EXHIBIT 10.1
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AMENDED AND RESTATED
PARTICIPATION AGREEMENT
dated as of July 12, 2000
among
QUANTUM CORPORATION,
as Lessee
SELCO SERVICE CORPORATION,
as Lessor and as a Participant,
THE BANK OF NOVA SCOTIA,
KEYBANK NATIONAL ASSOCIATION AND
UNION BANK OF CALIFORNIA, N.A.,
as Participants,
and
THE BANK OF NOVA SCOTIA,
as Agent
Specialty Storage Product Group Facilities
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TABLE OF CONTENTS
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SECTION 1 DEFINITIONS; INTERPRETATION............................................................... 2
SECTION 2 CLOSING DATE.............................................................................. 2
SECTION 3 ACQUISITION OF THE PROPERTY; FUNDING OF ADVANCES.......................................... 2
SECTION 3.1 Lessor Commitment............................................................ 2
SECTION 3.2 Participants' Commitments.................................................... 2
SECTION 3.3 Procedures for Acquisition of the Land Interest.............................. 3
SECTION 3.4 Procedures for Advances...................................................... 3
SECTION 3.5 Allocation of Commitments.................................................... 3
SECTION 3.6 Actions on Restructuring Date................................................ 4
SECTION 3.7 Termination, Extension or Reduction of Participants' Commitments............. 4
SECTION 3.8 Interest Rates; Yield and Payment Dates...................................... 6
SECTION 3.9 Computation of Interest and Yield............................................ 7
SECTION 3.10 Pro Rata Treatment and Payments.............................................. 7
SECTION 3.11 The Account.................................................................. 8
SECTION 3.12 Basic Rent................................................................... 8
SECTION 3.13 Purchase Payments by Lessee.................................................. 8
SECTION 3.14 Residual Value Guarantee Amount Payment by Lessee............................ 9
SECTION 3.15 Sales Proceeds of Remarketing of Property.................................... 10
SECTION 3.16 Supplemental Rent............................................................ 11
SECTION 3.17 Excepted Payments............................................................ 11
SECTION 3.18 Distribution of Payments After Event of Default.............................. 11
SECTION 3.19 Other Payments............................................................... 12
SECTION 3.20 Casualty and Condemnation Amounts............................................ 13
SECTION 3.21 Order of Application......................................................... 13
SECTION 4 FEES...................................................................................... 13
SECTION 4.1 Administrative Fee........................................................... 13
SECTION 4.2 Overdue Fees................................................................. 13
SECTION 5 CERTAIN INTENTIONS OF THE PARTIES......................................................... 13
SECTION 5.1 Nature of Transaction........................................................ 13
SECTION 5.2 Amounts Due Under Lease...................................................... 14
TABLE OF CONTENTS
(continued)
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SECTION 6 CONDITIONS PRECEDENT TO ACQUISITION OF LAND INTEREST AND ADVANCES........................ 15
SECTION 6.1 Conditions Precedent -- Documentation........................................ 15
(a) Acquisition and Funding Request.................................................. 15
(b) Closing Date; Operative Documents................................................ 15
(c) Environmental Certificate........................................................ 16
(d) Preliminary Letter of Value...................................................... 16
(e) Deed............................................................................. 16
(f) Lease Supplement; Equipment Schedule............................................. 16
(g) Survey and Title Insurance....................................................... 16
(h) Evidence of Recording and Filing................................................. 17
(i) Evidence of Insurance............................................................ 17
(j) Evidence of Use of Proceeds...................................................... 17
(k) Taxes............................................................................ 17
(l) Opinions of Counsel.............................................................. 17
(m) Approvals........................................................................ 18
(n) Litigation....................................................................... 18
(o) Requirements of Law.............................................................. 18
(p) Responsible Officer's Certificate of the Lessee.................................. 18
(q) The Lessee's Resolutions and Incumbency Certificate, etc......................... 18
(r) Responsible Officer's Certificate of the Guarantor............................... 18
(s) The Guarantor's Resolutions and Incumbency Certificate, etc...................... 19
(t) Land Interest Acquisition Date................................................... 19
(u) No Material Adverse Effect....................................................... 19
(v) Responsible Officer's Certificate of the Lessor.................................. 19
(w) The Lessor's Resolutions and Incumbency Certificate, etc......................... 19
(x) Construction Budget.............................................................. 20
(y) Termination of Liens............................................................. 20
(z) Property Purchase Agreement Conditions........................................... 20
SECTION 6.2 Further Conditions Precedent................................................. 20
(a) Representations and Warranties................................................... 20
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(b) Performance of Covenants........................................................ 20
(c) Title........................................................................... 21
(d) No Default...................................................................... 21
SECTION 6.3 Further Condition Precedent................................................. 21
(a) Appraisal....................................................................... 21
SECTION 6.4 Conditions to Restructuring Date............................................ 21
SECTION 7 COMPLETION DATE CONDITIONS............................................................... 22
SECTION 7.1 Conditions.................................................................. 22
(a) Architect's Certificate......................................................... 22
(b) Construction Completion......................................................... 22
(c) Lessee Certification............................................................ 22
SECTION 8 REPRESENTATIONS.......................................................................... 23
SECTION 8.1 Representations of the Lessor............................................... 23
(a) Due Organization, etc........................................................... 23
(b) Authorization; No Conflict...................................................... 23
(c) Enforceability, etc............................................................. 23
(d) Litigation...................................................................... 23
(e) Assignment...................................................................... 24
(f) Defaults........................................................................ 24
(g) Use of Proceeds................................................................. 24
(h) Securities Act.................................................................. 24
(i) Chief Place of Business......................................................... 24
(j) Federal Reserve Regulations..................................................... 24
(k) Investment Company Act.......................................................... 24
(l) No Plan Assets.................................................................. 24
(m) Equity Source................................................................... 24
SECTION 8.2 Representations of the Participants......................................... 25
(a) No Plan Assets.................................................................. 25
(b) Due Organization, etc........................................................... 25
(c) Authorization; No Conflict...................................................... 25
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(continued)
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(d) Enforceability, etc............................................................. 25
(e) Litigation...................................................................... 25
SECTION 8.3 Representations of the Lessee............................................... 26
(a) Corporate Status................................................................ 26
(b) Corporate Power and Authority................................................... 26
(c) No Violation.................................................................... 26
(d) Litigation...................................................................... 26
(e) Governmental Approvals.......................................................... 26
(f) Investment Company Act.......................................................... 27
(g) Public Utility Holding Company Act.............................................. 27
(h) Accuracy of Information Furnished............................................... 27
(i) Taxes........................................................................... 27
(j) Compliance with ERISA........................................................... 27
(k) Environmental and Other Regulations............................................. 28
(l) Offer of Securities, etc........................................................ 28
(m) Financial Statements............................................................ 28
(n) No Violation or Default......................................................... 28
(o) Title; Possession Under Leases.................................................. 28
(p) Patent and Other Rights......................................................... 29
(q) Solvency, Etc................................................................... 29
(r) Catastrophic Events............................................................. 29
SECTION 8.4 Representations of the Lessee With Respect to the Property on the Land
Interest Acquisition Date................................................... 29
(a) Representations................................................................. 29
(b) Property........................................................................ 29
(c) Title........................................................................... 30
(d) Insurance....................................................................... 31
(e) Lease........................................................................... 31
(f) Protection of Interests......................................................... 31
(g) Flood Hazard Areas.............................................................. 31
(h) Conditions Precedent............................................................ 31
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(continued)
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SECTION 8.5 Representations of the Lessee With Respect to Each Advance....................... 31
(a) Representations...................................................................... 31
(b) Improvements......................................................................... 32
(c) No Liens............................................................................. 32
(d) Advance.............................................................................. 32
(e) Lease................................................................................ 32
(f) Protection of Interests.............................................................. 32
(g) Title Insurance Date Down Endorsement................................................ 32
SECTION 9 PAYMENT OF CERTAIN EXPENSES................................................................... 33
SECTION 9.1 Transaction Expenses............................................................. 33
SECTION 9.2 Brokers' Fees and Stamp Taxes.................................................... 33
SECTION 9.3 Obligations...................................................................... 33
SECTION 10 OTHER COVENANTS AND AGREEMENTS................................................................ 34
SECTION 10.1 Covenants of the Lessee.......................................................... 34
(a) Financial Statements................................................................. 34
(b) Certificates, Notices and Other Information.......................................... 35
(c) Payment of Taxes..................................................................... 36
(d) Preservation of Existence............................................................ 36
(e) Maintenance of Properties............................................................ 36
(f) Maintenance of Insurance............................................................. 36
(g) Compliance with Requirements of Law.................................................. 36
(h) Inspection Rights.................................................................... 36
(i) Keeping of Records and Books of Account.............................................. 37
(j) Compliance with ERISA................................................................ 37
(k) Compliance With Agreements........................................................... 37
(l) Indebtedness......................................................................... 37
(m) Liens................................................................................ 38
(n) Fundamental Changes.................................................................. 40
(o) Dispositions......................................................................... 40
(p) Investments.......................................................................... 41
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(q) Restricted Payments.................................................................. 41
(r) ERISA................................................................................ 42
(s) Change in Nature of Business......................................................... 42
(t) Transactions with Affiliates......................................................... 42
(u) Certain Indebtedness Payments, Etc................................................... 42
(v) Financial Covenants.................................................................. 43
(w) Appraisal............................................................................ 44
(x) No Impairment of Deposits............................................................ 44
SECTION 10.2 Cooperation with the Lessee...................................................... 44
SECTION 10.3 Covenants of the Lessor.......................................................... 45
(a) Discharge of Liens................................................................... 45
(b) Change of Chief Place of Business.................................................... 45
SECTION 11 PARTICIPATIONS............................................................................... 45
SECTION 11.1 Amendments; Actions on Default................................................... 45
SECTION 11.2 General.......................................................................... 47
SECTION 11.3 Conflicts........................................................................ 47
SECTION 11.4 Refusal to Give Consents or Fund................................................. 48
SECTION 11.5 Required Repayments.............................................................. 48
SECTION 11.6 Indemnification.................................................................. 49
SECTION 11.7 Required Supplemental Payments................................................... 49
SECTION 11.8 Application of Payments Received From Defaulting Participant As a Cure
For Payment Defaults............................................................. 50
SECTION 11.9 Order of Application............................................................. 50
SECTION 11.10 Investments Pending Dispute Resolution; Overnight Investments.................... 50
SECTION 11.11 Agent to Exercise Lessor's Rights................................................ 51
SECTION 11.12 Exculpatory Provisions Regarding the Lessor...................................... 51
SECTION 12 TRANSFERS OF PARTICIPANTS' INTERESTS.......................................................... 51
SECTION 12.1 Restrictions on and Effect of Transfer by Participants........................... 51
(a) Required Notice and Effective Date................................................... 52
(b) Assumption of Obligations............................................................ 52
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(c) Employee Benefit Plans.......................................................... 52
(d) Representations................................................................. 52
(e) Amounts; Agent's Fee............................................................ 53
(f) Applicable Law.................................................................. 53
(g) Effect.......................................................................... 53
SECTION 12.2 Covenants and Agreements of Participants.................................... 53
(a) Participations.................................................................. 53
(b) Transferee Indemnities.......................................................... 54
SECTION 12.3 Future Participants......................................................... 54
SECTION 13 INDEMNIFICATION.......................................................................... 54
SECTION 13.1 General Indemnification..................................................... 54
SECTION 13.2 End of Term Indemnity....................................................... 56
SECTION 13.3 Environmental Indemnity..................................................... 57
SECTION 13.4 Proceedings in Respect of Claims............................................ 58
SECTION 13.5 General Impositions Indemnity............................................... 60
(a) Indemnification................................................................. 60
(b) Payments........................................................................ 60
(c) Reports and Returns............................................................. 60
(d) Income Inclusions............................................................... 61
(e) Withholding Taxes............................................................... 61
(f) Contests of Impositions......................................................... 62
(g) Documentation of Withholding Status............................................. 63
(h) Limitation on Tax Indemnification............................................... 64
(i) Tax Savings..................................................................... 64
SECTION 13.6 Funding Losses.............................................................. 64
SECTION 13.7 Regulation D Compensation................................................... 64
SECTION 13.8 Basis for Determining Interest Rate Inadequate or Unfair.................... 65
SECTION 13.9 Illegality.................................................................. 65
SECTION 13.10 Increased Cost and Reduced Return........................................... 66
SECTION 13.11 Substitution of Participant................................................. 67
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(continued)
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SECTION 13.12 Indemnity Payments in Addition to Residual Value Guarantee Amount........... 68
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(continued)
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SECTION 14 THE AGENT................................................................................ 68
SECTION 14.1 Appointment................................................................. 68
SECTION 14.2 Delegation of Duties........................................................ 68
SECTION 14.3 Exculpatory Provisions...................................................... 68
SECTION 14.4 Reliance by Agent........................................................... 69
SECTION 14.5 Notice of Default........................................................... 69
SECTION 14.6 Non-Reliance on Agent and Other Participants................................ 69
SECTION 14.7 Indemnification............................................................. 70
SECTION 14.8 Agent in its Individual Capacity............................................ 70
SECTION 14.9 Successor Agent............................................................. 70
SECTION 15 MISCELLANEOUS............................................................................ 71
SECTION 15.1 Survival of Agreements...................................................... 71
SECTION 15.2 No Broker, etc.............................................................. 71
SECTION 15.3 Notices..................................................................... 71
SECTION 15.4 Counterparts................................................................ 72
SECTION 15.5 Amendments.................................................................. 72
SECTION 15.6 Headings, etc............................................................... 73
SECTION 15.7 Parties in Interest......................................................... 73
SECTION 15.8 GOVERNING LAW............................................................... 73
SECTION 15.9 Severability................................................................ 73
SECTION 15.10 Liability Limited........................................................... 73
SECTION 15.11 Further Assurances.......................................................... 74
SECTION 15.12 Submission to Jurisdiction.................................................. 74
SECTION 15.13 Confidentiality............................................................. 74
SECTION 15.14 WAIVER OF JURY TRIAL........................................................ 75
SECTION 15.15 Usury Savings Clause........................................................ 75
SECTION 15.16 Effect on Original Participation Agreement.................................. 75
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TABLE OF CONTENTS
(continued)
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SCHEDULES
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SCHEDULE I Participants' Commitments
SCHEDULE II Pricing Grid
SCHEDULE III Notice Information and Funding Offices
SCHEDULE IV Environmental Matters
SCHEDULE V Methodology for Calculating Partial Purchase Option Prices
SCHEDULE 3.6 Advances on Restructuring Date
SCHEDULE 6.4 Conditions to Amendment and Restatement
SCHEDULE 10.1 Existing Indebtedness and Liens
APPENDICES
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APPENDIX 1 Definitions and Interpretation
EXHIBITS
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EXHIBIT A Form of Acquisition Request
EXHIBIT B Form of Funding Request
EXHIBIT C Form of Environmental Certificate
EXHIBIT D Opinion of Special Counsel to Lessee
EXHIBIT E Opinion of Local Counsel to Lessee
EXHIBIT F Opinion of Special Counsel to Lessor
EXHIBIT G Opinion of Internal Counsel to Lessor
EXHIBIT H Form of Architect's Completion Certificate
EXHIBIT I Form of Lessee's Completion Certificate
EXHIBIT J Form of Assignment and Acceptance
EXHIBIT K Form of Participant's Letter
EXHIBIT L Assignment of Lease and Consent to Assignment
EXHIBIT M Construction Agency Agreement
EXHIBIT N Construction Agency Agreement Assignment
EXHIBIT O Guarantee
EXHIBIT P Mortgage
EXHIBIT Q Form of Compliance Certificate
EXHIBIT R Form of Subordinated Debt Terms
EXHIBIT S Form of Cash Collateral Agreement
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AMENDED AND RESTATED PARTICIPATION AGREEMENT
THIS AMENDED AND RESTATED PARTICIPATION AGREEMENT, dated as of July 12,
2000 (this "Participation Agreement"), is entered into by and among QUANTUM
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CORPORATION, a Delaware corporation, as Lessee (together with its permitted
successors and assigns, the "Lessee"); SELCO SERVICE CORPORATION., an Ohio
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corporation, as Lessor (together with its permitted successors and assigns, the
"Lessor") and as a Participant; THE BANK OF NOVA SCOTIA, KEYBANK NATIONAL
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ASSOCIATION and UNION BANK OF CALIFORNIA, N.A., as Participants (together with
their permitted successors and assigns and SELCO SERVICE CORPORATION, in its
capacity as a Participant, each a "Participant" and collectively the
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"Participants"); and THE BANK OF NOVA SCOTIA, as Agent (in such capacity,
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together with its successors in such capacity, the "Agent") for the
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Participants.
PRELIMINARY STATEMENT
A. In accordance with the terms of the Participation Agreement dated as
of August 22, 1997, among Lessee, Lease Plan North America, Inc., as lessor and
a participant (the "Original Lessor"), ABN AMRO Bank N.V., San Francisco
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International Branch, as a participant, and ABN AMRO Bank N.V., San Francisco
International Branch, as agent (the "Original Agent"), as amended by the First
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Amendment to Participation Agreement dated as of June 26, 1998, the Second
Amendment to Participation Agreement dated as of December 18, 1998, the Third
Amendment to Participation Agreement dated as of August 31, 1999, and the Fourth
Amendment to Participation Agreement dated as of November 8, 1999 (said
participation agreement, as so amended, the "Original Participation Agreement"),
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and the lease and the other operative documents executed thereunder,
(i) the Original Lessor purchased certain parcels of land designated
by the Lessee located in Colorado Springs, Colorado;
(ii) using Advances from the Original Lessor, the Lessee, as
Construction Agent, built administration, manufacturing, design, research
and development and warehouse facilities on such parcels of land for the
Original Lessor, acquired certain items of Equipment to be used in
connection with such Improvements and leased, as Lessee, such Equipment,
Improvements and Land Interest from the Original Lessor; and
(iii) the Original Lessor obtained financing from the Participants of
the funding of the costs of acquisition of such Land Interest, the
construction of the Improvements and the acquisition of such Equipment
through the purchase of Participation Interests.
B. The Lessee and the Participants have requested that the Original
Participation Agreement be amended in certain respects at the time the Lessor
acquires the Original Lessor's interests in the Land Interest, Improvements,
Fixtures and Equipment and its Participation Interest and certain Participants
acquire the Participation Interests of ABN AMRO Bank N.V., San Francisco
International Branch, and the Lessee, the Lessor, the Participants and the Agent
would like to amend the Original Participation Agreement upon the terms and
subject to the
2
conditions set forth herein. For convenience of reference, the parties wish to
restate the Original Participation Agreement as so amended in its entirety.
In consideration of the mutual agreements contained in this Participation
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree that the
Original Participation Agreement shall be amended and restated as of the date
hereof to read in its entirety 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 1 hereto for
all purposes hereof; and the rules of interpretation set forth in Appendix 1
hereto shall apply to this Participation Agreement.
SECTION 2
CLOSING DATE
The closing date (the "Closing Date") shall occur on the earliest date on
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which all the conditions precedent thereto set forth in Sections 6.1 and 6.2
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hereof shall have been satisfied or waived by the applicable parties as set
forth therein.
SECTION 3
ACQUISITION OF THE PROPERTY; FUNDING OF ADVANCES
SECTION 3.1 Lessor Commitment. Subject to the conditions and terms
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hereof, the Lessor shall take the following actions at the written request of
the Lessee from time to time during the Commitment Period:
(a) make Advances (out of funds provided by the Participants) for the
purpose of financing the acquisition of the Land Interest and the Equipment and
construction of the Improvements;
(b) acquire the Land Interest and the Equipment (using funds provided
by the Participants); and
(c) lease the Property as lessor to the Lessee under the Lease.
SECTION 3.2 Participants' Commitments. Subject to the terms and
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conditions hereof, each Participant severally shall purchase a Participation
Interest in the Advances being made by the Lessor at the request of the Lessee
from time to time during the Commitment Period
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by making available to the Lessor on each Funding Date an amount in immediately
available funds equal to such Participants' Commitment Percentage of the amount
of the Advance being funded on such Funding Date. Notwithstanding any other
provision hereof, no Participant shall be obligated to purchase its
Participation Interest in any Advance if (i) the amount of such purchase would
exceed its Available Commitment, or (ii) if, after giving effect to the proposed
Advance, the outstanding aggregate amount of such Participant's Participation
Interest in the Advances would exceed such Participant's Commitment.
Notwithstanding the foregoing, until the conditions precedent set forth in
Section 6.3 have been satisfied, the Lessee shall not be permitted to request,
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and the Participants and the Lessor shall not be obligated to fund, Advances
exceeding $38,348,000 in aggregate.
SECTION 3.3 Procedures for Acquisition of the Land Interest. The Lessee
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shall give the Lessor and the Agent prior written notice not later than 10:00
a.m., San Francisco time, on the proposed Land Interest Acquisition Date,
pursuant to an Acquisition Request substantially in the form of Exhibit A (an
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"Acquisition Request"), specifying with respect to such Land Interest: (i) the
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proposed Land Interest Acquisition Date, (ii) the Land Interest to be acquired,
(iii) the Existing Owner of the Land Interest and the Land Interest Acquisition
Cost, and (iv) the date on which the Lessee will request the Lessor to fund the
Land Interest Acquisition Cost of such Land Interest. The Agent shall promptly
forward a copy of such Acquisition Request to each Participant.
SECTION 3.4 Procedures for Advances. With respect to each funding of an
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Advance, the Lessee shall give the Lessor and the Agent prior written notice not
later than 10:00 a.m., San Francisco time, three (3) Business Days prior to (or,
in the case of the initial Advance made on the Land Interest Acquisition Date,
on the day of) the proposed Funding Date, pursuant, in each case, to a Funding
Request substantially in the form of Exhibit B (a "Funding Request"), specifying
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(i) the proposed Funding Date, (ii) the amount and purpose of the Advance
requested, (iii) the Type of Advance, (iv) the initial Interest Period for such
Advance, (v) the payee of such Advance, and (vi) the allocation of such Advance
to the respective Land Interest Acquisition Cost and Property Improvements Costs
of the Property (and pro rata portions of the related remittances from the
Participants shall likewise be deemed to be so allocated). The Agent shall
promptly forward a copy of such Funding Request to each Participant. The Lessee
shall not request more than one Funding Date during any calendar month. Each
Advance (other than an Interest Payment Advance) shall be in a minimum amount of
$1,000,000 or in amounts of $100,000 in excess thereof. Subject to the
satisfaction or waiver of the conditions precedent to such Advance set forth in
Section 6, each Participant shall purchase its Participation Interest in such
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Advance by making available to the Lessor its proportionate share of such
Advance in immediately available federal funds by wire transfer to the Agent for
deposit to the Lessee's demand deposit account with the Agent not later than
12:00 noon, San Francisco time, on the applicable Funding Date. Upon (i) the
Lessee's receipt of the funds provided by the Participants with respect to an
Advance, and (ii) satisfaction or waiver of the conditions precedent to such
Advance set forth in Section 6, the Lessee shall (1) in the case of an Advance
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for the acquisition of the Land Interest, pay the acquisition price for such
Land Interest to the Existing Owner, and (2) in the case of other Advances, pay
or retain as payment or reimbursement of, Property Improvements Costs, in each
case from the funds provided by the Participants for such Advance.
4
SECTION 3.5 Allocation of Commitments. Schedule I hereto contains an
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allocation for each Participant of (i) the amount of its Commitment representing
its Tranche A Participation Interest ("Tranche A Participation Interest
--------------------------------
Commitment"), (ii) the amount of its Commitment representing its Tranche B
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Participation Interest ("Tranche B Participation Interest Commitment"), (iii)
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the amount of its Commitment representing its Tranche C Participation Interest
("Tranche C Participation Interest Commitment"), (iv) the amount of its
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Commitment (and allocation to its Tranche A Participation Interest Commitment,
Tranche B Participation Interest Commitment and Tranche C Participation Interest
Commitment), and (v) the percentage referred to in the definition of the term
"Participation Interest". The Lessee, the Lessor and the Participants have
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approved all such allocations and percentages. Schedule I shall be amended as
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required to reflect changes in the allocations set forth thereon due to the
addition of additional Participants pursuant to Section 12.1.
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SECTION 3.6 Actions on Restructuring Date. Notwithstanding anything to
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the contrary in Section 3.4 or 3.5, on the Restructuring Date (a) certain
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Participants shall make Advances as set forth on Schedule 3.6 in the aggregate
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amount of $300,000 for Transaction Expenses payable by the Lessee on the
Restructuring Date and (b) the Tranche A Participation Interests and the Tranche
B Participation Interests of The Bank of Nova Scotia and KeyBank National
Association shall be reallocated as set forth on Schedule I.
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SECTION 3.7 Termination, Extension or Reduction of Participants'
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Commitments. (a) The Lessor shall have the right, upon not less than three (3)
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Business Days' written notice to the Agent, to terminate the Participants'
Commitments or, from time to time, to reduce the amount of the Participants'
Commitments, provided that (i) after giving effect to such reduction, the
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aggregate outstanding principal amount of the Tranche A Participation Interests
shall not exceed the aggregate Tranche A Participation Interest Commitments,
(ii) after giving effect to such reduction, the aggregate outstanding principal
amount of the Tranche B Participation Interests shall not exceed the aggregate
Tranche B Participation Interest Commitments, (iii) after giving affect to such
reduction, the aggregate outstanding equity investment of the Tranche C
Participation Interests shall not exceed the aggregate Tranche C Participation
Interest Commitments, and (iv) any such reduction shall be made pro rata among
the Participants' Commitments within each Tranche. As long as there exists no
Event of Default that has occurred and is continuing, the Lessor shall exercise
such right only as directed by the Lessee, and after the occurrence and during
the continuance of an Event of Default the Lessor shall exercise such right only
as directed by the Required Participants. In the event that, after the
occurrence and during the continuance of an Event of Default, the Lessor and the
Participants exercise such right, the Lessee may exercise its Purchase Option
under Section 20.1 of the Lease upon not less than ten (10) days' written notice
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to the Lessor.
(b) The Lessee may, at any time after the first anniversary of the
Effective Date, by written request to the Lessor and Agent (which the Agent
shall promptly forward to each Participant) given not later than ninety (90)
days prior to the then current Maturity Date, request (an "Extension Request")
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that the Maturity Date be extended to the date that is one (1) year after such
Maturity Date. No later than the date (the "Extension Response Date") which is
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thirty (30) days after such request has been delivered to each of the
Participants, each Participant will notify the Lessor in writing (with a copy to
the Agent and the Lessee) whether or not it
5
consents to such Extension Request (which consent may be granted or denied by
each Participant in its sole discretion and may be conditioned on receipt of
such financial information or other documentation as may be specified by such
Participant including without limitation satisfactory appraisals of the
Property), provided that any Participant that fails to so advise the Lessor on
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or prior to the Extension Response Date shall be deemed to have denied such
Extension Request. The extension of the Maturity Date contemplated by any
Extension Request shall become effective as of the Maturity Date then in effect
(the "Extension Effective Date") on or after the Extension Response Date on
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which all of the Participants (other than Non-Consenting Participants which have
been replaced by Replacement Participants in accordance with Section 3.7(c))
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shall have consented to such Extension Request; provided that:
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(i) on both the date of the Extension Request and the Extension
Effective Date, (x) each of the representations and warranties made by the
Lessee and the Lessor in or pursuant to the Operative Documents shall be
true and correct in all material respects as if made on and as of each such
date, except for representations and warranties made as of a specific date,
which shall be true and correct in all material respects as of such date
and matters waived by the Required Participants or all of the Participants,
as applicable, (y) no Event of Default shall have occurred and be
continuing, and (z) on each of such dates the Agent shall have received a
certificate of the Lessee and the Lessor, each as to itself, as to the
matters set forth in clause (x) above and from the Lessee as to the matters
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set forth in clause (y) above;
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(ii) on the date that is ninety (90) days prior to the date of
the Extension Effective Date that is the fifth anniversary of the Closing
Date (and on each Extension Effective Date, if any, that is every fifth
anniversary thereafter), the Lessee shall deliver to the Lessor and the
Agent (with sufficient copies for each Participant) an Appraisal of the
Property in form and substance satisfactory to the Lessor and the Agent;
(iii) the Agent and the Required Participants shall have
received satisfactory evidence that the Expiration Date shall, after giving
effect to any extension thereof which has become effective on or prior to
such Extension Effective Date, occur on the Maturity Date as so extended;
and
(iv) the Maturity Date shall not be extended for more than two
(2) one-year periods pursuant to this Section 3.7(b).
--------------
(c) The Lessee shall be permitted to replace any Non-Consenting
Participant with a replacement bank or other financial institution (a
"Replacement Participant") at any time on or prior to the date which is thirty
-----------------------
(30) days after the relevant Extension Response Date; provided that (i) such
--------
replacement does not conflict with any Requirement of Law, (ii) the Replacement
Participant shall purchase, at par, all of the Participation Interest of such
Non-Consenting Participant on or prior to the date of replacement, (iii) the
Lessee shall be liable to such Non-Consenting Participant under Section 13 of
----------
this Participation Agreement if any Advance (or Participation Interest therein)
shall be prepaid (or purchased) other than on the last day of the Interest
Period or Interest Periods relating thereto, (iv) the Replacement Participant,
if not already a Participant, shall be reasonably satisfactory to the Required
Participants, (v) such
6
replacement shall be made in accordance with the provisions of Section 12 of
----------
this Participation Agreement (provided that the relevant Replacement Participant
(or the Lessee for the benefit of such Replacement Participant) shall be
obligated to pay the Transaction Expenses arising in connection therewith), (vi)
the Replacement Participant shall have agreed to be subject to all of the terms
and conditions of this Participation Agreement (including the extension of the
Maturity Date contemplated by the relevant Extension Request) and other
Operative Documents, and (vii) during the continuation of an Event of Default,
the Lessee shall have the exclusive right to designate the Replacement
Participant. The Agent hereby agrees to cooperate with the Lessee in the
Lessee's efforts to arrange one or more Replacement Participants as contemplated
by this Section 3.7(c).
--------------
SECTION 3.8 Interest Rates; Yield and Payment Dates. (a) The Tranche A
---------------------------------------
Participation Interest and the Tranche B Participation Interest in each Advance
shall bear interest at a rate of interest equal to (i) the Alternate Base Rate
plus the Applicable Margin, or (ii) at the Lessee's election in accordance with
Section 3.4 or this Section 3.8, for each day during each Interest Period with
----------- -----------
respect thereto at a rate per annum for such Interest Period equal to the
Eurodollar Rate determined for such day plus the Applicable Margin. The Tranche
A Participation Interest and the Tranche B Participation Interest in the initial
Advance shall bear interest at a rate equal to the Alternate Base Rate until
commencement of the initial Interest Period with respect thereto. The Lessee
shall give irrevocable notice to the Agent, in accordance with the applicable
provisions of Section 3.4 or this Section 3.8, of the length of each Interest
----------- -----------
Period to be applicable to each portion of each Advance. There shall not be
more than twelve Interest Periods outstanding under Sections 3.8(a) and (b) at
-----------------------
any time.
(b) The equity portion of each Advance (represented by the Tranche C
Participation Interest in such Advance) shall accrue equity yield (the "Yield")
-----
at a rate equal to (i) the Alternate Base Rate plus the Applicable Margin, or
(ii) at the Lessee's election in accordance with Section 3.4 or this Section
----------- -------
3.8, for each day during each Interest Period with respect thereto, the
Eurodollar Rate determined for such day plus the Applicable Margin. This
Tranche C Participation Interest in the initial Advance shall accrue Yield at a
rate equal to the Alternate Base Rate until commencement of the initial Interest
Period with respect thereto.
