENANTS (1) Each Shareholder, being a holder of five per cent. or more of the YHL Shares, undertakes with the other Shareholders, that, for so long as it, or any Affiliate of it, remains a member of YHL and for two years after the date on which it or any Affiliate ceases to be a member (the "TERMINATION DATE"), without the prior consent of the other Shareholder(s) (such consent not to be unreasonably withheld) it will not and will procure that any such Affiliate will not (either personally or through an agent): (a) be concerned in any business which is competitive or calculated or likely to be competitive with YHL, YLL or any other subsidiary in their pursuit or performance of the Project; or (b) induce or attempt to induce any supplier of any of YHL, YLL or any other subsidiary to cease to supply, or to restrict or vary the terms of supply to them; or (c) induce, or attempt to induce, any officer or employee of any of YHL, YLL or any other subsidiary to leave his employment with them; or (d) use or (insofar as it can reasonably do so) allow to be used (except by YHL, YLL or any of their subsidiaries) any trade name used by YHL, YLL or any of their 10 subsidiaries at the Termination Date or any other name calculated or likely to be confused with such a trade name. (2) For the purposes of subclause (1): (a) a Shareholder or its Affiliate is concerned in a business if it carries it on as principal or agent or if: (i) it is a partner, director, employee, secondee, consultant or agent in, of or to any person who carries on the business; or (ii) it has any direct or indirect financial interest (as shareholder or otherwise) in any person who carries on the business, disregarding any financial interest of a person in securities which are listed on The London Stock Exchange or traded on the Alternative Investment Market if that person, the Shareholder or its Affiliate and any person connected with it are interested in securities which amount to less than ten per cent. of the issued securities of that class and which, in all circumstances, carry less than ten per cent. of the voting rights (if any) attaching to the issued securities of that class; and (b) references to any of YHL, YLL and their subsidiaries include their respective successors in business. (3) Each covenant contained in each paragraph or subclause above shall be, and is, a separate covenant by each relevant Shareholder, and shall be enforceable by the other Shareholder(s) separately and independently of each of the other covenants and its validity shall not be affected if any of the others is invalid; if any of the covenants is void but would be valid if some part of the covenant were deleted the covenant in question shall apply with such modification as may be necessary to make it valid. (4) Each Shareholder, having obtained professional advice, acknowledges and agrees that the covenants contained in this clause are no more extensive than is reasonable to protect the other(s) as a subscriber of shares in YHL. (5) If any provision of this agreement or of any other agreement or arrangement of which it forms part is subject to registration under the Restrictive Trade Practices Act 1976, that provision shall not take effect until the day after particulars of the agreement or arrangement have been given to the Director General of Fair Trading under section 24 of that Act. 10A. MEANING OF TERMS IN CLAUSES 11, 11A AND 12 In Clauses 11, 11A and 12, the following terms have the following meanings unless the context otherwise requires: 11 "APPROVALS" means: (a) any necessary approvals required by any competent supranational, governmental or regulatory agencies or authorities; (b) any necessary approval of the shareholders of a Shareholder or Affiliate in general meeting; and (c) the prior approval of the Secretary of State for Transport if required by the terms of the DBFO Contract. "COMPETING PROPORTION" means the proportion derived from dividing the number of YHL Shares, the number of YLL Loan Stock or the principal amount of the Commercial Subordinated Loan Agreement held by a Shareholder by the sum of the number of YHL Shares, the number of YLL Loan Stock and the principal outstandings of the Commercial Subordinated Loan Agreement (as the case may be) held by the Continuing Shareholders or Losing Shareholders to whom an allotment is made pursuant to Clause 11A(4). "OTHER SHARES" means the YHL Shares held by Shareholders other than the Shareholder proposing to Transfer any interest in any YHL Share or any right attaching to them. "OWNERSHIP PROPORTION" means the proportion derived from dividing the number of YHL Shares, the number of YLL Loan Stock or the principal amount of the Commercial Subordinated Loan Agreement held by a Shareholder by the total number of YHL Shares then on issue, the total number of YLL Loan Stock then on issue and the total principal outstandings of the Commercial Subordinated Loan Agreement (as the case may be). "RELEVANT PROPORTION" means the proportion derived from dividing the number of YHL Shares, the number of YLL Loan Stock or the principal amount of the Commercial Subordinated Loan Agreement the subject of a Transfer Notice by the total number of YHL Shares then on issue, the total number of YLL Loan Stock then on issue and the total principal outstandings of the Commercial Subordinated Loan Agreement (as the case may be). "TRANSFER" means any sale, transfer, assignment, pledge, charge or other disposal. 11. TRANSFER OF SHARES Subject always to the terms of the Intercreditor Agreement, the Funding Agreements and the DBFO Contract: (1) No Shareholder may Transfer any interest in any YHL Share or any right attaching to it except: (a) with the prior written consent of all other Shareholders which (together with their Affiliates) hold not less than 90% of the Other Shares; or (b) pursuant to a Transfer to an Affiliate in accordance with subclause (5); or 12 (c) pursuant to a Transfer under subclause (2). Where a Shareholder is entitled to Transfer any interest in any YHL Share in accordance with Clause 11(1), such Transfer may be in respect of all or any part of the YHL Shares held by that Shareholder. (2) Other than in accordance with subclause (1)(a) and (b), no Shareholder may Transfer its YHL Shares: (a) [Not used] (b) without the prior approval of the Secretary of State for Transport and subject to the terms of the DBFO Contract; (c) without first offering the right to acquire the shares to each other Shareholder or the right to sell shares to a bona fide arms length third party in each case in accordance with Clause 11A of this Agreement. (2A) If a Continuing Shareholder is entitled to, and does, give notice that it wishes that this Clause 11(2A) apply ("VENDOR SHAREHOLDER"), the following shall occur: (a) the Vendor Shareholder shall have the right to sell to the Proposing Transferee an amount of YHL Shares, YLL Loan Stock and a principal amount of the Commercial Subordinated Loan Agreement equal to its Ownership Proportion of the Offered Interests ("VENDOR INTERESTS") and the Proposing Transferor shall only have the right to Transfer to the Proposing Transferee YHL Shares, YLL Loan Stock and a principal amount of the Commercial Subordinated Loan Agreement comprising the Offered Interests other than the Vendor Interests; (b) The sale referred to in clause 11(2A)(a) shall be at the same price per share and on the same terms offered by the third party; (c) A party making an election to exercise rights under this clause 11.2A shall have no right to make an offer to acquire any Offered Interests under clause 11A (except as permitted by Clause 11A(8)); (d) Any notification of the right to sell must be made within 10 Business Days of receiving the notice referred to in clause 11A(2); (e) For the avoidance of doubt, the YHL Shares, YLL Loan Stock and the principal amount of the Commercial Subordinated Loan Agreement that shall be Transferred to those Continuing Shareholders that exercise their right to acquire Offered Interests under Clause 11A, shall be that initially offered for Transfer by the Proposing Transferor. (3) The Shareholders agree, as between themselves, that no Shareholder shall attempt to Transfer or agree to Transfer any of its YHL Shares (or any interest therein), 13 any YLL Loan Stock (or any interest therein) or any interest in the Commercial Subordinated Loan Agreement except in accordance with the provisions of the YHL Articles and this agreement but, subject to compliance with all of such terms, a Proposing Transferor may transfer its YHL Shares without limitation, except that it shall be a condition of any transfer that: (i) the transferee undertakes in a form satisfactory to the other Shareholders to be bound by the obligations under this agreement by which the transferor is bound; and (ii) the transferee and the other Shareholders agree what procedures should be followed in the event that, following the date of such transfer, the Board or a general meeting of Shareholders become deadlocked. (4) If a Shareholder at any time attempts to Transfer any YHL Share, any YLL Loan Stock or any interest in the Commercial Subordinated Loan Agreement otherwise than in accordance with this Agreement, that Shareholder shall be deemed immediately before the attempt to have served YHL and the Continuing Shareholders with a Transfer Notice in respect of the YHL Shares. YHL shall notify the Continuing Shareholders promptly after receiving actual notice of such of the attempt. The Specified Terms shall incorporate the Fair Price ascertained in accordance with Clause 11(7) as at the date on which YHL receives actual notice of such attempt by reference to the information available at that time. YHL shall give notice to the Continuing Shareholders as soon as the Fair Price is ascertained. The Transfer Notice shall be deemed to be received by the Continuing Shareholders on receipt of the notice of the Fair Price and the provisions of Clause 11A shall apply. (4A) Each Shareholder agrees that it will not without the prior written consent of the other Shareholders, transfer, permit the issue of or otherwise dispose of or agree to transfer, sell or otherwise dispose of any beneficial interest in or enter into any arrangements relating to any YHL Shares or any interest therein, if as a result of such transfer, sale or other disposal or arrangements, YHL would cease to be a company owned by a consortium as defined in sections 247(9)(c) and 413(6) of the Income and Corporation Taxes Act 1988 (the "Act"). The Shareholders intend that YHL should be a company "owned by a consortium" and a "consortium company" as so defined. (5) For the purposes of this subclause (5): "TRANSFEROR" means a Shareholder which has transferred or proposes to transfer its YHL Shares to an Affiliate. "TRANSFEREE" means a company holding Shares in consequence of a transfer or a series of transfers between Affiliates. "RELEVANT SHARES" means YHL Shares acquired by a Transferee pursuant to a transfer or series of transfers to Affiliates and any additional YHL Shares issued 14 to that Transferee in exercise of capitalisation or acquired by the Transferee by way of any right or option granted or arising by virtue of any holding of such shares or the membership of YHL thereby conferred. If, while it holds YHL Shares, a Transferee ceases (or is about to cease) to be an Affiliate of the Transferor from which the Relevant Shares were derived, then the Transferee shall give a Transfer Notice in respect of those shares and, if the Transferee fails to give a Transfer Notice, it shall be deemed immediately following such event to have served YHL with a Transfer Notice in respect of those shares. The parties agree that MYL (for so long as it is wholly owned the MYL Owners) shall not be a Transferee for the purposes of this clause and the provisions of this Clause 11(5) shall not require MYL to issue a Transfer Notice if MYL ceases to be an Affiliate of MIUK. If the MYL Owners receive a bona fide offer to Transfer all or any part of its shares in MYL, from any bona fide arms length third party purchaser, then MEIP shall within 5 Business Days give notice to all other Shareholders including in such notice: (a) the percentage of shares in MYL which the MYL Owners are proposing to Transfer; (b) the purchase price; and (c) the material terms of the offer (including whether any sale is subject to any Approvals), and Clauses 11A(3), 11A(4), 11A(5), 11A(6), 11A(7) and 11A(8) shall apply except that: (d) references to "Transfer Notice" shall be construed as a reference to the notice containing the items in paragraphs (a), (b) and (c) and references to "Specified Terms" shall be construed as a reference to the terms of such Transfer Notice; (e) references to YHL Shares shall be construed as a reference to shares in MYL; (f) references to "YLL Loan Stock" and "interests in the Commercial Subordinated Loan Agreement" shall be disregarded; (g) references to the "Proposing Transferor" shall be construed as references to the MYL Owners; (h) references to the "Proposing Transferee" shall be construed as references to the bona fide arms length third party purchaser offering to acquire shares in MYL; and 15 (i) notices shall be given to MEIP, MEIP shall give notices and MEIP shall make determinations as to the terms of the offers (in each case, in lieu of YHL). For the avoidance of doubt, Clauses 11A(3A) and 11(2A) shall not apply to any Transfer or prospective Transfer of shares in MYL. (6) Except as provided under the Share Pledge Agreement, YHL shall not sell, transfer, assign, pledge, charge or otherwise dispose of any interest in any YLL Share. (7) The auditors of YHL shall be appointed to ascertain the Fair Price at the cost of the Transferee. The Fair Price shall mean the price which the auditors of YHL state in writing to be in their opinion the fair market value of the shares on a sale as between a willing seller and a willing purchaser (taking no account of whether the shares do or do not carry control of YHL). In stating the Fair Price, the auditors shall act as experts and not as arbitrators and their decision shall be final and binding on the parties. 11A PRE-EMPTIVE RIGHTS (1) A Shareholder who is entitled to Transfer any interest in any YHL Share in accordance with Clause 11(2) shall only be entitled to so in accordance with this Clause 11A. (1A) A Shareholder shall only be entitled to Transfer an interest in a YHL Share if the Proposing Transferor also proposes to Transfer to the Proposing Transferee: (a) an amount of YLL Loan Stock equal to the Relevant Proportion of the total amount of YLL Loan Stock; and (b) an interest in the Commercial Subordinated Loan Agreement equal to the Relevant Proportion of the outstanding principal amount of the Commercial Subordinated Loan Agreement (which Transfer shall take place under and in accordance with the terms of the Commercial Subordinated Loan Agreement). (2) Upon receipt of a bona fide offer to Transfer all or any part of a Shareholder's YHL Shares by a Shareholder ("PROPOSING TRANSFEROR") from any bona fide arms length third party purchaser ("PROPOSING TRANSFEREE"), such Shareholder shall within 5 Business Days give notice to YHL copied to all other Shareholders ("CONTINUING SHAREHOLDERS") of such offer including in such notice: (a) the percentage of the total number of shares in YHL, YLL Loan Stock and the principal amount of the Commercial Subordinated Loan Agreement which the Proposing Transferee is offering to Transfer ("OFFERED INTERESTS"); 16 (b) the purchase price; and (c) the material terms of the offer (including whether any sale is subject to any Approvals), (such notice hereafter being referred to as the "TRANSFER NOTICE" and the terms of such notice hereafter being referred to as the "SPECIFIED TERMS"). The Transfer Notice shall constitute YHL the agent of the Proposing Transferor. (3) If a Continuing Shareholder wishes to acquire the Offered Interests, it must within 20 Business Days of receipt of the notice referred to in Clause 11A(2) make a written offer to YHL to acquire the Offered Interests, which offer shall comply with the following conditions: (a) the Continuing Shareholder must offer to purchase all of the YHL shares, the YLL Loan Stock and the interest in the Commercial Subordinated Loan Agreement comprising the Offered Interests; (b) the offer must be on terms that are no worse than the Specified Terms (which, for the avoidance of doubt shall be determined taking into account whether any additional or more onerous Approvals are required in respect of the Transfer to the Continuing Shareholder that has offered to acquire the Offered Interests, as compared to those required in respect of the Transfer to the Proposing Transferee); and (c) the price offered by the Continuing Shareholders must be greater than or equal to the price offered by the Proposing Transferee; and (d) the offer must remain open until allotment of the Offered Interests in accordance with Clause 11A.4(c) (provided such offer shall not be required to remain open for a period longer than 40 Business Days after the expiry of the 20 Business Day period referred to above). (3A) If a Continuing Shareholder does not wish to acquire any of the Offered Interests, and that Continuing Shareholder is a holder of 5 per cent. or more of the YHL Shares, that Continuing Shareholder may give notice to YHL requesting that Clause 11(2A) apply within 10 Business Days of receipt of the notice referred to in Clause 11A(2). (4) On the expiry of the first 20 Business Day period referred to in Clause 11A(3), the following principles shall apply: (a) If no offer has been received, the Proposing Transferor may proceed with the Transfer to the Proposing Transferee and the Continuing Shareholders shall have no further rights to acquire the Offered Interests; (b) If only one offer has been received, the Offered Interests shall be allotted to that Continuing Shareholder; 17 (c) If more than one offer has been received, the following principles shall apply: (i) YHL shall determine which offer is the best offer (such determination to take into account the price and terms offered by the Continuing Shareholder, but otherwise be made in the sole and absolute discretion of YHL) and YHL shall notify the Continuing Shareholder or Continuing Shareholders who did not make the best offer ("LOSING SHAREHOLDERS") of the terms of the offer which YHL determines to be the best offer within 15 Business Days of the expiry of the first 20 Business Day period referred to in Clause 11A(3); and (ii) a Losing Shareholder may, within 5 Business Days of notification of the best offer under clause 11A.4(c)(i), notify YHL that that Losing Shareholder intends to match the terms of the best offer (the determination of whether an offer made by a Losing Shareholder matches the best offer shall take into account the price and terms offered, but otherwise be made in the sole and absolute discretion of YHL); (iii) if: (A) the offers made by the Continuing Shareholders under clause 11A.4(c)(i) are substantially the same; or (B) one or more Losing Shareholders matches the terms of the best offer under clause 11A.4(c)(ii), YHL shall notify the Continuing Shareholders or the Losing Shareholders referred to in this paragraph (iii) and such persons shall have the right to make a better offer within 5 Business Days of being notified by YHL (the determination of whether an offer made by a Continuing Shareholder or a Losing Shareholder matches the best offer shall take into account the price and terms offered, but otherwise be made in the sole and absolute discretion of YHL); (iv) If one of the offers made by the Continuing Shareholders or the Losing Shareholders referred to in paragraph (iii) is better than any other (the determination of whether an offer made by a Continuing Shareholder or a Losing Shareholder matches the best offer shall take into account the price and terms offered, but otherwise be made in the sole and absolute discretion of YHL), YHL shall notify the Continuing Shareholders or the Losing Shareholders of the terms of that better offer and the Continuing Shareholders or the Losing Shareholders shall have a further right to match the 18 terms of that better offer within 5 Business Days of being notified by YHL and sub-paragraph (iii) shall apply again; (v) If in any round of offers, the best offer made in the preceding round is not matched or is matched and not bettered and the Continuing Shareholder or Losing Shareholder who made the best offer in the preceding round does not wish to make a further offer, (the determination of whether an offer made by a Continuing Shareholder or a Losing Shareholder matches the best offer shall take into account the price and terms offered, but otherwise be made in the sole and absolute discretion of YHL), the Offered Interests shall be allotted to the Continuing Shareholder or Continuing Shareholders or Losing Shareholder or Losing Shareholders who have made or matched the best offer in their Competing Proportions, (any Offered Interests allotted pursuant to this Clause 11A(4) shall be referred to as "ALLOTTED INTERESTS"). (5) On any allocation under Clause 11A(4) being made, YHL shall notify the Proposing Transferor and the Continuing Shareholder to whom any Allotted Interests have been allotted ("ALLOTTEE"). (6) If no Approvals are required in respect of the Transfer of the Allotted Interests, the Allottee shall be bound to pay the purchase price for, and accept a transfer of the Allotted Interests within 10 Business Days of the date of the allotment. Upon receipt of the purchase price, the Proposing Transferee shall be bound to complete the sale of the Allotted Interests to each Allottee. (7) If any Approvals are required in respect of the Transfer of the Allotted Interests, the Allottee shall be bound to pay the purchase price for, and accept a transfer of the Allotted Interests within such time as is reasonable having regard to the nature of the Approval required (which time period shall not exceed a period of 180 days from the date of the allotment). (8) If, at the expiry of the period referred to in Clause 11A(6) or Clause 11A(7) (as the case may be), any Transfer of the Allotted Interests has not taken place ("UNTRANSFERRED INTERESTS"), YHL shall notify all the Continuing Shareholders (if any) other than the Allottee (including any Continuing Shareholder that was prohibited from making an offer to acquire Offered Interests under clause 11(2A)(c)). Such Continuing Shareholders (including any Continuing Shareholders that were prohibited from making an offer to acquire Offered Interests under clause 11(2A)(c)) shall have the right to acquire all (and with the agreement of the Proposing Transferor, any part) of the Untransferred Interests at any price being not less than the price specified in the Specified Terms, provided that the sale and purchase is completed within 40 Business Days of receipt of notification under this clause 11A(8). 19 (9) At the end of the period referred to in clause 11A(8), the Proposing Transferor may within 90 days of the expiry of such period, Transfer and complete the sale and purchase of all or any part of the Untransferred Interests to any person at any price being not less than the price specified in the Specified Terms. 12. TRANSFER OF YLL LOAN STOCK AND COMMERCIAL SUBORDINATED LOAN AGREEMENT 12.1 Subject always to the terms of the Intercreditor Agreement, the Funding Agreements and the DBFO Contract: (1) no Shareholder shall Transfer any interest in any of the YLL Loan Stock or the Commercial Subordinated Loan Agreement, except: (a) with the prior written consent of all other Shareholders which (together with their Affiliates) hold not less than 90% of that portion of the Other Shares; or (b) pursuant to a transfer to an Affiliate in accordance with subclause (4); or (c) pursuant to a transfer under subclause (2). (2) A Shareholder may only Transfer an interest in YLL Loan Stock or the Commercial Subordinated Loan Agreement: (a) to a person who is not an Affiliate; or (b) without the prior written consent of all other Shareholders which (together with their Affiliates) hold not less than 90% of that portion of the Other Shares, in accordance with Clause 11A. (3) [Not used] (4) Any Shareholder shall be entitled to Transfer all or any part of the YLL Loan Stock or any interest in the Commercial Subordinated Loan Agreement at any time to any Affiliate provided that if an Affiliate is not resident in the United Kingdom or is outside the scope of United Kingdom corporation tax, such Transfer shall only be to an Affiliate who is a wholly-owned subsidiary of the Shareholder. (5) Each Shareholder undertakes to ensure that any Affiliate which holds any YLL Loan Stock or any interest in the Commercial Subordinated Loan Agreement shall Transfer all of the YLL Loan Stock or any interest in the Commercial Subordinated Loan Agreement which it then holds to an Affiliate who is a wholly-owned subsidiary of the Shareholder and who is resident in the United Kingdom and not outside the scope of United Kingdom corporation tax before it 20 ceases at any time to be a wholly-owned subsidiary of the Shareholder. The parties agree that the provisions of this clause 12.5 shall not require MYL to issue a Transfer Notice in respect of the YLL Loan Stock or any interest in the Commercial Subordinated Loan Agreement if MYL ceased to be an Affiliate of MIUK provided the MYL Owners issue a Transfer Notice in respect of its shares in MYL pursuant to Clause 11(5). (6) Any transfer of YLL Loan Stock shall be conditional on the transferee first entering into and becoming bound by the Intercreditor Agreement as if it was an original party thereto. 13. DEFAULT (1) If: (a) any Shareholder makes a serious or persistent default in performing and observing any of its obligations under this agreement and, where such default is capable of remedy, fails to remedy it within 30 days after service of written notice from any other Shareholder of such default; or (b) any Shareholder or the Ultimate Parent Undertaking of any Shareholder (a "DEFAULTING PARTY"): (i) becomes insolvent or is unable or deemed unable pursuant to Section 123(1)(e) and (2) of the Insolvency Act 1986, to pay its debts or admits in writing that it is unable to pay its debts; (ii) commences negotiations with any one or more of its creditors with a view to the general readjustment or rescheduling of its indebtedness or makes a general assignment for the benefit of or a composition with its creditors; (iii) takes any corporate action to appoint or suffers the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of it or all or a material part of its revenues and assets; (iv) has a winding-up or administration order made in relation to it; (v) compounds with or negotiates for any composition with its creditors generally or permits any judgment against it to remain unsatisfied for 7 days; or (vi) is affected in any way in any jurisdiction other than England or Wales by anything equivalent to any of the things referred to in paragraphs (ii) to (v) above, then any Shareholder who is not a Defaulting Party and whose Ultimate Parent Undertaking is not a Defaulting Party, may, subject to any prior written approval of the agent being required under the Commercial Bank Facility Agreement and 21 any prior approval of the Secretary of State required under the DBFO Contract, give notice in writing to the Defaulting Party (or if the Defaulting Party is not a Shareholder, the relevant Shareholder) and YHL whereupon the relevant Shareholder (and each of its Affiliates) shall be deemed to have served a Transfer Notice in respect of all of its YHL Shares in accordance with Clause 11(4). (2) If a Shareholder shall be deemed to have served a Transfer Notice under subclause (1) and its YHL Shares have not been purchased by the other Shareholders: (a) each such Shareholder and any Director nominated by it shall not be entitled or required to vote on any decision of YHL or the YHL Board or any decision of YLL or the YLL Board; and (b) any general meeting or board meeting of YHL or YLL which would be quorate but for the absence of the relevant Shareholder or Director (appointed by it), shall be deemed quorate, provided that subclause (2)(a) shall not apply in relation to a default under subclause (1)(b). 14. CONFIDENTIALITY (1) Each Shareholder undertakes with the other that it shall use all reasonable endeavours to ensure that all information received by it relating to the other or any of the other's subsidiaries which is not in the public domain shall be treated as confidential and shall not be disclosed to any third party except with the consent of the other Shareholder or except as may be required by law or by any regulatory authority. (2) A Shareholder shall not be in breach of the provisions of this agreement by virtue of any Director appointed by a Shareholder passing to that Shareholder any information he receives as a Director of YHL, YLL or any other subsidiary of YHL, but nothing contained in this agreement shall require such disclosure where the Director's fiduciary duty to YHL, YLL or any such subsidiary, would be breached as a result. (3) In the event that a Shareholder ceases to be a party to this agreement, such Shareholder shall nevertheless remain bound by subclause (1) for a period of two years from ceasing to be such a party. 15. DURATION (1) This agreement shall commence on the date of this agreement and shall continue to bind each Shareholder until such time as such Shareholder ceases to hold any YHL Shares. (2) This agreement, save for clauses 10 (Restrictive Covenants), 14 (Confidentiality) and 18 (Announcements) shall cease to bind any Shareholder which ceases to hold any YHL Shares with effect from the date on which the transferee of that Shareholder's Shares assumes all of that Shareholder's obligations under this agreement. This clause is without prejudice to any rights of the other parties to this agreement which shall have 22 accrued prior to such date and nothing in this agreement shall affect any liabilities and financial obligations owed to YHL by the Shareholder which have accrued prior to the disposal of that Shareholder's Shares. 16. DISPUTES (1) Any dispute or difference between the parties (a "DISPUTE") may be referred by any party to a meeting of affected parties (the "AFFECTED PARTIES") convened by that party upon not less than 10 days notice to the Affected Parties such meeting to be held in the absence of agreement to the contrary at the registered office for the time being of YHL (an "AFFECTED PARTIES' MEETING"). (2) An Affected Party who receives notice of an Affected Parties' Meeting shall use all reasonable endeavours to make a director of its Ultimate Parent Undertaking available to attend the meeting but in any event shall send the most senior officer in its Group who is available to attend the meeting. (3) The Affected Parties shall endeavour to settle the Dispute but in the absence of agreement at the Affected Parties' Meeting or within the following 14 days the remaining provisions of this clause shall apply. (4) If the Dispute has not been settled in the manner described above then upon the application of an Affected Party the Dispute shall be submitted to a court of law for resolution. 17. TAX AND THE SURRENDER OF LOSSES (1) For the purposes of this clause 17, the following expressions shall have the following meanings: "ACCOUNTING PERIOD" shall have the same meaning as in Section 12 of the Act; "ACT" means the Income and Corporation Taxes Act 1988; "RELIEFS" means any trading losses, charges on income, management expenses and other amounts available for relief against any Tax Liability, where such amounts arise to YHL or YLL and to the extent that those amounts cannot be applied by YHL or YLL, as the case may be, in reducing a Tax Liability for the Accounting Period in which such amounts arise; "TAX" includes all present and future income and other taxes, levies, assessments, imposts, deductions, charges, duties and withholdings whatsoever and any charges in the nature thereof together with interest thereon and penalties and fines with respect thereto, if any, and any payments made on or in respect thereof and "TAXES" and "TAXATION" shall be construed accordingly; and "TAX LIABILITY" means any liability of YHL or YLL, as the case may be, in respect of Taxation. 23 (2) Unless the Shareholders and the Agent under the Commercial Bank Facility Agreement otherwise expressly agree in writing and subject to the rights of each Shareholder under subclauses (3) to (9), the Shareholders shall procure that Reliefs will: (a) to the greatest extent possible, be applied so as to reduce or extinguish any Tax Liability of YHL or YLL, as the case may be, for Accounting Periods which precede that in which the relevant Reliefs arise; and (b) to the extent that any such Reliefs cannot be applied in accordance with (a), be carried forward by YHL or YLL, as the case may be, so as to reduce or extinguish any Tax Liability of YHL or YLL, as the case may be, for subsequent Accounting Periods. (3) Notwithstanding subclause (2), if at any time after the date hereof YHL or YLL shall have available to it Reliefs, then to the extent permitted by subclause (6) below, by law and by the published practice of the tax authorities, each Shareholder or a member of that Shareholder's Group ("A CLAIMANT") shall be entitled to make a claim for the surrender by YHL or, as the case may be, YLL of some or all of those Reliefs by way of group relief in accordance with Chapter IV of Part X of the Act and shall be entitled to do all such acts and things and execute all such documents and deeds as are necessary to ensure that all such claims and surrenders are valid and effective. (4) Notwithstanding subclause (2), where subclause (3) applies, YHL or, as the case may be, YLL shall surrender group relief in accordance with Chapter IV of Part X of the Act and in accordance with subclause (3) in a timely manner and to the extent permitted by law, at the request in writing of a Claimant who makes a valid claim under subclause (3). The Shareholders shall procure that all such surrenders are in a form and manner sufficient to facilitate the relevant claim under subclause (3) and that YHL or, as the case may be, YLL executes all such documents and deeds and gives such consents in a timely manner so as to ensure that all such claims and surrenders of group relief are effective. (5) At the request in writing of a Claimant which makes a valid claim under subclause (3), each other Shareholder shall execute all such documents and deeds and give such consents in a timely manner so as to ensure that any such claim, and the corresponding surrender, is valid and effective. (6) Where, in any of its Accounting Periods ("THE CLAIM PERIOD"), a Claimant is or was chargeable to Tax in respect of any amount accrued but unpaid in respect of the YLL Loan Stock ("THE ACCRUAL"), then that Claimant shall, under subclause (3), be entitled to make one or more claims for the surrender by YHL or, as the case may be, YLL of Reliefs equal to the Accrual in respect of which that Claimant was chargeable for one or more Claim Periods ending on or prior to the date of the claim; provided that the aggregate amount of Reliefs which may be claimed by virtue of this subclause (6) shall not exceed the lesser of (a) the Accrual relating to the period from Completion until 30th June, 2000 and (b) (pound)3,000,000. Unless otherwise agreed in writing by the Shareholders, the aggregate amount of Reliefs which may be claimed by virtue of this subclause (b) by one or more Claimants which are members of the same Shareholder's Group shall not 24 exceed the lesser of (a) (pound)1,500,000 and (b) the Accrual relating to the period from Completion until 30th June, 2000 in respect of YLL Loan Stock which is beneficially owned by members of that Shareholder's Group throughout the period by reference to which that Accrual is ascertained. (7) Where a claim for the surrender of group relief is made under subclause (3), then an amount (a "GROUP RELIEF PAYMENT") shall be payable in the manner hereafter provided to whichever of YHL or YLL makes such a surrender. If the claim was made by a Shareholder, then the Group Relief Payment shall be made by the Shareholder. If the claim was made by a member of a Shareholder's Group, then that Shareholder shall procure that the relevant member of its Group enters into an agreement with YHL or, as the case may be, YLL regarding the terms of the aforesaid claim and providing for that member to make a Group Relief Payment. The terms of such agreement shall not be inconsistent with the terms of this Agreement. Where a member of a Shareholder's Group enters into such an agreement, the Shareholder concerned shall procure that that member performs its obligations under that agreement. YLL shall credit to the Tax Reserve Account (as defined in the Intercreditor Agreement) any amount which it receives in respect of or on account of a Group Relief Payment and YLL shall be entitled to any interest payable on the Tax Reserve Account which is attributable to such an amount. (8) The aggregate of the Group Relief Payments referred to in subclause (7) shall be calculated in accordance with this subclause (8). The Reliefs which are surrendered by YHL or YLL in accordance with subclause (3) shall be aggregated. The resulting aggregate ("THE CUMULATIVE RELIEFS") shall then be multiplied by the rate of Tax (ignoring any relief available under Section 13 of the Act) to which the profits of YHL, or as the case may be, YLL are or would be subject in the first Accounting Period of YHL or, as the case may be, YLL in which it is chargeable to Tax in respect of its profits or in which it would be so chargeable if any relief available to it under Section 240 or Chapter IV of Part X of the Act were ignored. The sum resulting from such multiplication is the aggregate of the Group Relief Payments payable in accordance with subclause (7). The portion of the aggregate of the Group Relief Payments which is payable by each Claimant in accordance with subclause (7) shall correspond to the fraction of the Cumulative Reliefs represented by the Reliefs in respect of which that Claimant has made a valid claim or claims in accordance with subclause (3). Subject to subclauses (9), (10) and (11), the Shareholders shall procure that all Group Relief Payments less any amounts paid under subclauses (9), (10) and (11), are made to YHL or, as the case may be, YLL in immediately available funds no later than the last day ("THE LAST DATE FOR PAYMENT") of the first Accounting Period of YHL or, as the case may be, YLL in which it is chargeable to tax in respect of its profits or in which it would be so chargeable if any relief available to it under Section 240 or Chapter IV of Part X of the Act were ignored. 25 (9) PAYMENTS ON ACCOUNT (a) In the circumstances and in the manner set out in this subclause (9), a Claimant shall be required to make one or more payments on account of a Group Relief Payment prior to the Last Date for Payment. (b) The aggregate of the Group Relief Payments payable in accordance with subclause (7) may be calculated by YHL and YLL from time to time on a provisional basis. This provisional amount ("THE PROVISIONAL SUM") shall be calculated by multiplying (i) the aggregate of the Reliefs which, at the date by reference to which the Provisional Sum falls to be determined, have been validly surrendered by YHL or YLL in accordance with subclause (3) and (ii) the rate of Tax to which YHL or, as the case may be, YLL would be subject for its then current Accounting Period if in that period it had profits chargeable to Tax and if the rate of Tax for that Period were the rate prevailing as at the date on which the Provisional Sum is calculated but ignoring any relief which would otherwise be available under Section 13 of the Act. The Provisional Sum shall be allocated among the Claimants as at the date by reference to which it is calculated in accordance with the share of the Reliefs taken into account in (i) above which have been the subject of a valid claim by each Claimant in accordance with subclause (3). (c) YHL and YLL shall calculate the Provisional Sum on and by reference to the date falling two working days prior to each date on which, but for the Intercreditor Agreement, interest would be payable in respect of the YLL Loan Stock. The Provisional Sum as so determined less any amounts already paid under subclause (9), (10) or (11), shall be called amount "A". The Shareholders, YHL and YLL shall at the same time ascertain from the Financial Model (as defined in the DBFO Contract), by reference to the same date, the interest which is forecast to be payable, in accordance with the Intercreditor Agreement, in respect of the YLL Loan Stock on or prior to the Last Date for Payment. Such forecast interest shall be called amount "B". If A is greater than B, then on the next date on which interest is payable in respect of the YLL Loan Stock or would be so payable but for the Intercreditor Agreement, the excess of A over B shall be payable to YHL or, as the case may be, YLL by the Claimants to whom the Provisional Sum has been allocated in the manner described in paragraph (b) above. The amount payable by each Claimant shall bear the same proportion to the excess of A over B as that Claimant's share of the Provisional Sum allocated in accordance with (b) above bears to the entire Provisional Sum, as so determined. (d) If the date on which interest is payable in respect of the YLL Loan Stock is one on which such interest is in fact paid, then an amount equal to the interest which 26 is in fact paid shall be payable on account of Group Relief Payments to YHL or, as the case may be, YLL by the Claimants to whom the Provisional Sum has been allocated in the manner aforesaid. The amount payable by each Claimant in this way shall bear the same proportion to the amount of interest which is in fact paid on that date in respect of the YLL Loan Stock as that Claimant's share of the Provisional Sum allocated in accordance with (b) above bears to the entire Provisional Sum determined in accordance with (b) and (c), by reference to the date falling two working days prior to the relevant date on which interest is in fact paid in respect of the YLL Loan Stock. If YLL has reasonable grounds for considering that a Claimant is unable or unwilling to make such a payment on account of Group Relief Payments, YLL shall be entitled to withhold from any interest otherwise falling to be paid by it in respect of the YLL Loan Stock to YHL or to any member of the Shareholder's Group of which the relevant Claimant is a member, a sum equal to the amount payable on account by that Claimant. The Shareholders and YHL hereby agree that YLL shall be discharged from any obligation to pay any amount which it withholds as aforesaid and that YLL shall be treated as if it had actually paid that amount in respect of the YLL Loan Stock. If YLL is entitled to withhold an amount in accordance with this paragraph (d), then if the amount so withheld would otherwise have been due and payable to YHL, YHL shall also be entitled to withhold a sum in accordance with (e) from any amount otherwise payable by it to any member of the Shareholder's Group to which belongs the Claimant whose unwillingness or inability to make a payment on account entitled YLL to withhold the amount which would otherwise have been due and payable to YHL. (e) The sum which YHL is entitled to withhold as aforesaid shall not exceed the amount which YLL is entitled to withhold in accordance with paragraph (d) and which would otherwise have been due and payable to YHL. (f) Each Shareholder shall procure that each member of that particular Shareholder's Group shall respect the provisions of paragraph (d). (10) EARLY PAYMENT ARRANGEMENTS This subclause applies where: (a) a Shareholder or a member of its Group sells any shares of YHL or any YLL Loan Stock or loan stock issued by YHL, other than to YHL or to another member of that same Group; or (b) YHL sells any YLL Loan Stock other than to a Shareholder or a member of a Shareholder's Group; THEN: (i) If (a) occurs, YHL and YLL shall determine and allocate the Provisional Sum in accordance with subclause (9) above by reference to the date of such sale. The Shareholder which sells, or a member of whose Group sells, such shares or loan 27 stock shall procure that an amount equal to the proceeds of such sale is promptly applied in paying to YHL or, as the case may be, YLL an amount equal to the lesser of (1) such proceeds and (2) the portion of the Provisional Sum, calculated as aforesaid, which is allocated to any Claimant or Claimants consisting of that Shareholder and/or members of its Group. YHL or, as the case may be, YLL shall treat any such payment as a payment on account of the Group Relief Payments payable by such Claimants in accordance with subclause (7) above. The payment on account shall, where necessary, be allocated pro rata between the Claimants concerned by reference to the amounts owed by them under subclause (7) and shall be treated accordingly as having been made by those Claimants. (ii) If (b) occurs, YHL and YLL shall determine and allocate the Provisional Sum in accordance with subclause (9) above by reference to the date of such sale. Each Shareholder shall procure that a sum equal to that portion of the sale proceeds which corresponds to the percentage of the ordinary share capital of YHL owned by it or by members of its Group shall be promptly applied in paying to YHL or, as the case may be, YLL an amount equal to the lesser of (1) that portion of such sale proceeds and (2) the portion of the Provisional Sum, calculated as aforesaid, which is allocated to any Claimant or Claimants consisting of that Shareholder and/or members of its Group. YHL or, as the case may be, YLL shall treat any such payment as a payment on account of the Group Relief Payments payable by such Claimants in accordance with subclause (7) above. The payment on account shall, where necessary, be allocated pro rata between the Claimants concerned by reference to the amounts owed by them under subclause (7) and shall be treated accordingly as having been made by those Claimants. (iii) If, when a payment on account is made to YHL or, as the case may be, YLL following the events described in paragraph (a) or (b) above, no prior payment has been made or treated as made under subclause (9) above by any Claimant who is treated in accordance with this subclause (10) as having made such a payment on account, then that payment shall be regarded as a full and final discharge pro tanto of that Claimant's obligation to make a Group Relief Payment under subclause (7) in respect of any Reliefs for which it has made a valid claim under subclause (3) prior to the events described in paragraph (a) or (b) above. 28 (11) CALAMITOUS EVENT PREPAYMENT This subclause applies where, prior to the Last Date for Payment, any of the following (a "RELEVANT EVENT") occurs: (a) there is an Event of Default under Clause 25 of the Commercial Banks Facility Agreement which leads to the Agent serving a written notice on the Borrower in accordance with Clause 25.31 of that Agreement prior to the Final Repayment Date; or (b) a Step-in Notice is given under the Direct Agreement for the DBFO Contract referred to in Schedule 4 hereof and is accepted by the Secretary of State for Transport; or (c) the DBFO Contract is terminated under Clause 37 or 38 thereof; then: (i) The Shareholders shall request the Agent under the Commercial Banks Facility Agreement to provide, at the Shareholders' expense, within 21 working days of the Relevant Event, a written reasoned opinion from a reputable firm of accountants or lawyers with recognised corporate tax expertise, to be selected by the Agent at its sole discretion, that if YHL or, as the case may be, YLL had not surrendered Reliefs in accordance with subclause (3), then notwithstanding the Relevant Event, it was reasonably probable that YHL or YLL, as the case may be, would have been able to utilise those Reliefs or otherwise to turn them to account; (ii) If no such opinion is provided as aforesaid, then any obligation under subclause (7) to make a Group Relief Payment shall, to the extent not already satisfied by one or more payments on account under subclauses (9) and (10), be discharged; (iii) If such an opinion is provided as aforesaid, then any Group Relief Payment otherwise payable under subclause (7) above in accordance with subclause (8) shall be adjusted by substituting for the amount determined under subclause (8) the aggregate found by adding together each amount of Reliefs claimed in accordance with subclause (3) multiplied by the rate of Tax (ignoring any relief available under Section 13 of the Act) to which YHL or, as the case may be, YLL would have been subject in respect of its profits for the Accounting Period in which each such amount of Reliefs was claimed if YHL or, as the case may be, YLL had been chargeable to Tax in respect of its profits for that Accounting Period; (iv) The amount substituted in accordance with paragraph (iii) above shall be reduced by any amount payable to YHL or, as the case may be, YLL in respect of such Reliefs under subclause (9) or (10) above and shall be further reduced so that it equals the amount which, in the reasonable opinion of the Shareholders, would have been the value to YHL or, as the case may be, YLL if the Reliefs had been available to it following the Relevant Event. Any such amount, as so reduced 29 where appropriate, shall be paid by the Shareholders to YHL or, as the case may be, YLL in full and final settlement of any Group Relief Payments otherwise owed hereunder by any Claimant and YHL and YLL shall accept such amounts in full and final discharge of any Group Relief Payments otherwise due. The amount payable hereunder shall be borne by the Shareholders pro rata to the Reliefs claimed under subclause (3) above by each Shareholder and/or a member of its Group. (12) If any amount surrendered or purportedly surrendered by YHL or, as the case may be, YLL in accordance with subclause (3) is subsequently disallowed or otherwise determined to be unavailable for surrender, then YHL or, as the case may be, YLL shall, as soon as reasonably practicable, notify each Shareholder, on behalf of the relevant Claimant or Claimants, of such disallowance or unavailability and any obligation to make a Group Relief Payment in accordance with subclause (7) shall to the extent of such disallowance or unavailability be extinguished. If in such circumstances a Group Relief Payment has been made, then YHL or, as the case may be, YLL shall, to the extent permitted by the Intercreditor Agreement, repay an amount of such Group Relief Payment corresponding to the proportion of the amount surrendered or purportedly surrendered which has been disallowed or determined to be unavailable. The amount of the Group Relief Payment which is repayable hereunder shall be repaid to the Shareholder by which or by a member of whose Group the relevant Group Relief Payment was made. (13) If the tax authorities do not for any reason accept any claim in respect of group relief which is permitted under subclause (3), then the Shareholders and YHL or, as the case may be, YLL shall take all reasonable action with a view to proving or otherwise establishing to the satisfaction of the tax authorities that the claim has been validly and effectively made in a timely manner. On request by notice in writing to it from either Shareholder, YHL or, as the case may be, YLL shall as soon as reasonably practicable, provide that Shareholder with an estimate of any Reliefs which may be available for surrender. YHL and YLL agree not to revoke or disclaim any surrender made pursuant to this Clause 17 without the consent in writing of the Shareholder which, or a member of whose Group which, made the claim under subclause (3) to which such surrender relates. (14) This Clause 17 shall be without prejudice to Clause 3(l), (2), (3) and (4) hereof. For the avoidance of doubt but subject to Clause 11(4), the Shareholders and the Board shall not, in taking decisions regarding the management and development of the business of YHL or YLL or any other action which could be of benefit to YHL or YLL, be required to have regard to whether as a result of such a decision or such action, a Claimant would or would not be able to make a claim under subclause (3). (15) The Shareholders, YHL and YLL shall jointly elect in a timely manner that Section 247 of the Act shall, to the extent permitted by law and the published practice of the tax authorities, apply to: (a) any dividend paid by YLL to YHL or by YHL to any of the Shareholders; and 30 (b) any payment by YLL to YHL or by YHL to YLL or by YHL to any of the Shareholders, which payment is referred to in Section 247(4) of the Act. The aforesaid election is referred to hereafter as the "GROUP INCOME ELECTION". YHL, YLL and the Shareholders shall execute and deliver all such documents and deeds in a timely manner as are necessary to ensure that the Group Income Election is valid and effective. Unless the Shareholders otherwise consent in writing, neither YHL nor YLL shall give a notice of the kind specified in Section 247(3) of the Act in respect of any dividend paid by it. (16) Without prejudice to the generality of Clause 1(2), references to Reliefs available under any Section, Chapter or Part of the Act shall include any statutory provision which subsequently provide an equivalent relief to that provided by the relevant Section, Chapter or Part of the Act. (17) This Clause 17 is without prejudice to any obligations of YLL under Clause 40.3.5 of the DBFO Contract. 18. ANNOUNCEMENTS No announcement concerning this agreement or its subject matter or any ancillary matter shall be made by any Shareholder except as required by law or any recognised stock exchange or by any other regulatory body without the prior written approval of the other (such approval not to be unreasonably withheld or delayed). 19. NOTICES AND RECEIPTS (1) Any notice or other document to be served under this agreement may be delivered or sent by prepaid first class recorded delivery post or facsimile process to the party to be served at its address appearing in this agreement or at such other address as it may have notified to the other parties in accordance with this clause. (2) In proving service of a notice or document it shall be sufficient to prove that delivery was made or that the envelope containing the notice or document was properly addressed and posted as a prepaid first class recorded delivery letter or that the facsimile message was properly addressed and despatched as the case may be. (3) The receipt of any party's solicitor for any sum or document to be paid or delivered to that party will discharge the obligor's obligation to pay or deliver it to that party. 20. COSTS AND VAT (1) Each of the Shareholders shall bear its own costs and expenses incidental to the negotiation, preparation and completion of this agreement. The Shareholders shall procure that YHL shall pay all costs and expenses properly and reasonably attributable to it in negotiating, preparing and completing this agreement. Subject to the above each of 31 the Shareholders shall bear its own costs and expenses incidental to the negotiation, preparation and completion of this agreement. (2) All figures stated in this agreement are exclusive of value added tax (if any). 21. SEVERABILITY The provisions contained in each clause and/or subclause of this agreement shall be enforceable independently of each of the others and its validity shall not be affected if any of the others is invalid; if any of those provisions is void but would be valid if some part of the provision were deleted, the provision in question shall apply with such modification as may be necessary to make it valid. 22. WHOLE AGREEMENT (1) This agreement and the documents referred to in it contain the whole agreement between the Shareholders relating to the transactions contemplated by this agreement and supersede all previous agreements between the Shareholders relating to these transactions. (2) In entering into this agreement (and any document referred to herein), no Shareholder may rely on any representation, warranty, collateral contract or other assurance (except those expressly set out in this agreement or any document referred to in it (made by or on behalf of any other party before the signature of this agreement)) and each Shareholder waives all rights and remedies which, but for this subclause, might otherwise be available to it in respect of any such representation, warranty, collateral contract or other assurance; provided that nothing in this subclause shall limit or exclude any liability for fraud. (3) Each obligation, representation and warranty on the part of each of the Shareholders under this agreement (excluding any obligation fully performed at the Completion Date) shall continue in force after the Completion Date. 23. GENERAL (1) In the event that there is any inconsistency between this agreement and the Articles, this agreement shall prevail as between the Shareholders in respect of their rights in relation to YHL. (2) The Shareholders agree, as between themselves, that they shall procure the convening of all meetings and the giving of all waivers and consents and the passing of all resolutions and shall otherwise exercise all powers and rights available to them in order to give effect to the provisions of this agreement. (3) YHL and YLL are excluded from any obligations contained in this agreement to the extent that such obligations would constitute an unlawful fetter on their statutory powers. 32 (4) None of the rights or obligations under this agreement may be assigned or transferred without the written consent of the other parties (such consent not to be unreasonably withheld), provided that if a Shareholder proposes to transfer its rights or obligations to an Affiliate, it shall enter into a guarantee (or procure that its Ultimate Parent Undertaking enters into a guarantee) substantially in the form of the Guarantee. (5) This agreement may be executed in any number of counterparts, all of which, taken together, shall constitute one and the same agreement, and any party may enter into this agreement by executing a counterpart. 24. NOT USED 25. COUNTER INDEMNITY Subject to the Intercreditor Agreement, YLL agrees to keep each LC Provider indemnified against all actions, proceedings, liabilities, claims, demands, damages, costs and expenses in relation to or arising out of or in connection with the BF Letter of Credit procured by that LC Provider and to pay to that LC Provider on demand all payments, losses, costs, charges, damages and expenses suffered or incurred by that LC Provider in consequence of the BF Letter of Credit or arising directly or indirectly therefrom. 26. GOVERNING LAW This agreement is governed by and shall be construed in accordance with English law. AS WITNESS the hands of the parties (or their duly authorised representatives) on the date which first appears on page 1. 33 SCHEDULE 1 DETAILS OF YHL AND YLL PART 1 (YHL) SHARE CAPITAL:
CLASS AUTHORISED ISSUED ~~Ordinary Shares (pound) 10,000,000 (pound) 3,000,000~~
SHAREHOLDERS:
NUMBER OF CLASS OF NAME SHARES SHARES HELD ~~Macquarie Yorkshire Limited 1,500,000 Ordinary Balfour Beatty plc 1,500,000 Ordinary~~
DIRECTORS: Ian Rylatt John Fox Colin Chanter Sean MacDonald Peter Dyer SECRETARY: Annabelle Helps REGISTERED OFFICE: Level 29 and 30, CityPoint 1 Ropemaker Street London EC2Y 9HD COMPANY NUMBER: 3059235 DATE OF INCORPORATION: 22nd May, 1995 34 PART 2 (YLL) SHARE CAPITAL:
CLASS AUTHORISED ISSUED ~~Ordinary Shares (pound) 10,000,000 (pound) 3,000,000~~
SHAREHOLDERS:
NUMBER OF CLASS OF NAME SHARES SHARES HELD ~~Yorkshire Link (Holdings) 3,000,000 Ordinary Limited~~
DIRECTORS: Ian Rylatt John Fox Colin Chanter Sean MacDonald Peter Dyer SECRETARY: Annabelle Helps REGISTERED OFFICE: Level 29 and 30, CityPoint 1 Ropemaker Street London EC2Y 9HD COMPANY NUMBER: 2999303 DATE OF INCORPORATION: 7th December, 1994 35 SCHEDULE 2 RESERVED MATTERS PART 1 THOSE MATTERS IN RELATION TO YHL AND YLL REQUIRING APPROVAL OF SHAREHOLDERS HOLDING NOT LESS THAN 90 PER CENT. IN NOMINAL VALUE OF THE YHL SHARES FOR THE TIME BEING ENTITLED TO ATTEND AND VOTE AT GENERAL MEETINGS (i) any amendment or addition to this agreement (ii) depart from the ordinary course of trading in any way (iii) alter the provisions in the Memorandum or Articles (iv) pass any resolution for winding up (v) tender for or undertake any new project (vi) [not used] (vii) make any acquisitions or disposals of any companies or businesses. PART 2 THOSE MATTERS IN RELATION TO YHL AND YLL REQUIRING THE APPROVAL OF ALL OF THOSE DIRECTORS APPOINTED BY ANY SHAREHOLDER HOLDING NOT LESS THAN 49% IN NOMINAL VALUE OF THE YHL SHARES FOR THE TIME BEING ENTITLED TO ATTEND AND VOTE AT GENERAL MEETINGS GENERAL (i) declare, make or pay any dividends (interim or final) (ii) give any guarantee or indemnity (iii) create, issue, purchase or redeem or reorganise any share or loan capital (iv) apply for the appointment of a receiver or an administrator (v) begin or settle any legal or arbitration proceedings other than routine debt collection ACCOUNTS AND GENERAL (i) incur expenditure exceeding (pound)10,000 on its capital account (ii) borrow any money 36 (iii) make any loans (iv) prepay any loans (v) change the financial year (vi) change the basis of accounting (vii) pay remuneration or expenses to anyone other than as proper remuneration for work done or services provided (viii) make any gift or political or charitable donation COMMERCIAL (i) create or redeem any mortgage, charge, debenture or other security (ii) dispose of or grant any option or right of pre-emption in respect of its assets except in the ordinary course of trading (iii) allow any insurances to lapse or do anything which would make any policy void or voidable (iv) enter into any agreement which cannot be terminated by YHL or YLL (as applicable) without penalty within 12 months of its commencement (v) enter into any abnormal or unusual contract or commitment including any which: (a) is outside the ordinary course of business (b) is unlikely to be profitable (c) is of a long-term nature (d) would have extended payment terms (e) would involve a total outlay over the term of the contract in excess of (pound)10,000 (vi) reorganise or change the nature or scope of its business (vii) enter into any agreement restricting its freedom to do business as it thinks fit PROPERTIES (I.E. REAL ESTATE) (i) grant any lease or third party rights in respect of any property (ii) transfer or dispose of any property (iii) create any interest over any property (including a security interest) 37 INTELLECTUAL PROPERTY (i) assign, licence, transfer, dispose of, create any security interest over, or otherwise deal with any intellectual property (ii) apply for registration of any intellectual property (iii) allow any registration of intellectual property to lapse or be cancelled (iv) prosecute any infringement action against parties other than partners, or defend any action for revocation or cancellation or any other challenge to the validity of any intellectual property (v) accept any restrictions on use of its own intellectual property EMPLOYEES (i) change the terms and conditions of employment of any director/partner or senior employee; for this purpose a "senior employee" is an employee with a gross annual salary of (pound)50,000 or above (ii) employ, or terminate without good cause the employment of any person (iii) dismiss any senior employees (as defined above) 38 SCHEDULE 3 REPRESENTATIONS AND WARRANTIES 1. STATUS It is a limited liability company duly organised and validly existing under the laws of its country of incorporation. 2. POWERS It has the power to enter into and perform its obligations under this agreement and each of the other documents referred to in this agreement to which it is a party. 3. CONSENTS It has all necessary consents, licences and approvals in connection with the entry into and performance of its obligations under this agreement and (if applicable) as a shareholder in YHL. 4. NON-VIOLATION OF LAW ETC. Its entry into this agreement and performance of its obligations under this agreement will not violate or conflict with, or exceed any limit imposed by (i) any law or regulation to which it is subject, (ii) its memorandum or Articles of Association or other applicable constitutional documents or (iii) any other agreement, instrument or undertaking binding upon it. 5. RECITALS The Recitals to this agreement are true and accurate insofar as they relate to it. 39 SCHEDULE 4 PART 1 YHL AGREEMENTS Intercreditor Agreement Share Pledge Agreement PART 2 YLL AGREEMENTS Commercial Bank Facility Agreement EIB Facility Agreement EIF Senior Guarantee Facility Agreement Commercial Subordinated Facility Agreement Intercreditor Agreement YLL Loan Stock Instrument Debenture ISDA Master Agreements Security Trust Deed DBFO Contract Direct Agreement for the DBFO Contract Construction Contract Direct Agreement for Construction Contract Technical Services Agreement Secondment Agreement Maintenance Depot Lease BB Parent Company Guarantee MEIP Parent Company Guarantee Model Custody Agreement Assignment of Intellectual Property Rights Appointment of Independent Engineer Agreement Motorway Communications Side Letter Insurance Policies 40 Signed by ) for MACQUARIE YORKSHIRE ) * LIMITED ) ___________ Signed by ) * for BALFOUR BEATTY PLC ) ___________ Signed by ) for YORKSHIRE LINK ) * (HOLDINGS) LIMITED ) ___________ Signed by ) * for YORKSHIRE LINK LIMITED ) ___________ Signed by ) for MACQUARIE EUROPEAN INFRASTRUCTURE ) * PLC ) ___________ 41 * This agreement was restated and amended by an Omnibus Deed dated as of April 30, 2003 between Macquarie Infrastructure (UK) Limited, Macquarie Yorkshire Limited, Balfour Beatty plc, Yorkshire Link (Holdings) Limited, Yorkshire Link Limited, Kvaerner plc and Macquarie European Infrastructure plc, which was executed by the parties thereto as follows: MACQUARIE INFRASTRUCTURE (UK) LIMITED /s/ Colin Chanter Attorney Witness /s/ Andrew Deszcz Name: Andrew Deszcz Address: 65 Fleet Street, London MACQUARIE YORKSHIRE LIMITED /s/ Sean MacDonald Director /s/ Colin Chanter Director BALFOUR BEATTY PLC /s/ John Fox Attorney Witness /s/ Andrew Deszcz Name: Andrew Deszcz Address: 65 Fleet Street, London YORKSHIRE LINK (HOLDINGS) LIMITED /s/ John Fox Director /s/ Peter Dyer Director YORKSHIRE LINK LIMITED /s/ John Fox Director /s/ Peter Dyer Director KVAERNER PLC /s/ Nigel Williams Attorney Witness /s/ Peter Dyer Name: Peter Dyer Address: 14 Crofton Avenue, Chiswick London W4 3EW MACQUARIE EUROPEAN INFRASTRUCTURE PLC /s/ Peter Dyer Attorney Witness /s/ Andrew Deszcz Name: Andrew Deszcz Address: 65 Fleet Street, London EX-10.9 7 y97636exv10w9.txt LIMITED LIABILITY COMPANY AGREEMENT EXHIBIT 10.9 EXECUTION COPY LIMITED LIABILITY COMPANY AGREEMENT OF PARKING COMPANY OF AMERICA AIRPORTS HOLDINGS, LLC A DELAWARE LIMITED LIABILITY COMPANY TABLE OF CONTENTS
PAGE ---- ARTICLE I. DEFINITIONS....................................................................... 1 ARTICLE II. FORMATION OF COMPANY.............................................................. 8 2.1. Formation......................................................................... 8 2.2. Name.............................................................................. 8 2.3. Principal Place of Business....................................................... 8 2.4. Registered Office and Registered Agent............................................ 8 2.5. Term.............................................................................. 8 2.6. Initial Members................................................................... 9 ARTICLE III. PURPOSE AND PERMITTED BUSINESS OF COMPANY......................................... 9 3.1. Purpose........................................................................... 9 ARTICLE IV. RIGHTS AND DUTIES OF MANAGER...................................................... 9 4.1. Management........................................................................ 9 4.2. Number, Tenure and Appointment.................................................... 9 4.3. Liability for Certain Acts........................................................ 9 4.4. Bank Accounts..................................................................... 10 4.5. Indemnity of the Manager, Employees and Other Agents.............................. 10 4.6. Resignation....................................................................... 10 4.7. Removal........................................................................... 10 4.8. Compensation, Reimbursement, Organization Expenses................................ 10 4.9. Right to Rely on the Manager...................................................... 10 4.10. Restrictions on Company Actions................................................... 11 ARTICLE V. RIGHTS AND OBLIGATIONS OF MEMBERS................................................. 12 5.1. Limitation of Liability........................................................... 12 5.2. List of Members................................................................... 12 5.3. No Agency Authority............................................................... 12 5.4. Company Books..................................................................... 12 5.5. Priority and Return of Capital.................................................... 12 5.6. Competing Activities.............................................................. 12 ARTICLE VI. ACTIONS AND MEETINGS OF MEMBERS................................................... 13 6.1. Action of Members................................................................. 13 6.2. No Required Meetings.............................................................. 13 6.3. Place of Meetings................................................................. 13
i 6.4. Notice of Meetings................................................................ 13 6.5. Meeting of all Members............................................................ 13 6.6. Record Date....................................................................... 13 6.7. Quorum............................................................................ 13 6.8. Manner of Acting.................................................................. 14 6.9. Proxies........................................................................... 14 6.10. Action by Members Without a Meeting............................................... 14 6.11. Waiver of Notice.................................................................. 14 ARTICLE VII. CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS................................. 15 7.1. Members' Capital Contributions.................................................... 15 7.2. Additional Contributions.......................................................... 15 7.3. Capital Accounts.................................................................. 15 7.4. Withdrawal or Reduction of Members' Contributions to Capital...................... 16 7.5. Capitalization.................................................................... 16 7.6. Loans to the Company by Members or Related Parties................................ 17 ARTICLE VIII. ALLOCATIONS, INCOME TAX, DISTRIBUTIONS, ELECTIONS AND REPORTS..................... 17 8.1. Allocations of Profits and Losses from Operations................................. 17 8.2. Special Allocations to Capital Accounts........................................... 17 8.3. Credit or Charge to Capital Accounts.............................................. 19 8.4. Distributions..................................................................... 19 8.5. Limitation Upon Distributions..................................................... 20 8.6. Accounting Principles............................................................. 20 8.7. Interest on and Return of Capital Contributions................................... 20 8.8. Loans to Company.................................................................. 20 8.9. Accounting Period................................................................. 20 8.10. Records and Reports............................................................... 20 8.11. Returns and other Elections....................................................... 20 8.12. Tax Matters Partner............................................................... 21 8.13. Certain Allocations for Income Tax (But Not Book Capital Account) Purposes........ 21 8.14. Section 754 Election.............................................................. 21 8.15. Debt Allocations.................................................................. 21 8.16. Tax Distributions................................................................. 21 ARTICLE IX. TRANSFERABILITY OF MEMBERSHIP INTERESTS........................................... 22 9.1. Transfers of Membership Interests................................................. 22 9.2. Prohibited Transfers.............................................................. 22 9.3. Admission of Transferee as Member................................................. 22 9.4. Rights of Assignees............................................................... 23 9.5. Withdrawal of Member upon Transfer of Entire Interest............................. 23 9.6. No Withdrawals, Resignations or Removals.......................................... 23

ii 9.7. Indemnification................................................................... 23 9.8. Right of First Refusal............................................................ 23 9.9. Drag-Along Rights................................................................. 25 9.10. Tag-Along Rights.................................................................. 25 9.11. Terms of Participation............................................................ 26 ARTICLE X. DISSOLUTION AND TERMINATION....................................................... 27 10.1. Dissolution....................................................................... 27 10.2. Effect of Dissolution............................................................. 27 10.3. Winding Up, Liquidation and Distribution of Assets................................ 27 10.4. Filing or Recording Statements.................................................... 28 10.5. Return of Contribution; Nonrecourse to Other Members.............................. 28 ARTICLE XI. MISCELLANEOUS PROVISIONS.......................................................... 29 11.1. Notice............................................................................ 29 11.2. Books of Account and Records...................................................... 29 11.3. Delivery of Financial Statements.................................................. 29 11.4. Application of Law................................................................ 30 11.5. Waiver of Action for Partition.................................................... 30 11.6. Amendments........................................................................ 30 11.7. Execution of Additional Instruments............................................... 30 11.8. Construction; Reference to "days"................................................. 30 11.9. Effect of Inconsistencies with the Act............................................ 30 11.10. Waivers........................................................................... 30 11.11. Rights and Remedies Cumulative.................................................... 30 11.12. Severability...................................................................... 31 11.13. Heirs, Successors and Assigns..................................................... 31 11.14. Creditors......................................................................... 31 11.15. Counterparts...................................................................... 31 11.16. Power of Attorney................................................................. 31 11.17. Investment Representations........................................................ 31 11.18. Representations and Warranties.................................................... 32 11.19. Confidentiality................................................................... 34

Exhibit A - Member Capital Contributions, Units and Sharing Ratios iii LIMITED LIABILITY COMPANY AGREEMENT OF PARKING COMPANY OF AMERICA AIRPORTS HOLDINGS, LLC A DELAWARE LIMITED LIABILITY COMPANY THE LIMITED LIABILITY COMPANY INTERESTS DESCRIBED IN THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS ("STATE ACTS") AND ARE RESTRICTED SECURITIES AS THAT TERM IS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933. THE SECURITIES MAY NOT BE OFFERED FOR SALE OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR QUALIFICATION UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE ACTS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION OR QUALIFICATION UNDER THE ACT AND APPLICABLE STATE ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE COMPANY. THIS LIMITED LIABILITY COMPANY AGREEMENT is entered into and effective this 1st day of October, 2003 (the "Agreement"), by and among the Company and each of the Persons whose names appear on EXHIBIT A and whose signatures appear on the signature page hereof (the "Initial Members"). In consideration of the mutual covenants herein contained and for other good and valuable consideration, the Initial Members, each other Person who shall hereinafter execute this Agreement as a Member of the Company (the Initial Members and all such other Persons collectively the "Members") and the Company hereby agree as follows: ARTICLE I. DEFINITIONS The following terms used in this Agreement shall have the following meanings (unless otherwise expressly provided herein): "1933 Act" shall have the meaning set forth in Section 9.14. "Act" shall mean the Delaware Limited Liability Company Act, as amended. "Additional Members" shall have the meaning set forth in Section 7.5(d) of this Agreement. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. For purposes of this definition, the term "controls," "is controlled by," or "is under common control with" shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Without limiting the generality of the foregoing, an "Affiliate" shall mean: (i) as to any Entity: (x) any officer, director, manager, trustee or general partner of such Entity, (y) any individual natural person or other Entity owning or otherwise controlling 50% or more of the outstanding voting or other equity interests of such first Entity, or (z) any officer, director, manager, trustee or general partner of any Entity described in the preceding clause (y); and (ii) as to any natural person, any Entity of which that natural person is an officer, director, manager or general partner of which that natural person owns or otherwise controls 50% or more of the outstanding voting or other equity interests. "Agreement" shall mean this Limited Liability Company Agreement, as the same may be amended from time to time. "Appraiser" means an accounting firm, independent investment banking or appraisal firm of recognized national standing. "Assumed Tax Rate" shall mean 46%. "Capital Account" as of any given date, shall mean the Capital Account of each Member as described in Section 7.3 of this Agreement and maintained to such date in accordance with this Agreement. "Capital Contribution" shall mean, with respect to any Member, the amount of cash and the initial Gross Asset Value of any property (other than cash) contributed to the Company with respect to the Membership Interest held by such Member. "Certificate of Formation" shall mean the Certificate of Formation of the Company as filed with the Delaware Secretary of the State as the same may be amended from time to time. "Closing Date" shall mean October 1, 2003. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Company" shall mean Parking Company of America Airports Holdings, LLC. "Company Minimum Gain" shall have the meaning set forth in Regulations Section 1.704-2 (d). "Company Property" shall mean all assets (real or personal, tangible or intangible, including cash) of the Company, including interests in, and assets of, any direct or indirect subsidiary of the Company. "Deficit Capital Account" shall mean with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the Fiscal Year, after giving effect to the following adjustments: (a) credit to such Capital Account the amount, if any, which such Member is obligated to restore pursuant to the next to last sentence of Regulations Section 1.704- 2 2(g)(1) and (i)(5), after taking into account any changes as of the end of the Fiscal Year in the Company Minimum Gain and Member Minimum Gain; and (b) debit to such Capital Account the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6). This definition of Deficit Capital Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. "Depreciation" shall mean, for each Fiscal Year, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such Fiscal Year, except that (1) with respect to any asset whose Gross Asset Value differs from its adjusted tax basis for federal income tax purposes at the beginning of a Fiscal Year and which difference is being eliminated in accordance with Section 8.13 of this Agreement, Depreciation for such Fiscal Year shall be the amount of book basis recovered for such Fiscal Year pursuant to Section 8.13 of this Agreement, and (2) with respect to any other asset whose Gross Asset Value differs from its adjusted tax basis at the beginning of such Fiscal Year, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Manager. "Distributable Cash" shall mean all cash, whether revenues or other funds, received by the Company, less the sum of the following, without duplication, to the extent paid or set aside by the Company: (i) all mandatory principal and interest payments on indebtedness of the Company and all other sums paid to lenders; (ii) all cash expenditures incurred incident to the normal operation of the Company's business; and (iii) Reserves. "Distribution" shall mean distributions in accordance with Section 8.4 of this Agreement. "Distribute" and "Distributed" shall have correlative meanings. "Drag-Along Notice" shall have the meaning set forth in Section 9.9(b) of this Agreement. "Economic Interest" shall mean a Person's share of one or more of the Profits, Losses and Distributions pursuant to this Agreement and the Act, but shall not include any right to participate in the management or affairs of the Company, including, the right to vote on, consent to or otherwise participate in any decision of the Members. "Encumbrance" shall mean any pledge, collateral assignment, grant of a security interest, mortgage or other lien or encumbrance. "Entity" shall mean any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association or any foreign trust or foreign business organization. 3 "Fiscal Year" shall mean the accounting year ending December 31 of each calendar year. "GAAP" shall have the meaning set forth in Section 11.3(a) of this Agreement. "Gift " shall mean a gift, bequest or other transfer for no consideration, whether or not by operation of law, except in the case of bankruptcy. "Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows: (a) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of the asset, as determined by the contributing Member and the Manager, provided that the initial Gross Asset Values of the assets contributed to the Company pursuant to Section 7.1 of this Agreement shall be as set forth in EXHIBIT A; (b) The Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values, as reasonably determined by the Manager as of the following times: (i) the acquisition of an additional interest by any new or existing Member in exchange for more than a de minimis Capital Contribution; (ii) the Distribution by the Company to a Member of more than a de minimis amount of property as consideration for a Membership Interest; and (iii) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (i) and (ii) above shall be made only if the Manager reasonably determines in good faith that such adjustments are necessary or appropriate to reflect the relative Economic Interests of the Members in the Company; (c) The Gross Asset Value of any Company asset Distributed to any Member shall be adjusted to equal the gross fair market value of such asset on the date of Distribution as reasonably determined by the distributee and the Manager, provided that, if the distributee is the Manager or any Affiliate of the Manager, the determination of the fair market value shall be subject to the valuation process set forth in Section (f) of this definition if any Member objects to the fair market value as established by the Manager; (d) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and Section 8.3 of this Agreement and paragraph (g) under the definition of Profits and Losses in this Agreement; provided, however, that Gross Asset Values shall not be adjusted pursuant to this paragraph (d) of this definition to the extent that the Manager reasonably determines in good faith that an adjustment pursuant to paragraph (b) of this definition is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this paragraph (d); and (e) If the Gross Asset Value of an asset has been determined or adjusted pursuant to paragraph (b) or (d) of this definition, then such Gross Asset Value shall 4 thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. (f) In the event that a Member objects to the fair market value established by the Manager pursuant to this definition of Gross Asset Value of any property contributed to the Company by the Manager or an Affiliate of the Manager, the fair market value of such property shall be determined by an appraisal conducted by an Appraiser selected by the Manager and acceptable to the objecting Member (whose approval shall not be unreasonably withheld or delayed) and whose decision, in the absence of fraud, shall be final, conclusive and binding on the parties. The Manager shall appoint the Appraiser on behalf of the Company in accordance with this Section (f) of this definition of Gross Asset Value within five business days. Any Appraiser appointed in accordance with this Section (f) of this definition of Gross Asset Value shall make its determination of fair market value within 30 days of its appointment. The Appraiser thus selected shall determine the fair market value of the relevant property by using any reasonable valuation methodology. The fees and expenses of the Appraiser shall be paid one-half by the Company and one-half by the objecting Member. "Initial Members" shall have the meaning set forth in the Preamble. "Majority Interest" shall mean one or more Membership Interests which taken together exceed 50% of the aggregate of all Sharing Ratios. "Majority Member" shall have the meaning set forth in Section 9.9(a) of this Agreement. "Manager" shall mean any Person selected as the Manager in accordance with Section 4.2 of this Agreement, in that capacity, and any successor thereto. "MAPC Member" shall mean Macquarie Americas Parking Corporation, a Delaware corporation. "Member" shall mean each of the parties who executes a counterpart of this Agreement as an Initial Member, Additional Member or Substitute Member. "Member Minimum Gain" shall mean an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a "nonrecourse liability" (as defined in Regulations Section 1.704-2(b)(3)), determined in accordance with Regulations Section 1.704-2(i)(3). "Member Nonrecourse Debt" shall have the meaning set forth in Regulations Section 1.704-2(b)(4). "Member Offerees" shall have the meaning set forth in Section 9.8(a) of this Agreement. "Membership Interest" shall mean a Member's entire interest, including its Economic Interest, in the Company, as measured in Units, and such other interests, rights and 5 privileges that the Member may enjoy by being a Member, including without limitation the right to vote on certain matters and to receive information concerning the business and affairs of the Company. "Option Notice " shall have the meaning set forth in Section 9.8(b) of this Agreement. "Person" shall mean any individual or Entity, and the heirs, executors, administrators, legal representatives, successors and assigns of such "Person" where the context so permits. "Profits" and "Losses" shall mean, for each Fiscal Year, an amount equal to the Company's net taxable income or loss for such Fiscal Year, determined in accordance Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments (without duplication): (a) Any items of income, gain, loss and deduction allocated to Members pursuant to Sections 8.2, 8.3, or 8.4 of this Agreement shall not be taken into account in computing Profits or Losses; (b) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits and Losses pursuant to this definition shall be added to such taxable income or loss; (c) Any expenditure of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.7041(b)(2)(iv)(i) and not otherwise taken into account in computing Profits and Losses pursuant to this definition shall be subtracted from such taxable income or loss; (d) In the event the Gross Asset Value of any Company asset is adjusted pursuant to paragraphs (b) or (c) of the definition of Gross Asset Value, the amount of such adjustment shall be taken into account as gain (if the adjustment increases the Gross Asset Value of the asset) or loss (if the adjustment decreases the Gross Asset Value of the asset) from the disposition of such asset for purposes of computing Profits and Losses; (e) Gain or loss resulting from any disposition of any Company asset with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the asset disposed of, notwithstanding that the adjusted tax basis of such asset differs from its Gross Asset Value; (f) In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year; and (g) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a 6 Distribution other than in liquidation of a Membership Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Profits or Losses. "Regulations" shall mean the Income Tax Regulations, including temporary and final regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Regulatory Allocations" shall have the meaning set forth in Section 8.3 of this Agreement. "Relevant Distribution Period" shall mean, with respect to a Distribution made pursuant to Section 8.16(a) of this Agreement, the twelve-month period that ends on the 31st day of March in the year following the Fiscal Year with respect to which such Distribution is required to be made. "Reserves" shall mean, with respect to any fiscal period, funds set aside or amounts allocated during such period to reserves which shall be maintained in amounts deemed sufficient by the Manager for working capital and for payment of taxes, insurance, debt service or other costs or expenses incident to the ownership or operation of the Company's business. "Sale", "Sell", or "Sold" shall mean a sale, assignment, exchange or other transfer for consideration, including but not limited to by virtue of any sale or exchange of a controlling interest in the owner, but shall exclude a transfer by an entity to its owners upon a liquidation of that entity. "Sale Notice" shall have the meaning set forth in Section 9.11 of this Agreement. "Seacoast Member" means Seacoast Holdings (PCAAH), Inc. a Delaware corporation. "Securities Acts" shall have the meaning set forth in Section 11.17 of this Agreement. "Selling Member" shall have the meaning set forth in Section 9.8(a) of this Agreement. "Sharing Ratio", with respect to any Member, shall be equal to the ratio determined by dividing the number of Units held by such Member by the total number of outstanding Units. The initial Sharing Ratios of the Members are set forth on EXHIBIT A. "State Acts" shall have the meaning set forth in the legend preceding Article I. "Substitute Member" shall mean any Person admitted as a Member in accordance with Section 9.3 of this Agreement. 7 "Tag-Along Notice" shall have the meaning set forth in Section 9.10(a) of this Agreement. "Tax Return" shall mean any return, report or similar statement (including any attached schedules) required to be filed with respect to any federal, state, local or foreign income, franchise, property, sales, use, employment, withholding, transfer, excise or other tax imposed by any governmental authority. A Tax Return shall include, without limitation, any information return, claim for refund, amended return or declaration or estimated tax. "TMP" shall have the meaning set forth in Section 8.12 of this Agreement. "Transfer" shall mean any Sale, Encumbrance or Gift. "Units" shall have the meaning set forth in Section 7.5(a) of this Agreement. ARTICLE II. FORMATION OF COMPANY 2.1. FORMATION. On August 20, 2003, Danielle Marinez organized a limited liability company pursuant to the Act by executing and delivering the Certificate of Formation to the Delaware Secretary of State in accordance with and pursuant to the Act. The Company and the Members hereby forever discharge the organizer from any liability or obligation to the Members, and the organizer shall be indemnified by the Company and the Members from and against any expense or liability actually incurred by the organizer, by reason of having been the organizer of the Company. 2.2. NAME. The name of the Company is Parking Company of America Airports Holdings, LLC. The Company shall conduct its business under that name or, upon compliance with applicable laws, any other name that the Manager deems appropriate or advisable. Fictitious business name statements shall be filed and published when and if the Manager determines it necessary. Any such statement shall be renewed as required by applicable law. 2.3. PRINCIPAL PLACE OF BUSINESS. The principal place of business of the Company shall be the Company's registered office in Delaware. The Company may locate its place or places of business at any other place or places as the Manager may from time to time deem advisable. 2.4. REGISTERED OFFICE AND REGISTERED AGENT. The Company's initial registered office in the State of Delaware and the name of the registered agent at such address shall be as set forth in the Certificate of Formation. The registered office and registered agent may be changed from time to time with the approval of the Manager by filing the address of the new registered office and/or the name of the new registered agent with the Delaware Secretary of State pursuant to the Act. 2.5. TERM. The Company shall continue in existence until it terminates in accordance with the provisions of this Agreement or the Act. 8 2.6. INITIAL MEMBERS. The names and addresses of the Initial Members of the Company are listed in EXHIBIT A. ARTICLE III. PURPOSE AND PERMITTED BUSINESS OF COMPANY 3.1. PURPOSE. The purpose of the Company shall be to carry on any lawful business, purpose or activity for which a limited liability company may be organized under the Act. The Company may conduct its business as set forth in this Article III either directly or through any direct or indirect subsidiaries. ARTICLE IV. RIGHTS AND DUTIES OF MANAGER 4.1. MANAGEMENT. The business and affairs of the Company shall be managed by its Manager. Except for situations in which the approval of the Members is expressly required by this Agreement or by non-waivable provisions of applicable law, the Manager shall have full and complete authority, power and discretion to manage and control the business, affairs and properties of the Company, to make all decisions regarding those matters and to perform any and all other acts and activities customary or incident to the management of the Company's business. At any time when there is more than one Manager, any one Manager may take any action permitted to be taken by the Manager, unless the approval of more than one Manager is expressly required pursuant to this Agreement or the Act. The Manager shall perform its duties in good faith, in a manner it reasonably believes to be in the best interests of the Company and its Members, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. Unless authorized to do so by this Agreement or by the Manager, no attorney-in-fact, employee or other agent of the Company shall have any power or authority to bind the Company in any way, to pledge its credit or to render it liable pecuniarily for any purpose. 4.2. NUMBER, TENURE AND APPOINTMENT. The Company shall initially have one Manager. The number of Managers shall be fixed from time to time by Members owning a Majority Interest. Each Manager shall hold office until such Manager resigns pursuant to Section 4.6 of this Agreement or is removed pursuant to Section 4.7 of this Agreement. All Managers shall be appointed by Members owning a Majority Interest. The initial Manager of the Company shall be the MAPC Member. The Company shall give notice of the resignation or appointment of a Manager or a change in the number of Managers to the Members within 30 days of such event in the manner provided in Section 11.1 of this Agreement. 4.3. LIABILITY FOR CERTAIN ACTS. (a) The Manager does not, in any way, guarantee the return of Capital Contributions or a profit for the Members from the operations of the Company. (b) The Manager shall not be liable to the Company or to any Member for any loss or damage sustained by the Company or any Member (or successor thereto), except to the extent, if any, that the loss or damage shall have been the result of fraud, willful misconduct, knowing violation of law or intentional breach of this Agreement. The Manager's liability under 9 this Section and as TMP under Section 8.12 of this Agreement shall be limited to the Manager's interest in the Company. 4.4. BANK ACCOUNTS. The Manager may from time to time open bank accounts in the name of the Company. The Manager shall be the sole signatory thereon unless the Manager determines otherwise. 4.5. INDEMNITY OF THE MANAGER, EMPLOYEES AND OTHER AGENTS. (a) The Company shall indemnify the Manager against any loss or liability incurred by the Manager, in connection with any claim, demand, action, suit or proceeding brought or made against the Manager by reason of the fact that the Manager is or was the Manager, and make advances for expenses incurred by the Manager in connection therewith to the maximum extent permitted under the Act, except to the extent the claim for which indemnification is sought results from an act or omission for which the Manager may be held liable to the Company or a Member under Section 4.3(b) of this Agreement. The Company shall indemnify its employees and other agents who are not Managers who are parties or are threatened to be made parties to actions, suits or proceedings by reason of the fact that such Persons provided services to the Company, to the fullest extent permitted by law, provided that such indemnification in any given situation is approved by Members owning a Majority Interest. (b) Expenses (including legal fees and expenses) incurred by a Manager in defending any claim, demand, action, suit or proceeding subject to Section 4.5(a) of this Agreement shall be paid by the Company in advance of the final disposition of such claim, demand, action, suit or proceeding upon receipt of an undertaking (which need not be secured) by or on behalf of the Manager to repay such amount if it shall ultimately be finally determined by a court of competent jurisdiction and not subject to appeal, that the Manager is not entitled to be indemnified by the Company as authorized hereunder. 4.6. RESIGNATION. The Manager may resign at any time by giving written notice to the Members. The resignation of any Manager shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. The resignation of a Manager who is also a Member shall not affect the Manager's rights as a Member. 4.7. REMOVAL. Members owning a Majority Interest may remove the Manager at any time with or without cause. The removal of a Manager who is also a Member shall not affect such Person's rights as a Member and shall not constitute a withdrawal of a Member. 4.8. COMPENSATION, REIMBURSEMENT, ORGANIZATION EXPENSES. The Manager shall not be entitled to compensation from the Company for services rendered to the Company as such. Upon the submission of appropriate documentation the Manager shall be reimbursed by the Company for reasonable out-of-pocket expenses incurred on behalf, or at the request, of the Company. 4.9. RIGHT TO RELY ON THE MANAGER. Any Person dealing with the Company may rely (without duty of further inquiry) upon a certificate signed by the Manager as to: 10 (1) The identity of any Manager or Member; (2) The existence or nonexistence of any fact or facts that constitute a condition precedent to acts on behalf of the Company by the Manager or which are in any other manner germane to the affairs of the Company; (3) The Persons who are authorized to execute and deliver any instrument or document of the Company; or (4) Any act or failure to act by the Company or any other matter whatsoever involving the Company or the Manager. 4.10. RESTRICTIONS ON COMPANY ACTIONS. Notwithstanding anything to the contrary contained herein, the Manager shall not cause the Company to: (1) except as permitted by this Agreement, commingle its assets with the assets of any other Person; (2) fail to maintain its records, books of account and bank accounts separate and apart from those of any other Person; (3) enter into any contract or agreement with any Person, except upon terms and conditions that are commercially reasonable and intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than such Person; (4) fail to correct any known misunderstandings regarding the separate identity of the Company and the Seacoast Member or any principal or Affiliate thereof or any other Person; (5) fail to file its own separate tax return, or file a consolidated federal income tax return with any other Person, except as may be required by the Code and related regulations; (6) fail either to hold itself out to the public as a legal entity separate and distinct from any other Person or to conduct its business solely in its own name in order not (a) to mislead others as to the identity with which such other party is transacting business, or (b) to suggest that it is responsible for the debts of any third party (including any of its principals or Affiliates); (7) except as may be required by the Code and related regulations, share any common logo with or hold itself out as or be considered as a department or division of (a) any of its principals or Affiliates, (b) any Affiliate of a principal or (c) any other Person; (8) fail to maintain separate financial statements, showing its assets and liabilities separate and apart from those of any other Person; (9) fail to pay its own liabilities and expenses only out of its own funds; 11 (10) fail to allocate fairly and reasonably any overhead expenses that are shared with an Affiliate, including paying for office space and services performed by any employee of an Affiliate; and (11) fail to use separate invoices and checks bearing its own name; Failure of the Company, or the Manager on behalf of the Company, to comply with any of the foregoing covenants or any other covenants contained in this Agreement shall not affect the status of the Company as a separate legal entity or the limited liability of the Members. ARTICLE V. RIGHTS AND OBLIGATIONS OF MEMBERS 5.1. LIMITATION OF LIABILITY. Except as otherwise provided by the non-waivable provisions of the Act and by this Agreement, no Member shall be liable for an obligation of the Company solely by reason of being or acting as a Member. 5.2. LIST OF MEMBERS. Upon written request of any Member made in good faith and for a purpose reasonably related to the Member's rights as Member under this Agreement (which reason shall be set forth in the written request), the Manager shall provide a list showing the names, addresses and Membership Interests of all Members. 5.3. NO AGENCY AUTHORITY. Except as expressly provided in this Agreement, the Members (in their capacity as Members) shall have no agency authority on behalf of the Company. 5.4. COMPANY BOOKS. In accordance with Section 8.10 of this Agreement, the Manager shall maintain and preserve, during the term of the Company, and for five years after dissolution, all accounts, books and other records of the Company's business. Upon written request of any Member made in good faith and for a purpose reasonably related to the Member's rights as Member under this Agreement (which reason shall be set forth in the written request), each Member shall have the right, during ordinary business hours, to inspect and copy such Company documents at the requesting Member's expense. 5.5. PRIORITY AND RETURN OF CAPITAL. Except as may be expressly provided in Article VIII, no Member shall have priority over any other Member, either as to the return of Capital Contributions or as to Profits, Losses or Distributions; provided, however, that this Section 5.5 shall not apply to loans (as distinguished from Capital Contributions) which a Member has made to the Company. 5.6. COMPETING ACTIVITIES. The Manager shall have no exclusive duty to act on behalf of the Company, and the Manager and each Member may have business interests other than their investments in the Company and may engage in other activities in addition to those relating to the Company. Neither the Company nor any Manager or Member shall have any right, except as provided in this Agreement, to share or participate in any other investments or activities of any other Manager or Member. Neither any Manager nor any Member shall incur any liability to the Company or to any of the Members or the Manager as a result of engaging in 12 any other business or venture, if and as long as such other activities are conducted in accordance with the terms of this Agreement. ARTICLE VI. ACTIONS AND MEETINGS OF MEMBERS 6.1. ACTION OF MEMBERS. Unless otherwise required in this Agreement, actions and consents of the Members may be communicated or reflected orally, electronically or in writing, and no action need be taken at a formal meeting. Members may, but are not required to, meet from time to time in accordance with the provisions of this Article. Any consent required to be in writing may be evidenced by separate written counterparts. Any action of the Members shall be effective when a sufficient number of Members to take such action communicate their consent to the action in writing to the Manager. 6.2. NO REQUIRED MEETINGS. The Members may, but shall not be required to, hold any annual, periodic or other formal meetings. However, meetings of the Members may be called by any Manager or by any Member or Members holding, in the aggregate, Sharing Ratios of at least 25% of the then outstanding Units; provided, however, that no Member shall call, or be entitled to call, any meeting for any insignificant or frivolous purposes. 6.3. PLACE OF MEETINGS. The Member or Members calling the meeting may designate any place within North America as the place of meeting for any meeting of the Members. If no designation is made, the place of meeting shall be the principal place of business of the Company. 6.4. NOTICE OF MEETINGS. Except as provided in Section 6.5 of this Agreement, written notice stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called shall be delivered not less than three days before the date of the meeting, either personally, by mail, by courier or by facsimile or other electronic means by or at the direction of the Member or Members calling the meeting, to each Member entitled to vote at such meeting. 6.5. MEETING OF ALL MEMBERS. If all of the Members shall meet at any time and place (including by conference telephone) and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and at such meeting lawful action may be taken. 6.6. RECORD DATE. For the purpose of determining Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof, or Members entitled to receive payment of any Distribution, or in order to make a determination of Members for any other purpose, the date on which notice of the meeting is mailed or the date on which the resolution declaring such Distribution is adopted, as the case may be, shall be the record date for such determination of Members. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this Section 6.6, such determination shall apply to any adjournment thereof. 6.7. QUORUM. Members holding at least a majority of the Sharing Ratios, represented in person or by proxy, shall constitute a quorum at any meeting of Members. In the 13 absence of a quorum at any such meeting, a majority of the Sharing Ratios so represented may adjourn the meeting from time to time for a period not to exceed 60 days without further notice. However, if the adjournment is for more than 60 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Member of record entitled to vote at the meeting. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The Members present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal during such meeting of that number of Sharing Ratios whose absence would cause less than a quorum. 6.8. MANNER OF ACTING. If a quorum is present, the affirmative vote of Members holding a Majority Interest shall be the act of the Members, unless the vote of a greater or lesser proportion or number is otherwise required by the Act or by the Certificate of Formation. Unless otherwise expressly provided herein, Members who have an interest (economic or otherwise) in the outcome of any particular matter upon which the Members vote or consent may vote or consent upon any such matter and their Sharing Ratio, vote or consent, as the case may be, shall be counted in the determination of whether the requisite matter is approved by the Members. 6.9. PROXIES. At all meetings of Members, a Member who is qualified to vote may vote in person or by proxy executed in writing by the Member or by a duly authorized attorney-in-fact. Such proxy shall be filed with the Manager before or at the time of the meeting. No proxy shall be valid after 11 months from the date of its execution, unless otherwise provided in the proxy. 6.10. ACTION BY MEMBERS WITHOUT A MEETING. Action required or permitted to be taken at a meeting of Members may be taken without a meeting if the action is evidenced by one or more written consents or approvals describing the action taken and signed by Members holding sufficient Sharing Ratios, or the appropriate Members, as the case may be, to approve such action had such action been properly voted on at a duly called meeting of the Members. Action taken under this Section 6.10 is effective when Members with the requisite Sharing Ratios, or the appropriate Members, as the case may be, have signed the consent or approval, unless the consent specifies a different effective date. The record date for determining Members entitled to take action without a meeting shall be the date the first Member signs a written consent. In the event any Member action is taken on a less than unanimous basis, prompt notice of such action shall be given to all Members in the manner set forth in Section 11.1 of this Agreement. 6.11. WAIVER OF NOTICE. When any notice is required to be given to any Member, a waiver thereof in writing signed by the person entitled to such notice, whether before, at, or after the time stated therein, shall be equivalent to the giving of such notice. 14 ARTICLE VII. CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS 7.1. MEMBERS' CAPITAL CONTRIBUTIONS. Each Initial Member shall contribute to the Company (and the Capital Account of such Member shall be credited with) such amounts and property as are set forth in EXHIBIT A attached hereto. Such initial Capital Contributions shall be made no later than the Closing Date. 7.2. ADDITIONAL CONTRIBUTIONS. Except as set forth in Section 7.1 of this Agreement, no Member shall be required to make any Capital Contributions. To the extent approved by the Members, from time to time, the Members may be permitted to make additional Capital Contributions if and to the extent they so desire, and if the Members determine that such additional Capital Contributions are necessary or appropriate in connection with the conduct of the Company's business (including without limitation, expansion or diversification). In such event, the Members shall have the opportunity (but not the obligation) to participate in such additional Capital Contributions in proportion to their Sharing Ratios. In the event any Member chooses not to participate in such additional Capital Contributions, the other Members shall have the right (but not the obligation) to contribute their proportionate shares of such additional Capital Contributions. The Members' Sharing Ratios and Capital Contributions, as reflected on EXHIBIT A, shall be amended to reflect any additional Capital Contributions made pursuant to this Section 7.2. The Sharing Ratios shall be recomputed to equal the ratios of the Members' Capital Accounts after they are increased to reflect any additional Capital Contributions. 7.3. CAPITAL ACCOUNTS. (a) A separate capital account (the "Capital Account") shall be maintained by the Company for each Member. Each Member's Capital Account shall be increased by (1) the amount of cash contributed by such Member to the Company; (2) the Gross Asset Value of property contributed by such Member to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Code Section 752); (3) allocations to such Member of Profits; (4) any items in the nature of income and gain which are specially allocated to the Member pursuant to Sections 8.2, 8.3 and 8.4 of this Agreement; and (5) the amount of any Company liabilities assumed by such Member or which are secured by any property distributed to such Member. Each Member's Capital Account shall be decreased by (1) the amount of cash Distributed to such Member by the Company; (2) the Gross Asset Value of property Distributed to such Member by the Company (net of liabilities secured by such Distributed property that such Member is considered to assume or take subject to under Code Section 752); (3) any items in the nature of deduction and loss that are specially allocated to the Member pursuant to Sections 8.2, 8.3 and 8.4 of this Agreement; (4) allocations to such Member of Losses; and (5) the amount of any liabilities of the Member assumed by the Company or which are secured by any property contributed by the Member to the Company. (b) Without limiting the other rights and duties of a transferee of a Membership Interest pursuant to this Agreement, in the event of a permitted sale or exchange of a Membership Interest in the Company, (1) the Capital Account of the transferor shall become the Capital Account of the transferee to the extent it relates to the transferred Membership Interest in accordance with Regulations Section 1.704-1(b)(2)(iv); and (2) the transferee shall be 15 treated as the transferor for purposes of allocations and Distributions pursuant to Article VIII to the extent that such allocations and Distributions relate to the transferred Membership Interest. (c) The manner in which Capital Accounts are to be maintained pursuant to this Section 7.3 is intended to comply with the requirements of Code Section 704(b) and the Regulations promulgated thereunder. If in the opinion of the Company's tax counsel or accountants the manner in which Capital Accounts are to be maintained pursuant to the preceding provisions of this Section 7.3 should be modified in order to comply with Code Section 704(b) and the Regulations thereunder, then, notwithstanding anything to the contrary contained in the preceding provisions of this Section 7.3, the method in which Capital Accounts are maintained shall be so modified; provided, however, that any change in the manner of maintaining Capital Accounts shall not materially alter the economic agreement between or among the Members. (d) Upon liquidation of the Company, liquidating Distributions shall be made in accordance with the positive Capital Account balances of the Members, as determined after taking into account all Capital Account adjustments for the Company's taxable year during which the liquidation occurs. Liquidation proceeds shall be paid in accordance with Section 10.3 of this Agreement. The Company may offset damages for breach of this Agreement by any Member whose interest is liquidated (either upon the withdrawal of the Member or the liquidation of the Company) against the amount otherwise Distributable to such Member; provided, the Company has received a final judgment by a court of competent jurisdiction which has not been stayed against such Member. Subject to Section 7.1 of this Agreement, no Member shall have any obligation to restore all or any portion of a deficit balance in such Member's Capital Account. (e) In determining the amount of any liability for purposes of Section 7.3(a) of this Agreement, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations. 7.4. WITHDRAWAL OR REDUCTION OF MEMBERS' CONTRIBUTIONS TO CAPITAL. A Member shall not be entitled to be repaid any portion of its Capital Contribution or withdraw from the Company except as provided in this Agreement. 7.5. CAPITALIZATION. (a) The respective interests of the Members in the Company's assets and allocations of income, gain, loss, deduction, credit and similar items from the Company pursuant to this Agreement and the Act shall be evidenced by the issuance to the Members of units ("Units"), which Units will not be certificated. The initial authorized capital of the Company will consist of One Thousand Units. All currently authorized Units are common voting Membership Interests and it is not necessary for all currently authorized Units to be issued or outstanding. The total number of authorized Units may not be increased without the approval of Members holding a Majority Interest. Upon the approval of Members holdings a Majority Interest, such additional Units may be issued in one or more series and the holders thereof may be separated into one or more classes entitled to rights and privileges that differ from those of 16 other series or classes. Any priority or preferential rights must be designated in an amendment to this Agreement. (b) The Units have no preferences, qualifications, limitations, restrictions, nor any special or relative rights, including convertible rights. (c) In consideration of the Capital Contributions described in Section 7.1 of this Agreement, concurrently with the execution and delivery hereof, the Company shall issue Units as set forth on EXHIBIT A hereto to the Members. (d) From time to time, the Company may, as approved by Members holding a Majority Interest, issue additional Units to existing or newly admitted Members ("Additional Members") upon the making by such Members of Capital Contributions (which may be in the form of cash, contributions of property to the Company, services rendered to the Company or a promissory note or other obligation to contribute cash or property to, or to perform services for, the Company) in such amounts, if any, as the Manager shall deem appropriate, based upon the needs of the Company, the net value of the Company's assets, the Company's financial condition and the benefits anticipated to be realized by the Company and the Members. EXHIBIT A shall be updated as necessary by the Manager to reflect the making of Capital Contributions by, and the issuance of Units to, the Additional Members. (e) In order that the Company may determine the Members entitled to notice of or to consent, approve or vote on any matter, or the Members or assignees exercise any rights in respect of any change, conversion or exchange of Units or for the purpose of any other lawful actions, the Manager shall cause the Company to maintain a register of the ownership of all Units of the Company. The Company and its Members and Manager shall be entitled to recognize the exclusive right of a person registered on the Company's books as the owner of Units to receive Distributions, and to vote as such owner and shall not be bound to recognize any equitable or other claim to or interest in such Unit or Units on the part of any other Person, whether or not the Company, the Members or the Manager shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. 7.6. LOANS TO THE COMPANY BY MEMBERS OR RELATED PARTIES. Notwithstanding any other provision of this Agreement, in no event shall any loan be made to the Company by any Member or by any person related to any Member within the meaning of Regulations Section 1.752-4(b) if the proceeds of such loan will be used to repay debt of the Company, unless the proceeds of such loan are used solely to repay debt of the Company to a Member or any person related to a Member within the meaning of Regulations Section 1.752-4(b). ARTICLE VIII. ALLOCATIONS, INCOME TAX, DISTRIBUTIONS, ELECTIONS AND REPORTS 8.1. ALLOCATIONS OF PROFITS AND LOSSES FROM OPERATIONS. Except as provided in Sections 8.2, 8.3 and 8.4 of this Agreement, the Profits and Losses for each Fiscal Year shall be allocated among the Members in accordance with their respective Sharing Ratios. 8.2. SPECIAL ALLOCATIONS TO CAPITAL ACCOUNTS. Notwithstanding Section 8.1 of this Agreement, the following special allocations shall be made in the following order: 17 (a) In the event that any Member unexpectedly receives any adjustments, allocations or Distributions described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6), which create or increase a Deficit Capital Account of such Member, then items of Company income and gain (consisting of a pro rata portion of each item of Company income, including gross income, and gain for such year and, if necessary, for subsequent years) shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Deficit Capital Account so created as quickly as possible. It is the intent that this Section 8.2(a) be interpreted to comply with the alternate test for economic effect set forth in Regulations Section 1.704-1(b)(2)(ii)(d). (b) The Losses allocated pursuant to Section 8.1 of this Agreement shall not exceed the maximum amount of Losses that can be so allocated without causing any Member to have a Deficit Capital Account at the end of any Fiscal Year. In the event that some, but not all, of the Members would have Deficit Capital Accounts as a consequence of an allocation of Losses pursuant to Section 8.1 of this Agreement, the limitation set forth in the preceding sentence shall be applied on a Member by Member basis so as to allocate the maximum permissible Losses to each Member under Regulations Section 1.704-1(b)(2)(ii)(d). All Losses in excess of the limitation set forth in this Section 8.2(b) shall be allocated to the Members in proportion to their respective positive Capital Account balances, if any, and thereafter to the Members in accordance with their Sharing Ratios. In the event that any Member would have a Deficit Capital Account at the end of any Fiscal Year which is in excess of the sum of the amount, if any, that such Member is obligated to restore to the Company under Regulations Section 1.704-1(b)(2)(ii)(c) and such Member's share of Company Minimum Gain as defined in Regulations Section 1.704-2(g)(1) (which is also treated as an obligation to restore in accordance with Regulations Section 1.704-1(b)(2)(ii)(d)), the Capital Account of such Member shall be specially credited with items of Company income (including gross income) and gain in the amount of such excess as quickly as possible. (c) Notwithstanding any other provision of this Section 8.2, if there is a net decrease in the Company Minimum Gain during a Fiscal Year, then the Capital Accounts of each Member shall be allocated items of income (including gross income) and gain for such Fiscal Year (and if necessary for subsequent Fiscal Years) equal to that Member's share of the net decrease in Company Minimum Gain. This Section 8.2(c) is intended to comply with the minimum gain chargeback requirement of Regulations Section 1.704-2 and shall be interpreted consistently therewith. If in any Fiscal Year that the Company has a net decrease in the Company Minimum Gain, if the minimum gain chargeback requirement would cause a distortion in the economic arrangement among the Members and it is not expected that the Company will have sufficient other income to correct that distortion, the Manager may in its discretion (and shall, if requested to do so by a Member) seek to have the Internal Revenue Service waive the minimum gain chargeback requirement in accordance with Regulations Section 1.704-2(f)(4). (d) Notwithstanding any other provision of this Section 8.2, except Section 8.2(c), if there is a net decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt during any Company Fiscal Year, each Member who has a share of the Member Minimum Gain as of the beginning of the Fiscal Year shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) equal to such Member's share of the net decrease in Member Minimum Gain attributable to such 18 Member Nonrecourse Debt. A Member's share of the net decrease in Member Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(i)(4); provided, however, that a Member shall not be subject to this provision to the extent that an exception is provided by Regulations Section 1.704-2(i)(4) and any Revenue Rulings issued with respect thereto. Any Member Minimum Gain allocated pursuant to this provision shall consist of first, gains recognized from the disposition of Company Property subject to the Member Nonrecourse Debt, and, second, if necessary, a pro rata portion of the Company's other items of income or gain (including gross income) for that Fiscal Year. This Section 8.2(d) is intended to comply with the minimum gain chargeback requirement in Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith. (e) Nonrecourse deductions, as defined in Regulations Section 1.704-2(b)(1), for any Fiscal Year shall be specially allocated among the Members in proportion to their Sharing Ratios. Items of Company loss, deduction and expenditures which are attributable to any nonrecourse debt of the Company and are characterized as partner nonrecourse deductions under Regulations Section 1.704-2(i) shall be allocated to the Members' Capital Accounts in accordance with the Members' Sharing Ratios. (f) To the extent that an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a Distribution to a Member in complete liquidation of its Membership Interest, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event Regulations Section 1.704(b)(2)(iv)(m)(2) applies, or to the Member to whom such Distribution was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies. 8.3. CREDIT OR CHARGE TO CAPITAL ACCOUNTS. Any credit or charge to the Capital Accounts of the Members pursuant to Section 8.2 of this Agreement ("Regulatory Allocations") shall be taken into account in computing subsequent allocations of Profits and Losses pursuant to Section 8.1 of this Agreement, so that the net amount of any items charged or credited to Capital Accounts pursuant to Section 8.1 of this Agreement and the Regulatory Allocations hereof and this Section 8.3 shall to the extent possible, be equal to the net amount that would have been allocated to the Capital Account of each Member pursuant to the provisions of this Article VIII if the special allocations required by the Regulatory Allocations hereof had not occurred. 8.4. DISTRIBUTIONS. Except as provided in Sections 7.3(d) and 10.3(b) (with respect to liquidating Distributions), 8.5 (with respect to limitations on Distributions) and 8.16 (with respect to tax Distributions) of this Agreement, and Section 2 of the PCAAH Member's Agreement, dated as of October 1, 2003, by and between the MAPC Member and the Seacoast Member, the Manager shall Distribute Distributable Cash to the Members pro rata in accordance with Sharing Ratios at such times and as often as it shall determine in its sole and absolute discretion. 19 8.5. LIMITATION UPON DISTRIBUTIONS. No Distribution shall be made if such Distribution would violate the Act. 8.6. ACCOUNTING PRINCIPLES. For financial reporting purposes, the Company shall use accounting principles applied on a consistent basis using the accrual method of accounting determined by the Manager, unless the Company is required to use a different method of accounting for federal income tax purposes, in which case that method of accounting shall be the Company's method of accounting. 8.7. INTEREST ON AND RETURN OF CAPITAL CONTRIBUTIONS. No Member shall be entitled to interest on its Capital Contribution or to return of its Capital Contribution, except as otherwise specifically provided for herein. 8.8. LOANS TO COMPANY. Subject to Section 7.6, nothing in this Agreement shall prevent any Member from making secured or unsecured loans to the Company by agreement with the Company. 8.9. ACCOUNTING PERIOD. The Company's accounting period shall be the Fiscal Year. 8.10. RECORDS AND REPORTS. At the expense of the Company, the Manager shall maintain records and accounts of all operations and expenditures of the Company. At a minimum the Company shall keep the following records: (a) A current list of the full name and last known business, residence, or mailing address of each Member and Manager, both past and present; (b) A copy of the Certificate of Formation and all amendments thereto, together with executed copies of any powers of attorney pursuant to which any amendment has been executed; (c) Copies of the Company's federal, state, and local income Tax Returns and reports, if any, for the six most recent Fiscal Years; (d) Copies of the Company's currently-effective Agreement and copies of any financial statements of the Company for the six most recent Fiscal Years; (e) Minutes of every meeting of Members; (f) Any written consents obtained from Members for actions taken by Members without a meeting. 8.11. RETURNS AND OTHER ELECTIONS. (a) The Manager shall cause the preparation and timely filing of all Tax Returns required to be filed by the Company pursuant to the Code and all other Tax Returns deemed necessary and required in each jurisdiction in which the Company does business. Such Tax Returns shall reflect and be consistent with the Company's treatment as a partnership for 20 federal and state income tax purposes, unless and until the Members unanimously elect otherwise. (b) All elections permitted to be made by the Company under federal or state laws shall be made by the Manager in its sole discretion; provided, however, that the Manager shall make any tax election requested by Members owning a Majority Interest. 8.12. TAX MATTERS PARTNER. The MAPC Member is hereby designated the tax matters partner ("TMP") as defined in Code Section 6231(a)(7). The TMP and the other Members shall use their reasonable efforts to comply with the responsibilities outlined in Code Sections 6221 through 6233 (including any Regulations promulgated thereunder), and in doing so shall incur no liability to any other Member except to the extent of any loss or damage sustained by the Company or any Member as the result of fraud, willful misconduct, knowing violation of law or intentional breach of this Agreement. The TMP's liability under this Section and Section 4.3(b) of this Agreement is limited to its interest in the Company. 8.13. CERTAIN ALLOCATIONS FOR INCOME TAX (BUT NOT BOOK CAPITAL ACCOUNT) PURPOSES. In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss and deductions with respect to any property contributed to the capital of the Company shall, solely for federal income tax purposes (and not for Capital Account purposes), be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company and its Gross Asset Value at the time of contribution. In the event the Gross Asset Value of any Company asset is adjusted pursuant to paragraph (a) of the definition of Gross Asset Value, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder. 8.14. SECTION 754 ELECTION. The Manager may cause the Company to file an election under Code Section 754. 8.15. DEBT ALLOCATIONS. For purposes of Regulations Section 1.752-3(a)(3) and the Regulations under Code Section 707, all debt incurred by the Company will be allocated among the Members in accordance with their Sharing Ratios. 8.16. TAX DISTRIBUTIONS. (a) In the event that there is net taxable income allocated from the Company to a Member for a Fiscal Year, then the Company shall, within three months after the end of such Fiscal Year, make a Distribution pursuant to this Section 8.16(a) to each Member in the minimum amount necessary to meet the following requirements: (i) all Distributions under this Section 8.16(a) shall be made in proportion to each Member's Sharing Ratio; and (ii) the total amount of Distributions to each Member pursuant to this Section 8.16(a) and Sections 8.4 and 8.16(b) of this Agreement during, or with respect to, the Relevant Distribution Period (excluding any Distributions made pursuant to this Section 8.16(a) with respect to a prior Fiscal Year or pursuant to Section 8.16(b) with respect to a future Fiscal Year) shall be at least equal to the product of (i) the net taxable income allocable from the Company to such Member for federal 21 income tax purposes for such Fiscal Year (without regard to any adjustments made under Code Sections 734, 743 or 754), multiplied by (ii) the Assumed Tax Rate; provided, however, that no Distribution shall be made pursuant to this Section 8.16(a) (w) to the extent that it would cause a Member's Capital Account (after taking into account estimated Profits and Losses and Distributions through the latest calendar quarter) to be negative, (x) if such Distribution is then prohibited by the Company's debt instruments, (y) in an amount which in the aggregate exceed Distributable Cash, or (z) would otherwise be imprudent. (b) The Company shall, on or before each of April 15th, June 15th, September 15th of any Fiscal Year and January 15th immediately following the closing of such Fiscal Year, make Distributions to Members of one-fourth of the amount estimated to be distributable pursuant to Section 8.16(a) of this Agreement in respect of such Fiscal Year. Such estimated amounts shall be included in the Company's operating budget. (c) Any Distribution which is made to a Member pursuant to Section 8.16(a) or (b) of this Agreement shall reduce the total amount of Distributions which such Member would otherwise be entitled to receive under Section 8.4 of this Agreement until the total amount of such reductions made pursuant to this Section 8.16(c) equals the cumulative amount of Distributions made to such Member pursuant to Section 8.16(a) and (b) of this Agreement. ARTICLE IX. TRANSFERABILITY OF MEMBERSHIP INTERESTS 9.1. TRANSFERS OF MEMBERSHIP INTERESTS. No Membership Interest may be transferred in whole or in part by any Member to any Person, except with the consent of Members holding a Majority Interest. In the event a Member desires to Transfer all or part of such Member's Units or any interest therein, such Member will be responsible for compliance with all conditions of Transfer imposed by this Agreement and under applicable law and for all expenses, if any, reasonably incurred by the Company for legal and/or accounting services in connection with reviewing any proposed Transfer or issuing opinions in connection therewith. Until the transferee is admitted as a Member, the transferor Member shall continue to be a Member and to be entitled to exercise any rights or powers of a Member with respect to the Membership Interest transferred. 9.2. PROHIBITED TRANSFERS. Any purported Transfer of any Units in violation of the provisions of this Agreement shall be wholly void and shall not effectuate the Transfer contemplated thereby. Notwithstanding anything contained herein to the contrary, no Member may Transfer any Membership Interests in violation of any provision of the Securities Act and any applicable state securities laws. 9.3. ADMISSION OF TRANSFEREE AS MEMBER. A transferee of a Membership Interest desiring to be admitted as a Member (a "Substitute Member") must execute a counterpart of, or an agreement adopting, this Agreement. The admission of such transferee as a Substitute Member is subject to the consent of the Majority Interest. Upon admission of the transferee as a Substitute Member, the transferee shall have, to the extent of the Membership Interest transferred, the rights and powers and shall be subject to the restrictions and liabilities of a Member under this Agreement, the Certificate of Formation and the Act. The transferee shall 22 also be liable, to the extent of the Membership Interest transferred, for the unfulfilled obligations, if any, of the transferor Member to make Capital Contributions, but shall not be obligated for liabilities unknown to the transferee at the time such transferee was admitted as a Member and that could not be ascertained from this Agreement. Whether or not the transferee of a Membership Interest becomes a Member, the transferor Member is not released from any liability to the Company under this Agreement, the Certificate of Formation or the Act. 9.4. RIGHTS OF ASSIGNEES. Until such time, if any, as a transferee is admitted to the Company as a Substitute Member pursuant to Section 9.3 of this Agreement, (i) such transferee shall be an assignee only, and only shall receive, to the extent Transferred, the Distributions and allocations of income, gain, loss, deduction, credit, or similar item to which the Member that Transferred its Membership Interest would be entitled, and (ii) such assignee shall not be entitled or enabled to exercise any other right or powers of a Member, such other rights remaining with the transferring Member. In such a case, the transferring Member shall remain a Member even if he has transferred his entire Economic Interest in the Company to one or more assignees. In the event any assignee desires to make a further assignment of any Economic Interest in the Company, such assignee shall be subject to all of the provisions of this Agreement to the same extent and in the same manner as any Member desiring to make such an assignment. 9.5. WITHDRAWAL OF MEMBER UPON TRANSFER OF ENTIRE INTEREST. If a Member has transferred its entire Membership Interest to one or more assignees or to the Company, then such Member shall withdraw from the Company if and when all such assignees have been admitted as Substitute Members in accordance with this Agreement or the Company has acquired such Membership Interest as herein provided. 9.6. NO WITHDRAWALS, RESIGNATIONS OR REMOVALS. No Member may withdraw or resign from the Company except as provided in Section 9.5 of this Agreement, and no Member shall be subject to removal. 9.7. INDEMNIFICATION. Each transferring Member hereby indemnifies the Company and the remaining Members against any and all loss, damage, or expense (including, without limitation, tax liabilities or loss of tax benefits) arising directly or indirectly as a result of any Transfer or purported Transfer in violation of this Article IX. 9.8. RIGHT OF FIRST REFUSAL. (a) In the event that any Member other than the MAPC Member desires to Sell such Member's Membership Interest in whole or in part (such Member being herein referred to as the "Selling Member"), such Member shall first offer such Membership Interest to the Company and the MAPC Member (the "Member Offerees") in accordance with the following provisions: (b) The Selling Member shall deliver a written notice (the "Option Notice") to the Company and the Member Offerees stating (i) the Selling Member's bona fide intention to Sell such Membership Interest, (ii) the Membership Interest to be Sold, (iii) the purchase price and other terms of payment for which the Selling Member proposes to Sell such Membership 23 Interest and (iv) if the Selling Member shall have received a bona fide offer to purchase such Membership Interest on such terms, the named and address of the proposed purchaser. (c) Within ten days after receiving the Option Notice, the Company shall have the right, but not the obligation, to purchase all or any part of the Membership Interest offered therein upon the price and terms of payment designated in the Offer Notice. If the Company exercises such right within such ten-day period, the Company shall give written notice of that fact to the Selling Member and the other Members. (d) In the event that the Company does not purchase, in accordance with the provisions of Section 9.8(c) of this Agreement, all of the Membership Interest proposed to be Sold by the Selling Member, then for an additional period of 30 days commencing on the earlier of the date that (A) the Company's right to purchase such Membership Interest has expired or the Company notifies the Selling Member in writing that the Company has determined not to exercise such right or (B) the Company has determined to exercise such right only with respect to a portion of such Membership Interest, the Member Offerees shall have the right to purchase all or any portion of the Membership Interest not so purchased by the Company on the same terms and conditions and at the bona fide offer price at which the Company was so entitled to purchase such Membership Interest. The specific portion of such Membership Interest that each Member Offeree shall be so entitled to purchase shall be determined on a pro rata basis in proportion to the respective Sharing Ratios of each Member Offeree desiring to purchase the portion of the offered Membership Interest remaining available for purchase. Any Member Offeree desiring so to purchase a part of such Membership Interest shall give notice of such desire to the Selling Member, the Company and all other Member Offerees confirming such desire and the proposed terms of purchase. In the event that any Member Offeree does not purchase its full pro rata share of any such Membership Interest proposed to be Sold, such unpurchased portion of the Membership Interest shall be offered by the Selling Member to the Member Offerees subscribing to purchase a portion of that Membership Interest on a pro rata basis on similar terms of purchase. No such Membership Interest or portion thereof shall be made available for purchase by any non-Member pursuant to the remaining provisions of this Section 9.8 unless and until all Member Offerees shall have had an opportunity to purchase all of such Membership Interest in accordance with the provisions of this Section 9.8(d). (e) The closing of any purchase by the Company or any Member Offerees of any offered Membership Interest as provided in this Section 9.8 shall take place on such date as designated by the Company or such Member Offeree(s) occurring within 30 days after receipt by the Selling Member of notification from the Company or such Member Offerees of the exercise of the Company's or such Member Offerees' right to purchase hereunder. At such closing, the Selling Member shall deliver to the Company or such Member Offerees, as the case may be, such documentation as the Company or such Member Offerees shall reasonably request to evidence the Sale of such offered Membership Interests, against payment therefor by the Company or such Member Offerees. (f) In the event that, after compliance with the foregoing provisions of this Section 9.8, the Company and the Member Offerees, taken together, fail to purchase all of the Membership Interest proposed to be Sold by the Selling Member, then for a period of 60 days commencing on the date that neither the Company nor any Member Offeree remains entitled to 24 exercise its right to purchase any offered Membership Interest in accordance with the foregoing provisions of this Section 9.8, the Selling Member may Sell to the proposed purchaser any portion of the Membership Interest described in the Option Notice that the Company and the Member Offerees are not purchasing; provided, however, that any such Sale to the proposed purchaser must be made for the consideration and upon the terms and conditions set forth in the Option Notice and shall be made subject to and in accordance with the other provisions of this Article IX. If the Selling Member shall not consummate the Sale of such remaining Membership Interest to the proposed purchaser within such 60-day period, such Membership Interest shall remain subject to the provisions of this Agreement and the Selling Member shall not thereafter Sell any such Membership Interest or portion thereof to any Person without again first complying with all of the provisions of this Agreement. 9.9. DRAG-ALONG RIGHTS. (a) If a Member (or group of Members who are Affiliates) that then holds a Majority Interest of the Units then outstanding (the "Majority Member") proposes to engage in a Sale of 100% of the Units then held by such Majority Member, then at the option of the Majority Member, there shall be included in such proposed Sale (on the same terms and subject to the same conditions as applicable to the Units to be sold by the Majority Member, except as herein otherwise provided) 100% of the Units then held by the Members other than the Majority Member all on the terms and subject to the conditions hereinafter set forth; provided, however, that if the Majority Member proposes to engage in a Sale with an Affiliate of the Majority Member, then the Majority Member may only exercise its rights under this Section 9.9 if the Sale is at such price and is on such terms as would be substantially similar to those that would be available from a third party on an arm's-length basis. (b) If the Majority Member proposes to engage in a Sale and to exercise the Majority Member's rights under this Section 9.9, then not less than 20 days prior to the date on which such Sale is scheduled to occur, the Majority Member shall give to the Company notice of the same (which notice shall include the price to be paid in such Sale and the other terms of purchase), and within five days thereafter, the Company shall send to each Member other than the Majority Member at such Member's address as then set forth on the books and records of the Company (i) a copy of such notice, and (ii) a statement of the number of Units required to be sold by such Member pursuant to this Section 9.9 (such notices together the "Drag-Along Notice"), which number of Units shall equal the same percentage of the Units held by that Member as the percentage of the Units held by the Majority Member and proposed to be sold in such Sale. (c) Each Member expressly agrees that if the Majority Member so elects, such Member shall sell such Member's Units on the terms of this Section 9.9, when and if the Majority Member sells its Units, in accordance with any Drag-Along Notice that such Holder receives with respect to such Sale. 9.10. TAG-ALONG RIGHTS. (a) If a Selling Member proposes to engage in a Sale (in a single transaction or a series of related transactions) of all or a part of such Member's Membership Interest 25 (provided, that the number of Units the Selling Member proposes to sell is greater than ten percent of the outstanding Units of the Company determined at the time of the sale, or such Selling Member (together with the Units included in such Sale) will have sold greater than ten percent of the outstanding Units of the Company), but neither the Company nor the other Members elect to exercise their rights under Section 9.8 of this Agreement or if the sale is not subject to Section 9.8 of this Agreement, then not less than 20 days prior to the date on which such Sale is scheduled to occur, the Selling Member shall give to the Company a notice of the same, including the Membership Interest proposed to be sold, the price and other terms of the Sale, and the name and address of the proposed purchaser, and within five days thereafter, the Company shall send to each Member (other than the Selling Member) at such Member's address as then set forth on the books and records of the Company (i) a copy of such notice from the Selling Member, and (ii) a statement of the number of Units that the Member receiving such notice shall have the right to sell pursuant to this Section 9.10 (such notice and statement together the "Tag-Along Notice"), which number shall equal the same percentage of the Units held by that Member as the percentage of the Units held by the Selling Member and proposed to be sold in such Sale. (b) A Member seeking to exercise its rights under this Section 9.10 shall give written notice thereof to the Selling Member and the Company within 15 days from the giving of the Tag-Along Notice, which notice shall specify the number of Units that such Member elects to include in such Sale. (c) If the tag-along rights set forth in this Section 9.10 are exercised by one or more Members with respect to any proposed Sale, the Selling Member shall not proceed with such Transfer unless and until each such other Member is given the right to so participate. 9.11. TERMS OF PARTICIPATION. Each Member receiving a Tag-Along Notice or a Drag-Along Notice (together a "Sale Notice") shall promptly take all steps described in the Sale Notice to effectuate the sale by such Holder of the Units required to be sold by the Drag-Along Notice or if such Sale Notice is a Tag-Along Notice, that such Member elects to sell pursuant to Section 9.10 of this Agreement. Without limiting the generality of the foregoing, each Member shall: (a) provide all such information with respect to such Member and Units as may be reasonably required by the purchaser in such Sale; (b) execute and deliver all such purchase documents as may be reasonably required by such purchaser; provided, however, that (i) Members (other than the Majority Member, a Selling Member, or any Member responsible directly, or by way of delegation of authority, for the operation or management of any the Company's businesses or properties) shall not be required to make any representation or warranty to the purchaser other than to the effect that such Members have good and marketable title to the Membership Interests being sold in such Transfer, free and clear of liens and Encumbrances, and as to their right, power and authority to sell such securities; (ii) that such representations and warranties shall be made by such Members individually; and (iii) except as to such representations and warranties, such Members shall not be liable beyond the net proceeds of the Sale received by them for any other breach of 26 representations or warranties, covenants or agreements in the purchase documents. In addition, unless expressly agreed to by a Member, no Member shall be required to enter into any covenant not to compete or similar agreement restricting such Member's business activities; and (c) deliver at the closing of such Sale such other transfer documentation as the purchaser may reasonably request against delivery of the purchase price therefor. ARTICLE X. DISSOLUTION AND TERMINATION 10.1. DISSOLUTION. (a) The Company shall be dissolved only upon the approval of Members holding a Majority Interest. Notwithstanding anything to the contrary in the Act, the Company shall not be dissolved upon the death, retirement, resignation, expulsion, bankruptcy or dissolution of a Member. (b) As soon as possible following the occurrence of an event specified in Section 10.1(a) of this Agreement effecting the dissolution of the Company, the appropriate representative of the Company shall execute all documents required by the Act at the time of dissolution and file or record such statements with the appropriate officials. 10.2. EFFECT OF DISSOLUTION. Upon dissolution, the Company shall cease to carry on its business, except insofar as may be necessary for the winding up of its business, but its separate existence shall continue until winding up and Distribution is completed and a certificate of cancellation is filed with the Delaware Secretary of State. 10.3. WINDING UP, LIQUIDATION AND DISTRIBUTION OF ASSETS. (a) Upon dissolution, an accounting shall be made by the Company's independent accountants of the accounts of the Company and of the Company's assets, liabilities and operations, from the date of the last previous accounting until the date of dissolution. The Manager shall immediately proceed to wind up the affairs of the Company. (b) If the Company is dissolved and its affairs are to be wound up, the Manager shall: (1) Sell or otherwise liquidate all of the Company's assets as promptly as practicable (except to the extent that the Manager may determine to Distribute in kind any assets to the Members); (2) Allocate any Profit or Loss resulting from such sales to the Members' Capital Accounts in accordance with Article VIII hereof; (3) Discharge all liabilities of the Company, including liabilities to Members who are also creditors, to the extent otherwise permitted by law, other than liabilities to Members for Distributions and the return of capital, and establish such Reserves as may 27 be reasonably necessary to provide for contingent liabilities of the Company (for purposes of determining the Capital Accounts of the Members, the amounts of such Reserves shall be deemed to be an expense of the Company); and (4) Distribute the remaining assets of the Company to the Members on a pro rata basis in accordance with the positive balance (if any) of each Member's Capital Account (as determined after taking into account all Capital Account adjustments for the Company's Fiscal Year during which the liquidation occurs), either in cash or in kind, as determined by the Manager, with any assets Distributed in kind being valued for this purpose at their respective fair market values and Distributed to the Members in shares according to the ratios of their Capital Accounts. Any such Distributions to the Members in respect of their Capital Accounts shall be made in accordance with the time requirements set forth in Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any assets of the Company are to be distributed in kind, the net fair market value of such assets as of the date of dissolution shall be determined by independent appraisal or by agreement of the Members. Such assets shall be deemed to have been sold as of the date of dissolution for their fair market value, and the Capital Accounts of the Members shall be adjusted pursuant to the provisions of Article VIII and Section 7.3 of this Agreement to reflect such deemed sale. Any assets distributed to the Members in kind shall be owned by the Members as tenants in common in proportion to their positive Capital Account balances described in Section 10.3(b)(4) of this Agreement. (c) Notwithstanding anything to the contrary in this Agreement, upon a liquidation within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), if any Member has a Deficit Capital Account (after giving effect to all contributions, Distributions, allocations and other Capital Account adjustments for all Fiscal Years, including the year during which such liquidation occurs), such Member shall have no obligation to make any Capital Contribution, and the negative balance of such Member's Capital Account shall not be considered a debt owed by such Member to the Company or to any other Person for any purpose whatsoever. (d) Upon completion of the winding up, liquidation and Distribution of the assets, the Company shall be deemed terminated. (e) The Manager shall comply with any applicable requirements of applicable law pertaining to the winding up of the affairs of the Company and the final Distribution of its assets. 10.4. FILING OR RECORDING STATEMENTS. Upon the conclusion of winding up, the appropriate representative of the Company shall execute all documents required by the Act at the time of completion of winding up and file or record such statements with the appropriate officials. 10.5. RETURN OF CONTRIBUTION; NONRECOURSE TO OTHER MEMBERS. Except as provided by law or as expressly provided in this Agreement, upon dissolution, each Member shall look solely to the assets of the Company for the return of its Capital Contribution. If the Company Property remaining after the payment or discharge of the debts and liabilities of the 28 Company is insufficient to return the cash or other contribution of one or more Members, such Members shall have no recourse against any other Member. ARTICLE XI. MISCELLANEOUS PROVISIONS 11.1. NOTICE. Any notice, demand, or communication required or permitted to be given by any provision of this Agreement shall be deemed to have been sufficiently given or served if sent by telecopy or facsimile transmission, delivered by messenger or overnight courier, or mailed, certified first class mail, postage prepaid, return receipt requested, and addressed or sent to the Member's and/or Company's address, as set forth on EXHIBIT A. Such notice shall be effective, (a) if delivered by messenger or by overnight courier, upon actual receipt (or if the date of actual receipt is not a business day, upon the next business day); (b) if sent by telecopy or facsimile transmission, upon confirmation of receipt (or if the date of such confirmation of receipt is not a business day, upon the next business day); or (c) if mailed, upon the earlier of seven business days after deposit in the mail and the delivery as shown by return receipt therefor. Any Member or the Company may change its address by giving notice in writing to the Company and the other Members of its new address. 11.2. BOOKS OF ACCOUNT AND RECORDS. (a) Proper and complete records and books of account shall be kept or shall be caused to be kept by the Manager, in which shall be entered fully and accurately all transactions and other matters relating to the Company's business in such detail and completeness as is customary and usual for businesses of the type engaged in by the Company. Such books and records shall be maintained as provided in Section 8.10 of this Agreement. (b) So long as a Member holds Units, such Member shall have the right to visit and inspect any of the properties of the Company or any of its subsidiaries, to examine books of account and records, to discuss the affairs, finances and accounts of the Company or any of its subsidiaries with its Manager, and to review such information as it reasonably requests, all at such reasonable times and as often as may be reasonably requested for a purposed relating to such member's ownership interest in the Company. The Company shall not be obligated under this Section 11.2(b) to disclose to a Member information that (i) the Manager determines in good faith is highly confidential or proprietary information or (ii) the Company is restricted from disclosing pursuant to an agreement with a third party. 11.3. DELIVERY OF FINANCIAL STATEMENTS. So long as a Member holds Units, the Company shall deliver to such Member, as soon as practicable, but in any event within 120 days after the end of each Fiscal Year of the Company, income statement, balance sheet, statement of operations, statement of Members' equity and statement of cash flows of the Company for and as of the end of such Fiscal Year, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles ("GAAP"). Additionally, to the extent that the Company receives any financial reports or other information pursuant to Section 12.3 of the Limited Liability Company Agreement of PCAA Parent, a Delaware limited liability company, by virtue of being a member of such company, then the Company shall deliver 29 copies of such reports or other information to the Seacoast Member promptly after receipt of such reports or other information from PCAA Parent. 11.4. APPLICATION OF LAW. This Agreement, and the application and interpretation hereof, shall be governed exclusively by its terms and by the laws of Delaware, and specifically the Act. 11.5. WAIVER OF ACTION FOR PARTITION. Each Member irrevocably waives during the term of the Company any right that it may have to maintain any action for partition with respect to the Company Property. 11.6. AMENDMENTS. This Agreement may not be amended except by the written agreement of Members holding a Majority Interest; provided, however, that no amendment to Sections 7.3(c) (Capital Accounts), 8.4 (Distributions), 8.16 (Tax Distributions) or 9.10 (Tag-Along Rights) will be effective without the written consent of the Seacoast Member. 11.7. EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to execute such other and further statements of interest and holdings, designations, powers of attorney and other instruments necessary to comply with any laws, rules or regulations applicable to the Company or its business, in each case to the extent consistent with the terms hereof. 11.8. CONSTRUCTION; REFERENCE TO "DAYS". Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa. Except as set forth in Section 11.1 of this Agreement, all references herein to the term "days" shall mean calendar days. 11.9. EFFECT OF INCONSISTENCIES WITH THE ACT. It is the express intention of the Members and the Company that this Agreement shall be the sole source of agreement among them with respect to the matters covered hereby, and, except to the extent that a provision of this Agreement expressly incorporates federal income tax rules by reference to sections of the Code or Regulations or is expressly prohibited by or is otherwise ineffective under the Act, this Agreement shall govern. In the event that the Act is subsequently amended or interpreted in such a way to make valid any provision of this Agreement that was formerly invalid, such provision shall be considered to be valid from the effective date of such interpretation or amendment. The Members and the Company hereby agree that the duties and obligations imposed on the Members as such shall be those set forth in this Agreement, which is intended to govern the relationship among the Company and the Members, notwithstanding any provision of the Act (to the maximum extent permitted by law), or common law that in the absence of this Agreement would be to the contrary. 11.10. WAIVERS. The failure of any party to seek redress for violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation. 11.11. RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not 30 preclude or waive the right to use any or all other remedies. Said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. 11.12. SEVERABILITY. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law. Without limiting the generality of the foregoing sentence, to the extent that any provision of this Agreement is prohibited or ineffective under the Act or common law, this Agreement shall be considered amended to the smallest degree possible in order to make the Agreement effective under the Act or common law. 11.13. HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective heirs, legal representatives, successors and assigns. 11.14. CREDITORS. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company. 11.15. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. 11.16. POWER OF ATTORNEY. Each Member hereby irrevocably makes, constitutes and appoints the Manager, with full power of substitution, so long as such Manager is acting in such a capacity (and any successor Manager thereof so long as such Manager is acting in such capacity), its true and lawful attorney, in such Member's name, place and stead (it is expressly understood and intended that the grant of such power of attorney is coupled with an interest) to make, execute, sign, acknowledge, swear and file with respect to the Company: (a) all amendments of this Agreement adopted in accordance with the terms hereof; (b) all documents which the Manager deems necessary or desirable to effect the dissolution and termination of the Company following the requisite vote; and (c) all such other instruments, documents and certificates which may from time to time be required by the laws of Delaware or any other jurisdiction in which the Company shall determine to do business, or any political subdivision or agency thereof, to effectuate, implement, continue and defend the valid existence of the Company. This power of attorney shall not be affected by and shall survive the bankruptcy, insolvency, death, incompetency, or dissolution of a Member and shall survive the delivery of any assignment by the Member of the whole or any portion of its Membership Interest. 11.17. INVESTMENT REPRESENTATIONS. The undersigned Members understand (1) that the Membership Interests evidenced by this Agreement have not been registered under the 1933 Act, the Delaware Securities Act or any other state securities laws (the "Securities Acts") because the Company is issuing these Membership Interests in reliance upon the exemptions 31 from the registration requirements of the Securities Acts providing for issuance of securities not involving a public offering, (2) that the Company has relied upon the fact that the Membership Interests are to be held by each Member for investment, and (3) that exemption from registrations under the Securities Acts would not be available if the Membership Interests were acquired by a Member with a view to distribution. Accordingly, each Member hereby confirms to the Company that such Member is acquiring the Membership Interests for such own Member's account, for investment and not with a view to the resale or Distribution thereof. Each Member agrees not to transfer, sell or offer for sale any of portion of the Membership Interests unless there is an effective registration or other qualification relating thereto under the 1933 Act and under any applicable state securities laws or unless the holder of Membership Interests delivers to the Company an opinion of counsel, satisfactory to the Company, that such registration or other qualification under such 1933 Act and applicable state securities laws is not required in connection with such transfer, offer or sale. Each Member understands that the Company is under no obligation to register the Membership Interests or to assist such Member in complying with any exemption from registration under the Securities Acts if such Member should at a later date, wish to dispose of the Membership Interest. Furthermore, each Member realizes that the Membership Interests are unlikely to qualify for disposition under Rule 144 of the Securities and Exchange Commission unless such Member is not an "affiliate" of the Company and the Membership Interest has been beneficially owned and fully paid for by such Member for at least two years. Each Member, prior to acquiring a Membership Interest, has made an investigation of the Company and its proposed business, and the Company has made available to each Member, all information with respect to the Company which such Member needs to make an informed decision to acquire the Membership Interest. Each Member considers himself, herself or itself to be a person possessing experience and sophistication as an investor, which are adequate for the evaluation of the merits and risks of such Member's investment in the Membership Interest. 11.18. REPRESENTATIONS AND WARRANTIES. Each Member hereby makes, as of the date such Member becomes a Member, each of the representations and warranties applicable to such Member as set forth in this Section 11.18 of this Agreement: (a) DUE INCORPORATION OR FORMATION; AUTHORIZATION OF AGREEMENT. If the Member is a corporation, partnership or limited liability company, such Member is a corporation duly organized or a partnership or limited liability company duly formed, validly existing, and in good standing under the laws of the jurisdiction of its incorporation or formation and has the corporate, partnership or limited liability company power and authority to own its property and carry on its business as owned and carried on at the date hereof and as contemplated hereby. Such Member is duly licensed or qualified to do business and in good standing in each of the jurisdictions in which the failure to be so licensed or qualified would have a material adverse effect on its financial condition or its ability to perform its obligations hereunder. Such Member has the corporate, partnership or limited liability company power and authority to execute and deliver this Agreement and to perform its obligations hereunder and the execution, delivery, and performance of this Agreement has been duly authorized by all necessary 32 corporate, partnership or limited liability company action. This Agreement constitutes the legal, valid, and binding obligation of such Member. (b) NO CONFLICT WITH RESTRICTIONS; NO DEFAULT. The execution, delivery, and performance of this Agreement by such Member will not (1) conflict with, violate, or result in a breach of any of the terms, conditions, or provisions of any law, regulation, order, writ, injunction, decree, determination, or award of any court, any governmental department, board, agency, or instrumentality, domestic or foreign, or any arbitrator, applicable to such Member, (2) conflict with, violate, result in a breach of, or constitute a default under any of the terms, conditions, or provisions of the articles of incorporation, bylaws, partnership agreement, limited liability company agreement or operating agreement of such Member or of any material agreement or instrument to which such Member is a party or by which such Member is or may be bound or to which any of its material properties or assets is subject, (3) conflict with, violate, result in a breach of, constitute a default under (whether with notice or lapse of time or both), accelerate or permit the acceleration of the performance required by, give to others any material interests or rights, or require any consent, authorization, or approval under any indenture, mortgage, lease agreement, or instrument to which such Member is a party or by which such Member is or may be bound, or (4) result in the creation or imposition of any lien upon any of the material properties or assets of such Member. (c) GOVERNMENT AUTHORIZATIONS. Any registration, declaration, or filing with, or consent, approval, license, permit, or other authorization or order by, any government or regulatory authority, domestic or foreign, that is required in connection with the valid execution, delivery, acceptance, and performance by such Member under this Agreement or the consummation by such Member of any transaction contemplated hereby has been completed, made, or obtained. (d) LITIGATION. There are no actions, suits, proceedings, or investigations pending or, to the knowledge of such Member, threatened against or affecting such Member or any of their properties, assets, or businesses in any court or before or by any governmental department, board, agency, or instrumentality, domestic or foreign, or any arbitrator which could, if adversely determined (or, in the case of an investigation, would lead to any action, suit, or proceeding, which if adversely determined would) reasonably be expected to materially impair such Member's ability to perform its obligations under this Agreement or to have a material adverse effect on the consolidated financial condition of such member; and such Member has not received any currently effective notice of any default, and such Member is not in default, under any applicable order, writ, injunction, decree, permit, determination, or award of any court, any governmental department, board, agency, or instrumentality, domestic or foreign, or any arbitrator which would reasonably be expected to materially impair such Member's ability to perform its obligations under this Agreement or to have a material adverse effect on the consolidated financial condition of such Member. (e) INVESTMENT COMPANY ACT. Such Member is not, nor will the Company as a result of such Member holding a Membership Interest be, an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940. 33 11.19. CONFIDENTIALITY. Except as contemplated hereby or required by a court of competent authority, each Member shall keep confidential and shall not disclose to others, and shall use its reasonable efforts to prevent its Affiliates and any of its, or its Affiliates', present or former employees, agents, and representatives from disclosing to third parties, any information which is confidential or proprietary information of any other Member or of the Company. No Member shall use, and each Member shall use its best efforts to prevent any Affiliate of such Member from using, any confidential or proprietary information of any other Member or of the Company, except for the benefit of the Company or in connection with the ownership of the Membership Interests. 34 The undersigned hereby agree, acknowledge and certify that the foregoing Agreement, consisting of 35 pages, excluding the Table of Contents and attached Exhibits, constitutes the Limited Liability Company Agreement of Parking Company of America Airports Holdings, LLC adopted by the Members as of October 1, 2003. COMPANY: PARKING COMPANY OF AMERICA AIRPORTS HOLDINGS, LLC By: MACQUARIE AMERICAS PARKING CORPORATION, Its Managing Member By: /s/ Duncan Murdoch --------------------------- Name: Duncan Murdoch Title: Vice President MEMBERS: MACQUARIE AMERICAS PARKING CORPORATION By: /s/ Duncan Murdoch --------------------------- Name: Duncan Murdoch Title: Vice President SEACOAST HOLDINGS (PCAAH), INC. By: /s/ Eben Moulton --------------------------- Name: Eben Moulton Title: President 35 EXHIBIT A MEMBER CAPITAL CONTRIBUTIONS, UNITS AND SHARING RATIOS
NAME, ADDRESS, FACSIMILE AND TELEPHONE NUMBER AND TAXPAYER IDENTIFICATION CAPITAL NUMBER OF MEMBER CONTRIBUTIONS UNITS SHARING RATIO - --------------------------------------- ------------- ----- ------------- Seacoast Holdings (PCAAH), Inc. $ 3,500,000(1) 168 16.8% c/o Seacoast II Advisors, LLC 55 Ferncroft Road Danvers, Massachusetts 01923 Telephone: (978) 750-1300 Facsimile: (978) 750-1301 Tax ID. No.: [TBD] Macquarie Americas Parking Corporation $17,323,000(2) 832 83.2% Level 8, 121 King Street West Toronto, Ontario MH5 3T9 Telephone: (416) 594-5167 Facsimile: (416) 594-0020 Tax ID. No.: 71-0905516
(1) Cash (2) MAPC shall contribute all of its rights in its Membership Interest in Parking Company of America Airports, LLC. The Members agree that MAPC shall receive a Capital Contribution credit in the amount of $17,323,000 for such contribution. AMENDMENT NO. 1 FIRST AMENDMENT TO LIMITED LIABILITY COMPANY AGREEMENT OF PARKING COMPANY OF AMERICA AIRPORTS HOLDINGS, LLC This First Amendment, effective December 19, 2003, to the Parking Company of America Airports Holdings, LLC Limited Liability Company Agreement, dated October 1, 2003 (hereinafter, the "LLC Agreement"). MAPC, as the Member holding a Majority Interest, hereby amends the LLC Agreement to provide as follows: 1. Amendment of the LLC Agreement. Section 7.5(a) of the LLC Agreement is hereby amended to state that the initial authorized capital of the Company will consist of Ten Thousand Units. 2. Miscellaneous. (a) Except as specifically amended hereby, the terms and provisions of the LLC Agreement shall remain in full force and effect. (b) Terms defined in the LLC Agreement shall be used in this First Amendment with the meanings defined in the LLC Agreement unless otherwise defined herein. (c) This First Amendment shall be governed by the laws of Delaware (without regard to its choice of law provisions). (d) This First Amendment may be executed in any number of counterparts by the parties hereto, each of which counterparts when so executed shall be an original, but all of the counterparts together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the day and year first above written. COMPANY: PARKING COMPANY OF AMERICA AIRPORTS HOLDINGS, LLC By: MACQUARIE AMERICAS PARKING CORPORATION Its: Manager By: /s/ Gregory Andrews ------------------------------- Gregory Andrews, President MAJORITY INTEREST: MACQUARIE AMERICAS PARKING CORPORATION By: /s/ Gregory Andrews ------------------------------- Gregory Andrews, President 2 AMENDMENT NO. 2 SECOND AMENDMENT TO LIMITED LIABILITY COMPANY AGREEMENT OF PARKING COMPANY OF AMERICA AIRPORTS HOLDINGS, LLC This second amendment, effective June 1, 2004, (hereinafter, "Second Amendment"), to the Parking Company of America Airports Holdings, LLC, Limited Liability Company Agreement, dated October 1, 2003 (hereinafter, the "Agreement") by and amongst the Company and the Members. Macquarie Americas Parking Corporation, as the Member holding a majority interest hereby amends the Agreement as follows: 1. Section 11.19 of the Agreement is hereby amended to state in its entirety as follows: "Confidentiality. Except as contemplated hereby or required by a court of ---------------- competent authority, each Member shall keep confidential and shall not disclose to others, and shall use its reasonable efforts to prevent its Affiliates and any of its, or its Affiliates', present or former employees, agents, and representatives from disclosing to third parties, any information which is confidential or proprietary information of any other Member or of the Company. No Member shall use, and each Member shall use its best efforts to prevent any Affiliate of such Member from using, any confidential or proprietary information of any other Member or of the Company, except for the benefit of the Company or in connection with the ownership of the Membership Interests. Notwithstanding the foregoing, the MAPC Member shall have the right to disclose any information regarding the Company, its business and the Agreement (including as amended by the First Amendment), including all financial information to the extent required by law or in accordance with the rules, regulations and orders of any court, administrative agency or commission or other governmental authority or instrumentality, whether local, domestic or foreign." 2. Miscellaneous ------------- a. Except as specifically amended hereby, the terms and provisions of the Agreement shall remain in full force and effect. b. Terms defined in the Agreement shall be used in this Second Amendment with the meanings defined in the Agreement unless otherwise defined herein. c. This Second Amendment shall be governed by the laws of Delaware. d. This Second Amendment may be executed in any number of counterparts by the parties hereto, each of which counterparts when so executed shall be an original, but all of the counterparts together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Second Amendment as of the day and year first above written. COMPANY: PARKING COMPANY OF AMERICA AIRPORTS HOLDINGS, LLC BY: MACQUARIE AMERICAS PARKING CORPORATION, Its Managing Member By: /s/ GREGORY ANDREWS ------------------- Name: GREGORY ANDREWS Title: PRESIDENT MAJORITY INTEREST: MACQUARIE AMERICAS PARKING CORPORATION By: /s/ GREGORY ANDREWS ------------------- Name: GREGORY ANDREWS Title: PRESIDENT EX-10.10 8 y97636exv10w10.txt LIMITED LIABILITY COMPANY AGREEMENT EXHIBIT 10.10 EXECUTION COPY LIMITED LIABILITY COMPANY AGREEMENT OF PCAA PARENT, LLC A DELAWARE LIMITED LIABILITY COMPANY September 30, 2003 TABLE OF CONTENTS
PAGE ---- ARTICLE I. DEFINITIONS ARTICLE II. FORMATION OF COMPANY 2.1 Formation............................................................................................... 10 2.2 Name.................................................................................................... 10 2.3 Principal Place of Business............................................................................. 10 2.4 Registered Office and Registered Agent.................................................................. 10 2.5 Term.................................................................................................... 10 2.6 Initial Members......................................................................................... 10 ARTICLE III. PURPOSE AND PERMITTED BUSINESS OF COMPANY 3.1 Purpose................................................................................................. 11 ARTICLE IV. GOVERNANCE 4.1 Establishment of Board.................................................................................. 11 4.2 Number and Election of Board Members; Term of Office.................................................... 11 4.3 Observer Rights......................................................................................... 12 4.4 Meetings of the Board................................................................................... 13 4.5 Unanimous Written Consent............................................................................... 13 4.6 Director Indemnification................................................................................ 13 4.7 Certain Limitations on the Company...................................................................... 13 ARTICLE V. RIGHTS AND DUTIES OF MANAGER 5.1 Management.............................................................................................. 15 5.2 Number, Tenure and Appointment.......................................................................... 15 5.3 Certain Powers of Manager............................................................................... 15 5.4 Limitation on Manager's Authority....................................................................... 16 5.5 Veto Rights of the PCA Group............................................................................ 17 5.6 Liability for Certain Acts.............................................................................. 18 5.7 Bank Accounts........................................................................................... 18 5.8 Indemnity of the Board, Manager, Employees and Other Agents............................................. 18 5.9 Resignation............................................................................................. 19 5.10 Removal................................................................................................. 19
i TABLE OF CONTENTS - CONTINUED 5.11 Compensation, Reimbursement, Organization Expenses...................................................... 19 5.12 Right to Rely on the Manager............................................................................ 19 5.13 Proprietary Information and Inventions Agreement........................................................ 20 ARTICLE VI. RIGHTS AND OBLIGATIONS OF MEMBERS 6.1 Limitation of Liability................................................................................. 20 6.2 List of Members......................................................................................... 20 6.3 No Agency Authority..................................................................................... 20 6.4 Company Books........................................................................................... 20 6.5 Priority and Return of Capital.......................................................................... 20 6.6 Competing Activities.................................................................................... 21 ARTICLE VII. ACTIONS AND MEETINGS OF MEMBERS 7.1 Action of Members....................................................................................... 21 7.2 No Required Meetings.................................................................................... 21 7.3 Place of Meetings....................................................................................... 21 7.4 Notice of Meetings...................................................................................... 22 7.5 Meeting of all Members.................................................................................. 22 7.6 Record Date............................................................................................. 22 7.7 Quorum.................................................................................................. 22 7.8 Manner of Acting........................................................................................ 22 7.9 Proxies................................................................................................. 23 7.10 Action by Members Without a Meeting..................................................................... 23 7.11 Waiver of Notice........................................................................................ 24 ARTICLE VIII. CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS 8.1 Members' Initial Capital Accounts....................................................................... 24 8.2 Additional Contributions................................................................................ 24 8.3 Capital Accounts........................................................................................ 24 8.4 Withdrawal or Reduction of Members' Contributions to Capital............................................ 25 8.5 Capitalization.......................................................................................... 25 8.6 Loans to the Company by Members or Related Parties...................................................... 27 ARTICLE IX. ALLOCATIONS, INCOME TAX, DISTRIBUTIONS, ELECTIONS AND REPORTS 9.1 Allocations of Profits and Losses from Operations....................................................... 27 9.2 Special Allocations to Capital Accounts................................................................. 28 9.3 Credit or Charge to Capital Accounts.................................................................... 29 9.4 Allocations Immediately Prior to Liquidation............................................................ 30 9.5 Distributions........................................................................................... 30 9.6 Limitation Upon Distributions........................................................................... 30

ii TABLE OF CONTENTS - CONTINUED 9.7 Accounting Principles................................................................................... 30 9.8 Interest on and Return of Capital Contributions......................................................... 30 9.9 Loans to Company........................................................................................ 30 9.10 Accounting Period....................................................................................... 30 9.11 Records and Reports..................................................................................... 30 9.12 Returns and other Elections............................................................................. 31 9.13 Tax Matters Partner..................................................................................... 32 9.14 Certain Allocations for Income Tax (But Not Book Capital Account) Purposes.............................. 32 9.15 Basis Adjustment........................................................................................ 33 9.16 Debt Allocations........................................................................................ 33 9.17 Tax Distributions....................................................................................... 33 ARTICLE X. TRANSFERABILITY OF MEMBERSHIP INTERESTS 10.1 Transfers of Membership Interests....................................................................... 34 10.2 Exempt Transfers........................................................................................ 34 10.3 Prohibited Transfers.................................................................................... 34 10.4 Admission of Transferee as Member....................................................................... 35 10.5 Rights of Assignees..................................................................................... 35 10.6 Withdrawal of Member upon Transfer of Entire Interest................................................... 35 10.7 No Withdrawals, Resignations or Removals................................................................ 35 10.8 Indemnification......................................................................................... 35 10.9 Pre-emptive Rights...................................................................................... 36 10.10 Right of First Refusal.................................................................................. 36 10.11 Drag-Along Rights....................................................................................... 38 10.12 Tag-Along Rights........................................................................................ 39 10.13 Terms of Participation.................................................................................. 40 10.14 Unit Legend............................................................................................. 40 ARTICLE XI. DISSOLUTION AND TERMINATION 11.1 Dissolution............................................................................................. 41 11.2 Effect of Dissolution................................................................................... 41 11.3 Winding Up, Liquidation and Distribution of Assets...................................................... 41 11.4 Filing or Recording Statements.......................................................................... 42 11.5 Return of Contribution, Nonrecourse to Other Members.................................................... 42 ARTICLE XII. MISCELLANEOUS PROVISIONS 12.1 Notice.................................................................................................. 43 12.2 Books of Account and Records............................................................................ 43 12.3 Delivery of Financial Statements........................................................................ 43 12.4 Application of Law...................................................................................... 44 12.5 Waiver of Action for Partition.......................................................................... 44

iii TABLE OF CONTENTS - CONTINUED 12.6 Amendments.............................................................................................. 44 12.7 Execution of Additional Instruments..................................................................... 45 12.8 Construction; Reference to "days"....................................................................... 45 12.9 Effect of Inconsistencies with the Act.................................................................. 45 12.10 Waivers................................................................................................. 45 12.11 Rights and Remedies Cumulative.......................................................................... 45 12.12 Severability............................................................................................ 45 12.13 Heirs, Successors and Assigns........................................................................... 46 12.14 Creditors............................................................................................... 46 12.15 Counterparts............................................................................................ 46 12.16 Power of Attorney....................................................................................... 46 12.17 Investment Representations.............................................................................. 46 12.18 Representations and Warranties.......................................................................... 47 12.19 Confidentiality,........................................................................................ 49 12.20 Assumption of Obligations............................................................................... 49

Exhibit A - Member Capital Contributions, Units and Sharing Ratios Exhibit B - Form of PCA Proxy iv LIMITED LIABILITY COMPANY AGREEMENT OF PCAA PARENT, LLC A DELAWARE LIMITED LIABILITY COMPANY THE LIMITED LIABILITY COMPANY INTERESTS DESCRIBED IN THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS ("STATE ACTS") AND ARE RESTRICTED SECURITIES AS THAT TERM IS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933. THE SECURITIES MAY NOT BE OFFERED FOR SALE OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR QUALIFICATION UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE ACTS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION OR QUALIFICATION UNDER THE ACT AND APPLICABLE STATE ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE COMPANY. THIS LIMITED LIABILITY COMPANY AGREEMENT is entered into and effective this 30th day of September, 2003 (the "Agreement"), by and among the Company and each of the Persons whose names appear on EXHIBIT A and whose signatures appear on the signature page hereof (the "Initial Members"). In consideration of the mutual covenants herein contained and for other good and valuable consideration, the Initial Members, each other Person who shall hereinafter execute this Agreement as a Member of the Company (the Initial Members and all such other Persons collectively the "Members") and the Company hereby agree as follows: ARTICLE I. DEFINITIONS The following terms used in this Agreement shall have the following meanings (unless otherwise expressly provided herein): "1933 Act" shall have the meaning set forth in Section 10.14. "ACI" shall mean Alex Chaves, Inc., a California corporation. "Act" shall mean the Delaware Limited Liability Company Act, as amended. "Additional Members" shall have the meaning set forth in Section 8.5(d) of this Agreement. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. For purposes 1 of this definition, the term "controls," "is controlled by," or "is under common control with" shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Without limiting the generality of the foregoing, an "Affiliate" shall mean: (i) as to any Entity: (x) any officer, director, manager, trustee or general partner of such Entity, (y) any individual natural person or other Entity owning or otherwise controlling 50% or more of the outstanding voting or other equity interests of such first Entity, or (z) any officer, director, manager, trustee or general partner of any Entity described in the preceding clause (y); and (ii) as to any natural person, any Entity of which that natural person is an officer, director, manager or general partner of which that natural person owns or otherwise controls 50% or more of the outstanding voting or other equity interests. "Agreement" shall mean this Limited Liability Company Agreement, as the same may be amended from time to time. "ARE" shall mean ARE Holdings, LLC, a Delaware limited liability company. "Appraiser" shall have the meaning set forth in Section 5.5(c) of this Agreement. "Assumed Tax Rate" shall mean 46%. "Atlas" shall mean Atlas Superpark Ltd., a Texas limited partnership. "Board" shall have the meaning set forth in Section 4.1 of this Agreement. "Board Members" shall have the meaning set forth in Section 4.1 of this Agreement. "Capital Account" as of any given date, shall mean the Capital Account of each Member as described in Section 8.3 of this Agreement and maintained to such date in accordance with this Agreement. "Capital Contribution" shall mean, with respect to any Member, the amount of cash and the initial Gross Asset Value of any property (other than cash) contributed to the Company with respect to the Membership Interest held by such Member. "Certificate of Formation" shall mean the Certificate of Formation of the Company as filed with the Delaware Secretary of the State as the same may be amended from time to time. "Change of Control Transaction" shall mean the merger or conversion of the Company, or a sale or other disposition of assets of the Company, or sale or other disposition of Membership Interests, or other transaction pursuant to which a Person or Persons acquire all or substantially all of the assets of, or Membership Interests in, the Company in a single or series of related transactions, including without limitation, a merger or conversion of the Company into a corporation or other Entity, whether or not such corporation or other Entity has the same owners as the Company and whether or not additional capital is contributed to such corporation or other Entity. 2 "Chaves Group" shall mean the PCA Group, ACI, PCA, Parking Company America Universal, Inc., Parking Company America Valet, Inc., Parking Company America L.A., Inc., Alex Chaves, Alex Martin Chaves, Eric Chaves, Renee Chaves-Valdes, Helen Mouat, Gerald Diduck, the Grantor Trusts, all other persons owning less than two percent of any of the above entities as of the date hereof, and any trust established for estate planning purposes for the benefit of such persons or his or her spouse, descendents or siblings, such Person's respective heirs, executors, administrators, testamentary trustees, legatees or beneficiaries. "Closing Date" shall mean October 1, 2003. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Company" shall mean PCAA Parent, LLC. "Company Minimum Gain" shall have the meaning set forth in Regulations Section 1.704-2(d). "Company Property" shall mean all assets (real or personal, tangible or intangible, including cash) of the Company, including interests in, and assets of, any direct or indirect subsidiary of the Company. "Deficit Capital Account" shall mean with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the Fiscal Year, after giving effect to the following adjustments: (a) credit to such Capital Account the amount, if any, which such Member is obligated to restore pursuant to the next to last sentence of Regulations Section 1.7042(g)(1) and (i)(5), after taking into account any changes as of the end of the Fiscal Year in the Company Minimum Gain and Member Minimum Gain; and (b) debit to such Capital Account the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6). This definition of Deficit Capital Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. "Depreciation" shall mean, for each Fiscal Year, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such Fiscal Year, except that (1) with respect to any asset whose Gross Asset Value differs from its adjusted tax basis for federal income tax purposes at the beginning of a Fiscal Year and which difference is being eliminated in accordance with Section 9.14 of this Agreement, Depreciation for such Fiscal Year shall be the amount of book basis recovered for such Fiscal Year pursuant to Section 9.14 of this Agreement, and (2) with respect to any other asset whose Gross Asset Value differs from its adjusted tax basis at the beginning of such Fiscal Year, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to 3 such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Manager. "Distributable Cash" shall mean all cash, whether revenues or other funds, received by the Company, less the sum of the following, without duplication, to the extent paid or set aside by the Company: (i) all mandatory principal and interest payments on indebtedness of the Company and all other sums paid to lenders; (ii) all cash expenditures incurred incident to the normal operation of the Company's business; and (iii) Reserves. "Distribution" shall mean distributions in accordance with Section 9.5 of this Agreement. "Distribute" and "Distributed" shall have correlative meanings. "Draft Election" shall have the meaning set forth in Section 9.12(c) of this Agreement. "Draft Form 1065" shall have the meaning set forth in Section 9.12(b) of this Agreement. "Drag-Along Notice" shall have the meaning set forth in Section 10.11(b) of this Agreement. "Economic Interest" shall mean a Person's share of one or more of the Profits, Losses and Distributions pursuant to this Agreement and the Act, but shall not include any right to participate in the management or affairs of the Company, including, the right to vote on, consent to or otherwise participate in any decision of the Members. "Encumbrance" shall mean any pledge, collateral assignment, grant of a security interest, mortgage or other lien or encumbrance. "Entity" shall mean any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association or any foreign trust or foreign business organization. "Exempt Transfer" shall have the meaning set forth in Section 10.2(c) of this Agreement. "First Offer Notice" shall have the meaning set forth in Section 10.9(a) of this Agreement. "Fiscal Year" shall mean the accounting year ending December 31 of each calendar year. "Fully Exercising Member" shall have the meaning set forth in Section 10.9(c) of this Agreement. 4 "GAAP" shall have the meaning set forth in Section 12.3(a) of this Agreement. "GIF A" shall mean Macquarie Global Infrastructure Fund A. "GIF B" shall mean Macquarie Global Infrastructure Fund B. "Gift" shall mean a gift, bequest or other transfer for no consideration, whether or not by operation of law, except in the case of bankruptcy. "Grantor Trusts" shall mean the following Chaves 1998 Irrevocable Trusts, dated May 8, 1998: Trust I (Alex Martin Chaves, Trustee), Trust II (Renee Doreen Chaves Valdes, Trustee) and Trust III ( Eric Joseph Chaves, Trustee). "Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows: (a) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of the asset, as determined by the contributing Member and the Manager, provided that, if the contributing Member is the Manager, or an Affiliate of the Manager, the fair market value shall be subject to the valuation process set forth in Section (f) of this definition if any Member objects to the fair market value as established by the Manager; (b) The Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values, as reasonably determined by the Manager as of the following times: (i) the acquisition of an additional interest by any new or existing Member in exchange for more than a de minimis Capital Contribution; (ii) the Distribution by the Company to a Member of more than a de minimis amount of property as consideration for a Membership Interest; and (iii) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (i) and (ii) above shall be made only if the Manager reasonably determines in good faith that such adjustments are necessary or appropriate to reflect the relative Economic Interests of the Members in the Company; (c) The Gross Asset Value of any Company asset Distributed to any Member shall be adjusted to equal the gross fair market value of such asset on the date of Distribution as reasonably determined by the distributee and the Manager, provided that, if the distributee is the Manager or any Affiliate of the Manager, the determination of the fair market value shall be subject to the valuation process set forth in Section (f) of this definition if any Member objects to the fair market value as established by the Manager; (d) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and Section 8.3 of this Agreement and paragraph (g) under the definition of Profits and Losses in this Agreement; provided, however, that Gross Asset Values shall not be adjusted pursuant to this paragraph (d) of this definition to the extent 5 that the Manager reasonably determines in good faith that an adjustment pursuant to paragraph (b) of this definition is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this paragraph (d); and (e) If the Gross Asset Value of an asset has been determined or adjusted pursuant to paragraph (b) or (d) of this definition, then such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. (f) In the event that a Member objects to the fair market value established by the Manager pursuant to this definition of Gross Asset Value of any property contributed to the Company by the Manager or an Affiliate of the Manager, the fair market value of such property shall be determined by an appraisal conducted by an Appraiser selected by the Manager and acceptable to the objecting Member (whose approval shall not be unreasonably withheld or delayed) and whose decision, in the absence of fraud, shall be final, conclusive and binding on the parties. The Manager shall appoint the Appraiser on behalf of the Company in accordance with this Section (f) of this definition of Gross Asset Value within five business days. Any Appraiser appointed in accordance with this Section (f) of this definition of Gross Asset Value shall make its determination of fair market value within 30 days of its appointment. The Appraiser thus selected shall determine the fair market value of the relevant property by using any reasonable valuation methodology. The fees and expenses of the Appraiser shall be paid one-half by the Company and one-half by the objecting Member. "Initial Members" shall have the meaning set forth in the Preamble. "Loan Agreement" shall mean that certain Loan Agreement among PCAA, PCAA Phoenix, PCA Airports, Ltd., and GMAC Commercial Mortgage Corporation, dated October 1, 2003. "Majority Interest" shall mean one or more Membership Interests which taken together exceed 50% of the aggregate of all Sharing Ratios. "Majority Member" shall have the meaning set forth in Section 10.11(a) of this Agreement. "Manager" shall mean any Person selected as the Manager in accordance with Section 5.2 of this Agreement, in that capacity, and any successor thereto. "Member" shall mean each of the parties who executes a counterpart of this Agreement as an Initial Member, Additional Member or Substitute Member. "Member Minimum Gain" shall mean an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a "nonrecourse liability" (as defined in Regulations Section 1.704-2(b)(3)), determined in accordance with Regulations Section 1.704-2(i)(3). 6 "Member Nonrecourse Debt" shall have the meaning set forth in Regulations Section 1.704-2(b)(4). "Member Offerees" shall have the meaning set forth in Section 10.10(a) of this Agreement. "Membership Interest" shall mean a Member's entire interest, including its Economic Interest, in the Company, as measured in Units, and such other interests, rights and privileges that the Member may enjoy by being a Member, including without limitation the right to vote on certain matters and to receive information concerning the business and affairs of the Company. "Option Notice" shall have the meaning set forth in Section 10.10(b) of this Agreement. "PCA" shall mean PCA Parking Company of America, LLC, a Delaware limited liability company. "PCAA" shall mean Parking Company of America Airports, LLC, a Delaware limited liability company. "PCAA GP" shall mean PCAA GP, LLC, a Delaware limited liability company. "PCAA LP" shall mean PCAA LP, LLC, a Delaware limited liability company. "PCAA Phoenix" shall mean Parking Company of America Airports Phoenix, LLC, a Delaware limited liability company. "PCAAH Member" shall mean Parking Company of America Airports Holdings, LLC, a Delaware limited liability company. "PCA Board Member" shall have the meaning set forth in Section 4.2(a)(1) of this Agreement. "PCA Group" shall mean ARE, Atlas, PCAM, and their respective successors and assigns that are members of the Chaves Group. "PCA Group Members" shall mean the members of the PCA Group. "PCA Observers" shall have the meaning set forth in Section 4.3 of this Agreement. "PCA Proxy" shall have the meaning set forth in Section 7.9(b) of this Agreement. "PCAM" shall mean Parking Company of America Management, LLC, a Delaware limited liability company. 7 "Person" shall mean any individual or Entity, and the heirs, executors, administrators, legal representatives, successors and assigns of such "Person" where the context so permits. "Profits" and "Losses" shall mean, for each Fiscal Year, an amount equal to the Company's net taxable income or loss for such Fiscal Year, determined in accordance Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments (without duplication): (a) Any items of income, gain, loss and deduction allocated to Members pursuant to Sections 9.2, 9.3, or 9.4 of this Agreement shall not be taken into account in computing Profits or Losses; (b) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits and Losses pursuant to this definition shall be added to such taxable income or loss; (c) Any expenditure of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Profits and Losses pursuant to this definition shall be subtracted from such taxable income or loss; (d) In the event the Gross Asset Value of any Company asset is adjusted pursuant to paragraphs (b) or (c) of the definition of Gross Asset Value, the amount of such adjustment shall be taken into account as gain (if the adjustment increases the Gross Asset Value of the asset) or loss (if the adjustment decreases the Gross Asset Value of the asset) from the disposition of such asset for purposes of computing Profits and Losses; (e) Gain or loss resulting from any disposition of any Company asset with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the asset disposed of, notwithstanding that the adjusted tax basis of such asset differs from its Gross Asset Value; (f) In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year; and (g) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a Distribution other than in liquidation of a Membership Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Profits or Losses. 8 "Regulations" shall mean the Income Tax Regulations, including temporary and final regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Regulatory Allocations" shall have the meaning set forth in Section 9.3 of this Agreement. "Relevant Distribution Period" shall mean, with respect to a Distribution made pursuant to Section 9.17(a) of this Agreement, the twelve-month period that ends on the 31st day of March in the year following the Fiscal Year with respect to which such Distribution is required to be made. "Reserves" shall mean, with respect to any fiscal period, funds set aside or amounts allocated during such period to reserves which shall be maintained in amounts deemed sufficient by the Manager for working capital and for payment of taxes, insurance, debt service or other costs or expenses incident to the ownership or operation of the Company's business. "Restricted Securities" shall have the meaning set forth in Section 10.14 of this Agreement. "Sale", "Sell", or "Sold" shall mean a sale, assignment, exchange or other transfer for consideration, including but not limited to by virtue of any sale or exchange of a controlling interest in the owner, but shall exclude a transfer by an entity to its owners upon a liquidation of that entity. "Sale Notice" shall have the meaning set forth in Section 10.13 of this Agreement. "Securities Acts" shall have the meaning set forth in Section 12.17 of this Agreement. "Selling Member" shall have the meaning set forth in Section 10.10(a) of this Agreement. "Sharing Ratio", with respect to any Member, shall be equal to the ratio determined by dividing the number of Units held by such Member by the total number of outstanding Units. The initial Sharing Ratios of the Members are set forth on EXHIBIT A. "State Acts" shall have the meaning set forth in the legend preceding Article I. "Substitute Member" shall mean any Person admitted as a Member in accordance with Section 10.4 of this Agreement. "Tag-Along Notice" shall have the meaning set forth in Section 10.12(a) of this Agreement. "Tax Return" shall mean any return, report or similar statement (including any attached schedules) required to be filed with respect to any federal, state, local or foreign income, franchise, property, sales, use, employment, withholding, transfer, excise or other tax imposed by 9 any governmental authority. A Tax Return shall include, without limitation, any information return, claim for refund, amended return or declaration or estimated tax. "TMP" shall have the meaning set forth in Section 9.13 of this Agreement. "Transfer" shall mean any Sale, Encumbrance or Gift. "Units" shall have the meaning set forth in Section 8.5(d) of this Agreement. ARTICLE II. FORMATION OF COMPANY 2.1 FORMATION. On August 20, 2003, the Company was organized pursuant to the Act by executing and delivering the Certificate of Formation to the Delaware Secretary of State in accordance with and pursuant to the Act. The Company and the Members hereby forever discharge the organizer from any liability or obligation to the Members, and the organizer shall be indemnified by the Company and the Members from and against any expense or liability actually incurred by the organizer, by reason of having been the organizer of the Company. 2.2 NAME. The name of the Company is PCAA Parent, LLC. The Company shall conduct its business under that name or, upon compliance with applicable laws, any other name that the Board deems appropriate or advisable. Fictitious business name statements shall be filed and published when and if the Manager determines it necessary. Any such statement shall be renewed as required by applicable law. 2.3 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the Company shall be the Company's registered office in Delaware. The Company may locate its place or places of business at any other place or places as the Board may from time to time deem advisable. 2.4 REGISTERED OFFICE AND REGISTERED AGENT. The Company's initial registered office in the State of Delaware and the name of the registered agent at such address shall be as set forth in the Certificate of Formation. The registered office and registered agent may be changed from time to time with the approval of the Board by filing the address of the new registered office and/or the name of the new registered agent with the Delaware Secretary of State pursuant to the Act. 2.5 TERM. The Company shall continue in existence until it terminates in accordance with the provisions of this Agreement or the Act. 2.6 INITIAL MEMBERS. The names and addresses of the Initial Members of the Company are listed in EXHIBIT A. 10 ARTICLE III. PURPOSE AND PERMITTED BUSINESS OF COMPANY 3.1 PURPOSE. The purpose of the Company shall be solely to hold the equity interests in PCAA, PCAA Phoenix, PCAA GP and PCAA LP. The Company shall not engage in any other business or activity and shall not acquire or own any other assets; provided, however, that the Company may engage in such other activities incidentally or directly related to, and in furtherance of, the foregoing business as may be necessary, advisable or appropriate, as determined by the Manager. ARTICLE IV. GOVERNANCE 4.1 ESTABLISHMENT OF BOARD. Subject to Section 4.7 and to the provisions of this Agreement relating to actions required to be approved by the Members or one or more specified Members, the business and affairs of the Company shall be managed by or under the direction of a committee of managers comprised of natural persons (the "Board" and the members of the Board, the "Board Members"). The Board Members shall perform their managerial duties in good faith, in a manner they reasonably believe to be in the best interests of the Company and its Members, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. A Board Member who so performs the duties of a Board Member shall not have any liability by reason of being or having been a Board Member. 4.2 NUMBER AND ELECTION OF BOARD MEMBERS; TERM OF OFFICE. (a) The authorized number of Board Members shall initially be five. The number of Board Members shall be fixed from time to time by the affirmative vote or written consent of a Majority Interest, provided that in no instance shall there be less than one Board Member. Board Members shall be elected by the affirmative vote or written consent of the Members, as follows: (1) The PCA Group will have the right to elect one Board Member (the "PCA Board Member") so long as the members of the PCA Group: (a) Have not Sold any of their Units other than to members of the Chaves Group and members of the Chaves Group continue to hold all of the Units issued to the PCA Group on the Closing Date; or (b) Have Sold Units to persons that are not members of the Chaves Group, but members of the Chaves Group continue to own at least ten percent of the Units then outstanding; provided, however, that sales to persons other than members of the Chaves Group made pursuant to Section 10.11 of this Agreement shall be disregarded for purposes of this Section 4.2(a)(1)(b). (2) The remaining Board Members shall be elected by the affirmative vote or written consent of a Majority Interest excluding, for this purpose only, the vote or consent 11 of the PCA Group, which will have no right to participate in the election or designation of the remaining Board Members so long as the PCA Group is entitled to elect or designate the PCA Board Member. (b) The Board Members shall hold office until their respective successors are elected and qualified or until their earlier resignation or removal. (c) The Members may, at any special meeting the notice of which shall state that it is called for that purpose, remove, with or without cause, any Board Member (other than the PCA Board Member) and fill such vacancy. Vacancies caused by such removal, and not filled by the Members at the meeting at which such removal shall have been made, or any vacancy caused by the death or resignation of any Board Member (other than the PCA Board Member) for any reason, and any newly created position on the Board resulting from any increase in the authorized number of Board Members, may be filled by the affirmative vote of a majority of the Board Members then in office (including the PCA Board Member, and in the case of resignation, the Board Member so resigning), although less than a quorum, and any such vacancy or newly created position of the Board shall hold office until the successor is elected and qualified or until such newly appointed Board Member's earlier resignation or removal. (d) A PCA Board Member may be removed from office with or without cause at any time by the affirmative vote or written consent of a majority of the PCA Group Sharing Ratios, or upon termination of the PCA Group's right to elect the PCA Board Member, by a Majority Interest. Any vacancy caused by such removal, or any vacancy caused by the death or resignation of any PCA Board Member, for any reason, may be filled by the affirmative vote or written of a majority of the PCA Group Sharing Ratios, or upon termination of the PCA Group's right to elect the PCA Board Member, by a Majority Interest. Any such PCA Board Member elected to fill a vacancy shall hold office until his or her successor is elected and qualified or until such newly appointed PCA Board Member's earlier resignation or removal. (e) The PCA Group shall designate the PCA Board Member by written consent signed by each Member of the PCA Group. The Company and the Members (other than the PCA Group Members) shall (i) be entitled to conclusively rely upon the currently appointed PCA Board Member with respect to matters concerning the PCA Group until delivery of an current written consent signed by each Member of the PCA Group designating a new or different person to act as the PCA Board Member; (ii) and shall not be liable to any of the PCA Group Members in the event of internal governance disputes, contradictory directions or conflicting claims to the election or appointment of the PCA Board Member. 4.3 OBSERVER RIGHTS. So long as the PCA Group retains the right to elect the PCA Board Member the PCA Group shall be entitled to appoint two Board observers (the "PCA Observers"). The PCA Observers shall have the right to receive notice of and to attend and participate in all Board meetings as observers, but shall not have the right to vote on any action taken by the Board. Each PCA Observer must execute an agreement to maintain the confidentiality of the Company's business and financial affairs as a condition to attending the Board meetings. 12 4.4 MEETINGS OF THE BOARD. The Board shall meet at such time and at such place as the Board may designate; provided that the Board shall meet not less than four times in any 12-month period. No regular or special meeting shall be conducted without the attendance of a least one of the Board Members other than that Board Member designated by the PCA Group Members. Special meetings of the Board shall be held on the call of any two Board Members upon at least 45 days' (if the meeting is to be held in person) or two days' (if the meeting is to be held by videoconference or telephone communications) oral or written notice to the Board Members, or upon such shorter notice as may be approved by all Board Members. Any Board Member may waive such notice as to himself or herself. A record shall be maintained of meetings of the Board. (a) Any meeting of the Board may be held in person, by videoconference or telephonically. (b) A majority of the Board Members who are then in office shall constitute a quorum of the Board for purposes of conducting business. (c) Except to the extent that this Agreement expressly requires the approval of the PCA Board Member or all Board Members, every act or decision done or made by a majority of the Board Members present at a meeting duly held at which a quorum is present is the act of the Board. 4.5 UNANIMOUS WRITTEN CONSENT. Unless otherwise prohibited by law, any action to be taken at any meeting of the Board, or by any committee thereof, may be taken without a meeting if all the members of the Board or committee, as the case may be, consent thereto in writing and the writing(s) are filed with the minutes of the proceedings of the Board or committee. 4.6 DIRECTOR INDEMNIFICATION. A Board Member shall be entitled to indemnification by the Company as set forth in Section 5.8 of the Agreement. 4.7 CERTAIN LIMITATIONS ON THE COMPANY. Notwithstanding any other provision of this Agreement, the Board Members and the Manager: (a) shall cause the Company to preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the laws of the jurisdiction of its formation or organization; (b) shall not permit the Company to merge or consolidate with any other Person; (c) shall not permit the Company to take any action to dissolve, wind-up, terminate or liquidate in whole or in part; to sell, transfer or otherwise dispose of all or substantially all of its assets; to change its legal structure, transfer, or permit the direct or indirect transfer of, any partnership, membership or other equity interests, as applicable, other than Permitted Transfers (as defined in the Loan Agreement); or seek to accomplish any of the foregoing; 13 (d) for so long as the Loan (as defined in the Loan Agreement) is outstanding, shall not permit the Company to amend or restate its organizational documents to amend this Section 4.7; (e) shall not permit the Company to own any subsidiary or make any investment in any other Person other than PCAA, PCAA Phoenix, LLC, PCAA GP and PCAA LP; (f) shall not permit the Company to commingle its assets with the assets of any other Person; (g) shall cause the Company to maintain its records, books of account, bank accounts, financial statements, accounting records and other entity documents separate and apart from those of any other Person; (h) shall cause the Company to only enter into any contract or agreement with any member, principal or affiliate of any of PCAA, PCAA Phoenix or PCAA GP, or any Affiliate thereof, upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties; (i) shall not permit the Company to maintain its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (j) shall not permit the Company to assume or guaranty the debts of any other Person, hold itself out to be responsible for the debts of another Person, or otherwise pledge its assets for the benefit of any other Person or hold out its credit as being available to satisfy the obligations of any other Person; (k) shall not permit the Company to make any loans or advances to any other Person; (l) shall cause the Company to file its own tax returns as required under federal and state law; (m) shall cause the Company to hold itself out to the public as a legal entity separate and distinct from any other Person, shall conduct its business solely in its own name, and shall correct any known misunderstanding regarding its separate identity; (n) shall cause the Company to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (o) shall cause the Company to allocate shared expenses (including, without limitation, shared office space) and to use separate stationery, invoices and checks; (p) shall cause the Company to pay its own liabilities (including, without limitation, salaries of its own employees) from its own funds; and 14 (q) shall not permit the Company to acquire obligations or securities of its Members. ARTICLE V. RIGHTS AND DUTIES OF MANAGER 5.1 MANAGEMENT. The business and affairs of the Company shall be managed by its Manager under the supervision of the Board. Subject to Section 4.7 and except for situations in which the approval of the Members and/or Board is expressly required by this Agreement or by non-waivable provisions of applicable law and subject to Sections 5.4 and 5.5 of this Agreement, the Manager shall have full and complete authority, power and discretion to manage and control the business, affairs and properties of the Company, to make all decisions regarding those matters and to perform any and all other acts and activities customary or incident to the management of the Company's business. At any time when there is more than one Manager, any one Manager may take any action permitted to be taken by the Manager, unless the approval of more than one Manager is expressly required pursuant to this Agreement or the Act. Unless authorized to do so by this Agreement or by the Manager, no attorney-in-fact, employee or other agent of the Company shall have any power or authority to bind the Company in any way, to pledge its credit or to render it liable pecuniarily for any purpose. 5.2 NUMBER, TENURE AND APPOINTMENT. The Company shall initially have one Manager. The number of Managers shall be fixed from time to time by the Board. Each Manager shall hold office until such Manager resigns pursuant to Section 5.9 of this Agreement or is removed pursuant to Section 5.10 of this Agreement. All Managers shall be appointed by the Board. The initial Manager of the Company shall be the PCAAH Member. The Company shall give notice of the resignation or appointment of a Manager or a change in the number of Managers to the Members within 30 days of such event in the manner provided in Section 12.1 of this Agreement. 5.3 CERTAIN POWERS OF MANAGER. Subject to the limitations of Sections 4.7, 5.4 and 5.5 of this Agreement, the Manager shall have power and authority to cause the Company: (a) To acquire property from any Person as the Manager may determine. The fact that the Manager or a Member is directly or indirectly affiliated or connected with any such Person shall not prohibit the Manager from dealing with that Person; (b) To borrow money from banks, other lending institutions, the Manager, Members, or Affiliates of the Manager or Members on such terms as the Manager deems appropriate, and in connection therewith, to hypothecate, encumber and grant security interests in Company Property to secure repayment of the borrowed sums; (c) To purchase liability and other insurance to protect the Company's property and business; (d) To hold and own any Company real and/or personal properties in the name of the Company; 15 (e) To invest any Company funds (by way of example but not limitation) in time deposits, short-term governmental obligations, commercial paper or other investments; (f) To execute on behalf of the Company all instruments and documents, including, without limitation, checks; drafts; notes and other negotiable instruments; mortgages or deeds of trust; security agreements; financing statements; documents providing for the acquisition, mortgage or disposition of Company Property; assignments; bills of sale; leases; partnership agreements, operating (or limited liability company) agreements of other limited liability companies; and any other instruments or documents necessary, in the opinion of the Manager, to the conduct of the business of the Company; (g) To employ accountants, legal counsel, managing agents or other experts to perform services for the Company and to compensate them from Company funds; (h) To enter into any and all other agreements on behalf of the Company, with any other Person for any purpose, in such forms as the Manager may approve; (i) To execute and file such other instruments, documents and certificates which may from time to time be required by the laws of the Delaware or any other jurisdiction in which the Company shall determine to do business, or any political subdivision or agency thereof, to effectuate, implement, continue and defend the valid existence of the Company; and (j) To do and perform all other acts as may be necessary or appropriate to the conduct of the Company's business. 5.4 LIMITATION ON MANAGER'S AUTHORITY. Subject to Section 4.7 and notwithstanding any other provision of this Agreement, the Manager shall not cause or permit the Company to take any of the following actions without first obtaining the affirmative vote or written consent of the Board: (a) Purchase or otherwise acquire (including by lease), or sell, exchange, or otherwise dispose of, any real property or any part thereof or any interest therein; (b) Mortgage, grant a deed of trust on or a security interest in, pledge or otherwise encumber any real property or other property and assets owned by the Company, or any part thereof or interest therein; (c) Borrow money from any party (in one or a series of related transactions) in an amount that exceeds $1,000,000, or issue evidences of indebtedness in connection with any borrowing, or amend or otherwise change the terms of, or extend the time for the payment of any indebtedness or other monetary obligation of the Company in excess of such amount; (d) Make any advance, loan or other extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of, or make any 16 other investment in, any third party, or create, incur, assume or suffer to exist any guarantee or obligation in connection with any third party's debt; (e) Issue or enter into any agreement providing for the issuance (contingent or otherwise) of any additional Units or other equity securities of the Company, or make any call for additional Capital Contributions; (f) Enter into any Change of Control Transaction; (g) Engage in any material transaction not in the ordinary course of business or make any capital expenditure materially in excess of the amounts budgeted by the Company; (h) Enter into any material transaction with Members or Affiliates of the Members; (i) Appoint any Company officers and/or determine such officers' respective powers and duties; (j) Change the Company's form of organization or tax status such that the Company is no longer an entity treated as a partnership for federal income tax purposes unless otherwise requested by the PCA Board Member, in which case the Manager shall present such request to the Board for consent, such consent not to be unreasonably withheld or delayed; or (k) Take any action as to which the approval of the Board is expressly required by any other provision of this Agreement. 5.5 VETO RIGHTS OF THE PCA GROUP. At any time the PCA Group is entitled to elect the PCA Board Member, the Company shall not: (a) Subject to the further restrictions set forth in Section 8.6, enter into or agree to enter into any transaction (or series of related transactions) with the PCAAH Member or an Affiliate of the PCAAH Member that involves the payment or receipt by the Company of $1,000,000 or more (whether or not such related transaction is included in the Company's budget) unless (i) such transaction is entered into in good faith on an arm's length basis, and (ii) the affirmative vote or written consent of the PCA Board Member is obtained, such consent not to be unreasonably withheld or delayed provided, however, that if the Manager obtains a written opinion from an independent Appraiser that the proposed transaction is on an arm's length basis, it shall not be reasonable to withhold or delay consent; (b) At any time prior to the fifth anniversary of this Agreement, change the Company's form of organization or tax status such that the Company is no longer an entity treated as a partnership for federal income tax purposes, unless the affirmative vote or written consent of the PCA Board Member is obtained, such consent not to be unreasonably withheld or delayed; 17 (c) Issue, or offer or enter into any agreement providing for the issuance or offering (contingent or otherwise) of, any additional Units, at a price that is less than the fair market value of such Units at the time of issuance without the affirmative vote or written consent of the PCA Board Member. For purposes of this Section 5.5(c), the fair market value of a Unit shall be such amount as is determined by a majority of the Board Members, provided, however, that in the event that the PCA Board Member disagrees with the Board's determination of the fair market value of the Units to be issued or offered, the Board shall select an accounting firm, independent investment banking or appraisal firm of recognized national standing (the "Appraiser") that is acceptable to the PCA Group (whose approval shall not be unreasonably withheld or delayed) to determine the fair market value of the Units proposed to be issued or offered and whose decision shall be final and binding on the Company and all Members. The Board shall appoint, on behalf of the Company, the Appraiser in accordance with this Section 5.5(c) within five business days. The Appraiser shall make its determination of fair market value within 30 days of its appointment. The fees and expenses of the Appraiser shall be paid one-half by the Company and one-half by the PCA Group; or (d) Enter into or agree to enter into any transaction obligating it to pay a management fee to the PCAAH Member or any Affiliate of the PCAAH Member for performing the duties of Manager pursuant to this Agreement. 5.6 LIABILITY FOR CERTAIN ACTS. (a) The Manager does not, in any way, guarantee the return of Capital Contributions or a profit for the Members from the operations of the Company. (b) The Manager shall not be liable to the Company or to any Member for any loss or damage sustained by the Company or any Member (or successor thereto), except to the extent, if any, that the loss or damage shall have been the result of gross negligence, fraud, deceit, reckless or willful misconduct, knowing violation of law or intentional breach of this Agreement. The Manager's liability under this Section and as TMP under Section 9.13 of this Agreement shall be limited to the assets of the Manager, including its interest in the Company. 5.7 BANK ACCOUNTS. The Manager may from time to time open bank accounts in the name of the Company and shall be the sole signatory thereon unless the Manager determines otherwise. 5.8 INDEMNITY OF THE BOARD, MANAGER, EMPLOYEES AND OTHER AGENTS. (a) The Company shall fully, unconditionally and irrevocably defend, indemnify and hold harmless the Manager and any Board Member against any loss or liability incurred by the Manager or Board Member, in connection with any claim, demand, action, suit or proceeding brought or made against the Manager or Board Member by reason of the fact that the Manager or Board Member is or was a Manager or Board Member, and make advances for expenses incurred by the Manager or Board Member in connection therewith to the maximum extent permitted under the Act, except, in the case of the Manager, to the extent the claim for 18 which indemnification is sought results from an act or omission for which the Manager may be held liable to the Company or a Member under Section 5.6(b). (b) The Company shall indemnify its employees and other agents who are not Managers or Board Members who are parties or are threatened to be made parties to actions, suits or proceedings by reason of the fact that such Persons provided services to the Company, to the fullest extent permitted by law, provided that such indemnification in any given situation is approved by Members owning a Majority Interest. (c) Expenses (including legal fees and expenses) incurred by a Manager or Board Member in defending any claim, demand, action, suit or proceeding subject to Section 5.8(a) of this Agreement shall be paid by the Company in advance of the final disposition of such claim, demand, action, suit or proceeding upon receipt of an undertaking (which need not be secured) by on behalf of the Manager or Board Member to repay such amount if it shall ultimately be finally determined by a court of competent jurisdiction and not subject to appeal, that the Manager or Board Member is not entitled to be indemnified by the Company as authorized hereunder. (d) The termination of any proceeding by judgment or settlement, shall not, of itself, create a presumption that the Manager or Board Member acted in bad faith or that the Manager's or Board Member's conduct was grossly negligent or constituted willful misconduct or a violation of securities law. (e) The Company may purchase and maintain liability insurance for any and all persons eligible for relief under this Section 5.8, as deemed appropriate by the Manager and/or Board. 5.9 RESIGNATION. The Manager may resign at any time by giving written notice to the Board. The resignation of any Manager shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. The resignation of a Manager who is also a Member shall not affect the Manager's rights as a Member. 5.10 REMOVAL. The Board may remove the Manager at any time with or without cause. The removal of a Manager who is also a Member shall not affect such Person's rights as a Member and shall not constitute a withdrawal of a Member. 5.11 COMPENSATION, REIMBURSEMENT, ORGANIZATION EXPENSES. The Manager shall not be entitled to compensation from the Company for services rendered to the Company as such. Upon the submission of appropriate documentation the Manager shall be reimbursed by the Company for reasonable out-of-pocket expenses incurred on behalf, or at the request, of the Company. 5.12 RIGHT TO RELY ON THE MANAGER. (a) Any Person dealing with the Company may rely (without duty of further inquiry) upon a certificate signed by the Manager as to: 19 (1) The identity of any Manager or Member; (2) The existence or nonexistence of any fact or facts that constitute a condition precedent to acts on behalf of the Company by the Manager or which are in any other manner germane to the affairs of the Company; (3) The Persons who are authorized to execute and deliver any instrument or document of the Company; or (4) Any act or failure to act by the Company or any other matter whatsoever involving the Company or the Manager. 5.13 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Manager shall cause each officer and employee of, and each consultant to the Company or any Company subsidiary with access to material confidential or proprietary information of the Company to enter into a proprietary information and inventions agreement. The Company may not disclose any material proprietary or confidential information to any current or future employee, officer or consultant of the Company unless and until such person executes the proprietary information and inventions agreement. ARTICLE VI. RIGHTS AND OBLIGATIONS OF MEMBERS 6.1 LIMITATION OF LIABILITY. Except as otherwise provided by the non-waivable provisions of the Act and by this Agreement, no Member shall be liable for an obligation of the Company solely by reason of being or acting as a Member. 6.2 LIST OF MEMBERS. Upon written request of any Member made in good faith and for a purpose reasonably related to the Member's rights as Member under this Agreement (which reason shall be set forth in the written request), the Manager shall provide a list showing the names, addresses and Membership Interests of all Members. 6.3 NO AGENCY AUTHORITY. Except as expressly provided in this Agreement, the Members (in their capacity as Members) shall have no agency authority on behalf of the Company. 6.4 COMPANY BOOKS. In accordance with Section 9.11 of this Agreement, the Manager shall maintain and preserve, during the term of the Company, and for five years after dissolution, all accounts, books and other records of the Company's business. Upon reasonable request, each Member shall have the right, during ordinary business hours, to inspect and copy such Company documents at the requesting Member's expense. 6.5 PRIORITY AND RETURN OF CAPITAL. Except as may be expressly provided in Article IX, no Member shall have priority over any other Member, either as to the return of Capital Contributions or as to Profits, Losses or Distributions; provided, however, that this Section 6.5 shall not apply to loans (as distinguished from Capital Contributions) which a Member has made to the Company. 20 6.6 COMPETING ACTIVITIES. (a) Except to the extent otherwise provided in this Section 6.6 or Article X of this Agreement, the Manager shall have no exclusive duty to act on behalf of the Company, and the Manager and each Member may have business interests other than their investments in the Company and may engage in other activities in addition to those relating to the Company. Neither the Company nor any Manager or Member shall have any right, except as provided in this Agreement, to share or participate in any other investments or activities of any other Manager or Member. Neither any Manager nor any Member shall incur any liability to the Company or to any of the Members or the Manager as a result of engaging in any other business or venture, if and as long as such other activities are conducted in accordance with the terms of this Agreement. (b) Notwithstanding Section 6.6(a), each Member shall be obligated to present to the Company any investment or business opportunity located within North America consistent with the on or off-site airport parking business of the Company's subsidiaries, including, without limitation, any opportunity to buy airport parking facilities or enter into a long term lease with respect to airport parking facilities, that may be presented or otherwise made available to such Member or any of such Member's Affiliates; provided, however, that no Member shall be obligated to present any airport parking management opportunity to the Company. Neither the Manager nor any Member shall have any right to hold any such investment or business opportunity (or any prospective economic advantage related thereto), directly or indirectly, for the account of such Member or any of its Affiliates, or to recommend such opportunity to Persons other than the Company, unless and until the Company by affirmative vote or written consent of the Board shall have determined not to pursue such opportunity. ARTICLE VII. ACTIONS AND MEETINGS OF MEMBERS 7.1 ACTION OF MEMBERS. Unless otherwise required in this Agreement, actions and consents of the Members may be communicated or reflected orally, electronically or in writing, and no action need be taken at a formal meeting. Members may, but are not required to, meet from time to time in accordance with the provisions of this Article. Any consent required to be in writing may be evidenced by separate written counterparts. Any action of the Members shall be effective when a sufficient number of Members to take such action communicate their consent to the action in writing to the Manager. 7.2 NO REQUIRED MEETINGS. The Members may but shall not be required to hold any annual, periodic or other formal meetings. However, meetings of the Members may be called by any Manager or by any Member or Members holding, in the aggregate, Sharing Ratios of at least ten percent of the then outstanding Units; provided, however, that no Member shall call, or be entitled to call, any meeting for any nonsignificant or frivolous purposes. 7.3 PLACE OF MEETINGS. The Member or Members calling the meeting may designate any place within North America as the place of meeting for any meeting of the 21 Members. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal place of business of the Company. 7.4 NOTICE OF MEETINGS. Except as provided in Section 7.5 of this Agreement, written notice stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called shall be delivered not less than ten nor more than 50 days before the date of the meeting, by or at the direction of the Member or Members calling the meeting, to each Member entitled to vote at such meeting. 7.5 MEETING OF ALL MEMBERS. If all of the Members shall meet at any time and place, either within or outside of California, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and at such meeting lawful action may be taken. 7.6 RECORD DATE. For the purpose of determining Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof, or Members entitled to receive payment of any Distribution, or in order to make a determination of Members for any other purpose, the date on which notice of the meeting is mailed or the date on which the resolution declaring such Distribution is adopted, as the case may be, shall be the record date for such determination of Members. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this Section 7.6, such determination shall apply to any adjournment thereof. 7.7 QUORUM. Members holding at least a majority of the Sharing Ratios, represented in person or by proxy, shall constitute a quorum at any meeting of Members. In the absence of a quorum at any such meeting, a majority of the Sharing Ratios so represented may adjourn the meeting from time to time for a period not to exceed 60 days without further notice. However, if the adjournment is for more than 60 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Member of record entitled to vote at the meeting. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The Members present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal during such meeting of that number of Sharing Ratios whose absence would cause less than a quorum. 7.8 MANNER OF ACTING. If a quorum is present, the affirmative vote of Members holding a Majority Interest shall be the act of the Members, unless the vote of a greater or lesser proportion or number is otherwise required by the Act, by the Certificate of Formation, or by this Agreement. Unless otherwise expressly provided herein, Members who have an interest (economic or otherwise) in the outcome of any particular matter upon which the Members vote or consent may vote or consent upon any such matter and their Sharing Ratio, vote or consent, as the case may be, shall be counted in the determination of whether the requisite matter is approved by the Members. 22 7.9 PROXIES. (a) At all meetings of Members a Member who is qualified to vote may vote in person or by proxy executed in writing by the Member or by a duly authorized attorney-in-fact. Such proxy shall be filed with the Manager before or at the time of the meeting. No proxy shall be valid after 11 months from the date of its execution, unless otherwise provided in the proxy. (b) Each PCA Group Member shall execute a proxy, in the form set forth in EXHIBIT B, appointing a natural Person who is a member of the Chaves Group as a proxy for all PCA Group Members (the "PCA Proxy") and granting the PCA Proxy the right to vote all Units held by the PCA Group Members. The PCA Proxy may only be removed or appointed by the execution by all PCA Group Members of subsequent proxies, in the form set forth in EXHIBIT B. Furthermore, the PCA Proxy may only be removed, except in the event of disability or death of the PCA Proxy, by contemporaneous appointment of a successor PCA Proxy. Each such removal and/or appointment of the PCA Proxy shall become effective only upon receipt by the Company of written notice from each of the PCA Group Members in accordance with the notice provisions set forth in Section 12.1 of this Agreement taking action to remove the then existing PCA Proxy and/or appoint a new PCA Proxy. In the event of the death or disability of the PCA Proxy, the PCA Group Members shall appoint a successor PCA Proxy within 30 days of such person's death or disability. The Company and the Members (other than the PCA Group Members) shall (i) be entitled to conclusively rely upon each vote or consent taken by the PCA Proxy with respect to all matters concerning the Units held by the PCA Group, and (ii) shall not be liable to any of the PCA Group Members in the event of internal governance disputes, contradictory directions or conflicting claims to the appointment of the PCA Proxy. All rights of the PCA Group and the PCA Group Members set forth in this Agreement shall be exercised by the PCA Proxy. All notice and reporting obligations of the Company, the Manager, the Board and the Members pursuant to this Agreement shall be fulfilled with respect to the PCA Group Members by notice or reporting, as appropriate, to the PCA Proxy. The PCA Proxy shall be fully entitled to disclose any and all information received, and distribute any and all documents obtained from and delivered by the Company to each member of the Chaves Group without being deemed in violation of any confidentiality or non-disclosure provisions. 7.10 ACTION BY MEMBERS WITHOUT A MEETING. Action required or permitted to be taken at a meeting of Members may be taken without a meeting if the action is evidenced by one or more written consents or approvals describing the action taken and signed by Members holding sufficient Sharing Ratios, as the case may be, to approve such action had such action been properly voted on at a duly called meeting of the Members. Action taken under this Section 7.10 is effective when Members with the requisite Sharing Ratios have signed the consent or approval, unless the consent specifies a different effective date. The record date for determining Members entitled to take action without a meeting shall be the date the first Member signs a written consent. In the event any Member action is taken on a less than unanimous basis, prompt notice of such action shall be given to all Members in the manner set forth in Section 12.1 of this Agreement. 23 7.11 WAIVER OF NOTICE. When any notice is required to be given to any Member, a waiver thereof in writing signed by the person entitled to such notice, whether before, at, or after the time stated therein, shall be equivalent to the giving of such notice. ARTICLE VIII. CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS 8.1 MEMBERS' INITIAL CAPITAL ACCOUNTS. The Capital Account of each Initial Member shall be credited with such amounts as are set forth in EXHIBIT A attached hereto. 8.2 ADDITIONAL CONTRIBUTIONS. Except as set forth in Section 8.1 of this Agreement, no Member shall be required to make any Capital Contributions. To the extent approved by the Board, from time to time, the Members may be permitted to make additional Capital Contributions if and to the extent they so desire, and if the Board determines that such additional Capital Contributions are necessary or appropriate in connection with the conduct of the Company's business (including without limitation, expansion or diversification). In such event, the Members shall have the opportunity (but not the obligation) to participate in such additional Capital Contributions in proportion to their Sharing Ratios. In the event any Member chooses not to participate in such additional Capital Contributions, the other Members shall have the right (but not the obligation) to contribute their proportionate shares of such additional Capital Contributions. The Members' Sharing Ratios and Capital Contributions, as reflected on EXHIBIT A, shall be amended to reflect any additional Capital Contributions made pursuant to this Section 8.2. 8.3 CAPITAL ACCOUNTS. (a) A separate capital account (the "Capital Account") shall be maintained by the Company for each Member. Each Member's Capital Account shall be increased by (1) the amount of cash contributed by such Member to the Company; (2) the Gross Asset Value of property contributed by such Member to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Code Section 752); (3) allocations to such Member of Profits; (4) any items in the nature of income and gain which are specially allocated to the Member pursuant to Sections 9.2, 9.3 and 9.4 of this Agreement; and (5) the amount of any Company liabilities assumed by such Member or which are secured by any property distributed to such Member. Each Member's Capital Account shall be decreased by (1) the amount of cash Distributed to such Member by the Company; (2) the Gross Asset Value of property Distributed to such Member by the Company (net of liabilities secured by such Distributed property that such Member is considered to assume or take subject to under Code Section 752); (3) any items in the nature of deduction and loss that are specially allocated to the Member pursuant to Sections 9.2, 9.3 and 9.4 of this Agreement; (4) allocations to such Member of Losses; and (5) the amount of any liabilities of the Member assumed by the Company or which are secured by any property contributed by the Member to the Company. (b) Without limiting the other rights and duties of a transferee of a Membership Interest pursuant to this Agreement, in the event of a permitted sale or exchange of a Membership Interest in the Company, (1) the Capital Account of the transferor shall become 24 the Capital Account of the transferee to the extent it relates to the transferred Membership Interest in accordance with Regulations Section 1.704-1(b)(2)(iv); and (2) the transferee shall be treated as the transferor for purposes of allocations and Distributions pursuant to Article IX to the extent that such allocations and Distributions relate to the transferred Membership Interest. (c) The manner in which Capital Accounts are to be maintained pursuant to this Section 8.3 is intended to comply with the requirements of Code Section 704(b) and the Regulations promulgated thereunder. If in the opinion of the Company's tax counsel or accountants the manner in which Capital Accounts are to be maintained pursuant to the preceding provisions of this Section 8.3 should be modified in order to comply with Code Section 704(b) and the Regulations thereunder, then, notwithstanding anything to the contrary contained in the preceding provisions of this Section 8.3, the method in which Capital Accounts are maintained shall be so modified; provided, however, that any change in the manner of maintaining Capital Accounts shall not materially alter the economic agreement between or among the Members. (d) Upon liquidation of the Company, liquidating Distributions shall be made in accordance with the positive Capital Account balances of the Members, as determined after taking into account all Capital Account adjustments for the Company's taxable year during which the liquidation occurs. Liquidation proceeds shall be paid in accordance with Section 11.3 of this Agreement. The Company may offset damages for breach of this Agreement by any Member whose interest is liquidated (either upon the withdrawal of the Member or the liquidation of the Company) against the amount otherwise Distributable to such Member; provided, the Company has received a final judgment by a court of competent jurisdiction which has not been stayed against such Member. Subject to Section 8.1 of this Agreement, no Member shall have any obligation to restore all or any portion of a deficit balance in such Member's Capital Account. (e) In determining the amount of any liability for purposes of Section 8.3(a) of this Agreement, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations. 8.4 WITHDRAWAL OR REDUCTION OF MEMBERS' CONTRIBUTIONS TO CAPITAL. (a) A Member shall not receive a Distribution of any part of its Capital Contribution to the extent such Distribution would violate Sections 9.5 or 9.6 of this Agreement. (b) In the event a Member is entitled to receive a Distribution of any part of its Capital Contribution, the Member, irrespective of the nature of its Capital Contribution, shall have no right to demand and receive property other than cash in return for its Capital Contribution. 8.5 CAPITALIZATION. (a) The respective interests of the Members in the Company's assets and allocations of income, gain, loss, deduction, credit and similar items from the Company pursuant to this Agreement and the Act shall be evidenced by the issuance to the Members of units evidenced by certificates ("Units"). The initial authorized capital of the Company will consist of 25 One Million Units with a stated value of One Thousand United States Dollars each. All currently authorized Units are common voting Membership Interests and it is not necessary for all currently authorized Units to be issued or outstanding. The total number of authorized Units may not be increased without the approval of Members holding a Majority Interest. Additional Units may be authorized and issued in one or more series and the holders thereof may be separated into one or more classes entitled to rights and privileges that differ from those of other series or classes. Any priority or preferential rights must be designated in an amendment to this Agreement. (b) Unit certificates shall be issued and every holder of Membership Interests in the Company shall be entitled to have a certificate signed in the name of the Company by the Manager or other person authorized by the Board certifying the Units owned by the Member. The Units have no preferences, qualifications, limitations, restrictions, nor any special or relative rights, including convertible rights. If future units issued by the Company are classified, or if any class has two (2) or more series, there shall appear on the certificate one of the following: (i) a statement of the rights, preferences, privileges, and restrictions granted to or imposed upon each class or series authorized to be issued and upon the holders thereof; (ii) a summary of such rights, preferences, privileges, and restrictions with reference to the provisions of the Certificate of Formation of the Company establishing the same; or (iii) a statement setting forth the office or agency of the Company from which Members may obtain, upon request and without charge, a copy of the statement referred to in (i) above. There shall also appear on the certificate the statements required by all of the following clauses to the extent applicable: (i) the fact that the Units are subject to restrictions upon transfer; (ii) if the Units are assessable or are not fully paid, a statement that they are assessable or, on partly paid Units, the total amount of the consideration to be paid therefor and the amount paid thereon; (iii) the fact that the Units are subject to an irrevocable proxy or restrictions upon voting rights contractually imposed by the Company; (iv) the fact that the Units are redeemable; and (v) the fact the Units are convertible and the period for conversion. Any such statement or reference thereto on the face of the certificate required by this paragraph shall be conspicuous. (c) In consideration of the Capital Contributions described in Section 8.1 of this Agreement, concurrently with the execution and delivery hereof, the Company shall issue Units as set forth on EXHIBIT A hereto to the Members. (d) From time to time, the Company may, as approved by the Board and subject to Section 5.5 of this Agreement, issue additional Units to existing or newly admitted Members ("Additional Members") upon the making by such Members of Capital Contributions (which may be in the form of cash, contributions of property to the Company, services rendered to the Company or a promissory note or other obligation to contribute cash or property to, or to perform services for, the Company) in such amounts, if any, as the Board shall deem appropriate, based upon the needs of the Company, the net value of the Company's assets, the Company's financial condition and the benefits anticipated to be realized by the Company and the Members. EXHIBIT A shall be updated as necessary by the Manager to reflect the making of Capital Contributions by, and the issuance of Units to, the Additional Members. The Board is hereby deemed to approve, and the Company shall issue, Units in consideration of the capital contributions made pursuant to Section 8.1(b) of this Agreement. 26 (e) In order that the Company may determine the Members entitled to notice of or to consent, approve or vote on any matter, or the Members or assignees exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful actions, the Manager shall cause the Company to maintain a register of the ownership of all Units of the Company. The Company and its Members and Manager shall be entitled to recognize the exclusive right of a person registered on the Company's books as the owner of Units to receive Distributions, and to vote as such owner and shall not be bound to recognize any equitable or other claim to or interest in such Unit or Units on the part of any other Person, whether or not the Company, the Members or the Manager shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. When this Agreement is amended in any way which affects the statements contained in the certificates for outstanding Units, or when it becomes desirable for any reason, in the discretion of the Board, to issue new certificates to evidence all of the Units of the same series or class in substitution for the existing certificates, the Board may order all holders of outstanding certificates for Units for such series or class to surrender and exchange them for new certificates within a reasonable time to be fixed by the Board, cancel such certificates following a reasonable period of time after delivery of notice of surrender and refuse to recognize transfers until such certificates are surrendered. The duty of surrender of any certificates may also be enforced by civil action. (f) Subject to any applicable restrictions contained in this Agreement or by law, Units of the Company may be transferred in any manner permitted or provided by law. Before any transfer of a Units is entered upon the books of the Company or any new certificate issued therefor, the old certificate properly endorsed shall be surrendered and canceled, except when a certificate has been lost or destroyed. 8.6 LOANS TO THE COMPANY BY MEMBERS OR RELATED PARTIES. Subject to compliance with Section 5.5(a) of this Agreement, notwithstanding any other provision of this Agreement, in no event shall any loan be made to the Company by any Member or by any person related to any Member within the meaning of Regulations Section 1.752-4(b) if the proceeds of such loan will be used to repay debt of the Company, unless either (a) such loan shall have been consented to by the PCA Group Members, such consent not to be unreasonably withheld or delayed, or (b) the proceeds of such loan are used solely to repay debt of the Company to a Member or any person related to a Member within the meaning of Regulations Section 1.752-4(b). ARTICLE IX. ALLOCATIONS, INCOME TAX, DISTRIBUTIONS, ELECTIONS AND REPORTS 9.1 ALLOCATIONS OF PROFITS AND LOSSES FROM OPERATIONS. Except as provided in Sections 9.2, 9.3 and 9.4 of this Agreement, the Profits and Losses for each Fiscal Year shall be allocated among the Members in accordance with their respective Sharing Ratios. 27 9.2 SPECIAL ALLOCATIONS TO CAPITAL ACCOUNTS. Notwithstanding Section 9.1 of this Agreement, the following special allocations shall be made in the following order: (a) In the event that any Member unexpectedly receives any adjustments, allocations or Distributions described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6), which create or increase a Deficit Capital Account of such Member, then items of Company income and gain (consisting of a pro rata portion of each item of Company income, including gross income, and gain for such year and, if necessary, for subsequent years) shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Deficit Capital Account so created as quickly as possible. It is the intent that this Section 9.2(a) be interpreted to comply with the alternate test for economic effect set forth in Regulations Section 1.704-1(b)(2)(ii)(d). (b) The Losses allocated pursuant to Section 9.1 of this Agreement shall not exceed the maximum amount of Losses that can be so allocated without causing any Member to have a Deficit Capital Account at the end of any Fiscal Year. In the event that some, but not all, of the Members would have Deficit Capital Accounts as a consequence of an allocation of Losses pursuant to Section 9.1 of this Agreement, the limitation set forth in the preceding sentence shall be applied on a Member by Member basis so as to allocate the maximum permissible Losses to each Member under Regulations Section 1.704-1(b)(2)(ii)(d). All Losses in excess of the limitation set forth in this Section 9.2(b) shall be allocated to the Members in proportion to their respective positive Capital Account balances, if any, and thereafter to the Members in accordance with their Sharing Ratios. In the event that any Member would have a Deficit Capital Account at the end of any Fiscal Year which is in excess of the sum of the amount, if any, that such Member is obligated to restore to the Company under Regulations Section 1.704-1(b)(2)(ii)(c) and such Member's share of Company Minimum Gain as defined in Regulations Section 1.704-2(g)(1) (which is also treated as an obligation to restore in accordance with Regulations Section 1.704-1(b)(2)(ii)(d)), the Capital Account of such Member shall be specially credited with items of Company income (including gross income) and gain in the amount of such excess as quickly as possible. (c) Notwithstanding any other provision of this Section 9.2, if there is a net decrease in the Company Minimum Gain during a Fiscal Year, then the Capital Accounts of each Member shall be allocated items of income (including gross income) and gain for such Fiscal Year (and if necessary for, subsequent Fiscal Years) equal to that Member's share of the net decrease in Company Minimum Gain. This Section 9.2(c) is intended to comply with the minimum gain chargeback requirement of Regulations Section 1.704-2 and shall be interpreted consistently therewith. If in any Fiscal Year that the Company has a net decrease in the Company Minimum Gain, if the minimum gain chargeback requirement would cause a distortion in the economic arrangement among the Members and it is not expected that the Company will have sufficient other income to correct that distortion, the Manager may in its discretion (and shall, if requested to do so by a Member) seek to have the Internal Revenue Service waive the minimum gain chargeback requirement in accordance with Regulations Section 1.704-2(f)(4). 28 (d) Notwithstanding any other provision of this Section 9.2 except Section 9.2(c), if there is a net decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt during any Company Fiscal Year, each Member who has a share of the Member Minimum Gain as of the beginning of the Fiscal Year shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) equal to such Member's share of the net decrease in Member Minimum Gain attributable to such Member Nonrecourse Debt. A Member's share of the net decrease in Member Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(i)(4); provided, however, that a Member shall not be subject to this provision to the extent that an exception is provided by Regulations Section 1.704-2(i)(4) and any Revenue Rulings issued with respect thereto. Any Member Minimum Gain allocated pursuant to this provision shall consist of first, gains recognized from the disposition of Company Property subject to the Member Nonrecourse Debt, and, second, if necessary, a pro rata portion of the Company's other items of income or gain (including gross income) for that Fiscal Year. This Section 9.2(d) is intended to comply with the minimum gain chargeback requirement in Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith. (e) Nonrecourse deductions, as defined in Regulations Section l.704-2(b)(1), for any Fiscal Year shall be specially allocated among the Members in proportion to their Sharing Ratios. Items of Company loss, deduction and expenditures which are attributable to any nonrecourse debt of the Company and are characterized as partner nonrecourse deductions under Regulations Section 1.704-2(i) shall be allocated to the Members' Capital Accounts in accordance with the Members' Sharing Ratios. (f) To the extent that an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a Distribution to a Member in complete liquidation of its Membership Interest, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such Distribution was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies. 9.3 CREDIT OR CHARGE TO CAPITAL ACCOUNTS. Any credit or charge to the Capital Accounts of the Members pursuant to Section 9.2 of this Agreement ("Regulatory Allocations") shall be taken into account in computing subsequent allocations of Profits and Losses pursuant to Section 9.1 of this Agreement, so that the net amount of any items charged or credited to Capital Accounts pursuant to Section 9.1 of this Agreement and the Regulatory Allocations hereof and this Section 9.3 shall to the extent possible, be equal to the net amount that would have been allocated to the Capital Account of each Member pursuant to the provisions of this Article IX if the special allocations required by the Regulatory Allocations hereof had not occurred. 29 9.4 ALLOCATIONS IMMEDIATELY PRIOR TO LIQUIDATION. Immediately prior to distribution upon liquidation in accordance with Section 11.3 of this Agreement, and notwithstanding any other provision of this Agreement, the Manager shall make targeted allocations of Company gain, loss, income, deduction and other items, in order to cause, to the extent possible in accordance with the Code and Regulations, the Members' respective Capital Accounts to be proportionate to the Members' respective Sharing Ratios. 9.5 DISTRIBUTIONS. Except as provided in Sections 8.3(d) and 11.3(b) (with respect to liquidating Distributions), 9.6 (with respect to limitations on Distributions) and 9.17 (with respect to tax Distributions) of this Agreement, the Manager shall Distribute Distributable Cash to the Members pro rata in accordance with Sharing Ratios at such times and as often as it shall determine in its sole and absolute discretion. No assets of the Company shall be distributed in kind except in accordance with Section 11.3 of this Agreement. 9.6 LIMITATION UPON DISTRIBUTIONS. No Distribution shall be made if such Distribution would violate the Act. 9.7 ACCOUNTING PRINCIPLES. For financial reporting purposes, the Company shall use accounting principles applied on a consistent basis using the accrual method of accounting determined by the Manager, unless the Company is required to use a different method of accounting for federal income tax purposes, in which case that method of accounting shall be the Company's method of accounting. 9.8 INTEREST ON AND RETURN OF CAPITAL CONTRIBUTIONS. No Member shall be entitled to interest on its Capital Contribution or to return of its Capital Contribution, except as otherwise specifically provided for herein. 9.9 LOANS TO COMPANY. Subject to Section 8.6, nothing in this Agreement shall prevent any Member from making secured or unsecured loans to the Company by agreement with the Company. 9.10 ACCOUNTING PERIOD. The Company's accounting period shall be the Fiscal Year. 9.11 RECORDS AND REPORTS. At the expense of the Company, the Manager shall maintain records and accounts of all operations and expenditures of the Company. At a minimum the Company shall keep at its principal place of business the following records: (a) A current list of the full name and last known business, residence, or mailing address of each Member and Manager, both past and present; (b) A copy of the Certificate of Formation and all amendments thereto, together with executed copies of any powers of attorney pursuant to which any amendment has been executed; (c) Copies of the Company's federal, state, and local income Tax Returns and reports, if any, for the six most recent Fiscal Years; 30 (d) Copies of the Company's currently effective written Agreement, copies of any writings permitted or required with respect to a Member's obligation to contribute cash, property or services, and copies of any financial statements of the Company for the six most recent Fiscal Years; (e) Minutes of every annual, special meeting and court-ordered meeting; (f) Any written consents obtained from Members for actions taken by Members without a meeting. 9.12 RETURNS AND OTHER ELECTIONS. (a) The Manager shall cause the preparation and timely filing of all Tax Returns required to be filed by the Company pursuant to the Code and all other Tax Returns deemed necessary and required in each jurisdiction in which the Company does business. Such Tax Returns shall reflect and be consistent with the Company's treatment as a partnership for federal and state income tax purposes, unless and until the Board unanimously elects otherwise. The Manager shall provide the Members with draft copies of all Tax Returns and the opportunity to comment on all returns at least fifteen days prior to filing any Tax Return. To the extent any Member indicates in writing to the Manager that a Tax Return is not in accordance with this Agreement or applicable law and the Manager agrees with such indication, the Manager shall remedy such inconsistency prior to filing the return. Copies of all filed Tax Returns shall be furnished to the Members within a reasonable time after the end of the Fiscal Year. (b) By the March 31st following the end of the first Fiscal Year of the Company, the Board shall furnish to the PCAAH Member and the PCA Group Members a draft copy of the United States federal income Tax Return of the Company on Internal Revenue Service Form 1065, together with all appropriate schedules, including Schedules K-1 (the "Draft Form 1065"), proposed to be filed with the Internal Revenue Service for the Company's first Fiscal Year. Within 30 days of receipt of the Draft Form 1065, the PCAAH Member and the PCA Group Members shall cooperate in good faith with each other to either (i) approve the Draft Form 1065 to become finalized or (ii) notify the Board of changes to be made thereto in sufficient detail to enable the Board to make such changes. If changes are required to be made pursuant to the immediately preceding clause (ii), the Board shall, within 15 days of notification, make any appropriate changes and furnish to the PCAAH Member and the PCA Group Members a revised Draft Form 1065. Within 15 days of receipt of the revised Draft Form 1065, the PCAAH Member and the PCA Group Members shall cooperate in good faith with each other to either (x) approve the revised Draft Form 1065, or (y) notify the Board to make any further changes thereto in sufficient detail to enable the Board to make such changes, subject the review and approval of the PCAAH Member and the PCA Group Members. Upon the approval by the PCAAH Member and the PCA Group Members of a Draft Form 1065, the Board shall finalize, file with the Internal Revenue Service and furnish a copy of such finalized Form 1065 to the PCAAH Member and the PCA Group Members, together with all appropriate schedules, including Schedules K-1. In the event that the PCAAH Member and the PCA Group Members are unable to resolve any dispute hereunder relating to a Draft Form 1065, such Members shall seek an expedited arbitration of such dispute from a nationally recognized independent 31 accounting firm or a law firm which is appointed by the Board. The decision of such firm on such matter shall be final. (c) A draft copy of any election that is proposed to be made with the Internal Revenue Service or the California Franchise Tax Board with respect to the Company for the Company's first Fiscal Year (excluding any election made on an Internal Revenue Service Form 1065 filed in accordance with Section 9.12(b) of this Agreement and excluding any election made with the California Franchise Tax Board that conforms to such an election made on such a Form 1065) (the "Draft Election") shall be furnished to the PCA Members for their approval prior to filing with the Internal Revenue Service. The election may be filed if the PCA Group Members approve such Draft Election by giving notice of such approval to the Board. If the PCA Group Members have not approved such Draft Election, the election may be filed in any event if the PCA Group Members have not notified the Board of their disapproval of the Draft Election within 15 days after receipt by such Members of the Draft Election. If the PCA Group Members have disapproved of the Draft Election by giving timely notice to the Board, the PCAAH Member and the PCA Group Members shall cooperate in good faith with each other to revise the Draft Election to the satisfaction of both parties and notify the Board in sufficient detail to make such revisions, subject to the review and approval of the PCAAH Member and the PCA Group Members. In the event that the PCAAH Member and the PCA Group Members are unable to resolve in good faith any dispute hereunder relating to a Draft Election, such Members shall seek an expedited arbitration of such dispute from a nationally recognized accounting firm or a law firm which is appointed by the Board. The decision of such firm on such matter shall be final. For the avoidance of doubt, elections described in Sections 9.12(d) and 9.15 of this Agreement are hereby approved by all Members. (d) Except as provided in Sections 9.12(b) and (c) of this Agreement, all elections permitted to be made by the Company under federal or state laws shall be made by the Manager in its sole discretion; provided, however, that the Manager shall make any tax election requested by Members owning a Majority Interest. Notwithstanding the previous sentence, the Manager shall cause the Company to make an appropriate election to treat the expenses incurred by the Company in connection with the formation and organization of the Company to be amortized under the 60-month period beginning with the month in which the Company begins business to the extent that such expenses constitute "organizational expenses" of the Company within the meaning of Code Section 709(b)(2). 9.13 TAX MATTERS PARTNER. The PCAAH Member is hereby designated the tax matters partner ("TMP") as defined in Code Section 6231(a)(7). The TMP and the other Members shall use their reasonable efforts to comply with the responsibilities outlined in Code Sections 6221 through 6233 (including any Regulations promulgated thereunder), and in doing so shall incur no liability to any other Member except to the extent of any loss or damage sustained by the Company or any Member as the result of gross negligence, fraud, deceit, reckless or willful misconduct, knowing violation of law or intentional breach of this Agreement. The TMP's liability under this Section and Section 5.6(b) of this Agreement is limited to the TMP's assets, including its interest in the Company. 9.14 CERTAIN ALLOCATIONS FOR INCOME TAX (BUT NOT BOOK CAPITAL ACCOUNT) PURPOSES. In accordance with Code Section 704(c) and the Regulations thereunder, income, 32 gain, loss and deductions with respect to any property contributed to the capital of the Company shall, solely for federal income tax purposes (and not for Capital Account purposes), be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company and its Gross Asset Value at the time of contribution. In the event the Gross Asset Value of any Company asset is adjusted pursuant to the paragraph (a) of the definition of Gross Asset Value, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder. Notwithstanding the foregoing sentence, in the event that the "ceiling rule" as described in Regulations Section 1.704-3(b) causes the book allocation of any item to a noncontributing Member to differ from the tax allocation of the same item to the noncontributing Member, then the Company shall (i) create a remedial item of income, gain, loss or deduction equal to the full amount of the difference and allocate it to the noncontributing Member, and (ii) create an offsetting remedial item in an identical amount and allocate it to the contributing Member, all pursuant to and in accordance with the remedial allocation method described in Regulations Section 1.704-3(d). 9.15 BASIS ADJUSTMENT. The Manager may cause the Company to file an election under Code Section 754 to adjust the basis of Company Property with respect to any Fiscal Year for all distributions of property and Transfers of Membership Interests during such Fiscal Year. 9.16 DEBT ALLOCATIONS. For purposes of Regulations Section 1.752-3(a)(3) and the Regulations under Code Section 707, all debt incurred by the Company will be allocated among the Members in accordance with their Sharing Ratios. 9.17 TAX DISTRIBUTIONS. (a) In the event that there is net taxable income allocated from the Company to a Member for a Fiscal Year, then the Company shall, within three months after the end of such Fiscal Year, make a Distribution pursuant to this Section 9.17(a) to each Member in the minimum amount necessary to meet the following requirements: (i) all Distributions under this Section 9.17(a) shall be made in proportion to each Member's Sharing Ratio; and (ii) the total amount of Distributions to each Member pursuant to this Section 9.17(a) and Sections 9.5 and 9.17(b) of this Agreement during, or with respect to, the Relevant Distribution Period (excluding any Distributions made pursuant to this Section 9.17(a) with respect to a prior Fiscal Year or pursuant to Section 9.17(b) with respect to a future Fiscal Year) shall be at least equal to the product of (i) the net taxable income allocable from the Company to such Member for federal income tax purposes for such Fiscal Year (without regard to any adjustments made under Code Sections 734, 743 or 754), multiplied by (ii) the Assumed Tax Rate; provided, however, that no Distribution shall be made pursuant to this Section 9.17(a) (x) to the extent that it would cause a Member's Capital Account (after taking into account estimated Profits and Losses and Distributions through the latest calendar quarter) to be negative, (y) if such Distribution is then prohibited by the Company's debt instruments, or (z) in an amount which in the aggregate exceed Distributable Cash. 33 (b) The Company shall, on or before each of April 15th, June 15th, September 15th of any Fiscal Year and January 15th immediately following the closing of such Fiscal Year, make Distributions to Members of one-fourth of the amount estimated to be distributable pursuant to Section 9.17(a) of this Agreement in respect of such Fiscal Year. Such estimated amounts shall be included in the Company's operating budget. (c) Any Distribution which is made to a Member pursuant to Section 9.17(a) or (b) of this Agreement shall reduce the total amount of Distributions which such Member would otherwise be entitled to receive under Section 9.5 of this Agreement until the total amount of such reductions made pursuant to this Section 9.17(c) equals the cumulative amount of Distributions made to such Member pursuant to Section 9.17(a) and (b) of this Agreement. ARTICLE X. TRANSFERABILITY OF MEMBERSHIP INTERESTS 10.1 TRANSFERS OF MEMBERSHIP INTERESTS. No Membership Interest may be transferred in whole or in part by any Member to any Person, except with the affirmative vote or consent of a Majority Interest, or in a Transfer described in Section 10.2 of this Agreement. In the event a Member desires to Transfer all or part of such Member's Units or any interest therein, such Member will be responsible for compliance with all conditions of Transfer imposed by this Agreement and under applicable law and for all expenses, if any, reasonably incurred by the Company for legal and/or accounting services in connection with reviewing any proposed Transfer or issuing opinions in connection therewith. Until the transferee is admitted as a Member, the transferor Member shall continue to be a Member and to be entitled to exercise any rights or powers of a Member with respect to the Membership Interest transferred. 10.2 EXEMPT TRANSFERS. Notwithstanding any other provision of this Agreement to the contrary (except Section 10.3 of this Agreement): (a) A Member may Transfer all or part of such Member's Membership Interest without first obtaining the prior affirmative vote or consent of a Majority Interest: (i) to the Company or another Member; (ii) by will or intestate succession to such Member's executors, administrators, testamentary trustees, legatees or beneficiaries; (iii) to a trust for the benefit of such Member or such Member's spouse, parent, sibling, in-law, child, or grandchild; (iv) in the case of the PCA Members, to any member of the Chaves Group, so long as Alex Chaves, Alex Martin Chaves, Eric Chaves, Renee Chaves-Valdes and the Grantor Trusts, collectively, beneficially own 80% or more of the Units owned by the PCA Group; or (v) in the case of a PCAAH Member, to an Affiliate of a PCAAH Member, and/or to Laurence Levy if such Transfer is made within 90 days after the Closing Date. (b) Transfers described in this Section 10.2 ("Exempt Transfers") shall not be subject to the provisions of Sections 10.10, 10.11 or 10.12 of this Agreement. 10.3 PROHIBITED TRANSFERS. Any purported Transfer of any Units in violation of the provisions of this Agreement shall be wholly void and shall not effectuate the Transfer contemplated thereby. Notwithstanding anything contained herein to the contrary, (i) no 34 Member may Transfer any Membership Interests in violation of any provision of the Securities Act and any applicable state securities laws, or (ii) no Transfer of any Membership Interest may be effected if such Transfer would cause a dissolution of the Company under the Act, unless the Members approve such Transfer as required by the Act. 10.4 ADMISSION OF TRANSFEREE AS MEMBER. A transferee of a Membership Interest desiring to be admitted as a Member (a "Substitute Member") must execute a counterpart of, or an agreement adopting, this Agreement. Except for any transferee acquiring its interest in an Exempt Transfer, the admission of such transferee as a Substitute Member is subject to the consent of the Majority Interest; provided, however, that no Member shall unreasonably withhold or delay consent. Upon admission of the transferee as a Substitute Member, the transferee shall have, to the extent of the Membership Interest transferred, the rights and powers and shall be subject to the restrictions and liabilities of a Member under this Agreement, the Certificate of Formation and the Act. The transferee shall also be liable, to the extent of the Membership Interest transferred, for the unfulfilled obligations, if any, of the transferor Member to make Capital Contributions, but shall not be obligated for liabilities unknown to the transferee at the time such transferee was admitted as a Member and that could not be ascertained from this Agreement. Whether or not the transferee of a Membership Interest becomes a Member, the transferor Member is not released from any liability to the Company under this Agreement, the Certificate of Formation or the Act. 10.5 RIGHTS OF ASSIGNEES. Until such time, if any, as a transferee is admitted to the Company as a Substitute Member pursuant to Section 10.4 of this Agreement, (i) such transferee shall be an assignee only, and only shall receive, to the extent Transferred, the Distributions and allocations of income, gain, loss, deduction, credit, or similar item to which the Member that Transferred its Membership Interest would be entitled, and (ii) such assignee shall not be entitled or enabled to exercise any other right or powers of a Member, such other rights remaining with the transferring Member. In such a case, the transferring Member shall remain a Member even if he has transferred his entire Economic Interest in the Company to one or more assignees. In the event any assignee desires to make a further assignment of any Economic Interest in the Company, such assignee shall be subject to all of the provisions of this Agreement to the same extent and in the same manner as any Member desiring to make such an assignment. 10.6 WITHDRAWAL OF MEMBER UPON TRANSFER OF ENTIRE INTEREST. If a Member has transferred its entire Membership Interest to one or more assignees or to the Company, then such Member shall withdraw from the Company if and when all such assignees have been admitted as Substitute Members in accordance with this Agreement or the Company has acquired such Membership Interest as herein provided. 10.7 NO WITHDRAWALS, RESIGNATIONS OR REMOVALS. No Member may withdraw or resign from the Company except as provided in Section 10.6 of this Agreement, and no Member shall be subject to removal. 10.8 INDEMNIFICATION. Each transferring Member hereby indemnifies the Company and the remaining Members against any and all loss, damage, or expense (including, without limitation, tax liabilities or loss of tax benefits) arising directly or indirectly as a result of any Transfer or purported Transfer in violation of this Article X. 35 10.9 PRE-EMPTIVE RIGHTS. Subject to the terms and conditions specified in this Section, the Company hereby grants each Member a right of first offer with respect to future issuances of equity interests in the Company. After the Closing Date, each time the Company proposes to offer for sale or otherwise issue any equity interest, the Company shall first make an offer to each Member in accordance with the following provisions: (a) The Company shall deliver written notice (the "First Offer Notice") to each Member stating (i) the Company's bona fide intention to offer such equity interest, (ii) the total number of such equity interests to be offered, and (iii) the price and terms upon which the Company proposes to offer such equity interests. (b) Within 20 days after receipt of the First Offer Notice, a Member may elect to purchase, at the price and on the terms specified in the First Offer Notice, up to that percentage of such equity interests which equals that Member's Sharing Ratio. (c) The Company shall promptly, in writing, notify each Member that purchases all of the equity interests offered to such Member by the First Offer Notice (each a "Fully Exercising Member") of any other Member's failure to do likewise. During the ten days following receipt of such notice, each Fully Exercising Member shall be entitled to purchase that percentage of the equity interests not subscribed for by the other Members in an amount equal to the number of equity interests then held by such Fully Exercising Member compared to the total number of equity interests held by all Fully Exercising Members who wish to participate in such re-offer. (d) If all equity interests referred to in the First Offer Notice are not purchased as provided in Section 10.9(b) and (c) of this Agreement, the Company may, during the 30 day period commencing on the expiration of the period provided therein, offer the equity interests not purchased by the Members to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, the price and terms those specified in the First Offer Notice. If the Company does not enter into an agreement for the sale of the equity interests within such period, or if such agreement is not consummated within 30 days of the execution thereof, the right of first refusal provided hereunder shall be deemed to be revived and such equity interests shall not be offered unless first re-offered to the Members in accordance herewith. 10.10 RIGHT OF FIRST REFUSAL. (a) In the event that any Member other than the PCAAH Member desires to Sell such Member's Membership Interest in whole or in part (such Member being herein referred to as the "Selling Member") other than pursuant to Section 10.2 of this Agreement, such Member shall first offer such Membership Interest to the Company and the PCAAH Member (the "Member Offerees") in accordance with the following provisions: (b) The Selling Member shall deliver a written notice (the "Option Notice") to the Company and the Member Offerees stating (i) the Selling Member's bona fide intention to Sell such Membership Interest, (ii) the Membership Interest to be Sold (iii) the purchase price and other terms of payment for which the Selling Member proposes to Sell such Membership 36 Interest and (iv) if the Selling Member shall have received a bona fide offer to purchase such Membership Interest on such terms, the named and address of the proposed purchaser. (c) Within ten days after receiving the Option Notice, the Company shall have the right, but not the obligation, to purchase all or any part of the Membership Interest offered therein upon the price and terms of payment designated in the Offer Notice. If the Company exercises such right within such ten-day period, the Company shall give written notice of that fact to the Selling Member and the other Members. (d) In the event that the Company does not purchase, in accordance with the provisions of Section 10.10(c) of this Agreement, all of the Membership Interest proposed to be Sold by the Selling Member, then for an additional period of 30 days commencing on the earlier of the date that (A) the Company's right to purchase such Membership Interest has expired or the Company notifies the Selling Member in writing that the Company has determined not to exercise such right or (B) the Company has determined to exercise such right only with respect to a portion of such Membership Interest, the Member Offerees shall have the right to purchase all or any portion of the Membership Interest not so purchased by the Company on the same terms and conditions and at the bona fide offer price at which the Company was so entitled to purchase such Membership Interest. The specific portion of such Membership Interest that each Member Offeree shall be so entitled to purchase shall be determined on a pro rata basis in proportion to the respective Sharing Ratios of each Member Offeree desiring to purchase the portion of the offered Membership Interest remaining available for purchase. Any Member Offeree desiring so to purchase a part of such Membership Interest shall give notice of such desire to the Selling Member, the Company and all other Member Offerees confirming such desire and the proposed terms of purchase. In the event that any Member Offeree does not purchase its full pro rata share of any such Membership Interest proposed to be Sold, such unpurchased portion of the Membership Interest shall be offered by the Selling Member to the Member Offerees subscribing to purchase a portion of that Membership Interest on a pro rata basis on similar terms of purchase. No such Membership Interest or portion thereof shall be made available for purchase by any non-Member pursuant to the remaining provisions of this Section 10.10 unless and until all Member Offerees shall have had an opportunity to purchase all of such Membership Interest in accordance with the provisions of this Section 10.10(d). (e) The closing of any purchase by the Company or any Member Offerees of any offered Membership Interest as provided in this Section 10.10 shall take place on such date as designated by the Company or such Member Offeree(s) occurring within 30 days after receipt by the Selling Member of notification from the Company or such Member Offerees of the exercise of the Company's or such Member Offerees' right to purchase hereunder. At such closing, the Selling Member shall deliver to the Company or such Member Offerees, as the case may be, such documentation as the Company or such Member Offerees shall reasonably request to evidence the Sale of such offered Membership Interests, against payment therefor by the Company or such Member Offerees. (f) In the event that, after compliance with the foregoing provisions of this Section 10.10, the Company and the Member Offerees, taken together, fail to purchase all of the Membership Interest proposed to be Sold by the Selling Member, then for a period of 60 days commencing on the date that neither the Company nor any Member Offeree remains entitled to 37 exercise its right to purchase any offered Membership Interest in accordance with the foregoing provisions of this Section 10.10, the Selling Member may Sell to the proposed purchaser any portion of the Membership Interest described in the Option Notice that the Company and the Member Offerees are not purchasing; provided, however, that any such Sale to the proposed purchaser must be made for the consideration and upon the terms and conditions set forth in the Option Notice and shall be made subject to and in accordance with the other provisions of this Article X. If the Selling Member shall not consummate the Sale of such remaining Membership Interest to the proposed purchaser within such 60-day period, such Membership Interest shall remain subject to the provisions of this Agreement and the Selling Member shall not thereafter Sell any such Membership Interest or portion thereof to any Person without again first complying with all of the provisions of this Agreement. 10.11 DRAG-ALONG RIGHTS. (a) A Member (or group of Members who are Affiliates) that then holds a Majority Interest of the Units then outstanding (the "Majority Member") proposes to engage in a Sale, then at the option of the Majority Member, there shall be included in such proposed Sale (on the same terms and subject to the same conditions as applicable to the Units to be sold by the Majority Member, except as herein otherwise provided) such number of Units then held by the Members other than the Majority Member as shall cause such other Members to have sold upon completion of such Sale the same percentage of the Units held by those Members as the percentage of the Units held by the Majority Member sold in such Sale, all on the terms and subject to the conditions hereinafter set forth. (b) If the Majority Member proposes to engage in a Sale and to exercise the Majority Member's rights under this Section 10.11, then not less than 20 days prior to the date on which such Sale is scheduled to occur, the Majority Member shall give to the Company notice of the same (which notice shall include the price to be paid in such Sale and the other terms of purchase), and within five days thereafter, the Company shall send to each Member other than the Majority Member at such Member's address as then set forth on the books and records of the Company (i) a copy of such notice, and (ii) a statement of the number of Units required to be sold by such Member pursuant to this Section 10.11 (such notices together the "Drag-Along Notice"), which number of Units shall equal the same percentage of the Units held by that Member as the percentage of the Units held by the Majority Member and proposed to be sold in such Sale. (c) Each Member expressly agrees that if the Majority Member so elects, such Member shall sell such Member's Units on the terms of this Section 10.11, when and if the Majority Member sells its Units, in accordance with any Drag-Along Notice that such Holder receives with respect to such Sale. (d) So long as the PCAAH Member is the Majority Member, it shall have the right to drag all other Members along as otherwise provided in this Section 10.11 in the event its members engage in a transaction for the Sale of all membership interests in the PCAAH Member in connection with a Change in Control Transaction. 38 10.12 TAG-ALONG RIGHTS. (a) If a Selling Member proposes to engage in a Sale (in a single transaction or a series of related transactions) of all or a part of such Member's Membership Interest (provided, the number of Units the Selling Member proposes to sell is greater than ten percent of the outstanding Units of the Company determined at the time of the sale), but neither the Company nor the other Members elect to exercise their rights under Section 10.10 of this Agreement or if the sale is not subject to Section 10.10 of this Agreement, then not less than 20 days prior to the date on which such Sale is scheduled to occur, the Selling Member shall give to the Company a notice of the same, including the Membership Interest proposed to be sold, the price and other terms of the Sale, and the name and address of the proposed purchaser, and within five days thereafter, the Company shall send to each Member (other than the Selling Member) at such Member's address as then set forth on the books and records of the Company (i) a copy of such notice from the Selling Member, and (ii) a statement of the number of Units that the Member receiving such notice shall have the right to sell pursuant to this Section 10.12 (such notice and statement together the "Tag-Along Notice"), which number shall equal the same percentage of the Units held by that Member as the percentage of the Units held by the Selling Member and proposed to be sold in such Sale. (b) If during the three year period commencing on December 18, 2002, the PCAAH Member (and/or its Affiliate) proposes to engage in a Sale or other disposition (in a single transaction or a series of related transactions) of all or a part of its (or their) Membership Interests such that a "termination" of the Company pursuant to Code Section 708(b)(1)(B) will occur as a result of such Sale or disposition, then the PCA Group shall be entitled to give a Tag-Along Notice and to include in such Sale or disposition such number of Units (not limited by the percentage of the number of Units owned by the PCAAH Member (or its Affiliates) proposed to be sold in the transaction(s)) as will give rise to an amount of net cash proceeds from the Sale or disposition as equals the estimated tax due from the beneficial owners of the PCA Group's Membership Interests as a consequence of such termination and Sale or disposition; provided, however, that if during the 12-month period preceding such proposed Sale or disposition by the PCAAH Member (and/or its Affiliates), one or more PCA Group Members had engaged in a Sale transaction or other disposition that would be included under Code Section 708(b)(1)(B) in determining whether a "termination" occurred and no such "termination" would occur by virtue of the Sale or disposition by the PCAAH Member (and/or its Affiliates) had none of the PCA Group Members Sold or otherwise disposed of Membership Interests, then this subdivision (b) shall not be applicable. (c) A Member seeking to exercise its rights under this Section 10.12 shall give written notice thereof to the Selling Member and the Company within 15 days from the giving of the Tag-Along Notice, which notice shall specify the number of Units that such Member elects to include in such Sale. (d) If the tag-along rights set forth in this Section 10.12 are exercised by one or more Members with respect to any proposed Sale, the Selling Member shall not proceed with such Transfer unless and until each such other Member is given the right to so participate. 39 10.13 TERMS OF PARTICIPATION. Each Member receiving a Tag-Along Notice or a Drag-Along Notice (together a "Sale Notice") shall promptly take all steps described in the Sale Notice to effectuate the sale by such Holder of the Units required to be sold by the Drag-Along Notice or if such Sale Notice is a Tag-Along Notice, that such Member elects to sell pursuant to Section 10.12 of this Agreement. Without limiting the generality of the foregoing, each Member shall: (a) provide all such information with respect to such Member and Units as may be reasonably required by the purchaser in such Sale; (b) execute and deliver all such purchase documents as may be reasonably by such purchaser; provided, however, that (i) Members (other than the Majority Member, a Selling Member, or any Member responsible directly, or by way of delegation of authority, for the operation or management of any the Company's businesses or properties) shall not be required to make any representation or warranty to the purchaser other than to the effect that such Members have good and marketable title to the Membership Interests being sold in such Transfer, free and clear of liens and Encumbrances, and as to their right, power and authority to sell such securities; (ii) that such representations and warranties shall be made by such Members individually; and (iii) except as to such representations and warranties, such Members shall not be liable beyond the net proceeds of the Sale received by them for any other breach of representations or warranties, covenants or agreements in the purchase documents. In addition, unless expressly agreed to by a Member, no Member shall be required to enter into any covenant not to compete or similar agreement restricting such Member's business activities; and (c) deliver at the closing of such Sale the certificate or certificates representing the Units to be sold, if any, duly endorsed for transfer, or such other transfer documentation as the purchaser may reasonably request, and against delivery of the purchase price therefor. 10.14 UNIT LEGEND. Each certificate representing the Units shall have conspicuously endorsed on its face or reverse side the following legends: THE OWNERSHIP, SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION OF THE UNITS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY THE PROVISIONS OF AN AGREEMENT AMONG THE COMPANY AND ITS MEMBERS, A COPY OF WHICH MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF THE COMPANY AND ALL THE PROVISIONS OF WHICH ARE INCORPORATED BY REFERENCE IN THIS CERTIFICATE. THE UNITS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR QUALIFIED OR REGISTERED UNDER ANY STATE SECURITIES LAW, AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE 1933 ACT. THESE UNITS MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN ANY MANNER ABSENT EITHER REGISTRATION 40 UNDER THE 1933 ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AND ITS COUNSEL (SUCH SATISFACTION BEING TO THE FORM AND SUBSTANCE OF THE OPINION AS WELL AS THE COUNSEL RENDERING THE OPINION) THAT REGISTRATION THEREUNDER IS NOT REQUIRED. ARTICLE XI. DISSOLUTION AND TERMINATION 11.1 DISSOLUTION. (a) Subject to Section 4.7, the Company shall be dissolved only upon the unanimous written agreement of all Members. Notwithstanding anything to the contrary in the Act, the Company shall not be dissolved upon the death, retirement, resignation, expulsion, bankruptcy or dissolution of a Member. (b) As soon as possible following the occurrence of any of the events specified in Section 11.1(a) of this Agreement effecting the dissolution of the Company, the appropriate representative of the Company shall execute all documents required by the Act at the time of dissolution and file or record such statements with the appropriate officials. 11.2 EFFECT OF DISSOLUTION. Upon dissolution, the Company shall cease to carry on its business, except insofar as may be necessary for the winding up of its business, but its separate existence shall continue until winding up and Distribution is completed and a certificate of cancellation is filed with the Delaware Secretary of State. 11.3 WINDING UP, LIQUIDATION AND DISTRIBUTION OF ASSETS. (a) Upon dissolution, an accounting shall be made by the Company's independent accountants of the accounts of the Company and of the Company's assets, liabilities and operations, from the date of the last previous accounting until the date of dissolution. The Manager shall immediately proceed to wind up the affairs of the Company. (b) If the Company is dissolved and its affairs are to be wound up, the Manager shall: (1) Sell or otherwise liquidate all of the Company's assets as promptly as practicable (except to the extent that the Manager may determine to Distribute in kind any assets to the Members); (2) Allocate any Profit or Loss resulting from such sales to the Members' Capital Accounts in accordance with Article IX hereof; (3) Discharge all liabilities of the Company, including liabilities to Members who are also creditors, to the extent otherwise permitted by law, other than liabilities to Members for Distributions and the return of capital, and establish such Reserves as may be reasonably necessary to provide for contingent liabilities of the Company (for 41 purposes of determining the Capital Accounts of the Members, the amounts of such Reserves shall be deemed to be an expense of the Company); and (4) Distribute the remaining assets of the Company to the Members on a pro rata basis in accordance with the positive balance (if any) of each Member's Capital Account (as determined after taking into account all Capital Account adjustments for the Company's Fiscal Year during which the liquidation occurs), either in cash or in kind, as determined by the Manager, with any assets Distributed in kind being valued for this purpose at their respective fair market values and Distributed to the Members in shares according to the ratios of their Capital Accounts. Any such Distributions to the Members in respect of their Capital Accounts shall be made in accordance with the time requirements set forth in Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any assets of the Company are to be distributed in kind, the net fair market value of such assets as of the date of dissolution shall be determined by independent appraisal or by agreement of the Members. Such assets shall be deemed to have been sold as of the date of dissolution for their fair market value, and the Capital Accounts of the Members shall be adjusted pursuant to the provisions of Article IX and Section 8.3 of this Agreement to reflect such deemed sale. Any assets distributed to the Members in kind shall be owned by the Members as tenants in common in proportion to their positive Capital Account balances described in Section 11.3(b)(4) of this Agreement. (c) Notwithstanding anything to the contrary in this Agreement, upon a liquidation within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), if any Member has a Deficit Capital Account (after giving effect to all contributions, Distributions, allocations and other Capital Account adjustments for all Fiscal Years, including the year during which such liquidation occurs), such Member shall have no obligation to make any Capital Contribution, and the negative balance of such Member's Capital Account shall not be considered a debt owed by such Member to the Company or to any other Person for any purpose whatsoever. (d) Upon completion of the winding up, liquidation and Distribution of the assets, the Company shall be deemed terminated. (e) The Manager shall comply with any applicable requirements of applicable law pertaining to the winding up of the affairs of the Company and the final Distribution of its assets. 11.4 FILING OR RECORDING STATEMENTS. Upon the conclusion of winding up, the appropriate representative of the Company shall execute all documents required by the Act at the time of completion of winding up and file or record such statements with the appropriate officials. 11.5 RETURN OF CONTRIBUTION, NONRECOURSE TO OTHER MEMBERS. Except as provided by law or as expressly provided in this Agreement, upon dissolution, each Member shall look solely to the assets of the Company for the return of its Capital Contribution. If the Company Property remaining after the payment or discharge of the debts and liabilities of the 42 Company is insufficient to return the cash or other contribution of one or more Members, such Members shall have no recourse against any other Member. ARTICLE XII. MISCELLANEOUS PROVISIONS 12.1 NOTICE. Any notice, demand, or communication required or permitted to be given by any provision of this Agreement shall be deemed to have been sufficiently given or served if sent by telecopy or facsimile transmission, delivered by messenger or overnight courier, or mailed, certified first class mail, postage prepaid, return receipt requested, and addressed or sent to the Member's and/or Company's address, as set forth on EXHIBIT A. Such notice shall be effective, (a) if delivered by messenger or by overnight courier, upon actual receipt (or if the date of actual receipt is not a business day, upon the next business day); (b) if sent by telecopy or facsimile transmission, upon confirmation of receipt (or if the date of such confirmation of receipt is not a business day, upon the next business day); or (c) if mailed, upon the earlier of seven business days after deposit in the mail and the delivery as shown by return receipt therefor. Any Member or the Company may change its address by giving notice in writing to the Company and the other Members of its new address. 12.2 BOOKS OF ACCOUNT AND RECORDS. (a) Proper and complete records and books of account shall be kept or shall be caused to be kept by the Manager, in which shall be entered fully and accurately all transactions and other matters relating to the Company's business in such detail and completeness as is customary and usual for businesses of the type engaged in by the Company. Such books and records shall be maintained as provided in Section 9.11 of this Agreement. The books and records shall at all times be maintained at the principal place of business of the Company and shall be open to the reasonable inspection and examination of the Members or their duly authorized representatives during reasonable business hours. (b) So long as a Member holds Units, such Member shall have the right to visit and inspect any of the properties of the Company or any of its subsidiaries, to examine books of account and records, to discuss the affairs, finances and accounts of the Company or any of its subsidiaries with its Manager, and to review such information as it reasonably requests, all at such reasonable times and as often as may be reasonably requested for a purposed relating to such member's ownership interest in the Company. The Company shall not be obligated under this Section 12.2(b) to disclose to a Member information that (i) the Board determines in good faith is highly confidential or proprietary information or (ii) the Company is restricted from disclosing pursuant to an agreement with a third party. 12.3 DELIVERY OF FINANCIAL STATEMENTS. So long as a Member holds Units, the Company shall deliver to such Member: (a) as soon as practicable, but in any event within 120 days after the end of each Fiscal Year of the Company, income statement, balance sheet, statement of operations, statement of Members' equity and statement of cash flows of the Company for and as of the end of such Fiscal Year, such year-end financial reports to be in 43 reasonable detail, prepared in accordance with generally accepted accounting principles ("GAAP"), and accompanied by an audit opinion by an independent public accounting firm of nationally recognized standing selected by the Company; and together with a statement showing the number of Units outstanding at the end of the period, all in sufficient detail as to permit the Member to calculate its percentage equity ownership in the Company; (b) as soon as practicable, but in any event within 60 days after the end of each of the first three quarters of each Fiscal Year of the Company, an unaudited income statement, balance sheet, statement of operations, statement of members' equity and statement of cash flows of the Company for and as of the end of such fiscal quarter; (c) as soon as practicable, and in any event within 30 days after the end of each month, unaudited income statement, balance sheet, statement of operations, statement of members' equity and statement of cash flows of the Company for such month and for the current Fiscal Year to date, if prepared in the ordinary course of business, including a comparison to plan figures for such period; (d) as soon as practicable, but in any event 30 days prior to the beginning of each Fiscal Year, an annual budget and operating plans for such Fiscal Year, prepared on a monthly basis, including balance sheets, sources and applications of funds statements for such months and, as soon as prepared, any other budgets or revised budgets; (e) with respect to the financial statements called for in Section 12.3(a) of this Agreement an instrument executed by the Chief Financial Officer or President of the Company certifying that such financial statements were prepared in accordance with GAAP consistently applied with prior practice for earlier periods (with the exception of footnotes that may be required by GAAP) and fairly present the financial condition of the Company and its results of operation for the period specified, subject to year-end audit adjustment. 12.4 APPLICATION OF LAW. This Agreement, and the application and interpretation hereof, shall be governed exclusively by its terms and by the laws of Delaware, and specifically the Act. 12.5 WAIVER OF ACTION FOR PARTITION. Each Member irrevocably waives during the term of the Company any right that it may have to maintain any action for partition with respect to the Company Property. 12.6 AMENDMENTS. This Agreement may not be amended except by the written agreement of Members holding a Majority Interest; provided, however, no amendment of Sections 3.1, 4.2, 4.3, 5.1, 5.3, 5.4, 5.5, 5.11, 6.1, 6.2, 6.3, 6.5, 6.6, 6.7, 7.2, 7.9, 8.5, 8.6, 10.1, 10.2, 10.3, 10.4, 10.5, 10.7, 10.9, 10.11, 10.12, 10.13, 11.3, or 12.6 or of Article IX of this Agreement shall be effective without the consent of the PCA Group Members. Provided further, no amendment that (a) decreases the voting or Economic Interests of any Member, (b) materially adversely affects the interests of any Member, or (c) changes the amount or manner of 44 calculating each such Members Capital Account (other than pursuant to Section 8.3(c) of this Agreement) shall be effective without the consent of that Member. 12.7 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to execute such other and further statements of interest and holdings, designations, powers of attorney and other instruments necessary to comply with any laws, rules or regulations applicable to the Company or its business, in each case to the extent consistent with the terms hereof. 12.8 CONSTRUCTION; REFERENCE TO "DAYS". Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa. Except as set forth in Section 12.1 of this Agreement, all references herein to the term "days" shall mean calendar days. 12.9 EFFECT OF INCONSISTENCIES WITH THE ACT. It is the express intention of the Members and the Company that this Agreement shall be the sole source of agreement among them with respect to the matters covered hereby, and, except to the extent that a provision of this Agreement expressly incorporates federal income tax rules by reference to sections of the Code or Regulations or is expressly prohibited by or is otherwise ineffective under the Act, this Agreement shall govern. In the event that the Act is subsequently amended or interpreted in such a way to make valid any provision of this Agreement that was formerly invalid, such provision shall be considered to be valid from the effective date of such interpretation or amendment. The Members and the Company hereby agree that the duties and obligations imposed on the Members as such shall be those set forth in this Agreement, which is intended to govern the relationship among the Company and the Members, notwithstanding any provision of the Act (to the maximum extent permitted by law), or common law that in the absence of this Agreement would be to the contrary. 12.10 WAIVERS. The failure of any party to seek redress for violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation. 12.11 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive the right to use any or all other remedies. Said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. 12.12 SEVERABILITY. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law. Without limiting the generality of the foregoing sentence, to the extent that any provision of this Agreement is prohibited or ineffective under the Act or common law, this Agreement shall be considered amended to the smallest degree possible in order to make the Agreement effective under the Act or common law. 45 12.13 HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective heirs, legal representatives, successors and assigns. 12.14 CREDITORS. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company. 12.15 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. 12.16 POWER OF ATTORNEY. Each Member hereby irrevocably makes, constitutes and appoints the Manager, with full power of substitution, so long as such Manager is acting in such a capacity (and any successor Manager thereof so long as such Manager is acting in such capacity), its true and lawful attorney, in such Member's name, place and stead (it is expressly understood and intended that the grant of such power of attorney is coupled with an interest) to make, execute, sign, acknowledge, swear and file with respect to the Company: (a) all amendments of this Agreement adopted in accordance with the terms hereof; (b) all documents which the Manager deems necessary or desirable to effect the dissolution and termination of the Company following the requisite vote; and (c) all such other instruments, documents and certificates which may from time to time be required by the laws of Delaware or any other jurisdiction in which the Company shall determine to do business, or any political subdivision or agency thereof, to effectuate, implement, continue and defend the valid existence of the Company. This power of attorney shall not be affected by and shall survive the bankruptcy, insolvency, death, incompetency, or dissolution of a Member and shall survive the delivery of any assignment by the Member of the whole or any portion of its Membership Interest. 12.17 INVESTMENT REPRESENTATIONS. The undersigned Members understand (1) that the Membership Interests evidenced by this Agreement have not been registered under the 1933 Act, the Delaware Securities Act or any other state securities laws (the "Securities Acts") because the Company is issuing these Membership Interests in reliance upon the exemptions from the registration requirements of the Securities Acts providing for issuance of securities not involving a public offering, (2) that the Company has relied upon the fact that the Membership Interests are to be held by each Member for investment, and (3) that exemption from registrations under the Securities Acts would not be available if the Membership Interests were acquired by a Member with a view to distribution. Accordingly, each Member hereby confirms to the Company that such Member is acquiring the Membership Interests for such own Member's account, for investment and not with a view to the resale or Distribution thereof. Each Member agrees not to transfer, sell or offer for sale any of portion of the Membership Interests unless there is an effective registration or other qualification relating thereto under the 1933 Act and under any applicable state securities laws or 46 unless the holder of Membership Interests delivers to the Company an opinion of counsel, satisfactory to the Company, that such registration or other qualification under such 1933 Act and applicable state securities laws is not required in connection with such transfer, offer or sale. Each Member understands that the Company is under no obligation to register the Membership Interests or to assist such Member in complying with any exemption from registration under the Securities Acts if such Member should at a later date, wish to dispose of the Membership Interest. Furthermore, each Member realizes that the Membership Interests are unlikely to qualify for disposition under Rule 144 of the Securities and Exchange Commission unless such Member is not an "affiliate" of the Company and the Membership Interest has been beneficially owned and fully paid for by such Member for at least two years. Each Member, prior to acquiring a Membership Interest, has made an investigation of the Company and its proposed business, and the Company has made available to each Member, all information with respect to the Company which such Member needs to make an informed decision to acquire the Membership Interest. Each Member considers himself, herself or itself to be a person possessing experience and sophistication as an investor, which are adequate for the evaluation of the merits and risks of such Member's investment in the Membership Interest. 12.18 REPRESENTATIONS AND WARRANTIES. Each Member hereby makes, as of the date such Member becomes a Member, each of the representations and warranties applicable to such Member as set forth in this Section 12.18 of this Agreement: (a) DUE INCORPORATION OR FORMATION; AUTHORIZATION OF AGREEMENT. If the Member is a corporation, partnership or limited liability company, such Member is a corporation duly organized or a partnership or limited liability company duly formed, validly existing, and in good standing under the laws of the jurisdiction of its incorporation or formation and has the corporate, partnership or limited liability company power and authority to own its property and carry on its business as owned and carried on at the date hereof and as contemplated hereby. Such Member is duly licensed or qualified to do business and in good standing in each of the jurisdictions in which the failure to be so licensed or qualified would have a material adverse effect on its financial condition or its ability to perform its obligations hereunder. Such Member has the corporate, partnership or limited liability company power and authority to execute and deliver this Agreement and to perform its obligations hereunder and the execution, delivery, and performance of this Agreement has been duly authorized by all necessary corporate, partnership or limited liability company action. This Agreement constitutes the legal, valid, and binding obligation of such Member. (b) NO CONFLICT WITH RESTRICTIONS; NO DEFAULT. The execution, delivery, and performance of this Agreement by such Member will not (1) conflict with, violate, or result in a breach of any of the terms, conditions, or provisions of any law, regulation, order, writ, injunction, decree, determination, or award of any court, any governmental department, board, agency, or instrumentality, domestic or foreign, or any arbitrator, applicable to such Member, (2) conflict with, violate, result in a breach of, or constitute a default under any of the terms, conditions, or provisions of the articles of incorporation, bylaws, partnership agreement, limited liability company agreement or operating 47 agreement of such Member or of any material agreement or instrument to which such Member is a party or by which such Member is or may be bound or to which any of its material properties or assets is subject, (3) conflict with, violate, result in a breach of, constitute a default under (whether with notice or lapse of time or both), accelerate or permit the acceleration of the performance required by, give to others any material interests or rights, or require any consent, authorization, or approval under any indenture, mortgage, lease agreement, or instrument to which such Member is a party or by which such Member is or may be bound, or (4) result in the creation or imposition of any lien upon any of the material properties or assets of such Member. (c) GOVERNMENT AUTHORIZATIONS. Any registration, declaration, or filing with, or consent, approval, license, permit, or other authorization or order by, any government or regulatory authority, domestic or foreign, that is required in connection with the valid execution, delivery, acceptance, and performance by such Member under this Agreement or the consummation by such Member of any transaction contemplated hereby has been completed, made, or obtained. (d) LITIGATION. There are no actions, suits, proceedings, or investigations pending or, to the knowledge of such Member, threatened against or affecting such Member or any of their properties, assets, or businesses in any court or before or by any governmental department, board, agency, or instrumentality, domestic or foreign, or any arbitrator which could, if adversely determined (or, in the case of an investigation, would lead to any action, suit, or proceeding, which if adversely determined would) reasonably be expected to materially impair such Member's ability to perform its obligations under this Agreement or to have a material adverse effect on the consolidated financial condition of such member; and such Member has not received any currently effective notice of any default, and such Member is not in default, under any applicable order, writ, injunction, decree, permit, determination, or award of any court, any governmental department, board, agency, or instrumentality, domestic or foreign, or any arbitrator which would reasonably be expected to materially impair such Member's ability to perform its obligations under this Agreement or to have a material adverse effect on the consolidated financial condition of such Member. (e) INVESTMENT COMPANY ACT. Such Member is not, nor will the Company as a result of such Member holding a Membership Interest be, an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940. (f) CHAVES FAMILY INTEREST. Alex Chaves, Alex Martin Chaves, Eric Chaves, Renee Chaves-Valdes and the Grantor Trusts, collectively, beneficially own 80% or more of the Units owned by the PCA Group as of the date hereof. (g) CHAVES GROUP OWNERSHIP. Alex Chaves, Alex Martin Chaves, Eric Chaves, Renee Chaves-Valdes and the Grantor Trusts, collectively, beneficially own 80% or more of the voting and economic interests in each Chaves Group member that is not a natural person as of the date hereof and will beneficially own 80% of more of the voting and economic interests in each Chaves Group member that is not a natural person at any time that it is a PCA Group Member. 48 12.19 CONFIDENTIALITY. Except as contemplated hereby or required by a court of competent authority, each Member shall keep confidential and shall not disclose to others, and shall use its reasonable efforts to prevent its Affiliates and any of its, or its Affiliates', present or former employees, agents, and representatives from disclosing to third parties, any information which is confidential or proprietary information of any other Member or of the Company. No Member shall use, and each Member shall use its best efforts to prevent any Affiliate of such Member from using, any confidential or proprietary information of any other Member or of the Company, except for the benefit of the Company or in connection with the ownership of the Membership Interests. 12.20 ASSUMPTION OF OBLIGATIONS. The Company hereby agrees that it shall perform (or cause to be performed) any obligation which Parking Company of America Airports, LLC, a Delaware limited liability company ("PCAA"), was obligated to perform pursuant to Sections 5.8, 6.4 or 12.3 or Article IX of the Amended and Restated Limited Liability Company Agreement of PCAA dated as of December 18, 2002 (as amended by the letter agreement dated December 13, 2002 among the then-members of PCAA, but prior to amendment by the Second Amended and Restated Limited Liability Company Agreement of PCAA dated as of October 1, 2003) (the "PCAA LLC Agreement"), to the extent that such obligation was required to be but was not performed by PCAA on or prior to October 1, 2003. In addition, the Manager hereby agrees that it shall perform any obligation which the Manager (as defined in the PCAA LLC Agreement) of PCAA was obligated to perform pursuant to Sections 6.4, 9.11, 9.12 or 12.2 of the PCAA LLC Agreement, to the extent that such obligation was required to be but was not performed by such Manager of PCAA on or prior to October 1, 2003. In addition, each Member hereby agrees that it shall perform any obligation which it was obligated to perform as a member of PCAA pursuant to Sections 9.13 or 10.8 of the PCAA LLC Agreement, to the extent that such obligation was required to be but was not performed by such member of PCAA on or prior to October 1, 2003; provided, however, that any right of any Member to be indemnified under Section 10.8 resulting from either (i) the transfer by Macquarie Americas Parking Corporation ("MAPC") of 1,150 Units to New WAI Holdings LP, pursuant to a letter agreement dated December 20, 2002, or (ii) the transfer by MAPC of its entire remaining Membership Interest (as defined in the PCAA LLC Agreement) in PCAA to the PCAAH Member, pursuant to an Assignment of Member Interest dated September 30, 2003, is expressly waived by such Member. 49 The undersigned hereby agree, acknowledge and certify that the foregoing Agreement, consisting of 52 pages, excluding the Table of Contents and attached Exhibits, constitutes the Limited Liability Company Agreement of PCAA Parent, LLC adopted by the Members as of September 30, 2003. COMPANY: PCAA PARENT, LLC By: PARKING COMPANY OF AMERICA AIRPORTS HOLDINGS, LLC Its: Managing Member By: MACQUARIE AMERICAS PARKING CORPORATION, Its Member By: /s/ Duncan Murdoch ------------------------ Name: Duncan Murdoch Title: Vice President MEMBERS: PARKING COMPANY OF AMERICA AIRPORTS HOLDINGS, LLC By: MACQUARIE AMERICAS PARKING CORPORATION Its: Sole Member By: /s/ Duncan Murdoch -------------------------- Name: Duncan Murdoch Title: Vice President 50 PARKING COMPANY OF AMERICA MANAGEMENT, LLC By: PCA PARKING COMPANY OF AMERICA, LLC Its Managing Member By: ALEX CHAVES, INC. Its Managing Member By: /s/ Alex Martin Chaves --------------------------------- Alex Martin Chaves, President ARE HOLDINGS, LLC By: PCA PARKING COMPANY OF AMERICA, LLC Its Managing Member By: ALEX CHAVES, INC. Its Managing Member By: /s/ Alex Martin Chaves ------------------------------ Alex Martin Chaves, President ATLAS SUPERPARK, LTD. By: PCA HOUSTON HOBBY G.P., LLC Its General Partner By: ARE HOLDINGS, LLC Its Managing Member By: PCA PARKING COMPANY OF AMERICA, LLC Its Managing Member By: ALEX CHAVES, INC. Its Managing Member By: /s/ Alex Martin Chaves ----------------------------- Alex Martin Chaves, President 51 NEW WAI HOLDINGS, LP BY: NEW WAREHOUSE PARTNERS, INC. By: /s/ Laurence Levy ------------------------------ Laurence Levy, President 52 EXHIBIT A MEMBER CAPITAL CONTRIBUTIONS, UNITS AND SHARING RATIOS
NAME, ADDRESS, FACSIMILE AND TELEPHONE NUMBER AND TAXPAYER IDENTIFICATION CAPITAL SHARING NUMBER OF MEMBER CONTRIBUTIONS UNITS RATIO - -------------------------------------- ------------------------- ----- ------- Parking Company of America Assets with a fair market 2,848 10.17% Management, LLC value of $2,848,000 11101 Lakewood Boulevard Downey, California 90241 Telephone: (562) 862-2118 Facsimile: (562) 862-4409 Tax ID. No.: 95-4650869 ARE Holding, LLC Assets with a fair market 8,380 29.93% 11101 Lakewood Boulevard value of $8,380,000 Downey, California 90241 Telephone: (562) 862-2118 Facsimile: (562) 862-4409 Tax ID. No.: 95-4650873 Atlas Superpark, Ltd. Assets with a fair market 772 2.76% 11101 Lakewood Boulevard value of $772,000 Downey, California 90241 Telephone: (562) 862-2118 Facsimile: (562) 862-4409 Tax ID. No.: 75-3036227 Parking Company of America Airports $4,425,000 and assets 14,850 53.04% Holdings, LLC c/o with a fair market value of $11,000,000 Macquarie Americas Parking Corporation Level 8, 121 King Street West Toronto, Ontario MH5 3T9 Telephone: (416) 594-5167 Facsimile: (416) 594-0020 Tax ID. No.: 71-0905516
A-1 New WAI Holdings, L.P. $575,000 1150 4.11% 595 Madison Avenue New York, New York 10022 Telephone: (212) 644-3450 Facsimile: (212) 644-6262 Tax ID. No.:

