PARTICIPATION AGREEMENT
dated as of March 26, 1997
by and among
ZENITH ELECTRONICS CORPORATION OF TEXAS
as Lessee,
GENERAL FOODS CREDIT CORPORATION
as Owner Participant,
FLEET NATIONAL BANK
as Owner Trustee,
the institutions listed on Schedule I hereto
as Lenders
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION
as Indenture Trustee
Leveraged Lease of
Television Picture Tube
and Other Television Manufacturing Equipment
Mexican Sited Equipment
TABLE OF CONTENTS
Page
ARTICLE IDefinitions and Rules of Usage -2-
ARTICLE IIFundings -2-
2.1 Equipment Closing Date -2-
2.2 Funding Request -4-
2.3 Acquisition and Leasing of the Equipment
-4-
ARTICLE IIIFunding Conditions -5-
3.1 Conditions Precedent to the Obligations
of the Participants and Agents on the
Equipment Closing Date -5-
3.2 Additional Conditions to Obligations of
Lenders. -10-
3.3 Conditions Precedent to the Obligations
of the Lessee on the Equipment Closing
Date -11-
ARTICLE IVRepresentations and Warranties -12-
4.1 Representations and Warranties of the
Lessee -12-
4.2 Representations and Warranties of the
Owner Participant -18-
4.3 Representations and Warranties of the
Indenture Trustee -19-
4.4 Representations and Warranties of the
Lenders -20-
4.5 Representations and Warranties of Fleet
and the Owner Trustee -22-
ARTICLE VCovenants -24-
5.1 Covenants of the Owner Participant,
Fleet and the Owner Trustee -24-
5.2 Covenants of the Indenture Trustee -25-
5.3 Covenants of the Lessee -25-
5.4 Transfers of Notes. -31-
5.5 Advertising; Trademarks. -31-
ARTICLE VIIndemnities -32-
6.1 General Indemnity -32-
6.2 Payment of Taxes; General Tax Indemnity
-36-
ARTICLE VIITax Withholding -47-
ARTICLE VIIIExpenses -48-
8.1 Transaction Expenses Payable by the
Owner Participant -48-
8.2 Transaction Expenses Payable by the
Lessee -48-
8.3 Amendments, Waivers, etc. -48-
8.4 Fees of Agents -49-
ARTICLE IXRecomputation of Basic Rent, EBO
Prices,Fixed Purchase Option Prices, Casualty
Values and Termination Values -49-
9.1 Making of Adjustments -49-
9.2 Limitations -50-
9.3 Computation of Adjustments -50-
9.4 Adjustments Certificate; Lease
Supplement -51-
9.5 Average Life of Notes -52-
9.6 Rent Adjustment Indemnity -52-
ARTICLE XTransfer of Owner Participant's Interests
-52-
10.1 Transfers -52-
ARTICLE XIRefunding -54-
11.1 Refunding -54-
11.2 Notice -57-
ARTICLE XIIMiscellaneous -57-
TABLE OF CONTENTS
Page
ARTICLE XIIINo Recourse to Owner Participant; No
Implied Obligations -57-
ARTICLE XIVTax Treatment -58-
ARTICLE XV
Quiet Enjoyment -58-
ARTICLE XVI
Lessee's Right to Assume Liability under Notes
-58-
ARTICLE XVII
Confidentiality -59-
ARTICLE XVIIILiability of Owner Trustee -60-
List of Schedules and Appendices
Schedule I Parties and Addresses; Account
Information
Schedule II Commitments
Schedule III Pricing Assumptions
Schedule IV Filings and Recordings
Schedule V Equipment
Appendix A Definitions and Rules of Usage
Appendix B Form of ▇▇▇▇ of Sale
Appendix C Form of Funding Request
Appendices D-1 Forms of Opinion of Lessee's
Counsel
and D-2
Appendices D-3 Forms of Opinions of Owner
Participant's
and ▇-▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇-▇ Form of Opinion of Owner
Trustee's Counsel
▇▇▇▇▇▇▇▇ ▇-▇ Form of Opinion of Indenture
Trustee's Counsel
Appendices D-7 Forms of
Opinions of Guarantor's
Counsel
and D-8
Appendix E Form of Acceptance Certificate
Appendix F Form of Owner Participant
Transfer Agreement
Appendix F-1 Form of Guaranty of
Prospective Owner
Participant's Parent
Appendix G Form of Officer's Certificate
of Guarantor
Appendix G-1 Form of Officer's Certificate
of Zenith
Appendix H Form of
Certificate from Chief
Financial Officer of Zenith
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT is made as
of the 26th day of March, 1997, by and among
ZENITH ELECTRONICS CORPORATION OF TEXAS, a Texas
corporation (the "Lessee"), as the Lessee, GENERAL
FOODS CREDIT CORPORATION, a Delaware corporation
(the "Owner Participant"), the institutions
designated as lenders on Schedule I hereto (each a
"Lender" and collectively the "Lenders"), FLEET
NATIONAL BANK, a national banking association, not
in its individual capacity, except as expressly
stated herein, but solely in its capacity as
trustee for THE ZENITH ELECTRONICS EQUIPMENT OWNER
TRUST 1997-II (the "Owner Trustee"), and FIRST
SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, not in its individual
capacity except as expressly stated herein, but
solely in its capacity as trustee under the
Indenture (the "Indenture Trustee"). Capitalized
terms used in the following recitals shall be
respectively defined as described below in
Article I.
RECITALS
A. Subject to the terms and conditions
set forth in this Participation Agreement, in the
Lease and the other Operative Documents, the Owner
Trustee has agreed to purchase from the Lessee and
to lease to the Lessee, and the Lessee has agreed
to sell to and lease from the Owner Trustee, all
of the items of Equipment listed on Schedule V
hereto.
B. Subject to the terms and conditions
set forth herein, each of the Lenders has agreed
to fund its respective Commitment Percentage of
each Series of Notes, and the Owner Participant
has agreed to fund the Equity Amount of the
Lessor's Cost of the Equipment.
C. The Owner Trustee has agreed to
serve as Owner Trustee pursuant to the Trust
Agreement and the Indenture Trustee has agreed to
serve as Indenture Trustee pursuant to the
Indenture.
NOW THEREFORE, in consideration of the
foregoing premises, and for other good and
valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
I. ARTICLE
Definitions and Rules of Usage
Unless the context otherwise requires,
capitalized terms used herein without other
definition shall have the respective meanings
assigned to such terms (whether directly or
indirectly by reference) in Appendix A hereto, and
the rules of usage set forth in such Appendix A
shall likewise govern this Participation
Agreement.
I. ARTICLE
Fundings
A. Equipment Closing Date. Subject to
the terms and conditions of this Participation
Agreement and on the basis of the representations
and warranties hereinafter set forth:
1. (i) Each Lender severally
agrees that, if requested by Lessee, it will pay
to Fleet on April 2, 1997, in immediately
available funds, an amount equal to such Lender's
Commitment Percentage, which amount shall be held
in trust by Fleet for the benefit of such Lender
and not as part of the Trust Estate until Fleet
makes available such amount to Owner Trustee
pursuant to Section 2.1(a)(ii), or such amount is
returned to such Lender in accordance with Section
2.1(a)(iii) hereof. Fleet agrees, upon receipt in
full of each Lender's amount of its Commitment
Percentage, together with instructions from such
Lender to release such amount received from such
Lender, to transfer such funds into the Trust
Estate. Owner Trustee agrees to apply such funds
as provided in Section 2.1(a)(ii) hereof.
(ii) On the Equipment Closing Date, (A)
the Owner Participant shall make available the
Equity Amount requested in the Funding Request for
the Equipment Closing Date by EFT no later than
12:00 noon New York time on the Equipment Closing
Date to the Owner Trustee at the account specified
on Schedule I hereto, (B) the Owner Trustee shall
execute, and the Indenture Trustee shall
authenticate and deliver to each Lender and each
Lender agrees to purchase from the Owner Trustee,
a Note in an amount equal to such Lender's
Commitment Percentage (as set forth on Schedule II
hereto) of the principal amount of the Notes to be
issued on such date, the funding of such Note
purchases to occur at the time, in the manner and
into the account referred to in clause (A) above,
and (C) the Owner Trustee shall apply the proceeds
of the issuance of such Notes, together with the
Equity Amount paid by the Owner Participant, to
pay to the Lessee the Lessor's Cost of the Items
of Equipment for which settlement is being made on
such Equipment Closing Date.
(iii) In the event the Equipment Closing
Date does not occur on or is postponed past April
2, 1997, the Lessee will reimburse each Lender on
demand for the losses, if any, occasioned by such
postponement or failure of the Equipment Closing
Date to occur in each case by paying to such
Lender on demand, as compensation in full for any
such losses, an amount equal to the sum of (x) the
excess, if any, of (A) interest at the Debt Rate
on the amount made available by each Lender
pursuant to Section 2.1(a)(i) hereof for each
calendar day from and including April 2, 1997 to
but excluding the earlier of (I) the Business Day
on which such amounts are returned to and received
by such Lender, prior to 11:00 A.M. New York City
time on such Business Day, and (II) the actual
Equipment Closing Date, over (2) the amount of
interest actually earned by such Lender (or Fleet
for the account of such Lender) on its investment
and reinvestment of the amount made available by
such Lender for such period and paid to such
Lender by Fleet (it being understood that Fleet,
on behalf of such Lender shall, unless requested
by Lessee to return such amount to each Lender,
use reasonable efforts to invest and reinvest such
amounts, upon the instructions and at the risk and
the expense of Lessee, in overnight or other
appropriate funds that are Permitted Investments)
plus (B) if such amount is returned to any Lender,
Make-Whole Premium Amount determined as if the
Equipment Notes were prepaid on the date such
amount is returned to such Lender by Fleet and the
principal amount prepaid was equal to the amount
made available by such Lender to Fleet.
All earnings in the investment and
reinvestment of each such amount shall be paid to
the relevant Lender by Fleet upon the earlier of
the date such amount is returned to the relevant
Lender or on the Equipment Closing Date.
If funds have been made available by
each Lender pursuant to Section 2.1(a)(i) hereof
and if the Equipment Closing Date is not April 2,
1997, then unless and until such funds are
redistributed to such Lender, which redistribution
shall occur no later than April 4, 1997, any
investments made or obligations purchased by Fleet
pursuant to Section 2.1(a)(iii) shall be held in
trust by Fleet and shall remain the sole property
of each Lender and not as part of the Trust Estate
unless and until released by each Lender and made
available by Fleet to the Owner Trustee and
applied as provided in Section 2.1(a)(ii) hereof.
1. The aggregate principal amount
of Notes to be issued hereunder and under the
Indenture shall not exceed $14,324,310.58. The
Notes are to be issued under the Indenture and
secured by Liens granted thereunder, to be dated
the date of the Equipment Closing Date, to bear
interest prior to maturity at the Debt Rate, such
interest to be paid semi-annually in arrears to
and including the final maturity thereof on each
Rent Payment Date, to mature on April 2, 2007, to
amortize in accordance with the applicable
amortization schedule set forth in the Pro Forma
Schedules included in Schedule III hereto, as
adjusted prior to the Equipment Closing Date in
accordance with the provisions of Article IX
hereof, and to be otherwise substantially in the
form attached to the Indenture as Exhibit C. The
Owner Trustee hereby agrees for the benefit of the
parties hereto (but subject to the terms and
conditions hereof and of the Indenture) to make
payments in respect of each Note issued by it in
accordance with the terms and conditions specified
in the Indenture and such Note.
1. The Equity Amount shall be
equal to $6,242,689.42.
1. The Participants' respective
commitments under this Section 2.1, and the Owner
Trustee's commitment to purchase Equipment
pursuant to the Funding Request, shall expire at
midnight (New York time) on the Cut-off Date. The
obligations of the Participants hereunder shall be
several and not joint and no Participant shall be
liable or responsible for the acts or defaults of
any other Participant.
A. Funding Request. The Lessee has
delivered a Funding Request in substantially the
form of Appendix C attached hereto to each
Participant and Agent. Such Funding Request is
irrevocable and specifies: (i) the date on which
such Equipment Closing Date shall occur; (ii) the
Items of Equipment to be purchased on such
Equipment Closing Date; (iii) the aggregate
Lessor's Cost of such Items; (iv) the Equity
Amount for such Equipment Closing Date; and (v)
the aggregate principal amount of the Notes to be
issued on such Equipment Closing Date. The Owner
Participant has delivered to the Lessee, each
other Participant and each Agent the schedules of
Basic Rent, Casualty Value, Termination Value, and
EBO Price applicable to such Items of Equipment,
the principal amounts of the Notes to be purchased
by each Lender on the Equipment Closing Date, and
the amortization schedule for the Notes to be
issued on the Equipment Closing Date, in each case
as adjusted pursuant to and in compliance with
Article IX hereof. In the event of an adjustment
pursuant to Section 9.1(a) prior to the Equipment
Closing Date, the Lessee shall also deliver such
adjusted Pro Forma Schedules to each Participant
and Agent together with the Funding Request for
the Equipment Closing Date (and effective on the
Equipment Closing Date, Schedule III to the
Participation Agreement shall be deemed to be
amended to reflect such adjusted Pro Forma
Schedules).
A. Acquisition and Leasing of the
Equipment. On the Equipment Closing Date, (a) the
Owner Trustee shall acquire title to each Item of
Equipment pursuant to a ▇▇▇▇ of Sale and (b) the
Owner Trustee shall lease to the Lessee, and the
Lessee shall lease from the Owner Trustee, such
Item of Equipment pursuant to, for the Rent and in
accordance with the terms of, the Lease (including
the applicable Lease Supplement and related
Schedule of Equipment, which Lease Supplement and
related Schedule of Equipment shall include the
schedules of Basic Rent, Casualty Value,
Termination Value, and EBO Price as set forth in
the Pro Forma Schedules, as modified pursuant to
in and in accordance with Article IX hereof).
I. ARTICLE
Funding Conditions
A. Conditions Precedent to the
Obligations of the Participants and Agents on the
Equipment Closing Date. The obligation of each of
(i) the Lenders, the Owner Participant, the Owner
Trustee and the Indenture Trustee to execute the
applicable Operative Documents to which each such
Person is party on the Equipment Closing Date,
(ii) the Lenders to disburse funds as contemplated
by Section 2.1(a) hereof and to purchase the Notes
on the Equipment Closing Date, (iii) the Owner
Participant to Fund the Equity Amount requested
for the Equipment Closing Date and (iv) the Owner
Trustee to purchase the Items of Equipment
specified in the Funding Request, shall be subject
in each case to the satisfaction, or waiver by the
Lenders, the Owner Participant, the Owner Trustee
and the Indenture Trustee, as the case may be, of
the following conditions prior to or on the
Equipment Closing Date (except that the obligation
of any party shall not be subject to such party's
own performance or compliance):
1. Funding Request. Each
Participant and Agent shall have received in a
timely manner copies of an appropriate Funding
Request in respect of the Equipment Closing Date
as required by Section 2.2(a), and the Owner
Participant shall have delivered to each
Participant and Agent the schedules of Basic Rent,
Casualty Value, Termination Value, and EBO Price
with respect to the Items of Equipment to be
settled for, and the principal amount of the Notes
to be issued and the amortization schedules for
such Notes as required by Section 2.1(a), and such
schedules and principal amounts shall be
acceptable to the Lessee and the Lenders.
1. Funding. The Owner Trustee
shall have duly executed, and the Indenture
Trustee shall have duly authenticated and
delivered to each Lender, a Note or Notes, dated
the Equipment Closing Date, in a principal amount
equal to such Lender's Commitment Percentage of
the aggregate principal amount of the Notes, and
such Notes shall, notwithstanding Section 2.1(d)
hereof, mature, bear interest and be payable as
provided in the Indenture, and in the Indenture
Supplement delivered on the Equipment Closing
Date. The Lenders shall have purchased such Notes
and the Owner Participant shall have made
available the Equity Amount for such Funding Date.
1. Authorization, Execution and
Delivery of Operative Documents. The Closing Date
Documents and the following additional documents
shall have been duly authorized, executed and
delivered by each designated party thereto prior
to or on the Equipment Closing Date and shall be
in full force and effect, enforceable in
accordance with its terms, on the Equipment
Closing Date without any event or condition having
occurred or existing which constitutes, or with
the giving of notice or lapse of time or both
would constitute, a default thereunder or breach
thereof or would give any party thereto the right
to terminate any thereof or excuse any party from
performing its obligations thereunder:
a) an original ▇▇▇▇ of Sale
to the Owner Trustee from the Lessee
conveying good and marketable title to the
Items of Equipment to be purchased on the
Equipment Closing Date to the Owner Trustee,
free and clear of all Liens, in form and
substance satisfactory to each Participant;
a) a Lease Supplement and
related Schedule of Equipment covering the
Items of Equipment delivered on the Equipment
Closing Date, with the chattel paper original
of such Lease Supplement having been
delivered to the Indenture Trustee; and
a) an Indenture Supplement
covering the Items of Equipment delivered on
the Equipment Closing Date.