(c) If all or a portion of (i) the principal amount or equity portion
of any Advance, (ii) any interest or Yield payable thereon or (iii) any other
amount payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum which is equal to the Overdue Rate.
(d) Interest and Yield shall be payable in cash (except as provided in
paragraph (e) below) in arrears on each Scheduled Payment Date, provided that
------------- --------
(i) interest or Yield accruing pursuant to paragraph (c) of this Section 3.8
---------------------------------
shall be payable from time to time on demand and (ii) each prepayment of
Advances shall be accompanied by accrued interest and Yield to the date of such
prepayment on the amount of Advances so prepaid.
(e) On each date which is three (3) Business Days prior to any
Scheduled Payment Date during the Construction Period, the Lessee shall be
deemed to have requested an Advance comprised of an Interest Payment Advance
pursuant to Section 3.4 and the Lessor shall
-----------
7
be deemed to have requested a purchase pursuant to Section 3.2 of Participation
-----------
Interests in such Advance in an amount equal to the aggregate amount of the
Basic Rent due and payable on such date with respect to accrued interest and
accrued Yield on outstanding Advances. The Funding Date with respect to any such
Interest Payment Advance and purchase of Participation Interests therein shall
be the relevant Scheduled Payment Date (provided that such Advance and the
purchase of such Participation Interests shall be subject to satisfaction of the
applicable conditions precedent set forth in Section 6) and the proceeds of such
---------
payment shall be applied to pay such accrued interest and accrued Yield. On each
such Funding Date, the Property Cost shall be increased by an amount equal to
the Basic Rent paid on such date with respect to such Property with the proceeds
of such payment, and the Land Interest Acquisition Cost and Property
Improvements Costs shall be increased by their pro rata portions of such
Advance.
SECTION 3.9 Computation of Interest and Yield. (a) Whenever it is
---------------------------------
calculated on the basis of the Alternate Base Rate, interest and Yield shall be
calculated on the basis of a 365- (or 366-, as the case may be) day year for the
actual days elapsed; and, otherwise, interest and Yield shall be calculated on
the basis of a 360-day year for the actual days elapsed. The Agent shall as
soon as practicable after the commencement of each Interest Period notify the
Lessor, the Lessee and the Participants of each determination of a Eurodollar
Rate. Any change in the interest rate or Yield rate on an Advance resulting
from a change in the Alternate Base Rate or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the day on
which such change becomes effective. The Agent shall as soon as practicable
notify the Lessor, the Lessee and the Participants of the effective date and the
amount of each such change in interest rate or Yield rate.
(b) Each determination of an interest rate or Yield rate by the Agent
pursuant to any provision of this Participation Agreement shall be conclusive
and binding on the Lessor, the Lessee and the Participants in the absence of
manifest error. The Agent shall, at the request of such parties, deliver to
such parties a statement showing the quotations used by the Agent in determining
any interest rate pursuant to Section 3.9(a).
--------------
SECTION 3.10 Pro Rata Treatment and Payments. (a) Each participation in
-------------------------------
the Advances by the Participants hereunder and each reduction of the Commitments
of the Participants shall be made pro rata among the Tranche A Participants,
Tranche B Participants and Tranche C Participants according to the respective
Commitment Percentages of each such Participant. Except as otherwise provided
in Sections 3.11 - 3.21, each payment (including each prepayment) by the Lessor
--------------------
on account of Participation Interests representing the principal amount of or
equity investment in and interest or Yield on the Advances shall be made pro
rata among the Tranche A Participants, Tranche B Participants and Tranche C
Participants according to the respective Participation Interests of each such
Participant. All payments (including prepayments) to be made by the Lessor
hereunder to the Participants with respect to their Participation Interests,
whether on account of principal, equity investment, interest, Yield or
otherwise, shall be payable to the extent received by the Lessor from or on
behalf of the Lessee and shall be made without setoff or counterclaim and shall
be made prior to 12:00 noon, San Francisco time, on the due date thereof to the
Agent, for the account of the Participants, at the Agent's office referred to in
Section 15.3 of this Participation Agreement, in Dollars and in immediately
------------
available funds. The Agent shall distribute such payments to the Participants
promptly upon receipt in like funds
8
as received. If any payment hereunder (other than payments of Participation
Interests in the Advances) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day. If any payment of Participation Interests in an Advance becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day unless the result of such extension
would be to extend such payment into another calendar month, in which event such
payment shall be made on the immediately preceding Business Day. In the case of
any extension or shortening of the due date of any payment pursuant to the
preceding two sentences, interest or Yield thereon shall be payable at the then
applicable rate during such extension or until such shortened due date, as the
case may be.
(b) Unless the Agent shall have been notified in writing by any
Participant prior to funding its Participation Interest in an Advance that such
Participant will not make its share of such Advance available to the Agent, the
Agent may assume that such Participant is making such amount available to the
Agent, and the Agent may, in reliance upon such assumption, make available to
the Lessor a corresponding amount. If such amount is not made available to the
Agent by the required time on the Funding Date therefor, such Participant,
without right of reimbursement from the Lessee to such Participant, shall pay to
the Agent, on demand, such amount with interest thereon at a rate equal to the
daily average Federal Funds Effective Rate for the period until such Participant
makes such amount immediately available to the Agent. A certificate of the
Agent submitted to any Participant with respect to any amounts owing under this
Section 3.10(b) shall be conclusive in the absence of manifest error. If such
---------------
Participant's share of such Advance is not made available to the Agent by such
Participant within three (3) Business Days of such Funding Date, the Agent shall
also be entitled to recover such amount with interest thereon at the rate borne
by such Advance, on demand, from the Lessee, to the extent the Agent has made a
corresponding amount of the Advance to the Lessee.
SECTION 3.11 The Account. The Agent may if it so desires establish an
-----------
account (the "Account") into which the Agent shall deposit all payments,
-------
receipts and other consideration of any kind whatsoever paid under the Lease and
received by the Agent pursuant to this Participation Agreement, the Lease and
any other Operative Document. The Agent shall make distributions of such
payments, receipts and other consideration (and, if an Account is used, from the
Account) pursuant to the requirements of Sections 3.12 -3.21 hereof.
-------------------
SECTION 3.12 Basic Rent. (a) Each payment (or portion thereof) of Basic
----------
Rent comprising interest or Yield on the Advances (and any payment of interest
on overdue installments of such component of Basic Rent) received by the Agent
shall be distributed by the Agent as promptly as possible (it being understood
that any payments of such component of Basic Rent received by the Agent 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) to the Participants
pro rata in accordance with, and for application to, the portion of their
Participation Interests in such portion of Basic Rent, as well as in any overdue
interest due to such Participant (to the extent permitted by applicable law).
(b) Each payment (or portion thereof) of Basic Rent comprising
principal of, or a redemption of the equity investment in, the Advances (and any
payment of interest on
9
overdue installments of such component of Basic Rent) received by the Agent
shall be distributed as promptly as possible (it being understood that any
payments of such component of Basic Rent received by the Agent 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) to the Participants pro rata in
accordance with, and for application to, the portion of their Participation
Interests in such portion of Basic Rent then due each Participant.
SECTION 3.13 Purchase Payments by Lessee. Any payment received (or offset
---------------------------
against the Cash Collateral) by the Agent as a result of:
(a) the purchase of the Lessor's interest in all of the Property in
connection with the Lessee's exercise of its Purchase Option under Section 20.1
------------
of the Lease or a portion of the Property in connection with any exercise by the
------------
Lessee of its Partial Purchase Option under Section 20.5 of the Lease, or
-------------------------
(b) the Lessee's compliance with its obligation to purchase the
Lessor's interest in the Property in accordance with Section 20.2 of the Lease,
-------------------------
or
(c) the payment of the Asset Termination Value in accordance with
Sections 16.2(b), 16.3 or 16.4 of the Lease, or
-------------------------------------------
(d) the Lessee failing to fulfill one or more of the conditions to
exercise of the Remarketing Option pursuant to Section 22.1 of the Lease and the
-------------------------
Agent's receipt pursuant to the next-to-last paragraph of Section 22.1 of the
-------------------
Lease of the Asset Termination Value in accordance with Section 20.2 of the
----- -------------------
Lease, shall be distributed by the Agent as promptly as possible (it being
-----
understood that any such payment received by the Agent on a timely basis and in
accordance with the provisions of the Lease shall be distributed on the date on
which such funds are so received) to pay in full or redeem the Participant
Balance of each Participant and in the case that the amount so distributed shall
be insufficient to pay in full as aforesaid, then pro rata among the
Participants without priority of one over the other, in the proportion that the
Participant Balance of each bears to the aggregate of all of the Participant
Balances.
(e) Notwithstanding any other provision in this Participation
Agreement, the Lease or any other Operative Document to the contrary, the
Lessee, the Agent, the Participants and the Lessor agree that upon the maturity
or acceleration of the Lessee's obligation to pay the Asset Termination Value,
Residual Value Guarantee Amount or Purchase Option Price, any and all amounts of
Cash Collateral that have been deposited by the Lessee pursuant to the Cash
Collateral Agreement and that have not been withdrawn by the Lessee or offset or
applied by the Lessor, the Agent or any Participant (in accordance with the
terms of the Cash Collateral Agreement) as of such maturity or acceleration
date, shall be required to be applied by the Agent and the Lessor to satisfy the
Lessee's obligation to pay the unpaid amount of such portion of the Asset
Termination Value, Purchase Option Price or Residual Value Guarantee represented
by the Cash Collateral, notwithstanding the fact that such amounts may not then
be actually available, for any reason attributable to the Lessor, the Agent or
any Participant. Such reasons include, without limitation, any fraud or
misapplication of funds by the Lessor, the Agent or any Participant, decline in
value of the Collateral or the filing by or against the Lessor, the Agent or
10
any Participant of any insolvency, bankruptcy, dissolution, liquidation,
reorganization or similar proceeding, but except to the extent resulting from a
proceeding involving the solvency of the Lessee).
SECTION 3.14 Residual Value Guarantee Amount Payment by Lessee. The
-------------------------------------------------
payment by the Lessee of the Residual Value Guarantee Amount to the Agent in
accordance with Article XXII of the Lease upon the Lessee's exercise of the
-------------------------
Remarketing Option shall be distributed by the Agent as promptly as possible (it
being understood that any such payment received by the Agent on a timely basis
in accordance with the provisions of the Lease shall be distributed on the date
on which such funds are so received) in the following order of priority:
first, to the Tranche A Participants for application to pay in full
-----
the Tranche A Participation Interest Balance of each Tranche A Participant;
second, to the Tranche B Participants for application to pay in full
------
the Tranche B Participation Interest Balance of each Tranche B Participant,
and in the case where the amounts so distributed shall be insufficient to
pay in full as aforesaid, then pro rata among the Tranche B Participants
without priority of one Tranche B Participant over the other in the
proportion that each such Tranche B Participant's Tranche B Participation
Interest Balance bears to the aggregate Tranche B Participation Interest
Balances of all Tranche B Participants; and
third, to the Tranche C Participants for application to redeem the
-----
Tranche C Participation Interest Balance of each Tranche C Participant, and
in the case where the amounts so distributed shall be insufficient to fully
redeem as aforesaid, then pro rata among the Tranche C Participants without
priority of one Tranche C Participant over the other in the proportion that
each such Tranche C Participant's Tranche C Participation Interest Balance
bears to the aggregate Tranche C Participation Interest Balances of all
Tranche C Participants.
SECTION 3.15 Sales Proceeds of Remarketing of Property. Any payments
-----------------------------------------
received by the Agent as proceeds from the sale of the Property sold pursuant to
the Lessee's exercise of the Remarketing Option pursuant to Article XXII of the
-------------------
Lease, together with any payment made by the Lessee as a result of an appraisal
-----
pursuant to Section 13.2 of this Participation Agreement, shall be distributed
------------
by the Agent as promptly as possible (it being understood that any such payment
received by the Agent 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 Tranche B Participants for application to pay in full
-----
the Tranche B Participation Interest Balance of each Tranche B Participant,
and in the case where the amount so distributed shall be insufficient to
pay in full as aforesaid, then pro rata among the Tranche B Participants
without priority of one Tranche B Participant over the other in the
proportion that each Tranche B Participant's Tranche B Participation
Interest Balance bears to the aggregate Tranche B Participation Interest
Balances of all Tranche B Participants;
11
second, to the Tranche C Participants for application to redeem the
------
Tranche C Participation Interest Balance of each Tranche C Participant, and
in the case where the amount so distributed shall be insufficient to fully
redeem as aforesaid, then pro rata among the Tranche C Participants without
priority of one Tranche C Participant over the other in the proportion that
each Tranche C Participant's Tranche C Participation Interest Balance bears
to the aggregate Tranche C Participation Interest Balances of all Tranche C
Participants;
third, to the Tranche A Participants for application to pay in full
-----
the Tranche A Participation Interest Balance of each Tranche A Participant,
and in the case where the amount so distributed shall be insufficient to
pay in full as aforesaid, then pro rata among the Tranche A Participants
without priority of one Tranche A Participant over the other in the
proportion that each Tranche A Participant's Tranche A Participation
Interest Balance bears to the aggregate Tranche A Participation Interest
Balances of all Tranche A Participants; and
fourth, the balance, if any, shall be promptly distributed to, or as
------
directed by, the Lessee.
SECTION 3.16 Supplemental Rent. All payments of Supplemental Rent
-----------------
received by the Agent (excluding any amounts payable pursuant to the preceding
provisions of this Section 3) shall be distributed promptly by Agent upon
---------
receipt thereof to the Persons entitled thereto pursuant to the Operative
Documents.
SECTION 3.17 Excepted Payments. Notwithstanding any other provision of
-----------------
this Participation Agreement or the Operative Documents, any Excepted Payment
received at any time by the Agent shall be distributed promptly to the Person
entitled to receive such Excepted Payment pursuant to the Operative Documents.
SECTION 3.18 Distribution of Payments After Event of Default. (a) All
-----------------------------------------------
payments received and amounts realized by the Lessor or the Agent after an Event
of Default exists, including under the Guarantee, the Deed of Trust or the Cash
Collateral Agreement, and proceeds from the sale of any of the Property,
proceeds of any amounts from any insurer or any Governmental Authority in
connection with any Casualty or Condemnation during the continuation of an Event
of Default, or from Lessee as payment in accordance with the Lease, including
any payment received from Lessee pursuant to Section 17 of the Lease, shall, if
-----------------------
received by Lessor, be paid to the Agent as promptly as possible and shall be
distributed by the Agent as promptly as possible (it being understood that any
such payment received by the Agent on a timely basis and in accordance with the
provisions of the Operative Documents shall be distributed on the date received
in the funds so received) in the following order of priority:
first, so much of such payment or amount as shall be required to
-----
reimburse the Lessor or the Agent for any tax, expense or other loss
incurred by the Lessor or the Agent (including, to the extent not
previously reimbursed, those incurred in connection with any duties of the
Agent as the Agent) and any unpaid ongoing fees of the Lessor and the Agent
shall be distributed to each of them for its own account;
11
second, so much of such payments or amounts as shall be required to
------
reimburse the then existing or prior Participants for payments made by them
to the Lessor pursuant to Section 18.1 of the Lease (to the extent not
-------------------------
previously reimbursed) and to pay such then existing or prior Participants
the amounts payable to them pursuant to any expense reimbursement or
indemnification provisions of the Operative Documents shall be distributed
to each such Participant without priority of one over the other in
accordance with the amount of such payment or payments payable to each such
Person;
third, in the case of a sale of the Property, receipt of Cash
-----
Collateral or application of the Cash Collateral, in the order of priority
set forth in Section 3.15;
------------
fourth, to the Tranche B Participants for application to pay in full
------
the Tranche B Participation Interest Balance of each Tranche B Participant,
and in the case where the amount so distributed shall be insufficient to
pay in full as aforesaid, then pro rata among the Tranche B Participants
without priority of one Tranche B Participant over the other in the
proportion that each Tranche B Participant's Tranche B Participation
Interest Balance bears to the aggregate Tranche B Participation Interest
Balances of all Tranche B Participants:
fifth, to the Tranche C Participants for application to redeem the
-----
Tranche C Participation Interest Balance of each Tranche C Participant, and
in the case where the amount so distributed shall be insufficient to fully
redeem as aforesaid, then pro rata among the Tranche C Participants without
priority of one Tranche C Participant over the other in the proportion that
each Tranche C Participant's Tranche C Participation Interest Balance bears
to the aggregate Tranche C Participation Interest Balances of all Tranche C
Participants;
sixth, to the Tranche A Participants for application to pay in full
-----
the Tranche A Participation Interest Balance of each Tranche A Participant,
and in the case where the amount so distributed shall be insufficient to
pay in full as aforesaid, then pro rata among the Tranche A Participants
without priority of one Tranche A Participant over the other in the
proportion that each Tranche A Participant's Tranche A Participation
Interest Balance bears to the aggregate Tranche A Participation Interest
Balances of all Tranche A Participants; and
seventh, the balance, if any, of such payment or amounts remaining
-------
thereafter shall be promptly distributed to, or as directed by, the Lessee.
SECTION 3.19 Other Payments. (a) Except as otherwise provided in Sections
-------------- --------
3.12, 3.13, 3.18 and paragraph (b) below, (i) any payment received by the Agent
---------------- -------------
for which no provision as to the application thereof is made in the Operative
Documents or elsewhere in this Section 3, and (ii)all payments received and
---------
amounts realized by the Agent under the Lease or otherwise with respect to the
Property, the Deed of Trust or the Cash Collateral to the extent received or
realized at any time after indefeasible payment in full or redemption of the
Participant Balances of all of the Participants and any other amounts due and
owing to the Lessor, the Participants or the Agent, shall be distributed
forthwith by the Agent in the order of priority set
12
forth in Section 3.13 (in the case of any payment described in clause (i) above)
------------ ----------
or in Section 3.18 hereof (in the case of any payment described in clause (ii)
------------ -----------
above), except, that (i) in the case of any payment described in clause (ii)
-----------
above, such payment shall be distributed omitting clause third of such Section
----------------------------
3.18; and the balance, if any (in the case of any payment described in clause
---- ------
(i) or (ii) above), shall be distributed to, or as directed by, the Lessee, and
-----------
(ii) any payments received under the Guaranty shall be distributed solely to the
Participants in accordance with the priorities set forth in Section 3.18.
------------
(b) Except as otherwise provided in Sections 3.12 and 3.13 hereof, any
----------------------
payment received by the Agent for which provision as to the application thereof
is made in an Operative Document but not elsewhere in this Section 3 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 3.20 Casualty and Condemnation Amounts. Any amounts payable to
---------------------------------
the Lessor as a result of a Casualty or Condemnation pursuant to Section 15.1 of
---------------
the Lease (but excluding any amounts payable pursuant to Section 16.2 of the
--------- -------------------
Lease) shall, if no Lease Event of Default exists, be paid over to Lessee for
-----
the rebuilding or restoration of that portion of the Property to which such
Casualty or Condemnation applied, and any excess proceeds shall be paid to the
Lessee. If a Lease Event of Default exists, then during the continuance of such
Lease Event of Default, all such amounts shall be held by the Agent as Cash
Collateral and upon exercise of the Lessor's remedies hereunder shall be
distributed pursuant to Section 3.18.
------------
SECTION 3.21 Order of Application. To the extent any payment made to any
--------------------
Participant pursuant to Sections 3.13, 3.14, 3.15 or 3.16 is insufficient to pay
---------------------------------
in full the Participant Balance of such Participant, then each such payment
shall first be applied to its Participation Interest in accrued interest and
then to its Participation Interest in principal of the Advances.
SECTION 4
FEES
SECTION 4.1 Administrative Fee. The Lessee shall pay an administrative
------------------
fee (the "Administrative Fee") to the Agent for its own account as referred to
------------------
in, and at such times as provided in, the Fee Letter.
SECTION 4.2 Overdue Fees. If all or a portion of any fee due hereunder
------------
shall not be paid when due, such overdue amount shall bear interest, payable by
the Lessee on demand, at a rate per annum equal to the Overdue Rate from the
date of such nonpayment until such amount is paid in full (as well after as
before judgment).
13
SECTION 5
CERTAIN INTENTIONS OF THE PARTIES
SECTION 5.1 Nature of Transaction. (a) It is the intent of the parties
---------------------
hereto that: (i) the Lease constitutes an "operating lease" pursuant to
Statement of Financial Accounting Standards No. 13, as amended, for purposes of
Lessee's financial reporting, and (ii) for purposes of federal, state and local
income or franchise taxes and for any other tax imposed on or measured by
income, the transaction contemplated hereby is a financing arrangement and
preserves ownership in the Property in the Lessee. Nevertheless, the Lessee
acknowledges and agrees that neither the Agent, the Lessor nor any Participant
has made any representations or warranties to the Lessee concerning the tax,
accounting or legal characteristics of the Operative Documents and that the
Lessee has obtained and relied upon such tax, accounting and legal advice
concerning the Operative Documents as it deems appropriate.
Notwithstanding any provision of this Participation Agreement to the
contrary, the parties hereto agree and declare that: (i) the transactions
contemplated by the Lease are intended to have a dual, rather than single, form;
and (ii) all references in this Participation Agreement to the "lease" of the
Property which fail to reference such dual form do so as a matter of convenience
only and do not reflect the intent of the parties hereto as to the true form of
such arrangements. The parties hereto agree that, in accordance with their
intentions expressed herein and the substance of the transactions contemplated
hereby, Lessee (and not Lessor) shall be treated as the owner of the Property
for federal, state, and local income and property tax purposes and the Lease
shall be treated as a financing arrangement. Lessee shall be entitled to take
any deduction, credit, allowance or other reporting, filing or other tax
position consistent with such characterizations. The Lessor and the
Participants shall file any federal, state or local income tax returns, reports
or other statements in a manner which is consistent with the foregoing
provisions of this Section 5.1; provided, that the Lessor and any Participant
----------- --------
may take a position that is inconsistent with the Lessee's status as owner of
the Property if: (x) there has been a change in law or regulation so requiring
as supported by an opinion of counsel reasonably acceptable to the Lessee that
there is not substantial authority for such a consistent reporting position; or
(y) (A) there has been an administrative or judicial holding that the Lessee is
not the owner of the Property for such tax purposes, (B) the Lessee has no right
to contest such holding pursuant to Section 13.5 of the Participation Agreement,
------------
and (C) the Lessee's lack of right to contest is not the result of an
Indemnitee's waiver of its right to indemnification pursuant to Section
-------
13.5(f)(iii) of the Participation Agreement or failure of the amount at issue to
------------
exceed the minimum amount set forth in Section 13.5(f)(iv)(B) of the
----------------------
Participation Agreement.
(b) Specifically, without limiting the generality of subsection (a) of
this Section 5.1, the parties hereto intend and agree that with respect to the
-----------
nature of the transactions evidenced by the Lease in the context of the exercise
of remedies under the Operative Documents, including, without limitation, in the
case of any insolvency or receivership proceedings or a petition under the
United States bankruptcy laws or any other applicable insolvency laws or statute
of the United States of America or any State or Commonwealth thereof affecting
the Lessee, the Lessor or any Participant or any enforcement or collection
actions, (i) the transactions evidenced by the Operative Documents are loans
made by the Lessor
14
and the Participants as unrelated third party lenders to the Lessee secured by
the Property, (ii) the obligations of the Lessee under the Lease to pay Basic
Rent and Supplemental Rent or Asset Termination Value in connection with any
purchase of the Property pursuant to the Lease shall be treated as payments of
interest on and principal of, respectively, loans from the Lessor and the
Participants to the Lessee, (iii) the Lease grants a security interest and
mortgage or deed of trust or lien, as the case may be, in the Property and the
collateral described in the Mortgage to the Lessor, the Agent and the
Participants to secure the Lessee's performance and payment of all amounts under
the Lease and the other Operative Documents.
SECTION 5.2 Amounts Due Under Lease. Anything else herein or elsewhere to
-----------------------
the contrary notwithstanding, it is the intention of the Lessee, the Lessor, the
Participants and the Agent that: (i) the amount and timing of installments of
Basic Rent due and payable from time to time from the Lessee under the Lease
shall be equal to the aggregate payments due to the Participants in respect of
their Participation Interests on each Payment Date; (ii) if the Lessee elects
the Purchase Option or becomes obligated to purchase the Property under the
Lease, the Participation Interests, all fees and all of the interest on overdue
amounts thereon and all other obligations of the Lessee owing to the Lessor, the
Participants and the Agent shall be paid in full by the Lessee; (iii) if the
Lessee properly elects the Remarketing Option, the Lessee shall only be required
to pay to the Lessor the proceeds of the sale of the Property, the Residual
Value Guarantee Amount and any amounts due pursuant to Section 13 of this
----------
Participation Agreement and Section 22.2 of the Lease (which aggregate amounts
-------------------------
may be less than the Asset Termination Value); and (iv) upon an Event of Default
resulting in an acceleration of the Lessee's obligation to purchase the Property
under the Lease, the amounts then due and payable by the Lessee under the Lease
shall include all amounts necessary to pay in full the Asset Termination Value,
plus all other amounts then due from the Lessee to the Participants, the Agent
and the Lessor under the Operative Documents.
SECTION 6
CONDITIONS PRECEDENT TO
ACQUISITION OF LAND INTEREST AND ADVANCES
SECTION 6.1 Conditions Precedent -- Documentation. The obligation of the
-------------------------------------
Lessor to acquire the Land Interest on the Land Interest Acquisition Date and to
make the Advance in respect of such Property on the Funding Date applicable
thereto, the obligation of the Lessor to make an Advance to finance the
acquisition of Equipment or the construction of any Improvements or the funding
of any Interest Payment Advance on any Funding Date, and the obligation of each
Participant to purchase its Participation Interest in, and to make available to
the Lessor its related portion of, each such Advance on such Funding Date are
subject to satisfaction or waiver of the following conditions precedent and the
conditions precedent set forth in Section 6.2 (it being understood that the
-----------
Lessor's obligation to acquire such Land Interest or to finance such Equipment,
if any, or Improvements shall not be subject to the conditions precedent set
forth in this Section 6.1 or Section 6.2 to the extent such conditions are
----------- -----------
actions required of the Lessor) on or prior to the Closing Date, the Land
Interest Acquisition Date or such Funding Date, as the case may be:
15
(a) Acquisition and Funding Request. Prior to the Land Interest
-------------------------------
Acquisition Date or the applicable Funding Date, the Agent and the Lessor shall
have received a fully executed counterpart of the Acquisition Request or Funding
Request, as the case may be, appropriately completed by the Lessee, in
accordance with Sections 3.3 and 3.4, respectively; provided, that this
-------------------- --------
condition shall be deemed to have been satisfied in connection with an Interest
Payment Advance pursuant to Section 3.8(d) hereof.
--------------
(b) Closing Date; Operative Documents. The Closing Date shall have
---------------------------------
occurred or shall occur simultaneously with the earlier of the initial Funding
Date or Land Interest Acquisition Date and each of the Operative Documents to be
entered into on the Closing Date shall have been duly authorized, executed and
delivered by the parties thereto, and shall be in full force and effect,
including, without limitation, (i) this Participation Agreement, (ii) the Lease,
(iii) the Lease Supplement; (iv) the Guarantee, (v) the Construction Agency
Agreement, (vi) the Construction Agency Agreement Assignment, (vii) the
Mortgage, (viii) the Assignment of Lease and Supplement to Assignment of Lease,
(ix) the Consent to Assignment, (x) the Assignment of Property Purchase
Agreement, (xi) the Deed and (xii) the Cash Collateral Agreement. No Default or
Event of Default shall exist thereunder and be continuing (both before and after
giving effect to the transactions contemplated by the Operative Documents), and
the Lessor, the Agent and each Participant shall each have received a fully
executed copy of each of such Operative Documents (other than the Lease and
Lease Supplement, of which the Agent shall receive the original and the Lessor
and the Participants shall receive specimens). On or prior to the Closing Date
or the Land Interest Acquisition Date, as applicable, the Operative Documents
(or memoranda thereof), any supplements thereto and any financing statements in
connection therewith required under the Uniform Commercial Code shall have been
recorded, registered and filed, if necessary, in such manner as to enable the
Lessee's counsel to render its opinion referred to in clauses l(i)(A) and (B)
-----------------------
below.
(c) Environmental Certificate. The Agent, each Participant and the
-------------------------
Lessor shall have received an Environmental Certificate substantially in the
form of Exhibit C (an "Environmental Certificate") with respect to the Property,
--------- -------------------------
provided that such Environmental Certificate shall be delivered not less than
--------
five (5) Business Days prior to the Land Interest Acquisition Date and shall
have been approved by the Agent, the Required Participants and the Lessor, and
accompanied by the Environmental Audit for the Property prepared by ▇▇▇▇▇▇▇
▇▇▇▇▇▇ Associates, dated August 13, 1997.
(d) Preliminary Letter of Value. On or prior to the Land Interest
---------------------------
Acquisition Date, the Agent, the Lessor and the Participants shall have received
a Preliminary Letter of Value of the Property prepared by the appraiser
preparing the Appraisal referred to in Section 10.1(s), which Preliminary Letter
---------------
of Value shall (i) show that the Fair Market Sales Value of the Land Interest
with respect to such Property as of the projected Completion Date shall not
exceed twenty-five (25%) of the Fair Market Sales Value of such Land Interest
and the Improvements to be constructed thereon in accordance with the Plans and
Specifications for Property, and (ii) show as of the projected Completion Date
the Fair Market Sales Value of such Land Interest and the Improvements to be
constructed thereon in accordance with the Plans and Specifications, and (iii)
meet the other applicable requirements set forth in clauses (i) and (ii) of the
--------------------
definition of the "Appraisal" contained in Appendix 1.
---------
16
(e) Deed. On or prior to the Land Interest Acquisition Date, the
----
Lessor shall have received a special warranty deed (the "Deed"), in conformity
----
with Applicable Law and appropriate for recording with the applicable
Governmental Authorities, with respect to the Land Interest (and all
Improvements located thereon), conveying fee simple title to the Land Interest
(and all Improvements located thereon) to the Lessor, subject only to Permitted
Exceptions.
(f) Lease Supplement; Equipment Schedule. The Lessee and the Lessor
------------------------------------
shall have delivered (i) on or prior to the Land Interest Acquisition Date, the
original counterpart of the Lease Supplement executed by the Lessee and the
Lessor to the Agent and (ii) on or prior to the applicable Funding Date, a duly
executed Equipment Schedule covering any Equipment, if any, being acquired with
the proceeds of such Advance by the Lessor, together with invoices or appraisals
in form and substance satisfactory to the Agent, the Lessor and the
Participants.
(g) Survey and Title Insurance. On or prior to the Land Interest
--------------------------
Acquisition Date, the Lessee shall have delivered (i) an ALTA/ACSM (1992)(Urban)
Survey of the Property, including Table A numbers 1, 2, 3, 4, 6, 8, 9, 10 and
11, certified to the Lessor, the Participants and the title company and
otherwise in form reasonably acceptable to the Participants, (ii) an ALTA (1992)
owners title insurance policy with extended coverage over the general
exceptions, insuring fee title in the Lessor to the Property, subject only to
the Permitted Exceptions, (iii) an ALTA (1992) Loan Policy insuring the Agent
that the Lien of the Mortgage is a first and primary lien in the Lessor's
interest in the Master Lease and in the fee title to the Property, subject only
to pending disbursements for construction and the Permitted Exceptions, and (iv)
an ALTA (1992) Loan Policy insuring the Agent that the Lien of the Master Lease
is a first and primary Lien in the Lessee's interest in the Property; such
policies each in an amount not less than the estimated Property Cost and to be
reasonably satisfactory to the Lessor, the Agent and the Participants with
extended coverage, access, tax parcel, survey identicality, variable rate,
future advances, usury, comprehensive, fraudulent conveyances, doing business,
mechanics liens and zoning endorsements and such other endorsements as and to
the extent available in such jurisdiction where the Property is located, if
requested by the Agent.
