-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qeqvfang3ivgl3ZNKT7EyJG1usdGqeadwEmx1bLQxt2hLatbezZUNd7Nw2HDLz4d 6Ewe1lkXD78xnlxZNgENSw== 0001021408-01-511400.txt : 20020413 0001021408-01-511400.hdr.sgml : 20020413 ACCESSION NUMBER: 0001021408-01-511400 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20011031 FILED AS OF DATE: 20011214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUGHES SUPPLY INC CENTRAL INDEX KEY: 0000049029 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRICAL APPARATUS & EQUIPMENT, WIRING SUPPLIES [5063] IRS NUMBER: 590559446 STATE OF INCORPORATION: FL FISCAL YEAR END: 0125 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08772 FILM NUMBER: 1813972 BUSINESS ADDRESS: STREET 1: 20 N ORANGE AVE, STE 200 STREET 2: P O BOX 2273 CITY: ORLANDO STATE: FL ZIP: 32802-2273 BUSINESS PHONE: 4078414755 10-Q 1 d10q.txt OCTOBER 31 FORM 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 2001 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number 001-08772 HUGHES SUPPLY, INC. (Exact name of registrant as specified in its charter) Florida 59-0559446 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 20 North Orange Avenue Suite 200 Orlando, Florida 32801 (Address of principal executive offices) (407) 841-4755 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock Outstanding as of December 10, 2001 ------------ ----------------------------------- $1 Par Value 23,560,131 HUGHES SUPPLY, INC. FORM 10-Q INDEX
Page(s) ------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of October 31, 2001 (unaudited) and January 26, 2001........................................................................ 3 Consolidated Statements of Income for the Three Months Ended October 31, 2001 and 2000 (unaudited)....................................................... 4 Consolidated Statements of Income for the Nine Months Ended October 31, 2001 and 2000 (unaudited)....................................................... 5 Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2001 and 2000 (unaudited)....................................................... 6 Notes to Consolidated Financial Statements (unaudited)...................................... 7 - 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................................................... 10 - 15 Item 3. Quantitative and Qualitative Disclosures about Market Risk.................................. 16 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K............................................................ 17 SIGNATURES............................................................................................... 18
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements HUGHES SUPPLY, INC. Consolidated Balance Sheets (in thousands, except share and per share data)
October 31, 2001 January 26, (unaudited) 2001 ----------- ----------- Assets Current Assets: Cash and cash equivalents......................................................... $ 13,619 $ 22,449 Accounts receivable, less allowance for doubtful accounts of $9,555 and $6,106.... 443,126 431,998 Inventories....................................................................... 396,626 441,789 Deferred income taxes............................................................. 17,083 18,524 Other current assets.............................................................. 40,758 66,131 ---------- ---------- Total current assets............................................................ 911,212 980,891 Property and Equipment, Net........................................................ 140,944 152,079 Excess of Cost Over Net Assets Acquired............................................ 267,598 249,826 Other Assets....................................................................... 19,390 17,481 ---------- ---------- $1,339,144 $1,400,277 ========== ========== Liabilities and Shareholders' Equity Current Liabilities: Current portion of long-term debt................................................. $ 21,692 $ 15,274 Accounts payable.................................................................. 207,644 215,353 Accrued compensation and benefits................................................. 39,364 32,762 Other current liabilities......................................................... 53,203 38,372 ---------- ---------- Total current liabilities....................................................... 321,903 301,761 Long-Term Debt..................................................................... 415,216 516,168 Deferred Income Taxes.............................................................. 6,068 6,704 Other Noncurrent Liabilities....................................................... 5,985 5,609 ---------- ---------- Total liabilities............................................................... 749,172 830,242 ---------- ---------- Commitments and Contingencies Shareholders' Equity: Preferred stock, no par value; 10,000,000 shares authorized; none issued.......... -- -- Common stock, par value $1 per share; 100,000,000 shares authorized; 23,723,350 and 24,211,485 shares issued.................................................... 23,723 24,211 Capital in excess of par value.................................................... 215,288 228,103 Retained earnings................................................................. 364,101 337,149 Treasury stock, 167,000 and 576,783 shares, at cost............................... (3,637) (13,307) Unearned compensation related to outstanding restricted stock..................... (9,503) (6,121) ---------- ---------- Total shareholders' equity...................................................... 589,972 570,035 ---------- ---------- $1,339,144 $1,400,277 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 3 HUGHES SUPPLY, INC. Consolidated Statements of Income (unaudited) (in thousands, except per share data) Three Months Ended October 31, ------------------------------ 2001 2000 -------- -------- Net Sales.................................. $790,042 $863,283 Cost of Sales.............................. 608,254 666,993 -------- -------- Gross Profit............................... 181,788 196,290 -------- -------- Operating Expenses: Selling, general and administrative...... 134,953 144,530 Depreciation and amortization............ 7,680 7,998 Provision for doubtful accounts.......... 2,617 2,045 -------- -------- Total operating expenses................. 145,250 154,573 -------- -------- Operating Income........................... 36,538 41,717 -------- -------- Non-Operating Income (Expenses): Interest and other income................ 2,192 1,508 Interest expense......................... (8,658) (11,290) -------- -------- (6,466) (9,782) -------- -------- Income Before Income Taxes................. 30,072 31,935 Income Taxes............................... 12,330 13,093 -------- -------- Net Income................................. $ 17,742 $ 18,842 ======== ======== Earnings Per Share: Basic.................................... $ 0.77 $ 0.80 ======== ======== Diluted.................................. $ 0.76 $ 0.80 ======== ======== Average Shares Outstanding: Basic.................................... 23,145 23,511 ======== ======== Diluted.................................. 23,356 23,617 ======== ======== Dividends Per Share........................ $ 0.085 $ 0.085 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 4 HUGHES SUPPLY, INC. Consolidated Statements of Income (unaudited) (in thousands, except per share data)
Nine Months Ended October 31, -------------------------------- 2001 2000 ----------- ---------- Net Sales................................. $2,371,508 $2,568,510 Cost of Sales............................. 1,835,035 1,989,103 ---------- ---------- Gross Profit.............................. 536,473 579,407 ---------- ---------- Operating Expenses: Selling, general and administrative...... 420,870 428,919 Depreciation and amortization............ 23,589 23,621 Provision for doubtful accounts.......... 6,966 5,157 ---------- ---------- Total operating expenses................ 451,425 457,697 ---------- ---------- Operating Income.......................... 85,048 121,710 ---------- ---------- Non-Operating Income (Expenses): Interest and other income................ 8,687 4,702 Interest expense......................... (27,928) (32,146) ---------- ---------- (19,241) (27,444) ---------- ---------- Income Before Income Taxes................ 65,807 94,266 Income Taxes.............................. 26,981 38,649 ---------- ---------- Net Income................................ $ 38,826 $ 55,617 ========== ========== Earnings Per Share: Basic................................... $ 1.67 $ 2.38 ========== ========== Diluted................................. $ 1.66 $ 2.38 ========== ========== Average Shares Outstanding: Basic................................... 23,204 23,323 ========== ========== Diluted................................. 23,397 23,413 ========== ========== Dividends Per Share....................... $ 0.255 $ 0.255 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 5 HUGHES SUPPLY, INC. Consolidated Statements of Cash Flows (unaudited) (in thousands)
Nine Months Ended October 31, ----------------------------- 2001 2000 -------- -------- Cash Flows from Operating Activities: Net income........................................... $ 38,826 $ 55,617 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization....................... 23,589 23,621 Provision for doubtful accounts..................... 6,966 5,157 Deferred income taxes............................... 975 4,209 Other............................................... (269) 3,981 Changes in assets and liabilities, net of businesses acquired: Accounts receivable................................. (4,579) (87,566) Inventories......................................... 54,744 20,885 Other current assets................................ 3,865 9,498 Other assets........................................ (2,978) (1,272) Accounts payable.................................... (13,902) (24,816) Accrued compensation and benefits................... 5,653 5,629 Other current liabilities........................... 14,141 19,386 Other noncurrent liabilities........................ 376 174 -------- -------- Net cash provided by operating activities....................................... 127,407 34,503 --------- -------- Cash Flows from Investing Activities: Capital expenditures................................ (11,770) (19,136) Proceeds from sale of property and equipment.......................................... 8,150 894 Business acquisitions, net of cash.................. (31,809) (34,111) Investments in affiliated entities.................. -- (5,757) Purchase of bestroute.com stock rights.............. (7,273) -- Collections on note receivable from sale of pool and spa business...................... 22,000 -- --------- -------- Net cash used in investing activities............. (20,702) (58,110) --------- -------- Cash Flows from Financing Activities: Net (payments) borrowings under short-term debt arrangements........................ (89,717) 41,894 Principal payments on acquired debt and other debt.. (8,684) (2,924) Principal payments on senior notes.................. (4,667) -- Purchase of treasury shares......................... (7,537) -- Dividends paid...................................... (6,076) (6,078) Other............................................... 1,146 205 --------- -------- Net cash (used in) provided by financing activities............................ (115,535) 33,097 --------- -------- Net (Decrease) Increase in Cash and Cash Equivalents................................... (8,830) 9,490 Cash and Cash Equivalents: Beginning of period................................. 22,449 10,000 --------- -------- End of period....................................... $ 13,619 $ 19,490 ========= ========
The accompanying notes are an integral part of these consolidated financial statements. 6 HUGHES SUPPLY, INC. Notes to Consolidated Financial Statements (unaudited) (in thousands, except share and per share data) 1. Basis of Presentation In the opinion of Hughes Supply, Inc. (the "Company"), the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of October 31, 2001, the results of operations for the three and nine months ended October 31, 2001 and 2000, and cash flows for the nine months ended October 31, 2001 and 2000. The results of operations for the periods presented are not necessarily indicative of the trends or results that may be expected for the full year. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended January 26, 2001, as filed with the Securities and Exchange Commission. The fiscal year of the Company is a 52-week period ending on the last Friday in January. The three and nine months ended October 31, 2001 and 2000 each contained 13 and 26 weeks, respectively. Certain prior year amounts in the consolidated financial statements have been reclassified to conform to current year presentation. These reclassifications had no impact on previously reported results of operations. 2. Earnings Per Share Basic earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding. Diluted earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding, adjusted for dilutive potential common shares. The weighted- average number of shares used in calculating basic earnings per share were 23,144,812 and 23,511,308 for the three months ended October 31, 2001 and 2000, respectively, and 23,203,706 and 23,322,932 for the nine months ended October 31, 2001 and 2000, respectively. In calculating diluted earnings per share, these amounts were adjusted to include dilutive potential common shares of 211,686 and 105,221 for the three months ended October 31, 2001 and 2000, respectively, and 193,252 and 90,515 for the nine months ended October 31, 2001 and 2000, respectively. The Company's dilutive potential common shares consist of employee and director stock options, restricted stock and stock rights issued in connection with the acquisition of bestroute.com ("bestroute") in fiscal 2001. Stock options and restricted stock totaling 266,114 and 552,214 shares in the three months ended October 31, 2001 and 2000, respectively, and 394,373 and 1,197,990 shares in the nine months ended October 31, 2001 and 2000, respectively, were not included in the computation of diluted earnings per share because their effect would have been anti- dilutive. 3. Bestroute On March 2, 2001, in connection with the closure of bestroute, one of the Company's e-commerce ventures, the Company entered into an agreement with the holders of 723,183 of the Company's stock rights originally issued as consideration for the bestroute acquisition. This agreement canceled 347,541 of the stock rights and enabled the remaining stock rights to be redeemed for $7,273 in cash. For the nine months ended October 31, 2001, the Company recorded a loss before income taxes of $2,776 for bestroute, including $1,542 of closure costs primarily related to employee severance pay and termination fees on certain agreements. The remaining $1,234 of the loss related to bestroute's loss from operations through the date of its closure. 4. Long-Term Debt On May 31, 2001, the Company executed an amendment to its $75,000 line of credit agreement, which extended the maturity date from July 17, 2001 to January 14, 2002. There were no amounts outstanding under this agreement at October 31, 2001. 5. Employee Benefit Plans During fiscal 2002, the Company granted certain key employees 410,000 restricted shares in accordance with a stock performance award under the 1997 Executive Stock Plan (collectively, the "Performance Plan"). Pursuant to the 7 Performance Plan, the shares will be awarded in five separate tranches as the Company achieves certain stock price levels. During the nine months ended October 31, 2001, three of the award levels were reached and 246,000 shares were issued pursuant to the Performance Plan. The shares vest five years from the award date, and are subject to certain other vesting and forfeiture provisions contained in the Performance Plan. On the date of these awards, the market value of the restricted shares was $5,670. This amount was recorded as unearned compensation, a component of shareholders' equity, and is being charged to expense over the respective vesting periods. 6. Commitments and Contingencies On June 22, 2001, the Company entered into a synthetic lease agreement and related documents with Atlantic Financial Group, Ltd (the "Lessor), certain financial parties as lenders, and SunTrust Bank as agent ("SunTrust") in which the Lessor and SunTrust agreed to fund up to $40,000 for the acquisition and development of real property projects chosen by the Company, including the Company's new corporate headquarters building in Orlando, Florida (the cost of which is estimated at $25,000). The term of this agreement is five years, which includes the construction period and a lease period. Lease payments will begin at the earlier of the completion of construction (which is expected in April 2003) or eighteen months following the acquisition of a property financed through the synthetic lease. Under the terms of the lease agreement, rent payments are interest only at a one month LIBOR rate plus applicable credit spreads (currently estimated to be 150 basis points). At the end of the lease term, the Company has the option to renew the lease for up to two additional five year periods, or to purchase the building for a price including the outstanding lease balance. If the Company elects not to renew the lease or purchase the building, the Company may elect to remarket the property and arrange the sale of the building to a third party. Under the remarketing option, the Company has guaranteed a percentage of the total original cost as the residual fair value of the building. On June 22, 2001, the Company entered into an operating lease agreement with the Lessor for the construction of a new warehouse in Miami, Florida. The Company anticipates total project costs not to exceed $15,000 with rent payments beginning at the earlier of the completion of construction (which is expected in January 2003) or eighteen months following the acquisition of the property. Under the terms of the lease agreement, rent payments for the first four years are interest only at a rate based on LIBOR plus applicable credit spreads (currently estimated to be 150 basis points). Beginning in the fifth year, rents are re-amortized and rates for the remainder of the term increase to 12.5% plus applicable consumer price index adjustments. During the first four years of the lease agreement, the Company may elect to purchase the property for the existing lease balance or convert it into the Company's synthetic lease facility referenced above. 7. Capital Stock On March 15, 1999, the Company's Board of Directors authorized the Company to repurchase up to 2,500,000 shares of its outstanding common stock to be used for general corporate purposes. Since March 15, 1999, the Company has repurchased 1,315,800 shares at an average price of $21.86 per share, of which 394,700 shares at an average price of $19.10 per share were repurchased during the nine months ended October 31, 2001. No shares were repurchased during the nine months ended October 31, 2000. On September 21, 2001, the Company retired 326,854 shares of its common stock previously held in treasury. 8. Segment Information The Company's operations are organized on a product basis into five stand- alone Groups: Electrical; Plumbing/HVAC; Industrial; Building Materials; and Water & Sewer. This is the basis management uses for making operating decisions and assessing performance. Segment information has been presented on a basis consistent with how business activities are reported internally to management. The Electrical Group includes the Company's electrical and electric utility products; the Plumbing/HVAC Group includes the Company's plumbing/HVAC products and its international business; the Industrial Group includes the Company's industrial pipe, valves and fittings products; the Building Materials Group includes the Company's building materials products and maintenance supplies; and the Water & Sewer Group includes the Company's water and sewer, fire protection and concrete products. The "Corporate & Other" category includes corporate level operating expenses not allocated to the Company's operating segments along with revenues and expenses for bestroute. Income before income taxes includes certain corporate expense allocations for employee benefits, interest expense, corporate capital charges, and property/casualty insurance. These allocations are based on consumption or at a standard rate determined by management. 8 The following table presents net sales and other financial information by Group for the three and nine months ended October 31, 2001 and 2000:
Plumbing/ Building Water & Corporate Electrical HVAC/(1)/ Industrial Materials/(1)/ Sewer & Other Consolidated ---------- ---------- ---------- -------------- --------- --------- ------------ Three Months Ended October 31: Net Sales 2001........................ $146,016 $227,018 $ 82,996 $ 76,431 $257,581 $ -- $ 790,042 2000........................ 159,268 267,250 79,080 103,399 254,279 7 863,283 Gross Profit 2001........................ 28,312 53,382 20,730 24,680 54,684 -- 181,788 2000........................ 30,278 62,128 21,059 30,181 52,643 1 196,290 Income Before Income Taxes 2001........................ 7,064 3,659 5,294 6,134 13,950 (6,029) 30,072 2000........................ 7,248 5,513 5,259 3,624 15,644 (5,353) 31,935 Nine Months Ended October 31: Net Sales 2001........................ 448,677 698,801 254,386 231,125 738,436 83 2,371,508 2000........................ 455,048 811,523 235,681 331,886 734,365 7 2,568,510 Gross Profit 2001........................ 85,820 164,506 63,353 69,730 153,055 9 536,473 2000........................ 88,283 184,792 64,678 93,184 148,469 1 579,407 Income Before Income Taxes 2001........................ 20,014 12,263 15,474 11,387 34,589 (27,920) 65,807 2000........................ 21,381 15,871 17,289 16,168 40,408 (16,851) 94,266
/(1)/ Results of operations for the pool and spa business, which was sold in January 2001, were included in the Plumbing/HVAC and Building Materials Groups for the three and nine months ended October 31, 2000. 9 PART I. FINANCIAL INFORMATION -- Continued HUGHES SUPPLY, INC. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following is management's discussion and analysis of certain significant factors which have affected the financial condition of the Company as of October 31, 2001, and the results of operations for the three and nine months then ended. This information should be read in conjunction with the Company's consolidated financial statements and the notes thereto contained herein and in the Company's Annual Report on Form 10-K for the year ended January 26, 2001. Forward-Looking Statements Certain statements set forth in this report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by such sections. When used in this report, the words "believe," "anticipate," "estimate," "expect," "may," "will," "should," "plan," "intend," "potential," "predict," "forecast," and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. The Company's actual results may differ significantly from the results discussed in such forward-looking statements. When appropriate, certain factors which may cause results to differ materially from those projected in the forward-looking statements are enumerated. Material Changes in Results of Operations Net Sales Net sales for the quarter ended October 31, 2001 decreased $73.2 million or 8% compared to the prior year's third quarter. Approximately $33.4 million or 46% of the decrease was attributable to the divestiture of the Company's pool and spa business. Of the $33.4 million, approximately $5.7 million and $27.7 million related to the Plumbing/HVAC Group and Building Materials Group, respectively. Same-store sales for the current quarter decreased $65.3 million or 8% compared to the prior year's third quarter and lost sales from closed branches totaled $2.4 million. These net sales decreases were partially offset by an increase in net sales of $27.9 million attributable to branches acquired or opened after January 31, 2000. Net sales for the nine months ended October 31, 2001 decreased $197.0 million or 8% compared to the prior fiscal year's first nine months. Approximately $127.2 million or 65% of the decrease was attributable to the divestiture of the Company's pool and spa business. Of the $127.2 million, approximately $23.9 million and $103.3 million related to the Plumbing/HVAC Group and Building Materials Group, respectively. Same-store sales for the nine months ended decreased $122.6 million or 5% compared to the prior fiscal year's first nine months and lost sales from closed branches totaled $11.2 million. These net sales decreases are partially offset by an increase in net sales of $64.0 million attributable to branches acquired or opened after January 31, 2000. Consolidated and same-store sales by Group for the three and nine months ended October 31, 2001 and 2000 were as follows (dollars in thousands):
Consolidated Sales Same-Store Sales --------------------------------------- ---------------------------------- Three Months Ended October 31, Three Months Ended October 31, --------------------------------------- ---------------------------------- Percent Percent 2001 2000 Variance 2001 2000 Variance -------- -------- ---------- --------- -------- ---------- Electrical.................... $146,016 $159,268 (8%) $144,749 $157,109 (8%) Plumbing/HVAC................. 227,018 267,250 (15%) 225,876 259,200 (13%) Industrial.................... 82,996 79,080 5% 82,996 79,080 5% Building Materials............ 76,431 103,399 (26%) 73,476 75,093 (2%) Water & Sewer................. 257,581 254,279 1% 228,610 250,491 (9%) Corporate & Other............. -- 7 (100%) -- -- -- -------- -------- -------- -------- Consolidated.................. $790,042 $863,283 (8%) $755,707 $820,973 (8%) ======== ======== ===== ======== ======== ====
10
Consolidated Sales Same-Store Sales --------------------------------------- ---------------------------------- Nine Months Ended October 31, Nine Months Ended October 31, --------------------------------------- ---------------------------------- Percent Percent 2001 2000 Variance 2001 2000 Variance ---------- ---------- ---------- ----------- ----------- ---------- Electrical....................... $ 448,677 $ 455,048 (1%) $ 444,917 $ 449,943 (1%) Plumbing/HVAC.................... 698,801 811,523 (14%) 695,876 777,655 (11%) Industrial....................... 254,386 235,681 8% 254,386 235,680 8% Building Materials............... 231,125 331,886 (30%) 221,870 228,034 (3%) Water & Sewer.................... 738,436 734,365 1% 682,227 730,577 (7%) Corporate & Other................ 83 7 1,086% -- -- -- ---------- ---------- ---------- ---------- Consolidated..................... $2,371,508 $2,568,510 (8%) $2,299,276 $2,421,889 (5%) ========== ========== ====== ========== ========== ====
The following sets forth factors impacting same-store sales for the Company's operating Groups: Electrical Same-store sales decreased $12.4 million or 8% and $5.0 million or 1% for the three and nine months ended October 31, 2001, respectively, compared to the same periods in the prior year. The same-store sales decreases were primarily attributable to a general slowdown in the U.S. economy combined with the completion of several infrastructure projects in fiscal 2001 with no corresponding activity in the current year. These decreases were partially offset from strong commercial activity in the Houston, Texas market and from increased sales of utility products in the Illinois market. Plumbing/HVAC Same-store sales decreased $33.3 million or 13% and $81.8 million or 11% for the three and nine months ended October 31, 2001, respectively, compared to the same periods in the prior year. These decreases were due to slower construction activity in the Arizona, Colorado, North Carolina and Texas markets. Sales performance in fiscal 2002 was further impacted by a slowdown in international business resulting from the completion of a large oil and gas pipeline project in fiscal 2001 with no corresponding activity in fiscal 2002. Net sales for the Company's international business decreased $6.8 million and $13.1 million, respectively, for the three and nine months ended October 31, 2001 as compared to same periods in the prior year. Industrial Same-store sales increased $3.9 million or 5% and $18.7 million or 8% for the three and nine months ended October 31, 2001, respectively, compared to the same periods in the prior year. These increases were primarily attributable to strong sales to customers in the chemical, petrochemical, power generation and gas utility industries. Same-store sales were also favorably impacted by several large petrochemical plant rehabilitation and energy and power plant installation projects in the Texas market. Additional sales related to these projects are expected through the end of fiscal 2002. The same-store sales increases for both the three and nine-month periods were partially offset by declining prices for certain commodity-based products, including stainless steel and nickel alloys. Building Materials Same-store sales decreased $1.6 million or 2% and $6.2 million or 3% for the three and nine months ended October 31, 2001, respectively, compared to the same periods in the prior year. These decreases were primarily attributable to sales of complementary building materials products that were lost as a result of the divestiture of the pool and spa business. Water & Sewer Same-store sales decreased $21.9 million or 9% and $48.4 million or 7% for the three and nine months ended October 31, 2001, respectively, compared to the same periods in the prior year. These decreases were primarily attributable to the completion of several large infrastructure projects for municipalities with less activity in the current year, declining commodity prices for certain PVC and domestic steel products, wet weather conditions in the Texas market, and slower construction activity in the Florida market. 11 Gross Profit and Gross Margin Gross profit and gross margin by Group for the three and nine months ended October 31, 2001 and 2000 were as follows (dollars in thousands):
Gross Profit Gross Margin -------------------------------- -------------------------------- Three Months Ended October 31, Three Months Ended October 31, -------------------------------- -------------------------------- Percent Basis Point 2001 2000 Variance 2001 2000 Variance -------- -------- -------- ---- ---- -------- Electrical..................... $ 28,312 $ 30,278 (6%) 19.4% 19.0% 40 Plumbing/HVAC.................. 53,382 62,128 (14%) 23.5% 23.2% 30 Industrial..................... 20,730 21,059 (2%) 25.0% 26.6% (160) Building Materials............. 24,680 30,181 (18%) 32.3% 29.2% 310 Water & Sewer.................. 54,684 52,643 4% 21.2% 20.7% 50 Corporate & Other.............. -- 1 (100%) -- 14.3% (1,430) -------- -------- Consolidated................... $181,788 $196,290 (7%) 23.0% 22.7% 30 ======== ======== ==== ==== ==== ====== Gross Profit Gross Margin -------------------------------- -------------------------------- Nine Months Ended October 31, Nine Months Ended October 31, -------------------------------- -------------------------------- Percent Basis Point 2001 2000 Variance 2001 2000 Variance -------- -------- -------- ---- ---- -------- Electrical..................... $ 85,820 $ 88,283 (3%) 19.1% 19.4% (30) Plumbing/HVAC.................. 164,506 184,792 (11%) 23.5% 22.8% 70 Industrial..................... 63,353 64,678 (2%) 24.9% 27.4% (250) Building Materials............. 69,730 93,184 (25%) 30.2% 28.1% 210 Water & Sewer.................. 153,055 148,469 3% 20.7% 20.2% 50 Corporate & Other.............. 9 1 800% 10.8% 14.3% (350) -------- -------- Consolidated................... $536,473 $579,407 (7%) 22.6% 22.6% -- ======== ======== ==== ==== ==== ======
The following sets forth factors impacting gross margins for the Company's operating Groups: Electrical Gross margin increased 40 basis points for the three months ended October 31, 2001, and decreased 30 basis points for the nine months ended October 31, 2001. The increase of 40 basis points for the quarter was primarily attributable to a sales mix that was more heavily weighted towards out of stock sales. The decrease of 30 basis points for the nine-month period was primarily attributable to (i) a sales mix that was more heavily weighted towards utility products, which generally are shipped direct from the manufacturer to the customer and have lower gross margins compared to gross margins as a whole for the Electrical Group, (ii) increased competition in the Florida and Carolina markets, and (iii) declining commodity prices for certain PVC and copper products. Plumbing/HVAC Gross margin increased 30 and 70 basis points for the three and nine months ended October 31, 2001, respectively, compared to the same periods in the prior year. These increases were primarily due to the Company's efforts to improve its margin on certain products and to a decline in lower-margin international business. Industrial Gross margin decreased 160 and 250 basis points for the three and nine months ended October 31, 2001, respectively, compared to the same periods in the prior year. These decreases were primarily attributable to declining prices for certain commodity-based products, including stainless steel and nickel alloys. The Company anticipates prices related to commodity based products to increase in fiscal 2003. Accordingly, gross margins are expected to increase slowly in fiscal 2003 as the inventories purchased during recent price decreases are depleted. Building Materials Gross margin increased 310 and 210 basis points for the three and nine months ended October 31, 2001, respectively, compared to the same periods in the prior year. These increases were primarily attributable to a sales mix that included more higher-margin fabricated products and to the divestiture of the pool and spa business, which generated lower gross margins compared to gross margins as a whole for the Building Materials Group. 12 Water & Sewer Gross margin increased 50 basis points for the three and nine months ended October 31, 2001, compared to the same periods in the prior year. These increases were primarily due to a change in sales mix that resulted from fewer large direct shipment orders, which typically generate lower gross margins, in the Florida and Carolina markets and to the Company's efforts to improve its margin on certain products. Operating Expenses Operating expenses for the three and nine months ended October 31, 2001 and 2000 were as follows (dollars in thousands):
Three Months Ended October 31, Nine Months Ended October 31, --------------------------------- ------------------------------- 2001 2000 Variance 2001 2000 Variance -------- -------- -------- -------- -------- -------- Operating expenses............ $145,250 $154,573 ($9,323) $451,425 $457,697 ($6,272) Percentage of net sales....... 18.4% 17.9% 2.8% 19.0% 17.8% 6.7%
Operating expenses as a percentage of net sales increased to 18.4% and 19.0% for the three and nine months ended October 31, 2001, respectively, compared to 17.9% and 17.8% for the three and nine months ended October 31, 2000. The increases for both periods were a direct result of the lower sales volumes experienced by the Company. Operating expenses decreased $9.3 million and $6.3 million for the three and nine months ended October 31, 2001, respectively, compared to the same periods in the prior year. These decreases were attributable to the Company's efforts to reduce certain variable costs through its cost reduction program and to lower personnel and other costs resulting from the divestiture of the pool and spa business. Operating expenses related to the pool & spa business totaled $6.4 million and $20.0 million, respectively, for the three and nine months ended October 31, 2000. Partially offsetting these decreases is approximately $5.0 million and $12.1 million of operating expenses for the three and nine months ended October 31, 2001, respectively, for new branches acquired and opened after January 31, 2000. In addition, operating expenses for the nine months ended were negatively impacted by (i) employee severance expense resulting from the elimination of certain management and staff positions totaling $2.6 million, of which $1.5 million related to the Company's separation agreement with its former president, which took place in the first quarter of fiscal 2002; (ii) increased employee health insurance costs, and (iii) expenses related to bestroute totaling $2.8 million, including $1.5 million in closure costs primarily related to employee severance pay and termination fees on certain agreements. In recent months, the Company has heightened its focus on controlling costs. These cost control procedures have included a hiring freeze, tightened management of all variable expenses and a reduction of capital spending. The Company will continue to review its operations and identify areas where additional efficiencies may be obtained. Non-Operating Income (Expenses) Interest and other income increased from $1.5 million for the three months ended October 31, 2000 to $2.2 million for the three months ended October 31, 2001. For the nine months ended October 31, 2000 and 2001, interest and other income increased from $4.7 million to $8.7 million, respectively. The increases for both periods were primarily due to (i) prior year non-recurring losses of $0.5 million and $3.7 million for the three and nine months ended October 31, 2000, respectively, related to the Company's equity investment in certain unconsolidated affiliates, and (ii) interest income of $0.1 million and $0.9 million for the three and nine months ended October 31, 2001, respectively, related to a $25.0 million short-term note receivable received in connection with the Company's sale of its pool and spa business. Interest expense decreased from $11.3 million for the three months ended October 31, 2000 to $8.7 million for the three months ended October 31, 2001. For the nine months ended October 31, 2000 and 2001, interest expense decreased from $32.1 million to $27.9 million, respectively. The decreases for both periods were primarily due to lower borrowing levels coupled with reduced interest rates. Net Income Net income was $17.7 million for this year's quarter compared to $18.8 million for the prior year's third quarter, a 6% decrease. For the nine months ended October 31, 2001 and 2000, net income was $38.8 million and $55.6 million, respectively, a decrease of 30%. Diluted earnings per share for the three and nine months ended October 31, 2001 were $0.76 and $1.66, respectively, compared to $0.80 and $2.38 for the three and nine months ended October 31, 2000, respectively. The 13 factors impacting net income and diluted earnings per share have been enumerated above. Liquidity and Capital Resources Working capital decreased $89.8 million to $589.3 million as of October 31, 2001, compared with $679.1 million as of January 26, 2001. The current ratio was 2.8 to 1 and 3.3 to 1 as of October 31, 2001 and January 26, 2001, respectively. The decrease was primarily driven by lower levels of inventories, a decrease in other current assets and increases in accrued interest and accrued taxes. These changes were partially offset by an increase in accounts receivable. The decrease in inventories reflects the Company's efforts to reduce inventory levels to be more in line with current market demand. The decrease in other current assets was primarily attributable to $22.0 million of collections on the note receivable from the Company's sale of its pool and spa business. Accrued interest and accrued taxes increased as a result of the timing of the related payments. The higher level of accounts receivable was primarily attributable to seasonal increases in sales volumes. Net cash provided by operations was $127.4 million and $34.5 million for the nine months ended October 31, 2001 and 2000, respectively. As previously discussed, the Company experienced lower sales volumes during the nine months ended October 31, 2001 compared to the same period in the prior year. As a result of the lower sales volumes, accounts receivable and accounts payable did not increase as much compared to the prior year's first nine months and inventory levels, excluding business acquisitions, were reduced by $54.7 million during the nine months ended October 31, 2001. The Company's expenditures for property and equipment were $11.8 million and $19.1 million for the nine months ended October 31, 2001 and 2000, respectively. The Company continues to closely monitor and control capital expenditures, and instituted a freeze on new building projects during the first nine months of fiscal 2002. Capital expenditures, excluding amounts for business acquisitions, are expected to be between $15 and $16 million in fiscal 2002. Proceeds from the sale of property and equipment were $8.2 million and $0.9 million for the nine months ended October 31, 2001 and 2000, respectively. This increase was primarily due to the sale and subsequent lease-back of substantially all of the Company's forklift fleet and certain of the Company's trailers in August 2001, which generated proceeds of $5.7 million and sales of certain of the Company's land and buildings related to its closed branches. Cash payments for business acquisitions totaled $31.8 million for the nine months ended October 31, 2001 compared to $34.1 million for the nine months ended October 31, 2000. Net payments on the Company's revolving credit agreement were $89.7 million for the nine months ended October 31, 2001, compared to net borrowings of $41.9 million for the nine months ended October 31, 2000. Principal reductions on long-term debt were $13.4 million for the nine months ended October 31, 2001, of which $8.7 million related to the repayment of debt assumed as a result of certain business acquisitions and $4.7 million related to payments on the Company's $98.0 million senior notes due 2011. The Company expects principal payments on senior notes to be $4.7 million in the fourth quarter of fiscal 2002. Long-term debt was $415.2 million and $516.2 million at October 31, 2001 and January 26, 2001, respectively, a decrease of $101.0 million. As a percentage of total capitalization, long-term debt was 41% at October 31, 2001 compared to 48% at January 26, 2001. Cash provided by operations and collections on the note receivable from the sale of the pool and spa business were used to reduce the Company's long-term debt during the nine months ended October 31, 2001. On May 31, 2001, the Company executed an amendment to its $75.0 million line of credit agreement, which extended the maturity date from July 17, 2001 to January 14, 2002. There were no amounts outstanding under this agreement at October 31, 2001. The Company anticipates amending its line of credit agreement in order to extend the maturity date in the near term. On June 22, 2001, the Company entered into a synthetic lease agreement and related documents with Atlantic Financial Group, Ltd (the "Lessor), certain financial parties as lenders, and SunTrust Bank as agent ("SunTrust") in which the Lessor and SunTrust agreed to fund up to $40.0 million for the acquisition and development of real property projects chosen by the Company, including the Company's new corporate headquarters building in Orlando, Florida (the cost of which is estimated at $25.0 million). The term of this agreement is five years, which includes the construction period and a lease period. Lease payments will begin at the earlier of the completion of construction (which is expected in April 2003) or eighteen months following the acquisition of a property financed through the synthetic lease. Under the terms of the lease agreement, rent payments are interest only at a one month LIBOR rate plus applicable credit spreads (currently estimated to be 150 basis points). At the end of the lease term, the Company has the option to renew the lease for up to two additional five year periods, or to purchase the building for a price including the outstanding lease balance. If the Company elects not to renew the lease or purchase the building, the Company may elect to remarket the property and arrange the sale of the building to a third party. Under the remarketing option, the Company has guaranteed a percentage of the total original cost as the residual fair value of the building. 14 On June 22, 2001, the Company entered into an operating lease agreement with the Lessor for the construction of a new warehouse in Miami, Florida. The Company anticipates total project costs not to exceed $15.0 million with rent payments beginning at the earlier of the completion of construction (which is expected in January 2003) or eighteen months following the acquisition of the property. Under the terms of the lease agreement, rent payments for the first four years are interest only at a rate based on LIBOR plus applicable credit spreads (currently estimated to be 150 basis points). Beginning in the fifth year, rents are re-amortized and rates for the remainder of the term increase to 12.5% plus applicable consumer price index adjustments. During the first four years of the lease agreement, the Company may elect to purchase the property for the existing lease balance or convert it into the Company's synthetic lease facility referenced above. As of October 31, 2001, the Company had approximately $13.6 million of cash and $311.6 million of unused borrowing capacity (subject to borrowing limitations under long-term debt covenants) to fund ongoing operating requirements and anticipated capital expenditures. The Company believes it has sufficient borrowing capacity and cash on hand to take advantage of growth and business opportunities in the near term. The Company expects to continue to finance future expansion on a project-by-project basis through additional borrowing or through the issuance of common stock. On March 15, 1999, the Company's Board of Directors authorized the Company to repurchase up to 2,500,000 shares of its outstanding common stock to be used for general corporate purposes. Since March 15, 1999, the Company has repurchased 1,315,800 shares at an average price of $21.86 per share, of which 394,700 shares at an average price of $19.10 per share were repurchased during the nine months ended October 31, 2001. No shares were repurchased during the nine months ended October 31, 2000. On September 21, 2001, the Company retired 326,854 shares of its common stock previously held in treasury. Dividend payments totaled $6.1 million during the nine months ended October 31, 2001 and 2000. On March 2, 2001, in connection with the closure of bestroute, one of the Company's e-commerce ventures, the Company entered into an agreement with the holders of 723,183 of the Company's stock rights originally issued as consideration for the bestroute acquisition. This agreement canceled 347,541 of the stock rights and the remaining stock rights were redeemed for $7.3 million in cash. Recent Accounting Pronouncements Effective in February 2001, the Company adopted Statement of Financial Accounting Standards ("FAS") No. 133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133"). FAS 133 was amended by FAS No. 138, Accounting for Certain Derivative Instruments and Hedging Activities ("FAS 138"). Both FAS 133 and FAS 138 require that an entity record all derivatives as either assets or liabilities in the balance sheet at fair value. The adoption of these standards did not have a material impact on the Company's consolidated financial statements. FAS No. 141, Business Combinations ("FAS 141") and FAS No. 142, Goodwill and Other Intangible Assets ("FAS 142"), were issued in July 2001. FAS 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. FAS 141 also specifies the criteria which must be met in order for certain acquired intangible assets to be recorded separately from goodwill. FAS 142 is effective for the Company beginning with the Company's first quarter of fiscal 2003. Under FAS 142, goodwill and intangible assets with indefinite useful lives will no longer be amortized but rather will be tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill and intangible assets acquired after June 30, 2001 will be subject immediately to the provisions of FAS 142. Goodwill is currently being amortized at approximately $9.5 million annually. The Company is currently evaluating the provisions of FAS 142 and has not yet determined the effect that adoption of this standard will have on its consolidated financial statements. FAS No. 143, Accounting for Asset Retirement Obligations ("FAS 143") was issued in June 2001. FAS 143, which is effective for the Company beginning in fiscal 2004, addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Company does not expect the adoption of FAS 143 to have a material impact on its consolidated financial statements. FAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("FAS 144") was issued in August 2001. FAS 144, which is effective beginning with the Company's first quarter of fiscal 2003, establishes a single accounting model for long-lived assets to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions. The Company does not expect the adoption of FAS 144 to have a material impact on its consolidated financial statements. 15 PART I. FINANCIAL INFORMATION -- Continued HUGHES SUPPLY, INC. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company is exposed to market risk from changes in interest rates on outstanding variable-rate debt and from changes in the prices of certain of its products that result from commodity price fluctuations. Interest Rate Risk At October 31, 2001, the Company had approximately $63.4 million of outstanding variable-rate debt. Based upon a hypothetical 10% increase or decrease in interest rates from their October 31, 2001 levels, the market risk with respect to the Company's variable-rate debt would not be material. The Company manages its interest rate risk by maintaining a combination of fixed-rate and variable- rate debt. Commodity Price Risk The Company is affected by price fluctuations in stainless steel, nickel alloy, copper, aluminum, plastic, lumber and other commodities. Such commodity price fluctuations have from time to time created cyclicality in the financial performance of the Company and could continue to do so in the future. The Company seeks to minimize the effects of commodity price fluctuations through economies of purchasing and inventory management resulting in cost reductions and productivity improvements as well as price increases to maintain reasonable profit margins. The Company also believes its diversified product offering reduces the impact of commodity price fluctuations. 16 PART II. OTHER INFORMATION HUGHES SUPPLY, INC. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 10.14 - Master Lease Agreement, dated as of June 22, 2001 between Atlantic Financial Group, Ltd, as Lessor and Hughes Supply, Inc. and Certain Subsidiaries of Hughes Supply, Inc., as Lessees - Synthetic Lease Exhibit 10.14 (a) - Loan Agreement, dated as of June 22, 2001 among Atlantic Financial Group, Ltd, as Lessor and Borrower, the financial institutions party hereto as Lenders and SunTrust Bank, as Agent - Synthetic Lease Exhibit 10.14 (b) - Construction Agency Agreement, dated as of June 22, 2001 among Atlantic Financial Group, Ltd, and Hughes Supply, Inc. as Construction Agent - Synthetic Lease Exhibit 10.14 (c) - Guaranty Agreement from Hughes Supply, Inc., dated as of June 22, 2001 - Synthetic Lease Exhibit 10.14 (d) - Appendix A to the Operative Documents, Definitions and Interpretation - Synthetic Lease Exhibit 10.15 - Master Lease Agreement, dated as of June 22, 2001 between Atlantic Financial Group, Ltd, as Lessor and Hughes Supply, Inc. and Certain Subsidiaries of Hughes Supply, Inc., as Lessees - Operating Lease Exhibit 10.15 (a) - Loan Agreement, dated as of June 22, 2001 among Atlantic Financial Group, Ltd, as Lessor and Borrower, the financial institutions party hereto as Lenders and SunTrust Bank, as Agent - Operating Lease Exhibit 10.15 (b) - Construction Agency Agreement, dated as of June 22, 2001 among Atlantic Financial Group, Ltd, and Hughes Supply, Inc. as Construction Agent - Operating Lease Exhibit 10.15 (c) - Guaranty Agreement from Hughes Supply, Inc., dated as of June 22, 2001 - Operating Lease Exhibit 10.15 (d) - Appendix A to the Operative Documents, Definitions and Interpretation - Operating Lease (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended October 31, 2001. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HUGHES SUPPLY, INC. Date: December 10, 2001 By:/s/ DAVID H. HUGHES -------------------------------------- David H. Hughes, Chairman of the Board and Chief Executive Officer Date: December 10, 2001 By:/s/ J. STEPHEN ZEPF --------------------------------------- J. Stephen Zepf, Treasurer, Chief Financial Officer and Chief Accounting Officer 18 EX-10.14 3 dex1014.txt MASTER LEASE - SYNTHETIC LEASE Exhibit 10.14 ================================================================================ MASTER LEASE AGREEMENT Dated as of June 22, 2001 between ATLANTIC FINANCIAL GROUP, LTD., as Lessor, and HUGHES SUPPLY, INC. AND CERTAIN SUBSIDIARIES OF HUGHES SUPPLY, INC., as Lessees ___________________________________________ [SYNTHETIC LEASE] ================================================================================
TABLE OF CONTENTS (Lease Agreement) Page ARTICLE I. DEFINITIONS......................................................... 1 ARTICLE II. LEASE OF LEASED PROPERTY............................................ 1 2.1 Acceptance and Lease of Property.................................... 1 2.2 Acceptance Procedure................................................ 2 ARTICLE III. RENT................................................................ 2 3.1 Basic Rent.......................................................... 2 3.2 Supplemental Rent................................................... 3 3.3 Method of Payment................................................... 3 3.4 Late Payment........................................................ 3 3.5 Net Lease; No Setoff, Etc........................................... 3 3.6 Certain Taxes....................................................... 4 3.7 Utility Charges..................................................... 5 ARTICLE IV. WAIVERS............................................................. 5 ARTICLE V. LIENS; EASEMENTS; PARTIAL CONVEYANCES............................... 6 ARTICLE VI. MAINTENANCE AND REPAIR;ALTERATIONS, MODIFICATIONS AND ADDITIONS..... 8 6.1 Maintenance and Repair; Compliance With Law......................... 8 6.2 Alterations......................................................... 8 6.3 Title to Alterations................................................ 9 ARTICLE VII. USE................................................................. 9 ARTICLE VIII. INSURANCE........................................................... 9 ARTICLE IX. ASSIGNMENT AND SUBLEASING........................................... 11 ARTICLE X. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE........................... 11 10.1 Event of Loss....................................................... 11 10.2 Event of Taking..................................................... 12 10.3 Casualty............................................................ 13 10.4 Condemnation........................................................ 13 10.5 Verification of Restoration and Rebuilding.......................... 13 10.6 Application of Payments............................................. 14
10.7 Prosecution of Awards....................................................... 14 10.8 Application of Certain Payments Not Relating to an Event of Taking.......... 15 10.9 Other Dispositions.......................................................... 15 10.10 No Rent Abatement........................................................... 15 ARTICLE XI. INTEREST CONVEYED TO LESSEES................................................ 16 ARTICLE XII. EVENTS OF DEFAULT........................................................... 16 ARTICLE XIII. ENFORCEMENT................................................................. 20 13.1 Remedies.................................................................... 20 13.2 Remedies Cumulative; No Waiver; Consents.................................... 22 13.3 Purchase Upon an Event of Default........................................... 22 Section 13.4 Limitation on Liability..................................................... 22 ARTICLE XIV. SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL........................ 23 14.1 Lessee's Option to Purchase................................................. 23 14.2 Conveyance to Lessee........................................................ 23 14.3 [Reserved].................................................................. 24 14.4 Determination of Purchase Price............................................. 24 14.5 Purchase Procedure.......................................................... 24 14.6 Option to Remarket.......................................................... 25 14.7 Rejection of Sale........................................................... 27 14.8 Return of Leased Property................................................... 28 14.9 Renewal..................................................................... 28 ARTICLE XV. LESSEE'S EQUIPMENT.......................................................... 29 ARTICLE XVI. RIGHT TO PERFORM FOR LESSEE................................................. 29 ARTICLE XVII. MISCELLANEOUS............................................................... 30 17.1 Reports..................................................................... 30 17.2 Binding Effect; Successors and Assigns; Survival............................ 30 17.3 Quiet Enjoyment............................................................. 30 17.4 Notices..................................................................... 30 17.5 Severability................................................................ 31 17.6 Amendment; Complete Agreements.............................................. 32 17.7 Construction................................................................ 32 17.8 Headings.................................................................... 32 17.9 Counterparts................................................................ 32 17.10 GOVERNING LAW............................................................... 32 17.11 Discharge of Lessee's Obligations by its Subsidiaries or Affiliates......... 32
17.12 Liability of Lessor Limited........................................... 33 17.13 Estoppel Certificates................................................. 33 17.14 No Joint Venture...................................................... 33 17.15 No Accord and Satisfaction............................................ 33 17.16 No Merger............................................................. 34 17.17 Survival.............................................................. 34 17.18 Chattel Paper......................................................... 34 17.19 Time of Essence....................................................... 34 17.20 Recordation of Lease.................................................. 34 17.21 Investment of Security Funds.......................................... 34 17.22 Ground Leases......................................................... 35 17.23 Land and Building..................................................... 35 17.24 Joint and Several..................................................... 35 17.25 IDB Documentation..................................................... 35
APPENDICES AND EXHIBITS - ----------------------- APPENDIX A Defined Terms EXHIBIT A Lease Supplement (iv) THIS MASTER LEASE AGREEMENT (as from time to time amended or supplemented, this "Lease"), dated as of June 22, 2001, is among ATLANTIC FINANCIAL GROUP, ----- LTD., a Texas limited partnership (together with its successors and assigns hereunder, the "Lessor"), as Lessor, and HUGHES SUPPLY, INC., a Florida ------ corporation ("Hughes"), and certain Subsidiaries of Hughes hereafter parties ------ hereto (individually, with its successors and permitted assigns hereunder, each a "Lessee" and collectively, the "Lessees"), as Lessees. ------ ------- PRELIMINARY STATEMENT A. Lessor will purchase, or acquire a leasehold interest in, from one or more third parties designated by the Construction Agent, on a Closing Date, certain parcels of real property to be specified by the Construction Agent, together with any improvements thereon. B. Lessor desires to lease to each Lessee, and each Lessee desires to lease from Lessor, certain of such properties as described on the Lease Supplement(s) to which such Lessee is a party. C. If applicable, the Construction Agent will, on behalf of Lessor, cause to be constructed, certain improvements on such parcels of real property which as constructed will be the property of Lessor and will become part of such property subject to the terms of this Lease. In consideration of the mutual agreements herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, Lessor and Lessees hereby agree as follows: ARTICLE I. DEFINITIONS ----------- Terms used herein and not otherwise defined shall have the meanings assigned thereto in Appendix A hereto for all purposes hereof. ---------- ARTICLE II. LEASE OF LEASED PROPERTY ------------------------ Section II.1 Acceptance and Lease of Property. On each Closing Date for -------------------------------- Land, Lessor, subject to the satisfaction or waiver of the conditions set forth in Section 3 of the Master Agreement, hereby agrees to accept delivery on such Closing Date of such Land pursuant to the terms of the Master Agreement, together with any Building or Buildings and other improvements thereon, and simultaneously to lease to the related Lessee hereunder for the Lease Term, Lessor's interest in such Land and in such Building or Buildings and other improvements, together with 1 any Building which thereafter may be constructed thereon pursuant to the Construction Agency Agreement, and such related Lessee hereby agrees, expressly for the direct benefit of Lessor, commencing on such Closing Date for the Lease Term, to lease from Lessor Lessor's interest in such Land to be delivered on such Closing Date, together with, in the case of Land, Lessor's interest in the Building or Buildings and other improvements thereon and/or which thereafter may be constructed thereon pursuant to the Construction Agency Agreement. This Lease shall be in full force and effect with respect to each Leased Property on the Closing Date therefor; provided, however, that, notwithstanding anything herein -------- ------- to the contrary, with respect to any Leased Property subject to the Construction Agency Agreement, the Lessee shall make payments hereunder with respect to such Leased Property (other than any payments due under Section 14.1 hereof or under ------------ Section 3.3, 3.4 or Article V of the Construction Agency Agreement) during the Construction Term therefor from the proceeds of Fundings pursuant to, and subject to the terms and conditions of, the Master Agreement. Section II.2 Acceptance Procedure. Lessor hereby authorizes one or more -------------------- employees of the related Lessee, to be designated by such Lessee, as the authorized representative or representatives of Lessor to accept delivery on behalf of Lessor of that Leased Property identified on the applicable Funding Request. Each Lessee hereby agrees that such acceptance of delivery by such authorized representative or representatives and the execution and delivery by such Lessee on each Closing Date for property to be leased hereunder of a Lease Supplement in substantially the form of Exhibit A hereto (appropriately --------- completed) shall, without further act, constitute the irrevocable acceptance by such Lessee of that Leased Property which is the subject thereof for all purposes of this Lease and the other Operative Documents on the terms set forth therein and herein, and that such Leased Property, together with, in the case of Land, any and all Buildings and other improvements thereon and/or to be constructed thereon pursuant to the Construction Agency Agreement, shall be deemed to be included in the leasehold estate of this Lease and shall be subject to the terms and conditions of this Lease as of such Closing Date. The demise and lease of each parcel of Land and each Building pursuant to this Section 2.2 ----------- shall include any additional right, title or interest in each such parcel of Land and each such Building which may at any time be acquired by Lessor, the intent being that all right, title and interest of Lessor in and to each such parcel of Land and each such Building shall at all times be demised and leased to the related Lessee hereunder. ARTICLE III. RENT ---- Section III.1 Basic Rent. Beginning with and including the first Payment ---------- Date occurring after the Initial Closing Date, each Lessee shall pay to the Agent the Basic Rent for the Leased Properties subject to a Lease Supplement to which such Lessee is a party, in installments, payable in arrears on each Payment Date during the Lease Term, provided that during the Construction Term -------- for a Leased Property, Basic Rent with respect to such Leased Property shall be capitalized pursuant to Section 2.3(c) of the Master Agreement. 2 Section III.2 Supplemental Rent. Each Lessee shall pay to the Agent, or ----------------- to whomever shall be entitled thereto as expressly provided herein or in any other Operative Document, any and all Supplemental Rent on the date the same shall become due and payable and in the event of any failure on the part of such Lessee to pay any Supplemental Rent, the Agent shall have all rights, powers and remedies provided for herein or by law or in equity or otherwise in the case of nonpayment of Basic Rent. All Supplemental Rent to be paid pursuant to this Section 3.2 shall be payable in the type of funds and in the manner set forth in - ----------- Section 3.3. - ----------- Section III.3 Method of Payment. Basic Rent shall be paid to the Agent, ----------------- and Supplemental Rent (including amounts due under Article XIV hereof) shall be ----------- paid to the Agent (or to such Person as may be entitled thereto) or, in each case, to such Person as the Agent (or such other Person) shall specify in writing to the related Lessee, and at such place as the Agent (or such other Person) shall specify in writing to the related Lessee. Each payment of Rent (including payments under Article XIV hereof) shall be made by the Lessees prior ----------- to 12:00 p.m. (noon) Atlanta, Georgia time at the place of payment in funds consisting of lawful currency of the United States of America which shall be immediately available on the scheduled date when such payment shall be due, unless such scheduled date shall not be a Business Day, in which case such payment shall be made on the next succeeding Business Day. The Agent agrees, at a Lessee's request, to arrange for automated clearing house debits from such Lessee's accounts for payments due hereunder. Section III.4 Late Payment. If any Basic Rent shall not be paid on the ------------ date when due, the related Lessee shall pay to the Agent, as Supplemental Rent, interest (to the maximum extent permitted by law) on such overdue amount from and including the due date thereof to but excluding the Business Day of payment thereof at the Overdue Rate. Section III.5 Net Lease; No Setoff, Etc. This Lease is a net lease and ------------------------- notwithstanding any other provision of this Lease, each Lessee shall pay all Basic Rent and Supplemental Rent, and all costs, charges, assessments and other expenses foreseen or unforeseen, for which such Lessee is or shall become liable by reason of such Lessee's estate, right, title or interest in the Leased Properties, or that are connected with or arise out of the acquisition (except the initial costs of purchase by Lessor of its interest in any Leased Property, which costs, subject to the terms of the Master Agreement, shall be funded by the Funding Parties pursuant to the Master Agreement), construction (except costs to be funded under the Construction Agency Agreement), installation, possession, use, occupancy, maintenance, ownership, leasing, repairs and rebuilding of, or addition to, the Leased Properties or any portion thereof, and any other amounts payable hereunder and under the other Operative Documents without counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and each Lessee's obligation to pay all such amounts throughout the Lease Term, including the Construction Term, is absolute and unconditional. The obligations and liabilities of each Lessee hereunder shall in no way be released, discharged or otherwise affected for any reason, including without limitation: (a) any defect in the condition, merchantability, design, quality or fitness for 3 use of any Leased Property or any part thereof, or the failure of any Leased Property to comply with all Applicable Law, including any inability to occupy or use any Leased Property by reason of such non-compliance; (b) any damage to, removal, abandonment, salvage, loss, contamination of or Release from, scrapping or destruction of or any requisition or taking of any Leased Property or any part thereof; (c) any restriction, prevention or curtailment of or interference with any use of any Leased Property or any part thereof including eviction; (d) any defect in title to or rights to any Leased Property or any Lien on such title or rights or on any Leased Property; (e) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by Lessor, the Agent or any Lender; (f) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to any Lessee, Lessor, any Lender, the Agent or any other Person, or any action taken with respect to this Lease by any trustee or receiver of any Lessee, Lessor, any Lender, the Agent, any Ground Lessor or any other Person, or by any court, in any such proceeding; (g) any claim that any Lessee has or might have against any Person, including without limitation, Lessor, any vendor, manufacturer, contractor of or for any Leased Property or any part thereof, the Agent, any Ground Lessor, any Governmental Authority, or any Lender; (h) any failure on the part of Lessor to perform or comply with any of the terms of this Lease, any other Operative Document, any applicable IDB Documentation or of any other agreement; (i) any invalidity or unenforceability or illegality or disaffirmance of this Lease against or by any Lessee or any provision hereof or any of the other Operative Documents or any provision of any thereof whether or not related to the Transaction; (j) the impossibility or illegality of performance by any Lessee, Lessor or both; (k) any action by any court, administrative agency or other Governmental Authority; (l) any restriction, prevention or curtailment of or interference with the Construction or any use of any Leased Property or any part thereof; or (m) any other occurrence whatsoever, whether similar or dissimilar to the foregoing, whether or not any Lessee shall have notice or knowledge of any of the foregoing. Except as specifically set forth in Articles XIV or X of this Lease, this Lease shall ------------ - be noncancellable by each Lessee in any circumstance whatsoever and each Lessee, to the extent permitted by Applicable Law, waives all rights now or hereafter conferred by statute or otherwise to quit, terminate or surrender this Lease, or to any diminution, abatement or reduction of Rent payable by such Lessee hereunder, provided that each Lessee shall retain the right to pursue a cause of -------- action against Lessor for damages for a breach by Lessor of its obligations under the Operative Documents. Each payment of Rent made by a Lessee hereunder shall be final and such Lessee shall not seek or have any right to recover all or any part of such payment from Lessor, the Agent, any Lender or any party to any agreements related thereto for any reason whatsoever. Each Lessee assumes the sole responsibility for the condition, use, operation, maintenance, and management of the Leased Properties leased by it and Lessor shall have no responsibility in respect thereof and shall have no liability for damage to the property of either any Lessee or any subtenant of any Lessee on any account or for any reason whatsoever, other than solely by reason of Lessor's willful misconduct or gross negligence (other than gross negligence or willful misconduct imputed to Lessor as a result of any action or inaction on the part of a Lessee). 4 Section III.6 Certain Taxes. Without limiting the generality of Section ------------- ------- 3.5, each Lessee agrees to pay when due all real estate taxes, personal property - --- taxes, gross sales taxes, including any sales or lease tax imposed upon the rental payments hereunder or under a sublease, occupational license taxes, water charges, sewer charges, assessments of any nature and all other governmental impositions and charges of every kind and nature whatsoever (the "tax(es)"), ------- when the same shall be due and payable without penalty or interest; provided, -------- however, that this Section shall not apply to any of the taxes covered by the - ------- exclusion described in Section 7.4(b) of the Master Agreement. It is the intention of the parties hereto that, insofar as the same may lawfully be done, Lessor shall be, except as specifically provided for herein, free from all expenses in any way related to the Leased Properties and the use and occupancy thereof. Any tax relating to a fiscal period of any taxing authority falling partially within and partially outside the Lease Term, shall be apportioned and adjusted between Lessor and the related Lessee. Each Lessee covenants to furnish Lessor and the Agent, upon the Agent's written request, within forty- five (45) days after the last date when any tax must be paid by such Lessee as provided in this Section 3.6, copies of official receipts of the appropriate ----------- taxing, authority or other proof satisfactory to Lessor, evidencing the payment thereof. So long as no Event of Default has occurred and is continuing, the related Lessee may defer payment of a tax so long as the validity or the amount thereof is contested by such Lessee with diligence and in good faith; provided, however, -------- ------- that such Lessee shall pay the tax in sufficient time to prevent delivery of a tax deed. Such contest shall be at the related Lessee's sole cost and expense. Each Lessee covenants to indemnify and save harmless Lessor, the Agent and each Lender from any actual and reasonable costs or expenses incurred by Lessor, the Agent or any Lender as a result of such contest, which indemnification shall survive the termination of this Lease; provided that neither the Agent nor any -------- Lender shall be entitled to claim any indemnity against any Lessee pursuant to this sentence with respect to any Construction Land Interest during the Construction Term therefor. Section III.7 Utility Charges. Each Lessee agrees to pay or cause to be --------------- paid as and when the same are due and payable all charges for gas, water, sewer, electricity, lights, heat, power, telephone or other communication service and all other utility services used, rendered or supplied to, upon or in connection with the Leased Properties leased by it. ARTICLE IV. WAIVERS ------- 5 During the Lease Term, Lessor's interest in the Leased Properties, including the Equipment, the Building(s) (whether or not completed) and the Land, is demised and let by Lessor "AS IS" subject to (a) the rights of any parties in possession thereof, (b) the state of the title thereto existing at the time Lessor acquired its interest in the Leased Properties, (c) any state of facts which an accurate survey or physical inspection might show (including the survey delivered on the related Closing Date), (d) all Applicable Law, and (e) any violations of Applicable Law which may exist upon or subsequent to the commencement of the Lease Term. EACH LESSEE ACKNOWLEDGES THAT, ALTHOUGH LESSOR WILL OWN AND HOLD TITLE TO THE LEASED PROPERTIES, LESSOR IS NOT A MANUFACTURER OF, OR DEALER IN ANY LEASED PROPERTY, AND IS NOT RESPONSIBLE FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE BUILDING(S) OR ANY ALTERATIONS. NEITHER LESSOR, THE AGENT NOR ANY LENDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE VALUE, MERCHANTABILITY, TITLE, HABITABILITY, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF THE LEASED PROPERTIES (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTIES (OR ANY PART THEREOF), ALL SUCH WARRANTIES BEING HEREBY DISCLAIMED, AND NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF ANY LEASED PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY APPLICABLE LAW, except that Lessor hereby represents and warrants that each Leased Property is and shall be free of Lessor Liens. As between Lessor and the Lessees, each related Lessee has been afforded full opportunity to inspect each Leased Property, is satisfied with the results of its inspections of such Leased Property and is entering into this Lease solely on the basis of the results of its own inspections and all risks incident to the matters discussed in the two preceding sentences, as between Lessor, the Agent or the Lenders on the one hand, and the Lessees, on the other, are to be borne by the Lessees, except for the foregoing representation and warranty of Lessor relative to the absence of Lessor Liens. The provisions of this Article IV have ---------- been negotiated, and, except to the extent otherwise expressly stated, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties by Lessor, the Agent or the Lenders, express or implied, with respect to the Leased Properties, that may arise pursuant to any law now or hereafter in effect, or otherwise. 6 ARTICLE V. LIENS; EASEMENTS; PARTIAL CONVEYANCES ------------------------------------- Each Lessee shall, within thirty (30) days following knowledge thereof, discharge or bond over any Lien on or with respect to any Leased Property, the title thereto, or any interest therein, including any Liens which arise out of the possession, use, occupancy, construction, repair or rebuilding of any Leased Property or by reason of labor or materials furnished or claimed to have been furnished to a Lessee, or any of its contractors or agents or Alterations constructed by a Lessee, except, in all cases, Permitted Liens or Lessor Liens. Notwithstanding the foregoing paragraph, at the request of a Lessee, Lessor shall, from time to time during the Lease Term and upon reasonable advance written notice from such Lessee, and within fifteen (15) days of receipt of the materials specified in the next succeeding sentence, consent to and join in any (i) grant of easements, licenses, rights of way and other rights in the nature of easements, including, without limitation, utility easements to facilitate Lessees' use, development and construction of the Leased Properties, (ii) release or termination of easements, licenses, rights of way or other rights in the nature of easements which are for the benefit of the Land or the Building(s) or any portion thereof, (iii) dedication or transfer of portions of the Land, not improved with a Building, for road, highway or other public purposes, (iv) execution of agreements for ingress and egress and amendments to any covenants and restrictions affecting the Land or the Building(s) or any portion thereof and (v) request to any Governmental Authority for platting or subdivision or replatting or resubdivision approval with respect to the Land or any portion thereof or any parcel of land of which the Land or any portion thereof forms a part or a request for rezoning or any variance from zoning or other governmental requirements. Lessor's obligations pursuant to the preceding sentence shall be subject to the requirements that: (a) any such action shall be at the sole cost and expense of the requesting Lessee and such Lessee shall pay all actual and reasonable out-of- pocket costs of Lessor, the Agent and any Lender in connection therewith (including, without limitation, the reasonable fees of attorneys, architects, engineers, planners, appraisers and other professionals reasonably retained by Lessor, the Agent or any Lender in connection with any such action), (b) the requesting Lessee shall have delivered to Lessor and Agent a certificate of a Responsible Officer of such Lessee stating that (i) such action will not cause any Leased Property, the Land or any Building or any portion thereof to fail to comply in any material respect with the provisions of this Lease or any other Operative Documents or any applicable IDB Documentation, or in any material respect with Applicable Law; and 7 (ii) such action will not materially reduce the Fair Market Sales Value, utility or useful life of any Leased Property, the Land or any Building nor Lessor's interest therein; and (c) in the case of any release or conveyance, if Lessor, the Agent or any Lender so reasonably requests, the requesting Lessee will cause to be issued and delivered to Lessor and the Agent by the Title Insurance Company an endorsement to the Title Policy which shall revise the insured legal description to delete the released property, and shall indicate that the Title Policy is in full force and effect at the original policy amount. In addition to the foregoing, the related Lessee may arrange for a sale of a portion of the Leased Property located at the southeast corner of N.W. 108th Avenue and N.W. 91st Terrace, Miami, Florida and Lessor shall execute such documents and instruments as may be requested by such Lessee to effect such sale, provided that all of the following conditions are met: (i) after giving -------- effect to such sale, the Leased Property complies with all Applicable Laws (including all zoning laws and regulations) and all applicable insurance requirements, (ii) after giving effect to such sale, such Leased Property has available all services of public facilities and other utilities, together with all means of egress and ingress, to and from such Leased Property, necessary for the use and operation of such Leased Property for its intended purpose, (iii) the net proceeds of such sale shall be at least equal to the diminution in the Fair Market Sales Value of such Leased Property resulting from such sale, and shall be applied to reduce the Funded Amounts (on a pro rata basis, among the Funding Parties) related thereto, (iv) such sale shall be on an "as is, where is" basis, without representation or recourse on the part of Lessor, (v) the related Lessee shall pay, or shall promptly reimburse the Agent and the Funding Parties for, all out of pocket costs and expenses, including legal fees and disbursements, incurred by any of them in connection with such sale, and (vi) the related Lessee shall deliver a certificate of a Responsible Officer to the effect that the foregoing conditions have been satisfied and such other certificates and documents as the Agent or any Funding Party shall reasonably request. 8 ARTICLE VI. MAINTENANCE AND REPAIR; ALTERATIONS, MODIFICATIONS AND ADDITIONS ---------------------------------------- Section VI.1 Maintenance and Repair; Compliance With Law. Each Lessee, ------------------------------------------- at its own expense, shall at all times (a) maintain each Leased Property leased by it in good repair and condition (subject to ordinary wear and tear), in accordance with prudent industry standards and, in any event, in no less a manner as other similar property owned or leased by such Lessee or its Affiliates, (b) make all Alterations in accordance with, and maintain (whether or not such maintenance requires structural modifications or Alterations) and operate and otherwise keep each Leased Property in compliance in all material respects with, all Applicable Laws and insurance requirements, and (c) make all repairs, replacements and renewals of each Leased Property or any part thereof which may be required to keep such Leased Property in the condition required by the preceding clauses (a) and (b). Each Lessee shall perform the foregoing ----------- --- maintenance obligations regardless of whether any Leased Property is occupied or unoccupied. Each Lessee waives any right that it may now have or hereafter acquire to (i) require Lessor, the Agent or any Lender to maintain, repair, replace, alter, remove or rebuild all or any part of any Leased Property or (ii) make repairs at the expense of Lessor, the Agent or any Lender pursuant to any Applicable Law or other agreements or otherwise. NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL BE PERSONALLY LIABLE TO ANY LESSEE OR TO ANY CONTRACTORS, SUBCONTRACTORS, LABORERS, MATERIALMEN, SUPPLIERS OR VENDORS FOR SERVICES PERFORMED OR MATERIAL PROVIDED ON OR IN CONNECTION WITH ANY LEASED PROPERTY OR ANY PART THEREOF. Neither Lessor, the Agent nor any Lender shall be required to maintain, alter, repair, rebuild or replace any Leased Property in any way. Section VI.2 Alterations. Each Lessee may, without the consent of Lessor, ----------- at such Lessee's own cost and expense, make Alterations which do not diminish the value, utility or useful life of any Leased Property. Section VI.3 Title to Alterations. Title to all Alterations shall without -------------------- further act vest in Lessor (subject to each Lessee's right to remove trade fixtures, personal property and equipment which do not constitute Alterations and which were not acquired with funds advanced by Lessor or any Lender) and shall be deemed to constitute a part of the Leased Properties and be subject to this Lease. 9 ARTICLE VII. USE --- Each Lessee may use each Leased Property leased by it or any part thereof for any lawful purpose, and in a manner consistent with the standards applicable to properties of a similar nature in the geographic area in which such Leased Property is located, provided that such use does not materially adversely affect -------- the Fair Market Sales Value, utility, remaining useful life or residual value of such Leased Property, and does not materially violate or conflict with, or constitute or result in a material default under, any Applicable Law or any insurance policy required hereunder. In the event that any use of any of the Leased Property changes the character or original intended use of such Leased Property and the Lessees do not purchase the Leased Properties at the end of the Lease Term, the related Lessee, upon request of Lessor, shall restore such Leased Property to its general character and intended use on the Closing Date or Completion Date therefor, ordinary wear and tear excepted. No Lessee shall commit or permit any waste of any Leased Property or any material part thereof. ARTICLE VIII. INSURANCE --------- The provisions of this Article VIII shall apply to Leased Properties ------------ that are not then subject to the Construction Agency Agreement. For any Leased Property subject to the Construction Agency Agreement, the Lessee shall maintain insurance in accordance with Section 2.9 of the Construction Agency Agreement. (a) At any time during which any part of any Building or any Alteration is under construction and as to any part of any Building or any Alteration under construction, the related Lessee shall maintain, or cause to be maintained, at its sole cost and expense, as a part of its blanket policies or otherwise, "all risks" non-reporting completed value form of builder's risk insurance. (b) During the Lease Term, each Lessee shall maintain, at its sole cost and expense, as a part of its blanket policies or otherwise, insurance against loss or damage to any Building or any item of equipment included in the Leased Property by fire and other risks, on terms and in amounts no less favorable than insurance covering other similar properties or equipment owned or leased by a Lessee, but in no event less than the replacement cost of such Building or item of equipment included in the Leased Property, as the case may be, from time to time. (c) During the Lease Term, each Lessee shall maintain, at its sole cost and expense, commercial general liability insurance with respect to such Lessee's use, operation and 10 occupancy of the Leased Properties. Such insurance shall be on terms and in amounts that are no less favorable than insurance maintained by a Lessee or its Affiliates with respect to similar properties or equipment that it owns or leases, but in no event less than $1,000,000 general liability, plus $5,000,000 liability umbrella coverage, per occurrence. Such insurance policies shall also provide that each Lessee's insurance shall be considered primary insurance. Nothing in this Article VIII shall prohibit Lessor, the Agent or any Lender from ------------ carrying at its own expense other insurance on or with respect to the Leased Properties, provided that any insurance carried by Lessor, the Agent or any -------- Lender shall not prevent any Lessee from carrying the insurance required hereby. (d) Each policy of insurance maintained by a Lessee pursuant to clauses (a) and (b) of this Article VIII shall provide that all insurance - ----------- --- ------------ proceeds in respect of any loss or occurrence shall be adjusted by, and all insurance proceeds shall be paid to, such Lessee, except if, and for so long as an Event of Default exists, all losses shall be adjusted solely by, and all insurance proceeds shall be paid solely to, the Agent (or Lessor if the Loans have been fully paid) for application pursuant to this Lease. (e) On the Closing Date for each parcel of Land and on each anniversary of the related policy date each Lessee shall furnish Lessor with certificates showing the insurance required under this Article VIII to be in ------------ effect and naming Lessor, the Agent and the Lenders as additional insureds. Such certificates shall include a provision for thirty (30) days' advance written notice by the insurer to Lessor and the Agent in the event of cancellation or expiration or nonpayment of premium with respect to such insurance, and shall include a customary breach of warranty clause. Each Lessee shall provide evidence to Lessor and the Agent that each insurance policy required by this Article VIII has been renewed or replaced prior to the ------------ scheduled expiration date therefor. (f) Each policy of insurance maintained by a Lessee pursuant to this Article VIII shall provide that in respect of the interests of Lessor, the Agent - ------------ and the Lenders, such policies shall not be invalidated by any fraud, action, inaction or misrepresentation of any Lessee or any other Person. Each of each Lessee, Lessor, the Agent and the Lenders agree to waive their rights of subrogation against the others to the extent of the losses paid under insurance policies. (g) All insurance policies carried in accordance with this Article ------- VIII shall be maintained with insurers rated at least A- by A.M. Best & Company, - ---- and in all cases the insurer shall be qualified to insure risks in the State where each Leased Property is located. 11 ARTICLE IX. ASSIGNMENT AND SUBLEASING ------------------------- No Lessee may assign any of its right, title or interest in, to or under this Lease, except (i) to a wholly owned Subsidiary of Hughes, provided that -------- Hughes reaffirms its obligations under the Guaranty Agreement after giving effect thereto and (ii) as set forth in the following sentence. Each Lessee may sublease all or any portion of any Leased Property, provided that (a) all -------- obligations of such Lessee shall continue in full effect as obligations of a principal and not of a guarantor or surety, as though no sublease had been made; (b) such sublease shall be expressly subject and subordinate to this Lease, the Loan Agreement and the other Operative Documents; and (c) each such sublease shall terminate on or before the Lease Termination Date. Each Lessee shall give the Agent and Lessor prompt written notice of any such sublease. Except pursuant to an Operative Document, this Lease shall not be mortgaged or pledged by any Lessee, nor shall any Lessee mortgage or pledge any interest in any Leased Property or any portion thereof. Any such mortgage or pledge shall be void. ARTICLE X. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE ----------------------------------------- 12 Section X.1 Event of Loss. Any event (i) which would otherwise ------------- constitute a Casualty during the Base Term, and (ii) which, in the good-faith judgment of the related Lessee, (A) requires repairs to the related Leased Property that would cost in excess of 50% of the original cost of such Leased Property or (B) renders repair and restoration of the related Leased Property impossible or impractical, and with respect to which such Lessee has determined not to repair and restore such Leased Property (it being understood that the -- ----- ---------- Lessee shall have the option to either purchase the affected Leased Property or repair and restore the affected Leased Property) shall constitute an "Event of -------- Loss". Within sixty (60) days after the occurrence of such event, the related - ---- Lessee shall deliver to Lessor an Officer's Certificate notifying Lessor of such event and of such judgment and decision not to repair and restore. In the case of any other event which constitutes a Casualty, the related Lessee shall restore such Leased Property pursuant to Section 10.3. If an Event of Loss ------------ other than an Event of Taking shall occur, the related Lessee shall purchase the affected Leased Property pursuant to Section 14.1 on the earlier of (i) the ------------ Lease Termination Date and (ii) the next Payment Date occurring not less than sixty (60) days after the delivery of the Officer's Certificate pursuant to the second preceding sentence; provided that if such an Event of Loss shall occur -------- during the Construction Term for such Leased Property, the related Lessee may, at such Lessee's option, pay to the Lessor the Construction Failure Payment instead of paying the Leased Property Balance as the purchase price for such Leased Property (in which case the Lessor shall retain the Lessor's interest in such Leased Property, subject to the provisions of Section 5.7 of the ----------- Construction Agency Agreement with respect to remarketing). Upon Lessor's receipt of such Leased Property Balance on such date, Lessor shall cause Lessor's interest in such Leased Property to be conveyed to the related Lessee in accordance with and subject to the provisions of Section 14.5 hereof; upon ------------ completion of such purchase (or payment of the Construction Failure Payment, as the case may be), but not prior thereto, this Lease with respect to such Leased Property and all obligations hereunder with respect to such Leased Property shall terminate, except with respect to obligations and liabilities hereunder, actual or contingent, that have arisen or relate to events occurring on or prior to such date of purchase, or which are expressly stated herein to survive termination of this Lease. Upon the consummation of the purchase of any Leased Property pursuant to this Section 10.1, any proceeds derived from insurance required to be maintained ------------ by the related Lessee pursuant to this Lease for any Leased Property remaining after payment of such purchase price shall be paid over to, or retained by, such Lessee or as it may direct, and Lessor shall assign to such Lessee, without warranty, all of Lessor's rights to and interest in such insurance required to be maintained by such Lessee pursuant to this Lease. Section X.2 Event of Taking. Any event (i) which constitutes a --------------- Condemnation of all of, or substantially all of, a Leased Property, or (ii) (A) which would otherwise constitute a Condemnation, and (B) which, in the good- faith judgment of the related Lessee, (A) requires repairs to the related Leased Property that would cost in excess of 50% of the original cost of such Leased Property or (B) renders restoration and rebuilding of the related Leased Property impossible or impractical, and with respect to which such Lessee has determined not to repair 13 and restore such Leased Property (it being understood that the Lessee shall have -- ----- ---------- the option to either purchase the affected Leased Property or repair and restore the affected Leased Property) shall constitute an "Event of Taking". Within --------------- sixty (60) days after the occurrence of such event, the related Lessee shall deliver to Lessor an Officer's Certificate notifying Lessor of such event and of such judgment and decision not to repair and restore. In the case of any other event which constitutes a Condemnation, the related Lessee shall restore and rebuild such Leased Property pursuant to Section 10.4. If an Event of Taking ------------ shall occur, the related Lessee shall purchase the affected Leased Property pursuant to Section 14.1 on the earlier of (A) the Lease Termination Date and ------------ (B) the next Payment Date occurring not less than sixty (60) days after the occurrence of such Event of Taking, in the case of an Event of Taking described in clause (i) above, or (2) on the earlier of (A) the Lease Termination Date and ---------- (B) the next Payment Date occurring not less than 60 days after the delivery of the Officer's Certificate pursuant to the second preceding sentence, in the case of an Event of Taking described in clause (ii) above, an amount equal to the ----------- related Leased Property Balance; provided that, if such an Event of Taking shall -------- occur during the Construction Term for such Leased Property, the related Lessee may, at such Lessee's option, pay to the Lessor the Construction Failure Payment instead of paying the Leased Property Balance as the purchase price for such Leased Property (in which case the Lessor shall retain the Lessor's interest in such Leased Property, subject to the provisions of Section 5.7 of the Construction Agency Agreement with respect to remarketing). Upon Lessor's receipt of such Leased Property Balance on such date, Lessor shall cause Lessor's interest in such Leased Property, and in all condemnation proceeds related thereto, to be conveyed to the related Lessee in accordance with and subject to the provisions of Section 14.5 hereof (provided that such conveyance ------------- shall be subject to all rights of the condemning authority); upon completion of such purchase (or payment of the Construction Failure Payment, as the case may be), but not prior thereto, this Lease with respect to such Leased Property and all obligations hereunder with respect to such Leased Property shall terminate, except with respect to obligations and liabilities hereunder, actual or contingent, that have arisen or relate to events occurring on or prior to such date of purchase, or which are expressly stated herein to survive termination of this Lease. Upon the consummation of the purchase of such Leased Property pursuant to this Section 10.2, all Awards received by Lessor, after deducting any reasonable ------------ out-of-pocket costs incurred by Lessor in collecting such Awards, received or payable on account of an Event of Taking with respect to such Leased Property during the related Lease Term shall be promptly paid to the related Lessee, and all rights of Lessor in Awards not then received shall be assigned to Lessee by Lessor. Section X.3 Casualty. If a Casualty shall occur after the Construction -------- Period for the affected Leased Property which is not an Event of Loss, the related Lessee shall rebuild and restore the affected Leased Property, will complete the same prior to the Lease Termination Date, and will cause the condition set forth in Section 3.5 (c) of the Master Agreement to be fulfilled with respect to such restoration and rebuilding prior to the Lease Termination Date, regardless of whether insurance proceeds received as a result of such Casualty are sufficient for such purpose. 14 Section X.4 Condemnation. If a Condemnation shall occur after the ------------ Construction Period for the affected Leased Property which is not an Event of Taking, the related Lessee shall rebuild and restore the affected Leased Property, will complete the same prior to the Lease Termination Date, and will cause the condition set forth in Section 3.5 (c) of the Master Agreement to be fulfilled with respect to such restoration and rebuilding prior to the Lease Termination Date. Section X.5 Verification of Restoration and Rebuilding. In the event of ------------------------------------------ Casualty or Condemnation that involves, or is reasonably expected to involve, repair or rebuilding costs in excess of $1,000,000, to verify the related Lessee's compliance with the foregoing Section 10.3 or 10.4, as appropriate, ------------ ---- Lessor, the Agent, the Lenders and their respective authorized representatives may, upon five (5) Business Days' notice to such Lessee, make a reasonable number of inspections of the affected Leased Property with respect to (i) the extent of the Casualty or Condemnation and (ii) the restoration and rebuilding of the related Building and the Land. All actual and reasonable out-of-pocket costs of such inspections incurred by Lessor, the Agent or any Lender will be paid by the related Lessee promptly after written request. No such inspection shall unreasonably interfere with the related Lessee's operations or the operations of any other occupant of such Leased Property. None of the inspecting parties shall have any duty to make any such inspection or inquiry and none of the inspecting parties shall incur any liability or obligation by reason of making or not making any such inspection or inquiry. Section X.6 Application of Payments. All proceeds (except for payments ----------------------- under insurance policies maintained other than pursuant to Article VIII of this ------------ Lease) received at any time by Lessor, any Lessee or the Agent from any Governmental Authority or other Person with respect to any Condemnation or Casualty to any Leased Property or any part thereof or with respect to an Event of Loss or an Event of Taking, plus the amount of any payment that would have ---- been due from an insurer but for a Lessee's self-insurance or deductibles ("Loss ---- Proceeds"), shall (except to the extent Section 10.9 applies) be applied as - -------- ------------ follows: (a) In the event the related Lessee purchases such Leased Property pursuant to Section 10.1 or Section 10.2, such Loss Proceeds shall be ------------ ------------ applied as set forth in Section 10.1 or Section 10.2, as the case may be; ------------ ------------ (b) In the event of a Casualty at such time when no Event of Default has occurred and is continuing and the related Lessee is obligated to repair and rebuild such Leased Property pursuant to Section 10.3, such ------------ Lessee may, in good faith and subsequent to the date of such Casualty, certify to Lessor and to the applicable insurer that no Event of Default has occurred and is continuing, in which event the applicable insurer shall pay the Loss Proceeds to such Lessee; 15 (c) In the event of a Condemnation at such time when no Event of Default has occurred and is continuing and the related Lessee is obligated to repair and rebuild such Leased Property pursuant to Section 10.4, such ------------ Lessee may, in good faith and subsequent to the date of such Condemnation, certify to Lessor and the Agent that no Event of Default has occurred and is continuing, in which event the applicable Award shall be paid over to such Lessee; and (d) As provided in Section 10.8, if such section is applicable. ------------ During any period of repair or rebuilding pursuant to this Article X, this --------- Lease will remain in full force and effect and Basic Rent shall continue to accrue and be payable without abatement or reduction. Each Lessee shall maintain records setting forth information relating to the receipt and application of payments in accordance with this Section 10.6. Such records shall be kept on ------------ file by each Lessee at its offices and shall be made available to Lessor, the Lenders and the Agent upon request during such Lessee's normal business hours. Section X.7 Prosecution of Awards. (a) If any Condemnation shall occur, --------------------- the party receiving the notice of such Condemnation shall give to the other party and the Agent promptly, but in any event within thirty (30) days after the occurrence thereof, written notice of such occurrence and the date thereof, generally describing the nature and extent of such Condemnation. With respect to any Event of Taking or any Condemnation, the related Lessee shall control the negotiations with the relevant Governmental Authority as to any proceeding in respect of which Awards are required, under Section 10.6, to be assigned or ------------ released to such Lessee, unless an Event of Default shall have occurred and be continuing, in which case (i) the Agent (or Lessor if the Loans have been fully paid) shall control such negotiations; and (ii) such Lessee hereby irrevocably assigns, transfers and sets over to Lessor all rights of such Lessee to any Award on account of any Event of Taking or any Condemnation and, if there will not be separate Awards to Lessor and such Lessee on account of such Event of Taking or Condemnation, irrevocably authorizes and empowers the Agent (or Lessor if the Loans have been fully paid) during the continuance of an Event of Default, with full power of substitution, in the name of such Lessee or otherwise (but without limiting the obligations of such Lessee under this Article X), to file and prosecute what would otherwise be such Lessee's claim - --------- for any such Award and to collect, receipt for and retain the same. In any event Lessor and the Agent may participate in such negotiations, and no settlement will be made without the prior consent of the Agent (or Lessor if the Loans have been fully paid), not to be unreasonably withheld. (b) Notwithstanding the foregoing, each Lessee may prosecute, and Lessor shall have no interest in, any claim with respect to such Lessee's personal property and equipment not financed by or otherwise property of Lessor, business interruption or similar award and such Lessee's relocation expenses. 16 Section X.8 Application of Certain Payments Not Relating to an Event of ----------------------------------------------------------- Taking. In case of a requisition for temporary use of all or a portion of any - ------ Leased Property which is not an Event of Taking, this Lease shall remain in full force and effect with respect to such Leased Property, without any abatement or reduction of Basic Rent, and the Awards for such Leased Property shall, unless an Event of Default has occurred and is continuing, be paid to the related Lessee. Section X.9 Other Dispositions. Notwithstanding the foregoing provisions ------------------ of this Article X, so long as an Event of Default shall have occurred and be --------- continuing, any amount that would otherwise be payable to or for the account of, or that would otherwise be retained by, Lessee pursuant to this Article X shall --------- be paid to the Agent (or Lessor if the Loans have been fully paid) as security for the obligations of the Lessees under this Lease and, at such time thereafter as no Event of Default shall be continuing, such amount shall be paid promptly to the related Lessee to the extent not previously applied by Lessor or the Agent in accordance with the terms of this Lease or the other Operative Documents. Section X.10 No Rent Abatement. Rent shall not abate hereunder by ----------------- reason of any Casualty, any Event of Loss, any Event of Taking or any Condemnation of any Leased Property, and each Lessee shall continue to perform and fulfill all of such Lessee's obligations, covenants and agreements hereunder notwithstanding such Casualty, Event of Loss, Event of Taking or Condemnation until the Lease Termination Date. 17 ARTICLE XI. INTEREST CONVEYED TO LESSEES ---------------------------- Each Lessee and Lessor intend that this Lease be treated, for accounting purposes, as an operating lease. For purposes of tax, commercial and bankruptcy law, each Lessee and Lessor intend that the transaction represented by this Lease be treated as a financing transaction; for such purposes, it is the intention of the parties hereto (i) that this Lease be treated as a mortgage or deed of trust (whichever is applicable in the jurisdictions in which the Leased Properties are located) and security agreement, encumbering the Leased Properties, and that each Lessee, as grantor, hereby grants to Lessor, as mortgagee or beneficiary and secured party, or any successor thereto, a first and paramount Lien on each Leased Property in which such Lessee has an interest, (ii) that Lessor shall have, as a result of such determination, all of the rights, powers and remedies of a mortgagee, deed of trust beneficiary or secured party available under Applicable Law to take possession of and sell (whether by foreclosure or otherwise) any Leased Property, (iii) that the effective date of such mortgage, security deed or deed of trust shall be the effective date of this Lease, or the related Lease Supplement, if later, (iv) that the recording of this Lease or a Lease Supplement shall be deemed to be the recording of such mortgage, security deed or deed of trust, (v) that the obligations secured by such mortgage, security deed or deed of trust shall include the Funded Amounts and all Basic Rent and Supplemental Rent hereunder and all other obligations of and amounts due from each Lessee hereunder and under the Operative Documents and (vi) that the related Lessee will be treated as the owner of the Leased Properties leased by such Lessee for tax, commercial and bankruptcy law purposes. ARTICLE XII. EVENTS OF DEFAULT ----------------- The following events shall constitute Events of Default (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) any Lessee shall fail to make any payment of Basic Rent within three (3) days after written or verbal notice thereof from Lessor or the Agent to Hughes, provided that no such notice shall be required if notice has been given -------- pursuant to this clause (a) twice during the relevant calendar year (in which ---------- case, the failure to make any payment of Basic Rent within three (3) days after such Basic Rent is due shall constitute an Event of Default); (b) any Lessee shall fail to make any payment of Rent (other than Basic Rent and other than as set forth in clause (c)) or any other amount payable ---------- hereunder or under any of the other Operative Documents (other than Basic Rent and other than as set forth in clause (c)), and ----------- 18 such failure shall continue for a period of ten (10) Business Days after written notice thereof from Lessor or the Agent to Hughes; (c) any Lessee shall fail to pay the Funded Amount or Lease Balance when due pursuant to Section 14.1 or 14.2, or any Lessee shall fail to pay the ------------ ---- Recourse Deficiency Amount when required pursuant to Section 13.4 or Article XIV ------------ ----------- or the Construction Agent shall fail to make any payment when due under the Construction Agency Agreement; (d) any Lessee shall fail to maintain insurance as required by Article ------- VIII hereof or Section 2.9 of the Construction Agency Agreement, and such - ---- failure shall continue until the earlier of (i) fifteen (15) days after written notice thereof from Lessor and (ii) the day immediately preceding the date on which any applicable insurance coverage would otherwise finally lapse or terminate; (e) any Consolidated Company shall fail to make when due (whether at stated maturity, by acceleration, on demand or otherwise, and after giving effect to any applicable grace period) any payment of principal of or interest on any Indebtedness (other than the Obligations) exceeding $5,000,000 in the aggregate; (f) any Consolidated Company shall fail to observe or perform within any applicable grace period any covenants or agreements (other than those referenced in paragraph (e) above) contained in any agreements or instruments relating to ------------- any of its Indebtedness exceeding $5,000,000 in the aggregate, or any other event shall occur if the effect of such failure or other event is to accelerate, or to permit the holder of such Indebtedness or any other Person to accelerate, the maturity of such Indebtedness (it being understood that if the holder of such Indebtedness waives such failure or accepts a cure of such failure, such waiver or acceptance of cure shall negate the Event of Default arising hereunder solely as a result of such failure); or any such Indebtedness shall be required to be prepaid (other than by a regularly scheduled required prepayment) in whole or in part prior to its stated maturity; (g) Hughes or any other Consolidated Company shall commence a voluntary case concerning itself under the Bankruptcy Code or an involuntary case for bankruptcy is commenced against any Consolidated Company and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or any part of the property of any Consolidated Company; or any Consolidated Company commences proceedings of its own bankruptcy or to be granted a suspension of payments or any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction, whether now or hereafter in effect, relating to any Consolidated Company or there is commenced against any Consolidated Company any such proceeding which remains undismissed for a period of 60 days; or any Consolidated Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or any Consolidated Company suffers any appointment of any custodian or 19 the like for it or any part of its property which continues undischarged or unstayed for a period of 60 days; or any Consolidated Company makes a general assignment for the benefit of creditors; or any Consolidated Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or any Consolidated Company shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; or any Consolidated Company shall by any act or failure to act indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate action is taken by any Consolidated Company for the purpose of effecting any of the foregoing; (h) a Plan of a Consolidated Company or a Plan subject to Title IV of ERISA of any of its ERISA Affiliates: i. shall fail to be funded in accordance with the minimum funding standard required by applicable law, the terms of such Plan, Section 412 of the Tax Code or Section 302 of ERISA for any plan year or a waiver of such standard is sought or granted with respect to such Plan under applicable law, the terms of such Plan or Section 412 of the Tax Code or Section 303 of ERISA; or ii. is being, or has been, terminated or the subject of termination proceedings under applicable law or the terms of such Plan; or iii. shall require a Consolidated Company to provide security under applicable law, the terms of such Plan, Section 401 or 412 of the Tax Code or Section 306 or 307 of ERISA; or iv. results in a liability to a Consolidated Company under applicable law, the terms of such Plan, or Title IV of ERISA; and there shall result from any such failure, waiver, termination or other event a liability to the PBGC or a Plan that would have a Material Adverse Effect; (i) a judgment or order for the payment of money in excess of $5,000,000 or otherwise having a Material Adverse Effect shall be rendered against Hughes or any other Consolidated Company and such judgment or order shall continue unsatisfied (in the case of a money judgment) and in effect for a period of 30 days during which execution shall not be effectively stayed or deferred (whether by action of a court, by agreement or otherwise); (j) Hughes shall at any time fail to own and control the percentage of the voting stock of any Subsidiary Guarantor, either directly or indirectly through a wholly-owned Subsidiary of Hughes set forth on Schedule 4.1(a) to the Master Agreement (with respect to Subsidiary Guarantors existing on the Initial Closing Date) or as otherwise required pursuant to Section 5.12 of the Master Agreement (with respect to all other Subsidiary Guarantors); 20 (k) (i) any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than the Hughes Family shall become the "beneficial owner(s)" (as defined in said Rule 13d-3) of more than twenty-five percent (25%) of the shares of the outstanding common stock of Hughes entitled to vote for members of Hughes' board of directors; or (ii) any event or condition shall occur or exist which, pursuant to the terms of any change in control provision, requires or permits the holder(s) of Indebtedness of any Consolidated Company to require that such Indebtedness be redeemed, repurchased, defeased, prepaid or repaid, in whole or in part, or the maturity of such Indebtedness to be accelerated in any respect (it being understood that if the holder of such Indebtedness waives such event or condition or accepts a cure of such event or condition, such waiver or acceptance of cure shall negate the Event of Default arising hereunder solely as a result of such event or condition); (l) an attachment or similar action shall be made on or taken against any of the assets of any Consolidated Company with an Asset Value exceeding $5,000,000 in the aggregate and is not removed, suspended or enjoined within 60 days of the same being made or any suspension or injunction being lifted; (m) if any of the Operative Documents shall be cancelled, terminated, revoked or rescinded or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Operative Documents shall be commenced by or on behalf of any Obligor, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Operative Documents is illegal, invalid or unenforceable in accordance with the terms thereof, and the enforcement of such judgment, order, decree or ruling is not stayed or suspended within 60 days of the entry thereof; (n) any representation or warranty by Hughes or any other Lessee in any Operative Document or in any certificate or document delivered to Lessor, the Agent or any Funding Party pursuant to any Operative Document shall have been incorrect in any material respect when made; (o) any Lessee or Hughes shall fail in any material respect to timely, perform or observe any covenant or agreement (not included in clause (a) through ---------- (n) of this Article XII) to be performed or observed by it hereunder or under - --- ----------- any other Operative Document and such failure shall continue for a period of thirty (30) days (or 10 Business Days in the case of financial covenants) after such Lessee's or Hughes' receipt of written notice thereof from Lessor, the Agent or any Funding Party or such Lessee or Hughes shall have actual knowledge of such failure, except that such thirty (30) day period shall be automatically extended for such additional period 21 of time as is reasonably necessary to cure such default, if such default is capable of being cured but cannot, with reasonable diligence, be cured within such thirty (30) day period, provided that (i) the related Lessee or Hughes is -------- in the process of diligently curing such default and (ii) such period shall not be extended for more than 120 days. ARTICLE XIII. ENFORCEMENT ----------- Section XIII.1 Remedies. Upon the occurrence and during the continuance -------- of any Event of Default, Lessor may do one or more of the following as Lessor in its sole discretion shall determine, without limiting any other right or remedy Lessor may have on account of such Event of Default; provided that, with respect -------- to any Leased Property subject to the Construction Agency Agreement, the Lessor's remedies with respect thereto shall be limited to those set forth in Section 5.3 of the Construction Agency Agreement. - ----------- (a) Lessor may, by notice to Hughes, rescind or terminate this Lease as of the date specified in such notice; however, (A) no reletting, reentry or taking of possession of any Leased Property by Lessor will be construed as an election on Lessor's part to terminate this Lease unless a written notice of such intention is given to Hughes, (B) notwithstanding any reletting, reentry or taking of possession, Lessor may at any time thereafter elect to terminate this Lease for a continuing Event of Default, and (C) no act or thing done by Lessor or any of its agents, representatives or employees and no agreement accepting a surrender of any Leased Property shall be valid unless the same be made in writing and executed by Lessor; (b) Lessor may (i) demand that the Lessees, and the Lessees shall upon the written demand of Lessor, return the Leased Properties promptly to Lessor in the manner and condition required by, and otherwise in accordance with all of the provisions of, Articles VI and XIV hereof as if the Leased Properties were being ----------- --- returned at the end of the Lease Term, and Lessor shall not be liable for the reimbursement of any Lessee for any costs and expenses incurred by such Lessee in connection therewith and (ii) without prejudice to any other remedy which Lessor may have for possession of the Leased Properties, and to the extent and in the manner permitted by Applicable Law, enter upon any Leased Property and take immediate possession of (to the exclusion of the related Lessee) any Leased Property or any part thereof and expel or remove the related Lessee and any other person who may be occupying such Leased Property, by summary proceedings or otherwise, all without liability to any Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such taking or otherwise and, in addition to Lessor's other damages, the Lessees shall be responsible for the actual and reasonable costs and expenses of reletting, including brokers' fees and the reasonable out-of-pocket costs of any alterations or repairs made by Lessor; (c) Lessor may demand, by written notice to Hughes, that the Lessees pay as liquidated damages for loss of a bargain and not as a penalty (the parties agreeing that the 22 Lessor's actual damages would be difficult to predict, but the aforementioned liquidated damages represent a reasonable approximation of such amount) an amount equal to sum of (A) the Permitted Lease Balances for all of the Leased Properties (or the Recourse Deficiency Amount pursuant to Section 13.4) and (B) ------------ any amounts due under Section 7.6 of the Master Agreement. If the sum of the ----------- Permitted Lease Balances for all of the Leased Properties and any amounts due under Section 7.6 of the Master Agreement equals the Lease Balance, ----------- the Lessees shall pay the Lease Balance, and the Lessor shall convey the Leased Property to the Lessees in accordance with Section 14.5. If the Lessees have not ------------ paid the Lease Balance pursuant to the foregoing sentence, and if the Lessor subsequently sells the Leased Properties, the net proceeds of such sale (that is, after deducting all costs and expenses incurred by the Lessor, the Agent or any Lender incident to holding, maintaining, insuring, securing and operating such Leased Properties and to such conveyance (including, without limitation, all costs, expenses, fees, premiums and taxes described in Section 14.5(b))) --------------- shall be distributed by the Lessor as follows: first to the Lessor in the amount ----- of the difference between (i) the Permitted Lease Balances of all of the Leased Properties and the amounts due under Section 7.6 of the Master Agreement, and ----------- (ii) the amount, if any, paid by the Lessees pursuant to the first sentence of this Section; second, to the extent the Lessees have made any payment pursuant ------- ------ to the first sentence of this Section, to the Lessees to reimburse them for such ------- payment; third, to the Lessor in an amount equal to any portion of the Lease ----- Balance that remains unpaid and fourth, to Hughes or the Person or Persons ------ otherwise legally entitled thereto the remaining amounts, if any. (d) Lessor may, at its option, not terminate this Lease, and continue to collect all Basic Rent, Supplemental Rent, and all other amounts (including, without limitation, the Funded Amount) due Lessor (together with all costs of collection) and enforce the Lessees' obligations under this Lease as and when the same become due, or are to be performed, and at the option of Lessor, upon any abandonment of any Leased Property by Lessee or re-entry of same by Lessor, Lessor may, in its sole and absolute discretion, elect not to terminate this Lease with respect thereto and may make such reasonable alterations and necessary repairs in order to relet such Leased Property, and relet such Leased Property or any part thereof for such term or terms (which may be for a term extending beyond the term of this Lease) and at such rental or rentals and upon such other terms and conditions as Lessor in its reasonable discretion may deem advisable; and upon each such reletting all rentals actually received by Lessor from such reletting shall be applied to the Lessees' obligations hereunder in such order, proportion and priority as Lessor may elect in Lessor's sole and absolute discretion. If such rentals received from such reletting during any Rent Period are less than the Rent to be paid during that Rent Period by the Lessees hereunder, the Lessees shall pay any deficiency, as reasonably calculated by Lessor, to Lessor on the Payment Date for such Rent Period; (e) Lessor may exercise any other right or remedy that may be available to it under Applicable Law, or proceed by appropriate court action (legal or equitable) to enforce the terms hereof or to recover damages for the breach hereof. Separate suits may be brought to collect any such damages for any Rent Period(s), and such suits shall not in any manner prejudice Lessor's 23 right to collect any such damages for any subsequent Rent Period(s), or Lessor may defer any such suit until after the expiration of the Lease Term, in which event such suit shall be deemed not to have accrued until the expiration of the Lease Term; or (f) Lessor may retain and apply against Lessor's damages all sums which Lessor would, absent such Event of Default, be required to pay to, or turn over to, a Lessee pursuant to the terms of this Lease. Section XIII.2 Remedies Cumulative; No Waiver; Consents. To the extent ---------------------------------------- permitted by, and subject to the mandatory requirements of, Applicable Law, each and every right, power and remedy herein specifically given to Lessor or otherwise in this Lease shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by Lessor, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any right, power or remedy. No delay or omission by Lessor in the exercise of any right, power or remedy or in the pursuit of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of any Lessee or to be an acquiescence therein. Lessor's consent to any request made by any Lessee shall not be deemed to constitute or preclude the necessity for obtaining Lessor's consent, in the future, to all similar requests. No express or implied waiver by Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Potential Event of Default or Event of Default. To the extent permitted by Applicable Law, each Lessee hereby waives any rights now or hereafter conferred by statute or otherwise that may require Lessor to sell, lease or otherwise use any Leased Property or part thereof in mitigation of Lessor's damages upon the occurrence of an Event of Default or that may otherwise limit or modify any of Lessor's rights or remedies under this Article ------- XIII. - ---- Section XIII.3 Purchase Upon an Event of Default. Upon the occurrence of --------------------------------- an Event of Default, until such time as Lessor commences material preparations for the sale or re-lease of the Leased Properties, the Lessees may purchase all, but not less than all, of the Leased Properties for the Lease Balance, including any amounts due pursuant to Section 7.5 of the Master Agreement. Such purchase shall be made in accordance with Section 14.5, upon not less than five (5) ------------ Business Days' written notice (which shall be irrevocable) to Lessor, which notice shall set forth the date of purchase (which shall be a date no later than thirty (30) Business Days from the date of such notice). Section XIII.4 Limitation on Liability. Notwithstanding the provisions ----------------------- of Section 13.1, the Lessees' recourse liability to Lessor as a consequence of ------------ the occurrence of a Limited Event of Default shall be limited to the payment by the Lessees of the Recourse Deficiency Amount; provided, however if Lessor used -------- ------- commercial reasonable standards in determining that such Limited Event of Default occurred, then the Lessor shall be entitled to exercise any of the 24 remedies set forth in Section 13.1; and provided, further that if the sole ------------ -------- ------- existing Event of Default is (i) an Event of Default under clause (f) of Article ---------- ------- XII and the Funding Parties and their Affiliates, either collectively or - --- individually, have the ability to control (by vote or otherwise) whether such Indebtedness will become due prior to its stated maturity, (ii) an Event of Default pursuant to clause (n) of Article XII that is based on the ---------- ----------- representation by Hughes set forth in the last sentence of Section 4.1(c) of the Master Agreement or in the last sentence of Section 4.1(s) of the Master Agreement or (iii) an Event of Default pursuant to clause (k)(ii) of Article XII -------------- ----------- or clause (f) of Article XII resulting from a Cross Default, the Lessees' ---------- ----------- recourse liability to Lessor shall be limited to the payment by the Lessees of the Recourse Deficiency Amount. ARTICLE XIV. SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL --------------------------------------------------- Section XIV.1 Lessee's Option to Purchase. (a) Subject to the terms, --------------------------- conditions and provisions set forth in this Article XIV, each Lessee shall have ----------- the option (the "Purchase Option"), to be exercised as set forth below, to --------------- purchase from Lessor, Lessor's interest in all of the Leased Properties; provided that, except as set forth in paragraph (b) below, such option must be - -------- ------------- exercised with respect to all, but not less than all, of the Leased Properties under all of the Lease Supplements. Such option must be exercised by written notice to Lessor not later than twelve (12) months prior to the Lease Termination Date which notice shall be irrevocable; such notice shall specify the date that such purchase shall take place, which date shall be a date occurring not less than thirty (30) days after such notice or the Lease Termination Date (whichever is earlier). If the Purchase Option is exercised pursuant to the foregoing, then, subject to the provisions set forth in this Article XIV, on the applicable purchase date or the Lease Termination Date, as - ----------- the case may be, Lessor shall convey to each Lessee, by special warranty deed and bill of sale, without recourse or warranty (other than as to the absence of Lessor Liens) and each Lessee shall purchase from Lessor, Lessor's interest in the Leased Properties leased by such Lessee. (b) Subject to the terms, conditions and provisions set forth in this Article XIV, each Lessee shall have the option (the "Partial Purchase Option"), - ----------- ----------------------- to be exercised as set forth below, to purchase from Lessor Lessor's interest in any Leased Property leased by such Lessee, provided that after giving effect to -------- such purchase, not less than one Leased Property remain subject to this Lease. Such option may be exercised by written notice to Lessor at any time prior to the last year of the term of this Lease, which notice shall be irrevocable; such notice shall specify the Leased Property to be purchased and the date that such purchase shall take place, which date shall be a date occurring not less than thirty (30) days after such notice. If a Partial Purchase Option is exercised pursuant to the foregoing, subject to the provisions set forth in this Article ------- XIV, on the applicable purchase date, Lessor shall convey to the related Lessee, - --- and such Lessee shall purchase from Lessor, Lessor's interest in the Leased Property that is the subject of such Partial Purchase Option pursuant to Section ------- 14.5. - ---- 25 Section XIV.2 Conveyance to Lessee. Unless (a) the Lessees shall have -------------------- properly exercised the Purchase Option and purchased the Leased Properties pursuant to Section 14.1(a) or 14.1(b) hereof, or (b) the Lessees shall have --------------- ------- properly exercised the Remarketing Option and shall have fulfilled all of the conditions of Section 14.6 hereof, then, subject to the terms, conditions and ------------ provisions set forth in this Article XIV, each Lessee shall purchase from ----------- Lessor, and Lessor shall convey to each Lessee, on the Lease Termination Date all of Lessor's interest in the Leased Properties leased to such Lessee. Any Lessee may designate, in a notice given to Lessor not less than ten (10) Business Days prior to the closing of such purchase, or any purchase pursuant to Section 14.1(a) or (b) (time being of the essence), the transferee to whom the - --------------- --- conveyance shall be made (if other than to such Lessee), in which case such conveyance shall (subject to the terms and conditions set forth herein) be made to such designee; provided, however, that such designation of a transferee shall -------- ------- not cause any Lessee to be released, fully or partially, from any of its obligations under this Lease. Section XIV.3 [Reserved] Section XIV.4 Determination of Purchase Price. Upon the purchase by the ------------------------------- Lessees of Lessor's interest in the Leased Properties upon the exercise of the Purchase Option or pursuant to Section 14.2, the aggregate purchase price for ------------ all of the Leased Properties shall be an amount equal to the Lease Balance as of the closing date for such purchase, including any amount due pursuant to Section 7.5(f) of the Master Agreement as a result of such purchase. Upon the purchase by a Lessee of Lessor's interest in a Leased Property upon the exercise of a Partial Purchase Option or pursuant to Section 10.1 or 10.2, the purchase price ------------ ---- for such Leased Property shall be an amount equal to the Leased Property Balance for such Leased Property as of the closing date for such purchase, including any amount due pursuant to Section 7.5(f) of the Master Agreement as the result of the purchase of such Leased Property. Section XIV.5 Purchase Procedure. (a) If a Lessee shall purchase ------------------ Lessor's interest in a Leased Property pursuant to any provision of this Lease, (i) such Lessee shall accept from Lessor and Lessor shall convey such Leased Property by a duly executed and acknowledged special warranty deed and quit claim bill of sale of such a Leased Property in recordable form, (ii) upon the date fixed for any purchase of Lessor's interest in Leased Property hereunder, the related Lessee(s) shall pay to the order of the Agent (or Lessor if the Loans have been paid in full) the Lease Balance or Leased Property Balance, as applicable, plus any amount due pursuant to Section 7.5 of the Master Agreement as a result of such purchase by wire transfer of immediately available funds, (iii) Lessor will execute and deliver to the related Lessee such other documents, including releases, affidavits, termination agreements and termination statements, as may be legally required or as may be reasonably requested by Lessee in order to effect such conveyance, free and clear of Lessor Liens and the Liens of the Operative Documents and (iv) if such Leased Property is subject to a Ground Lease, Lessor will execute and deliver to the related Lessee an assignment or termination of such Ground Lease, as directed by such Lessee, in such form as 26 may be reasonably requested by such Lessee, and such Lessee shall pay any amounts due with respect thereto under such Ground Lease. (b) Each Lessee shall, at such Lessee's sole cost and expense, obtain all required governmental and regulatory approval and consents and in connection therewith shall make such filings as required by Applicable Law; in the event that Lessor is required by Applicable Law to take any action in connection with such purchase and sale, the Lessees shall pay prior to transfer all reasonable out-of-pocket costs incurred by Lessor in connection therewith. Without limiting the foregoing, all costs incident to such conveyance, including, without limitation, each Lessee's attorneys' fees, Lessor's attorneys' fees, commissions, each Lessee's and Lessor's escrow fees, recording fees, title insurance premiums and all applicable documentary transfer or other transfer taxes and other taxes required to be paid in order to record the transfer documents that might be imposed by reason of such conveyance and the delivery of such deed shall be borne entirely by and paid by the Lessees. (c) Upon expiration or termination of this Lease resulting in conveyance of Lessor's interest in the title to the Leased Properties to the Lessees, there shall be no apportionment of rents (including, without limitation, water rents and sewer rents), taxes, insurance, utility charges or other charges payable with respect to the Leased Properties, all of such rents, taxes, insurance, utility or other charges due and payable with respect to the Leased Properties prior to termination being payable by the Lessees hereunder and all due after such time being payable by the Lessees as the then owners of the Leased Properties. Section XIV.6 Option to Remarket. Subject to the fulfillment of each of ------------------ the conditions set forth in this Section 14.6, the Lessees shall have the option ------------ to market all of, but not less than all of, the Leased Properties for Lessor (the "Remarketing Option"). ------------------ The Lessees' effective exercise and consummation of the Remarketing Option shall be subject to the due and timely fulfillment of each of the following provisions, the failure of any of which, unless waived in writing by Lessor and the Lenders, shall render the Remarketing Option and the Lessees' exercise thereof null and void, in which event, each Lessee shall be obligated to perform its obligations under Section 14.2. ------------ (a) Not later than twelve (12) months prior to the Lease Termination Date, Hughes shall give to Lessor and the Agent written notice of the Lessees' exercise of the Remarketing Option. (b) Not later than ten (10) Business Days prior to the Lease Termination Date, each Lessee shall deliver to Lessor and the Agent an environmental assessment of each Leased Property leased by it dated not more than one hundred eighty (180) days prior to the Lease Termination Date. Such environmental assessment shall be prepared by an environmental consultant selected by the related Lessee and reasonably satisfactory to the 27 Required Funding Parties, shall be in form, detail and substance reasonably satisfactory to the Required Funding Parties, and shall otherwise indicate no degradation in environmental conditions beyond those described in the related Environmental Audit for which corrective action is required by Applicable Law and shall not include a recommendation for further investigation to make such determination. (c) On the date of Hughes' notice to Lessor and the Agent of the Lessees' exercise of the Remarketing Option, each of the Construction Conditions shall have been timely satisfied and no Event of Default or Potential Event of Default shall exist, and thereafter, no Event of Default or Potential Event of Default shall exist under this Lease. (d) Each Lessee shall have completed in all material respects all Alterations, restoration and rebuilding of the Leased Properties leased by it pursuant to Sections 6.1, 6.2, 10.3 and 10.4 (as the case may be) and ------------ --- ---- ---- shall have fulfilled in all material respects all of the conditions and requirements in connection therewith pursuant to said Sections, in each -------- case by the date on which Lessor and the Agent receive Hughes' notice of the Lessees' exercise of the Remarketing Option (time being of the essence), regardless of whether the same shall be within such Lessee's control. (e) Upon request by the Agent, each Lessee shall promptly provide any maintenance records relating to each Leased Property leased by it to Lessor, the Agent and any potential purchaser, and shall otherwise do all things necessary to deliver possession of such Leased Property to the potential purchaser at the appropriate closing date. Each Lessee shall allow Lessor, the Agent and any potential purchaser reasonable access during normal business hours to any Leased Property for the purpose of inspecting the same. (f) On the Lease Termination Date, each Lessee shall surrender the Leased Properties leased by it in accordance with Section 14.8 hereof. ------------ (g) In connection with any such sale of the Leased Properties, each Lessee will provide to the purchaser all customary "seller's" indemnities reasonably requested by the potential purchaser (taking into account the location and nature of the Leased Properties), representations and warranties regarding title, absence of Liens (except Lessor Liens) and the condition of the Leased Properties. Each Lessee shall fulfill all of the requirements set forth in clause (b) of Section 14.5, and such requirements ---------- ------------ are incorporated herein by reference. As to Lessor, any such sale shall be made on an "as is, with all faults" basis without representation or warranty by Lessor, other than the absence of Lessor Liens. (h) In connection with any such sale of Leased Properties, each Lessee shall pay directly, and not from the sale proceeds, all prorations, credits, costs and expenses of the sale of the Leased Properties leased by it, whether incurred by Lessor, any Lender, the Agent or such Lessee, including without limitation, to the extent not paid by the 28 purchaser, the cost of all title insurance, surveys, environmental reports, appraisals, transfer taxes, Lessor's and the Agent's attorneys' fees, such Lessee's attorneys' fees, commissions, escrow fees, recording fees, and all applicable documentary and other transfer taxes. (i) The Lessees, jointly and severally, shall pay to the Agent on the Lease Termination Date (or to such other Person as Agent shall notify Lessee in writing, or in the case of Supplemental Rent, to the Person entitled thereto) an amount equal to the Recourse Deficiency Amount, plus ---- all accrued and unpaid Basic Rent and Supplemental Rent, and all other amounts hereunder which have accrued prior to or as of such date, in the type of funds specified in Section 3.3 hereof. ----------- If the Lessees have exercised the Remarketing Option, the following additional provisions shall apply: During the period commencing on the date twelve (12) months prior to the scheduled expiration of the Lease Term, one or more of the Lessees shall, as nonexclusive agent for Lessor, use commercially reasonable efforts to sell Lessor's interest in the Leased Properties and will attempt to obtain the highest purchase price therefor. The costs of such marketing of the Leased Properties shall be paid through the sales proceeds. Lessee promptly shall submit all bids to Lessor and the Agent and Lessor; the Agent will have the right to review the same; and the Agent and Lessor will have the right to submit any one or more bids. All bids shall be on an all-cash basis. In no event shall such bidder be a Lessee or any Subsidiary or Affiliate of a Lessee. The written offer must specify the Lease Termination Date as the closing date. If, and only if, the aggregate selling price (net of closing costs, marketing costs and prorations, as reasonably estimated by the Agent) (the "Offer Price") ----------- is less than the Lease Balance at such time, then Lessor or the Agent may, in its sole and absolute discretion, by notice to Hughes, given within 30 days of receipt of such offer, reject such offer to purchase, in which event the parties will proceed according to the provisions of Section 14.7 hereof. If neither ------------ Lessor nor the Agent rejects such purchase offer as provided above, the closing of such purchase of the Leased Properties by such purchaser shall occur on the Lease Termination Date, contemporaneously with the Lessees' surrender of the Leased Properties in accordance with Section 14.8 hereof, and the gross proceeds ------------ of the sale (i.e., without deduction for any marketing, closing or other costs, prorations or commissions) shall be paid directly to the Agent (or Lessor if the Funded Amounts have been fully paid). The Agent shall distribute the proceeds derived from any such sale first, to the Lessor in an amount of the difference ----- between (i) the Permitted Lease Balances and all amounts payable under Section 7.6 of the Master Agreement for all of the Leased Properties and (ii) the Recourse Deficiency Amount for all of the Leased Properties, if any, received by the Agent from the Lessees, second, to the extent the Lessees have paid the ------ Recourse Deficiency Amount to the Agent, to the Lessees to reimburse them to the extent of its payment of the Recourse Deficiency Amount, third, to the Lessor in ------ an amount equal to the remaining unpaid portion of the Lease Balance, and fourth, to Hughes or the Person or Persons otherwise legally entitled thereto the remaining amounts, if any. 29 Section XIV.7 Rejection of Sale. Notwithstanding anything contained ----------------- herein to the contrary, if Lessor or the Agent rejects the purchase offer for the Leased Properties as provided in (and subject to the conditions set forth in) Section 14.6, then the Agent shall have an appraisal done of the Leased ------------ Properties by an independent third party appraiser selected by the Agent, which appraiser shall determine the Fair Market Sales Value of the Leased Properties (such Fair Market Sales Value, less the cost of such appraisal, the "Appraised --------- Value"). If (a) the Appraised Value shall be equal to or greater than the Offer - ----- Price and the Lessor in its sole discretion still elects to proceed with such sale or (b) the Appraised Value shall be less than the Offer Price, the Leased Properties shall be sold, and the proceeds of such sale shall be distributed, in accordance with Section 14.6. If the Appraised Value shall be equal to or ------------ greater than the Offer Price and the Lessor shall not have elected to sell the Leased Properties, (a) the Lessor shall refund to the Lessees the amount by which (i) the Recourse Deficiency Amount paid by the Lessees pursuant to Section ------- 14.6(g) exceeds (ii) the amount by which (A) the Permitted Lease Balance exceeds - ------- (B) the Appraised Value, and (b) the Lessor shall retain title to the Leased Properties and shall retain all future proceeds of such Leased Properties free and clear of all claims of any Lessee. Section XIV.8 Return of Leased Property. If Lessor retains title to any ------------------------- Leased Property pursuant to Section 14.7 hereof, then each Lessee shall, on the ------------ Lease Termination Date, and at its own expense, return possession of the Leased Properties leased by it to Lessor for retention by Lessor or, if the Lessees properly exercise the Remarketing Option and fulfill all of the conditions of Section 14.6 hereof and neither Lessor nor the Agent rejects such purchase offer - ------------ pursuant to Section 14.6, then each Lessee shall, on such Lease Termination ------------ Date, and at its own cost, transfer possession of the Leased Properties leased by it to the independent purchaser thereof, in each case by surrendering the same into the possession of Lessor or such purchaser, as the case may be, free and clear of all Liens other than Lessor Liens, in as good condition as it was on the Completion Date therefor in the case of new Construction, or the Funding Date (as modified by Alterations permitted by this Lease), ordinary wear and tear excepted, and in compliance in all material respects with Applicable Law. Each Lessee shall, on and within a reasonable time before and after the Lease Termination Date, cooperate with Lessor and the independent purchaser of any Leased Property leased by such Lessee in order to facilitate the ownership and operation by such purchaser of such Leased Property after the Lease Termination Date, which cooperation shall include the following, all of which such Lessee shall do on or before the Lease Termination Date or as soon thereafter as is reasonably practicable: providing all books and records regarding the related Lessee's maintenance of such Leased Property and all know-how, data and technical information relating thereto, providing a copy of the Plans and Specifications within the possession of such Lessee or Hughes, granting or assigning all licenses (to the extent assignable) necessary for the operation and maintenance of such Leased Property, and cooperating in seeking and obtaining all necessary Governmental Action. Each Lessee shall have also paid the cost of all Alterations commenced prior to the Lease Termination Date. The obligations of such Lessee under this Article XIV shall survive the expiration ----------- or termination of this Lease. 30 Section XIV.9 Renewal. Subject to the conditions set forth herein, ------- Hughes may, by written notice to Lessor and the Agent given not later than twelve months and not earlier than sixteen months, prior to the end of the Base Term or the end of the first renewal term, as the case may be, request to renew this Lease for five years, commencing on the date following such Lease Termination Date, provided that in no event shall the Lease Term exceed fifteen -------- (15) years. No later than the date that is 45 days after the date the request to renew has been delivered to each of Lessor and the Agent, the Agent will notify Hughes whether or not Lessor and the Lenders consent to such renewal request (which consent may be granted or denied in the Lessor's and each Lender's sole discretion and may be conditioned on such conditions precedent as may be specified by Lessor or such Lender). If the Agent fails to respond in such time frame, such failure shall be deemed to be a rejection of such request. ARTICLE XV. LESSEE'S EQUIPMENT ------------------ After any repossession of any Leased Property (whether or not this Lease has been terminated), the related Lessee, at its expense and so long as such removal of such trade fixture, personal property or equipment shall not result in a violation of Applicable Law, shall, within a reasonable time after such repossession or within ninety (90) days after such Lessee's receipt of Lessor's written request (whichever shall first occur), remove all of such Lessee's trade fixtures, personal property and equipment from such Leased Property (to the extent that the same can be readily removed from such Leased Property without causing material damage to such Leased Property); provided, however, that such -------- ------- Lessee shall not remove any such trade fixtures, personal property or equipment that has been financed by Lessor under the Operative Documents or otherwise constituting Leased Property (or that constitutes a replacement of such property). Any of a Lessee's trade fixtures, personal property and equipment not so removed by such Lessee within such period shall be considered abandoned by such Lessee, and title thereto shall without further act vest in Lessor, and may be appropriated, sold, destroyed or otherwise disposed of by Lessor without notice to any Lessee and without obligation to account therefor and the related Lessee will pay Lessor, upon written demand, all reasonable costs and expenses incurred by Lessor in removing, storing or disposing of the same and all costs and expenses incurred by Lessor to repair any damage to such Leased Property caused by such removal. Each Lessee will immediately repair at its expense all damage to such Leased Property caused by any such removal (unless such removal is effected by Lessor, in which event such Lessee shall pay all reasonable costs and expenses incurred by Lessor for such repairs). Lessor shall have no liability in exercising Lessor's rights under this Article XV, nor shall Lessor ---------- be responsible for any loss of or damage to any Lessee's personal property and equipment. 31 ARTICLE XVI. RIGHT TO PERFORM FOR LESSEE --------------------------- If any Lessee shall fail to perform or comply with any of its agreements contained herein and either such failure shall continue for a period of 10 or more days after notice to Hughes or to such Lessee by Lessor or the Agent or such failure has resulted in immediate material danger to any Leased Property or Lessor's or the Agent's interest therein, Lessor, upon reasonable notice to Hughes or such Lessee, may perform or comply with such agreement, and Lessor shall not thereby be deemed to have waived any default caused by such failure, and the amount of such payment and the amount of the expenses of Lessor (including actual and reasonable attorneys' fees and expenses) incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, shall be deemed Supplemental Rent, payable by the related Lessee to Lessor within ten (10) days after written demand therefor. ARTICLE XVII. MISCELLANEOUS ------------- Section XVII.1 Reports. To the extent required under Applicable Law and ------- to the extent it is reasonably practical for a Lessee to do so, such Lessee shall prepare and file in timely fashion, or, where such filing is required to be made by Lessor or it is otherwise not reasonably practical for a Lessee to make such filing, Lessee shall prepare and deliver to Lessor (with a copy to the Agent) within a reasonable time prior to the date for filing and Lessor shall file, any material reports with respect to the condition or operation of such Leased Property that shall be required to be filed with any Governmental Authority. Section XVII.2 Binding Effect; Successors and Assigns; Survival. The ------------------------------------------------ terms and provisions of this Lease, and the respective rights and obligations hereunder of Lessor and the Lessees, shall be binding upon their respective successors, legal representatives and assigns (including, in the case of Lessor, any Person to whom Lessor may transfer any Leased Property or any interest therein in accordance with the provisions of the Operative Documents), and inure to the benefit of their respective permitted successors and assigns, and the rights granted hereunder to the Agent and the Lenders shall inure (subject to such conditions as are contained herein) to the benefit of their respective permitted successors and assigns. Each Lessee hereby acknowledges that Lessor has assigned all of its right, title and interest to, in and under this Lease to the Agent and the Lenders pursuant to the Loan Agreement and related Operative Documents, and that all of Lessor's rights hereunder may be exercised by the Agent. Section XVII.3 Quiet Enjoyment. Lessor covenants that it will not --------------- interfere in the related Lessee's or any of its permitted sublessees' quiet enjoyment of the Leased Properties in accordance with this Lease during the Lease Term, so long as no Event of Default has occurred 32 and is continuing. Such right of quiet enjoyment is independent of, and shall not affect, Lessor's rights otherwise to initiate legal action to enforce the obligations of the Lessees under this Lease. Section XVII.4 Notices. Unless otherwise specified herein, all notices, ------- offers, acceptances, rejections, consents, requests, demands or other communications to or upon the respective parties hereto shall be in writing and shall be deemed to have been given as set forth in Section 8.2 of the Master Agreement. All such notices, offers, acceptances, rejections, consents, requests, demands or other communications shall be addressed as follows or to such other address as any of the parties hereto may designate by written notice: If to Lessor: Atlantic Financial Group, Ltd. 2808 Fairmount Suite 250 Dallas, Texas 75201 Attn: Stephen Brookshire Facsimile: 214/871-2799 If to Hughes or any other Lessee: Hughes Supply, Inc. 20 North Orange Avenue, Suite 200 Orlando, Florida 32801 Attn: Mark Scimeca, Esq., Associate General Counsel Facsimile: 407/649-3018 with a copy to: Lowndes, Drosdick, Doster, Kantor & Reed, P.A. 450 South Orange Avenue, 8th Floor Orlando, Florida 32801 Attn: Kathi Borkholder, Esq. Facsimile: 407/843-4444 If to Agent: SunTrust Bank 200 South Orange Avenue Mail Code 1106 Orlando, Florida 32801 Attn: Bill Barr Facsimile: 407/237-4076 with a copy to: SunTrust Equitable Securities Corporation 303 Peachtree Street, 24th Floor MC 3951 Atlanta, Georgia 30308 Attn: Robert Kennedy Facsimile: 404/230-1344 33 If to a Lender, to the address provided in the Master Agreement. Section XVII.5 Severability. Any provision of this Lease that shall be ------------ prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction, and Lessee shall remain liable to perform its obligations hereunder except to the extent of such unenforceability. To the extent permitted by Applicable Law, each Lessee hereby waives any provision of law that renders any provision hereof prohibited or unenforceable in any respect. Section XVII.6 Amendment; Complete Agreements. Neither this Lease nor ------------------------------ any of the terms hereof may be terminated, amended, supplemented, waived or modified orally, except by an instrument in writing signed by Lessor and Hughes in accordance with the provisions of Section 8.4 of the Master Agreement. This Lease, together with the applicable Lease Supplement and the other Operative Documents, is intended by the parties as a final expression of their lease agreement and as a complete and exclusive statement of the terms thereof, all negotiations, considerations and representations between the parties having been incorporated herein and therein. No course of prior dealings between the parties or their officers, employees, agents or Affiliates shall be relevant or admissible to supplement, explain, or vary any of the terms of this Lease or any other Operative Document. Acceptance of, or acquiescence in, a course of performance rendered under this or any prior agreement between the parties or their Affiliates shall not be relevant or admissible to determine the meaning of any of the terms of this Lease or any other Operative Document. No representations, undertakings, or agreements have been made or relied upon in the making of this Lease other than those specifically set forth in the Operative Documents. Section XVII.7 Construction. This Lease shall not be construed more ------------ strictly against any one party, it being recognized that both of the parties hereto have contributed substantially and materially to the preparation and negotiation of this Lease. Section XVII.8 Headings. The Table of Contents and headings of the -------- various Articles and Sections of this Lease are for convenience of reference only and shall not modify, define or limit any of the terms or provisions hereof. Section XVII.9 Counterparts. This Lease may be executed by the parties ------------ hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section XVII.10 GOVERNING LAW. THIS LEASE SHALL IN ALL RESPECTS BE ------------- GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE 34 STATE OF FLORIDA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD OR MORTGAGE ESTATES HEREUNDER, AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATES IN WHICH SUCH ESTATES ARE LOCATED. Section XVII.11 Discharge of Lessee's Obligations by its Subsidiaries or -------------------------------------------------------- Affiliates. Lessor agrees that performance of any Lessee's obligations - ---------- hereunder by one or more of such Lessee's Subsidiaries or Affiliates shall constitute performance by Lessee of such obligations to the same extent and with the same effect hereunder as if such obligations were performed by such Lessee, but no such performance shall excuse any Lessee from any obligation not performed by it or on its behalf under the Operative Documents. Section XVII.12 Liability of Lessor Limited. Except as otherwise --------------------------- expressly provided below in this Section 17.12, it is expressly understood and ------------- agreed by and between each Lessee, Lessor and their respective successors and assigns that nothing herein contained shall be construed as creating any liability of Lessor or any of its Affiliates or any of their respective officers, directors, employees or agents, individually or personally, for any failure to perform any covenant, either express or implied, contained herein, all such liability (other than that resulting from Lessor's gross negligence or willful misconduct, except to the extent imputed to Lessor by virtue of any Lessee's action or failure to act), if any, being expressly waived by each Lessee and by each and every Person now or hereafter claiming by, through or under any Lessee, and that, so far as Lessor or any of its Affiliates or any of their respective officers, directors, employees or agents, individually or personally, is concerned, each Lessee and any Person claiming by, through or under any Lessee shall look solely to the right, title and interest of Lessor in and to the Leased Properties and any proceeds from Lessor's sale or encumbrance thereof (provided, however, that no Lessee shall be entitled to any double -------- ------- recovery) for the performance of any obligation under this Lease and under the Operative Documents and the satisfaction of any liability arising therefrom (other than that resulting from Lessor's gross negligence or willful misconduct, except to the extent imputed to Lessor by virtue of any Lessee's action or failure to act). Section XVII.13 Estoppel Certificates. Each party hereto agrees that at --------------------- any time and from time to time during the Lease Term, it will promptly, but in no event later than thirty (30) days after request by the other party hereto, execute, acknowledge and deliver to such other party or to any prospective purchaser (if such prospective purchaser has signed a commitment or letter of intent to purchase any Leased Property or any part thereof or any Note), assignee or mortgagee or third party designated by such other party, a certificate stating (a) that this Lease is unmodified and in force and effect (or if there have been modifications, that this Lease is in force and effect as modified, and identifying the modification agreements); (b) the date to which Basic Rent has been paid; (c) whether or not there is any existing default by any Lessee in the payment of Basic Rent or any other sum of money hereunder, and whether or not there is any other existing default 35 by either party with respect to which a notice of default has been served, and, if there is any such default, specifying the nature and extent thereof; (d) whether or not, to the knowledge of the signer, there are any setoffs, defenses or counterclaims against enforcement of the obligations to be performed hereunder existing in favor of the party executing such certificate and (e) other items that may be reasonably requested; provided that no such certificate -------- may be requested unless the requesting party has a good faith reason for such request. Section XVII.14 No Joint Venture. Any intention to create a joint ---------------- venture, partnership or other fiduciary relationship between Lessor and any Lessee is hereby expressly disclaimed. Section XVII.15 No Accord and Satisfaction. The acceptance by Lessor of -------------------------- any sums from any Lessee (whether as Basic Rent or otherwise) in amounts which are less than the amounts due and payable by the Lessees hereunder is not intended, nor shall be construed, to constitute an accord and satisfaction of any dispute between Lessor and any Lessee regarding sums due and payable by any Lessee hereunder, unless Lessor specifically deems it as such in writing. Section XVII.16 No Merger. In no event shall the leasehold interests, --------- estates or rights of any Lessee hereunder, or of the holder of any Notes secured by a security interest in this Lease, merge with any interests, estates or rights of Lessor in or to the Leased Properties, it being understood that such leasehold interests, estates and rights of each Lessee hereunder, and of the holder of any Notes secured by a security interest in this Lease, shall be deemed to be separate and distinct from Lessor's interests, estates and rights in or to the Leased Properties, notwithstanding that any such interests, estates or rights shall at any time or times be held by or vested in the same person, corporation or other entity. Section XVII.17 Survival. The obligations of the parties to be -------- performed under this Lease prior to the Lease Termination Date and the obligations of the parties pursuant to Articles III, X, XI, XIII, Sections 14.2, -------- --- - -- ---- ------------- 14.3, 14.4, 14.5, 14.8, Articles XV, and XVI, and Sections 17.10 and 17.12 shall - ---- ---- ---- ---- -------- -- --- -------------- ----- survive the expiration or termination of this Lease. The extension of any applicable statute of limitations by Lessor, any Lessee, the Agent or any Indemnitee shall not affect such survival. Section XVII.18 Chattel Paper. To the extent that this Lease constitutes ------------- chattel paper (as such term is defined in the Uniform Commercial Code in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the sole original counterpart, which shall be identified as the original counterpart by the receipt of the Agent. Section XVII.19 Time of Essence. Time is of the essence of this Lease. --------------- 36 Section XVII.20 Recordation of Lease. Each Lessee will, at its expense, -------------------- cause this Lease or a memorandum of lease in form and substance reasonably satisfactory to Lessor and such Lessee (if permitted by Applicable Law) to be recorded in the proper office or offices in the States and the municipalities in which the Land is located. Section XVII.21 Investment of Security Funds. The parties hereto agree ---------------------------- that any amounts not payable to a Lessee pursuant to any provision of Article ------- VIII, X or XIV or this Section 17.21 shall be held by the Agent (or Lessor if - ---- - --- ------------- the Loans have been fully paid) as security for the obligations of the Lessees under this Lease and the Master Agreement and of Lessor under the Loan Agreement. At such time as such amounts are payable to the Lessee, such amounts, net of any amounts previously applied to the Lessees' obligations hereunder or under the Master Agreement (which application is hereby agreed to by Lessee), shall be paid to the related Lessee. Any such amounts which are held by the Agent (or Lessor if the Loans have been fully paid) pending payment to a Lessee shall until paid to such Lessee, as provided hereunder or until applied against the Lessees' obligations herein and under the Master Agreement and distributed as provided in the Loan Agreement or herein (after the Loan Agreement is no longer in effect) in connection with any exercise of remedies hereunder, be invested by the Agent or Lessor, as the case may be, as directed from time to time in writing by Lessee (provided, however, if an Event of -------- ------- Default has occurred and is continuing it will be directed by the Agent or, if the Loans have been fully paid, Lessor) and at the expense and risk of the Lessees, in Permitted Investments. Any gain (including interest received) realized as the result of any such investment (net of any fees, commissions and other expenses, if any, incurred in connection with such investment) shall be applied in the same manner as the principal invested. Lessee upon demand shall pay to the Agent or Lessor, as appropriate, the amount of any loss incurred in connection with all such investments and the liquidation thereof. Section XVII.22 Ground Leases. Each Lessee will, at its expense, timely ------------- perform all of the obligations of Lessor, in its capacity as ground lessee, under each Ground Lease and, if requested by Lessor, shall provide satisfactory evidence to Lessor of such performance. Section XVII.23 Land and Building. If the cost of the Raw Land related ----------------- to any Leased Property exceeds 25% of the projected Leased Property Balance for such Leased Property as set forth in the Construction Budget for such Leased Property, the Raw Land and the Building related to such Leased Property shall be leased under separate Lease Supplements. If any Building and the Raw Land on which such Building is located are subject to separate Lease Supplements, at any time that the related Lessee exercises an option to purchase such Building or such Raw Land, or to renew this Lease with respect to such Building or such Raw Land, or purchases such Building or such Land as a result of an Event of Loss, an Event of Taking or an Event of Default, such purchase or renewal shall be made simultaneously with respect to all of such Building and such Raw Land. In the event that the Remarketing Option is exercised pursuant to Section 14.6, the ------------ amount paid by the related Lessee pursuant to Section 14.6 shall be ------------ 37 determined separately for the Raw Land and Building thereon if such Raw Land and Building are leased under separate Lease Supplements. Section XVII.24 Joint and Several. Each obligation of each Lessee ----------------- hereunder shall be a joint and several obligation of all of the Lessees. Section XVII.25 IDB Documentation. If any Leased Property is subject to ----------------- an IDB Lease, this Lease shall be deemed to be a sublease. Each Lessee hereby agrees to perform all of its obligations and all obligations of Lessor under all IDB Documentation related to any Leased Property. In the event that a Lessee purchases any Leased Property that is the subject of IDB Documentation, such Lessee shall prepay, or cause to be prepaid, the Bonds related to such Leased Property or shall assume all obligations of the Lessor related to such IDB Documentation and cause the Lessor to be released therefrom pursuant to documentation reasonably satisfactory to the Lessor. [Signature page follows] 38 IN WITNESS WHEREOF, the undersigned have each caused this Lease Agreement to be duly executed and delivered and attested by their respective officers thereunto duly authorized as of the day and year first above written. Witnessed: HUGHES SUPPLY, INC., as a Lessee By: ________________________ By:________________________________ Name:________________ Name:__________________________ Title:__________________________ By: ________________________ Name:________________ S-1 ATLANTIC FINANCIAL GROUP, LTD., as Lessor By: Atlantic Financial Managers, Inc., its General Partner Witnessed: By: _______________________ By:________________________________ Name:___________________ Name: Stephen Brookshire Title: President By: _______________________ Name:___________________ S-2 STATE OF FLORIDA ) ) ss.: COUNTY OF ORANGE ) The foregoing instrument was acknowledged before me this _____ day of __________, 2001, by __________, as ___________, of HUGHES SUPPLY, INC., a Florida corporation, on behalf of said corporation. He is personally known to me and did not take an oath. [Notarial Seal] ____________________________________ Notary Signature Printed Name Notary Public, State of Florida Commission Number: My commission expires: N-1 STATE OF _________________ ) ) ss.: COUNTY OF ________________ ) The foregoing Lease Agreement was acknowledged before me, the undersigned Notary Public, in the County of ______________, ____ ____, this _____ day of __________, _______________, by _____________________, as ____________________ of Atlantic Financial Group, Ltd., on behalf of such partnership. [Notarial Seal] ___________________________ Notary Public My commission expires: ______________ N-2 Receipt of this original counterpart of the foregoing Lease is hereby acknowledged as of the date hereof. SUNTRUST BANK, as the Agent By:______________________________ Name:_________________________ Title:________________________ N-3 Recording requested by EXHIBIT A TO and when recorded mail to: THE LEASE ------------ ____________________________ ____________________________ ____________________________ ____________________________ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - LEASE SUPPLEMENT NO. __ AND MEMORANDUM OF LEASE THIS LEASE SUPPLEMENT NO. __ AND MEMORANDUM OF LEASE (this "Lease ----- Supplement") dated as of [ ], between ATLANTIC FINANCIAL GROUP, - ---------- LTD., as lessor (the "Lessor"), and [HUGHES SUPPLY, INC., a Florida ------ corporation,] as lessee (the "Related Lessee"). -------------- WHEREAS Lessor is the owner of the Land described on Schedule I hereto and ---------- wishes to lease the Land together with any Building and other improvements thereon or which thereafter may be constructed thereon pursuant to the Lease to Lessee; and NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions; Interpretation. For purposes of this Lease --------------------------- Supplement, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in Appendix A to the Master Lease Agreement, dated as of June 22, 2001 (as amended and supplemented from time to time, the "Lease"), among the Lessees named therein and Lessor; and the rules of - ------ interpretation set forth in Appendix A to the Lease shall apply to this Lease Supplement. SECTION 2. The Properties. Attached hereto as Schedule I is the -------------- description of certain Land (the "Subject Property"). Effective upon the ---------------- execution and delivery of this Lease Supplement by Lessor and Lessee, such Land, together with any Building and other improvements thereon or which thereafter may be constructed thereon shall be subject to the terms and provisions of the Lease and Lessor hereby grants, conveys, transfers and assigns to the Related Lessee those interests, rights, titles, estates, powers and privileges provided for in the Lease with respect to the Subject Property. A-1 SECTION 3. Amendments to Lease with Respect to Subject Property. ---------------------------------------------------- Effective upon the execution and delivery of this Lease Supplement by Lessor and the Related Lessee, the following terms and provisions shall apply to the Lease with respect to the Subject Property: [Insert Applicable Sections per Local Law as contemplated by the Master Agreement] SECTION 4. Recourse Deficiency Percentage. The Recourse Deficiency ------------------------------ Percentage for the Subject Property is __%. SECTION 5. Ratification; Incorporation. Except as specifically modified --------------------------- hereby, the terms and provisions of the Lease are hereby ratified and confirmed and remain in full force and effect. The terms of the Lease (as amended by this Lease Supplement) are by this reference incorporated herein and made a part hereof. SECTION 6. Original Lease Supplement. The single executed original of ------------------------- this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt of the Agent therefor on or following the signature page thereof shall be the original executed counterpart of this Lease Supplement (the "Original Executed ----------------- Counterpart"). To the extent that this Lease Supplement constitutes chattel - ----------- paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. SECTION 7. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND ------------- CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF FLORIDA, BUT EXCLUDING ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES OF SUCH STATE, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD AND MORTGAGE ESTATES HEREUNDER, AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH SUCH ESTATES ARE LOCATED. SECTION 8. Counterpart Execution. This Lease Supplement may be executed --------------------- in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. A-2 IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement to be duly executed by an officer thereunto duly authorized as of the date and year first above written. Witnessed: ATLANTIC FINANCIAL GROUP, LTD., as the Lessor By:_______________________ By: Atlantic Financial Managers, Name: Inc., its General Partner By:_______________________ By:____________________________ Name: Name: Title: Witnessed: [HUGHES SUPPLY, INC.], as Related Lessee By: ______________________ By:_____________________________ Name: Name: Title: By: ______________________ Name: S-1 STATE OF _________________ ) ) ss.: COUNTY OF ________________ ) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of ______________, ____ ____, this _____ day of __________, _______________, by _____________________, as ____________________ of Atlantic Financial Group, Ltd., on behalf of such partnership. [Notarial Seal] ___________________________ Notary Public My commission expires: _____________ N-1 STATE OF FLORIDA ) ) ss.: COUNTY OF ORANGE ) The foregoing instrument was acknowledged before me this _____ day of __________, 2001, by ____, as ______, of HUGHES SUPPLY, INC., a Florida corporation, on behalf of said corporation. He is personally known to me and did not take an oath. [Notarial Seal] ______________________________ Notary Signature ______________________________ Printed Name Notary Public, State of Florida Commission Number: My commission expires: N-2 Receipt of this original counterpart of the foregoing Lease Supplement is hereby acknowledged as of the date hereof. SUNTRUST BANK, as the Agent By: __________________________ Name: Title: S-3 EX-10.14 (A) 4 dex1014a.txt LOAN AGREEMENT - SYNTHETIC LEASE Exhibit 10.14(a) ================================================================================ LOAN AGREEMENT Dated as of June 22, 2001 among ATLANTIC FINANCIAL GROUP, LTD. as Lessor and Borrower, the financial institutions party hereto, as Lenders and SUNTRUST BANK, as Agent [STNTHETIC LEASE] ================================================================================ TABLE OF CONTENTS Page SECTION 1 DEFINITIONS; INTERPRETATION...................................................................................... 1 SECTION 2 AMOUNT AND TERMS OF COMMITMENTS; REPAYMENT AND PREPAYMENT OF LOANS............................................... 1 SECTION 2.1 Commitment.................................................................................................... 1 SECTION 2.2 Notes......................................................................................................... 2 SECTION 2.3 Scheduled Principal Repayment................................................................................. 2 SECTION 2.4 Interest...................................................................................................... 2 SECTION 2.5 Allocation of Loans to Leased Properties...................................................................... 3 SECTION 2.6 Prepayment.................................................................................................... 3 SECTION 3 RECEIPT, DISTRIBUTION AND APPLICATION OF CERTAIN PAYMENTS IN RESPECT OF LEASE AND LEASED PROPERTY; RELEASE................................................................... 3 SECTION 3.1 Distribution and Application of Rent Payments................................................................. 3 SECTION 3.2 Distribution and Application of Purchase Payment.............................................................. 3 SECTION 3.3 Distribution and Application to Funding Party Balances of Lessee Payment of Recourse Deficiency Amount Upon Exercise of Remarketing Option..................................... 4 SECTION 3.4 Distribution and Application to Funding Party Balances of Remarketing Proceeds of Leased Property....................................................................... 4 SECTION 3.5 Distribution and Application of Payments Received When an Event of Default Exists or Has Ceased to Exist Following Rejection of the Lease........................................................................................ 5 SECTION 3.6 Distribution of Other Payments................................................................................ 6 SECTION 3.7 Timing of Agent Distributions................................................................................. 7 SECTION 3.8 Release of Leased Properties.................................................................................. 7 SECTION 4 THE LESSOR; EXERCISE OF REMEDIES UNDER LEASE..................................................................... 7 SECTION 4.1 Covenant of Lessor............................................................................................ 7 SECTION 4.2 Lessor Obligations Nonrecourse; Payment from Certain Lease Obligations and Certain Proceeds of Leased Property Only...................................................... 8 SECTION 4.3 Exercise of Remedies Under the Lease.......................................................................... 9 SECTION 5 LOAN EVENTS OF DEFAULT; REMEDIES.............................................................................. 10 SECTION 5.1 Loan Events of Default........................................................................................ 10 SECTION 5.2 Remedies...................................................................................................... 11
SECTION 6 THE AGENT........................................................................................................ 11 SECTION 6.1 Appointment...................................................................................................... 11 SECTION 6.2 Delegation of Duties............................................................................................. 12 SECTION 6.3 Exculpatory Provisions........................................................................................... 12 SECTION 6.4 Reliance by Agent................................................................................................ 12 SECTION 6.5 Notice of Default................................................................................................ 13 SECTION 6.6 Non-Reliance on Agent and Other Lenders.......................................................................... 13 SECTION 6.7 Indemnification.................................................................................................. 13 SECTION 6.8 Agent in Its Individual Capacity................................................................................. 14 SECTION 6.9 Successor Agent.................................................................................................. 14 SECTION 7 MISCELLANEOUS.................................................................................................... 15 SECTION 7.1 Amendments and Waivers........................................................................................... 15 SECTION 7.2 Notices.......................................................................................................... 15 SECTION 7.3 No Waiver; Cumulative Remedies................................................................................... 15 SECTION 7.4 Successors and Assigns........................................................................................... 15 SECTION 7.5 Counterparts..................................................................................................... 15 SECTION 7.6 GOVERNING LAW.................................................................................................... 15 SECTION 7.7 Survival and Termination of Agreement............................................................................ 15 SECTION 7.8 Entire Agreement................................................................................................. 16 SECTION 7.9 Severability..................................................................................................... 16