1. Appraisal. The Owner
Participant shall have received an Appraisal
satisfactory to it in all respects with respect to
the Lease and each Item of Equipment purchased by
the Lessor on the Equipment Closing Date,
confirming that, among other matters, (i) the fair
market value of the Equipment to be purchased on
such Equipment Closing Date is equal to the
Lessor's Cost thereof, (ii) the economic useful
life of such Equipment equals or exceeds 125% of
the Base Term applicable to such Equipment, (iii)
the fair market value of such Items of Equipment
at the Scheduled Lease Termination Date,
determined without giving effect to inflation, is
expected to be at least 20% of the Lessor's Cost
of such Items of Equipment, (iv) use of the Items
of Equipment by parties unaffiliated with the
Lessee or its Affiliates at the expiration of the
Base Term will be commercially feasible, and (v)
the EBO Prices with respect to such Items of
Equipment are not less than the respective
estimated fair market value of such Items on the
EBO Date, after giving effect to inflation, and
such other matters as the Owner Participant may
reasonably request. Each Lender shall have
received a letter from the Independent Appraiser
confirming that, based on the Appraisal, the fair
market value of the Equipment to be purchased on
the Equipment Closing Date is equal to the
Lessor's Cost thereof and the economic useful life
of such Equipment exceeds the Base Term.
2. Filings and Recordings. All
filings, recordings and similar actions reasonably
requested by any Participant shall have been duly
made or taken in order to protect the rights of
the Owner Trustee as owner of the Items of
Equipment delivered on such Equipment Closing Date
and as Lessor under the Lease and to establish and
perfect the right, title and interest of the
Indenture Trustee therein under the Indenture, in
each case as against creditors of and purchasers
from the Owner Trustee and the Lessee.
1. Certificates. Each
Participant and each Agent shall have received an
Officer's Certificate of:
(i) Lessee Certificate the Lessee
dated the Equipment Closing Date, the truth
and accuracy of which shall be a condition to
the obligations of such Persons hereunder
with respect to the Equipment Closing Date,
to the effect that the warranties and
representations of the Lessee set forth in
Section 4.1 hereof are true and correct on
the Equipment Closing Date with the same
effect as though made on and as of that date
(except to the extent that any such
representation or warranty expressly refers
to a specific date, in which case such
representation and warranty shall have been
true and correct on and as of such date);
(ii) Owner Participant Certificate
the Owner Participant dated the Equipment
Closing Date, the truth and accuracy of which
shall be a condition to the obligations of
such Persons hereunder with respect to the
Equipment Closing Date, to the effect that
the warranties and representations of the
Owner Participant set forth in Section 4.2
hereof are true and correct on the Equipment
Closing Date with the same effect as though
made on and as of that date (except to the
extent that any such representation or
warranty expressly refers to a specific date,
in which case such representation and
warranty shall have been true and correct on
and as of such date);
(iii) Indenture Trustee
Certificate the Indenture Trustee dated the
Equipment Closing Date, the truth and
accuracy of which shall be a condition to the
obligations of such Persons hereunder with
respect to the Equipment Closing Date, to the
effect that the warranties and
representations of the Indenture Trustee set
forth in Section 4.3 hereof are true and
correct on the Equipment Closing Date with
the same effect as though made on and as of
that date (except to the extent that any such
representation or warranty expressly refers
to a specific date, in which case such
representation and warranty shall have been
true and correct on and as of such date);
(iv) Owner Trustee Certificate the
Owner Trustee dated the Equipment Closing
Date, the truth and accuracy of which shall
be a condition to the obligations of such
Persons hereunder with respect to the
Equipment Closing Date, to the effect that
the warranties and representations of the
Owner Trustee set forth in Section 4.5 hereof
are true and correct on the Equipment Closing
Date with the same effect as though made on
and as of that date (except to the extent
that any such representation or warranty
expressly refers to a specific date, in which
case such representation and warranty shall
have been true and correct on and as of such
date);
(v) Guarantor Certificate the
Guarantor dated the Equipment Closing Date,
the truth and accuracy of which shall be a
condition to the obligations of such Persons
hereunder with respect to the Equipment
Closing Date, in the form attached hereto as
Appendix G;
(vi) Zenith Certificate Zenith
dated the Equipment Closing Date, the truth
and accuracy of which shall be a condition to
the obligations of such Persons hereunder
with respect to the Equipment Closing Date,
in the form attached hereto as Appendix G-1;
and
(vii) Additional Zenith
Certificate Zenith dated the Equipment
Closing Date, the truth and accuracy of which
shall be a condition to the obligations of
such Persons hereunder with respect to the
Equipment Closing Date, in the form attached
hereto as Appendix H.
1. Legal Opinions.
a) Each Participant and each
Agent shall have received the respective
legal opinions dated the Equipment Closing
Date of:
(A) Lessee's Counsel,
substantially in the form of Appendices D-1
and D-2 hereto;
(B) Owner Participant's
Counsel, substantially in the forms of
Appendices D-3 and D-4 hereto;
(C) Owner Trustee's Counsel,
substantially in the form of ▇▇▇▇▇▇▇▇ ▇-▇
hereto;
(D) Indenture Trustee's
Counsel, substantially in the form of
▇▇▇▇▇▇▇▇ ▇-▇ hereto; and
(E) Guarantor's Counsel,
substantially in the form of Appendices D-7
and D-8 hereto.
a) In addition, the Owner
Participant shall have received an opinion of
Hunton & ▇▇▇▇▇▇▇▇, as Owner Participant's
Counsel, addressing certain tax matters in
form and substance satisfactory to the Owner
Participant, and the Lenders shall have
received an opinion of Lenders' Counsel as to
such matters as the Lenders may request, in
form and substance satisfactory to the
Lenders.
a) In addition, the Participants
and the Agents shall have received an opinion
of ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇, S.C., as to such
matters of Mexican law as the Participants
and the Agents may request, in form and
substance satisfactory to the Participants
and the Agents.
1. Taxes. All Taxes, if any,
payable on or prior to the Equipment Closing Date
in connection with the execution, delivery,
recording and filing of the Operative Documents
and in connection with the consummation of the
transactions contemplated by the Operative
Documents shall have been paid in full.
1. Governmental Action. All
Governmental Action required or, in the reasonable
opinion of such Participant or such Agent,
advisable as of the Equipment Closing Date for the
consummation of the transactions contemplated
hereby or by the other Operative Documents,
including all approvals, if any, of any Korean
Governmental Authority required for the Guarantor
to enter into and perform its obligations under
the Guaranty, shall have been obtained and shall
be in full force and effect and such Participant
or Agent shall have received copies of evidence of
such Governmental Action, if any.
1. Documents. Prior to or on the
Equipment Closing Date, each Participant and each
Agent shall have received (i) certified copies of
the Organic Documents of the Lessee, the
Guarantor, the Owner Trustee, the Owner
Participant, and the Indenture Trustee (ii) good
standing certificates relating to each such Person
certified by the appropriate agency of the
jurisdiction of such Person's organization, and in
the case of the Lessee, the State of Illinois and
(iii) such other evidence as to the due authority
of each such Person to execute, deliver and
perform its obligations under each document
executed by it or contemplated by the terms hereof
to be executed by it as such Participant and such
Agent shall reasonably request.
1. Final Acceptance Date;
Delivery Date. The Final Acceptance Date and the
Delivery Date for each Item of Equipment to be
settled for on the Equipment Closing Date shall
have occurred (and each Item of Equipment has been
assembled and is readily available for use, except
as set forth in the following-referenced Officer's
Certificate), and each Participant and each Agent
shall have received an Officer's Certificate of
the Lessee regarding the occurrence of such Final
Acceptance Date and Delivery Date.
1. Purchase Agreements; Invoices.
The Owner Participant and the Indenture Trustee
shall have received copies of such Purchase
Documents relating to the Items of Equipment
delivered on the Equipment Closing Date and
Invoices from the respective Sellers thereof
specifying the amounts comprising the respective
purchase prices of such Items as the Owner
Participant may request, in each case certified as
true, correct and complete on the Equipment
Closing Date by a Responsible Officer of the
Lessee.
1. Transaction Expenses. The
Owner Participant or the Lessee, shall have paid
or made arrangements satisfactory to the parties
entitled thereto for the payment of all
Transaction Expenses for which invoices were
received at least two (2) Business Days prior to
the Equipment Closing Date.
1. Illegality. In the opinion of
each Participant and Agent or its counsel, it
would not be illegal under Applicable Law for such
Participant or Agent to participate in any of the
transactions contemplated by any Operative
Document.
1. No Default. No Default or
Event of Default shall have occurred and be
continuing or shall result from the transactions
to take place on the Equipment Closing Date.
1. No Change in Tax Law. No
change or proposed change in federal, state or
local tax law (including, without limitation, the
Code, regulations, rulings or case law) shall have
occurred on or prior to the Equipment Closing
Date.
1. Other Matters. Each
Participant and each Agent shall have received
copies of such other documents and assurances as
to such other matters as any such Person may have
reasonably requested in connection with the
transactions contemplated hereby.
A. Additional Conditions to
Obligations of Lenders. The obligation of the
Lenders to purchase the Notes to be issued on the
Equipment Closing Date, shall be subject to the
satisfaction of (or waiver by the Lenders of) the
additional conditions that (a) the Notes issued on
the Equipment Closing Date shall qualify as legal
investments for each Lender under any laws
regulating investments to which it may be subject
(without recourse to provisions in any such law
permitting limited investments without restriction
as to the character of the particular investment),
and each Lender shall have received such evidence
as it may reasonably request to establish
compliance with this condition (b) no Indenture
Default or Indenture Event of Default shall have
occurred and be continuing or shall result from
the transactions to take place on the Equipment
Closing Date, and (c) prior to the Equipment
Closing Date, each Lender shall have received such
evidence as such Lender shall reasonably request
to establish compliance with Section 9.5 hereof as
of the Equipment Closing Date.
A. Conditions Precedent to the
Obligations of the Lessee on the Equipment Closing
Date. The obligations of the Lessee to take the
actions contemplated hereby on the Equipment
Closing Date shall be subject to the satisfaction,
or waiver by the Lessee, prior to or on the
Equipment Closing Date, of the following
conditions precedent:
1. Authorization, Execution and
Delivery of Operative Documents. Each of the
Operative Documents shall have been duly
authorized, executed and delivered by each
designated party thereto (other than the Lessee)
and shall be in full force and effect on the
Equipment Closing Date, and the Lessee shall have
received an executed counterpart of each Operative
Document and any other document of which an
executed counterpart shall have been delivered to
the Participants and a copy of each such document
of which a copy shall have been delivered to the
Participants.
1. Certificates. The Lessee
shall have received the Officer's Certificates
referred to in Sections 3.1(f)(ii)-(iv), the truth
and accuracy of which shall be a condition to the
obligations of the Lessee hereunder with respect
to the Equipment Closing Date.
1. Legal Opinions. The Lessee
shall have received opinions addressed to each
such Person, of the counsel respectively specified
in Sections 3.1(g)(i)(B)-(D).
1. Funding. The Owner Trustee
shall have paid directly to the Lessee, the
Lessor's Cost for the Items of Equipment specified
in the Funding Request.
1. Appraisal. The Lessee shall
have received a copy of the Appraisal, which it
shall maintain on a confidential basis on the
terms set forth in Article XVII.
1. Illegality. In the opinion of
the Lessee, based on consultation with the
Lessee's Counsel, it would not be illegal under
Applicable Law for the Lessee to consummate any of
the transactions contemplated by any Operative
Document.
I. ARTICLE
Representations and Warranties
A. Representations and Warranties of
the Lessee. The Lessee represents and warrants as
follows:
1. Due Incorporation, etc. The
Lessee (i) is a corporation duly organized and
validly existing under the laws of the State of
Delaware, (ii) has the power and authority to own
or hold under lease properties used in its
business and to enter into and perform its
obligations under each of the Operative Documents
to which it is a party, (iii) has all Governmental
Action required to carry on its business as
presently conducted and as contemplated, to own or
hold under lease the properties used in its
business, including the Equipment, and to enter
into and perform its obligations under this
Agreement and each other Operative Document to
which it is or is to become a party, and (iv) is
duly qualified to do business as a foreign
corporation and is in good standing in each
jurisdiction where the failure to be so qualified
would reasonably be expected to have a Material
Adverse Effect.
1. Due Authorization, Non-
Contravention, etc. The execution, delivery and
performance of the Operative Documents to which
the Lessee is a party have been duly authorized by
all necessary corporate action on its part, do not
and will not conflict with, result in any
violation of, or constitute any default under, any
provision of any Organic Document of the Lessee or
any Applicable Law and will not result in or
require the creation or imposition of any Lien
(other than Permitted Liens) on any of the
properties of the Lessee.
1. Due Execution. This
Participation Agreement and each other Operative
Document to which the Lessee is a party have been
duly executed and delivered by, and each such
Operative Document constitutes the legal, valid
and binding obligation of, the Lessee enforceable
in accordance with its terms, except as
enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally or
by equitable principles relating to
enforceability.
1. No Violation, etc. Neither
the execution, delivery, and performance by the
Lessee of this Participation Agreement or any
other Operative Document to which it is, or is to
become, a party, nor the consummation of the
transactions contemplated thereby will conflict
with, or result in a breach of any of the terms or
provisions of, or constitute a default under, or
result in the creation or imposition of any Lien
(other than Permitted Liens) pursuant to any
Contractual Obligation of the Lessee which could
reasonably be expected to have a material adverse
impact on the Lessee's ability to perform its
obligations under the Operative Documents to which
it is a party, nor will such actions result in any
violation of the provisions of the Organic
Documents of the Lessee.
1. Governmental Action. No
Governmental Action by, and no notice to or filing
with, any Governmental Authority is required for
the due execution, delivery and performance by the
Lessee of the Operative Documents to which it is a
party, except for such Governmental Actions,
notices or filings identified on Schedule IV as
have been duly obtained or made and are in full
force and effect. There is no proceeding pending
or, to the best knowledge of the Lessee,
threatened which seeks, or which would reasonably
be expected, to rescind, terminate, modify or
suspend any such Governmental Action. The Lessee
is not an "investment company" or a company
"controlled" by an "investment company", within
the meaning of the Investment Company Act of 1940,
or a "holding company" or a "subsidiary company"
of a "holding 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.
1. Litigation. There is no
pending or, to the best knowledge of the Lessee,
threatened litigation, Environmental Claim,
action, arbitration or proceeding affecting the
Lessee or any of its properties, assets or
revenues which questions the validity or
enforceability of any Operative Document or which,
individually or in the aggregate, if decided
adversely to the interests of the Lessee, would
reasonably be expected to have a Material Adverse
Effect.
1. Location and Status of
Equipment. On the Equipment Closing Date, each
Item of Equipment delivered on such date is
located at either the ▇▇▇▇▇▇▇ Facility or the
▇▇▇▇▇▇ Facility. The Items of Equipment subject
to each Lease Supplement are personal property and
are not, and will not be attached to or related to
the real estate in such a manner so that any Item
of Equipment constitutes, or will constitute, a
fixture. The Items of Equipment subject to each
Lease Supplement are the same Items of Equipment
identified in the copy of the Appraisal delivered
to the Lessee as being located in Illinois. As of
the Equipment Closing Date, each of the Items of
Equipment will be properly installed in a
workmanlike manner in accordance with Applicable
Law and in accordance with the plans and
specifications therefor, will contain no material,
structural or systemic defect and will be in good
operating order.
1. Compliance with Applicable Law
and Governmental Action. The Lessee is in
compliance with all Applicable Law (including all
Applicable Law relating to the ownership, use,
operation and lease of the Equipment) except to
the extent that the failure to comply with any
such Applicable Law could not, individually or in
the aggregate, reasonably be expected to have a
Material Adverse Effect.
1. ERISA. The Lessee is not
entering into this Participation Agreement or any
transaction contemplated hereby or by any other
Operative Document to which it is, or is to
become, a party, directly or indirectly in
connection with any arrangement or understanding
by it in any way involving any "employee benefit
plan" (within the meaning of Section 3(3) of
ERISA) or "plan" (within the meaning of
Section 4975(e)(1) of the Code) or any "plan
assets" of any such employee plan or plans and the
transactions contemplated by the Operative
Documents will not cause or result in any non-
exempt prohibited transactions within the meaning
of Section 406 of ERISA or Section 4975 of the
Code. The representation and warranty in the
preceding sentence is made by the Lessee in
reliance upon, and is subject to the accuracy of,
the representations and warranties made by the
Participants in Sections 4.2(f) and 4.4(d) hereof,
respectively.
1. No Public Offering.
a) Neither the Lessee nor
Salomon Brothers Inc. (the only Person
authorized or employed by the Lessee as
agent, broker, dealer or otherwise in
connection with the offering or sale of the
Notes or any similar securities) has offered
any of the Notes or similar securities, or
solicited offers to buy any thereof from, or
otherwise approached or negotiated with
respect thereto with, any prospective
purchaser, other than the Lenders and not
more than 80 other institutional investors,
each of which was offered such Notes at
private sale for investment and each of which
the Lessee or such agent had reasonable
grounds to believe, and did believe, and as
to the Lenders after reasonable inquiry does
believe, has such knowledge and experience in
financial and business matters that it is
capable of evaluating the merits and risks of
investment in such Notes. Neither the Lessee
nor any Person authorized to act on its
behalf will take any action which would
subject the issuance or sale of any Notes or
any interest in the Lease or any other debt
or other instrument issued or to be issued to
finance the Equipment to the registration
requirements of Section 5 of the Securities
Act.
a) Neither the Lessee nor
Salomon Brothers Inc. (the only Person
authorized or employed by the Lessee as
agent, broker, dealer or otherwise in
connection with the offering or sale of the
beneficial interest in the Trust Estate or
any similar securities) has offered the
beneficial interest in the Trust Estate or
similar securities, or solicited offers to
buy any thereof from, or otherwise approached
or negotiated with respect thereto with, any
prospective purchaser, other than the Owner
Participant and not more than 34 other
institutional investors, each of which was
offered such beneficial interest at private
sale for investment and each of which the
Lessee or such agent had reasonable grounds
to believe, and did believe, and as to the
Owner Participant after reasonable inquiry
does believe, has such knowledge and
experience in financial business matters that
it is capable of evaluating the merits and
risks of investment in such beneficial
interest. Neither the Lessee nor any Person
authorized to act on its behalf will take any
action which would subject the issuance or
sale of any beneficial interest in the Trust
Estate, or any interest in the Lease or any
other debt or other instrument issued or to
be issued to finance the Equipment to the
registration requirements of Section 5 of the
Securities Act.