(h) Evidence of Recording and Filing. On or prior to the Land
--------------------------------
Interest Acquisition Date, the Agent shall have received evidence reasonably
satisfactory to it that each of the Deed, the Lease Supplement, the Assignment
of Lease and Supplement to Assignment of Lease, the Consent to Assignment and
the Mortgage shall have been or are being recorded with the appropriate
Governmental Authorities in the order in which such documents are listed in this
clause, and the UCC Financing Statements with respect to the Property being
acquired shall have been or are being filed with the appropriate Governmental
Authorities.
(i) Evidence of Insurance. On or prior to the Land Acquisition Date,
---------------------
the Agent, the Lessor and each Participant shall have received evidence of
insurance with respect to the Property required to be maintained pursuant to the
Lease, setting forth the respective coverages, limits of liability, carrier,
policy number and period of coverage.
(j) Evidence of Use of Proceeds. On or prior to the Land Interest
---------------------------
Acquisition Date or the applicable Funding Date, the Agent and each Participant
shall have received evidence reasonably satisfactory to the Agent and each
Participant as to the use of the proceeds of the
17
Advance in accordance with the provisions of Section 8.1(g), which conditions
--------------
shall be satisfied by delivery of the applicable duly executed Funding Request
with respect thereto.
(k) Taxes. On or prior to the Land Interest Acquisition Date, all
-----
taxes, fees and other charges in connection with the execution, delivery,
recording, filing and registration of the Operative Documents shall have been
paid or provisions for such payment shall have been made to the satisfaction of
the Agent, each Participant and the Lessor.
(l) Opinions of Counsel. On or prior to the Land Interest Acquisition
-------------------
Date, (i) the Lessee shall have delivered to the Agent, each Participant and the
Lessor (A) an opinion of Wilson, Sonsini, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the
Lessee, as to the matters set forth in Exhibit D; and (B) an opinion of local
---------
counsel licensed to practice in the jurisdiction where the Property is located
as to the matters set forth in Exhibit E; and (ii) the Lessor shall have
---------
delivered to the Agent and each Participant (A) an opinion of special counsel in
the form set forth on Exhibit F; and (B) an opinion of internal counsel to the
---------
Lessor to the effect and in the form set forth in Exhibit G.
---------
(m) Approvals. All necessary (or, in the reasonable opinion of the
---------
Lessor, the Participants or the Agent or any of their respective counsel,
advisable) Governmental Actions and covenants and approvals of or by any
Governmental Authority or other Person, in each case required by any Requirement
of Law, covenant or restriction affecting the Property or the transactions
contemplated thereby to have been obtained by such date shall have been obtained
or made and be in full force and effect.
(n) Litigation. No action or proceeding shall have been instituted,
----------
nor shall any action or proceeding be threatened, before any Governmental
Authority, nor shall any order, judgment or decree have been issued or proposed
to be issued by any Governmental Authority (i) to set aside, restrain, enjoin or
prevent the full performance of this Participation Agreement, the Lease or any
other Operative Document or any transaction contemplated hereby or thereby or
(ii) which is reasonably likely to have a Material Adverse Effect.
(o) Requirements of Law. In the reasonable opinion of the Lessor, the
-------------------
Participants, the Agent and their respective counsel, the transactions
contemplated by the Operative Documents do not and will not violate any
Requirement of Law and do not and will not subject the Lessor, the Agent or any
Participant to any adverse regulatory or tax prohibitions or constraints.
(p) Responsible Officer's Certificate of the Lessee. On or prior to
-----------------------------------------------
the earlier of the initial Funding Date or the Land Interest Acquisition Date,
the Lessor, each Participant and the Agent shall each have received a
Responsible Officer's Certificate, dated as of the Land Interest Acquisition
Date, of the Lessee stating that (i) each and every representation and warranty
of the Lessee contained in the Operative Documents to which it is a party is
true and correct on and as of the Closing Date; (ii) no Default or Event of
Default under the Lease, the Property Purchase Agreement or the Construction
Agency Agreement has occurred and is continuing; (iii) each Operative Document
to which the Lessee is a party is in full force and effect with respect to it;
and (iv) the Lessee has duly performed and complied with all covenants,
18
agreements and conditions contained herein or in any Operative Document required
to be performed or complied with by it on or prior to the earlier of the initial
Funding Date or the Land Interest Acquisition Date.
(q) The Lessee's Resolutions and Incumbency Certificate, etc. On or
--------------------------------------------------------
prior to the earlier of the initial Funding Date or the Land Interest
Acquisition Date, the Lessor, each Participant and the Agent shall each have
received (i) a certificate of the Secretary or an Assistant Secretary of the
Lessee attaching and certifying as to (A) the resolutions of the Board of
Directors of the Lessee, duly authorizing the execution, delivery and
performance by the Lessee of documents and agreements of the type represented by
each Operative Document to which it is or will be a party, (B) its articles of
incorporation and bylaws, and (C) the incumbency and signature of persons
authorized to execute and deliver on its behalf the Operative Documents to which
it is a party, and (ii) a good standing certificate from the appropriate officer
of the state in which the Property is located.
(r) Responsible Officer's Certificate of the Guarantor. On or prior
--------------------------------------------------
to the earlier of the initial Funding Date or the Land Interest Acquisition
Date, the Lessor, each Participant and the Agent shall each have received a
Responsible Officer's Certificate, dated as of the Land Interest Acquisition
Date, of the Guarantor stating that (i) each and every representation and
warranty of the Guarantor contained in the Operative Documents to which it is a
party is true and correct on and as of the Closing Date; (ii) no Default or
Event of Default under the Guarantee has occurred and is continuing; (iii) each
Operative Document to which the Guarantor is a party is in full force and effect
with respect to it; and (iv) the Guarantor has duly performed and complied with
all covenants, agreements and conditions contained herein or in any Operative
Document required to be performed or complied with by it on or prior to the
earlier of the initial Funding Date or the Land Interest Acquisition Date.
(s) The Guarantor's Resolutions and Incumbency Certificate, etc. On or
-----------------------------------------------------------
prior to the earlier of the initial Funding Date or the Land Interest
Acquisition Date, the Lessor, each Participant and the Agent shall each have
received a certificate of the Secretary or an Assistant Secretary of the
Guarantor attaching and certifying as to (i) the resolutions of its Board of
Directors duly authorizing the execution, delivery and performance by the
Guarantor of documents and agreements of the type represented by each Operative
Document to which it is or will be a party (ii) its articles of incorporation
and by-laws, and (iii) the incumbency and signature of persons authorized to
execute and deliver on its behalf the Operative Documents to which it is a
party.
(t) Land Interest Acquisition Date. The Land Interest Acquisition
------------------------------
Date shall occur on or prior to September 30, 1997.
(u) No Material Adverse Effect. As of each Funding Date, there shall
--------------------------
not have occurred any Material adverse change in the Lessee's, the Guarantor's
and their respective subsidiaries capital structure, ownership or consolidated
assets, liabilities, results of operations, or financial condition taken as a
whole from that set forth or contemplated in the most recent financial
statements referred to in Section 8.3(m), and no event or condition shall have
--------------
occurred that would result in a Material Adverse Effect.
19
(v) Responsible Officer's Certificate of the Lessor. On or prior to
-----------------------------------------------
the Land Interest Acquisition Date, the Lessee, the Agent and each Participant
shall have received a certificate of an authorized officer of the Lessor, dated
as of the Land Interest Acquisition Date, stating that (i) each and every
representation and warranty of the Lessor contained in the Operative Documents
to which it is a party is true and correct on and as of the Closing Date, (ii)
each Operative Document to which the Lessor is a party is in full force and
effect with respect to it, and (iii) the Lessor has duly performed and complied
with all covenants, agreements and conditions contained herein or in any
Operative Document required to be performed or complied with by it on or prior
to the Land Interest Acquisition Date.
(w) The Lessor's Resolutions and Incumbency Certificate, etc. On or
---------------------------------------------------------
prior to the Land Interest Acquisition Date, the Lessee, the Agent and each
Participant shall have received a certificate of the Secretary or an Assistant
Secretary of the Lessor attaching and certifying as to (i) the resolutions of
the Board of Directors duly authorizing the execution, delivery and performance
by the Lessor of documents and agreements of the type represented by each
Operative Document to which it is or will be a party, (ii) the pertinent
provisions of its by-laws and (iii) the incumbency and signature of persons
authorized to execute and deliver on its behalf the Operative Documents to which
it is a party.
(x) Construction Budget. On or prior to the Land Interest Acquisition
-------------------
Date, the Lessor, the Agent and each Participant shall have received a
construction budget with respect to the Property reasonably satisfactory to each
of them.
(y) Termination of Liens. On or prior to the Land Interest
--------------------
Acquisition Date, the Agent, each Participant and the Lessor shall have received
a pay-off letter from each Existing Lender, together with duly executed UCC-3
termination statements, mortgage releases and such other instruments, in form
and substance satisfactory to the Agent, each Participant and the Lessor, as
shall be necessary to terminate and satisfy all Liens created pursuant to the
Existing Financing and all other Liens except Permitted Exceptions.
(z) Property Purchase Agreement Conditions. On or prior to the Land
--------------------------------------
Interest Acquisition Date, the Lessor, the Agent and the Participants shall have
received a copy of the Property Purchase Agreement; the Property Purchase
Agreement shall be in full force and effect and shall have been validly assigned
to the Lessor pursuant to the Assignment of Property Purchase Agreement; and the
conditions to closing under the Property Purchase Agreement shall have been
satisfied to satisfaction of, or waived by, the Lessor, the Agent and the
Participants.
SECTION 6.2 Further Conditions Precedent. The obligation of the Lessor to
----------------------------
acquire the Land Interest on the Land Acquisition Date or to make an Advance on
any Funding Date and the obligation of each Participant to purchase its
Participation Interest in, and to make available its related portion of, such
Advance on such Funding Date are subject to satisfaction or waiver of the
following conditions precedent and to satisfaction on or before the Closing
Date, Land Interest Acquisition Date or such Funding Date of the conditions
precedent set forth in Section 6.1 (it being understood that the Lessor's
-----------
obligations to acquire the Land Interest and to make Advances to the Lessee and
each Participant's obligation to fund the purchase of its Participation Interest
in an Advance shall not be subject to the conditions precedent set forth in
Section 6.1 and
-----------
20
this Section 6.2 to the extent such conditions are actions required of the
-----------
Lessor or such Participant):
(a) Representations and Warranties. (i) On the Closing Date, the
------------------------------
representations and warranties of the Lessee, the Guarantor, the Lessor and each
Participant contained herein and in each of the other Operative Documents shall
be true and correct as though made on and as of such date, except to the extent
such representations or warranties relate solely to an earlier date, in which
case such representations and warranties shall have been true and correct on and
as of such earlier date; and (ii) on the Land Interest Acquisition Date (if such
date occurs after the Closing Date) and each other Funding Date, the
representations and warranties of the Lessee contained herein and in each of the
Operative Documents shall be true and correct as though made on and as of such
date; in each case except to the extent such representations or warranties
relate solely to an earlier date, in which case such representations and
warranties shall have been true an correct on and as of such earlier date.
(b) Performance of Covenants. (i) On the Closing Date the parties
------------------------
hereto shall have performed their respective agreements contained herein and in
the other Operative Documents to be performed by them on or prior to such date,
and (ii) on the Land Interest Acquisition Date (if such date occurs after the
Closing Date) and each other Funding Date the Lessee shall have performed its
respective agreements contained herein and in the other Operative Documents to
be performed by it on or prior to such date.
(c) Title. Title to the Property shall conform to the representations
-----
and warranties set forth in Section 8.4(c).
--------------
(d) No Default. There shall not have occurred and be continuing any
----------
Default or Event of Default under any of the Operative Documents, and no Default
or Event of Default under any of the Operative Documents will have occurred
after giving effect to the acquisition of the Property and/or the making of the
Advance requested by such Funding Request, as the case may be.
SECTION 6.3 Further Condition Precedent. The obligation of the Lessor to
---------------------------
make any Advance in respect of the Property on a Funding Date after the Land
Interest Acquisition Date, the obligation of the Lessor to make the initial
Advance to finance the acquisition of Equipment or the construction of any
Improvements or the funding of any Interest Payment Advance on any Funding Date,
and the obligation of each Participant to purchase its Participation Interest
in, and to make available to the Lessor its related portion of, each such
Advance on such Funding Date are subject to satisfaction or waiver of the
following condition precedent and the conditions precedent set forth in Section
-------
6.1 and Section 6.2 (it being understood that the Lessor's obligation to finance
--- -----------
such Equipment, if any, or Improvements shall not be subject to the conditions
precedent set forth in this Section 6.3 or Section 6.1 or Section 6.2 to the
----------- ----------- -----------
extent such conditions are actions required of the Lessor) on or prior to such
Funding Date:
(a) Appraisal. On or prior to such Funding Date, the Agent, the
---------
Lessor and the Participants shall have received an Appraisal of that portion of
the Property not subject to the Appraisal referred to in Section 10.1(s) and
---------------
prepared by the appraiser preparing the Appraisal
21
referred to in Section 10.1(s), which Appraisal shall (i) show that the Fair
---------------
Market Sales Value of that portion of the Land Interest with respect to
such Property as of the projected Completion Date shall not exceed twenty-five
(25%) of the Fair Market Sales Value of such portion of the Land Interest and
the Improvements to be constructed thereon in accordance with the Plans and
Specifications for such Property, and (ii) show as of the projected Completion
Date the Fair Market Sales Value of such Land Interest and the Improvements to
be constructed thereon in accordance with the Plans and Specifications, and
(iii) meet the other applicable requirements set forth in the definition of the
"Appraisal" contained in Appendix 1.
---------
If any of the conditions precedent set forth in this Section 6.3 or in
-----------
Section 6.1 or Section 6.2 (if such conditions apply to subsequent Funding
----------- -----------
Dates) shall not have been satisfied on any Funding Date subsequent to the
initial Funding Date and the Lessor and the Participants refuse to fund the
requested Advance, the Lessee may exercise its Purchase Option under Section
-------
20.1 of the Lease upon not less than ten (10) days' written notice to the
-----------------
Lessor, the Agent and the Participants.
SECTION 6.4 Conditions to Restructuring Date. The assignments of and
--------------------------------
amendments to the Operative Documents to take effect on the Restructuring Date
are subject to satisfaction or waiver of the conditions precedent set forth on
Schedule 6.4; provided, however, that the title insurance policies or
------------ -------- -------
commitments described in Part III.A. of Schedule 6.4 may include standard
---------------------------
exceptions for rights or claims of parties in possession, easements or claims of
easements, and discrepancies, conflicts in boundary lines, shortage in area,
encroachments, and any facts which a correct survey would disclose and which are
not shown by the public records, if not later than forty-five (45) days after
the Restructuring Date, the Lessee delivers a current ALTA survey certified to
the Lessor, the Participants and the title company in a form which will enable
the title company to issue such title insurance policies without such standard
exceptions or any new exceptions disclosed by such survey. The Lessee covenants
to deliver to the Agent the survey and title insurance policies or commitments
described in the proviso to the preceding sentence and any failure to deliver
such items to the Agent may give rise to a Lease Event of Default under Section
-------
17.1(d) of the Lease, but in no event shall the cure period provided by such
--------------------
section exceed thirty (30) days.
SECTION 7
COMPLETION DATE CONDITIONS
SECTION 7.1 Conditions. The occurrence of the Completion Date shall be
----------
subject to the fulfillment to the satisfaction of, or waiver by, the Required
Participants of the following conditions precedent:
(a) Architect's Certificate. The Lessee shall have furnished to the
-----------------------
Lessor and Agent a (i) certificate of the Architect (substantially in the form
of Exhibit H) dated at or about the Completion Date and stating that (a) the
---------
Improvements have been completed substantially in accordance with the Plans and
Specifications and the Property is ready for occupancy, (b) the Property, as so
completed, complies in all material respects with all Applicable Laws, and
22
certifying that attached thereto are true and complete copies of an "as built"
or "record" set of the Plans and Specifications, and a plat of survey of the
Property "as built" showing all paving, driveways, fences and exterior
improvements; and (ii) a date-down endorsement to or amendment and restatement
of the title insurance policies described in Section 6.1(g).
--------------
(b) Construction Completion. The construction of the Improvements
-----------------------
shall have been completed substantially in accordance with the Plans and
Specifications and all Applicable Law, and such Property shall be ready for
occupancy and operation. All Fixtures, Equipment and other Improvements
contemplated under the Plans and Specifications to be incorporated into or
installed in the Property shall have been incorporated or installed free and
clear of all Liens except for Permitted Liens.
(c) Lessee Certification. The Lessee shall have furnished the Lessor
--------------------
and the Agent with a certification of the Lessee (substantially in the form of
Exhibit I) as follows:
---------
(i) The representations and warranties of the Lessee with respect
to the Property set forth in Section 8.4(b) are true and correct as of the
--------------
Completion Date. All amounts owing to third parties for the construction
of the Improvements have been paid in full.
(ii) No changes or modifications were made to the related Plans
and Specifications after the Closing Date that have had a Material adverse
effect on the value, use or useful life of the Property.
SECTION 8
REPRESENTATIONS
SECTION 8.1 Representations of the Lessor. The Lessor represents and
-----------------------------
warrants to each of the other parties hereto as follows:
(a) Due Organization, etc. It is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of Ohio and
has the corporate power and authority to enter into and perform its obligations
under each of the Operative Documents to which it is or will be a party and each
other agreement, instrument and document to be executed and delivered by it in
connection with or as contemplated by each such Operative Document to which it
is or will be a party.
(b) Authorization; No Conflict. The execution, delivery and
--------------------------
performance of each Operative Document to which it is or will be a party has
been duly authorized by all necessary action on its part and neither the
execution and delivery thereof, nor the consummation of the transactions
contemplated thereby, nor compliance by it with any of the terms and provisions
thereof (i) does or will require any approval or consent of any trustee or
holders of any of its indebtedness or obligations, (ii) does or will contravene
any current United States or Ohio law, governmental rule or regulation, (iii)
does or will contravene or result in any breach of or constitute any default
under, or result in the creation of any Lien upon any of its property under,
23
its articles of incorporation or by-laws, or any indenture, mortgage, deed of
trust, conditional sales contract, credit agreement or other agreement or
instrument to which it is a party or by which it or its properties may be bound
or affected or (iv) does or will require any Governmental Action by any
Governmental Authority, except such as have been obtained on the Lessee's or the
Lessor's behalf.
(c) Enforceability, etc. Each Operative Document to which the Lessor
--------------------
is or will be a party has been duly executed and delivered by the Lessor and
each such Operative Document to which the Lessor is a party constitutes, or upon
execution and delivery will constitute, a legal, valid and binding obligation
enforceable against the Lessor in accordance with the terms thereof, except as
the same may be limited by insolvency, bankruptcy, reorganization or other laws
relating to or affecting creditors' rights or by general equitable principles.
(d) Litigation. There is no action or proceeding pending or, to its
----------
knowledge, threatened to which it is a party, before any Governmental Authority
that, if adversely determined, would materially and adversely affect its ability
to perform its obligations under the Operative Documents to which it is a party,
would have a material adverse effect on the financial condition of the Lessor or
would question the validity or enforceability of any of the Operative Documents
to which it is or will become a party.
(e) Assignment. It has not assigned or transferred any of its right,
----------
title or interest in or under the Lease except to the Agent, for the benefit of
the Participants, in accordance with this Participation Agreement and the other
Operative Documents.
(f) Defaults. No Default or Event of Default under the Operative
--------
Documents attributable to it has occurred and is continuing.
(g) Use of Proceeds. The proceeds of the purchase of the
---------------
Participation Interests shall be applied by the Lessor solely in accordance with
the provisions of the Operative Documents.
(h) Securities Act. Neither the Lessor nor any Person authorized by
--------------
the Lessor to act on its behalf has offered or sold any interest in the Lease,
or in any similar security relating to the Property, or in any security the
offering of which for the purposes of the Securities Act would be deemed to be
part of the same offering as the offering of the aforementioned securities to,
or solicited any offer to acquire any of the same from, any Person other than
the Agent and the Participants, and neither the Lessor nor any Person authorized
by the Lessor to act on its behalf will take any action which would subject the
issuance or sale of any interest in the Lease or the Property to the provisions
of Section 5 of the Securities Act or require the qualification of any Operative
Document under the Trust Indenture Act of 1939, as amended.
(i) Chief Place of Business. The Lessor's chief place of business,
-----------------------
chief executive office and office where the documents, accounts and records
relating to the transactions contemplated by this Participation Agreement and
each other Operative Document are kept are located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
24
(j) Federal Reserve Regulations. The Lessor is not engaged
---------------------------
principally in, and does not have as one of its important activities, the
business of extending credit for the purpose of purchasing or carrying any
margin stock (within the meaning of Regulation U of the Board), and no part of
the proceeds of the purchase of the Participation Interests will be used by it
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock or for any purpose that
violates, or is inconsistent with, the provisions of Regulation T, U, or X of
the Board.
(k) Investment Company Act. The Lessor is not an "investment company"
----------------------
or a company controlled by an "investment company" within the meaning of the
Investment Company Act.
(l) No Plan Assets. The Lessor is not acquiring its interests in the
--------------
Property with the assets of any "employee benefit plan" (as defined in Section
3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as defined in
Section 4975(e)(1) of the Code).
(m) Equity Source. (i) The source of its 3.520838% minimum equity
-------------
investment in the Tranche C Participation Interest is full recourse debt the
obligee of which is KeyBank National Association, the ultimate parent of the
Lessor; (ii) the Lessor will not obtain residual insurance or any other residual
guarantee to ensure recovery of its equity investment; and (iii) the Lessor will
be liable for any decline in the fair value of the residual interest and has,
and is expected to continue to have during the term of the Lease, other
significant assets, in addition to and of a value that exceeds its equity
investment, that are at risk.
SECTION 8.2 Representations of the Participants. Each Participant
-----------------------------------
represents and warrants to the Lessor, each of the other Participants and the
Lessee as follows:
(a) No Plan Assets. Such Participant is not and will not be funding
--------------
its Participation Interest hereunder, and is not performing its obligations
under the Operative Documents, with the assets of an "employee benefit plan" (as
defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or
"plan" (as defined in Section 4975(e)(1) of the Code). The advancing of any
amount with respect to its Participation Interest on any Funding Date shall
constitute an affirmation by the subject Participant of the preceding
representation and warranty.
(b) Due Organization, etc. It is either (i) a duly organized and
----------------------
validly existing corporation in good standing under the laws of the state of its
incorporation, or (ii) a national banking association duly organized and validly
existing under the laws of the United States or (iii) a banking corporation duly
organized and validly existing under the laws of the jurisdiction of its
organization, and, in each case, has the corporate power and authority to
execute, deliver and carry out the terms and provisions of the Operative
Documents to which it is a party.
(c) Authorization; No Conflict. The execution, delivery and
--------------------------
performance of each Operative Document to which it is or will be a party has
been duly authorized by all necessary action on its part and neither the
execution and delivery thereof, nor the consummation of the transactions
contemplated thereby, nor compliance by it with any of the terms and provisions
thereof (i) does or will require any approval or consent of any trustee or
holders of any
25
of its indebtedness or obligations, (ii) does or will contravene any current
law, governmental rule or regulation of the United States or the state or
country of its organization, (iii) does or will contravene or result in any
breach of or constitute any default under, or result in the creation of any Lien
upon any of its property under, its certificate of incorporation or bylaws,
articles of association or other organizational documents or any indenture,
mortgage, deed of trust, conditional sales contract, credit agreement or other
agreement or instrument to which it is a party or by which it or its properties
may be bound or affected or (iv) does or will require any Governmental Action by
any Governmental Authority.
(d) Enforceability, etc. Each Operative Document to which it is a
-------------------
party has been, or on or before the Closing Date or applicable Funding Date or
Land Interest Acquisition Date will be, duly executed and delivered by it and
each such Operative Document to which it is a party constitutes, or upon
execution and delivery will constitute, a legal, valid and binding obligation
enforceable against it in accordance with the terms thereof, except as the same
may be limited by insolvency, bankruptcy, reorganization or other laws relating
to or affecting creditors' rights or by general equitable principles.
(e) Litigation. There is no action or proceeding pending or, to its
----------
knowledge, threatened to which it is or will be a party before any Governmental
Authority that is reasonably likely to be adversely determined and, if adversely
determined, would materially and adversely affect its ability to perform its
obligations under the Operative Documents to which it is a party.
SECTION 8.3 Representations of the Lessee. The Lessee represents and
-----------------------------
warrants to each of the other parties hereto that:
(a) Corporate Status. The Lessee (i) is a corporation duly organized,
----------------
validly existing and in good standing under the laws of the State of Delaware
and (ii) has duly qualified and is authorized to do business and has obtained a
certificate of authority to transact business as a foreign corporation in the
States of California and Colorado and in each other jurisdiction where the
failure to so qualify is reasonably likely to be Material.
(b) Corporate Power and Authority. The Lessee has corporate power and
-----------------------------
authority to execute, deliver and carry out the terms and provisions of the
Operative Documents to which it is or will be a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Operative Documents to which it is or will be a party and has or will
have duly executed and delivered each Operative Document required to be executed
and delivered by it and, assuming the due authorization, execution and delivery
thereof on the part of each other party thereto, each such Operative Document
constitutes or will constitute a legal, valid and binding obligation enforceable
against it in accordance with its terms, except as the same may be limited by
insolvency, bankruptcy, reorganization or other laws relating to or affecting
the enforcement of creditors' rights or by general equitable principles.
(c) No Violation. Neither the execution, delivery and performance by
------------
the Lessee of the Operative Documents to which it is or will be a party nor
compliance with the terms and provisions thereof, nor the consummation by the
Lessee of the transactions contemplated therein (i) will result in a violation
by the Lessee of any applicable provision of any
26
law, statute, rule, regulation, order, writ, injunction or decree of any court
or governmental instrumentality having jurisdiction over the Lessee or the
Property that would (x) adversely affect the validity or enforceability of the
Operative Documents to which the Lessee is a party, or the title to, or value or
condition of, the Property, or (y) have a Material Adverse Effect on the
consolidated financial position, business or consolidated results of operations
of the Lessee, or (z) have an adverse effect on the ability of the Lessee to
perform its obligations under the Operative Documents, (ii) will conflict with
or result in any breach under, or (other than pursuant to the Operative
Documents) result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any of the property or assets of Lessee pursuant to the
terms of, any indenture, loan agreement or other agreement for borrowed money to
which the Lessee is a party or by which it or any of its property or assets is
bound or to which it may be subject (other than Permitted Liens), or (iii) will
violate any provision of the certificate or articles of incorporation or bylaws
of the Lessee.
(d) Litigation. There are no actions, suits or proceedings pending
----------
or, to the knowledge of the Lessee, threatened (i) that are reasonably likely to
have a Material Adverse Effect or (ii) that question the validity of the
Operative Documents or the rights or remedies of the Lessor, the Agent or the
Participants with respect to the Lessee or the Property under the Operative
Documents.
(e) Governmental Approvals. No Governmental Action by any
----------------------
Governmental Authority having jurisdiction over the Lessee or the Property is
required to authorize or is required in connection with (i) the execution,
delivery and performance by the Lessee of any Operative Document or (ii) the
legality, validity, binding effect or enforceability against the Lessee of any
Operative Document, except for the filing or recording of the Operative
Documents listed in Section 8.4(f) hereof with the appropriate Governmental
--------------
Authorities, all of which will have been completed on or prior to the Land
Interest Acquisition Date.
(f) Investment Company Act. The Lessee is not an "investment company"
----------------------
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act.
(g) Public Utility Holding Company Act. The Lessee is not a "holding
----------------------------------
company, or a "subsidiary company," or an "affiliate" of a "holding company", or
of a "subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
(h) Accuracy of Information Furnished. None of the Operative
---------------------------------
Documents and none of the other certificates, statements or information
furnished to the Lessor, the Agent or any Participant by or on behalf of the
Lessee or any of its Subsidiaries in connection with the Operative Documents or
the transactions contemplated thereby (taken together with all such Operative
Documents, certificates, statements or information) contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading (it being understood by the Lessor,
the Agent or any Participant that the projections and forecasts provided by the
Lessee are not to be viewed as facts and that actual results during the period
or
27
periods covered by such projections and forecasts may differ from the
projected or forecasted results).
(i) Taxes. All United States federal income tax returns and all other
-----
Material tax returns which are required to have been filed have been or will be
prepared in accordance with applicable law and filed by or on behalf of the
Lessee by the respective due dates, including extensions, and all taxes due with
respect to the Lessee pursuant to such returns or pursuant to any assessment
received by the Lessee have been or will be paid. The charges, accruals and
reserves on the books of the Lessee in respect of taxes or other governmental
charges are, in the opinion of the Lessee, adequate.
(j) Compliance with ERISA. Each member of the ERISA Group has
---------------------
fulfilled its obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and is in compliance in all Material respects
with the presently applicable provisions of ERISA and the Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Code in respect of any Plan, (ii)
failed to make any contribution or payment to any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
(k) Environmental and Other Regulations. Except as set forth in
-----------------------------------
Schedule III attached hereto, the Lessee and the Property are in compliance with
------------
all Environmental Laws relating to pollution and environmental control or
employee safety in the jurisdiction in which the Property is located and in all
other domestic jurisdictions, other than, with respect to such other
jurisdictions, those Environmental Laws the non-compliance with which would not
have a Material Adverse Effect.
(l) Offer of Securities, etc. Neither the Lessee nor the Guarantor
------------------------
nor any Person authorized to act on their behalf has, directly or indirectly,
offered any interest in the Property or the Lease or any other interest similar
thereto (the sale or offer of which would be integrated with the sale or offer
of such interest in the Property or the Lease), for sale to, or solicited any
offer to acquire any of the same from, any Person other than the Participants,
the Lessor and other "accredited investors" (as defined in Regulation D of the
Securities and Exchange Commission).
(m) Financial Statements. The audited consolidated statement of
--------------------
financial position of the Lessee and its consolidated Subsidiaries as of March
31, 1997 and the related consolidated statements of income, shareholder's equity
and cash flows for the fiscal year then ended, reported on by Ernst & Young,
LLP, a copy of which has been delivered to each of the Lessor, the Participants
and the Agent, present fairly in all material respects, in conformity with
generally accepted accounting principles, the financial position of the Lessee
as of such date and its results of operations and cash flows for such fiscal
year.
28
(n) No Violation or Default. Neither the Lessee nor any of the
-----------------------
Lessee's Subsidiaries is in violation of or in default with respect to (i) any
Requirement of Law applicable to such Person or (ii) any Contractual Obligation
of such Person, where, in each case, such violation or default is reasonably
likely to have a Material Adverse Effect. Without limiting the generality of
the foregoing, neither the Lessee nor any of the Lessee's Subsidiaries (A) is in
violation of any Environmental Laws, (B) to the best of the Lessee's knowledge,
has any liability or potential liability under any Environmental Laws or (C) has
received written notice or other written communication of an investigation or is
under investigation by any Governmental Authority having jurisdiction over the
Lessee or any of the Lessee's Subsidiaries having authority to enforce
Environmental Laws, where, in each case, such violation, liability or
investigation could reasonably be expected to have a Material Adverse Effect,
nor, to the best of the Lessee's knowledge, have any Hazardous Materials been
released or disposed of on any of the properties owned by the Lessee or the
Lessee's Subsidiaries which, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. No Event of Default
or Default has occurred and is continuing.