EXHIBITS EXHIBIT A Form of Note -3- THIS LOAN AGREEMENT (as it may be amended or modified from time to time in accordance with the provisions hereof, this "Loan Agreement") dated as of June -------------- 22, 2001 is among ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership, as Lessor and Borrower (the "Lessor"); SUNTRUST BANK and the other financial ------ institutions which are, or may from time to time become, parties hereto as lenders (the "Lenders") and SUNTRUST BANK, a Georgia banking corporation, as ------- agent for the Lenders (in such capacity, the "Agent"). ----- PRELIMINARY STATEMENT In accordance with the terms and provisions of the Master Agreement, dated as of June 22, 2001 (as amended, supplemented or otherwise modified from time to time, the "Master Agreement"), among Hughes Supply, Inc., as Guarantor and as a ---------------- Lessee, certain Subsidiaries of Hughes Supply, Inc., as Lessees, the Lessor, the Lenders and the Agent, the Lease, this Loan Agreement and the other Operative Documents, (i) the Lessor contemplates acquiring the Leased Properties and leasing the Leased Properties to the Lessees, (ii) Hughes, as Construction Agent for the Lessor, wishes, in certain instances, to construct Buildings on the Land for the Lessor and, when completed, to lease the Buildings, or to cause the Buildings to be leased, from the Lessor as part of the Leased Properties under the Lease, (iii) Hughes wishes to obtain, and the Lessor is willing to provide, funding for the acquisition of the Land and any Buildings thereon or, in certain instances, the construction of the Buildings, and (iv) the Lessor wishes to obtain, and the Lenders are willing to provide, financing of a portion of the funding for the acquisition of the Land and any Buildings thereon and, if applicable, the construction of the Buildings. In consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINITIONS; INTERPRETATION Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in Appendix A to the ---------- Master Agreement for all purposes hereof; and the rules of interpretation set forth in Appendix A to the Master Agreement shall apply to this Loan Agreement. ---------- SECTION 2 AMOUNT AND TERMS OF COMMITMENTS; REPAYMENT AND PREPAYMENT OF LOANS SECTION 2.1 Commitment. (a) Subject to the terms and conditions hereof ---------- and of the Master Agreement, each Lender agrees to make term loans to the Lessor ("Loans") from time to time during the period from and including the Initial ----- Closing Date through the Funding Termination Date, on each Closing Date and on each subsequent Funding Date, in the amounts required under Section 2.2 of the Master Agreement. SECTION 2.2 Note. The Loans made by each Lender to the Lessor shall be ---- evidenced by a note of the Lessor (the "Note"), substantially in the form of ---- Exhibit A with appropriate insertions, duly executed by the Lessor and payable - --------- to the order of the Agent, on behalf of the Lenders, and in a principal amount equal to the aggregate Lenders' Commitment Percentages of the aggregate Commitments (or, if less, the aggregate unpaid principal amount of all Loans, made by the Lenders to the Lessor). The Note shall be dated the Initial Closing Date and delivered to the Agent in accordance with Section 3.2 of the Master Agreement. The Agent is hereby authorized to record the date and amount of each Loan made by each Lender to the Lessor on the Note or in its records, and each Lender is hereby authorized to record the date and amount of each Loan made by such Lender to the Lessor in its records, but the failure by the Agent or any Lender to so record such Loan shall not affect or impair any obligations with respect thereto. The Note shall (i) be stated to mature no later than the final Lease Termination Date and (ii) bear interest from the date a Loan is made on the unpaid principal amount thereof from time to time outstanding at the applicable interest rate per annum determined as provided in, and payable as specified in, Section 2.4. Upon the occurrence of an Event of Default under ----------- clause (g) of Article XII of the Lease, or upon Acceleration as described in Section 4.3(b) hereof, each Note shall automatically become due and payable in - -------------- full. SECTION 2.3 Scheduled Principal Repayment. On the Lease Termination Date, ----------------------------- the Lessor shall pay the aggregate unpaid principal amount of all Loans as of such date. SECTION 2.4 Interest. (a) Each Loan related to a LIBOR Advance shall -------- bear interest during each Rent Period at a rate equal to the sum of (i) the Adjusted LIBO Rate for such Rent Period, computed using the actual number of days elapsed and a 360 day year, plus (ii) the Applicable Margin per annum. ---- Each Loan related to a Base Rate Advance shall bear interest at a rate equal to the Base Rate in effect from time to time, computed using the actual number of days elapsed and a 360 day year. (b) If all or a portion of the principal amount of or interest on the Loans shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall, without limiting the rights of the Lenders under Section 5, bear interest at the Overdue Rate, in --------- each case from the date of nonpayment until paid in full (after as well as before judgment). (c) Interest accruing on each Loan with respect to any Leased Property during the Construction Term of such Leased Property shall, subject to the limitations set forth in Section 2.3(c) of the Master Agreement, be added to the principal amount of such Loan from time to time. Following the date each Loan is made (or in the case of Loans with respect to a Construction Land Interest, the Construction Term Expiration Date), interest on such Loan shall be payable in arrears on each Payment Date with respect thereto. 2 (d) Any change in the interest rate on the Loans resulting from a change in the Base Rate shall become effective as of the opening of business on the day on which such Base Rate changes as provided in the definition thereof. SECTION 2.5 Allocation of Loans to Leased Properties. Pursuant to each ---------------------------------------- Funding Request, each Loan shall be allocated to the Leased Property, the cost of acquisition or construction of which the proceeds of such Loan are used to pay. For purposes of the Operative Documents, the "related Loans" with respect to any Leased Property or Loans "related to" any Leased Property shall mean those Loans allocated to such Leased Property as set forth in the foregoing sentence. SECTION 2.6 Prepayment. Except in conjunction with a payment by a Lessee ---------- or the Construction Agent of the Lease Balance, a Construction failure Payment or a Leased Property Balance pursuant to the terms of the Lease or the Construction Agency Agreement, the Lessor shall have no right to prepay the Loans. SECTION 3 RECEIPT, DISTRIBUTION AND APPLICATION OF CERTAIN PAYMENTS IN RESPECT OF LEASE AND LEASED PROPERTY; RELEASE; SECURITY INTEREST SECTION 3.1 Distribution and Application of Rent Payments. --------------------------------------------- (a) Basic Rent. Each payment of Basic Rent (and any payment of interest on ---------- overdue installments of Basic Rent) received by the Agent shall be distributed pro rata to the Funding Parties to be applied to the amounts of accrued and unpaid interest (including overdue interest) on the Loans and accrued and unpaid Yield (including overdue Yield). (b) Supplemental Rent. Each payment of Supplemental Rent received by the ----------------- Agent shall be paid to or upon the order of the Person owed the same in accordance with the Operative Documents. SECTION 3.2 Distribution and Application of Purchase Payment. With ------------------------------------------------ respect to any Leased Property, the payment by a Lessee of: (a) the purchase price for a consummated sale of such Leased Property received by the Agent in connection with such Lessee's exercise of the Purchase Option or Partial Purchase Option under Section 14.1 of the Lease or such Lessee's or the Construction Agent's exercise of its option to purchase such Leased Property under Section 5.3 of the Construction Agency Agreement, or (b) the payment payable in connection with such Lessee's compliance with its obligation to purchase the Leased Property in accordance with Section 14.2 of the Lease, or 3 (c) the Leased Property Balance therefor in accordance with Section 10.1 or Section 10.2 of the Lease, shall be distributed by Agent as promptly as possible, to the Funding Parties pro rata in accordance with, and for application to, their respective Funding - --- ---- Party Balances in respect of such Leased Property or Properties. SECTION 3.3 Distribution and Application to Funding Party Balances of --------------------------------------------------------- Lessee Payment of Recourse Deficiency Amount Upon Exercise of Remarketing - ------------------------------------------------------------------------- Option. With respect to any Leased Property, the payment by a Lessee of the - ------ Recourse Deficiency Amount to the Agent on the Lease Termination Date in accordance with Section 14.6 or Section 14.7 of the Lease following the Lessees' exercise of the Remarketing Option, shall be applied by the Agent to the accrued and unpaid interest on, and the outstanding principal of, the Loans in respect of such Leased Property. With respect to any Leased Property, the payment by the Construction Agent of the Construction Failure Payment with respect thereto pursuant to the Construction Agency Agreement shall be applied by the Agent, first to the accrued and unpaid interest on, and the outstanding principal of, - ----- the Loans in respect of such Leased Property, and second to the accrued and ------ unpaid Yield on, and outstanding Lessor's Invested Amount related to such Leased Property. SECTION 3.4 Distribution and Application to Funding Party Balances of --------------------------------------------------------- Remarketing Proceeds of Leased Property. (a) Any payments payable to and - --------------------------------------- received by the Lessor in accordance with the terms of the Lease as proceeds from the sale of any Leased Property sold pursuant to the Lessees' exercise of the Remarketing Option pursuant to Section 14.6 or 14.7 of the Lease, shall be distributed (or applied, in the case of amounts payable to the Lessor) by the Lessor as promptly as possible (it being understood that any such payment received by the Lessor on a timely basis and in accordance with the provisions of the Lease shall be distributed on the date received in the funds so received) in the following order of priority: first, to the extent not previously deducted from such proceeds, to ----- the Agent and the Funding Parties as reimbursement for any and all reasonable remarketing, sale, closing or other transfer costs, prorations or commissions (including broker fees, appraisal costs, legal fees and expenses and transfer taxes), paid or incurred by the Agent or any Funding Party and not reimbursed by the Lessees, pro rata according to the amount --- ---- of such costs and fees; second, to the Lenders pro rata for application to their remaining ------ --- ---- Funding Party Balances in respect of all of the Leased Properties, an amount equal to their such remaining Funding Party Balances in respect of all of the Leased Properties; 4 third, to the Lessor for application to the Lessor's Invested Amounts ----- in respect of all of the Leased Properties, an amount equal to the Lessor's Invested Amounts in respect of all of the Leased Properties; and fourth, to the related Lessee(s) or the Person or Persons otherwise ------ legally entitled thereto. (b) Any payments payable to and received by the Lessor in accordance with the Construction Agency Agreement as proceeds from the sale of any Leased Property sold following the payment of the Construction Failure Payment shall be distributed (or applied, as appropriate) by the Lessor as promptly as possible (it being understood that any such payment received by the Lessor on a timely basis and in accordance with the provisions of the Construction Agency Agreement shall be distributed on the date received in the funds so received) in the following order of priority: first, to the extent not previously deducted from such proceeds, to ----- the Funding Parties or the Agent, as the case may be, in reimbursement of all reasonable costs, expenses and taxes, if any, incurred by any of them to complete the construction of such Leased Property, maintain and insure such Leased Property, remarket such Leased Property and sell such Leased Property, pro rata according to the amount of such costs, expenses and --- ---- taxes; second, to the Funding Parties pro rata for application to their ------ --- ---- Funding Party Balances in respect to such Leased Property, an amount equal to such Funding Party Balances in respect of such Leased Property; third, to the Construction Agent or the Person or Persons otherwise ----- legally entitled thereto. SECTION 3.5 Distribution and Application of Payments Received When an --------------------------------------------------------- Event of Default Exists or Has Ceased to Exist Following Rejection of the Lease. (a) Proceeds of Leased Property. Any payments received by the Lessor or --------------------------- the Agent when an Event of Default exists (or has ceased to exist by reason of a rejection of the Lease in a proceeding with respect to a Lessee described in Article XII (g) of the Lease), as (i) proceeds from the sale of any or all of the Leased Property sold pursuant to the exercise of the Lessor's remedies pursuant to Article XIII of the Lease, or (ii) proceeds of any amounts from any insurer or any Governmental Authority in connection with an Event of Loss or Event of Taking 5 shall if received by the Lessor be paid to the Agent as promptly as possible, and shall be distributed or applied in the following order of priority prior to the Release Date: first, to the Agent for any amounts reasonably expended by it in ----- connection with such Leased Property or the Operative Documents and not previously reimbursed to it; second, to the Funding Parties pro rata for application to their ------ --- ---- Funding Party Balances in respect of all of the Leased Properties, an amount equal to such Funding Party Balances; and third, to the related Lessee or the Person or Persons otherwise ----- legally entitled thereto, the excess, if any; and on and after such Release Date (and any application otherwise required under this Section 3 has been made) such amounts shall be paid over to the Lessor and --------- shall be distributed or applied by the Lessor, first to the Lessor for ----- application to any amounts owed to it in respect of such Leased Property, and second to the related Lessee or the Person or Persons otherwise legally entitled - ------ thereto, the excess, if any. (b) Proceeds of Recoveries from Lessee. Any payments received by any ---------------------------------- Funding Party when an Event of Default exists (or has ceased to exist by reason of a rejection of the Lease in a proceeding with respect to a Lessee described in Article XII(g) of the Lease), from a Lessee as a payment in accordance with the Lease shall be paid to the Agent as promptly as possible, and shall then be distributed or applied by the Agent as promptly as possible in the order of priority set forth in paragraph (a) above. ------------- SECTION 3.6 Distribution of Other Payments. All payments under Section ------------------------------ 7.6 of the Master Agreement shall be made first, to the Funding Parties, pro ----- --- rata, until their Funding Party Balances have been paid in full, and second, to - ---- ------ the Lessor who shall be entitled to retain all such remaining amounts. Except as otherwise provided in this Section 3, any payment received by the Lessor --------- which is to be paid to Agent pursuant hereto or for which provision as to the application thereof is made in an Operative Document but not elsewhere in this Section 3 shall, if received by the Lessor, be paid forthwith to the Agent and - --------- when received shall be distributed forthwith by the Agent to the Person and for the purpose for which such payment was made in accordance with the terms of such Operative Document. SECTION 3.7 Timing of Agent Distributions. Payments received by the Agent ----------------------------- in immediately available funds before 12:00 p.m. (noon), Atlanta, Georgia time, on any Business Day shall be distributed to the Funding Parties in accordance with and to the extent provided in this Section 3 on such Business Day. --------- Payments received by the Agent in immediately available funds after 12:00 p.m. (noon), Atlanta, Georgia time shall be distributed to the Funding Parties in accordance with and to the extent provided in this Section 3 on the next --------- Business Day. 6 SECTION 3.8 Release of Leased Properties. (a) If one or more of the Lessees ---------------------------- shall at any time purchase any or all of the Leased Properties pursuant to Section 13.3 or Article 14 of the Lease, or if any or all of the Leased Properties shall be sold in accordance with, and the Lessees otherwise satisfy each of the obligations and conditions set forth in, Section 14.6 of the Lease in respect thereof, then, upon application of such amounts to prepay the related Loans pursuant to Section 2.6 and the Agent's and the Lenders' receipt of all accrued interest and any other payments due and owing from the Lessees and/or the Lessor to the Agent and the Lenders on such date in respect thereof, such Leased Property or Properties, as the case may be, shall be released from the applicable Mortgage and the Assignment of Lease and Rents, to the extent relating to such Leased Property or Properties. (b) Upon the termination of the Lenders' Commitments and the payment in full of all of the Loans and all other amounts owing by the Lessees and/or the Lessor hereunder or under any other Operative Document to the Lessor, the Agent and the Lenders (other than unasserted indemnities), the Leased Properties shall be released from the Mortgages and Assignments of Lease and Rents. (c) Upon request of the Lessor or a Lessee following a release of any Leased Property described in clause (a) or (b) above, the Agent shall, at the ---------- --- sole cost and expense of the Lessees, execute and deliver to the Lessor or the requesting Lessee such documents as the Lessor or such Lessee shall reasonably request to evidence such release, including, if requested, a release of the Assignments of Lease and Rents to the extent relating to such Leased Property. (d) Upon the termination of the Lenders' Commitments and the payment in full of all of the Loans and all other amounts owing to the Lenders hereunder or under any other Operative Document and the Lessor's Invested Amounts and all other amounts owing to the Lessor and the Agent under the Operative Documents (other than unasserted indemnities), all remaining moneys shall be paid out to Hughes. SECTION 4 THE LESSOR; EXERCISE OF REMEDIES UNDER LEASE 7 SECTION 4.1 Covenant of Lessor. So long as any Lender's Commitment remains ------------------ in effect, any Loan remains outstanding and unpaid or any other amount is owing to any Lender with respect to its Funding Party Balances, subject to Section ------- 4.2, the Lessor will promptly pay all amounts payable by it under this Loan - --- Agreement and the Notes issued by it in accordance with the terms hereof and thereof and shall duly perform each of its obligations under this Loan Agreement and the Note. The Lessor agrees to provide to the Agent a copy of each estoppel certificate that the Lessor proposes to deliver pursuant to Section 17.13 of the Lease at least five (5) days prior to such delivery and to make any corrections thereto reasonably requested by the Agent prior to such delivery. The Lessor shall keep each Leased Property owned by it free and clear of all Lessor Liens. The Lessor shall not reject any sale of any Leased Property pursuant to Section 14.6 of the Lease unless all of the related Loans have been paid in full or the Lenders consent to such rejection. In the event that the Lenders reject any sale of any Leased Property pursuant to Section 14.6 of the Lease, the Lessor agrees to take such action as the Lenders reasonably request to effect a sale or other disposition of such Leased Property, provided that the Lessor shall not be -------- required to expend its own funds in connection with such sale or disposition. In the event that the Construction Agent returns any Leased Property to the Lessor pursuant to Section 5.3(a) of the Construction Agency Agreement, unless all of the related Loans are paid in full, the Lessor agrees to take such action as the Lenders reasonably request to complete the Construction, or to effect a sale or other disposition, of such Leased Property, provided that the Lessor shall not -------- be required to expend its own funds in connection therewith. During the Construction Term for each Leased Property, the Lessor agrees to assume liability for, and to indemnify, protect, defend, save and hold harmless the Agent, each Lender and each of their respective Affiliates, successors, assigns, employees, officers and directors, on an After-Tax Basis from and against, any and all Claims that may be imposed on, incurred by or asserted or threatened to be asserted against the Agent or any Lender, in any way relating to or arising out of the circumstances set forth in Section 7.1 or 7.4 of the Master Agreement, provided that the Lessor shall only be obligated pursuant to this -------- sentence to the extent that the Lessor receives payment from the Construction Agent or any other Person with respect to such Claim. SECTION 4.2 Lessor Obligations Nonrecourse; Payment from Certain Lease ---------------------------------------------------------- Obligations and Certain Proceeds of Leased Property Only. All payments to be - -------------------------------------------------------- made by the Lessor in respect of the Loans, the Note and this Loan Agreement shall be made only from certain payments received under the Lease, the Guaranty Agreement, the Subsidiary Guaranty and the Construction Agency Agreement and certain proceeds of the Leased Properties and only to the extent that the Lessor or the Agent shall have received sufficient payments from such sources to make payments in respect of the Loans in accordance with Section 3. Each Lender --------- agrees that it will look solely to such sources of payments to the extent available for distribution to such Lender as herein provided and that neither the Lessor nor the Agent is or shall be personally liable to any Lender for any amount payable hereunder or under the Note. Nothing in this Loan Agreement, the Note or any other Operative Document shall be construed as creating any liability (other than for willful misconduct, gross negligence or misrepresentation) of the Lessor individually to pay any sum or to perform any covenant, either express or implied, in this Loan Agreement, the Note or any other Operative Documents (all such liability, if any, being expressly waived by each Lender) 8 and that each Lender, on behalf of itself and its successors and assigns, agrees in the case of any liability of the Lessor hereunder or thereunder (except for such liability attributable to its willful misconduct, gross negligence or misrepresentation) that it will look solely to those certain payments received under the Lease, the Guaranty Agreement, the Subsidiary Guaranty and the Construction Agency Agreement and those certain proceeds of the Leased Properties, provided, however, that the Lessor in its individual capacity shall -------- ------- in any event be liable with respect to (i) the removal of Lessor's Liens or involving its gross negligence, willful misconduct or misrepresentation or (ii) failure to turn over payments the Lessor has received in accordance with Section ------- 3; and provided further that the foregoing exculpation of the Lessor shall not - - -------- ------- be deemed to be exculpations of the Guarantor, any Lessee or any other Person. SECTION 4.3 Exercise of Remedies Under the Lease. ------------------------------------ (a) Event of Default. With respect to any Potential Event of Default as to ---------------- which notice thereof by the Lessor to a Lessee is a requirement to cause such Potential Event of Default to become an Event of Default, the Lessor agrees to give such notice to such Lessee promptly upon receipt of a written request by any Lender or the Agent. The Lessor shall not, without the prior written consent of the Required Lenders, waive any Event of Default. (b) Acceleration of Lease Balance. When an Event of Default exists, the ----------------------------- Lessor shall exercise such remedies as shall be permitted by the Operative Documents or Applicable Law and directed by the Required Lenders, including demanding payment in full of the amounts owed by the Lessees under the Operative Documents (the "Acceleration"). The Lessor shall consult with the Lenders ------------ regarding actions to be taken in response to such Event of Default. The Lessor (1) shall not, without the prior written consent of the Required Lenders and (2) shall (subject to the provisions of this Section), if so directed by the ------- Required Lenders, do any of the following: commence eviction or foreclosure proceedings, or file a lawsuit against any Lessee under the Lease, or sell the Leased Properties, or exercise other remedies against the Lessees or the Guarantor under the Operative Documents in respect of such Event of Default; provided, however, that any payments received by the Lessor shall be distributed - -------- ------- in accordance with Section 3. Notwithstanding any such consent, direction or --------- approval by the Required Lenders of any such action or omission, the Lessor shall not have any obligation to follow such direction if the same would, in the Lessor's reasonable judgment, require the Lessor to expend its own funds or expose the Lessor to expense, or unless Required Lenders provide to the Lessor an indemnity, in form and substance reasonably acceptable to the Lessor, for such liability, loss or damage or unless and until the Lenders advance to the Lessor an amount which is sufficient, in the Lessor's reasonable judgment, to cover such liability, expense, loss or damage (excluding the Lessor's pro rata share thereof, if any). Notwithstanding the foregoing, on and after the related Release Date (and any application otherwise required under Section 3 has been --------- made): the Lenders shall have no rights to such Leased Property or any proceeds thereof; the Lenders shall have no rights to direct or give consent to any actions with respect to such Leased Property and the proceeds thereof; the Lessor shall have absolute discretion (but in all events subject to the terms of the Operative Documents) with respect to such exercise of remedies with respect to such Leased Property, and the proceeds thereof, including, without limitation, any foreclosure or sale of such Leased 9 Property; and the Lessor shall have no liability to the Lenders with respect to the Lessor's actions or failure to take any action with respect to such Leased Property. SECTION 5 LOAN EVENTS OF DEFAULT; REMEDIES SECTION 5.1 Loan Events of Default. Each of the following events shall ---------------------- constitute a Loan Event of Default (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority) and each such Loan Event of Default shall continue so long as, but only as long as, it shall not have been remedied: (a) Lessor shall fail to distribute in accordance with the provisions of Section 3 any amount received by the Lessor pursuant to any Lease or the --------- Master Agreement within two (2) Business Days of receipt thereof if and to the extent that the Agent or the Lenders are entitled to such amount or a portion thereof; or (b) the Lessor shall fail to pay to the Agent, within two (2) Business Days of the Lessor's receipt thereof, any amount which a Lessee is required, pursuant to the Operative Documents, to pay to the Agent but erroneously pays to the Lessor; or (c) failure by the Lessor to perform in any material respect any other covenant or condition herein or in any other Operative Document to which the Lessor is a party, which failure shall continue unremedied for thirty (30) days after receipt by the Lessor of written notice thereof from the Agent or any Lender; or (d) any representation or warranty of the Lessor contained in any Operative Document or in any certificate required to be delivered thereunder shall prove to have been incorrect in a material respect when made and shall not have been cured within thirty (30) days of receipt by the Lessor of written notice thereof from the Agent or any Lender; or (e) the Lessor or the General Partner shall become bankrupt or make an assignment for the benefit of creditors or consent to the appointment of a trustee or receiver; or a trustee or a receiver shall be appointed for the Lessor or the General Partner or for substantially all of its property without its consent and shall not be dismissed or stayed within a period of ninety (90) days; or bankruptcy, reorganization or insolvency proceedings shall be instituted by or against the Lessor or the General Partner and, if instituted against the Lessor or the General Partner, shall not be dismissed or stayed for a period of ninety (90) days; or (f) any Event of Default shall occur and be continuing. 10 SECTION 5.2 Remedies. -------- (a) Upon the occurrence of a Loan Event of Default hereunder, (i) if such event is a Loan Event of Default specified in clause (e) of Section 5.1 with ---------- ----------- respect to the Lessor, automatically the Lenders' Commitments shall terminate and the outstanding principal of, and accrued interest on, the Loans shall be immediately due and payable, and (ii) if such event is any other Loan Event of Default, upon written request of the Required Lenders, the Agent shall, by notice of default to the Lessor, declare the Commitments of the Lenders to be terminated forthwith and the outstanding principal of, and accrued interest on, the Loans to be immediately due and payable, whereupon the Commitments of the Lenders shall immediately terminate and the outstanding principal of, and accrued interest on, the Loans shall become immediately due and payable. (b) When a Loan Event of Default exists, the Agent may, and upon the written instructions of the Required Lenders shall, exercise any or all of the rights and powers and pursue any and all of the remedies available to it hereunder, under the Note, the Mortgages and the Assignments of Lease and Rents and shall have and may exercise any and all rights and remedies available under the Uniform Commercial Code or any provision of law. When a Loan Event of Default exists, the Agent may, and upon the written instructions of the Required Lenders shall, have the right to exercise all rights of the Lessor under the Lease pursuant to the terms and in the manner provided for in the Mortgages and the Assignments of Lease and Rents. (c) Except as expressly provided above, no remedy under this Section 5.2 ----------- is intended to be exclusive, but each shall be cumulative and in addition to any other remedy provided under this Section 5.2 or under the other Operative ----------- Documents or otherwise available at law or in equity. The exercise by the Agent or any Lender of any one or more of such remedies shall not preclude the simultaneous or later exercise of any other remedy or remedies. No express or implied waiver by the Agent or any Lender of any Loan Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Loan Event of Default. The failure or delay of the Agent or any Lender in exercising any rights granted it hereunder upon any occurrence of any of the contingencies set forth herein shall not constitute a waiver of any such right upon the continuation or recurrence of any such contingencies or similar contingencies and any single or partial exercise of any particular right by the Agent or any Lender shall not exhaust the same or constitute a waiver of any other right provided herein. 11 SECTION 6 THE AGENT SECTION 6.1 Appointment. Each Lender hereby irrevocably designates and ----------- appoints the Agent as the agent of such Lender under this Loan Agreement and the other Operative Documents, and each such Lender irrevocably authorizes the Agent, in such capacity, to take such action on its behalf under the provisions of this Loan Agreement and the other Operative Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Loan Agreement and the other Operative Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Loan Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Loan Agreement or any other Operative Document or otherwise exist against the Agent. SECTION 6.2 Delegation of Duties. The Agent may execute any of its duties -------------------- under this Loan Agreement and the other Operative Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. SECTION 6.3 Exculpatory Provisions. Neither the Agent nor any of its ---------------------- officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Loan Agreement or any other Operative Document (except for its or such Person's own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Lessor or any Lessee or any officer thereof contained in this Loan Agreement or any other Operative Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Loan Agreement or any other Operative Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Loan Agreement or any other Operative Document or for any failure of the Lessor or any Lessee to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Loan Agreement or any other Operative Document, or to inspect the properties, books or records of the Lessor, the Guarantor or any Lessee. SECTION 6.4 Reliance by Agent. The Agent shall be entitled to rely, and ----------------- shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Lessor or any Lessee), independent accountants and other experts selected by the Agent. 12 The Agent may deem and treat the payee of the Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Loan Agreement or any other Operative Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Funding Parties against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Subject to the Operative Documents, the Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Loan Agreement and the other Operative Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of an interest in the Note. SECTION 6.5 Notice of Default. The Agent shall not be deemed to have ----------------- knowledge or notice of the occurrence of any Loan Potential Event of Default or Loan Event of Default hereunder unless the Agent has received notice from a Lender referring to this Loan Agreement, describing such Loan Potential Event of Default or Loan Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give notice thereof to the Lenders. The Agent shall take such action, subject to the Operative Documents with respect to such Loan Potential Event of Default or Loan Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until the Agent shall have received such -------- directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Loan Potential Event of Default or Loan Event of Default as it shall deem advisable in the best interests of the Lenders. SECTION 6.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly --------------------------------------- acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Lessor, the Guarantor or any Lessee, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Lessor, the Guarantor and each Lessee and made its own decision to make its Loans hereunder and enter into this Loan Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Loan Agreement and the other Operative Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Lessor, the Guarantor and each Lessee. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition 13 (financial or otherwise), prospects or creditworthiness of the Lessor, the Guarantor or any Lessee which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. SECTION 6.7 Indemnification. The Lenders agree to indemnify the Agent in --------------- its capacity as such (to the extent not reimbursed by a Lessee and without limiting the obligation of any Lessee to do so), ratably according to the percentage each Lender's Commitment bears to the total Commitments of all of the Lenders on the date on which indemnification is sought under this Section 6.7 ----------- (or, if indemnification is sought after the date upon which the Lenders' Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with the percentage that each Lender's Commitment bears to the Commitments of all of the Lenders immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Note) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of, the Commitments, this Loan Agreement, any of the other Operative Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be -------- liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's gross negligence or willful misconduct. The agreements in this Section 6.7 shall survive the payment of the Note and all ----------- other amounts payable hereunder. SECTION 6.8 Agent in Its Individual Capacity. The Agent and its -------------------------------- Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Lessor, the Guarantor or any Lessee as though the Agent were not the Agent hereunder and under the other Operative Documents. With respect to Loans made or renewed by it, the Agent shall have the same rights and powers under this Loan Agreement and the other Operative Documents as any Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. Each Lender acknowledges that the Agent in its individual capacity has had and continues to have other business relations and transactions with Hughes, Hughes' Affiliates and the Lessor. SECTION 6.9 Successor Agent. The Agent may resign as Agent upon 20 days' --------------- notice to the Lenders effective upon the appointment of a successor agent. If the Agent shall resign as Agent under this Loan Agreement and the other Operative Documents, then the Required Lenders shall appoint a successor agent for the Lenders, which successor agent shall be a commercial bank organized under the laws of the United States of America or any State thereof or under the laws of another country which is doing business in the United States of America and having a combined capital, surplus and undivided profits of at least $100,000,000, whereupon such successor agent shall succeed to the rights, powers and duties of the Agent, and the term "Agent" shall mean such successor agent effective upon such appointment and approval, and the 14 former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Loan Agreement or any holders of an interest in the Note. After any retiring Agent's resignation as Agent, all of the provisions of this Section ------- 6 shall inure to its benefit as to any actions taken or omitted to be taken by - - it while it was Agent under this Loan Agreement and the other Operative Documents. SECTION 7 MISCELLANEOUS SECTION 7.1 Amendments and Waivers. Neither this Loan Agreement, the ---------------------- Note, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of Section 8.4 of the Master Agreement. SECTION 7.2 Notices. Unless otherwise specified herein, all notices, ------- requests, demands or other communications to or upon the respective parties hereto shall be given in accordance with Section 8.2 of the Master Agreement. SECTION 7.3 No Waiver; Cumulative Remedies. No failure to exercise and no ------------------------------ delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. The provisions of Section 8.11 of the Master Agreement shall apply to this Loan Agreement. SECTION 7.4 Successors and Assigns. This Loan Agreement shall be binding ---------------------- upon and inure to the benefit of the Lessor, the Agent, the Lenders, all future holders of or interest in the Note and their respective successors and permitted assigns. SECTION 7.5 Counterparts. This Loan Agreement may be executed by one or ------------ more of the parties to this Loan Agreement on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same agreement. A set of the counterparts of this Loan Agreement signed by all the parties hereto shall be lodged with the Lessor and the Agent. SECTION 7.6 GOVERNING LAW. THIS LOAN AGREEMENT AND THE NOTE AND THE ------------- RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS LOAN AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF FLORIDA. SECTION 7.7 Survival and Termination of Agreement. All covenants, ------------------------------------- agreements, representations and warranties made herein and in any certificate, document or statement 15 delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Loan Agreement, and the Note and shall continue in full force and effect so long as the Note or any amount payable to any Lender under or in connection with this Loan Agreement or the Note is unpaid, at which time this Loan Agreement shall terminate. SECTION 7.8 Entire Agreement. This Loan Agreement and the other Operative ---------------- Documents set forth the entire agreement of the parties hereto with respect to its subject matter, and supersedes all previous understandings, written or oral, with respect thereto. SECTION 7.9 Severability. Any provision of this Loan Agreement or of the ------------ Note which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or thereof or affecting the validity, enforceability or legality of any such provision in any other jurisdiction. 16 IN WITNESS THEREOF, the parties hereto have caused this Loan Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. SUNTRUST BANK, as Agent By: ______________________________ Name:_________________________ Title:________________________ LOAN AGREEMENT SYNTHETIC LEASE S-1 ATLANTIC FINANCIAL GROUP, LTD., as Lessor and Borrower By: Atlantic Financial Managers, Inc., its General Partner By: _________________________ Name: Stephen Brookshire Title: President LOAN AGREEMENT SYNTHETIC LEASE S-2 SUNTRUST BANK, as a Lender By:_______________________ Name:__________________ Title:_________________ LOAN AGREEMENT SYNTHETIC LEASE S-3 EX-10.14 (B) 5 dex1014b.txt CONSTRUCTION AGREEMENT - SYNTHETIC LEASE Exhibit 10.14 (b) CONSTRUCTION AGENCY AGREEMENT dated as of June 22, 2001 among ATLANTIC FINANCIAL GROUP, LTD. and HUGHES SUPPLY, INC. as Construction Agent [SYNTHETIC LEASE] TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS 1.1. Defined Terms..........................................................................................1 ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT .......................................................2 2.1. Appointment............................................................................................2 2.2. Acceptance; Construction...............................................................................2 2.3. Commencement of Construction...........................................................................2 2.4. Supplements to this Agreement..........................................................................2 2.5. Term...................................................................................................3 2.6. Identification of Properties; Construction Documents...................................................3 2.7. Scope of Authority.....................................................................................3 2.8. Covenants of the Construction Agent....................................................................4 2.9. Insurance..............................................................................................5 ARTICLE III THE BUILDINGS...........................................................................11 3.1. Amendments; Modifications.............................................................................11 3.2. Casualty and Condemnation.............................................................................11 3.3. Indemnity.............................................................................................12 3.4. Construction Force Majeure Events.....................................................................12 ARTICLE IV PAYMENT OF FUNDS........................................................................13 4.1. Funding of Property Acquisition Costs and Property Buildings Costs....................................13 ARTICLE V CONSTRUCTION AGENCY EVENTS OF DEFAULT ..................................................14 5.1. Construction Agency Events of Default.................................................................14 5.2. Damages...............................................................................................15 5.3. Remedies; Remedies Cumulative.........................................................................15 5.4. Limitation on Construction Agent's Recourse Liability.................................................17 5.5. Construction Agent's Right to Purchase................................................................18 5.6. Construction Return Procedures........................................................................18 5.7. Option to Remarket....................................................................................19 5.8. Rejection of Sale.....................................................................................22 5.9. Return of Leased Property.............................................................................22 5.10. Reimbursements.......................................................................................23 5.11. Construction Failure Payment.........................................................................23 ARTICLE VI NO CONSTRUCTION AGENCY FEE..............................................................23 6.1. Lease as Fulfillment of Lessor's Obligations..........................................................23 ARTICLE VII LESSOR'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS............................................24
i 7.1. Exercise of the Lessor's Rights.......................................................................24 7.2. Lessor's Right to Cure Construction Agent's Defaults..................................................24 ARTICLE VIII MISCELLANEOUS...........................................................................24 8.1. Notices...............................................................................................24 8.2. Successors and Assigns................................................................................24 8.3. GOVERNING LAW.........................................................................................24 8.4. Amendments and Waivers................................................................................25 8.5. Counterparts..........................................................................................25 8.6. Severability..........................................................................................25 8.7. Headings and Table of Contents........................................................................25 8.8. Jurisdiction; Waivers.................................................................................25
ii EXHIBITS Exhibit A Form of Supplement to Construction Agency Agreement iii CONSTRUCTION AGENCY AGREEMENT ----------------------------- CONSTRUCTION AGENCY AGREEMENT, dated as of June 22, 2001 (as amended, supplemented or otherwise modified from time to time, this "Agreement"), between --------- ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership, (the "Lessor"), and ------ HUGHES SUPPLY, INC., a Florida corporation ("Hughes", and in its capacity as ------ construction agent, the "Construction Agent"). ------------------ PRELIMINARY STATEMENT A. Lessor, Hughes, certain subsidiaries of Hughes that may become signatories thereto, the Lenders signatory thereto and SunTrust Bank, as agent for such Lenders (in such capacity, the "Agent") are parties to that certain ----- Master Agreement, dated as of June 22, 2001 (as amended, supplemented or otherwise modified from time to time pursuant thereto, the "Master Agreement"). ---------------- B. Subject to the terms and conditions hereof, (i) the Lessor desires to appoint Hughes as the Construction Agent to act as its sole and exclusive agent for the identification and acquisition of the Land pursuant to the Master Agreement and construction of the Buildings in accordance with the Plans and Specifications and pursuant to the Master Agreement, and (ii) the Construction Agent desires, for the benefit of the Lessor, to cause the Buildings to be constructed in accordance with the Plans and Specifications and pursuant to the Master Agreement and this Agreement, in each case in accordance with the terms herein set forth. NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: ARTICLE I DEFINITIONS I.1. Defined Terms. Capitalized terms used but not otherwise defined ------------- in this Agreement shall have the meanings set forth in Appendix A to the Master Agreement. ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT II.1. Appointment. Pursuant to and subject to the terms and ----------- conditions set forth herein and in the Master Agreement and the other Operative Documents, the Lessor hereby irrevocably designates and appoints Hughes as the Construction Agent to act as its exclusive agent for (i) the identification and acquisition from time to time of Land to be acquired or leased by the Lessor and leased or subleased to Hughes and (ii) the construction of the Buildings in accordance with the Plans and Specifications on such Land. II.2. Acceptance; Construction. Hughes hereby unconditionally accepts ------------------------ the designation and appointment as Construction Agent. The Construction Agent will cause the Buildings to be constructed on the Land substantially in accordance with the Plans and Specifications and, in accordance with the Operative Documents, to be equipped in all material respects with all Applicable Law and insurance requirements. If a Leased Property will be leased by a Lessee other than Hughes, Hughes may appoint such Lessee as its sub-construction agent with respect to such Leased Property, provided that such appointment shall not -------- affect Hughes' obligations hereunder, which obligations shall be primary and shall remain in full force and effect. II.3. Commencement of Construction. Subject to Construction Force ---------------------------- Majeure Events, the Construction Agent hereby agrees, unconditionally and for the benefit of the Lessor, to cause Construction of a Building to commence on each parcel of Land as soon as is reasonably practicable, in its reasonable judgment, after the Closing Date in respect of such Land. For purposes hereof, Construction of a Building shall be deemed to commence on the date after the Closing Date for the related Leased Property (the "Construction Commencement ------------------------- Date") on which excavation for the foundation for such Building or any other - ---- Construction of such Building commences. Without limiting the foregoing, no phase of such Construction shall be undertaken until all permits required for such phase have been issued therefor. II.4. Supplements to this Agreement. On the Closing Date of each ----------------------------- parcel of Land, the Lessor and the Construction Agent shall each execute and deliver to the Agent a supplement to this Agreement in the form of Exhibit A to --------- this Agreement, appropriately completed, pursuant to which the Lessor and the Construction Agent shall, among other things, each acknowledge and agree that the Construction of such parcel of Land will be governed by the terms of this Agreement. Following the execution and delivery of a supplement to this Agreement as provided above, such supplement and all supplements previously delivered under this Agreement shall constitute a part of this Agreement. On or prior to the Closing Date of each parcel of Land, the Construction Agent shall prepare and deliver to the Lessor and the Agent a construction budget (the "Construction Budget") for the related Leased Property, setting forth in ------------------- reasonable detail the budget for the Construction of the proposed Building on such Land in accordance with the Plans and Specifications therefor, and all related costs including the capitalized interest and Yield expected to accrue during the related Construction Term; such Construction Budget shall include a line item for the amount of self-insurance or deductibles applicable to such Leased Property. 2 II.5. Term. This Agreement shall commence on the date hereof and ---- shall terminate with respect to any given Leased Property upon the first to occur of: (a) payment by the Lessee of the Leased Property Balance and termination of the Lease with respect to such Leased Property in accordance with the Lease; (b) the expiration or earlier termination of the Lease; (c) termination of this Agreement pursuant to Article V hereof; --------- (d) the Completion Date for such Leased Property and the completion of all punch list items as set forth in Section 2.8(d); and -------------- (e) the payment by the Construction Agent of the Leased Property Balance or the Construction Failure Payment with respect to such Leased Property pursuant to this Agreement. II.6. Identification of Properties; Construction Documents. The ---------------------------------------------------- Construction Agent may execute any of its duties and obligations under this Agreement by or through agents, contractors, developers, Affiliates, employees or attorneys-in-fact, and the Construction Agent shall enter into such agreements with architects and contractors as the Construction Agent deems necessary or desirable for the construction of the Buildings pursuant hereto (the "Construction Documents"); provided, however, that no such delegation shall ---------------------- -------- ------- limit or reduce in any way the Construction Agent's duties and obligations under this Agreement; provided, further, that contemporaneously with the execution and -------- ------- delivery of a Construction Document, the Construction Agent will execute and deliver to the Lessor the Security Agreement and Assignment, pursuant to which the Construction Agent assigns to the Lessor, among other things, all of the Construction Agent's rights under and interests in such Construction Documents. Each construction contract shall be with a reputable general contractor with experience in constructing projects that are similar in scope and type to the proposed Building, and shall provide for a guaranteed maximum project cost and at least 10% retainage initially, which amount may decline to 5% retainage at such time as Construction of the related Building is at least 50% complete in accordance with the terms of the related construction contract. II.7. Scope of Authority. (a) Subject to the terms, conditions, ------------------ restrictions and limitations set forth in the Operative Documents, the Lessor hereby expressly authorizes the Construction Agent, or any agent or contractor of the Construction Agent, and the Construction Agent unconditionally agrees, for the benefit of the Lessor, to take all action necessary or desirable for the performance and satisfaction of all of the Construction Agent's obligations hereunder with respect to the Leased Properties acquired or leased by the Lessor, including, without limitation: (i) the identification and assistance with the acquisition or lease of Land in accordance with the terms and conditions of the Master Agreement; 3 (ii) all design and supervisory functions relating to the construction of the Buildings and performing all engineering work related to the construction of the Buildings; (iii) negotiating and entering into all contracts or arrangements to procure the equipment and services necessary to construct the Buildings on such terms and conditions as are customary and reasonable in light of local standards and practices; (iv) obtaining all necessary permits, licenses, consents, approvals and other authorizations, including those required under Applicable Law, from all Governmental Authorities in connection with the construction and the development of the Leased Property on the Land in accordance with the Plans and Specifications; (v) maintaining all books and records with respect to the construction, operation and management of the Leased Properties; and (vi) performing any other acts necessary or appropriate in connection with the identification, and acquisition (or leasing) and development of the Land and construction of the Buildings in accordance with the Plans and Specifications, and all other functions typically undertaken for the construction and development of similar properties. (b) Neither the Construction Agent nor any of its Affiliates or agents shall enter into any contract which would, directly or indirectly, impose any liability or obligation on the Lessor unless such contract expressly contains an acknowledgment by the other party or parties thereto that the obligations of the Lessor are non-recourse, and that the Lessor shall have no personal liability with respect to such obligations. Any contract entered into by the Construction Agent or any of its Affiliates or agents not meeting the requirements of the foregoing sentence shall be ineffective. Subject to the foregoing, the Lessor shall execute such documents and take such other actions as the Construction Agent shall reasonably request, at the Construction Agent's expense (which expenses shall be Construction Costs and shall be reimbursed with the proceeds of Advances), to permit the Construction Agent to perform its duties hereunder. (c) Subject to the terms and conditions of this Agreement and the other Operative Documents, the Construction Agent shall have sole management and control over the means, methods, sequences and procedures with respect to the Construction. The parties agree that the Construction Agent shall be in possession and control of each Leased Property during the Construction Term therefor. II.8. Covenants of the Construction Agent. The Construction Agent ----------------------------------- hereby covenants and agrees that it will: 4 (a) following the Construction Commencement Date for each parcel of Land, cause construction of a Building on such Land to be prosecuted diligently and without undue interruption substantially in accordance with the Plans and Specifications for such Land, in accordance with the Construction Budget for such Leased Property and in compliance in all material respects with all Applicable Law and insurance requirements; (b) notify the Lessor and the Agent in writing not less than five (5) Business Days after the occurrence of each Construction Force Majeure Event; (c) take all reasonable and practical steps to cause the Completion Date for such Leased Property to occur on or prior to the Scheduled Construction Termination Date for such Leased Property, and cause all Liens (including, without limitation, Liens or claims for materials supplied or labor or services performed in connection with the construction of the Buildings), other than Permitted Liens and Lessor Liens, to be discharged; (d) following the Completion Date for each Leased Property, cause all outstanding punch list items with respect to the Buildings on such Leased Property to be completed within sixty (60) days after said Completion Date; (e) at all times during Construction, cause all title to all personalty financed by the Lessor on or within such Leased Property to be and remain vested in the Lessor and cause to be on file with the applicable filing office or offices all necessary documents under Article 9 of the Uniform Commercial Code to perfect such title free of all Liens other than Permitted Liens, it being understood and acknowledged that such Lessor's rights, title and interest in and to said personalty have been assigned to the Agent pursuant to the Operative Documents; (f) not enter into any agreements or arrangements with any Person (other than the Funding Parties pursuant to the Operative Documents) that would result in any claim against, or liability of, the Agent or any Funding Party resulting from the fact that any Leased Property is not completed on or prior to the Scheduled Construction Termination Date therefor; and (g) take all reasonable and practical steps to minimize the disruption of the construction process arising from Construction Force Majeure Events. II.9. Insurance. --------- (a) Insurance by the Construction Agent: The Construction Agent ----------------------------------- shall cause to be procured with proceeds of Advances pursuant to, and subject to the terms and conditions of, the Operative Documents and maintain in full force and effect during the Construction Term insurance policies with insurance companies authorized to do business in each jurisdiction in which the Leased Properties under Construction are located with a Best Insurance Reports rating 5 of "A-" or better and a financial size category of "VIII" or higher, with limits and coverage provisions as set forth below. (i) General Liability Insurance. Liability insurance on an --------------------------- occurrence basis for the Construction Agent's and Lessor's liability arising out of claims for personal injury (including bodily injury and death) and property damage. Such insurance shall provide coverage for products-completed operations, contractual and personal injury liability with a $1,000,000 limit per occurrence for combined bodily injury and property damage with policy aggregates of $2,000,000 (other than products- completed operations) and $1,000,000 for products-completed operations. A maximum deductible or self-insured retention of $5,000 per occurrence shall be allowed. (ii) Automobile Liability Insurance. Automobile liability insurance ------------------------------ for the Construction Agent's and Lessor's liability arising out of claims for bodily injury and property damage covering all leased, non-owned and hired vehicles used in the performance of the Construction Agent's obligations under this Agreement with a $1,000,000 limit per accident for combined bodily injury and property damage and containing appropriate no- fault insurance provisions wherever applicable. A maximum deductible or self-insured retention of $5,000 per occurrence shall be allowed. (iii) Excess Liability Insurance. Liability insurance in excess of the -------------------------- insurance coverage required in clauses (i) and (ii) above with a limit of ----------- ---- $10,000,000 per occurrence and in the aggregate. (iv) Builder's Risk Insurance. Property damage insurance on an "all ------------------------ risk" basis insuring the Construction Agent and Lessor, as their interests may appear, including coverage against loss or damage from the perils of earth movement (including but not limited to earthquake, landslide, subsidence and volcanic eruption), flood, strike, riot and civil commotion. a. Property Covered. The builder's risk insurance shall provide ---------------- coverage for (i) the Buildings, structures, machinery, equipment, facilities, fixtures, supplies and other property constituting a part of the Leased Property under Construction, (ii) property of others in the care, custody or control of the Construction Agent in connection with the Leased Property, but not contractor's tools, machinery, plant and equipment including spare parts and accessories not destined to become a permanent part of the Leased Property, (iii) all preliminary works, temporary works and interconnection works and (iv) foundations and other property below the surface of the ground. b. Additional Coverages. The builder's risk policy shall insure -------------------- (i) the cost (including labor) of preventive measures to reduce or prevent further loss, (ii) inland transit with sublimits sufficient to insure the largest single shipment to or 6 from the Leased Property site from anywhere within North America, (iii) attorney's fees, engineering and other consulting costs, and permit fees directly incurred in order to repair or replace damaged insured property in the amount of $2,500, (iv) expediting expenses (defined as reasonable extra costs incurred after an insured loss to make temporary repairs and expedite the permanent repair of the damaged property) with a sublimit in the amount of $25,000, (v) off- site storage to insure the full replacement value of any property or equipment not stored on the Leased Property site with a sublimit of $150,000, and (vi) demolition expenses, removal of undamaged portion, and increased cost of construction due to operation of laws or codes with a sublimit of twenty-five percent (25%) of the amount of the physical loss or damage. c. Special Clauses. The builder's risk policy shall include (i) --------------- a 72 hour flood/windstorm/earthquake clause, (ii)unintentional errors and omissions clause, (iii) a requirement that the insurer pay losses within 60 days after receipt of an acceptable proof of loss, and (iv) an extension clause allowing the policy period to be extended up to 60 days without modification to the terms and conditions of the policy and payment of the premium on a pro-rata basis. d. Prohibited Exclusions. The builder's risk policy shall not --------------------- contain any (i) coinsurance provisions, (ii) exclusion for ensuing direct physical loss or damage resulting from freezing, (iii) exclusion for physical loss or damage covered under any guarantee or warranty arising out of an insured peril, or (iv) exclusion for resultant physical loss or damage caused by ordinary wear and tear, gradual deterioration, faulty workmanship, design or materials. e. Sum Insured. The builder's risk policy shall (i) be on a ----------- completed value form, (ii) insure 100% of the completed insurable value of the Building(s), (iii) value losses at replacement cost, without deduction for physical depreciation or obsolescence including custom duties, taxes and fees and (iv) insure loss or damage from earth movement and flood with separate sublimits of $15,000,000. f. Deductible. The builder's risk insurance may have a ---------- deductible not in excess of $5,000. (v) Delayed Startup Insurance. Delayed startup coverage insuring the ------------------------- Lessor and covering the Lessor's accrued and capitalized interest and Yield for a six month period as a result of loss or damage insured by the builder's risk insurance resulting in a delay in completion of the Building(s) beyond their anticipated date of completion. Such insurance shall (a) have a deductible of not greater than 10 days per occurrence during the Construction Term, (b) have an indemnity period not less than six months, (c) cover loss sustained when access to the Leased Property site is prevented due to an 7 insured peril at premises in the vicinity of the Leased Property site with a sublimit of $27,500, (d) cover loss sustained due to the action of a public authority preventing access to the Leased Property site due to imminent or actual loss or destruction arising from an insured peril at premises in the vicinity of the Leased Property site with a sublimit of $27,500, (e) not contain any form of a coinsurance provision or include a waiver of such provisions, (f) insure loss caused by damage to finished equipment or machinery while awaiting shipment at a supplier's premises, and (g) cover losses relating to real estate tax assessments, insurance expenses, architect's and engineer's fees to repair or replace lost work, legal and accounting fees, construction management fees, testing and permitting expenses, marketing and administration expenses and overhead. (vi) Endorsements. All policies of liability insurance required to be ------------ maintained by the Construction Agent shall be endorsed as follows. a. To name the Lessor as the loss payee with respect to property insurance; b. To name the Lessor, the Lenders and the Agent as additional insureds with respect to all liability insurance; c. To provide a severability of interests and cross liability clause; d. That the insurance shall be primary and not excess to or contributing with any insurance or self-insurance maintained by the Lessor or the additional insureds. (vii) Waiver of Subrogation. The Construction Agent hereby waives any --------------------- and every claim for recovery from the Lessor, the Lenders and the Agent for any and all loss or damage covered by any of the insurance policies to be maintained under this Agreement to the extent that such loss or damage is recovered under any such policy. If the foregoing waiver will preclude the assignment of any such claim to the extent of such recovery, by subrogation (or otherwise), to an insurance company (or other person), the Construction Agent (or other appropriate party) shall give written notice of the terms of such waiver to each insurance company which has issued, or which may issue in the future, any such policy of insurance (if such notice is required by the insurance policy) and shall cause each such insurance policy to be properly endorsed by the issuer thereof to, or to otherwise contain one or more provisions that, prevent the invalidation of the insurance coverage provided thereby by reason of such waiver. (b) Conditions. ---------- (i) Adjustment of Losses. Losses, if any, with respect to any Leased -------------------- Property under any damage policies required to be carried under this Section 2.9 shall be adjusted with the insurance companies, including the ----------- filing of appropriate proceedings, as follows: 8 (x) so long as no Construction Agency Event of Default shall have occurred and be continuing, and provided that the Construction Agent is required, or has agreed, to repair the damage or if the purchase option has been exercised, such losses will be adjusted by the Construction Agent, (y) if any Construction Agency Event of Default shall have occurred and be continuing or Construction Force Majeure Event declared, or if the Construction Agent is not required to, and has not agreed to, repair the damage, such losses shall be adjusted by the Lessor with the consent of the Construction Agent (which consent shall not be unreasonably withheld or delayed). The party which shall be entitled to adjust losses may appear in any proceeding or action to negotiate, prosecute, adjust or appeal any claim for any award, compensation or insurance payment on account of any Casualty at such party's reasonable request, and the other party shall participate in any such proceeding, action, negotiation, prosecution or adjustment. The Construction Agent may incur no expenses with respect to loss adjustment without the prior consent, not to be unreasonably withheld, of the Lessor. Adjustment expenses shall be funded through Advances. The parties hereto agree that this Agreement shall control the rights of the parties hereto in and to any such award, compensation or insurance payment relating to any Casualty affecting a Construction Land Interest. (ii) Application of Insurance Proceeds. All proceeds of insurance --------------------------------- maintained pursuant to this Section 2.9 on account of any damage or ----------- destruction of any Leased Property (or part thereof) subject to Construction shall be paid to Lessor, provided that (i) if no Construction Agency Event of Default shall have occurred and (ii) subject to Section ------- 3.4, the Construction Agent has undertaken to repair the damage and has --- demonstrated to the reasonable satisfaction of the Lessor that the application of such insurance proceeds (including, without limitation, delay in start up coverage), together with the remaining Commitment, are sufficient to cause the construction to be completed on or prior to the Scheduled Construction Termination Date, such funds shall be held by Lessor in a segregated account and disbursed to the Construction Agent to pay costs incurred by the Construction Agent to effect the repair of the Leased Property. If the Construction cannot be completed on or prior to the Scheduled Construction Termination Date, the parties agree to discuss the issue of disbursement of insurance proceeds to the Construction Agent in good faith and after such discussion the Lessor shall make a determination in the exercise of its sole discretion. Any proceeds of insurance paid to Lessor pursuant in this Section 2.9, not used to repair the Leased Property ----------- and held by Lessor shall be applied to the account of Construction Agent to reduce the Lease Balance. (iii) Additional Insurance. Any additional insurance obtained by the -------------------- Construction Agent or the Lessor shall provide that it shall not interfere with or in any way limit the insurance described in this Section 2.9 or ----------- increase the amount of any premium payable with respect to any insurance described in such Section. The proceeds of any such additional insurance will be for the account of the party maintaining such additional insurance. 9 (iv) Payment of Premiums. The Construction Agent shall cause to be ------------------- paid (including, in the case of insurance required under this Section 2.9, ----------- with the proceeds of Advances and capitalized as part of Permitted Lease Balance), all premiums for the insurance required hereunder. The Construction Agent shall renew or replace, or cause to be renewed or replaced, each insurance policy required hereunder prior to the expiration date thereof for the duration of the Construction Term. (v) Policy Cancellation and Change. All policies of insurance ------------------------------ required to be maintained pursuant to this Section 2.9 shall be endorsed so ----------- that if at any time they are cancelled, or their coverage is reduced (by any party including the insured) so as to affect the interests of the Lessor, such cancellation or reduction shall not be effective as to the Lessor for 30 days, except for non-payment of premium which shall be for 10 days, after receipt by the Lessor of written notice from such insurer of such cancellation or reduction. (vi) Miscellaneous Policy Provisions. All property damage and ------------------------------- delayed startup insurance policies, (i) shall not include any annual or term aggregate limits of liability or clause requiring the payment of additional premium to reinstate the limits after loss except for insurance covering the perils of flood, earth movement, sabotage and terrorism, (ii) shall include the Lessor as a named insured as its interest may appear, and (iii) shall include a clause requiring the insurer to make final payment on any claim within 60 days after the submission of proof of loss and its acceptance by the insurer. (vii) Separation of Interests. All policies shall insure the ----------------------- interests of the Lessor regardless of any breach or violation by the Construction Agent or any other Person of warranties, declarations or conditions contained in such policies, any action or inaction of the Construction Agent or others, or any foreclosure relating to the Leased Property or any change in ownership of all or any portion of the Leased Property. (viii) Acceptable Policy Terms and Conditions. All policies of -------------------------------------- insurance required to be maintained pursuant to this Section 2.9 shall ----------- contain terms and conditions reasonably acceptable to the Lessor. (c) Evidence of Insurance. On the related Construction Commencement --------------------- Date and on an annual basis at least 10 days prior to each policy anniversary, the Construction Agent shall furnish the Lessor with certificates of insurance or binders, in a form acceptable to the Lessor, evidencing all of the insurance required by the provisions of this Section 2.9. Such certificates of ----------- insurance/binders shall be executed by each insurer or by an authorized representative of each insurer. Such certificates of insurance/binders shall identify underwriters, the type of insurance, the insurance limits and the policy term and shall specifically list the special provisions enumerated for such insurance required by this Section 2.9. Upon request, the Construction ----------- Agent will promptly furnish the Lessor with copies of all insurance policies, binders and cover 10 notes or other evidence of such insurance relating to the insurance required to be maintained hereunder. (d) Reports. Concurrently with the furnishing of the certification ------- referred to in paragraph (c), the Construction Agent shall furnish the Lessor ------------- with a report of an independent broker, signed by an officer of the broker, stating that in the opinion of such broker, the insurance then carried or to be renewed is in accordance with the terms of this Section 2.9. In addition the ----------- Construction Agent will advise the Lessor in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Construction Agent which may invalidate or render unenforceable, in whole or in part, any insurance being maintained by the Construction Agent pursuant to this Section 2.9. - ----------- (e) No Duty of Lessor to Verify or Review. No provision of this Section ------------------------------------- ------- 2.9 or any provision of this Agreement or the other Operative Documents shall - --- impose on the Lessor any duty or obligation to verify the existence or adequacy of the insurance coverage maintained by the Construction Agent, nor shall the Lessor be responsible for any representations or warranties made by or on behalf of the Construction Agent to any insurance company or underwriter. Any failure on the part of the Lessor to pursue or obtain the evidence of the insurance required by this Agreement from the Construction Agent and/or failure of the Lessor to point out any non-compliance of such evidence of insurance shall not constitute a waiver of any of the insurance requirements in this Agreement. Notwithstanding anything herein to the contrary, the Construction Agent shall not be responsible for the payment of any insurance deductible amounts. ARTICLE III THE BUILDINGS III.1. Amendments; Modifications. The Construction Agent may, subject to ------------------------- the conditions, restrictions and limitations set forth herein and in the Operative Documents (but not otherwise), at any time during the term hereof revise, amend or modify the Plans and Specifications and the related Construction Documents without the consent of the Lessor; provided, however, -------- ------- that the Lessor's prior written consent will be required in the following instances: (x) such revision, amendment or modification by its terms would result in the Completion Date of the Buildings occurring after the Scheduled Construction Termination Date, or (y) such revision, amendment or modification would result in the cost for such Leased Property exceeding the then remaining Commitments, minus the then remaining costs for completing each other Leased ----- Property for which the Completion Date has not occurred, or increase the Construction Budget therefor, or (z) the aggregate effect of such revision, amendment or modification, when taken together with any previous or contemporaneous revision, amendment or modification to the Plans and Specifications for such Leased Property, 11 would be to reduce the Fair Market Sales Value of such Leased Property in a material respect when completed. III.2. Casualty and Condemnation. If at any time prior to the Completion ------------------------- Date with respect to any Building there occurs a Casualty or the Lessor or the Construction Agent receives notice of a Condemnation, then, in each case the Construction Agent shall promptly and diligently take all commercially reasonable and practical steps to cause the Construction of the related Building to be completed substantially in accordance with the Plans and Specifications and with the terms hereof, and cause the Completion Date to occur on or prior to the Scheduled Construction Termination Date. The Construction Agent shall use all insurance proceeds or Awards received by it with respect to such Casualty or Condemnation, as the case may be, to pay the construction costs incurred in connection with such rebuilding or restoration. The Lessor shall make all insurance proceeds or Awards received with respect to such Casualty or Condemnation available to the Construction Agent to reimburse the Construction Agent for, or to pay, all construction costs incurred in connection with such rebuilding or restoration. To the extent that such insurance proceeds are insufficient to pay such construction costs, such construction costs shall be paid with the proceeds of Advances made pursuant to the Master Agreement. In the event that Lessor does not make such insurance proceeds or Advances available, then the provisions of Section 5.3 shall apply to the related Leased Property. ----------- Notwithstanding the foregoing, if the Casualty or Condemnation constitutes a Construction Force Majeure Event, then the provisions of Section 3.4 shall ----------- apply. III.3. Indemnity. During the Construction Term for each Leased Property, --------- the Construction Agent agrees to assume liability for, and to indemnify, protect, defend, save and hold harmless the Lessor on an After-Tax Basis, from and against, any and all Claims that may be imposed on, incurred by or asserted or threatened to be asserted, against the Lessor, whether or not the Lessor shall also be indemnified as to any such Claim by any other Person, in any way relating to or arising out of (i) any event, condition or circumstance within the Construction Agent's control,(ii) fraud, misapplication of funds, illegal acts or willful misconduct on the part of the Construction Agent, or (iii) any event described in paragraph (g) of Article XII of the Lease with respect to the Construction Agent. As used in clause (i) of the foregoing sentence, the term ---------- "within the Construction Agent's control" shall mean caused by or arising from any failure by any Obligor to comply with any of its obligations under the Operative Documents (including its insurance obligations), any representation or warranty by any Obligor in any of the Operative Documents being inaccurate, any negligence or wilful misconduct of any Obligor, or any claim by any third party against the Lessor based upon the action or inaction of or by any Obligor; provided, however, that if such Claim is related to construction completion and - -------- ------- such Claim does not arise out of or result from events or circumstances described in the foregoing clause (ii) or (iii), the Construction Agent's ----------- ----- liability shall be limited to an amount equal to the Construction Failure Payment. Any Claims that are incurred by any Indemnified Party for which the Construction Agent is not obligated to indemnify pursuant to this Section 3.3 or ----------- the Master Agreement shall, if requested by the Agent by written notice to Lessor be capitalized, and result in an increase to the Funded Amounts related to the relevant Leased Property. The foregoing 12 indemnities are in addition to, and not in limitation of, the indemnities with respect to environmental claims set forth in Section 7.2 of the Master Agreement. The provisions of Section 7.3 of the Master Agreement shall apply to any amounts that the Construction Agent is requested to pay pursuant to this Section 3.3. - ----------- III.4. Construction Force Majeure Events. If a Construction Force Majeure --------------------------------- Event that results in, or could reasonably be expected to result in, a Force Majeure Loss (including any losses that result from a Construction Force Majeure Event that prevents, or could reasonably be expected to prevent, the Construction Agent from completing Construction prior to the Scheduled Construction Termination Date) occurs, the Construction Agent shall promptly provide the Lessor with written notice thereof within ten (10) Business Days of the Construction Agent's knowledge of the occurrence thereof (the "Construction ------------ Force Majeure Declaration"). Upon receipt of the Construction Force Majeure - ------------------------- Declaration, Lessor and the Construction Agent shall consult with each other as to what steps, if any, are to be taken to remediate such Construction Force Majeure Event, including consulting as to the appropriateness of an extension of the Scheduled Construction Termination Date. The Construction Agent shall take all reasonable and practical steps to minimize the disruption of the construction process and all steps reasonably necessary to prevent further damage arising from such Construction Force Majeure Event. The Construction Agent shall be entitled to reimbursement from Lessor for any costs directly related to minimizing the disruption and to preventing further damage of such Construction Force Majeure Event through the proceeds of Fundings pursuant to, and subject to the terms and conditions of, the Master Agreement. The Construction Agent shall, within thirty (30) days of the delivery of the Construction Force Majeure Declaration, submit to the Lessor a budget detailing the costs that would be incurred in remediating such Construction Force Majeure Event and a schedule for effecting the same. The Construction Agent will commence such remediation only upon receipt of written authorization from the Lessor to do so, which authorization (or denial thereof) shall be given by written notice to Construction Agent not later than fifteen (15) Business Days after Lessor's receipt of the budget referred to in the preceding sentence. The Lessor in its sole discretion may elect to continue Construction and make Advances for such remediation or terminate this Agreement with respect to the affected Leased Property. If the Lessor elects to terminate this Agreement with respect to the affected Leased Property, subject to Construction Agent's right to purchase such Leased Property in accordance with Section 5.5 hereof, the ----------- Construction Agent shall within thirty (30) days of receipt of written notice of termination return the affected Leased Property to the Lessor in accordance with the procedures set forth in Section 5.6 and pay to the Lessor the Construction ----------- Failure Payment, in which event, Section 5.6 shall be applicable, or, if the ----------- Construction Agent exercises the Construction Default Remarketing Option, Section 5.7 shall be applicable. - ----------- In the event the Lessor elects to continue Construction after receipt of a Construction Force Majeure Declaration, the Lessor shall make available to the Construction Agent, so long as no Construction Agency Event of Default shall have occurred and be continuing, all insurance proceeds payable to the Lessor with respect to such event to the extent necessary to remediate such event. 