1. Title. On the Equipment
Closing Date, all UCC financing statements,
Purchase Documents and other documents, if any
necessary or advisable to establish and protect
the Lessor's right, title and interest in and to
the Equipment to be acquired by it and to perfect
for the benefit of the Indenture Trustee and the
Lenders the Lien and security interest in the
Trust Indenture Estate created pursuant to the
Indenture will have been duly executed by all
necessary and appropriate Persons and filed or
recorded and the Indenture, together with such
filings and recordings, will on the Equipment
Closing Date create a valid and perfected first
priority Lien and security interest in the Trust
Indenture Estate effective as against creditors of
and purchasers from the Lessee and, assuming that
the representations and warranties of the Owner
Trustee herein are true and correct, the Owner
Trustee. Upon delivery of the Equipment pursuant
to a ▇▇▇▇ of Sale, the Owner Trustee will
thereupon have good, valid and marketable title to
such Equipment free and clear of all Liens other
than Permitted Liens described in clauses (a) -
(c) in the definition of "Permitted Liens". On
the Equipment Closing Date, the Equipment is
located on real property leased by the Lessee from
a directly or indirectly wholly-owned subsidiary
of Zenith and the Equipment is held by such
subsidiary as bailee.
1. No Default, etc. The Lessee
is not in default, and no condition exists that
with notice or lapse of time or both would
constitute a default under any mortgage, deed of
trust, indenture, contract or other instrument or
agreement to which the Lessee is a party or by
which it or any of its properties or assets may be
bound which individually or in the aggregate could
reasonably be expected to have a Material Adverse
Effect with respect to the Lessee, the Indenture
Trustee, the Owner Trustee or any Participant.
1. Taxes. The Lessee has filed
or caused to be filed all tax returns required to
be filed by it and has paid all Taxes shown to be
due and payable on such returns (other than those
that are not yet delinquent, and those Taxes that
the Lessee is contesting in good faith, none of
which contested Taxes are material).
1. Defaults; Events of Loss. No
Default or Event of Default has occurred and is
continuing or will result from the transactions to
take place on the Equipment Closing Date. As of
the Equipment Closing Date, no Event of Loss or
event that with the passage of time or giving of
notice or both would constitute an Event of Loss
has occurred and is continuing with respect to any
Item of Equipment.
1. Sales Tax. All sales, use,
transfer, recording and similar taxes due on the
Equipment Closing Date in connection with the
transactions contemplated by the Operative
Documents have been paid on the Equipment Closing
Date or such transactions are exempt from such
taxes.
1. Financial Statements and
Condition. The audited consolidated balance
sheets and consolidated statements of income and
retained earnings and cash flows of Zenith and its
subsidiaries set forth in Zenith's annual report
on Form 10-K for the fiscal year ended December
31, 1995 (copies of which have been delivered to
the Participants), fairly present, in conformity
with generally accepted accounting principles, the
consolidated financial position of Zenith and its
subsidiaries as of such date and the results of
their operations for the period then ended. The
unaudited consolidated balance sheets and
consolidated statements of income and retained
earnings and cash flows of Zenith and its
subsidiaries set forth in the Lessee's quarterly
report on Form 10-Q for the fiscal quarter ended
September 30, 1996 (copies of which have been
delivered to the Participants), fairly present, in
conformity with generally accepted accounting
principles consistently applied, the consolidated
financial position of Zenith and its subsidiaries
as of such date and the results of their
operations for the period then ended, subject to
the absence of footnotes and normal year-end
adjustments. Since September 30, 1996, no
material adverse change has occurred in the
business or consolidated financial condition of
Zenith and its subsidiaries which has not been
disclosed in Zenith's reports under the Securities
Exchange Act of 1934 or otherwise disclosed in
writing. Zenith's reports under the Securities
Exchange Act of 1934 referred to in this Section
did not contain as of their respective dates any
untrue statement of a material fact or omit to
state a material fact necessary to make the
statements therein in light of the context in
which they were made, not misleading.
1. Chief Executive Office. The
chief executive office (as such term is used in
Article 9 of the UCC) of the Lessee is located at
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
2. Environmental Matters. The
Lessee holds and is in compliance with the terms
and conditions of all Governmental Actions
required under applicable Environmental Laws which
Governmental Actions are associated with the
Equipment; the Lessee is in compliance with all
Environmental Laws, except for such non-compliance
as would not involve the risk of any criminal
liability to any Participant or any Agent or would
not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on
the Lessee, any Participant or any Agent and
Lessee is in compliance with all Environmental
Laws applicable to or otherwise affecting the
Equipment; no Lien has been attached to any of the
Equipment pursuant to any Environmental Law; the
Lessee has not received written notice, and to
Lessee's best knowledge the Lessee is not aware,
of any Environmental Claim or investigation, or
notice of violation, pending or threatened, based
on or related to Environmental Law relating to the
Equipment; to the Lessee's best knowledge, there
are no facts, activities, events, conditions or
circumstances involving Hazardous Substances that
could reasonably be anticipated to form the basis
of an Environmental Claim against or involving the
Lessee, except for Environmental Claims that would
not reasonably be expected to have a Material
Adverse Effect on the Lessee, any Agent or any
Participant; there are no past, pending or, to the
Lessee's best knowledge after due inquiry,
threatened Environmental Claims in any way
involving or relating to (i) the Lessee, except
for Environmental Claims that could not reasonably
be anticipated, individually or in the aggregate,
to have a Material Adverse Effect on the Lessee,
any Participant or any Agent, or (ii) the
Equipment; Hazardous Substances associated in any
way with the Equipment have not at any time been
generated, used, treated, managed, recycled,
stored, disposed of, Released or transported other
than in compliance with all applicable
Environmental Laws; no polychlorinated biphenyls
(PCBs) are used in connection with or contaminate
any part of the Equipment; the Lessee has no
knowledge of any pending or threatened
Environmental Claim at any treatment, storage or
disposal facility that has received Hazardous
Substances associated in any way with the
Equipment.
1. Insurance. On the Equipment
Closing Date, the Equipment will be covered by the
insurance required by Article XX of the Lease.
1. Margin Regulations. None of
the transactions contemplated by the Operative
Documents (including, without limitation, the use
of the proceeds from the sale of the Notes) will
result in a violation of Section 7 of the Exchange
Act or any regulations issued thereunder or
Regulations G, T, U or X of the Board of Governors
of the Federal Reserve System, 12 C.F.R., Chapter
II. None of the proceeds from the sale of the
Notes will be used to purchase or carry (or
refinance any borrowing the proceeds of which were
used to purchase or carry) any "margin stock"
within the meaning of any such Regulations.
1. Broker's Fee. No broker's or
finder's or placement fee or commission will be
payable with respect to the transactions
contemplated by the Operative Documents as a
result of any action by the Lessee, except for the
fees of Salomon Brothers Inc, which shall be
included in Transaction Expenses.
(v) Labor Claims. Neither Lessee nor
any of its Affiliates which hold the Equipment are
subject to any labor or labor-related claim under
any Applicable Law which could reasonably be
expected to have a Material Adverse Effect with
respect to the Lessee or Zenith (and, to the best
of Lessee's knowledge, no such claims are
threatened).
A. Representations and Warranties of
the Owner Participant. The Owner Participant
represents and warrants as follows:
1. Due Incorporation, etc. It is
a corporation duly organized and validly existing
in good standing under the laws of its
jurisdiction of incorporation, and has the
corporate power and authority to enter into and
perform its obligations under the Operative
Documents to which it is a party.
1. Due Authorization, Non-
Contravention, etc. The execution, delivery and
performance of the Operative Documents to which it
is a party have been duly authorized by all
necessary corporate action, do not and will not
conflict with, result in any violation of, or
constitute any default under, any provision of any
of its Organic Documents or Contractual
Obligations or any Applicable Law (but only, in
the case of any Contractual Obligations, as to any
such conflict, violation or default which could
not reasonably be expected to have a Material
Adverse Effect with respect to the Owner
Participant) and will not result in or require the
creation of any Lien (other than Permitted Liens
that are not also Owner Participant Liens) on any
part of the Equipment or on any of its properties
and no Governmental Action by, and no notice to or
filing with, any Governmental Authority or
regulatory body is required for the due execution,
delivery and performance by such Owner Participant
of the Operative Documents to which it is a party,
except for such Governmental Actions, notices or
filings as have been duly obtained or made and are
in full force and effect.
1. Due Execution. The Operative
Documents to which it is a party have been duly
executed and delivered by, and each such Operative
Document constitutes the legal, valid and binding
obligation of, the Owner Participant enforceable
in accordance with its terms.
1. No Public Offering; Brokers.
Neither the Owner Participant nor any Person
acting on its behalf has directly or indirectly
offered or sold, nor will it offer or sell, the
Notes, or any interest in the Equipment or the
Lease, or any similar securities, or has otherwise
approached or negotiated, nor will it approach or
negotiate, with any Person with respect thereto,
so as to bring any of the transactions
contemplated hereby within the purview of
Section 5 of the Securities Act. It is acquiring
its interest in the Trust Estate for its own
account for investment and not with a view to, or
for sale in connection with, any distribution;
provided that the disposition of its property
shall at all times be and remain within its
control. It has not retained or employed, nor
will it retain or employ, any broker or finder to
act on its behalf in connection with the
transactions contemplated by the Operative
Documents on the Equipment Closing Date and has
not authorized, nor will it authorize any broker
or finder retained or employed by any other Person
so to act.
1. Owner Participant Liens. The
Equipment and the Trust Estate are free of Owner
Participant Liens.
1. ERISA. No part of the funds
constituting part of the Equity Amount or
Transaction Expenses, to be used by it to acquire
any interest in the Equipment constitutes an asset
of an "employee benefit plan" (as such term is
defined in Section 3(3) of ERISA) or any "plan"
(as such term is defined in Section 4975(e)(1) of
the Code).
1. Litigation. There is no
pending or, to the best knowledge of such Owner
Participant, threatened litigation, action,
arbitration or proceeding affecting such Owner
Participant or any of its properties, assets or
revenues before any Governmental Authority which
questions the validity or enforceability of any
Operative Document or which, individually or in
the aggregate, if decided adversely to such Owner
Participant, would reasonably be expected to have
a material adverse effect on its ability to
perform its obligations under the Operative
Documents to which it is a party.
A. Representations and Warranties of
the Indenture Trustee. The Indenture Trustee in
its individual capacity represents and warrants as
follows:
1. Due Organization. It is a
national banking association duly organized and
validly existing in good standing under the laws
of the United States and has all requisite
corporate power and authority to execute, deliver
and perform its obligations under this
Participation Agreement and the other Operative
Documents to which it is a party.
1. Due Authorization. This
Participation Agreement and the other Operative
Documents to which it is party have been duly
authorized, executed and delivered by the
Indenture Trustee and constitute the legal, valid
and binding obligations of the Indenture Trustee
enforceable against the Indenture Trustee in
accordance with the terms hereof and thereof.
1. Non-Contravention. Neither
the execution and delivery by the Indenture
Trustee of this Participation Agreement and the
other Operative Documents to which it is party,
nor the authentication by it of the Notes, nor the
consummation by it of the transactions
contemplated hereby or thereby, nor the compliance
by it with any of the terms or provisions thereof
will contravene any Applicable Law, or any
Connecticut or United States judgment or order
applicable to or binding on it, or contravene or
result in any breach of, or constitute any default
under, its Organic Documents or Contractual
Obligations to which it is a party or by which any
of its properties may be bound.
1. Governmental Action. Neither
the execution and delivery by the Indenture
Trustee of this Participation Agreement and the
other Operative Documents to which it is or is to
be party, nor the performance by it of any of the
transactions contemplated hereby or thereby
requires the consent or approval of, the giving of
notice to, the registration with, or the taking of
any other action in respect of, any Governmental
Authority governing the banking or trust powers of
the Indenture Trustee.
1. Litigation. There is no
pending or, to the best knowledge of the Indenture
Trustee, threatened litigation, action,
arbitration or proceeding affecting the Indenture
Trustee or any of its properties, assets or
revenues before any Governmental Authority which
questions the validity or enforceability of any
Operative Document or which, individually or in
the aggregate, if decided adversely to the
Indenture Trustee, would reasonably be expected to
have a material adverse effect on its ability to
perform its obligations under the Operative
Documents to which it is a party.
A. Representations and Warranties of
the Lenders. Each Lender severally represents and
warrants as follows:
(a) Due Organization. It is duly
organized and validly existing in good standing
under the laws of its jurisdiction of organization
and has all requisite corporate power and
authority to execute, deliver and perform its
obligations under this Participation Agreement and
the other Operative Documents to which it is a
party.
(b) Due Authorization. This
Participation Agreement and the other Operative
Documents to which it is party have been duly
authorized, executed and delivered by such Lender
and constitute the legal, valid and binding
obligations of such Lender enforceable against
such Lender in accordance with the terms hereof
and thereof.
(c) Notes for Investment Only. It is
acquiring the Notes for its own account or for one
or more separate accounts maintained by it for
investment and not with a view to, or for sale in
connection with, any distribution, provided that
the disposition of its property shall at all times
be and remain within its control.
(d) ERISA. At least one of the
following statements is an accurate representation
as to each source of funds (a "Source") to be used
by such Lender to pay the purchase price of the
Notes to be purchased by it hereunder:
(i) the Source is an insurance
company general account as such term is used
in U.S. Department of Labor Prohibited
Transaction Class Exemption ("PTCE") 95-60,
and the amount of reserves and liabilities
(as defined in the annual statement for life
insurance companies approved by the National
Association of Insurance Commissioners (the
"NAIC Annual Statement") and before reduction
for credits on account of any reinsurance
ceded on the coinsurance basis) (the
"Reserves and Liabilities"), for the general
account contract(s) held by or on behalf of
any Plan, together with the amount of the
Reserves and Liabilities for the general
account contracts(s) held by or on behalf of
any other Plans maintained by the same
employer (or any "affiliate" thereof within
the meaning of Section V(a)(1) of PTCE 95-
60), does not exceed 10% of the total
Reserves and Liabilities of such general
account plus surplus, as set forth in the
NAIC Annual Statement filed with the state of
domicile of the insurance company maintaining
such general account; or
(ii) the Source is a separate
account that is maintained solely in
connection with such Lender's fixed
contractual obligations under which the
amounts payable, or credited, to any employee
benefit plan (or its related trust) that has
any interest in such separate account (or to
any participant or beneficiary of such plan
(including any annuitant)) are not affected
in any manner by the investment performance
of the separate account; or
(iii) the Source is either (A) an
insurance company pooled separate account,
within the meaning of ▇▇▇▇ ▇▇-▇ (▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇), ▇▇ (▇) a bank collective
investment fund, within the meaning of PTCE
91-38 (issued July 12, 1991) and, except as
disclosed by such Purchaser to the Lessee and
the Owner Participant in writing pursuant to
this paragraph (iii), no employee benefit
plan or group of plans maintained by the same
employer or employee organization
beneficially owns more than 10% of all assets
allocated to such pooled separate account or
collective investment fund; or
(iv) the Source constitutes assets
of an "investment fund" (within the meaning
of Part V of PTCE 84-14) managed by a
"qualified professional asset manager" or
"QPAM" (within the meaning of Part V of PTCE
84-14), no employee benefit plan's assets
that are included in such investment fund,
when combined with the assets of all other
employee benefit plans established or
maintained by the same employer or by an
affiliate (within the meaning of Section
V(c)(1) of PTCE 84-14) of such employer or by
the same employee organization and managed by
such QPAM, exceed 20% of the total client
assets managed by such QPAM, the conditions
of Part I (c) and (g) of PTCE 84-14 are
satisfied, and neither the QPAM nor a person
controlling or controlled by the QPAM
(applying the definition of "control" in
Section V(e) of PTCE 84-14) owns a 5% or more
interest in the Lessee or the Owner
Participant; or
(v) the Source constitutes assets
managed by an "in-house asset manager" or
"INHAM" (within the meaning of Part IV of
PTCE 96-23), the conditions of Part I(a) of
PTCE 96-23 are satisfied, and neither the
INHAM nor a person controlling or controlled
by the INHAM (applying the definition of
"control" in Section IV(d) of PTCE 96-23)
owns a 5% or more interest in the Lessee or
the Owner Participant; or
(vi) the Source is a governmental
plan; or
(vii) the Source is one or more
employee benefit plans, or a separate account
or trust fund comprised of one or more
employee benefit plans, each of which has
been identified to the Lessee and the Owner
Participant in writing pursuant to this
paragraph (vii); or
(viii) the Source does not include
assets of any employee benefit plan, other
than a plan exempt from the coverage of
ERISA. As used in this Section 4.4(d), the
terms "employee benefit plan", "governmental
plan" and "separate account" shall have the
respective meanings assigned to such terms in
Section 3 of ERISA.