A-2 EXHIBIT A-1 MEMBER CAPITAL CONTRIBUTIONS, UNITS AND SHARING RATIOS
NAME, ADDRESS, FACSIMILE AND TELEPHONE NUMBER AND TAXPAYER IDENTIFICATION CAPITAL SHARING NUMBER OF MEMBER CONTRIBUTIONS UNITS RATIO - -------------------------------------- ------------------------- ----- ------- Parking Company of America Assets with a fair market 2,848 8.27% Management, LLC value of $2,848,000 11101 Lakewood Boulevard Downey, California 90241 Telephone: (562) 862-2118 Facsimile: (562) 862-4409 Tax ID. No.: 95-4650869 ARE Holding, LLC Assets with a fair market 8,380 24.33% 11101 Lakewood Boulevard value of $8,380,000 Downey, California 90241 Telephone: (562) 862-2118 Facsimile: (562) 862-4409 Tax ID. No.: 95-4650873 Atlas Superpark, Ltd. Assets with a fair market 772 2.24% 11101 Lakewood Boulevard value of $772,000 Downey, California 90241 Telephone: (562) 862-2118 Facsimile: (562) 862-4409 Tax ID. No.: 75-3036227 Parking Company of America Airports $7,925,000 and assets with 18,350 53.27% Holdings, LLC c/o a fair market value of $11,000,000 Macquarie Americas Parking Corporation Level 8, 121 King Street West Toronto, Ontario MH5 3T9 Telephone: (416) 594-5167 Facsimile: (416) 594-0020 Tax ID. No.: 71-0905516
A-1-1 New WAI Holdings, L.P. $1,025,000 1,600 4.64% 595 Madison Avenue New York, New York 10022 Telephone: (212) 644-3450 Facsimile: (212) 644-6262 Tax ID. No.: Richard West $231,710 and assets with a 1,000 2.90% 4 Claremont Avenue fair market value of Maplewood, New Jersey 07040 $768,290 Telephone: Facsimile: (973) 378-5860 Frank Lemieux $565,073 and assets with a 1,000 2.90% 3 Crescent Court fair market value of Centerpoint, New York 11721 $434,927 Telephone: Facsimile: (631) 757-1765 Macquarie Securities (USA), Inc. $500,000 500 1.45% 600 Fifth Avenue 21st Floor New York, New York 10020 Telephone: (212) 548-6555 Facsimile: (212) 399-8930 Tax ID No.

A-1-2 EXHIBIT B PARKING COMPANY OF AMERICA AIRPORTS, LLC IRREVOCABLE PROXY This Irrevocable Proxy is given by [__________], with reference to the following facts: Parking Company of America Airports Holdings, LLC, a Delaware limited liability company ("PCAAH"), Parking Company of America Management LLC, a Delaware limited liability company ("PCAM"), ARE Holdings LLC, a Delaware limited liability company ("ARE"), and Atlas Superpark, Ltd., a Texas limited partnership ("ATLAS") have entered into that certain Limited Liability Company Agreement of PCAA Parent, LLC (the "Company"), dated as of [August _, 2003] (the "LLC Agreement"). Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the LLC Agreement. Section 7.9(b) of the LLC Agreement requires each PCA Group Member to execute a proxy appointing a natural Person who is a member of the Chaves Group as a proxy for all PCA Group Members (the "PCA Proxy") and to grant to the PCA Proxy the right to vote all Units held by the PCA Group Members. In consideration of the covenants and obligations set forth in the LLC Agreement, each PCA Group Member intends this proxy to be irrevocable. NOW, THEREFORE, in accordance with Section 7.9(b) of the LLC Agreement, the undersigned, as record and beneficial owner of the number of Units of the Company set forth below, hereby revokes all previous proxies and irrevocably and unconditionally [appoints [______] as the PCA Proxy] [removes [______] as the PCA Proxy and appoints [______] as the successor PCA Proxy] to attend and vote all Units held by the PCA Group Members at any and all meetings of the Members of the Company, and any adjournments thereof, held on or after the date of the giving of this proxy and to execute any and all written consents of the Members of the Company executed on or after the date of the giving of this proxy, with the same effect as if the undersigned had personally attend the meeting and personally voted the Units or had personally signed the written consent. The undersigned authorizes and directs the PCA Proxy to file this proxy appointment with the Manager in accordance with the notice provisions set forth in Section 12.1 of the LLC Agreement. Dated: ________________ Number of Units: ________________ /s/ ______________________________ [Type name] B-1 JOINDER AGREEMENT Richard West, an individual ("Mr. West"), hereby enters into this Joinder Agreement and agrees to be bound by and comply with the terms of the Limited Liability Company Agreement of PCAA Parent, LLC (the "LLC Agreement"), dated as of September 30, 2003, by and among PCAA Parent, LLC, Parking Company of America Airports Holdings, LLC, Parking Company of America Management, LLC, ARE Holdings, LLC, Atlas Superpark, Ltd., and New WAI Holdings LP, and shall be, as of the date hereof, a party to the LLC Agreement as fully as though Mr. West had executed and delivered the LLC Agreement at the time originally executed by the other parties thereto. /s/ Richard West ------------------------------------------- RICHARD WEST Dated: 10/1/03 JOINDER AGREEMENT Frank Lemieux, an individual ("Mr. Lemieux"), hereby enters into this Joinder Agreement and agrees to be bound by and comply with the terms of the Limited Liability Company Agreement of PCAA Parent, LLC (the "LLC Agreement"), dated as of September 30, 2003, by and among PCAA Parent, LLC, Parking Company of America Airports Holdings, LLC, Parking Company of America Management, LLC, ARE Holdings, LLC, Atlas Superpark, Ltd., and New WAI Holdings LP, and shall be, as of the date hereof, a party to the LLC Agreement as fully as though Mr. Lemieux had executed and delivered the LLC Agreement at the time originally executed by the other parties thereto. /s/ Frank Lemieux ___________________________________________ FRANK LEMIEUX Dated: Oct. 1, 2003 JOINDER AGREEMENT Macquarie Securities (USA), Inc., a Delaware corporation ("MSI"), hereby enters into this Joinder Agreement and agrees to be bound by and comply with the terms of the Limited Liability Company Agreement of PCAA Parent, LLC (the "LLC Agreement"), dated as of September 30, 2003, by and among PCAA Parent, LLC, Parking Company of America Airports Holdings, LLC, Parking Company of America Management, LLC, ARE Holdings, LLC, Atlas Superpark, Ltd., and New WAI Holdings LP, and shall be, as of the date hereof, a party to the LLC Agreement as fully as though MSI had executed and delivered the LLC Agreement at the time originally executed by the other parties thereto. MACQUARIE SECURITIES (USA), INC. By: /s/ Murray Bleach --------------------------------------- Name: Murray Bleach Title: Executive Director Dated: October 1, 2003 AMENDMENT NO. 1 EXECUTION COPY FIRST AMENDMENT TO LIMITED LIABILITY COMPANY AGREEMENT OF PCAA PARENT, LLC This First Amendment, effective December 18, 2003, to the PCAA Parent, LLC Limited Liability Company Agreement, dated September 30, 2003 (hereinafter, the "LLC Agreement"). The Majority Interest and the PCA Group hereby amend the LLC Agreement to provide as follows: 1. Amendment of the LLC Agreement. (a) Article I - Definitions, is hereby amended to include the following definition: "PCAA Chicago shall mean PCAA Chicago, LLC, a Delaware limited liability company." (b) Section 3.1 of the LLC Agreement is hereby amended to state in its entirety as follows: "Purpose. The purpose of the Company shall be solely to hold the equity interests in PCAA, PCAA Phoenix, PCAA GP, PCAA LP and PCAA Chicago. The Company shall not engage in any other business or activity and shall not acquire or own any other assets; provided, however, that the Company may engage in such other activities incidentally or directly related to, and in furtherance of, the foregoing business as may be necessary, advisable or appropriate, as determined by the Manager." (c) Section 4.7(e) of the LLC Agreement is hereby amended to state in its entirety as follows: "(e) shall not permit the Company to own any subsidiary or make any investment in any other Person other than PCAA, PCAA Phoenix, PCAA GP, PCAA LP and PCAA Chicago." (d) Section 4.7(h) of the LLC Agreement is hereby amended to state in its entirety as follows: "(h) shall cause the Company to only enter into any contract or agreement with any member, principal or affiliate of any of PCAA, PCAA Phoenix, PCAA GP, PCAA LP and PCAA Chicago, or any Affiliate thereof, upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties." (e) Section 4.7(j) of the LLC Agreement is hereby amended to state in its entirety as follows: "(j) shall not permit the Company to assume or guaranty the debts of any other Person, hold itself out to be responsible for the debts of another Person, or otherwise pledge its assets for the benefit of any other Person or hold out its credit as being available to satisfy the obligations of any other Person, other than pursuant to the Guaranty in favor of GMAC Commercial Mortgage Bank dated December 22, 2003." 2. Miscellaneous. (a) Except as specifically amended hereby, the terms and provisions of the LLC Agreement shall remain in full force and effect. (b) Terms defined in the LLC Agreement shall be used in this First Amendment with the meanings defined in the LLC Agreement unless otherwise defined herein. (c) This First Amendment shall be governed by the laws of Delaware (without regard to its choice of law provisions). (d) This First Amendment may be executed in any number of counterparts by the parties hereto, each of which counterparts when so executed shall be an original, but all of the counterparts together shall constitute one and the same instrument. 2 IN WITNESS WHEREOF, the parties have executed this First Amendment as of the day and year first above written. COMPANY: PCAA PARENT, LLC By: PARKING COMPANY OF AMERICA AIRPORTS HOLDINGS, LLC Its: Managing Member By: MACQUARIE AMERICAS PARKING CORPORATION Its: Managing Member By: /s/ Gregory Andrews --------------------------------------- Gregory Andrews, President MAJORITY INTEREST: PARKING COMPANY OF AMERICA AIRPORTS HOLDINGS, LLC By: MACQUARIE AMERICAS PARKING CORPORATION Its: Managing Member By: /s/ Gregory Andrews -------------------------------------------- Gregory Andrews, President 3 PCA GROUP: PARKING COMPANY OF AMERICA MANAGEMENT, LLC By: PCA PARKING COMPANY OF AMERICA, LLC Its: Managing Member By: ALEX CHAVES, INC. Its: Managing Member By: /s/ Alex Martin Chaves --------------------------------------- Alex Martin Chaves, President ARE HOLDINGS, LLC By: PCA PARKING COMPANY OF AMERICA, LLC Its: Managing Member By: ALEX CHAVES, INC. Its: Managing Member By: /s/ Alex Martin Chaves --------------------------------------- Alex Martin Chaves, President ATLAS SUPERPARK, LTD. By: PCA HOUSTON HOBBY G.P., LLC Its: General Partner By: ARE HOLDINGS, LLC Its: Managing Member By: PCA PARKING COMPANY OF AMERICA, LLC Its: Managing Member By: ALEX CHAVES, INC. Its: Managing Member By: /s/ Alex Martin Chaves ---------------------------------- Alex Martin Chaves, President 4 AMENDMENT NO. 2 EXECUTION COPY SECOND AMENDMENT TO LIMITED LIABILITY COMPANY AGREEMENT OF PCAA PARENT, LLC This Second Amendment, effective February 25, 2004, to the PCAA Parent, LLC Limited Liability Company Agreement, dated September 30, 2003, as amended by the First Amendment to Limited Liability Company Agreement of PCAA Parent, LLC dated December 18, 2003 (hereinafter, the "LLC Agreement"). The Members hereby amend the LLC Agreement to provide as follows: 1. Amendment of the LLC Agreement. (a) Article I - Definitions, is hereby amended to include the following definition: "PCAA Oakland shall mean PCAA Oakland, LLC, a Delaware limited liability company." (b) Section 3.1 of the LLC Agreement is hereby amended to state in its entirety as follows: "Purpose. The purpose of the Company shall be solely to hold the equity interests in PCAA, PCAA Phoenix, PCAA GP, PCAA LP, PCAA Chicago and PCAA Oakland. The Company shall not engage in any other business or activity and shall not acquire or own any other assets; provided, however, that the Company may engage in such other activities incidentally or directly related to, and in furtherance of, the foregoing business as may be necessary, advisable or appropriate, as determined by the Manager." (c) Section 4.7(d) of the LLC Agreement is hereby amended to state in its entirety as follows: "[intentionally omitted]" (d) Section 4.7(e) of the LLC Agreement is hereby amended to state in its entirety as follows: "(e) shall not permit the Company to own any subsidiary or make any investment in any other Person other than PCAA, PCAA Phoenix, PCAA GP, PCAA LP, PCAA Chicago and PCAA Oakland." (e) Section 4.7(0 of the LLC Agreement is hereby amended to state in its entirety as follows: "(h) shall cause the Company to only enter into any contract or agreement with any member, principal or affiliate of any of PCAA, PCAA Phoenix, PCAA GP, PCAA LP, PCAA Chicago and PCAA Oakland, or any Affiliate thereof, upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties." (f) Section 4.7(j) of the LLC Agreement is hereby amended to state in its entirety as follows: "(j) shall not permit the Company to assume or guaranty the debts of any other Person, hold itself out to be responsible for the debts of another Person, or otherwise pledge its assets for the benefit of any other Person or hold out its credit as being available to satisfy the obligations of any other Person, other than pursuant to the Guaranty in favor of GMAC Commercial Mortgage Bank dated December 22, 2003 and the Pledge Agreement of the Company in favor of PCAM dated February 25, 2004." 2. Section 12.19 of the LLC Agreement is hereby amended to state in its entirety as follows: (a) "Confidentiality. Except as contemplated hereby or required by a court of competent authority, each Member shall keep confidential and shall not disclose to others, and shall use its reasonable efforts to prevent its Affiliates and any of its, or its Affiliates', present or former employees, agents, and representatives from disclosing to third parties, any information which is confidential or proprietary information of any other Member or of the Company; provided, however, that at the request of the Manager, such information may be disclosed to (a) investment bankers, accountants, attorneys, consultants, lenders and their respective representatives and advisors and any other third parties in connection with any financing, capital raising, or other similar transaction ("Transaction"), (b) any judicial or regulatory body in connection with such Transaction, or (c) generally to the public in connection with such Transaction. No Member shall use, and each Member shall use its best efforts to prevent any Affiliate of such Member from using, any confidential or proprietary information of any other Member or of the Company, except for the benefit of the Company or in connection with the ownership of the Membership Interests." 2 3. Miscellaneous. (a) Except as specifically amended hereby, the terms and provisions of the LLC Agreement shall remain in full force and effect. (b) Terms defined in the LLC Agreement shall be used in this Second Amendment with the meanings defined in the LLC Agreement unless otherwise defined herein. (c) This Second Amendment shall be governed by the laws of Delaware (without regard to its choice of law provisions). (d) This Second Amendment may be executed in any number of counterparts by the parties hereto, each of which counterparts when so executed shall be an original, but all of the counterparts together shall constitute one and the same instrument. 3 IN WITNESS WHEREOF, the parties have executed this Second Amendment as of the day and year first above written. COMPANY: PCAA PARENT, LLC By: PARKING COMPANY OF AMERICA AIRPORTS HOLDINGS, LLC Its: Managing Member By: MACQUARIE AMERICAS PARKING CORPORATION Its: Managing Member By: /s/ Gregory Andrews --------------------------------------- Gregory Andrews, President MEMBERS: PARKING COMPANY OF AMERICA AIRPORTS HOLDINGS, LLC By: MACQUARIE AMERICAS PARKING CORPORATION Its: Managing Member By: /s/ Gregory Andrews -------------------------------------------- Gregory Andrews, President PARKING COMPANY OF AMERICA MANAGEMENT, LLC By: PCA PARKING COMPANY OF AMERICA, LLC Its: Managing Member By: ALEX CHAVES, INC. Its Managing Member By: /s/ Alex Martin Chaves --------------------------------------- Alex Martin Chaves, President 4 ARE HOLDINGS, LLC By: PCA PARKING COMPANY OF AMERICA, LLC Its: Managing Member By: ALEX CHAVES, INC. Its: Managing Member By: /s/ Alex Martin Chaves --------------------------------------- Alex Martin Chaves, President ATLAS SUPERPARK, LTD. By: PCA HOUSTON HOBBY G.P., LLC Its: General Partner By: ARE HOLDINGS, LLC Its: Managing Member By: PCA PARKING COMPANY OF AMERICA, LLC Its: Managing Member By: ALEX CHAVES, INC. Its: Managing Member By: /s/ Alex Martin Chaves ----------------------------- Alex Martin Chaves, President 5 MACQUARIE SECURITIES (USA) INC. By: /s/ Oliver Yates By: /s/ Luke Sullivan ----------------------------- ----------------------------- Name: Oliver Yates Name: Luke Sullivan --------------------------- --------------------------- Title: Co-Chief Executive Officer Title: Co-Chief Executive Officer -------------------------- -------------------------- NEW WAI HOLDINGS, LP By: NEW WAREHOUSE PARTNERS, INC. Its: General Partner By: /s/ Laurence Levy ---------------------------- Laurence Levy, President /s/ Richard West -------------------------------- RICHARD WEST /s/ Frank Lemieux -------------------------------- FRANK LEMIEUX 6 EX-10.11 9 y97636exv10w11.txt LOAN AGREEMENT EXHIBIT 10.11 ----------------------------------------------------------------------- LOAN AGREEMENT BETWEEN PARKING COMPANY OF AMERICA AIRPORTS, LLC AND PCA AIRPORTS, LTD. AND PARKING COMPANY OF AMERICA AIRPORTS PHOENIX, LLC (COLLECTIVELY, BORROWER) AND GMAC COMMERCIAL MORTGAGE CORPORATION (LENDER) DATED: OCTOBER 1, 2003 ----------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- ARTICLE 1 DEFINED TERMS AND CONSTRUCTION GUIDELINES 1.01. Defined Terms...................................................................... 1 1.02. General Construction............................................................... 1 1.03. Property........................................................................... 1 ARTICLE 2 LOAN AMOUNT; PAYMENT TERMS; ADVANCES 2.01. Commitment to Lend................................................................. 2 2.02. Calculation of Interest............................................................ 2 2.03. Payment of Principal and Interest.................................................. 4 2.04. Payments Generally................................................................. 6 2.05. Prepayment Rights.................................................................. 7 2.06. Right of First and Last Refusal.................................................... 8 2.07. Interest Rate Cap/Hedge............................................................ 8 ARTICLE 3 CASH MANAGEMENT 3.01. Lockbox............................................................................ 9 ARTICLE 4 ESCROW AND RESERVE REQUIREMENTS 4.01. Creation and Maintenance of Escrows and Reserves................................... 10 4.02. Tax Escrow......................................................................... 12 4.03. Insurance Premium Escrow........................................................... 12 4.04. Capital Improvements Escrow Account................................................ 13 4.05. Replacement Reserve Account........................................................ 14 4.06. Recourse Carveout Reserve Account.................................................. 15 4.07. Deferred Purchase Payment Reserve Account.......................................... 16 4.08. Leasehold Payment Reserve Account.................................................. 17 ARTICLE 5 COMPLETION OF REPAIRS RELATED TO RESERVE ACCOUNTS; CONDITIONS TO RELEASE OF FUNDS 5.01. Conditions Precedent to Disbursements from Certain Reserve Accounts................ 17 5.02. Waiver of Conditions to Disbursement............................................... 19 5.03. Direct Payments to Suppliers and Contractors....................................... 19 5.04. Performance of Reserve Items....................................................... 19 ARTICLE 6 LOAN SECURITY AND RELATED OBLIGATIONS 6.01. Security Instrument and Assignment of Rents and Leases............................. 20 6.02. Assignment of Property Management Contract......................................... 20 6.03. Assignment of Rate Cap Agreement................................................... 20
i LOAN NUMBER: 41655 6.04. Assignment of Operating Agreements................................................. 20 6.05. Pledge as Property; Grant of Security Interest..................................... 21 6.06. Environmental Indemnity Agreement.................................................. 21 6.07. Guaranty of Borrower Sponsors...................................................... 21 6.08. Letter of Credit................................................................... 21 ARTICLE 7 SINGLE PURPOSE ENTITY REQUIREMENTS 7.01. Commitment to be a Single Purpose Entity........................................... 23 7.02. Definition of Single Purpose Entity................................................ 23 ARTICLE 8 REPRESENTATIONS AND WARRANTIES 8.01. Organization; Legal Status......................................................... 26 8.02. Power; Authorization; Enforceable Obligations...................................... 27 8.03. No Legal Conflicts................................................................. 27 8.04. No Litigation...................................................................... 27 8.05. Business Purpose of Loan........................................................... 27 8.06. Warranty of Title.................................................................. 27 8.07. Condition of the Property.......................................................... 28 8.08. No Condemnation.................................................................... 28 8.09. Requirements of Law................................................................ 28 8.10. Operating Permits.................................................................. 28 8.11. Separate Tax Lot................................................................... 28 8.12. Flood Zone......................................................................... 28 8.13. Adequate Utilities................................................................. 29 8.14. Public Access...................................................................... 29 8.15. Boundaries......................................................................... 29 8.16. Mechanic Liens..................................................................... 29 8.17. Assessments........................................................................ 29 8.18. Insurance.......................................................................... 29 8.19. Leases............................................................................. 29 8.20. Management Agreement............................................................... 30 8.21. Financial Condition................................................................ 30 8.22. Taxes.............................................................................. 30 8.23. No Foreign Person.................................................................. 30 8.24. Federal Regulations................................................................ 30 8.25. Investment Company Act; Other Regulations.......................................... 30 8.26. ERISA.............................................................................. 30 8.27. No Illegal Activity as Source of Funds............................................. 31 8.28. Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering Laws.. 31 8.29. Brokers and Financial Advisors..................................................... 31 8.30. Complete Disclosure; No Change in Facts or Circumstances........................... 31 8.31. Survival........................................................................... 31 8.32. Memorandum of Lease................................................................ 31 8.33. No Senior Liens.................................................................... 31

ii LOAN NUMBER: 41655 8.34. Parking Lease Assignable........................................................... 32 8.35. Parking Lease Default.............................................................. 32 8.36. Parking Lease Notice............................................................... 32 8.37. Parking Lease Cure................................................................. 32 8.38. Parking Lease Term................................................................. 32 8.39. New Parking Lease.................................................................. 32 8.40. Parking Lease Insurance Proceeds................................................... 32 8.41. Parking Lease Subleasing........................................................... 32 8.42. Trademark Agreement................................................................ 33 ARTICLE 9 BORROWER COVENANTS 9.01. Payment of Debt and Performance of Obligations..................................... 33 9.02. Payment of Taxes and Other Lienable Charges........................................ 33 9.03. Insurance.......................................................................... 34 9.04. Obligations upon Condemnation or Casualty.......................................... 37 9.05. Inspections and Right of Entry..................................................... 42 9.06. Leases and Rents................................................................... 42 9.07. Use of Property.................................................................... 43 9.08. Maintenance of Property............................................................ 43 9.09. Waste.............................................................................. 44 9.10. Compliance with Laws............................................................... 44 9.11. Financial Reports, Books and Records............................................... 44 9.12. Performance of Other Agreements.................................................... 46 9.13. Existence; Change of Name; Location as a Registered Organization................... 47 9.14. Property Management................................................................ 47 9.15. ERISA.............................................................................. 47 9.16. Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering Laws.. 48 9.17. Equity Contribution................................................................ 48 9.18. Parking Lease Covenants............................................................ 48 9.19. Additional Covenants............................................................... 48 9.20. Defaults........................................................................... 49 9.21. Parking Lease Lessor Estoppel Certificate.......................................... 49 9.22. Taxes.............................................................................. 49 9.23. Trademark Agreement................................................................ 50 9.24. JFK Lease.......................................................................... 51 ARTICLE 10 NO TRANSFERS OR ENCUMBRANCES; DUE ON SALE 10.01. Prohibition Against Transfers...................................................... 51 10.02. Lender Approval.................................................................... 51 10.03. Borrower Right to Partial Releases for Partial Release Price....................... 52 10.04. Other Releases of the Mortgaged Property........................................... 54 ARTICLE 11 EVENTS OF DEFAULT; REMEDIES

iii LOAN NUMBER: 41655 11.01. Events of Default.................................................................. 54 11.02. Remedies........................................................................... 56 11.03. Cumulative Remedies; No Waiver; Other Security..................................... 59 11.04. Enforcement Costs.................................................................. 59 11.05. Application of Proceeds............................................................ 59 11.06. Cross-Default; Cross-Collateralization; Waiver of Marshalling of Assets............ 60 ARTICLE 12 NONRECOURSE - LIMITATIONS ON PERSONAL LIABILITY 12.01. Nonrecourse Obligation............................................................. 60 12.02. Full Personal Liability............................................................ 60 12.03. Personal Liability for Certain Losses.............................................. 61 12.04. No Impairment...................................................................... 62 12.05. No Waiver of Certain Rights........................................................ 62 ARTICLE 13 INDEMNIFICATION 13.01. Indemnification Against Claims..................................................... 62 13.02. Duty to Defend..................................................................... 63 ARTICLE 14 SUBROGATION; NO USURY VIOLATIONS 14.01. Subrogation........................................................................ 63 14.02. No Usury........................................................................... 64 ARTICLE 15 SALE OR SECURITIZATION OF LOAN 15.01. Splitting the Note................................................................. 64 15.02. Lender's Rights to Sell or Securitize.............................................. 65 15.03. Dissemination of Information....................................................... 65 15.04. Reserves Accounts.................................................................. 66 15.05. Securitization Indemnification..................................................... 66 15.06. Additional Financial Information for Large Loans................................... 67 ARTICLE 16 BORROWER'S FURTHER ACTS AND ASSURANCES PAYMENT OF SECURITY RECORDING CHARGES 16.01. Further Acts....................................................................... 68 16.02. Replacement Documents.............................................................. 68 16.03. Borrower Estoppel Certificates..................................................... 68 16.04. Recording Costs.................................................................... 69 16.05. Publicity.......................................................................... 69 ARTICLE 17 LENDER CONSENT 17.01. No Joint Venture; No Third Party Beneficiaries..................................... 69 17.02. Lender Approval.................................................................... 69 17.03. Performance at Borrower's Expense.................................................. 70

vi LOAN NUMBER: 41655 ARTICLE 18 MISCELLANEOUS PROVISIONS 18.01. Notices............................................................................ 70 18.02. Entire Agreement; Modifications; Time of Essence................................... 71 18.03. Binding Effect; Joint and Several Obligations...................................... 71 18.04. Duplicate Originals; Counterparts.................................................. 72 18.05. Unenforceable Provisions........................................................... 72 18.06. Governing Law...................................................................... 72 18.07. Consent to Jurisdiction............................................................ 72 18.08. WAIVER OF TRIAL BY JURY............................................................ 72 18.09. Good Faith......................................................................... 72

v LOAN NUMBER: 41655 LOAN AGREEMENT (CII - LIBOR) THIS LOAN AGREEMENT is made as of this 1st day of October, 2003, by PARKING COMPANY OF AMERICA AIRPORTS, LLC, a Delaware limited liability company ("PCAA"), PCA Airports, Ltd., a Texas limited partnership ("PCA TEXAS"), and Parking Company of America Airports Phoenix, LLC, a Delaware limited liability company ("PCA PHOENIX" and, together with PCAA and PCA Texas, individually and collectively as the context requires, "Borrower"), as borrower, and GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation (together with its successors and assigns, "LENDER"), as lender. BACKGROUND Borrower desires to obtain a commercial mortgage loan from Lender in the original principal amount of $126,000,000.00 in lawful money of the United States of America. Lender is willing to make such loan to Borrower on the terms and conditions set forth in this Loan Agreement. AGREEMENT NOW, THEREFORE, in consideration of such loan and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, Borrower and Lender agree as follows: ARTICLE 1 DEFINED TERMS AND CONSTRUCTION GUIDELINES 1.01. Defined Terms. Each defined term used in this Loan Agreement has the meaning given to that term in Schedule 1.01 to this Loan Agreement. 1.02. General Construction. Defined terms used in this Loan Agreement may be used interchangeably in singular or plural form, and pronouns are to be construed to cover all genders. All references to this Loan Agreement or any agreement or instrument referred to in this Loan Agreement shall mean such agreement or instrument as originally executed and as hereafter amended, supplemented, extended, consolidated or restated from time to time. The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Loan Agreement as a whole and not to any particular subdivision; and the words "Article" and "section" refer to the entire article or section, as applicable and not to any particular subsection or other subdivision. Reference to days for performance means calendar days unless business days are expressly indicated. 1.03. Property. The parties hereto acknowledge that the defined term "Property" has been defined to collectively include each Individual Property. All references to "Property" in this Loan Agreement shall be deemed to refer to one or more Individual Properties, as the context requires. It is the intent of the parties hereto in making any determinations under 1 LOAN NUMBER: 41655 this Loan Agreement, including, without limitation, in determining whether (a) breach of a representation, warranty or a covenant has occurred, (b) there has occurred a default or Event of Default, or (c) an event has occurred which would create recourse obligations under Article 12 of this Loan Agreement, that any such breach, occurrence or event with respect to any Individual Property shall be deemed to be such a breach, occurrence or event with respect to the Loan. ARTICLE 2 LOAN AMOUNT; PAYMENT TERMS; ADVANCES 2.01. Commitment to Lend. (a) Loan Amount Approved. Subject to the terms and conditions set forth herein, and in reliance on Borrower's representations, warranties and covenants set forth herein, Lender agrees to loan the Loan Amount to Borrower. The Loan shall be evidenced by this Loan Agreement and by the Note made by Borrower to the order of Lender and shall bear interest and be paid upon the terms and conditions provided herein. (b) Advance of Loan Amount. On the Closing Date, Lender shall advance the entire Loan Amount to Borrower. 2.02. Calculation of Interest. (a) Calculation Basis. Interest due on the Loan shall be paid in arrears, calculated based on a 360-day year and paid for the actual number of days elapsed for any whole or partial month in which interest is being calculated. (b) Initial Applicable Interest Rate and Rate Adjustment Date. Interest shall accrue on outstanding principal at the rate ("APPLICABLE INTEREST RATE") which is the LIBOR Rate plus three and forty-four hundredths percent (3.44%) (as the same may be increased pursuant to Section 2.03(d)(ii)(E) below, "MARGIN"), provided that in no event shall the Applicable Interest Rate during the initial term of the Loan (prior to any extension under Section 2.03(d)) be less than four and fifty-six hundredths percent (4.56%). Adjustments to the Applicable Interest Rate in connection with changes in the LIBOR Rate shall be made on the Interest Rate Adjustment Date, except that the initial Applicable Interest Rate shall be determined two business days prior to the Closing Date. (c) LIBOR Unascertainable. Lender's obligation to maintain interest based on the LIBOR Rate shall be suspended and the Applicable Interest Rate shall be based on the Interest Rate Index (plus Margin) upon Lender's determination, in good faith, that adequate and reasonable means do not exist for ascertaining the LIBOR Rate or that a contingency has occurred which materially and adversely affects the London Interbank Eurodollar Market at which Lender prices loans (which determination by Lender shall be conclusive and binding on Borrower in the absence of manifest error). Computation of the Applicable Interest Rate based on the Interest Rate Index shall continue until Lender determines that the circumstances giving rise to Lender's substitution of the Interest Rate Index for the LIBOR Rate no longer exist. Lender shall promptly notify Borrower of each such determination. 2 LOAN NUMBER: 41655 (d) Adjustment Due to Calculation Errors. If, at any time, Lender determines that it has miscalculated the Applicable Interest Rate (whether because of a miscalculation of the LIBOR Rate or otherwise), Lender shall promptly notify Borrower of the necessary correction. If the corrected Applicable Interest Rate represents an increase in the applicable monthly payment, Borrower shall, within ten (10) days after receipt of such written notice, pay to Lender the corrected amount. If the corrected Applicable Interest Rate represents an overpayment by Borrower to Lender and no Event of Default then exists, Lender shall refund the overpayment to Borrower or, at Lender's option, credit such amounts against Borrower's payment next due hereunder. (e) Adjustment for Impositions on Loan Payment. All payments made by Borrower hereunder shall be made free and clear of, and without reduction for, or on account of, any income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings hereafter imposed, levied, collected, withheld or assessed by any government or taxing authority (other than taxes on the overall net income or overall gross receipts of Lender imposed as a result of a present or former connection between Lender and the jurisdiction of the government or taxing authority imposing such; this exclusion shall not apply to a connection arising solely from Lender's having executed, delivered, performed its obligations under, received a payment under, or enforced this Loan Agreement or any other Loan Document). If any such amounts are required to be withheld from amounts payable to Lender, the amounts payable to Lender under these Loan Documents shall be increased to the extent necessary to yield to Lender, after payment of such amounts, interest or any such other amounts payable at the rates or in the amounts specified herein. If any such amounts are payable by Borrower, Borrower shall pay all such amounts before penalties or interest begin to accrue thereon and promptly send Lender a certified copy of an original official receipt showing payment thereof. If Borrower fails to pay such amounts before penalties or interest begin to accrue thereon or to deliver the required receipt to Lender, Borrower shall indemnify Lender for any incremental taxes, interest or penalties that may become payable by Lender as a result of any such failure. (f) Increased Costs of Maintaining Interest. If Lender determines that the adoption of any law, regulation, rule or guideline (including, without limitation, any change regarding the imposition or increase in reserve requirements but excluding taxes on the overall net income or overall gross receipts of Lender imposed as a result of a present or former connection between Lender and the jurisdiction of the government or taxing authority imposing such), whether or not having the force of law, does or will have the effect of reducing Lender's rate of return on the Loan, then, from time to time, within five (5) business days after written demand by Lender (which demand shall include an itemized calculation of the additional amounts necessary to compensate Lender for such reduction), Borrower shall pay Lender such additional amount as will compensate Lender for its reduction. In addition, if any law, regulation, rule or guideline hereafter is enacted or modified, whether or not having the force of law, and compliance therewith results in an increase in the cost to Lender (including, without limitation, a reduction in the income received by Lender but excluding taxes on the overall net income or overall gross receipts of Lender imposed as a result of a present or former connection between Lender and the jurisdiction of the government or taxing authority imposing such) in making, funding or maintaining interest on the Loan at the rate herein provided, then, within five 3 LOAN NUMBER: 41655 (5) business days after written demand by Lender, Borrower shall pay Lender the additional amounts necessary to compensate Lender for such increased costs. (g) Acceleration. Notwithstanding anything to the contrary contained herein, if Borrower is prohibited by law from paying any amount due to Lender under Section 2.02(e) or (f), Lender may elect to declare the unpaid principal balance of the Loan, together with all unpaid interest accrued thereon and any other amounts due hereunder, due and payable within ninety (90) days after Lender's written notice to Borrower. No prepayment fee shall be due in such event. Lender's delay or failure in accelerating the Loan upon the discovery or occurrence of an event under Section 2.02(e) or (f), shall not be deemed a waiver or estoppel against the exercise of such right. 2.03. Payment of Principal and Interest. (a) Payment at Closing. If the Loan is funded on a date other than the first (1st) day of a calendar month, Borrower shall pay to Lender at the time of funding an interest payment calculated by multiplying (i) the number of days from and including the date of funding to (but excluding) the first (1st) day of the next calendar month by (ii) a daily rate based on the Applicable Interest Rate effective on the Closing Date and calculated for a 360-day year. (b) Payment Dates. Commencing on the first (1st) day of November 2003 and continuing on the first (1st) day of each and every successive month thereafter (each, a "PAYMENT DUE DATE"), through and including the Payment Due Date immediately prior to the Maturity Date, Borrower shall pay consecutive monthly payments of interest only, at the Applicable Interest Rate (determined as of the immediately preceding Interest Rate Adjustment Date), based on principal advanced and outstanding during the prior calendar month; and (c) Maturity Date. Subject to Section 2.02(d) below, on the first (1st) day of October 2006 ("MATURITY DATE"), Borrower shall pay the entire outstanding principal balance of the Loan, together with all accrued but unpaid interest thereon and all other amounts due under this Loan Agreement, the Note or any other Loan Document. (d) Extension of Maturity Date. (i) Extension Option. Borrower has the right to extend the Maturity Date of the Loan for two (2) additional, consecutive, twelve-month terms (each an "EXTENSION TERM"; the first additional term is referred to in this Loan Agreement as the "FIRST EXTENSION TERM", and the second additional term is referred to in this Loan Agreement as the "SECOND EXTENSION TERM"). The Maturity Date, as extended for the First Extension Term, is sometimes referred to in this Loan Agreement as the "FIRST EXTENDED MATURITY DATE", and, as extended for the Second Extension Term, is referred to sometimes in this Loan Agreement as the "SECOND EXTENDED MATURITY DATE". Upon Borrower's proper and timely exercise of its rights under this Section 2.03(d), the term "MATURITY DATE" shall be deemed to mean the First Extended Maturity Date and, as applicable, the Second Extended Maturity Date. 4 LOAN NUMBER: 41655 (ii) Conditions Precedent to Maturity Date Extension. Each of the following conditions must be satisfied in a manner reasonably acceptable to Lender (or waived in writing by Lender) as a condition precedent to extension of the Maturity Date: (A) Borrower delivers written notice to Lender not more than ninety (90) days and not less than thirty (30) days prior to the expiring Maturity Date advising that Borrower is exercising its extension option, together with all materials needed by Lender to confirm that the Property satisfies the performance criteria identified in subsection (D) below. (B) Intentionally omitted. (C) No Event of Default exists as of the date Borrower exercises such extension option and as of the commencement date of the relevant Extension Term. (D) Borrower demonstrates to Lender's satisfaction that the Property achieved and maintained, prior to the commencement date of the relevant Extension Term, the following performance criteria: (1) for the First Extension Term, a Debt Service Coverage Constant Ratio of at least 1.10:1.00 and (2) for the Second Extension Term, a Debt Service Coverage Constant Ratio of at least 1.15:1.00. (E) Commencing on the first day of the First Extension Term and ending on the First Extended Maturity Date, the Margin shall be equal to 3.54%, and commencing on the first day of the Second Extension Term and ending on the Second Extended Maturity Date, the Margin shall be equal to 3.69%. In no event shall the Applicable Interest Rate during the First Extension Term be less than four and sixty-six hundredths percent (4.66%) or the Applicable Interest Rate during the Second Extension Term be less than four and eighty-one hundredths percent (4.81%). (F) Borrower obtains, and assigns to the benefit of Lender, a Rate Cap which (1) will be effective for the Extension Term and provide for payments whenever the LIBOR Rate exceeds a strike price determined by Lender for the Extension Term such that a minimum Debt Service Coverage Ratio of 1.30:1.00 is maintained, and (2) otherwise satisfies all requirements of Section 2.07 of this Loan Agreement. (G) Borrower executes and delivers to Lender an amendment to the Loan Agreement, reasonably acceptable to Lender in all respects which confirms the date to which the Maturity Date has been extended, the principal and interest amounts payable during the Extension Term and such other matters as Lender may reasonably require. 5 LOAN NUMBER: 41655 (H) Borrower reimburses Lender for all out-of-pocket costs reasonably incurred by Lender in processing the extension request, including, without limitation, reasonable legal fees and expenses. 2.04. Payments Generally. (a) Delivery of Payments. All payments due to Lender under this Loan Agreement and the other Loan Documents are to be paid to Lender at Lender's office located at 200 Witmer Road, P.O. Box 809, Horsham, Pennsylvania 19044, Attn: Servicing - Accounting Manager, or at such other place as Lender may designate to Borrower in writing from time to time in immediately available funds. All amounts due under this Loan Agreement and the other Loan Documents shall be paid without setoff, counterclaim or any other deduction whatsoever. (b) Credit for Payment Receipt. No payment due under this Loan Agreement or any of the other Loan Documents shall be deemed paid to Lender until received by Lender at its designated office on a business day prior to 2:00 p.m. Eastern Standard Time. Any payment received after the time established by the preceding sentence shall be deemed to have been paid on the immediately following business day. Each payment that is paid to Lender in the calendar month in which it is due, but prior to its scheduled Payment Due Date, shall not be deemed a prepayment and shall be deemed to have been received on the Payment Due Date solely for the purpose of calculating interest due. Where a Payment Due Date falls on a date other than a business day, the Payment Due Date shall be deemed the first business day immediately thereafter. (c) Invalidated Payments. If any payment received by Lender is deemed by a court of competent jurisdiction to be a voidable preference or fraudulent conveyance under any bankruptcy, insolvency or other debtor relief law, and is required to be returned by Lender, then the obligation to make such payment shall be reinstated, notwithstanding that the Note may have been marked satisfied and returned to Borrower or otherwise canceled, and such payment shall be immediately due and payable upon demand. (d) Late Charges. If any payment due on a Payment Due Date is not received by Lender on the Payment Due Date, Borrower shall pay to Lender, immediately and without demand, a late fee equal to five percent (5%) of such delinquent amount (provided, however, that Lender agrees to waive the late charge provided in this subsection (d) if and only if (i) such payment is received by Lender within five (5) days after the applicable Payment Due Date and (ii) Borrower's failure to make the payment on the Payment Due Date occurs no more than once in any calendar year during the term of the Loan). (e) Default Interest Rate. If the Loan is not paid in full on or before the Maturity Date (subject to any extension thereto properly exercised by Borrower in accordance with this Loan Agreement) or if the Loan is accelerated following an Event of Default and during the continuance thereof, the interest rate payable on the Loan shall immediately increase to the Applicable Interest Rate plus five hundred (500) basis points ("DEFAULT RATE") and continue to accrue at the Default Rate until full payment is received. In addition, Lender shall have the right, without acceleration of the Loan, to collect interest at the Default Rate on any other payment not described in the first sentence of this subsection (e) due hereunder (including, without limitation, 6 LOAN NUMBER: 41655 late charges and fees for legal counsel) which is not received by Lender within five (5) days of the date on which such payment originally was due. Interest at the Default Rate also shall accrue on any judgment obtained by Lender in connection with collection of the Loan or enforcement of any obligations due under the other Loan Documents until such judgment amount is paid in full. (f) Application of Payments. Payments of principal and interest due from Borrower shall be applied first to the payment of late fees, then to Lender advances made to protect the Property or to perform obligations which Borrower failed to perform, then to the payment of accrued but unpaid interest, and then to reduction of the outstanding principal. Following an Event of Default, Lender may apply all payments to amounts then due in any manner and in any order determined by Lender, in its sole discretion. No principal amount repaid may be reborrowed. 2.05. Prepayment Rights. (a) Lock-out Period. Borrower may not prepay the Loan in whole or in part at any time until after the date which is 18 months following the Closing Date ("LOCK-OUT PERIOD"). (b) Prepayment After Lock-Out Period. After the Lock-Out Period has expired, Borrower may prepay principal in whole or in part, provided any such partial prepayment is in the amount not less than $1,000,000.00, as long as each of the following conditions are satisfied: (i) Borrower provides written notice to Lender of its intent to prepay not more than sixty (60) days and not less than thirty (30) days prior to the intended prepayment date. (ii) No Event of Default exists as of the date Borrower delivers notice of intent to prepay and as of the date such prepayment is made. (iii) Intentionally Omitted. (iv) Borrower pays with such prepayment all accrued interest and all other outstanding amounts then due and unpaid under this Loan Agreement and the other Loan Documents. (v) Intentionally Omitted. (vi) If prepayment is not made on a Payment Due Date, Borrower pays with such prepayment (in addition to all other amounts due under this Section 2.05(b)) an amount equal to the unearned interest computed on the principal amount being prepaid which would accrue for the period from the date of prepayment through the forthcoming Payment Due Date. (c) Prohibited Prepayment During Lock-Out Period. Except as otherwise set forth in Section 2.05(d) below, if payment of all or any part of the principal balance of the Loan is tendered by Borrower, a purchaser at foreclosure, a Guarantor, or any other Person prior to the 7 LOAN NUMBER: 41655 expiration of the Lock-Out Period, whether by reason of acceleration of the Loan or otherwise (a "PROHIBITED PREPAYMENT"), such tender shall be deemed an attempt to circumvent the prohibition against prepayment set forth in Section 2.05(a) and, at Lender's option, shall be an Event of Default. If a Prohibited Prepayment occurs and is accepted voluntarily or otherwise by Lender, then, in addition to all other rights and remedies available to Lender upon an Event of Default, a prepayment premium equal to three percent (3%) of the Loan Amount ("PROHIBITED PREPAYMENT FEE") shall be due to compensate Lender for damages suffered as a result of the Prohibited Prepayment, such amount shall be due in addition to the outstanding principal balance, all accrued and unpaid interest and other outstanding amounts due under the Loan Documents. (d) Prepayment as a Result of a Casualty or Condemnation. Prepayments arising from Lender's application of insurance proceeds upon the occurrence of a Casualty or the application of a condemnation award upon the occurrence of a Condemnation may be made during the Lock-Out Period without being deemed a Prohibited Prepayment and without payment of the Prohibited Prepayment Fee. (e) Notice Irrevocable. Notwithstanding any provision of this Loan Agreement to the contrary, Borrower's notice of prepayment in accordance with subsection (a) above shall be irrevocable, and the principal balance to be prepaid shall be absolutely and unconditionally due and payable on or about the date specified in such notice. 2.06. Right of First and Last Refusal. In consideration for Lender's agreement to waive its customary exit fee, Borrower agrees to grant to Lender the right of first and last refusal to refinance the Loan and further agrees in the event of the sale of all or part of the Property, to introduce Lender to the prospective purchaser of all or part of the Property. Borrower reserves the sole and exclusive right to select the source(s) of all refinancing proposals. If Lender does not agree, in writing, to refinance the Loan upon the same terms set forth in any bona fide refinancing proposal received by Borrower (a "REFINANCING PROPOSAL") within thirty (30) days after Borrower gives Lender written notice of the terms of such Refinancing Proposal, Lender's rights under this Section shall terminate, provided, however, that if the material economic terms set forth in the Refinancing Proposal are modified in any material way adverse to Borrower prior to the closing of the new loan, Borrower shall once again notify Lender of same, and Lender shall have fifteen (15) days to notify Borrower of its intent to match the revised Refinancing Proposal. If Lender does not so notify Borrower within such fifteen (15) day period, Lender's rights under this Section shall terminate. 2.07. Interest Rate Cap/Hedge. (a) Initial Interest Rate Cap. On or before the date hereof, Borrower shall obtain a Rate Cap for the benefit of Lender which provides for payments to be made by the Rate Cap Provider if, at any time during the term of the Loan, the LIBOR Rate exceeds the Strike Rate. Each Rate Cap required hereunder must: (i) be issued by a Rate Cap Provider that satisfies the credit criteria set forth below in Section 2.07(c); (ii) be fully effective as of the Closing Date; (iii) permit Borrower's interest in the Rate Cap to be assigned to Lender without the payment of fees or costs and without the Rate Cap Provider's consent; (iv) contain no cross-defaults to any other agreements among any Borrower, Rate Cap Provider and Lender, or any of 8 LOAN NUMBER: 41655 their respective Affiliates; (v) contain no performance obligations of Borrower or Lender beyond Borrower's payment of a one-time fee at the effective date of the Rate Cap Agreement; (vi) be evidenced by a Rate Cap Agreement acceptable to Lender in all respects and delivered to Lender at Closing, fully executed, along with a legal opinion from Rate Cap Provider's counsel (which may be in-house counsel) as to the authorization, execution and delivery by Rate Cap Provider and enforceability in accordance with its terms; (vii) comply with criteria issued by any of the Rating Agencies regarding interest rate cap agreements including, without limitation, the requirement for additional legal opinions from Rate Cap Provider's counsel; and (viii) otherwise be reasonably satisfactory to Lender in all respects. (b) Assignment to Lender as Property. The Rate Cap, each replacement of a Rate Cap, and each Rate Cap that Borrower is required to provide in connection with the extension of the Maturity Date, shall be assigned to Lender as collateral. Borrower acknowledges that Borrower's assignment of the Rate Cap to Lender shall not be deemed completed until such time as Borrower has delivered to Lender a written acknowledgement from the Rate Cap Provider of Borrower's assignment of the Rate Cap to Lender that is acceptable to Lender in all respects. All payments made by the Rate Cap Provider shall be made directly to the Lockbox Account. Failure by the Rate Cap Provider to make any payment under the Rate Cap shall not relieve Borrower of any of its obligations to make any payments hereunder or any other Loan Documents. (c) Credit Rating of Can Provider; Replacement Upon Adverse Change in Rating. The Rate Cap must be issued by a Rate Cap Provider having (i) a long-term unsecured debt rating of at least "A+" from S & P; or (ii) a short-term unsecured debt rating of at least "A-1" from S & P; or (iii) an equivalent rating by a Rating Agency approved by Lender. If, at any time during the term of the Loan, the Rate Cap Provider's credit rating falls below that required in the previous sentence, Lender shall have the right to require that Borrower, at Borrower's expense, provide a replacement Rate Cap from a different Rate Cap Provider which satisfies the required credit rating. Each replacement Rate Cap shall satisfy all requirements of this Section 2.07 and, unless otherwise agreed by Lender, shall be substantially in the form of the Rate Cap Agreement assigned to Lender as of the Closing Date. Each replacement Rate Cap and all required documents must be delivered to Lender within ten (10) business days of Lender's notification that a replacement Rate Cap is required. (d) Borrower's Payment of Lender Review Expenses. Borrower shall pay all reasonable, out-of-pocket expenses incurred by Lender in connection with Lender's review and approval of the initial Rate Cap and Rate Cap Provider, each Rate Cap due in connection with an extension of the Maturity Date, and each replacement of a Rate Cap that is required under the terms of this Loan Agreement, including, without limitation, reasonable out-of-pocket legal fees and expenses. ARTICLE 3 CASH MANAGEMENT 3.01. Lockbox. Borrower acknowledges that all Operating Income from the Property is deposited into blocked bank accounts at local banks ("PROPERTY BANKS") by 9 LOAN NUMBER: 41655 Borrower no less than once weekly and if a property manager is subsequently engaged, Borrower shall cause such Property Manager to do likewise. Borrower shall direct all Property Banks to make deposits of all Operating Income (other than petty cash not to exceed $1,000 per Collection Account (as such term is defined in the Lockbox Agreement), and amounts necessary to satisfy the minimum balance requirements of the Property Banks, if any) to the Lockbox Account pursuant to the Lockbox Agreement in accordance with existing practices, but no less than once weekly. Borrower acknowledges that it has sent Credit Card Issuer Letters (as defined in the Lockbox Agreement) to all Credit Card Issuers (as defined in the Lockbox Agreement). Prior to an Event of Default, Borrower shall have access to the Lockbox Account in accordance with the terms and conditions of the Lockbox Agreement. Borrower agrees and covenants not to (i) change the identity of the Property Banks, or (ii) alter or modify the terms and conditions governing the operation of the blocked accounts at the Property Banks in any material respect without Lender's prior written consent, not to be unreasonably withheld, conditioned or delayed. ARTICLE 4 ESCROW AND RESERVE REQUIREMENTS 4.01. Creation and Maintenance of Escrows and Reserves. (a) Control of Reserve Accounts. On the Closing Date, each of the Reserve Accounts shall be established by Lender. Each Reserve Account required under this Loan Agreement shall be a custodial account established by Lender, and, at Lender's option, funds deposited into a Reserve Account may be commingled with other money held by Lender. Each Reserve Account shall be under the sole dominion and control of Lender, and Borrower shall not have any right to withdraw funds from a Reserve Account. Unless required by the laws of the state which govern this Loan Agreement or otherwise expressly provided in this Loan Agreement, Borrower shall not be entitled to any earnings or interest on funds deposited in the Tax Escrow Account and the Insurance Premium Escrow Account. The Reserve Accounts, other than the Tax Escrow Account and the Insurance Premium Escrow Account, shall be interest-bearing accounts, provided, however, that interest paid or payable with respect to any Reserve Account held by or on behalf of Lender may not be based on the highest rate of interest payable by Lender on deposits and shall not be calculated based on any particular external interest rate or interest rate index, nor shall any such interest reflect the interest rate utilized by Lender to calculate interest payable on deposits held with respect to any particular loan or borrower or class of loans or borrowers, and Lender shall have no liability with respect to the amount of interest paid and/or loss of principal. All interest earned on the Reserve Accounts (other than the Tax Escrow Account and Insurance Premium Escrow Account) by Lender shall be credited to such accounts. Subject to the provisions of Section 4.07, upon the occurrence of an Event of Default, Lender may, in addition to any and all other rights and remedies available to Lender, apply any sums then present in any or all of the Reserve Accounts to the payment of the Debt in any order as determined by Lender in its sole discretion; provided, however, that Lender may not apply sums held in the Recourse Carveout Reserve Account to the payment of Debt unless (and then only to the extent that) Borrower has personal liability for the Loan pursuant to Section 12.02 of this Loan Agreement or has personal liability for Lender's losses, costs and expenses pursuant to Section 12.03 of this Loan Agreement. If and to the extent that, as of the Maturity Date, Borrower has previously deposited into any of the Reserve Accounts any sums that have 10 LOAN NUMBER: 41655 (a) not been applied to the payment of the amounts with respect to which such Reserve Accounts were created or to the payment of subsequent monthly deposits required to be made into the applicable Reserve Accounts or (b) not repaid by Lender to Borrower, then such amounts shall be applied to the then-outstanding principal balance of the Loan, together with all accrued and unpaid interest and other charges then payable thereon. (b) Funds Dedicated to Particular Purpose. Funds held in a Reserve Account are not to be used to fund Reserve Items contemplated by a different Reserve Account, and Borrower may not use and Lender shall have no obligation to apply funds from one Reserve Account to pay for Reserve Items contemplated by another Reserve Account. For example, (i) funds held in the Capital Improvements Escrow Account shall not be used to pay for Replacements and (ii) funds held in the Replacement Reserve Account shall not be used to pay for Capital Improvements. (c) Release of Reserves Upon Payment of Debt. Upon payment in full of the Loan, Lender shall disburse to Borrower all unapplied funds, including any accrued and unpaid interest thereon, held by Lender in the Reserve Accounts pursuant to this Loan Agreement. (d) Release of Individual Reserve Account after Full Performance of Reserve Items. Lender shall disburse to Borrower all unapplied funds remaining in the Capital Improvements Escrow Account upon receipt of evidence reasonably satisfactory to Lender that (i) Borrower has completed, in the manner required by this Loan Agreement, all Reserve Items to be funded by such Reserve Account, and (ii) no Liens (other than Liens granted in favor of Lender) exist against the Property with respect to such Reserve Items. Lender shall not be obligated to make any such disbursement when an Event of Default exists, and Lender may deduct from any such disbursement all outstanding amounts then due and unpaid to Lender under the Loan Documents. (e) No Obligation of Lender. Nothing in this Loan Agreement shall: (i) make Lender responsible for making or completing any Reserve Item; (ii) require Lender to advance, disburse or expend funds in addition to funds then on deposit in the related Reserve Account to make or complete any Reserve Item; or (iii) obligate Lender to demand from Borrower additional sums to make or complete any Reserve Item. (f) No Waiver of Default. No disbursements made from a Reserve Account at the time when a Borrower default or Event of Default has occurred and is then continuing shall be deemed a waiver or cure by Lender of that default or Event of Default, nor shall Lender's rights and remedies by prejudiced in any manner thereby. (g) Insufficient Amounts in a Reserve Account. Notwithstanding that Lender has the right to require Borrower to pay any deficiency in a Reserve Account if Lender determines that amounts in a Reserve Account are insufficient, the insufficiency of funds in a Reserve Account, or Lender's application of funds in a Reserve Account following an Event of Default other than for funding of the Reserve Items, shall not relieve Borrower from its obligation to perform in full each of its: (i) obligations and covenants under this Loan Agreement or (ii) agreements or covenants as tenant under the Parking Leases. 11 LOAN NUMBER: 41655 4.02. Tax Escrow. (a) Deposits to the Tax Reserve. On the Closing Date, Borrower has deposited such amount as is noted on the Closing Statement for Taxes to the Tax Escrow Account which is the amount determined by Lender that is necessary to pay when due Borrower's obligation for Taxes upon the due dates established by the appropriate tax or assessing authorities during the next ensuing twelve (12) months, taking into consideration the Monthly Tax Deposits to be collected from the first Payment Due Date to the due date for payment of Taxes. Thereafter, beginning on the first Payment Due Date and on each Payment Due Date thereafter, Borrower shall deliver to Lender the Monthly Tax Deposit. (b) Disbursement from Tax Escrow Account. Provided amounts in the Tax Reserve Account are sufficient to pay the Taxes then due and no Event of Default exists, Lender shall pay the Taxes as they become due on their respective due dates on behalf of Borrower by applying the funds held in the Tax Escrow Account to the payments of Taxes then due. In making any payment of Taxes, Lender may do so according to any bill, statement or estimate obtained from the appropriate public office with respect to Taxes without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof. (c) Surplus or Deficiency in Tax Escrow Account. If amounts on deposit in the Tax Escrow Account collected for an annual tax period exceed the Taxes actually paid during such tax period, Lender shall return the excess to Borrower or, in its discretion, credit the excess against the payments Borrower is to make to the Tax Escrow Account for the next tax period. If amounts on deposit in the Tax Escrow Account collected for an annual tax period are insufficient to pay the Taxes actually due during such tax period, Lender shall notify Borrower of the deficiency and, within ten (10) days after Borrower's receipt of such notice, Borrower shall deliver to Lender such deficiency amount. If, however, Borrower receives notice of any such deficiency on a date that is within ten (10) days prior to the date that Taxes are due, Borrower will deposit the deficiency amount within three (3) business days after its receipt of such deficiency notice. (d) Changes in Amount of Taxes Due; Changes in the Monthly Tax Deposit. Borrower shall notify Lender immediately of any changes to the amounts, schedules and instructions for payment of any Taxes of which it has or obtains knowledge and authorizes Lender or its agent to obtain the bills for Taxes directly from the appropriate taxing authority. If the amount due for Taxes shall increase and Lender reasonably determines that amounts on deposit in the Tax Escrow Account will not be sufficient to pay Taxes due for an annual tax period, Lender shall notify Borrower of such determination and of the increase needed to the Monthly Tax Deposit. Commencing with the first Payment Due Date following such notice from Lender, Borrower shall make deposits at the increased amount of the Monthly Tax Deposit. 4.03. Insurance Premium Escrow. (a) Deposits to Insurance Premium Escrow Account. On the Closing Date, Borrower has deposited such amount as is noted on the Closing Statement for Insurance Premiums to the Insurance Premium Escrow Account which is the amount determined by Lender 12 LOAN NUMBER: 41655 that is necessary to pay when due Borrower's obligation for twenty-five percent (25%) of the annual expected Insurance Premiums. (b) Payments of Insurance Premiums. Borrower shall pay the Insurance Premiums as they become due on their respective due dates and shall provide Lender with proof of such payment promptly following such payment. (c) Intentionally Omitted. (d) Changes in Insurance Premium Amounts. Borrower shall notify Lender immediately of any changes to the amounts, schedules and instructions for payment of any Insurance Premiums of which it has or obtains knowledge and authorizes Lender or its agent to obtain copies of the bills for the Insurance Premiums directly from the insurance provider or its agent. If the amount due for Insurance Premiums shall increase and Lender reasonably determines that amounts on deposit in the Insurance Premium Escrow Account will not be sufficient to pay for twenty-five percent (25%) of the annual expected Insurance Premiums, Lender shall notify Borrower of such determination and of the increase needed to the Insurance Premium Escrow Account. Promptly following such notice, but in no event more than thirty (30) days following such notice, Borrower shall make the required deposit. Following any failure of Borrower to provide evidence of the required monthly payment (following notice and a five (5) day cure period), or at any time following an Event of Default, Lender may require, in its sole discretion, change to the procedures for the escrow and payment of Insurance Premiums, to include monthly escrows for same. If Lender requires monthly escrows, Borrower shall deposit such amount as is determined by Lender that is necessary to pay when due Borrower's obligation for Insurance Premiums during the next ensuing twelve (12) months, taking into consideration the Monthly Insurance Deposits to be collected from the next succeeding Payment Due Date to the due date for payment of such Insurance Premiums. Thereafter, beginning on the next succeeding Payment Due Date and on each Payment Due Date thereafter, Borrower shall deliver to Lender the Monthly Insurance Deposit. 4.04. Capital Improvements Escrow Account. (a) Capital Improvements Escrow Generally. Amounts in the Capital Improvements Escrow Account are to be used for the purpose of funding the Capital Improvements, which Borrower covenants and agrees to perform in accordance with the terms of this Loan Agreement not later than twelve (12) months from the date hereof. (b) Deposit to the Capital Improvements Escrow Account. On the Closing Date, Borrower shall deposit $209,100 with Lender as the reserve for completion of the Capital Improvements ("CAPITAL IMPROVEMENTS DEPOSIT"). (c) Disbursements from the Capital Improvements Escrow Account. Lender shall make disbursements from the Capital Improvements Escrow Account upon Borrower's performance, to Lender's satisfaction, of all conditions to disbursement set forth in Article 5 of this Loan Agreement. 13 LOAN NUMBER: 41655 (d) Reassessment of Required Deposit. If at any time Lender reasonably determines that the Capital Improvements Deposit will not be sufficient to pay the cost of the Capital Improvements, Lender may notify Borrower of such determination and of the amount estimated by Lender to make-up such deficiency. Within ten (10) days after receipt of such notice from Lender, Borrower shall deliver the deficiency amount to Lender, and Lender shall deposit in the Capital Improvements Escrow Account and hold and administer same in accordance with this Loan Agreement. 4.05. Replacement Reserve Account. (a) Replacement Reserve Generally. Amounts in the Replacement Reserve Account are to be used for the purpose of funding the Replacements, which Replacements Borrower covenants and agrees to perform in accordance with the terms of this Loan Agreement, and within the time periods shown on Exhibit F attached hereto. (b) Deposits to the Replacement Reserve Account. On the Closing Date, Borrower shall deposit $38,067 with Lender as an initial deposit to the Replacement Reserve Account. Beginning on the first Payment Due Date and on each Payment Due Date thereafter, Borrower shall pay $38,067 ("MONTHLY REPLACEMENT RESERVE DEPOSIT") to Lender as a deposit to the Replacement Reserve Account. Provided no Event of Default exists, the amounts on deposit in the Replacement Reserve Account shall not exceed $150,000 (the "REPLACEMENT RESERVE CAP"). Notwithstanding the foregoing, the Replacement Reserve Cap may be increased not more than once annually upon mutual agreement of Borrower and Lender. If Lender and Borrower are unable, after using good faith efforts, to agree upon whether any increase in the Replacement Reserve Cap is necessary, and, if so, the amount of any such increase, Lender may, but not more frequently than once per year, engage an independent inspector at Borrower's expense to inspect the Property and to determine whether an increase in the Replacement Reserve Cap is necessary to fund replacements of the nature described in Section 4.05(d)(i) or (ii) below. In such event, the determination of the independent inspector shall be final absent manifest error. Borrower's Monthly Reserve Deposit shall be suspended at such time as and only for so long as, the amounts on deposit in the Replacement Reserve Account equals or exceeds the Replacement Reserve Cap. At such time as amounts on deposit in the Replacement Reserve Account are less than the Replacement Reserve Cap, Borrower's obligation to make the Monthly Replacement Reserve Deposit shall be reinstated until such time as and only for so long as, the amount on deposit in the Replacement Reserve Account equals the Replacement Reserve Cap. Borrower may, at its option, provide a Letter of Credit which complies with the terms and conditions of Section 6.08 of this Loan Agreement, in the amount of the Replacement Reserve Cap, in fulfillment of its obligations under this Section 4.05, provided that, upon disbursement of funds under such Letter of Credit, Borrower provides Lender with a replacement Letter of Credit in the amount of the Replacement Cap. (c) Disbursements from the Replacement Reserve Account. Lender shall make disbursements from the Replacement Reserve Account upon Borrower's performance, to Lender's satisfaction, of all conditions to disbursement set forth in Article 5 hereof. 14 LOAN NUMBER: 41655 (d) Reassessment of Required Monthly Deposits. The amount of the Monthly Replacement Reserve Deposit may be increased upon the mutual agreement of Lender and Borrower if an increase is necessary (i) to fund replacements not listed as part of the Replacements (and not intended to be covered by the Capital Improvements Escrow Account) which are advisable to keep the Property in good order, repair and marketable condition, or (ii) to fund the replacement of any major building systems or components (e.g., roof, HVAC system) not listed as part of the Replacements (and not intended to be covered by the Capital Improvements Escrow Account) which will reach the end of its useful life within two (2) years of the date of Lender's inspection. If Lender and Borrower are unable, after using good faith efforts, to agree upon whether any increase in the Monthly Replacement Reserve Deposit is necessary, and, if so, the amount of any such increase, Lender may, but not more frequently than once per year, engage an independent inspector at Borrower's expense to inspect the Property and to determine whether an increase in the Monthly Replacement Reserve Deposit is necessary to fund replacements of the nature described in clause (i) or clause (ii) above. In such event, the determination of the independent inspector shall be final absent manifest error. Promptly following such determination, whether by mutual agreement or following the determination by the independent inspector, but in no event more than thirty (30) days following such notice, Borrower shall commence paying the increased Monthly Replacement Reserve Deposit. 4.06. Recourse Carveout Reserve Account. (a) Recourse Carveout Reserve Generally. Amounts in the Recourse Carveout Reserve Account are to be used for the purpose of paying Borrower's obligations pursuant to Article 12 of this Loan Agreement. (b) Deposits to the Recourse Carveout Reserve Account. On the Closing Date, Lender shall establish a Recourse Carveout Reserve Account. Thereafter, all cash flow otherwise distributable to Borrower (after payment of monthly Debt Service then due and payable, the Monthly Replacement Reserve Deposit, Monthly Tax Deposit, any other deposit required under this Loan Agreement, and normal and customary Operating Expenses) pursuant to the Lockbox Agreement shall instead be added to the Recourse Carveout Reserve Account until the balance of such Reserve Accounts equals $3,000,000.00. Notwithstanding the foregoing, Borrower may fulfill its obligations under this Section 4.06 by delivering to Lender a Letter of Credit, in the amount of $3,000,000.00, that satisfies the terms and conditions of Section 6.08 of this Loan Agreement. (c) Disbursements from the Recourse Carveout Reserve Account. Lender shall disburse amounts in the Recourse Carveout Reserve Account to reimburse Lender for any losses, claims, expenses or other liabilities incurred by Lender pursuant to Section 12.02 or Section 12.03 of this Loan Agreement. If Borrower elects to deposit cash into the Recourse Carveout Reserve Account, Borrower shall, once the balance of such account reaches $3,000,000.00, and provided such balance remains at $3,000,000.00, be entitled to any interest accrued on such account, payable not less than quarterly. 15 LOAN NUMBER: 41655 4.07. Deferred Purchase Payment Reserve Account. (a) Deferred Purchase Payment Reserve Account Generally. On the Closing Date, Borrower shall deposit $1,000,000.00 with Lender as a deposit to the Deferred Purchase Payment Reserve Account. Notwithstanding the foregoing, Borrower may fulfill its obligations under this Section 4.07 by delivering to Lender a Letter of Credit in the amount of One Million and NO/100 Dollars ($1,000,000.00) which satisfies the terms and conditions of Section 6.08 of this Loan Agreement. (b) Disbursements from the Deferred Purchase Payment Reserve Account. Borrower, on or before the Closing Date, entered into a certain Asset Purchase Agreement (the "ASSET PURCHASE AGREEMENT") with Airport Satellite Parking, LLC, a Delaware limited liability company, and certain of its wholly owned subsidiaries (collectively "AVISTAR") for the purchase of certain assets which constitute a portion of the Property. Pursuant to the Asset Purchase Agreement, Borrower is obligated, under certain circumstances, to pay to Avistar the sum of $1,000,000.00 on or before the first anniversary date of the Asset Purchase Agreement. Subject to Section 4.07(c) below, Lender shall disburse the funds in the Deferred Purchase Payment Reserve Account to the appropriate party (i) upon receipt of a writing signed by both Borrower and Avistar, (ii) following the decision of the Independent Accountant (as such term is defined in the Asset Purchase Agreement), which decision is not appealed by any party to the Asset Purchase Agreement within ninety (90) days thereafter, (iii) following a final, nonappealable decision by a court of competent jurisdiction with respect to such funds, or (iv) pursuant to a procedure (provided such procedure has been agreed to by Avistar in the Asset Purchase Agreement), whereby Borrower notifies Avistar that Avistar is not entitled to the additional purchase consideration described in Section 3.2(d) of the Asset Purchase Agreement and Avistar fails to object thereto in writing to Borrower and Lender (at the address provided in Section 18.01 hereof) within thirty (30) days of such notice. Notwithstanding the foregoing, if Lender shall at any time in its sole discretion determine that a dispute exists with respect to the appropriate recipient of the funds in the Deferred Purchase Payment Reserve Account, Lender may deposit such funds with a court of competent jurisdiction for an appropriate judicial determination thereof, at which time Lender shall have no further liability to Borrower, Avistar or any other third party, express or implied with respect to the funds in the Deferred Purchase Payment Reserve Account. (c) Event of Default. If at any time prior to Lender's disbursement from the Deferred Purchase Payment Reserve Account pursuant to subsection (b) above (i) there shall occur an Event of Default or Borrower shall otherwise incur liability to Lender under Article 12 of this Loan Agreement and (ii) the amount held by Lender in the Recourse Carveout Reserve Account is less than $3,000,000.00 (and further Borrower has not fulfilled its obligation under Section 4.06 by delivering a Letter of Credit in the amount of $3,000,000.00), then Lender shall be entitled to apply sums then present in the Deferred Purchase Payment Reserve Account to the Recourse Carveout Reserve Account in order to increase the balance of the Recourse Carveout Reserve Account to $3,000,000.00. 16 LOAN NUMBER: 41655 4.08. Leasehold Payment Reserve Account. (a) Intentionally Omitted. (b) Deposits into the Leasehold Payment Reserve Account. On the Closing Date, Borrower shall deposit $568,000 with Lender for the Leasehold Payment Reserve Account, which is the amount determined by Lender that is necessary to pay when due Borrower's obligations under the Parking Leases for a minimum of one (1) month. (c) Payments of Leasehold Rents. Borrower shall pay all amounts due under the Parking Leases on their respective due dates, and each month during the term of the Loan shall promptly provide Lender with a certification which provides reasonable proof of all such payments during the month. (d) Deposit Reassessment. Lender may, from time to time, based on Lender's review of the Parking Leases, reassess the amount determined by Lender that is necessary to pay when due Borrower's obligations under the Parking Leases for a minimum of one (1) month and may increase such amount on not less than thirty (30) days written notice to Borrower if Lender determines that an increase is necessary to maintain a proper reserve to pay all amounts likely to arise with respect to the Parking Leases for a minimum of one (1) month. Following any failure of Borrower to provide evidence of the required monthly payment, or following an Event of Default, Lender may require, in its sole discretion, changes to the procedures for the escrow and payment of amounts due under the Parking Leases, to include monthly escrows for same. ARTICLE 5 COMPLETION OF REPAIRS RELATED TO RESERVE ACCOUNTS; CONDITIONS TO RELEASE OF FUNDS 5.01. Conditions Precedent to Disbursements from Certain Reserve Accounts. The following provisions apply to each request for disbursement from the Capital Improvements Escrow Account and the Replacement Reserve Account. (a) Disbursement only for Completed Repairs. Disbursements shall be limited to Reserve Items that are fully completed and paid for in full by Borrower, except to the extent permitted under Section 5.01(b) of this Loan Agreement. At no time shall Lender be obligated to pay amounts to Borrower in excess of the current balance in the applicable Reserve Account at the time of disbursement. (b) Partial Completion. Lender may agree to disburse funds for Reserve Items prior to completion thereof where (i) the contractor performing such work requires periodic payments pursuant to the terms of its written contract with Borrower and Lender has given its prior written approval to such contract, and (ii) the cost of the portion of the Reserve Item to be completed under such contract exceeds $10,000. (c) Disbursement Request; Maximum Frequency and Amount. Borrower shall submit to Lender a Disbursement Request together with such additional information as Lender may reasonably request in connection with the Disbursement Request, at least 17 LOAN NUMBER: 41655 ten (10) business days prior to the date on which Borrower requests Lender to make a disbursement from a Reserve Account. Unless otherwise agreed to by Lender, Borrower may not submit, and Lender shall not be required to respond to, more than one (1) Disbursement Request for each Reserve Account during any calendar quarter. No Disbursement Request shall be made for less than $10,000 or the total cost of the Reserve Items, if less. (d) No Existing Event of Default. Lender may refuse to make any disbursement if an Event of Default exists as of the date on which Borrower submits the Disbursement Request or on the date the disbursement is actually to be made. (e) Responsible Officer Certificate. Lender must receive a certificate, signed by a Responsible Officer of Borrower (and, at Lender's option, also signed by Borrower's project architect or engineer if (i) Borrower has engaged an architect or engineer or (ii) the disbursement requested is for a work which is structural in nature), which certifies that: (i) All information stated in the Disbursement Request is true and correct in all material respects, each attachment to the Disbursement Request is correct and complete in all material respects, and if the attachment is a copy of the original, it is a true and an accurate reproduction of the original; (ii) Each of the Reserve Items to be funded in connection with the Disbursement Request was performed in a good and workmanlike manner and in accordance with all Requirements of Law and has been paid in full by Borrower; (iii) Subject to Section 5.03, each party that supplied materials, labor or services has been paid in full (for the portion for which disbursement is sought in the case of disbursements authorized in accordance with Section 5.01(b) hereof); and (iv) In the case of disbursements authorized in accordance with Section 5.01(b) hereof, the materials for which the request are made are on-site at the Property and properly secured or have been installed in the Property. (f) Inspection to Confirm Completion. Prior to making any disbursement Lender may require an inspection of the Property, performed at Borrower's expense, to verify completion thereof. (g) Absence of Liens. Lender may require that Borrower provide Lender with any or all of the following: (i) a written lien waiver acceptable to Lender from each party to be paid in connection with the Disbursement Request; (ii) a search of title to the Property effective to the date of the disbursement which shows no Liens other than the Permitted Encumbrances; or (iii) an endorsement to the Title Insurance Policy which updates the effective date of such policy to the date of the disbursement and shows no Liens other than the Permitted Encumbrances. 18 LOAN NUMBER: 41655 (h) Payment of Lender's Expenses. Borrower shall pay all reasonable out-of-pocket expenses incurred by Lender in good faith in processing Borrower's Disbursement Request, provided such costs are customary in the industry, including, without limitation, any inspection costs (whether performed by Lender or an independent inspector selected by Lender) and reasonable legal fees and expenses. (i) Other Items Lender Deems Necessary. Lender shall have received such other evidence as Lender reasonably requests in connection with its confirmation that each Reserve Item to be paid in connection with the Disbursement Request has been completed or performed in accordance with the terms of this Loan Agreement. 5.02. Waiver of Conditions to Disbursement. No waiver given by Lender of any condition precedent to disbursement from a Reserve Account shall preclude Lender from requiring that such condition be satisfied prior to making any other disbursement from a Reserve Account. 5.03. Direct Payments to Suppliers and Contractors. Lender, at its option, may make disbursements directly to the supplier or contractor to be paid in connection with the Disbursement Request. Borrower's execution of this Loan Agreement constitutes an irrevocable direction and authorization for Lender to make requested payments directly to the supplier or contractor, notwithstanding any contrary instructions from Borrower or notice from Borrower of a dispute with such supplier or contractor. Each disbursement so made by Lender shall satisfy Lender's obligation under this Loan Agreement. 5.04. Performance of Reserve Items. (a) Performance of Reserve Items. Borrower agrees to commence each Reserve Item by its required commencement date stated on the applicable Exhibit to this Loan Agreement identifying such Reserve Item and to pursue completion diligently of each Reserve Item on or before its completion date stated on such Exhibit and, in the absence of a commencement date or completion date being specified, when necessary in order to keep the Property in good order and repair, in a good and marketable condition and as necessary to keep any portion thereof from deteriorating. Borrower shall complete each Reserve Item in a good and workmanlike manner, using only materials of the same or better quality than that being replaced. All Reserve Items shall be performed in accordance with, and upon completion shall comply with, all Requirements of Law (including without limitation obtaining and maintaining in effect all necessary permits and governmental approvals) and all applicable insurance requirements. (b) Contracts. Lender shall have the right, at its option, not to be unreasonably withheld, conditioned or delayed, to approve all contracts or work orders with materialmen, mechanics, suppliers, subcontractors, contractors or other parties providing labor or materials in connection with the Reserve Items which require aggregate payments in excess of $50,000. (c) Entry onto Property. In order to perform inspections or, following an Event of Default, to complete Reserve Items which Borrower has failed to perform, Borrower 19 LOAN NUMBER: 41655 hereby grants Lender and its agents the right, from time to time, to enter onto the Property upon prior notice to Borrower (notice to be given not less than (2) business days prior to entry by Lender or its agents unless an Event of Default or an emergency exists, as determined by Lender in good faith). (d) Lender Remedy for Failure to Perform. In addition to Lender's remedies following an Event of Default, Borrower acknowledges that Lender shall have the right following an Event of Default (but not the obligation) to complete or perform the Reserve Items for which amounts have been reserved under this Loan Agreement and for such purpose, Borrower hereby appoints Lender its attorney-in-fact with full power of substitution (and which shall be deemed to be coupled with an interest and irrevocable until the Loan is paid in full and the Security Instrument is discharged of record, with Borrower hereby ratifying all that its said attorney shall do by virtue thereof): (i) to complete or undertake such work in the name of Borrower; (ii) to proceed under existing contracts or to terminate existing contracts (even where a termination penalty may be incurred) and employ such contractors, subcontractors, watchman, agents, architects and inspectors as Lender' determines necessary or desirable for completion of such work; (iii) to make any additions, changes and corrections to the scope of the work as Lender deems necessary or desirable for timely completion; (iv) to pay, settle or compromise all existing bills and claims which are or may become Liens against the Property or as may be necessary or desirable for completion of such work; (v) to execute all applications and certificates in the name of Borrower which may be required to obtain permits and approvals for such work or completion of such work; (vi) to prosecute and defend all actions or proceedings in connection with the repair or improvements to the Property; and (vii) to do any and every act which Borrower might do in its own behalf to fulfill the terms of Borrower's obligations under this Loan Agreement. Amounts expended by Lender which exceed amounts held in the Reserve Accounts shall be added to the Loan Amount, shall be immediately due and payable, and shall bear interest at the Default Rate from the date of disbursement until paid in full. ARTICLE 6 LOAN SECURITY AND RELATED OBLIGATIONS 6.01. Security Instrument and Assignment of Rents and Leases. Payment of the Loan and performance of the Obligations shall be secured, inter alia, by the Security Instrument and the Assignment of Leases and Rents. Borrower shall execute at closing the Security Instrument and the Assignment of Leases and Rents and abide by its obligations thereunder. 6.02. Assignment of Property Management Contract. Borrower and any Property Manager shall execute at closing the Assignment of the Property Management Contract and Subordination of Management Fees and to abide by their respective obligations thereunder. 6.03. Assignment of Rate Cap Agreement. Borrower shall execute and deliver at closing the assignment and consent with respect to the Rate Cap as contemplated by Section 2.07 of this Loan Agreement and abide by its obligations thereunder. 6.04. Assignment of Operating Agreements. As security for payment of the Loan and performance by Borrower of all Obligations, Borrower hereby transfers, sets over and 20 LOAN NUMBER: 41655 assigns to Lender, to the extent assignable, all of Borrower's right, title and interest in and to the Operating Agreements to Lender for security purposes. 6.05. Pledge as Property; Grant of Security Interest. As security for payment of the Loan and performance by Borrower of all Obligations, Borrower hereby pledges, assigns, sets over and transfers to Lender, and grants to Lender a continuing security interest in and to: (a) each of the Reserve Accounts and each of the Collection Accounts, (b) all funds and monies from time to time deposited or held in each of the Reserve Accounts and each of the Collection Accounts, and (c) all interest accrued, if any, with respect to the Reserve Accounts and each of the Collection Accounts; provided that Lender shall make disbursements from each of the Reserve Accounts when, as and to the extent required by this Loan Agreement. The parties agree that each of the Reserve Accounts and each of the Collection Accounts is a "deposit account" within the meaning of Article 9 of the UCC and that this Loan Agreement also constitutes a "security agreement" within the meaning of Article 9 of the UCC. Borrower shall not, without Lender's prior written consent, further pledge, assign, transfer or grant any security interest in any of the Reserve Accounts or in any of the Collection Accounts nor permit any Lien to attach thereto, except as may be created in favor of Lender in connection with the Loan. 6.06. Environmental Indemnity Agreement. Borrower will be required to execute at closing the Environmental Indemnity and to abide by its obligations thereunder. 6.07. Guaranty of Borrower Sponsors. Each Guarantor will be required to execute at closing the Guaranty of Exceptions to Nonrecourse Liability and to abide by its obligations thereunder. 6.08. Letter of Credit. In lieu of making deposits into the Replacement Reserve Account and/or the Recourse Carveout Reserve Account and/or the Deferred Purchase Payment Reserve Account, Borrower may, as security for performance of Borrower's obligations under Section 4.04 and Article 5 of this Loan Agreement, Borrower's obligations under Section 4.06 and Article 12, or Borrower's obligations under Section 4.07 and the Asset Purchase Agreement, respectively, deliver to Lender on the Closing Date an irrevocable letter of credit (payable on sight draft) in the amounts specified in Sections 4.04(b), 4.06(b) and 4.07(a), respectively, (each, a "LETTER OF CREDIT"), naming Lender as the sole beneficiary thereof. The Letter of Credit shall: (a) be perpetual or for a term of one year with automatic renewals unless Lender receives written notice of non-renewal from the issuing financial institution sixty (60) days prior to the expiration of the then current Letter of Credit; (b) be issued by a domestic financial institution that is not an Affiliate of Borrower and that has a long-term senior debt rating by S&P of not less than "AA" or such other credit rating as is acceptable to Lender; (c) permit full or partial draws without condition or charge to the beneficiary of the Letter of Credit; (d) be freely transferable by the beneficiary of the Letter of Credit (and each successor as beneficiary) without restriction or charge and (e) otherwise be acceptable to Lender in all respects. If Borrower elects, in lieu of making deposits to the Replacement Reserve Account and/or the Recourse Carveout Reserve Account and/or the Deferred Purchase Payment Reserve Account, to deliver to Lender a Letter of Credit, Borrower shall cause the Letter of Credit to remain valid and effective at all times while Borrower's obligations under Section 4.04 or 4.06 or 4.07, as the case may be, remain to be completed plus an additional thirty (30) days unless and to the extent the Letter of Credit is drawn upon by Lender and paid in the amount of such draw. The Letter of Credit shall be 21 LOAN NUMBER: 41655 effective and delivered as of the Closing Date. Subject to Section 4.06(c) above and 4.07 above, Lender shall have the right to draw in full or in part upon the Letter of Credit, without notice to Borrower: (i) upon the occurrence of an Event of Default; (ii) to satisfy Borrower's obligations under Section 4.04 or 4.06 or 4.07, as the case may be; (iii) if Lender has not received, at least thirty (30) days prior to the date on which the then outstanding Letter of Credit is scheduled to expire, a renewal or replacement Letter of Credit that satisfies all requirements of this Section 6.08 and Borrower has not deposited into the Replacement Reserve Account and/or the Recourse Carveout Reserve Account and/or the Deferred Purchase Payment Reserve Account the amounts that Borrower is obligated to deposit pursuant to Section 4.04 and/or Section 4.06 or 4.07; (iv) if, upon a transfer of the Loan by Lender (within the meaning of Article 15 hereof) to another party ("TRANSFEREE"), Lender or its Transferee has not been delivered, for any reason, either an endorsement to any Letter of Credit by the issuing financial institution evidencing Transferee as the new beneficiary thereunder or a substitute Letter of Credit naming Transferee as beneficiary thereunder and Borrower has not deposited into the Replacement Reserve Account and/or the Recourse Carveout Reserve Account and/or the Deferred Purchase Payment Reserve Account the amounts that Borrower is obligated to deposit pursuant to Section 4.04 and/or Section 4.06 or 4.07; (v) if Borrower fails to cooperate in any manner deemed appropriate or advisable by Lender in order for Lender to obtain an endorsement or substitute Letter of Credit and Borrower has not deposited into the Replacement Reserve Account and/or the Recourse Carveout Reserve Account and/or the Deferred Purchase Payment Reserve Account the amounts that Borrower is obligated to deposit pursuant to Section 4.04 and/or Section 4.06 or 4.07; (vi) if Borrower fails to pay any transfer fee due in connection with transferring the Letter of Credit to the Transferee and Borrower has not deposited into the Replacement Reserve Account and/or the Recourse Carveout Reserve Account and/or the Deferred Purchase Payment Reserve Account the amounts that Borrower is obligated to deposit pursuant to Section 4.04 and/or Section 4.06 or 4.07; or (vii) if Lender has not received within ten (10) business days of the earlier of (A) Lender's notice to Borrower that the financial institution issuing the Letter of Credit ceases to meet the rating requirement set forth in this Section 6.08, or (B) Borrower finding out that the financial institution issuing the Letter of Credit ceases to meet the rating requirement set forth in this Section 6.08, a replacement Letter of Credit that satisfies all requirements of this Section 6.08 and Borrower has not deposited into the Replacement Reserve Account and/or the Recourse Carveout Reserve Account and/or the Deferred Purchase Payment Reserve Account the amounts that Borrower is obligated to deposit pursuant to Section 4.04 and/or Section 4.06 or 4.07. Lender shall be entitled to charge Borrower a reasonable processing fee for administering and reviewing any renewal, replacement or release of the Letter of Credit which Borrower is required to provide pursuant to this Loan Agreement unless Borrower deposits into the Replacement Reserve Account and/or the Recourse Carveout Reserve Account and/or the Deferred Purchase Payment Reserve Account, as the case may be, the amounts the Borrower is obligated to have on deposit in such Reserve Account. 22 LOAN NUMBER: 41655 ARTICLE 7 SINGLE PURPOSE ENTITY REQUIREMENTS 7.01. Commitment to be a Single Purpose Entity. Borrower represents, warrants and covenants to Lender as follows: (a) Borrower is, and will continue to be, a Single Purpose Entity at all times until the Loan has been paid in full. Borrower has at all times since its formation been in material compliance with the Borrower criteria set forth in Section 7.02(a) hereof. (b) SPE Equity Owner has been, is, and will continue to be a Single Purpose Entity at all times until the Loan has been paid in full. (c) As of the Closing Date, the Organizational Chart attached to this Loan Agreement as Exhibit D is true, complete and correct. (d) All of the factual assumptions made in the substantive nonconsolidation legal opinion delivered by Borrower's counsel to Lender, of even date herewith, are true and correct in all material respects. (e) The "single purpose entity" provisions included in the organizational documents of Borrower and SPE Equity Owner shall not, without Lender's prior written consent, be amended, rescinded or otherwise revoked until the Loan has been paid in full. (f) Prior to the withdrawal or the disassociation of the SPE Equity Owner from PCA Texas, PCA Texas shall immediately appoint a new managing member whose articles of incorporation or articles of organization are substantially similar to those of the original SPE Equity Owner and, if an opinion letter pertaining to substantive nonconsolidation was required at closing, deliver a new substantive nonconsolidation opinion letter with respect to the new SPE Equity Owner and its equity owners which is acceptable in all respects to Lender and, if a Securitization has occurred, to the Rating Agencies. (The requirements of this subsection shall not be construed to permit a Transfer in violation of Article 10.) 7.02. Definition of Single Purpose Entity. (a) Borrower Criteria. With respect to Borrower, a "SINGLE PURPOSE ENTITY" means a corporation, limited partnership or limited liability company which, at all times since its formation and thereafter: (i) has not engaged and shall not engage in any business or activity other than with respect to Borrower, the ownership, operation and maintenance of the Property, and activities incidental thereto; (ii) has not acquired or owned and shall not acquire or own any assets other than with respect to Borrower, the Property and such incidental Personal Property as may be necessary for the operation of the Property. Borrower may not acquire additional property (whether through purchase or lease of additional land) without the prior written 23 LOAN NUMBER: 41655 consent of Lender, which consent may be conditioned upon receipt of a Rating Confirmation; (iii) if such entity is (A) a limited liability company (other than a single member limited liability company which satisfies the requirements of clause (iv), which single member limited liability company is governed instead by Section 7.02(c) below), has had and shall have at least one member that satisfies the requirements of Section 7.02(b) below (unless such member is a single member limited liability company which satisfies the requirements of clause (iv) below), and (B) a limited partnership, has had and shall have a general partner that satisfies the requirements of Section 7.02(b) below (unless such general partner is a single member limited liability company which satisfies the requirements of clause (iv) below); (iv) if such entity is a single member limited liability company, such entity shall be formed and organized under Delaware law and otherwise comply with all other Rating Agency criteria for single member limited liability companies (including, without limitation, the inclusion of a "springing member" and delivery of Delaware single member liability company opinions acceptable in all respects to Lender and to the Rating Agencies and Independent Director or equivalent; (v) if such entity is a corporation, has had and shall have at least one (1) Independent Director on its board of directors; provided, however, if this Loan becomes part of a Securitization and any Rating Agency requires at least two (2) Independent Directors, Borrower shall appoint, or cause the appointment of, a second Independent Director; (vi) has preserved and shall preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the laws of the jurisdiction of its formation or organization; (vii) has not merged or consolidated and shall not merge or consolidate with any other Person; (viii) has not taken, and shall not take, any action to dissolve, wind-up, terminate or liquidate in whole or in part; to sell, transfer or otherwise dispose of all or substantially all of its assets; to change its legal structure, transfer, or permit the direct or indirect transfer of, any partnership, membership or other equity interests, as applicable, other than Permitted Transfers; or seek to accomplish any of the foregoing; (ix) shall not, without the unanimous written consent of all Borrower's members and the written consent of 100% of the members of the board of directors of the SPE Equity Owner or board of managers in the case of a single member limited liability company, including without limitation the Independent Director(s): (A) file or consent to the filing of any petition, either voluntary or involuntary, to take advantage of any applicable insolvency, bankruptcy, liquidation or reorganization statute; (B) seek or consent to the appointment of a receiver, liquidator or any similar official; or (C) make an assignment for the benefit of creditors; 24 LOAN NUMBER: 41655 (x) shall not amend or restate its organizational documents if such change would adversely impact the requirements set forth in this Section 7.02; (xi) shall not own any subsidiary or make any investment in any other Person; (xii) shall not commingle its assets with the assets of any other Person; (xiii) shall not incur any debt, secured or unsecured, direct or contingent (including, without limitation, guaranteeing any obligation), other than (A) the Loan and (B) customary unsecured trade payable incurred in the ordinary course of owning and operating the Property, or capital leases or installment financing contracts for shuttle buses, provided the same do not exceed, in the aggregate, at any time a maximum amount of four percent (4%) of the outstanding principal balance of the Loan, and are paid within ninety (90) days of the date incurred (other than the capital leases or installment financing contracts which shall be paid in accordance with their terms); (xiv) shall maintain its records, books of account, financial statements, accounting records and other entity documents separate and apart from those of any other Person and maintain its bank accounts separate and apart from those of any other Person who is not a Borrower. Each Borrower agrees, if requested by Lender, to establish separate bank accounts for all operating and collection accounts, all such accounts to be in accordance with the terms and conditions of the Lockbox Agreement; (xv) shall only enter into any contract or agreement with any general partner, member, shareholder, principal or Affiliate of Borrower or Guarantor, or any general partner, member, principal or Affiliate thereof, upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties; (xvi) shall not maintain its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (xvii) shall not assume or guaranty the debts of any other Person, hold itself out to be responsible for the debts of another Person, or otherwise pledge its assets for the benefit of any other Person or hold out its credit as being available to satisfy the obligations of any other Person, other than the liability which each of the three Borrowers hereunder, jointly and severally, have with respect to the Loan; (xviii) shall not make any loans or advances to any other Person; (xix) shall file its own tax returns as required under federal and state law; (xx) shall hold itself out to the public as a legal entity separate and distinct from any other Person, shall conduct its business solely in its own name or as otherwise permitted under the Trademark Agreement, and shall correct any known misunderstanding regarding its separate identity; 25 LOAN NUMBER: 41655 (xxi) shall maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (xxii) shall allocate shared expenses (including, without limitation, shared office space) and to use separate stationery, invoices and checks; (xxiii) shall pay (or cause the Property Manager, if any, to pay on behalf of Borrower from Borrower's funds) its own liabilities (including, without limitation, salaries of its own employees) from its own funds; and (xxiv) shall not acquire obligations or securities of its partners, members or shareholders, as applicable. (b) SPE Equity Owner Criteria. With respect to SPE Equity Owner, a "SINGLE PURPOSE ENTITY" means an entity which, at all times since its formation and thereafter: (i) has had as its sole asset its interest in PCA Airports, Ltd. (and incidental assets relating thereto); (ii) complies in its own right with each of the requirements contained in Section 7.02(a)(iv) - (xxiv) except that with respect to 7.02(a)(xi), the SPE Equity Owner shall not own any subsidiary or make any investment in any other Person other than its general partnership interest in PCA Airports, Ltd., and with respect to 7.02(a)(xiii), the SPE Equity Owner shall not incur any debt, secured or unsecured, direct or contingent (including, without limitation, guaranteeing any obligation) other than customary unsecured trade payables incurred on the ordinary course of business relating to the ownership of its equity interest in PCA Airports, Ltd. provided the same do not exceed, in the aggregate, at any time, a maximum amount of $10,000 and are paid within sixty (60) days of the date incurred; (iii) shall not engage in any business or activity other than owning an interest in PCA Airports, Ltd.; and (iv) shall not acquire or own any assets other than its partnership, membership, or other equity interest in PCA Airports, Ltd. (c) Equity Owner Criteria. So long as SPE Equity Owner, Parking Company of America Airports, LLC and Parking Company of America Airports Phoenix, LLC shall each remain single member limited liability companies formed and organized under Delaware law and otherwise comply with all other Rating Agency criteria for single member limited liability companies (including, without limitation, the inclusion of a "springing member" and delivery of Delaware single member liability company opinions acceptable in all respects to Lender and to the Rating Agencies and Independent Director or equivalent, Equity Owner, their respective single member, need not comply with the provisions of Sections 7.02(a) or (b). ARTICLE 8 REPRESENTATIONS AND WARRANTIES Borrower represents and warrants to Lender that, as of the Closing Date: 8.01. Organization; Legal Status. Borrower (a) is duly organized, validly existing and in good standing under the laws of its state of formation; (b) is duly qualified to transact business and is in good standing in each state where the Property is located; and (c) 26 LOAN NUMBER: 41655 other than as set forth on Schedule 8.01 attached hereto, has all necessary approvals, governmental and otherwise, and full power and authority to own, operate and lease the Property and otherwise carry on its business as now conducted and proposed to be conducted. Borrower's correct legal name is set forth on the first page of this Loan Agreement. Borrower is a "registered organization" within the meaning of the UCC and Borrower's organization identification number issued by its state of organization is correctly stated on the signature page to this Loan Agreement. 8.02. Power; Authorization; Enforceable Obligations. Borrower has full power, authority and legal right to execute, deliver and perform its obligations under the Loan Documents. Borrower has taken all necessary action to authorize the borrowing of the Loan on the terms and conditions of this Loan Agreement and the other Loan Documents, and Borrower has taken all necessary action to authorize the execution and delivery of its performance under the Loan Documents. The officer or representative of Borrower signing the Loan Documents has been duly authorized and empowered to do so. The Loan Documents constitute legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their terms. 8.03. No Legal Conflicts. The borrowing of the Loan and Borrower's execution, delivery and performance of its obligations under the Loan Documents will not: (a) violate, conflict with, result in a material default (following notice and/or expiration of the related grace/cure period without cure or both, as applicable) under any agreement or other instrument to which Borrower is a party or by which the Property may be bound or affected, or any Requirements of Law (including, without limitation, usury laws); (b) result in the creation or imposition of any Lien whatsoever upon any of its assets, except the Liens created by the Loan Documents; or (c) require any authorization or consent from, or any filing with, any Governmental Authority (except for the recordation of the Security Instrument in the appropriate land records in each state where the Property is located and UCC filings relating to the security interest created hereby and by the Security Instrument which are necessary to perfect Lender's security interest in the Property). 8.04. No Litigation. Except as set forth on Schedule 8.04 attached hereto, no action, suit or proceeding, or investigation, judicial, administrative or otherwise (including, without limitation, any reorganization, bankruptcy, insolvency or similar proceeding) currently is pending or, to the best of Borrower's knowledge, threatened or contemplated against or affecting Borrower, SPE Equity Owner, Equity Owner, any Guarantor or the Property that has not been disclosed by Borrower in writing to Lender and which, if adversely determined, could reasonably be expected to have a Material Adverse Effect. 8.05. Business Purpose of Loan. Borrower will use the proceeds of the Loan solely for the purpose of carrying on a business or commercial enterprise and not for personal, family or household purposes. 8.06. Warranty of Title. Borrower has good, marketable and insurable fee simple or leasehold title of record to the Property, as applicable, free and clear of all Liens whatsoever except for the Permitted Encumbrances. The Security Instrument and Assignment of Leases and Rents, when properly recorded in the appropriate recording office, together with the 27 LOAN NUMBER: 41655 UCC financing statements required to be filed in connection therewith, will create (a) a valid, first priority, perfected lien on the Property subject only to Permitted Encumbrances; and (b) perfected security interests in and to, and perfected assignments as collateral of, all Personal Property (including, without limitation, the Leases), all in accordance with the terms thereof, in each case subject only to any Permitted Encumbrances. None of the Permitted Encumbrances, individually or in the aggregate: (a) materially interferes with the benefits of the security intended to be provided by the Security Instrument, (b) materially and adversely affects the value of the Property, or (c) materially and adversely impair the use and operations of the Property. Borrower owns or has rights in all collateral given as security for the Loan, free and clear of any and all Liens except for Permitted Encumbrances and the Liens created in favor of Lender in connection with the Loan. Borrower shall forever warrant, defend and preserve the title and the validity and priority of the Liens created in favor of Lender in connection with the Loan and shall forever warrant and defend the same to Lender against the claims of all persons except the holders of Permitted Encumbrances. 8.07. Condition of the Property. The Improvements are fit for the purpose for which they are used, are structurally sound, in good repair and free of material defects in materials and workmanship. All major building systems located within the Improvements (including, without limitation, the heating and air conditioning systems, the electrical systems, plumbing systems, and all liquid and solid waste disposal, septic and sewer systems), if any, are in good working order and condition and in compliance with all Requirements of Law. The Property is free from damage caused by fire or other casualty. 8.08. No Condemnation. Except as set forth on Schedule 8.08 attached hereto, no Condemnation proceeding has been commenced or, to the best of Borrower's knowledge, is contemplated with respect to all or any portion of the Property or for the relocation of roadways providing access to the Property. 8.09. Requirements of Law. Except as set forth on Schedule 8.09 attached hereto, the Property and its present and contemplated use and occupancy are in compliance in all material respects with all Requirements of Law. 8.10. Operating Permits. Except as set forth on Schedule 8.10 attached hereto, Borrower has obtained all licenses, permits, registrations, certificates and other approvals, governmental and otherwise (including, without limitation, zoning, building code, land use and environmental), necessary for the use, occupancy and operation of the Property and the conduct of its business thereat, all of which are in full force and effect as of the date hereof. No event or condition currently exists which could result in the revocation, suspension, or forfeiture thereof. 8.11. Separate Tax Lot. Except as set forth on Schedule 8.11 attached hereto, the Property is assessed for real estate tax purposes as one or more wholly independent tax lot or lots, separate from any adjoining land or improvements not constituting a part of the Property. 8.12. Flood Zone. Except as otherwise disclosed on the surveys of the Property provided to Lender in connection with the Loan, no portion of the Improvements is located in an area identified by the Federal Emergency Management Agency or any successor thereto, as an area having special flood hazards. 28 LOAN NUMBER: 41655 8.13. Adequate Utilities. The Property is adequately served by all utilities required for the current or contemplated use thereof. All water and sewer systems are provided to the Property by public utilities, and the Property has accepted or is equipped to accept such utility services. 8.14. Public Access. All public roads and streets necessary for access to the Property for the current or contemplated use thereof have been completed, are serviceable and all-weather, and are physically and legally open for use by the public. 8.15. Boundaries. Except as set forth on Schedule 8.15 attached hereto, all of the Improvements lie wholly within the boundaries and building restriction lines of the Property, and no easements or other encumbrances affecting the Property (including, without limitation, the Permitted Encumbrances) encroach upon any of the Improvements. No improvements on adjacent properties encroach upon the Property. 8.16. Mechanic Liens. No mechanics', materialmen's or similar liens or claims have been, or may be, filed for work, labor or materials affecting the Property which are or may be Liens prior, equal or subordinate to the Security Instrument. 8.17. Assessments. No unpaid assessments for public improvements or assessments otherwise affecting the Property currently exist or, to the best of Borrower's knowledge, are pending, nor are improvements contemplated to the Property that may result in any such assessments. 8.18. Insurance. Borrower has obtained and delivered to Lender all insurance policies Lender has required pursuant to Section 9.03 of this Loan Agreement, reflecting the insurance coverages, amounts and other requirements set forth in this Loan Agreement. No claims have been made under any of such insurance policies, and no party, including Borrower, has done, by act or omission, anything which would impair the coverage of any of such insurance policies. 8.19. Leases. With respect to the Leases: (a) except as disclosed on Schedule 8.19(a), the Property is not subject to any Leases; (b) Borrower has delivered to Lender complete and accurate copies of all Leases and no verbal or written agreements exist which terminate, modify or supplement the Leases, except as otherwise disclosed to Lender in writing and acknowledged by Lender; (c) Borrower is the sole owner of the entire lessor's interest in the Leases and has not assigned, pledged or otherwise transferred the Rents reserved in the Leases (except to Lender); (d) except as disclosed on Schedule 8.19(d), all of the Leases are bona fide, arms-length agreements with tenants unrelated to Borrower; (e) none of the Rents have been collected for more than one (1) month in advance (and for such purpose, a security deposit shall not be deemed rent collected in advance); (f) all security deposits, if any, have been collected and are being held by Borrower in the full amount; (g) all work to be performed by Borrower, if any, under each Lease has been performed as required and has been accepted unconditionally by the applicable tenant; (h) no offsets or defenses exist in favor of any tenant under any Lease to the payment of any portion of the Rents and Borrower has no monetary obligation to any tenant under any Lease; (i) Borrower has not received notice from any tenant under any Lease challenging the validity or enforceability of the applicable Lease; (j) all payments due from 29 LOAN NUMBER: 41655 tenants under the Leases are current; (k) no tenant under any Lease is in default thereunder, or is a debtor in any bankruptcy, reorganization, insolvency or similar proceeding, or has demonstrated a history of payment problems which suggest financial difficulty; (l) no Lease contains an option to purchase, right of first refusal to purchase, or any other similar provision; and (m) no brokerage commissions, finders fees or similar payment obligations are due and unpaid by Borrower or any Affiliate of Borrower regarding any Lease. 8.20. Management Agreement. No change in the employment agreements with the Key Management Personnel has occurred since the date of the most recent information submitted to Lender with respect thereto, other than any change that has been disclosed in writing to Lender. 8.21. Financial Condition. Borrower currently is solvent and has received reasonably equivalent value for its granting of the Liens in favor of Lender in connection with the Loan. No change has occurred in the financial condition of Borrower, SPE Equity Owner, Equity Owner, Guarantor, or any of their respective constituent equity owners, general partners or managing members, which would have a Material Adverse Effect since the date of the most recent financial statements submitted to Lender with respect to each such party, other than has been disclosed in writing to Lender. 8.22. Taxes. Borrower, SPE Equity Owner and Equity Owner have filed all federal, state, county, municipal, and city income tax returns required to have been filed by them and have paid all taxes and related liabilities which have become due pursuant to such returns or pursuant to any assessments received by them. Borrower does not know of any basis for any additional assessment in respect of any such taxes and related liabilities for prior years. 8.23. No Foreign Person. Borrower is not a "foreign person" within the meaning of Section 1445(f)(3) of the Tax Code. 8.24. Federal Regulations. Borrower is not engaged nor will it engage, principally, or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U or Regulation G. 8.25. Investment Company Act; Other Regulations. Borrower is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940 and the regulations issued thereunder, each as amended. Borrower is not subject to regulations under any federal or state statute or regulation which limits its ability to incur indebtedness. 8.26. ERISA. (a) Borrower is not and will not be an "employee benefit plan," as defined in Section 3(3) of ERISA, subject to Title I of ERISA, (b) none of the assets of Borrower constitute or will constitute "plan assets" of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101, (c) Borrower is not and will not be a "governmental plan" within the meaning of Section 3(3) of ERISA, and (d) transactions by or with Borrower are not and will not be subject to state statutes regulating investment of, and fiduciary obligations with respect to, governmental plans. 30 LOAN NUMBER: 41655 8.27. No Illegal Activity as Source of Funds. No portion of the Property has been or will be purchased, improved, equipped or furnished with proceeds of any illegal activity. 8.28. Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering Laws. Borrower, SPE Equity Owner, Equity Owner, each Guarantor, and to the best of Borrower's knowledge, after having made diligent inquiry (a) each Person owning a direct or indirect interest in Borrower, SPE Equity Owner, Equity Owner, each Guarantor, and (b) any tenant whose rent exceeds 20% of the total revenue generated by relevant Parking Lot Operation: (i) is not currently identified on OFAC List, and (ii) is not a Person with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States. As of the Closing Date, Borrower has implemented procedures, and will consistently apply those procedures throughout the term of the Loan, to ensure the foregoing representations and warranties remain true and correct during the term of the Loan. 8.29. Brokers and Financial Advisors. Borrower has not dealt with any financial advisor, broker, underwriter, placement agent or finder in connection with the transaction contemplated by this Loan Agreement who may be owed a commission or other compensation which Borrower will not have paid in full as of the Closing Date, including but not limited to, a fee to Macquarie Securities (USA), Inc. for financial advisory services rendered in connection with the contemplated transaction. To the extent any fee due under this Section 8.29 is not paid at Closing, Borrower shall deposit a like sum with Lender at Closing to be held in escrow pending the payment of such obligation. 8.30. Complete Disclosure; No Change in Facts or Circumstances. Borrower has disclosed to Lender all material facts and has not failed to disclose any material fact that could cause any representation or warranty made herein to be materially inaccurate, incomplete or misleading. All information provided or supplied in connection with the application for Loan, or in satisfaction of the terms thereof, remains true, complete and correct in all material respects, and no adverse change in any condition or fact has occurred that would make any of such information materially inaccurate, incomplete or misleading. 8.31. Survival. The representations and warranties contained in this Article 8 survive for so long as the Loan remains payable and any Obligation remains to be performed. 8.32. Memorandum of Lease. Except as set forth on Schedule 8.32 attached hereto, a memorandum of ground lease or its equivalent has been duly recorded for each Parking Lease. Each Parking Lease contains the entire agreement of the landlord thereunder (the "PARKING LEASE LESSOR") and the Borrower pertaining to Borrower's interest under the respective Parking Lease. Except as described on Schedule 8.32 attached hereto, since the date on which each such memorandum was recorded, the applicable Parking Lease has not been amended or modified so as to render the memorandum thereof inaccurate in any material respect. 8.33. No Senior Liens. Except for the Permitted Encumbrances, Borrower's interest in each Parking Lease is not subject to any liens or encumbrances superior to, or of equal priority with, the Security Instrument, other than the fee interest of the Parking Lease Lessor thereunder and any fee mortgage liens thereon. 31 LOAN NUMBER: 41655 8.34. Parking Lease Assignable. Borrower's interest in each Parking Lease is assignable to Lender as collateral security for the Loan without the consent of the Parking Lease Lessor thereunder (or if any such consent is required, it has been obtained prior to the Closing Date). 8.35. Parking Lease Default. Except as disclosed on Schedule 8.35 attached hereto, as of the Closing Date, each Parking Lease is in full force and effect and to the best of Borrower's knowledge no default has occurred under any Parking Lease and there is no existing condition which, but for the passage of time or the giving of notice or both, would result in a default under the terms of any Parking Lease. 8.36. Parking Lease Notice. Except as disclosed in Schedule 8.36 attached hereto, each Parking Lease (as amended by any landlord estoppel executed in favor of Lender) requires the Parking Lease Lessor thereunder to give notice of any default by Borrower thereunder to Lender. 8.37. Parking Lease Cure. Except as disclosed in Schedule 8.37 attached hereto, Lender is permitted a reasonable opportunity (which cure period is detailed on such Schedule) to cure any default under such Parking Lease (as amended by any landlord estoppel executed in favor of Lender), which is curable after the receipt of notice of such default before the Parking Lease Lessor may terminate the applicable Parking Lease. 8.38. Parking Lease Term. The Parking Leases have a current term, and extension options, as shown on Schedule 8.38 attached hereto. There are no restrictions to Borrower's exercise of any renewal or extension options under any Parking Lease except as set forth on Schedule 8.38 attached hereto. 8.39. New Parking Lease. Except as disclosed in Schedule 8.39 attached hereto, each Parking Lease (as amended by any landlord estoppel executed in favor of Lender) requires the Parking Lease Lessor to enter into a new lease with Lender upon termination of the Parking Lease for any reason, including, without limitation, rejection of the Parking Lease in a bankruptcy proceeding. 8.40. Parking Lease Insurance Proceeds. Except as disclosed in Schedule 8.40 attached hereto, under the terms of each Parking Lease (as amended by any landlord estoppel executed in favor of Lender) and the Security Instrument, taken together, any insurance proceeds will be applied either to the repair or restoration of the affected Individual Property with Lender having the right to hold and disburse the proceeds as the repair or restoration progresses, or, to the extent not so used, to the payment of the outstanding principal balance of the Loan together with any accrued interest thereon. 8.41. Parking Lease Subleasing. Except as disclosed in Schedule 8.41 attached hereto, no Parking Lease (as amended by any landlord estoppel executed in favor of Lender) imposes any restrictions on subletting, other than that subleases be subject to the terms, covenants and conditions of the Parking Lease, that all subleases be at not less than market rents, and that any such sublease requires the consent of the Parking Lease Lessor, not to be unreasonably withheld, conditioned or delayed. 32 LOAN NUMBER: 41655 8.42. Trademark Agreement. No change in the Trademark Agreement has occurred since the date of the most recent information submitted to Lender with respect thereto, other than has been disclosed in writing to Lender. The Trademark Agreement is in full force and effect, and to the best of Borrower's knowledge, there is no default, breach or violation existing thereunder by any party thereto and no event has occurred that, with the passage of time or the giving of notice, or both, would constitute a default, breach or violation by any party thereunder. Neither the execution and delivery of the Loan Documents, Borrower's performance thereunder, nor the exercise of any remedies by Lender, will adversely affect Borrower's rights under the Trademark Agreement. ARTICLE 9 BORROWER COVENANTS 9.01. Payment of Debt and Performance of Obligations. Borrower shall fully and punctually pay the Loan and perform the Obligations when and as required by the Loan Documents. Borrower may not prepay the Loan except in strict accordance with this Loan Agreement. 9.02. Payment of Taxes and Other Lienable Charges. (a) Payment Obligation. Except to the extent sums sufficient to pay Taxes or Other Charges have been deposited with Lender in accordance with this Loan Agreement, Borrower shall promptly and fully pay by their due date all Taxes and Other Charges now or hereafter assessed or charged against the Property as they become due and payable. Subject to Section 9.02(b) below, Borrower shall promptly cause to be paid and discharged any Lien which may be or become a Lien against the Property (including, without limitation, mechanic's or materialman's liens). Except to the extent sums sufficient to pay Taxes or Other Charges have been deposited with Lender in accordance with this Loan Agreement, Borrower shall furnish to Lender, upon request, evidence reasonably satisfactory to Lender that all Taxes and Other Charges have been paid and are not delinquent. Provided (i) the Tax Escrow Account has sufficient funds to pay Taxes and Other Charges, and (ii) no Event of Default has occurred and is then continuing, Lender shall pay such Taxes and Other Charges on Borrower's behalf from funds in the Tax Escrow Account. (b) Right to Contest. After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceedings, promptly initiated and conducted in good faith with due diligence, the amount or validity or application in whole or in part of any of the Taxes or Other Charges, provided that: (i) no Event of Default exists; (ii) such proceedings suspend the collection of such Taxes or Other Charges and the Property will not be in danger of being sold for such unpaid Taxes or Other Charges, or Borrower has paid all of such Taxes or Other Charges under protest; (iii) such proceeding is permitted under and is conducted in accordance with the provisions of any other instrument to which Borrower or the Property is subject and does not constitute a default thereunder; (iv) if Borrower has not paid the disputed amounts in full under protest, Borrower shall deposit with Lender cash (or other security as may be approved, in writing, by Lender) in an amount which Lender deems (together with all funds then existing in the Tax Escrow Account) sufficient to insure the payment of any such Taxes or Other 33 LOAN NUMBER: 41655 Charges together with interest and penalties thereon, if any, provided that after a Securitization, one hundred twenty-five percent (125%) of the contested amount (plus anticipated penalty and interest) shall be deposited with Lender (after crediting all amounts then existing in the Tax Escrow Account which are not otherwise reserved for other known Taxes or Other Charges due or to become due); (v) Borrower furnishes to Lender all other items reasonably requested by Lender; and (vi) upon a final determination thereof, Borrower, subject to the provisions of the following sentence, promptly pays the amount of any such Taxes or Other Charges, together with all costs, interest and penalties which may be payable in connection therewith. Lender shall pay over any security held by Lender pursuant to this Section to the claimant entitled thereto at any time when, in Lender's reasonable judgment, the entitlement of such claimant is established, and, to the extent the security posted by Borrower with Lender is insufficient to pay the full amount due (including, without limitation, any penalties or interest thereon), Borrower shall be liable for the deficiency. If Lender pays the deficiency (which Lender shall not be obligated to do), the amount paid by Lender shall be added to principal, shall bear interest at the Default Rate until paid in full and payment of such amounts shall be secured by the Security Instrument and other collateral given to secure the Loan. 9.03. Insurance. (a) Insurance Required During the Loan Term. Borrower, at Borrower's expense, shall obtain and maintain during the term of the Loan such insurance coverage (including, without limitation, type, minimum coverage amount, maximum deductible and acceptable exclusions) for Borrower and the Property as Lender deems reasonably necessary considering, among other things, the location and occupancy of the Property and all uses of the Property. Lender reserves the right to periodically review the insurance coverage Lender has required (types, minimum coverage amounts and maximum deductibles) and to increase or otherwise change the required coverage should Lender deem an increase or change to be reasonably necessary under then existing circumstances. Without limiting Lender's rights hereunder in any respect, it shall be deemed reasonable for Lender to require no less coverage than the coverage in place on the Closing Date. Subject to the foregoing, Lender shall require the following insurance coverage to be effective during the term of the Loan, coverage amounts and deductibles to be acceptable to Lender: (i) Property Insurance. Casualty insurance must be maintained for the Improvements and all Personal Property insuring against any peril now or hereafter included within the classification "all risks of physical loss" and in an amount at all times equal to the full replacement cost (as reasonably determined and adjusted from time to time by Lender) of the Improvements and Personal Property (without taking into account any depreciation and exclusive of excavations, footings and foundations, landscaping and paving), without any exclusions for windstorms. In all cases where (A) the outstanding principal balance on the Note exceeds $5 million, or (B) any part of the Improvements constitutes a legal non-conforming use under the Requirements of Law, such insurance must include "Ordinance of Law Coverage," with "Time Element," "Loss to the Undamaged Portion of the Building," "Demolition Cost" and "Increased Cost of Construction" endorsements in the amount of coverage requested by Lender. The policy must name Lender as an insured mortgagee under a standard mortgagee clause. The deductible shall not exceed $10,000.00 for each Individual Property. 34 LOAN NUMBER: 41655 (ii) Insurance against Acts of Terrorism. The insurance coverage provided under Section 9.03(a) in effect as of the Closing Date and during the Loan Term must also insure against loss or damage resulting from acts of terrorism or comparable coverage acceptable to Lender in its discretion. The deductible shall not exceed $10,000.00 for each Individual Property. (iii) Boiler and Machinery Insurance. Broad form boiler and machinery insurance (without exclusion for explosion) and systems breakdown coverage must be maintained, covering all steam boilers, pipes, turbines, engines or other pressure vessels, electrical machinery, HVAC equipment, refrigeration equipment and other similar mechanical equipment located in, on or about the Property in such amount per accident equal to the full replacement cost thereof (as reasonably determined and adjusted from time to time by Lender) and also providing coverage against loss of occupancy or use arising from any breakdown thereof. The policy must name Lender as an insured under a standard joint loss clause and provide that all proceeds are to be paid to Lender. (iv) Flood Insurance. Flood insurance must be maintained if any portion of the Improvements is located in an area identified by the Federal Emergency Management Agency or any successor thereto as a 100-year flood zone or special hazard area. The required coverage amount shall be equal to the full replacement cost of the Improvements and Personal Property (without taking into account any depreciation and exclusive of excavations, footings and foundations, landscaping and paving). Such coverage may need to be purchased through excess carriers if the required coverage exceeds the maximum insurance available for the Property under the then-current guidelines published by the Federal Emergency Management Agency or any successor thereto. The policy must name Lender as an insured mortgagee under a standard mortgagee clause. (v) Business Interruption. Business interruption insurance must be maintained in an amount sufficient to provide the lost Operating Income for the Property for a period of not less than one (1) year from the date of Casualty, with a six (6) month extended period of indemnity (but a minimum of eighteen (18) months with a six (6) month extended period of indemnity at all times during which the outstanding principal balance of the Note is greater that $25 million and a minimum of eighteen (18) months with a twelve (12) month extended period of indemnity at all times during which the outstanding principal balance of the Note is greater than $50 million). The policy must name Lender as a loss payee and provide that all proceeds are to be paid to Lender. (vi) Liability Insurance. Commercial general liability insurance coverage must be maintained, covering bodily injury or death and property damage, including all legal liability to the extent insurable and all court costs, legal fees and expenses, arising out of, or connected with, the possession, use, leasing, operation, maintenance or condition of the Property in such amounts generally required by institutional lenders for properties comparable to the Property but in no event for a combined single limit of less than $2 million and $1 million per occurrence. The required coverage must provide for claims to be made on an occurrence basis. The policy must name Lender as an additional insured. The insurance coverage required under this subsection (vi) may be satisfied by a layering of Commercial General Liability, Umbrella and Excess Liability Policies, but in 35 LOAN NUMBER: 41655 no event will the Commercial General Liability policy be written for an amount less than $1,000,000 per occurrences and $2,000,000 aggregate for bodily injury and property damage liability. Lender may require umbrella coverage which will be evaluated on a case by case basis, but in no event less than $25,000,000. (vii) Workers' Compensation Insurance. Workers' compensation insurance must be maintained with respect to all employees employed at the Property, in compliance with the laws of the state in which the Property is located. (viii) Earthquake Insurance. If the Property is located in a high earthquake hazard area, earthquake insurance must be maintained in an amount equal to the full replacement value of the Property and for loss of revenues and be in form, amount and with deductibles satisfactory to Lender but in no event greater than 10% of the Allocated Loan Amount. (ix) Garage Keeper's Insurance. Garage keeper's insurance in form and substance acceptable to Lender must be maintained in the amount of $2,500,000 for each Individual Property and must name Lender as an insured mortgagee under a standard mortgage clause. (x) Automobile Insurance. Comprehensive automobile liability insurance must be maintained for all owned and non-owned vehicles used in connection with the operation, maintenance, or management of the Property and in an amount of not less than $1,000,000 per occurrence. (xi) Other Coverage. Without limiting Lender's rights under this Section 9.03(a), Lender may also require Borrower to maintain builder's risk insurance during any period of construction, renovation or alteration of the Improvements, "dram shop" or similar coverage if alcoholic beverages are sold at the Property, fidelity bond coverage for employees handling Rents and other income from the Property, environmental insurance, sinkhole coverage and other insurance with respect to the Property or on any replacements or substitutions thereof or additions thereto against other insurable hazards or casualties which at the time are commonly insured against in the case of property similarly situated, due regard being given to the height and type of buildings, their construction, location, use and occupancy. (b) Qualified Insurers; Lender's Consent. All insurance must be issued under valid and enforceable policies of insurance acceptable to Lender and issued by one or more domestic primary insurers authorized to issue insurance in the state in which the Property is located. Each insurer must have a minimum investment grade rating of "A" or better (but a minimum of "AA" at all times during which the outstanding principal balance of the Note is $25,000,000 or more unless Borrower obtains an acceptable "cut through" endorsement from a properly rated reinsurer) from S&P, or equivalent ratings from one or more comparable credit rating agencies acceptable to Lender. Lender's approval of insurance coverage at any time is not a representation or warranty concerning the sufficiency of any coverage or the solvency of any insurer, and Lender shall not be responsible for, nor incur any liability for, the insolvency of the insurer or other failure of the insurer to perform. 36 LOAN NUMBER: 41655 (c) Policy Requirements. All policies must be for a term of not less than a year and name Lender as a beneficiary of such coverage as provided in this Section 9.03 or otherwise identified by Lender. Each policy must also contain: (i) an endorsement or provision that permits recovery by Lender notwithstanding the negligent or willful acts or omission of Borrower; (ii) a waiver of subrogation endorsement as to Lender to the extent available at commercially reasonable rates; (iii) a provision that prohibits cancellation or termination before the expiration date, denial of coverage upon renewal, or material modification without at least thirty (30) days prior written notice to Lender in each instance; and (iv) effective waivers by the insurer of all claims for Insurance Premiums against Lender. If the required insurance coverage is to be provided under a blanket policy covering the Property and other properties and assets not part of the Property, such blanket policy must specify the portion of the total coverage that is allocated to the Property and any sublimit in such blanket policy which is applicable to the Property and shall otherwise comply in all respects with the requirements of this Section 9.03. (d) Evidence of Insurance. Borrower must deliver to Lender either (i) the original of each insurance policy required hereunder or (ii) a copy of such policy certified by the insurance agent to be a true, correct and complete copy of the original. Insurance binders or certificates will not be accepted. Evidence of the required coverage for the first year of the Loan (as well as satisfactory proof of payment) must be delivered to Lender on or before the Closing Date and thereafter not less than thirty (30) days prior to the expiration date of each policy. (e) Lender's Right to Obtain Insurance for Borrower. If Borrower fails to deliver to Lender the evidence of insurance coverage required by this Loan Agreement and does not cure such deficiency within ten (10) days after Lender's notice of nondelivery, an Event of Default shall be deemed to have occurred (without further cure period or notice) and Lender may procure such insurance at Borrower's expense, without prejudice to Lender's rights upon an Event of Default. All amounts advanced by Lender to procure the required insurance shall be added to principal, secured by the Security Instrument and bear interest at the Default Rate. Lender shall not be responsible for, nor incur any liability for the insolvency of the insurer or other failure of the insurer to perform, even though Lender has caused the insurance to be placed with the insurer after Borrower's failure to furnish such insurance. (f) Additional Insurance. Borrower shall not obtain insurance for the Property in addition to that required by Lender without Lender's prior written consent, which consent will not be unreasonably withheld provided that (i) Lender is named insured on such insurance, (ii) Lender receives evidence of such insurance as required by subsection (d) above, and (iii) such insurance will not breach any requirements set forth in this Loan Agreement. 9.04. Obligations upon Condemnation or Casualty. If the Property, or any portion thereof, shall be damaged or destroyed by a Casualty or become subject to any Condemnation, the following shall apply: (a) Generally. Borrower shall promptly notify Lender, in writing, of any actual or threatened Condemnation or of any Casualty that damages or renders unusable the Property or any part thereof and, except as otherwise provided below, shall promptly and diligently pursue Borrower's claim for a Condemnation award or insurance proceeds, as applicable. Borrower shall not make any agreement in lieu of Condemnation or accept 37 LOAN NUMBER: 41655 any Condemnation award without Lender's prior written consent (which Lender agrees not to unreasonably withhold or delay). Borrower shall not accept any settlement of insurance proceeds with respect to a Casualty without Lender's prior written consent (which Lender agrees not to unreasonably withhold or delay). If requested by Lender, Borrower agrees to provide copies to Lender of all notices or filings made or received by Borrower in connection with the Casualty or Condemnation or with respect to collection of the insurance proceeds or Condemnation award, as applicable. Notwithstanding that a Casualty or Condemnation has occurred, or that rights to a Condemnation award or insurance proceeds are pending, Borrower shall continue to pay the Loan at the time and in the manner provided in this Loan Agreement. (b) Lender Right to Pursue Claim. If the amount of any claim arising with respect to Casualty or Condemnation exceeds $250,000, Lender may elect, at Lender's option, either: (i) to settle and adjust any claim arising with respect to the Casualty or Condemnation without Borrower's consent, or (ii) to allow Borrower to settle and adjust such claim; provided that, in either case, the insurance proceeds or Condemnation award, as applicable, is paid directly to Lender. Borrower hereby appoints Lender its attorney-in-fact with full power of substitution (and which shall be deemed to be coupled with an interest and irrevocable until the Loan is paid and the Security Instrument is discharged of record, with Borrower hereby ratifying all that its said attorney shall do by virtue thereof) to endorse any agreements, instruments or drafts received in connection with a Casualty or Condemnation. If any portion of the insurance proceeds or Condemnation award, as applicable, should be paid directly to Borrower, Borrower shall be deemed to hold such amounts in trust for Lender and shall promptly remit such amounts to Lender. If the Property is sold, through foreclosure or otherwise, prior to the receipt of the Condemnation award, Lender shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive the proceeds of such sale in an amount sufficient to pay the Loan in full. All expenses reasonably incurred by Lender in the settlement and collection of amounts paid with respect to a Casualty or Condemnation (including, without limitation, reasonable legal fees and expenses) shall be deducted and reimbursed to Lender from the insurance proceeds or Condemnation award, as applicable, prior to any other application thereof. The insurance proceeds or Condemnation award paid or payable on account of a Casualty or Condemnation, as applicable (including all business interruption insurance proceeds paid as a result of such Casualty or Condemnation), less expenses to be reimbursed to Lender hereunder, is referred to herein as the "RESTORATION PROCEEDS." (c) Application of Restoration Proceeds; Restoration Obligations. Except as specifically hereafter provided in subsection (d) below, Lender may, in its sole discretion, either (i) apply the Restoration Proceeds to payment of the Loan, whether or not then due and payable, or (ii) hold and release the Restoration Proceeds to Borrower (A) for the costs of Restoration undertaken by Borrower in accordance with this Loan Agreement and (B) to cover any shortfall in Operating Income as a result of such Casualty or Condemnation that is necessary to pay in full the debt service payments due from Borrower on each Payment Due Date and other Operating Expenses falling due during the period until Restoration is completed; provided, however, that Lender shall have no 38 LOAN NUMBER: 41655 obligation to release Restoration Proceeds to fund amounts contemplated by clause (B) unless (1) Lender is satisfied that Restoration Proceeds are sufficient to pay in full the estimated cost to complete Restoration and (2) all Operating Expenses to be funded with Restoration Proceeds are approved by Lender. If Lender applies Restoration Proceeds to payment of the Loan and the Loan is still outstanding, interest will continue to accrue and be due on the unpaid principal at the Applicable Interest Rate. If Lender makes the Restoration Proceeds available to Borrower for Restoration, Borrower shall diligently pursue Restoration so as to restore the Property to at least equal value and substantially the same character as existed immediately prior to such Casualty or Condemnation. Provided the cost of Restoration exceeds $250,000, all plans and specifications for the Restoration and all contractors, subcontractors and materialmen to be engaged in the Restoration, as well as the contracts under which they have been engaged, shall be subject to Lender's prior review and approval, which Lender agrees not to unreasonably withhold or delay. Lender may engage, at Borrower's expense, an independent engineer or inspector to assist Lender in its review of the approvals requested of Lender in connection with the Restoration and to periodically inspect the Restoration in progress and upon substantial completion. (d) Condition to Release of Restoration Proceeds for Restoration. Lender agrees to make the Restoration Proceeds available to Borrower for Restoration as long as: (i) The Restoration Proceeds recovered are less than the outstanding principal balance of the Loan. (ii) No Event of Default exists. (iii) Borrower demonstrates to Lender's satisfaction that the Restoration Proceeds are sufficient to pay in full the estimated cost to complete Restoration and any shortfalls in Operating Income as a result of such Casualty or Condemnation that are anticipated until Restoration is substantially completed, or, if the Restoration Proceeds are determined by Lender to be insufficient to pay such costs in full, Borrower deposits with Lender, in cash or by a cash equivalent acceptable to Lender, the additional amount estimated by Lender to be necessary to pay the full cost of Restoration ("RESTORATION DEFICIENCY DEPOSIT"). (iv) Intentionally Omitted. (v) Restoration can be completed not later than the earlier of (A) twelve (12) months from the date the Casualty or Condemnation occurred, (B) the earliest date by which completion is required under the Requirements of Law to preserve the right to rebuild the Improvements as they existed prior to the Casualty or Condemnation, (C) the expiration of Borrower's business interruption insurance, or (D) six (6) months prior to the Maturity Date (without taking into consideration any unexercised extension). (vi) If a Condemnation has occurred, (A) less than 10% of the Land is taken and the land taken is along the perimeter or periphery of the Land, and (B) 39 LOAN NUMBER: 41655 no portion of any structural Improvements are taken which would have a Material Adverse Effect. (vii) If a Casualty has occurred, (A) less than 10% of the paved parking area of the Individual Property is damaged or rendered unusable by the Casualty, and (B) no portion of any structural Improvements are damaged or rendered unusable which would have a Material Adverse Effect. (viii) Intentionally Omitted. (ix) The Property and its use after completion of Restoration will be in compliance in all material respects with, and permitted under, all Requirements of Law. (e) Disbursement Procedure; Holdback. If the Restoration Proceeds will be made available by Lender to Borrower for Restoration and the estimated cost of Restoration approved by Lender (together with all other amounts then held by Borrower pursuant to this subsection (e)) is less than $250,000, Lender shall disburse the entire amount of the Restoration Proceeds to Borrower, and Borrower hereby covenants and agrees to use the Restoration Proceeds solely for Restoration performed in accordance with this Loan Agreement. If, however, the estimated cost of Restoration approved by Lender (together with all other amounts then held by Borrower pursuant to this subsection (e)) is more than $250,000, Lender may retain the Restoration Proceeds in an interest bearing escrow account and make periodic disbursements to Borrower as follows: (i) Disbursements for Restoration. (A) Lender will disburse Restoration Proceeds for the costs of Restoration to, or as directed by, Borrower from time to time during the course of the Restoration, upon receipt of evidence reasonably satisfactory to Lender that (1) all materials installed and work and labor performed in connection with the Restoration have been paid in full (except to the extent that they are to be paid out of the requested disbursement), and (2) there exist no notices of pendency, stop orders, mechanic's or materialman's liens or notices of intention to file same, or any other Liens of any nature whatsoever on the Property arising out of the Restoration which have not either been fully bonded and discharged of record or, in the alternative, fully insured to Lender's reasonable satisfaction by the title company insuring the Lien of the Security Instrument. (B) Lender may limit disbursements to not more than one (1) per month. (C) Lender may hold-back from each requested disbursement an amount equal to the greater of (1) ten percent (10%) of the requested disbursement or (2) the amount which Borrower is permitted to withhold under its contract with the contractor or supplier to be paid with the 40 LOAN NUMBER: 41655 proceeds of such disbursement (either "RESTORATION HOLDBACK"). Amounts held as the Restoration Holdback shall be disbursed once: (1) Lender receives satisfactory evidence that Restoration has been fully completed in accordance with all Requirements of Law; (2) Lender receives satisfactory evidence that all Restoration costs have been paid in full or will be fully paid from the remaining Restoration Proceeds and the Restoration Holdback; and (3) Lender receives, at Lender's option, a search of title to the Property, effective as of the date on which the Restoration Holdback is to be disbursed, showing no Liens other than the Permitted Encumbrances or an endorsement to its Title Insurance Policy which updates the effective date of such policy to the date on which the Restoration Holdback is to be disbursed and which shows no Liens since the date of recordation of the Security Instrument (other than the Permitted Encumbrances). (D) Notwithstanding subsection (C) above, Lender may release from the Restoration Holdback payments to a contractor or supplier if: (1) Lender receives satisfactory evidence that such contractor has satisfactorily completed its contract with Borrower; (2) such contractor or supplier delivers to Lender an acceptable written waiver of its mechanic's lien, in recordable form; and (3) Borrower provides written consent from the surety company, if any, which has issued a payment or performance bond with respect to such contractor or supplier. (ii) Disbursements for Shortfalls in Operating Income. Provided that Lender determines that the Restoration Proceeds are sufficient to pay in full the estimated cost to complete Restoration, Lender will disburse Restoration Proceeds not reserved for Restoration to pay the shortfall in Operating Income necessary to pay (A) first, the debt service payments due from Borrower on each Payment Due Date falling due from the date of the Casualty or Condemnation through the date on which Restoration is substantially completed and (B) then, any Operating Expenses approved by Lender. Lender may require satisfactory evidence that Operating Expenses to be paid have been incurred and may issue payments directly to the Person entitled to the payment claimed as an Operating Expense. (iii) Restoration Proceeds Deemed Insufficient. If, in Lender's judgment, at any time during Restoration, the undisbursed portion of the Restoration Proceeds shall not be sufficient to pay the costs remaining for Restoration to be completed or to pay any shortfall in Operating Income needed to pay in full Borrower's debt service payments on the Loan and Operating Expenses anticipated to be incurred during the period of Restoration, Borrower shall deposit the deficiency with Lender, in cash or by a cash equivalent acceptable to Lender (also called a "RESTORATION DEFICIENCY DEPOSIT"), within ten (10) days after Lender's notice of such deficiency, and no further disbursement of the Restoration Proceeds will be made until such funds are deposited. Amounts held by Lender as the Restoration Deficiency Deposit shall be disbursed in accordance with this Section 9.04. 41 LOAN NUMBER: 41655 (iv) Consequence of Event of Default. Lender shall not be obligated to disburse Restoration Proceeds or amounts from the Restoration Holdback when an Event of Default exists, and upon the occurrence of an Event of Default, any undisbursed portion of the Restoration Proceeds (including the Restoration Deficiency Deposit and the Restoration Holdback) may, at Lender's option, be applied against the Loan, whether or not then due or accelerated, in such order and manner as Lender determines. (v) Surplus Restoration Proceeds After Restoration Completion. Any Restoration Proceeds remaining after full payment of Restoration costs and unpaid expenses due to Lender for which Lender is permitted reimbursement under this Section 9.04 shall be released to Borrower provided no Event of Default exists, and Borrower delivers evidence satisfactory to Lender that (i) Restoration has been fully completed in accordance with all Requirements of Law and (ii) the Property is free and clear of all Liens which may be asserted with respect to the Restoration. 9.05. Inspections and Right of Entry. Lender and its agents may enter the Property upon prior notice to Borrower (notice to be given not less than two (2) business days prior to entry by Lender or its agents unless an Event of Default or an emergency exists, as determined by Lender in good faith) to inspect the Property and Borrower's books and records relating to the Property. In making such entry and inspection, Lender agrees to use reasonable efforts to minimize disturbance to Borrower and tenants of the Property. Lender and its agents shall have access, at all reasonable times, to the Property, including, without limitation, all contracts, plans and specifications, permits, licenses and approvals required or obtained in connection with the Property. 9.06. Leases and Rents. (a) Right to Enter into New Leases. Borrower may enter into new Leases for space at the Property and renew or extend existing Leases only with Lender's prior written consent, which shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, Lender's approval shall not be required for leases ("PERMITTED LEASES") which (i) are for non-parking related uses, (ii) have a term of three (3) years or less, (iii) together with all other Leases affecting the Parking Lot Operation in question, do not generate in excess of five percent (5%) of the gross revenue attributable to such Parking Lot Operation, and (iv) do not contain provisions permitting tenant mortgages, options, rights of first refusal or offer, exclusivity, or extension options in favor of the tenant thereunder. Borrower shall promptly deliver to Lender a copy of each executed Lease. All subleases shall be in accordance with the terms and conditions of the applicable Parking Leases. (b) Leasing Decisions. Other than Permitted Leases, Borrower may not, without Lender's prior written consent: (i) amend or supplement any Lease or waive any term thereof (including, without limitation, shortening the lease term, reducing rents, granting rent abatements, or accepting a surrender of all or any portion of the leased space); (ii) cancel or terminate any Lease; (iii) consent to a tenant's assignment of its Lease or subleasing of space; or (iv) amend, supplement, waive or terminate any Lease Guaranty; provided that none of the 42 LOAN NUMBER: 41655 foregoing actions (taking into account the planned alternative use of the affected space in the case of termination, rent reduction, surrender of space or shortening of term) will have a Material Adverse Effect on the value of the Property taken as a whole and such Lease, as amended, supplemented or waived, is otherwise in compliance with the requirements of Section 9.06(a) hereof. Termination of a Lease with a tenant who is in default beyond applicable notice and grace/cure periods shall not be considered action which has a Material Adverse Effect on the value of the Property taken as a whole. Any action with respect to any Lease that does not satisfy the requirements set forth in this Section requires Lender's prior written approval, which may not be unreasonably withheld or delayed, at Borrower's expense (including reasonable legal fees). Borrower shall promptly deliver to Lender a copy of all instruments documenting the action taken, together with written certification from a Responsible Officer that (x) the copies delivered are true, complete and correct copies of the materials represented thereby and (y) Borrower has satisfied all conditions of this Section. Lender's acceptance of Borrower's certification or a copy of such Lease materials shall not be deemed a waiver of the requirements of this Section if the action taken is not in compliance herewith. (c) Observance of Lessor Obligations. Borrower (i) shall observe and perform all obligations imposed upon the lessor under the Leases and shall not do or permit to be done anything to impair the value of any of the Leases as security for the Loan; (ii) upon Lender's request, shall promptly send copies to Lender of all notices of default which Borrower shall send or receive (or may have sent or received) under any non-residential Lease; (iii) shall enforce in a commercially reasonable manner all of the material terms, covenants and conditions contained in the Leases to be observed or performed by the tenant; (iv) shall not collect any Rents more than one (1) month in advance which, in the aggregate, exceed $50,000 (and for this purpose a security deposit shall not be deemed rent collected in advance); and (v) shall not execute any assignment or pledge of the lessor's interest in any of the Leases or the Rents (other than in connection with the Loan). 9.07. Use of Property. Borrower shall not allow changes in the use of the Property without Lender's prior written consent, which shall not be unreasonably withheld, conditioned or delayed. Borrower shall not initiate, join in, or consent to any change in any private restrictive covenant or zoning or land use ordinance limiting or defining the uses which may be made of the Property as of the Closing Date. If use of all or any portion of the Property is or shall become a nonconforming use, Borrower will not cause or permit the nonconforming use to be discontinued or the nonconforming portion of the Property to be abandoned without Lender's prior written consent. 9.08. Maintenance of Property. Borrower shall maintain the Property in a good and safe condition and repair. No portion of the Property shall be removed, demolished or materially altered (except for normal repair or replacement) without Lender's prior written consent. Borrower shall promptly repair or replace any portion of the Property which may become damaged, worn or dilapidated. Borrower shall obtain and maintain all licenses, permits, registrations, certificates and other approvals, governmental and otherwise (including, without limitation, zoning, building code, land use and environmental), necessary for the use, occupancy and operation of the Property and the conduct of its business thereat. 43 LOAN NUMBER: 41655 9.09. Waste. Borrower shall not commit or suffer any waste of the Property or do or permit to be done thereon anything that may in any way impair the value of the Property or invalidate the insurance coverage required hereunder to be maintained by Borrower. Borrower will not, without Lender's prior written consent, permit any drilling or exploration for or extraction, removal, or production of any minerals from the surface or the subsurface of the Property, regardless of the depth thereof or the method of mining or extraction thereof. 9.10. Compliance with Laws. (a) Obligation to Perform. Borrower shall promptly and fully comply with all Requirements of Law now or hereafter affecting the Property. Borrower shall notify Lender promptly of Borrower's knowledge or receipt of any notice related to a violation of any Requirements of Law or of the commencement of any proceedings or investigations which relate to compliance with Requirements of Law. At Lender's request, Borrower shall provide Lender with copies of all notices, reports or other documents relating to any litigation or governmental investigation relating to Borrower or the Property. (b) Right to Contest. After prior written notice to Lender, Borrower, at its own expenses may contest, by appropriate legal proceedings, promptly initiated and conducted in good faith and with due diligence, the Requirements of Law affecting the Property or alleged violation thereof, provided that: (i) no Event of Default exists; (ii) such proceeding shall not otherwise be prohibited by any, and shall be conducted in accordance with all, Requirements of Law; (iii) the Property will not be in danger of being sold, forfeited, terminated, cancelled or lost; (iv) non-compliance with such Requirement of Law shall not impose any civil liability on Lender or Borrower which has not otherwise been accounted for by the reserve created under clause (v) below, or any criminal or environmental liability on Lender or Borrower; (v) Borrower deposits with Lender cash (or other security reasonably acceptable to Lender) in such amount as Lender deems sufficient to cover loss or damage that may result from Borrower's failure to prevail in such contest, provided that after a Securitization, one hundred twenty-five percent (125%) of the amount estimated by Lender is deposited; (vi) Borrower furnishes to Lender all other items reasonably requested by Lender; and (vii) upon a final determination thereof, Borrower promptly complies with the obligations, if any, determined to be applicable. 9.11. Financial Reports, Books and Records. (a) Delivery of Financial Statements. Borrower shall keep adequate books and records of account with respect to its financial condition and the operation of the Property, in accordance with GAAP consistently applied (or such other method which is reasonably acceptable to Lender), and shall furnish the following to Lender, each prepared in such detail as reasonably required by Lender and certified by a Responsible Officer to be true, complete and correct: (i) if requested by Lender (but not more often than once per calendar quarter), a Rent Roll; (ii) as soon as available, but in any event within sixty (60) days after the end of each fiscal quarter, a quarterly operating statement for Borrower detailing the 44 LOAN NUMBER: 41655 Operating Income received, Operating Expenses incurred, the cost of all Capital Improvements and Replacements performed or paid during such quarter, and the Debt Service Coverage Ratio as of the end of such fiscal quarter; (iii) within sixty (60) days after the end of each fiscal quarter, a quarterly Compliance Certificate; (iv) as soon as available, but in any event within one hundred twenty (120) days after the close of Borrower's fiscal year, (A) an annual operating statement for each Property presented on a basis consistent with the quarterly operating statements described above and audited by an independent certified public accountant; (B) an annual balance sheet and profit and loss statement for Borrower audited by an independent certified public accountant; and (C) a statement of change of financial position of Borrower, setting forth in comparative form the figures for the previous fiscal year; (v) if requested by Lender, an annual operating budget for Borrower presented on a monthly basis consistent with the information required in the quarterly operating statement described above which budget shall be subject to Lender's approval; and (vi) such other financial information or property management information (including, without limitation, copies of Borrower's state and federal tax returns, information on tenants under Leases to the extent such information is available to Borrower, and an accounting of security deposits) as may reasonably be required by Lender from time to time. Notwithstanding the foregoing, (i) upon the request of Lender prior to a Securitization, (ii) following an Event of Default, or (iii) until such time as either the Recourse Carveout Reserve Account has a balance of $3,000,000, or Borrower has posted a $3,000,000 letter of credit pursuant to Section 4.06(b) in lieu thereof. Borrower shall promptly provide monthly statements in connection with subsections (ii) and (iii) above, within twenty (20) days following the end of each calendar month. Until either the Recourse Carveout Reserve Account has a balance of $3,000,000, or Borrower has posted a $3,000,000 letter of credit pursuant to Section 4.06(b) in lieu thereof, Borrower will also supply, with each such monthly statement, a computation of excess cash flow (i.e., Operating Income less Operating Expenses, Loan Debt Service, Reserve Amounts and such other amounts as otherwise approved by Lender (in its reasonable discretion with respect to out-of-pocket expenses paid to non-affiliates and in its sole discretion with respect to any other amounts)). Once Lender accepts Borrower's determination of excess cash flow (whether as computed by Borrower in the monthly statement, or as subsequently revised by Borrower based on consultation with Lender), Lender shall promptly withdraw such excess cash flow from the Deposit Account (as defined in the Lockbox Agreement) and deposit such sum into the Recourse Carveout Reserve Account. (b) Lender Audit Rights. Lender and its agents have the right, upon prior written notice to Borrower (notice to be given at least two (2) business days prior to such inspection unless an Event of Default exists), to examine the records, books and other papers which reflect upon Borrower's financial condition or pertain to the income, expense and management of the Property and to make copies and abstracts from such materials. Lender also 45 LOAN NUMBER: 41655 shall have the right, from time to time (but, in the absence of an Event of Default existing, not more than annually) and upon prior notice to Borrower (notice to be given unless an Event of Default exists), to have an independent audit conducted of any of Borrower's financial information. Lender shall pay the cost of such audit unless Lender performed the audit following the occurrence of an Event of Default or if the results of Lender's audit disclose an error in the categories of total income, total expenses, total assets or total liabilities by more than ten percent (10%), in which case (and in addition to Lender's other remedies) Borrower shall pay the cost incurred by Lender with respect to such audit upon Lender's demand. Upon Borrower's failure to pay such amounts, and in addition to Lender's remedies for Borrower's failure to perform, the unpaid amounts shall be added to principal, shall bear interest at the Default Rate until paid in full, and payment of such amounts shall be secured by the Security Instrument and other collateral given to secure the Loan. (c) Financial Reports from Guarantors, SPE Equity Owner and Equity Owner. Borrower shall cause each Guarantor and, at Lender's request, the SPE Equity Owner and Equity Owner, to provide to Lender (i) within ninety (90) days after the close of such party's fiscal year, such party's balance sheet and profit and loss statement (or if such party is an individual, within ninety (90) days after the close of each calendar year, such party's personal financial statements) in form reasonably satisfactory to Lender and certified by such party to be accurate and complete; and (ii) such additional financial information (including, without limitation, copies of state and federal tax returns) as Lender may reasonably require from time to time and in such detail as reasonably required by Lender. (d) Data Delivery Failure. If a Data Delivery Failure occurs, Borrower shall pay Lender, without demand, the applicable Data Delivery Failure Fee on the first Business Day following each occurrence of a Data Delivery Failure. If a Data Delivery Failure occurs on more than two (2) separate occasions during any twelve month period or on more than five (5) occasions while the Loan is outstanding, it shall be an immediate Event of Default hereunder. The collection of the Data Delivery Failure Fee shall be in addition to Lender's other rights and remedies under the Loan Documents and, until paid, shall be deemed added to the Debt, secured by the Security Instrument and shall bear interest at the Default Rate. 9.12. Performance of Other Agreements. Borrower shall observe and perform in a timely manner each and every obligation to be observed or performed by Borrower pursuant to the terms of any agreement or recorded instrument affecting or pertaining to the Property or used in connection with the operation of the Property (including, without limitation, the Operating Agreements). Without limiting the foregoing, Borrower shall (a) give prompt notice to Lender of any notice received by Borrower with respect to any of the Operating Agreements which alleges a default or nonperformance by Borrower thereunder, together with a complete copy of any such notice; (b) enforce, short of termination, performance of the Operating Agreements to be performed or observed, and (c) not terminate or amend, or waive compliance with, any of the Operating Agreements without Lender's prior written consent, except as may be (i) permitted pursuant to the respective terms thereof or (ii) absent the existence of an Event of Default, done in the ordinary course of business. If the absence of an Operating Agreement that has terminated will have a Material Adverse Effect on the value of the Property, Borrower agrees to use commercially reasonable efforts to enter into a new Operating Agreement in replacement of the terminated Operating Agreement, containing terms and conditions no less favorable to 46 LOAN NUMBER: 41655 Borrower than the terminated Operating Agreement. Borrower shall notify Lender if Borrower does not replace any terminated Operating Agreement, the absence of which is likely to have a Material Adverse Effect. 9.13. Existence; Change of Name; Location as a Registered Organization. Borrower shall continuously maintain (a) its existence and shall not dissolve or permit its dissolution, and (b) its rights and franchises to do business in each state where the Property is located. Borrower shall not change Borrower's name, legal entity, or its location as a registered organization within the meaning of the UCC, without notifying Lender of such change in writing at least thirty (30) days prior to its effective date. The notification requirements set forth in this Section are in addition to, and not in limitation of, the requirements of Article 7. Borrower shall pay all costs and expenses incurred by Lender (including, without limitation, reasonable legal fees) in connection with any change described herein. 9.14. Property Management. Borrower intends to self-manage the Property, and has entered into employment contracts (reasonably approved by Lender) with the following individuals: Alex Martin Chaves, Eric Chaves, Rick West and Frank Lemieux ("KEY MANAGEMENT PERSONNEL"). Borrower shall not remove (except for cause) or replace the Key Management Personnel, or modify or waive any material terms of the employment contract with such parties, without Lender's prior written consent. The Key Management Personnel shall enter into agreements with Lender subordinating all management fees, compensation, bonuses or other payments due such parties to the repayment of the Loan, and otherwise in form and substance reasonably acceptable to Lender. Following an Event of Default, or in the event the Debt Service Coverage Ratio should at any time fall below 1.20:1.00, Lender reserves the right to cause Borrower to terminate all in-house management and management overhead personnel, including but not limited to the Key Management Personnel, and immediately engage a third party property manager reasonably acceptable to Lender, on terms reasonably acceptable to Lender, but in no event at a management fee in excess of 3.5% of Operating Income unless otherwise approved by Lender. Borrower shall not engage any third party manager for the Property without Lender's prior written consent and Rating Confirmation. Upon engagement of a property manager, Borrower shall, and shall cause the new manager of the Property to, execute an Assignment of Property Management Contract in form and substance reasonably acceptable to Lender. Borrower agrees that no management or related costs, expenses and employee compensation shall be paid at any time as, and for so long as, any payment due under the Loan remains delinquent unless otherwise approved by Lender. Other than if required by law, Borrower shall not enter into any collective bargaining agreement with its employees without the consent of Lender, to be granted in its sole discretion. 9.15. ERISA. Borrower shall not engage in any transaction which would cause any obligation or action taken or to be taken hereunder by Borrower (or the exercise by Lender of any of its rights under any of the Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA. Borrower agrees to deliver to Lender such certifications or other evidence throughout the term of the Loan as requested by Lender in its sole discretion to confirm compliance with Borrower's obligations under this Section 9.15 or to confirm that Borrower's representations and warranties regarding ERISA remain true. 47 LOAN NUMBER: 41655 9.16. Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering Laws. Borrower shall comply in all material respects with all Requirements of Law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect. Upon Lender's request from time to time during the term of the Loan, Borrower shall certify in writing to Lender that Borrower's representations, warranties and obligations under Section 8.28 and this Section 9.16 remain true and correct in all material respects and have not been breached. Borrower shall immediately notify Lender in writing if any of such representations, warranties or covenants are no longer true or have been breached or if Borrower has a reasonable basis to believe that they may no longer be true or have been breached in any material respect. In connection with such an event, Borrower shall comply in all material respects with all Requirements of Law and directives of Governmental Authorities and, at Lender's request, provide to Lender copies of all notices, reports and other communications exchanged with, or received from, Governmental Authorities relating to such an event. Borrower shall also reimburse Lender any reasonable expense incurred by Lender in evaluating the effect of such an event on the Loan and Lender's interest in the collateral for the Loan, in obtaining any necessary license from Governmental Authorities as may be necessary for Lender to enforce its rights under the Loan Documents, and in complying with all Requirements of Law applicable to Lender as the result of the existence of such an event and for any penalties or fines imposed upon Lender as a result thereof. 9.17. Equity Contribution. On the Closing Date, the equity owners of Borrower shall provide satisfactory evidence to Lender that they have, as of the Closing Date, an aggregate equity investment in Borrower in an amount not less than $32,000,000.00 in a manner which is satisfactory to Lender. 9.18. Parking Lease Covenants. Borrower covenants and agrees as follows: (i) promptly and faithfully to observe, perform and comply in all material respects with all of the terms, covenants and provisions of the Parking Leases; (ii) to refrain from doing anything and not do or permit any act, event or omission, as a result of which there is likely to occur a default or breach under any Parking Lease; (iii) to immediately give Lender notice of any default by the Parking Lease Lessor or the Borrower under any Parking Lease upon learning of such default and immediately deliver to Lender a copy of each notice of default and all responses to such notice of default and all other material instruments, notices or demands received or delivered by Borrower under or in connection with any Parking Lease; (iv) to notify immediately Lender in writing in the event of the initiation of any litigation or arbitration proceeding affecting Borrower or the Property under or in connection with any Parking Lease; and (v) not to exercise any purchase option under any Parking Lease without Lender's prior written consent. The occurrence of a default on the part of Borrower under any Parking Lease beyond the periods granted in any Parking Lease for notice and cure shall constitute a deemed Partial Release of such Individual Property pursuant to Section 10.03(a) hereof. 9.19. Additional Covenants. Borrower further covenants and agrees that it will not fail to exercise in a timely manner any renewal option(s) contained in each Parking Lease, if reasonably required by Lender, nor, without written consent of Lender, modify, alter or amend any Parking Lease, either orally or in writing, which consent (a) with respect to monetary or material non-monetary provisions, may be granted, conditioned or withheld in Lender's sole discretion and (b) with respect to non-monetary, non-material provisions, may not be 48 LOAN NUMBER: 41655 unreasonably withheld, conditioned or delayed. Any assignment, transfer, conveyance, surrender, termination, cancellation, modification, alteration or amendment of any Parking Lease in contravention of the foregoing sentence shall be void and of no force and effect. For the purposes of this Section 9.19, the phrase "material non-monetary" shall mean provisions with respect to any of the following: (i) the term of any Parking Lease, (ii) any economic matter (including costs passed through to Borrower) that would affect the rent or any other charge thereunder, (iii) any security deposit, if any, (iv) defaults, events of default and remedies, (v) termination or cancellation, (vi) disposition of casualty or condemnation proceeds, (vii) transfer of the leased premises, (viii) tenant mortgages, (ix) assignment and subletting (other than as otherwise permitted in such lease and this Loan Agreement) and (x) options, rights of first refusal or offer and extension options. 9.20. Defaults. In the event of a default and during its continuance by Borrower under any Parking Lease, then, in each and every such case, Lender may (but shall not be obligated to), in its sole discretion, cause such default or defaults by Borrower to be remedied and otherwise take or perform such other actions as Lender may deem necessary or desirable as a result thereof or in connection therewith. Borrower shall, on demand, reimburse Lender for all advances made and expenses incurred by Lender in curing any such default(s) (including, without limitation, reasonable attorneys' fees), together with interest thereon at the Default Rate, from the date advanced by Lender until the same is paid in full to Lender and all such sums so advanced shall be secured hereby. The provisions of this subsection are in addition to any other right or remedy given to or allowed Lender under each Parking Lease or otherwise. 9.21. Parking Lease Lessor Estoppel Certificate. Subject to the fact that the Parking Lease Lessor under each Parking Lease may not have an obligation to deliver an estoppel certificate, Borrower shall, from time to time, use commercially reasonable efforts to obtain and deliver (or cause to be delivered) to Lender, an estoppel certificate, in a form reasonably acceptable to Lender, from the Parking Lease Lessor. Borrower shall provide such estoppel certificates, at its own cost and expense, upon the request of Lender no more than two (2) times each calendar year, unless an Event of Default has occurred (in which case no such limitation shall apply). 9.22. Taxes. To the extent not otherwise covered by Section 4.02, in the event that it is claimed by any governmental agency, authority or subdivision that any tax or governmental charge or imposition is due, unpaid or payable by Borrower upon or in connection with any Parking Lease, Borrower shall promptly either (i) pay such tax, charge or imposition when due and deliver to Lender satisfactory proof of payment thereof or (ii) contest such tax in accordance with the applicable provisions of this Loan Agreement. If liability for such tax is asserted against Lender, Lender will give to Borrower prompt notice of such claim, and Borrower, upon complying with the provisions of this Loan Agreement pertaining to contesting taxes, shall have full right and authority to contest such claim of taxability. 49 LOAN NUMBER: 41655 9.23. Trademark Agreement. (a) Borrower shall cause Property to be operated pursuant to the Trademark Agreement. (b) Borrower shall: (i) pay all sums required to be paid by Borrower under the Trademark Agreement and/or promptly perform and observe all of the covenants and agreements required to be performed and observed by it under the Trademark Agreement and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (ii) promptly notify Lender in writing of any default under the Trademark Agreement of which it is aware and provide Lender with copies of any notices delivered in connection therewith; (iii) promptly enforce the performance and observance of all of the covenants and agreements required to be performed and observed by the licensor under the Trademark Agreement; (iv) grant Lender the right, but Lender shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all the terms, covenants and conditions of the Trademark Agreement on the part of Borrower to be performed or observed to be promptly performed or observed on behalf of Borrower, to the end that the rights of Borrower in, to and under the Trademark Agreement shall be kept unimpaired and free from default; (v) use its reasonable efforts to obtain, from time to time, from the licensor such certificates of estoppel with respect to compliance by Borrower with the terms of the Trademark Agreement as may be reasonably requested by Lender; (vi) promptly notify Lender in writing and provide Lender with copies of any notices delivered to Borrower, including, without limitation, any notice of default under the Trademark Agreement, which contain information that, if true, might materially adversely affect the value, use or operation of the Property; and (vii) assign to Lender as collateral security for the Loan Borrower's interest in the Trademark Agreement and cause licensor to deliver a Consent, Subordination and Recognition Agreement in form and content satisfactory to Lender. (c) Borrower shall not, without Lender's prior written consent: (i) surrender, terminate or cancel the Trademark Agreement; (ii) reduce or consent to the reduction of the term of the Trademark Agreement; (iii) increase or consent to the increase of the amount of any charges under the Trademark Agreement; (iv) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under the Trademark Agreement in any material respect; or (v) operate any of the Individual Properties which are currently operated under the name of Parking Company of America under any other name. 50 LOAN NUMBER: 41655 9.24. JFK Lease. Borrower acknowledges that it occupies and operates a parking operation located at 129th and 52nd Avenue (the "JFK LOCATION"), adjacent to JFK Airport pursuant to that certain lease agreement dated April 14, 2003 by and between Borrower (by an assignment from Airport Satellite Parking, LLC), as tenant and Fleet Recovery, Inc., as landlord ("JFK LANDLORD"). The JFK Landlord is a permit holder from the State of New York, which permits the JFK Landlord to use the JFK Location on a month to month basis. Accordingly, Borrower recognizes that its right to use and operate the JFK Location is subject to possible termination at any time. Borrower agrees to notify Lender within ten (10) days following any action or notice by the JFK Landlord or the State of New York to terminate Borrower's right (or with respect to the State of New York, the JFK Landlord's right) to use and occupy the JFK Location. Any notice delivered by Borrower to Lender pursuant to the preceding sentence shall include evidence, reasonably satisfactory to Lender, regarding the impact which the loss of Borrower's right to use and occupy the JFK Location is expected to have on Borrower's Operating Income. If Lender is satisfied, in its reasonable discretion, based on evidence submitted by Borrower, that the loss of the JFK Location will have no material adverse impact on Borrower's Operating Income, Borrower shall not be required to take any further action as a result of the loss of the JFK Location. If, however, Lender concludes that the loss of the JFK Location can reasonably be expected to have a material adverse effect on Borrower's Operating Income, Lender shall so notify Borrower, at which time (i) Borrower may elect to install parking lifts at adjacent properties in order to increase Borrower's parking capacity at such properties in a manner reasonably satisfactory to Lender to recoup the loss in Operating Income or (ii) in the event Borrower fails to so elect, or fails to so install such parking lifts within a reasonable period following its election, the termination shall be deemed a Partial Release pursuant to Section 10.03(a) hereof, and the Allocated Loan Amount shall, in accordance with Exhibit H, be $3,759,017. If Borrower installs parking lifts at adjacent properties in a manner which Lender reasonably believes will recoup any loss in Operating Income resulting from the termination of the Parking Lease at the JFK Location, Borrower shall not be treated as having experienced a Parking Lease termination pursuant to Section 10.03(a), and shall not be required to repay any portion of the Loan. ARTICLE 10 NO TRANSFERS OR ENCUMBRANCES; DUE ON SALE 10.01. Prohibition Against Transfers. Borrower shall not permit any Transfer to be undertaken or cause any Transfer to occur other than a Permitted Transfer. Any Transfer made in violation of this Loan Agreement shall be void. 10.02. Lender Approval. Except as otherwise provided in this Section 10.02, Lender's decision to approve any Transfer proposed by Borrower shall be made in Lender's sole discretion and Lender shall not be obligated to approve any Transfer. Notwithstanding the foregoing, Lender will not unreasonably withhold its consent one (1) time during the term of the Loan to a transfer or sale (but not a pledge, mortgage, assignment, encumbrance or other transfer as security for an obligation) of the Property and Borrower's obligations under the Loan Documents to a Qualified Transferee, provided Borrower satisfies all of the conditions set forth in this Section 10.02. Borrower agrees to supply all information Lender may request to evaluate a Transfer, including, without limitation, information regarding the proposed transferee's 51 LOAN NUMBER: 41655 ownership structure, financial condition and management experience for comparable properties. Borrower acknowledges that Lender may impose conditions to its approval of a Transfer, including, without limitation, (i) no Event of Default, or an event which with the giving of notice or lapse of time or both could become an Event of Default, has occurred and is continuing, (ii) approval of the proposed transferee's ownership structure, financial condition and management experience for comparable properties, (iii) payment of an assumption fee equal to one half of one percent (1/2%) of the outstanding principal balance of the Loan, (iv) replacing the Guarantors with substitute guarantors reasonably acceptable to Lender, (v) assumption in writing by the transferee and a guarantor acceptable to Lender in its sole discretion of all obligations of the transferor and Guarantor under the Loan Documents and execution and delivery of such other documentation as may be required by Lender and the Rating Agencies, (vi) delivery of a new substantive nonconsolidation opinion, and other applicable opinions as required by Lender and the Rating Agencies, (vii) adjusting amounts required for the Reserve Accounts, and (viii) obtaining Rating Confirmations if a Securitization has occurred. Borrower agrees to pay all of Lender's reasonable expenses incurred in connection with reviewing and documenting a Transfer (including, without limitation, the costs of obtaining Rating Confirmations if required), which amounts must be paid by Borrower whether or not the proposed Transfer is approved. Upon Borrower's failure to pay such amounts, and in addition to Lender's remedies for Borrower's failure to perform, the unpaid amounts shall be added to principal, shall bear interest at the Default Rate until paid in full, and payment of such amounts shall be secured by the Security Instrument and other collateral given to secure the Loan. 10.03. Borrower Right to Partial Releases for Partial Release Price. (a) Right to Release. After the Lock-Out Period has expired, Borrower shall have the right, from time to time, to obtain a partial release ("PARTIAL RELEASE") of a Release Property from the Security Instrument, Assignment of Leases and Rents and related UCC financing statements. Borrower must provide not less than forty-five (45) days prior written notice to Lender requesting a Partial Release and identifying the Release Property and date upon which Borrower intends to have the Release Property released ("PARTIAL RELEASE DATE"). Lender shall permit a Partial Release, upon satisfaction, to Lender's reasonable satisfaction, of each of the following conditions: (i) No Event of Default shall have occurred and be continuing at the time Borrower requests a Partial Release or on the Partial Release Date. (ii) On or before the Partial Release Date, Borrower shall deliver to Lender 125% of the Allocated Loan Amount (the "PARTIAL RELEASE PRICE") allocated to the Release Property under this Loan Agreement (unless the Debt Service Coverage Ratio, after giving effect to the release, is 1.20:1.00 or greater, whereupon the Partial Release Price shall be equal to 115% of the Allocated Loan Amount allocated to the Release Property). (iii) Borrower pays to Lender a release fee equal to one percent (1%) of the Partial Release Price for the applicable Property. 52 LOAN NUMBER: 41655 (iv) The Property remaining after the Partial Release (and all prior Partial Releases) continues to be in material compliance with all Requirements of Law (including, without limitation, all zoning and subdivision laws, setback requirements, parking ratio requirements and use requirements), has direct access to a public right of way and is subject to no material encroachments from the Release Property. (v) Borrower has delivered to Lender forms of all documents necessary to release the Release Property from the liens created by the Security Instrument, Assignment of Rents and Leases and related UCC financing statements, each in appropriate form required by the state in which the Release Property is located and otherwise reasonably satisfactory to Lender in all respects. (vi) Borrower has obtained a Rating Confirmation. (vii) Borrower has delivered a Compliance Certificate along with a certificate from a Responsible Officer certifying that the requirements set forth in this Section 10.03 have been satisfied in all material respects. (viii) Borrower has paid all amounts then due and payable under the Loan Documents through (and including) the Release Date and in connection with the Partial Release. Following a Partial Release, all references in the Loan Documents shall be deemed to refer to the Property as it existed prior to the Partial Release less the Release Property. Subject to the provisions of Section 9.24 hereof, any transfer or termination of any Parking Lease (whether by expiration of the stated term or otherwise), or the loss of any license or permit or zoning designation necessary to operate the Individual Property as a parking lot (unless Borrower proves to Lender's reasonable satisfaction that such license or permit can be obtained within a reasonable period of time, or, in the alternative, such loss will not have a material adverse impact on Borrower's Operating Income) shall be deemed a Partial Release of such Property, and Borrower shall comply with all of the obligations set forth in this Section 10.03(a) within five (5) days of such transfer or termination. (b) Reimbursement of Lender Expenses. Borrower agrees to pay all of Lender's reasonable, out-of-pocket expenses incurred in connection with reviewing and documenting such Partial Release (including, without limitation, the costs of obtaining Rating Confirmations if required by Lender), which amounts must be paid by Borrower whether or not the proposed Partial Release is approved or executed. Upon Borrower's failure to pay such amounts, and in addition to Lender's remedies for Borrower's failure to perform, the unpaid amounts shall be added to principal, shall bear interest at the Default Rate until paid in full and payment of such amounts shall be secured by the Security Instrument and other collateral given to secure the Loan. (c) Liens of Security Instrument Otherwise Unaffected. No Partial Release granted by Lender shall, in any way, impair or affect the lien or priority of the Security Instrument relating to the portion of the Property not included in the Partial Release (or any prior Partial Release) or improve the position of any subordinate lienholder with respect thereto, 53 LOAN NUMBER: 41655 except to the extent that the obligations hereunder shall have been reduced by the actual monetary consideration, if any, received by Lender for such Partial Release. This Security Instrument shall continue as a Lien and security interest on the portion of the Property not included in a Partial Release (or any prior Partial Releases). 10.04. Other Releases of the Mortgaged Property. In addition to the rights granted to Borrower under Section 10.03 with respect to the Release Properties, Lender may release any other portions of the Property for such consideration and upon such conditions as Lender may require without, as to the remainder of the Property, in any way impairing or affecting the Lien or priority of the Security Instrument or improving the position of any subordinate lienholder with respect thereto, except to the extent that the obligations hereunder shall have been reduced by the actual monetary consideration, if any, received by Lender for such release, and Lender may accept by assignment, pledge or otherwise any other property in place thereof as Lender may require without being accountable for so doing to any other lienholder. Notwithstanding anything to the contrary herein, Borrower shall have no right to request and Lender shall have no obligation to grant its consent to any release pursuant this Section 10.04. ARTICLE 11 EVENTS OF DEFAULT; REMEDIES 11.01. Events of Default. The occurrence of any one or more of the following events shall, at Lender's option, constitute an "Event of Default" hereunder: (a) If any payment of interest is not paid in full within five (5) days after the Payment Due Date on which such payment is due; (b) If any monthly payment required to be made to a Reserve Account is not paid within five (5) days after the Payment Due Date on which such payment is due; (c) If unpaid principal, accrued but unpaid interest and all other amounts outstanding under the Loan Documents are not paid in full on or before the Maturity Date; (d) Intentionally Omitted; (e) If any representation or warranty made by Borrower, SPE Equity Owner, Equity Owner or any Guarantor herein, in the Guaranty, in the Environmental Indemnity or in any other Loan Document, or in any certificate, report, financial statement or other instrument or document furnished to Lender in connection herewith or hereafter, or in connection with any request for consent by Lender made during the term of the Loan shall have been false or misleading in any material respect as of the date made; (f) If Borrower, SPE Equity Owner, Equity Owner or any Guarantor shall (i) make an assignment for the benefit of creditors; (ii) generally not be paying its debts as they become due; or (iii) admit in writing its inability to pay its debts as they become due; 54 LOAN NUMBER: 41655 (g) If (i) Borrower, SPE Equity Owner, Equity Owner or any Guarantor shall commence any case, proceeding or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors (A) seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets; or (ii) there shall be commenced against Borrower, SPE Equity Owner, Equity Owner or any Guarantor any case, proceeding or other action of a nature referred to in clause (i) above by any party other than Lender which (A) results in the entry of an order for relief or any such adjudication or appointment, or (B) remains undismissed, undischarged or unbonded for a period of ninety (90) days; or (iii) there shall be commenced against Borrower, SPE Equity Owner, Equity Owner or any Guarantor any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of any order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within ninety (90) days from the entry thereof; or (iv) Borrower, SPE Equity Owner, Equity Owner or any Guarantor shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; (h) Any judgment for monetary damages is entered against Borrower, SPE Equity Owner, Equity Owner or any Guarantor which, in Lender's sole judgment, has a Material Adverse Effect or is not covered to Lender's satisfaction by collectible insurance proceeds; (i) If Borrower or SPE Equity Owner violates or fails to comply in any material respect with any provision of Article 7 of this Loan Agreement (captioned: Single Purpose Entity Requirements); (j) If Borrower violates or fails to comply with any of the provisions of Section 9.03 (captioned: Insurance), Section 9.06 (captioned: Leases and Rents), or Section 9.13 (captioned: Existence, Change of Name or Location as a Registered Organization); (k) If a Transfer (other than a Permitted Transfer) shall occur without Lender's prior written consent or in violation of the terms of Lender's consent; (l) If Borrower abandons or ceases work on any Capital Improvement or Replacement for a period of more than twenty (20) days, unless such cessation results from causes beyond the reasonable control of Borrower and Borrower is diligently pursuing reinstitution of such work or such cessation occurs in the ordinary course of business and will not have a Material Adverse Effect; 55 LOAN NUMBER: 41655 (m) If a Lien (other than a Permitted Encumbrance or a Lien granted to Lender) is filed against the Property, unless such Lien is promptly contested in good faith by Borrower as permitted in accordance with Section 9.02 (b); (n) If a Data Delivery Failure occurs as described in Section 9.11(d); (o) If any of the material assumptions contained in the substantive nonconsolidation opinion delivered to Lender in connection with the Loan, or in any update thereof or additional substantive nonconsolidation opinion delivered subsequent to the closing of the Loan, is or shall become untrue in any material respect; (p) If Borrower fails to pay the Prohibited Prepayment Fee or any other fees or damages due hereunder when required; (q) Except for the specific defaults set forth in this Section 11.01, if Borrower fails to perform fully and timely any obligation hereunder or under any other Loan Document, or any other default occurs hereunder or under any other Loan Document, in either case which is not cured (i) in the case of any failure or default which can be cured by the payment of a sum of money, within five (5) days after written notice from Lender to Borrower, or (ii) in the case of any other failure or default, within thirty (30) days after written notice from Lender to Borrower; provided that if a failure or default under clause (ii) cannot reasonably be cured within such thirty (30) day period and Borrower has responsibly commenced to cure such failure or default promptly upon notice thereof from Lender and thereafter diligently proceeds to cure same, such thirty (30) day period shall be extended for so long as necessary to permit Borrower, in the exercise of due diligence, to cure such failure or default, but in no event shall the entire cure period be more than sixty (60) days; (r) If any Guarantor repudiates or revokes the Guaranty; or (s) The death or incapacity of any Guarantor. Notwithstanding the foregoing, a Guarantor's actions in subsections (f), (g), (h), (r) and (s) shall not result in an Event of Default hereunder, if (i) Borrower provides a replacement Guarantor within ninety (90) days of the occurrence of any event described in such subsections who satisfies Lender's requirements as to creditworthiness, net worth and liquidity substantially similar to those imposed by Lender on the existing Guarantors, or (ii) each remaining Guarantor increases its Guaranteed Amount (as such term is defined in the Guaranty) on a prorata basis such that the total of all remaining Guarantors' Guaranteed Amounts equals $2,000,000. 11.02. Remedies. If an Event of Default occurs, Lender may, at its option, and without prior notice or demand, do and hereby is authorized and empowered by Borrower so to do, any or all of the following: (a) Acceleration. Lender may declare the entire unpaid principal balance of the Loan to be immediately due and payable. 56 LOAN NUMBER: 41655 (b) Recovery of Unpaid Sums. Lender may, from time to time, take legal action to recover any sums as the same become due, without regard to whether or not the Loan shall be accelerated and without prejudice to Lender's right thereafter to accelerate the Loan or exercise any other remedy, if such sums remain uncollected. (c) Foreclosure. Lender may institute proceedings, judicial or otherwise, for the complete or partial foreclosure of the Security Instrument or the complete or partial sale of the Property under power of sale or under any applicable provision of law. In connection with any such proceeding, Lender may sell the Property as an entirety or in parcels or units and at such times and place (at one or more sales) and upon such terms as it may deem expedient unless prohibited by law from so acting. (d) Receiver. Lender may apply for the appointment of a receiver, trustee, liquidator or conservator of the Property, without regard for the adequacy of the security for the Debt or a showing of insolvency, fraud or mismanagement on the part of Borrower. Any receiver or other party so appointed has all powers permitted by law which may be necessary or usual in such cases for the protection, possession, control, management and operation of the Property. Borrower hereby consents, to the extent permitted under applicable law, to the appointment of a receiver or trustee of the Property upon Lender's request if an Event of Default has occurred. At Lender's option, such receiver or trustee shall serve without any requirement of posting a bond. (e) Recovery of Possession. Lender may enter into or upon the Property, either personally or by its agents, and dispossess and exclude Borrower and its agents and servants therefrom (without liability for trespass, damages or otherwise), and take possession of all books, records and accounts relating to the Property, and Borrower agrees to surrender possession of the Property and all other Property, including without limitation, all documents, books, records and accounts relating to the Property, to Lender upon demand. As a mortgagee-in-possession of the Property, Lender shall have all rights and remedies permitted by law or in equity to a mortgagee-in-possession, including, without limitation, the right to charge Borrower the fair and reasonable rental value for Borrower's use and occupation of any part of the Property that may be occupied or used by Borrower and the right to exercise all rights and powers of Borrower with respect to the Property, whether in the name of Borrower or otherwise (including, without limitation, the right to make, cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for, collect and receive all Rents of the Property). (f) UCC Remedies. Lender may exercise with respect to the Property, each right, power or remedy granted to a secured party under the UCC, including, without limitation, (i) the right to take possession of the Property and to take such other measures as Lender deems necessary for the care, protection and preservation of the Property, and (ii) the right to require that Borrower, at its expense, assemble the Property and make it available to Lender at a convenient place acceptable to Lender. Any notice of sale, disposition or other intended action by Lender with respect to the Property sent to Borrower in accordance with the provisions hereof at least ten (10) days prior to such action, shall constitute reasonable notice to Borrower. Lender shall not have any obligation to clean-up or otherwise prepare the Property for sale. 57 LOAN NUMBER: 41655 (g) Apply Funds in Reserve Accounts. Lender may apply any funds then deposited in any or all of the Reserve Accounts and or otherwise held in escrow or reserve by Lender under the Loan Documents (including without limitation Restoration Proceeds) as a credit on to Loan, in such priority and proportion as Lender deems appropriate; provided, however, that Lender may not apply sums in the Recourse Carveout Reserve Account to the payment of Debt unless (and then only to the extent that) Borrower has personal liability for the Loan pursuant to Section 12.02 of this Loan Agreement or has personal liability for Lender's losses, costs and expenses pursuant to Section 12.03 of this Loan Agreement. (h) Insurance Policies. Lender may surrender any or all insurance policies maintained as required by this Loan Agreement, collect the unearned Insurance Premiums and apply such sums as a credit on the Loan, in such priority and proportion as Lender deems appropriate. Borrower hereby appoints Lender its attorney-in-fact with full power of substitution (and which shall be deemed to be coupled with an interest and irrevocable until the Loan is paid and the Security Instrument is discharged of record, with Borrower hereby ratifying all that its said attorney shall do by virtue thereof) to surrender such insurance policies and collect such Insurance Premiums. (i) Application of Letter of Credit. Lender may draw on the Letter of Credit, without prior notice to Borrower, and apply such amounts as a credit on the Loan, in such priority and proportion as Lender deems appropriate; provided, however, that Lender may not apply the proceeds of any letter of Credit provided by Borrower in lieu of its obligation to deposit funds into the Recourse Carveout Reserve Account to the payment of the Loan unless (and then only to the extent that) Borrower has personal liability for the Loan pursuant to Section 12.02 of this Loan Agreement or has personal liability for Lender's losses, costs and expenses pursuant to Section 12.03 of this Loan Agreement. (j) Protection of Lender's Security and Right to Cure. Lender may, without releasing Borrower from any obligation hereunder or waiving the Event of Default, perform the obligation which Borrower failed to perform in such manner and to such extent as Lender deems necessary to protect and preserve the Property and Lender's interest therein, including without limitation (i) appearing in, defending or bringing any action or proceeding with respect to the Property, in Borrower's name or otherwise; (ii) making repairs to the Property or completing improvements or repairs in progress; (iii) hiring and paying legal counsel, accountants, inspectors or consultants; and (iv) paying amounts which Borrower failed to pay. Amounts disbursed by Lender shall be added to the Loan, shall be immediately due and payable, and shall bear interest at the Default Rate from the date of disbursement until paid in full. (k) Violation of Laws. If the Property is not, in any material respect, in compliance with all Requirements of Laws, Lender may impose additional requirements upon Borrower in connection with such Event of Default including, without limitation, monetary reserves or financial equivalents. (l) Purchase of Rate Cap by Lender. If the Loan has been accelerated following an Event of Default and the Rate Cap obtained by Borrower expires prior to 58 LOAN NUMBER: 41655 Lender's receipt of full payment of the Loan or completion of a foreclosure action (or acceptance of a deed-in-lieu of foreclosure), Lender may purchase, at Borrower's expense, a Rate Cap upon such terms as Lender deems necessary to guard against fluctuations of the interest rate of the Loan until the Loan is paid in full or a foreclosure action (or acceptance of a deed-in-lieu of foreclosure) is completed. 11.03. Cumulative Remedies; No Waiver; Other Security. Lender's remedies under this Loan Agreement are cumulative (whether set forth in this Article 11 or in any other section of this Loan Agreement) with those in the other Loan Documents and otherwise permitted by law or in equity and, to the extent permitted by applicable law, may be exercised independently, concurrently or successively in Lender's sole discretion and as often as occasion therefor shall arise. Lender's delay or failure to accelerate the Loan or exercise any other remedy upon the occurrence of an Event of Default shall not be deemed a waiver of such right as remedy. No partial exercise by Lender of any right or remedy will preclude further exercise thereof. Notice or demand given to Borrower in any instance will not entitle Borrower to notice or demand in similar or other circumstances (except where notice is expressly required by this Loan Agreement to be given) nor constitute Lender's waiver of its right to take any future action in any circumstance without notice or demand. Lender may release security for the Loan, may release any party liable therefor, may grant extensions, renewals or forbearances with respect thereto, may accept a partial or past due payment or grant other indulgences, or may apply any other security held by it to payment of the Loan, in each case without prejudice to its rights under the Loan Documents and without such action being deemed an accord and satisfaction or a reinstatement of the Loan. Lender will not be deemed as a consequence of its delay or failure to act, or any forbearance granted, to have waived or be estopped from exercising any of its rights or remedies. 11.04. Enforcement Costs. Borrower shall pay, on written demand by Lender all costs incurred by Lender in (a) collecting any amount payable under the Loan Documents, or (b) enforcing its rights under the Loan Documents, in each case whether or not legal proceedings are commenced or whether legal action is pursued to final judgment. Such fees and expenses include, without limitation, reasonable fees for attorneys, paralegals, law clerks and other hired professionals, a reasonable assessment of the cost of services performed by Lender's default management staff, court fees, costs incurred in connection with pre-trial, trial and appellate level proceedings, including discovery, and costs incurred in post-judgment collection efforts or in any bankruptcy proceeding. Amounts incurred by Lender shall be added to principal, shall be immediately due and payable, shall bear interest at the Default Rate from the date of disbursement until paid in full, if not paid in full within five (5) days after Lender's written demand for payment, and such amounts shall be secured by the Security Instrument and other collateral given to secure the Loan. 11.05. Application of Proceeds. The proceeds from disposition of the Property shall be applied by Lender as a credit to the Loan and to recovery or reimbursement of the costs of enforcement (contemplated by Section 11.04 above) in such priority and proportion as Lender determines appropriate. 59 LOAN NUMBER: 41655 11.06. Cross-Default; Cross-Collateralization; Waiver of Marshalling of Assets. (a) Borrower acknowledges that Lender has made the Loan to Borrower upon the security of its collective interest in the Property and in reliance upon the aggregate of the Property taken together being of greater value as collateral security than the sum of each Individual Property taken separately. Borrower agrees that the Security Instruments are and will be cross-collateralized and cross-defaulted with each other so that (i) an Event of Default under any of the Security Instruments shall constitute an Event of Default under each of the other Security Instrument which secure the Note; (ii) an Event of Default under the Note or this Agreement shall constitute an Event of Default under each Security Instrument; (iii) each Security Instrument shall constitute security for the Note as if a single blanket lien were placed on all of the Properties as security for the Note; and (iv) such cross-collateralization shall in no event be deemed to constitute a fraudulent conveyance. (b) To the fullest extent permitted by law, Borrower, for itself and its successors and assigns, waives all rights to a marshalling of the assets of Borrower, Borrower's partners and others with interests in Borrower, and of the Property, or to a sale in inverse order of alienation in the event of foreclosure of all or any of the Security Instruments, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of the Property for the collection of the Debt without any prior or different resort for collection or of the right of Lender to the payment of the Debt out of the net proceeds of the Property in preference to every other claimant whatsoever. In addition, to the extent permitted by applicable law, Borrower, for itself and its successors and assigns, waives in the event of foreclosure of any or all of the Security Instruments, any equitable right otherwise available to Borrower which would require the separate sale of the Property or require Lender to exhaust its remedies against any Individual Property or any combination of the Property before proceeding against any other Individual Property or combination of Property; and further in the event of such foreclosure Borrower does hereby expressly consents to and authorizes, at the option of Lender, the foreclosure and sale either separately or together of any combination of the Property. ARTICLE 12 NONRECOURSE - LIMITATIONS ON PERSONAL LIABILITY 12.01. Nonrecourse Obligation. Except as otherwise provided in this Article 12, in Section 15.05 or as expressly stated in any of the other Loan Documents, Lender shall enforce the liability of Borrower to perform and observe the obligations contained in this Loan Agreement and in each other Loan Document only against the Property and other collateral given by Borrower as security for payment of the Loan and performance of Borrower's obligations under the Loan Documents and not against Borrower or any of Borrower's principals, directors, officers or employees. Without limiting the foregoing, this Article 12 is not applicable to the Environmental Indemnity or to any Guaranty executed in connection herewith. 12.02. Full Personal Liability. Section 12.01 above shall BECOME NULL AND VOID and the Loan FULLY RECOURSE to Borrower if: (a) the Property or any part thereof 60 LOAN NUMBER: 41655 becomes an asset in a voluntary bankruptcy or other voluntary insolvency proceeding; or (b) an involuntary bankruptcy or other insolvency proceeding is commenced against Borrower (by a party other than Lender) but only if Borrower has failed to use commercially reasonable efforts to cause such proceeding to be dismissed (provided that such efforts shall not require that the Borrower is capitalized to pay off the person or entity that has commenced such proceedings) or has consented to such proceeding or if Borrower, Guarantor or any Affiliate of Borrower or any Guarantor has acted in concert with, colluded or conspired with the party to cause the filing thereof. 12.03. Personal Liability for Certain Losses. Section 12.01 above SHALL NOT APPLY and Borrower shall be PERSONALLY LIABLE for all losses, claims, expenses or other liabilities incurred by Lender arising out of, or attributable to, any of the following: (a) Fraud or intentional misrepresentation or failure to disclose a material fact by Borrower or any other agent or representative of Borrower in connection with (i) the application for the Loan or the execution and delivery of the Loan Documents or making of the Loan, (ii) any financial statement or any other material certificate, report or document required to be furnished by Borrower to Lender herewith or hereafter, or (iii) any request for Lender's consent made during the term of the Loan; (b) A violation of any provision of Article 10 (captioned: No Transfers or Encumbrances; Due On Sale); (c) Any material breach by Borrower or the SPE Equity Owner of Article 7 (captioned: Single Purpose Entity Requirements); (d) Failure by Borrower, SPE Equity Owner or the Equity Owner to comply with any of the provisions of Section 9.13 (captioned: Existence, Change of Name or Location as a Registered Organization) of the Loan Agreement; (e) Misapplication or misappropriation of (i) insurance proceeds or condemnation awards payable to Lender in accordance with the Loan Agreement; (ii) Rent or other Operating Income received by Borrower, (iii) Rent paid in advance by tenants under the Leases; (iv) tenant security deposits or other refundable deposits held by or on behalf of Borrower in connection with Leases or (v) collateral, including but not limited to (x) removal of all or any portion of the Personal Property in violation of the Loan Documents and (y) fees or commissions paid by Borrower, after the occurrence and during the continuance of an Event of Default, to any Guarantor, any Affiliate, or any principal of Borrower, any Guarantor or Affiliate, in violation of the Loan Documents; (f) Intentionally Omitted; (g) Intentionally Omitted; (h) Criminal acts or gross negligence of Borrower, any principal of Borrower, or any Affiliate resulting in the seizure, forfeiture or loss of all or any part of the Property; 61 LOAN NUMBER: 41655 (i) Intentionally Omitted; (j) All amounts contemplated under Section 11.04; (k) All amounts expended by Lender to protect its interest in the Property or other collateral; (l) All amounts expended by Lender for any real estate or other transfer tax incurred to transfer title to the Property in connection with any foreclosure, deed in lieu of foreclosure or non-judicial sale of the Property following the occurrence of an Event of Default; and (m) Any liability arising under the Environmental Indemnity. 12.04. No Impairment. Nothing contained in this Article 12 shall impair, release or otherwise adversely affect: (a) any lien, assignment or security interest created by the Loan Documents; (b) any indemnity, personal guaranty, master lease or similar instrument now or hereafter made in connection with the Loan (including, without limitation, the Environmental Indemnity and Guaranty); (c) Lender's right to have a receiver or trustee appointed for the Property; (d) Lender's right to name Borrower as a defendant in any foreclosure action or judicial sale under the Security Instrument or other Loan Documents or in any action for specific performance or otherwise to enable Lender to enforce obligations under the Loan Documents or to realize upon Lender's interest in any collateral given to Lender as security for the Loan; or (e) Lender's right to a judgment on the Note against Borrower if necessary to enforce any guaranty or indemnity provided in connection with the Note or to obtain any insurance proceeds or condemnation awards to which Lender would otherwise be entitled under this Loan Agreement; provided, however, that any judgment obtained against Borrower shall, except to the extent otherwise expressly provided in this Article 12, be enforceable against Borrower only to the extent of Borrower's interest in the Property and other collateral securing payment of the Loan and performance of Borrower's obligations under the Loan Documents. 12.05. No Waiver of Certain Rights. Nothing contained in this Article 12 shall be deemed a waiver of any right which Lender may have under the Bankruptcy Code or applicable law to protect and pursue its rights under the Loan Documents including, without limitation, its rights under Sections 506(a) or any other provision of the Bankruptcy Code to file a claim for the full amount of the Loan or to require that the collateral continues to secure all of the indebtedness owing to Lender under Loan Documents. ARTICLE 13 INDEMNIFICATION 13.01. Indemnification Against Claims. Borrower shall indemnify, defend, release and hold harmless Lender and each of the other Indemnified Parties from and against any and all Losses (other than, with respect to any Individual Property, those Losses arising solely from a state of facts that first came into existence after the date that Lender acquired title to such Individual Property by foreclosure or deed in lieu of foreclosure) directly or indirectly arising out 62 LOAN NUMBER: 41655 of, or in any way relating to, or as a result of (a) accident, injury to or death of Persons, or loss of, or damage to, property occurring in, on or with respect to the Property or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways or otherwise arising with respect to the use of the Property; (b) failure of the Property to be in compliance with any Requirements of Law; (c) breach or default of Borrower's representations or obligations under Sections 8.27, 8.28 or 9.16 of this Loan Agreement; (d) any and all claims and demands whatsoever which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge the lessor's agreements contained in any Lease; (e) breach or default under the ERISA obligations set forth in Sections 8.26 and 9.15 of this Loan Agreement (including, without limitation, legal fees and costs incurred in the investigations, defense and settlement of Losses incurred in correcting any prohibited transaction or in the sale of a prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA that may be required, in Lender's sole discretion); or (f) any claim, litigation, investigation or proceeding commenced or threatened relating to any of the foregoing, whether or not Indemnified Party is a party thereto; provided, however, any such indemnity shall not apply to any Indemnified Party to the extent any such Losses arise from Indemnified Party's gross negligence or willful misconduct (collectively, "INDEMNIFIED CLAIMS"). 13.02. Duty to Defend. If an Indemnified Party claims indemnification under this Loan Agreement, the Indemnified Party shall promptly notify Borrower of the Indemnified Claim. After notice by any Indemnified Party, Borrower shall defend such Indemnified Party against such Indemnified Claim (if requested by any Indemnified Party, in the name of the Indemnified Party) by attorneys and other professionals reasonably approved, in writing, by the Indemnified Party. Notwithstanding the foregoing, any Indemnified Party may, in its sole discretion and at the expense of Borrower, engage its own attorneys and other professionals to defend or assist it if such Indemnified Party reasonably determines that the strategic approach of the defense proposed or conducted by Borrower is unsatisfactory or that a conflict of interest exists between any of the parties represented by Borrower's counsel in such action or proceeding. Within five (5) business days of Indemnified Party's demand, Borrower shall pay or, in the sole discretion of the Indemnified Party, reimburse, the Indemnified Party for the payment of Indemnified Party's costs and expenses (including, without limitation, reasonable attorney fees, engineer fees, environmental consultant fees, laboratory fees and other professionals in connection therewith) in connection with the Indemnified Claim. Payment not made timely shall bear interest at the Default Rate until paid in full and payment of such amounts shall be secured by the Security Instrument and other collateral given to secure the Loan. ARTICLE 14 SUBROGATION; NO USURY VIOLATIONS 14.01. Subrogation. If the Loan is used to pay, satisfy, discharge, extend or renew any indebtedness secured by a pre-existing mortgage, deed of trust or other Lien encumbering the Property, then to the extent of funds so used, Lender shall automatically, and without further action on its part, be subrogated to all rights, including lien priority, held by the holder of the indebtedness secured by such prior Lien, whether or not the prior Lien is released, and such former rights are not waived but rather are continued in full force and effect in favor of 63 LOAN NUMBER: 41655 Lender and are merged with the Liens created in favor of Lender as security for payment of the Loan and performance of the Obligations. 14.02. No Usury. At no time is Borrower required to pay interest on the Loan or on any other payment due hereunder or under any of the other Loan Documents (or to make any other payment deemed by law or by a court of competent jurisdiction to be interest) at a rate which would subject Lender either to civil or criminal liability as a result of being in excess of the maximum interest rate which Borrower is permitted by applicable law to pay. If interest (or such other amount deemed to be interest) paid or payable by Borrower is deemed to exceed such maximum rate, then the amount to be paid immediately shall be reduced to such maximum rate and thereafter computed at such maximum rate. All previous payments in excess of such maximum rate shall be deemed to have been payments of principal (in inverse order of maturity) and not on account of interest due hereunder. For purposes of determining whether any applicable usury law has been violated, all payments deemed by law or a court of competent jurisdiction to be interest shall, to the extent permitted by applicable law, be deemed to be amortized, prorated, allocated and spread over the full term of the Loan in such manner so that interest is computed at a rate throughout the full term of the Loan which does not exceed the maximum lawful rate of interest. ARTICLE 15 SALE OR SECURITIZATION OF LOAN 15.01. Splitting the Note. Lender has the right, from time to time, to sever the Note into one or more separate promissory notes in such denominations as Lender determines in its sole discretion (including the creation of a mezzanine loan secured by a collateral assignment of the equity interest in Borrower and SPE Equity Owner and Equity Owner) which promissory notes may be included in separate sales or securitizations undertaken by Lender. In conjunction with any such action, Lender may redefine the interest rate; provided, however, that if Lender redefines the interest rate, the interest rates contained in the severed promissory notes taken in the aggregate shall equal the Applicable Interest Rate. Subject to the foregoing, each severed promissory note, and the Loan evidenced thereby, shall be upon all of the terms and provisions contained in this Loan Agreement and the Loan Documents which continue in full force and effect, except that Lender may allocate specific collateral given for the Loan as security for performance of specific promissory notes, in each case with or without cross default provisions. Borrower, at Borrower's expense, agrees to cooperate with all reasonable requests of Lender to accomplish the foregoing, including, without limitation, execution and prompt delivery to Lender of a severance agreement and such other documents as Lender shall reasonably require. Borrower hereby appoints Lender its attorney-in-fact with full power of substitution (and which shall be deemed to be coupled with an interest and irrevocable until the Loan is paid and the Security Instrument is discharged of record, with Borrower hereby ratifying all that its said attorney shall do by virtue thereof) to make and execute all documents necessary or desirable to effect the aforesaid severance; provided, however, Lender shall not make or execute any such documents under such power until five (5) days after written notice has been given to Borrower by Lender of Lender's intent to exercise its rights under such power. Borrower's failure to deliver any of the documents requested by Lender hereunder for a period of ten (10) business 64 LOAN NUMBER: 41655 days after such notice by Lender shall, at Lender's option, constitute an Event of Default hereunder. 15.02. Lender's Rights to Sell or Securitize. Borrower acknowledges that Lender, and each successor to Lender's interest, may (without prior notice to Borrower or Borrower's prior consent), sell or grant participation in the Loan (or any part thereof), sell or subcontract the servicing rights related to the Loan, Securitize the Loan or include the Loan as part of a Securitization and, in connection therewith, assign Lender's rights hereunder to a securitization trustee. Borrower, at its expense, agrees to cooperate with all reasonable requests of Lender in connection with any of the foregoing including, without limitation, (i) providing additional information regarding the Property, Borrower, or any of its Affiliates (such information to include additional appraisals, environmental reports, engineering reports and similar due diligence materials and updates, and verifications and consents with respect to such materials that were delivered at closing), (ii) delivering additional landlord and/or tenant estoppel letters, subordination agreements or similar agreements (subject, in all instances, to the terms and conditions of the applicable leases), (iii) participating in meetings and presentations (including the senior management of Borrower) to the Rating Agencies and prospective investors (in each case as required by the Rating Agencies or prospective investors), (iv) executing any financing statements or other documents deemed necessary by Lender or its transferee to create, perfect or preserve the rights and interest to be acquired by such transferee, (v) provide any updated financial information with appropriate verification through auditors letters, (vi) deliver revised organizational documents and counsel opinions satisfactory to the Rating Agencies, (vii) execute amendments to the Loan Documents, and (viii) review information contained in a preliminary or final private placement memorandum, prospectus, prospectus supplements or other disclosure document providing a mortgagor estoppel certificate and such other information about Borrower, SPE Equity Owner, Equity Owner, any Guarantor or the Property as Lender may require for Lender's offering materials, provided that no such modification, revision, additional documents, or other action in connection with such cooperation shall materially increase the obligations or materially decrease the rights of Borrower pursuant to the Loan Documents. At the request of Lender, Borrower shall make such representations and warranties as of the date of the securitization as are customary in securitization transactions involving properties of the same nature as the subject properties. Notwithstanding the foregoing, Borrower's obligations to obtain landlord estoppel letters with respect to the Parking Leases shall be limited as follows: Borrower shall not be required to obtain estoppels for those Individual Properties listed on Schedule 15.02.1, shall be required only to use commercially reasonable efforts to obtain estoppels for those Individual Properties listed on Schedule 15.02.2, and for all other Individual Properties shall obtain estoppels representing at least 80% of the Loan amount allocated to all such Individual Properties. 15.03. Dissemination of Information. Borrower acknowledges that Lender may provide to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, ownership, purchase, participation or Securitization of the Loan, including, without limitation, any Rating Agency and any entity maintaining databases on the underwriting and performance of commercial mortgage loans, any and all information which Lender now has or may hereafter acquire relating to the Loan, the Property, Borrower, SPE Equity Owner, Equity Owner or any Guarantor, as Lender determines necessary or desirable and 65 LOAN NUMBER: 41655 that such information may be included in disclosure documents in connection with a Securitization or syndication of participation interests, including, without limitation, a prospectus, prospectus supplement, offering memorandum, private placement memorandum or similar document (each, a "DISCLOSURE DOCUMENT") and also may be included in filing with the Securities and Exchange Commission pursuant to the Securities Act on the Securities Exchange Act. To the fullest extent permitted under applicable law, Borrower irrevocably waives all rights, if any, to prohibit such disclosure, including, without limitation, any right of privacy. 15.04. Reserves Accounts. If the Loan is made a part of a Securitization, Borrower acknowledges that all funds held by Lender in the Reserve Accounts in accordance with this Loan Agreement or the other Loan Documents shall be deposited in "eligible accounts" at "eligible institutions" or invested in "permitted investments" as then defined and required by the Rating Agencies, and this Loan Agreement will automatically be amended to so provide. 15.05. Securitization Indemnification. Each of Borrower and each Guarantor agrees to provide, in connection with each Disclosure Document provided by Lender to such parties, an indemnification certificate: (a) certifying that Borrower and such Guarantor have reviewed such Disclosure Document including, without limitation, the sections entitled "Special Considerations," and/or "Risk Factors," and "Certain Legal Aspects of the Mortgage Loan," or similar sections, and all sections relating to Borrower, SPE Equity Owner, Equity Owner, Guarantors, Property Manager, if any, their respective Affiliates, the Loan, the Loan Documents and the Property, and any risks or special considerations relating thereto, and that, to the best of such Indemnitor's knowledge, such sections (and any other sections reasonably requested) do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; (b) indemnifying Lender (and for purposes of this Section 15.05, Lender shall include its officers and directors) and the Affiliate of Lender that (i) has filed the registration statement, if any, relating to the Securitization and/or (ii) which is acting as issuer, depositor, sponsor and/or a similar capacity with respect to the Securitization (any Person described in (i) or (ii), an "ISSUER PERSON"), and each director and officer of any Issuer Person, and each Person or entity who controls any Issuer Person within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act (collectively, "ISSUER GROUP"), and each Person which is acting as an underwriter, manager, placement agent, initial purchaser or similar capacity with respect to the Securitization, each of its directors and officers and each Person who controls any such Person within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act which is acting as an underwriter, manager, placement agent, initial purchaser or similar capacity with respect to the Securitization, each of its directors and officers and each Person who controls any such Person within the meaning of Section 15 of the Securities Act and Section 20 of the Securities Exchange Act (collectively, "UNDERWRITER GROUP") for any Losses to which Lender, the Issuer Group or the Underwriter Group may become subject insofar as the Losses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such section or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such sections necessary in order to make the statements in such sections or in light of the circumstances under which they were made, not misleading (collectively, "SECURITIES LIABILITIES"); and (c) agreeing to reimburse Lender, the Issuer Group and the Underwriter Group for any legal or other expenses reasonably 66 LOAN NUMBER: 41655 incurred by Lender, the Issuer Group and the Underwriter Group in investigating or defending the Securities Liabilities; provided, however, that indemnitor will be liable under clauses (b) or (c) above only if and to the extent that (a) such misstatement or omission is material and (b) Borrower, each Guarantor and their respective Affiliates knew, or reasonably should have known after due inquiry, at the time that Borrower, each Guarantor and their respective Affiliates approved the Disclosure Document, that the Disclosure Document contained a material misstatement or omission. This indemnity is in addition to any liability which Borrower may otherwise have and shall be effective whether or not an indemnification certificate described in (a) above is provided and shall be applicable based on information previously provided by or on behalf of Borrower or a Guarantor if the indemnification certificate is not provided. 15.06. Additional Financial Information for Large Loans. (a) If required by law in connection with a Securitization, Borrower, at Borrower's expense, shall provide Lender with all financial statements and other financial, statistical or operating information, to the extent required pursuant to Regulation S-X of the Securities Act or any other Requirements of Law in connection with any Disclosure Document or Securities Filing. All financial statements provided by Borrower pursuant to this Section shall be prepared in accordance with GAAP and shall meet the requirements of Regulation S-X and other applicable Requirements of Law. All financial statements reporting for a full operating year (i) shall be audited by the independent accountants in accordance with generally accepted auditing standards, Regulation S-X and all other applicable Requirements of Law, (ii) shall be accompanied by the manually executed report of the independent accountants thereon, which report shall meet the requirements of Regulation S-X and all other applicable Requirements of Law, and (iii) shall be accompanied by a manually executed written consent of the independent accountants, acceptable to Lender, that authorizes the inclusion of such financial statements in any Disclosure Document or Securities Filing and permits the use of the name of such independent accountants and reference to such independent accountants as "experts" in any Disclosure Document and Securities Filing, all of which shall be provided, at Borrower's expense, at the same time as the related financial statements are required to be provided. All other financial statements shall be certified by the chief financial officer of Borrower, which certification shall state that such financial statements meet the requirements set forth in the first sentence of this paragraph. (b) If requested by Lender, Borrower shall provide Lender, promptly upon request, with any other or additional financial statements or financial, statistical or operating information as Lender determines to be required pursuant to Regulation S-X or other legal requirements in connection with any Disclosure Document or any filing under or pursuant to the Securities Exchange Act in connection with or relating to a Securitization. (c) If Lender determines in connection with a Securitization, that the financial statements required in order to comply with Regulation S-X or other legal requirements are other than as provided herein, then notwithstanding the provisions of this Section, Lender may request, and Borrower shall promptly provide, such combination of Acquired Property Statement and/or Large Loan Statements or such other financial statements as Lender determines to be necessary or appropriate for such compliance. 67 LOAN NUMBER: 41655 ARTICLE 16 BORROWER'S FURTHER ACTS AND ASSURANCES PAYMENT OF SECURITY RECORDING CHARGES 16.01. Further Acts. Borrower, at Borrower's expense, agrees to take such further actions and execute such further documents as Lender reasonably may request to carry out the intent of the Loan Documents or to establish and protect the rights and remedies created or intended to be created Lender under the Loan Documents or to protect the value of the Property and Lender's security interest or liens therein. Borrower agrees to pay all filing, registration or recording fees or taxes, and all expenses incident to the preparation, execution, acknowledgement, or filing/recording of the Security Instrument, the Assignment of Leases and Rents, financing statements or any such instrument of further assurance, except where prohibited by law so to do. 16.02. Replacement Documents. Upon receipt of an affidavit from an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other Loan Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such document, Borrower will issue a replacement original in lieu thereof in the same original principal amount and otherwise on the same terms and conditions as the original. 16.03. Borrower Estoppel Certificates. (a) Borrower Information. Borrower, within ten (10) days of Lender's written request (but in any event not more than four (4) times annually, except following an Event of Default, in which case such limitation shall not apply), shall furnish to Lender or Lender's designee a statement, duly acknowledged and certified by a Responsible Officer, setting forth: (i) the Loan Amount and the amount of principal advanced as of the certificate date; (ii) the unpaid principal amount of the Loan; (iii) the calculation of the rate of interest accruing on the Loan, including the then Applicable Interest Rate; (iv) the Payment Due Date, the Maturity Date, any unexercised rights to extend the Maturity Date and any exercised extension of the Maturity Date, if any; (v) the date installments of interest and/or principal were last paid; (vi) that, except as provided in such statement, no defaults or events exists which would be an Event of Default with the giving of any applicable notice or the expiration of any applicable grace or cure period or both; (vii) that the Loan Documents are valid, legal and binding obligations and have not been modified or, if modified, giving the particulars of such modification; (viii) whether any offsets or defenses exist against Borrower's obligation to pay the Loan and perform the Obligations and, if any are alleged to exist, a detailed description thereof; (ix) that all Leases are in full force and effect, and for Leases other than residential Leases, have not been modified or if modified, setting forth all modifications; (x) if requested, a current Rent Roll for the Property, (xi) the date to which Rents under the Leases have been paid; (xii) whether or not, to the best knowledge of Borrower, any of the tenants under the Leases are in default under the Leases, and, if any of the tenants are in default, setting forth the specific nature of all such defaults; and (xiii) such other matters reasonably requested by Lender and reasonably related to the Leases or the Property, including Borrower's due observance, performance and compliance with the terms and conditions of the Parking Leases. 68 LOAN NUMBER: 41655 (b) Tenant Estoppels. Subject to the terms and conditions of the applicable leases, Borrower shall deliver to Lender, promptly upon Lender's written request (but in any event no later than fifteen (15) business days following Lender's request, but in any event not more often than twice annually, except following an Event of Default, in which case such limitation shall not apply), duly executed estoppel certificates from tenants identified by Lender which are paying $50,000 or more annually to Borrower under their respective leases, attesting to such facts regarding a tenant's non-residential Lease as Lender may require, including, without limitation: (i) that the Lease is in full force and effect with no defaults thereunder on the part of any party, and no event exists that would be an event of default thereunder with giving of any applicable notice or the expiration of any applicable grace or cure period or both; (ii) that none of the Rents have been paid more than one month in advance, except as a security deposit; and (iii) that the tenant claims no defense or offset against the full and timely performance of its obligations under the Lease. (c) Lender Statement of Loan Information. After written request by Borrower not more than twice annually, Lender shall furnish Borrower a statement setting forth: (i) the original Loan Amount and the amount of principal advanced by Lender as of the certificate date; (ii) the unpaid principal amount of the Loan; (iii) the rate of interest accruing on the Loan, including the then Applicable Interest Rate; and (iv) the balance of amounts held in the Reserve Accounts, if any. 16.04. Recording Costs. Except as otherwise required by law, Borrower will pay all transfer taxes, filing, registration, recording or similar fees, and all expenses incident to the preparation, execution, acknowledgment, recording, filing and/or release or discharge of the Note, the Security Instrument and each of the other Loan Documents, and all modifications, extensions, consolidations, or restatements of the same, except where prohibited by law so to do. 16.05. Publicity. Borrower acknowledges and agrees that Lender may release publicity articles concerning the financing or servicing of the Loan, subject, however, to the terms of any confidentiality agreement between Borrower and Lender. ARTICLE 17 LENDER CONSENT 17.01. No Joint Venture; No Third Party Beneficiaries. Borrower and Lender intend that the relationships created hereunder and under each of the other Loan Documents are solely those of borrower and lender. Nothing herein or in any of the other Loan Documents is intended to create, nor shall it be construed as creating anything but a debtor-creditor relationship between Borrower and Lender nor shall they be deemed to confer on anyone other than Lender, and its successors and assigns, any right to insist upon or to enforce the performance or observance of any of the obligations contained herein or therein. 17.02. Lender Approval. Wherever pursuant to a Loan Document (a) Lender exercises any right to approve or disapprove or to grant or withhold consent; (b) any arrangement or term is to be satisfactory to Lender; (c) a waiver is requested from Lender, or (d) any other decision is to be made by Lender, all shall be made in Lender's sole discretion, unless expressly 69 LOAN NUMBER: 41655 provided otherwise in such Loan Document. By approving or granting consent, accepting performance from Borrower, or releasing funds from a Reserve Account, Lender shall not be deemed to have warranted or affirmed the sufficiency, completeness, legality or effectiveness of the subject matter or of Borrower's compliance with Requirements of Laws. Notwithstanding any provision under the Loan Documents which provide Lender the opportunity to approve or disapprove any action or decision by Borrower, Lender is not undertaking the performance of any obligation of Borrower under any of the Loan Documents or any of the other documents and agreements in connection with this transaction (including, without limitation, the Leases). 17.03. Performance at Borrower's Expense. Borrower acknowledges and agrees that in connection with each request by Borrower to: (a) modify or waive any provision of the Loan Documents; (b) release or substitute Property; (c) obtain Lender's approval or consent whenever required by the Loan Documents including, without limitation, review of a Transfer request, matters affecting a Major Lease, improvements or alterations to the Property, and easements or other additions to Permitted Encumbrances; or (d) provide a subordination, non-disturbance and attornment agreement, Lender reserves the right to collect a review or processing fee from Borrower based on a reasonable estimate of the administrative costs which Lender will incur to connection therewith. Borrower agrees to pay such fee along with all reasonable legal fees and expenses incurred by Lender and the fees required for a Rating Confirmation or approval from the trustee if the Loan has been Securitized, as applicable, irrespective of whether the matter is approved, denied or withdrawn (provided, however, that Lender shall only charge review or processing fees which Lender typically and customarily charges to similarly situated Borrowers). Any amounts payable by Borrower hereunder, shall be deemed a part of the Loan, shall be secured by this Loan Agreement and shall bear interest at the Default Rate if not fully paid within ten (10) days of written demand for payment. ARTICLE 18 MISCELLANEOUS PROVISIONS 18.01. Notices. All notices and other communications under this Loan Agreement are to be in writing and addressed to each party as set forth below. Default or demand notices shall be deemed to have been duly given upon the earlier of: (a) actual receipt; (b) one (1) business day after having been timely deposited for overnight delivery, fee prepaid, with a reputable overnight courier service, having a reliable tracking system; or (c) three (3) business days after having been deposited in any post office or mail depository regularly maintained by the U.S. Postal Service and sent by certified mail, postage prepaid, return receipt requested, and in the case of clause (b) and (c) irrespective of whether delivery is accepted. A new address for notice may be established by written notice to the other; provided, however, that no change of address will be effective until written notice thereof actually is received by the party to whom such address change is sent. Notice to outside counsel or parties other than the named Borrower and Lender, now or hereafter designated by a party as entitled to notice, are for convenience only and are not required for notice to a party to be effective in accordance with this section. Notice addresses are as follows: 70 LOAN NUMBER: 41655 Address for Lender: GMAC Commercial Mortgage Corporation 200 Witmer Road Horsham, PA 19044 Attn.: Servicing Accounting - Manager Fax: 215-328-3478 with required copies to: Commercial Capital Initiatives, Inc. 48 Wall Street, 17th Floor New York, NY 10005 Attn.: Manager - Loan Administration Fax: 212-269-5286 and Dechert LLP 4000 Bell Atlantic Tower 1717 Arch Street Philadelphia, PA 19103-2793 Attn: Richard D. Jones Fax: 215-994-2222 Address for Borrower: Parking Company of America Airports, LLC 11101 Lakewood Boulevard Downey, CA 90241 Attn.: Greg Andrews Fax: 562-622-2767 and Dykema Gossett PLLC 400 Renaissance Center Detroit, MI 48243 Attn: Aleks Miziolek Fax: 313-568-6832 18.02. Entire Agreement; Modifications; Time of Essence. This Loan Agreement, together with the other Loan Documents, contain the entire agreement between Borrower and Lender relating to the Loan and supersede and replace all prior discussions, representations, communications and agreements (oral or written). If any documents relating to the Loan are in conflict, the Note shall control over this Loan Agreement, and this Loan Agreement shall control over all of the other documents. No Loan Document shall be modified, supplemented or terminated, nor any provision thereof waived, except by a written instrument signed by the party against whom enforcement thereof is sought, and then only to the extent expressly set forth in such writing. Time is of the essence with respect to all of Borrower's obligations under the Loan Documents. 18.03. Binding Effect; Joint and Several Obligations. This Loan Agreement and each of the other Loan Documents shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, whether by voluntary action of the parties or by operation of law. (The foregoing does not modify any conditions regulating 71 LOAN NUMBER: 41655 Transfers.) If Borrower consists of more than one party, each shall be jointly and severally liable to perform the obligations of Borrower under the Loan Documents. 18.04. Duplicate Originals; Counterparts. This Loan Agreement and each of the other Loan Documents may be executed in any number of duplicate originals, and each duplicate original shall be deemed to be an original. This Loan Agreement and each of the other Loan Documents (and each duplicate original) also may be executed in any number of counterparts, each of which shall be deemed an original and all of which together constitute a fully executed agreement even though all signatures do not appear on the same document. 18.05. Unenforceable Provisions. Any provision of this Loan Agreement or any other Loan Documents which is determined by a court of competent jurisdiction or government body to be invalid, unenforceable or illegal shall be ineffective only to the extent of such holding and shall not affect the validity, enforceability or legality of any other provision, nor shall such determination apply in any circumstance or to any party not controlled by such determination. 18.06. Governing Law. This Loan Agreement and each of the other Loan Documents shall be interpreted and enforced according to the laws of the State of New York (without giving effect to rules regarding conflict of laws), provided, however, that the creation, perfection and enforcement of the lien of each Security Instrument and Assignment of Leases and Rents shall instead be governed by the laws of the state in which the Individual Property encumbered by such Security Instrument and Assignment of Leases and Rents is located. 18.07. Consent to Jurisdiction. Borrower hereby consents and submits to the exclusive jurisdiction and venue of any state or federal court sitting in the county and state of New York with respect to any legal action or proceeding arising with respect to the Loan Documents and waives all objections which it may have to such jurisdiction and venue. Nothing herein shall, however, preclude or prevent Lender from bringing actions against Borrower in any other jurisdiction as may be necessary to enforce or realize upon the security for the Loan provided in any of the Loan Documents. 18.08. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH WAIVE THEIR RESPECTIVE RIGHT, TO THE FULLEST EXTENT PERMITTED BY LAW, AND AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT, OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER. 18.09. Good Faith. All decisions, consents and approvals required of Lender under the Loan Documents, whether exercised in Lender's sole discretion or in its reasonable discretion, shall be made in good faith by Lender. [REMAINDER OF PAGE IS BLANK; SIGNATURES APPEAR ON NEXT PAGE.] 72 IN WITNESS WHEREOF, Lender and Borrower hereby sign, seal and deliver this Loan Agreement. Lender: Borrower: GMAC Commercial Mortgage Corporation PARKING COMPANY OF AMERICA AIRPORTS, LLC, a Delaware limited liability company By: /s/ Nicholas P. Cassino ---------------------------------- Name: NICHOLAS P. CASSINO By: PCAA Parent, LLC, a Delaware Title: SENIOR VICE PRESIDENT limited liability company, its sole member By: Parking Company of America Airports Holdings, LLC, a Delaware limited liability company, its Managing Member By: Macquarie Americas Parking Corporation, a Delaware corporation, its Managing Member By: /s/ Duncan Murdoch ---------------------- Name: DUNCAN MURDOCH Title: VICE PRESIDENT [Signature Page to Loan Agreement] LOAN NUMBER: 41655 PCA AIRPORTS, LTD., a Texas limited partnership By: PCAA GP, LLC, a Delaware limited liability company, its general partner By: PCAA Parent, LLC, a Delaware limited liability company, its sole member By: Parking Company of America Airports Holdings, LLC, a Delaware limited liability company, its Managing Member By: Macquarie Americas Parking Corporation, a Delaware corporation, its Managing Member By: /s/ Duncan Murdoch ---------------------------- Name: DUNCAN MURDOCH Title: VICE PRESIDENT 73 LOAN NUMBER: 41655 PARKING COMPANY OF AMERICA AIRPORTS PHOENIX, LLC, a Delaware limited liability company By: PCAA Parent, LLC, a Delaware limited liability company, its sole member By: Parking Company of America Airports Holdings, LLC, a Delaware limited liability company, its Managing Member By: Macquarie Americas Parking Corporation, a Delaware corporation, its Managing Member By: /s/ Duncan Murdoch ------------------------------- Name: DUNCAN MURDOCH Title: VICE PRESIDENT 74 LOAN NUMBER: 41655
ATTACHMENTS: - ---------------- Schedule 1.01 Defined Terms Schedule 8.01 Exceptions to Required Approvals Schedule 8.04 Litigation Schedule 8.08 Condemnation Proceedings Schedule 8.09 Exceptions to Compliance with Requirements of Law Schedule 8.10 Exceptions to Required Licenses and Permits Schedule 8.11 Exceptions to Separate Tax Lots Schedule 8.15 Encroachments Schedule 8.19(a) Leases Schedule 8.19(d) Leases to Related Persons Schedule 8.32 Changes since Memorandum of Lease Schedule 8.35 Parking Lease Defaults Schedule 8.36 Exceptions to Notice Requirement under Parking Leases Schedule 8.37 Exceptions to Cure Provisions under Parking Leases Schedule 8.38 Term and Extension Options of Parking Leases Schedule 8.39 Exceptions to "New Lease" Requirement under Parking Leases Schedule 8.40 Exceptions to Insurance/Condemnation Proceeds Application under Parking Leases Schedule 8.41 Restrictions to Subletting under Parking Leases Schedule 15.02.1 Parking Lease Estoppels not required Schedule 15.02.2 Estoppels for which Borrower shall use commercially reasonable efforts Exhibit A Compliance Certificate Form Exhibit B Disbursement Request Form Exhibit C Capital Improvements Exhibit D Organizational Chart Exhibit E Intentionally Omitted Exhibit F Replacements Exhibit G Intentionally Omitted Exhibit H Allocated Loan Amounts Exhibit I Parking Leases Exhibit J Off-Airport Parking Lot Businesses
LOAN NUMBER: 41655 SCHEDULE 1.01 LIST OF DEFINED TERMS 1. "ACQUIRED PROPERTY STATEMENTS" has the meaning provided in Section 15.06 of this Loan Agreement. 2. "AFFILIATE" of any Person means (a) any other Person which, directly or indirectly, is in Control of, is Controlled by or is under common Control with, such Person; (b) any other Person who is a director or officer of (i) such Person, (ii) any subsidiary of such Person, or (iii) any Person described in clause (a) above; or (c) any corporation, limited liability company or partnership which has as a director any Person described in clause (b) above. 3. "ALLOCATED LOAN AMOUNT" means, for each Individual Property, the amount set forth on Exhibit H hereto. 4. "APPLICABLE INTEREST RATE" has the meaning set forth in Section 2.02(b) of this Loan Agreement. It is the interest rate from time to time accruing on the Loan. 5. "ASSET PURCHASE AGREEMENT" has the meaning set forth in Section 4.07 of this Loan Agreement. 6. "ASSIGNMENT OF INTEREST RATE CAP" means the Assignment of Interest Rate Cap Agreement dated as of the Closing Date from Borrower, as assignor, to Lender, as assignee, assigning to Lender all of Borrower's rights, title and interest in and to the Rate Cap Agreement. 7. "ASSIGNMENT OF LEASES AND RENTS" means the Assignment of Leases and Rents dated as of the Closing Date from Borrower, as assignor, to Lender, as assignee, assigning to Lender all of Borrower's right, title and interest in and to the Leases and the Rents with respect to the Property. 8. "ASSIGNMENT OF PROPERTY MANAGEMENT CONTRACT" means an Assignment of Property Management Contract and Subordination of Management Fees dated as of the Closing Date from Borrower, as assignor, to Lender, as assignee, and acknowledged by Property Manager, or, as applicable, any other Assignment of Property Management Contract executed pursuant to Section 9.14. 9. "BANKRUPTCY CODE" means the Bankruptcy Reform Act of 1978 codified as 11 U.S.C. Section 101 et. seq., and the regulations issued thereunder, both as hereafter modified from time to time. 10. "BORROWER" has the meaning in the introductory paragraph of this Loan Agreement. 11. "BUSINESS DAY" or "BUSINESS DAY" means any day other than a Saturday, a Sunday, or days when Federal Banks located in the State of New York or Commonwealth of Pennsylvania are closed for a legal holiday or by government directive. When used with respect LOAN NUMBER: 41655 to the Interest Rate Adjustment Date, "BUSINESS DAY" shall mean a day on which banks are open for dealing in foreign currency and exchange in London and New York City. 12. "CAPITAL IMPROVEMENTS" means the capital improvements to be made to the Property which are identified on Exhibit C hereto. 13. "CAPITAL IMPROVEMENTS DEPOSIT" has the meaning set forth in Section 4.04(b) of this Loan Agreement. 14. "CASH FLOW AVAILABLE FOR DEBT SERVICE" means, for a specified period, (a) actual Operating Income normalized for the following twelve (12) month period less (b) actual Operating Expenses normalized for the following twelve (12) month period less (c) reserves for Replacements underwritten at the product of $0.05 and the total square foot area of the Property. Notwithstanding the foregoing, for the purposes of calculating Debt Service Coverage Ratio and Cash Flow Available for Debt Service in connection with Borrower's exercise of an Extension Option or in connection with a Partial Release, neither Operating Income nor Operating Expenses associated with a Non-underwritten Parking Lease shall be included. Operating Income and Operating Expenses will be normalized (i) in accordance with the guidelines delivered to Borrower prior to the Closing Date, provided that Lender shall have the right, in its sole and absolute discretion, to amend or discontinue such guidelines from time to time, and (ii) based upon information available to Lender at the time of such calculation which are expected to effect such calculation, including but not limited to (x) termination of a Lease or a Parking Lease, (y) changes in Borrower's obligations under any Parking Lease or (z) receipt of a current tax bill. 15. "CASUALTY" means the occurrence of damage or destruction to the Property, or any part thereof, by fire, flood, vandalism, windstorm, hurricane, earthquake, acts of terrorism or any other casualty. 16. "CLOSING DATE" means October 1, 2003. 17. "CLOSING STATEMENT" means the closing statement executed by Borrower in connection with the Loan. 18. "COLLECTION ACCOUNT" has the meaning set forth in the Lockbox Agreement. 19. "COMPLIANCE CERTIFICATE" means a compliance certificate substantially in the form of Exhibit A hereto, signed by a Responsible Office of Borrower. 20. "CONDEMNATION" means the taking by any Governmental Authority of the Property or any part thereof through eminent domain or otherwise (including, without limitation, any transfer made in lieu of or in anticipation of the exercise of such taking). 21. "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person whether through ownership of voting securities, beneficial interests, by contract or otherwise. The definition is to be construed to apply equally to variations of the word "Control" including "Controlled," "Controlling" or "Controlled by." LOAN NUMBER: 41655 22. "DATA DELIVERY FAILURE" means, without reference to any cure period under Article 11, each instance that any of the following occur: (a) failure to deliver any of the reports, information, statements or other materials required under Section 9.11 after Lender giving of two written notices, the first written notice to provide Borrower with thirty (30) days to cure Borrower's failure and the second notice to provide Borrower with an additional thirty (30) days to cure, (b) failure to provide the Compliance Certificate within five (5) business days after written notice from Lender, or (c) failure to permit Lender or its representatives to inspect or copy books and records within two (2) Business Days of Lender's written request. Notwithstanding anything in this Loan Agreement to the contrary, Borrower's failure to deliver any of the reports, information, statements or other materials required under Section 9.11 on a timely basis shall be excused by, and the respective dates by which Borrower shall be required to provide such reports, information, statements or other materials shall be extended for the period of any delay caused by any Force Majeure Event. 23. "DATA DELIVERY FAILURE FEE" means an amount of Five Thousand Dollars ($5,000.00) for the first failure, Fifteen Thousand ($15,000.00) for the second failure, Twenty-five Thousand Dollars ($25,000.00) for the third failure and each failure thereafter. 24. "DEBT" means the aggregate of all principal and interest payments that accrue or are due and payable in accordance with the Loan Agreement, together with any other amounts due under the Loan Documents. The terms "Debt" and "Loan" have the same meaning whenever used in the Loan Documents. 25. "DEBT SERVICE COVERAGE RATIO" means, as to a specific period, the ratio obtained by dividing (a) the Cash Flow Available for Debt Service, by (b) interest due and payable under the Note for that period. 26. "DEBT SERVICE COVERAGE CONSTANT RATIO" means, as to a specific period, the ratio obtained by dividing (a) the Cash Flow Available for Debt Service, by (b) a debt service payment calculated using the Loan Constant. 27. "DEFAULT RATE" has the meaning set forth in Section 2.04(e) of this Loan Agreement. 28. "DISBURSEMENT REQUEST" means a written request from Borrower delivered to Lender, substantially in the form attached hereto as Exhibit B, signed by a Responsible Officer of Borrower and requesting Lender to disburse funds from a Reserve Account. Each Disbursement Request shall describe in reasonable detail the use of the funds requested by the Disbursement Request and shall have attached to it, as applicable: (a) the original invoices for all items or materials purchased or services performed which are to be funded by the Disbursement Request, and (b) copies of all permits, licenses and approvals, if any, by any Governmental Authority confirming completion of the Reserve Items. If an original invoice is not available, Borrower shall be required to evidence, to Lender's satisfaction, the amounts expended for which reimbursement is requested. 29. "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 15.03 of this Loan Agreement. LOAN NUMBER: 41655 30. "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity Agreement dated as of the Closing Date from Borrower to Lender. 31. "EQUITY INTERESTS" means (a) partnership interests (whether general or limited) in an entity which is a partnership; (b) membership interests in an entity which is a limited liability company; or (c) the shares or stock interests in an entity which is a corporation. 32. "EQUITY OWNER" means PCAA Parent, LLC, a Delaware limited liability company. 33. "ERISA" means the Employee Retirement Income Security Act of 1974, and the regulations issued thereunder, all as amended or restated from time to time. 34. "EVENT OF DEFAULT" means any of the events specified in Section 11.01 of this Loan Agreement. 35. "EXTENSION TERM" has the meaning set forth in Section 2.03(d) of this Loan Agreement. 36. "FIRST EXTENDED MATURITY DATE" has the meaning set forth in Section 2.03(d) of this Loan Agreement. 37. "FIRST EXTENSION TERM" has the meaning set forth in Section 2.03(d) of this Loan Agreement. 38. "FORCE MAJEURE EVENT" means any act of God, act of war, insurrection, terrorist activity, governmental restriction or any other cause beyond Borrower's reasonable control. 39. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time. 40. "GOVERNMENTAL AUTHORITY" means any nation or government, any state or other political subdivision thereof, and any Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to such government. 41. "GUARANTOR" means the following Persons: Alex Chaves, Alex Martin Chaves, Frank Lemieux and Richard West, individually or collectively as the context requires, who are executing the Guaranty as guarantors, or, pursuant to the terms and conditions of this Loan Agreement and the Guaranty, a replacement guarantor who satisfies Lender's requirements as to creditworthiness, net worth and liquidity substantially similar to those imposed by Lender on the foregoing named guarantors. 42. "GUARANTY" means the Guaranty (Exceptions to Nonrecourse Liability) dated as of the Closing Date from Guarantor to Lender. 43. "CAPITAL IMPROVEMENTS DEPOSIT" has the meaning set forth in Section 4.04(b) of this Loan Agreement, subject to adjustment as set forth in Section 4.04(d). LOAN NUMBER: 41655 44. "CAPITAL IMPROVEMENTS ESCROW ACCOUNT" means an account held by Lender, or Lender's designee, in which the Capital Improvements Deposit will be held, which shall not constitute a trust fund. 45. "IMPROVEMENTS" has the meaning set forth in the Security Instrument. 46. "INDEMNIFIED CLAIM" means the basis for the Indemnified Party's claim for indemnification under Article 13 hereof. 47. "INDEMNIFIED PARTIES" means Lender, together with its successors and assigns, which shall include, without limitation, any owner or prior owner or holder of the Note, any servicer of the Loan, any investor, or holder of a full or partial interest in the Loan, any receiver or other fiduciary appointed in a foreclosure or other proceeding under any Requirements of Law regarding creditors' rights, any officers, directors, shareholders, partners, members, employees, agents, servants, representatives, contractors, subcontractors, Affiliates of any and all of the foregoing, in all cases whether during the term of the Loan or as part of, or following, a foreclosure of the Security Instrument. 48. "INDEPENDENT DIRECTOR" means an individual who shall not have been at the time of such individual's initial appointment, and may not have been at any time during the preceding five years, and shall not be at any time while serving as an Independent Director of the SPE Equity Owner or Borrower if a single member limited liability company, if applicable, either (a) a shareholder of, or an officer, director, partner or employee of, Borrower or SPE Equity Owner or Equity Owner or any of their respective shareholders, partners, members, subsidiaries or Affiliates, (b) a customer of, or supplier to, Borrower or SPE Equity Owner or Equity Owner or any of their respective shareholders, partners, members, subsidiaries or Affiliates, (c) a person or other entity Controlling or under common Control with any such shareholder, officer, director, partner, member, employee, supplier or customer, or (d) a member of the immediate family of any such shareholder, officer, director, partner, member, employee, supplier or customer. 49. "INDIVIDUAL PROPERTY" means fee title to, or a leasehold interest in, as the case may be, of any of the properties described in Exhibit G. 50. "INSURANCE PREMIUMS" means the premiums for the insurance Borrower is required to provide pursuant to Section 9.03 of this Loan Agreement. 51. "INSURANCE PREMIUM ESCROW ACCOUNT" means an account held by Lender, or Lender's designee, pursuant to the provisions of Section 4.03 of the Loan Agreement. 52. "INTEREST RATE ADJUSTMENT DATE" means the first (1st) day of each calendar month. 53. "INTEREST RATE INDEX" means the weekly average yield on United States Treasury Securities adjusted to a constant maturity of one year, as made available by the Federal Reserve Board forty-five (45) days prior to each Rate Adjustment Date. 54. "ISSUER GROUP" has the meaning set forth in Section 15.05 of this Loan Agreement. LOAN NUMBER: 41655 55. "ISSUER PERSON" has the meaning set forth in Section 15.05 of this Loan Agreement. 56. "KEY MANAGEMENT PERSONNEL" has the meaning set forth in Section 9.14 of this Loan Agreement. 57. "LAND" has the meaning set forth in the Security Instrument. 58. "LARGE LOAN STATEMENTS" has the meaning provided in Section 15.06 of this Loan Agreement. 59. "LEASE" has the meaning set forth in the Security Instrument. 60. "LEASE GUARANTY" has the meaning set forth in the Security Instrument. 61. "LENDER" has the meaning in the introductory paragraph of this Loan Agreement. 62. "LETTER OF CREDIT" has the meaning set forth in Section 6.08 of this Loan Agreement. 63. "LIBOR RATE" means the average of London Interbank Offered Rates (in U.S. dollar deposits) for a term of one month as shown on the close-of-business LIBOR Rate from "Page 3750" on the Telerate Service on the last business day of the month immediately preceding the Interest Rate Adjustment Date. If Telerate Service ceases publication or ceases to publish the LIBOR Rate, Lender shall select a comparable publication to determine the LIBOR Rate and provide notice thereof to Borrower. The LIBOR Rate may or may not be the lowest rate based upon the market for U.S. dollar deposits in the London Interbank Eurodollar Market at which Lender prices loans on the date on which the LIBOR Rate is determined by Lender as set forth above. 64. "LIEN" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), 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, the filing of any financing statement under the UCC or comparable law of any jurisdiction in respect of any of the foregoing and a mechanics' or materialman's lien). 65. "LOAN" means the aggregate of all principal and interest payments that accrue or are due and payable in accordance with the Loan Agreement, together with any other amounts due under the Loan Documents. The terms "Loan" and "Debt" have the same meaning whenever used in the Loan Documents. 66. "LOAN AMOUNT" means the maximum principal amount of $126,000,000.00, in lawful money of the United States of America, to be advanced to Borrower pursuant to this Loan Agreement. Reference in the Loan Agreement to "Loan Amount" mean the maximum principal amount, irrespective of actual principal amount outstanding or actually advanced to Borrower during the term of the Loan. LOAN NUMBER: 41655 67. "LOAN AGREEMENT" means this Loan Agreement. 68. "LOAN CONSTANT" means 11.33%. 69. "LOAN DOCUMENTS" means, collectively, this Loan Agreement, the Note, the Security Instrument, the Assignment of Leases and Rents, the Assignment of Property Management Contract, the Environmental Indemnity, the Guaranty, the Lockbox Agreement, the Assignment of Interest Rate Cap Agreement, the Rate Cap Provider Consent and any and all other documents and agreements executed in connection with the Loan, as each such agreement may be modified, supplemented, consolidated, extended or reinstated from time to time. 70. "LOCK-OUT PERIOD" has the meaning set forth in Section 2.05(a) of this Loan Agreement. 71. "LOCKBOX ACCOUNT" means the Deposit Account and Lockbox as such terms are defined in the Lockbox Agreement. 72. "LOCKBOX AGREEMENT" means the Lockbox - Deposit Account and Control Agreement dated as of the Closing Date between Borrower, PNC Bank, National Association and Lender. 73. "LOSSES" means any and all claims, suits, liabilities (including, without limitation, strict liabilities and liabilities under federal and state securities laws), actions, proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, judgments, awards, and amounts paid in settlement of whatever kind or nature (including without limitation reasonable legal fees and other costs of defense). 74. "MARGIN" has the meaning set forth in Section 2.02(b) of this Loan Agreement. 75. "MATERIAL ADVERSE EFFECT" means, with respect to any circumstance, act, condition or event of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event, act, condition circumstances, whether or not related, in Lender's reasonable judgment, a material adverse change in, or a materially adverse effect upon (a) the business, operations, prospects or financial condition of Borrower or Guarantor; (b) the ability of Borrower or Guarantor to perform its obligations under any Loan Document to which it is a party; (c) the value or condition of the Property; (d) compliance of the Property with any Requirements of Law; or (e) the validity, priority or enforceability of any Loan Document or the liens, rights (including, without limitation, recourse against the Property) or remedies of Lender hereunder or thereunder. 76. "MATURITY DATE" has the meaning set forth in Section 2.03(c) of this Loan Agreement. If Borrower has extended the Maturity Date in accordance with this Loan Agreement, references thereafter in this Loan Agreement shall mean the Maturity Date as so extended, unless the context otherwise requires. 77. "MONTHLY INSURANCE DEPOSIT" means, with respect to the specified period, an amount equal to one-twelfth (1/12) of the Insurance Premiums that Lender estimates will be LOAN NUMBER: 41655 payable during the next ensuing twelve (12) months, subject to adjustment as set forth in this Loan Agreement. 78. "MONTHLY REPLACEMENT RESERVE DEPOSIT" has the meaning set forth in Section 4.05(b) of this Loan Agreement, subject to adjustment as set forth in Section 4.05(d). 79. "MONTHLY TAX DEPOSIT" means, with respect to the specified period, an amount equal to one-twelfth (1/12) of the Taxes that Lender estimates will be payable during the next ensuing twelve (12) months, subject to adjustment as set forth in Section 4.02(d) of this Loan Agreement. 80. "NON-UNDERWRITTEN PARKING LEASES" means all Parking Leases located at (i) Bradley International Airport, Hartford, CT, (ii) Chicago-O'Hare Airport, Chicago, IL, (iii) LaGuardia Airport, Queens, NY, and Philadelphia International Airport, Philadelphia, PA, provided, however, that if the term of any such Parking Lease is extended beyond 2046, such Parking Lease shall no longer be deemed a Non-underwritten Parking Lease. 81. "NOTE" means the Promissory Note dated as of the Closing Date from Borrower to the order of Lender in the original principal amount equal to the Loan Amount. 82. "OBLIGATIONS" means the Loan, and all other obligations and liabilities of the Borrower to Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with the Loan or the Loan Documents, whether on account of principal, interest, fees, indemnities, costs, expenses (including, without limitation, all reasonable fees and disbursements of legal counsel) or otherwise. 83. "OFAC LIST" means the list of specially designated nationals and blocked persons subject to financial sanctions that is maintained by the U.S. Treasury Department, Office of Foreign Assets Control and any other similar list maintained by the U.S. Treasury Department, Office of Foreign Assets Control pursuant to any Requirements of Law, including, without limitation, trade embargo, economic sanctions, or other prohibitions imposed by Executive Order of the President of the United States. The OFAC List is accessible through the internet website www.treas.gov/ofac/t11sdn.pdf. 84. "OPERATING AGREEMENTS" has the meaning set forth in the Security Instrument. 85. "OPERATING EXPENSES" means all cash expenses actually incurred by or charged to Borrower (appropriately pro-rated for any expenses that, although actually incurred in a particular period, also relate to other periods), with respect to the ownership, operation, leasing and management of the Property in the ordinary course of business, determined in accordance with GAAP, including, without limitation: (a) personal property taxes and real estate taxes; (b) sales taxes or any tax on rents (unless netted against Operating Income); (c) wages, salaries, payroll taxes and employee benefits; (d) costs of utility services; (e) maintenance, repair and custodial costs; (f) premiums payable for insurance carried on or with respect to the Property; (g) office supplies, other administrative expenses and professional fees; (h) costs of advertising and marketing for the Property; (i) costs of telephone service; (j) costs of garbage removal; (k) an LOAN NUMBER: 41655 allowance for income items that are determined to be uncollectible; (1) if a property or asset manager has been engaged by Borrower, any compensation, fees or reimbursements paid to such property or asset manager; if a property or asset manager has not been engaged by Borrower, all management related and head office expenses and salaries incurred by Borrower (but not less than 3.5% of Operating Income) and (k) ground rents. Notwithstanding the foregoing, Operating Expenses specifically exclude (l) capital expenditures, (2) depreciation and amortization, (3) payments made in connection with the payment of the outstanding principal balance of the Loan, (4) costs of Restoration following a Casualty or Condemnation, (5) funds disbursed from any Reserve Account, (6) any other non-cash items, (7) interest expense and (8) all income tax expenses. Solely for purposes of calculating the Debt Service Coverage Ratio under Sections 2.03(d)(ii)(F) and 10.03(a)(ii) and the Debt Service Coverage Constant Ratio under Section 2.03(d)(ii)(D), Operating Expenses under clause (1) above shall be deemed capped at the higher of (x) the actual management fee paid to any third party property manager and (y) 3.5% of Operating Income. 86. "OPERATING INCOME" means all gross cash income, revenues and consideration received or paid to or for the account or benefit of Borrower resulting from or attributable to the operation or leasing of the Property determined in accordance with GAAP, including, without limitation: (a) parking revenues, rents from tenants, assignees, subtenants, ground lessee, or parties to walkway agreements, provided such tenants, assignees or subtenants are in actual occupancy pursuant to valid leases and paying rent; (b) amounts (to the extent included in Operating Expenses) payable by tenants to Borrower on account of maintenance or service charges, taxes, assessments, utilities and maintenance of the Property; (c) rents and receipts from licenses, service contracts, concessions, vending machines and similar items located at or operated from the Property; and (d) interest income; but excluding any income or revenues from a sale, refinancing, Casualty or Condemnation, payment of rents more than one (1) month in advance, lease termination payments, or payments from any other events not related to the ordinary course of operations of the Property. 87. "ORGANIZATIONAL CHART" means the chart attached hereto as Exhibit D which shows all persons or entities having an ownership interest in Borrower and in the SPE Equity Owner and in Equity Owner. 88. "OTHER CHARGES" means all ground rents, maintenance charges, impositions (other than Taxes) and similar charges (including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Property), now or hereafter assessed or imposed against the Property, or any part thereof, together with any penalties thereon. 89. "PARKING LEASES" means Borrower's leasehold interest in the leases set forth on Exhibit I hereto and any modifications, amendments, and supplements thereto. 90. "PARKING LEASE LESSOR" has the meaning set forth in Section 8.32 of this Loan Agreement. 91. "PARKING LOT OPERATIONS" means, collectively, the off-airport parking lot businesses described on attached Exhibit J, which are operated on the respective Individual LOAN NUMBER: 41655 Properties set forth opposite the names of the respective Parking Lot Operations. Each off-airport parking lot business described on attached Exhibit J is referred to as a "Parking Lot Operation." 92. "PARTIAL RELEASE" has the meaning set forth in Section 10.03 of this Loan Agreement. 93. "PARTIAL RELEASE DATE" has the meaning set forth in Section 10.03 of this Loan Agreement. 94. "PARTIAL RELEASE PRICE" has the meaning set forth in Section 10.03 of this Loan Agreement. 95. "PAYMENT DUE DATE" has the meaning set forth in Section 2.03(b) of this Loan Agreement. It is the date that a regularly scheduled payment of principal and interest (or interest if the loan payments are interest-only) is due. 96. "PERMITTED ENCUMBRANCES" means each of the following: (i) Those exceptions shown in the Title Insurance Policy and each other Lien which has been approved in writing by Lender. (ii) Liens for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and, in each case, for which Borrower maintains adequate reserves. (iii) Liens arising in the ordinary course of business (such as (1) Liens of carriers, warehousemen, mechanics and materialmen and other similar Liens imposed by law and (2) Liens incurred in connection with worker's compensation, unemployment compensation and other types of social security (excluding Liens arising under ERISA) or in connection with surety bonds, bids, performance bonds and similar obligations) for sums not overdue or being contested in good faith by appropriate proceedings and not involving any deposits or advances or borrower money or the deferred purchase price of property or services and, in each case, for which Borrower maintains adequate reserves. (iv) Liens arising in connection with capital leases (and attaching only to the property being leased), subject to the limitations of Section 7.02(a)(xiii); and (v) easements, rights of way, restrictions, minor defects or irregularities in title and other similar Liens arising after the date hereof which will not interfere in any material respect with the value, use or ordinary conduct of the business of the Borrower. LOAN NUMBER: 41655 97. "PERMITTED LEASE" has the meaning set forth in Section 9.06(a) of this Loan Agreement. 98. "PERMITTED TRANSFER" means each of the following: (i) Transfers of Equity Interests which, in the aggregate over the term of the Loan (i) do not exceed forty-nine percent (49%) of the total interests in Borrower or in SPE Equity Owner or in Equity Owner or in Guarantor, as applicable; (ii) do not result in any Person holding an Equity Interest in Borrower or SPE Equity Owner or in Equity Owner, as applicable, which exceeds forty-nine percent (49%) of the total Equity Interests in Borrower or in SPE Equity Owner or in Equity Owner, as applicable; and (iii) do not result in a change of Control. (ii) Transfers with respect to any Person whose stocks or certificates are traded on a nationally recognized stock exchange. (iii) Transfers which have been approved by Lender in accordance with Section 10.02 of this Loan Agreement. (iv) Permitted Encumbrances. (v) All Transfers of worn out or obsolete furnishings, fixtures or equipment that are promptly replaced with property of equivalent value and functionality. (vi) All Leases which have been approved by Lender in accordance with this Loan Agreement or which do not require Lender's approval. (vii) Transfer of interests in Borrower and its Affiliates prior to Closing which have been approved by Lender. 99. "PERSON" means an individual, partnership, limited partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. 100. "PERSONAL PROPERTY" has the meaning set forth in the Security Instrument. 101. "PROHIBITED PREPAYMENT" has the meaning set forth in Section 2.05(c) of this Loan Agreement. 102. "PROHIBITED PREPAYMENT FEE" has the meaning set forth in Section 2.05(c) of this Loan Agreement. 103. "PROPERTY" means collectively, all Individual Properties securing the Loan, as described on Exhibit G, hereto, or one or more of the Individual Properties, as the context requires. LOAN NUMBER: 41655 104. "PROPERTY MANAGER" means any third party property manager retained by Borrower at Lender's direction or with Lender's approval, all as set forth in this Loan Agreement. 105. "PROPERTY BANKS" has the meaning set forth in Section 3.01 of this Loan Agreement. 106. "QUALIFIED TRANSFEREE" means shall mean one or more of the following: (i) a real estate investment trust, bank, saving and loan association, investment bank, insurance company, trust company, commercial credit corporation, pension plan, pension fund or pension advisory firm, mutual fund, government entity or plan, provided that any such Person referred to in this clause (i) satisfies the Eligibility Requirements; (ii) an investment company, money management firm or "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, or an institutional "accredited investor" within the meaning of Regulation D under the Securities Act of 1933, as amended, provided that any such Person referred to in this clause (ii) satisfies the Eligibility Requirements; (iii) an institution substantially similar to any of the foregoing entities described in clauses (i) or (ii) that has total assets (in name or under management) in excess of $600,000,000 and (except with respect to a pension advisory firm or similar fiduciary) capital/statutory surplus or shareholder's equity of $250,000,000 satisfies the Eligibility Requirements; (iv) any entity controlled by any of the entities described in clauses (i), (ii) or (iii) above; or (v) an investment fund, limited liability company, limited partnership or general partnership where a Permitted Fund Manager or an entity that is otherwise a Qualified Transferee under clauses (i), (ii), (iii) or (iv) of this definition acts as the general partner, managing member or fund manager and at least 50% of the equity interests in such investment vehicle are owned, directly or indirectly, by one or more entities that are otherwise Qualified Transferees under clauses (i), (ii), (iii) or (iv) of this definition. which entity also either satisfies or engages a property manager or employs a management team which satisfies the following: 1) has at least five (5) years' experience in the management of off-airport parking operations similar to the operation of the Property. LOAN NUMBER: 41655 2) operates at least ten (10) off-airport parking facilities which (i) are located at a minimum of six (6) different airports nationally; (ii) contain a minimum of 12,000 parking spaces in aggregate, and (iii) generate a minimum revenue of $25 million annually. 107. "RATE CAP" means an interest rate cap in the notional amount of $126,000,000.00 obtained by Borrower as protection against interest rate fluctuations under the Loan, which interest rate cap shall remain in effect until the Maturity Date. 108. "RATE CAP AGREEMENT" means the written agreement evidencing the financial and performance terms of the Rate Cap purchased by Borrower from Rate Cap Provider which satisfies all requirements of Section 2.07 of this Loan Agreement. 109. "RATE CAP PROVIDER" means the counterparty issuing a Rate Cap to Borrower. 110. "RATE CAP PROVIDER CONSENT" means the Rate Cap Provider Consent and Acknowledgement to Assignment of Rate Cap with respect to the assignment of the Rate Cap from Borrower to Lender, executed by the Rate Cap Provider in favor of Lender. 111. "RATING AGENCIES" means Fitch, Inc., Moody's Investors Service, Inc. and S&P, or any successor entity of the foregoing, or any other nationally recognized statistical rating organization to the extent that any of the foregoing have been or will be engaged by Lender or its designees in connection with or in anticipation of Securitization or any other sale or grant of participation interests in the Loan (or any part thereof). 112. "RATING CONFIRMATION" means a written confirmation from each of the Rating Agencies (unless otherwise agreed by Lender) that an action shall not result in a downgrade, withdrawal or qualification of any securities issued in connection with a Securitization. 113. "RECOURSE CARVEOUT RESERVE ACCOUNT" means an account held by Lender or Lender's designee, pursuant to Section 4.06 hereof, which shall not constitute a trust fund. 114. Intentionally Omitted. 115. "RELEASE PROPERTY" means each portion of the Property identified as "Release Property" above in the definition of Partial Release Price. 116. "RENT ROLL" means a statement from Borrower, in a form reasonably acceptable to Lender, detailing the names of all tenants of the Property, the portion of Property occupied by each tenant, the base rent and any other charges payable under each Lease, the term of each Lease, the beginning date and expiration date of each Lease, whether any tenant is in default under its Lease (and detailing the nature of such default), and any other information as is reasonably required by Lender, all certified by a Responsible Officer to be true, correct and complete. 117. "RENTS" has the meaning set forth in the Security Instrument. LOAN NUMBER: 41655 118. "REPLACEMENT RESERVE ACCOUNT" means an account held by Lender, or Lender's designee, in which the Monthly Replacement Deposits will be held, which shall not constitute a trust fund. 119. "REPLACEMENT RESERVE CAP" has the meaning set forth in Section 4.05(b). 120. "REPLACEMENTS" means the scheduled repairs and replacements to the Property identified on Exhibit F hereto. 121. "REQUIREMENTS OF LAW" means (a) the organizational documents of an entity, and (b) any law, regulation, ordinance, code, decree, treaty, ruling or determination of an arbitrator, court or other Governmental Authority, or any Executive Order issued by the President of the United States, in each case applicable to or binding upon such Person or to which such Person, any of its property or the conduct of its business is subject including, without limitation, laws, ordinances and regulations pertaining to the zoning, occupancy and subdivision of real property. 122. "RESERVE ACCOUNTS" means, individually and collectively, as the context requires, the Tax Escrow Account, the Insurance Premiums Escrow Account, the Capital Improvements Escrow Account, the Replacement Reserve Account and the Recourse Carveout Reserve Account. 123. "RESERVE ITEM" means, individually and collectively, as the context requires, the Capital Improvements and the Replacements. 124. "RESPONSIBLE OFFICER" means, as to any Person, an individual who is a managing member, a general partner, the chief executive officer, the president or any vice president of such Person or, with respect to financial matters, the chief financial officer or treasurer of such Person or any other officer authorized by such Person to deliver documents with respect to financial matters pursuant to this Loan Agreement. 125. "RESTORATION" means the repairs, replacements, improvements, or rebuilding of or to the Property following a Casualty or Condemnation. 126. "RESTORATION DEFICIENCY DEPOSIT" has the meaning set forth in Section 9.04(d) of this Loan Agreement. All amounts deposited by Borrower with Lender as the Restoration Deficiency Deposit shall become a part of the Restoration Proceeds and disbursed by Lender for Restoration on the same conditions applicable to disbursement of Restoration Proceeds and, until so disbursed, are pledged to Lender as security for the Loan and Obligations. 127. "RESTORATION HOLDBACK" has the meaning set forth in Section 9.04(e) of this Loan Agreement. 128. "RESTORATION PROCEEDS" has the meaning set forth in Section 9.03(b) of this Loan Agreement. 129. "S & P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor thereto. LOAN NUMBER: 41655 130. "SECOND EXTENDED MATURITY DATE" has meaning set forth in Section 2.03(d) of this Loan Agreement. 131. "SECOND EXTENSION TERM" has meaning set forth in Section 2.03(d) of this Loan Agreement. 132. "SECURITIES ACT" means the Securities Act of 1933 and any successor statute thereto and the related regulations issued thereunder, all as amended from time to time. 133. "SECURITIES LIABILITIES" has the meaning provided in Section 15.05 of this Loan Agreement. 134. "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, and any successor statute thereto and the related regulations issued thereunder, all as amended from time to time. 135. "SECURITIZATION" or "SECURITIZE" means the sale of the Loan, by itself or as part of a pool with other loans, in a transaction whereby mortgage pass-through certificates or other securities evidencing a beneficial interest, backed by the Loan or such pool of loans, will be sold as a rated or unrated public offering or private placement. 136. "SECURITY INSTRUMENT" means those certain Mortgages, Assignment of Rents and Leases, Security Agreement and Fixture Filing, or the Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing, as applicable, encumbering the Property and executed by Borrower to Lender or to a trustee for the benefit of Lender, as the case may be, to secure Borrower's payment of the Loan and performance of the Obligations. 137. "SINGLE PURPOSE ENTITY" has the meaning set forth in Section 7.02 of this Loan Agreement. 138. "SPE EQUITY OWNER" means PCAA GP, LLC, a Delaware limited liability company. 139. "STRIKE RATE" means with respect to the period from and including the Closing Date through October 1, 2006, 4.5%. The Strike Rate for any Extension Term shall be determined by Lender in accordance with Section 2.03(d) of this Loan Agreement. 140. "TAX ESCROW ACCOUNT" means an account held by Lender, or Lender's designee, in which Borrower's initial deposit for Taxes made on the Closing Date and the Monthly Tax Deposits will be held, which shall not constitute a trust fund. 141. "TAXES" means all real estate taxes, government assessments or impositions, lienable water charges, lienable sewer rents, assessments due under owner association documents, ground rents, vault charges and license fees for the use of vaults chutes and all other charges (other than the Other Charges), now or hereafter levied or assessed against the Land and Improvements. LOAN NUMBER: 41655 142. "TITLE INSURANCE POLICY" means the mortgagee title insurance policy obtained by Lender in connection with the Loan, and, until the issuance of such policy, the commitment for title insurance as marked-up as of the Closing Date, in either case in form and substance (with such endorsements and affirmative coverages) as is satisfactory to Lender, insuring that the Security Instrument constitutes a perfected first Lien against the Property in the Loan Amount, subject only to Permitted Encumbrances. 143. "TRADEMARK AGREEMENT" means that certain Trademark License Agreement dated as of December 18, 2002 by and between Parking Company of America Management, LLC as licensor, and Parking Company of America Airports, LLC as licensee, as amended from time to time. 144. "TRANSFER" means any action by which either (a) the legal or beneficial ownership of the Equity Interests in Borrower or in SPE Equity Owner or in Equity Owner or, if the Guarantor is an entity, in the Guarantor or (b) the legal or equitable title to the Property, or any part thereof, or (c) the cash flow from the Property or any portion thereof, are sold, assigned, transferred, hypothecated, pledged or otherwise encumbered or disposed of, in each case (a), (b) or (c) whether undertaken, directly or indirectly, or occurring by operation of law or otherwise, including, without limitation, each of the following actions: (i) the sale, conveyance, assignment, grant of an option with respect to, mortgage, deed in trust, pledge, grant of a security interest in, or any other transfer, as security or otherwise, of the Property or with respect to the Leases or Rents (or any thereof); (ii) the grant of an easement across the Property (other than minor easements not having a Material Adverse Effect) or any other agreement granting rights in or restricting the use or development of the Property (including, without limitation, air rights); (iii) an installment sale wherein Borrower agrees to sell the Property for a price to be paid in installments; or (iv) an agreement by Borrower leasing all or a substantial part of the Property for other than actual occupancy by a space tenant thereunder. 145. "TRANSFEREE" has the meaning provided in Section 6.08 of this Loan Agreement. 146. "UCC" means the Uniform Commercial Code in effect in the State where the Property is located, as from time to time amended or restated. For purposes of this UCC's application to the Reserve Accounts, the parties agree that the Reserve Accounts shall be deemed located in the laws of the State of New York. 147. "UNDERWRITER GROUP" has the meaning provided in Section 15.05 of this Loan Agreement. EX-10.13 10 y97636exv10w13.txt USE AND OCCUPANCY AGREEMENT EXHIBIT 10.13 USE AND OCCUPANCY AGREEMENT BETWEEN PAN AMERICAN WORLD AIRWAYS, INC. AND TEXACO, INC. TA-191 TETERBORO AIRPORT TABLE OF CONTENTS
Section Number Title Page - ------ ----- ---- 1. Term.......................................................................... 1 2. Rights of User................................................................ 1 3. Fees to Pan American.......................................................... 2 4. Time of Payment and Computation of Amounts.................................... 2 5. Obstruction Lights............................................................ 2 6. Care, Maintenance and Repair.................................................. 3 7. Insurance..................................................................... 3 8. Indemnity, Liability Insurance................................................ 5 9. Ingress and Egress............................................................ 6 10. Various Obligations of the User............................................... 6 11. Prohibited Acts............................................................... 9 12. Rules and Regulations......................................................... 11 13. Signs......................................................................... 12 14. Construction by the User...................................................... 12 15. Assignment and Sub-Use........................................................ 12 16. Condemnation.................................................................. 13 17. Non-Discrimination............................................................ 14 18. Governmental Requirements..................................................... 15 19. Rights of Entry Reserved...................................................... 16 20. Basic Agreement............................................................... 17 21. Patents, Trademarks........................................................... 17 22. Additional Fees and Charges................................................... 17 23. Right of Re-Entry............................................................. 18
24. Surrender..................................................................... 18 25. Termination by Pan American................................................... 18 26. Survival of the Obligations of the User....................................... 20 27. Use Subsequent to Cancellation or Termination................................. 21 28. Remedies to be Non-Exclusive.................................................. 21 29. Limitation of Rights and Privileges Granted................................... 22 30. Option for Renewal............................................................ 22 31. Removal of Personal Property.................................................. 23 32. Brokerage..................................................................... 23 33. Notices....................................................................... 23 34. Construction and Application of Terms......................................... 24 35. Non-Liability of Individuals.................................................. 24 36. Abatement..................................................................... 24 37. Port Authority Consent........................................................ 24 38. Entire Agreement.............................................................. 24 Exhibit A Consent Agreement............................................................. 1-4