13 ARTICLE IV PAYMENT OF FUNDS IV.1. Funding of Property Acquisition Costs and Property Buildings Costs. ------------------------------------------------------------------ (a) In connection with the acquisition or lease of any Land and during the course of the construction of the Buildings on any Land, the Construction Agent may request that the Lessor advance funds for the payment of acquisition, transaction and closing costs or property improvement costs, and the Lessor will comply with such request to the extent provided for under, and subject to the conditions, restrictions and limitations contained in, the Master Agreement and the other Operative Documents. (b) The proceeds of any funds made available to the Lessor to pay acquisition, transaction and closing costs or improvement costs shall be made available to the Construction Agent in accordance with the Funding Request relating thereto and the terms of the Master Agreement. The Construction Agent will use such proceeds only to pay the acquisition, transaction and closing costs or improvement costs for Leased Properties set forth in the Funding Request relating to such funds. ARTICLE V CONSTRUCTION AGENCY EVENTS OF DEFAULT V.1. Construction Agency Events of Default. If any one or more of the ------------------------------------- following events (each a "Construction Agency Event of Default") shall occur and ------------------------------------ be continuing: (a) the Construction Agent fails to apply any funds paid by, or on behalf of, the Lessor to the Construction Agent for the acquisition or lease of the Land and the construction of the Buildings to the payment of acquisition, transaction and closing costs or improvements costs for such Leased Property; (b) subject to Construction Force Majeure Events, the Construction Commencement Date with respect to any Leased Property shall fail to occur for any reason on or prior to the date that is one year after the Closing Date with respect to such Leased Property; (c) the Completion Date with respect to any Leased Property shall fail to occur for any reason on or prior to the earlier of the Funding Termination Date and the Scheduled Construction Termination Date for such Leased Property (as such Scheduled Construction Termination Date may have been extended pursuant to Section 3.4); ----------- 14 (d) any Event of Default shall have occurred and be continuing; or (e) the Construction Agent shall fail to observe or perform in any material respect any term, covenant or condition of this Agreement (except those specified in clauses (a) through (d) above), and such failure shall ----------- --- remain uncured for a period of thirty (30) days after notice thereof to the Construction Agent, except that such thirty (30) day period shall be automatically extended for such additional period of time as is reasonably necessary to cure such default, if such default is capable of being cured but cannot, with reasonable diligence, be cured within such thirty (30) day period, provided that (i) the Construction Agent is in the process of -------- diligently curing such default and (ii) such period shall not be extended for more than 120 days; then, in any such event (but subject to Section 5.3), the Lessor may, in ----------- addition to the other rights and remedies provided for in this Article, immediately terminate this Agreement as to any Leased Property or Properties or all of the Leased Properties, separately, successively or concurrently (all in Lessor's sole discretion) by giving the Construction Agent written notice of such termination, and upon the giving of such notice, this Agreement shall terminate as to such Leased Property or Properties or all of the Leased Properties (as the case may be) and all rights of the Construction Agent and, subject to the terms of the Operative Documents, all obligations of the Lessor under this Agreement with respect to such Leased Property or Properties or all of the Leased Properties (as the case may be) shall cease. The Construction Agent shall pay upon demand all reasonable costs, expenses, losses, expenditures and damages (including, without limitation, attorneys' fees and disbursements) actually incurred by or on behalf of the Lessor in connection with any Construction Agency Event of Default. V.2. Damages. The termination of this Agreement pursuant to Section 5.1 ------- ----------- shall in no event relieve the Construction Agent of its liability and obligations hereunder, all of which shall survive any such termination. V.3. Remedies; Remedies Cumulative. (a) If a Construction Agency Event ----------------------------- of Default shall have occurred and be continuing under Section 5.1(b), 5.1(c), -------------- ------ 5.1(d) (other than a Lease Event of Default under paragraph (g) of Article XII - ------ of the Lease) or 5.1(e) other than as a result of Construction Agent's ------ fraudulent or illegal acts, misapplication of funds or willful misconduct, then, in each case, the Lessor shall have all rights and remedies available under the Operative Documents or available at law, equity or otherwise, Lessor shall have the right to terminate this Agreement by giving Construction Agent written notice of such termination, and upon the giving of such notice, all rights and all obligations of the Construction Agent under this Agreement shall cease, except for such rights and obligations as by their terms are to continue beyond such termination, including Section 5.6(f) hereof and Lessor shall have the -------------- right to require Construction Agent to pay immediately upon receipt of notice from Lessor the Construction Failure Payment for all of the Construction Land Interests; provided that the Construction Agent has the option to purchase the -------- Leased Property in accordance with Section 5.5 hereof and the ----------- 15 Construction Agent shall have the option to cause the Leased Property to be remarketed in accordance with Section 5.7 hereof. ----------- In the event Construction Agent does not purchase the Leased Property pursuant to the terms hereof or the Construction Agent does not cause the Leased Property to be remarketed in accordance with Section 5.7 hereof, the related ----------- Lessee(s) shall return the Leased Property to Lessor within ten (10) Business Days in accordance with Section 5.6 hereof and Lessor shall have the right to ----------- sell the Leased Property to an unaffiliated third party and to require Construction Agent to pay to Lessor, immediately upon receipt of the termination notice, cash in an amount equal to the Construction Failure Payment for all of the Construction Land Interests. The Agent shall distribute the Land Proceeds derived from any such sale first, to the Lessor in an amount of the difference between (i) the Land Acquisition Cost and (ii) the Land Construction Failure Payment received by the Agent pursuant to the preceding sentence of this Section ------- 5.3(a), second, to the extent the Construction Agent has paid the Land - ------ Construction Failure Payment due to the Agent pursuant to the preceding sentence of this Section 5.3(a), to the Construction Agent to reimburse it to the extent -------------- of its payment of such amount, third, to the Lessor in an amount equal to the ----- remaining unpaid portion of the related Land Acquisition Cost and fourth, to the ------ Construction Agent, or to the Person or Persons otherwise lawfully entitled thereto, in an amount equal to the remaining proceeds, if any. The Agent shall distribute the Building Proceeds derived from any such sale first, to the Lessor in an amount of the difference between (i) the Permitted Lease Balance minus the Land Acquisition Cost and (ii) the Building Construction Failure Payment, if any, received by the Agent pursuant to the preceding sentence of this Section ------- 5.3(a), second, to the extent the Construction Agent has paid the Building - ------ Construction Failure Payment due to the Agent pursuant to the preceding sentence of this Section 5.3(a), to the Construction Agent to reimburse it to the extent -------------- of its payment of such amount, third, to the Lessor in an amount equal to the ----- remaining unpaid portion of the related Leased Property Balance minus the Land ----- Acquisition Cost, and fourth, to the Construction Agent, or to the Person or ------ Persons otherwise lawfully entitled thereto, in an amount equal to the remaining proceeds, if any. (b) If a Construction Agency Event of Default shall have occurred and be continuing under Sections 5.1(a) or 5.1(d) (as the result of an Event of --------------- ------ Default under paragraph (g) of Article XII of the Lease), Lessor shall have the right to terminate this Agreement by giving Construction Agent written notice of such termination, and upon the giving of such notice, all rights and all obligations of the Construction Agent under this Agreement shall cease, except for such rights and obligations as by their terms are to continue beyond such termination, including Section 5.6(f) hereof and Lessor shall have the right to -------------- require Construction Agent to pay immediately upon receipt of notice from Lessor the sum of (i) the Permitted Lease Balance then outstanding and (ii) an amount equal to all insurance proceeds paid to Construction Agent following the occurrence of any Construction Force Majeure Event which were not applied by the Construction Agent or are not required to reimburse the Construction Agent for Construction Costs incurred in connection with such Construction Force Majeure Event, to uses permitted by this Agreement (and which are not otherwise included in clause (i) of this sentence). In addition, but subject to the Construction ---------- Agent's purchase right under Section 5.5 and the Construction ----------- 16 Agent's right to remarket pursuant to Section 5.7, the Lessor may satisfy the ----------- foregoing obligation by a sale of the Leased Property and the proceeds derived from any such sale, net of all sale costs, closing costs and carrying costs (including, without limitation, amounts expended by the Agent or any Funding Party to insure, protect, maintain, operate the Leased Property, sales, transfer and real property taxes, brokers' fees, legal fees, the insurance costs, interest and Yield, and survey costs), shall be allocated between the Land Portion of such proceeds (the "Land Proceeds") and the Building Portion of such ------------- proceeds (the "Building Portion"). The Land Proceeds shall be distributed first, ---------------- ----- to Lessor in the amount of the Land Acquisition Cost to the extent not previously paid by the Construction Agent, second, to the extent the ------ Construction Agent has paid to the Lessor the Land Acquisition Cost, to the Construction Agent to reimburse it to the extent of its payment of the Land Acquisition Cost, but if no such payment was made to the Lessor, third, to the ----- Lessor, in an amount equal to the remaining unpaid portion of the Land Acquisition Cost and fourth, to the Construction Agent, or such Person or ------ Persons who may be lawfully entitled thereto, in an amount equal to the remaining Land Proceeds, if any. The Building Proceeds shall be distributed first, to Lessor in the amount of the Permitted Lease Balance minus the Land - ----- Acquisition Cost to the extent not previously paid by the Construction Agent, second, to the extent the Construction Agent has paid to the Lessor the - ------ Permitted Lease Balance minus the Land Acquisition Cost, to the Construction Agent to reimburse it to the extent of its payment of the Permitted Lease Balance minus the Land Acquisition Cost, but if no such payment was made, to the Lessor, third to the Lessor in an amount equal to the remaining unpaid portion ----- of the related Leased Property Balance minus the Land Acquisition Cost and ----- fourth, to the Construction Agent, or such other Person or Persons who may be - ------ lawfully entitled thereto, in an amount equal to the remaining proceeds, if any. The Lessor shall have all the rights and remedies afforded Lessor by Applicable Law and the Operative Documents. Upon payment to Lessor of the Lease Balance and any other amounts owing hereunder, Lessor shall convey the Leased Property to Construction Agent as though Construction Agent had exercised the purchase option under Section 5.5 hereof. If the Construction Agent does not purchase the ----------- Leased Property or exercise the Construction Default Remarketing Option pursuant to Section 5.7, it shall return the Leased Property to the Lessor within ten ----------- (10) Business Days of the declaration of the Construction Agency Event of Default in accordance with Section 5.6 hereof. ----------- (c) Remedies Cumulative. No failure to exercise and no delay in exercising, ------------------- on the part of the Lessor any right, remedy, power or privilege under this Agreement or under the other Operative Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in this Agreement and in the other Operative Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. V.4. Limitation on Construction Agent's Recourse Liability. Subject to the ----------------------------------------------------- last sentence of this Section 5.4, notwithstanding anything contained herein or ----------- in any other Operative Document to the contrary, upon the occurrence and during the continuance of a Construction Agency Event of Default with respect to any Leased Property described in Section 5.1(b), 5.1(c), -------------- ------ 17 5.1(d) (other than a Lease Event of Default under paragraph (g) of Article XII - ------ of the Lease) or 5.1(e), the aggregate maximum recourse liability of the ------ Construction Agent with respect to such default to the Lessor or any Person claiming by, through or under the Lessor under the Operative Documents, shall be limited to the Construction Failure Payment for such Leased Property. The Construction Agent nonetheless acknowledges and agrees that (i) the Lessor shall be entitled to recover from the applicable Leased Property (including through any reletting and/or sale of such Leased Property or any portion thereof) the entire outstanding Permitted Lease Balance of such Leased Property (and, to the extent sales proceeds exceed the Permitted Lease Balance, amounts in excess of the Permitted Lease Balance as provided in Section 5.3(a) and (b) and Section -------------- --- ------- 5.7 (g)), all accrued and unpaid interest, accrued Yield and other amounts then - ------- due and owing to the Lessor under the Operative Documents and all other costs and expenses of the Lessor incurred in connection with such Leased Property (including without limitation, any costs incurred in connection with the construction of the Building(s) and other improvements and/or any reletting or sale of such Leased Property or any portion thereof) from and after the date of such return and (ii) the foregoing recourse limitations shall not affect the Construction Agent's obligations pursuant to Section 3.3. If a Construction ----------- Agency Event of Default occurs due to the fraud, misapplication of funds, illegal acts or wilful misconduct on the part of the Construction Agent or any event described in paragraph (g) of Article XII of the Lease, the Construction Agent shall be obligated to pay the Permitted Lease Balance as set forth herein. V.5. Construction Agent's Right to Purchase. If a Construction Agency Event -------------------------------------- of Default hereunder relates only to a specific Leased Property or specific Leased Properties but not all Leased Properties, the Construction Agent shall have the right, at its option, to cure such Construction Agency Event of Default by purchasing (a "Construction Purchase") such affected Leased Property or --------------------- Properties for the Leased Property Balance(s) therefor from the Lessor within five (5) Business Days of the delivery of the notice of termination referred to in Section 5.3 (a) or (b) in accordance with the terms and subject to the --------------- --- conditions, restrictions and limitations of Section 14.5 of the Lease, in which case no Construction Agency Event of Default shall be deemed to have occurred hereunder for the purposes of the other Operative Documents. V.6. Construction Return Procedures. In the case of any return of any ------------------------------ Leased Property to the Lessor pursuant to Section 3.4 or Article V hereof (other ----------- --------- than returns pursuant to Section 5.7 hereof)(a "Construction Return"), the ----------- ------------------- Construction Agent shall, at its cost and expense, do each of the following on or prior to the return date specified by the Lessor in a written notice to the Construction Agent given at least ten (10) Business Days prior thereto: (a) the Construction Agent shall, on or prior to the return date, execute and deliver to the Lessor (or to the Lessor's designee): (i) a limited warranty deed with respect to all of the interest of the Lessees and the Construction Agent in the Leased Property containing representations and covenants of grantor to the Lessor (or such other Person) solely regarding the absence of Liens (other than Lessor Liens and the Liens of the Operative Documents (other than Liens in favor of a Lessee or the Construction Agent)), (ii) an agreement granting easements and rights of way to such Leased Property as reasonably deemed necessary by the Lessor, (iii) a bill of sale without 18 warranty (except as to the absence of liens other than Lessor Liens) with respect to all of the interest of the Lessee and the Construction Agent in all personalty and equipment financed by the Funding Parties and (iv) an assignment of such Construction Agent's entire interest in such Leased Property (which shall include an assignment of all such Construction Agent's right, title and interest in and to all awards, compensation and insurance proceeds payable in connection with any Casualty, Condemnation or Construction Force Majeure Event affecting such Leased Property and an assignment of leases of such Leased Property), in the case of the documents referred to in clauses (i), (ii) and ----------- ---- (iv) in recordable form and otherwise in conformity with local custom and free - ---- and clear of any Liens other than Lessor Liens. (b) the Construction Agent shall, on the construction return date, pay over to the Agent (as assignee of the Lessor) any awards, compensation and insurance previously received by the Construction Agent in connection with such Leased Property which have not been applied in connection with the Construction, repair or maintenance of the Leased Property except such amounts as may be necessary to reimburse the Construction Agent for expenditures incurred in connection with such Construction, repair or maintenance during the Construction Term which have not been reimbursed; (c) The Construction Agent shall execute and deliver to the Lessor a statement of termination of this Agreement and each of the other Operative Documents with respect to the affected Leased Property to be executed by the Funding Parties and delivered to the Construction Agent; (d) the Construction Agent shall, on or prior to the return date, vacate the Leased Property and transfer possession of such Leased Property to the Lessor or any Person designated by the Lessor, in each case by surrendering the same into the possession of the Lessor or such Person, as the case may be, free and clear of all Liens (other than Lessor Liens and the liens of the Operative Documents) in compliance with all Applicable Law (including Environmental Laws); (e) on or prior to the return date, the Construction Agent shall deliver to the Lessor or any Person designated by the Lessor copies of all Construction Documents, permits, licenses, books and records regarding the maintenance of such Leased Property and the Construction Agent's interest in such Leased Property, and a current copy of the Plans and Specifications; and (f) the Construction Agent shall take all actions reasonably requested by the Lessor to fully assign to the Lessor all of its rights and claims in, to and under, all of the Construction Documents, and all permits and other governmental authorizations related to such Leased Property or the Construction. V.7. Option to Remarket. Notwithstanding any provisions of this Agreement ------------------ and the Operative Documents to the contrary and subject to the fulfillment of each of the conditions set forth in this Section 5.7, the Construction Agent ----------- shall have the option to remarket the Leased 19 Property with respect to which a Construction Agency Event of Default has occurred for the Lessor or with respect to which the Lessee shall be required to pay the Construction Failure Payment pursuant to Section 3.4 (the "Construction ----------- ------------ Default Remarketing Option"). The Construction Agent's effective exercise and - -------------------------- consummation of the Construction Default Remarketing Option shall be subject to the due and timely fulfillment of each of the following provisions, the failure of any of which, unless waived in writing by the Lessor and the Lenders, shall render the Construction Default Remarketing Option and the Construction Agent's exercise thereof null and void, in which event, the Construction Agent shall not have any rights under this Section 5.7. ----------- (a) Not later than five Business Days after Lessor's service of the notice of termination referred to in Section 5.3(a) or (b) or the Lessor's denial of -------------- --- authorization to remediate any Construction Force Majeure Event under Section ------- 3.4, the Construction Agent shall give to the Lessor and the Agent written - --- notice of the Construction Agent's exercise of the Construction Default Remarketing Option. The date of such notice shall be the "CDRO Notice Date"; ---------------- (b) Not later than thirty (30) days after Lessor's service of the notice of termination referred to in Section 5.3(a) or (b) or the Lessor's denial of -------------- --- authorization to remediate any Construction Force Majeure Event under Section ------- 3.4, the Construction Agent shall deliver to the Lessor and the Agent an - --- environmental assessment of such Leased Property dated not earlier than forty- five (45) days prior to the date of delivery thereof. Such environmental assessment shall be prepared by an environmental consultant selected by the Required Funding Parties, shall be in form, detail and substance reasonably satisfactory to the Required Funding Parties, and shall otherwise indicate the environmental condition of such Leased Property to be the same as described in the related Environmental Audit. (c) The Construction Agent shall promptly provide any maintenance records relating to such Leased Property to the Lessor, the Agent and any potential purchaser upon request, and shall otherwise do all things necessary to deliver possession of such Leased Property to the potential purchaser. The Construction Agent shall allow the Lessor, the Agent and any potential purchaser access to any Leased Property for the purpose of inspecting the same. (d) On the ninetieth (90/th/) day (such date, or such later date as the Lessor may specify in writing, being the "CDRO Closing Date") after Lessor's ----------------- service of the notice of termination referred to in Section 5.3(a) or (b) or the -------------- --- Lessor's denial of authorization to remediate any Construction Force Majeure Event under Section 3.4, the Construction Agent shall surrender such Leased ----------- Property in accordance with Section 5.9 hereof. ----------- (e) In connection with any such sale of the Leased Property, the Construction Agent shall provide to the purchaser all customary "seller's" indemnities (taking into account the location and nature of the Leased Property), representations and warranties regarding title, absence of Liens (except Lessor Liens) and the condition of the Leased Property, including, without limitation, an environmental indemnity. The Construction Agent shall fulfill all of the requirements set forth in 20 clause (b) of Section 14.5 of the Lease (mutatis mutandis, as if Construction Agent were a Lessee, purchasing the Leased Property in accordance with the provisions of Section 14.1 of the Lease), and such requirements are incorporated herein by reference. As to the Lessor, any such sale shall be made on an "as is, with all faults" basis without representation or warranty by the Lessor, other than the absence of Lessor Liens. (f) In connection with any such sale of such Leased Property, the Construction Agent shall pay from the proceeds of remarketing, all prorations, credits, costs and expenses of the sale of the Leased Property, whether incurred by the Lessor, any Lender, the Agent or the Construction Agent, including without limitation, the cost of all title insurance, survey, environmental report, appraisal, transfer taxes, the Lessor's and the Agent's attorneys' fees, the Construction Agent's attorneys' fees, commissions, escrow fees, recording fees, and all applicable documentary and other transfer taxes. (g) The Construction Agent shall pay to the Agent immediately following the delivery of the termination notice pursuant to Section 5.3(a) or (b) or the -------------- --- Lessor's denial of authorization to remediate any Construction Force Majeure Event under Section 3.4, (or to such other Person as Agent shall notify ----------- Construction Agent in writing, or in the case of Supplemental Rent, to the Person entitled thereto) an amount equal to (i) in the case of the exercise of remedies under Section 5.3(a) or a payment due under Section 3.4, the -------------- ----------- Construction Failure Payment, or (ii) in the case of the exercise of remedies under Section 5.3(b), the Permitted Lease Balance, in the type of funds -------------- specified in Section 3.3 of the Lease. If the Construction Agent has exercised ----------- the Construction Default Remarketing Option, the following additional provisions shall apply: During the period commencing on the CDRO Notice Date, the Construction Agent shall, as nonexclusive agent for the Lessor, use commercially reasonable efforts to sell the Lessor's interest in the Leased Property and will attempt to obtain the highest purchase price therefor. All such marketing of the Leased Property shall be paid from the proceeds of remarketing. The Construction Agent promptly shall submit all bids to the Lessor and the Agent and the Lessor and the Agent will have the right to review the same and the right to submit any one or more bids. All bids shall be on an all-cash basis. In no event shall such bidder be the Construction Agent or any Subsidiary or Affiliate of the Construction Agent. The written offer must specify the CDRO Closing Date as the closing date. If, and only if, the selling price (net of closing costs and prorations, as reasonably estimated by the Agent)(the "Construction Offer ------------------ Price") is less than the Lease Balance at such time, then the Lessor or the - ----- Agent may, in its sole and absolute discretion, by notice to the Construction Agent, reject such offer to purchase, in which event the parties will proceed according to the provisions of Section 5.8 hereof. If neither the Lessor nor the ----------- Agent rejects such purchase offer as provided above, the closing of such purchase of the Leased Property by such purchaser shall occur on the CDRO Closing Date, contemporaneously with the Construction Agent's surrender of the Leased Property in accordance with Section 5.9 hereof, and the gross proceeds of ----------- the sale (after deduction, however, for any marketing, closing or other costs, prorations or commissions) shall be paid directly to the Agent (or the Lessor if the Funded Amounts have been fully paid). The Agent shall distribute the Land Proceeds derived from any such sale first, to the Lessor in an amount of the difference between (i) the Land Acquisition Cost 21 and (ii) the Construction Failure Payment to the extent attributable to clause (i) of the definition thereof (the "Land Construction Failure Payment") received --------------------------------- by the Agent pursuant to clause (i) of the first sentence of this Section ---------- ------- 5.7(g), second, to the extent the Construction Agent has paid the Land - ------ Construction Failure Payment due to the Agent pursuant to clause (i) of the ---------- first sentence of this Section 5.7(g), to the Construction Agent to reimburse it -------------- to the extent of its payment of such amount, third, to the Lessor in an amount ----- equal to the remaining unpaid portion of the related Land Acquisition Cost and fourth, to the Construction Agent, or to the Person or Persons otherwise - ------ lawfully entitled thereto, in an amount equal to the remaining proceeds, if any. The Agent shall distribute the Building Proceeds derived from any such sale first, to the Lessor in an amount of the difference between (i) the Permitted Lease Balance minus the Land Acquisition Cost and (ii) the Construction Failure Payment to the extent attributable to clause (ii) of the definition thereof (the "Building Construction Failure Payment"), if any, received by the Agent pursuant ------------------------------------- to clause (i) of the first sentence of this Section 5.7(g), second, to the ---------- -------------- extent the Construction Agent has paid the Building Construction Failure Payment due to the Agent pursuant to clause (i) of the first sentence of this Section ---------- ------- 5.7(g), to the Construction Agent to reimburse it to the extent of its payment - ------ of such amount, third, to the Lessor in an amount equal to the remaining unpaid ----- portion of the related Leased Property Balance minus the Land Acquisition Cost, ----- and fourth, to the Construction Agent, or to the Person or Persons otherwise ------ lawfully entitled thereto, in an amount equal to the remaining proceeds, if any. The Construction Agent shall not have the right, power or authority to bind the Lessor in connection with any proposed sale of the Leased Property. V.8. Rejection of Sale. Notwithstanding anything contained herein to the ----------------- contrary, if the Lessor or the Agent rejects the purchase offer for any Leased Property as provided in Section 5.7, then the Agent shall have an appraisal done ----------- of the Leased Property by an independent third party appraiser selected by the Agent, which appraiser shall determine the Fair Market Sales Value of the Leased Property in the condition in which such Leased Property exists at such time (the "Construction Appraised Value"). If (A) if the Construction Appraised Value ---------------------------- shall be equal to or greater than the Construction Offer Price, and the Lessor in its sole discretion so elects, or (B) the Construction Appraised Value shall be less than the Construction Offer Price, the Leased Property shall be sold pursuant to Section 5.7(g), and the proceeds of such sale shall be distributed, -------------- in accordance with Section 5.7. If the Construction Appraised Value shall be ----------- equal to or greater than the Construction Offer Price and the Lessor shall not have elected to sell the Leased Property pursuant to Section 5.7(g), (a) the -------------- Lessor shall refund to the Lessee the amount by which (x) (i) the Land Construction Failure Payment exceeds (ii) the amount by which (A) the Land Acquisition Costs exceeds (B) the Land Portion of the Construction Appraised Value and (y) (i) the Building Construction Failure Payment exceeds (ii) the amount by which (A) the Permitted Lease Balance minus the Land Acquisition Costs exceeds (B) the Building Portion of the Construction Appraised Value, and (b) the Lessor shall retain title to the Leased Property and shall retain all proceeds with respect to the Leased Property, free and clear of all claims of the Lessee and the Construction Agent. 22 V.9. Return of Leased Property. If the Lessor retains title to any Leased ------------------------- Property pursuant to Section 5.8 hereof, then the Construction Agent shall, on ----------- the CDRO Closing Date for such Leased Property (or such later date on which the Lessor shall elect not to sell the Leased Property pursuant to Section 5.7), and ----------- at its own expense, return possession of such Leased Property to the Lessor for retention by the Lessor and shall do all things required under Section 5.6 or, ----------- if the Construction Agent properly exercises the Construction Default Remarketing Option and fulfills all of the conditions of Section 5.7 hereof and ----------- neither the Lessor nor the Agent rejects such purchase offer pursuant to Section ------- 5.7, then the Construction Agent shall, on such CDRO Closing Date, and at its - --- own cost, transfer possession of the Leased Property to the independent purchaser thereof, in each case by surrendering the same into the possession of the Lessor or such purchaser, as the case may be, free and clear of all Liens other than Lessor Liens, in as good condition as it was on the CDRO Notice Date, and in compliance in all material respects with Applicable Law and deliver to the independent purchaser thereof the documents described in clauses (i) through ----------- (iii) of Section 5.6(a). In the case of a sale under Section 5.7, the - ----- -------------- ----------- Construction Agent shall, on and within a reasonable time before and after the CDRO Closing Date, cooperate with the Lessor and the independent purchaser of such Leased Property in order to facilitate the ownership and operation by such purchaser of such Leased Property after the CDRO Closing Date, which cooperation shall include the following, all of which the Construction Agent shall do on or before the CDRO Closing Date or as soon thereafter as is reasonably practicable: providing all books and records, including copies of all Construction Documents, regarding the construction, maintenance and ownership of such Leased Property and all know-how, data and technical information relating thereto, providing a copy of the Plans and Specifications, granting or assigning all permits and licenses (to the extent assignable) necessary for the construction, operation and maintenance of such Leased Property, and cooperating in seeking and obtaining all necessary Governmental Action and taking all action necessary to fully assign and transfer all of its rights, claims and causes of action under all of the Construction Documents (including, without limitation, obtaining all necessary consents to such assignments). The obligations of the Construction Agent under this Section 5.9 shall survive the expiration or termination of this ----------- Agreement. V.10. Reimbursements. If (i) any deduction was made in the Construction -------------- Failure Payment due from the Construction Agent hereunder for amounts payable by the Construction Agent that the Construction Agent was legally required to pay after the end of the Construction Term pursuant to the definition of "Construction Failure Payment" and (ii) the Construction Agent shall be reimbursed in full or in part for such amount by any other Person (including, but not limited to, any insurer), the Construction Agent shall promptly pay the amount so reimbursed to the Lessor. V.11. Building Construction Failure Payment. The Building Construction ------------------------------------- Failure Payment shall include 89.9% of Project Costs (exclusive of Land Acquisition Costs) incurred by Lessor to complete or to further the Construction of the related Leased Property, whether incurred before or after the termination of the Construction Agent's rights and obligations under this Agreement with respect to such Leased Property. To the extent such costs are incurred by 23 Lessor after the payment by the Construction Agent of the Building Construction Failure Payment, the Construction Agent shall make one or more additional payments upon demand to Lessor such that the sum of such payment, plus the ---- Future Value of the amounts previously paid by the Construction Agent on account of the Building Construction Failure Payment equals 89.9% of the aggregate Project Costs (exclusive of Land Acquisition Cost) incurred to the date of calculation, provided that such additional paid amounts shall be included in the -------- Building Construction Failure Payment for purposes of calculating any amount required to be reimbursed to the Construction Agent from the proceeds of the sale of the related Leased Property pursuant to this Agreement. ARTICLE VI NO CONSTRUCTION AGENCY FEE VI.1. Lease as Fulfillment of Lessor's Obligations. All obligations, -------------------------------------------- duties and requirements imposed upon or allocated to the Construction Agent shall be performed by the Construction Agent at the Construction's Agent's sole cost and expense, and the Construction Agent will not be entitled to, and the Lessor shall not have any obligation to pay, any agency fee or other fee or compensation, and the Construction Agent shall not be entitled to, and the Lessor shall not have any obligation to make or pay, any reimbursement therefor, it being understood that this Agreement is being entered into as consideration for and as an inducement to the Lessor entering into the Lease and the other Operative Documents. ARTICLE VII LESSOR'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS VII.1. Exercise of the Lessor's Rights. The Construction Agent hereby ------------------------------- acknowledges and agrees that the rights and powers of the Lessor under this Agreement have been assigned to, and may be exercised by, the Agent. VII.2. Lessor's Right to Cure Construction Agent's Defaults. The Lessor, ---------------------------------------------------- without waiving or releasing any obligation or Construction Agency Event of Default, may, upon prior written notice to the Construction Agent (but shall be under no obligation to), remedy any Construction Agency Event of Default for the account of the Construction Agent, and such costs and expenses shall be capitalized and shall result in an increase to the Funded Amounts related to the related Leased Property. All reasonable out of pocket costs and expenses so incurred (including actual and reasonable fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by the Lessor, shall be capitalized and shall result in an increase to the Funded Amounts related to the related Leased Property. 24 ARTICLE VIII MISCELLANEOUS VIII.1. Notices. All notices, consents, directions, approvals, ------- instructions, requests, demands and other communications required or permitted by the terms hereof to be given to any Person shall be given in writing in the manner provided in, shall be sent to the respective addresses set forth in, and the effectiveness thereof shall be governed by the provisions of, Section 8.2 of the Master Agreement. VIII.2. Successors and Assigns. This Agreement shall be binding upon ---------------------- and inure to the benefit of the Lessor, the Construction Agent and their respective legal representatives, successors and permitted assigns. The Construction Agent shall not assign its rights or obligations hereunder without the prior written consent of the Lessor and the Agent. VIII.3. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ------------- OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. VIII.4. Amendments and Waivers. Subject to Section 8.4 of the Master ---------------------- Agreement, the Lessor and the Construction Agent may from time to time, enter into written amendments, supplements or modifications hereto. VIII.5. Counterparts. This Agreement may be executed on any number of ------------ separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same agreement. VIII.6. Severability. Any provision of this Agreement which is ------------ prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. VIII.7. Headings and Table of Contents. The headings and table of ------------------------------ contents contained in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. VIII.8. Jurisdiction; Waivers. The Lessor and the Construction Agent --------------------- hereby acknowledge that the terms of Section 8.11 of the Master Agreement apply to this Agreement. 25 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. HUGHES SUPPLY, INC. By___________________________________ Name:______________________________ Title:_____________________________ ATLANTIC FINANCIAL GROUP, LTD. By: Atlantic Financial Managers, Inc., its General Partner By___________________________________ Name:______________________________ Title:_____________________________ CONSTRUCTION AGENCY AGREEMENT SYNTHETIC LEASE S-1 EXHIBIT A Supplement to Construction Agency Agreement ------------------------------------------- SUPPLEMENT to Construction Agency Agreement, dated as of ______________, 200_, between ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership (the "Lessor"), and HUGHES SUPPLY, INC., a Florida corporation (in ------ its capacity as construction agent, the "Construction Agent"). Capitalized terms ------------------ used but not otherwise defined herein shall have the meanings given them in the Construction Agency Agreement. The Lessor and the Construction Agent are parties to that certain Construction Agency Agreement, dated as of June 22, 2001 (as amended, supplemented or otherwise modified, the "Construction Agency Agreement"), ----------------------------- pursuant to which (i) the Lessor has appointed the Construction Agent as its sole and exclusive agent in connection with the identification and acquisition of Land and construction of the Buildings in accordance with the Plans and Specifications, and (ii) the Construction Agent has agreed, for the benefit of the Lessor, to cause the construction of the Buildings to be completed in accordance with the Plans and Specifications. Subject to the terms and conditions of the Construction Agency Agreement, the Lessor and the Construction Agent desire that the terms of the Construction Agency Agreement apply to the Land described in Schedule 1 and wish ---------- to execute this Supplement to provide therefor. NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: 1. The Construction Agent agrees to act as Construction Agent and to perform its obligations under the Construction Agency Agreement in connection with the completion of construction of the Building on the Land described in Schedule 1 in accordance with the Plans and Specifications for such Land. The - ---------- Construction Agent hereby represents and warrants to Lessor that the Construction Agent has heretofore delivered to Lessor a true, correct and complete copy of the Plans and Specifications for the Building on the Land described in Schedule 1 or, if not available on the date hereof, will deliver ---------- such Plans and Specifications as soon as available. 2. Each of the Lessor and the Construction Agent acknowledges and agrees that the development of the Land described in Schedule 1 and the ---------- construction of the Buildings thereon shall be governed by the terms of the Construction Agency Agreement. A-1 3. The anticipated construction budget relating to the construction and development of the Building on the Land described in Schedule 1 is ---------- $__________. The acquisition cost of the Land described in Schedule 1 is ---------- $___________. 4. This Supplement shall, upon its execution and delivery, constitute a part of the Construction Agency Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. HUGHES SUPPLY, INC. By___________________________________ Name: Title: ATLANTIC FINANCIAL GROUP, LTD. By: Atlantic Financial Managers, Inc., its General Partner By___________________________________ Name: Title: A-2 Schedule 1 to Supplement Description of Land Interest ---------------------------- EX-10.14 (C) 6 dex1014c.txt GUARANTY AGREEMENT - SYNTHETIC LEASE Exhibit 10.14(c) ================================================================================ GUARANTY AGREEMENT from HUGHES SUPPLY, INC. Dated as of June 22, 2001 [SYNTHETIC LEASE] ================================================================================ TABLE OF CONTENTS
Page SECTION 1. Guaranty............................................ 1 SECTION 2. Bankruptcy.......................................... 2 SECTION 3. Continuing Guaranty................................. 2 SECTION 4. Reinstatement....................................... 3 SECTION 5. Certain Actions..................................... 3 SECTION 6. Application......................................... 3 SECTION 7. Waiver.............................................. 3 SECTION 8. Assignment.......................................... 4 SECTION 9. Miscellaneous....................................... 4
GUARANTY AGREEMENT ------------------ THIS GUARANTY AGREEMENT, dated as of June 22, 2001 (as amended or otherwise modified from time to time, this "Guaranty"), is made by HUGHES SUPPLY, INC., a -------- Florida corporation ("Hughes" or "Guarantor"). ------ --------- W I T N E S S E T H: - - - - - - - - - - WHEREAS, Guarantor, certain Subsidiaries of Hughes that are or may become party thereto, as Lessees, Atlantic Financial Group, Ltd., as Lessor, the financial institutions party thereto, as Lenders, and SunTrust Bank, as Agent, have entered into that certain Master Agreement, dated as of June 22, 2001 (as it may be modified, amended or restated from time to time as and to the extent permitted thereby, the "Master Agreement"; and, unless otherwise defined herein, ---------------- terms which are defined or defined by reference in the Master Agreement (including Appendix A thereto) shall have the same meanings when used herein as such terms have therein); and WHEREAS, it is a condition precedent to the Funding Parties consummating the transactions to be consummated on the Initial Closing Date that the Guarantor execute and deliver this Guaranty; and WHEREAS, it is in the best interests of the Guarantor that the transactions contemplated by the Master Agreement be consummated on the Initial Closing Date; and WHEREAS, this Guaranty, and the execution, delivery and performance hereof, have been duly authorized by all necessary corporate action of Guarantor; and WHEREAS, this Guaranty is offered by the Guarantor as an inducement to the Funding Parties to consummate the transactions contemplated in the Master Agreement, which transactions, if consummated, will be of benefit to Guarantor; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Guarantor, the Guarantor hereby agrees as follows: SECTION 1. Guaranty. Guarantor hereby unconditionally guarantees to the -------- Agent and the Funding Parties the full and prompt payment when due, whether by acceleration or otherwise, and at all times thereafter, and the full and prompt performance, of all of the Liabilities (as hereinafter defined), including rent, interest and earnings on any such Liabilities whether accruing before or after any bankruptcy or insolvency case or proceeding involving Guarantor, or any other Person and, if rent, interest or earnings on any portion of such obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, including such rent, interest and earnings as would have accrued on any such portion of such obligations if such case or proceeding had not commenced, and further agrees to pay all reasonable expenses (including reasonable attorneys' fees and legal expenses) actually paid or incurred by each of the Funding Parties in endeavoring to collect the Liabilities, or any part thereof, and in enforcing this Guaranty. Notwithstanding the foregoing, during the Construction Term for any Leased Property, only the Lessor shall be entitled to make a claim under this Guaranty for Liabilities related to such Leased Property. The term "Liabilities", as used herein, shall mean all of the ----------- following, in each case howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due: (i) all amounts payable by the Lessees or the Construction Agent to the Agent and the Funding Parties under the Lease (including, without limitation, Basic Rent, Supplemental Rent and the Recourse Deficiency Amount), the Master Agreement, the Construction Agency Agreement or any other Operative Document, and (ii) all principal of the Notes and interest accrued thereon, and all additional amounts and other sums at any time due and owing, and required to be paid, to the Funding Parties under the terms of the Master Agreement, the Loan Agreement, the Construction Agency Agreement, the Assignments of Lease and Rents, the Mortgages, the Notes or any other Operative Document; provided, however, that the Guarantor will not be obligated to pay to -------- ------- the Agent and Funding Parties under this Guaranty any amounts greater than the Lessees and the Construction Agent would have had to pay to the Agent and the Funding Parties under the Lease, the Master Agreement, the Construction Agency Agreement and the other Operative Documents assuming that such documents were enforced in accordance with their terms (and without giving effect to any discharge or limitation thereon resulting or arising by reason of the bankruptcy or insolvency of a Lessee), plus all actual and reasonable costs of enforcing this Guaranty. By way of extension but not in limitation of any of its other obligations hereunder, Guarantor stipulates and agrees that if any foreclosure proceedings are commenced with respect to any Leased Property and result in the entering of a foreclosure judgment, any such foreclosure judgment, to the extent related to the Liabilities and payable to any of the Funding Parties, shall be treated as part of the Liabilities, and Guarantor unconditionally guarantees the full and prompt payment of such judgment. SECTION 2. Bankruptcy. Guarantor agrees that, in the event any ---------- bankruptcy, reorganization or insolvency proceeding shall be instituted by or against Guarantor and, if instituted against Guarantor, shall not be dismissed or stayed for a period of ninety (90) days, and if such event shall occur at a time when any of the Liabilities may not then be due and payable, Guarantor will pay to the Funding Parties forthwith the full amount which would be payable hereunder by Guarantor as if all Liabilities were then due and payable. SECTION 3. Continuing Guaranty. THIS GUARANTY SHALL IN ALL RESPECTS BE A ------------------- CONTINUING, ABSOLUTE AND UNCONDITIONAL GUARANTY OF PROMPT AND COMPLETE PAYMENT AND PERFORMANCE (AND NOT MERELY OF COLLECTION), AND SHALL REMAIN IN FULL FORCE AND EFFECT 2 (NOTWITHSTANDING, WITHOUT LIMITATION, THE DISSOLUTION OF GUARANTOR) UNTIL THE TERMINATION OF THE COMMITMENTS AND THE FULL AND FINAL PAYMENT OF ALL OF THE LIABILITIES. SECTION 4. Reinstatement. Guarantor further agrees that, if at any time ------------- all or any part of any payment theretofore applied to any of the Liabilities is or must be rescinded or returned for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of Guarantor or any Lessee), such Liabilities shall, for the purposes of this Guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application, and this Guaranty shall continue to be effective or be reinstated, as the case may be, as to such Liabilities, all as though such application had not been made. SECTION 5. Certain Actions. The Funding Parties may, from time to time at --------------- their discretion and without notice to Guarantor (but subject to the terms of the other Operative Documents), take any or all of the following actions without impairing Guarantor's obligations hereunder: (a) retain or obtain (i) a security interest in any Lessee's interests in the Lease or the Leased Property and (ii) a lien or a security interest hereafter granted by any Person upon or in any property, in each case to secure any of the Liabilities or any obligation hereunder; (b) retain or obtain the primary or secondary obligation of any obligor or obligors, in addition to the Guarantors, with respect to any of the Liabilities; (c) extend or renew for one or more periods (regardless of whether longer than the original period), or release or compromise any obligation of Guarantor hereunder or any obligation of any nature of any other obligor (including, without limitation, the Lessor and the Lessees) with respect to any of the Liabilities; (d) release or fail to perfect its Lien upon or security interest in, or impair, surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Liabilities or any obligation hereunder, or extend or renew for one or more periods (regardless of whether longer than the original period) or release or compromise any obligations of any nature of any obligor with respect to any such property; and (e) resort to Guarantor for payment of any of the Liabilities, regardless of whether the Agent or any other Person shall have resorted to any property securing any of the Liabilities or any obligation hereunder or shall have proceeded against any Lessee or any other obligor primarily or secondarily obligated with respect to any of the Liabilities (all of the actions referred to in this clause (e) being hereby expressly waived by Guarantor). ---------- SECTION 6. Application. Any amounts received by any Funding Party from ----------- whatever source on account of the Liabilities shall be applied by it toward the payment of such of the Liabilities, and in such order of application, as is set forth in the Operative Documents. SECTION 7. Waiver. Guarantor hereby expressly waives: (a) notice of the ------ acceptance of this Guaranty; (b) notice of the existence or creation or non- payment of all or any of the Liabilities; (c) presentment, demand, notice of dishonor, protest, and all other notices 3 whatsoever; and (d) all diligence in collection of or realization upon the Liabilities or any thereof, any obligation hereunder, or any security for or guaranty of any of the foregoing. SECTION 8. Assignment. Subject to Section 6 of the Master Agreement, each ---------- Funding Party may, from time to time, whether before or after any discontinuance of this Guaranty, at its sole discretion and without notice to Guarantor, assign or transfer any or all of its portion of the Liabilities or any interest therein; and, notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof, such Liabilities shall be and remain Liabilities for the purposes of this Guaranty, and each and every such immediate and successive assignee or transferee of any of the Liabilities or of any interest therein shall, to the extent of such assignee's or transferee's interest in the Liabilities, be entitled to the benefits of this Guaranty to the same extent as if such assignee or transferee were such Funding Party. SECTION 9. Miscellaneous. No delay in the exercise of any right or remedy ------------- shall operate as a waiver thereof, and no single or partial exercise of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy; nor shall any modification or waiver of any of the provisions of this Guaranty be binding upon any Funding Party except as expressly set forth in a writing duly signed and delivered on its behalf. No action permitted hereunder shall in any way affect or impair any Funding Party's rights or Guarantor's obligations under this Guaranty. For the purposes of this Guaranty, Liabilities shall include all of the obligations described in the definition thereof, notwithstanding any right or power of any Lessee or the Lessor or anyone else to assert any claim or defense (other than final payment or full performance) as to the invalidity or unenforceability of any such obligation, and no such claim or defense shall affect or impair the obligations of Guarantor hereunder. Guarantor hereby acknowledges that there are no conditions to the effectiveness of this Guaranty. This Guaranty shall be binding upon Guarantor and upon Guarantor's successors and permitted assigns; and all references herein to Guarantor shall be deemed to include any successor or successors thereof, whether immediate or remote, to such Person; provided that Guarantor shall not assign its -------- obligations hereunder without the prior written consent of the Funding Parties. Wherever possible each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Guaranty shall be prohibited by or invalid thereunder, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. Guarantor: (a) submits for itself and its property in any legal action or proceeding relating to this Guaranty, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of Florida, the courts of the United States of America for the Middle District of Florida, and appellate courts from any thereof; (b) consents that any such action or proceedings may be brought 4 to such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; and (c) agrees that nothing herein shall affect the right to effect service of process in any manner permitted by law or shall limit the right of the Funding Parties to sue in any other jurisdiction. All notices, demands, declarations, consents, directions, approvals, instructions, requests and other communications required or permitted by this Guaranty shall be in writing and shall be deemed to have been duly given when addressed to the appropriate Person and delivered in the manner specified in Section 8.2 of the Master Agreement. THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF FLORIDA, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. 5 IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. HUGHES SUPPLY, INC. By:__________________________________________ Name Printed:____________________________ Title:___________________________________ S-1 EX-10.14 (D) 7 dex1014d.txt APPENDIX A - SYNTHETIC LEASE Exhibit 14(d) [SYNTHETIC LEASE] APPENDIX A to the Operative Documents ----------------------- DEFINITIONS AND INTERPRETATION A. Interpretation. In each Operative Document, unless a clear contrary -------------- intention appears: (i) the singular number includes the plural number and vice versa; ---- ----- (ii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by the Operative Documents; (iii) reference to any gender includes each other gender; (iv) reference to any agreement (including any Operative Document), document or instrument means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of the other Operative Documents and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor; (v) reference to any Applicable Law or Requirement of Law means such Applicable Law or Requirement of Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any section or other provision of any Applicable Law or Requirement of Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) reference in any Operative Document to any Article, Section, ------- ------- Appendix, Schedule or Exhibit means such Article or Section thereof or -------- -------- ------- ------- ------- Appendix, Schedule or Exhibit thereto; -------- -------- ------- (vii) "hereunder", "hereof", "hereto" and words of similar import shall be deemed references to an Operative Document as a whole and not to any particular Article, Section, paragraph or other provision of such ------- ------- Operative Document; (viii) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; (ix) "or" is not exclusive; and (x) relative to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding". B. Accounting Terms. In each Operative Document, unless expressly ---------------- otherwise provided, all terms of an accounting character used in the Operative Documents shall be interpreted, all accounting determinations under the Operative Documents shall be made, and all financial statements required to be delivered under the Master Agreement shall be prepared, in accordance with GAAP. C. Conflict in Operative Documents. If there is any conflict between any ------------------------------- Operative Documents, each such Operative Document shall be interpreted and construed, if possible, so as to avoid or minimize such conflict but, to the extent (and only to the extent) of such conflict, the Master Agreement shall prevail and control. D. Legal Representation of the Parties. The Operative Documents were ----------------------------------- negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring any Operative Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof. E. Defined Terms. Unless a clear contrary intention appears, terms ------------- defined herein have the respective indicated meanings when used in each Operative Document. "Address" means with respect to any Person, its address set forth in ------- Schedule 8.2 to the Master Agreement or such other address as it shall have identified to the parties to the Master Agreement in writing in the manner provided for the giving of notices thereunder. "Adjusted LIBO Rate" means with respect to each Rent Period for a LIBOR ------------------ Advance, the rate obtained by dividing (A) LIBOR for such Rent Period by (B) a percentage equal to 1 minus the then stated maximum rate (stated as a decimal) ----- of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurodollar liabilities as defined in Regulation D (or against any successor category of liabilities defined in Regulation D). "Advance" means a LIBOR Advance or a Base Rate Advance. ------- "Affiliate" of any Person means any other Person directly or indirectly --------- controlling, controlled by, or under common control with, such Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this definition, "control" (including -2- with correlative meanings, the terms "controlling", "controlled by", and "under common control with") as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person. "After-Tax Basis" means (a) with respect to any payment to be received by --------------- an Indemnitee (which, for purposes of this definition, shall include any Tax Indemnitee), the amount of such payment supplemented by a further payment or payments so that, after deducting from such payments the amount of all Taxes (net of any current credits, deductions or other Tax benefits arising from the payment by the Indemnitee of any amount, including Taxes, for which the payment to be received is made) imposed currently on the Indemnitee by any Governmental Authority or taxing authority with respect to such payments, the balance of such payments shall be equal to the original payment to be received and (b) with respect to any payment to be made by any Indemnitee, the amount of such payment supplemented by a further payment or payments so that, after increasing such payment by the amount of any current credits or other Tax benefits realized by the Indemnitee under the laws of any Governmental Authority or taxing authority resulting from the making of such payments, the sum of such payments (net of such credits or benefits) shall be equal to the original payment to be made; provided, however, for the purposes of this definition, and for purposes of any - -------- ------- payment to be made to either a Lessee or an Indemnitee on an after-tax basis, it shall be assumed that (i) federal, state and local taxes are payable at the highest combined marginal federal and state statutory income tax rate (taking into account the deductibility of state income taxes for federal income tax purposes) applicable to corporations from time to time and (ii) such Indemnitee or such Lessee has sufficient income to utilize any deductions, credits (other than foreign tax credits, the use of which shall be determined on an actual basis) and other Tax benefits arising from any payments described in clause (b) ---------- of this definition. "Agent" means SunTrust Bank, a Georgia banking corporation, in its capacity ----- as agent under the Master Agreement and the Loan Agreement. "Alterations" means, with respect to any Leased Property, fixtures, ----------- alterations, improvements, modifications and additions to such Leased Property. "Applicable Facility Fee Percentage" shall mean the percentage designated ---------------------------------- below based on Hughes' Leverage Ratio for the most recently ended fiscal quarter for which financial statements have been delivered pursuant to Section 5.7(a) or (b) of the Master Agreement: --------------------------------------------------------------- Leverage Ratio Applicable Facility Fee Percentage: --------------------------------------------------------------- Less than 0.4:1.0 0.150% --------------------------------------------------------------- Greater than or equal to 0.4:1.0 0.175% but less than 0.45:1.0 --------------------------------------------------------------- -3- --------------------------------------------------------- Greater than or equal to 0.45:1.0 0.20% but less than 0.5:1.0 --------------------------------------------------------- Greater than or equal to 0.5:1.0 0.25% but less than 0.55:1.0 --------------------------------------------------------- Greater than or equal to 0.55:1.0 0.30% --------------------------------------------------------- provided, however, that: - -------- ------- (a) The Applicable Facility Fee Percentage in effect as of the date of execution and delivery of the Master Agreement is 0.20% for the Commitments, and such percentage shall remain in effect until such time as the Applicable Facility Fee Percentage may be adjusted as hereinafter provided; and (b) Adjustments, if any, to the Applicable Facility Fee Percentages based on changes in the ratios set forth above shall be made and become effective (i) on the first day of the fiscal quarter immediately following delivery of the financial statements required pursuant to Section 5.7(b) of the Master Agreement and (ii) on the first day of the second fiscal quarter immediately following the last day of any fiscal year of Hughes "Applicable Law" means all applicable laws (including Environmental Laws), -------------- rules, regulations (including temporary and final income tax regulations), statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by, any Governmental Authority, and applicable judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator or other administrative, judicial or quasi-judicial tribunal or agency of competent jurisdiction (including those pertaining to health, safety or the environment (including, without limitation, wetlands) and those pertaining to the construction, use or occupancy of any Leased Property). "Applicable Margin" shall mean the percentage designated below based on ----------------- Hughes' Leverage Ratio for the most recently ended fiscal quarter for which financial statements have been delivered pursuant to Section 5.7(a) or (b) of the Master Agreement: -------------------------------------------------------------- Leverage Ratio Applicable Margin: -------------------------------------------------------------- Less than 0.4:1.0 1.025% -------------------------------------------------------------- Greater than or equal to 0.4:1.0 1.125% but less than 0.45:1.0 -------------------------------------------------------------- Greater than or equal to 0.45:1.0 1.375% but less than 0.5:1.0 -------------------------------------------------------------- -4- -------------------------------------------------------------- Greater than or equal to 0.5:1.0 1.500% but less than 0.55:1.0 -------------------------------------------------------------- Greater than or equal to 0.55:1.0 1.7500% -------------------------------------------------------------- provided, however, that: - -------- ------- (a) The Applicable Margin in effect as of the date of execution and delivery of the Master Agreement is 1.375%, and such percentage shall remain in effect until such time as the Applicable Margin may be adjusted as hereinafter provided; (b) Adjustments, if any, to the Applicable Margin based on changes in the ratios set forth above shall be made and become effective (i) on the first day of the fiscal quarter immediately following delivery of the financial statements required pursuant to Section 5.7(b) of the Master Agreement and (ii) on the first day of the second fiscal quarter immediately following the last day of any fiscal year of Hughes; and (c) during the Construction Period, the Applicable Margin shall be the Applicable Margin designated in the table above, plus 0.125%. ---- "Appraisal" is defined in Section 3.1 of the Master Agreement. --------- "Appraiser" means an MAI appraiser reasonably satisfactory to the Agent. --------- "Architect" means, with respect to any Leased Property, the architect --------- engaged in connection with the construction of the related Building, if any, who may be an employee of the General Contractor for such Leased Property. "Architect's Agreement" means, with respect to any Leased Property, the --------------------- architectural services agreement, if any, between the Construction Agent (or a Lessee), in its capacity as agent for Lessor, and the related Architect. "Asbestos Laws" means the common law in all federal, state and local and ------------- foreign jurisdictions and other laws in such jurisdictions, and regulations, codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder, now or hereafter in effect relating to or concerning asbestos or asbestos-containing material, including without limitation, exposure to asbestos or asbestos-containing material. "Asset Value" shall mean, with respect to any property or asset of any ----------- Consolidated Company as of any particular date, an amount equal to the greater of (i) the then book value of such property or asset as established in accordance with GAAP, and (ii) the then fair market value of such property or asset as determined in good faith by the board of directors of such Consolidated Company. -5- "Assignment and Assumption" means an assignment and assumption agreement, ------------------------- substantially in the form of Exhibit F to the Master Agreement. "Assignment of Lease and Rents" means, with respect to any Leased Property, ----------------------------- the Assignment of Lease and Rents, dated as of the related Closing Date, from the Lessor to the Agent, substantially in the form of Exhibit B to the Master Agreement. "Authority" means a development or similar authority of any state, county --------- or municipality that is an issuer of Bonds. "Award" means any award or payment received by or payable to the Lessor or ----- a Lessee on account of any Condemnation or Event of Taking (less the actual costs, fees and expenses, including reasonable attorneys' fees, incurred in the collection thereof, for which the Person incurring the same shall be reimbursed from such award or payment). "Bankruptcy Code" means The Bankruptcy Code of 1978, as amended and in --------------- effect from time to time (11 U.S.C. (S)101 et seq.). "Base Rate" means (with any change in the Base Rate to be effective as of --------- the date of change of either of the following rates) the higher of (i) the rate which the Agent publicly announces from time to time as its prime lending rate, as in effect from time to time, and (ii) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%) per annum. The Agent's ---- prime lending rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to customers; the Agent may make commercial loans or other loans at rates of interest at, above or below the Agent's prime lending rate. The Base Rate is determined daily. "Base Rate Advance" means that portion of the Funded Amount bearing ----------------- interest at the Base Rate. "Base Term" means, with respect to any Leased Property, (a) the period --------- commencing on the related Closing Date and ending on June 22, 2006 or (b) such shorter period as may result from earlier termination of the Lease as provided therein. "Basic Rent" means the rent payable pursuant to Section 3.1 of the Lease, ---------- determined in accordance with the following: each installment of Basic Rent payable on any Payment Date shall be in an amount equal to the sum of (A) the aggregate amount of Lender Basic Rent payable on such Payment Date, plus (B) the ---- aggregate amount of Lessor Basic Rent payable on such Payment Date, in each case, for the Leased Property or Properties that are then subject to the Lease. -6- "Board" means the Board of Governors of the Federal Reserve System and any ----- successor thereto or to the functions thereof. "Board of Directors", with respect to a corporation, means either the Board ------------------ of Directors or any duly authorized committee of that Board which pursuant to the by-laws of such corporation has the same authority as that Board as to the matter at issue. "Bonds" means industrial revenue or development bonds issued by a state, ----- county or municipal authority in connection with any Leased Property. "Building" means, with respect to any Leased Property, the buildings, -------- structures and improvements located or to be located on the related Land, along with all fixtures used or useful in connection with the operation of such Leased Property, including, without limitation, all furnaces, boilers, compressors, elevators, fittings, pipings, connectives, conduits, ducts, partitions, equipment and apparatus of every kind and description now or hereafter affixed or attached to the Building, equipment, if any, financed by the Lessor and/or the Lenders and all Alterations (including all restorations, repairs, replacements and rebuilding of such buildings, improvements and structures) thereto (but in each case excluding trade fixtures and equipment financed other than by the Lessor or the Lenders). "Building Construction Failure Payment" is defined in Section 5.7(g) of the ------------------------------------- Construction Agency Agreement. "Building Cost" with respect to any Leased Property at any time, means the ------------- Leased Property Balance therefor at such time, minus the Land Acquisition Cost ----- for the Land related to such Leased Property. "Building Portion" for any Leased Property means the ratio, expressed as a ---------------- percentage, of (i) the Fair Market Sales Value of the related Building to (ii) the Fair Market Sales Value of the Leased Property. "Building Proceeds" is defined in Section 5.3(b) of the Construction Agency ----------------- Agreement. "Business Day" means any day other than a Saturday, Sunday or other day on ------------ which banks are required or authorized to be closed for business in Atlanta, Georgia or Orlando, Florida and, if the applicable Business Day relates to a LIBOR Advance, on which trading is not carried on by and between banks in the London interbank market. "Capitalized Lease Obligations" shall mean all lease obligations which have ----------------------------- been or are required to be, in accordance with GAAP, capitalized on the books of the lessee. "Casualty" means an event of damage or casualty relating to all or part of -------- any Leased Property that does not constitute an Event of Loss. -7- "Change in Control Provision" shall mean any term or provision contained in --------------------------- any indenture, debenture, note, or other agreement or document evidencing or governing Indebtedness of Hughes evidencing debt or a commitment to extend loans in excess of $5,000,000 which requires, or permits the holder(s) of such Indebtedness of Hughes to require that such Indebtedness of Hughes be redeemed, repurchased, defeased, prepaid or repaid, either in whole or in part, or the maturity of such Indebtedness of Hughes to be accelerated in any respect, as a result of a change in ownership of the capital stock of Hughes or voting rights with respect thereto. "Claims" means liabilities, obligations, damages, losses, demands, ------ penalties, fines, claims, actions, suits, judgments, proceedings, settlements, utility charges, costs, expenses and disbursements (including, without limitation, reasonable legal fees and expenses) of any kind and nature whatsoever. "Closing Date" means, with respect to each parcel of Land, the date on ------------ which (i) such Land is acquired by the Lessor pursuant to a Purchase Agreement or such Land is leased to the Lessor pursuant to a Ground Lease and (ii) the initial Funding occurs with respect to such Land under the Master Agreement. "Code" or "Tax Code" means the Internal Revenue Code of 1986, as amended. ---- -------- "Commitment" means as to each Funding Party, its obligation to make ---------- Fundings as investments in each Leased Property, or to make Loans to the Lessor, in an aggregate amount not to exceed at any one time outstanding the amount set forth for such Funding Party on Schedule 2.2 to the Master Agreement (as it may be adjusted from time to time pursuant to Section 6 of the Master Agreement), minus such Funding Party's "Commitment" (whether funded or unfunded) under the - ----- Master Agreement [Operating Lease], dated as of June 22, 2001, among the Lessor, the Company, the Lenders and the Agent. "Commitment Percentage" means as to any Funding Party, at a particular --------------------- time, the percentage of the aggregate Commitments in effect at such time represented by such Funding Party's Commitment, as such percentage is shown for such Funding Party on Schedule 2.2 to the Master Agreement (as it may be adjusted from time to time pursuant to Section 6 of the Master Agreement). "Company" means Hughes. ------- "Completion Date" with respect to any Leased Property means the Business --------------- Day on which the conditions specified in Section 3.5 of the Master Agreement have been satisfied or waived with respect to such Leased Property. "Condemnation" means any condemnation, requisition, confiscation, seizure ------------ or other taking or sale of the use, occupancy or title to any Leased Property or any part thereof in, by or on -8- account of any actual eminent domain proceeding or other action by any Governmental Authority or other Person under the power of eminent domain or any transfer in lieu of or in anticipation thereof, which in any case does not constitute an Event of Taking. A Condemnation shall be deemed to have "occurred" on the earliest of the dates that use is prevented or occupancy or title is taken. "Consolidated Amortization" shall mean, for any fiscal period of Hughes, ------------------------- amortization of the Consolidated Companies for such period determined on a consolidated basis in accordance with GAAP. "Consolidated Companies" shall mean, collectively, Hughes and all of its ---------------------- Subsidiaries. "Consolidated Depreciation" shall mean, for any fiscal period of Hughes, ------------------------- depreciation of the Consolidated Companies for such period determined on a consolidated basis in accordance with GAAP. "Consolidated EBITR" shall mean, for any fiscal period of Hughes, an amount ------------------ equal to Consolidated Net Income (Loss) for such period, plus, to the extent ---- deducted in determining Consolidated Net Income (Loss), (i) Consolidated Tax Expense for such period, (ii) Consolidated Interest Expense for such period, and (iii) Consolidated Rental Expense for such period. "Consolidated EBITDAR" shall mean, for any fiscal period of Hughes, an -------------------- amount equal to Consolidated Net Income (Loss) for such period plus to the ---- extent deducted in determining Consolidated Net Income (Loss), (i) Consolidated Interest Expense for such period, (ii) Consolidated Tax Expense for such period, (iii) Consolidated Depreciation for such period, (iv) Consolidated Amortization for such period and (v) Consolidated Rental Expense for such period. "Consolidated Interest Expense" shall mean, for any fiscal period of ----------------------------- Hughes, total interest expense (including without limitation, interest expense attributable to capitalized leases in accordance with GAAP and any program costs incurred by Hughes in connection with sales of accounts receivable pursuant to a securitization program) of the Consolidated Companies for such period, determined on a consolidated basis. "Consolidated Net Income (Loss)" shall mean, for any fiscal period of ------------------------------ Hughes, the net income (or loss) of the Consolidated Companies for such period (taken as a single accounting period) determined on a consolidated basis in conformity with GAAP; provided that there shall be excluded therefrom (i) any items of gain or loss which were included in determining such Consolidated Net Income and were not realized in the ordinary course of business or the result of a sale of assets other than in the ordinary course of business; and (ii) the income (or loss) of any party accrued prior to the date such becomes a Subsidiary of Hughes or is merged into or consolidated with Hughes or any of its Subsidiaries, or such party's assets are acquired by any Consolidated Company, unless such party is acquired in a transaction accounted for as a pooling of interests. -9- "Consolidated Net Worth" shall mean as of the date of determination, ---------------------- Hughes' total shareholder's equity of such date as determined in accordance with GAAP. "Consolidated Rental Expense" shall mean, for any fiscal period of Hughes, --------------------------- total operating lease expense of the Consolidated Companies for such period, determined on a consolidated basis in accordance with GAAP. "Consolidated Tax Expense" shall mean, for any fiscal period of Hughes, tax ------------------------ expense of the Consolidated Companies for such period determined on a consolidated basis in accordance with GAAP. "Construction" means, with respect to any Leased Property, the construction ------------ of the related Building pursuant to the related Plans and Specifications. "Construction Agency Agreement" means the Construction Agency Agreement, ----------------------------- dated as of June 22, 2001, between Hughes and the Lessor. "Construction Agency Event of Default" is defined in Section 5.1 of the ------------------------------------ Construction Agency Agreement. "Construction Agent" means Hughes in its capacity as construction agent ------------------ pursuant to the Construction Agency Agreement. "Construction Budget" is defined in Section 2.4 of the Construction Agency ------------------- Agreement. "Construction Conditions" means the conditions set forth in Section 3.5 of ----------------------- the Master Agreement. "Construction Contract" means, with respect to any Leased Property, that --------------------- certain construction contract, if any, between a Lessee or the Construction Agent, as agent for Lessor, and a General Contractor for the Construction of the related Building, provided that such contract shall be assigned to the Lessor, and such assignment shall be consented to by such General Contractor, pursuant to an assignment of such construction contract substantially in the form of the Security Agreement and Assignment set forth as Exhibit C to the Master Agreement. "Construction Costs" means, with respect to any Leased Property, all costs ------------------ of acquisition or ground lease, as applicable, of the related Land, all closing, development and transaction costs related thereto, including fees, costs and expenses of attorneys, architects, surveyors, engineers, title and other insurance companies, appraisers and environmental firms, all costs of Construction, and all interest and Yield accrued on the Funded Amounts related to such Leased Property during the Construction Term therefor. -10- "Construction Failure Payment" means, with respect to any Leased Property ---------------------------- and as of any date of calculation, an amount equal to (i) 100% of the related Land Acquisition Cost, plus (ii) the excess of (A) 89.9% of the Project Costs (exclusive of Land Acquisition Cost) incurred as of the date of calculation, minus (B) the sum of (without duplication) (1) the Present Value of any payments (other than Unrestricted Indemnification Amounts) payable by the Construction Agent under the Operative Documents that the Construction Agent is legally required to pay as of the date of calculation that have not been reimbursed as of the date of calculation to the extent such payments have been included in Project Costs and (2) the Future Value of any payments (other than Unrestricted Indemnification Amounts) previously paid by the Construction Agent under the Operative Documents that have not been reimbursed as of the date of calculation to the extent such payments have been included in Project Costs and (without duplication) any indemnification payments (other than Unrestricted Indemnification Amounts) made by the Construction Agent pursuant to Section 3.3 that are related to Construction completion; provided that it is understood that -------- the Lessor shall be entitled to receive amounts reimbursed to the Construction Agent in accordance with Section 5.10 of the Construction Agency Agreement. "Construction Force Majeure Declaration" is defined in Section 3.4 of the -------------------------------------- Construction Agency Agreement. "Construction Force Majeure Event" means, with respect to any Leased -------------------------------- Property during the Construction Term therefor: (a) an act of God arising after the related Closing Date, or (b) any change in any state or local law, regulation or other legal requirement arising after such Closing Date and relating to the use of the Land or the construction of a building on the Land, or (c) strikes, lockouts, labor troubles, unavailability of materials, riots, insurrections or other events resulting from causes beyond a Lessee's (including a contractor's and subcontractor's) control which could not have been avoided or which cannot be remedied by the Construction Agent through the exercise of all commercially reasonable efforts or the expenditure of funds and, in the case of (b) above, the existence or potentiality of which was not known to and could not have been discovered prior to such Closing Date through the exercise of reasonable due diligence by the Construction Agent. "Construction Land Interest" means each parcel of Land for which the -------------------------- Completion Date has not yet occurred. "Construction Offer Price" is defined in Section 5.7 of the Construction ------------------------ Agency Agreement. -11- "Construction Period" means, with respect to any Leased Property, the ------------------- Construction Term therefor. "Construction Purchase" is defined in Section 5.5 of the Construction --------------------- Agency Agreement. "Construction Term" means, with respect to any Leased Property, the period ----------------- commencing on the related Closing Date and ending on the related Construction Term Expiration Date, or such shorter period as may result from earlier termination of the Lease as provided therein. "Construction Term Expiration Date" means, with respect to any Leased --------------------------------- Property, the earliest of the following: (a) the related Completion Date, (b) the date on which the aggregate Funded Amounts equal the Commitments, and (c) the related Scheduled Construction Termination Date. "Contractual Obligation", as applied to any Person, means any provision of ---------------------- any securities issued by that Person or any indenture, mortgage, deed of trust, contract, undertaking, agreement, instrument or other document to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject (including, without limitation, any restrictive covenant affecting any of the properties of such Person). "Cross Default" with respect to any agreement relating to Indebtedness ------------- means the occurrence of any event (other than the non-payment of money) the effect of which is to permit the holder of such Indebtedness to accelerate the maturity of such Indebtedness, but with respect to which such holder has not so accelerated such maturity. "Deed" means, with respect to any Land, a general warranty deed (or, if the ---- related Title Policy is acceptable to the related Lessee and the Agent, a special, limited warranty or trustee's deed), dated the applicable Closing Date, from the applicable Seller to the Lessor, conveying such Land. "Default" means any of the events specified in Article XII of the Lease, ------- without giving effect to any requirement for the giving of notice, for the lapse of time, or both, or for the happening of any other condition, event or act. "Dollars" and the sign "$" means lawful money of the United States of ------- America. "EITF 97-10" means FASB Emerging Issues Task Force Issue No. 97-10. ---------- -12- "Engineer" means, with respect to any Leased Property, the engineer engaged -------- in connection with the construction of the related Building, if any, who may be an employee of the General Contractor for such Leased Property. "Engineer's Agreement" means, with respect to any Leased Property, the -------------------- engineering services agreement, if any, between the Construction Agent, in its capacity as agent for Lessor, and the related Engineer. "Environment" shall have the meaning set forth in 42 U.S.C. (S)9601(8) as ----------- defined on the date of the Master Agreement, and "Environmental" means pertaining or relating to the Environment. "Environmental Audit" means, with respect to each parcel of Land, a Phase I ------------------- Environmental Assessment and, if appropriate, a Phase II Environmental Assessment, dated no more than 180 days prior to the related Closing Date, by an environmental services firm satisfactory to the Funding Parties and Hughes. "Environmental Laws" means and include the Resource Conservation and ------------------ Recovery Act of 1976, (RCRA) 42 U.S.C. (S)(S) 6901-6987, as amended by the Hazardous and Solid Waste Amendments of 1984, the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. (S)(S) 9601-9657, (CERCLA), the Hazardous Materials Transportation Act of 1975, 49 U.S.C. (S)(S) 1801-1812, the Toxic Substances Control Act, 15 U.S.C. (S)(S) 2601-2671, the Clean Air Act, 42 U.S.C. (S)(S) 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S)(S) 136 et seq., and all similar federal, state and local environmental laws, ordinances, rules, orders, statutes, decrees, judgments, injunctions, codes and regulations, and any other federal, state or local laws, ordinances, rules, codes and regulations, relating to the environment, human health or natural resources or the regulation or control of or imposing liability or standards of conduct concerning human health, the environment, Hazardous Materials or the clean-up or other remediation of any Leased Property, or any part thereof, as any of the foregoing may have been from time to time amended, supplemented or supplanted. "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended from time to time or any successor federal statute, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" shall mean, with respect to any Person, each trade or --------------- business (whether or not incorporated) which is a member of a group of which that Person is a member and which is under common control within the meaning of the regulations promulgated under Section 414 of the Tax Code. "Event of Default" means any event or condition designated as an "Event of ---------------- Default" in Article XII of the Lease. -13- "Event of Loss" is defined in Section 10.1 of the Lease. ------------- "Event of Taking" is defined in Section 10.2 of the Lease. --------------- "Exchange Act" means the Securities Exchange Act of 1934, as amended from ------------ time to time, and any successor statute thereto. "Executive Officer" means, with respect to any Person, the Chief Executive ----------------- Officer, President, Vice Presidents (if elected by the Board of Directors of such Person), Chief Financial Officer, Treasurer, Secretary and any Person holding comparable offices or duties (if elected by the Board of Directors of such Person). "Fair Market Sales Value" means, with respect to any Leased Property or any ----------------------- portion thereof, the fair market sales value as determined by an independent appraiser chosen by the related Lessee and reasonably acceptable to the Lessor and the Agent (unless an Event of Default or a Construction Agency Event of Default has occurred and is continuing, in which case the appraiser shall be chosen by the Agent), that would be obtained in an arm's-length transaction between an informed and willing buyer (other than a lessee currently in possession) and an informed and willing seller, under no compulsion, respectively, to buy or sell and neither of which is related to the Lessor or any Lessee, for the purchase of such Leased Property. Such fair market sales value shall be calculated as the value for such Leased Property, assuming, in the determination of such fair market sales value, that such Leased Property is in the condition and repair required to be maintained by the terms of the Lease (unless such fair market sales value is being determined for purposes of Section 13.1 of the Lease and except as otherwise specifically provided in the Lease or the Master Agreement, in which case this assumption shall not be made; it being understood that if such fair market sales value is being determined for purposes of the Construction Agency Agreement, such value shall be determined for the related Leased Property in its then state of completion, but assuming that all construction had been done in accordance with the standards required pursuant to the Construction Agency Agreement). "Federal Funds Rate" means, for any period, a fluctuating interest rate per ------------------ annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of Atlanta, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Final Rent Payment Date" with respect to any Leased Property is defined in ----------------------- Section 13.1(e) of the Lease. -14- "Fixed Charge Coverage Ratio" shall mean, as of any date of determination, --------------------------- the ratio of (A) Consolidated EBITDAR to (B) the sum of (i) Consolidated Interest Expense plus (ii) Consolidated Rental Expense, in each case measured ---- for the four fiscal quarter period ending on such date (or if such date is not the last day of any fiscal quarter, for the four fiscal quarter period ending immediately prior to such date). "Force Majeure Losses" means, with respect to any Leased Property and as -------------------- of any date of calculation, the loss incurred by the Lessor in connection with a Construction Force Majeure Event with respect to which a Construction Force Majeure Declaration has been made, measured by the sum of (i) the lower of (A) the insurance proceeds paid with respect thereto plus the related deductible amount and (B) the reduction in Fair Market Sales Value of the Leased Property as a result of the Construction Force Majeure Event as set forth in an Appraisal, plus (ii) other direct costs incurred by the Lessor that the Lessor has consented to in accordance with Section 3.4 of the Construction Agency Agreement in connection with such Construction Force Majeure Event to the extent such costs are not covered by insurance; provided that insurance proceeds shall -------- be used in such calculation only to the extent the event giving rise to the loss can be remediated for an amount equal to the resulting insurance proceeds plus the deductible; provided, further, that it is expressly understood and agreed -------- ------- that Force Majeure Losses shall not include the costs of repairing damage occasioned not as a result of the Construction Force Majeure Event, but as a result of the Construction Agent's failure to take all reasonable steps to minimize the damages caused by such Construction Force Majeure Event. "Funded Amount" means, as to the Lessor, the Lessor's Invested Amounts, ------------- and, as to each Lender, the outstanding principal amount of such Lender's Loans. "Funding" means any funding by the Funding Parties pursuant to Section 2.2 ------- of the Master Agreement. "Funding Date" means each Closing Date and each other date on which a ------------ Funding occurs under Section 2 of the Master Agreement. "Funding Parties" means the Lessor and the Lenders, collectively. --------------- "Funding Party Balance" means, with respect to any Leased Property, (i) for --------------------- the Lessor as of any date of determination, an amount equal to the sum of the outstanding related Lessor's Invested Amount, all accrued and unpaid Yield on such outstanding related Lessor's Invested Amount, all unpaid related fees owing to the Lessor under the Operative Documents, and all other related amounts owing to the Lessor by the Lessees under the Operative Documents, and (ii) for any Lender as of any date of determination, an amount equal to the sum of the outstanding related Loans of such Lender, all accrued and unpaid interest thereon, all unpaid related fees owing to such Lender under the Operative Documents, and all other related amounts owing to such Lender by the Lessees under the Operative Documents. -15- "Funding Request" is defined in Section 2.2 of the Master Agreement. --------------- "Funding Termination Date" means the earlier of (i) June 22, 2003 and (ii) ------------------------ the termination of the Commitments pursuant to Section 5.2 of the Loan Agreement. "Future Value" means, with respect to any component of the Recourse ------------ Deficiency Percentage or the Construction Failure Payment, the accreted value of such component as of the end of the Base Term or the date of calculation, respectively, that is giving effect to the time value of money using the Implicit Rate. "GAAP" shall mean generally accepted accounting principles in the United ---- States. "General Partner" means Atlantic Financial Managers, Inc., a Texas --------------- corporation. "Governmental Action" means all permits, authorizations, registrations, ------------------- consents, approvals, waivers, exceptions, variances, orders, judgments, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Applicable Law and shall include, without limitation, all citings, environmental and operating permits and licenses that are required for the use, occupancy, zoning and operation of any Leased Property. "Governmental Authority" means any nation or government, any state or other ---------------------- political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Ground Lease" means, with respect to any Land, the ground lease between ------------ the related Ground Lessor and the Lessor pursuant to which a leasehold estate is conveyed in the Land to the Lessor. "Ground Lessor" means, as to any Land, the ground lessor of such Land. ------------- "Guaranteed Indebtedness" shall mean, as to any Person, any obligation of ----------------------- such Person guaranteeing any indebtedness, lease, dividend, or other obligation ("primary obligation") of any other Person (the "primary obligor") in any manner including, without limitation, any obligation or arrangement of such Person (a) to purchase or repurchase any such primary obligation, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) to indemnify the owner of such primary obligation against loss in respect thereof. "Guarantor" means Hughes. --------- -16- "Guaranty Agreement" means the Guaranty Agreement, dated as of June 22, ------------------ 2001, issued by Hughes. "Hazardous Material" or "Hazardous Substance" means any substance, waste or ------------------ ------------------- material which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous, including petroleum, crude oil or any fraction thereof, petroleum derivatives, by products and other hydrocarbons, or which is or becomes regulated under any Environmental Law by any Governmental Authority, including any agency, department, commission, board or instrumentality of the United States, any jurisdiction in which a Leased Property is located or any political subdivision thereof and also including, without limitation, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs") and radon gas. ---- "Hughes" means Hughes Supply, Inc., a Florida corporation. ------ "Hughes Family" shall mean (i) David H. Hughes, Vincent S. Hughes, Russell ------------- V. Hughes, (ii) any of their direct family members (including, without limitation, lineal ancestors and descendants, siblings, and lineal descendants of siblings), (iii) any trusts and profit sharing plans and stock option plans established for the sole benefit of the foregoing, and (iv) the heirs and personal representatives of the foregoing. "IDB Documentation" means the Bonds, each IDB Lease and all other ----------------- agreements, documents, contracts and instruments entered into in connection with any Bonds or IDB Property. "IDB Lease" means a lease between the Lessor and an Authority with respect --------- to a Leased Property. "IDB Property" means each Leased Property that is the subject of Bonds. ------------ "Implicit Rate" means the weighted average of the Lessor Rate and the rate ------------- at which interest on the Lender's Loans is capitalized, each as in effect on the date of calculation based on the outstanding Funded Amounts. "Indebtedness" of any Person shall mean, without duplication (i) all ------------ obligations of such Person which in accordance with GAAP would be shown on the balance sheet of such Person as a liability (including, without limitation, obligations for borrowed money and for the deferred purchase price of property or services, and obligations evidenced by bonds, debentures, notes or other similar instruments); (ii) all Guaranteed Indebtedness of such Person (including contingent reimbursements obligations under undrawn financial letters of credit but not performance letters of credit) (iii) Capitalized Lease Obligations; (iv) Indebtedness of others secured by any Lien upon property owned by such Person, whether or not assumed; and (v) obligations or other liabilities under currency contracts, interest rate contracts, or similar agreements or combinations -17- thereof. Notwithstanding the foregoing, in determining the Indebtedness of any Person, there shall be included all obligations of such Person of the character referred to in clauses (i) through (v) above deemed to be extinguished under GAAP but for which such Person remains legally liable except to the extent that such obligations (x) have been defeased in accordance with the terms of the applicable instruments governing such obligations and (y) the accounts or other assets dedicated to such defeasance are not included as assets on the balance sheet of such Person. "Indemnitee" means SunTrust Bank, in its individual capacity and in its ---------- capacity as Agent, and each Lender (but, in each case, only, with respect to any Leased Property, from and after the Completion Date for such Leased Property), and the Lessor, and their respective Affiliates, successors, permitted assigns, permitted transferees, employees, officers, directors and agents; provided, -------- however, that in no event shall any Lessee be an Indemnitee; provided, further - ------- -------- ------- that with respect to any indemnification arising with respect to any Leased Property during the Construction Period for such Leased Property, the Indemnitee shall only be the Lessor (except as provided in Section 7.2 of the Master Agreement). "Indemnitee Group" means the respective Affiliates, employees, officers, ---------------- directors and agents of the Agent (in its individual capacity), each Lender or the Lessor, as applicable; provided, however, that in no event shall any Lessee -------- ------- be a member of the Indemnitee Group. "Initial Closing Date" means the Closing Date for the first Leased Property -------------------- acquired by the Lessor. "Intercompany Loan Documents" shall mean, collectively, the promissory --------------------------- notes and all related loan, subordination, and other agreements, to the extent that they exist, relating in any manner to the Intercompany Loans. "Intercompany Loans" shall mean, collectively, (i) the loans more ------------------ particularly described on Schedule 4.1(v) to the Master Agreement and (ii) those loans or other extensions of credit made by any Consolidated Company to another Consolidated Company satisfying the terms and conditions set forth in Section 5.13 of the Master Agreement or as may otherwise be approved in writing by the Agent and the Required Lenders. "Investment" shall mean, when used with respect to any Person, any direct ---------- or indirect advance, loan or other extension of credit (other than the creation of receivables in the ordinary course of business) or capital contribution by such Person (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise) to any Person, or any direct or indirect purchase or other acquisition by such Person of, or of a beneficial interest in, capital stock, partnership interests, bonds, notes, debentures or other securities issued by any other Person. -18- "Joinder Agreement" means an agreement substantially in the form of Exhibit ----------------- E to the Master Agreement pursuant to which a Subsidiary of Hughes shall become a Lessee. "Land" means the land described in the related Lease Supplement. ---- "Land Acquisition Costs" with respect to any Leased Property means the ---------------------- Funded Amounts advanced for the purpose of acquiring the related Land, including any earnest money deposits and all other amounts payable under the related Purchase Agreement or Ground Lease, together with all interest, Yield and transaction expenses allocated to Land Acquisition Costs pursuant to Section 2.3(f) of the Master Agreement. "Land Construction Failure Payment" is defined in Section 5.7(g) of the --------------------------------- Construction Agency Agreement. "Land Portion" with respect to any Leased Property means the ratio, ------------ expressed as a percentage of (i) the Fair Market Sales Value of the Land related to such Leased Property to (ii) the Fair Market Sales Value of such Leased Property. "Land Proceeds" is defined in Section 5.3(b) of the Construction Agency ------------- Agreement. "Laws" means all ordinances, statutes, rules, regulations, orders, ---- injunctions, writs, treaties or decrees of any Governmental Authority, or of any court or similar entity established by any thereof. "Lease" means the Master Lease Agreement, dated as of June 22, 2001 ----- together with each Lease Supplement thereto, among the Lessees and the Lessor. "Lease Balance" means, with respect to all of the Leased Properties, as of ------------- any date of determination, an amount equal to the aggregate sum of the outstanding Funded Amounts of all Funding Parties, all accrued and unpaid interest on the Loans, all accrued and unpaid Yield on the Lessor's Invested Amounts, all unpaid fees owing to the Funding Parties under the Operative Documents, and all other amounts owing to the Funding Parties by the Lessees under the Operative Documents. "Lease Supplement" means a supplement to the Lease substantially in the ---------------- form of Exhibit A thereto. "Lease Term" means (a) the Base Term, as it may be renewed pursuant to ---------- Section 14.9 of the Lease or (b) such shorter period as may result from earlier termination of the Lease as provided therein. "Lease Termination Date" means the last day of the Lease Term. ---------------------- -19- "Leased Property" means Land and the related Building(s). For purposes of --------------- the Lease, "Leased Property" means the Land identified in a Lease Supplement and the Buildings related thereto, unless the context provides otherwise. "Leased Property" shall not include any inventory of any Lessee. "Leased Property Balance" means, with respect to any Leased Property, as of ----------------------- any date of determination, an amount equal to the aggregate sum of the outstanding related Funded Amounts of all Funding Parties, all accrued and unpaid interest on the related Loans, all accrued and unpaid Yield on the related Lessor Invested Amounts, all related unpaid fees owing to the Funding Parties under the Operative Documents, and all other amounts owing to the Funding Parties by any Lessee under the Operative Documents with respect to such Leased Property. "Lender Basic Rent" means, for any Rent Period under the Lease, the ----------------- aggregate amount of interest accrued on the Loans pursuant to Section 2.4 of the Loan Agreement during such Rent Period. "Lenders" means such financial institutions as are, or who may hereafter ------- become, parties to the Loan Agreement as Lenders to the Lessor. "Lending Office" for each Lender means the office such Lender sets forth on -------------- Schedule 8.2 to the Master Agreement or such other office as such Lender designates in writing from time to time to Hughes and the Agent. "Lessee" is defined in the preamble to the Master Agreement. The "related" ------ Lessee with respect to any Leased Property means the Lessee that is party to the Lease Supplement for such Leased Property. "Lessor" is defined in the preamble to the Master Agreement. ------ "Lessor Basic Rent" means, for any Rent Period under the Lease, the ----------------- aggregate amount of Yield accrued and unpaid on the Lessor's Invested Amounts pursuant to Section 2.3(a) of the Master Agreement during such Rent Period. "Lessor Liens" means Liens on or against any Leased Property, the Lease, ------------ any other Operative Document or any payment of Rent (a) which result from any act or omission of, or any Claim against, the Lessor unrelated to the Transaction or from Lessor's failure to perform as required under the Operative Documents or (b) which result from any Tax owed by the Lessor, except any Tax for which a Lessee or Hughes is obligated to indemnify (including, without limitation, in the foregoing exception, any assessments with respect to any Leased Property noted on the related Title Policy or assessed in connection with any construction or development by a Lessee or the Construction Agent). -20- "Lessor Rate" is defined in the Lessor Side Letter, provided that during ----------- -------- the Construction Period, the Lessor Rate shall be increased by 0.125%. "Lessor Side Letter" means the letter agreement, dated as of June 22, 2001, ------------------ between Hughes and the Lessor. "Lessor's Invested Amount" means the amounts funded by the Lessor pursuant ------------------------ to Section 2 of the Master Agreement that are not proceeds of Loans by a Lender, as such amount may be increased during the related Construction Term pursuant to Section 2.3(c) of the Master Agreement. "Leverage Ratio" shall mean, as of any date of determination, the ratio of -------------- Total Funded Debt as of such date to Total Capitalization as of such date. "LIBOR" means, for any Rent Period, with respect to LIBOR Advances the ----- offered rate for deposits in U.S. Dollars, for a period comparable to the Rent Period, appearing on the Reuters Screen LIBOR Page as of 11:00 A.M. (London, England time) on the day that is two London banking days prior to the first day of the Rent Period. If at least two such rates appear on the Reuters Screen LIBOR Page, the rate for that Rent Period shall be the arithmetic mean of such rates, rounded, if necessary, to the next higher 1/16 of 1.0%; and in either case as such rates may be adjusted for any applicable reserve requirements. If the foregoing rate is unavailable from the Reuters Screen for any reason, then such rate shall be determined by the Agent from Telerate or, if such rate is also unavailable on such service, then on any other interest rate reporting service of recognized standing designated in writing by the Agent to Hughes and the Lenders; in any such case rounded, if necessary, to the next higher 1/16 of 1.0%, if the rate is not such a multiple. "LIBOR Advance" means that portion of the Funded Amount bearing interest at ------------- a rate based on LIBOR. "Lien" means, with respect to any asset, any mortgage, deed to secure debt, ---- deed of trust, lien, pledge, charge, security interest, security title, preferential arrangement which has the practical effect of constituting a security interest or encumbrance, or encumbrance or servitude of any kind in respect of such asset to secure or assure payment of indebtedness, whether by consensual agreement or by operation of statute or other law, or by any agreement, contingent or otherwise, to provide any of the foregoing. "Limited Event of Default" means an Event of Default under paragraph, (h), ------------------------ --------- --- (i), (n) or (o) of Article XII of the Lease, solely if the breach of the related - --- --- --- ----------- covenant, representation or warranty was based on a subjective interpretation of the term "diligently," "material," "materially," "Material Adverse Effect," "materially adversely affect," "material adverse change," "materially and adversely affects," "material adverse effect," "adverse," "adversely," "substantial," or "substantially"; provided, however, if the Event of Default, -------- ------- covenant or representation or -21- warranty relates to the use of the Leased Property, then such Event of Default, covenant or representation or warranty will not be deemed a Limited Event of Default. "Loan" shall have the meaning specified in Section 2.1 of the Loan ---- Agreement. "Loan Agreement" means the Loan Agreement, dated as of June 22, 2001, among -------------- the Lessor, the Agent and the Lenders. "Loan Documents" means the Loan Agreement, the Notes, the Assignments of -------------- Lease and Rents, the Mortgages and all documents and instruments executed and delivered in connection with each of the foregoing. "Loan Event of Default" means any of the events specified in Section 5.1 of --------------------- the Loan Agreement, provided that any requirement for the giving of notice, the -------- lapse of time, or both, or any other condition, event or act has been satisfied. "Loan Potential Event of Default" means any event, condition or failure ------------------------------- which, with notice or lapse of time or both, would become a Loan Event of Default. "Loss Proceeds" is defined in Section 10.6 of the Lease. ------------- "Margin Regulations" means Regulations T, U and X of the Board of Governors ------------------ of the Federal Reserve System, as the same may be in effect from time to time. "Margin Stock" means "margin stock" as defined in Regulation T, U or X. ------------ "Master Agreement" means the Master Agreement, dated as of June 22, 2001, ---------------- among Hughes, the Lessees, the Lessor, the Agent and the Lenders. "Material Adverse Effect" means with respect to any event or occurrence of ----------------------- whatever nature (including any adverse determination in any litigation, arbitration or governmental investigation or proceeding), (i) a materially adverse effect on the ability of Guarantor or any Lessee to perform its obligations under any Operative Document, (ii) a materially adverse effect on the financial condition, operations, business, prospects or assets of Hughes and its Subsidiaries, taken as a whole, (iii) a materially adverse effect on the value or useful life of any Leased Property, or the legality, validity or enforceability of any of the Operative Documents or (iv) a materially adverse effect on the status or priority of the Agent's or any Funding Party's interest in any Leased Property. "Material Subsidiary" shall mean each Subsidiary of Hughes, now existing or ------------------- hereinafter established or acquired, that at any time prior to the Lease Termination Date, has or acquires total assets in excess of $1,000,000 or that accounted for or produced more than 5% of the Consolidated EBITR of Hughes on a consolidated basis during any of the three most recently completed fiscal years of Hughes. -22- "Monthly Payment Date" means the fifteenth (15th) day of each calendar -------------------- month or, if such day is not a Business Day, the next Business Day. "Moody's" means Moody's Investors Service, Inc. ------- "Mortgage" means, with respect to any Leased Property, that certain -------- mortgage, deed of trust or security deed, dated as of the related Closing Date, by the Lessor to the Agent, in the form of Exhibit D-1 or D-2 attached to the Master Agreement, with such modifications as are satisfactory to the Lessor and the Agent in conformity with Applicable Law to assure customary remedies in favor of the Agent in the jurisdiction where the Leased Property is located. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) ------------------ of ERISA. "Notes" means the note issued by the Lessor under the Loan Agreement, and ----- any and all notes issued in replacement or exchange therefor in accordance with the provisions thereof. "Obligations" means all indebtedness (whether principal, interest, fees or ----------- otherwise), obligations and liabilities of the Guarantor and each Lessee to the Funding Parties (including without limitation all extensions, renewals, modifications, rearrangements, restructures, replacements and refinancings thereof, whether or not the same involve modifications to interest rates or other payment terms of such indebtedness, obligations and liabilities), whether arising under any of the Operative Documents or otherwise, and whether now existing or hereafter created, absolute or contingent, direct or indirect, joint or several, secured or unsecured, due or not due, contractual or tortious, liquidated or unliquidated, arising by operation of law or otherwise, or acquired by Funding Parties outright, conditionally or as collateral security from another, including but not limited to the obligation of the Guarantor and each Lessee to repay future advances by the Funding Parties, whether or not made pursuant to commitment and whether or not presently contemplated by the Guarantor or any Lessee and the Funding Parties under the Operative Documents. "Obligors" means the Guarantor, the Subsidiary Guarantors and the Lessees, -------- collectively. "Officer's Certificate" of a Person means a certificate signed by the --------------------- Chairman of the Board or the President or the Chief Financial Officer or any Executive Vice President or any Senior Vice President or any other Vice President or the Treasurer or any Assistant Treasurer or the Controller or any Assistant Controller or the Secretary of such Person. "Operative Documents" means the Master Agreement, the Purchase Agreements, ------------------- the Deeds, the Lease, the Security Agreement and Assignment, the Notes, the Loan Agreement, the Guaranty Agreement, the Assignments of Lease and Rents, the Mortgages, the Ground Leases, the Construction Agency Agreement, the Joinder Agreements, the Subsidiary Guaranty and the other documents delivered in connection with the transactions contemplated by the Master Agreement. -23- "Overdue Rate" means the lesser of (a) the highest interest rate permitted ------------ by Applicable Law and (b) an interest rate per annum (calculated on the basis of a 365-day (or 366-day, if appropriate) year equal to 2.0% above the Base Rate in effect from time to time or, in the case of Yield, 2% above the Lessor Rate. "Partial Purchase Option" is defined in Section 14.1(b) of the Lease. ----------------------- "Partnership Agreement" means the Agreement of Limited Partnership of AFG, --------------------- dated as of February 28, 1996, among the General Partner and the persons listed on Schedule A thereto as limited partners. "Payment Date" means the last day of each Rent Period (and if such Rent ------------ Period is longer than three months, the day that is 90 days after the first day of such Rent Period) or, if such day is not a Business Day, the next Business Day. "Payment Date Notice" is defined in Section 2.3(d) of the Master Agreement. ------------------- "PBGC" means the Pension Benefit Guaranty Corporation, and any successor ---- thereto. "Permitted Lease Balance" means, with respect to any Leased Property and ----------------------- calculated as of any date, (i) the Leased Property Balance with respect to such Leased Property as of the date of such calculation, minus (ii) Force Majeure ----- Losses with respect to such Leased Property, plus (iii) the amount of insurance ---- proceeds applied towards the remediation of such Force Majeure Losses, minus ----- (iv) any amounts that have been added to the Funded Amounts pursuant to the third sentence of Section 3.3 of the Construction Agency Agreement. For purposes of this definition, Leased Property means the Raw Land and/or the Building subject to a particular Lease Supplement. "Permitted Liens" means the following with respect to any Leased Property: --------------- (a) the respective rights and interest of the related Lessee, the Lessor, the Agent and any Lender, as provided in the Operative Documents, (b) Liens for Taxes either not yet due or being contested in good faith and by appropriate proceedings, so long as enforcement thereof is stayed pending such proceedings, (c) materialmen's, mechanics', workers', repairmen's, employees' or other like Liens arising after the related Closing Date in the ordinary course of business for amounts either not yet due or being contested in good faith and by appropriate proceedings, so long as enforcement thereof is stayed pending such proceedings, (d) Liens arising after such Closing Date out of judgments or awards with respect to which at the time an appeal or proceeding for review is being prosecuted in good faith, so long as the enforcement thereof has been stayed pending such appeal or review, (e) easements, rights of way, reservations, servitudes and rights of others against the Land which do not materially and adversely affect the value or the utility of such Leased Property, (f) other Liens incidental to the conduct of the related Lessee's business which were not incurred in connection with the borrowing of money or the obtaining of advances or credit and which do not in the aggregate materially detract from the value of such Leased -24- Property or materially impair the use thereof, (g) assignments and subleases expressly permitted by the Operative Documents, (h) Liens in favor of municipalities agreed to by the related Lessee that do not affect the value or utility of the related Leased Property and (i) Liens created by IDB Documentation. "Person" means an individual, corporation, partnership, limited liability ------ company, joint venture, association, joint-stock company, trust, nonincorporated organization or government or any agency or political subdivision thereof. "Plan" shall mean any employee benefit plan, program, arrangement, practice ---- or contract, maintained by or on behalf of Hughes or an ERISA Affiliate, which provides benefits or compensation to or on behalf of employees or former employees, whether formal or informal, whether or not written, including but not limited to the following types of plans: (a) Executive Arrangements - any bonus, incentive compensation, stock ---------------------- option, deferred compensation, commission, severance, "golden parachute", "rabbi trust", or other executive compensation plan, program, contract, arrangement or practice; (b) ERISA Plans - any "employee benefit plan" as defined in Section ----------- 3(3) of ERISA, including, but not limited to, any defined benefit pension plan, profit sharing plan, money purchase pension plan, savings or thrift plan, stock bonus plan, employee stock ownership plan, Multiemployer Plan, or any plan, fund, program, arrangement or practice providing for medical (including post-retirement medical), hospitalization, accident, sickness, disability, or life insurance benefits; (c) Other Employee Fringe Benefits - any stock purchase, vacation, ------------------------------ scholarship, day care, prepaid legal services, severance pay or other fringe benefit plan, program, arrangement, contract or practice. "Plans and Specifications" means with respect to any Building the final ------------------------ plans and specifications for such Building prepared by the Architect, and, if applicable, referred to by the Appraiser in the Appraisal, as such Plans and Specifications may be hereafter amended, supplemented or otherwise modified from time to time. "Potential Event of Default" means any event, condition or failure which, -------------------------- with notice or lapse of time or both, would become an Event of Default. "Present Value" with respect to any payment to be made in the future means ------------- the amount of such payment, discounted to present value as of the date of calculation employing a discount rate equal to the Implicit Rate, and, with respect to any payment made prior to the date of such calculation means the amount of such payment, plus interest on such amount calculated at the Implicit Rate for such Leased Property. -25- "Project Costs" means, as of any date and with respect to any Leased ------------- Property, those portions, in the aggregate, of the Funded Amount for such Leased Property as of such date that, when expended by the Lessor, were, or would have been, capitalized by Lessor in accordance with GAAP. For purposes of calculating the Construction Failure Payment, "Project Costs" shall also include other costs related to Construction paid to third parties other than the Funding Parties as described in EITF 97-10. For purposes of calculating the Recourse Deficiency Percentage, as used in this definition, Leased Property means the Raw Land and/or the Building subject to a particular Lease Supplement. "Purchase Agreement" means with respect to any Land, the purchase agreement ------------------ with the Seller for the conveyance of such Land to the Lessor. "Purchase Option" is defined in Section 14.1(a) of the Lease. --------------- "Raw Land" means, with respect to any Leased Property, the parcel of land -------- described in the related Lease Supplement, excluding any improvements thereon. "Recourse Deficiency Amount" means, with respect to any Leased Property, -------------------------- calculated as of the Completion Date, in the case of Leased Properties that shall have been subject to the Construction Agency Agreement, or the Closing Date, in the case of all other Leased Properties, for such Leased Property, the result of (A) the Recourse Deficiency Percentage times (B) the Project Costs for such Leased Property; provided, however, that, if Raw Land is leased pursuant to -------- ------- a separate Lease Supplement in accordance with Section 17.23 of the Lease, the Recourse Deficiency Amount with respect to such Leased Property shall equal the Land Acquisition Cost with respect to such Raw Land. For purposes of this definition, Leased Property means the Raw Land and/or the Building subject to a particular Lease Supplement. "Recourse Deficiency Percentage" means, with respect to any Leased ------------------------------ Property, the percentage set forth in the related Lease Supplement calculated as follows and expressed as a percentage: (a) the Future Value of: (i) 89.9% of (x) the estimated Project Cost (estimated as of the Closing Date for such Leased Property based upon the Construction Budget as of such date) or (y) the actual Project Cost in the case of Leased Properties not subject to the Construction Agency Agreement, less (ii) the Present Value, as of such date, of any "minimum lease payments" with respect to such Leased Property as such term is used in Section 7(d) of Financial Accounting Standard No. 13 (excluding for purposes of this calculation the Recourse Deficiency Amount)), divided by (b) such estimated or actual Project Cost, as the case may be. "Regulation D" means Regulation D of the Board of Governors of the Federal ------------ Reserve System as the same may be in effect from time to time. "Release" means the release, deposit, disposal or leak of any Hazardous ------- Material into or upon or under any land or water or air, or otherwise into the environment, including, without -26- limitation, by means of burial, disposal, discharge, emission, injection, spillage, leakage, seepage, leaching, dumping, pumping, pouring, escaping, emptying, placement and the like. "Release Date" means, with respect to any Leased Property, the earlier of ------------ (i) the date that the Lease Balance has been paid in full, and (ii) the date on which the Agent gives notice to the Lessor that the Lenders release any and all interest they may have in such Leased Property, and all proceeds thereof, and any rights to direct, consent or deny consent to any action by the Lessor with respect to such Leased Property. "Remarketing Option" is defined in Section 14.6 of the Lease. ------------------ "Rent" means Basic Rent and Supplemental Rent, collectively. ---- "Rent Period" means (i) in the case of Base Rate Advances, means the period ----------- from, and including, a Monthly Payment Date (or the date of the borrowing or conversion of such Base Rate Advance, if such date is other than a Monthly Payment Date) to, but excluding, the next succeeding Monthly Payment Date; and (ii) with respect to any LIBOR Advance: (1 initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such LIBOR Advance and ending one, two, three or six months thereafter, as selected by Hughes in its Funding Notice or Payment Date Notice, as the case may be, given with respect thereto; and (2 thereafter, each period commencing on the last day of the next preceding Rent Period applicable to such LIBOR Advance and ending one, two, three or six months thereafter, as selected by Hughes by irrevocable notice to the Agent in its related Payment Date Notice; provided, however that: - -------- ------- (a) The initial Rent Period for any Funding shall commence on the Funding Date of such Funding and each Rent Period occurring thereafter in respect of such Funding shall commence on the day on which the next preceding Rent Period expires; (b) If any Rent Period would otherwise expire on a day which is not a Business Day, such Rent Period shall expire on the next succeeding Business Day, provided that if any Rent Period in respect of LIBOR Advances would -------- otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Rent Period shall expire on the next preceding Business Day; (c) Any Rent Period in respect of LIBOR Advances which begins on a day for which there is no numerically corresponding day in the calendar month at the end of such -27- Rent Period shall, subject to paragraph (d) below, expire on the last ------------- Business Day of such calendar month; (d) No Rent Period shall extend beyond the Lease Termination Date; and (e) At any one time, there shall be no more than six (6) Rent Periods. "Report" is defined in Section 7.6 of the Master Agreement. ------ "Required Funding Parties" means, at any time, Funding Parties holding an ------------------------ aggregate outstanding principal amount of Funded Amounts equal to at least 66- 2/3% of the aggregate outstanding principal amount of all Funded Amounts. "Required Lenders" means, at any time, Funding Parties holding an aggregate ---------------- outstanding principal amount of Loans equal to at least 66-2/3% of the aggregate outstanding principal amount of all Loans. "Requirement of Law" for any Person means the articles or certificate of ------------------ incorporation and bylaws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Reuters Screen" means, when used in connection with any designated page -------------- and LIBOR, the display page so designated on the Reuters Monitor Money Rates Service (or such other page as may replace that page on that service for the purpose of displaying rates comparable to LIBOR). "Revolving Credit Agreement" means the Revolving Credit Agreement, dated as -------------------------- of January 26, 1999, among Hughes, SunTrust Bank (as successor to SunTrust Bank, Central Florida, National Association), individually and as Administrative Agent, First Union National Bank, as Documentation Agent, Bank of America, N.A., individually and as Syndication Agent, Southtrust Bank, individually and as Co- Agent, and the other Lenders party thereto. "Scheduled Construction Termination Date" means with respect to any --------------------------------------- Building eighteen (18) months after the Closing Date for the related Land. "SEC" means the United States Securities and Exchange Commission. --- "Securities Act" means the Securities Act of 1933, as amended. -------------- "Securities Exchange Act" means the Securities Exchange Act of 1934, as ----------------------- amended. -28- "Security Agreement and Assignment" means, with respect to any Leased --------------------------------- Property, the Security Agreement and Assignment (Construction Contract, Architect's Agreement, Permits, Licenses and Governmental Approvals, and Plans, Specifications and Drawings) from the Construction Agent to the Lessor, substantially in the form of Exhibit C to the Master Agreement. "Seller" with respect to any Leased Property means the Person who transfers ------ such Leased Property to Lessor. "Solvent" means, with respect to any Person as of any date, that on such ------- date(i) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (ii) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become matured, (iii) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (v) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at anytime, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Subordinated Debt" shall mean all Indebtedness of Hughes and its ----------------- Subsidiaries subordinated to all obligations of Hughes and its Subsidiaries or any other Credit Party arising under this Agreement, the Revolving Notes and the Guaranty Agreement on terms and conditions satisfactory in all respects to the Agent and the Required Lenders, including without limitation, with respect to interest rates, payment terms, maturities, amortization schedules, covenants, defaults, remedies, and subordination provisions, as evidenced by the written approval of the Agent and Required Lenders. "Subsidiary" shall mean, with respect to any Person, any corporation or ---------- other entity (including, without limitation, partnerships, joint ventures, and associations) regardless of its jurisdiction of organization or formation, at least a majority of the total combined voting power of all classes of voting stock or other ownership interests of which shall, at the time as of which any determination is being made, be owned by such Person, either directly or indirectly through one or more other Subsidiaries. "Subsidiary Guarantors" shall mean, collectively, each Material Subsidiary --------------------- of Hughes that has executed the Subsidiary Guaranty as of the Initial Closing Date, together with all other -29- Material Subsidiaries that hereafter execute supplements to the Subsidiary Guaranty, and their respective successors and permitted assigns. "Subsidiary Guaranty" means the Subsidiary Guaranty, dated as of June 22, ------------------- 2001, issued by the Subsidiary Guarantors. "Supplemental Rent" means any and all amounts, liabilities and obligations ----------------- other than Basic Rent which any Lessee assumes or agrees or is otherwise obligated to pay under the Lease or any other Operative Document (whether or not designated as Supplemental Rent) to the Lessor, the Agent, any Lender or any other party, including, without limitation, amounts under Article XVI of the Lease, and indemnities and damages for breach of any covenants, representations, warranties or agreements, and all overdue or late payment charges in respect of any Funded Amount. "Tax Code" means the Internal Revenue Code of 1986, as amended and in -------- effect from time to time. "Tax Indemnitee" means, with respect to each Leased Property, (i) so long -------------- as such Leased Property is a Construction Land Interest, the Lessor and its Affiliates, successors, permitted assigns, permitted transferees, employees, officers, directors and agents and (ii) from and after the Completion Date for such Leased Property, the Lessor, SunTrust Bank, in its individual capacity and in its capacity as Agent, each Lender and their respective Affiliates, successors, permitted assigns, permitted transferees, employees, officers, directors and agents; provided, however, that in no event shall any Lessee be a -------- ------- Tax Indemnitee. "Taxes" means any present or future taxes, levies, imposts, duties, fees, ----- assessments, deductions, withholdings or other charges of whatever nature, including without limitation, income, receipts, excise, property, sales, transfer, license, payroll, withholding, social security and franchise taxes now or hereafter imposed or levied by the United States, or any state, local or foreign government or by any department, agency or other political subdivision or taxing authority thereof or therein and all interest, penalties, additions to tax and similar liabilities with respect thereto. "Telerate" means, when used in connection with any designated page and -------- LIBOR, the display page so designated on the Dow Jones Telerate Service (or such other page as may replace that page on that service for the purpose of displaying rates comparable to LIBOR). "Title Insurance Company" means the company that has or will issue the ----------------------- title policies with respect to a Leased Property, which company shall be reasonably acceptable to the Funding Parties. "Title Policy" is defined in Section 3.1 of the Master Agreement. ------------ -30- "Total Capitalization" shall mean, as of any date of determination, the sum -------------------- of (i) Total Funded Debt plus (ii) Consolidated Net Worth as of such date. ---- "Total Funded Debt" shall mean all Indebtedness of the Consolidated ----------------- Companies that by its terms or by the terms of any instrument or agreement relating thereto matures, or which is otherwise payable or unpaid, one year or more from, or is directly or indirectly renewable or extendable at the option of the debtor to a date one year or more (including an option of the debtor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of one year or more) from, the date of the creation thereof, provided that Total Funded Debt shall include, as at any date of determination, any portion of such Indebtedness outstanding on such date which matures on demand or within one year from such date (whether by sinking fund, other required prepayment, or final payment at maturity) and shall also include all Indebtedness of the Consolidated Companies for borrowed money under a line of credit, guidance line, revolving credit, bankers acceptance facility or similar arrangement for borrowed money, including, without limitation, all unpaid drawings under letters of credit and unreimbursed amounts pursuant to letter of credit reimbursement agreements, regardless of the maturity date thereof. "Transaction" means all the transactions and activities referred to in or ----------- contemplated by the Operative Documents. "Trust Indenture" is defined in Section 2.6 of the Master Agreement. --------------- "Unrestricted Indemnification Amounts" means, with respect to any Leased ------------------------------------ Property (i) any amounts payable by the Construction Agent with respect to such Leased Property pursuant to (A) Section 3.3(ii) of the Construction Agency Agreement, (B) Section 3.3(iii) of the Construction Agency Agreement, (C) that portion of Section 3.3(i) of the Construction Agency Agreement within the parenthetical phrase within such Section 3.3(i) relating to Claims for personal injury or, to the extent not related to Construction completion, damage to property and any other Claims not related to Construction completion, or (D) any provision of any Operative Document requiring indemnification for Claims arising from environmental conditions with respect to such Leased Property and (ii) any other amounts that EITF 97-10 allows a Lessee to pay that are capitalizable under GAAP and are not required to be included in the calculation of a Lessee's maximum guaranty amount under EITF 97-10. "UCC" means the Uniform Commercial Code of Florida, as in effect from time --- to time. "Wholly Owned Subsidiary" shall mean any Subsidiary, all the stock or ----------------------- ownership interest of every class of which, except directors' qualifying shares, shall, at the time as of which any determination is being made, be owned by Hughes either directly or indirectly. "Withholding Taxes" is defined in Section 7.5(f) of the Master Agreement. ----------------- -31- "Yield" is defined in Section 2.3 of the Master Agreement. ----- -32- EX-10.15 8 dex1015.txt MASTER LEASE - OPERATING LEASE EXHIBIT 10.15 ================================================================================ MASTER LEASE AGREEMENT Dated as of June 22, 2001 between ATLANTIC FINANCIAL GROUP, LTD., as Lessor, and HUGHES SUPPLY, INC. AND CERTAIN SUBSIDIARIES OF HUGHES SUPPLY, INC., as Lessees ___________________________________________ [OPERATING LEASE] ================================================================================ TABLE OF CONTENTS (Lease Agreement)
Page ARTICLE I. DEFINITIONS........................................................ 1 ARTICLE II. LEASE OF LEASED PROPERTY........................................... 1 2.1 Acceptance and Lease of Property................................... 1 2.2 Acceptance Procedure............................................... 2 ARTICLE III. RENT............................................................... 2 3.1 Basic Rent......................................................... 2 3.2 Supplemental Rent.................................................. 3 3.3 Method of Payment.................................................. 3 3.4 Late Payment....................................................... 3 3.5 Net Lease; No Setoff, Etc.......................................... 3 3.6 Certain Taxes...................................................... 5 3.7 Utility Charges.................................................... 5 ARTICLE IV. WAIVERS............................................................ 5 ARTICLE V. LIENS; EASEMENTS; PARTIAL CONVEYANCES.............................. 6 ARTICLE VI. MAINTENANCE AND REPAIR;ALTERATIONS, MODIFICATIONS AND ADDITIONS.... 8 6.1 Maintenance and Repair; Compliance With Law........................ 8 6.2 Alterations........................................................ 9 6.3 Title to Alterations............................................... 9 ARTICLE VII. USE................................................................ 9 ARTICLE VIII. INSURANCE.......................................................... 9 ARTICLE IX. ASSIGNMENT AND SUBLEASING.......................................... 11 ARTICLE X. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE.......................... 11 10.1 Event of Loss. .................................................... 11 10.2 Event of Taking.................................................... 12 10.3 Casualty........................................................... 13 10.4 Condemnation....................................................... 13 10.5 Verification of Restoration and Rebuilding......................... 13 10.6 Application of Payments............................................ 14
10.7 Prosecution of Awards.................................................. 15 10.8 Application of Certain Payments Not Relating to an Event of Taking..... 15 10.9 Other Dispositions..................................................... 15 10.10 No Rent Abatement...................................................... 16 ARTICLE XI. INTEREST CONVEYED TO LESSEES........................................... 16 ARTICLE XII. EVENTS OF DEFAULT...................................................... 16 ARTICLE XIII. ENFORCEMENT............................................................ 20 13.1 Remedies............................................................... 20 13.2 Remedies Cumulative; No Waiver; Consents............................... 21 13.3 Purchase Upon an Event of Default...................................... 22 13.4 Limitation on Liability................................................ 22 ARTICLE XIV. SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL................... 23 14.1 Lessee's Option to Purchase............................................ 23 14.2 Determination of Purchase Price........................................ 23 14.3 Purchase Option on Lease Termination Date.............................. 23 14.4 Purchase Procedure..................................................... 23 14.5 Surrender.............................................................. 24 ARTICLE XV. LESSEE'S EQUIPMENT..................................................... 26 ARTICLE XVI. RIGHT TO PERFORM FOR LESSEE............................................ 27 ARTICLE XVII. MISCELLANEOUS.......................................................... 27 17.1 Reports................................................................ 27 17.2 Binding Effect; Successors and Assigns; Survival....................... 27 17.3 Quiet Enjoyment........................................................ 27 17.4 Notices................................................................ 28 17.5 Severability........................................................... 29 17.6 Amendment; Complete Agreements......................................... 29 17.7 Construction........................................................... 29 17.8 Headings............................................................... 29 17.9 Counterparts........................................................... 29 17.10 GOVERNING LAW.......................................................... 30 17.11 Discharge of Lessee's Obligations by its Subsidiaries or Affiliates.... 30 17.12 Liability of Lessor Limited............................................ 30 17.13 Estoppel Certificates.................................................. 30 17.14 No Joint Venture....................................................... 31 17.15 No Accord and Satisfaction............................................. 31
17.16 No Merger.............................................................. 31 17.17 Survival .............................................................. 31 17.18 Chattel Paper.......................................................... 31 17.19 Time of Essence........................................................ 31 17.20 Recordation of Lease................................................... 32 17.21 Investment of Security Funds........................................... 32 17.22 Ground Leases.......................................................... 32 17.23 Land and Building...................................................... 32 17.24 Joint and Several...................................................... 33 17.25 IDB Documentation...................................................... 33
APPENDICES AND EXHIBITS - ----------------------- APPENDIX A Defined Terms EXHIBIT A Lease Supplement (iv) THIS MASTER LEASE AGREEMENT (as from time to time amended or supplemented, this "Lease"), dated as of June 22, 2001, is among ATLANTIC FINANCIAL GROUP, ----- LTD., a Texas limited partnership (together with its successors and assigns hereunder, the "Lessor"), as Lessor, and HUGHES SUPPLY, INC., a Florida ------ corporation ("Hughes"), and certain Subsidiaries of Hughes hereafter parties ------ hereto (individually, with its successors and permitted assigns hereunder, each a "Lessee" and collectively, the "Lessees"), as Lessees. ------ ------- PRELIMINARY STATEMENT A. Lessor will purchase, or acquire a leasehold interest in, from one or more third parties designated by the Construction Agent, on a Closing Date, certain parcels of real property to be specified by the Construction Agent, together with any improvements thereon. B. Lessor desires to lease to each Lessee, and each Lessee desires to lease from Lessor, certain of such properties as described on the Lease Supplement(s) to which such Lessee is a party. C. If applicable, the Construction Agent will, on behalf of Lessor, cause to be constructed, certain improvements on such parcels of real property which as constructed will be the property of Lessor and will become part of such property subject to the terms of this Lease. In consideration of the mutual agreements herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, Lessor and Lessees hereby agree as follows: ARTICLE I. DEFINITIONS ----------- Terms used herein and not otherwise defined shall have the meanings assigned thereto in Appendix A hereto for all purposes hereof. ---------- ARTICLE II. LEASE OF LEASED PROPERTY ------------------------ Section II.1 Acceptance and Lease of Property. On each Closing Date for -------------------------------- Land, Lessor, subject to the satisfaction or waiver of the conditions set forth in Section 3 of the Master Agreement, hereby agrees to accept delivery on such Closing Date of such Land pursuant to the terms of the Master Agreement, together with any Building or Buildings and other improvements thereon, and simultaneously to lease to the related Lessee hereunder for the Lease Term, Lessor's interest in such Land and in such Building or Buildings and other improvements, together with any Building which thereafter may be constructed thereon pursuant to the Construction Agency Agreement, and such related Lessee hereby agrees, expressly for the direct benefit of Lessor, commencing on such Closing Date for the Lease Term, to lease from Lessor Lessor's interest in such Land to be delivered on such Closing Date, together with, in the case of Land, Lessor's interest in the Building or Buildings and other improvements thereon and/or which thereafter may be constructed thereon pursuant to the Construction Agency Agreement. This Lease shall be in full force and effect with respect to each Leased Property on the Closing Date therefor; provided, however, that, notwithstanding anything herein -------- ------- to the contrary, with respect to any Leased Property subject to the Construction Agency Agreement, the Lessee shall make payments hereunder with respect to such Leased Property (other than any payments due under Section 14.1 hereof or under ------------ Section 3.3, 3.4 or Article V of the Construction Agency Agreement) during the Construction Term therefor from the proceeds of Fundings pursuant to, and subject to the terms and conditions of, the Master Agreement. Section II.2 Acceptance Procedure. Lessor hereby authorizes one or more -------------------- employees of the related Lessee, to be designated by such Lessee, as the authorized representative or representatives of Lessor to accept delivery on behalf of Lessor of that Leased Property identified on the applicable Funding Request. Each Lessee hereby agrees that such acceptance of delivery by such authorized representative or representatives and the execution and delivery by such Lessee on each Closing Date for property to be leased hereunder of a Lease Supplement in substantially the form of Exhibit A hereto (appropriately --------- completed) shall, without further act, constitute the irrevocable acceptance by such Lessee of that Leased Property which is the subject thereof for all purposes of this Lease and the other Operative Documents on the terms set forth therein and herein, and that such Leased Property, together with, in the case of Land, any and all Buildings and other improvements thereon and/or to be constructed thereon pursuant to the Construction Agency Agreement, shall be deemed to be included in the leasehold estate of this Lease and shall be subject to the terms and conditions of this Lease as of such Closing Date. The demise and lease of each parcel of Land and each Building pursuant to this Section 2.2 ----------- shall include any additional right, title or interest in each such parcel of Land and each such Building which may at any time be acquired by Lessor, the intent being that all right, title and interest of Lessor in and to each such parcel of Land and each such Building shall at all times be demised and leased to the related Lessee hereunder. ARTICLE III. RENT ---- Section III.1 Basic Rent . Beginning with and including the first ---------- Payment Date occurring after the Initial Closing Date, each Lessee shall pay to the Agent the Basic Rent for the Leased Properties subject to a Lease Supplement to which such Lessee is a party, in installments, payable in arrears on each Payment Date during the Lease Term, provided that during the Construction Term -------- for a Leased Property, Basic Rent with respect to such Leased Property shall be capitalized pursuant to Section 2.3(c) of the Master Agreement. 2 Section III.2 Supplemental Rent. Each Lessee shall pay to the Agent, or ----------------- to whomever shall be entitled thereto as expressly provided herein or in any other Operative Document, any and all Supplemental Rent on the date the same shall become due and payable and in the event of any failure on the part of such Lessee to pay any Supplemental Rent, the Agent shall have all rights, powers and remedies provided for herein or by law or in equity or otherwise in the case of nonpayment of Basic Rent. All Supplemental Rent to be paid pursuant to this Section 3.2 shall be payable in the type of funds and in the manner set forth in - ----------- Section 3.3. - ----------- Section III.3 Method of Payment. Basic Rent shall be paid to the Agent, ----------------- and Supplemental Rent (including amounts due under Article XIV hereof) shall be ----------- paid to the Agent (or to such Person as may be entitled thereto) or, in each case, to such Person as the Agent (or such other Person) shall specify in writing to the related Lessee, and at such place as the Agent (or such other Person) shall specify in writing to the related Lessee. Each payment of Rent (including payments under Article XIV hereof) shall be made by the Lessees prior ----------- to 12:00 p.m. (noon) Atlanta, Georgia time at the place of payment in funds consisting of lawful currency of the United States of America which shall be immediately available on the scheduled date when such payment shall be due, unless such scheduled date shall not be a Business Day, in which case such payment shall be made on the next succeeding Business Day. The Agent agrees, at a Lessee's request, to arrange for automated clearing house debits from such Lessee's accounts for payments due hereunder. Section III.4 Late Payment. If any Basic Rent shall not be paid on the ------------ date when due, the related Lessee shall pay to the Agent, as Supplemental Rent, interest (to the maximum extent permitted by law) on such overdue amount from and including the due date thereof to but excluding the Business Day of payment thereof at the Overdue Rate. Section III.5 Net Lease; No Setoff, Etc. This Lease is a net lease and ------------------------- notwithstanding any other provision of this Lease, each Lessee shall pay all Basic Rent and Supplemental Rent, and all costs, charges, assessments and other expenses foreseen or unforeseen, for which such Lessee is or shall become liable by reason of such Lessee's estate, right, title or interest in the Leased Properties, or that are connected with or arise out of the acquisition (except the initial costs of purchase by Lessor of its interest in any Leased Property, which costs, subject to the terms of the Master Agreement, shall be funded by the Funding Parties pursuant to the Master Agreement), construction (except costs to be funded under the Construction Agency Agreement), installation, possession, use, occupancy, maintenance, ownership, leasing, repairs and rebuilding of, or addition to, the Leased Properties or any portion thereof, and any other amounts payable hereunder and under the other Operative Documents without counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and each Lessee's obligation to pay all such amounts throughout the Lease Term, including the Construction Term, is absolute and unconditional. The obligations and liabilities of each Lessee hereunder shall in no way be released, discharged or otherwise affected for any reason, including without limitation: (a) any defect in the condition, merchantability, design, quality or fitness for 3 use of any Leased Property or any part thereof, or the failure of any Leased Property to comply with all Applicable Law, including any inability to occupy or use any Leased Property by reason of such non-compliance; (b) any damage to, removal, abandonment, salvage, loss, contamination of or Release from, scrapping or destruction of or any requisition or taking of any Leased Property or any part thereof; (c) any restriction, prevention or curtailment of or interference with any use of any Leased Property or any part thereof including eviction; (d) any defect in title to or rights to any Leased Property or any Lien on such title or rights or on any Leased Property; (e) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by Lessor, the Agent or any Lender; (f) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to any Lessee, Lessor, any Lender, the Agent or any other Person, or any action taken with respect to this Lease by any trustee or receiver of any Lessee, Lessor, any Lender, the Agent, any Ground Lessor or any other Person, or by any court, in any such proceeding; (g) any claim that any Lessee has or might have against any Person, including without limitation, Lessor, any vendor, manufacturer, contractor of or for any Leased Property or any part thereof, the Agent, any Ground Lessor, any Governmental Authority, or any Lender; (h) any failure on the part of Lessor to perform or comply with any of the terms of this Lease, any other Operative Document, any applicable IDB Documentation or of any other agreement; (i) any invalidity or unenforceability or illegality or disaffirmance of this Lease against or by any Lessee or any provision hereof or any of the other Operative Documents or any provision of any thereof whether or not related to the Transaction; (j) the impossibility or illegality of performance by any Lessee, Lessor or both; (k) any action by any court, administrative agency or other Governmental Authority; (l) any restriction, prevention or curtailment of or interference with the Construction or any use of any Leased Property or any part thereof; or (m) any other occurrence whatsoever, whether similar or dissimilar to the foregoing, whether or not any Lessee shall have notice or knowledge of any of the foregoing. Except as specifically set forth in Articles XIV or X of this Lease, this Lease shall ------------ - be noncancellable by each Lessee in any circumstance whatsoever and each Lessee, to the extent permitted by Applicable Law, waives all rights now or hereafter conferred by statute or otherwise to quit, terminate or surrender this Lease, or to any diminution, abatement or reduction of Rent payable by such Lessee hereunder, provided that each Lessee shall retain the right to pursue a cause of -------- action against Lessor for damages for a breach by Lessor of its obligations under the Operative Documents. Each payment of Rent made by a Lessee hereunder shall be final and such Lessee shall not seek or have any right to recover all or any part of such payment from Lessor, the Agent, any Lender or any party to any agreements related thereto for any reason whatsoever. Each Lessee assumes the sole responsibility for the condition, use, operation, maintenance, and management of the Leased Properties leased by it and Lessor shall have no responsibility in respect thereof and shall have no liability for damage to the property of either any Lessee or any subtenant of any Lessee on any account or for any reason whatsoever, other than solely by reason of Lessor's willful misconduct or gross negligence (other than gross negligence or willful misconduct imputed to Lessor as a result of any action or inaction on the part of a Lessee). 4 Section III.6 Certain Taxes. Without limiting the generality of Section ------------- ------- 3.5, each Lessee agrees to pay when due all real estate taxes, personal property - --- taxes, gross sales taxes, including any sales or lease tax imposed upon the rental payments hereunder or under a sublease, occupational license taxes, water charges, sewer charges, assessments of any nature and all other governmental impositions and charges of every kind and nature whatsoever (the "tax(es)"), ------- when the same shall be due and payable without penalty or interest; provided, -------- however, that this Section shall not apply to any of the taxes covered by the - ------- exclusion described in Section 7.4(b) of the Master Agreement. It is the intention of the parties hereto that, insofar as the same may lawfully be done, Lessor shall be, except as specifically provided for herein, free from all expenses in any way related to the Leased Properties and the use and occupancy thereof. Any tax relating to a fiscal period of any taxing authority falling partially within and partially outside the Lease Term, shall be apportioned and adjusted between Lessor and the related Lessee. Each Lessee covenants to furnish Lessor and the Agent, upon the Agent's written request, within forty- five (45) days after the last date when any tax must be paid by such Lessee as provided in this Section 3.6, copies of official receipts of the appropriate ----------- taxing, authority or other proof satisfactory to Lessor, evidencing the payment thereof. So long as no Event of Default has occurred and is continuing, the related Lessee may defer payment of a tax so long as the validity or the amount thereof is contested by such Lessee with diligence and in good faith; provided, however, -------- ------- that such Lessee shall pay the tax in sufficient time to prevent delivery of a tax deed. Such contest shall be at the related Lessee's sole cost and expense. Each Lessee covenants to indemnify and save harmless Lessor, the Agent and each Lender from any actual and reasonable costs or expenses incurred by Lessor, the Agent or any Lender as a result of such contest, which indemnification shall survive the termination of this Lease; provided that neither the Agent nor any -------- Lender shall be entitled to claim any indemnity against any Lessee pursuant to this sentence with respect to any Construction Land Interest during the Construction Term therefor. Section III.7 Utility Charges. Each Lessee agrees to pay or cause to be --------------- paid as and when the same are due and payable all charges for gas, water, sewer, electricity, lights, heat, power, telephone or other communication service and all other utility services used, rendered or supplied to, upon or in connection with the Leased Properties leased by it. ARTICLE IV. WAIVERS ------- 5 During the Lease Term, Lessor's interest in the Leased Properties, including the Equipment, the Building(s) (whether or not completed) and the Land, is demised and let by Lessor "AS IS" subject to (a) the rights of any parties in possession thereof, (b) the state of the title thereto existing at the time Lessor acquired its interest in the Leased Properties, (c) any state of facts which an accurate survey or physical inspection might show (including the survey delivered on the related Closing Date), (d) all Applicable Law, and (e) any violations of Applicable Law which may exist upon or subsequent to the commencement of the Lease Term. EACH LESSEE ACKNOWLEDGES THAT, ALTHOUGH LESSOR WILL OWN AND HOLD TITLE TO THE LEASED PROPERTIES, LESSOR IS NOT A MANUFACTURER OF, OR DEALER IN ANY LEASED PROPERTY, AND IS NOT RESPONSIBLE FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE BUILDING(S) OR ANY ALTERATIONS. NEITHER LESSOR, THE AGENT NOR ANY LENDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE VALUE, MERCHANTABILITY, TITLE, HABITABILITY, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF THE LEASED PROPERTIES (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTIES (OR ANY PART THEREOF), ALL SUCH WARRANTIES BEING HEREBY DISCLAIMED, AND NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF ANY LEASED PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY APPLICABLE LAW, except that Lessor hereby represents and warrants that each Leased Property is and shall be free of Lessor Liens. As between Lessor and the Lessees, each related Lessee has been afforded full opportunity to inspect each Leased Property, is satisfied with the results of its inspections of such Leased Property and is entering into this Lease solely on the basis of the results of its own inspections and all risks incident to the matters discussed in the two preceding sentences, as between Lessor, the Agent or the Lenders on the one hand, and the Lessees, on the other, are to be borne by the Lessees, except for the foregoing representation and warranty of Lessor relative to the absence of Lessor Liens. The provisions of this Article IV have ---------- been negotiated, and, except to the extent otherwise expressly stated, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties by Lessor, the Agent or the Lenders, express or implied, with respect to the Leased Properties, that may arise pursuant to any law now or hereafter in effect, or otherwise. 6 ARTICLE V. LIENS; EASEMENTS; PARTIAL CONVEYANCES ------------------------------------- Each Lessee shall, within thirty (30) days following knowledge thereof, discharge or bond over any Lien on or with respect to any Leased Property, the title thereto, or any interest therein, including any Liens which arise out of the possession, use, occupancy, construction, repair or rebuilding of any Leased Property or by reason of labor or materials furnished or claimed to have been furnished to a Lessee, or any of its contractors or agents or Alterations constructed by a Lessee, except, in all cases, Permitted Liens or Lessor Liens. Notwithstanding the foregoing paragraph, at the request of a Lessee, Lessor shall, from time to time during the Lease Term and upon reasonable advance written notice from such Lessee, and within fifteen (15) days of receipt of the materials specified in the next succeeding sentence, consent to and join in any (i) grant of easements, licenses, rights of way and other rights in the nature of easements, including, without limitation, utility easements to facilitate Lessees' use, development and construction of the Leased Properties, (ii) release or termination of easements, licenses, rights of way or other rights in the nature of easements which are for the benefit of the Land or the Building(s) or any portion thereof, (iii) dedication or transfer of portions of the Land, not improved with a Building, for road, highway or other public purposes, (iv) execution of agreements for ingress and egress and amendments to any covenants and restrictions affecting the Land or the Building(s) or any portion thereof and (v) request to any Governmental Authority for platting or subdivision or replatting or resubdivision approval with respect to the Land or any portion thereof or any parcel of land of which the Land or any portion thereof forms a part or a request for rezoning or any variance from zoning or other governmental requirements. Lessor's obligations pursuant to the preceding sentence shall be subject to the requirements that: (a) any such action shall be at the sole cost and expense of the requesting Lessee and such Lessee shall pay all actual and reasonable out-of- pocket costs of Lessor, the Agent and any Lender in connection therewith (including, without limitation, the reasonable fees of attorneys, architects, engineers, planners, appraisers and other professionals reasonably retained by Lessor, the Agent or any Lender in connection with any such action), (b) the requesting Lessee shall have delivered to Lessor and Agent a certificate of a Responsible Officer of such Lessee stating that (i) such action will not cause any Leased Property, the Land or any Building or any portion thereof to fail to comply in any material respect with the provisions of this Lease or any other Operative Documents or any applicable IDB Documentation, or in any material respect with Applicable Law; and 7 (ii) such action will not materially reduce the Fair Market Sales Value, utility or useful life of any Leased Property, the Land or any Building nor Lessor's interest therein; and (c) in the case of any release or conveyance, if Lessor, the Agent or any Lender so reasonably requests, the requesting Lessee will cause to be issued and delivered to Lessor and the Agent by the Title Insurance Company an endorsement to the Title Policy which shall revise the insured legal description to delete the released property, and shall indicate that the Title Policy is in full force and effect at the original policy amount. In addition to the foregoing, the related Lessee may arrange for a sale of a portion of the Leased Property located at the southeast corner of N.W. 108/th/ Avenue and N.W. 91/st/ Terrace, Miami, Florida and Lessor shall execute such documents and instruments as may be requested by such Lessee to effect such sale, provided that all of the following conditions are met: (i) after giving -------- effect to such sale, the Leased Property complies with all Applicable Laws (including all zoning laws and regulations) and all applicable insurance requirements, (ii) after giving effect to such sale, such Leased Property has available all services of public facilities and other utilities, together with all means of egress and ingress, to and from such Leased Property, necessary for the use and operation of such Leased Property for its intended purpose, (iii) the net proceeds of such sale shall be at least equal to the diminution in the Fair Market Sales Value of such Leased Property resulting from such sale, and shall be applied to reduce the Funded Amounts (on a pro rata basis, among the Funding Parties) related thereto, (iv) such sale shall be on an "as is, where is" basis, without representation or recourse on the part of Lessor, (v) the related Lessee shall pay, or shall promptly reimburse the Agent and the Funding Parties for, all out of pocket costs and expenses, including legal fees and disbursements, incurred by any of them in connection with such sale, and (vi) the related Lessee shall deliver a certificate of a Responsible Officer to the effect that the foregoing conditions have been satisfied and such other certificates and documents as the Agent or any Funding Party shall reasonably request. 8 ARTICLE VI. MAINTENANCE AND REPAIR; ALTERATIONS, MODIFICATIONS AND ADDITIONS ---------------------------------------- Section VI.1 Maintenance and Repair; Compliance With Law. Each Lessee, at ------------------------------------------- its own expense, shall at all times (a) maintain each Leased Property leased by it in good repair and condition (subject to ordinary wear and tear), in accordance with prudent industry standards and, in any event, in no less a manner as other similar property owned or leased by such Lessee or its Affiliates, (b) make all Alterations in accordance with, and maintain (whether or not such maintenance requires structural modifications or Alterations) and operate and otherwise keep each Leased Property in compliance in all material respects with, all Applicable Laws and insurance requirements, and (c) make all repairs, replacements and renewals of each Leased Property or any part thereof which may be required to keep such Leased Property in the condition required by the preceding clauses (a) and (b). Each Lessee shall perform the foregoing ----------- --- maintenance obligations regardless of whether any Leased Property is occupied or unoccupied. Each Lessee waives any right that it may now have or hereafter acquire to (i) require Lessor, the Agent or any Lender to maintain, repair, replace, alter, remove or rebuild all or any part of any Leased Property or (ii) make repairs at the expense of Lessor, the Agent or any Lender pursuant to any Applicable Law or other agreements or otherwise. NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL BE PERSONALLY LIABLE TO ANY LESSEE OR TO ANY CONTRACTORS, SUBCONTRACTORS, LABORERS, MATERIALMEN, SUPPLIERS OR VENDORS FOR SERVICES PERFORMED OR MATERIAL PROVIDED ON OR IN CONNECTION WITH ANY LEASED PROPERTY OR ANY PART THEREOF. Neither Lessor, the Agent nor any Lender shall be required to maintain, alter, repair, rebuild or replace any Leased Property in any way. Section VI.2 Alterations. Each Lessee may, without the consent of Lessor, ----------- at such Lessee's own cost and expense, make Alterations which do not diminish the value, utility or useful life of any Leased Property. Section VI.3 Title to Alterations. Title to all Alterations shall without -------------------- further act vest in Lessor (subject to each Lessee's right to remove trade fixtures, personal property and equipment which do not constitute Alterations and which were not acquired with funds advanced by Lessor or any Lender) and shall be deemed to constitute a part of the Leased Properties and be subject to this Lease. 9 ARTICLE VII. USE --- Each Lessee may use each Leased Property leased by it or any part thereof for any lawful purpose, and in a manner consistent with the standards applicable to properties of a similar nature in the geographic area in which such Leased Property is located, provided that such use does not materially adversely affect -------- the Fair Market Sales Value, utility, remaining useful life or residual value of such Leased Property, and does not materially violate or conflict with, or constitute or result in a material default under, any Applicable Law or any insurance policy required hereunder. In the event that any use of any of the Leased Property changes the character or original intended use of such Leased Property and the Lessees do not purchase the Leased Properties at the end of the Lease Term, the related Lessee, upon request of Lessor, shall restore such Leased Property to its general character and intended use on the Closing Date or Completion Date therefor, ordinary wear and tear excepted. No Lessee shall commit or permit any waste of any Leased Property or any material part thereof. ARTICLE VIII. INSURANCE --------- The provisions of this Article VIII shall apply to Leased Properties ------------ that are not then subject to the Construction Agency Agreement. For any Leased Property subject to the Construction Agency Agreement, the Lessee shall maintain insurance in accordance with Section 2.9 of the Construction Agency Agreement. (a) At any time during which any part of any Building or any Alteration is under construction and as to any part of any Building or any Alteration under construction, the related Lessee shall maintain, or cause to be maintained, at its sole cost and expense, as a part of its blanket policies or otherwise, "all risks" non-reporting completed value form of builder's risk insurance. (b) During the Lease Term, each Lessee shall maintain, at its sole cost and expense, as a part of its blanket policies or otherwise, insurance against loss or damage to any Building or any item of equipment included in the Leased Property by fire and other risks, on terms and in amounts no less favorable than insurance covering other similar properties or equipment owned or leased by a Lessee, but in no event less than the replacement cost of such Building or item of equipment included in the Leased Property, as the case may be, from time to time. (c) During the Lease Term, each Lessee shall maintain, at its sole cost and expense, commercial general liability insurance with respect to such Lessee's use, operation and 10 occupancy of the Leased Properties. Such insurance shall be on terms and in amounts that are no less favorable than insurance maintained by a Lessee or its Affiliates with respect to similar properties or equipment that it owns or leases, but in no event less than $1,000,000 general liability, plus $5,000,000 liability umbrella coverage, per occurrence. Such insurance policies shall also provide that each Lessee's insurance shall be considered primary insurance. Nothing in this Article VIII shall prohibit ------------ Lessor, the Agent or any Lender from carrying at its own expense other insurance on or with respect to the Leased Properties, provided that any insurance carried -------- by Lessor, the Agent or any Lender shall not prevent any Lessee from carrying the insurance required hereby. (d) Each policy of insurance maintained by a Lessee pursuant to clauses (a) and (b) of this Article VIII shall provide that all insurance - ----------- --- ------------ proceeds in respect of any loss or occurrence shall be adjusted by, and all insurance proceeds shall be paid to, such Lessee, except if, and for so long as an Event of Default exists, all losses shall be adjusted solely by, and all insurance proceeds shall be paid solely to, the Agent (or Lessor if the Loans have been fully paid) for application pursuant to this Lease. (e) On the Closing Date for each parcel of Land and on each anniversary of the related policy date each Lessee shall furnish Lessor with certificates showing the insurance required under this Article VIII to be in ------------ effect and naming Lessor, the Agent and the Lenders as additional insureds. Such certificates shall include a provision for thirty (30) days' advance written notice by the insurer to Lessor and the Agent in the event of cancellation or expiration or nonpayment of premium with respect to such insurance, and shall include a customary breach of warranty clause. Each Lessee shall provide evidence to Lessor and the Agent that each insurance policy required by this Article VIII has been renewed or replaced prior to the ------------ scheduled expiration date therefor. (f) Each policy of insurance maintained by a Lessee pursuant to this Article VIII shall provide that in respect of the interests of Lessor, the Agent - ------------ and the Lenders, such policies shall not be invalidated by any fraud, action, inaction or misrepresentation of any Lessee or any other Person. Each of each Lessee, Lessor, the Agent and the Lenders agree to waive their rights of subrogation against the others to the extent of the losses paid under insurance policies. (g) All insurance policies carried in accordance with this Article ------- VIII shall be maintained with insurers rated at least A- by A.M. Best & Company, - ---- and in all cases the insurer shall be qualified to insure risks in the State where each Leased Property is located. 11 ARTICLE IX. ASSIGNMENT AND SUBLEASING ------------------------- No Lessee may assign any of its right, title or interest in, to or under this Lease, except (i) to a wholly owned Subsidiary of Hughes, provided that -------- Hughes reaffirms its obligations under the Guaranty Agreement after giving effect thereto and (ii) as set forth in the following sentence. Each Lessee may sublease all or any portion of any Leased Property, provided that (a) all -------- obligations of such Lessee shall continue in full effect as obligations of a principal and not of a guarantor or surety, as though no sublease had been made; (b) such sublease shall be expressly subject and subordinate to this Lease, the Loan Agreement and the other Operative Documents; and (c) each such sublease shall terminate on or before the Lease Termination Date. Each Lessee shall give the Agent and Lessor prompt written notice of any such sublease. Except pursuant to an Operative Document, this Lease shall not be mortgaged or pledged by any Lessee, nor shall any Lessee mortgage or pledge any interest in any Leased Property or any portion thereof. Any such mortgage or pledge shall be void. ARTICLE X. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE ----------------------------------------- 12 Section X.1 Event of Loss. Any event (i) which would otherwise ------------- constitute a Casualty during the Base Term, and (ii) which, in the good-faith judgment of the related Lessee, (A) requires repairs to the related Leased Property that would cost in excess of 50% of the original cost of such Leased Property or (B) renders repair and restoration of the related Leased Property impossible or impractical, and with respect to which such Lessee has determined not to repair and restore such Leased Property (it being understood that the -- ----- ---------- Lessee shall have the option to either purchase the affected Leased Property or repair and restore the affected Leased Property) shall constitute an "Event of -------- Loss". Within sixty (60) days after the occurrence of such event, the related - ---- Lessee shall deliver to Lessor an Officer's Certificate notifying Lessor of such event and of such judgment and decision not to repair and restore. In the case of any other event which constitutes a Casualty, the related Lessee shall restore such Leased Property pursuant to Section 10.3. If an Event of Loss ------------ other than an Event of Taking shall occur, the related Lessee shall purchase the affected Leased Property pursuant to Section 14.4 on the earlier of (i) the ------------ Lease Termination Date and (ii) the next Payment Date occurring not less than sixty (60) days after the delivery of the Officer's Certificate pursuant to the second preceding sentence; provided that if such an Event of Loss shall occur -------- during the Construction Term for such Leased Property, the related Lessee may, at such Lessee's option, pay to the Lessor the Construction Failure Payment instead of paying the Leased Property Balance as the purchase price for such Leased Property (in which case the Lessor shall retain the Lessor's interest in such Leased Property, subject to the provisions of Section 5.7 of the ----------- Construction Agency Agreement with respect to remarketing). Upon Lessor's receipt of such Leased Property Balance on such date, Lessor shall cause Lessor's interest in such Leased Property to be conveyed to the related Lessee in accordance with and subject to the provisions of Section 14.5 hereof; upon ------------ completion of such purchase (or payment of the Construction Failure Payment, as the case may be), but not prior thereto, this Lease with respect to such Leased Property and all obligations hereunder with respect to such Leased Property shall terminate, except with respect to obligations and liabilities hereunder, actual or contingent, that have arisen or relate to events occurring on or prior to such date of purchase, or which are expressly stated herein to survive termination of this Lease. Upon the consummation of the purchase of any Leased Property pursuant to this Section 10.1, any proceeds derived from insurance required to be maintained ------------ by the related Lessee pursuant to this Lease for any Leased Property remaining after payment of such purchase price shall be paid over to, or retained by, such Lessee or as it may direct, and Lessor shall assign to such Lessee, without warranty, all of Lessor's rights to and interest in such insurance required to be maintained by such Lessee pursuant to this Lease. Section X.2 Event of Taking. Any event (i) which constitutes a --------------- Condemnation of all of, or substantially all of, a Leased Property, or (ii) (A) which would otherwise constitute a Condemnation, and (B) which, in the good- faith judgment of the related Lessee, (A) requires repairs to the related Leased Property that would cost in excess of 50% of the original cost of such Leased Property or (B) renders restoration and rebuilding of the related Leased Property impossible or impractical, and with respect to which such Lessee has determined not to repair 13 and restore such Leased Property (it being understood that the Lessee shall have -- ----- ---------- the option to either purchase the affected Leased Property or repair and restore the affected Leased Property) shall constitute an "Event of Taking". Within --------------- sixty (60) days after the occurrence of such event, the related Lessee shall deliver to Lessor an Officer's Certificate notifying Lessor of such event and of such judgment and decision not to repair and restore. In the case of any other event which constitutes a Condemnation, the related Lessee shall restore and rebuild such Leased Property pursuant to Section 10.4. If an Event of Taking ------------ shall occur, the related Lessee shall purchase the affected Leased Property pursuant to Section 14.4 on the earlier of (A) the Lease Termination Date and ------------ (B) the next Payment Date occurring not less than sixty (60) days after the occurrence of such Event of Taking, in the case of an Event of Taking described in clause (i) above, or (2) on the earlier of (A) the Lease Termination Date and ---------- (B) the next Payment Date occurring not less than 60 days after the delivery of the Officer's Certificate pursuant to the second preceding sentence, in the case of an Event of Taking described in clause (ii) above, an amount equal to the ---------- related Leased Property Balance; provided that, if such an Event of Taking shall -------- occur during the Construction Term for such Leased Property, the related Lessee may, at such Lessee's option, pay to the Lessor the Construction Failure Payment instead of paying the Leased Property Balance as the purchase price for such Leased Property (in which case the Lessor shall retain the Lessor's interest in such Leased Property, subject to the provisions of Section 5.7 of the Construction Agency Agreement with respect to remarketing). Upon Lessor's receipt of such Leased Property Balance on such date, Lessor shall cause Lessor's interest in such Leased Property, and in all condemnation proceeds related thereto, to be conveyed to the related Lessee in accordance with and subject to the provisions of Section 14.4 hereof (provided that such conveyance ------------ shall be subject to all rights of the condemning authority); upon completion of such purchase (or payment of the Construction Failure Payment, as the case may be), but not prior thereto, this Lease with respect to such Leased Property and all obligations hereunder with respect to such Leased Property shall terminate, except with respect to obligations and liabilities hereunder, actual or contingent, that have arisen or relate to events occurring on or prior to such date of purchase, or which are expressly stated herein to survive termination of this Lease. Upon the consummation of the purchase of such Leased Property pursuant to this Section 10.2, all Awards received by Lessor, after deducting any reasonable ------------ out-of-pocket costs incurred by Lessor in collecting such Awards, received or payable on account of an Event of Taking with respect to such Leased Property during the related Lease Term shall be promptly paid to the related Lessee, and all rights of Lessor in Awards not then received shall be assigned to Lessee by Lessor. Section X.3 Casualty. If a Casualty shall occur after the Construction -------- Period for the affected Leased Property which is not an Event of Loss, the related Lessee shall rebuild and restore the affected Leased Property, will complete the same prior to the Lease Termination Date, and will cause the condition set forth in Section 3.5 (c) of the Master Agreement to be fulfilled with respect to such restoration and rebuilding prior to the Lease Termination Date, regardless of whether insurance proceeds received as a result of such Casualty are sufficient for such purpose. 14 Section X.4 Condemnation. If a Condemnation shall occur after the ------------ Construction Period for the affected Leased Property which is not an Event of Taking, the related Lessee shall rebuild and restore the affected Leased Property, will complete the same prior to the Lease Termination Date, and will cause the condition set forth in Section 3.5 (c) of the Master Agreement to be fulfilled with respect to such restoration and rebuilding prior to the Lease Termination Date. Section X.5 Verification of Restoration and Rebuilding. In the event of ------------------------------------------ Casualty or Condemnation that involves, or is reasonably expected to involve, repair or rebuilding costs in excess of $1,000,000, to verify the related Lessee's compliance with the foregoing Section 10.3 or 10.4, as appropriate, ------------ ---- Lessor, the Agent, the Lenders and their respective authorized representatives may, upon five (5) Business Days' notice to such Lessee, make a reasonable number of inspections of the affected Leased Property with respect to (i) the extent of the Casualty or Condemnation and (ii) the restoration and rebuilding of the related Building and the Land. All actual and reasonable out-of-pocket costs of such inspections incurred by Lessor, the Agent or any Lender will be paid by the related Lessee promptly after written request. No such inspection shall unreasonably interfere with the related Lessee's operations or the operations of any other occupant of such Leased Property. None of the inspecting parties shall have any duty to make any such inspection or inquiry and none of the inspecting parties shall incur any liability or obligation by reason of making or not making any such inspection or inquiry. Section X.6 Application of Payments. All proceeds (except for payments ----------------------- under insurance policies maintained other than pursuant to Article VIII of this ------------ Lease) received at any time by Lessor, any Lessee or the Agent from any Governmental Authority or other Person with respect to any Condemnation or Casualty to any Leased Property or any part thereof or with respect to an Event of Loss or an Event of Taking, plus the amount of any payment that would have ---- been due from an insurer but for a Lessee's self-insurance or deductibles ("Loss ---- Proceeds"), shall (except to the extent Section 10.9 applies) be applied as - -------- ------------ follows: (a) In the event the related Lessee purchases such Leased Property pursuant to Section 10.1 or Section 10.2, such Loss Proceeds shall be ------------ ------------ applied as set forth in Section 10.1 or Section 10.2, as the case may be; ------------ ------------ (b) In the event of a Casualty at such time when no Event of Default has occurred and is continuing and the related Lessee is obligated to repair and rebuild such Leased Property pursuant to Section 10.3, such ------------ Lessee may, in good faith and subsequent to the date of such Casualty, certify to Lessor and to the applicable insurer that no Event of Default has occurred and is continuing, in which event the applicable insurer shall pay the Loss Proceeds to such Lessee; 15 (c) In the event of a Condemnation at such time when no Event of Default has occurred and is continuing and the related Lessee is obligated to repair and rebuild such Leased Property pursuant to Section 10.4, such ------------ Lessee may, in good faith and subsequent to the date of such Condemnation, certify to Lessor and the Agent that no Event of Default has occurred and is continuing, in which event the applicable Award shall be paid over to such Lessee; and (d) As provided in Section 10.8, if such section is applicable. ------------ During any period of repair or rebuilding pursuant to this Article X, this --------- Lease will remain in full force and effect and Basic Rent shall continue to accrue and be payable without abatement or reduction. Each Lessee shall maintain records setting forth information relating to the receipt and application of payments in accordance with this Section 10.6. Such records ------------ shall be kept on file by each Lessee at its offices and shall be made available to Lessor, the Lenders and the Agent upon request during such Lessee's normal business hours. Section X.7 Prosecution of Awards. (a) If any Condemnation shall --------------------- occur, the party receiving the notice of such Condemnation shall give to the other party and the Agent promptly, but in any event within thirty (30) days after the occurrence thereof, written notice of such occurrence and the date thereof, generally describing the nature and extent of such Condemnation. With respect to any Event of Taking or any Condemnation, the related Lessee shall control the negotiations with the relevant Governmental Authority as to any proceeding in respect of which Awards are required, under Section 10.6, to be ------------ assigned or released to such Lessee, unless an Event of Default shall have occurred and be continuing, in which case (i) the Agent (or Lessor if the Loans have been fully paid) shall control such negotiations; and (ii) such Lessee hereby irrevocably assigns, transfers and sets over to Lessor all rights of such Lessee to any Award on account of any Event of Taking or any Condemnation and, if there will not be separate Awards to Lessor and such Lessee on account of such Event of Taking or Condemnation, irrevocably authorizes and empowers the Agent (or Lessor if the Loans have been fully paid) during the continuance of an Event of Default, with full power of substitution, in the name of such Lessee or otherwise (but without limiting the obligations of such Lessee under this Article X), to file and prosecute what would otherwise be such Lessee's claim - --------- for any such Award and to collect, receipt for and retain the same. In any event Lessor and the Agent may participate in such negotiations, and no settlement will be made without the prior consent of the Agent (or Lessor if the Loans have been fully paid), not to be unreasonably withheld. (b) Notwithstanding the foregoing, each Lessee may prosecute, and Lessor shall have no interest in, any claim with respect to such Lessee's personal property and equipment not financed by or otherwise property of Lessor, business interruption or similar award and such Lessee's relocation expenses. 