(e) U.S. Person. It is a "United
States Person" as defined in Section 7701(a)(30)
of the Code.
A. Representations and Warranties of
Fleet and the Owner Trustee. Fleet and the Owner
Trustee (where noted) represent and warrant to
each of the other parties hereto that:
1. Due Organization. Fleet is a
national banking association duly organized and
validly existing in good standing under the laws
of the United States and has all requisite
corporate power and authority to execute, deliver
and perform its obligations under this Agreement
and the Trust Agreement and (assuming due
authorization, execution and delivery of the Trust
Agreement by the Owner Participant) has all
requisite corporate power and authority as Owner
Trustee to execute and deliver the other Operative
Documents to which it is or is to be a party.
1. Due Authorization. This
Agreement and the Trust Agreement have been duly
authorized, executed and delivered by Fleet and
the Owner Trustee, as the case may be, and
constitute the legal, valid and binding
obligations of Fleet and the Owner Trustee, as the
case may be, enforceable against Fleet and the
Owner Trustee, as the case may be, in accordance
with the terms hereof and thereof. Assuming the
due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, the
Operative Documents to which the Owner Trustee is
a party have been duly authorized, executed and
delivered by it and constitute the legal, valid
and binding obligations of the Owner Trustee
enforceable against it in accordance with the
terms thereof.
1. Non-Contravention. Neither
the execution and delivery by Fleet or the Owner
Trustee, as the case may be, of any of the
Operative Documents to which it is or is to be a
party, nor the consummation by it of the
transactions contemplated thereby nor compliance
by it with any of the terms or provisions thereof
will contravene any Applicable Law of Connecticut,
any Applicable Law of the United States governing
banking and trust powers or any judgment or order
applicable to or binding on it, or contravene or
result in any breach of, or constitute any default
under, its Organic Documents or Contractual
Obligations to which it is a party or by which any
of its properties may be bound.
1. Governmental Action. Neither
the execution and delivery by Fleet or the Owner
Trustee, as the case may be, of each of the
Operative Documents to which it is or is to be a
party, nor the performance of its obligations
thereunder requires the consent or approval of or
the giving of notice to, the registration with, or
the taking of any other action in respect of, any
Connecticut Governmental Authority or any United
States Governmental Authority governing its
banking and trust powers.
1. Location. The chief executive
office (as such term is used in Article 9 of the
UCC) of the Owner Trustee is located at Boston,
Massachusetts, and its principal corporate trust
office is located at Hartford, Connecticut.
1. Title. On the Equipment
Closing Date, the Owner Trustee will have whatever
title to the Items of Equipment delivered on such
Equipment Closing Date as was conveyed to it by
the Lessee.
1. Litigation. There is no
pending or, to the best knowledge of Fleet or the
Owner Trustee, as the case may be, threatened
litigation, action, arbitration or proceeding
affecting the Owner Trustee or any of its
properties, assets or revenues before any
Governmental Authority which questions the
validity or enforceability of any Operative
Document or which, individually or in the
aggregate, if decided adversely to Fleet or the
Owner Trustee, as the case may be, would
reasonably be expected to have a material adverse
effect on its ability to perform its obligations
under the Operative Documents to which it is a
party.
1. Liens; Conveyances. The Trust
Estate is free and clear of any Lessor Liens
attributable to Fleet or the Owner Trustee, as the
case may be. Except as contemplated by the
Operative Documents, the Owner Trustee has not
conveyed any interest in the Trust Estate to any
Person.
I. ARTICLE
Covenants
A. Covenants of the Owner Participant,
Fleet and the Owner Trustee.
1. Liens. Each of the Owner
Participant, Fleet and the Owner Trustee severally
agrees that at all times the Trust Estate shall be
free of any Owner Participant Liens or Lessor
Liens, respectively, attributable to it. The
Owner Participant, Fleet and the Owner Trustee
each severally agrees that it will, at its own
cost and expense, promptly take such action as may
be necessary duly to discharge any Owner
Participant Lien or Lessor Lien, respectively,
attributable to it and will make restitution and
hold harmless each other Indemnified Person on an
After Tax Basis, from and against any costs or
expenses (including Fees and Expenses) and, any
reduction in the amount payable out of the Trust
Indenture Estate to each present or future holder
of a Note in respect of the Notes, incurred, in
each case, by such party as a result of the
imposition or enforcement of any such Owner
Participant Lien or Lessor Lien attributable to
it; provided, that the Owner Participant and Fleet
may in good faith by appropriate proceedings
contest claims or charges resulting in any such
Owner Participant Lien or Lessor Lien as long as
such proceeding does not involve any material
danger of the sale, forfeiture or loss (or loss of
use) of any Item of Equipment or any other part of
the Trust Estate or the Trust Indenture Estate, or
any interest therein.
1. No Amendments. Each of Fleet
and the Owner Participant agrees that until
expiration or earlier termination of the Lease it
will not terminate the Trust Agreement or amend
the Trust Agreement in any manner which would be
materially adverse to the Lessee, the Lenders or
the Indenture Trustee without the prior written
consent of the Indenture Trustee and the Lessee.
1. Change to Principal Place of
Business or Chief Executive Office, etc. Fleet
shall use its best efforts to notify the Owner
Participant, the Indenture Trustee and the Lessee
in writing at least 30 days prior to any change to
its principal place of business, chief executive
office, name or organizational structure or to the
place where the Owner Trustee maintains records
concerning the transactions contemplated hereby
and, in any event, shall notify such parties
within 30 days after such change.
A. Covenants of the Indenture Trustee.
The Indenture Trustee agrees, in its individual
capacity, that:
1. Discharge of Liens. The
Indenture Trustee shall not create or permit to
exist, and shall, at its own cost and expense,
promptly take such action as may be necessary duly
to discharge all liens and encumbrances on any
part of the Trust Indenture Estate which result
from claims against it in its individual capacity
not related to its Lien and security interest in
the Trust Indenture Estate or the administration
of the Trust Indenture Estate.
1. Discharge of Indenture. The
Indenture Trustee shall release the Lien of the
Indenture when directed to do so pursuant to
Section 10.01 thereof.
A. Covenants of the Lessee.
1. Further Assurances. The
Lessee, at its own cost and expense, shall cause
to be promptly and duly taken, executed,
acknowledged and delivered all such further acts,
documents (including Bills of Sale) and assurances
as any Participant, the Owner Trustee, the Owner
Participant or the Indenture Trustee may from time
to time reasonably request in order to carry out
more effectively the intent and purposes of this
Participation Agreement and the other Operative
Documents, and the transactions contemplated
hereby and thereby (including ensuring that the
agreements between Lessee and its Affiliates that
possess the Equipment establish that the Equipment
is leased by Lessee under the Lease Agreement).
The Lessee, at its own cost and expense, shall
cause the financing statements (and continuation
statements with respect thereto) and documents
enumerated and described in Schedule IV to be
recorded or filed at such places and times in such
manner, and shall take all such other actions or
cause such actions to be taken, as may be
necessary or requested by the Owner Trustee, the
Owner Participant or the Indenture Trustee, in
order to establish, preserve, protect and perfect
the good and marketable title of the Owner Trustee
to the Equipment, and the Owner Trustee's and the
Owner Participant's rights under this
Participation Agreement and the other Operative
Documents and, so long as any Notes are
outstanding under the Indenture, the first
priority Lien and security interest of the
Indenture Trustee in the Trust Indenture Estate
and the Indenture Trustee's rights under this
Participation Agreement and the other Operative
Documents referred to and included under the
Granting Clauses of the Indenture (including,
without limitation, the filing of financing
statements in appropriate jurisdictions and filing
offices relating to any site to which any portion
of the Equipment may be relocated and the filing
of continuation statements in appropriate
jurisdictions and filing offices). The Lessee
shall promptly from time to time furnish to the
Owner Participant or the Owner Trustee such
information as may be required to enable the Owner
Participant or the Owner Trustee, as the case may
be, to timely file any reports and obtain any
licenses or permits required to be filed or
obtained by the Owner Trustee as the lessor under
the Lease or as the owner of the Equipment or the
Owner Participant as the beneficiary of the Trust
Estate with any Governmental Authority (including
environmental and tax authorities). The Lessee
will at the Lessee's expense furnish to Owner
Trustee and the Indenture Trustee, annually and at
the time continuation statements are required to
be filed, an opinion of counsel satisfactory to
Owner Trustee and the Indenture Trustee stating
that (1) all financing statements or other notices
have been filed for record in all public offices
wherein such filing is necessary to protect the
right, title and interest of the Owner Trustee in
and to the Equipment and to perfect the Lien and
security interest in the Trust Indenture Estate
created pursuant to the Indenture under the
provisions of the UCC and (2) all continuation
statements and amendments to such financing
statements required to maintain the priority and
perfection of such Liens and security interests
have been recorded, registered and filed as
necessary in order to maintain such priority and
perfection.
1. Maintenance of Corporate
Existence, etc. The Lessee shall at all times
maintain its existence as a corporation in good
standing under the laws of the State of Delaware.
The Lessee shall do or shall cause to be done all
things necessary to preserve and keep in full
force and effect its rights (charter and
statutory) and franchises.
1. Change to Principal Place of
Business or Chief Executive Office, Etc. The
Lessee shall provide the Owner Trustee, the Owner
Participant and the Indenture Trustee with ten
(10) Business Days' prior written notice of any
change to its chief executive office, principal
place of business, name or corporate structure or
to the place where it maintains its business
records.
1. Lessee to Defend Title. The
Lessee covenants that it shall, at all times, at
its own cost and expense, warrant and defend the
title of the Owner Trustee to the Trust Estate and
the Lien and security interest of the Indenture
Trustee in and to the Trust Indenture Estate
against any Lien (other than Permitted Liens),
claims and demands of or against the Lessee and
all other Persons claiming through the Lessee.
The Lessee covenants that with respect to any Item
of Equipment that has not had a Final Acceptance
Date as of the Equipment Closing Date, the Lessee
shall on or prior to September 30, 1997, either
have (a) caused a Final Acceptance Date to occur,
or (b) rejected such Item of Equipment (based upon
such Item's failure to comply with the operating
specifications therefor) after an Equipment
Closing Date has occurred with respect to such
Item of Equipment and prior to the Final
Acceptance Date for such Item.
1. Furnishing of Information. The
Lessee agrees to furnish to each Participant and
each Agent:
a) within 120 days after the
close of each fiscal year of the Lessee
occurring after the Initial Closing Date, an
unaudited, unconsolidated balance sheet and
statement of income of Lessee as of the end
of and for such year;
a) within sixty (60) days after
the end of each of the first three (3)
quarters of each of Zenith's fiscal years, an
unaudited, unconsolidated balance sheet and
statement of income of Lessee as of the end
of and for such period;
a) simultaneously with the
delivery of the year-end financial statements
referred to in (i) above, a certificate of
the Chief Financial Officer, the Comptroller,
Treasurer or an Assistant Treasurer of the
Lessee stating that such officer has reviewed
the activities of the Lessee during the
immediately preceding fiscal year and
whether, to the knowledge of such officer,
there exists on the date of such certificate
any Default, Event of Default, Indenture
Event of Default, or Event of Loss, and, if
any Default, Event of Default, Indenture
Event of Default or Event of Loss exists,
specifying the nature and period of existence
thereof and the action the Lessee is taking
and proposes to take with respect thereto;
a) immediately upon the Lessee
becoming aware of the existence of a Default
or Event of Default, a written notice
specifying the nature of such Default or
Event of Default and what action the Lessee
is taking or proposes to take with respect
thereto;
b) all reports and permits
required under Applicable Law to be filed or
delivered by any Lessor Party with respect to
the Equipment;
a) promptly, all reports or
statements which the Lessee may make to, or
file with, the Securities Exchange Commission
or any successor agency thereto; and
a) promptly, such additional
information with respect to the financial
condition or business of the Lessee as any
Participant or the Indenture Trustee or the
Owner Trustee may reasonably request.
1. Inspection. The Lessee will
permit each Participant, the Owner Trustee and the
Indenture Trustee, upon reasonable notice and at a
mutually convenient time and at their expense so
long as no Default or Event of Default has
occurred and is continuing (and thereafter at the
expense of the Lessee), (i) to visit the sites
where the Items of Equipment are located and
inspect such Equipment and related records and the
corporate headquarters of the Lessee and (ii) to
discuss with the relevant officers of the Lessee
the Items of Equipment and the financial affairs
and condition of the Lessee or any Subsidiary
thereof insofar as these are relevant to their
interests hereunder and subject to any legal
restrictions on disclosure.
1. Merger, Consolidation, etc.,
of Lessee. The Lessee covenants that it shall not
consolidate or merge with or into any Person, nor
sell, transfer, convey or lease all or
substantially all its properties or assets as an
entirety to any Person, unless:
a) the successor entity
formed by such consolidation or with or into
which it is merged, or the successor entity
that acquires by conveyance, transfer or
lease all or substantially all its assets as
an entirety, shall be organized under the
laws of the U.S., a state thereof or the
District of Columbia, shall be authorized
under all Applicable Laws to operate the
Equipment and perform the obligations of the
Lessee under the Operative Documents to which
it is a party to the same extent as the
Lessee, shall have a tangible net worth (as
determined in accordance with GAAP) not less
than the tangible net worth of the Lessee
immediately prior to giving effect to such
transaction, shall execute and deliver to the
Owner Trustee, the Indenture Trustee and each
Participant an agreement in form and
substance satisfactory to the Owner Trustee,
the Indenture Trustee and each Participant,
containing an assumption by such successor
entity of the due and punctual performance of
each covenant and condition of the Operative
Documents to be performed or observed by the
Lessee;
a) immediately after giving
affect to such transaction, no Default or
Event of Default shall have occurred and be
continuing;
a) the Lessee or such successor
entity, as the case may be, shall have
delivered to the Owner Trustee, the Indenture
Trustee and each Participant an Officer's
Certificate and an opinion of counsel
satisfactory to the Owner Trustee, the
Indenture Trustee and each Participant,
stating that such consolidation, merger,
sale, conveyance, transfer or lease, and the
assumption agreement required by clause (i)
above, comply with this Section 5.3, that all
conditions precedent relating to such action
have been satisfied, that such assumption
agreement has been duly authorized, executed
and delivered by such successor entity and
constitutes the legal, valid and binding
obligation of such successor entity,
enforceable against such successor entity in
accordance with its terms and that the rights
of the Participants under the Operative
Documents will not be adversely affected
thereby, and that such transaction will not
result in adverse tax consequences for the
Owner Trustee, the Indenture Trustee or any
Participant with respect to the transactions
contemplated by the Operative Documents; and
a) the Guarantor and Zenith
shall have delivered to the Owner Trustee,
the Indenture Trustee and each Participant a
confirmation in form and substance
satisfactory to each such Person confirming
its obligations under the Guaranty or the
Parent Guaranty, as the case may be, with
respect to such successor entity.
Upon any such consolidation or merger,
or any sale, conveyance, transfer or lease of
substantially all the assets of the Lessee in
accordance with this Section 5.3(g), the successor
entity formed by such consolidation or with or
into which the Lessee shall be merged, or to which
such sale, conveyance, transfer or lease shall be
made, shall succeed to, and be substituted for,
and may exercise every right and power and shall
be subject to each and every obligation of, the
Lessee under the Operative Documents to which it
is a party with the same effect as if such
successor corporation had been named as the Lessee
therein. No such sale, conveyance, transfer or
lease of all or substantially all the assets of
the Lessee shall have the effect of releasing the
Lessee or any successor entity that shall
theretofore have become such in the manner
prescribed in this Section 5.3(g) from its
liability under the Operative Documents to which
it is a party.
1. Purchase of Notes. Other than
in connection with the exercise of the EBO Option
under the Lease, neither the Lessee nor any of its
Affiliates will purchase or otherwise acquire any
of the Notes.
(i) Environmental Matters. The Lessee
shall
a) comply in all respects, and
cause all other Persons to comply in all
respects, with all Environmental Laws
applicable in any way to, or otherwise
affecting, the Equipment, and the Lessee
shall have sole responsibility for the
expenses (including legal, consultant and
other professional fees and expenses and
costs of investigation) associated with such
compliance;
a) obtain, at or prior to the
time required by applicable Environmental
Laws, all Governmental Actions necessary in
connection with the Equipment, and maintain
such Governmental Actions in full force and
effect;
a) not treat, recycle, manage,
generate, transport, store or Release, or
permit the treatment, recycling, management,
generation, transportation, storage or
Release of, Hazardous Substances used in
connection with the Equipment, other than in
compliance with all applicable Environmental
Laws;
a) conduct and complete, at its sole
and expense, any investigation, study,
sampling, monitoring and testing and
undertake any cleanup, removal, remedial,
corrective, mitigation, response or other
action necessary or advisable to ▇▇▇▇▇,
correct, remove and clean up or remediate any
Release or threatened Release of any
Hazardous Substance associated in any way
with the Equipment, in accordance with
applicable Environmental Laws;
a) provide reasonably detailed
written notice, within 10 days of Lessee's
discovery thereof, of any fact, circumstance,
condition, occurrence or Release relating in
any way to the Equipment that has resulted or
is reasonably likely to result in (i)
noncompliance with any applicable
Environmental Law or (ii) an Environmental
Claim; and
a) provide to each Participant and
each Agent copies of all written
communications relating to any alleged
violation of or noncompliance with any
Environmental Law or any Environmental Claim
relating to the Equipment simultaneously with
the giving or receiving of such written
communications.