2 Teterboro Airport Use and Occupancy Agreement TA 191 USE AND OCCUPANCY AGREEMENT THIS AGREEMENT, made as of January 1, 1986, by and between PAN AMERICAN WORLD AIRWAYS, INC. (hereinafter called "Pan American"), a New York Corporation, and TEXACO, INC. (hereinafter called the "User"), a Delaware Corporation. WITNESSETH THAT: WHEREAS, the Port Authority of New York and New Jersey (hereinafter called "the Port Authority") is the owner of Teterboro Airport located in the Boroughs of Teterboro, Moonachie and Hasbrouck Heights and in the Township of Lyndhurst, County of Bergen in the State of New Jersey (hereinafter called "the Airport"); and, WHEREAS, Pan American is the operator of the Airport and has the right to operate and use the Airport under an agreement between Pan American and the Port Authority dated September 19, 1967 (hereinafter called the "Basic Agreement"); and WHEREAS, User by a Use and Occupancy Agreement, dated January 1, 1976, bearing file designation TA-107, used and occupied certain premises at the Airport; and WHEREAS, User desires to continue to use and occupy the area at the Airport as hereinafter described; NOW, THEREFORE, for and in consideration of the respective promises and mutual agreements made by the parties hereto hereinafter set forth Pan American hereby grants to the User the right to use and occupy the areas at the Airport shown in diagonal hatching on Exhibit A attached hereto, which exhibit is hereby made a part hereof, together with all buildings, structures, improvements, additions and permanent installations existing therein or thereon and constructed and installed therein or thereon during the term of this Agreement (hereinafter referred to as the "Space") upon the following terms and conditions and it is hereby mutually agreed as follows: 1. Term The term of this Agreement shall commence upon January 1, 1986 ("effective date"), and, unless so terminated or extended, shall expire on December 31, 1990. 2. Rights of User 2.1 The User shall use the Space for the storage and maintenance of aircraft owned, leased by or operated for the User and for private aircraft owned or leased by the elected officers and directors of the User and for no other purpose whatsoever. 1 2.2 Nothing contained in this Agreement shall give or shall be construed or deemed to give to the User any right to sell aviation fuel at the Airport except under a separate agreement with Pan American for bulk fuel storage and sale to authorized Permittees at the Airport. 2.2.1 The User shall be permitted to acquire its own petroleum products for purposes authorized hereunder from authorized Permittees at the Airport. 2.2.2 If at such time no Permittee at the Airport is able to supply the User with Texaco, Inc., petroleum products then the User may supply itself with its requirements for such petroleum products for its own use only, provided that the User shall pay to Pan American whatever fuel fees are applicable at the Airport at such time. 3. Fees to Pan American 3.1 The User shall pay to Pan American a basic annual fee of Two Hundred Thousand Twenty-Two Dollars and Eighty Four Cents ($200,022.84) in monthly installments of Sixteen Thousand Six Hundred Sixty Eight Dollars and Fifty Seven Cents ($16,668.57) throughout the term of this Agreement. 4. Time of Payment and Computation of Amounts 4.1 User shall pay to Pan American the monthly installments of the basic annual fee specified in Section 3.1 in advance on the first (1st) day of each and every month of this Agreement, provided, however, that if this Agreement is terminated on other than the last day of a month the last payment shall be the then effective monthly installment of the basic annual fee prorated in the same proportion the number of days the Agreement was effective in the last month bears to the actual number of days in said month. 4.2 The fees specified herein shall be payable at the office of the Manager of Teterboro Airport, 399 Industrial Avenue, Teterboro, New Jersey 07608, or at such other location as may from time to time be substituted therefor. 5. Obstruction Lights The User shall furnish such obstruction lights as Pan American shall direct, of the type and design approved by Pan American, and shall install said lights in the locations on the Space designated by Pan American and shall maintain them in first class operating condition at all times. The User shall furnish and install the bulbs and furnish the electricity necessary for the operation of the said lights, and shall operate the same in accordance with the directions of Pan American. Pan American hereby directs that all said obstruction lights shall, until further notice, be operated daily for a period commencing thirty (30) minutes before sunset and ending thirty (30) minutes after sunrise and for such other periods as may be directed or requested by the Control Tower of the Airport. 2 6. Care, Maintenance and Repair 6.1 The User shall at its own expense at all times keep the Space and all the User's fixtures, equipment and personal property which are located in any parts of the Space which are open to or visible by the general public, in a clean and orderly condition and appearance. 6.2 The User shall at its own expense repair, replace or rebuild all or any part of the Space which may be damaged or destroyed by the acts or omissions of the User or by those of its employees, customers, guests or invitees or of other persons doing business with the User. 6.3 Further, the User at its own expense shall take good care of the Space, including without limitation paved areas, fences, roofs, skylights, steelwork, walls, partitions, floors, foundations, ceilings, columns, windows, doors, glass of every kind, plumbing, heating, lights, fire-protection, fire-alarm, sewerage, drainage, water-supply and electrical systems, including all pipes, wires, lines, conduits, equipment and fixtures and shall make all necessary structural and nonstructural repairs and replacements and do all necessary rebuilding and repainting, regardless of the cause or the condition requiring the same. 6.4 In the event the User fails to commence to so repair, replace, rebuild or paint as required above within a period of ten (10) days after notice from Pan American so to do, or fails diligently to continue to complete the repair, rebuilding, replacement, or painting of all the Space required to be repaired, replaced, rebuilt or painted by the User under the terms of this Agreement, Pan American may, at its option, and in addition to any other remedies which may be available to it, repair, replace, rebuild or paint all or any part of the Space included in the said notice, and charge the cost thereof to the User, the amount of such charge to constitute an item of additional fee. 7. Insurance 7.1 During the term of this Agreement the User shall, insure and keep insured to the extent of One Hundred Percent (100%) of the replacement value thereof, all buildings, structures, improvements, installations, facilities, and fixtures now or in the future located on the Space against such hazards and risks as may now or in the future be included under the standard form of fire insurance policy of the State of New Jersey and also against damage or loss by windstorm, cyclone, tornado, hail, explosion, riot, civil commotion, aircraft, vehicles and smoke, under the standard form of fire insurance policy of New Jersey, and the form of extended coverage endorsement prescribed as of the effective date of the said insurance by the rating organization having jurisdiction, and also covering boiler and machinery hazards and risks and also, subject to the availability thereof, covering nuclear property losses and contamination hazards and risks in a separate insurance policy or policies or as an additional coverage endorsement to the aforesaid policies in the form as may now or in the future be prescribed as of the effective date of said insurance by the rating organization having jurisdiction. 3 7.2 The aforesaid insurance coverages and renewals thereof shall insure the Port Authority and Pan American as their interests may appear and shall provide that the loss, if any, shall be adjusted with Pan American and the Port Authority and shall be payable to the Port Authority or Pan American as their interests may appear. 7.3 In the event the Space or any part thereof shall be damaged by any casualty against which insurance is carried pursuant to this Section, the User shall promptly notify Pan American of such casualty, and shall thereafter furnish to Pan American such information and data as shall enable the parties to adjust the loss. 7.4 At least seven (7) days prior to the beginning of the term of this Agreement, the policies or certificates representing said insurance shall be delivered by the User to Pan American and each policy or certificate delivered shall bear an endorsement obligating the insurance company to furnish the Port Authority and Pan American twenty (20) days' advance notice of the cancellation of the insurance evidenced by said policy or certificates or of any changes or endorsements which may be made thereon. Renewal policies or certificates shall be delivered to Pan American at least twenty (20) days before the expiration of the insurance which such policies are to renew. 7.5 The aforesaid insurance shall be written by a company or companies approved by Pan American. 7.6 To the extent that any loss is recouped by actual payment to the Port Authority or Pan American of the proceeds of the insurance herein referred to above, such proceeds will be paid to the User to cover its costs of rebuilding or repairing the portion or all of the Space which has been damaged or destroyed. Such payment will be made by Pan American to the User in installments if requested by the User and as work progresses provided that as to each request for payment the User shall certify by a responsible officer or authorized representative thereof that the amounts requested are due and payable to its contractor for work completed. Upon completion of all the work, the User shall certify by a responsible officer or authorized representative that such rebuilding and repairs have been completed, that all costs in connection therewith have been paid by the User and said costs are fair and reasonable and said certification shall also include an itemization of costs. Nothing herein contained shall be deemed to release the User from any of its repair, maintenance or rebuilding obligations under the Agreement. If the proceeds of any such insurance paid to Pan American exceed the User's costs of rebuilding or repair, the excess of such proceeds shall be retained by Pan American. 7.7 If there is damage or destruction to the Space covered by insurance under this Section, the User shall promptly repair, rebuild or replace the damaged or destroyed portion of the Space. 7.8 If the User does not so properly proceed then Pan American may repair or rebuild and may apply such proceeds of such insurance towards such repair, replacement and rebuilding, but no such application shall relieve the User of its obligations under this 4 Agreement, or Pan American in its discretion may elect to relieve the User of its obligations under this Agreement to repair, replace and rebuild the damaged or destroyed property, and not to have said property repaired, replaced or rebuilt and in such latter event the entire proceeds of the insurance shall be retained by Pan American. 7.9 If, moreover, there is damage or destruction to the property covered under this Section which occurs within the last three years of the term of the Agreement, the obligations of the User to repair, replace or rebuild such damaged or destroyed property shall be discharged (provided that the insurance applicable thereto has been maintained in full force and effect) and the entire proceeds of the insurance applicable thereto small be retained by Pan American. 8. Indemnity, Liability Insurance 8.1 The User shall indemnify and hold harmless the Port Authority, its Commissioners, officers, employees and representatives; and Pan American, its subsidiaries and affiliates, their Directors, officers, employees and agents (to include reasonable attorney and other professional fees) from and against all claims and demands of third persons, including, but not limited to, claims and demands for death or personal injury or for property damage arising out of the use and occupancy of the Space by the User or out of any other acts or omissions of the User, its officers, employees on the Space or out of the acts or omissions of others on the Space with the consent of the User whether or not such claims, demands, causes of action, liabilities, etc., are made or asserted before or against termination or expiration of this Agreement. 8.2 In addition to the obligations set forth in the Subsection immediately above, the User, in its own name as assured, shall maintain and pay the premiums or the following described policies of comprehensive general including aircraft liability insurance and automobile liability insurance which shall cover its operations hereunder and shall be effective throughout the term in limits not lower than the following: 8.2.1 Combined single limit of $100,000,000 for bodily injury and property damage. 8.3 Neither the Port Authority nor Pan American shall be named as an insured in any policy of insurance required by this Agreement, unless the Port Authority or Pan American shall, at any time during the effective period of this Agreement, direct otherwise in writing, in which case the User shall cause the Port Authority and/or Pan American to be so named. 8.4 As to any insurance required by the provisions of this Agreement to be obtained by or at the direction of the User, a certified copy of each of the policies or certificates evidencing the existence thereof, or binders, together with evidence of the payment of the premium thereon, shall be delivered to Pan American within fifteen (15) days prior to occupancy by User of the Space. In the event any binder is delivered, it shall be replaced within thirty (30) days by a certified copy of the policy or a certificate. Each such copy or certificate shall contain a valid provision or endorsement that the 5 policy may not be cancelled, terminated, changed or modified without giving twenty (20) days' written advance notice thereof to Pan American. A renewal policy shall be delivered to Pan American at least twenty (20) days prior to the expiration date of each expiring policy, except for any policy expiring after the date of expiration of the term. If at any time any of the policies shall be or become unsatisfactory to Pan American as to form or substance or if any of the carriers issuing such policies shall be or become unsatisfactory to Pan American, the User shall promptly obtain a new and satisfactory policy in replacement. 9. Ingress and Egress 9.1 The User, its customers, its contractors, suppliers of material and furnishers of services shall have the right of ingress and egress between the Space and the city streets or public ways outside the Airport by means of such pedestrian or vehicular roadways to be used in common with others having rights of passage within the Airport, as may from time to time be designated by Pan American for the use of the public. 9.2 The User shall have the right of ingress and egress between the Space and the public landing areas at the Airport by means of connecting taxiways, to be used in common with others having rights of passage thereon. 9.3 The use of any such roadway or taxiway shall be subject to the Rules and Regulations of the Airport which are now in effect or which may hereafter be promulgated for the safe and efficient operation of the Airport. Pan American may, at any time, temporarily or permanently, close or consent to or request the closing of, any such roadway or taxiway and any other way at, in or near the Space presently or hereafter used as such, so long as a reasonable means of ingress and egress as provided above remains available to the User. The User hereby releases and discharges the Port Authority, its Commissioners, officers, employees and agents; Pan American, its subsidiaries, their Directors, officers, employees and agents and all municipalities and other governmental authorities and their respective successors and assigns, of and from any and all claims, demands, or causes of action which the User may now or at any time hereafter have against any of the foregoing, arising or alleged to arise out of the closing of any street, roadway or other area, whether within or outside the Space. The User shall not do or permit anything to be done which will interfere with the free access and passage of others to space adjacent to the Space or in any streets or roadways near the Space. 10. Various Obligations of the User 10.1 The User shall conduct its operations in an orderly and proper manner and so as not to annoy, disturb or be offensive to others at the Space on the Airport. The User shall take all reasonable measures: 6 10.1.1 to eliminate vibrations tending to damage any equipment, structure, building or portion of a building which is on the Space, or is a part thereof, or is located elsewhere on the Airport, and 10.1.2 to keep the sound level of its operations as low as possible. 10.2 The User shall control the conduct, demeanor and appearance of its employees and invitees and of those doing business with it, and upon objection from Pan American concerning the conduct, demeanor or appearance of any such shall immediately take all lawful steps necessary to remove the cause of the objection. If Pan American shall so request, the User agrees to supply and require its employees to wear or carry badges or other suitable means of identification, which shall be subject to the prior and continuing approval of the Manager of the Airport. 10.3 It is the intent of the parties hereto that noise caused by aircraft engine operation shall be held to a minimum. To this end the User will conduct its operations in such a manner as to keep the noise produced by aircraft engines and component parts thereof to a minimum by such methods as are practicable, considering the extent and type of the operations of the User. In addition, the User will employ the maximum amount of noise arresting and noise reducing devices that are available and economically practicable, considering the extent of the operations of the User. In its use of the Space, the User shall take all possible care, caution and precaution and shall use its best efforts to minimize prop or jet blast interference to aircraft operating on or to buildings, structures and roadways, now located on or which in the future may be located on areas adjacent to the Space. In the event Pan American determines that the User has not curbed the prop or jet blast interference, the User hereby covenants and agrees to erect and maintain at its own expense such structure or structures as may be necessary to prevent prop or jet blast interference subject, however, to the prior written approval of Pan American as to type, manner and method of construction. 10.4 The User shall daily remove from the Space by means of facilities provided by User all garbage, debris and other waste materials arising out of or in correction with its operations hereunder, and any such not immediately removed shall be temporarily stored in a clean and sanitary condition in suitable garbage and waste receptacles, the same to be made of metal and equipped with tight-fitting covers, and to be of a design safely and properly to contain whatever material may be placed therein, said receptacles being provided and maintained by the User. The receptacles shall be kept covered except when filling or emptying the same. The User shall exercise extreme care in removing such garbage, debris and other waste materials from the Space. The manner of such storage and removal shall be subject in all respects to the continual approval of Pan American. No facilities of the Airport shall be used for such removal unless with Pan American's prior consent in writing. No such garbage, debris or other waste materials shall be or be permitted to be thrown, discharged or disposed into or upon the waters at or bounding the Space. 10.5 It is intended that the standards and obligations imposed by this Section shall be maintained or complied with by the User in addition to its compliance with all 7 applicable Federal, State and Municipal laws, ordinances and regulations, and in the event that any of said laws, ordinances and regulations shall be more stringent than such standards and obligations, the User agrees that it will comply with such laws, ordinances and regulations in its operations hereunder. Changes in such laws or regulations are not grounds for termination of this Agreement. 10.6 The User shall promptly observe, comply with and execute the provisions of any and all present and future rules and regulations, requirements, orders and directions of the National Fire Protection Association and the Fire Insurance Organization of New Jersey or of any other board or organization exercising or which may exercise similar functions which may pertain or apply to the operations of the User on the Space and the User shall, subject to and in accordance with the provisions of this Agreement relating to construction by the User, make any and all structural or nonstructural improvements, alterations or repairs of the Space that may be required at any time hereafter by any such present or future rule, regulation, requirement, order or direction. If by reason of any failure on the part of the User to comply with the provisions of this Section, any fire insurance, extended coverage or other insurance rate on the Space or any part thereof, or on the Airport or any part thereof, shall at any time be higher than it otherwise would be, then the User shall pay to Pan American that part of all premiums paid by Pan American which shall have been charged because of such violation or failure by the User. 10.7 In addition to compliance by the User with all laws, ordinances, governmental rules, regulations and orders now or at any time in effect during the term of the use hereunder which as a matter of law are applicable to the operation, use or maintenance by the User of the Space or the operations of the User under this Agreement (the foregoing not to be construed as a submission by Pan American or the Port Authority to the application to itself of such requirements or any of them), the User agrees that it shall conduct all its operations under the Agreement and shall operate, use and maintain the Space in accordance with a high standard and in such manner that there will be at all times a minimum of air pollution, water pollution or any other type of pollution and a minimum of noise emanating from, arising out of or resulting from the operation, use or maintenance of the Space by the User and from the operations of the User under this Agreement. Pan American hereby reserves the right from time to time and at any time during the term of the Agreement to require the User, and the User agrees to design and construct at its sole cost and expense such reasonable structures, fences, equipment, devices and other facilities as may be necessary or appropriate to accomplish the objectives as set forth in the first sentence of this paragraph. All locations, the manner, type and method of construction and the size of any of the foregoing shall be determined by Pan American. The User shall submit for Pan American approval a Construction Application together with its plans and specifications covering the required work and upon receiving such approval shall proceed diligently to construct the same. 10.8 The obligations assumed by the User under the above paragraph shall continue throughout the term of this Agreement and shall not be limited, affected, impaired or in any manner modified by the fact that Pan American or the Port Authority shall 8 have approved any Construction Application and supporting plans, specifications and contracts covering construction work and notwithstanding the incorporation therein of Pan American's or the Port Authority's recommendations or requirements and notwithstanding that Pan American and the Port Authority may have at any time during the term of the Agreement consented to or approved any particular procedure or method of operation which the User may have proposed, or Pan American or the Port Authority may have itself prescribed the use of any procedure or method. The agreement of the User to assume the obligations under the above paragraph is a special inducement and consideration to Pan American in entering into this Agreement with the User. 10.9 The Port Authority has applied for and received a grant or grants of money from the Administrator of the Federal Aviation Administration pursuant to the Federal Airport Act of 1946 and pursuant to the Airport and Airway Development Act of 1970 (49 U.S.C. 1701), as the same have been amended and supplemented, and the Port Authority may in the future apply for and receive further such grants. Pan American under its Operating Agreement with the Port Authority for Teterboro Airport, Dated September 19, 1967, has assumed certain obligations of the Port Authority under the Grant Agreement and in connection therewith, the Port Authority and Pan American may in the future undertake certain additional obligations respecting the operation of the Airport and the activities of contractors, lessees and permittees thereon. The performance by the User of the promises and obligations contained in this Agreement is therefore a special consideration and inducement to Pan American to enter into this Agreement and the User further covenants and agrees that if the Administrator of the Federal Aviation Administration or any other governmental officer or body having jurisdiction over the enforcement of the obligations of the Port Authority and/or Pan American in connection with Federal Airport Aid, shall make any orders, recommendations or suggestions respecting the performance by the User will promptly comply therewith, at the time or times when and to the extent that Pan American may direct. 10.10 The User shall be solely responsible for compliance with the provisions of this Section and no act or omission of Pan American shall relieve the User of such responsibility. 11. Prohibited Acts 11.1 The User shall not install, maintain, operate or permit the installation, maintenance or operation of any restaurant, kitchen, stand or other establishment of any type for the sale of food or of any vending machines or device designed to dispense or sell merchandise or services of any kind to the public, except that User may, for the benefit of its employees, customers, guests and visitors install coin operated vending machines or services for the dispensing and sale of the following: 11.1.1 Hot and cold packaged foods; 11.1.2 Hot and cold beverages; 9 11.1.3 Candy and chewing gum; 11.1.4 Tobacco and tobacco products; 11.1.5 Newspapers and periodicals; 11.1.6 Telephone services (pay stations) (hereinafter called "vending machines"). 11.2 If User, installs or causes to be installed vending machines on the Space for the limited sale of merchandise or services permitted hereunder, User shall have the right to retain the revenues derived therefrom, provided, however, that: 11.2.1 The User shall itself, and shall also require its contractors, to indemnify and hold harmless Pan American, its subsidiaries, their Directors, officers, agents and employees and the Port Authority, its Commissioners, officers, agents and employees (to include reasonable attorney's and other professional fees) from and against all claims and demands of third persons (including employees, (to include reasonable attorney and other professional fees) officers and agents of Pan American and the Port Authority) arising or alleged to arise out of the installation, operation or maintenance of the vending machines (or consumable obtained therefrom) or arising or alleged to arise out of any actual or alleged infringement of any patent, trademark or copyright or any alleged or actual unfair competition in any wise connected with the operation of the vending machines whether or not such claims, demands, causes of action, liabilities, etc. are made or asserted before or after termination or expiration of this agreement. 11.3 The limited right to install, operate and maintain vending machines granted to User herein may be terminated by Pan American at any time during the term of this Agreement upon ninety (90) days' notice to the User and Pan American, at any time thereafter, may substitute for the User's vending machines other machines selling similar merchandise or services operated by Pan American or by its permittee or concessionaire and thereupon User shall remove its machines. 11.4 Upon installation by Pan American or by its permittee or concessionaire of vending machines in substitution of User's vending machines, all revenues derived therefrom shall be retained by Pan American. 11.5 Upon rendering of notice to User of termination of the right to operate vending machines, Pan American may elect to permit User's vending machines to remain, but in such case, User shall pay or cause to be paid to Pan American each month for each machine upon the same basis for the preceding month as any permittee or concessionaire of Pan American then operating machines at the Airport for sale to the general public of similar merchandise or rendering of similar services. 11.6 The termination by Pan American of the limited right of User to install vending machines at the Space shall be nondiscriminatory in that similar rights granted to 10 other Users at the Airport shall be terminated concurrently therewith, and in the exercise of such right by Pan American User shall not be entitled to assert any claim or institute any action or proceeding at law or in equity to assert any claim on account thereof whether for loss, damages or loss of revenue, consequential or otherwise. 11.7 The User shall nor overload any floor or paved area on the Space and shall repair any floor including supporting members and any paved area damaged by overloading. 11.8 The User shall not do or permit to be done anything which may interfere with the effectiveness or accessibility of the utility, mechanical, electrical, drainage and sewer systems, fire-protection system and other systems installed or located on or in the Space. 11.9 The User shall not commit any nuisance or permit its employees or others on the Space with its consent to commit or create or continue or tend to create any nuisance on the Space or in or near the Airport. 11.10 The User shall not cause or permit to be caused or produced upon the Space, to permeate the same or to emanate therefrom, any unusual, noxious or objectionable smokes, gases, vapor or odors. 11.11.1 The User shall not do or permit to be done any act or thing upon the Space which: 11.11.2 will invalidate or conflict with any fire insurance policies covering the Space or any part thereof, or the Airport or any part thereof; or 11.11.3 which, in the opinion of Pan American, may constitute an extra hazardous condition so as to increase the risks normally attendant upon the operations permitted by this Agreement; or 11.11.4 which will increase the rate of any fire insurance, extended coverage or other insurance on the Airport or any part thereof or upon the contents of any building or structure thereon. 12. Rules and Regulations 12.1 User shall observe and obey and shall compel others on the Space and those doing business with it with respect to the Space to observe and obey such Rules and Regulations of the Airport as are now in effect or as may be promulgated from time to time for the government and conduct of operations of the Airport for reasons of safety, health or preservation of property, for the good and orderly appearance of the Space and for the safe and efficient operation and use of the Space. If a copy of the Rules and Regulations is not attached, then Pan American will make a copy thereof available to the User at the office of the Manager of Teterboro Airport. 11 13. Signs 13.1 Except with the prior written approval of Pan American, the User shall not erect, maintain or display any advertising, signs, posters or similar devices at or on the Space. 13.2 Upon demand by Pan American, the User shall remove, obliterate or paint out any and all advertising, signs, posters and similar devices placed by the User on the Space or elsewhere on the Airport without the prior approval of Pan American. In the event of a failure on the part of the User so to remove, obliterate or paint out each and every sign or piece of advertising and so to restore the Space and the Airport, Pan American may perform the necessary work and the User shall pay the costs thereof to Pan American on demand. 14. Construction by the User 14.1 The User shall not erect any structures, make any improvements or do any construction work on the Space, or install any fixtures (other than trade fixtures, removable without material damage to the Space, any such damage to be immediately repaired by the User) without the prior written approval of Pan American through the medium of a construction or alteration application and in the event any construction, improvement, alteration, modification, addition, repair or replacement is made without such approval, then upon reasonable notice so to do, the User will remove the same or at the option of Pan American, cause the same to be changed to the satisfaction of Pan American. In case of any failure on the part of the User to comply with such notice, Pan American may effect the removal or change and User shall pay the cost thereof to Pan American. 14.2 Title to any construction, improvement, alteration, modification or addition performed by User at or on the Space in accordance with a Pan American approved construction or alteration application shall vest in the Port Authority immediately upon completion without any further action or notice of any kind. 15. Assignment 15.1 The User agrees that it will not grant the right of sub-use, sell, convey, transfer, assign, mortgage or pledge this Agreement or any part thereof or any rights granted thereby in the Agreement hereunder or any part hereof without the prior written consent of Pan American, which consent shall not be unreasonable withheld. 15.1.1 In the event that such right of sub-use is granted by Pan American, the User agrees to pay to Pan American an amount equal to Fifty Percent (50%) of any fees paid by the sub-user to the User in excess of the fees due to Pan American under Section 3 of the Agreement. 15.2 Notwithstanding the provisions of the foregoing subsection, the User may assign this Agreement in its entirety to any successor in interest to the User with or into which the User may be merged or consolidated or to any entity to whom the User has sold 12 all or substantially all of its assets, provided that each such succeeding entity or purchaser shall execute and deliver an instrument to Pan American in a form satisfactory to Pan American assuming the obligations of the User under this Agreement, and provided, further, that the User shall execute and deliver to Pan American a statement to the effect the User's guarantee of the obligations hereunder shall cover hereunder the obligations of each succeeding entity or purchaser. 15.3 Nothing contained herein nor the privileges of assignment or granting the right of sub-use as set forth in Section 15.1.1 and 15.2 above shall be or be deemed to constitute a waiver or release of liability of the User and the User agrees that it shall at all time remain primarily liable for all of the obligations imposed upon it as User under this Agreement as if no assignment of or granting of right of sub-use under this Agreement was ever made or attempted. 15.4 If the User assigns, sells, conveys, transfers, mortgages, pledges or grants the right of sub-use under this Agreement in violation of the foregoing provisions of this Section 15, Pan American may collect from any assignee, sub-user or anyone who claims a right to this Agreement or who occupies the Space or any part thereof, and shall apply the net amount collected to the fees herein reserved; and no such collection shall be deemed a waiver by Pan American of the covenants contained in this Section 15 nor of acceptance by Pan American of any assignee, sub-user, claimant or occupant nor a release of the User by Pan American from the further performance by the User of the covenants contained herein. 16. Condemnation 16.1 The User, in any action or proceeding instituted by any governmental agency or agencies for the taking for a public use of any interest in all or any part of the Space, shall not be entitled to assert any claim to any compensation or award or part thereof made or to be made therein or therefor, or to institute any action or proceeding or to assert any claim against such agency or agencies or against the Port Authority or Pan American, or its subsidiaries and affiliates for or on account of any such taking (except the possible claim to an award for loss of the User's removable fixtures), it being understood and agreed between Pan American and the User that Pan American shall be entitled to all the compensation or awards made or to be made or paid for in such taking, free of any claim or right of the User. 16.2 In the event of a taking of the entire Space by any governmental agency or agencies, then this Agreement shall be cancelled as of the date possession is taken from the Port Authority by the agency or agencies, and shall cease and expire in the same manner and with the same effect as if the Agreement had on that date expired. 16.3 In the event that all or any portion of the Space is required by the Port Authority to comply with any present or future governmental law, rules, regulation, requirement, order or direction, Pan American may by notice given to the User terminate the Agreement with respect to all or such portion of the Space so required. Such termination shall be effective on the date specified in the notice. The User hereby 13 agrees to deliver possession of all or such portion of Space so required upon the effective date of such termination. 16.4 No taking by or conveyance to any governmental authority as described above nor any delivery by the User nor taking by the Port Authority pursuant to this subsection shall be or be construed to be a breach of this Agreement or be made the basis of any claim by the User against the Port Authority or Pan American or its subsidiaries and affiliates for damages, consequential or otherwise. 16.5 In the event of a taking by any governmental agency or agencies or by the Port Authority of a part of the Space, then use of such part only shall, as of the date possession thereof is taken, cease and determine, and the Fees thereafter to be paid by the User to Pan American shall be abated as hereinafter provided from and after the date of such taking. In the event that a substantial part shall be taken, which shall be deemed to mean a taking so extensive that the User is unable to use or operate the Space for the purposes expressed in this Agreement, then the User shall have the right to be exercised within thirty (30) days of the taking to terminate this Agreement, such termination to have the same effect as expiration. 17. Non-Discrimination 17.1 Without limiting the generality of any of the provisions of this Agreement, the User, for itself, its successors in interest, and assigns, as a part of the consideration hereof, does hereby covenant and agree as a covenant running with the land that (1) no person on the grounds of sex, race, color, or national origin shall be excluded from participation in, denied the benefits of, or be otherwise subjected to discrimination in the use of the Space, (2) that in the construction of any improvement on, over, or under the Space and the furnishing of services thereon, no person on the grounds of race, color, or national origin shall be excluded from participation in, denied the benefits of, or otherwise subjected to discrimination, (3) that the User shall use the Space in compliance with all other requirements imposed by or pursuant to Title 49, Code of Federal Regulations, Department of Transportation, Subtitle A, Office of the Secretary, Part 21, nondiscrimination in Federally-assisted programs of the Department of Transportation-Effectuation of Title VI of the Civil Rights Act of 1964, and as said Regulations may be amended, and any other present or future laws, rules, regulations, orders or directions of the United States of America with respect thereto which from tine to time may be applicable to the User's operations thereat, whether by reason of agreement between Pan American and the United States Government or otherwise. 17.2 The User assures that it will undertake an affirmative action program as required by 14 CFR Part 152, Subpart E, to insure that no person shall on the grounds of race, creed, color, national origin, or sex be excluded from participating in any employment activities covered in 14 CFR Part 152, Subpart E. The User assures that no person shall be excluded on these grounds from participating in or receiving the services or benefits of any program or activity covered by this subpart. The User assures that it will require that its covered suborganization provide assurances to the 14 User that they similarly will undertake affirmative action programs and that they will require assurances from their suborganizations, as required by 14 CFR Part 152, Subpart E, to the same effect. 17.3 The User shall include the provisions of the above subsections in every agreement or concession pursuant to which any person or persons, other than the User, operates any business or facility in or at the Space providing services to the public and shall also include therein a provision granting Pan American a right to take such action as the United States may direct to enforce such covenant. 17.4 The User's noncompliance with the provisions of this Section shall constitute a material breach of the Agreement. In the event of the breach by the User of any of the above nondiscrimination provisions, Pan American may take any appropriate action to enforce compliance; or in the event such noncompliance shall continue for a period of twenty (20) days after receipt of written notice from Pan American, Pan American shall have the right to terminate this Agreement with the same force and effect as a termination under the Section of the Agreement providing for termination for default by the User in the performance or observance of any other term or provision of the Agreement; or may pursue such other remedies as may be provided by law; and as to any or all of the foregoing, Pan American may take such action as the United States may direct. 17.5 The User shall indemnify and hold harmless Pan American, its subsidiaries and affiliates and the Port Authority (to include reasonable attorney's and other professional fees) from any claims and demands of third persons including the United States of America resulting from the User's noncompliance with any of the provisions of this Section and the User shall reimburse Pan American and the Port Authority for any loss or expense incurred by reason of such noncompliance, whether or not such claims, demands, causes of action, liability, etc., are made or asserted before or after termination or expiration of this agreement. 17.6 Nothing contained in this Section shall grant or shall be deemed to grant to the User the right to transfer or assign the Agreement, to make any agreement or concession of the type mentioned in this Section, or any right to perform any construction on the Space. 18. Governmental Requirements 18.1 The User shall procure all licenses, certificates, permits or other authorization from all governmental authorities, if any, having jurisdiction over the User's operations at the Space which may be necessary for the User's operations thereat. 18.2 The User shall pay all taxes, license, certification, permit and examination fees and excise which may be assessed, levied, exacted or imposed on the Space or operation hereunder or on the gross receipts or income to User therefrom, and shall make all applications, reports and returns required in connection therewith. 15 18.3 Pan American has agreed by a provision in its agreement with the Port Authority covering the Airport to conform to the enactments, ordinances, resolutions and regulations of various governmental authorities having jurisdiction of the airport and of their various departments, boards and bureaus in regard to construction and maintenance of buildings and structures and in regard to health and fire protection. The User shall, within forty-eight (48) hours after its receipt of any notice of violation, warning notice, summons or other legal process for the enforcement of any such enactment, ordinance, resolution or regulation, deliver the same to Pan American. Unless otherwise directed in writing by Pan American because the same is inapplicable, the User shall conform to such enactments, ordinances, resolutions and regulations insofar as they relate to the operations of the User at the Space. In the event of compliance with any such enactment, ordinance, resolution or regulation on the part of the User, acting in good faith, commenced after such delivery to Pan American but prior to the receipt by the User of a written direction from Pan American, such compliance shall not constitute a breach of this Agreement, although Pan American thereafter notifies the User to refrain from such compliance. 18.4 The User shall promptly observe, comply with and execute the provisions of any and all present and future governmental laws, rules, regulations, requirements, orders and directions which may pertain or apply to the User's operations at the Space. 18.5 The User's obligations to comply with governmental requirements are provided herein for the purpose of assuring proper safeguards for the protection of persons and property at the Space. 19. Rights of Entry Reserved 19.1 The Port Authority, by its officers, employees, agents, representatives and contractors and Pan American and its subsidiaries and affiliates by its officers, employees, agents, representatives and contractors shall have the right at all reasonable times to enter upon the Space for the purpose of inspecting the same, for observing the performance by the User of its obligations under this Agreement and for the doing of any act or thing which the Port Authority or Pan American nay be obligated or have the right to do under this Agreement, or otherwise. 19.2 Without limiting the generality of the foregoing, Pan American, by its officers, employees, agents, representatives and contractors and by the employees, agents, representatives and contractors of any furnisher of utility services in the vicinity, shall have the right, for its own benefit, for the benefit of the User, or for the benefit of others than the User at the Airport, to maintain existing and future utilities systems or portions thereof on the Space, including therein, without limitation thereto, systems for the supply of heat, water, gas, fuel, electricity and for the furnishing of fire-alarm, fire-protection, sprinkler, sewerage, drainage, telegraph and telephone services, including all lines, pipes, mains, wires, conduits and equipment connected with or appurtenant to such systems, and to enter upon the Space at all reasonable times to make such repairs, replacements or alterations as may, in the opinion of Pan American, be deemed necessary or advisable and, from time to time to construct or 16 install over, in or under the Space new systems or parts thereof, including lines, pipes, mains, wires, conduits and equipment; provided, however, that in the exercise of such rights of repair, alteration or new construction Pan American shall not unreasonably interfere with the use and occupancy of the Space by the User. 19.3 The exercise of any or all of the foregoing rights by the Port Authority, Pan American or others shall not be or be construed to be an eviction of the User nor be made the grounds for any abatement of fees, nor any claim or demand for damages, consequential or otherwise. 19.4 Nothing in this Section shall impose or shall be construed to impose upon Pan American or the Port Authority any obligation so to construct or maintain or to make repairs, replacements, alterations or additions, or shall create any liability for any failure so to do. 20. Basic Agreement 20.1 In the event the Basic Agreement is terminated, revoked, cancelled or expires, this Agreement shall terminate on the day preceding such date the same as if such preceding date were the expiration date of the term of this Agreement and such termination, revocation, cancellation or expiration of the Basic Agreement shall not be deemed a breach of this Agreement. 21. Patents, Trademarks 21.1 The User represents that it is the owner of or fully authorized to use any and all services, processes, machines, articles, marks, names or slogans used by it in its operations under or in anywise connected with this Agreement. The User agrees to indemnify and to save and hold the Port Authority, Pan American, its subsidiaries and affiliates, their Commissioners, Directors, officers, employees, agents and representatives free and harmless of and from any loss, liability, expense, suit or claim for damages in connection with any actual or infringement of any patent, trademark or copyright, or arising from any alleged or actual unfair competition or other similar claim arising out of the operations of the User under or in anywise connected with this Agreement, whether or not such claims, demands, causes of action, liabilities, etc., are made or asserted before or after termination or expiration of this Agreement and to include reasonable attorney's and other professional fees. 22. Additional Fees and Charges 22.1 If Pan American is required or elects to pay any sum or sums or incurs any obligations or expense by reason of the failure, neglect or refusal of the User to perform or fulfill any one or more of the conditions or agreements contained in this Agreement, or as a result of an act or omission of the User contrary to the said conditions and agreements, the User agrees to pay the sum or sums so paid or the expense so incurred, including all interest, costs, damages and penalties, and the same may be added to any installment of Fees thereafter due hereunder, and each and every part of the same shall be and become additional Fees, recoverable by Pan American 17 in the same manner and with like remedies as if they were originally a part of the Fees as set forth in the Section entitled "Fees to Pan American" hereof. 23. Right of Re-Entry 23.1 Pan American shall, as an additional remedy upon the giving of a notice of termination as provided in the Section entitled "Termination by Pan American" hereof, have the right to re-enter the Space and every part thereof upon the effective date of termination without further notice of any kind, and may regain and resume possession either with or without the institution of summary or any other legal proceedings or otherwise. Such re-entry or regaining or resumption of possession, however, shall not in any manner affect, alter or diminish any of the obligations of the User under this Agreement, and shall in no event constitute an acceptance of surrender. 24. Surrender 24.1 The User covenants and agrees to yield and deliver peaceably to Pan American, possession of the Space on the date of cessation of the Agreement, whether such cessation be by termination, expiration or otherwise, promptly and in good condition, except for reasonable wear which does not cause or tend to cause deterioration of the improvements or adversely affect the efficiency or proper utilization thereof. 25. Termination by Pan American 25.1 Upon the occurrence of any of the following events or at any time thereafter during the continuance thereof, Pan American may terminate the rights of the User under this Agreement upon five (5) days' written notice, such termination to be effective upon the date specified in such notice: 25.1.1 The User shall become insolvent or shall take the benefit of any present or future insolvency statute, or shall make a general assignment for the benefit of creditors, or file a voluntary petition in bankruptcy or a petition or an answer seeking an arrangement or its reorganization or the readjustment of its indebtedness under the federal bankruptcy laws or under any other law or statute of the United States or of any State thereof, or consent to the appointment of a receiver, trustee or liquidator of all or substantially all of its property; or 25.1.2 By order of decree of a court, the User shall be adjudged bankrupt or an order shall be made approving a petition filed by any of the creditors or, if the User is a corporation, by any of the stockholders of the user, seeking its reorganization or the readjustment of its indebtedness under the federal bankruptcy laws or under any law or statute of the United States or of any State thereof; or 25.1.3 A petition under any part of the federal bankruptcy laws or an action under any present or future insolvency law or statute shall be filed against the User and shall not be dismissed within thirty (30) days after the filing thereof; or 18 25.1.4 Except as may be provided in the Section of this Agreement entitled "Assignment," the interest of User under this Agreement shall be transferred to, pass to or devolve upon, by operation of law or otherwise, any other person, firm or corporation; or 25.1.5 The User, if a corporation, shall, without the prior written approval of Pan American, become a successor or merged corporation in a merger, a constituent corporation in a consolidation, or a corporation in dissolution; or 25.1.6 By or pursuant to, or under authority of any legislative act, resolution or rule, or any order or decree of any court or governmental board, agency or officer having jurisdiction, a receiver, trustee, or liquidator shall take possession or control of all or substantially all of the Space of the User and such possession or control shall continue in effect for a period of twenty (20) working days; or 25.1.7 The User shall voluntarily abandon, desert or vacate the Space or discontinue its operations at the Airport, or, after exhausting or abandoning any right of further appeal, the User shall be prevented for a period of sixty (60) days by action of any governmental agency having jurisdiction thereof, from conducting its operations at the Airport, regardless of the fault of the User; or 25.1.8 Any lien is filed against the Space because of any act or omission of the User and is not removed within forty-five (45) days after notice to the User thereof; or 25.1.9 The User shall fail duly and punctually to pay the Fees or to make any other payment required hereunder when due to Pan American and shall persist in its failure for a period of ten (10) days following the receipt of written notice of such default from Pan American; or 25.1.10 The User shall fail to keep, perform and observe each and every other promise and agreement set forth in this Agreement on its part to be kept, performed, or observed, within ten (10) days after receipt of notice of default thereunder from Pan American (except where fulfillment or its obligation requires activity over a period of time, and the User shall have commenced substantially to perform whatever may be required for fulfillment within ten (10) days after receipt of notice and continues diligently such substantial performance without interruption except for causes beyond its control); or 25.1.11 There shall be an occurrence of any of the events of default resulting in termination of any other use and occupancy agreements or permits between the User and Pan American at the Airport. 25.2 If any of the events enumerated in the above subsections of this Section shall occur prior to the effective date of this Agreement, the User shall not be entitled to enter into possession of the Space, and Pan American upon the occurrence of any such event, or at any time thereafter during the continuance thereof by twenty-four (24) hours' notice may cancel this Agreement, such cancellation to be effective upon the date specified in such notice. 19 25.3 No acceptance by Pan American of fees, charges, or other payments in whole or in part for any period or periods after a default of any of the terms, agreements and conditions hereof to be performed, kept or observed by the User shall be deemed a waiver of any right on the part of Pan American to terminate this Agreement. 25.4 No waiver by Pan American of any default on the part of the User in performance of any of the terms, covenants or conditions hereof to be performed, kept or observed by the User shall be or be construed to be a waiver by Pan American, of any other or subsequent default in performance of any of the valid terms, agreements and conditions. 25.5 The rights of termination described above shall be in addition to any other rights of termination provided in this Agreement and in addition to any rights and remedies that Pan American would have at law or in equity consequent upon any breach of this Agreement by the User, and the exercise by Pan American of any right of termination shall be without prejudice to any other such rights and remedies, except that in the event of termination pursuant to the portion of the subsection above of this Section reading "after exhausting or abandoning any right of further appeal, the User shall be prevented for a period of sixty (60) days by action of any governmental agency having jurisdiction thereof, from conducting its operations at the Airport, regardless of the fault of the User," the sole right of Pan American shall be a right of termination. 26. Survival of the Obligations of the User 26.1 In the event that the Agreement shall have been terminated in accordance with a notice of termination as provided in the Section entitled "Termination by Pan American" hereof, or in the event that Pan American has re-entered, regained or resumed possession of the Space in accordance with the provisions of the Section entitled "Right of Re-Entry" hereof, all the obligations of the User under this Agreement shall survive such termination or cancellation, re-entry, regaining or resumption of possession and shall remain in full force and effect for the full term of this Agreement, and the amount or amounts of damages or deficiency shall become due and payable to Pan American to the same extent, at the same time or times, and in the same manner as if no termination, cancellation, re-entry, regaining or resumption of possession had taken place. Pan American may maintain separate actions each month to recover the damage or deficiency then due or at its option and at any time may sue to recover the full deficiency, for the entire unexpired term of the Agreement. 26.2 The amount of damages for the period of time subsequent to termination or cancellation (or re-entry, regaining or resumption of possession) on account of the User's Fee obligations, shall be the sum of the following: 26.2.1 The amount of the total of all installments of fees pursuant to the Section entitled "Fees to Pan American" hereof, less the installments thereof payable prior to the effective date of termination except that the credit to be allowed for the installment 20 payable on the first (1st) day of the month in which the termination is effective shall be prorated for the part of the month the Agreement remains in effect on the basis of the total days in the month; and an amount equal to all expenses incurred by Pan American in connection with regaining possession, restoring the Space, acquiring a User for the Space, legal expenses (including but not limited to attorneys' fees), putting the Space in order including, without limitation to, cleaning, redecorating (on failure of the User to restore), maintenance and brokerage fees. 27. Use Subsequent to Cancellation or Termination 27.1 Pan American, upon termination or cancellation pursuant to the Section entitled "Termination by Pan American" of this Agreement, or upon any re-entry, regaining or resumption of possession pursuant to the Section entitled "Right of Re-Entry" of this Agreement, may occupy the Space or may enter into an agreement with another User and shall have the right to permit any person, firm or corporation to enter upon the Space and use the same. Such use may be part only of the Space or of the entire Space or a part thereof, together with other space, and for a period of time the same as or different from the balance of the term hereunder remaining, and on terms and conditions the same as or different from those set forth in this Agreement. Pan American shall also, upon said termination or cancellation, or upon said re-entry, regaining or resumption of possession, have the right to repair and to make structural or other changes in the Space, including changes which alter the character of the Space and the suitability thereof for the purposes of the User under this Agreement, without affecting, altering or diminishing the obligations of the User hereunder. 27.2 In the event either of use by others or of any actual use and occupancy by Pan American, there shall be credited to the account of the User against its survived obligations hereunder any net amount remaining after deducting from the amount actually received from any User, licensee, permittee or other occupier in connection with the use of the said Space or portion thereof during the balance of the term of use and occupancy as the same is originally stated in this Agreement, or from the market value of the occupancy of such portion of the Space as Pan American may itself during such period actually use and occupy, less all expenses, costs and disbursements incurred or paid by Pan American in connection therewith. 27.3 No such use and occupancy shall be or be construed to be an acceptance of a surrender of the Space, nor shall such use and occupancy constitute a waiver of any rights of Pan American hereunder. Pan American will use its best efforts to minimize damages to User under this Section commensurate with its obligations under the Basic Agreement. 28. Remedies to be Non-Exclusive 28.1 Except where otherwise specifically provided, all remedies provided in this Agreement shall be deemed cumulative and additional and not in lieu of or exclusive of each other or of any other remedy available to either party at law or in equity. 21 29. Limitation of Rights and Privileges Granted 29.1 No exclusive rights at the Airport are granted by this Agreement and no greater rights or privileges with respect to the use of the Space or any part thereof are granted or intended to be granted to the User by this Agreement, or by any provision thereof, than the rights and privileges expressly and specifically granted hereby. 30. Option for Renewal 30.1 The User shall have the right to extend this Agreement for an additional period of (5) years ("extended term") on the same terms and conditions except for fees and this option, upon condition that: 30.1.1 The User shall notify Pan American of its desire to so extend this Agreement on or before December 31, 1989; and 30.1.2 At both the date of receipt of notice to Pan American and on January 1, 1991: 30.1.3 the User shall be in possession of and occupying the Space under this Agreement, 30.1.4 the User shall not be under notice of termination from Pan American, and 30.1.5 the User shall not be in default in the performance of any of the terms, covenants and agreements contained herein and to be performed by the User. 30.2 Upon the date the option shall have become effective and throughout the extended term User shall pay to Pan American the following fees: 30.2.1 A basic annual fee of Two Hundred Thousand Twenty Two Dollars and Eighty Four Cents ($200,022.84) multiplied by a fraction the numerator of which shall be all Urban Consumers of the Bureau of Labor Statistics of the United States Department of Labor, all items, Selected Large Cities for the New York - Northeastern New Jersey area (hereinafter called "the CPI") as published for the month of December 1990 and the denominator of which shall be the CPI published for the month of June 1985. 30.2.2 In computing the basic annual fee for the extended term, in no event shall the basic annual fee be less than Two Hundred Thousand Twenty Two Dollars and Eight Four Cents ($200,022.84). 30.2.3 The basic annual fee for the extended term as computed in Section 30.2.1 above shall be payable in equal monthly installments each and every month throughout the extended term. 22 31. Removal of Personal Property 31.1 The User shall have the right at any time during the term of this Agreement to remove its equipment, inventories, removable fixtures and other personal property from the Space. 31.2 If the User shall fail to remove its property on or before the termination or expiration of the term, Pan American may remove such property to a public warehouse for deposit or retain the same in its own possession, all without insurance, and sell the same at public auction, the proceeds of which shall be applied first, to the expense of removal, storage and sale; second, to any sums owed by the User to Pan American, with any balance remaining to be paid to the User, but if the expenses of such removal, storage and sale shall exceed the proceeds of sale, the User shall pay such excess to Pan American upon demand. 32. Brokerage 32.1 The User represents and warrants that no broker has been concerned on its behalf in the negotiation of this Agreement and that there is no such broker who is or may be entitled to be paid a commission in connection therewith. The User shall indemnify and save harmless Pan American its subsidiaries and affiliates of and from any claim for commission or brokerage made by any such broker when such claim is based in whole or in part upon any act or omission of the User, whether or not such claims, demands, causes of action, liabilities, etc., are made or asserted before or after termination or expiration of this Agreement (to include reasonable attorney's and other professional fees). 33. Notices 33.1 Except where expressly required or permitted herein to be oral, all notices, requests, consents and approvals required to be given to or by either party shall be in writing, and all such notices and requests shall be personally delivered to the duly designated officer or representative of such party or delivered to the office of such officer or representative during regular business hours, or forwarded to him or to the party at such address by certified mail. Notices to Pan American shall be directed to: J. Scott Piper Authorized Representative Pan Am World Services Pan Am Building Teterboro Airport, New Jersey 07608 23 with copy to: Airport Manager 399 Industrial Avenue Teterboro Airport, New Jersey 07608 Notices to User shall be directed to: Manager, Aviation Transportation Texaco, Inc. 177 Industrial Avenue Teterboro Airport Teterboro, New Jersey 07608 34. Construction and Application of Terms 34.1 The Section and subsection headings, if any, in this Agreement, are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of intent of any provision hereof. 35. Non-Liability of Individuals 35.1 Neither the Directors of Pan American, its subsidiaries and affiliates, or User nor any officers, agents or employees thereof, shall be charged personally by the other with any liability or held liable to the other under any term or provision of this Agreement, or because of its execution or attempted execution, or because of any breach or attempted or alleged breach thereof. 36. Abatement 36.1 If at any time the User shall become entitled to abatement of Fees by the provisions of this Agreement or otherwise, the abatement of Fees shall be made on an equitable basis giving effect to the amount and character of the Space, the use of which is denied the User as compared with the entire Space. 37. Port Authority Consent 37.1 This Agreement shall become effective upon the execution hereof by all parties hereto and the execution of a Consent Agreement between and among the Port Authority, Pan American, and User. 38. Entire Agreement 38.1 This Agreement consists of the following: Sections 1 through 38 and Exhibit A. 24 38.2 The foregoing constitutes the entire Agreement of the parties on the subject matter hereof. It may not be changed, modified, discharged or extended except by written instrument duly executed by Pan American and the User. The User agrees that no representations or warranties shall be binding upon Pan American unless expressed in writing in this Agreement. 25 IN WITNESS WHEREOF, the parties hereto have executed these presents as of the day and year first above written. PAN AMERICAN WORLD AIRWAYS, INC. ATTEST: /s/ Illegible - ------------------------------- By /s/ Linda B. Young ---------------------------------- Title: Authorized Representative ------------------------------ TEXACO INC. /s/ G. Marshall ------------------------------------ (User) ATTEST: /s/ R. Koch - ------------------------------- By General Manager Assistant Secretary ---------------------------------- Title: Corporate Real Estate Department ------------------------------ 26 Assignment Agreement TA-191 CONSENT AGREEMENT THIS AGREEMENT, dated as of , 1988, by and among THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (hereinafter called "the Port Authority") and PAN AMERICAN WORLD AIRWAYS, INC. (hereinafter called "the Airport Operator"), and TEXACO INC, a Delaware corporation (hereinafter called "the Assignor") and ATLANTIC AVIATION CORPORATION, a Delaware corporation (hereinafter called "the Assignee"), WITNESSETH, THAT: WHEREAS, the Port Authority and the Airport Operator have heretofore entered into an agreement dated September 19, 1967 (which agreement, as the same has been or may be supplemented and amended, is hereinafter called "the Main Agreement") pursuant to which the Airport Operator is operating and using Teterboro Airport (hereinafter called "the Airport"); and WHEREAS, the Airport Operator entered into a Use and Occupancy Agreement with the Assignor dated January 1, 1986 designated TA-191 and the Consent Agreement in connection therewith (which Use and Occupancy Agreement as heretofore supplemented and amended, is hereinafter referred to as "the Agreement" and together with the said Consent Agreement, collectively hereinafter referred to as the "Assigned Agreements"). WHEREAS, the Assignor proposes to assign the Agreement to the Assignee in accordance with an "Assignment Agreement", a copy of which is attached hereto and made a part hereof and hereafter referred to as "the Assignment Agreement", subject to the consent of the Airport Operator and the Port Authority, and the execution of a Consent Agreement by and among the Airport Operator, the Assignor, the Assignee and the Port Authority pursuant to and in accordance with the terms of the Main Agreement. NOW, THEREFORE, for and in consideration of the mutual agreements herein contained, the Port Authority, the Airport Operator, the Assignor and the Assignee hereby agree effective as of June 1, 1988 as follows: 1. On the terms and conditions hereinafter set forth, the Port Authority and the Airport Operator consent to the Assignment Agreement. 2. The execution of this instrument by the Airport Operator and the Port Authority does not constitute a representation by them that the Assignor has performed or fulfilled every obligation required by the Agreement; as to such matters the Assignee agrees to rely solely upon the representations of the Assignor. 3. The Agreement shall terminate, without notice to the Assignee, on the day preceding the date of expiration or earlier termination of the Main Agreement, or on such earlier date as may be provided for in the Agreement. 1 4. Neither this Consent Agreement, nor anything contained herein nor the consent granted hereunder shall constitute or be deemed to constitute a consent to nor shall they create an inference or implication that there has been consent to any enlargement, variation or change in the rights, powers and privileges granted to the Airport Operator under the Main Agreement, nor consent to the granting or conferring of any rights, powers or privileges to the Assignee as may be provided by the Agreement if not granted to the Airport Operator under the Main Agreement, nor shall the same impair or change any of the duties, liabilities and obligations imposed on the Airport Operator under the Main Agreement. The Assignment Agreement is an agreement between the Assignor and the Assignee with respect to the various matters set forth therein. Neither this Consent Agreement nor anything contained herein nor the consent granted hereunder shall apply and pertain as between the Airport Operator and the Port Authority, it being understood that the terms, provisions, covenants, conditions and agreements of the Main Agreement shall, in all respects, be controlling, effective and determinative. The specific mention of or reference to the Port Authority in any part of the Agreement or the Assignment Agreement including, without limitation thereto, any mention of any consent or approval of the Port Authority now or hereafter to be obtained, shall not be or be deemed to create an inference that the Port Authority has granted its consent or approval thereto under this Consent Agreement or shall thereafter grant its consent or approval thereto or that the subject matter as to which the consent or approval applies has been or shall be approved or consented to in principle or in fact or that the Port Authority's discretion pursuant to the Main Agreement as to any such consents or approvals shall in any way be affected or impaired. The lack of any specific reference in any provisions of the Assignment Agreement to Port Authority approval or consent shall not be deemed to imply that no such approval or consent is required and the Main Agreement shall in all respects be controlling, effective and determinative. No provision of the Assigned Agreements including, but not limited to, those imposing obligations on the Assignee with respect to laws, rules, regulations, taxes, assessments and liens, shall be construed as a submission or admission by the Port Authority that the same could or does lawfully apply to the Port Authority, nor shall the existence of any provision of the Assigned Agreements covering actions which shall or may be undertaken by the Assignee or the Airport Operator be deemed to imply or infer that Port Authority consent or approval thereto pursuant to the Main Agreement will be given or that Port Authority discretion with respect thereto will in any way be affected or impaired. References in this paragraph to specific matters and provisions shall not be construed as indicating any limitation upon the rights of the Port Authority with respect to its discretion as to the granting or withholding approvals or consents as to other matters and provisions in the Assigned Agreements or the Assignment Agreement which are not specifically referred to herein. 5. The Assignee, in its operations under or in connection with the Assigned Agreements shall be subject to the applicable terms, provisions, covenants and conditions of the Main Agreement. Without in any way affecting the obligations of the Airport Operator under the Main Agreement and under this Consent Agreement, all acts and omissions of the Assignee shall be deemed to be acts and omissions of the Airport Operator under the Main Agreement, but notwithstanding the foregoing shall not constitute a breach thereof 2 if, except for causes beyond the control of the Airport Operator, it shall have commenced to remedy said default within twenty (20) days after receipt of notice thereof from the Port Authority and continues diligently to pursue such remedy. 6. Neither the Assigned Agreements nor the Assignment Agreement shall be changed, modified, discharged or extended except by written instrument duly executed by the parties thereto and only with the express prior written consent of the Port Authority. 7. If the Airport Operator shall at any time be in default of its obligations under the Main Agreement to make payments to the Port Authority, or if there shall occur at any time an event involving insolvency, bankruptcy, arrangement or reorganization of the Airport Operator which under the terms of the Main Agreement would constitute an event the occurrence of which grants the Port Authority the right to terminate the Main Agreement, and provided the same has not been cured within the time granted therefor, if any, under the Main Agreement, the Assignee shall on demand of the Port Authority pay directly to the Port Authority any fee or other amount due to the Airport Operator. No such payment shall relieve the Airport Operator from any obligations under the Main Agreement or under this Consent Agreement but all such payments shall be credited against the obligations of the Airport Operator and of the Assignee for each payment or part thereof. 8. The granting of the consent hereunder by the Port Authority shall not be or be deemed to operate as a waiver of consent to any subsequent agreement with respect to privileges at the Airport (by the Airport Operator or by the Assignee) or to any assignment of the Main Agreement or the Assigned Agreements or of any rights under either of them, whether in whole or in part. 9. In the event of any substantial default by the Assignee under any of the provisions of this Consent Agreement and said default has not been cured within thirty (30) days after the Port Authority has served a notice of such default upon the Airport Operator and the Assignee, the Port Authority shall have the right to revoke the consent granted hereunder upon thirty (30) days' written notice to the Airport Operator and the Assignee, but no such revocation shall be deemed to affect the Main Agreement and the continuance thereof, it being understood, moreover, that the foregoing shall not be deemed to affect or limit any rights of the Port Authority under the Main Agreement or the Assigned Agreements. In the event of the revocation of the consent hereunder as hereinabove provided, the Airport Operator shall immediately terminate the Agreement. 10. Reference herein to the Assignee shall mean and include the Assignee, its officers, agents, employees and also others on the space covered by the Agreement or on the Airport with the consent of the Assignee. 11. Neither the Commissioners of the Port Authority nor any of them, nor any officer, agent or employee thereof shall be held personally liable to the Airport Operator, to the Assignor or to the Assignee under any term or provision of this Consent Agreement or because of its execution or because of any breach or alleged breach hereof. 3 12. Neither the Directors of the Airport Operator, nor any of them, nor any officer, agent or employee thereof shall be personally liable to the Assignor or the Assignee under any term or provision of this Consent Agreement or because of its execution or because of any breach or alleged breach thereof. 4 CERTIFICATE OF SECRETARY I, Franklin S. Eyster, II, certify that I am the Secretary of the corporation named in the attached agreement; that Donald R. Romano, who signed said authorized agreement on behalf of the corporation was then the Senior Vice President and Treasurer of said corporation; that said agreement was duly signed for and in behalf of said corporation by authority of its governing body, and is within the scope of its corporate powers. /s/ Franklin S. Eyster, II ------------------------------------------- Franklin S. Eyster, II (Corporate Seal) STATE OF DELAWARE ) ) SS. NEW CASTLE COUNTY ) On this 8th day of July, One Thousand Nine Hundred and Eighty Eight before me, Victoria A. Tait, a Notary Public in and for the County of New Castle, State of Delaware, duly commissioned and qualified, personally appeared Franklin S. Eyster, II, known to me to be the person described in and whose name is subscribed to the attached instrument, and acknowledged to me that he executed the instrument for the purposes and consideration therein stated. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my office seal, at my office the day and year in this certificate first written above. /s/ Victoria A. Tait ------------------------------------------- Notary Public My Commission Expires: August 27, 1990 1 I, Catherine Doherty, certify that I am the Assistant Secretary of the corporation named in the attached agreement; that Les Gertach who signed said authorized agreement on behalf of the corporation was then the __________________ of said corporation; that said agreement was duly signed for and in behalf of said corporation by authority of its governing body, and is within the scope of its corporate powers. /s/ Catherine Doherty ------------------------------------------- (Signature) (Corporate Seal) STATE OF NEW YORK COUNTY OF WESTCHESTER On this 2nd day of August, One Thousand Nine Hundred and Eighty Eight before me, Lerodie A. Robertson, a Notary Public in and for the County of Westchester, State of New York, duly commissioned and qualified, personally appeared Catherine Doherty, known to me to be the person described in and whose name is subscribed to the attached instrument, and acknowledged to me that he executed the instrument for the purposes and consideration therein stated. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my office seal, at my office the day and year in this certificate first written above. By: /s/ Lerodie A. Robertson --------------------------------------- My Commission Expires: March 30, 1989 1 ASSIGNMENT AGREEMENT This Assignment Agreement made this 8th day of July, 1988, between ATLANTIC AVIATION CORPORATION a Delaware corporation, with its principal place of business at 153 North DuPont Highway, Greater Wilmington Airport, New Castle, Delaware 19720 ("Atlantic") and TEXACO INC., a Delaware corporation, with an office at 2000 Westchester Avenue, White Plains, New York 10650 ("Texaco"). A. Texaco uses and occupies space at Teterboro Airport located in Bergen County, New Jersey, pursuant to a Use and Occupancy Agreement with Pan American World Airways, Inc. bearing file designation TA 191, and the Consent Agreement in connection with the foregoing, which Use and Occupancy Agreement, together with said Consent Agreement, are hereafter collectively referred to as (the "Agreement"). B. Atlantic uses and occupies space at the Airport adjacent to the space occupied by Texaco and wishes to expand the area occupied by it. C. Texaco and Atlantic have agreed to an assignment of the Agreement. NOW, THEREFORE, Texaco and Atlantic agree as follows: 1. Texaco assigns to Atlantic all of its right, title and interest in and to the Agreement, a true, correct and complete copy of which with all amendments thereto is attached to this Assignment Agreement as Exhibit A. 2. Atlantic accepts the assignment and agrees to perform and observe all the terms, conditions and obligations in the Agreement which were imposed on Texaco, as though Atlantic were the original signatory to the Agreement, and to hold harmless and indemnify Texaco from any claims, demands or actions brought against it by reason of the failure of Atlantic to observe and perform the terms, conditions and obligations of the Agreement. 3. Texaco warrants that as of the date Atlantic occupies the space that the Agreement is in full force and effect; it is not in default; Texaco has committed no act or omission that could give rise to a default and that all fees required to be paid have been paid through April 30, 1988. 4. This Assignment Agreement is subject to the approval of Pan American World Airways, Inc. ("Pan American") and The Port Authority of New York and New Jersey ("Port Authority"). Atlantic will submit the Assignment Agreement to Pan Am for approval. 5. Texaco shall use its best efforts to vacate the space on or prior to June 1, 1988, but Texaco shall incur no liability if for any reason it is unable to do so. 1 IN WITNESS WHEREOF, the parties have executed this Assignment Agreement as of the date first above written. TEXACO INC. ATTEST: By: /s/ Les Gerlach ------------------------------ /s/ Catherine Doherty - ------------------------------- Title: Manager Aviation Transport --------------------------- Secretary ATLANTIC AVIATION CORPORATION ATTEST: By: /s/ Illegible ------------------------------ /s/ Franklin S. Eyster, II - ------------------------------- Title: Illegible Secretary --------------------------- 2 CERTIFICATE OF SECRETARY I, Franklin S. Eyster, II, certify that I am the Secretary of the corporation named in the attached agreement; that Donald R. Romano, who signed said authorized agreement on behalf of the corporation was then the Senior Vice President and Treasurer of said corporation; that said agreement was duly signed for and in behalf of said corporation by authority of its governing body, and is within the scope of its corporate powers. /s/ Franklin S. Eyster, II ------------------------------------------- Franklin S. Eyster, II (Corporate Seal) STATE OF DELAWARE ) ) SS. NEW CASTLE COUNTY ) On this 8th day of July, One Thousand Nine Hundred and Eighty Eight before me, Victoria A. Tait, a Notary Public in and for the County of New Castle, State of Delaware, duly commissioned and qualified, personally appeared Franklin S. Eyster, II, known to me to be the person described in and whose name is subscribed to the attached instrument, and acknowledged to me that he executed the instrument for the purposes and consideration therein stated. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my office seal, at my office the day and year in this certificate first written above. /s/ Victoria A. Tait ------------------------------------------- Notary Public My Commission Expires: August 27, 1990 1 I, Catherine Doherty, certify that I am the Assistant Secretary of the corporation named in the attached agreement ("Texaco Inc."); that Les Gerlach who signed said authorized agreement on behalf of the corporation was then the Manager of Aviation Transport of said corporation; that said agreement was duly signed for and in behalf of said corporation by authority of its governing body, and is within the scope of its corporate powers. /s/ Catherine Doherty ------------------------------------------- (Signature) (Corporate Seal) STATE OF NEW YORK COUNTY OF WESTCHESTER On this 2nd day of August, One Thousand Nine Hundred and Eighty Eight before me, _____ A. Robertson, a Notary Public in and for the County of Westchester; State of New York, duly commissioned and qualified, personally appeared Catherine Doherty, known to me to be the person described in and whose name is subscribed to the attached instrument, and acknowledged to me that he executed the instrument for the purposes and consideration therein stated. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my office seal, at my office the day and year in this certificate first written above. By: /s/ Lerodie A. Robertson ---------------------------------------- My Commission Expires: March 30, 1989 1 Teterboro Airport Use & Occupancy Agreement Agreement TA-191 Supplement No. 1 Supplement Agreement THIS AGREEMENT, made this 23rd day of January, 1995 by and between JOHNSON CONTROLS WORLD SERVICES INC. (hereinafter called "Johnson Controls"), a Florida State Corporation, and ATLANTIC AVIATION CORPORATION, a Delaware corporation (hereinafter called "the User"). WITNESSETH, THAT: WHEREAS, The Port Authority of New York and New Jersey (hereinafter called "the Port Authority"), is the owner of Teterboro Airport located in the Boroughs of Teterboro, Moonachie and Hasbrouck Heights and in the Township of Lyndhurst, County of Bergen in the State of New Jersey; and WHEREAS, Johnson Controls is the operator of Teterboro Airport and has the right to operate and use the Airport as successor - assignee to an agreement between Pan American World Airways, Inc ("Pan American") and the Port Authority dated September 19, 1967 (Basic Agreement") ; and WHEREAS, Pan American entered into a Use and Occupancy Agreement with Texaco, Inc. dated as of January 1, 1986 designated TA-191 and a Consent Agreement in connection therewith (which Use and Occupancy Agreement is hereinafter referred to as the "the Agreement"); and WHEREAS, the Agreement was assigned to Atlantic Aviation Corporation pursuant to an Assignment Agreement (hereinafter called the "Assignment Agreement") between Texaco Inc. and Atlantic Aviation Corporation dated July 8, 1988; and WHEREAS, the User and Johnson Controls desire to amend and extend the term of the Agreement as hereinafter provided. NOW, THEREFORE, in consideration of the mutual agreements and respective promises herein contained, and made by the parties hereto, it is mutually agreed as follows: 1. Section 1 "Term: The expiration date of December 31, 1990, as revised by Letter Renewal Notice dated September 29, 1989, which revised the expiration date to December 31, 1995 is now changed to read "December 30, 1999". 2. Section 3 "Fees" shall be amended by adding a new subparagraphs 3.2 as follows: "3.2 Beginning January 1, 1996, and continuing until December 30, 1999, the User shall pay to Johnson Controls a monthly fee whichever is the greater of: 1 (i) Twenty Five Thousand Dollars and Zero Cents ($25,000.00); or (ii) Sixteen Thousand Six Hundred Sixty Eight Dollars and Fifty Cents ($16,668.50) multiplied by a fraction, the numerator of which shall be the CPI (as hereinafter defined) published for the month of December, 1995 and the denominator shall be the CPI published for the month of June, 1985. 3. Except as provided herein, all the terms, covenants and conditions of the Agreement remain and shall be in full force and effect. 4. Neither the Directors of Johnson Controls, its subsidiaries and affiliates, nor any officer or employee thereof shall be charged personally by the user with any liability or held liable to it under any term or provision of this Supplement, or because of its execution or attempted execution, or because of any breach or attempted or alleged breach thereof. IN WITNESS WHEREOF, the parties hereto have executed these presents as of the day and year first above written. ATTEST: JOHNSON CONTROLS WORLD SERVICES INC. /s/ Illegible By: /s/ Illegible - ---------------------------------- ----------------------------------- Title: Illegible Title: Vice President ---------------------------- ATTEST: ATLANTIC AVIATION CORPORATION /s/ H.J. Esposito By: /s/ Franklin S. Eyster, II - ---------------------------------- ----------------------------------- Title: Illegible Title: Sr. VP ---------------------------- -------------------------------- 2 CONSENT AGREEMENT THIS AGREEMENT, dated as of January 23, 1995 by and among THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (herein after called "The Port Authority") and JOHNSON CONTROLS WORLD SERVICES INC. (hereinafter called "the Airport Operator") and ATLANTIC AVIATION CORPORATION (hereinafter called "the User"), WITNESSETH, THAT: WHEREAS, the Port Authority and the Airport operator have heretofore entered into an agreement dated September 19, 1967 (which agreement, as the same has been or may hereafter be supplemented and amended, is hereinafter called "the Main Agreement"), pursuant to which the Airport Operator is operating and using Teterboro Airport (hereinafter called "the Airport"); and WHEREAS, pursuant to and in accordance with the terms of the Main Agreement, the Airport Operator and the User, have entered into a Use and Occupancy Agreement dated January 1, 1986 with the consent of the Port Authority which Use and Occupancy Agreement has been designated TA-191; and WHEREAS, the Port Authority, the Airport Operator and the User entered into a Consent Agreement dated as of January 1, 1986 (hereinafter called "the Use and Occupancy Consent Agreement"), wherein the Port Authority gave its consent to the Use and Occupancy Agreement; and WHEREAS, the Airport Operator and the User desire to supplement the above referenced Use and Occupancy Agreement, a copy of which Supplement is attached hereto, made a part hereof and hereafter called "the supplement", subject to the consent of the Port Authority and the execution of a Consent Agreement by and among the Airport Operator, the User and the Port Authority. NOW, THEREFORE, for and in consideration of the covenants and mutual agreements contained, the Port Authority, the Airport Operator and the User hereby agree effective as of the effective date of the Supplement as follows: 1. On the terms and condition hereinafter set forth, the Port Authority consents to the Supplement. 2. It is hereby specifically agreed that all of the terms and provisions of the Use and Occupancy Consent Agreement shall apply with like effect to this consent to the Supplement as though each and every such term and such provision were incorporated herein. 3. Neither the Commissioner of the Port Authority nor any of them, nor any officer, agent or employee thereof shall be held personally liable to the Airport Operator or to the User under any term or provision of this Consent Agreement to the Supplement or because of its execution or because of any breach or alleged breach hereof. 1 IN WITNESS WHEREOF, the Port Authority, the Airport Operator and the User have executed these presents. PORT AUTHORITY OF NEW YORK AND NEW JERSEY ATTEST: /s/ Lysa C. Meduri By: /s/ Illegible - ---------------------------------- ----------------------------------- Title: Acting Secretary Title: /s/ Illegible ---------------------------- -------------------------------- JOHNSON CONTROLS WORLD SERVICES INC. ATTEST: /s/ Illegible By: /s/ Illegible - ---------------------------------- ----------------------------------- Title: Illegible Title: Vice President ---------------------------- -------------------------------- ATLANTIC AVIATION CORPORATION (User) ATTEST: /s/ H.J. Esposito By: /s/ Franklin S. Eyster, II - ---------------------------------- ----------------------------------- Title: Illegible Title: Sr. VP ---------------------------- -------------------------------- 2 Teterboro Airport Use & Occupancy Agreement Agreement TA-191 Supplement No. 2 Supplement Agreement THIS AGREEMENT, dated this 27 day of May, 1999 by and between JOHNSON CONTROLS WORLD SERVICES INC. (hereinafter called "Johnson Controls"), a Florida Corporation, and ATLANTIC AVIATION CORPORATION, a Delaware corporation (hereinafter called "the User"). WITNESSETH, THAT: WHEREAS, The Port Authority of New York and New Jersey (hereinafter called "the Port Authority"), is the owner of Teterboro Airport located in the Boroughs of Teterboro, Moonachie and Hasbrouck Heights and in the Township of Lyndhurst, County of Bergen in the State of New Jersey; and WHEREAS, Johnson Controls is the operator of Teterboro Airport and has the right to operate and use the Airport as successor - assignee to an agreement between Pan American World Airways, Inc ("Pan American") and the Port Authority dated September 19, 1967 ("Basic Agreement"); and WHEREAS, Pan American entered into a Use and Occupancy Agreement with Texaco, Inc. dated as of January 1, 1986 and designated TA-191 and a Consent Agreement in connection therewith (which Use and Occupancy Agreement, as the same has heretofore been supplemented or amended, and Consent Agreement are hereinafter collectively referred to as the "Agreement"); and WHEREAS, the Agreement was assigned to the User pursuant to an Assignment Agreement between Texaco Inc. and the User dated July 8, 1988 and a Consent Agreement in connection therewith (which Assignment Agreement and Consent Agreement are hereinafter collectively called the "Assignment Agreement"); and WHEREAS, the User, in accordance with the terms of Supplement No. 4 to Use and Occupancy Agreement designated TA-121, has agreed to the demolition of the facility known as Hangar 2 and the construction of a replacement facility; and WHEREAS, the User and Johnson Controls desire to amend and extend the term of the Agreement as hereinafter provided in order to provide sufficient time to construct said replacement facility; NOW, THEREFORE, in consideration of the mutual agreements and respective promises herein contained and made by the parties hereto, it is mutually agreed, effective as of the date of this Supplement, as follows: 1 1. Effective on May 31, 1999, Exhibit A to the Agreement shall be deemed deleted and of no further effect, and reference to "Exhibit A" in the Agreement shall be deleted and substituted by reference "Exhibit A-1". 2. Effective on June 1, 1999, the Space under the Agreement shall be the area set forth in hatching on Exhibit A-1, attached hereto and made a part hereof, together with all buildings, structures, improvements, additions and permanent installations constructed and installed or to be constructed and installed therein or thereon or thereunder during the remainder of the term of this Agreement (hereinafter collectively referred to as the "Space"). 3. The parties hereby agree that the term of the Agreement shall be extended beyond the current expiration date of December 30, 1999 to expire thirty (30) days after the completion (as hereinafter defined) of the hangar facility as provided for in Paragraph 3 of Supplement No. 4 to User's Use and Occupancy Agreement bearing file No. TA-121. 4. The term "completion" shall mean the Completion Date as defined in subsection 3.6.14 of Use and Occupancy Agreement TA-121. 5. In the event that, upon the expiration date referenced in Paragraph 3 above, the Space shall not be occupied by First Aviation Services, Inc., the current user of the facility known as Hangar 1, or if First Aviation Services, Inc. shall have notified Johnson Controls of its intention not to occupy Hangar 1, then, upon notice by Johnson Controls to the User the term of the Agreement shall be extended to expire upon the expiration date of Use and Occupancy Agreement TA-121. 6. In the event that Taxiway P at the Airport is relocated, then, upon notice by Johnson Controls to the User that said Taxiway has been decommissioned, Area 2 as shown on Exhibit A-1 shall be added to and become part of the Space as herein defined. The User shall proceed expeditiously and with all reasonable diligence, in accordance with Section 14 of the Agreement, to pave and construct an aircraft parking ramp on said Area 2. 7. Section 3 "Fees" shall be further amended by adding new subparagraphs 3.3, 3.4, 3.5 and 3.6 as follows: "3.3 Beginning on the effective date of Supplement No. 2 to the Agreement and continuing until December 31, 1999, the User shall pay to Johnson Controls a monthly fee of Twenty-seven Thousand Nine Hundred Thirty-three Dollars and One Cent ($27,933.01), as detailed on Exhibit B as Area 1, attached hereto and made a part hereof. 3.4 Effective January 1, 2000 the User shall pay to Johnson Controls a monthly fee of Thirty-four Thousand Two Hundred Twenty-one Dollars and Fifty-three Cents ($34,221.53), multiplied by a fraction, the numerator of which shall be the CPI as published for the month of December 1999 2 and the denominator of which shall be the CPI published for the month of December 1998. In computing the monthly fee payable January 1, 2000 in no event shall the monthly fee be less than Thirty-four Thousand Two Hundred Twenty-one Dollars and Fifty-three Cents ($34,221.53). 3.4.1 In the event that Area 2 as shown on Exhibit A-1 has become part of the Space, effective January 1, 2000 the User shall pay to Johnson Controls a total monthly land use fee determined as follows: a total base fee of Three Thousand Three Hundred Sixty-five Dollars and Fifty Cents ($3,365.50) shall first be multiplied by a fraction, the numerator of which shall be the CPI as published for the month of December 1999 and the denominator of which shall be the CPI published for the month of December 1998 and the User shall pay the product thereof on January 1, 2000 and on the first day of each and every month thereafter . In computing the total monthly fee payable January 1, 2000 in no event shall the monthly fee be less than Three Thousand Three Hundred Sixty-five Dollars and Fifty Cents ($3,365.50). 3.4.2 Effective January 1, 2001 and annually thereafter the User shall pay to Johnson Controls a total monthly fee for Area 1 and Area 2, if then a part of the Space, equal to the prior year's fee multiplied by a fraction, the numerator of which shall be the CPI as published for the month of December of the year prior to the affected year and the denominator of which shall be the CPI published for the month of December of two years prior to the affected year. In computing the total monthly fee payable in no event shall the monthly fee be less than the prior year's fee or be increased by an amount greater than six percent (6%). 3.5 Johnson Controls reserves the right, at its option, to perform a real estate appraisal of the User's Space in the year 2009. In the event that such an appraisal is performed, from and after January 1, 2010 the monthly fee payable by the User shall be the greater of either (i) one twelfth of the appraised building rate for Hangar 12 plus the appraised land rate for the Space or (ii) the December 2009 total monthly fee payable multiplied by a fraction, the numerator of which shall be the CPI as published for the month of December 2009 and the denominator of which shall be the CPI published for the month of December 2008. In the event that the fee calculated in accordance with (ii) above is fifteen percent (15%) or higher than that calculated in accordance with (i) above, then the monthly fee payable effective January 1, 2010 would be the greater of (a) the fee payable January 2000 adjusted annually by 1/2 of the change in the CPI or (b) the rate calculated per (i) above. 3.5.1 In the event that a real estate appraisal of the User's Space is not performed in the year 2009, effective January 1, 2010 the User shall pay to Johnson Controls a total monthly fee equal to the fee payable December 2009 multiplied by a fraction, the numerator of which shall be the CPI as 3 published for the month of December 2009 and the denominator of which shall be the CPI published for the month of December 2008. In computing the total monthly fee payable in no event shall the monthly fee be less than the prior year's fee or be increased by an amount greater than six percent (6%). 3.6 Effective January 1, 2011 and annually thereafter the User shall pay to Johnson Controls a total monthly fee equal to the prior year's fee multiplied by a fraction, the numerator of which shall be the CPI as published for the month of December of the year prior to the affected year and the denominator of which shall be the CPI published for the month of December of two years prior to the effected year. In computing the total monthly fee payable in no event shall the monthly fee be less than the prior year's fee or be increased by an amount greater than six percent (6%)." 8. (a) The following Subsection 10.11 shall be added to Section 10 "Various Obligations of the User": "10.11 The following terms shall have the following respective meanings as used herein: 10.11.1 "Environmental Damages" shall mean any one or more of the following: (i) the presence on, about or under the Space of any Hazardous Substance, as hereinafter defined, and/or (ii) the disposal, release or threatened release of any Hazardous Substance from the Space, and/or (iii) an Off-Space Hazardous Substance, as hereinafter defined, and/or (iv) any personal injury (including wrongful death) or property damage arising out of or related to such Hazardous Substances, and/or (v) the violation of any Environmental Requirements, as hereinafter defined, pertaining to such Hazardous Substances or Off-Space Hazardous Substances, the Space and/or the activities thereon. 10.11.2 "Environmental Requirements" and "Environmental Requirement" shall mean all applicable present and future laws, statues, enactments, resolutions, regulations, rules, ordinances, codes, licenses, permits, orders (including agreed upon consent orders), approvals, plans, authorizations, concessions, franchises, requirements and similar items, of all Governmental Agencies, and all applicable judicial, administrative, and regulatory decrees, judgments, and orders relating to the protection of human health or the environment, and in the event that there shall be more than one compliance standard, as among the various Governmental Agencies, the standard for any of the foregoing to be that which requires the lowest level of a Hazardous Substance taking into account the nature and intended use of the Space, the foregoing to include without limitation: 4 (a) All requirements pertaining to reporting, licensing, permitting, investigation and remediation of emissions, discharges, releases, or threatened releases of Hazardous Substances into the air, surface water, groundwater, or land, or relating to the manufacture, processing, distribution, use treatment, storage, disposal, transport, or handling of Hazardous Substances; and (b) All environmental requirements pertaining to the protection of the health and safety of employees or the public. 10.11.4 "Hazardous Substances" and "Hazardous Substance" shall mean and include without limitation any pollutant, contaminant, toxic or hazardous waste, dangerous substance, potentially dangerous substance, noxious substance, toxic substance, flammable, explosive or radioactive material, urea formaldehyde foam insulation, asbestos, polychlorinated biphenyls (PCBs), chemicals known to cause cancer or reproductive toxicity, petroleum and petroleum products and other substances which have been or in the future shall be declared to be hazardous or toxic, or the removal of which have been or in the future shall be required, or the manufacture, preparation, production, generation, use, maintenance, treatment, storage, transfer, handling, or ownership of which have been or in the future shall be restricted, prohibited, regulated or penalized by any Environmental Requirement. 10.11.5 "Off-Premises Hazardous Substance" shall mean the presence of any Hazardous Substance in, about or under property at the Airport other than the Space as a result of the User's use and occupancy of the Space, whether by migration, release, discharge or any other manner, it being understood that the User shall have the burden of proof to establish that any migration of a Hazardous Substance from the Space was not a result of the User's use and occupancy of the Space. (b) The User, prior to the execution of this Agreement, had thoroughly examined the Space and determined it to be suitable for the User's operations hereunder and the User restates and continues said determination in connection with the extension hereunder. Except as otherwise provided herein, the User hereby agrees to assume all responsibility for any and all risks, costs and expenses of any kind whatsoever caused by, arising out of or in connection with the condition of the Space whether any aspect of such condition existed prior to, on or after the effective date of the letting of the Space, including, without limitation, all Environmental Requirements and Environmental Damages, as herein defined and all soil remediation to the extent required under Environmental Requirements, including but not limited to, remediation which may be required as a result of discovery of any contaminants while performing test borings or in the performance of any construction work, and to indemnify and hold harmless the Port Authority and Johnson Controls with respect to third party claims for Section 8 of this Agreement TA 191, as amended. Notwithstanding the foregoing, the 5 User shall be responsible for the removal of and remediation of Hazardous Substances placed, or permitted or caused to be placed, on, in or under the Space by the User or by its employees, agents, contractors, or others using or occupying the Space under this Agreement. 9. Port Authority's Additional Rights to Recapture or Accommodate Others on Portions of User's Ramp Space The User acknowledges that the Airport serves the transportation needs of the public and that the Public Aircraft Facilities should be utilized to the fullest extent possible with airport users afforded fair and reasonable access. The User also acknowledges that the following subsections provide that if the User does not utilize its facilities to the level set forth in stated performance criteria such underutilized facilities may be either recaptured by the Port Authority or required to be offered by the User to another user in accordance with the following: 9.1 It is hereby agreed that, commencing either one year after the effective date of the addition of Area 2 to the Space, or January 1, 2002, whichever occurs earlier and which will be known as the "Start Date", and for each and every calendar year thereafter, the Port Authority may ascertain the User's percentage share (hereinafter referred to as the "User's Current Fuel Share") of the total aircraft fuel gallons sold (hereinafter referred to as "Total Current Fuel Dispensed") at the Airport for the preceding calendar year. The fuel dispensed by the User for the year preceding the Start Date and the year preceding each and every calendar year thereafter during which such calculation is made shall be known as the "User's Current Fuel Dispensed". The User's Current Fuel Share shall be calculated by dividing the User's Current Fuel Dispensed by the Total Current Fuel Dispensed preceding the year during which such calculation is made. The User's Current Fuel Share for calendar year 1998 shall hereinafter be defined as "the Base Year Fuel Share" and is shown below:
Teterboro Airport User Fuel Share in 1998 ---------------------- ------------------ Atlantic Aviation Corporation 17.8% First Aviation Services, Inc. 16.5% Jet Aviation of America, Inc. 34.4% General Aviation Aircraft Services, Inc. (doing 17.0% business as Million Air-Teterboro Signature Flight Support-New Jersey, Inc. 14.3%
9.2 As of the Start Date and as of January 1 of each succeeding calendar year, in the event that the User's Current Fuel Share for the respective preceding calendar year is determined to be at least twelve and one-half percent (12.5%) less than the User's Base Year Fuel Share, the Port Authority shall have the right but not the obligation, upon two (2) month's written notice to the User, to require the User and the User hereby agrees to make ramp space in Area 2 (hereinafter called "Accommodation Space") available to other users, sub-users or the Port Authority 6 in useable increments as directed by the Port Authority in the manner and amount and to the extent set forth below:
Percentage of the User's Current Fuel Share Divided by Ramp Space to be Made User's Base Year Fuel Share Available in Area 2 --------------------------- ------------------- 87.5% (12.5% reduction or greater) Up to 20.0% of Total 75.0% (25% reduction or greater) Up to 50.0% of Total 50.0% (50% reduction or greater) Up to 100.0% of Total
9.3 In the event the User is so notified by the Port Authority it shall either (a) enter into a sub-use and occupancy agreement with another user as determined by the Port Authority or (b) enter into a surrender agreement as directed by the Port Authority. Any such sub-use and occupancy agreement shall be subject to the prior and continuing approval of the Port Authority and the execution by and among the User, the Sub-user, the Airport Operator, and the Port Authority of a Consent Agreement in form satisfactory to the Port Authority. Moreover, and without limiting the forgoing, the User shall provide any and all information to the Airport Operator as may be requested by the Airport Operator from time to time as to all aspects of its accommodation of a Sub-user hereunder. Nothing contained herein shall in any way affect the discretion of the Airport Operator or the Port Authority in granting or withholding its consent to a sub-use and occupancy agreement. 9.4 The failure of the Port Authority to exercise its right under this Section during any year in which it may have such a right shall not affect, waive or limit its rights to exercise such right in any subsequent year during any period of underutilization. In no event will the Accommodation Space exceed the percentages set forth above. 9.5 The User shall make such ramp space available during the period set forth in the aforesaid notice. The Port Authority shall consider a request by the User to restore the Accommodation Space to the User when the User's Current Fuel Share shall have returned to within twelve and one-half percent (12.5%) or less of the User's Base Year Fuel Share, provided the Accommodation Space is not then covered by a sub-use or other agreement or at such other time as the Port Authority deems it is in the best interest of the Airport to restore the Accommodation Space to the User. 9.6 The User agrees that all handling, sublease, sub-use and occupancy agreements shall be reasonable and at non-discriminatory rates, fees and charges and shall be based on the recovery by the User of a pro rata score share of the User's costs of (1) operation and maintenance, (2) services provided, and (3) the User's fees and investment in the Accommodation Space. 10. Except as provided herein, all the terms, covenants and conditions of the Agreement remain and shall be in full force and effect. 7 11. Neither the Directors of Johnson Controls, its subsidiaries and affiliates, nor any officer or employee thereof shall be charged personally by the User with any liability or held liable to it under any term or provision of this Supplement, or because of its execution or attempted execution, or because of any breach or attempted or alleged breach thereof. IN WITNESS WHEREOF, the parties hereto have executed these presents as of the day and year first above written. ATTEST: JOHNSON CONTROLS WORLD SERVICES INC. /s/ Laura Conner By: /s/ Illegible - ---------------------------------- ----------------------------------- Title: Admin. Assistant Title: Vice President ---------------------------- -------------------------------- ATTEST: ATLANTIC AVIATION CORPORATION /s/ Victoria A. Tait By: /s/ RN Fitzgerald - ---------------------------------- ----------------------------------- Title: Secretary Title: President ---------------------------- -------------------------------- 8 CONSENT AGREEMENT THIS AGREEMENT, dated as of May 27, 1999 by and among THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (hereinafter called "The Port Authority") and JOHNSON CONTROLS WORLD SERVICES INC. (hereinafter called "the Airport Operator") and ATLANTIC AVIATION CORPORATION (hereinafter called "the User"), WITNESSETH, THAT: WHEREAS, the Port Authority and the Airport Operator have heretofore entered into an agreement dated September 19, 1967 (which agreement, as the same has been or may hereafter be supplemented and amended, is hereinafter called "the Main Agreement"), pursuant to which the Airport Operator is operating and using Teterboro Airport (hereinafter called "the Airport"); and WHEREAS, pursuant to and in accordance with the terms of the Main Agreement, the Airport Operator and the User, have entered into a Use and Occupancy Agreement dated January 1, 1986 and is hereinafter called the "Use and Occupancy Agreement" which Use and Occupancy Agreement has been designated TA-191; and WHEREAS, the Port Authority, the Airport Operator and the User entered into a Consent Agreement dated as of January 1, 1986 (hereinafter called "the Use and Occupancy Consent Agreement"), wherein the Port Authority gave its consent to the Use and Occupancy Agreement; and WHEREAS, the Airport Operator and the User desire to supplement the above referenced Use and Occupancy Agreement, a copy of which Supplement is attached hereto, made a part hereof and hereinafter called "the Supplement", subject to the consent of the Port Authority and the execution of a Consent Agreement by and among the Airport Operator, the User and the Port Authority; NOW, THEREFORE, for and in consideration of the covenants and mutual agreements hereinafter contained, the Port Authority, the Airport Operator and the User hereby agree, effective as of the effective date of the Supplement, as follows: 1. On the terms and condition hereinafter set forth, the Port Authority consents to the Supplement. 2. (a) If the Main Agreement shall terminate (whether through the expiration of its term or by earlier termination as provided in the Main Agreement) before the expiration date of the Use and Occupancy Agreement, the Use and Occupancy Agreement shall terminate as hereinafter provided and, if the User is in occupancy and using the Space, the Port Authority or a successor airport operator selected by the Port Authority shall enter into a use and occupancy agreement with the User covering the use and occupancy of the Space, with the term thereof commencing as of the expiration or earlier termination of the Use and Occupancy Agreement, the permitted uses of the Space, the fees and charges thereunder being as set forth in the Use and Occupancy Agreement, and on substantially the same remaining 1 terms and conditions as set forth in the Use and Occupancy Agreement and such additional terms as may be necessary or appropriate. (b) Any successor airport operator that may be selected by the Port Authority shall be required to assume all Port Authority obligations hereunder and under any successor use and occupancy agreement and relieve the Port Authority of same. (c) In the event the User has commenced the construction work set forth in Paragraph 3 to Supplement 3 to User's Use and Occupancy Agreement TA-121, the expiration date of December 30, 1999, as referenced in Section 1, "Term" of said Agreement shall be changed to expire, unless sooner terminated in accordance with said Agreement, thirty (30) days after completion of said construction. In the event that, upon the expiration date referenced above, the Space shall not be occupied by First Aviation Services, Inc., or if First Aviation Services, Inc. shall have notified the Airport Operator of its intention not to occupy Hangar 1 at the Airport, the term of the Agreement shall be changed to expire on the day before the Twentieth (20th) Year Anniversary of the completion of the construction as provided for in Paragraph 3 and 10 of said Agreement TA-121, whichever occurs last. 3. Neither this Consent Agreement, nor anything contained herein nor the consent granted hereunder shall constitute or be deemed to constitute a consent to nor shall they create an inference or implication that there has been consent to any enlargement, variation or change in the rights, powers and privileges granted to the Airport Operator under the Main Agreement, nor consent to the granting or conferring of any rights, powers or privileges to the User as may be provided by the Use and Occupancy Agreement or the Supplement if not granted to the Airport Operator under the Main Agreement, nor shall the same impair or change any of the duties, liabilities and obligations imposed on the Airport Operator under the Main Agreement. The Use and Occupancy Agreement and the Supplement are agreements between the Airport Operator and the User with respect to the various matters set forth therein. Neither this Consent Agreement nor anything contained herein nor the consent granted hereunder shall constitute an agreement between the Port Authority and the Airport Operator that the provisions of the Use and Occupancy Agreement or the Supplement shall apply and pertain as between the Airport Operator and the Port Authority, it being understood that the terms, provisions, covenants, conditions and agreements of the Main Agreement shall, in all respects, be controlling, effective and determinative. The specific mention of or reference to the Port Authority in any part of the Use and Occupancy Agreement or the Supplement, including, without limitation thereto, any mention of any consent or approval of the Port Authority now or hereafter to be obtained, shall not be or be deemed to create an inference that the Port Authority has granted its consent or approval thereto under this Consent Agreement or shall thereafter grant its consent or approval thereto or that the subject matter as to which the consent or approval applies has been or shall be approved or consented to in principle or in fact or that the Port Authority's 2 discretion pursuant to the Main Agreement as to any such consents or approvals shall in any way be affected or impaired. The lack of any specific reference in any provisions of the Use and Occupancy Agreement or the Supplement to Port Authority approval or consent shall not be deemed to imply that no such approval or consent is required and the Main Agreement shall, in all respects, be controlling, effective and determinative. 4. No provision of the Use and Occupancy Agreement or the Supplement including, but not limited to, those imposing obligations on the User with respect to laws, rules, regulations, taxes, assessments and liens, shall be construed as a submission or admission by the Port Authority that the same could or does lawfully apply to the Port Authority, nor shall the existence of any provision of the Use and Occupancy Agreement or the Supplement covering actions which shall or may be undertaken by the User or the Airport Operator including, but not limited to, construction on the Space covered by the Use and Occupancy Agreement or the Supplement, be deemed to imply or infer that Port Authority consent or approval thereto pursuant to the Main Agreement will be given or that Port Authority discretion with respect thereto will in any way be affected or impaired. References in this paragraph to specific matters and provisions shall not be construed as indicating any limitation upon the rights of the Port Authority with respect to its discretion as to the granting or withholding approvals or consents as to other matters and provisions in the Use and Occupancy Agreement or the Supplement which are not specifically referred to herein. 5. The User, in its operations under or in connection with the Use and Occupancy Agreement or the Supplement and in its occupancy of the Space covered by the Use and Occupancy Agreement or the Supplement, shall be subject to the applicable terms, provisions, covenants and conditions of the Main Agreement. Without in any way affecting the obligations of the Airport Operator under the Main Agreement and under this Consent Agreement, all acts and omissions of the User shall be deemed to be acts and omissions of the Airport Operator under the Main Agreement, but notwithstanding the foregoing, the Airport Operator shall not be or be deemed to be in default of the Main Agreement to the extent that any of the foregoing shall constitute a breach thereof if, except for causes beyond the control of the Airport Operator, it shall have commenced to remedy said default within twenty (20) days after receipt of notice thereof from the Port Authority and continues diligently to pursue such remedy. 6. The Use and Occupancy Agreement or the Supplement shall not be changed, modified, discharged or extended except by written instrument duly executed by the parties thereto and only with the express prior written consent of the Port Authority. 7. If the Airport Operator shall at any time be in default of its obligations under the Main Agreement to make payments to the Port Authority, or if there shall occur at any time an event involving insolvency, bankruptcy, arrangement or reorganization of the Airport Operator which under the terms of the Main 3 Agreement would constitute an event the occurrence of which grants the Port Authority the right to terminate the Main Agreement, and provided the same has not been cured within the time granted therefor, if any, under the Main Agreement, the User shall on demand of the Port Authority pay directly to the Port Authority any fee or other amount due to the Airport Operator. No such payment shall relieve the Airport Operator from any obligations under the Main Agreement or under this Consent Agreement but all such payments shall be credited against the obligations of the Airport Operator and of the User for each payment or part thereof. 8. The granting of the consent hereunder by the Port Authority shall not be or be deemed to operate as a waiver of consent to any subsequent agreement with respect to the use or occupancy of space at the Airport (by the Airport Operator or by the User) or to any assignment of the Main Agreement or the Use and Occupancy Agreement or the Supplement or of any rights under any of them, whether in whole or in part. 9. In the event of any default by the User under any of the provisions of this Consent Agreement and said default has not been cured within thirty (30) days (or such longer period as is required in the reasonable opinion of the Port Authority, to correct such default, provided the User promptly commences and diligently continues to effectuate a cure) after the Port Authority has served a notice of such default upon the Airport Operator and the User, the Port Authority shall have the right to revoke the consent granted hereunder upon thirty (30) days' written notice to the Airport Operator and the User, but no such revocation shall be deemed to affect the Main Agreement and the continuance thereof, it being understood, moreover, that the foregoing shall not be deemed to affect or limit any rights of the Port Authority under the Main Agreement. In the event of the revocation of the consent hereunder as hereinabove provided, the Airport Operator shall immediately terminate the Use and Occupancy Agreement. 10. Reference herein to the User shall mean and include the User, its officers, agents, employees and also others on the Space covered by the Use and Occupancy Agreement or the Supplement or elsewhere on the Airport with the consent of the User. 11. Neither the Commissioners of the Port Authority nor any of them, nor any officer, agent or employee thereof shall be held personally liable to the Airport Operator or to the User under any term of provision of this Consent Agreement or because of its execution or because of any breach or alleged breach hereof. 4 IN WITNESS WHEREOF, the Port Authority, the Airport Operator and the User have executed these presents. PORT AUTHORITY OF NEW YORK AND NEW JERSEY ATTEST: /s/ Karen Eastman By: /s/ R. Kelly - ---------------------------------- ----------------------------------- Title: Assistant Secretary Title: Aviation Director ---------------------------- -------------------------------- JOHNSON CONTROLS WORLD SERVICES INC. ATTEST: /s/ Laura Conner By: /s/ Illegible - ---------------------------------- ----------------------------------- Title: Admin. Assistant Title: Vice President ---------------------------- -------------------------------- ATLANTIC AVIATION CORPORATION (User) ATTEST: /s/ Illegible By: /s/ RN Fitzgerald - ---------------------------------- ----------------------------------- Title: Secretary Title: President ---------------------------- -------------------------------- 5 EX-10.14 11 y97636exv10w14.txt USE AND OCCUPANCY AGREEMENT EXHIBIT 10.14 TA-121 USE AND OCCUPANCY AGREEMENT BETWEEN PAN AMERICAN WORLD AIRWAYS, INC. AND ATLANTIC AVIATION CORPORATION TETERBORO AIRPORT C O N T E N T S
Section Number Title Page - ------ ----- ---- 1. Term 1 2. Rights of User 1 3. Construction by User 2 4. Other Construction by the User 10 5. Fees to Pan American 10 6. Time of Payment and Computation of Amounts 14 7. Care, Maintenance and Repair 15 8. Obstruction Lights 16 9. Insurance 17 10. Indemnity, Liability Insurance 19 11. Ingress and Egress 20 12. Various Obligations of the User 21 13. Prohibited Acts 24 14. Rules and Regulations 26 15. Signs 26 16. Assignment 26 17. Condemnation 27 18. Non-Discrimination 29 19. Governmental Requirements 30 20. Rights of Entry Reserved 31 21. Basic Agreement 32 22. Patents, Trademarks 32 23. Additional Fees and Charges 32
i
Section Number Title Page - ------ ----- ---- 24. Right of Re-Entry 33 25. Surrender 33 26. Termination by Pan American 33 27. Services by User 35 28. Survival of the Obligations of the User 37 29. Use Subsequent to Cancellation or Termination 37 30. Remedies to be Non-Exclusive 38 31. Limitation of Rights and Privileges Granted 38 32. Removal of Personal Property 38 33. Brokerage 39 34. Notices 39 35. Construction and Application of Terms 39 36. Non-Liability of Individuals 39 37. Abatement 39 38. Port Authority Consent 40 39. Entire Agreement 40 Exhibit A Exhibit B Exhibit C Consent Agreement
ii USE AND OCCUPANCY AGREEMENT THIS AGREEMENT, made as of February 14, 1979 by and between PAN AMERICAN WORLD AIRWAYS, INC., Pan Am Building, New York, New York 10017 (hereinafter called "Pan American"), and ATLANTIC AVIATION CORPORATION, a Delaware Corporation (hereinafter called "the User"), having an office and place of business at Teterboro Airport, Teterboro, New Jersey 07608, WITNESSETH THAT: WHEREAS, the Port Authority of New York and New Jersey (hereinafter called "the Port Authority") is the owner of Teterboro Airport (hereinafter called "the Airport") located in the Boroughs of Teterboro, Moonachie and Hasbrouck Heights and in the Township of Lyndhurst, County of Bergen in the State of New Jersey; and, WHEREAS, Pan American is the operator of the Airport and has the right to operate and use the Airport under an agreement between Pan American and the Port Authority dated September 19, 1967 (hereinafter called "the Basic Agreement"); and, WHEREAS, the User desires to use and occupy the area of the Airport shown on Exhibit A as herein described and to make certain improvements thereto; NOW, THEREFORE, for and in consideration of the respective promises and mutual agreements made by the parties hereto hereinafter set forth Pan American hereby grants to the User the right to use and occupy the ground areas at the Airport identified as AREA "A" and AREA "B" as shown in diagonal hatching on Exhibit A attached hereto and made a part hereof, together with all buildings, structures, improvements, additions and permanent installations constructed and installed thereon or therein (hereinafter called "the Space") during the term of this Agreement upon the following terms and conditions and it is hereby mutually agreed as follows: 1. Term The term of this Agreement shall commence as of February 14, 1979 (hereinafter called "the effective date"), and, unless sooner terminated, shall expire on December 30, 1999. 2. Rights of User 2.1 User shall use AREA B for the parking and servicing of aircraft only and for no other purposes whatsoever; 2.2 User shall use AREA A for the following purposes and for no other purpose whatsoever: 2.2.1 for the storage, maintenance servicing, overhaul, modification and repair of aircraft, aircraft assemblies, aircraft accessories and aircraft radio and electronic equipment and any component parts thereof, subject to the provisions of 27.2.5 hereof; 2.2.2 for the sale of aircraft, aircraft assemblies, aircraft accessories, aircraft radio and electronic equipment and any component parts thereof; 2.2.3 for the operation, leasing and chartering of general aviation aircraft; 2.2.4 for, passenger air taxi operations under Part 298 of 14CFR and for all cargo operations under said Part not conducted on a regularly scheduled basis; 2.2.5 for the parking of automobiles and other vehicles operated by officers, employees, invitees and business visitors of the User; it being understood that the parking of automotive vehicles on areas of the Space shall be subject to the prior and continuing approval of the Airport Manager; 2.2.6 for the parking of aircraft; 2.2.7 for the conduct of pilot training; 2.2.8 for business and operations offices in connection with purposes authorized hereunder; 2.2.9 for solicitation and sale of aviation insurance and the financing of general aviation aircraft sold by User; 2.2.10 for the sale of aviation fuel and aviation lubricants and for delivery of such fuel and lubricants to and into aircraft, all in accordance with the provisions of other agreements entered into or to be entered into between Pan American and the User specifically regulating such sales and deliveries and providing for the payment of fees therefor and only for such period or periods as said agreements continue in effect. 2.2.11 Notwithstanding the right granted to User to conduct pilot training hereunder, Pan American hereby reserves the right to restrict or terminate touch-and-go flight operations and to restrict the time primary flight training operations may be conducted at the Airport when, in its sole judgment, such action is deemed necessary for Airport safety. 2.2.12 All flight operations conducted at the Airport by the User shall be subject to the Schedule of Charges pertaining thereto in addition to all other fees payable by the User hereunder. 3. Construction by User 3.1 The User agrees to construct on the Space the following facilities; 3.1.1 an aircraft hangar consisting approximately 30,000 square feet together with 5,000 square feet of shops; and 3.1.2 approximately 7,500 square feet of office and lounge area; and 2 3.1.3 paving to accommodate 150 auto parking spaces, 3.1.4 together with the clearing and grading of the ground area contained within the Space and the installation on or in the Space such utilities as may be appropriate or necessary for the utilization of the Space for the purposes the User is permitted to use the same under Section 2 hereof, all in ____________________________. 3.2 The User agrees to complete the construction of the facilities set forth in subsection 3.1 above on or before eighteen (18) months from the effective date hereof, provided, however, the User shall not be held in default under this subsection in the event construction cannot be completed within the said time limit due to acts of God or work stoppages. 3.3 Prior to the commencement of construction of the facilities set forth in subsection 3.1 above, or any part thereof, User shall submit to Pan American a construction application and complete plans and specifications of such proposed construction. 3.3.1 The plans and specifications shall be submitted by Pan American to the Port Authority for approval and Pan American or the Port Authority may refuse to grant approval if, in their opinion, the proposed facilities as laid out and indicated by the User on such plans, or if constructed according to such plans and specifications, the facilities: 3.3.1.1 will be structurally unsound or unsafe or hazardous for human occupancy or improper for the use and occupancy for which it is designed; 3.3.1.2 will not comply with all the requirements of this Agreement; 3.3.1.3 will not comply with Pan American's or the Port Authority's standards for harmony of external architecture of similar or future construction at the Airport; 3.3.1.4 will not comply with the standards set by Pan American or the Port Authority with respect to utility or rentability; 3.3.1.5 will be so located that there will not be sufficient clearances in respect to existing or planned projecting aprons, runways or taxiways adjacent thereto; 3.3.1.6 is designed for use for purposes other than those for which User is permitted to use the Space under this Agreement; 3.3.1.7 will be in violation of any local code, OSHA-70, NFPA as it pertains to hangars and the National Electric Code or any other law, ordinance or regulation of any governmental authority having jurisdiction over the Airport if the Port Authority were a private corporation. 3.3.1.8 will not be compatible with external and interior building materials and finishes of similar existing or future construction at the Airport; 3 3.3.1.9 will set forth ground elevations or heights other than those that are consistent with the proper operation and use of the Airport; 3.3.1.10 will not provide adequate circulation arteries for vehicular and pedestrian traffic and fire-fighting equipment; 3.3.1.11 will not be at locations or not be oriented in accordance with the approved comprehensive plans for the Airport. 3.4 Upon approval of such plans and specifications by Pan American and the Port Authority the User shall proceed expeditiously and with all reasonable diligence to construct, at its own expense and cost, the facilities in accordance with such approved plans and specifications. 3.4.1 The User or User's construction contractor shall furnish Pan American performance and payment bonds in a sum equal to the estimated cost of construction, in a form and with sureties satisfactory to Pan American, for the faithful performance by User of its construction obligations contained in this Agreement and for the guarantee of payment of all claims of materialmen, workmen and subcontractors. User shall deliver such bonds to Pan American prior to commencement of construction or within thirty (30) days after the award by User of construction contract or contracts, whichever occurs first. 3.5 Upon completion of any work to be performed by User hereunder, title thereto shall immediately and without execution of any further instrument vest in the Port Authority and such work shall thereupon become and thereafter be a part of the Airport. 3.6 All construction work shall be done in accordance with the following terms and conditions: 3.6.1 The User hereby assumes the risk of loss or damage to all of the construction work prior to the completion thereof and the risk of loss or damage to all property of Pan American and of the Port Authority arising out of or in connection with the performance of the construction work. In the event of such loss or damage, the User shall forthwith repair, replace and make good the construction work and the property of Pan American or of the Port Authority without cost or expense to Pan American. The User shall itself and shall also require its contractors to indemnify and hold harmless Pan American, its Directors, officers, agents and employees from and against all claims and demands, just or unjust, of third persons (including employees, officers, and agents of Pan American) arising or alleged to arise out of the performance of the construction work and for all expenses incurred by it and by them in the defense, settlement or satisfaction thereof, including without limitation thereto, claims and demands for death, for personal injury or for property damage, direct or consequential, whether they arise from the acts or omissions of the User, of any contractors of the User, of Pan American or of third persons, or from acts of God or of the public enemy, or otherwise 4 (including claims of the Port Authority of New York and New Jersey against Pan American pursuant to the Basic Agreement whereby Pan American has agreed to indemnify the Port Authority against claims excepting only claims and demands which result solely from negligent acts done by Pan American, its Directors, officers, agents and employees subsequent to the commencement of the construction work. 3.6.2 Prior to engaging or retaining an architect or architects for the construction work, the name or names of said architect or architects shall be submitted to Pan American for its approval. Pan American shall have the right to disapprove any architect who may be unacceptable to it. All construction work shall be done in accordance with plans and specifications to be submitted to and approved by Pan American and the Port Authority prior to the commencement of the construction work, and until such approval has been obtained the User shall continue to resubmit plans and specifications as required. Upon approval of such plans and specifications the User shall proceed diligently at its sole cost and expense to perform the construction work. All construction work, including workmanship and materials, shall be of first class quality. The User shall re-do, replace or reconstruct at its own cost and expense, any construction work not done in accordance with the approved plans and specifications, the provisions of this Section or any further requirements of Pan American made in accordance with this Agreement. 3.6.3 Prior to entering into a contract for any part of the construction work, the User shall submit to Pan American for its approval the names of the contractors to whom the User proposes to award said contracts. Pan American shall have the right to disapprove any contractor who may be unacceptable to it. The User shall include in all such contracts such provisions and conditions as may be required by Pan American including, without limitation thereto, the provisions set forth in Exhibit B attached hereto and hereby made a part hereof. 3.6.4 The User shall furnish or require its architect to furnish a resident engineer during the construction period as Pan American may require. The User shall require certification by a licensed engineer of all pile driving data and of all controlled concrete work and such other certifications as may be requested by Pan American from time to time. 3.6.5 The User agrees to be solely responsible for any plans and specifications used by it and for any loss or damages resulting from the use thereof, notwithstanding the same have been approved by Pan American and the Port Authority notwithstanding the incorporation therein of Pan American or Port Authority recommendations or requirements. Notwithstanding the requirements for approval by Pan American of the contracts to be entered into by the User on the incorporation therein of Pan American requirements or recommendations, and notwithstanding any rights Pan American may have reserved to itself hereunder, Pan American shall have no liabilities or obligations of any kind to any contractors engaged by the User or for any other matter in connection therewith 5 and the User hereby releases and discharges Pan American, its Directors, officers, representatives and employees of and from any and all liability, claims for damages or losses of any kind, whether legal or equitable, or from any action or cause of action arising or alleged to arise out of the performance of any construction work pursuant to the contracts between the User and its contractors. Any warranties contained in any construction contract entered into by the User for the performance of the construction work hereunder shall be for the benefit of Pan American and the Port Authority as well as the User. 3.6.6 Pan American shall have the right, through its duly designated representatives, to inspect the construction work and the plans and specifications thereof, at any and all times during the progress thereof and from time to time, in its discretion, to take samples and perform testing on any part of the construction work. 3.6.7 The User agrees that it shall deliver to Pan American "as-built" drawings (capable of being reproduced) of the construction work and shall during the term of this Agreement keep said drawings current showing thereon any changes or modifications which may be made. (No changes or modifications to be made without Pan American's consent.) 3.6.8 The User shall, if requested by Pan American, take all reasonable measures to prevent erosion of the soil and the blowing of sand and soil during the performance of the construction work, including but not limited to the fencing of the space or portion thereof and the covering of open areas with asphaltic emulsion or similar materials as Pan American may direct. 3.6.9 The User shall pay or cause to be paid all claims lawfully made against it by its contractors, subcontractors, materialmen and workmen, and all claims lawfully made against it by other third persons arising out of or in connection with or because of the performance of the construction work, and shall cause its contractors and subcontractors to pay all such claims lawfully made against them, provided, however, that nothing herein contained shall be construed to limit the right of the User to contest any claim of a contractor, subcontractor, materialman, workman and/or other person and no such claim shall be considered to be an obligation of the User within the meaning of this Section unless and until the same shall have been finally adjudicated. The User shall use its best efforts to resolve any such claims and shall keep Pan American fully informed of its actions with respect thereto. The User shall require its construction contractor to furnish a bond for the faithful performance of all obligations imposed upon the contractor by the construction contract and also for the payment of all lawful claims of subcontractors, materialmen and workmen arising out of the performance of said construction contract. 3.6.10 The User shall procure and maintain comprehensive general liability insurance, including automotive, with a contractual liability endorsement covering the obligations assumed by the User pursuant to this Section 3 which shall be in addition to all policies of insurance otherwise required under the Agreement or 6 the User may provide such insurance by requiring each contractor engaged by it for the construction work to procure and maintain such insurance including such contractual liability endorsement, said insurance not to contain any care, custody or control exclusions, any exclusions for explosions, collapses or damage to underground utilities or facilities, and not to contain any exclusion for bodily injury to or sickness, disease or death of any employee of the User or of any of its contractors which would conflict with or in any way impair coverage under the contractual liability endorsement. Said insurance shall name Pan American and the Port Authority as an additional insured and be in not less than the following amounts: (i) Bodily Injury Liability: For injury to or wrongful death to one person.................... $1,000,000 For injury or wrongful death to more than one person for any one occurrence.................................. $3,000,000 Aggregate Products Completed Operations.......................... $3,000,000