16 Section X.8 Application of Certain Payments Not Relating to an Event of ----------------------------------------------------------- Taking. In case of a requisition for temporary use of all or a portion of any - ------ Leased Property which is not an Event of Taking, this Lease shall remain in full force and effect with respect to such Leased Property, without any abatement or reduction of Basic Rent, and the Awards for such Leased Property shall, unless an Event of Default has occurred and is continuing, be paid to the related Lessee. Section X.9 Other Dispositions. Notwithstanding the foregoing provisions ------------------ of this Article X, so long as an Event of Default shall have occurred and be --------- continuing, any amount that would otherwise be payable to or for the account of, or that would otherwise be retained by, Lessee pursuant to this Article X shall --------- be paid to the Agent (or Lessor if the Loans have been fully paid) as security for the obligations of the Lessees under this Lease and, at such time thereafter as no Event of Default shall be continuing, such amount shall be paid promptly to the related Lessee to the extent not previously applied by Lessor or the Agent in accordance with the terms of this Lease or the other Operative Documents. Section X.10 No Rent Abatement. Rent shall not abate hereunder by ----------------- reason of any Casualty, any Event of Loss, any Event of Taking or any Condemnation of any Leased Property, and each Lessee shall continue to perform and fulfill all of such Lessee's obligations, covenants and agreements hereunder notwithstanding such Casualty, Event of Loss, Event of Taking or Condemnation until the Lease Termination Date. ARTICLE XI. INTEREST CONVEYED TO LESSEES ---------------------------- Each Lessee and Lessor intend that this Lease be treated as a true lease for all purposes. ARTICLE XII. EVENTS OF DEFAULT ----------------- The following events shall constitute Events of Default (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) any Lessee shall fail to make any payment of Basic Rent within three (3) days after written or verbal notice thereof from Lessor or the Agent to Hughes, provided that no such notice shall be required if notice has been given -------- pursuant to this clause (a) twice during the relevant calendar year (in which ---------- case, the failure to make any payment of Basic Rent within three (3) days after such Basic Rent is due shall constitute an Event of Default); 17 (b) any Lessee shall fail to make any payment of Rent (other than Basic Rent and other than as set forth in clause (c)) or any other amount payable ---------- hereunder or under any of the other Operative Documents (other than Basic Rent and other than as set forth in clause (c)), and such failure shall continue for ---------- a period of ten (10) Business Days after written notice thereof from Lessor or the Agent to Hughes; (c) any Lessee shall fail to pay the Lease Balance when due pursuant to Section 14.1 or Article XIV or the Construction Agent shall fail to make any - ------------ ----------- payment when due under the Construction Agency Agreement; (d) any Lessee shall fail to maintain insurance as required by Article VIII ------------ hereof or Section 2.9 of the Construction Agency Agreement, and such failure shall continue until the earlier of (i) fifteen (15) days after written notice thereof from Lessor and (ii) the day immediately preceding the date on which any applicable insurance coverage would otherwise finally lapse or terminate; (e) any Consolidated Company shall fail to make when due (whether at stated maturity, by acceleration, on demand or otherwise, and after giving effect to any applicable grace period) any payment of principal of or interest on any Indebtedness (other than the Obligations) exceeding $5,000,000 in the aggregate; (f) any Consolidated Company shall fail to observe or perform within any applicable grace period any covenants or agreements (other than those referenced in paragraph (e) above) contained in any agreements or instruments relating to ------------- any of its Indebtedness exceeding $5,000,000 in the aggregate, or any other event shall occur if the effect of such failure or other event is to accelerate, or to permit the holder of such Indebtedness or any other Person to accelerate, the maturity of such Indebtedness (it being understood that if the holder of such Indebtedness waives such failure or accepts a cure of such failure, such waiver or acceptance of cure shall negate the Event of Default arising hereunder solely as a result of such failure); or any such Indebtedness shall be required to be prepaid (other than by a regularly scheduled required prepayment) in whole or in part prior to its stated maturity; (g) Hughes or any other Consolidated Company shall commence a voluntary case concerning itself under the Bankruptcy Code or an involuntary case for bankruptcy is commenced against any Consolidated Company and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or any part of the property of any Consolidated Company; or any Consolidated Company commences proceedings of its own bankruptcy or to be granted a suspension of payments or any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction, whether now or hereafter in effect, relating to any 18 Consolidated Company or there is commenced against any Consolidated Company any such proceeding which remains undismissed for a period of 60 days; or any Consolidated Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or any Consolidated Company suffers any appointment of any custodian or the like for it or any part of its property which continues undischarged or unstayed for a period of 60 days; or any Consolidated Company makes a general assignment for the benefit of creditors; or any Consolidated Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or any Consolidated Company shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; or any Consolidated Company shall by any act or failure to act indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate action is taken by any Consolidated Company for the purpose of effecting any of the foregoing; (h) a Plan of a Consolidated Company or a Plan subject to Title IV of ERISA of any of its ERISA Affiliates: i. shall fail to be funded in accordance with the minimum funding standard required by applicable law, the terms of such Plan, Section 412 of the Tax Code or Section 302 of ERISA for any plan year or a waiver of such standard is sought or granted with respect to such Plan under applicable law, the terms of such Plan or Section 412 of the Tax Code or Section 303 of ERISA; or ii. is being, or has been, terminated or the subject of termination proceedings under applicable law or the terms of such Plan; or iii. shall require a Consolidated Company to provide security under applicable law, the terms of such Plan, Section 401 or 412 of the Tax Code or Section 306 or 307 of ERISA; or iv. results in a liability to a Consolidated Company under applicable law, the terms of such Plan, or Title IV of ERISA; and there shall result from any such failure, waiver, termination or other event a liability to the PBGC or a Plan that would have a Material Adverse Effect; (i) a judgment or order for the payment of money in excess of $5,000,000 or otherwise having a Material Adverse Effect shall be rendered against Hughes or any other Consolidated Company and such judgment or order shall continue unsatisfied (in the case of a money judgment) and in effect for a period of 30 days during which execution shall not be effectively stayed or deferred (whether by action of a court, by agreement or otherwise); 19 (j) Hughes shall at any time fail to own and control the percentage of the voting stock of any Subsidiary Guarantor, either directly or indirectly through a wholly-owned Subsidiary of Hughes set forth on Schedule 4.1(a) to the Master Agreement (with respect to Subsidiary Guarantors existing on the Initial Closing Date) or as otherwise required pursuant to Section 5.12 of the Master Agreement (with respect to all other Subsidiary Guarantors); (k) (i) any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than the Hughes Family shall become the "beneficial owner(s)" (as defined in said Rule 13d-3) of more than twenty-five percent (25%) of the shares of the outstanding common stock of Hughes entitled to vote for members of Hughes' board of directors; or (ii) any event or condition shall occur or exist which, pursuant to the terms of any change in control provision, requires or permits the holder(s) of Indebtedness of any Consolidated Company to require that such Indebtedness be redeemed, repurchased, defeased, prepaid or repaid, in whole or in part, or the maturity of such Indebtedness to be accelerated in any respect (it being understood that if the holder of such Indebtedness waives such event or condition or accepts a cure of such event or condition, such waiver or acceptance of cure shall negate the Event of Default arising hereunder solely as a result of such event or condition); (l0 an attachment or similar action shall be made on or taken against any of the assets of any Consolidated Company with an Asset Value exceeding $5,000,000 in the aggregate and is not removed, suspended or enjoined within 60 days of the same being made or any suspension or injunction being lifted; (m0 if any of the Operative Documents shall be cancelled, terminated, revoked or rescinded or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Operative Documents shall be commenced by or on behalf of any Obligor, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Operative Documents is illegal, invalid or unenforceable in accordance with the terms thereof, and the enforcement of such judgment, order, decree or ruling is not stayed or suspended within 60 days of the entry thereof; (n0 any representation or warranty by Hughes or any other Lessee in any Operative Document or in any certificate or document delivered to Lessor, the Agent or any Funding Party pursuant to any Operative Document shall have been incorrect in any material respect when made; or (o0 any Lessee or Hughes shall fail in any material respect to timely, perform or observe any covenant or agreement (not included in clause (a) through ---------- (n) of this Article XII) to - --- ----------- 20 be performed or observed by it hereunder or under any other Operative Document and such failure shall continue for a period of thirty (30) days (or 10 Business Days in the case of financial covenants) after such Lessee's or Hughes' receipt of written notice thereof from Lessor, the Agent or any Funding Party or such Lessee or Hughes shall have actual knowledge of such failure, except that such thirty (30) day period shall be automatically extended for such additional period of time as is reasonably necessary to cure such default, if such default is capable of being cured but cannot, with reasonable diligence, be cured within such thirty (30) day period, provided that (i) the related Lessee or Hughes is -------- in the process of diligently curing such default and (ii) such period shall not be extended for more than 120 days. ARTICLE XIII. ENFORCEMENT ----------- Section XIII.1 Remedies. Upon the occurrence and during the continuance of -------- any Event of Default, Lessor may do one or more of the following as Lessor in its sole discretion shall determine, without limiting any other right or remedy Lessor may have on account of such Event of Default; provided that, with respect -------- to any Leased Property subject to the Construction Agency Agreement, the Lessor's remedies with respect thereto shall be limited to those set forth in Section 5.3 of the Construction Agency Agreement. - ----------- (a) Lessor may, by notice to Hughes, rescind or terminate this Lease as of the date specified in such notice; however, (A) no reletting, reentry or taking of possession of any Leased Property by Lessor will be construed as an election on Lessor's part to terminate this Lease unless a written notice of such intention is given to Hughes, (B) notwithstanding any reletting, reentry or taking of possession, Lessor may at any time thereafter elect to terminate this Lease for a continuing Event of Default, and (C) no act or thing done by Lessor or any of its agents, representatives or employees and no agreement accepting a surrender of any Leased Property shall be valid unless the same be made in writing and executed by Lessor; (b) Lessor may (i) demand that the Lessees, and the Lessees shall upon the written demand of Lessor, return the Leased Properties promptly to Lessor in the manner and condition required by, and otherwise in accordance with all of the provisions of, Articles VI and XIV hereof as if the Leased Properties were being ----------- --- returned at the end of the Lease Term, and Lessor shall not be liable for the reimbursement of any Lessee for any costs and expenses incurred by such Lessee in connection therewith and (ii) without prejudice to any other remedy which Lessor may have for possession of the Leased Properties, and to the extent and in the manner permitted by Applicable Law, enter upon any Leased Property and take immediate possession of (to the exclusion of the related Lessee) any Leased Property or any part thereof and expel or remove the related Lessee and any other person who may be occupying such Leased Property, by summary proceedings or otherwise, all without liability to any Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such taking or 21 otherwise and, in addition to Lessor's other damages, the Lessees shall be responsible for the actual and reasonable costs and expenses of reletting, including brokers' fees and the reasonable out-of-pocket costs of any alterations or repairs made by Lessor; (c) Lessor may (i) sell all or any part of the Leased Properties at public or private sale, as Lessor may determine, free and clear of any rights of any Lessee and without any duty to account to any Lessee with respect to such action or inaction or any proceeds with respect thereto (except to the extent required by clause (ii) below if Lessor shall elect to exercise its rights thereunder) in ----------- which event the Lessees' obligation to pay Basic Rent hereunder for periods commencing after the date of such sale shall be terminated or proportionally reduced, as the case may be; and (ii) if Lessor shall so elect, demand, by written notice to Hughes, that the Lessees pay as liquidated damages for loss of a bargain and not as a penalty (the parties agreeing that the Lessor's actual damages would be difficult to predict, but the aforementioned liquidated damages represent a reasonable approximation of such amount) an amount equal to (A) the excess of the sum of (1) all Rent due and unpaid as of the date of such payment, plus (2) the Permitted Lease Balances for all of the Leased Properties over (B) the net proceeds of such sale (that is after deducting all costs, taxes and expenses incurred by Lessor, the Agent or any Lender incident to such conveyance); (d) Lessor may, at its option, not terminate this Lease, and continue to collect all Basic Rent, Supplemental Rent, and all other amounts (including, without limitation, the Funded Amount) due Lessor (together with all costs of collection) and enforce the Lessees' obligations under this Lease as and when the same become due, or are to be performed, and at the option of Lessor, upon any abandonment of any Leased Property by Lessee or re-entry of same by Lessor, Lessor may, in its sole and absolute discretion, elect not to terminate this Lease with respect thereto and may make such reasonable alterations and necessary repairs in order to relet such Leased Property, and relet such Leased Property or any part thereof for such term or terms (which may be for a term extending beyond the term of this Lease) and at such rental or rentals and upon such other terms and conditions as Lessor in its reasonable discretion may deem advisable; and upon each such reletting all rentals actually received by Lessor from such reletting shall be applied to the Lessees' obligations hereunder in such order, proportion and priority as Lessor may elect in Lessor's sole and absolute discretion. If such rentals received from such reletting during any Rent Period are less than the Rent to be paid during that Rent Period by the Lessees hereunder, the Lessees shall pay any deficiency, as reasonably calculated by Lessor, to Lessor on the Payment Date for such Rent Period; (e) Lessor may exercise any other right or remedy that may be available to it under Applicable Law, or proceed by appropriate court action (legal or equitable) to enforce the terms hereof or to recover damages for the breach hereof. Separate suits may be brought to collect any such damages for any Rent Period(s), and such suits shall not in any manner prejudice Lessor's right to collect any such damages for any subsequent Rent Period(s), or Lessor may defer any 22 such suit until after the expiration of the Lease Term, in which event such suit shall be deemed not to have accrued until the expiration of the Lease Term; or (f) Lessor may retain and apply against Lessor's damages all sums which Lessor would, absent such Event of Default, be required to pay to, or turn over to, a Lessee pursuant to the terms of this Lease. Section XIII.2 Remedies Cumulative; No Waiver; Consents. To the extent ---------------------------------------- permitted by, and subject to the mandatory requirements of, Applicable Law, each and every right, power and remedy herein specifically given to Lessor or otherwise in this Lease shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by Lessor, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any right, power or remedy. No delay or omission by Lessor in the exercise of any right, power or remedy or in the pursuit of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of any Lessee or to be an acquiescence therein. Lessor's consent to any request made by any Lessee shall not be deemed to constitute or preclude the necessity for obtaining Lessor's consent, in the future, to all similar requests. No express or implied waiver by Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Potential Event of Default or Event of Default. To the extent permitted by Applicable Law, each Lessee hereby waives any rights now or hereafter conferred by statute or otherwise that may require Lessor to sell, lease or otherwise use any Leased Property or part thereof in mitigation of Lessor's damages upon the occurrence of an Event of Default or that may otherwise limit or modify any of Lessor's rights or remedies under this Article ------- XIII. - ---- Section XIII.3 Purchase Upon an Event of Default. Upon the occurrence of an --------------------------------- Event of Default, until such time as Lessor commences material preparations for the sale or re-lease of the Leased Properties, the Lessees may purchase all, but not less than all, of the Leased Properties for a purchase price equal to (A) the Lease Balance, including any amounts due pursuant to Section 7.5 of the Master Agreement, if such purchase occurs prior to the EBO Date and (B) the greater of (i) the Lease Balance, including any amounts due pursuant to Section 7.5 of the Master Agreement and (ii) the aggregate Fair Market Sales Value of the Leased Properties, if such purchase occurs on or after the EBO Date; such purchase shall be made in accordance with Section 14.5, upon not less than five ------------ (5) Business Days' written notice (which shall be irrevocable) to Lessor, which notice shall set forth the date of purchase (which shall be a date no later than thirty (30) Business Days from the date of such notice). Section XIII.4 Limitation on Liability. Notwithstanding the provisions of ----------------------- Section 13.1, the Lessees' recourse liability to Lessor as a consequence of the - ------------ occurrence of a Limited Event of Default shall be limited to the payment by the Lessees of the Discounted Lease Balance; 23 provided, however if Lessor used commercial reasonable standards in determining - -------- ------- that such Limited Event of Default occurred, then the Lessor shall be entitled to exercise any of the remedies set forth in Section 13.1; and provided, further ------------ -------- ------- that if the sole existing Event of Default is (i) an Event of Default under clause (f) of Article XII and the Funding Parties and their Affiliates, either - ---------- ----------- collectively or individually, have the ability to control (by vote or otherwise) whether such Indebtedness will become due prior to its stated maturity, (ii) an Event of Default pursuant to clause (n) of Article XII that is based on the ---------- ----------- representation by Hughes set forth in the last sentence of Section 4.1(c) of the Master Agreement or in the last sentence of Section 4.1(s) of the Master Agreement or (iii) an Event of Default pursuant to clause (k)(ii) of Article XII -------------- ----------- or clause (f) of Article XII resulting from a Cross Default, the Lessees' ---------- ----------- recourse liability to Lessor shall be limited to the payment by the Lessees of the Discounted Lease Balance. ARTICLE XIV. SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL ---------------------------------------------------- Section XIV.1 Lessee's Option to Purchase. Subject to the terms, --------------------------- conditions and provisions set forth in this Article XIV, each Lessee shall have ----------- the option (the "Purchase Option"), to be exercised as set forth below, to --------------- purchase from Lessor, Lessor's interest in all of the Leased Properties; provided that such option must be exercised with respect to all, but not less - -------- than all, of the Leased Properties under all of the Lease Supplements. Such option must be exercised by written notice to Lessor not later than the EBO Date, which notice shall be irrevocable; such notice shall specify the date that such purchase shall take place, which date shall be a date occurring not less than thirty (30) days after such notice or the EBO Date (whichever is earlier). If the Purchase Option is exercised pursuant to the foregoing, then, subject to the provisions set forth in this Article XIV, on the applicable purchase date, ----------- Lessor shall convey to each Lessee, by special warranty deed and bill of sale, without recourse or warranty (other than as to the absence of Lessor Liens) and each Lessee shall purchase from Lessor, Lessor's interest in the Leased Properties leased by such Lessee. Section XIV.2 Determination of Purchase Price. Upon the purchase by the ------------------------------- Lessees of Lessor's interest in the Leased Properties upon the exercise of the Purchase Option, the aggregate purchase price for all of the Leased Properties shall be an amount equal to the Lease Balance as of the closing date for such purchase, including any amount due pursuant to Section 7.5(f) of the Master Agreement as a result of such purchase. Section XIV.3 Purchase Option on Lease Termination Date. In the event that ----------------------------------------- that the Lessees do not purchase the Leased Properties pursuant to Section 14.1, ------------ the Lessees may elect to purchase all, but not less than all, of the Leased Properties on the Lease Termination Date for a price equal to the Fair Market Sales Value therefor as of the Lease Termination Date. The Lessees may exercise such option by giving the Lessor irrevocable notice of such exercise at least twelve (12) months prior to the Lease Termination Date. In the event that the Lessees do not 24 exercise such purchase option by giving such notice by such date, the Lessor shall have no further duty to offer any of the Leased Properties to any Lessee, and may hold, re-lease or sell any or all of the Leased Properties, at its discretion, free and clear of any claim of any Lessee. Section XIV.4 Purchase Procedure. (a) If a Lessee shall purchase Lessor's ------------------ interest in a Leased Property pursuant to any provision of this Lease, (i) such Lessee shall accept from Lessor and Lessor shall convey such Leased Property by a duly executed and acknowledged special warranty deed and quit claim bill of sale of such a Leased Property in recordable form, (ii) upon the date fixed for any purchase of Lessor's interest in Leased Property hereunder, the related Lessee(s) shall pay to the order of the Agent (or Lessor if the Loans have been paid in full) the Lease Balance or Leased Property Balance, or the Fair Market Sales Value, as applicable, plus any amount due pursuant to Section 7.5 of the Master Agreement as a result of such purchase by wire transfer of immediately available funds, (iii) Lessor will execute and deliver to the related Lessee such other documents, including releases, affidavits, termination agreements and termination statements, as may be legally required or as may be reasonably requested by Lessee in order to effect such conveyance, free and clear of Lessor Liens and the Liens of the Operative Documents and (iv) if such Leased Property is subject to a Ground Lease, Lessor will execute and deliver to the related Lessee an assignment or termination of such Ground Lease, as directed by such Lessee, in such form as may be reasonably requested by such Lessee, and such Lessee shall pay any amounts due with respect thereto under such Ground Lease. (b) Each Lessee shall, at such Lessee's sole cost and expense, obtain all required governmental and regulatory approval and consents and in connection therewith shall make such filings as required by Applicable Law; in the event that Lessor is required by Applicable Law to take any action in connection with such purchase and sale, the Lessees shall pay prior to transfer all reasonable out-of-pocket costs incurred by Lessor in connection therewith. Without limiting the foregoing, all costs incident to such conveyance, including, without limitation, each Lessee's attorneys' fees, Lessor's attorneys' fees, commissions, each Lessee's and Lessor's escrow fees, recording fees, title insurance premiums and all applicable documentary transfer or other transfer taxes and other taxes required to be paid in order to record the transfer documents that might be imposed by reason of such conveyance and the delivery of such deed shall be borne entirely by and paid by the Lessees. (c) Upon expiration or termination of this Lease resulting in conveyance of Lessor's interest in the title to the Leased Properties to the Lessees, there shall be no apportionment of rents (including, without limitation, water rents and sewer rents), taxes, insurance, utility charges or other charges payable with respect to the Leased Properties, all of such rents, taxes, insurance, utility or other charges due and payable with respect to the Leased Properties prior to termination being payable by the Lessees hereunder and all due after such time being payable by the Lessees as the then owners of the Leased Properties. 25 Section XIV.5 Surrender. If the Lessees have not purchased the Leased --------- Properties, the Lessees shall surrender the Leased Properties to Lessor on the Lease Termination Date. The Lessees shall fulfill all of the following conditions in connection with such surrender: (a) Not later than ten (10) Business Days prior to the Lease Termination Date, each Lessee shall deliver to Lessor and the Agent an environmental assessment of each Leased Property leased by it dated not more than one hundred eighty (180) days prior to the Lease Termination Date. Such environmental assessment shall be prepared by an environmental consultant selected by the related Lessee and reasonably satisfactory to the Required Funding Parties, shall be in form, detail and substance reasonably satisfactory to the Required Funding Parties, and shall otherwise indicate no degradation in environmental conditions beyond those described in the related Environmental Audit for which corrective action is required by Applicable Law and shall not include a recommendation for further investigation to make such determination. (b) On the date of Lessees' surrender, each of the Construction Conditions shall have been timely satisfied and no Event of Default or Potential Event of Default shall exist, and thereafter, no Event of Default or Potential Event of Default shall exist under this Lease. (c) Each Lessee shall have completed in all material respects all Alterations, restoration and rebuilding of the Leased Properties leased by it pursuant to Sections 6.1, 6.2, 10.3 and 10.4 (as the case may be) and ------------ --- ---- ---- shall have fulfilled in all material respects all of the conditions and requirements in connection therewith pursuant to said Sections, in each -------- case by the date on which the Lessees' surrender the Leased Properties, regardless of whether the same shall be within such Lessee's control. (d) Upon request by the Agent, each Lessee shall promptly provide any maintenance records relating to each Leased Property leased by it to Lessor, the Agent and any potential purchaser, and shall otherwise do all things necessary to deliver possession of such Leased Property to the potential purchaser at the appropriate closing date. Each Lessee shall allow Lessor, the Agent and any potential purchaser reasonable access during normal business hours to any Leased Property for the purpose of inspecting the same. (e) In connection with any such sale of the Leased Properties, each Lessee will provide to the purchaser all customary "seller's" indemnities reasonably requested by the potential purchaser (taking into account the location and nature of the Leased Properties), representations and warranties regarding title, absence of Liens (except Lessor Liens) and the condition of the Leased Properties. Each Lessee shall fulfill all of the requirements set forth in clause (b) of Section 14.4, and such requirements ---------- ------------ are incorporated herein by 26 reference. As to Lessor, any such sale shall be made on an "as is, with all faults" basis without representation or warranty by Lessor, other than the absence of Lessor Liens. (f) Each Lessee shall, on such Lease Termination Date, and at its own cost, transfer possession of the Leased Properties leased by it to the Lessor or the independent purchaser thereof, in each case by surrendering the same into the possession of Lessor or such purchaser, as the case may be, free and clear of all Liens other than Lessor Liens, in as good condition as it was on the Completion Date therefor in the case of new Construction, or the Funding Date (as modified by Alterations permitted by this Lease), ordinary wear and tear excepted, and in compliance in all material respects with Applicable Law. (g) Each Lessee shall, on and within a reasonable time before and after the Lease Termination Date, cooperate with Lessor and the independent purchaser of any Leased Property leased by such Lessee in order to facilitate the ownership and operation by such purchaser of such Leased Property after the Lease Termination Date, which cooperation shall include the following, all of which such Lessee shall do on or before the Lease Termination Date or as soon thereafter as is reasonably practicable: providing all books and records regarding the related Lessee's maintenance of such Leased Property and all know-how, data and technical information relating thereto, providing a copy of the Plans and Specifications within the possession of such Lessee or Hughes, granting or assigning all licenses (to the extent assignable) necessary for the operation and maintenance of such Leased Property, and cooperating in seeking and obtaining all necessary Governmental Action. The obligations of such Lessee under this Article XIV shall survive the expiration or termination of this Lease. ----------- ARTICLE XV. LESSEE'S EQUIPMENT ------------------ After any repossession of any Leased Property (whether or not this Lease has been terminated), the related Lessee, at its expense and so long as such removal of such trade fixture, personal property or equipment shall not result in a violation of Applicable Law, shall, within a reasonable time after such repossession or within ninety (90) days after such Lessee's receipt of Lessor's written request (whichever shall first occur), remove all of such Lessee's trade fixtures, personal property and equipment from such Leased Property (to the extent that the same can be readily removed from such Leased Property without causing material damage to such Leased Property); provided, however, that such -------- ------- Lessee shall not remove any such trade fixtures, personal property or equipment that has been financed by Lessor under the Operative Documents or otherwise constituting Leased Property (or that constitutes a replacement of such property). Any of a Lessee's trade fixtures, personal property and equipment not so removed by such Lessee within such period shall be considered abandoned by such Lessee, and title thereto shall without 27 further act vest in Lessor, and may be appropriated, sold, destroyed or otherwise disposed of by Lessor without notice to any Lessee and without obligation to account therefor and the related Lessee will pay Lessor, upon written demand, all reasonable costs and expenses incurred by Lessor in removing, storing or disposing of the same and all costs and expenses incurred by Lessor to repair any damage to such Leased Property caused by such removal. Each Lessee will immediately repair at its expense all damage to such Leased Property caused by any such removal (unless such removal is effected by Lessor, in which event such Lessee shall pay all reasonable costs and expenses incurred by Lessor for such repairs). Lessor shall have no liability in exercising Lessor's rights under this Article XV, nor shall Lessor be responsible for any ---------- loss of or damage to any Lessee's personal property and equipment. ARTICLE XVI. RIGHT TO PERFORM FOR LESSEE --------------------------- If any Lessee shall fail to perform or comply with any of its agreements contained herein and either such failure shall continue for a period of 10 or more days after notice to Hughes or to such Lessee by Lessor or the Agent or such failure has resulted in immediate material danger to any Leased Property or Lessor's or the Agent's interest therein, Lessor, upon reasonable notice to Hughes or such Lessee, may perform or comply with such agreement, and Lessor shall not thereby be deemed to have waived any default caused by such failure, and the amount of such payment and the amount of the expenses of Lessor (including actual and reasonable attorneys' fees and expenses) incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, shall be deemed Supplemental Rent, payable by the related Lessee to Lessor within ten (10) days after written demand therefor. ARTICLE XVII. MISCELLANEOUS ------------- Section XVII.1 Reports. To the extent required under Applicable Law and ------- to the extent it is reasonably practical for a Lessee to do so, such Lessee shall prepare and file in timely fashion, or, where such filing is required to be made by Lessor or it is otherwise not reasonably practical for a Lessee to make such filing, Lessee shall prepare and deliver to Lessor (with a copy to the Agent) within a reasonable time prior to the date for filing and Lessor shall file, any material reports with respect to the condition or operation of such Leased Property that shall be required to be filed with any Governmental Authority. Section XVII.2 Binding Effect; Successors and Assigns; Survival. The ------------------------------------------------ terms and provisions of this Lease, and the respective rights and obligations hereunder of Lessor and the Lessees, shall be binding upon their respective successors, legal representatives and assigns (including, in the case of Lessor, any Person to whom Lessor may transfer any Leased Property 28 or any interest therein in accordance with the provisions of the Operative Documents), and inure to the benefit of their respective permitted successors and assigns, and the rights granted hereunder to the Agent and the Lenders shall inure (subject to such conditions as are contained herein) to the benefit of their respective permitted successors and assigns. Each Lessee hereby acknowledges that Lessor has assigned all of its right, title and interest to, in and under this Lease to the Agent and the Lenders pursuant to the Loan Agreement and related Operative Documents, and that all of Lessor's rights hereunder may be exercised by the Agent. Section XVII.3 Quiet Enjoyment. Lessor covenants that it will not --------------- interfere in the related Lessee's or any of its permitted sublessees' quiet enjoyment of the Leased Properties in accordance with this Lease during the Lease Term, so long as no Event of Default has occurred and is continuing. Such right of quiet enjoyment is independent of, and shall not affect, Lessor's rights otherwise to initiate legal action to enforce the obligations of the Lessees under this Lease. Section XVII.4 Notices. Unless otherwise specified herein, all notices, ------- offers, acceptances, rejections, consents, requests, demands or other communications to or upon the respective parties hereto shall be in writing and shall be deemed to have been given as set forth in Section 8.2 of the Master Agreement. All such notices, offers, acceptances, rejections, consents, requests, demands or other communications shall be addressed as follows or to such other address as any of the parties hereto may designate by written notice: If to Lessor: AFG Services, L.P. 2808 Fairmount Suite 250 Dallas, Texas 75201 Attn: Stephen Brookshire Facsimile: 214/871-2799 If to Hughes or any other Lessee: Hughes Supply, Inc. 20 North Orange Avenue, Suite 200 Orlando, Florida 32801 Attn: Mark Scimeca, Esq., Associate General Counsel Facsimile: 407/649-3018 with a copy to: Lowndes, Drosdick, Doster, Kantor & Reed, P.A. 450 South Orange Avenue, 8th Floor Attn: Kathi Borkholder, Esq. Facsimile: 407/843-4444 If to Agent: SunTrust Bank 200 South Orange Avenue 29 Mail Code 1106 Orlando, Florida 32801 Attn: Bill Barr Facsimile: 407/237-4076 with a copy to: SunTrust Equitable Securities Corporation 303 Peachtree Street, 24th Floor MC 3951 Atlanta, Georgia 30308 Attn: Robert Kennedy Facsimile: 404/230-1344 If to a Lender, to the address provided in the Master Agreement. Section XVII.5 Severability. Any provision of this Lease that shall be ------------ prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction, and Lessee shall remain liable to perform its obligations hereunder except to the extent of such unenforceability. To the extent permitted by Applicable Law, each Lessee hereby waives any provision of law that renders any provision hereof prohibited or unenforceable in any respect. Section XVII.6 Amendment; Complete Agreements. Neither this Lease nor any ------------------------------ of the terms hereof may be terminated, amended, supplemented, waived or modified orally, except by an instrument in writing signed by Lessor and Hughes in accordance with the provisions of Section 8.4 of the Master Agreement. This Lease, together with the applicable Lease Supplement and the other Operative Documents, is intended by the parties as a final expression of their lease agreement and as a complete and exclusive statement of the terms thereof, all negotiations, considerations and representations between the parties having been incorporated herein and therein. No course of prior dealings between the parties or their officers, employees, agents or Affiliates shall be relevant or admissible to supplement, explain, or vary any of the terms of this Lease or any other Operative Document. Acceptance of, or acquiescence in, a course of performance rendered under this or any prior agreement between the parties or their Affiliates shall not be relevant or admissible to determine the meaning of any of the terms of this Lease or any other Operative Document. No representations, undertakings, or agreements have been made or relied upon in the making of this Lease other than those specifically set forth in the Operative Documents. Section XVII.7 Construction. This Lease shall not be construed more ------------ strictly against any one party, it being recognized that both of the parties hereto have contributed substantially and materially to the preparation and negotiation of this Lease. 30 Section XVII.8 Headings. The Table of Contents and headings of the -------- various Articles and Sections of this Lease are for convenience of reference only and shall not modify, define or limit any of the terms or provisions hereof. Section XVII.9 Counterparts. This Lease may be executed by the ------------ parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section XVII.10 GOVERNING LAW. THIS LEASE SHALL IN ALL RESPECTS BE ------------- GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD OR MORTGAGE ESTATES HEREUNDER, AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATES IN WHICH SUCH ESTATES ARE LOCATED. Section XVII.11 Discharge of Lessee's Obligations by its Subsidiaries ----------------------------------------------------- or Affiliates. Lessor agrees that performance of any Lessee's obligations - ------------- hereunder by one or more of such Lessee's Subsidiaries or Affiliates shall constitute performance by Lessee of such obligations to the same extent and with the same effect hereunder as if such obligations were performed by such Lessee, but no such performance shall excuse any Lessee from any obligation not performed by it or on its behalf under the Operative Documents. Section XVII.12 Liability of Lessor Limited. Except as otherwise --------------------------- expressly provided below in this Section 17.12, it is expressly understood and ------------- agreed by and between each Lessee, Lessor and their respective successors and assigns that nothing herein contained shall be construed as creating any liability of Lessor or any of its Affiliates or any of their respective officers, directors, employees or agents, individually or personally, for any failure to perform any covenant, either express or implied, contained herein, all such liability (other than that resulting from Lessor's gross negligence or willful misconduct, except to the extent imputed to Lessor by virtue of any Lessee's action or failure to act), if any, being expressly waived by each Lessee and by each and every Person now or hereafter claiming by, through or under any Lessee, and that, so far as Lessor or any of its Affiliates or any of their respective officers, directors, employees or agents, individually or personally, is concerned, each Lessee and any Person claiming by, through or under any Lessee shall look solely to the right, title and interest of Lessor in and to the Leased Properties and any proceeds from Lessor's sale or encumbrance thereof (provided, however, that no Lessee shall be entitled to any double -------- ------- recovery) for the performance of any obligation under this Lease and under the Operative Documents and the satisfaction of any liability arising therefrom (other than that resulting from Lessor's gross negligence or willful misconduct, except to the extent imputed to Lessor by virtue of any Lessee's action or failure to act). 31 Section XVII.13 Estoppel Certificates. Each party hereto agrees that --------------------- at any time and from time to time during the Lease Term, it will promptly, but in no event later than thirty (30) days after request by the other party hereto, execute, acknowledge and deliver to such other party or to any prospective purchaser (if such prospective purchaser has signed a commitment or letter of intent to purchase any Leased Property or any part thereof or any Note), assignee or mortgagee or third party designated by such other party, a certificate stating (a) that this Lease is unmodified and in force and effect (or if there have been modifications, that this Lease is in force and effect as modified, and identifying the modification agreements); (b) the date to which Basic Rent has been paid; (c) whether or not there is any existing default by any Lessee in the payment of Basic Rent or any other sum of money hereunder, and whether or not there is any other existing default by either party with respect to which a notice of default has been served, and, if there is any such default, specifying the nature and extent thereof; (d) whether or not, to the knowledge of the signer, there are any setoffs, defenses or counterclaims against enforcement of the obligations to be performed hereunder existing in favor of the party executing such certificate and (e) other items that may be reasonably requested; provided that no such certificate may be requested unless the -------- requesting party has a good faith reason for such request. Section XVII.14 No Joint Venture. Any intention to create a joint ---------------- venture, partnership or other fiduciary relationship between Lessor and any Lessee is hereby expressly disclaimed. Section XVII.15 No Accord and Satisfaction. The acceptance by Lessor -------------------------- of any sums from any Lessee (whether as Basic Rent or otherwise) in amounts which are less than the amounts due and payable by the Lessees hereunder is not intended, nor shall be construed, to constitute an accord and satisfaction of any dispute between Lessor and any Lessee regarding sums due and payable by any Lessee hereunder, unless Lessor specifically deems it as such in writing. Section XVII.16 No Merger. In no event shall the leasehold interests, --------- estates or rights of any Lessee hereunder, or of the holder of any Notes secured by a security interest in this Lease, merge with any interests, estates or rights of Lessor in or to the Leased Properties, it being understood that such leasehold interests, estates and rights of each Lessee hereunder, and of the holder of any Notes secured by a security interest in this Lease, shall be deemed to be separate and distinct from Lessor's interests, estates and rights in or to the Leased Properties, notwithstanding that any such interests, estates or rights shall at any time or times be held by or vested in the same person, corporation or other entity. Section XVII.17 Survival. The obligations of the parties to be -------- performed under this Lease prior to the Lease Termination Date and the obligations of the parties pursuant to Articles III, X, XI, XIII, Sections 14.2, ------------ - -- ---- ------------- 14.3, 14.4, 14.5, 14.8, Articles XV, and XVI, and Sections 17.10 and 17.12 shall - ---- ---- ---- ---- ----------- --- -------------- ----- survive the expiration or termination of this Lease. The extension of any 32 applicable statute of limitations by Lessor, any Lessee, the Agent or any Indemnitee shall not affect such survival. Section XVII.18 Chattel Paper. To the extent that this Lease ------------- constitutes chattel paper (as such term is defined in the Uniform Commercial Code in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the sole original counterpart, which shall be identified as the original counterpart by the receipt of the Agent. Section XVII.19 Time of Essence. Time is of the essence of this Lease. --------------- Section XVII.20 Recordation of Lease. Each Lessee will, at its -------------------- expense, cause this Lease or a memorandum of lease in form and substance reasonably satisfactory to Lessor and such Lessee (if permitted by Applicable Law) to be recorded in the proper office or offices in the States and the municipalities in which the Land is located. Section XVII.21 Investment of Security Funds. The parties hereto agree ---------------------------- that any amounts not payable to a Lessee pursuant to any provision of Article ------- VIII, X or XIV or this Section 17.21 shall be held by the Agent (or Lessor if - ---- - --- ------------- the Loans have been fully paid) as security for the obligations of the Lessees under this Lease and the Master Agreement and of Lessor under the Loan Agreement. At such time as such amounts are payable to the Lessee, such amounts, net of any amounts previously applied to the Lessees' obligations hereunder or under the Master Agreement (which application is hereby agreed to by Lessee), shall be paid to the related Lessee. Any such amounts which are held by the Agent (or Lessor if the Loans have been fully paid) pending payment to a Lessee shall until paid to such Lessee, as provided hereunder or until applied against the Lessees' obligations herein and under the Master Agreement and distributed as provided in the Loan Agreement or herein (after the Loan Agreement is no longer in effect) in connection with any exercise of remedies hereunder, be invested by the Agent or Lessor, as the case may be, as directed from time to time in writing by Lessee (provided, however, if an Event of Default has -------- ------- occurred and is continuing it will be directed by the Agent or, if the Loans have been fully paid, Lessor) and at the expense and risk of the Lessees, in Permitted Investments. Any gain (including interest received) realized as the result of any such investment (net of any fees, commissions and other expenses, if any, incurred in connection with such investment) shall be applied in the same manner as the principal invested. Lessee upon demand shall pay to the Agent or Lessor, as appropriate, the amount of any loss incurred in connection with all such investments and the liquidation thereof. Section XVII.22 Ground Leases. Each Lessee will, at its expense, ------------- timely perform all of the obligations of Lessor, in its capacity as ground lessee, under each Ground Lease and, if requested by Lessor, shall provide satisfactory evidence to Lessor of such performance. 33 Section XVII.23 Land and Building. If the cost of the Raw Land related ----------------- to any Leased Property exceeds 25% of the projected Leased Property Balance for such Leased Property as set forth in the Construction Budget for such Leased Property, the Raw Land and the Building related to such Leased Property shall be leased under separate Lease Supplements. If any Building and the Raw Land on which such Building is located are subject to separate Lease Supplements, at any time that the related Lessee exercises an option to purchase such Building or such Raw Land, or to renew this Lease with respect to such Building or such Raw Land, or purchases such Building or such Land as a result of an Event of Loss, an Event of Taking or an Event of Default, such purchase or renewal shall be made simultaneously with respect to all of such Building and such Raw Land. Section XVII.24 Joint and Several. Each obligation of each Lessee ----------------- hereunder shall be a joint and several obligation of all of the Lessees. Section XVII.25 IDB Documentation. If any Leased Property is subject ----------------- to an IDB Lease, this Lease shall be deemed to be a sublease. Each Lessee hereby agrees to perform all of its obligations and all obligations of Lessor under all IDB Documentation related to any Leased Property. In the event that a Lessee purchases any Leased Property that is the subject of IDB Documentation, such Lessee shall prepay, or cause to be prepaid, the Bonds related to such Leased Property or shall assume all obligations of the Lessor related to such IDB Documentation and cause the Lessor to be released therefrom pursuant to documentation reasonably satisfactory to the Lessor. [Signature page follows] 34 IN WITNESS WHEREOF, the undersigned have each caused this Lease Agreement to be duly executed and delivered and attested by their respective officers thereunto duly authorized as of the day and year first above written. Witnessed: HUGHES SUPPLY, INC., as a Lessee By: ______________________________ By:______________________________ Name:______________________ Name:_________________________ Title:________________________ By: ______________________________ Name:______________________ LEASE AGREEMENT S-1 OPERATING LEASE ATLANTIC FINANCIAL GROUP, LTD., as Lessor By: Atlantic Financial Managers, Inc., its General Partner Witnessed: By:_______________________ By:___________________________ Name:___________________ Name: Stephen Brookshire Title: President By:_______________________ Name:___________________ LEASE AGREEMENT S-2 OPERATING LEASE STATE OF FLORIDA) ) ss.: COUNTY OF ORANGE ) The foregoing instrument was acknowledged before me this _____ day of __________, 2001, by___________ , as___________ , of HUGHES SUPPLY, INC., a Florida corporation, on behalf of said corporation. He is personally known to me and did not take an oath. [Notarial Seal] ______________________________ Notary Signature Printed Name Notary Public, State of Florida Commission Number: My commission expires: LEASE AGREEMENT N-1 OPERATING LEASE STATE OF _________________ ) ) ss.: COUNTY OF ________________ ) The foregoing Lease Agreement was acknowledged before me, the undersigned Notary Public, in the County of ______________, ____ ____, this _____ day of __________, _______________, by _____________________, as ____________________ of Atlantic Financial Group, Ltd., on behalf of such partnership. [Notarial Seal] ___________________________ Notary Public My commission expires: _____________ LEASE AGREEMENT OPERATING LEASE N-2 Receipt of this original counterpart of the foregoing Lease is hereby acknowledged as of the date hereof. SUNTRUST BANK, as the Agent By:_____________________ Name:________________ Title:_______________ LEASE AGREEMENT OPERATING LEASE N-3 Recording requested by EXHIBIT A TO and when recorded mail to: THE LEASE --------- _____________________________ _____________________________ _____________________________ _____________________________ - -------------------------------------------------------------------------------- LEASE SUPPLEMENT NO. __ AND MEMORANDUM OF LEASE THIS LEASE SUPPLEMENT NO. __ AND MEMORANDUM OF LEASE (this "Lease ----- Supplement") dated as of [ ], between ATLANTIC FINANCIAL GROUP, LTD., as lessor - ---------- (the "Lessor"), and [HUGHES SUPPLY, INC., a Florida corporation,] as lessee (the ------ "Related Lessee"). -------------- WHEREAS Lessor is the owner of the Land described on Schedule I hereto ---------- and wishes to lease the Land together with any Building and other improvements thereon or which thereafter may be constructed thereon pursuant to the Lease to Lessee; and NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions; Interpretation. For purposes of this Lease --------------------------- Supplement, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in Appendix A to the Master Lease Agreement, dated as of June 22, 2001 (as amended and supplemented from time to time, the "Lease"), among the Lessees named therein and Lessor; and the rules of ----- interpretation set forth in Appendix A to the Lease shall apply to this Lease Supplement. SECTION 2. The Properties. Attached hereto as Schedule I is the -------------- description of certain Land (the "Subject Property"). Effective upon the ---------------- execution and delivery of this Lease Supplement by Lessor and Lessee, such Land, together with any Building and other improvements thereon or which thereafter may be constructed thereon shall be subject to the terms and provisions of the Lease and Lessor hereby grants, conveys, transfers and assigns to the Related Lessee those interests, rights, titles, estates, powers and privileges provided for in the Lease with respect to the Subject Property. A-1 SECTION 3. Amendments to Lease with Respect to Subject Property. ---------------------------------------------------- Effective upon the execution and delivery of this Lease Supplement by Lessor and the Related Lessee, the following terms and provisions shall apply to the Lease with respect to the Subject Property: [Insert Applicable Sections per Local Law as contemplated by the Master Agreement] SECTION 4. Ratification; Incorporation. Except as specifically modified --------------------------- hereby, the terms and provisions of the Lease are hereby ratified and confirmed and remain in full force and effect. The terms of the Lease (as amended by this Lease Supplement) are by this reference incorporated herein and made a part hereof. SECTION 5. Original Lease Supplement. The single executed original of ------------------------- this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt of the Agent therefor on or following the signature page thereof shall be the original executed counterpart of this Lease Supplement (the "Original Executed ----------------- Counterpart"). To the extent that this Lease Supplement constitutes chattel - ----------- paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY ------------- AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF FLORIDA, BUT EXCLUDING ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES OF SUCH STATE, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATES HEREUNDER, AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH SUCH ESTATES ARE LOCATED. SECTION 7. Counterpart Execution. This Lease Supplement may be executed --------------------- in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. A-2 IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement to be duly executed by an officer thereunto duly authorized as of the date and year first above written. Witnessed: ATLANTIC FINANCIAL GROUP, LTD. as the Lessor By:________________________ By: Atlantic Financial Managers, Name: Inc., its General Partner By:________________________ By:_____________________________ Name: Name: Title: Witnessed: [HUGHES SUPPLY, INC.], as Related Lessee By:________________________ By:______________________________ Name: Name: Title: By:____________________________ Name: S-1 STATE OF _________________ ) ) ss.: COUNTY OF ________________ ) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of ______________, ____ ____, this _____ day of __________, _______________, by _____________________, as ____________________ of Atlantic Financial Group, Ltd., on behalf of such partnership. [Notarial Seal] ___________________________ Notary Public My commission expires: _____________ N-1 STATE OF FLORIDA ) ) ss.: COUNTY OF ORANGE ) The foregoing instrument was acknowledged before me this _____ day of __________, 2001, by ___________, as ___________ , of HUGHES SUPPLY, INC., a Florida corporation, on behalf of said corporation. He is personally known to me and did not take an oath. [Notarial Seal] ______________________________ Notary Signature _____________________ Printed Name Notary Public, State of Florida Commission Number: My commission expires: N-2 Receipt of this original counterpart of the foregoing Lease Supplement is hereby acknowledged as of the date hereof. SUNTRUST BANK, as the Agent By: ___________________ Name: Title: S-3 EX-10.15 (A) 9 dex1015a.txt LOAN AGREEMENT - OPERATING LEASE EXHIBIT 10.15(a) =============================================================================== LOAN AGREEMENT Dated as of June 22, 2001 among ATLANTIC FINANCIAL GROUP, LTD. as Lessor and Borrower, the financial institutions party hereto, as Lenders and SUNTRUST BANK, as Agent [OPERATING LEASE] =============================================================================== TABLE OF CONTENTS
Page SECTION 1 DEFINITIONS; INTERPRETATION..................................................................... 1 SECTION 2 AMOUNT AND TERMS OF COMMITMENTS; REPAYMENT AND PREPAYMENT OF LOANS............................................................................. 1 SECTION 2.1 Commitment................................................................................ 1 SECTION 2.2 Note...................................................................................... 1 SECTION 2.3 Scheduled Principal Repayment............................................................. 2 SECTION 2.4 Interest.................................................................................. 2 SECTION 2.5 Allocation of Loans to Leased Properties.................................................. 3 SECTION 2.6 Prepayment................................................................................ 3 SECTION 3 RECEIPT, DISTRIBUTION AND APPLICATION OF CERTAIN PAYMENTS IN RESPECT OF LEASE AND LEASED PROPERTY; RELEASE........................................ 3 SECTION 3.1 Distribution and Application of Rent Payments.............................................. 3 SECTION 3.2 Distribution and Application of Purchase Payment........................................... 3 SECTION 3.3 Distribution and Application to Funding Party Balances of Construction Failure Payment.................................................................................. 4 SECTION 3.4 Distribution and Application to Funding Party Balances of Remarketing Proceeds of Leased Property...................................................................... 4 SECTION 3.5 Distribution and Application of Payments Received When an Event of Default Exists or Has Ceased to Exist Following Rejection of the Lease........................... 4 SECTION 3.6 Distribution of Other Payments............................................................. 5 SECTION 3.7 Timing of Agent Distributions.............................................................. 5 SECTION 3.8 Release of Leased Properties............................................................... 5 SECTION 4 THE LESSOR; EXERCISE OF REMEDIES UNDER LEASE..................................................... 6 SECTION 4.1 Covenant of Lessor......................................................................... 6 SECTION 4.2 Lessor Obligations Nonrecourse; Payment from Certain Lease Obligations and Certain Proceeds of Leased Property Only..................................................... 6 SECTION 4.3 Exercise of Remedies Under the Lease....................................................... 7 SECTION 5 LOAN EVENTS OF DEFAULT; REMEDIES................................................................. 8 SECTION 5.1 Loan Events of Default..................................................................... 8 SECTION 5.2 Remedies................................................................................... 9 SECTION 6 THE AGENT....................................................................................... 10 SECTION 6.1 Appointment............................................................................... 10 SECTION 6.2 Delegation of Duties...................................................................... 10
SECTION 6.3 Exculpatory Provisions.................................................................... 10 SECTION 6.4 Reliance by Agent......................................................................... 10 SECTION 6.5 Notice of Default......................................................................... 11 SECTION 6.6 Non-Reliance on Agent and Other Lenders................................................... 11 SECTION 6.7 Indemnification........................................................................... 12 SECTION 6.8 Agent in Its Individual Capacity.......................................................... 12 SECTION 6.9 Successor Agent........................................................................... 12 SECTION 7 MISCELLANEOUS................................................................................... 13 SECTION 7.1 Amendments and Waivers.................................................................... 13 SECTION 7.2 Notices................................................................................... 13 SECTION 7.3 No Waiver; Cumulative Remedies............................................................ 13 SECTION 7.4 Successors and Assigns.................................................................... 13 SECTION 7.5 Counterparts.............................................................................. 13 SECTION 7.6 GOVERNING LAW............................................................................. 13 SECTION 7.7 Survival and Termination of Agreement..................................................... 14 SECTION 7.8 Entire Agreement.......................................................................... 14 SECTION 7.9 Severability.............................................................................. 14
EXHIBITS EXHIBIT A Form of Note -3- THIS LOAN AGREEMENT (as it may be amended or modified from time to time in accordance with the provisions hereof, this "Loan Agreement") dated as of June -------------- 22, 2001 is among ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership, as Lessor and Borrower (the "Lessor"); SUNTRUST BANK and the other financial ------ institutions which are, or may from time to time become, parties hereto as lenders (the "Lenders") and SUNTRUST BANK, a Georgia banking corporation, as ------- agent for the Lenders (in such capacity, the "Agent"). ----- PRELIMINARY STATEMENT In accordance with the terms and provisions of the Master Agreement, dated as of June 22, 2001 (as amended, supplemented or otherwise modified from time to time, the "Master Agreement"), among Hughes Supply, Inc., as Guarantor and as a ---------------- Lessee, certain Subsidiaries of Hughes Supply, Inc., as Lessees, the Lessor, the Lenders and the Agent, the Lease, this Loan Agreement and the other Operative Documents, (i) the Lessor contemplates acquiring the Leased Properties and leasing the Leased Properties to the Lessees, (ii) Hughes, as Construction Agent for the Lessor, wishes, in certain instances, to construct Buildings on the Land for the Lessor and, when completed, to lease the Buildings, or to cause the Buildings to be leased, from the Lessor as part of the Leased Properties under the Lease, (iii) Hughes wishes to obtain, and the Lessor is willing to provide, funding for the acquisition of the Land and any Buildings thereon or, in certain instances, the construction of the Buildings, and (iv) the Lessor wishes to obtain, and the Lenders are willing to provide, financing of a portion of the funding for the acquisition of the Land and any Buildings thereon and, if applicable, the construction of the Buildings. In consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINITIONS; INTERPRETATION Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in Appendix A to the ---------- Master Agreement for all purposes hereof; and the rules of interpretation set forth in Appendix A to the Master Agreement shall apply to this Loan Agreement. ---------- SECTION 2 AMOUNT AND TERMS OF COMMITMENTS; REPAYMENT AND PREPAYMENT OF LOANS SECTION 2.1 Commitment. (a) Subject to the terms and conditions hereof ---------- and of the Master Agreement, each Lender agrees to make term loans to the Lessor ("Loans") from time to time during the period from and including the Initial ----- Closing Date through the Funding Termination Date, on each Closing Date and on each subsequent Funding Date, in the amounts required under Section 2.2 of the Master Agreement. SECTION 2.2 Note. The Loans made by each Lender to the Lessor shall be ---- evidenced by a note of the Lessor (the "Note"), substantially in the form of ---- Exhibit A with appropriate insertions, duly executed by the Lessor and payable - --------- to the order of the Agent, on behalf of the Lenders, and in a principal amount equal to the aggregate Lenders' Commitment Percentages of the aggregate Commitments (or, if less, the aggregate unpaid principal amount of all Loans, made by the Lenders to the Lessor). The Note shall be dated the Initial Closing Date and delivered to the Agent in accordance with Section 3.2 of the Master Agreement. The Agent is hereby authorized to record the date and amount of each Loan made by each Lender to the Lessor on the Note or in its records, and each Lender is hereby authorized to record the date and amount of each Loan made by such Lender to the Lessor in its records, but the failure by the Agent or any Lender to so record such Loan shall not affect or impair any obligations with respect thereto. The Note shall (i) be stated to mature no later than the final Lease Termination Date and (ii) bear interest from the date a Loan is made on the unpaid principal amount thereof from time to time outstanding at the applicable interest rate per annum determined as provided in, and payable as specified in, Section 2.4. Upon the occurrence of an Event of Default under ----------- clause (g) of Article XII of the Lease, or upon Acceleration as described in Section 4.3(b) hereof, each Note shall automatically become due and payable in - -------------- full. SECTION 2.3 Scheduled Principal Repayment. On each Payment Date occurring ----------------------------- after the EBO Date, the Lessor shall pay to the Agent, for distribution to the Lenders, the Amortization Amount for such Payment Date, which amount shall be applied to reduce the outstanding principal of the Loans. On the Lease Termination Date, the Lessor shall pay the aggregate unpaid principal amount of all Loans as of such date. SECTION 2.4 Interest. (a) Each Loan related to a LIBOR Advance shall bear -------- interest during each Rent Period at a rate equal to the sum of (i) the Adjusted LIBO Rate for such Rent Period, computed using the actual number of days elapsed and a 360 day year, plus (ii) the Applicable Margin per annum. Each Loan related ---- to a Base Rate Advance shall bear interest at a rate equal to the Base Rate in effect from time to time, computed using the actual number of days elapsed and a 360 day year. (b) If all or a portion of the principal amount of or interest on the Loans shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall, without limiting the rights of the Lenders under Section 5, bear interest at the Overdue Rate, in --------- each case from the date of nonpayment until paid in full (after as well as before judgment). (c) Interest accruing on each Loan with respect to any Leased Property during the Construction Term of such Leased Property shall, subject to the limitations set forth in Section 2.3(c) of the Master Agreement, be added to the principal amount of such Loan from time to time. Following the date each Loan is made (or in the case of Loans with respect to a Construction Land Interest, the Construction Term Expiration Date), interest on such Loan shall be payable in arrears on each Payment Date with respect thereto. 2 (d) Any change in the interest rate on the Loans resulting from a change in the Base Rate shall become effective as of the opening of business on the day on which such Base Rate changes as provided in the definition thereof. SECTION 2.5 Allocation of Loans to Leased Properties. Pursuant to each ---------------------------------------- Funding Request, each Loan shall be allocated to the Leased Property, the cost of acquisition or construction of which the proceeds of such Loan are used to pay. For purposes of the Operative Documents, the "related Loans" with respect to any Leased Property or Loans "related to" any Leased Property shall mean those Loans allocated to such Leased Property as set forth in the foregoing sentence. SECTION 2.6 Prepayment. Except in conjunction with a payment by a Lessee ---------- or the Construction Agent of the Lease Balance, a Construction Failure Payment or a Leased Property Balance pursuant to the terms of the Lease or the Construction Agency Agreement, the Lessor shall have no right to prepay the Loans. SECTION 3 RECEIPT, DISTRIBUTION AND APPLICATION OF CERTAIN PAYMENTS IN RESPECT OF LEASE AND LEASED PROPERTY; RELEASE; SECURITY INTEREST SECTION 3.1 Distribution and Application of Rent Payments. --------------------------------------------- (a) Basic Rent. Each payment of Basic Rent (and any payment of interest on ---------- overdue installments of Basic Rent) received by the Agent shall be distributed first, pro rata to the Lenders to be applied to the amounts of accrued and - ----- unpaid interest (including overdue interest) on the Loans, second, pro rata to ------ the Lenders to be applied to the principal amount of the Loans then due, and third to the Lessor. - ----- (b) Supplemental Rent. Each payment of Supplemental Rent received by the ----------------- Agent shall be paid to or upon the order of the Person owed the same in accordance with the Operative Documents. SECTION 3.2 Distribution and Application of Purchase Payment. With ------------------------------------------------ respect to any Leased Property, the payment by a Lessee of: (a) the purchase price for a consummated sale of such Leased Property received by the Agent in connection with such Lessee's exercise of the Purchase Option under Section 14.1 of the Lease, or such Lessee's exercise of its purchase option pursuant to Section 14.3 of the Lease, or such Lessee's or the Construction Agent's exercise of its option to purchase such Leased Property under Section 5.3 of the Construction Agency Agreement, or 3 (b) the Leased Property Balance therefor in accordance with Section 10.1 or Section 10.2 of the Lease, shall be distributed by Agent as promptly as possible, first, to the Lenders pro rata in accordance with, and for application to, their respective Funding Party - ---- Balances in respect of such Leased Property or Properties and second, to the ------ Lessor. SECTION 3.3 Distribution and Application to Funding Party Balances of --------------------------------------------------------- Construction Failure Payment. With respect to any Leased Property, the payment - ---------------------------- by the Construction Agent of the Construction Failure Payment with respect thereto pursuant to the Construction Agency Agreement shall be applied by the Agent, first to the accrued and unpaid interest on, and the outstanding ----- principal of, the Loans in respect of such Leased Property, and second to the ------ Lessor. SECTION 3.4 Distribution and Application to Funding Party Balances of --------------------------------------------------------- Remarketing Proceeds of Leased Property. Any payments payable to and received - --------------------------------------- by the Lessor in accordance with the Construction Agency Agreement as proceeds from the sale of any Leased Property sold following the payment of the Construction Failure Payment shall be distributed (or applied, as appropriate) by the Lessor as promptly as possible (it being understood that any such payment received by the Lessor on a timely basis and in accordance with the provisions of the Construction Agency Agreement shall be distributed on the date received in the funds so received) in the following order of priority: first, to the extent not previously deducted from such proceeds, to ----- the Funding Parties or the Agent, as the case may be, in reimbursement of all reasonable costs, expenses and taxes, if any, incurred by any of them to complete the construction of such Leased Property, maintain and insure such Leased Property, remarket such Leased Property and sell such Leased Property, pro rata according to the amount of such costs, expenses and --- ---- taxes; second, to the Lenders pro rata for application to their Funding Party ------ --- ---- Balances in respect to such Leased Property, an amount equal to such Funding Party Balances in respect of such Leased Property; and third, to the Lessor. ----- SECTION 3.5 Distribution and Application of Payments Received When an --------------------------------------------------------- Event of Default Exists or Has Ceased to Exist Following Rejection of the Lease. - ------------------------------------------------------------------------------- (a) Proceeds of Leased Property. Any payments received by the Lessor or --------------------------- the Agent when an Event of Default exists (or has ceased to exist by reason of a rejection of the Lease in a proceeding with respect to a Lessee described in Article XII (g) of the Lease) or a Loan Event of Default exists, as 4 (i) proceeds from the sale of any or all of the Leased Property sold pursuant to the exercise of the Lessor's remedies pursuant to Article XIII of the Lease or pursuant to the exercise of the Agent's remedies pursuant to the Loan Documents, or (ii) proceeds of any amounts from any insurer or any Governmental Authority in connection with an Event of Loss or Event of Taking shall if received by the Lessor be paid to the Agent as promptly as possible, and shall be distributed or applied in the following order of priority prior to the Release Date: first, to the Agent for any amounts reasonably expended by it in ----- connection with such Leased Property or the Operative Documents and not previously reimbursed to it; second, to the Lenders pro rata for application to their Funding Party ------ --- ---- Balances in respect of all of the Leased Properties, an amount equal to such Funding Party Balances; and third, to the Lessor; and ----- on and after such Release Date (and any application otherwise required under this Section 3 has been made) such amounts shall be paid over to the Lessor. --------- (b) Proceeds of Recoveries from Lessee. Any payments received by any ---------------------------------- Funding Party when an Event of Default exists (or has ceased to exist by reason of a rejection of the Lease in a proceeding with respect to a Lessee described in Article XII(g) of the Lease), from a Lessee as a payment in accordance with the Lease shall be paid to the Agent as promptly as possible, and shall then be distributed or applied by the Agent as promptly as possible in the order of priority set forth in paragraph (a) above. ------------- SECTION 3.6 Distribution of Other Payments. Except as otherwise provided ------------------------------ in this Section 3, any payment received by the Lessor which is to be paid to --------- Agent pursuant hereto or for which provision as to the application thereof is made in an Operative Document but not elsewhere in this Section 3 shall, if --------- received by the Lessor, be paid forthwith to the Agent and when received shall be distributed forthwith by the Agent to the Person and for the purpose for which such payment was made in accordance with the terms of such Operative Document. SECTION 3.7 Timing of Agent Distributions. Payments received by the Agent ----------------------------- in immediately available funds before 12:00 p.m. (noon), Atlanta, Georgia time, on any Business Day shall be distributed to the Funding Parties in accordance with and to the extent provided in this Section 3 on such Business Day. --------- Payments received by the Agent in immediately available funds after 12:00 p.m. (noon), Atlanta, Georgia time shall be distributed to the Funding Parties in accordance with and to the extent provided in this Section 3 on the next --------- Business Day. 5 SECTION 3.8 Release of Leased Properties. (a) If one or more of the ---------------------------- Lessees shall at any time purchase any or all of the Leased Properties pursuant to Section 13.3 or Article 14 of the Lease, then, upon application of such amounts to prepay the related Loans pursuant to Section 2.6 and the Agent's and ----------- the Lenders' receipt of all accrued interest and any other payments due and owing from the Lessees and/or the Lessor to the Agent and the Lenders on such date in respect thereof, such Leased Property or Properties, as the case may be, shall be released from the applicable Mortgage and the Assignment of Lease and Rents, to the extent relating to such Leased Property or Properties. (b) Upon the termination of the Lenders' Commitments and the payment in full of all of the Loans and all other amounts owing by the Lessees and/or the Lessor hereunder or under any other Operative Document to the Lessor, the Agent and the Lenders (other than unasserted indemnities), the Leased Properties shall be released from the Mortgages and Assignments of Lease and Rents. (c) Upon request of the Lessor or a Lessee following a release of any Leased Property described in clause (a) or (b) above, the Agent shall, at the ---------- --- sole cost and expense of the Lessees, execute and deliver to the Lessor or the requesting Lessee such documents as the Lessor or such Lessee shall reasonably request to evidence such release, including, if requested, a release of the Assignments of Lease and Rents to the extent relating to such Leased Property. 6 SECTION 4 THE LESSOR; EXERCISE OF REMEDIES UNDER LEASE SECTION 4.1 Covenant of Lessor. So long as any Lender's Commitment remains ------------------ in effect, any Loan remains outstanding and unpaid or any other amount is owing to any Lender with respect to its Funding Party Balances, subject to Section ------- 4.2, the Lessor will promptly pay all amounts payable by it under this Loan - --- Agreement and the Notes issued by it in accordance with the terms hereof and thereof and shall duly perform each of its obligations under this Loan Agreement and the Note. The Lessor agrees to provide to the Agent a copy of each estoppel certificate that the Lessor proposes to deliver pursuant to Section 17.13 of the Lease at least five (5) days prior to such delivery and to make any corrections thereto reasonably requested by the Agent prior to such delivery. The Lessor shall keep each Leased Property owned by it free and clear of all Lessor Liens. In the event that the Construction Agent returns any Leased Property to the Lessor pursuant to Section 5.3(a) of the Construction Agency Agreement, unless all of the related Loans are paid in full, the Lessor agrees to take such action as the Lenders reasonably request to complete the Construction, or to effect a sale or other disposition, of such Leased Property, provided that the Lessor -------- shall not be required to expend its own funds in connection therewith. During the Construction Term for each Leased Property, the Lessor agrees to assume liability for, and to indemnify, protect, defend, save and hold harmless the Agent, each Lender and each of their respective Affiliates, successors, assigns, employees, officers and directors, on an After-Tax Basis from and against, any and all Claims that may be imposed on, incurred by or asserted or threatened to be asserted against the Agent or any Lender, in any way relating to or arising out of the circumstances set forth in Section 7.1 or 7.4 of the Master Agreement, provided that the Lessor shall only be obligated pursuant to this -------- sentence to the extent that the Lessor receives payment from the Construction Agent or any other Person with respect to such Claim. SECTION 4.2 Lessor Obligations Nonrecourse; Payment from Certain Lease ---------------------------------------------------------- Obligations and Certain Proceeds of Leased Property Only. All payments to be - -------------------------------------------------------- made by the Lessor in respect of the Loans, the Note and this Loan Agreement shall be made only from certain payments received under the Lease, the Guaranty Agreement, the Subsidiary Guaranty and the Construction Agency Agreement and certain proceeds of the Leased Properties and only to the extent that the Lessor or the Agent shall have received sufficient payments from such sources to make payments in respect of the Loans in accordance with Section 3. Each Lender --------- agrees that it will look solely to such sources of payments to the extent available for distribution to such Lender as herein provided and that neither the Lessor nor the Agent is or shall be personally liable to any Lender for any amount payable hereunder or under the Note. Nothing in this Loan Agreement, the Note or any other Operative Document shall be construed as creating any liability (other than for willful misconduct, gross negligence or misrepresentation) of the Lessor individually to pay any sum or to perform any covenant, either express or implied, in this Loan Agreement, the Note or any other Operative Documents (all such liability, if any, being expressly waived by each Lender) and that each Lender, on behalf of itself and its successors and assigns, agrees in the case of any liability of the Lessor hereunder or thereunder (except for such liability attributable to its willful misconduct, gross negligence or misrepresentation) that it will look solely to those certain payments received under the Lease, the Guaranty Agreement, the Subsidiary Guaranty and the 7 Construction Agency Agreement and those certain proceeds of the Leased Properties, provided, however, that the Lessor in its individual capacity shall -------- ------- in any event be liable with respect to (i) the removal of Lessor's Liens or involving its gross negligence, willful misconduct or misrepresentation or (ii) failure to turn over payments the Lessor has received in accordance with Section ------- 3; and provided further that the foregoing exculpation of the Lessor shall not - - -------- ------- be deemed to be exculpations of the Guarantor, any Lessee or any other Person. SECTION 4.3 Exercise of Remedies Under the Lease. ------------------------------------ (a) Event of Default. With respect to any Potential Event of Default as to ---------------- which notice thereof by the Lessor to a Lessee is a requirement to cause such Potential Event of Default to become an Event of Default, the Lessor agrees to give such notice to such Lessee promptly upon receipt of a written request by any Lender or the Agent. The Lessor shall not, without the prior written consent of the Required Lenders, waive any Event of Default. (b) Acceleration of Lease Balance. When an Event of Default exists, the ----------------------------- Lessor shall exercise such remedies as shall be permitted by the Operative Documents or Applicable Law and directed by the Required Lenders, including demanding payment in full of the amounts owed by the Lessees under the Operative Documents (the "Acceleration"). The Lessor shall consult with the Lenders ------------ regarding actions to be taken in response to such Event of Default. The Lessor (1) shall not, without the prior written consent of the Required Lenders and (2) shall (subject to the provisions of this Section), if so directed by the ------- Required Lenders, do any of the following: commence eviction or foreclosure proceedings, or file a lawsuit against any Lessee under the Lease, or sell the Leased Properties, or exercise other remedies against the Lessees or the Guarantor under the Operative Documents in respect of such Event of Default; provided, however, that any payments received by the Lessor shall be distributed - -------- ------- in accordance with Section 3. Notwithstanding any such consent, direction or --------- approval by the Required Lenders of any such action or omission, the Lessor shall not have any obligation to follow such direction if the same would, in the Lessor's reasonable judgment, require the Lessor to expend its own funds or expose the Lessor to expense, or unless Required Lenders provide to the Lessor an indemnity, in form and substance reasonably acceptable to the Lessor, for such liability, loss or damage or unless and until the Lenders advance to the Lessor an amount which is sufficient, in the Lessor's reasonable judgment, to cover such liability, expense, loss or damage (excluding the Lessor's pro rata share thereof, if any). Notwithstanding the foregoing, on and after the related Release Date (and any application otherwise required under Section 3 has been --------- made): the Lenders shall have no rights to such Leased Property or any proceeds thereof; the Lenders shall have no rights to direct or give consent to any actions with respect to such Leased Property and the proceeds thereof; the Lessor shall have absolute discretion (but in all events subject to the terms of the Operative Documents) with respect to such exercise of remedies with respect to such Leased Property, and the proceeds thereof, including, without limitation, any foreclosure or sale of such Leased Property; and the Lessor shall have no liability to the Lenders with respect to the Lessor's actions or failure to take any action with respect to such Leased Property. 8 SECTION 5 LOAN EVENTS OF DEFAULT; REMEDIES SECTION 5.1 Loan Events of Default. Each of the following events shall ---------------------- constitute a Loan Event of Default (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority) and each such Loan Event of Default shall continue so long as, but only as long as, it shall not have been remedied: (a) Lessor shall fail to distribute in accordance with the provisions of Section 3 any amount received by the Lessor pursuant to any Lease or the --------- Master Agreement within two (2) Business Days of receipt thereof if and to the extent that the Agent or the Lenders are entitled to such amount or a portion thereof; or (b) the Lessor shall fail to pay to the Agent, within two (2) Business Days of the Lessor's receipt thereof, any amount which a Lessee is required, pursuant to the Operative Documents, to pay to the Agent but erroneously pays to the Lessor; or (c) failure by the Lessor to perform in any material respect any other covenant or condition herein or in any other Operative Document to which the Lessor is a party, which failure shall continue unremedied for thirty (30) days after receipt by the Lessor of written notice thereof from the Agent or any Lender; or (d) any representation or warranty of the Lessor contained in any Operative Document or in any certificate required to be delivered thereunder shall prove to have been incorrect in a material respect when made and shall not have been cured within thirty (30) days of receipt by the Lessor of written notice thereof from the Agent or any Lender; or (e) the Lessor or the General Partner shall become bankrupt or make an assignment for the benefit of creditors or consent to the appointment of a trustee or receiver; or a trustee or a receiver shall be appointed for the Lessor or the General Partner or for substantially all of its property without its consent and shall not be dismissed or stayed within a period of ninety (90) days; or bankruptcy, reorganization or insolvency proceedings shall be instituted by or against the Lessor or the General Partner and, if instituted against the Lessor or the General Partner, shall not be dismissed or stayed for a period of ninety (90) days; or (f) any Event of Default shall occur and be continuing. 9 SECTION 5.2 Remedies. -------- (a) Upon the occurrence of a Loan Event of Default hereunder, (i) if such event is a Loan Event of Default specified in clause (e) of Section 5.1 with ---------- ----------- respect to the Lessor, automatically the Lenders' Commitments shall terminate and the outstanding principal of, and accrued interest on, the Loans shall be immediately due and payable, and (ii) if such event is any other Loan Event of Default, upon written request of the Required Lenders, the Agent shall, by notice of default to the Lessor, declare the Commitments of the Lenders to be terminated forthwith and the outstanding principal of, and accrued interest on, the Loans to be immediately due and payable, whereupon the Commitments of the Lenders shall immediately terminate and the outstanding principal of, and accrued interest on, the Loans shall become immediately due and payable. (b) When a Loan Event of Default exists, the Agent may, and upon the written instructions of the Required Lenders shall, exercise any or all of the rights and powers and pursue any and all of the remedies available to it hereunder, under the Note, the Mortgages and the Assignments of Lease and Rents and shall have and may exercise any and all rights and remedies available under the Uniform Commercial Code or any provision of law. When a Loan Event of Default exists, the Agent may, and upon the written instructions of the Required Lenders shall, have the right to exercise all rights of the Lessor under the Lease pursuant to the terms and in the manner provided for in the Mortgages and the Assignments of Lease and Rents. (c) Except as expressly provided above, no remedy under this Section 5.2 ----------- is intended to be exclusive, but each shall be cumulative and in addition to any other remedy provided under this Section 5.2 or under the other Operative ----------- Documents or otherwise available at law or in equity. The exercise by the Agent or any Lender of any one or more of such remedies shall not preclude the simultaneous or later exercise of any other remedy or remedies. No express or implied waiver by the Agent or any Lender of any Loan Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Loan Event of Default. The failure or delay of the Agent or any Lender in exercising any rights granted it hereunder upon any occurrence of any of the contingencies set forth herein shall not constitute a waiver of any such right upon the continuation or recurrence of any such contingencies or similar contingencies and any single or partial exercise of any particular right by the Agent or any Lender shall not exhaust the same or constitute a waiver of any other right provided herein. 10 SECTION 6 THE AGENT SECTION 6.1 Appointment. Each Lender hereby irrevocably designates and ----------- appoints the Agent as the agent of such Lender under this Loan Agreement and the other Operative Documents, and each such Lender irrevocably authorizes the Agent, in such capacity, to take such action on its behalf under the provisions of this Loan Agreement and the other Operative Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Loan Agreement and the other Operative Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Loan Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Loan Agreement or any other Operative Document or otherwise exist against the Agent. SECTION 6.2 Delegation of Duties. The Agent may execute any of its duties -------------------- under this Loan Agreement and the other Operative Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. SECTION 6.3 Exculpatory Provisions. Neither the Agent nor any of its ---------------------- officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Loan Agreement or any other Operative Document (except for its or such Person's own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Lessor or any Lessee or any officer thereof contained in this Loan Agreement or any other Operative Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Loan Agreement or any other Operative Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Loan Agreement or any other Operative Document or for any failure of the Lessor or any Lessee to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Loan Agreement or any other Operative Document, or to inspect the properties, books or records of the Lessor, the Guarantor or any Lessee. SECTION 6.4 Reliance by Agent. The Agent shall be entitled to rely, and ----------------- shall be fully protected in relying, upon writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Lessor or any Lessee), independent accountants and other experts selected by the Agent. 11 The Agent may deem and treat the payee of the Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Loan Agreement or any other Operative Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Funding Parties against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Subject to the Operative Documents, the Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Loan Agreement and the other Operative Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of an interest in the Note. SECTION 6.5 Notice of Default. The Agent shall not be deemed to have ----------------- knowledge or notice of the occurrence of any Loan Potential Event of Default or Loan Event of Default hereunder unless the Agent has received notice from a Lender referring to this Loan Agreement, describing such Loan Potential Event of Default or Loan Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give notice thereof to the Lenders. The Agent shall take such action, subject to the Operative Documents with respect to such Loan Potential Event of Default or Loan Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until the Agent shall have received such -------- directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Loan Potential Event of Default or Loan Event of Default as it shall deem advisable in the best interests of the Lenders. SECTION 6.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly --------------------------------------- acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Lessor, the Guarantor or any Lessee, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Lessor, the Guarantor and each Lessee and made its own decision to make its Loans hereunder and enter into this Loan Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Loan Agreement and the other Operative Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Lessor, the Guarantor and each Lessee. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition 12 (financial or otherwise), prospects or creditworthiness of the Lessor, the Guarantor or any Lessee which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. SECTION 6.7 Indemnification. The Lenders agree to indemnify the Agent in --------------- its capacity as such (to the extent not reimbursed by a Lessee and without limiting the obligation of any Lessee to do so), ratably according to the percentage each Lender's Commitment bears to the total Commitments of all of the Lenders on the date on which indemnification is sought under this Section 6.7 ----------- (or, if indemnification is sought after the date upon which the Lenders' Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with the percentage that each Lender's Commitment bears to the Commitments of all of the Lenders immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Note) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of, the Commitments, this Loan Agreement, any of the other Operative Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be -------- liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's gross negligence or willful misconduct. The agreements in this Section 6.7 shall survive the payment of the Note and all ----------- other amounts payable hereunder. SECTION 6.8 Agent in Its Individual Capacity. The Agent and its Affiliates -------------------------------- may make loans to, accept deposits from and generally engage in any kind of business with the Lessor, the Guarantor or any Lessee as though the Agent were not the Agent hereunder and under the other Operative Documents. With respect to Loans made or renewed by it, the Agent shall have the same rights and powers under this Loan Agreement and the other Operative Documents as any Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. Each Lender acknowledges that the Agent in its individual capacity has had and continues to have other business relations and transactions with Hughes, Hughes' Affiliates and the Lessor. SECTION 6.9 Successor Agent. The Agent may resign as Agent upon 20 days' --------------- notice to the Lenders effective upon the appointment of a successor agent. If the Agent shall resign as Agent under this Loan Agreement and the other Operative Documents, then the Required Lenders shall appoint a successor agent for the Lenders, which successor agent shall be a commercial bank organized under the laws of the United States of America or any State thereof or under the laws of another country which is doing business in the United States of America and having a combined capital, surplus and undivided profits of at least $100,000,000, whereupon such successor agent shall succeed to the rights, powers and duties of the Agent, and the term "Agent" shall mean such successor agent effective upon such appointment and approval, and the 13 former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Loan Agreement or any holders of an interest in the Note. After any retiring Agent's resignation as Agent, all of the provisions of this Section ------- 6 shall inure to its benefit as to any actions taken or omitted to be taken by - - it while it was Agent under this Loan Agreement and the other Operative Documents. SECTION 7 MISCELLANEOUS SECTION 7.1 Amendments and Waivers. Neither this Loan Agreement, the Note, ---------------------- nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of Section 8.4 of the Master Agreement. SECTION 7.2 Notices. Unless otherwise specified herein, all notices, ------- requests, demands or other communications to or upon the respective parties hereto shall be given in accordance with Section 8.2 of the Master Agreement. SECTION 7.3 No Waiver; Cumulative Remedies. No failure to exercise and no ------------------------------ delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. The provisions of Section 8.11 of the Master Agreement shall apply to this Loan Agreement. SECTION 7.4 Successors and Assigns. This Loan Agreement shall be binding ---------------------- upon and inure to the benefit of the Lessor, the Agent, the Lenders, all future holders of an interest in the Note and their respective successors and permitted assigns. SECTION 7.5 Counterparts. This Loan Agreement may be executed by one or ------------ more of the parties to this Loan Agreement on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same agreement. A set of the counterparts of this Loan Agreement signed by all the parties hereto shall be lodged with the Lessor and the Agent. SECTION 7.6 GOVERNING LAW. THIS LOAN AGREEMENT AND THE NOTE AND THE RIGHTS ------------- AND OBLIGATIONS OF THE PARTIES UNDER THIS LOAN AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF FLORIDA. SECTION 7.7 Survival and Termination of Agreement. All covenants, ------------------------------------- agreements, representations and warranties made herein and in any certificate, document or statement 14 delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Loan Agreement, and the Note and shall continue in full force and effect so long as the Note or any amount payable to any Lender under or in connection with this Loan Agreement or the Note is unpaid, at which time this Loan Agreement shall terminate. SECTION 7.8 Entire Agreement. This Loan Agreement and the other Operative ---------------- Documents set forth the entire agreement of the parties hereto with respect to its subject matter, and supersedes all previous understandings, written or oral, with respect thereto. SECTION 7.9 Severability. Any provision of this Loan Agreement or of the ------------ Note which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or thereof or affecting the validity, enforceability or legality of any such provision in any other jurisdiction. 15 IN WITNESS THEREOF, the parties hereto have caused this Loan Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. SUNTRUST BANK, as Agent By:____________________________________ Name:_______________________________ Title:______________________________ LOAN AGREEMENT OPERATING LEASE S-1 ATLANTIC FINANCIAL GROUP, LTD. as Lessor and Borrower By: Atlantic Financial Managers, Inc., its General Partner By:_______________________________ Name: Stephen Brookshire Title: President LOAN AGREEMENT OPERATING LEASE S-2 SUNTRUST BANK, as a Lender By:___________________________________ Name:______________________________ Title:_____________________________ LOAN AGREEMENT OPERATING LEASE S-3 EX-10.15 (B) 10 dex1015b.txt CONSTRUCTION AGREEMENT - OPERATING LEASE Exhibit 10.15(b) CONSTRUCTION AGENCY AGREEMENT dated as of June 22, 2001 among ATLANTIC FINANCIAL GROUP, LTD. and HUGHES SUPPLY, INC. as Construction Agent [OPERATING LEASE] TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS.................................................................................. 1 1.1. Defined Terms........................................................................................ 1 ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT............................................................ 2 2.1. Appointment.......................................................................................... 2 2.2. Acceptance; Construction............................................................................. 2 2.3. Commencement of Construction......................................................................... 2 2.4. Supplements to this Agreement........................................................................ 2 2.5. Term................................................................................................. 3 2.6. Identification of Properties; Construction Documents................................................. 3 2.7. Scope of Authority................................................................................... 3 2.8. Covenants of the Construction Agent.................................................................. 4 2.9. Insurance............................................................................................ 5 ARTICLE III THE BUILDINGS................................................................................ 11 3.1. Amendments; Modifications............................................................................ 11 3.2. Casualty and Condemnation............................................................................ 11 3.3. Indemnity............................................................................................ 12 3.4. Construction Force Majeure Events.................................................................... 12 ARTICLE IV PAYMENT OF FUNDS............................................................................. 13 4.1. Funding of Property Acquisition Costs and Property Buildings Costs................................... 13 ARTICLE V CONSTRUCTION AGENCY EVENTS OF DEFAULT........................................................ 14 5.1. Construction Agency Events of Default................................................................ 14 5.2. Damages.............................................................................................. 15 5.3. Remedies; Remedies Cumulative........................................................................ 15 5.4. Limitation on Construction Agent's Recourse Liability................................................ 17 5.5. Construction Agent's Right to Purchase............................................................... 18 5.6. Construction Return Procedures....................................................................... 18 5.7. Option to Remarket................................................................................... 19 5.8. Rejection of Sale.................................................................................... 21 5.9. Return of Leased Property............................................................................ 22 5.10. Reimbursements...................................................................................... 23 5.11. Building Construction Failure Payment............................................................... 23 ARTICLE VI NO CONSTRUCTION AGENCY FEE................................................................... 23 6.1. Lease as Fulfillment of Lessor's Obligations......................................................... 23