(j) Purchase Agreement; Invoices. The
Lessee shall deliver or otherwise make available
to each of the Indenture Trustee and the Owner
Participant copies of such Purchase Documents
relating to the Items of Equipment delivered on
the Equipment Closing Date and Invoices from the
respective Sellers thereof specifying the amounts
comprising the respective purchase prices of such
Items, in each case as such Person may reasonably
request.
(k) Performance Under Lease. The
Lessee agrees that it will fully perform its
obligations under the Lease.
A. Transfers of Notes. Each Lender
agrees that it will not transfer any Note unless
such Note is registered under the Securities Act
or an exemption from such registration is avail-
able. Furthermore, each Lender, solely with
respect to itself, severally covenants that,
except pursuant to Section 2.13 or 2.17 of the
Trust Indenture, it will not transfer any Note to
any Person unless such Person (the "Proposed
Lender") (a) shall have agreed in writing to be
bound by this Participation Agreement, and the
other Operative Documents to which the Lenders are
a party, as though named as a Lender herein and
therein and (b) the representations set forth in
Section 4.4 hereof (other than Section 4.4(e)) are
true with respect to such Proposed Lender as of
the date of the transfer of such Notes (provided
that if the representation in Section 4.4(d) is
correct with respect to such Proposed Lender only
because clause (vii) applies, no such transfer of
the Notes to such Proposed Lender shall be made
without the prior consent of the Lessee and the
Owner Participant).
A. Advertising; Trademarks. Each
Participant and Agent agrees that it will not
advertise, or otherwise publish for advertising
purposes in any news medium, the fact that it has
furnished financing or lease accommodations to any
party hereto without first obtaining the written
consent of such party; provided, that such consent
shall not be required in connection with the
transfer by the Owner Participant of its right,
title and interest in the Trust Estate in
accordance with the terms of the Operative
Documents. Notwithstanding any other provision of
any Operative Document, no Participant or Agent
will have any right to use any trademark, trade
name or trade dress of, or otherwise refer to, any
party hereto in any promotion or publication in a
news medium without first obtaining the written
consent of such party, except for identifying the
Equipment as having been owned by, leased to or
used by Zenith, in connection with (a) the
repossession of or foreclosure on the Equipment,
or (b) any transfer by the Owner Participant of
its right, title and interest in the Trust Estate
in accordance with the terms of the Operative
Documents.
I. ARTICLE
Indemnities
All payments to be made by the Lessee to
any Indemnified Person under this Article VI will
be free of expense to such Indemnified Person for
collection or other charges. The Lessee's
obligations to any Indemnified Person under the
indemnities provided in this Participation
Agreement shall be those of a primary obligor
whether or not such Indemnified Person shall also
be indemnified with respect to the same matter
under the terms of any other agreement
contemplated hereby or thereby, or any other
document or instrument whether or not related to
the transactions contemplated hereby or thereby,
and the Persons seeking indemnification from the
Lessee pursuant to any provisions of this
Participation Agreement may proceed directly
against the Lessee without first seeking to
enforce any other right of indemnification.
A. General Indemnity. The Lessee
hereby assumes liability for, and (whether or not
any of the transactions contemplated hereby shall
be consummated and whether or not the Lease, any
Lease Supplement or other Operative Document has
expired or been terminated) agrees to defend,
indemnify, protect, release, save and hold
harmless and keep whole each Indemnified Person,
on an After-Tax Basis, from and against any and
all liabilities (including but not limited to
liabilities arising out of the doctrine of strict
liability or arising out of violation of
regulatory requirements of any kind), obligations,
losses, damages, penalties, claims (including
Environmental Claims), actions, suits, judgments,
costs, expenses, charges, fees and disbursements
(including out of pocket fees and expenses, Fees
and Expenses and costs of investigation), whether
any of the foregoing be founded or unfounded, of
whatsoever kind and nature (collectively, the
"Claims") that may be imposed on, incurred by or
asserted against any Indemnified Person or any
Equipment, in any way relating to or arising out
of (a) the Equipment or the Operative Documents
(including, without limitation, the performance or
enforcement of all obligations of the Lessee or
the Guarantor under the Operative Documents and
payments made pursuant thereto or any other
transactions contemplated thereby or the breach of
any covenant or agreement contained therein by the
Lessee or the Guarantor, or the falsity of any
representation or warranty made therein by the
Lessee or the Guarantor), or the design, manufac-
ture, construction, reassembly, purchase,
acceptance, possession, rejection, control,
financing, refinancing, modification, alteration,
testing, non-use, ownership, delivery,
nondelivery, use, operation, leasing, subleasing,
condition, maintenance, repair, sale, abandonment,
storage, substitution, insurance, redelivery or
de-installation, return or other disposition of
the Equipment or any Item thereof (whether or not
such Equipment or Item is in compliance with the
Operative Documents), (b) any other disposition
of, or the imposition of any Lien (or incurrence
of any liability to refund or pay over any amount
as a result of any Lien) on, the Equipment or any
interest therein, including, without limitation,
any claim or penalty arising out of violations of
Applicable Law, or in tort (whether creating a
strict liability or otherwise) or arising from the
active or passive negligence of an Indemnified
Person, latent or other defects, whether or not
discoverable by any Indemnified Person, or any
other Person, loss of or damage to any property or
the environment, death of or injury to any Person
and any claim for patent, trademark or copyright
infringement, (c) the offer, issuance, sale,
resale or delivery of any Note or any direct or
beneficial interest under any Operative Document,
(d) any Event of Default, any Event of Loss, any
redemption, refunding, prepayment or transfer of
the Notes made in accordance with the Operative
Documents, any amendment, modification or
supplement to any Operative Document, or any
transfer of all or any part of the right, title
and interest of the Owner Trustee or any Owner
Participant in the Trust Estate or in, to and
under any of the Operative Documents, (e) the
presence, Release or threatened Release of any
Hazardous Substance in, on, at or from any Item of
Equipment or any facility or site in or on which
any Item of Equipment is or was present, stored,
used, recycled, managed, treated, disposed of, or
located at any time, (f) any transport, treatment,
recycling, storage, Release, disposal or
arrangement therefor, of any Hazardous Substance
generated by, used in connection with or otherwise
present in or on any Item of Equipment or any
facility or site in or on which any Item of
Equipment is or was present, stored, used,
recycled, managed, treated, disposed of, or
located at any time, (g) any Environmental Law or
any published policy or guidance document issued
in connection therewith or demand of a
Governmental Authority applicable in any way
whatsoever related to any Item of Equipment or any
facility or site in or on which any Item of
Equipment is or was present, stored, used,
recycled, managed, treated, disposed of, or
located at any time, (h) any loss of or damage to
any property, natural resources or the
environment, or death of or injury to any Person,
resulting from or relating to any Hazardous
Substance that is or was present, used, generated,
treated, stored, recycled, managed, transported or
Released in connection with any Item of Equipment
or any facility or site in or on which any Item of
Equipment is or was present, stored, used,
recycled, managed, treated, disposed of or
otherwise located at any time or (i) any non-
exempt prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code; provided, that
the Lessee shall not be required pursuant to this
Section 6.1 to indemnify:
a) any Indemnified Person
for any Claim to the extent resulting or
arising from acts or events occurring after
redelivery of all of the Items of Equipment
in accordance with the Lease and payment of
all Rent due and payable but only to the
extent not resulting or arising from acts or
events occurring prior to such redelivery;
a) any Indemnified Person
for loss or liability to the extent resulting
from the gross negligence or wilful
misconduct of such Indemnified Person or a
Related Indemnified Person of such Person
(for purposes of this Section, the Indenture
Trustee shall not be deemed a Related
Indemnified Person of any Lender and the
Owner Trustee shall not be deemed to be a
Related Indemnified Person of the Owner
Participant), or from such Indemnified
Person's or a Related Indemnified Person's
breach of any of its representations or
warranties or covenants contained in any
Operative Document;
a) any Indemnified Person for
any Taxes, and any cost or expense of
contesting any such Taxes, other than any
Item referred to in clause (i) above which
constitutes a Tax; provided, however, that
this clause (iii) does not affect any
payments otherwise payable hereunder on an
After-Tax Basis;
a) Fleet, the Owner Trustee
or the Owner Participant, as the case may be,
in connection with any claim resulting from
any Lessor Lien or any Owner Participant Lien
attributable to it;
(v) the Lenders, Fleet, the Owner
Trustee or the Owner Participant, as the case
may be, in connection with any claim
resulting from the sale, lease or other
disposition by the Lenders, Owner Trustee or
Owner Participant, as the case may be, of
their respective rights in the Notes, the
Equipment or any part thereof or any right to
or interest in the Operative Documents except
for any transfer or disposition by reason of
or pursuant to (A) any sublease, substitution
or maintenance of, or modification to, any
Item of Equipment, (B) the Lessee's exercise
of the Purchase Option or the EBO Option, or
the option to terminate the Lease with
respect to certain Items for obsolescence
pursuant to Article VII of the Lease, (C) an
Event of Loss, or a condemnation or taking
not constituting an Event of Loss, (D) after
or during the continuance of an Event of
Default, or (E) Lessee's exercise of its
rights under Article XI or XVI hereof or,
with respect to the Lenders, any transfer of
the Notes pursuant to Section 2.13 or 2.17 of
the Indenture, all as specifically
contemplated by the Operative Documents
(items described in (A)-(E) above being
defined as "Excepted Transfers");
(vi) any Indemnified Party in
connection with any claim resulting from
either Agent's failure to distribute funds
held by it in accordance with the terms of
the Operative Documents; or
(vii) the Owner Participant or any
Related Indemnified Person of such Person in
connection with any claim arising from or
related to any prohibited transaction or
other violation of Section 406 of ERISA or
Section 4975 of the Code resulting from or
attributable to an alleged breach of
fiduciary duty or any prohibited transaction
by the Owner Participant or such Related
Indemnified Party within the meaning of
Section 406 of ERISA or Section 4975 of the
Code.
The indemnities set forth in this
Section 6.1 shall not constitute a guarantee,
representation or warranty to any Indemnified
Person of, or as to the value or useful life of,
any Item of Equipment or a guarantee,
representation or warranty that any debt incurred
by the Owner Participant to finance its Equity
Amount will be paid. Upon payment in full of any
indemnity pursuant to this Section 6.1, the Lessee
shall, to the extent of such payment and so long
as no Event of Default shall have occurred and be
continuing, be subrogated to any rights of the
Indemnified Person in respect of the matter
against which such indemnity was given (other than
with respect to any insurance policies carried by
such Indemnified Person).
Subject to the provisions of the
following paragraph, the Lessee shall at its sole
cost and expense be entitled to control, and shall
assume full responsibility for, the defense of any
Claim; provided, that the Lessee shall keep the
Indemnified Person which is the subject of such
proceeding fully apprised of the status of such
proceeding and shall provide such Indemnified
Person with all information with respect to such
proceeding as such Indemnified Person shall
reasonably request.
Notwithstanding any of the foregoing to
the contrary, the Lessee shall not be entitled to
control and assume responsibility for the defense
of such Claim unless it shall have confirmed in
writing to the relevant Indemnified Person that
such Claim is covered by the terms of the
indemnity set forth herein and that it
acknowledges its liability to fully indemnify such
Indemnified Person in respect thereof or if (i) an
Event of Default shall have occurred and be
continuing, (ii) such proceeding will involve any
material danger of the sale, forfeiture or loss
of, or the creation of any Lien (other than any
Permitted Lien or a Lien which is adequately
bonded to the satisfaction of such Indemnified
Person) on any Item of Equipment, (iii) the
amounts involved, in the good faith opinion of
such Indemnified Person, are likely to have an
adverse effect on the business of such Indemnified
Person other than the ownership, leasing and
financing of the Equipment, (iv) in the good faith
opinion of such Indemnified Person, there exists
an actual or potential conflict of interest such
that it is advisable for such Indemnified Person
to retain control of such proceeding or (v) such
claim or liability involves the possibility of
criminal sanctions or liability to such
Indemnified Person. In any of the circumstances
described above, the Indemnified Person shall be
entitled to control and assume responsibility for
the defense of such claim or liability at the
expense of the Lessee. In addition, any
Indemnified Person may participate in any
proceeding controlled by the Lessee pursuant to
this Section 6.1, at its own expense in respect of
any such proceeding as to which the Lessee shall
have acknowledged in writing its obligation to
indemnify the Indemnified Person pursuant to this
Section 6.1, and at the expense of Lessee in
respect of any such proceeding as to which the
Lessee shall not have so acknowledged its
obligation to the Indemnified Person pursuant to
this Section 6.1. The Lessee may in any event
participate in all such proceedings at its own
cost. Nothing contained in this Section 6.1 shall
be deemed to require an Indemnified Person to
contest any Claim or to assume responsibility for
or control of any judicial proceeding with respect
thereto.
6.2 Payment of Taxes; General Tax
Indemnity.
(a) General Taxes. Subject to the
provisions of Section 6.2(b), the Lessee agrees to
pay and assume liability for, and does hereby
agree to indemnify, protect, defend and hold
harmless, on an After-Tax Basis, each Indemnified
Person from and against any and all Taxes imposed
upon or payable by such Indemnified Person
(including amounts payable by such Indemnified
Person solely as withholding agent) or the Lessee
or withheld from any payment pursuant to the
Operative Documents, whether imposed against the
Equipment or any Item of Equipment, any
Modification, or any part or portion thereof or
interest therein, or the Notes, or any Affiliate
of the Lessee that possesses the Equipment,
otherwise in connection with or relating to or on
or with respect to (i) this Agreement or any of
the other Operative Documents or any amendment,
supplement, waiver or consent thereto or the
execution, delivery or performance of any thereof;
(ii) the Equipment, any Item of Equipment, any
Modification, or any interest therein; (iii) the
acquisition, construction, purchase, acceptance,
possession, rejection, ownership, delivery,
nondelivery, return, financing, refinancing,
mortgaging, repossession, transfer, control, use,
non-use, operation, leasing, subleasing,
gratuitous bailment, registration, re-
registration, hire, condition, maintenance,
storage, modification, importation, exportation,
repair, substitution, replacement, insuring,
improvement, sale, abandonment, redelivery,
location, transfer of title or other application
or disposition of or with respect to the
Equipment, any Item of Equipment, any part of the
Equipment, any Modification, or any interest
therein; (iv) the payment of Rent or other
amounts, receipts, income or earnings arising from
or received with respect to the Equipment or any
part thereof or interest therein or any
application, acquisition or disposition thereof;
(v) any other amount paid or payable pursuant to
the Operative Documents or any document related
thereto or the property, income or other proceeds
with respect to the property held in the Trust
Estate or the Indenture Estate; (vi) the payment
of principal of, or interest or premium on, or
other amounts payable with respect to, or the
issuance, acquisition, modification, refinancing,
reoptimization, holding, sale, assignment,
transfer or other disposition of, any Note; or
(vi) otherwise with respect to or in connection
with the transactions contemplated by the
Operative Documents.