(o) Title; Possession Under Leases. The Lessee and the Lessee's
------------------------------
Subsidiaries (i) own and have good title (without regard to minor defects of
title), or leasehold interests in, all their other respective properties and
assets which are material to the business of the Lessee and its Subsidiaries
taken as a whole as reflected in the most recent Financial Statements delivered
to the Agent (except those assets and properties disposed of since the date of
such Financial Statements in compliance with this Participation Agreement) and
(ii) own and have good title (without regard to minor defects of title) to, or
leasehold interests in, all respective properties and assets acquired by the
Lessee and the Lessee's Subsidiaries since such date which are material to the
business of the Lessee and its Subsidiaries taken as a whole (except those
assets and properties disposed of in compliance with this Participation
Agreement). Such assets and properties are subject to no Lien, except for
Permitted Liens.
(p) Patent and Other Rights. The Lessee and the Lessee's Subsidiaries
-----------------------
own or license under validly existing agreements (or could obtain such
ownership, possession or license on terms not materially adverse to the Lessee
and its Subsidiaries, taken as a whole, and under circumstances that could not
reasonably be expected to have a Material Adverse Effect), and have the full
right to license without the consent of any other Person, all patents, licenses,
trademarks, trade names, trade secrets, service marks, copyrights and all rights
with respect thereto, which are material to conduct the businesses of the Lessee
and its Subsidiaries (taken as a whole) as now conducted.
(q) Solvency, Etc. The Lessee and each of its Material Subsidiaries
-------------
is Solvent and, after the execution and delivery of the Operative Documents and
the consummation of the transactions contemplated thereby, will be Solvent.
(r) Catastrophic Events. Neither the Lessee nor any of the Lessee's
-------------------
Subsidiaries and none of their properties is affected by any fire, explosion,
strike, lockout or other labor dispute, earthquake, embargo or other casualty
that is reasonably likely to have a Material Adverse Effect. As of the Closing
Date, there are no disputes presently subject to grievance procedure,
arbitration or litigation under any of the collective bargaining agreements,
29
employment contracts or employee welfare or incentive plans to which the Lessee
or any of the Lessee's Subsidiaries is a party, an there are no strikes,
lockouts, work stoppages or slowdowns, or, to the best knowledge of the Lessee,
jurisdictional disputes or organizing activities occurring or threatened which
alone or in the aggregate are reasonably likely to have a Material Adverse
Effect.
SECTION 8.4 Representations of the Lessee With Respect to the Property on
-------------------------------------------------------------
the Land Interest Acquisition Date. The Lessee hereby represents and warrants
----------------------------------
as follows:
(a) Representations. The representations and warranties of the
---------------
Construction Agent and the Lessee set forth in the Operative Documents are true
and correct. The Construction Agent and the Lessee are in compliance in with
their respective obligations under the Operative Documents and there exists no
Default or Event of Default.
(b) Property. Such Property consists of the Land Interest on which
--------
administration, manufacturing design and warehouse facilities will be
constructed pursuant to the Construction Agency Agreement. Such Property is
located in the State of Colorado. Such Property as improved in accordance with
the related Plans and Specifications and the use thereof by the Lessee and its
agents, assignees, employees, invitees, lessees, licensees, contractors and
tenants will comply in all material respects with all Requirements of Law
(including, without limitation, Title III of the Americans with Disabilities
Act, all zoning and land use laws and Environmental Laws) and Insurance
Requirements, except for such Requirements of Law as the Lessee shall be
contesting in good faith by appropriate proceedings. The related Plans and
Specifications have been or will be prepared in all material respects in
accordance with applicable Requirements of Law (including, without limitation,
Title III of the Americans with Disabilities Act, applicable Environmental Laws
and building, planning, zoning and fire codes) and upon completion of the
facility in accordance with the Plans and Specifications, such facility and the
other Improvements on such Property will not encroach in any manner onto any
adjoining land (except as permitted by express written easements or as insured
by appropriate title insurance) and such facility and other Improvements will
comply in all Material respects with all applicable Requirements of Law
(including, without limitation, Title III of the Americans with Disabilities
Act, all applicable Environmental Laws and building, planning, zoning and fire
codes). Upon completion of such facility in accordance with the related Plans
and Specifications, the Improvements including, without limitation, structural
members, the plumbing, heating, air conditioning and electrical systems thereof,
and all water, sewer, electric, gas, telephone and drainage facilities will be
completed in a workmanlike manner and in accordance with the Plans and
Specifications and will be in first class working condition and fit for use as
administration, manufacturing design and warehouse facilities, and all other
utilities required to adequately service the Improvements for their intended use
are or will be available and "tapped on" and hooked up pursuant to adequate
permits (including any that may be required under applicable Environmental
Laws). There is no action, suit or proceeding (including any proceeding in
condemnation or eminent domain or under any Environmental Law) pending or, to
the best of the Lessee's knowledge, threatened with respect to the Lessee, its
Affiliates or such Property which adversely affects the title to, or the use,
operation or value of, the Property. As of the Land Interest Acquisition Date,
no fire or other casualty with respect to the Property shall have occurred, and
as of each other Funding Date, no fire or other casualty with respect to the
30
Property shall have occurred that constitutes a Significant Casualty with
respect to which the Lessee shall have delivered a Termination Notice under
Section 16.1 of the Lease. The Property has or will have available all material
-------------------------
services of public facilities and other utilities necessary for use and
operation of such facility and the other Improvements for their primary intended
purposes, including, without limitation, adequate water, gas and electrical
supply, storm and sanitary sewerage facilities, telephone, other required public
utilities and means of access to such facility from publicly dedicated streets
and public highways for pedestrians and motor vehicles. All utilities serving
such Property, or proposed to serve such Property in accordance with the related
Plans and Specifications, are located in, and vehicular access to the
Improvements on such Property is provided by, either public rights-of-way
abutting such Property or Appurtenant Rights. All material licenses, approvals,
authorizations, consents, permits (including, without limitation, building,
demolition and environmental permits, licenses, approvals, authorizations and
consents), easements and rights-of-way, including proof and dedication, required
for (x) the use, treatment, storage, transport, disposal or disposition of any
Hazardous Substance on, at, under or from such Property during the construction
of the Improvements thereon, and (y) construction of such Improvements in
accordance with the related Plans and Specifications and the Construction Agency
Agreement have either been obtained from the appropriate Governmental
Authorities having jurisdiction or from private parties, as the case may be, or
will be obtained from the appropriate Governmental Authorities having
jurisdiction or from private parties, as the case may be, prior to commencing
any such construction or use and operation, as applicable and will in each case
be maintained by the Lessee during the periods for which they are required by
Applicable Law or such Governmental Authorities.
(c) Title. The Deed providing for the acquisition of the Property is
-----
sufficient to convey title to the Property in fee simple, subject only to
Permitted Exceptions. Upon conveyance of the Deed on the Land Interest
Acquisition Date, the Lessor will own fee simple title in the Land Interest and
any Improvements and will have the right to grant the Mortgage on the Property.
The Lessor will at all times during the Term have good title to all Equipment
wherever located and to any Improvements.
(d) Insurance. The Lessee has obtained insurance coverage covering
---------
the Property which meets the requirements of Article XIV of the Lease, and such
------------------------
coverage is in full force and effect.
(e) Lease. Upon the execution and delivery of the Lease Supplement to
-----
the Lease, (i) the Lessee will have unconditionally accepted the Property and
will be bound by the terms of the Lease Supplement and will have a valid
leasehold interest in the Property, subject only to the Permitted Exceptions;
(ii) the Lessee's obligation to pay Rent will be an independent covenant and no
right of deduction or offset will exist with respect to any Rent or other sums
payable under the Lease; and (iii) no Rent under the Lease will have been
prepaid and the Lessee will have no right to prepay the Rent, except as
specifically set forth therein.
(f) Protection of Interests. (i) On the Land Interest Acquisition
-----------------------
Date, the Lease Supplement, the Assignment of Lease, the Supplement to
Assignment of Lease, the Consent to Assignment and the Mortgage are each in a
form sufficient, and have been recorded in all recording offices necessary, to
grant perfected first priority liens on the Property to the
31
Agent or the Lessor, as the case may be, (ii) the Agent Financing Statements are
each in a form sufficient, and have been filed in all filing offices necessary,
to create a valid and perfected first priority security interest in the Lessor's
interest in all Equipment, if any, to be located on the Property and the
Improvements; and (iii) the Lessor Financing Statements are each in a form
sufficient, and have been filed in all filing offices necessary, to perfect the
Lessor's interest under the Lease to the extent the Lease is a security
agreement.
(g) Flood Hazard Areas. No portion of the Property is located in an
------------------
area identified as a special flood hazard area by the Federal Emergency
Management Agency or other applicable agency, or if any portion of the Property
is located in an area identified as a special flood hazard area by the Federal
Emergency Management Agency or other applicable agency, then flood insurance has
been obtained for the Property or such portion thereof in accordance with
Section 14.2(b) of the Lease and in accordance with the National Flood Insurance
----------------------------
Act of 1968, as amended.
(h) Conditions Precedent. All conditions precedent contained in this
--------------------
Participation Agreement and in the other Operative Documents relating to the
acquisition and leasing of the Property by the Lessor have been satisfied in
full or waived.
SECTION 8.5 Representations of the Lessee With Respect to Each Advance.
----------------------------------------------------------
The Lessee hereby represents and warrants as of each Funding Date on which an
Advance is made as follows:
(a) Representations. The representations and warranties of the
---------------
Construction Agent and the Lessee set forth in the Operative Documents
(including the representations and warranties set forth in Sections 8.3 and 8.4)
--------------------
are true and correct in all Material respects on and as of such Funding Date,
except to the extent such representations or warranties relate solely to an
earlier date, in which case such representations and warranties shall have been
true and correct in all Material respects on and as of such earlier date. The
Construction Agent and the Lessee are in compliance in all Material respects
with their respective obligations under the Operative Documents and there exists
no Default or Event of Default which is continuing. No Default or Event of
Default will occur as a result of, or after giving effect to, the Advance
requested by the Acquisition Request or the Funding Request on such date.
(b) Improvements. Construction of the Improvements to date has been
------------
performed in a good and workmanlike manner, substantially in accordance with the
Plans and Specifications and in compliance with all Insurance Requirements and
Requirements of Law.
(c) No Liens. There have been no Liens against the Property since the
--------
recordation of the Deed, the Lease Supplement, the Assignment of Lease, the
Consent to Assignment or the Mortgage other than Permitted Exceptions and Liens
that have been removed or bonded by or on behalf of the Lessee to the
satisfaction of the Lessor and the Agent. The Participation Interests funding
such Advance are secured by the Lien of the Mortgage.
(d) Advance. The amount of the Advance requested represents amounts
-------
owing in respect of the acquisition price of the Land Interest or amounts that
the Lessee
32
reasonably believes will be due in the sixty (60) days following such Advance
from the Lessee to third parties in respect of Property Improvements Costs, or
amounts paid by the Lessee to third parties in respect of Property Costs for
which the Lessee has not previously been reimbursed by an Advance. The
conditions precedent to such Advance and the related remittances by the
Participants with respect thereto set forth in Section 6 have been satisfied.
---------
(e) Lease. Upon the execution and delivery of each Equipment Schedule
-----
to the Lease, the Lessee will have unconditionally accepted the Equipment, if
any, subject to the Lease Supplement and will have good and marketable title to
a valid and subsisting leasehold interest in such Equipment, subject only to
Permitted Exceptions.
(f) Protection of Interests. On each Funding Date for the acquisition
-----------------------
of Equipment, (i) the Lease Supplement, the applicable Equipment Schedule and
the Mortgage are each a form sufficient to grant perfected Liens on the Lessee's
and the Lessor's interests, respectively, in the Equipment to the Lessor and
Agent, respectively, (ii) the Agent Financing Statements are each in a form
sufficient, and have been filed in all filing offices necessary, to create a
valid and perfected first priority security interest in such interest in such
Equipment, and (iii) the Lessor Financing Statements are each in a form
sufficient, and have been filed in all filing offices necessary, to perfect the
Lessor's interest in such Equipment under the Lease to the extent the Lease is a
security agreement.
(g) Title Insurance Date Down Endorsement. Prior to each Advance
-------------------------------------
during the Construction Period and prior to an Advance following the
Construction Period for Property Improvement Costs to which a mechanics' lien
could take priority over the lien of the Mortgage or the lien of the Lease, the
Lessee shall furnish the Lessor at the Lessee's expense an endorsement or other
coverage reasonably acceptable to the Agent from the title insurance company
issuing the policies pursuant to Section 6.1, insuring the Lessor and the Agent
-----------
that (i) all mechanics' or similar liens and claims for such liens which could
arise from that part of the Property Improvements Costs previously paid for, if
any, or to be paid for with the then proposed Advance, have been waived and (ii)
there has not been filed with respect to all or any parts of the Land Interest
and Improvements any mechanics' or similar liens or claims of such liens that
are not discharged of record, or insured over by the title insurance company, in
respect of any part of the Land Interest and Improvements.
SECTION 9
PAYMENT OF CERTAIN EXPENSES
The Lessee agrees, for the benefit of the Lessor, the Agent and the
Participants, that:
SECTION 9.1 Transaction Expenses. (a) The Lessee shall pay, or cause to
--------------------
be paid, from time to time all Transaction Expenses in respect of the
transactions consummated on the Closing Date, the Land Interest Acquisition Date
or any Funding Date, it being understood and agreed that neither the Agent, the
Lessor nor any Participant shall be required to advance any Transaction Expenses
in connection with the closing. Such Transaction Expenses may be added
33
to the Property Cost to the extent supported by the Appraisal and agreed by the
Agent and the Participants.
(b) The Lessee shall pay or cause to be paid (i) all Transaction
Expenses of the Lessor, (ii) the Administrative Fee, (iii) all Transaction
Expenses reasonably incurred by the Lessee, the Agent or the Lessor in entering
into any future amendments or supplements with respect to any of the Operative
Documents, whether or not such amendments or supplements are ultimately entered
into, or giving or withholding of waivers or consents hereto or thereto, in each
case (except after the occurrence of an Event of Default) which have been
requested by or approved by the Lessee, (iv) all Transaction Expenses incurred
by the Lessor, the Lessee or the Agent in connection with any purchase of the
Property by the Lessee or other Person pursuant to Articles XVI, XVII, XX or
-------------------------
XXII of the Lease, and (v) all Transaction Expenses incurred by any of the other
-----------------
parties hereto in respect of enforcement of any of their rights or remedies
against the Lessee in respect of the Operative Documents.
SECTION 9.2 Brokers' Fees and Stamp Taxes. The Lessee shall pay or cause
-----------------------------
to be paid any brokers' fees and any and all stamp, transfer and other similar
taxes, fees and excises, if any, including any interest and penalties, which are
payable in connection with the transactions contemplated by this Participation
Agreement and the other Operative Documents.
SECTION 9.3 Obligations. The Lessee shall pay, on or before the due date
-----------
thereof, all costs, expenses and other amounts required to be paid by the
Mortgage and the Assignment of Lease.
SECTION 10
OTHER COVENANTS AND AGREEMENTS
SECTION 10.1 Covenants of the Lessee. So long as this Participation
-----------------------
Agreement is in effect, the Lessee shall, and shall (except in the case of the
Lessee's reporting covenants) cause each Subsidiary, to::
(a) Financial Statements. Deliver to the Agent and each Participant,
--------------------
in form and detail satisfactory to the Agent and the Required Participants:
(i) as soon as available, but in any event within (A) ninety (90)
days after the end of each fiscal year of the Lessee, or, (B) if the Lessee
has been granted an extension by the Securities and Exchange Commission
permitting the late filing by the Lessee of any annual report on form 10-K,
the earlier of (x) 120 days after the end of each fiscal year of the Lessee
or (y) the last day of any such extension, a consolidated balance sheet of
the Lessee and its Subsidiaries as at the end of such fiscal year, and the
related consolidated statements of income and cash flows for such fiscal
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, audited and accompanied by
a report and opinion of an independent certified public accountant of
nationally recognized standing, which report and opinion shall be
34
prepared in accordance with GAAP and shall not be subject to any
qualifications or exceptions as to the scope of the audit nor to any
qualifications and exceptions not reasonably acceptable to the Required
Participants;
(ii) as soon as available, but in any event within (A) forty-
five (45) days after the end of each of the first three fiscal quarters of
each fiscal year of the Lessee, or, (B) if the Lessee has been granted an
extension by the Securities and Exchange Commission permitting the late
filing by the Lessee of any quarterly report on form 10-Q, the earlier of
(x) sixty (60) days after the end of each of the first three fiscal
quarters of each fiscal year of the Lessee or (y) the last day of any such
extension, a consolidated balance sheet of the Lessee and its Subsidiaries
as at the end of such fiscal quarter, and the related consolidated
statements of income and cash flows for such fiscal quarter and for the
portion of the Lessee's fiscal year then ended, setting forth in each case
in comparative form the figures for the corresponding fiscal quarter of the
previous fiscal year and the corresponding portion of the previous fiscal
year, all in reasonable detail and certified by a Responsible Officer of
the Lessee as fairly presenting the financial condition, results of
operations and cash flows of the Lessee and its Subsidiaries in accordance
with GAAP, subject only to normal year-end audit adjustments and the
absence of footnotes; and
(iii) Reports required to be delivered pursuant to clauses (i)
-----------
and (ii) of this Section 10.1(a) shall be deemed to have been delivered on
--------------------------------
the date on which the Lessee posts such reports on the Lessee's website on
the Internet at the website address listed on Schedule III hereof or when
------------
such report is posted on the Securities and Exchange Commission's website
at ▇▇▇.▇▇▇.▇▇▇.; provided that (A) the Lessee shall deliver paper copies of
--------
the reports referred to in such clauses (i) and (ii) of this Section
------------------------------------
10.1(a) to the Agent or any Participant who requests the Lessee to deliver
-------
such paper copies until written request to cease delivering paper copies is
given by the Agent or such Participant, (B) the Lessee shall notify the
Agent and the Participants of the posting of any such new material, and (C)
in every instance the Lessee shall provide paper copies of the Compliance
Certificates required by clause (i) of Section 10.1(b) to the Agent and
-----------------------------
each Participant. Except for the Compliance Certificates referred to in
such clause (i) of Section 10.1(b), the Agent shall have no obligation to
-----------------------------
request the delivery or to maintain copies of the reports referred to in
clauses (i) and (ii) of this Section 10.1(a), and in any event shall have
--------------------------------------------
no responsibility to monitor compliance by the Lessee with any such request
for delivery, and each Participant shall be solely responsible for
requesting delivery to it or maintaining its copies of such reports.
(b) Certificates, Notices and Other Information. Deliver to the
-------------------------------------------
Agent and each Participant, in form and detail satisfactory to the Agent and the
Required Participants:
(i) concurrently with the delivery of the financial statements
referred to in clauses (i) and (ii) of Section 10.1(a), a duly completed
---------------------------------------
Compliance Certificate signed by a Responsible Officer of the Lessee;
35
(ii) promptly after the same are available, copies of each
annual report, proxy or financial statement or other report or
communication sent to the stockholders of the Lessee, and copies of all
annual, regular, periodic and special reports and registration statements
which the Lessee may file or be required to file with the Securities and
Exchange Commission under Sections 13 or 15(d) of the Securities Exchange
Act of 1934, and not otherwise required to be delivered to the Agent
pursuant hereto;
(iii) promptly after the occurrence thereof, notice of any
Default or Event of Default;
(iv) notice of any change in accounting policies or financial
reporting practices by the Lessee or any Subsidiary that is material to the
Lessee or to the Lessee and its Subsidiaries on a consolidated basis;
(v) promptly after the commencement thereof, notice of any
litigation, investigation or proceeding affecting the Lessee where the
reasonably expected damages to the Lessee exceed the Threshold Amount, or
in which injunctive relief or similar relief is sought, which relief, if
granted, has a Material Adverse Effect;
(vi) promptly after the occurrence thereof, notice of any
Reportable Event with respect to any Plan or the intent to terminate any
Plan, or the institution of proceedings or the taking or expected taking of
any other action to terminate any Plan or withdraw from any Plan;
(vii) promptly after the occurrence thereof, notice of any
Material Adverse Effect; and
(viii) promptly, such other data and information as from time to
time may be reasonably requested by the Agent, or, through the Agent or any
Participant. Notwithstanding any provision of this Participation Agreement
to the contrary, so long as no Default or Event of Default shall have
occurred and be continuing, neither the Lessee nor any of its Subsidiaries
shall be required to disclose, permit the inspection, examination,
photocopying or making extracts of, or discuss, any document, information
or other matter that (A) constitutes non-financial trade secrets or non-
financial proprietary information, or (B) the disclosure of which to any
Participant, or their designated representative, is then prohibited by law
or any agreement binding on the Lessee or any of its Subsidiaries that was
not entered into by the Lessee or any such Subsidiary for the purpose of
concealing information from the Participants.
Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer of the Lessee setting forth details of the
occurrence referred to therein and stating what action the Lessee has taken and
proposes to take with respect thereto.
(c) Payment of Taxes. Pay and discharge when due all material taxes,
----------------
assessments, and governmental charges, except for any such tax, assessment,
charge, or levy
36
which is an Ordinary Course Lien under subsection (b) of the definition of such
-------------
term and except as otherwise provided in Section 13 hereof or Article XIII of
---------- ------------
the Lease.
(d) Preservation of Existence. Preserve and maintain its existence,
-------------------------
licenses, permits, rights, franchises and privileges necessary or desirable in
the normal conduct of its business, except (i) as permitted by Section 10.1(n),
---------------
or (ii) where failure to do so does not have a Material Adverse Effect.
(e) Maintenance of Properties. Maintain, preserve and protect all of
-------------------------
its material properties and equipment necessary in the operation of its business
in good order and condition, subject to wear and tear in the ordinary course of
business, and not permit any waste of its properties, except where failure to do
so would not reasonably be expected to have a Material Adverse Effect..
(f) Maintenance of Insurance. Maintain liability and casualty
------------------------
insurance with responsible insurance companies satisfactory to the Agent in such
amounts and against such risks as is customary for similarly situated
businesses.
(g) Compliance with Requirements of Law. (i) Comply with all
-----------------------------------
Requirements of Law, noncompliance with which has a Material Adverse Effect; and
(ii) conduct its operations and keep and maintain its property in material
compliance with all Environmental Laws.
(h) Inspection Rights. At any time during regular business hours and
-----------------
as often as reasonably requested upon reasonable notice, permit the Agent or any
Participant, or any employee, agent or representative thereof, to examine, audit
and make copies and abstracts from the Lessee's records and books of account and
to visit and inspect its properties and to discuss its affairs, finances and
accounts with any of its officers and key employees, and, upon request, furnish
promptly to the Agent or any Participant true copies of all financial
information and internal management reports made available to their senior
management.
(i) Keeping of Records and Books of Account. Keep adequate records
---------------------------------------
and books of account reflecting all financial transactions in conformity with
GAAP, consistently applied, and in material conformity with all applicable
requirements of any Governmental Authority having regulatory jurisdiction over
the Lessee or any applicable Subsidiary.
(j) Compliance with ERISA. Cause, and cause each of its ERISA
---------------------
Affiliates to: (i) maintain each Plan in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or state
law; (ii) cause each Plan which is qualified under Section 401(a) of the Code to
maintain such qualification; and (iii) make all required contributions to any
Plan subject to Section 412 of the Code.
(k) Compliance With Agreements. Promptly and fully comply with all
--------------------------
Contractual Obligations to which any one or more of them is a party, except for
any such Contractual Obligations (i) the nonperformance of which would not cause
a Default or Event of Default, (ii) then being contested by any of them in good
faith by appropriate proceedings, or
37
(iii) if the failure to comply therewith could not reasonably be expected to
have a Material Adverse Effect.
(l) Indebtedness. Create, incur, assume or suffer to exist any
------------
Indebtedness, except for the following ("Permitted Indebtedness"):
------ ----------------------
(i) The obligations of the Lessee under the Operative
Documents;
(ii) Indebtedness outstanding on the date hereof and listed on
Schedule 10.1 and any refinancings, refundings, renewals or extensions
-------------
thereof, provided that the amount of such Indebtedness is not increased at
--------
the time of such refinancing, refunding, renewal or extension except by an
amount equal to the premium or other amount paid, and fees and expenses
incurred, in connection with such refinancing and by an amount equal to any
utilized commitments thereunder;
(iii) Ordinary Course Indebtedness;
(iv) Indebtedness of the Lessee under the Convertible
Subordinated Debentures;
(v) Indebtedness of the Lessee under any letter of credit
facility (a "Permitted LC Agreement"), provided that (A) the only credit
---------------------- --------
extended to the Lessee pursuant to any Permitted LC Agreement consists of
letters of credit issued for the benefit of MKE or its affiliates to secure
obligations owed by the Lessee to the beneficiaries for the purchase price
of inventory; (B) the sum at any time of the aggregate face amount of all
letters of credit issued and outstanding under all Permitted LC Agreements,
plus the aggregate amount of all unremedied drawings under such letters of
----
credit, does not exceed $85,000,000; and (C) the Indebtedness of the Lessee
under any Permitted LC Agreement is at all times either unsecured or
secured by Liens permitted pursuant to Section 10.1(m);
---------------
(vi) Indebtedness of the Lessee and its Subsidiaries under
loans and Capital Leases incurred by the Lessee or any of its Subsidiaries
to finance the acquisition by such Person of real property, improvements,
fixtures, equipment or other fixed assets (together with attachments,
ascensions, additions, "soft costs" and proceeds thereof), provided that in
--------
each case, (A) such Indebtedness is incurred by such Person at the time of,
or not later than six (6) months after, the acquisition by such Person of
the property so financed, and (B) such Indebtedness does not exceed the
purchase price of the property so financed;
(vii) Indebtedness of the Lessee and any of its Subsidiaries
under Synthetic Lease Obligations;
(viii) Indebtedness of the Lessee and its Subsidiaries under
initial or successive refinancings, refundings, renewals or extensions of
any Indebtedness permitted by clauses (v), (vi) and (vii) above, provided
--------------------------- --------
that the amount of such Indebtedness is not
38
increased at the time of such refinancing, refunding, renewal or extension
except by an amount equal to the premium or other amount paid, and fees and
expenses incurred, in connection with such refinancing;
(ix) Indebtedness of the Lessee and its Subsidiaries in respect
of any Permitted Receivables Facility;
(x) Indebtedness of the Lessee to any of the Lessee's
Subsidiaries, Indebtedness of any of the Lessee's Subsidiaries to the
Lessee or Indebtedness of any of the Lessee's Subsidiaries to any of the
Lessee's other Subsidiaries;
(xi) Subordinated Indebtedness of the Lessee to any Person,
provided that (A) such Indebtedness contains subordination provisions no
--------
less favorable to the Agent and the Participants than those set forth in
Exhibit R or as otherwise approved by the Required Participants and (B) the
---------
aggregate principal amount of all Subordinated Debt of the Lessee
outstanding (including the Convertible Subordinated Debentures) does not
exceed $700,000,000 at any time; and
(xii) Indebtedness not exceeding, in the aggregate at any time,
ten percent (10%) of the total consolidated assets of the Lessee and its
Subsidiaries determined as of the end of the most recent fiscal quarter.
(m) Liens. Incur, assume or suffer to exist, any Lien upon any of
-----
its property, assets or revenues, whether now owned or hereafter acquired,
except for the following ("Permitted Liens"):
---------------
(i) Liens in favor of any of the Agent or any Participant
securing the obligations of the Lessee under the Operative Documents;
(ii) Liens existing on the date hereof and listed on Schedule
--------
10.1 and any renewals or extensions thereof, provided that the property
---- --------
covered thereby is not increased and any renewal or extension of the
obligations secured or benefited thereby is permitted by Section 10.1(l);
---------------
(iii) Ordinary Course Liens;
(iv) Liens securing Investments which constitute Permitted
Investments under Section 10.1(p);
---------------
(v) Liens on cash or cash equivalents securing reimbursement
obligations of the Lessee under letters of credit (other than any letters
of credit issued under the Loan Documents) in an aggregate amount of all
such cash and cash equivalents not to exceed $100,000,000;
(vi) Liens in respect of any Permitted Receivables Facility;
39
(vii) Liens on the property or assets of any corporation which
becomes a Subsidiary of the Lessee after the date of this Participation
Agreement, provided that (A) such Liens exist at the time such corporation
--------
became a Subsidiary, and (B) such Liens were not created in contemplation
of such acquisition by the Lessee;
(viii) Rights of vendors or lessors under conditional sale
agreements, Capital Leases or other title retention agreements, provided
--------
that in each case, (A) such rights secure or otherwise relate to Permitted
Indebtedness, (B) such rights do not extend to any property other than
property acquired with the proceeds of such Permitted Indebtedness
(together with accessions, additions, replacements and proceeds thereof),
and (z) such rights do not secure any Indebtedness other than Permitted
Indebtedness;
(ix) Liens securing Indebtedness and any related obligations of
the Lessee or any of its Subsidiaries which constitutes Permitted
Indebtedness under clause (vii) of Section 10.1(l) (or refinancings of such
-------------------------------
Indebtedness under clause (viii) of Section 10.1(l)), provided that such
-------------------------------- --------
Liens cover only those assets subject to Synthetic Lease Obligations
(together with accessions, additions, replacements and proceeds thereof);
(x) Liens incurred in connection with leases, subleases,
licenses and sublicenses granted to Persons not interfering in any material
respect with the business of the Lessee and its Subsidiaries and any
interest or title of a lessee or licensee under any such leases, subleases,
licenses or sublicenses;
(xi) Liens in favor of the Lenders in connection with the
letter of credit cash collateral account established in accordance with the
Loan Documents; and
(xii) Liens not otherwise permitted hereunder on the property or
assets of the Lessee and any of its Subsidiaries securing (A) borrowed
money Indebtedness, (B) all obligations of the Lessee arising other than in
connection with any securitization which are evidenced by bonds,
debentures, notes or other similar instruments, or (C) Indebtedness
consisting of letter of credit reimbursement obligations (including
pursuant to a Permitted LC Agreement), provided that, in each case, (x) the
--------
aggregate principal amount of all Indebtedness secured by such Liens does
not exceed at any time ten percent (10%) of the total assets of the Lessee
and its Subsidiaries determined as of the end of the fiscal quarter
immediately preceding the date of determination and (y) such Liens do not
encumber current assets of the Lessee and its Subsidiaries in excess of
$50,000,000.
(n) Fundamental Changes. Merge or consolidate with or into any Person
-------------------
or liquidate, wind-up or dissolve itself, or permit or suffer any liquidation or
dissolution or sell all or substantially all of its assets, except that:
------
(i) any Subsidiary may merge with (A) the Lessee, provided
--------
that the Lessee shall be the continuing or surviving corporation, (B) any
one or more Subsidiaries,
40
and (C) any joint venture, partnership or other Person, so long as such
joint venture, partnership and other Person will, as a result of making
such merger and all other contemporaneous related transactions, become a
Subsidiary;
(ii) any Subsidiary may sell all or substantially all of its
assets (upon voluntary liquidation or otherwise), to the Lessee or to
another Subsidiary;
(iii) the Lessee may merge into or consolidate with any other
Person, provided that (A) the Lessee is the surviving corporation, and (B)
--------
immediately after giving effect to such merger or consolidation, no Default
or Event of Default shall have occurred and be continuing; and
(iv) any Subsidiary may merge or consolidate with or into any
other Person or sell all or substantially all of its assets to the extent
such transaction is a Disposition otherwise permitted under Section 10.1(o)
---------------
or an Investment otherwise permitted under Section 10.1(p) and immediately
---------------
after giving effect to such merger or consolidation, no Default or Event of
Default shall have occurred and be continuing.