i ARTICLE VII LESSOR'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS................................................. 23 7.1. Exercise of the Lessor's Rights...................................................................... 23 7.2. Lessor's Right to Cure Construction Agent's Defaults................................................. 24 ARTICLE VIII MISCELLANEOUS................................................................................ 24 8.1. Notices.............................................................................................. 24 8.2. Successors and Assigns............................................................................... 24 8.3. GOVERNING LAW........................................................................................ 24 8.4. Amendments and Waivers............................................................................... 24 8.5. Counterparts......................................................................................... 24 8.6. Severability......................................................................................... 24 8.7. Headings and Table of Contents....................................................................... 25 8.8. Jurisdiction; Waivers................................................................................ 25
ii EXHIBITS Exhibit A Form of Supplement to Construction Agency Agreement iii CONSTRUCTION AGENCY AGREEMENT ----------------------------- CONSTRUCTION AGENCY AGREEMENT, dated as of June 22, 2001 (as amended, supplemented or otherwise modified from time to time, this "Agreement"), between --------- ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership, (the "Lessor"), and ------ HUGHES SUPPLY, INC., a Florida corporation ("Hughes", and in its capacity as ------ construction agent, the "Construction Agent"). ------------------ PRELIMINARY STATEMENT A. Lessor, Hughes, certain subsidiaries of Hughes that may become signatories thereto, the Lenders signatory thereto and SunTrust Bank, as agent for such Lenders (in such capacity, the "Agent") are parties to that certain ----- Master Agreement, dated as of June 22, 2001 (as amended, supplemented or otherwise modified from time to time pursuant thereto, the "Master Agreement"). ---------------- B. Subject to the terms and conditions hereof, (i) the Lessor desires to appoint Hughes as the Construction Agent to act as its sole and exclusive agent for the identification and acquisition of the Land pursuant to the Master Agreement and construction of the Buildings in accordance with the Plans and Specifications and pursuant to the Master Agreement, and (ii) the Construction Agent desires, for the benefit of the Lessor, to cause the Buildings to be constructed in accordance with the Plans and Specifications and pursuant to the Master Agreement and this Agreement, in each case in accordance with the terms herein set forth. NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: ARTICLE I DEFINITIONS I.1. Defined Terms. Capitalized terms used but not otherwise defined in ------------- this Agreement shall have the meanings set forth in Appendix A to the Master Agreement. ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT II.1. Appointment. Pursuant to and subject to the terms and conditions ----------- set forth herein and in the Master Agreement and the other Operative Documents, the Lessor hereby irrevocably designates and appoints Hughes as the Construction Agent to act as its exclusive agent for (i) the identification and acquisition from time to time of Land to be acquired or leased by the Lessor and leased or subleased to Hughes and (ii) the construction of the Buildings in accordance with the Plans and Specifications on such Land. II.2. Acceptance; Construction. Hughes hereby unconditionally accepts the ------------------------ designation and appointment as Construction Agent. The Construction Agent will cause the Buildings to be constructed on the Land substantially in accordance with the Plans and Specifications and, in accordance with the Operative Documents, to be equipped in all material respects with all Applicable Law and insurance requirements. If a Leased Property will be leased by a Lessee other than Hughes, Hughes may appoint such Lessee as its sub-construction agent with respect to such Leased Property, provided that such appointment shall not affect -------- Hughes' obligations hereunder, which obligations shall be primary and shall remain in full force and effect. II.3. Commencement of Construction. Subject to Construction Force Majeure ---------------------------- Events, the Construction Agent hereby agrees, unconditionally and for the benefit of the Lessor, to cause Construction of a Building to commence on each parcel of Land as soon as is reasonably practicable, in its reasonable judgment, after the Closing Date in respect of such Land. For purposes hereof, Construction of a Building shall be deemed to commence on the date after the Closing Date for the related Leased Property (the "Construction Commencement ------------------------- Date") on which excavation for the foundation for such Building or any other - ---- Construction of such Building commences. Without limiting the foregoing, no phase of such Construction shall be undertaken until all permits required for such phase have been issued therefor. II.4. Supplements to this Agreement. On the Closing Date of each parcel ----------------------------- of Land, the Lessor and the Construction Agent shall each execute and deliver to the Agent a supplement to this Agreement in the form of Exhibit A to this --------- Agreement, appropriately completed, pursuant to which the Lessor and the Construction Agent shall, among other things, each acknowledge and agree that the Construction of such parcel of Land will be governed by the terms of this Agreement. Following the execution and delivery of a supplement to this Agreement as provided above, such supplement and all supplements previously delivered under this Agreement shall constitute a part of this Agreement. On or prior to the Closing Date of each parcel of Land, the Construction Agent shall prepare and deliver to the Lessor and the Agent a construction budget (the "Construction Budget") for the related Leased Property, setting forth in - -------------------- reasonable detail the budget for the Construction of the proposed Building on such Land in accordance with the Plans and Specifications therefor, and all related costs including the capitalized interest and Yield expected to accrue during the related Construction Term; such Construction Budget shall include a line item for the amount of self-insurance or deductibles applicable to such Leased Property. 2 II.5. Term. This Agreement shall commence on the date hereof and shall ---- terminate with respect to any given Leased Property upon the first to occur of: (a) payment by the Lessee of the Leased Property Balance and termination of the Lease with respect to such Leased Property in accordance with the Lease; (b) the expiration or earlier termination of the Lease; (c) termination of this Agreement pursuant to Article V hereof; --------- (d) the Completion Date for such Leased Property and the completion of all punch list items as set forth in Section 2.8(d); and -------------- (e) the payment by the Construction Agent of the Leased Property Balance or the Construction Failure Payment with respect to such Leased Property pursuant to this Agreement. II.6. Identification of Properties; Construction Documents. The ---------------------------------------------------- Construction Agent may execute any of its duties and obligations under this Agreement by or through agents, contractors, developers, Affiliates, employees or attorneys-in-fact, and the Construction Agent shall enter into such agreements with architects and contractors as the Construction Agent deems necessary or desirable for the construction of the Buildings pursuant hereto (the "Construction Documents"); provided, however, that no such delegation shall ---------------------- -------- ------- limit or reduce in any way the Construction Agent's duties and obligations under this Agreement; provided, further, that contemporaneously with the execution and -------- ------- delivery of a Construction Document, the Construction Agent will execute and deliver to the Lessor the Security Agreement and Assignment, pursuant to which the Construction Agent assigns to the Lessor, among other things, all of the Construction Agent's rights under and interests in such Construction Documents. Each construction contract shall be with a reputable general contractor with experience in constructing projects that are similar in scope and type to the proposed Building, and shall provide for a guaranteed maximum project cost and at least 10% retainage initially, which amount may decline to 5% retainage at such time as Construction of the related Building is at least 50% complete in accordance with the terms of the related construction contract. II.7. Scope of Authority. (a) Subject to the terms, conditions, ------------------ restrictions and limitations set forth in the Operative Documents, the Lessor hereby expressly authorizes the Construction Agent, or any agent or contractor of the Construction Agent, and the Construction Agent unconditionally agrees, for the benefit of the Lessor, to take all action necessary or desirable for the performance and satisfaction of all of the Construction Agent's obligations hereunder with respect to the Leased Properties acquired or leased by the Lessor, including, without limitation: (i) the identification and assistance with the acquisition or lease of Land in accordance with the terms and conditions of the Master Agreement; 3 (ii) all design and supervisory functions relating to the construction of the Buildings and performing all engineering work related to the construction of the Buildings; (iii) negotiating and entering into all contracts or arrangements to procure the equipment and services necessary to construct the Buildings on such terms and conditions as are customary and reasonable in light of local standards and practices; (iv) obtaining all necessary permits, licenses, consents, approvals and other authorizations, including those required under Applicable Law, from all Governmental Authorities in connection with the construction and the development of the Leased Property on the Land in accordance with the Plans and Specifications; (v) maintaining all books and records with respect to the construction, operation and management of the Leased Properties; and (vi) performing any other acts necessary or appropriate in connection with the identification, and acquisition (or leasing) and development of the Land and construction of the Buildings in accordance with the Plans and Specifications, and all other functions typically undertaken for the construction and development of similar properties. (b) Neither the Construction Agent nor any of its Affiliates or agents shall enter into any contract which would, directly or indirectly, impose any liability or obligation on the Lessor unless such contract expressly contains an acknowledgment by the other party or parties thereto that the obligations of the Lessor are non-recourse, and that the Lessor shall have no personal liability with respect to such obligations. Any contract entered into by the Construction Agent or any of its Affiliates or agents not meeting the requirements of the foregoing sentence shall be ineffective. Subject to the foregoing, the Lessor shall execute such documents and take such other actions as the Construction Agent shall reasonably request, at the Construction Agent's expense (which expenses shall be Construction Costs and shall be reimbursed with the proceeds of Advances), to permit the Construction Agent to perform its duties hereunder. (c) Subject to the terms and conditions of this Agreement and the other Operative Documents, the Construction Agent shall have sole management and control over the means, methods, sequences and procedures with respect to the Construction. The parties agree that the Construction Agent shall be in possession and control of each Leased Property during the Construction Term therefor. II.8. Covenants of the Construction Agent. The Construction Agent hereby ----------------------------------- covenants and agrees that it will: 4 (a) following the Construction Commencement Date for each parcel of Land, cause construction of a Building on such Land to be prosecuted diligently and without undue interruption substantially in accordance with the Plans and Specifications for such Land, in accordance with the Construction Budget for such Leased Property and in compliance in all material respects with all Applicable Law and insurance requirements; (b) notify the Lessor and the Agent in writing not less than five (5) Business Days after the occurrence of each Construction Force Majeure Event; (c) take all reasonable and practical steps to cause the Completion Date for such Leased Property to occur on or prior to the Scheduled Construction Termination Date for such Leased Property, and cause all Liens (including, without limitation, Liens or claims for materials supplied or labor or services performed in connection with the construction of the Buildings), other than Permitted Liens and Lessor Liens, to be discharged; (d) following the Completion Date for each Leased Property, cause all outstanding punch list items with respect to the Buildings on such Leased Property to be completed within sixty (60) days after said Completion Date; (e) at all times during Construction, cause all title to all personalty financed by the Lessor on or within such Leased Property to be and remain vested in the Lessor and cause to be on file with the applicable filing office or offices all necessary documents under Article 9 of the Uniform Commercial Code to perfect such title free of all Liens other than Permitted Liens, it being understood and acknowledged that such Lessor's rights, title and interest in and to said personalty have been assigned to the Agent pursuant to the Operative Documents; (f) not enter into any agreements or arrangements with any Person (other than the Funding Parties pursuant to the Operative Documents) that would result in any claim against, or liability of, the Agent or any Funding Party resulting from the fact that any Leased Property is not completed on or prior to the Scheduled Construction Termination Date therefor; and (g) take all reasonable and practical steps to minimize the disruption of the construction process arising from Construction Force Majeure Events. II.9. Insurance. --------- (a) Insurance by the Construction Agent: The Construction Agent shall ----------------------------------- cause to be procured with proceeds of Advances pursuant to, and subject to the terms and conditions of, the Operative Documents and maintain in full force and effect during the Construction Term insurance policies with insurance companies authorized to do business in each jurisdiction in which the Leased Properties under Construction are located with a Best Insurance Reports rating 5 of "A-" or better and a financial size category of "VIII" or higher, with limits and coverage provisions as set forth below. (i) General Liability Insurance. Liability insurance on an --------------------------- occurrence basis for the Construction Agent's and Lessor's liability arising out of claims for personal injury (including bodily injury and death) and property damage. Such insurance shall provide coverage for products-completed operations, contractual and personal injury liability with a $1,000,000 limit per occurrence for combined bodily injury and property damage with policy aggregates of $2,000,000 (other than products- completed operations) and $1,000,000 for products-completed operations. A maximum deductible or self-insured retention of $5,000 per occurrence shall be allowed. (ii) Automobile Liability Insurance. Automobile liability insurance ------------------------------ for the Construction Agent's and Lessor's liability arising out of claims for bodily injury and property damage covering all leased, non-owned and hired vehicles used in the performance of the Construction Agent's obligations under this Agreement with a $1,000,000 limit per accident for combined bodily injury and property damage and containing appropriate no- fault insurance provisions wherever applicable. A maximum deductible or self-insured retention of $5,000 per occurrence shall be allowed. (iii) Excess Liability Insurance. Liability insurance in excess of -------------------------- the insurance coverage required in clauses (i) and (ii) above with a limit ----------- ---- of $10,000,000 per occurrence and in the aggregate. (iv) Builder's Risk Insurance. Property damage insurance on an "all ------------------------ risk" basis insuring the Construction Agent and Lessor, as their interests may appear, including coverage against loss or damage from the perils of earth movement (including but not limited to earthquake, landslide, subsidence and volcanic eruption), flood, strike, riot and civil commotion. a. Property Covered. The builder's risk insurance shall provide ---------------- coverage for (i) the Buildings, structures, machinery, equipment, facilities, fixtures, supplies and other property constituting a part of the Leased Property under Construction, (ii) property of others in the care, custody or control of the Construction Agent in connection with the Leased Property, but not contractor's tools, machinery, plant and equipment including spare parts and accessories not destined to become a permanent part of the Leased Property, (iii) all preliminary works, temporary works and interconnection works and (iv) foundations and other property below the surface of the ground. b. Additional Coverages. The builder's risk policy shall insure -------------------- (i) the cost (including labor) of preventive measures to reduce or prevent further loss, (ii) inland transit with sublimits sufficient to insure the largest single shipment to or 6 from the Leased Property site from anywhere within North America, (iii) attorney's fees, engineering and other consulting costs, and permit fees directly incurred in order to repair or replace damaged insured property in the amount of $2,500, (iv) expediting expenses (defined as reasonable extra costs incurred after an insured loss to make temporary repairs and expedite the permanent repair of the damaged property) with a sublimit in the amount of $25,000, (v) off- site storage to insure the full replacement value of any property or equipment not stored on the Leased Property site with a sublimit of $150,000, and (vi) demolition expenses, removal of undamaged portion, and increased cost of construction due to operation of laws or codes with a sublimit of twenty-five percent (25%) of the amount of the physical loss or damage. c. Special Clauses. The builder's risk policy shall include (i) --------------- a 72 hour flood/windstorm/earthquake clause, (ii)unintentional errors and omissions clause, (iii) a requirement that the insurer pay losses within 60 days after receipt of an acceptable proof of loss, and (iv) an extension clause allowing the policy period to be extended up to 60 days without modification to the terms and conditions of the policy and payment of the premium on a pro-rata basis. d. Prohibited Exclusions. The builder's risk policy shall not --------------------- contain any (i) coinsurance provisions, (ii) exclusion for ensuing direct physical loss or damage resulting from freezing, (iii) exclusion for physical loss or damage covered under any guarantee or warranty arising out of an insured peril, or (iv) exclusion for resultant physical loss or damage caused by ordinary wear and tear, gradual deterioration, faulty workmanship, design or materials. e. Sum Insured. The builder's risk policy shall (i) be on a ----------- completed value form, (ii) insure 100% of the completed insurable value of the Building(s), (iii) value losses at replacement cost, without deduction for physical depreciation or obsolescence including custom duties, taxes and fees and (iv) insure loss or damage from earth movement and flood with separate sublimits of $15,000,000. f. Deductible. The builder's risk insurance may have a ---------- deductible not in excess of $5,000. (v) Delayed Startup Insurance. Delayed startup coverage insuring the ------------------------- Lessor and covering the Lessor's accrued and capitalized interest and Yield for a six month period as a result of loss or damage insured by the builder's risk insurance resulting in a delay in completion of the Building(s) beyond their anticipated date of completion. Such insurance shall (a) have a deductible of not greater than 10 days per occurrence during the Construction Term, (b) have an indemnity period not less than six months, (c) cover loss sustained when access to the Leased Property site is prevented due to an 7 insured peril at premises in the vicinity of the Leased Property site with a sublimit of $27,500, (d) cover loss sustained due to the action of a public authority preventing access to the Leased Property site due to imminent or actual loss or destruction arising from an insured peril at premises in the vicinity of the Leased Property site with a sublimit of $27,500, (e) not contain any form of a coinsurance provision or include a waiver of such provisions, (f) insure loss caused by damage to finished equipment or machinery while awaiting shipment at a supplier's premises, and (g) cover losses relating to real estate tax assessments, insurance expenses, architect's and engineer's fees to repair or replace lost work, legal and accounting fees, construction management fees, testing and permitting expenses, marketing and administration expenses and overhead. (vi) Endorsements. All policies of liability insurance required to ------------ be maintained by the Construction Agent shall be endorsed as follows. a. To name the Lessor as the loss payee with respect to property insurance; b. To name the Lessor, the Lenders and the Agent as additional insureds with respect to all liability insurance; c. To provide a severability of interests and cross liability clause; d. That the insurance shall be primary and not excess to or contributing with any insurance or self-insurance maintained by the Lessor or the additional insureds. (vii) Waiver of Subrogation. The Construction Agent hereby waives --------------------- any and every claim for recovery from the Lessor, the Lenders and the Agent for any and all loss or damage covered by any of the insurance policies to be maintained under this Agreement to the extent that such loss or damage is recovered under any such policy. If the foregoing waiver will preclude the assignment of any such claim to the extent of such recovery, by subrogation (or otherwise), to an insurance company (or other person), the Construction Agent (or other appropriate party) shall give written notice of the terms of such waiver to each insurance company which has issued, or which may issue in the future, any such policy of insurance (if such notice is required by the insurance policy) and shall cause each such insurance policy to be properly endorsed by the issuer thereof to, or to otherwise contain one or more provisions that, prevent the invalidation of the insurance coverage provided thereby by reason of such waiver. (b) Conditions. ---------- (i) Adjustment of Losses. Losses, if any, with respect to any Leased -------------------- Property under any damage policies required to be carried under this Section 2.9 shall be adjusted with the insurance companies, including the ----------- filing of appropriate proceedings, as follows: 8 (x) so long as no Construction Agency Event of Default shall have occurred and be continuing, and provided that the Construction Agent is required, or has agreed, to repair the damage or if the purchase option has been exercised, such losses will be adjusted by the Construction Agent, (y) if any Construction Agency Event of Default shall have occurred and be continuing or Construction Force Majeure Event declared, or if the Construction Agent is not required to, and has not agreed to, repair the damage, such losses shall be adjusted by the Lessor with the consent of the Construction Agent (which consent shall not be unreasonably withheld or delayed). The party which shall be entitled to adjust losses may appear in any proceeding or action to negotiate, prosecute, adjust or appeal any claim for any award, compensation or insurance payment on account of any Casualty at such party's reasonable request, and the other party shall participate in any such proceeding, action, negotiation, prosecution or adjustment. The Construction Agent may incur no expenses with respect to loss adjustment without the prior consent, not to be unreasonably withheld, of the Lessor. Adjustment expenses shall be funded through Advances. The parties hereto agree that this Agreement shall control the rights of the parties hereto in and to any such award, compensation or insurance payment relating to any Casualty affecting a Construction Land Interest. (ii) Application of Insurance Proceeds. All proceeds of insurance --------------------------------- maintained pursuant to this Section 2.9 on account of any damage or ----------- destruction of any Leased Property (or part thereof) subject to Construction shall be paid to Lessor, provided that (i) if no Construction Agency Event of Default shall have occurred and (ii) subject to Section ------- 3.4, the Construction Agent has undertaken to repair the damage and has --- demonstrated to the reasonable satisfaction of the Lessor that the application of such insurance proceeds (including, without limitation, delay in start up coverage), together with the remaining Commitment, are sufficient to cause the construction to be completed on or prior to the Scheduled Construction Termination Date, such funds shall be held by Lessor in a segregated account and disbursed to the Construction Agent to pay costs incurred by the Construction Agent to effect the repair of the Leased Property. If the Construction cannot be completed on or prior to the Scheduled Construction Termination Date, the parties agree to discuss the issue of disbursement of insurance proceeds to the Construction Agent in good faith and after such discussion the Lessor shall make a determination in the exercise of its sole discretion. Any proceeds of insurance paid to Lessor pursuant in this Section 2.9, not used to repair the Leased Property ----------- and held by Lessor shall be applied to the account of Construction Agent to reduce the Lease Balance. (iii) Additional Insurance. Any additional insurance obtained by the -------------------- Construction Agent or the Lessor shall provide that it shall not interfere with or in any way limit the insurance described in this Section 2.9 or ----------- increase the amount of any premium payable with respect to any insurance described in such Section. The proceeds of any such additional insurance will be for the account of the party maintaining such additional insurance. 9 (iv) Payment of Premiums. The Construction Agent shall cause to be ------------------- paid (including, in the case of insurance required under this Section 2.9, ----------- with the proceeds of Advances and capitalized as part of Permitted Lease Balance), all premiums for the insurance required hereunder. The Construction Agent shall renew or replace, or cause to be renewed or replaced, each insurance policy required hereunder prior to the expiration date thereof for the duration of the Construction Term. (v) Policy Cancellation and Change. All policies of insurance ------------------------------ required to be maintained pursuant to this Section 2.9 shall be endorsed so ----------- that if at any time they are cancelled, or their coverage is reduced (by any party including the insured) so as to affect the interests of the Lessor, such cancellation or reduction shall not be effective as to the Lessor for 30 days, except for non-payment of premium which shall be for 10 days, after receipt by the Lessor of written notice from such insurer of such cancellation or reduction. (vi) Miscellaneous Policy Provisions. All property damage and ------------------------------- delayed startup insurance policies, (i) shall not include any annual or term aggregate limits of liability or clause requiring the payment of additional premium to reinstate the limits after loss except for insurance covering the perils of flood, earth movement, sabotage and terrorism, (ii) shall include the Lessor as a named insured as its interest may appear, and (iii) shall include a clause requiring the insurer to make final payment on any claim within 60 days after the submission of proof of loss and its acceptance by the insurer. (vii) Separation of Interests. All policies shall insure the ----------------------- interests of the Lessor regardless of any breach or violation by the Construction Agent or any other Person of warranties, declarations or conditions contained in such policies, any action or inaction of the Construction Agent or others, or any foreclosure relating to the Leased Property or any change in ownership of all or any portion of the Leased Property. (viii) Acceptable Policy Terms and Conditions. All policies of -------------------------------------- insurance required to be maintained pursuant to this Section 2.9 shall ----------- contain terms and conditions reasonably acceptable to the Lessor. (c) Evidence of Insurance. On the related Construction Commencement Date --------------------- and on an annual basis at least 10 days prior to each policy anniversary, the Construction Agent shall furnish the Lessor with certificates of insurance or binders, in a form acceptable to the Lessor, evidencing all of the insurance required by the provisions of this Section 2.9. Such certificates of ----------- insurance/binders shall be executed by each insurer or by an authorized representative of each insurer. Such certificates of insurance/binders shall identify underwriters, the type of insurance, the insurance limits and the policy term and shall specifically list the special provisions enumerated for such insurance required by this Section 2.9. Upon request, the Construction ----------- Agent will promptly furnish the Lessor with copies of all insurance policies, binders and cover 10 notes or other evidence of such insurance relating to the insurance required to be maintained hereunder. (d) Reports. Concurrently with the furnishing of the certification ------- referred to in paragraph (c), the Construction Agent shall furnish the Lessor ------------- with a report of an independent broker, signed by an officer of the broker, stating that in the opinion of such broker, the insurance then carried or to be renewed is in accordance with the terms of this Section 2.9. In addition the ----------- Construction Agent will advise the Lessor in writing promptly of any default in the payment of any premium and of any other act or omission on the part of the Construction Agent which may invalidate or render unenforceable, in whole or in part, any insurance being maintained by the Construction Agent pursuant to this Section 2.9. - ----------- (e) No Duty of Lessor to Verify or Review. No provision of this Section ------------------------------------- ------- 2.9 or any provision of this Agreement or the other Operative Documents shall - --- impose on the Lessor any duty or obligation to verify the existence or adequacy of the insurance coverage maintained by the Construction Agent, nor shall the Lessor be responsible for any representations or warranties made by or on behalf of the Construction Agent to any insurance company or underwriter. Any failure on the part of the Lessor to pursue or obtain the evidence of the insurance required by this Agreement from the Construction Agent and/or failure of the Lessor to point out any non-compliance of such evidence of insurance shall not constitute a waiver of any of the insurance requirements in this Agreement. Notwithstanding anything herein to the contrary, the Construction Agent shall not be responsible for the payment of any insurance deductible amounts. ARTICLE III THE BUILDINGS III.1. Amendments; Modifications. The Construction Agent may, subject to ------------------------- the conditions, restrictions and limitations set forth herein and in the Operative Documents (but not otherwise), at any time during the term hereof revise, amend or modify the Plans and Specifications and the related Construction Documents without the consent of the Lessor; provided, however, -------- ------- that the Lessor's prior written consent will be required in the following instances: (x) such revision, amendment or modification by its terms would result in the Completion Date of the Buildings occurring after the Scheduled Construction Termination Date, or (y) such revision, amendment or modification would result in the cost for such Leased Property exceeding the then remaining Commitments, minus the then remaining costs for completing each other Leased ----- Property for which the Completion Date has not occurred, or increase the Construction Budget therefor, or (z) the aggregate effect of such revision, amendment or modification, when taken together with any previous or contemporaneous revision, amendment or modification to the Plans and Specifications for such Leased Property, 11 would be to reduce the Fair Market Sales Value of such Leased Property in a material respect when completed. III.2. Casualty and Condemnation. If at any time prior to the Completion ------------------------- Date with respect to any Building there occurs a Casualty or the Lessor or the Construction Agent receives notice of a Condemnation, then, in each case the Construction Agent shall promptly and diligently take all commercially reasonable and practical steps to cause the Construction of the related Building to be completed substantially in accordance with the Plans and Specifications and with the terms hereof, and cause the Completion Date to occur on or prior to the Scheduled Construction Termination Date. The Construction Agent shall use all insurance proceeds or Awards received by it with respect to such Casualty or Condemnation, as the case may be, to pay the construction costs incurred in connection with such rebuilding or restoration. The Lessor shall make all insurance proceeds or Awards received with respect to such Casualty or Condemnation available to the Construction Agent to reimburse the Construction Agent for, or to pay, all construction costs incurred in connection with such rebuilding or restoration. To the extent that such insurance proceeds are insufficient to pay such construction costs, such construction costs shall be paid with the proceeds of Advances made pursuant to the Master Agreement. In the event that Lessor does not make such insurance proceeds or Advances available, then the provisions of Section 5.3 shall apply to the related Leased ----------- Property. Notwithstanding the foregoing, if the Casualty or Condemnation constitutes a Construction Force Majeure Event, then the provisions of Section ------- 3.4 shall apply. - --- III.3. Indemnity. During the Construction Term for each Leased Property, --------- the Construction Agent agrees to assume liability for, and to indemnify, protect, defend, save and hold harmless the Lessor on an After-Tax Basis, from and against, any and all Claims that may be imposed on, incurred by or asserted or threatened to be asserted, against the Lessor, whether or not the Lessor shall also be indemnified as to any such Claim by any other Person, in any way relating to or arising out of (i) any event, condition or circumstance within the Construction Agent's control,(ii) fraud, misapplication of funds, illegal acts or willful misconduct on the part of the Construction Agent, or (iii) any event described in paragraph (g) of Article XII of the Lease with respect to the Construction Agent. As used in clause (i) of the foregoing sentence, the term ---------- "within the Construction Agent's control" shall mean caused by or arising from any failure by any Obligor to comply with any of its obligations under the Operative Documents (including its insurance obligations), any representation or warranty by any Obligor in any of the Operative Documents being inaccurate, any negligence or wilful misconduct of any Obligor, or any claim by any third party against the Lessor based upon the action or inaction of or by any Obligor; provided, however, that if such Claim is related to construction completion and - -------- ------- such Claim does not arise out of or result from events or circumstances described in the foregoing clause (ii) or (iii), the Construction Agent's ----------- ----- liability shall be limited to an amount equal to the Construction Failure Payment. Any Claims that are incurred by any Indemnified Party for which the Construction Agent is not obligated to indemnify pursuant to this Section 3.3 or ----------- the Master Agreement shall, if requested by the Agent by written notice to Lessor be capitalized, and result in an increase to the Funded Amounts related to the relevant Leased Property. The foregoing 12 indemnities are in addition to, and not in limitation of, the indemnities with respect to environmental claims set forth in Section 7.2 of the Master Agreement. The provisions of Section 7.3 of the Master Agreement shall apply to any amounts that the Construction Agent is requested to pay pursuant to this Section 3.3. - ------------ III.4. Construction Force Majeure Events. If a Construction Force Majeure --------------------------------- Event that results in, or could reasonably be expected to result in, a Force Majeure Loss (including any losses that result from a Construction Force Majeure Event that prevents, or could reasonably be expected to prevent, the Construction Agent from completing Construction prior to the Scheduled Construction Termination Date) occurs, the Construction Agent shall promptly provide the Lessor with written notice thereof within ten (10) Business Days of the Construction Agent's knowledge of the occurrence thereof (the "Construction ------------ Force Majeure Declaration"). Upon receipt of the Construction Force Majeure - ------------------------- Declaration, Lessor and the Construction Agent shall consult with each other as to what steps, if any, are to be taken to remediate such Construction Force Majeure Event, including consulting as to the appropriateness of an extension of the Scheduled Construction Termination Date. The Construction Agent shall take all reasonable and practical steps to minimize the disruption of the construction process and all steps reasonably necessary to prevent further damage arising from such Construction Force Majeure Event. The Construction Agent shall be entitled to reimbursement from Lessor for any costs directly related to minimizing the disruption and to preventing further damage of such Construction Force Majeure Event through the proceeds of Fundings pursuant to, and subject to the terms and conditions of, the Master Agreement. The Construction Agent shall, within thirty (30) days of the delivery of the Construction Force Majeure Declaration, submit to the Lessor a budget detailing the costs that would be incurred in remediating such Construction Force Majeure Event and a schedule for effecting the same. The Construction Agent will commence such remediation only upon receipt of written authorization from the Lessor to do so, which authorization (or denial thereof) shall be given by written notice to Construction Agent not later than fifteen (15) Business Days after Lessor's receipt of the budget referred to in the preceding sentence. The Lessor in its sole discretion may elect to continue Construction and make Advances for such remediation or terminate this Agreement with respect to the affected Leased Property. If the Lessor elects to terminate this Agreement with respect to the affected Leased Property, subject to Construction Agent's right to purchase such Leased Property in accordance with Section 5.5 hereof, the ----------- Construction Agent shall within thirty (30) days of receipt of written notice of termination return the affected Leased Property to the Lessor in accordance with the procedures set forth in Section 5.6 and pay to the Lessor the Construction ----------- Failure Payment, in which event, Section 5.6 shall be applicable, or, if the ----------- Construction Agent exercises the Construction Default Remarketing Option, Section 5.7 shall be applicable. - ----------- In the event the Lessor elects to continue Construction after receipt of a Construction Force Majeure Declaration, the Lessor shall make available to the Construction Agent, so long as no Construction Agency Event of Default shall have occurred and be continuing, all insurance proceeds payable to the Lessor with respect to such event to the extent necessary to remediate such event. 13 ARTICLE IV PAYMENT OF FUNDS IV.1. Funding of Property Acquisition Costs and Property Buildings Costs. ------------------------------------------------------------------ (a) In connection with the acquisition or lease of any Land and during the course of the construction of the Buildings on any Land, the Construction Agent may request that the Lessor advance funds for the payment of acquisition, transaction and closing costs or property improvement costs, and the Lessor will comply with such request to the extent provided for under, and subject to the conditions, restrictions and limitations contained in, the Master Agreement and the other Operative Documents. (b) The proceeds of any funds made available to the Lessor to pay acquisition, transaction and closing costs or improvement costs shall be made available to the Construction Agent in accordance with the Funding Request relating thereto and the terms of the Master Agreement. The Construction Agent will use such proceeds only to pay the acquisition, transaction and closing costs or improvement costs for Leased Properties set forth in the Funding Request relating to such funds. ARTICLE V CONSTRUCTION AGENCY EVENTS OF DEFAULT V.1. Construction Agency Events of Default. If any one or more of the ------------------------------------- following events (each a "Construction Agency Event of Default") shall occur and ------------------------------------ be continuing: (a) the Construction Agent fails to apply any funds paid by, or on behalf of, the Lessor to the Construction Agent for the acquisition or lease of the Land and the construction of the Buildings to the payment of acquisition, transaction and closing costs or improvements costs for such Leased Property; (b) subject to Construction Force Majeure Events, the Construction Commencement Date with respect to any Leased Property shall fail to occur for any reason on or prior to the date that is one year after the Closing Date with respect to such Leased Property; (c) the Completion Date with respect to any Leased Property shall fail to occur for any reason on or prior to the earlier of the Funding Termination Date and the Scheduled Construction Termination Date for such Leased Property (as such Scheduled Construction Termination Date may have been extended pursuant to Section 3.4); ----------- 14 (d) any Event of Default shall have occurred and be continuing; or (e) the Construction Agent shall fail to observe or perform in any material respect any term, covenant or condition of this Agreement (except those specified in clauses (a) through (d) above), and such failure shall ----------- --- remain uncured for a period of thirty (30) days after notice thereof to the Construction Agent, except that such thirty (30) day period shall be automatically extended for such additional period of time as is reasonably necessary to cure such default, if such default is capable of being cured but cannot, with reasonable diligence, be cured within such thirty (30) day period, provided that (i) the Construction Agent is in the process of -------- diligently curing such default and (ii) such period shall not be extended for more than 120 days; then, in any such event (but subject to Section 5.3), the Lessor may, in ----------- addition to the other rights and remedies provided for in this Article, immediately terminate this Agreement as to any Leased Property or Properties or all of the Leased Properties, separately, successively or concurrently (all in Lessor's sole discretion) by giving the Construction Agent written notice of such termination, and upon the giving of such notice, this Agreement shall terminate as to such Leased Property or Properties or all of the Leased Properties (as the case may be) and all rights of the Construction Agent and, subject to the terms of the Operative Documents, all obligations of the Lessor under this Agreement with respect to such Leased Property or Properties or all of the Leased Properties (as the case may be) shall cease. The Construction Agent shall pay upon demand all reasonable costs, expenses, losses, expenditures and damages (including, without limitation, attorneys' fees and disbursements) actually incurred by or on behalf of the Lessor in connection with any Construction Agency Event of Default. V.2. Damages. The termination of this Agreement pursuant to Section 5.1 ------- ----------- shall in no event relieve the Construction Agent of its liability and obligations hereunder, all of which shall survive any such termination. V.3. Remedies; Remedies Cumulative. (a) If a Construction Agency Event ----------------------------- of Default shall have occurred and be continuing under Section 5.1(b), 5.1(c), -------------- ------ 5.1(d) (other than a Lease Event of Default under paragraph (g) of Article XII - ------ of the Lease) or 5.1(e) other than as a result of Construction Agent's ------ fraudulent or illegal acts, misapplication of funds or willful misconduct, then, in each case, the Lessor shall have all rights and remedies available under the Operative Documents or available at law, equity or otherwise, Lessor shall have the right to terminate this Agreement by giving Construction Agent written notice of such termination, and upon the giving of such notice, all rights and all obligations of the Construction Agent under this Agreement shall cease, except for such rights and obligations as by their terms are to continue beyond such termination, including Section 5.6(f) hereof and Lessor shall have the -------------- right to require Construction Agent to pay immediately upon receipt of notice from Lessor the Construction Failure Payment for all of the Construction Land Interests; provided that the Construction Agent has the option to purchase the -------- Leased Property in accordance with Section 5.5 hereof and the ----------- 15 Construction Agent shall have the option to cause the Leased Property to be remarketed in accordance with Section 5.7 hereof. ---------- In the event Construction Agent does not purchase the Leased Property pursuant to the terms hereof or the Construction Agent does not cause the Leased Property to be remarketed in accordance with Section 5.7 hereof, the related ----------- Lessee(s) shall return the Leased Property to Lessor within ten (10) Business Days in accordance with Section 5.6 hereof and Lessor shall have the right to ----------- sell the Leased Property to an unaffiliated third party and to require Construction Agent to pay to Lessor, immediately upon receipt of the termination notice, cash in an amount equal to the Construction Failure Payment for all of the Construction Land Interests. The Agent shall distribute the Land Proceeds derived from any such sale first, to the Lessor in an amount of the difference between (i) the Land Acquisition Cost and (ii) the Land Construction Failure Payment received by the Agent pursuant to the preceding sentence of this Section ------- 5.3(a), second, to the extent the Construction Agent has paid the Land - ------ Construction Failure Payment due to the Agent pursuant to the preceding sentence of this Section 5.3(a), to the Construction Agent to reimburse it to the extent -------------- of its payment of such amount, third, to the Lessor in an amount equal to the ----- remaining unpaid portion of the related Land Acquisition Cost and fourth, to the ------ Construction Agent, or to the Person or Persons otherwise lawfully entitled thereto, in an amount equal to the remaining proceeds, if any. The Agent shall distribute the Building Proceeds derived from any such sale first, to the Lessor in an amount of the difference between (i) the Permitted Lease Balance minus the Land Acquisition Cost and (ii) the Building Construction Failure Payment, if any, received by the Agent pursuant to the preceding sentence of this Section ------- 5.3(a), second, to the extent the Construction Agent has paid the Building - ------ Construction Failure Payment due to the Agent pursuant to the preceding sentence of this Section 5.3(a), to the Construction Agent to reimburse it to the extent -------------- of its payment of such amount, and third, to the Lessor. ----- (b) If a Construction Agency Event of Default shall have occurred and be continuing under Sections 5.1(a) or 5.1(d) (as the result of an Event of Default --------------- ------ under paragraph (g) of Article XII of the Lease), Lessor shall have the right to terminate this Agreement by giving Construction Agent written notice of such termination, and upon the giving of such notice, all rights and all obligations of the Construction Agent under this Agreement shall cease, except for such rights and obligations as by their terms are to continue beyond such termination, including Section 5.6(f) hereof and Lessor shall have the right to -------------- require Construction Agent to pay immediately upon receipt of notice from Lessor the sum of (i) the Permitted Lease Balance then outstanding and (ii) an amount equal to all insurance proceeds paid to Construction Agent following the occurrence of any Construction Force Majeure Event which were not applied by the Construction Agent or are not required to reimburse the Construction Agent for Construction Costs incurred in connection with such Construction Force Majeure Event, to uses permitted by this Agreement (and which are not otherwise included in clause (i) of this sentence). In addition, but subject to the Construction ---------- Agent's purchase right under Section 5.5 and the Construction Agent's right to ----------- remarket pursuant to Section 5.7, the Lessor may satisfy the foregoing ----------- obligation by a sale of the Leased Property and the proceeds derived from any such sale, net of all sale costs, closing costs and carrying costs (including, without limitation, amounts expended by the Agent 16 or any Funding Party to insure, protect, maintain, operate the Leased Property, sales, transfer and real property taxes, brokers' fees, legal fees, the insurance costs, interest and Yield, and survey costs), shall be allocated between the Land Portion of such proceeds (the "Land Proceeds") and the Building ------------- Portion of such proceeds (the "Building Portion"). The Land Proceeds shall be ---------------- distributed first, to Lessor in the amount of the Land Acquisition Cost to the ----- extent not previously paid by the Construction Agent, second, to the extent the ------ Construction Agent has paid to the Lessor the Land Acquisition Cost, to the Construction Agent to reimburse it to the extent of its payment of the Land Acquisition Cost, but if no such payment was made to the Lessor, and third, to ----- the Lessor. The Building Proceeds shall be distributed first, to Lessor in the ----- amount of the Permitted Lease Balance minus the Land Acquisition Cost to the extent not previously paid by the Construction Agent, second, to the extent the ------ Construction Agent has paid to the Lessor the Permitted Lease Balance minus the Land Acquisition Cost, to the Construction Agent to reimburse it to the extent of its payment of the Permitted Lease Balance minus the Land Acquisition Cost, but if no such payment was made, to the Lessor, and third to the Lessor. The ----- Lessor shall have all the rights and remedies afforded Lessor by Applicable Law and the Operative Documents. If the Construction Agent does not purchase the Leased Property or exercise the Construction Default Remarketing Option pursuant to Section 5.7, it shall return the Leased Property to the Lessor within ten ----------- (10) Business Days of the declaration of the Construction Agency Event of Default in accordance with Section 5.6 hereof. ----------- (c) Remedies Cumulative. No failure to exercise and no delay in ------------------- exercising, on the part of the Lessor any right, remedy, power or privilege under this Agreement or under the other Operative Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in this Agreement and in the other Operative Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. V.4. Limitation on Construction Agent's Recourse Liability. Subject to the ----------------------------------------------------- last sentence of this Section 5.4, notwithstanding anything contained herein or ----------- in any other Operative Document to the contrary, upon the occurrence and during the continuance of a Construction Agency Event of Default with respect to any Leased Property described in Section 5.1(b), 5.1(c), 5.1(d) (other than a Lease -------------- ------ ------ Event of Default under paragraph (g) of Article XII of the Lease) or 5.1(e), the ------ aggregate maximum recourse liability of the Construction Agent with respect to such default to the Lessor or any Person claiming by, through or under the Lessor under the Operative Documents, shall be limited to the Construction Failure Payment for such Leased Property. The Construction Agent nonetheless acknowledges and agrees that (i) the Lessor shall be entitled to recover from the applicable Leased Property (including through any reletting and/or sale of such Leased Property or any portion thereof) the entire outstanding Permitted Lease Balance of such Leased Property (and, to the extent sales proceeds exceed the Permitted Lease Balance, amounts in excess of the Permitted Lease Balance as provided in Section 5.3(a) and (b) and Section 5.7 (g)), all accrued and unpaid -------------- --- ---------------- interest, accrued Yield and other amounts then due and owing to the Lessor under the Operative Documents and all other costs and expenses of the Lessor incurred in 17 connection with such Leased Property (including without limitation, any costs incurred in connection with the construction of the Building(s) and other improvements and/or any reletting or sale of such Leased Property or any portion thereof) from and after the date of such return and (ii) the foregoing recourse limitations shall not affect the Construction Agent's obligations pursuant to Section 3.3. If a Construction Agency Event of Default occurs due to the fraud, - ----------- misapplication of funds, illegal acts or wilful misconduct on the part of the Construction Agent or any event described in paragraph (g) of Article XII of the Lease, the Construction Agent shall be obligated to pay the Permitted Lease Balance as set forth herein. V.5. Construction Agent's Right to Purchase. If a Construction Agency -------------------------------------- Event of Default hereunder relates only to a specific Leased Property or specific Leased Properties but not all Leased Properties, the Construction Agent shall have the right, at its option, to cure such Construction Agency Event of Default by purchasing (a "Construction Purchase") such affected Leased Property --------------------- or Properties for the Leased Property Balance(s) therefor from the Lessor within five (5) Business Days of the delivery of the notice of termination referred to in Section 5.3 (a) or (b) in accordance with the terms and subject to the --------------- --- conditions, restrictions and limitations of Section 14.5 of the Lease, in which case no Construction Agency Event of Default shall be deemed to have occurred hereunder for the purposes of the other Operative Documents. V.6. Construction Return Procedures. In the case of any return of any ------------------------------ Leased Property to the Lessor pursuant to Section 3.4 or Article V hereof (other ----------- --------- than returns pursuant to Section 5.7 hereof)(a "Construction Return"), the ----------- ------------------- Construction Agent shall, at its cost and expense, do each of the following on or prior to the return date specified by the Lessor in a written notice to the Construction Agent given at least ten (10) Business Days prior thereto: (a) the Construction Agent shall, on or prior to the return date, execute and deliver to the Lessor (or to the Lessor's designee): (i) a limited warranty deed with respect to all of the interest of the Lessees and the Construction Agent in the Leased Property containing representations and covenants of grantor to the Lessor (or such other Person) solely regarding the absence of Liens (other than Lessor Liens and the Liens of the Operative Documents (other than Liens in favor of a Lessee or the Construction Agent)), (ii) an agreement granting easements and rights of way to such Leased Property as reasonably deemed necessary by the Lessor, (iii) a bill of sale without warranty (except as to the absence of liens other than Lessor Liens) with respect to all of the interest of the Lessee and the Construction Agent in all personalty and equipment financed by the Funding Parties and (iv) an assignment of such Construction Agent's entire interest in such Leased Property (which shall include an assignment of all such Construction Agent's right, title and interest in and to all awards, compensation and insurance proceeds payable in connection with any Casualty, Condemnation or Construction Force Majeure Event affecting such Leased Property and an assignment of leases of such Leased Property), in the case of the documents referred to in clauses (i), (ii) and (iv) in ---------- ---- ---- recordable form and otherwise in conformity with local custom and free and clear of any Liens other than Lessor Liens. 18 (b) the Construction Agent shall, on the construction return date, pay over to the Agent (as assignee of the Lessor) any awards, compensation and insurance previously received by the Construction Agent in connection with such Leased Property which have not been applied in connection with the Construction, repair or maintenance of the Leased Property except such amounts as may be necessary to reimburse the Construction Agent for expenditures incurred in connection with such Construction, repair or maintenance during the Construction Term which have not been reimbursed; (c) The Construction Agent shall execute and deliver to the Lessor a statement of termination of this Agreement and each of the other Operative Documents with respect to the affected Leased Property to be executed by the Funding Parties and delivered to the Construction Agent; (d) the Construction Agent shall, on or prior to the return date, vacate the Leased Property and transfer possession of such Leased Property to the Lessor or any Person designated by the Lessor, in each case by surrendering the same into the possession of the Lessor or such Person, as the case may be, free and clear of all Liens (other than Lessor Liens and the liens of the Operative Documents) in compliance with all Applicable Law (including Environmental Laws); (e) on or prior to the return date, the Construction Agent shall deliver to the Lessor or any Person designated by the Lessor copies of all Construction Documents, permits, licenses, books and records regarding the maintenance of such Leased Property and the Construction Agent's interest in such Leased Property, and a current copy of the Plans and Specifications; and (f) the Construction Agent shall take all actions reasonably requested by the Lessor to fully assign to the Lessor all of its rights and claims in, to and under, all of the Construction Documents, and all permits and other governmental authorizations related to such Leased Property or the Construction. V.7. Option to Remarket. Notwithstanding any provisions of this Agreement ------------------ and the Operative Documents to the contrary and subject to the fulfillment of each of the conditions set forth in this Section 5.7, the Construction Agent ----------- shall have the option to remarket the Leased Property with respect to which a Construction Agency Event of Default has occurred for the Lessor or with respect to which the Lessee shall be required to pay the Construction Failure Payment pursuant to Section 3.4 (the "Construction Default Remarketing Option"). The ----------- --------------------------------------- Construction Agent's effective exercise and consummation of the Construction Default Remarketing Option shall be subject to the due and timely fulfillment of each of the following provisions, the failure of any of which, unless waived in writing by the Lessor and the Lenders, shall render the Construction Default Remarketing Option and the Construction Agent's exercise thereof null and void, in which event, the Construction Agent shall not have any rights under this Section 5.7. - ----------- 19 (a) Not later than five Business Days after Lessor's service of the notice of termination referred to in Section 5.3(a) or (b) or the Lessor's denial of -------------- --- authorization to remediate any Construction Force Majeure Event under Section ------- 3.4, the Construction Agent shall give to the Lessor and the Agent written - --- notice of the Construction Agent's exercise of the Construction Default Remarketing Option. The date of such notice shall be the "CDRO Notice Date"; ---------------- (b) Not later than thirty (30) days after Lessor's service of the notice of termination referred to in Section 5.3(a) or (b) or the Lessor's denial of -------------- --- authorization to remediate any Construction Force Majeure Event under Section ------- 3.4, the Construction Agent shall deliver to the Lessor and the Agent an - --- environmental assessment of such Leased Property dated not earlier than forty- five (45) days prior to the date of delivery thereof. Such environmental assessment shall be prepared by an environmental consultant selected by the Required Funding Parties, shall be in form, detail and substance reasonably satisfactory to the Required Funding Parties, and shall otherwise indicate the environmental condition of such Leased Property to be the same as described in the related Environmental Audit. (c) The Construction Agent shall promptly provide any maintenance records relating to such Leased Property to the Lessor, the Agent and any potential purchaser upon request, and shall otherwise do all things necessary to deliver possession of such Leased Property to the potential purchaser. The Construction Agent shall allow the Lessor, the Agent and any potential purchaser access to any Leased Property for the purpose of inspecting the same. (d) On the ninetieth (90/th/) day (such date, or such later date as the Lessor may specify in writing, being the "CDRO Closing Date") after Lessor's ----------------- service of the notice of termination referred to in Section 5.3(a) or (b) or the -------------- --- Lessor's denial of authorization to remediate any Construction Force Majeure Event under Section 3.4, the Construction Agent shall surrender such Leased ----------- Property in accordance with Section 5.9 hereof. ----------- (e) In connection with any such sale of the Leased Property, the Construction Agent shall provide to the purchaser all customary "seller's" indemnities (taking into account the location and nature of the Leased Property), representations and warranties regarding title, absence of Liens (except Lessor Liens) and the condition of the Leased Property, including, without limitation, an environmental indemnity. The Construction Agent shall fulfill all of the requirements set forth in clause (b) of Section 14.5 of the Lease (mutatis mutandis, as if Construction Agent were a Lessee, purchasing the Leased Property in accordance with the provisions of Section 14.1 of the Lease), and such requirements are incorporated herein by reference. As to the Lessor, any such sale shall be made on an "as is, with all faults" basis without representation or warranty by the Lessor, other than the absence of Lessor Liens. (f) In connection with any such sale of such Leased Property, the Construction Agent shall pay from the proceeds of remarketing, all prorations, credits, costs and expenses of the sale of the Leased Property, whether incurred by the Lessor, any Lender, the Agent or the Construction Agent, including without limitation, the cost of all title insurance, survey, 20 environmental report, appraisal, transfer taxes, the Lessor's and the Agent's attorneys' fees, the Construction Agent's attorneys' fees, commissions, escrow fees, recording fees, and all applicable documentary and other transfer taxes. (g) The Construction Agent shall pay to the Agent immediately following the delivery of the termination notice pursuant to Section 5.3(a) or (b) or the -------------- --- Lessor's denial of authorization to remediate any Construction Force Majeure Event under Section 3.4, (or to such other Person as Agent shall notify ----------- Construction Agent in writing, or in the case of Supplemental Rent, to the Person entitled thereto) an amount equal to (i) in the case of the exercise of remedies under Section 5.3(a) or a payment due under Section 3.4, the -------------- ----------- Construction Failure Payment, or (ii) in the case of the exercise of remedies under Section 5.3(b), the Permitted Lease Balance, in the type of funds -------------- specified in Section 3.3 of the Lease. If the Construction Agent has exercised ----------- the Construction Default Remarketing Option, the following additional provisions shall apply: During the period commencing on the CDRO Notice Date, the Construction Agent shall, as nonexclusive agent for the Lessor, use commercially reasonable efforts to sell the Lessor's interest in the Leased Property and will attempt to obtain the highest purchase price therefor. All such marketing of the Leased Property shall be paid from the proceeds of remarketing. The Construction Agent promptly shall submit all bids to the Lessor and the Agent and the Lessor and the Agent will have the right to review the same and the right to submit any one or more bids. All bids shall be on an all-cash basis. In no event shall such bidder be the Construction Agent or any Subsidiary or Affiliate of the Construction Agent. The written offer must specify the CDRO Closing Date as the closing date. If, and only if, the selling price (net of closing costs and prorations, as reasonably estimated by the Agent)(the "Construction Offer ------------------ Price") is less than the Lease Balance at such time, then the Lessor or the - ----- Agent may, in its sole and absolute discretion, by notice to the Construction Agent, reject such offer to purchase, in which event the parties will proceed according to the provisions of Section 5.8 hereof. If neither the Lessor nor the ----------- Agent rejects such purchase offer as provided above, the closing of such purchase of the Leased Property by such purchaser shall occur on the CDRO Closing Date, contemporaneously with the Construction Agent's surrender of the Leased Property in accordance with Section 5.9 hereof, and the gross proceeds of ----------- the sale (after deduction, however, for any marketing, closing or other costs, prorations or commissions) shall be paid directly to the Agent (or the Lessor if the Funded Amounts have been fully paid). The Agent shall distribute the Land Proceeds derived from any such sale first, to the Lessor in an amount of the difference between (i) the Land Acquisition Cost and (ii) the Construction Failure Payment to the extent attributable to clause (i) of the definition thereof (the "Land Construction Failure Payment") received by the Agent pursuant --------------------------------- to clause (i) of the first sentence of this Section 5.7(g), second, to the ---------- -------------- extent the Construction Agent has paid the Land Construction Failure Payment due to the Agent pursuant to clause (i) of the first sentence of this Section ---------- ------- 5.7(g), to the Construction Agent to reimburse it to the extent of its payment of such amount, and third, to the Lessor. The Agent shall distribute the ----- Building Proceeds derived from any such sale first, to the Lessor in an amount of the difference between (i) the Permitted Lease Balance minus the Land Acquisition Cost and (ii) the Construction Failure Payment to the extent attributable to clause (ii) of the definition thereof (the "Building -------- Construction Failure Payment"), if any, received by the Agent pursuant to clause - ---------------------------- ------ (i) of the first sentence of this Section 5.7(g), - --- -------------- 21 second, to the extent the Construction Agent has paid the Building Construction Failure Payment due to the Agent pursuant to clause (i) of the first sentence of ---------- this Section 5.7(g), to the Construction Agent to reimburse it to the extent of -------------- its payment of such amount, and third, to the Lessor. The Construction Agent ----- shall not have the right, power or authority to bind the Lessor in connection with any proposed sale of the Leased Property. V.8. Rejection of Sale. Notwithstanding anything contained herein to the ----------------- contrary, if the Lessor or the Agent rejects the purchase offer for any Leased Property as provided in Section 5.7, then the Agent shall have an appraisal done ----------- of the Leased Property by an independent third party appraiser selected by the Agent, which appraiser shall determine the Fair Market Sales Value of the Leased Property in the condition in which such Leased Property exists at such time (the "Construction Appraised Value"). If (A) if the Construction Appraised Value ---------------------------- shall be equal to or greater than the Construction Offer Price, and the Lessor in its sole discretion so elects, or (B) the Construction Appraised Value shall be less than the Construction Offer Price, the Leased Property shall be sold pursuant to Section 5.7(g), and the proceeds of such sale shall be distributed, -------------- in accordance with Section 5.7. If the Construction Appraised Value shall be ----------- equal to or greater than the Construction Offer Price and the Lessor shall not have elected to sell the Leased Property pursuant to Section 5.7(g), (a) the -------------- Lessor shall refund to the Lessee the amount by which (x) (i) the Land Construction Failure Payment exceeds (ii) the amount by which (A) the Land Acquisition Costs exceeds (B) the Land Portion of the Construction Appraised Value and (y) (i) the Building Construction Failure Payment exceeds (ii) the amount by which (A) the Permitted Lease Balance minus the Land Acquisition Costs exceeds (B) the Building Portion of the Construction Appraised Value, and (b) the Lessor shall retain title to the Leased Property and shall retain all proceeds with respect to the Leased Property, free and clear of all claims of the Lessee and the Construction Agent. V.9. Return of Leased Property. If the Lessor retains title to any Leased ------------------------- Property pursuant to Section 5.8 hereof, then the Construction Agent shall, on ----------- the CDRO Closing Date for such Leased Property (or such later date on which the Lessor shall elect not to sell the Leased Property pursuant to Section 5.7), and ----------- at its own expense, return possession of such Leased Property to the Lessor for retention by the Lessor and shall do all things required under Section 5.6 or, ----------- if the Construction Agent properly exercises the Construction Default Remarketing Option and fulfills all of the conditions of Section 5.7 hereof and ----------- neither the Lessor nor the Agent rejects such purchase offer pursuant to Section ------- 5.7, then the Construction Agent shall, on such CDRO Closing Date, and at its - --- own cost, transfer possession of the Leased Property to the independent purchaser thereof, in each case by surrendering the same into the possession of the Lessor or such purchaser, as the case may be, free and clear of all Liens other than Lessor Liens, in as good condition as it was on the CDRO Notice Date, and in compliance in all material respects with Applicable Law and deliver to the independent purchaser thereof the documents described in clauses (i) through ----------- (iii) of Section 5.6(a). In the case of a sale under Section 5.7, the - ----- -------------- ----------- Construction Agent shall, on and within a reasonable time before and after the CDRO Closing Date, cooperate with the Lessor and the independent purchaser of such Leased Property in order to facilitate the ownership and operation by such purchaser of such Leased Property after the 22 CDRO Closing Date, which cooperation shall include the following, all of which the Construction Agent shall do on or before the CDRO Closing Date or as soon thereafter as is reasonably practicable: providing all books and records, including copies of all Construction Documents, regarding the construction, maintenance and ownership of such Leased Property and all know-how, data and technical information relating thereto, providing a copy of the Plans and Specifications, granting or assigning all permits and licenses (to the extent assignable) necessary for the construction, operation and maintenance of such Leased Property, and cooperating in seeking and obtaining all necessary Governmental Action and taking all action necessary to fully assign and transfer all of its rights, claims and causes of action under all of the Construction Documents (including, without limitation, obtaining all necessary consents to such assignments). The obligations of the Construction Agent under this Section ------- 5.9 shall survive the expiration or termination of this Agreement. - --- V.10. Reimbursements. If (i) any deduction was made in the Construction -------------- Failure Payment due from the Construction Agent hereunder for amounts payable by the Construction Agent that the Construction Agent was legally required to pay after the end of the Construction Term pursuant to the definition of "Construction Failure Payment" and (ii) the Construction Agent shall be reimbursed in full or in part for such amount by any other Person (including, but not limited to, any insurer), the Construction Agent shall promptly pay the amount so reimbursed to the Lessor. V.11. Building Construction Failure Payment. The Building Construction ------------------------------------- Failure Payment shall include 89.9% of Project Costs (exclusive of Land Acquisition Costs) incurred by Lessor to complete or to further the Construction of the related Leased Property, whether incurred before or after the termination of the Construction Agent's rights and obligations under this Agreement with respect to such Leased Property. To the extent such costs are incurred by Lessor after the payment by the Construction Agent of the Building Construction Failure Payment, the Construction Agent shall make one or more additional payments upon demand to Lessor such that the sum of such payment, plus the Future Value of the amounts previously paid by the Construction Agent on account of the Building Construction Failure Payment equals 89.9% of the aggregate Project Costs (exclusive of Land Acquisition Cost) incurred to the date of calculation, provided that such additional paid amounts shall be included in the -------- Building Construction Failure Payment for purposes of calculating any amount required to be reimbursed to the Construction Agent from the proceeds of the sale of the related Leased Property pursuant to this Agreement. ARTICLE VI NO CONSTRUCTION AGENCY FEE VI.1. Lease as Fulfillment of Lessor's Obligations. All obligations, -------------------------------------------- duties and requirements imposed upon or allocated to the Construction Agent shall be performed by the Construction Agent at the Construction's Agent's sole cost and expense, and the Construction 23 Agent will not be entitled to, and the Lessor shall not have any obligation to pay, any agency fee or other fee or compensation, and the Construction Agent shall not be entitled to, and the Lessor shall not have any obligation to make or pay, any reimbursement therefor, it being understood that this Agreement is being entered into as consideration for and as an inducement to the Lessor entering into the Lease and the other Operative Documents. ARTICLE VII LESSOR'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS VII.1. Exercise of the Lessor's Rights. The Construction Agent hereby ------------------------------- acknowledges and agrees that the rights and powers of the Lessor under this Agreement have been assigned to, and may be exercised by, the Agent. VII.2. Lessor's Right to Cure Construction Agent's Defaults. The Lessor, ---------------------------------------------------- without waiving or releasing any obligation or Construction Agency Event of Default, may, upon prior written notice to the Construction Agent (but shall be under no obligation to), remedy any Construction Agency Event of Default for the account of the Construction Agent, and such costs and expenses shall be capitalized and shall result in an increase to the Funded Amounts related to the related Leased Property. All reasonable out of pocket costs and expenses so incurred (including actual and reasonable fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by the Lessor, shall be capitalized and shall result in an increase to the Funded Amounts related to the related Leased Property. ARTICLE VIII MISCELLANEOUS VIII.1. Notices. All notices, consents, directions, approvals, ------- instructions, requests, demands and other communications required or permitted by the terms hereof to be given to any Person shall be given in writing in the manner provided in, shall be sent to the respective addresses set forth in, and the effectiveness thereof shall be governed by the provisions of, Section 8.2 of the Master Agreement. VIII.2. Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the Lessor, the Construction Agent and their respective legal representatives, successors and permitted assigns. The Construction Agent shall not assign its rights or obligations hereunder without the prior written consent of the Lessor and the Agent. VIII.3. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF ------------- THE PARTIES UNDER THIS AGREEMENT SHALL BE 24 GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. VIII.4. Amendments and Waivers. Subject to Section 8.4 of the Master ---------------------- Agreement, the Lessor and the Construction Agent may from time to time, enter into written amendments, supplements or modifications hereto. VIII.5. Counterparts. This Agreement may be executed on any number of ------------ separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same agreement. VIII.6. Severability. Any provision of this Agreement which is prohibited ------------ or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. VIII.7. Headings and Table of Contents. The headings and table of ------------------------------ contents contained in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. VIII.8. Jurisdiction; Waivers. The Lessor and the Construction Agent --------------------- hereby acknowledge that the terms of Section 8.11 of the Master Agreement apply to this Agreement. 25 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. HUGHES SUPPLY, INC. By -------------------------------- Name: --------------------------- Title: -------------------------- ATLANTIC FINANCIAL GROUP, LTD. By: Atlantic Financial Managers, Inc., its General Partner By -------------------------------- Name: --------------------------- Title: -------------------------- S-1 EXHIBIT A Supplement to Construction Agency Agreement ------------------------------------------- SUPPLEMENT to Construction Agency Agreement, dated as of ______________, 200__, between ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership (the "Lessor"), and HUGHES SUPPLY, INC., a Florida corporation (in its capacity as - ------- construction agent, the "Construction Agent"). Capitalized terms used but not ------------------ otherwise defined herein shall have the meanings given them in the Construction Agency Agreement. The Lessor and the Construction Agent are parties to that certain Construction Agency Agreement, dated as of June 22, 2001 (as amended, supplemented or otherwise modified, the "Construction Agency Agreement"), ----------------------------- pursuant to which (i) the Lessor has appointed the Construction Agent as its sole and exclusive agent in connection with the identification and acquisition of Land and construction of the Buildings in accordance with the Plans and Specifications, and (ii) the Construction Agent has agreed, for the benefit of the Lessor, to cause the construction of the Buildings to be completed in accordance with the Plans and Specifications. Subject to the terms and conditions of the Construction Agency Agreement, the Lessor and the Construction Agent desire that the terms of the Construction Agency Agreement apply to the Land described in Schedule 1 and wish to execute ---------- this Supplement to provide therefor. NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: 1. The Construction Agent agrees to act as Construction Agent and to perform its obligations under the Construction Agency Agreement in connection with the completion of construction of the Building on the Land described in Schedule 1 in accordance with the Plans and Specifications for such Land. The - ---------- Construction Agent hereby represents and warrants to Lessor that the Construction Agent has heretofore delivered to Lessor a true, correct and complete copy of the Plans and Specifications for the Building on the Land described in Schedule 1 or, if not available on the date hereof, will deliver ---------- such Plans and Specifications as soon as available. 2. Each of the Lessor and the Construction Agent acknowledges and agrees that the development of the Land described in Schedule 1 and the construction of ---------- the Buildings thereon shall be governed by the terms of the Construction Agency Agreement. A-1 3. The anticipated construction budget relating to the construction and development of the Building on the Land described in Schedule 1 is $__________. ---------- The acquisition cost of the Land described in Schedule 1 is $___________. ---------- 4. This Supplement shall, upon its execution and delivery, constitute a part of the Construction Agency Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. HUGHES SUPPLY, INC. By --------------------------------- Name: Title: ATLANTIC FINANCIAL GROUP, LTD. By: Atlantic Financial Managers, Inc., its General Partner By --------------------------------- Name: Title: A-2 Schedule 1 to Supplement Description of Land Interest ---------------------------- EX-10.15 (C) 11 dex1015c.txt GUARANTY AGREEMENT - OPERATING LEASE EXHIBIT 10.15(c) ================================================================================ GUARANTY AGREEMENT from HUGHES SUPPLY, INC. Dated as of June 22, 2001 [OPERATING LEASE] ================================================================================ TABLE OF CONTENTS
Page SECTION 1. Guaranty............................................................................................. 1 SECTION 2. Bankruptcy........................................................................................... 2 SECTION 3. Continuing Guaranty.................................................................................. 2 SECTION 4. Reinstatement........................................................................................ 3 SECTION 5. Certain Actions...................................................................................... 3 SECTION 6. Application.......................................................................................... 3 SECTION 7. Waiver............................................................................................... 3 SECTION 8. Assignment........................................................................................... 4 SECTION 9. Miscellaneous........................................................................................ 4
GUARANTY AGREEMENT ------------------ THIS GUARANTY AGREEMENT, dated as of June 22, 2001 (as amended or otherwise modified from time to time, this "Guaranty"), is made by HUGHES SUPPLY, INC., a -------- Florida corporation ("Hughes" or "Guarantor"). ------ --------- W I T N E S S E T H: ------------------- WHEREAS, Guarantor, certain Subsidiaries of Hughes that are or may become party thereto, as Lessees, Atlantic Financial Group, Ltd., as Lessor, the financial institutions party thereto, as Lenders, and SunTrust Bank, as Agent, have entered into that certain Master Agreement, dated as of June 22, 2001 (as it may be modified, amended or restated from time to time as and to the extent permitted thereby, the "Master Agreement"; and, unless otherwise defined herein, ---------------- terms which are defined or defined by reference in the Master Agreement (including Appendix A thereto) shall have the same meanings when used herein as such terms have therein); and WHEREAS, it is a condition precedent to the Funding Parties consummating the transactions to be consummated on the Initial Closing Date that the Guarantor execute and deliver this Guaranty; and WHEREAS, it is in the best interests of the Guarantor that the transactions contemplated by the Master Agreement be consummated on the Initial Closing Date; and WHEREAS, this Guaranty, and the execution, delivery and performance hereof, have been duly authorized by all necessary corporate action of Guarantor; and WHEREAS, this Guaranty is offered by the Guarantor as an inducement to the Funding Parties to consummate the transactions contemplated in the Master Agreement, which transactions, if consummated, will be of benefit to Guarantor; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Guarantor, the Guarantor hereby agrees as follows: SECTION 1. Guaranty. Guarantor hereby unconditionally guarantees to the -------- Agent and the Funding Parties the full and prompt payment when due, whether by acceleration or otherwise, and at all times thereafter, and the full and prompt performance, of all of the Liabilities (as hereinafter defined), including rent, interest and earnings on any such Liabilities whether accruing before or after any bankruptcy or insolvency case or proceeding involving Guarantor, or any other Person and, if rent, interest or earnings on any portion of such obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, including such rent, interest and earnings as would have accrued on any such portion of such obligations if such case or proceeding had not commenced, and further agrees to pay all reasonable expenses (including reasonable attorneys' fees and legal expenses) actually paid or incurred by each of the Funding Parties in endeavoring to collect the Liabilities, or any part thereof, and in enforcing this Guaranty. Notwithstanding the foregoing, during the Construction Term for any Leased Property, only the Lessor shall be entitled to make a claim under this Guaranty for Liabilities related to such Leased Property. The term "Liabilities", as used herein, shall mean all of the ----------- following, in each case howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due: all amounts payable by the Lessees or the Construction Agent to the Agent and the Funding Parties under the Lease (including, without limitation, Basic Rent and Supplemental Rent), the Master Agreement, the Construction Agency Agreement or any other Operative Document; provided, however, that the Guarantor will not be obligated to pay to the Agent - -------- ------- and Funding Parties under this Guaranty any amounts greater than the Lessees and the Construction Agent would have had to pay to the Agent and the Funding Parties under the Lease, the Master Agreement, the Construction Agency Agreement and the other Operative Documents assuming that such documents were enforced in accordance with their terms (and without giving effect to any discharge or limitation thereon resulting or arising by reason of the bankruptcy or insolvency of a Lessee), plus all actual and reasonable costs of enforcing this Guaranty. By way of extension but not in limitation of any of its other obligations hereunder, Guarantor stipulates and agrees that if any foreclosure proceedings are commenced with respect to any Leased Property and result in the entering of a foreclosure judgment, any such foreclosure judgment, to the extent related to the Liabilities and payable to any of the Funding Parties, shall be treated as part of the Liabilities, and Guarantor unconditionally guarantees the full and prompt payment of such judgment. SECTION 2. Bankruptcy. Guarantor agrees that, in the event any ---------- bankruptcy, reorganization or insolvency proceeding shall be instituted by or against Guarantor and, if instituted against Guarantor, shall not be dismissed or stayed for a period of ninety (90) days, and if such event shall occur at a time when any of the Liabilities may not then be due and payable, Guarantor will pay to the Funding Parties forthwith the full amount which would be payable hereunder by Guarantor as if all Liabilities were then due and payable. SECTION 3. Continuing Guaranty. THIS GUARANTY SHALL IN ALL RESPECTS BE A ------------------- CONTINUING, ABSOLUTE AND UNCONDITIONAL GUARANTY OF PROMPT AND COMPLETE PAYMENT AND PERFORMANCE (AND NOT MERELY OF COLLECTION), AND SHALL REMAIN IN FULL FORCE AND EFFECT (NOTWITHSTANDING, WITHOUT LIMITATION, THE DISSOLUTION OF GUARANTOR) UNTIL THE TERMINATION OF THE COMMITMENTS AND THE FULL AND FINAL PAYMENT OF ALL OF THE LIABILITIES. 2 SECTION 4. Reinstatement. Guarantor further agrees that, if at any time ------------- all or any part of any payment theretofore applied to any of the Liabilities is or must be rescinded or returned for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of Guarantor or any Lessee), such Liabilities shall, for the purposes of this Guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application, and this Guaranty shall continue to be effective or be reinstated, as the case may be, as to such Liabilities, all as though such application had not been made. SECTION 5. Certain Actions. The Funding Parties may, from time to time at --------------- their discretion and without notice to Guarantor (but subject to the terms of the other Operative Documents), take any or all of the following actions without impairing Guarantor's obligations hereunder: (a) retain or obtain (i) a security interest in any Lessee's interests in the Lease or the Leased Property and (ii) a lien or a security interest hereafter granted by any Person upon or in any property, in each case to secure any of the Liabilities or any obligation hereunder; (b) retain or obtain the primary or secondary obligation of any obligor or obligors, in addition to the Guarantors, with respect to any of the Liabilities; (c) extend or renew for one or more periods (regardless of whether longer than the original period), or release or compromise any obligation of Guarantor hereunder or any obligation of any nature of any other obligor (including, without limitation, the Lessor and the Lessees) with respect to any of the Liabilities; (d) release or fail to perfect its Lien upon or security interest in, or impair, surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Liabilities or any obligation hereunder, or extend or renew for one or more periods (regardless of whether longer than the original period) or release or compromise any obligations of any nature of any obligor with respect to any such property; and (e) resort to Guarantor for payment of any of the Liabilities, regardless of whether the Agent or any other Person shall have resorted to any property securing any of the Liabilities or any obligation hereunder or shall have proceeded against any Lessee or any other obligor primarily or secondarily obligated with respect to any of the Liabilities (all of the actions referred to in this clause (e) being hereby expressly waived by Guarantor). ---------- SECTION 6. Application. Any amounts received by any Funding Party from ----------- whatever source on account of the Liabilities shall be applied by it toward the payment of such of the Liabilities, and in such order of application, as is set forth in the Operative Documents. SECTION 7. Waiver. Guarantor hereby expressly waives: (a) notice of the ------ acceptance of this Guaranty; (b) notice of the existence or creation or non- payment of all or any of the Liabilities; (c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever; and (d) all diligence in collection of or realization upon the Liabilities or any thereof, any obligation hereunder, or any security for or guaranty of any of the foregoing. SECTION 8. Assignment. Subject to Section 6 of the Master Agreement, each ---------- Funding Party may, from time to time, whether before or after any discontinuance of this Guaranty, at its 3 sole discretion and without notice to Guarantor, assign or transfer any or all of its portion of the Liabilities or any interest therein; and, notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof, such Liabilities shall be and remain Liabilities for the purposes of this Guaranty, and each and every such immediate and successive assignee or transferee of any of the Liabilities or of any interest therein shall, to the extent of such assignee's or transferee's interest in the Liabilities, be entitled to the benefits of this Guaranty to the same extent as if such assignee or transferee were such Funding Party. SECTION 9. Miscellaneous. No delay in the exercise of any right or remedy ------------- shall operate as a waiver thereof, and no single or partial exercise of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy; nor shall any modification or waiver of any of the provisions of this Guaranty be binding upon any Funding Party except as expressly set forth in a writing duly signed and delivered on its behalf. No action permitted hereunder shall in any way affect or impair any Funding Party's rights or Guarantor's obligations under this Guaranty. For the purposes of this Guaranty, Liabilities shall include all of the obligations described in the definition thereof, notwithstanding any right or power of any Lessee or the Lessor or anyone else to assert any claim or defense (other than final payment or full performance) as to the invalidity or unenforceability of any such obligation, and no such claim or defense shall affect or impair the obligations of Guarantor hereunder. Guarantor hereby acknowledges that there are no conditions to the effectiveness of this Guaranty. This Guaranty shall be binding upon Guarantor and upon Guarantor's successors and permitted assigns; and all references herein to Guarantor shall be deemed to include any successor or successors thereof, whether immediate or remote, to such Person; provided that Guarantor shall not assign its -------- obligations hereunder without the prior written consent of the Funding Parties. Wherever possible each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Guaranty shall be prohibited by or invalid thereunder, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. Guarantor: (a) submits for itself and its property in any legal action or proceeding relating to this Guaranty, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of Florida, the courts of the United States of America for the Middle District of Florida, and appellate courts from any thereof; (b) consents that any such action or proceedings may be brought to such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; and (c) agrees that nothing herein shall affect the right to effect service of process in any manner 4 permitted by law or shall limit the right of the Funding Parties to sue in any other jurisdiction. All notices, demands, declarations, consents, directions, approvals, instructions, requests and other communications required or permitted by this Guaranty shall be in writing and shall be deemed to have been duly given when addressed to the appropriate Person and delivered in the manner specified in Section 8.2 of the Master Agreement. THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF FLORIDA, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. 5 IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. HUGHES SUPPLY, INC. By:_________________________________ Name Printed:____________________ Title:___________________________ GUARANTY OPERATING LEASE S-1 EX-10.15 (D) 12 dex1015d.txt APPENDIX A - OPERATING LEASE EXHIBIT 10.15(d) [OPERATING LEASE] APPENDIX A to the Operative Documents ----------------------- DEFINITIONS AND INTERPRETATION A. Interpretation. In each Operative Document, unless a clear contrary -------------- intention appears: (i) the singular number includes the plural number and vice versa; ---- ----- (ii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by the Operative Documents; (iii) reference to any gender includes each other gender; (iv) reference to any agreement (including any Operative Document), document or instrument means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of the other Operative Documents and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor; (v) reference to any Applicable Law or Requirement of Law means such Applicable Law or Requirement of Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any section or other provision of any Applicable Law or Requirement of Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) reference in any Operative Document to any Article, Section, ------- ------- Appendix, Schedule or Exhibit means such Article or Section thereof or -------- -------- ------- ------- ------- Appendix, Schedule or Exhibit thereto; -------- -------- ------- (vii) "hereunder", "hereof", "hereto" and words of similar import shall be deemed references to an Operative Document as a whole and not to any particular Article, Section, paragraph or other provision of such ------- ------- Operative Document; (viii) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; (ix) "or" is not exclusive; and (x) relative to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding". B. Accounting Terms. In each Operative Document, unless expressly ---------------- otherwise provided, all terms of an accounting character used in the Operative Documents shall be interpreted, all accounting determinations under the Operative Documents shall be made, and all financial statements required to be delivered under the Master Agreement shall be prepared, in accordance with GAAP. C. Conflict in Operative Documents. If there is any conflict between any ------------------------------- Operative Documents, each such Operative Document shall be interpreted and construed, if possible, so as to avoid or minimize such conflict but, to the extent (and only to the extent) of such conflict, the Master Agreement shall prevail and control. D. Legal Representation of the Parties. The Operative Documents were ----------------------------------- negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring any Operative Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof. E. Defined Terms. Unless a clear contrary intention appears, terms ------------- defined herein have the respective indicated meanings when used in each Operative Document. "Address" means with respect to any Person, its address set forth in ------- Schedule 8.2 to the Master Agreement or such other address as it shall have identified to the parties to the Master Agreement in writing in the manner provided for the giving of notices thereunder. "Adjusted LIBO Rate" means (1) with respect to each Rent Period for a LIBOR ------------------ Advance ending prior to the EBO Date, the rate obtained by dividing (A) LIBOR for such Rent Period by (B) a percentage equal to 1 minus the then stated ----- maximum rate (stated as a decimal) of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurodollar liabilities as defined in Regulation D (or against any successor category of liabilities defined in Regulation D) and (2) with respect to each Rent Period for a LIBOR Advance ending on or after the EBO Date, the higher of the Adjusted LIBO Rate in effect for the immediately preceding Rent Period and the Adjusted LIBO Rate, determined in accordance with the foregoing clause (1) ---------- for such Rent Period. "Advance" means a LIBOR Advance or a Base Rate Advance. ------- -2- "Affiliate" of any Person means any other Person directly or indirectly --------- controlling, controlled by, or under common control with, such Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by", and "under common control with") as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person. "After-Tax Basis" means (a) with respect to any payment to be received by --------------- an Indemnitee (which, for purposes of this definition, shall include any Tax Indemnitee), the amount of such payment supplemented by a further payment or payments so that, after deducting from such payments the amount of all Taxes (net of any current credits, deductions or other Tax benefits arising from the payment by the Indemnitee of any amount, including Taxes, for which the payment to be received is made) imposed currently on the Indemnitee by any Governmental Authority or taxing authority with respect to such payments, the balance of such payments shall be equal to the original payment to be received and (b) with respect to any payment to be made by any Indemnitee, the amount of such payment supplemented by a further payment or payments so that, after increasing such payment by the amount of any current credits or other Tax benefits realized by the Indemnitee under the laws of any Governmental Authority or taxing authority resulting from the making of such payments, the sum of such payments (net of such credits or benefits) shall be equal to the original payment to be made; provided, however, for the purposes of this definition, and for purposes of any - -------- ------- payment to be made to either a Lessee or an Indemnitee on an after-tax basis, it shall be assumed that (i) federal, state and local taxes are payable at the highest combined marginal federal and state statutory income tax rate (taking into account the deductibility of state income taxes for federal income tax purposes) applicable to corporations from time to time and (ii) such Indemnitee or such Lessee has sufficient income to utilize any deductions, credits (other than foreign tax credits, the use of which shall be determined on an actual basis) and other Tax benefits arising from any payments described in clause (b) ---------- of this definition. "Agent" means SunTrust Bank, a Georgia banking corporation, in its capacity ----- as agent under the Master Agreement and the Loan Agreement. "Alterations" means, with respect to any Leased Property, fixtures, ----------- alterations, improvements, modifications and additions to such Leased Property. "Amortization Amount" for any Payment Date (i) occurring prior to the EBO ------------------- Date, means $0 and (ii) occurring on or after the EBO Date, means the Basic Rent payable on such Payment Date, minus the interest on the Loans accrued and unpaid ----- as of such Payment Date, minus the Yield accrued and unpaid as of such Payment ----- Date. -3- "Applicable Facility Fee Percentage" shall mean the percentage designated ---------------------------------- below based on Hughes' Leverage Ratio for the most recently ended fiscal quarter for which financial statements have been delivered pursuant to Section 5.7(a) or (b) of the Master Agreement: ------------------------------------------------------------------------ Leverage Ratio Applicable Facility Fee Percentage: ------------------------------------------------------------------------ Less than 0.4:1.0 0.150% ------------------------------------------------------------------------ Greater than or equal to 0.4:1.0 but less than 0.45:1.0 0.175% ------------------------------------------------------------------------ Greater than or equal to 0.45:1.0 but less than 0.5:1.0 0.20% ------------------------------------------------------------------------ Greater than or equal to 0.5:1.0 but less than 0.55:1.0 0.25% ------------------------------------------------------------------------ Greater than or equal to 0.55:1.0 0.30% ------------------------------------------------------------------------ provided, however, that: - -------- ------- (a) The Applicable Facility Fee Percentage in effect as of the date of execution and delivery of the Master Agreement is 0.20% for the Commitments, and such percentage shall remain in effect until such time as the Applicable Facility Fee Percentage may be adjusted as hereinafter provided; and (b) Adjustments, if any, to the Applicable Facility Fee Percentages based on changes in the ratios set forth above shall be made and become effective (i) on the first day of the fiscal quarter immediately following delivery of the financial statements required pursuant to Section 5.7(b) of the Master Agreement and (ii) on the first day of the second fiscal quarter immediately following the last day of any fiscal year of Hughes. "Applicable Law" means all applicable laws (including Environmental Laws), -------------- rules, regulations (including temporary and final income tax regulations), statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by, any Governmental Authority, and applicable judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator or other administrative, judicial or quasi-judicial tribunal or agency of competent jurisdiction (including those pertaining to health, safety or the environment (including, without limitation, wetlands) and those pertaining to the construction, use or occupancy of any Leased Property). "Applicable Margin" shall mean the percentage designated below based on ----------------- Hughes' Leverage Ratio for the most recently ended fiscal quarter for which financial statements have been delivered pursuant to Section 5.7(a) or (b) of the Master Agreement: -4- -------------------------------------------------------------------------- Leverage Ratio Applicable Margin: -------------------------------------------------------------------------- Less than 0.4:1.0 1.025% -------------------------------------------------------------------------- Greater than or equal to 0.4:1.0 1.125% but less than 0.45:1.0 -------------------------------------------------------------------------- Greater than or equal to 0.45:1.0 1.375% but less than 0.5:1.0 -------------------------------------------------------------------------- Greater than or equal to 0.5:1.0 1.500% but less than 0.55:1.0 -------------------------------------------------------------------------- Greater than or equal to 0.55:1.0 1.7500% -------------------------------------------------------------------------- provided, however, that: - -------- ------- (a) The Applicable Margin in effect as of the date of execution and delivery of the Master Agreement is 1.375%, and such percentage shall remain in effect until such time as the Applicable Margin may be adjusted as hereinafter provided; (b) Adjustments, if any, to the Applicable Margin based on changes in the ratios set forth above shall be made and become effective (i) on the first day of the fiscal quarter immediately following delivery of the financial statements required pursuant to Section 5.7(b) of the Master Agreement and (ii) on the first day of the second fiscal quarter immediately following the last day of any fiscal year of Hughes; and (c) during the Construction Period, the Applicable Margin shall be the Applicable Margin designated in the table above, plus 0.125%. ---- "Appraisal" is defined in Section 3.1 of the Master Agreement. --------- "Appraiser" means an MAI appraiser reasonably satisfactory to the Agent. --------- "Architect" means, with respect to any Leased Property, the architect --------- engaged in connection with the construction of the related Building, if any, who may be an employee of the General Contractor for such Leased Property. "Architect's Agreement" means, with respect to any Leased Property, the --------------------- architectural services agreement, if any, between the Construction Agent (or a Lessee), in its capacity as agent for Lessor, and the related Architect. -5- "Asbestos Laws" means the common law in all federal, state and local and ------------- foreign jurisdictions and other laws in such jurisdictions, and regulations, codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder, now or hereafter in effect relating to or concerning asbestos or asbestos-containing material, including without limitation, exposure to asbestos or asbestos-containing material. "Asset Value" shall mean, with respect to any property or asset of any ----------- Consolidated Company as of any particular date, an amount equal to the greater of (i) the then book value of such property or asset as established in accordance with GAAP, and (ii) the then fair market value of such property or asset as determined in good faith by the board of directors of such Consolidated Company. "Assignment and Assumption" means an assignment and assumption agreement, ------------------------- substantially in the form of Exhibit F to the Master Agreement. "Assignment of Lease and Rents" means, with respect to any Leased Property, ----------------------------- the Assignment of Lease and Rents, dated as of the related Closing Date, from the Lessor to the Agent, substantially in the form of Exhibit B to the Master Agreement. "Authority" means a development or similar authority of any state, county --------- or municipality that is an issuer of Bonds. "Award" means any award or payment received by or payable to the Lessor or ----- a Lessee on account of any Condemnation or Event of Taking (less the actual costs, fees and expenses, including reasonable attorneys' fees, incurred in the collection thereof, for which the Person incurring the same shall be reimbursed from such award or payment). "Bankruptcy Code" means The Bankruptcy Code of 1978, as amended and in --------------- effect from time to time (11 U.S.C. (S)101 et seq.). "Base Rate" means (with any change in the Base Rate to be effective as of --------- the date of change of either of the following rates) the higher of (i) the rate which the Agent publicly announces from time to time as its prime lending rate, as in effect from time to time, and (ii) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%) per annum. The Agent's ---- prime lending rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to customers; the Agent may make commercial loans or other loans at rates of interest at, above or below the Agent's prime lending rate. The Base Rate is determined daily. "Base Rate Advance" means that portion of the Funded Amount bearing ----------------- interest at the Base Rate. -6- "Base Term" means, with respect to any Leased Property, (a) the period --------- commencing on the related Closing Date and ending on June 22, 2019 or (b) such shorter period as may result from earlier termination of the Lease as provided therein. "Basic Rent" means the rent payable pursuant to Section 3.1 of the Lease, ---------- determined in accordance with the following: (1) each installment of Basic Rent payable on any Payment Date occurring prior to the EBO Date shall be in an amount equal to the sum of (A) the aggregate amount of Lender Basic Rent payable on such Payment Date, plus (B) the aggregate amount of Lessor Basic Rent payable ---- on such Payment Date, in each case, for the Leased Property or Properties that are then subject to the Lease and (2) each installment of Basic Rent payable on any Payment Date occurring on or after the EBO Date shall be in an amount equal to the product of (A) an amount equal to the product of (i) the Lease Balance as of the EBO Date, times (ii) the Rent Percentage as of such Payment Date, times ----- ----- (iii) 1/12 times (B) the positive rate of change, if any, in the Consumer Price ----- Index, using the month in which the EBO Date occurs as the base month. "Board" means the Board of Governors of the Federal Reserve System and any ----- successor thereto or to the functions thereof. "Board of Directors", with respect to a corporation, means either the Board ------------------ of Directors or any duly authorized committee of that Board which pursuant to the by-laws of such corporation has the same authority as that Board as to the matter at issue. "Bonds" means industrial revenue or development bonds issued by a state, ----- county or municipal authority in connection with any Leased Property. "Building" means, with respect to any Leased Property, the buildings, -------- structures and improvements located or to be located on the related Land, along with all fixtures used or useful in connection with the operation of such Leased Property, including, without limitation, all furnaces, boilers, compressors, elevators, fittings, pipings, connectives, conduits, ducts, partitions, equipment and apparatus of every kind and description now or hereafter affixed or attached to the Building, equipment, if any, financed by the Lessor and/or the Lenders and all Alterations (including all restorations, repairs, replacements and rebuilding of such buildings, improvements and structures) thereto (but in each case excluding trade fixtures and equipment financed other than by the Lessor or the Lenders). "Building Construction Failure Payment" is defined in Section 5.7(g) of the ------------------------------------- Construction Agency Agreement. "Building Cost" with respect to any Leased Property at any time, means the ------------- Leased Property Balance therefor at such time, minus the Land Acquisition Cost ----- for the Land related to such Leased Property. -7- "Building Portion" for any Leased Property means the ratio, expressed as a ---------------- percentage, of (i) the Fair Market Sales Value of the related Building to (ii) the Fair Market Sales Value of the Leased Property. "Building Proceeds" is defined in Section 5.3(b) of the Construction Agency ----------------- Agreement. "Business Day" means any day other than a Saturday, Sunday or other day on ------------ which banks are required or authorized to be closed for business in Atlanta, Georgia or Orlando, Florida and, if the applicable Business Day relates to a LIBOR Advance, on which trading is not carried on by and between banks in the London interbank market. "Capitalized Lease Obligations" shall mean all lease obligations which have ----------------------------- been or are required to be, in accordance with GAAP, capitalized on the books of the lessee. "Casualty" means an event of damage or casualty relating to all or part of -------- any Leased Property that does not constitute an Event of Loss. "Change in Control Provision" shall mean any term or provision contained in --------------------------- any indenture, debenture, note, or other agreement or document evidencing or governing Indebtedness of Hughes evidencing debt or a commitment to extend loans in excess of $5,000,000 which requires, or permits the holder(s) of such Indebtedness of Hughes to require that such Indebtedness of Hughes be redeemed, repurchased, defeased, prepaid or repaid, either in whole or in part, or the maturity of such Indebtedness of Hughes to be accelerated in any respect, as a result of a change in ownership of the capital stock of Hughes or voting rights with respect thereto. "Claims" means liabilities, obligations, damages, losses, demands, ------ penalties, fines, claims, actions, suits, judgments, proceedings, settlements, utility charges, costs, expenses and disbursements (including, without limitation, reasonable legal fees and expenses) of any kind and nature whatsoever. "Closing Date" means, with respect to each parcel of Land, the date on ------------ which (i) such Land is acquired by the Lessor pursuant to a Purchase Agreement or such Land is leased to the Lessor pursuant to a Ground Lease and (ii) the initial Funding occurs with respect to such Land under the Master Agreement. "Code" or "Tax Code" means the Internal Revenue Code of 1986, as amended. ---- -------- "Commitment" means as to each Funding Party, its obligation to make ---------- Fundings as investments in each Leased Property, or to make Loans to the Lessor, in an aggregate amount not to exceed at any one time outstanding the amount set forth for such Funding Party on Schedule 2.2 to the Master Agreement (as it may be adjusted from time to time pursuant to Section 6 of the Master Agreement). -8- "Commitment Percentage" means as to any Funding Party, at a particular --------------------- time, the percentage of the aggregate Commitments in effect at such time represented by such Funding Party's Commitment, as such percentage is shown for such Funding Party on Schedule 2.2 to the Master Agreement (as it may be adjusted from time to time pursuant to Section 6 of the Master Agreement). "Company" means Hughes. ------- "Completion Date" with respect to any Leased Property means the Business --------------- Day on which the conditions specified in Section 3.5 of the Master Agreement have been satisfied or waived with respect to such Leased Property. "Condemnation" means any condemnation, requisition, confiscation, seizure ------------ or other taking or sale of the use, occupancy or title to any Leased Property or any part thereof in, by or on account of any actual eminent domain proceeding or other action by any Governmental Authority or other Person under the power of eminent domain or any transfer in lieu of or in anticipation thereof, which in any case does not constitute an Event of Taking. A Condemnation shall be deemed to have "occurred" on the earliest of the dates that use is prevented or occupancy or title is taken. "Consolidated Amortization" shall mean, for any fiscal period of Hughes, ------------------------- amortization of the Consolidated Companies for such period determined on a consolidated basis in accordance with GAAP. "Consolidated Companies" shall mean, collectively, Hughes and all of its ---------------------- Subsidiaries. "Consolidated Depreciation" shall mean, for any fiscal period of Hughes, ------------------------- depreciation of the Consolidated Companies for such period determined on a consolidated basis in accordance with GAAP. "Consolidated EBITR" shall mean, for any fiscal period of Hughes, an amount ------------------ equal to Consolidated Net Income (Loss) for such period, plus, to the extent ---- deducted in determining Consolidated Net Income (Loss), (i) Consolidated Tax Expense for such period, (ii) Consolidated Interest Expense for such period, and (iii) Consolidated Rental Expense for such period. "Consolidated EBITDAR" shall mean, for any fiscal period of Hughes, an -------------------- amount equal to Consolidated Net Income (Loss) for such period plus to the ---- extent deducted in determining Consolidated Net Income (Loss), (i) Consolidated Interest Expense for such period, (ii) Consolidated Tax Expense for such period, (iii) Consolidated Depreciation for such period, (iv) Consolidated Amortization for such period and (v) Consolidated Rental Expense for such period. "Consolidated Interest Expense" shall mean, for any fiscal period of ----------------------------- Hughes, total interest expense (including without limitation, interest expense attributable to capitalized leases in -9- accordance with GAAP and any program costs incurred by Hughes in connection with sales of accounts receivable pursuant to a securitization program) of the Consolidated Companies for such period, determined on a consolidated basis. "Consolidated Net Income (Loss)" shall mean, for any fiscal period of ------------------------------ Hughes, the net income (or loss) of the Consolidated Companies for such period (taken as a single accounting period) determined on a consolidated basis in conformity with GAAP; provided that there shall be excluded therefrom (i) any items of gain or loss which were included in determining such Consolidated Net Income and were not realized in the ordinary course of business or the result of a sale of assets other than in the ordinary course of business; and (ii) the income (or loss) of any party accrued prior to the date such becomes a Subsidiary of Hughes or is merged into or consolidated with Hughes or any of its Subsidiaries, or such party's assets are acquired by any Consolidated Company, unless such party is acquired in a transaction accounted for as a pooling of interests. "Consolidated Net Worth" shall mean as of the date of determination, ---------------------- Hughes' total shareholder's equity of such date as determined in accordance with GAAP. "Consolidated Rental Expense" shall mean, for any fiscal period of Hughes, --------------------------- total operating lease expense of the Consolidated Companies for such period, determined on a consolidated basis in accordance with GAAP. "Consolidated Tax Expense" shall mean, for any fiscal period of Hughes, tax ------------------------ expense of the Consolidated Companies for such period determined on a consolidated basis in accordance with GAAP. "Construction" means, with respect to any Leased Property, the construction ------------ of the related Building pursuant to the related Plans and Specifications. "Construction Agency Agreement" means the Construction Agency Agreement, ----------------------------- dated as of June 22, 2001, between Hughes and the Lessor. "Construction Agency Event of Default" is defined in Section 5.1 of the ------------------------------------ Construction Agency Agreement. "Construction Agent" means Hughes in its capacity as construction agent ------------------ pursuant to the Construction Agency Agreement. "Construction Budget" is defined in Section 2.4 of the Construction Agency ------------------- Agreement. "Construction Conditions" means the conditions set forth in Section 3.5 of ----------------------- the Master Agreement. -10- "Construction Contract" means, with respect to any Leased Property, that --------------------- certain construction contract, if any, between a Lessee or the Construction Agent, as agent for Lessor, and a General Contractor for the Construction of the related Building, provided that such contract shall be assigned to the Lessor, and such assignment shall be consented to by such General Contractor, pursuant to an assignment of such construction contract substantially in the form of the Security Agreement and Assignment set forth as Exhibit C to the Master Agreement. "Construction Costs" means, with respect to any Leased Property, all costs ------------------ of acquisition or ground lease, as applicable, of the related Land, all closing, development and transaction costs related thereto, including fees, costs and expenses of attorneys, architects, surveyors, engineers, title and other insurance companies, appraisers and environmental firms, all costs of Construction, and all interest and Yield accrued on the Funded Amounts related to such Leased Property during the Construction Term therefor. "Construction Failure Payment" means, with respect to any Leased Property ---------------------------- and as of any date of calculation, an amount equal to (i) 100% of the related Land Acquisition Cost, plus (ii) the excess of (A) 89.9% of the Project Costs (exclusive of Land Acquisition Cost) incurred as of the date of calculation, minus (B) the sum of (without duplication) (1) the Present Value of any payments (other than Unrestricted Indemnification Amounts) payable by the Construction Agent under the Operative Documents that the Construction Agent is legally required to pay as of the date of calculation that have not been reimbursed as of the date of calculation to the extent such payments have been included in Project Costs and (2) the Future Value of any payments (other than Unrestricted Indemnification Amounts) previously paid by the Construction Agent under the Operative Documents that have not been reimbursed as of the date of calculation to the extent such payments have been included in Project Costs and (without duplication) any indemnification payments (other than Unrestricted Indemnification Amounts) made by the Construction Agent pursuant to Section 3.3 that are related to Construction completion; provided that it is understood that -------- the Lessor shall be entitled to receive amounts reimbursed to the Construction Agent in accordance with Section 5.10 of the Construction Agency Agreement. "Construction Force Majeure Declaration" is defined in Section 3.4 of the -------------------------------------- Construction Agency Agreement. "Construction Force Majeure Event" means, with respect to any Leased -------------------------------- Property during the Construction Term therefor: (a) an act of God arising after the related Closing Date, or (b) any change in any state or local law, regulation or other legal requirement arising after such Closing Date and relating to the use of the Land or the construction of a building on the Land, or -11- (c) strikes, lockouts, labor troubles, unavailability of materials, riots, insurrections or other events resulting from causes beyond a Lessee's (including a contractor's and subcontractor's) control which could not have been avoided or which cannot be remedied by the Construction Agent through the exercise of all commercially reasonable efforts or the expenditure of funds and, in the case of (b) above, the existence or potentiality of which was not known to and could not have been discovered prior to such Closing Date through the exercise of reasonable due diligence by the Construction Agent. "Construction Land Interest" means each parcel of Land for which the -------------------------- Completion Date has not yet occurred. "Construction Offer Price" is defined in Section 5.7 of the Construction ------------------------ Agency Agreement. "Construction Period" means, with respect to any Leased Property, the ------------------- Construction Term therefor. "Construction Purchase" is defined in Section 5.5 of the Construction --------------------- Agency Agreement. "Construction Term" means, with respect to any Leased Property, the period ----------------- commencing on the related Closing Date and ending on the related Construction Term Expiration Date, or such shorter period as may result from earlier termination of the Lease as provided therein. "Construction Term Expiration Date" means, with respect to any Leased --------------------------------- Property, the earliest of the following: (a) the related Completion Date, (b) the date on which the aggregate Funded Amounts equal the Commitments, and (c) the related Scheduled Construction Termination Date. "Contractual Obligation", as applied to any Person, means any provision of ---------------------- any securities issued by that Person or any indenture, mortgage, deed of trust, contract, undertaking, agreement, instrument or other document to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject (including, without limitation, any restrictive covenant affecting any of the properties of such Person). "Cross Default" with respect to any agreement relating to Indebtedness ------------- means the occurrence of any event (other than the non-payment of money) the effect of which is to permit -12- the holder of such Indebtedness to accelerate the maturity of such Indebtedness, but with respect to which such holder has not so accelerated such maturity. "Deed" means, with respect to any Land, a general warranty deed (or, if the ---- related Title Policy is acceptable to the related Lessee and the Agent, a special, limited warranty or trustee's deed), dated the applicable Closing Date, from the applicable Seller to the Lessor, conveying such Land. "Default" means any of the events specified in Article XII of the Lease, ------- without giving effect to any requirement for the giving of notice, for the lapse of time, or both, or for the happening of any other condition, event or act. "Discounted Lease Balance" as of any date of determination means the ------------------------ remaining payments of Basic Rent due from the Lessees during the Base Term discounted to present value as of the date of determination employing a discount rate equal to 10.52% per annum. --- ----- "Dollars" and the sign "$" means lawful money of the United States of ------- America. "EBO Date" means June 22, 2005. -------- "EITF 97-10" means FASB Emerging Issues Task Force Issue No. 97-10. ---------- "Engineer" means, with respect to any Leased Property, the engineer engaged -------- in connection with the construction of the related Building, if any, who may be an employee of the General Contractor for such Leased Property. "Engineer's Agreement" means, with respect to any Leased Property, the -------------------- engineering services agreement, if any, between the Construction Agent, in its capacity as agent for Lessor, and the related Engineer. "Environment" shall have the meaning set forth in 42 U.S.C. (S)9601(8) as ----------- defined on the date of the Master Agreement, and "Environmental" means pertaining or relating to the Environment. "Environmental Audit" means, with respect to each parcel of Land, a Phase I ------------------- Environmental Assessment and, if appropriate, a Phase II Environmental Assessment, dated no more than 180 days prior to the related Closing Date, by an environmental services firm satisfactory to the Funding Parties and Hughes. "Environmental Laws" means and include the Resource Conservation and ------------------ Recovery Act of 1976, (RCRA) 42 U.S.C. (S)(S) 6901-6987, as amended by the Hazardous and Solid Waste Amendments of 1984, the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. -13- (S)(S) 9601-9657, (CERCLA), the Hazardous Materials Transportation Act of 1975, 49 U.S.C. (S)(S) 1801-1812, the Toxic Substances Control Act, 15 U.S.C. (S)(S) 2601-2671, the Clean Air Act, 42 U.S.C. (S)(S) 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S)(S) 136 et seq., and all similar federal, state and local environmental laws, ordinances, rules, orders, statutes, decrees, judgments, injunctions, codes and regulations, and any other federal, state or local laws, ordinances, rules, codes and regulations, relating to the environment, human health or natural resources or the regulation or control of or imposing liability or standards of conduct concerning human health, the environment, Hazardous Materials or the clean-up or other remediation of any Leased Property, or any part thereof, as any of the foregoing may have been from time to time amended, supplemented or supplanted. "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended from time to time or any successor federal statute, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" shall mean, with respect to any Person, each trade or --------------- business (whether or not incorporated) which is a member of a group of which that Person is a member and which is under common control within the meaning of the regulations promulgated under Section 414 of the Tax Code. "Event of Default" means any event or condition designated as an "Event of ---------------- Default" in Article XII of the Lease. "Event of Loss" is defined in Section 10.1 of the Lease. ------------- "Event of Taking" is defined in Section 10.2 of the Lease. --------------- "Exchange Act" means the Securities Exchange Act of 1934, as amended from ------------ time to time, and any successor statute thereto. "Executive Officer" means, with respect to any Person, the Chief Executive ----------------- Officer, President, Vice Presidents (if elected by the Board of Directors of such Person), Chief Financial Officer, Treasurer, Secretary and any Person holding comparable offices or duties (if elected by the Board of Directors of such Person). "Fair Market Sales Value" means, with respect to any Leased Property or any ----------------------- portion thereof, the fair market sales value as determined by an independent appraiser chosen by the related Lessee and reasonably acceptable to the Lessor and the Agent (unless an Event of Default or a Construction Agency Event of Default has occurred and is continuing, in which case the appraiser shall be chosen by the Agent), that would be obtained in an arm's-length transaction between an informed and willing buyer (other than a lessee currently in possession) and an informed and willing seller, under no compulsion, respectively, to buy or sell and neither of which is related to the Lessor or any Lessee, for the purchase of such Leased Property. Such fair -14- market sales value shall be calculated as the value for such Leased Property, assuming, in the determination of such fair market sales value, that such Leased Property is in the condition and repair required to be maintained by the terms of the Lease (unless such fair market sales value is being determined for purposes of Section 13.1 of the Lease and except as otherwise specifically provided in the Lease or the Master Agreement, in which case this assumption shall not be made; it being understood that if such fair market sales value is being determined for purposes of the Construction Agency Agreement, such value shall be determined for the related Leased Property in its then state of completion, but assuming that all construction had been done in accordance with the standards required pursuant to the Construction Agency Agreement). "Federal Funds Rate" means, for any period, a fluctuating interest rate per ------------------ annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of Atlanta, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Fixed Charge Coverage Ratio" shall mean, as of any date of determination, --------------------------- the ratio of (A) Consolidated EBITDAR to (B) the sum of (i) Consolidated Interest Expense plus (ii) Consolidated Rental Expense, in each case measured ---- for the four fiscal quarter period ending on such date (or if such date is not the last day of any fiscal quarter, for the four fiscal quarter period ending immediately prior to such date). "Force Majeure Losses" means, with respect to any Leased Property and as -------------------- of any date of calculation, the loss incurred by the Lessor in connection with a Construction Force Majeure Event with respect to which a Construction Force Majeure Declaration has been made, measured by the sum of (i) the lower of (A) the insurance proceeds paid with respect thereto plus the related deductible amount and (B) the reduction in Fair Market Sales Value of the Leased Property as a result of the Construction Force Majeure Event as set forth in an Appraisal, plus (ii) other direct costs incurred by the Lessor that the Lessor has consented to in accordance with Section 3.4 of the Construction Agency Agreement in connection with such Construction Force Majeure Event to the extent such costs are not covered by insurance; provided that insurance proceeds shall -------- be used in such calculation only to the extent the event giving rise to the loss can be remediated for an amount equal to the resulting insurance proceeds plus the deductible; provided, further, that it is expressly understood and agreed -------- ------- that Force Majeure Losses shall not include the costs of repairing damage occasioned not as a result of the Construction Force Majeure Event, but as a result of the Construction Agent's failure to take all reasonable steps to minimize the damages caused by such Construction Force Majeure Event. "Funded Amount" means, as to the Lessor, the Lessor's Invested Amounts, ------------- and, as to each Lender, the outstanding principal amount of such Lender's Loans. -15- "Funding" means any funding by the Funding Parties pursuant to Section 2.2 ------- of the Master Agreement. "Funding Date" means each Closing Date and each other date on which a ------------ Funding occurs under Section 2 of the Master Agreement. "Funding Parties" means the Lessor and the Lenders, collectively. --------------- "Funding Party Balance" means, with respect to any Leased Property, (i) for --------------------- the Lessor as of any date of determination, an amount equal to the sum of the outstanding related Lessor's Invested Amount, all accrued and unpaid Yield on such outstanding related Lessor's Invested Amount, all unpaid related fees owing to the Lessor under the Operative Documents, and all other related amounts owing to the Lessor by the Lessees under the Operative Documents, and (ii) for any Lender as of any date of determination, an amount equal to the sum of the outstanding related Loans of such Lender, all accrued and unpaid interest thereon, all unpaid related fees owing to such Lender under the Operative Documents, and all other related amounts owing to such Lender by the Lessees under the Operative Documents. "Funding Request" is defined in Section 2.2 of the Master Agreement. --------------- "Funding Termination Date" means the earlier of (i) December 22, 2002 and ------------------------ (ii) the termination of the Commitments pursuant to Section 5.2 of the Loan Agreement. "Future Value" means, with respect to any component of the Construction ------------ Failure Payment, the accreted value of such component as of the date of calculation that is giving effect to the time value of money using the Implicit Rate. "GAAP" shall mean generally accepted accounting principles in the United ---- States. "General Partner" means Atlantic Financial Managers, Inc., a Texas --------------- corporation. "Governmental Action" means all permits, authorizations, registrations, ------------------- consents, approvals, waivers, exceptions, variances, orders, judgments, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Applicable Law and shall include, without limitation, all citings, environmental and operating permits and licenses that are required for the use, occupancy, zoning and operation of any Leased Property. "Governmental Authority" means any nation or government, any state or other ---------------------- political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. -16- "Ground Lease" means, with respect to any Land, the ground lease between ------------ the related Ground Lessor and the Lessor pursuant to which a leasehold estate is conveyed in the Land to the Lessor. "Ground Lessor" means, as to any Land, the ground lessor of such Land. ------------- "Guaranteed Indebtedness" shall mean, as to any Person, any obligation of ----------------------- such Person guaranteeing any indebtedness, lease, dividend, or other obligation ("primary obligation") of any other Person (the "primary obligor") in any manner including, without limitation, any obligation or arrangement of such Person (a) to purchase or repurchase any such primary obligation, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) to indemnify the owner of such primary obligation against loss in respect thereof. "Guarantor" means Hughes. --------- "Guaranty Agreement" means the Guaranty Agreement, dated as of June 22, ------------------ 2001 issued by Hughes. "Hazardous Material" or "Hazardous Substance" means any substance, waste or ------------------ ------------------- material which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous, including petroleum, crude oil or any fraction thereof, petroleum derivatives, by products and other hydrocarbons, or which is or becomes regulated under any Environmental Law by any Governmental Authority, including any agency, department, commission, board or instrumentality of the United States, any jurisdiction in which a Leased Property is located or any political subdivision thereof and also including, without limitation, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs") and radon gas. ---- "Hughes" means Hughes Supply, Inc., a Florida corporation. ------ "Hughes Family" shall mean (i) David H. Hughes, Vincent S. Hughes, Russell ------------- V. Hughes, (ii) any of their direct family members (including, without limitation, lineal ancestors and descendants, siblings, and lineal descendants of siblings), (iii) any trusts and profit sharing plans and stock option plans established for the sole benefit of the foregoing, and (iv) the heirs and personal representatives of the foregoing. "IDB Documentation" means the Bonds, each IDB Lease and all other ----------------- agreements, documents, contracts and instruments entered into in connection with any Bonds or IDB Property. -17- "IDB Lease" means a lease between the Lessor and an Authority with respect --------- to a Leased Property. "IDB Property" means each Leased Property that is the subject of Bonds. ------------ "Implicit Rate" means the weighted average of the Lessor Rate and the rate ------------- at which interest on the Lender's Loans is capitalized, each as in effect on the date of calculation based on the outstanding Funded Amounts. "Indebtedness" of any Person shall mean, without duplication (i) all ------------ obligations of such Person which in accordance with GAAP would be shown on the balance sheet of such Person as a liability (including, without limitation, obligations for borrowed money and for the deferred purchase price of property or services, and obligations evidenced by bonds, debentures, notes or other similar instruments); (ii) all Guaranteed Indebtedness of such Person (including contingent reimbursements obligations under undrawn financial letters of credit but not performance letters of credit) (iii) Capitalized Lease Obligations; (iv) Indebtedness of others secured by any Lien upon property owned by such Person, whether or not assumed; and (v) obligations or other liabilities under currency contracts, interest rate contracts, or similar agreements or combinations thereof. Notwithstanding the foregoing, in determining the Indebtedness of any Person, there shall be included all obligations of such Person of the character referred to in clauses (i) through (v) above deemed to be extinguished under GAAP but for which such Person remains legally liable except to the extent that such obligations (x) have been defeased in accordance with the terms of the applicable instruments governing such obligations and (y) the accounts or other assets dedicated to such defeasance are not included as assets on the balance sheet of such Person. "Indemnitee" means SunTrust Bank, in its individual capacity and in its ---------- capacity as Agent, and each Lender (but, in each case, only, with respect to any Leased Property, from and after the Completion Date for such Leased Property), and the Lessor, and their respective Affiliates, successors, permitted assigns, permitted transferees, employees, officers, directors and agents; provided, -------- however, that in no event shall any Lessee be an Indemnitee; provided, further - ------- -------- ------- that with respect to any indemnification arising with respect to any Leased Property during the Construction Period for such Leased Property, the Indemnitee shall only be the Lessor (except as provided in Section 7.2 of the Master Agreement). "Indemnitee Group" means the respective Affiliates, employees, officers, ---------------- directors and agents of the Agent (in its individual capacity), each Lender or the Lessor, as applicable; provided, however, that in no event shall any Lessee -------- ------- be a member of the Indemnitee Group. "Initial Closing Date" means the Closing Date for the first Leased Property -------------------- acquired by the Lessor. -18- "Intercompany Loan Documents" shall mean, collectively, the promissory --------------------------- notes and all related loan, subordination, and other agreements, to the extent that they exist, relating in any manner to the Intercompany Loans. "Intercompany Loans" shall mean, collectively, (i) the loans more ------------------ particularly described on Schedule 4.1(v) to the Master Agreement and (ii) those loans or other extensions of credit made by any Consolidated Company to another Consolidated Company satisfying the terms and conditions set forth in Section 5.13 of the Master Agreement or as may otherwise be approved in writing by the Agent and the Required Lenders. "Investment" shall mean, when used with respect to any Person, any direct ---------- or indirect advance, loan or other extension of credit (other than the creation of receivables in the ordinary course of business) or capital contribution by such Person (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise) to any Person, or any direct or indirect purchase or other acquisition by such Person of, or of a beneficial interest in, capital stock, partnership interests, bonds, notes, debentures or other securities issued by any other Person. "Joinder Agreement" means an agreement substantially in the form of Exhibit ----------------- E to the Master Agreement pursuant to which a Subsidiary of Hughes shall become a Lessee. "Land" means the land described in the related Lease Supplement. ---- "Land Acquisition Costs" with respect to any Leased Property means the ---------------------- Funded Amounts advanced for the purpose of acquiring the related Land, including any earnest money deposits and all other amounts payable under the related Purchase Agreement or Ground Lease, together with all interest, Yield and transaction expenses allocated to Land Acquisition Costs pursuant to Section 2.3(f) of the Master Agreement. "Land Construction Failure Payment" is defined in Section 5.7(g) of the --------------------------------- Construction Agency Agreement. "Land Portion" with respect to any Leased Property means the ratio, ------------ expressed as a percentage of (i) the Fair Market Sales Value of the Land related to such Leased Property to (ii) the Fair Market Sales Value of such Leased Property. "Land Proceeds" is defined in Section 5.3(b) of the Construction Agency ------------- Agreement. "Laws" means all ordinances, statutes, rules, regulations, orders, ---- injunctions, writs, treaties or decrees of any Governmental Authority, or of any court or similar entity established by any thereof. -19- "Lease" means the Master Lease Agreement, dated as of June 22, 2001 ----- together with each Lease Supplement thereto, among the Lessees and the Lessor. "Lease Balance" means, with respect to all of the Leased Properties, as of ------------- any date of determination, an amount equal to the aggregate sum of the outstanding Funded Amounts of all Funding Parties, all accrued and unpaid interest on the Loans, all accrued and unpaid Yield on the Lessor's Invested Amounts, all unpaid fees owing to the Funding Parties under the Operative Documents, and all other amounts owing to the Funding Parties by the Lessees under the Operative Documents. "Lease Supplement" means a supplement to the Lease substantially in the ---------------- form of Exhibit A thereto. "Lease Term" means (a) the Base Term or (b) such shorter period as may ---------- result from earlier termination of the Lease as provided therein. "Lease Termination Date" means the last day of the Lease Term. ---------------------- "Leased Property" means Land and the related Building(s). For purposes of --------------- the Lease, "Leased Property" means the Land identified in a Lease Supplement and the Buildings related thereto, unless the context provides otherwise. "Leased Property" shall not include any inventory of any Lessee. "Leased Property Balance" means, with respect to any Leased Property, as of ----------------------- any date of determination, an amount equal to the aggregate sum of the outstanding related Funded Amounts of all Funding Parties, all accrued and unpaid interest on the related Loans, all accrued and unpaid Yield on the related Lessor Invested Amounts, all related unpaid fees owing to the Funding Parties under the Operative Documents, and all other amounts owing to the Funding Parties by any Lessee under the Operative Documents with respect to such Leased Property. "Lender Basic Rent" means, for any Rent Period under the Lease, the ----------------- aggregate amount of interest accrued on the Loans pursuant to Section 2.4 of the Loan Agreement during such Rent Period. "Lenders" means such financial institutions as are, or who may hereafter ------- become, parties to the Loan Agreement as Lenders to the Lessor. "Lending Office" for each Lender means the office such Lender sets forth on -------------- Schedule 8.2 to the Master Agreement or such other office as such Lender designates in writing from time to time to Hughes and the Agent. "Lessee" is defined in the preamble to the Master Agreement. The "related" ------ Lessee with respect to any Leased Property means the Lessee that is party to the Lease Supplement for such Leased Property. -20- "Lessor" is defined in the preamble to the Master Agreement. ------ "Lessor Basic Rent" means, for any Rent Period under the Lease, the ----------------- aggregate amount of Yield accrued and unpaid on the Lessor's Invested Amounts pursuant to Section 2.3(a) of the Master Agreement during such Rent Period. "Lessor Liens" means Liens on or against any Leased Property, the Lease, ------------ any other Operative Document or any payment of Rent (a) which result from any act or omission of, or any Claim against, the Lessor unrelated to the Transaction or from Lessor's failure to perform as required under the Operative Documents or (b) which result from any Tax owed by the Lessor, except any Tax for which a Lessee or Hughes is obligated to indemnify (including, without limitation, in the foregoing exception, any assessments with respect to any Leased Property noted on the related Title Policy or assessed in connection with any construction or development by a Lessee or the Construction Agent). "Lessor Rate" is defined in the Lessor Side Letter, provided that during ----------- -------- the Construction Period, the Lessor Rate shall be increased by 0.125%. "Lessor Side Letter" means the letter agreement, dated as of June 22, 2001, ------------------ between Hughes and the Lessor. "Lessor's Invested Amount" means the amounts funded by the Lessor pursuant ------------------------ to Section 2 of the Master Agreement that are not proceeds of Loans by a Lender, as such amount may be increased during the related Construction Term pursuant to Section 2.3(c) of the Master Agreement. "Leverage Ratio" shall mean, as of any date of determination, the ratio of -------------- Total Funded Debt as of such date to Total Capitalization as of such date. "LIBOR" means, for any Rent Period, with respect to LIBOR Advances the ----- offered rate for deposits in U.S. Dollars, for a period comparable to the Rent Period, appearing on the Reuters Screen LIBOR Page as of 11:00 A.M. (London, England time) on the day that is two London banking days prior to the first day of the Rent Period. If at least two such rates appear on the Reuters Screen LIBOR Page, the rate for that Rent Period shall be the arithmetic mean of such rates, rounded, if necessary, to the next higher 1/16 of 1.0%; and in either case as such rates may be adjusted for any applicable reserve requirements. If the foregoing rate is unavailable from the Reuters Screen for any reason, then such rate shall be determined by the Agent from Telerate or, if such rate is also unavailable on such service, then on any other interest rate reporting service of recognized standing designated in writing by the Agent to Hughes and the Lenders; in any such case rounded, if necessary, to the next higher 1/16 of 1.0%, if the rate is not such a multiple. "LIBOR Advance" means that portion of the Funded Amount bearing interest at ------------- a rate based on LIBOR. -21- "Lien" means, with respect to any asset, any mortgage, deed to secure debt, ---- deed of trust, lien, pledge, charge, security interest, security title, preferential arrangement which has the practical effect of constituting a security interest or encumbrance, or encumbrance or servitude of any kind in respect of such asset to secure or assure payment of indebtedness, whether by consensual agreement or by operation of statute or other law, or by any agreement, contingent or otherwise, to provide any of the foregoing. "Limited Event of Default" means an Event of Default under paragraph (h), ------------------------ (i), (n) or (o) of Article XII of the Lease, solely if the breach of the related ----------- covenant, representation or warranty was based on a subjective interpretation of the term "diligently," "material," "materially," "Material Adverse Effect," "materially adversely affect," "material adverse change," "materially and adversely affects," "material adverse effect," "adverse," "adversely," "substantial," or "substantially"; provided, however, if the Event of Default, -------- ------- covenant or representation or warranty relates to the use of the Leased Property, then such Event of Default, covenant or representation or warranty will not be deemed a Limited Event of Default. "Loan" shall have the meaning specified in Section 2.1 of the Loan ---- Agreement. "Loan Agreement" means the Loan Agreement, dated as of June 22, 2001, among -------------- the Lessor, the Agent and the Lenders. "Loan Documents" means the Loan Agreement, the Notes, the Assignments of -------------- Lease and Rents, the Mortgages and all documents and instruments executed and delivered in connection with each of the foregoing. "Loan Event of Default" means any of the events specified in Section 5.1 of --------------------- the Loan Agreement, provided that any requirement for the giving of notice, the -------- lapse of time, or both, or any other condition, event or act has been satisfied. "Loan Potential Event of Default" means any event, condition or failure ------------------------------- which, with notice or lapse of time or both, would become a Loan Event of Default. "Loss Proceeds" is defined in Section 10.6 of the Lease. ------------- "Margin Regulations" means Regulations T, U and X of the Board of Governors ------------------ of the Federal Reserve System, as the same may be in effect from time to time. "Margin Stock" means "margin stock" as defined in Regulation T, U or X. ------------ "Master Agreement" means the Master Agreement, dated as of June 22, 2001, ---------------- among Hughes, the Lessees, the Lessor, the Agent and the Lenders. -22- "Material Adverse Effect" means with respect to any event or occurrence of ----------------------- whatever nature (including any adverse determination in any litigation, arbitration or governmental investigation or proceeding), (i) a materially adverse effect on the ability of Guarantor or any Lessee to perform its obligations under any Operative Document, (ii) a materially adverse effect on the financial condition, operations, business, prospects or assets of Hughes and its Subsidiaries, taken as a whole, (iii) a materially adverse effect on the value or useful life of any Leased Property, or the legality, validity or enforceability of any of the Operative Documents or (iv) a materially adverse effect on the status or priority of the Agent's or any Funding Party's interest in any Leased Property. "Material Subsidiary" shall mean each Subsidiary of Hughes, now existing or ------------------- hereinafter established or acquired, that at any time prior to the Lease Termination Date, has or acquires total assets in excess of $1,000,000 or that accounted for or produced more than 5% of the Consolidated EBITR of Hughes on a consolidated basis during any of the three most recently completed fiscal years of Hughes. "Monthly Payment Date" means the fifteenth (15th) day of each calendar -------------------- month or, if such day is not a Business Day, the next Business Day. "Moody's" means Moody's Investors Service, Inc. ------- "Mortgage" means, with respect to any Leased Property, that certain -------- mortgage, deed of trust or security deed, dated as of the related Closing Date, by the Lessor to the Agent, in the form of Exhibit D-1 or D-2 attached to the Master Agreement, with such modifications as are satisfactory to the Lessor and the Agent in conformity with Applicable Law to assure customary remedies in favor of the Agent in the jurisdiction where the Leased Property is located. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) ------------------ of ERISA. "Notes" means the note issued by the Lessor under the Loan Agreement, and ----- any and all notes issued in replacement or exchange therefor in accordance with the provisions thereof. "Obligations" means all indebtedness (whether principal, interest, fees or ----------- otherwise), obligations and liabilities of the Guarantor and each Lessee to the Funding Parties (including without limitation all extensions, renewals, modifications, rearrangements, restructures, replacements and refinancings thereof, whether or not the same involve modifications to interest rates or other payment terms of such indebtedness, obligations and liabilities), whether arising under any of the Operative Documents or otherwise, and whether now existing or hereafter created, absolute or contingent, direct or indirect, joint or several, secured or unsecured, due or not due, contractual or tortious, liquidated or unliquidated, arising by operation of law or otherwise, or acquired by Funding Parties outright, conditionally or as collateral security from another, including but not limited to the obligation of the Guarantor and each Lessee to repay future advances by the Funding Parties, whether or not made pursuant to commitment and -23- whether or not presently contemplated by the Guarantor or any Lessee and the Funding Parties under the Operative Documents. "Obligors" means the Guarantor, the Subsidiary Guarantors and the Lessees, -------- collectively. "Officer's Certificate" of a Person means a certificate signed by the --------------------- Chairman of the Board or the President or the Chief Financial Officer or any Executive Vice President or any Senior Vice President or any other Vice President or the Treasurer or any Assistant Treasurer or the Controller or any Assistant Controller or the Secretary of such Person. "Operative Documents" means the Master Agreement, the Purchase Agreements, ------------------- the Deeds, the Lease, the Security Agreement and Assignment, the Notes, the Loan Agreement, the Guaranty Agreement, the Assignments of Lease and Rents, the Mortgages, the Ground Leases, the Construction Agency Agreement, the Joinder Agreements, the Subsidiary Guaranty and the other documents delivered in connection with the transactions contemplated by the Master Agreement. "Overdue Rate" means the lesser of (a) the highest interest rate permitted ------------ by Applicable Law and (b) an interest rate per annum (calculated on the basis of a 365-day (or 366-day, if appropriate) year equal to 2.0% above the Base Rate in effect from time to time or, in the case of Yield, 2% above the Lessor Rate. "Partnership Agreement" means the Agreement of Limited Partnership of --------------------- Lessor, dated as of February 28, 1996, among the General Partner and the persons listed on Schedule A thereto as limited partners. "Payment Date" means the last day of each Rent Period (and if such Rent ------------ Period is longer than three months, the day that is 90 days after the first day of such Rent Period) or, if such day is not a Business Day, the next Business Day. "Payment Date Notice" is defined in Section 2.3(d) of the Master Agreement. ------------------- "PBGC" means the Pension Benefit Guaranty Corporation, and any successor ---- thereto. "Permitted Lease Balance" means, with respect to any Leased Property and ----------------------- calculated as of any date, (i) the Leased Property Balance with respect to such Leased Property as of the date of such calculation, minus (ii) Force Majeure ----- Losses with respect to such Leased Property, plus (iii) the amount of insurance ---- proceeds applied towards the remediation of such Force Majeure Losses, minus ----- (iv) any amounts that have been added to the Funded Amounts pursuant to the third sentence of Section 3.3 of the Construction Agency Agreement. For purposes of this definition, Leased Property means the Raw Land and/or the Building subject to a particular Lease Supplement. -24- "Permitted Liens" means the following with respect to any Leased Property: --------------- (a) the respective rights and interest of the related Lessee, the Lessor, the Agent and any Lender, as provided in the Operative Documents, (b) Liens for Taxes either not yet due or being contested in good faith and by appropriate proceedings, so long as enforcement thereof is stayed pending such proceedings, (c) materialmen's, mechanics', workers', repairmen's, employees' or other like Liens arising after the related Closing Date in the ordinary course of business for amounts either not yet due or being contested in good faith and by appropriate proceedings, so long as enforcement thereof is stayed pending such proceedings, (d) Liens arising after such Closing Date out of judgments or awards with respect to which at the time an appeal or proceeding for review is being prosecuted in good faith, so long as the enforcement thereof has been stayed pending such appeal or review, (e) easements, rights of way, reservations, servitudes and rights of others against the Land which do not materially and adversely affect the value or the utility of such Leased Property, (f) other Liens incidental to the conduct of the related Lessee's business which were not incurred in connection with the borrowing of money or the obtaining of advances or credit and which do not in the aggregate materially detract from the value of such Leased Property or materially impair the use thereof, (g) assignments and subleases expressly permitted by the Operative Documents, (h) Liens in favor of municipalities agreed to by the related Lessee that do not affect the value or utility of the related Leased Property and (i) Liens created by IDB Documentation. "Person" means an individual, corporation, partnership, limited liability ------ company, joint venture, association, joint-stock company, trust, nonincorporated organization or government or any agency or political subdivision thereof. "Plan" shall mean any employee benefit plan, program, arrangement, practice ---- or contract, maintained by or on behalf of Hughes or an ERISA Affiliate, which provides benefits or compensation to or on behalf of employees or former employees, whether formal or informal, whether or not written, including but not limited to the following types of plans: (a) Executive Arrangements - any bonus, incentive compensation, stock ---------------------- option, deferred compensation, commission, severance, "golden parachute", "rabbi trust", or other executive compensation plan, program, contract, arrangement or practice; (b) ERISA Plans - any "employee benefit plan" as defined in Section ----------- 3(3) of ERISA, including, but not limited to, any defined benefit pension plan, profit sharing plan, money purchase pension plan, savings or thrift plan, stock bonus plan, employee stock ownership plan, Multiemployer Plan, or any plan, fund, program, arrangement or practice providing for medical (including post-retirement medical), hospitalization, accident, sickness, disability, or life insurance benefits; (c) Other Employee Fringe Benefits - any stock purchase, vacation, ------------------------------ scholarship, day care, prepaid legal services, severance pay or other fringe benefit plan, program, arrangement, contract or practice. -25- "Plans and Specifications" means with respect to any Building the final ------------------------ plans and specifications for such Building prepared by the Architect, and, if applicable, referred to by the Appraiser in the Appraisal, as such Plans and Specifications may be hereafter amended, supplemented or otherwise modified from time to time. "Potential Event of Default" means any event, condition or failure which, -------------------------- with notice or lapse of time or both, would become an Event of Default. "Present Value" with respect to any payment to be made in the future means ------------- the amount of such payment, discounted to present value as of the date of calculation employing a discount rate equal to the Implicit Rate, and, with respect to any payment made prior to the date of such calculation means the amount of such payment, plus interest on such amount calculated at the Implicit Rate for such Leased Property. "Project Costs" means, as of any date and with respect to any Leased ------------- Property, those portions, in the aggregate, of the Funded Amount for such Leased Property as of such date that, when expended by the Lessor, were, or would have been, capitalized by Lessor in accordance with GAAP. For purposes of calculating the Construction Failure Payment, "Project Costs" shall also include other costs related to Construction paid to third parties other than the Funding Parties as described in EITF 97-10. "Purchase Agreement" means with respect to any Land, the purchase agreement ------------------ with the Seller for the conveyance of such Land to the Lessor. "Purchase Option" is defined in Section 14.1 of the Lease. --------------- "Raw Land" means, with respect to any Leased Property, the parcel of land -------- described in the related Lease Supplement, excluding any improvements thereon. "Regulation D" means Regulation D of the Board of Governors of the Federal ------------ Reserve System as the same may be in effect from time to time. "Release" means the release, deposit, disposal or leak of any Hazardous ------- Material into or upon or under any land or water or air, or otherwise into the environment, including, without limitation, by means of burial, disposal, discharge, emission, injection, spillage, leakage, seepage, leaching, dumping, pumping, pouring, escaping, emptying, placement and the like. "Release Date" means, with respect to any Leased Property, the earlier of ------------ (i) the date that the Lease Balance has been paid in full, and (ii) the date on which the Agent gives notice to the Lessor that the Lenders release any and all interest they may have in such Leased Property, and all proceeds thereof, and any rights to direct, consent or deny consent to any action by the Lessor with respect to such Leased Property. -26- "Rent" means Basic Rent and Supplemental Rent, collectively. ---- "Rent Percentage" means, as of any Payment Date, the sum of (i) 12.50%, in --------------- the case of the first Payment Date occurring on or after the EBO Date, or the Rent Percentage for the immediately preceding Payment Date in the case of any other Payment Date plus (ii) the positive difference, if any, between the ---- Adjusted LIBO Rate for the immediately preceding Rent Period and the Adjusted LIBO Rate for the Rent Period beginning on such Payment Date. "Rent Period" means (i) in the case of Base Rate Advances, means the period ----------- from, and including, a Monthly Payment Date (or the date of the borrowing or conversion of such Base Rate Advance, if such date is other than a Monthly Payment Date) to, but excluding, the next succeeding Monthly Payment Date; and (ii) with respect to any LIBOR Advance: (1 initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such LIBOR Advance and ending one, two, three or six months thereafter, as selected by Hughes in its Funding Notice or Payment Date Notice, as the case may be, given with respect thereto; and (2 thereafter, each period commencing on the last day of the next preceding Rent Period applicable to such LIBOR Advance and ending one, two, three or six months thereafter, as selected by Hughes by irrevocable notice to the Agent in its related Payment Date Notice; provided, however that: - -------- ------- (a) The initial Rent Period for any Funding shall commence on the Funding Date of such Funding and each Rent Period occurring thereafter in respect of such Funding shall commence on the day on which the next preceding Rent Period expires; (b) If any Rent Period would otherwise expire on a day which is not a Business Day, such Rent Period shall expire on the next succeeding Business Day, provided that if any Rent Period in respect of LIBOR Advances would -------- otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Rent Period shall expire on the next preceding Business Day; (c) Any Rent Period in respect of LIBOR Advances which begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Rent Period shall, subject to paragraph (d) below, ------------- expire on the last Business Day of such calendar month; (d) No Rent Period shall extend beyond the Lease Termination Date; (e) At any one time, there shall be no more than six (6) Rent Periods; and -27- (f) From and after the EBO Date, there shall be one Rent Period in effect, which Rent Period shall be equal to one month. "Report" is defined in Section 7.6 of the Master Agreement. ------ "Required Funding Parties" means, at any time, Funding Parties holding an ------------------------ aggregate outstanding principal amount of Funded Amounts equal to at least 66- 2/3% of the aggregate outstanding principal amount of all Funded Amounts. "Required Lenders" means, at any time, Funding Parties holding an aggregate ---------------- outstanding principal amount of Loans equal to at least 66-2/3% of the aggregate outstanding principal amount of all Loans. "Requirement of Law" for any Person means the articles or certificate of ------------------ incorporation and bylaws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Reuters Screen" means, when used in connection with any designated page -------------- and LIBOR, the display page so designated on the Reuters Monitor Money Rates Service (or such other page as may replace that page on that service for the purpose of displaying rates comparable to LIBOR). "Revolving Credit Agreement" means the Revolving Credit Agreement, dated as -------------------------- of January 26, 1999, among Hughes, SunTrust Bank (as successor to SunTrust Bank, Central Florida, National Association), individually and as Administrative Agent, First Union National Bank, as Documentation Agent, Bank of America, N.A., individually and as Syndication Agent, Southtrust Bank, individually and as Co- Agent, and the other Lenders party thereto. "Scheduled Construction Termination Date" means with respect to any --------------------------------------- Building eighteen (18) months after the Closing Date for the related Land. "SEC" means the United States Securities and Exchange Commission. --- "Securities Act" means the Securities Act of 1933, as amended. -------------- "Securities Exchange Act" means the Securities Exchange Act of 1934, as ----------------------- amended. "Security Agreement and Assignment" means, with respect to any Leased --------------------------------- Property, the Security Agreement and Assignment (Construction Contract, Architect's Agreement, Permits, Licenses and Governmental Approvals, and Plans, Specifications and Drawings) from the -28- Construction Agent to the Lessor, substantially in the form of Exhibit C to the Master Agreement. "Seller" with respect to any Leased Property means the Person who transfers ------ such Leased Property to Lessor. "Solvent" means, with respect to any Person as of any date, that on such ------- date(i) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (ii) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become matured, (iii) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (v) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at anytime, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Subordinated Debt" shall mean all Indebtedness of Hughes and its ----------------- Subsidiaries subordinated to all obligations of Hughes and its Subsidiaries or any other Credit Party arising under this Agreement, the Revolving Notes and the Guaranty Agreement on terms and conditions satisfactory in all respects to the Agent and the Required Lenders, including without limitation, with respect to interest rates, payment terms, maturities, amortization schedules, covenants, defaults, remedies, and subordination provisions, as evidenced by the written approval of the Agent and Required Lenders. "Subsidiary" shall mean, with respect to any Person, any corporation or ---------- other entity (including, without limitation, partnerships, joint ventures, and associations) regardless of its jurisdiction of organization or formation, at least a majority of the total combined voting power of all classes of voting stock or other ownership interests of which shall, at the time as of which any determination is being made, be owned by such Person, either directly or indirectly through one or more other Subsidiaries. "Subsidiary Guarantors" shall mean, collectively, each Material Subsidiary --------------------- of Hughes that has executed the Subsidiary Guaranty as of the Initial Closing Date, together with all other Material Subsidiaries that hereafter execute supplements to the Subsidiary Guaranty, and their respective successors and permitted assigns. -29- "Subsidiary Guaranty" means the Subsidiary Guaranty, dated as of June 22, ------------------- 2001, issued by the Subsidiary Guarantors. "Supplemental Rent" means any and all amounts, liabilities and obligations ----------------- other than Basic Rent which any Lessee assumes or agrees or is otherwise obligated to pay under the Lease or any other Operative Document (whether or not designated as Supplemental Rent) to the Lessor, the Agent, any Lender or any other party, including, without limitation, amounts under Article XVI of the Lease, and indemnities and damages for breach of any covenants, representations, warranties or agreements, and all overdue or late payment charges in respect of any Funded Amount. "Tax Code" means the Internal Revenue Code of 1986, as amended and in -------- effect from time to time. "Tax Indemnitee" means, with respect to each Leased Property, (i) so long -------------- as such Leased Property is a Construction Land Interest, the Lessor and its Affiliates, successors, permitted assigns, permitted transferees, employees, officers, directors and agents and (ii) from and after the Completion Date for such Leased Property, the Lessor, SunTrust Bank, in its individual capacity and in its capacity as Agent, each Lender and their respective Affiliates, successors, permitted assigns, permitted transferees, employees, officers, directors and agents; provided, however, that in no event shall any Lessee be a -------- ------- Tax Indemnitee. "Taxes" means any present or future taxes, levies, imposts, duties, fees, ----- assessments, deductions, withholdings or other charges of whatever nature, including without limitation, income, receipts, excise, property, sales, transfer, license, payroll, withholding, social security and franchise taxes now or hereafter imposed or levied by the United States, or any state, local or foreign government or by any department, agency or other political subdivision or taxing authority thereof or therein and all interest, penalties, additions to tax and similar liabilities with respect thereto. "Telerate" means, when used in connection with any designated page and -------- LIBOR, the display page so designated on the Dow Jones Telerate Service (or such other page as may replace that page on that service for the purpose of displaying rates comparable to LIBOR). "Title Insurance Company" means the company that has or will issue the ----------------------- title policies with respect to a Leased Property, which company shall be reasonably acceptable to the Funding Parties. "Title Policy" is defined in Section 3.1 of the Master Agreement. ------------ "Total Capitalization" shall mean, as of any date of determination, the sum -------------------- of (i) Total Funded Debt plus (ii) Consolidated Net Worth as of such date. ---- -30- "Total Funded Debt" shall mean all Indebtedness of the Consolidated ----------------- Companies that by its terms or by the terms of any instrument or agreement relating thereto matures, or which is otherwise payable or unpaid, one year or more from, or is directly or indirectly renewable or extendable at the option of the debtor to a date one year or more (including an option of the debtor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of one year or more) from, the date of the creation thereof, provided that Total Funded Debt shall include, as at any date of determination, any portion of such Indebtedness outstanding on such date which matures on demand or within one year from such date (whether by sinking fund, other required prepayment, or final payment at maturity) and shall also include all Indebtedness of the Consolidated Companies for borrowed money under a line of credit, guidance line, revolving credit, bankers acceptance facility or similar arrangement for borrowed money, including, without limitation, all unpaid drawings under letters of credit and unreimbursed amounts pursuant to letter of credit reimbursement agreements, regardless of the maturity date thereof. "Transaction" means all the transactions and activities referred to in or ----------- contemplated by the Operative Documents. "Trust Indenture" is defined in Section 2.6 of the Master Agreement. --------------- "Unrestricted Indemnification Amounts" means, with respect to any Leased ------------------------------------ Property (i) any amounts payable by the Construction Agent with respect to such Leased Property pursuant to (A) Section 3.3(ii) of the Construction Agency Agreement, (B) Section 3.3(iii) of the Construction Agency Agreement, (C) that portion of Section 3.3(i) of the Construction Agency Agreement within the parenthetical phrase within such Section 3.3(i) relating to Claims for personal injury or, to the extent not related to Construction completion, damage to property and any other Claims not related to Construction completion, or (D) any provision of any Operative Document requiring indemnification for Claims arising from environmental conditions with respect to such Leased Property and (ii) any other amounts that EITF 97-10 allows a Lessee to pay that are capitalizable under GAAP and are not required to be included in the calculation of a Lessee's maximum guaranty amount under EITF 97-10. "UCC" means the Uniform Commercial Code of Florida, as in effect from time --- to time. "Wholly Owned Subsidiary" shall mean any Subsidiary, all the stock or ----------------------- ownership interest of every class of which, except directors' qualifying shares, shall, at the time as of which any determination is being made, be owned by Hughes either directly or indirectly. "Withholding Taxes" is defined in Section 7.5(f) of the Master Agreement. ----------------- "Yield" is defined in Section 2.3 of the Master Agreement. ----- -31- -----END PRIVACY-ENHANCED MESSAGE-----