(b) The Lessee will have no obligation
under Section 6.2(a) with respect to any one or
more of the following:
(i) Taxes imposed on an Indemnified
Person by the United States or, in the case
of the Owner Participant, any foreign taxing
authority or the State of Texas (or any local
government authority therein) and, in each
case, that are measured by, based on or with
respect to the net or gross income or
receipts, items of tax preference, excess
profits, conduct of business, capital or net
worth of such Indemnified Person provided,
however, that the exclusion in this
subparagraph (i) (A) shall apply to Taxes
imposed by any foreign taxing jurisdiction or
the State of Texas (or any local government
authority therein) on the Owner Participant
only to the extent that such Taxes would have
been imposed in the absence of (v) the use,
location, registration, subleasing, leasing
or operation of the Equipment or any part
thereof in such foreign taxing jurisdiction
or the State of Texas (or any local
government authority therein), (w) the
execution or delivery of any Operative
Document in such foreign taxing jurisdiction
or the State of Texas (or any local
government authority therein), (x) the making
or receipt of any payment pursuant to the
Operative Documents in such foreign taxing
jurisdiction or the State of Texas (or any
local government authority therein), (y) the
identity or activities or presence of the
Lessee, the Guarantor or any Lessee Person in
such foreign taxing jurisdiction or the State
of Texas (or any local government authority
therein) or (z) the performance of or
exercise of rights, powers or remedies under
the Operative Documents; and (B) shall not
apply to any Taxes that are, or are in the
nature of, sales, use, transfer, value-added,
ad valorem, property, license, stamp or
rental Taxes or similar Taxes; provided, that
this Section 6.2(b)(i) (and each other
exclusion contained in Section 6.2(b)) shall
not be interpreted to exclude any amounts
necessary to make any payment on an After-Tax
basis;
(ii) Taxes that are imposed by any state
of the United States or any local government
authority therein (other than the State of
Texas or any local government authority
therein) and based on or measured by or with
respect to the net or gross income or
receipts, items of tax preference, excess
profits, conduct of business, capital or net
worth; provided, that the exclusion in this
subparagraph (ii) shall apply to Taxes
imposed by any state or local government
political subdivision or taxing authority
therein only to the extent that such Taxes
would have been imposed in the absence of the
use, location, registration, subleasing,
leasing or operation of the Equipment or any
part thereof in such state or locality and,
provided, further, that there shall not be
excluded under this subparagraph (ii) any
Taxes that are, or are in the nature of,
sales, use, transfer, value-added, ad valorem
property, license, stamp or rental Taxes or
similar Taxes;
(iii) Taxes imposed against or payable
by an Indemnified Person attributable to (A)
any voluntary sale, assignment, transfer or
other disposition (a "Transfer") by such
Indemnified Person of any interest in the
Owner Trust, the Equipment or any interest
therein, the Notes, or any interests or
obligations arising under the Operative
Documents other than (1) any Transfer
contemplated by the Operative Documents to
occur on the Equipment Closing Date, (2) any
Refunding pursuant to Article XI of the
Participation Agreement, (3) any Transfer
while a Material Default or an Event of
Default has occurred and is continuing or (4)
any Transfer in connection with the exercise
of any of the Lessee's rights or performance
of the Lessee's obligations under the
Operative Documents (including without
limitation, any sale, assignment, transfer or
disposition under Articles VI, VII, VIII, IX,
X and XI of the Lease) or (B) any involuntary
transfer by such Indemnified Person of any
interest in the Owner Trustee, the Trust
Estate, the Equipment or any part thereof or
interest therein, the Notes or any interests
or obligations arising under the Operative
Documents resulting from any bankruptcy or
other proceeding for relief of debtors in
which such Indemnified Person is the debtor
or any foreclosure by a creditor of the
Indemnified Person other than any such
transfer following a Default or an Event of
Default;
(iv) with respect to the Equipment,
Taxes attributable to any period after the
expiration or earlier termination of the
Lease with respect to the Equipment and, if
the Lessee is required to return such
Equipment to the Owner Trustee, the return of
the Equipment to the Owner Trustee in
accordance with the terms of the Lease and
payment in full of all amounts then due under
the Operative Documents, unless and to the
extent such Taxes are attributable to
actions, omissions or events occurring in
connection with the exercise of remedies
following the occurrence and continuance of a
Material Default or an Event of Default;
provided, that with respect to the Equipment,
there shall not be excluded under this
subparagraph (iv) any Taxes to the extent
such Taxes relate to events, acts or
omissions or circumstances occurring or
matters arising prior to or simultaneously
with such expiration or termination or, if
applicable, such return or to payments made
pursuant to the Operative Documents;
(v) any Taxes imposed against or payable
by an Indemnified Person resulting from the
gross negligence or willful misconduct of
such Indemnified Person;
(vi) Taxes imposed on or with respect to
or payable by the Owner Trustee or the
Indenture Trustee based on, measured by or
imposed with respect to any fees paid to or
accruable by the Owner Trustee or the
Indenture Trustee, as the case may be, in its
capacity as Owner Trustee or the Indenture
Trustee, as the case may be;
(vii) with respect to the Noteholders
only, Taxes imposed against or payable by any
Noteholder by or to any jurisdiction to the
extent such Taxes would not have been imposed
but for such Noteholder being organized under
the laws of such jurisdiction or engaging in
such jurisdiction in activities unrelated to
the transactions contemplated by the
Operative Documents;
(viii) with respect to the Noteholders
only, United States federal, state and local
income Taxes which are required to be
withheld from payments hereunder (or under
the Lease) to or for the benefit of any
Noteholder;
(ix) in the case of payments to or for
the benefit of the Owner Participant, Taxes
imposed, or which are required to be withheld
from payments hereunder (or under the Lease),
solely as a result of the Owner Participant
being a Non-U.S. Person;
(x) Taxes which have been included in
Lessor's Cost to the extent actually paid on
or before the Equipment Closing Date;
(xi) Taxes imposed upon the Owner
Participant for which the Lessee is obligated
to indemnify the Owner Participant pursuant
to the Tax Indemnity Agreement; and
(xii) Taxes imposed against a transferee
(or subsequent transferee) of an original
Indemnified Person to the extent of the
excess of such Taxes over the amount of such
Taxes which would have been imposed against
the original Indemnified Person had there not
been a transfer by such Original Indemnified
Person of its interest in the Owner Trustee,
the Trust Estate, the Equipment or any part
thereof or interest therein, or the Notes;
provided, however, that this
subparagraph (xii) shall not apply to any
transfer following the occurrence and
continuance of a Material Default or an Event
of Default or to any amounts necessary to
make any payments hereunder on an After-Tax
Basis.
(c) Calculation of General Tax
Indemnity Payments; Tax Savings. Any payment or
indemnity to or for the benefit of any Indemnified
Person with respect to any Tax which is subject to
indemnification under Section 6.2(a) hereof shall
be made on an After-Tax Basis. If, by reason of
any payment made on an "After-Tax Basis" to or for
the account of an Indemnified Person by or on
behalf of the Lessee pursuant to Section 6.1, this
Section 6.2, Article VII, or any other Operative
Document other than the Tax Indemnity Agreement
(or the circumstances or event giving rise
thereto) such Indemnified Person or any of its
Affiliates realizes a net Tax benefit, refund,
saving, deduction or credit that results in a
reduction in Taxes for which the Lessee is not
required to indemnify such Indemnified Person
under this Agreement or the other Operative
Documents and such reduction in Taxes was not
previously taken into account in computing the
amount of the payment to such Indemnified Person,
such Indemnified Person shall pay to the Lessee on
an After-Tax Basis an amount equal to the net
reduction in Taxes, if any, as determined in good
faith by the Indemnified Person, realized by such
Indemnified Person or any of its Affiliates which
is attributable to such net Tax benefit, refund,
saving, deduction or credit. The Indemnified
Person shall make such payment within 30 days
after it or any of its Affiliates actually
realizes such reduction in Taxes. Each of the
Owner Participant, the Owner Trustee and the Trust
Estate agrees to use its reasonable efforts and to
cause its Affiliates (in a manner consistent with
its overall financial and public relations
interests) to seek and claim, and further agrees
to take such actions as the Lessee may reasonably
request, as long as such efforts or actions do not
expose such Persons to a risk of material adverse
consequences (determined in good faith judgment of
the Indemnified Person), and such Indemnified
Person is indemnified in a manner satisfactory to
such Indemnified Party, determined in its sole
discretion for any adverse consequences, to
realize any refunds, deductions or other tax
benefits that would reduce the Lessee's indemnity
obligations hereunder. Any costs incurred by an
Indemnified Person in pursuing the actions
contemplated by the preceding sentence shall be
for the account of the Lessee. Notwithstanding
the foregoing provisions of this Section 6.2(c),
(A) an Indemnified Person shall not be obligated
to make any payment pursuant to this
Section 6.2(c) if, and for so long as, a Material
Default or an Event of Default shall have occurred
and
be continuing (but shall hold such amount for the
benefit of the Lessee and pay such withheld amount
to the Lessee promptly following the date on which
the Material Default or Event of Default is no
longer continuing) and (B) to the extent the
amount of such payment by the Indemnified Person
to the Lessee made pursuant to Section 6.2(c) (all
determined without regard to any amount necessary
to make such payments on an After-Tax Basis) would
exceed the excess of all payments made on an
After-Tax Basis by the Lessee to such Indemnified
Person pursuant to Section 6.1, Section 6.2(a),
Article VII or the other Operative Documents other
than the Tax Indemnity Agreement (all determined
without regard to any amount necessary to make
such payments on an After-Tax Basis) over the
amount of all prior payments by such Indemnified
Person to the Lessee of tax benefits pursuant to
this paragraph (c) (determined without regard to
any amounts necessary to make such payments on an
After-Tax Basis), such excess shall not be paid
but shall be carried forward and shall reduce the
Lessee's obligation to make subsequent payments on
an After-Tax Basis to such Indemnified Person
under Section 6.1, Section 6.2(a), Article VII or
the other Operative Documents other than the Tax
Indemnity Agreement. Any Taxes that are imposed
on any Indemnified Person (or any of its
Affiliates)as a result of the disallowance,
unavailability, recapture or reduction of any tax
benefit, savings, deduction or credit referred to
in this Section 6.2(c) as to which an Indemnified
Person has made a payment to the Lessee or which
was otherwise taken into account under
Section 6.1, Section 6.2, Article VII or the other
Operative Documents other than the Tax Indemnity
Agreement shall be treated as a Tax for which the
Lessee must indemnify such Indemnified Person
hereunder without regard to Section 6.2(b) or (d)
hereof.
Notwithstanding the preceding, the
Lessee and the Owner Participant agree that the
obligation of the Owner Participant to reimburse
the Lessee in the case of payments made by the
Lessee pursuant to Article VII which are made as a
result of the Owner Participant being a Non-U.S.
Person shall be governed by the provisions of
Article VII.
(d) Contests.
(i) Initiation. If any written claim
shall be made against any Indemnified Person
or if any proceeding shall be commenced
against any Indemnified Person for any Taxes
as to which the Lessee may have an indemnity
obligation pursuant to this Section 6.2, such
Indemnified Person shall promptly notify the
Lessee provided, however, that the failure to
notify the Lessee shall not relieve the
Lessee of any obligation to indemnify the
Indemnified Person hereunder unless such
failure precludes the Lessee from initiating
or continuing the contest of such claim. The
Indemnified Person shall not take any action
with respect to such claim, proceeding or Tax
without the consent of the Lessee (such
consent not to be unreasonably withheld or
unreasonably delayed) for 30 days after the
receipt of such notice by the Lessee, unless
the Indemnified Person shall be required by
law or regulation to take action prior to the
end of such 30-day period.
(ii) Control and Conditions. If a
contest is requested in writing by the Lessee
within 30 days after receipt by the Lessee of
the notice required by subparagraph (i) with
respect to the claim or proceeding that is
the subject of such notice (provided,
however, that if a shorter period is required
for taking actions with respect to such Tax
claim, the Lessee shall use its best efforts
to request such contest within the shorter
period of time), or, in the case of any claim
or proceeding with respect to which the
Lessee (as opposed to the Indemnified Person)
receives notice, upon the written request of
the Lessee, the Lessee may, in the case of a
Tax which may be contested (1) in the name of
the Lessee, (2) independently from any Tax
that is not subject to indemnification by the
Lessee and (3) in the Indemnified Person's
good faith determination without any adverse
effect on such Indemnified Person, contest
the validity, applicability or amount of such
Tax. If the Lessee has made the written
request described in the first sentence of
the subparagraph (ii) and the contest would
meet the requirements of clauses (1) and (2)
of such first sentence, the Lessee shall, if
requested by the Indemnified Person, in good
faith, contest the validity, applicability or
amount of such Tax. A contest described in
either of the first two sentences of this
subparagraph (ii) shall be hereinafter
referred to as a "Lessee-Controlled Contest.
If the contest requested by the Lessee
pursuant to the first sentence of this
subparagraph (ii) is not a Lessee-Controlled
Contest, the Indemnified Person shall itself,
contest in good faith the validity,
applicability or amount of such Tax. Any
contest conducted pursuant to this
subparagraph (ii) shall be conducted by (1)
resisting payment thereof, (2) not paying the
same except under protest (which protest must
be pursued using reasonable efforts in
appropriate administrative and/or judicial
proceedings) if protest shall be necessary
and proper or (3) if payment shall be made,
using reasonable efforts to obtain a refund
thereof in appropriate administrative and/or
judicial proceedings (it being understood
that no appeal to the United States Supreme
Court shall be required hereunder).
Notwithstanding the foregoing, in no
event shall an Indemnified Person be required to
commence or continue any contest unless: (1) the
amount at issue (taking into account all similar
and logically related claims) exceeds $75,000; (2)
the Lessee shall have agreed in writing to pay the
Indemnified Person and shall pay on demand on an
After-Tax Basis as incurred all reasonable out-of-
pocket costs (including computer time) and
expenses that such Indemnified Person shall incur
in connection with contesting such claim
(including, without limitation, all reasonable
costs, expenses, legal, accounting and
investigatory fees and disbursements); (3) such
Indemnified Person shall have in good faith
reasonably determined that the action to be taken
will not result in any material danger of sale,
forfeiture or loss of the Equipment or the
creation of any Lien on the Equipment, the Trust
Estate or the Indenture Estate or the security
interests of the Lenders and the Indenture Trustee
therein and that there is no risk of criminal
liability that may be imposed with respect to such
Indemnified Person or any Affiliate; (4) if such
contest shall involve payment of the claim, the
Lessee shall advance the amount thereof plus
interest, penalties and additions to tax with
respect thereto to such Indemnified Person on an
interest-free basis (with no additional net after-
tax cost to such Indemnified Person); (5) no
Material Default or Event of Default shall have
occurred and be continuing; (6) prior to
initiating the contest, if requested, the Lessee
shall have furnished the Indemnified Person with
an opinion of tax counsel selected by the Lessee
and reasonably satisfactory to the Indemnified
Person to the effect that a reasonable basis
within the meaning of ABA Formal Opinion No. 85-
352 exists for such contest and in the case of an
appeal from an adverse lower court decision, that
it is more likely than not that the lower court's
opinion would be reversed or substantially
modified; and (7) the Lessee shall have
acknowledged in writing its obligation to
indemnify the Indemnified Person in the event the
contest is unsuccessful in whole or in part unless
the contest is ultimately resolved by a court of
competent jurisdiction on a clearly articulated
basis that establishes no basis for
indemnification hereunder.
(iii) Conduct. The Lessee shall
conduct any Lessee-Controlled Contest and the
relevant Indemnified Person shall control any
contest other than a Lessee-Controlled
Contest. The party conducting the contest
("Controlling Party") shall consult in good
faith with the other party ("Noncontrolling
Party") and its counsel with respect to the
contest of such claim for Taxes (or claim for
refund) but the decisions regarding what
actions to be taken shall be made by the
Controlling Party in its sole judgment
provided, however, that the Indemnified
Person shall be entitled to reassert control
of any contest if it determines in good faith
that the Lessee's continued control of the
contest will adversely affect the Indemnified
Person. In addition, the Controlling Party
shall keep the Noncontrolling Party
reasonably informed as to the progress of the
contest, and upon request shall provide the
Noncontrolling Party with a copy of (or
appropriate excerpts from) any reports or
claims issued by the relevant auditing agents
or taxing authority to the Controlling Party
or any Affiliate thereof, in connection with,
but solely to the extent relating to, such
claim or the contest thereof. The
Controlling Party shall be responsible for
the selection of counsel, which counsel, in
the case of a Lessee-Controlled Contest, must
be reasonably satisfactory to the
Noncontrolling Party.
Notwithstanding anything contained in
this paragraph (d) to the contrary, no
Indemnified Person shall be required to
contest any Tax claim if the subject matter
thereof shall be of a continuing nature and
there shall have been a Final Determination
with respect thereto, unless there shall have
been a change in facts or the law (including,
without limitation, amendments to statues or
Regulations, administrative rulings and court
decisions), and such Indemnified Person shall
have received an opinion of counsel, selected
by the Lessee and reasonably acceptable to
the Indemnified Person, which opinion shall
be furnished at the Lessee's sole expense,
setting forth the facts and legal analysis on
which it is based, to the effect that as a
result of such change in facts or the law it
is more likely than not that the Indemnified
Person shall prevail in the contest of such
claim.
(iv) Waiver of Indemnity.
Notwithstanding anything contained in this
Section 6.2, an Indemnified Person shall not
be required to contest any claim or permit
the Lessee to contest any claim and may
settle any contest without the consent of the
Lessee if such Indemnified Person (A) shall
waive its right to indemnity under this
Section 6.2 with respect to such claim for
such Tax, and (B) shall pay to the Lessee any
amount previously paid or advanced by the
Lessee pursuant to clause (4) of the second
paragraph of Section 6.2(d)(ii) with respect
to such claim.
(e) Payments. Any Taxes payable
hereunder by the Lessee shall be payable by the
Lessee, to the extent allowed, directly to the
appropriate taxing authority on or before the time
due, and in the manner, prescribed by Applicable
Law, without the necessity of any prior demand by
an Indemnified Person. If direct payment is not
permitted or otherwise is not made, any amount
payable by the Lessee to an Indemnified Person
pursuant to this Section 6.2 shall be paid within
10 days after receipt by the Lessee of a written
demand therefor from such Indemnified Person
accompanied by a written statement describing in
reasonable detail the amount so payable, but shall
in no event be payable before the date such Tax is
due. Any payments to be made pursuant to this
Section 6.2 by Lessee to an Indemnified Person or
by an Indemnified Person to the Lessee shall be
made directly to the Indemnified Person entitled
thereto or the Lessee, as the case may be, in
immediately payable funds at such bank or to such
account as specified by the payee in written
directions to the payor or, if no such direction
shall have been given, by check of the payor
payable to the order of the payee and mailed to
the payee by certified mail, postage prepaid at
its address. Any amount payable under this
Section 6.2 that is not paid when due shall bear
interest at the Overdue Rate. Upon a Final
Determination of any contest pursuant to
Section 6.2(d) in respect of any Taxes for which
the Lessee has made an advance payment, the amount
of the Lessee's obligation under Section 6.2 shall
be determined as if such advance payment had not
been made. If in connection with a refund or
credit of all or part of any Taxes paid,
reimbursed or advanced by the Lessee pursuant to
this Section 6.2, an Indemnified Person receives
an amount representing interest on such refund or
credit, the Indemnified Person shall pay to the
Lessee the amount of such interest that shall be
fairly attributable to such Taxes paid, reimbursed
or advanced by the Lessee prior to the receipt of
such refund or credit. Any obligation of the
Lessee under this Section 6.2 and the Indemnified
Person's obligation to repay the advance and
interest, if any, will be satisfied first by set
off against each other, and any difference owing
by either party will be paid within 10 days of
such Final Determination.