(o) Dispositions. Make any Dispositions, except:
------------ ------
(i) Ordinary Course Dispositions;
(ii) Dispositions permitted by Section 10.1(n);
---------------
(iii) Dispositions which constitute the making of or liquidation
of Permitted Investments;
(iv) Dispositions of assets on commercially reasonable terms or
accounts receivables in connection with a Permitted Receivables Facility by
the Lessee and its Subsidiaries (it being understood that any determination
as to whether a particular Disposition is on commercially reasonable terms
shall take into consideration any larger business transaction to which such
particular Disposition is related); and
(v) Dispositions not otherwise permitted hereunder not
exceeding twenty percent (20%) of Consolidated Tangible Net Worth for the
four fiscal quarter period ending as of the end of the fiscal quarter
immediately preceding the date of determination.
(p) Investments. Make any Investments, except for the following
----------- ------
("Permitted Investments"):
---------------------
(i) Investments existing on March 31, 2000;
(ii) Ordinary Course Investments;
(iii) Investments permitted by Section 10.1(l) or Section
--------------- -------
10.1(n);
-------
41
(iv) Investments arising from rights received by the Lessee and
its Subsidiaries upon the required payment of any permitted contingent
obligations of the Lessee and its Subsidiaries;
(v) Investments in the nature of Acquisitions, provided that
--------
the aggregate amount of such Acquisitions in any period of four consecutive
fiscal quarters does not exceed twenty percent (20%) of Consolidated
Tangible Net Worth as determined as of the fiscal quarter immediately
preceding the date of determination;
(vi) Investments of the Lessee and its Subsidiaries in Swap
Contracts, provided that all such arrangements are entered into in
--------
connection with bona fide hedging operations and not for speculation;
(vii) Investments by Quantum Technology Ventures (or any other
Subsidiary of the Lessee with the primary purpose of making venture
investments) and other Investments which the Lessee's Board of Directors
determines to be strategic for the Lessee in an aggregate cost basis, at
any time invested for all such entities and investments together, not to
exceed the sum of (A) $150,000,000 and (B) the aggregate gain or loss on
such Investments previously made under this clause (vii); and
------------
(viii) Investments not otherwise permitted hereunder, provided
--------
that the aggregate amount of such other Investments made after March 31,
2000 (less any return on any such Investments) does not exceed twenty
percent (20%) of Consolidated Tangible Net Worth as determined as of the
fiscal quarter immediately preceding the date of determination.
(q) Restricted Payments. Make any Restricted Payments, except as
------------------- ------
follows:
(i) the Lessee may pay dividends or other distributions
payable solely in shares of capital stock of the Lessee or any Subsidiary
or payable by a Subsidiary to the Lessee or to another Subsidiary;
(ii) the Lessee may distribute rights pursuant to a shareholder
rights plan or redeem such rights, provided that such redemption is in
--------
accordance with the terms of such shareholder rights plan;
(iii) the Lessee may make Restricted Payments in connection with
or pursuant to any of its Employee Benefits Plans or in connection with the
employment, termination or compensation of its employees, officers or
directors;
(iv) the Lessee may make Restricted Payments with the Net
Security Proceeds received from a substantially concurrent issuance of
Equity Securities or capital stock or with its Equity Securities or capital
stock or the Lessee may convert any Equity Securities in accordance with
their terms into other Equity Securities;
(v) the Lessee may purchase Equity Securities pursuant to one
or more stock repurchase programs, provided that (A) no Default or Event of
--------
Default shall have
42
occurred and be continuing, and (B) after giving effect to any such
repurchases the Lessee shall be in compliance with Section 10.1(v); and
--------------
(vi) any Subsidiary of the Lessee may declare or pay any
dividends in respect of its Equity Securities or purchase or redeem shares
of its Equity Securities or make distributions to shareholders not
otherwise permitted hereunder, provided that the aggregate amount paid or
--------
distributed in any period of four consecutive quarters (excluding any
amounts covered by clause (ii) above) does not exceed five percent (5%) of
-----------
Consolidated Tangible Net Worth as determined as of the fiscal quarter
immediately preceding the date of determination.
(r) ERISA. At any time engage in a transaction which could be subject
-----
to Sections 4069 or 4212(c) of ERISA, or permit any Pension Plan to (i) engage
in any non-exempt "prohibited transaction" (as defined in Section 4975 of the
Code); (ii) fail to comply with ERISA or any other applicable Requirements of
Law; or (iii) incur any material "accumulated funding deficiency" (as defined in
Section 302 of ERISA), which, with respect to each event listed above, has a
Material Adverse Effect.
(s) Change in Nature of Business. Engage, either directly or
----------------------------
indirectly through Affiliates, in any line of business other than the digital
storage business, any other business incidental or reasonably related thereto,
or any businesses that are, as determined by the Board of Directors of the
Lessee, appropriate extensions thereof.
(t) Transactions with Affiliates. Enter into any transaction of any
----------------------------
kind with any Affiliate (other than transactions among the Lessee or any of its
Subsidiaries and any Subsidiary) of the Lessee other than arm's-length
transactions with Affiliates that are otherwise permitted hereunder.
(u) Certain Indebtedness Payments, Etc. Neither the Lessee nor any of
----------------------------------
its Subsidiaries shall pay, prepay, redeem, purchase, defease or otherwise
satisfy in any manner prior to the scheduled payment thereof any Subordinated
Debt except as otherwise permitted under this Section 10.1(u); amend, modify or
---------------
otherwise change the terms of any document, instrument or agreement evidencing
Subordinated Debt such that such amendment, modification or change would (i)
cause the outstanding aggregate principal amount of all such Subordinated Debt
so amended, modified or changed to be increased as a consequence of such
amendment, modification or change, (ii) cause the subordination provisions
applicable to such Subordinated Debt to be less favorable to the Agent and the
Participants than those set forth on Exhibit R, (iii) increase the interest rate
---------
applicable thereto, or (iv) accelerate the scheduled payment thereof, except
that, subject to the other terms and provisions hereof, the Lessee may (A)(1)
call for redemption of the entire outstanding amount of the Convertible
Subordinated Debentures and, (2) to the extent such Convertible Subordinated
Debentures are not converted prior to the redemption date, redeem up to thirty
percent (30%) of any such outstanding Convertible Subordinated Debentures less
the amount of Subordinated Debt purchased by the Lessee pursuant to clause
------
(B)(ii) of this Section 10.1(u), provided that (x) no Default or Event of
------------------------------- --------
Default has occurred and is continuing or would result from such call for
redemption or redemption and (y) the closing price of the common stock shall
have exceeded one hundred twenty percent
43
(120%) of the then applicable conversion price for twenty (20) trading days
within a period of thirty (30) consecutive trading days ending within five (5)
trading days prior to the notice of redemption. The Lessee shall not cause or
permit any of its obligations, except the obligations constituting Senior
Indebtedness to constitute "Designated Senior Indebtedness" under the Indenture
governing the Convertible Subordinated Debentures (it being understood that the
obligations of the Lessee under the Operative Documents shall at all times
constitute "Designated Senior Indebtedness"); (B)(1) pay, prepay, redeem,
purchase, defease or otherwise satisfy in any manner any Subordinated Debt, with
the Net Security Proceeds from the substantially contemporaneous issuance of
Equity Securities by the Lessee or in exchange for Equity Securities of the
Lessee, and (2) otherwise purchase outstanding Subordinated Debt, provided that
--------
the aggregate value of all such Subordinated Debt repurchased, together with the
amount of all redemptions undertaken pursuant to clause (A) of this Section
--------------------------
10.1(u), does not at any time exceed thirty (30%) of the total amount of any
-------
Convertible Subordinated Debentures outstanding as of March 31, 2000; and (C)
the Lessee may convert, or honor a conversion request with respect to, any such
Subordinated Debt into Equity Securities of the Lessee in accordance with the
terms of, and pay any cash to holders of such Subordinated Debt in connection
with, such a conversion solely to the extent representing the value of any
fractional shares.
(v) Financial Covenants.
-------------------
(i) Consolidated Tangible Net Worth. Permit Consolidated
-------------------------------
Tangible Net Worth on the last day of any fiscal quarter (such date to be
referred to herein as a "determination date"), commencing with the fiscal
quarter ended March 31, 2000, to be less than the greater of (A) seventy-
five percent (75%) of Consolidated Tangible Net Worth as of March 31, 2000,
or (B) the sum of (1) an amount equal to seventy-five percent (75%) of
Consolidated Tangible Net Worth as of March 31, 2000; plus (2) an amount
----
equal to seventy-five percent (75%) of the sum of positive Consolidated Net
Income (ignoring any quarterly losses) for each fiscal quarter after the
quarter ended March 31, 2000, through and including the quarter ending on
the determination date; plus (3) an amount equal to seventy-five (75%) of
----
the Net Security Proceeds of all Equity Securities issued by the Lessee
(excluding any issuance where the Net Security Proceeds to the Lessee
therefor are less than $10,000,000) during the period commencing on March
31, 2000 and ending on the determination date; plus (4) an amount equal to
----
seventy-five percent (75%) of the increase in the value of outstanding
Equity Securities resulting, in accordance with GAAP, from any conversion
of Convertible Subordinated Debentures into such Equity Securities; minus
-----
(5) the lesser of (x) the aggregate amount paid by the to repurchase Equity
Securities during the period commencing on March 31, 2000 and ending on the
determination date and (y) $200,000,000; and minus (6) the lesser of (x)
-----
the aggregate amount of charges taken by the Lessee for In-Process Research
& Development associated with Acquisitions during the period commencing on
March 31, 2000 and ending on the determination date, and (y) $100,000,000,
provided that any such charges were taken by the Lessee during the quarter
--------
in which any such Acquisition was completed.
44
(ii) Minimum Quick Ratio. Permit the Quick Ratio determined as
-------------------
of the last day of any fiscal quarter of the Lessee (commencing with the
quarter ending March 31, 2000) to be less than 1.10:1.
(iii) Maximum Leverage Ratio. Permit the Leverage Ratio,
----------------------
determined as of the last day of any fiscal quarter of the Lessee,
commencing with the fiscal quarter ending March 31, 2000 (measured on a
rolling four quarter basis for the four fiscal quarters ended), to be
greater than 2.00:1.
(iv) Minimum Profitability. Suffer or permit there to exist, as
---------------------
of the last day of any fiscal quarter, for the four fiscal quarters ending
on such date, commencing with the fiscal quarter ending March 31, 2000, (A)
any two fiscal quarters in which the aggregate negative Consolidated Net
Income for such fiscal quarters exceeds five percent (5%) of Consolidated
Tangible Net Worth as of such date, or (B) cumulative Consolidated Net
Income for such four-quarter period of less than $1.00. For purposes of
calculating this covenant, charges for In-Process Research & Development
associated with Acquisitions shall be excluded, provided that (x) any such
--------
charges are taken during the quarter in which any such Acquisitions are
completed, and (y) the aggregate amount of any such charges taken does not
exceed $100,000,000 during the term of this Participation Agreement.
(w) Appraisal. On or prior to the date that is not later than thirty
---------
(30) days (or such later date as is acceptable to the Agent and the Lessor)
after the Land Interest Acquisition Date, the Agent, the Lessor and the
Participants shall have received an Appraisal of that portion of the Phase I
project on the Land Interest described in the Preliminary Letter of Value
delivered pursuant to Section 6.1(d), which Appraisal shall (i) show that the
--------------
Fair Market Sales Value of the Land Interest with respect to such Property as of
the projected Completion Date shall not exceed twenty-five (25%) of the Fair
Market Sales Value of such Land Interest and the Improvements to be constructed
thereon in accordance with the Plans and Specifications for Property, and (ii)
show as of the projected Completion Date the Fair Market Sales Value of such
Land Interest and the Improvements to be constructed thereon in accordance with
the Plans and Specifications, and (iii) meet the other applicable requirements
set forth in the definition of the term "Appraisal" contained in Appendix 1.
(x) No Impairment of Deposits. The Lessee shall not, nor shall it
-------------------------
permit any of its Subsidiaries to, directly or indirectly, enter into or become
bound by any agreement, instrument, indenture or other obligation which could
directly or indirectly restrict, prohibit or require the consent of any Person
to the making by the Lessee of any deposit of Cash Collateral or the realization
thereon or utilization thereof (or of any earnings thereon or of any other
Collateral) by the Lessor, the Agent or any of the Participants.
SECTION 10.2 Cooperation with the Lessee. The Lessor, the Participants
---------------------------
and the Agent shall, to the extent reasonably requested by the Lessee (but
without assuming additional liabilities, duties or other obligations on account
thereof), at the Lessee's expense, cooperate with the Lessee in connection with
its covenants contained herein including, without limitation, at any time and
from time to time, upon the request of the Lessee, to promptly and duly execute
and
45
deliver any and all such further instruments, documents and financing statements
(and continuation statements related thereto) as the Lessee may reasonably
request in order to perform such covenants.
SECTION 10.3 Covenants of the Lessor. The Lessor hereby agrees that so
-----------------------
long as this Participation Agreement is in effect:
(a) Discharge of Liens. The Lessor will not create or permit to
------------------
exist at any time, and will, at its own cost and expense, promptly take such
action as may be necessary duly to discharge, or to cause to be discharged, all
Lessor Liens on the Property attributable to it; provided, however, that the
-------- -------
Lessor shall not be required to so discharge any such Lessor Lien while the same
is being contested in good faith by appropriate proceedings diligently
prosecuted so long as such proceedings shall not involve any material danger of
impairment of the Liens of the Lease or the Security Documents or of the sale,
forfeiture or loss of, and shall not interfere with the use or disposition of,
the Property or title thereto or any interest therein or the payment of Rent.
(b) Change of Chief Place of Business. The Lessor shall give prompt
---------------------------------
notice to the Lessee and the Agent if the Lessor's chief place of business or
chief executive office, or the office where the records concerning the accounts
or contract rights relating to the Property are kept, shall cease to be located
at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or if it shall change its name,
identity or corporate structure.
SECTION 11
PARTICIPATIONS
SECTION 11.1 Amendments; Actions on Default. (a) The Lessor shall have
------------------------------
the right to forebear from exercising rights against the Lessee to the extent
the Lessor shall determine in good faith that such forbearance is appropriate
and is permitted by Section 15.5 and Sections 11.1, 11.2 and 11.3. Upon the
------------ ----------------------------
direction of the Required Participants, the Lessor shall execute any waiver,
modification or amendment of the Lease or the Construction Agency Agreement
requested by the Lessee; provided, that: (i) the waiver, modification or
--------
amendment is not prohibited by the forgoing provisions of this Participation
Agreement, (ii) the waiver, modification or amendment does not (A) increase the
amount the Lessor may be required to pay to the Lessee or anyone else, or (B)
reduce or postpone (and cannot reasonably be expected to reduce or postpone) any
payments that the Lessor would, but for such modification or amendment, be
expected to receive, or (C) release the Lessor's interest in all or a
substantial part of the Property; and (iii) the Lessor is not excused from
executing the waiver, modification or amendment by Section 11.3.
------------
(b) The Lessor will, with reasonable promptness, provide each
Participant with copies of all default notices it sends or receives under the
Lease or Construction Agency Agreement and notify each Participant of any Event
of Default under the Lease of which it is aware and of any other matters which,
in the Lessor's reasonable judgment, are likely to
46
materially affect the payments each Participant will be required to make or be
entitled to receive under this Participation Agreement, but the Lessor will not
in any event be liable to any Participant for the Lessor's failure to do so
unless such failure constitutes gross negligence or willful misconduct on the
part of the Lessor.
(c) Before taking possession of the Property or exercising foreclosure
or offset rights against the Property or filing any lawsuit against the Lessee
because of any breach by the Lessee of the Operative Documents or if requested
in writing by any Participant at any time when an Event of Default has occurred
and is continuing, the Lessor shall promptly call a meeting with each
Participant and the Agent to discuss what, if anything, the Lessor should do.
Such meeting shall be scheduled during regular business hours in the offices of
the Agent, or another appropriate location in San Francisco, California, not
earlier than five (5) and not later than twenty (20) Business Days after the
Lessor's receipt of the written request from a Participant. If the Required
Participants shall direct the Lessor in writing to (a) send any default notices
required before a Default can become an Event of Default, or (b) bring a lawsuit
against the Lessee to enforce the Operative Documents when an Event of Default
has occurred and is continuing, then the Lessor shall send the notice or bring
the suit, and the Lessor shall prosecute any such suit with reasonable diligence
using reputable counsel. However, if the Agent is not a member of the Required
Participants voting pursuant to this subsection 11.1(d) in favor of the giving
------------------
of any such notice or the bringing of any such suit, then the Lessor may require
that it first receive the written agreement (in form reasonably acceptable to
the Lessor) of the members of the Required Participants so voting to indemnify
the Agent and the Lessor from and against all costs, liabilities and claims that
may be incurred by or asserted against the Lessor because of the action the
Required Participants direct the Agent or the Lessor to take. In no event shall
any Participant instigate any suit or other action directly against the Lessee
with respect to the Operative Documents or the Property, even if such
Participant would, but for this Participation Agreement, be entitled to do so as
a third party beneficiary or otherwise under the Operative Documents.
(d) In the event the Lessee or its designee fails to purchase the
Property after any exercise of its Purchase Option or Expiration Date Purchase
Obligation or following the occurrence and continuance of an Event of Default,
the Lessor shall, if the Required Participants shall agree in writing, bring
suit against the Lessee to enforce the Operative Documents in such form as shall
be recommended by reputable counsel, and thereafter the Lessor shall prosecute
the suit with reasonable diligence in accordance with the advice of reputable
counsel. If the Lessor acquires the interests of the Lessee in any of the
Property as a result of such suit or otherwise, the Lessor shall thereafter
proceed with reasonable diligence to sell the Property in a commercially
reasonable manner to one or more bona fide third party purchasers and shall in
any event endeavor to consummate the sale of the entire Property (through a
single sale of the entire Property or a series of sales of parts) within five
(5) years following the date the Lessor recovers possession of the Property at
the best price or prices the Lessor believes are reasonably attainable within
such time. Further, after the Designated Payment Date and prior to the Lessor's
sale of the entire Property, the Lessor shall retain a property management
company experienced in the area where the Property is located to manage the
operation of the Property and pursue the leasing of any completed Improvements
which are part of the Property. The Lessor shall not retain an Affiliate of the
Lessor to act as the property manager except under a bona fide, arms-length
47
management contract containing commercially reasonable terms. Further, after
the Designated Payment Date and until the Lessor sells the Property, the Lessor
shall (i) endeavor in good faith to maintain, or shall obtain the agreement of
one or more of such tenants to maintain, the Property in good order and repair,
(ii) procure and maintain casualty insurance against risks customarily insured
against by owners of comparable properties, in amounts sufficient to eliminate
the effects of coinsurance, (iii) keep and allow each Participant to review
accurate books and records covering the operation of the Property, and (iv) pay
prior to delinquency all taxes and assessments lawfully levied against the
Property.
(e) Notwithstanding the foregoing, Defaulting Participants shall have
no voting or consent rights under this Section 11.1 and no rights to require the
------------
Lessor to call a meeting pursuant to Section 11.1(d) until they cease to be
---------------
Defaulting Participants. During any period that any Defaulting Participants
have no voting rights under this Section 11.1, only the Commitment Percentages
------------
of the other Participants that still have voting rights will be considered for
purposes of determining the Required Participants.
SECTION 11.2 General. Subject to the limitations set forth in Section
------- -------
11.1 and Section 14:
---- ----------
(a) The Lessor shall have the exclusive right to take any action and
to exercise any available powers, rights and remedies to enforce the obligations
of the Lessee under the Operative Documents, or to refrain from taking any such
action or exercising any such power, right or remedy.
(b) The Lessor shall be entitled to (i) give any consent, waiver or
approval requested by the Lessee with respect to any construction or other
approval contemplated in the Lease or (ii) waive or consent to any adverse title
claims affecting the Property, provided that, in either case, such action will
--------
not have a material adverse effect on the Lessee's obligations or ability to
make the payments required under the Operative Documents, the Lessor's rights
and remedies under the Operative Documents or any Participant's rights
hereunder.
SECTION 11.3 Conflicts. Notwithstanding anything to the contrary herein
---------
contained, the Lessor shall be entitled, even over the objection of each
Participant or the Required Participants, (i) to take any action required of the
Lessor by, or to refrain from taking any action prohibited by, the Operative
Documents or any law, rule or regulation to which the Lessor is subject
(provided, that this Section shall not be construed to authorize the Lessor to
take any action required by a modification of the Operative Documents prohibited
by Section 11.1), and (ii) after notice to the Participants, to bring and
------------
prosecute a suit against the Lessee in the form recommended by and in accordance
with advice of reputable counsel at any time when a breach of the Operative
Documents by the Lessee shall have put the Lessor (or any of its officers or
employees) at risk of criminal prosecution or significant liability to third
parties or at any time after the Lessee or its designee fails to purchase the
Property on the Designated Payment Date. Nothing herein contained shall be
construed to require the Lessor to agree to modify the Operative Documents or to
take any action or refrain from taking any action in any manner that could
increase the Lessor's liability to the Lessee or others, that could reduce or
postpone
48
payments to which the Lessor is entitled thereunder, or that could reduce the
scope and coverage of the indemnities provided for the Lessor's benefit therein.
SECTION 11.4 Refusal to Give Consents or Fund. If any Participant
--------------------------------
declines to consent to any amendment, modification, waiver, release or consent
for which such Participant's consent is requested or required by reason of this
Participation Agreement, or if any Participant fails to pay any amount owed by
it hereunder, the Lessor shall have the right, but not the obligation and
without limiting any other remedy of the Lessor, to terminate such Participant's
rights to receive any further payments under Section 3 of this Participation
---------
Agreement (other than payments required because of the Lessor's collection of
any Rent applied by the Lessor as reimbursement for a Defaulted Amount or
interest on a Defaulted Amount) by paying such Participant a termination fee
equal to the total of:
(i) all amounts actually advanced by such Participant to the
Lessor under Section 3.4 hereof before the termination; excluding, however,
any such amounts that were repaid to such Participant before the
termination by actual payments made to such Participant by the Lessor of,
or the Lessor's offset against, sums representing:
(A) Such Participant's Commitment Percentage times any
payments of Rent received by the Lessor under the Lease; plus
(B) Such Participant's Commitment Percentage times any sales
proceeds received by the Lessor under the Lease; and
(ii) Such Participant's Commitment Percentage, times:
(A) the then accrued but unpaid Basic Rent due under the
Lease; plus
(B) interest on past due amounts described in the preceding
clause (A) computed at the Federal Funds Effective Rate; plus
----------
(C) interest on any amounts (other than interest itself)
past due from the Lessee or its designees under the Operative
Documents, computed at the Federal Funds Effective Rate.
Such Participant's rights to receive payments equal to such Participant's
Commitment Percentage of any Rent applied by the Lessor as reimbursement for a
Defaulted Amount or interest on a Defaulted Amount shall not be impaired or
affected by any termination contemplated in this Section 11.4; accordingly, the
------------
Lessor shall not, as a condition to such a termination, be required to reimburse
such Participant for any payments such Participant has made in connection with
Defaulted Amounts pursuant to Section 3.3.
-----------
SECTION 11.5 Required Repayments. Each Participant shall repay to the
-------------------
Lessor, upon written request or demand by the Lessor (i) any sums paid by the
Lessor to such Participant under this Participation Agreement from, or that were
computed by reference to, any Rent or other amounts which the Lessor shall be
required to return or pay over to another party, whether
49
pursuant to any bankruptcy or insolvency law or proceeding or otherwise and (ii)
any interest or other amount that the Lessor is also required to pay to another
party with respect to such sums. Such repayment by any Participant shall not
constitute a release of such Participant's right to receive such Participant's
Commitment Percentage times the amount of any such Rent or any such other amount
(or any interest thereon) that the Lessor may later recover.
SECTION 11.6 Indemnification. Each Participant agrees to indemnify and
---------------
defend the Lessor (to the extent not reimbursed by the Lessee within ten (10)
days after demand) from and against such Participant's Commitment Percentage of
any and all liabilities, obligations, claims, expenses or disbursements
(including reasonable fees of attorneys, accountants, experts and advisors) of
any kind or nature whatsoever (in this Section 11.6 collectively called "Covered
------------ -------
Liabilities") which to any extent (in whole or in part) may be imposed on,
-----------
incurred by or asserted against the Lessor growing out of, resulting from or in
any other way associated with the Property or the Operative Documents (including
the enforcement thereof, whether exercised upon the Lessor's own initiative or
upon the direction of the Required Participants) and the transactions and events
at any time associated therewith or contemplated therein. The foregoing
indemnification shall apply whether or not such Covered Liabilities are in any
way or to any extent caused, in whole or in part, by any negligent act or
omission of any kind by the Lessor; provided, only that no Participant shall be
--------
obligated under this Section 11.6 to indemnify the Lessor (i) for Covered
------------
Liabilities incurred in connection with any transfer or assignment by the Lessor
of its right to receive Rent or its rights and interests in and to the Property,
the Operative Documents or this Participation Agreement to its Affiliates or
(ii) for that portion or percentage, if any, of any of the Covered Liabilities
which is proximately caused by: (A) the Lessor's own gross negligence or willful
misconduct; (B) any representation made by the Lessor in the Operative Documents
that is false in any material respect and that the Lessor knew was false at the
time of the Lessor's execution of the Operative Documents; or (C) Lessor Liens
not claimed by, through or under any of the Participants. After each
Participant has paid its Percentage of any Covered Liabilities, each Participant
shall be entitled to payment from the Lessor of an amount equal to the Adjusted
Percentage (as defined below) of any payments subsequently received by the
Lessor as Excess Reimbursement (as defined below) for such Covered Liabilities.
As used in this Section "Adjusted Percentage" shall equal (i) such Participant's
-------------------
Commitment Percentage, divided by (ii) the sum of the Commitment Percentages of
all Participants who have paid the Lessor their respective shares of the Covered
Liabilities at issue. As used in this Section, the term "Excess Reimbursement"
--------------------
shall mean, for the Covered Liabilities at issue, amounts reimbursed or paid by
the Lessee to or on behalf of the Lessor on account of such Covered Liabilities
in excess of (i) such Covered Liabilities, times (ii) the Commitment Percentages
of any Participants that have not paid the Lessor their respective Percentages
of such Covered Liabilities.
SECTION 11.7 Required Supplemental Payments. In the event that the Lessee
------------------------------
fails to pay any Required Supplemental Payment when due (a "Defaulted Amount"),
----------------
the Lessor shall notify each Participant of such Defaulted Amount, whereupon
each Participant shall pay to the Lessor an amount equal to such Participant's
Commitment Percentage times the Defaulted Amount; such payment from Participant
to the Lessor shall be due prior to 2:00 p.m., San Francisco time, on the date
of such notice if such notice is given by 12:00 noon, San Francisco time,
otherwise prior to 12:00 noon, San Francisco time, on the next Business Day
following
50
such notice. After payment of a Participant's Commitment Percentage times the
Defaulted Amount, any payments subsequently received by the Lessor from the
Lessee as reimbursement for such Defaulted Amount, and any interest received by
the Lessor from the Lessee that accrued on the Defaulted Amount after the date
of such Participant's payment of its Commitment Percentage times the Defaulted
Amount, will constitute Supplemental Rent for purposes of computing payments due
such Participant under this Participation Agreement.
SECTION 11.8 Application of Payments Received From Defaulting Participant
------------------------------------------------------------
As a Cure For Payment Defaults. If after a failure to make a payment required
------------------------------
by Section 3.4, any Defaulting Participant cures such failure, in whole or in
-----------
part, by paying to the Lessor all or part of such payment and interest thereon
at the Late Payment Rate, then the Lessor shall apply the payments so made to
the Lessor, net of the costs of collecting such payments (the "Net Cure
--------
Proceeds"), or other funds available to the Lessor equal to the Net Cure
--------
Proceeds, in the following order before applying the same to any other purpose:
(i) first, to make payments to the Lessor itself equal to its
-----
Excess Investment (if any) until the Lessor shall no longer have any Excess
Investment; and
(ii) second, to make further Advances to the Lessee under this
------
Participation Agreement to the extent the Lessor is required or deems it
appropriate to do so; provided, that such further Advances do not cause the
--------
total Property Cost to exceed the sum of the Commitments.
SECTION 11.9 Order of Application. For purposes of this Participation
--------------------
Agreement, the Lessor shall be entitled, but not required, to apply any payments
received from the Lessee under the Operative Documents to satisfy (1) unpaid
Required Supplemental Payments (and interest thereon) not included in Rent, if
any, and (2) costs incurred by the Lessor because of any sale under the Lease
before applying such payments to satisfy the Lessee's other obligations,
regardless of how the Lessee may have designated such payments.
SECTION 11.10 Investments Pending Dispute Resolution; Overnight
-------------------------------------------------
Investments. Whenever the Lessor in good faith determines that it does not have
-----------
all information needed to determine how payments to Participants must be made on
account of any then existing Participation Interests which the Lessor has
received, or whenever the Lessor in good faith determines that there is any
dispute among the Participants about payments which must be made on account of
Participation Interests actually received by the Lessor, the Lessor may choose
to defer the payments which are the subject of such missing information or
dispute. However, to minimize any such deferral, the Lessor shall attempt
diligently to obtain any missing information needed to determine how payments to
the Participants must be made. Also, pending any such deferral, or if the
Lessor is otherwise required to invest funds pending distribution to the
Participants, the Lessor shall invest funds equal to (i) the total of the
Commitment Percentages of all Participants to whom payments have not been made
with respect to the Participation Interests at issue, times (ii) the total
percentages at issue. In addition, the Lessor shall endeavor to invest payments
of Participation Interests it receives after 12:00 noon, San Francisco time, on
the day in question that are to be paid to a Participant on the next Business
Day pursuant to Section 3; provided that the Lessor shall have no liability to
--------- --------
any Participant if the Lessor is unable to make
51
such investments. Investments by the Lessor shall be in the overnight federal
funds market pending distribution, and the interest earned on each dollar of
principal so invested shall be paid to the Person entitled to receive such
dollar of principal when the principal is paid to such Person.
SECTION 11.11 Agent to Exercise Lessor's Rights. The Lessor has assigned
---------------------------------
its interest in the Lease to the Agent, for the benefit of the Participants,
pursuant to the Assignment of Lease. To the extent provided therein, the
rights, remedies, duties and responsibilities of the Lessor contained in this
Section 11 and in the other Operative Documents with respect thereto shall be
----------
exercisable by, binding upon and inure to the benefit of the Agent, for the
benefit of the Participants.
SECTION 11.12 Exculpatory Provisions Regarding the Lessor. Subject to the
-------------------------------------------
provisions of Section 11.11, each Participant hereby irrevocably authorizes the
-------------
Lessor to take such actions on its behalf as are expressly vested in or
delegated to the Lessor by the terms of this Participation Agreement and the
other Operative Documents, together with such powers as are reasonably
incidental thereto. The provisions of the following Sections of this
Participation Agreement are hereby incorporated by reference into this Section
-------
11.12, substituting the word "Lessor" for "Agent" therein:
-----
(i) Section 14.1 - second sentence.
------------
(ii) Section 14.2 - all.
------------
(iii) Section 14.3 - all.
------------
(iv) Section 14.4 - all.
------------
(v) Section 14.5 - first sentence.
------------
(vi) Section 14.6 - last sentence.