(ii) Property Damage Liability: For all damage arising out of injury to or destruction of property in any one occurrence.............................. $3,000,000 Aggregate Products Completed Operations.......................... $3,000,000 Aggregate Operations............................................. $3,000,000 Aggregate Productive............................................. $3,000,000 Aggregate Contractual............................................ $3,000,000

The insurance required hereunder shall be maintained in effect during the performance of the construction work. A certified copy of each of the policies or a certificate or certificates evidencing the existence thereof, or binders, shall be delivered to Pan American at least fifteen (15) days prior to the commencement of any work. In the event any binder is delivered, it shall be replaced within thirty (30) days by a certified copy of the policy or a certificate. Each such copy or certificate shall contain a valid provision or endorsement that the policy may not be cancelled, terminated, changed or modified without giving fifteen (15) days' written advance notice thereof to Pan American and the Port Authority. The aforesaid insurance shall be written by a company or companies approved by Pan American, Pan American agreeing not to withhold its approval unreasonably. If at any time any of the insurance policies shall be or become unsatisfactory to Pan American as to form or substance or if any of the carriers issuing such policies shall be or become unsatisfactory to Pan American, the User shall promptly 7 obtain a new and satisfactory policy in replacement, Pan American agreeing not to act unreasonably hereunder. 3.6.11 The User shall prior to the commencement of the construction work at all times during the construction work submit to Pan American all engineering studies with respect to the construction work and samples of construction materials as may be required at any time and from time to time by Pan American. 3.6.12 The User shall procure and maintain or cause to be procured and maintained Builder's Risk Completed Value Insurance covering the construction work during the performance thereof including material delivered to the construction site but not attached to the realty. Such insurance shall name Pan American, the Port Authority, the User and its contractors and subcontractors as additional assureds and such policy shall provide that the loss shall be adjusted with and payable to the User. Such proceeds shall be used by the User for the repair, replacement or rebuilding of the construction work and any excess shall be paid over to Pan American. The policies or certificates representing this insurance shall be delivered by the User to Pan American prior to the commencement of construction and each policy or certificate delivered shall bear the endorsement of or be accompanied by evidence of payment of the premium thereon and, also, a valid provision obligating the insurance company to furnish the Port Authority and Pan American fifteen (15) days' advance notice of the cancellation, termination, change or modification of the insurance evidenced by said policy or certificate. The insurance shall be written by companies approved by Pan American, Pan American agreeing not to withhold its approval unreasonably. If at any time any of the insurance policies shall be or become unsatisfactory to Pan American as to form or substance or if any of the carriers issuing such policies shall be or become unsatisfactory to Pan American, the User shall promptly obtain a new and satisfactory policy in replacement, Pan American agreeing not to act unreasonably hereunder. 3.6.13 Nothing contained in this Agreement shall grant or be deemed to grant to any contractor, architect, supplier, subcontractor or any other person engaged by the User or any of its contractors in the performance of any part of the construction work any right of action or claim against Pan American, its Directors, officers, agents and employees or the Port Authority, its Commissioners, officers, agents and employees with respect to any work any of them may do in connection with the construction work. Nothing contained herein shall create or be deemed to create any relationship between Pan American and any such contractor, architect, supplier, subcontractor or any other person engaged by the User or any of its contractors in the performance of any part of the construction work and neither Pan American nor the Port Authority shall be responsible to any of the foregoing for any payments due or alleged to be due thereto for any work performed or materials purchased in connection with the construction work. 3.6.14 When the construction work is substantially completed and is ready for use by the User, the User shall advise Pan American to such effect and shall deliver to Pan 8 American a certificate by an authorized officer of the User certifying that such construction work has been constructed strictly in accordance with the approved plans and specifications and the provisions of this Agreement and in compliance with all applicable laws, ordinances and governmental rules, regulations and orders. Thereafter, such construction work will be inspected by Pan American and if the same has been completed as specified by the User, a certificate to such effect shall be delivered to the User, subject to the condition that all risks thereafter with respect to the construction and installation of the same and any liability therefor for negligence or other reason shall be borne by the User. The User shall not use or permit the use of the construction work for the purposes set forth in this Agreement until such certificate is received from Pan American. The date of delivery of the certificate by Pan American shall constitute the Completion Date for the purposes of this Agreement. 3.6.15 The construction work shall be constructed in such a manner that there will be at all times a minimum of air pollution, water pollution or any other type of pollution and a minimum of noise emanating from, arising out of or resulting from the operations of the User under this Agreement. Accordingly, and in addition to all other obligations imposed on the User under this Agreement and without diminishing, limiting, modifying or affecting any of the same, the User shall be obligated to construct as part of the construction work hereunder such structures, fences, equipment, devices and other facilities as may be necessary or appropriate to accomplish the foregoing and all of the foregoing shall be covered under the plans and specifications of the User submitted under Section 3 hereof and shall be part of the construction work hereunder. 3.6.15.1 Notwithstanding the provisions of subsection 3.6.15 above and in addition thereto, Pan American hereby reserves the right from time to time and at any time during the term of the Agreement to require the User, subsequent to the completion of the construction work to design and construct at its sole cost and expense such further reasonable structures, fences, equipment, devices and other facilities as may be necessary or appropriate to accomplish the objectives as set forth in the first sentence of said subsection. 3.6.15.2 All locations, the manner, type and method of construction and the size of any of the foregoing shall be determined by Pan American. The User shall submit for Pan American's approval its plans and specifications covering the required work and upon receiving such approval shall proceed diligently to construct the same. All other provisions of this Section with respect to the construction work shall apply and pertain with like effect to any work which the User is obligated to perform pursuant to this subsection 3.6.15 and upon completion of each portion of such work it shall be and become a part of the construction work. The obligations assumed by the User under this subsection 3.6.15 are a special inducement and consideration to Pan American in granting this Agreement to the User. 9 4. Other Construction by the User 4.1 Except as otherwise expressly provided herein, the User shall not erect any structures, make any improvements or do any other construction work on the Space, or install any fixtures (other than trade fixtures, removable without material damage to the Space, any such damage to be immediately repaired by the User) without the prior written approval of Pan American and in the event any construction, improvement, alteration, modification, addition, repair or replacement is made without such approval, then upon reasonable notice so to do, the User will remove the same or at the option of Pan American, cause the same to be changed to the satisfaction of Pan American. In case of any failure on the part of the User to comply with such notice, Pan American may effect the removal or change and User shall pay the cost thereof to Pan American. 4.2 In no event shall the User erect or be authorized to erect any structure on Area B. 5. Fees to Pan American 5.1 Commencing upon the effective date and continuing each month until the completion of the sixtieth (60th) month of the term hereof, the User shall pay to Pan American a monthly fee of Sixteen Thousand Nine Hundred Sixty-Three Dollars ($16,963.00), subject to adjustment as hereinafter provided. 5.1.1 If the effective date occurs on a day other than the first day of a month, the fee payable for such month shall be prorated on the basis that the number of days from the effective date to the end of such month bears to the actual number of days in such month. 5.2 Commencing upon the date the User's contractor enters upon the Space to begin construction of the facilities set forth in Section 3.1 hereof and ending upon the Completion Date, the monthly fee set forth in Section 5.1 above shall be abated at the rate of One Thousand Two Hundred Thirty-Three Dollars ($1,233.00) per month. 5.3 Upon the effective date a structure known as Building 29 exists upon the Space. User is hereby authorized to demolish said structure in connection with the construction of facilities set forth in Section 3.1 hereof and upon the date of completion of such demolition and removal of all debris, the monthly fee set forth in Section 5.1 above shall be abated at the rate of Nine Hundred Dollars ($900.00) per month. 5.4 Upon the effective date a structure known as Building 26 exists upon the Space. User hereby agrees to demolish said structure prior to commencement of construction set forth in Section 3 hereof and upon the date of completion of such demolition and removal of all debris the monthly fee set forth in Section 5.1 above shall be abated at the rate of Fifty Dollars ($50.00) per month. 10 5.5 Upon the effective date a structure known as Hangar No. 3 exists upon the Space. Subject to prior approval by the Port Authority and Pan American of an alteration application for the demolition of Hangar No. 3, User may demolish said Hangar upon written authorization from Pan American to so proceed, and upon the date of completion of such demolition removal of all debris and appropriate supplemental site work to permit the Hangar No. 3 site to be used as an aircraft ramp, the monthly fee shall be abated by Five Thousand Three Hundred Eighty-Seven Dollars and Fifty Cents ($5,387.50) per month. Nothing contained herein shall constitute an obligation upon the Port Authority or Pan American to authorize the demolition of Hangar No. 3. 5.6 The abatements referred to in 5.3, 5.4 and 5.5 above shall become effective upon the date Pan American renders to User acceptance in writing of the demolition work. 5.7 Notwithstanding any provision hereof, User understands and acknowledges that upon the effective date of this Agreement Mars Aircraft Radio Service Company of New Jersey ("Mars") occupies approximately 2,096 square feet on the second floor of the west lean-to of Hangar No. 3 ("the Mars Space") under a Use and Occupancy Agreement with Pan American dated March 3, 1978 ("the Mars Agreement") and that said Mars Space is not a part of the Space under this Agreement. Starting with the second anniversary of the effective date of this Agreement or upon earlier termination of the Mars Agreement, whichever occurs first, the monthly fee shall be Seventeen Thousand Two Hundred Fifteen Dollars ($17,215.00), subject to abatement as provided in 5.2, 5.3, 5.4 and 5.5 above and subject to proration for a fractional month as set forth in 5.1.1; and thenceforth the Mars Space shall become a part of the Space under this Agreement. 5.7.1 During the occupancy of the Mars Space by Mars, User agrees to supply to Mars heat and electricity and agrees to permit Mars, its employees and customers to use the existing stairway leading from the hangar floor to the Mars Space and to use the common corridors for purposes of access to the Mars Space and as a means of access to the public street adjacent to the Space and to provide for the use of toilet facilities and washroom in the west lean-to of Hangar No. 3. 5.7.2 Further, User hereby agrees to the use by Mars, solely for its employees and customers, of twelve automobile parking spaces at rates mutually satisfactory to User and Mars; and to use space on aircraft parking ramps for the sole purpose of parking aircraft of Mars' customers at User established rates, provided, however, that such use by Mars shall be subject to approval by User as to location and that the exercise of such right of use shall not unreasonably interfere with User's operations on the Space. 5.7.3 User hereby agrees to the use by Mars of the Space for the erection of Mars' signs, subject to the approval of User and of Pan American of an alteration application. 11 5.8 Starting with the first day of the sixty-first (61st) full month of the term of this Agreement counting from the effective date and continuing for the next succeeding sixty (60) months, the monthly fee shall be Seventeen Thousand Two Hundred Fifteen Dollars ($17,215.00) (less any abatement granted to User under the provisions of Sections 5.3, 5.4 or 5.5 above), multiplied by a fraction, the numerator of which shall be the Consumer Price Index for all urban consumers of the Bureau of Labor Statistics of the United States Department of Labor, all items, Selected Large Cities, for the New York-Northeastern New Jersey Area Base Year 1967 = 100 (hereinafter referred to as "the CPI") as published for the month in which the fee payment for the sixtieth (60th) full month of the term shall become due and the denominator of which shall be the CPI published for the month preceding the month in which the effective date falls. 5.8.1 Starting with the 121st monthly payment and continuing for the next succeeding sixty (60) months, the monthly payments shall be computed in the same manner as in Section 5.8 above, except that the numerator of the fraction shall be the CPI published for the month that the 120th monthly payment shall be due. 5.8.2 Starting with the 181st monthly payment and continuing for the next succeeding sixty (60) months, the monthly payments shall be computed in the same manner as 5.8 above except that the numerator of the fraction shall be the CPI published for the month that the 180th monthly payment shall be due. 5.8.3 Starting with the 241st monthly payment and continuing throughout the remaining term of the Agreement, the monthly payments shall be computed in the same manner as in 5.8 above except that the numerator of the fraction shall be the CPI published for the month that the 240th monthly payment shall be due. 5.8.4 In computing the adjustments for the monthly fees, in no event shall the monthly fees be less than the monthly fees payable during the five year period immediately preceding. 5.8.5 In the event any CPI is published using a base year other than 1967, the CPI shall be converted to a 1967 base year equivalent, following the instructions for such conversion provided by the Bureau of Labor Statistics or any succeeding governmental statistical authority. 5.9 In addition to the fees set forth above and commencing upon the first day of the calendar year following the effective date the User shall pay to Pan American the following percentage fees: 5.9.1 Five Percent (5%) of the gross receipts (as hereinafter defined) of the User arising during each annual period in excess of an amount ("the annual exemption amount") to be calculated (1) by determining the sum of (a) the then effective monthly fee and (b) .833% of the capital investment by the User in new buildings or new structures as such are defined in Section 17.8 hereof; and (2) multiplying said sum by a factor of two hundred forty (240); and 12 5.9.2 1/4 of 1% of gross receipts from sales of aircraft. 5.9.3 The term "gross receipts" as used in 5.9.1 above shall include all monies paid or payable to the User for all sales made and for all services rendered at or from the Airport, regardless of the time and place of receipt of the order therefor, and for sales made and for services rendered outside the Airport, if the order therefor is received at the Airport, and shall include revenues of any type arising out of or in connection with the activities of the User at the Airport under this Agreement except: 5.9.3.1 revenues from sales of aviation fuels and oils; 5.9.3.2 revenues from sale of new or used aircraft; 5.9.3.3 refunds to customers for returned merchandise previously reported sold; 5.9.3.4 intra-company charges for products or services not representing a direct sale or service to customers at the Airport; 5.9.3.5 avionics units or components sold concurrently with any aircraft sale which are an integral part of the aircraft sale transaction and are included in the aircraft sale price; 5.9.3.6 any taxes imposed by law which are separately stated to and paid by customers of the User and directly remitted by the User to the taxing or tax collecting authority. 5.9.4 The term "annual period" shall mean the twelve months beginning with January 1 of the calendar year following the effective date and each successive twelve month period thereafter. 5.9.5 In the event that Pan American shall enter into agreements with other users at the Airport providing for a percentage or other fee payable to Pan American for the sale of aircraft from the Airport, which fee is less than the fee as set forth in subsection 5.9.2 hereof, such lesser fee shall be substituted for the aforementioned fee upon the effective date of such agreement for such lesser fee with other users. 5.9.6 All gross receipts from the sale of aircraft by the User shall be considered as having been derived at the Airport and are subject to the percentage fee set forth in 5.9.2 above, with the exception of aircraft sales in which each and everyone of the following tests are met: 5.9.6.1 that the sale was consummated at a location other than at the Airport, 5.9.6.2 that the contract for sale was executed at a location other than at the Airport, 5.9.6.3 that the demonstration of the aircraft to the purchaser was made at a place other than the Airport, and 13 5.9.6.4 that the delivery of the aircraft was made at a location other than at the Airport. 5.9.7 In the event a sale of an aircraft was made for which User accepted another aircraft in trade, the value of the sale less the value allowed the customer for the aircraft taken in trade shall be subject to the percentage fee, provided, however, that the aircraft taken in trade shall be subject to said fee at its resale price when sold. 5.9.8 Sales of aircraft owned by others for which User has acted as broker shall not be considered as gross receipts from sale of aircraft, provided, however, that the brokerage fee earned by User from such sale shall be considered as gross receipts as defined in 5.7.3 above. 5.9.9 There shall be included in gross receipts and gross receipts from aircraft sales all monies paid or payable to any subsidiary of User in which User owns 50% interest or more, which monies have been derived by such subsidiaries, firms, corporations or entities exercising any of the rights and privileges hereunder at the Airport. User shall render written notice to Pan American whenever any of User's rights and privileges hereunder are being exercised by any such firms, subsidiaries, corporations or entities. The foregoing shall not be deemed to grant to any such subsidiary, firm, corporation or entity any rights or privileges granted to User hereunder. 6. Time of Payment and Computation of Amounts 6.1 User shall pay to Pan American the monthly fees specified in the Section entitled "Fees to Pan American" hereof in advance on the first (1st) day of each and every month until the termination of this Agreement, provided, however, if this Agreement is terminated other than the last day of the month the last payment shall be the then effective basic monthly fee prorated in the same proportion the number of days the Agreement was effective in the last month bears to thirty (30) days. 6.2 For each annual period the User shall pay the gross receipts percentage fee as follows: on the twentieth (20th) day of the first (1st) month following the effective date hereof and on the twentieth (20th) day of each and every month thereafter including the month following the end of the annual period, the User shall render to Pan American a statement certified by User's principal financial officer showing its gross receipts for the preceding calendar month and its cumulative gross receipts from the date of commencement of the annual period for which the report is made, through the last day of the preceding calendar month; whenever any such statement shall show that the cumulative gross receipts for the annual period are in excess of the annual exemption amount, the User shall pay to Pan American at the time of rendering the statement an amount equal to Five Percent (5%) of such excess and shall on the twentieth (20th) day of each month thereafter during the annual period and the month next succeeding that annual period, pay to Pan American an amount equal to Five Percent (5%) of the 14 gross receipts of each subsequent month during the annual period. At any time that the annual exemption amount is decreased by abatement so that there is an excess of gross receipts as to which such percentage fee has not been paid the same shall be payable to Pan American on demand. 6.3 Upon any termination of the use and occupancy hereunder (even if stated to have the same effect as expiration, but in no event if termination of said use and occupancy is due to termination of the Basic Agreement either by the Port Authority pursuant to any of the provisions of Section 15 (a) thereof or by Pan American for any reason whatsoever), the User shall, within twenty (20) days of the effective date of such termination, make a payment of such percentage fees computed as follows: First, the User shall within twenty (20) days after the effective date of termination render to Pan American a statement of gross receipts certified by User's principal financial officer for the annual period in which the effective date of termination falls; and, second, the payment when due on account of all such percentage fees for the annual period in which the effective date of termination falls shall be the excess of such percentage fees computed as follows, over the total of such percentage fee payments previously made for such annual period: Five Percent (5%) of the gross receipts of the User for such annual period which are in excess of the annual exemption amount, said annual exemption amount being multiplied by a fraction, the numerator of which shall be the number of days from the commencement of the annual period to the effective date of termination, and the denominator of which shall be three hundred sixty-five (365). 6.4 Nothing contained in the foregoing shall affect the survival of the obligations of the User as set forth in the Sections of this Agreement covering the survival of the User's obligations. 6.5 User shall pay the percentage fee on gross receipts from sales of aircraft as follows: on the twentieth (20th) day of the first (1st) month following the commencement of the annual period and on the twentieth (20th) day of each and every month thereafter User shall render to Pan American a statement certified by User's principal financial officer showing its gross receipts from the retail sales of aircraft made during the preceding month and shall pay the percentages fee thereon at the time such statement is rendered. If no sales were made during any month, a negative statement shall be rendered to that effect. 6.6 The fees specified herein shall be payable at the office of the Manager of Teterboro Airport, 399 Industrial Avenue, Teterboro, New Jersey 07608, or such other location as may from time to time be substituted therefor. 7. Care, Maintenance and Repair 7.1 The User shall at its own expense at all times keep in a clean and orderly condition and appearance the Space and all the User's fixtures, equipment and 15 personal property which are located in any parts of the Space which are open to or visible by the general public. 7.2 The User shall at its own expense repair, replace or rebuild all or any part of the Space which may be damaged or destroyed by the acts or omissions of the User or by those of its employees, customers, guests or invitees or of other persons doing business with the User. 7.3 Further, the User at its own expense shall take good care of the Space, whether structural or non-structural, including therein, without limitation thereto, paved areas, fences, roofs, skylights, steelwork, walls, partitions, floors, foundations, ceilings, columns, windows, doors, glass of every kind, plumbing, heating, fire-protection, fire-alarm, sewerage, drainage, water-supply and electrical systems, including all pipes, wires, lines, conduits, equipment and fixtures and shall make all necessary repairs and replacements and do all necessary rebuilding and repainting, regardless of the cause or the condition requiring the same. 7.4 In the event the User fails to commence so to repair, replace, rebuild or paint within a period of ten (10) days after notice from Pan American so to do, or fails diligently to continue to complete the repair, replacement, rebuilding or painting of all the Space required to be repaired, replaced, rebuilt or painted by the User under the terms of this Agreement, Pan American may, at its option, and in addition to any other remedies which may be available to it, repair, replace, rebuild or paint all or any part of the Space included in the said notice, and charge the cost thereof to the User, the amount of such charge to constitute an item of additional fee. 7.5 During the period of occupancy by Mars all non-structural replacements, repairs and repainting necessary for the proper care and maintenance of the Mars Space shall be the responsibility of Mars. User shall be responsible for all structural, roof and exterior repairs of the Mars Space. 8. Obstruction Lights 8.1 The User shall furnish such obstruction lights as Pan American shall direct, of the type and design approved by Pan American, and shall install said lights in the locations on the Space designated by Pan American and shall maintain them in first class operating condition at all times. The User shall furnish and install the bulbs and furnish the electricity necessary for the operation of the said lights, and shall operate the same in accordance with the directions of Pan American. Pan American hereby directs that all said obstruction lights shall until further notice, be operated daily for a period commencing thirty (30) minutes before sunset and ending thirty (30) minutes after sunrise and for such other periods as may be directed or requested by the Control Tower of the Airport. 16 9. Insurance 9.1 The User shall, during the term of this Agreement, insure and keep insured to the extent of One Hundred Percent (100%) of the replacement value thereof, all buildings, structures, improvements, installations, facilities, and fixtures now or in the future located on the Space against such hazards and risks as may now or in the future be included under the standard form of fire insurance policy of the State of New Jersey and also against damage or loss by windstorm, cyclone, tornado, hail, explosion, riot, civil commotion, aircraft, vehicles and smoke, under the standard form of fire insurance policy of New Jersey, and the form of extended coverage endorsement prescribed as of the effective date of the said insurance by the rating organization having jurisdiction, and also covering boiler and machinery hazards and risks and also, subject to the availability thereof, covering nuclear property losses and contamination hazards and risks in a separate insurance policy or policies or as an additional coverage endorsement to the aforesaid policies in the form as may now or in the future be prescribed as of the effective date of said insurance by the rating organization having jurisdiction. 9.2 The aforesaid insurance coverages and renewals thereof shall insure the Port Authority and Pan American as their interests may appear and shall provide that the loss, if any, shall be adjusted with Pan American and the Port Authority and shall be payable to the Port Authority or Pan American as their interests may appear. 9.3 In the event the Space or any part thereof shall be damaged by any casualty against which insurance is carried pursuant to this Section the User shall promptly notify Pan American of such casualty and shall thereafter furnish to Pan American such information and data as shall enable the parties to adjust the loss. 9.4 At least seven (7) days prior to the beginning of the term of this Agreement, the policies or certificates representing said insurance shall be delivered by the User to Pan American and each policy or certificate delivered shall bear an endorsement obligating the insurance company to furnish the Port Authority and Pan American twenty (20) days' advance notice of the cancellation of the insurance evidenced by said policy or certificates or of any changes or endorsements which may be made thereon. Renewal policies or certificates shall be delivered to Pan American at least twenty (20) days before the expiration of the insurance which such policies are to renew. 9.4.1 The aforesaid insurance shall be written by a company or companies approved by Pan American. 9.5 To the extent that any loss is recouped by actual payment to the Port Authority or Pan American of the proceeds of the insurance herein referred to above, such proceeds will be paid to the User to cover its costs of rebuilding or repairing the portion or all of the Space which has been damaged or destroyed. Such payment will be made by Pan American to the User in installments if requested by the User 17 and as work progresses provided that as to each request for payment the User shall certify by a responsible officer or authorized representative thereof that the amounts requested are due and payable to its contractor for work completed. Upon completion of all the work, the User shall certify by a responsible officer or authorized representative that such rebuilding and repairs have been completed, that all costs in connection therewith have been paid by the User and said costs are fair and reasonable and said certification shall also include an itemization of costs. Nothing herein contained shall be deemed to release the User from any of its repair, maintenance or rebuilding obligations under the Agreement. If the proceeds of any such insurance paid to Pan American exceed the User's costs of rebuilding or repair, the excess of such proceeds shall be retained by Pan American. 9.6 If there is damage or destruction to the Space covered by insurance under this Section, the User shall promptly repair, rebuild or replace the damaged or destroyed portion of the Space. 9.7 If the User does not so properly proceed then Pan American may repair or rebuild and may apply such proceeds of such insurance towards such repair, replacement and rebuilding, but no such application shall relieve the User of its obligations under this Agreement. 9.8 If, moreover, there is damage or destruction to the property covered under this Section which occurs within the last three years of the term of the Agreement, the obligations of the User to repair, replace or rebuild such damaged or destroyed property at User's option may be discharged (provided that the insurance applicable thereto has been maintained in full force and effect) in which case the entire proceeds of the insurance applicable thereto shall be retained by Pan American. 9.9 The provisions of Section 9.1 above notwithstanding, the User may request, in writing, that Pan American secure and maintain the insurance coverage to the extent specified in said Section 9.1, provided, however, that the User shall reimburse Pan American for the cost thereof and provided, further, that the policy or policies provided by Pan American shall name the Port Authority and Pan American as insured under such policies and that any loss shall be adjusted with Pan American and the Port Authority as their interests may appear but that in the event the User is required to make repairs, replacement or rebuilding on the Space or any part thereof which is covered by the aforesaid insurance, the proceeds thereof shall be made available to the User for the purpose of performing its obligations in the same manner and same extent as set forth in Section 9.5 hereof. 9.9.1 In the event User elects to request Pan American to provide the insurance as set forth in 9.9 above, and said insurance is in fact provided, Pan American agrees and hereby grants the User and any sub-user of the Space approved in writing by Pan American, a waiver of subrogation under said fire insurance policy or policies, provided, however, that if Pan American deems the operations 18 performed on or within the Space by the User or such approved sub-user are extra hazardous or otherwise will invalidate the terms of said fire insurance policy or policies, the said waiver of subrogation shall be withdrawn by Pan American. 10. Indemnity, Liability Insurance 10.1 The User shall indemnify and hold harmless the Port Authority, its Commissioners, officers, employees and representatives; and Pan American, its Directors, officers, employees and representatives from all claims and demands of third persons, including, but not limited to, claims and demands for death or personal injury or for property damages arising out of the use and occupancy of the Space by the User or out of any other acts or omissions of the User, its officers, employees on the Space or out of the acts or omissions of others on the Space with consent of the User, excepting only claims and demands which result solely from negligent acts done by Pan American, its Directors, officers, agents and employees. 10.2 In addition to the obligations set forth in the above subsection, the User, in its own name as assured, shall maintain and pay the premiums on the following described policies of comprehensive public liability insurance and automobile liability insurance which shall cover its operations hereunder and shall be effective throughout the term in limits not lower than the following: 10.2.1 Comprehensive Airport Liability with single blanket limit of $10,000,000 for Bodily Injury, Personal Injury and Property Damage including but not limited to coverages in the following areas: Premises and Operation Broad Form Contractual Products Hangar Keepers Owner's-Contractor's Protective Completed Operations 10.2.2 Comprehensive Auto Liability and single blanket limit of $1,000,000 for Bodily Injury and Property Damages with coverage in the following areas: Own Vehicles Non-Owned Vehicles Hired Vehicles 10.3 Neither the Port Authority nor Pan American shall be named as an insured in any policy of insurance required by this Section, unless the Port Authority or Pan American shall, at any time during the effective period of this Agreement, direct otherwise in writing, in which case the User shall cause the Port Authority and/or Pan American to be so named. As to any insurance required by the provisions of this Agreement to secured by or at the direction of the User, a certified copy of each of the policies or certificates evidencing the existence thereof, or binders, 19 together with evidence of the payment of the premium thereon, shall be delivered to Pan American within fifteen (15) days prior to occupancy by User of the Space. In the event any binder is delivered, it shall be replaced within thirty (30) days by a certified copy of the policy or a certificate. Each such copy or certificate shall contain a valid provision or endorsement that the policy may not be cancelled, terminated, changed or modified without giving twenty (20) days' written advance notice thereof to Pan American. A renewal policy shall be delivered to Pan American at least twenty (20) days prior to the expiration date of each expiring policy, except for any policy expiring after the date of expiration of the term. If at any time any of the policies shall be or become unsatisfactory to Pan American as to form or substance or if any of the carriers issuing such policies shall be or become unsatisfactory to Pan American, the User shall promptly obtain a new and satisfactory policy in replacement. 11. Ingress and Egress 11.1 The User, its customers, its contractors, suppliers of material and furnishers of services shall have the right of ingress and egress between the Space and the city streets or public ways outside the Airport by means of such pedestrian or vehicular roadways to be used in common with others having rights of passage within the Airport, as may from time to time be designated by Pan American for the use of the public. 11.2 The User shall have the right of ingress and egress between the Space and the public landing areas at the Airport by means of connecting taxiways, to be used in common with others having rights of passage thereon. 11.3 The use of any such roadway or taxiway shall be subject to the Rules and Regulations of the Airport which are now in effect or which may hereafter be promulgated for the safe and efficient operation of the Airport. Pan American may, at any time, temporarily or permanently, close or consent to or request the closing of, any such roadway or taxiway and any other way at, in or near the Space presently or hereafter used as such, so long as a reasonable means of ingress and egress as provided above remains available to the User. Subject to the foregoing obligation the User hereby releases and discharges the Port Authority, its Commissioners, officers, employees and agents; Pan American, its Directors, officers, employees and agents and all municipalities and other governmental authorities and their respective successors and assigns, of and from any and all claims, demands or causes of action which the User may now or at any time hereafter have against any of the foregoing, arising or alleged to arise out of the closing of any street, roadway or other area, whether within or outside the Space. The User shall not do or permit anything to be done which will interfere with the free access and passage of others to space adjacent to the Space or in any streets or roadways near the Space. 20 12. Various Obligations of the User 12.1 The User shall conduct its operations in an orderly and proper manner and so as not to annoy, disturb or be offensive to others at the Space. The User shall take all reasonable measures: 12.1.1 to eliminate vibrations tending to damage any equipment, structure, building or portion of a building which is on the Space, or is a part thereof, or is located elsewhere on the Airport, and 12.1.2 to keep the sound level of its operations as low as possible. 12.2 The User shall control the conduct, demeanor and appearance of its employees and invitees and of those doing business with it, and upon objection from Pan American concerning the conduct, demeanor or appearance of any such shall immediately take all lawful steps necessary to remove the cause of the objection. If Pan American shall so request, the User agrees to supply and require its employees to wear or carry badges or other suitable means of identification, which shall be subject to the prior and continuing approval of the Manager of the Airport. 12.3 It is the intent of the parties hereto that noise caused by aircraft engine operation shall be held to a minimum. To this end the User will conduct its operations in such a manner as to keep the noise produced by aircraft engines and component parts thereof to a minimum by such methods as are practicable, considering the extent and type of the operations of the User. In addition, the User will employ the maximum amount of noise arresting and noise reducing devices that are available and economically practicable, considering the extent of the operations of the User. In its use of the Space, the User shall take all possible care, caution and precaution and shall use its best efforts to minimize prop or jet blast interference to aircraft operating on or to buildings, structures and roadways, now located on or which in the future may be located on areas adjacent to the Space. In the event Pan American determines that the User has not curbed the prop or jet blast interference, the User hereby covenants and agrees to erect and maintain at its own expense such structure or structures as may be necessary to prevent prop or jet blast interference subject, however, to the prior written approval of Pan American as to type, manner and method of construction. 12.4 The User shall daily remove from the Space by means of facilities provided by it all garbage, debris and other waste materials arising out of or in connection with its operations hereunder, and any such not immediately removed shall be temporarily stored in a clean and sanitary condition in suitable garbage and waste receptacles, the same to be made of metal and equipped with tight-fitting covers, and to be of a design safely and properly to contain whatever material may be placed therein, said receptacles being provided and maintained by the User. The receptacles shall be kept covered except when filling or emptying the same. The User shall exercise extreme care in removing such garbage, debris and other 21 waste materials from the Space. The manner of such storage and removal shall be subject in all respects to _______________________. No facilities of the Airport shall be used for such removal unless with Pan American's prior consent in writing. No such garbage, debris or other waste materials shall be or be permitted to be thrown, discharged or disposed into or upon the waters at or bounding the Space. 12.5 It is intended that the standards and obligations imposed by this Section shall be maintained or complied with by the User in addition to its compliance with all applicable Federal, State and Municipal laws, ordinances and regulations, and in the event that any of said laws, ordinances and regulations shall be more stringent than such standards and obligations, the User agrees that it will comply with such laws, ordinances and regulations in its operations hereunder. Changes in such laws or regulations are not grounds for termination of this Agreement. 12.6 The User shall promptly observe, comply with and execute the provisions of any and all present and future rules and regulations, requirements, orders and directions of the National Fire Protection Association and the Fire Insurance Organization of New Jersey or of any other board or organization exercising or which may exercise similar functions which may pertain or apply to the operations of the User on the Space and the User shall, subject to and in accordance with the provisions of this Agreement relating to construction by the User, make any and all structural or nonstructural improvements, alterations or repairs of the Space that may be required at any time hereafter by any such present or future rule, regulation, requirement, order or direction. If by reason of any failure on the part of the User to comply with the provisions of this Section, any fire insurance, extended coverage or other insurance rate on the Space or any part thereof, or on the Airport or any part thereof, shall at any time be higher than it otherwise would be, then the User shall pay to Pan American that part of all premiums paid by Pan American which shall have been charged because of such violation or failure by the User. 12.7 In connection with the conduct of User's business the User shall: 12.7.1 use its best efforts in every proper manner to maintain, develop and increase the business conducted by it hereunder; 12.7.2 not divert, cause or allow to be diverted, any business from the Airport; 12.7.3 maintain in accordance with accepted accounting practice during the term hereof User's records and books of account recording all transactions at, through or in anywise connected with the Airport which records and books of account shall be kept at all times at the User's place of business at the Airport; 12.7.4 permit in ordinary business hours during the term hereof and for one (1) year thereafter the examination and audit by the officers, employees or representatives of Pan American of such records and books of account and also any records and 22 books of account of any company owned or controlled by the User if said Company performs services similar to those performed by the User anywhere at the Airport. 12.7.5 The User shall be solely responsible for compliance with the provisions of this Section and no act or omission of Pan American shall relieve the User _______________________. 12.8 In addition to compliance by the User with all laws, ordinances, governmental rules, regulations and orders now or at any time in effect during the term of the use hereunder which as a matter of law are applicable to the operation, use or maintenance by the User of the Space or the operations of the User under this Agreement (the foregoing not to be construed as a submission by Pan American or the Port Authority to the application to itself of such requirements or any of them), the User agrees that it shall conduct all its operations under the Agreement and shall operate, use and maintain the Space in accordance with a high standard and in such manner that there will be at all times a minimum of air pollution, water pollution or any other type of pollution and a minimum of noise emanating from, arising out of or resulting from the operation, use or maintenance of the Space by the User and from the operations of the User under this Agreement. Pan American hereby reserves the right from time to time and at any time during the term of the Agreement to require the User, and the User agrees to design and construct at its sole cost and expense such reasonable structures, fences, equipment, devices and other facilities as may be necessary or appropriate to accomplish the objectives as set forth in the first sentence of this paragraph. All locations, the manner, type and method of construction and the size of any of the foregoing shall be determined by Pan American. The User shall submit for Pan American approval a Construction Application together with its plans and specifications covering the required work and upon receiving such approval shall proceed diligently to construct the same. 12.9 The obligations assumed by the User under the above paragraph shall continue throughout the term of this Agreement and shall not be limited, affected, impaired or in any manner modified by the fact that Pan American or the Port Authority shall have approved any Construction Application and supporting plans, specifications and contracts covering construction work and notwithstanding the incorporation therein of Pan American's or the Port Authority's recommendations or requirements and notwithstanding that Pan American and the Port Authority may have at any time during the term of the Agreement consented to or approved any particular procedure or method of operation which the User may have proposed, or Pan American or the Port Authority may have itself prescribed the use of any procedure or method. The agreement of the User to assume the obligations under the above paragraph is a special inducement and consideration to Pan American in entering into this Agreement with the User. 23 13. Prohibited Acts 13.1 The User shall not without prior written approval of Pan American install, maintain, operate or permit the installation, maintenance or operation of any restaurant, kitchen, stand or other establishment of any type for the sale of food or of any vending machines or device designed to dispense or sell merchandise or services of any kind to the public, except that User may, for the benefit of its employees, customers, guests and visitors install coin operated vending machines or services for the dispensing and sale of the following: 13.1.1 Hot and cold packaged foods 13.1.2 Hot and cold beverages 13.1.3 Candy and chewing gum 13.1.4 Tobacco and tobacco products 13.1.5 Newspapers and periodicals 13.1.6 Telephone services (pay stations) (hereinafter called "vending machines"). 13.2 If User, by itself or by contractors installs vending machines on the Space for the limited sale of merchandise or services permitted hereunder, it shall have the right to retain the revenues derived therefrom, provided, however, that 13.3 The User shall itself and shall also require its contractors to indemnify and hold harmless Pan American, its Directors, officers, agents and employees and the Port Authority, its Commissioners, officers, agents and employees from and against all claims and demands of third persons (including employees, officers and agents of Pan American and the Port Authority) arising or alleged to arise out of the installation, operation or maintenance of the vending machines or arising or alleged to arise out of any actual or alleged infringement of any patent, trademark or copyright or any alleged or actual unfair competition in any wise connected with the operation of the vending machines. 13.4 The limited right to install, operate and maintain vending machines granted to User herein may be terminated by Pan American at any time during the term of this Agreement upon ninety (90) days' notice to the User and Pan American, at any time thereafter, may substitute for the User's vending machines other machines selling similar merchandise or services operated by Pan American or by its permittee or concessionnaire and thereupon User shall remove its machines. 13.5 Upon installation by Pan American or by its permittee or concessionnaire of vending machines in substitution of User's vending machines, all revenues derived therefrom shall be retained by Pan American. 24 13.6 Upon rendering of notice to User of termination of the right to operate vending machines, Pan American may elect to permit User's vending machines to remain, but in such case, User shall pay or cause to be paid to Pan American each month for each machine upon the same basis for the preceding month as any permittee or concessionnaire of Pan American then operating machines at the Airport for sale to the general public of similar merchandise or rendering of similar services. 13.7 The termination by Pan American of the limited right of User to install vending machines at the Space shall be non-discriminatory in that similar rights granted to other Users at the Airport shall be terminated concurrently therewith, and in the exercise of such right by Pan American User shall not be entitled to assert any claim or institute any action or proceeding at law or in equity to assert any claim on account thereof whether for loss, damages or loss of revenue, consequential or otherwise. 13.8 The User shall not overload any floor or paved area on the Space and shall repair any floor including supporting members and any paved area damaged by overloading. 13.9 The User shall not do or permit to be done anything which may interfere with the effectiveness or accessibility of the utility, mechanical, electrical, drainage and sewer systems, fire-protection system and other systems installed or located on or in the Space. 13.10 The User shall not commit any nuisance or permit its employees or others on the Space with its consent to commit or create or continue or tend to create any nuisance on the Space or in or near the Airport. 13.11 The User shall not cause or permit to be caused or produced upon the Space, to permeate the same or to emanate therefrom, any unusual, noxious or objectionable smokes, gases, vapor or odors. 13.12 The User shall not do or permit to be done any act or thing upon the Space which: 13.12.1 will invalidate or conflict with any fire insurance policies covering the Space or any part thereof, or the Airport, or any part thereof; or 13.12.2 which, in the opinion of Pan American, may constitute an extra-hazardous condition so as to increase the risks normally attendant upon the operations permitted by this Agreement; or 13.12.3 which will increase the rate of any fire insurance, extended coverage or other insurance on the Airport or any part thereof or upon the contents of any building thereon. 13.13 Except persons who have been granted valid permits from Pan American, User shall not permit, foster or allow on the Space any persons who are: 25 13.13.1 doing maintenance work on aircraft not owned solely by said persons, 13.13.2 giving flight instruction of any sort unless such persons are members of User's flight instruction staff, or 14. Rules and Regulations 14.1 User shall observe and obey and shall compel others on the Space and those doing business with it with respect to the Space to observe and obey such Rules and Regulations of the Airport as are now in effect or as may be promulgated from time to time for the government and conduct of operations for reasons of safety, health or preservation of property, for the good and orderly appearance of the Space and for the safe and efficient operation and use of the Space. If a copy of the Rules and Regulations is not attached, then Pan American will make a copy thereof available to the User at the office of the Manager of Teterboro Airport. 15. Signs 15.1 Except with the prior written approval of Pan American, the User shall not erect, maintain or display any advertising, signs, posters or similar devices at or on the Space. 15.2 Upon demand by Pan American, the User shall remove, obliterate or paint out any and all advertising, signs, posters and similar devices placed by the User on the Space or elsewhere on the Airport without the prior approval of Pan American. In the event of a failure on the part of the User so to remove, obliterate or paint out each and every sign or piece of advertising and so to restore the Space and the Airport, Pan American may perform the necessary work and the User shall pay the costs thereof to Pan American on demand. 16. Assignment 16.1 The User agrees that it will not grant the right of sub-use, sell, convey, transfer, assign, mortgage or pledge this Agreement or any part thereof or any rights granted thereby without the prior written consent of Pan American. 16.2 If the User assigns, sells, conveys, transfers, mortgages, pledges or grants the right of sub-use under this Agreement in violation of the foregoing provisions of this Section, or if the Space is occupied by anyone other than the User, Pan American may collect from any assignee, sub-user or anyone who claims a right to this Agreement or who occupies the Space any charges or fees payable by it and shall apply the net amount collected to the fees, herein reserved; and no such collection shall be deemed a waiver by Pan American of the agreements contained in this Section nor of acceptance by Pan American of any assignee, claimant or occupant, nor as a release of the User by Pan American from the further performance by the User of the agreements contained herein. 26 17. Condemnation 17.1 The User, in any action or proceeding instituted by any governmental agency or agencies for the taking for a public use of any interest in all or any part of the Space, shall not be entitled to assert any claim to any compensation or award or part thereof made or to be made therein or therefor, or to institute any action or proceeding or to assert any claim against such agency or agencies or against the Port Authority or Pan American for or on account of any such taking (except the possible claim to an award for loss of the User's removable fixtures), it being understood and agreed between Pan American and the User that Pan American shall be entitled to all the compensation or awards made or to be made or paid for in such taking, free of any claim or right of the User. 17.2 In the event of a taking of the entire Space by any governmental agency or agencies, then this Agreement shall be cancelled as of the date possession is taken from the Port Authority by the agency or agencies, and shall cease and determine in the same manner and with the same effect as if the Agreement had on that date expired. 17.3 In the event of a taking by any governmental agency or agencies of a part of the Space, then use as to such part only shall, as of the date possession thereof is taken from the Port Authority by such agency or agencies, cease and determine, and the Fees thereafter to be paid by the User to Pan American shall be abated as hereinafter provided from and after the date of such taking. In the event that a substantial part shall be taken which shall be deemed to mean a taking so extensive that the User is unable to use or operate the Space for the purposes expressed in this Agreement, then the User shall have the right to be exercised within thirty (30) days of the taking to terminate this Agreement, such termination to have the same effect as expiration. 17.4 In the event that all or any portion of the Space is required by the Port Authority to comply with any present or future governmental law, rule, regulation, requirement, order or direction, Pan American may by notice given to the User terminate the Agreement with respect to all or such portion of the Space so required. Such termination shall be effective on the date specified in the notice. The User hereby agrees to deliver possession of all or such portion of Space so required upon the effective date of such termination. No taking by or conveyance to any governmental authority as described in this Section, nor any delivery by the User nor taking by the Port Authority pursuant to this subsection shall be or be construed to be a breach of this Agreement or be made the basis of any claim by the User against the Port Authority or Pan American for damages, consequential or otherwise. 17.5 In the event a taking or conveyance as set forth above occurs with respect to all or any portion of the new building or new structures which shall be erected or constructed by the User, Pan American shall pay to the User the unamortized capital investment (as is hereinafter defined), if there be any, of such new building 27 or new structures, provided, however, that with respect to a taking or conveyance the sums payable to the User by Pan American shall be limited to the extent of amounts covering the foregoing which shall have actually been paid to Pan American by the Port Authority or by others under the terms of the Basic Agreement, which amounts shall have been paid to Pan American through the Port Authority by the governmental agency or agencies, it being understood that the User shall not have any claim whatsoever against Pan American or the Port Authority by reason of insufficient or claimed insufficiency of the amounts so paid to Pan American. Payment to the User shall be made within sixty (60) days after receipt of the notice by Pan American from the Port Authority that payments have been received by the Port Authority from the governmental agency or agencies and confirmation that the Port Authority will reimburse Pan American upon evidence of payment to User. 17.6 The unamortized capital investment referred to in the above subsection shall be the capital investment in all or any part of the new building or new structures which shall be erected at the Space by the User with the approval of Pan American as referred to in the Section entitled "Construction by User" of this Agreement (as may be affected by the taking or conveyance in whole or in part), multiplied by a fraction, the numerator of which shall be the number of whole calendar months between the effective date of taking or termination as set forth above, and the end of the amortization period of each such new building or new structures as hereinafter set forth, and the denominator of which shall be the total said amortization period of such new building or new structures. 17.7 Except as otherwise agreed to by the parties hereto prior to commencement of construction, the amortization period with respect to each such new structure or new building shall commence as of the date of substantial completion of the same, shall be computed in whole months, and shall be: 17.7.1 the useful life of the new building or new structure as determined under sound accounting practice; or 17.7.2 two hundred forty (240) months; or 17.7.3 to termination of the term hereof, whichever is least of the above. 17.8 For purposes of this Agreement and to the extent permitted by sound accounting practice, the capital investment of the User for each such new building or new structure shall mean the sum of the following items: 17.8.1 payments to independent contractors and suppliers of materials, excluding any payments for engineering, architectural planning or designing services, engaged or retained by the User for the actual construction of the work, including site preparation and bringing utilities to the site; and 17.8.2 an amount equal to Ten Percent (10%) of the above item. 28 17.9 A statement of capital investment in duplicate detailing all of the foregoing including two copies of invoices and contracts and certified by the principal financial officer of the User shall be delivered to Pan American not later than forty-five (45) days after completion of any construction, and the User shall permit Pan American and the Port Authority by their agents, employees or representatives at all reasonable times prior to a final settlement or determination of capital investment to examine and audit the records and books of the User which pertain to the capital investment and the User agrees to keep such records and books of account within the District of the Port Authority during such time. If in the certified statement, there is included any item of cost or expense as having been incurred which in the opinion of Pan American or the Port Authority was not so incurred, or which in the opinion of Pan American or the Port Authority was not a cost or expense properly chargeable to the capital investment under sound accounting practice, within one hundred eighty (180) days after completion of audit and examination by the Port Authority and Pan American, Pan American shall give written notice to the User stating its objection to such item and the grounds therefor, which notice shall be considered final in the determination of the capital investment. 17.10 There shall be excluded from the capital investment any cost of personal property. 17.11 Notwithstanding any other provision of this Agreement, in ascertaining the amount Pan American shall be obligated to pay the User under the terms of this Section the unamortized capital investment of each such new structure or new building shall be diminished by the amount that any part of the components of any costs thereof are secured by liens, mortgages or other encumbrances or conditional bills of sale on said capital investment and less any other amounts whatsoever due to Pan American by the User under this Agreement or any other agreement with the User at the Airport. The capital investment for any such new structure or new building shall not include any expenses, outlays or charges by or for the account of the User for or in connection with the work unless said work is actually made and completed and becomes part of the Space. 18. Non-Discrimination 18.1 Without limiting the generality of any of the provisions of this Agreement, the User, for itself, its successors in interest, and assigns, as a part of the consideration hereof, does hereby covenant and agree as a covenant running with the land that (1) no person on the grounds of race, color, or national origin shall be excluded from participation in, denied the benefits of, or be otherwise subjected to discrimination in the use of the Space, (2) that in the construction of any improvement on, over, or under the Space and the furnishing of services thereon, no person on the grounds of race, color, or national origin shall be excluded from participation in, denied the benefits of, or otherwise subjected to discrimination, (3) that the User shall use the Space in compliance with all other requirements imposed by or pursuant to Title 49, Code of Federal Regulations, Department of Transportation, Subtitle A, Office of the Secretary, Part 21, 29 Nondiscrimination in Federally-assisted programs of the Department of Transportation-Effectuation of Title VI of the Civil Rights Act of 1964, and as said Regulations may be amended, and any other present or future laws, rules, regulations, orders or directions of the United States of America with respect thereto which from time to time may be applicable to the User's operations thereat, whether by reason of agreement between Pan American and the United States Government or otherwise. 18.2 The User shall include the provisions of the above subsection in every agreement or concession pursuant to which any person or persons, other than the User, operates any facility at the Space providing services to the public and shall also include therein a provision granting Pan American a right to take such action as the United States may direct to enforce such covenant. 18.3 The User's noncompliance with the provisions of this Section shall constitute a material breach of the Agreement. In the event of the breach by the User of any of the above nondiscrimination provisions, Pan American may take any appropriate action to enforce compliance; or in the event such noncompliance shall continue for a period of twenty (20) days after receipt of written notice from Pan American, Pan American shall have the right to terminate this Agreement with the same force and effect as a termination under the Section of the Agreement providing for termination for default by the User in the performance or observance of any other term or provision of the Agreement; or may pursue such other remedies as may be provided by law; and as to any or all of the foregoing, Pan American may take such action as the United States may direct. 18.4 The User shall indemnify and hold harmless Pan American and the Port Authority from any claims and demands of third persons including the United States of America resulting from the User's noncompliance with any of the provisions of this Section and the User shall reimburse Pan American and the Port Authority for any loss or expense incurred by reason of such noncompliance. 18.5 Nothing contained in this Section shall grant or shall be deemed to grant to the User the right to transfer or assign the Agreement, to make any agreement or concession of the type mentioned in this Section, or any right to perform any construction on the Space. 19. Governmental Requirements 19.1 The User shall procure all licenses, certificates, permits or other authorization from all governmental authorities, if any, having jurisdiction over the User's operations at the Space which may be necessary for the User's operations thereat. 19.2 The User shall pay all taxes, license, certification, permit and examination fees and excise which may be assessed, levied, exacted or imposed on the Space or operation hereunder or on the gross receipts or income to User therefrom, and shall make all applications, reports and returns required in connection therewith. 30 19.3 Pan American has agreed by a provision in its agreement with the Port Authority covering the Airport to conform to the enactments, ordinances, resolutions and regulations of various governmental authorities having jurisdiction and of their various departments, boards and bureaus in regard to construction and maintenance of buildings and structures and in regard to health and fire protection. The User shall, within forty-eight (48) hours after its receipt of any notice of violation, warning notice, summons or other legal process for the enforcement of any such enactment, ordinance, resolution or regulation, deliver the same to Pan American. Unless otherwise directed in writing by Pan American because the same is inapplicable, the User shall conform to such enactments, ordinances, resolutions and regulations insofar as they relate to the operations of the User at the Space. In the event of compliance with any such enactment, ordinance, resolution or regulation on the part of the User, acting in good faith, commenced after such delivery to Pan American but prior to the receipt by the User of a written direction from Pan American, such compliance shall not constitute a breach of this Agreement, although Pan American thereafter notifies the User to refrain from such compliance. 19.4 The User shall promptly observe, comply with and execute the provisions of any and all present and future governmental laws, rules, regulations, requirements, orders and directions which may pertain or apply to the User's operations at the Space. 19.5 The User's obligations to comply with governmental requirements are provided herein for the purpose of assuring proper safeguards for the protection of persons and property at the Space. 20. Rights of Entry Reserved 20.1 The Port Authority, by its officers, employees, agents, representatives and contractors and Pan American by its officers, employees, agents, representatives and contractors shall have the right at all reasonable times to enter upon the Space for the purpose of inspecting the same, for observing the performance by the User of its obligations under this Agreement and for the doing of any act or thing which the Port Authority or Pan American may be obligated or have the right to do under this Agreement, or otherwise. 20.2 Without limiting the generality of the foregoing, Pan American, by its officers, employees, agents, representatives and contractors and by the employees, agents, representatives and contractors of any furnisher of utility services in the vicinity, shall have the right, for its own benefit, for the benefit of the User, or for the benefit of others than the User at the Airport, to maintain existing and future utilities systems or portions thereof on the Space, including therein, without limitation thereto, systems for the supply of heat, water, gas, fuel, electricity and for the furnishing of fire-alarm, fire-protection, sprinkler, sewerage, drainage, telegraph and telephone services, including all lines, pipes, mains, wires, conduits and equipment connected with or appurtenant to such systems, and to enter upon 31 the Space at all reasonable times to make such repairs, replacements or alterations as may, in the opinion of Pan American, be deemed necessary or advisable and, from time to time to construct or install over, in or under the Space new systems or parts thereof, including lines, pipes, mains, wires, conduits and equipment; provided, however, that in the exercise of such rights of repair, alteration or new construction Pan American shall not unreasonably interfere with the use and occupancy of the Space by the User. 20.3 The exercise of any or all of the foregoing rights by the Port Authority, Pan American or others shall not be or be construed to be an eviction of the User nor be made the grounds for any abatement of fees, nor any claim or demand for damages, consequential or otherwise. 20.4 Nothing in this Section shall impose or shall be construed to impose upon Pan American or the Port Authority any obligation so to construct or maintain or to make repairs, replacements, alterations or additions, or shall create any liability for any failure so to do. 21. Basic Agreement 21.1 In the event the Basic Agreement is terminated, revoked, cancelled or expires, this Agreement shall terminate on the day preceding such date the same as if such preceding date were the expiration date of the term of this Agreement. 22. Patents, Trademarks 22.1 The User represents that it is the owner of or fully authorized to use any, and all services, processes, machines, articles, marks, names or slogans used by it in its operations under or in anywise connected with this Agreement. The User agrees to save and hold the Port Authority, Pan American, their Commissioners, Directors, officers, employees, agents and representatives free and harmless of and from any loss, liability, expense, suit or claim for damages in connection with any actual or alleged infringement of any patent, trademark or copyright, or arising from any alleged or actual unfair competition or other similar claim arising out of the operations of the User under or in anywise connected with this Agreement. 23. Additional Fees and Charges 23.1 If Pan American is required or elects to pay any sum or sums or incurs any obligations or expense by reason of the failure, neglect or refusal of the User to perform or fulfill any one or more of the conditions or agreements contained in this Agreement, or as a result of an act or omission of the User contrary to the said conditions and agreements, the User agrees to pay the sum or sums so paid or the expense so incurred, including all interest, costs, damages and penalties, and the same may be added to any installment of Fees thereafter due hereunder, and each and every part of the same shall be and become additional Fees, recoverable by Pan American in the same manner and with like remedies as if they were 32 originally a part of the Fees as set forth in the Section entitled "Fees to Pan American" hereof. 24. Right of Re-Entry 24.1 Pan American shall, as an additional remedy upon the giving of a notice of termination as provided in the Section entitled "Termination by Pan American" hereof, have the right to re-enter the Space and every part thereof upon the effective date of termination without further notice of any kind, and may regain and resume possession either with or without the institution of summary or any other legal proceedings or otherwise. Such re-entry or regaining or resumption of possession, however, shall not in any manner affect, alter or diminish any of the obligations of the User under this Agreement, and shall in no event constitute an acceptance of surrender. 25. Surrender 25.1 The User covenants and agrees to yield and deliver peaceably to Pan American possession of the Space on the date of cessation of the Agreement, whether such cessation be by termination, expiration or otherwise, promptly and in good condition, except for reasonable wear which does not cause or tend to cause deterioration of the improvements or adversely affect the efficiency or proper utilization thereof. 26. Termination by Pan American 26.1 Upon the occurrence of any of the following events or at any time thereafter during the continuance thereof, Pan American may terminate the rights of the User under this Agreement upon five (5) days' written notice, such termination to be effective upon the date specified in such notice: 26.1.2 The User shall become insolvent, or shall take the benefit of any present or future insolvency statute, or shall make a general assignment for the benefit of creditors, or file a voluntary petition in bankruptcy or a petition or an answer seeking an arrangement or its reorganization or the readjustment of its indebtedness under the federal bankruptcy laws or under any other law or statute of the United States or of any State thereof, or consent to the appointment of a receiver, trustee or liquidator of all or substantially all of its property; or 26.1.3 By order of decree of a court the User shall be adjudged bankrupt or an order shall be made approving a petition filed by any of the creditors or, if the User is a corporation, by any of the stockholders of the User, seeking its reorganization or the readjustment of its indebtedness under the federal bankruptcy laws or under any law or statute of the United States or of any State thereof; or 26.1.4 A petition under any part of the federal bankruptcy laws or an action under any present or future insolvency law or statute shall be filed against the User and shall not be dismissed within thirty (30) days after the filing thereof; or 33 26.1.5 Except as may be provided in the Section entitled "Assignment" hereof, the interest of User under this Agreement shall be transferred to, pass to or devolve upon, by operation or law or, otherwise, any other person, firm or corporation; or 26.1.6 The User, if a corporation, shall, without the prior written notice to Pan American, become a possessor or merged corporation in a merger, a constituent corporation in a consolidation, or a corporation in dissolution; or 26.1.7 By or pursuant to, or under authority of any legislative act, resolution or rule, or any order or decree of any court or governmental board, agency or officer having jurisdiction, a receiver, trustee, or liquidator shall take possession or control of all or substantially all of the Space of the User and such possession or control shall continue in effect for a period of twenty (20) working days; or 26.1.8 The User shall voluntarily abandon, desert or vacate the Space or discontinue its operations at the Airport, or, after exhausting or abandoning any right of further appeal, the User shall be prevented for a period of sixty (60) days by action of any governmental agency having jurisdiction thereof, from conducting its operations at the Airport, regardless of the fault of the User; or 26.1.9 Any lien is filed against the Space because of any act or omission of the _____________________. 26.1.10 The User shall fail duly and punctually to pay the Fees or to make any other payment required hereunder when due to Pan American and shall persist in its failure for a period of ten (10) days following the receipt of written notice of such default from Pan American; or 26.1.11 The User shall fail to complete the construction as set forth in Section 3 hereof; or 26.1.12 The User shall fail to keep, perform and observe each and every other promise and agreement set forth in this Agreement on its part to be kept, performed, or observed, within ten (10) days after receipt of notice of default thereunder from Pan American (except where fulfillment of its obligation requires activity over a period of time, and the User shall have commenced to perform whatever may be required for fulfillment within ten (10) days after receipt of notice and continues such performance without interruption except for causes beyond its control; or 26.1.13 There shall be an occurrence of any of the events of default under any other use and occupancy agreements or permits between the User and Pan American at the Airport. 26.2 If any of the events enumerated in the above subsections of this Section shall occur prior to the effective date of this Agreement, the User shall not be entitled to enter into possession of the Space, and Pan American upon the occurrence of any such event, or at any time thereafter during the continuance thereof by twenty-four (24) hours' notice may cancel this Agreement, such cancellation to be effective upon the date specified in such notice. 34 26.3 No acceptance by Pan American of fees, charges, or other payments in whole or in part for any period or periods after a default of any of the terms, agreements and conditions hereof to be performed, kept or observed by the User shall be deemed a waiver of any right on the part of Pan American to terminate this Agreement. 26.4 No waiver by Pan American of any default on the part of the User in performance of any of the terms, covenants or conditions hereof to be performed, kept or observed by the User shall be or be construed to be a waiver by Pan American or any other or subsequent default in performance of any of the valid terms, agreements and conditions. 26.5 The rights of termination described above shall be in addition to any other rights of termination provided in this Agreement and in addition to any rights and remedies that Pan American would have at law or in equity consequent upon any breach of this Agreement by the User, and the exercise by Pan American of any right of termination shall be without prejudice to any other such rights and remedies, except that in the event of termination pursuant to the portion of the subsection above of this Section reading "after exhausting or abandoning any right of further appeal, the User shall be prevented for a period of sixty (60) days by action of any governmental agency having jurisdiction thereof, from conducting its operations at the Airport, regardless of the fault of the User," the sole right of Pan American shall be a right of termination. 27. Services by User 27.1 A principal purpose of Pan American in the making of this Agreement is to make available at the Airport the items and/or services which the User is permitted to sell and/or render hereunder and the User hereby warrants and agrees that it will conduct a first-class operation and will furnish all necessary or proper fixtures, equipment, personnel (including licensed personnel as necessary), supplies, materials, and facilities. 27.2 The User shall: 27.2.1 furnish good, prompt and efficient service hereunder adequate to meet all demands therefor at the Space; 27.2.2 furnish said service on a fair, equal and nondiscriminatory basis to all users thereof; and 27.2.3 charge fair, reasonable and nondiscriminatory prices for each unit of sale or service, provided that the User may make reasonable and nondiscriminatory discounts, rebates or other similar types of price reductions to volume purchasers. 27.2.4 As used in the above subsections, "service" shall include furnishing of parts, materials and supplies (including sale thereof). 35 27.2.5 Pan American and User recognize the desirability and the existing need to provide aircraft maintenance services to User's hangar occupants; therefore, as a special, inducement for Pan American in entering into this Agreement User hereby agrees to continue providing or cause to be provided FAA approved personnel and facilities for maintenance servicing and repair of aircraft during the term of this Agreement, so long as the rendering of such services are economically justifiable. In the event the economics of rendering such services are such as to impose such severe financial hardship upon the User that can only be relieved by the discontinuance thereof by User, User shall render sixty (60) days' written notice to Pan American of its intention to so discontinue, together with financial data and other factors supporting such decision. Concurrently with notice to Pan American, User shall notify its customers in order that they may assess the continued need for such services. User shall take all appropriate steps consistent with this Agreement and consistent with User's existing space and its insurance requirements to assist and permit its customers in making alternate arrangements for the provision of maintenance services. It is clearly understood by Pan American and User that in the event User terminates maintenance services for economic reasons that User's customers may with User's permission which shall not unreasonably be withheld have FAA approved and qualified maintenance personnel perform maintenance on User's customers' aircraft within User's Space provided the User is properly indemnified. In the event User discontinues maintenance services (except temporary disruption due to labor disputes) for reasons other than financial hardship directly attributable to rendering such services, such discontinuance shall constitute a material breach hereof and if such services are not resumed by User within a period of thirty (30) days after receipt of written notice from Pan American, Pan American shall have the right to terminate this Agreement with the same force and effect as a termination under Section 26 hereof. 27.3 The Port Authority has applied for and received a grant or grants of money from the Administrator of the Federal Aviation Administration pursuant to the Federal Airport Act of 1946 and pursuant to the Airport and Airway Development Act of 1970 (49 U.S.C. 1701), as the same have been amended and supplemented, and the Port Authority may in the future apply for and receive further such grants. Pan American under its Operating Agreement with the Port Authority for Teterboro Airport, dated September 19, 1967, has assumed certain obligations of the Port Authority under the Grant Agreement and in connection therewith, the Port Authority and Pan American may in the future undertake certain additional obligations respecting the operation of the Airport and the activities of contractors, lessees and permittees thereon. The performance by the User of the promises and obligations contained in this Agreement is therefore a special consideration and inducement to Pan American to enter into this Agreement and the User further covenants and agrees that if the Administrator of the Federal Aviation Administration or any other governmental officer or body having 36 jurisdiction over the enforcement of the obligations of the Port Authority and/or Pan American in connection with Federal Airport Aid, shall make any orders, recommendations or suggestions respecting the performance by the User of its obligations under this Agreement, the User will promptly comply therewith, at the time or times when and to the extent that Pan American may direct. 28. Survival of the Obligations of the User 28.1 In the event that the Agreement shall have been terminated in accordance with a notice of termination as provided in the Section entitled "Termination by Pan American" hereof, or in the event that Pan American has re-entered, regained or resumed possession of the Space in accordance with the provisions of the Section entitled "Right of Re-Entry" hereof, all the obligations of the User under this Agreement shall survive such termination or cancellation, re-entry, regaining or resumption of possession and shall remain in full force and effect for the full term of this Agreement, and the amount or amounts of damages or deficiency shall become due and payable to Pan American to the same extent, at the same time or times, and in the same manner as if no termination, cancellation, re-entry, regaining or resumption of possession had taken place. Pan American may maintain separate actions each month to recover the damage or deficiency then due or at its option and at any time may sue to recover the full deficiency less the proper discount, for the entire unexpired term of the Agreement. 28.2 The amount of damages for the period of time subsequent to termination or cancellation (or re-entry, regaining or resumption of possession) on account of the User's Fee obligations, shall be the sum of the following: 28.2.1 The amount of the total of all installments of basic fees pursuant to the Section entitled "Fees to Pan American" hereof, less the installments thereof payable prior to the effective date of termination except that the credit to be allowed for the installment payable on the first (1st) day of the month in which the termination is effective shall be prorated for the part of the month the Agreement remains in effect on the basis of the total days in the month; 28.2.2 An amount equal to all expenses incurred by Pan American in connection with regaining possession, restoring the Space, acquiring a User for the Space, legal expenses (including but not limited to attorneys' fees), putting the Space in order including, without limitation to, cleaning, redecorating (on failure of the User to restore), maintenance and brokerage fees. 29. Use Subsequent to Cancellation or Termination 29.1 Pan American, upon termination or cancellation pursuant to the Section entitled "Termination by Pan American" of this Agreement, or upon any re-entry, regaining or resumption of possession pursuant to the Section entitled "Right of Re-Entry" of this Agreement, may occupy the Space or may enter into an agreement with another User and shall have the right to permit any person, firm or 37 corporation to enter upon the Space and use the same. Such use may be of part only of the Space or of the entire Space or a part thereof, together with other space, and for a period of time the same as or different from the balance of the term hereunder remaining, and on terms and conditions the same as or different from those set forth in this Agreement. Pan American shall also, upon said termination or cancellation, or upon said re-entry, regaining or resumption of possession, have the right to repair and to make structural or other changes in the Space, including changes which alter the character of the Space and the suitability thereof for the purposes of the User under this Agreement, without affecting, altering or diminishing the obligations of the User hereunder. In the event either of use by others or of any actual use and occupancy by Pan American, there shall be credited to the account of the User against its survived obligations hereunder any net amount remaining after deducting from the amount actually received from any User, licensee, permittee or other occupier in connection with the use of the said Space or portion thereof during the balance of the term of use, and occupancy as the same is originally stated in this Agreement, or from the market value of the occupancy of such portion of the Space as Pan American may itself during such period actually use and occupy, less all expenses, costs and disbursements incurred or paid by Pan American in connection therewith. No such use and occupancy shall be or be construed to be an acceptance of a surrender of the Space, nor shall such use and occupancy constitute a waiver of any rights of Pan American hereunder. Pan American will use its best efforts to minimize damages to User under this Section commensurate with its obligations under the Basic Agreement. 30. Remedies to be Non-Exclusive 30.1 Except where otherwise specifically provided, all remedies provided in this Agreement shall be deemed cumulative and additional and not in lieu of or exclusive of each other or of any other remedy available to either party at law or in equity. 31. Limitation of Rights and Privileges Granted 31.1 No exclusive rights at the Airport are granted by this Agreement and no greater rights or privileges with respect to the use of the Space or any part thereof are granted or intended to be granted to the User by this Agreement, or by any provision thereof, than the rights and privileges expressly and specifically granted hereby. 32. Removal of Personal Property 32.1 The User shall have the right at any time during the term of this Agreement to remove its equipment, inventories, removable fixtures and other personal property from the Space. 38 32.2 If the User shall fail to remove its property on or before the termination or expiration of the term, Pan American may remove such property to a public warehouse for deposit or retain the same in its own possession, and sell the same at public auction, the proceeds of which shall be applied first, to the expense of removal, storage and sale; second, to any sums owed by the User to Pan American, with any balance remaining to be paid to the User, but if the expenses of such removal, storage and sale shall exceed the proceeds of sale, the User shall pay such excess to Pan American upon demand. 33. Brokerage 33.1 The User represents and warrants that no broker has been concerned on its behalf in the negotiation of this Agreement and that there is no such broker who is or may be entitled to be paid a commission in connection therewith. The User shall indemnify and save harmless Pan American of and from any claim for commission or brokerage made by any such broker when such claim is based in whole or in part upon any act or omission of the User. 34. Notices 34.1 Except where expressly required or permitted herein to be oral, all notices, requests, consents and approvals required to be given to or by either party shall be in writing, and all such notices and requests shall be personally delivered to the duly designated officer or representative of such party or delivered to the office of such officer or representative during regular business hours, or forwarded to him or to the party at such address by registered mail. 35. Construction and Application of Terms 35.1 The Section and subsection headings, if any, in this Agreement, are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of intent of any provision hereof. 36. Non-Liability of Individuals 36.1 Neither the Directors of Pan American or User nor any officers, agents or employees thereof, shall be charged personally by the other with any liability or held liable to the other under any term or provision of this Agreement, or because of its execution or attempted execution, or because of any breach or attempted or alleged breach thereof. 37. Abatement 37.1 Except for abatement of fees set forth in Sections 5.2, 5.3, 5.4 and 5.5 hereof, if at any time the User shall become entitled to abatement of Fees by the provisions of this Agreement or otherwise, the abatement of Fees shall be made on an equitable basis giving effect to the amount and character of the Space, the use of which is denied the User as compared with the entire Space. 39 38. Port Authority Consent 38.1 This Agreement shall become effective upon the execution hereof by all parties hereto and the execution of a Consent Agreement between and among the Port Authority, Pan American, and User. 39. Entire Agreement 39.1 This Agreement consists of the following: Sections 1 through 39 and Exhibits A, B and C. 39.2 It constitutes the entire Agreement of the parties on the subject matter hereof. It may not be changed, modified, discharged or extended except by written instrument duly executed by Pan American and the User. The User agrees that no representations or warranties shall be binding upon Pan American unless expressed in writing in this Agreement. IN WITNESS WHEREOF, the parties hereto have executed these presents as of the day and year first above written. PAN AMERICAN WORLD AIRWAYS, INC. ATTEST: /s/ Illegible By /s/ John P. Kennedy - ----------------------------- ---------------------------------------- (Title) Director ----------------------------------- Metropolitan Air Facilities Division ATLANTIC AVIATION CORPORATION ATTEST: (User) /s/ Thomas Cassidy By /s/ Illegible - ----------------------------- ---------------------------------------- (Title) Sr. Vice President ----------------------------------- 40 Teterboro Airport Agreement TA-121 Supplement No. 1 SUPPLEMENTAL AGREEMENT THIS AGREEMENT, made this 1st day of January 1985 day of by and between PAN AMERICAN WORLD AIRWAYS, INC. (hereinafter called "Pan American"), New York State corporation, and ATLANTIC AVIATION CORPORATION, a Delaware corporation (hereinafter called "the User"), WITNESSETH, THAT: WHEREAS, The Port Authority of New York and New Jersey (hereinafter called "The Port Authority") is the owner of Teterboro Airport located in the Boroughs of Teterboro, Moonachie and Hasbrouck Heights and in the Township of Lyndhurst, County of Bergen in the State of New Jersey; and WHEREAS, Pan American is the operator of Teterboro Airport and has the right to operate and use the Airport under an agreement between Pan American and the Port Authority dated September 19, 1967 ("Basic Agreement"); and WHEREAS, Pan American and the User have entered into a Use and Occupancy Agreement dated February 14, 1979, bearing file No. TA-121 (hereinafter called "the Agreement"); and WHEREAS Exhibit C of the Agreement shows a building entitled "Power Bldg"; and WHEREAS the Power Bldg. is used exclusively by the Federal Aviation Administration (FAA) for the storage of equipment; NOW, THEREFORE, for and in consideration of the covenants, respective promises and mutual agreements herein contained and made parties hereto, it is hereby mutually agreed: 1) Effective January 1, 1985, the Power Building shall no longer be deemed to be part of the Space under the Agreement. 2) In the event that the FAA shall at anytime vacate the Power Building, then upon the effective date of such surrender by the FAA, the Power Building shall be and become a part of the space under the Agreement and shall be subject to all of the terms and provisions of the Agreement. 3) Except as herein supplemented and amended, all the terms, conditions and covenants of the Agreement shall be and remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed these presents as of the day and year first above written. ATTEST: Pan American World Airways, Inc. /s/ Illegible - ----------------------------- By /s/ Linda B. Young ---------------------------------------- Linda B. Young Title Authorized Representative ------------------------------------- Pan American World Airways, Inc. ATTEST: Atlantic Aviation Corporation /s/ Illegible - ----------------------------- By /s/ Illegible ---------------------------------------- Title VP GM ------------------------------------- 2 CONSENT AGREEMENT THIS AGREEMENT, dated as of January 1, 1985 by and among THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (hereinafter called "the Port Authority") and PAN AMERICAN WORLD AIRWAYS, INC. (hereinafter called "the Airport Operator") and Atlantic Aviation, Corporation, a corporation in the State of Delaware (hereinafter called "the User"), WITNESSETH, THAT: WHEREAS, the Port Authority and the Airport Operator have heretofore entered into an agreement dated September 19, 1979 (which agreement, as the same has been or may hereafter be supplemented and amended, is hereinafter called "the Main Agreement"), pursuant to which the Airport Operator is operating and using Teterboro Airport (hereinafter called "the Airport"); and WHEREAS, pursuant to and in accordance with the terms of the Main Agreement, the Airport Operator and the User have entered into a Use and Occupancy Agreement dated February 14, 1979 which Use and Occupancy Agreement has been designated TA-121; and WHEREAS, Pan American and User desire to supplement the above referenced Use and Occupancy Agreement, copy of which is attached hereto, made a part hereof and hereafter called "the Supplement," subject to the consent of the Port Authority and the execution of a Consent Agreement by and among the Airport Operator, the User and the Port Authority; and WHEREAS, the Port Authority, Pan American and the User entered into a Consent Agreement dated as of February 14, 1979 (hereinafter called "the Use and Occupancy Consent Agreement"), wherein the Port Authority gave its consent to the Use and Occupancy Agreement; NOW, THEREFORE, for and in consideration of the covenants and mutual agreements herein contained, the Port Authority, the Airport Operator and the User hereby agree effective as of January 1, 1985 as follows: 1. On the terms and conditions hereinafter set forth, the Port Authority consents to the Supplement. 2. It is hereby specifically agreed that all of the terms and provisions of the Use and Occupancy Consent Agreement shall apply with like effect to this consent to the Supplement as though each and every such term and such provision were incorporated herein. 3. Neither the Commissioners of the Port Authority nor any of them, nor any officer, agent or employee thereof shall be held personally liable to the Airport Operator or to the User under any term of provision of this Consent Agreement to the Supplement or because of its execution or because of any breach or alleged breach hereof. IN WITNESS WHEREOF, the Port Authority, the Airport Operator and the User have executed these presents. THE PORT AUTHORITY OF NEW YORK ATTEST: AND NEW JERSEY /s/ Illegible - --------------------------- By: /s/ Gerald P. Fitzgerald -------------------------------------- SECRETARY Title: Deputy Director of Aviation ----------------------------------- ATTEST: PAN AMERICAN WORLD AIRWAYS, INC. /s/ Illegible - --------------------------- By: /s/ Linda B. Young -------------------------------------- Linda B. Young SECRETARY Title: Authorized Representative ----------------------------------- Pan American World Airways, Inc. ATLANTIC AVIATION CORPORATION ATTEST: /s/ F.S. Eyster By: /s/ Illegible - ----------------------------- -------------------------------------- Corporate Secretary Title: VP GM ----------------------------------- 2 Teterboro Airport Agreement TA-121 Supplement No. 2 SUPPLEMENTAL AGREEMENT THIS AGREEMENT, made as of January 1, 1987 by and between PAN AMERICAN WORLD AIRWAYS, INC., a New York State Corporation (hereinafter called "Pan American"), and ATLANTIC AVIATION CORPORATION, (hereinafter called "the User"), a Delaware Corporation, WITNESSETH THAT: WHEREAS, the Port Authority of New York and New Jersey (hereinafter called "the Port Authority") is the owner of Teterboro Airport (hereinafter called "the Airport") located in the boroughs of Teterboro, Moonachie and Hasbrouck Heights and in the Township of Lyndhurst, County of Bergen in the State of New Jersey; and, WHEREAS, Pan American is the operator of the Airport and has the right to operate and use the Airport under an agreement between Pan American and the Port Authority dated September 19, 1967 (hereinafter called "the Basic Agreement"); and, WHEREAS, the User and Pan American have entered into a Use and Occupancy Agreement dated February 14, 1979, designated Agreement No. TA-121 (which agreement as has heretofore been supplemented and amended is hereinafter called "the Agreement"); and WHEREAS, the User desires to extend the area of use and occupancy by incorporating into the Agreement the area previously covered under a Use and Occupancy Agreement dated June 14, 1972, designated Agreement NO. TA-028; NOW, THEREFORE, for and in consideration of the convenants, respective promises and mutual agreements herein contained and made by the parties hereto, it is hereby mutually agreed as follows: 1. Effective January 1, 1987, Pan American hereby grants to the User the right to use and occupy the additional area set forth as shown in stipple on Exhibit A-2 attached hereto and made a part hereof, together with all buildings, structures, improvements, additions and permanent installations constructed and installed therein or thereon during the reminder of the term of this Agreement (hereinafter to be deemed to be a part of the "Space"). 2. In addition to the Space set forth in diagonal hatching on Exhibit A-1, from and after January 1, 1987 the Space set forth in stipple on Exhibit A-2 shall become part of the Agreement and subject to all terms, provisions and conditions of the Agreement. 3. Section 2.2.2 of the Agreement shall be deleted and the following substituted therefore: "2.2.2 for the sale of aircraft assemblies, aircraft accessories, aircraft radio and electronic equipment and any component parts thereof;" 4. Sections 5.9.2, 5.9.5, 5.9.6, 5.9.6.1,5.9.6.2, 5.9.6.3, 5.9.6.4, 5.9.7, 5.9.8 and 6.5 of the Agreement shall be deleted in their entirety. 5. The User agrees to use the portion of the Space outlined in stipple on Exhibit A-2 shall be and become a part of Area A under the Agreement and used, for purposes as outlined in Section 2.2 of the Agreement and for no other purposes. 6. The following Subsections 5.10, 5.11, 5.11.1,5.11.2 and 5.11.3 shall be added to Section 5 "Fees to Pan American", of the Agreement: 5.10 Effective January 1 , 1987 and continuing each and every month throughout the remaining term of the Agreement, the User agrees to pay to Pan American a monthly fee of Six Thousand Nine Hundred Forty Eight Dollars and Forty Three Cents ($6,948.43) for the additional portion of the Space as shown in stipple on Exhibit A-2. The fee is in addition to that specified in Section 5.1 of the Agreement. 5.11 Effective March 1, 1989 and continuing for the next succeeding sixty (60) monthly payments the monthly fee as stated in Section 5.10 above shall be Six Thousand Nine Hundred Forty Eight Dollars and Forty Three Cents ($6,948.43) multiplied by a fraction the numerator of which shall be the Consumer Price Index for all Urban Consumers of the Bureau of Labor Statistics of the United States Department of Labor, all items, Selected Large Cities, for the New York - Northeastern New Jersey area (hereinafter called "the CPI") as published for the month of February 1989 and the denominator of which shall be the CPI published for the month of October 1984. 5.11.1 Effective March 1, 1994 and continuing for the next succeeding sixty (60) monthly payments the monthly fee as stated in Section 5.10 above shall be computed in the same manner as in Section 5.11 above except that the numerator of the fraction shall be the CPI published for the month of February 1994. 5.1.2 Effective March 1, 1999 and continuing throughout the remaining term of the Agreement, the monthly fee as stated in Section 5.10 above shall be computed in the same manner as in Section 5.11 above, except that the numerator of the fraction shall be the CPI published for the month of February 1999. 5.11.3 In computing the adjustments for the monthly fee stated in Section 5.10, in no event shall the monthly fee be less than the monthly fees payable during the year period immediately preceding." 7. The following words shall be inserted in the last sentence of Section 5.1 of the Agreement after the words "hereinafter provided"; 2 ",for the portion of the Space as shown in diagonal hatching on Exhibit A-1." 8. The following words shall be inserted after the words "the monthly fee" on the third line of the first sentence of Section 5.8 of the Agreement: "for the portion of the Space as shown in diagonal hatching on Exhibit A-1." 9. The following Subsections 16.1.1 and 16.1.2 shall be added to Section 16 of the Agreement: 16.1.2 Notwithstanding the above, the User agrees that Pan American will not grant the right of sub-use of the entire Space to a single entity or individual or to various entities or individuals controlled, represented or managed by a single entity or individual." 10. The following words shall be inserted after the words "Exhibits A-1, B and C" on the second line of the first sentence of Section 39.1 of the Agreement pursuant to the terms of Supplement No. 1: "and A-2" 11. Except as supplemented and amended herein, all of the covenants terms and conditions of the Agreement shall remain in full force and effect. 12. Neither the Directors of Pan American, its subsidiaries and affiliates, nor any of their officers, agents or employees thereof, shall be charged personally by the User with any liability or held liable to it under any term or provision of this Agreement, or because of its execution or attempted execution, or because of any breach or attempted or alleged breach thereof. 3 IN WITNESS WHEREOF, the parties hereto have executed these presents as of the day and year first above written. PAN AMERICAN WORLD AIRWAYS, INC. ATTEST: By /s/ Linda B. Young ------------------------------------ /s/ Illegible - ----------------------------- Title: Authorized Representative -------------------------------- ATLANTIC AVIATION CORPORATION ATTEST: By /s/ Illegible /s/ F.S. Eyster ------------------------------------ - ----------------------------- Title: VP GM -------------------------------- 4 CONSENT AGREEMENT THIS AGREEMENT, dated as of January 1, 1987 by and among THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (hereinafter called "the Port Authority") and PAN AMERICAN WORLD AIRWAYS, INC. (hereinafter called "the Airport Operator" and ATLANTIC AVIATION CORPORATION (hereinafter called "the User"), WITNESSETH, THAT: WHEREAS, the Port Authority and the Airport Operator have heretofore entered into an agreement dated September 19, 1967 (which agreement, as the same has been or may hereafter be supplemented and amended, is hereinafter called "the Main Agreement"), pursuant to which the Airport Operator is operating and using Teterboro Airport (hereinafter called "the Airport"); and WHEREAS, pursuant to and in accordance with the terms of the Main Agreement, the Airport Operator and the User have entered into a Use and Occupancy Agreement dated February 14, 1979 which Use and Occupancy Agreement has been designated TA-121; and WHEREAS, Pan American and User desire to supplement the above referenced Use and Occupancy Agreement, copy of which is attached hereto, made a part hereof and hereafter called "the Supplement," subject to the consent of the Port Authority and the execution of a Consent Agreement by and among the Airport Operator, the User and the Port Authority; and WHEREAS, the Port Authority, Pan American and the User entered into a Consent Agreement dated as of February 14, 1979 (hereinafter called "the Use and Occupancy Consent Agreement"), wherein the Port Authority gave its consent to the Use and Occupancy Agreement; NOW, THEREFORE, for and in consideration of the covenants and mutual agreements herein contained, the Port Authority, the Airport Operator and the User hereby agree effective as of January 1, 1987 as follows: 1. On the terms and conditions hereinafter set forth, the Port Authority consents to the Supplement. 2. It is hereby specifically agreed that all of the terms and provisions of the Use and Occupancy Consent Agreement shall apply with like effect to this consent to the Supplement as though each and every such term and such provision were incorporated herein. 3. Neither the Commissioners of the Port Authority nor any of them, nor any officer, agent or employee thereof shall be held personally liable to the Airport Operator or to the User under any term of provision of this Consent Agreement to the Supplement or because of its execution or because of any breach or alleged breach hereof. IN WITNESS WHEREOF, the Port Authority, the Airport Operator and the User have executed these presents. THE PORT AUTHORITY OF NEW YORK ATTEST: AND NEW JERSEY /s/ Illegible By: /s/ Gerald P. Fitzgerald - --------------------------- -------------------------------------- SECRETARY Title: Deputy Director of Aviation ----------------------------------- ATTEST: PAN AMERICAN WORLD AIRWAYS, INC. /s/ Illegible - --------------------------- By: /s/ Linda B. Young Secretary -------------------------------------- Linda B. Young Title: Authorized Representative ----------------------------------- Pan American World Airways, Inc. ATLANTIC AVIATION CORPORATION ATTEST: /s/ F.S. Eyster By: /s/ Illegible - --------------------------- -------------------------------------- Corporate Secretary Title: VP GM ----------------------------------- 2 Teterboro Airport Agreement TA-121 Supplement No. 3 SUPPLEMENTAL AGREEMENT THIS AGREEMENT, dated this 1st day of January, 1995 by and between JOHNSON CONTROLS WORLD SERVICES INC. (hereinafter called "Johnson Controls") a Florida corporation, and ATLANTIC AVIATION CORPORATION, a Delaware corporation (hereinafter called "the User"). WITNESSETH, THAT: WHEREAS, The Port Authority of New York and New Jersey (hereinafter called "the Port Authority") is the owner of Teterboro Airport located in the Boroughs of Teterboro, Moonachie and Hasbrouck Heights and in the Township of Lyndhurst, County of Bergen in the State of New Jersey; and WHEREAS, Johnson Controls is the operator of Teterboro Airport and has the right to operate and use the Airport as successor - assignee to an agreement between Pan American World Airways, Inc. ("Pan American") and the Port Authority dated September 19, 1967 ("Basic Agreement"); and WHEREAS, a Use and Occupancy Agreement, bearing file No. TA-121 and made effective as of February 14, 1979, was entered into between Pan American and the User for the use and occupancy of certain Space at Teterboro Airport (which Use and Occupancy Agreement as has heretofore been supplemented and amended is hereinafter referred to as "the Agreement"); and WHEREAS, the User desires to extend the area of use and occupancy covered under this Agreement. NOW, THEREFORE, in consideration of the mutual agreements and respective promises herein contained, and made by the parties hereto, the parties hereby agree, effective as of the date of this Supplemental Agreement, as follows: 1. Effective June 1, 1995, Johnson Controls here by grants to the User the right to use and occupy the additional area set forth as shown in stipple on Exhibit A-3, attached hereto and made a part hereof, together with all buildings, structures, improvements, additions and permanent installations constructed and installed therein or thereon during the reminder of the term of this Agreement (hereinafter to be deemed to be a part of the "Space"). 2. In addition to the Space set forth in diagonal hatching on Exhibit A-1 and the Space set forth in stipple on Exhibit A-2, from and after January 1, 1995, the Space set forth in cross hatching on Exhibit A-3 shall become part of the Agreement and subject to all terms, provisions and conditions of the Agreement. 3. The User agrees to use the portion of the Space outlined in cross hatching on Exhibit A-3 for the purpose of parking of automobiles and other vehicles operated by officers, employees, invitees and business visitors of the User and for no other purposes. 4. The following Subsections 5.12, 5.13 and 5.13.1 shall be added to Section 5 "Fees", of the Agreement 5.12 Effective 1, 1995 and continuing each and every month throughout the remaining term of the Agreement the User agrees to pay to Johnson Controls a monthly fee of Six Hundred Eighty Nine Dollars ($689.00) for the additional portion of the Space as shown in cross hatching on Exhibit A-3. The fee is in addition to that specified in Subsection 5.1 of the Agreement and 5.10 of Supplement No. 2 to the Agreement. 5.13 Effective March 1, 1999 and continuing throughout the remaining term of the Agreement, the monthly fee as stated in Subsection 5.12 above shall be Six Hundred Eighty Nine Dollars ($689.00) multiplied by a fraction the numerator of which shall be the CPI as published for the month of February 1999 and the denominator of which shall be the CPI published for the month of June 1993. 5.13.1 In computing the adjustments for the monthly fee stated in Subsection 5.12, in no event shall the monthly fee be less than the monthly fee payable during the year period immediately preceding. 5. The User hereby agrees to construct on the Space, as shown in cross hatching on Exhibit A-3, paving to accommodate the approved uses of said Space, together with the clearing and grading of the ground area contained within said Space and the installation on or in said Space such utilities as may be appropriate or necessary for the utilization of said Space for the permitted uses. 6. The User agrees to perform the construction stated in paragraph 5 above in accordance the requirements of Section 3 "Construction by User" of the Agreement, to submit a construction application and complete plans and specifications of such proposed construction and obtain Port Authority approval of the construction application prior to start of construction. 7. The following words shall be inserted after the words "Exhibits A-1, B and C and A-2" on the second line of the first sentence of Subsection 39.1 of the Agreement pursuant to the terms of Supplement No. 2: "and A-3" 8. Except as herein supplemented, all terms, provisions, covenants and conditions of the Agreement shall continue in full force and effect. 2 9. Neither the Directors of Johnson Controls, its subsidiaries and affiliates, nor any officers, agents, or employees thereof, shall be charged personally by the User with any liability or held liable to it under any term of provision of this Agreement, or because of its execution or attempted execution, or because of any breach or attempted or alleged breach thereof. IN WITNESS WHEREOF, the parties hereto have executed these presents as of the day and year first above written. ATTEST: JOHNSON CONTROLS WORLD SERVICES INC. /s/ Illegible By: /s/ Illegible - ----------------------------- ---------------------------------- Title: Illegible Title: Vice President - ----------------------------- -------------------------------- ATTEST: ATLANTIC AVIATION CORPORATION /s/ F.S. Eyster By: /s/ Illegible - ----------------------------- ---------------------------------- Title: Secretary Title: SR VP - ----------------------------- -------------------------------- 3 I, Franklin S. Eyster, II, certify that I am the Secretary of the corporation named in the attached agreement, that Joseph J. McShulkis who signed said authorized agreement on behalf of the corporation was then the Sr. Vice President of said corporation; that said, agreement was duly signed for and in behalf of said corporation by authority of its governing body, and is within the scope of its corporate powers. /s/ Franklin S. Eyster, II ------------------------------------ (Signature) (Corporate Seal) STATE OF DELAWARE ---------- COUNTY OF NEW CASTLE ---------- On this 26th day of April, One Thousand Nine Hundred and Ninety Five before me, Victoria A. Tait, a Notary Public in and for the County of New Castle, State of Delaware, duly commissioned and qualified, personally appeared Franklin S. Eyster, II, known to me to be the person described in and whose name is subscribed to the attached instrument, and acknowledged to me that he executed the instrument for the purposes and consideration therein stated. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my office seal, at my office the day and year in this certification first written above. By: /s/ Victoria A. Tait ----------------------------- My Commission Expires: August 27, 1998 - ----------------------------- Teterboro Airport Agreement TA-121 Supplement No. 3 CONSENT AGREEMENT THIS AGREEMENT, dated as of January 1, 1995 by and among THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (hereinafter called "the Port Authority") and JOHNSON CONTROLS WORLD SERVICES INC. (hereinafter called "the Airport Operator") and ATLANTIC AVIATION CORPORATION (hereinafter called "the User"), WITNESSETH, THAT: WHEREAS, the Port Authority and the Airport operator have heretofore entered into an agreement dated September 19, 1967 (which agreement, as the same has been or may hereafter be supplemented and amended, is hereinafter called "the Main Agreement"), pursuant to which the Airport Operator is operating and using Teterboro Airport (hereinafter called "the Airport"); and WHEREAS, pursuant to and in accordance with the terms of the Main Agreement, the Airport Operator and the User have entered into a Use and Occupancy Agreement made effective as of February 14, 1979 with the consent of the Port Authority (which consent was set forth in an agreement hereinafter called the "Consent Agreement") which Use and Occupancy Agreement has been designated TA-121; and WHEREAS, Airport Operator and User desire to supplement the above referenced Use and Occupancy Agreement, copy of which is attached hereto, made a part hereof and hereafter called "the Supplement," subject to the consent of the Port Authority and the execution of a Consent Agreement by and among the Airport Operator, the User and the Port Authority; and NOW, THEREFORE, for and in consideration of the covenants and mutual agreements herein contained, the Port Authority, the Airport Operator and the User hereby agree, effective as of the effective date of the Supplement, as follows: 1. On the terms and conditions hereinafter set forth, the Port Authority consents to the Supplement. 2. It is hereby specifically agreed that all of the terms and provisions of the Use and Occupancy Consent Agreement shall apply with like effect to this consent to the Supplement as though each and every such term and such provision were incorporated herein. 3. Neither the Commissioners of the Port Authority nor any of them, nor any officer, agent or employee thereof shall be held personally liable to the Airport Operator or the User under any term of provision of this Consent Agreement to the Supplement or because of its execution or because of any breach or alleged breach hereof. IN WITNESS WHEREOF, the Port Authority, the Airport Operator and the User have executed these presents. ATTEST: THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY /s/ Illegible By: /s/ Gary L. Davis - ----------------------------------- ---------------------------------- Title: Acting Secretary Title: Gary L. Davis --------------------------- General Manager Central Business Division Aviation Department ------------------------------- ATTEST: JOHNSON CONTROLS WORLD SERVICES INC. (Airport Operator) /s/ Illegible By: /s/ Illegible - ----------------------------------- ---------------------------------- Title: Illegible Title: Vice President --------------------------- ------------------------------- ATTEST: ATLANTIC AVIATION CORPORATION (USER) /s/ Illegible By: /s/ Illegible - ----------------------------------- ---------------------------------- Title: Illegible Title: SR VP --------------------------- ------------------------------- 2 CERTIFICATE OF OCCUPANCY Pursuant to the provisions of Section 3.6.14 of Use and Occupancy Agreement TA-121 (hereinafter referred to as the "Agreement") between Atlantic Aviation Corporation (hereinafter referred to as "Atlantic Aviation") and Pan American World Airways, Inc. (hereinafter referred to as "Pan American"); Pan American having received from Atlantic Aviation, in compliance with the aforesaid section of the Agreement, a Certificate of Substantial Completion of the construction work as part of said Agreement, and; Pan American having inspected said construction work and having found it completed as specified by Atlantic Aviation; Pan American does hereby permit use of the construction work for the purposes set forth in the Agreement. Notwithstanding the above, Atlantic Aviation assumes all risks hereafter with respect to the construction work and any liability therefor for negligence or other reason. PAN AMERICAN WORLD AIRWAYS, INC. By: /s/ John P. Kennedy ---------------------------------- Director Dated: July 31, 1981 --------- Teterboro Airport Agreement TA-121 Supplement No. 4 SUPPLEMENTAL AGREEMENT THIS AGREEMENT, dated this 18 day of May, 1999 by and between JOHNSON CONTROLS WORLD SERVICES INC. (hereinafter called "Johnson Controls"), a Florida corporation, and ATLANTIC AVIATION CORPORATION (hereinafter called "the User"), a Delaware corporation. WITNESSETH, THAT: WHEREAS, The Port Authority of New York and New Jersey (hereinafter called "the Port Authority") is the owner of Teterboro Airport (the "Airport") located in the Boroughs of Teterboro, Moonachie and Hasbrouck Heights and in the Township of Lyndhurst, County of Bergen in the State of New Jersey; and WHEREAS, Johnson Controls is the operator of the Airport and has the right to operate and use the Airport as successor - assignee to an agreement between Pan American World Airways, Inc. ("Pan American") and the Port Authority dated September 19, 1967 ("Basic Agreement"); and WHEREAS, a Use and Occupancy Agreement dated February 14, 1979 was entered into between Pan American and the User for the use and occupancy of certain Space at Teterboro Airport, bearing file No. TA-121 (which Use and Occupancy Agreement, as has heretofore been supplemented or amended, is hereinafter referred to as the "Agreement"); and WHEREAS, the User desires to construct and Johnson Controls desires to permit the User to construct a hangar facility at the Space provided for in the Agreement and in consideration of said construction extend the term of the Agreement, NOW, THEREFORE, in consideration of the mutual agreements and respective promises herein contained and made by the parties hereto, the parties hereby agree, effective as of June 1, 1999 (the "Effective Date" of this Supplement) unless otherwise stated, as follows: 1. Effective on May 31, 1999, Exhibits A-1, A-2 and A-3 to the Agreement shall be deemed deleted and of no further effect, and reference to "Exhibits A-1"," A-2" and "A-3" in the Agreement shall be deleted and substituted by the reference "Exhibit A-4." 2. Effective on June 1, 1999, the Space under the Agreement shall be the area set forth in hatching and cross hatching on Exhibit A-4, attached hereto and made a part hereof, together with all buildings, structures, improvements, additions and permanent installations constructed and installed or to be constructed and installed therein or thereon or thereunder during the remainder of the term of this Agreement (hereinafter collectively referred to as the "Space"). 3. The parties hereby agree that within six (6) months of the date of execution by the Port Authority of the Consent Agreement granting the Port Authority's consent to this Supplement No. 4 to the Agreement, the User shall, in accordance with subsection 3.3 of the Agreement, submit plans and specifications for the demolition of the facility currently on the Space in Area No. 1 known as Hangar 2 and the construction of a replacement facility consisting of a minimum of 30,000 square feet of aircraft hangar space to ether with approximately 7,500 square feet of adjoining office and shop space (hereinafter referred to as the "Construction Work") with a minimum investment of Four Million Dollars ($4,000,000.00). Upon approval by the Port Authority of said plans and specifications the User agrees to promptly commence performance of the construction work as provided for in Section 3 of the Agreement and to complete construction within one (1) year from the date of Port Authority approval. 4. The parties acknowledge that the Consent Agreement granting the Port Authority's consent to this Supplemental Agreement and the matters herein set forth shall provide that the expiration date of December 30, 1999, as referenced in Section 1, "Term" of the Agreement shall be changed to expire, unless sooner terminated as hereinafter provided or as provided for in the Consent Agreement, on the day before the Twentieth (20th) Year Anniversary of the Completion Date, as defined in subsection 3.6.14 of the Agreement and as amended by Paragraph 7 of this Supplemental Agreement, of construction as provided for in Paragraph 3 hereof. 5. Effective on December 30, 1999, the User's right to use and occupy the portion of the Space in Area 4 shall be terminated. 6. Subsection 3.2 of the Agreement shall be deleted in its entirety and the following substituted therefor: "3.2 The User agrees to complete the construction of the facility set forth in Paragraph 3 of Supplement No. 4 to the Agreement on or before twelve (12) months from the commencement of construction as set forth in subsection 3.4 below and Paragraph 3 of said Supplement, provided, however, the User shall not be held in default under this subsection in the event construction cannot be completed within the said time limit due to Force Majure." 7. Subsection 3.6.14 of the Agreement shall be deleted in its entirety and the following substituted therefor: "3.6.14 When the construction work on the new Hangar 2 facility is substantially completed and is ready for use by the User, the User shall advise Johnson Controls to such effect and shall deliver to Johnson Controls a certificate by an authorized officer of the User and the User's architect or engineer certifying that such construction work has been constructed strictly in accordance with the approved plans and specifications and the provisions 2 of the Agreement and Supplement No. 4 to the Agreement and in compliance with all applicable laws, ordinances and governmental rules, regulations and orders. Within thirty (30) days after receipt of said certificate from the User, such construction work will be inspected by Johnson Controls and if the same has been completed as certified by the User, a certificate to such effect shall be delivered to the User, subject to the condition that all risks thereafter with respect to the construction and installation of the same and any liability therefor for negligence or other reason shall be borne by the User. The User shall not use or permit the use of the construction work for the purpose set forth in this Agreement until such certificate is received from Johnson Controls. The date of delivery of the certificate by Johnson Controls shall constitute the Completion Date for the purposes of the Agreement." 8. The User hereby agrees to upgrade, improve and refurbish Hangar 3 located on the Space. The specific list of these upgrades, improvements and refurbishments (hereinafter referred to as the "Construction Work") are shown in Exhibit D, attached hereto and made a part hereof Said upgrades, improvements and refurbishments shall be done in accordance with Section 3 of the Agreement, have a cost of not less that Five Hundred Thousand Dollars ($500,000.00), and be completed within one (1) year of the Completion Date of the new Hangar 2 facility. 9. In the event that Taxiway P at the Airport is relocated, then, upon notice by Johnson Controls to the User that said Taxiway has been decommissioned, Area 3 as shown on Exhibit A-4 shall be added to and become part of the Space as herein defined. The User shall proceed expeditiously and with all reasonable diligence, in accordance with Section 3 of the Agreement, to pave and construct an aircraft parking ramp on said Area 3. 10. In the event that the Airport's administrative office is relocated and the existing structure is demolished, then, upon notice by Johnson Controls to the User that said building has been demolished, Area 2 as shown on Exhibit A-4 shall be added to and become part of the Space as herein defined. The User shall proceed expeditiously and with all reasonable diligence, in accordance with Section 3 of the Agreement, to construct an aircraft hangar facility consisting of a minimum of 30,000 square feet of aircraft hangar space together with approximately 7,500 square feet of adjoining office and shop space (hereinafter referred to as the "Construction Work") with a minimum investment of Four Million Dollars ($4,000,000.00) in accordance with plans and specifications to be submitted by the User to the Port Authority for its approval and in accordance with Section 3 of the Agreement. The User shall pay to Johnson Controls the then prevailing land use fee for Area 2, in addition to all other fees and charges. 3 11. The following subsections 5.14, 5.15, 5.16, 5.17, 5.18, 5.19 and 5.20 shall be added to Section 5 "Fees" of the Agreement: "5.14 Effective on the Effective Date of Supplement No. 4 to the Agreement and continuing until December 31, 1999, the User shall pay to Johnson Controls a total monthly fee of Seventy-eight Thousand Nine Hundred Ninety-three Dollars and Thirty-eight Cents ($78,993.38), as detailed on Exhibit E, attached hereto and made a part hereof. 5.14.1 Upon notice by the User to the Port Authority of the date that it has vacated and no longer using the existing structure known as Hangar 2 and is prepared to demolish it, the total monthly fee stated above shall be abated from and after said date by the then current building rental fee. 5.15 In the event that the construction set forth in Paragraph 3 of Supplement No. 4 of the Agreement is not completed in the time frame set forth therein and in subsection 3.2 above, as amended by Paragraph 6 of Supplement No. 4 of the Agreement, the User agrees to pay to Johnson Controls a surcharge equal to Nineteen Thousand Six Hundred Twenty-six Dollars and Forty-eight Cents ($19,626.48) representing one half (1/2) of the monthly land use fee as stated in subsection 5.14 above, for each month, or fraction thereof, that the completion of construction extends beyond the twelve (12) month time frame. This surcharge shall be in addition to all other fees and charges set forth in this Section. 5.16 In the event that Area 3 as shown on Exhibit A-4 becomes part of the Space prior to December 31, 1999, effective on the date of notice to such effect and continuing until December 31, 1999, the User shall pay to Johnson Controls a monthly land use fee of Thirty-five Thousand Nine Hundred Sixty-six Dollars and Forty Cents ($35,966.40). 5.17 Effective January 1, 2000 the User shall pay to Johnson Controls a total monthly fee for building space and land area in Area 1 determined as follows: a total base fee of One Hundred Ninety-five Thousand One Hundred Seven Dollars and Thirty-three Cents ($195,107.33) shall first be multiplied by a fraction, the numerator of which shall be the CPI as published for the month of December 1999 and the denominator of which shall be the CPI published for the month of December 1998 and the User shall pay the product thereof on January 1, 2000 and on the first day of each and every month thereafter. In computing the total monthly fee payable January 1, 2000 in no event shall the monthly fee be less than One Hundred Ninety-five Thousand One Hundred Seven Dollars and Thirty-three Cents ($195,107.33). 5.17.1 In the event that Area 3 as shown on Exhibit A-4 has become part of the Space, effective January 1, 2000 the User shall pay to Johnson Controls a total monthly fee for the land area in Area 3 determined as follows: a total 4 base fee of Thirty-five Thousand Nine Hundred Sixty-six Dollars and Forty Cents ($35,966.40) shall first be multiplied by a fraction, the numerator of which shall be the CPI as published for the month of December 1999 and the denominator of which shall be the CPI published for the month of December 1998 and the User shall pay the product thereof on January 1, 2000 and on the first day of each and every month thereafter. In computing the total monthly fee payable January 1, 2000 in no event shall the monthly fee be less than Thirty-five Thousand Nine Hundred Sixty-six Dollars and Forty Cents ($35,966.40). 5.17.2 Effective January 1, 2001 and annually thereafter the User shall pay to Johnson Controls a total monthly fee for building and land for Area 1 and Area 3, if then a part of the Space, equal to the greater of either the prior year's fee multiplied by a fraction, the numerator of which shall be the CPI as published for the month of December of the year prior to the affected year and the denominator of which shall be the CPI published for the month of December of two years prior to the affected year or the prior year's fee. In computing the total monthly fee payable in no event shall the monthly fee be less than the prior year's fee or increased by an amount greater than six percent (6 %). 5.18 Johnson Controls reserves the right, at its option, to perform a real estate appraisal of the User's Space in the year 2009. In the event that such an appraisal is performed, from and after January 1, 2010 the monthly fee payable by the User shall be the greater of either (i) one twelfth of the appraised building rate for Hangar 3 and Hangar 4 plus the appraised land rate for Area 1 and 3, if Area 3 is then a part of the Space or (ii) the December 2009 total monthly fee payable for Area 1 and 3 multiplied by a fraction the numerator of which shall be the CPI as published for the month of December 2009 and the denominator of which shall be the CPI published for the month of December 2008. In the event that the fee calculated in accordance with (ii) above is fifteen percent (15%) or higher than that calculated in accordance with (i) above, then the monthly fee payable effective January 1, 2010 would be the greater of (a) the fee payable January 2000 adjusted annually by 1/2 of the change in the CPI or (b) the rate calculated per (i) above. 5.18.1 In the event that a real estate appraisal of the User's Space is not performed in the year 2009, effective January 1, 2010 the User shall pay to Johnson Controls a total monthly fee for building and land for Area 1 and Area 3, if then a part of the Space, equal to the greater of either (i) the fee payable December 1, 2009 multiplied by a fraction, the numerator of which shall be the CPI as published for the month of December 2009 and the denominator of which shall be the CPI published for the month of December 2008 or (ii) the rate payable December 1, 2009. In computing the total monthly fee payable in no event shall the monthly fee be less than 5 the prior year's fee or increased by an amount greater than six percent (6%). 5.19 Effective January 1, 2011 and annually thereafter the User shall pay to Johnson Controls a total monthly fee for building and land for Area 1 and Area 3, if then a part of the Space, equal to the greater of (i) the prior year's fee multiplied by a fraction, the numerator of which shall be the CPI as published for the month of December of the year prior to the affected year and the denominator of which shall be the CPI published for the month of December of two years prior to the affected year, or (ii) the rate payable December of the prior year. In computing the total monthly fee payable in no event shall the monthly fee be less than the prior year's fee or increased by an amount greater than six percent (6%). 5.20 In the event that the term of the Agreement is extended beyond the twenty (20) year anniversary of the completion of the construction provided for in Paragraph 3 of Supplement No. 4 of the Agreement due to the later completion of the construction provided for in Paragraph 10 above, the User shall, from the day after the twentieth (20th) year anniversary of the Completion Date of the construction provided for in Paragraph 3 of Supplement No. 4 of the Agreement until the expiration of the term of the Agreement, pay to Johnson Controls a monthly building rental fee based upon the appraised building rate derived from a real estate appraisal performed of the facility, with the appraiser to be selected by the Port Authority. If an appraisal is not conducted the building rental fee will be determined using the prevailing rate for comparable space at the Airport or the existing rate increased by the CPI, whichever is higher. 5.20.1 Effective on the January 1st following the twentieth (20th) year anniversary of the Completion Date described in Paragraph 3 of Supplement No. 4 of the Agreement and annually thereafter, the User shall pay to Johnson Controls the monthly building rental fee stated above, multiplied by a fraction, the numerator of which shall be the CPI as published for the month of December of the year immediately preceding January 1 of the fee increase and the denominator of which shall be the CPI published for the month of December two years preceding. In computing the total monthly fee payable in no event shall the monthly fee be less than the year preceding." 12. In accordance with the construction required in Section 3 of the Agreement, the User hereby agrees to use its reasonable efforts to ensure that minority business enterprises (M.B.E.) and women-owned business enterprises (W.B.E.) as defined in 49 CFR Part 23 have the maximum opportunity to participate in said construction. The participation goal for M.B.E. and W.B.E. participation in the total contract price shall be twelve percent (12%) for firms owned and controlled by minorities and five percent (5%) for firms owned and controlled by women. 6 13. (a) The following Subsection 12.10 shall be added to Section 12 of the Agreement entitled "Various Obligations of the User": "12.10 The following terms shall have the following respective meanings as used herein: 12.10.1 "Environmental Damages" shall mean any one or more of the following: (i) the presence on, about or under the Space of any Hazardous Substance, as hereinafter defined, and/or (ii) the disposal, release or threatened release of any Hazardous Substance from the Space, and/or (iii) an Off-Space Hazardous Substance, as hereinafter defined, and/or (iv) any personal injury (including wrongful death) or property damage arising out of or related to such Hazardous Substances, and/or (v) the violation of any Environmental Requirements, as hereinafter defined, pertaining to such Hazardous Substances or Off-Space Hazardous Substances, the Space and/or the activities thereon. 12.10.2 "Environmental Requirements" and "Environmental Requirement" shall mean all applicable present and future laws, statues, enactments, resolutions, regulations, rules, ordinances, codes, licenses, permits, orders (including agreed upon consent orders), approvals, plans, authorizations, concessions, franchises, requirements and similar items, of all Governmental Agencies, and all applicable judicial, administrative, and regulatory decrees, judgments, and orders relating to the protection of human health or the environment, and in the event that there shall be more than one compliance standard, as among the various Governmental Agencies, the standard for any of the foregoing to be that which requires the lowest level of a Hazardous Substance taking into account the nature and intended use of the Space, the foregoing to include without limitation: (a) All requirements pertaining to reporting, licensing, permitting, investigation and remediation of emissions, discharges, releases, or threatened releases of Hazardous Substances into the air, surface water, groundwater, or land, or relating to the manufacture, processing, distribution, use treatment, storage, disposal, transport, or handling of Hazardous Substances; and (b) All Environmental Requirements pertaining to the protection of the health and safety of employees or the public. 12.10.3 "Hazardous Substances" and "Hazardous Substance" shall mean and include without limitation any pollutant, contaminant, toxic or hazardous waste, dangerous substance, potentially dangerous substance, noxious substance, toxic substance, flammable, explosive or radioactive material, urea formaldehyde foam insulation, asbestos, polychlorinated biphenyls (PCBs), chemicals known to cause cancer or reproductive toxicity, 7 petroleum and petroleum products and other substances which have been or in the future shall be declared to be hazardous or toxic, or the removal of which have been or in the future shall be required, or the manufacture, preparation, production, generation, use, maintenance, treatment, storage, transfer, handling or ownership of which have been or in the future shall be restricted, prohibited, regulated or penalized by any Environmental Requirement. 12.10.4 "Off-Space Hazardous Substance" shall mean the presence of any Hazardous Substance in, about or under property at the Airport other than the Space as a result of the User's use and occupancy of the Space, whether by migration, release, discharge or any other manner, it being understood that the User shall have the burden of proof to establish that any migration of a Hazardous Substance from the Space was not a result of the User's use and occupancy of the Space. (b) The User, prior to the execution of this Agreement, had thoroughly examined the Space and determined it to be suitable for the User's operations hereunder and the User restates and continues said determination in connection with the extension hereunder. Except as otherwise provided herein, the User hereby agrees to assume all responsibility for any and all risks, costs and expenses of any kind whatsoever caused by, arising out of or in connection with the condition of the Space whether any aspect of such condition existed prior to, on or after the effective date of the letting of the Space, including, without limitation, all Environmental Requirements and Environmental Damages, as herein defined and all soil remediation to the extent required under Environmental Requirements, including but not limited to, remediation which may be required as a result of discovery of any contaminants while performing test borings or in the performance of any construction work, and to indemnify and hold harmless the Port Authority and Johnson Controls with respect to third party claims for Section 8 of this Agreement, as amended. Notwithstanding the foregoing, the User shall be responsible for the removal of and remediation of Hazardous Substances placed, or permitted or caused to be placed, on, in or under the Space by the User or by its employees, agents, contractors, or others using or occupying the Space under this Agreement. 14.0. Port Authority's Additional Rights to Recapture or Accommodate Others on Portions of User's Ramp Space The User acknowledges that the Airport serves the transportation needs of the public and that the Public Aircraft Facilities should be utilized to the fullest extent possible with airport users afforded fair and reasonable access. The User also acknowledges that the following subsections provide that if the User does not utilize its facilities to the level set forth in stated performance criteria such underutilized facilities may be either recaptured by the Port Authority or required to be offered by the User to another user in accordance with the following: 8 14.1. It is hereby agreed that, commencing either one year after the effective date of the addition of Area 3 to the Space, or January 1, 2002, whichever occurs earlier and which will be known as the "Start Date", and for each and every calendar year thereafter, the Port Authority may ascertain the User's percentage share (hereinafter referred to as the "User's Current Fuel Share") of the total aircraft fuel gallons sold (hereinafter referred to as "Total Current Fuel Dispensed") at the Airport for the preceding calendar year. The fuel dispensed by the User for the year preceding the Start Date and the year preceding each and every calendar year thereafter during which such calculation is made shall be known as the "User's Current Fuel Dispensed". The User's Current Fuel Share shall be calculated by dividing the User's Current Fuel Dispensed by the Total Current Fuel Dispensed preceding the year during which such calculation is made. The User's Current Fuel Share for calendar year 1998 shall hereinafter be defined as "the Base Year Fuel Share" and is shown below:
Teterboro Airport User Fuel Share in 1998 - ----------------------------------------------- ------------------ Atlantic Aviation Corporation 17.8% First Aviation Services, Inc. 16.5% Jet Aviation of America, Inc. 34.4% General Aviation Aircraft Services, Inc. (doing 17.0% business as Million Air-Teterboro Signature Flight Support-New Jersey, Inc. 14.3
14.2. As of the Start Date and as of January 1 of each succeeding calendar year, in the event that the User's Current Fuel Share for the respective preceding calendar year is determined to be at least twelve and one-half percent (12.5%) less than the User's Base Year Fuel Share, the Port Authority shall have the right but not the obligation, upon two (2) month's written notice to the User, to require the User and the User hereby agrees to make ramp space in Area 3 (hereinafter called "Accommodation Space") available to other users, sub-users or the Port Authority in useable increments as directed by the Port Authority in the manner and amount and to the extent set forth below:
Percentage of the User's Current Fuel Share Divided by Ramp Space to be Made User's Base Year Fuel Share Available in Area 3 - ----------------------------------- --------------------- 87.5% (12.5% reduction or greater) Up to 20.0% of Total 75.0% (25% reduction or greater) Up to 50.0% of Total 50.0% (50% reduction or greater) Up to 100.0% of Total
14.3. In the event the User is so notified by the Port Authority it shall either (a) enter into a sub-use and occupancy agreement with another user as determined by the Port Authority or (b) enter into a surrender agreement as directed by the Port Authority. Any such sub-use and occupancy agreement shall be subject to the prior and continuing approval of the Port Authority and the execution by and among the User, the Sub-user, the Airport Operator, and the Port Authority of a Consent Agreement in form satisfactory to the Port Authority. Moreover, and 9 without limiting the forgoing, the User shall provide any and all information to the Airport Operator as may be requested by the Airport Operator from time to time as to all aspects of its accommodation of a Sub-user hereunder. Nothing contained herein shall in any way affect the discretion of the Airport Operator or the Port Authority in granting or withholding its consent to a sub-use and occupancy agreement. 14.4. The failure of the Port Authority to exercise its right under this Section during any year in which it may have such a right shall not affect, waive or limit its rights to exercise such right in any subsequent year during any period of underutilization. In no event will the Accommodation Space exceed the percentages set forth above. 14.5. The User shall make such ramp space available during the period set forth in the aforesaid notice. The Port Authority shall consider a request by the User to restore the Accommodation Space to the User when the User's Current Fuel Share shall have returned to within twelve and one-half percent (12.5%) or less of the User's Base Year Fuel Share, provided the Accommodation Space is not then covered by a sub-use or other agreement or at such other time as the Port Authority deems it is in the best interest of the Airport to restore the Accommodation Space to the User. 14.6. The User agrees that all handling, sublease, sub-use and occupancy agreements shall be reasonable and at non-discriminatory rates, fees and charges and shall be based on the recovery by the User of a pro rata share of the User's costs of (1) operation and maintenance, (2) services provided, and (3) the User's fees and investment in the Accommodation Space. 15.0. Construction Payments -- In the event that the User seeks Port Authority financing for construction of any of the hangars or other improvements the following will apply. 15.1. (a) The following terms as used in this Agreement shall have the respective meanings given below: (1) "Accrued Amount" shall mean the monthly amount, calculated on the last day of each calendar month, equal to the product obtained by multiplying the daily average of the Construction Payment Amount, as hereinafter defined, during such month by the decimal .006875, for each month during the period commencing on the first Construction Payment Date and ending on the day preceding the Additional Rental Commencement Date. (2) "Construction Commencement Date" shall mean the first date any contractor of the User enters upon any portion of the Space to perform any portion of the Construction Work. 10 (3) "Construction Costs" shall mean the following costs actually paid by the User to the extent that the inclusion of the same is permitted by sound accounting practices consistently applied; (i) amounts actually paid to independent contractors for work actually performed and labor actually furnished and materials actually delivered in connection with the performance of the Construction Work; and (ii) amounts actually paid in connection with the Construction Work for engineering, architectural, professional and consulting services, construction management and supervision of construction provided, however, payments under this paragraph (a) (3) (ii) shall not exceed fifteen percent (15 %) of the amounts paid under paragraph (a) (3) (i); provided and to the extent that such work is performed by the User in accordance with all the terms and provisions of (i) this Agreement and (ii) the final Construction Application(s) (including the final plans and specifications) as approved by the Port Authority pursuant to Section 3.3 of the Agreement. Notwithstanding the foregoing, the Construction Costs shall not include: (i) the costs of Construction Work which although performed pursuant to an approved plan or specification is not incorporated in the final plans and specifications as approved by the Port Authority or the cost of altering such Construction Work; or (ii) any amounts paid for or in connection with any trade fixtures or other personal property of the User. (4) "Construction Payment" shall mean each payment made by the Port Authority to the User for Construction Costs. (5) "Construction Payment Amount" shall mean the aggregate amount of all Construction Payments made by the Port Authority to the User at any time during the term of this Agreement pursuant to paragraph (b) of this Paragraph 15 of Supplement No. 4 to the Agreement together with the Accrued Amount accumulated thereon. (6) "Construction Payment Date" shall mean the date upon which each Construction Payment is made pursuant to the Paragraph. 11 (7) "Final Date" shall mean the last day of the twelfth month following the month in which the certificate of the User is delivered to the Port Authority pursuant to Section 3.6.14 of the Agreement. (b) The Port Authority shall reimburse the User for Construction Costs, subject to and in accordance with the terms and provisions hereinafter set forth. (1) On the twentieth day of the calendar month following the month in which the Construction Commencement Date occurs, and on the twentieth day of each calendar month thereafter up to and including the calendar month following the Final Date, the User shall deliver to the Port Authority a certificate which shall be signed by a responsible fiscal office of the User, sworn to before a notary public, and shall: (i) certify the amounts of actual payments made by the User and the amounts actually due and payable from the User to its independent contractors for work actually performed and labor and materials actually furnished for the Construction Work; (ii) certify the amounts of actual payments made by the User and the amounts due and payable from the User in connection with the Construction Work for engineering, architectural, professional, consulting services, construction management and supervision of construction; (iii) certify all due and payable amounts included by the User in previous certificates against which a Construction Payment has been made by the Port Authority to the User and which have been paid by the User since the submission of each such previous certificate, and shall have attached there to or included therein such verification as shall be required by the Port Authority, that such amounts have been paid; (iv) certify the total cumulative payments made by the User from the commencement of the Construction Work to the date of each certificate; (v) contain a representation by the User that the User will apply the Construction Payment only against expenses actually incurred as Construction Costs and for no other purpose whatsoever; (vi) certify that the amounts, payments and expenses therein set forth constitute Construction Costs; 12 (vii) certify that the work for which payment is requested has been accomplished, that the amounts requested have been paid or are due and payable to the User's contractors, and, subject to the concurrence of the Port Authority, that such work is in place and has a value of not less than the amount requested to be paid; (viii) certify that each portion of the Construction Work covered by such certificate has been performed in accordance with the terms of this Agreement; (ix) have attached thereto reproduction copies or duplicate originals of the invoices of such independent contractors and other persons (whether such invoices are paid or unpaid) and for such invoices which have been paid, an acknowledgement by such independent contractors and other persons of the receipt by them of such amounts and payments; and (x) contain such further information and documentation with respect to the User's costs as the Port Authority may from time to time require, which information, documentation and certification shall be given on such forms as may be adopted by the Port Authority. (2) In addition to the foregoing, the User shall furnish to the Port Authority information concerning Construction Costs and timing of the performance of the Construction Work as may be requested by the Port Authority from time to time and at any time, including but not limited to, the following: (i) The User's original detailed Construction Costs projections, accompanied by a certification signed by an independent engineering consultant or independent licensed architect, to the effect that the Construction Costs projections submitted by the User are accurate, and that the same represent reasonable prices for the work in question. (ii) Reports of the full-time resident engineer or licensed architect and reports of the User's chief architect, which reports or log must contain reports as to activity conducted in connection with the Construction Work for each and every day that such activity occurred from the commencement of the work to the date of submission; 13 (iii) A certification signed by the User's architect or architects certifying the value of work in place, both on and off the site; and (iv) Accurate, readable and complete copies of all change orders, extra work authorizations, design change authorizations and purchase orders in connection with the Construction Work. (3) The User shall mark as "final" its final certificate covering the Construction Work, which certificate, with respect to amounts withheld by the User which have been deducted from a Construction Payment and which have subsequently been paid by the User, shall have attached thereto or included thereon such verification as shall be required by the Port Authority that such withheld and deducted amounts have been paid by the User and to the extent such withheld and deducted amounts have been so paid, such withheld and deducted amounts shall be included in the amount of the final Construction Payment. After submitting such final certificate the User shall submit no further certificate hereunder. (c) Subject to the provisions of subparagraphs (c) (1) through (c) (4) hereof, within thirty (30) days after the delivery of duly submitted certificates by the User satisfying in full the requirements set forth of this Paragraph, the Port Authority shall pay to the User the amounts paid by the User as certified in such certificates, to the extent that such amounts or any portion thereof have not theretofore been included in any Construction Payment. (1) In the event this Agreement is not in full force and effect, or the User shall be under a notice of termination of the use of the Space under this Agreement, or in default under any term or provision hereof, the Port Authority shall have the right, in its discretion, to withhold the payment of any Construction Payment to the User, provided, further, no payment or withholding of a Construction Payment shall be or be deemed to be a waiver of any rights of the Port Authority with respect to the termination of the use of the Space under this Agreement, or to a default by the User under any term or provision therefore, or to the withholding or payment of future Construction Payments, or with respect to any determination as to the usability of any item of work. (2) It is hereby understood and agreed that nothing in this Section shall be or be deemed to be for the benefit of any contractor of the User. (3) It is further understood that at the election of the Port Authority no payment will be made if the Port Authority's inspection or audit 14 does not substantiate the contents of any such certificate and until such matters have been resolved to the satisfaction of the Port Authority, but the Port Authority shall have no obligation to conduct any such inspection or audit. (4) No Construction Payment shall be made by the Port Authority to the User until all due and payable amounts included on all previously submitted certificates have been paid by the User and the payment thereof verified to the satisfaction of the Port Authority (unless such amounts are being withheld by the User and the amount so withheld shall have been deducted from the amount of a Construction Payment). (d) If for any reason the construction of the Construction Work or any portion thereof is not performed in accordance with the terms and provisions of (i) this Agreement, and (ii) the Construction Application(s) (including the final plans and specifications) as finally approved by the Port Authority, it is understood and agreed that the Port Authority shall not be obligated to make any Construction Payments nor shall the Construction Payment Amount include any amount for such work or any costs in connection with the removal, restoration, modification, correction or change required to cause such work to comply with such terms and provisions, and in the event that the Port Authority shall have made a Construction Payment for such work, the Port Authority shall have the right to withhold and credit future Construction Payments against any such amount or upon demand of the Port Authority, the User shall pay to the Port Authority the amount of any such Construction Payment or portion thereof covering such work. (e) The entire obligation of the Port Authority under this Agreement for Construction Costs shall be limited in amount to a total sum of Twelve Million Dollars and No Cents ($12,000,000.00), and limited in time to Construction Costs adequately documented and covered by certificates of the User submitted in accordance with subparagraph (b) of this Paragraph no later than the Final Date. (f) The User shall promptly submit to the Port Authority further information, including but not limited to its estimate of the amounts and times of the various payments it will be making for Construction Costs as the Port Authority may from time to time, and at any time, request, and shall be available itself or cause its architect or engineer to be available for consultation in connection with payment certificates submitted pursuant to subparagraph (b) of this Paragraph. (g) Without limiting any other provision of this Agreement, the Port Authority shall have the right at any time and from time to time by its agents, employees and representatives to audit and inspect during regular business hours the books, records and other data of the User relating to the cost of 15 the Construction Work, it being understood that the Port Authority shall not be bound by any prior audit conducted by it. The User agrees to keep such books, records and other data within the Port of New York District. The User shall maintain such books, records and other data for five (5) years after the User has delivered the certificate marked "final" called for under subparagraph (b) above. (h) If the User has included in any portion of the cost of the Construction work any item as having been incurred, but which in the opinion of the Port Authority was not so incurred, or which in the opinion of the Port Authority was not so incurred is not an item properly chargeable to such element of cost under sound accounting practice, or does not represent an appropriate division of the costs of a particular contract which are required to be designated according to time of performance or delivery, and the parties have been unable to resolve their differences within 90 days after the Port Authority gave its notice objecting to the same, the Port Authority's decision as to the nature of the items in question shall be final. (i) Any payment by the Port Authority which may exceed the limitation set forth in subparagraph (a) (3) (ii) shall be promptly refunded to the Port Authority upon demand. Further, in connection with the limitation set forth in subparagraph (a) (3) (ii), of this Paragraph, it is agreed that such limitation shall not be applied for the purpose of calculating the amount of a Construction Payment until the User has submitted the final certificate as hereinbefore provided, at which time such fifteen percent limitation shall be applied). 16. Additional Rental 16.1. These paragraphs related to Additional Rental are only used when the User accepts Port Authority advances for construction payments. 16.1.1 The following terms as used in this Agreement shall have the respective meanings given below: (1) "Monthly Additional Rental Commencement Date" shall mean the earlier occurring of (i) January 1, 2002 or (ii) the first day of the month following the month during which the Completion Date, as defined as the date a certificate of occupancy has been issued occurs. (2) "Monthly Additional Rental Factor" shall mean the factor or factors derived in accordance herewith from time to time by the application of the following formula: 0.006875 --------------------------- 1 = Additional Rental Factor -------------------- 1- (1.006875)degrees 16 Where n (a power) equals the number of calendar months (expressed in whole numbers) from the Monthly Additional Rental Commencement Date to the expiration date of the Agreement. (3) The term "Accrued Amount" shall mean the monthly amount, calculated on the last day of each calendar month, equal to the product obtained by multiplying 0.004375 and the amount of the Construction Investment Amount (including any previously calculated Accrued Amount) during said month, for each month during the period commencing on the first Construction Advance Date and ending on the day preceding the Monthly Additional Rental Commencement Date. (4) The term "the Reimbursement Amount" shall mean the period commencing on the Monthly Additional Rental Commencement Date and ending on the expiration date of the Agreement. (5) The "Monthly Additional Rental Period" shall mean the period commencing on the Monthly Additional Rental Commencement Date and ending on the expiration date of the Agreement. 16.1.2 The User shall pay to the Port Authority a Monthly Additional Rental as follows: (1) Commencing on the Monthly Additional Rental Commencement Date, the User shall pay to the Port Authority a Monthly Additional Rental which shall be an amount determined for and payable on the first day of each and every calendar month occurring during the Monthly Additional Rental Period equal to the product obtained by multiplying the Reimbursement Amount by the Monthly Additional Rental Factor. (2) (i) In the event the Monthly Additional Rental Commencement Date shall precede the Final Date and the Port Authority shall make a Construction Advance or Construction Advances to the User on or after the Monthly Additional Rental Commencement Date (each such payment being a part of the Construction Advance Amount and being herein called a "Subsequent Construction Advance"), then, with respect to each such Subsequent Construction Advance, a Monthly Additional Rental Factor shall be calculated using the formula set forth in item (2) of subparagraph (a) hereof where n (a power) shall equal the number of calendar months (expressed in whole numbers) from the date of each such Subsequent Construction Advance if such date be the first day of a calendar month, or if not then the first day of the following calendar month, to the expiration date of the Agreement. (ii) As a part of the payment of Monthly Additional Rental due as provided in this subparagraph (b) and in addition to the foregoing, the User shall pay to the Port Authority on the first day of each and every 17 calendar month during the Monthly Additionally Rental Period subsequent to the payment of each Subsequent Construction Advance, an amount equal to the product obtained by multiplying (A) the amount of each Subsequent Construction Advance and (B) the Monthly Additional Rental Factor applicable to said Subsequent Construction Advance; such amount to be payable as a part of the Monthly Additional Rental payments to be made hereunder and to be deemed a part thereof for all purposes of the Agreement. (iii) As a part of the payment of Monthly Additional Rental due as provided in this subparagraph (b) and in addition to the foregoing, the User shall pay to the Port Authority an amount equal to the product obtained by multiplying (A) the amount of each Subsequent Construction Advance made on other than the last day of a month, and (B) the number of days in the period from the date of such Subsequent Construction Advance is made to and including the last day of the calendar month in which such Subsequent Construction Advance is made; and (C) the quotient derived from dividing 0.006875 by 30; such amount to be payable as part of the Monthly Additional Rental payment due on the first day of the month following the month in which such Subsequent Construction Advance is made. 16.1.3 In the event that a Port Authority audit shall disclose that the User has expended Construction Costs which total less than the total of all Construction Advances made to the User hereunder up to the time of such audit then, upon demand of the Port Authority, the User shall immediately pay to the Port Authority an amount equal to the difference between the amounts expended by the User as disclosed by the Port Authority audit and the aforesaid amount of the total of all Construction Advances made to the User and effective from and after such date of payment the Construction Advance Amount shall be reduced by the amount of such payment and the Monthly Additional Rental payable by the User adjusted appropriately hereunder. 17. The Port Authority may advance funds to the User for the construction of hangars. If Port Authority funds are provided to the User a security deposit in the form of any of the following will need to be provided: Cash, Letter of Credit, Treasury Bonds, Treasury Notes. The bonds can be issued by any of the following: States of New Jersey or New York or the Port Authority of New York and New Jersey. Security will be in the amount of one million dollars ($1,000,000) for each hangar to be constructed. If two hangars are being constructed simultaneously one million dollars will need to be provided to the Port Authority for each hangar for which funding is being provided. If the hangars are being constructed consecutively (only one is being constructed at a time), the one million dollar security from the first hangar can be rolled over to be used for the second. The security is only required during the construction period until a certificate of occupancy has been issued. 18 18. Except as herein supplemented, all terms, provisions, covenants and conditions of the Agreement shall continue in full force and effect. 19. No director, officer, agent, employee, shareholder, principal, parent, subsidiary or affiliate of any party hereto shall be charged personally or held contractually liable by or to the other party under any term or provision of this Supplemental Agreement, or because of its execution or attempted execution, or because of any breach or attempted or alleged breach thereof. Notwithstanding the foregoing, the person or persons executing this Supplemental Agreement on behalf of Johnson Controls and the User respectively represent that such person is authorized to execute this Supplemental Agreement. 19 IN WITNESS WHEREOF, the parties hereto have executed these presents as of the day and year first above written. ATTEST: JOHNSON CONTROLS WORLD SERVICES INC. /s/ Laura Conner By: /s/ C.R. Borders - -------------------------------- ---------------------------- Title: Illegible Title: Vice President -------------------------- ------------------------- ATTEST ATLANTIC AVIATION CORPORATION /s/ Victoria A. Tait By: /s/ R.N. Fitzgerald - -------------------------------- ---------------------------- Title: Secretary Title: President -------------------------- ------------------------- 20 I, Victoria A. Tait, certify that I am the Secretary of the corporation named in the attached agreement, that Raymond N. Fitzgerald who signed said authorized agreement on behalf of the corporation was then the President of said corporation; that said agreement was duly signed for and in behalf of said corporation by authority of its governing body, and is within the scope of its corporate powers. /s/ Victoria A. Tait ------------------------------------ Victoria A. Tait (Corporate Seal) STATE OF DELAWARE COUNTY OF NEW CASTLE On this 19th day of May, One Thousand Nine Hundred and Ninety Nine (1999) before me, Kathleen A. Stansell, a Notary Public in and for the County of New Castle, State of Delaware, duly commissioned and qualified, personally appeared Raymond N. Fitzgerald, known to me to be the person described in and whose name is subscribed to the attached instrument, and acknowledged to me that he executed the instrument for the purposes and consideration therein stated. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my office seal, at my office the day and year in this certification first written above. /s/ Kathleen A. Stansell ---------------------------------------- Kathleen A. Stansell Notary Public My Commission Expires: February 13, 2001 THIS AGREEMENT SHALL NOT BE BINDING UPON JOHNSON CONTROLS UNTIL DULY EXECUTED BY AN EXECUTIVE OFFICER THEREOF AND DELIVERED TO THE USER BY AN AUTHORIZED REPRESENTATIVE OF JOHNSON CONTROLS Use and Occupancy Agreement No. TA-121 SURRENDER AGREEMENT THIS SURRENDER AGREEMENT, dated as of August 1, 1999, by and between JOHNSON CONTROLS WORLD SERVICES INC. (hereinafter called "Johnson Controls") and ATLANTIC AVIATION CORPORATION (hereinafter called the "User"); WITNESSETH, That: WHEREAS, The Port Authority of New York and New Jersey (hereinafter called the "Port Authority") is the owner of Teterboro Airport (hereinafter called the "Airport") located in the Boroughs of Teterboro, Moonachie and Hasbrouck Heights and in the Township of Lyndhurst, County of Bergen in the State of New Jersey; and WHEREAS, Johnson Controls is the operator of the Airport and has the right to operate and use the Airport as successor - assignee to an agreement bearing file No. TA-204 and dated September 19, 1967 between Pan American World Airways, Inc. ("Pan American") and the Port Authority (hereinafter called the "Basic Agreement"); and WHEREAS, a Use and Occupancy Agreement, bearing file No. TA-121 and dated February 14, 1979 was entered into between Johnson Controls and the User for the use and occupancy of certain Space at the Airport (which Use and Occupancy Agreement is hereinafter called "the Agreement"); and WHEREAS, the User, upon receipt of notice (hereinafter called the "Notice") from the Port Authority within two (2) years of the date hereof that the Port Authority or the current operator of the Airport has entered into an agreement with the then-current user of Hangar No. 1 at the Airport covering, among other things, the incorporation of the surrendered space, as hereinafter defined, in the Port Authority's agreement with said user of Hangar No. 1 covering its operations at the Airport, agrees to terminate its occupancy of certain portions of the Space under the Agreement consisting of a total of approximately 7,813 square feet of outside ground area designated Area 1A and Area 3A on the drawing attached hereto, hereby made a part hereof and marked "Exhibit A-4," said portions being hereinafter collectively called "the surrendered space," and to surrender the same to Johnson Controls effective as of 11:59 o'clock P.M. on the date set forth in the Notice, which hour and date are hereinafter, for purposes of Paragraphs 1 through 4 hereof, collectively called "the effective date;" and Page 1 WHEREAS, Johnson Controls is willing to accept such surrender on the terms and conditions hereinafter set forth; and WHEREAS, the parties desire to amend the Agreement in certain other respects as hereinafter set forth; NOW, THEREFORE, for and in consideration of the mutual covenants and agreements hereinafter set forth, it is hereby agreed by and between Johnson Controls and the User to amend the Agreement, effective as of August 31, 1999, as follows: 1. Upon receipt by the User of the Notice from the Port Authority to surrender the surrendered space, as herein before set forth, the User shall grant, bargain, sell, surrender and yield up and does by these presents grant, bargain, sell, surrender and yield up unto Johnson Controls, its successors and assigns, forever, the surrendered space and the term of years with respect thereto under the Agreement yet to come and give, grant and surrender and by these presents does give, grant and surrender to Johnson Controls, its successors and assigns, all the rights, rights of renewal, licenses, privileges and options of the User granted by the Agreement with respect to the surrendered space, all to the intent and purpose that the said term under the Agreement and the said rights of renewal, license, privileges and options may be wholly merged, extinguished and determined on the effective date, with the same force and effect as if the said term were in and by the provisions of the Agreement originally fixed to expire on the effective date; TO HAVE AND TO HOLD the same unto Johnson Controls, its successors and assigns forever. 2. The User hereby covenants on behalf of itself, its successors and assigns that (a) it has not done or suffered and will not do or suffer anything whereby the surrendered space, or the User's rights therein, have been or shall be encumbered as of the effective date in any way whatsoever, (b) the User is and will remain until the effective date the sole and absolute owner of the rights, rights of renewal, licenses, privileges and options granted by the Agreement with respect thereto and that the same are and will remain until the effective date free and clear of all liens and encumbrances of whatsoever nature created or suffered by the User; and (c) the User has full right and power to make this Agreement. 3. All promises, covenants, agreements and obligations of the User with respect to the surrendered space, under the Agreement or otherwise, which under the provisions thereof would have matured upon the date originally fixed in the Agreement for the expiration of the term thereof, or upon the termination of the Agreement prior to the said date, or within a stated period after expiration or termination, shall notwithstanding such provisions, mature upon the effective date and shall survive the execution and delivery of this Agreement. 4. The User does by these presents release and discharge Johnson Controls from any and all obligations of every kind, past, present or future on the part of Johnson Controls to be performed under the Agreement with respect to the surrendered space. Johnson Controls does by these presents release and discharge the User from any and all obligations on the part of the User to be performed under the Agreement with respect to the surrendered space for that Page 2 portion of the term subsequent to the effective date; it being understood that nothing herein contained shall release, relieve or discharge the User from any liability for fees or for other charges that may be due or become due to Johnson Controls for any period or periods prior to the effective date, or for breach of any other obligation on the User's part to be performed under the Agreement for or during such period or periods or maturing pursuant to Paragraph 3 above; it being further understood that nothing herein contained shall release, relieve or discharge Johnson Controls from any liability for breach of any obligation on the part of Johnson Controls to be performed under the Agreement for or during such period or periods. 5. From and after the effective date, fees for the Space under the Agreement shall be appropriately abated in accordance with the terms thereof. 6. Each party represents and warrants to the other that no broker has been concerned in the negotiation of this Surrender Agreement or the surrender hereunder and that there is no broker who is or may be entitled to be paid a commission in connection therewith. Each party shall indemnify and save harm-less the other of and from any and all claims for commission or brokerage made by any and all persons, firms or corporations whatsoever as a result of the indemnifying party's actions for services in connection with the negotiation and execution of this Surrender Agreement or the surrender hereunder. 7. Neither the directors of Johnson Controls nor any of them, nor any officer, agent or employee thereof, shall be charged personally by the User with any liability, or held liable to it under any term or provision of this Surrender Agreement, or because of its execution or attempted execution or because of any breach thereof. 8. As hereby amended, all of the terms, covenants, provisions, conditions and agreements of the Agreement shall be and remain in full force and effect. 9. This Surrender Agreement and the Agreement which it amends constitute the entire agreement between Johnson Controls and the User on the subject matter, and may not be changed, modified, discharged or extended except by instrument in writing duly executed on behalf of Johnson Controls and the User. The User agrees that no representations or warranties shall be binding upon Johnson Controls unless expressed in writing in the Agreement or this Surrender Agreement. Page 3 IN WITNESS WHEREOF, Johnson Controls and the User have executed and sealed these presents as of the date first written above. ATTEST: JOHNSON CONTROLS WORLD SERVICES INC. /s/ Illegible By /s/ C.R. Borders - -------------------------------- ----------------------------- Vice President (Title) Vice President (Corporate Seal) ATTEST: ATLANTIC AVIATION CORPORATION /s/ Victoria A. Tait By /s/ R.N. Fitzgerald - -------------------------------- ----------------------------- Secretary (Title) President (Corporate Seal) Page 4 STATE OF FLORIDA ) ) ss. COUNTY OF BREVARD ) On this 12th day of October, 1999, before me, the subscriber, a Notary Public, personally appeared Charles R. Borders, the Vice President of JOHNSON CONTROLS WORLD SERVICES INC. who I am satisfied is the person who has signed the within instrument; and I having first made known to him the contents thereof, he did acknowledge that he signed, sealed with the corporate seal and delivered the same as such officer aforesaid and that the within instrument is the voluntary act and deed of such corporation, made by virtue of the authority of its Board of Directors. /s/ Denise E. Minacapelli ------------------------------- (notarial seal and stamp) STATE OF DELAWARE ) ) ss. COUNTY OF NEW CASTLE ) On this 11th day of October, 1999, before me, the subscriber, a Notary Public, personally appeared RN Fitzgerald the President of ATLANTIC AVIATION CORPORATION who I am satisfied is the person who has signed the within instrument; and I having first made known to him the contents thereof, he did acknowledge that he signed, sealed with the corporate seal and delivered the same as such officer aforesaid and that the within instrument is the voluntary act and deed of such corporation, made by virtue of the authority of its Board of Directors. /s/ Kathleen A. Stansell ------------------------------- (notarial seal and stamp) CONSENT AGREEMENT THIS AGREEMENT, dated as of October 15, 1999 by and among THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (hereinafter called "the Port Authority") and JOHNSON CONTROLS WORLD SERVICES INC. (hereinafter called the "Airport Operator") and ATLANTIC AVIATION CORPORATION (hereinafter called "the User"), WITNESS, THAT: WHEREAS, the Port Authority and the Airport Operator have heretofore entered into an agreement dated September 19, 1967 (which agreement, as the same has been or may hereafter be supplemented and amended, is hereinafter called "the Main Agreement"), pursuant to which the Airport Operator is operating and using Teterboro Airport (hereinafter called "the Airport") and; WHEREAS, pursuant to and in accordance with the terms of the Main Agreement, the Airport Operator and the User entered into a Use and Occupancy Agreement dated February 14, 1979 with the consent of the Port Authority (which consent was set forth in an agreement hereinafter called the "Consent Agreement") which Use and Occupancy Agreement has been designated TA-121 and hereinafter called "TA-121"; and WHEREAS, the Airport Operator and the User desire to execute a Surrender Agreement which calls for the User, under certain conditions, to surrender a portion of the Space associated with TA-121. A copy of which Surrender Agreement is attached hereto, made a part hereof and hereafter called "the Surrender Agreement", subject to the consent of the Port Authority and the execution of a Consent Agreement by and among the Airport Operator, the User and the Port Authority. NOW, THEREFORE, for and in consideration of the mutual agreements herein contained, the Port Authority, the Airport Operator and the User hereby agree effective as of the Effective Date of the Surrender Agreement as follows: 1. On the terms and conditions hereinafter set forth, the Port Authority consents to the Surrender Agreement. 2. (a) If the Main Agreement shall terminate (whether through the expiration of its term or by earlier termination as provided in the Main Agreement) before the expiration date of the two year period identified in the Surrender Agreement, if the User is in occupancy of and using the "surrender space" identified in the Surrender Agreement, the Surrender Agreement will be terminated. Under these conditions, the User is obligated to enter into another surrender agreement with the Port Authority or a successor airport operator selected by the Port Authority with the same terms and conditions of the Surrender Agreement, and with such additional terms as may be necessary or appropriate. 3. Neither this Consent Agreement, nor anything contained herein nor the consent granted hereunder shall constitute or be deemed to constitute a Page 1 consent to nor shall they create an inference or implication that there has been consent to any enlargement, variation or change in the rights, powers and privileges granted to the Airport Operator under the Main Agreement, nor consent to the granting or conferring of any rights, powers or privileges to the User as may be provided by TA-121 if not granted to the Airport Operator under the Main Agreement, nor shall the same impair or change any of the duties, liabilities and obligations imposed on the Airport Operator under the Main Agreement. The Surrender Agreement is an agreement between the Airport Operator and the User with respect to the various matters set forth therein. Neither this Consent Agreement nor anything contained herein nor the consent granted hereunder shall constitute an agreement between the Port Authority and the Airport Operator that the provisions of Surrender Agreement shall apply and pertain as between the Airport Operator and the Port Authority, it being understood that the terms, provisions, covenants, conditions and agreements of the Main Agreement shall, in all respects, be controlling, effective and determinative. The specific mention of or reference to the Port Authority in any part of Surrender Agreement, including, without limitation thereto, any mention of any consent or approval of the Port Authority now or hereafter to be obtained, shall not be or be deemed to create an inference that the Port Authority has granted its consent or approval thereto under this Consent Agreement or shall thereafter grant its consent or approval thereto or that the subject matter as to which the consent or approval applies has been or shall be approved or consented to in principle or in fact or that the Port Authority's discretion pursuant to the Main Agreement as to any such consents or approvals shall in any way be affected or impaired. The lack of any specific reference in any provisions of the Surrender Agreement to Port Authority approval or consent shall not be deemed to imply that no such approval or consent is required and the Main Agreement shall, in all respects, be controlling, effective and determinative. 4. The granting of the consent hereunder by the Port Authority shall not be or be deemed to operate as a waiver of consent to any subsequent agreement with respect to the use or occupancy of space at the Airport (by the Airport Operator or by the User) or to any assignment of the Main Agreement or TA-121 or of any rights under either of them, whether in whole or in part. 5. Reference herein to the User shall mean and include the User, its officers, agents, employees and also others on the Space covered by TA-121 or elsewhere on the Airport with the consent of the User. 6. Neither the Commissioners of the Port Authority nor any of them, nor any officer, agent or employee thereof shall be held personally liable to the Airport Operator or to the User under any term of provision of this Consent Agreement or because of its execution or because of any breach or alleged breach hereof. Page 2 IN WITNESS WHEREOF, the Port Authority, the Airport Operator and the User have executed these presents. ATTEST THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY /s/ Illegible By: /s/ R. Kelly - -------------------------------- --------------------------------- Assistant Secretary Title: Aviation Director ATTEST JOHNSON CONTROLS WORLD SERVICES INC. /s/ Illegible By: /s/ C.R. Borders - -------------------------------- --------------------------------- Title: Vice President Title: Vice President ATTEST ATLANTIC AVIATION CORPORATION /s/ Victoria A. Tait By: /s/ R.N. Fitzgerald - -------------------------------- --------------------------------- Title: Secretary Title: President Page 3 STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) On the 15th day of October, in the year 1999, before me, the undersigned, a Notary Public in and for said state, personally appeared Robert J. Kelly personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument. /s/ Karen E. Eastman ---------------------------------- (notarial seal and stamp) STATE OF FLORIDA ) ) ss. COUNTY OF BREVARD ) On this 12th day of October, 1999, before me, the subscriber, a Notary Public, personally appeared Charles R. Borders the Vice President of JOHNSON CONTROLS WORLD SERVICES INC., who I am satisfied is the person who has signed the within instrument; and I having first made known to him the contents thereof, he did acknowledge that he signed, sealed with the corporate seal and delivered the same as such officer aforesaid and that the within instrument is the voluntary act and deed of such corporation, made by virtue of the authority of its Board of Directors. /s/ Denise E. Minacapelli ---------------------------------- (notarial seal and stamp) STATE OF DELAWARE ) ) ss. COUNTY OF NEW CASTLE ) On this 11th day of October, 1999, before me, the subscriber, a Notary Public, personally appeared RN Fitzgerald the President of ATLANTIC AVIATION CORPORATION, who I am satisfied is the person who has signed the within instrument; and I having first made known to him the contents thereof he did acknowledge that he signed, sealed with the corporate seal and delivered the same as such officer aforesaid and that the within instrument is the voluntary act and deed of such corporation, made by virtue of the authority of its Board of Directors. /s/ Kathleen A. Stansell ---------------------------------- (notarial seal and stamp) DELEGATION OF AUTHORITY In accordance with the authority granted by the General Delegation Resolutions of Johnson Controls World Services Inc. (the "Company"), as modified by the Resolutions adopted at that certain meeting of the Board of Directors of the Company held on December 19, 1989, I, Mark C. Filteau, hereby delegate to C. Robert Borders, Vice President (Acting) the authority to act on my behalf with respect to matters related to the Airport Management Services Division of the Company and Teterboro Airport, including the authority to sign the following documents related thereto: General correspondence Payroll Notifications in accordance with Company policy Contractual Agreements for supplies and services not exceeding $100,000. *Teterboro Airport Use and Occupancy Agreement for tenants and modifications thereto. *Permits to conduct business at Teterboro Airport and modifications and amendments thereto. *Licenses as may be required for activities at Teterboro Airport. *Consent Agreements. *FAA Reimbursement Documentation *Subject to the terms of the Teterboro Operating Agreement executed between Pan American World Airways, Inc. and the Port of New York Authority dated September 19, 1967, which may require the consent of the Port Authority. This Delegation of Authority is valid from July 1, 1996 through March 31, 1999, unless earlier rescinded by the writer. JOHNSON CONTROLS WORLD SERVICES INC. BY: /s/ Mark C. Filteau ------------------------------------------------- Mark C. Filteau, Vice President, Federal Services DATE: 12-23-98 CERTIFICATION I, Robert M. Carter, hereby certify that I am the Secretary of Johnson Controls World Services Inc. (the "Company"); that Mark C. Filteau, who executed the above Delegation of Authority, is the Vice President of the Company and has been authorized by the General Delegation Resolutions, as modified by the Resolutions of the Board of Directors adopted on December 19, 1989, to delegate the authority to execute in the name of and on behalf of the Company certain documents further described above; and, that said Resolutions have not been revoked, canceled, modified or superseded, to date. BY: /s/ Robert M. Carter ------------------------------------------------- Robert M. Carter, Secretary DATE: 12-23-98 SEAL THIS SUPPLEMENT SHALL NOT BE BINDING UPON THE PORT AUTHORITY UNTIL DULY EXECUTED BY AN EXECUTIVE OFFICER THEREOF AND DELIVERED TO THE USER BY AN AUTHORIZED REPRESENTATIVE OF THE PORT AUTHORITY Teterboro Airport Agreement TA-121 Supplement No. 5 SUPPLEMENTAL AGREEMENT THIS AGREEMENT, dated this 23rd day of August, 2000 by and between THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (hereinafter called the "Port Authority") and ATLANTIC AVIATION CORPORATION, a corporation organized under the laws of the State of Delaware (hereinafter called the "User"), WITNESSETH, THAT: WHEREAS, The Port Authority of New York and New Jersey (hereinafter called "the Port Authority") is the owner of Teterboro Airport located in the Boroughs of Teterboro, Moonachie and Hasbrouck Heights and in the Township of Lyndhurst, County of Bergen in the State of New Jersey; and WHEREAS, Johnson Controls World Services Inc. (hereinafter called "Johnson Controls") is the operator of Teterboro Airport and has the right to operate and use the Airport as successor - assignee to an agreement between Pan American World Airways, Inc. (hereinafter called "Pan American") and the Port Authority dated September 19, 1967 (hereinafter called the "Basic Agreement"); and WHEREAS, a Use and Occupancy Agreement, bearing file No. TA-121 and made effective as of February 14, 1979, was entered into between Pan American and the User for the use and occupancy of certain Space at Teterboro Airport (which Use and Occupancy Agreement is hereinafter referred to as "the Agreement"); and WHEREAS, Johnson Controls and the Port Authority intend to terminate the Basic Agreement effective as of the Termination Date, as hereinafter defined; and WHEREAS, effective from and after the Termination Date the Port Authority will be the operator of the Airport and now desires, together with the User, to provide for the continuation of the Agreement and the substitution of the Port Authority in the place and stead of Johnson Controls as the Airport Operator under the Agreement; NOW, THEREFORE, in consideration of the mutual agreements and respective promises herein contained and made by the parties hereto, the parties hereby agree, as of the date first set forth above, as follows: 1. The parties hereby agree that if, as and when the Basic Agreement shall expire or be terminated, the Port Authority shall notify the User of the effective date thereof, with such date set forth in said notice being herein referred to as the "Effective Date." From and after the Effective Date, the term of the Agreement shall continue as provided in the Agreement with the Port Authority as the Airport Operator thereunder, with the Port Authority succeeding to all the rights and obligations of Johnson Controls under the Agreement from and after the Termination Date. The obligations and liabilities of Johnson Controls to the User arising under the Agreement prior to the Termination Date shall be and remain the obligations and liabilities of Johnson Controls and the Port Authority shall have no responsibility therefore. 2. As between the Port Authority and the User, this substitution of the Port Authority shall not in any way whatsoever affect or impair the liability of Johnson Controls to the User or to the Port Authority to perform all the terms, provisions and conditions of the Agreement on the part of Johnson Controls to be performed, for the period from the effective date of the Agreement to and including the Termination Date and the obligation to comply with all requirements of the Port Authority and appropriate federal, state and local governmental agencies arising from any environmental condition of the Space. 3. From and after the Termination Date, the Port Authority shall assume all the rights, obligations and duties of Johnson Controls under the Agreement as well as the performance of, and does hereby agree to perform, all the terms, provisions and conditions of the Agreement on the part of the Airport Operator thereunder to be performed. The execution of this instrument by the Port Authority does not constitute a representation by it that Johnson Controls has performed or fulfilled every obligation required by the Agreement; as to such matters the User agrees to look solely to Johnson Controls. 4. No provision of the Agreement, including but not limited to, those imposing obligations on the User with respect to laws, rules, regulations, taxes, assessments and liens, shall be construed as a submission or admission by the Port Authority that the same could or does lawfully apply to the Port Authority, nor shall the existence of any provision of the Agreement covering actions which shall or may be undertaken by the User or the Airport Operator, including but not limited to, construction on the Space covered by the Agreement, be deemed to imply or infer that Port Authority consent or approval thereto has been or shall be given or that Port Authority discretion with respect thereto will in any way be affected or impaired. References in this paragraph to specific matters and provisions shall not be construed as indicating any limitation upon the rights of the Port Authority with respect to its discretion as to matters and provisions in the Agreement which are not specifically referred to herein. 5. Except as otherwise provided herein, during the remainder of the term of the Agreement all the terms, provisions, covenants and conditions of the Agreement shall be and continue in full force and effect. 6. Neither the Commissioners of the Port Authority nor any of them, nor any officer, agent or employee thereof, shall be charged personally by the User with any liability, or held liable to it under any term or provision of this Supplemental Agreement, or because of its execution or attempted execution or because of any breach thereof. -2- 7. This Supplemental Agreement and the Agreement which it amends constitute the entire agreement between the Port Authority and the User on the subject matter, and may not be changed, modified, discharged or extended except by instrument in writing duly executed on behalf of both the Port Authority and the User. IN WITNESS WHEREOF, the parties hereto have executed these presents as of the day and year first above written. ATTEST THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY /s/ Illegible By: /s/ Francis A. Dimola - -------------------------------- -------------------------------- Secretary Title: Assistant Director ATTEST ATLANTIC AVIATION CORPORATION /s/ T.W. Crawley By: /s/ R.N. Fitzgerald - -------------------------------- -------------------------------- Title: President (Corporate Seal) -3- STATE OF NEW JERSEY ) ) ss. COUNTY OF ) On this 4th day of December, 2000, before me, the subscriber, a notary public of New York, personally appeared Francis A. Dimola, the Assistant Dir. Aviation Dept of The Port Authority of New York and New Jersey, who I am satisfied is the person who has signed the within instrument; and, I having first made known to him the contents thereof, he did acknowledge that he signed, sealed with the corporate seal and delivered the same as such officer aforesaid and that the within instrument is the voluntary act and deed of such corporation made by virtue of the authority of its Board of Commissioners.. /s/ Mary Ann Grossu ---------------------------------- (notarial seal and stamp) STATE OF DELAWARE ) ) ss. COUNTY OF NEW CASTLE ) On this 3rd day of November, 2000, before me, the subscriber, a Notary Public, personally appeared Raymond N. Fitzgerald, the President of Atlantic Aviation Corporation, who I am satisfied is the person who has signed the within instrument; and, I having first made known to him the contents thereof, he did acknowledge that he signed, sealed with the corporate seal and delivered the same as such officer aforesaid and that the within instrument is the voluntary act and deed of such corporation, made by virtue of the authority of its Board of Directors. /s/ Victoria A. Tait ---------------------------------- (notarial seal and stamp) EX-10.16 12 y97636exv10w16.txt SHARE PURCHASE AGREEMENT EXHIBIT 10.16 Dated 30 April 2004 MACQUARIE LEASING (UK) LIMITED and MACQUARIE BANK LIMITED and MACQUARIE LUXEMBOURG WATER SARL SHARE PURCHASE AGREEMENT Linklaters One Silk Street London EC2Y 8HQ Telephone (44-20) 7456 2000 Facsimile (44-20) 7456 2222 Ref John Goodwin TABLE OF CONTENTS
CONTENTS PAGE 1 Interpretation........................................................................ 1 2 Agreement to Sell the Shares.......................................................... 4 3 Consideration......................................................................... 5 4 Closing............................................................................... 5 5 Warranties............................................................................ 6 6 Limitation of Seller's Liability...................................................... 7 7 Claims................................................................................ 9 8 Guarantee and indemnity............................................................... 10 9 Confidentiality....................................................................... 13 10 Other Provisions...................................................................... 14 Schedule 1 The Company and the Subsidiaries............................................. 22 Schedule 2 The Seller's Closing Obligations (Clause 4).................................. 23 Schedule 3 Warranties given by the Seller under Clause 5.1.............................. 24 Schedule 4 (Clause 5.1.4)............................................................... 29 Schedule 5 (Clause 5.2)................................................................. 30 Schedule 6 (Clause 5.7) Warranties given by the Purchaser............................... 31 Schedule 7 Warranties given by the Seller under Clause 10.15............................ 32
i SHARE PURCHASE AGREEMENT THIS AGREEMENT is made on 30 April 2004 BETWEEN: (1) MACQUARIE LEASING (UK) LIMITED a company incorporated in England whose registered office is at Level 30, 1 Ropemaker Street, London EC2Y 9HD (the "SELLER"); (2) MACQUARIE BANK LIMITED a company incorporated in Australia (acting through its London branch at Level 30, CityPoint, 1 Ropemaker Street, London EC2Y 9HD) (the "GUARANTOR"); and (3) MACQUARIE LUXEMBOURG WATER SARL a company incorporated In Luxembourg whose registered office is at 5, rue Guillaume Kroll - BP2501, L-1025 Luxembourg (the "PURCHASER"). WHEREAS: (A) The Seller has agreed to sell the Shares (as defined below) and to assume the obligations imposed on the Seller under this Agreement. (B) The Purchaser has agreed to purchase the Shares and to assume the obligations imposed on the Purchaser under this Agreement. (C) The Guarantor has agreed to guarantee the Seller's obligations under this Agreement. IT IS AGREED AS FOLLOWS: 1 INTERPRETATION In this Agreement, unless the context otherwise requires, the provisions in this Clause 1 apply: 1.1 DEFINITIONS "BARCLAYS CONSENT" means the consent dated 6 April 2004 of Barclays Bank PLC, pursuant to the Bridge Facility, in relation to the issue by the Company of the New Loan Notes and related matters; BRIDGE FACILITY means the facility agreement dated 1 October 2003 made between inter alia, Barclays Bank PLC and the Company for the loan of (pound)359,000,000 on the terms referred to therein for the purposes therein mentioned; "BUSINESS DAY" means a day which is not a Saturday, Sunday or a public holiday in England or Luxembourg; "CALL OPTION" has the meaning given in Clause 10.15; "CLOSING" means the completion of the sale of the Shares pursuant to Clause 4; "CLOSING DATE" means the date Closing occurs; "CLOSING DOCUMENTS" has the meaning given in Schedule 2; "COMPANY" means Macquarie Water (UK) Limited, details of which are set out In Schedule 1; 1 "DEED OF SUBORDINATION" means the deed of subordination to be entered into by the Purchaser, the Company and Barclays Bank PLC, relating to the New Loan Notes; "DISCLOSURE SCHEDULE" means Schedule 5 to this Agreement; "ENCUMBRANCE" means any claim, charge, mortgage, lien, option, equity, power of sale, hypothecation, retention of title, right of pre-emption, right of first refusal or other third party right or security interest of any kind or an agreement, arrangement or obligation to create any of the foregoing; "EXISTING LOAN NOTE INSTRUMENT" means the loan note instrument dated 1 October 2003 pursuant to which the Company issued the Existing Loan Notes; "EXISTING LOAN NOTES" means the loan notes issued by the Company to the Guarantor pursuant to the Existing Loan Note Instrument; "GROUP" means the Group Companies, taken as a whole; "GROUP COMPANIES" means the Company and the Subsidiaries and "GROUP COMPANY" means any one of them; "LOAN NOTE REPAYMENT" means the proposed repayment by the Company to the Guarantor of (pound)41,680,500 nominal of the Existing Loan Notes on the Closing Date; "LOSSES" means all losses, liabilities, costs, charges, expenses, actions, proceedings, claims and demands; "NEW LOAN NOTE INSTRUMENT" means the instrument to be entered into on or about Closing between the Company and the Purchaser for the issue of the New Loan Notes; "NEW LOAN NOTES" means (pound)41,680,500 nominal of loan notes to be issued by the Company to the Purchaser on Closing in accordance with Clause 4.2.2 and Schedule 2 and on the terms of the New Loan Note Instrument; "PRE-CLOSING DIVIDEND" means the dividend of(pound)2.6 million paid by the Company on 7 April 2004; "PURCHASER'S GROUP" means the Purchaser, its subsidiaries and subsidiary undertakings, any holding company of the Purchaser and all other subsidiaries or subsidiary undertakings of any such holding company from time to time; "RETAINED SHARES" means the 13,819,500 ordinary shares in the capital of the Company legally and beneficially owned by the Seller and not being sold by the Seller to the Purchaser pursuant to this Agreement; "SELLER'S GROUP" means the Seller, its subsidiaries and subsidiary undertakings, any holding company of the Seller and all other subsidiaries or subsidiary undertakings of any such holding company from time to time (but excluding members of the Group); "SELLER'S WARRANTIES" means the warranties and representations given by the Seller pursuant to Clause 5 and Schedule 3 and, if applicable, pursuant to Clause 10.15.7 and Schedule 7 and "SELLER'S WARRANTY" means any one of them; "SHARES" means 41,680,501 ordinary shares of(pound)1 each in the capital of the Company; "SUBORDINATED LOAN AGREEMENT" means the subordinated loan agreement dated 7 April 2004 between the Company and the Guarantor in respect of the funds required to pay the Pre-Closing Dividend; 2 "SUBSIDIARIES" means the subsidiaries listed in paragraph 2 of Schedule 1 and "SUBSIDIARY" means any one of them; "TAXATION" or "TAX" means all forms of taxation whether direct or indirect and whether levied by reference to income, profits, gains, net wealth, asset values, turnover, added value or other reference and statutory, governmental, state, provincial, local governmental or municipal impositions, duties, contributions, rates and levies (including without limitation social security contributions and any other payroll taxes), whenever and wherever imposed (whether imposed by way of a withholding or deduction for or on account of tax or otherwise) and in respect of any person and all penalties, charges, costs and interest relating thereto; "TAX AUTHORITY" means any taxing or other authority competent to impose any liability in respect of Taxation or responsible for the administration and/or collection of Taxation or enforcement of any law in relation to Taxation; and "VAT" means United Kingdom Value Added Tax. 1.2 MODIFICATION ETC. OF STATUTES References to a statute or statutory provision include: 1.2.1 that statute or provision as from time to time modified, re-enacted or consolidated whether before or after the date of this Agreement; 1.2.2 any past statute or statutory provision (as from time to time modified, re-enacted or consolidated) which that statute or provision has directly or indirectly replaced; and 1.2.3 any subordinate legislation made from time to time under that statute or statutory provision, except to the extent that any statute, statutory provision or subordinate legislation made or enacted after the date of this Agreement would create or increase a liability of the Seller or the Purchaser under this Agreement. 1.3 SINGULAR, PLURAL, GENDER References to one gender include all genders and references to the singular include the plural and vice versa. 1.4 REFERENCES TO PERSONS AND COMPANIES References to: 1.4.1 a person include any company, partnership or unincorporated association (whether or not having separate legal personality); and 1.4.2 a company shall include any company, corporation or any body corporate, wherever incorporated. 1.5 REFERENCES TO SUBSIDIARIES AND HOLDING COMPANIES The words "HOLDING COMPANY" and "SUBSIDIARY" and shall have the same meaning in this Agreement as their respective definitions in the Companies Act 1985. 3 1.6 CONNECTED PERSONS A person shall be deemed to be connected with another if that person is connected with such other within the meaning of Section 839 of the Income and Corporation Taxes Act 1988 and "Connected Person" shall be construed accordingly. 1.7 SCHEDULES ETC. References to this Agreement shall include any Recitals and Schedules to it and references to Clauses and Schedules are to Clauses of, and Schedules to, this Agreement. References to paragraphs and Parts are to paragraphs and Parts of the Schedules. 1.8 HEADINGS Headings shall be ignored in interpreting this Agreement. 2 AGREEMENT TO SELL THE SHARES 2.1 AGREEMENT On and subject to the terms of this Agreement, the Seller agrees to sell, and the Purchaser agrees to purchase, the Shares. 2.2 FREE FROM ENCUMBRANCE The Shares shall be sold by the Seller with full title guarantee free from Encumbrances and together with all rights and advantages attaching to them as at Closing (including, without limitation, the right to receive all dividends or distributions declared, made or paid on or after Closing). 2.3 PRE-EMPTION ETC. The Seller shall procure that on or prior to Closing any and all rights of pre-emption over the Shares are waived irrevocably by the persons entitled thereto. 3 CONSIDERATION 3.1 AMOUNT The consideration for the purchase of the Shares under this Agreement shall be an amount in cash equal (pound)41,680,501. 3.2 REDUCTION OF CONSIDERATION If any payment is made by the Seller to the Purchaser in respect of any claim for any breach of this Agreement, including pursuant to any of the Seller's Warranties, the payment shall so far as practicable be made by way of adjustment of the consideration paid by the Purchaser for the Shares (and, if the Call Option is exercised, the Retained Shares) under this Agreement and the consideration shall be deemed to have been reduced by the amount of such payment. 4 CLOSING Closing shall take place immediately following execution of this Agreement. On Closing: 4.1 the Seller shall comply with its obligations In Schedule 2; and 4 4.2 the Purchaser shall (against compliance by the Seller with Clause 4.1): 4.2.1 pay to the Seller the consideration specified in Clause 3.1; 4.2.2 subscribe at par for(pound)41,680,500 in nominal amount of New Loan Notes; and 4.2.3 enter into the Deed of Subordination. 5 WARRANTIES 5.1 THE SELLER'S WARRANTIES 5.1.1 Subject to Clause 5.2, the Seller warrants and represents to the Purchaser that the statements set out in Schedule 3 are true and accurate and not misleading as of the date of this Agreement. 5.1.2 The Seller acknowledges that the Purchaser has entered into this Agreement in reliance upon the Seller's Warranties. 5.1.3 Each of the Seller's Warranties shall be separate and independent and shall not be limited by reference to any other paragraph of Schedule 3 (or, as applicable, Schedule 7) or by anything in this Agreement. 5.1.4 Any Seller's Warranty qualified by the expression "to the best of the Seller's knowledge, information and belief" or any similar expression shall, unless otherwise stated, be deemed to refer to the knowledge of the persons whose names and addresses are set out in Schedule 4 who shall be deemed to have knowledge of such matters as they would have discovered, had they made reasonable enquiries of the Managing Director, the Director of Finance and Investment, the Company Secretary and the Legal Manager of Southern Utilities (Holdings) Limited. 5.2 SELLER'S DISCLOSURES The Seller's Warranties are subject to the matters fairly disclosed in the Disclosure Schedule. 5.3 THE SELLER'S WAIVER OF RIGHTS AGAINST THE GROUP Save in the case of fraud, the Seller undertakes to the Purchaser for itself and as trustee for the Group Companies and their respective directors, officers and agents to waive any rights, remedies or claims which it may have in respect of any misrepresentation, inaccuracy or omission in or from any information or advice supplied or given by the Group Companies or their respective directors, officers or agents in connection with assisting the Seller in the giving of any Seller's Warranty or the preparation of the Disclosure Schedule. 5.4 EFFECT OF CLOSING The Seller's Warranties and all other provisions of this Agreement, to the extent that they have not been performed by Closing, shall not be extinguished or affected by Closing, by completion of the transfer of any Retained Shares pursuant to Clause 10.15 or by any other event or matter, except by a specific and duly authorised written waiver or release by the Purchaser. 5 5.5 BREACH OF ACQUISITION DOCUMENTS 6 In the event that the Purchaser or any holding company or subsidiary of the Purchaser becomes aware of any contravention or non-compliance by any Vendor Party of any Acquisition Document (each such term as defined in paragraph 7.2 of Schedule 3) or of any matter or circumstance which could entitle a claim to be made against a Vendor Party pursuant to the Acquisition Documents, then the Purchaser or (as applicable) its holding company or subsidiary shall be entitled, in its absolute discretion, to take such action as it shall deem necessary to pursue such claim but shall, so far as practicable, consult with the Seller before taking any such action. 5.6 PURCHASER'S WARRANTIES The Purchaser warrants and represents to the Seller that the statements in Schedule 6 are true and accurate and not misleading as of the date of this Agreement. 6 LIMITATION OF SELLER'S LIABILITY 6.1 TIME LIMITATION FOR CLAIMS The Seller shall not be liable in respect of any claim for breach of any Seller's Warranty in respect of any claim unless a notice of the claim is given by the Purchaser to the Seller within, in the case of the Seller's Warranties in Schedule 3, two years of the Closing Date and, in the case of the Seller's Warranties in Schedule 7, two years of the date of the relevant transfer of Retained Shares pursuant to Clause 10.15. Any claim notified by the Purchaser to the Seller pursuant to this Clause shall specify the matters set out in Clause 7.2. 6.2 MINIMUM CLAIMS 6.2.1 The Seller shall not be liable in respect of any individual claim (or a series of claims arising from substantially identical facts or circumstances) for breach of any Seller's Warranty where the liability agreed or determined (disregarding the provisions of this Clause 6.2) in respect of any such claim or series of claims does not exceed (pound)50,000. 6.2.2 Where the liability agreed or determined in respect of any such claim or series of claims exceeds (pound)50,000, subject as provided elsewhere in this Clause 6, the Seller shall be liable for the amount of the claim or series of claims as agreed or determined. 6.3 AGGREGATE MINIMUM CLAIMS 6.3.1 The Seller shall not be liable in respect of any claim for breach of any Seller's Warranty unless the aggregate amount of all claims for which the Seller would otherwise be liable for breach of any Seller's Warranty (disregarding the provisions of this Clause 6.3) exceeds (pound)500,000. 6.3.2 Where the liability agreed or determined in respect of all claims referred to in Clause 6.3.1 exceeds (pound)500,000 subject as provided elsewhere in this Clause 6, the Seller shall be liable for the aggregate amount of all claims as agreed or determined. 6.4 MAXIMUM LIABILITY The aggregate liability of the Seller in respect of all breaches of the Seller's Warranties shall not exceed the aggregate of the consideration paid for the Shares pursuant to Clause 7 3.1 and, if the Call Option is exercised pursuant to Clause 10.15, the consideration paid for the relevant Retained Shares pursuant to Clause 10.15. 6.5 MATTERS ARISING SUBSEQUENT TO THIS AGREEMENT The Seller shall not be liable for breach of any Seller's Warranty in respect of any matter to the extent that the same would not have occurred but for: 6.5.1 any matter or thing done or omitted to be done pursuant to and in compliance with this Agreement or otherwise at the request in writing or with the approval in writing of the Purchaser; 6.5.2 the passing of, or any change in, after Closing, any law, rule, regulation or administrative practice of any government, governmental department, agency or regulatory body including (without prejudice to the generality of the foregoing) any increase in the rates of Taxation or any imposition of Taxation or any withdrawal of relief from Taxation not actually (or prospectively) in effect at the date of Closing; 6.5.3 any change after Closing of any generally accepted interpretation or application of any legislation; or 6.5.4 any change in accounting or Taxation policy, bases or practice of the Purchaser or any of the Group Companies introduced or having effect after Closing. 6.6 RECOVERY FROM THIRD PARTIES FOLLOWING RECOVERY FROM THE SELLER If the Seller has paid an amount in discharge of any claim for breach of any Seller's Warranty and the Purchaser or any Group Company is entitled to recover (whether by payment, discount, credit, relief, insurance or otherwise) from a third party a sum which indemnifies or compensates the Purchaser or Group Company (in whole or in part) in respect of the loss or liability which is the subject matter of the claim, the Purchaser shall, or shall procure that the relevant Group Company shall, pay to the Seller as soon as practicable after receipt an amount equal to (i) any sum recovered from the third party less any costs and expenses incurred in obtaining such recovery less any Taxation attributable to the recovery after taking account of any tax relief available in respect of any matter giving rise to the claim or if less (ii) the amount previously paid by the Seller to the Purchaser less any Taxation attributable to it. 6.7 MITIGATION OF LOSSES The Purchaser shall procure that all reasonable steps are taken and all reasonable assistance is given to avoid or mitigate any Losses which in the absence of mitigation might give rise to a liability in respect of any claim for breach of any Seller's Warranty. 6.8 FRAUD None of the limitations contained in this Clause 6 shall apply to any claim which arises or is increased, or to the extent to which it arises or is increased, as the consequence of, or which is delayed as a result of, fraud or wilful concealment by the Seller or any of its directors, officers, employees or agents. 7 CLAIMS 7.1 NOTIFICATION OF POTENTIAL CLAIMS 8 If the Purchaser becomes aware of any fact, matter or circumstance that may give rise to a claim against the Seller for breach of any Seller's Warranty, the Purchaser shall as soon as reasonably practicable give a notice in writing to the Seller setting out such information as is available to the Purchaser as is reasonably necessary to enable the Seller to assess the merits of the claim and shall use its reasonable endeavours to preserve such evidence as the Seller may consider necessary. Failure to give notice within such period shall not affect the rights of the Purchaser except to the extent that the Seller is prejudiced by the failure. 7.2 NOTIFICATION OF CLAIMS UNDER THIS AGREEMENT Notices of claims for breach of Seller's Warranty shall be given by the Purchaser to the Seller within the time limits specified in Clause 6.1, specifying in reasonable detail the legal and factual basis of the claim and the evidence on which the Purchaser relies and, if practicable, an estimate of the amount of Losses which are, or are to be, the subject of the claim (including any Losses which are contingent on the occurrence of any future event). 7.3 COMMENCEMENT OF PROCEEDINGS Any claim notified pursuant to Clause 7.2 shall (if it has not been previously satisfied, settled or withdrawn) be deemed to be irrevocably withdrawn twelve months after the notice is given pursuant to Clause 7.2 or, in the case of any contingent liability, twelve months after such contingent liability becomes an actual liability and is due and payable unless legal proceedings in respect of it have been commenced by being both issued and served. 7.4 INVESTIGATION BY THE SELLER In connection with any matter or circumstance that may give rise to a claim against the Seller for breach of any Seller's Warranty: 7.4.1 the Purchaser shall allow, and shall procure that the relevant Group Company allows, the Seller and its financial, accounting or legal advisers to investigate the matter or circumstance alleged to give rise to a claim and whether and to what extent any amount is payable in respect of such claim; and 7.4.2 the Purchaser shall disclose to the Seller all material of which the Purchaser is aware which relates to the claim and shall, and shall procure that the relevant Group Company shall, give, subject to their being paid all reasonable costs and expenses, all such information and assistance, including access to premises and personnel, and the right to examine and copy or photograph any assets, accounts, documents and records, as the Seller or its professional advisers may reasonably request subject to the Seller agreeing in such form as the Purchaser may reasonably require to keep all such information confidential and to use it only for the purpose of investigating and defending the claim in question. 7.5 CONDUCT OF THIRD PARTY CLAIMS If the matter or circumstance that may give rise to a claim against the Seller for breach of any Seller's Warranty is a result of or in connection with a claim by or liability to a third party then the Purchaser or other member of the Purchaser's Group shall, subject to the next sentence, be entitled, in its absolute discretion, to take such action as it shall deem necessary to avoid, dispute, deny, defend, resist, appeal, compromise or contest such claim or liability (including, without limitation, making counterclaims or other claims against third parties) but shall, so far as practicable, without prejudice to the rights of the insurers 9 of the Purchaser's Group, consult with the Seller and with the Guarantor before taking any such action. No such claim shall be settled by the Purchaser without the prior written consent of the Guarantor. 8 GUARANTEE AND INDEMNITY 8.1 In consideration of the Purchaser entering into this Agreement, the Guarantor irrevocably and unconditionally: 8.1.1 guarantees to the Purchaser the due and punctual performance and discharge by the Seller of all its obligations and liabilities (including without limitation the obligation to pay money) under this Agreement and the Closing Documents (together, the "GUARANTEED OBLIGATIONS") and agrees to pay on demand from time to time each sum which the Seller is liable to pay under this Agreement and the Closing Documents; and 8.1.2 agrees, as an additional and independent obligation, that if any of the Guaranteed Obligations are not recoverable from the Guarantor under the guarantee in Clause 8.1.1 for any reason the Guarantor will be liable to the Purchaser as a principal debtor by way of indemnity for the same amount as that for which it would have been liable had those Guaranteed Obligations been recoverable and further agrees to discharge that liability on demand from time to time. 8.2 The guarantee in Clause 8.1.1 shall be a continuing security until the performance and discharge in full of the Guaranteed Obligations. 8.3 The Guarantor's obligations to the Purchaser shall not be reduced, discharged, impaired or adversely affected by reason of: 8.3.1 any time, indulgence, waiver or other concession which the Purchaser may grant to the Seller or any other person; 8.3.2 the insolvency, incapacity, lack of authority, death or disability of the Seller or the Guarantor or of any person purporting to act on behalf of either of them; 8.3.3 any termination, amendment, variation, release, novation or supplement of or to this Agreement or the terms of any of the Guaranteed Obligations; 8.3.4 any variation, extension, discharge or compromise of any right or remedy which the Purchaser may now or hereafter have from or against the Seller and any other person in respect of any of the obligations and liabilities of the Seller and any other person under and in respect of this Agreement; 8.3.5 any act or omission by the Purchaser or any other person in perfecting or enforcing any security, guarantee, assurance against loss or indemnity present or future from or against the Seller and any other person or any such security, guarantee, assurance against loss or indemnity being defective, void or unenforceable; 8.3.6 any claim or enforcement of payment from the Seller and any other person; 8.3.7 any defect, irregularity, unenforceability, invalidity, illegality, frustration or discharge by operation of law of any of the obligations of the Purchaser or the Guarantor; 8.3.8 any change of control of the Seller or the occurrence of any circumstance affecting the liability of the Seller to discharge any Guaranteed Obligations; 10 8.3.9 any security given or payment made to the Purchaser by the Seller or any other person being avoided or reduced under any law (whether English or foreign) relating to bankruptcy, liquidation or analogous circumstances in force from time to time; 8.3.10 any change in the Seller's or the Guarantor's constitution or any statutory or other compromise or arrangement with creditors affecting the Seller; or 8.3.11 any act or omission which would not have discharged or affected the obligations of the Guarantor had it been a principal debtor instead of a guarantor. 8.4 The obligations and liabilities expressed to be undertaken by the Guarantor under the guarantee in Clause 8.1.1 are those of primary obligor and not merely as a surety. 8.5 The Purchaser shall not be obliged before taking steps to enforce any of its rights and remedies under the guarantee in Clause 8.1.1: 8.5.1 to take action or obtain judgment in any court against the Seller and any other person; 8.5.2 to make or file any claim in a bankruptcy, liquidation, administration or insolvency of the Seller and any other person; or 8.5.3 to make demand, enforce or seek to enforce any claim, right or remedy against the Seller and any other person. 8.6 The guarantee in Clause 8.1.1 shall be in addition to any other security, guarantee, assurance against loss or indemnity held by the Purchaser at any time from the Seller or any other person and shall not merge with or prejudice or be prejudiced by any security, guarantee, assurance against loss or indemnity or any other contractual or legal rights of the Purchaser. 8.7 Any settlement or discharge in whole or in part by the Purchaser of the Guaranteed Obligations shall be deemed to be given or made on condition that it shall be of no effect as a settlement or discharge if the assurance, security or payment on the faith of which it was made shall afterwards be avoided, set aside or ordered to be refunded by virtue of any law (whether English or foreign) relating to bankruptcy, liquidation or analogous circumstances in force from time to time or for any other reason so that at any time after such avoidance, setting aside or order for refund the Purchaser shall be entitled to exercise its rights under the guarantee in Clause 8.1.1 as if no such settlement or discharge had been made. 8.8 All payments by the Guarantor shall be made in immediately available funds to the credit of such account as the Purchaser may designate and in full without any set-off, counterclaim or other deduction. If any such deduction is so required, the Guarantor shall simultaneously pay to the Purchaser such amount as is necessary to ensure that the Purchaser receives a net sum equal to what it would have received had no deduction been made. 8.9 No claim may be made against the Guarantor pursuant to this Clause 8 more than three years after the date of this Agreement, or, in the case of a claim related to any Seller's Warranty in Schedule 7 given pursuant to Clause 10.15, more than three years after the date on which the relevant Seller's Warranty is given. 11 8.10 The aggregate liability of the Guarantor pursuant to this Clause 8 shall not exceed the aggregate of the consideration paid for the Shares pursuant to Clause 3 and, if the Call Option is exercised pursuant to Clause 10.15, the consideration paid by the Purchaser for the relevant Retained Shares pursuant to Clause 10.15. 9 CONFIDENTIALITY 9.1 UNDERTAKING Subject to Clause 9.2: 9.1.1 each of the Seller and the Purchaser shall treat as strictly confidential and not disclose or use any information received or obtained as a result of entering into this Agreement (or any agreement entered into pursuant to this Agreement) which relates to the provisions of this Agreement and any agreement entered into pursuant to this Agreement; and 9.1.2 the Seller shall treat as strictly confidential and not disclose or use any information relating to the Group Companies following Closing. 9.2 EXCEPTIONS Clause 9.1 shall not prohibit disclosure or use of any information if and to the extent: 9.2.1 the disclosure or use is required by law, any regulatory body or any recognised stock exchange; 9.2.2 the disclosure is made to a Tax Authority in connection with the Tax affairs of the disclosing party, 9.2.3 the disclosure is made to professional advisers or investment managers of the Seller or the Purchaser; 9.2.4 the Information is or becomes publicly available (other than by breach of this Agreement); 9.2.5 the other party has given prior written approval for the disclosure or use; 9.2.6 the information is independently developed by the disclosing party after Closing; 9.2.7 the disclosure is by the Seller to other members of its group of information relating to the Group Companies received by the Seller as a shareholder in the Company; 9.2.8 the disclosure is by the Purchaser to any investor or potential investor in the Purchaser or any holding company or other controlling body of the Purchaser; or 9.2.9 the disclosure is for the purpose of or in connection with the listing on any investment exchange of any debt or equity securities of Macquarie Infrastructure Assets Trust (for which purpose the parties agree that any of the parties to this Agreement or any third party shall be entitled to make any disclosure otherwise prohibited by Clause 9.1) 10 OTHER PROVISIONS 10.1 FURTHER ASSURANCES 12 10.1.1 Each of the Seller and the Purchaser shall, and shall use reasonable endeavours to procure that any necessary third party shall, from time to time execute such documents and perform such acts and things as either of the Seller or the Purchaser may reasonably require to transfer the Shares and, if applicable, the Retained Shares to the Purchaser and to give each of them the full benefit of this Agreement. 10.1.2 Pending registration of the Purchaser as owner of the Shares and, if applicable, the Retained Shares, the Seller shall exercise all voting and other rights in relation to the Shares and, if applicable, the Retained Shares in accordance with the Purchaser's Instructions. 10.2 WHOLE AGREEMENT 10.2.1 This Agreement contains the whole agreement between the parties relating to the sale of the Shares and, If applicable, the Retained Shares at the date of this Agreement to the exclusion of any terms implied by law which may be excluded by contract and supersedes any previous written or oral agreement between the parties in relation to the matters dealt with in this Agreement. 10.2.2 The Purchaser acknowledges that it has not been induced to enter this Agreement by any representation, warranty or undertaking not expressly incorporated into it. 10.2.3 So far as is permitted by law and except in the case of fraud, each of the Seller and the Purchaser agrees and acknowledges that its only right and remedy in relation to any representation, warranty or undertaking made or given in connection with this Agreement shall be for breach of the terms of this Agreement to the exclusion of all other rights and remedies (including those in tort or arising under statute). 10.3 ASSIGNMENT 10.3.1 Each of the Seller and the Guarantor agrees that the benefit of every provision in this Agreement is given to the Purchaser for itself and its successors in title and assigns. Accordingly, the Purchaser (and its successors and permitted assigns) may, without the consent of the Seller or of the Guarantor, assign to the beneficial owner for the time being of the Shares and, if applicable, the Retained Shares the benefit of all or any of the Seller's and the Guarantor's obligations under this Agreement, and/or any benefit arising under or out of this Agreement, provided that the assignee shall not be entitled to receive under this Clause any greater amount than that to which the Purchaser would have been entitled. 10.3.2 Each of the Seller and the Guarantor agrees that, upon the request of the Purchaser or its successors in title or permitted assigns, this Agreement may be novated (in whole but not in part) in favour of the beneficial owner for the time being of the Shares and, if applicable, the Retained Shares and the Seller and the Guarantor shall execute a novation agreement in terms to be agreed at the time between the Seller, the Purchaser and the Guarantor. 10.4 THIRD PARTY RIGHTS 10.4.1 A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of, or enjoy any benefit under, this Agreement, except to the extent set out in this Clause 10.4. 13 10.4.2 A Group Company (whilst the Group Company remains in the Purchaser's Group) may enforce and rely on Clause 5.3 to the same extent as if it were a party. 10.4.3 This Agreement may be terminated and any term may be amended or waived without the consent of any Group Company. 10.5 VARIATION No variation of this Agreement shall be effective unless in writing and signed by or on behalf of each of the parties. 10.6 METHOD OF PAYMENT Wherever in this Agreement provision is made for the payment by one party to the other, such payment shall be effected by crediting for same day value the account specified by the payee to the payer reasonably in advance and in sufficient detail to enable payment by telegraphic or other electronic means to be effected on or before the due date for payment. 10.7 COSTS Each party shall bear its own costs in connection with the preparation, negotiation and entry into of this Agreement and the sale of the Shares and, if applicable, the Retained Shares. 10.8 INTEREST If a party to this Agreement defaults in the payment when due of any sum payable under this Agreement, its liability shall be increased to include interest on such sum from the date when such payment is due until the date of actual payment (after as well as before judgment) at a rate per annum of two per cent above the base rate from time to time of Barclays Bank PLC. Such interest shall accrue from day to day and shall be compounded monthly. 10.9 GROSSING-UP OF INDEMNITY PAYMENTS, VAT 10.9.1 Where any payment is made under this Agreement pursuant to an indemnity, compensation or reimbursement provision (including for the avoidance of doubt any claim pursuant to Clauses 5, 7 or 8) and that sum is subject to a charge to Taxation in the hands of the recipient (other than Taxation attributable to a payment being properly treated as an adjustment to the consideration paid by the Purchaser for the Shares) the sum payable shall be increased to such sum as will ensure that after payment of such Taxation (and after giving credit for any tax relief available to the recipient in respect of the matter giving rise to the payment) the recipient shall be left with a sum equal to the sum that it would have received in the absence of such a charge to taxation. 10.9.2 Where under the terms of this Agreement one party is liable to indemnify or reimburse another party in respect of any costs, charges or expenses, the payment shall include an amount equal to any VAT thereon not otherwise recoverable by the other party, subject to that party using all reasonable endeavours to recover such amount of VAT as may be practicable. 10.9.3 If any payment under this Agreement constitutes the consideration for a taxable supply for VAT purposes, then in addition to that payment the payer shall pay any VAT due. 14 10.10 NOTICES 10.10.1 Any notice or other communication in connection with this Agreement (each, a "NOTICE") shall be: (i) in writing; (ii) delivered by hand, fax, pre-paid first class post or courier; 10.10.2 A Notice to the Seller shall be sent to the following address, or such other person or address as the Seller may notify to the Purchaser from time to time: the Seller Address: Level 30, CityPoint, One Ropemaker Street, London EC2Y 9HD Fax: 020 7065 Attention: Rob Tallentire 10.10.3 A Notice to the Purchaser shall be sent to the following address, or such other person or address as the Purchaser may notify to the Seller from time to time: the Purchaser Address: 5, rue Guillaume Kroll - BP2501, L-1025 Luxembourg Fax: +352 (48) 18 63 Attention: Mr Bruno Bagnouls With a copy to: Address: Level 30, CityPoint, One Ropemaker Street, London EC2Y 9HD Fax: 020 7065 2041 Attention: Annabelle Helps 10.10.4 A Notice to the Guarantor shall be sent to the following address, or such other person or address as the Seller may notify to the Purchaser from time to time: MBL: Address: Level 30, CityPoint, 1 Ropemaker Street, London EC2Y 9HD Fax: Attention: Robert Tallentire 10.10.5 A Notice shall be effective upon receipt and shall be deemed to have been received: (i) two Business Days after posting, if delivered by pre-paid first class post; (ii) at the time of delivery, if delivered by hand or courier; (iii) at the time of transmission in legible form, if delivered by fax. 10.11 INVALIDITY 10.11.1 If any provision in this Agreement shall be held to be illegal, invalid or unenforceable, in whole or in part, the provision shall apply with whatever deletion 15 or modification is necessary so that the provision is legal, valid and enforceable and gives effect to the commercial intention of the parties. 10.11.2 To the extent it is not possible to delete or modify the provision, in whole or in part, under Clause 10.11.1, then such provision or part of it shall, to the extent that it is illegal, invalid or unenforceable, be deemed not to form part of this Agreement and the legality, validity and enforceability of the remainder of this Agreement shall, subject to any deletion or modification made under Clause 10.11.1, not be affected. 10.12 COUNTERPARTS This Agreement may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. Any party to this Agreement may enter into this Agreement by executing any such counterpart. 10.13 GOVERNING LAW AND SUBMISSION TO JURISDICTION 10.13.1 This Agreement shall be governed by and construed in accordance with English law. 10.13.2 Each of the parties to this Agreement irrevocably agrees that the courts of England are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with this Agreement and that accordingly any proceedings arising out of or in connection with this Agreement shall be brought in such courts. Each of the parties irrevocably submits to the jurisdiction of such courts and waives any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum. 10.14 APPOINTMENT OF PROCESS AGENT 10.14.1 The Purchaser hereby irrevocably appoints Macquarie Investment Management (UK) Limited of Level 30, 1 Ropemaker Street, London EC2Y 9HD and the Guarantor hereby appoints the Seller as their respective agents to accept service of process in England in any legal action or proceedings arising out of this Agreement, service upon whom shall be deemed completed whether or not forwarded to or received by (as applicable) the Purchaser or the Guarantor. 10.14.2 The Purchaser agrees to inform the Seller, and the Guarantor agrees to inform the Purchaser, in writing of any change of address of such process agent within 28 days of such change. 10.14.3 If such process agent ceases to be able to act as such or to have an address in England, the Purchaser or (as applicable) the Guarantor irrevocably agrees to appoint a new process agent in England acceptable to the Seller or the Purchaser, respectively, and to deliver to the Seller or the Purchaser, respectively, within 14 days a copy of a written acceptance of appointment by the process agent. 10.14.4 Nothing in this Agreement shall affect the right to serve process in any other manner permitted by law or the right to bring proceedings in any other jurisdiction for the purposes of the enforcement or execution of any judgment or other settlement in any other courts. 10.15 CALL OPTION OVER THE RETAINED SHARES 16 10.15.1 The Seller hereby grants the Purchaser, in consideration of the Purchaser's execution of this Agreement, a call option (the "CALL OPTION") over the Retained Shares, upon the terms of this Clause 10.15. 10.15.2 The Call Option may be exercised by the Purchaser by notice in writing to the Purchaser served at any time up to and including 31 December 2004. 10.15.3 The Call Option may be exercised either in respect of all the Retained Shares at the same time, or in two separate tranches of 4,107,000 Retained Shares and 9,712,500 Retained Shares each. 10.15.4 The price payable by the Purchaser on exercise of the Call Option shall be an amount in cash equal to (pound)1 per Retained Share the subject of the exercise of the Call Option plus an amount calculated as follows: (A x 12% x (T)/365) - (B + C) where: A = (pound)2 x the number of Retained Shares the subject of the exercise of the Call Option; B = the amount of interest on P, calculated in accordance with the terms of the Existing Loan Note Instrument, for the period comprised in T; C = the amount of any dividends paid by the Company in the period comprised in T in respect of the Retained Shares the subject of the exercise of the Call Option; P = the nominal amount of Existing Loan Notes equal to the nominal value of the Retained Shares the subject of the exercise of the Call Option; and T = the number of days elapsed from (and including) 30 April 2004 to (but excluding) the date of completion of the transfer of Shares by the Seller to the Purchaser (or as it may direct) upon exercise of the Call Option. 10.15.5 The transfer of Retained Shares shall take place within five Business Days after exercise of the Call Option at such place as the Purchaser and the Seller may agree. On that transfer, the Purchaser shall pay the Seller the Call Option price for the relevant Retained Shares. Against that payment, the Seller shall execute, and deliver to the Purchaser or as it may direct, a duly executed stock transfer form in respect of the relevant Retained Shares in favour of the Purchaser or as it may direct accompanied by the relative share certificate. 10.15.6 The provisions of Clauses 2.2 and 2.3 shall apply to the sale of Retained Shares, as if the references in them to Shares were to Retained Shares and to Closing were to the date of transfer of the Retained Shares. 10.15.7 On the transfer of Retained Shares to the Purchaser, the Seller shall be deemed to represent and warrant to the Purchaser that the statements set out in Schedule 7 are true and accurate and not misleading as of the date of that transfer. 10.15.8 While the Call Option remains exercisable the Seller shall not create any Encumbrance on, or dispose of, the Retained Shares or any interest in them except in accordance with this Clause. 17 10.15.9 On the transfer of Retained Shares pursuant to this Clause 10.15, the Purchaser shall also subscribe for New Loan Notes with a nominal amount equal to the nominal value of the Retained Shares being transferred at that time. On receipt of the proceeds of that subscription, the Company shall forthwith repay the same nominal amount of Existing Loan Notes. 10.15.10 The Purchaser may not exercise the Call Option in respect of all the Retained Shares or in respect of the tranche of 9,712,500 of the Retained Shares unless and until debt or equity securities of Macquarie Infrastructure Assets Trust are admitted to trading on an investment exchange. 10.15.11 The Seller agrees with the Purchaser, in consideration for the Purchaser's execution of this Agreement, not to sell, transfer or otherwise dispose of any interest that it may have in any of the Retained Shares at any time (other than to the Purchaser) without first ensuring that the proposed transferee enters into a shareholder's agreement with the Purchaser, its shareholders and the Company substantially in the form of the shareholders agreement between the Purchaser and its shareholders (a copy of which is available to the Seller on request to the Purchaser). In witness whereof this Agreement has been duly executed. SIGNED by } /s/ Illegible on behalf of MACQUARIE } /s/ Illegible LEASING (UK) LIMITED: } SIGNED by } /s/ Illegible on behalf of MACQUARIE BANK } /s/ Illegible LIMITED: } SIGNED by } /s/ Illegible on behalf of MACQUARIE } /s/ Illegible LUXEMBOURG WATER SARL: } 18 SCHEDULE 1 THE COMPANY AND THE SUBSIDIARIES 1 PARTICULARS OF THE COMPANY NAME OF COMPANY: Registered number: 4866277 Registered office: Level 30, CityPoint, One Ropemaker Street, London EC2Y 9HD Date and place of incorporation: 14 August 2003, England & Wales Issued share capital: 55,500,001 ordinary shares @(pound)1.00 Registered and beneficial shareholder: Macquarie Leasing (UK) Limited 2 NAMES OF THE SUBSIDIARIES Southern Utilities (Holdings) Limited (formerly Saur Water Services Plc) South East Water Limited Optimum Information Services Limited Dynamco Limited Mid-Sussex Water Limited West Kent Water Plc Eastbourne Water Plc Mid-Southern Water Plc Watercall Limited Southern Utilities Limited 19 SCHEDULE 2 THE SELLER'S CLOSING OBLIGATIONS (CLAUSE 4) On Closing, the Seller shall deliver or procure that the Company delivers or makes available to the Purchaser the following (together the "CLOSING DOCUMENTS"): 1 a transfer of the Shares duly executed by the Seller in favour of the Purchaser or as it may direct accompanied by the relative share certificate; 2 a board resolution of the Company approving the registration of the share transfer referred to in paragraph 1 of this Schedule subject only to its being duly stamped, the issue of the New Loan Notes to the Purchaser and the execution of the Deed of Subordination; 3 documents evidencing: (a) the drawdown under the Subordinated Loan Agreement to fund payment of the Pre-Closing Dividend; and (b) the declaration and payment of the Pre-Closing Dividend; 4 against performance by the Purchaser of its obligations pursuant to Clause 4.2.2, a copy of the New Loan Note Instrument and the original certificate for the New Loan Notes; 5 against performance by the Purchaser of its obligations pursuant to Clause 4.2.2, documents, in a form agreed with the Purchaser, evidencing the Loan Note Repayment; 6 in relation to the Company: certificate of incorporation, certificates of incorporation on change of name (if applicable), common seal (if applicable), statutory registers, minute books, share certificate books, books of account and all other books (all duly written up to date); 7 acknowledgements, in a form agreed with the Purchaser, from the Seller and the Company confirming that at and immediately after Closing, save for the (pound)13,819,500 of Existing Loan Notes issued by the Company to the Guarantor and not repaid at Closing and save for (pound)2.6 million owed by the Company pursuant to the Subordinated Loan Agreement, nothing is owed by, on the one hand, the Company or any of its Subsidiaries to, on the other hand, the Seller, any member of the Seller's Group and any Connected Person of the Seller, and that there are no outstanding claims by any such person against the Company or any of its Subsidiaries or that, to the extent that there are any such sums due or possible claims, these are waived; and 8 any power of attorney under which any document required to be delivered under this Schedule 2 has been executed. 20 SCHEDULE 3 WARRANTIES GIVEN BY THE SELLER UNDER CLAUSE 5.1 1 THE SHARES 1.1 The Seller: 1.1.1 is the sole legal and beneficial owner of the Shares; and 1.1.2 has the right to exercise all voting and other rights over the Shares. 1.2 The Seller is the sole legal and beneficial owner of the entire issued share capital of the Company 1.3 To the best of the Seller's knowledge, information and belief, the Seller or a Group Company is the sole legal and beneficial owner of the entire issued share capital of each Subsidiary (the "SUBSIDIARY Shares"). 1.4 The Shares, together with the Retained Shares, comprise the whole of the issued and allotted share capital of the Company. 1.5 The Shares have been properly and validly issued and allotted and are each fully paid or credited as fully paid. 1.6 No person has the right (whether exercisable now or in the future and whether contingent or not) to call for the allotment, conversion, issue, registration, sale or transfer, of any share or loan capital or any other security giving rise to a right over, or an interest in, the capital of the Company nor, to the best of the Seller's knowledge, information and belief, of any Group Company under any option, agreement or other arrangement (including conversion rights and rights of pre-emption). 1.7 There are no Encumbrances on the Shares or, to the best of the knowledge, information and belief of the Seller, on the Subsidiary Shares. 1.8 All consents for the transfer of the Shares have been obtained. 2 GENERAL 2.1 AUTHORITY AND CAPACITY 2.1.1 The Seller is validly existing and is a company duly incorporated under the laws of England and Wales. 2.1.2 The Seller has the legal right and full power and authority to enter into and perform this Agreement. 2.1.3 This Agreement constitutes valid and binding obligations on the Seller, in accordance with its terms. 2.1.4 The Seller has taken all corporate action required by it to authorise it to enter into and to perform this Agreement. 21 3.4 No order has been made, petition or application presented, resolution passed or meeting convened for the purpose of winding-up the Company or, to the best of the Seller's knowledge, information and belief, any of the Subsidiaries or whereby the assets of the Company (or, as applicable, the relevant Subsidiary) are to be distributed to creditors or shareholders or other contributories of the Company (or, as applicable, the relevant Subsidiary). 3.5 No receiver (including an administrative receiver), liquidator, trustee, administrator, supervisor, nominee, custodian or similar official has been appointed in respect of the whole or any part of the business or assets of the Company nor, to the best of the Seller's knowledge, information and belief, of any of the Subsidiaries nor has any step been taken for or with a view to the appointment of such a person nor has any event taken place or is likely to take place as a consequence of which such an appointment might be made. 3.6 No creditor of the Company or, to the best of the knowledge, information and belief of the Seller, of any of the Subsidiaries has taken, or is entitled to take any steps to enforce, or has enforced any security over any assets of the Company (or, as applicable, of the relevant Subsidiary). 4 BUSINESS ISSUES SINCE 1 OCTOBER 2003 To the best of the Seller's knowledge, information and belief, since 1 October 2003 (the date on which the Company acquired the whole of the issued share capital of Southern Utilities (Holdings) Limited - formerly SAUR Water Services plc): 4.1 there has been no material adverse change in the financial or trading position of the Group when taken as a whole; 4.2 each Group Company's business has been carried on as a going concern in its normal course; 4.3 no Group Company has entered into any contract or commitment other than on arms' length terms and in the ordinary course of business; 4.4 no capital commitment involving expenditure in excess of (pound)1,000,000 (exclusive of VAT) has been entered into by any Group Company; 4.5 no Group Company has declared, made or paid any dividend or other distribution to its members (other than the Pre-Closing Dividend or to another Group Company); 4.6 no Group Company has issued or allotted or agreed to issue or allot any share capital or any other security giving rise to a right over its capital nor has it repaid, redeemed or purchased (or agreed to do so) any securities of any class of its share capital; 4.7 otherwise than in the normal course of carrying on the Group's business, no Group Company has incurred any indebtedness for borrowed money; 4.8 other than to another Group Company, no Group Company has disposed of any interest in any of the shares in the capital of any other Group Company; 4.9 no Group Company has granted to any person the right (whether exercisable now or in the future and whether contingent or not) to call for the allotment, conversion, issue, registration, sale or transfer of any share or loan capital of any Group Company under any 23 SCHEDULE 3 WARRANTIES GIVEN BY THE SELLER UNDER CLAUSE 5.1 1 THE SHARES 1.1 The Seller: 1.1.1 is the sole legal and beneficial owner of the Shares; and 1.1.2 has the right to exercise all voting and other rights over the Shares. 1.2 The Seller is the sole legal and beneficial owner of the entire issued share capital of the Company 1.3 To the best of the Seller's knowledge, information and belief, the Seller or a Group Company is the sole legal and beneficial owner of the entire issued share capital of each Subsidiary (the "SUBSIDIARY Shares"). 1.4 The Shares, together with the Retained Shares, comprise the whole of the issued and allotted share capital of the Company. 1.5 The Shares have been properly and validly issued and allotted and are each fully paid or credited as fully paid. 1.6 No person has the right (whether exercisable now or in the future and whether contingent or not) to call for the allotment, conversion, issue, registration, sale or transfer, of any share or loan capital or any other security giving rise to a right over, or an interest in, the capital of the Company nor, to the best of the Seller's knowledge, information and belief, of any Group Company under any option, agreement or other arrangement (including conversion rights and rights of pre-emption). 1.7 There are no Encumbrances on the Shares or, to the best of the knowledge, information and belief of the Seller, on the Subsidiary Shares. 1.8 All consents for the transfer of the Shares have been obtained. 2 GENERAL 2.1 AUTHORITY AND CAPACITY 2.1.1 The Seller is validly existing and is a company duly incorporated under the laws of England and Wales. 2.1.2 The Seller has the legal right and full power and authority to enter into and perform this Agreement. 2.1.3 This Agreement constitutes valid and binding obligations on the Seller, in accordance with its terms. 23 option, agreement or other arrangement (including conversion rights and rights of pre-emption); 4.10 no Group Company has created any Encumbrances on its shares or on the shares in any other Group Company; 4.11 no Group Company has acquired or agreed to acquire any interest in any share capital or other security referred to in paragraph 4.9 above of any other company (wherever incorporated) other than of another Group Company; 4.12 no Group Company has established any branch, division, establishment or operations outside England; 4.13 no Group Company has granted any guarantee, indemnity or suretyship in respect of any material obligation of any third party; 4.14 the Group is not engaged in, and has not been threatened with, any litigation or arbitration or similar proceedings which individually or collectively are regarded or ought reasonably to be regarded by the Seller as likely to have a material adverse effect on the financial position of the Group as a whole; or 4.15 the Group is not engaged in any dispute with, and has not received notices in writing from, Ofwat, the Environment Agency or the Office of Fair Trading which individually or collectively are regarded or ought reasonably to be regarded by the Seller as likely to have a material adverse effect on the financial position of the Group as a whole. 5 CHANGE OF CONTROL As a result of the acquisition of the Shares by the Purchaser no party (other than the Company) will be relieved from its obligations under or entitled to terminate any material agreement or arrangement with the Company. 6 ACCURACY OF INFORMATION The information contained or referred to in Schedule 1 is true, complete and accurate and not misleading and the information contained in the Disclosure Schedule is true and accurate and not misleading. 7 CONTRACTUAL ARRANGEMENTS 7.1 To the best of the Seller's knowledge, information and belief: 7.1.1 no Group Company is in contravention of, or non-compliance with, any provision of any document relating to the Bridge Facility and the Existing Loan Note Instrument; 7.1.2 no steps for the early repayment of any outstanding indebtedness of any Group Company have been taken or threatened in writing; and 7.1.3 no circumstances exist (other than the Loan Note Repayment) as a result of which the continuation of the Bridge Facility or the Existing Loan Note Instrument might cease or be prejudiced, or which may give rise to any alteration in the terms and conditions of any of the Bridge Facility or the Existing Loan Note Instrument. 24 7.2 To the best of the Seller's knowledge, information and belief: no Group Company is in contravention of, or non-compliance with, any provision of any document relating to the acquisition by the Company of Southern Utilities (Holdings) Limited in October 2003 (the "ACQUISITION DOCUMENTS"); no counterparty to any of such documents ("VENDOR PARTIES") is in contravention of, or non-compliance with, any provision of such documents; and neither the Company nor the Seller is entitled to make any claim against any Vendor Party pursuant to the Acquisition Documents, whether for breach of warranty or otherwise. 8 PRE-CLOSING DIVIDEND AND LOAN NOTE REPAYMENT Payment of the Pre-Closing Dividend and effecting the Loan Note Repayment by the Company is lawful and, other than the Barclays Consent, does not require the consent of any third party. SCHEDULE 4 (CLAUSE 5.1.4) The following are the persons referred to in Clause 5.1.4: John Stent Jim Craig Sondra Baron Andrew Hunter , all of c/o Macquarie Bank Limited, (London branch), Level 30, CityPoint, 1 Ropemaker Street, London EC2Y 9HD 25 SCHEDULE 5 (CLAUSE 5.2) The following matters are disclosed for the purpose of Clause 5 1 On 7 November 2003, Pipeway Limited, then a subsidiary of Southern Utilities (Holdings) Limited (formerly Saur Water Services plc), was sold to an unconnected third party by Southern Utilities (Holdings) Limited for (pound)1.35 million. 2 On 29 February 2004, Optimum Information Services Limited transferred its business and assets to South East Water Limited. 3 On 8 January 2004, South East Water Limited and the Guarantor entered into an agreement for the provision by the Guarantor of financial and corporate strategy advice for a charge of (pound)2.4 million per annum. 4 South East Water Limited is in dispute with one of its contractors. Thus far, there has been exchange of correspondence with the threat of litigation from the contractor, but no proceedings have as yet been issued. The contractor alleges breaches of procurement rules in relation to the award of a contract in 2001 and is claiming loss of profit and bid costs of just over (pound)5 million. The management of South East Water Limited are confident there is no legitimate basis to this claim. 5 South East Water Limited has entered into two capital commitments in excess of(pound)1 million since 1 October 2003, being: 5.1 in relation to the Bewil-Darwell link, with a value of(pound)4.3 million; and 5.2 in relation to the Cowbeech Water Treatment Works project, with a value of(pound)2.4 million. 6 A former employee of South East Water Limited has alleged false reporting of a failure of chlorination at Beenham Heath Treatment Works in November 1999. Management of South East Water Limited have investigated the claim and are confident that there is no legitimate basis to it. 7 The two issued shares in Southern Utilities Limited (a dormant company) are registered in the name of Margaret Devlin (Managing Director of South East Water Limited) and Geoffrey Hoskins (formerly Deputy Chairman of South East Water Limited). They are to be transferred to Southern Utilities (Holdings) Limited shortly after Closing. 26 SCHEDULE 6 (CLAUSE 5.7) WARRANTIES GIVEN BY THE PURCHASER 1 The Purchaser is validly existing and is a company duly incorporated under the laws of Luxembourg. 2 The Purchaser has the legal right and full power and authority to enter into and perform this Agreement. 3 This Agreement constitutes valid and binding obligations on the Purchaser, in accordance with its terms. 4 The Purchaser has taken all corporate action required by it to authorise it to enter into and to perform this Agreement. 5 No consent, approval, authorisation or order of any court or government or local agency or body or any other person is required by the Purchaser for the execution or implementation of this Agreement and compliance with the terms of this Agreement does not and will not conflict with, result in the breach of or constitute a default under any agreement, instrument or obligation by which it may be bound or any provision of its constitutional documents. 27 SCHEDULE 7 WARRANTIES GIVEN BY THE SELLER UNDER CLAUSE 10.15 1 The Seller is the sole legal and beneficial owner of the Retained Shares being sold by the Seller to the Purchaser pursuant to Clause 10.15 (the "RELEVANT RETAINED SHARES") and has the right to exercise all voting and other rights over the Relevant Retained Shares. 2 The Relevant Retained Shares have been properly and validly issued and allotted and are each fully paid or credited as fully paid. 3 There are no Encumbrances on the Relevant Retained Shares 4 All consents for the transfer of the Relevant Retained Shares have been obtained. 28 EX-10.17 13 y97636exv10w17.txt SECONDMENT AGREEMENT EXHIBIT 10.17 YORKSHIRE LINK LIMITED AND MACQUARIE INFRASTRUCTURE (UK) LIMITED AND BALFOUR BEATTY PLC _____________________________________ AMENDED AND RESTATED SECONDMENT AGREEMENT _____________________________________ 1 CONFORMED COPY SECONDMENT AGREEMENT THIS AGREEMENT is made on 26th March, 1996 as amended and restated on 30 April 2003 BETWEEN: (1) YORKSHIRE LINK LIMITED ("YLL") of (registered number 2999303) whose registered office is at Level 29 and 30, 1 Ropemaker Street, London EC2Y 9HD; (2) MACQUARIE INFRASTRUCTURE (UK) LIMITED ("MIUK") (registered number 1540913) whose registered office is at Level 29 and 30, 1 Ropemaker Street, London EC2Y 9HD; and (3) BALFOUR BEATTY PLC ("BB") (registered number 395826) whose registered office is at 130 Wilton Road, London SWIV 1LQ. WHEREAS:- (A) YLL has entered into an agreement on 26 March 1996 with the Secretary of State for Transport relating to the concession for the M1-Al Link Road (Lofthouse to Bramham) (the "CONCESSION AGREEMENT"). (B) BB and Trafalgar House Services Limited ("THSL"), being an Affiliate of one of the original shareholders in YLHL, Trafalgar House Corporate Development Limited ("THCD"), agreed on 26 March 1996 to second or procure the secondment to YLL of personnel required by YLL from time to time to assist YLL in undertaking the M1-Al Link Road project (as defined in the Concession Agreement) and in particular in the performance of its obligations under the Concession Agreement ("ORIGINAL SECONDMENT AGREEMENT"). (C) THSL was subsequently renamed Kvaerner Services Ltd ("KSL") and THCD was subsequently renamed Kvaerner Corporate Development Limited ("KCD"). (D) In 1999, KCD was acquired by Macquarie European Infrastructure Plc and KCD changed its name to MIUK. (E) Under a deed of novation dated 3 February 2000 between YLL, KSL, BB and MIUK, KSL ceased to be a party to the Original Secondment Agreement and MIUK became a party in its place and various consequential amendments were made ("DEED OF NOVATION"). (F) The parties now wish to amend and restate the Original Secondment Agreement as amended by the deed of novation on the terms hereinafter appearing. As the context may require, personnel seconded by MIUK to YLL shall hereinafter be called "THE MIUK PERSONNEL" and each and all personnel seconded by BB to YLL shall hereinafter be called "THE BB PERSONNEL" and the MIUK Personnel and BB Personnel shall together be called "THE PERSONNEL"). NOW IT IS HEREBY AGREED as follows:- 1. SUPPLY OF PERSONNEL 1.1 Each of MIUK and BB shall use its reasonable endeavours to provide the MIUK Personnel or the BB Personnel (as appropriate) to YLL at such times and for such periods and either on a full or part time basis as may be required by YLL in its performance of the Concession Agreement. 1.2 The MIUK Personnel and the BB Personnel shall be deemed to be acting for and on behalf of YLL (to the extent that they would otherwise be acting for and on behalf of their respective employers in the performance of their normal duties) and shall at all times receive their instruction from YLL's Managing Director or his deputy. In the case of YLL's Managing Director he shall receive his instructions from the Board of YLL. 2 1.3 The MIUK Personnel and the BB Personnel shall be suitably qualified and professionally competent (the grades, numbers and individuals to be agreed between the parties). Except where otherwise agreed, each of MIUK and BB (as appropriate) shall provide YLL with details of their qualifications and experience. 1.4 MIUK and BB shall not change MIUK Personnel or BB Personnel seconded hereunder without prior consultation with YLL, provided that each of MIUK and BB reserves the right to replace MIUK Personnel and BB Personnel, as appropriate, with other suitably qualified and professionally competent MIUK Personnel or BB Personnel, as appropriate. 1.5 The MIUK Personnel and the BB Personnel to be seconded under this agreement on a full-time and part-time basis are to be agreed between the parties. 2. PAYMENT 2.1 The fees payable by YLL in respect of the supply of the MIUK Personnel and the BB Personnel will be those set out in Part 2 of the Schedule hereto. 2.2 The fees shall be subject to any applicable VAT which, if applicable, shall be paid by YLL to MIUK or BB on each payment at the relevant rate in force from time to time. 2.3 Payments by YLL to MIUK or BB shall be made without any deductions or set-off. 3. DURATION 3.1 The provision of the Personnel to YLL hereunder commenced with effect from the date hereof and shall continue for such period as YLL shall determine that the Personnel are required to be supplied to YLL in its performance of the Concession Agreement. YLL may terminate the requirement for any of the Personnel on not less than ninety days' notice. 3.2 In the event that YLL terminates the requirements for any of the Personnel pursuant to clause 3.1, YLL shall indemnify MIUK or BB (as appropriate) in respect of all costs, claims, liabilities or expenses arising therefrom suffered by MIUK or BB and relating only to the period of secondment hereunder. 3.3 Any party may terminate this Agreement by written notice to the others if any other party fails materially to observe or perform any of its obligations under this Agreement and has been notified in writing by the party aggrieved of the nature of the failure within fifteen days after its occurrence and has not taken steps to remedy such failure within thirty days after such notice. 4. [NOT USED] 5. [NOT USED] 6. TRAVELLING AND HOTEL EXPENSES The Personnel shall be reimbursed their reasonable and proper travelling and hotel expenses incurred in the course of their secondment hereunder, in accordance with YLL's internal controls in force from time to time. 7. ASSIGNMENT No obligations or rights arising under this Agreement may be assigned or sublet by any of the parties to any person or assumed by any successors thereto unless (i) such person is a company within either of the BB or Macquarie European Infrastructure Plc ("MEIP") groups of companies and (ii) the prior written consent of the other parties (such consent not to be unreasonably withheld or delayed) to such transaction, has been 3 obtained. This Agreement shall enure to and be binding upon the respective permitted assignees, or successors of the parties hereto. 8. LIABILITY 8.1 The liability of MIUK to YLL hereunder by reason of any breach of contract, tort or otherwise, shall under no circumstances exceed the aggregate of the fees paid by YLL to MIUK hereunder during the period of twelve months preceding the cause of action giving rise to such liability. 8.2 The liability of BB to YLL hereunder by reason of any breach of contract, tort or otherwise, shall under no circumstances exceed the aggregate of the fees paid by YLL to BB hereunder during the period of twelve months preceding the cause of action giving rise to such liability. 9. CONFIDENTIALITY 9.1 During the period of this agreement and thereafter each party shall keep confidential and shall not disclose or transfer to or use on behalf of itself or for the benefit of any third party without the prior written consent of each other party any technical or confidential information or documentation of such other party obtained under or as a result of the implementation of this agreement, provided always that nothing in this clause is intended to prevent MEIP or BB or any of their subsidiaries or associates from time to time (subject always to the terms of the Concession Agreement) using any of the information knowledge and experience which any of them or their personnel shall have gained from their involvement in the M1-Al Link Road project or in any other similar scheme. 9.2 Upon the termination of this Agreement each party shall return to the other relevant party all documents belonging to one party and provided to any of the others in connection with the implementation of this agreement. 10. NOTICES Notices shall be served upon any party to this agreement at its address referred to herein or at its last notified address and shall be deemed served ten days after posting if posted or two days after transmission if sent by facsimile transmission or if by hand on acknowledgement of receipt of delivery. 11. LAW This agreement is governed by and shall be construed in accordance with English law. COUNTERPARTS 12. This agreement may be executed in any number of counterparts and by the several parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all the counterparts shall together constitute one and the same instrument. AS WITNESS the hands of the parties (or their duly authorised representatives) on the date which first appears on page 1. SIGNED by ) for and on behalf of ) * YORKSHIRE LINK LIMITED ) SIGNED by ) for and on behalf of ) MACQUARIE INFRASTRUCTURE ) * (UK) LIMITED ) 4 SIGNED by ) for and on behalf of ) * BALFOUR BEATTY PLC ) * This agreement was restated and amended by an Omnibus Deed dated as of April 30, 2003 between Macquarie Infrastructure (UK) Limited, Macquarie Yorkshire Limited, Balfour Beatty plc, Yorkshire Link (Holdings) Limited, Yorkshire Link Limited, Kvaerner plc and Macquarie European Infrastructure plc, which was executed by the parties thereto as follows: MACQUARIE INFRASTRUCTURE (UK) LIMITED /s/ Colin Chanter Attorney Witness /s/ Andrew Deszcz Name: Andrew Deszcz Address: 65 Fleet Street, London MACQUARIE YORKSHIRE LIMITED /s/ Sean MacDonald Director /s/ Colin Chanter Director BALFOUR BEATTY PLC /s/ John Fox Attorney Witness /s/ Andrew Deszcz Name: Andrew Deszcz Address: 65 Fleet Street, London YORKSHIRE LINK (HOLDINGS) LIMITED /s/ John Fox Director /s/ Peter Dyer Director YORKSHIRE LINK LIMITED /s/ John Fox Director /s/ Peter Dyer Director KVAERNER PLC /s/ Nigel Williams Attorney Witness /s/ Peter Dyer Name: Peter Dyer Address: 14 Crofton Avenue, Chiswick London W4 3EW MACQUARIE EUROPEAN INFRASTRUCTURE PLC /s/ Peter Dyer Attorney Witness /s/ Andrew Deszcz Name: Andrew Deszcz Address: 65 Fleet Street, London EX-10.19 14 y97636exv10w19.txt DBFO CONTRACT EXHIBIT 10.19 DATED MARCH 1996 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) DBFO CONTRACT THE SECRETARY OF STATE FOR TRANSPORT AND YORKSHIRE LINK LIMITED INDEX OF SCHEDULES SCHEDULE 1 FINANCIAL MATTERS Part 1 Form of Performance Guarantee S1/1 Part 2 Milestone Event S1/5 Part 3 Base Case S1/6 Part 4 Form of Direct Agreement S1/7 SCHEDULE 2 PROGRAMME S2/1 SCHEDULE 3 LAND Part 1 Existing Road S3/1 Part 2 New Road S3/2 Part 3 Connecting Roads S3/5 Part 4 Defects in Existing Road S3/6 Part 4A Shared Facilities S3/7 Part 5 Form of Lease S3/8 Part 6 Scheme Orders S3/26 Part 7 Drawings S3/28 SCHEDULE 4 CONSTRUCTION AND HANDBACK REQUIREMENTS Part 1 Core Construction Requirements S4/1 Part 2 Construction Requirements S4/3 Part 3 Design and Certification Procedure S4/653 Part 4 Handback Requirements S4/710 Part 5 Construction Finishing Works S4/716 Part 6 Noise Insulation Requirements S4/717 Part 7 Drawings S4/722 SCHEDULE 5 QUALITY ASSURANCE Part 1 Principles for Quality Plans S5/1 Part 2 Quality Plans S5/13 SCHEDULE 6 OPERATION AND MAINTENANCE Part 1 Core O&M Requirements S6/1 Part 2 O&M Requirements S6/3 Part 3 Drawings S6/112 SCHEDULE 7 REPRESENTATIVES Part 1 Department's Agent S7/1 Part 2 Department's Representative S7/4 Part 3 Review Procedure S7/7 SCHEDULE 8 THIRD PARTIES Part 1 Relevant Authorities S8/1