(f) Reports. If any report, return or
statement (a "Filing") is required to be filed
with respect to any Tax that is subject to
indemnification under this Section 6.2, the Lessee
shall promptly notify the appropriate Indemnified
Person of such requirement in writing and, if
permitted by Applicable Law to do so, the Lessee
shall timely file or cause to be filed such Filing
with respect to such Tax (except for any such
Filing that an Indemnified Person has notified
Lessee in writing that such Indemnified Person
intends to file) and will (if ownership of the
Equipment or any part thereof or interest therein
is required to be shown on such Filing) show the
ownership of the Equipment in the name of the
Owner Trustee, and send a copy of such Filing to
the appropriate Indemnified Person; provided, that
such Indemnified Person shall have furnished the
Lessee, at the Lessee's request and expense, with
such information, not within the control of the
Lessee, as is in such Indemnified Person's control
or is reasonably available to such Indemnified
Person and necessary to file such Filing. If the
Lessee is not permitted by Applicable Law to file
any such Filing, the Lessee will promptly notify
the appropriate Indemnified Person of such
requirement in writing and prepare and deliver to
the appropriate Indemnified Person a proposed form
of such Filing within a reasonable time, and in
all events at least 10 days prior to the time such
Filing is required to be filed. If the Owner
Participant, the Owner Trustee, or the Trust
Estate becomes aware of any Tax due, or report,
return or filing required with respect to any Tax
indemnified hereunder, it will promptly notify the
Lessee of such requirement, it being understood
that any failure to so notify the Lessee shall not
affect any Indemnified Person's rights hereunder.
(g) Verification. At the Lessee's
request, such request to be made in writing within
15 days after the Lessee receives any computation
from the Indemnified Person, the amount of any
indemnity payment by the Lessee pursuant to this
Section 6.2 or any payment by an Indemnified
Person to the Lessee pursuant to this Section 6.2
shall be verified by a nationally recognized
independent accounting firm mutually acceptable to
the Indemnified Person and the Lessee who shall be
asked to verify, after consulting with the
Indemnified Person, whether the Indemnified
Person's computations are correct and to report
its conclusions to both the Lessee and the
Indemnified Person. Subject to acceptable
confidentiality agreements as described below,
each Indemnified Person and the Lessee hereby
agree to provide such firm with all information
and materials as shall be reasonably necessary or
desirable in connection therewith provided,
however, that in no case shall the Indemnified
Person be required to provide its books or tax
returns to such accounting firm or anybody else.
The fee of such firm shall be paid by the Lessee
unless such verification discloses an error
adverse to the Lessee equal to 5% or more of the
amount determined to be due by such firm, in which
case such fees shall be paid by such Indemnified
Person. Any information provided to such firm by
any Person shall be and remain the exclusive
property of such Person and shall be deemed by the
parties to be (and such firm will confirm in
writing in a manner satisfactory to the
Indemnified Person that they will treat such
information as) the private, proprietary and
confidential property of such Person, and no
Person other than such Person and such firm shall
be entitled thereto, and all such materials shall
be returned to such Person. Such firm shall be
requested to make its determination within 30
days. If such firm shall determine that such
computations are incorrect, then such firm shall
determine what it believes to be the correct
computations. The computations of the accounting
firm shall be final, binding and conclusive upon
the Lessee and such Indemnified Person with
respect to matters other than the interpretation
of this Agreement and the Lessee shall have no
right to inspect the books, records, tax returns
or other documents (including working papers) of
or relating to such Indemnified Person or
Affiliate to verify such computations or for any
other purpose; provided, that the Lessee and each
Indemnified Person agree that the sole
responsibility of the accounting firm shall be to
verify the amount of an indemnity payable
hereunder and that matters of interpretation of
this Agreement are not within the scope of the
accounting firm's responsibilities.
I. ARTICLE
Tax Withholding
The Lessee agrees that in the event the
Lessee, the Lessor, the Indenture Trustee or the
Owner Participant is required by law to withhold
Taxes from any payment of Rent, the Lessee shall
make such withholding and shall pay the full
amount withheld to the applicable taxing authority
or other authority in accordance with Applicable
Law, and the Lessee shall pay an additional amount
on an After-Tax Basis such that, after deduction
of all amounts required to be withheld, the net
amount actually received by the Lessor and the
Indenture Trustee on an After-Tax Basis will equal
the amount that would have been received absent
such withholding, provided that in no event shall
the net amount paid after deduction for such
withholding tax be less than the amount payable
prior to the calculation of such withholding tax
and the amount payable under this Article VII.
Upon presentment of evidence of payment of
withheld Taxes, and provided that no Material
Default or Event of Default has occurred and is
continuing, the Lessee shall be entitled to
reimbursement from the Owner Participant on an
After-Tax Basis (such reimbursement being
sufficient to place the Lessee in the same
position it would have been in if no such
withholding had been imposed) for any such
additional amount with respect to any withholding
for United States federal income Taxes required to
be withheld solely by reason of the status of the
Owner Participant as a Non-U.S. Person.
Notwithstanding any other provision of
this Article VII to the contrary, the Lessee will
indemnify the Owner Trustee, the Trust Estate and
the Owner Participant (and any Affiliate of any of
the foregoing) on an After-Tax Basis for any
obligation with respect to United States federal
withholding Taxes imposed on the Owner Trustee,
the Trust Estate or the Owner Participant (or any
Affiliate of any of the foregoing) with respect to
the Notes (or any debt issued to refinance or
refund the Notes) or as a result of a claim by the
Internal Revenue Service (the "Service") asserted
against the Trust Estate, the Owner Trustee or the
Owner Participant (or any Affiliate of any of the
foregoing) with respect to such withholding Tax;
provided, however, that (A) the Lessee shall be
subrogated to the rights and defenses of the Owner
Trustee, the Trust Estate and the Owner
Participant (and any Affiliate of any of the
foregoing) in respect of such withholding Taxes,
including the rights and defenses set forth under
the Operative Documents, and (B) the Lessee shall
have no indemnification obligation under this
sentence if such obligation of the Owner Trust,
the Owner Trustee or the Owner Participant (or any
Affiliate of any of the foregoing) results solely
from the status of the Owner Participant as a Non-
U.S. Person.
The Indenture Trustee shall comply with
Section 2.04 of the Indenture with respect to
withholding taxes on payments due on the Notes.
I. ARTICLE
Expenses
A. Transaction Expenses Payable by the
Owner Participant. The Lessee shall have the
right to review all invoices for Transaction
Expenses. Subject to the Lessee's prior review,
Transaction Expenses for which invoices have been
received by the Owner Participant (with a copy to
the Lessee) shall be paid by the Owner Participant
promptly after receipt thereof. Subject to the
Lessee's prior review, Transaction Expenses for
which invoices are submitted after the Equipment
Closing Date shall be paid promptly after receipt
thereof by the Owner Participant (with a copy to
the Lessee); provided, that all invoices in
respect of Transaction Expenses incurred on or
prior to the Equipment Closing Date shall be
submitted within sixty (60) days after the
Equipment Closing Date.
A. Transaction Expenses Payable by the
Lessee. If the transactions contemplated hereby
are not consummated for any reason, the Lessee
will pay all Transaction Expenses promptly after
receipt of an invoice therefor; provided, that all
invoices in respect of Transaction Expenses shall
be submitted within sixty (60) days after the
scheduled Equipment Closing Date or, if no such
date has been scheduled, within sixty (60) days
after the last date of incurrence of Transaction
Expenses. If the transactions contemplated hereby
are consummated, the Owner Participant shall be
responsible for all Transaction Expenses up to the
percentages indicated in the Pricing Assumptions;
provided, however, if the Transaction Expenses
shall exceed the percentages indicated in the
Pricing Assumptions, the Lessee, at the request of
the Owner Participant, will pay the amount of
Transaction Expenses which exceeds the percentages
indicated in the Pricing Assumptions promptly
after receipt of an invoice therefor; provided,
that Lessee shall pay any Transaction Expenses not
promptly paid by, and which are required hereby to
be paid by, the Owner Participant and the Owner
Participant shall reimburse the Lessee for any
such Transaction Expenses paid by the Lessee on
behalf of the Owner Participant; provided further
that all invoices in respect of such Transaction
Expenses which are incurred on or prior to the
Equipment Closing Date shall be submitted within
sixty (60) days after the Equipment Closing Date.
A. Amendments, Waivers, etc. The
Lessee will pay all costs and expenses for which
appropriate bills and invoices are submitted
within nine months after the incurrence thereof
which have been incurred in connection with the
entering into or the giving or withholding of any
future amendments, supplements, waivers, consents
with respect to the Operative Documents, any
action requested by the Lessee or any action
required by the Operative Documents (other than
those required as a result of an action taken by a
Person other than Lessee or the Guarantor),
including, without limitation, any amendments,
waivers, or consents resulting from any Event of
Default, work-out, renegotiation or restructuring
relating to the non-performance by the Lessee or
the Guarantor of its respective obligations under
the Operative Documents, whether or not the same
shall become effective.
A. Fees of Agents. The Lessee will
pay all continuing fees and expenses of the Agents
in connection with the transactions contemplated
by the Operative Documents, other than the initial
fees of such Agents due and payable on the Initial
Closing Date and included in Transaction Expenses.
If the Owner Participant fails to pay such initial
fees when due, the Lessee shall be obligated to
pay such fees and shall be entitled to recover any
such payment from the Owner Participant.
I. ARTICLE
Recomputation of Basic Rent, EBO Prices,
Fixed Purchase Option Prices,
Casualty Values and Termination Values
A. Making of Adjustments.
(a) In the event that on or prior to the
Equipment Closing Date, it is determined that any
of the factors constituting Pricing Assumptions
(including but not limited to, the actual Lessor's
Cost of the Equipment to be settled for on such
Equipment Closing Date or the date of such
Equipment Closing Date) shall be different from
those reflected in the Pricing Assumptions and,
the Owner Participant shall elect to effect an
adjustment pursuant hereto; then, (x) the Pro
Forma Schedules of Basic Rent, the EBO Price,
Casualty Values and Termination Values for such
Items of Equipment to be purchased on such
Equipment Closing Date shall be adjusted by such
amounts as shall be appropriate to preserve for
the benefit of the Owner Participant its Net
Economic Return and (y) the amortization schedules
set forth in the Pro Forma Schedules for each
Series of Notes to be issued on or after such
Equipment Closing Date shall be adjusted in
compliance with Section 9.5 hereof.
(b) In the event that:
(i) a Refunding pursuant to
Article XI hereof and Section 2.12 of the
Indenture shall occur; or
(ii) Transaction Expenses paid by
the Owner Participant are different from 2% of
Lessor's Cost; or
(iii) a Modification is financed
by the Lessor pursuant to Section 6.4 of the
Lease;
and, in any such case, the Owner Participant shall
elect to effect an adjustment pursuant hereto;
then, Basic Rent, the EBO Price, Casualty Values
and Termination Values for all affected Items of
Equipment shall be adjusted from time to time by
such amounts as shall be appropriate to preserve
for the benefit of the Owner Participant its Net
Economic Return effective as of the next
succeeding Rent Payment Date for such Items of
Equipment.
A. Limitations. Any provision herein
or in any other Operative Document to the contrary
notwithstanding, no adjustment pursuant to Section
9.1 shall result in (a) Basic Rent payable on any
Rent Payment Date being less than the principal
amount of, and interest on, the Notes payable on
such Rent Payment Date under the Indenture, (b)
the Casualty Value and Termination Value for each
Item of Equipment payable on any date being less
than the principal amount of the Notes equal to
the Loan Value of such Item (other than, in the
case of any such date which is also a Rent Payment
Date, interest due on such Rent Payment Date) and
(c) the EBO Price payable on each EBO Date for the
Items of Equipment described in any Lease
Supplement and related Schedule of Equipment being
less than the principal amount of the Notes plus
any accrued and unpaid interest. Further, no
adjustment to the amortization schedules of the
Notes set forth in the Pro Forma Schedules shall
violate Section 9.5.
A. Computation of Adjustments. Upon
the occurrence of an event requiring an adjustment
to the Basic Rent, the EBO Price, Casualty Values
or Termination Values pursuant to this Article IX,
the Owner Participant shall make the necessary
computations and, within ninety (90) days after
the Owner Participant's knowledge of such event,
furnish to the Lessee a certificate complying with
the requirements of Section 9.4 hereof. In making
any such computations, the Owner Participant
(a) shall utilize the same methods and assumptions
(including tax constraints) originally used to
calculate the payments of Basic Rent, the EBO
Price, Casualty Values and Termination Values
(other than those assumptions changed as a result
of the event described in Section 9.1
necessitating such computations; it being agreed
that such computation shall reflect solely any
changes of assumptions or facts resulting directly
from any such event necessitating such recalcu-
lation); and (b) shall minimize to the maximum
extent possible, but subject at all times to the
preservation of Net Economic Return, the present
value (discounted semi-annually at an interest
rate per annum equal to the Debt Rate) of the
payments of Basic Rent. All Basic Rent
adjustments shall be consistent with Rev. Procs.
75-21 and 75-28 and Section 467 of the Code as in
effect at the time of the adjustment, including
any final, proposed or temporary regulation or
other administrative announcement issued
thereunder. In no event shall any such
adjustment, in the judgment of the Owner
Participant, result in the Lease being treated as
a "disqualified leaseback" or "long term
agreement" within the meaning of Section 467 of
the Code and any regulation (including any
proposed regulation) or other interpretation
regarding Section 467 of the Code, or otherwise
cause any adverse tax consequences to the Owner
Participant. If the Lessee shall disagree with
any such determinations, such determinations and
the supporting data described below shall be
reviewed and determined by an independent
accounting firm jointly chosen by the Lessee and
the Owner Participant, or, in the absence of
agreement as to such firm, by a third independent
accounting firm jointly chosen by two independent
accounting firms, one chosen by the Owner
Participant and one chosen by the Lessee. In
connection with any such review, the Owner
Participant shall make available to such
accounting firm or firms on a confidential basis
its pricing runs and its related assumptions, but
under no circumstances shall such pricing runs or
assumptions be made available to the Lessee;
provided, however, that in connection with any
such review the Owner Participant shall not be
required to disclose its tax returns or other
proprietary information. The adjustments as
determined by such accounting firm will replace
the adjustments provided by Owner Participant
unless the Lessee and the Owner Participant
otherwise agree. The costs of such verification
shall be borne by the Lessee, except that such
costs shall be borne by the Owner Participant if
such verification results in a reduction of the
amount of the present value (discounted semi-
annually at an interest rate per annum equal to
the Debt Rate) of the Basic Rent payments during
the Base Term of the affected Items of Equipment
from the amounts proposed by the Owner Participant
of more than the lesser of (a) 10 basis points or
(b) 5% of the Owner Participant's proposed
adjustments, in which case such costs shall be
borne by the Owner Participant. Notwithstanding
any provision herein to the contrary, the sole
responsibility of the accounting firm shall be to
verify the calculations hereunder, and matters of
interpretation of this Agreement or any other
Operative Document shall not be within the scope
of its duties.
A. Adjustments Certificate; Lease
Supplement. In connection with any adjustments
pursuant to this Article IX, the Owner Participant
shall provide to the Lessee a certificate of a
Responsible Officer of such Owner Participant
stating that all such computations were made in
good faith and were made so that any increase in
Net Economic Return was minimized consistent with
the adjustments required, and (b) stating that all
the requirements of Article IX were complied with.
In connection with any adjustment pursuant to this
Article IX, the Owner Trustee and the Lessee shall
enter into a Lease Supplement setting forth the
revised schedules of Basic Rent, Casualty Value,
Termination Value and EBO Prices, and the Lessee
shall deliver a copy of each such Lease Supplement
to the Indenture Trustee and each Participant, and
shall deliver the chattel paper original of each
such Lease Supplement to the Indenture Trustee.
A. Average Life of Notes.
Notwithstanding anything to the contrary contained
herein or in any other Operative Document, on the
Equipment Closing Date, the Average Life of Notes
shall not deviate from the Average Life of the
Notes as determined in the Pro-Forma Schedules by
more than three months.
A. Rent Adjustment Indemnity. The
Lessee shall indemnify and hold harmless (in the
manner provided in Sections 6.1 and 6.2 hereof and
subject to the exclusions contained therein) the
Owner Trustee, the Owner Participant, the
Indenture Trustee and the Lenders on an After-Tax
Basis for all fees, costs and expenses, including,
without limitation, the reasonable and actual fees
and expenses of their respective counsel, in
connection with the transactions contemplated by
this Article IX.
I. ARTICLE
Transfer of Owner Participant's Interests
A. Transfers.
1. Without the prior written
consent of the Lessee or the Guarantor (in each
case so long as no Event of Default has occurred
and is continuing), and the Indenture Trustee, no
Owner Participant shall assign, convey or
otherwise transfer all or any part of its right,
title and interest in and to the Trust Estate
except as provided in this Section 10.1.