------------
SECTION 12
TRANSFERS OF PARTICIPANTS' INTERESTS
SECTION 12.1 Restrictions on and Effect of Transfer by Participants. No
------------------------------------------------------
Participant may (without the prior written consent of the Agent and Lessee (not
to be unreasonably withheld)) assign, convey or otherwise transfer (including
pursuant to a participation) all or any portion of its right, title or interest
in, to or under its Participation Interest or any of the Operative Documents or
the Property, provided that (x) any Participant may pledge its interest without
--------
the consent of the Agent or the Lessee to any Federal Reserve Bank, (y) without
the prior written consent of the Agent, any Participant may transfer all or any
portion of its interest to any Affiliate of such Participant or to any other
existing Participant and (z) the Lessor may not transfer its Tranche C
Participation Interest in the absence of an Event of Default; provided; further,
-------- -------
that in
52
the case of any transfer (other than to such Affiliate) each of the
following conditions and any other applicable conditions of the other Operative
Documents are satisfied:
(a) Required Notice and Effective Date. Any Participant desiring to
----------------------------------
effect a transfer of its interest shall give written notice of each such
proposed transfer to the Lessee, the Agent and each other Participant at least
five (5) Business Days prior to such proposed transfer, setting forth the name
of such proposed transferee, the percentage or interest to be retained by such
Participant, if any, and the date on which such transfer is proposed to become
effective. All reasonable out-of-pocket costs (including, without limitation,
legal expenses) incurred by the Lessor, the Agent or any Participant in
connection with any such disposition by a Participant under this Section 12.1
------------
shall be borne by such transferring Participant. In the event of a transfer
under this Section 12.1, any expenses incurred by the transferee in connection
------------
with its review of the Operative Documents and its investigation of the
transactions contemplated thereby shall be borne by such transferee or the
relevant Participant, as they may determine, but shall not be considered costs
and expenses which the Lessee is obligated to pay or reimburse under Section 9.
---------
Any such proposed transfer shall become effective upon the later of (i) the date
proposed in the transfer notice referred to above and (ii) the date on which all
conditions to such transfer set forth in this Section 12.1 shall have been
------------
satisfied.
(b) Assumption of Obligations. Any transferee pursuant to this
-------------------------
Section 12.1 shall execute and deliver to the Agent and the Lessee an Assignment
------------
and Acceptance in substantially the form attached as Exhibit J ("Assignment and
--------- --------------
Acceptance"), duly executed by such transferee and the transferring Participant,
----------
and a letter in substantially the form of the Participant's Letter attached
hereto as Exhibit K ("Participant's Letter"), and thereupon the obligations of
--------- --------------------
the transferring Participant under the Operative Documents shall be
proportionately released and reduced to the extent of such transfer. Upon any
such transfer as above provided, the transferee shall be deemed to be bound by
all obligations (whether or not yet accrued) under, and to have become a party
to, all Operative Documents to which its transferor was a party, shall be deemed
the pertinent "Participant" for all purposes of the Operative Documents and
shall be deemed to have made that portion of the payments pursuant to this
Participation Agreement previously made or deemed to have been made by the
transferor represented by the interest being conveyed; and each reference herein
and in the other Operative Documents to the pertinent "Participant" shall
thereafter be deemed a reference to the transferee, to the extent of such
transfer, for all purposes. Upon any such transfer, the Agent shall deliver to
each Participant, the Lessor and the Lessee a new Schedule I and Schedule II to
---------- -----------
this Participation Agreement, revised to reflect the relevant information for
such new Participant and the Commitment of such new Participant (and the revised
Commitment of the transferor Participant if it shall not have transferred its
entire interest).
(c) Employee Benefit Plans. No Participant may make any such
----------------------
assignment, conveyance or transfer to or in connection with any arrangement or
understanding in any way involving any employee benefit plan (or its related
trust), as defined in Section 3(3) of ERISA, or with the assets of any such plan
(or its related trust), as defined in Section 4975(e)(1) of the Code.
53
(d) Representations. Notwithstanding anything to the contrary set
---------------
forth above, no Participant may assign, convey or transfer its interest to any
Person, unless such Person shall have delivered to the Agent and the Lessee a
certificate confirming the accuracy of the representations and warranties set
forth in Section 8 with respect to such Person (other than as such
---------
representation or warranty relates to the execution and delivery of Operative
Documents) and representing that such Person has, independently and without
reliance upon the Agent, any other Participant or, except to the extent of the
Lessee's representations made under the Operative Documents when made, the
Lessee, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into this transaction,
the Property and the Lessee and made its own decision to enter into this
transaction.
(e) Amounts; Agent's Fee. Any transfer of a Tranche A Participation
--------------------
Interest shall be in a principal amount which is equal to or greater than
$2,000,000; provided, that no such minimum transfer limitation shall be imposed
--------
on a transfer of a Tranche B Participation Interest or, if permitted to be
transferred under Section 12.1, a Tranche C Participation Interest. Each
------------
transferring Participant shall pay to the Agent a transfer fee of $2,500.
(f) Applicable Law. Such transfer shall comply with Applicable Law
--------------
and shall not require registration under any securities law applicable thereto.
(g) Effect. From and after any transfer of its Participation
------
Interest the transferring Participant shall be released, to the extent assumed
by the transferee, from its liability and obligations hereunder and under the
other Operative Documents to which such transferor is a party in respect of
obligations to be performed on or after the date of such transfer. Upon any
transfer by a Participant as above provided, any such transferee shall be deemed
a "Participant" for all purposes of such documents and each reference herein to
a Participant shall thereafter be deemed a reference to such transferee for all
purposes to the extent of such transfer, except as the context may otherwise
require. Notwithstanding any transfer as provided in this Section 12.1, the
------------
transferor shall be entitled to all benefits accrued and all rights vested prior
to such transfer, including, without limitation, rights to indemnification under
this Participation Agreement or any other Operative Document.
SECTION 12.2 Covenants and Agreements of Participants.
----------------------------------------
(a) Participations. Each Participant covenants and agrees that it
--------------
will not grant Participations in its Participation Interest to any Person (a
"Sub-Participant") unless such participation complies with Applicable Law and
----------------
does not require registration under any securities law applicable thereto and
such Sub-Participant (i) is a bank or other financial institution and (ii)
represents and warrants, in writing, to such Participant for the benefit of the
Participants, the Lessor and the Lessee that (A) no part of the funds used by it
to acquire an interest in any Participation Interest constitutes assets of any
"employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject
to Title I of ERISA, or "plan" (as defined in Section 4975(e)(1) of the Code)
and (B) such Sub-Participant is acquiring its interest for investment purposes
without a view to the distribution thereof. Any such Person shall require any
transferee of its interest in its Participation Interest to make the
representations and warranties set forth in the preceding sentence, in writing,
to such Person for its benefit and the benefit of the Participants, the Lessor
54
and Lessee. In the event of any such sale by a Participant of a participating
interest in its Participation Interest to a Sub-Participant, such Participant's
obligations under this Participation Agreement and under the other Operative
Documents shall remain unchanged, such Participant shall remain solely
responsible for the performance thereof, such Participant shall remain the
holder of its Participation Interest, for all purposes under this Participation
Agreement and under the other Operative Documents, and the Lessor, the Agent
and, except as set forth in Section 12.2(b), the Lessee shall continue to deal
---------------
solely and directly with such Participant in connection with such Participant's
rights and obligations under this Participation Agreement and under the other
Operative Documents.
(b) Transferee Indemnities. Each Sub-Participant shall be entitled to
----------------------
the benefits of Sections 13.5, 13.6, and 13.7 and 13.10 with respect to its
---------------------------------------
participation in the Participation Interests outstanding from time to time;
provided that no Sub-Participant shall be entitled to receive any greater amount
--------
pursuant to such Sections than the transferor Participant would have been
entitled to receive in respect of the amount of the participation transferred by
such transferor Participant to such Sub-Participant had no such transfer or
participation occurred.
SECTION 12.3 Future Participants. Each Participant shall be deemed to be
-------------------
bound by and, upon compliance with the requirements of this Section 12, will be
----------
entitled to all of the benefits of the provisions of, this Participation
Agreement.
SECTION 13
INDEMNIFICATION
SECTION 13.1 General Indemnification. The Lessee agrees, whether or not
-----------------------
any of the transactions contemplated hereby shall be consummated, to assume
liability for, and to indemnify, protect, defend, save and keep harmless each
Indemnitee, on an After Tax Basis, from and against, any and all Claims that may
be imposed on, incurred by or asserted against such Indemnitee (whether because
of action or omission by such Indemnitee or otherwise), whether or not such
Indemnitee shall also be indemnified as to any such Claim by any other Person
and whether or not such Claim arises or accrues prior to the Closing Date or
after the Expiration Date, in any way relating to or arising out of:
(a) any of the Operative Documents or any of the transactions
contemplated thereby or any violation thereof, and any amendment, modification
or waiver in respect thereof;
(b) the Property, the Lease or any part thereof or interest therein;
(c) the purchase, design, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection, ownership,
management, possession, operation, rental, lease, sublease, repossession,
maintenance, repair, alteration, modification, addition or substitution,
storage, transfer of title, redelivery, use, financing, refinancing,
disposition, operation, condition, sale (including, without limitation, any sale
pursuant to Sections 16.2, 16.3, 16.4, 17.2(c), 17.2(e) or 17.4 of the Lease or
----------------------------------------------------------------
any sale pursuant to Articles XX or XXII of the
--------------------------
55
Lease, return or other disposition of all or any part or any interest in the
-----
Property or the imposition of any Lien (or incurring of any liability to refund
or pay over any amount as a result of any Lien) thereon, including, without
limitation: (1) Claims or penalties arising from any violation of federal, state
or local law, rule, regulation or order or in tort (strict liability or
otherwise), (2) latent or other defects, whether or not discoverable, (3) any
Claim based upon a violation or alleged violation of the terms of any
restriction, easement, condition or covenant or other matter affecting title to
the Property, (4) the making of any Modifications in violation of any standards
imposed by any insurance policies required to be maintained by Lessee pursuant
to the Lease which are in effect at any time with respect to the Property or any
part thereof, (5) any Claim for patent, trademark or copyright infringement, and
(6) Claims arising from any public improvements with respect to the Property
resulting in any charge or special assessments being levied against the Property
or any plans to widen, modify or realign any street or highway adjacent to the
Property;
(d) the offer, issuance or sale of the Participation Interests,
provided that (i) the Lessor shall not be entitled to indemnification under this
--------
clause (d) if it shall have been determined by a court of competent jurisdiction
----------
to have breached its representation set forth in Section 8.1(h), (ii) no
--------------
Participant shall be entitled to indemnification under this clause (d) if it
----------
shall have been determined by a court of competent jurisdiction to have breached
its representation set forth in Section 8.2(f) and (iii) neither the Lessor nor
--------------
any Participant shall be entitled to indemnification under this clause (d) with
----------
respect to any Claim which a court of competent jurisdiction determines to have
arisen out of the gross negligence or willful misconduct of the Lessor, the
Agent or any Participant or its agents, employees or contractors (other than the
Lessee) or any misrepresentation of a material fact made by the Lessor, the
Agent or such Participant, unless the misrepresentation was made in reliance
upon and in conformity with information furnished to the Lessor or such
Participant, as applicable, by the Lessee or its agents, employees or
contractors;
(e) the breach by the Lessee of any covenant, representation or
warranty made by it or deemed made by it in any Operative Document or any
certificate required to be delivered by any Operative Document;
(f) the retaining or employment of any broker, finder or financial
advisor by the Lessee to act on its behalf in connection with this Participation
Agreement, or the incurring of any fees or commissions to which the Lessor might
be subjected by virtue of entering into the transactions contemplated by this
Participation Agreement;
(g) the existence of any Lien on or with respect to the Property, the
Improvements, the Equipment, any Basic Rent or Supplemental Rent, title thereto,
or any interest therein including any Liens which arise out of the possession,
use, occupancy, construction, repair or rebuilding of the Property or by reason
of labor or materials furnished or claimed to have been furnished to the Lessee,
the Existing Owner, the Lessor or any of their contractors or agents or by
reason of the financing of the Property or any personalty or equipment purchased
or leased by the Lessee or Improvements or Modifications constructed by the
Lessee, except Lessor Liens and Liens in favor of the Agent or the Lessor;
56
(h) the transactions contemplated by the Lessee hereby or by any other
Operative Document, in respect of the application of Parts 4 and 5 of Subtitle B
of Title I of ERISA and any prohibited transaction described in Section 4975(c)
of the Code (other than any Claim resulting from a breach of representation or
warranty of the Lessor or any Participant); or
(i) the Existing Financing, any documentation relating thereto, the
Existing Participants, the Existing Owner, or the purchase of the Property by
the Lessor, or any matters arising therefrom or related thereto; provided,
--------
however, the Lessee shall not be required to indemnify (x) the Lessor for any
-------
Claim to the extent arising from any misrepresentation by the Lessor under
Section 8.1 (e) or (l) or from the failure by the Lessor to comply with Section
---------------------- -------
10.3(a), or (y) any Indemnitee under this Section 13.1 for any of the following:
------- ------------
(1) any Claim to the extent resulting from the willful misconduct or gross
negligence of such Indemnitee or its agents, employees or contractors (other
than the Lessee and its agents, employers or contractors) (it being understood
that the Lessee shall be required to indemnify an Indemnitee even if the
ordinary (but not gross) negligence of such Indemnitee caused or contributed to
such Claim), (2) any Claim resulting from Lessor Liens which the Lessor is
responsible for discharging under the Operative Documents, (3) any Claim to the
extent attributable to acts or events occurring after the expiration of the Term
or the termination of the Lessee's right to possess and control the Property
(but not any claim to the extent attributable to acts or events occurring prior
to or during the Term or occurring at any time that the Lessee is in actual
possession or control of the Property), (4) any Imposition or other claims for
Taxes, and (5) any Claims of the type(s) described in Sections 13.2 (only with
-------------
respect to claims in respect of a decline in the Fair Market Sales Value of the
Property as a result of an event described in Section 13.2(b) and the Lessee's
---------------
exercise of the Remarketing Option), 13.6, 13.7, 13.8 and 13.10. It is
--------------------------
expressly understood and agreed that the indemnity provided for herein shall
survive the expiration or termination of and shall be separate and independent
from any remedy under the Lease or any other Operative Document. Without
limiting the express rights of any Indemnitee under this Section 13.1, this
------------
Section 13.1 shall be construed as an indemnity only and not a guaranty of
------------
residual value of the Property or as a guaranty of the Participation Interests.
SECTION 13.2 End of Term Indemnity.
---------------------
(a) If the Lessee elects the Remarketing Option and there would, after
giving effect to the proposed remarketing transactions, be a Shortfall Amount,
then prior to the Maturity Date and as a condition to the Lessee's right to
complete the remarketing of the Property pursuant to Section 22.1 of the Lease,
-------------------------
the Lessee shall cause to be delivered to the Lessor at least thirty (30) days
prior to either the Expiration Date or the last day of the Remarketing Period,
if Section 17.2(h) of the Lease is applicable, at the Lessee's sole cost and
----------------------------
expense, a report from an appraiser selected by the Lessor and reasonably
satisfactory to the Agent and the Required Participants in form and substance
satisfactory to the Lessor, the Agent and the Required Participants (the "End of
------
the Term Report") which shall state the appraiser's conclusions as to the reason
---------------
for any decline in the Fair Market Sales Value of the Property from that
anticipated for such date in the Appraisal delivered on the Closing Date.
(b) Prior to the Expiration Date, the Lessee shall pay to the Lessor
an amount (not to exceed the Shortfall Amount) equal to the portion of the
Shortfall Amount that the End of
57
the Term Report demonstrates was the result of a decline in the Fair Market
Sales Value of the Property due to:
(i) extraordinary wear and tear, excessive usage, failure to
maintain, to repair, to restore, to rebuild or to replace, failure to
comply with the Lease and all applicable laws, failure to use, workmanship,
method of installation or removal or maintenance, repair, rebuilding or
replacement (excepting in each case ordinary wear and tear);
(ii) any Modification made to, or any rebuilding of, the
Property or any part thereof by the Lessee or any sublessee; or
(iii) the existence of any Hazardous Activity, Hazardous
Substance or Environmental Violations; or
(iv) any restoration or rebuilding carried out by the Lessee or
any sublessee; or
(v) any condemnation of any portion of the Property pursuant
to Article XV of the Lease; or
-----------------------
(vi) any use of the Property or any part thereof by the Lessee
or any sublessee other than as permitted by the Operative Documents; or
(vii) any grant, release, dedication, transfer, annexation or
amendment made pursuant to Section 12.2 of the Lease; or
-------------------------
(viii) the failure of the Lessor to have good and marketable fee
title to the Property free and clear of all Liens (including Permitted
Liens and Permitted Exceptions) and exceptions to title, except (A) such
Liens or exceptions to title that existed on the Closing Date and were
disclosed in the policy of title insurance delivered pursuant to Section
-------
6.1; (B) Lessor Liens; and (C) to the extent any such liability arising as
---
a result of a title defect is offset by the proceeds of title insurance.
SECTION 13.3 Environmental Indemnity. Without limitation of the other
-----------------------
provisions of this Section 13, the Lessee hereby agrees to indemnify, hold
----------
harmless and defend each Indemnitee from and against any and all claims
(including without limitation third party claims for personal injury or real or
personal property damage), losses (including but not limited to any loss of
value of the Property), damages, liabilities, fines, penalties, charges,
administrative and judicial proceedings (including informal proceedings) and
orders, judgments, remedial action, requirements, enforcement actions of any
kind, and all reasonable and documented costs and expenses incurred in
connection therewith (including but not limited to reasonable and documented
attorneys' and/or paralegals' fees and expenses), including, but not limited to,
all costs incurred in connection with any investigation or monitoring of site
conditions or any clean-up, remedial, removal or restoration work by any
federal, state or local government agency, which such Indemnitee becomes subject
to because of its involvement with the Property, the
58
transactions contemplated by the Operative Documents or any other matter
referred to in paragraphs (a) through (i) of Section 13.1 arising in whole or in
------------------------------------------
part, out of:
(a) the presence on or under the Property of any Hazardous Substances,
or any Releases or discharges of any Hazardous Substances on, under, from or
onto the Property;
(b) any activity, including, without limitation, construction, carried
on or undertaken on or off the Property, and whether by the Lessee, the Lessor,
the Existing Owner or any predecessor in title or any employees, agents,
contractors or subcontractors of the Lessee, the Lessor (if such activity was
undertaken with the consent or at the direction of the Lessee), the Existing
Owner or any predecessor in title, or any other Persons (including such
Indemnitee), in connection with the handling, treatment, removal, storage,
decontamination, cleanup, transport or disposal of any Hazardous Substances that
at any time are located or present on or under or that at any time migrate,
flow, percolate, diffuse or in any way move onto or under the Property;
(c) loss of or damage to any property or the environment (including,
without limitation, cleanup costs, response costs, remediation and removal
costs, cost of corrective action, costs of financial assurance, fines and
penalties and natural resource damages), or death or injury to any Person, and
all expenses associated with the protection of wildlife, aquatic species,
vegetation, flora and fauna, and any mitigative action required by or under
Environmental Laws;
(d) any claim concerning lack of compliance with Environmental Laws,
or any act or omission causing an environmental condition that requires
remediation or would allow any Governmental Authority to record a Lien on the
land records;
(e) any residual contamination on or under the Property, or affecting
any natural resources, or any contamination of any property or natural resources
arising in connection with the generation, use, handling, storage, transport or
disposal of any such Hazardous Substances, and irrespective of whether any of
such activities were or will be undertaken in accordance with applicable
Environmental Laws; or
(f) any material inaccuracies, misrepresentations, misstatements, and
omissions and any conflicting information contained in or omitted from the
Environmental Audit; provided, however, the Lessee shall not be required to
-------- -------
indemnify any Indemnitee under this Section 13.3 for (1) any Claim to the extent
------------
resulting from the willful misconduct or gross negligence of such Indemnitee or
its agents, employees and contractors (other than the Lessee and its agents,
employees and contractors) (it being understood that the Lessee shall be
required to indemnify an Indemnitee even if the ordinary (but not gross)
negligence of such Indemnitee caused or contributed to such Claim), (2) subject
to the provisions Section 15.2 of the Lease, any Claim to the extent
-------------------------
attributable to acts or events occurring after the expiration of the Term or the
termination of the Lessee's right to possess and control the Property (but not
any claim to the extent attributable to acts or events occurring prior to or
during the Term or occurring at any time that the Lessee is in actual possession
or control of the Property), (3) any Imposition or other claims for Taxes of the
type(s) described in Section 13.5 or (4) any Claims of the type(s) described in
------------
Sections 13.2 (only with respect to claims in respect of a decline in the Fair
-------------
Market
59
Sales Value of the Property and the Lessee's exercise of the Remarketing
Option), 13.6, 13.7, 13.8 and 13.10. It is expressly understood and agreed that
--------------------------
the indemnity provided for herein shall survive the expiration or termination of
and shall be separate and independent from any remedy under the Lease or any
other Operative Document.
SECTION 13.4 Proceedings in Respect of Claims. With respect to any amount
--------------------------------
that the Lessee is requested by an Indemnitee to pay by reason of Section 13.1
------------
or 13.3, such Indemnitee shall, if so requested by the Lessee and prior to any
-------
payment, submit such additional information to the Lessee as the Lessee may
reasonably request and which is in the possession of such Indemnitee to
substantiate properly the requested payment.
In case any action, suit or proceeding shall be brought against any
Indemnitee, such Indemnitee shall notify the Lessee of the commencement thereof,
and the Lessee shall be entitled, at its expense, to participate in, and, to the
extent that the Lessee desires to, assume and control the defense thereof;
provided, however, that the Lessee shall have acknowledged in writing its
-------- -------
obligation to fully indemnify such Indemnitee in respect of such action, suit or
proceeding, and the Lessee shall keep such Indemnitee fully apprised of the
status of such action, suit or proceeding and shall provide such Indemnitee with
all information with respect to such action, suit or proceeding as such
Indemnitee shall reasonably request, and provided further, that the Lessee shall
----------------
not be entitled to assume and control the defense of any such action, suit or
proceeding if and to the extent that, (A) in the reasonable opinion of such
Indemnitee, (x) such action, suit or proceeding involves any possibility of
imposition of criminal liability or any risk of material civil liability on such
Indemnitee or will involve a material risk of the sale, forfeiture or loss of,
or the creation of any Lien (other than a Permitted Exception) on the Property
or any part thereof unless, in the case of civil liability or Lien, the Lessee
shall have posted a bond or other security satisfactory to the relevant
Indemnitee in respect to such risk or (y) the control of such action, suit or
proceeding would involve an actual or potential conflict of interest, (B) such
proceeding involves Claims not fully indemnified by the Lessee which the Lessee
and the Indemnitee have been unable to sever from the indemnified claim(s), or
(C) an Event of Default under the Lease has occurred and is continuing. The
Indemnitee may participate in a reasonable manner at its own expense and with
its own counsel in any proceeding conducted by the Lessee in accordance with the
foregoing. The Lessee shall not enter into any settlement or other compromise
with respect to any Claim which is entitled to be indemnified under Section 13.1
------------
or 13.3 without the prior written consent of the Indemnitee which consent shall
-------
not be unreasonably withheld in the case of a money settlement not involving an
admission of liability of such Indemnitee.
Each Indemnitee shall at the expense of the Lessee cooperate with and
supply the Lessee with such information and documents reasonably requested by
the Lessee as are necessary or advisable for the Lessee to participate in any
action, suit or proceeding to the extent permitted by Section 13.1 or 13.3.
--------------------
Unless an Event of Default under the Lease shall have occurred and be
continuing, no Indemnitee shall enter into any settlement or other compromise
with respect to any Claim which is entitled to be indemnified under Section 13.1
------------
or 13.3 without the prior written consent of the Lessee, which consent shall not
-------
be unreasonably withheld, unless such Indemnitee waives its right to be
indemnified under Section 13.1 or 13.3 with respect to such Claim.
--------------------
60
Upon payment in full of any Claim by the Lessee pursuant to Section
-------
13.1 or 13.3 to or on behalf of an Indemnitee, the Lessee, without any further
------------
action, shall be subrogated to any and all claims that such Indemnitee may have
relating thereto (other than claims in respect of insurance policies maintained
by such Indemnitee at its own expense), and such Indemnitee shall execute such
instruments of assignment and conveyance, evidence of claims and payment and
such other documents, instruments and agreements as may be necessary to preserve
any such claims and otherwise cooperate with the Lessee and give such further
assurances as are necessary or advisable to enable the Lessee vigorously to
pursue such claims.
Any amount payable to an Indemnitee pursuant to Section 13.1 or 13.3
--------------------
shall be paid to such Indemnitee promptly upon receipt of a written demand
therefor from such Indemnitee, accompanied by a written statement describing in
reasonable detail the basis for such indemnity and the computation of the amount
so payable and, if requested by the Lessee, such determination shall be verified
by a nationally recognized independent accounting firm mutually acceptable to
the Lessee and the Indemnitee at the expense of the Lessee.
SECTION 13.5 General Impositions Indemnity.
-----------------------------
(a) Indemnification. The Lessee shall pay and assume liability for,
---------------
and does hereby agree to indemnify, protect and defend the Property and all
Indemnitees, and hold them harmless against, all Impositions on an After Tax
Basis.
(b) Payments. (i) Subject to the terms of Section 13.5(f), the Lessee
-------- ---------------
shall pay or cause to be paid all Impositions directly to the taxing authorities
where feasible and otherwise to the Indemnitee, as appropriate, and the Lessee
shall at its own expense, upon such Indemnitee's reasonable request, furnish to
such Indemnitee copies of official receipts or other satisfactory proof
evidencing such payment.
(ii) In the case of Impositions for which no contest is conducted
pursuant to Section 13.5(f) and which the Lessee pays directly to the
---------------
taxing authorities, the Lessee shall pay such Impositions prior to the
latest time permitted by the relevant taxing authority for timely payment.
In the case of Impositions for which the Lessee reimburses an Indemnitee,
the Lessee shall do so within twenty (20) days after receipt by the Lessee
of demand by such Indemnitee describing in reasonable detail the nature of
the Imposition and the basis for the demand (including the computation of
the amount payable), but in no event shall the Lessee be required to pay
such reimbursement prior to ten (10) days before the latest time permitted
by the relevant taxing authority for timely payment. In the case of
Impositions for which a contest is conducted pursuant to Section 13.5(f),
---------------
the Lessee shall pay such Impositions or reimburse such Indemnitee for such
Impositions, to the extent not previously paid or reimbursed pursuant to
subsection (a), prior to the latest time permitted by the relevant taxing
authority for timely payment after conclusion of all contests under Section
-------
13.5(f).
-------
(iii) At the Lessee's request, the amount of any indemnification
payment by the Lessee pursuant to subsection (a) shall be verified and
certified by an independent public accounting firm mutually acceptable to
the Lessee and the
61
Indemnitee. The fees and expenses of such independent public accounting
firm shall be paid by the Lessee unless such verification shall result in
an adjustment in the Lessee's favor of five percent (5%) or more of the
payment as computed by the Indemnitee, in which case such fee shall be paid
by the Indemnitee.
(c) Reports and Returns. The Lessee shall be responsible for
-------------------
preparing and filing any real and personal property or ad valorem tax returns in
respect of the Property. In case any other report or tax return shall be
required to be made with respect to any obligations of the Lessee under or
arising out of subsection (a) and of which the Lessee has knowledge or should
have knowledge, the Lessee, at its sole cost and expense, shall notify the
relevant Indemnitee of such requirement and (except if such Indemnitee notifies
the Lessee that such Indemnitee intends to file such report or return) (A) to
the extent required or permitted by and consistent with Applicable Law, make and
file in its own name such return, statement or report; and (B) in the case of
any other such return, statement or report required to be made in the name of
such Indemnitee, advise such Indemnitee of such fact and prepare such return,
statement or report for filing by such Indemnitee or, where such return,
statement or report shall be required to reflect items in addition to any
obligations of the Lessee under or arising out of subsection (a), provide such
Indemnitee at the Lessee's expense with information sufficient to permit such
return, statement or report to be properly made with respect to any obligations
of the Lessee under or arising out of subsection (a). Such Indemnitee shall,
upon the Lessee's request and at the Lessee's expense, provide any data
maintained by such Indemnitee (and not otherwise available to or within the
control of the Lessee) with respect to the Property which the Lessee may
reasonably require to prepare any required tax returns or reports. Each
Indemnitee agrees to use its best efforts to send to the Lessee a copy of any
written request or other notice that the Indemnitee receives with respect to any
reports or returns required to be filed with respect to the Property or the
transactions contemplated by the Operative Documents, it being understood that
no Indemnitee shall have any liability for failure to provide such copies.
(d) Income Inclusions. If as a result of the payment or reimbursement
-----------------
by the Lessee of any expenses of the Lessor or the payment of any Transaction
Expenses incurred in connection with the transactions contemplated by the
Operative Documents, the Lessor or any Participant shall suffer a net increase
in any federal, state or local income tax liability, the Lessee shall indemnify
such Persons (without duplication of any indemnification required by subsection
(a)) on an After Tax Basis for the amount of such increase. The calculation of
any such net increase shall take into account any current or future tax savings
realized or reasonably expected to be realized by such person in respect
thereof, as well as any interest, penalties and additions to tax payable by the
Lessor, or any Participant or such Affiliate, in respect thereof.
(e) Withholding Taxes. As between the Lessee on one hand, and the
-----------------
Lessor or the Agent and any Participant on the other hand, the Lessee shall be
responsible for, and, subject to the provisions of Sections 13.5(g) and (h), the
------------------------
Lessee shall indemnify and hold harmless the Lessor, the Agent and the
Participants (without duplication of any indemnification required by subsection
(a)) on an After Tax Basis against, any obligation for United States or foreign
withholding taxes imposed in respect of payments with respect to the
Participation Interests or with respect to Rent payments under the Lease or
payments of the Asset Termination Value or Purchase Option Price (and, if the
Lessor, the Agent or any Participant receives a
62
demand for such payment from any taxing authority, the Lessee shall discharge
such demand on behalf of the Lessor, the Agent or such Participant).
Notwithstanding the foregoing provisions of this Section 13.5(e) or any other
--------------
provision of any Operative Document to the contrary, the Lessee shall not be
responsible for and shall not be required to indemnify or otherwise hold
harmless any Person from or against any withholding tax imposed as a collection
device for, or in substitution or lieu of, an income, franchise or similar tax
to the extent such income, franchise or similar tax would not otherwise be
subject to indemnification pursuant to this Section 13.5 (a "Qualified
------------ ---------
Withholding Tax"). As used herein, Qualified Withholding Taxes include, without
---------------
limitation, any withholding taxes arising under Section 871, 881, 1441 or 1442
of the Code and any similar taxes arising under state, local or foreign law as
well as any withholding tax imposed as a collection device for, or in
substitution or lieu of the Imposition that qualifies as an "income tax" within
the meaning of United States Treasury Regulation Section 1.901-2.
(f) Contests of Impositions. (i) If a written claim is made against
-----------------------
any Indemnitee or if any proceeding shall be commenced against such Indemnitee
(including a written notice of such proceeding), for any Impositions, such
Indemnitee shall promptly notify the Lessee in writing and shall not take action
with respect to such claim or proceeding without the consent of the Lessee for
thirty (30) days after the receipt of such notice by the Lessee; provided,
--------
however, that, in the case of any such claim or proceeding, if action shall be
-------
required by law or regulation to be taken prior to the end of such 30-day
period, such Indemnitee shall, in such notice to the Lessee, inform the Lessee
of such shorter period, and no action shall be taken with respect to such claim
or proceeding without the consent of the Lessee before two (2) days before the
end of such shorter period; provided, further, that the failure of such
-------- -------
Indemnitee to give the notices referred to this sentence shall not diminish the
Lessee's obligation hereunder except to the extent such failure precludes the
Lessee from contesting all or part of such claim.
(ii) If, within thirty (30) days of receipt of such notice from
the Indemnitee (or such shorter period as the Indemnitee has notified the
Lessee is required by law or regulation for the Indemnitee to commence such
contest), the Lessee shall request in writing that such Indemnitee contest
such Imposition, the Indemnitee shall, at the expense of the Lessee, in
good faith conduct and control such contest (including, without limitation,
by pursuit of appeals) relating to the validity, applicability or amount of
such Impositions (provided, however, that (A) if such contest involves a
-------- -------
tax other than a tax on net income and can be pursued independently from
any other proceeding involving an unindemnified tax liability of such
Indemnitee, the Indemnitee, at the Lessee's request, shall allow the Lessee
to conduct and control such contest and (B) in the case of any contest, the
Indemnitee may request the Lessee to conduct and control such contest) by,
in the sole discretion of the Person conducting and controlling such
contest, (1) resisting payment thereof, (2) not paying the same except
under protest, if protest is necessary and proper, (3) if the payment be
made, using reasonable efforts to obtain a refund thereof in appropriate
administrative and judicial proceedings, or (4) taking such other action as
is reasonably requested by the Lessee from time to time.
(iii) The party controlling any contest shall consult in good
faith with the non-controlling party and shall keep the non-controlling
party reasonably informed as to the conduct of such contest; provided, that
--------
all decisions ultimately shall be made in the
63
sole discretion of the controlling party except that no decision shall be
made to concede an indemnified issue without the prior consent of Lessee
(which consent shall not be unreasonably withheld). The parties agree that
an Indemnitee may at any time decline to take further action with respect
to the contest of any Imposition and may settle such contest if such
Indemnitee shall waive its rights to any indemnity from the Lessee that
otherwise would be payable in respect of such claim (and any future claim
by any taxing authority, the contest of which is precluded by reason of
such resolution of such claim) and shall pay to the Lessee any amount
previously paid or advanced by the Lessee pursuant to this Section 13.5 by
------------
way of indemnification or advance for the payment of an Imposition other
than expenses of such contest.
(iv) Notwithstanding the foregoing provisions of this Section
-------
13.5, an Indemnitee shall not be required to take any action and the Lessee
----
shall not be permitted to contest any Impositions in its own name or that
of the Indemnitee unless (A) the Lessee shall have agreed such Imposition
is subject to indemnity hereunder and shall pay to such Indemnitee on
demand and on an After Tax Basis all reasonable costs, losses and expenses
that such Indemnitee actually incurs in connection with contesting such
Impositions, including, without limitation, all reasonable legal,
accounting and investigatory fees and disbursements, (B) in the case of a
claim that must be pursued in the name of an Indemnitee (or an Affiliate
thereof), the amount of the potential indemnity (taking into account all
similar or logically related claims that have been or could be raised in
any audit involving such Indemnitee for which the Lessee may be liable to
pay an indemnity under this Section 13.5) exceeds $10,000, (C) the
------------
Indemnitee shall have reasonably determined that the action to be taken
will not result in any material danger of sale, forfeiture or loss of the
Property, or any part thereof or interest therein, will not interfere with
the payment of Rent, and will not result in risk of criminal liability, (D)
if such contest shall involve the payment of the Imposition prior to the
contest, the Lessee shall provide to the Indemnitee an interest-free
advance in an amount equal to the Imposition that the Indemnitee is
required to pay (with no additional net after-tax cost to such Indemnitee),
(E) in the case of a claim that must be pursued in the name of an
Indemnitee (or an Affiliate thereof), the Lessee shall have provided to
such Indemnitee an opinion of independent tax counsel selected by the
Indemnitee and reasonably satisfactory to the Lessee stating that a
reasonable basis exists to contest such claim (or, in the case of an appeal
of an adverse judicial determination, an opinion of such counsel to the
effect that there is substantial authority for the position asserted in
such appeal) and (F) no Event of Default hereunder shall have occurred and
be continuing. In no event shall an Indemnitee be required to appeal an
adverse judicial determination to the United States Supreme Court. In
addition, an Indemnitee shall not be required to contest any claim in its
name (or that of an Affiliate) if the subject matter thereof shall be of a
continuing nature and shall have previously been decided adversely by a
court of competent jurisdiction pursuant to a contest completed in
accordance with the provisions of this Section 13.5, unless there shall
------------
have been a change in law (or interpretation thereof) and the Indemnitee
shall have received, at the Lessee's expense, an opinion of independent tax
counsel selected by the Indemnitee and reasonably acceptable to the Lessee
stating
64
that as a result of such change in law (or interpretation thereof), it is
more likely than not that the Indemnitee will prevail in such contest.
(g) Documentation of Withholding Status. Each Participant (or any
-----------------------------------
successor thereto or transferee thereof) that is organized under the laws of a
jurisdiction outside of the United States of America and each Lessor that is
organized under the laws of a jurisdiction outside of the United States of
America shall:
(i) on or before the date it becomes a party to any Operative
Document, deliver to the Lessee any certificates, documents, or other
evidence that shall be required by the Code or Treasury Regulations issued
pursuant thereto to establish its exemption from United States Federal
withholding requirements, including (A) two valid, duly completed, original
copies of Internal Revenue Service Form W-8BEN or Form W-8ECI or successor
applicable form, properly and duly executed, certifying in each case that
such party is entitled to receive payments pursuant to the Operative
Documents without deduction or withholding of United States Federal income
taxes, or (B) a valid, duly completed, original copy of Internal Revenue
Service Form W-8 or Form W-9 or applicable successor form, properly and
duly executed, certifying that such party is entitled to an exemption from
United States of America backup withholding tax; and
(ii) so long as it shall be legally entitled to do so, on or
before the date that any such form described above expires or becomes
obsolete, or after the occurrence of any event requiring a change in the
most recent such form previously delivered to the Lessee, deliver to the
Lessee two further valid, duly completed, original copies of any such form
or certification, properly and duly executed.
(h) Limitation on Tax Indemnification. The Lessee shall not be
---------------------------------
required to indemnify any Indemnitee, or to pay any increased amounts to any
Indemnitee or tax authority with respect to any Impositions pursuant to this
Section 13.5 to the extent that (i) such Imposition is attributable to such
------------
Indemnitee's failure to comply with the provisions of Section 13.5(g); or (ii)
---------------
to the extent such Imposition constitutes or is collected by means of a
Qualified Withholding Tax.
(i) Tax Savings. In the event an Indemnitee receives a refund (or
-----------
similar tax savings) in respect of any Imposition paid or reimbursed by the
Lessee which was not considered in calculating the After Tax Basis with respect
to such payment or reimbursement by Lessee, such Indemnitee shall within thirty
(30) days thereafter remit the amount of such refund (or tax savings) to the
Lessee, provided that the amount so remitted shall not exceed the lesser of: (i)
--------
the amount received by such Indemnitee as a refund (or tax savings) net of all
reasonable costs and expenses incurred by such Indemnitee in connection with
obtaining and paying such amount; and (ii) (a) the amount of all prior payments
by the Lessee to such Indemnitee with respect to Impositions, plus any refunded
interest, less (b) the amount of all prior payments by the Indemnitee to the
Lessee under this Section 13.5(i).
---------------
SECTION 13.6 Funding Losses. If any payment of any Advance or any portion
--------------
of any Participation Interest is made on any day other than the last day of an
Interest Period applicable
65
thereto, or if the Lessee fails to utilize the proceeds of any purchase of
Participation Interests after notice has been given to any Participant in
accordance with Section 3 or 4, the Lessee shall reimburse each Participant
--------------
within fifteen (15) days after demand for any Funding Losses provided that such
--------
Participant shall have delivered to the Lessee a certificate as to the amount of
such loss or expense, which certificate shall be conclusive in the absence of
manifest error, and provided further that such loss shall in no event exceed the
----------------
interest on the Advances which would have been payable for the balance of such
Interest Period or other period, less the amount actually earned by such
Participant on such Advances. Such Participant will, at the request of the
Lessee, furnish such additional information concerning the determination of such
loss as the Lessee may reasonably request.
SECTION 13.7 Regulation D Compensation. For so long as any Participant is
-------------------------
required by a Change of Law to increase its existing reserve percentage above
that applicable under existing law as of the Effective Date against
"Eurocurrency Liabilities" (or any other category of liabilities which include
deposits by reference to which the interest rate on its Participation Interest
in any Advance is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of such Participant to
United States residents), and, as a result, the cost to such Participant (or its
Funding Office) of purchasing or maintaining its Participation Interest in any
Advance is increased, then such Participant may require the Lessee to pay,
contemporaneously with each payment of interest or Yield on the Advances an
additional amount on the Participation Interest of such Participant in the
Advances at a rate per annum up to but not exceeding the excess of (i) (A) the
applicable Eurodollar Rate divided by (B) one minus the Eurocurrency Reserve
Requirements and (ii) the applicable Eurodollar Rate. Any Participant wishing
to require payment of such additional amount (x) shall so notify the Lessee and
the Agent, in which case such additional interest on its Participation Interest
in any Advance shall be payable to such Participant at the place indicated in
such notice with respect to each Interest Period commencing at least three (3)
Business Days after the giving of such notice and (y) shall furnish to the
Lessee at least five (5) Business Days prior to each date on which interest is
payable on the Advance an officer's certificate setting forth the amount to
which such Participant is then entitled under this Section (which shall be
consistent with such Participant's good faith estimate of the level at which the
related reserves are maintained by it). Each such certificate shall be
accompanied by such information as the Lessee may reasonably request as to the
computation set forth therein.
SECTION 13.8 Basis for Determining Interest Rate Inadequate or Unfair. If
--------------------------------------------------------
on or prior to the first day of any Interest Period:
(a) deposits in dollars (in the applicable amounts) are not being
offered to the Agent in the relevant market for such Interest Period or any
Participants shall advise the Agent that the Eurodollar Rate as determined by
the Agent will not adequately and fairly reflect the cost to such Participant of
funding its Participation Interest in any Advance for such Interest Period; or
(b) any Participant determines that, by reason of the adoption, on or
after the date of this Participation Agreement, of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any Governmental
66
Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Participant (or its Funding Office)
with any request or directive (whether or not having the force of law) of any
such authority, central bank or governmental agency, it is restricted, directly
or indirectly, in the amount it may hold of (i) a category of liabilities that
includes deposits by reference to which, or on the basis of which, the interest
rates applicable to Advances to fund its Participation Interest Commitment based
on the Eurodollar Rate are directly or indirectly determined, or (ii) the
category of assets which includes Advances to fund its Participation Interest
Commitment based on the Eurodollar Rate; the Agent shall forthwith give notice
thereof to the Lessee and the Participants, whereupon until the Agent notifies
the Lessee that the circumstances giving rise to such suspension no longer
exist, each outstanding Advance shall begin to bear interest on the last day of
the then current Interest Period applicable thereto at a rate per annum equal to
the sum of (i) the Participants' average cost of funds employed to fund their
Participation Interests, as notified to the Agent and the Lessee, plus (ii) the
Applicable Margin for Eurodollar Rate-based Advances at such time.
SECTION 13.9 Illegality. If, on or after the date of this Participation
----------
Agreement, the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Participant (or
its Funding Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency (a
"Charge of Law"), shall make it unlawful or impossible for any Participant (or
-------------
its Funding Office) to purchase, maintain or fund its Participation Interest in
any Advance and such Participant shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Participants and the Lessee,
whereupon until such Participant notifies the Lessee and the Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Participant to purchase its Participation Interest in any Advance shall be
suspended. Before giving any notice to the Agent pursuant to this Section, such
Participant shall, if practicable, with the consent of the Lessee (which consent
shall not unreasonably be withheld), designate a different Funding Office if
such designation will avoid the need for giving such notice and will not, in the
judgment of such Participant, be otherwise disadvantageous to such Participant.
If such notice is given (i) the Lessee shall be entitled upon its request to a
reasonable explanation of the factors underlying such notice and (ii) each
outstanding Participation Interest in any Advance of such Participant then
outstanding shall begin to bear interest at the Alternate Base Rate plus the
Applicable Margin either (a) on the last day of the then current Interest Period
applicable to such Advance if such Participant may lawfully continue to maintain
and fund such Participation Interest to such day or (b) immediately if such
Participant shall determine that it may not lawfully continue to maintain and
fund such Participation Interest to such day. If such notice is given the
Lessee may exercise its Purchase Option under Section 20.1 of the Lease upon not
-------------------------
less than ten (10) days' written notice to the Lessor, the Agent and the
Participants.
SECTION 13.10 Increased Cost and Reduced Return. (a) In the event that
---------------------------------
the adoption of any applicable law, rule or regulation, or any change therein or
in the interpretation or application thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof or compliance by any Participant with any
67
request or directive after the date hereof (whether or not having the force of
law) of any such authority, central bank or comparable agency:
(i) does or shall subject such Participant to any additional
tax of any kind whatsoever with respect to the Operative Documents or any
purchase of a Participation Interest in any Advance, or change the basis or
the applicable rate of taxation of payments to such Participant of its
Participation Interest or any other amount payable hereunder (except for
the imposition of or change in (x) any tax on or measured by the overall
net income of such Participant including, without limitation, any tax that
qualifies as an "income tax" within the meaning of United States Treasury
Regulation Section 1.901-2 and which is not an Imposition or (y) any
Qualified Withholding Tax);
(ii) does or shall impose, modify or hold applicable any
reserve, special deposit, insurance assessment, compulsory loan or similar
requirement against assets held by, or deposits or other liabilities in or
for the account of, advances or loans by, or other credit extended by, or
any other acquisition of funds by, any office of such Participant which are
not otherwise included in determination of the rate of interest on Advances
hereunder; or
(iii) does or shall impose on such Participant any other
condition; and the result of any of the foregoing is to increase the cost
to such Participant of purchasing or maintaining its Participation Interest
in any Advance or to reduce any amount receivable hereunder with respect
thereto, then in any such case, the Lessee shall promptly pay such
Participant, upon its demand, any additional amounts necessary to
compensate such Participant for such increased cost or reduced amount
receivable which such Participant deems to be material as determined by
such Participant provided, however, that the Lessee shall not be obligated
-------- -------
to pay any Participant for any such increased costs or reduced amounts
incurred more than sixty (60) days prior to the date of such Participant's
demand for payment if such demand was made more than sixty (60) days after
the latest of (A) the date such Participant received actual notice of such
increased cost or reduced amount, (B) the effective date of such change or
(C) the date such change occurred or was enacted.
(b) If any Participant shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or any request
or directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency has or would have the
effect of reducing the rate of return on capital of such Participant (or any
entity directly or indirectly controlling such Participant) as a consequence of
such Participant's obligations under the Operative Documents to a level below
that which such Participant (or any entity directly or indirectly controlling
such Participant) could have achieved but for such adoption, change, request or
directive (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Participant to be material, then from time
to time, within fifteen (15) days after demand by such Participant (with a copy
to the Agent), the Lessee shall pay to such
68
Participant such additional amount or amounts as will compensate such
Participant (or its parent) for such reduction.
(c) Each Participant will promptly notify the Lessee and the Agent of
any event of which it has knowledge, occurring after the date hereof, which will
entitle such Participant to compensation pursuant to this Section and will, if
practicable, with the consent of the Lessee (which consent shall not
unreasonably be withheld), designate a different Funding Office or take any
other reasonable action if such designation or action will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Participant, be otherwise disadvantageous to such Participant. A certificate of
any Participant claiming compensation under this Section and setting forth in
reasonable detail its computation of the additional amount or amounts to be paid
to it hereunder shall be conclusive in the absence of manifest error. In
determining such amount, such Participant may use any reasonable averaging and
attribution methods. This Section shall survive the termination of this
Participation Agreement and payment of the outstanding Advances and
Participation Interests.
SECTION 13.11 Substitution of Participant. If (i) the obligation of any
---------------------------
Participant to purchase or maintain its Participation Interest has been
suspended pursuant to this Section 13, or (ii) any Participant has demanded
----------
compensation or given notice of its intention to demand compensation under
Sections 13.1, 13.2, 13.5 or 13.10, the Lessee shall have the right, with the
----------------------------------
assistance of the Agent, to seek one or more mutually satisfactory substitute
banks or financial institutions (which may be one or more of the Participants)
to replace such Participant under the Operative Documents.
SECTION 13.12 Indemnity Payments in Addition to Residual Value Guarantee
----------------------------------------------------------
Amount. The Lessee acknowledges and agrees that its obligations to make
------
indemnity payments under this Section 13 are separate from, in addition to, and
----------
do not reduce, its obligation to pay the Residual Value Guarantee Amount under
the Lease; provided, that except as otherwise set forth in Section 13.2 hereof,
-------- ------------
the Shortfall Amount payable by the Lessee in connection with the Remarketing
Option under the Lease shall not be increased under this Section 13.
----------
SECTION 14
THE AGENT
SECTION 14.1 Appointment. Each Participant hereby irrevocably designates
-----------
and appoints the Agent as the agent of such Participant under this Participation
Agreement and the other Operative Documents, and each Participant irrevocably
authorizes the Agent, in such capacity, to take such action on its behalf under
the provisions of this Participation 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 Participation 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 Participation Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Participant or any other party to the Operative Documents,
and no
69
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Participation Agreement or any other
Operative Document or otherwise exist against the Agent.
SECTION 14.2 Delegation of Duties. The Agent may execute any of its
--------------------
duties under this Participation 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 14.3 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 Participation 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 Participants
or any other party to the Operative Documents for any recitals, statements,
representations or warranties made by the Lessor or the Lessee or any officer
thereof contained in this Participation 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
Participation Agreement or any other Operative Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Participation Agreement or any other Operative Document or for any failure of
the Lessor or the Lessee to perform its obligations hereunder or thereunder.
The Agent shall not be under any obligation to any Participant or any other
party to the Operative Documents to ascertain or to inquire as to the observance
or performance of any of the agreements contained in, or conditions of, this
Participation Agreement or any other Operative Document, or to inspect the
properties, books or records of the Lessor or the Lessee.
SECTION 14.4 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 the Lessee), independent accountants and
other experts selected by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Participation Agreement or any
other Operative Document unless it shall first receive such advice or
concurrence of the Required Participants as it deems appropriate or it shall
first be indemnified to its satisfaction by the Participants against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Participation
Agreement and the other Operative Documents in accordance with a request of the
Required Participants, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Participants.
SECTION 14.5 Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has received
70
notice from a Participant, the Lessor or the Lessee describing such Default or
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 other parties hereto. Subject to the provisions of Section 11 and Section
---------- -------
15.5 hereof, the Agent shall take such action with respect to such Default or
----
Event of Default as shall be reasonably directed by the Required Participants;
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 Default or Event of Default as it shall
deem advisable in the best interests of the Participants.
SECTION 14.6 Non-Reliance on Agent and Other Participants. Each
--------------------------------------------
Participant 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 or the Lessee, shall be
deemed to constitute any representation or warranty by the Agent to any
Participant. Each Participant represents to the Agent that it has,
independently and without reliance upon the Agent or any other Participant, 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 Lessee and
the Property and made its own decision to purchase its Participation Interest
hereunder and enter into this Participation Agreement. Each Participant also
represents that it will, independently and without reliance upon the Agent, the
Lessor or any other Participant, 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 Participation
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 and the Lessee.
Except for notices, reports and other documents expressly required to be
furnished to the Participants by the Agent hereunder, the Agent shall not have
any duty or responsibility to provide any Participant with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Lessor or the Lessee which
may come into the possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
SECTION 14.7 Indemnification. The Participants agree to indemnify the
---------------
Agent in its capacity as such (to the extent not reimbursed by the Lessee and
without limiting the obligation of the Lessee to do so), ratably according to
their respective Commitment Percentages in effect on the date on which
indemnification is sought under this Section 14.7 (or, if indemnification is
------------
sought after the date upon which the Commitments shall have terminated and the
Participation Interests shall have been paid in full, ratably in accordance with
their Commitment Percentages 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 Participation Interests) be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of, the Commitments,
this Participation Agreement, the Property, 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
any of them under or in connection with any of the foregoing; provided that no
--------
71
Participant 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 gross negligence or willful
misconduct of the Agent. The agreements in this Section 14.7 shall survive the
------------
payment of the Participation Interests and all other amounts payable hereunder.
SECTION 14.8 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 or the Lessee as though the Agent were not the
Agent hereunder and under the other Operative Documents. With respect to its
Participation Interest purchased by it, the Agent shall have the same rights and
powers under this Participation Agreement and the other Operative Documents as
any Participant and may exercise the same as though it were not the Agent, and
the terms "Participant" and "Participants" shall include the Agent in its
individual capacity.
SECTION 14.9 Successor Agent. The Agent may resign as Agent upon twenty
---------------
(20) days' notice to the Participants, the Lessor or the Lessee. If the Agent
shall resign as Agent under this Participation Agreement and the other Operative
Documents, then the Required Participants shall appoint a successor agent for
the Participants, 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 (and if no Default or Event of Default exists, shall be approved by
the Lessee (which consent shall not be unreasonably withheld)), 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 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 Participation Agreement. If no successor
Agent has accepted appointment as Agent by the date which is twenty (20) days
following a resigning Agent's notice of resignation, the resigning Agent's
resignation shall nevertheless thereupon become effective and the Participants
shall perform all of the duties of the Agent hereunder until such time, if any,
as the Required Participants appoint a successor Agent as provided above. After
any retiring Agent's resignation as Agent, all of the provisions of this Section
-------
14 shall inure to its benefit as to any actions taken or omitted to be taken by
--
it while it was Agent under this Participation Agreement and the other Operative
Documents.
SECTION 15
MISCELLANEOUS
SECTION 15.1 Survival of Agreements. The representations, warranties,
----------------------
covenants, indemnities and agreements of the parties provided for in the
Operative Documents, and the parties' obligations under any and all thereof,
shall survive the execution and delivery of this Participation Agreement, the
transfer of the Property to the Lessor, the construction of any Improvements,
any disposition of any interest of the Lessor in the Property or any
Improvements, payment of the Advances and the Participation Interests and any
disposition thereof and shall be
72
and continue in effect notwithstanding any investigation made by any party and
the fact that any party may waive compliance with any of the other terms,
provisions or conditions of any of the Operative Documents. Except as otherwise
expressly set forth herein or in other Operative Documents, the indemnities of
the parties provided for in the Operative Documents shall survive the expiration
or termination of any thereof.
SECTION 15.2 No Broker, etc. Each of the parties hereto represents to the
--------------
others that it has not retained or employed any broker, finder or financial
adviser to act on its behalf in connection with this Participation Agreement or
the transactions contemplated herein, nor has it authorized any broker, finder
or financial adviser retained or employed by any other Person so to act. Any
party who is in breach of this representation shall indemnify and hold the other
parties harmless from and against any liability arising out of such breach of
this representation.
SECTION 15.3 Notices. Unless otherwise specifically provided herein, all
-------
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be given in writing and delivered (i) personally, (ii) by a
nationally recognized overnight courier service, (iii) by mail (by registered or
certified mail, return receipt requested, postage prepaid) or (iv) by facsimile,
in each case directed to the address of such Person as indicated on Schedule
--------
III. Any such notice shall be effective upon receipt or refusal.
---
From time to time any party may designate a new address for purposes
of notice hereunder by written notice to each of the other parties hereto in
accordance with this Section.
SECTION 15.4 Counterparts. This Participation Agreement 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 15.5 Amendments. Subject to the provisions of Section 11 hereof,
---------- ----------
no Operative Document nor any of the terms thereof may be terminated, amended,
supplemented, waived or modified with respect to the Lessee, the Lessor, the
Agent or any Participant, except (a) in the case of a termination, amendment,
supplement, waiver or modification to be binding on the Lessee, the Lessor or
the Agent, with the written agreement or consent of such party, and (b) in the
case of a termination, amendment, supplement, waiver or modification to be
binding on the Participants, with the written agreement or consent of the
Required Participants; provided, however, that
-------- -------
(x) no such termination, amendment, supplement, waiver or
modification shall without written agreement or consent of each Participant:
(i) modify any of the provisions of Section 11 of this
----------
Participation Agreement or this Section 15.5, change the definition of
------------
"Required Participants" or modify or waive any provision of an Operative
Agreement requiring action by the foregoing;
73
(ii) amend, modify, waive or supplement any of the provisions of
Sections 3.6, 3.7 or 3.10 - 3.21 of this Participation Agreement or the
--------------------------------
representations of such Participant in Section 8 or the covenants in
---------
Sections 7 and 10 of this Participation Agreement;
-----------------
(iii) reduce, modify, amend or waive any fees or indemnities in
favor of any Participant, including without limitation amounts payable
pursuant to Section 13 (except that any Person may consent to any
----------
reduction, modification, amendment or waiver of any indemnity or fee
payable to it);
(iv) modify, postpone, reduce or forgive, in whole or in part,
any payment of Rent (other than pursuant to the terms of any Operative
Agreement), any payment in respect of its Participation Interest, or any
payment of the Asset Termination Value, Residual Value Guarantee Amount,
amounts due pursuant to Section 22.2 of the Lease, or interest or, subject
-------------------------
to clause (iii) above, any other amount payable under the Lease or this
------------
Participation Agreement, or modify the definition or method of calculation
of Rent (other than pursuant to the terms of any Operative Agreement),
Participation Interest, Asset Termination Value, Shortfall Amount, Residual
Value Guarantee Amount, Required Supplemental Payments, Property
Improvements Cost, Participant Balance, Tranche A Participation Interest
Balance, Tranche B Participation Interest Balance, or any other definition
which would affect the amounts to be advanced or which are payable under
the Operative Documents; or
(v) consent to any assignment of the Lease, releasing the
Lessee from its obligations in respect of the payments of Rent and the
Asset Termination Value or changing the absolute and unconditional
character of such obligation; and
(y) no other termination, amendment, supplement, waiver or
modification shall, without the written agreement or consent of the Lessor and
the Required Participants, be made to the Lease or Section 6 of this
---------
Participation Agreement or the definition of "Event of Default".
SECTION 15.6 Headings, etc. The Table of Contents and headings of the
-------------
various Sections of this Participation Agreement are for convenience of
reference only and shall not modify, define, expand or limit any of the terms or
provisions hereof.
SECTION 15.7 Parties in Interest. Except as expressly provided herein,
-------------------
none of the provisions of this Participation Agreement are intended for the
benefit of any Person except the parties hereto. Subject to the provisions of
Section 25.1 of the Lease, the Lessee shall not assign or transfer any of its
-------------------------
rights or obligations under the Operative Documents without the prior written
consent of the Lessor, the Agent and the Participants, except that the Lessee
may without such consent assign rights or obligations of the Lessee under the
Operative Documents to an Affiliate of the Lessee, provided that the Lessee
--------
remains primarily liable with respect to such obligations and provides its full
unconditional and irrevocable guaranty of such Subsidiary's obligations under
the Operative Documents, such guaranty to be in form and substance reasonably
satisfactory to the Required Participants. If the Lessor, the Agent and the
Participants
74
consent to any such assignment or transfer to a Person not an Affiliate of the
Lessee, the Lessee shall remain primarily liable with respect to such
obligations and provide its full and unconditional guaranty of such Person's
obligations under the Operative Documents, such guaranty to be in form and
substance reasonably satisfactory to the Required Participants.
SECTION 15.8 GOVERNING LAW. THIS PARTICIPATION AGREEMENT SHALL IN ALL
-------------
RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF ILLINOIS (EXCLUDING ANY
CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF
THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
SECTION 15.9 Severability. Any provision of this Participation Agreement
------------
that 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.
SECTION 15.10 Liability Limited. (a) The parties hereto agree that the
-----------------
Lessor shall have no personal liability whatsoever to the Lessee, the Agent or
any Participant or their respective successors and assigns for any claim based
on or in respect of the Lease or any of the other Operative Documents or arising
in any way from the transactions contemplated hereby or thereby; provided,
--------
however, that the Lessor shall be liable in its individual capacity (a) for its
-------
own willful misconduct or gross negligence (or negligence in the handling of
funds), (b) for liabilities that may result from its breach of the covenant to
remove Lessor Liens set forth in Section 10.3, or (c) for any Tax based on or
------------
measured by any fees, commission or compensation received by it for acting as
the Lessor as contemplated by the Operative Documents. It is understood and
agreed that, except as provided in the preceding proviso: (i) the Lessor shall
have no personal liability under any of the Operative Documents; (ii) all
obligations of the Lessor to the Lessee, the Agent and the Participants are
solely nonrecourse obligations and shall be enforceable solely against the
interest of the Lessor in the Property; and (iii) all such personal liability of
the Lessor is expressly waived and released as a condition of, and as
consideration for, the execution and delivery of the Operative Documents by the
Lessor. Notwithstanding anything contained herein, the limitations on liability
stated in the preceding provisions of this Section 15.10(a) shall not apply to
----------------
liability of the Lessor arising because of a breach of the Lessor's obligation
to remove Lessor Liens or because of its receiving Advances and failing to
disburse Advances to the Lessee in accordance with the Operative Documents, or
failure to disburse proceeds from the sale of the Property in accordance with
the Lease and this Participation Agreement.
(b) No Participant shall have any obligation to any other Participant
or to the Lessee, the Lessor or the Agent with respect to transactions
contemplated by the Operative Documents, except those obligations of such
Participant expressly set forth in the Operative Documents or except as set
forth in the instruments delivered in connection therewith, and no Participant
shall be liable for performance by any other party hereto of such other party's
obligations under the Operative Documents except as otherwise so set forth.
75
SECTION 15.11 Further Assurances. The parties hereto shall promptly cause
------------------
to be taken, executed, acknowledged or delivered, at the sole expense of the
Lessee, all such further acts, conveyances, documents and assurances as the
other parties may from time to time reasonably request in order to carry out and
effectuate the intent and purposes of this Participation Agreement, the other
Operative Documents, and the transactions contemplated hereby and thereby
(including, without limitation, the preparation, execution and filing of any and
all Uniform Commercial Code financing statements and other filings or
registrations which the parties hereto may from time to time request to be filed
or effected). The Lessee, at its own expense and without need of any prior
request from any other party, shall take such action as may be necessary
(including any action specified in the preceding sentence), or (if the Lessor
shall so request) as so requested, in order to maintain and protect all security
interests provided for hereunder or under any other Operative Document.
SECTION 15.12 Submission to Jurisdiction. The Lessee hereby submits to
--------------------------
the nonexclusive jurisdiction of the United States District Court for the
Northern District of Illinois and of any Illinois state court sitting in ▇▇▇▇
County for purposes of all legal proceedings arising out of or relating to the
Operative Documents or the transactions contemplated hereby. The Lessee
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
SECTION 15.13 Confidentiality. The Lessor, the Agent and each Participant
---------------
represent that they will maintain the confidentiality of the transactions
contemplated by, and of any written or oral information provided under, the
Operative Documents by or on behalf of the Lessee (hereinafter collectively
called "Confidential Information"), subject to the Lessor's, the Agent's and
------------------------
each Participant's (a) obligation to disclose any such Confidential Information
pursuant to a request or order under applicable laws and regulations or pursuant
to a subpoena or other legal process, (b) right to disclose any such
Confidential Information to its bank examiners, Affiliates, auditors, counsel
and other professional advisors and to other Participants, (c) right to disclose
any such Confidential Information in connection with any litigation or dispute
involving the Participants and the Lessee or any of its Subsidiaries and
Affiliates and (d) right to provide such information to Sub-Participants,
prospective Sub-Participants to which sales of participating interests are
permitted pursuant to this Participation Agreement and prospective assignees to
which assignments of interests are permitted pursuant to this Participation
Agreement, but only if (i) such Sub-Participant, prospective Sub-Participant or
prospective assignee agrees in writing to maintain the confidentiality of such
information on terms substantially similar to those of this Section as if it
were a "Participant" party hereto and (ii) the Lessee receives copies of such
written agreement prior to the release of such information. Notwithstanding the
foregoing, any such information supplied to a Participant, Sub-Participant,
prospective Sub-Participant or prospective assignee under this Participation
Agreement shall cease to be Confidential Information if it is or becomes known
to such Person by other than unauthorized disclosure, or if it becomes a matter
of public knowledge.
SECTION 15.14 WAIVER OF JURY TRIAL. EACH OF THE LESSEE, THE AGENT, THE
--------------------
LESSOR, AND EACH PARTICIPANT HEREBY IRREVOCABLY WAIVES
76
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THE OPERATIVE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 15.15 Usury Savings Clause. Nothing contained in this
--------------------
Participation Agreement or the other Operative Documents shall be deemed to
require the payment of interest or other charges by the Lessee or any other
Person in excess of the amount which may be may lawfully be charged under any
applicable usury laws. In the event that the Lessor or any other Person shall
collect moneys under the Participation Agreement or any other Operative Document
which are deemed to constitute interest (including, without limitation, the
Basic Rent or Supplemental Rent) which would increase the effect interest rate
to a rate in excess of that permitted to be charged by applicable law, all such
sums deemed to constitute interest in excess of the legal rate shall, upon such
determination, at the option of the Person to whom such payment was made, be
returned to the Person making such payment or credited against other amounts
owed by the person making such payment.
SECTION 15.16 Effect on Original Participation Agreement. Effective upon
------------------------------------------
the Restructuring Date, all parties hereto agree that this Participation
Agreement and Schedules I, II, III and V, Appendix I and Exhibit Q attached
-------------------------- ---------- ---------
hereto shall amend, restate in their entirety and replace, without notation, the
Original Participation Agreement and Schedules I, II, III and V, Appendix I and
-------------------------- ----------
Exhibit Q attached thereto; provided, however, that with respect to the period
--------- -------- -------
prior to the Restructuring Date nothing contained herein shall (i) operate as a
waiver of any right, power or remedy of the Lessor, the Agent or any Participant
under the Original Participation Agreement or any other Operative Document or
(ii) extinguish or impair any obligations of the Lessee under the Original
Participation Agreement or any other Operative Document except to the extent any
such obligation is actually satisfied by Lessee; and provided, further, that all
-------- -------
Advances outstanding under the Original Participation Agreement shall remain
outstanding and shall be deemed to have been made under this Participation
Agreement on a pro rata basis by the Participants hereunder in accordance with
their respective Participant Balances.
[signature pages follow]
77
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
QUANTUM CORPORATION, as Lessee
By:________________________________________
Name:
Title:
SELCO SERVICE CORPORATION., as Lessor
By:________________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA, as Agent
By:________________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA, as a Participant
By:________________________________________
Name:
Title:
KEYBANK NATIONAL ASSOCIATION, as a
Participant
By:________________________________________
Name:
Title:
S-1
SELCO SERVICE CORPORATION, as a Participant
By:________________________________________
Name:
Title:
UNION BANK OF CALIFORNIA, N.A., as a
Participant
By:________________________________________
Name:
Title:
S-2
SCHEDULE I
Commitment
Participant Commitments Percentage
----------- ----------- ----------
THE BANK OF NOVA SCOTIA Tranche A Participation $21,827,558.85 34.75%
Interest:
Tranche B Participation $ 2,474,385.66 3.94%
Interest:
KEYBANK NATIONAL ASSOCIATION Tranche A Participation $20,102,551.58 32.01%
Interest:
Tranche B Participation $ 1,988,164.44 3.17%
Interest:
UNION BANK OF CALIFORNIA, N.A. Tranche A Participation $12,507,900.46 19.92%
Interest:
Tranche B Participation $ 1,692,245.31 2.69%
Interest:
SELCO SERVICE CORPORATION Tranche C Participation $ 2,211,228.49 3.52%
Interest:
TOTAL COMMITMENT: $62,804,034.79 100.00%
==============
SCHEDULE II
PRICING GRID
-------------------------------------------------------------------------------------------------
Applicable Margin in Basis Points per annum
-------------------------------------------------------------------------------------------------
Eurodollar Advances Alternate Base Rate Advances
-------------------------------------------------------------------------------------------------
Level Leverage Ratio Tranche Tranche Tranche Tranche
A and B C A and B C
-------------------------------------------------------------------------------------------------
1 *0.75:1 112.50 200.00 12.50 100.00
-------------------------------------------------------------------------------------------------
2 **0.75:1 but ***1.00:1 125.00 200.00 25.00 100.00
-------------------------------------------------------------------------------------------------
3 **1.00:1 but ***1.25:1 137.50 200.00 37.50 100.00
-------------------------------------------------------------------------------------------------
4 **1.25:1 but ***1.50:1 150.00 200.00 50.00 100.00
-------------------------------------------------------------------------------------------------
5 **1.50:1 175.00 200.00 75.00 100.00
-------------------------------------------------------------------------------------------------
* less than
** more than or equals to
*** more than
EXPLANATION
1. The Applicable Margin for each Eurodollar Rate Advance or Alternate Base
Rate Advance will be based upon the Leverage Ratio as set forth in the most
recent Compliance Certificate received by the Agent pursuant to clause (i)
----------
of Section 10.1(b) of the Participation Agreement; provided, however, that
------------------------------------------------- -------- -------
from July 12, 2000, until October, 19, 2000, the Applicable Margin shall be
fixed as indicated for pricing level 3 set forth above.
2. The Applicable Margin shall be in effect from the date the most recent
Compliance Certificate is received by the Agent to but excluding the date
the next Compliance Certificate is received.
II-1
SCHEDULE III
Notice Information and Funding Offices
Lessee: QUANTUM CORPORATION
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Assistant Treasurer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Lessor: SELCO SERVICE CORPORATION
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Vice President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email:
III-1
Agent: THE BANK OF NOVA SCOTIA
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Director
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Operations Contact:
THE BANK OF NOVA SCOTIA
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ or ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇_▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ or
sonia_mckoy@scotiacapital
III-2
Participant: THE BANK OF NOVA SCOTIA
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Operations Contact:
THE BANK OF NOVA SCOTIA
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ or ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇_▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ or
sonia_mckoy@scotiacapital
Payment
Instructions: The Bank of Nova Scotia
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
ABA No.: ▇▇▇▇▇▇▇▇▇
Account No.: ▇▇▇▇▇▇▇ BNS San Francisco Loan Servicing
Reference: Quantum Corporation Lease
III-3
Participant: KEYBANK NATIONAL ASSOCIATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇_▇_▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Operations Contact:
KEYBANK NATIONAL ASSOCIATION
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇/Specialty Services Team
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇_▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Payment
Instructions: KeyBank National Association
Seattle, Washington
ABA No.: ▇▇▇▇▇▇▇▇▇
Account Name: Western Loan Services
Account No.: ▇▇▇▇▇▇▇▇
Attention: Specialty Services Team
Reference: Quantum
III-4
Participant: SELCO SERVICE CORPORATION
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Vice President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email:
Payment
Instructions: KeyBank National Association
Cleveland, Ohio
ABA No.: ▇▇▇▇▇▇▇▇▇
Account No.: 010027501
Attention: ▇▇▇ ▇▇▇▇▇/SELCO
Reference: Quantum
III-5
Participant: UNION BANK OF CALIFORNIA, N.A.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇▇▇.▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
Operations Contact:
UNION BANK OF CALIFORNIA, N.A.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇.▇▇▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
Payment
Instructions: UNION BANK OF CALIFORNIA, N.A.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ABA No.: ▇▇▇-▇▇▇-▇▇▇
Account No.: 070196431
Reference: Quantum Corporation
III-6
SCHEDULE V
Methodology for Calculating Partial Purchase Option Prices
----------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Bank Financed Only
Final Cost Summary ($000)
By Building
June '00
-------------------------------------------------------------------------------------------------------
$K
-------------------------------------------------------------------------------------------------------
Total
-------------------------------------------------------------------------------------------------------
Item $K ▇▇▇▇. ▇ ▇▇▇▇. ▇ ▇▇▇▇. ▇ ▇▇▇▇. ▇ Land
-------------------------------------------------------------------------------------------------------
Land
-------------------------------------------------------------------------------------------------------
Acres 40.7 18 7.8 8.7 6.2
-------------------------------------------------------------------------------------------------------
% by Bldg. 44% 19% 22% 15%
-------------------------------------------------------------------------------------------------------
Cost 4,354 1,916 827 958 653
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Bldg. + FFE 50,716 24,421 9,607 16,188 500
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Total Land, Bldg. + FFE 55,070 26,337 10,434 17,146 1,153
-------------------------------------------------------------------------------------------------------
48% 19% 31% 2%
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Fees
-------------------------------------------------------------------------------------------------------
Design & Construction 3,690 1,771 701 1,144 74
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Closing 404 194 77 125 8
-------------------------------------------------------------------------------------------------------
Construction Interest 3,340 1,603 635 1,035 67
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Total 62,504 29,905 11,847 19,452 1,300
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
$/SF 155 152 149 153 N/A
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
V-1
SCHEDULE 3.6
ADVANCES ON RESTRUCTURING DATE
Participant Proportionate Share of Advances
----------- -------------------------------
The Bank of Nova Scotia $150,000.00
KeyBank National Association $148,989.77
SELCO Service Corporation $ 1,010.23
TOTAL $300,000.00
===========
SCHEDULE 6.4
CONDITIONS TO AMENDMENT AND RESTATEMENT
I. Assignments and Transfers
A. The Original Lessor shall have executed and delivered to the Lessor:
1. A special warranty deed, in conformity with Applicable Law and
appropriate for recording with the applicable Governmental
Authorities, with respect to the Land Interest (and all
Improvements located thereon), conveying fee simple title to the
Land Interest (and all Improvements located thereon) to the
Lessor.
2. A ▇▇▇▇ of sale conveying the Original Lessor's interests in the
Equipment and Fixtures to the Lessor.
3. UCC-3 assignments conveying the Original Lessor's interests in
the Lessor Financing Statements to the Lessor.
B. The Original Lessor and the Lessor shall have executed and delivered a
Lessor Assignment and Acceptance assigning the rights and obligations
of the Original Lessor under the Operative Documents and its Tranche C
Participation Interest to the Lessor, and the Lessee and the
Participants shall have consented to such Lessor Assignment and
Acceptance.
C. The Original Agent and the Agent shall have executed and delivered an
Resignation and Assignment by Agent and Acceptance by Successor Agent
assigning the rights and obligations of the Original Agent under the
Operative Documents to the Agent, and the Lessee and the Participants
shall have consented to such Resignation and Assignment by Agent and
Acceptance by Successor Agent.
D. The Original Lessor, the Original Agent, the Lessor and the Agent
shall have executed and delivered an Assignment and Amendment of the
Mortgage and an Assignment and Assumption of Interests in Lease and
Consent and the Lessee shall have consented to such Assignment and
Assumption of Interests in Lease and Consent, in form appropriate for
recording with the applicable Governmental Authorities.
E. The Original Agent shall have executed and delivered UCC-3 assignments
conveying the Original Agent's interests in the Agent Financing
Statements to the Agent.
F. ABN AMRO Bank N.V., San Francisco International Branch, The Bank of
Nova Scotia and KeyBank National Association shall have executed and
delivered an Assignment and Acceptance assigning the Tranche A
Participation Interest and
6.4-1
Tranche B Participation Interest of ABN AMRO Bank N.V., San Francisco
International Branch, to The Bank of Nova Scotia and KeyBank National
Association.
II. Amended and Restated Operative Documents
A. The Lessee, the Lessor, the Participants and the Agent shall have
executed and delivered the Amended and Restated Participation
Agreement.
B. The Lessee and the Lessor shall have executed and delivered the
Amended and Restated Master Lease and an Amended and Restated Lease
Supplement No. 1, in form appropriate for recording with the
applicable Governmental Authorities.
C. The Guarantor shall have executed and delivered a consent to such
amended and restated Operative Documents.
D. The Lessor shall have executed and delivered Agent Financing
Statements in form appropriate for filing in New York.
III. Title Documents
A. Commitments to issue the following revised title insurance policies
shall have been delivered to the Agent in an amount not less than the
Property Cost and reasonably satisfactory to the Lessor and the Agent
with extended coverage, access, tax parcel, survey identicality,
variable rate, future advances, usury, comprehensive, fraudulent
conveyances, doing business, mechanics liens and zoning endorsements
and such other endorsements as and to the extent available in the
jurisdiction where the Property is located:
1. An ALTA (1992) owners title insurance policy with extended
coverage over the general exceptions, insuring fee title in the
Lessor to the Property, subject only to Permitted Exceptions.
2. An ALTA (1992) loan policy insuring the Agent that the Lien of
the Mortgage, as assigned and amended, is a first and primary
lien in the Lessor's interest in the Lease, as assigned, amended
and restated, and in the fee title to the Property, subject only
to the Permitted Exceptions.
3. An ALTA (1992) loan policy insuring the Agent that the Lien of
the Lease, as assigned, amended and restated, is a first and
primary Lien in the Lessee's interest in the Property.
B. The Lessor and the Agent shall have received evidence reasonably
satisfactory that each of the special warranty deed described in Item
I.A.1, the Amended and Restated Master Lease and Amended and Restated
Lease Supplement No. 1 described in Item II.B. and the Assignment and
Amendment of the Mortgage and the Assignment and Assumption of
Interests in Lease and Consent described in
6.4-2
Item I.D. have been or are being recorded with the appropriate
Governmental Authorities in the order listed in this clause and the
UCC-3 assignments to the Lessor Financing Statements described in Item
I.A.3, the UCC-3 assignments to the Agent Financing Statements
described in Item I.E. and the Agent Financing Statements described in
Item II.D. have been or are being filed with the appropriate
Governmental Authorities.
IV. Lessee Corporate Documents
A. The Lessee shall have delivered a certificate of an authorized officer
of the Lessee, dated as of the date of the Amended and Restated
Participation Agreement, stating that (i) each and every
representation and warranty of the Lessee contained in the Operative
Documents to which it is a party is true and correct in all material
respects as if made on the Restructuring Date (except for
representations and warranties expressly made as of a specified date,
which are true and correct as of such date), (ii) no Default or Event
of Default under the Operative Documents has occurred and is
continuing as of the Restructuring Date; and (iii) each Operative
Document to which the Lessee is a party is in full force and effect
with respect to it.
B. The Lessee shall have delivered a certificate of the Secretary or an
Assistant Secretary of the Lessee attaching and certifying as to (i)
the resolutions of the Board of Directors duly authorizing the
execution, delivery and performance by the Lessee of documents and
agreements of the type represented by each Operative Document to be
executed as of the Restructuring Date, and (ii) the incumbency and
signature of persons authorized to execute and deliver on its behalf
the Operative Documents to be executed by it as of the Restructuring
Date.
▇. ▇▇▇▇▇▇ Corporate Documents
A. The Lessor shall have delivered a certificate of an authorized officer
of the Lessor, dated as of the date of the Amended and Restated
Participation Agreement, stating that (i) each and every
representation and warranty of the Lessor contained in the Operative
Documents to which it is a party is true and correct on and as of the
Restructuring Date, and (ii) each Operative Document to which the
Lessor is a party is in full force and effect with respect to it.
B. The Lessor shall have delivered a certificate of the Secretary or an
Assistant Secretary of the Lessor attaching and certifying as to (i)
the resolutions of the Board of Directors duly authorizing the
execution, delivery and performance by the Lessor of documents and
agreements of the type represented by each Operative Document to which
it is or will be a party, (ii) the pertinent provisions of its by-laws
and (iii) the incumbency and signature of persons authorized to
execute and deliver on its behalf the Operative Documents to which it
is a party.
VI. Insurance
6.4-3
The Lessor and the Agent shall have received evidence that they are named
as additional insureds and loss payees and the mortgagee endorsement with
respect to the insurance required pursuant to the Lease.
VII. Fees and Expenses
A. All fees and expenses payable to the Agent, the Lessor or the
Participants set forth in an invoice received on or prior to the
Restructuring Date (including fees payable pursuant to the Fee Letter)
shall have been paid.
B. All reasonable fees and expenses of counsels to the Agent and the
Lessor through the Restructuring Date shall have been paid.
6.4-4
10.1-1
SCHEDULE 10.01
EXISTING INDEBTEDNESS AND LIENS
INDEBTEDNESS
1. Reimbursement Agreement between Sumitomo Bank, Ltd. and Quantum
Peripherals (Europe), S.A., dated September 14, 1998, related to
outstanding letters of credit in an amount not to exceed $85,000,000.
2. Tax Ownership Operating Lease (Colorado Springs, CO) between
Quantum Corporation and Lease Plan North America, Inc., dated August
25, 1997.
3. Mortgage (Louisville, CO and Shrewsbury, MA), dated August 22,
1995, between Quantum Corporation and QD Investors securing
$39,226,000 in outstanding principal as of December 31, 1999.
4. Reimbursement Agreement between Fleet National Bank and ATL
Products, Inc., a Subsidiary of Quantum Corporation, dated February 3,
1999, related to an outstanding letter of credit in favor of National
Westminster Bank, plc in the amount of (Pounds)300,000.
LIENS
1. Lien (State: CO, file # 19992029330, dated 5/19/99) established
under the Equipment Lease Agreement between Quantum Corporation and
▇▇▇▇▇▇▇▇ Property Services, as Debtor, and BCL Capital.
2. Lien (State: CO, file # 19992024197, dated 4/29/99) established
under the Equipment Lease Agreement between Quantum Corporation and
Colorado Business Leasing, Inc.
3. Lien (State: CO, file # 19982060561, dated 9/24/98) established
under the Master Lease Agreement between Quantum Corporation and Avnet
Computer, a division of Avnet, Inc.
4. Lien (State: CO, file # 19972076228, dated 9/5/97) established
under the Financing Statement between Quantum Corporation and Lease
Plan North America, Inc.
5. Lien (State: CO, file # 199F0722387, dated 9/5/97) established
under the Financing Statement between Quantum Corporation and Lease
Plan North America, Inc.
10.1-2
6. Lien (State: CO, file # 962097106, dated 12/30/96) established
under the Agreement between Quantum Corporation and American Leasing,
Inc.
7. Lien (State: CO, file # 962081967, dated 10/31/96) established
under the Agreement between Quantum Corporation and ▇▇▇▇▇▇ Leasing,
Inc.
8. Lien (State: CA, file # 9732260586, dated 11/18/97) established
under the Lease Agreement between ATL Products, Inc. and Sun
Microsystems Finance.
9. Lien (State: CA, file # 9807660402, dated 3/16/98) established
under the Lease Agreement between ATL Products, Inc. and Union Bank of
California, N.A.
10. Lien (State: CA, file # 9821760711, dated 8/4/98) established
under the Subordination Agreement between ATL Products, Inc. and
Mellon US Leasing, a Division of Mellon Leasing Corporation.
11. Lien (State: CA, file # 9830060877, dated 10/23/98) established
under the Equipment Schedule between ATL Products, Inc. and Mellon US
Leasing, a Division of Mellon Leasing Corporation.
12. Lien (State: CA, file # 9903660704, dated 2/4/99) established
under the Equipment Schedule between ATL Products, Inc. and Mellon US
Leasing, a Division of Mellon Leasing Corporation.
13. Lien (State: CA, file # 9714961077, dated 5/27/97) established
under rental between ATL Products, Inc. and Inter-Tel Leasing, Inc.
14. Lien (State: CA, file # 9719760464, dated 7/11/97) established
under the Agreement between ATL Products, Inc. and Imperial Bank.
15. Lien (State: CA, file # 9510460180, dated 4/10/95) established
under the Financing Agreement between Quantum Corporation and Hewlett-
Packard Company.
16. Lien (State: CA, file # 9510460187, dated 4/10/95) established
under the Financing Agreement between Quantum Corporation and Hewlett-
Packard Company.
17. Lien (State: CA, file # 9526460720, dated 9/18/95) established
under the Alternative Purchase Plan between Quantum Corporation and
AT&T Capital Services Corporation.
18. Lien (State: CA, file # 9620660866, dated 6/22/96) established
under the Financing Agreement between Quantum Corporation and Hewlett-
Packard Company.
10.1-3
19. Lien (State: CA, file # 9623360189, dated 8/16/96) established
under the Security Agreement between Quantum Corporation and Orix
Credit Alliance, Inc.
20. Lien (State: CA, file # 9636660392, dated 12/30/96) established
under the Equipment Lease Agreement between Quantum Corporation and
American Leasing, Inc.
21. Lien (State: CA, file # 9724660679, dated 9/2/97) established
under the Financing Statement between Quantum Corporation and ABN AMRO
Bank, N.V. San Francisco International Branch, as Agent.
22. Lien (State: CA, file # 9733960635, dated 12/1/97) established
under the Security Agreement between Quantum Corporation and Unisource
Worldwide, Inc.
23. Lien (State: CA, file # 9813360891, dated 5/12/98) established
under the Agreement between Quantum Corporation and AT&T Capital
Corporation, Instrument and Data Services.
24. Lien (State: CA, file # 9818960462, dated 7/6/98) established
under the Agreement between Quantum Corporation and Employment
Development Department.
25. Lien (State: CA, file # 9934060376, dated 12/1/99) established
under the Agreement between Quantum Corporation and Newcourt
Technologies Corp (dba Newcourt Financial-Technology Rentals &
Services.
26. Lien (State: CA, file # 9934060391, dated 12/1/99) established
under the Agreement between Quantum Corporation and Newcourt
Technologies Corp (dba Newcourt Financial-Technology Rentals &
Services).
27. Lien (State: CA, file # 0003860457, dated 2/2/00) established
under the Equipment Agreement between Quantum Corporation and ATEL
Business Credit, Inc.
28. Lien (State: MA, file # 345962, dated 5/25/95) established under
the Schedule between Quantum Corporation and Comdisco, Inc.
29. Lien (State: MA, file # 343626, dated 10/11/95) established under
the Agreement between Quantum Corporation and Comdisco, Inc.
30. Lien (State: MA, file # 371364, dated 2/23/96) established under
the Agreement between Quantum Corporation and Business Credit Leasing.
31. Lien (State: MA, file # 425668, dated 10/25/96) established under
the Financing Agreement between Quantum Corporation and Hewlett-
Packard Company.
10.1-4
32. Lien (State: MA, file # 456959, dated 3/25/97) established under
the Agreement between Quantum Corporation and Sanwa Leasing
Corporation.
33. Lien (State: MA, file # 449499, dated 2/18/97) established under
the Financing Agreement between Quantum Corporation and Hewlett-
Packard Company.
34. Lien (State: MA, file # 459264, dated 4/7/97) established under
the Agreement between Quantum Corporation and Sanwa Leasing
Corporation.
35. Lien (State: MA, file # 468158, dated 5/12/97) established under
the Financing Agreement between Quantum Corporation and Hewlett-
Packard Company.
36. Lien (State: MA, file # 518464, dated 12/22/97) established under
the Agreement between Quantum Corporation and Sanwa Leasing
Corporation.
37. Lien (State: MA, file # 582939, dated 10/9/98) established under
the Agreement between Quantum Corporation and Hewlett-Packard Company.
10.1-5
EXHIBIT Q
TO PARTICIPATION AGREEMENT
FORM OF COMPLIANCE CERTIFICATE
Financial Statement Date: _______________________,___
To: The Bank of Nova Scotia, as Agent
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Participation
Agreement, dated as of July 12, 2000 between Quantum Corporation, a Delaware
corporation (the "Lessee"), SELCO Service Corporation, an Ohio corporation (the
------
"Lessor"), the Participants from time to time party thereto, The Bank of Nova
------
Scotia, as agent (the "Agent"), (said agreement, as amended, restated, extended,
-----
supplemented or otherwise modified in writing from time to time, the
"Participation Agreement;" the terms defined therein being used herein as
-----------------------
therein defined).
The undersigned Responsible Officer hereby certifies as of the date hereof
that he is the ____________________________________ of the Lessee, and that, as
such, he is authorized to execute and deliver this Compliance Certificate to the
Agent on the behalf of the Lessee, and that:
[Use following for fiscal year-end financial statements]
1. Attached hereto as Schedule 1 are the year-end audited financial
statements required by clause (i) of Section 10.1(a) of the Participation
--------------------------------------------------
Agreement for the fiscal year of the Lessee ended as of the above date, together
---------
with the report and opinion of an independent certified public accountant
required by such section.
[Use following for fiscal quarter-end financial statements]
1. Attached hereto as Schedule 1 are the unaudited financial statements
----------
required by clause (ii) of Section 10.1(a) of the Participation Agreement for
-------------------------------------------------------------
the fiscal quarter of the Lessee ended as of the above date. Such financial
statements fairly present the financial condition, results of operations and
changes in financial position of the Lessee and its Subsidiaries in accordance
with GAAP as at such date and for such periods, subject only to normal year-end
audit adjustments and the absence of footnotes.
2. The undersigned has reviewed and is familiar with the terms of the
Participation Agreement and has made, or has caused to be made under his
supervision, a detailed review of the transactions and conditions (financial or
otherwise) of the Lessee during the accounting period covered by the attached
financial statements.
Q-1
3. A review of the activities of the Lessee and its Subsidiaries during
such fiscal period has been made under my supervision with a view to determining
whether during such fiscal period the Lessee performed and observed all its
respective obligations under the Operative Documents, and
[select one:]
[to the knowledge of the undersigned during such fiscal period, the Lessee
performed and observed each covenant and condition of the Operative Documents
applicable to it.]
--or--
[the following covenants or conditions have not been performed or observed
and the following is a list of all such Defaults and its nature and status:]
4. The following financial covenant analyses and information set forth on
Schedule 2 attached hereto are true and accurate on and as of the date of this
Compliance Certificate.
IN WITNESS WHEREOF, the undersigned has executed this Compliance
Certificate as of ________________, ___________.
QUANTUM CORPORATION
By:____________________
Name:__________________
Title:_________________
Q-2
For the Quarter/Year ended _______________ ("Statement Date")
--------------
SCHEDULE 2
to the Compliance Certificate
($ in 000's)
I. Section 10.1(v)(i) - Minimum Consolidated Tangible Net Worth.
A. Actual Consolidated Tangible Net Worth at Statement Date:
1. Shareholders' Equity: $________________
2. Intangible Assets: $________________
3. Consolidated Tangible Net Worth (Lines I.A.1 less Line I.A.2): $________________
B. 75% of Consolidated Tangible Net Worth as of March 31, 2000 $________________
C. Amount equal to 75% of the sum of positive Consolidated Net $________________
Income (ignoring any quarterly losses) for each fiscal quarter
after the quarter ended March 31, 2000, through and including the
quarter ending on the Statement Date:
D. Amount equal to 75% of the Net Security Proceeds of all Equity $________________
Securities issued by the Lessee (excluding any issuance where the
Net Security Proceeds to the Lessee are less than $10,000,000)
during the period commencing on March 31, 2000 and ending on the
Statement Date:
E. Amount equal to 75% of the increase in the value of $________________
outstanding Equity Securities resulting from any conversion of
Convertible Subordinated Debentures into Equity Securities during
the period commencing on March 31, 2000 and ending on the
Statement Date:
F. Lesser of (i) the aggregate amount paid by the Lessee to $________________
repurchase Equity Securities during the period commencing on
March 31, 2000 and ending on the Statement Date, and (ii)
$200,000,000:
G. Lesser of (i) the aggregate amount of charges taken by the $________________
Lessee for In Process Research & Development associated
Q-3
with Acquisitions during the period commencing on March 31, 2000 and
ending on the Statement Date, and (ii) $100,000,000; provided that any
such amounts were paid during the quarter in which any such
Acquisition was completed:
H. Sum of: Lines I.B + I.C + I.D + I.E less I.F less I.G: $_____________________
I. Greater of Line I.B and I.H: $_____________________
J. Excess (deficiency) for covenant compliance (Lines I.A.3 less $_____________________
I.I):
Q-4
II. Section 10.1(v)(ii) - Minimum Quick Ratio.
A. Quick Assets:
1. Amount of cash and cash equivalents of the Lessee and its $___________________
Subsidiaries (excluding restricted cash) as of the Statement Date:
2. Amount of all accounts receivable of the Lessee and its $___________________
Subsidiaries, less all reserves therefor, as of the Statement Date:
3. Amount of Quick Assets as of Statement Date (Lines II.A.1 + 2): $___________________
B. Current Liabilities:
1. Amount of current liabilities of the Lessee and its $___________________
Subsidiaries as of the Statement Date (including any such
liabilities outstanding under the Loan Documents and the
Operative Documents):
2. Aggregate amount of outstanding obligations under the $___________________
Loan Documents with respect to the principal amount of
loans, the undrawn face amount of letters of credit and
unreimbursed drawings under letters of credit (to the extent
not included in Line II.B.1):
3. For one year prior to the Maturity Date, the aggregate
outstanding Synthetic Lease Obligations under the Operative
Documents:
4. Amount of total current liabilities of the Lessee and its $___________________
Subsidiaries as of the Statement Date (Line II.B.1 + 2 + 3):
C. Quick Ratio ((Line II.A.3 Line II.B.3): _______________ to 1
Minimum required: 1.10 to 1
Q-5
III. Section 10.1(v)(iii) - Maximum Leverage Ratio.
A. Consolidated EBITDA measured on a rolling four quarter basis
for the four fiscal quarters ended as of the Statement Date
("Subject Period"):
--------------
1. Consolidated Net income for Subject Period: $___________________
2. Consolidated Interest Charges for Subject Period: $___________________
3. Provision for income taxes for Subject Period: $___________________
4. Depreciation expenses for Subject Period: $___________________
5. Amortization expenses for intangibles for Subject Period: $___________________
6. Amount written off in connection with In-Process Research $___________________
& Development related to the Meridian Acquisition (in the
second fiscal quarter of year 2000 only):
7. Amount of charge taken in connection with HDD (in the $___________________
second fiscal quarter of year 2000 only):
8. Amount of charge taken in connection with DSS (in the $___________________
fourth fiscal quarter of year 2000 only):
9. Lesser of (i) the aggregate amount of charges taken by $___________________
the Lessee for In Process Research & Development associated
with Acquisitions during the period commencing on March 31,
2000 and ending on the Statement Date, and (ii)
$100,000,000; provided that any such amounts were paid
--------
during the quarter in which any such Acquisition was
completed:
10. Consolidated EBITDA (Lines III.A.1 + 2 + 3 + 4 + 5 + 6 + $___________________
7 + 8 + 9):
B. Consolidated Funded Indebtedness at Statement Date: $___________________
C. Leverage Ratio (Line III.B Line III.A.10): ________________to 1
Maximum permitted: 2.00 to 1
Q-6
IV. Section 10.1(v)(iv) - Minimum Profitability.
A. 5% of Consolidated Tangible Net Worth as of Statement Date: $_____________________
B. Aggregate amount of the two greatest quarterly losses incurred $_____________________
during the four quarters immediately preceding the Statement Date:
C. Excess (deficiency) for covenant compliance (Line IV.A less $_____________________
Line IV.B):
D. Cumulative Consolidated Net Income for the four quarters $_____________________
immediately preceding the Statement Date:
E. Excess (deficiency) for covenant compliance (Line IV.D less $_____________________
$1.00):
Q-7