i Part 2 Other Interested Parties S8/9 Part 3 Requirements of Relevant Authorities S8/12 Part 4 Requirements of Other Interested Parties S8/82 SCHEDULE 9 PAYMENTS Part 1 Payments between Permit to Use Date and Completion Certificate S9/1 Part 2 Traffic Payment S9/3 Part 3 Lane Closure Charge S9/16 Part 4 Safety Performance Payment S9/35 Part 5 Indexation S9/41 Part 6 Road Lengths S9/45 SCHEDULE 10 INSURANCE S10/1 SCHEDULE 11 DELAY AND FORCE MAJEURE Part 1 Delay Events S11/1 Part 2 Force Majeure S11/3 SCHEDULE 12 CHANGE Part 1 General Change Procedure S12/1 Part 2 Department's Works Change S12/17 Part 3 Department's Change in Specification S12/20 Part 4 Additional Works S12/23 Part 5 Compensation Events S12/25 Part 6 User Paid Tolls S12/28 SCHEDULE 13 ADDITIONAL WORKS Part 1 Procedure for Additional Works S13/1 Part 2 Payment for Additional Works Services S13/4 Part 3 Subsequent Schemes S13/6 Part 4 Improvements S13/10 Part 5 Safety Improvements S13/11 SCHEDULE 14 RECORDS AND REPORTS Part 1 Records S14/1 Part 2 Reports S14/5 SCHEDULE 15 DISPUTES RESOLUTION PROCEDURE S15/1 SCHEDULE 16 LIAISON PROCEDURES Part 1 General Principles S16/1 Part 2 Operations, Emergencies and Traffic Management S16/2 SCHEDULE 17 COMMUNICATIONS REQUIREMENTS Part 1 Core Communications Requirements S17/1 Part 2 Communications Requirements S17/8

ii SCHEDULE 18 PENALTY POINTS S18/1 SCHEDULE 19 STATUTORY UNDERTAKERS Part 1 Authorised Functions S19/1 Part 2 Services in Relation to the Secretary of State's Function S19/3 Part 3 Other Services S19/7 SCHEDULE 20 TRAFFIC SIGNS Part 1 Locations S20/1 Part 2 Text S20/2 SCHEDULE 21 CONTRACTED OUT FUNCTIONS OF THE SECRETARY OF STATE S21/1

iii M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) THIS DBFO CONTRACT (this "Agreement") is made the 26th day of March 1996 BETWEEN: (1) THE SECRETARY OF STATE FOR TRANSPORT of 76 Marsham Street, London SW1P 4DR (the "Secretary of State"); and (2) YORKSHIRE LINK LIMITED, a company organised and existing under the laws of England, registered under number 2999303 and having its registered office at 1 Berkeley Street, London W1A 1BY (the "DBFO Co"). WHEREAS: (A) The Government of the United Kingdom desires to have the private sector invest and participate in the development of the nation's transport system. (B) In accordance with the foregoing policy, interested persons were invited to submit proposals for investing in the Project. (C) The Project will comprise the design, construction, financing and operation of approximately 30km of motorway and trunk road between Junction 28 (Tingley) of the M62 motorway and Bramham Crossroads on the A1 Trunk Road, together with ancillary highway, landscaping and drainage works as authorised by the Secretary of State in 1993, the construction of a maintenance depot at Bramham and the maintenance of the Project Facilities throughout the Contract Period. (D) Proposals were submitted by the DBFO Co for the design and construction of the Works, the financing, operation and maintenance of the Project Facilities and the conduct of the other Operations during the Contract Period. (E) The agreements referred to in Clause 2.3 have been entered into on or prior to the date hereof. (F) The Secretary of State and the DBFO Co have reached agreement as set out in this Agreement. (G) The Secretary of State is satisfied that this Agreement would be of benefit to the public. NOW IT IS HEREBY AGREED as follows: M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) PART I GENERAL 1. DEFINITIONS AND INTERPRETATION 1.1 Definitions In this Agreement (including the recitals and Schedules), unless the context otherwise requires, the following expressions have the following meanings: "Abnormal Indivisible Load" means any vehicle which does not comply with the restrictions as to laden weight and dimensions set out in Part IV of The Road Vehicles (Construction and Use) Regulations 1986 (S.I. 1986/1078). "Accrued Relevant Payments" has the meaning given in Clause 36.3A.4.2.1. "Additional Works" means any change, improvement or addition made or proposed to be made to the design, layout or structure of the Existing Road (other than any Upgraded Section) at any time or of the New Road at any time after issue of the Completion Certificate (but excluding any Subsequent Scheme and any Improvement). "Additional Works Contract" has the meaning given in paragraph 3.1.4 of Part 1 of Schedule 13. "Additional Works Contractor" has the meaning given in paragraph 3.1.4 of Part 1 of Schedule 13. "Additional Works Notice" has the meaning given in paragraph 1.1 of Part 1 of Schedule 13. "Additional Works Services" has the meaning given in paragraph 3.1 of Part 1 of Schedule 13. "Adjacent Areas" means the areas, shown or identified as such on the date hereof on drawings entitled 'Land Areas' in Part 7 of Schedule 3, which do not form part of the Site but upon which part of the Operations are to be carried out; provided that each part of the Temporary Adjacent Areas shall cease to be part of the Adjacent Areas from the date upon which a Taking Over Certificate is issued in respect of Local Facilities located on such part. "Advance Works Contract" means an agreement dated 8th February 1996 made between the Secretary of State and the unincorporated joint venture comprising Trafalgar House Construction Special Projects Limited and Wimpey Construction Limited in respect of certain advance site clearance works in relation to the Project. "Affected Contract Year" means each Contract Year in respect of which there is a Change in Costs, a Change in Traffic or a Change in Capital Costs as a consequence of an Eligible Change. "Aggregate Commuted Sum" has the meaning given in Clause 29.1.1. "Aggregate Relevant Monthly Amount" has the meaning given in Clause 29.3.1.1. "Alternative Proposal" has the meaning given in paragraph 1 of Section B of Part 3 of Schedule 4. "Amended Funding Agreement" has the meaning given in Clause 2.4.4.2. "Annual Reconciliation Notice" has the meaning given in Clause 29.4.2. "Annual Report" has the meaning given in paragraph 3 of Part 2 of Schedule 14. 2 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Appeal" has the meaning given in Clause 26A.4.2.2. "Applicable Interest Rate" means: (a) in respect of the Relevant Funding Liabilities arising in respect of, or (in the case of a Funding Agreement which is a Hedging Agreement) in relation to, the facility agreement referred to in Clause 2.3.1.3.2: (i) to the extent not guaranteed by 3i, per cent per annum plus the Applicable Margin as defined in the relevant Funding Agreement, and (ii) to the extent guaranteed by 3i, per cent per annum plus the Applicable Margin as defined in the relevant Funding Agreement; (b) in respect of Relevant Funding Liabilities arising in respect of, or (in the case of a Funding Agreement which is a Hedging Agreement) in relation to the facility agreement referred to in Clause 2.3.1.3.3, per cent per annum plus the Applicable Margin and Guarantee Fee Rate as defined in the relevant Funding Agreement; (c) in respect of Relevant Funding Liabilities arising in respect of, or (in the case of a Funding Agreement which is a Hedging Agreement) in relation to, the senior subordinated facility agreement referred to in Clause 2.3.1.3.4, per cent per annum plus the Applicable Margin as defined in the relevant Funding Agreement; (d) in respect of Relevant Funding Liabilities arising in respect of, or (in the case of a Funding Agreement which is a Hedging Agreement) in relation to, the facility agreement referred to in Clause 2.3.1.3.5, per cent per annum plus the Applicable Margin and Redemption Premium as defined in the relevant Funding Agreement; (e) in respect of Relevant Funding Liabilities arising in respect of, or (in the case of a Funding Agreement which is a Hedging Agreement) in relation to, the subordinated facility agreement referred to in Clause 2.3.1.3.5, per cent per annum plus the Applicable Margin and Guarantee Fee Rate as defined in the relevant Funding Agreement; (f) in respect of the (pound)12,000,000 15% subordinated loan stock created by the Instrument referred to in Clause 2.3.1.3.18; (g) in any other case, per cent per annum. "Application" has the meaning given in Clause 26A.4.2.1. "Approval" has the meaning given in Clause 43.2 [Reasonableness]. "Approved Funding Agreement" means a Funding Agreement which, in accordance with Clauses 2.4.2 and 2.4.3, constitutes an "Approved Funding Agreement" for the purposes of this Agreement, and shall include any Immaterial Amendments and Waivers of such Funding Agreement (whether or not such Immaterial Amendments and Waivers are approved by the Secretary of State for the purposes of such Clauses). "Archaeologist" means Peter Fasham of Babtie Group or such substitute as may be appointed by the Contractor for the time being in accordance with Clause 41.4.1. "Associated Company" means, in respect of a relevant company, a company which is a Subsidiary, a Holding Company or a company which is a Subsidiary of a Holding Company of that relevant company and, in the case of the DBFO Co, shall include each of the Sponsors and the Contractor and any company 3 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) which is a Subsidiary, a Holding Company or a company which is a Subsidiary of a Holding Company of a Sponsor or the Contractor. "Audit Team" has the meaning given in paragraph 2.1 of Section A of Part 3 of Schedule 4. "Band" means each of the bands of Traffic Payments referred to in Part 2 of Schedule 9. "Base Case" means the output from the Financial Model on the date of execution of this Agreement, a print out of the assumptions, cash flow, profit and loss and balance sheet parts of which is set out in Part 3 of Schedule 1. "Brief Annual Report" has the meaning given in paragraph 3.2 of Part 2 of Schedule 14. "Census Limits of Accuracy" has the meaning given in Clause 28.4.1. "Certificate" means any certificate to be issued pursuant to this Agreement and in particular: (a) "Advance Release Certificate" means a certificate to be issued by the Department's Representative on behalf of the Secretary of State pursuant to Clause 17.8.3.1 in the form set out in Annex 1(22) to Part 3 of Schedule 4. (b) "Alternative Proposal Certificate" means a certificate in the form set out in Annex 1(12) to Part 3 of Schedule 4. (c) "Certificate of Commencement" means the certificate to be issued by or on behalf of the Secretary of State pursuant to Clause 7.2 [Certificate of Commencement] in the form set out in Annex 1(19) to Part 3 of Schedule 4. (d) "Check Certificate" (Structures) means a certificate in the form set out in Annex 1(4) to Part 3 of Schedule 4; (e) "Communications Certificate" means a certificate in the form set out in Annex 1(20) to Part 3 of Schedule 4; (f) "Completion Certificate" means a certificate in the form set out in Annex 1(16) to Part 3 of Schedule 4; (g) "Construction Certificate" means a certificate in the form set out in Annex 1(13) to Part 3 of Schedule 4; (h) "DBFO Co's Substantial Completion Certificate" means a certificate in the form set out in Annex 1(14) to Part 3 of Schedule.4; (i) "DBFO Co's Works Change Certificate" means a certificate in the form set out in Annex 1(10) to Part 3 of Schedule 4; (j) "Department's Works Change Certificate" means a certificate in the form set out in Annex 1(11) to Part 3 of Schedule 4; (k) "Design Certificate (General)" means a certificate in the form set out in Annex 1(1) to Part 3 of Schedule 4; (l) "Design Certificate (Geotechnical) means a certificate in the form set out in Annex 1(2) to Part 3 of Schedule 4; 4 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) (m) "Design Certificate (Structures)" means a certificate in the form set out in Annex 1(3) to Part 3 of Schedule 4; (n) "Handback Certificate" means a certificate in the form set out in Annex 1(18) to Part 3 of Schedule 4; (o) "Milestone Certification" means a certificate in the form set out in Annex 1(21) to Part 3 of Schedule 4; (p) the Permit to Use; (q) "Programme Certificate" means a certificate in the form set out in Annex 1(6) to Part 3 of Schedule 4; (r) "Road Safety Audit Certificate" means a certificate in the form set out in Annex 1(9) to Part 3 of Schedule 4; (s) "Taking Over Certificate" means a certificate in the form set out in Annex 1(17) to Part 3 of Schedule 4; (t) "Temporary Works Check Certificate" means a certificate in the form set out in Annex 1(5) to Part 3 of Schedule 4; and (u) "Test Confirmation Certificate" means a certificate in the form set out in Annex 1(7) to Part 3 of Schedule 4. "Change Figure" has the meaning given in paragraph 4.1 of Part 1 of Schedule 12. "Change in Capital Costs" means any net increase in the DBFO Co's costs of performing the Operations (other than (i) operation and maintenance costs and other costs of a similar or recurring nature and (ii) Lane Closure Charges) as a consequence of an Eligible Change or Eligible Changes the subject of a notice under paragraph 2.1 of Part 1 of Schedule 12. For the avoidance of doubt, this does not include any loss of revenue and any increase in such costs shall be a positive figure. "Change in Costs" means any net increase or decrease in the DBFO Co's costs of performing the Operations in respect of a Contract Year as a consequence of an Eligible Change or Eligible Changes the subject of a notice under paragraph 2.1 of Part 1 of Schedule 12. For the avoidance of doubt, this includes Lane Closure Charges but does not include any loss of revenue. The Change in Costs shall be calculated on the assumption that all costs in respect of a Contract Year are incurred on the day which is the mid point of such Contract Year. For the avoidance of doubt, any increase in costs shall be a positive figure and any decrease in costs shall be a negative figure. "Change in Law" means the coming into effect of: (a) any Legislation enacted after the date of execution of this Agreement; or (b) any modification of any Legislation existing on the date of this Agreement (where such modification comes into effect after the date of execution of this Agreement) (but excluding in either such case any lawful requirements of any Relevant Authority and any change in the interpretation of any Legislation) which is binding on the DBFO Co. "Change in Revenues" means any increase or decrease in the DBFO Payments (but excluding any Aggregate Commuted Sum) receivable by the DBFO Co in respect of a Contract Year as a consequence of the Eligible Change or Eligible Changes the subject of a notice under paragraph 2.1 of Part 1 of Schedule 5 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 12. The Change in Revenues shall be calculated on the assumption that all Traffic Payments in respect of a Contract Year are received on the day which is the mid point of such Contract Year. For the avoidance of doubt, any decrease in revenues shall be a positive figure and any increase in revenues shall be a negative figure. "Change in Traffic" means any net increase or decrease in the traffic using the Project Road in a Contract Year as a consequence of the Eligible Change or Eligible Changes the subject of a notice under paragraph 2.1 of Part 1 of Schedule 12. "Checker" means any person appointed in accordance with paragraph 39 of Section A of Part 3 of Schedule 4 to check a Category III Structure or such substitute as may be appointed by the DBFO Co for the time being in accordance with Clause 41.4.1. "Checking Team" has the meaning given in paragraph 2.3 of Section A of Part 3 of Schedule 4. "Claim" means any claim, demand, proceedings or liability. "Commencement Date" means the date on which the Certificate of Commencement is issued. "Commissioners" has the meaning given in Clause 44.1.3. "Communications Requirements" means the requirements set out or identified in Part 2 of Schedule 17 [Communications Requirements] as amended from time to time by any Works Change, Alternative Proposal or Department's Change in Specification or in accordance with Clause 12.2 [O&M Requirements]. "Commuted Sum" has the meaning given in paragraph 6 of Part 1 of Schedule 12. "Compensation Event" means any of the following: (a) an event within Clause 24.5.3 [Step-In Rights] (but only if it is determined to be a Delay Event); (b) a material breach by the Secretary of State of the provisions of Clause 8.1 [Access for DBFO Co] (but only if such breach is determined to be a Delay Event); (c) failure by the Department's Agent to issue the Permit to Use, the Completion Certificate or a Taking Over Certificate when required to do so in accordance with Clause 11.1, 11.2 or 11.3 respectively; (d) the disallowance by HM Customs & Excise of recovery of input VAT incurred by the DBFO Co on expenditure attributable to the Project on the grounds that the supplies made by the DBFO Co in relation to the Project are exempt and not taxable for the purposes of VAT; (e) the occurrence of a Relevant Change in Law (but only if such Relevant Change in Law does not give rise to a right of termination in accordance with Clause 38.5). "Confidential Information" has the meaning given in Clause 46.1 [Confidential Information]. "Connecting Roads" means the lengths of trunk road or motorway described in Part 3 of Schedule 3 which provide access to the Project Road and for which the Secretary of State is the highway authority. "Construction Contract" means the contract titled "Agreement for the Design and Construction of the M1-A1 Link Road (Lofthouse to Bramham)" of even date herewith between the DBFO Co and the Contractor for the design and construction of the Works. "Construction Finishing Works" means the works more particularly set out in Part 5 of Schedule 4. 6 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Construction Period" means the period commencing on the Commencement Date and ending on the Permit to Use Date. "Construction Period LCCs" has the meaning given in paragraph 6 of Part 3 of Schedule 9. "Construction Plant" means plant, materials and equipment used or to be used by the Contractor in the construction of the Project Facilities but does not include Plant. "Construction Requirements" means: (a) the standards, specifications and requirements for design and construction set out or identified in Part 2 of Schedule 4; and (b) the Noise Insulation Requirements, as amended from time to time by any Works Change, Alternative Proposal or Department's Change in Specification. "Contracting Associate" means the Designer, Contractor, and any other Associated Company of the DBFO Co which performs any function in connection with this Agreement or the Operations. "Contract Period" means the period commencing on the Commencement Date and expiring 30 years therefrom (subject to the provisions of Clauses 33.4.1 and 33.4.4 [Consequences of Force Majeure]) or on such other date as shall be the Termination Date. "Contract Year" means a period of twelve months starting on 1st April, with the exception of the first Contract Year, which shall commence on the Commencement Date and end on the 31st March 1997 (the "First Contract Year"), and the last Contract Year, which shall commence on 1st April and end on the Termination Date (the "Last Contract Year"). "Contractor" means the unincorporated joint venture comprising Trafalgar House Construction Special Projects Limited and Balfour Beatty Civil Engineering Limited or such substitute contractor as may be appointed by the DBFO Co for the time being in accordance with Clause 41.4.1. "Contractor's Quality Plan" has the meaning given in Clause 21.1.3.3. "Core Constriction Requirements" means the requirements set out or identified or referred to in Part 1 of Schedule 4 [Core Construction Requirements]. "Core Communications Requirements" means the requirements set out or identified or referred to in Part 1 of Schedule 17 [Core Communications Requirements]. "Core O&M Requirements" means the requirements set out or identified or referred to in Part 1 of Schedule 6 [Core O&M Requirements]. "Court" means any court of competent jurisdiction. "Credit Providers" has the meaning given to it in the Direct Agreement. "Cumulative Threshold" means (pound)2,000,000 (in April 1995 prices). "Custody Agreement" means the agreement so titled of even date herewith between the DBFO Co, the Secretary of State and the National Computing Centre Limited for the custody of the Financial Model. 7 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Date for Completion" means 30th June 2000, subject to adjustment in accordance with Clause 10.6 [Extension of Time]. "DBFO Co's Quality Plan" has the meaning given in Clause 21.1.3.1. "DBFO Co's Quality Plan for O&M" has the meaning given in Clause 21.1.3.1.3. "DBFO Co's Quality Plan for the Management of Construction" has the meaning given in Clause 21.1.3.1.1. "DBFO Co's Quality Plan for the Management of O&M" has the meaning given in Clause 21.1.3.1.2. "DBFO Co's Representative" means the person appointed by the DBFO Co pursuant to Clause 20.2 (The DBFO Co's Representative] or such substitute as may be appointed by the DBFO Co for the time being pursuant to Clause 20.3 [Change of Representatives]. "DBFO Co's Systems" has the meaning given in Schedule 17. "DBFO Co Termination Event" means any of the events set out in Clause 37.1 [DBFO Co Termination Events]. "DBFO Co Traffic Sign" has the meaning given in Clause 14.4. "DBFO Co's Works Change" means a Works Change initiated by the DBFO Co in accordance with Clause 9.4. "DBFO Payment" has the meaning given in Clause 29.1.1 [DBFO Payments]. "Deemed Department's Change" means any Change in Law which requires: (a) a variation in the design, quality or quantity of the Works (including any addition, omission, substitution, alteration in design and/or variation in the Construction Requirements or the Communications Requirements); or (b) a variation in the quality or quantity of the Operations (other than as referred to in paragraph (a) above) and which, if it were instructed as such, would constitute a Department's Works Change or a Department's Change in Specification; provided that there shall be excluded from the definition of a Deemed Department's Change any such Change in Law (other than a Relevant Change in Law) if, following such a Department's Works Change or Department's Change in Specification, the Construction Requirements, the Communications Requirements or the O&M Requirements (as the case may be) would be materially less likely to achieve satisfaction of the Core Construction Requirements (but excluding the Core Construction Requirements set out in Annex 15 to Part 2 of Schedule 4), the Core Communications Requirements (but excluding the Core Communications Requirements set out in Sections A and B of Part 1 of Schedule 17) or the Core O&M Requirements (as the case may be) than the Construction Requirements, the Communications Requirements or the O&M Requirements (as the case may be) prior to such Department's Works Change or Department's Change in Specification. "Deemed Department's Change Notice" has the meaning given in Clause 33A.2.1. "Deemed Issue Period" has the meaning given in Clause 11.1.5. "Default Period" has the meaning given in Clause 36.3A.4.2.1. 8 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Defective Equipment" has the meaning given in Clause 28.7.1 [Correction of Defects]. "Delay Event" means any of the events specified in Part 1 of Schedule 11 [Delay Events]. "Delay Period" has the meaning given in Clause 10.6.6. "Department's Agent" means Pell Frischmann Consultants Limited (Wakefield) or such substitute as may be appointed by the Secretary of State for the time being pursuant to Clause 20.3 [Change of Representatives]. "Department's Change in Specification" means a variation in the quality or quantity of the Operations (other than a Department's Works Change) initiated by the Department's Representative in accordance with Part 3 of Schedule 12 [Department's Change in Specification] and may include any addition, omission, substitution, alterations in design and/or variations in the Technical Requirements. "Department's Nominee" means, where referred to in the context of the design, construction, completion, commissioning or testing of the Works or any activities under this Agreement related thereto, the Department's Agent and in all other circumstances the Department's Representative. "Department's Representative" means the Northern Network Management Division of the Highways Agency or such substitute as may be appointed by the Secretary of State for the time being pursuant to Clause 20.3 [Change of Representatives]. "Department's Standards" means all standards and specifications issued by the Secretary of State from time to time in respect of the design, construction, operation or maintenance of highways, including without limitation the following: (a) the Design Manual for Roads and Bridges including all Department Technical Advice Notes and Technical Design Notes; (b) the Specification for Highway Works; (c) the Notes for Guidance; (d) Highway Construction Details, published by HMSO as Volume 3 of the Manual of Contract Documents for Highway Works; (e) Roads Circulars issued by the Department; (f) the Trunk Roads Maintenance Manual. "Department's Works Change" means a Works Change initiated by the Department's Agent in accordance with Part 2 of Schedule 12 [Department's Works Change]. "Departure from Standard" means one of, or a combination of, the following: (a) the use of technical design directives other than those in the DMRB for fundamental aspects of design; (b) the use of technical specifications for materials or workmanship other than those in the SHW for fundamental aspects of construction; (c) the use of a set of requirements (additional criteria) for any aspect of the Works for which requirements are not given in the Department's Standards in force at the date of execution of this Agreement; 9 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) (d) the use of a standard set out in the DMRB in circumstances where such standard would not normally be applicable, where such usage is justified on economic or environmental grounds; in any such case approved by the Secretary of State on or prior to the date of execution of this Agreement, and any relaxation in any of the Department's Standards in force at the date of execution of this Agreement not requiring approval by the Secretary of State in accordance with the DMRB. "Design and Certification Procedure" means the procedure set out in Part 3 of Schedule 4 [Design and Certification Procedure]. "Design Contract" means the contract titled "Agreement for Design Services" of even date herewith between the Contractor and the Designer for the design of the Works. "Design Data" means all calculations, designs, design or construction information, standards, specifications, plans, drawings, graphs, sketches, models and other materials, including all eye readable or computer or other machine readable data, prepared or to be prepared by or on behalf of the DBFO Co or the Secretary of State relating to the design or construction of the Works or any Works Change or the operation, maintenance or improvement of the Project Facilities. "Designer" means Babtie Group Limited or such substitute as may be appointed by the Contractor for the time being in accordance with Clause 41.4.1. "Designer's Quality Plan" has the meaning given in Clause 21.1.3.2. "Designer's Quality Plan for Design" has the meaning given in Clause 21.1.3.2.1. "Designer's Quality Plan for Examination of the Works" has the meaning given in Clause 21.1.3.2.2. "Design Manual for Roads and Bridges" or "DMRB" means the Design Manual for Roads and Bridges, published by HMSO. "Design Team" has the meaning given in paragraph 2.4 of Section A of Part 3 of Schedule 4. "Detailed Design" means the detailed design to be developed from the preliminary design shown in the Construction Requirements and the Communications Requirements in respect of each part of the Permanent Works so as to allow construction of that part in accordance with the Construction Requirements and the Communications Requirements and so as to procure satisfaction of the Core Construction Requirements and the Core Communications Requirements. "De-Trunked Segment" means any segment of the Existing Road described as such in Part 1 of Schedule 3 (and shown on drawings numbered 40114/04/05/10 Revision A and 40114/04/05/13 Revision C in Part 7 of Schedule 3) which is or is to be de-trunked in accordance with an order made pursuant to Section 10(2)(b) of the Highways Act. "Direct Agreement" means the agreement to be entered into between the Secretary of State, the Intercreditor Agent (on behalf of the Credit Providers) and the DBFO Co in the form set out in Part 4 of Schedule 1 and includes any New Direct Agreement (as defined in such agreement) from time to time. "Direction" has the meaning given in Clause 26A.4.2.4. "Disclosed Data" has the meaning given in Clause 34.2.1. "Discount Rate" means the nominal internal rate of return of the Project before interest and tax as shown in the Base Case, which is agreed to be per cent. 10 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Dispute" means a difference or dispute of whatever nature between the Secretary of State (and/or the Department's Nominee) of the one part and the DBFO Co (and/or the DBFO Co's Representative) of the other part arising under, out of or in connection with this Agreement (including without limitation any question of interpretation of this Agreement). "Disputes Resolution Procedure" means the procedure referred to in Clause 48 and set out in Schedule 15 [Disputes Resolution Procedure.]. "DTp" or "Department" or "DOT" or "MOT" means the Department of Transport. "East Leeds Radial Junction" means all infrastructure necessary to form a junction in the vicinity of Pontefract Lane between the Project Road and a road proposed to be built by Leeds City Council (the "East Leeds Radial Road") including without limitation the slip roads associated with such junction, but excluding (i) any modifications to the Project Road resulting from the construction of the junction and (ii) any Works included in the Construction Requirements contained in Schedule 4 of this Agreement (including without limitation the Pontefract Lane West overbridge). "Eligible Change" means any of the following: (a) a Department's Works Change; (b) a Department's Change in Specification; (c) any Additional Works which result in any change in the costs of or revenues to the DBFO Co in the conduct of the Operations; (d) any Compensation Event; (e) the imposition or removal of User Paid Tolls or any change in User Paid Tolls within the scope of paragraph 6 of Part 6 of Schedule 12 which results in any change in the costs of the DBFO Co in the conduct of the Operations. "Eligible Force Majeure" has the meaning given to it in paragraph 2 of Part 2 of Schedule 11 [Force Majeure]. "Emergency" means any unforeseen event affecting the Project Facilities whether directly or indirectly which causes or has the potential to cause disruption to the free flow of traffic on the Project Road or a threat to the safety of the public or which is an immediate or imminent threat to the long term integrity of any part of the infrastructure of the Project Facilities or to land adjacent to the Project Facilities or likely to be affected by events on the Project Road. "Encumbrance" means any mortgage, charge, pledge, lien, assignment, option, right to acquire, right of pre-emption, security interest, trust arrangement and any other equity or preferential right or any agreement or arrangement to create any of them. "Event of Default" means any of the events set out in Clause 36.1 [Events of Default]. "Excepted Off-Site Works" has the meaning given to it in Clause 11.2.7. "Excepted Works" means all or any of: (a) the Excepted Off-Site Works; and (b) (provided that, at all times prior to the Date for Completion, the DBFO Co shall have complied with its obligations under Part 6 of Schedule 4 (and without prejudice to Clause 11.2.6.3)) any 11 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) Traffic Noise Works which, in accordance the provisions of Part 6 of Schedule 4, fall to be completed after the Date for Completion. "Existing Road" means the lengths of trunk road or motorway described in Part 1 of Schedule 3 (and shown on drawings numbered C2/09/100/14 Revision B, C 1/09/100/01 Revision C C3/09/100/01 Revision B and C3/09/100/02 Revision C contained in Part 7 of Schedule 3), including without limitation: (a) all carriageways, hard shoulders, slip roads, access roads, side roads, bridges and other Structures whether over or under such road (but excluding the bridges and other Structures (if any) so specified in Part 1 of Schedule 3); and (b) unless otherwise expressly provided, any Upgraded Sections, together with all supporting infrastructure and amenity, including without limitation all fences and barriers, drainage systems including outfalls and balancing ponds, grassed areas, hedges and trees, planted areas, footways, road markings, road traffic signs, road lighting, communications installations, public toilets, embankments and cuttings, but excluding any parts thereof which are excluded from this definition from time to time in accordance with Clause 11.3.4.2. "Expected Final Inspection Date" has the meaning given in Clause 11.1.1.1. "Expert" means any person appointed as such from time to time under and subject to the provisions of Schedule 15 [Disputes Resolution Procedure]. "Expiry Date" has the meaning given in Clause 17.1 [Handback Requirements]. "Final Inspection Commencement Date" has the meaning given in Clause 11.1.1.9. "Financial Model" means the financial model created for the DBFO Co and embodied in its financial model software (to be run in conjunction with an IBM (or IBM compatible) personal computer with 24 megabytes or more of operating memory) setting out the basis on which the financing of the Project and/or the costs of and revenue from the Project have been calculated by the DBFO Co (including without limitation the assumptions used, the cell logic network for the financial model software and any accompanying documentation necessary to operate the financial model), whether embodied on tape, disk or other electronic storage medium. "Financial Terms" means the financial terms set out in the Funding Agreements. "First Contract Year" has the meaning given in the definition of "Contract Year". "First Party" has the meaning given in Clause 44.1.3. "Force Majeure" means any of those events referred to in Part 2 of Schedule 11 [Force Majeure]. "Fossils and Antiquities" means all fossils, articles of value or antiquity and structures or other remains or things of particular geological, historical or archaeological interest discovered on the Site or Adjacent Areas or in the course of carrying out the Operations. "Funders" means all or any of the persons who provide financing or funding in respect of the Project under the Funding Agreements. "Funding Agreements" means all or any of the agreements or instruments of even date herewith specified in Clause 2.3.1.3, including any amendments or supplements thereto, any transactions entered into after the date of this Agreement pursuant to any of the Master Hedging Agreements referred to in Clause 2.3.1.3.12 and any agreements or instruments entered into by the DBFO Co to raise additional or substitute finance or 12 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) financial facilities of any form or relating to the rescheduling of its indebtedness or the re-financing of the Project, and "Funding Agreement" shall be construed accordingly, provided that the facility agreement referred to in Clause 2.3.1.3.4 shall only be treated as a Funding Agreement for the purposes of Clause 40.3 to the extent that amounts are owed under such agreement to a person other than any Sponsor or any Associated Company of such Sponsor. "General Change Procedure" means the procedure set out in Part 1 of Schedule 12 [General Change Procedure]. "Good Industry Practice" means the exercise of that degree of skill, diligence, prudence and foresight which would reasonably and ordinarily be expected from a skilled and experienced operator seeking in good faith to comply with its contractual obligations, complying with all applicable laws and engaged in the same type of undertaking and under the same or similar circumstances and conditions. "Government" means the government of the United Kingdom. "Ground, Physical and Geophysical Investigations" means the investigation of the conditions of the Site and Adjacent Areas, including the surface and subsoil, to enable the Works to be designed and constructed with due regard for those conditions and for seismic activity in the region of the Site and Adjacent Areas. "Handback Amount" has the meaning given in Clause 17.6.7. "Handback Inspection" has the meaning given in Clause 17.6.1. "Handback Requirements" means the requirements set out or identified or referred to in paragraph I of Part 4 of Schedule 4 [Handback Requirements]. "Hedging Agreement" means an agreement entered into by the DBFO Co for the purposes of hedging the exposure of the DBFO Co to interest rate fluctuations under any Funding Agreement. "HGV" means any motor vehicle greater than 5.2 metres in length. "Highways Act" means the Highways Act 1980. "Highway Construction Details" or "HCD" means the Highway Construction Details published by HMSO as Volume 3 of the Manual of Contract Documents for Highway Works. "Holding Company" has the meaning given to it in Section 736 of the Companies Act 1985 as amended by Section 144 of the Companies Act 1989. Notwithstanding the provisions of Clause 1.2.5 this definition shall not be changed in the event of an amendment to the definition of "holding company" contained in the Companies Act 1985 as amended by the Companies Act 1989, whether by any subordinate legislation or otherwise. "Hold Point" has the meaning given in paragraph 2 of Part 1 of Schedule 5. "Immaterial Amendments and Waivers" means an amendment or waiver of any "of the terms of any Funding Agreement which does not in any way affect or alter: (a) the amount of any liability or indebtedness of, or the amount of any loan or other financial accommodation made or to be made available to, the DBFO Co under or pursuant to such Funding Agreement or any other Funding Agreement; (b) the currency of such Funding Agreement, the stated due date or dates for any payment or repayment under such Funding Agreement, the rate or rates of interest applicable under such Funding Agreement, any fees, commissions or other charges payable under such Funding 13 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) Agreement or any other amount or matter which would be taken into account in calculating the Relevant Funding Liabilities. "Impact Date" has the meaning given in paragraph 5.13 of Part 1 of Schedule 12. "Implementation Date" means the date for implementation of a Department's Change in Specification, as agreed or determined in accordance with either paragraph 3 or paragraph 4 of Part 3 of Schedule 12. "Improvement" means any change, improvement or addition proposed to be made by the DBFO Co to the design, layout or structure of the Existing Road (other than any Upgraded Section) at any time or of the New Road at any time after the issue of the Completion Certificate which can be lawfully accomplished by the DBFO Co without obtaining specific line, side road or compulsory purchase orders under the Highways Act. "Index" has the meaning given in paragraph 1 of Part 5 of Schedule 9. "Indicators" has the meaning given in paragraph 5.1 of Part 1 of Schedule 12. "Individual Threshold" means (pound)500,000 (in April 1995 prices). "Initial Inspection" has the meaning given in Clause 17.2.1. "Initial Design and Construction Value" has the meaning given in Clause 4.3. "Inspection Area" has the meaning given in Clause 11.1.1.1.1. "Inspection Schedule" has the meaning given in Clause 11.1.1.1. "Insulation Works" has the meaning given to it in Part 6 of Schedule 4. "Intellectual Property" means all current and future legal and/or equitable interests in registered or unregistered trade marks, service marks, patents, registered designs, utility marks, applications for any of the foregoing, copyrights, unauthorised extraction rights, unregistered designs, inventions, confidential information, know-how or other intellectual property rights subsisting in or relating to the Design Data and/or the Traffic Data. "Intercreditor Agent" means any bank, trustee or other financial institution appointed by the Credit Providers to act in that capacity and such substitute as may be appointed from time to time in accordance with the Direct Agreement and notified to the Secretary of State in writing. "Interested Parties" means those persons who may be affected by the carrying out of the Works or Operations or who are duly authorised by a Statutory Requirement to review or otherwise take an interest in the Works or Operations, including without limitation the Relevant Authorities and those persons identified in Part 2 of Schedule 8. "Interest Rate" means a rate of interest per annum equivalent to the average of the base lending rates announced by Barclays Bank PLC and National Westminster Bank PLC which are current on the date upon which the amount bearing interest first became due (such interest to accrue daily on the basis of a 365 day year and to be compounded at six monthly intervals). In the event of any variation in such lending rates being announced while such amount remains outstanding, the interest payable shall be correspondingly varied from the date of each such variation. "Landfill Tax" means any amount payable by way of that tax announced by the Chancellor of the Exchequer on 29th November 1994 and to be introduced by legislation in the Finance Act 1996 which 14 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) requires certain persons to account to HM Customs & Excise for tax in respect of the disposal of material as waste. "Lane Closure" has the meaning given in paragraph 1 of Part 3 of Schedule 9. "Lane Closure Charge" means the charge referred to in paragraph 3.1 of Part 3 of Schedule 9 [Lane Closure Charge]. "Last Contract Year" has the meaning given in the definition of "Contract Year". "Latent Defect" has the meaning given in Clause 15.1 [Latent Defects]. "Law" means any applicable law, statute, proclamation, by-law, directive, decision, regulation, rule, order, notice, rule of court or delegated or subordinate legislation. "Lease" means a lease in respect of the Maintenance Area in the form set out in Part 5 of Schedule 3. "Legislation" means United Kingdom legislation or subordinate legislation or any legislative act of the Council of the European Union or the Commission of the European Communities (or the European Parliament to the extent that it has legislative powers) which (without further enactment) has legal effect within the United Kingdom, including for the avoidance of doubt any such legislation, subordinate legislation or legislative act which introduces or modifies any tax (other than any Landfill Tax). "Liaison Procedures" means any of the procedures set out in Schedule 16 [Liaison Procedures] or to be developed pursuant to this Agreement in accordance with such Schedule 16, as the case may be. "Local Authority Road" means any De-Trunked Segment and any part of the Off-Site Facilities which is or is to be a highway maintainable at public expense (as indicated or shown on drawings entitled 'Land Areas' contained in Part 7 of Schedule 3), including without limitation all carriageways, hard shoulders, slip roads, access roads, side roads, bridges and other highway structures, together with all supporting infrastructure and amenity, including without limitation all fences and barriers, drainage systems including outfalls and balancing ponds, grassed areas, hedges and trees, planted areas, footways, road markings, road traffic signs, road lighting, communications installations, embankments and cuttings. "Local Facilities" means any De-Trunked Segment and any part of the Off-Site Facilities (including without limitation any Local Authority Road) which is intended, on completion, to be handed over to the Secretary of State, a local authority or other third party for operation and maintenance. "Local Person" means any highway authority or other third party to whom any Local Facilities or De-Trunked Segments are to be handed over in accordance with Clause 11.3 [Local Facilities and De-Trunked Segments]. "Loss" means any loss, damage, costs or expenses. "Maintenance Area" means the area identified as such on drawing numbered 40114/04/05/16 Revision A contained in Part 7 of Schedule 3. "Maintenance Depot" means that part of the Permanent Works relating to the design, construction and completion of a maintenance depot located on the Maintenance Area. "Maintenance Works" means any works for the maintenance or repair of the Existing Road or the Maintenance Depot or, after the issue of the Completion Certificate, the New Road, but excluding any Routine Maintenance. 15 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Manual of Contract Documents for Highways Works" or "MCHW" means the manual of contract documents for highways works published by HMSO. "Measure" means, in respect of the traffic passing a Measurement Point during a period, to count the number of vehicles comprising such traffic and to determine the classification of each such vehicle in accordance with the provisions of Clause 28.3.2 [Measuring Equipment], and "Measurement" shall be construed accordingly. "Measuring Equipment" has the meaning given in Clause 28.3.1 [Measuring Equipment]. "Measurement Limits of Accuracy" has the meaning given in Clause 28.4.1. "Measurement Point" means any point designated as such pursuant to Clause 28.2 [Measurement Points]. "Milestone Event" has the meaning given in Part 2 of Schedule 1 [Milestone Event]. "Monthly Traffic Payment" has the meaning given in Clause 29.3.1. "Monthly Report" has the meaning given in paragraph 2 of Part 2 of Schedule 14. "Net Cash Flow" means the sum of any Traffic Payments, any Safety Performance Payments and any Aggregate Commuted Sums less any Lane Closure Charges, operating and maintenance costs, capital expenditure and taxes. "Net Present Value" means the net present value of any stream of cashflows calculated as at the stated reference date, determined by: (a) discounting any such cash flows subsequent to the reference date by the Discount Rate (with semi-annual rests), and (b) inflating any such cash flows prior to such reference date by the Discount Rate (with semi-annual rests). "New Funding Agreement" has the meaning given in Clause 2.4.4.1. "New Road" means the lengths of trunk road or motorway described in Part 2 of Schedule 3 (and shown on drawings numbered C2/09/100/14 Revision B, C 1/09/100/01 Revision C, C3/09/100/01 Revision B and C3/09/100/02 Revision C contained in Part 7 of Schedule 3) which are constructed or modified or to be constructed or modified by the DBFO Co, including without limitation: (a) all carriageways, hard shoulders, slip roads, access roads, side roads, bridges and other Structures whether over or under such road (but excluding the bridges and Structures (if any) so specified in Part 2 of Schedule 3); and (b) unless otherwise expressly provided, any Upgraded Sections, together with all supporting infrastructure and amenity, including without limitation all fences and barriers, drainage systems including outfalls and balancing ponds, grassed areas, hedges and trees, planted areas, footways, road markings, road traffic signs, road lighting, communications installations, embankments and cuttings. "Noise Insulation Requirements" has the meaning given to it in Part 6 of Schedule 4. "Notes for Guidance" means the Notes for Guidance on the Specification for Highway Works, published by HMSO as Volume 2 of the Manual of Contract Documents for Highway Works. 16 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Notice" has the meaning given in Clause 42.1. "O&M Requirements" means the standards, specifications, procedures and other requirements for the operation and maintenance of the Project Facilities set out or identified or referred to in Part 2 of Schedule 6, as amended from time to time by any Department's Change in Specification or in accordance with Clause 12.2 [O&M Requirements]. "Objection" has the meaning given in Clause 26A.4.2.6. "Off-Site Facilities" means those parts of the Permanent Works located on Adjacent Areas, including but not limited to carriageways, hard shoulders, slip roads, access roads, side roads, bridges and other highway structures, fences and barriers, drainage systems including outfalls and balancing ponds, grassed areas, hedges and trees, planted areas, footways, road markings, road traffic signs, road lighting, communications installations, embankments and cuttings, but excluding any parts thereof which are excluded from this definition from time to time in accordance with Clause 11.3.4.2. "Off-Site Works" means those parts of the Works which are to be carried out by the DBFO Co in respect of the Off-Site Facilities. "Operations" means the activities of or required of the DBFO Co (and/or any of the DBFO Co's agents, employees, contractors or sub-contractors of any tier) in connection with the design, construction, completion, commissioning and testing of the Works, the conduct of any Additional Works Services, the operation and maintenance of the Project Facilities (including without limitation the performance of any Maintenance Works and any Routine Maintenance), the performance of all other obligations of the DBFO Co under this Agreement, the conduct of any other works or operations of the DBFO Co (and/or any agents, employees, contractors or subcontractors of any tier of the DBFO Co) on or in relation to the Project Facilities, the Site or the Adjacent Areas and the performance by the unincorporated joint venture comprising Trafalgar House Construction Special Projects Limited and Wimpey Construction Limited (and/or any of its agents, employees, contractors or sub-contractors of any tier) of all or any of such unincorporated joint venture's obligations under the Advance Works Contract. "Original Financial Model" has the meaning given in paragraph 5.13 of Part 1 of Schedule 12. "Original Funding Agreements" mean the Funding Agreements of even date herewith specified in Clause 2.3.1.3 (excluding any amendments or supplements thereto and any agreements or instruments entered into by the DBFO Co to raise additional or substitute finance or financial facilities of any form or relating to the rescheduling of its indebtedness or the re-financing of the Project but including any novation or assignment (by way of transfer certificate or otherwise) of any of the Funders' rights under such Funding Agreements). "Ordinary Shares" means the 3,000,001 ordinary shares of (pound)1 each in the issued share capital of the DBFO Co. "Other Party" has the meaning given in paragraph 2.1 of Part 1 of Schedule 12. "Other Vehicles" means all motor vehicles other than HGVs. "Penalty Point" has the meaning given in Clause 24.2 [Penalty Points]. "Penalty Points Commencement Notice" has the meaning given in Clause 24.1A.1. "Performance Guarantee" means a guarantee in the form set out in Part 1 of Schedule 1. "Permanent Works" means the works having a permanent function (regardless of the length of the design life of such works) which are to be designed, constructed and completed by the DBFO Co in accordance with the Construction Requirements and the Communications Requirements. 17 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Permit to Use" means a permit in the form set out in Annex 1(15) to Part 3 of Schedule 4 to be issued by the Department's Agent prior to the operation of the New Road (other than any Upgraded Section) in accordance with Clause 11.1.2. "Permitted Closure" has the meaning given in Clause 15.4.3.1. "Permit to Use Date" means the date on which the Permit to Use is issued or deemed to be issued in accordance with Clause 11.1. "Permit to Use Standard" has the meaning given in Clause 11.1.1.1. "Plant" means machinery, apparatus and the like intended to form or forming part of the Permanent Works or the Existing Road. "Programme" means the outline programme for the design and construction of the Works appearing in Schedule 2 (as amended from time to time in accordance with this Agreement). "Project" means the design and construction of the Works, the financing, operation and maintenance of the Project Facilities and the conduct of any other Operations during the Contract Period. "Project Documents" means the documents referred to in Clause 2.3.1. "Project Facilities" means the Project Road, the Maintenance Depot and the Off-Site Facilities. "Project Quality Director" means the person so appointed in accordance with Clause 21.5 [Project Quality Director]. "Project Road" (other than for the purposes of Part 6 of Schedule 12 [User Paid Tolls]) means the Existing Road and the New Road. "Provisional Monthly Payment" has the meaning given in Clause 29.3.1. "Proponent" has the meaning given in paragraph 2.1 of Part 1 of Schedule 12. "Proposed Substitute" has the meaning given to it in the Direct Agreement. "Proposal" has the meaning given in paragraph 1 of Section A of Part 3 of Schedule 4. "Protestor" means any person not entitled to be upon the Site or Adjacent Areas and who is engaged in a protest action against the construction or operation of the Project Road or against the construction or operation of highways generally. "Qualifying Number" has the meaning given in Clause 24.3. "Quality Management Systems" has the meaning given in Clause 21.1 [Quality Management Systems and Plans]. "Quality Manual" means any quality manual or procedure referred to in Clause 21.2 [Quality Manuals and Procedures]. "Quality Plan" means any quality plan in force from time to time in accordance with Clause 21.1 [Quality Management Systems and Plans], and in particular: (a) the DBFO Co's Quality Plan for the Management of Construction; 18 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) (b) the Designer's Quality Plan for Design; (c) the Contractor's Quality Plan; (d) the Designer's Quality Plan for Examination of the Works; (e) the DBFO Co's Quality Plan for the Management of O&M; and (f) the DBFO Co's Quality Plan for O&M. "Quarter" means a period of three calendar months beginning on 1st January, 1st April, 1st July or 1st October. "Regional Legislative Body" means any body (having jurisdiction solely within a part of the United Kingdom) established after the date of this Agreement with legislative powers that, at the date of this Agreement, were exercisable solely by Parliament (but only to the extent such body is exercising such legislative powers). "Relevant Authority" means any entity whose authority is or may be required for the carrying out of all or any part of the Operations or which has any authority in respect of any part of any of the Project Facilities under any Law, including without limitation those entities identified in Part 1 of Schedule 8 and "Relevant Authorities" shall be construed accordingly, provided that, for the purposes only of the definition of "Change in Law", "Relevant Authority" shall exclude the Parliament or Government of the United Kingdom or any department or agency thereof (other than the Secretary of State as highway authority for any road other than the Project Road), any Regional Legislative Body or any department or agency thereof and the Council of the European Union or the Commission of the European Communities or any entity to which the Council of the European Union or Commission of the European Communities has delegated any of its powers. "Relevant Change" means each Eligible Change which is, in accordance with paragraph 2.2.1 of Part 1 of Schedule 12, the subject of a notice pursuant to paragraph 2.1 of Part 1 of Schedule 12. "Relevant Change in Law" means any Change in Law the purpose and effect of which is to discriminate against: (a) the Project Road in relation to other roads; (b) roads whose design, construction, financing and operation are procured by a single contract on a similar basis to the Project Road in relation to other roads; (c) the DBFO Co in relation to other companies; or (d) companies undertaking the functions referred to in paragraph (b) above (under a single contract with the Secretary of State similar to this Agreement) in relation to other companies; provided that Legislation which also affects roads other than the Project Road or companies other than the DBFO Co in the same terms shall not be deemed to be discriminatory solely on the basis that its effect on the Project Road or the DBFO Co is greater than on any such other roads or other companies. "Relevant Date" has the meaning given in Clause 11.1.3. "Relevant Funding Liabilities" has the meaning given to it in Clause 40.3.3. "Relevant Notice" has the meaning given in Clause 25.5.1. 19 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Relevant O&M Contract" has the meaning given to it in Clause 2.3.5. "Relevant O&M Contractor" has the meaning given to it in Clause 2.3.5. "Relevant Payments" has the meaning given in Clause 36.3A.1. "Relevant Remedial Works" has the meaning given in Clause 15.4.3. "Relevant Renewal Works" has the meaning given in Clause 17.8.1. "Relevant Secretary of State Breach" has the meaning given to it in Part 1 of Schedule 11. "Remedial Period" has the meaning given in Clause 24.1 [Remedial Works]. "Renewal Amount" has the meaning given in Clause 17.3.1.3. "Renewal Programme" has the meaning given in Clause 17.3.1.2. "Renewal Works" has the meaning given in Clause 17.3.1.1. "Report" means any report given in accordance with Clause 22.1 [Required Reports]. "Requirements of Interested Parties" means the requirements of Interested Parties set out or referred to in Parts 3 and 4 of Schedule 8. "Residual Life" means that part of the Serviceable Life of an element of the Project Facilities that remains at the Termination Date. "Residual Value" means any value attaching to the Ordinary Shares immediately following termination of this Agreement pursuant to Clause 40 arising as a result of or attributable to either: (a) the continuing activities of the DBFO Co and any of its Subsidiaries other than the Project; or (b) the value of any assets relating to or derived from the Project remaining vested in the DBFO Co or any of its Subsidiaries immediately following termination, but excluding the value of any assets to the extent that the liability incurred in connection with the acquisition or creation thereof is excluded under Clauses 40.3.2.3 to 40.3.2.5, such value to be as agreed by the Department's Representative and the DBFO Co's financial adviser or, if no such agreement has been reached within 60 days after the date of termination of this Agreement, as determined by the Disputes Resolution Procedure on reference by either Party. "Retention Account" means a joint deposit account to be opened in the names of the Secretary of State and the DBFO Co in accordance with Clause 17.7.1. "Retention Sum" means an amount equal to 40% of the Renewal Amount from time to time. "Review Date" means the last day of a Contract Year or, for purposes of Schedule 12, any other date on which any Index is to be applied. "Review Procedure" means the procedure whereby submissions are made to the Department's Agent or the Department's Representative as set out in Part 3 of Schedule 7 [Review Procedure]. "Revised Values" has the meaning given in paragraph 5.3 of Part 1 of Schedule 12. 20 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Rights in respect of land" means any right over or in respect of or otherwise relating in any way to land, whether temporary, revocable, legal, equitable or otherwise of whatever nature. "Road Length" means each stretch of the Project Road served by a single Measurement Point, as shown in drawings numbered C2/09/100/14 Revision B, C1/09/100/01 Revision C, C3/09/100/01 Revision B and C3/09/100/02 Revision C contained in Part 7 of Schedule 3 as adjusted to reflect the addition of any Measurement Points pursuant to Clause 28.2.1.2. "Road User's Charter" means the document of that name issued by the Highways Agency in April 1994 or any replacement or substitute therefor. "Routine Maintenance" means work which is short term or cyclic in nature and necessary to keep the Project Road in good and safe working order, including without limitation minor repair s to all elements of the Project Road, cleansing, verge and horticultural maintenance and Winter Maintenance and inspections and surveys associated with any of the foregoing. "RPI" means the Retail Prices Index (all items) published by the Central Statistical Office. "Safety Improvement" means any Subsequent Scheme or Improvement proposed by the DBFO Co in accordance with paragraph 3 of Part 5 of Schedule 13. "Safety Performance Payment" means the payment referred to in paragraph 2.1 of Part 4 of Schedule 9. "Schedule of Lane Closures" means a schedule submitted: (a) by the DBFO Co under Clause 13.3.1 (or any revision thereof submitted under Clause 13.3.2 or Clause 13.3.3) indicating the period or periods during which the DBFO Co plans to effect any Lane Closure in respect of the Project Road; or (b) by the Secretary of State under Clause 13.5.2 indicating the period or periods during which the Secretary of State plans to close one or more lanes of traffic using the Connecting Roads or to take any other action liable to restrict traffic flow on the Connecting Roads, but excluding in either such case any Type C lane closures (as defined in Section 6 of Chapter 8 of the Traffic Signs Manual). "Scheme Orders" means those road orders and compulsory purchase orders listed in Part 6 of Schedule 3. "Second Inspection" has the meaning given in Clause 17.4.1. "Second Party" has the meaning given in Clause 44.1.3. "Serviceable Life" means: (a) in the case of a proprietary manufactured element of the Project Facilities, the period of time, as declared in writing by the manufacturer, for which the element will continue to perform as intended after incorporation in the Project Facilities in a manner, and operating under design conditions, accepted by the manufacturer, and subject to maintenance in accordance with the manufacturer's written recommendations; (b) in the case of a non-proprietary element of the Project Facilities, the period of time for which the element is expected to continue to perform as intended after completion of construction of the relevant Project Facilities, and subject to design in accordance with the Construction Requirements and the Communications Requirements and maintenance in accordance with the O&M Requirements. 21 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Service Obligations" has the meaning given in Clause 36.3A.5. "Shadow Penalty Point Notice" has the meaning given in Clause 24.1A.1. "Shadow Penalty Points" has the meaning given in Clause 24.1A.2.2. "Site" means the land, spaces, waterway, roads and any surface required for the Project Road and the Maintenance Area, shown or identified as such on the date hereof on drawings entitled 'Land Areas' contained in Part 7 of Schedule 3. "Specification for Highway Works" or "SHW" means the Specification for Highway Works, published by HMSO as Volume 1 of the Manual of Contract Documents for Highway Works. "Sponsors" means both or either of Trafalgar House Corporate Development Limited registered in England with number 1540913 and BICC plc registered in England with number 395826 and "Sponsor" shall be construed accordingly. "Statutory Requirement" means the requirement of any United Kingdom or European Community Law or of any Law, requirement or demand of any Relevant Authority which has jurisdiction with regard to the Operations or whose systems may be affected by the conduct of any of the Operations. "Statutory Undertaker" means an undertaker for the purposes of Part III of the New Roads and Street Works Act 1991 as defined in Section 48(4) of that Act. "Step-In Bond" has the meaning given in Clause 1.1 of the Direct Agreement. "Step-In Obligor" has the meaning given in Clause 1.1 of the Direct Agreement. "Step-In Period" has the meaning given in Clause 1.1 of the Direct Agreement. "Step-In Undertaking" has the meaning given in Clause 1.1 of the Direct Agreement. "Structure" means (except in Parts 1, 2 and 5 of Schedule 4) any (temporary or permanent): (a) bridge, tunnel or culvert having an individual span of 3 metres or more or (in respect of a multi-span structure) a cumulative span of 5 metres or more; (b) bridge, tunnel or culvert (other than of corrugated metal) having a span of 1.8 metres or more and where the cover to the road surface is less than 1 metre; (c) corrugated metal bridge or culvert having a span of 0.9 metres or more (irrespective of cover to the road surface); (d) pedestrian subway (irrespective of span and cover to the road surface); (e) retaining wall, including without limitation reinforced earth, anchored earth and cribwall systems with slope between 70(degree) and 90(degree) to the horizontal, where the level of the fill at the back of the wall is greater than 1.5m above the finished ground level in front of the wall; (f) (save in respect of Clause 15.4 [Costs of Latent Defects]) environmental barrier; and (g) (save in respect of Clause 15.4 [Costs of Latent Defects]) sign/signal gantry or high mast for lighting, television cameras and catenary lighting systems. 22 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Subsequent Scheme" means any change, improvement or addition proposed to be made by the DBFO Co to the design, layout or structure of the Existing Road (other than any Upgraded Section) at any time or of the New Road at any time after the issue of the Completion Certificate which cannot lawfully be accomplished by the DBFO Co without obtaining specific line, side road or compulsory purchase orders under the Highways Act. "Subsequent Scheme Notice" has the meaning given in paragraph 1.1 of Part 3 of Schedule 13. "Subsidiary" shall have the meaning given to it in Section 736 of the Companies Act 1985 as amended by Section 144 of the Companies Act 1989. Notwithstanding the provisions of Clause 1.2.5 this definition shall not be changed in the event of an amendment to the definition of "subsidiary" contained in the Companies Act 1985 as amended by the Companies Act 1989, whether by any subordinate legislation or otherwise. "Taxes" means all present and future taxes (including for the avoidance of doubt, United Kingdom income tax, corporation tax and advance corporation tax), levies, assessments, imposts, deductions, withholdings and charges of a similar nature imposed by any governmental authority of the United Kingdom or any part thereof and any payments made in respect thereof, including, for the avoidance of doubt, any interest thereon and any penalties with respect thereto and "Tax" and "Taxation" shall be construed accordingly. "Tax Relief' means any relief, credit, loss, allowance, deduction, set-off or right to repayment in respect of Taxation. "Technical Requirements" means the Construction Requirements, the O&M Requirements, the Communications Requirements and the Handback Requirements. "Temporary Adjacent Areas" means those parts of the Adjacent Areas shown or identified as such on drawings entitled 'Land Areas' contained in Part 7 of Schedule 3. "Temporary Construction Area" means at any time any area within any Upgraded Section within which any part of the Works are actively being carried out at such time. "Temporary Works" means all works and things (of a temporary nature) of every kind required in or about the execution and completion of the Permanent Works or of capital works in connection with the operation, maintenance or improvement of the Project Facilities. "Termination Accounts" means: (a) accounts of the DBFO Co and, if appropriate, consolidated accounts of the DBFO Co and its Subsidiaries and Yorkshire Holdings which have been prepared applying accounting principles and bases consistent with those applied in the immediately preceding audited accounts of the DBFO Co or, as the case may be, consolidated audited accounts of the DBFO Co and its Subsidiaries and Yorkshire Holdings; and (b) a statement of liabilities of the DBFO Co in respect of the Project as at the date of termination of this Agreement, or which arise out of or in connection with such termination, in each case drawn up as at such date of termination and to be agreed or determined as provided in Clause 40.1 [Termination Accounts]. "Termination Date" means the date upon which this Agreement terminates. "Termination Notice" has the meaning given in Clause 3 of Part 4 of Schedule 1. "Terrorist Remedial Works" has the meaning given in Clause 27.9.3. 23 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "3i" means 3i Group plc. "Traffic Census Equipment" has the meaning given in Clause 28.3.3. "Traffic Data" means the information relating to traffic in the reports submitted pursuant to paragraph 2 of Part 2 of Schedule 14. "Traffic Noise Works" has the meaning given to it in Part 6 of Schedule 4. "Traffic Payment" means the amount determined in accordance with Part 2 of Schedule 9 in respect of a Contract Year. "Traffic Sign" has the meaning given to it in Section 64 of the Road Traffic Regulations Act 1984. "Traffic Signs Provisions" means the Road Traffic Regulation Act 1984, The Traffic Signs Regulations and General Directions 1994 (S.I. 1994/1519) and any authorisation given under Section 64 or direction given under Section 65 of the Road Traffic Regulation Act 1984. "Traffic Signs Manual" means the manual of that name published by HMSO and any associated advice (including without limitation all local transport notes issued from time to time by the Department and published by HMSO). "Transfer Date" has the meaning given in Clause 7.3.5. "Trunk Roads Maintenance Manual" or "TRMM" means the trunk roads maintenance manual issued by the Department. "Upgraded Sections" means those lengths of existing trunk road or motorway described as such in Part 1 of Schedule 3 which are to be widened or otherwise modified in accordance with the Construction Requirements and the Communications Requirements. "User Paid Tolls" has the meaning given in paragraph 1 of Part 6 of Schedule 12. "Users" means the users of the Project Road. "VAT" means value added tax or any similar tax which is introduced to replace value added tax. "VAT Sum" has the meaning given in Clause 44.1.5. "Verification" means the process of testing any of the Measuring Equipment for the purpose of assessing any error in Measurement, and "Verify" shall be construed accordingly. "Warning Notice" has the meaning given in Clause 24.3. "Winter Maintenance" means those works required to prevent the formation of ice and to remove snow and ice as more particularly identified in Section 5 of Part 2 of Schedule 6 and all maintenance works and functions relating thereto. "Working Day" means a day (other than a Saturday or Sunday) on which banks are open for business in the City of London. "Works" means the Permanent Works (including Plant) and the Temporary Works required in accordance with the Construction Requirements and the Communications Requirements for the design, construction, testing and completion of the New Road, the Maintenance Depot, the Off-Site Facilities and any works in respect of any De-Trunked Segment and all related slip roads, access roads, side roads, bridges and other 24 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) highway structures, fences and barriers, drainage systems including outfalls and balancing ponds, grassed areas, hedges and trees, planted areas, footways, road markings, road traffic signs, road lighting, communications installations, embankments and cuttings and archaeological and ecological works. "Works Change" means a variation in the design, quality or quantity of the Works and may include any addition, omission, substitution, alteration in design and/or variation in the Construction Requirements or the Communications Requirements. A Works Change shall be either a Department's Works Change or a DBFO Co's Works Change. "Works Programme" means the detailed programme of design, investigations, construction and related works, based upon the Programme, to be submitted by the DBFO Co in accordance with Clause 10.2 [Works Programme) or any amended or varied version thereof submitted by the DBFO Co in accordance with Clause 10.3 [Variations to Works Programme). "Yorkshire Holdings" means Yorkshire Link (Holdings) Limited registered in England with number 3059235. 1.2 Interpretation Save to the extent that the context or the express provisions of this Agreement otherwise require: 1.2.1 headings and sub-headings are for ease of reference only and shall not be taken into consideration in the interpretation or construction of this Agreement; 1.2.2 all references to Clauses and Schedules are references to Clauses of and Schedules to this Agreement and all references to Parts, Sections, paragraphs, Annexes or Appendices are references to Parts, Sections and paragraphs contained in and Annexes and Appendices to the Schedules; 1.2.3 the Schedules to this Agreement are an integral part of this Agreement and reference to this Agreement includes reference thereto; 1.2.4 all references to agreements, documents or other instruments include (subject to all relevant approvals and any other provision of this Agreement concerning amendment of agreements, documents or other instruments) a reference to that agreement, document or instrument as amended, supplemented, substituted, novated or assigned; 1.2.5 all references to any statute or statutory provision (including any subordinate legislation) shall include references to any statute or statutory provision which amends, extends, consolidates or replaces the same or which has been amended, extended, consolidated or replaced by the same and shall include any orders, regulations, codes of practice, instruments or other subordinate legislation made under the relevant statute; 1.2.6 all references to time of day shall be a reference to whatever time of day shall be in force in England and Wales; 1.2.7 the words "herein", "hereto" and "hereunder" refer to this Agreement as a whole and not to the particular Clause, Schedule, Part, Section, paragraph, Annex or Appendix in which such word may be used; 1.2.8 words importing the singular include the plural and vice versa; 1.2.9 words importing a particular gender include all genders; 25 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 1.2.10 "person" includes any individual, partnership, firm, trust, body corporate, government, governmental body, authority, emanation, agency or instrumentality, unincorporated body of persons or association; 1.2.11 any reference to a public organisation shall be deemed to include a reference to any successor to such public organisation or any organisation or entity which has taken over the functions or responsibilities of such public organisation; 1.2.12 references to "Parties" mean the parties to this Agreement and references to a "Party" mean one of the parties to this Agreement; 1.2.13 references to drawings are references to drawings appearing in the Schedules hereto provided that, in the event of any conflict or discrepancy between the stated revision of a drawing in this Agreement (other than as set out in Appendix 0/4 to Part 2 of Schedule 4) and the stated revision of such drawing as set out in Appendix 0/4 to Part 2 of Schedule 4, the latter shall prevail; 1.2.14 all monetary amounts are expressed in pounds sterling; and 1.2.15 references to amounts or sums being expressed in April 1995 prices are references to amounts or sums which have been or are to be adjusted to reflect the effects of inflation after that date as measured by changes in the RPI from the level published in May 1995 for the month of April 1995. April 1995 prices shall be calculated by applying the following formula: R(April 1995) = R(n) x RPI(April 1995) ---------------------- RPI(n) where: R(April 1995) = the relevant amount or sum expressed in April 1995 prices. N = the calendar month in respect of which the April 1995 price comparison is to be made. RPI(April 1995) = the RPI published in May 1995 for the month of April 1995. Rn = the actual amount or sum pertaining in month n. RPI(n) = the RPI published or which is to be published in month n+I for the preceding month n. 1.3 Language The language of this Agreement is English. All correspondence, drawings, Design Data, test reports, certificates, specifications and information shall be entirely in English. All operating and maintenance instructions, name and rating plates, identification labels and other written and printed matter required for the Operations shall be in English, as shall instructions and notices to the public and staff and all other signs and information notices. 1.4 Provisions applicable to Existing Road and New Road Save as otherwise expressly provided, both the provisions of this Agreement applicable to the Existing Road and the provisions of this Agreement applicable to the New Road shall apply in respect of any Upgraded Sections, provided that: 26 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 1.4.1 save as otherwise expressly provided, in respect of any statement of the time from which any provision of this Agreement is to apply, Upgraded Sections shall be treated as part of the Existing Road and not part of the New Road; and 1.4.2 the DBFO Co shall be relieved from the obligation to perform Routine Maintenance of any Temporary Construction Area in existence from time to time (but without prejudice to the obligation to comply with the Construction Requirements in respect of the operation or maintenance of such Temporary Construction Area). 2. DOCUMENTATION 2.1 Ambiguities In the case of any ambiguity or discrepancy between the provisions in the main body of this Agreement and those in any Schedule or between the provisions of any Schedules, the Department's Nominee (or, if the ambiguity or discrepancy affects both the Works and any other Operations, the Department's Representative) shall at the request of the DBFO Co state in writing which provision shall take priority. 2.2 Additional Payments and Time The DBFO Co shall not be entitled to any additional payment or extension of time under this Agreement as a result of giving effect to the decision of the Department's Nominee or Department's Representative under Clause 2.1 unless the ambiguity or discrepancy is one which the DBFO Co could not reasonably have been expected (in accordance with Good Industry Practice) to have identified or foreseen at any time prior to the execution of this Agreement. In such event the decision of the Department's Nominee or Department's Representative shall be treated as a Department's Works Change in accordance with Part 2 of Schedule 12 or as a Department's Change in Specification in accordance with Part 3 of Schedule 12, as appropriate, provided that if the Department's Nominee considers there to be any ambiguity or uncertainty as to which is appropriate, such decision shall be treated as a Department's Change in Specification in accordance with Part 3 of Schedule 12. 2.3 Project Documents 2.3.1 Prior to the execution of this Agreement the DBFO Co has provided to the Secretary of State copies of the following documents, which copies (if they are not originals) have been initialled by the Parties for the purposes of identification: 2.3.1.1 the shareholders agreement between the Sponsors; 2.3.1.2 the Memorandum and Articles of Association of the DBFO Co and Yorkshire Holdings; 2.3.1.3 each of the following: 2.3.1.3.1 the Direct Agreement; 2.3.1.3.2 a facility agreement of even date herewith made between the DBFO Co, Lloyds Bank Plc as agent, ABN AMRO Bank N.V., Banque Indosuez, Credit Suisse, The Dai-Ichi Kangyo Bank, Ltd., Lloyds Bank Plc and National Westminster Bank Plc as the arrangers and the financial institutions described therein as lenders in respect of maximum aggregate credit facilities of (pound)268,540,000. 27 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 2.3.1.3.3 a facility agreement of even date herewith made between the DBFO Co and the European Investment Bank as lender in respect of maximum aggregate credit facilities of (pound)90,000,000; 2.3.1.3.4 a senior subordinated facility agreement of even date herewith made between the DBFO Co and Morgan Grenfell & Co. Limited as lender in respect of maximum aggregate credit facilities of (pound)6,500,000; 2.3.1.3.5 a facility agreement of even date herewith made between the DBFO Co and 3i as lender in respect of maximum aggregate credit facilities of (pound)10,000,000; 2.3.1.3.6 a subordinated facility agreement of even date herewith made between the DBFO Co and Morgan Grenfell & Co. Limited and The Royal Bank of Scotland plc as lenders in credit facilities of such maximum aggregate principal amount as may be notified by the lenders to the DBFO Co in accordance with the terms thereof (but which shall not, in any event, exceed (pound)20,000,000); 2.3.1.3.7 a senior guarantee facility agreement of even date herewith made between the DBFO Co and the European Investment Fund as issuer of a guarantee to European Investment Bank for outstandings under the facility agreement referred to in Clause 2.3.1.3.3. in respect of a maximum amount of (pound)22,500,000; 2.3.1.3.8 a subordinated guarantee facility agreement of even date herewith between the DBFO Co and the European Investment Fund as issuer of a guarantee to the lenders under the senior subordinated facility agreement referred to in Clause 2.3.1.3.4 for outstandings of up to (pound)10,000,000; 2.3.1.3.9 the debenture of even date herewith granted by the DBFO Co to Lloyds Bank Plc as security trustee under the security trust deed referred to in Clause 2.3.1.3.11; 2.3.1.3.10 the share mortgage (incorporating a floating charge) of even date herewith granted by Yorkshire Holdings to Lloyds Bank Plc as security trustee under the security trust deed referred to in Clause 2.3.1.3.11 in respect of the Ordinary Shares; 2.3.1.3.11 the security trust agreement of even date herewith made between the DBFO Co, the Credit Providers in the facility agreements referred to in Clauses 2.3.1.3.2 to 2.3.1.3.8 (inclusive) and Lloyds Bank Plc as intercreditor agent and as security trustee; 2.3.1.3.12 the several International Swaps and Derivative Association, Inc. 1992 master agreements of even date herewith between the DBFO Co and various of the Credit Providers and the confirmations thereunder in respect of transactions entered into on the date hereof, 2.3.1.3.13 the two documents of undertaking and guarantee of even date herewith made between the DBFO Co, Morgan Grenfell & Co. 28 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) Limited and Trafalgar House Public Limited Company and BICC plc respectively; 2.3.1.3.14 account mandates of even date herewith from the DBFO Co to Lloyds Bank Plc in relation to the opening and running of the Project Accounts (as defined in the Intercreditor Agreement); 2.3.1.3.15 fee letters of even date herewith in connection with the payment by the DBFO Co of the fees described therein in relation to certain of the facilities referred to in Clauses 2.3.1.3.2 to 2.3.1.3.8 (inclusive) above; 2.3.1.3.16 the direct agreement of even date herewith made between the Contractor, Trafalgar House Public Limited Company, BICC plc, Lloyds Bank Plc as intercreditor agent and as the security trustee and the Borrower; 2.3.1.3.17 [Clause not used] 2.3.1.3.18 an Instrument of even date herewith executed by the DBFO Co whereby it created (pound)12,000,000 15% secured subordinated stock (which loan stock is subscribed for in full by the Sponsors); 2.3.1.3.19 the intercreditor agreement of even date herewith between, amongst others, the DBFO Co, the Credit Providers in the facility agreements referred to in Clauses 2.3.1.3.2 to 2.3.1.3.8 (inclusive) above, Trafalgar House Corporate Development Limited and BICC plc in respect of the regulation of the claims of such lenders against the DBFO Co; 2.3.1.4 the Construction Contract; 2.3.1.5 the agreement of even date herewith setting out the terms of the appointment of an independent engineer to act in relation to the Construction Contract and the Performance Bond referred to in Clause 2.3.1.8; 2.3.1.6 a Guarantee of even date herewith issued by BICC plc in favour of the DBFO Co in relation to certain obligations of Balfour Beatty Civil Engineering Ltd. under the Construction Contract; 2.3.1.7 a Guarantee of even date herewith issued by Trafalgar House Public Limited Company in favour of the DBFO Co in relation to certain obligations of Trafalgar House Construction Special Projects Limited under the Construction Contract; 2.3.1.8 the Performance Bond of even date herewith to be issued by Chemical Bank as issuing bank in favour of the DBFO Co and procured by the Contractor in relation to certain obligations of the Contractor under the Construction Contract; 2.3.1.9 the Design Contract (including, without limitation, the terms and conditions of engagement of the Archaeologist); 2.3.1.10 the Technical Services Agreement of even date herewith made between the DBFO Co and the Sponsors in relation to services to be provided by the Sponsors to the DBFO Co; 29 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 2.3.1.11 the Custody Agreement; 2.3.1.12 a Secondment Agreement of even date herewith between the DBFO Co, Trafalgar House Services Limited and BICC plc; 2.3.1.13 the Performance Guarantee of even date herewith issued by Lloyds Bank Plc to the Secretary of State pursuant to Clause 7.1.2; 2.3.1.14 the agreement relating to intellectual property rights and other matters of even date herewith between the DBFO Co, George Wimpey PLC, Trafalgar House Corporate Development Limited, Trafalgar House Construction Special Projects Limited, Morgan Grenfell & Co. Limited and the Secretary of State; 2.3.1.15 an agreement of even date herewith made between the DBFO Co and Babtie Group Limited; 2.3.1.16 the Lease referred to in Clause 7.1.5 (when entered into); 2.3.1.17 the Contractor Deferral Agreement of even date herewith made between the DBFO Co, the Sponsors and the Contractor. 2.3.2 The DBFO Co shall perform its obligations under and observe all the terms of the Project Documents to which it is a party and (save in respect of the Funding Agreements) shall not: 2.3.2.1 terminate or permit the termination of any Project Document to which it is a party (provided that this Clause 2.3.2.1 shall not apply to a termination of the Construction Contract in accordance with the terms of the Direct Agreement or the direct agreement referred to in Clause 2.3.1.3.16); 2.3.2.2 make or agree to any material amendment to or material variation of any Project Document to which it is a party; 2.3.2.3 in any material respect depart from, or waive or fail to enforce any rights it may have under, any of the Project Documents to which it is a party; or 2.3.2.4 enter into, or permit the entry by the Contractor or the Designer into, any agreement or document which would materially affect the interpretation or application of any of the Project Documents; unless the relevant document or proposed course of action has been submitted to the Department's Nominee and there has been no objection in accordance with the Review Procedure (provided that, for the avoidance of doubt, nothing in this Clause 2.3.2 shall affect or restrict any right of the Secretary of State to do or not to do, in his absolute discretion, any of the things referred to in Clauses 2.3.2.1 to 2.3.2.4 (inclusive) in respect of any of the instruments referred to in Clauses 2.3.1.11, 2.3.1.13, 2.3.1.14 and 2.3.1.16. 2.3.3 The Department's Nominee shall only be entitled to object to a document or proposed course of action submitted to the Review Procedure pursuant to Clause 2.3.2 on the grounds set out in paragraph 3.1 of Part 3 of Schedule 7. 2.3.4 If at any time a material amendment is made to any Project Document, the DBFO Co is granted a waiver or release of any of the material obligations under any Project Document, or any agreement is entered into which would materially affect the interpretation or application of any of the Project Documents, then the DBFO Co shall deliver to the Secretary of State a conformed copy of each such amendment, release, waiver or agreement or (so far as it is not 30 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) in writing) a true and complete record thereof in writing within 15 Working Days of the date of its execution or creation, certified as a true copy by an officer of the DBFO Co. 2.3.5 The DBFO Co shall procure, in respect of each agreement (a "Relevant O&M Contract") of any tier from time to time entered into by the DBFO Co or any Contracting Associate (other than the Contractor prior to the issue of the Completion Certificate) with any third party (a "Relevant O&M Contractor") relating to the operation and maintenance of any of the Project Facilities (including without limitation the Technical Services Agreement referred to in Clause 2.3.1.10), that: 2.3.5.1 such Relevant O&M Contract shall include provisions enabling and entitling the Secretary of State, without qualification, to require the novation of such agreement to the Secretary of State or his nominee on termination of this Agreement such that, upon such novation, a new agreement shall be constituted between the Secretary of State and such Relevant O&M Contractor upon the same terms, mutatis mutandis, as such Relevant O&M Contract, provided that the term of such new agreement shall (unless the Secretary of State and such Relevant O&M Contractor otherwise agree) be of a duration equal to the unexpired term of such Relevant O&M Contract immediately prior to such novation; and 2.3.5.2 such Relevant O&M Contract shall not be capable of termination or suspension (nor shall any of its terms be capable of variation or any further or alternative terms become applicable) solely by reason of: 2.3.5.2.1 the occurrence of an Event of Default under this Agreement; 2.3.5.2.2 any of the rights or remedies of the Secretary of State under this Agreement (including, without limitation, termination of this Agreement) becoming exercisable or being exercised; or 2.3.5.2.3 the right of the Secretary of State to require the novation of such Relevant O&M Contract becoming exercisable or being exercised. The DBFO Co shall procure that a copy of each Relevant O&M Contract shall be given to the Secretary of State forthwith upon the same being entered into. 2.4 Funding Agreements 2.4.1 The DBFO Co shall not: 2.4.1.1 terminate or permit the termination of any of the Funding Agreements; 2.4.1.2 make or agree to any material amendment to or material variation of any of the Funding Agreements; 2.4.1.3 in any material respect depart from, or waive or fail to enforce any rights it may have under, any of the Funding Agreements; or 2.4.1.4 enter into, or permit the entry by any of the Sponsors, the Contractor or the Designer or any Associated Company of any of them into, any agreement or document which would materially affect the interpretation or application of any of the Funding Agreements; or 2.4.1.5 enter into any Funding Agreement other than those listed in Clause 2.3.1.3; 31 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) if to do so would materially and adversely affect: 2.4.1.6 the ability of the DBFO Co to perform its obligations under this Agreement; or 2.4.1.7 any right of the Secretary of State under this Agreement or the ability of the Secretary of State to exercise or enforce any such right or to perform his obligations under this Agreement or to carry out any statutory function, (provided that, for the avoidance of doubt, nothing in this Clause 2.4.1 shall affect or restrict any right of the Secretary of State to do or not to do, in his absolute discretion, any of the things referred to in Clauses 2.4.1.1 to 2.4.1.5 (inclusive) in respect of the Direct Agreement). For the avoidance of doubt, the occurrence of an event of default under any of the Funding Agreements, or of some other event giving rise to termination of any of the Funding Agreements (other than by reason of any notice or election under the terms of, or other voluntary act of the DBFO Co in respect of, such Funding Agreement), shall not of itself constitute a breach of Clause 2.4.1.1 or 2.4.1.3. 2.4.2 For the avoidance of doubt, each of the Original Funding Agreements as in force at the date of this Agreement shall constitute an "Approved Funding Agreement" for the purposes of this Agreement. 2.4.3 The following provisions of this Clause 2.4 shall apply in respect of any proposed New Funding Agreement or any proposed Amended Funding Agreement to the extent that it would in any way affect or alter: 2.4.3.1 the amount of any liability or indebtedness of, or the amount of any loan or other financial accommodation made or to be made available to, the DBFO Co under or pursuant to such Funding Agreement or any other Funding Agreement; or 2.4.3.2 the currency of such Funding Agreement, the stated due date or dates for any payment or repayment under such Funding Agreement, the rate or rates of interest applicable under such Funding Agreement, any fees, commissions or other charges payable under such Funding Agreement or any other amount or matter which would be taken into account in calculating the Relevant Funding Liabilities, but such provisions are without prejudice to the application of Clause 2.4.1 in relation to any other terms of such proposed New Funding Agreement or such proposed Amended Funding Agreement. A New Funding Agreement or an Amended Funding Agreement shall only constitute an "Approved Funding Agreement" for the purposes of this Agreement if and to the extent that its terms are approved by the Secretary of State in accordance with the provisions of Clauses 2.4.4 to 2.4.6 (inclusive). 2.4.4 If the DBFO Co proposes that: 2.4.4.1 any Funding Agreement other than an Original Funding Agreement (a 'New Funding Agreement"); or 2.4.4.2 any Approved Funding Agreement which is or is proposed to be amended or supplemented (such Approved Funding Agreement, as so amended or supplemented, being an "Amended Funding Agreement"), should constitute an Approved Funding Agreement for the purposes of this Agreement, the DBFO Co shall give the Secretary of State written notice to such effect, together with a copy 32 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) of such proposed New Funding Agreement or such proposed Amended Funding Agreement, as the case may be. 2.4.5 Any, notice given pursuant to Clause 2.4.4 shall contain a statement summarising: 2.4.5.1 in the case of a New Funding Agreement, the terms of such proposed New Funding Agreement; or 2.4.5.2 in the case of an Amended Funding Agreement, the terms of the relevant amendment or supplementation. 2.4.6 Subject to the Secretary of State having received such further information in respect of the extent of the DBFO Co's liabilities and obligations under such proposed New Funding Agreement or Amended Funding Agreement, as the case may be, and such other information in respect of the DBFO Co's proposal and such proposed New Funding Agreement or Amended Funding Agreement as he may reasonably require, the Secretary of State shall, within 30 days after receipt of the DBFO Co's notice (or, if later, the receipt of such information), notify the DBFO Co whether or not (or the extent to which) he approves as an Approved Funding Agreement such proposed New Funding Agreement or such proposed Amended Funding Agreement, as the case may be, such approval not to be unreasonably withheld or delayed. If, but only where this Clause 2.4.6 applies, the DBFO Co considers the Secretary of State to have withheld or delayed any such approval unreasonably, the DBFO Co may refer the matter to the Disputes Resolution Procedure. 3. THE PROJECT 3.1 Design, Construction, Operation and Maintenance Subject to and in accordance with the provisions of this Agreement, the DBFO Co shall have the right and obligation to: 3.1.1 design, construct, complete, commission and test the Works; 3.1.2 finance, operate and maintain the Project Facilities during the Contract Period; and 3.1.3 conduct the other Operations during the Contract Period; at its own cost and risk without recourse to Government funds (other than as expressly provided in this Agreement) or to Government guarantees. 3.2 Improvements The DBFO Co may, if it thinks fit, improve the Project Facilities, subject to and in accordance with the provisions of this Agreement, including but not limited to Clause 9.4 [DBFO Co's Works Changes], Clause 12.6 [Maintenance and Other Works], Part 3 of Schedule 13 [Subsequent Schemes], Part 4 of Schedule 13 [Improvements] and Part 5 of Schedule 13 [Safety Improvements]. 3.3 Public Use 3.3.1 The DBFO Co shall: 3.3.1.1 subject to Clause 13.3 [Lane Closures], keep the Existing Road open for public use; and 33 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 3.3.1.2 from the date of issue of the Permit to Use, open and, subject to Clause 13.3 [Lane Closures], keep open the New Road for public use. 3.3.2 Without prejudice to Clause 26.2, all Operations shall be carried on so as not to interfere unnecessarily with the convenience of the public or the access to, use and occupation of public or private roads or footpaths, whether under the control or in the possession of the Secretary of State or any other person. 3.4 Standard of Performance The DBFO Co shall procure that the Operations are at all times performed: 3.4.1 in an efficient, effective and safe manner and in accordance with Good Industry Practice and the Quality Plans; 3.4.2 in a manner that is not likely to be injurious to health or (save to the extent necessarily caused by the carrying out of the Works) to cause damage to property; 3.4.3 in such manner as to enable the Secretary of State to discharge his statutory duties and his undertakings or objectives set out in the Road User's Charter and as not to detract from the image and reputation of the Secretary of State as highway authority; 3.4.4 in compliance with all applicable United Kingdom and European Union (including all European Communities) Laws and all Statutory Requirements. 3.5 Discrimination The DBFO Co shall not, and confirms that it will procure that the Contractor and the Designer shall not, unlawfully discriminate on the grounds of colour, sex, religion, political opinion or nationality and in particular but without limitation the DBFO Co, the Contractor and the Designer shall not discriminate on the grounds of nationality in the selection of sub-contractors. 34 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 4. GUARANTEES 4.1 Performance Guarantee The DBFO Co shall prior to the issue of the Certificate of Commencement deliver to the Secretary of State the Performance Guarantee in the sum of (pound)20,000,000, duly executed by a bank or insurance company approved by the Secretary of State. 4.2 Release Following the occurrence of the Milestone Event or the earlier termination of this Agreement pursuant to Clause 37 [Termination by the DBFO Co] or Clause 38 [Non-Default Termination], unless there is any accrued liability under the Performance Guarantee, the Secretary of State shall undertake with due expedition such action as the DBFO Co may reasonably request to release the issuer of the Performance Guarantee from its liability thereunder. 4.3 Milestone Certificate 4.3.1 Subject to the Department's Agent having received from the DBFO Co: 4.3.1.1 such proof of expenditure as the Department's Agent shall have required in accordance with Clause 4.3.3; and 4.3.1.2 a certificate of the DBFO Co (signed by two directors) that to the best of its knowledge and belief, having made all reasonable enquiries (including without limitation of the Contractor and any sub-contractors of any tier of the DBFO Co), there are no outstanding liabilities (whether actual or contingent) arising out of the design or construction of the New Road to date save: 4.3.1.2.1 as set out in such certificate; and 4.3.1.2.2 for the DBFO Co's liability to comply with such of its obligations under Clause 3.1 as they fall due, in accordance with the terms of this Agreement, to be performed after the date of such certificate, the Department's Agent shall, within 28 days after receiving a written request from the DBFO Co so to do, determine whether the aggregate amount properly and prudently expended by the Contractor in the design and construction of the Works (net of any outstanding liability arising out of the design or construction of the New Road as certified pursuant to this Clause 4.3.1.2 or as notified by the Department's Agent to the DBFO Co prior to the issue of the Milestone Certificate, other than any liability to make any payment properly incurred under the Construction Contract or any sub-contract) (the "Initial Design and Construction Value") exceeds (pound)62,500,000. 4.3.2 If the Department's Agent does so determine that the Initial Design and Construction Value exceeds (pound)62,500,000, then the Secretary of State shall procure that the Department's Agent shall issue the Milestone Certificate within 7 days. 4.3.3 The DBFO Co shall promptly submit to the Department's Agent all such proof of expenditure or other evidence in respect of the Initial Design and Construction Value as the Department's Agent shall reasonably require for the purpose of determining the Initial Design and Construction Value. 4.3.4 If any Dispute shall arise as to whether the aggregate amount properly and prudently expended by the Contractor exceeds (pound)62,500,000, either Party may refer the Dispute to the 35 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) Disputes Resolution Procedure and, in making such determination, the Expert shall have regard to such principles of Good Industry Practice in respect of such matters as he considers relevant to such determination, provided that if the application of such principles would require the Expert to include in his determination a consideration of any bill of quantities or other costings or estimates prepared by the Contractor or the DBFO Co in respect of the design and construction of the New Road, the Expert shall, for the purposes of such determination, disregard any of the prices attributed to any part of the design and construction of the New Road by the Contractor or the DBFO Co in such bill of quantities or other costings or estimates to the extent that, in the Expert's opinion, they exceed the market price for the relevant type of work prevailing in the United Kingdom construction industry at such time. 36 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 5. FINANCIAL MODEL 5.1 Custody Arrangements 5.1.1 Immediately on execution of this Agreement, 2 copies of the Financial Model shall be lodged by the DBFO Co (after verification of the identity of the Financial Model on behalf of the Secretary of State) with The National Computing Centre Limited of Oxford House, Oxford Road, Manchester M1 7ED to be held in custody upon the terms set out in the Custody Agreement. The Parties shall agree a substitute custodian in the event that The National Computing Centre Limited ceases to act as custodian. 5.1.2 The DBFO Co shall in addition promptly lodge with The National Computing Centre Limited 2 copies of any revisions to the Financial Model in accordance with paragraph 7 of Part 1 of Schedule 12, to be held in custody upon the terms set out in the Custody Agreement. 5.2 Costs The cost of these custody arrangements shall be met in the first instance by the Secretary of State and he shall be reimbursed one half of such costs by the DBFO Co. 5.3 Base Case A copy of a print out of the assumptions, cash flow, balance sheet and profit and loss parts of the Base Case is attached as Part 3 of Schedule 1. 37 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) PART II OPERATIONS 6. SITE INSPECTION Without prejudice to Clause 15 [Latent Defects in Existing Road] and without limitation to any other provision of this Agreement (including without limitation Clause 34.2.2), the DBFO Co shall be deemed prior to executing this Agreement to have, and warrants that it has: 6.1 inspected and examined to its satisfaction the Site and the Adjacent Areas and their surroundings and, where applicable, any existing structures or works on, over or under the Site and the Adjacent Areas; 6.2 satisfied itself as to the nature of the climatic, hydrological, ecological, environmental and general conditions of the Site and the Adjacent Areas, the nature of the ground and subsoil, the form and nature of the Site and the Adjacent Areas, the risk of injury or damage to property adjacent to or affecting the Site and the Adjacent Areas and to occupiers of such property, the nature of the materials (whether natural or otherwise) to be excavated, and the nature of the design, work, Plant and materials necessary for the execution of the Operations; 6.3 satisfied itself as to: 6.3.1 the means of communication with and access to and through the Site and the Adjacent Areas, the accommodation it may require and the adequacy of the rights of access set out in Clause 8.1 [Access for DBFO Co] for those purposes; 6.3.2 the possibility of interference by persons (other than the Secretary of State and other than persons claiming rights or title through, under or paramount to the Secretary of State) with access to or use of the Site and Adjacent Areas, with particular regard to the Requirements of Interested Parties; and 6.3.3 the precautions and times and methods of working necessary to prevent any unnecessary nuisance or interference (and to minimise any necessary nuisance or interference), whether public or private, being caused to any third parties; 6.4 thoroughly examined, checked and satisfied itself as to the adequacy, correctness and suitability of all Design Data made available to the DBFO Co by the Secretary of State prior to execution of this agreement and which the DBFO Co has adopted or made use of in the Construction Requirements, the Communications Requirements or the O&M Requirements or which the DBFO Co intends to adopt or make use of, 6.5 has conducted its own analysis and review of the other materials, documents and data referred to in Clause 34.2.1 which bear on any of the matters referred to in Clauses 6.1, 6.2 and 6.3; and 6.6 generally obtained for itself all necessary information as to: 6.6.1 the risks, contingencies and all other circumstances which may influence or affect the Construction Requirements, the Communications Requirements and the O&M Requirements and its obligation to carry out the Operations; and 6.6.2 any other factors which would affect its decision to enter into this Agreement or the terms on which it would do so. The provisions of any sub-Clause of this Clause 6 shall be without limitation to the provisions of any other sub-Clause of this Clause 6. 38 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 7. COMMENCEMENT 7.1 Conditions to Commencement The following shall be conditions to the issue of the Certificate of Commencement: 7.1.1 the Secretary of State having received from the DBFO Co notice confirming: 7.1.1.1 that all conditions to the availability of funds by the DBFO Co under the Funding Agreements (other than the issue of the Certificate of Commencement) have been satisfied or waived; 7.1.1.2 the unconditional subscription by Yorkshire Holdings of (pound)3,000,001 for 3,000,001 Ordinary Shares of the DBFO Co at par and the unconditional receipt by the DBFO Co of such subscription moneys; and 7.1.1.3 the unconditional subscription by the Sponsors of (pound)12, 000,000 loan stock issued by the DBFO Co at par under an instrument constituting (pound)12,000,000 15% secured subordinated stock issued by the DBFO Co and the unconditional receipt by the DBFO Co of such subscription moneys; in each case accompanied by such evidence thereof as may reasonably be required by the Secretary of State; 7.1.2 the Secretary of State having received the Performance Guarantee referred to in Clause 4.1; 7.1.3 the Secretary of State having received such evidence of compliance with Clause 18 [Insurance] as he may reasonably require; 7.1.4 there being no Dispute which remains the subject of the Disputes Resolution Procedure the resolution of which may give rise to the premature termination of this Agreement; and 7.1.5 the obtaining of a valid Court order made under the provisions of Section 38(4) of the Landlord and Tenant Act 1954 excluding the provisions of Sections 24 to 28 (inclusive) of that Act in respect of the Lease. 7.2 Certificate of Commencement Subject to Clause 36.1.4, the Secretary of State shall issue the Certificate of Commencement no later than the date on which he receives notice from the DBFO Co confirming that all the conditions referred to in Clause 7.1 have been satisfied. 7.3 Commencement of Operation and Maintenance 7.3.1 Subject to Clause 7.3.2 and Clause 7.3.3, the DBFO Co shall be responsible for the operation and maintenance of the Project Facilities from the Commencement Date. 7.3.2 Subject to Clause 7.3.3, the DBFO Co shall be responsible for the operation and maintenance of the following sections of the Existing Road from the date set out below in respect of each such section: 7.3.2.1 M1 north of the M1/M62 Junction 42/29 (Lofthouse) to a point on the south side of Urn Farm overbridge including the northbound access slip road and southbound exit slip road at M1/M62 Junction 42/29 from 29th July 1996; 39 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 7.3.2.2 M62 east of Junction 28 (Tingley) to the M1/M62 Junction 42/29 (Lofthouse) including the access and exit slip roads to the east of Junction 28 and to the west of Junction 29 from 8th July 1996; and 7.3.2.3 A1(T) northwards from a point 520m south of the Old Great North Road at Micklefield to a point lkm north of A64(T) Leeds Road at Bramham including access and exit slip roads at A64(T) (Bramham Crossroads) and A642 (Hook Moor) from 8th July 1996. 7.3.3 The DBFO Co shall be responsible for Winter Maintenance in respect of the Existing Road from the date of issue of the Permit to Use. 7.3.4 The DBFO Co shall procure that, within 90 days after the date of this Agreement, the Liaison Procedures referred to in Clause 12.5.1 are developed and agreed with each of the persons referred to in paragraph 1 of Part 2 of Schedule 16. 7.3.5 The DBFO Co shall procure that adequate procedures are agreed between the DBFO Co and each of North Yorkshire County Council (for A1 Trunk Road) and Owen Williams Limited (for M1 and M62 motorways) for the transfer of the operation and maintenance of the relevant section of the Existing Road to the DBFO Co with effect from the date (the "Transfer Date") on which the DBFO Co is to commence operation and maintenance of it under Clause 7.3.2. Such agreement shall be reached by the earliest to occur of: 7.3.5.1 the date which is 90 days after the date of this Agreement; and 7.3.5.2 the date which is seven days prior to the Transfer Date in respect of the relevant section of the Existing Road. 40 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 8. LAND 8.1 Access for DBFO Co Subject to the conditions set out in Clause 7.1 having been and remaining satisfied and subject to Clause 8.3 and to the provisions of the Secretary of State's disclosure letter of even date herewith from the Secretary of State to the DBFO Co, the Secretary of State shall make available to the DBFO Co for the periods referred to in Clause 8.2 [Duration] access to so much of the Site and the Adjacent Areas as shall be required from time to time for the carrying out of the relevant part of the Operations, in each case subject to: 8.1.1 any rights of public passage or access existing over any part of the Site or the Adjacent Areas from time to time; 8.1.2 subject to the provisions of Clause 12.4.2, the right of any Relevant Authority under any Law or Statutory Requirement to have access to the Site or the Adjacent Areas; 8.1.3 the right of Users to use the Project Road or of the public to use any Local Authority Road or other highway; 8.1.4 the rights of access referred to in Clause 12.4.1 [Access]; 8.1.5 the right of any relevant highway authority to have access for the execution on or near the Site or the Adjacent Areas of any work in fulfilling any function of such highway authority under any Law; 8.1.6 the terms and conditions of any Rights in respect of land comprising the Site and the Adjacent Areas; and 8.1.7 the terms of the Lease (in the case of the Maintenance Area). 8.2 Duration Subject to Clause 39.1, the commencement and duration of the rights of access given under Clause 8.1 shall be as follows: 8.2.1 in respect of the Site, from the Commencement Date or, in the case of the Existing Road, the relevant date set out in Clause 7.3.2, and thereafter until the end of the Contract Period or, in respect of any part of the Site comprising a De-Trunked Segment, the date on which a de-trunking order comes into effect; 8.2.2 in respect of the Temporary Adjacent Areas, from the later of the Commencement Date and the date on which access is required in respect of the relevant part of the Temporary Adjacent Areas under the Programme and thereafter until a Taking Over Certificate is issued in respect of the Local Facilities on the relevant part of the Temporary Adjacent Areas in accordance with Clause 11.3 [Local Facilities and De-Trunked Segments]; 8.2.3 in respect of the Adjacent Areas other than the Temporary Adjacent Areas, from the later of the Commencement Date and the date on which access is required in respect of the relevant part of the Adjacent Areas under the Programme and thereafter until the end of the Contract Period. 41 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 8.3 Limitation 8.3.1 The rights of access referred to in Clause 8.1 shall subsist for the purposes of carrying out the Operations and for no other purposes. Save in respect of any access to the Maintenance Depot under the terms of the Lease, any access given under Clause 8.1 shall be by way of licence for the particular activity only and shall not grant or be deemed to grant any legal estate or other interest in land. 8.3.2 Without prejudice to the DBFO Co's obligations under this Agreement, the rights of access given to the DBFO Co under Clause 8.1 shall not apply, and (without prejudice to Clause 9.3 [Review Procedure]) the DBFO Co shall not commence any of the Operations in respect of, any part of the Existing Road prior to the later of: 8.3.2.1 the date on which the Secretary of State is satisfied that the Liaison Procedures referred to in Clause 12.5.1 have been developed and agreed with each of the persons referred to in paragraph 1 of Part 2 of Schedule 16; and 8.3.2.2 the date on which the Secretary of State is satisfied that adequate procedures have been agreed between the DBFO Co and each of North Yorkshire County Council (for A 1 Trunk Road) and Owen Williams Limited (for M 1 and M62 motorways) for the transfer of the operation and maintenance of the relevant section of the Existing Road to the DBFO Co with effect from the date on which the DBFO Co is to commence operation and maintenance of it under Clause 7.3.2. 8.4 Additional Access 8.4.1 Any request by the DBFO Co that the Secretary of State exercise in respect of any land outside the Site and the Adjacent Areas any power of entry under any Law (to the extent that the exercise of such power of entry is necessary to enable the DBFO Co to perform its obligations under this Agreement) shall be dealt with in accordance with Clause 25, and the DBFO Co shall bear and indemnify the Secretary of State in respect of all costs and charges in respect of and any Loss or Claims arising from such entry. 8.4.2 Save as provided in Clause 8.4.1, the DBFO Co shall procure, and shall bear and indemnify the Secretary of State in respect of all costs and charges in respect of and any Loss or Claims arising from, any access to any land required additional to that required to be provided by the Secretary of State pursuant to Clause 8.1 [Access for DBFO Co]. 8.5 Off-Site Works Without prejudice to Clause 11.2.6.3, to the extent that Off-Site Works are to be carried out on land or highways in the control or ownership of a highway authority other than the Secretary of State and such highway authority has not given access to the DBFO Co of areas required to carry out the Off-Site Works, then and during any such period the DBFO Co shall not be required to carry out the Off-Site Works relating to such area. 8.6 Acquisition of Land by DBFO Co The DBFO Co shall not acquire any land or any interest in any land required for or for the support of the Project Facilities without the prior consent of the Secretary of State. 42 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 8.7 Observance by DBFO Co The DBFO Co shall observe and comply with the terms and conditions of any Rights in respect of land comprising the Site and the Adjacent Areas. 8.8 Boundaries of Site and Adjacent Areas 8.8.1 The Parties acknowledge that the boundaries of the Site and Adjacent Areas, as they relate to the New Road and as reflected on drawings entitled 'Land Areas' contained in Part 7 of Schedule 3, have been set by reference to the preliminary design of the New Road as shown in the Construction Requirements on the date of execution of this Agreement. 8.8.2 Within 90 days after the issuance of the Completion Certificate, the DBFO Co shall by notice to the Secretary of State specify any area of land falling within the boundaries of the Site and Adjacent Areas as referred to in Clause 8.8.1 which is not required for the Project. The Secretary of State shall be entitled in his absolute discretion (as between the Secretary of State and the DBFO Co) to return any such area of land to the person who owned it prior to its acquisition by the Secretary of State (or the successors in interest of such person). 8.8.3 If the Secretary of State exercises the right referred to in Clause 8.8.2 in respect of any area of land, then such area of land shall be excluded from the definition of the Site or the Adjacent Areas (as the case may be) with effect from the effective date of such exercise. The Parties shall use their reasonable endeavours to agree any revisions to drawings entitled 'Land Areas' contained in Part 7 of Schedule 3 necessary to reflect such exclusion and if they are unable to reach agreement within 90 days of the effective date of such exercise then either Party may refer the dispute for resolution under the Disputes Resolution Procedure. 8.8.4 For the avoidance of doubt, if and so long as the Secretary of State does not exercise the right referred to in Clause 8.8.2 in respect of any such area of land, then such area shall remain part of the Site or the Adjacent Areas (as the case may be) and the DBFO Co shall remain subject to the terms of this Agreement in respect of such area of land. 8.9 Lease of Maintenance Depot 8.9.1 Subject to the conditions set out in Clause 7.1 (other than those contained in Clause 7.1.4) having been and remaining satisfied, the Parties shall, on the date which is not later than the first to occur of: 8.9.1.1 the issue of the Completion Certificate; and 8.9.1.2 the date which is 14 days after the date on which the Department's Agent notifies the DBFO Co that he is satisfied that the construction of the Maintenance Depot has been completed in all material respects in accordance with the Construction Requirements insofar as they relate to the Maintenance Depot, enter into the Lease, the term of which shall take effect from the Commencement Date. 8.9.2 In the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Lease, the terms of the Lease shall prevail. 8.9.3 The Secretary of State will: 43 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 8.9.3.1 use all reasonable endeavours to perfect his title to the premises to be demised by the Lease prior to completion of the Lease and in any event will do so as soon as possible thereafter; 8.9.3.2 provide the DBFO Co with all such evidence available of the Secretary of State's title and reasonable assistance as will enable the DBFO Co to apply for the registration of the Lease at H.M. Land Registry, such evidence to be given forthwith after the Secretary of State has acquired title to those premises. 8.10 Disposal of Materials Won on Site The right of the DBFO Co to excavate, extract, dispose of, exploit or otherwise deal with any materials, including without limitation, any soil, aggregates, rocks, coal, minerals or other deposits, excavated, arising or produced in connection with the carrying out of the Operations on the Site or any Adjacent Areas (together "Site Materials") shall be subject to the following provisions of this Clause 8.10: 8.10.1 the DBFO Co may only excavate, extract, dispose of, exploit or otherwise deal with any Site Materials: 8.10.1.1 if and to the extent that the Secretary of State has the right to do so by Law or pursuant to the terms of any agreement or compulsory purchase order; 8.10.1.2 if and to the extent that, in the case of excavation or extraction of Site Materials, such excavation or extraction is necessary for the purpose of constructing the New Road in accordance with the Construction Requirements; 8.10.1.3 subject to the rights of any third party, whether being rights in or to the Site Materials, Rights in respect of land or otherwise; and 8.10.1.4 subject to any limitation, restriction or condition, whether pursuant to any Law or otherwise, applying to or affecting the right of the Secretary of State to undertake any such excavation, extraction, disposal, exploitation or other dealing; 8.10.2 subject to Clause 8.10.3, the Secretary of State shall not be entitled to any payment from the DBFO Co in relation to any excavation, extraction, disposal, exploitation of or other dealing with any Site Materials in accordance with Clause 8.10.1; and 8.10.3 without prejudice to the generality of Clause 35.1, the DBFO Co shall indemnify and keep indemnified the Secretary of State in respect of any Claims or Losses of any person which may arise out of, or in the course of or in connection with, any excavation, extraction, disposal, exploitation of or other dealing with any Site Materials or any breach by the DBFO Co of the provisions of this Clause 8.10. 8.11 Responsibility for Protestors and trespassers 8.11.1 For the avoidance of doubt, the DBFO Co shall bear the entire risk of any action by any Protestor in respect of the Project. 8.11.2 The Secretary of State shall not be responsible for the presence on the Site or Adjacent Areas (whether before or during the Contract Period) of any Protestor or other person not entitled to be upon the Site or Adjacent Areas (in this Clause 8.11, a "trespasser") nor for any act, omission or default of any such person. The presence on or entry onto the Site or Adjacent Areas of any such person and any lawful or unlawful activities of such person shall not be a breach of the obligations of the Secretary of State under this Clause 8 to make available to the 44 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) DBFO Co access to the Site and the Adjacent Areas, nor a breach of any other obligation or warranty of the Secretary of State under this Agreement. 8.11.3 The DBFO Co shall not be relieved of any obligations under this Agreement as a result of the presence on or entry onto the Site or the relevant Adjacent Areas of any Protestor or other trespasser or any lawful or unlawful activities of such person. 9. DESIGN AND CONSTRUCTION 9.1 Responsibility The DBFO Co shall be responsible for the design, construction, completion, commissioning and testing of the Works, which shall be carried out in strict accordance with the Construction Requirements and the Communications Requirements (subject to Clause 9.4 [DBFO Co's Works Changes] and Part 2 of Schedule 12 [Department's Works Changes]), the Design and Certification Procedure and the Review Procedure and in such manner as to procure satisfaction of the Core Construction Requirements and the Core Communications Requirements. For the avoidance of doubt, if the Secretary of State wishes the DBFO Co to comply with any Department's Standards or any amendment to any Department's Standards or any amendment to the Road Users' Charter in any case issued after 6th October 1995, then a Department's Works Change or a Department's Change in Specification, as the case may be, shall be issued to implement such requirement. 9.2 Design and Certification Procedure 9.2.1 The DBFO Co shall procure that the Designer shall prepare and supervise the preparation of, or shall adopt, all Design Data in respect of the Works (including without limitation the Detailed Design) in accordance with the Construction Requirements and the Communications Requirements (subject to Clause 9.4 [DBFO Co's Works Changes] and Part 2 of Schedule 12 [Department's Works Changes]) and shall comply with the Design and Certification Procedure. 9.2.2 The DBFO Co shall procure that the certification procedures referred to in the Design and Certification Procedure are complied with by the appropriate persons referred to therein, including but not limited to the Design Team, the Designer and any independent team or engineer within the Designer, as the case may be, and that such persons are at all relevant times duly authorised to carry out such procedures and to sign the relevant Certificates. 9.2.3 The DBFO Co shall procure that the checking procedures referred to in the Design and Certification Procedure are complied with by the appropriate persons referred to therein, including but not limited to the Checking Team, the Checker, the Audit Team and any independent team or engineer within the Designer, as the case may be, and that such persons are at all relevant times duly appointed to carry out such procedures. 9.2.4 Without limitation to Clause 47.3 [DBFO Co Responsibility], any failure by any person referred to in the Design and Certification Procedure, including but not limited to the Design Team, the Designer, the Checking Team, the Checker, the Audit Team and any independent team or engineer within the Designer, to fulfill the obligations required of them under the Design and Certification Procedure shall be a breach of the DBFO Co's obligations under this Agreement. 9.2.5 Design Data the subject of a Certificate which has been submitted to the Department's Agent in accordance with the Design and Certification Procedure shall not be departed from otherwise than pursuant to a Works Change. 45 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 9.3 Review Procedure 9.3.1 The DBFO Co shall not commence or permit the commencement of construction of any part of the Works until there has been no objection under the Review Procedure to all Design Data and all relevant Certificates required in respect of such part of the Works in accordance with the Design and Certification Procedure. Relevant Certificates shall include, without limitation, Design Certificates, Check Certificates, and Traffic Management Certificates as appropriate under the Design and Certification Procedure. 9.3.2 The DBFO Co shall not commence or permit the commencement of construction or implementation of any Temporary Works for which a Temporary Works Check Certificate is required under the provisions of Part 3 of Schedule 4 until there has been no objection under the Review Procedure to that Certificate and the relevant Design Data. 9.4 DBFO Co's Works Changes If the DBFO Co proposes to vary or amend the Construction Requirements or the Communications Requirements, such proposal together with all supporting Design Data and an explanation of the reasons for the proposed change (including if appropriate the Designer's comments) shall be submitted in accordance with the Review Procedure as a proposed DBFO Co's Works Change. The DBFO Co shall not proceed to implement a proposed DBFO Co's Works Change unless and until there has been no objection in accordance with the Review Procedure (on the grounds set out in paragraph 3.4 of Part 3 of Schedule 7) and the relevant DBFO Co's Works Change Certificate has been issued by the Designer and duly countersigned by the Department's Agent in accordance with paragraph 7 of Part 3 of Schedule 7. 9.5 Breaches 9.5.1 In the event that the DBFO Co becomes aware of a breach of any of Clauses 9.1 to 9.4 (both inclusive), the DBFO Co shall: 9.5.1.1 forthwith notify the Department's Agent of the fact of such breach and the subject matter thereof, and 9.5.1.2 as soon as reasonably practicable make a submission in respect of such breach to the Review Procedure, including in such submission: 9.5.1.2.1 a full statement of the circumstances in which such breach took place together with a full explanation of the reasons for such breach and, if appropriate, for any delay in providing notification under paragraph 9.5.1.1; 9.5.1.2.2 a full statement of the measures, if any, which the DBFO Co proposes to adopt in order to rectify such breach and/or to preclude or mitigate the consequences thereof (if any); and 9.5.1.2.3 if such breach relates to a variation in the design, quality or quantity of the Works, an application for a DBFO Co's Works Change. 9.5.2 The Department's Agent shall deal with a submission pursuant to Clause 9.5.1 above as soon as reasonably practicable (but without being subject to any specific time limit). The Department's Agent shall be entitled to raise comments in respect of such a submission in its absolute discretion, but shall have regard to all the circumstances, including without limitation: 46 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 9.5.2.1 whether the breach is inadvertent on the part of the DBFO Co or the Contractor; 9.5.2.2 whether there has been culpable delay in making the relevant notification under Clause 9.5.1.1 or submission under Clause 9.5.1.2; 9.5.2.3 whether similar breaches occurred previously and, if so, the gravity of such breaches and the measures, if any, adopted by the DBFO Co to prevent their re-occurrence; provided that in the circumstances set out in Clause 9.5.1 the Department's Agent shall not comment upon a certificate issued by the Designer or by the Checker accompanying such a submission unless such submission related to a DBFO Co's Works Change for which a DBFO Co's Works Change Certificate has not previously been issued. 9.6 Department's Design Data Save as expressly provided in this Agreement, the DBFO Co shall not seek to recover from the Secretary of State and shall indemnify the Secretary of State and his servants and agents against any Loss or Claim which may arise from the adoption, use or application by or on behalf of the DBFO Co, the Designer, the Checker, the Contractor, or any other person for whom the DBFO Co is responsible in the design, construction, testing, operation and maintenance of the Project Facilities of any Design Data and other data and documents made available to it or its representatives in connection with the Project by or on behalf of the Secretary of State whether before or after the execution of this Agreement. 9.7 Site Safety and Security The DBFO Co shall throughout the progress of the Works have full regard for the safety of all persons on the Site or the Adjacent Areas (whether lawfully or not) and shall keep the Site, the Adjacent Areas and the Works in an orderly state appropriate to the avoidance of danger to such persons. Without limitation to Clause 27.2, the DBFO Co shall take such measures as are reasonably required to prevent the trespass onto the Site or the Adjacent Areas of any persons or livestock not entitled to be there including, without limitation, fencing of the Site and the Adjacent Areas where appropriate. 9.8 Health and Safety 9.8.1 In this Clause 9.8: 9.8.1.1 "the Regulations" means the Construction (Design and Management) Regulations 1994 (1994 S.I. 3140) (and "Regulation" shall be construed accordingly); and 9.8.1.2 "the client" and "the Executive" have the same meanings as in the Regulations. 9.8.2 Within 7 days of the date of execution of this Agreement the DBFO Co shall make and serve on the Executive a declaration pursuant to and in the form (if any) required by Regulation 4 that the DBFO Co will act as the client in relation to the Operations for all the purposes of the Regulations. The DBFO Co shall forthwith send a copy of the declaration to the Department's Agent and upon receipt of notice from the Executive that it has received the declaration the DBFO Co shall send a copy of such notice to the Department's Agent. During the Contract Period the DBFO Co shall not and shall not seek to withdraw, terminate or in any manner derogate from its declaration that it will act as, and its acceptance of its responsibilities as, the client for all the purposes of the Regulations. 9.8.3 The DBFO Co shall observe, perform and discharge and shall procure the observance, performance and discharge of: 47 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 9.8.3.1 all the obligations, requirements and duties arising under the Regulations in connection with the Operations; and 9.8.3.2 any Code of Practice for the time being approved by the Health and Safety Commission pursuant to the Health and Safety at Work etc. Act 1974 in connection with the Regulations. 9.8.4 The DBFO Co shall indemnify the Secretary of State and his servants and agents against all Loss and Claims arising out of or in connection with any breach of the Regulations (whether in relation to obligations, requirements and duties of the client or otherwise). 9.9 Access and Facilities for Department's Agent Without limitation to Clause 12.4 [Access], the DBFO Co shall procure that: 9.9.1 subject to complying with all relevant safety procedures, the Department's Agent shall have unrestricted access at all reasonable times to any site or workshop where materials are being manufactured for the Works for the purposes of general inspection and of attending any test or investigation being carried out in respect of the Works; 9.9.2 the Department's Agent shall have the right to attend monthly Site and other similar progress meetings; and 9.9.3 there are kept on site one copy of all drawings for construction and of all specifications, and that the same shall at all reasonable times be available for inspection and use by the Department's Agent and by any other person authorised by the Department's Agent. 9.10 Noise Insulation Requirements The DBFO Co shall comply with the provisions of Part 6 of Schedule 4. 48 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 10. PROGRAMME AND DATE FOR COMPLETION 10.1 Programme Subject to Clause 10.6 [Extension of Time], the DBFO Co shall be responsible for ensuring that the investigations, design, construction, commissioning, testing, maintenance and related works appearing in the Construction Requirements and the Communications Requirements are carried out in accordance with the Programme. 10.2 Works Programme 10.2.1 The DBFO Co shall procure the preparation of the Works Programme, which shall be in all respects consistent with the Programme, and shall provide to the Department's Agent a copy of the same, accompanied by a Programme Certificate, within 28 days of the date of execution of this Agreement. The Works Programme shall be in accordance with Good Industry Practice and shall be in sufficient detail so as to enable the Department's Agent to resource itself appropriately. 10.2.2 Subject to Clause 10.4, the Works Programme shall be provided for the information of the Secretary of State and the Department's Agent. In the event of any conflict between the Programme and the Works Programme, the Programme shall (unless otherwise agreed by the Secretary of State) prevail. 10.3 Variations to Works Programme The DBFO Co shall promptly submit to the Department's Agent a copy of any version of the Works Programme subsequently varied or amended, in each case accompanied by a Programme Certificate. 10.4 Compliance with Programme Should it appear to the Department's Agent at any time that the actual progress of the Works does not conform with the Programme then the Department's Agent shall be entitled to require the DBFO Co either: 10.4.1 to submit to the Department's Agent a report identifying the reasons for the delay, and/or 10.4.2 to produce and submit to the Department's Agent in accordance with the Review Procedure a revised Works Programme showing the order of procedure and periods necessary to ensure completion of the Works (other than the Excepted Works) by the Date for Completion. The Department's Agent shall be entitled to raise comments in respect of the revised Works Programme only on the grounds set out in paragraph 3.5 of Part 3 of Schedule 7. 10.5 Date for Completion 10.5.1 The Date for Completion shall be determined by reference to the period of time shown between the Commencement Date and the Date for Completion in the Programme. 10.5.2 The DBFO Co shall use all reasonable endeavours to procure that the Works (other than the Excepted Works) are completed to such standard as would enable the issue of the Completion Certificate by the date anticipated therefor in the Programme and in any event will procure that the Works (other than the Excepted Works) are completed to that standard by the Date for Completion, subject only to any change in the Date for Completion pursuant to Clause 10.6 [Extension of Time]. 49 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 10.6 Extension of Time 10.6.1 A delay in achieving completion of the Works (other than the Excepted Works) to such standard as would enable the Completion Certificate to be issued by the Date for Completion shall be excused to the extent that it is caused by a Delay Event affecting the DBFO Co (except and to the extent that the same shall arise out of any act, neglect or omission of the DBFO Co), provided that the DBFO Co: 10.6.1.1 notifies the Department's Agent of a Delay Event in accordance with Clause 10.6.2 and provides such further written information as the Department's Agent may reasonably require regarding the nature and likely duration of such event in accordance with Clause 10.6.2; 10.6.1.2 affords the Department's Agent reasonable facilities for investigating the validity of the DBFO Co's claim, including on-site inspection; and 10.6.1.3 takes all steps necessary and consistent with Good Industry Practice to mitigate the consequences of a Delay Event (provided that this Clause 10.6.1.3 shall not require the DBFO Co to accelerate the Works Programme if to do so would require the DBFO Co to incur material additional costs (other than where such Delay Event is a Compensation Event)). 10.6.2 Save as provided in the last paragraph of this Clause 10.6.2, the DBFO Co shall give notice to the Department's Agent as soon as it can foresee a Delay Event occurring or, if the same is not foreseeable, as soon as it shall become aware of such Delay Event but in any case within 14 days of such event becoming apparent to the DBFO Co or, if earlier, of the date upon which the same ought reasonably to have become apparent to the DBFO Co. Thereafter but in any event not later than 21 days after such notification the DBFO Co shall give further written details to the Department's Agent, which shall include: 10.6.2.1 a statement of which Delay Event the claim is based upon; 10.6.2.2 details of the circumstances from which the delay or impediment arises; 10.6.2.3 details of the contemporary records which the DBFO Co will maintain to substantiate its claim; 10.6.2.4 details of the consequences, whether direct or indirect, which such delay or impediment may have on completion of the Works; and 10.6.2.5 details of any measures which the DBFO Co proposes to adopt to mitigate the consequences of delay or impediment. The DBFO Co shall not give a notice under this Clause 10.6.2 in respect of a Relevant Secretary of State Breach unless such Relevant Secretary of State Breach is likely directly to cause a delay in completion of the Works. 10.6.3 Within 21 days of the DBFO Co receiving or becoming aware of any supplemental information which may further substantiate or support the DBFO Co's claim then, provided that there shall have been no undue delay in either the receipt or becoming aware of such information, the DBFO Co may submit further particulars based on such information to the Department's Agent. 10.6.4 If the DBFO Co has failed to comply with the requirements as to the giving of notice under Clause 10.6.2, then the Department's Agent may require the DBFO Co to promptly submit 50 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) details of the reasons for such failure. If the Department's Agent has not stated that he is satisfied with the reasons given within 28 days of their receipt, the DBFO Co may refer the matter for resolution under the Disputes Resolution Procedure, and if either the Department's Agent is satisfied or the decision of the Disputes Resolution Procedure is that the said failure is excusable, then the Department's Agent shall proceed to the evaluation of the request for an extension of time in accordance with Clause 10.6.6. If the decision of the Disputes Resolution Procedure is that the failure is not excusable, then the DBFO Co shall not be entitled to an extension of the Date for Completion in respect of the relevant Delay Event. 10.6.5 The Department's Agent will be entitled, after receipt of written details under Clause 10.6.2 or of further particulars under Clause 10.6.3, by notice in writing to require the DBFO Co to provide such further supporting particulars as it may reasonably consider necessary. 10.6.6 Subject to: 10.6.6.1 the DBFO Co complying with Clause 10.6.2 or, if the Department's Agent has issued a request pursuant to Clause 10.6.4, the sufficiency of the reasons for default being accepted by the Secretary of State or under the Disputes Resolution Procedure; and 10.6.6.2 the DBFO Co putting forward proposals where required pursuant to Clause 10.6.2.5 as to the reasonable steps which it intends to take in order to mitigate any delay; the Department's Agent shall, as soon as reasonably practicable, grant to the DBFO Co in writing (either prospectively or retrospectively) such extension of the Date for Completion as may in the opinion of the Department's Agent be justified (the period of such extension being the "Delay Period"). If the Department's Agent declines to grant an extension of time or the DBFO Co considers that the extension is insufficient, then the DBFO Co shall be entitled to refer the matter to the Disputes Resolution Procedure. 10.6.7 In determining the Delay Period in accordance with Clause 10.6.6, the Department's Agent may, subject to Clause 10.6.9, take into account, inter alia: 10.6.7.1 whether (and if so to what extent) as a consequence of the failure of the DBFO Co to conduct the Operations at all times prior to the occurrence of the Delay Event in accordance with the Programme and Good Industry Practice the impact of the Delay Event on the ability of the DBFO Co to complete the Works (other than the Excepted Works) by the Date for Completion is greater than it would otherwise have been; and 10.6.7.2 (without prejudice to Clause 10.6.1.3) the extent to which the delay or impediment caused by the Delay Event ought reasonably to be or to have been mitigated by the DBFO Co by the taking of reasonable steps (including but not limited to those put forward in accordance with Clause 10.6.6.2) after the occurrence of the Delay Event. 10.6.8 Where the DBFO Co may have a claim for additional payment as a result of: 10.6.8.1 a Delay Event referred to in paragraph 1.1 of Part 1 of Schedule 11, the provisions of Clause 33.4 shall have effect; 10.6.8.2 a Delay Event referred to in paragraph 1.2 of Part 1 of Schedule 11, the provisions of Part 2 of Schedule 12 [Department's Works Change] shall have effect; or 51 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 10.6.8.3 a Delay Event referred to in paragraph 1.3, 1.5 or 1.6 of Part 1 of Schedule 11, the provisions of Part 5 of Schedule 12 [Compensation Events] shall have effect. For the avoidance of doubt, the DBFO Co shall have no claim against the Secretary of State for any additional payment as a result of any delay which is not a Delay Event referred to in Clauses 10.6.8.1, 10.6.8.2 and 10.6.8.3 above, unless otherwise expressly provided in this Agreement. 10.6.9 For the avoidance of doubt, the Department's Agent may not refuse to grant the DBFO Co an extension of the Date for Completion solely by reason of the Contractor having agreed with the DBFO Co under the Construction Contract to carry out the Works to such standard as would enable the Completion Certificate to be issued by a date prior to the Date for Completion or solely by reason that the Contractor has at any time in fact progressed the Works beyond the stage to which they would have to be progressed at such time in order for the Completion Certificate to be issued by the Date for Completion. 52 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 11. INSPECTION AND COMPLETION 11.1 Permit to Use 11.1.1 The following provisions of this Clause 11.1.1 shall apply in relation to the conduct of inspections of the New Road by the Department's Agent for the purposes of determining whether the New Road has been completed to such extent as to be suitable and safe for use by members of the public without traffic management restrictions (other than those necessary and permitted in respect of the Construction Finishing Works or the Excepted Works): 11.1.1.1 not more than 180 days, but not less than 90 days, prior to the date (the "Expected Final Inspection Date") upon which the DBFO Co expects the whole of the Works will be completed or completed to such extent that the New Road shall be suitable and safe for use by members of the public without traffic management restrictions (other than those necessary and permitted in respect of the Construction Finishing Works or the Excepted Works) (the "Permit to Use Standard"), the DBFO Co shall submit to the Department's Agent a schedule (the "Inspection Schedule"): 11.1.1.1.1 identifying those areas or elements of the Works (an "Inspection Area") which it considers will be completed to the Permit to Use Standard more than 28 days prior to the Expected Permit to Use Date and which could reasonably be subject to a discrete inspection by the Department's Agent; and 11.1.1.1.2 specifying a timetable for the carrying out of all such inspections, provided that no such inspection shall be programmed in such timetable to occur earlier than the date on which the Works comprised in the relevant Inspection Area are expected by the DBFO Co, at the time of submitting the Inspection Schedule, to be completed to the Permit to Use Standard; 11.1.1.2 the Department's Agent shall, within 14 days after receipt of the Inspection Schedule either: 11.1.1.2.1 notify the DBFO Co of his agreement to the Inspection Schedule; or 11.1.1.2.2 notify the DBFO Co of any objections to the Inspection Schedule; 11.1.1.3 if the Department's Agent shall notify the DBFO Co of any objections to the Inspection Schedule, the DBFO Co shall submit a revised Inspection Schedule taking account of the Department's Agent's objections and the provisions of Clause 11.1.1.2 and this Clause 11.1.1.3 shall apply, mutatis mutandis, until the Inspection Schedule is agreed by the Department's Agent. If the Department's Agent and the DBFO Co shall fail to agree upon the Inspection Schedule within 28 days after the date on which the DBFO Co submitted the first Inspection Schedule, either of them may refer the matter(s) in dispute to the Disputes Resolution Procedure; 11.1.1.4 the DBFO Co will notify the Department's Agent on each of the dates occurring 28, 14 and 7 days prior to the date on which the Works comprised in a relevant Inspection Area are expected by the DBFO Co, at the time of the relevant notice, to be completed to the Permit to Use Standard; 53 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 11.1.1.5 on the date identified in any 7 day notice served pursuant to Clause 11.1.1.4 or, if such date differs from the date allocated to such inspection in the Inspection Schedule (as agreed or determined in accordance with Clause 11.1.1.2 or Clause 11.1.1.3), as soon as reasonably practicable after such date, the Department's Agent shall commence an inspection of the relevant Inspection Area; 11.1.1.6 within 10 Working Days after the completion of any inspection under Clause 11.1.1.5, the Department's Agent shall either: 11.1.1.6.1 issue a provisional confirmation that, subject to completion of the relevant areas or elements of the Works comprised in the remaining Inspection Areas, those areas or elements of the New Road comprised in the relevant Inspection Area have been completed to the Permit to Use Standard; or 11.1.1.6.2 notify the DBFO Co of the reason(s) for his refusal to issue such a provisional confirmation; 11.1.1.7 in the event of service of a notice by the Department's Agent under Clause 11.1.1.6.2 and following completion by the DBFO Co of such further works or other measures necessary or appropriate to remedy the cause of the refusal to issue the provisional confirmation under Clause 11.1.1.6.1, the DBFO Co may give notice to the Department's Agent that such further works have been completed or measures taken and the Department's Agent shall inspect such further works or measures as soon as reasonably practicable following such notice, whereupon the provisions of Clauses 11.1.1.4 to 11.1.1.6 (inclusive) and this Clause 11.1.1.7 shall apply, mutatis mutandis; 11.1.1.8 the DBFO Co will notify the Department's Agent on each of the dates occurring 28, 14 and 7 days prior to the Expected Final Inspection Date; 11.1.1.9 on the date identified in the 7 day notice served pursuant to Clause 11.1.1.8 (but subject to the provision of a DBFO Co's Substantial Completion Certificate in accordance with paragraph 32 of Section A of Part 3 of Schedule 4 on or before such date), the Department's Agent shall commence an inspection of the New Road and the provisions of Clause 11.1.2 shall apply (the date of such commencement being the "Final Inspection Commencement Date"); 11.1.1.10 the provisions of this Clause 11.1.1, including without limitation, the issue of any provisional confirmation in accordance with Clause 11.1.1.6.1, shall be without prejudice to the provisions of Clauses 11.1.2 to 11.1.5 (inclusive); 11.1.1.11 without prejudice to the Department's Agent's rights under Clause 11.1.3 to refuse to issue the Permit to Use, the Department's Agent shall endeavour in good faith to advise the DBFO Co promptly following his becoming aware (as a result of any inspection carried out under the foregoing provisions of this Clause 11.1.1) of any matter which, in the Department's Agent's opinion, is likely to cause the Permit to Use not to be issued; and 11.1.1.12 for the avoidance of doubt: 11.1.1.12.1 only the inspection of the Works made in accordance with Clause 11.1.1.9 shall be relevant for the purposes of the Department's Agent's determination of whether or not to issue the Permit to Use; and 54 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 11.1.1.12.2 nothing in this Clause 11.1.1, including without limitation the issue of a provisional confirmation in accordance with Clause 11.1.1.6.1, shall prevent the Department's Agent from relying on any matter which was known to him at the time of such provisional confirmation as a ground for refusing to issue the Permit to Use. 11.1.2 Subject to the Department's Agent's having issued a provisional confirmation in accordance with Clause 11.1.1.6 in respect of each Inspection Area prior to the Final Inspection Commencement Date, the Secretary of State shall, on the Final Inspection Commencement Date (or on the first available publication date thereafter), procure the publication of the notice of opening in respect of the New Road in accordance with the Special Roads (Notice of Opening) Regulations 1992 (the "Notice of Opening"). 11.1.3 The Department's Agent shall not later than the date which is the later of (i) the date (the "Relevant Date") which is 10 Working Days after the Final Inspection Commencement Date and (ii) the date which is 8 days after the publication of the Notice of Opening, either: 11.1.3.1 issue the Permit to Use, whereupon the New Road shall as soon as practicable be made available for public use without traffic management restrictions (other than those necessary and permitted in respect of Construction Finishing Works or the Excepted Works); or 11.1.3.2 notify the DBFO Co in writing of his decision not to issue the Permit to Use and state the reasons for such decision (which must be reasons within Clause 11.1.6). 11.1.4 If the Permit to Use is not issued on or before the Relevant Date solely by reason of any act, omission or default of the Secretary of State in procuring the publication of the Notice of Opening in accordance with Clause 11.1.2, then for the purposes only of Clause 29.2 the Permit to Use will be deemed to have been issued on the Relevant Date. 11.1.5 If the Permit to Use is deemed to have been issued on the Relevant Date under Clause 11.1.4, then, for the purposes of determining the amount of the Traffic Payment in respect of the period from the Relevant Date to the date immediately preceding the date on which the Permit to Use is actually issued (the "Deemed Issue Period"), the numbers of vehicle kilometres in respect of Other Vehicles and HGVs respectively for each Road Length during the Deemed Issue Period shall be deemed to be such numbers of vehicle kilometres in respect of Other Vehicles and HGVs respectively as are determined in respect of that period which commences on the date on which the Permit to Use is actually issued and whose duration is equal to that of the Deemed Issue Period. 11.1.6 The Department's Agent may only refuse to issue the Permit to Use if: 11.1.6.1 the New Road has not been completed to such extent as to be suitable and safe for use by members of the public without traffic management restrictions (other than those necessary and permitted in respect of the Construction Finishing Works); 11.1.6.2 there has been and continues to be material non-compliance with the Design and Certification Procedure; 11.1.6.3 satisfactory evidence of compliance with Clause 18.1.1.2 [Insurance Cover] has not been adduced; or 11.1.6.4 the Relevant Date has not occurred. 55 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 11.1.7 In the event of service of a notice by the Department's Agent under Clause 11.1.3.2 and following completion by the DBFO Co of such further works or other measures necessary or appropriate to remedy or remove the cause of the refusal to issue the Permit to Use, the DBFO Co may give notice to the Department's Agent that such further works have been completed or measures taken and the Department's Agent shall inspect such further works or measures within 5 Working Days of such notice and the provisions of Clauses 11.1.2 to 11.1.6 (inclusive) and this Clause 11.1.7 shall thereafter apply to such notice mutatis mutandis. 11.1.8 The Department's Agent may not refuse to issue the Permit to Use by reason only of all or any of the Construction Finishing Works not having been completed prior to the Final Inspection Commencement Date. 11.2 Completion Certificate 11.2.1 Notwithstanding the issue of the Permit to Use in respect of the New Road, the DBFO Co shall promptly complete all outstanding Works, if any, as soon as practicable. 11.2.2 Not later than 28 days prior to the date upon which the DBFO Co expects the whole of the Works (other than any Excepted Works) to be completed, the DBFO Co shall issue to the Department's Agent a notice to that effect. Upon the DBFO Co confirming completion as aforesaid, the Department's Agent shall within 15 Working Days of receipt of such confirmation commence an inspection of the Works. 11.2.3 The Department's Agent shall within 10 Working Days of the commencement of such inspection either: 11.2.3.1 issue the Completion Certificate; or 11.2.3.2 notify the DBFO Co in writing of his decision not to issue the Completion Certificate and state the reasons for such decision (which must be reasons within Clause 11.2.4). 11.2.4 The Department's Agent may only refuse to issue the Completion Certificate if: 11.2.4.1 the Works (other than any Excepted Works) have not been completed in all material respects in accordance with the Construction Requirements and the Communications Requirements; or 11.2.4.2 there has been and continues to be material non-compliance with the Design and Certification Procedure. 11.2.5 In the event of service of a notice by the Department's Agent under Clause 11.2.3.2 and following completion by the DBFO Co of such further works or other measures necessary or appropriate to remedy or remove the cause of the refusal to issue the Completion Certificate, the DBFO Co may give notice to the Department's Agent that such further works have been completed or measures taken and the Department's Agent shall inspect such further works or measures within 5 Working Days of such notice and the provisions of Clauses 11.2.3 and 11.2.4 and this Clause 11.2.5 shall thereafter apply to such notice mutatis mutandis. 11.2.6 The issue of the Completion Certificate shall be without prejudice to: 11.2.6.1 the obligation of the DBFO Co to operate and maintain the Project Facilities in accordance with this Agreement; 11.2.6.2 any warranties given by the DBFO Co under this Agreement; 56 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 11.2.6.3 the obligation of the DBFO Co to complete all Excepted Off-Site Works as soon as practicable following the grant of access to the relevant areas by the relevant highway authority for the purpose of carrying out such Works; or 11.2.6.4 the obligation of the DBFO Co to complete all Insulation Works in accordance with the requirements of Part 6 of Schedule 4. 11.2.7 In this Clause 11.2, "Excepted Off-Site Works" means Off-Site Works which: 11.2.7.1 are required to be carried out on land or highways in the control or ownership of a highway authority other than the Secretary of State; and 11.2.7.2 have not been completed in all material respects in accordance with the Construction Requirements and the Communications Requirements at the time of the inspection under Clause 11.2.2 solely by reason of such highway authority not having given access to the DBFO Co to such areas to carry out such Off-Site Works (provided such failure to give access is not attributable to any act, neglect or default of the DBFO Co or any failure by the DBFO Co to give reasonable prior notice to such highway authority of the DBFO Co's requirement for such access). 11.3 Local Facilities and De-Trunked Segments 11.3.1 Not later than 28 days prior to the date upon which the DBFO Co expects: 11.3.1.1 the works in respect of any Local Authority Road will be completed in all material respects in accordance with the Construction Requirements and, without limitation thereto, completed to such extent that such Local Authority Road shall be suitable and safe for use by members of the public; or 11.3.1.2 the works in respect of any other Local Facilities will be completed in all material respects in accordance with the Construction Requirements; the DBFO Co shall issue a notice to that effect to the Department's Agent. Upon the DBFO Co confirming that completion as aforesaid has occurred then the Department's Agent shall within 15 Working Days of receipt of such confirmation commence an inspection of such Local Facilities, and the DBFO Co shall not object to the participation in such inspection of any Local Person to whom such Local Facilities are intended to be handed over. 11.3.2 The Department's Agent shall within 10 Working Days of the commencement of such inspection either: 11.3.2.1 issue a Taking Over Certificate; or 11.3.2.2 notify the DBFO Co in writing of his decision not to issue a Taking Over Certificate and state the reasons for such decision (which must be reasons within Clause 11.3.3). 11.3.3 The Department's Agent may only refuse to issue a Taking Over Certificate if: 11.3.3.1 in the case of a Local Authority Road, it has not been completed in all material respects in accordance with the Construction Requirements or has not been completed to such extent as to be suitable and safe for use by members of the public; 57 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 11.3.3.2 in the case of any Local Facilities other than a Local Authority Road, they have not been completed in all material respects in accordance with the Construction Requirements; or 11.3.3.3 in the case of any Local Facilities there has been and continues to be material non-compliance with the Design and Certification Procedure. 11.3.4 Upon the issue of a Taking Over Certificate in respect of any Local Facilities or (if earlier or if no Works are to be carried out in respect of a De-Trunked Segment) any de-trunking order coming into effect in respect of any De-Trunked Segment: 11.3.4.1 either the Secretary of State shall procure that the relevant Local Person assumes responsibility for the operation and maintenance (subject to Clause 11.3.4.3) of such Local Facilities or De-Trunked Segment or the Secretary of State shall himself assume responsibility for the operation and maintenance (subject to Clause 11.3.4.3) of such Local Facilities or De-Trunked Segment; 11.3.4.2 subject to Clause 11.3.8, those parts of the Works comprising such Local Facilities and those parts of the Existing Road comprising any De-Trunked Segment shall be excluded from the definition of "Existing Road" or "Off-Site Facilities", as the case may be, for all purposes of this Agreement (save for the purpose of giving effect to the provisions of this Clause 11.3); and 11.3.4.3 the DBFO Co shall execute all such work of amendment, reconstruction, and remedying of defects, shrinkages or other faults as the Department's Agent may reasonably instruct the DBFO Co to execute in order to bring or return the relevant Local Facilities to the standard required by the Construction Requirements, such instruction to be issued either during the period of 52 weeks following the date of issue of the Taking Over Certificate or within 14 days after the expiration of such period, as a result of an inspection made by or on behalf of the Department's Agent prior to its expiration. 11.3.5 In the event of service of a notice by the Department's Agent under Clause 11.3.2.2 and following completion by the DBFO Co of such further works or other measures necessary or appropriate to remedy or remove the cause of the refusal to issue a Taking Over Certificate, the DBFO Co may give notice to the Department's Agent that such further works have been completed or measures taken. The Department's Agent shall inspect such further works or measures within 5 Working Days of such notice, and the DBFO Co shall not object to the participation in such inspection of the relevant Local Person. The provisions of Clauses 11.3.2 and 11.3.3 and this Clause 11.3.5 shall thereafter apply to such notice mutatis mutandis. 11.3.6 For the avoidance of doubt, all work referred to in Clause 11.3.4.3 shall be executed by the DBFO Co at its own cost. 11.3.7 If the relevant Local Person assumes the responsibility for the operation and maintenance of the Local Facilities or De-Trunked Segment in accordance with Clause 11.3.4.1, then it shall be entitled to the benefit of any warranties by the DBFO Co under this Agreement to the extent applicable to such Local Facilities and to the benefit of the undertakings by the DBFO Co under this Clause 11.3 to the extent applicable to such Local Facilities or De-Trunked Segment. The DBFO Co shall execute such further documents and do all such other things as may be reasonably requested by the Secretary of State for the purpose of confirming or giving effect to the provisions of this Clause 11.3.7. 58 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 11.3.8 If the Secretary of State assumes responsibility for the operation and maintenance of any Local Facilities or De-Trunked Segment in accordance with Clause 11.3.4.1, then he may at his option by notice to the DBFO Co require the DBFO Co to continue the operation and maintenance of such Local Facilities or De-Trunked Segment for such period as may be specified in such notice. In such event: 11.3.8.1 the Secretary of State shall pay to the DBFO Co such sum in respect of the operation and maintenance of such Local Facilities or De-Trunked Segment as may be agreed between the Secretary of State and the DBFO Co or, in the absence of agreement, as may be determined under the Disputes Resolution Procedure to be reasonable in the circumstances; and 11.3.8.2 such Local Facilities or De-Trunked Segment shall continue to be included in the definition of "Existing Road" or "Off-Site Facilities", as the case may be, for all purposes of this Agreement for the period specified in such notice. 11.3.9 Subject to Clause 11.3.8, as soon as practicable following the issue of a Taking Over Certificate, the DBFO Co shall vacate the relevant part of the Adjacent Areas or Existing Road and leave it clear and free from such debris, construction materials, Construction Plant and the like as shall arise from the execution of the Works in respect of the relevant Local Facilities to the reasonable satisfaction of the Department's Agent. 11.3.10 Subject to Clause 11.3.8, as soon as practicable after a de-trunking order comes into effect with respect to a De-Trunked Segment in respect of which no Works are required under the Construction Requirements, the DBFO Co shall vacate the relevant De-Trunked Segment, leaving it in no worse condition than when the DBFO Co first was given access to or occupation of the relevant De-Trunked Segment. 11.4 Disputed Certificate 11.4.1 If there shall be any Dispute as to whether the Permit to Use, the Completion Certificate or a Taking Over Certificate is required to be issued in accordance with the terms of Clause 11.1, Clause 11.2 or Clause 11.3 respectively, then either the Department's Agent or the DBFO Co may refer such Dispute for resolution under the Disputes Resolution Procedure. 11.4.2 The issues for resolution in any such referral to the Disputes Resolution Procedure shall be: 11.4.2.1 whether the Permit to Use, Completion Certificate or Taking Over Certificate, as the case may be, was required to be issued in accordance with the terms of Clause 11.1, Clause 11.2 or Clause 11.3 respectively; and 11.4.2.2 if so, the date on which such Permit to Use, Completion Certificate or Taking Over Certificate should have been issued. 11.4.3 The provisions of Part 5 of Schedule 12 [Compensation Events] shall, if applicable, be given effect. 59 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 12. OPERATION AND MAINTENANCE 12. 1 Operation and Maintenance Subject to the last sentence of Clause 9.1: 12.1.1 Save to the extent that it is prohibited from so doing by reason of a breach by the Secretary of State of his obligations under Clause 8.1 [Access for DBFO Co], from the Commencement Date or such later date or dates as are specified in Clause 7.3 and thereafter throughout the Contract Period the DBFO Co shall operate and maintain the Project Facilities (other than the New Road (but excluding from the definition of New Road any Upgraded Section)) in accordance with the terms of this Agreement (including without limitation the O&M Requirements) and in such manner as to procure satisfaction of the Core O&M Requirements. 12.1.2 Save to the extent that it is prohibited from so doing by reason of a breach by the Secretary of State of his obligations under Clause 8.1 [Access for DBFO Co], from the date of issue of the Permit to Use in respect of the New Road and thereafter throughout the Contract Period, the DBFO Co shall operate and maintain the New Road in accordance with the terms of this Agreement (including without limitation the O&M Requirements) and in such a manner as to procure satisfaction of the Core O&M Requirements. 12.2 O&M Requirements 12.2.1 The DBFO Co may at any time hereafter submit to the Department's Representative in accordance with the Review Procedure any proposed revision to or substitution for the O&M Requirements or the Communications Requirements so far as they relate to operation and maintenance of the DBFO Co's Systems (as defined in Schedule 17) (as set out in Part 2 of Schedule 6 or Schedule 17 or as previously varied in accordance with this Clause 12.2) or any part thereof. If there shall be no objection to such proposed revision or substitution (on the grounds set out in paragraph 3.6 of Part 3 of Schedule 7), then the O&M Requirements or the Communications Requirements (as the case may be) as so varied shall be the O&M Requirements or the Communications Requirements (as the case may be) for purposes of this Agreement, subject to any further revision or substitution to which there has been no objection in accordance with the Review Procedure. 12.2.2 Without limitation to Clause 12.2.1, within 90 days of issue of the Permit to Use in respect of the New Road, the DBFO Co shall prepare and submit to the Department's Representative in accordance with the Review Procedure a revision of the then existing O&M Requirements containing such revisions as necessary to provide for the operation and maintenance of the entire Project Road, including the New Road 12.3 Inspections 12.3.1 The DBFO Co shall give the Department's Representative timely notice of any general or principal inspection or any other inspection of structures to be conducted in accordance with the O&M Requirements. 12.3.2 The Department's Representative shall be entitled to attend any inspection of the Project Facilities (whether or not it is entitled to receive or has received notice thereof in accordance with Clause 12.3.1) upon giving reasonable notice to the DBFO Co. 12.4 Access 12.4.1 The DBFO Co shall procure that: 60 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 12.4.1.1 the Department's Nominee and any designee of the Department's Nominee has unrestricted access to the Site and the Adjacent Areas at all reasonable times throughout the Contract Period in order to perform its functions under this Agreement; and 12.4.1.2 the Secretary of State and any contractor or other designee of the Secretary of State has unrestricted access to the Site and the Adjacent Areas at all reasonable times throughout the Contract Period in order: 12.4.1.2.1 to perform any obligations or exercise any rights of the Secretary of State under this Agreement, or 12.4.1.2.2 to fulfill any statutory functions of the Secretary of State, or 12.4.1.2.3 without limitation to Clauses 12.4.1.2.1 and 12.4.1.2.2, to conduct any study or trial for purposes of research initiated by the Secretary of State; provided that any such action shall be conducted in such manner as to minimise any adverse effect on traffic flows on the Project Road and no such action shall, without the consent of the DBFO Co (such consent not to be unreasonably withheld or delayed), substantially affect the physical integrity of the Project Facilities at all (in the case of any such action pursuant to Clause 12.4.1.2.3) or (in the case of any such action pursuant to Clause 12.4.1.2.1 or Clause 12.4.1.2.2) beyond the extent reasonably necessary to perform the obligations, exercise the rights or fulfill the statutory functions of the Secretary of State; provided further that no such action shall be deemed to have substantially affected the physical integrity of the Project Facilities if appropriate remedial measures are taken following the completion of such action to leave the Project Facilities substantially in the condition they were in prior to such action. 12.4.2 The DBFO Co shall procure that all Relevant Authorities have access to the Site and the Adjacent Areas throughout the Contract Period in order to carry out any work (including without limitation surveys and inspections) in accordance with any Statutory Requirement or any right of such Relevant Authority under any Law, subject, other than in the case of an emergency, to reasonable notice being given. Whenever consistent with the requirements of the Relevant Authority in carrying out such work, such access may be limited so as not unnecessarily to impede or restrict traffic flows or any works being carried out by the DBFO Co. 12.4.3 The Secretary of State shall procure that the DBFO Co (or the Contractor) has access to the Connecting Roads at all times throughout the Contract Period to the extent necessary to enable the DBFO Co to perform its obligations under this Agreement, subject, other than in the case of emergency, to reasonable notice being given. 12.5 Emergencies and Liaison 12.5.1 As soon as practicable after the date hereof the Parties shall develop Liaison Procedures in accordance with the provisions of Parts 1 and 2 of Schedule 16. 12.5.2 Notwithstanding any other provision of this Agreement, the DBFO Co shall and shall be entitled to take (at its own cost) such steps as necessary in an emergency for the protection of the public, but subject to the provisions of the Liaison Procedures. 61 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 12.6 Maintenance and Other Works The provisions of Clause 9 and paragraphs 3.4, 3.13, 4 and 7 of Part 3 of Schedule 7 shall apply, mutatis mutandis, to any works the subject of a Proposal other than the Works and other than any works in relation to any Improvement, with any reference therein to: 12.6.1 the Works being deemed a reference to such works the subject of the Proposal; 12.6.2 the Department's Agent being deemed a reference to the Department's Representative; 12.6.3 a DBFO Co's Works Change being deemed a reference to an Alternative Proposal; 12.6.4 a DBFO Co's Works Change Certificate being deemed a reference to an Alternative Proposal Certificate; 12.6.5 a Department's Works Change being deemed a reference to a Department's Change in Specification; and 12.6.6 a Works Change being deemed a reference to an Alternative Proposal or a Department's Change in Specification, as the case may be. 62 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 13. TRAFFIC MANAGEMENT 13.1 Traffic Management 13.1.1 Subject to Clauses 13.1.3 and 13.2, general management of traffic on the Project Road shall be the responsibility of the DBFO Co. 13.1.2 Users of the Project Road shall be subject to the same Laws as those using the remainder of the public highway network, and the enforcement of those Laws shall be the responsibility of the police. 13.1.3 Control of any network control system applicable to the Project Road (including without limitation any system of variable message signs) shall be in the absolute control of the police or (where they fail or refuse to exercise such control) the Secretary of State, or such other person as may be appointed by the Secretary of State from time to time to carry out that function. 13.2 Liaison The DBFO Co shall be responsible during the conduct of the Operations for ensuring compliance with the reasonable requirements of the Secretary of State in respect of then existing highways (other than the Project Road) for which he is the highway authority, of other highway authorities and of the police with regard to the management of traffic which may be affected by the carrying out of the Operations, all in accordance with the Liaison Procedures. 13.3 Lane Closures 13.3.1 Within 90 days after the date of execution of this Agreement the DBFO Co shall submit to the Department's Representative in accordance with the Review Procedure a Schedule of Lane Closures in respect of the Project Road for the First Contract Year and the next succeeding Contract Year. Not later than 1st January in each Contract Year after the First Contract Year the DBFO Co shall submit to the Department's Representative in accordance with the Review Procedure a Schedule of Lane Closures in respect of the Project Road for the next succeeding Contract Year. Any such Schedule of Lane Closures shall give details of the proposed start and end dates for each period of Lane Closure and the works to be carried out. 13.3.2 Not later than 60 days prior to the commencement of any Quarter, the DBFO Co may submit to the Department's Representative in accordance with the Review Procedure a revision of the Schedule of Lane Closures submitted pursuant to Clause 13.3.1 showing proposed revisions to the periods of Lane Closure in respect of such Quarter. If there is no objection to any such revision in accordance with the Review Procedure, then it shall replace the annual Schedule of Lane Closures in respect of such Quarter. 13.3.3 The Department's Representative may raise comments in respect of any period of Lane Closure requested in a Schedule of Lane Closures submitted by the DBFO Co pursuant to Clause 13.3.1 or Clause 13.3.2 in accordance with paragraph 3.7 of Part 3 of Schedule 7. In such event, the Department's Representative shall notify the DBFO Co thereof with reasons and shall indicate, in the case of an objection pursuant to paragraph 3.7.3 or 3.7.4 of Part 3 of Schedule 7, an appropriate duration for such Lane Closure and in any other case a period when the unacceptable period can be re-scheduled, on the basis that each such re-scheduled period shall be as close as reasonably practicable to the requested period of Lane Closure and of equal duration or, if the DBFO Co has indicated another period and/or duration that would be preferable to it and that is acceptable to the Department's Representative, such other period and/or duration. The DBFO Co shall thereupon amend the relevant Schedule of Lane 63 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) Closures accordingly and re-submit the same to the Department's Representative in accordance with the Review Procedure. 13.3.4 The DBFO Co shall not effect any Lane Closures save: 13.3.4.1 in accordance with a Schedule of Lane Closures to which no objection has been made under the Review Procedure; 13.3.4.2 in accordance with the procedures set out in Clause 13.3.6; 13.3.4.3 in an emergency, in accordance with Clause 13.3.7; or 13.3.4.4 for Type C lane closures (as defined in Section 6 of Chapter 8 of the Traffic Signs Manual). The DBFO Co shall not effect any Lane Closure without first obtaining any order in respect of such Lane Closure necessary under any Law. 13.3.5 Notwithstanding that there has been no objection to a Schedule of Lane Closures in accordance with the Review Procedure, the Department's Representative may upon 90 days prior written notice require the DBFO Co to re-schedule a period of Lane Closure if due to a change in any circumstances such re-scheduling is necessary to satisfy the standards set out in paragraph 3.7.1 or 3.7.2 of Part 3 of Schedule 7, provided, however, that the Department's Representative may not require: 13.3.5.1 that such period of Lane Closure be brought forward by more than 60 days from the scheduled date of commencement of such period of Lane Closure; or 13.3.5.2 that a period of Lane Closure be deferred by more than 60 days from the scheduled date of commencement of such period of Lane Closure. 13.3.6 If the need arises for unprogrammed maintenance or repair works (not being an emergency) requiring Lane Closures otherwise than in accordance with an approved Schedule of Lane Closures, the DBFO Co shall advise the Department's Representative of such need and request approval of the proposed commencement date and estimated duration of the requisite Lane Closures. The Department's Representative's approval of such works shall not be unreasonably withheld or delayed, having regard to the factors set out in paragraph 3.7 of Part 3 of Schedule 7. 13.3.7 If as a result of an emergency the need arises for unprogrammed maintenance or repair works requiring Lane Closures otherwise than in accordance with an approved Schedule of Lane Closures, the DBFO Co may effect such Lane Closures, provided that the DBFO Co shall as soon as reasonably practicable advise the Department's Representative of such closure and the reasons therefor and shall take all reasonable steps to minimise the duration of such Lane Closure. 13.3.8 In the event of an emergency occurring on a Connecting Road, at the request of the Department's Representative the DBFO Co shall as far as is reasonably practicable temporarily remove or modify any existing Lane Closures and delay any proposed Lane Closures under any Schedule of Lane Closures to which there has been no objection under the Review Procedure which in either such case conflict with any lane closures or other arrangements implemented to deal with the emergency. 64 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 13.3.9 Notwithstanding any other provision of this Clause 13.3, the DBFO Co shall not effect any Lane Closure on the Existing Road on any day on which a fixture relating to the 1996 European Football Championships is scheduled to take place at any of the following stadia: 13.3.9.1 Old Trafford (Manchester); 13.3.9.2 Elland Road (Leeds); 13.3.9.3 St James' Park (Newcastle); 13.3.9.4 Anfield (Liverpool); and 13.3.9.5 Hillsborough (Sheffield). 13.3.10 The DBFO Co shall promptly remove traffic cones which are no longer required. 13.4 Information Requirements 13.4.1 The DBFO Co shall provide to the Secretary of State such information (including without limitation details of proposed Lane Closures and information about its traffic safety and management measures on the Project Road) as may be required for purposes of any public information service operated by or on behalf of the Secretary of State (including without limitation the National Lane Closure Bulletin and the Cones Hotline or any facility replacing the same) from time to time. Such information shall contain such details, be in such format and be sent to such address at such times as may be notified to the DBFO Co by the Secretary of State from time to time. 13.4.2 The DBFO Co shall operate a telephone service 24 hours per day to: 13.4.2.1 provide relevant information to callers about the DBFO Co's traffic safety and management measures on the Project Road and existing and planned Lane Closures; and 13.4.2.2 to receive any complaints in respect of the Project Road. 13.5 Secretary of State's Maintenance 13.5.1 Without prejudice to Clause 13.3.8, the Secretary of State shall use reasonable endeavours to co-ordinate his maintenance programme for the Connecting Roads with any Schedule of Lane Closures in respect of the Project Road to which there has been no objection under the Review Procedure, so as to minimise any disruption to the operation of the Project Road. 13.5.2 Within 90 days after the date of execution of this Agreement the Department's Representative shall provide to the DBFO Co a Schedule of Lane Closures in respect of the Connecting Roads for the First Contract Year and the next succeeding Contract Year. Not later than 1st February in each Contract Year after the First Contract Year the Department's Representative shall provide to the DBFO Co a Schedule of Lane Closures in respect of the Connecting Roads for the next succeeding Contract Year. 13.5.3 Other than in the case of emergency, the Department's Representative shall give prompt notice to the DBFO Co of any revisions to the Schedule of Lane Closures provided to the DBFO Co pursuant to Clause 13.5.2. 13.5.4 The Schedule of Lane Closures provided to the DBFO Co pursuant to Clause 13.5.2 and any revisions thereto provided pursuant to Clause 13.5.3 shall be for information purposes only. 65 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) The Secretary of State shall have no liability to the DBFO Co in respect of any variations of or departures from any such Schedule of Lane Closures. 66 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 14. SIGNING AND COMMUNICATIONS 14.1 Traffic Signs Provisions The DBFO Co shall procure that all Traffic Signs on or near the Project Road shall be in accordance with the Traffic Signs Provisions and the Traffic Signs Manual, except: 14.1.1 to the extent required by any contrary provision in the Technical Requirements; 14.1.2 to the extent required by any Department's Change in Specification; and 14.1.3 for any Traffic Signs on the Project Road on the Commencement Date, provided that any such Traffic Signs which under the Traffic Signs Provisions are required by a specified time to be replaced by signs of a different design or removed shall be so replaced or removed. 14.2 New Signs Save to the extent that any of the same are specified by the Technical Requirements or any Department's Change in Specification and notwithstanding and without prejudice to any obligation to obtain any necessary authorisations in accordance with the Traffic Signs Provisions in respect thereof, the DBFO Co shall submit the proposed layout, location, type, size, colour and content of all Traffic Signs or other signs (including without limitation the signs referred to in Clause 14.5) to be located on or near the Project Road to the Department's Nominee in accordance with the Review Procedure. The Department's Nominee shall be entitled to raise comments on any such proposal only on the grounds set out in paragraph 3.8 of Part 3 of Schedule 7. 14.3 Local Roads Signing on roads for which the Secretary of State is not the highway authority shall be subject to agreement between the DBFO Co and the relevant local highway authority. 14.4 Directional Signs The Secretary of State shall, at his own cost, install on motorways or trunk roads for which the Secretary of State is the highway authority (other than the Project Road) such signs notifying motorists of the access to the Project Road as shall be necessary in accordance with the Secretary of State's duties as highway authority. Without limitation to the foregoing, the Secretary of State will install and, for a period not exceeding eighteen months from the date of issue of the Permit to Use, maintain at each location specified in Part 1 of Schedule 20 a traffic sign (a "DBFO Co Traffic Sign"), provided that: 14.4.1 the DBFO Co shall bear and indemnify the Secretary of State in respect of all costs and expenses incurred by the Secretary of State relating to the manufacture or purchase of all DBFO Co Traffic Signs and all costs and expenses incurred by the Secretary of State in connection with their installation and maintenance; 14.4.2 the legends appearing on the DBFO Co Traffic Signs shall be those set out in Part 2 of Schedule 20 or as otherwise approved in advance by the Secretary of State; and 14.4.3 the Secretary of State's obligations in respect of DBFO Co Traffic Signs shall be subject always to any conflicting requirements arising as a result of the Secretary of State's duties as highways authority. 67 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 14.5 Notification Signs The DBFO Co shall install on the Project Road at distances not further than l kilometre from each access to or exit from the Project Road signs notifying the Users that the DBFO Co is responsible for the maintenance and operation of the Project Road and giving a single readily assimilable telephone number (not being chargeable at premium rates) for enquiries and complaints in respect of the Project Road. 14.6 Additional Signs For the avoidance of doubt, the Secretary of State may require the DBFO Co to place Traffic Signs (other than those required in accordance with the Technical Requirements or Clauses 14.4 and 14.5) on or near the Project Road or to remove any such Traffic Signs. Where the Secretary of State does so require, then prior to the issue of the Permit to Use in respect of signs to be placed on or near or removed from the New Road such requirement shall be treated as a Department's Works Change and otherwise it shall be treated as a Department's Change in Specification. 14.7 Removal of Signs The DBFO Co shall, at its own cost, remove all signs referred to in Clause 14.5 within 30 days following termination of this Agreement. 14.8 Communications 14.8.1 The DBFO Co shall comply with the Communications Requirements. 14.8.2 The DBFO Co shall obtain in a timely manner and maintain in force any licence or consent required under the Telecommunications Act 1984 in order to perform its obligations under this Agreement. 68 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 15. LATENT DEFECTS IN EXISTING ROAD 15.1 Latent Defects 15.1.1 For the purposes of this Agreement, the term "Latent Defect" shall mean any defect in the Existing Road at the date hereof which could not reasonably have been ascertained by a competent person acting in accordance with Good Industry Practice during the inspection referred to in Clause 6.1 or from an analysis of all relevant information available to the DBFO Co prior to the date of execution of this Agreement (including without limitation the information referred to in Clause 34.2.1). 15.1.2 Without limitation to Clause 15.1.1, the DBFO Co acknowledges that: 15.1.2.1 it is aware of the defects which are identified in Part 4 of Schedule 3 and that no such defects shall constitute a Latent Defect; and 15.1.2.2 the list included in Part 4 of Schedule 3 is not intended as an exhaustive list of those matters which do not constitute Latent Defects. 15.2 Discovery of Defects In the event that a Latent Defect in the Existing Road shall become apparent, the DBFO Co shall promptly give notice to the Secretary of State identifying such defect. If the Secretary of State gives notice to the DBFO Co that he believes such defect ought reasonably to be remedied or rectified during the Contract Period, the Parties shall endeavour to agree the required remedial action to be taken to enable the Existing Road to be returned to a standard complying with the O&M Requirements and as would enable the DBFO Co at the end of the Contract Period to satisfy the requirements of Clause 17.1 [Handback Requirements] on the assumption that the DBFO Co complied with its obligations as to operation and maintenance of the Existing Road under this Agreement, and in default of agreement the Dispute shall be referred to the Disputes Resolution Procedure. 15.3 Remedial Action The DBFO Co shall be responsible for the execution of the remedial works agreed or determined under Clause 15.2. 15.4 Costs of Latent Defects 15.4.1 Without prejudice to Clause 15.4.3, the costs of and associated with execution of the remedial works agreed or determined under Clause 15.2 shall be borne by the DBFO Co. 15.4.2 For the avoidance of doubt, the Secretary of State shall have no liability to the DBFO Co in respect of any loss of profit, loss of income, loss of contract or any other losses arising out of or in connection with the existence of a Latent Defect in the Existing Road and the execution of the remedial works. 15.4.3 The following provisions of this Clause 15.4.3 shall apply in relation to the imposition of Lane Closure Charges in respect of any Lane Closures on the Existing Road as a result of the carrying out of the remedial works agreed or determined under Clause 15.2 ("Relevant Remedial Works"): 15.4.3.1 the Parties shall seek to agree upon a schedule of necessary lane closures (each a "Permitted Closure") in respect of each relevant section of the Existing Road in respect of the Relevant Remedial Works prior to their commencement; 69 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 15.4.3.2 if the Parties shall fail to agree upon any Permitted Closure within 45 days after the date on which the Relevant Remedial Works are agreed or determined under Clause 15.2, the Dispute may be referred by either Party to the Disputes Resolution Procedure; 15.4.3.3 to the extent that any actual Lane Closure on a particular section of the Existing Road exceeds the Permitted Closure for that section (whether as to the number of lanes, duration or otherwise), Lane Closure Charges will be payable by the DBFO Co in respect of that excess in accordance with Part 3 of Schedule 9 (other than as solely applicable to Construction Period LCCs), provided that, to the extent that any such Lane Closure on a particular section of the Existing Road occurring during the Construction Period exceeds the Permitted Closure for that section (whether as to the number of lanes, duration or otherwise), Lane Closure Charges will be payable by the DBFO Co in respect of that excess in accordance with Part 3 of Schedule 9 as it relates to Construction Period LCCs. 70 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 16. FOSSILS AND ANTIQUITIES 16.1 Archaeological Works 16.1.1 The DBFO Co shall procure that the Archaeologist has unrestricted access to the Site and the Adjacent Areas at all reasonable times prior to the issue of the Completion Certificate and, without limitation to Clause 16.3, shall give due regard to any recommendation of the Archaeologist in regard to any archaeological surveys or inspections of the Site or the Adjacent Areas. 16.1.2 The DBFO Co shall undertake archaeological works on the Site and Adjacent Areas in accordance with the Construction Requirements (in particular as set out in Annex 14 to Part 2 of Schedule 4). 16.2 Ownership As between the Secretary of State and the DBFO Co, all Fossils and Antiquities shall be the property of the Secretary of State. 16.3 Disposal The DBFO Co shall take all reasonable precautions to prevent the removal or damage of any such Fossils and Antiquities. It shall immediately inform the Department's Nominee of the discovery of any such Fossils and Antiquities and shall (at the expense of the Secretary of State) carry out any orders of the Department's Nominee regarding the examination and disposal of the same. 16.4 Costs If there will be a delay in or increase in the cost of the execution of the Works or the conduct of the Operations as a consequence of compliance with Clause 16.3, the Department's Nominee shall request a Department's Works Change pursuant to Part 2 of Schedule 12 or, as appropriate, a Department's Change in Specification pursuant to Part 3 of Schedule 12; provided that if the Department's Nominee does not make such a request within 28 days after the issuance of any order under Clause 16.3 then the DBFO Co may give a notice to the Department's Nominee reflecting the terms of such order and such notice shall be treated as a notice of a Department's Works Change pursuant to Part 2 of Schedule 12 or, as appropriate, a Department's Change in Specification pursuant to Part 3 of Schedule 12, provided that the DBFO Co shall not be entitled to make any objection in respect of such notice pursuant to paragraph 2.1 of Part 2 of Schedule 12 or paragraph 2.1.1 of Part 3 of Schedule 12. Save as agreed or determined in accordance with Clause 10.6 or Part 2 or Part 3 of Schedule 12, no extensions of time will be granted nor increases in costs allowed as a consequence of compliance with Clause 16.3. 71 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 17. HANDBACK 17.1 Handback Requirements Upon the date of expiry of this Agreement in accordance with the provisions of Clause 38.2 [Expiry of Term] (the "Expiry Date"), each element of the Project Facilities shall comply with the Handback Requirements (but without prejudice, in the case of the Maintenance Depot, to the terms of the Lease). 17.2 Initial Inspection 17.2.1 Not less than 57 months nor more than 63 months prior to the expected Expiry Date, the DBFO Co and the Department's Representative shall conduct a joint inspection (the "Initial Inspection") of the pavement of the Project Road and all Structures forming part of the Project Road. 17.2.2 Such inspection shall comply with the requirements set out in paragraph 2 of Part 4 of Schedule 4. 17.3 Renewal Programme 17.3.1 Within 90 days after the completion of the Initial Inspection, the DBFO Co shall provide to the Department's Representative a report on the condition of the pavement of the Project Road and the Structures referred to in Clause 17.2.1 and a notice setting out: 17.3.1.1 the DBFO Co's proposals as to the Maintenance Works or other works of renewal, reconstruction, repair or reinstatement (the "Renewal Works") required to be carried out in respect of the pavement and such Structures in order to procure that they will, on the Expiry Date, satisfy the Handback Requirements; 17.3.1.2 the DBFO Co's proposals as to the programme (the "Renewal Programme") for the carrying out of the Renewal Works over the remainder of the Contract Period; and 17.3.1.3 the DBFO Co's estimate of the cost of carrying out the Renewal Works (the amount of such cost agreed or determined in accordance with this Clause 17 being the "Renewal Amount"). 17.3.2 The proposals referred to in Clause 17.3.1.1 shall be made, inter alia: 17.3.2.1 on the basis of an assessment of the Residual Life of the relevant element of the Project Facilities in accordance with the provisions of paragraph 2 of Part 4 of Schedule 4; and 17.3.2.2 on the assumption that the Project Facilities will be maintained in accordance with the O&M Requirements for the remainder of the Contract Period. 17.3.3 The Department's Representative may, within 90 days after receipt of the notice from the DBFO Co in accordance with Clause 17.3.1, by notice to the DBFO Co object to the proposals in respect of any or all of the Renewal Works, the Renewal Programme and the Renewal Amount as set out in the DBFO Co's notice. The notice from the Department's Representative shall give details of the grounds for such objection and shall give the Department's Representative's proposals in respect of the Renewal Works and Renewal Programme and its estimate of the Renewal Amount. 72 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 17.3.4 If no agreement is reached between the DBFO Co and the Department's Representative as to any matter referred to in the notice given in accordance with Clause 17.3.3 within 60 days, then either the DBFO Co or the Department's Representative may refer the matter to the Disputes Resolution Procedure for determination: 17.3.4.1 in the case of an objection in respect of the Renewal Works, whether or not the objection is justified and whether any alternative proposals by the Department's Representative are more appropriate to ensure that the pavement of the Project Road and the relevant Structures will satisfy the Handback Requirements on the Expiry Date (on the basis referred to in Clause 17.3.2); 17.3.4.2 in the case of an objection in respect of the Renewal Programme, what programme would be reasonable for the implementation of the Renewal Works; and 17.3.4.3 in the case of an objection in respect of the Renewal Amount, what amount would represent the reasonable cost of carrying out the Renewal Works, on the assumption that such Renewal Works will be carried out in accordance with Good Industry Practice. 17.3.5 Upon agreement or determination in accordance with the Disputes Resolution Procedure of the Renewal Works and the Renewal Programme, the DBFO Co shall procure that the Renewal Works are carried out in accordance with the Renewal Programme. For the avoidance of doubt, the DBFO Co shall procure at its own cost that the Renewal Works are carried out notwithstanding that the actual cost of the Renewal Works may be higher than the Renewal Amount. 17.3.6 For the avoidance of doubt, neither the agreement of the Department's Representative to any Renewal Works, Renewal Programme or Renewal Amount, nor the participation of the Department's Representative in any inspection under this Clause 17, nor the complete or partial carrying out of the Renewal Works shall relieve or absolve the DBFO Co from: 17.3.6.1 its obligation under Clause 17.1; or 17.3.6.2 any obligation to conduct any other inspection or perform any other works in accordance with the O&M Requirements. 17.4 Second Inspection 17.4.1 Not less than 15 months nor more than 18 months prior to the expected Expiry Date, the DBFO Co and the Department's Representative shall conduct a joint inspection (the "Second Inspection") of all elements of the Project Facilities, including without limitation the pavement and the Structures referred to in Clause 17.2.1 (whether or not the Renewal Works in respect of the pavement and such Structures have been carried out). 17.4.2 Such inspection shall comply with the requirements set out in paragraph 2 of Part 4 of Schedule 4 as applicable to each element of the Project Facilities. 17.5 Revised Renewal Programme 17.5.1 Within 60 days after the completion of the Second Inspection, the DBFO Co shall provide to the Department's Representative a report on the condition of the Project Facilities and a notice setting out: 73 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 17.5.1.1 the DBFO Co's proposals as to any revisions or additions to the Renewal Works (including without limitation those referred to in Clause 17.5.6) required in order to procure that all elements of the Project Facilities will, on the Expiry Date, satisfy the Handback Requirements; 17.5.1.2 the DBFO Co's proposals as to any revisions to the Renewal Programme as a consequence of such revisions or additions to the Renewal Works; and 17.5.1.3 the DBFO Co's estimate of any changes in the Renewal Amount as a consequence of such revisions or additions to the Renewal Works. 17.5.2 The proposals referred to in Clause 17.5.1.1 shall be made, inter alia, on the basis set out in Clause 17.3.2. 17.5.3 The Department's Representative may, within 28 days after receipt of the notice from the DBFO Co in accordance with Clause 17.5.1, by notice to the DBFO Co object to any proposed revisions or additions to any or all of the Renewal Works, the Renewal Programme and the Renewal Amount as set out in the DBFO Co's notice. The notice from the Department's Representative shall give details of the grounds for such objection and shall give the Department's Representative's proposals in respect of such matters. 17.5.4 If no agreement is reached between the DBFO Co and the Department's Representative as to any matter referred to in the notice given in accordance with Clause 17.5.3 within 28 days, then either the DBFO Co or the Department's Representative may refer the matter to the Disputes Resolution Procedure for determination: 17.5.4.1 in the case of an objection in respect of any revisions or additions to the Renewal Works, whether or not the objection is justified and whether any alternative proposals by the Department's Representative are more appropriate to ensure that each element of the Project Facilities will satisfy the Handback Requirements on the Expiry Date (on the basis referred to in Clause 17.3.2); 17.5.4.2 in the case of an objection in respect of any revisions to the Renewal Programme, what programme would be reasonable for the implementation of the Renewal Works (as revised or added to in accordance with the provisions of this Clause 17.5); and 17.5.4.3 in the case of an objection in respect of any change in the Renewal Amount, what amount would represent the reasonable cost of carrying out the Renewal Works (as revised or added to in accordance with the provisions of this Clause 17.5). 17.5.5 Upon agreement or determination in accordance with the Disputes Resolution Procedure of any revision or addition to the Renewal Works or the Renewal Programme, the DBFO Co shall procure that the Renewal Works (as so revised or added to) are carried out in accordance with the Renewal Programme (as so revised). For the avoidance of doubt, the DBFO Co shall procure at its own cost that the Renewal Works (as so revised or added to) are carried out notwithstanding that the actual cost of the Renewal Works may be higher than the Renewal Amount (as changed in accordance with this Clause 17.5). 17.5.6 The Renewal Works proposed pursuant to Clause 17.5.1.1 shall include the following: 17.5.6.1 the renewal of all reflecting road studs on the Project Facilities within the last 6 months of the Contract Period, provided that metal housings having a Residual Life of at least 5 years at the Expiry Date need not be renewed; and 74 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 17.5.6.2 the renewal of all lamps on the Project Facilities within the last 6 months of the Contract Period. 17.6 Handback Inspection 17.6.1 Not later than 28 days after the Expiry Date, the DBFO Co and the Department's Representative shall conduct a joint inspection of the Project Facilities (the "Handback Inspection"). Such inspection shall comply with the requirements set out in paragraph 2 of Part 4 of Schedule 4 as applicable to each element of the Project Facilities. 17.6.2 Within 90 days after the completion of the Handback Inspection, the Department's Representative shall either: 17.6.2.1 issue to the DBFO Co a Handback Certificate; or 17.6.2.2 notify the DBFO Co in writing of its decision not to issue the Handback Certificate and state the reason for such decision (being a reason within Clause 17.6.3). 17.6.3 The Department's Representative may only refuse to issue the Handback Certificate if. 17.6.3.1 the DBFO Co shall have failed to complete all of the Renewal Works; or 17.6.3.2 the Project Facilities for any other reason do not comply with the Handback Requirements in all respects (otherwise than by virtue of an event occurring after the Expiry Date). 17.6.4 Any notice given by the Department's Representative in accordance with Clause 17.6.2.2 shall set out each respect in which the Renewal Works have not been completed or the Project Facilities do not comply with the Handback Requirements and shall state the Department's Representative's estimate of the cost of completing such Renewal Works and/or of procuring that the Project Facilities comply in all respects with the Handback Requirements. 17.6.5 The DBFO Co may, within 28 days after receipt of a notice given in accordance with Clause 17.6.2.2, by notice to the Department's Representative object to any matter set out in the Department's Representative's notice. The notice from the DBFO Co shall give details of the grounds for such objection and shall give the DBFO Co's proposals in respect of such matters. 17.6.6 If no agreement is reached between the DBFO Co and the Department's Representative as to any matter referred to in the notice given in accordance with Clause 17.6.5 within 60 days, then either the DBFO Co or the Department's Representative may refer the matter to the Disputes Resolution Procedure for determination, as the case may be: 17.6.6.1 whether the Renewal Works have been completed; 17.6.6.2 whether the Project Facilities comply in all respects with the Handback Requirements; and 17.6.6.3 of the estimated cost of procuring that such Renewal Works are completed and that the Project Facilities comply in all respects with the Handback Requirements. 17.6.7 If it is agreed or determined in accordance with the Disputes Resolution Procedure that the DBFO Co has not completed the Renewal Works or that the Project Facilities do not comply in all respects with the Handback Requirements, then without prejudice to any other right or 75 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) remedy of the Secretary of State the DBFO Co shall pay to the Secretary of State an amount equal to the estimated cost of completing such Renewal Works or procuring that the Project Facilities comply in all respects with the Handback Requirements, as agreed or determined in accordance with Clause 17.6.6 (the "Handback Amount"). Such payment shall be made not later than 14 days after such estimated cost has been agreed or determined in accordance with this Clause 17.6. 17.7 Retention Account 17.7.1 The Secretary of State and the DBFO Co shall procure that the Retention Account is established with a bank located in the United Kingdom not later than the date which is 5 years prior to the Expiry Date. The Secretary of State may by notice in writing to the DBFO Co designate the Retention Account as a "Charged Retention Account". Any interest accrued on any money standing to the credit of the Retention Account shall be credited to the Retention Account. All sums standing to the credit of the Retention Account from time to time, including without limitation any accrued interest, shall be dealt with only in accordance with the provisions of this Clause 17. The DBFO Co shall be entitled to grant a security interest to European Investment Bank and European Investment Fund in and to the Retention Account on terms that at all times such security interest: 17.7.1.1 is subject to, and ranks behind, any Encumbrance (whenever created) in favour of the Secretary of State over, and any other rights of the Secretary of State in and to, the Retention Account, all sums from time to time standing to the credit of the Retention Account and all accrued interest; 17.7.1.2 is subject to the provisions of this Agreement; and 17.7.1.3 shall not in any way interfere with, prejudice or otherwise affect any of the rights and obligations of the Parties under this Agreement (in particular, but without limitation, this Clause 17) or in respect of the Retention Account, and otherwise upon such terms as the Secretary of State shall approve in writing in advance. The DBFO Co shall execute such documents and do such things as the Secretary of State may reasonably require to give effect to the ranking of any security interest contemplated by this Clause 17. 17.7.2 Subject to Clause 17.7.3, from the date which is 5 years prior to the expected Expiry Date, the Secretary of State shall withhold from any payment which would otherwise be due to the DBFO Co under this Agreement in respect of any Monthly Traffic Payment or any DBFO Payment (other than any Aggregate Commuted Sum) a sum equal to 40% of such payment. The Secretary of State shall procure that such sum is deposited into the Retention Account on the date on which payment of such sum would, absent the provisions of this Clause 17.7.2, be due to the DBFO Co. 17.7.3 If at any time the amount standing to the credit of the Retention Account (including any accrued interest but less any bank charges and any tax on interest arising by reason of the operation of the Retention Account) is equal to the Retention Sum less the amount of any Advance Release Amount agreed or determined in accordance with Clause 17.8, then subject to Clause 17.7.5.1 the Secretary of State shall not be entitled to withhold any further sums in accordance with Clause 17.7.2 and the DBFO Co shall be entitled to receive directly the full amount of any sum due to it under any other provision of this Agreement. 17.7.4 If, following the Initial Inspection, it is agreed or determined in accordance with Clause 17.3 that no Renewal Works are required, then within 14 days of such agreement or determination the Secretary of State and the DBFO Co shall pay to the DBFO Co all sums standing to the 76 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) credit of the Retention Account (including any accrued interest but less any bank charges and any tax on interest arising by reason of the operation of the Retention Account), but without prejudice to the provisions of Clause 17.7.5. 17.7.5 If, as a result of the Second Inspection: 17.7.5.1 the Renewal Amount is increased, then the provisions of Clause 17.7.2 shall apply, or shall again apply, until the amount held in the Retention Account equals the increased Retention Sum less the amount of any Advance Release Amount agreed or determined in accordance with Clause 17.8; 17.7.5.2 there is a decrease in the Renewal Amount, such that the total amount held in the Retention Account (including accrued interest but less any bank charges and any tax on interest arising by reason of the operation of the Retention Account) exceeds the revised Retention Sum less the amount of any Advance Release Amount agreed or determined in accordance with Clause 17.8, then the Secretary of State and the DBFO Co shall, within 14 days of the agreement or determination of the revised Renewal Amount in accordance with the provisions of Clause 17.5, pay the amount of such excess out of the Retention Account to the DBFO Co. 17.7.6 Within 14 days after the issue of a Handback Certificate in accordance with Clause 17.6.2.1, the Secretary of State and the DBFO Co shall pay the monies standing to the credit of the Retention Account (including any accrued interest but less any bank charges and any tax on interest arising by reason of the operation of the Retention Account) to the DBFO Co. 17.7.7 If the Department's Representative gives a notice in accordance with Clause 17.6.2.2, then pending the agreement or determination in accordance with the Disputes Resolution Procedure of all matters referred to in that notice, the Secretary of State and the DBFO Co shall retain in the Retention Account whichever is the lesser of: 17.7.7.1 the amount standing to the credit of the Retention Account (including accrued interest), and 17.7.7.2 the amount stated by the Department's Representative in the notice given in accordance with Clause 17.6.2.2 as its estimate of the cost of completing the Renewal Works and/or of procuring that the Project Facilities comply in all respects with the Handback Requirements, and the balance (if any) of any amount standing to the credit of the Retention Account (less any bank charges and any tax on interest arising by reason of the operation of the Retention Account) shall be released to the DBFO Co in accordance with Clause 17.7.6. 17.7.8 If any sum is retained in the Retention Account in accordance with Clause 17.7.7, then the Secretary of State and the DBFO Co shall continue to hold such sum in the Retention Account pending the agreement or determination under the Disputes Resolution Procedure of all matters raised in the notice given by the Department's Representative in accordance with Clause 17.6.2.2. 17.7.9 Within 14 days after the agreement or determination in accordance with the Disputes Resolution Procedure of the Handback Amount, the Secretary of State and the DBFO Co shall pay out of the Retention Account to the Secretary of State an amount equal to the Handback Amount or, if the amount standing to the credit of the Retention Account is insufficient to pay the Handback Amount in full, the entire amount (including accrued interest but less any bank charges and any tax on interest arising by reason of the operation of the Retention Account) 77 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) standing to the credit of the Retention Account. Any remaining sums standing to the credit of the Retention Account (after deducting the amount payable to the Secretary of State and any bank charges and any tax on interest arising by reason of the operation of the Retention Account) shall be paid by the Secretary of State and the DBFO Co out of the Retention Account to the DBFO Co. 17.7.10 If the amount standing to the credit of the Retention Account is less than the Handback Amount, then the payment of any sum to the Secretary of State in accordance with Clause 17.7.9 in or towards satisfaction of the Handback Amount shall not in any way prejudice or affect any other rights or remedies of the Secretary of State for the purpose of recovering the remainder of the Handback Amount. 17.7.11 Upon the occurrence of an Event of Default, the Secretary of State may at his option and without prejudice to any of his other rights or remedies require that any amount standing to the credit of the Retention Account be applied in payment of any amount due from the DBFO Co to the Secretary of State or becoming due as a consequence of such Event of Default or any termination of this Agreement (including without limitation any damages arising from such Event of Default). The DBFO Co and the Secretary of State shall pay to the Secretary of State out of the Retention Account such sum or, if the amount standing to the credit of the Retention Account is insufficient to pay such amount in full, the entire amount (including accrued interest but less bank charges) standing to the credit of the Retention Account upon termination of this Agreement. Any remaining sums standing to the credit of the Retention Account (after deducting the amount payable to the Secretary of State and any bank charges and any tax on interest arising by reason of the operation of the Retention Account) shall be paid by the Secretary of State and the DBFO Co out of the Retention Account to the DBFO Co. 17.7.12 The foregoing provisions of this Clause 17.7 shall not apply if, not later than the date which is 5 years prior to the expected Expiry Date, the DBFO Co procures that a performance guarantee is provided to the Secretary of State in respect of the DBFO Co's obligations under this Clause 17 (other than this Clause 17.7) by a bank or other institution approved by the Secretary of State and in form and substance acceptable to him (in each case in his absolute discretion). 17.8 Advance Renewal Works 17.8.1 Provided that the relevant Advance Release Amount (as determined in accordance with Clause 17.8.4) would, if an Advance Release Certificate were to be issued in respect thereof in accordance with Clause 17.8.3, be a positive amount, the DBFO Co may, on completion of any Renewal Works (the "Relevant Renewal Works") prior to the Second Inspection, give notice to the Secretary of State: 17.8.1.1 identifying the Relevant Renewal Works which have been completed; 17.8.1.2 giving full particulars of the costs of the Relevant Renewal Works; and 17.8.1.3 specifying the amount which the DBFO Co requires to be released to it from the Retention Account in advance of the date of release which would otherwise be determined in accordance with Clause 17.7. 17.8.2 Not later than 28 days after receipt by the Secretary of State of a notice under Clause 17.8.1, the DBFO Co and the Department's Representative shall conduct a joint inspection of the Relevant Renewal Works which inspection shall comply with the requirements set out in paragraph 2 of Part 4 of Schedule 4 as applicable to each element of the Relevant Renewal Works, provided that, for the avoidance of doubt, the required Residual Life for each such 78 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) element shall be calculated from expiry of the period of 30 years from the Commencement Date. 17.8.3 Within 60 days after completion of such inspection, the Department's Representative shall either: 17.8.3.1 issue an Advance Release Certificate in respect of the Relevant Renewal Works for the Advance Release Amount (as determined in accordance with Clause 17.8.4); or 17.8.3.2 notify the DBFO Co in writing of its decision not to issue an Advance Release Certificate in respect of the Relevant Renewal Works. 17.8.4 The Advance Release Amount shall be an amount equal to the lesser of: 17.8.4.1 the amount attributed (in determining the Renewal Amount) to the Relevant Renewal Works; and 17.8.4.2 such amount as, on its release from the Retention Account, would leave an amount standing to the credit of the Retention Account equal to the aggregate amount of the Renewal Amount attributed (in determining the Renewal Amount) to the Renewal Works which have not been completed by the DBFO Co as at the date of such release. 17.8.5 The Department's Representative may refuse to issue an Advance Release Certificate if: 17.8.5.1 the DBFO Co shall have failed to complete all of the Relevant Renewal Works; or 17.8.5.2 there shall have occurred and be subsisting an Event of Default or an event or circumstance which with the lapse of time, the giving of notice or the satisfaction of any other condition would become an Event of Default. 17.8.6 Any notice given by the Department's Representative in accordance with Clause 17.8.3.2 shall specify which of the grounds for refusal set out in Clause 17.8.5 is being relied upon by the Department's Representative. Where the ground for refusal is that the DBFO Co shall have failed to complete all of the Relevant Renewal Works in accordance with the requirements set out in paragraph 2 of Part 4 of Schedule 4, such notice shall also set out each respect in which the Relevant Renewal Works have not been completed. 17.8.7 The DBFO Co may: 17.8.7.1 within 28 days after receipt of an Advance Release Certificate, by notice to the Department's Representative object to the Department's Representative's determination of the cost of the Relevant Renewal Works for the purposes of calculating the Advance Release Amount; or 17.8.7.2 within 28 days after receipt of a notice given in accordance with Clause 17.8.3.2, by notice to the Department's Representative object to any matter set out in the Department's Representative's notice, and, in either case, the notice from the DBFO Co shall give details of the grounds for objection and shall give the DBFO Co's proposals in respect of such matters. 79 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 17.8.8 If no agreement is reached between the DBFO Co and the Department's Representative as to any matter referred to in a notice given in accordance with Clause 17.8.7 within 60 days after receipt of such notice, then either the DBFO Co or the Department's Representative may refer the matter to the Disputes Resolution Procedure. 17.8.9 Within 45 days after the date of an Advance Release Certificate or, if the DBFO Co shall have given notice in accordance with Clause 17.8.7.1, within 14 days after the date on which the costs of the Relevant Renewal Works are finally determined in accordance with the Disputes Resolution Procedure, and subject in either case to there not having occurred and being subsisting an Event of Default or an event or circumstance which with the lapse of time, the giving of notice or the satisfaction of any other condition would become an Event of Default, the Secretary of State and the DBFO Co shall pay from the Retention Account the Advance Release Amount to the DBFO Co, provided that there shall be deducted from such amount and paid to the Secretary of State the full amount of all reasonable costs and expenses of the Secretary of State and the Department's Representative in conducting the inspection under Clause 17.8.2 and making all determinations, assessments and other decisions for the purposes of this Clause 17.8. 80 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 18. INSURANCE 18.1 Insurance Cover 18.1.1 The DBFO Co shall take out and maintain in force the insurances specified in Schedule 10 throughout the relevant stages of the Contract Period as follows: 18.1.1.1 the DBFO Co shall procure that the insurances identified in paragraph 1 of Schedule 10 are taken out prior to the commencement of the Works and are maintained until the issue of the Completion Certificate; and 18.1.1.2 the DBFO Co shall procure that the insurances identified in paragraph 2 of Schedule 10 are taken out in respect of each section of the Existing Road prior to the commencement of any activities in respect of the operation and maintenance of the relevant section of the Existing Road in accordance with the provisions of Clause 7.3.2 and in respect of the New Road prior to the issue of the relevant Permit to Use and are, thereafter maintained throughout the Contract Period. 18.1.2 Prior to taking out or changing any such insurances, the DBFO Co shall submit to the Department's Agent (with respect to the insurances referred to in paragraph 1 of Schedule 10 or the Department's Representative (in respect of the insurances referred to in paragraph 2 of Schedule 10) in accordance with the Review Procedure: 18.1.2.1 the identity of the insurer, and 18.1.2.2 the principal terms and conditions of such insurances or any revision to such terms and conditions; and there shall have been no objection in accordance with the Review Procedure (on the grounds set out in paragraph 3.9 of Part 3 of Schedule 7). 18.1.3 The DBFO Co shall not take any action or fail to take any reasonable action, or (insofar as it is reasonably within its power) permit anything to occur in relation to it, which would entitle any insurer to refuse to pay any claim under any such insurance policy. 18.2 Copies The DBFO Co shall furnish copies of all insurance policies to the Department's Nominee on request. The Department's Nominee shall be entitled to inspect during ordinary business hours the original policies of insurance taken out and maintained pursuant to Clause 18.1 which are or should be in the custody of the DBFO Co, together with evidence that the premiums payable thereunder have been paid and that the insurances are in full force and effect. 18.3 Rights of Subrogation and Notice of Cancellation All such policies of insurance shall contain a clause to the effect that the insurers have agreed to waive all rights of subrogation against the Secretary of State and his servants and agents and shall provide for 30 days written notice to be given to the Secretary of State prior to any cancellation, non-renewal or material modification of any such policy. 81 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 18.4 Renewal Certificates Renewal certificates in relation to such insurances shall be obtained as and when necessary and copies thereof (certified in a manner acceptable to the Department's Nominee) shall be forwarded to the Department's Nominee as soon as possible but in any event at least 10 days before the renewal date. 18.5 Secretary of State's Right to Insure If the DBFO Co fails or refuses to obtain or maintain any insurance required to be effected by it under the provisions of this Clause 18 or to provide the Department's Nominee with copies of the renewal certificates in relation thereto (certified in a manner acceptable to the Department's Nominee) as and when required, the Secretary of State shall, without prejudice to any of its rights under this Agreement or otherwise, have the right itself to procure such insurances, in which event any sums so paid by the Secretary of State in this regard shall immediately become due and payable to the Secretary of State by the DBFO Co and the Secretary of State shall be entitled to deduct such sums from any moneys due or which may become due to the DBFO Co. 18.6 Notification of Claims The DBFO Co shall give the Department's Nominee notification of any claim (other than a claim for less than (pound)10,000) with respect to any of the insurance policies referred to in this Clause 18 accompanied by full details of the incident giving rise to such claim. 18.7 Application of Proceeds 18.7.1 The DBFO Co shall ensure that the insurers of any of the insurance policies which the DBFO Co is required to take out and maintain in force pursuant to Clause 18.1.1 pay the proceeds of: 18.7.1.1 any insurance policy for third party legal liability or employees' liability: 18.7.1.1.1 directly to the third party or employee concerned; or 18.7.1.1.2 to the Secretary of State as loss payee (and the Secretary of State shall, promptly upon receipt of such proceeds, pay the same to the relevant third party or employee concerned); 18.7.1.2 any other policies of such insurances to the Secretary of State as loss payee except where the DBFO Co has already restored, replaced or reinstated the Project Facilities or any other asset (as the case may be), in which case the proceeds shall be paid directly to the DBFO Co, and where the proceeds of such policies of insurances are paid to the Secretary of State as loss payee in whole or in part, the Secretary of State shall pay the amount of such proceeds received by the Secretary of State to the DBFO Co promptly upon the DBFO Co's restoring, replacing or reinstating the Project Facilities or any other asset (as the case may be) or, as the case may be, that part of the Project Facilities or any other such asset in respect of which such proceeds have been paid to the Secretary of State as loss payee. 18.8 Re-instatement of the Maintenance Depot The following provisions of this Clause 18.8 shall apply in the event of termination of the Lease in accordance with sub-clause 3.28(f) thereof: 18.8.1 the Secretary of State and the DBFO Co shall consult and shall use their respective reasonable endeavours, for a period of not less than 3 months, to locate and agree upon a site owned by 82 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) the Secretary of State, being reasonably proximate to the Project Road, which would be suitable for the construction of a maintenance depot and for use by the DBFO Co in the performance of its obligations under this Agreement; 18.8.2 if the Secretary of State and the DBFO Co shall agree upon such a site within such 3 month period (or such longer period as they may agree), then: 18.8.2.1 the Secretary of State shall apply any insurance proceeds received by him in respect of the Maintenance Depot in or towards the construction of a new maintenance depot on such site by the DBFO Co under Clause 18.8.2.2; 18.8.2.2 the DBFO Co shall construct such new maintenance depot to such specification as the Secretary of State shall reasonably require (not being a higher standard of specification than that of the Maintenance Depot), obtain at its own cost all necessary consents in connection with such construction and fund the costs of such construction to the extent that they exceed the amount of such insurance proceeds; and 18.8.2.3 on completion of the construction of such new maintenance depot, the Secretary of State shall (subject to first obtaining a court order on respect thereof as is referred in Clause 7.1.5, both parties using their reasonable efforts to obtain such court order) grant to the DBFO Co a lease of such new maintenance depot on the same terms, mutatis mutandis, as the Lease (provided that the term of such new lease shall be co-terminous with this Agreement (howsoever terminated)); 18.8.3 if the Secretary of State and the DBFO Co shall fail to agree upon such a site within such 3 month period (or such longer period as they may agree), then: 18.8.3.1 the proceeds of such insurance shall be payable to the Secretary of State absolutely; and 18.8.3.2 the Maintenance Depot shall be excluded from the Handback Requirements, provided that, for the avoidance of doubt, nothing in this Clause 18.8 or the Lease shall in any way affect or diminish the obligations of the DBFO Co under this Agreement in respect of the operation and maintenance of the Project Facilities (other than the Maintenance Depot). 18.9 Saving Neither failure to comply nor full compliance with the insurance provisions of this Agreement shall limit or relieve the DBFO Co of its liabilities and obligations under this Agreement and in particular the DBFO Co's obligation to hold the Secretary of State harmless in compliance with any indemnity provisions contained in this Agreement. 83 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 19. SECRETARY OF STATE'S OBLIGATIONS 19.1 Connecting Roads Without prejudice to Clause 35.1.14, the Secretary of State shall repair and maintain the Connecting Roads throughout the Contract Period having regard to the classification of each highway in question (for example (without limitation) as a motorway, trunk road, rural road, urban road, dual or single carriageway) and the traffic which is reasonably to be expected to use it and to the standard of maintenance appropriate for a highway of that classification and used by such traffic. 19.2 Information The Secretary of State shall provide to the DBFO Co such information within his possession or control with respect to the Project as the DBFO Co may reasonably request to enable it to perform its obligations under this Agreement, provided that the Secretary of State shall have no obligation to provide any information with respect to which he is subject to an obligation of confidentiality (whether under any Law or contract or otherwise) which he is not able to have released using his reasonable endeavours (without the payment of any sum). 84 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) PART III RELATIONSHIPS AND MONITORING 20. REPRESENTATIVES 20.1 The Department's Agent and Department's Representative 20.1.1 The Secretary of State has appointed the Department's Agent to act as his agent in relation to the design, construction, completion, commissioning and testing of the Works and, prior to the issue of the Completion Certificate, the maintenance of the New Road (excluding any Upgraded Sections). The Department's Agent will exercise the functions set out in this Agreement (a summary of which is set out in Part 1 of Schedule 7) and such other functions in respect of this Agreement as the Secretary of State may notify to the DBFO Co from time to time (but, for the avoidance of doubt, such right of notification may not increase the rights the Secretary of State has against the DBFO Co under this Agreement). 20.1.2 The Secretary of State has appointed the Department's Representative to act as his agent in connection with all Operations other than those referred to in Clause 20.1.1. The Department's Representative will exercise the functions set out in this Agreement (a summary of which is set out in Part 2 of Schedule 7) and such other functions in respect of this Agreement as the Secretary of State may notify to the DBFO Co from time to time (but, for the avoidance of doubt, such right of notification may not increase the rights the Secretary of State has against the DBFO Co under this Agreement). 20.1.3 The functions of the Department's Agent and the Department's Representative shall be separate and apart and neither shall have the power to override the other. In the event of any conflict between the instructions or actions of the Department's Agent and the Department's Representative or of any confusion as to their respective roles, the matter shall be referred to the Secretary of State. 20.1.4 During any period when there is no Department's Agent or Department's Representative, the Secretary of State shall carry out the functions which would otherwise be performed by the Department's Agent or Department's Representative, as the case may be. 20.1.5 Except as expressly stated in this Agreement, neither the Department's Agent nor the Department's Representative shall have any authority to relieve the DBFO Co of any of its obligations under this Agreement. 20.1.6 Except as notified by the Secretary of State to the DBFO Co in writing, the DBFO Co shall be entitled to treat any act of the Department's Agent or the Department's Representative which is authorised by this Agreement as being expressly authorised by the Secretary of State, and the DBFO Co shall not be required to determine whether an express authority has in fact been given. 20.2 The DBFO Co's Representative 20.2.1 The DBFO Co shall appoint a competent and qualified person to act as its agent in connection with this agreement. Such appointment shall be subject to the approval of the Secretary of State, such approval not to be unreasonably withheld or delayed. 20.2.2 The DBFO Co's Representative shall have full authority to act on behalf of the DBFO Co for all purposes of this Agreement. The Secretary of State, the Department's Agent and the Department's Representative shall be entitled to treat any act of the DBFO Co's Representative in connection with this Agreement as being expressly authorised by the DBFO 85 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) Co, and the Secretary of State, the Department's Agent and the Department's Representative shall not be required to determine whether any express authority has in fact been given. 20.3 Change of Representatives 20.3.1 The Secretary of State may at any time and from time to time by notice to the DBFO Co terminate the appointment of the Department's Agent or Department's Representative or appoint a substitute Department's Agent or Department's Representative. Any such notice shall specify the date on which such termination or substitution shall have effect, which date shall, other than in the case of an emergency, be such as will not cause serious inconvenience to the DBFO Co in the execution of its obligations hereunder. 20.3.2 Save in the case of death, serious illness or termination of employment (for whatever reason and including retirement), the appointment of the DBFO Co's Representative shall not be terminated without the prior approval of the Secretary of State. Immediately upon the DBFO Co's Representative ceasing to act in the case of death or serious illness and prior to termination of the appointment in all other cases, the DBFO Co shall by notice to the Secretary of State appoint a substitute. Such appointment shall be subject to the approval of the Secretary of State, such approval not to be unreasonably withheld or delayed. 86 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 21. QUALITY ASSURANCE 21.1 Quality Management Systems and Plans 21.1.1 The DBFO Co shall procure that all aspects of the Operations are the subject of quality management systems which comply with the provisions of this Clause 21 (the "Quality Management Systems"). 21.1.2 The Quality Management Systems shall comply with: 21.1.2.1 BS EN ISO 9001 or BS EN ISO 9002 as appropriate; 21.1.2.2 the Technical Requirements; and 21.1.2.3 Good Industry Practice; and shall be reflected in appropriate Quality Plans which comply with the requirements set out in Part 1 of Schedule 5. 21.1.3 Without limitation to the generality of Clause 21.1.2, there shall be: 21.1.3.1 a DBFO Co's Quality Plan, which shall meet the requirement set out in: 21.1.3.1.1 Annex 1 to Part 1 of Schedule 5 (the DBFO Co's Quality Plan, to the extent meeting such requirements, being referred to as the "DBFO Co's Quality Plan for the Management of Construction"); 21.1.3.1.2 Annex 5 to Part 1 of Schedule 5 (the DBFO Co's Quality Plan, to the extent meeting such requirements, being referred to as the "DBFO Co's Quality Plan for the Management of O&M"); and 21.1.3.1.3 Annex 6 to Part 1 of Schedule 5 (the DBFO Co's Quality Plan, to the extent meeting such requirements, being referred to as the "DBFO Co's Quality Plan for O&M"); 21.1.3.2 a Designer's Quality Plan, which shall meet the requirements set out in: 21.1.3.2.1 Annex 2 to Part 1 of Schedule 5 (the Designer's Quality Plan, to the extent meeting such requirements, being referred to as the "Designer's Quality Plan for Design"); and 21.1.3.2.2 Annex 3 to Part 1 of Schedule 5 (the Designer's Quality Plan, to the extent meeting such requirements, being referred to as the "Designer's Quality Plan for Examination of the Works"); and 21.1.3.3 a Contractor's Quality Plan, which shall meet the requirements set out in Annex 4 to Part 1 of Schedule 5 (the "Contractor's Quality Plan") 21.1.4 The DBFO Co shall not commence or permit the commencement of any aspect of the Operations before those parts of the Quality Plans which concern such aspect of the Operations have been submitted to the Department's Nominee and there has been no objection thereto in accordance with the Review Procedure (on the grounds set out in paragraph 3.10 of Part 3 of Schedule 7). 87 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 21.1.5 It shall not be necessary to submit to the Review Procedure in accordance with the provisions of Clause 21.1.4 the Quality Plans (or parts thereof) which have been agreed at the date of execution of this Agreement, which are set out in Part 2 of Schedule 5. 21.1.6 The DBFO Co shall comply with the DBFO Co's Quality Plan and shall procure that: 21.1.6.1 the Designer complies with the Designer's Quality Plan; and 21.1.6.2 the Contractor complies with the Contractor's Quality Plan. 21.1.7 Where any aspect of the Operations is performed by more than one contractor or sub-contractor, then the provisions of this Clause 21 shall apply in respect of each of such contractors or sub-contractors, and references in this Clause 21 to the DBFO Co, the Designer and the Contractor shall be construed accordingly. 21.1.8 The DBFO Co shall from time to time submit to the Department's Nominee in accordance with the Review Procedure any changes to any of the Quality Plans required for such Quality Plan to continue to reflect Quality Management Systems which comply with the requirements set out in Clause 21.1.2. The Department's Nominee may object to any such proposed change only on the grounds set out in paragraph 3.10 of Part 3 of Schedule 7. 21.1.9 If the DBFO Co fails to propose any change required pursuant to Clause 21.1.8, then the Secretary of State may propose such change and it shall be dealt with in accordance with the Review Procedure as though it had been proposed by the DBFO Co. 21.1.10 If there is no objection under the Review Procedure to a part of a Quality Plan referred to in Clause 21.1.4 or a change proposed pursuant to Clause 21.1.8 or Clause 21.1.9, the Quality Plan shall be amended to incorporate such part or change. 21.2 Quality Manuals and Procedures If any Quality Plan refers to, relies on or incorporates any quality manual or procedure, then such quality manual or procedure or the relevant parts thereof shall be submitted to the Department's Nominee at the time that the relevant Quality Plan or part of or change to a Quality Plan is submitted in accordance with the Review Procedure, and the contents of such quality manual or procedure shall be taken into account in the consideration of the relevant Quality Plan or part of or change to a Quality Plan in accordance with the Review Procedure. The Department's Nominee may require the amendment of any such quality manual or procedure to the extent necessary to enable the relevant Quality Plan to satisfy the requirements of Clause 21.1.2. 21.3 Additional Information Notwithstanding any other provision of this Clause 21, the DBFO Co shall provide to the Department's Nominee such information as the Department's Nominee may reasonably require to demonstrate compliance with this Clause 21 and the provisions of Part 1 of Schedule 5. 21.4 Testing All on-site and off site testing shall be carried out by laboratories accredited by the National Measurement Accreditation Service for that test or by laboratories accredited to an equivalent standard, where this is required by Table NG 1/1 in the Notes for Guidance. 88 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 21.5 Project Quality Director The DBFO Co shall appoint as soon as reasonably practicable a Project Quality Director, who shall be independent of the project management team (but, for the avoidance of doubt, need not be a director of the DBFO Co). The identity of the Project Quality Director (and any replacement) and the terms and conditions of his engagement shall be subject to the approval of the Secretary of State (such approval not to be unreasonably withheld or delayed). Without limitation to the foregoing, the terms and conditions of engagement of the Project Quality Director shall require him to: 21.5.1 ensure the effective operation of the Quality Management Systems; 21.5.2 audit the Quality Management Systems at regular intervals and report the findings of such audit to the Department's Nominee; 21.5.3 review all Quality Management Systems at intervals agreed with the Department's Nominee to ensure their continued suitability and effectiveness; and 21.5.4 liaise with the Department's Nominee on all matters relating to quality management. 21.5 Quality Monitoring Without limitation to Clause 24 [Monitoring of Performance], the Department's Nominee may carry out audits of the DBFO Co's Quality Management Systems (including without limitation all Quality Plans and any Quality Manuals) at approximate intervals of 3 months and may carry out other periodic monitoring, spot checks and auditing of the Quality Management Systems. 89 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 22. REPORTS AND INFORMATION 22.1 Required Reports The DBFO Co shall submit to the Department's Nominee the reports specified in Part 2 of Schedule 14, in such numbers as provided therein. 22.2 Form The form of such Reports shall be agreed with the Department's Nominee, such agreement not to be unreasonably withheld. 22.3 Further Information The DBFO Co shall at any time and from time to time at its own cost provide to the Department's Agent or the Department's Representative one copy of such information with respect to the Project as the Department's Agent or the Department's Representative may reasonably require. 22.4 Objections to Reports 22.4.1 If the Department's Nominee considers that any Report either has not been compiled in accordance with the provisions of this Agreement or has been based on erroneous information or data, then it may serve a notice to that effect on the DBFO Co within 28 days of receipt of such Report objecting to such Report. 22.4.2 If any such objection has not been resolved by agreement between the Department's Nominee and the DBFO Co within 14 days after the service of such notice, then either of them may refer the matter to the Disputes Resolution Procedure. 22.5 Revisions to Reports If either: 22.5.1 the resolution (whether by agreement or determination under the Disputes Resolution Procedure) of any objection made pursuant to Clause 22.4.1; or 22.5.2 the correction of any calculation pursuant to Clause 28.7, requires any revision or adjustment to any Report, then the DBFO Co shall as soon as practicable issue revised versions of each affected Report and such revised Report shall for all purposes of this Agreement take the place of the original Report. 90 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 23. RECORDS 23.1 Required Records 23.1.1 The DBFO Co shall maintain and update those records relating to the Project set out in Part 1 of Schedule 14. 23.1.2 The Secretary of State shall be entitled at his own cost within 180 days after the Commencement Date to deliver up to the DBFO Co the existing records of the Secretary of State in respect of the Project Facilities and shall be required to deliver any such records (or copies thereof) to the extent such records are required for the conduct of the Operations. In such event, the DBFO Co shall retain such records in safe storage at its own cost and such records shall thereafter be treated for all purposes as though they were records referred to in Clause 23.1.1. 23.2 Audit The records referred to in Clause 23.1 shall be kept in good order and in such form as to be capable of audit (including by electronic means) by the Department's Nominee. The DBFO Co shall make such records available for inspection by or on behalf of the Secretary of State, the Department's Agent and the Department's Representative at all reasonable times. 23.3 Copies The Secretary of State, the Department's Agent and the Department's Representative shall be entitled to take copies of all such records at the DBFO Co's cost and for that purpose to use such copying facilities as are maintained at the place where the records are kept. 23.4 Retention of Records 23.4.1 All records referred to in Clause 23.1 shall be retained for no less than the period specified in respect of such records in Part 1 of Schedule 14 or, if no such period is specified, a period of 7 years after the end of the Contract Year to which such records relate. 23.4.2 Where the period for the retention of any records (as set out against the relevant class of records in Part 1 of Schedule 14) has expired, then the DBFO Co shall notify the Secretary of State as to what it intends to do with such records. If it intends to dispose of them or subsequently decides to dispose of them, the DBFO Co shall notify the Secretary of State, and if the Secretary of State shall within 40 days of such notice elect to receive those records or any part of them the DBFO Co, at its own cost, shall deliver up such records to the Secretary of State in the manner and at such location as the Secretary of State shall reasonably specify. 23.4.3 Upon the termination for whatever reason of this Agreement, the DBFO Co shall as soon as practicable and at its own cost deliver up to the Secretary of State in the manner and at such location as the Secretary of State shall reasonably specify all such records as are referred to in Clause 23.1 which were in existence at the Termination Date (or, where those records are required by statute to remain with the DBFO Co, copies thereof) or such part of such records as the Secretary of State may by notice to the DBFO Co specify. The Secretary of State shall make available to the DBFO Co all the records the DBFO Co delivers up pursuant to this Clause 23.4.3, subject to reasonable notice. 23.5 Computer Records To the extent that the records of the DBFO Co are to be created or maintained on a computer or other electronic storage device, then the DBFO Co shall agree with the Department's Nominee a procedure for 91 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) back-up and off-site storage for copies of such records and shall adhere to such agreed procedure and shall cause the Contractor, the Designer, and its or their sub-contractors to implement and adhere to such agreed procedure. 92 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 24. MONITORING OF PERFORMANCE 24.1 Remedial Works If at any time the DBFO Co has failed to perform any of its obligations under this Agreement and such failure is capable of remedy, then the Department's Nominee may serve a notice on the DBFO Co requiring the DBFO Co (at its own cost and expense) to remedy such failure (and any damage resulting from such failure) within a reasonable period (the "Remedial Period") and for the avoidance of doubt a failure to perform shall include a failure to remedy as required by this Clause 24.1. 24.1A Shadow Penalty Points 24.1A.1 If at any time circumstances exist in which, but for the giving of the Penalty Points Commencement Notice (as defined in Clause 24.1A.3), the Department's Nominee would have been entitled to award any Penalty Points to the DBFO Co in accordance with the provisions of Clause 24.2, the Department's Nominee may serve a notice (a "Shadow Penalty Point Notice") on the DBFO Co. 24.1A.2 A Shadow Penalty Point Notice shall specify: 24.1A.2.1 the reasons for the serving of such Notice; and 24.1A.2.2 the number of Penalty Points ("Shadow Penalty Points") which, had the Penalty Point Commencement Notice been given prior to the date of the relevant Shadow Penalty Point Notice, would have been awarded in respect of the matters referred to in the reasons given in accordance with Clause 24.1A.2.1. 24.1A.3 If at any time the DBFO Co has been awarded a total of 25 or more Shadow Penalty Points in any 1 year period, the Secretary of State may serve on the DBFO Co a notice (the "Penalty Points Commencement Notice") bringing into effect the provisions of Clause 24.2, such notice to be signed on behalf of the Secretary of State by the Project Director of the Project or any more senior official of the Department. 24.2 Penalty Points 24.2.1 If at any time following the date of the Penalty Points Commencement Notice: 24.2.1.1 any Report indicates or the Department's Nominee otherwise becomes aware that the DBFO Co has failed to perform any of its obligations under this Agreement; or 24.2.1.2 the Department's Nominee serves a notice under Clause 24.1 and the DBFO Co fails to remedy the failure within the Remedial Period, then (subject to Clause 24.2.5 and Clause 24.2.6) the Department's Nominee may (without prejudice to any other right or remedy available to the Secretary of State) by notice to the DBFO Co award points (herein called "Penalty Points") calculated by reference to the table set out in Schedule 18, provided that, in the case of any Penalty Points awarded in respect of a failure to perform identified under Clause 24.2.1.1, the Department's Nominee shall, in the case of a failure which is capable of remedy, at the same time serve on the DBFO Co a notice under Clause 24.1; if the DBFO Co remedies the relevant failure within the relevant Remedial Period, the number of Penalty Points in respect thereof shall be reduced by 50 per cent. 24.2.2 The Parties acknowledge that Schedule 18 provides a list of examples of matters which may attract Penalty Points (or Shadow Penalty Points) but is only by way of illustration of the matters for which Penalty Points (or Shadow Penalty Points) may be awarded and the severity 93 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) attributed to such defaults and in no way restricts the Department's Nominee's right to award Penalty Points (or Shadow Penalty Points) for other failures by the DBFO Co to perform its obligations under this Agreement or to enforce other remedies in respect of such breaches of this Agreement. 24.2.3 If, within 14 days after receipt of a Shadow Penalty Points Notice or a notice pursuant to Clause 24.2.1, the DBFO Co demonstrates to the reasonable satisfaction of the Department's Nominee that the failure in respect of which the relevant Shadow Penalty Points or Penalty Points were awarded occurred solely as a result of an event beyond the reasonable control of the DBFO Co (or its contractors, subcontractors, servants or agents), having regard to the nature of the obligation which DBFO Co failed to perform and such steps as the DBFO Co took or could reasonably be expected to have taken in order to mitigate the effects of such failure, then the award of such Shadow Penalty Points or Penalty Points shall be rescinded. 24.2.4 The DBFO Co may within 28 days of receipt of any Shadow Penalty Point Notice or any notice pursuant to Clause 24.2.1 object to the award of any such Shadow Penalty Points or Penalty Points or, where Shadow Penalty Points or Penalty Points have been awarded in respect of a matter which is not set out in Schedule 18, to the number of such Shadow Penalty Points or Penalty Points. If the Department's Nominee and the DBFO Co are unable to reach agreement on any such matter within 14 days, either may refer the Dispute for resolution under the Disputes Resolution Procedure. In respect of any Dispute as to the number of Shadow Penalty Points or Penalty Points to be awarded pursuant to Clause 24.2.2, the issue for decision shall be how many Shadow Penalty Points or Penalty Points should be awarded in comparison with the number of Shadow Penalty Points or Penalty Points set out in Schedule 18 for defaults of equivalent severity. 24.2.5 If the DBFO Co has been awarded a total of 50 Penalty Points in any 12 month period, then (subject to Clause 24.2.6) any further Penalty Points may only be validly awarded if the notice under Clause 24.2.1 is countersigned by the Project Director of the Project (or any more senior official of the Department) on behalf of the Secretary of State. 24.2.6 If the DBFO Co has been awarded a total of 75 Penalty Points in any 12 month period, any further Penalty Points may only be validly awarded if the notice under Clause 24.2.1 is countersigned by the Director of the Northern Network Management Division of the Highways Agency (or any successor office or body) or any more senior official of the Department, and in such event the countersignature of any such notice by the Project Director of the Project shall cease to be required. 24.2.7 If the DBFO Co shall effect any Lane Closure in breach of Clause 13.3.9 then: 24.2.7.1 the Penalty Points Commencement Notice shall be deemed to have been given for purposes of this Agreement with effect from the day preceding the first day of any such Lane Closure; and 24.2.7.2 without limitation to Clause 24.2.7.1, the Department's Agent shall be entitled to award Penalty Points in respect of such Lane Closure in accordance with Clause 24.2.1 (and not Shadow Penalty Points in accordance with Clause 24.1A.1) and the proviso to Clause 24.2.1 shall not apply in respect of such Lane Closure. 24.2.8 Notwithstanding anything else in this Clause 24.2 (but without prejudice to Clause 24.2.1.2), Shadow Penalty Points and Penalty Points shall not be awarded more than once in respect of a particular failure to perform by the DBFO Co or under more than one category in Schedule 18 in respect of the same failure to perform by the DBFO Co, provided that where more than one such category is relevant to a particular failure to perform the number of Shadow Penalty Points or Penalty Points which may be awarded is the highest number applicable to any of such categories in Schedule 18. 94 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 24.3 Warning Notices Without prejudice to any other right or remedy available to the Secretary of State, if at any time the DBFO Co has committed any material breach of its obligations under this Agreement or has been awarded a total of 300 or more Penalty Points (the "Qualifying Number") in any 3 year period, then the Department's Nominee may give written notice (herein called a "Warning Notice") to the DBFO Co setting out in general terms the matter or matters giving rise to such notice and containing a reminder to the DBFO Co of the implications of such notice. Any such notice shall state on its face that it is a "Warning Notice" and shall be signed by or on behalf of the Secretary of State. In determining whether or not the Qualifying Number of Penalty Points has been incurred in any relevant period, there shall be excluded any Penalty Points which have already been comprised in a Qualifying Number of Penalty Points in respect of which a Warning Notice has already been issued under this Clause 24.3. 24.4 Increased Monitoring In the event of the DBFO Co either: 24.4.1 being awarded a total of 50 or more Penalty Points in any 1 year period; or 24.4.2 receiving one or more Warning Notices, the Department's Nominee may (without prejudice to any other right or remedy available to the Secretary of State) by notice to the DBFO Co increase the level of its monitoring of the DBFO Co until such time as the DBFO Co shall have demonstrated to the reasonable satisfaction of the Department's Nominee that it will perform and is capable of performing its obligations under this Agreement. The notice to the DBFO Co shall specify the additional measures to be taken by the Department's Nominee in monitoring the DBFO Co in response to the matters which led to such Penalty Points being awarded or Warning Notice sent. The DBFO Co shall compensate the Secretary of State for all costs incurred by him as a result of such increased level of monitoring (including, without limitation, the relevant administrative expenses of the Secretary of State, including an appropriate sum in respect of general staff costs and overheads). 24.5 Step-In Rights 24.5.1 Without prejudice to Clause 24.5.2, if at any time the Department's Nominee serves a notice under Clause 24.1 and the DBFO Co fails to remedy the failure within the Remedial Period, then the Secretary of State may (without prejudice to any other right or remedy available to him) himself take such steps as necessary to remedy such failure or engage others to take such steps, and the provisions of Clauses 24.5.3 and 24.5.4 shall apply. 24.5.2 Without prejudice to any other right or remedy of the Secretary of State: 24.5.2.1 in the event that the Secretary of State considers that a breach by the DBFO Co of an obligation under this Agreement may create an immediate and serious threat to public safety; or 24.5.2.2 in the event of an emergency; or 24.5.2.3 where it appears to the Secretary of State necessary or expedient in the interests of road safety, the Secretary of State may give notice requiring the DBFO Co forthwith to take such steps as he reasonably considers necessary or expedient to mitigate or preclude such state of affairs. In the event that the DBFO Co shall fail to take such steps as the Secretary of State may reasonably think necessary and within such time as the Secretary of State shall reasonably 95 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) think fit, then the Secretary of State may take such steps himself or engage others to take such steps, and the provisions of Clauses 24.5.3 and 24.5.4 shall apply. 24.5.3 To the extent that the Parties shall agree, or it shall be determined under the Disputes Resolution Procedure, that the DBFO Co had not failed to perform its obligations under this Agreement (in the case of any action taken pursuant to Clause 24.5.1) or the Secretary of State was not reasonable in requiring the DBFO Co to take such steps as are referred to in Clause 24.5.2 or, in the case of Clause 24.5.2.1, that no such breach had occurred (any such determination to be made on the basis of the facts available to the Secretary of State at the time he took or required such action to be taken), then the provisions of Part 5 of Schedule 12 shall apply. 24.5.4 Except in the circumstances referred to in Clause 24.5.3, the DBFO Co shall reimburse the Secretary of State for all costs incurred by him in taking the steps or engaging others to take the steps referred to in Clause 24.5.1 or Clause 24.5.2 (including, without limitation, the relevant administrative expenses of the Secretary of State, including an appropriate sum in respect of general staff costs and overheads). 24.5.5 Where the Secretary of State has exercised his rights under Clause 24.5.1 or Clause 24.5.2 to take any steps in respect of any obligation of the DBFO Co of a continuing nature, then the DBFO Co shall recommence the performance of such obligation (and the Secretary of State shall cease the taking of such steps) upon the later to occur of: 24.5.5.1 the date on which the DBFO Co proves to the reasonable satisfaction of the Secretary of State that it is capable of performing and will perform such obligation in accordance with the terms of this Agreement; and 24.5.5.2 the expiry of any agreement entered into by the Secretary of State with any third party for the performance of such obligation. 24.6 Removal of Personnel The Department's Nominee may require the DBFO Co to remove forthwith from the Site and Adjacent Areas any person who, in the opinion of the Department's Nominee, misconducts himself or is incompetent or negligent in the proper performance of his duties, or whose presence on the Site or Adjacent Areas is otherwise considered by the Department's Nominee to be undesirable, and such person shall not be again allowed upon the Site or the Adjacent Areas without the consent of the Department's Nominee. 96 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 25. STATUTORY POWERS 25.1 Application Whenever the exercise by the Secretary of State of any statutory power is necessary to enable the DBFO Co to perform any obligation under this Agreement, the provisions of this Clause 25 shall apply. 25.2 Procedure 25.2.1 If the DBFO Co believes that the exercise by the Secretary of State of any statutory power is necessary (or desirable) to enable the DBFO Co to perform (or to perform more expediently) any obligation under this Agreement, the DBFO Co shall give notice to that effect to the Secretary of State. 25.2.2 Any notice given by the DBFO Co in accordance with Clause 25.2.1 shall: 25.2.2.1 clearly specify the action requested of the Secretary of State, the duty of the DBFO Co under this Agreement in respect of which such action is requested and the reasons why such action by the Secretary of State is required; 25.2.2.2 indicate the time by which the requested action is required; and 25.2.2.3 set out any recommendation by the DBFO Co in respect of the requested action. 25.2.3 Within 21 days after receipt of a notice given in accordance with Clause 25.2.1, the Secretary of State shall acknowledge receipt of such notice and shall give his good faith estimate of the date on which he will respond on the merits of the request, provided that no such estimate shall be binding on the Secretary of State. 25.2.4 The Secretary of State shall respond to the merits of the request contained in the notice given in accordance with Clause 25.2.1 as soon as reasonably practicable in the circumstances, taking into consideration, inter alia, any requirement for consultation with the public or other interested parties in connection with such request. 25.3 No Fetter on Discretion The Secretary of State shall consider on its merits in accordance with his statutory duties any request for action contained in a notice given in accordance with Clause 25.2.1. Without in any way limiting the discretion of the Secretary of State in responding to any such request, the Secretary of State shall, in reaching any such decision, give consideration in good faith, inter alia, to the matters set out in Clause 25.4. The decision of the Secretary of State on the merits of the request shall not be subject to review under the Disputes Resolution Procedure. 25.4 Relevant Considerations The considerations referred to in Clause 25.3 are the following: 25.4.1 whether the Secretary of State has the statutory power to take the action requested; 25.4.2 whether there is any alternative course available to the DBFO Co (and the cost of such alternative course) which would not require action by the Secretary of State; 25.4.3 the effect the requested action would have on the interests of any third parties; 97 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 25.4.4 whether the timing and substance of the request is such as to enable the Secretary of State to consider the merits of the request in accordance with the principles of procedural fairness (taking into account where appropriate the necessity or desirability of consultation with other interested parties); and 25.4.5 whether the action requested would have any implications for safety, either of Users or of any other third parties. 25.5 Refusal of Request 25.5.1 This Clause 25.5 shall apply only in relation to a notice pursuant to Clause 25.2.1 requesting the exercise by the Secretary of State of a statutory power which is necessary (and not merely desirable) to enable the DBFO Co to perform (and not merely to perform more expediently or at a lower cost) any obligation under this Agreement (a "Relevant Notice"). 25.5.2 Subject to Clause 25.5.3, if, in the exercise of his discretion, the Secretary of State refuses to take the action requested in a Relevant Notice, then the DBFO Co shall be relieved from liability under this Agreement to the extent that by reason of such refusal the DBFO Co is not able to perform the obligations identified in the request contained in the notice given in accordance with Clause 25.2.1. 25.5.3 The DBFO Co shall be relieved of its liability in accordance with Clause 25.5.2 only if it has taken all steps necessary to mitigate the effects of the refusal of the Secretary of State to take the requested action. 25.5.4 If the failure to take any action requested in a Relevant Notice renders impossible (and not merely more expensive) the DBFO Co's performance of this Agreement or has a fundamental effect on the rights or obligations of the DBFO Co under this Agreement, then the Parties shall negotiate for a period of not less than 90 days in good faith in an attempt to agree an alternative means of performance which does not require the exercise of any statutory power and which: 25.5.4.1 still provides substantially the same level of service to the Secretary of State; and 25.5.4.2 does not involve the DBFO Co in any material increase in cost or reduction of return. If the Parties are unable to reach agreement within such period of 90 days, the provisions of Clause 38.4 shall apply. 98 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 26. STATUTORY UNDERTAKERS 26.1 Definitions For the purpose of this Clause 26: 26.1.1 "Apparatus" means all apparatus (including apparatus as defined in 1991 Act) located in, on, under, over, across, along or adjacent to the Site or Adjacent Areas; 26.1.2 "Authorised Functions" means each of the functions conferred on the Secretary of State by the 1991 Act which the DBFO Co is authorised by the Secretary of State from time to time to exercise pursuant to Clause 26.4.1 or 26.4.5, as the case may be; 26.1.3 "Authorisation Period" means either the Contract Period or the period commencing on the Commencement Date and expiring 10 years therefrom, whichever is shorter; 26.1.4 "Bridge Authority" has the meaning given in Section 147(1)(b) of the 1991 Act; 26.1.5 "Codes of Practice" means the codes of practice issued from time to time pursuant to Part III of the 1991 Act; 26.1.6 "Diversionary Works" means works involving the diversion, change in level, protection or removal of Apparatus or other works in relation to Apparatus which are necessary to facilitate the execution of the Operations; 26.1.7 "Highway Authority" has the same meaning as ascribed in the Highways Act; 26.1.8 "Major Highway Works" means both major highway works as defined in Section 86(3) of the 1991 Act and major bridge works as defined in Section 90(2) of the 1991 Act; 26.1.9 "the Regulations" means regulations issued pursuant to Part III of the 1991 Act; 26.1.10 "the Renewed Authorisation Period" has the meaning given in Clause 26.4.5.2; 26.1.11 "Street Authority" has the meaning given in Section 49(1) of the 1991 Act; 26.1.12 "Street Works Licences" has the meaning given in Section 50(1) of the 1991 Act; 26.1.13 "Sample Inspections" has the meaning given to it in the Code of Practice entitled Code of Practice for Inspections; 26.1.14 "Traffic Authority" has the meaning given in Section 121A of the Road Traffic Regulation Act 1984; 26.1.15 "Works for Road Purposes" has the meaning given in Section 86(2) of the 1991 Act; 26.1.16 "1991 Act" means the New Roads and Street Works Act 1991; 26.1.17 "1995 Order" means the Contracting Out (Highway Functions) Order 1995 (SI 1995/1986); and 26.1.18 "affected" or "affecting" shall be regarded as including the meaning given to "affected" in Section 105(4) of the 1991 Act. 99 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 26.2 Primary Duty of Co-ordination 26.2.1 The DBFO Co covenants with the Secretary of State to use its best endeavours to co-ordinate the execution of works of all kinds affecting the Project Facilities and the surrounding highway network: 26.2.1.1 in the interests of safety; 26.2.1.2 so as to minimise the inconvenience to persons using the Project Facilities having regard in particular to the needs of people with disabilities; 26.2.1.3 so as to protect the structure of the Project Facilities and the integrity of Apparatus; and in accordance with all relevant Codes of Practice. 26.2.2 The DBFO Co shall comply with such directions as to the co-ordination of works of all kinds including the co-ordination of works on streets other than the Project Road, as the Secretary of State may give from time to time consistent with Good Industry Practice. 26.3 General 26.3.1 In constructing and operating the Project Facilities and otherwise performing the Operations, the DBFO Co shall comply with the 1991 Act, the Regulations, the Codes of Practice and any requirements of Statutory Undertakers notified to the DBFO Co or the Secretary of State pursuant to the 1991 Act. 26.3.2 The DBFO Co shall notify the Secretary of State of all proposed Major Highway Works, Diversionary Works and Works for Road Purposes necessary in connection with the Operations and shall contract, commit or compromise in respect of such works with Statutory Undertakers and carry out any such works in accordance with the 1991 Act, the Regulations, the Codes of Practice and the provisions of this Clause 26. 26.3.3 The DBFO Co will be responsible for all costs of, and shall make all payments due to, Statutory Undertakers in connection with any Diversionary Works and shall indemnify the Secretary of State against all Losses or Claims of any person arising out of or in connection with Diversionary Works. 26.3.4 Subject to Clauses 26.3.5 and 26.6.2 the Secretary of State will pay to the DBFO Co within 28 days of receipt any monies actually received by him from any Statutory Undertaker in respect of the Project Facilities pursuant to any provision of the 1991 Act, the Regulations or the Codes of Practice, other than fees relating to Sample Inspections. 26.3.5 If a contribution is made to the Secretary of State pursuant to Section 78 of the 1991 Act then payment will only be made to the DBFO Co if the contribution relates to costs actually incurred or likely to be incurred by the DBFO Co during the Contract Period and the DBFO Co shall pay to the Secretary of State any contribution received if the contribution relates to costs incurred or likely to be incurred outside the Contract Period. 26.3.6 At the request of the DBFO Co, and subject to an indemnity for all costs including administrative costs, general staff costs and overheads, the Secretary of State will use his reasonable endeavours to recover all damages, losses, charges, fees, contributions and costs due to the Secretary of State as Street Authority in respect of the Project Facilities pursuant to the 1991 Act, the Regulations or Codes of Practice. 100 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 26.3.7 The DBFO Co shall provide to such person as may be nominated from time to time by the Secretary of State such information as may be prescribed pursuant to Sections 53 and 54 of the 1991 Act and such other information of which it becomes aware which is eligible for registration and shall make such payment or payments to such party as the Secretary of State may require pursuant to Section 53(5) of the 1991 Act. The DBFO Co shall maintain at all times a terminal linked to the street works register for the purposes of giving and receiving notices and information affecting the Project Road and the surrounding road network. 26.3.8 Subject to the provisions of Section 50 and Schedule 3 of the 1991 Act, the Secretary of State will, as soon as is reasonably practicable after receiving a request from the DBFO Co, grant a Street Works Licence to the DBFO Co on the following terms: 26.3.8.1 it shall be non-assignable; 26.3.8.2 it shall not inure beyond the shorter of the Contract Period and the period during which the Secretary of State is Street Authority in respect of the Project Facilities; 26.3.8.3 it shall only be exercisable after consultation with any affected Relevant Authority or person owning Apparatus. 26.3.9 [Clause not used]. 26.3.10 The DBFO Co shall notify the Secretary of State of any possible offence committed or likely to be committed by a Statutory Undertaker under the 1991 Act of which the DBFO Co is or should reasonably be aware and shall provide such information relating to such offence as may be specified by the Secretary of State. 26.3.11 The DBFO Co will at all times assist and facilitate the Secretary of State in carrying out, and shall take all steps necessary to ensure that the Secretary of State is able to comply with, his duties under the 1991 Act, the Regulations and the Codes of Practice. 26.3.12 The DBFO Co and (if so requested by the DBFO Co by notice in writing, but at the DBFO Co's cost) the Secretary of State shall each take such actions as are (in the case of the DBFO Co) appropriate or (in the case of the Secretary of State) reasonably requested by the DBFO Co to inform all interested parties of the DBFO Co's role on behalf of the Secretary of State pursuant to Clauses 26.4 and 26.5. 26.4 Contracting Out of Functions 26.4.1 Subject to the provisions of this Clause 26.4 and pursuant to the 1995 Order, the DBFO Co is hereby authorised by the Secretary of State as Street Authority, Highway Authority, Bridge Authority and Traffic Authority (as the case may be) for the Authorisation Period to exercise in respect of the Project Facilities each of the functions of the Secretary of State listed in Part 1 of Schedule 19. 26.4.2 From the Commencement Date and for so long as any authorisation made under this Clause 26.4. is effective, the DBFO Co shall exercise properly and fully in respect of the Project Facilities each of the Authorised Functions. 26.4.3 The authorisation made under this Clause 26.4 in respect of an Authorised Function is made on the following terms: 26.4.3.1 it shall be non assignable; 101 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 26.4.3.2 the DBFO Co shall not delegate any such Authorised Function. 26.4.4 On or before the expiry of the Authorisation Period (or any Renewed Authorisation Period) in respect of an Authorised Function the DBFO Co may request the Secretary of State to renew the authorisation for any period not exceeding 10 years from the date of renewal. The decision whether or not to renew the authorisation in whole or in part shall be in the absolute discretion of the Secretary of State. The decision of the Secretary of State shall not be subject to review under the Disputes Resolution Procedure. 26.4.5 If, following a request under Clause 26.4.4, the Secretary of State decides to renew the authorisation, he shall confirm the same by notice in writing to the DBFO Co. Such notice shall specify: 26.4.5.1 the function of the Secretary of State which the DBFO Co is authorised to exercise in respect of the Project Facilities; and 26.4.5.2 the authorisation period, which shall not exceed the shorter of the Contract Period and 10 years from the date of the renewal (the "Renewed Authorisation Period"). 26.4.6 If the 1995 Order or any replacement order made under Sections 69 and 77 of the Deregulation and Contracting Out Act 1994 shall cease for whatever reason to be in effect, the DBFO Co may request the Secretary of State to take such action as necessary to bring into effect a further order in respect of part or all of the functions the subject of the original order. The provisions of Clauses 25.2, 25.3 and 25.4 (but for the avoidance-of doubt not Clause 25.5) shall apply mutatis mutandis to any such request. 26.4.7 In exercising the Authorised Functions the DBFO Co will act in accordance with the principles of administrative law which govern the conduct of the Secretary of State and, without prejudice to the generality of the foregoing, will: 26.4.7.1 obey all relevant legal and procedural requirements; 26.4.7.2 not take any decisions or actions which may be considered perverse and liable to be quashed in a court of law; and 26.4.7.3 obey the rules of natural justice. 26.4.8 For so long as any authorisation under this Clause 26.4 is effective the DBFO Co shall provide to the Department's Nominee five copies of a formal monthly report on all actions taken by the DBFO Co pursuant to the Authorised Functions, including without limitation details of: 26.4.8.1 all notices given and received; 26.4.8.2 all directions and consents given to Statutory Undertakers; 26.4.8.3 all agreements, commitments or compromises reached with Statutory Undertakers with regard to Diversionary Works; and 26.4.8.4 any arbitration proceedings commenced or proposed. 26.4.9 Without prejudice to the generality of Clause 26.4.8, the DBFO Co shall provide the Department's Nominee with copies of all consents and directions given by the DBFO Co and all notices given and received by the DBFO Co pursuant to the 1991 Act. 102 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 26.4.10 The DBFO Co shall indemnify the Secretary of State against all Losses or Claims of any person arising out of or in connection with the DBFO Co's exercise, purported exercise or failure to exercise any of the Authorised Functions. 26.4.11 If the DBFO Co fails to exercise any Authorised Function in the manner set out in Clause 26.4.7 then the Secretary of State may withdraw or suspend the authorisation in respect of such Authorised Function and the DBFO Co shall indemnify the Secretary of State against all costs incurred by him in performing or engaging others to perform such Authorised Function. Such suspension or withdrawal shall not be treated by the DBFO Co as a repudiation by the Secretary of State. 26.4.12 If an authorisation under this Clause 26.4 is revoked by the Secretary of State, other than in accordance with Clause 26.4.11, then for the purposes of Section 73 of the Deregulation and Contracting Out Act 1994 "relevant contract" shall mean this Clause 26.4 and no other provision of this Agreement. 26.5 Management of Operations affecting Apparatus 26.5.1 If at any time an authorisation under Clause 26.4 is revoked or expires (and is not renewed) the DBFO Co shall be released from exercising and shall not exercise the relevant Authorised Function. Subject to Clause 26.5.3, the DBFO Co shall instead perform those services set out in Part 2 of Schedule 19 (if any) which relate to the same function of the Secretary of State as the Authorised Function which has been revoked or has expired. 26.5.2 In addition to its obligations under Clause 26.4 or Clause 26.5.1 as the case may be but subject to Clause 26.5.3, the DBFO Co shall throughout the Contract Period perform the services set out in Part 3 of Schedule 19. 26.5.3 In carrying out its services pursuant to this Clause 26.5, the DBFO Co shall not contract with, enter into binding commitments with, compromise with, give a notice of intention to proceed to, impose obligations upon, issue Street Works Licences to or seek to recover costs from Statutory Undertakers or carry out works affecting Statutory Undertakers without the prior written approval of the Secretary of State. 26.5.4 For the purposes of Clause 26.5.3, the approval of the Secretary of State may be given from time to time either in terms relating to a particular contract, commitment, compromise or works or upon terms relating to particular classes of contracts, commitment, compromise or works. 26.6 The Secretary of State's Responsibility 26.6.1 Without prejudice to the DBFO Co's obligations pursuant to Clause 26.3.12 the Secretary of State shall: 26.6.1.1 from time to time, at the request of DBFO Co, notify Statutory Undertakers that, subject to the terms and conditions set out in this Clause 26, the DBFO Co will be exercising the Authorised Functions or will be performing the services set out in Clause 26.5 (as the case may be); 26.6.1.2 notify the DBFO Co promptly of any Statutory Undertaker's requirements or notices or any notices from Street Authorities for streets other than the Project Road (but which affect the Project Road) which he receives pursuant to the 1991 Act, the Regulations or the Codes of Practice. 103 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 26.6.2 If works are necessary as a consequence of an event described in Section 82(2) of the 1991 Act then those works shall be considered as a Department's Change in Specification and any sums received by the Secretary of State from any Statutory Undertaker shall not be subject to Clause 26.3.4. 26.7 Yorkshire Electricity The DBFO Co acknowledges that the Secretary of State has settled two invoices from Yorkshire Electricity in the amount of (pound)282,808.33 and (pound)664,599.58 in respect of the diversion of the 132 Kv overhead lines at Rothwell Haigh and Lofthouse which, if such invoices had been issued after the date of this Agreement, would have been the responsibility of the DBFO Co. The DBFO Co shall, without further demand by the Secretary of State, repay (or procure the repayment) to the Secretary of State on or before 14th May 1996 the sum of (pound)947,407.91 and if it fails to do so such sum shall bear interest in accordance with Clause 30.7. 104 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 26A. OTHER FUNCTIONS OF THE SECRETARY OF STATE 26A.1 Definitions For the purpose of this Clause 26A: 26A.1.1 "Highway Authority" has the same meaning as ascribed in the Highways Act; 26A.1.2 "Statutory Provisions" means the provisions of the statutes and regulations set out in Schedule 21 and (subject to Clause 26A.3.7.3) the provisions of any statute or regulation which the Secretary of State has authorised the DBFO Co to exercise pursuant to Clause 26A.3.7; 26A.1.3 "Third Party" means any third party (but excluding any Statutory Undertaker to the extent that the provisions of Clause 26 apply in relation to such Statutory Undertaker in any particular case); 26A.1.4 "Third Party Authorised Functions" means each of the functions conferred on the Secretary of State by the Statutory Provisions, which the DBFO Co is authorised by the Secretary of State from time to time to exercise pursuant to Clause 26A.3. 1, Clause 26A.3.5 or (subject to Clause 26A.3.7.3) Clause 26A.3.7; 26A.1.5 "Third Party Authorisation Period" means, in the case of an authorisation pursuant to Clause 26A.3.1, either the Contract Period or the period commencing on the Commencement Date and expiring 10 years therefrom, whichever is shorter or, in the case of an authorisation pursuant to Clause 26A.3.7.3, the period specified in the notice given by the Secretary of State pursuant to Clause 26A.3.7.2.2; 26A.1.6 "Third Party Renewed Authorisation Period" has the meaning given in Clause 26A.3.5.2; 26A.1.7 "1995 Order" means the Contracting Out (Highway Functions) Order 1995 (SI 1995/1986). 26A.2 General 26A.2.1 Without limitation to Clause 3.4, the DBFO Co will at all times assist and facilitate the Secretary of State in carrying out, and shall take all steps necessary to ensure that the Secretary of State is able to comply with, his duties under the Statutory Provisions. 26A.2.2 The DBFO Co shall take such actions as are appropriate to inform all interested parties of its role on behalf of the Secretary of State pursuant to Clauses 26A.3 and 26A.4. 26A.3 Contracting Out of Functions 26A.3.1 Subject to the provisions of this Clause 26A.3 and pursuant to the 1995 Order, the DBFO Co is hereby authorised by the Secretary of State as Highway Authority and as Minister under the Parish Councils Act 1957 (as the case may be) for the Third Party Authorisation Period to exercise in respect of the Project Facilities each of the functions of the Secretary of State listed in Schedule 21. 26A.3.2 From the Commencement Date and for so long as any authorisation made under this Clause 26A.3 is effective, the DBFO Co shall exercise properly and fully in respect of the Project Facilities each of the Third Party Authorised Functions. 26A.3.3 The authorisation made under this Clause 26A.3 in respect of a Third Party Authorised Function is made on the following terms: 105 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 26A.4.3.1 it shall be non assignable; 26A.4.3.2 the DBFO Co shall not delegate any such Third Party Authorised Function. 26A.3.4 On or before the expiry of the Third Party Authorisation Period (or any Third Party Renewed Authorisation Period) in respect of a Third Party Authorised Function the DBFO Co may request the Secretary of State to renew the authorisation for any period not exceeding 10 years from the date of renewal. The decision whether or not to renew the authorisation in whole or in part shall be in the absolute discretion of the Secretary of State. The decision of the Secretary of State shall not be subject to review under the Disputes Resolution Procedure. 26A.3.5 If, following a request under Clause 26A.3.4, the Secretary of State decides to renew the authorisation, he shall confirm the same by notice in writing to the DBFO Co. Such notice shall specify: 26A.3.5.1 the function of the Secretary of State which the DBFO Co is authorised to exercise in respect of the Project Facilities; and 26A.3.5.2 the authorisation period, which shall not exceed the shorter of the Contract Period and 10 years from the date of the renewal (the "Third Party Renewed Authorisation Period"). 26A.3.6 If the 1995 Order or any replacement order made under Sections 69 and 77 of the Deregulation and Contracting Out Act 1994 shall cease for whatever reason to be in effect, the DBFO Co may request the Secretary of State to take such action as necessary to bring into effect a further order in respect of part or all of the functions the subject of the original order. The provisions of Clauses 25.2, 25.3 and 25.4 (but for the avoidance of doubt not Clause 25.5) shall apply mutatis mutandis to any such request. 26A.3.7 The DBFO Co may at any time and from time to time request the Secretary of State to authorise it to exercise any one or more of the functions conferred on the Secretary of State by the provisions of any of the statutes or regulations set out in any of the schedules to the 1995 Order (other than those functions authorised pursuant to Clause 26A.3.1 and Clause 26.4.1) and the following provisions shall apply to any such request by the DBFO Co: 26A.3.7.1 the provisions of Clauses 25.2, 25.3 and 25.4 (but for the avoidance of doubt not Clause 25.5) shall apply mutatis mutandis in relation to any such request pursuant to this Clause 26A.3.7; 26A.3.7.2 if the Secretary of State decides to make any such authorisation, he shall confirm the same by a notice in writing to the DBFO Co. Such notice shall specify: 26A.3.7.2.1 the function(s) of the Secretary of State which the DBFO Co is authorised to exercise in respect of the Project Facilities; 26A.3.7.2.2 the authorisation period, which shall not exceed the shorter of the Contract Period and 10 years from the date of the grant of the authorisation; and 26A.3.7.3 each of the statutes or regulations setting out one of the functions so authorised shall be deemed to be a Statutory Provision from the date of the authorisation and the provisions of this Clause 26A applicable to Third Party Authorised Functions (other than this Clause 26A.3.7) shall apply mutatis mutandis in respect of such function from such date. The decision of the Secretary of State whether or not to accede to any request of the DBFO Co pursuant to this Clause 26A.3.7 in whole or in part shall not be subject to review under the Disputes Resolution Procedure. 106 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 26A.3.8 In exercising the Third Party Authorised Functions the DBFO Co will act in accordance with the principles of administrative law which govern the conduct of the Secretary of State and, without prejudice to the generality of the foregoing, will: 26A.3.8.1 obey all relevant legal and procedural requirements; 26A.3.8.2 not take any decisions or actions which may be considered perverse and liable to be quashed in a court of law; and 26A.3.8.3 obey the rules of natural justice. 26A.3.9 For so long as any authorisation under this Clause 26A.3 is effective the DBFO Co shall provide to the Department's Nominee five copies of a formal monthly report on all actions taken by the DBFO Co or which the DBFO Co is aware of relating to the Third Party Authorised Functions, including without limitation details of: 26A.3.9.1 all notices given and received; 26A.3.9.2 all directions, permissions and consents given to Third Parties in the exercise of any Third Party Authorised Functions; 26A.3.9.3 all agreements, commitments or compromises reached with Third Parties in the exercise of any Third Party Authorised Functions; and 26A.3.9.4 any legal proceedings (including without limitation any appeals) commenced or proposed or threatened to be commenced in relation to any Statutory Provision or the exercise of any Third Party Authorised Function. 26A.3.10 Without prejudice to the generality of Clause 26A.3.9, the DBFO Co shall provide the Department's Nominee with copies of all permissions, consents, directions and proceedings issued by the DBFO Co and all notices given and received by the DBFO Co and all proceedings (including without limitation any appeals) commenced against the DBFO Co in respect of any Statutory Provision or the exercise of any Third Party Authorised Function. 26A.3.11 The DBFO Co shall indemnify the Secretary of State against all Losses or Claims of any person arising out of or in connection with the DBFO Co's exercise, purported exercise or failure to exercise any of the Third Party Authorised Functions. 26A.3.12 If the DBFO Co fails to exercise any Third Party Authorised Function in the manner referred to in Clause 26A.3.8, then the Secretary of State may withdraw or suspend the authorisation in respect of such Third Party Authorised Function and the DBFO Co shall indemnify the Secretary of State against all costs reasonably and properly incurred by him in performing or engaging others to perform such Authorised Function. Such suspension or withdrawal shall not be treated by the DBFO Co as a repudiation by the Secretary of State. 26A.3.13 If an authorisation under this Clause 26A.3 is revoked by the Secretary of State, other than in accordance with Clause 26A.3.12, then for the purposes of Section 73 of the Deregulation and Contracting Out Act 1994 "relevant contract" shall mean this Clause 26A.3 and no other provision of this Agreement. 26A.4 Management of Operations 26A.4.1 If at any time and from time to time: 26A.4.1.1 an authorisation under Clause 26A.3 is revoked or expires (and is not renewed) the DBFO Co shall be released from exercising and shall not exercise the relevant Third Party Authorised Function and, subject to Clause 26A.4.5 and unless otherwise directed by the Secretary of State, the DBFO Co shall instead perform those services set out in Clause 26A.4.2 insofar as they apply to the 107 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) same function of the Secretary of State as the Third Party Authorised Function which has been revoked or has expired; 26A.4.1.2 a Third Party requests the DBFO Co or the Secretary of State (and the Secretary of State notifies the DBFO Co of such request) to exercise in relation to the Project Facilities or the Operations any function of the Secretary of State as Highway Authority under any statute or regulation (other than a Third Party Authorised Function) (an "Other Function"), then, subject to Clause 26A.4.5 and unless otherwise directed by the Secretary of State, the DBFO Co shall perform those services set out in Clause 26A.4.2 insofar as they apply to the Other Function. 26A.4.2 In the circumstances referred to in Clauses 26A.4. 1.1 and 26A.4.1.2 , in relation to: 26A.4.2.1 any application for a permission, consent, authorisation or other form of approval relating to the Project Facilities or the execution of the Operations the grant of which is required by Law to be made by or on behalf of the Secretary of State (an "Application"), the DBFO Co shall assemble all requisite documentation to support and explain the relevant Application and shall prepare a recommendation in respect of (i) any terms and conditions to be attached to any consent to the Application (if relevant) and (ii) the merits of the relevant Application, and submit the same to the Secretary of State. Upon the Secretary of State granting or refusing any Application, the DBFO Co shall upon notice from the Secretary of State take all necessary steps to give effect to any such grant or refusal and comply with the terms thereof, 26A.4.2.2 any proceedings commenced by a Third Party relating to any decision made or condition imposed on an Application ("Appeal"), the DBFO Co shall assemble all requisite documentation and evidence to defend the Appeal and shall prepare a recommendation in respect of the merits of the relevant Appeal and submit the same to the Secretary of State; 26A.4.2.3 any power to carry out any works on the Project Road by or on behalf of the Secretary of State and to recover the expenses from any Third Party, the DBFO Co shall assemble all relevant documentation and evidence necessary to explain why the said works should be carried out and prepare a recommendation as to how the said expenses should be recovered; 26A.4.2.4 any requirement for a notice or a direction to a Third Party which is required by Law to be made by or on behalf of the Secretary of State (a "Direction"), the DBFO Co shall assemble all requisite documentation to support and explain the Direction and prepare a recommendation as to whether the Direction should be made and the terms thereof. Upon the Secretary of State making a Direction the DBFO Co shall serve the Direction on the relevant Third Party on behalf of the Secretary of State; 26A.4.2.5 any power to manage, maintain or provide facilities on any part of the Project Facilities by or on behalf of the Secretary of State, the DBFO Co shall prepare recommendations to the Secretary of State as and when required by the Secretary of State in respect of the exercise of the aforementioned powers in relation to the Project Facilities; 26A.4.2.6 any right of the Secretary of State as Highway Authority in relation to the Project Facilities to object to a proposed course of action by a Third Party ("Objection"), the DBFO Co shall assemble all requisite documentation and evidence in relation to the Objection and prepare a recommendation in relation to the Objection and submit the same to the Secretary of State. 108 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 26A.4.3 As part of the Liaison Procedures the DBFO Co shall establish with the Department's Representative a procedure for the communication of the matters referred to in Clause 26A.4.2 to the Secretary of State. 26A.4.4 Without limitation to Clause 3.4, the DBFO Co shall deal with all matters relating to its obligations pursuant to Clause 26A.4.2 in a timely and expeditious manner so as to ensure that the Secretary of State is able to discharge or exercise any relevant duty, power or discretion within the time required by Law. 26A.4.5 In carrying out its services pursuant to this Clause 26A.4, the DBFO Co shall not contract with, enter into binding commitments with, compromise with, give a notice of intention to proceed to, impose obligations upon, respond to any Application from or Appeal by, issue any Direction to or seek to recover costs from any Third Party or carry out works affecting any Third Party without the prior written approval of the Secretary of State. 26A.4.6 For the purposes of Clause 26A.4.5, the approval of the Secretary of State may be given from time to time either in terms relating to a particular matter relating to the relevant Statutory Provision or upon terms relating to particular classes of such matters. 26A.4.7 Actions taken by the DBFO Co pursuant to this Clause 26A.4 shall not in any way limit or fetter the discretion of the Secretary of State in the discharge or exercise of his duties or powers. The decision of the Secretary of State on the merits of any recommendation made by the DBFO Co pursuant to Clause 26A.4.2 shall not be subject to review under the Disputes Resolution Procedure. 26A.5 The Secretary of State's Responsibility Without prejudice to the DBFO Co's obligations pursuant to Clause 26A.2.2, the Secretary of State shall: 26A.5.1 from time to time, at the request of DBFO Co, notify Third Parties that, subject to the terms and conditions set out in this Clause 26A, the DBFO Co will be exercising the Third Party Authorised Functions or will be performing the services set out in Clause 26A.4 (as the case may be); 26A.5.2 notify the DBFO Co promptly of any Third Parties' requirements, notices or details of legal proceedings which he receives relating to the Statutory Provisions. 109 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 27. OTHER THIRD PARTIES 27.1 Third Party Claims 27.1.1 The DBFO Co shall deal with any complaints received (whether received orally or in writing, and whether from a User or others) in a prompt, courteous and efficient manner. 27.1.2 If the DBFO Co receives any Claim from a third party relating wholly to any period or any act or omission in respect of the Project Facilities prior to the date of execution of this Agreement, it shall promptly forward such Claim to the Secretary of State. All other Claims from third parties shall be dealt with in accordance with the provisions of Clause 35. 27.2 Claims Against Third Parties 27.2.1 As between the Secretary of State and the DBFO Co, the DBFO Co will bear, without recourse to the Secretary of State, any Loss suffered by the DBFO Co, its agents, contractors or sub-contractors of any tier or the employees of any of them which is: 27.2.1.1 caused by or results from the presence of any persons not entitled to be upon the Site or the Adjacent Areas (including, without limitation, any Protestors); or 27.2.1.2 caused by the acts or omissions of any User of the Project Facilities, including without limitation any damage to property, any personal injury or death, and any loss of income (including without limitation any reduction in DBFO Payments). 27.2.2 For the avoidance of doubt, nothing in Clause 27.2.1 shall affect: 27.2.2.1 any right of the Secretary of State to make or recover any Claim against any person referred to in Clause 27.2.1 for damage suffered by the Secretary of State, its agents or contractors (other than the DBFO Co) or sub-contractors of any tier or the employees of any of them, or 27.2.2.2 any right of the DBFO Co to make or recover any Claim against any person referred to in Clause 27.2.1 for damage suffered by the DBFO Co, its agents, contractors or sub-contractors of any tier, or the employees of any of them. 27.2.3 Subject to the prior consent of the Secretary of State (such consent not to be unreasonably withheld or delayed and to be on such terms as the Secretary of State may reasonably require), the DBFO Co may if necessary bring any action against a person referred to in Clause 27.2.1 in the name of the Secretary of State, provided that the DBFO Co shall indemnify and keep indemnified the Secretary of State against all costs and expenses of and Losses and Claims arising out of any such action. 27.3 Police The DBFO Co shall comply at all times with all instructions of the police in respect of the Project Facilities. 27.4 Interested Parties 27.4.1 The DBFO Co shall discharge the Requirements of Interested Parties. 110 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 27.4.2 Without limitation to Clause 27.4.1, the DBFO Co shall be responsible for complying with any requirements of any Interested Party of which the DBFO Co has notice or ought reasonably to be aware from time to time. 27.5 Abnormal Indivisible Loads 27.5.1 The Secretary of State shall promptly advise the DBFO Co of any notice it receives of any Abnormal Indivisible Load to be transported over the Project Road. The DBFO Co shall be responsible for liaising with the police and other relevant persons regarding any Abnormal Indivisible Load. 27.5.2 For the avoidance of doubt, the provisions of Clause 27.2.1 shall apply in respect of any damage caused to the Project Facilities by any such Abnormal Indivisible Load. 27.6 Litter Authority 27.6.1 If and so long as required by the Secretary of State (by notice) to do so, the DBFO Co shall discharge in respect of the Project Road (or any part thereof) the duties of the Secretary of State under Sections 89(1) and 89(2) of the Environmental Protection Act 1990. In discharging those duties, the DBFO Co shall have regard to any codes of practice in force under Section 89(7) of such Act from time to time. 27.6.2 For the avoidance of doubt, in respect of any period during which, or any part of the Project Road in respect of which, the Secretary of State has not given a notice pursuant to Clause 27.6.1, the DBFO Co shall procure access for the Relevant Authority in accordance with Clause 12.4.2 to discharge the duties under Sections 89(1) and 89(2) of the Environmental Protection Act 1990. 27.7 Shared Facilities 27.7.1 If any electrical power supply serving the Project Facilities also serves any facilities (other than the Project Facilities) for which the Secretary of State is the highway authority, then: 27.7.1.1 the DBFO Co shall use all reasonable endeavours to procure at the earliest date practicable the installation of separate meters measuring only the supply of electricity used in respect of the Project Facilities and shall make payment for such supply directly to the provider of such supply; and 27.7.1.2 in respect of any period during which there are no such separate meters installed, the Secretary of State shall in the first instance meet the cost of such supply and he shall be reimbursed by the DBFO Co a proportion of such cost equal to the ratio of the power rating of the DBFO Co's equipment which is connected to that supply to the power rating of all equipment which is connected to that supply. 27.7.2 For the avoidance of doubt, save to the extent otherwise agreed by the DBFO Co with the relevant third party, the DBFO Co shall be fully responsible, at its expense, for the operation and maintenance of any shared facilities forming part of the Project Facilities (including, without limitation, those set out in Part 4A of Schedule 3 [Shared Facilities]). 27.8 Liaison Procedures Whenever the DBFO Co is required by this Agreement to take any action in accordance with the Liaison Procedures, it shall take such action in accordance with the procedures set out in or agreed in accordance with the provisions of Schedule 16. 111 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 27.9 Acts of Terrorism 27.9.1 Without prejudice and in addition to Clause 33 [Force Majeure], the following provisions shall apply in respect of any damage to the Project Road caused by an act of terrorism referred to in paragraph 1.5 of Part 2 of Schedule 11 (for the avoidance of doubt, not being any act by or damage by or resulting from any persons not entitled to be upon the Site or Adjacent Areas and who are engaged in a protest action against the construction or operation of the Project Road or against the construction or operation of highways generally). 27.9.2 In the event that any damage to the Project Road is caused by an act of terrorism to which this Clause 27.9 applies, the DBFO Co shall promptly give notice to the Secretary of State identifying such damage. The Parties shall endeavour to agree the required remedial action to be taken to enable the Project Road to be returned to a standard complying with the O&M Requirements and as would enable the DBFO Co at the end of the Contract Period to satisfy the requirements of Clause 17.1 [Handback Requirements] on the assumption that the DBFO Co complied with its obligations as to operation and maintenance of the Project Road under this Agreement, and in default of agreement the Dispute shall be referred to the Disputes Resolution Procedure. 27.9.3 The DBFO Co shall be responsible for the execution (at its own cost) of all necessary remedial works ("Terrorist Remedial Works") in respect of such damage agreed or determined under Clause 27.9.2. 27.9.4 The following provisions shall apply in relation to the imposition of Lane Closure Charges in respect of any lane closures on the Project Road as a result of the carrying out of the Terrorist Remedial Works: 27.9.4.1 the Parties shall seek to agree upon a Permitted Closure (as defined in Clause 15.4.3.1) in respect of each affected section of the Project Road in respect of the Terrorist Remedial Works prior to their commencement; 27.9.4.2 if the Parties shall fail to agree upon any Permitted Closure within 45 days after the date on which the Terrorist Remedial Works are agreed or determined under Clause 27.9.2, the Dispute shall be referred to the Disputes Resolution Procedure; 27.9.4.3 to the extent that any actual lane closure on a particular section of the Project Road exceeds the Permitted Closure for that section (whether as to the number of lanes, duration or otherwise), Lane Closure Charges will be payable by the DBFO Co in respect of that closure in accordance with Part 3 of Schedule 9. 112 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) PART IV PAYMENTS 28. MEASUREMENT OF TRAFFIC 28.1 Measurement Method At all times from and after the date of issue of the Permit to Use, the traffic using the Project Road shall be continuously measured by the DBFO Co at each Measurement Point using the Measuring Equipment. 28.2 Measurement Points 28.2.1 Each of the following shall be a Measurement Point for the purposes of this Agreement: 28.2.1.1 each of the points so designated on drawings numbered C2/09/100/14 Revision B, C1/09/100/01 Revision C, C3/09/100/01 Revision B and C3/09/100/02 Revision C contained in Part 7 of Schedule 3; and 28.2.1.2 if as a result of any Subsequent Scheme, Additional Works or otherwise the Measurement Points specified in Clause 28.2.1.1 shall be insufficient or inadequate to Measure accurately all traffic using the Project Road, such other point or points as necessary to Measure such traffic accurately. 28.2.2 If there is any Dispute between the DBFO Co and the Department's Representative as to the need for or location of any Measurement Point referred to in Clause 28.2.1.2 or as to any amendment required to Part 6 of Schedule 9 as a consequence of the addition of any such Measurement Point, such Dispute shall at the request of either be submitted to the Disputes Resolution Procedure. 28.2.3 The Secretary of State shall bear the cost of any additional Measurement Point required pursuant to Clause 28.2.1.2 as a result of any Additional Works. The DBFO Co shall bear the cost of any other Measurement Point required pursuant to Clause 28.2.1.2. 28.3 Measuring Equipment 28.3.1 The DBFO Co shall provide and install (at its own cost, save as provided in Clause 28.2.3) the following equipment (the "Measuring Equipment") at each Measurement Point: 28.3.1.1 one set of vehicle detection equipment meeting the specification set out in Section A of Part 1 and Section A of Part 2 of Schedule 17; and 28.3.1.2 all other measuring and verification equipment (together with necessary housings, appliances and buildings) required to Measure the traffic passing the Measurement Point. 28.3.2 The Measuring Equipment shall be capable of classifying each vehicle passing the Measurement Point into one of the following categories: 28.3.2.1 HGVs; and 28.3.2.2 Other Vehicles. 28.3.3 The DBFO Co shall provide and install at its own cost at the Measurement Point so designated on drawing numbered C 1/09/100/01 Revision C contained in Part 7 of Schedule 3 113 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) the following equipment (the "Traffic Census Equipment") in addition to the Measuring Equipment: 28.3.3.1 one set of vehicle detection equipment meeting the specification set out in Section B of Part 1 and Section B of Part 2 of Schedule 17; and 28.3.3.2 such cables or other means of electronic data transmission as necessary to connect the equipment referred to in Clause 28.3.3.1 to the public service telephone network. 28.3.4 The Measuring Equipment and the Traffic Census Equipment shall include such alternative facilities as may reasonably be required to ensure that failure or withdrawal for maintenance or adjustment of any individual component does not materially affect the Measurement of traffic by the Measuring Equipment or the Traffic Census Equipment (as the case may be). 28.3.5 Prior to the installation or replacement of any component of the Measuring Equipment or Traffic Census Equipment which may materially affect the accuracy of Measurement of such Measuring Equipment or Traffic Census Equipment, the DBFO Co shall notify the Department's Representative of the design and type of such equipment and such notice shall be dealt with under the Review Procedure. 28.3.6 Without limitation to Clause 28.3.4, the DBFO Co shall install, maintain, repair, replace and operate all Measuring Equipment and Traffic Census Equipment in accordance with Good Industry Practice. 28.3.7 The Secretary of State shall be entitled at any time and from time to time to install and operate (at its own expense and risk) at any Measurement Point: 28.3.7.1 check measuring equipment to check the Measurement of the traffic at such Measurement Point; and/or 28.3.7.2 equipment linked directly to the Measuring Equipment; to provide at the Secretary of State's premises independent confirmation and/or direct readings of the Measurement of the traffic at such Measurement Point. 28.3.8 Any equipment installed by the Secretary of State pursuant to Clause 28.3.7 shall be compatible with and shall not interfere with the use or operation of the Measuring Equipment. 28.4 Verification 28.4.1 The DBFO Co shall Verify the Measuring Equipment and the Traffic Census Equipment at each Measurement Point at least once in every 90 days or at such other frequency as may be agreed by the Department's Representative. Without limitation to Clause 28.7.1 the DBFO Co shall adjust such Measuring Equipment to read centrally and accurately within the limits of accuracy set out in paragraph 2 of Section A of Part 1 of Schedule 17 (the "Measurement Limits of Accuracy") and shall adjust such Traffic Census Equipment to read centrally and accurately within the limits of accuracy set out in paragraph 2 of Section B of Part 1 of Schedule 17 (the "Census Limits of Accuracy"). 28.4.2 The DBFO Co shall give to the Department's Representative reasonable notice of the date and time of any Verification pursuant to Clause 28.4.1 and the Department's Representative shall be entitled to attend and witness any such Verification. The Department's Representative may require the DBFO Co to Verify any Measuring Equipment or the Traffic Census Equipment at any other time. 114 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 28.4.3 Verifications shall be made at the expense of the DBFO Co, except that the Secretary of State shall bear the costs of the attendance of the Department's Representative at any Verification and the whole expense of any Verification (other than periodic) made at the request of the Department's Representative if the Measuring Equipment or Traffic Census Equipment (as the case may be) is found to be registering within the Measurement Limits of Accuracy or Census Limits of Accuracy (as the case may be). 28.5 Collection of Data 28.5.1 The DBFO Co shall procure that the Traffic Data is collected at such times and in such format as will enable the DBFO Co to prepare the Monthly Report. 28.5.2 Subject to Clause 28.7.2, if there is more than one set of vehicle detection equipment measuring the same flow of traffic at a Measurement Point, then the traffic passing the Measurement Point during any period shall be deemed to be the average of the figures produced by each of such sets of vehicle detection equipment during such period. Such average shall be calculated and provided to the Secretary of State in the Monthly Report together with the figures produced for each of such sets of vehicle detection equipment. 28.6 Inspection and Auditing The Department's Representative shall be entitled at all reasonable times to inspect: 28.6.1 any Measuring Equipment and the Traffic Census Equipment; and 28.6.2 any charts or other measurement or test data relating to the Measuring Equipment or the Traffic Census Equipment. 28.7 Correction of Defects 28.7.1 If at any time any Measuring Equipment is found to be defective or measuring outside the Measurement Limits of Accuracy, the DBFO Co shall as soon as practicable adjust such equipment (the "Defective Equipment") to read centrally and accurately within such limits or (if that is not possible) shall replace it with serviceable equipment 28.7.2 If the Defective Equipment comprises only one of two or more sets of vehicle detection equipment at a Measurement Point, then the calculation for the relevant Measurement Point pursuant to Clause 28.5.2 shall be retrospectively corrected, excluding from such calculations the data from such defective set of vehicle detection equipment from the time when such set of vehicle detection equipment became defective or (where that time cannot be established) from the time which is the mid-point between the last Verification which indicated that the set of vehicle detection equipment was operating within the Measurement Limits of Accuracy and the next following Verification. 28.7.3 In all other circumstances where there is any Defective Equipment, the Traffic Data from the relevant Measurement Point or (where there are two or more sets of vehicle detection equipment at a Measurement Point) the calculations for the relevant Measurement Point pursuant to Clause 28.5.2 shall be retrospectively corrected from the time when such equipment became defective (or where two or more sets of vehicle detection equipment are defective, from the time when the second such set of vehicle detection equipment became defective) or (where that time cannot be established) from the time which is the mid-point between the last Verification which indicated that the equipment was operating within the Measurement Limits of Accuracy and the next following Verification. 115 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 28.7.4 Calculations shall be corrected for purposes of Clause 28.7.3 by applying the methods set out below in the order in which they appear: 28.7.4.1 by using the readings recorded by any check measuring equipment, provided that such equipment is operating within the Measurement Limits of Accuracy. If such equipment is not operating accurately or if no such equipment has been installed, then 28.7.4.2 by correcting the error if the percentage of error is ascertainable to the satisfaction of the DBFO Co and the Department's Representative by calibration, test or mathematical calculation. If the percentage of error is not so ascertainable, then 28.7.4.3 by using the readings recorded during the comparable period of the immediately preceding month, provided the relevant equipment was operating within the Measurement Limits of Accuracy during such period. If such equipment was not operating accurately or if there are no such readings, then 28.7.4.4 by estimating the number and classification of vehicles by reference to Measurements made under similar circumstances when the Defective Equipment was registering accurately. If there is any Dispute between the DBFO Co and the Department's Representative on any such estimate, then such Dispute shall at the request of either be submitted to the Disputes Resolution Procedure. 116 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 29. CALCULATION OF PAYMENTS 29.1 DBFO Payments 29.1.1 In consideration for the conduct of the Operations from the date of this Agreement but subject to the provisions of Clause 29.2 (in particular, but without limitation, Clause 29.2.1), the Secretary of State shall pay to the DBFO Co in respect of each Contract Year an amount (the "DBFO Payment") determined in accordance with the following formula: P = TP - LCC + SPP + CS where: P = the DBFO Payment in respect of the Contract Year. TP = the Traffic Payment in respect of the Contract Year, calculated in accordance with Part 2 of Schedule 9. LCC = the Lane Closure Charge in respect of the Contract Year, calculated in accordance with Part 3 of Schedule 9. SPP = the Safety Performance Payment in respect of the Contract Year, calculated in accordance with Part 4 of Schedule 9. CS = the aggregate of all Commuted Sums, calculated in accordance with paragraph 6 of Part 1 of Schedule 12, payable in respect of the Contract Year (the "Aggregate Commuted Sum"). 29.1.2 Subject to paragraph 6 of Part 3 of Schedule 9, the DBFO Payment in respect of a Contract Year shall be paid in monthly instalments in accordance with Clause 29.3 [Provisional DBFO Payments], as adjusted in accordance with Clause 29.4 [Annual Reconciliation]. 29.2 Commencement of Payments 29.2.1 Notwithstanding any other provision of this Agreement, no DBFO Payment (including any provisional DBFO Payment pursuant to Clause 29.3) shall be payable by the Secretary of State to the DBFO Co in respect of any vehicle kilometres measured in respect of any part of the Project Road during any period prior to the Permit to Use Date. The Traffic Payment payable in respect of the Contract Year during which the Permit to Use Date occurs shall be calculated in accordance with Part 1 of Schedule 9. 29.2.2 Notwithstanding the provisions of Clauses 29.1 and 29.2.1 (but subject to paragraph 6 of Part 3 of Schedule 9), in respect of any period following the issue of the Permit to Use in respect of the New Road but prior to the issue of the Completion Certificate, the DBFO Co shall be entitled to receive: 29.2.2.1 in respect of any Monthly Traffic Payment, only 80 per cent of the sum which would otherwise be payable under the other provisions of this Clause 29 in respect of that Monthly Traffic Payment; and 29.2.2.2 in respect of the Traffic Payment for the Contract Year in which such period (or any part of it) falls, the amount determined in accordance with paragraph 2 of Part 1 of Schedule 9. 117 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 29.3 Provisional DBFO Payments 29.3.1 Subject to Clauses 29.2.1, 29.3.2 and 29.3.3 and to paragraph 6 of Part 3 of Schedule 9, the Secretary of State shall pay to the DBFO Co in respect of each month during a Contract Year, as a provisional payment in respect of the DBFO Payment for that Contract Year (the "Provisional Monthly Payment"), the aggregate of: 29.3.1.1 the aggregate of all Relevant Monthly Amounts payable in respect of such month in accordance with paragraph 6 of Part 1 of Schedule 12 (the "Aggregate Relevant Monthly Amount"); and 29.3.1.2 an amount (the "Monthly Traffic Payment") equal to the Traffic Payment for the Contract Year immediately prior to the Contract Year in question, divided by 12. 29.3.2 For purposes of Clause 29.3.1: 29.3.2.1 the Monthly Traffic Payment in respect of each month during the first Contract Year in respect of which payments are to be made under this Agreement shall be (pound)4,000,000; and 29.3.2.2 the Monthly Traffic Payment in respect of each month during the next succeeding Contract Year shall be the Traffic Payment for such first Contract Year divided by the number of whole or partial months during such first Contract Year in respect of which Monthly Traffic Payments were required to be made under this Agreement. 29.3.3 If the Traffic Payment for the preceding Contract Year has not been determined in accordance with Part 2 of Schedule 9 at the time the Monthly Traffic Payment in respect of any month is to be determined for the purposes of Clause 29.3.1, then the Monthly Traffic Payment applicable immediately prior to the beginning of the Contract Year in which such month falls shall be used as the Monthly Traffic Payment in respect of such month. For the avoidance of doubt, once the Traffic Payment for the preceding Contract Year has been determined, the Monthly Traffic Payment in respect of all subsequent months in the Contract Year in question shall be determined as provided in Clause 29.3.1, but no adjustment shall be made in respect of any Monthly Traffic Payments previously made other than in accordance with Clause 29.4. 29.4 Annual Reconciliation 29.4.1 Not later than 28 days following the end of each Contract Year the DBFO Co shall notify the Secretary of State of the following information: 29.4.1.1 the actual DBFO Payment in respect of such Contract Year, determined in accordance with Clause 29.1.1; 29.4.1.2 the total of the Monthly Traffic Payments, Aggregate Relevant Monthly Amounts and Permitted O&M Payments paid in respect of such Contract Year; 29.4.1.3 the amount payable by the Secretary of State to the DBFO Co in respect of the DBFO Payment, being the amount by which the amount in Clause 29.4.1.1 exceeds the amount in Clause 29.4.1.2, or the amount payable by the DBFO Co to the Secretary of State in respect of the DBFO Payment, being the amount by which the amount in Clause 29.4.1.2 exceeds the amount in Clause 29.4.1.1; 118 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 29.4.1.4 any Value Added Tax payable on the amount payable pursuant to Clause 29.4.1.3 or, where the amount is payable to the Secretary of State, the amount of VAT over-paid by the Secretary of State; 29.4.1.5 any other adjustments to reflect previous over-payments and/or under-payments (each adjustment stated separately); 29.4.1.6 any other amount due and payable from one Party to the other under this Agreement; 29.4.1.7 any interest payable in respect of any amounts owed; and 29.4.1.8 the net amount owing by the Secretary of State to the DBFO Co or by the DBFO Co to the Secretary of State. 29.4.2 The notice given pursuant to Clause 29.4.1 (the "Annual Reconciliation Notice") shall be accompanied by workpapers clearly setting forth the derivation of the figures set out in the Annual Reconciliation Notice. The workpapers shall illustrate, inter alia, the calculation of: 29.4.2.1 the DBFO Payment (following the formula specified in Clause 29.1.1) and showing separately the calculation of the Traffic Payment in accordance with Part 2 of Schedule 9, the calculation of the Lane Closure Charge in accordance with Part 3 of Schedule 9, the calculation of the Safety Performance Payment in accordance with Part 4 of Schedule 9 and the calculation of the relevant Commuted Sums and the Aggregate Commuted Sum in accordance with paragraph 6 of Part 1 of Schedule 12 and Clause 29.1.1; 29.4.2.2 any adjustments to reflect previous over-payments and/or under-payments; 29.4.2.3 any other amount due and payable from one Party to the other under this Agreement; and 29.4.2.4 if the Annual Reconciliation Notice reflects any amounts due and owing on which interest is payable, the amount of interest. 29.4.3 The following provisions of this Clause 29.4.3 shall apply where the relevant Contract Year falls wholly or partly at any time after the payment of a Commuted Sum under paragraph 6 of Part 1 of Schedule 12: 29.4.3.1 the DBFO Payment specified in Clause 29.4.1.1 for that relevant Contract Year shall be reduced in accordance with this Clause 29.4.3, by reference to the amount of any Tax Reliefs to which the DBFO Co is entitled in respect of any accounting period (as defined in Section 12 of the Income and Corporation Taxes Act 1988) ending within such Contract Year where the entitlement to the Tax Reliefs arises as a direct consequence of expenditure of the DBFO Co which was financed from that Commuted Sum. No amount of Tax Reliefs shall be taken into account more than once under this Clause 29.4.3 and, in particular, if DBFO Co becomes entitled to Tax Reliefs in an earlier accounting period (the "earlier period") and subsequently carries any or all of those Tax Reliefs forward to a later accounting period (the "later period"), the Tax Reliefs shall only be taken into account in reducing the DBFO Payment as mentioned above for the Contract Year in which the earlier period ends; 29.4.3.2 where the Tax Reliefs consist of any amount which can be taken into account so as to restrict or reduce, in any manner, the amount of any income, profits or 119 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) gains of the DBFO Co or to create or increase a loss or deficit of the DBFO Co for the relevant accounting period, then the DBFO Payment shall be reduced by a sum equal to the face value of such Tax Reliefs multiplied by the rate of Tax to which the DBFO Co is subject, for the relevant accounting period or periods, in respect of its income, profits or gains, or to which it would be so subject for such period or periods if it had sufficient income, profits or gains; 29.4.3.3 where the Tax Reliefs consist of a credit against Tax, a right of set-off against Tax or a right to repayment of Tax, the DBFO Payment shall be reduced by a sum equal to the face value of such Tax Reliefs; and 29.4.3.4 where the Tax Reliefs consist of any amount of expenditure which could be used so as to discharge, in whole or in part, a liability to Tax of the DBFO Co, assuming a sufficiency of taxable income, profits or gains of the DBFO Co, then the DBFO Payment shall be reduced by a sum equal to the face value of such Tax Reliefs multiplied by the rate of Tax to which the DBFO Co is subject, for the relevant accounting period or periods, in respect of its income, profits or gains or to which it would be so subject for such period or periods if it had sufficient income, profits or gains. 29.4.4 If, in the reasonable opinion of the DBFO Co, it is not in the event entitled to any Tax Reliefs which have been taken into account under Clause 29.4.3.1 then the DBFO Payment specified in Clause 29.4.1.1 shall be treated as never having been reduced in accordance with Clause 29.4.3 by reference to such Tax Reliefs and an amount equal to any such reduction shall be repayable to the DBFO Co, provided that this Clause 29.4.4 shall not apply where the DBFO Co is not entitled to such Tax Reliefs because of its failure to make a claim or election in a timely manner. 120 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 30. INVOICING AND PAYMENT 30.1 Monthly Invoices 30.1.1 The Monthly Traffic Payment and any Aggregate Relevant Monthly Amount shall be payable by the Secretary of State to the DBFO Co monthly in arrears. 30.1.2 Within 10 days following the last day of each month, the DBFO Co shall deliver to the Secretary of State a report setting out the payments payable in respect of such month. The report shall show: 30.1.2.1 the Monthly Traffic Payment and any Aggregate Relevant Monthly Amount for the relevant month; 30.1.2.2 any Value Added Tax payable for the relevant month; 30.1.2.3 any adjustments to reflect previous over-payments and/or under-payments (each adjustment stated separately); 30.1.2.4 any other amount due and payable from one Party to the other under this Agreement; 30.1.2.5 any interest payable in respect of any amounts owed; and 30.1.2.6 the net amount owing by the Secretary of State to the DBFO Co or by the DBFO Co to the Secretary of State. 30.1.3 The report delivered pursuant to Clause 30.1.2 shall be accompanied by workpapers clearly setting forth the derivation of the Monthly Traffic Payment and any Aggregate Relevant Monthly Amount, all other charges and any adjustments. The workpapers shall illustrate, inter alia, the calculation of: 30.1.3.1 the Monthly Traffic Payment and any Aggregate Relevant Monthly Amount; 30.1.3.2 any adjustments to the invoice to reflect previous over-payments or under-payments; 30.1.3.3 any other amount due and payable from one Party to the other under this Agreement; and 30.1.3.4 if the invoice reflects any amounts due and owing on which interest is being charged, the amount of interest. 30.1.4 If the report delivered pursuant to Clause 30.1.2 shows a net amount owing by the Secretary of State to the DBFO Co, it shall be accompanied by an invoice from the DBFO Co to the Secretary of State in respect of such amount (which invoice shall separately identify any additional VAT payable by the Secretary of State). If the report shows a net amount owing by the DBFO Co to the Secretary of State, the Secretary of State shall issue a debit note to the DBFO Co in respect of such amount promptly following his receipt of such report (which debit note shall separately identify any VAT overpaid by the Secretary of State). 30.2 Annual Invoices 30.2.1 If the Annual Reconciliation Notice shows an amount payable by the DBFO Co to the Secretary of State, the Secretary of State shall issue a debit note to the DBFO Co in respect of 121 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) such amount promptly following his receipt of the Annual Reconciliation Notice (which debit note shall separately identify any VAT overpaid by the Secretary of State). 30.2.2 If the Annual Reconciliation Notice shows an amount payable by the Secretary of State to the DBFO Co, the DBFO Co shall issue an invoice to the Secretary of State in respect of such amount together with the Annual Reconciliation Notice (which invoice shall separately identify any additional VAT payable by the Secretary of State). 30.3 Secretary of State's Invoices If the DBFO Co fails to issue any report or invoice within the time period required pursuant to Clause 30.1 or Clause 30.2, the Secretary of State may himself prepare such report or invoice and the report or invoice so prepared shall be deemed to have been issued by the DBFO Co. 30.4 Due Date for Payments 30.4.1 Without prejudice to Clause 30.6, the Secretary of State shall pay to the DBFO Co the amount of an invoice issued by the DBFO Co pursuant to Clause 30.1.4 not later than the later of: 30.4.1.1 the last day of the month following the month to which the invoice relates; or 30.4.1.2 the twentieth day after the Secretary of State has received both the said invoice and the Monthly Report in respect of such month. 30.4.2 Without prejudice to Clause 30.6, the DBFO Co shall pay to the Secretary of State the amount of a debit note issued by the Secretary of State pursuant to Clause 30.1.4 not later than the later of: 30.4.2.1 the last day of the month following the month to which the debit note relates; or 30.4.2.2 the twentieth day after the DBFO Co has received the said debit note. 30.4.3 Without prejudice to Clause 30.6, the Secretary of State shall pay to the DBFO Co the amount of an invoice issued by the DBFO Co pursuant to Clause 30.2.2 not later than the later of: 30.4.3.1 30 days after receipt of such invoice; or 30.4.3.2 the twentieth day after the Secretary of State has received all of the said invoice, the Annual Reconciliation Notice in respect of the relevant Contract Year and the Annual Report in respect of such Contract Year. 30.4.4 Without prejudice to Clause 30.6, the DBFO Co shall pay to the Secretary of State the amount of a debit note issued by the Secretary of State pursuant to Clause 30.2.1 not later than 20 days after receipt of such debit note. 30.4.5 Should the original due date for any payment pursuant to this Agreement not be a Working Day, then the due date shall be the Working Day next following the original due date. 30.5 Payments All payments under this Agreement shall be made in pounds sterling by telegraphic transfer or equivalent instantaneous transfer of funds for value on the day in question to the bank account of the recipient (located in the United Kingdom) specified in the invoice or debit note, quoting the invoice or debit note number against which payment is made. 122 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 30.6 Disputed Amounts 30.6.1 Either Party shall have the right to dispute, in good faith, any amount specified in an invoice or debit note referred to in this Agreement. The Party disputing any such amount shall pay such amount of the invoice or debit note in question as is not in dispute and shall be entitled to withhold the balance pending resolution of the dispute. 30.6.2 The Parties shall use all reasonable endeavours to resolve the dispute in question within 30 days of the dispute arising. If they fail so to resolve it, either Party may refer the matter to the Disputes Resolution Procedure. 30.6.3 Following resolution of the dispute, any amount agreed or adjudged to be due shall promptly on demand be paid, together with interest thereon at a rate per annum equal to the Interest Rate plus 1 per cent per annum from the day after the date on which payment was due to (and including) the date of payment. 30.7 Late Payments If any undisputed payment due under this Agreement remains unpaid after its due date, such payment shall bear interest at a rate per annum equal to the Interest Rate plus 2 per cent per annum from the day after the date on which the payment was due to (and including) the date of payment. The right of either Party to receive interest in respect of the late payment of any sum due shall be without prejudice to such other rights as that Party may have under this Agreement. 30.8 Satisfaction of Obligation If the calculation of any amounts payable by the Secretary of State under this Agreement would (otherwise than for this Clause 30.8) require the Secretary of State to pay an amount more than once within the same provision or under more than one provision of this Agreement, in respect of the same costs, expense, liability or obligation, the Secretary of State's obligations in respect thereof shall be discharged if and to the extent that payment of such amount is paid once only. 30.9 Set-Off 30.9.1 Subject to Clause 30.9.2, whenever any sum of money shall be recoverable from or payable by the DBFO Co under this Agreement, such sum may be deducted from or reduced by the amount of any sum then due or which at any time thereafter may become due to the DBFO Co under this Agreement or any other contract between the DBFO Co and any department, office, instrumentality or agency of the Government. 30.9.2 Clause 30.9.1 shall not apply in respect of any sum of money claimed to be recoverable from or payable by the DBFO Co if, at the time at which the provisions of Clause 30.9.1 would otherwise apply: 30.9.2.1 the amount of such sum, or the liability to pay it, is the subject of a bona fide Dispute which, before such time, has been referred to, but not finally determined in accordance with, the Disputes Resolution Procedure; and 30.9.2.2 no Event of Default has occurred and is continuing. 30.10 Examination of Records Without limitation to Clause 23.2 [Audit], the Secretary of State shall have the right at reasonable hours upon giving the DBFO Co reasonable notice and at its own expense to examine the books and records of the DBFO Co relative to this Agreement to the extent necessary to verify the accuracy of any accounting 123 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) statement, charge, computation or claim made pursuant to any of the provisions of this Agreement, provided that: 30.10.1 such books and records need not (unless the same contain information relating to a bona fide Dispute) be preserved longer than the period specified in respect of such books or records in Part 1 of Schedule 14 or (if no such period is so specified) a period of 7 years after the end of the Contract Year to which such books or records refer; 30.10.2 if any such examination reveals any inaccuracy in any invoice theretofore made, the necessary adjustments in such invoice and payment shall be made within 14 days after the date that such inaccuracy is established by agreement or adjudication; and 30.10.3 such right to examine must be exercised within the period specified for retention of such books or records in Part 1 of Schedule 14 or (if no such period is so specified) a period of 7 years after the end of the Contract Year to which the books or records being examined refer. 124 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) PART V CHANGE, LIABILITIES AND TERMINATION 31. CHANGE PROCEDURE If at any time after the date of this Agreement an Eligible Change occurs, except and to the extent that the same arises out of a breach by the DBFO Co (or any person for whom it is responsible) of any obligations under this Agreement or the Project Documents, or User Paid Tolls are introduced or changed, the provisions of Schedule 12 [Change] shall apply. 125 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 32. ADDITIONAL WORKS SERVICES AND SUBSEQUENT SCHEMES 32.1 Additional Works Services Where the Secretary of State requires the DBFO Co to carry out any Additional Works Services, the DBFO Co shall procure that such Additional Works Services are carried out in accordance with the provisions of Part 1 of Schedule 13. 32.2 Compensation 32.2.1 The DBFO Co shall be entitled to compensation from the Secretary of State in respect of Additional Works Services, calculated in accordance with the provisions of Part 2 of Schedule 13. 32.2.2 The provisions of Part 4 of Schedule 12 shall apply with respect to any Change in Costs or Change in Revenues of the DBFO Co consequential upon the carrying out of any Additional Works. 32.3 Subsequent Schemes Subject to Clause 32.5, where the DBFO Co desires a Subsequent Scheme to be carried out the provisions of Part 3 of Schedule 13 shall apply. 32.4 Improvements Subject to Clause 32.5, where the DBFO Co desires to make any Improvement to the Project Facilities the provisions of Part 4 of Schedule 13 shall apply. 32.5 Safety Improvements Where the DBFO Co desires to make any Safety Improvement, the provisions of Part 5 of Schedule 13 shall apply. 32.6 East Leeds Radial Junction 32.6.1 It is acknowledged by both Parties that Leeds City Council is the highway authority in respect of the proposed East Leeds Radial Junction, that the East Leeds Radial Junction will not form part of the Project Facilities, and that, subject to Clause 32.6.5, the Secretary of State shall have no responsibility for, and shall not as a consequence of this Agreement have any liability to the DBFO Co in respect of, the East Leeds Radial Junction. 32.6.2 If the DBFO Co or any Associated Company of the DBFO Co enters into an agreement with Leeds City Council for the construction of the East Leeds Radial Junction, the DBFO Co shall submit to the Department's Nominee under the Review Procedure any proposal for the modification of any part of the Project Facilities to accommodate the East Leeds Radial Junction. The Department's Nominee shall be entitled to object to any such proposal in its absolute discretion. 32.6.3 Subject to Clause 32.6.6, the DBFO Co shall indemnify and keep indemnified the Secretary of State in respect of any Claims or Losses of the DBFO Co or of any Associated Company of the DBFO Co which may arise out of, or in the course of or in connection with, the design, construction, completion, commissioning, testing, operation or maintenance of the East Leeds Radial Junction. 32.6.4 Without limitation to Clauses 32.6.1 and 32.6.3, but subject to Clause 32.6.6, the DBFO Co: 126 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 32.6.4.1 shall not be relieved from any liability for Lane Closure Charges in respect of any Lane Closure, occasioned by the construction, operation or maintenance of the East Leeds Radial Junction or any part thereof; 32.6.4.2 shall not be entitled to any compensation from the Secretary of State in respect of any costs or loss of revenues occasioned by the construction, operation or maintenance of the East Leeds Radial Junction. 32.6.5 The Secretary of State shall have the right but not the obligation to give a notice under Clause 32.1 requiring the DBFO Co to carry out any Additional Works Services in respect of the East Leeds Radial Junction, and in such event the provisions of Clauses 32.1 and 32.2 and Parts 1 and 2 of Schedule 13 shall apply in accordance with their terms. 32.6.6 If the Secretary of State, as contemplated by Clause 32.6.5, gives a notice under Clause 32.1 requiring the DBFO Co to carry out any Additional Works Services in respect of the East Leeds Radial Junction, Clauses 32.6.3 and 32.6.4 shall not apply in respect of any such Additional Works Services. 127 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 33. FORCE MAJEURE 33.1 Relief from Liability The Parties shall be relieved from liability under this Agreement to the extent that by reason of Force Majeure they are not able to perform their obligations under this Agreement. 33.2 Notice Relief under Clause 33.1 shall not be given unless the Party intending to claim relief has, by notice to the other Party within 10 days of becoming aware of the event of Force Majeure or, if later, of the failure to perform, informed the other Party that it intends to claim relief. Such notice shall contain such relevant information relating to such failure as is available, including (without limitation) the actions being taken to remedy such failure to perform and an estimate of the period of time required to remedy such failure. 33.3 Obligation to Remedy As soon as practicable after the occurrence of an event of Force Majeure the Party affected shall take all necessary steps to remedy the failure to perform and relief under this Clause 33 shall cease to be available to a Party if it fails so to take all necessary steps to remedy the failure. 33.4 Consequences of Force Majeure If the Parties agree or it is determined through the Disputes Resolution Procedure that: 33.4.1 Force Majcure has prior to the issue of the Completion Certificate prevented the DBFO Co from, or delayed the DBFO Co in, completing the Works (other than the Excepted Works), the DBFO Co may make application to the Department's Agent for an extension of time for completion of the Works (other than the Excepted Works) pursuant to Clause 10.6 [Extension of Time], provided that the aggregate of all such extensions pursuant to this Clause 33.4.1 shall not in any event exceed 18 months. Where such a grant of extension of time is made, the Contract Period shall be extended by an equivalent period; 33.4.2 Eligible Force Majeure has prior to the issue of the Completion Certificate caused damage to the Works then: 33.4.2.1 the DBFO Co shall give notice thereof to the Department's Agent together with details of the effect thereof and the proposed steps to rectify the damage and the costs thereof; 33.4.2.2 the Parties shall enter into discussions concerning the event of Eligible Force Majeure and the damage with the intent that as soon as possible after the cessation of the event of Eligible Force Majeure rectification work can be commenced; 33.4.2.3 following agreement between the Parties on the rectification works to be carried out, or in default of agreement upon a decision under the Disputes Resolution Procedure, the DBFO Co shall procure that such rectification works are carried out as though the Secretary of State had requested a Department's Works Change in respect of such Works and the provisions of Part 2 of Schedule 12 [Department's Works Changes] shall apply, except that: 33.4.2.3.1 the DBFO Co shall not be entitled to give a notice under paragraph 2.1 or 2.2 of Part 2 of Schedule 12; and 128 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 33.4.2.3.2 for purposes of determining the Revised Values in accordance with paragraph 5 of Part 1 of Schedule 12, no Change in Traffic shall be taken into account; 33.4.3 [Clause not used]; 33.4.4 Eligible Force Majeure occurring after the issue of the Completion Certificate or prior to the issue of the Completion Certificate and affecting the Existing Road (other than any Upgraded Section), has substantially affected the traffic flow on the Project Road, then the Contract Period shall be extended by a period equal to the period during which the traffic flow on the Project Road has been so affected, provided that: 33.4.4.1 there shall be excluded from such period of extension the first 7 days of each occurrence of an Eligible Force Majeure event so affecting the traffic flow, and 33.4.4.2 the aggregate extension of the Contract Period pursuant to this Clause 33.4.4 shall not in any event exceed 1 year; 33.4.5 Eligible Force Majeure has prior to the issue of the Completion Certificate caused damage to the Existing Road (other than any Upgraded Section) or has after the issue of the Completion Certificate caused damage to the Project Facilities (other than the Maintenance Depot); then: 33.4.5.1 the DBFO Co shall give notice thereof to the Department's Representative together with details of the effect thereof and the proposed steps to rectify the damage and the costs thereof, 33.4.5.2 the Parties shall enter into discussions concerning the event of Eligible Force Majeure and the damage with the intent that as soon as possible after the cessation of the event of Eligible Force Majeure rectification work can be commenced; 33.4.5.3 following agreement between the Parties on the rectification works to be carried out, or in default of agreement upon a decision under the Disputes Resolution Procedure, the DBFO Co shall procure that such rectification works are carried out as though they were Additional Works in accordance with the provisions of Part 1 of Schedule 13 and the provisions of Part 4 of Schedule 12 [Additional Works] shall apply, except that for purposes of determining the Revised Values in accordance with paragraph 5 of Part 1 of Schedule 12, no Change in Traffic shall be taken into account. 33.4.6 Where an occurrence of Eligible Force Majeure renders the performance of this Agreement financially or practicably impossible or has a fundamental effect on the rights or obligations of either of the Parties the provisions of Clause 38.1 shall apply. 33.4.7 For the avoidance of doubt, save as expressly set out in this Clause 33 (other than this Clause 33.4.7), none of the Secretary of State, his servants or agents shall have any liability to the DBFO Co in relation to any Loss or Claim which the DBFO Co suffers or incurs as a result of any event of Force Majeure and, accordingly, as between the Parties, any such Loss or Claim shall be borne by the DBFO Co. 129 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 33A. CHANGE IN LAW 33A.1 Relevant Change in Law 33A.1.1 If the DBFO Co believes that a Relevant Change in Law has occurred which is a Compensation Event, the DBFO Co may give a notice pursuant to paragraph 2.1 of Part 1 of Schedule 12 and the General Change Procedure shall apply in accordance with Part 5 of Schedule 12. 33A.1.2 Where, after the date of this Agreement, any Relevant Change in Law is repealed or modified or any Law is enacted or modified the effect of which is to neutralise or reduce the discriminatory effect of a Relevant Change in Law, then the Secretary of State may give a notice to that effect to the DBFO Co and the provisions of Part 5 of Schedule 12 shall apply, mutatis mutandis, as if such event were a Compensation Event, with references to the Secretary of State being deemed to be references to the DBFO Co, and vice versa, and with references to Relevant Change in Law being replaced by references to the repeal, modification or enactment referred to in this Clause 33A.1.2. For the avoidance of doubt, the Secretary of State shall be the "Proponent" and the DBFO Co shall be the "Other Party" for the purposes of the General Change Procedure. 33A.2 Deemed Department's Change 33A.2.1 Where the DBFO Co believes that a Change in Law constitutes a Deemed Department's Change, it may serve a notice (a "Deemed Department's Change Notice") to that effect on the Department's Nominee. 33A.2.2 The Deemed Department's Change Notice shall: 33A.2.2.1 identify the relevant Change in Law; 33A.2.2.2 give details of the variation to the Works and/or the other Operations which has become necessary as a result of the relevant Change in Law; and 33A.2.2.3 set out the basis of its belief that the same should have been effected by means of a Department's Works Change or a Department's Change in Specification. 33A.2.3 Within 45 days of receipt of the Deemed Department's Change Notice, the Department's Nominee shall notify the DBFO Co that either: 33A.2.3.1 it agrees that a Deemed Department's Change has occurred; or 33A.2.3.2 it does not agree that a Deemed Department's Change has occurred, in which case the Department's Nominee shall set out in the notice the grounds of objection. 33A.2.4 Where the Department's Nominee fails to respond to a Deemed Department's Change Notice within such 45 day period, a Deemed Department's Change shall be deemed to have occurred and the DBFO Co may serve a notice on the Department's Nominee requiring him to issue a Department's Works Change or a Department's Change in Specification as appropriate and the provisions of Part 2 or Part 3 of Schedule 12 (as appropriate) shall apply. 33A.2.5 Where the Department's Nominee gives a notice under Clause 33A.2.3.2, the Parties shall negotiate for a period of 60 days in an attempt to agree: 33A.2.5.1 whether a Deemed Department's Change has occurred; and 33A.2.5.2 where a Deemed Department's Change has occurred, the effect, if any, it has on the Works and/or the other Operations. 130 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 33A.2.6 If the Parties fail to agree any matter referred to in Clause 33A.2.5 within such 60 day period, then either Party may refer the Dispute to the Disputes Resolution Procedure. 33A.2.7 Where the Department's Nominee agrees, or it is determined in accordance with the Disputes Resolution Procedure, that there has been a Deemed Department's Change, the Department's Nominee shall issue a Department's Works Change or a Department's Change in Specification as appropriate and the provisions of Part 2 or Part 3 of Schedule 12 (as appropriate) shall apply. 131 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 34. WARRANTIES AND DISCLAIMERS 34.1 Warranties by the DBFO Co Without prejudice to any warranties or conditions implied by law, the DBFO Co warrants and undertakes at all times during this Agreement (save in the case of the warranties contained in Clauses 34.1.7, 34.1.11, 34.113 and 34.1.15 which shall be given solely at the date of this Agreement) that: 34.1.1 it will fully comply with and meet the Technical Requirements; 34.1.2 the design of the Works and of any other works the subject of a Proposal will in all respects meet the Technical Requirements and all other requirements of this Agreement; 34.1.3 the Works and any other works the subject of a Proposal will comprise only materials and goods which will be of sound and merchantable quality and have been manufactured or prepared in accordance with the Technical Requirements and with the quality assurance procedures established pursuant to Clause 21 [Quality Assurance] and all workmanship shall be in accordance with sound construction practice applicable at the time of construction; 34.1.4 the DBFO Co will at all times comply with the requirements of the Department's Nominee as permitted under this Agreement and the Requirements of Interested Parties and any Statutory Requirement; 34.1.5 the Works and any other works the subject of a Proposal when constructed will comply in all respects with the Core Construction Requirements, the Construction Requirements, the Core Communications Requirements, the Communications Requirements and the design as received in accordance with Clause 9 [Design and Construction] or Clause 12.6 [Maintenance and Other Works] (as the case may be) and the Design and Certification Procedure; 34.1.6 subject to the terms of the Design and Certification Procedure, the design of the Works and of any other works the subject of a Proposal will be carried out by or under the supervision of the Designer and the persons carrying out any design and/or supervision are suitably qualified and experienced so to do and in particular have adequate previous experience of the part of the design they are carrying out or supervising; 34.1.7 all information, representations and other matters of fact communicated in writing to the Secretary of State or his agents or employees in connection with the DBFO Co's response to the invitation to tender in respect of the Project or in the course of the subsequent negotiations in respect of this Agreement are true, complete and accurate in all material respects; 34.1.8 it is a limited liability company, duly incorporated and validly existing under the laws of the jurisdiction of its incorporation; 34.1.9 it has full power and authority to enter into this Agreement and to carry out the Operations; 34.1.10 the entry into and performance by it of this Agreement do not and will not: 34.1.10.1 conflict with its constitutional documents; or 34.1.10.2 conflict with any document which is binding upon it or any of its assets to the extent that such conflict would be reasonably likely to have a material adverse effect on the ability of the DBFO Co to perform its obligations under this Agreement; 132 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 34.1.11 there has been no material adverse change in the financial condition of Trafalgar House Corporate Development Limited since its accounts dated 30th September 1995 or of BICC plc since its accounts dated 31st December 1995; 34.1.12 the Financial Terms are the basis on which the DBFO Co will finance the Project; 34.1.13 each of the Project Documents is in full force and effect and constitutes the valid, binding and enforceable obligations of the parties thereto, the copies of the Project Documents which the DBFO Co has delivered to the Secretary of State are true and complete copies of such documents, and there are not in existence any other agreements or documents replacing or relating to any of the Project Documents which would materially affect the interpretation or application of any of the Project Documents; 34.1.14 any items referred to in Clauses 45.1.1 and 45.1.2 will be original and will not infringe any third party's copyright, moral rights, design rights, trade mark or any other intellectual property rights; and 34.1.15 the DBFO Co has not carried out any trading activity or business since the date of its incorporation, and it has no liabilities (contingent or otherwise) other than (a) in relation to the Project to the extent disclosed to the Secretary of State by the DBFO Co in a DBFO Co disclosure letter of even date herewith and/or (b) those arising under or in connection with this Agreement or any of the agreements referred to in Clause 2.3.1 or any other agreement which the DBFO Co is required to enter into by the terms of this Agreement and/or (c) those arising (if any) under various letters in relation to this Agreement of even date herewith exchanged between the parties to this Agreement. 34.2 Disclaimer 34.2.1 The Secretary of State has made available to the DBFO Co prior to the date hereof certain materials, documents and data (the "Disclosed Data") related to the design or construction of the Works, the operation and maintenance of the Project Facilities, the Site, the Adjacent Areas, traffic records and forecasts and other matters which are or may be relevant to the Project and the obligations undertaken by the DBFO Co under this Agreement. The Disclosed Data includes, without limitation, all such materials, documents and data which were provided to the DBFO Co in connection with the invitation to tender in respect of the Project (including all such contained in the data room in respect of the Project). 34.2.2 The Secretary of State shall not be liable to the DBFO Co (whether in contract, tort, by statute or otherwise howsoever and whether or not arising out of any negligence on the part of the Secretary of State or any agent or servant of his) in respect of any inaccuracy, error, omission, unfitness for purpose, defect or inadequacy of any kind whatsoever in the Disclosed Data. 34.2.3 The Secretary of State gives no warranty or undertaking that the Disclosed Data represents all of the information in his possession or power (either during the tender for the Project or at the execution of this Agreement) relevant or material to the Project or the obligations undertaken by the DBFO Co under this Agreement. The Secretary of State shall not be liable to the DBFO Co in respect of any failure to disclose or make available (whether before or after the execution of this Agreement) to the DBFO Co any information, documents or data, nor to keep the Disclosed Data up to date, nor to inform the DBFO Co (whether before or after execution of this Agreement) of any inaccuracy, error, omission, unfitness for purpose, defects or inadequacy in the Disclosed Data. 34.2.4 The DBFO Co acknowledges and confirms that: 133 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 34.2.4.1 it has conducted its own analysis and review of the Disclosed Data and has before the execution of this Agreement satisfied itself as to the accuracy, completeness and fitness for purpose of all such Disclosed Data upon which it places reliance; and 34.2.4.2 it shall not be entitled to make any claim against the Secretary of State whether in damages or for extensions of time or additional payments under this Agreement on the grounds of any misunderstanding or misapprehension in respect of the Disclosed Data or the matters referred to in Clause 6 or Clause 34.2.4.1 or on the grounds that incorrect or insufficient information relating thereto or to the Site or Adjacent Areas was given to it by any person, whether or not in the employ of the Secretary of State. Nor shall the DBFO Co be relieved from any risks or obligations imposed on or undertaken by it under this Agreement on any such ground. 34.3 Savings The warranty by the DBFO Co under any provision of this Agreement shall be without limitation to any warranty by the DBFO Co under any other provision of this Agreement. 34.4 Warranties by the Secretary of State The Secretary of State warrants (solely at the date of this Agreement) that (save as referred to in the Secretary of State's disclosure letter of even date herewith from the Secretary of State to the DBFO Co): 34.4.1 save as contained or referred to in the Disclosed Data, the Secretary of State is not aware of any Rights in respect of land affecting the Site which would have a material and adverse effect on the ability of the DBFO Co to perform its obligations under this Agreement; and 34.4.2 the Scheme Orders have been properly made and are, or will be at the Commencement Date, in full force and effect. 34.5 Data Room The Secretary of State shall, for the period of the Contract Period and one year thereafter, retain and keep together the Disclosed Data and shall allow the DBFO Co (or such other persons as it may nominate from time to time on its behalf) access, upon reasonable prior notice and at reasonable times during any Working Day, to the Disclosed Data. The DBFO Co (and such nominees) may, at their own cost, take such copies of the Disclosed Data as they may require. The Secretary of State shall take such reasonable care of the Disclosed Data as he would of his own papers and data. For the avoidance of doubt, nothing in the foregoing provisions of this Clause 34.5 shall in any way prevent or restrict the right of the Secretary of State or the Department's Nominee to have access to, use, and/or take copies of any of the Disclosed Data at any time or to permit any of their respective officers, employees, agents or contractors to do so. 134 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 35. INDEMNITIES 35.1 DBFO Co's Indemnities Save to the extent that the DBFO Co is entitled to an indemnity from the Secretary of State under Clause 35.4 [Secretary of State's Indemnities], the DBFO Co shall indemnify and keep indemnified the Secretary of State in respect of any Claims or Losses of any person (including, for the avoidance of doubt, the DBFO Co and the Secretary of State) which may arise out of, or in the course of or in connection with, the Operations or the performance of or failure to perform any obligation under this Agreement and, without limitation to the generality of the foregoing, in respect of: 35.1.1 any criminal penalties or fines arising out of or resulting from the breach by the DBFO Co of any of its obligations under this Agreement; 35.1.2 any damages or compensation payable to any workman or other person in the employment of the DBFO Co or any contractor or sub-contractor of any tier of the DBFO Co; 35.1.3 any loss or damage to the Works or the Project Facilities or any materials or Plant to be used in the construction of the Works or the Project Facilities from any cause (other than as provided in Clause 33 [Force Majeure]); 35.1.4 all Losses of the DBFO Co caused by any of the defects in the Existing Road identified in Part 4 of Schedule 3, including without limitation all costs of any remedial action taken in respect of any such defect and any loss of income as a consequence of any such defect or any such remedial action; 35.1.5 all Losses to be borne by the DBFO Co in accordance with Clause 15 [Latent Defects in Existing Road]; 35.1.6 any Claims for damage suffered by any User of the Project Facilities or any other third party which arises out of the execution of the Works or the operation, maintenance or improvement of the Project Facilities (including without limitation any Claims in respect of environmental mitigation measures); 35.1.7 any Claims made by any person in respect of any accommodation works which the DBFO Co has performed or agreed to perform whether pursuant to any requirement of this Agreement or otherwise; 35.1.8 any Loss or Claims arising whether directly or indirectly out of a breach of the provisions of Clause 26 [Statutory Undertakers]; 35.1.9 any Loss which is to be borne by the DBFO Co in accordance with Clause 27.2 [Claims Against Third Parties]; 35.1.10 any Loss or Claims which may arise out of or in connection with any breach of the warranties set out in Clause 6 or Clause 34.1; 35.1.11 any Loss or Claims arising out of the carrying out of any Ground, Physical and Geophysical Investigations or archaeological or ecological surveys in each case carried out by or on behalf of the DBFO Co; 35.1.12 any costs, charges, Losses or Claims to be borne by the DBFO Co in accordance with Clause 8.4 [Additional Access]; 135 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 35.1.13 any Loss or Claim arising whether directly or indirectly out of any act or omission of the DBFO Co which directly or indirectly causes any breach by the Secretary of State of any of his statutory duties; 35.1.14 any Loss or Claim arising whether directly or indirectly out of any damage to the Connecting Roads in the course of or in connection with the Operations; 35.1.15 any Loss suffered or incurred by, or any Claim made by, any third party resulting from any event of Force Majeure other than any Loss which is to be borne by the Secretary of State in accordance with Clause 33 [Force Majeure]; 35.1.16 any inaccuracy, error, omission, unfitness for purpose, defect or inaccuracy of any kind whatsoever in the Disclosed Data (whether or not arising from any negligence on the part of the Secretary of State or any servant or agent of his); and (in the case of Clauses 35.1.1 to 35.1.15) whether arising out of the act, neglect or omission of the DBFO Co, its contractors or sub-contractors of any tier or agents or its or their employees. 35.2 Savings 35.2.1 The DBFO Co's liability to the Secretary of State arising under any indemnity in this Agreement shall be without prejudice to any other right or remedy available to the Secretary of State and in particular shall not prejudice in any way the ability of the Secretary of State to enforce any guarantee given pursuant to Clause 4 at any time and in any manner whatsoever. 35.2.2 The indemnity by the DBFO Co under any provision of this Agreement shall be without limitation to any indemnity by the DBFO Co under any other provision of this Agreement. 35.3 Conduct of Claims Subject to DBFO Co's Indemnities 35.3.1 If the Secretary of State receives any notice, demand, letter or other document concerning any Claim from which it appears that the Secretary of State is or may become entitled to indemnification under this Agreement, the Secretary of State shall give notice in writing to the DBFO Co as soon as reasonably practicable. 35.3.2 Subject to Clauses 35.3.3, 35.3.4 and 35.3.5 and, with respect to any Claim arising under or in respect of the New Roads and Street Works Act 1991, the provisions of Clause 26 or Clause 26A, on the giving of a notice pursuant to Clause 35.3.1 the DBFO Co shall be entitled to and shall resist the Claim in the name of the Secretary of State at its own expense and shall have the conduct of any defence, dispute, compromise or appeal of the Claim and of any incidental negotiations, and the Secretary of State will give the DBFO Co all reasonable cooperation, access and assistance for the purposes of considering and resisting such Claim. 35.3.3 With respect to any Claim subject to Clause 35.3.2: 35.3.3.1 the DBFO Co shall keep the Secretary of State fully informed and consult with him about the conduct of the Claim; 35.3.3.2 to the extent that the Secretary of State is not entitled to be indemnified by the DBFO Co for all of the liability arising out of the act or omission which is the subject of the Claim, no action shall be taken pursuant to Clause 35.3.2 which shall increase the amount of any payment to be made by the Secretary of State in respect of that part of the Claim which is not covered by the indemnity from the DBFO Co; and 136 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 35.3.3.3 the DBFO Co shall not (save to the extent it is required to do so by Law) pay or settle such Claim without the consent of the Secretary of State, such consent not to be unreasonably withheld or delayed; provided that such consent shall not be required to the payment or settlement of a Claim subject to the indemnity in Clause 35.1.6 if the Claim is paid or settled in full and the amount of such payment or settlement does not exceed (pound)10,000 (in April 1995 prices). 35.3.4 The Secretary of State shall be free to pay or settle any Claim on such terms as he may in his absolute discretion think fit and without prejudice to his rights and remedies under this Agreement if: 35.3.4.1 within 28 days of the notice from the Secretary of State under Clause 35.3.1 the DBFO Co fails to notify the Secretary of State of its intention to dispute the Claim; or 35.3.4.2 the DBFO Co fails to comply in any material respect with the provisions of Clause 35.3.3. 35.3.5 The Secretary of State shall be free at any time to give notice to the DBFO Co that he is taking over the conduct of any defence, dispute, compromise or appeal of any Claim subject to Clause 35.3.2 or of any incidental negotiations. Upon receipt of such notice the DBFO Co shall promptly take all steps necessary to transfer the conduct of such Claim to the Secretary of State and shall provide to the Secretary of State all reasonable cooperation, access and assistance for the purposes of considering and resisting such Claim. If the Secretary of State gives any notice pursuant to this Clause 35.3.5, then the DBFO Co shall be released from its indemnity in respect of such Claim. 35.4 Secretary of State's Indemnities The Secretary of State shall indemnify and keep indemnified the DBFO Co in respect of: 35.4.1 any Loss or Claims to the extent resulting from any negligent act or omission of the Secretary of State, his agents, employees or other contractors (not being employed by the DBFO Co) save in respect of the matters referred to in Clause 35.1.16; 35.4.2 the cost of acquiring all land or Rights in respect of land the subject of the rights of access and occupation set out in Clause 8.1 [Access for DBFO Co]; 35.4.3 any Claims made by any person in respect of any accommodation works, other than any accommodation works which the DBFO Co has performed or agreed to perform whether pursuant to any requirement of this Agreement or otherwise; and 35.4.4 any Loss which is to be borne by the Secretary of State in accordance with Clause 33 [Force Majeure]. 35.5 Disclaimer Save as expressly provided in Clause 35.4 [Secretary of State's Indemnities], the Secretary of State shall not under any circumstances be liable to the DBFO Co whether in contract, tort or otherwise and whether or not arising from any negligence on the part of the Secretary of State or any of his agents or employees, for any Claims or Losses of any person arising out of, or in the course of or in connection with, the Operations. This Clause 35.5 shall not apply in relation to: 35.5.1 any failure by the Secretary of State to make proper payment to the DBFO Co in accordance with the terms of this Agreement; 137 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 35.5.2 any negligent act or omission of the Secretary of State or any of his agents or employees giving rise to death or personal injury; and 35.5.3 any liability of the Secretary of State for any breach of his obligations under this Agreement. 35.6 Conduct of Claims Subject to Secretary of State's Indemnities 35.6.1 If the DBFO Co receives any notice, demand, letter or other document concerning any Claim from which it appears that the DBFO Co is or may become entitled to indemnification under this Agreement, the DBFO Co shall give notice in writing to the Secretary of State as soon as reasonably practicable. 35.6.2 Subject to Clauses 35.6.3 and 35.6.4, on the giving of a notice pursuant to Clause 35.6.1 the Secretary of State shall be entitled to resist the Claim in the name of the DBFO Co at his own expense and to have the conduct of any defence, dispute, compromise or appeal of the Claim and of any incidental negotiations, and the DBFO Co will give the Secretary of State all reasonable cooperation, access and assistance for the purposes of considering and resisting such Claim. 35.6.3 With respect to any Claim subject to Clause 35.6.2: 35.6.3.1 the Secretary of State shall keep the DBFO Co fully informed and consult with it about the conduct of the Claim; 35.6.3.2 to the extent that the DBFO Co is not entitled to be indemnified by the Secretary of State for all of the liability arising out of the act or omission which is the subject of the Claim, no action shall be taken pursuant to Clause 35.6.2 which shall increase the amount of any payment to be made by the DBFO Co in respect of that part of the Claim which is not covered by the indemnity from the Secretary of State; and 35.6.3.3 the Secretary of State shall not pay or settle such Claim without the consent of the DBFO Co, such consent not to be unreasonably withheld or delayed. 35.6.4 The DBFO Co shall be free to pay or settle the Claim on such terms as it may in its absolute discretion think fit and without prejudice to its rights and remedies under this Agreement if: 35.6.4.1 within 28 days of the notice from the DBFO Co under Clause 35.6.1 the Secretary of State fails to notify the DBFO Co of its intention to dispute the Claim; or 35.6.4.2 the Secretary of State fails to comply in any material respect with the provisions of Clause 35.6.3. 138 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 36. DEFAULT 36.1 Events of Default The following shall be Events of Default: 36.1.1 the occurrence of any act of insolvency in respect of the DBFO Co or an Contracting Associate or any Sponsor, including: 36.1.1.1 any meeting of creditors of the person in question being held or any arrangement or composition with or for the benefit of its creditors (including any voluntary arrangement as defined in the Insolvency Act 1986) being proposed or entered into by or in relation to the person in question; 36.1.1.2 a supervisor, receiver, administrator, administrative receiver or other encumbrancer taking possession of or being appointed over, or any distress, execution or other process being levied or enforced (and not being discharged within 7 days) upon the whole or any part of the assets of the person in question; 36.1.1.3 the person in question ceasing or threatening to cease to carry on business, or being or becoming unable to pay its debts within the meaning of Section 123 of the Insolvency Act 1986; 36.1.1.4 a petition being presented or circumstances existing for a petition being presented, or a meeting being convened for the purpose of considering a resolution, for the making of an administration order or the winding-up, bankruptcy or dissolution of the person in question; or 36.1.1.5 if the person in question shall suffer any event analogous to any of the foregoing in any jurisdiction in which it is incorporated or resident; but in the case of any of the foregoing affecting a Contracting Associate or Sponsor, only if the occurrence will have a material effect on the ability of the DBFO Co to perform its obligations under this Agreement; 36.1.2 the occurrence of any change in control as referred to in Clause 41.3; 36.1.3 the DBFO Co or a Contracting Associate or a Sponsor sells, transfers, leases or otherwise disposes of the whole or any part (which is material in the context of the performance of the DBFO Co's obligations under this Agreement) of its undertakings, properties or assets by a single transaction or a number of transactions (whether related or not and whether at the same time or over a period of time and other than in respect of the grant of security pursuant to Clause 41.2.2) without prior consent of the Secretary of State, but in the case of a Contracting Associate or a Sponsor, only if the disposal would have a material effect on the ability of the DBFO Co to perform its obligations under this Agreement; 36.1.4 the failure of the conditions referred to in Clause 7.1 to be satisfied within three days after the date of this Agreement; 36.1.5 the repudiation of this Agreement by the DBFO Co; 36.1.6 the DBFO Co commits a serious breach of its material obligations under this Agreement, including without limitation the DBFO Co otherwise than as a consequence of a breach by the Secretary of State of his obligations under this Agreement: 139 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 36.1.6.1 abandoning the Works; 36.1.6.2 failing to complete the Works (other than the Excepted Works) to such standard as would enable the issuance of the Completion Certificate by the Date for Completion; 36.1.6.3 ceasing to maintain or operate the Project Facilities or any, or any material part of any, of them; 36.1.7 the DBFO Co neglecting persistently to comply with any of its material obligations under this Agreement and such neglect has a material effect on the performance of the Operations; 36.1.8 without limitation to the generality of Clause 36.1.7: 36.1.8.1 the DBFO Co receiving a total number of two or more Warning Notices in any 5 year period; 36.1.8.2 the DBFO Co being awarded a total of 150 (after taking into account the reduction (if any) in Penalty Points pursuant to the proviso in Clause 24.2.1 and any Penalty Points rescinded pursuant to Clause 24.2.3) or more Penalty Points in any 1 year period; 36.1.9 any of the warranties in Clause 6 or Clause 34.1 shall prove to be materially untrue or incorrect, in the case of the warranties contained in Clauses 34.1.7, 34.1.11, 34.1.13 and 34.1.11.15 at the date of this Agreement, and, in the case of the warranties in Clause 6 and any of the other warranties in Clause 34.1, at any time; or 36.1.10 any of the Project Documents: 36.1.10.1 ceases to be in full force and effect or no longer constitutes the valid, binding and enforceable obligations of the parties thereto (except in accordance with its terms or where a substitute agreement has been entered into in accordance with Clause 2.3.2), or 36.1.10.2 is materially amended, varied or departed from (other than in accordance with Clause 2.3.2), and, in any such case where the DBFO Co is not a party to such Project Document, this would materially adversely affect the ability of the DBFO Co to perform its obligations under this Agreement or any right of the Secretary of State under this Agreement or his ability to enforce any such right or to perform his obligations under this Agreement or to perform any statutory duty; or 36.1.11 the DBFO Co fails to pay any sum due to the Secretary of State hereunder (which sum is not in dispute) and such failure continues for 90 days; or 36.1.12 the DBFO Co commits any breach of Clause 2.4.1 or Clause 41.2.1; or 36.1.13 the DBFO Co either: 36.1.13.1 commits a serious breach of any of its material obligations under the Lease; or 36.1.13.2 neglects persistently to comply with any of its material obligations under the Lease and such neglect has a material effect on the performance of the Operations; or 140 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 36.1.14 the failure of the DBFO Co fully to perform its obligations under Clause 7.3.4 or Clause 7.3.5 by the date for such performance specified in such Clause, provided that: (A) none of the events or circumstances set out in Clause 36.1.5, 36.1.6 or 36.1.7 shall constitute an Event of Default to the extent that Penalty Points are awarded in respect thereof under Clause 24.2; and (B) the appointment of any receiver or manager or administrative receiver of the whole or any part of the assets of the DBFO Co shall not constitute an Event of Default under Clause 36.1.1.2 if on the date of such appointment the Intercreditor Agent delivers a Step-In Bond to the Secretary of State and the Step-In Obligor gives to the Secretary of State a Step-In Undertaking in accordance with the terms of Clause 4.2.3 of the Direct Agreement, provided further that if the Intercreditor Agent on behalf of the Credit Providers fails to observe or perform in full any of its material obligations and liabilities under the Direct Agreement or the Step-In Obligor fails to perform in full any of its material obligations and liabilities under such Step-In Undertaking, or the Step-In Period shall be terminated (whether by expiry or otherwise), and, in any such case, such appointment is continuing, then such appointment shall constitute an Event of Default under Clause 36.1.1.2 with effect from the time of such failure by the Intercreditor Agent or the Step-In Obligor (as the case may be) or such termination of the Step-in Period. 36.2 Notification of Events of Default The DBFO Co undertakes that it shall notify the Secretary of State of the occurrence and details of any Event of Default and of any event or circumstance which would, with the passage of time or otherwise, constitute or give rise to an Event of Default, in either case promptly upon the DBFO Co becoming aware of the occurrence thereof. 36.3 Remedies Upon the occurrence of an Event of Default, and so long as the same is continuing or there are any outstanding liabilities owing by the DBFO Co to the Secretary of State arising as a consequence of the occurrence of an Event of Default, the Secretary of State may at his option and without prejudice to any of his other rights or remedies and to any rights of action which shall accrue or shall have already accrued to the Secretary of State do any or all of the following (provided that where the Secretary of State has given.a Termination Notice pursuant to Clause 3.1 of the Direct Agreement any or all of the following rights or remedies shall continue to be exercisable, subject to the terms of the Direct Agreement, notwithstanding that such Event of Default has ceased to be continuing or there are no longer any such outstanding liabilities owing by the DBFO Co to the Secretary of State): 36.3.1 subject to Clause 36.3A, suspend payment of the DBFO Payments and any other payments otherwise due hereunder or retain any amount due from the Secretary of State to the DBFO Co howsoever arising; 36.3.2 apply any sums standing to the credit of the Retention Account in accordance with Clause 17.7.11; 36.3.3 without determining this Agreement, by notice in writing having immediate effect suspend performance by the DBFO Co of part only of the functions to be performed by it under this Agreement until such time as the DBFO Co shall have demonstrated to the reasonable satisfaction of the Secretary of State that it will perform and is capable of performing it obligations under this Agreement and thereafter himself perform or procure a third party to perform such part of the functions for such period, and in such event the provisions of Clause 36.4 shall apply; 141 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 36.3.4 in the case of the Events of Default referred to in Clauses 36.1.1 to 36.1.4 (both inclusive), Clause 36.1.8 and Clause 36.1.6.2 and any other Event of Default arising as a result of a breach of this Agreement by the DBFO Co which is incapable of remedy, terminate the Agreement in its entirety by notice in writing having immediate effect; 36.3.5 in the case of any Event of Default other than those referred to in Clause 36.3.4, serve notice of default on the DBFO Co requiring the DBFO Co at the DBFO Co's option either: 36.3.5.1 to remedy the breach or breaches referred to in such notice of default within 60 days of such notice (or such longer period as may be agreed by the Secretary of State in his absolute discretion); or 36.3.5.2 to put forward within 21 days of such notice a reasonable programme for the remedying of the breach or breaches, such programme to specify in reasonable detail the manner in which such breach or breaches is or are proposed to be remedied and the latest date by which it is proposed that such breach or all such breaches shall be remedied, and the provisions of Clause 36.5 shall apply. 36.3A Suspension of Payments 36.3A.1 The rights of the-Secretary of State under Clause 36.3.1 to suspend payment of or retain the amount of any payment which would have been due and payable to the DBFO Co but for the exercise by the Secretary of State of his rights under such Clause (together "Relevant Payments") shall be exercisable in accordance with and subject to the following provisions of this Clause 36.3A. 36.3A.2 If the DBFO Co is performing none of the Service Obligations at any time following the occurrence of an Event of Default, the Secretary of State may suspend or retain Relevant Payments in full, without prejudice to the Secretary of State's obligations to resume the making of Relevant Payments under Clause 36.3A.4 if performance of the Service Obligations is subsequently resumed in full or in part, as the case may be. 36.3A.3 For so long as the DBFO Co performs all of the Service Obligations in full continuously and at all times following the occurrence of an Event of Default, the Secretary of State shall continue to make Relevant Payments in full (subject to prior deduction of any costs of the Secretary of State arising from or in connection with such Event of Default, including without limitation all administrative expenses of the Secretary of State including general staff costs and overheads). 36.3A.4 If and for so long as neither Clause 36.3A.2 nor Clause 36.3A.3 applies following the occurrence of an Event of Default, the Secretary of State may suspend or retain Relevant Payments in full until such time as the DBFO Co has demonstrated to the reasonable satisfaction of the Secretary of State that it is capable of performing all of the Service Obligations and the DBFO Co resumes such performance. Upon resumption of such performance, and subject to there being no continuing Event of Default or other material unperformed obligations under this Agreement: 36.3A.4.1 the Secretary of State shall resume the making of Relevant Payments with effect from, and in respect of periods commencing after, such resumption of performance (provided that if the amount of the costs referred to in Clause 36.3A.4.2.2 exceeds the amount of the Accrued Relevant Payments (as defined in Clause 36.3A.4.2.1) the Secretary of State shall be entitled to deduct the amount of such excess from such Relevant Payments until discharged); and 36.3A.4.2 subject to the DBFO Co performing all of the Service Obligations in full continuously and at all times for a period of not less than one month after such 142 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) resumption of such performance, the Secretary of State shall pay to the DBFO Co an amount equal to the lesser of: 36.3A.4.2.1 such proportion of those payments (the "Accrued Relevant Payments") constituting the Relevant Payments accrued (but unpaid) during the period (the "Default Period") from the occurrence of the relevant Event of Default to the date of such resumption of performance as equates to the proportion (as determined by the Secretary of State) which the actual amount of the Service Obligations performed by the DBFO Co during the Default Period bears to the full amount of Service Obligations falling due to be performed by it during such Period; and 36.3A.4.2.2 the amount of the Accrued Relevant Payments less the amount of any costs of the Secretary of State arising from or in connection with the relevant Event of Default, including without limitation all costs incurred by him in performing or engaging others to perform the functions of the DBFO Co and all administrative expenses of the Secretary of State including general staff costs and overheads. 36.3A.5 In this Clause 36.3A "Service Obligations" means all or any of the DBFO Co's obligations under this Agreement falling due to be performed at the relevant time, as determined by the Secretary of State, in respect of or in connection with the operation and maintenance of the Project Facilities (including without limitation the performance of any Maintenance Works and any Routine Maintenance) and the conduct of any other works or operations on or in relation to the Project Facilities, the Site or the Adjacent Areas and any other obligation of the DBFO Co under this Agreement arising after the issue of the Permit to Use. 36.3A.6 Notwithstanding the foregoing provisions of this Clause 36.3A: 36.3A.6.1 if, during the subsistence of an Event of Default, the DBFO Co considers that, solely by reason of any suspension or retention of Relevant Payments under Clause 36.3A.2 or 36.3A.4, the DBFO Co has insufficient financial resources from which to fund Relevant O&M Costs, the DBFO Co may serve a written notice to such effect on the Secretary of State, together with particulars supporting such assertion; 36.3A.6.2 the Secretary of State shall, within 15 days after receipt of such notice (and subject to receipt of such further supporting particulars as he shall reasonably require) notify the DBFO Co whether or not he agrees that the DBFO Co has insufficient financial resources from which to fund Relevant O&M Costs; if the Secretary of State does not so agree, either Party may refer the matter for determination under the Disputes Resolution Procedure; 36.3A.6.3 subject to agreement or determination of the matters referred to in Clauses 36.3A.6.1 and 36.3A.6.2, the Secretary of State shall, in respect of each month during the Partial Payment Period, pay to the DBFO Co the Permitted O&M Payment in respect of such month, such payment to be made subject to and in accordance with the following provisions of this Clause 36.3A.6 and, subject to such provisions, Clause 30; 36.3A.6.4 the DBFO Co shall promptly submit to the Department's Representative all such proof of expenditure in respect of the Relevant O&M Costs in respect of each month during the Partial Payment Period as the Department's Representative shall require for the purpose of determining the amount of the Permitted O&M Payment for such month; 143 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 36.3A.6.5 (subject to his having received from the DBFO Co such proof of expenditure as the Department's Representative shall have required for such purposes in accordance with Clause 36.3A.6.4) the Department's Representative shall determine the Relevant O&M Costs and the amount of the Permitted O&M Payment in respect of each month during the Partial Payment Period as soon as reasonably practicable following the end of that month; 36.3A.6.6 prior to the malting of any Permitted O&M Payment, the Secretary of State and the DBFO Co shall procure that there is established an account (the "O&M Account") in the joint names of the Secretary of State and the DBFO Co with a bank located in the United Kingdom, the mandate for which shall include a condition that no cheques or other payments may be drawn against or debited to the O&M Account without the prior written authority or countersignature of a duly authorised representative of the Department's Representative; 36.3A.6.7 all Permitted O&M Payments shall be paid by the Secretary of State directly to the O&M Account for application in accordance with the provisions of this Clause 36.3A; 36.3A.6.8 the amount of the Permitted O&M Payment in respect of a month which is credited to the O&M Account shall be applied in or towards the discharge (to the extent of the Permitted O&M Payment) of the Relevant O&M Costs for such month, provided that no cheques or other payments may be drawn against or debited to the O&M Account without the prior written authority or countersignature of the Department's Representative; 36.3A.6.9 the Department's Representative may only withhold his authority or countersignature for the purposes of Clause 36.3A.6.6 or Clause 36.3A.6.8 if: 36.3A.6.9.1 the relevant cheque or other payment is not being drawn against or debited to the O&M Account in or towards the discharge (to the extent of the Permitted O&M Payment) of the Relevant O&M Costs for the relevant month; or 36.3A.6.9.2 the proposed payee of the relevant cheque or other payment is not the payee identified in the proof of expenditure provided to the Department's Representative under Clause 36.3A.6.4; 36.3A.6.10 without prejudice to Clause 41.2.1, and notwithstanding Clause 41.2.2, the DBFO Co shall not assign or transfer any interest in, or create or allow to subsist any Encumbrance, trust or other interest in or over, the O&M Account or any Permitted O&M Payment or any interest in either of them; 36.3A.6.11 for the avoidance of doubt, neither the suspension or retention of any Relevant Payments under Clauses 36.3A.2 and 36.3A.4 nor the limitation of the amount of any Provisional Monthly Payment in accordance with the foregoing provisions of this Clause 36.3A.6 shall in any way release, diminish or affect, or relieve the DBFO Co from, any of the DBFO Co's obligations and liabilities under this Agreement; 36.3A.6.12 in determining whether, for the purposes of this Clause 36.3A.6, the DBFO Co has insufficient financial resources from which to fund Relevant O&M Costs, regard shall be had only to amounts standing to the credit of: 144 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) (a) the Operating Account to the extent that such funds represent Included Funds; (b) the Maintenance Reserve Account to the extent that such funds represent funds for the Relevant O&M Costs to which this Clause 36.3A.6 refers (the certificate of the Intercreditor Agent as to such amount being conclusive in the absence of manifest error); and (c) any accounts which the DBFO Co may from time to time hold other than the Cash Collateral Account, the EIB Collateral Accounts, and other accounts which are not Project Accounts at the time in question for the purposes of the Intercreditor Agreement. 36.3A.6.13 For the purposes of this Clause 36.3A.6: "Cash Collateral Account" has the meaning given in the facility agreement referred to in Clause 2.3.1.3.2; "Included Funds" means the amount, for the time being, standing to the credit of the Operating Account to the extent that the DBFO Co would be permitted to withdraw such funds on the next Payment Date in accordance with paragraph (xx) or (xxi) of Clause 16.3 and Clause 16.7 of the Intercreditor Agreement; "Intercreditor Agreement" means the intercreditor agreement referred to in Clause 2.3.1.3.19; "Partial Payment Period" means the period: (a) commencing on the date agreed or determined in accordance with Clause 36.3A.6.2 to be the first date following the relevant suspension or retention of Relevant Payments on which the DBFO Co had insufficient financial resources from which to finance Relevant O&M Costs; and (b) ending on the date which is the earlier of: (i) the date on which the Secretary of State resumes the making of Relevant Payments under Clause 36.3A.4.1; and (ii) the Termination Date; "Permitted O&M Payment" means an amount determined by the Department's Representative as being equal to the lesser of: (a) an amount equal to one twelfth of the Projected Relevant O&M Costs for the Contract Year in which the first day of such month occurs; and (b) the amount of the Relevant O&M Costs in respect of such month; 145 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) less, in either case, the amount of any financial resources available to the DBFO Co for the purposes of funding any of the Relevant O&M Costs in respect of such month; "Projected Relevant O&M Costs" means, in respect of any Contract Year, the projected amount of routine maintenance costs and winter maintenance costs in respect of such Contract Year as shown in the Financial Model as in force at the date of this Agreement; "Relevant O&M Costs" means, in respect of any month, the aggregate amount (as determined by the Department's Representative), excluding VAT, of: (a) costs properly and prudently incurred by the DBFO Co in the carrying out of Routine Maintenance in respect of the Project Road during such month; and (b) reasonable administrative and staff costs properly and prudently incurred by the DBFO Co in respect of such month for the purposes of carrying out the Routine Maintenance referred to in paragraph (a) above; and the following terms have the meanings ascribed to them in the Intercreditor Agreement: (a) EIB Collateral Accounts; (b) Intercreditor Agent; (c) Maintenance Reserve Account; (d) Operating Account; (e) Payment Date; and (f) Project Accounts. 36.4 Partial Suspension In the case of a partial suspension of the performance by the DBFO Co under this Agreement in accordance with Clause 36.3.3, the DBFO Co shall (save to the extent that the Secretary of State is reimbursed in respect of such costs by means of any deduction from payments made by him under Clause 36.3A.3 or Clause 36.3A.4) reimburse the Secretary of State for all costs reasonably incurred by him in performing or engaging others to perform the functions of the DBFO Co which are suspended (including, without limitation, the relevant administrative expenses of the Secretary of State, including an appropriate sum in respect of general staff costs and overheads). 36.5 Termination in Full 36.5.1 Where the DBFO Co puts forward a programme in accordance with Clause 36.3.5.2 the Secretary of State shall have 28 days within which to notify the DBFO Co that it does not accept such programme as being reasonable, failing which the Secretary of State shall be deemed to have accepted such programme. Where the Secretary of State notifies the DBFO Co that it does not accept such programme as being reasonable, the parties shall endeavour 146 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) within the following 7 days to agree any necessary amendments to the programme put forward. In the absence of agreement within such 7 day period, the question of whether or not the programme (as the same may have been amended by agreement) is reasonable may be referred by either Party to the Disputes Resolution Procedure. 36.5.2 If: 36.5.2.1 the breach or breaches notified in a notice of default served under Clause 36.3.5 is or are not remedied: 36.5.2.1.1 before the expiry of the period referred to in Clause 36.3.5.1 (if applicable); or 36.5.2.1.2 where the DBFO Co puts forward a programme pursuant to Clause 36.3.5.2 which has been accepted by the Secretary of State or determined by the Disputes Resolution Procedure as being reasonable, in accordance with such programme; or 36.5.2.2 such programme as is put forward by the DBFO Co pursuant to Clause 36.3.5.2 is rejected by the Secretary of State as not being reasonable, and the Disputes Resolution Procedure does not find against that rejection, the Secretary of State may terminate this Agreement in its entirety by notice in writing having immediate effect. 36.6 Savings The rights of the Secretary of State under this Clause 36 are in addition and without prejudice to any other right the Secretary of State may have to claim the amount of any loss or damage suffered by the Secretary of State on account of the acts or omissions of the DBFO Co, whether pursuant to any bond or guarantee given in accordance with the requirements of this Agreement or otherwise. 147 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 37. TERMINATION BY THE DBFO CO 37.1 DBFO Co Termination Events The following are DBFO Co Termination Events: 37.1.1 the Government sequesters, requisitions or otherwise seizes the Project Facilities or any, or any material part of any, of them otherwise than pursuant to this Agreement or otherwise than as a result of any default by the DBFO Co; 37.1.2 the Secretary of State shall fail to issue the Certificate of Commencement within 14 days after the date of receipt by the Secretary of State of the DBFO Co's notice under Clause 7.2; 37.1.3 the Secretary of State shall be in material breach of its obligations under Clause 8.1 [Access for DBFO Co] and such breach shall materially adversely affect the ability of the DBFO Co to perform its obligations under this Agreement for a period of not less than 180 days; 37.1.4 the Secretary of State shall cease to be the highway authority in respect of the Project Road or any material part of the Project Road (but excluding by way of any temporary or permanent delegation of the whole or any part of his statutory functions as highway authority); 37.1.5 the obligations of the Secretary of State under this Agreement shall (without the prior consent of the DBFO Co, such consent not to be unreasonably withheld or delayed) be novated or otherwise transferred (whether by virtue of any Law or any scheme pursuant to any Law or otherwise) to another person other than: 37.1.5.1 any department, office, instrumentality or agency of the Government; or 37.1.5.2 any person whose obligations under this Agreement are guaranteed by the Government or any department, office, instrumentality or agency of the Government; 37.1.6 the Secretary of State shall fail to pay any sum due to the DBFO Co hereunder (which sum is not in dispute), and such failure continues for 90 days; or 37.1.7 the failure by the Secretary of State to take any action which gives rise to the circumstances referred to in Clause 25.5.3. 37.2 Termination Procedure 37.2.1 Upon the occurrence of a DBFO Co Termination Event and so long as such DBFO Co Termination Event is subsisting, the DBFO Co may at its option serve notice on the Secretary of State of the occurrence of such DBFO Co Termination Event. If the relevant matter or circumstance has not been rectified or remedied by the Secretary of State or otherwise within 60 days of such notice, the DBFO Co may serve a further notice on the Secretary of State terminating this Agreement with immediate effect. 37.2.2 Upon a termination of this Agreement pursuant to Clause 37.2.1 (other than a termination for the reason set out in Clause 37.1.7), the DBFO Co shall be entitled to compensation in accordance with Clause 40 [Compensation on Termination]. 37.2.3 The DBFO Co may give notice to the Secretary of State terminating this Agreement only in accordance with the provisions of this Clause 37.2, Clause 38.1.1.1, Clause 38.4 or Clause 38.5. 148 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 38. NON-DEFAULT TERMINATION 38.1 Termination for Eligible Force Majeure 38.1.1 Where an occurrence of Eligible Force Majeure renders the performance of this Agreement financially or practicably impossible or has a fundamental effect on the rights or obligations of either of the Parties: 38.1.1.1 in either case for a continuous period of more than 18 months, either Party may, following consultation for a period of not less than a further 90 days to reach a solution acceptable to both Parties, and so long as such circumstances continue, terminate this Agreement by notice to the other having immediate effect; or 38.1.1.2 the Secretary of State may at any time after such occurrence, but following consultation for a period of not less than 90 days to reach a solution acceptable to both Parties, and so long as such circumstances continue, terminate this Agreement by notice to the DBFO Co having immediate effect. 38.1.2 In the event of any termination pursuant to Clause 38.1.1.1, the Secretary of State shall pay to the DBFO Co the amounts determined in accordance with Clause 40.3. 38.1.3 In the event of any termination by the Secretary of State pursuant to Clause 38.1.1.2, the Secretary of State shall pay to the DBFO Co the amounts determined in accordance with Clause 40.3 and Clause 40.4. 38.2 Expiry of Term This Agreement shall terminate automatically upon the expiry of the period of 30 years from the Commencement Date (or such other period as may be substituted therefor in accordance with Clause 3 or Clause 33.4.4) unless it shall have previously been terminated in accordance with the provisions of this Agreement. 38.3 Termination for Failure to Provide Access to DBFO Co 38.3.1 If: 38.3.1.1 there shall be a material breach by the Secretary of State of the provisions of Clause 8.1 [Access for DBFO Co] giving rise to a Compensation Event; 38.3.1.2 the DBFO Co shall be entitled to be compensated in respect of such Compensation Event under the General Change Procedure; and 38.3.1.3 the period in respect of which such compensation is payable by the Secretary of State exceeds 180 days in aggregate, then the Secretary of State may at any time after such 180 day period terminate this Agreement by notice to the DBFO Co having immediate effect. 38.3.2 In the event of any termination pursuant to Clause 38.3.1, the Secretary of State shall pay to the DBFO Co the amounts determined in accordance with Clause 40.2 or Clause 40.3, as the case may be, and Clause 40.4. 149 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 38.4 Termination for Failure to Exercise Powers If the Parties are unable to reach agreement within the period of 90 days referred to in Clause 25.5.4, then either Party may terminate this Agreement by notice to the other, provided that the DBFO Co shall not be entitled to any compensation as a consequence of any such termination. 38.5 Termination on Relevant Change in Law 38.5.1 If a Relevant Change in Law comes into effect which renders illegal or impossible (but not merely more expensive) all or substantially all of the DBFO Co's obligations under this Agreement, then either Party may terminate this Agreement by notice to the other. 38.5.2 In the event of any termination pursuant to Clause 38.5.1, the Secretary of State shall pay to the DBFO Co the amounts determined in accordance with Clause 40.3 and Clause 40.4. 150 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 39. EFFECT OF TERMINATION 39.1 Step-in Rights 39.1.1 Without prejudice to Clause 24.5 [Step-In Rights], in the event that the Secretary of State has given notice of default or notice of termination under Clause 36.3, Clause 36.5, Clause 38.1, Clause 38.3, Clause 38.4 or Clause 38.5 or the DBFO Co has given notice of termination under Clause 37.2, Clause 38.1.1.1, Clause 38.4 or Clause 38.5 and, in any such case, members of the public shall be unable to use the Project Facilities either safely, without undue delay or at all, then: 39.1.1.1 the Secretary of State may by 7 days notice to the DBFO Co expel the DBFO Co from the Site and the Adjacent Areas without thereby avoiding this Agreement or releasing the DBFO Co from any of its outstanding obligations or liabilities under this Agreement; and 39.1.1.2 whether or not he exercises the right under Clause 39.1.1.1, the Secretary of State may take, or employ others to take, such steps in relation to the operation and maintenance of the Project Facilities as he may think fit to protect the position of such members of the public, and (in the case of a notice of default or notice of termination under Clause 36.3 or Clause 36.5) the Secretary of State may recover all costs of so doing (including, without limitation, the relevant administrative expenses of the Secretary of State, including an appropriate sum in respect of general staff costs and overheads) from the DBFO Co. 39.1.2 For the avoidance of doubt, subject to the exercise by the Secretary of State of any right under Clause 39.1.1, the Parties shall continue to perform their obligations under this Agreement notwithstanding the giving of any notice of default or notice of termination until the termination of this Agreement becomes final in accordance with the provisions of this Clause 39. 39.2 Disputed Termination 39.2.1 Notwithstanding the provisions of Clauses 36.3 [Remedies], 36.5 [Termination in Full], 37.2 [Termination Procedure], 38.1 [Termination for Eligible Force Majeure], 38.3 [Termination for Failure to Provide Access to DBFO Co], 38.4 [Termination for Failure to Exercise Powers] and 38.5 [Termination on Relevant Change in Law], where either Party has given notice of termination of this Agreement and the other Party has within 14 days of receipt of such notice referred the question of whether or not this Agreement has been wrongfully terminated to the Disputes Resolution Procedure, termination of this Agreement shall not take effect unless and until it is finally determined in accordance with the Disputes Resolution Procedure that such termination is not wrongful. 39.2.2 If at any time a notice of termination has been received and a reference to the Disputes Resolution Procedure has not been made pursuant to Clause 39.2.1, then either Party may (within the 14 days period referred to in Clause 39.2.1) apply to the Court for injunctive or declaratory relief (whichever shall be appropriate) in respect of such purported termination and/or refer to the Court the question whether this Agreement has been wrongfully terminated and, if so, the damages accruing therefrom, in which event such matter shall be dealt with by the Court and not pursuant to the Disputes Resolution Procedure. Termination of this Agreement shall not take effect until it has been finally determined by the Court whether or not injunctive or declaratory relief is to be granted. Any Court proceedings shall be conducted by both Parties with due expedition. 151 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 39.2.3 If the Secretary of State has given notice of termination of this Agreement to the DBFO Co and has exercised the right referred to in Clause 39.1.1.1, then such termination shall be final notwithstanding a determination under the Disputes Resolution Procedure that such termination was wrongful and the DBFO Co shall not be entitled to access to any part of the Site or Adjacent Areas. 39.3 Savings 39.3.1 Save as otherwise expressly provided in this Agreement: 39.3.1.1 termination of this Agreement shall be without prejudice to any accrued rights and obligations under this Agreement as at the date of termination (including without limitation the right of the Secretary of State to recover damages from the DBFO Co where the termination has arisen as a result of an Event of Default); and 39.3.1.2 termination of this Agreement shall not affect the continuing rights and obligations of the DBFO Co and the Secretary of State under Clauses 14.7 [Removal of Signs], 18 [Insurance], 27.2 [Claims Against Third Parties], 29 [Calculation of Payments], 30 [Invoicing and Payment], 35 [Indemnities], 38.1 [Termination for Eligible Force Majeure], 38.3 [Termination for Failure to Provide Access to DBFO Co], 38.4 [Termination for Failure to Exercise Powers], 38.5 [Termination on Relevant Change in Law], 40 [Compensation on Termination], 44 [Taxes], 45 [Intellectual Property] and 46 [Confidentiality], Schedules 14 [Records and Reports] and 15 [Disputes Resolution Procedure] and this Clause 39 or under any other Clause which is expressed to survive termination or which is required to give effect to such termination or the consequences of such termination. Save as provided in this Clause 39.3, all rights and obligations of the Secretary of State and the DBFO Co under this Agreement shall cease and be of no further force and effect upon termination of this Agreement. 39.3.2 Notwithstanding any breach of this Agreement by either Party and without prejudice to any other rights which the other Party may have in relation thereto, the other Party may elect to continue to treat this Agreement as in full force and effect and to enforce its rights hereunder, and failure of either Party to exercise any right hereunder including any right to terminate this Agreement and any right to claim damages shall not be deemed a waiver of such right for any continuing or subsequent breach. 39.4 Transfer of Assets, etc On the termination of this Agreement (other than by a novation of this Agreement to a Substitute Entity as defined in, and in accordance with, the Direct Agreement) or, in the case of Clause 39.4.5, on and for the duration of the exercise by the Secretary of State of his step-in rights under Clause 39.1.1: 39.4.1 the rights of access under Clause 8.1 [Access for DBFO Co] shall automatically terminate; 39.4.2 if prior to the issue of the Completion Certificate, the DBFO Co shall transfer to and there shall vest in the Secretary of State such part of the Works as shall have been carried out, and if the Secretary of State so elects: 39.4.2.1 the Construction Contract shall be novated to the Secretary of State (and upon such election the DBFO Co shall take all necessary steps as soon as reasonably practicable to procure such novation to the Secretary of State) and all Plant and 152 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) all materials on the Site or adjacent thereto shall remain available to him for the purposes of completing the Works; and 39.4.2.2 the Construction Plant shall remain available to the Secretary of State for the purposes of completing the Works subject to payment therefor of a reasonable hire charge; 39.4.3 the DBFO Co shall hand over to and there shall vest in the Secretary of State any interest of the DBFO Co in the Project Facilities, which in the case of the termination of this Agreement in accordance with Clause 38.2 shall be in the state required in accordance with Clause 17 [Handback]; 39.4.4 if the Secretary of State so elects, each Relevant O&M Contract in effect at the Termination Date shall be novated to him and upon such election the DBFO Co shall take all necessary steps as soon as reasonably practicable to procure such novation to the Secretary of State; 39.4.5 the Secretary of State shall have an option to purchase or (where the Secretary of State has exercised his step-in rights under Clause 39.1.1) hire from the DBFO Co or any of its Associated Companies at a fair market value (as between a willing vendor and willing purchaser, with any disputes as to such fair market value being determined by the Expert) and free from any security interest all or any part of the stocks of material, road vehicles, spare parts and other moveable property owned by the DBFO Co or any of its Associated Companies and reasonably required in connection with the operation and maintenance of the Project Facilities; 39.4.6 the DBFO Co shall deliver to the Secretary of State or his designee "as built drawings" showing all alterations made since the commencement of operation for the Project Facilities; 39.4.7 the DBFO Co shall deliver to the Secretary of State operation and maintenance manuals for the Project Facilities, including without limitation in respect of communications; signalling and other systems in service at the Termination Date; 39.4.8 the DBFO Co shall procure that the benefit of all manufacturer's warranties in respect of mechanical and electrical equipment included in the Project Facilities is assigned to the Secretary of State; and 39.4.9 the DBFO Co shall deliver to the Secretary of State or his designee the records referred to in Clause 23.4.3. 39.5 Handover On the termination of this Agreement for any reason: 39.5.1 the DBFO Co shall cooperate fully with the Secretary of State and any successor operator of the Project Facilities in order to achieve a smooth transfer of the operation of the Project Facilities, so as to protect the safety of and avoid undue delay or inconvenience to the members of the public; 39.5.2 the DBFO Co shall as soon as practicable remove from the Site, the Adjacent Areas and, without prejudice to the terms of the Lease, the Maintenance Depot, all Plant, materials, Construction Plant, temporary buildings, road vehicles, spare parts and other property not required by the Secretary of State pursuant to Clause 39.4.2 or acquired by the Secretary of State pursuant to Clause 39.4.5, and if it has not done so within 28 days after any notice from the Secretary of State requiring it to do so the Secretary of State may (without being responsible for any Loss (unless caused by his gross negligence or wilful default)) remove 153 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) and sell any such property and shall hold any proceeds less all costs incurred to the credit of the DBFO Co; 39.5.3 the DBFO Co shall within 1 week of the Termination Date deliver to the Department's Representative: 39.5.3.1 keys to all traffic sign housings; and 39.5.3.2 lifting keys for all types of chamber covers; and 39.5.4 the DBFO Co shall as soon as practicable vacate the Site, the Adjacent Areas and, without prejudice to the terms of the Lease, the Maintenance Depot and shall leave the Site, the Adjacent Areas and, without prejudice to the terms of the Lease, the Maintenance Depot in a clean and orderly condition. 154 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 40. COMPENSATION ON TERMINATION 40.1 Termination Accounts 40.1.1 The DBFO Co shall procure that not later than 90 days after termination of this Agreement pursuant to Clause 37 [Termination by the DBFO Co] (other than a termination for the reason set out in Clause 37.1.7), Clause 38.1 [Termination for Eligible Force Majeure], Clause 38.3 [Termination for Failure to Provide Access to DBFO Co] or Clause 38.5 [Termination on Relevant Change in Law] (or such longer period as may be agreed between the Department's Representative and the DBFO Co's auditors), the Termination Accounts shall be drawn up. The Termination Accounts shall be audited by the DBFO Co's auditors and shall have annexed thereto a report signed by the DBFO Co's auditors in respect of the amount of the deductions to be made pursuant to Clause 40.3.2, which such report shall for the purposes of this Clause 40 be deemed to form part of the Termination Accounts. 40.1.2 The Termination Accounts shall be presented to the Department's Representative for review. In order to enable the Department's Representative to review the Termination Accounts, the DBFO Co will ensure that it keeps up to date and makes available at all reasonable times to the Department's Representative and its or the Secretary of State's professional advisers all books, records and other information as may be reasonably required by the Department's Representative or its or the Secretary of State's professional advisers. The DBFO Co shall and shall procure that its auditors shall cooperate with the Department's Representative and its or the Secretary of State's professional advisers with regard to such review. 40.1.3 If the Department's Representative does not within 60 days of presentation to it of the Termination Accounts notify the DBFO Co that it agrees with the basis of preparation of the Termination Accounts and the calculations contained therein, the Parties shall attempt in good faith to reach agreement in respect thereof. If they are unable to do so within 28 days of the expiry of such 60 day period or the earlier notification by the Department's Representative that it does not agree such basis of preparation, any matter over which there is disagreement may be referred to the Expert. The determination by the Expert shall then be reflected in the Termination Accounts which, as so amended, shall be final and binding upon the Parties. 40.2 [Clause not used]. 40.3 Termination 40.3.1 If the DBFO Co terminates this Agreement pursuant to Clause 37 [Termination by the DBFO Co] (other than a termination for the reason set out in Clause 37.1.7) as a consequence of the occurrence of a DBFO Co Termination Event or this Agreement is terminated by either Party pursuant to Clause 38.1.1 or Clause 38.5.1 or by the Secretary of State pursuant to Clause 38.3.1 as a result of the occurrence of an event or circumstance giving rise to such termination after the Commencement Date, then subject to the provisions of Clauses 40.3.2 to 40.3.7 (inclusive) the Secretary of State shall pay to the DBFO Co an amount, as determined from the Termination Accounts, equal to the aggregate of: 40.3.1.1 the Relevant Funding Liabilities; and 40.3.1.2 all other liabilities and obligations of the DBFO Co to third parties (including employees) arising out of or in connection with the Project, which are in existence at the date of termination or arise as a result of or in connection with such termination. 40.3.2 There shall be excluded from the amount payable pursuant to Clause 40.3.1: 155 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 40.3.2.1 any liability of the DBFO Co in respect of subscription monies paid by or any other obligations owed to holders of the Ordinary Shares in respect of such Ordinary Shares; 40.3.2.2 any sums received in respect of the Project from the Funders, or otherwise derived from the Project, and subsequently applied for purposes other than the Project, such other purposes not to include the application of sums by way of the return of principal or capital or the payment of interest, dividends or distributions to Funders or otherwise pursuant to the Funding Agreements and being, in the case of such principal and capital, in reduction of amounts owing to Funders thereunder; 40.3.2.3 all liabilities and obligations arising out of agreements or arrangements entered into by the DBFO Co prior to such termination, to the extent that such agreements or arrangements were not entered into in the ordinary course of business and on commercial arm's length terms; 40.3.2.4 all liabilities and obligations arising out of agreements or arrangements entered into by the DBFO Co on or following such termination and any agreements or arrangements entered into at whatever time with any professional advisers or consultants of the DBFO Co or the Funders: 40.3.2.4.1 regarding any claim or potential claim against the Secretary of State arising from or in connection with such termination; or 40.3.2.4.2 in respect of the payment of any amounts due as a consequence of the termination of the engagement of any such adviser or consultant which are not directly attributable to work done or services performed or costs reasonably incurred by such adviser or consultant as a consequence of the termination of this Agreement; and 40.3.2.4.3 in the case of amounts due to advisers or consultants employed by the Funders, all such amounts in excess of (pound)500,000; 40.3.2.5 all liabilities and obligations of the DBFO Co arising as a result of a breach of a contract relating to the Project (except any breach of contract arising as a result of termination of this Agreement); 40.3.2.6 (without prejudice to Clause 40.3.2.4) any liability of the DBFO Co, under or in respect of any contract relating to the Project, to pay any amount by way of reimbursement of, or indemnification in respect of costs and expenses incurred by any other party to any such contract if and to the extent that: 40.3.2.6.1 such costs and expenses were not properly incurred; or 40.3.2.6.2 such costs and expenses were properly incurred but exceed a reasonable amount. 40.3.3 For the purposes of this Clause 40.3, "Relevant Funding Liabilities" shall, subject to Clauses 40.3.4 and 40.3.7, mean: 40.3.3.1 if at the Termination Date there are no Funding Agreements other than Approved Funding Agreements, all outstanding amounts owing by the DBFO Co to the Funders under the Approved Funding Agreements at the Termination 156 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) Date (having taken account of all proceeds of enforcement of security which have previously been applied in reduction thereof) and all amounts owing to such Funders under such Approved Funding Agreements which arise from such termination (including amounts owing in respect of any liabilities and obligations to such Funders under such Approved Funding Agreements arising from the early repayment of monies and any interest which accrues under such Approved Funding Agreements from the Termination Date to the date of payment under this Clause 40.3 and swap agreement termination costs); and 40.3.3.2 if at the Termination Date there are any Funding Agreements other than Approved Funding Agreements, an amount equal to the lesser of: 40.3.3.2.1 all outstanding amounts owing by the DBFO Co to the Funders under the Funding Agreements at the Termination Date (having taken account of all proceeds of enforcement of security which have previously been applied in reduction thereof) and all amounts owing to such Funders under such Funding Agreements which arise from such termination (including amounts owing in respect of any liabilities and obligations to such Funders under such Funding Agreements arising from the early repayment of monies and any interest which accrues under such Funding Agreements from the date of termination of this Agreement to the date of payment under this Clause 40.3 and swap agreement termination costs); and 40.3.3.2.2 all outstanding amounts which would have been owing by the DBFO Co to the Funders under the Approved Funding Agreements at the Termination Date (having taken account of all proceeds of enforcement of security which have previously been applied in reduction of amounts outstanding under the Funding Agreements) and all amounts which would have been owing to such Funders under the Approved Funding Agreements and which would have arisen from such termination (including amounts which would have been owing in respect of any liabilities and obligations to such Funders under the Approved Funding Agreements arising from the early repayment of monies and any interest which would have accrued under the Approved Funding Agreements from the Termination Date to the date of payment under this Clause 40.3 and swap agreement termination costs) provided that for the purpose of determining such amounts the following assumptions shall apply, namely that: 40.3.3.2.2.1 (without prejudice to Clause 2.4.1) the Approved Funding Agreements remained in force at the Termination Date upon the terms and conditions approved by the Secretary of State; 40.3.3.2.2.2 no Funding Agreements were entered into in addition to the Approved Funding Agreements; and 40.3.3.2.2.3 the aggregate principal amounts drawn down under the Approved Funding Agreements prior to the Termination Date were those projected as being drawn down in the Financial Model as in force at the date of this Agreement, as amended to reflect the terms of any Approved Funding Agreement entered into after the date of this Agreement, together with (i) 157 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) any amount which would have been drawn down under any standby or similar facility contained in any Approved Funding Agreement in order to pay for escalation in the contract price under the Construction Contract as a consequence of any overall increase in the Index referred to in Annex 2 of Part 1 of Schedule 9 above that shown in the Financial Model as in force at the date of this Agreement and (ii) any amount which had actually been drawn down under any standby or similar facility contained in any Approved Funding Agreement as at the Termination Date. 40.3.4 The following provisions of this Clause 40.3.4 shall apply notwithstanding the provisions of any Funding Agreement, and notwithstanding that any Funding Agreement is an Approved Funding Agreement: 40.3.4.1 in calculating the amount of any interest (including, without limitation, any capitalised interest) comprised in the Relevant Funding Liabilities, the percentage rate per annum by reference to which such interest shall be calculated shall not exceed the lesser of: 40.3.4.1.1 the relevant Applicable Interest Rate(s); and 40.3.4.1.2 the rate applying under the terms of the relevant Funding Agreement; and 40.3.4.2 in the case of any Funding Agreement which is a Hedging Agreement, in calculating the Relevant Funding Liabilities in respect of such Funding Agreement, any actual or notional percentage rate of interest per annum payable or expressed to be payable by the DBFO Co under or in relation to such Funding Agreement or by reference to which such Relevant Funding Liabilities would be calculated shall not exceed the lesser of: 40.3.4.2.1 the relevant Applicable Interest Rate(s); and 40.3.4.2.2 the actual or notional rate applying under the terms of such Funding Agreement. 40.3.5 The following provisions of this Clause 40.3.5 shall apply in any case where amounts are payable by the Secretary of State to the DBFO Co under this Clause 40.3: 40.3.5.1 if any amount payable by the Secretary of State to the DBFO Co under this Clause 40.3 is subject to Tax (in whole or in part), the Secretary of State shall pay to the DBFO Co such additional amount or amounts as will put the DBFO Co in the same after-tax position as it would have been in had the payment not been subject to Tax, provided that in determining the after-tax position of the DBFO Co, no account shall be taken, other than in accordance with Clause 40.3.5.2, of any Tax Reliefs which are or may be available to the DBFO Co (whether or not following any claim or election by the DBFO Co); 40.3.5.2 if the DBFO Co is also entitled to receive additional compensation under Clause 40, the DBFO Co shall use all reasonable endeavours to reduce or eliminate the Tax for which it is accountable in respect of sums payable under this Clause 158 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 40.3 whether by the use of Tax Reliefs, the making or withdrawing of any claims or otherwise, provided always that: 40.3.5.2.1 the DBFO Co shall be entitled to treat all available Tax Reliefs as allocated in the first place so as to reduce or eliminate any Tax for which it is accountable in respect of any additional compensation to which it is entitled in accordance with Clause 40.4.2 or Clause 40.4.3 before treating them, or any of them which remains unutilised, as allocated so as to reduce or eliminate the Tax in respect of sums payable under this Clause 40.3; and 40.3.5.2.2 the obligations of the DBFO Co under this Clause 40.3.5.2 shall not require it to revoke, disclaim or withdraw any claim or surrender made by it or agreed to be made by it, prior to the termination of this Agreement, in respect of any Tax Reliefs. 40.3.6 The Secretary of State shall be entitled to deduct from the amount payable pursuant to Clause 40.3.1: 40.3.6.1 in the case of Relevant Funding Liabilities, an amount equal to the proceeds of any insurances in respect of the Project received or to be received by any of the Funders at or at any time following the termination which gives rise to the obligation to make payment pursuant to Clause 40.3.1 and which, had they been received before the date of such termination, the Funders would have been entitled, upon receipt, to apply in and towards settlement of amounts which would otherwise be Relevant Funding Liabilities; and 40.3.6.2 in the case of the liabilities and obligations referred to in Clause 40.3.1.2, an amount equal to the proceeds of any insurances in respect of such liabilities and obligations received or to be received by the DBFO Co at or at any time following the termination which gives rise to the obligation to make payment pursuant to Clause 40.3.1. 40.3.7 Notwithstanding any other provision of this Agreement, unless otherwise agreed by the Secretary of State in his absolute discretion (and, for the avoidance of doubt, the exercise of such discretion may not be referred to the Disputes Resolution Procedure or otherwise disputed or challenged), the aggregate amount payable by the Secretary of State under Clause 40.3.1 in respect of the Relevant Funding Liabilities shall not exceed the aggregate amount which would have been owing at the Termination Date under the Original Funding Agreements by more than (pound)50,000,000. 40.4 Additional Compensation 40.4.1 If Clause 40.3 shall apply as a consequence of the termination of this Agreement pursuant to Clause 37 [Termination by the DBFO Co] (other than a termination for the reason set out in Clause 37.1.7), Clause 38.1.1.2, Clause 38.3.1 or Clause 38.5.1, the Secretary of State shall in addition to any amounts payable pursuant to Clause 40.3 pay to the DBFO Co as at the date of termination of this Agreement a sum calculated in accordance with this Clause 40.4. The amount payable by the Secretary of State shall be calculated: 40.4.1.1 in the case of a DBFO Co Termination Event referred to in any of Clauses 37.1.1, 37.1.2, 37.1.4 and 37.1.5, as at the Working Day immediately preceding the date upon which such DBFO Co Termination Event occurs; 159 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 40.4.1.2 in the case of a DBFO Co Termination Event referred to in Clauses 37.1.3 and 37.1.6, as at the Working Day immediately preceding the date upon which the DBFO Co gives notice terminating this Agreement; 40.4.1.3 in the case of termination of this Agreement by the Secretary of State pursuant to Clause 38.3.1, as at the Working Day immediately preceding the date upon which the Secretary of State gives notice terminating this Agreement; and 40.4.1.4 in the case of termination of this Agreement by either Party pursuant to Clause 38.5.1, as at the Working Day immediately preceding the date upon which the relevant Party gives notice terminating this Agreement. 40.4.2 If Clause 40.3 shall apply as a consequence of the termination of this Agreement pursuant to Clause 37 [Termination by the DBFO Co] (other than a termination for the reason set out in Clause 37.1.7), Clause 38.1.1.2, Clause 38.3.1 or Clause 38.5.1 by reason of the event or circumstance giving rise to such termination occurring before the first anniversary of the date of the Completion Certificate, the amount payable under Clause 40.4.1 shall be equal to the aggregate of 40.4.2.1 all Eligible Equity at the Termination Date; and 40.4.2.2 an amount equal to interest on each amount of such Eligible Equity for the Commitment Period relating thereto calculated at the rate of 6 per cent per annum above Average LIBOR (such interest to accrue from day to day and to be payable on the basis of a year of 365 days). For the purposes of this Clause 40.4.2: "Commitment Period" means, in respect of each amount of Eligible Equity, the period commencing on the later of (i) the date on which the relevant amount of Eligible Equity was subscribed or advanced to the DBFO Co and (ii) the date of this Agreement, and ending on the Termination Date. "Eligible Equity" means all or any of the following (but not exceeding in aggregate the sum of (pound)22,500,000 unless the Secretary of State shall otherwise agree in writing): (a) the aggregate unredeemed amount subscribed for any Ordinary Shares of the DBFO Co; and (b) the aggregate outstanding principal amount of all loans (including any interest capitalised in accordance with the terms of the relevant agreements in respect of such loans) advanced to the DBFO Co for the purpose of carrying out the Operations and owing to the Sponsors or any of their Associated Companies or Yorkshire Holdings. "LIBOR" means the percentage rate of interest per annum (as determined by the Secretary of State), being the rate per annum equal to the arithmetic mean of the rates which are quoted as of 11 a.m. (London time) on each Determination Date for deposits in Sterling of comparable amount to the relevant amount of Eligible Equity on page "LIBP" of the Reuter Monitor Money Rates Service (or any other page which may replace page "LIBP" for the purpose of displaying London interbank offered rates for Sterling of leading reference banks) for a term of six months (or, if six month periods are not quoted on page LIBP, any period quoted on that page which the Secretary of State determines to be substantially the same). 160 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Determination Date" means the first Working Day of each Commitment Period and the first Working Day of each of the following consecutive periods of six months throughout each Commitment Period. "Average LIBOR" means, in relation to each amount of Eligible Equity, a percentage rate per annum equal to the aggregate LIBOR Amounts in respect of the Commitment Period relating to such amount divided by the number of weeks in such Commitment Period. "LIBOR Amount" means, in respect of each LIBOR Determination Period, the product of LIBOR as of the Determination Date for that Period and the number of weeks in that Period. "LIBOR Determination Period" means, in respect of each Determination Date, the period of six months commencing on that Date or, in the case of the final Determination Date, the period from that Date until the Termination Date. 40.4.3 If Clause 40.3 shall apply as a consequence of the termination of this Agreement pursuant to Clause 37 [Termination by the DBFO Co] (other than a termination for the reason set out in Clause 37.1.7), Clause 38.1.1.2, Clause 38.3.1 or Clause 38.5.1 by reason of the event or circumstance giving rise to such termination occurring on or after the first anniversary of the date of the Completion Certificate, the amount payable under Clause 40.4.1 shall be equal to the Projected NPV (determined on the basis and in accordance with the procedure set out in Clause 40.4.4). 40.4.4 In the circumstances referred to in Clause 40.4.3: 40.4.4.1 the Parties shall, within the period of 30 days after the Termination Date, jointly commission the Determination Period Report; 40.4.4.2 the Parties shall within such period seek to agree upon a procedure by which the matters which are the subject of the Determination Period Report are to be determined by the Determination Period Expert and, failing such agreement within such period, the procedure for such determination shall be that which is contained in paragraph 6 of Schedule 15 (as if the Determination Period Expert were an Expert for the purposes of such Schedule); 40.4.4.3 the determination of the Determination Period Expert shall be final and binding upon the Parties, save in the case of fraud, manifest error or any failure by the Determination Period Expert to disclose any conflicting interest or duty; 40.4.4.4 within 60 days after the publication of the Determination Period Report, the Secretary of State shall, subject to the other provisions of this Clause 40, pay to the DBFO Co an amount equal to the Projected NPV. For the purposes of this Clause 40.4.4: "Determination Period" means the period from the Termination Date to the Expiry Date. "Determination Period Expert" means an independent expert whose appointment is agreed by the Parties (or, failing such agreement within 30 days after the Termination Date, appointed in accordance with the provisions of paragraphs 3 and 4 of Schedule 15, as if such independent expert were to be an Expert under the Disputes Resolution Procedure). "Determination Period Report" means a report by the Determination Period Expert containing his determination of: 161 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) (a) the Projected Traffic; (b) the Projected Operating Costs; and (c) the Required Rate of Return. "Projected NPV" means: (a) the Projected Net Operating Revenue; less (b) the amount of the Relevant Funding Liabilities (but excluding (i) amounts owing to the relevant Funders under the relevant Funding Agreements arising from the early repayment of monies and swap agreement termination costs, provided such amounts would not have arisen but for the termination of this Agreement and (ii) any interest accruing under any Approved Funding Agreement from the Termination Date to the date of payment of the Relevant Funding Liabilities under Clause 40.3.1). "Projected Net Operating Revenue" means an amount equal to: (a) the Net Present Value (calculated as at the Termination Date by reference to a discount rate equal to the Required Rate of Return instead of the Discount Rate) of the Projected Operating Revenues; less (b) the Net Present Value (calculated as at the Termination Date by reference to a discount rate equal to the Required Rate of Return instead of the Discount Rate) of the Projected Operating Costs, but before deducting interest and tax. "Projected Operating Costs" means the anticipated total operating costs of the DBFO Co in performing all of its obligations under this Agreement (including, without limitation, complying with the O&M Requirements and the Handback Requirements) in respect of each Contract Year (or part of a Contract Year) during the Determination Period, based on the assumptions that: (a) this Agreement had continued in full force and effect throughout the Determination Period in accordance with its terms as in effect at the Termination Date; and (b) all costs in respect of such Contract Year or such part of a Contract Year, as the case may be, are incurred on the day which is the mid point of such Contract Year or such part of a Contract Year, as the case may be. "Projected Operating Revenues" means the anticipated total revenues of the DBFO Co under this Agreement in respect of each Contract Year (or part of a Contract Year) during the Determination Period as determined by reference to the Projected Traffic and based on the assumption that all revenues in respect of such Contract Year or such part of a Contract Year, as the case may be, are earned on the day which is the mid point of such Contract Year or such part of a Contract Year, as the case may be. 162 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) "Required Rate of Return" means the nominal rate of return at which the Project's projected cashflow should be valued by investors as of the Termination Date as determined by the Determination Period Expert on a pre-tax and pre-interest basis and taking into account (to the extent relevant or available as comparators): (a) the rate of return likely to have been required by investors if they had been offered immediately prior to the Termination Date (and ignoring the grounds that gave rise to the termination) the opportunity to purchase the cashflows of the Project; (b) the Projected Traffic and Projected Operating Costs; (c) the rates of return which comparable privately financed road schemes in the United Kingdom were projected to earn at the time they were let; (d) differences between the relative risk profiles of such schemes at the time they were let and the Project at the Termination Date; and (e) such other factors as the Determination Period Expert shall deem appropriate in the circumstances. "Projected Traffic" means a forecast of the number of vehicle kilometres for HGVs and Other Vehicles in respect of each Contract Year (or part of a Contract Year) during the Determination Period, based on: (a) the assumptions that: (i) this Agreement would have continued in full force and effect throughout the Determination Period in accordance with its terms as at the Termination Date; and (ii) there would be no changes during the Determination Period in the extent, operation or management of the United Kingdom motorway or trunk road network as at the Termination Date (other than any such changes as are publicly announced by the Government prior to the Termination Date) which would affect the number of HGVs or Other Vehicles using the Project Road; and (b) such other assumptions as to factors affecting traffic levels in respect of the Project Road as the Determination Period Expert shall deem appropriate. 40.5 Adjustments to Compensation If the calculation of amounts payable under any provision of this Clause 40 gives a negative amount, such amount shall be aggregated with any amount payable under other provisions of this Clause 40, which shall be reduced accordingly, but in no circumstances shall the calculation of compensation under this Clause 40 give rise to an obligation on the DBFO Co to make payment to the Secretary of State (but without prejudice to any obligation of the DBFO Co to make any payment to the Secretary of State pursuant to any other provision of this Agreement). 40.6 Interest The Secretary of State shall pay interest to the DBFO Co on any amount due to the DBFO Co under this Clause 40 as a consequence of termination of this Agreement pursuant to Clause 37 [Termination by the 163 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) DBFO Co] (other than a termination for the reason set out in Clause 37.1.7), Clause 38.1.1.2, Clause 38.3.1 or Clause 38.5.1 (but excluding the amounts payable in respect of interest which accrues under the Funding Agreements referred to in Clause 40.3.1.1) from the date of termination of this Agreement to the date of payment at a rate per annum equal to the Interest Rate plus 2 per cent per annum. 40.7 Satisfaction in Full 40.7.1 Any payment made pursuant to this Clause 40 in respect of a termination of this Agreement shall be in full satisfaction of the DBFO Co's claim (if any) in respect of the circumstances leading to that termination and the DBFO Co shall be excluded from all other rights and remedies in respect thereof. 40.7.2 For the avoidance of doubt, in the event of a termination of this agreement as a result of an Event of Default, the DBFO Co shall not be entitled to the payment of any amount in respect of the value of the Works or the Project Facilities or any other compensation or damages. 40.8 Consultation In the event of a termination of this Agreement, and without prejudice to the other obligations of either party under this Clause 40, the DBFO Co and the Secretary of State shall consult in good faith to determine how any payments under this Clause 40 should be made so as to minimise the incidence of Taxation on them, provided always that nothing in the foregoing provisions of this Clause 40.8 shall oblige the DBFO Co to take any action or co-operate with the Secretary of State in any manner which it believes in its absolute discretion may be prejudicial to the business, operations or financial condition of the DBFO Co or of any Associated Company of the DBFO Co or of the Sponsors. 164 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) PART VI MISCELLANEOUS 41. ASSIGNMENT AND SUB-CONTRACTING 41.1 Binding on Successors and Assigns This Agreement shall be binding on and shall enure to the benefit of the DBFO Co and the Secretary of State and their respective successors and permitted assigns. 41.2 Assignment 41.2.1 Subject to Clause 41.2.2 the DBFO Co shall not and shall procure that no Contracting Associate shall, in any such case without the prior consent of the Secretary of State, assign, novate, transfer or create or allow to subsist any Encumbrance, trust or interest in this Agreement, the Lease, the Design Contract, any Relevant O&M Contract or the Construction Contract or any other contract entered into by the DBFO Co in performing its obligations under this Agreement or any part thereof or any benefit or interest therein or thereunder or (save to the extent permitted in accordance with Clause 17.7.1) in the Retention Account or any sums from time to time standing to the credit thereof. 41.2.2 The provisions of Clause 41.2.1 do not apply: 41.2.2.1 in relation to the assignment of the benefit of any of the agreements referred to in Clause 41.2.1 by way of security in accordance with: 41.2.2.1.1 the Original Funding Agreements; or 41.2.2.1.2 any Funding Agreements other than the Original Funding Agreements, provided such assignment is on terms which are substantially the same as, or no more disadvantageous to the Secretary of State than, any Encumbrance created by or pursuant to any of the Original Funding Agreements, provided that in the case of an assignment of the benefit of this Agreement or any part thereof or any benefit or interest therein or thereunder any assignee shall have entered into the Direct Agreement or other similar agreement in relation to the exercise of its rights as the Secretary of State shall require; or 41.2.2.2 to the novation of this Agreement to a Proposed Substitute in accordance with the provisions of the Direct Agreement. 41.2.3 Without prejudice to Clauses 41.4.1, 41.4.2 and 41.4.3, the DBFO Co shall procure that the Designer shall not be permitted to assign the Design Contract or any part thereof or any benefit or interest therein or thereunder and the Contractor shall not be permitted to assign the Construction Contract or any part thereof or any benefit or interest therein or thereunder without the DBFO Co having obtained the prior consent of the Secretary of State. 41.2.4 Without prejudice to Clause 41.2.1, no assignment, novation or other transfer of this Agreement shall be effective unless the Lease is simultaneously assigned, novated or transferred (as the case may be) to the same person. 165 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 41.3 Change in Control 41.3.1 Subject to Clause 41.3.3, there is a change in control of the DBFO Co for the purposes of Clause 36.1.2 whenever: 41.3.1.1 any person has control of the DBFO Co who did not have control of the DBFO Co when this Agreement was executed; or 41.3.1.2 any person having control of the DBFO Co when this Agreement was executed ceases to have such control, and, in either case, the change in control shall have taken place without the prior consent of the Secretary of State, which consent shall not be unreasonably withheld or delayed in the following circumstances, and otherwise may be withheld or delayed in his absolute discretion: 41.3.1.3 in the case of a reorganisation for bona fide fiscal purposes where the ultimate control of the DBFO Co does not change; 41.3.1.4 in respect of a change in control proposed at any time after the third anniversary of the date of issue of the Completion Certificate; and 41.3.1.5 where the proposed change in control is pursuant to: 41.3.1.5.1 the transfer of the Ordinary Shares to the mortgagee (acting solely in that capacity) in accordance with the share mortgage (incorporating a floating charge) referred to in Clause 2.3.1.3.10; or 41.3.1.5.2 the bona fide enforcement of the share mortgage (incorporating a floating charge) referred to in Clause 2.3.1.3.10 following an Event of Default to an entity of financial standing (as reasonably determined by the Secretary of State) at least equivalent to the financial standing at the date of this Agreement of the ultimate Holding Company of the Sponsor whose shares are proposed to be sold. 41.3.2 Subsections (2) and (4) to (6) of Section 416 of the Income and Corporation Taxes Act 1988 shall apply for the purpose of determining whether for the purposes of this Clause 41.3 a person has or had control of the DBFO Co, with the following modifications: 41.3.2.1 for the words "the greater part" wherever they occur in the said subsection (2) there shall be substituted the words "one third or more"; and 41.3.2.2 in the said subsection (6), for the word "may" there shall be substituted the word "shall", the words from "and such attributions" onwards shall be omitted and in the other provisions of that subsection any reference to an associate of a person shall be construed as including only a relative of his (as defined by Section 417(4) of that Act), a partner of his and a trustee of a settlement (as defined by Section 660(G)(1) of that Act) of which he is a beneficiary. 41.3.3 A change in control: 41.3.3.1 of any Sponsor or any of its Holding Companies which arises from any bona fide open market transactions in any shares or other securities of such Sponsor 166 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) or such Holding Company effected on a recognised investment exchange (within the meaning of the Financial Services Act 1986); or 41.3.3.2 of BICC plc or of any entity which controls BICC plc from time to time, shall not constitute a change in control for the purposes of Clause 36.1.2. 41.3.4 A change in control of Trafalgar House Corporate Development Limited which arises from any offer made by Kvaerner A.S. for any shares or other securities of Trafalgar House plc pursuant to the announcement by Kvaerner A.S. on 4th March, 1996 of its agreed bid for Trafalgar House plc (including pursuant to any revisions of such offer) shall not constitute a change in control for the purposes of Clause 36.1.2. 41.4 Sub-Contracting 41.4.1 Neither the engagement nor employment of the following persons shall be terminated without the written consent of the Secretary of State (such consent not to be unreasonably withheld or delayed) to the appointment of any proposed substitute and the terms of engagement or employment of the proposed substitute: 41.4.1.1 the Contractor; 41.4.1.2 the Designer; 41.4.1.3 any Checker; 41.4.1.4 the Archaeologist; and 41.4.1.5 the Project Quality Director. 41.4.2 If any of the persons referred to in Clause 41.4.1 shall cease to act at any time, the DBFO Co shall forthwith appoint (or, in the case of the Designer, procure that the Contractor appoints) a replacement, subject to the prior approval of the Secretary of State (such approval not to be unreasonably withheld or delayed) both as to the substitute to be appointed and the terms of engagement or employment of the proposed substitute. 41.4.3 Without prejudice to any obligation under Clause 21 [Quality Assurance] the Works may be sub-contracted by the Contractor without the consent of the Secretary of State or the Department's Agent, subject always to compliance with the Design and Certification Procedure. 41.4.4 Without prejudice to any obligation under Clause 21 [Quality Assurance] the operation and maintenance of the Project Facilities may be sub-contracted by-the DBFO Co without the consent of the Secretary of State or the Department's Representative, subject always to compliance with the Design and Certification Procedure and the provisions of Clause 2.3.5. 41.4.5 The DBFO Co shall procure that the Contractor procures that the Archaeologist is appointed on terms which ensure that his or her functions is carried out independently of the Designer and the Contractor and that such independence is maintained at all times in relation to the Project. 167 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 41.5 Consents Save as provided in Clause 41.3.1, 41.4.1 and 41.4.2, any consent to be given by the Secretary of State under this Clause 41 shall be in his absolute discretion and upon such terms as he may in his absolute discretion determine. 168 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 42. NOTICES 42.1 Requirement for Writing Wherever in this Agreement provision is made for the giving or issuing of any notice, endorsement, consent, approval, certificate or determination by any person (a "Notice"), unless otherwise specified such Notice shall be in writing and the words "notify", "endorsed", "consent", "approval", "certify" or "determined" shall be construed accordingly. 42.2 Addresses Any Notice shall be duly given if signed by or on behalf of a duly authorised officer of the person giving the Notice and left at or sent by recorded delivery post or facsimile transmission to the following addresses: Secretary of State The Highways Agency 8th Floor West City House New Station Street PO Box 206 Leeds LS1 4UR Telefax: 0113 283 6623 Attention: J R Langham DBFO Co Yorkshire Link Limited 20 Eastbourne Terrace London W2 6LE Telefax: 0171 957 3529 Attention: The Company Secretary Department's Agent Pell Frischmann Consultants Limited George House George Street Wakefield West Yorkshire WF1 1LY Telefax: 01924 376643 Attention: J Gallagher 169 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) Department's Representative The Northern Network Management Division The Highways Agency 8th Floor West City House New Station Street PO Box 206 Leeds LS1 4UR Telefax: 0113 283 6623 Attention: J R Langham 42.3 Changes Either Party may change its address for notice to another address in England and Wales by prior notice to the other Party with a copy to the Department's Agent and the Department's Representative. The Department's Agent or the Department's Representative may change its address for notice to another address in England and Wales by prior notice to the Parties. 42.4 Receipt Any Notice shall be deemed to have been received: 42.4.1 if sent by hand or recorded delivery post, when delivered; 42.4.2 if sent by facsimile, upon sending, subject to: 42.4.2.1 confirmation of uninterrupted transmission by a transmission report; and 42.4.2.2 there having been no telephonic communication by the recipient to the sender (any such telephonic communication to be confirmed in writing) that the facsimile has not been received in legible form: 42.4.2.2.1 within 3 hours after sending, if sent on a Working Day and between the hours of 9.00 am. and 4.00 p.m.; or 42.4.2.2.2 by noon on the next following Working Day if sent after 4.00 p.m. on a Working Day but before 9.00 a.m. on the next following Working Day; provided that any Notice (other than a routine Notice) given by fax shall be confirmed by letter sent by hand or post, but without prejudice to the original fax Notice if received in accordance with this Clause 42.4.2. 170 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 43. CONSENTS AND APPROVALS 43.1 Review Procedure 43.1.1 Any proposed document (including without limitation any Design Data) or proposed course of action on the part of the DBFO Co which, under the terms of this Agreement, is required to be submitted to the Review Procedure shall be dealt with in accordance with the provisions of Part 3 of Schedule 7. 43.1.2 Without limitation to Clause 43.3, notwithstanding the application of the Review Procedure, the DBFO Co shall not be entitled to recover from the Secretary of State and shall indemnify him against any Losses and Claims which may arise out of or in connection with any inadequacy, error or failure of any matter which has been subject to the Review Procedure and any comments made by the Department's Nominee in the course thereof. The DBFO Co shall obtain from the Designer and Contractor waivers of liability in favour of the Secretary of State and the Department's Nominee in respect of any such Losses and Claims. No comments or absence of comments on any matter in the course of the Review Procedure shall relieve the DBFO Co of any of its obligations under this agreement in connection with the Operations. 43.2 Reasonableness Unless otherwise specified, where any agreement, certificate, consent, permission, expression of satisfaction or other approval (an "Approval") is to be given by the Secretary of State or any person on his behalf under the terms of this Agreement, the same shall not be unreasonably withheld or delayed. 43.3 Effect of Consents, Approvals and Inspections 43.3.1 Neither the giving of any Approval, knowledge of the terms of any agreement or document (including without limitation the Project Documents), nor the review of any document or course of action pursuant to the Review Procedure by or on behalf of the Secretary of State, the Department's Agent or the Department's Representative shall relieve the DBFO Co of any of its obligations under this Agreement or of its duty to ensure the correctness, accuracy or suitability of the matter or thing which is the subject of the Approval, knowledge or review under the Review Procedure. 43.3.2 Without limitation to Clause 43.3.1, no examination or lack of examination by the Department's Agent or the Department's Representative of the DBFO Co's drawings, documents, calculations, or details relating to the design, construction, completion, commissioning, testing and maintenance of the Works or the operation, maintenance or improvement of the Project Facilities or otherwise nor any comment, rejection or Approval expressed by such person in regard thereto, either with or without modifications, shall in any respect relieve or absolve the DBFO Co from any obligations or liability under or in connection with this Agreement whether in relation to accuracy, safety, suitability, adequacy of performance or practicality of its design or howsoever otherwise arising. 43.3.3 Without limitation to Clause 43.3.1, notwithstanding any inspection by the Department's Agent or the Department's Representative under this Agreement or the failure of the Department's Agent or the Department's Representative to make any inspection under this Agreement, the DBFO Co's responsibility under this Agreement shall not be relieved or absolved or otherwise modified. 43.3.4 Any Approval shall be final, subject to being opened up, reviewed or revised: 43.3.4.1 if errors or further relevant facts are revealed after the Approval has been given; or 171 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 43.3.4.2 in accordance with paragraph 7.3 of Schedule 15. 43.3.5 Without prejudice to Clause 43.3.4 any endorsement, decision, opinion, instruction, notice, statement of objection, finding, determination, requirement or certificate of the Department's Agent or the Department's Representative and any determination of an Expert shall be final, subject to the exercise by either Party of any rights of objection under this Agreement and to the terms of the Disputes Resolution Procedure. 172 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 44. TAXES 44.1 VAT 44.1.1 All amounts stated to be payable by either Party under this Agreement shall be exclusive of any VAT properly chargeable thereon. 44.1.2 Each Party shall pay to the other Party any VAT properly chargeable in respect of any supply made to it under this Agreement provided that it shall first have received from the other Party a valid tax invoice or authenticated receipt in respect of that supply which complies with the requirements of Part III Value Added Tax Regulations 1995. 44.1.3 If either Party (in this Clause 44 the "First Party") shall consider that any VAT which the other Party (in this Clause 44 the "Second Party") claims to be properly chargeable on a supply made under this Agreement is not in fact properly so chargeable, the First Party shall be entitled to require the Second Party to obtain a ruling from the Commissioners for Customs and Excise (or, if relevant, such other body as is charged at the time with the collection and management of VAT) (in this Clause 44 the "Commissioners") as to the VAT (if any) properly so chargeable. The Second Party shall forthwith request the Commissioners for such a ruling. 44.1.4 The following further provisions shall apply in respect of the application for a ruling in accordance with Clause 44.1.3: 44.1.4.1 prior to submitting its request for such a ruling and any further communication to the Commissioners in connection with the obtaining of the ruling, the Second Party shall first obtain the agreement of the First Party to the contents of such request and any such further communication, such agreement not to be unreasonably withheld or delayed; 44.1.4.2 the Second Party shall provide to the First Party copies of all communications received from the Commissioners in connection with the application for a ruling as soon as practicable after receipt; and 44.1.4.3 the Second Party shall use all reasonable efforts (including without limitation the provision of such additional information as the Commissioners may require) to obtain such a ruling as soon as reasonably practicable following the initial request 44.1.5 If a ruling is required by the First Party under Clause 44.1.3, the First Party shall not be obliged to pay the VAT so claimed by the Second Party unless and until a written ruling is received from the Commissioners which states that a sum of VAT is properly so chargeable. In the event of the receipt of a written ruling which states that a sum of VAT (the "VAT Sum") is properly so chargeable, then subject to Clause 44.1.6 and 44.1.7 and provided that the First Party shall first have received a copy of the written ruling and a valid tax invoice or authenticated receipt which complies with the requirements of Part III Value Added Tax Regulations 1995 and which states the VAT Sum to be the amount of VAT chargeable, the First Party shall pay the VAT Sum to the Second Party together with any penalties or interest related to the VAT Sum. 44.1.6 In the event that the First Party disagrees with any ruling obtained pursuant to Clause 44.1.3 by the Second Party from the Commissioners, then the Second Party shall take such action and give such information and assistance to the First Party as the First Party may require to challenge such ruling or otherwise to resist or avoid the imposition of VAT on the relevant 173 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) supply and the First Party shall indemnify the Second Party against all reasonable costs and expenses which it may incur in relation thereto. 44.1.7 The following further provisions shall apply in the event that the First Party shall exercise its rights under Clause 44.1.6: 44.1.7.1 the action which the First Party shall be entitled to require the Second Party to take shall include (without limitation) contesting any assessment to VAT or other relevant determination of the Commissioners before any VAT tribunal or court of competent jurisdiction and appealing any judgment or decision of any such tribunal or court; 44.1.7.2 in the event that the Second Party shall be required to pay to or deposit with the Commissioners a sum equal to the VAT assessed as a condition precedent to its pursuing any appeal, the First Party shall, at its election, either pay such sum to the Commissioners on behalf of the Second Party or the First Party shall pay such sum to the Second Party and the Second Party shall as soon as practicable provide receipt of proof in a form reasonably satisfactory to the First Party that the Second Party has paid such sum to or deposited such sum with the Commissioners; 44.1.7.3 save as specifically provided in Clause 44.1.7.2, the First Party shall not be obliged to pay to the Second Party any sum in respect of the VAT in dispute or in respect of VAT on any further supplies made by the Second Party to the First Party which are of the same type and raise the same issues as the supplies which are the subject of the relevant dispute unless and until the final outcome of the relevant dispute is that it is either determined or agreed that VAT is properly chargeable on the relevant supply or supplies in which case payment of the VAT and penalties and interest shall be in accordance with Clause 44.1.5; 44.1.7.4 the Second Party shall account to the First Party for any costs awarded to the Second Party on any appeal, for any sum paid to or deposited with the Commissioners in accordance with Clause 44.1.7.2 which is repayable to the Second Party and for any interest to which the Second Party is entitled in respect of such sums. 44.2 Deductions from Payments Save as otherwise provided in this Agreement and save only as may be required by law all sums payable by either Party to the other under this Agreement shall be paid free and clear of all deductions or withholdings whatsoever in respect of taxation. 44.3 Construction Industry Tax Deduction Scheme 44.3.1 In this Clause 44.3: 44.3.1.1 "the Act" means the Income and Corporation Taxes Act 1988; 44.3.1.2 "the Regulations" means the Income Tax (Sub-Contractors in the Construction Industry) Regulations 1993 (SI 1993/743); 44.3.1.3 "contractor" means a person who is a contractor for the purposes of the Act and the Regulations; 174 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 44.3.1.4 "evidence" means such evidence as is required by the Regulations to be produced to a contractor for the verification of a sub-contractor's tax certificate; 44.3.1.5 "statutory deduction" means the deduction referred to in Section 559(4) of the Act or such other deduction as may be in force at the relevant time; 44.3.1.6 "sub-contractor" means a person who is a sub-contractor for the purposes of the Act and the Regulations; and 44.3.1.7 "tax certificate" is a certificate issuable under Section 561 of the Act. 44.3.2 The provisions of this Clause 44.3 shall apply throughout the term of this Agreement save for any period during such term in respect of which the Secretary of State has received written confirmation from the Inland Revenue in a form which is reasonably satisfactory to the Secretary of State that it is not a contractor (in which event only Clause 44.3.11 shall apply). 44.3.3 Not later than 21 days before the first payment under this Agreement is due to be made to the DBFO Co or after this Clause 44.3 applies for the first time and on each occasion when this Clause 44.3 applies following a period when it has not so applied the DBFO Co shall either: 44.3.3.1 provide the Secretary of State with the evidence that the DBFO Co is entitled to be paid without the statutory deduction, or 44.3.3.2 inform the Secretary of State in writing that it is not entitled to be paid without the statutory deduction. 44.3.4 If the Secretary of State is not satisfied with the validity of the evidence submitted in accordance with Clause 44.3.3.1, he shall within 14 days of the DBFO Co submitting such evidence notify the DBFO Co in writing that he intends to make the statutory deduction from payments due under this Agreement to the DBFO Co and give his reasons for that decision. 44.3.5 Where Clause 44.3.3.2 applies, the DBFO Co shall immediately inform the Secretary of State if it obtains a tax certificate, and thereupon Clause 44.3.3.1 shall apply. 44.3.6 If the period for which the tax certificate has been issued to the DBFO Co expires before the final payment is made to the DBFO Co under this Agreement and provided that this Clause 44.3 applies at that time, the DBFO Co shall not later than 28 days before the date of expiry either: 44.3.6.1 provide the Secretary of State with evidence that the DBFO Co from the said date of expiry is entitled to be paid for a further period without the statutory deduction, in which case the provisions of Clause 44.3.4 shall apply if the Secretary of State is not satisfied with the evidence; or 44.3.6.2 inform the Secretary of State in writing that it will not be entitled to be paid without the statutory deduction after the said date of expiry. 44.3.7 The DBFO Co shall immediately inform the Secretary of State in writing if its current tax certificate is cancelled and give the date of such cancellation. 44.3.8 The Secretary of State shall, as a "contractor" in accordance with the Regulations, send promptly to the Inland Revenue any voucher which, in compliance with the obligations of the DBFO Co as a "sub-contractor" under the Regulations, the DBFO Co gives to the Secretary of State. 175 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 44.3.9 The Secretary of State shall be entitled to make a deduction at the rate and from the amount specified in Section 559(4) of the Act or at such other rate as may be in force from time to time. 44.3.10 Where any error or omission has occurred in calculating or making the statutory deduction then: 44.3.10.1 in the case of an overdeduction, the Secretary of State shall correct that error by payment of the sum overdeducted to the DBFO Co; and 44.3.10.2 in the case of an underdeduction, the DBFO Co shall correct that error or omission by payment of the sum which should have been but was not deducted to the Secretary of State. 44.3.11 The DBFO Co shall at the request of the Secretary of State produce to the Secretary of State the original of any current tax certificate which it holds and shall permit the Secretary of State to make a copy of such tax certificate and/or to record such details in respect of such tax certificate as the Secretary of State may consider appropriate. 44.3.12 If compliance with this Clause 44.3 involves the Secretary of State or the DBFO Co in not complying with any other of the terms of this Agreement, then the provisions of this Clause 44.3 shall prevail. 44.3.13 Any Dispute arising out of the application of this Clause 44.3 shall be resolved in accordance with the Disputes Resolution Procedure. 176 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 45. INTELLECTUAL PROPERTY 45.1 Design and Other Data The DBFO Co shall: 45.1.1 make available to the Secretary of State without charge all materials, documents and data of any nature (including without limitation all Design Data) acquired or brought into existence in any manner whatsoever by the DBFO Co for the purposes of the design or construction of the Works, the operation, maintenance or improvement of the Project Facilities or the conduct of the other Operations and which might reasonably be required by the Secretary of State for the purposes of exercising his rights or carrying out his duties under this Agreement or carrying out any statutory duty; and 45.1.2 make available to the Secretary of State all such materials, documents and data acquired or brought into existence by third parties for use by or on behalf of or for the benefit of the DBFO Co as may reasonably be required for the purposes referred to in Clause 45.1.1. 45.2 Licences 45.2.1 The DBFO Co: 45.2.1.1 hereby grants to the Secretary of State a perpetual, transferable (but only to any assignee of any rights or benefits under this Agreement or upon or at any time following the termination of this Agreement), non-exclusive, royalty-free licence (carrying the right to grant sub-licences) to use for any purpose (whether during or after the Contract Period) relating to the design, construction, completion, commissioning or testing of the Works, the operation, maintenance or improvement of the Project Facilities, or the conduct of any other Operations or the carrying out by the Secretary of State of any statutory functions in respect of the Project Facilities all and any Intellectual Property which at the start of the Contract Period is or during the Contract Period becomes vested in the DBFO Co and to make any alterations, adaptations or additions to the Design Data and the Traffic Data which is or becomes vested in the DBFO Co; and 45.2.1.2 where any Intellectual Property is vested in any third party but is available for use by or on behalf of or for the benefit of the DBFO Co, it shall procure the grant of a like licence to the Secretary of State for any purpose (whether during or after the Contract Period) relating to the design, construction, completion, commissioning or testing of the Works, the operation, maintenance or improvement of the Project Facilities, the conduct of any other Operations or the carrying out by the Secretary of State of any statutory functions in respect of the Project Facilities. 45.2.2 The Secretary of State hereby grants to the DBFO Co an irrevocable, non-transferable, non-exclusive, royalty-free licence (carrying the right to grant sub-licences to any contractor or sub-contractor of the DBFO Co to the extent required for the purposes of the design or construction of the Works, the operation, maintenance or improvement of the Project Facilities or the conduct of the other Operations, on terms to the reasonable satisfaction of the Secretary of State) to use (during the Contract Period only) all and any Intellectual Property which is or becomes vested in the Secretary of State for any purpose relating to the design, construction, completion, commissioning or testing of the Works, the operation, maintenance or improvement of the Project Facilities or the conduct of any other Operations. 177 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 45.2.3 With respect to Intellectual Property arising during the Contract Period, the licence granted pursuant to Clause 45.2.1 or Clause 45.2.2 shall take effect immediately upon the coming into existence of such Intellectual Property. 45.3 Computerised Data 45.3.1 To the extent that any of the data, materials and documents referred to in Clause 45.1 are generated by or maintained on a computer or in any other machine readable format, the DBFO Co shall procure for the benefit of the Secretary of State at no charge the grant of a licence or sub-licence for and supply of any relevant software or database to enable the Secretary of State or his nominee to access and otherwise use such data for the purposes set out in this Agreement or following its termination for the purposes of the design, construction, completion, commissioning or testing of the Works or the operation, maintenance or improvement of the Project Facilities, provided that the DBFO Co may make a reasonable commercial charge in respect of any such licence or sub-licence in respect of any period after the Contract Period. 45.3.2 Within 28 days after the execution of this Agreement the DBFO Co shall submit to the Department's Agent in accordance with the Review Procedure its proposals for back-up and storage in safe custody of the data, materials and documents referred to in Clause 45.1 and the Department's Agent shall only be entitled to object and require alterations or additions if the same shall not accord with Good Industry Practice. The DBFO Co shall and shall cause the Contractor and any other contractor or sub-contractor of the DBFO Co to comply with the procedures to which no such objection has been raised by the Department's Agent. The DBFO Co may vary its procedures for such back up and storage subject to submitting in accordance with the Review Procedure its proposals for change to the Department's Agent, or, after issue of the Permit to Use, to the Department's Representative, who may only object on the basis set out above. 45.4 Indemnity The DBFO Co shall indemnify the Secretary of State from and against all Claims made or brought against the Secretary of State by any person for or on account of infringement of any Intellectual Property licensed to the Secretary of State under Clause 45.2 or any plant, machinery or equipment used in connection with the Works or Operations, and the provisions set out in Clause 35.3 [Conduct of Claims Subject to DBFO Co's Indemnities] shall apply to this indemnity. 45.5 Further Assurances The DBFO Co and the Secretary of State each undertakes at the request of the other to execute all documents and do all acts which may be necessary to bring into effect or confirm the terms of any assignment or licence contained in Clause 45.2 [Licences]. 45.6 Traffic Data 45.6.1 Without prejudice to any rights which the DBFO Co may have in the Traffic Data, the Secretary of State shall be entitled without further consent from the DBFO Co: 45.6.1.1 to use the Traffic Data for the purposes of exercising his rights or carrying out his duties under this Agreement or carrying out any statutory function; and 45.6.1.2 to incorporate the Traffic Data in any traffic or other statistics prepared by or on behalf of the Secretary of State and to publish such statistics or the Traffic Data either generally or to a limited category of persons and whether or not in return for any fee. 178 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 45.6.2 Without prejudice to any rights which the Secretary of State may have in the Traffic Data, the DBFO Co shall be entitled without further consent from the Secretary of State: 45.6.2.1 to use the Traffic Data for the purposes of exercising its rights or carrying out its duties under this Agreement; and 45.6.2.2 to incorporate the Traffic Data in any traffic or other statistics prepared by or on behalf of the DBFO Co and to publish such statistics or the Traffic Data either generally or to a limited category of persons and whether or not in return for any fee. 45.7 Termination This Clause 45 shall survive the termination of this Agreement irrespective of the reason for termination. 179 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 46. CONFIDENTIALITY 46.1 Confidential Information Each Party agrees, for itself and its respective directors, officers, employees, servants and agents, to keep confidential and not to disclose to any person (save as hereinafter provided) any of the terms of this Agreement or any confidential or proprietary information (including documents, computer records, specifications, formulae, evaluations, methods, processes, technical descriptions, reports, and other data, records, drawings and information whether or not included in the Design Data or Traffic Data) (together the "Confidential Information") provided to or arising or acquired by it pursuant to the terms or performance of this Agreement (including without limitation any such documents or information supplied in the course of proceedings under the Disputes Resolution Procedure). 46.2 Exceptions Notwithstanding Clause 46.1, a Party shall be entitled to disclose the whole or any part of the Confidential Information: 46.2.1 to its directors, officers, employees, servants, subcontractors, agents, or professional advisers to the extent necessary to enable it to perform (or to cause to be performed) or to enforce any of its rights or obligations under this Agreement; or 46.2.2 when required to do so by law or by or pursuant to the rules or any order having the force of law of any court, association or agency of competent jurisdiction or any governmental agency; or 46.2.3 in the case of the DBFO Co, to any bank or financial institution from whom it is seeking or obtaining finance; or 46.2.4 to the extent that the Confidential Information has, except as a result of breach of confidentiality, become publicly available or generally known to the public at the time of such disclosure; or 46.2.5 to the extent that the Confidential Information is already lawfully in the possession of the recipient or lawfully known to him prior to such disclosure; or 46.2.6 to the extent that it has acquired the Confidential Information from a third party who is not in breach of any obligation as to confidentiality to the other Party; or 46.2.7 to the extent permitted by Clause 45.2 [Licence] and Clause 45.6 [Traffic Data]; or 46.2.8 in the case of the Secretary of State, to the extent required for the purpose of the design, construction, completion, commissioning and testing of the Works or the operation, maintenance or improvement of the Project Facilities in the event of termination of this Agreement; 46.2.9 in the case of the DBFO Co, to any shareholder or proposed shareholder or any Contracting Associate of the DBFO Co provided that such disclosure is either: 46.2.9.1 made by reason only of any employee or officer of the DBFO Co being an employee or officer of such shareholder, proposed shareholder or Contracting Associate and then only to the extent necessary in order to enable such employee or officer to perform his duties as an employee or office-holder (as the case may be); or 180 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 46.2.9.2 with the prior written consent of the Secretary of State; and, in the cases of Clauses 46.2.1, 46.2.3 and 46.2.9 upon obtaining from such person or entity to whom the disclosure is to be made an undertaking of strict confidentiality in relation to the Confidential Information in question. 46.3 Return of Confidential Information On the Termination Date each party shall return to the other such Confidential Information within its possession or control as may belong to the other Party, save that this Clause 46.3 shall not apply to: 46.3.1 Confidential Information belonging to the DBFO Co necessary for the design, construction, completion, commissioning and testing of the Works or the operation, maintenance or improvement of the Project Facilities, which Confidential Information may be so used or applied in the design, construction, completion, commissioning and testing of the Works or the operation, maintenance or improvement of the Project Facilities; or 46.3.2 Traffic Data. 46.4 Continuation of Confidentiality Obligations The obligations of the parties under this Clause 46 shall continue for a period of 5 years following the Termination Date notwithstanding such termination. 46.5 Publicity Regarding Disputes Neither the DBFO Co nor the Secretary of State shall without the prior written authority of the other publish alone or in conjunction with any other person any articles or other material relating to any dispute arising under this Agreement nor impart any information regarding any such dispute except to its professional advisers under obligations of confidentiality, except and to the extent that such publication shall arise out of any statutory or regulatory obligation applicable to the DBFO Co or any obligation under any Law applicable to the Secretary of State. 181 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 47. AGENCY 47.1 No Delegation For the avoidance of doubt, save as expressly provided in Clause 26 or 26A no provision of this Agreement shall be construed as a delegation by the Secretary of State of any of his statutory authority to the DBFO Co. 47.2 No Agency: Crown Immunity Save as otherwise provided in this Agreement, the DBFO Co shall not be or be deemed to be an agent of the Secretary of State and the DBFO Co shall not hold itself out as having authority or power to bind the Secretary of State in any way. For the avoidance of doubt, the DBFO Co shall not have the benefit of any Crown immunity and, unless otherwise agreed by the Secretary of State, shall apply for and obtain all consents, licences and permissions which would be necessary under any Law on the basis that the DBFO Co does not have the benefit of any Crown immunity. 47.3 DBFO Co Responsibility As between the Parties, the DBFO Co shall be responsible for the acts, defaults, omissions and neglect of the Designer, the Checker, the Contractor, the Archaeologist, the Project Quality Director and any other contractor or sub-contractor of the DBFO Co of any tier and the agents, employees or workmen of any of them as fully as if they were the acts, defaults, omissions or neglect of the DBFO Co, its agents, employees or workmen. 47.4 DBFO Co Knowledge Without limitation to its actual knowledge, the DBFO Co shall for all purposes of this Agreement be deemed to have such knowledge in respect of the Project and the Operations as is held (or as ought reasonably to be held) by the Designer, the Contractor or the Archaeologist in the relevant circumstances. 182 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 48. DISPUTES RESOLUTION PROCEDURE Except as expressly provided in any other provision of this Agreement, all Disputes shall be resolved in accordance with the provisions set out in Schedule 15 [Disputes Resolution Procedure]. 49. WHOLE AGREEMENT This Agreement (including the Schedules) constitutes the whole agreement and understanding of the Parties as to the subject matter hereof and there are no prior or contemporaneous agreements between the Parties with respect thereto. 50. WAIVER Failure by either Party at any time to enforce any provision of this Agreement or to require performance by the other Party of any of the provisions of this Agreement shall not be construed as a waiver of any such provision and shall not affect the validity of the Agreement or any part thereof or the right of such first Party to enforce any provision in accordance with its terms. 51. AMENDMENTS No amendment to this Agreement shall be binding unless in writing and signed by the duly authorised representatives of the Secretary of State and the DBFO Co. 52. CONFLICTS OF INTEREST The DBFO Co shall ensure that no conflict of interest arises between its performance of the Operations and any other matter in which it may be interested whether directly or indirectly. 53. REGISTRABLE AGREEMENT 53.1 To the extent that this Agreement or any arrangement of which it forms part is registrable under the Restrictive Trade Practices Act 1976 (the "RTPA") then: 53.1.1 any provision contained in this Agreement or in any arrangement of which this Agreement forms part by virtue of which this Agreement or such arrangement is subject to registration under the RTPA shall not come into effect until the day following the day on which particulars of this Agreement and of any such arrangement have been furnished to the Office of Fair Trading (or on such later date as may be provided for in relation to any such restriction); and 53.1.2 the Parties agree to furnish such particulars within three months of the date after this Agreement. 183 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 54. GOVERNING LAW AND JURISDICTION 54.1 Law This Agreement shall be governed by and construed in all respects in accordance with English law. 54.2 Jurisdiction Subject to the provisions of Clause 48 [Disputes Resolution Procedure], the Parties agree to submit to the non-exclusive jurisdiction of the English Courts as regards any claim or matter arising in relation to this Agreement. IN WITNESS WHEREOF the parties hereto have executed this Agreement as a Deed. 184 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) The Official Seal of the ) SECRETARY OF STATE FOR ) TRANSPORT hereunto affixed ) is authenticated by ) /s/ Illegible - --------------------------------------------- Name: The Common Seal of ) YORKSHIRE LINK LIMITED ) was hereunto affixed ) in the presence of: ) /s/ Illegible - --------------------------------------------- Director /s/ Illegible - --------------------------------------------- Director/Secretary 185 M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) INDEX
PAGE NO PART I - GENERAL 1. Definitions and Interpretation...........................................................................2 2. Documentation...........................................................................................27 3. The Project.............................................................................................33 4. Guarantees..............................................................................................35 5. Financial Model.........................................................................................37 PART II - OPERATIONS 6. Site Inspection.........................................................................................38 7. Commencement............................................................................................39 8. Land....................................................................................................41 9. Design and Construction.................................................................................45 10. Programme and Date for Completion.......................................................................49 11. Inspection and Completion...............................................................................53 12. Operation and Maintenance...............................................................................60 13. Traffic Management......................................................................................63 14. Signing and Communications..............................................................................67 15. Latent Defects in Existing Road.........................................................................69 16. Fossils and Antiquities.................................................................................71 17. Handback................................................................................................72 18. Insurance...............................................................................................81 19. Secretary of State's Obligations........................................................................84 PART III - RELATIONSHIPS AND MONITORING 20. Representatives.........................................................................................85 21. Quality Assurance.......................................................................................87 22. Reports and Information.................................................................................90 23. Records.................................................................................................91 24. Monitoring of Performance...............................................................................93 25. Statutory Powers........................................................................................97 26. Statutory Undertakers...................................................................................99 26A. Other Functions of the Secretary of State..............................................................105 27. Other Third Parties....................................................................................110 PART IV - PAYMENTS 28. Measurement of Traffic.................................................................................113 29. Calculation of Payments................................................................................117 30. Invoicing and Payment..................................................................................121 PART V - CHANGE, LIABILITIES AND TERMINATION 31. Change Procedure.......................................................................................125 32. Additional Works Services and Subsequent Schemes.......................................................126 33. Force Majeure..........................................................................................128 33A. Change in Law..........................................................................................130 34. Warranties and Disclaimers.............................................................................132
M1-A1 LINK ROAD (LOFTHOUSE TO BRAMHAM) 35. Indemnities............................................................................................135 36. Default................................................................................................139 37. Termination by the DBFO Co.............................................................................148 38. Non-Default Termination................................................................................149 39. Effect of Termination..................................................................................151 40. Compensation on Termination............................................................................155 PART VI - MISCELLANEOUS 41. Assignment and Sub-Contracting.........................................................................165 42. Notices................................................................................................169 43. Consents and Approvals.................................................................................171 44. Taxes..................................................................................................173 45. Intellectual Property..................................................................................177 46. Confidentiality........................................................................................180 47. Agency.................................................................................................182 48. Disputes Resolution Procedure..........................................................................183 49. Whole Agreement........................................................................................183 50. Waiver.................................................................................................183 51. Amendments.............................................................................................183 52. Conflicts of Interest..................................................................................183 53. Registrable Agreement..................................................................................183 54. Governing Law and Jurisdiction.........................................................................184

2 EX-10.20 15 y97636exv10w20.txt COMMERCIAL BANKS FACILITY AGREEMENT EXHIBIT 10.20 CLIFFORD LIMITED LIABILITY PARTNERSHIP CHANCE YORKSHIRE LINK LIMITED as Borrower and ABN AMRO BANK N.V. as Arranger, Issuing Bank and Agent AMENDED AND RESTATED FACILITY AGREEMENT CONTENTS
CLAUSE PAGE PART 1 DEFINITIONS AND INTERPRETATIONS............................................................................. 1 1. DEFINITIONS......................................................................................... 1 PART 2 THE FACILITY................................................................................................ 16 2. THE FACILITY........................................................................................ 16 3. PURPOSE............................................................................................. 17 4. AVAILABILITY OF THE TRANCHE A BALANCE............................................................... 17 5. LETTERS OF CREDIT................................................................................... 19 6. COUNTER-INDEMNITY................................................................................... 20 PART 3 INTEREST.................................................................................................... 22 7. INTEREST............................................................................................ 22 8. ALTERNATIVE INTEREST RATES.......................................................................... 23 PART 4 REPAYMENT, CANCELLATION, ILLEGALITY AND PREPAYMENT.......................................................... 25 9. CANCELLATION........................................................................................ 25 10. REPAYMENT........................................................................................... 25 11. ILLEGALITY.......................................................................................... 25 12. PREPAYMENT.......................................................................................... 27 PART 5 CHANGES IN CIRCUMSTANCES.................................................................................... 28 13. TAXES............................................................................................... 28 14. INCREASED COSTS..................................................................................... 32 PART 6 INFORMATION, FORECASTS AND CASHFLOW......................................................................... 35 15. FINANCIAL INFORMATION............................................................................... 35 16. PROJECT BUDGETS..................................................................................... 36
i 17. PROJECT FORECASTS................................................................................... 37 18. PROJECT ACCOUNTS AND CASHFLOWS...................................................................... 37 PART 7 COVENANTS, REPRESENTATIONS AND EVENTS OF DEFAULT............................................................ 38 19. POSITIVE COVENANTS.................................................................................. 38 20. REPRESENTATIONS BY THE BORROWER..................................................................... 42 21. NEGATIVE COVENANTS.................................................................................. 44 22. EVENTS OF DEFAULT................................................................................... 49 PART 8 DEFAULT INTEREST AND INDEMNITY.............................................................................. 57 23. DEFAULT INTEREST, INDEMNITY AND RELEASE............................................................. 57 PART 9 PAYMENTS.................................................................................................... 59 24. CURRENCY OF ACCOUNT AND PAYMENT..................................................................... 59 25. ACCOUNTS, ETC....................................................................................... 59 26. PAYMENTS............................................................................................ 60 27. REDISTRIBUTION OF PAYMENTS AND SET-OFF.............................................................. 61 PART 10 FEES, COSTS AND EXPENSES................................................................................... 63 28. COMMITMENT COMMISSION, L/C COMMISSION AND OTHER COMPENSATIONS....................................... 63 29. COSTS AND EXPENSES.................................................................................. 64 PART 11 AGENCY PROVISIONS.......................................................................................... 66 30. THE AGENT AND THE FINANCE PARTIES................................................................... 66 PART 12 ASSIGNMENTS AND TRANSFERS.................................................................................. 72 31. BENEFIT OF AGREEMENT, TRANSFER ETC.................................................................. 72 PART 13 MISCELLANEOUS.............................................................................................. 74 32. PARTIAL INVALIDITY, WAIVER AND AMENDMENTS........................................................... 74 33. NOTICES............................................................................................. 74 PART 14 LAW AND JURISDICTION....................................................................................... 75

ii 34. LAW................................................................................................. 75 35. JURISDICTION........................................................................................ 75 Schedule 1 The Banks.............................................................................................. 77 Schedule 2 Form of Letter of Credit............................................................................... 78 Schedule 3 Project Documents...................................................................................... 84 Schedule 4 Security Documents..................................................................................... 85 Schedule 5 Transfer Certificate................................................................................... 86 Schedule 6 Additional Costs Rate.................................................................................. 90 Schedule 7 Form of Confidentiality Agreement...................................................................... 92 Schedule 8 Insurances............................................................................................. 94 Schedule 9 Repayment Schedule..................................................................................... 114 Schedule 10 Form of Utilisation Request............................................................................ 116

iii THIS AGREEMENT is made the 26th day of March 1996, amended and restated on 20 October 1997 and further amended and restated on 4 September 2001. BETWEEN: (1) YORKSHIRE LINK LIMITED (the "BORROWER"); (2) ABN AMRO BANK N.V. ("ABN AMRO") in its capacity separately as arranger (the "ARRANGER"), as issuing bank (the "ISSUING BANK") and as agent (the "AGENT"); and (3) CERTAIN FINANCIAL INSTITUTIONS whose names appear in Schedule 1. WHEREAS: (A) The Secretary of State for Transport (the "SECRETARY OF STATE") has agreed to grant to the Borrower, the concession to design, build, finance, operate and maintain the M1-Al link road (Lofthouse to Bramham) and various related on and off site facilities (the "CONCESSION"), and the Borrower has agreed to undertake the same in accordance with the terms of the DBFO Contract (the "PROJECT"). (B) The Original Parties (including the parties hereto as at the Amendment Date) entered into this Agreement on the Execution Date to record the terms and conditions upon and subject to which the persons that were then the Banks agreed to make available to the Borrower certain banking facilities to assist the Borrower to finance the Project. (C) Pursuant to the Amendment and Restatement Agreement, it was agreed between the parties that certain amendments would be made to this Agreement. NOW IT IS HEREBY AGREED as follows: PART 1 DEFINITIONS AND INTERPRETATIONS 1. DEFINITIONS 1.1 In this Agreement: "ACCOUNT BANK" and "ACCOUNT BANK MANDATE" shall have the meaning given to it in the Intercreditor Agreement; "ADVANCE" means, subject as hereinafter provided, an advance (as from time to time reduced by repayment) made by the Banks under this Agreement prior to or after the Amendment Date or under the Amendment and Restatement Agreement (and, for the avoidance of doubt, shall include an Advance pursuant to Clause 5.2(iii) (Conversion to Tranche B Advance)); "AFFILIATE" means, with respect to any person, any person that controls, is controlled by or is under common control with such person. For the purposes of this definition, 1 "CONTROL" (including, with correlative meanings, the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or by contract or otherwise; "AMENDMENT AND RESTATEMENT AGREEMENT" means the Amendment and Restatement Agreement to which this Agreement is appended as the Ninth Schedule; "AMENDMENT DATE" means the Amendment Date, as defined in the Amendment and Restatement Agreement; "ANNUAL DEBT SERVICE COVER RATIO" means in respect of any relevant period, the ratio of A:B where: A is the aggregate amount of (but without double counting and provided that cash balances/cash flows shall not be double counted): (i) the Cash Flow Available for Debt Service received during such relevant period; and (ii) amounts paid during such relevant period from monies standing to the credit of the Tax Reserve Account and/or the Maintenance Reserve Account; and (iii) the Claims Reserve Surplus released in accordance with and as defined in clause 11.5 of the Intercreditor Agreement; But deducting from the foregoing aggregate amount any amounts credited or due to be credited to the Tax Reserve Account and/or the Maintenance Reserve Account during such relevant period; and B is the aggregate amount of (but without double counting any amount): (i) interest, fees, commission, costs and other amounts under the Facility and the EIB Facility and the Senior Guarantee Agreement (and under any other financial indebtedness ranking, under the terms of the Intercreditor Agreement, pari passu therewith) which fall due during such relevant period but deducting from interest due under the Facility hedging receipts under the relevant Hedging Contracts (after taking account of any required netting thereunder); (ii) hedging payments which fall due during such relevant period under any Hedging Contract (after taking account of any required netting thereunder); and (iii) principal repayments which fall due under this Agreement and under the EIB Facility Agreement (and any other financial indebtedness ranking, under the terms of the Intercreditor Agreement, pari passu therewith) during such relevant period but ignoring any amounts payable in respect of Refinancing Expenses; "ANNUAL RECONCILIATION ACCOUNT" means the account to be opened and maintained pursuant to Clause 10 of the Intercreditor Agreement; "APPLICABLE MARGIN" means in relation to any day: (a) from (and including) the Amendment Date, and up to (but excluding) the date which is 5 years thereafter, 0.75% per annum; 2 (b) from (and including) the date falling 5 years after the Amendment Date, and up to (but excluding) the date which is 19 years after the Amendment Date, 0.80% per annum; and (c) thereafter, 0.90% per annum; "ASSUMPTIONS" shall have the meaning given to it in the Intercreditor Agreement; "AUTHORISED INVESTMENT" shall have the meaning given to it in the Intercreditor Agreement; "AUTHORISED SIGNATORY" means, in relation to the Borrower and any communication to be made, or any document to be executed or certified by the Borrower at any time, any person who is duly authorised at such time, by or pursuant to board resolutions of the Borrower or in such other manner as may be reasonably acceptable to the Agent, to make such communication, or to execute or certify such document on behalf of the Borrower; "AVAILABILITY PERIOD" means, in relation to the Tranche A Balance, the period beginning on the earliest of: (a) the date which is six months after the Launch of Primary Syndication; or (b) the date which is nine months after the Amendment Date; or (c) the occurrence of a successful Primary Syndication or such earlier date agreed to by ABN AMRO in writing in circumstances where ABN AMRO reasonably considers (and taking due interest of the commercial interests of the Borrower) that a drawing under the Tranche A Balance will be required to achieve a Successful Primary Syndication; and ending on the third anniversary of the Amendment Date; "AVAILABLE TRANCHE A BALANCE" means the Tranche A Balance available to be drawn from time to time during the Availability Period, as calculated in accordance with Clause 4.3; "BANK" means, at any time, each of the Banks listed in Schedule 1 and each Transferee, successor or assignee of a Bank which has rights and/or obligations hereunder at such time; "BASE CASE" means the base case financial model produced by the Borrower and approved by the Arranger and EIB as at the Amendment Date; "BANK LOAN LIFE COVER RATIO" means the Bank Loan Life Cover Ratio as defined in the Intercreditor Agreement; "CASH COLLATERAL ACCOUNT" means the account to be opened in accordance with Clause 11.1 (Liabilities under Letter of Credit); 3 "CASH FLOW AVAILABLE FOR DEBT SERVICE" means, in respect of any relevant period, the aggregate of (i) DBFO Payments received in such relevant period; (ii) any insurance for loss of revenue and liquidated damages received in such relevant period; (iii) interest received in such period on cash deposits and (iv) income received in such relevant period from Authorised Investments; But deducting from the aggregate of the foregoing (a) those amounts which have been credited or fell due to be credited to the Annual Reconciliation Account in such relevant period; and (b) Permitted Payments made or which fell due to be paid in such relevant period other than Refinancing Expenses; "CLAIMS RESERVE ACCOUNT" means the account opened pursuant to the Amendment and Restatement Agreement and further described in Clause 11 of the Intercreditor Agreement; "COMMERCIAL SUBORDINATED FINANCIER" means Macquarie Infrastructure (UK) Limited and Balfour Beatty Plc in their capacities as providers of funds under the Commercial Subordinated Loan Agreement; "COMMERCIAL SUBORDINATED LOAN AGREEMENT" means the agreement dated the Execution Date made between the Borrower and 3i Group Plc, whereby 3i Group Plc agreed to make certain facilities available to the Borrower on the terms set out therein, the rights and obligations of 3i Group Plc having been transferred by 3i Group Plc to Macquarie Infrastructure (UK) Limited and Balfour Beatty Plc on or before the Amendment Date; "COMPANY ACCOUNT" means the account opened and maintained pursuant to Clause 10 of the Intercreditor Agreement; "COMPENSATION ACCOUNT" means the account opened and maintained pursuant to Clause 10 of the Intercreditor Agreement; "CONSTRUCTION CONTRACT" means the construction contract dated 26 March 1996 made between the Borrower and the Contractor for the design and construction of the Project; "CONTRACTOR" means the unincorporated joint venture comprising each of Skanska Cementation UK Limited (formerly, Kvaerner Construction Limited) and Balfour Beatty Civil Engineering Limited; "DBFO COMPENSATION" means any payments made by the Secretary of State under Clauses 40.3 and/or 40.4 and/or 40.6 of the DBFO Contract; "DBFO CONTRACT" means the contract dated 26 March 1996 made between the Borrower and the Secretary of State whereby the Secretary of State granted the Concession to the Borrower; "DBFO PAYMENTS" means those payments to be made by the Secretary of State to the Borrower pursuant to the DBFO Contract (excluding DBFO Compensation); 4 "DEBENTURE" means the fixed and floating charge debenture dated 26 March 1996 granted by the Borrower to the Security Trustee referred to in paragraph 1 of Schedule 4; "DEBT SERVICE RESERVE ACCOUNT" means the account opened and maintained pursuant to Clause 10 of the Intercreditor Agreement; "DIRECT AGREEMENT" means the agreement dated 26 March 1996 and made between Lloyds Bank plc as Agent, the Secretary of State and the Borrower; "DISTRIBUTIONS" shall bear the meaning given to it the Intercreditor Agreement; "DMG" means Morgan Grenfell & Co. Limited; "EIB" means European Investment Bank; "EIB ANNUAL DEBT SERVICE COVER RATIO" shall bear the meaning given to it in the EIB Facility Agreement; "EIB FACILITY" means the loan facility provided by EIB to the Borrower pursuant to the EIB Facility Agreement; "EIB FACILITY AGREEMENT" means the agreement dated 26 March 1996 made between EIB and the Borrower relating to a loan of (pound)90,000,000 to be made by EIB to the Borrower (subject to the terms and conditions thereof); "EIB FORECAST ANNUAL DEBT SERVICE COVER RATIO" shall bear the meaning given to it in the EIB Facility Agreement; "EIB/ISSUER CASH COLLATERAL ACCOUNT" means the account to be opened and maintained in accordance with Clause 11.3 (Loss of Qualifying Issuer Status); "EIB LOAN LIFE COVER RATIO" shall bear the meaning given to it in the EIB Facility Agreement; "EVENT OF DEFAULT" means any of those events mentioned in Clause 22 (Events of Default); "EXECUTION DATE" means 26 March 1996; "FACILITY" means the Tranche A Facility and the Tranche B Facility or, as the context may require, either one of them; "FINAL REPAYMENT DATE" means 31 March 2024; "FINANCE DOCUMENTS" means each of this Agreement, the EIB Facility Agreement, the Hedging Contracts (for the purposes of Part 7 only), each Security Document and the Intercreditor Agreement and "FINANCE DOCUMENT" shall mean any one of them; 5 "FINANCE PARTIES" means the Arranger, the Issuing Bank, the Agent and each Bank and "FINANCE PARTY" shall mean any one of them; "FINANCIAL MODEL" means a computer programme produced by the Borrower in the spreadsheet format agreed between the Borrower, the Arranger and EIB designed for use in calculating, projecting and estimating the past and future revenue and expenditure of the Borrower in respect of the Project by application of given values to certain specified assumptions; "FINANCIERS" shall have the meaning given to it in the Intercreditor Agreement; "FINANCIER DOCUMENTS" shall have the same meaning given to "FINANCE DOCUMENTS" in the Intercreditor Agreement; "FIRST REPAYMENT DATE" means 30 September 2001; "FORECAST ANNUAL DEBT SERVICE COVER RATIO" means, on any relevant date and in respect of any relevant period, the ratio of A:B where: A is the aggregate amount of (but without double counting and provided that cash balances/cash flows shall not be double counted): (i) the Forecast Cash Flow Available for Debt Service; and (ii) amounts forecast to be paid during such relevant period from monies standing to the credit of the Tax Reserve Account and/or the Maintenance Reserve Account; and (iii) the Claims Reserve Surplus forecast to be released in accordance with and as defined in Clause 11.5 of the Intercreditor Agreement at the beginning of such relevant period; But deducting from the foregoing aggregate amount any amounts forecast to be credited to the Tax Reserve Account and/or the Maintenance Reserve Account during such relevant period; and B is the aggregate amount of (but without double counting any amount): (i) interest, fees, commission, costs and other amounts under the Facility and the EIB Facility and the Senior Guarantee Agreement (and any other financial indebtedness ranking under the terms of the Intercreditor Agreement pari passu therewith) falling due during the relevant period but deducting from interest due under the Facility hedging receipts under the relevant Hedging Contracts (after taking account of any required netting thereunder); (ii) hedging payments falling due for payment during such relevant period under any Hedging Contract (after taking account of any required netting thereunder; and (iii) principal repayments falling due under this Agreement and the EIB Facility Agreement (and any other financial indebtedness ranking under the terms of the Intercreditor Agreement pari passu therewith) during such relevant period other than Refinancing Expenses; "FORECAST CASH FLOW AVAILABLE FOR DEBT SERVICE" means, in respect of any relevant period, the aggregate of: (i) DBFO Payments scheduled to be received in such relevant period; (ii) any insurance for loss of revenue and liquidated damages forecast to be received in such relevant period or, if the relevant period is greater than twelve months, 6 in the first twelve months of such relevant period; and (iii) interest forecast to be received on cash deposits in such relevant period; and (iv) income forecast to be received on Authorised Investments in such relevant period; But deducting from the aggregate of the foregoing (a) those amounts which are forecast to be credited to the Annual Reconciliation Account in such relevant period; and (b) Permitted Payments falling due in such relevant period other than Refinancing Expenses; "HEDGE PAYMENT DATE" means each of the dates on which payments fall due to be made under the Hedging Contracts; "HEDGED PORTION" means at any time that proportionate part of the Loan which is hedged pursuant to the Hedging Contracts, apportioning such unhedged part pro rata between outstanding Advances under Tranche A and Tranche B; "HEDGING CONTRACTS" means the hedging contracts dated 26 March 1996 made between the Borrower and ABN AMRO, Credit Suisse, The Dai-Ichi Kangyo Bank, Ltd. and National Westminster Bank Plc, including all confirmations thereunder and the hedging contract dated 4 September 2001 between the Borrower and ABN AMRO; "INFORMATION MEMORANDUM" means the information memorandum to be prepared on or after the Amendment Date (based on information supplied by the Borrower) in connection with the Project; "INSURANCE ADVISER" means Willis Corroon or such other person as the Agent and the Borrower shall from time to time approve as such; "INSURANCES" means each of the contracts for insurance required under Schedule 8 and entered into by or on behalf of the Borrower and any other contracts or policies of insurance taken out by the Borrower from time to time relating to the Project and/or the Site; "INTERCREDITOR AGENT" shall have the meaning given to it in the Intercreditor Agreement; "INTERCREDITOR AGREEMENT" means the intercreditor agreement dated 26 March 1996 made between the Borrower, the Agent, the Banks, EIB and others; "INTEREST PAYMENT DATE" means the last day of each Interest Period (or, if any such date is not a business day, the next following business day unless that day falls in the calendar month succeeding that in which it would otherwise have ended in which case it shall end on the preceding business day); "INTEREST PERIOD" in relation to any Advance or Unpaid Sum means each of those periods referred to in Clause 7.1 (Interest Periods) or, as the case may be, Clause 23.1 (Default Interest); "LAUNCH OF PRIMARY SYNDICATION" means the date (as notified by ABN AMRO to the Borrower) on which the website prepared by ABN AMRO in relation to Primary 7 Syndication is able to be accessed by institutions wishing to participate in Primary Syndication; "LENDING OFFICE", in relation to a Bank, means the UK office located at the address identified with its signature below or, as the case may be, in a Transfer Certificate to which it is party as Transferee, or such other UK office as it may from time to time select; "LETTER OF CREDIT" means an irrevocable documentary letter of credit in, or substantially in, the form set out in Schedule 2 with such amendments thereto as EIB and the Majority Banks may agree (or, if such amendments may increase the amount payable by the Borrower pursuant to Clause 6 (Counter-Indemnity), as EIB, the Banks and the Borrower may agree); "LIBOR" means: (a) the rate per annum which appears on Page LIBOR 01 on the Reuters Screen; or (b) if no such rate appears on the Reuters Screen, the arithmetic mean (rounded upward to four decimal places) of the rates, as supplied to the Agent at its request, quoted by the Reference Banks to leading banks in the London interbank market, at or about 11.00 a.m. on the applicable date upon which the rate is to be fixed for the offering of deposits in the currency of the relevant Loan for a period comparable to the relevant Interest Period, and in this definition "Page LIBOR 01" means the display designated as Page LIBOR 01 on the Reuters Screen (or such other pages as may replace Page LIBOR 01) on that service or such other service as may be nominated by the British Bankers' Association as the information vendor for the purposes of displaying British Bankers' Association Interest Settlement Rates for deposits in Sterling; "LOAN" means the aggregate principal amount of the Facility advanced by the Banks to the Borrower and for the time being outstanding hereunder including any Advance under Clause 5.2(iii) (Conversion to Tranche B Advance); "MAINTENANCE RESERVE ACCOUNT" means the account opened and maintained pursuant to Clause 10 of the Intercreditor Agreement; "MAJORITY BANKS" means a group of Banks to whom in aggregate more than 66% per cent. of the total Outstandings are (or, immediately before their repayment, were) owed or to whom in aggregate more than 66% per cent. of the total Outstandings of those Banks who do give instructions to the Agent within the period specified by the Agent are (or, immediately before their repayment, were) owed Provided that the period specified by the Agent shall, if not already specified in this Agreement, be not less than: (a) in the case of any decision under Clause 22, fifteen business days from the notification date; and 8 (b) in the case of any consent required under this Agreement, five business days from the notification date; where the notification date is the date the Agent gives notice to the Banks requesting instructions or, if later, the date the Agent supplies the information (if any) which the notice states the Agent intends to supply; "MANDATORY COSTS RATE" means, in relation to any Advance or Unpaid Sum, the rate determined in accordance with Schedule 6; "MATERIAL ADVERSE EFFECT" means the happening of any event which is reasonably likely to have a material adverse effect on the Borrower's ability to perform or comply with its obligations under any of the Relevant Documents; "OPERATING ACCOUNT" means the account opened and maintained pursuant to Clause 10 of the Intercreditor Agreement; "OPERATING ACCOUNT SUB-ACCOUNT" shall have the meaning given to it in the Amendment and Restatement Agreement; "ORIGINAL PARTIES" means the parties to this Agreement as at the Execution Date; "OUTSTANDINGS", in relation to a Bank on any day means, subject as hereinafter provided, the aggregate of its Tranche A Outstandings and its Tranche B Outstandings on such day; "PART 1 LIABILITIES" shall have the meaning given to it in the Intercreditor Agreement; "PAYMENT DATE" means each Repayment Date and each Interest Payment Date; "PERMITTED PAYMENTS" means those costs approved in the Project Budget from time to time which comprise (excluding 50% of those payments due under the Technical Services Agreement and payments due to any of the Financiers under the Financier Documents): (i) legal, accounting, merchant bank and other professional fees, and fees payable to the Agent, Security Trustee, the Intercreditor Agent, the Arranger and the Issuing Bank under the Finance Documents; (ii) all costs incurred in relation to obtaining any necessary consent; and (iii) any VAT in respect of the above; (iv) payments due under the Project Documents (other than the Shareholders Agreement); (v) operation and maintenance costs (including permitted capital expenditure under the DBFO Contract); (vi) insurance premiums; 9 (vii) taxes; (viii) other miscellaneous expenditure (including, without limitation, payments under hire purchase contracts) approved in the Project Budget; (ix) payments to be made in respect of the Part I Liabilities after all amounts standing to the credit of the Claims Reserve Account have been reduced to zero; and (x) Refinancing Expenses, but only to the extent that such Refinancing Expenses are paid from the Operating Account Sub-Account; "PORTION" bears the meaning ascribed thereto in Clause 5.1 (Liability); "POTENTIAL EVENT OF DEFAULT" means any event which would or is reasonably likely to become (with the passage of time, the giving of notice, the making of any determination hereunder or any combination thereof) an Event of Default; "PRIMARY SYNDICATION" means the syndication of the Facility; "PROJECT ACCOUNTS" shall have the meaning given to it in the Intercreditor Agreement; "PROJECT BUDGET" means each budget prepared by the Borrower and delivered to the Agent pursuant to Clause 16 (Project Budgets) as the same is agreed pursuant to Clause 16.3 (Agreement of Project Budget); "PROJECT DOCUMENTS" means the documents listed in Schedule 3 and any document hereafter entered into by the Borrower in connection with the carrying out of its rights and obligations under the DBFO Contract in relation to the Project designated as a Project Document by the Agent and the Borrower (any such designation by the Borrower not to be unreasonably withheld or delayed), and "PROJECT DOCUMENT" shall mean any one of such documents; "PROJECT FORECAST" means a forecast from time to time prepared by the Borrower in accordance with Clause 19 of the Intercreditor Agreement utilising the Financial Model and delivered to the Agent in accordance with such Clause 19; "PROMOTERS" means each of Macquarie European Infrastructure Plc and Balfour Beatty plc; "QUALIFYING ISSUER" shall have the meaning given to it in the EIB Facility Agreement; "QUALIFYING LENDER" shall have the meaning given to it in Clause 13.12 (Additional Definitions); "QUOTATION DATE" means, in relation to any Interest Period, except as otherwise agreed, the day on which quotations would ordinarily be given by prime banks in the London Interbank Market for deposits in sterling for delivery on the first day of that Interest Period or, if there are two or more such days, whichever is the latest; 10 "REFERENCE BANK" means the principal London offices of the Agent and The Royal Bank of Scotland plc or any other or substitute reference banks from time to time agreed between the Agent and the Borrower; "REFINANCING EXPENSES" means those amounts detailed in the Refinancing Expenses Letter; "REFINANCING EXPENSES LETTER" shall have the meaning given to it in the Amendment and Restatement Agreement; "RELEVANT DOCUMENTS" means the Finance Documents, and the Project Documents and "RELEVANT DOCUMENT" shall mean any one of such documents; "RELEVANT GROUP COMPANY" means each of Balfour Beatty Civil Engineering Limited and Balfour Beatty plc; "REPAYMENT DATE" means the First Repayment Date and the last day of each consecutive six month period thereafter and the Final Repayment Date (or, if any such date is not a business day, the next following business day unless that day falls in the calendar month succeeding that in which it would otherwise have ended in which case it shall end on the preceding business day); "RPI" shall have the meaning given to it in the Intercreditor Agreement; "SECURITY DOCUMENTS" means the documents listed in Schedule 4 and "SECURITY DOCUMENT" shall mean any one of such documents; "SECURITY TRUST DEED" means the security trust agreement dated 26 March 1996 referred to in paragraph 3 of Schedule 4; "SECURITY TRUSTEE" means ABN AMRO; "SENIOR GUARANTEE AGREEMENT" means the agreement made between the European Investment Fund and the Borrower dated 26 March 1996; "SHARE MORTGAGE" means the share mortgage (incorporating floating charge) referred to in paragraph 2 of Schedule 4; "SHAREHOLDERS AGREEMENT" means the shareholders agreement dated 26 March 1996 and made between the Borrower, YLHL, DMG, Kvaerner plc, Kvaerner Corporate Development Ltd and BICC plc; "SUBORDINATED LOAN" means the principal amounts outstanding under the Commercial Subordinated Loan Agreement; "SUCCESSFUL PRIMARY SYNDICATION" means, if as a result of receipt of unconditional binding commitments from other financiers during Primary Syndication, ABN AMRO's 11 hold position in respect of the Facility is equal to or less than an amount as may be agreed between ABN AMRO and the Borrower in writing; "TAX RESERVE ACCOUNT" means the account to be opened and maintained pursuant to Clause 10 of the Intercreditor Agreement; "TECHNICAL ADVISER" means Owen Williams Limited or such other person as the Agent shall from time to time select; "TECHNICAL SERVICES AGREEMENT" means the agreement referred to in paragraph 3 of Schedule 3; "3i" means 3i Group plc; "TOTAL TRANCHE A FACILITY" means the total amount of the Tranche A Facility, being the sum of (pound)235,128,693.62; "TRAFFIC ADVISER" means Maunsell Ltd or such other person as the Agent and the Borrower shall from time to time approve as such; "TRANCHE" means either the Tranche A Facility or the Tranche B Facility, as the context may require; "TRANCHE A BALANCE" means that amount of the Tranche A Facility not drawn prior to or on the Amendment Date; "TRANCHE A FACILITY" means the floating rate sterling loan facility granted to the Borrower pursuant to Clause 2.1(i) (also referred to as "TRANCHE A"); "TRANCHE A OUTSTANDINGS", in relation to a Bank on any day means, subject as herein provided, the aggregate on such day of an amount equal to its participation in each outstanding Advance made under the Tranche A Facility which, for the avoidance of doubt, shall include its participation in each Utilisation; "TRANCHE B FACILITY" means the letter of credit facility granted to the Borrower pursuant to Clause 2.1(ii) (also referred to as "TRANCHE B"); "TRANCHE B OUTSTANDINGS", in relation to a Bank on any day means, subject as herein provided, the aggregate of (i) its maximum actual and contingent liability under any Letter of Credit issued hereunder and (ii) the aggregate on such day of its participation in each Advance made under the Tranche B Facility pursuant to Clause 5.2(iii); "TRANSFER CERTIFICATE" means a certificate in the form set out in Schedule 5 signed by a Bank and a Transferee; "TRANSFEREE" means a bank or other financial institution to which a Bank seeks to transfer the whole or any part of its rights and obligations hereunder in accordance with Clause 31.3 (Transfer by Banks); 12 "UNHEDGED PORTION" means at any time that proportionate part of the Loan which is not the Hedged Portion; "UNPAID SUM" means the balance from time to time outstanding of any sum due and payable by the Borrower hereunder which is not paid on the due date in accordance with the provisions hereof; "UPSTREAM LOAN AGREEMENT" shall have the meaning given to it in the Amendment and Restatement Agreement; "UTILISATION" means any Advance made under the Tranche A Facility from the Available Tranche A Balance; "UTILISATION DATE" in respect of any Utilisation means the date stated to be the Date for Drawdown in the Utilisation Request in respect of such Utilisation; "UTILISATION REQUEST" means a request from the Borrower to the Agent in the form appended hereto as Schedule 10, signed by an Authorised Signatory and requesting the making of an Advance under the Tranche A Facility; and "YLHL" means Yorkshire Link (Holdings) Limited (Company No. 3059235). 1.2 In this Agreement, the following terms shall have the meanings given to them in the DBFO Contract: "ADDITIONAL WORKS"; "ADJACENT AREAS"; "ALTERNATIVE PROPOSAL"; "COMPENSATION EVENT"; "COMPLETION CERTIFICATE"; "DBFO CO'S WORKS CHANGE"; "DEPARTMENT'S CHANGE IN SPECIFICATION"; "DEPARTMENT'S WORKS CHANGE"; "DELAY EVENT"; "ELIGIBLE CHANGE"; "GOOD INDUSTRY PRACTICE"; "IMPROVEMENT"; "LATENT DEFECT"; "LEASE"; "PENALTY POINTS"; "PERMIT TO USE"; "PROJECT ROAD"; "RETENTION ACCOUNT"; "SAFETY IMPROVEMENT"; "SECTION", "SITE"; "SUBSEQUENT SCHEME"; "TERMINATION ACCOUNTS"; "TERMINATION EVENT"; "WARNING NOTICE"; "WORKS PROGRAMME"; and "WORKS"; 1.3 In this Agreement, the following terms shall have the meanings given to them in the Construction Contract: "CERTIFICATE"; "DESIGNER"; "DISPUTE RESOLUTION"; "PROCEDURE"; "EMPLOYER"; "EMPLOYER'S AGENT"; "FORCE MAJEURE"; and "INDEPENDENT ENGINEER". 1.4 INTERPRETATION Any reference in this Agreement to: a document being "IN THE AGREED FORM" shall be construed as a reference to such document having been initialled for the purposes hereof on behalf of the Agent and the Borrower, together with any changes thereto approved by the Agent; 13 a "BUSINESS DAY" shall be construed as a reference to a day on which banks are open for business of the kind contemplated in this Agreement in London; a time of day is a reference to London time; an "ENCUMBRANCE" shall be construed as a reference to a mortgage, charge, pledge, lien or other encumbrance or security interest of any kind whatsoever securing any obligation of any person or any other type of preferential arrangement (including, without limitation, title transfer and retention arrangements) having a similar effect; "FINANCIAL INDEBTEDNESS" shall be construed as a reference to any indebtedness in respect of loans, overdrafts, acceptances, indemnities (in respect of letters of credit, bonds, guarantees, documentary credits or similar), the extension of credit, finance leasing transactions, deferred purchase arrangements (other than trade credits in the ordinary course of business), commercial paper, bonds, debentures, notes, loan stock or any financial obligation arising out of any financial instrument similar in form or effect to any of the foregoing, and any guarantees and indemnities in respect of the foregoing; "FINANCIAL YEAR" means each twelve month period ending on 31 March; "GUARANTEED" or "GUARANTEE" shall include supported by way of letter of credit as well as supported by way of guarantee; "INDEBTEDNESS" shall be construed so as to include any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent; "MONTH" means a calendar month, provided that where payments are to be made on any day which is not a Business Day then such payments shall be made on the immediately succeeding Business Day unless such day falls within another month, in which case such payments shall be made on the immediately preceding Business Day; a "PERSON" shall be construed as a reference to any person, firm, company, corporation, government, state or agency of a state, or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing; "SUCCESSOR" in relation to a party means an assignee of or successor in title to such party or any person who, under the laws of its jurisdiction of incorporation or domicile, has assumed the rights and obligations of such party hereunder or to which under such laws the same has been transferred; "TAX" shall be construed so as to include any present or future tax, levy, impost, assessment, withholding, deduction, duty or other charge of a similar nature (including without limitation any penalty payable in connection with any failure to pay or any delay in paying any of the same); and a "CLAUSE", a "RECITAL" or a "SCHEDULE" is, unless otherwise stated, a reference to a clause hereof or a recital or schedule hereto. 14 1.5 In this Agreement "(POUND)" and "STERLING" denotes lawful currency of the United Kingdom. 1.6 References in this Agreement to the Agent, an Arranger, the Security Trustee, the Issuing Bank, EIB, EIF, the Senior Subordinated Lender, the Commercial Subordinated Financier, a Promoter or any Bank shall be construed so as to include its respective successors, replacements and permitted Transferees and assigns. 1.7 Any reference in this Agreement to this Agreement, another agreement or any other document shall be construed as a reference to this Agreement or that other agreement or document as the same may have been, or may from time to time be, amended, varied, supplemented or novated. 1.8 Clause and Schedule headings are for ease of reference only. 1.9 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms. 1.10 CHANGE OF CURRENCY If a change in any currency of a country occurs, this Agreement will, to the extent the Agent (acting reasonably and after consultation with the Borrower) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in London and otherwise to reflect the change in currency. 15 PART 2 THE FACILITY 2. THE FACILITY 2.1 GRANT OF THE FACILITY The Banks, pursuant to the terms of this Agreement prior to the Amendment Date and pursuant to the terms of the Amendment and Restatement Agreement, have granted to the Borrower, upon the terms and subject to the conditions hereof, a floating rate sterling facility in the aggregate principal amount of (pound)282,588,000, divided into two sub-facilities on and from the Amendment Date as follows: (i) TRANCHE A Tranche A comprising (pound)235,128,693.62 in aggregate: (a) which has been drawn down in part by the Borrower by way of cash advances prior to or on the Amendment Date in accordance with the terms of this Agreement and in accordance with the terms of the Amendment and Restatement Agreement; and (b) the balance of which constitutes the Tranche A Balance and which shall be available to the Borrower in accordance with Clause 4 of this Agreement. (ii) TRANCHE B Tranche B comprising (pound)47,459,306.38 in aggregate which has been drawn down by the Borrower by way of the issue of Letters of Credit by the Issuing Bank on behalf of the Banks to EIB in relation to the EIB Facility in accordance with the terms of this Agreement prior to the Amendment Date and in accordance with the terms of the Amendment and Restatement Agreement. 2.2 BANKS' OBLIGATIONS SEVERAL The obligations of the Banks hereunder are several. The failure of a Bank to perform its obligations hereunder shall not affect the obligations of the Borrower towards the Agent or any other Bank; neither the Agent nor any other Bank shall be liable for the failure of such Bank to perform its obligations hereunder, nor shall such failure release any other Bank from performing its obligations hereunder upon the terms and subject to the conditions hereof. If any Bank fails to perform its obligations hereunder, the Agent and such Bank shall (without any liability on its part to take over any or all of such Bank's commitment or obligations hereunder) use its reasonable efforts for a period of up to 28 days to replace such Bank with another Qualifying Issuer willing to perform such Bank's obligations hereunder. 16 3. PURPOSE 3.1 PURPOSE OF UTILISATIONS The Borrower shall in accordance with the other terms hereof apply the proceeds of all Advances drawn under the Tranche A Balance for the purposes of funding the Company Account in accordance with the Intercreditor Agreement and for the purposes contemplated in Clauses 4.2 and 22.27(ii)(3) of this Agreement. 3.2 NO RESPONSIBILITY No Finance Party shall be obliged to concern itself with the application of amounts raised by the Borrower hereunder. 3.3 BORROWER'S OBLIGATIONS For the avoidance of doubt, the obligations of the Borrower under this Agreement are in no way conditional upon the performance or observance of the terms of any of the Construction Contract, the DBFO Contract, the Technical Services Agreement or any other Project Document or any provision thereof respectively by any party thereto and will not be affected or discharged by any matter affecting any of the Construction Contract, the DBFO Contract, the Technical Services Agreement or any other Project Document including, without limitation, its performance, non-performance, frustration or invalidity or the destruction, non-completion or non-functioning of any of the goods and services to be supplied thereunder. 4. AVAILABILITY OF THE TRANCHE A BALANCE 4.1 CONDITIONS PRECEDENT TO EACH UTILISATION It is a condition precedent to the making of each Utilisation that: (i) not less than ten business days before the proposed date of such Utilisation, the Agent has received from the Borrower a Utilisation Request therefor which shall oblige the Borrower to make the Utilisation therein requested on the date therein stated upon the terms and subject to the other conditions contained herein; (ii) the proposed date for making such Utilisation is any business day which falls within the Availability Period but is not a Repayment Date; (iii) the proposed date for the making of such Utilisation is not less than ten business days after the date upon which the previous Utilisation (if any) was made hereunder; (iv) the making of such Utilisation would not result in more than six Advances being made under the Tranche A Balance; 17 (v) the proposed amount of such Utilisation is an amount which is no less than the lesser of (pound)1,000,000 or the Available Tranche A Balance; (vi) the interest rate applicable to such Utilisation during its first Interest Period would not fall to be determined pursuant to Clause 8.1 (Market Disruption); (vii) unless waived by the Majority Banks, no Event of Default or Potential Event of Default (other than under Clause 22.27 in respect of a Utilisation for the purposes set out in Clause 22.27) has occurred and is continuing and the representations set out in Clause 20 (Representations) are true on and as of the proposed date for the making of such Utilisation; (viii) the Agent has received a revised Project Forecast from the Borrower demonstrating that: (a) following the making of such Utilisation: (1) the Bank Loan Life Cover Ratio shall not be less than 1.27:1; (2) the Forecast Annual Debt Service Cover Ratio at all times from the date of such Utilisation shall not be less than 1.16:1; (3) the EIB Loan Life Cover Ratio shall not be less than 1.31:1; (4) the EIB Forecast Annual Debt Service Cover Ratio until the Final Repayment Date shall not be less than 1.16:1; and (b) the EIB Annual Debt Service Cover Ratio and the Annual Debt Service Cover Ratio in respect of the 12 month period immediately preceding the making of such Advance is not less than 1.16:1. 4.2 DEBT SERVICE RESERVE ACCOUNT The Senior Facility Agent shall: (i) prior to the making of any Utilisation, calculate the amount contemplated in Clause 13.2(i) of the Intercreditor Agreement (and for the purposes of such calculation, the Utilisation to be made shall be deemed to have been made on the immediately preceding Payment Date); (ii) deduct from such Utilisation deposit directly into the 3 Month DSRA Sub-Account such amount as is required to ensure that the balance standing to the credit of the Debt Service Reserve Account is equivalent to one half of the amount calculated pursuant to Clause 4.2(i) above; and (iii) if the purpose of the Utilisation is to make the payment contemplated in Clause 22.27(ii)(3) of this Agreement, deposit the balance into the Claims Reserve 18 Account or, if the purpose of the Utilisation is for any other purpose, deposit the balance into the Company Account. 4.3 CALCULATION OF THE AVAILABLE TRANCHE A BALANCE The Available Tranche A Balance on any Utilisation Date shall be calculated by application of the formula set out below: (i) the Tranche A Balance as reduced on each Repayment Date preceding that Utilisation Date by the percentage set opposite each Repayment Date(s) in Schedule 9, less (ii) the sum of the amounts calculated in accordance with this Clause 4.3(ii) in respect of each Utilisation made prior to the Utilisation Date upon which the Available Tranche A Balance is being calculated, to be calculated as follows: 100% - (the sum of each percentage in Schedule 9 applying from the First X Repayment Date to the Utilisation Date upon which this calculation is to be made (both inclusive)) Amount of Utilisation A ----------------------------- 100% - (the sum of each percentage in Schedule 9 applying from the First Repayment Date to the Repayment Date immediately preceding the date upon which Utilisation A was made (both inclusive)) where: A = each single Utilisation made prior to the Utilisation Date upon which the Available Tranche A Balance is being calculated. 5. LETTERS OF CREDIT 5.1 LIABILITY The face value of each Letter of Credit shall be allocated to, and apportioned among, the Banks in the same proportion as that Bank's Tranche A Outstandings bear to the 19 aggregate of the Tranche A Outstandings of all the Banks (each such amount so allocated in respect of a Letter of Credit, a "PORTION"). 5.2 DRAWINGS UNDER LETTERS OF CREDIT (i) NOTIFICATION As soon as practicable after receipt by the Agent, the Issuing Bank or any Bank (and if by the Issuing Bank or a Bank then the Issuing Bank or such Bank shall forthwith notify the Agent thereof) of notice from EIB of its intention to make a drawing under any Letter of Credit, the Agent shall notify all the Banks thereof and on receipt by it of all documents required for a drawing under such Letter of Credit, the Agent shall not less than two business days prior to the due date for payment of such drawing notify each Bank of the amount, and due date for payment, of such Bank's Portion of such drawing and each Bank will, on the due date for payment of such drawing, make the amount so notified to it (less such Bank's share of any amount standing to the credit of the Cash Collateral Account in respect thereof) available through its Lending Office by payment thereof in sterling to the Agent. (ii) APPLICATION The Agent shall apply any amount paid to it pursuant to Clause 5.2(i) (or standing to the credit of the Cash Collateral Account as aforesaid) in payment of the drawing under the relevant Letter of Credit on behalf of the Banks. (iii) CONVERSION TO TRANCHE B ADVANCE Amounts made available by the Banks to the Agent pursuant to Clause 5.2(i) and applied by the Agent in the manner referred to in Clause 5.2(ii) shall together constitute one Advance and shall be deemed to have been made by the Banks to the Borrower on and subject to the terms and conditions hereof and on the basis that: (a) any such Advance shall be repayable by the Borrower on the demand of the Agent (and, for the avoidance of doubt, shall not then be available for reborrowing); and (b) save as provided in Clause 7.2, the provisions of Clauses 7 (Interest) and 8 (Alternative Interest Rates) shall apply mutatis mutandis to the calculation and payment of interest on each such Advance. 6. COUNTER-INDEMNITY 6.1 INDEMNITY The Borrower agrees to keep each Finance Party indemnified against all actions, proceedings, liabilities, claims, demands, damages, costs and expenses in relation to or 20 arising out of or in connection with any of the Letters of Credit whether thereunder or hereunder and to pay to the Agent (subject to Clause 5.2(iii) (Conversion to Tranche B Advance)) on demand for the account of the party being indemnified all payments, losses, costs, charges, damages and expenses suffered or incurred by any Finance Party in consequence of any of the Letters of Credit or arising directly or indirectly therefrom. 6.2 PAYMENTS The Borrower hereby irrevocably authorises and directs the Agent, the Issuing Bank and the Banks to make payments and comply with any demand which may be claimed or made or appears on its face to be claimed or made under any Letter of Credit without any reference to or further authority, confirmation or verification from the Borrower and agrees that any payment which the Agent, the Issuing Bank or any Bank shall make in accordance, or appearing on its face to be in accordance, with any Letter of Credit shall be binding upon the Borrower and shall be accepted by the Borrower as conclusive evidence that the Agent, the Issuing Bank or the relevant Bank was liable to make such payment or comply with such demand. 6.3 DEMANDS The Borrower agrees (without prejudice to any other provision of this counter-indemnity) that any demand made upon the Agent, the Issuing Bank or any Bank for payment of sums specified in any Letter of Credit shall for all purposes relating to this counter-indemnity be deemed to be a valid and effective demand and the Agent, the Issuing Bank and the Banks shall be entitled to treat it as such notwithstanding any actual lack of authority on the part of the person making the demand, if the demand appears on its face to be in order. 21 PART 3 INTEREST 7. INTEREST 7.1 INTEREST PERIODS The period for which an Advance is outstanding shall be divided into successive periods each of which (other than the first, which shall start on the date on which such Advance is drawn) shall start on the last day of its preceding such period. 7.2 DURATION The duration of each Interest Period relating to an Advance shall, save as otherwise provided herein, be six months (or of such other duration as the Borrower and the Agent may from time to time agree) Provided that: (i) in relation to an Advance made under the Hedged Portion, each Interest Period relating thereto shall be of a duration of six months, Provided that an Interest Period ending in a month in which there is a Hedge Payment Date shall be of such duration that it ends on that Hedge Payment Date (or, if more than one, that Hedge Payment Date agreed between the Agent and the Borrower) and, notwithstanding the foregoing, all then subsisting Interest Periods shall end on the First Repayment Date and each Interest Period thereafter shall be of a duration of six months ending on a Repayment Date; (ii) in relation to an Advance made under the Unhedged Portion, each Interest Period shall be of a duration of six months (or such other period as may be agreed between the Agent and the Borrower) and each such Interest Period (other than those ending six months or more prior to the First Repayment Date) shall end on a Repayment Date; (iii) if any Advance has been made pursuant to Clause 5.2(iii) (Conversion to Tranche B Advance) the duration of the first Interest Period relating to such Advance shall be 7 days; (iv) the first Interest Period after the Amendment Date shall commence on the Amendment Date and end on 30 September 2001; and (v) the first Interest Period of each Advance made under the Tranche A Balance shall commence on the date of such Advance and end on the first Repayment Date immediately following the making of such Advance. 7.3 CALCULATION OF INTEREST The rate of interest applicable to an Advance during each Interest Period relating thereto shall be the rate per annum which is the sum of the Applicable Margin, the Mandatory Costs Rate in respect thereof at such time and LIBOR on the Quotation Date therefor. 22 7.4 PAYMENT OF INTEREST On each Interest Payment Date the Borrower shall pay accrued interest on the Advance to which such Interest Period relates. 8. ALTERNATIVE INTEREST RATES 8.1 MARKET DISRUPTION If: (i) the Agent determines that at or about 11.00 a.m. (London time) on the Quotation Date for an Interest Period none or only one of the Reference Banks was being offered by prime banks in the London Interbank Market sterling deposits in the amount and for the period required for the purposes of Clause 7.3 (Calculation of Interest); or (ii) before the close of business in London on the first day of an Interest Period the Agent has been notified by each of a group of Banks to whom in aggregate thirty five per cent. or more of the relevant Advance is (or, if such Advance were then made, would be) owed that the arithmetic mean referred to in the definition of LIBOR in Clause 1.1 (Definitions) does not accurately reflect the cost to it of obtaining such deposits, then, notwithstanding the provisions of Clause 7 (Interest) (and until any substitute basis for determining rates of interest has been agreed in accordance with the terms of Clause 8.2 in respect of the event which caused this Clause 8 to apply in respect of a particular Interest Period or, as the case may be, such Advance): (a) (if paragraph (i) above applies) the duration of the relevant Interest Period (other than one to which proviso (iii) to Clause 7.2 applies, the duration of which shall remain seven days) shall be one month or such lesser duration as shall cause it to end on the next Repayment Date; and (b) (if paragraph (i) or (ii) above applies) during such Interest Period the rate of interest applicable to the Advance to which such Interest Period relates shall be the rate per annum which is the sum of the Applicable Margin, the Associated Costs Rate in respect thereof at such time and the rate per annum determined by the Agent to be the weighted average of the rates (as notified in writing to the Agent before the last day of each Interest Period to which this Clause 8.1 applies) which express as a percentage rate per annum the cost to each Bank of funding from the London Interbank Market (or, if more practicable, from whatever other sources and in whatever manner it may reasonably select) its portion of such Advance during such Interest Period. 23 8.2 SUBSTITUTE BASIS If either of those events mentioned at paragraphs (a) and (b) in Clause 8.1 occurs: (i) the Agent shall promptly notify the Borrower and the Banks of such event; and (ii) within five days of such notification the Agent and the Borrower shall enter into negotiations in good faith with a view to agreeing a substitute basis (a) for determining the rates of interest from time to time applicable to the Advances and/or (b) upon which the Advances may be maintained (whether in sterling or some other currency) thereafter and any agreement resulting from any such negotiations shall take effect in accordance with its terms Provided that the Agent may not agree any substitute basis without the prior consent of each Bank. 8.3 DISTRIBUTION TO BANKS Interest on an Advance during an Interest Period relating thereto calculated at the rate specified in Clause 8.1(ii)(b) shall be distributed by the Agent to the Banks in proportion to the amounts which represent the cost to each Bank of funding its share of such Advance during such Interest Period provided that any such interest which is attributable to the Applicable Margin shall be distributed by the Agent to the Banks in proportion to their respective shares of such Advance. 24 PART 4 REPAYMENT, CANCELLATION, ILLEGALITY AND PREPAYMENT 9. CANCELLATION 9.1 The Borrower may, on 14 days prior written notice to the Agent, cancel the whole or any part of the Available Tranche A Balance. 9.2 Any Available Tranche A Balance remaining undrawn at the end of the Availability Period shall be automatically cancelled on such date. 9.3 The Borrower shall not be entitled to reborrow any part of the Available Tranche A Balance cancelled in accordance with this Clause 9. 10. REPAYMENT Without prejudice to the Borrower's obligation to repay any relevant Advance at any time referred to in Clause 5.2(iii) (Conversion to Tranche B Advance), the Borrower shall: 10.1 repay Tranche A Advances on each Repayment Date (the first repayment instalment to be made on the First Repayment Date and each subsequent repayment instalment to be made on each subsequent Repayment Date) as follows: (i) repay all Tranche A Advances made on or prior to the Amendment Date by repaying a percentage of the aggregate total amount of such Advances outstanding as at the Amendment Date, being the percentage set opposite such Repayment Date in Schedule 9; (ii) for each Utilisation, the percentage set opposite such Repayment Date in Schedule 9 multiplied by the amount calculated as follows: Amount of Utilisation ---------------------------------------------- 100% - (the sum of each percentage in Schedule 9 applying from the First Repayment Date to the Repayment Date immediately preceding the date upon which Utilisation was made (both inclusive)) 10.2 repay Advances made under the Tranche B Facility in accordance with Clause 5.2(iii) (Conversion to Tranche B Advance). 11. ILLEGALITY 11.1 LIABILITIES UNDER LETTER OF CREDIT If as a consequence of the adoption of, or any change in the interpretation or administration of, any applicable law or regulation after the date hereof it becomes unlawful, or contrary to any regulation for the Issuing Bank or a Bank to remain under any actual or contingent liability in respect of a Letter of Credit, the Borrower shall 25 within fourteen days of receipt by it of a notice to that effect from the Agent procure release of the Issuing Bank/Bank from the relevant liability, failing which the Borrower shall within seven days after demand by the Agent, deposit into a cash collateral account (the "CASH COLLATERAL ACCOUNT") opened by the Borrower on or before the date of this Agreement with the Account Bank an amount equal to its actual or contingent liability in respect of such Letter of Credit Provided that, if the Borrower has made a deposit as aforesaid and the Agent is satisfied thereafter that such illegality has ceased to apply (and subject to no Event of Default or Potential Event of Default having occurred) the Agent shall, at the request and cost of the Borrower, release such amount to the Borrower. 11.2 FUNDING OF ADVANCES If as a consequence of the adoption of, or any change in the interpretation or administration of, any applicable law or regulation after the date hereof it becomes unlawful, or contrary to any regulation, for a Bank to allow to remain outstanding all or any of its portion of an Advance made hereunder, then if the Agent on the instructions of such Bank so requires, the Borrower shall within the period necessary to comply with the law repay such Bank's share of the Loan together with accrued interest thereon. 11.3 LOSS OF QUALIFYING ISSUER STATUS If any Bank ceases to be a Qualifying Issuer or any Bank suffers an event described in Clause 9.1(e)(i), (ii) or (iii) of the EIB Facility Agreement, such Bank shall promptly notify the Agent whereupon whilst such Bank remains a non-Qualifying Issuer or subject to such an event: (i) each Bank hereby agrees that (to the extent it is lawful to do so) if it ceases to be a Qualifying Issuer and does not, within 45 days of a demand from EIB served upon the Agent pursuant to Clause 9.1(g) of the EIB Facility Agreement, effect a transfer pursuant to Part 12 of all of its rights and obligations to a bank or financial institution which is a Qualifying Issuer, it shall establish, fund and maintain a cash collateral account (each such account herein referred to as an "EIB/ISSUER CASH COLLATERAL ACCOUNT") which account shall be subject to the terms of this Clause 11.3, for so long as it shall continue to be a Bank which is not a Qualifying Issuer, no transfer has been effected as aforesaid subsequently and the same has not been released under Clause 12 of the EIB Facility Agreement; (ii) any EIB/Issuer Cash Collateral Account will be an account in the name of such Bank with a bank or financial institution in London, being a bank or financial institution proposed by such Bank and approved by EIB (such approval not to be unreasonably withheld or delayed and not be withheld if such bank or financial institution is itself a Qualifying Issuer); (iii) the cash collateral amount to be deposited in any such EIB/Issuer Cash Collateral Account shall: 26 (a) be in an original principal amount equal to, and thereafter be reduced or, as the case may be, increased to the amount from time to time equal to, such Bank's Portion of issued and outstanding Letters of Credit; and (b) bear interest at such term deposit rate as such Bank is able to negotiate with the relevant bank or financial institution with which such EIB/Issuer Cash Collateral Account is maintained; (iv) any amount by which the amount standing to the credit of EIB/Issuer Cash Collateral Account exceeds the amount which at such time is required to be standing to the credit thereof by virtue of paragraph (iii)(a) above (whether such amount represents interest paid on such account or a part of the original or any subsequent amount credited thereto by the Bank) shall, upon request by such Bank, be paid to such Bank; (v) the cash collateral deposit in the EIB/issuer Cash Collateral Account will be assigned or pledged by such Bank in favour of EIB by way of first ranking security in form and substance satisfactory to EIB (acting reasonably); (vi) such Bank shall be entitled to receive the L/C Commission under Clause 28.2 (LIC Commission), notwithstanding that it has ceased to be a Qualifying Issuer and notwithstanding that its Portion of the Letters of Credit may have been cancelled, whilst it is providing replacement cash collateral in the EIB Issuer Cash Collateral Account and such LJC Commission shall be calculated on the amount deposited in such account by such Bank; and (vii) in the event that EIB makes demand in respect of such Bank's Portion of issued and outstanding Letters of Credit, then notwithstanding any other provision of this Agreement, that Bank shall be solely liable in respect of such demand. 11.4 DEMAND FOR PAYMENT OF INTEREST In the event that EIB makes demand under any issued and outstanding Letters of Credit in respect of the interest portion of such Letter of Credit, and any Bank fails to makes its Portion of such demand available to the Agent in accordance with Clause 5.2 (Drawings under Letters of Credit), then notwithstanding any other provision of this Agreement, such Bank will be solely liable in respect of its Portion of such demand. 12. PREPAYMENT The Borrower shall at all times comply with the provisions set out in Clause 23 of the Intercreditor Agreement. 27 PART 5 CHANGES IN CIRCUMSTANCES 13. TAXES 13.1 TAX GROSS-UP Subject to Clause 13.6 below, all payments to be made by the Borrower hereunder shall be made free and clear of and without deduction or withholding for or on account of tax unless required by law. If the Borrower is so required on account of any Relevant Tax to make any deduction or withholding from any sum payable by it to or for the account of any person ("THE RECIPIENT") hereunder or if the recipient or the Agent on its behalf is required to pay any Relevant Tax (other than tax on its overall net income) imposed, levied, collected or assessed directly on it in respect of any payment receivable by it under this Agreement: (i) the Borrower shall notify the Agent of any such requirement or any change in any such requirement as soon as the Borrower becomes aware of it or, as the case may be, the recipient will forthwith notify the Borrower of its liability to such tax as soon as it becomes aware of such liability; (ii) the Borrower, the Agent or the recipient (as the case may be) shall pay any such tax to the relevant authority in full within the time allowed for such payment under applicable law and, without prejudice to the foregoing, before the date on which penalties attach thereto; and (iii) the sum payable by the Borrower in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, that person receives on the due date and retains (free from any liability in respect of any such deduction, withholding or payment) a net sum equal to what it would have received had no such deduction, withholding or payment been required or made. 13.2 DELIVERY OF RECEIPT The Borrower shall after it has made any payment of tax referred to in Clause 13.1(ii) to the applicable authority use all reasonable endeavours to deliver to the Agent an original receipt (or a certified copy thereof) issued by such authority evidencing such payment as soon as possible. 13.3 INDEMNITY Without prejudice to the provisions of Clause 13.1 but subject to Clause 13.7, if as a consequence of the adoption of, or any change, or change in the judicial interpretation or administration in accordance with published practice of, any applicable law, regulation or provision after the date hereof, any Finance Party or the Agent on its behalf is required by any law or regulation to make any payment, whether on account of tax (other than tax, or 28 an increase in the rate of tax, on its overall net income) or otherwise, on or in relation to any sum received or receivable by such person hereunder, or any liability in respect of any such payment is asserted, imposed, levied or assessed against such person, then the Borrower shall upon demand pay to the Agent for its own account or (as the case may be) for the account of such person an amount sufficient to indemnify such person against such payment or liability, together with any interest, penalties and expenses payable or incurred in connection therewith Provided that the Borrower shall not be required to pay any increased amount to compensate any person for any penalty incurred by such person by reason of such person failing to make timely payment of tax to the relevant authorities in circumstances where such person had itself received an amount equal to such tax from the Borrower prior to the due date for payment thereof to such authorities. If the Agent or any such person makes any payment of tax referred to in Clause 13.1(ii) or in this Clause 13.3 it shall promptly on receipt thereof use all reasonable endeavours to deliver to the Borrower an original receipt (or a certified copy thereof) issued by the relevant authority evidencing such payment as soon as possible. 13.4 NOTIFICATION Any person intending to make a claim pursuant to Clause 13.3 shall notify the Agent of the event by reason of which it is entitled to do so and provide it with supporting evidence where practicable, whereupon the Agent shall notify the Borrower thereof. 13.5 RELEVANT TAX For the purposes of this Clause 13 "RELEVANT TAX" in relation to any payment which falls to be made hereunder means any present or future taxes of any nature now or hereafter imposed by the laws of the United Kingdom. 13.6 EXCEPTION TO GROSS-UP If on the date that a payment becomes due hereunder to or for the account of a recipient: (iii) a Finance Party is a Treaty Lender and the Treaty Lender did not comply with Clause 13.10 below; or (iv) a Finance Party is not a Qualifying Lender or, at any time on or after the date of this Agreement but prior to such payment becoming due, a Finance Party is not or ceases to be a Qualifying Lender; and, as a result, the Borrower is required to make the aforementioned payment subject to a deduction or withholding on account of tax, the Borrower shall not be under an obligation to pay an additional amount to or for the account of that recipient under Clause 13.1 except as provided in Clause 13.8. 29 13.7 EXCEPTION TO TAX INDEMNITY If: (i) on the date on which a payment on account of tax is made or a tax liability arises, a Finance Party is not a Qualifying Lender or, at any time on or after the date of this Agreement but prior to that date, a Finance Party is not or ceases to be a Qualifying Lender; and (ii) such payment or liability would have been reduced if the relevant Finance Party had been a Qualifying Lender at the relevant time, any liability of the Borrower to indemnify the relevant Finance Party pursuant to Clause 13.3 shall be correspondingly reduced except as provided in Clause 13.8. 13.8 CONDITIONS TO EXCEPTIONS Clauses 13.6 and 13.7 shall not relieve the Borrower from making payments or increased payments under Clauses 13.1 or 13.3 if: (i) there shall have been any Tax Change and as a result thereof the relevant Finance Party ceases to be a Qualifying Lender; or (ii) the Borrower would be obliged to make a payment, or increased payment, of the same amount under Clauses 13.1 or 13.3 irrespective of whether any Finance Party is at any time on or after the date hereof a Qualifying Lender; or (iii) such payments or increased payments become due as a result of the Borrower becoming resident outside its Residence Jurisdiction for tax purposes. 13.9 QUALIFYING LENDER Any Bank which ceases, for whatever reason, to be a Qualifying Lender shall promptly notify the Borrower of that change in its status. 13.10 TREATY LENDER The Agent, a Treaty Lender and the Borrower which makes a payment to which that Treaty Lender is entitled shall each cooperate in completing any procedural formalities they are able to complete which are necessary for the Borrower to obtain authorisation to make that payment without a deduction or withholding on account of tax. 13.11 TAX CREDIT If the Borrower pays any additional amount under Clause 13.1(iii) or any amount under Clause 13.3 (a "TAX PAYMENT") and any recipient of a Tax Payment (the "RECIPIENT") effectively obtains a refund of tax, or credit against tax on its overall net income, by reason of that Tax Payment ("TAX CREDIT"), and the Recipient is able to identify the Tax 30 Credit as being attributable in whole or in part to the Tax Payment, then the Recipient shall pay to the Agent, for reimbursement to the Borrower, such amount as it shall determine to be the proportion of the Tax Credit as will leave the Recipient, after that reimbursement, in no better or worse position than it would have been in if the Tax Payment had not been required. Each Recipient shall have an absolute discretion as to whether to claim any Tax Credit and, if it does so claim, the extent, order and manner in which it does so. No Recipient shall be obliged to disclose any information regarding its tax affairs or computations to the Borrower. Nothing in this Clause 13.11 shall interfere with the right of each Recipient to arrange its tax affairs in whatever manner it thinks fit. 13.12 ADDITIONAL DEFINITIONS In this Part 5: "ENACTMENT DATE" means the date on which the Finance Act was enacted into law; "FINANCE ACT" means the Finance Act 1996; "QUALIFYING LENDER" means a Bank which is (on the date a payment falls due): (a) within the charge to United Kingdom corporation tax in respect of that payment and that is a Bank in respect of a utilisation of the facility made by a person that was a bank (as defined for the purpose of section 349 of the Income and Corporation Taxes Act 1988 in section 840A of the Income and Corporation Taxes Act 1988) at the time the utilisation was made; or (b) resident (as defined in the appropriate double taxation agreement) in a country with which the UK has a double taxation agreement giving residents of that country full exemption from UK taxation on interest and does not carry on business in the UK through a permanent establishment with which the payment is effectively connected (a "TREATY LENDER"); (c) a building society (as defined in section 832 of the Income and Corporation Taxes Act 1988) which is entitled to receive interest payable to it under this Agreement without deduction of tax pursuant to section 477A(7) of that Act; or (d) a person beneficially entitled to the income in respect of which that payment (not being a payment in respect of which a direction has been given and not revoked under section 349 of the Income and Corporation Taxes Act 1988) is made and which is a company resident in the United Kingdom, and within the charge to United Kingdom corporation tax in respect of that payment. "RESIDENCE JURISDICTION" means, in respect of the Borrower, the jurisdiction which it is, at the date hereof, resident for tax purposes; and "TAX CHANGE" means the introduction of, change in, or change in the interpretation, administration or application of, any law or regulation or any published practice or 31 concession of the Inland Revenue on or after the date of this Agreement but shall not include the enactment into law of the Finance Act. 14. INCREASED COSTS 14.1 INCREASED COSTS Subject to Clause 14.2, if by reason of (a) the adoption of, or any change, or change in the interpretation or administration of, any applicable law or regulation after the date hereof and/or (b) compliance with any request from or requirement made after the date hereof of any central bank (other than, save in the case of paragraph (v) below, the requirements of the Bank of England reflected in the Associated Costs Rate) or other fiscal, monetary or other financial authority (whether or not having the force of law but, if not having the force of law, being a request or requirement which is customarily complied with by banks): (i) a Finance Party incurs a cost (other than tax, or an increase in tax, on its overall net income) as a result of its having entered into and/or performing its obligations under this Agreement and/or as a result of any Letter of Credit or any Advance being outstanding hereunder; (ii) by reason of capital adequacy requirements the rate of return on the overall capital of a Finance Party is reduced as a result of such Finance Party entering into and/or performing its obligations under this Agreement, any Letter of Credit and/or assuming or maintaining its Available Commitment hereunder and/or maintaining its actual or contingent liability under any Letter of Credit to a level below that which such party would have achieved but for such adoption or change; (iii) there is any increase in the cost to a Finance Party (other than tax, or an increase in tax, on its overall net income) of making, funding or maintaining all or any of the advances comprised in a class of advances formed by or including the advances made or to be made by it hereunder and/or maintaining its actual or contingent liability under any Letter of Credit; (iv) a Finance Party becomes liable to make any payment (not being a payment of tax or an increased rate of tax on its overall net income) on or calculated by reference to the amount of any advance made or to be made by it hereunder and/or its actual or contingent liability under any Letter of Credit; or (v) the Associated Costs Rate, as calculated hereunder, does not represent the cost (ignoring tax on its overall net income) to a Finance Party of complying with the requirements of the Bank of England in relation to its funding or maintaining of its participation in the Advances, then, the Borrower shall within 21 days of demand by the Agent pay to the Agent for account of that Finance Party an amount sufficient to indemnify it against, as the case may be, (i) such cost, (ii) such proportion of such reduction in the rate of return as is attributable to its obligations hereunder and/or under any Letter of Credit, (iii) such 32 portion of such increased cost as is attributable to its making, funding or maintaining advances hereunder and/or maintaining its actual or contingent liability under any Letter of Credit, (iv) such liability, or (v) such portion of such costs as is not represented by the Associated Costs Rate. 14.2 EXCEPTIONS TO INCREASED COSTS INDEMNITY Clause 14.1 shall not apply to: (i) costs, reductions or increased costs covered by the Associated Costs Rate; (ii) any cost, reduction or increased cost arising as a result of default by a Finance Party in complying with any request or requirement of any fiscal, monetary or regulatory authority; (iii) any cost, reduction or increased costs resulting from any implementation in whole or in part of the paper entitled "International Convergence of Capital Measurement and Capital Standards" dated July 1988 (as amended in 1991) published by The Basle Committee on Banking Regulations and Supervisory Practices; or (iv) any cost, reduction or increased cost which results from a deduction or withholding for or on account of tax or from a payment on account of tax which deduction, withholding or payment is referred to in Clause 13.1 or Clause 13.3. 14.3 INCREASED COSTS CLAIMS If a Finance Party intends to make a claim pursuant to Clause 13.1 (Tax Gross-up) it shall notify the Agent of the event by reason of which it is entitled to do so and provide the Agent with supporting evidence where practicable, whereupon the Agent shall notify the Borrower thereof. 14.4 MITIGATION If circumstances arise which would or would upon the giving of notice result in: (i) an amount becoming payable under Clause 13.1(iii) (Tax Gross-up) or a claim for indemnification by a Finance Party or the Agent pursuant to Clause 13.3 (Indemnity) or Clause 14 (Increased Costs); or (ii) a determination or notification pursuant to Clause 8.1(ii)(b) (Market Disruption), then, without in any way limiting, reducing or otherwise qualifying the Borrower's obligations under any of the Clauses referred to in sub-paragraphs (i) to (iii) above, such Finance Party shall notify the Agent thereof (which shall, in turn, promptly notify the Borrower thereof) and, in consultation with the Agent and the Borrower, make reasonable efforts to mitigate the effects of such circumstances including the transfer of a Bank's rights and obligations hereunder to another financial institution (including, without 33 limitation, an Affiliate of such Bank willing to participate in the Facility), Provided that such Bank shall be under no obligation to make any such efforts if such steps would or might have an adverse effect upon its business, operations or financial condition. 34 PART 6 INFORMATION, FORECASTS AND CASHFLOW 15. FINANCIAL INFORMATION 15.1 ANNUAL STATEMENTS The Borrower shall as soon as the same become available, but in any event within 120 days after the end of each of its financial years, deliver to the Agent in sufficient copies for the Banks its financial statements for such financial year. 15.2 SEMI-ANNUAL STATEMENTS The Borrower shall as soon as the same become available, but in any event within 90 days after the end of each half of each of its financial years, deliver to the Agent in sufficient copies for the Banks its financial statements for such period. 15.3 QUARTERLY REPORTS The Borrower shall as soon as the same become available but in any event within 28 days after the end of each calendar quarter deliver to the Agent in sufficient copies for the Banks a quarterly report in the agreed form. Each such quarterly report shall be prepared by the Borrower and shall, on receipt, be submitted by the Agent to the Technical Adviser for his comments. On receipt of such comments the Agent shall send copies of the same to the Borrower and each of the Banks. 15.4 OTHER FINANCIAL INFORMATION The Borrower shall from time to time on the request of the Agent, furnish the Agent with such information about the Project and the Borrower's business and financial condition as the Agent may reasonably require. 15.5 REQUIREMENTS AS TO FINANCIAL STATEMENTS The Borrower shall ensure that: (i) each set of financial statements delivered by it pursuant to this Clause 15 is prepared on the same basis as was used in the preparation of the Base Case and in accordance with accounting principles generally accepted in England and consistently applied; (ii) each set of financial statements delivered by it pursuant to this Clause 15 is certified by a duly authorised officer of the Borrower as giving a true and fair view (in the case of audited statements) of, or otherwise as presenting with reasonable accuracy, the financial condition of the Borrower as at the end of the period to which those financial statements relate and of the results of its operations during such period; and 35 (iii) each set of financial statements delivered by it pursuant to Clause 15.1 (Annual Statements) has been audited by Arthur Andersen or another firm of auditors acceptable to the Agent. 15.6 ACCOUNTING POLICIES The Borrower shall ensure that each set of financial statements delivered to the Agent pursuant to this Clause 15 is prepared using accounting policies, practices, procedures and reference period consistent with those applied in the preparation of the Base Case, unless in relation to any such set of financial statements the Borrower notifies the Agent that there have been one or more changes in any such accounting policies, practices, procedures or reference period and the auditors for the time being of the Borrower provide: (i) a description of the changes and the adjustments which would be required to be made to those financial statements in order to cause them to use the accounting policies, practices, procedures and reference period upon which the Base Case was prepared; and (ii) sufficient information, in such detail and format as may be reasonably required by the Agent, to enable the Banks to make an accurate comparison between the financial position indicated by those financial statements and the Base Case; and any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Base Case was prepared. 16. PROJECT BUDGETS 16.1 DELIVERY OF PROJECT BUDGETS No later than 60 days before the end of each of its financial years the Borrower shall deliver to the Agent (in sufficient copies for the Banks) copies of its budget for its next financial year. 16.2 FORM OF PROJECT BUDGET The Borrower shall ensure that each budget delivered by it pursuant to Clause 16.1 shall be in the agreed form and prepared on a basis consistent with the initial Project Budget and using (i) accounting policies, practices, procedures and reference period consistent with such initial Project Forecast and each set of financial statements delivered pursuant to Clause 15 (Financial Information) and (ii) the Assumptions most recently agreed or determined pursuant to Clause 19.3 (Value of Assumptions) of the Intercreditor Agreement. 36 16.3 AGREEMENT OF PROJECT BUDGET Each budget received by the Agent pursuant to Clause 16.1 shall be forwarded by the Agent to the Banks, the Technical Adviser and the Traffic Adviser. Unless the Agent, after consultation with the Banks where appropriate, requires a change to be made to any such budget within 30 days of receipt thereof, such budget shall become the Project Budget for the Borrower's next financial year. If any budget received by the Agent is in excess of the forecast budget for such financial year (as set out in the most recent Project Forecast delivered pursuant to Clause 19 of the Intercreditor Agreement), the Agent, after consultation as aforesaid, may require a change to any such budget within 30 days of receipt thereof, the Agent shall so notify the Borrower of such change which shall not reduce such budget to a level below the forecast budget set out in such Project Forecast for that financial year and the Borrower shall prepare a revised budget reflecting such required change which shall then become the Project Budget for the Borrower's next financial year. 17. PROJECT FORECASTS The Borrower shall at all times comply with the provisions set out in Clause 19 of the Intercreditor Agreement. 18. PROJECT ACCOUNTS AND CASHFLOWS 18.1 ACCOUNTS The Borrower shall open, maintain and operate each of the Project Accounts in accordance with the provisions of Part 5 of the Intercreditor Agreement. 18.2 CASH FLOW The Borrower shall comply with the provisions of Clause 10 of the Intercreditor Agreement and each of the other provisions of Part 5 of the Intercreditor Agreement. 37 PART 7 COVENANTS, REPRESENTATIONS AND EVENTS OF DEFAULT 19. POSITIVE COVENANTS The Borrower shall: 19.1 CONSENTS ETC Obtain, comply in all material respects with the terms of and do all that is necessary to maintain in full force and effect all consents, licences, permits, approvals, authorisations, rights of way, easements and access to any part of the Project site as and when required from time to time in or by the laws and regulations of England to enable it to carry out the Project and to lawfully enter into and perform its obligations under each of the Relevant Documents and to ensure the legality, validity, enforceability or admissibility in evidence in England of each of the Relevant Documents; 19.2 ENVIRONMENTAL MATTERS Comply in all material respects with all applicable laws and regulations concerning the protection of the environment insofar as they apply to the Project and the Site, and obtain and comply in all material respects with the terms of any licence, permit, authorisation, consent or approval of any kind required under or in relation to any such laws and regulations; 19.3 NOTIFICATION OF EVENTS OF DEFAULT Promptly inform the Agent of the occurrence of any Event of Default or Potential Event of Default and, upon receipt of a written request to that effect from the Agent, confirm to the Agent that, save as previously notified to the Agent or as notified in such confirmation, no Event of Default or Potential Event of Default has occurred; 19.4 CLAIMS PARI PASSU Ensure that at all times the claims of the Finance Parties against it under each of the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors save those whose claims are preferred by any bankruptcy, insolvency, liquidation or other similar laws of general application; 19.5 OBLIGATIONS UNDER RELEVANT DOCUMENTS At all times comply with all its obligations under each of the Relevant Documents and under any other agreement to which it is a party or which is binding on it or any of its assets and maintain and enforce all its rights thereunder (where failure to do so is reasonably likely to have a Material Adverse Effect); 38 19.6 OBLIGATIONS UNDER DBFO CONTRACT AND LEASE Without prejudice to Clause 19.5, at all times comply with its obligations under the DBFO Contract and the Lease referred to in Clause 8.9 thereof and maintain and enforce all its rights thereunder (where failure to do so may have a Material Adverse Effect) and, if at any time the Borrower becomes aware that it is entitled to terminate the DBFO Contract, to inform the Agent thereof; 19.7 OPERATION ETC OF THE PROJECT At all times operate the Project in a sound and efficient manner, in accordance with Good Industry Practice and in accordance with all applicable laws, regulations, directives (including as to safety and the environment) and the terms of the Project Documents; 19.8 ACCESS TO SITE ETC. Ensure that the Agent, the Technical Adviser and any of their representatives or consultants have, on reasonable notice and at reasonable times full access to the Site, any Adjacent Areas and other physical facilities and all books and records of the Borrower (wherever kept); 19.9 INSPECTIONS Promptly notify the Agent of any inspection to be made by or on behalf of the Secretary of State of the Project, the Site, any Adjacent Areas or any of the books and records of the Borrower; and shall if reasonably practicable afford the Agent, the Technical Adviser or any of their representatives or consultants like access and facilities at the same time; 19.10 MEETINGS At the request of the Agent and on reasonable notice, whether at the time of an inspection or otherwise, meet (through its senior representatives) with the Agent and the Banks' Technical Adviser and, at the request of the Agent, use reasonable endeavours to procure the attendance at such meeting of such personnel as the Agent (having consulted with the Banks' Technical Adviser) may specify including any subcontractor of the Borrower; 19.11 INSURANCES From time to time effect and maintain the Insurances in accordance with the provisions of Schedule 8 and, in any event, at all times as required by any applicable law; 19.12 NOTIFICATION Promptly notify the Agent of (i) the calling of any general meeting of shareholders of the Borrower, and provide, as soon as practicable thereafter, minutes of all such meetings; (ii) upon becoming aware of the same, any material litigation, arbitration or administrative proceedings involving the Borrower (actual or threatened); 39 19.13 COMPLIANCE Duly comply with all applicable laws and regulations and promptly pay (when due) all taxes and all outgoings (in each case, net of all allowable deductions or other amounts and save where such taxes or outgoings are the subject of a bona fide dispute) relating to any assets or property of the Borrower from time to time due and payable in both cases, where failure to do so may have a material effect on the Borrower's business or financial condition; 19.14 INDEMNIFICATION Indemnify each of the Finance Parties from and against liabilities incurred or suffered pursuant to any present or future environmental laws or regulations and arising out of the construction or operation of the Project or any other matter connected with the Project or the Site; 19.15 DBFO CONTRACT COPY NOTICES Promptly deliver to the Agent copies of any notice or request given or received by it under the DBFO Contract pursuant to Clauses 15.2 (Discovery of Defects), 22.1 (Required Reports), 22.5 (Revisions to Reports), 24.1 (Remedial Works), 24.3 (Warning Notices), 24.4 (Increased Monitoring), 24.5.2 (Secretary of State Step-In), 25 (Statutory Powers), 27.9.2 (Terrorist Damage), 29.4 (Annual Reconciliation), 30.1.2 (Monthly Payments), 30.2.1 (Annual Reconciliation Account), 33 (Force Majeure), 33A (Change in Law), 35.3.1 (Claims), 36.2 (Events of Default), 36.3.1 (Suspension of DBFO Payments), 36.3.5.2 (Programme for Remedying Breach), 36.5 (Termination in Full), 37.2 (Termination Procedure), 38 (Non-Default Termination), 39.1.1.1 (Expulsion from Site), 44.3.4 (Statutory Deduction from Payments), 45.3.2 (Storage of Data), Schedule 12 Part I paragraph 2 (Notification of Eligible Change), Schedule 12 Part 2 paragraphs 1 and 2 (Department's Works Change), Schedule 12 Part 3 paragraphs 1 and 2 (Department's Change in Specification), Schedule 12 Part 4 paragraph 1 (Additional Works), Schedule 12 Part 5 paragraph 1.1 (Compensation Events), Schedule 12 Part 6 paragraph 6.1 (Change in Costs), Schedule 13 Part 1 paragraph 1.1 (Additional Works Notice), Schedule 13 Part 3 paragraph 1.1 (Subsequent Scheme Notice), Schedule 13 Part 5 paragraph 3.1 (Safety Improvement Notice) and Schedule 15 paragraphs 1 and 2 (Disputes Resolution Procedure); 19.16 NOTIFICATION OF EVENTS UNDER DBFO CONTRACT Promptly upon becoming aware of the same, notify the Agent of the happening of any Compensation Event, Delay Event, or Eligible Change to the extent it is not otherwise required to do so under Clause 19.15 and shall pursue its rights and remedies in relation thereto under the DBFO Contract in accordance with the terms and conditions thereof (where failure to do so may have a Material Adverse Effect or a material adverse effect on the interests of the Banks) and shall keep the Agent informed in relation thereto; 40 19.17 NOTIFICATION OF EVENTS UNDER CONSTRUCTION CONTRACT Promptly upon becoming aware of the same, notify the Agent of (i) any continuing and material breach of the Construction Contract which is unremedied; and (ii) notify the Agent and the Technical Adviser of, and involve the Agent and the Technical Adviser in, any consultation process relating to a dispute or difference under the Construction Contract; 19.18 INFORMATION Promptly deliver to the Agent in sufficient copies for the Banks: (i) each Annual Report issued by it pursuant to Schedule 14 Part 2 paragraph 3 of the DBFO Contract; (ii) each Works Programme or variation thereof provided by it pursuant to Clause 10 of the DBFO Contract; (iii) any Termination Accounts (and annexures) prepared pursuant to Clause 40.1 of the DBFO Contract; (iv) all reports and/or information required to be supplied by the Borrower to the Secretary of State pursuant to the DBFO Contract; 19.19 PROTESTOR ACTION Promptly notify the Agent of any protestor action as contemplated by Clause 8.11 of the DBFO Contract; 19.20 PENALTY POINTS Promptly notify the Agent of the receipt by it of (i) a cumulative total of 10 (or any multiple thereof) Penalty Points in any 12 month period; and (ii) once it has received a cumulative total of 80 or more Penalty Points in any 12 month period, each Penalty Point received by it thereafter; 19.21 REVISED FINANCIAL MODEL Promptly deliver to the Agent in the event that the Financial Model is amended or varied a computer disc containing such revised Financial Model in an agreed format; 19.22 COPIES OF SUB-CONTRACTS Ensure that any sub-contracts providing for the carrying out of operations and maintenance services required to be carried out by the Borrower under the DBFO Contract are renewed or replaced at least three months prior to the expiry thereof (and promptly deliver to the Agent certified true copies of any such renewal or replacement); any such renewed or replaced sub-contracts shall themselves be renewed or replaced 41 three months prior to their expiry (and copies of any such renewed or replacement sub-contracts delivered to the Agent) and so on; 19.23 PROJECT DOCUMENTS Without prejudice to Clause 19.22 deliver to the Agent certified true copies of any further Project Documents entered into by it after the date hereof; 19.24 NOVATION OF OPERATIONS AND MAINTENANCE CONTRACTS If so requested by the Agent, procure that any operations and maintenance contract entered into by it as referred to in Clause 17.22 is made on terms such that it is capable of being novated in favour of the Banks and/or any nominee of the Banks in the event the Banks exercise their step-in rights under the Direct Agreement; 19.25 FINANCIAL STATEMENTS Deliver to the Agent in sufficient copies for the Banks, as soon as practicable following publication thereof, the published audited financial statements (consolidated where appropriate) of YLHL, each of the Promoters and each Relevant Group Company; 19.26 DEFECTS Upon becoming aware of the same, promptly notify the Contractor of any Latent Defects or any other material defect and, if the Contractor is obliged to remedy such defect, require such defects to be remedied by the Contractor in accordance with the terms of the Construction Contract; 19.27 SUPPLY OF INFORMATION BY AGENT Permit the Agent to deliver to the Secretary of State any information relating to the Project which is in the possession or under the control of the Agent or the Banks in accordance with Clause 4.15 of the Direct Agreement; 19.28 ISSUE OF INFORMATION MEMORANDUM Promptly deliver to the Agent all information necessary for the Information Memorandum to be issued; 19.29 INTELLECTUAL PROPERTY The Borrower hereby covenants with the Agent on behalf of the Banks on like terms, mutatis mutandis, to Clauses 45.1, 45.2, 45.3.1 and 45.6.1 of the DBFO Contract. 20. REPRESENTATIONS BY THE BORROWER The following representations shall be deemed to be made by the Borrower on the date of each Utilisation Request (by reference to the facts and circumstances then existing). 42 20.1 VALIDITY AND ADMISSIBILITY IN EVIDENCE All acts, conditions and things required to be done, fulfilled and performed (including, without limitation, the obtaining of all consents, licences, permits, approvals, authorisations, rights of way, easements and access to any part of the Project site as and when required) in order (a) to enable it lawfully to carry out the Project, (b) to enter into, exercise its rights under and perform and comply with the obligations expressed to be assumed by it in each of the Finance Documents, (c) to ensure that the obligations expressed to be assumed by it in each of the Finance Documents are legal, valid and binding and (d) to make each of the Finance Documents admissible in evidence in England have been done, fulfilled and performed. 20.2 BINDING OBLIGATIONS Subject to the legal qualifications (but not the qualifications and assumptions of fact) contained in the legal opinion of Clifford Chance LLP to be delivered under paragraph (xix) of Schedule 1 of the Amendment and Restatement Agreement, the obligations expressed to be assumed by it in each of the Finance Documents are legal and valid obligations binding and enforceable on it in accordance with the terms thereof. 20.3 NO MATERIAL DEFAULTS It is not is in breach of or in default under any agreement to which it is a party or which is binding on it or any of its assets to an extent or in a manner which would or could reasonably be expected to have a Material Adverse Effect. 20.4 NO MATERIAL PROCEEDINGS No action or administrative proceedings (other than in relation to the Part 1 Liabilities) of or before any court or agency which could reasonably be expected to have a Material Adverse Effect has been started or (so far as it is aware) threatened. 20.5 NO OBLIGATION TO CREATE SECURITY Its execution of each of the Relevant Documents and its exercise of its rights and performance of its obligations thereunder will not result in the existence of nor oblige it to create any encumbrance over all or any of its present or future revenues or assets. 20.6 EXECUTION OF THE RELEVANT DOCUMENTS Its execution of each of the Relevant Documents and its exercise of its rights and performance of its obligations thereunder do not and will not: (i) conflict with any agreement, mortgage, bond or other instrument or treaty to which it is a party or which is binding upon it or any of its assets; (ii) conflict with its constitutive documents and rules and regulations; or 43 (iii) conflict with any applicable law or any legally binding regulation or official or judicial order. 20.7 INSURANCES The Insurances required to have been effected pursuant to Clause 19.11 (Insurances) have been duly effected and remain in full force and effect and there has been no failure to disclose or (to the best of the knowledge and belief of the Borrower) any other event or circumstance which is reasonably likely to entitle any insurer to avoid the same or to reduce its liability thereunder to an amount less than the limit of liability expressly stated in the relevant policy. 20.8 INTELLECTUAL PROPERTY The Borrower has available to it all intellectual property of any description which is material to the carrying out by it of the Project. 20.9 EVENT OF DEFAULT No Event of Default has occurred hereunder which has not been already waived or remedied; 21. NEGATIVE COVENANTS The Borrower shall not: 21.1 NEGATIVE PLEDGE Create or permit to subsist any encumbrance over all or any of its present or future revenues or assets other than: (i) any lien arising by operation of law in the ordinary course of business and securing amounts not more than 20 days overdue or which are being contested in good faith; (ii) the Security Documents; (iii) subject to the priority of the Security Documents any encumbrance in respect of unpaid tax or arising under an attachment or similar process or out of judgements or awards whilst the tax or other amount concerned is being contested by the Borrower in good faith on reasonable grounds; (iv) any encumbrance contained in a Finance Document; (v) any encumbrance which consists of a retention of title on normal commercial terms imposed by a supplier of materials and equipment to the Borrower in the ordinary course of its business; 44 (vi) a legal charge granted to the Secretary of State or any of the Senior Financiers over the Retention Account; (vii) any encumbrance in favour of EIB pursuant to Clause 4.1.2(c) of the EIB Facility Agreement; 21.2 LOANS AND GUARANTEES Make any loans, grant any credit (save in the ordinary course of business) or give any guarantee or indemnity in respect of financial indebtedness (save as contemplated hereby) to or for the benefit of any person or otherwise voluntarily assume any liability, whether actual or contingent, in respect of any obligation of any other person other than: (i) loans in favour of employees not at any time exceeding (pound)50,000 in aggregate; (ii) as contained in any Finance Document; (iii) Authorised Investments permitted by the Intercreditor Agreement; (iv) loans made on terms and conditions substantially similar to those contained in the Upstream Loan Agreement for the purpose of making any Distributions in accordance with the Intercreditor Agreement; (v) loans permitted pursuant to Clause 12.3(xviii) of the Intercreditor Agreement, provided that in the case of loans on terms not substantially similar to those contained in the Upstream Loan Agreement the terms of any such loans have been previously approved by the Agent (acting on the instructions of the Majority Banks) (such approval not to be unreasonably withheld); or (vi) loans made from amounts standing to the credit of the Company Account on the terms and conditions of an Upstream Loan Agreement; 21.3 ALTERATION OF SHARE RIGHTS Alter any rights attaching to its issued shares in existence at the date hereof or issue any new shares other than to YLHL; 21.4 DISPOSALS Save as contemplated hereby and by the Intercreditor Agreement, sell, lease, transfer or otherwise dispose of, by one or more transactions or series of transactions (whether related or not), the whole or any part of its revenues or its assets other than the disposal of immaterial assets which are worn out or obsolete or assets which are to be replaced; 21.5 ABANDONMENT Abandon or withdraw from the Project or propose any abandonment or withdrawal from the Project (other than to the Banks); 45 21.6 TERMINATION OR AMENDMENT ETC OF DBFO CONTRACT OR CONSTRUCTION CONTRACT Terminate, suspend, cancel, amend or vary (i) the DBFO Contract (except that the Borrower may agree amendments or variations to the DBFO Contract (other than to Clauses 3.3, 3.4, 4, 8, 9, 10, 11, 12, 13, 15, 17, 19, 24, 25, 27.9, all of Parts IV and V, Clauses 41, 43, 48, 51 or Schedules 1, 2, 3, 4, 6, 9, 11, 12, 13, 15, Part 2 of Schedule 16 or Schedule 18 thereof) to the extent that such amendment or variation is beneficial or immaterial to the interests of the Banks and does not have a Material Adverse Effect) or (ii) (by itself or through the Employer's Agent) the Construction Contract (other than to Clauses 6.2.2, 17, 31.3 or 35 thereof and to the extent that any amendment or variation of such Clauses is beneficial or immaterial to the interests of the Banks and in either case does not have a Material Adverse Effect); 21.7 AMENDMENTS OF OTHER PROJECT DOCUMENTS Amend or vary any of the terms and conditions of any Project Document (other than the DBFO Contract and the Construction Contract) in any way which may have a Material Adverse Effect or have a material adverse effect on the interests of the Banks; 21.8 TERMINATION ETC OF OTHER PROJECT DOCUMENTS Terminate, suspend or cancel any of the Project Documents (other than the DBFO Contract and the Construction Contract) unless the Borrower has supplied to the Agent a substitute for any Project Document (the form, terms and parties of which are satisfactory to, and approved by, the Majority Banks prior to its execution); 21.9 NEW PROJECT DOCUMENTS Enter into any new Project Documents except: (i) contracts expressly permitted under any other provision of this Agreement; (ii) contracts approved by the Majority Banks; or (iii) contracts which are immaterial (including contracts of employment for employees); 21.10 AMENDMENT OF EIB FACILITY Amend or vary any of the terms and conditions of the EIB Facility Agreement or (save as shall be required to comply with the provisions of the Project Documents) take any action or omit to take any action which would or might result in the conditions contained in Clause 12.1 (Release Condition) thereof not being fulfilled on the dates therein specified; 21.11 ASSIGNMENT BY CONTRACTOR Consent to any assignment by the Contractor of the Construction Contract or any part thereof or any benefit, obligation or interest therein or thereunder; 46 21.12 FINANCIAL INDEBTEDNESS Incur any financial indebtedness, whether direct or indirect, actual or contingent, other than: (i) under the Finance Documents; (ii) under the agreements evidencing the Subordinated Loans; (iii) any financial indebtedness as permitted by Clause 21.17; (iv) operating leases or hire purchase agreements where the amount of rentals payable does not exceed (pound)100,000 (indexed in line with RPI) in any year; and (v) any loans made by either of the Promoters or YLHL which are subordinated to the priority level of and pari passu with Distributions; 21.13 THE BORROWER'S BUSINESS Carry on any business other than such business as is contemplated by the DBFO Contract, or as may be related or incidental thereto, or establish any subsidiary or merge or consolidate with any other person; 21.14 AVOIDANCE OF INSURANCES Take or omit to take any action whereby any of the Insurances which it is required to carry may become avoided; 21.15 AMENDMENT OF SUBORDINATED FACILITIES/UPSTREAM LOAN AGREEMENT Amend or vary any of the terms and conditions of the Commercial Subordinated Loan Agreement or the Upstream Loan Agreement unless the Majority Banks, acting reasonably, consider that such amendment or variation is not adverse to their interests; 21.16 PAYMENTS OF SUBORDINATED LOANS Pay any interest or fees, repay or prepay any principal or make any other payment in connection with any of the Subordinated Loans other than in accordance with the payment cascade set out in Clause 12.3 of the Intercreditor Agreement or from amounts standing to the credit of the Company Account; 21.17 FURTHER HEDGING ARRANGEMENTS Enter into any hedging arrangements (including any forward foreign exchange transactions, options or swaps) without the consent of the Majority Banks (save for (i) the Hedging Contracts and (ii) hedging arrangements in respect of that portion of the Subordinated Facility Documents where the Borrower's interest rate exposure is floating providing that such hedging arrangements are with a Subordinated Lender (as defined in 47 the Intercreditor Agreement) and that the Borrower's liabilities thereunder and/or in relation thereto are Subordinated Liabilities (as defined in the Intercreditor Agreement)); 21.18 ADDITIONAL WORKS Tender, or enter into any contract, for Additional Works; 21.19 PROPOSALS Make any proposal for any Alternative Proposal, DBFO Co's Works Change, Improvement, Safety Improvement or Subsequent Scheme or, if to do so may have a Material Adverse Effect or a material increase in cost or result in a claim for an increase in price under the Construction Contract, make any other proposal or take any other action as is contemplated by Clause 3.2 or 12.2.1 of the DBFO Contract; 21.20 COSTS AND LIABILITIES Incur any costs or liabilities in connection with the operation of the Project and the carrying out of its rights and obligations under the DBFO Contract otherwise than: (i) as contemplated in the Project Budget most recently delivered by the Borrower to the Agent pursuant to Clause 16 (Project Budgets) as the same may be agreed pursuant to Clause 16.3 (Agreement of Project Budget); or (ii) as required to comply with its obligations under any Project Document provided that, if the incurring of such liability would result in the aggregate of costs and liabilities incurred and forecast to be incurred in the financial year covered by the Project Budget being in excess of the amount stated in the Project Budget, the payment of such excess can be funded from: (a) funds made available pursuant to DBFO Contract (other than funds which are or will be required on (or on the Repayment Date next following) receipt thereof to be applied under the terms and conditions of the agreements(s) evidencing the relevant indebtedness in accordance with Clause 12.3 of the Intercreditor Agreement); and/or (b) the (pound)100,000 balance that is to stand to the credit of the Operating Amount; and/or (c) the proceeds of any share subscription or subordinated loans permitted hereunder which have been received or have been unconditionally committed (but, if committed, the commitment must be given by counterparties and in form and substance satisfactory to the Majority Banks); 48 21.21 EXERCISE OF RIGHTS Without prejudice to the Borrower's obligation to comply with its obligations under the Construction Contract, exercise or omit to exercise, or allow the Employer's Agent to exercise or omit to exercise, any of its rights, powers or discretions under the Construction Contract if to do so may have a Material Adverse Effect; 21.22 ACCOUNTING REFERENCE DATE Change its accounting reference date; 21.23 FINANCIAL MODEL Amend or vary the Financial Model unless otherwise permitted pursuant to this Agreement or the Intercreditor Agreement; 21.24 EMPLOYER'S AGENT ETC Without prior notification to, and consultation with, the Agent and the Technical Adviser, (i) authorise the Contractor to publish any articles or other material relating to any dispute arising under the Construction Contract or any information regarding any such dispute, (ii) refer any dispute under the Construction Contract to the Dispute Resolution Procedure, or (iii) agree any replacement for the Independent Engineer or any variation to the Independent Engineer's terms of appointment; 21.25 CONSORTIUM RELIEF Do anything which would prevent it from complying with its obligations under Clause 17 of the Shareholders Agreement; 21.26 DISTRIBUTIONS Declare, make or pay any dividends or other distributions except to the extent lawful and permitted by Clause 12.3(xviii) of the Intercreditor Agreement or to the extent of any amounts standing to the credit of the Company Account. 22. EVENTS OF DEFAULT 22.1 FAILURE TO PAY The Borrower fails to pay any sum due from it hereunder or under any other Finance Document at the time, in the currency and in the manner specified herein within three business days of the date it becomes due. 22.2 MISREPRESENTATION Any representation or statement made by the Borrower in this Agreement prior to the Amendment Date or any of the other Finance Documents to which it is a party or in any notice or other document, certificate or statement delivered by the Borrower pursuant 49 hereto or thereto or in connection herewith or therewith, is or proves to have been incorrect or misleading in any material respect when made. 22.3 SPECIFIC COVENANTS The Borrower fails duly to perform or comply with any of the obligations expressed to be assumed by it in Clause 15 (Financial Information), Clause 16 (Project Budgets), Clause 19 of the Intercreditor Agreement (Project Forecasts), Clause 18 (Project Accounts and Cashflows), Clause 19.11 (Insurances) or Clause 20 (Negative Covenants) and (but only in relation to Clause 20 and if such failure is capable of remedy in the opinion of the Agent) such failure is not remedied within 15 days of such failure. 22.4 OTHER OBLIGATIONS Without prejudice to Clause 22.3, the Borrower fails duly to perform or comply with any of the obligations expressed to be assumed by it in Clause 19 (Positive Covenants) not mentioned in Clause 22.3 or with any other obligation expressed to be assumed by it in this Agreement or any other Finance Document to which it is party and such failure is either not capable of remedy or, if capable of remedy, is not remedied in the case of any of the obligations in Clause 19 within 15 days of such failure and in the case of any other obligation within thirty days after the Agent has given notice thereof to the Borrower. 22.5 CROSS DEFAULT Any financial indebtedness of the Borrower is not paid when due or, if there is an originally agreed grace period, within such grace period, or any financial indebtedness of the Borrower is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default or mandatory prepayment event (however the same may be defined or described, however caused, and whether or not involving fault) or any creditor or creditors of the Borrower become entitled to declare any financial indebtedness of the Borrower due and payable prior to its specified maturity as a result of an event of default or mandatory prepayment event (however the same may be defined or described, however caused, and whether or not involving fault) Provided that an Event of Default shall not occur under this Clause 22.5 (unless the financial indebtedness in question includes indebtedness under any Finance Document) if (in aggregate) it does not exceed (pound)100,000. For the avoidance of doubt the capitalisation of any interest in respect of a Subordinated Facility or the deferment of the payment of any Subordinated Facility pursuant to the terms of the Intercreditor Agreement shall not of itself constitute an Event of Default under this Clause 22.5. 22.6 DEFAULT OF PROMOTERS OR RELEVANT GROUP COMPANY Subject to Clause 22.30, prior to the twelfth anniversary of the date of issue of the Completion Certificate any financial indebtedness of either Promoter or any Relevant Group Company is not paid within two business days of the due date or, if there is an originally agreed grace period which is longer, within such grace period or any financial indebtedness of either Promoter or any Relevant Group Company is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event 50 of default or mandatory prepayment event (however the same may be defined or described, however caused, and whether or not involving fault) or any creditor or creditors of either Promoter or any Relevant Group Company become entitled to declare any financial indebtedness of either Promoter or any Relevant Group Company due and payable prior to its specified maturity as a result of an event of default or mandatory prepayment event (however the same may be defined or described, however caused, and whether or not involving fault) Provided that an Event of Default shall not occur under this Clause 22.6 if such financial indebtedness (in the case of Macquarie European Infrastructure Plc) does not exceed (pound)5,000,000 in aggregate or (in the case of Balfour Beatty plc and Balfour Beatty Civil Engineering Limited) does not exceed (pound)5,000,000 in respect of any one obligation and does not exceed (pound)20,000,000 in aggregate and is, in either case, incurred other than under a Relevant Document. 22.7 INSOLVENCY AND RESCHEDULING Subject to Clause 22.30: (a) the Borrower, or (b) any Promoter or any Relevant Group Company prior to the twelfth anniversary of the date of issue of the Completion Certificate, is unable to pay its debts as they fall due, commences negotiations with any one or more of its creditors with a view to the general readjustment or rescheduling of its indebtedness or makes a general assignment for the benefit of or a composition with its creditors. 22.8 WINDING-UP Subject to Clause 22.30: (a) the Borrower, or (b) any Promoter or any Relevant Group Company prior to the twelfth anniversary of the date of issue of the Completion Certificate, takes any corporate action or other steps are taken or legal proceedings are started (other than frivolous or vexatious actions) for its winding-up, dissolution, administration or re-organisation or for the appointment of a liquidator, receiver, administrator, administrative receiver, conservator, custodian, trustee or similar officer of it or of any or all of its revenues and assets Provided that this Clause 22.8 will not apply to any step or legal proceeding (other than a petition for an administration) if (i) the action concerned is not initiated, acquiesced in, nor supported by the Borrower, Promoter or Relevant Group Company or any Affiliate and that action is discharged within 21 days to the satisfaction of the Majority Banks or (ii) the action concerned is a voluntary solvent amalgamation, reconstruction, reorganisation, merger or consolidation or equivalent or analogous procedure in relation to the Promoter or any Relevant Group Company. 22.9 EXECUTION OR DISTRESS Subject to Clause 22.30, any execution or distress is levied against (unless any such execution is discharged within 14 days and is for an aggregate amount not exceeding (pound)100,000 in the case of the Borrower and the Contractor and (pound)1,000,000 in any other case), or an encumbrancer takes possession of, the whole or any part of, the property, undertaking or assets of, any of the Borrower or, prior to the twelfth anniversary of the date of issue of the Completion Certificate, any of the Relevant Group Companies. 51 22.10 ANALOGOUS EVENTS Subject to Clause 22.30, any event occurs which under the laws of any jurisdiction has a similar or analogous effect to any of those events mentioned in Clause 22.7 (Insolvency and Rescheduling), Clause 22.8 (Winding-up) or Clause 22.9 (Execution or Distress). 22.11 GOVERNMENTAL INTERVENTION By or under the authority of any government, (a) the management of the Borrower is wholly or partially displaced or the authority of the Borrower in the conduct of its business is wholly or partially curtailed or (b) all or a majority of the issued shares of the Borrower or YLHL, or the whole or any part of the Borrower's revenues or assets is seized, nationalised, expropriated or compulsorily acquired (other than a nonmaterial part thereof not required for the Project). 22.12 OWNERSHIP ETC. YLHL transfers or otherwise disposes (legally or beneficially) of any of the shares in the Borrower held by it; or (ii) there is a breach of Clause 41.3 of the DBFO Contract. 22.13 THE BORROWER'S BUSINESS The Borrower carries on any business other than such business as is contemplated by the DBFO Contract, or as may be related or incidental thereto, or establishes any subsidiary or merges or consolidates with any other person. 22.14 REPUDIATION The Borrower repudiates this Agreement or any of the other Finance Documents or does or causes to be done any act or thing evidencing an intention to repudiate this Agreement or any of the other Finance Documents. 22.15 VALIDITY AND ADMISSIBILITY At any time any act, condition or thing required at such time to be done, fulfilled or performed in order (a) to enable the Borrower lawfully to carry out the Project in all material respects and to enter into, exercise its rights under and perform the obligations expressed to be assumed by it in each of the Finance Documents, (b) to ensure that the obligations expressed to be assumed by the Borrower in each of the Finance Documents, are, subject to the qualifications of law (but not fact) set out in the legal opinion of Clifford Chance delivered to the persons who were then the Banks on or about the Execution Date, legal, valid and binding or (c) to make each of the Finance Documents admissible in evidence in England, is not done, fulfilled or performed. 22.16 ILLEGALITY At any time it is or becomes unlawful for the Borrower to perform or comply with any or all of its obligations under any of the Finance Documents or any of the obligations of the 52 Borrower under any of the Finance Documents are not or cease to be legal, valid and binding subject, in each case, to the qualifications of law (but not fact) set out in the legal opinion of Clifford Chance delivered to the Banks on or about the date of the Amendment and Restatement Agreement. 22.17 ADVERSE CHANGE Any circumstances arise which give reasonable grounds in the reasonable opinion of the Majority Banks for belief that there has been an adverse change (since the date of this Agreement) in the Project or the financial condition of the Borrower which is likely to have a Material Adverse Effect. 22.18 DEFAULT UNDER DBFO CONTRACT AND CONSTRUCTION CONTRACT The happening of any event of default or Termination Event as referred to or defined in the DBFO Contract or the happening of any default entitling termination by the Borrower under the Construction Contract. 22.19 PENALTY POINTS If: (i) the Borrower is awarded a total of 100 or more Penalty Points (after taking into account the reduction (if any) in Penalty Points pursuant to the proviso to Clause 24.2.1 of the DBFO Contract) in one year; or (ii) having already received one Warning Notice, the Borrower is awarded a total of 200 or more Penalty Points (after taking into account the reduction (if any) in Penalty Points pursuant to the proviso to Clause 24.2.1 of the DBFO Contract) in any subsequent three year period, and in either case: (a) the Borrower is unable to demonstrate within 7 days thereof to the reasonable satisfaction of the Agent that the level of Penalty Points is a direct result only of management difficulties and it has taken measures which have corrected the management difficulties which have given rise to such a level of Penalty Points being awarded at such a rate; or (b) if the Borrower does demonstrate the above, but a further 25 or more Penalty Points are awarded within the immediately following 60 day period, Provided that any Penalty Points which are being disputed in good faith pursuant to Clause 24.2.3 or 24.2.4 of the DBFO Contract shall only be taken into account to the extent they are taken into account in the DBFO Contract. 53 22.20 ABANDONMENT The Borrower abandons or withdraws from the Project or evidences any intention of abandoning or withdrawing from the Project. 22.21 BREACH OF CONSTRUCTION CONTRACT The Contractor serves any notice of termination of the Construction Contract in accordance with the terms thereof or the Contractor is in breach under the Construction Contract and such breach may have a Material Adverse Effect. 22.22 TERMINATION Any party to any of the other Project Documents serves any notice of termination, cancellation, suspension or default thereof in accordance with the terms thereof or is in default of its obligations thereunder (if such termination, cancellation, suspension or default may have a Material Adverse Effect). 22.23 RATIOS As evidenced by any Project Forecast delivered pursuant to the Intercreditor Agreement, the Annual Debt Service Cover Ratio or the Forecast Annual Debt Service Cover Ratio produced in accordance with Clause 19.2(v)(a) of the Intercreditor Agreement is less than 1.05:1. 22.24 ENVIRONMENTAL LIABILITY Any Finance Party incurs or will incur any material liability (not including, for the avoidance of doubt, a liability which would only arise upon an enforcement of security held by it) under or pursuant to any environmental law, decree, regulation, civil action or penal notice which such liability would not have been incurred by such person if such person was not party to the arrangements established under or pursuant to the Relevant Documents in the capacity or capacities in which such person is from time to time so party and within thirty days of notification thereof to the Borrower no proposal has been made by the Borrower which is acceptable to such person for the unconditional discharge or cancellation of such liability in full and/or the compensation of such person in respect thereof. 22.25 CONSENTS ETC Any consent, licence, permit, approval or authorisation in relation to the Project or any Relevant Document is suspended, cancelled, revoked, forfeited, surrendered or terminated (whether in whole or in part) or otherwise ceases to be in full force and effect to an extent or in a manner which will have a Material Adverse Effect. 54 22.26 TOTAL LOSS The whole or any material part of the Project is assessed by the relevant insurers to constitute a total loss for insurance purposes. 22.27 NO MATERIAL PROCEEDINGS (i) Any actions or administrative proceedings of or before any court or agency have been started or threatened which could reasonably be expected to have a Material Adverse Effect, other than in relation to the Part 1 Liabilities. (ii) If, in relation to the Part 1 Liabilities: (1) a first judgment is granted against the Borrower in favour of the Secretary of State in an amount (the "Judgment Amount") which together with all outstanding costs, fees and expenses relating thereto for which the Borrower is or will be liable, is in excess of the amount then standing to the credit of the Claims Reserve Account; (2) a project forecast (prepared by utilising the Financial Model in substantially the same form as the then current Financial Model but adjusted to take into account the amount in excess of the Claims Reserve Account and any other adjustments which the Agent, acting reasonably following consultation with the Borrower) shows that at any time prior to the Final Repayment Date an Event of Default as set out in Clause 22.23 of this Agreement or Clause 10.1(e) of the EIB Facility Agreement has occurred or will occur; and (3) either the Borrower or the shareholders of the Borrower do not within 30 days of notification by the Agent that the project forecast prepared in accordance with Clause 22.27(ii)(2) shows that an Event of Default as set out in Clause 22.23 of this Agreement or Clause 10.1(e) of the EIB Facility Agreement has occurred or will occur, deposit into the Claims Reserve Account an amount required to ensure that such Event of Default is immediately remedied or shall not occur. For the purposes of this Clause 22.27(ii): (a) the provisions of Clause 19 of the Intercreditor Agreement shall not apply; and (b) the project forecast shall be prepared by the Agent; and (c) the Borrower shall promptly upon being requested to do so by the Agent, provide the Agent with a reasonable estimate of all outstanding costs, fees and expenses contemplated in Clause 22.27(ii)(1). 55 22.28 ACCELERATION AND CANCELLATION Upon the occurrence of an Event of Default and at any time thereafter if the Event of Default is continuing, the Agent (if so instructed by Majority Banks and subject to Clause 28.2 of the Intercreditor Agreement) shall, by written notice to the Borrower: (i) declare the Advances to be immediately due and payable (whereupon the same shall become so payable together with accrued interest thereon and any other sums then owed by the Borrower hereunder) or declare the Advances to be due and payable on demand of the Agent; and/or (ii) require the Borrower to deposit (and the Borrower shall forthwith so deposit) into the Cash Collateral Account an amount equal to the maximum aggregate actual and contingent liability of each Bank and the Issuing Bank under the Letters of Credit; and/or (iii) require the Security Trustee to exercise any and all such rights as may be available to it under any of the Security Documents and/or require the Intercreditor Agent to exercise any and all such rights (including step-in rights) as may be available to it under the Direct Agreement. 22.29 ADVANCES DUE ON DEMAND If, pursuant to Clause 22.28 (Acceleration and Cancellation), the Agent declares the Advances to be due and payable on demand of the Agent or pursuant to Clause 5.2(iii) (Conversion to Tranche B Advance) an Advance is repayable on demand of the Agent, then, and at any time thereafter, the Agent (if so instructed by Majority Banks and subject to Clause 28.2 of the Intercreditor Agreement) shall by written notice to the Borrower: (i) require repayment of the Advances on such date as it may specify in such notice (whereupon the same shall become due and payable on such date together with accrued interest thereon and any other sums then owed by the Borrower hereunder) or withdraw its declaration with effect from such date as it may specify in such notice; and/or (ii) select as the duration of any Interest Period which begins whilst such declaration remains in effect a period of six months or less. 22.30 PROMOTER AND RELEVANT GROUP COMPANY If any of the events referred to in Clause 22.6 to 22.10 occurs in relation to a Promoter or a Relevant Group Company it shall not thereby constitute an Event of Default unless the event in question is reasonably likely to have a Material Adverse Effect or to materially affect the interests of the Finance Parties (after taking account of the ability of the other Promoter or Relevant Group Companies (as the case may be) to which the events have not occurred to comply with their respective obligations under the Relevant Documents). 56 PART 8 DEFAULT INTEREST AND INDEMNITY 23. DEFAULT INTEREST, INDEMNITY AND RELEASE 23.1 DEFAULT INTEREST Each Unpaid Sum shall bear interest for the period from and including the date on which it fell due up to but excluding the date of actual payment and calculated by reference to successive Interest Periods relating thereto each of which (other than the first) shall start on the last day of the preceding such Interest Period and the duration of each of which shall be selected by the Agent (having regard to the likely period of the default) Provided that the first Interest Period relating to an Unpaid Sum which is all or part of an Advance which became due and payable otherwise than on the last day of an Interest Period relating to that Advance shall be of a duration equal to the unexpired portion of that Interest Period relating to that Advance. 23.2 RATE OF DEFAULT INTEREST The rate of interest applicable to an Unpaid Sum during an Interest Period relating thereto (both before and after judgment) shall be the percentage rate per annum which exceeds by one per cent. the rate which would have been applicable thereto had it been an Advance with a corresponding Interest Period Provided that the rate of interest applicable to an Unpaid Sum which is all or part of an Advance which became due and payable otherwise than on the last day of an Interest Period relating to that Advance shall, during the first Interest Period relating to that Unpaid Sum, be the percentage rate per annum which exceeds by one per cent. the rate applicable to that Advance immediately before it became so due and payable. 23.3 PAYMENT OF DEFAULT INTEREST Interest on an Unpaid Sum accrued under Clause 23.1 shall be due and payable and shall be paid by the Borrower at the end of each Interest Period relating thereto or on such other date as the Agent may specify by written notice to the Borrower. 23.4 BROKEN PERIODS If any Bank receives or recovers all or any part of its share of an Advance or an Unpaid Sum otherwise than on the last day of the then current Interest Period relating thereto, the Borrower shall pay to the Agent for account of that Bank within seven days of demand such an amount equal to the amount (if any) by which (a) the additional interest which would have been payable on the amount so received or recovered had it been received or recovered on the last day of that Interest Period exceeds (b) the amount of interest which in the reasonable opinion of the Agent would have been payable to the Agent on the last day of that Interest Period in respect of a sterling deposit equal to the amount so received or recovered placed by it with a prime bank in London for a period starting on the third business day following the date of such receipt or recovery and ending on the last day of that Interest Period. 57 23.5 BORROWER'S INDEMNITY The Borrower undertakes to indemnify: (i) each of the Finance Parties in respect of all proceedings, costs, claims, liabilities, damages, demands, penalties, losses, expenses and fees (including legal fees and cash) which it may sustain or incur as a consequence of, or in any way relating to, any default by the Borrower in the due performance of any of the obligations expressed to be assumed by it in any of the Finance Documents; (ii) each Bank against any loss it may suffer or incur as a result of its funding or making arrangements to fund its portion of an Advance requested by the Borrower hereunder but not made by reason of the operation of any one or more of the provisions hereof; and (iii) each Finance Party which is party to a Hedging Contract in accordance with the terms of the relevant Hedging Contract. 23.6 UNPAID SUMS AS ADVANCES For the purposes of Clause 14.1 (Increased Costs) and Schedule 6 (Associated Costs Rate), each Bank's share of an Unpaid Sum shall be treated as an advance made by that Bank hereunder. 58 PART 9 PAYMENTS 24. CURRENCY OF ACCOUNT AND PAYMENT 24.1 CURRENCY OF ACCOUNT Sterling is the currency of account and payment for each and every sum at any time due from the Borrower hereunder. 25. ACCOUNTS, ETC 25.1 BANKS' ACCOUNTS Each Bank shall maintain in accordance with its usual practice accounts evidencing the amounts from time to time lent by and owing to it hereunder. 25.2 AGENT'S ACCOUNT The Agent shall maintain on its books a control account or accounts in which shall be recorded (i) the amount of each sum due or to become due from the Borrower hereunder and each Bank's share therein and (ii) the amount of any sum received or recovered by the Agent hereunder and each Bank's share therein. 25.3 OBLIGATIONS OF THE BORROWER In any legal action or proceedings arising out of or in connection with this Agreement, the entries made in the accounts maintained pursuant to Clauses 25.1 and 25.2 shall, in the absence of manifest error, be prima facie evidence of the existence and extent of the obligations of the Borrower therein recorded. 25.4 CALCULATIONS Commission and interest payable hereunder shall be calculated on the basis of a year of 365 days and the actual number of days elapsed. 25.5 REFERENCE BANKS' QUOTATIONS If a quotation required of a Reference Bank under the foregoing provisions of this Agreement cannot be obtained by the Agent, the rate for which such quotation was required shall be determined on the basis of those quotations which are supplied to the Agent. 25.6 WEIGHTED AVERAGE INTEREST RATES If a Bank fails to supply the Agent with a rate required for the purpose of the determination of a weighted average under Clause 8.1(ii) (Market Disruption), that Bank shall be deemed to have supplied the Agent with a rate equal to the arithmetic mean of 59 the rates which were supplied to the Agent for the purpose of determining that weighted average. 25.7 BANKS' CERTIFICATES A certificate of a Bank as to the amount for the time being required to indemnify it against any such cost or liability as is mentioned in Clause 14.1 (Increased Costs) shall (a) in the absence of manifest error, be prima facie evidence in any legal action or proceedings arising out of or in connection with this Agreement and (b) give reasonable details of the amount claimed and be accompanied by documentary evidence in support thereof to the extent practicable and lawful Provided that such Bank shall not be obliged pursuant hereto to disclose any confidential information relating to the organisation of its affairs. 26. PAYMENTS 26.1 PAYMENTS TO THE AGENT On each date on which an amount is due from the Borrower hereunder the Borrower shall make the same available to the Agent by payment in sterling and in same day funds to the Agent's Account for account of the person or persons entitled thereto. 26.2 PAYMENTS BY THE AGENT Any payment made under Clause 26.1 for the account of a Bank shall be made by the Agent to that Bank for value the same day by transfer for account of that Bank's Lending Office to such account of that Bank with such bank in London as that Bank shall have previously notified to the Agent on not less than five business days' notice. 26.3 NO SET-OFF All payments to be made by the Borrower hereunder shall be made free and clear of and without deduction for or on account of any set-off or counterclaim. 26.4 CLAWBACK Where a sum is to be paid hereunder to the Agent for account of another person, the Agent shall not be obliged to make the same available to that other person until it has been able to establish to its satisfaction that it has actually received such sum, but if it does so and it proves to be the case that it had not actually received the sum it paid out, then the person to whom such sum was so made available shall on request refund the same to the Agent together with an amount sufficient to reimburse the Agent for any amount it may have been required to pay out by way of interest on moneys borrowed to fund the sum in question during the period beginning on the due date for payment thereof and ending on the date on which it receives the same. 60 26.5 INDEMNITY PAYMENTS Any payment to be made by the Borrower which is expressed to be by way of indemnity shall be paid within 21 days of demand by the Agent therefor. 27. REDISTRIBUTION OF PAYMENTS AND SET-OFF 27.1 REDISTRIBUTION OF PAYMENTS If at any time the proportion which any Bank (a "RECOVERING BANK") has received or recovered (whether by payment, exercise of a right of set-off or otherwise) in respect of its portion of any payment to be made under this Agreement by the Borrower for account of such Bank and one or more other Banks ("THE RELEVANT PAYMENT") is greater (the amount of the excess being herein called "THE EXCESS AMOUNT") than the proportion thereof received or recovered by the Bank or Banks receiving or recovering the smallest proportion thereof (which shall include a nil receipt), then: (i) such Recovering Bank shall promptly pay to the Agent an amount equal to the excess amount; (ii) there shall thereupon fall due from the Borrower an amount equal to the amount paid out by such Recovering Bank pursuant to paragraph (i), the amount so due being, for the purposes of this Clause, treated as if it were an unpaid part of such Recovering Bank's portion of the relevant payment; and (iii) the Agent shall treat the amount received by it from such Recovering Bank pursuant to paragraph (i) as if such amount had been received by it from the Borrower in respect of the relevant payment and shall pay the same to the persons entitled thereto (including such Recovering Bank) pro rata to their respective entitlements thereto, Provided always that this Clause 27.1 shall not oblige the Borrower at any time to pay an amount in excess of the aggregate amount of all sums, whether actual or contingent, expressed to be then due and payable by the Borrower pursuant to the terms of this Agreement. 27.2 REPAYABLE RECOVERIES If any sum (a "RELEVANT SUM") received or recovered by a Recovering Bank in respect of any amount owing to it by the Borrower becomes repayable and is repaid by such Recovering Bank, then: (i) each Bank which has received a share of such relevant sum by reason of the implementation of Clause 27.1 (Redistribution of Payments) shall, upon request of the Agent, pay to the Agent for account of such Recovering Bank an amount equal to its share of such relevant sum; and 61 (ii) there shall thereupon fall due from the Borrower to each such Bank an amount equal to the amount paid out by it pursuant to paragraph (a) above, the amount so due being, for the purposes hereof, treated as if it were the sum payable to such Bank against which such Bank's share of such relevant sum was applied. 27.3 SHARING AFTER PROCEEDINGS If any Bank shall commence any action or proceeding in any court to enforce its rights hereunder after consultation with the other Banks and with the consent of the Majority Banks (such consent not to be unreasonably withheld) and, as a result thereof or in connection therewith, shall receive any excess amount (as defined in Clause 27.1), then such Bank shall not be required to share any portion of such excess amount with any Bank which has the legal right to, but does not, join in such action or proceeding or commence and diligently prosecute a separate action or proceeding to enforce its rights in another court. 27.4 SET-OFF The Borrower authorises each Bank to apply any credit balance to which the Borrower is entitled on any account of the Borrower with that Bank in satisfaction of any sum due and payable from the Borrower to such Bank hereunder but unpaid; for this purpose each Bank is authorised to purchase with the monies standing to the credit of any such account such other currencies as may be necessary to effect such application. No Bank shall be obliged to exercise any right given to it by this Clause, but if it does so, it shall promptly notify the Agent, which shall notify the Borrower thereof. 62 PART 10 FEES, COSTS AND EXPENSES 28. COMMITMENT COMMISSION, L/C COMMISSION AND OTHER COMPENSATIONS 28.1 COMMITMENT COMMISSION The Borrower shall pay to the Agent for the account of the Banks a commitment commission on the uncancelled amount of the Available Tranche A Balance from day to day during the period beginning on the Amendment Date and ending on the last day of the Availability Period. Such commitment commission to be calculated at the rate of 0.375% per annum and payable semi-annually in arrears on each Repayment Date and on the last day of the Availability Period. 28.2 L/C COMMISSION The Borrower shall pay to the Agent for the account of each Bank commission on its Portion of the Required Value (as defined in the EIB Facility Agreement) of each Letter of Credit issued by the Issuing Bank ("L/C COMMISSION") from day to day during the period beginning on the date of issue thereof and ending on the date on which such Bank is under no further actual or contingent liability under such Letter of Credit, such commission to be calculated at the rate of the Applicable Margin and payable semi-annually in arrear and on the date on which the Banks cease to be under any further actual or contingent liability under such Letter of Credit. 28.3 ISSUING BANK The Borrower shall pay to the Issuing Bank for its own account a fee in the amounts and at the times specified in a letter dated on or about the Amendment Date from the Issuing Bank to the Borrower. 28.4 L/C COSTS The Borrower shall from time to time within seven days of demand by the Agent pay all stamp duty (if any) and all reasonable costs and expenses incurred by a Bank in connection with its Letter of Credit or normally charged by such Bank in respect of letters of credit issued or negotiated by it to the extent that the same are not paid by the beneficiary of such Letter of Credit. 28.5 UP-FRONT FEE The Borrower shall pay to the Arranger an up-front fee in the amount and at the time specified in a letter dated on or about the Amendment Date from the Arranger to the Borrower. 63 28.6 AGENCY FEE The Borrower shall on the date hereof and thereafter on each anniversary of the date hereof pay to the Agent for its own account an agency fee of the amount specified in a letter dated on or about the Amendment Date from the Agent to the Borrower. 28.7 AGENT'S COSTS The Borrower shall, from time to time on demand of the Agent, reimburse the Agent for its own account at such rates as the Agent may from time to time determine, acting reasonably, for the cost of utilising its management time and/or other resources in connection with taking all such steps or other action as the Agent may deem appropriate (acting on the instructions of Majority Banks) in connection with (i) any breach by the Borrower of its obligations hereunder or under any other Finance Document or any investigation as to whether any such breach may have occurred; (ii) the occurrence of any Event of Default or Potential Event of Default; or (iii) the preservation and/or enforcement of any of the rights of the Agent and the Banks hereunder or under any other Finance Document. 29. COSTS AND EXPENSES 29.1 AGENT/ARRANGER The Borrower shall indemnify the Agent and the Arranger in respect of all reasonable costs and expenses (including legal fees) incurred by them in connection with the preparation of the Finance Documents and the Project Documents and any other documents associated therewith, and the negotiation and completion of the transactions contemplated herein and therein, and for all reasonable costs and expenses of the Technical Adviser, and the Insurance Adviser, incurred in connection herewith. 29.2 FINANCE PARTIES The Borrower shall from time to time indemnify each Finance Parry in respect of all costs and expenses (including legal fees) incurred in or in connection with the preservation and/or enforcement of any of their respective rights under the Finance Documents. 29.3 TAXES ETC The Borrower shall pay all stamp, registration and other documentation taxes to which any of the Finance Documents or any judgment or order given or made in connection therewith is or at any time may be subject and shall from time to time within seven days of demand indemnify each Finance Party against any liabilities, costs, claims and expenses resulting from any failure to pay or any delay in paying any such tax Provided that the Borrower shall not be required to pay an amount to compensate any person for any penalty incurred by such person by reason of such person failing to make timely payment of tax to the relevant authorities in circumstances where such person had itself received (for value at least seven business days prior to the due date for payment thereof) 64 an amount hereunder from the Borrower sufficient to enable it to pay the same prior to such due date Provided that this Clause 29.3 shall not extend to any stamp duty, registration and other documentation taxes arising from a transfer under Part 12 of this Agreement. 65 PART 11 AGENCY PROVISIONS 30. THE AGENT AND THE FINANCE PARTIES 30.1 APPOINTMENT OF THE AGENT Each Finance Party hereby appoints the Agent to act as its agent in connection with the Finance Documents and authorises the Agent to exercise such rights, powers, authorities and discretion as are specifically delegated to the Agent by the terms thereof together with all such rights, powers, authorities and discretion as are reasonably incidental thereto. 30.2 AGENT'S DISCRETION The Agent may: (i) assume, unless it has, in its capacity as agent for the Finance Parties, received notice to the contrary from any other party hereto, that (i) any representation made by the Borrower in connection with the Finance Documents is true, (ii) no Event of Default or Potential Event of Default has occurred, (iii) the Borrower is not in breach of or default under its obligations under the Finance Documents and (iv) any right, power, authority or discretion vested in the Finance Documents upon the Majority Banks, the Finance Parties or any of them or any other person or group of persons has not been exercised; (ii) assume that the Lending Office of each Bank is that identified with its signature below (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee) until it has received from such Bank a notice designating some other office of such Bank to replace its Facility Office and act upon any such notice until the same is superseded by a further such notice; (iii) engage and pay for the advice or services of any lawyers, accountants, surveyors or other experts whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained; (iv) rely as to any matters of fact which might reasonably be expected to be within the knowledge of the Borrower upon a certificate signed by or on behalf of the Borrower; (v) rely upon any communication or document believed by it to be genuine; (vi) refrain from exercising any right, power or discretion vested in it as agent hereunder unless and until instructed by Majority Banks as to whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised; and 66 (vii) refrain from acting in accordance with any instructions of Majority Banks to begin any legal action or proceeding arising out of or in connection with this Agreement until it shall have received such security as it may require (whether by way of payment in advance or otherwise) for all costs, claims, losses, expenses (including legal fees) and liabilities together with any VAT thereon which it will or may expend or incur in complying with such instructions. 30.3 AGENT'S OBLIGATIONS The Agent shall: (i) promptly inform each Finance Party of the contents of any notice or document received by it in its capacity as Agent from the Borrower hereunder; (ii) promptly notify each Finance Party of the occurrence of any Event of Default or any default by the Borrower in the due performance of or compliance with its obligations under this Agreement of which the Agent has notice from any other party hereto; (iii) save as otherwise provided herein, act as agent hereunder in accordance with any instructions given to it by Majority Banks, which instructions shall be binding on all of the Finance Parties; and (iv) if so instructed by Majority Banks, refrain from exercising any right, power or discretion vested in it as agent hereunder. 30.4 EXCLUDED OBLIGATIONS Notwithstanding anything to the contrary expressed or implied herein, no Finance Party shall: (i) be bound to enquire as to (i) whether or not any representation made by the Borrower in connection with any of the Finance Documents is true, (ii) the occurrence or otherwise of any Event of Default or Potential Event of Default, (iii) the performance by the Borrower of its obligations under any of the Finance Documents or (iv) any breach of or default by the Borrower of or under its obligations under any of the Finance Documents; (ii) be bound to account to any Finance Party for any sum or the profit element of any sum received by it for its own account; (iii) be bound to disclose to any other person any information relating to the Borrower or the Project if such disclosure would or might in its opinion constitute a breach of any law or regulation or be otherwise actionable at the suit of any person; or (iv) be under any obligations other than those for which express provision is made herein. 67 30.5 INDEMNIFICATION Each Bank shall, from time to time on demand by the Agent, indemnify the Agent, in the proportion its share of the Loan (or, if no Advances have been made, its Available Commitment) bears to the amount of the Loan (or, if no Advances have been made, the Available Facility) at the time of such demand (or, if the Loan has then been repaid in full, immediately prior to the final repayment thereof), against any and all costs, claims, losses, expenses (including legal fees) and liabilities together with any VAT thereon which the Agent may incur, otherwise than by reason of its own gross negligence or wilful misconduct, in acting in its capacity as agent hereunder. 30.6 EXCLUSION OF LIABILITIES No Finance Party accepts any responsibility for the accuracy and/or completeness of the Information Memorandum or any other information supplied in writing or otherwise by the Borrower in connection herewith or for the legality, validity, effectiveness, adequacy or enforceability of any of the Finance Documents and no Finance Party shall be under any liability as a result of taking or omitting to take any action in relation to any of the Finance Documents, save in the case of gross negligence or wilful misconduct. 30.7 NO ACTIONS Each of the Finance Parties agrees that it will not assert or seek to assert against any director, officer or employee of the Agent or the Arranger any claim it might have against any of them in respect of the matters referred to in Clause 30.6 (Exclusion of Liabilities). 30.8 BUSINESS WITH THE GROUP The Agent and the Arranger may accept deposits from, lend money to and generally engage in any kind of banking or other business with the Borrower, either of the Promoters and each Relevant Group Company (or any Affiliate thereof) (including, without limitation, acting as agent or otherwise on behalf of any group of banks providing facilities to any of the foregoing). 30.9 RESIGNATION The Agent may resign its appointment hereunder at any time without assigning any reason therefor by giving not less than sixty days' prior written notice to that effect to each of the other parties hereto Provided that no such resignation shall be effective until a successor for the Agent is appointed in accordance with the succeeding provisions of this Clause 30. 30.10 SUCCESSOR AGENT If the Agent gives notice of its resignation pursuant to Clause 30.9 (Resignation), then any reputable and experienced bank or other financial institution may, after consultation with the Borrower, be appointed as a successor to the Agent by the Majority Banks 68 during the period of such notice but, if no such successor is so appointed, the Agent may, after consultation with the Borrower, appoint such a successor itself. 30.11 RIGHTS AND OBLIGATIONS If a successor to the Agent is appointed under the provisions of Clause 30.10 (Successor Agent), then (a) the retiring Agent shall be discharged from any further obligation hereunder but shall remain entitled to the benefit of the provisions of this Clause 30 and (b) its successor and each of the other parties hereto shall have the same rights and obligations amongst themselves as they would have had if such successor had been a party hereto. 30.12 OWN RESPONSIBILITY It is understood and agreed by each Finance Party that it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, creditworthiness, condition, affairs, status and nature of each member of the Group and, accordingly, each Bank warrants to the Agent and the Arranger that it has not relied on and will not hereafter rely on the Agent and the Arranger nor either of them: (i) to check or enquire on its behalf into the adequacy, accuracy or completeness of any information provided by the Borrower in connection with any of the Finance Documents or the transactions herein contemplated (whether or not such information has been or is hereafter circulated to such Bank by the Agent and the Arranger or either of them); or (ii) to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Borrower or any Relevant Group Company. 30.13 AGENCY DIVISION SEPARATE In acting as Agent for the other Finance Parties, the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments and, notwithstanding the foregoing provisions of this Clause 30, any information received by some other division or department of the Agent may be treated as confidential and shall not be regarded as having been given to the Agent's agency division. 30.14 CONFIDENTIAL INFORMATION Notwithstanding anything to the contrary expressed or implied herein and without prejudice to the provisions of Clause 30.13 (Agency Division Separate), the Agent shall not as between itself and the other Finance Parties be bound to disclose to any Bank or other person any information which is supplied by the Borrower to the Agent in its capacity as Agent for the Finance Parties and which is identified by the Borrower at the time it is so supplied as being confidential information Provided that the consent of the 69 Borrower to such disclosure shall not be required in relation to any information which in the opinion of the Agent relates to an Event of Default or Potential Event of Default or in respect of which the Banks have given a confidentiality undertaking in a form satisfactory to the Agent and the Borrower. 30.15 SYNDICATE MEETINGS (i) The Agent may at any time in its own discretion convene a meeting of the Banks; (ii) if authorised by a Relevant Instructing Group, the Agent shall (except where any other authority is required for the same by the express provisions of this Agreement) at any time convene a meeting of the Banks; (iii) whenever the Agent is to convene any such meeting it shall forthwith give notice in writing to the Banks of the day, time and place thereof and the nature of the business to be transacted thereat; (iv) for the purposes of this Clause 30.15 a "RELEVANT INSTRUCTING GROUP" means a group of Banks to whom in aggregate more than 20 per cent of the Outstandings are (or, immediately prior to its repayment were then) owed. 30.16 AMENDMENTS, WAIVERS ETC The Agent may, with the prior written consent of the Majority Banks, from time to time (i) enter into written amendments, supplements or modifications hereto; and (ii) at the request of the Borrower execute and deliver to the Borrower a written instrument waiving prospectively or retrospectively, on such terms and conditions as the Agent may specify in such instrument, any of the requirements of this Agreement Provided that: (i) no such waiver and no such amendment, supplement or modification shall, without the prior written consent of all the Banks, amend, modify or waive any of the provisions contained in this Agreement which would have the effect of: (a) reducing the Applicable Margin; or (b) reducing the amount of any sums due from the Borrower hereunder; or (c) increasing the Available Commitment of any Bank; or (d) extending the Final Repayment Date or changing the amount repayable by the Borrower on any Repayment Date; or (e) changing the definition of Majority Banks or Special Majority Banks; or (f) changing this Clause 30.16; or (g) reducing the L/C Commission payable pursuant to Clause 28.2; or (h) amending or waiving any of the provisions of Clause 19.4 (Claims Pari Passu); 70 (ii) no such waiver and no such amendment, supplement or modification shall, without the prior written consent of the Special Majority Banks, amend, modify or waive any of the provisions contained in this Agreement which would have the effect of: (a) amending or waiving any of the provisions of Clauses 19.5 (Obligations under Relevant Documents), 19.6 (Obligations under DBFO Contract and Lease) and 21.1 (Negative Pledge); or (b) amending or waiving any of the provisions of Clauses 21.5 (Abandonment), 21.6 (Termination etc of DBFO Contract or Construction Contract), 21.13 (The Borrower's Business), and 21.14 (Avoidance of Insurances), and provided further that any amendment, supplement or modification which would affect the rights or obligations of the Agent hereunder shall require its prior written consent. 30.17 SPECIAL MAJORITY BANKS For the purposes of Clause 30.16, "SPECIAL MAJORITY BANKS" means a group of Banks to whom more than 85 per cent of the total Outstandings of those Banks who do give instructions to the Agent at the relevant time are (or, immediately before their repayment, were) owed. 30.18 RECEIPT OF NOTICES Where the giving of notice to the Agent is required pursuant to the terms of this Agreement, the Agent shall only be deemed to have notice of any fact, request, occurrence or any other event as contemplated by the requirements for the giving of such notice upon receipt of written notice from the Arranger, the Issuing Bank, a Bank or the Borrower, as the case may be, in the manner set out in Clause 33 (Notices). 71 PART 12 ASSIGNMENTS AND TRANSFERS 31. BENEFIT OF AGREEMENT, TRANSFER ETC. 31.1 BINDING EFFECT This Agreement shall be binding upon and enure to the benefit of each party hereto and its successors and assigns. 31.2 ASSIGNMENT BY BORROWER The Borrower shall not, except with the prior consent of the Agent and the other Finance Parties, assign or transfer all or any of its rights, benefits and obligations hereunder. 31.3 TRANSFER BY BANKS Subject to Clause 31.5, a Bank may at any time at no cost to the Borrower transfer in accordance with this Clause 31 to any one or more banks or other lending institutions all or any of its rights, benefits and obligations hereunder, in which case such transfer shall be effected by the delivery to the Agent of a duly completed and duly executed Transfer Certificate and payment of a fee of (pound)1,500 by the Transferee to the Agent whereupon: (i) to the extent that in such Transfer Certificate the Bank party thereto seeks to transfer its rights, benefits and/or its obligations hereunder as a Bank, the Borrower and such Bank shall each be released from further obligations to the other hereunder and their respective rights and benefits against each other hereunder shall be cancelled (such rights, benefits and obligations being referred to in this Clause as "DISCHARGED RIGHTS AND OBLIGATIONS"); (ii) the Borrower and the Transferee party thereto shall each assume obligations towards and/or acquire rights and benefits from each other hereunder which differ from such discharged rights and obligations only insofar as the Borrower and such Transferee have assumed and/or acquired the same in place of the Borrower and such Bank; (iii) each of the Finance Parties other than the transferring Bank shall acquire the same rights and assume the same obligations between themselves hereunder as they would have acquired and assumed had such Transferee been an original party hereto as a Bank with the rights and/or the obligations acquired or assumed by it as a result of such transfer; and (iv) such Transferee shall become a party thereto as a "BANK". 31.4 AMOUNT OF TRANSFER Any transfer pursuant to Clause 31.3 shall be either such that the aggregate amount of the Outstandings thereby transferred (whether Tranche A Outstandings, Tranche B 72 Outstandings or a combination of the two) is not less than (pound)2,500,000 or such that such transfer comprises all of the Outstandings of the Bank effecting such transfer. 31.5 TRANSFER REQUIREMENTS No Bank may transfer under Clause 31.3 to a person who is not: (i) prior to final release of the Letters of Credit, a Qualifying Issuer; and (ii) a Qualifying Lender. 31.6 DISCLOSURE OF INFORMATION Any Finance Party may disclose to a potential assignee or to any person who may otherwise enter into a participation or other similar contractual relations with such Finance Party in relation to this Agreement a copy of this Agreement and such of the information supplied to the Agent and the Finance Parties pursuant to or in connection with this Agreement as such Finance Party shall consider appropriate Provided that prior to such disclosure such potential assignee or person has undertaken in writing to the Borrower and the Banks that it will be bound by the terms of Schedule 7 as if it were a Bank. 31.7 NO ADDITIONAL COSTS Where any Finance Party transfers all or any part of its obligations hereunder, the Borrower shall not be liable to pay any additional amounts under Clauses 13 (Taxes), 14 (Increased Costs) or 29.3 (Taxes etc) which would otherwise be payable from the effective date of such assignment or transfer as a result thereof and which would not have been payable had no such assignment or transfer taken place. 31.8 GLOBAL TRANSFER The Finance Parties may, as part of the strategy of the Arranger for syndication of the Facility, on a date (the "GLOBAL TRANSFER DATE") to be notified to the Borrower by the Agent not less than seven days prior to such Global Transfer Date, transfer all or part of their commitments to a Transferee pursuant to a transfer agreement (the "GLOBAL TRANSFER AGREEMENT") to be executed by the Banks and the Transferees and the Borrower in a mutually agreed form. Notwithstanding Clause 31.3, the Global Transfer Agreement will be in place of separate Transfer Certificates but shall provide for a transfer of all rights and obligations relating to the Outstandings transferred on the same basis as if individual Transfer Certificates had been entered into by the Banks and the Transferees. On the Global Transfer Date, the Banks may enter into such subparticipation agreements as are necessary to comply with the syndication strategy of the Arranger. 73 PART 13 MISCELLANEOUS 32. PARTIAL INVALIDITY, WAIVER AND AMENDMENTS 32.1 ILLEGALITY If at any time any provision hereof is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 32.2 NO WAIVER No delay or omission by any party hereto in exercising any of its rights hereunder shall operate or be construed as a waiver thereof nor shall a single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right of such party hereunder. 32.3 AMENDMENTS Any term hereof may only be amended in writing. 33. NOTICES 33.1 Each communication to be made hereunder shall be made in writing but, unless otherwise stated, may be made by telefax (provided a fax confirmation of transmission is received) or letter or electronically. 33.2 Any communication or document to be made or delivered by one person to another pursuant to or in connection with this Agreement shall (unless that other person has by fifteen days' written notice to such other person specified another address) be made or delivered to that other person at the address set out above or identified with its signature below and shall be deemed to have been made or delivered when despatched (and fax confirmation of transmission received) (in the case of any communication made by telefax) or (in the case of any communication made by letter) when left at that address or (as the case may be) ten days after being deposited in the post, postage prepaid, in an envelope addressed to it at that address or (in the case of any communication made electronically by a method approved by the Agent) when an email return receipt is received; Provided that if such communication or document would otherwise be deemed to have been received on a day which is not a business day it shall be deemed to have been received on the next subsequent business day. 33.3 Each communication and document made or delivered by one party to another pursuant to this Agreement shall be in the English language. 74 PART 14 LAW AND JURISDICTION 34. LAW This Agreement shall be governed by and construed in accordance with English law. 35. JURISDICTION 35.1 ENGLISH COURTS Each of the parties hereto irrevocably agrees for the benefit of each of the Agent, the Arranger and the Banks that the courts of England shall have jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and for such purposes irrevocably submits to the jurisdiction of such courts. 35.2 APPROPRIATE FORUM The Borrower irrevocably waives any objection which it may have now or hereafter to any of the courts referred to in Clause 35.1 being nominated as a forum to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and agrees not to claim that any such court is not a convenient or appropriate forum. 35.3 NON-EXCLUSIVE SUBMISSION The submission to the jurisdiction of the courts referred to in Clause 35.1 shall not (and shall not be construed so as to) limit the right of the Finance Parties or any of them to take proceedings against the Borrower in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not. 35.4 CONSENT TO ENFORCEMENT The Borrower hereby consents generally in respect of any suit, action or proceeding which may arise out of or in connection with this Agreement to the giving of any relief or the issue of any process in connection with such action or proceeding including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment which may be made or given in such action or proceeding. 35.5 WAIVER OF IMMUNITY To the extent that the Borrower may in any jurisdiction claim for itself or its assets immunity from suit, execution, attachment (whether in aid of execution, before judgment or otherwise) or other legal process and to the extent that in any such jurisdiction there may be attributed to itself or its assets such immunity (whether or not claimed) the 75 Borrower hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity to the full extent permitted by the laws of such jurisdiction. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. 76 SCHEDULE 1 THE BANKS BANK ABN AMRO BANK N.V. 77 SCHEDULE 2 FORM OF LETTER OF CREDIT(1) To: Dear Sirs, IRREVOCABLE LETTER OF CREDIT NO ISSUED PURSUANT TO THE EIB FACILITY AGREEMENT DATED 26 MARCH 1996 (AS AMENDED) 1. In this letter except where the context otherwise requires, the following expressions have the meanings set opposite them: "ISSUING BANK" [name, address and fax number] "EIB" European Investment Bank 100 boulevard Konrad Adeneur L-2950 Luxembourg - Kirchberg "BORROWER" Yorkshire Link Limited "BUSINESS DAY" a day on which banks are open for business in Luxembourg and London "DEMAND" EIB's first written notice of demand in the form set out in Appendix 2 "EXPIRY DATE" 31 March 2020 "FACILITY AGREEMENT" means the EIB Facility Agreement dated 26 March 1996 between EIB and the Borrower (as amended) "ISSUERS" the banks and financial institutions whose names and addresses are set out in the first column of Appendix 1 hereto "PARTICIPATION AGREEMENT" the percentage set opposite the name of each Issuer in the second column of Appendix 1 hereto "TOTAL SUM" (pound),[ ](2) - -------------------------- (1) Unless otherwise defined, terms used in this Part 2 have the meaning given to them in the EIB Facility Agreement. (2) Insert amount which is the Required Value of the Loan. 78 2. In consideration of EIB agreeing to accept this Letter of Credit, upon the Issuing Bank receiving before the Expiry Date a Demand, each of the Issuers irrevocably and unconditionally (but subject to the remaining provisions of this letter) agrees to pay to EIB its Participation Percentage of the amount specified in the Demand on the later of 5 Business Days after the receipt by the Issuing Bank of the Demand or such later date as may be specified in the Demand. 3. (a) The aggregate amount payable by each Issuer hereunder shall not exceed its Participation Percentage of the Total Sum. (b) Any payment made hereunder shall be made by transfer to an account in EIB's name with such bank as may be specified in the Demand, or in such other manner as may be acceptable to EIB directly by each Issuer in accordance with the terms of the Demand. (c) The obligations of the Issuers hereunder shall cease upon the Expiry Date except in respect of any Demand received by the Issuing Bank hereunder on or prior to such date. (d) The obligations of the Issuers hereunder are several and not joint and the Issuing Bank shall not be liable for any failure, nor shall any Issuer be liable for the failure, of any other Issuer to perform its obligations hereunder. (e) Save in its separate capacity as an Issuer, the Issuing Bank shall have no liability hereunder. (f) All demands made by EIB hereunder shall be made in accordance with part 18 of the Intercreditor Agreement. 4. Each Demand shall specifically refer to this Letter of Credit No and shall be given to the Issuing Bank by notice in writing by an authorised signatory of EIB at the Issuing Bank's address stated below or by tested telex to the number stated below. 5. The Letter of Credit may be amended only by an instrument in writing signed on behalf of all the parties hereto save that the delivery to the Issuing Bank of a notice from EIB in the form of Appendix 3 to this Letter of Credit shall have the effect as set out therein which shall take effect upon receipt of the same by the Issuing Bank. 6. This Letter of Credit shall be governed by and construed in accordance with the laws of England. This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits, 1993 Revision, International Chamber of Commerce Publication No. 500 insofar as the same are applicable (but so that the second sentence of Article 17 thereof shall be deemed excluded for this purpose with effect that, if this Letter of Credit expires during any interruption of business referred to in the first sentence of such Article, the Issuer whose business has been so interrupted shall remain liable to make payment under this Letter of Credit in respect of any demand no later than 15 Business Days after it has notified EIB that its business has ceased to be so interrupted). 79 7. This Letter of Credit is not capable of being assigned by EIB. Yours faithfully, (as Issuing Bank for and on behalf of the Issuers) Issuing Bank's address for Demands: [insert address of Issuing Bank] Issuing Bank's fax no. for Demands: [insert fax number of Issuing Bank] 80 APPENDIX 1 TO LETTER OF CREDIT NO NAMES AND ADDRESSES OF ISSUERS PARTICIPATION PERCENTAGE 81 APPENDIX 2 TO LETTER OF CREDIT NO To: [Issuing Bank] IRREVOCABLE LETTER OF CREDIT NO DATED (THE "LETTER OF CREDIT") 1. We refer to the above Letter of Credit issued by you as Issuing Bank for and on behalf of the Issuers, and hereby notify you that: (a) the Borrower has failed to make payment(s) of [(pound) ] in aggregate to ourselves under the Facility Agreement and two Business Days have elapsed since such failure; (b) pursuant to Clause 9.2 of the Facility Agreement we are entitled to demand payment from [name of Issuer(s) of the sum(s) of (pound) and (pound) respectively].(3) 2. Accordingly, we hereby demand payment no later than [date] of the sum of (being the aforementioned sum in default together with interest thereon at the contractual default rate from the due date thereof up to such date) [which sum is only payable by the Issuer(s) specified in (b) above in the amount(s) there specified).(4) [AND 3. In order to reduce the aggregate principal amount of the Loan to an amount such that the Adjusted Required Value is restored, we hereby demand payment on (insert next Payment Date) of the sum of (pound) (being the principal sum whose prepayment will restore the Adjusted Required Value of the Letter of Credit)].(5) Terms defined in the Facility Agreement or in the Letter of Credit shall have the same meanings in this demand. For European Investment Bank Dated: [ ] [authorised signatory] - -------------------------- (3) Required to be included appropriately amended in the case of a demand contemplated by Clause 9.2(e) of the Facility Agreement. (4) Insert where the demand is against particular issuer. (5) Where the Borrower's default is in respect of interest. 82 APPENDIX 3 TO LETTER OF CREDIT NO To: [Issuing Bank] IRREVOCABLE LETTER OF CREDIT NO DATED (THE "LETTER OF CREDIT") 1. We refer to the above Letter of Credit issued by you as Issuing Bank for and on behalf of the Issuers. 2. We are required to deliver this notice to you pursuant to Clause [6.5/12.2(a)] of the Facility Agreement. 3. The Total Sum under the Letter of Credit shall be reduced to (pound)[ ]. For European Investment Bank Dated: [ ] [authorised signatory] 83 SCHEDULE 3 PROJECT DOCUMENTS 1. The DBFO Contract. 2. The Construction Contract. 3. The Technical Services Agreement dated 26 March 1996 made between the Borrower and the Promoters. 4. The Shareholders Agreement. 5. The Secondment Agreement dated 26 March 1996 made between the Borrower and the Promoters. 6. The Custody Agreement dated 26 March 1996 made between the Secretary of State for Transport, the Borrower and the National Computing Centre. 7. The Lease entered into prior to the date of issue of the Completion Certificate between the Borrower and the Secretary of State. 84 SCHEDULE 4 SECURITY DOCUMENTS 1. The Debenture dated 26 March 1996 granted by Yorkshire Link Limited to the Security Trustee. 2. The Share Mortgage (incorporating floating charge) dated 26 March 1996 made between YLHL and the Security Trustee. 3. The Security Trust Agreement dated 26 March 1996 made between the Borrower, Lloyds Bank Plc (in various capacities) and others. 85 SCHEDULE 5 TRANSFER CERTIFICATE To: From: [ ] TRANSFER CERTIFICATE relating to the agreement ("THE FACILITY AGREEMENT") dated [ ] 1996 (as amended) whereby a letter of credit issuance facility and a floating rate sterling credit facility was made available to Yorkshire Link Limited ("THE BORROWER") by a group of banks on whose behalf ABN AMRO Bank N.V. ("THE AGENT") acted as agent in connection therewith. Terms defined in the Facility Agreement shall bear the same meaning herein. 1. [Transferor Bank] ("THE BANK") confirms the accuracy of the summary of its participation in the Facility Agreement set out in the Schedule below and requests [Transferee Bank] ("THE TRANSFEREE") to accept and procure the transfer to the Transferee of that part of such participation specified in the Schedule by countersigning and delivering this Transfer Certificate to the Agent at its address for the service of notices specified in the Facility Agreement. 2. The Transferee hereby requests the Agent to accept this Transfer Certificate as being delivered to the Agent pursuant to and for the purposes of Clause 28.3 of the Facility Agreement so as to take effect in accordance with the terms thereof on [date of transfer], subject only to the Agent's having previously received (where necessary) the written consent of the Borrower and of the Bank [and [tested] telex confirmation from [Bank's correspondent] that the sum of has been credited to the Bank's account no. with [Bank's correspondent] for value [date of transfer]. 3. The Transferee confirms that it has received a copy of the Facility Agreement together with such other documents and information as it has required in connection with this transaction and that it has not relied and will not hereafter rely on the Bank to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy or completeness of any such documents or information and further agrees that it has not relied and will not rely on the Bank to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Borrower, either Promoter or any Relevant Group Company or of any other party to the Facility Agreement or any other Finance Document. 4. The Transferee hereby undertakes with the Bank and each of the other parties to the Facility Agreement that it will perform in accordance with their terms all those obligations which by the terms of the Facility Agreement and each of the other Finance Documents will be assumed by it after delivery of this Transfer Certificate to the Agent and satisfaction of the conditions (if any) subject to which this Transfer Certificate is expressed to take effect. 86 5. The Bank makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of the Facility Agreement, any of the other Finance Documents or any document relating thereto and assumes no responsibility for the financial condition of the Borrower, either Promoter or any Relevant Group Company or any other party to the Facility Agreement or any other Finance Document or for the performance and observance by the Borrower, either Promoter or any Relevant Group Company or any such other party of any of its obligations under the Facility Agreement, any other Finance Document or any document relating thereto and any and all such conditions and warranties, whether express or implied by law or otherwise, are hereby excluded. 6. The Bank hereby gives notice that nothing herein or in any Finance Document or any document relating thereto shall oblige the Bank to (a) accept a re-transfer of the whole or any part of its rights, benefits and/or obligations under the Facility Agreement hereby transferred or (b) support any losses directly or indirectly sustained or incurred by the Transferee (i) by reason of the non-performance by the Borrower or any other party to any Relevant Document or any other document relating thereto of its obligations under any such document or (ii) otherwise. The Transferee hereby acknowledges the absence of any such obligation as is referred to in (a) or (b) above. 7. This Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with English law. THE SCHEDULE Bank's portion of Portion Transferred each Outstanding Advance Bank's Portion in relation to any Letter of Credit to be issued by Transferee NOTES 1. Transfers may be made of the whole of a Bank's Outstandings or of a part thereof in accordance with the terms of the Facility Agreement. Any transfer of part of a Bank's Outstandings as aforesaid must be of an equal portion of such Bank's Tranche A Outstandings and Tranche B Outstandings. 2. Transferee Bank will need to be a Qualifying Issuer (up to final release of the Letters of Credit) and at all times a Qualifying Lender with a UK Lending Office. 87 3. A fee of f 1,500 is payable to the Agent in respect of any transfer. [Transferor Bank] [Transferee Bank) By: By: Date: Date: 88 ADMINISTRATIVE DETAILS OF TRANSFEREE Lending Office: Telephone No: Telefax No: Account for payments: 89 SCHEDULE 6 ADDITIONAL COSTS RATE 1. The Mandatory Cost Rate is an addition to the interest rate to compensate the Banks for the cost of compliance with the requirements of the Financial Services Authority (or any other authority which replaces all or any of its functions). 2. On the first day of each Interest Period (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the "ADDITIONAL COSTS RATE") for each Bank, in accordance with the formulae set out below. The Mandatory Cost Rate will be calculated by the Agent as a weighted average of the Banks' Additional Costs Rates (weighted in proportion to the percentage participation of each Bank in the relevant Advance) and will be expressed as a percentage rate per annum. 3. The additional cost rate for each Bank will be calculated by the Agent as follows: (a) in relation to sterling Advances: E x 0.01 per cent. per annum -------- 100 (b) in relation to Advances in any currency other than sterling: E x 0.01 per cent. per annum. -------- 100 Where: E is the rate of charge payable by the Bank to the Financial Services Authority pursuant to the Fee Regulations (but, for this purpose, ignoring any minimum fee required pursuant to the Fee Regulations) and expressed in pounds per (pound)1,000,000 of the Fee Base of that Bank. 4. For the purposes of this Schedule: (a) "FEE REGULATIONS" means the Banking Supervision (Fees) Regulations 1999 or such other law as may be in force from time to time in respect of the payment of fees for banking supervision; and (b) "FEE BASE" has the meaning given to it, and will be calculated in accordance with, the Fee Regulations. 5. Each Bank shall supply any information required by the Agent for the purpose of calculating the above formulae. In particular, but without limitation, each Bank shall supply the following information in writing on or prior to the date on which it becomes a Bank: (a) its jurisdiction of incorporation and the jurisdiction of its Facility Office; and 90 (b) such other information that the Agent may reasonably require for such purpose. Each Bank shall promptly notify the Agent in writing of any change to the information provided by it pursuant to this paragraph. 6. The percentages or rates of charge of each Bank for the purpose of E in clause 3 above shall be determined by the Agent based upon the information supplied to it pursuant to paragraph 5 above and on the assumption that, unless a Bank notifies the Agent to the contrary, each Bank's obligations in relation to cash ratio deposits, special deposits and the Fee Regulations are the same as those of a typical bank from its jurisdiction or incorporation with a Facility Office in the same jurisdiction as its Facility Office. The Agent shall have no liability to any person if such determination results in an additional cost rate which over or under compensates any Bank and shall be entitled to assume that the information provided by any Bank pursuant to clause 5 above is true and correct in all respects. 7. The Agent shall distribute the additional amounts received pursuant to the Mandatory Cost Ratio to the Banks on the basis of the additional costs rate for each Bank, in accordance with the above formulae and based on the information provided by each Bank pursuant to clause 5 above. 8. Any determination by the Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost Rate, an additional costs rate or any amount payable to a Bank shall, in the absence of manifest error, be conclusive and binding on all of the parties hereto. 9. The Agent may from time to time, after consultation with the Borrower and the Banks, determine and notify to all parties any amendments or variations which are required to be made to any of the formulae set out above in order to comply with any change in law or any requirements from time to time imposed by the Bank of England or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all the parties hereto. 91 SCHEDULE 7 FORM OF CONFIDENTIALITY AGREEMENT To: Yorkshire Link Limited ("YLL") [date] Dear Sirs, M1/A1 Link Road and a Facility Agreement dated 26 March 1996 (the "FACILITY AGREEMENT") 1. We, [ ], in our capacity as a Finance Party hereby agree that (save as provided in paragraph 2 below) we shall keep confidential and not disclose to any third person or make use of for purposes unconnected with the Finance Documents the following: (a) any of the terms of the DBFO Contract; (b) any confidential or proprietary information (including documents, computer records, specifications, formulae, evaluations, methods, processes, technical descriptions, reports and other data, records, drawings and information whether or not included in the Design Data or the Traffic Data (each as defined in the DBFO Contract) provided to or arising or acquired by the Borrower pursuant to the terms or performance of the DBFO Contract (including without limitation any such documents or information supplied in the course of proceedings under the Disputes Resolution Procedure (as defined in the DBFO Contract)); and (c) all of the information, reports or documents supplied in or in connection with the invitation to tender for the DBFO Contract, the Information Memorandum, any Project Document, any Finance Document or in the course of discussions thereto or any calculations made or conclusions or determinations reached in accordance with the Finance Documents (including the Financial Model and any results obtained from it), together, the "CONFIDENTIAL INFORMATION". 2. We shall be entitled to disclose any Confidential Information (subject to any restrictions to the contrary imposed by a person other than the Borrower in relation to information which is confidential to them): (a) with the prior written consent of the Borrower; (b) to any other Finance Party (as defined in the Intercreditor Agreement); (c) when required to do so by any law, regulation or official requirement; (d) to our professional advisers and consultants who need to know such and upon obtaining from them in favour of ourselves a similar confidentiality undertaking and providing a copy of such to the Borrower; 92 (e) to the extent that the same has become generally available to the public otherwise than as a result of a breach of this undertaking or an obligation of confidentiality to another person; and (f) to any person proposing to become a Finance Party in accordance with the terms of the Facility Agreement] upon obtaining from them in favour of the Borrower a similar confidentiality undertaking and providing a copy of such to the Borrower. 3. If we or any person to whom we disclose Confidential Information in accordance with this undertaking is legally compelled by a court of competent jurisdiction or by a supervisory or regulatory body to disclose any of the Confidential Information, we will use all reasonable efforts to the extent permitted by any relevant order to provide the Borrower with prompt notice thereof so that the Borrower may seek a protective order or other appropriate remedy. If the protective order or other remedy is not obtained, then we agree that, if requested by the Borrower, we will disclose only that portion of Confidential Information which we reasonably believe ourselves to be compelled legally to so disclose. 4. Our obligations under this undertaking shall continue until the date falling on the fifth anniversary of the Termination Date (as defined in the DBFO Contract). 5. This undertaking is to be governed by and construed in accordance with the laws of England. Yours faithfully, .............................................. For and on behalf of [NAME OF FINANCE PARTY] 93 SCHEDULE 8 INSURANCES PART 1 GENERAL PROVISIONS 1. OPERATION PHASE 1.1 The Borrower shall procure that Insurances complying with the requirements specified in Part 2 of this Schedule 8 are taken out in respect of the Project Facilities and are thereafter maintained throughout the Contract Period. 1.2 The Borrower shall procure that "contractors professional indemnity" insurance (which in the opinion of the Agent (in consultation with the Insurance Adviser), is satisfactory in all respects and in effect with suitable insurers) shall be maintained for the twelve year period commencing on the date of issue of the Completion Certificate. 2. ADDITIONAL COVERAGES 2.1 Without prejudice to any other requirement, the Borrower shall at all times effect and maintain in full force those insurances which it is required to have by any applicable law or by the terms of any Relevant Document or by the terms of any other contract to which it is at any time a party. 2.2 The Agent (acting reasonably) may, from time to time, acting on the advice of the Insurance Adviser and in consultation with the Borrower, by notice to the Borrower, require the Borrower to effect such insurance coverage in respect of risks or liabilities (including without limitation in respect of risks and liabilities in respect of new technology), other than as specified in this Schedule 8 and in accordance with paragraphs 1 and 2 above, in order that the business, assets and operations of the Borrower, including the Project, are insured in the manner, upon the terms and with the cover appropriate to such business, assets and operations and in particular to construction projects such as the Project and the Borrower shall, following receipt of any such notice from the Agent, promptly insure against the risks and liabilities, in the amounts and with the deductibles specified in such notice. 3. GENERAL REQUIREMENTS 3.1 The Borrower shall procure that each policy taken out pursuant to paragraphs 1 or 2 above shall: (a) be effected against the risks and liabilities, and maintained in the amounts specified in, and otherwise comply with the requirements of this Schedule 8 (as varied from time to time as required by paragraphs (b), (c) and (d) below or as specified by the Agent pursuant to paragraph 2.2 above); (b) subject to any applicable limit of indemnity specified in this Schedule 8 and save as otherwise provided therein or as specified by the Agent pursuant to paragraph 94 2.2 above, cover all moveable and immovable tangible assets, plant and equipment (including any part thereof) to be insured pursuant to this Schedule 8 to their full replacement value (save as otherwise provided herein), increased from time to time as necessary to maintain such full replacement value; (c) be increased from time to time to such amounts due to inflation and/or reflect any increase in the value of the assets insured as may be reasonably required by the Agent, after consultation with the Insurance Adviser and the Borrower, in order to cover the risks and liabilities insured; (d) be in such form and substance as may be approved from time to time by the Agent in writing, taking into account generally accepted insurance market practice and after consultation with the Insurance Adviser (such approval not to be unreasonably withheld or delayed); (e) (in respect of material damage, loss of revenue, third party liability and employer's liability policies) be the subject of a notice of assignment duly given on or before 10 April 1996 and substantially in the form set out in Part 6 which has been duly acknowledged by the insurers; (f) contain an acknowledgement by the insurers (other than in respect of third party liability, motor vehicle liability, professional indemnity, fidelity and employer's liability policies) that no claim in respect of any loss exceeding (pound)500,000 may be settled or otherwise compromised by the Borrower without the consent of the Agent; (g) be placed and maintained through such brokers and with such insurers and underwriters as may be approved from time to time by the Agent in writing, after consultation with the Insurance Adviser (such approval not to be unreasonably withheld) provided that if any such approval is withheld the Agent shall provide the Borrower with details of the reasons therefor; (h) include the Finance Parties, EM and the Commercial Subordinated Financier (together, the "LENDERS") as insureds in respect of any policy covering third party liabilities, material damage or loss of revenue; (i) where the Lenders are an insured party, contain an acknowledgement by the insurers that in no circumstances shall the Lenders be liable for the payment of premiums or (other than in respect of third party liability and employer's liability insurances) for the performance of any other obligations owed to the insurers, save their obligation to disclose any material fact, circumstance or occurrence in relation to information made available to them by any other insured party relating to the Project Facilities; (j) in respect of those Insurances required under the DBFO Contract, contain a provision that the Secretary of State shall be given 30 days' written notice prior to any cancellation, non-renewal or material modification of any such policy; and 95 (k) where the Borrower is an insured party, provide for any vehicle company established by the Finance Parties (the "STEP-IN SPV") to be included as an insured on the exercise by the Finance Parties of any of their step-in rights in relation to the Project. 3.2 The Borrower shall procure that the insurances identified in paragraphs 1 and 2 of Part 2 of this Schedule 8 shall contain provisions substantially in the form set out in paragraphs 1, 3, 4, 5 and 6 of Part 3 of this Schedule 8, and that the insurances identified in paragraph 3 of Part 2 of this Schedule 8 shall contain provisions substantially in the form set out in paragraphs 1, 2, 3, 4, 5 and 6 of Part 3 of this Schedule 8. 3.3 The Borrower shall not at any time take any action or fail to take any reasonable action or (so far as it is reasonably within its power) permit anything to occur in relation to it whereby any Insurance taken out as contemplated herein may be rendered void or voidable or suspended, impaired or defeated in whole or in part or which would entitle any insurer to refuse to pay any claim under any such insurance policy provided that for these purposes any omission by the Borrower shall be deemed to be a knowing omission if it concerns or relates to any matter or thing of which the Borrower had or ought reasonably with regard to all of the circumstance to have had knowledge. 3.4 The Borrower shall promptly pay all premiums payable in respect of any Insurances contemplated herein and shall at the request of the Agent produce to the Agent a copy of the receipt therefor or other evidence of payment satisfactory to the Agent. Upon the renewal of any such policy the Borrower shall produce to the Agent and/or before its expiry date, evidence of such renewal. 3.5 The Borrower shall procure that each broker or agent through whom any insurance policy is effected in or towards satisfaction of the Borrower's obligations under this Schedule 8 delivers to the Agent a letter substantially in the form set out in Part 5 of this Schedule 8 as soon as practicable after such policy is effected, and shall not terminate the appointment of any broker or agent until such a letter has been delivered to the Agent by any replacement broker or agent who shall have been approved by the Agent (in consultation with the Insurance Adviser). 3.6 The Borrower shall not compromise or settle any claim exceeding (pound)500,000 under any policy required to be effected pursuant to paragraphs 1 or 2 above (other than third party liability, employer's liability, fidelity, motor vehicle liability and professional indemnity policies) without the prior written consent of the Agent. 3.7 The Borrower shall supply to the Agent copies of the policies of insurance promptly upon receipt. 4. INFORMATION 4.1 The Borrower shall give to the Agent and the Insurance Adviser such information as to the Insurances taken out by the Borrower (or as to any matter which may be relevant to such Insurance) as the Agent may from time to time reasonably request. The Agent or Insurance Adviser shall be entitled to inspect on reasonable notice during ordinary 96 business hours the original policies of Insurances taken out and maintained pursuant to this Schedule 8 which are or should be in the custody of the Borrower, together with evidence that the premiums payable thereunder have been paid and that the insurances are in full force and effect. 4.2 Without prejudice to paragraph 4.1 above, the Borrower shall as soon as possible (and in any event at least 10 days prior to the date on which any Insurance is required to be renewed hereunder) deliver to the Agent a renewal certificate therefor issued by the insurer which confirms that such Insurance is in full force and effect. 4.3 Without prejudice to Clause 4.1 above or Clause 5 below and subject to Clause 19.11 of this Agreement, the Borrower shall prior to taking out or changing any such Insurance notify the Agent of the identity of the insurer and of the principal terms and conditions of such Insurance or any version to such terms and conditions. 5. ALTERATION OF COVERAGE The Borrower shall procure that no reductions in limits or coverage (including those resulting from extensions) or increases in deductibles, exclusions or exceptions shall be made to any Insurance effected pursuant hereto without the written consent of the Agent (not to be unreasonably withheld). 6. APPLICATION OF PROCEEDS The Borrower shall apply any proceeds received under any of the Insurances referred to in this Schedule 8 in accordance with the provisions of Clause 14 of the Intercreditor Agreement. 7. DEFAULT BY BORROWER If the Borrower fails to comply with any or all of its obligations with respect to insurance as required hereunder, the Agent may (but shall not be required to) effect or renew any such insurance either in its own name or in its name and that of the Borrower jointly or in the name of the Borrower with an endorsement of the Agent's interest. All moneys expended by the Agent in so effecting or renewing any such insurance shall be reimbursed by the Borrower to the Agent on demand and shall carry interest from the date of payment by the Agent until so reimbursed at the rate and otherwise as mentioned in Clause 23.2 of this Agreement. 8. MARKET AVAILABILITY 8.1 Notwithstanding the foregoing but save as provided in Clause 8.2 below, the Borrower shall not be in breach of its obligations hereunder to the extent that: (a) insurances or the level of cover otherwise required to be taken out or maintained hereunder are not available owing to lack of capacity in the insurance market; or 97 (b) the premiums in respect of any such insurances are unreasonable in the opinion of the Insurance Adviser (after consulting with the Agent and the Borrower's insurance adviser having regard to the risk being covered and the interests of the Banks under the Finance Documents); or (c) the Agent, after consultation with the Insurance Adviser and the Majority Banks, agrees to waive the benefit of such obligations. 8.2 If in relation to any particular policy the provisions referred to in paragraph (6) of Part B or paragraph (6)(v) of Part 3 paragraph 1 of this Schedule 8 are not available in the worldwide insurance market or where the extra premiums required in respect of the inclusion of such provisions are in the reasonable opinion of the Agent excessive for cover of that type in the worldwide insurance market, the Borrower and the Agent shall negotiate in good faith for a period not exceeding 20 days to determine whether an alternative mutually acceptable solution exists and if agreement on such a solution is reached it shall be implemented instead of the inclusion in such policy of the provisions set out in the said paragraph (6) or (6)(v) (as the case may be). 9. DATA SYSTEM The Borrower shall, within 21 days of a request from the Agent (following consultation with the Insurance Adviser): 9.1 procure that an information storage and retrieval system ("DATA SYSTEM") is established; 9.2 notify the Contractors' all risks, advance loss of revenue, material damage and loss of revenue insurers in writing within 7 days of the establishment and existence of the Data System; 9.3 deposit in the Data System: (i) no later than the 15th day after the date thereof, a copy of any variation or amendment to any Project Document the non-disclosure of which would reasonably be expected to have an adverse effect on the nature or extent of the cover to be provided under any of the Insurances and a copy of any additional Project Document entered into after the date hereof; (ii) contemporaneously with the delivery to the Agent, copies of any information delivered pursuant to Clauses 19.15, 19.16, 19.17, 19.18 and 19.19 of the Agreement; 9.4 contemporaneously deliver (through the Borrower's insurance broker) to the lead insurers on the Contractors' all-risks, advance loss of revenue, material damage and loss of revenue policies copies of the documents deposited in the Data System pursuant to Clause 9.3 above; 98 9.5 no later than the 15th business day after delivery of any document to the lead insurers under Clause 9.4 above, provide the Insurance Adviser with evidence of the insurers' acknowledgement of receipt thereof. 99 PART 2 OPERATIONAL PHASE INSURANCES All operational insurance should be in the name of the Borrower. The LENDERS and the STEP-IN SPV should be Insured Parties in respect of sections of cover numbered 1, 2 and 3; the SECRETARY OF STATE should be an insured party in respect of section 3 of cover. 1. MATERIAL DAMAGE (PROPERTY) COVER "All risks" of loss of damage to the Property Insured from any cause not excluded. PROPERTY INSURED Property and interests of every description used for or in connection with the ownership, maintenance and operation of the Project Road including all property for which the Borrower is responsible. SUM INSURED An amount sufficient to pay claims on a full replacement value basis or loss limit basis based on a loss limit projection to be agreed by the Agent (in consultation with the Insurance Adviser). DEDUCTIBLE Not exceeding (pound)50,000 per occurrence or such other amount as may be mutually agreed upon by the Borrower and the Agent (in consultation with the Insurance Adviser) from time to time. PERIOD 12 months and annually renewable thereafter. PRINCIPAL EXTENSIONS Replacement/reinstatement basis of claims settlement Architects' and surveyors' fees Debris removal costs Additional costs of complying with public authority requirements Cost of labour and computer time expended in reproducing documents or computer records, including accidental or malicious erasure Automatic reinstatement of sum insured Full Terrorism PRINCIPAL EXCLUSIONS Machinery breakdown War and civil war Radioactive contamination Deliberate acts or omissions of the Insured Unexplained shortages or mysterious disappearance. The cost of making good wear and tear, gradual deterioration, flaws, deformation, distortion, cracks or partial fractures, defects in design, materials or workmanship but this shall not 100 exclude subsequent damage resulting from an ensuing cause which is not otherwise excluded Sonic bangs Loss of or damage to vehicles licensed for road use, marine vessels or aircraft 2. LOSS OF REVENUE (BUSINESS INTERRUPTION) INDEMNITY In respect of loss of revenue, additional expenses or Financing Costs and/or continuing expenses during the Indemnity Period resulting from a physical loss, destruction or damage covered under the material damage insurances. PERIOD 12 months and annually renewable thereafter. SUM INSURED An amount representing the loss over a 12 month period or loss limit based on a loss limit projection to be agreed by the Borrower and the Agent (in consultation with the Insurance Adviser). INDEMNITY PERIOD 12 months from the date of the damage. WAITING PERIOD 7 days per occurrence or such other period as may be mutually agreed upon by the parties from time to time. PRINCIPAL EXTENSIONS Denial of access as a result of damage in the vicinity of the Project Road Utilities NOTE See Note in paragraph 2 of Part 2 of this Schedule 8. 3. THIRD PARTY LIABILITY COVER Legal liability of the Insured to third parties for bodily injury, illness or death, loss or damage arising from the activities of the Insured. LIMIT Minimum limit of (pound)50,000,000 any one occurrence/unlimited in the number of occurrences but in the aggregate in respect of product liability and pollution or such other amount as may be mutually agreed upon by the Borrower and the Agent (in consultation with the Insurance Adviser) from time to time. DEDUCTIBLES Not exceeding (pound)10,000 each and every claim in respect of property damage only or such amount as may be subject to a level of deductible in an amount as may be mutually agreed upon by the Borrower and the Agent (in consultation with the Insurance Adviser). 101 PERIOD 12 months and annually renewable thereafter. PRINCIPAL EXTENSIONS Including inter alia: Interference, trespass, loss of amenities, nuisance, denial of access, obstruction etc. Cross liabilities clause Costs and expenses clause Contractual liability clause Worldwide Jurisdiction Pollution - "sudden and accidental" basis. PRINCIPAL EXCLUSIONS Penalties or fines imposed by regulatory or statutory authorities and courts, liquidated and ascertained damages, pollution other than "sudden and accidental" pollution, inevitable occurrences, Insureds' own employees. 4. EMPLOYERS LIABILITY COVER As required under UK law. LIMIT Minimum limit of (pound)10,000,000 any one occurrence/ unlimited in the number of occurrences. PERIOD 12 months and annually renewable thereafter. 5. MOTOR VEHICLE LIABILITY COVER Motor Vehicle liability insurance complying with UK Road Traffic Act legislation up to an unlimited amount for private cars,(pound)5,000,000 for Commercial Vehicles; 6. FIDELITY GUARANTEE OR CRIME INSURANCE INDEMNITY The fraudulent misappropriation of cash/assets of the Borrower. LIMIT (pound)5,000,000 in the aggregate. DEDUCTIBLE (pound)25,000 each and every event or such other amount as may be mutually agreed upon by the Borrower and the Agent (in consultation with the Insurance Adviser) from time to time. PERIOD 12 months and annually renewable thereafter. 102 PART 3 POLICY PROVISIONS 1. GENERAL PROVISIONS The policies shall include the following provisions substantially in the form set out below: (1) The insurers hereby agree to waive all rights of subrogation howsoever arising which they may have or acquire against any of the Lenders and their officers, directors, employees and assigns arising out of any occurrence in respect of which any claim is admitted hereunder. (2) All the provisions of this policy (except those relating to limits of liability) shall operate as if there were a separate policy covering each insured. Accordingly, the liability of the insurers shall not be conditional upon the due observance and fulfilment by any other Insured of the terms of this policy and of any duties imposed upon it relating thereto and shall not be affected by any failure in such observance of fulfilment by any other Insured. (3) The Lenders and their respective directors, employees and assigns shall (whether or not they are insured parties under the policy) in no circumstances be liable for the payment of any premium or to perform any other obligation owed to the insurers. The insurers waive all rights of contribution against any other insurance effected by the Lenders. (4) The Lenders and their respective officers, directors, employees and assigns are additional insureds under this policy. In respect of any policies covering third party liabilities, the Lenders are to be included as an insured. (5) The Agent shall be advised: (i) at least 60 days (or such lesser period as may be agreed between the Agent, the Insurance Adviser and the Borrower Provided that such lesser period shall be a minimum of 30 days) before any cancellation is to take effect if any insurer cancels or gives notice of such cancellation of any insurance relative to the Project for any reason including non payment of premium; (ii) at least 60 days (or such lesser period as may be agreed between the Agent, the Insurance Adviser and the Borrower Provided that such lesser period shall be a minimum of 30 days) before any reduction in any limit or coverage, any increase in any deductible or any termination before the original expiry date is to take effect; (iii) of any act or omission or of any event of which the insurer has knowledge and which might invalidate or render unenforceable in whole or in part any insurance relative to the Project. (6) In addition to any other requirements relating to such insurance, the Borrower shall ensure and agrees to procure that each of its primary insurers shall ensure in relation to 103 each such policy of insurance that it acknowledges that the Borrower is the borrower under loans with the Lenders and that the following provisions shall apply to the policy: (i) the insurer undertakes to advise the Lenders of any circumstance regarding the renewal or non-renewal of the insurance or failure to pay the premium so that there is not, under any circumstances, a break in the period of insurance and to pass outstanding premium notices to the Lenders, who may pay the premium on behalf of the insured; (ii) the sums insured and risks covered under the insurances may not be reduced in any way without the prior written consent of the Agent; (iii) in the event of failure to pay the premium by the insured, as referred to in paragraph 5(i) above, the insurer undertakes to issue an endorsement modifying the policy, with effect from the preceding due date, to take account of any requirements of the Agent; (iv) the insurer undertakes to make all payments under the policy directly into the Compensation Account and to name the Security Trustee as sole loss payee (except under policies or sections covering legal liability in respect of third party claims or employer's liability, or in respect of all payments following notification by the Security Trustee of the occurrence of a Designated Event or a Prepayment Event); (v) the Insurers undertake to each Lender that the policy shall not be invalidated as regards the respective rights and interest of each Lender and that the Insurers will not seek directly or indirectly to avoid any liability under this policy because of any act, neglect, error or omission made by any other Insured (whether occurring before or after the inception of the policy), including, without limitation, any failure by any other Insured to disclose any material fact, circumstance or occurrence, any misrepresentation by any other Insured, any breach or non-fulfilment by any other insured whether or not any such act, neglect, error or omission, could, if known at any time, have affected any decision of the Insurers to grant the policy, to agree to any particular term or terms of the policy (including, without limitation, this provision) and the amount in relation to this policy or to liability which might arise thereunder. The Lenders shall have no duty of disclosure except in relation to information made available to them by any other insured parties relating to this Project, and that the foregoing provisions shall take effect from the date of the policy and may not be altered without the consent of the Lenders. 2. COMMUNICATIONS All notices or other communications under or in connection with this policy will be given in writing or by telex or fax. Any such notice will be deemed to be given as follows: (i) if in writing, when delivered; 104 (ii) if by telex, when despatched but only if, at the time of transmission the correct answerback appears, at the start and end of the sender's copy of the notice; and (iii) if by fax, when transmitted but only if, immediately after the transmission, the sender's fax machine records the correct answerback. The address and fax number of the Agent for all notices under or in connection with this policy are those notified form time to time by the Agent for this purpose to the Borrower's insurance broker at the relevant time. The initial address and fax of the Agent are as follows: The Agent: ABN AMRO Bank N.V. Address: Fax No: Attention: 105 PART 4 FORM OF BROKER'S LETTER OF UNDERTAKING [To the Agent] Dear Sirs, We confirm, in our capacity as insurance brokers to Yorkshire Link Limited, that the insurances (the "INSURANCES") specified in Part [2] [other than Professional Indemnity insurance, which will be in effect on 15 April 1996] [3] of Schedule 8 to the facility agreement (the "FACILITY AGREEMENT") dated [ ] 1996 between Yorkshire Link Limited as borrower, ABN AMRO Bank N.V. as arranger, issuing bank and agent and the parties named therein as banks are in effect as at the date hereof on and in respect of the risks set out in the attached cover notes. We also confirm that the Insurers have acknowledged the Notice of Assignment of Insurances (a copy of which is attached hereto) and that the relevant endorsements required pursuant to Schedule 8 to the Facility Agreement have been or will be issued in substantially the form set out in Part 3 of Schedule 8 in respect of the insurance policies (the "POLICIES") evidenced in the attached cover notes for the period stipulated therein. Terms defined in the Facility Agreement shall have the same meaning in this letter. We confirm that we will advise you if the Borrower fails at any time to pay any premiums due in respect of the Insurances. We further confirm that, in our opinion, such Insurances comply with the Schedule of Minimum Insurances set forth in, and the other provisions of, Schedule 8 of the Facility Agreement. Pursuant to instructions received from the Borrower, we hereby undertake in respect of the interests of the Borrower and the Lenders in the insurances referred to in the attached cover notes, binder or certificate from [the Insurers/us] that we will use our best endeavours: 1. to seek Insurers' agreement to have endorsed on each and every Policy as and when the same is issued endorsements substantially in the form attached hereto together with a copy of the said Notice of Assignment of Insurances to the insurer signed by authorised signatories of the Borrower and acknowledged by the Insurers; 2. (a) to advise you promptly upon receipt of notice of any material changes which we know to be material notified to us which are proposed to be made in the terms of the insurances and which, if effected, would result in any material reduction in limits of coverage (including those resulting from extensions) or in any increase in deductibles, exclusions or exceptions; (b) to notify you at least 30 days prior to the expiry of these insurances if we have not received instructions from the Borrower to negotiate renewal, and, in the event of our receiving instructions to renew, to advise you promptly of the details thereof; and 106 (c) to notify you at least 30 days prior to ceasing to act as brokers to the Borrower (unless owing to circumstances beyond our control in which case we shall notify you promptly upon becoming aware that we shall cease, or that we have ceased, to act); 3. to pay to the Facility Agent without any set-off or deduction of any kind for any reason any and all proceeds from the insurances received by us from the Insurers except as might be otherwise permitted in the relevant loss payable clauses set out in the attached endorsements; 4. to advise you: (a) if any insurer cancels or gives notice of cancellation of this insurance at least 30 days before such cancellation is to take effect (unless owing to circumstances beyond our control in which case we shall notify you promptly upon becoming aware of such cancellation or notice of cancellation); and (b) of any act or omission or of any event of which we have actual knowledge and which will invalidate or render unenforceable in whole or in part this insurance; 5. to disclose to the Insurers and the Agent any fact, change of circumstance or occurrence which we know to be material to the risks insured against under the insurances promptly when we become aware of such fact, change of circumstance or occurrence; 6. to hold the insurance slips or contracts, the Policies with any renewals thereof of any new or substitute policies (in each case, issued only with the Agent's consent), to the extent held by us, to the order of the Agent. The above undertakings are given: (a) subject to our lien, if any, on the Policies referred to above for premiums and fees due under and in respect of the Policies and subject to any Insurers' right of cancellation (if any) following default in excess of 60 days in payment of such premiums, but we undertake to advise you as soon as practicable if any such amounts are not paid to us by the due date and to give you a reasonable opportunity of paying such amounts of such premiums outstanding before notification of cancellation on behalf of the Insurers; and (b) subject to our continuing appointment as insurance brokers to the Borrower and shall automatically cease upon termination of our appointment. This letter shall be governed by and construed in all respects in accordance with English law. Yours faithfully, 107 ..................................... for and on behalf of [The insurance broker] 108 PART 5 FORM OF NOTICE OF ASSIGNMENT OF INSURANCES IN RESPECT OF MATERIAL DAMAGE & LOSS OF REVENUE INSURANCES To: [Insurer] Date: [ ] Dear Sirs, We hereby give you notice that we have assigned by way of security pursuant to a debenture entered into by us in favour of Lloyds Bank Plc as trustee (the "SECURITY TRUSTEE") dated [ ] all our right, title and interest in and to the [insurance policy/proceeds of insurance] details of which are set out below to the Security Trustee. After your receipt of this notice: (a) all payments under or arising from the material damage insurances(6) should be made to the Secretary of State (except where the property insured has already been restored, replaced or reinstated, in which case the payments should be made to Yorkshire Link Limited); (b) all payments under or arising from the loss of revenue insurances* should be made to the Security Trustee or to its order; and (c) all rights, interests and benefits whatsoever accruing to or for the benefit of ourselves arising from the [policy] belong to the Security Trustee. We acknowledge that we remain obliged to observe and perform all of our obligations pursuant to the insurance policy and that all of your rights under the policy are unaffected by this notice. Please acknowledge receipt of this notice by signing the acknowledgement on the enclosed copy letter and returning the same to the Security Trustee at [ ] marked for the attention of [ ]. Details of the insurance policy:
DATE PARTIES INSURANCE POLICY DETAILS OF ASSIGNED - ---- ------------------------ -------------------
- -------------------------- (6) Material damage insurance is deemed to include property damage and machinery breakdown insurances. Loss of revenue insurance is deemed to include business interruption and machinery breakdown business interruption insurances. 109 Yours faithfully, ................. for and on behalf of Yorkshire Link Limited 110 [On copy only: To: Yorkshire Link Limited with a copy to ABN AMRO Bank N.V. We acknowledge receipt of a notice in the foregoing terms and confirm that we have not received notice of any previous assignments or charges of or over any of the rights, interests and benefits referred to in such notice. [We further confirm that no amendment, waiver or release of any of such rights, interests and benefits shall be effective without the prior written consent of [the Security Trustee]. No termination of such rights, interests or benefits shall be effective unless we have given [the Security Trustee] 30 days written notice of the proposed termination. For and on behalf of [ ] By: .......................... Dated: 111 FORM OF NOTICE OF ASSIGNMENT OF INSURANCES IN RESPECT OF THIRD PARTY LIABILITY AND EMPLOYER'S LIABILITY INSURANCES To: [Insurer] Date: [ ] Dear Sirs, We hereby give you notice that we have assigned by way of security pursuant to a debenture entered into by us in favour of Lloyds Bank plc as trustee (the "SECURITY TRUSTEE") dated [ ] all our right, title and interest in and to the [insurance policy/proceeds of insurance] details of which are set out below to the Security Trustee. After your receipt of this notice: (a) all payments under or arising from the [third party liability insurances] should be paid directly to the person whose claim(s) constitutes the risk or liability insured against; and (b) all rights, interests and benefits whatsoever accruing to or for the benefit of ourselves arising from the [policy] belong to the Security Trustee. We acknowledge that we remain obliged to observe and perform all of our obligations pursuant to the insurance policy and that all of your rights under the policy are unaffected by this notice. Please acknowledge receipt of this notice by signing the acknowledgement on the enclosed copy letter and returning the same to the Security Trustee at [ ] marked for the attention of [ ]. Details of the insurance policy:
DATE PARTIES INSURANCE POLICY DETAILS OF ASSIGNED - ---- ------------------------ -------------------
Yours faithfully, ................. for and on behalf of Yorkshire Link Limited 112 [On copy only: To: Yorkshire Link Limited with a copy to ABN AMRO Bank N.V. We acknowledge receipt of a notice in the foregoing terms and confirm that we have not received notice of any previous assignments or charges of or over any of the rights, interests and benefits referred to in such notice. [We further confirm that no amendment, waiver or release of any of such rights, interests and benefits shall be effective without the prior written consent of [the Security Trustee]. No termination of such rights, interests or benefits shall be effective unless we have given [the Security Trustee] 30 days written notice of the proposed termination. For and on behalf of [ ] By: ............................ Dated: 113 SCHEDULE 9 REPAYMENT SCHEDULE
REPAYMENT DATE PERCENTAGE -------------- ---------- 2001.1 30-Sep-01 1.81% 2001.2 31-Mar-02 2.01% 2002.1 30-Sep-02 1.88% 2002.2 31-Mar-03 1.96% 2003.1 30-Sep-03 2.04% 2003.2 31-Mar-04 2.09% 2004.1 30-Sep-04 3.27% 2004.2 31-Mar-05 2.36% 2005.1 30-Sep-05 3.13% 2005.2 31-Mar-06 2.34% 2006.1 30-Sep-06 2.66% 2006.2 31-Mar-07 3.10% 2007.1 30-Sep-07 3.21% 2007.2 31-Mar-08 3.39% 2008.1 30-Sep-08 3.91% 2008.2 31-Mar-09 3.75% 2009.1 30-Sep-09 3.29% 2009.2 31-Mar-10 3.11% 2010.1 30-Sep-10 3.56% 2010.2 31-Mar-11 3.11% 2011.1 30-Sep-11 4.95% 2011.2 31-Mar-12 3.67% 2012.1 30-Sep-12 5.13% 2012.2 31-Mar-13 3.68% 2013.1 30-Sep-13 3.97% 2013.2 31-Mar-14 4.44% 2014.1 30-Sep-14 0.00% 2014.2 31-Mar-15 1.38% 2015.1 30-Sep-15 0.93% 2015.2 31-Mar-16 0.76% 2016.1 30-Sep-16 0.93% 2016.2 31-Mar-17 0.80% 2017.1 30-Sep-17 0.69% 2017.2 31-Mar-18 0.68% 2018.1 30-Sep-18 0.67% 2018.2 31-Mar-19 0.59% 2019.1 30-Sep-19 0.73% 2019.2 31-Mar-20 0.00% 2020.1 30-Sep-20 0.77% 2020.2 31-Mar-21 1.39% 2021.1 30-Sep-21 1.57% 2021.2 31-Mar-22 1.51% 2022.1 30-Sep-22 1.57%
114
REPAYMENT DATE PERCENTAGE -------------- ---------- 2022.2 31-Mar-23 1.15% 2023.1 30-Sep-23 1.41% 2023.2 31-Mar-24 0.65% - ------ --------- ---- TOTAL 100%
115 SCHEDULE 10 FORM OF UTILISATION REQUEST To: [Insert name of Agent] [Insert address of Agent] Attention: [Insert name of relevant department or title of relevant officer] (POUND)[ ] FACILITY AGREEMENT DATED 26 MARCH 1996 (AS AMENDED) We refer to the above agreement between ourselves and yourselves as Arranger, Agent and Issuing Bank (the "AGREEMENT"). Terms defined in the Agreement have the same meaning in this notice. We give you notice that we wish an Advance to be made to us as follows: FACILITY: Tranche A AMOUNT: (pound) DATE FOR DRAWDOWN: 20 (or, if that is not a Business Day, the next Business Day) INTEREST PERIOD: *1/3/6 months PURPOSE: The proceeds of the Advance (less the amount to be paid by you into the Debt Service Reserve Account pursuant to Clause 4.2 of the Agreement, such payment being hereby authorised by us) are to be: (1) made available to us by payment to the Company Account; and/or (2) used for the purposes contemplated in Clause 22.27 of the Agreement and shall be paid by you to the Claims Reserve Account (delete if one is not applicable). We hereby certify that: (i) No Event of Default or Potential Event of Default (other than in relation to Clause 22.27 which is being remedied by this Utilisation) has occurred and is continuing or will occur as a result of making this Advance; (ii) all representations and warranties in Clause 20 of the Agreement have been complied with by reference to the circumstances now existing; and (iii) each of the conditions precedent in Clause 4.1 have been satisfied and will be satisfied after the making of the requested Advance. 116 We attach to this Notice (which shall form a integral part thereof) a revised Project Forecast as set out in Clause 4.1(viii) of the Agreement. Dated 20 YORKSHIRE LINK LIMITED By: Authorised signatory/ies 117 THE BORROWER YORKSHIRE LINK LIMITED Address: Level 30 Citypoint 1 Ropemaker Street London EC2Y 9HD Fax: 020 7065 2041 Attention: The Company Secretary ABN AMRO BANK N.V. Address: 250 Bishopsgate London EC2M 4AA Fax: 020 7678 6021 Attention: Structured Debt Agency 118 * This agreement was and was deemed to be amended and restated by an Amendment and Restatement Agreement dated as of September 4, 2001 between Yorkshire Link Limited, Yorkshire Link (Holdings) Limited, ABN AMRO Bank N.V., European Investment Bank, European Investment Fund, Certain Financial Institutions, as hedging counterparties, 3i Group plc, Macquarie Infrastructure (UK) Limited and Balfour Beatty plc, which was executed by the authorized representatives of the parties thereto as follows: YORKSHIRE LINK LIMITED By: /s/ Sean MacDonald ------------------------------ YORKSHIRE LINK (HOLDINGS) LIMITED By: /s/ Sean MacDonald ------------------------------ ABN AMRO BANK N.V. in each of its capacities as refinancing bank, Intercreditor Agent, Senior Facility Agent, Senior Issuing Bank, Hedging Counterparty and Security Trustee By: /s/ Andrea Echberg ------------------------------ 3i GROUP PLC By: /s/ Andrew Bell ------------------------------ THE DAI-ICHI KANGYO BANK, LIMITED By: /s/ Chris O'Gorman ------------------------------ THE ROYAL BANK OF SCOTLAND plc acting as agent for: NATIONAL WESTMINSTER BANK PLC By: /s/ Vivek Sapra ------------------------------ MACQUARIE INFRASTRUCTURE (UK) LIMITED By: /s/ Sean MacDonald ------------------------------ BALFOUR BEATTY PLC By: /s/ Anthony Rabin ------------------------------ EUROPEAN INVESTMENT BANK By: /s/ E. Uhlmann /s/ T.C. Barrett ------------------------------ --------------------------------- EUROPEAN INVESTMENT BANK for and on behalf of EUROPEAN INVESTMENT FUND By: /s/ P-L Gilibert /s/ K.J. Andreopoulos ------------------------------ --------------------------------- EX-10.21 16 y97636exv10w21.txt EIB FACILITY AGREEMENT Exhibit 10.21 (1) EUROPEAN INVESTMENT BANK -AND- (2) YORKSHIRE LINK LIMITED A1 - M1 DBFO ROAD PROJECT EIB FACILITY AGREEMENT (POUND)90,000,000 DATED 26 MARCH 1996 AS AMENDED AND RESTATED ON 4 SEPTEMBER 2001 THIS AGREEMENT is made the 26th day of March 1996 and amended and restated on 4th day of September 2001. BETWEEN: - (1) EUROPEAN INVESTMENT BANK, an international institution established by the Treaty of Rome on 25th March 1957 and having its seat at 100 boulevard Konrad Adenauer, L-2950 Luxembourg ("EIB"); and (2) YORKSHIRE LINK LIMITED a company incorporated in England and Wales with registered no. 2999303 (the "BORROWER"). WHEREAS: (A) The Government of the United Kingdom desires to have the private sector invest and participate in the development of the nation's transport system. (B) In accordance with the foregoing policy, interested persons were invited to submit proposals for investing in the Project. (C) The Project comprises the design, construction, financing and operation of approximately 30km of motorway and trunk road between Junction 28 (Tingley) of the M62 motorway and Bramham Crossroads on the Al Trunk Road in accordance with Annex 3. (D) Proposals were submitted by the Borrower for the design and construction of the Works, the financing, operation and maintenance of the Project Facilities and the conduct of the other Operations during the Contract Period. (E) The Secretary of State for Transport (the "SECRETARY OF STATE") and the Borrower reached agreement as set out in the DBFO Contract dated 26 March 1996 (the "DBFO CONTRACT"). (F) The Borrower is a company owned as to 100% by Yorkshire Link (Holdings) Limited. (G) Yorkshire Link (Holdings) Limited is a company incorporated in England and Wales, the shareholders of which are as set out below:
SHAREHOLDER ORDINARY SHARES - ----------- --------------- ~~Macquarie Infrastructure (UK) Limited 1,500,000 Balfour Beatty plc 1,500,000 Deutsche Bank A.G. London Branch 1~~
(H) The Borrower requested that EIB establish the terms on which it would be willing to make available to the Borrower a credit in the aggregate amount of(pound)90,000,000 (ninety million pounds) (the "CREDIT"). 1 (I) The persons that were then the Banks under the Commercial Bank Facility Agreement agreed with the Borrower to issue letters of credit to EIB and EIF (as defined below) agreed with the Borrower to issue a guarantee to EIB, in each case, in order to secure financial obligations of the Borrower arising in respect of the Credit. (J) EIB, being satisfied that the financing of the Project was within the scope of its functions and having regard to the matters recited above, decided to give effect to the Borrower's request. (K) Pursuant to the amendment and restatement agreement, to which this Agreement is appended as the Fifth Schedule (the "AMENDMENT AND RESTATEMENT AGREEMENT"), it was agreed between the parties that certain amendments would be made to this Agreement. 1. INTERPRETATION 1.1 DEFINITIONS In this Agreement, unless the context otherwise requires, the following words and expressions shall have the meanings ascribed to them below: "ACCOUNT BANK" means ABN AMRO Bank N.V.; "ADJUSTED REQUIRED VALUE" in respect of the EIB Bank Security means its Required Value at any date to the extent (if any) reduced by means of Notices of Release of EIB Bank Security pursuant to Clause 12.1; "AMORTISATION DATE" means each Payment Date and the Final Maturity Date; "BANKS" has the meaning ascribed to it in the Commercial Banks Facility Agreement; "BASE CASE" means the Base Case as defined in the Commercial Banks Facility Agreement; "BF LETTERS OF CREDIT" means two irrevocable letters of credit issued to EIB in the form of Annex 5 or otherwise as accepted by EIB; "BUSINESS DAY" means a day which is both a Luxembourg Business Day and a London Business Day; "CBFA FINAL MATURITY DATE" means 31 March 2024; "COMMERCIAL BANKS FACILITY AGREEMENT" means the facility agreement dated 26 March 1996 made between, inter alios, the persons that were then the Facility Agent and the Commercial Banks, as amended and restated on 20 October 1997 and on 4 September 2001 by the Amendment and Restatement Agreement; 2 "COMPENSATION ACCOUNT" means the account to be opened and maintained pursuant to clause 14 of the Intercreditor Agreement; "COMPULSORY PREPAYMENT" means any prepayment of the whole or any part of the Loan (other than a Voluntary Prepayment) including, without limitation, prepayments following a demand made under Clauses 9 or 10; "CONCESSION MATURITY DATE" means the date of the expiration of the period of 30 years commencing on the Commencement Date; "CLAIMS RESERVE ACCOUNT" means the account to be opened and maintained pursuant to clause 11 of the Intercreditor Agreement; "CREDIT" has the meaning ascribed to it in Recital (H); "DBFO CONTRACT" has the meaning ascribed to it in Recital (E); "DEBT SERVICE RESERVE ACCOUNT" means the account to be opened and maintained pursuant to clause 13 of the Intercreditor Agreement; "DIRECT AGREEMENT" means the agreement dated 26 March 1996 made between the Secretary of State, the Intercreditor Agent and the Borrower; "EIB ANNUAL DEBT SERVICE COVER RATIO" means in respect of any relevant period, the ratio of A:B where: A is the aggregate amount of (but without double counting and provided that cash balances/cash flows shall not be double counted): (i) the EIB Cash Flow Available for Debt Service received during such relevant period; (ii) amounts paid during such relevant period from monies standing to the credit of the Tax Reserve Account and/or the Maintenance Reserve Account; But deducting from the foregoing aggregate amount any amounts credited or due to be credited to the Tax Reserve Account and/or the Maintenance Reserve Account during such relevant period; and (iii) the Claims Reserve Surplus released in accordance with and as defined in clause 11.5 of the Intercreditor Agreement; B is the aggregate amount of (but without double counting any amount): (i) interest, fees, commission, costs and other amounts under the Commercial Banks Facility Agreement, the EIF Senior Guarantee Facility Agreement and the EIB Facility Agreement (and under any other financial indebtedness ranking, under the terms of the Intercreditor Agreement, pari passu therewith) which fall due during such relevant period but deducting from interest due under the Facility hedging receipts under the relevant Hedging Contracts (after taking account of any required netting thereunder); (ii) hedging payments which fall due during such relevant period under any Hedging Contract (after taking account of any required netting thereunder); and (iii) principal repayments which fall due under this Agreement and under the Commercial Banks Facility Agreement (and any other financial indebtedness ranking, under the terms of the Intercreditor 3 Agreement, pari passu therewith) during such relevant period but ignoring any amounts payable in respect of Refinancing Expenses; "EIB BANK SECURITY" means Letters of Credit and EIB Cash Security arising in respect of the EIB Cash Collateral Accounts; "EIB/BORROWER PREPAYMENT CASH COLLATERAL ACCOUNT" means the cash collateral account for the benefit of EIB to be opened and maintained with the Account Bank into which prepayments by the Borrower may be paid subject to and in accordance with this Agreement; "EIB CASH COLLATERAL ACCOUNTS" means the EIB/Borrower Prepayment Cash Collateral Account and each EIB/Issuer Cash Collateral Account; "EIB CASH FLOW AVAILABLE FOR DEBT SERVICE" means, in respect of any relevant period, the aggregate of (i) DBFO Payments received in such relevant period; (ii) any insurance for loss of revenue and liquidated damages received in such relevant period; (iii) interest received in such period on cash deposits and (iv) income received in such relevant period from Authorised Investments; But deducting from the aggregate of the foregoing (a) those amounts which have been credited or fell due to be credited to the Annual Reconciliation Account in such relevant period; and (b) Permitted Payments made or which fell due to be paid in such relevant period but ignoring any amounts payable in respect of Refinancing Expenses; "EIB CASH SECURITY" means the Sterling cash collateral which is, in accordance with this Agreement, from time to time standing to the credit of one or more EIB Cash Collateral Accounts in respect of which a valid first ranking security interest exists in favour of EIB under (in the case of the EIB/Borrower Prepayment Cash Collateral Account) the Debenture and (in the case of the EIB/Issuer Cash Collateral Account) such other charging document as shall be executed and delivered for the purpose; "EIB FORECAST ANNUAL DEBT SERVICE COVER RATIO" means, on any relevant date and in respect of any relevant period, the ratio of A:B where: A is the aggregate amount of (but without double counting and provided that cash balances/cash flows shall not be double counted): (i) the EIB Forecast Cash Flow Available for Debt Service; (ii) amounts forecast to be paid during such relevant period from monies standing to the credit of the Tax Reserve Account and/or the Maintenance Reserve Account at the beginning of such relevant period; and (iii) the Claims Reserve Surplus released in accordance with and as defined in clause 11.5 of the Intercreditor Agreement at the beginning of such relevant period; But deducting from the foregoing aggregate amount any amounts forecast to be credited to the Tax Reserve Account and/or the Maintenance Reserve Account during such relevant period; and B is the aggregate amount of (but without double counting any amount): (i) interest, fees, commission, costs and other amounts under the Commercial Banks Facility Agreement, EIF Senior Guarantee Facility Agreement and the EIB 4 Facility Agreement (and any other financial indebtedness ranking under the terms of the Intercreditor Agreement pari passu therewith) falling due during the relevant period but deducting from interest due under the Facility hedging receipts under the relevant Hedging Contracts (after taking account of any required netting thereunder); (ii) hedging payments falling due for payment during such relevant period under any Hedging Contract (after taking account of any required netting thereunder; and (iii) principal repayments falling due under this Agreement and the Commercial Banks Facility Agreement (and any other financial indebtedness ranking under the terms of the Intercreditor Agreement pari passu therewith) during such relevant period but ignoring any amounts payable in respect of Refinancing Expenses; "EIB FORECAST CASH FLOW AVAILABLE FOR DEBT SERVICE" means, in respect of any relevant period, the aggregate of: (i) DBFO Payments scheduled to be received in such relevant period; (ii) any insurance for loss of revenue and liquidated damages forecast to be received in such relevant period or, if the relevant period is greater than twelve months, in the first twelve months of such relevant period; (iii) interest forecast to be received on cash deposits in such relevant period; and (iv) income forecast to be received on Authorised Investments in such relevant period, But deducting from the aggregate of (i), (ii), (iii) and (iv) above (a) those amounts which are forecast to be credited to the Annual Reconciliation Account in such relevant period; and (b) Permitted Payments falling due in such relevant period but ignoring any amounts payable in respect of Refinancing Expenses (the "TOTAL AMOUNT"). Provided that the aggregate amount forecast to be received under (iii) and (iv) above shall be capped at an amount equal to 7.5% of the Total Amount and to the extent the amount forecast to be received under (iii) and (iv) above exceeds 7.5% of the Total Amount the Total Amount shall be reduced by any such excess; "EIB/ISSUER CASH COLLATERAL ACCOUNT" means each cash collateral account for the benefit of EIB to be opened and maintained pursuant to clause 11.3 of the Commercial Banks Facility Agreement into which sums may be paid by an Issuer so as to constitute EIB Cash Security as contemplated by Clause 9; "EIB LOAN LIFE COVER RATIO" means, on any relevant date, the ratio of A : B where:- A is the sum of (but without double counting and provided that cash balances/cash flows shall not be double counted):- (i) the net present value (at a discount rate set out in the Base Case or, as the case may be, in the Project Forecast most recently delivered hereunder at such date, equal to the forecast weighted average cost to the Borrower of funds (taking into account the effect of any hedging that is in place) drawn under the Banks Facility (including the Applicable Margin) and the Credit) of the EIB Forecast Cash Flow Available for Debt Service disregarding any interest accruing on the amount standing to the credit of the EIB/Borrower Prepayment Cash Collateral Account) calculated from such relevant date to the Final Maturity Date; 5 (ii) credit balances on the Project Accounts (other than the Claims Reserve Account and Company Account) to the extent such credit balances will not be applied in accordance with paragraphs (x) to (xvii) of Clause 12.3 of the Intercreditor Agreement in the next 6 month period; and (iii) the face value of any letter of credit (issued by a bank acceptable to EIB) in lieu of credit balances held on the Debt Service Reserve Account; and B is the sum of (but without double counting):- (i) the Loan at such time less the amount then standing to the credit of the EIB/Borrower Prepayment Cash Collateral Account to the extent only that such amount comprises amounts originally credited to such account pursuant to Clause 6.4; (ii) all outstanding advances made (or deemed made) by the Banks pursuant to the Commercial Banks Facility Agreement prior to the Final Maturity Date and which are, in each case scheduled to be repaid prior to the Final Maturity Date; (iii) any other financial indebtedness of the Borrower (excluding for this purpose any obligation to counter-indemnify any Issuer or the EIF in respect of the future performance by such Issuer or the ElF of its obligations under any EIB Bank Security or the EIF Senior Guarantee) ranking under the terms of the Intercreditor Agreement in terms of security at least pari passu with the Loan or the security created by the Shared Security Documents in each case scheduled to be repaid prior to the Final Maturity Date; "EIB SECURITY" means the EIB Bank Security and the EIF Senior Guarantee; "EIB SECURITY VALUE" means at any time: (a) in relation to a Letter of Credit, the maximum amount payable under such Letter of Credit at the relevant time; and (b) in relation to EIB Cash Security, the face value thereof at the relevant time; "EIF" means the European Investment Fund; "EIF SENIOR GUARANTEE" means the guarantee by EIF in favour of EIB in the form of schedule 2 to the EIF Senior Guarantee Facility Agreement, as amended and restated in accordance with the Amendment and Restatement Agreement; "EIF SENIOR GUARANTEE FACILITY AGREEMENT" means the facility agreement dated 26 March 1996 between the Borrower and EIF providing, inter alia, for the issue of the EIF 6 Senior Guarantee, as amended and restated in accordance with the Amendment and Restatement Agreement; "EVENT OF DEFAULT" means any one of those events specified, or incorporated herein by reference, in Clauses 9.1 and 10; "EXPIRY DATE" means in relation to any EIB Bank Security, the date on which it ceases to be available as security for the claims intended to be supported thereby; "FINAL BANK REPAYMENT DATE" means the Final Repayment Date as defined in the Commercial Banks Facility Agreement; "FINAL MATURITY DATE" means 25 March 2020; "FIRST RELEASE" means the first release of Letters of Credit to become effective pursuant to Clause 12.3; "FIRST RELEASE DATE" has the meaning given to it in Clause 12.2; "INTERCREDITOR AGENT" means ABN AMRO Bank N.V. in its capacity as intercreditor agent under the Intercreditor Agreement (and any duly appointed successor intercreditor agent); "INTERCREDITOR AGREEMENT" means the agreement dated 26 March 1996 between, inter alios, the Borrower and the person that was the Intercreditor Agent, as amended and restated on 20 October 1997 and on 4 September 2001 by the Amendment and Restatement Agreement; "INTEREST DIFFERENTIATED RATE" means, in respect of the Unguaranteed Loan, 9.53 percent per annum; "INTEREST PERIOD" means each successive period commencing on a Payment Date and ending on the next Payment Date; "INTEREST RATE" means 9.23 percent per annum; "ISSUER" means a Bank by whom or on whose behalf a Letter of Credit is issued or is to be issued hereunder; "LETTER OF CREDIT" means an irrevocable letter of credit issued by ABN AMRO Bank N.V. (or other Bank acceptable to EIB) on behalf of the Banks as Issuers in the form of Annex 1 or otherwise as accepted by EIB; "LOAN" means the aggregate principal amount advanced by EIB to the Borrower and for the time being outstanding hereunder; "LONDON BUSINESS DAY" means a day on which banks are open for business in London; 7 "LUXEMBOURG BUSINESS DAY" means a day which is a working day of EIB in Luxembourg; "MAINTENANCE RESERVE ACCOUNT" means the account to be opened and maintained pursuant to clause 15 of the Intercreditor Agreement; "NOTICE OF RELEASE" means a notice by EIB to the Borrower and/or (as the case may be) the Issuing Bank given pursuant to Clause 12; "OPERATING ACCOUNT" means the account to be opened and maintained pursuant to clause 12 of the Intercreditor Agreement; "PAYMENT DATE" means 31 March and 30 September of each year until and including the Final Maturity Date; "POTENTIAL EVENT OF DEFAULT" means any event which would or is reasonably likely to become (with the passage of time, the giving of notice, the making of any determination or any combination thereof) an Event of Default; "PREPAYMENT AMOUNT" has the meaning ascribed to it in Clause 6.2(a); "PREPAYMENT DATE" in relation to a Voluntary Payment, has the meaning ascribed to it in Clause 6.2(a) and, in the case of a Compulsory Prepayment, means the date of demand (where Clause 9 or 10 applies) or, in any other case, the date of actual prepayment; "PREPAYMENT NOTICE" has the meaning ascribed to it in Clause 6.2(a); "PROJECT" has the meaning ascribed thereto in recital (A) to the Commercial Banks Facility Agreement; "PROJECT ACCOUNTS" means the Claims Reserve Account, the Compensation Account, the Maintenance Reserve Account, the Operating Account, the Tax Reserve Account and the Debt Service Reserve Account; "PROJECT FORECAST" means a forecast from time to time prepared by the Borrower in accordance with clause 19 of the Intercreditor Agreement utilising the Financial Model and delivered to the Intercreditor Agent in accordance with such clause; "QUALIFYING ISSUER" means an institution which at any material time satisfies the criteria of Clause 11.3; "REFERENCE RATE" means the finest rate of interest, reduced by 15 (fifteen) basis points, which EIB generally quotes on the date falling one month prior to a date on which a prepayment is made pursuant to Clause 6.1 or 6.2 for a loan in Sterling, having semi-annual dates for the payment of interest and having an average life equal to the remaining original average life of either the relevant amount of the Loan which is prepaid or, as the case may be, the undisbursed portion of the Credit which is annulled or 8 cancelled, if EIB does not quote such a rate, the rate, reduced as aforesaid, generally quoted for the period most closely corresponding to that average life; "RELEASE CONDITION" has the meaning ascribed to it in Clause 12.1; "RELEVANT EIB BANK SECURITY" in relation to the Loan means the EIB Bank Security issued or created in respect of it; "RENEWAL DATE" in relation to a Letter of Credit means the date which is 30 days prior to its Expiry Date; "RELEASE DATE" means, as the case may be, the First Release Date or the Second Release Date; "RELEVANT EIB SECURITY" in relation to the Loan means the EIB Security issued or created in respect of it; "REQUIRED PERCENTAGE" means: (a) prior to the First Release, 50 per cent; (b) after the First Release but prior to the Second Release, 25 per cent; and (c) after the Second Release, zero;- "REQUIRED VALUE" in respect of the EIB Bank Security for the Loan on any date (each a "Relevant Date") means the aggregate of: (a) the Required Percentage of the Loan on the Relevant Date; (b) the amount of interest to be accrued over the then current Interest Period calculated on a sum equal to the Required Percentage of the Loan during such Interest Period calculated at the Interest Rate; (c) one month's delayed interest calculated at the Interest Rate plus a premium of 2.5 per cent. per annum on:- (i) the amount of interest payable on a sum equal to the Required Percentage of the Loan at the rate applicable thereto during such Interest Period; plus (ii) a sum equal to the Required Percentage of the Loan, if any, due to be repaid at the end of the then current Interest Period; (d) one month's interest calculated at the Interest Rate on:- (i) a sum equal to the Required Percentage of the Loan; less 9 (ii) the Required Percentage of the Loan, if any, referred to in (c)(ii) above in respect thereof; and (e) a sum equal to the amount which would be payable under Clause 6.3(d)(ii) in respect of the Required Percentage of the Loan at the start of the relevant Interest Period; "SECOND RELEASE" means that release of Letters of Credit to become effective pursuant to Clause 12.3 after which there are no Letters of Credit issued or capable of being required to be issued and outstanding in favour of EIB pursuant to this Agreement. "SECOND RELEASE DATE" has the meaning given to it in Clause 12.2; "SENIOR FACILITY AGENT" means ABN AMRO Bank N.V. in its capacity as agent for the Banks under the Commercial Banks Facility Agreement (and any duly appointed successor agent of the Banks in such capacity); "STERLING" or "(POUND)" means the lawful currency for the time being of the United Kingdom; "TAXES" means and includes all present and future income and other taxes, levies, assessments, imposts, deductions, charges, duties, compulsory loans and withholdings whatsoever and wheresoever imposed and any charges in the nature of taxation together with interest thereon and penalties and fines with respect thereto, if any, and any payments made on or in respect thereof and "Tax" and "Taxation" shall be construed accordingly; "TAX RESERVE ACCOUNT" means the account to be opened and maintained pursuant to clause 16 of the Intercreditor Agreement; "UNGUARANTEED LOAN" means that part of the Loan which (i), by virtue of release pursuant to Clause 12, is not guaranteed by a Letter of Credit; and (ii) is not guaranteed by the EIF Senior Guarantee; "VOLUNTARY PREPAYMENT" means a prepayment made by the Borrower pursuant to Clause 6.2(a). 1.2 PARTICULAR TERMS (a) Unless the context otherwise requires, "CLAUSE", "ANNEX", "RECITAL" and "SCHEDULE" mean respectively a clause of, or an annex, recital or schedule to, this Agreement. (b) Headings are inserted for ease of reference only and are not relevant to the interpretation of any provision of this Agreement. (c) Subject to Clause 1.3(a), the following terms defined in the DBFO Contract have the same meaning when used in this Agreement, being "COMMENCEMENT DATE", 10 "COMPLETION CERTIFICATE", "CONTRACT PERIOD", "OPERATIONS", "PROJECT FACILITIES" and "WORKS". (d) Subject to Clause 1.3(b), the following terms defined in the Commercial Banks Facility Agreement have the same meaning when used in this Agreement, being "ADVANCES", "ANNUAL DEBT SERVICE COVER RATIO", "ANNUAL RECONCILIATION ACCOUNT", "APPLICABLE MARGIN", "AUTHORISED INVESTMENT", "BANKS", "COMMERCIAL SUBORDINATED AGREEMENT", "COMMERCIAL SUBORDINATED FINANCIERS", "CONSTRUCTION CONTRACT", "CONTRACTOR", "DBFO PAYMENTS", "DEBENTURE", "EIB FACILITY", "FACILITY", "FINANCE DOCUMENTS", "FINANCIAL MODEL", "HEDGING CONTRACTS", "PERMITTED PAYMENTS", "REFINANCING EXPENSES", "RELEVANT DOCUMENTS", "TECHNICAL SERVICES AGREEMENT", "TRANCHE A FACILITY". (e) The following terms defined in the Intercreditor Agreement have the same meaning when used in this Agreement, being "EXCESS CASH FLOW", and "SHARED SECURITY DOCUMENTS". 1.3 GENERAL PROVISIONS AS REGARDS REFERENCED DOCUMENTS (a) All definitions made herein, or used in clauses of the Commercial Banks Facility Agreement, which are incorporated herein by reference to the DBFO Contract or the Construction Contract, shall survive the expiry of the DBFO Contract or, as the case may be, the Construction Contract. Any amendment to any such definition agreed between the parties to the relevant contract and, where so required by the terms of this Agreement, the Commercial Banks Facility Agreement, the ElF Senior Guarantee Facility Agreement, the Intercreditor Agreement or any other Finance Document, consented to by the Banks (or any majority of them), EIB and/or EIF, shall apply for the purposes of this Agreement. Subject thereto, all such definitions shall be construed by reference to the form of the DBFO Contract or, as the case may be, Construction Contract as originally executed. (b) All definitions made and all clauses incorporated by reference to the Commercial Banks Facility Agreement shall survive the expiry of the Commercial Banks Facility Agreement and the repayment and discharge of all monies and liabilities of the Borrower thereunder. Any amendment to any such definition or incorporated clause, or any consent or waiver given under or in connection with any such definition or clause, agreed between, or binding upon, the parties to the Commercial Banks Facility Agreement and approved by EIB shall apply for the purposes of this Agreement Provided that no such amendment, waiver or consent shall apply for the purposes of determining whether the Release Condition has been satisfied at any time unless, at the time at which EIB approved the same, such approval was expressly and specifically stated to apply for such purposes. Subject thereto, all such definitions and incorporated clauses shall be construed by reference to the Commercial Banks Facility Agreement as originally executed and as if no such consent or waiver had been given. 11 1.4 CHANGE OF CURRENCY If a change in any currency of a country occurs, this Agreement will, to the extent EIB (acting reasonably and after consultation with the Borrower) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in London and otherwise to reflect the change in currency. 2. PURPOSE The purpose of the Credit is to provide funds to be used by the Borrower exclusively in respect of the Project. 3. CREDIT (a) EIB hereby establishes the Credit in favour of the Borrower which is hereby accepted by the Borrower. (b) The Credit is available on and subject to the terms and conditions of this Agreement. 4. BF LETTERS OF CREDIT 4.1 PROCUREMENT AND TERMS OF BF LETTERS OF CREDIT 4.1.1 The Borrower has procured the issue of BF Letters of Credit to EIB on the basis that: (a) a BF Letter of Credit shall be in the form of Annex 5; (b) the issuer of a BF Letter of Credit shall possess a rating as described in Clause 11.3(a)(i)(A); (c) the issuer of a BF Letter of Credit shall have confirmed to EIB in writing that the Borrower neither owes nor will owe any obligation whatsoever (whether of indemnity, counter-indemnity, contribution, payment, reimbursement, subrogation or otherwise) to such issuer arising out of the issue of such BF Letter of Credit; 4.1.2 The Borrower agrees that: (a) the Borrower shall procure the replacement of any BF Letter of Credit with a BF Letter of Credit of equivalent value where: (i) the issuer thereof ceases to possess a rating as described in Clause 11.3 (a)(i)(A); or (ii) the issuer thereof shall have given notice to EIB that the relevant BF Letter of Credit is to expire in accordance with the provisions thereof; (b) EIB shall be entitled to make a demand under each BF Letter of Credit in any of the following circumstances: 12 (i) non-payment when due of compensation payable by the Borrower to EIB upon a Compulsory Prepayment or Voluntary Prepayment pursuant to Clause 6.3(c) or 6.3(d) if and to the extent that the same exceeds an amount calculated in respect thereof in accordance with Clause 6.3(d)(ii) only ("Excess Broken Funding Costs"); (ii) the issuer of such BF Letter of Credit ceases to possess a rating as described in Clause 11.3(a)(i)(A) and such BF Letter of Credit is not replaced by another BF Letter of Credit complying with the provisions of this Clause 4 within 5 Business Days of demand to that effect addressed by EIB to the Borrower; or (iii) the issuer of such BF Letter of Credit shall have given notice to EIB of the date of expiration thereof and less than fifteen days remain until the date of expiry of such BF Letter of Credit and EIB has not received a replacement BF Letter of Credit of equivalent value issued in its favour in respect of which more than three hundred days remain until the date of expiry thereof, and in the case of (i) above the amount of such demand (which shall be made in equal parts against each BF Letter of Credit) shall be equal to the unpaid Excess Broken Funding Costs and in the case of (ii) and (iii) above the amount of such demand shall be equal to the Total Sum specified therein less any amount previously received by EIB pursuant to such BF Letter of Credit; and (c) any monies received by EIB pursuant to a demand made in respect of a BF Letter of Credit contemplated by paragraph (b)(ii) or (iii) above shall be credited to an account in the name of the Borrower and such account and the amounts from time to time credited thereto shall be the subject of a first ranking security interest created in favour of EIB as security for the payment when due of Excess Broken Funding Costs and a second ranking security interest created as security for the performance when due of any obligation owed by the Borrower to any person which has any right of indemnity or payment as against the Borrower arising out of the issue of such BF Letter of Credit or the making of any payment thereunder. Such cash collateral shall be subject to the same regime for releases thereof as would have applied had there not been any demand under the relevant BF Letter of Credit. 5. INTEREST 5.1 RATE OF INTEREST The Loan will bear interest at the Interest Rate; provided that the Unguaranteed Loan shall bear interest at the Interest Differentiated Rate. 13 5.2 INTEREST ON OVERDUE SUMS Without prejudice to Clause 9 and by way of exception to Clause 5.1, interest shall accrue on any overdue sum payable in respect of the Loan from the due date to the date of payment at an annual rate equal to the aggregate of: (a) 2.5 per cent.; and (b) the Interest Differentiated Rate in respect of overdue Unguaranteed Loan amounts and the Interest Rate in respect of all other overdue amounts. For the avoidance of doubt where interest ("Additional Interest") becomes payable upon interest charged in accordance with this Clause 5.2 (the "Original Interest") such Additional Interest shall be payable at the rate at which the Original Interest was charged. 5.3 PAYMENT OF INTEREST Interest shall be calculated and payable semi-annually in arrears in accordance with the provisions of Clause 7. 6. REPAYMENT 6.1 NORMAL REPAYMENT The Borrower shall repay the Loan by semi-annual instalments on Amortisation Dates in accordance with the amortisation table set out at Annex 4. 6.2 VOLUNTARY PREPAYMENT (a) Subject to and in accordance with the provisions of clause 20.1 of the Intercreditor Agreement, the Borrower may prepay all or part of the Loan upon giving written notice (a "PREPAYMENT NOTICE") specifying the amount of the Loan to be prepaid (the "PREPAYMENT AMOUNT") and the proposed date of prepayment (the "PREPAYMENT DATE"), which shall be an Amortisation Date. (b) The Prepayment Notice shall be delivered to EIB at least one month prior to the Prepayment Date. Prepayment shall be subject to the payment by the Borrower of the compensation, if any, due to EIB in accordance with the provisions of Clause 6.3(c). 6.3 EARLY REPAYMENT COMPENSATION (a) VOLUNTARY PREPAYMENTS: (i) Voluntary Prepayments are subject to the payment by the Borrower to EIB of compensation calculated in accordance with Clause 6.3(c). (ii) EIB shall give notice to the Borrower of the compensation due to it pursuant to this Clause 6.3(a). Within two Luxembourg Business Days 14 following its receipt of the said notice from EIB, the Borrower may, if the notice states that compensation is due, in writing revoke the Prepayment Notice. Save as aforesaid, the Borrower shall be obliged to effect prepayment on the Prepayment Date in accordance with the Prepayment Notice, together with accrued interest on the Prepayment Amount and any sum due under Clause 6.3(c). (b) COMPULSORY PREPAYMENTS: Compulsory Prepayments are subject to the payment by the Borrower to EIB of compensation calculated in accordance with Clause 6.3(d). (c) COMPENSATION IN RESPECT OF VOLUNTARY PREPAYMENTS: In the case of a Voluntary Prepayment, the Borrower shall pay to EIB an amount in Sterling equal to the shortfall in interest incurred by EIB in respect of the relevant prepaid amount for each period ending on successive Payment Dates following the Prepayment Date calculated as the amount by which (1) interest that would have been payable hereunder in respect of that period on the amount so prepaid exceeds (2) the interest which would have been payable during that period if calculated at the Reference Rate, discounted to the Prepayment Date by applying a discount rate equal to the Reference Rate. (d) COMPENSATION IN RESPECT OF COMPULSORY PREPAYMENTS: In the case of a Compulsory Prepayment, the Borrower shall pay to EIB whichever is the greater of:- (i) an amount in Sterling equal to the shortfall in interest incurred by EIB in respect of the relevant prepaid amount for each period ending on successive Payment Dates following the Prepayment Date calculated as the amount by which (1) interest that would have been payable hereunder in respect of that period on the amount so prepaid exceeds (2) the interest which would have been payable during that period if calculated at the Reference Rate, discounted to the Prepayment Date by applying a discount rate equal to the Reference Rate; and (ii) an amount in Sterling calculated at the annual rate of 0.25 per cent from the Prepayment Date to the respective dates on which each instalment of the amount prepaid would have been repayable but for the prepayment. 6.4 CASH COLLATERAL IN LIEU OF PREPAYMENT (a) Whenever the Borrower makes a Voluntary Prepayment or a Compulsory Prepayment and, but for the operation of this Clause 6.4, the Borrower would be required to pay compensation calculated in accordance with Clause 6.3(c) or (d), the Borrower may request, by written notice thereof to EIB, (a "Cash 15 Collateralisation Request") that the amount to be prepaid be credited to the EIB/Borrower Prepayment Cash Collateral Account. (b) Provided that the terms of the EIB Cash Security arising from such cash collateralisation are acceptable to EIB (acting reasonably), EIB shall accede to a Cash Collateralisation Request and the amount so requested to be paid to the EIB/Borrower Prepayment Cash Collateral Account shall be so paid to such account. EIB shall be entitled to regard the terms of such EIB Cash Security to be unacceptable to it in the circumstances (inter alia) where EIB has been advised by suitably qualified and experienced legal counsel that, by reason of matters then prevailing, the validity and enforceability of such EIB Cash Security would be in question. (c) EIB shall be entitled to apply the whole or any part of the amount from time to time in whole or partial prepayment of the Loan at any time following the taking of any action by or on behalf of the Banks pursuant to clause 22 of the Commercial Banks Facility Agreement or (where no compensation under Clause 6.3(c) or, as the case may be, Clause 6.3(d) would be payable by reason of such prepayment) at any time after the occurrence of an Event of Default and such prepayment shall be deemed for all purposes to be a Voluntary Prepayment or, as the case may be, a Compulsory Prepayment in respect of which compensation shall be payable by the Borrower to EIB calculated in accordance with Clause 6.3(c) or, as the case may be, Clause 6.3(d). The exercise of rights by EIB under this Clause 6.4(c) shall take precedence over any exercise by the Borrower of its rights under Clause 6.4(d). (d) The Borrower may at any time by giving a Prepayment Notice pursuant to Clause 6.2(a) require that the whole or any part of the amount from time to time standing to the credit of the EIB/Borrower Prepayment Cash Collateral Account be applied in whole or partial prepayment of the Loan, in which event the provisions of Clause 6.2 shall apply and the Borrower shall pay to EIB compensation calculated in accordance with Clause 6.3(c). 6.5 REDUCTION OF EIB BANK SECURITY (a) The Borrower may (subject to Clause 6.6(g)), at the same time as any prepayment of all or any part of any semi annual instalment of the Loan pursuant to either of Clause 6.2 or 6.3 or any cash collateralisation made in lieu of a prepayment pursuant to Clause 6.4, request that EIB deliver to the Issuing Bank a notice in the form of Appendix 3 to Annex 1 having the effect of reducing the "Total Sum" under each Letter of Credit issued by the Issuing Bank (as defined in such Letter of Credit) in accordance with the following provisions of this Clause 6.5. (b) In the case of any such prepayment or cash collateralisation in lieu thereof pursuant to Clause 6.2 or Clause 6.3 or Clause 6.4, the Total Sum (as defined above) shall be reduced by an amount in Sterling equal to the Required Value 16 (ignoring, for this purpose only, paragraph (e) of the definition of Required Value) of the amount so prepaid or cash collateralised. (c) Upon receipt of any request delivered to it by the Borrower pursuant to Clause 6.5(a) EIB shall deliver a notice to the Issuing Bank as required by the foregoing provisions of this Clause 6.5 unless EIB shall not have received at such time the relevant prepayment amount or cash collateral together with (where relevant) any early repayment compensation payable in connection therewith. 6.6 GENERAL PROVISIONS REGARDING PREPAYMENT (a) In the case of Voluntary Prepayments any amount prepaid shall be applied to reduce the repayment instalments of the Loan on a pro rata basis. (b) Save as provided in Clause 6.4(c), any amount prepaid upon a Compulsory Prepayment shall be applied to reduce the repayment instalments of the Loan in inverse order of their due dates for payment. (c) Each prepayment shall be accompanied by payment to EIB of accrued interest and early repayment compensation calculated on the amount prepaid in accordance with Clause 6.3(c) and 6.3(d). (d) For the purpose of determining compensation payable for the prepayment of the Unguaranteed Loan under Clause 6.3(c) and 6.3(d)(i): (i) the interest rate applicable to the Unguaranteed Loan is the Interest Differentiated Rate; (ii) for the purpose of calculating the Reference Rate the Reference Rate shall be increased by a number of basis points equal to the difference between the Interest Rate and the Interest Differentiated Rate. (e) Amounts prepaid may not be redrawn. (f) This Clause 6 shall not prejudice Clause 9 or 10. (g) Each prepayment pursuant to either Clause 6.2 or 6.3 or any cash collateralisation made in lieu of a prepayment pursuant to clause 6.4 shall be applied as between the Loan guaranteed by a Letter of Credit, the Loan guaranteed by the EIF Senior Guarantee and the Unguaranteed Loan pro rata in the proportion which each of the Loan guaranteed by a Letter of Credit, the Loan guaranteed by the EIF Senior Guarantee and the Unguaranteed Loan bears to the Loan. 17 7. PAYMENTS 7.1 PLACE OF PAYMENT Each sum payable by the Borrower under this Agreement shall be paid to the account notified by EIB to the Borrower. EIB shall indicate the account not less than fifteen days before the due date for the first payment by the Borrower and shall notify any change of account not less than fifteen days before the date of the first payment to which the change applies. This period of notice does not apply in the case of payment under Clause 9 or 10. 7.2 CALCULATION OF PAYMENTS RELATING TO A FRACTION OF A YEAR Any amount due by way of interest, commission or otherwise from the Borrower under this Agreement, and calculated in respect of any fraction of a year, shall be calculated on the basis of a month of 30 days and a 360 day year. 7.3 DAYS OF PAYMENT (a) Interest, payments of principal and other sums due semi-annually under this Agreement are payable to EIB on the Payment Dates. (b) Any payment due in respect of the Loan on a date which is not a London Business Day shall be payable on the nearest preceding day which is a London Business Day. (c) Other sums due hereunder are payable within seven days of receipt by the Borrower of the demand made by EIB. (d) A sum due from the Borrower shall be deemed paid when it is received in the account notified by EIB pursuant to Clause 7.1. 8. UNDERTAKINGS 8.1 DURATION OF UNDERTAKINGS The Borrower undertakes to EIB in the terms of the following provisions of this Clause 8, such undertakings to commence on the date of this Agreement and to continue for so long as any sum is outstanding under the Loan or this Agreement. 8.2 SPECIFIC UNDERTAKINGS The Borrower undertakes:- (a) TENDERING PROCEDURES: to purchase equipment, secure services and order works for the Project, so far as appropriate and in a manner satisfactory to EIB, by international tender which is: 18 (i) open at least to nationals of all countries which are signatories to the Agreement on the European Economic Area; or (ii) in accordance with each Directive of the Council of the European Union applicable to the Project; (b) ACCESS TO FACILITIES: to procure (so far as it is within its power so to do) that at reasonable times (on reasonable prior notice and at their own risk) any one or more representatives of EIB be afforded access to, and be permitted to inspect or observe, the Works and, to the extent reasonably required by them in connection with this Agreement or the exercise or performance of rights and duties hereunder, any premises of the Borrower; (c) NOTICE OF DEFAULT ETC: promptly upon becoming aware of the occurrence of any Event of Default or Potential Event of Default, to give notice thereof to EIB; (d) INSPECTION: to the extent reasonably required in connection with this Agreement or the exercise or performance of rights hereunder, to procure that at reasonable times (on reasonable prior notice) any one or more representatives of EIB may have access to senior officers of the Borrower and, to the extent so required, be provided with copies of books, records, accounts, documents, computer programmes and other data or information in the possession of or available to the Borrower; (e) INFORMATION: (i) to deliver to EIB a copy of each document supplied, or which it is obliged to supply, to the Senior Facility Agent under clause 15.3 of the Commercial Banks Facility Agreement and (ii) promptly to inform EIB of each appointment by it of a consultant on any matter material to the environmental impact of the Project, to the financial outcome of the Project or to the interests of EIB and to be supplied with such information and explanations relating to such matters as EIB may reasonably require; (f) EIB BANK SECURITY RENEWAL: If upon the Renewal Date of any Letter of Credit which has not been fully released in accordance with Clause 12 there shall be any amount outstanding in respect of the Loan such that the EIB Security Value of EIB Bank Security would (in the absence of renewal under this Clause) be less than the Adjusted Required Value of the EIB Bank Security in respect of the Loan at that time, to ensure that, on that Renewal Date, the EIB Bank Security for the Loan will, with effect from its Expiry Date and for at least 12 months thereafter, have an EIB Security Value at least equal to the Adjusted Required Value; and (g) RETENTION ACCOUNT: to open when required to do so the retention account referred to in clause 17.7.1 of the DBFO Contract. 8.3 PROJECT FORECASTS The Borrower shall at all times comply with the provisions set out in clause 19 of the Intercreditor Agreement. 19 8.4 PROJECT ACCOUNTS AND CASHFLOW The Borrower shall open and maintain with the Account Bank each of the Project Accounts in accordance with the provisions of part 5 of the Intercreditor Agreement. 8.5 COVENANTS AND REPRESENTATIONS IN THE COMMERCIAL BANKS FACILITY AGREEMENT (a) The covenants and representations contained in clauses 19, 20 and 21 of the Commercial Banks Facility Agreement shall be deemed incorporated in this Agreement and repeated for the benefit of EIB as if: (i) each reference therein to "the Agent", "the Finance Parties", "the Majority Banks" and "the Banks" included EIB; and (ii) each reference in clauses 19.16, 21.6 and 21.7 to "the interests of the Banks" was a reference to "the interests of the Banks or EIB". (b) The representations and warranties contained in Clause 20 of the Commercial Banks Facility Agreement which are incorporated herein pursuant to Clause 8.5(a) will be deemed to be repeated herein on the dates set out in Clause 20 of the Commercial Banks Facility Agreement. 9. EVENTS OF DEFAULT IN RESPECT OF SECURED AMOUNTS 9.1 DEFINITION OF DEFAULT Each of the following events may be declared by EIB, following the fulfilment of the respective condition mentioned in Clause 9.2 (if any) for the making of demand on the Borrower for repayment of the Loan or part thereof, to be an Event of Default and to give rise to the right to take the action set forth in Clause 9.2, that is to say:- (a) NON-PAYMENT BY BORROWER AND ISSUERS: (i) failure by an Issuer (or the Issuing Bank on an Issuer's behalf) to pay, within five London Business Days of the receipt by the Issuing Bank of demand made under any Letter of Credit, any sum payable under such Letter of Credit by reason of a failure by the Borrower to pay an amount due and payable to EIB under this Agreement when so due and payable; or (ii) failure by the Borrower to ensure that, within 30 days of the due date for any payments by any Issuer under any Letter of Credit, the EIB Bank Security for the Loan will have an EIB Security Value at least equal to the Adjusted Required Value in respect of the Loan immediately after such payment; or (b) NON-PAYMENT BY BORROWER AND EIF: failure by EIF to pay, within five London Business Days of receipt by EIF of demand made under the EIF Senior Guarantee, any sum payable under the EIF Senior Guarantee by reason of a 20 failure by the Borrower to pay an amount due and payable to EIB under this Agreement; or (c) IMPOSSIBILITY OF REALISING OTHER EIB SECURITY: (i) EIB determines that it is not possible to realise immediately any EIB Security (other than a Letter of Credit or the EIF Senior Guarantee) which is intended to be realisable in respect of an amount payable by the Borrower to EIB under this Agreement which is due and payable but is unpaid by the Borrower; or (ii) failure by the Borrower to ensure that, within 30 days of the realisation of any EIB Security as contemplated in paragraph (i) above, the EIB Security for the Loan will have a Security Value at least equal to the Adjusted Required Value in respect of the Loan immediately after such realisation; or (d) NON-RENEWAL OF EIB BANK SECURITY: failure by the Borrower to comply with Clause 8.2(f); or (e) (i) ISSUER INSOLVENCY, ETC: an Issuer is unable to pay its debts as they fall due, is dissolved, is declared insolvent, admits its inability to pay its debts, makes a general assignment of its debts, makes a composition or agrees a moratorium with its creditors generally or suffers the appointment by the court or any public authority of an administrator or equivalent officer over any substantial part of its assets or affairs and in each case such Issuer is not replaced in accordance with Clause 9.3, within 30 days following the date of a written demand to that effect addressed by EIB to the Borrower and the Senior Facility Agent, by one or more Qualifying Issuers or by EIB Cash Security; or (ii) RECONSTRUCTION OF ISSUER: an Issuer is (x) dissolved in the course of a reconstruction and is not replaced by a successor entity which is a Qualifying Issuer or in accordance with Clause 9.3, or (y) merged with another entity with the effect, in the opinion of EIB (formed in accordance with the provisions of Clause 11.3(b)), that it is no longer a Qualifying Issuer and is not replaced in accordance with Clause 9.3 within 45 days following the date of a written demand to that effect addressed by EIB to the Borrower and the Senior Facility Agent by one or more Qualifying Issuers or by EIB Cash Security; or (iii) ISSUER REPUDIATION: an Issuer repudiates any Relevant EIB Security or does or causes to be done any act or thing evidencing an intention to repudiate any Relevant EIB Security, or the performance by the Issuer of its obligations under any Letter of Credit becomes illegal or unenforceable; or 21 (f) (i) EIF INSOLVENCY, ETC: EIF is unable to pay its debts as they fall due, is dissolved, is declared insolvent, admits its inability to pay its debts, makes a general assignment of its debts, makes a composition or agrees a moratorium with its creditors generally or suffers the appointment by the court or any public authority of an administrator or equivalent officer over any substantial part of its assets or affairs and in each case EIF is not replaced in accordance with Clause 9.4, within 30 days following the date of a written demand to that effect addressed by EIB to the Borrower and EIF, by one or more Qualifying Issuers or by EIB Cash Security; (ii) RECONSTRUCTION OF EIF: EIF is (x) dissolved in the course of a reconstruction and is not replaced by a successor entity having in the reasonable opinion of EIB an ability to meet its obligations under the EIF Senior Guarantee at least as strong as the previous ability of EIF or in accordance with Clause 9.4 or (y) merged with another entity with the effect, in the reasonable opinion of EIB, that it suffers a material deterioration in its ability to meet its obligations under the EIF Senior Guarantee and is not replaced in accordance with Clause 9.4 within 30 days following the date of a written demand to that effect addressed by EIB to the Borrower by one or more Qualifying Issuers or by EIB Cash Security; (iii) CESSATION OF BUSINESS BY EIF: EIF ceases to carry on business and is not replaced in accordance with Clause 9.4 within 30 days following the date of a written demand to that effect addressed by EIB to the Borrower and EIF by one or more Qualifying Issuers or by EIB Cash Security; or (iv) EIF REPUDIATION: EIF repudiates any Relevant EIB Security or does or causes to be done any act or thing evidencing an intention to repudiate any Relevant EIB Security, or the performance by EIF of its obligations under the EIF Senior Guarantee becomes illegal or unenforceable; or (g) LOSS OF QUALIFYING STATUS OF ISSUER: an Issuer under any Relevant EIB Bank Security ceases to be a Qualifying Issuer within the meaning of Clause 11.3 and is not replaced by another Qualifying Issuer or by EIB Cash Security in accordance with Clause 9.3, within 45 days following a written demand to that effect addressed by EIB to the Borrower; or (h) EVENTS OF DEFAULT UNDER OTHER SENIOR FACILITY AGREEMENTS: there occurs any event which is an event of default (howsoever described) under Clause 22 of the Commercial Banks Facility Agreement (construed in accordance with Clause 9.5) or the EIF Senior Guarantee Facility Agreement. 9.2 ACTION UPON DEFAULT (a) If any of the events described in paragraph (a) (Non-payment by Borrower and Issuers) of Clause 9.1 shall occur, EIB may demand immediate payment by the 22 Borrower of such amount of the EIB Loan as is equal to the then maximum actual or contingent liability of the relevant Issuers or Issuer under the EIB Bank Security. (b) If the event described in paragraph (b) (Non-payment by Borrower and EIF) of Clause 9.1 shall occur, EIB may demand immediate payment by the Borrower of all amounts which if not paid by the Borrower when due would be payable by EIF. (c) If either of the events described in paragraph (c) (Impossibility of realising other EIB Security) of Clause 9.1 shall occur, EIB may demand immediate payment by the Borrower of all amounts which if not paid by the Borrower when due would be payable out of the proceeds of realisation of the Relevant EIB Security. (d) If the event described in paragraph (d) (Non-renewal of EIB Bank Security) of Clause 9.1 shall occur, and unless the EIB Bank Security has been wholly released in accordance with Clause 12, EIB may demand immediate payment from the Borrower and/or under the Relevant EIB Bank Security of all amounts which if not paid by the Borrower when due would be payable out of the proceeds of realisation of the Relevant EIB Security. (e) (i) If either of the events described in paragraph (e)(i) or (ii) (Issuer Insolvency, Etc. and Reconstruction of Issuer) of Clause 9.1 shall occur, EIB may (A) within 30 days following expiry of the 30-day or, as the case may be, 45-day grace period mentioned in Clause 9.1(e)(i) or (ii) demand immediate payment by the relevant Issuer under the Relevant EIB Bank Security of an amount (the "DUE AMOUNT") which represents such a percentage of the entire sum outstanding in respect of the Loan as corresponds to the Percentage Participation in the Relevant EIB Bank Security of the Issuer in relation to which the event occurred; and (B) upon non-payment by the relevant Issuer within two London Business Days of the demand, demand immediate payment by the Borrower of the due amount; (ii) If the event described in paragraph (e)(iii) (Issuer Repudiation) of Clause 9.1 shall occur, EIB may demand immediate payment by the Borrower of all amounts which if not paid by the Borrower when due would be payable by the relevant Issuer. (f) (i) If any of the events described in paragraph (f)(i), (ii) or (iii) (EIF Insolvency, Etc., Reconstruction of EIF and Cessation of Business by EIF) of Clause 9.1 shall occur, EIB may (A) within 30 days following the expiry of the 30 day grace period mentioned in Clause 9.1(f)(i), (ii) or (iii), claim under the EIF Senior Guarantee all monies guaranteed thereby in respect of the Loan (the "DUE AMOUNT") and (B) upon non-payment by EIF within two London Business Days of the demand, demand immediate payment by the Borrower of the due amount. 23 (ii) If the event described in paragraph (f) (EIF Repudiation) of Clause 9.1 shall occur, EIB may demand immediate payment by the Borrower of all amounts which if not paid by the Borrower when due would be payable by EIF. (g) If the event described in paragraph (g) (Loss of Qualifying Status of Issuer) of Clause 9.1 shall occur, EIB may (i) within 30 days following expiry of the 45-day grace period mentioned in Clause 9.1(g) demand immediate payment by the relevant Issuer under the Relevant EIB Bank Security of an amount (the "DUE AMOUNT") which represents such a percentage of the entire sum outstanding in respect of the Loan as corresponds to the Percentage Participation in the Relevant EIB Bank Security of the Issuer in relation to which the event occurred; and (ii) upon non-payment by the relevant Issuer within two London Business Days of the demand, demand immediate payment by the Borrower of the due amount. (h) If an event described in paragraph (h) (Events of Default under Other Senior Facility Agreements) of Clause 9.1 shall occur, EIB may (in accordance with part 13 of the Intercreditor Agreement) demand immediate payment by the Borrower of the Loan. (i) Upon any demand for payment being made by EIB pursuant to any of the provisions of this Clause 9.2: (i) the same shall become forthwith due and payable by the Borrower in accordance with the terms of the demand together with accrued interest and early repayment compensation under Clause 6.3(d); (ii) EIB may make such claims and demands under, and enforce and, where appropriate, instruct the Security Trustee to enforce, the EIB Security to such extent as EIB shall decide; and (iii) EIB may exercise such rights as are then available to it under the Intercreditor Agreement to require the Security Trustee to exercise any and all such rights as may be available to it under any of the Shared Security Documents and/or require the Intercreditor Agent to exercise any and all such rights (including step-in rights) as may be available to it under the Direct Agreement. (j) If the application of any of the 30-day or, as the case may be, 45-day grace periods referred to in Clause 9.1 and the foregoing provisions of this Clause 9.2 would, as a result of the Expiry Date of the Letter of Credit, the EIF Guarantee or other Relevant EIB Security, result in EIB not being able to make a claim under any Letter of Credit or the EIF Guarantee or to realise any other relevant EIB Security in relation to any sum demanded by EIB by at least three Business Days prior to the Expiry Date of such Letter of Credit or the EIF Guarantee, then such grace periods shall be shortened to such extent as may be necessary so as to enable EIB to make such a claim prior to such Expiry Date. 24 9.3 REPLACEMENT OF AN ISSUER Whenever an Issuer is required to be replaced pursuant to Clause 9.1(e), the Borrower shall as soon as possible inform EIB: (a) to the effect that the Loan will be prepaid in whole or in part and, if in part, to an extent equivalent to the proportion thereof in respect of which non payment when due by the Borrower would give rise to an obligation on the part of such Issuer to make payment under the Relevant EIB Bank Security; and/or (b) that steps will be taken by the Borrower (whether by way of Letters of Credit or the provision of EIB Cash Security (on terms acceptable to EIB, acting reasonably) by the Borrower or the Issuer by payment to the appropriate EIB Cash Collateral Accounts) to ensure that there is provided to EIB such EIB Bank Security as will have an EIB Security Value at least equal to the EIB Security Value of the Letter of Credit to be replaced; and will procure implementation of such steps (with such modifications thereof as the Borrower and EIB may agree) within the period specified in Clause 9.1(e). 9.4 REPLACEMENT OF EIF If EIF is required to be replaced pursuant to Clause 9.1(f), the Borrower shall as soon as possible inform EIB:- (a) to the effect that the Loan will be prepaid in whole or in part and, if in part, to an extent equivalent to the proportion thereof which is guaranteed by EIF under the EIF Senior Guarantee; and/or (b) that steps will be taken by the Borrower to ensure that there is provided to EIB such EIB Security as will have a value at least equal to the EIF Senior Guarantee; and will procure implementation of such steps (with such modifications thereof as the Borrower and EIB may agree) within the period specified in Clause 9.1(f). 9.5 CONSTRUCTION OF EVENTS OF DEFAULT IN THE COMMERCIAL BANKS FACILITY AGREEMENT (a) The events of default under clause 22 of the Commercial Banks Facility Agreement shall be construed as if:- (i) each reference therein to "the Agent", "the Finance Parties", "the Banks" and "the Majority Banks" included EIB; and (ii) each reference therein to "the interests of the Banks" was a reference to "the interests of the Banks or EIB". 25 10. EVENTS OF DEFAULT IN RESPECT OF UNSECURED AMOUNTS 10.1 DEFINITION OF DEFAULT Each of the following events may be declared by EIB to be an Event of Default and to give rise to the right to take the action set forth in Clause 10.2, that is to say:- (a) NON-PAYMENT BY BORROWER: failure by the Borrower to pay any sum that is due on the Loan (other than a sum the non-payment of which gives rise to a right exercisable by EIB to make a claim for the payment to it of an amount equal to such sum under any Letter of Credit or the EIF Senior Guarantee or out of the proceeds of realisation of any other Relevant EIB Security other than EIB Security provided pursuant to Clause 8.5(b)) within two London Business Days of the due date; (b) MISREPRESENTATION: any representation, warranty or statement made by the Borrower in Clause 4.1 of the Amendment and Restatement Agreement or clause 20 of the Commercial Banks Facility Agreement (as deemed to be repeated on the dates set out in clause 20 of the Commercial Banks Facility Agreement) in any notice or other document, certificate or statement delivered by any such person pursuant hereto or in connection herewith is or proves to have been incorrect or misleading in any material aspect when made or deemed to have been made; (c) SPECIFIC COVENANTS: the Borrower fails duly to perform or comply with any of its undertakings in Clause 8.2; (d) EVENTS OF DEFAULT UNDER OTHER SENIOR FACILITY AGREEMENTS: there occurs any event of default (howsoever described) under clause 22 of the Commercial Banks Facility Agreement (construed in accordance with Clause 9.5) or the EIF Senior Guarantee Facility Agreement; (e) DEFAULT RATIOS: as evidenced by any Project Forecast prepared pursuant to clause 19 of the Intercreditor Agreement: (i) the EIB Loan Life Cover Ratio on the date as at which such Project Forecast was prepared is less than 1.10:1; or (ii) the average of the EIB Forecast Annual Debt Service Cover Ratios in respect of the two 12 months periods within each consecutive period of 24 months, of which the first commences on the date as at which the relevant Project Forecast has been prepared and the last ends on the CBFA Final Maturity Date (and for the purposes of this clause each subsequent period of 24 months shall commence on the day after the last day of the proceeding period of 24 months), is less than 1.05: 1. 26 10.2 ACTION UPON DEFAULT (a) If any of the events described in Clause 10.1 shall occur, EIB may (in accordance with part 13 of the Intercreditor Agreement) demand immediate payment by the Borrower of such part of the Loan the non-payment of which by the Borrower would not give rise to a right exercisable by EIB to make a claim for the payment to it of an equal amount under any Letter of Credit or the EIF Senior Guarantee or out of the proceeds of realisation of any other Relevant EIB Security other than EIB Security provided pursuant to Clause 8.5(b). (b) Upon any demand for payment being made by EIB pursuant to Clause 10.2(a):- (i) the same shall become forthwith due and payable by the Borrower in accordance with the terms of the demand together with accrued interest and early repayment compensation under Clause 6.3(d); (ii) EIB may make such claims and demands under, and enforce and, where appropriate, instruct the Security Trustee to enforce, the EIB Security to such extent as EIB shall decide; and (iii) EB may exercise such rights as are then available to it under the Intercreditor Agreement to require the Security Trustee to exercise any and all such rights as may be available to it under any of the Shared Security Documents and/or require the Intercreditor Agent to exercise any and all such rights (including step-in rights) as may be available to it under the Direct Agreement. 11. ISSUE OF LETTERS OF CREDIT AND EIB CASH SECURITY 11.1 AMOUNT, TENOR AND FORM Each Letter of Credit shall be issued in substantially the same form as Annex 1. EIB shall not, without more reason, refuse a Letter of Credit expressed in a form substantially in the form set out in Annex 1 or in any other form previously agreed with the Borrower. 11.2 SELECTION OF QUALIFYING ISSUERS Each Issuer shall be a Qualifying Issuer as defined in Clause 11.3. 11.3 QUALIFYING ISSUERS (a) A legal person shall be a Qualifying Issuer if: (i) it satisfies the following conditions: (A) it possesses a current AA rating or better (whether graded plus or minus or otherwise qualified) awarded by Standard & Poor's Corporation or a current Aa rating or better awarded by Moody's 27 Investor Service, Inc. (whether graded 1, 2 or 3 or otherwise qualified) in respect of its most recent unsecured (and unsubordinated) long or medium term issue on any capital market or, if the said agencies should both cease to publish such ratings, it possesses an equivalent rating from another rating agency of equal repute (the "CREDIT STANDARD"); or (B) it is otherwise approved by EIB, and in each case its aggregate liability or proposed liability under the EIB Bank Security does not and will not exceed any specific limit notified by EIB to the Borrower prior to the date the person in question becomes a party to the Commercial Banks Facility Agreement as would cause the limit to be exceeded in respect of the person in question; and (ii) it is an institution which is permitted under the laws to which it is subject in connection with its liabilities under the EIB Bank Security to cause letters of credit to be issued in its name and to accept liability thereunder. (b) If an Issuer previously possessing a rating referred to in Clause 11.3(a)(i)(A) should cease to possess a rating of the Credit Standard and if it is subject to a notice from EIB to the Borrower that it is not approved or, being admitted to be a Qualifying Issuer by virtue only of Clause 11.3(a)(i)(B) or by virtue of EIB not giving such a notice of non approval, should be the subject of a notice by EIB to the Senior Facility Agent (with a copy to the Borrower) to the effect that the Issuer has, in the opinion of EIB, acting reasonably, suffered a material adverse change in its financial condition since its approval by EIB under that clause or, as the case may be, since ceasing to possess a rating of the Credit Standard, it shall cease to be a Qualifying Issuer. 12. RELEASE OF LETTERS OF CREDIT 12.1 RELEASE CONDITION (a) EIB undertakes towards the Borrower to effect successive releases of the Letters of Credit or any other EIB Bank Security as from the satisfaction of the Release Condition in accordance with the timetable and subject to the conditions set out in this Clause 12. (b) For these purposes, the "RELEASE CONDITION" means the giving of notice by EIB to the Borrower and the Senior Facility Agent that each of the following conditions is fulfilled as at the relevant Release Date or on any Payment Date occurring after the relevant Release Date in respect of which the Borrower seeks a release pursuant to Clause 12.1(c): (i) the Project Forecast prepared as at the relevant Release Date or subsequent Payment Date (the "RELEVANT RELEASE FORECAST DATE") pursuant to clause 28 19 of the Intercreditor Agreement shows that the EIB Loan Life Cover Ratio is at least 1.31:1; (ii) the Project Forecast prepared as at the Relevant Release Forecast Date pursuant to clause 19 of the Intercreditor Agreement shows that: (1) the EIB Annual Debt Service Cover Ratio is at least 1.16:1 in respect of the period of 12 months ended on the Relevant Release Forecast Date; (2) the EIB Forecast Annual Debt Service Cover Ratio is at least 1.16:1 in respect of the period of 12 months commencing on the Relevant Release Forecast Date; and (3) the average of the EIB Forecast Annual Debt Service Cover Ratios in respect of the two 12 month periods within each consecutive period of 24 months, of which the first commences on the Relevant Release Forecast Date and the last ends on the CBFA Final Maturity Date (and for the purposes of this clause each subsequent period of 24 months shall commence on the day after the last day of the preceding period of 24 months), is at least 1.16:1; (iii) the DBFO Contract has not been terminated and is in full force and effect; (iv) no Event of Default or Potential Event of Default has occurred and is continuing and the Borrower provides a certificate to EIB to that effect or an Event of Default or Potential Event of Default has occurred of which EIB has actual written notice from the Borrower and EIB has certified that, in its opinion, the event concerned would, if the release concerned were to take effect, be materially prejudicial to the interests of EIB (provided that, for the purpose of the Release Condition in relation to the Second Release Date, no regard shall be had to any event falling within Clause 9.1(f)(i) or (ii) or 9.1(g) in relation to any Issuer); (v) the Debt Service Reserve Account the Maintenance Reserve Account and the Tax Reserve Account (each term as defined in the Intercreditor Agreement) have been fully funded to the extent required at such time and in accordance with the terms of the Intercreditor Agreement; and (vi) there shall not have been an amendment to or variation of the provisions of the DBFO Contract in breach of clause 24.4(ii) of the Intercreditor Agreement. (c) From the date on which it believes the above conditions to be met, the Borrower may, 60 days prior to any relevant Release Date or any Payment Date occurring after the relevant Release Date, seek a release by requesting EIB to consider whether the Release Condition is fulfilled and, upon being satisfied that the Release Condition is fulfilled, to certify and, if not so satisfied, to inform the 29 Borrower and the Senior Facility Agent accordingly. Within 30 days of receipt of each request, EIB shall examine each condition of the Release Condition and shall certify to the Borrower and the Senior Facility Agent whether or not the Release Condition is satisfied. (d) The following provisions of this Clause 12 shall apply upon the delivery of EIB's certificate as aforesaid. 12.2 LETTER OF CREDIT REDUCTION SCHEDULE As soon as reasonably practicable after the Release Condition is fulfilled, EIB shall deliver: (a) a notice in the form of Appendix 3 to Annex 1 to the Issuing Bank (with a copy to the Borrower) specifying that the "Total Sum" (as defined in the Bank Letter of Credit) shall be reduced by an amount in Sterling the effect of which (after taking into account any Notice of Release to be issued pursuant to paragraph (b) below) is to take account of the Adjusted Required Value of EIB Bank Security for the Loan arising from the satisfaction of the Release Condition and the operation of the definition of "Required Percentage" by reason thereof; and (b) a Notice of Release of other EIB Security (in the form of Annex 2) to the Borrower with respect to any other EIB Bank Security. For this purpose: "FIRST RELEASE DATE" means the date following four years after the date of issue of the Completion Certificate; and "SECOND RELEASE DATE" means the date following six years after the date of issue of the Completion Certificate. 12.3 EFFECTIVE DATE OF RELEASE Upon the delivery of a Notice of Release, the release shall take effect upon the issue by the Account Bank (as defined in the Intercreditor Agreement) to EIB of a certificate, in form and substance satisfactory to EIB, to the effect that the conditions specified in Clause 12.1(b)(i) to (vi) is fulfilled as at the date of issue of such certificate. 12.4 RELEASE OF OTHER EIB SECURITY In order to give effect to the release of any other EIB Bank Security, EIB undertakes to execute and do all such deeds, acts and things as the Borrower may reasonably request to implement the release or in order to reduce the value of such other EIB Bank Security to its Adjusted Required Value. 30 12.5 RELEASE OF BF LETTERS OF CREDIT At the same time as EIB delivers a notice pursuant to Clause 12.2(a), EIB shall also deliver to each of the issuers of BF Letters of Credit a notice in the form of Appendix 2 to Annex 5. 13. ACCOUNTS AND REPORTS 13.1 ACCOUNTS Without prejudice to Clause 8.2(e), the Borrower undertakes that, so long as the Loan is outstanding, it shall: (a) keep its books of account and prepare all accounts in accordance with the requirements set forth in the Commercial Banks Facility Agreement; (b) deliver to EIB, as soon as available to shareholders, in respect of each financial year a balance sheet, a profit and loss account and such other financial statements, if any, which are required by the laws of England and Wales; (c) promptly inform EIB of any change of its status, of any change in its corporate documents or of any law or decree specifically and expressly affecting the Project; and (d) promptly deliver to EIB such other information in relation to its financial condition as EIB may from time to time reasonably request. 13.2 REPORTS AND FORECASTS So long as any part of the Loan is outstanding, the Borrower shall procure that EIB receives: (a) a copy of all statements, reports, audits and other information delivered under clause 15 of the Commercial Banks Facility Agreement and at the same time as delivery of the same to the Banks; and (b) such other information on the Project as EIB may from time to time reasonably request. 14. TAXATION INDEMNITY 14.1 THIS AGREEMENT The Borrower shall pay and indemnify EIB against the cost of all Taxes (other than Taxes on overall net profits) which may become due by reason of the signature and implementation of this Agreement and the EIB Security and/or to ensure the validity or enforceability of this Agreement and the validity and enforceability of each Letter of Credit and the EIF Senior Guarantee. 31 14.2 OTHER DOCUMENTS The Borrower shall pay, and indemnify EIB against the cost of, all Taxes (other than Taxes on overall net profits), which may become due or payable in connection with the signing or implementation of any document envisaged in the Annexes hereto and any document creating, implementing or perfecting any security. 14.3 GROSS UP (a) If any deduction or withholding for or on account of Taxes or any other deduction from any payments made or to be made to EIB under any of the Finance Documents is required by law, then the Borrower will:- (i) ensure that the deduction or withholding does not exceed the minimum amount legally required; (ii) pay to the relevant Taxation or other authorities within the period for payment permitted by the applicable law such amount as is required to be paid in consequence of the deduction (including, but without prejudice to the generality of the foregoing, the full amount of any deduction from any additional amount paid pursuant to this Clause 14); (iii) indemnify EIB on demand against any losses or costs incurred by it by reason of (a) any failure on the part of the Borrower to make any deduction or withholding or (b) any such additional amount not being paid on the due date for payment thereof; and (iv) promptly pay to EIB an additional amount being the amount required to procure that the aggregate net amount received by EIB will equal the full amount which would have been received by it had no such deduction or withholding or other deduction been made. (b) If any deduction or withholding for or on account of Taxes or any other deduction from any payments made or to be made by the Security Trustee to EIB under any of the Finance Documents is required by law, then the Borrower will promptly pay to EIB an additional amount being the amount required to procure that the aggregate net amount received by EIB will equal the full amount which would have been received by it had no such deduction or withholding or other deduction been made. (c) If the Borrower makes a payment pursuant to Clause 14.3(a) or (b) and EIB has, in its sole opinion, (acting in good faith) received or been granted a credit against, relief, remission or repayment of, any tax paid or payable (a "Tax Credit") which is identified by EIB as being attributable to that payment or the corresponding payment under the Finance Documents, EIB shall, to the extent that it can do so without prejudicing the retention of the tax benefit of such credit, relief, remission or repayment, promptly pay to the Borrower such amount as EIB reasonably determines to be attributable to such payment and which will leave EIB (after 32 such payment) in no better or worse position than it would have been in had the relevant deduction or withholding not been required. (d) Any such payment pursuant to Clause 14.3(c) shall in the absence of manifest error be prima facie evidence of the amount due to the Borrower hereunder. (e) Nothing herein contained shall interfere with the right of EIB to arrange its tax affairs in whatever manner it thinks fit, and in particular, EIB shall be under no obligation to claim credit, relief, remission, repayment or other benefit from or against its tax liability in respect of the amount of such deduction in priority to any other similar claims, reliefs, credits or deductions available to it, nor shall EIB be under any obligation to disclose to the Borrower any information in relation to EIB's tax affairs. 15. EXPENSES The Borrower shall bear all external costs and expenses including external professional fees, banking, exchange and transfer charges and stamp duties, if any, (but excluding Taxes on overall net profits) incurred in the execution, operation, amendment or restatement of this Agreement or any security therefor including without limitation legal, accounting, valuation and investigation expenses, provided that legal expenses in relation to any waiver under or amendment to this Agreement shall not exceed a certain figure previously agreed between the Borrower and EIB but this Clause 15 shall not apply to any Tax to the extent that it could be the subject of a claim against the Borrower under Clause 14.3. 16. LAW AND JURISDICTION 16.1 LAW This Agreement shall be governed by and construed in all respects in accordance with the laws of England. 16.2 EVIDENCE OF MISCELLANEOUS SUMS DUE In any legal action arising out of this Agreement the certificate of EIB as to the amount of any sum due to EIB shall be conclusive, save for manifest error. 16.3 REMEDIES NON-EXCLUSIVE The remedies expressed in this Agreement to be available to EIB are not exclusive of any right or remedy available at law. 16.4 PARTIAL INVALIDITY If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions will not be affected or impaired in any way. 33 16.5 CONSENT TO ENFORCEMENT The Borrower hereby consents generally in respect of any suit, action or proceeding which may arise out of or in connection with this Agreement to the giving of any relief or the issue of any process in connection with such action or proceeding including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment which may be made or given in such action or proceeding. 16.6 WAIVER OF IMMUNITY To the extent that the Borrower may in any jurisdiction claim for itself or its assets immunity from suit, execution, attachment (whether in aid of execution, before judgment or otherwise) or other legal process and to the extent that in any such jurisdiction there may be attributed to itself or its assets such immunity (whether or not claimed) the Borrower hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity to the full extent permitted by the laws of such jurisdiction. 17. AMENDMENTS, WAIVERS AND ASSIGNMENTS 17.1 AMENDMENTS No amendment to this Agreement shall be effective unless made in writing. 17.2 NON-EXERCISE No omission or delay on the part of EIB in exercising any right arising under this Agreement, and no partial or incomplete exercise of any such right, shall be construed as a waiver of it. 17.3 NON-WAIVER No single waiver shall imply any further waiver or any obligation to grant a waiver on any continuation or recurrence of the circumstances for which the initial waiver is given. 17.4 ASSIGNMENTS Neither the Borrower nor EIB shall be entitled to assign or transfer all or any of its respective rights and obligations under this Agreement. 18. NOTICES 18.1 NOTICES Notices and other communications given hereunder (other than such as arise out of litigation) addressed by one party to another shall be sent by telex, telefax, registered letter or letter with recorded delivery, to the latter's address hereinafter mentioned or to 34 such other address as it may notify to the other in writing as being its new address for such purpose. for EIB: 100 boulevard Konrad Adenauer L-2950 Luxembourg-Kirchberg Telex: 3530 BNKEU LU Telephone: (352) 43791 Telefax: (352) 437704 Attention Credit Risk Department for the Borrower: Level 30 CityPoint 1 Ropemaker Street London EC2Y 9HD Telephone: 0207 065 2026 Fax: 0207 065 2041 Any notice or communication hereunder shall be irrevocable and shall be effective upon receipt. 18.2 ANNEXES The Annexes form an integral part of this Agreement. 18.3 THIRD PARTY RIGHTS A person who is not a party to this Agreement has no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed on their behalf in five originals in the English language. SIGNED for and on behalf of ) EUROPEAN INVESTMENT ) * BANK ) SIGNED for and on behalf of ) YORKSHIRE LINK LIMITED ) * * This agreement was and was deemed to be amended and restated by an Amendment and Restatement Agreement dated as of September 4, 2001 between Yorkshire Link Limited, Yorkshire Link (Holdings) Limited, ABN AMRO Bank N.V., European Investment Bank, European Investment Fund, Certain Financial Institutions, as hedging counterparties, 3i Group plc, Macquarie Infrastructure (UK) Limited and Balfour Beatty plc, which was executed by the authorized representatives of the parties thereto as follows: YORKSHIRE LINK LIMITED By: /s/ Sean MacDonald ------------------------------ YORKSHIRE LINK (HOLDINGS) LIMITED By: /s/ Sean MacDonald ------------------------------ ABN AMRO BANK N.V. in each of its capacities as refinancing bank, Intercreditor Agent, Senior Facility Agent, Senior Issuing Bank, Hedging Counterparty and Security Trustee By: /s/ Andrea Echberg ------------------------------ 3i GROUP PLC By: /s/ Andrew Bell ------------------------------ THE DAI-ICHI KANGYO BANK, LIMITED By: /s/ Chris O'Gorman ------------------------------ THE ROYAL BANK OF SCOTLAND plc acting as agent for: NATIONAL WESTMINSTER BANK PLC By: /s/ Vivek Sapra ------------------------------ MACQUARIE INFRASTRUCTURE (UK) LIMITED By: /s/ Sean MacDonald ------------------------------ BALFOUR BEATTY PLC By: /s/ Anthony Rabin ------------------------------ EUROPEAN INVESTMENT BANK By: /s/ E. Uhlmann /s/ T.C. Barrett ------------------------------ --------------------------------- EUROPEAN INVESTMENT BANK for and on behalf of EUROPEAN INVESTMENT FUND By: /s/ P-L Gilibert /s/ K.J. Andreopoulos ------------------------------ --------------------------------- 35 ANNEX I FORM OF LETTER OF CREDIT To: European Investment Bank Dear Sirs, Irrevocable Letter of Credit No - issued pursuant to the EIB Facility Agreement dated - 1996 (as amended and restated) 1. In this letter except where the context otherwise requires, the following expressions have the meanings set opposite them: "Issuing Bank" [name, address and fax number] "EIB" European Investment Bank 100 boulevard Konrad Adeneur L-2950 Luxembourg - Kirchberg "Borrower" Yorkshire Link Limited "Business Day" a day on which banks are open for business in Luxembourg and London "Demand" EIB's first written notice of demand in the form set out in Appendix 2 "Expiry Date" 31 March 2020 "Facility Agreement" means the EIB Facility Agreement dated 26 March 1996 between EIB and the Borrower as amended and restated "Issuers" the banks and financial institutions whose names and addresses are set out in the first column of Appendix 1 hereto "Participation Percentage" the percentage set opposite the name of each Issuer in the second column of Appendix 1 hereto "Total Sum" (pound)[ - ](1) 2. In consideration of EIB agreeing to accept this Letter of Credit, upon the Issuing Bank receiving before the Expiry Date a Demand, each of the Issuers irrevocably and - ---------- (1) Insert amount which is the Required Value of the Loan. 36 unconditionally (but subject to the remaining provisions of this letter) agrees to pay to EIB its Participation Percentage of the amount specified in the Demand on the later of 5 Business Days after the receipt by the Issuing Bank of the Demand or such later date as may be specified in the Demand. 3. (a) The aggregate amount payable by each Issuer hereunder shall not exceed its Participation Percentage of the Total Sum. (b) Any payment made hereunder shall be made by transfer to an account in EIB's name with such bank as may be specified in the Demand, or in such other manner as may be acceptable to EIB directly by each Issuer in accordance with the terms of the Demand. (c) The obligations of the Issuers hereunder shall cease upon the Expiry Date except in respect of any Demand received by the Issuing Bank hereunder on or prior to such date. (d) The obligations of the Issuers hereunder are several and not joint and the Issuing Bank shall not be liable for any failure, nor shall any Issuer be liable for the failure, of any other Issuer to perform its obligations hereunder. (e) Save in its separate capacity as an Issuer, the Issuing Bank shall have no liability hereunder. (f) All demands made by EIB hereunder shall be made in accordance with part 18 of the Intercreditor Agreement. 4. Each Demand shall specifically refer to this Letter of Credit No o and shall be given to the Issuing Bank by notice in writing by an authorised signatory of EIB at the Issuing Bank's address stated below or by tested telex to the number stated below. 5. The Letter of Credit may be amended only by an instrument in writing signed on behalf of all the parties hereto. 6. This Letter of Credit shall be governed by and construed in accordance with the laws of England. This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits, 1993 Revision, International Chamber of Commerce Publication No. 500 insofar as the same are applicable (but so that the second sentence of Article 17 thereof shall be deemed excluded for this purpose with effect that, if this Letter of Credit expires during any interruption of business referred to in the first sentence of such Article, the Issuer whose business has been so interrupted shall remain liable to make payment under this Letter of Credit in respect of any demand no later than 15 Business Days after it has notified EIB that its business has ceased to be so interrupted). 7. This Letter of Credit is not capable of being assigned by EIB. 37 8. [This Letter of Credit is issued in replacement of Letter of Credit no......](2) Yours faithfully, (as Issuing Bank for and on behalf of the Issuers) Issuing Bank's address for Demands: [insert address of Issuing Bank] Issuing Bank's tested telex no. for Demands: [insert telex number of Issuing Bank] - ---------- (2) Incorporate if applicable 38 APPENDIX 1 TO LETTER OF CREDIT NO - NAMES AND ADDRESSES OF ISSUERS PARTICIPATION PERCENTAGE 39 APPENDIX 2 TO LETTER OF CREDIT NO - To: [Issuing Bank] Irrevocable Letter of Credit No- dated- (the "Letter of Credit") 1. We refer to the above Letter of Credit issued by you as Issuing Bank for and on behalf of the Issuers, and hereby notify you that: (a) the Borrower has failed to make payment(s) of [(pound)-] in aggregate to ourselves under the Facility Agreement and two Business Days have elapsed since such failure; (b) pursuant to Clause 9.2 of the Facility Agreement we are entitled to demand payment from [name of Issuer(s) of the sum(s) of(pound)- and f- respectively](3). 2. Accordingly, we hereby demand payment no later than [date] of the sum of o (being the aforementioned sum in default together with interest thereon at the contractual default rate from the due date thereof up to such date) [which sum is only payable by the Issuer(s) specified in (b) above in the amount(s) there specified](4). [AND 3. In order to reduce the Loan to an amount such that the Adjusted Required Value is restored, we hereby demand payment on (insert next Payment Date) of the sum of(pound)- (being the principal sum whose prepayment will restore the Adjusted Required Value of the Letter of Credit)](5). Terms defined in the Facility Agreement or in the Letter of Credit shall have the same meanings in this demand. For European Investment Bank Dated: [ ] [authorised signatory] - ---------- (3) Required to be included appropriately amended in the case of a demand contemplated by Clause 9.2(e) of the Facility Agreement. (4) Insert where the demand is greater than the item. (5) Where the Borrowers default is in respect of interest. 40 APPENDIX 3 TO LETTER OF CREDIT NO - To: [Issuing Bank] Irrevocable Letter of Credit No - dated - (the "Letter of Credit") 1. We refer to the above Letter of Credit issued by you as Issuing Bank for and on behalf of the Issuers. 2. We are required to deliver this notice to you pursuant to Clause [6.5/12.2(a)] of the Facility Agreement. 3. The Total Sum under the Letter of Credit shall be reduced to(pound)[ - ]. For European Investment Bank Dated: [ ] [authorised signatory] 41 ANNEX 2 FORM OF NOTICE OF RELEASE OF OTHER EIB SECURITY (PURSUANT TO CLAUSE 12.2(b)) From: European Investment Bank To: Borrower, copy to Senior Facility Agent YORKSHIRE LINK LIMITED FACILITY AGREEMENT DATED [ ]1996 [THE "EIB FACILITY AGREEMENT")] Dear Sirs, Terms used in this letter have the same meanings as used in the EIB Facility Agreement. We refer to your letter dated - requesting us to consider whether we are satisfied that the Release Condition specified in Clause 12.1 of the EIB Facility Agreement has been fulfilled as of the Release Date(6) falling on -. We are satisfied that the Release Condition is fulfilled and accordingly we hereby effect a [partial/total] release of the following EIB Bank Security pursuant to the [1st/2nd](7) partial/total and final reduction on its scheduled date pursuant to Clause 12.2(b) of the EIB Facility Agreement: [details of security and amounts released] This notice shall take effect forthwith upon our receipt of the certificate of the Account Bank referred to in Clause 12.3 of the EIB Facility Agreement. Yours faithfully, EUROPEAN INVESTMENT BANK - ---------- (6) Change to Payment Date if applicable. (7) Delete and fill in as appropriate. 42 ANNEX 3 EIB'S TECHNICAL DESCRIPTION OF THE PROJECT The Project concerns the design, construction and commissioning of some 30km of a new motorway link between the Ml/M62 motorways south of Leeds and the A1 trunk road south of Wetherby (east of Leeds). The Project will be carried out under the DBFO Contract. The construction works, from south of Leeds towards the north-east include: - - the symmetrical widening of 3.lkm of the M62 motorway from dual 3 lane (D3M) to dual 4 lane motorway (D4M) - - the 1.7km long Lofthouse Interchange connection (D2M) between the M1 and the M62 with the construction of two tunnels (90m and 160m long respectively) - - the widening of l.lkm of the existing D3M M1 motorway by the addition of two ancillary lanes - - the construction on a new alignment of 15.8km of D3M standard between the MI at Belle Isle and the Al at Hook Moor, including a 1.3km diversion at Belle Isle interchange - - the widening of the Al to 3 or 4 lanes in each direction between Hook Moor and Bramham Crossroads, including links towards Micklefield and the A64 (some 9.9km overall) The project includes new motorway interchanges at Belle Isle (merging of D3M + D3M to five lanes) and Hook Moor (merging of D3M + D3M to four lanes) and new junctions at Rothwell Haigh, Austhorpe, Parlington and Bramham Crossroads. The works include also the alteration of side roads, the diversion of statutory undertakers' plant, the supply and installation of lighting, road and traffic counting equipment and a National Motorway Communications system. 43 ANNEX 4 AMORTISATION TABLE
PRINCIPAL AMOUNT AMORTISATION DATE AS A PERCENTAGE OF THE LOAN ----------------- --------------------------- 1. 31 March 2000 0.86% 2. 30 September 2000 0.90% 3. 31 March 2001 0.94% 4. 30 September 2001 0.99% 5. 31 March 2002 1.03% 6. 30 September 2002 1.08% 7. 31 March 2003 1.13% 8. 30 September 2003 1.18% 9. 31 March 2004 1.24% 10. 30 September 2004 1.29% 11. 31 March 2005 1.35% 12. 30 September 2005 1.41% 13. 31 March 2006 1.48% 14. 30 September 2006 1.55% 15. 31 March 2007 1.62% 16. 30 September 2007 1.69% 17. 31 March 2008 1.77% 18. 30 September 2008 1.85% 19. 31 March 2009 1.94% 20. 30 September 2009 2.03% 21. 31 March 2010 2.12% 22. 30 September 2010 2.22% 23. 31 March 2011 2.32% 24. 30 September 2011 2.43% 25. 31 March 2012 2.54% 26. 30 September 2012 2.66% 27. 31 March 2013 2.78%
44 28. 30 September 2013 2.91% 29. 31 March 2014 3.05% 30. 30 September 2014 3.19% 31. 31 March 2015 3.33% 32. 30 September 2015 3.49% 33. 31 March 2016 3.65% 34. 30 September 2016 3.82% 35. 31 March 2017 3.99% 36. 30 September 2017 4.18% 37. 31 March 2018 4.37% 38. 30 September 2018 4.57% 39. 31 March 2019 4.78% 40. 30 September 2019 5.00% 41. 25 March 2020 5.27% ------ 100.00%

45 ANNEX 5 FORM OF BF LETTER OF CREDIT To: European Investment Bank Dear Sirs, Irrevocable Letter of Credit No - issued pursuant to the EIB Facility Agreement dated - 1996 1. In this letter, except where the context otherwise requires, the following expressions have the meanings set opposite them: "Issuer" [name, address and fax number]; "EIB" European Investment Bank 100 boulevard Konrad Adenauer L-2950 Luxembourg-Kirchberg; "Borrower" Yorkshire Link Limited; "Business Day" a day on which banks are open for business in Luxembourg and London; "Demand" EIB's first written demand in the form set out in Appendix 1; "Original Expiry Date" [ 1; "Facility Agreement" the EIB Facility Agreement dated o 1996 between EIB and the Borrower as amended and restated; "Requesting Party" Macquarie Infrastructure (UK) Limited / Balfour Beatty Plc; "Total Sum" (pound)1,000,000 (as reduced in accordance with paragraph 7); 2. At the request of the Requesting Party the Issuer has issued this irrevocable letter of credit to EIB. 3. This irrevocable Letter of Credit will be extended for an additional period of ten (10) months from the Original Expiry Date (the extension being to the "Revised Expiry Date") unless forty five (45) days prior to such date (or any Revised Expiry Date) the Issuer notifies the EIB in writing at the address specified above (marked for the attention of PM Credit Monitoring Department) that the Issuer elects not to renew this Letter of Credit for such additional period. 46 4. The Issuer irrevocably and unconditionally (but subject to the remaining provisions of this letter) agrees to pay, upon the Issuer receiving before the Expiry Date a Demand, to EIB the amount specified in the Demand on the later of 3 Business Days after the receipt by the Issuer of the Demand or such later date as may be specified in the Demand. 5. (a) The aggregate amount payable by the Issuer hereunder shall not exceed the Total Sum. (b) Any payment made hereunder shall be made by transfer to such account as may be specified in the Demand. (c) The obligation of the Issuer hereunder shall cease upon the Expiry Date except in respect of any Demand received by the Issuer hereunder on or prior to such date. 6. Each Demand shall specifically refer to this Letter of Credit No o and shall be given to the Issuer by notice in writing by an authorised signatory of EIB at the Issuer's address stated below or by tested telex to the number stated below. 7. The Letter of Credit may be amended only by an instrument in writing signed on behalf of all the parties hereto save that the delivery to the Issuer of a notice from EIB in the form of Appendix 2 to this letter shall have the effect as set out therein which shall take effect upon receipt of the same by the Issuer. 8. This Letter of Credit shall be governed by and construed in accordance with the laws of England. This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits, 1993 Revision, International Chamber of Commerce Publication No. 500 insofar as the same are applicable (but so that the second sentence of Article 17 thereof shall be deemed excluded for this purpose with effect that, if this Letter of Credit expires during any interruption of business referred to in the first sentence of such Article, the Issuer whose business has been so interrupted shall remain liable to make payment under this Letter of Credit in respect of any demand no later than 15 Business Days after it has notified EIB that its business has ceased to be so interrupted). [This Letter of Credit is issued in replacement of Letter of Credit no........](8) Yours faithfully, Issuer Issuer's address for Demands: [insert address of Issuer] Issuer's tested telex no. for Demands: [insert telex number of Issuer] - ---------- (8) Text for use with replacement LCs. 47 APPENDIX 1 TO LETTER OF CREDIT NO - DEMAND To: [Issuer] Irrevocable Letter of Credit No - dated - (the "Letter of Credit") 1. We refer to the above Letter of Credit issued by you as Issuer and hereby notify you that [the Borrower has failed to make payment(s) of (pound)[ - ] in aggregate to ourselves under the Facility Agreement in respect of Excess Broken Funding Costs/five Business Days have elapsed since we gave notice to the Borrower that you have ceased to possess a rating as described in Clause 11.3(a)(i)(A) of the Facility Agreement/the Borrower has failed to procure the replacement of the above referenced letter of credit as required by Clause 4.1.2(a)(ii) of the Facility Agreement](9). 2. Accordingly, we hereby demand payment no later than [date] of the sum of(pound)[ - ]. Terms defined in the Facility Agreement or in the Letter of Credit shall have the same meanings in this demand. For European Investment Bank Dated: [ ] [authorised signatory] - ---------- (9) Delete as appropriate. 48 APPENDIX 2 TO LETTER OF CREDIT NO - REDUCTION NOTICE To: [Issuer] IRREVOCABLE LETTER OF CREDIT NO - DATED - (THE "LETTER OF CREDIT") 1. We refer to the above Letter of Credit issued by you as Issuer. 2. We are required to deliver this notice to you pursuant to Clause 12.5 of the Facility Agreement. 3. [The amount which is the Total Sum under the Letter of Credit shall be reduced to(pound)[500,000]. The Letter of Credit is hereby cancelled.](10) For European Investment Bank Dated: [ ] [authorised signatory] - ---------- (10) Reduction to(pound)500,000 on First Release, cancellation on Second Release. 49 EX-10.22 17 y97636exv10w22.txt COMMERCIAL BANKS FACILITY AGREEMENT Exhibit 10.22 YORKSHIRE LINK LIMITED (1) (as Borrower) - AND - MACQUARIE INFRASTRUCTURE (UK) LIMITED (2) AND BALFOUR BEATTY PLC (as Lenders) AMENDED AND RESTATED COMMERCIAL SUBORDINATED LOAN AGREEMENT IN RELATION TO A (POUND)10,000,000 FACILITY CONTENTS
CLAUSE PAGE NO 1. DEFINITIONS AND INTERPRETATION 1 2. THE FACILITY 11 3. INTEREST 11 4. ALTERNATIVE INTEREST RATES 13 5. REPAYMENT 14 6. [UNUSED] 15 7. ILLEGALITY 15 8. PREPAYMENT 15 9. TAXES 15 10. INCREASED COSTS 19 11. FINANCIAL INFORMATION 21 12. PROJECT BUDGETS 22 13. PROJECT FORECASTS 23 14. PROJECT ACCOUNTS AND CASHFLOWS 23 15. POSITIVE COVENANTS 23 16. NEGATIVE COVENANTS 27 17. EVENTS OF DEFAULT 31 18. DEFAULT INTEREST, INDEMNITY AND RELEASE 37 19. ACCOUNTS, ETC 38 20. PAYMENTS 39 21. REDISTRIBUTION OF PAYMENTS AND SET-OFF 39 22. OTHER COMPENSATIONS 40 23. COSTS AND EXPENSES 40 24. BENEFIT OF AGREEMENT 41 25. PARTIAL INVALIDITY, WAIVER AND AMENDMENTS 43 26. NOTICES 43 27. LAW 44 28. JURISDICTION 44
i THIS AGREEMENT is made the 26th day of March 1996 and amended and restated on 20 October 1997 and further amended and restated on 4 September 2001. BETWEEN: (1) YORKSHIRE LINK LIMITED, a company registered in England with registered number 02999303 (the "Borrower"); and (2) MACQUARIE INFRASTRUCTURE (UK) LIMITED and BALFOUR BEATTY PLC as Lenders (as defined below). WHEREAS: (A) The Secretary of State for Transport (the "Secretary of State") has agreed to grant to the Borrower, the concession to design, build, finance, operate and maintain the M1-Al link road (Lofthouse to Bramham) and various related on and off site facilities (the "Concession") and the Borrower has agreed to undertake the same in accordance with the terms of the DBFO Contract (the "Project"). (B) The Original Parties entered into this Agreement on the Execution Date to record the terms and conditions upon and subject to which 3i agreed to make available to the Borrower subordinated loan and guarantee facilities in a total amount of up to (pound)10,000,000 to assist the Borrower to finance the Project. (C) The Lenders accepted a transfer from 3i of all of 3i's rights under this Agreement. (D) Pursuant to the Amendment and Restatement Agreement (as defined below) it was agreed between the parties that certain amendments would be made to this Agreement. (E) This Agreement is subject to the terms of the Intercreditor Agreement (as defined below). IT IS AGREED as follows: 1. DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In this Agreement the following words and expressions have the meanings set opposite them: "3i" means 3i Group plc; "ADDITIONAL COSTS RATE" in relation to the Advance or any Unpaid Sum, means the rate determined in accordance with the Fifth Schedule; "ADVANCE" means the principal amount of the advances (as from time to time reduced by repayment) made hereunder prior to the Amendment Date; and, in respect of each 1 Lender, shall mean such proportion of that principal amount as is advanced by that Lender, or as is allocated to that Lender upon a transfer; "AFFILIATE" means with respect to any person, any person that controls, is controlled by or is under common control with such person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with") as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or by contract or otherwise; "AMENDMENT DATE" shall have the meaning given to it in the Amendment and Restatement Agreement; "APPLICABLE MARGIN" means 4% per annum; "AUTHORISED SIGNATORY" in relation to any person and any communication to be made, or any document to be executed or certified, by it, means at any time, any person: (a) who is duly authorised at such time, by or pursuant to board resolutions of the Borrower or in such other manner as may be reasonably acceptable to the Lenders, to make such communication, or to execute or certify such document on its behalf; and (b) in respect of whom the Lenders have received a certificate signed by a director of it, or by another of its Authorised Signatories, setting out the name and, where such person is authorised to execute or certify documents, signature of such person and confirming such person's authority to act as aforesaid; "BASE CASE" means the base case financial model produced by the Borrower and approved by the Lenders as at the Amendment Date; "CONSTRUCTION CONTRACT" means the construction contract of even date herewith made between the Borrower and the Contractor for the design and construction of the Project; "CONTRACTOR" means the unincorporated joint venture comprising each of Skansa Cementation UK Limited (formerly, Kvaerner Construction Limited) and Balfour Beatty Civil Engineering Limited; "CONTRACTOR DESIGNATING DEED" means the form of designating deed scheduled to the Intercreditor Agreement; "DBFO COMPENSATION" means any payments made by the Secretary of State under clauses 40.3 and/or 40.4 and/or 40.6 of the DBFO Contract; "DBFO CONTRACT" means the contract dated 26 March 1996 made between the Borrower and the Secretary of State for Transport, whereby the Secretary of State for Transport granted the Concession to the Borrower; 2 "DBFO PAYMENTS" means those payments to be made by the Secretary of State to the Borrower pursuant to the DBFO Contract; "DEBENTURE" means the fixed and floating charge debenture dated 26 March 1996 granted by the Borrower to the Security Trustee more particularly referred to in paragraph 1 of the Fourth Schedule; "DEFERRED INTEREST" has the meaning given to it in clause 3.5 (Deferral of Payments); "DIRECT AGREEMENT" means the agreement dated 26 March 1996 made between the Intercreditor Agent, the Secretary of State and the Borrower; "EIB" means European Investment Bank; "EIB FACILITY" means the loan facility to be provided by EIB pursuant to the EIB Facility Agreement; "EIB FACILITY AGREEMENT" means the agreement dated 26 March 1996 made between EIB and the Borrower relating to a loan of (pound)90,000,000 to be made by EIB to the Borrower (subject to the terms and conditions thereof); "EIF" means the European Investment Fund; "EIF SENIOR GUARANTEE" means the guarantee to be provided by EIF in respect of part of the EIB Facility; "EIF SENIOR GUARANTEE FACILITY AGREEMENT" means the agreement dated 26 March 1996 made between the Borrower and EIF under which EIF issues the ELF Senior Guarantee; "EVENT OF DEFAULT" means any of those events mentioned in clause 17 (Events of Default); "EXECUTION DATE" means 26 March 1996; "FACILITIES" means the Loan Facility; "FINAL REPAYMENT DATE" means the last scheduled Repayment Date referred to in clause 5 (Repayment); "FINANCE DOCUMENTS" means each of this Agreement, each Security Document and the Intercreditor Agreement and "Finance Document" shall mean any one of them; "FINANCE PARTIES" means the Lenders and the Security Trustee; "FINANCIAL MODEL" means a computer programme produced by the Borrower in the spreadsheet format agreed between the Borrower and the Lenders designed for use in calculating, projecting and estimating the past and future revenue and expenditure of the 3 Borrower in respect of the Project by application of given values to certain specified assumptions; "FIRST REPAYMENT DATE" means 31 March 2005; "INSURANCE ADVISER" means Willis Corroon or such other person as the Lenders and the Borrower shall from time to time approve as such; "INSURANCES" means each of the contracts for insurance contemplated in clause 15.11 entered into by or on behalf of the Borrower and any other contracts or policies of insurance taken out by the Borrower from time to time relating to the Project and/or the Site; "INTERCREDITOR AGENT" shall have the meaning given to it in the Intercreditor Agreement; "INTERCREDITOR AGREEMENT" means the agreement dated 26 March 1996 as amended and restated on 20 October 1997 made between, inter alia, the Borrower, the Lenders, the Senior Agent, the Banks, EIB and EIF; "INTEREST PAYMENT DATE" means the last day of each Interest Period (or, if any such date is not a business day, the next following business day unless that day falls in the calendar month succeeding that in which it would otherwise have ended in which case it shall end on the preceding business day); "INTEREST PERIOD" means, in relation to any Advance or Unpaid Sum, each of those periods referred to in clause 3.1 (Interest Periods) or, as the case may be, clause 18 (Default Interest, Indemnity and Release); "JUNIOR SUBORDINATED LENDERS" means the Promoters and any other person to whom the Borrower may from time to time incur financial indebtedness under clause 16.12(vi) below or that may, from time to time, hold any shares in the Borrower; "JUNIOR SUBORDINATED LOAN AGREEMENT" means the (pound)12,000,000 loan stock instrument of even date herewith issued by the Borrower and subscribed for by the Promoters; "JUNIOR SUBORDINATED LOANS" means loans or other credit arrangements made or to be made available to the Borrower under or in respect of the Junior Subordinated Loan Agreement; "LENDER" means, at any time, any of the lenders named as a party hereto and each transferee successor or assignee which has rights hereunder at such time; "LENDING OFFICE" means, in relation to a Lender, the office located at the address identified with its signature below or, as the case may be, in a Transfer Certificate to which it is a party as transferee, or such other office in the United Kingdom as the relevant Lender may from time to time select; 4 "LIBOR" means in relation to any amount owed by the Borrower hereunder on which interest for a given period is to accrue: (a) the rate per annum determined by the Lenders to be equal to the arithmetic mean (rounded upwards to four decimal places) of the offered quotations which appear on page "LIBOR01" of the Reuter Monitor Money Rates Service for the display of London Interbank Offered Rates for such amount and for such period at or about 11.00 am (London time) on the Quotation Date for such period (or, if such page or such service shall cease to be available, such other page or such other service (as the case may be) for the purpose of displaying London Interbank Offered Rate for sterling as the Lenders shall agree); and (b) if less than two quotations for sterling and the relevant period are displayed and the Lenders have not selected any alternative service as contemplated in (a) above, the arithmetic mean (rounded upwards to four decimal places) of the rates (as notified to the Lenders) at which the Reference Banks were offering to prime banks in the London Interbank Market deposits in sterling for such period at or about 11.00 am (London time) on the Quotation Date for such period; "LOAN" means the principal amount of the Advance for the time being outstanding hereunder; "LOAN FACILITY" means the subordinated loan facility referred to in clause 2 (the Facility), as the same may be reduced or cancelled from time to time in accordance with the provisions of this Agreement; "MATERIAL ADVERSE EFFECT" means the happening of any event which is reasonably likely to have a material adverse effect on the Borrower's ability to perform or comply with its obligations under any of the Relevant Documents; "NORMAL INTEREST RATE" has the meaning given to in it clause 3.3 (Calculation of Interest); "ORIGINAL PARTIES" means 3i and the Borrower; "OUTSTANDINGS" means, on any day, subject as herein provided, the aggregate on such day of the amount equal to all outstanding Advances; "POTENTIAL EVENT OF DEFAULT" means any event which would, or is reasonably likely to become (with the passage of time, the giving of notice, the making of any determination hereunder or any combination thereof), an Event of Default; "PROJECT ACCOUNTS" means the accounts referred to in Part 5 of the Intercreditor Agreement; "PROJECT BUDGET" means each budget prepared by the Borrower and delivered to the Lenders pursuant to clause 12 (Project Budgets) as the same is agreed pursuant to clause 12.3 (Agreement of Project Budget); 5 "PROJECT DOCUMENTS" means the documents listed in the Third Schedule and any document hereafter entered into by the Borrower in connection with the carrying out of its rights and obligations under the DBFO Contract in relation to the Project designated as a Project Document by the Lenders and the Borrower (any such designation by the Borrower not to be unreasonably withheld or delayed), and "PROJECT Document" shall mean any one of such documents; "PROJECT FORECAST" means a forecast from time to time prepared by the Borrower in accordance with clause 19 of the Intercreditor Agreement utilising the Financial Model and delivered to the Intercreditor Agent in accordance with such clause 19; "PROMOTERS" means each of Macquarie Infrastructure (U.K.) Limited and Balfour Beatty plc; "QUOTATION DATE" means, in relation to any Interest Period, except as otherwise agreed, the day on which quotations would ordinarily be given by prime banks in the London Interbank Market for deposits in sterling for delivery on the first day of that Interest Period or, if there are two or more such days, whichever is the latest; "RELEVANT DOCUMENTS" means the Total Funding Documents and the Project Documents and "RELEVANT DOCUMENT" shall mean any one of such documents; "RELEVANT TAX" has the meaning given to it in clause 9.5 (Relevant Tax); "REPAYMENT DATE" means the First Repayment Date and each of the twenty-three dates falling at successive 6 monthly intervals thereafter; "SECURITY DOCUMENTS" means the documents listed in the Fourth Schedule and shall include any substituted or additional security entered into in favour of the Security Trustee or the Lenders to secure all or part of the same liabilities and "SECURITY DOCUMENT" shall mean any one of such documents; "SECURITY TRUST DEED" means the security trust deed dated 26 March 1996 as amended and restated on 20 October 1997 more particularly referred to in paragraph 3 of the Fourth Schedule; "SECURITY TRUSTEE" means ABN Amro Bank N.V.; "SENIOR AGENT" means ABN Amro Bank N.V. in its capacity as agent for the Banks under the Senior Facilities Agreement and any successor Senior Agent; "SENIOR FACILITIES AGREEMENT" means the agreement dated 26 March 1996 as amended and restated on 20 October 1997 governing the provision of the Senior Facilities made between the Borrower (1), the banks named therein as arrangers (2), Lloyds Bank Plc as issuing bank (3), the banks named therein as Banks (4) and the Senior Agent (5); "SENIOR FACILITIES" means the facilities made or to be made available under the Senior Facilities Agreement; 6 "SENIOR FINANCE DOCUMENTS" means the Senior Facilities Agreement, the EIB Facility Agreement, the EIF Senior Guarantee, the EIF Senior Guarantee Facility Agreement, the Intercreditor Agreement and each Security Document; "SHAREHOLDERS AGREEMENT" means the shareholders agreement dated 26 March 1996 and made between the Borrower, YLHL, Deutsche Bank AG (London Branch), Kvaerner plc, Kvaerner Corporate Development Ltd and BICC plc; "SHARE PLEDGE" means the mortgage of even date herewith given by YLHL in favour of the Security Trustee; "SUBORDINATED LOANS" means this Loan and the Junior Subordinated Loans; "SUPPLEMENTAL INTEREST" means the redemption premium payable on each date on which any part of the Advance is repaid or prepaid hereunder in an amount equal to 65% of the principal amount of the Advance so repaid or prepaid; "TAX RESERVE ACCOUNT" means the account of that name to be opened and maintained pursuant to clause 10 of the Intercreditor Agreement; "TECHNICAL ADVISER" means Owen Williams Limited or such other person as the Agent shall from time to time select with the prior approval of the Lenders; "TECHNICAL SERVICES AGREEMENT" means the agreement referred to in paragraph 3 of the Third Schedule; "TOTAL FUNDING DOCUMENTS" means the Senior Facilities Agreement, EIB Facility Agreement, the EIF Senior Guarantee Facility Agreement, the EIF Senior Guarantee, this Agreement, the Junior Subordinated Loan Agreement, the Security Documents and the Intercreditor Agreement; "TRAFFIC ADVISER" means Maunsell Ltd, or such other person as the Lenders and the Borrower shall from time to time approve as such; "TRANSFER CERTIFICATE" means a transfer certificate in the form set out in the Seventh Schedule signed by the relevant Transferors and transferee; "UNPAID SUM" means the balance from time to time outstanding of any sum due and payable by the Borrower hereunder which is not paid on the due date in accordance with the provisions hereof; "UPSTREAM LOAN AGREEMENT" shall have the meaning given to it in the Amendment and Restatement Agreement; "YLHL" means Yorkshire Link (Holdings) Limited. 7 1.2 In this Agreement, the following terms shall bear the meanings ascribed thereto in the DBFO Contract: "ADDITIONAL WORKS"; "ADJACENT AREAS"; "ALTERNATIVE PROPOSAL"; "COMPENSATION EVENT"; "COMPLETION CERTIFICATE"; "CONFIDENTIAL INFORMATION"; "DELAY EVENT"; "DEPARTMENT'S CHANGE IN SPECIFICATION"; "DEPARTMENT'S WORKS CHANGE"; "DESIGN DATA"; "ELIGIBLE CHANGE"; "GOOD INDUSTRY PRACTICE"; "IMPROVEMENT"; "LATENT DEFECTS"; "LEASE"; "NEW ROAD"; "PENALTY POINTS"; "PROJECT ROAD"; "RETENTION ACCOUNT"; "SAFETY IMPROVEMENT"; "SECTION"; "SITE"; "SUBSEQUENT SCHEME"; "TERMINATION ACCOUNTS"; "TERMINATION DATE"; "TERMINATION EVENT"; "TRAFFIC DATA"; "WARNING NOTICE"; "WORKS"; AND "WORKS PROGRAMME". 1.3 In this Agreement, the following terms shall bear the meaning ascribed to them in the Construction Contract: "CERTIFICATE"; "DISPUTE RESOLUTION"; "PROCEDURE"; "EMPLOYER"; "EMPLOYER'S AGENT"; "FORCE MAJEURE"; "INDEPENDENT ENGINEER"; 1.4 In this Agreement, the following terms shall bear the meanings ascribed to them in the Senior Facilities Agreement: "AMENDMENT AND RESTATEMENT AGREEMENT", "ANNUAL DEBT SERVICE COVER RATIO"; "BANKS"; "FINANCIER"; "FINANCIER DOCUMENTS"; "FORECAST ANNUAL DEBT SERVICE COVER RATIO"; "PERMITTED PAYMENTS", "REFERENCE BANKS" AND "RELEVANT GROUP COMPANY"; 1.5 In this Agreement, the following terms shall bear the meanings ascribed to them in the intercreditor Agreement: "ASSUMPTIONS"; "AUTHORISED INVESTMENTS"; "BANK LOAN LIFE COVER RATIO"; "DISTRIBUTIONS"; "PAYMENT DATE"; "RPI"; "SENIOR FINANCIERS" AND "SUBORDINATED LLCR"; and each of the "DISBURSEMENT ACCOUNT", "CONSTRUCTION RESERVE ACCOUNT", "OPERATING ACCOUNT", "DEBT SERVICE RESERVE ACCOUNT", "COMPENSATION ACCOUNT", "MAINTENANCE RESERVE ACCOUNT", "TAX RESERVE ACCOUNT", "ESCROW ACCOUNT" and "ANNUAL RECONCILIATION ACCOUNT" shall mean the respective accounts to be opened and maintained pursuant to clauses 10 to 18 inclusive of the intercreditor Agreement. 1.6 INTERPRETATION Any reference in this Agreement to: (a) a document being "IN THE AGREED FORM" shall be construed as a reference to such document having been initialed for the purposes hereof on behalf of the Lenders and the Borrower, together with any changes agreed by the Lenders; 8 (b) a "BUSINESS DAY" shall be construed as a reference to a day on which banks are open for business of the kind contemplated in this Agreement in London; (c) a "TIME OF DAY" is a reference to London time; (d) an "ENCUMBRANCE" shall be construed as a reference to a mortgage, charge, pledge, lien (other than a lien arising in the ordinary course of trading or by operation of law) or other encumbrance or security interest of any kind whatsoever securing any obligation of any person or any other type of preferential arrangement (including, without limitation, title transfer and retention arrangements) having a similar effect save to the extent that such arrangement arises in the ordinary course of business or by operation of law; (e) "FINANCIAL INDEBTEDNESS" shall be construed as a reference to any indebtedness in respect of loans, overdrafts, acceptances, indemnities (in respect of letters of credit, bonds, guarantees or documentary credits or similar), the extension of credit, finance leasing transactions, deferred purchase arrangements (other than trade credits in the ordinary course of business), commercial paper, bonds, debentures, notes, loan stock or any financial obligation arising out of any financial instrument similar in form or effect to any of the foregoing, and any guarantees and indemnities in respect of the foregoing; (f) "FINANCIAL YEAR" means each twelve month period ending on 31 March; (g) "INDEBTEDNESS" shall be construed so as to include any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent; (h) a "PERSON" shall be construed as a reference to any person, firm, company, corporation, government, state or agency of a state, or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing; (i) "SUCCESSOR" in relation to a party means an assignee of or successor in title to such party or any person who, under the laws of its jurisdiction of incorporation or domicile, has assumed the rights and obligations of such party hereunder or to which under such laws the same has been transferred; (j) "TAX" shall be construed so as to include any present or future tax, levy, impost, assessment, withholding, deduction, duty or other charge of a similar nature (including without limitation any penalty payable in connection with any failure to pay or any delay in paying any of the same); (k) a "CLAUSE", a "RECITAL" or a "SCHEDULE" is, unless otherwise stated, a reference to a clause hereof or a recital or schedule hereto; (l) "GUARANTEED" or "GUARANTEE" shall include supported by way of letter of credit as well as supported by way of guarantee; and 9 (m) the "LENDERS" shall mean all of the Lenders, and, for the avoidance of doubt, if a consent, approval, notice or determination is required to be given by the Lenders, then all Lenders shall be required to so consent, approve, give notice (although they may give the same notice) or determine. 1.7 In this Agreement "(POUND)" and "STERLING" denotes the lawful currency of the United Kingdom. 1.8 References in this Agreement to a LENDER, the JUNIOR SUBORDINATED LENDERS, EIB, EIF, YLHL, the BANKS, the INTERCREDITOR AGENT or the SECURITY TRUSTEE shall be construed so as to include their respective successors and permitted transferees and assigns. 1.9 Any reference in this Agreement to this Agreement, another agreement or any other document shall be construed as a reference to this Agreement or that other agreement or document as the same may have been, or may from time to time be, amended, varied, supplemented or novated. 1.10 Clause and schedule headings are for ease of reference only. 1.11 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT: A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms. 1.12 CHANGE OF CURRENCY: If a change occurs, this Agreement will, to the extent the Lenders (acting reasonably and after consultation with the Borrower) specify to be necessary, be amended to comply with any generally accepted conventions and market practice in London and otherwise to reflect the change in currency. 1.13 Any reference to "continue" in the context of an Event of Default or Potential Event of Default shall be construed as follows: (a) so that where the underlying circumstances which caused that Event of Default or Potential Event of Default are incapable of remedy, that Event of Default or Potential Event of Default is continuing, unless and until it has been expressly waived and any conditions of such waiver have all been fulfilled to the satisfaction of the Lenders; (b) so that in any other case, that Event of Default or Potential Event of Default is continuing unless and until it has been expressly waived (and any conditions of such waiver have all been fulfilled) to the satisfaction of the Lenders or the underlying circumstances which caused that Event of Default or Potential Event of Default have been remedied so that the resulting position is not different from what it would have been if such Event of Default or Potential Event of Default had not occurred; and (c) so that, in the case of the late delivery of a document which is subsequently satisfactorily delivered, or the withdrawal or settlement of a claim the existence or 10 pursuance of which constituted an Event of Default or Potential Event of Default, that Event of Default or Potential Event of Default is not continuing once the underlying circumstances no longer apply. 2. THE FACILITY GRANT OF THE FACILITY: Pursuant to the terms of this Agreement prior to the Amendment Date, the person who was then the Lender granted to the Borrower, upon the terms and subject to the conditions hereof, the Loan Facility, in the aggregate principal amount of (pound)10,000,000. 2.1 NO RESPONSIBILITY: No Lender shall be obliged to concern itself with the application of amounts raised by the Borrower hereunder. 2.2 BORROWER'S OBLIGATIONS: For the avoidance of doubt, the obligations of the Borrower under this Agreement are in no way conditional upon the performance or observance of the terms of any of the Construction Contract, the DBFO Contract or any other Project Document or any provision thereof respectively by any party thereto and will not be affected or discharged by any matter affecting any of the Construction Contract, the DBFO Contract or any other Project Document including, without limitation, its performance, non-performance, frustration or invalidity or the destruction, non-completion or non-functioning of any of the goods and services to be supplied thereunder. 3. INTEREST 3.1 INTEREST PERIODS: The period for which the Advance is outstanding shall be divided into successive periods each of which (other than the first, which shall start on the date on which the Advance is drawn) shall start on the last day of the preceding such period. 3.2 DURATION: The duration of each Interest Period relating to the Advance shall, save as otherwise provided herein, be such that such Interest Period begins on a Payment Date and ends on the day preceding the next Payment Date; 3.3 CALCULATION OF INTEREST: Subject to clause 4 (Alternative Interest Rates) and clause 18 (Default Interest, Indemnity and Release), the rate of interest applicable to the Advance during each Interest Period relating thereto (the "Normal Interest Rate") shall be the rate per annum which is the higher of: (a) LIBOR for that Interest Period on the Quotation Date therefor plus the Additional Costs Rate plus the Applicable Margin; and (b) 6%. 3.4 PAYMENT OF INTEREST: Subject to clause 3.5 (Deferral of Payments), on each Interest Payment Date, the Borrower shall pay to the Lenders accrued interest on each Advance to which such Interest Period relates. 11 3.5 DEFERRAL OF PAYMENTS: (a) Any interest which would otherwise have been payable on an Interest Payment Date, shall be deferred (such interest being referred to in this Agreement as "Deferred Interest") in the circumstances set out in this clause 3.5 (Deferral of Payments). (b) Interest accrued in the first two Interest Periods shall be deferred, subject to clause 3.5(c), until the third Interest Payment Date. (c) The Borrower is entitled to continue to defer payments of interest and to defer payments of principal and Supplemental Interest on the third and any subsequent Interest Payment Date if (but only to the extent that) the Borrower is not entitled to make such payment of interest or principal or Supplemental Interest on that date by reason of the operation of clause 12.6 of the Intercreditor Agreement. (d) The deferral of interest, principal or Supplemental Interest under this clause 3.5 shall be treated as an agreed variation of the original due dates and shall not constitute a breach of this Agreement or an Event of Default. 3.6 PAYMENT OF DEFERRED INTEREST: Deferred Interest shall be paid by the Borrower to the Lenders on the earlier of: (a) the first Interest Payment Date on which the Borrower's entitlement to defer payment of interest under clause 3.5 has ceased to the extent that the Borrower then has cash available to pay such Deferred Interest in accordance with the cascade set out in clause 12.3 of the Intercreditor Agreement; (b) the declaration of an Event of Default by the Lenders under clause 17 (Events of Default) at any time after such declaration is permitted by the terms of the Intercreditor Agreement; (c) the Final Repayment Date; (d) prepayment in full of the Facilities; or (e) the date of termination or expiry of the DBFO Contract. 3.7 INTEREST ACCRUING ON DEFERRED INTEREST: (a) Deferred Interest accrued in any Interest Period shall itself bear interest during any subsequent Interest Period whilst it remains unpaid at the Normal Interest Rate applicable during such period. (b) At the end of each Interest Period, interest which has accrued on the Deferred interest which is not paid on that date shall be added to and treated as forming part of the Deferred Interest and interest shall accrue thereon in accordance with clause 3.7(a). 12 4. ALTERNATIVE INTEREST RATES 4.1 MARKET DISRUPTION if: (a) LIBOR cannot be determined as contemplated in paragraph (a) of the definition in clause 1.1 (Definitions) and the Lenders determine that at or about 11.00 am (London time) on the Quotation Date for an Interest Period none or only one of the Reference Banks was offering to prime banks in the London Interbank Market sterling deposits in the amount and for the period required for the purposes of clause 3.3 (Calculation of Interest); or (b) before the close of business in London on the first day of an Interest Period the Lenders determine that the arithmetic mean referred to in the definition of LIBOR in clause 1.1 (Definitions) does not accurately reflect the cost to it of obtaining such deposits, then, notwithstanding the provisions of clause 3 (Interest) (and until any substitute basis for determining rates of interest has been agreed in accordance with the terms of clause 4.2 (Substitute basis) in respect of the event which caused this clause 4 to apply in respect of a particular Interest Period or, as the case may be, the Advance): (i) (if clause 4.1(a) applies) the duration of the relevant Interest Period shall be one month or such lesser duration as shall cause it to end on the next Repayment Date; and (ii) (if clause 4.1(a) or (b) applies) during such Interest Period the rate of interest applicable to the Advance shall be the rate per annum which is the sum of the Applicable Margin, the Additional Costs Rate in respect thereof at such time and the percentage rate per annum of the cost to the Lenders of funding the Advance from the London Interbank Market (or, if more practicable, from whatever other sources and in whatever manner it may reasonably select) during such Interest Period. 4.2 SUBSTITUTE BASIS OR REPAYMENT: If either of those events mentioned at clauses 4.1(a) and (b) (Market Disruption) occurs: (a) the Lenders shall promptly notify the Borrower of such event; (b) within five days of such notification the Lenders and the Borrower shall enter into negotiations in good faith with a view to agreeing a substitute basis: (i) for determining the rates of interest from time to time applicable to the Advance; and/or (ii) upon which the Advance may be maintained (whether in sterling or some other currency) thereafter and any agreement resulting from any such negotiations shall take effect in accordance with its terms. 13 5. REPAYMENT REPAYMENT: The Borrower shall repay the Advance by instalments on each Repayment Date in the amount set out opposite such Repayment Date below (or such lesser amount which comprises the Advance as at that date):
REPAYMENT DATES AMOUNT (pound) First 200,000 Second 200,000 Third 200,000 Fourth 200,000 Fifth 300,000 Sixth 300,000 Seventh 300,000 Eighth 300,000 Ninth 300,000 Tenth 300,000 Eleventh 300,000 Twelfth 300,000 Thirteenth 300,000 Fourteenth 300,000 Fifteenth 600,000 Sixteenth 600,000 Seventeenth 600,000 Eighteenth 600,000 Nineteenth 600,000 Twentieth 600,000 Twenty-First 600,000 Twenty-Second 600,000 Twenty-Third 700,000 Twenty-Fourth 700,000 ---------- Total 10,000,000 ==========
Provided that if on any Repayment Date the Borrower would be entitled to defer the payment of principal by reason of the provisions of clause 3.5(c) (Deferral of Payments), then the Borrower shall defer the repayment of principal under this clause 5 until the earlier of: (a) the first Repayment Date thereafter on which the Borrower's entitlement to defer principal under clause 3.5(c) has ceased to the extent that the Borrower then has cash available to pay such deferred principal in accordance with the cascade set out in clause 12.3 of the Intercreditor Agreement; 14 (b) the declaration of an Event of Default by the Lenders under clause 17 (Events of Default) at any time after such declaration is permitted by the terms of the Intercreditor Agreement; (c) the Final Repayment Date; (d) prepayment in full of the Facilities; and (e) the date of termination or expiry of the DBFO Contract. For the avoidance of doubt, deferred principal shall continue to accrue interest in accordance with clause 3.4 (Payment of Interest). 6. [UNUSED] 7. ILLEGALITY 7.1 FUNDING OF ADVANCE: If as a consequence of the adoption of, or any change in the Interpretation or administration of, any applicable law or regulation after the date hereof it becomes unlawful, or contrary to any regulation, for a Lender to make, fund or allow to remain outstanding any part of the Advance made or to be made hereunder, then if such Lender so requires, the Borrower shall within the period necessary to comply with the law, repay the relevant Lender's share of the Loan together with accrued interest thereon. 8. PREPAYMENT 8.1 VOLUNTARY PREPAYMENT: The Borrower may, if it has given to the Lenders not less than ten business days' prior notice to that effect repay the whole or any part of the Advance (being an amount or integral multiple of (pound)1,000,000) (but so that if any repayment is made otherwise than on the last day of an Interest Period for the Advance, the Borrower shall pay broken Interest Period costs in accordance with clause 18.4 (Broken Periods) on the date of such prepayment). 8.2 NO REBORROWING: The Borrower shall not repay all or any part of the Loan except at the times and in the manner expressly provided herein and shall not, be entitled to reborrow any amount repaid or prepaid by it hereunder. 9. TAXES 9.1 TAX GROSS-UP: Subject to clause 9.6, all payments to be made by the Borrower hereunder shall be made free and clear of and without deduction or withholding for or on account of tax unless required by law. If the Borrower is required on account of any Relevant Tax to make any deduction or withholding from any sum payable by it to a Lender hereunder or if a Lender is required to pay any Relevant Tax (other than tax on its overall net income) imposed, levied, collected or assessed directly on it in respect of any payment receivable by it under this Agreement: 15 (i) the Borrower shall notify the relevant Lender of any such requirement or any change in any such requirement as soon as the Borrower becomes aware of it or, as the case may be, the relevant Lender will forthwith notify the Borrower of its liability to such Relevant Tax as soon as it becomes aware of such liability; (ii) the Borrower or the relevant Lender (as the case may be) shall pay any such Relevant Tax to the relevant authority in full within the time allowed for such payment under applicable law and, without prejudice to the foregoing, before the date on which penalties attach thereto; and (iii) the sum payable by the Borrower in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, the relevant Lender receives on the due date and retains (free from any liability in respect of any such deduction, withholding or payment) a net sum equal to what it would have received had no such deduction, withholding or payment been required or made. 9.2 DELIVERY OF RECEIPT: The Borrower shall after it has made any payment of tax referred to in clause 9.1 (ii) (Tax gross-up) to the applicable authority use all reasonable endeavours to deliver to the relevant Lender an original receipt (or a certified copy thereof) issued by such authority evidencing such payment as soon as possible. 9.3 INDEMNITY: Without prejudice to the provisions of clause 9.1 (Tax gross-up) but subject to clause 9.7, if as a consequence of the adoption of, or any change, or change in the judicial interpretation or administration in accordance with published practice of, any applicable law, regulation or provision after the date hereof, a Lender is required by any law or regulation to make any payment, whether on account of tax (other than tax or an increase in the rate of tax on its overall net income) or otherwise, on or in relation to any sum received or receivable by the relevant Lender hereunder, or any liability in respect of any such payment is asserted, imposed, levied or assessed against a Lender, then the Borrower shall upon demand, pay to the relevant Lender for its own account an amount sufficient to indemnify that Lender against such payment or liability, together with any interest, penalties and expenses payable or incurred in connection therewith provided that the Borrower shall not be required to pay any increased amount to compensate the relevant Lender for any penalty incurred by the relevant Lender by reason of the relevant Lender failing to make timely payment of tax to the relevant authorities in circumstances where the relevant Lender had itself received an amount equal to such tax from the Borrower prior to the due date for payment thereof to such authorities. If a Lender makes any payment of tax referred to in clause 9.1(ii) (Tax gross-up) or this clause 9.3 (Indemnity) it shall promptly on receipt thereof use all reasonable endeavours to deliver to the Borrower an original receipt (or a certified copy thereof) issued by the relevant authority evidencing such payment as soon as is possible. 16 9.4 NOTIFICATION: If a Lender intends to make a claim pursuant to clause 9.3 (Indemnity), it shall notify the Borrower of the event by reason of which it is entitled to do so and provide it with supporting evidence where practicable. 9.5 RELEVANT TAX: For the purposes of this clause 9 (Taxes) "Relevant Tax" in relation to any payment which falls to be made hereunder means any present or future taxes of any nature now or hereafter imposed by the laws of the United Kingdom. 9.6 EXCEPTION TO GROSS-UP: If on the date that a payment becomes due hereunder to or for the account of a recipient: (i) the relevant Lender is a Treaty Lender (as defined in clause 9.13) and the Treaty Lender did not comply with Clause 9.12 below; or (ii) the relevant Lender is not a Qualifying Lender or, at any time on or after the date hereof but prior to such payment becoming due, the relevant Lender is not or ceases to be a Qualifying Lender; and, as a result, the Borrower is required to make the aforementioned payment subject to a deduction or withholding on account of tax, the Borrower shall not be under an obligation to pay an additional amount to or for the account of the relevant Lender under clause 9.1 except as provided in clause 9.8. 9.7 EXCEPTION TO TAX INDEMNITY: If: (i) on the date on which a payment on account of tax is made or a tax liability arises, a Lender is not a Qualifying Lender or, at any time on or after the date hereof but prior to that date, the relevant Lender was not or ceased to be a Qualifying Lender; and (ii) such payment or liability would have been reduced if the relevant Lender had been a Qualifying Lender at the relevant time, any liability of the Borrower to indemnify the relevant Lender pursuant to clause 9.3 shall be correspondingly reduced except as provided in clause 9.8. 9.8 CONDITIONS TO EXCEPTIONS: Clauses 9.6 and 9.7 shall not relieve the Borrower from making payments or increased payments under clauses 9.1 or 9.3 if: (i) there shall have been any Tax Change and as a result thereof the relevant Lender ceases to be a Qualifying Lender; or (ii) the Borrower would be obliged to make a payment or increased payment under clause 9.1 or 9.3 irrespective of whether the relevant Lender is at any time on or after the date hereof a Qualifying Lender. 9.9 TAX WARRANTY: To the extent that it is not at any time on or after the date hereof a Qualifying Lender within paragraph (a), (b) or (c) of the definition of "Qualifying 17 Lender" in clause 9.13 below, each Lender warrants that it is, and will continue to be, a Qualifying Lender within paragraph (d) of that definition. Each Lender agrees to indemnify the Borrower, on demand and on an after-tax basis, against any tax, losses or other liabilities, together with any interest, penalties and expenses payable in connection therewith, which the Borrower incurs as a result of a breach of the warranty given by the relevant Lender in this clause 9.9. 9.10 QUALIFYING LENDER: Any Lender which ceases, for whatever reason, to be a Qualifying Lender shall promptly notify the Borrower of that change in its status. 9.11 TREATY LENDER: A Treaty Lender and the Borrower which makes a payment to which that Treaty Lender is entitled shall each co-operate in completing any procedural formalities they are able to complete which are necessary for the Borrower to obtain authorisation to make that payment without a deduction or withholding on account of tax. 9.12 TAX CREDIT: If the Borrower pays any additional amount under clause 9.1(iii) or 9.3 (a "TAX PAYMENT") and the relevant Lender effectively obtains a refund of tax, or credit against tax on its overall net income by reason of that Tax Payment ("TAX CREDIT"), and the relevant Lender is able to identify the Tax Credit as being attributable in whole or in part to the Tax Payment, then the relevant Lender shall reimburse to the Borrower such amount as it shall determine to be the proportion of the Tax Credit as will leave the relevant Lender, after that reimbursement, in no better or worse position than it would have been in if the Tax Payment had not been required. The relevant Lender shall have an absolute discretion as to whether to claim any Tax Credit and, if it does so claim, the extent, order and manner in which it does so. The relevant Lender shall not be obliged to disclose any information regarding its tax affairs or computations to the Borrower. Nothing in this clause 9.12 shall interfere with the right of the relevant Lender to arrange its tax affairs in whatever manner it thinks fit. 9.13 ADDITIONAL DEFINITIONS: "QUALIFYING LENDER" means a Lender which is (on the date a payment falls due); (a) within the charge to United Kingdom corporation tax in respect of that payment and that is a Lender in respect of a utilisation of the facility made by a person that was a bank (as defined for the purpose of section 349 of the Income and Corporation Taxes Act 1988 in section 840A of that Act) at the time the utilisation was made; or (b) resident in a territory outside the United Kingdom for the purposes of an applicable double tax treaty between that territory and the United Kingdom, outside the scope of United Kingdom corporation tax in respect of that payment and, pursuant to the terms of that treaty, entitled to exemption from United Kingdom income tax in respect of interest derived from the facility (a "TREATY LENDER"); or 18 (c) a building society (as defined in section 832 of the Income and Corporation Taxes Act 1988) which is entitled to receive interest payable to it under this Agreement without deduction of tax pursuant to section 477A(7) of that Act; or (d) for any payment made in or after 1 April 2001, a person beneficially entitled to the income in respect of which that payment (not being a payment in respect of which a direction has been given and not revoked under section 349(c) of the Income and Corporation Taxes Act 1988) is made and which is a company resident in the United Kingdom and within the charge to United Kingdom corporation tax in respect of that payment. "TAX CHANGE" means the introduction of, change in, or change in the interpretation, administration or application of any law or regulation or any published practice or concession of the Inland Revenue on or after the date of this Agreement but shall not include the enactment into law of the Finance Act 1996. 10. INCREASED COSTS 10.1 INCREASED COSTS: Subject to clause 10.2, if by reason of: (a) the adoption of, or any change, or change in the interpretation or administration of, any applicable law or regulation after the date hereof; and/or (b) compliance with any request from or requirement made after the date hereof of any central bank (other than, save in the case of paragraph 10.1(b)(v) below, the requirements of the Bank of England reflected in the Additional Costs Rate) or other fiscal, monetary or other financial authority (whether or not having the force of law but, if not having the force of law, being a request or requirement which is customarily complied with by banks): (i) a Lender incurs a cost (other than tax, or an increase in tax, on its overall net income) as a result of its having entered into and/or performing its obligations under this Agreement and/or as a result of the Outstandings hereunder; (ii) by reason of capital adequacy requirements the rate of return on the overall capital of a Lender is reduced as a result of it entering into and/or performing its obligations under this Agreement; (iii) there is any increase in the cost to a Lender (other than tax, or an increase in tax, on its overall net income) of making, funding or maintaining the Advance made or to be made by it hereunder; (iv) a Lender becomes liable to make any payment (not being a payment of tax on its overall net income) on or calculated by reference to the amount of the Advance made or to be made by it hereunder; or 19 (v) the Additional Costs Rate, as calculated hereunder, does not represent the cost (ignoring tax on its overall net income) to a Lender of complying with the requirements of the Bank of England in relation to its funding or maintaining of its participation in the Advance, then, the Borrower shall within 21 days of demand by the relevant Lender pay to the relevant Lender an amount sufficient to indemnify it against, as the case may be, (i) such cost, (ii) such proportion of such reduction in the rate of return as is attributable to its obligations hereunder, (iii) such portion of such increased cost as is attributable to its making, funding or maintaining advances hereunder, or (iv) such liability, or (v) such portion of such costs as are not represented by the Additional Costs Rate. 10.2 EXCEPTIONS TO INCREASED COSTS INDEMNITY: Clause 10.1 shall not apply to: (i) costs, reductions or increased costs covered by the Additional Costs Rate; (ii) any cost, reduction or increased cost arising as a result of default by a Lender in complying with any request or requirement of any fiscal, monetary or regulatory authority; (iii) any cost, reduction or increased costs resulting from any implementation in whole or in part of the paper entitled "International Convergence of Capital Measurement and Capital Standards" dated July 1988 (as amended in 1991) published by The Basle Committee on Banking Regulations and Supervisory Practices; or (iv) any cost, reduction or increased cost which results from a deduction or withholding for or on account of tax or from a payment on account of tax which deduction, withholding or payment is referred to in clause 10.1 or clause 10.3. 10.3 INCREASED COSTS CLAIMS: If a Lender intends to make a claim pursuant to clause 10.1 it shall notify the Borrower of the event by reason of which it is entitled to do so and provide the Borrower with supporting evidence where practicable. 10.4 MITIGATION: If circumstances arise which would or would upon the giving of notice result in: (a) an amount becoming payable under clause 9.1(iii) (Tax Gross-up) or a claim for indemnification by a Lender pursuant to clause 9.3 (Indemnity) or clause 10 (Increased Costs); or (b) a determination or notification pursuant to clause 4.1(ii)(b) (Market Disruption), then, without in any way limiting, reducing or otherwise qualifying the Borrower's obligations under any of the clauses referred to in clauses 10.4(a) or (b) the relevant Lender shall promptly notify the Borrower thereof and, in consultation with the Borrower, the Borrower and the relevant Lender shall make reasonable efforts to mitigate the effects of such circumstances including the transfer of the relevant Lender's rights and 20 obligations hereunder to another entity (including, without limitation, an Affiliate of the relevant Lender willing to participate in the Facilities) Provided that the relevant Lender shall be under no obligation to make any such efforts if such steps would or might have an adverse effect upon its business, operations or financial condition. 11. FINANCIAL INFORMATION 11.1 ANNUAL STATEMENTS: The Borrower shall as soon as the same become available, but in any event within 120 days after the end of each of its financial years, deliver to each Lender its financial statements for such financial year. 11.2 SEMI-ANNUAL STATEMENTS: The Borrower shall as soon as the same become available, but in any event within 90 days after the end of each half of each of its financial years, deliver to each Lender its financial statements for such period. 11.3 QUARTERLY REPORTS: The Borrower shall as soon as the same become available but in any event within 28 days after the end of each calendar quarter deliver to each Lender a quarterly report in the agreed form. Each such quarterly report shall be prepared by the Borrower in conjunction with the Technical Adviser and shall, on receipt, be submitted by the Lenders to the Technical Adviser for his comments. On receipt of such continents the Lenders shall send copies of the same to the Borrower. 11.4 OTHER FINANCIAL INFORMATION: The Borrower shall from time to time on the request of a Lender furnish that Lender with such information about the Project and the Borrower's business and financial condition as that Lender may reasonably require. 11.5 REQUIREMENTS AS TO FINANCIAL STATEMENTS: The Borrower shall ensure that: (i) each set of financial statements delivered by it pursuant to this clause 11 is prepared on the same basis as was used in the preparation of the Base Case and in accordance with accounting principles generally accepted in England and consistently applied; (ii) each set of financial statements delivered by it pursuant to this clause 11 is certified by a duly authorised officer of the Borrower as giving a true and fair view (in the case of audited statements) of, or otherwise as presenting with reasonable accuracy, the financial condition of the Borrower as at the end of the period to which those financial statements relate and of the results of its operations during such period; and (iii) each set of financial statements delivered by it pursuant to this clause 11.1 (Annual Statements) has been audited by Arthur Anderson or another firm of auditors acceptable to the Lenders. 11.6 ACCOUNTING POLICIES: The Borrower shall ensure that each set of financial statements delivered to the Lenders pursuant to this clause 11 is prepared using accounting policies, practices, procedures and reference period consistent with those applied in the preparation of the Base Case, unless in relation to any such set of financial statements the 21 Borrower notifies the Lenders that there have been one or more changes in any such accounting policies, practices, procedures or reference period and the auditors for the time being of the Borrower provide: (i) a description of the changes and the adjustments which would be required to be made to those financial statements in order to cause them to use the accounting policies, practices, procedures and reference period upon which the Base Case was prepared; and (ii) sufficient information, in such detail and format as may be reasonably required by the Lenders, to enable the Lenders to make an accurate comparison between the financial position indicated by those financial statements and the Base Case; and any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Base Case was prepared. 12. PROJECT BUDGETS 12.1 DELIVERY OF PROJECT BUDGETS: No later than 60 days before the end of each of its financial years the Borrower shall deliver to the Lenders copies of its budget for its next financial year. 12.2 FORM OF PROJECT BUDGET: The Borrower shall ensure that each budget delivered by it pursuant to clause 12.1 shall be in the agreed form and prepared on a basis consistent with the initial Project Budget and using (i) accounting policies, practices, procedures and reference period consistent with such initial Project Forecast and each set of financial statements delivered pursuant to clause 11 (Financial Information) and (ii) the Assumptions most recently agreed or determined pursuant to clause 19.3 (Value of Assumptions) of the Intercreditor Agreement. 12.3 AGREEMENT OF PROJECT BUDGET: Each budget received by the Lenders pursuant to clause 12.1 shall be forwarded by the Lenders to the Technical Adviser and the Traffic Adviser. Unless the Lenders (having consulted with the Technical Adviser and the Traffic Adviser) require a change to be made to any such budget within 30 days of receipt thereof, such budget shall become the Project Budget for the Borrower's next financial year. If any budget received by the Lenders is in excess of the forecast budget for such financial year as set out in the most recent Project Forecast delivered pursuant to clause 19 of the Intercreditor Agreement for the financial year in relation to which such budget was delivered, the Lenders (having consulted with the Technical Adviser and the Traffic Adviser) may require a change to any such budget within 30 days of receipt thereof, the Lenders shall so notify the Borrower of such change which shall not reduce such budget to a level below the forecast budget for that financial year and the Borrower shall prepare a revised budget reflecting such required change which shall then become the Project Budget for the Borrower's next financial year. 22 13. PROJECT FORECASTS The Borrower shall at all times comply with the provisions set out in clause 19 of the Intercreditor Agreement. 14. PROJECT ACCOUNTS AND CASHFLOWS 14.1 ACCOUNTS: The Borrower shall open and maintain and operate each of the Project Accounts in accordance with the provisions of Part 5 of the Intercreditor Agreement. 14.2 CASH FLOW: The Borrower shall comply with the provisions of clause 12 of the Intercreditor Agreement and each of the other provisions of Part 5 of the Intercreditor Agreement. 15. POSITIVE COVENANTS The Borrower shall: 15.1 CONSENTS ETC: obtain, comply with the terms of and do all that is necessary to maintain in full force and effect all consents, licences, permits, approvals, authorisations, rights of way, easements and access to any part of the Project site as and when required from time to time in or by the laws and regulations of England to enable it to carry out the Project and to lawfully enter into and perform its obligations under each of the Relevant Documents and to ensure the legality, validity, enforceability or admissibility in evidence in England of each of the Relevant Documents; 15.2 ENVIRONMENTAL MATTERS: comply in all material respects with all applicable laws and regulations concerning the protection of the environment insofar as they apply to the Project and the Site, and obtain and comply in all material respects with the terms of any licence, permit, authorisation, consent or approval of any kind required under or in relation to any such laws and regulations; 15.3 NOTIFICATION OF EVENTS OF DEFAULT: promptly inform the Lenders of the occurrence of any Event of Default or Potential Event of Default and, upon receipt of a written request to that effect from a Lender, confirm to the relevant Lender that, save as previously notified to the Lenders or as notified in such confirmation, no Event of Default or Potential Event of Default has occurred; 15.4 CLAIMS PARI PASSU: ensure that at all times the claims of each Lender against it under each of the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors save those whose claims are preferred by any bankruptcy, insolvency, liquidation or other similar laws of general application; 15.5 OBLIGATIONS UNDER RELEVANT DOCUMENTS: at all times comply with all its obligations under each of the Relevant Documents and under any other agreement to which it is a party or which is binding on it or any of its assets and maintain and enforce all its rights thereunder (where failure to do so is reasonably likely to have a Material Adverse Effect); 23 15.6 OBLIGATIONS UNDER DBFO CONTRACT AND LEASE: without prejudice to clause 15.5, at all times comply with its obligations under the DBFO Contract and the Lease referred to in clause 8.9 thereof and maintain and enforce all its rights thereunder (where failure to do so may have a Material Adverse Effect) and, if at any time the Borrower becomes aware that it is entitled to terminate the DBFO Contract, to inform the Lenders thereof; 15.7 OPERATION ETC OF THE PROJECT: at all times operate the Project in a sound and efficient manner, in accordance with Good Industry Practice and in accordance with all applicable laws, regulations, directives (including as to safety and the environment) and the terms of the Project Documents; 15.8 ACCESS TO SITE ETC.: ensure that each Lender, the Technical Adviser and any of their representatives or consultants have, on reasonable notice and at reasonable times full access to the Site, any Adjacent Areas and other physical facilities and all books and records of the Borrower (wherever kept); 15.9 INSPECTIONS: promptly notify each Lender of any inspection to be made by or on behalf of the Secretary of State of the Project, the Site, any Adjacent Areas or any of the books and records of the Borrower; and shall if reasonably practicable afford the Lenders, the Technical Adviser or any of their representatives or consultants like access and facilities at the same time; 15.10 MEETINGS: at the request of a Lender and on reasonable notice, whether at the time of an inspection or otherwise, meet (through its senior representatives) with the relevant Lender and, at the request of that Lender, use reasonable endeavours to procure the attendance at such meeting of such personnel as that Lender (having consulted with the Technical Adviser) may specify including any sub-contractor of the Borrower; 15.11 INSURANCES: from time to time effect and maintain the Insurances in accordance with the provisions of Schedule 8 to the Senior Facilities Agreement which shall be deemed to be incorporated and repeated in this Agreement for the benefit of each Lender as if each reference therein to the "Agent", the "Finance Parties", the "Majority Banks" and the "Banks" included the Lenders and references to the "Finance Documents" extended to this Agreement and, in any event, at all times as required by any applicable law; 15.12 NOTIFICATION: promptly notify each Lender of (i) the calling of any general meeting of shareholders of the Borrower, and provide, as soon as practicable thereafter, minutes of all such meetings; (ii) upon becoming aware of the same, any material litigation, arbitration or administrative proceedings involving the Borrower (actual or threatened); 15.13 COMPLIANCE: duly comply with all applicable laws and regulations and promptly pay (when due) all taxes and all outgoings (in each case, net of all allowable deductions or other amounts and save where such taxes or outgoings are the subject of a bona fide dispute) relating to any assets or property of the Borrower from time to time due and payable (in both cases, where failure to do so may have a material effect on the Borrower's business or financial condition); 24 15.14 INDEMNIFICATION: indemnify each Lender from and against liabilities incurred or suffered pursuant to any present or future environmental laws or regulations and arising out of the construction or operation of the Project or any other matter connected with the Project or the Site; 15.15 DBFO CONTRACT COPY NOTICES: promptly deliver to each Lender copies of any notice or request given or received by it under the DBFO Contract pursuant to clauses 15.2 (Discovery of Defects), 22.1 (Required Reports), 22.5 (Revisions to Reports), 24.1 (Remedial Works), 24.3 (Warning Notices), 24.4 (Increased Monitoring), 24.5.2 (Secretary of State Step-In), 25 (Statutory Powers), 27.9.2 (Terrorist Damage), 29.4 (Annual Reconciliation), 30.1.2 (Monthly Payments), 30.2.1 (Annual Reconciliation Account), 33 (Force Majeure), 33A (Change in Law), 35.3.1 (Claims), 36.2 (Events of Default), 36.3.1 (Suspension of DBFO Payments), 36.3.5.2 (Programme for Remedying Breach), 36.5 (Termination in Full), 37.2 (Termination Procedure), 38 (Non-Default Termination), 39.1.1.1 (Expulsion from Site), 44.3-4 (Statutory Deduction from Payments), 45.3.2 (Storage of Data), Schedule 12 Part 1 paragraph 2 (Notification of Eligible Change), Schedule 12 Part 2 paragraphs 1 and 2 (Department's Works Change), Schedule 12 Part 3 paragraphs 1 and 2 (Department's Change in Specification), Schedule 12 Part 4 paragraph 1 (Additional Works), Schedule 12 Part 5 paragraph 1.1 (Compensation Events), Schedule 12 Part 6 paragraph 6.1 (Change in Costs), Schedule 13 Part 1 paragraph 1.1 (Additional Works Notice), Schedule 13 Part 3 paragraph 1.1 (Subsequent Scheme Notice), Schedule 13 Part 5 paragraph 3.1 (Safety Improvement Notice) and Schedule 15 paragraphs 1 and 2 (Disputes Resolution Procedure); 15.16 NOTIFICATION OF EVENTS UNDER DBFO CONTRACT: promptly upon becoming aware of the same, notify each Lender of the happening of any Compensation Event, Delay Event or Eligible Change to the extent it is not otherwise required to do so under clause 15.15 and shall pursue its rights and remedies in relation thereto under the DBFO Contract in accordance with the terms and conditions thereof (where failure to do so may have a Material Adverse Effect or a material adverse effect on the interests of the Lenders) and shall keep the Lenders informed in relation thereto; 15.17 NOTIFICATION OF EVENTS UNDER CONSTRUCTION CONTRACT: promptly upon becoming aware of the same, notify each Lender of (i) any continuing and material breach of the Construction Contract which is unremedied; (ii) any event of Force Majeure; (iii) notify each Lender and the Technical Adviser of, and involve the Lenders and the Technical Adviser in, any consultation process relating to a dispute or difference under the Construction Contract; 15.18 INFORMATION: promptly deliver to each Lender: (i) each Annual Report issued by it pursuant to Schedule 14 Part 2 paragraph 3 of the DBFO Contract; (ii) each Works Programme or variation thereof provided by it pursuant to clause 10 of the DBFO Contract; 25 (iii) any Termination Accounts (and annexures) prepared pursuant to clause 40.1 of the DBFO Contract; and (iv) all reports and/or information required to be supplied by the Borrower to the Secretary of State pursuant to the DBFO Contract; 15.19 PROTESTOR ACTION: promptly notify each Lender of any protestor action as contemplated by clause 8.11 of the DBFO Contract; 15.20 PENALTY POINTS: promptly notify each Lender of (i) the receipt by it of a cumulative total of 10 (or any multiple thereof) Penalty Points in any 12 month period and (ii) once it has received a total of 40 or more Penalty Points in any six month period, each Penalty Point received by it thereafter; 15.21 REVISED FINANCIAL MODEL: promptly deliver to each Lender in the event that the Financial Model is amended or varied a computer disc containing such revised Financial Model in an agreed format; 15.22 COPIES OF SUB-CONTRACTS: ensure that any sub-contracts providing for the carrying out of operations and maintenance services required to be carried out by the Borrower under the DBFO Contract are renewed or replaced at least three months prior to the expiry thereof (and promptly deliver to each Lender certified true copies of any such renewal or replacement); any such renewed or replaced subcontracts shall themselves be renewed or replaced three months prior to their expiry (and copies of any such renewed or replacement sub-contracts delivered to each Lender) and so on; 15.23 PROJECT DOCUMENTS: without prejudice to clause 15.22 deliver to each Lender certified true copies of any further Project Documents entered into by it after the date hereof; 15.24 NOVATION OF OPERATIONS AND MAINTENANCE CONTRACTS: procure that any operations and maintenance contract entered into by it as referred to in clause 15.22 is made on terms such that it is capable of being novated in favour of the Lenders and/or any nominee of the Lenders in the event the Lenders exercise their step-in rights under the Direct Agreement; 15.25 FINANCIAL STATEMENTS: deliver to each Lender, as soon as practicable following publication thereof, the published audited financial statements (consolidated where appropriate) of each of YLHL, the Promoters and each Relevant Group Company; 15.26 DEFECTS: upon becoming aware of the same, promptly notify the Contractor of any Latent Defects or any other material defect and, if the Contractor is obliged to remedy such defect, require such defects to be remedied by the Contractor in accordance with the terms of the Construction Contract; 15.27 INTELLECTUAL PROPERTY: The Borrower hereby covenants with the Lenders on like terms, mutatis mutandis, to clauses 45.1, 45.2, 45.3.1 and 45.6.1 of the DBFO Contract; and 26 15.28 FURTHER POSITIVE COVENANTS: The Borrower further covenants that it shall use its best endeavours to ensure that, before the first payment falls due to be made to it by the Secretary of State under the DBFO Contract it obtains and, thereafter, until the Facilities are repaid in full, it retains its certification under the construction industry tax deduction scheme. 16. NEGATIVE COVENANTS The Borrower shall not: 16.1 NEGATIVE PLEDGE: create or permit to subsist any encumbrance over all or any of its present or future revenues or assets other than: (i) any lien arising by operation of law in the ordinary course of business and securing amounts not more than 20 days overdue or which are being contested in good faith; (ii) the Security Documents; (iii) subject to the priority of the Security Document any encumbrance in respect of unpaid tax or arising under an attachment or similar process or out of judgments or awards whilst the tax or other amount concerned is being contested by the Borrower in good faith on reasonable grounds; (iv) any encumbrance contained in a Finance Document; (v) any encumbrance which consists of a retention of title on normal commercial terms imposed by a supplier of materials and equipment to the Borrower in the ordinary course of its business; (vi) a legal charge granted to the Secretary of State or any of the Senior Financiers over the Retention Account; (vii) any encumbrance in favour of EIB pursuant to clause 4(f) of the EIB Facility Agreement; 16.2 LOANS AND GUARANTEES: make any loans, grant any credit (save in the ordinary course of business) or give any guarantee or indemnity in respect of financial indebtedness (save as contemplated hereby) to or for the benefit of any person or otherwise voluntarily assume any liability, whether actual or contingent, in respect of any obligation of any other person other than: (i) loans in favour of employees not at any time exceeding (pound)50,000 in aggregate; (ii) as contained in any Finance Document; (iii) Authorised Investments permitted by the Intercreditor Agreement; 27 (iv) loans made on terms and conditions substantially similar to those contained in the Upstream Loan Agreement for the purpose of making any Distributions in accordance with the Intercreditor Agreement; (v) loans permitted pursuant to Clause 12.3(xviii) of the Intercreditor Agreement, provided that in the case of loans not on terms and conditions substantially similar to those contained in the Upstream Loan Agreement, the terms of any such loans have been previously approved by the Agent (acting on the instructions of the Majority Banks) (such approval not to be unreasonably withheld); or (vi) loans made from amounts standing to the credit of the Company Account on the terms and conditions of an Upstream Loan Agreement. 16.3 ALTERATION OF SHARE RIGHTS: alter any rights attaching to its issued shares in existence at the date hereof or issue any new shares other than to YLHL (Co. No. 03059235); 16.4 DISPOSALS: save as contemplated hereby and by the Intercreditor Agreement, sell, lease, transfer or otherwise dispose of, by one or more transactions or series of transactions (whether related or not), the whole or any part of its revenues or its assets other than the disposal of immaterial assets which are worn out or obsolete or assets which are to be replaced; 16.5 ABANDONMENT: abandon or withdraw from the Project or propose any abandonment or withdrawal from the Project (other than to the Lenders or the Banks); 16.6 TERMINATION OR AMENDMENT ETC OF DBFO CONTRACT OR CONSTRUCTION CONTRACT: terminate, suspend, cancel, amend or vary (i) the DBFO Contract (except that the Borrower may agree amendments or variations to the DBFO Contract (other than to clauses 3.3, 3.4, 4, 8, 9, 10, 11, 12, 13, 15, 17, 19, 24, 25, 27.9, all of Parts IV and V, clauses 41, 43, 48, 51 or Schedules 1, 2, 3, 4, 6, 9, 11, 12, 13, 15, Part 2 of Schedule 16 or Schedule 18 thereof) to the extent that such amendment or variation is beneficial or immaterial to the interests of the Lenders and does not have a Material Adverse Effect) or (ii) (by itself or through the Employer's Agent) the Construction Contract (other than to clauses 6.2.2, 17, 31.3 or 35 thereof and to the extent that any amendment or variation of such clauses is beneficial or immaterial to the interests of the Lenders and in either case does not have a Material Adverse Effect); 16.7 AMENDMENTS OF OTHER PROJECT DOCUMENTS: amend or vary any of the terms and conditions of any Project Document (other than the DBFO Contract and the Construction Contract) in any way which may have a Material Adverse Effect or have a material adverse effect on the interests of the Lenders; 16.8 TERMINATION ETC OF OTHER PROJECT DOCUMENTS: terminate, suspend or cancel any of the Project Documents (other than the DBFO Contract and the Construction Contract) unless the Borrower has supplied to the Lenders a substitute for any Project Document (the form, terms and parties of which are satisfactory to, and approved by, the Lenders prior to its execution); 28 16.9 NEW PROJECT DOCUMENTS: enter into any new Project Documents except: (a) contracts expressly permitted under any other provision of this Agreement; (b) contracts approved by the Lenders; or (c) contracts which are immaterial (including contracts of employment for employees); 16.10 AMENDMENT OF EIB FACILITY: amend or vary any of the terms and conditions of the EIB Facility Agreement or (save as shall be required to comply with the provisions of the Project Documents) take any action or omit to take any action which would or might result in the conditions contained in clause 11 (Release Conditions) thereof not being fulfilled on the dates therein specified; 16.11 ASSIGNMENT BY CONTRACTOR: consent to any assignment by the Contractor of the Construction Contract or any part thereof or any benefit, obligation or interest therein or thereunder; 16.12 FINANCIAL INDEBTEDNESS: incur any financial indebtedness, whether direct or indirect, actual or contingent, other than: (i) under the Senior Finance Documents; (ii) under the agreements evidencing the Subordinated Loans; (iii) any financial indebtedness as permitted by clause 16.17; (iv) operating leases or hire purchase agreements where the amount of rentals payable does not exceed (pound)100,000 (indexed in line with RPI) in any year; and (v) any loans made by either of the Promoters or YLHL which are subordinated to the priority level of and pari passu with transfers to the Distribution Account under the Intercreditor Agreement. 16.13 THE BORROWER'S BUSINESS: carry on any business other than such business as is contemplated by the DBFO Contract, or as may be related or incidental thereto, or establish any subsidiary or merge or consolidate with any other person; 16.14 AVOIDANCE OF INSURANCES: take or omit to take any action whereby any of the Insurances which it is required to carry may become avoided; 16.15 AMENDMENT OF SUBORDINATED FACILITIES/ UPSTREAM LOAN AGREEMENT: amend or vary any of the terms and conditions of any of the agreements evidencing the Subordinated Loans or the Upstream Loan Agreement unless the Lenders, acting reasonably, consider that such amendment or variation is not adverse to their interests; 29 16.16 PAYMENTS OF SUBORDINATED LOANS: pay any interest or fees, repay or prepay any principal or make any other payment in connection with any of the Subordinated Loans other than in accordance with the payment cascade set out in clause 12.3 of the Intercreditor Agreement or from amounts standing to the credit of the Company Account or as otherwise permitted by the Intercreditor Agreement; 16.17 FURTHER HEDGING ARRANGEMENTS: enter into any hedging arrangements (including any forward foreign exchange transactions, options or swaps) without the consent of the Lenders (save for the hedging arrangements agreed between the Borrower and the Arrangers prior to the date hereof): 16.18 ADDITIONAL WORKS: tender, or enter into any contract, for Additional Works; 16.19 PROPOSALS: make any proposal for any Alternative Proposal, DBFO Co's Works Change, Improvement, Safety Improvement or Subsequent Scheme or, if to do so may have a Material Adverse Effect or a material increase in cost or result in a claim for an increase in price under the Construction Contract, make any other proposal or take any other action as is contemplated by clause 3.2 or 12.2.1 of the DBFO Contract; 16.20 COSTS AND LIABILITIES incur any costs or liabilities in connection with the operation of the Project and the carrying out of its rights and obligations under the DBFO Contract otherwise than: (i) as contemplated in the Project Budget most recently delivered by the Borrower to the Lenders pursuant to clause 12 (Project Budgets) as the same may be agreed pursuant to clause 12.3 (Agreement of Project Budget); or (ii) as required to comply with its obligations under any Project Document provided that, if the incurring of such liability would result in the aggregate of costs and liabilities incurred and forecast to be incurred in the financial year covered by the Project Budget being in excess of the amount stated in the Project Budget, the payment of such excess can be funded from: (A) funds made available pursuant to the DBFO Contract (other than funds which are or will be required on (or on the Payment Date next following) receipt thereof to be applied under the terms and conditions of the agreement(s) evidencing the relevant indebtedness in accordance with clause 12.3 of the Intercreditor Agreement); and/or (B) the (pound)100,000 balance that is to stand to the credit of the Operating Account; and/or (C) the proceeds of any share subscription or subordinated loans permitted hereunder which have been received or have been 30 unconditionally committed (but, if committed, the commitment must be given by counterparties and in form and substance satisfactory to the Lenders); 16.21 EXERCISE OF RIGHTS: without prejudice to the Borrower's obligations to comply with its obligations under the Construction Contract, exercise or omit to exercise, or allow the Employer's Agent to exercise or omit to exercise, any of its rights, powers or discretions under the Construction Contract if to do so may have a Material Adverse Effect; 16.22 ACCOUNTING REFERENCE DATE: change its accounting reference date; 16.23 FINANCIAL MODEL: amend or vary the Financial Model unless otherwise permitted pursuant to this Agreement or the Intercreditor Agreement; 16.24 EMPLOYER'S AGENT ETC: without prior notification to, and consultation with, the Lenders and the Technical Adviser, (i) authorise the Contractor to publish any articles or other material relating to any dispute arising under the Construction Contract or any information regarding any such dispute, (ii) refer any dispute under the Construction Contract to the Dispute Resolution Procedure, or (iii) agree any replacement for the Independent Engineer or any variation to the Independent Engineer's terms of appointment; 16.25 CONSORTIUM RELIEF: do anything which would prevent it from complying with its obligations under clause 17 of the Shareholders Agreement; 16.26 DISTRIBUTIONS: declare, make or pay any dividends or other distributions except to the extent lawful and permitted by clause 12.3 (xviii) of the Intercreditor Agreement or to the extent of any amounts standing to the credit of the Company Account. 17. EVENTS OF DEFAULT 17.1 FAILURE TO PAY: The Borrower fails to pay any sum due from it hereunder or under any other Finance Document at the time, in the currency and in the manner specified herein within three Business Day of the date it becomes due. 17.2 MISREPRESENTATION: Any representation or statement made by the Borrower in this Agreement prior to the Amendment Date or any of the other Finance Documents to which it is a party or by YLHL in the Share Pledge or in any notice or other document, certificate or statement delivered by any such person pursuant hereto or thereto or in connection herewith or therewith is or proves to have been incorrect or misleading in any material respect when made. 17.3 SPECIFIC COVENANTS: The Borrower fails duly to perform or comply with any of the obligations expressed to be assumed by it in clause 11 (Financial Information), clause 12 (Project Budgets), clause 19 of the Intercreditor Agreement (Project Forecasts), clause 14 (Project Accounts and Cashflows), clause 15.11 (Insurance) or clause 16 (Negative Covenants) and (but only in relation to clause 16 and if such failure is capable of remedy in the opinion of the Lenders) such failure is not remedied within 15 days of such failure. 31 17.4 OTHER OBLIGATIONS: Without prejudice to clause 17.3, the Borrower fails duly to perform or comply with any of the obligations expressed to be assumed by it in clause 15 (Positive Covenants) not mentioned in clause 17.3 or with any other obligation expressed to be assumed by it in this Agreement or any other Finance Document to which it is party and such failure is either not capable of remedy or, if capable of remedy, is not remedied in the case of any of the obligations in clause 15 within 15 days of such failure and in the case of any other obligation within thirty days after the Lenders have given notice thereof to the Borrower. 17.5 CROSS DEFAULT: Any financial indebtedness of the Borrower is not paid when due or, if there is an originally agreed grace period, within such grace period, or any financial indebtedness of the Borrower is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default or mandatory prepayment event (however the same may be defined or described, however caused, and whether or not involving fault) or any creditor or creditors of the Borrower become entitled to declare any financial indebtedness of the Borrower due and payable prior to its specified maturity as a result of an event of default or mandatory prepayment event (however the same may be defined or described, however caused, and whether or not involving fault) provided that an Event of Default shall not occur under this clause 17.5 (unless the financial indebtedness in question includes any indebtedness under any Senior Finance Document or Finance Document) if (in aggregate) it does not exceed (pound)100,000. For the avoidance of doubt the capitalisation of any interest in respect of a Subordinated Loan or the deferment of the payment of any Subordinated Loan pursuant to the terms of the Intercreditor Agreement shall not of itself constitute an Event of Default under this clause 17.5. 17.6 DEFAULT OF PROMOTERS OR RELEVANT GROUP COMPANY: Subject to clause 17.30 below, prior to the twelfth anniversary of the date of issue of the Completion Certificate, any financial indebtedness of either Promoter or any Relevant Group Company is not paid within two business days of the due date or, if there is an originally agreed grace period which is longer, within such grace period or any financial indebtedness of either of the Promoters or any Relevant Group Company is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default or mandatory prepayment event (however the same may be defined or described, however caused, and whether or not involving fault) or any creditor or creditors of either of the Promoters or any Relevant Group Company becomes entitled to declare any financial indebtedness of the relevant Promoter or any Relevant Group Company due and payable prior to its specified maturity as a result of an event of default or mandatory prepayment event (however the same may be defined or described, however caused, and whether or not involving fault) Provided that an Event of Default shall not occur under this clause 17.6 if such financial indebtedness (in the case of Macquarie Infrastructure (U.K.) Limited) does not exceed (pound)5,000,000 or (in the case of Balfour Beatty plc and Balfour Beatty Civil Engineering Limited) does not exceed (pound)5,000,000 in respect of any one obligation and does not exceed (pound)20,000,000 in aggregate and, in either case, is incurred other than under a Relevant Document. 32 17.7 INSOLVENCY AND RESCHEDULING: Subject to clause 17.30, (a) the Borrower or (b) any Promoter or any Relevant Group Company prior to the twelfth anniversary of the date of issue of the Completion Certificate is unable to pay its debts as they fall due, commences negotiations with any one or more of its creditors with a view to the general readjustment or rescheduling of its indebtedness or makes a general assignment for the benefit of or a composition with its creditors. 17.8 WINDING-UP: Subject to clause 17.30, (a) the Borrower or (b) any Promoter or any Relevant Group Company prior to the twelfth anniversary of the date of issue of the Completion Certificate takes any corporate action or other steps are taken or legal proceedings are started (other than frivolous or vexatious actions) for its winding-up, dissolution, administration or reorganisation or for the appointment of a liquidator, receiver, administrator, administrative receiver, conservator, custodian, trustee or similar officer of it or of any or all of its revenues and assets Provided that this clause 17.8 will not apply to any step or legal proceeding (other than a petition for an administration) if (i) the action concerned is not initiated, acquiesced in, nor supported by the Borrower, any Promoter or Relevant Group Company or any Affiliate and that action is discharged within 21 days to the satisfaction of the Lenders or (ii) the action concerned is a voluntary solvent amalgamation, reconstruction, reorganisation, merger or consolidation or equivalent or analogous procedure in relation to the Promoter or any Relevant Group Company. 17.9 EXECUTION OR DISTRESS: Subject to clause 17.30, any execution or distress is levied against (unless any such execution is discharged within 14 days and is for an aggregate amount not exceeding (pound)100,000 in the case of the Borrower and (pound)1,000,000 in any other case), or an encumbrancer takes possession of, the whole or any part of, the property, undertaking or assets of any of the Borrower or, prior to the twelfth anniversary of the date of issue of the Completion Certificate, any of the Relevant Group Companies. 17.10 ANALOGOUS EVENTS: Subject to clause 17.30, any event occurs which under the laws of any jurisdiction has a similar or analogous effect to any of those events mentioned in clause 17.7 (Insolvency and Rescheduling), clause 17.8 (Winding-up) or clause 17.9 (Execution or Distress). 17.11 GOVERNMENTAL INTERVENTION: By or under the authority of any government, (a) the management of the Borrower is wholly or partially displaced or the authority of the Borrower in the conduct of its business is wholly or partially curtailed or (b) all or a majority of the issued shares of the Borrower or YLHL or the whole or any part of the Borrower's revenues or assets is seized, nationalised, expropriated or compulsorily acquired (other than a non-material part thereof not required for the Project). 17.12 OWNERSHIP: (i) YLHL transfers or otherwise disposes (legally or beneficially) of any of the shares in the Borrower held by it; or (ii) there is a breach of clause 41.3 of the DBFO Contract. 33 17.13 THE BORROWER'S BUSINESS: The Borrower carries on any business other than such business as is contemplated by the DBFO Contract, or as may be related or incidental thereto, or establishes any subsidiary or merges or consolidates with any other person. 17.14 REPUDIATION: The Borrower repudiates this Agreement or any of the other Finance Documents or does or causes to be done any act or thing evidencing an intention to repudiate this Agreement or any of the other Finance Documents. 17.15 VALIDITY AND ADMISSIBILITY: At any time any act, condition or thing required at such time to be done, fulfilled or performed in order (a) to enable the Borrower lawfully to carry out the Project in all material respects and to enter into, exercise its rights under and perform the obligations expressed to be assumed by it in each of the Finance Documents, (b) to ensure that the obligations expressed to be assumed by the Borrower in each of the Finance Documents, are, subject to the qualifications of law but not fact) set out in the legal opinion of Clifford Chance delivered to the persons who were then the Banks under the Senior Facility Agreement on or about the Execution Date, legal, valid and binding or (c) to make each of the Finance Documents admissible in evidence in England is not done, fulfilled or performed. 17.16 ILLEGALITY: At any time it is or becomes unlawful for the Borrower to perform or comply with any or all of its obligations under each of the Finance Documents or any of the obligations of the Borrower under each of the Finance Documents are not or cease to be legal, valid and binding, subject in each case to the qualifications of law (but not fact) set out in the said legal opinion of Clifford Chance delivered to the Banks under the Senior Facility Agreement on or about the Execution Date. 17.17 ADVERSE CHANGE: Any circumstances arise which give reasonable grounds in the opinion of the Lenders for belief that there has been an adverse change since the date of this Agreement in the Project or the financial condition of the Borrower which is likely to have a Material Adverse Effect. 17.18 DEFAULT UNDER DBFO CONTRACT AND CONSTRUCTION CONTRACT: The happening of any event of default or Termination Event as referred to or as defined in the DBFO Contract or the happening of any default entitling termination by the Borrower under the Construction Contract. 17.19 PENALTY POINTS: If: (a) the Borrower is awarded a total of 100 or more Penalty Points (after taking into account the reduction (if any) in Penalty Points pursuant to the proviso to clause 24.2.1 of DBFO Contract) in one year; or (b) having already received one Warning Notice, the Borrower is awarded a total of 200 or more Penalty Points (after taking into account the reduction (if any) in Penalty Points pursuant to the proviso to clause 24.2.1 of DBFO Contract) in any subsequent three year period, 34 and in either case: (i) the Borrower is unable to demonstrate within 7 days thereof to the reasonable satisfaction of the Lenders (after consultation with the Traffic Adviser) that the level of Penalty Points is a direct result only of management difficulties and it has taken measures which have corrected the management difficulties which have given rise to such a level of Penalty Points being awarded at such a rate; or (ii) if the Borrower does demonstrate the above, but a further 25 or more Penalty Points are awarded within the immediately following 60 day period, Provided that any Penalty Points which are being disputed in good faith pursuant to clause 24.2.3 or 24.2.4 of the DBFO Contract shall only be taken into account to the extent they are taken into account in the DBFO Contract. 17.20 ABANDONMENT: The Borrower abandons or withdraws from the Project or evidences any intention of abandoning or withdrawing from the Project. 17.21 BREACH OF CONSTRUCTION CONTRACT: The Contractor serves any notice of termination of the Construction Contract in accordance with the terms thereof or the Contractor is in breach under the Construction Contract and such breach may have a Material Adverse Effect. 17.22 TERMINATION: Any party to any of the other Project Documents serves any notice of termination, cancellation, suspension or default thereof in accordance with the terms thereof or is in default of its obligations thereunder (if such termination, cancellation, suspension or default may have a Material Adverse Effect). 17.23 RATIOS: As evidenced by any Project Forecast delivered pursuant to the Intercreditor Agreement, the Annual Debt Service Cover Ratio or the Forecast Annual Debt Service Cover Ratio produced in accordance with Clause 19.2(v)(a) of the Intercreditor Agreement is less than 1.05:1. 17.24 ENVIRONMENTAL LIABILITY: A Lender incurs or will incur any material liability (not including, for the avoidance of doubt, a liability which would only arise upon an enforcement of security held by it) under or pursuant to any environmental law, decree, regulation, civil action or penal notice which such liability would not have been incurred by such person if such person was not party to the arrangements established under or pursuant to the Relevant Documents in the capacity or capacities in which such person is from time to time so party and within thirty days of notification thereof to the Borrower no proposal has been made by the Borrower which is acceptable to such person for the unconditional discharge or cancellation of such liability in full and/or the compensation of such person in respect thereof. 17.25 CONSENTS ETC: Any consent, licence, permit, approval or authorisation in relation to the Project or any Relevant Document is suspended, cancelled, revoked, forfeited, surrendered or terminated (whether in whole or in part) or otherwise ceases to be in full force and effect to an extent or in a manner which will have a Material Adverse Effect. 35 17.26 TOTAL LOSS: The whole or any material part of the Project is assessed by the relevant insurers to constitute a total loss for insurance purposes. 17.27 NO MATERIAL PROCEEDINGS: No actions or administrative proceedings of or before any court or agency has been started or threatened which could reasonably be expected to have a Material Adverse Effect, other than in relation to the Borrower's indemnity liability in respect of claims for compensation under Part 1 of the Land Compensation Act 1973. 17.28 OTHER EVENTS OF DEFAULT: The occurrence of any Event of Default (to the extent not waived) under any of the Senior Finance Documents, the agreements evidencing the terms of any of the other Commercial Subordinated Loans or the Junior Subordinated Loan Agreement. 17.29 ACCELERATION AND CANCELLATION: Upon the occurrence of an Event of Default and at any time thereafter if the Event of Default is continuing, the Lenders may (subject to clause 28.1 of the Intercreditor Agreement), by written notice to the Borrower: (i) declare the Advance to be immediately due and payable (whereupon the same shall become so payable together with accrued interest thereon and any other sums then owed by the Borrower to the Lenders hereunder) or declare the Advance to be due and payable on demand of the Lenders; and/or (ii) require the Security Trustee to exercise any and all such rights as may be available to the Lenders under any of the Security Documents (except where Lenders are shareholders or Affiliates of shareholders of the Borrower) and/or require the Intercreditor Agent to exercise any and all such rights (including step-in rights) as may be available to it under the Direct Agreement. 17.30 ADVANCES DUE ON DEMAND: If, pursuant to clause 17.28 (Acceleration and Cancellation), the Lenders declare Advances to be due and payable on demand then, and at any time thereafter, the Lenders may (subject to clause 28.2 of the Intercreditor Agreement) by written notice to the Borrower: (i) require repayment of the Advances on such date as the Lenders may specify in such notice (whereupon the same shall become due and payable on such date together with accrued interest thereon and any other sums then owed by the Borrower to each Lender hereunder) or withdraw their declaration with effect from such date as they may specify in such notice; and/or (ii) select as the duration of any Interest Period which begins whilst such declaration remains in effect a period of six months or less. 17.31 PROMOTER AND RELEVANT GROUP COMPANY: If any of the events referred to in clause 17.6 to 17.10 occurs in relation to a Promoter or a Relevant Group Company, it 36 shall not thereby constitute an Event of Default unless the event in question is reasonably likely to have a Material Adverse Effect or to materially affect the interests of the Lenders (after taking into account the ability of the other Promoter or Relevant Group Companies (as the case may be) to which the events have not occurred to comply with their respective obligations under the relevant documents). 18. DEFAULT INTEREST, INDEMNITY AND RELEASE 18.1 DEFAULT INTEREST: Each Unpaid Sum shall bear interest for the period from and including the date on which it fell due up to but excluding the date of actual payment and calculated by reference to successive Interest Periods relating thereto each of which (other than the first) shall start on the last day of the preceding such Interest Period and the duration of each of which shall be selected by the relevant Lender (having regard to the likely period of the default) Provided that the first Interest Period relating to an Unpaid Sum which is all or part of the Advance which became due and payable otherwise than on the last day of an Interest Period shall be of a duration equal to the unexpired portion of that Interest Period. 18.2 RATE OF DEFAULT INTEREST: The rate of interest applicable to an Unpaid Sum during an Interest Period relating thereto (both before and after judgment) shall be the percentage rate per annum which exceeds by one per cent. the rate which would have been applicable thereto had it been the Advance with a corresponding Interest Period Provided that the rate of interest applicable to an Unpaid Sum which is all or part of the Advance which became due and payable otherwise than on the last day of an Interest Period relating to the Advance shall, during the first Interest Period relating to that Unpaid Sum, be the percentage rate per annum which exceeds by one per cent. the rate applicable to the Advance immediately before it became so due and payable. 18.3 PAYMENT OF DEFAULT INTEREST: Interest on an Unpaid Sum accrued under clause 18.1 shall be due and payable and shall be paid by the Borrower at the end of each Interest Period relating thereto or on such other date as the relevant Lender may specify by written notice to the Borrower. 18.4 BROKEN PERIODS: If for any reason a Lender receives or recovers all or any part of the Advance or an Unpaid Sum otherwise than on the last day of the then current interest Period relating thereto, the Borrower shall pay to the relevant Lender within seven days of its demand an amount equal to the amount (if any) by which (a) the additional interest which would have been payable on the amount so received or recovered had it been received or recovered on the last day of that Interest Period exceeds (b) the amount of interest which in the reasonable opinion of the relevant Lender would have been payable to that Lender on the last day of that Interest Period in respect of a sterling deposit equal to the amount so received or recovered placed by it with a prime bank in London for a period starting on the third business day following the date of such receipt or recovery and ending on the last day of that Interest Period; together with an amount equal to the sum of any losses, costs or expenses incurred by the relevant Lender by reason of it liquidating or re-deploying funds acquired or borrowed by it to fund or maintain the Advance (or part of it). 37 18.5 BORROWER'S INDEMNITY: The Borrower undertakes to indemnify each Lender on demand: (i) in respect of all proceedings, costs, claims, liabilities, damages, demands, penalties, losses, expenses and fees (including legal fees and cash) which it may sustain or incur as a consequence of, or in any way relating to any default by the Borrower in the due performance of any of the obligations expressed to be assumed by it in any of the Finance Documents; (ii) against any loss it may suffer or incur as a result of its funding or making arrangements to fund the Advance requested by the Borrower hereunder but not made by reason of the operation of any one or more of the provisions hereof. 18.6 UNPAID SUMS US ADVANCES: For the purpose of clause 10.1 (Increased Costs) and the Sixth Schedule (Additional Costs Rate), an Unpaid Sum shall be treated as an advance made by the relevant Lender hereunder. 19. ACCOUNTS, ETC 19.1 LENDER'S ACCOUNT: Each Lender shall maintain on its books a control account or accounts in which shall be recorded: (a) the amount of each sum due or to become due from the Borrower hereunder; and (b) the amount of any sum received or recovered by that Lender. 19.2 OBLIGATIONS OF THE BORROWER: In any legal action or proceedings arising out of or in connection with this Agreement, the entries made in the accounts maintained pursuant to clause 19.1 (Lender's Account) shall, in the absence of manifest error, be prima facie evidence of the existence and extent of the obligations of the Borrower therein recorded. 19.3 CALCULATIONS: Commission and interest payable hereunder shall be calculated on the basis of a year of 365 days and the actual number of days elapsed. 19.4 REFERENCE BANKS' QUOTATIONS: If a quotation required of a Reference Bank under the foregoing provisions of this Agreement cannot be obtained by a Lender, the rate for which such quotation was required shall be determined on the basis of those quotations which are supplied to that Lender. 19.5 LENDER'S CERTIFICATES: A certificate of a Lender as to the amount for the time being required to indemnify it against any such cost or liability as is mentioned in clause 10.1 (Increased Costs) shall: (a) in the absence of manifest error, be prima facie evidence in any legal action or proceedings arising out of or in connection with this Agreement; and 38 (b) give reasonable details of the amount claimed and be accompanied by documentary evidence in support thereof to the extent practicable and lawful provided that such Lender shall not be obliged pursuant hereto to disclose any confidential information relating to the organisation of its affairs. 20. PAYMENTS 20.1 PAYMENTS TO THE LENDER: On each date on which an amount is due from the Borrower hereunder the Borrower shall make the same available to the relevant Lender by payment in sterling and in same day funds to such account as that Lender shall have specified for this purpose. 20.2 NO SET-OFF: All payments to be made by the Borrower hereunder shall be made free and clear of and without deduction for or on account of any set-off or counterclaim. 20.3 CLAWBACK: Where a sum is to be paid hereunder to a Lender for account of another person, the relevant Lender shall not be obliged to make the same available to that other person until it has been able to establish to its satisfaction that it has actually received such sum, but if it does so and it proves to be the case that it had not actually received the sum it paid out, then the person to whom such sum was so made available shall on request refund the same to the relevant Lender together with an amount sufficient to reimburse that Lender for any amount it may have been required to pay out by way of interest on moneys borrowed to fund the sum in question during the period beginning on the due date for payment thereof and ending on the date on which it receives the same. 20.4 INDEMNITY PAYMENTS: Any payment to be made by the Borrower which is expressed to be by way of indemnity shall be paid within 21 days of demand by the relevant Lender therefor. 21. REDISTRIBUTION OF PAYMENTS AND SET-OFF 21.1 REPAYABLE RECOVERIES: If any sum (a "relevant sum") received or recovered by a Lender in respect of any amount owing to it by the Borrower becomes repayable and is repaid by the relevant Lender, then there shall thereupon fall due from the Borrower to that Lender an amount equal to the amount paid out by it. 21.2 SET-OFF: The Borrower authorises each Lender to apply any credit balance to which the Borrower is entitled on any account of the Borrower with the relevant Lender in satisfaction of any sum due and payable from the Borrower to the relevant Lender hereunder but unpaid; for this purpose the relevant Lender is authorised to purchase with the moneys standing to the credit of any such account such other currencies as may be necessary to effect such application. No Lender shall be obliged to exercise any right given to it by this clause, but if a Lender does so, it shall promptly notify the other Lender and the Borrower thereof. 21.3 DISTRIBUTION OF RECOVERIES: Recoveries shall be dealt with in accordance with the terms of the Intercreditor Agreement. 39 22. OTHER COMPENSATIONS 22.1 SUPPLEMENTAL INTEREST: On each date on which the Borrower shall make any repayment or prepayment of any principal amount of the Advance, the Supplemental Interest shall become due and payable by the Borrower to the relevant Lender calculated on the principal amount so repaid or prepaid Provided that if, on the due date for payment of the Supplemental Interest the Borrower would be entitled to defer such payment by reason of the provisions of clause 3.5(c) (Deferral of Payment), then the Borrower shall defer such payment until the earlier of:- (a) the first Repayment Date thereafter on which the Borrower's entitlement to defer Supplemental Interest under clause 3.5(c) (Deferral of Payment) has ceased to the extent that the Borrower then has cash available to pay such deferred Supplemental Interest in accordance with the cascade set out in clause 12.3 of the Intercreditor Agreement; (b) the declaration of an Event of Default by the Lenders under clause 17 (Events of Default) at any time after such declaration is permitted by the terms of the Intercreditor Agreement; (c) the Final Repayment Date; (d) prepayment in full of the Facilities; and (e) the date of termination or expiry of the DBFO Contract; (and for the avoidance of doubt, deferred Supplemental Interest shall not bear interest). 23. COSTS AND EXPENSES 23.1 PREPARATION: the Borrower shall indemnify each Lender in respect of all reasonable costs and expenses (including legal fees) incurred by it in connection with the preparation of the Finance Documents and the Project Documents and any other documents associated therewith, and the negotiation and completion of the transactions completed herein and therein. 23.2 PRESERVATION/ENFORCEMENT: The Borrower shall from time to time indemnify each Lender in respect of all costs and expenses (including legal fees) incurred in or in connection with the preservation and/or enforcement of any of their respective rights under the Finance Documents. 23.3 TAXES ETC: The Borrower shall pay all stamp, registration and other documentation taxes to which any of the Finance Documents or any judgment or order given or made in connection therewith is or at any time may be subject and shall from time to time, within 7 days of demand, indemnify each Lender against any liabilities, costs, claims and expenses resulting from any failure to pay or any delay in paying such tax, provided that the Borrower shall not be required to pay any amount to compensate any person for any 40 penalty incurred by such person by reason of such person failing to make timely payment of tax to the relevant authorities in circumstances where such person has itself received (for value at least 7 business days prior to the due date for payment thereof) an amount hereunder from the Borrower sufficient to enable it to pay the same prior to such due date, provided that this clause 23.3 shall not extend to any stamp duty, registration and other documentation taxes arising from an assignment or transfer under clause 24.3 (Assignment by Lender) or clause 24.5 (Transfer by Lender). 24. BENEFIT OF AGREEMENT 24.1 BINDING EFFECT: This Agreement shall be binding upon and enure to the benefit of each party hereto and its successors and assigns. 24.2 ASSIGNMENT BY BORROWER: The Borrower shall not, except with the prior consent of the Lenders assign or transfer all or any of its rights, benefits and obligations hereunder. 24.3 ASSIGNMENT BY LENDERS: A Lender may assign at any time at no cost to the Borrower, to any Affiliate acting through a UK Lending Office and (subject to clause 24.10) with the consent of the Borrower and the other Lender (such consent not to be unreasonably withheld or delayed and, in any event, such consent or refusal to be granted or refused within ten days of the proposed assignment) to any one or more entities all or any part (but if in part in a minimum amount of (pound)2,000,000) of the Lender's rights and benefits hereunder in respect of the Advance and in that event this Agreement and the other Finance Documents shall thereafter be read and construed and shall have effect as if the assignee were the relevant Lender to the intent that the assignee shall have the same rights against the Borrower hereunder as it would have had if it had been a party hereto. 24.4 ASSIGNEES: Unless and until an assignee has agreed with the relevant Lender that it shall be under the same obligations towards it as it would have been under if it had been a party hereto, no Finance Party shall be obliged to recognise such assignee as having the rights against it which such assignee would have had if it had been a party hereto. 24.5 TRANSFER BY LENDER: In addition to its rights under clause 24.3 and subject to clause 24.10, each Lender may at any time at no cost to the Borrower and the other Lender, with the consent of the Borrower (such consent not to be unreasonably withheld or delayed and, in any event, such consent or refusal to be granted or refused within ten days of the proposed transfer) transfer in accordance with this clause 24.5 to any one or more entities acting through a UK Lending Office all or any of its rights, benefits and obligations hereunder, in which case such transfer may be effected by the delivery to the relevant Lender of a duly completed and duly executed Transfer Certificate and payment of a fee of (pound)500 by the proposed transferee whereupon: (a) to the extent that in such Transfer Certificate the relevant Lender seeks to transfer its rights, benefits and/or its obligations hereunder as a Lender, the Borrower, the relevant Lender and the other Lender(s) shall each be released from further obligations to the other hereunder and their respective rights and benefits against 41 each other hereunder shall be cancelled (such rights, benefits and obligations being referred to in this clause as "discharged rights and obligations"); (b) the Borrower, the remaining Lender(s) and the transferee party thereto shall each assume obligations towards and/or acquire rights and benefits from each other hereunder which differ from such discharged rights and obligations only insofar as the Borrower and such transferee have assumed and/or acquired the same in place of the Borrower and the transfering Lender; and (c) such transferee shall become a party hereto as a Lender. 24.6 AMOUNT OF TRANSFER: Any transfer pursuant to clause 24.5 (Transfer by Lenders) shall be either such that the aggregate amount of the Outstandings thereby transferred is not less than (pound)2,000,000 or such that such transfer comprises all of the Outstandings of the relevant Lender. 24.7 PARTIAL ASSIGNMENT OR TRANSFER: In the case of a partial assignment or transfer: (a) the relevant Lender shall exercise the powers of an agent lender for the purposes of this Agreement and, in relation to the Borrower, exercise all discretions and rights reserved to that Lender under this Agreement; and (b) all payments due to the relevant Lender under this Agreement shall be deemed to be payable to that Lender and each assignee or transferee Lender in proportion to their participations. 24.8 FURTHER ASSURANCE: The Borrower shall agree: (a) to make such amendments to any Finance Documents as the Lenders may require to reflect such transfer; and (b) to carry out such further acts in connection with such assignment or transfer as may reasonably be required by the Lenders to effect any assignment or transfer in accordance with this clause 24. 24.9 DISCLOSURE OF INFORMATION: The Lenders may disclose to a potential assignee or transferee or to any other person who may otherwise enter into contractual relations with it in relation to this Agreement a copy of this Agreement and such of the information supplied to the Lenders pursuant to or in connection with this Agreement as the Lenders shall consider appropriate having regard to the terms of the Confidentiality Agreement set out in the Sixth Schedule. 24.10 RIGHTS OF PRE-EMPTION: If a Lender proposes to transfer any of its rights and benefits under this Agreement (other than a transfer to an Affiliate under clause 24.3) it shall first give to the other Lender(s) notice (a TRANSFER NOTICE) of the proposed transfer, together with details of the amount to be transferred, the purchase price and any other material terms of the transfer. The continuing Lender(s) shall have the right to purchase the rights and benefits outlined in the Transfer Notice, on the same terms as specified therein. If 42 there are more than one continuing Lenders then the continuing Lenders shall have the right to purchase an amount equal to the proportion that their Advances bear to the total of all Advances not held by the transferring Lender. If the continuing Lender(s) shall not have exercised their rights within 15 business days of the issue of the Transfer Notice, they shall be deemed to have elected not to purchase, provided that, if there are more than one continuing Lenders and some of the continuing Lenders have elected not to purchase then the other continuing Lenders shall have a further 5 business days to elect to purchase that proportion. 25. PARTIAL INVALIDITY, WAIVER AND AMENDMENTS 25.1 ILLEGALITY: If at any time any provision hereof is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 25.2 NO WAIVER: No delay or omission by any party hereto in exercising any of its rights hereunder shall operate or be construed as a waiver thereof nor shall a single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right of such party hereunder. 25.3 AMENDMENTS: Any term hereof may only be amended in writing. 26. NOTICES 26.1 NOTICES: Each communication to be made hereunder shall be made in writing but, unless otherwise stated, may be made by telex or letter or fax. 26.2 DELIVERY OF NOTICES: Any communication or document to be made or delivered by one person or another pursuant to this Agreement shall (unless that other person has by fifteen days' written notice to the Lenders specified another address) be made or delivered to that other person at the address identified with its signature below and shall be deemed to have been made or delivered when despatched (in the case of a facsimile, evidenced by a confirmed answerback) or (in the case of any document or any communication made by letter) when left at that address or (as the case may be) fourteen days after being deposited in the post first class postage prepaid (airmail, if international) in an envelope addressed to it at that address Provided that (i) any communication or document to be made or delivered to the Lenders shall be effective only when received by the Lenders and (ii) each person shall (without prejudice to its ultimate ability to do so by letter) first endeavour to communicate with another person hereunder by fax or international courier service (but so that, so far as utilisation requests are concerned, the Lenders will only act upon receipt of the original document). 26.3 ENGLISH LANGUAGE: Each communication and document made or delivered by one party to another pursuant hereto shall be in the English language. 43 27. LAW This Agreement shall be governed by and construed in accordance with English law. 28. JURISDICTION 28.1 ENGLISH COURTS: The Borrower irrevocably agrees for the benefit of the Lenders that the courts of England shall have jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and for such purposes irrevocably submits to the jurisdiction of such courts. 28.2 APPROPRIATE FORUM: The Borrower irrevocably waives any objection which it may have now or hereafter to any of the courts referred to in clause 28.1 being nominated as a forum to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and agrees not to claim that any such court is not a convenient or appropriate forum. 28.3 NON-EXCLUSIVE SUBMISSION: The submission to the jurisdiction of the courts referred to in clause 28.1 shall not (and shall not be construed so as to) limit the right of the Lenders to take proceedings against the Borrower in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not. 28.4 CONSENT TO ENFORCEMENT: The Borrower hereby consents generally in respect of any suit, action or proceeding which may arise out of or in connection with this Agreement to the giving of any relief or the issue of any process in connection with such action or proceeding including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment which may be made or given in such action or proceeding. 28.5 WAIVER OF IMMUNITY: To the extent that the Borrower may in any jurisdiction claim for itself or its assets immunity from suit, execution, attachment (whether in aid of execution, before judgment or otherwise) or other legal process and to the extent that in any such jurisdiction there may be attributed to itself or its assets such immunity (whether or not claimed) the Borrower hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity to the full extent permitted by the laws of such jurisdiction. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. 44 FIRST SCHEDULE [NOT USED)] SECOND SCHEDULE [NOT USED] THIRD SCHEDULE PROJECT DOCUMENTS 1. The DBFO Contract. 2. The Construction Contract. 3. The Technical Services Agreement dated 26 March 1996 made between the Borrower and the Promoters. 4. The Shareholders Agreement. 5. The Secondment Agreement dated 26 March 1996 made between the Borrower and the Promoters. 6. The Custody Agreement dated 26 March 1996 made between the Secretary of State for Transport, the Borrower, DMG and the National Computing Centre. 7. The Lease entered into prior to the date of issue of the Completion Certificate between the Borrower and the Secretary of State. FOURTH SCHEDULE SECURITY DOCUMENTS 1. The Debenture dated 26 March 1996 by the Borrower to the Security Trustee. 2. The Share Pledge (incorporating floating charge) dated 26 March 1996 made between YLHL and the Security Trustee. 3. The Security Trust Deed dated 26 March 1996 made between the Borrower, the Senior Agent, the Security Trustee and the persons named therein as Initial Beneficiaries. FIFTH SCHEDULE BANK OF ENGLAND: MONETARY CONTROL ADDITIONAL COSTS' RATE FORMULA 1. The additional rate relative to the Loan is, subject as hereinafter provided, the percentage rate arrived at by applying the following formula: Additional Cost = BY + L(Y-X) + S(Y - Z)% per annum --------------------- 100 - (B+S) Where: B = The percentage of the Lender's eligible liabilities then required to be held on a non-interest-bearing deposit account with the Bank of England. Y = The rate at which sterling deposits in an amount comparable to the amount of the Loan are offered by the relevant Lender to leading banks in the London Interbank Market at or about 11.00 a.m. on the commencement of the relevant Interest Period for a period comparable to the Interest Period. L = The average percentage of eligible liabilities which the Bank of England from time to time requires the relevant Lender to maintain as secured money with members of the London Discount Market Association and/or as secured call money with those money brokers and gilt-edged market-makers recognised by the Bank of England. X = The rate at which secured sterling deposits in an amount comparable to the amount of the Loan may be placed by the relevant Lender with members of the London Discount Market Association and/or as secured call money with money brokers and gilt-edged market-markers at or about 11.00 a.m. on the commencement of the relevant Interest Period for a period comparable to the Interest Period. S = The percentage of the relevant Lender's eligible liabilities then required to be placed as a special deposit with the Bank of England. Z = The percentage interest rate per annum allowed by the Bank of England on special deposits. For the purposes of this paragraph "ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" shall bear the meanings ascribed to them from time to time by the Bank of England. 2. In the application of the above formula, B, Y, L, X, S and Z will be included in the formula as figures and not as percentages, e.g. if B = 0.5% and Y = 15%, BY will be calculated as 0.5 x 15 and not as 0.5% x 15%. 3. The additional rate computed by the relevant Lender in accordance with this Schedule shall, if not already such a multiple, be rounded upwards to the nearest whole multiple of one-sixteenth of one per cent (1/16) per annum. 4. The calculation of the additional rate for the Loan will be made by the relevant Lender on the commencement of the relevant Interest Period relative thereto. 5. Calculations will be made on the basis of a year of 365 days (or, if market practice differs, in accordance with market practice). 6. A negative result obtained by subtracting X from Y or Z from Y shall be taken as zero. 7. In the event of a change in circumstances (including the imposition of alternative or additional official requirements) which renders the above formula inapplicable the relevant Lender shall notify the Borrower of the manner in which the additional rate shall thereafter be determined which shall reflect the additional costs following such change incurred by that Lender at such time and from time to time. 8. The percentages used in B, L and S above shall be those required to be maintained on the first day of the relevant period as determined in accordance with Y above. 9. Additional amounts calculated in accordance with this Schedule are payable on the last day of the Interest Period to which they relate. 10. The determination of the Additional Costs Rate in relation to any period shall, in the absence of manifest error, be conclusive and binding on all of the parties hereto. 11. The relevant Lender may from time to time, after consultation with the Borrower, determine and notify to all the parties hereto any amendments or variations which are required to be made to the formula set out above in order to comply with any requirements from time to time imposed by the Bank of England in relation to the Advance denominated in sterling (including any requirements relating to sterling primary liquidity) and, any such determination shall, in the absence of manifest error, be conclusive and binding on all the parties hereto. SIXTH SCHEDULE FORM OF CONFIDENTIALITY AGREEMENT To: Yorkshire Link Limited ("YLL") [Date] Dear Sirs M1/AI LINK ROAD We refer to the Facility Agreement dated [ ], made between us. Capitalised terms used and not otherwise defined herein shall have the meanings given to them in that Facility Agreement. 1. We, [ ], in our capacity as Lender hereby agree that (save as provided in paragraph 2 below) we shall keep confidential and not disclose to any third person or make use of for purposes unconnected with the Finance Documents the following: (a) any of the terms of the DBFO Contract; (b) any confidential or proprietary information (including documents, computer records, specifications, formulae, evaluations, methods, processes, technical descriptions, reports and other data, records, drawings and information whether or not included in the Design Data or the Traffic Data (each as defined in the DBFO Contract)) provided to or arising or acquired by YLL pursuant to the terms or performance of the DBFO Contract (including without limitation any such documents or information supplied in the course of proceedings under the Disputes Resolution Procedure (as defined in the DBFO Contract)); and (c) all of the information, reports or documents supplied in or in connection with the invitation to tender for the DBFO Contract, any Project Document, any Finance Document or in the course of discussions thereto or any calculations made or conclusions or determinations reached in accordance with the Finance Documents (including the Financial Model and any results obtained from it); together, the "Confidential Information". 2. We shall be entitled to disclose any Confidential Information (subject to any restrictions to the contrary imposed by a person other than YLL in relation to information which is confidential to them): (a) with the prior written consent of YLL; (b) to any other Lender (as defined in the Intercreditor Agreement); (c) when required to do so by any law, regulation or official requirement; (d) to our professional advisers and consultants who need to know such and upon obtaining from them in favour of ourselves a similar confidentiality undertaking and providing a copy of such to the Borrower; (e) to the extent that the same has become generally available to the public otherwise than as a result of a breach of this undertaking or an obligation of confidentiality to another person; and (f) to any person proposing to become a Lender in accordance with the terms of the Facility Agreement upon obtaining from them in favour of YLL a similar confidentiality undertaking and providing a copy of such to YLL. 3. If we are or any person to whom we disclose Confidential Information in accordance with this undertaking is legally compelled by a court of competent jurisdiction or by a supervisory or regulatory body to disclose any of the Confidential Information, we will use all reasonable efforts to the extent permitted by any relevant order to provide YLL with prompt notice thereof so that the Borrower may seek a protective order or other appropriate remedy. If the protective order or other remedy is not obtained, then we agree that, if requested by the Borrower, we will disclose only that portion of Confidential Information as we reasonably believe ourselves to be legally compelled so to disclose. 4. Our obligations under this undertaking shall continue until the date falling on the fifth anniversary of the Termination Date (as defined in the DBFO Contract). 5. This undertaking is to be governed by and construed in accordance with the laws of England. Yours faithfully, - ----------------------- For and on behalf of [NAME OF FINANCE PARTY] SEVENTH SCHEDULE TRANSFER CERTIFICATE To: From: [ ] TRANSFER CERTIFICATE relating to the facilities agreement dated [ ] 1996 between Yorkshire Link Limited (as Borrower) and Macquarie Infrastructure (UK) Limited and Balfour Beatty Plc as Lenders (as amended, supplemented and/or restated from time to time, the "Facilities Agreement"). Terms defined in the Facilities Agreement shall bear the same meaning herein. 1. The [Transferor] as Transferor (the "Transferor") confirms the accuracy of the summary of its participation in the Facilities Agreement set out in the Schedule below and requests [Transferee Lender] (the "Transferee") to accept and procure the transfer to the Transferee of that part of such participation specified in the Schedule by countersigning and delivering this Transfer Certificate to the Transferee at its address for the service of notices specified in the Facilities Agreement. 2. The Transferee hereby requests the Transferor to accept this Transfer Certificate as being delivered to it pursuant to and for the purposes of clause 24.5 of the Facilities Agreement so as to take effect in accordance with the terms thereof on [date of transfer], subject only to the Transferor's having previously received (where necessary) the written consent of the Borrower [and [tested] telex confirmation from [the Transferor's correspondent] that the sum of has been credited to the Transferor's account no. with [the Transferor's correspondent] for value [date of transfer]. 3. The Transferee confirms that it has received a copy of the Facilities Agreement together with such other documents and information as it has required in connection with this transaction and that it has not relied and will not hereafter rely on the Transferor to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy or completeness of any such documents or information and further agrees that it has not relied and will not rely on the Transferor to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of any other party to any other Total Funding Document. 4. The Transferee hereby undertakes with the Transferor and each of the other parties to the Facilities Agreement that it will perform in accordance with their terms all those obligations which by the terms of the Facilities Agreement and each of the other Finance Documents will be assumed by it after delivery of this Transfer Certificate to the Transferor and satisfaction of the conditions (if any) subject to which this Transfer Certificate is expressed to take effect. 5. The Transferor makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of any of the Finance Documents or any document relating thereto and assumes no responsibility for the financial condition of the Borrower or either Promoter or any Relevant Group Company or any other party to any Finance Document or for the performance and observance by the Borrower, either Promoter or any Relevant Group Company or any such other party of any of its obligations under any Finance Document or any document relating thereto and any and all such conditions and warranties, whether express or implied by law or otherwise, are hereby excluded. 6. The Transferor hereby gives notice that nothing herein or in any Finance Document or any document relating thereto shall oblige the Transferor to: (a) accept a re-transfer of the whole or any part of its rights, benefits and/or obligations under the Facilities Agreement hereby transferred; or (b) support any losses directly or indirectly sustained or incurred by the Transferee by reason of the non-performance by the Borrower or any other party to any Finance Document or any other document relating thereto of its obligations under any such document or otherwise. The Transferee hereby acknowledges the absence of any such obligation as is referred to in (a) or (b) above. 7. This Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with English law. THE SCHEDULE Available Commitment Portion Transferred NOTES 1. Transfers may be made of the whole of the Transferor's Available Commitment and Outstandings or of a part thereof in accordance with the terms of the Facilities Agreement. Any transfer of part of the Transferor's Available Commitment and Outstandings as aforesaid must be of an equal portion of the Transferor's Available Commitment and Outstandings. 2. [A fee of(pound)[ ] is payable to the Transferee in respect of any transfer.] [Transferor] [Transferee] By: By: Date: Date: ADMINISTRATIVE DETAILS OF TRANSFEREE Lending Office: Telephone No: Telex No: Account for payments: SIGNED by ) for and on behalf of ) * MACQUARIE INFRASTRUCTURE ) (UK) LIMITED ) Level 30 CityPoint 1 Ropemaker Street London EC2Y 9HD Fax: 020 7065 2041 Attention: The Company Secretary SIGNED by ) for and on behalf of ) * BALFOUR BEATTY PLC ) Balfour Beatty Capital Projects 130 Wilton Road London SWIV 1LQ Fax: 020 7216 6990 Attention: Stuart Leadill SIGNED by ) for and on behalf of ) * YORKSHIRE LINK LIMITED ) Level 30 CityPoint 1 Ropemaker Street London EC2Y 9HD Fax: 020 7065 2041 Attention: The Company Secretary * This agreement was and was deemed to be amended and restated by an Amendment and Restatement Agreement dated as of September 4, 2001 between Yorkshire Link Limited, Yorkshire Link (Holdings) Limited, ABN AMRO Bank N.V., European Investment Bank, European Investment Fund, Certain Financial Institutions, as hedging counterparties, 3i Group plc, Macquarie Infrastructure (UK) Limited and Balfour Beatty plc, which was executed by the authorized representatives of the parties there to as follows: YORKSHIRE LINK LIMITED By: /s/ Sean MacDonald ------------------------------ YORKSHIRE LINK (HOLDINGS) LIMITED By: /s/ Sean MacDonald ------------------------------ ABN AMRO BANK N.V. in each of its capacities as refinancing bank, Intercreditor Agent, Senior Facility Agent, Senior Issuing Bank, Hedging Counterparty and Security Trustee By: /s/ Andrea Echberg ------------------------------ 3i GROUP PLC By: /s/ Andrew Bell ------------------------------ THE DAI-ICHI KANGYO BANK, LIMITED By: /s/ Chris O'Gorman ------------------------------ THE ROYAL BANK OF SCOTLAND plc acting as agent for: NATIONAL WESTMINSTER BANK PLC By: /s/ Vivek Sapra ------------------------------ MACQUARIE INFRASTRUCTURE (UK) LIMITED By: /s/ Sean MacDonald ------------------------------ BALFOUR BEATTY PLC By: /s/ Anthony Rabin ------------------------------ EUROPEAN INVESTMENT BANK By: /s/ E. Uhlmann /s/ T.C. Barrett ------------------------------ --------------------------------- EUROPEAN INVESTMENT BANK for and on behalf of EUROPEAN INVESTMENT FUND By: /s/ P-L Gilibert /s/ K.J. Andreopoulos ------------------------------ --------------------------------- EX-21.1 18 y97636exv21w1.txt SUBSIDIARIES: TRUST Exhibit 21.1 MACQUARIE INFRASTRUCTURE ASSETS TRUST Subsidiaries of the Registrant Macquarie Infrastructure Assets Trust (Registrant)
SUBSIDIARIES STATE OF INCORPORATION OR ORGANIZATION - ----------------------------------- -------------------------------------- ~~Macquarie Infrastructure Assets LLC Delaware Macquarie Infrastructure Assets Inc. Delaware~~
1 EX-23.3 19 y97636exv23w3.htm CONSENT OF ERNST & YOUNG LLP CONSENT OF ERNST & YOUNG LLP

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated May 20, 2004 with respect to the consolidated financial statements of Macquarie Americas Parking Corporation and our report dated May 20, 2004 with respect to the consolidated statements of operations and cash flows of Off-Airport Parking Operations of PCA Parking Company of America, LLC each included in the Registration Statement (Form S-1) and related Prospectus dated June 7, 2004 of Macquarie Infrastructure Assets Trust and Macquarie Infrastructure Assets LLC for the registration of shares representing beneficial interests in Macquarie Infrastructure Assets Trust and LLC interests of Macquarie Infrastructure Assets LLC.


Delaware	4700	20-6196808
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)


Delaware	4700	43-2052503
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)


	Per Share	Total

Public offering price	$	$
Underwriting discount	$	$
Proceeds, before expenses, to us	$	$


Shares Offered by Us		shares

Shares Outstanding after the Offering		shares

Use of Proceeds		We estimate that our net proceeds from this offering without exercise of the overallotment option will be approximately $ million. We intend to use these net proceeds and the $35 million of proceeds from the private placement to our Manager to

		• pay the purchase price and related costs of our acquisitions of our initial businesses and investments, and

		• pay the transaction costs related to this offering.

Dividend Policy		We intend to declare and pay regular quarterly cash dividends on all outstanding shares and expect the initial quarterly dividend to be approximately $ per share. The declaration and payment of this and any other dividends and, if declared, the amount of any such dividend will be subject to the discretion of the company’s board of directors.

Risk Factors		See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in the shares.



		Year Ended				Three Months Ended
		December 31,				March 31,

Atlantic		2002		2003		2003		2004


		($ in thousands)
Statements of Operations Data:
	Revenue	$	68,591	$	78,417	$	18,736	$	24,704
	Operating income		13,380		16,205		3,084		4,482
	Income (loss) from continuing operations		4,942		6,045		1,102		(1,097	)


Antonia E. Stolper Shearman & Sterling LLP 599 Lexington Avenue New York, New York 10022 (212) 848-4000		Norman D. Slonaker Jack I. Kantrowitz Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 (212) 839-5300


	Page

Prospectus Summary		1
Risk Factors		8
Forward-Looking Statements		20
Use of Proceeds		21
Exchange Rates		22
Dividend Policy		22
The Acquisition of Our Initial Businesses and Initial Investments		23
Pro Forma Capitalization		27
Pro Forma Condensed Combined Financial Statements		28
Selected Financial Data		38
Management’s Discussion and Analysis of Financial Condition and Results of Operations		44
Business		69
Management		100
Our Manager		103
Principal Shareholders/ Security Ownership of Directors and Executive Officers		111
Certain Relationships and Related Party Transactions		111
Description of Shares		112
Securities Eligible for Future Sale		118
Material U.S. Federal Income Tax Considerations		119
Underwriting		131
Legal Matters		134
Experts		134
Where You Can Find Additional Information		134
Index to Financial Statements		F-1



		At December 31,						At March 31,

		2002			2003			2004

Balance Sheet Data:
	Total assets	$	128,836		$	135,210		$	135,877
	Total liabilities		74,968			75,369			77,120
	Preferred stock		64,099			64,099			64,099
	Stockholders’ deficit		(10,231	)		(4,258	)		(5,342	)


								Macquarie
					Predecessor			Parking			Macquarie			Macquarie Parking
		Predecessor			Period from			from July 23,			Parking			Three Months
		Year Ended			January 1 to			2002 to			Year Ended			Ended March 31,
		December 31,			December 18,			December 31,			December 31,
Macquarie Parking		2001			2002			2002(1)			2003(2)			2003			2004(2)


		($ in thousands)
Statement of Operations Data:
	Revenue	$	20,541		$	20,524		$	525		$	26,291		$	4,226		$	12,156
	Operating income		3,200			4,184			(556	)		1,730			114			2,059
	Net income (loss)		(4,042	)		(6,727	)		(636	)		(5,000	)		(556	)		61


							Combined 12
		Year Ended March 31,					Months Ended
							March 31,
CHL		2002		2003			2004


		(£ in thousands)
Statement of Operations Data:
	Revenue		£46,051		£45,267			£46,205
	Operating income		33,895		32,618			32,311
	Net income (loss)		4,549		(2,113	)		11,025


	*Our cash flows may be negatively affected by our failure to consummate the acquisitions of our initial businesses and investments as anticipated.*


Sourcesof Funds

($ in millions)
Shares offered hereby		$
Our Manager’s investment		$	35.0
	Total sources	$


Uses o Funds

($ in millions)
Purchase of:
	Atlantic(1)	$	120.1
	Macquarie Parking	$	33.0
	CHL(2)	$	79.6
Purchase of interest in:
	MCG	$	70.0
	SEW(3)	$	37.5
General corporate purposes		$	10.0
	Total uses	$	350.2



	Australian Dollar/U.S. Dollar						Pound Sterling/U.S. Dollar

Time Period	High		Low		Average		High		Low		Average

1999		1.5853		1.5088		1.5494		0.6349		0.6034		0.6184
2000		1.9164		1.5244		1.7197		0.7014		0.6096		0.6598
2001		1.9936		1.8012		1.9346		0.7133		0.6769		0.6946
2002		1.9501		1.7600		1.8392		0.7029		0.6304		0.6656
2003		1.7156		1.3530		1.5337		0.6354		0.5709		0.6120
First Quarter 2004		1.3652		1.2532		1.3070		0.5586		0.5251		0.5439
April 2004		1.3892		1.3026		1.3441		0.5658		0.5318		0.5546
May 2004		1.4564		1.3630		1.4212		0.5700		0.5444		0.5600


			Pro Forma
			As of March 31, 2004

			($ in thousands)
Long-term debt:
	Atlantic senior debt facility		$
	Macquarie Parking senior debt facility
	Loan from Connect M1-A1 Limited

		Total long-term debt
Shareholders’ equity:
	Trust stock: (no par value); 500,000,000 shares authorized; 100 shares issued and outstanding; shares issued and outstanding as adjusted for the offering(1)
Total shareholders’ equity

Total capitalization			$


	*Operational Strategy*


	*Acquisition Strategy*


								Pro Forma
								Combined
			Macquarie					Macquarie
	Atlantic		Parking		Pro Forma			Infrastructure
	As Reported		As Reported		Adjustments			Assets Trust


	($ in thousands)
Liabilities and Shareholders’ Equity (Deficit)
					$	797	(c)
						(1,051	)(d)
						(5,831	)(d)

Current liabilities	$	15,597	$	4,288		(6,085	)	$	13,800
						585	(b)
						39,132	(d)

Deferred tax liabilities		23,005		—		39,717			62,722

						129,203	(c)
						(29,170	)(d)
						18,374	(f)

Long-term debt		29,170		130,635		118,407			278,212
						(178	)(b)
						1,300	(d)

Other long-term liabilities		9,348		1,065		1,122			11,535


Total liabilities		77,120		135,988		153,161			366,269

Minority interests		—		6,376		—			6,376

Redeemable convertible preferred stock		64,099		—		(64,099	)(d)		—
						350,205	(a)
						(12,114	)(b)
						120,100	(c)
						5,342	(d)


a.	Reflects issuance of shares and the net proceeds from this offering (after deducting underwriting discounts and commission of $ million and estimated offering expenses of $ ) and the concurrent private placement to our Manager:
		To finance acquisitions	$	340,205
		Additional proceeds for working capital and capital expenditures		10,000

			$	350,205


b.	Reflects (1) purchase accounting adjustments to reflect Macquarie Parking assets acquired and liabilities assumed at their estimated fair values, (2) working capital adjustment required by the MAPC purchase agreement and (3) elimination of historical shareholders’ equity:
		Cash	$	(107	)
		Land		863
		Property and equipment		652
		Other intangible assets		1,946
		Goodwill		19,516
		Deferred financing costs		(1,577	)
		Deferred tax liabilities		(585	)
		Other long-term liabilities		178
		Elimination of historical shareholders’ equity		12,114

			$	33,000


c.	Reflects equity contributed and debt assumed in connection with the acquisition of North America Capital (the holding company for Atlantic) by us and related financing costs:
		Equity	$	(120,100	)
		Debt — current portion		(797	)
		Debt		(129,203	)
		Cash		12,114
		Deferred financing costs		4,075
		Restricted Cash (six-month debt service reserve)		4,650

			$	(229,261	)


d.	Reflects (1) purchase accounting adjustments to reflect Atlantic assets acquired and liabilities assumed at their estimated fair values, (2) elimination of liabilities not assumed and preferred stock redeemed and (3) elimination of historical shareholders’ deficit:
		Deferred tax assets		$	(2,909	)
		Property and equipment			2,843
		Contract rights and other intangible assets			94,718
		Goodwill and intangible assets with indefinite lives			83,283
		Deferred financing costs			(1,232	)
		Other assets			(160	)
		Accrued liabilities			1,051
		Deferred tax liabilities			(39,132	)
		Long-term liabilities			(1,300	)
		Cash not acquired			(1,659	)
		Liabilities not assumed and preferred stock redeemed:
			— Current liabilities		5,831
			— Long-term liabilities, net of current portion		29,170
			— Preferred stock		64,099
		Elimination of historical shareholders’ deficit			(5,342	)

				$	229,261


e.	Elimination of North America Capital equity upon the acquisition by the company			$	(120,100	)

f.	Acquisition of Macquarie Yorkshire and related indebtedness:
		Investment in unconsolidated business		$	77,548
		Fair value of subordinated loans due from Connect M1-A1 Limited			20,431
		Fair value of loan due to Connect M1-A1 Limited			(18,374	)

				$	79,605


g.	Securities available for sale:
		Investment in MCG		$	70,000

h.	Investment in Macquarie Luxembourg:
		Macquarie Luxembourg		$	37,500


					Three
					Months
		Year Ended			Ended
		December 31,			March 31,
		2003			2004

A.	Additional amortization expense of other intangible assets resulting from the acquisition of MAPC, which will be amortized over 2 to 20 years	$	919		$	230

B.	Adjustment to deferred financing cost amortization relating to Macquarie Parking	$	(1,617	)	$	(155	)

C.	Additional depreciation expense resulting from acquisition of Macquarie Parking, which will be amortized over 20 years	$	33		$	8



			Year Ended December 31,						Three Months Ended March 31,

			2002			2003			2003			2004


			($ in thousands)
Statement of Operations Data:
Revenue:
	Fuel revenue		$	49,893		$	57,697		$	13,352		$	18,023
	Non-fuel revenue			18,698			20,720			5,384			6,681

		Total revenue		68,591			78,417			18,736			24,704
Cost of revenue:
	Cost of revenue — fuel			(22,250	)		(27,135	)		(6,772	)		(9,170	)
	Cost of revenue — non-fuel			(3,391	)		(4,253	)		(945	)		(1,392	)

		Gross profit		42,950			47,029			11,019			14,142
Selling, general and administrative expense				(26,247	)		(27,303	)		(7,077	)		(8,759	)
Depreciation				(1,852	)		(2,126	)		(508	)		(535	)
Amortization				(1,471	)		(1,395	)		(350	)		(366	)

Operating income:				13,380			16,205			3,084			4,482
	Interest income			63			71			26			17
	Interest expense			(5,351	)		(4,820	)		(1,236	)		(1,127	)
	Other expense			—			(1,219	)		(24	)		(5,201	)

Income (loss) from continuing operations before income tax provision				8,092			10,237			1,850			(1,829	)
(Provision) benefit for income taxes				(3,150	)		(4,192	)		(748	)		732

Income (loss) from continuing operations				4,942			6,045			1,102			(1,097	)
Discontinued operations:
	Income (Loss) from operations of discontinued operations			197			121			(70	)		—
	Loss on disposal of discontinued operations			(11,620	)		(435	)		—			—

Loss from discontinued operations (net of applicable income tax provisions)				(11,423	)		(314	)		(70	)		—

Net income (loss)			$	(6,481	)	$	5,731		$	1,032		$	(1,097	)

Cash Flow Data:
Cash provided by operating activities			$	9,608		$	9,811		$	4,475		$	4,720
Cash (used in) investing activities				(2,787	)		(4,648	)		(723	)		(884	)
Cash (used in) financing activities				(5,012	)		(5,956	)		(3,897	)		(4,615	)

Net increase (decrease) in cash			$	1,809		$	(793	)	$	(145	)	$	(779	)


					Predecessor			Successor
		Predecessor			January 1,			July 23,			Combined						Three Months Ended
		Year Ended			2002 to			2002 to			Year Ended			Year Ended			March 31,
		December 31,			December 18,			December 31,			December 31,			December 31,
		2001			2002			2002(2)			2002			2003(3)			2003			2004(3)


		($ in thousands)
Statement of Operations Data:
Revenue		$	20,541		$	20,524		$	525		$	21,049		$	26,291		$	4,226		$	12,156
Direct expenses(1)			(15,773	)		(15,095	)		(458	)		(15,553	)		(19,236	)		(3,306	)		(8,400	)

			4,768			5,429			67			5,496			7,055			920			3,756
Selling, general and administrative expenses			(1,084	)		(1,219	)		(563	)		(1,782	)		(1,749	)		(140	)		(916	)
Amortization of intangibles			(484	)		(26	)		(60	)		(86	)		(3,576	)		(666	)		(781	)

Operating income			3,200			4,184			(556	)		3,628			1,730			114			2,059
	Interest income		—			—			1			1			21			7			0
	Interest expense		(7,227	)		(10,921	)		(104	)		(11,025	)		(8,281	)		(700	)		(1,971	)
	Other expense		(15	)		—			(1	)		(1	)		—			—			—
	Other income		—			10			—			10			10			—			—

Income (loss) before income taxes and minority interests			(4,042	)		(6,727	)		(660	)		(7,387	)		(6,520	)		(579	)		88
Income tax (expense) benefit			—			—			—			—			—			—			—
Minority interest in (income) loss of consolidated subsidiaries			—			—			24			24			1,520			23			(27	)

Net income (loss)		$	(4,042	)	$	(6,727	)	$	(636	)	$	(7,363	)	$	(5,000	)	$	(556	)	$	61


(1) Includes depreciation expense of		$	1,949		$	1,854		$	36		$	1,890		$	1,343		$	251		$	559

(2) Established on July 23, 2002, operations commenced on December 19, 2002 with the acquisition of the predecessor.
(3) Includes Avistar, which as acquired on October 1, 2003.


							Nine Months			Three Months
	Year Ended March 31,						Ended			Ended
							December 31,			March 31,
	2002			2003			2003			2004


	(£ in thousands)
Statement of Operations Data:
Revenue		£46,051			£45,267			£35,090			£11,115
Costs of revenue(1)		(10,892	)		(11,404	)		(9,570	)		(2,912	)

Gross margin		35,159			33,863			25,520			8,203
General and administrative expenses		(1,264	)		(1,245	)		(814	)		(598	)

Operating income		33,895			32,618			24,706			7,605
Interest expense		(26,741	)		(22,168	)		(15,277	)		(5,072	)
Interest income		1,539			1,772			1,172			466
Income (loss) from interest rate swaps		(2,245	)		(15,260	)		1,760			(163	)
Income tax expense (benefit)		1,899			(925	)		3,197			975

Net income (loss)		£4,549			£(2,113	)		£9,164			£1,861

Cash Flow Data:
Cash provided by (used in) operating activities		£16,004			£16,152			£17,181			£(1,030	)
Cash provided by (used in) investing activities		(21,294	)		10,261			(19	)		(1,220	)
Cash provided by (used in) financing activities		6,500			(27,072	)		(8,250	)		(7,075	)

Net increase (decrease) in cash and cash equivalents		£1,210			£(659	)		£8,912			£(9,325	)


(1) Includes depreciation expense of:		£9,201			£9,508			£7,389			£2,401


	Three Months Ended March 31, 2004 as Compared to Three Months Ended March 31, 2003


	Selling, General and Administrative Expenses and Operating Income


	Year Ended December 31, 2003 as Compared to Year Ended December 31, 2002


	Direct Expenses, Selling, General and Administrative and Operating Income


	Year Ended December 31, 2002 as Compared to Year Ended December 31, 2001


	Nine Months Ended December 31, 2003 and Year Ended March 31, 2004 as Compared to Year Ended March 31, 2003.


											Change —
											Year Ended
											March 31, 2003
									Combined		Compared to
				Nine Months		Three Months			12 Months		Combined
	Year Ended			Ended		Ended			Ended		12 Months
	March 31,			December 31,		March 31,			March 31,		Ended
	2003			2003		2004			2004		March 31, 2004


	(£ in thousands)
Revenue		£45,267			£35,090		£11,115			£46,205		2.1	%
Cost of revenue(1)		11,404			9,570		2,912			12,482		9.5	%
General and administrative expense		1,245			814		598			1,412		13.4	%

Operating income		32,618			24,706		7,605			32,311		—
Net interest expense		20,396			14,105		4,606			18,711		(8.3	)%
Income (loss) on interest rate swaps		(15,260	)		1,760		(163	)		1,597

Income (loss) before income taxes		(3,038	)		12,361		2,836			15,197
Income tax expense (benefit)		(925	)		3,197		975			4,172

Net income (loss)		£(2,113	)		£9,164		£1,861			£11,025


(1) Includes depreciation expense of:		£9,508			£7,389		£2,401			£9,790


	Cost of Revenue, General and Administrative Expense and Operating Income


	Year Ended March 31, 2003 as Compared to Year Ended March 31, 2002


	*Atlantic and Macquarie Parking Cash Flow provided by Operations*


	Year Ended			Three Months Ended
	December 31, 2003			March 31, 2004


	($ in thousands)
Atlantic		(4,648	)		(884	)
Macquarie Parking		(67,138	)		(119	)


Amount outstanding at drawdown		Tranche A $25 million Tranche B $105 million
Term		7 years
Amortization		Tranche A amortizes. Tranche B is payable at maturity.
Interest rate type		Floating
Interest rate base		LIBOR
Interest rate margin		Tranche A — 2.25% Tranche B — 3.0%
Interest rate hedging		Required
Debt service reserve		Six month debt service reserve
Cash sweep		Year 1 — no cash sweep Year 2, 3, 4 — cash sweep if debt service coverage is less than 1.5 times Year 5, 6, 7 — cash sweep if debt service coverage is less than 1.6 times


Loan	Loan 1	Loan 2

Amount outstanding as of March 31, 2004	$126.0 million	$4.6 million
Term	3 years (September 2006)	5 years (January 2009)
Extension options	Two 1 year extensions subject to meeting certain covenants	None
Interest and principal repayments	Interest only during term of the loan. Repayment of principal at maturity.	Monthly payment of interest and principal of $28,675. Repayment of remaining principal at maturity.
Interest rate type	Floating	Fixed
Interest rate base	1 month LIBOR	N/A
Interest rate margin	1-3 years: 3.44%	5.3%
	4th year: 3.54%
	5th year: 3.69%
Interest rate cap	1 month LIBOR cap of 4.5% out to 3 years for a notional amount of $126.0 million	N/A
Debt reserves	Various reserves totaling $5.3 million, currently fully funded	None
Lock-up/cash sweeps	None	None


	Senior Subordinated Loan	Junior Subordinated Loan

Outstanding balance as of March 31, 2004	£5 million	£2.85 million
Interest rate	U.K. LIBOR + 4% per year payable semiannually (minimum 6% per year)	15% per year payable semiannually
Redemption premium	65% of principal repayments
Maturity	September 30, 2016	March 26, 2020
Repayment schedule	Semiannually from March 31, 2005. Payable during year ended December 31,	Repayment at maturity
	2005-2006 £200,000
	2007-2011 £300,000
	2012-2015 £600,000
	2016 £700,000