1. An Owner Participant may
assign, convey or otherwise transfer all or any
part of its right, title and interest in the Trust
Estate to an Eligible Owner Participant pursuant
to an Owner Participant Transfer Agreement in
substantially the form of Appendix F to this
Agreement, subject to such assignment satisfying
the conditions set forth in this Section 10.1.
1. After giving effect to any
such assignment, conveyance or transfer, the
aggregate number of Owner Participants shall not
exceed four (4).
1. The assignment, conveyance or
transfer shall not result in a violation of the
Securities Act, and the Lessee, the Guarantor and
the Indenture Trustee shall each have received, at
the expense of the parties to such assignment,
conveyance or transfer, an opinion of counsel
(which may be the General Counsel of the Owner
Participant or the transferee) to that effect, in
form and substance satisfactory to each such
Person and to Lessee's Counsel.
1. The transferee or assignee
shall not be a Competitor of the Lessee or the
Guarantor or an Affiliate of such a Competitor
(excluding any Person which is a passive Investor
holding a minority interest in such Competitor).
1. The Lessee, the Guarantor and
the Indenture Trustee shall each have received, at
the expense of the parties to such assignment, (i)
an Owner Participant Transfer Agreement in
substantially the form of Appendix F, executed by
the transferor and the transferee, by which such
transferee agrees to be bound by and to undertake
on its own behalf all of the terms,
representations and warranties (to the extent
applicable) and covenants of the transferring
Owner Participant under the Operative Documents on
and after the effective date of transfer, (ii) if
applicable (pursuant to the definition of Eligible
Owner Participant), a guaranty with respect to the
obligations of such transferee in substantially
the form of Appendix F-1 and (iii) an opinion of
counsel (which may be the General Counsel of the
Owner Participant or the transferee, as the case
may be) reasonably acceptable to the Lessee, the
Lessee's Counsel and the Indenture Trustee as to
the due authorization and enforceability of such
agreements.
1. The transferring Owner
Participant shall have given written notice to the
Lessee, and the Indenture Trustee of any such
transfer or assignment at least fifteen (15)
Business Days prior to the effective date of such
transfer or assignment, together with drafts of
the certificates, opinions and agreements to be
delivered in accordance with the foregoing
conditions and such other evidence as is necessary
to establish compliance with the foregoing
conditions.
1. Upon any such assignment,
conveyance or transfer (including any subsequent
assignment, conveyance or transfer), (i) the
transferee shall be deemed an "Owner Participant"
for all purposes hereof, and shall be deemed to
have made all payments in respect of the right,
title and interest so transferred, and shall have
a ratable interest therein, and each reference in
any Operative Document to or encompassing such
Owner Participant shall thereafter be deemed to
include a reference to such transferee and
(ii) the transferor shall have no further rights
or interest hereunder or under any other Operative
Document, to the extent of the interest so
transferred.
(i) Notwithstanding any of the
foregoing, (i) the Owner Participant shall be
permitted and required to transfer its interest in
the Trust Estate to the Lessee in accordance with
the terms of Article X of the Lease if the Lessee
so elects in connection with its exercise of the
EBO Option and (ii) the limitations set forth in
Sections 10.1 (e) shall not apply if a Material
Default or an Event of Default has occurred and is
continuing.
I. ARTICLE
Refunding
A. Refunding. So long as no Material
Default or Event of Default shall be in existence
and Zenith simultaneously requests a refunding or
refinancing under the U.S. Participation
Agreement, and subject to satisfaction of the
terms and conditions set forth in this Article XI
and in Section 2.12 of the Indenture, the Lessee
shall have the right to request the Owner
Participant to effect, and the Owner Participant,
the Owner Trustee and the Indenture Trustee agree,
at the sole cost and expense of the Lessee whether
or not such refunding is consummated, to cooperate
to effect, an optional prepayment of all, but not
less than all, of the Notes pursuant to
Section 2.12 of the Indenture as part of a
refunding or refinancing, on the terms set forth
in this Article XI and such Section 2.12 (such
refunding or refinancing, a "Refunding");
provided, that the Lessee shall have the right to
so request a Refunding and a "Refunding" under and
as defined in the U.S. Participation Agreement
only twice in the aggregate; provided further,
that a substantially simultaneous Refunding
hereunder with a "Refunding" under the U.S.
Participation Agreement shall be deemed as one
refunding request for purposes of such limit and;
provided further, that the Owner Participant shall
in any event have the right to consent to any such
Refunding, which consent the Owner Participant may
withhold in the Owner Participant's sole good
faith discretion; except that the Owner
Participant shall not have such consent right if
and to the extent Hunton & ▇▇▇▇▇▇▇▇, or such other
counsel selected by the Owner Participant and
reasonably acceptable to the Lessee, delivers an
opinion to the Owner Participant (which opinion
the Owner Participant agrees to timely request at
the time of such Refunding) that, as a result of a
change in or clarification of Regulations under
Section 467 of the Code (which change or
clarification occurs after the Equipment Closing
Date and before such Refunding), the absence of
such consent right shall not adversely affect the
eligibility of the Lease for initial and continued
compliance with Section 1.467-3(c)(2)(i) of the
Regulations. In connection with a Refunding:
1. there shall be no
material change in the Operative Documents
(except to the extent provided in clause (c)
and for the inclusion, if any, of additional
covenants upon the Lessee which are
acceptable to, or required by, the Lessee and
the Owner Participant), and specifically,
there shall be no change in the Operative
Documents adverse to the Owner Participant or
the Owner Trustee, in either of such Person's
reasonable judgment, including the provisions
of the Indenture providing the Owner Trustee
with rights in the event of an Indenture
Default or an Indenture Event of Default;
1. the Lessee, the Owner
Participant, the Owner Trustee, the Indenture
Trustee, and any other appropriate parties
will enter into an agreement, in form and
substance satisfactory to such Persons,
providing for (i) the issuance and sale by
the Owner Trustee on the date specified in
such agreement (for the purposes of this
Article XI, the "Refunding Date") of debt
securities in an aggregate principal amount
(in the lawful currency of the U.S.) equal to
the aggregate outstanding principal amount of
all of the Notes on the Refunding Date, after
taking into account any scheduled
amortization of principal, if any, occurring
on such Refunding Date (the "Replacement
Notes"), (ii) payments by the Lessee as
Supplemental Rent to the Person or Persons
entitled thereto of all other amounts, in
respect of accrued interest, and Make Whole
Premium Amount, if any, payable on such
Refunding Date and all other amounts due and
owing to the Lenders under the Operative
Documents, and (iii) such other provisions as
are reasonably acceptable to or required by
the Owner Participant, the Owner Trustee, the
Indenture Trustee, the Lessee and the
Guarantor;
1. the Lessee and the Owner
Trustee will amend the Lease to provide that
Rent payable in respect of the period from
and after the Refunding Date shall be
recalculated to preserve the Net Economic
Return which the Owner Participant would have
realized had such refunding or refinancing
not occurred; provided, that the net present
value of Rent shall be minimized to the
extent consistent therewith, and amounts
payable in respect of Casualty Value,
Termination Value, and the EBO Price from and
after the Refunding Date shall be
appropriately recalculated to preserve the
Net Economic Return which the Owner
Participant would have realized had such
refunding or refinancing not occurred (it
being agreed that any recalculations pursuant
to this clause (c) shall be performed in
accordance with the requirements of
Article IX);
1. subject to subparagraph
(a) above, the Owner Trustee will enter into
an agreement not materially different from
the Indenture to provide for the securing
thereunder of the Replacement Notes issued by
the Owner Trustee pursuant to this Article XI
in like manner as the Notes refunded;
2. on the Refunding Date and
as a condition precedent to such Refunding,
the entire principal amount of Notes,
together with accrued interest thereon, the
Make Whole Premium Amount, if any, and all
other sums due to the Lenders under the
Operative Documents shall be prepaid or paid
in accordance with Section 2.12 of the
Indenture;
1. the Lessee shall pay to
the Owner Participant a Refunding fee in an
amount equal to $150,000 (it being understood
that one payment of $150,000 will discharge
the Lessee's obligation under this Section
11.1(f) and Zenith's obligation under Section
11.1(f) of the U.S. Participation Agreement);
1. such refinancing shall
not result in a violation of Applicable Law
and the Lessee, the Guarantor, the Owner
Participant, the Owner Trustee and the
Indenture Trustee shall have received
(i) such opinions of counsel as they may
reasonably request concerning compliance with
Applicable Law relating to the sale of
securities and (ii) such other opinions of
counsel and such certificates and other
documents, each in form and substance
satisfactory to them, as they may reasonably
request in connection with the terms and
conditions of this Article XI;
1. all necessary
authorizations, Governmental Actions,
approvals and consents in connection with
such Refunding shall have been obtained;
1. as a result of such
Refunding, the Equity Amount shall not
increase or decrease; and
1. the Replacement Notes
shall be in the form of non-recourse loans
denominated in dollars and the final stated
maturity of the Replacement Notes for each
Series shall not extend beyond the final
stated maturity of the Notes being refunded,
and the Weighted Average Life to Maturity of
the Replacement Notes shall not exceed the
Weighted Average Life to Maturity of the
Notes being refunded;
1. the refunding shall not
result in the Lease being treated as other
than an operating lease under Statement of
Financial Accounting Standards No. 13.
provided, that (x) no Refunding of the Notes will
be permitted unless, within thirty (30) days after
receipt of a request pursuant to the first
sentence of Section 11.2 from the Lessee to effect
a refinancing pursuant to this Section 11.1 and of
all relevant information regarding the terms and
conditions of such Refunding necessary to render
the determinations referred to below, the Owner
Participant, at the expense of the Lessee, shall
have received an opinion of independent tax
counsel (selected by the Owner Participant and
reasonably acceptable to the Lessee) reasonably
satisfactory to the Owner Participant to the
effect that there shall be no adverse tax
consequences resulting from such Refunding or the
Lessee shall have agreed to indemnify the Owner
Participant in a manner in form and substance
(including with respect to any collateral
arrangement) satisfactory to the Owner Participant
in its sole discretion (exercised in good faith);
and (y) the Lessee shall (i) compensate, on a
reasonable basis, the Owner Participant for its
time and (ii) pay to or reimburse the
Participants, the Owner Trustee and the Indenture
Trustee, on an After-Tax Basis, for all reasonable
costs and expenses (including Fees and Expenses)
paid or incurred by them, in either case, in
connection with such Refunding or such proposed
Refunding.
A. Notice. The Lessee shall give the
other parties hereto written notice at least
thirty (30) days prior to the deposit of cash with
the Indenture Trustee in connection with any
desired refinancing or refunding pursuant to this
Article XI, which notice shall set forth to the
extent practicable the proposed terms and
conditions of such refunding or refinancing,
including the desired date therefor. The Lessee
will promptly provide to the Participants, the
Owner Trustee and the Indenture Trustee final
terms and conditions of any such refunding or
refinancing not less than three Business Days
prior to the execution and delivery of the
documents contemplated hereunder in connection
therewith.
I. ARTICLE
Miscellaneous
This Participation Agreement shall be
governed by, and construed in accordance with, all
of the Documentary Conventions; provided, however,
that no amendment, supplement or modification of
this Participation Agreement which would have the
effect of (a) increasing the amount of, or
bringing forward in time the due date for payment
of, any obligation of the Lessee or (b) amending
this Article XII shall be effective as against the
Guarantor unless made by an instrument in writing
signed by the Guarantor.
I. ARTICLE
No Recourse to Owner Participant; No Implied
Obligations
1. No Recourse. It is expressly
agreed and understood that no recourse may be had
to any Owner Participant, and no Owner Participant
shall have any obligation or liability, with
respect to the obligations and liabilities of the
Owner Trustee or the Trust Estate (including,
without limitation, the obligations and
liabilities of the Owner Trustee under the
Indenture with respect to the Notes); provided,
however, that the Owner Participant shall be
personally liable for amounts due under Section
2.13 of the Indenture upon an election by the
Owner Trustee to purchase the Notes as provided in
such Section.
1. No Implied Obligations. No
Participant shall have any obligations to any
other party hereto except for the express
obligations of such Participant set forth in the
Operative Documents.
I. ARTICLE
Tax Treatment
It is hereby agreed among the parties
hereto that for federal and state income tax
purposes the Owner Participant will treat itself
as the owner of each Item of Equipment as of the
Equipment Closing Date and the Lessee will treat
itself as the lessee of each Item of Equipment as
of such date, and that neither the Owner
Participant nor the Lessee will take a position
that is inconsistent with the foregoing.
ARTICLE XV
Quiet Enjoyment
So long as no Event of Default shall
have occurred and be continuing, as among the
Lessee and the Lessor Parties, the Lessee shall
have the exclusive rights to possession and
control of all Items of Equipment and none of the
Lessor Parties nor any Person acting or claiming
through any of them will take any action that
shall interfere with the peaceful and quiet
enjoyment or the possession and use or non-use of
any Item of Equipment by the Lessee, and the
Lessee shall have the right to possess and use or
not use such Item of Equipment in its sole
discretion, subject always to the terms and
conditions of the Lease. The foregoing is not
intended to limit the inspection rights of the
Items of Equipment granted by the Lessee pursuant
to Sections 8.3 and 12.1 of the Lease.
ARTICLE XVI
Lessee's Right to Assume Liability under Notes
Each of the Lenders acknowledges and
agrees that pursuant to Article X of the Lease,
the Lessee will have the right to assume liability
under the Notes as provided in such Article X.
Each Lender and the Lessee agree to cooperate in
amending, modifying, restating or substituting for
the Notes in the event of such an assumption, if
required or deemed advisable by the Lessee or the
Lenders, to reflect the Lessee as the obligor
under such Notes.
ARTICLE XVII
Confidentiality
The Lessor Parties agree to take normal
and reasonable precautions in accordance with
their normal procedures and exercise due care to
maintain the confidentiality of all information
relating to the Lessee, the Guarantor and their
respective Affiliates, which has been identified
as confidential by the Lessee or the Guarantor,
and neither the Lessor Parties nor any of their
Affiliates shall use any such information for any
purpose or in any manner other than pursuant to
the terms contemplated by the Operative Documents;
except to the extent such information (a) was or
becomes generally available to the public other
than as a result of a disclosure by the Lessor
Parties, or (b) was or becomes available on a non-
confidential basis from a source other than the
Lessee or the Guarantor; provided, that such
source is not bound by a confidentiality agreement
with either the Lessee or the Guarantor known to
the Lessor Parties; and provided, further, that
any Lessor Party may disclose such information (i)
at the request or pursuant to any requirement of
any Governmental Authority to which such Lessor
Party is subject or in connection with an
examination of such Lessor Party by any such
Governmental Authority including, without
limitation, the National Association of Insurance
Commissioners and any other industry regulators or
rating agencies, (ii) pursuant to subpoena or
other court process, (iii) when required to do so
in accordance with the provisions of any
Applicable Law, (iv) to each Lessor Party's
independent auditors and other professional
advisors and (v) to any Person and in any
proceeding necessary in any Lessor Party's
judgment to protect such Lessor Party's interests
in connection with any claim or dispute involving
the Lessor Party. Notwithstanding the foregoing,
the Lessee authorizes the Lessor Parties to
disclose to any Participant or assignee or
purchaser of Equipment (each, a "Transferee"), to
any prospective Transferee and to any Affiliate,
such financial and other information in the Lessor
Parties' possession concerning the Lessee, the
Guarantor or their respective Affiliates which has
been delivered to the Lessor Parties pursuant to
this Lease or the Participation Agreement;
provided, that unless otherwise agreed by the
Lessee or the Guarantor, as applicable, the
Transferee agrees in writing to such Lessor
Parties to keep such information confidential to
the same extent required of the Lessor Parties
hereunder. The Lessee agrees to keep the
Appraisal confidential on the terms set forth in,
and subject to the exceptions set forth in, the
first sentence of this Section, in each case
mutatis mutandis.
ARTICLE XVIII
Liability of Owner Trustee
The parties hereto each acknowledge that
the Owner Trustee (except as otherwise expressly
provided herein or therein) is entering into this
Agreement and the other Operative Documents to
which it is a party (other than the Trust
Agreement), solely in its capacity as trustee, as
the case may be, under the Trust Agreement and not
in its individual capacity and that Fleet shall
not be liable or accountable under any
circumstances whatsoever in its individual
capacity for or on account of any statements,
representations, warranties, covenants or
obligations stated to be those of the Owner
Trustee except for its own gross negligence or
willful misconduct and as otherwise expressly
provided herein or in the other Operative
Documents.
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IN WITNESS WHEREOF, intending to be legally
bound, the parties hereto have each caused this
Participation Agreement to be duly executed as of
the date first above written.
ZENITH ELECTRONICS
CORPORATION OF TEXAS
By:
_____________________________
Name:
Title:
GENERAL FOODS CREDIT
CORPORATION
By:
_____________________________
Name:
Title:
FLEET NATIONAL BANK,
not in its
individual capacity
(except as expressly
set forth herein)
but solely as Owner
Trustee
By:
_____________________________
Name:
Title:
FIRST SECURITY BANK,
NATIONAL
ASSOCIATION, not in
its individual
capacity (except as
expressly set forth
herein) but solely
as Indenture Trustee
By:
_____________________________
Name:
Title: