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PARTICIPATION AGREEMENT
dated as of August 15, 1997
among
VITESSE SEMICONDUCTOR CORPORATION,
as Lessee,
LEASE PLAN NORTH AMERICA, INC.,
as Lessor,
ABN AMRO BANK N.V., SAN FRANCISCO INTERNATIONAL BRANCH,
as a Participant,
and
ABN AMRO BANK N.V., SAN FRANCISCO INTERNATIONAL BRANCH,
as Agent
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Vitesse Fab 2 Equipment Lease Facility
TABLE OF CONTENTS
Page
SECTION 1.
DEFINITIONS; INTERPRETATION ..........................................................1
SECTION 2.
CLOSING DATE .........................................................................2
SECTION 3.
ACQUISITION OF THE PROPERTY; FUNDING OF ADVANCES .....................................2
SECTION 3.1. Lessor Commitment ....................................................2
SECTION 3.2. Participants' Commitments ............................................2
SECTION 3.3. [Intentionally Omitted] ..............................................2
SECTION 3.4. Procedures for Advances ..............................................2
SECTION 3.5. Allocation of Commitments ............................................3
SECTION 3.6. Termination, Reduction or Extension of Participants'
Commitments ..........................................................3
SECTION 3.7. Interest Rates and Payment Dates .....................................4
SECTION 3.8. Computation of Interest ..............................................6
SECTION 3.9. Pro Rata Treatment and Payments ......................................6
SECTION 3.10. The Account ..........................................................7
SECTION 3.11. Basic Rent ...........................................................7
SECTION 3.12. Purchase Payments by Lessee ..........................................7
SECTION 3.13. Residual Value Guarantee Amount Payment or Renewal Term
Payments by Lessee ...................................................9
SECTION 3.14. Sales Proceeds of Remarketing of Property ............................9
SECTION 3.15. Supplemental Rent ...................................................10
SECTION 3.16. Excepted Payments ...................................................10
SECTION 3.17. Distribution of Payments After Event of Default .....................10
SECTION 3.18. Other Payments ......................................................11
SECTION 3.19. Casualty and Condemnation Amounts ...................................11
SECTION 3.20. Order of Application ................................................11
SECTION 4.
FEES ................................................................................12
SECTION 4.1. Commitment Fees .....................................................12
SECTION 4.2. Lease Arrangement Fee ...............................................12
SECTION 4.3. Defeasance Fee ......................................................12
SECTION 4.4. Overdue Fees ........................................................12
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SECTION 5.
CERTAIN INTENTIONS OF THE PARTIES ..................................................12
SECTION 5.1. Nature of Transaction ..............................................12
SECTION 5.2. Amounts Due Under Lease ............................................13
SECTION 6.
CONDITIONS PRECEDENT TO
ACQUISITION OF EQUIPMENT AND ADVANCES ..............................................14
SECTION 6.1. Conditions Precedent Documentation .................................14
(a) Funding Request ........................................................14
(b) Operative Documents ....................................................14
(c) [Intentionally Omitted] ................................................15
(d) Appraisal ..............................................................15
(e) [Intentionally Omitted] ................................................15
(f) Equipment Schedule and ▇▇▇▇ of Sale ....................................15
(g) [Intentionally Omitted] ................................................15
(h) Evidence of Recording and Filing .......................................15
(i) Evidence of Insurance ..................................................15
(j) Evidence of Use of Proceeds ............................................15
(k) Taxes ..................................................................15
(l) [Intentionally Omitted] ................................................15
(m) Approvals ..............................................................15
(n) Litigation .............................................................16
(o) Requirements of Law ....................................................16
(p) Responsible Officer's Certificate of the Lessee ........................16
(q) The Lessee's Resolutions and Incumbency Certificate, etc. ..............16
(r) Responsible Officer's Certificate of the Guarantor .....................16
(s) The Guarantor's Resolutions and Incumbency Certificate, etc. ...........17
(t) Closing Date ...........................................................17
(u) No Material Adverse Effect .............................................17
(v) Responsible Officer's Certificate of the Lessor ........................17
(w) The Lessor's Resolutions and Incumbency Certificate, etc. ..............17
SECTION 6.2. Further Conditions Precedent .......................................17
(a) Representations and Warranties .........................................18
(b) Performance of Covenants ...............................................18
(c) Title ..................................................................18
(d) No Default .............................................................18
SECTION 7.
[Intentionally Omitted] ............................................................18
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SECTION 8.
REPRESENTATIONS ....................................................................18
SECTION 8.1. Representations of the Lessor ......................................18
(a) Due Organization, etc. .................................................19
(b) Authorization; No Conflict .............................................19
(c) Enforceability, etc. ...................................................19
(d) Litigation .............................................................19
(e) Assignment .............................................................19
(f) Defaults ...............................................................19
(g) Use of Proceeds ........................................................19
(h) Securities Act .........................................................20
(i) Chief Place of Business ................................................20
(j) Federal Reserve Regulations ............................................20
(k) Investment Company Act .................................................20
(l) No Plan Assets .........................................................20
SECTION 8.2. Representations of the Participants ................................20
(a) No Plan Assets .........................................................20
(b) Due Organization, etc. .................................................20
(c) Authorization; No Conflict .............................................21
(d) Enforceability, etc. ...................................................21
(e) Litigation .............................................................21
SECTION 8.3. Representations of the Lessee ......................................21
(a) Corporate Status .......................................................21
(b) Corporate Power and Authority ..........................................21
(c) No Violation ...........................................................22
(d) Litigation .............................................................22
(e) Governmental Approvals .................................................22
(f) Investment Company Act .................................................22
(g) Public Utility Holding Company Act .....................................22
(h) Information ............................................................22
(i) Taxes ..................................................................23
(j) Compliance with ERISA ..................................................23
(k) Environmental and Other Regulations ....................................23
(l) Offer of Securities, etc. ..............................................23
(m) Financial Statements ...................................................23
SECTION 8.4. Representations of the Lessee With Respect to the Property on
the Closing Date ...................................................24
(a) Representations ........................................................24
(b) Property ...............................................................24
(c) Title ..................................................................25
(d) Insurance ..............................................................25
(e) Lease ..................................................................25
(f) Protection of Interests ................................................25
(g) [Intentionally Omitted] ................................................25
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(h) Conditions Precedent........................................25
SECTION 8.5. Representations of the Lessee With Respect to
Each Advance...........................................25
(a) Representations.............................................25
(b) Equipment...................................................26
(c) No Liens....................................................26
(d) Advance.....................................................26
(e) Lease.......................................................26
(f) Protection of Interests.....................................26
SECTION 9.
PAYMENT OF CERTAIN EXPENSES............................................26
SECTION 9.1 Transaction Expenses...................................26
SECTION 9.2. Brokers' Fees and Stamp Taxes..........................27
SECTION 9.3. Obligations............................................27
SECTION 10.
OTHER COVENANTS AND AGREEMENTS.........................................27
SECTION 10.1. Covenants of the Lessee................................27
(a) Information.................................................27
(b) Compliance with Laws........................................29
(c) Further Assurances..........................................29
(d) Existence; Franchises; Businesses...........................29
(e) Books and Records...........................................29
(f) Minimum Consolidated Quick Ratio............................29
(g) Minimum Consolidated Tangible Net Worth.....................29
(h) Maximum Consolidated Total Liabilities to Consolidated
Tangible Net Worth..........................................30
(i) Minimum Consolidated Fixed Charge Ratio.....................30
(j) Profitability...............................................30
(k) Liens.......................................................30
(l) Fundamental Changes.........................................30
(m) Transactions with Affiliates................................31
(n) Restricted Payments.........................................31
(o) No Impairment of Deposits...................................31
(p) Investments.................................................31
SECTION 10.2. Cooperation with the Lessee............................32
SECTION 10.3. Covenants of the Lessor................................32
(a) Discharge of Liens..........................................32
(b) Change of Chief Place of Business...........................32
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SECTION 11.
PARTICIPATIONS.................................................................32
SECTION 11.1. Amendments; Actions on Default................................32
SECTION 11.2. General.......................................................34
SECTION 11.3. Conflicts.....................................................34
SECTION 11.4. Refusal to Give Consents or Fund..............................35
SECTION 11.5. Required Repayments...........................................35
SECTION 11.6 Indemnification...............................................36
SECTION 11.7. Required Supplemental Payments................................36
SECTION 11.8. Application of Payments Received From Defaulting Participant
As a Cure For Payment Defaults................................37
SECTION 11.9. Order of Application..........................................37
SECTION 11.10. Investments Pending Dispute Resolution; Overnight
Investments...................................................37
SECTION 11.11. Agent to Exercise Lessor's Rights.............................38
SECTION 11.12. Exculpatory Provisions Regarding the Lessor...................38
SECTION 12.
TRANSFERS OF PARTICIPANTS' INTERESTS...........................................38
SECTION 12.1. Restrictions on and Effect of Transfer by Participants.........38
(a) Required Notice and Effective Date................................38
(b) Assumption of Obligations.........................................39
(c) Employee Benefit Plans............................................39
(d) Representations...................................................39
(e) Amounts; Agent's Fee..............................................40
(f) Applicable Law....................................................40
(g) Effect............................................................40
SECTION 12.2. Covenants and Agreements of Participants.......................40
(a) Participations....................................................40
(b) Transferee Indemnities............................................41
SECTION 12.3. Future Participants............................................41
SECTION 13.
INDEMNIFICATION................................................................41
SECTION 13.1. General Indemnification........................................41
SECTION 13.2. End of Term Indemnity..........................................43
SECTION 13.3. Environmental Indemnity........................................44
SECTION 13.4. Proceedings in Respect of Claims...............................45
SECTION 13.5. General Impositions Indemnity..................................46
(a) Indemnification...................................................46
(b) Payments..........................................................46
(c) Reports and Returns...............................................47
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(d) Income Inclusions ..............................................47
(e) Witholding Taxes ...............................................48
(f) Contests of Impositions ........................................48
(g) Documentations of Withholding Status ...........................50
(h) Limitation of Tax Indemnification ..............................50
SECTION 13.6. Funding Losses ..............................................51
SECTION 13.7. Regulation D Compensation ...................................51
SECTION 13.8. Basis for Determining Interest Rate Inadequate or Unfair.....51
SECTION 13.9. Illegality...................................................52
SECTION 13.10. Increased Cost and Reduced Return............................53
SECTION 13.11. Substitution of Participant..................................54
SECTION 13.12. Indemnity Payment in Addition to Residual Value Guarantee
Amount................................................................54
SECTION 14.
THE AGENT ....................................................................54
SECTION 14.1. Appointment..................................................54
SECTION 14.2. Delegation of Duties.........................................55
SECTION 14.3. Exculpatory Provisions.......................................55
SECTION 14.4. Reliance by Agent............................................55
SECTION 14.5. Notice of Default............................................55
SECTION 14.6. NonReliance on Agent and Other Participants..................56
SECTION 14.7. Indemnification..............................................56
SECTION 14.8. Agent in its Individual Capacity.............................57
SECTION 14.9. Successor Agent..............................................57
SECTION 15.
MISCELLANEOUS ................................................................57
SECTION 15.1. Survival of Agreements.......................................57
SECTION 15.2. No Broker, etc ..............................................58
SECTION 15.3. Notices......................................................58
SECTION 15.4. Counterparts.................................................58
SECTION 15.5. Amendments ..................................................58
SECTION 15.6. Headings, etc ...............................................59
SECTION 15.7. Parties in Interest..........................................59
SECTION 15.8. GOVERNING LAW ...............................................60
SECTION 15.9. Severability ................................................60
SECTION 15.10. Liability limited............................................60
SECTION 15.11. Further Assurances...........................................60
SECTION 15.12. Submission to Jurisdiction...................................61
SECTION 15.13. Confidentiality..............................................61
SECTION 15.14. WAIVER OF JURY TRIAL.........................................61
SECTION 15.15. Usury Savings Clause.........................................61
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SCHEDULES
SCHEDULE I Participants' Commitments
SCHEDULE II Notice Information and Funding Offices
SCHEDULE III Environmental Matters
APPENDICES
APPENDIX 1 Definitions and Interpretation
EXHIBITS
EXHIBIT A Intentionally Omitted
EXHIBIT B Form of Funding Request
EXHIBIT C Intentionally Omitted
EXHIBIT D Intentionally Omitted
EXHIBIT E Intentionally Omitted
EXHIBIT F Intentionally Omitted
EXHIBIT G Intentionally Omitted
EXHIBIT H Intentionally Omitted
EXHIBIT I Form of Lessee's Completion Certificate
EXHIBIT J Form of Assignment and Acceptance
EXHIBIT K Form of Participant's Letter
EXHIBIT L Assignment of Lease and Consent to Assignment
EXHIBIT M Construction Agency Agreement
EXHIBIT N Construction Agency Agreement Assignment
EXHIBIT O Guarantee
EXHIBIT P Defeasance Deposit Agreement
EXHIBIT Q Intentionally Omitted
EXHIBIT R Security Agreement
EXHIBIT S Form of Financial Covenant Compliance Certificate
-vii-
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT, dated as of August 15, 1997 (this
"Participation Agreement"), is entered into by and among VITESSE SEMICONDUCTOR
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CORPORATION, a Delaware corporation, as Lessee (together with its permitted
successors and assigns, the "Lessee"); LEASE PLAN NORTH AMERICA, INC., an
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Illinois corporation, as Lessor (together with its permitted successors and
assigns, the "Lessor"); ABN AMRO BANK N.V., SAN FRANCISCO INTERNATIONAL BRANCH,
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as a Participant (together with its permitted successors and assigns each a
"Participant" and collectively the "Participants"); and ABN AMRO BANK N.V., SAN
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FRANCISCO INTERNATIONAL BRANCH, as Agent (in such capacity, together with its
successors in such capacity, the "Agent") for the Participants.
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PRELIMINARY STATEMENT
In accordance with the terms of this Participation Agreement, the Lease and
the other Operative Documents,
A. the Lessor contemplates purchasing certain items of Equipment to
be used in connection with the Lessee's semiconductor fabrication facility
located in Colorado Springs, Colorado and leasing, as Lessor, such
Equipment to the Lessee under the Lease; and
C. the Lessor wishes to obtain, and the Participants are willing to
provide, financing of the funding of the costs of acquisition of such
Equipment through the purchase of Participation Interest in the Lease and
the Rent.
In consideration of the mutual agreements contained in this Participation
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1.
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and not
defined herein shall have the meanings assigned thereto in Appendix 1 hereto for
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all purposes hereof; and the rules of interpretation set forth in Appendix 1
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hereto shall apply to this Participation Agreement.
SECTION 2.
CLOSING DATE
The closing date (the "Closing Date") shall occur on the date of the
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initial Advance, which shall be the earliest date on which all the conditions
precedent thereto set forth in Sections 6.1 and 6.2 hereof shall have been
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satisfied or waived by the applicable parties as set forth therein.
SECTION 3.
ACQUISITION OF THE PROPERTY; FUNDING OF ADVANCES
SECTION 3.1. Lessor Commitment. Subject to the conditions and terms
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hereof, the Lessor shall take the following actions at the written request of
the Lessee from time to time during the Commitment Period:
(a) make Advances (out of funds provided by the Participants) for
the purpose of financing the acquisition of the Equipment;
(b) acquire the Equipment (using funds provided by the
Participants); and
(c) lease the Property as lessor to the Lessee under the Lease.
SECTION 3.2 Participants' Commitments. Subject to the terms and
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conditions hereof, each Participant severally shall purchase a Participation
Interest in the Advances being made by the Lessor at the request of the Lessee
from time to time during the Commitment Period by making available to the Lessor
on each Funding Date an amount in immediately available funds equal to such
Participants' Commitment Percentage of the amount of the Advance being funded on
such Funding Date. Notwithstanding any other provision hereof, no Participant
shall be obligated to purchase its Participation Interest in any Advance if (i)
the amount of such purchase would exceed its Available Commitment, or (ii) if,
after giving effect to the proposed Advance, the outstanding aggregate amount of
such Participant's Participation Interest in the Advances would exceed such
Participant's Commitment.
SECTION 3.3 [Intentionally Omitted].
SECTION 3.4 Procedures for Advances. (a) With respect to each funding of
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an Advance, the Lessee shall give the Lessor and the Agent prior written notice
not later than 10:00 a.m., San Francisco time, three Business Days prior to the
proposed Funding Date, pursuant, in each case, to a Funding Request
substantially in the for of Exhibit B (a "Funding Request"), specifying (i) the
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proposed funding Date, (ii) the amount and purpose of the Advance requested,
(iii) the initial Interest Period for such Advance, (iv) the payee of such
Advance, and (v) the Property Costs of the applicable Property. The Agent shall
promptly forward a copy of such Funding REquest to each Participant. The
Lessee shall not request more than one Funding Date during any calendar month.
-2-
Each Advance (other than an Interest Payment Advance and the initial Advance)
shall be in a minimum amount of $1,000,000 or in amounts of $100,000 in excess
thereof. Subject to the satisfaction or waiver of the conditions precedent to
such Advance set forth in Section 6, each Participant shall purchase its
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Participation Interest in such Advance by making available to the Lessor its
proportionate share of such Advance in immediately available federal funds by
wire transfer to the Agent for deposit to the Lessee's demand deposit account
with the Agent not later than 12:00 noon, San Francisco time, on the applicable
Funding Date. Upon (i) the Lessee's receipt of the funds provided by the
Participants with respect to an Advance, and (ii) satisfaction or waiver of the
conditions precedent to such Advance set forth in Section 6, the Lessee shall
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pay or retain as payment or reimbursement of, Property Costs, in each case from
the funds provided by the Participants for such Advance.
(b) On each Funding Date requested pursuant to Section 3.4(a), the
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Lessee shall deposit immediately available funds with the Defeasance Deposit
Depositary Bank in the amount of the Tranche A Participation Interest in the
Advance so requested pursuant to the Defeasance Deposit Agreement. Each such
deposit (collectively, the "Defeasance Deposit") shall be the property of the
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Defeasance Deposit Depositary Bank and shall be held and administered in
accordance with the Defeasance Deposit Agreement.
SECTION 3.5. ALLOCATION OF COMMITMENTS. Schedule I hereto contains an
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allocation for each Participant of (i) the amount of its Commitment
representing its Tranche A Participation Interest ("Tranche A Participation
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Interest Commitment"), (ii) the amount of its commitment representing its
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Tranche B Participation Interest ("Tranche B Participation Interest
---------------------------------
Commitment"), and (iii) the percentage referred to in the definition of the term
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"Participation Interest". The Lessee, the Lessor and the Participants have
approved all such allocations and percentages. Schedule I shall be amended (i)
as required to reflect changes in the allocations set forth thereon due to the
addition of additional Participants pursuant to Section 12.1 and (ii) to reflect
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the payment of any Renewal Term Payment pursuant to Section 21.1 of the Lease
and the distribution of such payment to the Participants pursuant to Section
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3.13.
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SECTION 3.6 Termination, Reduction or Extension of Participants'
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Commitments. (a) The Lessor shall have the right, upon not less than five
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Business Days' written notice to the Agent, to terminate the Participants'
Commitments or, from time to time, to reduce the amount of the Participants'
Commitments, provided that (i) after giving effect to such reduction the
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aggregate outstanding principal amount of the Tranche A Participation Interests
shall not exceed the aggregate Tranche A Participation Interest Commitments,
(ii) after giving effect to such reduction, the aggregate outstanding principal
amount of the Tranche B Participation Interests shall not exceed the aggregate
Tranche B Participation Interest Commitments, and (iii) any such reduction shall
be made pro rata among the Participants' Commitments within each Tranche. Prior
to the occurrence and continuance of an Event of Default the Lessor shall
exercise such right only as directed by the Lessee and after the occurrence and
during the continuance of an Event of Default the Lessor shall exercise such
right only as directed by the Required Participants. In the event that, after
the occurrence and during the continuance of any Event of Default, the Lessor
and the Participants exercise such right, the Lessee may exercise its Purchase
Option under Section 20.1 of the Lease upon not less than ten (10) days' written
notice to the Lessor.
-3-
(b) The Lessee may, by written request to the Lessor and Agent (which
the Agent shall promptly forward to each Participant) given not later than 90
days prior to the Maturity Date then in effect, request (an "Extension Request")
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that the Maturity Date be extended for up to two one (1) - year periods
commencing on the date following the Maturity Date then in effect. The extension
of the Maturity Date contemplated by any Extension Request shall become
effective as of the date following the Maturity Date then in effect; (the
"Extension Effective Date") provided that:
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(A) on both the date of the Extension Request and the Extension
Effective Date, (x) each of the representations and warranties made by the
Lessee and the Lessor in or pursuant to the Operative Documents shall be
true and correct in all material respects as if made on and as of each such
date, except for representations and warranties made as of a specific date,
which shall be true and correct in all material respects as of such date,
(y) no Event of Default shall have occurred and be continuing, and (z) on
each of such dates the Agent shall have received a certificate of the
Lessee and the Lessor, each as to itself, as to the matters set forth in
clause (x) above and from the Lessee as to the matters set forth in clause
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(y) above,
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(B) the Agent and the Required Participants shall have received
satisfactory evidence that the Expiration Date shall, after giving effect
to any extension thereof which has become effective on or prior to such
Extension Effective Date, occur on the Maturity Date as so extended,
(C) on or prior to November 1 of the year in which an
Extension Request is made, the Lessor shall have received a Renewal Term
Appraisal, and
(D) on the Maturity Date then in effect the Lessee
shall pay to the Lessor the Renewal Term Payment.
(c) The Lessee shall notify the Lessor and the Participants whether
it wishes to extend the Construction Period to the date that is six months after
the initial Outside Completion Date at least thirty (30) days prior to the
initial Outside Completion Date. The Construction Period and the Outside
Completion Date shall not be extended unless each Participant, in its sole
discretion, consents thereto within fifteen (15) days of the initial Outside
Completion Date. Each Participant may make such decision based upon such credit
information regarding the Lessee, interest rates and market conditions and such
other factors as it may consider relevant. If the Construction Period is so
extended, the Lessee shall pay Commitment Fees to the Agent for the account of
the Tranche B Participants during such extension of the Construction Period.
SECTION 3.7. Interest Rates and Payment Dates. (a) Each Advance
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representing Tranche A Participation Interests shall bear interest at a rate per
annum determined as follows:
(i) during the Term of the Lease and ending on the initial
Expiration Date, each Advance representing Tranche A Participation
Interests shall bear interest at a rate per annum equal to [*] for the
period commencing on the initial Funding Date and ending on the initial
Expiration Date; and
[* CONFIDENTIAL INFORMATION]
4
(ii) during any Renewal Term of the Lease, if any, each Advance
representing Tranche A Participation Interests shall bear interest at a
rate per annum equal to [*] for the period commencing on the first day of
such Renewal Term and ending on the last day of such Renewal Term.
Each Advance in respect of the Tranche B Participation Interests shall bear
interest for each day during each Interest Period with respect thereto at a rate
per annum for such Interest Period equal to the Three Month Eurodollar Rate
determined for such day plus the Applicable Margin.
(b) If all or a portion of(i) the amount of any Advance, (ii) any interest
payable thereon or (iii) any other amount payable hereunder shall not be paid
when due (whether at the stated maturity, by acceleration or otherwise), such
overdue amount shall bear interest at a rate per annum which is equal to the
Overdue Rate.
(c) Interest shall be payable in cash (except as provided in paragraphs (d)
and (e) below) in arrears on each Scheduled Payment Date, provided that (i)
interest accruing pursuant to paragraph (b) of this Section 3.7 shall be payable
from time to time on demand and (ii) each prepayment of Advances shall be
accompanied by accrued interest to the date of such prepayment on the amount of
Advances so prepaid.
(d) On each date which is three Business Days prior to any Scheduled
Payment Date during the Interest Capitalization Period, the Lessee shall be
deemed to have requested an Advance comprised of an Interest Payment Advance
pursuant to Section 3.4 and the Lessor shall be deemed to have requested a
purchase pursuant to Section 3.2 of Participation Interests in such Advance in
an amount equal to the aggregate amount of the Basic Rent due and payable on
such date with respect to accrued interest on outstanding Advances. The Funding
Date with respect to any such Interest Payment Advance and purchase of
Participation Interests therein shall be the relevant Scheduled Payment Date
(provided that such Advance and the purchase of such Participation Interests
shall be subject to satisfaction of the applicable conditions precedent set
forth in Section 6) and the proceeds of such payment shall be applied to pay
such accrued interest. On each such Funding Date, the Property Cost shall be
increased by an amount equal to the Basic Rent paid on such date with respect to
such Property with the proceeds of such payment, and the Property Cost of each
item of Equipment shall be increased by its pro rata portion of such Advance.
(e) After the Interest Capitalization Period, interest accruing on the
Tranche A Participation Interests shall be payable by offsetting interest
accruing on the Defeasance Deposit pursuant to the Defeasance Deposit Agreement
as of the applicable Payment Date.
SECTION 3.8. Computation of Interest. (a) Whenever it is calculated on the
basis of the Alternate Base Rate, interest shall be calculated on the basis of a
365- (or 366-, as the case may be) day year for the actual days elapsed; and,
other, vise, interest shall be calculated on the basis of a 360-day year for the
actual days elapsed. The Agent shall as soon as practicable after the
commencement of each Interest Period notify the Lessor, the Lessee and the
Participants of each determination of a Three Month Eurodollar Rate. Any change
in the interest rate on an Advance
[* CONFIDENTIAL INFORMATION]
5
resulting from a change in the Alternate Base Rate or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the day on
which such change becomes effective. The Agent shall as soon as practicable
notify the Lessor, the Lessee and the Participants of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Lessor, the
Lessee and the Participants in the absence of manifest error. The Agent shall,
at the request of such parties, deliver to such parties a statement showing the
quotations used by the Agent in determining any interest rate pursuant to
Section 3.8(a).
SECTION 3.9. Pro Rata Treatment and Payments. (a) Each participation in the
Advances by the Participants hereunder and each reduction of the Commitments of
the Participants shall be made pro rata among the Tranche A Participants and
Tranche B Participants according to the respective Commitment Percentages of
each such Participant. Except as otherwise provided in Sections 3.10 - 3.20,
.each payment (including each prepayment) by the Lessor on account of
Participation Interests representing the amount of and interest on the Advances
shall be made pro rata among the Tranche A Participants and Tranche B
Participants according to the respective Participation Interests of each such
Participant. All payments (including prepayments) to be made by the Lessor
'hereunder to the Participants with respect to their Participation Interests,
whether on account of principal, interest or otherwise, shall be payable to the
extent received by the Lessor from or on behalf of the Lessee and shall be made
without setoff or counterclaim and shall be made prior to 12:00 noon, San
Francisco time, on the due date thereof to the Agent, for the account of the
Participants, at the Agent's office referred to in Section 15.3 of this
Agreement, in Dollars and in immediately available funds. The Agent shall
distribute such payments to the Participants promptly upon receipt in like funds
as received. If any payment hereunder (other than payments of Participation
Interests in the Advances) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day. If any payment of Participation Interests in an Advance becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day unless the result of such extension
would be to extend such payment into another calendar month, in which event such
payment shall be made on the immediately preceding Business Day. In the case of
any extension or shortening of the due date of any payment pursuant to the
preceding two sentences, interest thereon shall be payable at the then
applicable rate during Such extension or until such shortened due date, as the
case may be.
(b) Unless the Agent shall have been notified in writing by any Participant
prior to funding its Participation Interest in an Advance that such Participant
will not make its share of such Advance available to the Agent, the Agent may
assume that such Participant is making such amount available to the Agent, and
the Agent may, in reliance upon such assumption, make available to the Lessor a
corresponding amount. If such amount is not made available to the Agent by the
required time on the Funding Date therefor, such Participant shall pay to the
Agent, on demand, such amount with interest thereon at a rate equal to the daily
average Federal Funds Effective Rate for the period until such Participant makes
such amount immediately available to the Agent. A certificate of the Agent
submitted to any Participant with respect to any amounts owing under this
Section 3.9(b) shall
6
be conclusive in the absence of manifest error. If such Participant's share of
such Advance is not made available to the Agent by such Participant within three
Business Days of such Funding Date, the Agent shall also be entitled to recover
such amount with interest thereon at the rate borne by such Advance, on demand,
from the Lessee, to the extent the Agent has made a corresponding amount of the
Advance to the Lessee.
SECTION 3.10. The Account. The Agent may if it so desires establish an account
-----------
(the "Account") into which the Agent shall deposit all payments, receipts and
-------
other consideration of any kind whatsoever paid under the Lease and received by
the Agent pursuant to this Agreement, the Lease and any other Operative
Document. The Agent shall make distributions of such payments, receipts and
other consideration (and, if an Account is used, from the Account) pursuant to
the requirements of Sections 3.11 -3.20 hereof. Notwithstanding anything
-------------------
contained in this Section 3 or the other Operative Documents to the contrary, to
the extent Tranche A Basic Rent, the Residual Value Guarantee Amount or any
portion of Asset Termination Value payable to the Lessor on account of the
Tranche A Participation Interests in the Advances is to be paid from the
interest accruing on, or the principal amount of, the Defeasance Deposit
pursuant to any provision of the Lease or the Defeasance Deposit Agreement, (i)
such payments shall not require a cash transfer from the Lessee but shall be
payable by means of an offset against interest accruing on, or the applicable
amount of principal of, the Defeasance Deposit and (ii) the Lessee shall not be
required to make any such transfer of such amounts to the Tranche A
Participants.
SECTION 3.11. Basic Rent. Each payment (or portion thereof) of Basic Rent
----------
comprising interest on the Advances (and any payment of interest on overdue
installments of such component of Basic Rent) received by the Agent shall be
distributed by the Agent as promptly as possible (it being understood that any
-------------------
payments of such component of Basic Rent received by the Agent on a timely basis
and in accordance with the provisions of the Lease shall be distributed on the
date received in the funds so received) to the Participants pro rata in
--------
accordance with, and for application to, the portion of their Participation
Interests in such portion of Basic Rent, as well as in any overdue interest due
to such Participant (to the extent permitted by applicable law); provided, that
(i) interest accruing on the Defeasance Deposit shall only be applied to pay
Basic Rent owing to the Tranche A Participants; and (ii) Basic Rent paid in cash
by the Lessee in respect of interest accruing on the Tranche B Participation
Interests shall only be applied to pay Basic Rent owing to the Tranche B
Participant.s.
SECTION 3.12. Purchase Payments by Lessee. Any payment received by the Agent as
---------------------------
a result of:
(a) the purchase of the Lessor's interest in the Property in connection with the
Lessee's exercise of its Purchase Option or Partial Purchase Option under
Section 20.1 of the Lease, or
(b) the Lessee's compliance with its obligation to purchase the Lessor's
interest in the Property in accordance with Section 20.2 of the Lease, or
7
(c) the payment of the Asset Termination Value in accordance with Sections
16.2(b), I6.3 or 16.4 of the Lease, or
(d) the Lessee falling to fulfill one or more of the conditions to exercise of
the Remarketing Option pursuant to Section 22.1 of the Lease and the Agent's
receipt pursuant to the next-to-last paragraph of Section 22.1 of the Lease of
the Asset Termination Value in accordance with Section 20.2 of the Lease,
shall be distributed by the Agent as promptly as possible (it being understood
that any such payment received by the Agent on a timely basis and in accordance
with the provisions of the Lease shall be distributed on the date on which such
funds are so received) to pay in full the Participant Balance of each
Participant and in the case that the amount so distributed shall be insufficient
to pay in full as aforesaid, then pro rata among the Participants without
priority of one over the other, in the proportion that the Participant Balance
of each bears to the aggregate of all of the Participant Balances; provided,
that any payment received by means of offset against the Defeasance Deposit
shall be applied in the following order of priority:
first, to the Tranche A Participants for application to pay in full the Tranche
-----
A Participation Interest Balance of each Tranche A Participant; and
second, to the Tranche B Participants for application to pay in full the Tranche
------
B Participation Interest Balance of each Tranche B Participant, and in the case
where the amounts so distributed shall be insufficient to pay in full as
aforesaid, then pro rata among the Tranche B Participants without priority of
--------
one Tranche B Participant over the other in the proportion that each such
Tranche B Participant's Tranche B Participation Interest Balance bears to the
aggregate Tranche B Participation Interest Balances of all Tranche B
Participants. To the extent that any amount of the Defeasance Deposit Collateral
remains in any Account (as defined in the Defeasance Deposit Agreement) after
all payments required to be made by this Section 3.12 and Section 3.13 have been
made and the Participation Interests have been paid in full, the Agent shall
cause such remaining amount to be refunded promptly to the Lessee.
(e) Notwithstanding any other provision in this Agreement, the Lease or any
other Operative Document to the contrary, the Lessee, the Agent, the
Participants and the Lessor agree that upon the maturity or acceleration of the
Lessee's obligation to pay the Asset Termination Value, Residual Value Guarantee
Amount or Purchase Option Price, any and all amounts of Defeasance Deposit
Collateral that have been deposited by the Lessee pursuant to the Defeasance
Deposit Agreement and that have not been withdrawn by the Lessee or offset or
applied by the Lessor, the Agent or any Participant (in accordance with the
terms of the Defeasance Deposit Agreement) as of such maturity or acceleration
date, shall be required to be applied by the Agent and the Lessor to satisfy the
Lessee's obligation to pay such portion of the Asset Termination Value, Purchase
Option Price or Residual Value Guarantee represented by the Defeasance Deposit
Collateral notwithstanding the fact that such amounts may not then be actually
available, for any reason attributable to the Lessor, the Agent or any
Participant (including, without limitation any fraud or misapplication of funds
by the Lessor, the Agent or any Participant, decline in value of the
8
Collateral or the filing by or against the Lessor, the Agent or any Participant
of any insolvency, bankruptcy, dissolution, liquidation, reorganization or
similar proceeding, but except to the extent resulting from a proceeding
involving the insolvency of the Lessee), at Defeasance Deposit Depositary Bank
to pay such obligation.
SECTION 3.13. Residual Value Guarantee Amount Payment or Renewal Term
-------------------------------------------------------
Payments by Lessee. The payment by the Lessee to the Agent of (i) the Residual
------------------
Value Guarantee Amount in accordance with Article XXII of the Lease (including
payment by means of offset against the Defeasance Deposit) upon the Lessee's
exercise of the Remarketing Option or (ii) a Renewal Term Payment in accordance
with Section 21.1 of the Lease (including payment by means of offset against the
Defeasance Deposit) in connection with the Lessee's exercise of a Renewal Option
shall be distributed by the Agent as promptly as possible (it being understood
that any such payment received by the Agent on a timely basis in accordance with
the provisions of the Lease shall be distributed on the date on which such funds
are so received) in the following order of priority:
first, to the Tranche A Participants for application to pay in full
-----
the Tranche A Participation Interest Balance of each Tranche A Participant;
and
second, to the Tranche B Participants for application to pay in full
------
the Tranche B Participation Interest Balance of each Tranche B Participant,
and in the case where the amounts so distributed shall be insufficient to
pay in full as aforesaid, then pro rata among the Tranche B Participants
without priority of one Tranche B Participant over the other in the
proportion that each such Tranche B Participant's Tranche B Participation
Interest Balance bears to the aggregate Tranche B Participation Interest
Balances of all Tranche B Participants.
SECTION 3.14. Sales Proceeds of Remarketing of Property. Any payments
-----------------------------------------
received by the Agent as proceeds from the sale of the Property sold pursuant to
the Lessee's exercise of the Remarketing Option pursuant to Article XXII of the
Lease, together with any payment made by the Lessee as a result of an appraisal
pursuant to Section 13.2 of this Agreement, shall be distributed by the Agent as
------------
promptly as possible (it being understood that any such payment received by the
-------------------
Agent on a timely basis and in accordance with the provisions of the Lease shall
be distributed on the date received) in the funds so received in the following
order of priority:
first, to the Tranche B Participants for application to pay in full the
-----
Tranche B Participation Interest Balance of each Tranche B Participant, and
in the case where the amount so distributed shall be insufficient to pay in
full as aforesaid, then pro rata among the Tranche B Participants without
priority of one Tranche B Participant over the other in the proportion that
each Tranche B Participant's Tranche B Participation Interest Balance bears
to the aggregate Tranche B Participation Interest Balances of all Tranche B
Participants;
second, to the Tranche A Participants for application to pay in full
------
the Tranche A Participation Interest Balance of each Tranche A Participant,
and in the case where the amount so distributed shall be insufficient to
pay in full as aforesaid, then pro rata among
--------
9
the Tranche A Participants without priority of one Tranche A Participant
over the other in the proportion that each Tranche A Participant's Tranche
A Participation Interest Balance bears to the aggregate Tranche A
Participation Interest Balances of all Tranche A Participants; and
third, the balance, if any, shall be promptly distributed to, or as
directed by, the Lessee.
SECTION 3.15. Supplemental Rent. All payments of Supplemental Rent received
by the Agent (excluding any amounts payable pursuant to the preceding provisions
of this Section 3) shall be distributed promptly by Agent upon receipt thereof
to the Persons entitled thereto pursuant to the Operative Documents.
SECTION 3.16. Excepted Payments. Notwithstanding any other provision of
this Agreement or the Operative Documents, any Excepted Payment received at any
time by the Agent shall be distributed promptly to the Person entitled to
receive such Excepted Payment pursuant to the Operative Documents.
SECTION 3.17. Distribution of Payments After Event of Default. (a) All
payments received and amounts realized by the Lessor or the Agent after an Event
of Default exists, including under the Guarantee or the Defeasance Deposit
Agreement and proceeds from the sale of any of the Property, proceeds of any
amounts from any insurer or any Governmental Authority in connection with any
Casualty or Condemnation, or from Lessee as payment in accordance with the
Lease, including any payment received from Lessee pursuant to Section 17 of the
Lease, shall, if received by Lessor, be paid to the Agent as promptly as
possible and shall be distributed by the Agent as promptly as possible (it being
understood that any such payment received by the Agent on a timely basis and in
accordance with the provisions of the Operative Documents shall be distributed
on the date received in the funds so received) in the following order of
priority:
first, so much of such payment or amount as shall be required to
reimburse the Lessor or the Agent for any tax, expense or other loss
incurred by the Lessor or the Agent (including, to the extent not
previously reimbursed, those incurred in connection with any duties of the
Agent as the Agent) and any unpaid ongoing fees of the Lessor and the Agent
shall be distributed to each of them for its own account;
second, so much of such payments or amounts as shall be required to
reimburse the then existing or prior Participants for payments made by them
to the Lessor pursuant to Section 18.1 of the Lease (to the extent not
previously reimbursed) and to pay such then existing or prior Participants
the amounts payable to them pursuant to any expense reimbursement or
indemnification provisions of the Operative Documents shall be distributed
to each such Participant without priority of one over the other in
accordance with the amount of such payment or payments payable to each such
Person;
third, (i) in the case of a sale of the Property, in the order of
priority set forth in Section 3.14, (ii) in the case of the application of
the Defeasance Deposit, in the order of
10
priority set forth in Section 3.13 and (iii) in all other cases, so much
of such amount as shall be required to pay in full the Participant
Balance of each Participant, and in the case that the amounts so
distributed shall be insufficient to pay in full as aforesaid, then pro
rata among the Participants without priority of one over the other, in the
proportion that the Participant Balance of each bears to the aggregate
Participant Balances of all the Participants; and
fourth, the balance, if any, of such payment or amounts remaining
thereafter shall be promptly distributed to, or as directed by, the Lessee.
SECTION 3.18. Other Payments. (a) Except as otherwise provided in Sections
3.11, 3.12, 3.17 and paragraph (b) below,
(i) any payment received by the Agent for which no provision as to the
application thereof is made in the Operative Documents or elsewhere in this
Section 3, and
(ii) all payments received and amounts realized by the Agent under the
Lease or otherwise with respect to the Property or the Defeasance Deposit
to the extent received or realized at any time after indefeasible payment
in full of the Participant Balances of all of the Participants and any
other amounts due and owing to the Lessor, the Participants or the Agent,
shall be distributed forthwith by the Agent in the order of priority set forth
in Section 3.12 (in the case of any payment described in clause (i) above) or
in Section 3.17 hereof (in the case of any payment described in clause (ii)
above), except, that (i) in the case of any payment described in clause (ii)
above, such payment shall be distributed omitting clause third of such Section
3.17; and the balance, if any (in the case of any payment described in clause
(i) or (ii) above), shall be distributed to, or as directed by, the Lessee, and
(ii) any payments received under the Guaranty shall be distributed solely to
the Participants in accordance with the priorities set forth in Section 3.17.
(b) Except as otherwise provided in Sections 3.11 and 3.12 hereof, any
payment received by the Agent for which provision as to the application thereof
is made in an Operative Document but not elsewhere in this Section 3 shall be
distributed forthwith by the Agent to the Person and for the purpose for which
such payment was made in accordance with the terms of such Operative Document.
SECTION 3.19. Casualty and Condemnation Amounts. Any amounts payable to the
Lessor as a result of a Casualty or Condemnation pursuant to Section 15.1 of the
Lease (but excluding any amounts payable pursuant to Section 16.2 of the Lease)
shall, if no Lease Event of Default exists, be paid over to Lessee for the
rebuilding, replacement or restoration of that portion of the Property to which
such Casualty or Condemnation applied, and any excess proceeds shall be paid to
the Lessee.
SECTION 3.20. Order of Application. To the extent any payment made to any
Participant pursuant to Sections 3.1-2, 3.13, 3.14 or 3.15 is insufficient to
pay in full the Participant Balance of
11
such Participant, then each such payment shall first be applied to its
Participation Interest in accrued interest and then to its Participation
Interest in principal of the Advances.
SECTION 4.
FEES
SECTION 4.1. Commitment Fees. The Lessee shall pay to the Agent for the
account of each Tranche B Participant a commitment fee (the "Commitment Fees")
for the period from and including the Closing Date to the earlier of (i) the
Completion Date or (ii) the Outside Completion Date, computed in the case of
each Tranche B Participant at a rate per annum equal to the Commitment Fee Rate
on the amount of the Available Tranche B Commitment of such Participant, in each
case during the period for which payment is made, payable on each Commitment Fee
Payment Date. Commitment Fees shall be calculated on the basis of a 365- (or
366-, as the case may be) day year for the actual days elapsed.
SECTION 4.2. Lease Arrangement Fee. The Lessee shall pay to the Arranger
the lease arrangement fee (the "Lease Arrangement Fee") referred to in that
certain commitment letter from the Arranger to the Lessee dated as of June 26,
1997, at such times as are specified in such letter.
SECTION 4.3. Defeasance Fee. The Lessee shall pay to the Agent for the
account of each Tranche A Participant a defeasance fee (the "Defeasance Fee") in
the amount of [*] of the aggregate Tranche A Participation Interest Commitment
on the Closing Date.
SECTION 4.4. Overdue Fees. If all or a portion of any fee due hereunder
shall not be paid when due, such overdue amount shall bear interest, payable by
the Lessee on demand, at a rate per annum equal to the Overdue Rate from the
date of such nonpayment until such amount is paid in full (as well after as
before judgment).
SECTION 5.
CERTAIN INTENTIONS OF THE PARTIES
SECTION 5.1. Nature of Transaction. (a) It is the intent of the parties
hereto that: (i) the Lease constitutes an "operating lease" pursuant to
Statement of Financial Accounting Standards No. 13, as amended, for purposes of
the Lessee's financial reporting, and (ii) for purposes of federal, state and
local income or franchise taxes and for any other tax imposed on or measured by
income, the transaction contemplated hereby is a financing arrangement and
preserves ownership in the Property in the Lessee. Nevertheless, the Lessee
acknowledges and agrees that neither the Agent, the Lessor nor any Participant
has made any representations or warranties to the Lessee concerning the tax,
accounting or legal characteristics of the Operative Documents and that the
Lessee has obtained and relied upon such tax, accounting and legal advice
concerning the Operative Documents as it deems appropriate.
[* CONFIDENTIAL INFORMATION]
12
Notwithstanding any provision of this Participation Agreement to the
contrary, the parties hereto agree and declare that: (i) the transactions
contemplated by the Lease are intended to have a dual, rather than single, form;
and (ii) all references in this Participation Agreement to the "lease" of the
Property which fail to reference such dual form do so as a matter of convenience
only and do not reflect the intent of the parties hereto as to the true form of
such arrangements. The parties hereto agree that, in accordance with their
intentions expressed herein and the substance of the transactions contemplated
hereby, the Lessee (and not the Lessor) shall be treated as the owner of the
Property for federal, state, and local income and property tax purposes and the
Lease shall be treated as a financing arrangement. The Lessee shall be entitled
to take any deduction, credit, allowance or other reporting, filing or other tax
position consistent with such characterizations. The Lessor and the Participants
shall file any federal, state or local income tax returns, reports or other
statements in a manner which is consistent with the foregoing provisions of this
Section 5.1, provided that the Lessor and any Participant may take a position
that is inconsistent with the Lessee's status as owner of the Property if: (x)
there has been a change in law or regulation so requiring as supported by an
opinion of counsel reasonably acceptable to the Lessee that there is not
substantial authority for such a consistent reporting position; or (y) (A) there
has been an administrative or judicial holding that the Lessee is not the owner
of the Property for such tax purposes, (B) the Lessee has no fight to contest
such holding pursuant to Section 13.5 of the Participation Agreement, and (C)
the Lessee's lack of right to contest is not the result of an Indemnitee's
waiver of its fight to indemnification pursuant to Section 13.5(f)(iii) of the
Participation Agreement or failure of the amount at issue to exceed the minimum
amount set forth in Section 13.5(f)(iv)(B) of the Participation Agreement.
(b) Specifically, without limiting the generality of subsection (a) of this
Section 5.1, the parties hereto intend and agree that with respect to the nature
of the transactions evidenced by the Lease in the context of the exercise of
remedies under the Operative Documents, including, without limitation, in the
case of any insolvency or receivership proceedings or a petition under the
United States bankruptcy laws or any other applicable insolvency laws or statute
of the United States of America or any State or Commonwealth thereof affecting
the Lessee, the Lessor or any Participant or any enforcement or collection
actions, (i) the transactions evidenced by the Operative Documents are loans
made by the Lessor and the Participants as unrelated third party lenders to the
Lessee secured by the Property, (ii) the obligations of the Lessee under the
Lease to pay Basic Rent and Supplemental Rent or Asset Termination Value in
connection with any purchase of the Property pursuant to the Lease shall be
treated as payments of interest on and principal of, respectively, loans from
the Lessor and the Participants to the Lessee, (iii) the Lease grants a security
interest and lien on the Property and the collateral described in the Security
Agreement to the Lessor, the Agent and the Participants to secure the Lessee's
performance and payment of all amounts under the Lease and the other Operative
Documents.
SECTION 5.2. Amounts Due Under Lease. Anything else herein or elsewhere to
the contrary notwithstanding, it is the intention of the Lessee, the Lessor, the
Participants and the Agent that: (i) the amount and timing of installments of
Basic Rent due and payable from time to time from the Lessee under the Lease
shall be equal to the aggregate payments due to the Participants in respect of
their Participation Interests on each Payment Date; (ii) if the Lessee elects
the Purchase Option or becomes obligated to purchase the Property under the
Lease, the Participation Interests,
13
all fees and all of the interest on overdue amounts thereon and all other
obligations of the Lessee owing to the Lessor, the Participants and the Agent
shall be paid in full by the Lessee; (iii) if the Lessee properly elects the
Remarketing Option, the Lessee shall only be required to pay to the Lessor the
proceeds of the sale of the Property, the Residual Value Guarantee Amount and
any amounts due pursuant to Section 13 of this Participation Agreement and
Section 22.2 of the Lease (which aggregate amounts may be less than the Asset
Termination Value); and (iv) upon an Event of Default resulting in an
acceleration of the Lessee's obligation to purchase the Property under the
Lease, the amounts then due and payable by the Lessee under the Lease shall
include all amounts necessary to pay in full the Asset Termination Value, plus
all other amounts then due from the Lessee to the Participants, the Agent and
the Lessor under the Operative Documents.
SECTION 6.
CONDITIONS PRECEDENT TO
ACQUISITION OF EQUIPMENT AND ADVANCES
SECTION 6.1. Conditions Precedent-- Documentation. The obligation of the
Lessor to acquire Equipment on any Funding Date and to make an Advance to
finance the acquisition of Equipment or the funding of any Interest Payment
Advance on any Funding Date, and the obligation of each Participant to purchase
its Participation Interest in, and to make available to the Lessor its related
portion of, each such Advance on such Funding Date are subject to satisfaction
or waiver of the following conditions precedent and the conditions precedent set
forth in Section 6.2 (it being understood that the Lessor's obligation to
acquire such Equipment, shall not be subject to the conditions precedent set
forth in this Section 6.1 or Section 6.2 to the extent such conditions are
actions required of the Lessor) on or prior to the Closing Date or such Funding
Date, as the case may be:
(a) Funding Request. Prior to each Funding Date the Agent and the Lessor
shall have received a fully executed counterpart of the related Funding Request,
appropriately completed by the Lessee, in accordance with Section 3.4; provided,
that this condition shall be deemed to have been satisfied in connection with an
Interest Payment Advance pursuant to Section 3.7(d) hereof.
(b) Operative Documents. On or prior to the Closing Date, each of the
Operative Documents to be entered into on the Closing Date shall have been duly
authorized, executed and delivered by the parties thereto, and shall be in full
force and effect, including, without limitation, (i) this Participation
Agreement, (ii) the Lease, (iii) the Guarantee, (iv) the Defeasance Deposit
Agreement, (v) the Construction Agency Agreement, (vi) the Construction Agency
Agreement Assignment, (vii) the Security Agreement, (viii) the Assignment of
Lease and Supplement to Assignment of Lease and (ix) the Consent to Assignment.
No Default or Event of Default shall exist thereunder and be continuing (both
before and after giving effect to the transactions contemplated by the Operative
Documents), and the Lessor, the Agent and each Participant shall each have
received a fully executed copy of each of such Operative Documents (other than
the Lease, of which the Agent shall receive the original and the Lessor and the
Participants shall receive specimens). On or prior to the Closing Date, any
financing statements in connection therewith required under
14
the Uniform Commercial Code shall have been recorded, registered and filed, if
necessary, in such manner as to enable the Lessee's counsel to render its
opinion referred to in clauses l(i)(A) and (B) below.
------------------------
(c) [Intentionally Omitted].
(d) Appraisal. On or prior to the Closing Date, the Agent, the Lessor
-----------
and the Participants shall have received an Appraisal of the Property, which
Appraisal shall meet the requirements set forth in the definition of the term
"Appraisal" contained in Appendix 1.
-----------
(e) [Intentionally Omitted].
(f) Equipment Schedule and ▇▇▇▇ of Sale. The Lessee, the Lessor
-------------------------------------
and/or the vendor of the Equipment, as the case may be, shall have delivered, on
or prior to the applicable Funding Date, a duly executed Equipment Schedule and
▇▇▇▇ of Sale covering the Equipment being acquired with the proceeds of such
Advance by the Lessor, together with invoices in form and substance satisfactory
to the Agent, the Lessor and the Participants.
(g) [Intentionally Omitted].
(h) Evidence of Recording, and Filing. On the Closing Date, the Agent
-----------------------------------
shall have received evidence reasonably satisfactory to it that each of the UCC
Financing Statements with respect to the Property to be acquired pursuant to the
Operative Documents shall have been or are being filed with the appropriate
Governmental Authorities.
(i) Evidence of Insurance. On or prior to the Closing Date, the
-----------------------
Agent, the Lessor and each Participant shall have received evidence of insurance
with respect to the Property required to be maintained pursuant to the Lease,
setting forth the respective coverages, limits of liability, carrier, policy
number and period of coverage.
(j) Evidence of Use of Proceeds. On or prior to each Advance, the
-----------------------------
Agent and each Participant shall have received evidence reasonably satisfactory
to the Agent and each Participant as to the use of the proceeds of the Advance
in accordance with the provisions of Section 8.1(g).
-------
(k) Taxes. On the Closing Date, all taxes, fees and other charges in
-------
connection with the execution, delivery, filing and registration of the
Operative Documents shall have been paid or provisions for such payment shall
have been made to the satisfaction of the Agent, each Participant and the
Lessor.
(1) [Intentionally Omitted].
(m) Approvals. On or prior to the Closing Date or each Funding Date,
-----------
as applicable, all necessary (or, in the reasonable opinion of the Lessor, the
Participants or the Agent or any of their respective counsel, advisable)
Governmental Actions and covenants and approvals
15
of or by any Governmental Authority or other Person, in each case required by
any Requirement of Law, covenant or restriction affecting the Property or the
transactions contemplated thereby to have been obtained by such date shall have
been obtained or made and be in full force and effect.
(n) Litigation. As of each Funding Date, no action or proceeding shall have
been instituted, nor shall any action or proceeding be threatened, before any
Governmental Authority, nor shall any order, judgment or decree have been issued
or proposed to be issued by any Governmental Authority (i) to set aside,
restrain, enjoin or prevent the full performance of this Participation
Agreement, the Lease or any other Operative Document or any transaction
contemplated hereby or thereby or (ii) which is reasonably likely to have a
Material Adverse Effect.
(o) Requirements of Law. As of the Closing Date and each Funding Date, in
the reasonable opinion of the Lessor, the Participants, the Agent and their
respective counsel, the transactions contemplated by the Operative Documents do
not and will not violate any Requirement of Law and do not and will not subject
the Lessor, the Agent or any Participant to any adverse regulatory or tax
prohibitions or constraints.
(p) Responsible Officer's Certificate of the Lessee. On the Closing Date,
the Lessor, each Participant and the Agent shall each have received a
Responsible Officer's Certificate, dated as of the Closing Date, of the Lessee
stating that (i) each and every representation and warranty of the Lessee
contained in the Operative Documents to which it is a party is true and correct
on and as of the Closing Date; (ii) no Default or Event of Default under the
Lease or the Construction Agency Agreement has occurred and is continuing; (iii)
each Operative Document to which the Lessee is a party is in full force and
effect with respect to it; and (iv) the Lessee has duly performed and complied
with all covenants, agreements and conditions contained herein or in any
Operative Document required to be performed or complied with by it on or prior
to the Closing Date.
(q) The Lessee's Resolutions and Incumbency Certificate, etc. On the
Closing Date, the Lessor, each Participant and the Agent shall each have
received (i) a certificate of the Secretary or an Assistant Secretary of the
Lessee attaching and certifying as to (A) the resolutions of the Board of
Directors of the Lessee, duly authorizing the execution, delivery and
performance by the Lessee of documents and agreements of the type represented by
each Operative Document to which it is or will be a party, (B) its articles of
incorporation and bylaws, and (C) the incumbency and signature of persons
authorized to execute and deliver on its behalf the Operative Documents to which
it is a party, and (ii) a good standing certificate from the appropriate officer
of the state in which the Property is located.
(r) Responsible Officer's Certificate of the Guarantor. On the Closing
Date, the Lessor, each Participant and the Agent shall each have received a
Responsible Officer's Certificate, dated as of the Closing Date, of the
Guarantor stating that (i) each and every representation and warranty of the
Guarantor contained in the Operative Documents to which it is a party is true
and correct on and as of the Closing Date; (ii) no Default or Event of Default
under the Guarantee has occurred and is continuing; (iii) each Operative
Document to which the Guarantor is a party is in full force and effect with
respect to it; and (iv) the Guarantor has duly performed and complied with
16
all covenants, agreements and conditions contained heroin or in any Operative
Document required to be performed or complied with by it on or prior to the
Closing Date.
(s) The Guarantor's Resolutions and Incumbency Certificate, etc. On the
Closing Date, the Lessor, each Participant and the Agent shall each have
received a certificate of the Secretary or an Assistant Secretary of the
Guarantor attaching and certifying as to (i) the resolutions of its Board of
Directors duly authorizing the execution, delivery and performance by the
Guarantor of documents and agreements of the type represented by each Operative
Document to which it is or will be a party (ii) its articles of incorporation
and by-laws, and (iii) the incumbency and signature of persons authorized to
execute and deliver on its behalf the Operative Documents to which it is a
party.
(t) Closing Date. The Closing Date shall occur on or prior to August 31,
1997.
(u) No Material Adverse Effect. As of the Closing Date, there shall not
have occurred any Material adverse change in the Lessee% or the Guarantor%
capital structure, ownership or consolidated assets, liabilities, results of
operations, or financial condition from that set forth or contemplated in the
most recent financial statements referred to in Section 8.3(m), and no event or
condition shall have occurred that would result in a Material Adverse Effect.
(v) Responsible Officer's Certificate of the Lessor. On the Closing Date,
the Lessee, the Agent and each Participant shall have received a certificate of
an authorized officer of the Lessor, dated as of the Closing Date, stating that
(i) each and every representation and warranty of the Lessor contained in the
Operative Documents to which it is a party is true and correct on and as of the
Closing Date, (ii) each Operative Document to which the Lessor is a party is in
full force and effect with respect to it, and (iii) the Lessor has duly
performed and complied with all covenants, agreements and conditions contained
herein or in any Operative Document required to be performed or complied with by
it on or prior to the Closing Date.
(w) The Lessor's Resolutions and Incumbency Certificate, etc. On the
Closing Date, the Lessee, the Agent and each Participant shall have received a
certificate of the Secretary or an Assistant Secretary of the Lessor attaching
and certifying as to (i) the resolutions of the Board of Directors duly
authorizing the execution, delivery and performance by the Lessor of documents
and agreements of the type represented by each Operative Document to which it is
or will be a party, (ii) the pertinent provisions of its by-laws and (iii) the
incumbency and signature of persons authorized to execute and deliver on its
behalf the Operative Documents to which it is a party.
SECTION 6.2. Further Conditions Precedent. The obligation of the Lessor to
make an Advance on any Funding Date and the obligation of each Participant to
purchase its Participation Interest in, and to make available its related
portion of, such Advance on such Funding Date are subject to satisfaction or
waiver of the following conditions precedent and to satisfaction on or before
the Closing Date or such Funding Date of the conditions precedent set forth in
Section 6.1 (it being understood that the Lessor's obligations to make Advances
to the Lessee and each Participant's obligation to fund the purchase of its
Participation Interest in an Advance shall not be
17
subject to the conditions precedent set forth in Section 6.1 and this Section
6.2 to the extent such conditions are actions required of the Lessor or such
Participant):
(a) Representations and Warranties. (i) On the Closing Date, the
representations and warranties of the Lessee, the Guarantor, the Lessor and each
Participant contained herein and in each of the other Operative Documents shall
be true and correct as though made on and as of such date, except to the extent
such representations or warranties relate solely to an earlier date, in which
case such representations and warranties shall have been true and correct on and
as of such earlier date; and (ii) on each Funding Date, the representations and
warranties of the Lessee Contained herein and in each of the Operative Documents
shall be true and correct as though made on and as of such date; in each case
except to the extent such representations or warranties relate solely to an
earlier date, in which case such representations and warranties shall have been
true an correct on and as of such earlier date.
(b) Performance of Covenants. (i) On the Closing Date the parties hereto
shall have performed their respective agreements contained herein and in the
other Operative Documents to be performed by them on or prior to such date, and
(ii) on each other Funding Date the Lessee shall have performed its respective
agreements contained herein and in the other Operative Documents to be performed
by it on or prior to such date.
(c) Tide. Tide to the Property shall conform to the representations and
warranties set forth in Section 8.4(c).
(d) No Default. There shall not have occurred and .be continuing any
Default or Event of Default under any of the Operative Documents, and no Default
or Event of Default under any of the Operative Documents will have occurred
after giving effect to the acquisition of the Property and/or the making of the
Advance requested by such Funding Request, as the case may be.
If any of the conditions precedent set forth in this Section 6.2 or in
Section 6.1 (if such conditions apply to subsequent Funding Dates) shall not
have been satisfied on any Funding Date subsequent to the initial Funding Date
and the Lessor and the Participants refuse to fund the requested Advance, the
Lessee may exercise its Purchase Option under Section 20.1 of the Lease upon not
less than ten (10) days' written notice to the Lessor, the Agent and the
Participants.
SECTION 7.
[Intentionally Omitted]
SECTION 8.
REPRESENTATIONS
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SECTION 8.1. Representations of the Lessor. The Lessor represents and
warrants to each of the other parties hereto as follows:
(a) Due Organization, etc. It is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois and has
the corporate power and authority to enter into and perform its obligations
under each of the Operative Documents to which it is or will be a party and each
other agreement, instrument and document to be executed and delivered by it in
connection with or as contemplated by each such Operative Document to which it
is or will be a party.
(b) Authorization; No Conflict. The execution, delivery and performance of
each Operative Document to which it is or will be a party has been duly
authorized by all necessary action on its part and neither the execution and
delivery thereof, nor the consummation of the transactions contemplated thereby,
nor compliance by it with any of the terms and provisions thereof (i) does or
will require any approval or consent of any trustee or holders of any of its
indebtedness or obligations, (ii) does or will contravene any current United
States or Illinois law, governmental rule or regulation, (iii) does or will
contravene or result in any breach of or constitute any default under, or result
in the creation of any Lien upon any of its property under, its articles of
incorporation or by-laws, or any indenture, mortgage, deed of trust, conditional
sales contract, credit agreement or other agreement or instrument to which it is
a party or by which it or its properties may be bound or affected or (iv) does
or will require any Governmental Action by any Governmental Authority, except
such as have been obtained on the Lessee's or the Lessor's behalf.
(c) Enforceability, etc. Each Operative Document to which the Lessor is or
will be a party has been, or on or before the Closing Date will be, duly
executed and delivered by the Lessor and each such Operative Document to which
the Lessor is a party constitutes, or upon execution and delivery will
constitute, a legal, valid and binding obligation enforceable against the Lessor
in accordance with the terms thereof, except as the same may be limited by
insolvency, bankruptcy, reorganization or other laws relating to or affecting
creditors' rights or by general equitable principles.
(d) Litigation. There is no action or proceeding pending or, to its
knowledge, threatened to which it is a party, before any Governmental Authority
that, if adversely determined, would materially and adversely affect its ability
to perform its-obligations under the Operative Documents to which it is a party,
would have a material adverse effect on the financial condition of the Lessor or
would question the validity or enforceability of any of the Operative Documents
to which it is or will become a party.
(e) Assignment. It has not assigned or transferred any of its right, title
or interest in or under the Lease except to the Agent, for the benefit of the
Participants, in accordance with this Agreement and the other Operative
Documents.
(f) Defaults. No Default or Event of Default under the Operative Documents
attributable to it has occurred and is continuing.
19
(g) Use of Proceeds. The proceeds of the purchase of the Participation Interests
shall be applied by the Lessor solely in accordance with the provisions of the
Operative Documents.
(h) Securities Act. Neither the Lessor nor any Person authorized by the Lessor
to act on its behalf has offered or sold any interest in the Lease, or in any
similar security relating to the Property, or in any security the offering of
which for the purposes of the Securities Act would be deemed to be part of the
same offering as the offering of the aforementioned securities to, or solicited
any offer to acquire any of the same from, any Person other than the Agent and
the Participants, and neither the Lessor nor any Person authorized by the Lessor
to act on its behalf will take any action which would subject the issuance or
sale of any interest in the Lease or the Property to the provisions of Section 5
of the Securities Act or require the qualification of any Operative Document
under the Trust Indenture Act of 1939, as amended.
(i) Chief Place of Business. The Lessor's chief place of business, chief
executive office and office where the documents, accounts and records relating
to the transactions contemplated by this Participation Agreement and each other
Operative Document are kept are located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(j) Federal Reserve Regulations. The Lessor is not engaged principally in, and
does not have as one of its important activities, the business of extending
credit for the purpose of purchasing or carrying any margin stock (within the
meaning of Regulation U of the Board), and no part of the proceeds of the
purchase of the Participation Interests will be used by it to purchase or carry
any margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock or for any purpose that violates, or is
inconsistent with, the provisions of Regulation G, T, U, or X of the Board.
(k) Investment Company Act. The Lessor is not an "investment company" or a
company controlled by an "investment company" within the meaning of the
Investment Company Act.
(1) No Plan Assets. The Lessor is not acquiring its interests in the Property
with the assets of any "employee benefit plan" (as defined in Section 3(3) of
ERISA) which is subject to Title I of ERISA, or "plan" (as defined in Section
4975(e)(1 ) of the Code).
SECTION 8.2. Representations of the Participants. Each Participant represents
and warrants to the Lessor, each of the other Participants and the Lessee as
follows:
(a) No Plan Assets. Such Participant is not and will not be funding its
Participation Interest hereunder, and is not performing its obligations under
the Operative Documents, with the assets of an "employee benefit plan" (as
defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or
"plan" (as defined in Section 4975(e)(1 ) of the Code). The advancing of any
amount with respect to its Participation Interest on any Funding Date shall
constitute an affirmation by the subject Participant of the preceding
representation and warranty.
20
(b) Due Organization, etc. It is either (i) a duly organized and validly
existing corporation in good standing under the laws of the state of its
incorporation, or (ii) a national banking association duly organized and validly
existing under the laws of the United States or (iii) a banking corporation duly
organized and validly existing under the laws of the jurisdiction of its
organization, and, in each case, has the corporate power and authority to
execute, deliver and carry out the terms and provisions of the Operative
Documents to which it is a party.
(c) Authorization; No Conflict. The execution, delivery and performance of
each Operative Document to which it is or will be a party has been duly
authorized by all necessary action on its part and neither the execution and
delivery thereof, nor the consummation of the transactions contemplated thereby,
nor compliance by it with any of the terms and provisions thereof (i) does or
will require any approval or consent of any trustee or holders of any of its
indebtedness or obligations, (ii) does or will contravene any current law,
governmental role or regulation of the United States or the state or country of
its organization, (iii) does or will contravene or result in any breach of or
constitute any default under, or result in the creation of any Lien upon any of
its property under, its certificate of incorporation or bylaws, articles of
association or other organizational documents or any indenture, mortgage, deed
of trust, conditional sales contract, credit agreement or other agreement or
instrument to which it is a party or by which it or its properties may be bound
or affected or (iv) does or will require any Governmental Action by any
Governmental Authority.
(d) Enforceability, etc. Each Operative Document to which it is a party has
been, or on or before the Closing Date will be, duly executed and delivered by
it and each such Operative Document to which it is a party constitutes, or upon
execution and delivery will constitute, a legal, valid and binding obligation
enforceable against it in accordance with the terms thereof, except as the same
may be limited by insolvency, bankruptcy, reorganization or other laws relating
to or affecting creditors' rights or by general equitable principles.
(e) Litigation. There is no action or proceeding pending or, to its
knowledge, threatened to which it is or will be a party before any Governmental
Authority that is reasonably likely to be adversely determined and. if adversely
determined, would materially and adversely affect its ability to perform its
obligations under the Operative Documents to which it is a party.
SECTION 8.3. Representations of the Lessee. The Lessee represents and
warrants to each of the other parties hereto that:
(a) Corporate Status. The Lessee (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and (ii) has duly qualified and is authorized to do business and has obtained a
certificate of authority to transact business as a foreign corporation in the
States of California and Colorado and in each other jurisdiction where the
failure to so qualify is reasonably likely to be Material.
(b) Corporate Power and Authority. The Lessee has corporate .power and
authority to execute, deliver and carry out the terms and provisions of the
Operative Documents to which it is or will be a party and has taken all
necessary corporate action to authorize the execution,
21
delivery and performance of the Operative Documents to which it is or will be a
party and has or will have duly executed and delivered each Operative Document
required to be executed and delivered by it and, assuming the due authorization,
execution and delivery thereof on the part of each other party thereto, each
such Operative Document constitutes or will constitute a legal, valid and
binding obligation enforceable against it in accordance with its terms, except
as the same may be limited by insolvency, bankruptcy, reorganization or other
laws relating to or affecting the enforcement of creditors' rights or by general
equitable principles.
(c) No Violation. Neither the execution, delivery and performance by the Lessee
of the Operative Documents to which it is or will be a party nor compliance with
the terms and provisions thereof; nor the consummation by the Lessee of the
transactions contemplated therein (i) will result in a violation by the Lessee
of any applicable provision of any law, statute, rule, regulation, order, writ,
injunction or decree of any court or governmental instrumentality having
jurisdiction over the Lessee or the Property that would (x) adversely affect the
validity or enforceability of the Operative Documents to which the Lessee is a
party, or the title to, or value or condition of, the Property, or (y) have a
Material Adverse Effect on the consolidated financial position, business or
consolidated results of operations of the Lessee, or (z) have an adverse effect
on the ability of the Lessee to perform its obligations under the Operative
Documents, (ii) will conflict with or result in any breach under, or (other than
pursuant to the Operative Documents) result in the creation or imposition of (or
the obligation to create or impose) any Lien upon any of the property or assets
of Lessee pursuant to the terms of, any indenture, loan agreement or other
agreement for borrowed money to which the Lessee is a party or by which it or
any of its property or assets is bound or to which it may be subject (other than
Permitted Liens), or (iii) will violate any provision of the certificate or
articles of incorporation or bylaws of the Lessee.
(d) Litigation. There are no actions, suits or proceedings pending or, to the
knowledge of the Lessee, threatened (i) that are reasonably likely to have a
Material Adverse Effect or (ii) that question the validity of the Operative
Documents or the rights or remedies of the Lessor, the Agent or the Participants
with respect to the Lessee or the Property under the Operative Documents.
(e) Governmental Approvals. No Governmental Action by any Governmental Authority
having jurisdiction over the Lessee or the Property is required to authorize or
is required in connection with (i) the execution, delivery and performance by
the Lessee of any Operative Document or (ii) the legality, validity, binding
effect or enforceability against the Lessee of any Operative Document, except
for the filing or recording of the Operative Documents listed in Section 8.4(f)
hereof with the appropriate Governmental Authorities, all of which will have
been completed on or prior to the Closing Date.
(f) Investment Company Act. The Lessee is not an "investment company" or a
company "controlled" by an "investment company," within the meaning of the
Investment Company Act.
(g) Public Utility Holding Company Act. The Lessee is not a "holding company, or
a "subsidiary company," or an "affiliate" of a "holding company, or of a
"subsidiary company"
22
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
(h) Information. All regular or periodic reports filed by the Lessee with the
Securities and Exchange Commission prior to the Closing Date and all other
written information and material regarding the Lessee and the Property which
were provided by the Lessee to one or more of the Participants prior to the
Closing Date are true and accurate in all material respects on the date as of
which such information and materials are dated or certified and not incomplete
by omitting to state any material fact necessary to make such information not
misleading at such time in light of the circumstances under which such
information was provided.
(i) Taxes. All United States federal income tax returns and all other Material
tax returns which are required to have been filed have been or will be prepared
in accordance with applicable law and filed by or on behalf of the Lessee by the
respective due dates, including extensions, and all taxes due with respect to
the Lessee pursuant to such returns or pursuant to any assessment received by
the Lessee have been or will be paid. The charges, accruals and reserves on the
books of the Lessee in respect of taxes or other governmental charges are, in
the opinion of the Lessee, adequate.
(j) Compliance with ERISA. Each member of the ERISA Group has fulfilled its
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and is in compliance in all Material respects with the
presently applicable provisions of ERISA and the Code with respect to each Plan.
No member of the ERISA Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in respect
of any Benefit Arrangement, or made any amendment to any Plan or Benefit
Arrangement, which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security under ERISA or the Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
(k) Environmental and Other Regulations. Except as set forth in Schedule III
attached hereto, the Lessee and the Property are in compliance with all
Environmental Laws relating to pollution and environmental control or employee
safety in the jurisdiction in which the Property is located and in all other
domestic jurisdictions, other than, with respect to such other jurisdictions,
those Environmental Laws the non-compliance with which would not have a Material
Adverse Effect.
(1) Offer of Securities, etc. Neither the Lessee nor the Guarantor nor any
Person authorized to act on their behalf has, directly or indirectly, offered
any interest in the Property or the Lease or any other interest similar thereto
(the sale or offer of which would be integrated with the sale or offer of such
interest in the Property or the Lease), for sale to, or solicited any offer to
acquire any of the same from, any Person other than the Participants, the Lessor
and other "accredited investors" (as defined in Regulation D of the Securities
and Exchange Commission).
23
(m) Financial Statements. The audited consolidated statement of financial
position of the Lessee and its consolidated Subsidiaries as of September 30,
1996 and the related consolidated statements of income, shareholder's equity and
cash flows for the fiscal year then ended, reported on by KPMG Peat Marwick, a
copy of which has been delivered to each of the Lessor, the Participants and the
Agent, present fairly in all material respects, in conformity with generally
accepted accounting principles, the financial position of the Lessee as of such
date and its results of operations and cash flows for such fiscal year.
SECTION 8.4. Representations of the lessee With Respect to the Property on
the closing Date. The Lessee hereby represents and warrants as of the Closing
Date as follows:
(a) Representations. The representations and warranties of the Construction
Agent and the Lessee set forth in the Operative Documents are true and correct.
The Construction Agent and the Lessee are in compliance in with their respective
obligations under the Operative Documents and there exists no Default or Event
of Default.
(b) Property. Such Property consists of the Equipment to be contacted and
installed at the Lessee's semiconductor fabrication facility pursuant to the
Construction Agency Agreement. Such Facility is, and the Property will be,
located in the State of Colorado. Such Property as constructed and installed in
accordance with the related Plans and Specifications and the use thereof by the
Lessee and its agents, assignees, employees, invitees, lessees, licensees,
contractors and tenants will comply in all material respects with all
Requirements of Law (including, without limitation, Title III of the Americans
with Disabilities Act, all zoning and land use laws and Environmental Laws) and
Insurance Requirements, except for such Requirements of Law as the Lessee shall
be contesting in good faith by appropriate proceedings. The related Plans 'and
Specifications have been or will be prepared in all material respects in
accordance with applicable Requirements of Law (including, without limitation,
Title III of the Americans with Disabilities Act, applicable Environmental Laws
and building, planning, zoning and fire codes) and upon completion of the
construction and installation of the Equipment in accordance with the Plans and
Specifications, such Equipment will comply in all Material respects with all
applicable Requirements of Law (including, without limitation, Title Ill of the
Americans with Disabilities Act, all applicable Environmental Laws and building,
planning, zoning and fire codes). Upon completion of the construction and
installation of the Equipment in accordance with the related Plans and
Specifications, installation of the Equipment will be completed in a workmanlike
manner and in accordance with the Plans and Specifications and the Equipment
will be in first class working condition and fit for its intended use. There is
no action, suit or proceeding (including any proceeding in condemnation or
eminent domain or under any Environmental Law) pending or, to the best of the
Lessee's knowledge, threatened with respect to the Lessee, its Affiliates or
such Property which adversely affects the title to, or the use, operation or
value of, the Property. As of the Closing Date, no fire or other casualty with
respect to the Property shall have occurred, and as of each other Funding Date,
no fire or other casualty with respect to the Property shall have occurred that
constitutes a Significant Casualty with respect to which the Lessee shall have
delivered a Termination Notice under Section 16.1 of the Lease. All material
licenses, approvals, authorizations, consents, permits (including, without
limitation, building, demolition and environmental permits, licenses, approvals,
authorizations and consents), easements and
24
rights-of-way, including proof and dedication, required for construction and
installation of such Equipment in accordance with the related Plans and
Specifications and the Construction Agency Agreement have either been obtained
from the appropriate Governmental Authorities having jurisdiction or from
private parties, as the case may be, or will be obtained from the appropriate
Governmental Authorities having jurisdiction or from private parties, as the
case may be, prior to commencing any such construction or use and operation, as
applicable and will in each case be maintained by the Lessee during the periods
for which they are required by Applicable Law or such Governmental Authorities.
(c) Title. The Bills of Sale providing for the acquisition of the Property
are sufficient to convey good and marketable title to the Property subject only
to Permitted Liens. The Lessor will at all times during the Term have good title
to all Equipment wherever located.
(d) Insurance. The Lessee has obtained insurance coverage covering the
Property acquired and leased to the Lessee on the Closing Date which meets the
requirements of Article XIV of the Lease, and such coverage is in full force and
effect.
(e) Lease. Upon the execution and delivery of each Equipment Schedule, (i)
the Lessee will have unconditionally accepted the Property subject thereto and
will be bound by the terms of the Lease with respect to such Properly and will
have a valid leasehold interest in the Property, subject only to the Permitted
Liens; (ii) the Lessee's obligation to pay Rent will be an independent covenant
and no right of deduction or offset will exist with respect to any Rent or other
sums payable under the Lease; and (iii) no Rent under the Lease will have been
prepaid and the Lessee will have no right to prepay the Rent, except as
specifically set forth therein.
(f) Protection of Interests. (i) On the Closing Date, the Lease, the
Assignment of Lease, the Supplement to Assignment of Lease, the Consent to
Assignment and the Security Agreement are each in a form sufficient, to grant
liens on the Property to the Agent or the Lessor, as the case may be, (ii) the
Agent Financing Statements are each in a form sufficient, and have been filed in
all filing offices necessary, to perfect a first priority security interest in
the Lessor's interest in all Equipment to be located on the Facility subject to
Permitted Liens; and (iii) the Lessor Financing Statements are each in a form
sufficient, and have been filed in all filing offices necessary, to perfect the
Lessor's interest under the Lease to the extent the Lease is a security
agreement.
(g) [Intentionally Omitted].
(h) Conditions Precedent. All conditions precedent contained in this
Agreement and in the other Operative Documents relating to the acquisition and
leasing of the Property by the Lessor have been satisfied in full or waived.
SECTION 8.5. Representations of the Lessee With Respect to Each Advance.
The Lessee hereby represents and warrants as of each Funding Date on which an
Advance is made as follows:
25
(a) Representations. The representations and warranties of the Construction
Agent arid the Lessee set forth in the Operative Documents (including the
representations and warranties set forth in Sections 8.3 and 8.4) are true and
correct in all Material respects on and as of such Funding Date, except to the
extent such representations or warranties relate solely to an earlier date, in
which case such representations and warranties shall have been true and correct
in all Material respects on and as of such earlier date. The Construction Agent
and the Lessee are in compliance in all Material respects with their respective
obligations under the Operative Documents and there exists no Default or Event
of Default which is continuing. No Default or Event of Default will occur as a
result of, or after giving effect to, the Advance requested by the Funding
Request on such date.
(b) Equipment. Construction and installation of the Equipment to date has
been performed in a good and workmanlike manner, substantially in accordance
with the Plans and Specifications and in compliance with all Insurance
Requirements and Requirements of Law.
(c) No Liens. There have been no Liens against the Property other than
Permitted Liens and Liens that have been removed or bonded by or on behalf of
the Lessee to the satisfaction of the Lessor and the Agent. The Participation
Interests funding such Advance are secured by the Lien of the Security Agreement
and the Tranche A Participation Interests funding such Advance are secured by
the Defeasance Deposit and the other Collateral.
(d) Advance. The amount of the Advance requested represents amounts that
the Lessee reasonably believes will be due in the sixty (60) days following such
Advance from the Lessee to third parties in respect of Property Costs, or
amounts paid by the Lessee to third parties in respect of Property Costs for
which the Lessee has not previously been reimbursed by an Advance. The
conditions precedent to such Advance and the related remittances by the
Participants with respect thereto set forth in Section 6 have been satisfied.
(e) Lease. Upon the execution and delivery of each Equipment Schedule to
the Lease and a ▇▇▇▇ of Sale with respect thereto, the Lessee will have
unconditionally accepted the Equipment subject thereto and will have good and
marketable title to such Equipment, subject only to Permitted Liens.
(f) Protection of Interests. On each Funding Date for the acquisition of
Equipment, (i) the applicable Equipment Schedule and the Security Agreement are
each a form sufficient to grant perfected Liens on the Lessee's and the Lessor's
interests, respectively, in the Equipment to the Lessor and Agent, respectively,
(ii) the Agent Financing Statements are each in a form sufficient, and have been
filed in all filing offices necessary, to create a valid and perfected first
priority security interest in such interest in such Equipment, and (iii) the
Lessor Financing Statements are each in a form sufficient, and have been filed
in all filing offices necessary, to perfect the Lessor's interest in such
Equipment under the Lease to the extent the Lease is a security agreement.
26
SECTION 9.
PAYMENT OF CERTAIN EXPENSES
The Lessee agrees, for the benefit of the Lessor, the Agent and the
Participants, that:
SECTION 9.1. Transaction Expenses. (a) The Lessee shall pay, or cause to be
paid, from time to time all Transaction Expenses in respect of the transactions
consummated on the Closing Date or any Funding Date, it being understood and
agreed that neither the Agent, the Lessor nor any Participant shall be required
to advance any Transaction Expenses in connection with the closing. Such
Transaction Expenses, the Defeasance Fee and the Lease Arrangement Fee may be
added to the Property Cost to the extent supported by the Appraisal and agreed
by the Agent and the Participants.
(b) The Lessee shall pay or cause to be paid (i) all Transaction Expenses
of the Lessor, (ii) the Commitment Fees, (iii) the Defeasance Fee, (iv) the
Lease Arrangement Fee, (v) all Transaction Expenses incurred by the Lessee, the
Agent, ABN AMRO or the Lessor in entering into any future amendments or
supplements with respect to any of the Operative Documents, whether or not such
amendments or supplements are ultimately entered into, or giving or withholding
of waivers or consents hereto or thereto, in each case (except after the
occurrence of an Event of Default) which have been requested by or approved by
the Lessee, (vi) all Transaction Expenses incurred by the Lessor, the Lessee,
ABN AMRO or the Agent in connection with any purchase of the Property by the
Lessee or other Person pursuant to Articles XVI, XVII, XX or XXII of the Lease,
and (vii) all Transaction Expenses incurred by any of the other parties hereto
in respect of enforcement of any of their rights or remedies against the Lessee
in respect of the Operative Documents.
SECTION 9.2. Brokers' Fees and Stamp Taxes. The Lessee shall pay or cause
to be paid any brokers' fees arising from the Lessee's relationship with any
Person and any and all stamp, transfer and other similar taxes, fees and
excises, if any, including any interest and penalties, which are payable in
connection with the transactions contemplated by this Participation Agreement
and the other Operative Documents.
SECTION 9.3. Obligations. The Lessee shall pay, on or before the due date
thereof, all costs, expenses and other amounts required to be paid by the
Security Agreement and the Assignment of Lease.
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SECTION 10.
OTHER COVENANTS AND AGREEMENTS
SECTION 10.1. Covenants of the Lessee. The Lessee hereby agrees that so
long as this Participation Agreement is in effect:
(a) Information. The Lessee will deliver to the Lessor, the Participants
and the AGENT:
(i) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Lessee, a statement of financial
position of the Lessee and its consolidated subsidiaries as of the end of
such fiscal year and the related consolidated statements of income,
shareholder's equity and cash flows for such fiscal year, setting forth in
each case in comparative form the figures for the previous fiscal year, all
reported on by independent public accountants of nationally recognized
standing, together with (i) a Responsible Officer's Certificate from the
chief financial officer of the Lessee substantially in the form of Exhibit
S hereto containing a computation of, and showing compliance with, each of
the financial ratios and restrictions contained in this Section 10.1 and
(ii) a certificate from such accountants to the effect that, in making the
examination necessary for the signing of such annual audit report by such
accountants, they have not become aware of any Event of Default or Default
that has occurred and is continuing, or if they have become aware of any
such Event of Default or Default, describing it and the steps, if any,
being taken to cure it;
(ii) as soon as available and in any event within forty-five (45) days
after the end of each of the first three quarters of each fiscal year of
the Lessee, an unaudited consolidated statement of financial position of
the Lessee as of the end of such period and the related consolidated
statements of income, shareholders' equity and cash flows for such period
and for the portion of the Lessee's fiscal year ended at the end of such
period, together with a Responsible Officer's Certificate of the chief
financial officer of the Lessee or other officer responsible for the
financial affairs of the Lessee containing a computation of, and showing
compliance with, each of the financial ratios and restrictions contained in
this Section 10.1 and stating that no Default or Event of Default has
occurred or is continuing or, if any Default or Event of Default has
occurred and is continuing, describing it and the steps, if any, being
taken to cure it;
(iii) promptly after the filing thereof, if applicable, copies
(without exhibits thereto other than, in the case of reports on Form 10-K,
the portions of the annual report incorporated therein by reference) of all
reports on Forms 10oK, 10-Q and 8-K (or their equivalents), which the
Lessee shall have filed with the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended;
(iv) if and when any member of the ERISA Group (1) gives or is
required to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA)
28
with respect to any Plan which might constitute grounds for a termination of
such Plan under Title IV or ERISA, or knows that the plan administrator of any
Plan has given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be given to the
PBGC; (2) receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (3) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer any Plan, a copy of such notice; (4) applies
for a waiver of the minimum funding standard under Section 412 of the Code, a
copy of such application; (5) gives notice of intent to terminate any Plan under
Section 4041(c) of ERISA, a copy of such notice and other information filed with
the PBGC; (6) gives notice of withdrawal from any Plan pursuant to Section 4063
of ERISA, a copy of such notice; or (7) fails to make any payment or
contribution to any Plan or Multiemployer Plan or in respect of any Benefit
Arrangement or makes any amendment to any Plan or Benefit Arrangement which has
resulted or could result in the imposition of a Lien or the posting of a bond or
other security, a certificate of the chief financial officer or the chief
accounting officer of the Lessee setting forth details as to such occurrence and
action, if any, which the Lessee or applicable member of the ERISA Group is
required or proposes to take;
(v) promptly after the occurrence of any Default or Event of Default, notice
thereof in writing, together with information regarding the steps, if any, being
taken to cure it; and
(vi) from time to time such additional information regarding the Lessee, the
Lessee or the Property as the Lessor or the Agent, at the request of any
Participant, may reasonably request.
(b) Compliance with Laws. The Lessee will, and will cause its Subsidiaries to,
comply in all material respects with all applicable laws, ordinances, rules,
regulations, orders and requirements of governmental authorities (including,
without limitation, Environmental Laws and ERISA and the rules and regulations
thereunder) except where the necessity of compliance therewith is contested in
good faith by appropriate proceedings and such contest is not reasonably likely
to result in a Material Adverse Effect.
(c) Further Assurances. The Lessee shall take or cause to be taken from time
to time all action necessary to assure during the Term that title to the
Property remains in the Lessor as contemplated by Section 12.1 of the Lease,
that the Lessor holds a perfected Lien on the Property securing the Lease
Balance as contemplated by Section 7.1 of the Lease, and that the Agent holds a
perfected Lien on the Property and the Lease securing the repayment of the
Participation Interests.
(d) Existence; Franchises; Businesses. Except as otherwise expressly permitted
in this Agreement, the Lessee shall, and shall cause each Subsidiary to (i)
maintain in full force and effect its separate existence and all rights,
licenses, leases and franchises reasonably necessary to
29
the conduct of its business, and (ii) continue doing business as a whole
in the lines of business in which they were engaged on the Closing Date.
(e) Books and Records. The Lessee shall, and shall cause each Subsidiary
to, maintain its books and records in accordance with GAAP, and permit the
Lessor and each Participant to make or cause to be made inspections and audits
of any books, records and papers of the Lessee and its Subsidiaries and to make
extracts therefrom at all such reasonable times and as often as any such Person
may reasonably require.
(f) Minimum Consolidated Quick Ratio. The Lessee shall maintain at all
times a minimum Consolidated Quick Ratio of [*].
(g) Minimum Consolidated Tangible Net Worth. At no time will the Lessee's
Consolidated Tangible Net Worth be less than an amount equal to the sum of (i)
[*] of the Lessee's Consolidated Tangible Net Worth at
September 30, 1996 plus (ii) an amount equal to [*] of the Lessee's Consolidated
Net Income for each fiscal quarter of the Lessee beginning with the quarter
ending on December 31, 1996 (but with no deduction on account of negative
Consolidated Net Income for any fiscal quarter) plus (iii) one hundred percent
(100%) of the aggregate net proceeds, including the fair market value of
property other than cash (as determined in good faith by the Board of Directors
of the Lessee), received by the Lessee from the issuance and sale after
September 30, 1996 of any capital stock of the Lessee (including the issuance
and sale of any capital stock (x) to a Subsidiary of the Lessee or (y) which is
required to be redeemed, or is redeemable at the option of the holder, if
certain events or conditions occur or exist or otherwise) or in connection with
the conversion or exchange of any Indebtedness of the Lessee into capital stock
of the Lessee after September 30, 1996.
(h) Maximum Consolidated Total Liabilities to Consolidated Tangible Net
Worth. At no time shall the ratio of the Lessee's Consolidated Total Liabilities
to Consolidated Tangible Net Worth be greater than [*].
(i) Minimum Consolidated Fixed Charge Ratio. The Lessee shall maintain at
all times a minimum Consolidated Fixed Charge Ratio of [*], commencing
with the four quarter period ending on December 31, 1996.
(j) Profitability. The Lessee (i) shall not incur net losses (but excluding
any non-recurring non-cash charges) in any two consecutive fiscal quarters as
measured at the end of any fiscal quarter commencing with the fiscal quarter
ending on December 31, 1996 and (ii) shall not permit Consolidated Net Income
(but excluding any non-recurring non-cash charges) to be less than $0, as
measured at the end of any fiscal quarter for the previous four quarters on a
rolling four-quarter basis commencing with the four quarter period ending on
December 31, 1996. In the event the Lessee incurs a net loss in any fiscal
quarter, no such net loss shall exceed [*].
(k) Liens. The Lessee shall not, and shall not permit any Subsidiary to,
create, assume, or permit to exist, any Lien on any of its property or assets
now owned or hereafter acquired except (i) Liens in favor of the Lessor or the
Agent under the Operative Documents, (ii) statutory
[* CONFIDENTIAL INFORMATION]
▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇, (▇▇▇) easements, rights-of-way, zoning and similar
restrictions and other similar charges of encumbrances not interfering with the
ordinary conduct of business on assets other than the Property and which do not
detract materially from the value of the property to which they attached or
impair materially the use thereof, (iv) Liens created to secure purchase money
Indebtedness, Capitalized Lease Obligations or Off-Balance Sheet Debt, provided
that such Liens are only in respect of the property or assets subject to, and
secure only, such Indebtedness, (v) Permitted Liens and (vi) Liens permitted
under the Fab 2 Real Property Participation Agreement and related Operative
Documents. Notwithstanding the foregoing there shall be no Liens on (A) any of
the Defeasance Deposit or the Collateral other than Liens in favor of the Lessor
and the Agent, for the benefit of the Participants or on (B) the Fab 2 Real
Property Cash Collateral, the Fab 2 Defeasance Deposit or the Collateral (as
defined in the Fab 2 Real Property Participation Agreement), except as permitted
in such Participation Agreement.
(1) Fundamental Changes. The Lessee shall not, nor shall it permit any
Subsidiary to, enter into any merger, consolidation or amalgamation, or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution); convey, sell, assign, transfer or otherwise dispose of all or
substantially all of the property, business or assets of the Lessee and its
Subsidiaries; provided, however, that if(i) at least thirty (30) days prior to
the consummation of such transaction the Lessee shall have furnished to the
Lessor, the Participants and the Agent a Responsible Officer's Certificate of
the chief financial officer of the Lessee that no Default or Event of Default
shall occur after giving effect thereto, and (ii) no Default or Event of Default
shall have occurred before or after giving effect thereto:
(A) any Subsidiary of the Lessee may be merged or consolidated with or into
the Lessee (provided, however, that the Lessee shall be the continuing or
surviving corporation) or with or into any one or more wholly-owned Subsidiaries
of the Lessee (provided, however, that the wholly-owned Subsidiary or
Subsidiaries shall be the continuing or surviving corporation);
(B) any wholly-owned Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or otherwise) to
the Lessee or any other wholly-owned Subsidiary of the Lessee; and
(C) the Lessee may merge or consolidate with any other Person so long as
the Lessee is the surviving corporation.
(m) Transactions with Affiliates. The Lessee shall not, nor shall it permit
any Subsidiary to, conduct any business or enter into any transaction or series
of similar transactions (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate of the Lessee or
any legal or beneficial owner of 5% or more of any class of capital stock of the
Lessee or with any Affiliate of such owner unless the terms of such business,
transaction or series of transactions are (i) as favorable to the LeSsee or such
Subsidiary as terms that would be obtainable at the time for a comparable
transaction or series of similar transactions in arm's-length dealings with an
unrelated third Person or, if such transaction is not one which by its nature
could be obtained from such Person, is on fair and reasonable terms and (ii) are
in the ordinary course of business or, if not in the ordinary course of
business, are set forth in writing and the board of
31
directors of the Lessee or such Subsidiary, as the case may be, has determined
in good faith that such business or transaction or series of transactions meet
the applicable criteria set forth in clause (i) above.
(n) Restricted Payments. The Lessee shall not, nor shall it cause or permit any
of its Subsidiaries to, make any Restricted Payment; provided, that (i) Lessee's
Subsidiaries may make dividends, distributions and payments to the Lessee, and
(ii) the Lessee may (A) make loans to its employees and purchase the Lessee's
stock from its employees in the ordinary course of business, (B) make other
Restricted Payments in the ordinary course of business and (C) make other
Restricted Payments, provided that the aggregate of which Restricted Payments
made under clauses (ii)(A), (B) and (C) shall not exceed $5,000,000 during the
Term.
(o) No Impairment of Deposits. The Lessee shall not, nor shall it permit any of
its Subsidiaries to, directly or indirectly, enter into or become bound by any
agreement, instrument, indenture or other obligation which could directly or
indirectly restrict, prohibit or require the consent of any Person to the making
by the Lessee of any deposit constituting part of the Defeasance Deposit or the
realization thereon or utilization thereof (or of any earnings thereon or of any
other Collateral) by the Lessor, the Agent or any of the Participants.
(p) Investments. The Lessee shall not, nor shall it permit any of its
Subsidiaries to, make any investment in, or make or accrue loans or advances of
money to any Person, through the direct or indirect lending of money, holding of
securities or otherwise, other than Permitted Investments, and except as
permitted or required in Sections 10.1 (1) and (n).
SECTION 10.2. Cooperation with the Lessee. The Lessor, the Participants and the
Agent shall, to the extent reasonably requested by the Lessee (but without
assuming additional liabilities, duties or other obligations on account
thereof), at the Lessee's expense, cooperate with the Lessee in connection with
its covenants contained herein including, without limitation, at any time and
from time to time, upon the request of the Lessee, to promptly and duly execute
and deliver any and all such further instruments, documents and financing
statements (and continuation statements related thereto) as the Lessee may
reasonably request in order to perform such covenants.
SECTION 10.3. Covenants of the Lessor. The Lessor hereby agrees that so long as
this Participation Agreement is in effect:
(a) Discharge of Liens. The Lessor will not create or permit to exist at any
time, and will, at its own cost and expense, promptly take such action as may be
necessary duly to discharge, or to cause to be discharged, all Lessor Liens on
the Property attributable to it; provided, however, that the Lessor shall not be
required to so discharge any such Lessor Lien while the same is being contested
in good faith by appropriate proceedings diligently prosecuted so long as such
proceedings shall not involve any material danger of impairment of the Liens of
the Lease or the Security Documents or of the sale, forfeiture or loss of, and
shall not interfere with the use or disposition of, the Property or title
thereto or any interest therein or the payment of Rent.
32
(b) Change of Chief Place of Business. The Lessor shall give prompt notice to
the Lessee and the Agent if the Lessor's chief place of business or chief
executive office, or the office where the records concerning the accounts or
contract rights relating to the Property are kept, shall cease to be located at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or if it shall change its
name, identity or corporate structure.
SECTION 11. PARTICIPATIONS
SECTION 11.1. Amendments; Actions on Default. (a) The Lessor shall have the
right to forebear from exercising rights against the Lessee to the extent the
Lessor shall determine in good faith that such forbearance is appropriate and is
permitted by Section 15.5 and Sections 11.1, 11.2 and 11.3. Upon the direction
of the Required Participants, the Lessor shall execute any waiver, modification
or amendment of the Lease or the Construction Agency Agreement requested by the
Lessee; provided, that: (i) the waiver, modification or amendment is not
prohibited by the forgoing provisions of this Agreement, (ii) the waiver,
modification or amendment does not (A) increase the amount the Lessor may be
required to pay to the Lessee or anyone else, or (B) reduce or postpone (and
cannot reasonably be expected to reduce or postpone) any payments that the
Lessor would, but for such modification or amendment, be expected to receive, or
(C) release the Lessor's interest in all or a substantial part of the Property;
and (iii) the Lessor is not excused from executing the waiver, modification or
amendment by Section 11-3.
(b) The Lessor will, with reasonable promptness, provide each Participant with
copies of all default notices it sends or receives under the Lease or
Construction Agency Agreement and notify each Participant of any Event of
Default under the Lease of which it is aware and of any other matters which, in
the Lessor's reasonable judgment, are likely to materially affect the payments
each Participant will be required to make or be entitled to receive under this
Agreement, but the Lessor will not in any event be liable to any Participant for
the Lessor's failure to do so unless such failure constitutes gross negligence
or willful misconduct on the part of the Lessor.
(c) Before taking possession of the Property or exercising foreclosure or
offset rights against the Property or filing any lawsuit against the Lessee
because of any breach by the Lessee of the Operative Documents or if requested
in writing by any Participant at any time when an Event of Default has occurred
and is continuing, the Lessor shall promptly call a meeting with each
Participant and the Agent to discuss what, if anything, the Lessor should do.
Such meeting shall be scheduled during regular business hours in the offices of
the Agent, or another appropriate location in San Francisco, California, not
earlier than five (5) and not later than twenty (20) Business Days after the
Lessor's receipt of the written request from a Participant. If the Required
Participants shall direct the Lessor in writing to (a) send any default notices
required before a Default can become an Event of Default, or (b) bring a lawsuit
against the Lessee to enforce the Operative Documents when an Event of Default
has occurred and is continuing, then the Lessor shall send the notice or bring
the suit, and the Lessor shall prosecute any such suit with reasonable diligence
using reputable counsel. However, if the Agent is not a member of the Required
Participants voting
33
pursuant to this subsection 11.1 (d) in favor of the giving of any such notice
or the bringing of any such suit, then the Lessor may require that it first
receive the written agreement (in form reasonably acceptable to the Lessor) of
the members of the Required Participants so voting to indemnify the Agent and
the Lessor from and against all costs, liabilities and claims that may be
incurred by or asserted against the Lessor because of the action the Required
Participants direct the Agent or the Lessor to take. In no event shall any
Participant instigate any suit or other action directly against the Lessee with
respect to the Operative Documents or the Property, even if such Participant
would, but for this agreement, be entitled to do so as a third party beneficiary
or otherwise under the Operative Documents.
(d) In the event the Lessee or its designee fails to purchase the Property after
any exercise of its Purchase Option or Expiration Date Purchase Obligation or
following the occurrence and continuance of an Event of Default, the Lessor
shall, if the Required Participants shall agree in writing, bring suit against
the Lessee to enforce the Operative Documents in such form as shall be
recommended by reputable counsel, and thereafter the Lessor shall prosecute the
suit with reasonable diligence in accordance with the advice of reputable
counsel. If the Lessor acquires the interests of the Lessee in any of the
Property as a result of such suit or otherwise, the Lessor shall thereafter
proceed with reasonable diligence to sell the Property in a commercially
reasonable manner to one or more bona fide third party purchasers and shall in
any event endeavor to consummate the sale of the entire Property (through a
single sale of the entire Property or a series of sales of parts) within five
(5) years following the date the Lessor recovers possession of the Property at
the best price or prices the Lessor believes are reasonably attainable within
such time. Further, after the Designated Payment Date and until the Lessor sells
the Property, the Lessor shall (i) endeavor in good faith to maintain, or shall
obtain the agreement of one or more of such tenants to maintain, the Property in
good order and repair, (ii) procure and maintain casualty insurance against
risks customarily insured against by owners of comparable properties, in amounts
sufficient to eliminate the effects of coinsurance, (iii) keep and allow each
Participant to review accurate books and records covering the operation of the
Property, and (iv) pay prior to delinquency all taxes and assessments lawfully
levied against the Property.
(e) Notwithstanding the foregoing, Defaulting Participants shall have no voting
or consent rights under this Section 11.1 and no rights to require the Lessor to
call a meeting pursuant to Section 11.1 (d) until they cease to be Defaulting
Participants. During any period that any Defaulting Participants have no voting
rights under this Section 11.1. only the Commitment Percentages of the other
Participants that still have voting rights will be considered for purposes of
determining the Required Participants.
SECTION 11.2. General. Subject to the limitations set forth in
Section 11.1 and Section 14:
(a) The Lessor shall have the exclusive right to take any action and to exercise
any available powers, rights and remedies to enforce the obligations of the
Lessee under the Operative Documents, or to refrain from taking any such action
or exercising any such power, right or remedy.
34
(b) The Lessor shall be entitled to (i) give any consent, waiver or approval
requested by the Lessee with respect to any construction or other approval
contemplated in the Lease or (ii) waive or consent to any adverse title claims
affecting the Property, provided that, in either case, such action will not have
a material adverse effect on the Lessee's obligations or ability to make the
payments required under the Operative Documents, the Lessor's rights and
remedies under the Operative Documents or any Participant's rights hereunder.
SECTION 11.3 Conflicts. Notwithstanding anything to the contrary herein
contained, the Lessor shall be entitled, even over the objection of each
Participant or the Required Participants, (i) to take any action required of the
Lessor by, or to refrain from taking any action prohibited by, the Operative
Documents or any law, rule or regulation to which the Lessor is subject
(provided, that this Section shall not be construed to authorize the Lessor to
take any action required by a modification of the Operative Documents prohibited
by Section 11.1), and (ii) after notice to the Participants, to bring and
prosecute a suit against the Lessee in the form recommended by and in accordance
with advice of reputable counsel at any time when a breach of the Operative
Documents by the Lessee shall have put the Lessor (or any of its officers or
employees) at risk of criminal prosecution or significant liability to third
parties or at any time after the Lessee or its designee fails to purchase the
Property on the Designated Payment Date. Nothing herein contained shall be
construed to require the Lessor to agree to modify the Operative Documents or to
take any action or refrain from taking any action in any manner that could
increase the Lessor's liability to the Lessee or others, that could reduce or
postpone payments to which the Lessor is entitled thereunder, or that could
reduce the scope and coverage of the indemnities provided for the Lessor's
benefit therein.
SECTION 11.4. Refusal to Give Consents or Fund. If any Participant declines to
consent to any amendment, modification, waiver, release or consent for which
such Participant's consent is requested or required by reason of this Agreement,
or if any Participant fails to pay any amount owed by it hereunder, the Lessor
shall have the right, but not the obligation and without limiting any other
remedy of the Lessor, to terminate such Participant's rights to receive any
further payments under Section 3 of this Agreement (other than payments required
because of the Lessor's collection of any Rent applied by the Lessor as
reimbursement for a Defaulted Amount or interest on a Defaulted Amount) by
paying such Participant a termination fee equal to the total of:
(i) all amounts actually advanced by such Participant to the Lessor under
Section 3.4 hereof before the termination; excluding, however, any such amounts
that were repaid to such Participant before the termination by actual payments
made to such Participant by the Lessor of, or the Lessor's offset against, sums
representing:
(A) Such Participant's Commitment Percentage times any payments of Rent received
by the Lessor under the Lease; plus
(B) Such Participant's Commitment Percentage times any sales proceeds received
by the Lessor under the Lease; and
(ii) Such Participant's Commitment Percentage, times:
35
(A) the then accrued but unpaid Basic Rent and Commitment Fees due
under the Lease and hereunder; plus
(B) interest on past due amounts described in the preceding clause (A)
computed at the Federal Funds Effective Rate; plus
(C) interest on any amounts (other than interest itself) past due from
the Lessee or its designees under the Operative Documents, computed at the
Federal Funds Effective Rate.
Such Participant's rights to receive payments equal to such Participant's
Commitment Percentage of any Rent applied by the Lessor as reimbursement for a
Defaulted Amount or interest on a Defaulted Amount shall not be impaired or
affected by any termination contemplated in this Section 11.4; accordingly, the
Lessor shall not, as a condition to such a termination, be required to reimburse
such Participant for any payments such Participant has made in connection with
Defaulted Amounts pursuant to Section 3.3.
SECTION 11.5. Required Repayments. Each Participant shall repay to the
Lessor, upon written request or demand by the Lessor (i) any sums paid by the
Lessor to such Participant under this Agreement from, or that were computed by
reference to, any Rent or other amounts which the Lessor shall be required to
return or pay over to another party, whether pursuant to any bankruptcy or
insolvency law or proceeding or otherwise and (ii) any interest or other amount
that the Lessor is also required to pay to another party with respect to such
sums. Such repayment by any Participant shall not constitute a release of such
Participant's right to receive such Participant's Commitment Percentage times
the amount of any such Rent or any such other amount (or any interest thereon)
that the Lessor may later recover.
SECTION 11.6. Indemnification. Each Participant agrees to indemnify and
defend the Lessor (to the extent not reimbursed by the Lessee within ten (10)
days after demand) from and against such Participant's Commitment Percentage of
any and all liabilities, obligations, claims, expenses or disbursements
(including reasonable fees of attorneys, accountants, experts and advisors) of
any kind or nature whatsoever (in this Section 11.6 collectively called "Covered
Liabilities") which to any extent (in whole or in part) may be imposed on,
incurred by or asserted against the Lessor growing out of, resulting from or in
any other way associated with the Property or the Operative Documents (including
the enforcement thereof, whether exercised upon the Lessor's own initiative or
upon the direction of the Required Participants) and the transactions and events
at any time associated therewith or contemplated therein. The foregoing
indemnification shall apply whether or not such Covered Liabilities are in any
way or to any extent caused, in whole or in part, by any negligent act or
omission of any kind by the Lessor; provided, only that no Participant shall be
obligated under this Section 11.6 to indemnify the Lessor (i) for Covered
Liabilities incurred in connection with any transfer or assignment by the Lessor
of its right to receive Rent or its rights and interests in and to the Property,
the Operative Documents or this Agreement to its Affiliates or (ii) for that
portion or percentage, if any, of any of the Covered Liabilities which is
proximately caused by: (A) the Lessor's own gross negligence or willful
misconduct; (B) any representation made by the Lessor in the Operative Documents
that is false in any material respect and that the Lessor knew
36
was false at the time of the Lessor's execution of the Operative Documents; or
(C) Lessor Liens not claimed by, through or under any of the Participants. After
each Participant has paid its Percentage of any Covered Liabilities, each
Participant shall be entitled to payment from the Lessor of an amount equal to
the Adjusted Percentage (as defined below) of any payments subsequently received
by the Lessor as Excess Reimbursement (as defined below) for such Covered
Liabilities. As used in this Section "Adjusted Percentage" shall equal (i) such
Participant's Commitment Percentage, divided by (ii) the sum of the Commitment
Percentages of all Participants who have paid the Lessor their respective shares
of the Covered Liabilities at issue. As used in this Section, the term "Excess
Reimbursement" shall mean, for the Covered Liabilities at issue, amounts
reimbursed or paid by the Lessee to or on behalf of the Lessor on account of
such Covered Liabilities in excess of (i) such Covered Liabilities, times (ii)
the Commitment Percentages of any Participants that have not paid the Lessor
their respective Percentages of such Covered Liabilities.
SECTION 11.7. Required Supplemental Payments. In the event that the Lessee fails
to pay any Required Supplemental Payment when due (a "Defaulted Amount"), the
Lessor shall notify each Participant of such Defaulted Amount, whereupon each
Participant shall pay to the Lessor an amount equal to such Participant's
Commitment Percentage times the Defaulted Amount; such payment from Participant
to the Lessor shall be due prior to 2:00 p.m., San Francisco time, on the date
of such notice if such notice is given by 12:00 noon, San Francisco time,
otherwise prior to 12:00 noon, San Francisco time, on the next Business Day
following such notice. After payment of a Participant's Commitment Percentage
times the Defaulted Amount, any payments subsequently received by the Lessor
from the Lessee as reimbursement for such Defaulted Amount, and any interest
received by the Lessor from the Lessee that accrued on the Defaulted Amount
after the date of such Participant's payment of its Commitment Percentage times
the Defaulted Amount, will constitute Supplemental Rent for purposes of
computing payments due such Participant under this Agreement.
SECTION 11.8. Application of Payments Received From Defaulting Participant As a
Cure For Payment Defaults. If after a failure to make a payment required by
Section 3.4, any Defaulting Participant cures such failure, in whole or in part,
by paying to the Lessor all or pan of such payment and interest thereon at the
Late Payment Rate, then the Lessor shall apply the payments so made to the
Lessor, net of the costs of collecting such payments (the "Net Cure Proceeds"),
or other funds available to the Lessor equal to the Net Cure Proceeds, in the
following order before applying the same to any other purpose:
(i) first, to make payments to the Lessor itself equal to its Excess Investment
(if any) until the Lessor shall no longer have any Excess Investment; and
(ii) second, to make further Advances to the Lessee under this Agreement to the
extent the Lessor is required or deems it appropriate to do so; provided, that
such further Advances do not cause the total Property Cost to exceed the sum of
the Commitments.
SECTION 11.9. Order of Application. For purposes of this Agreement, the Lessor
shall be entitled, but not required, to apply any payments received from the
Lessee under the Operative Documents to satisfy (1) unpaid Required Supplemental
Payments (and interest thereon) not
37
included in Rent, if any, and (2) costs incurred by the Lessor because of any
sale under the Lease before applying such payments to satisfy the Lessee's other
obligations, regardless of how the Lessee may have designated such payments.
SECTION 11.10. Investments Pending Dispute Resolution; Overnight
Investments. Whenever the Lessor in good faith determines that it does not have
all information needed to determine how payments to Participants must be made on
account of any then existing Participation Interests which the Lessor has
received, or whenever the Lessor in good faith determines that there is any
dispute among the Participants about payments which must be made on account of
Participation Interests actually received by the Lessor, the Lessor may choose
to defer the payments which are the subject of such missing information or
dispute. However, to minimize any such deferral, the Lessor shall attempt
diligently to obtain any missing information needed to determine how payments to
the Participants must be made. Also, pending any such deferral, or if the Lessor
is otherwise required to invest funds pending distribution to the Participants,
the Lessor shall invest funds equal to (i) the total of the Commitment
Percentages of all Participants to whom payments have not been made with respect
to the Participation Interests at issue, times (ii) the total percentages at
issue. In addition, the Lessor shall endeavor to invest payments of
Participation Interests it receives after 12:00 noon, San Francisco time, on the
day in question that are to be paid to a Participant on the next Business Day
pursuant to Section 3; provided that the Lessor shall have no liability to any
Participant if the Lessor is unable to make such investments. Investments by the
Lessor shall be in the overnight federal funds market pending distribution, and
the interest earned on each dollar of principal so invested shall be paid to the
Person entitled to receive such dollar of principal when the principal is paid
to such Person.
SECTION 11.11. Agent to Exercise Lessor's Rights. The Lessor has assigned
its interest in the Lease to the Agent, for the benefit of the Participants,
pursuant to the Assignment of Lease. To the extent provided therein, the rights,
remedies, duties and responsibilities of the Lessor contained in this Section 11
and in the other Operative Documents with respect thereto shall be exercisable
by, binding upon and inure to the benefit of the Agent, for the benefit of the
Participants.
SECTION 11.12. Exculpatory Provisions Regarding the Lessor. Subject to the
provisions of Section 11.11, each Participant hereby irrevocably authorizes the
Lessor to take such actions on its behalf as are expressly vested in or
delegated to the Lessor by the terms of this Agreement and the other Operative
Documents, together with such powers as are reasonably incidental thereto. The
provisions of the following Sections of this Agreement are hereby incorporated
by reference into this Section 11.12, substituting the word "Lessor" for "Agent"
therein:
(i) Section 14.1 - second sentence.
(ii) Section 14.2 - all.
(iii) Section 14.3 - all.
(iv) Section 14.4 - all.
38
(V) SECTION 14.5 - first sentence.
(IV) SECTION 14.6 - last sentence.
SECTION 12.
TRANSFERS OF PARTICIPANTS' INTERESTS
SECTION 12.1. Restrictions on and Effect of Transfer by Participants. No
Participant may (without the prior written consent of the Agent and Lessee (not
to be unreasonably withheld)) assign, convey or otherwise transfer (including
pursuant to a participation) all or any portion of its right, title or interest
in, to or under its Participation Interest or any of the Operative Documents or
the Property, provided that (x) any Participant may pledge its interest without
the consent of the Agent or the Lessee to any Federal Reserve Bank, and (y)
without the prior written consent of the Agent, any Participant may transfer all
or any portion of its interest to any Affiliate of such Participant or to any
other existing Participant; provided that in the case of any transfer (other
than to such Affiliate) each of the following conditions and any other
applicable conditions of the other Operative Documents are satisfied:
(a) Required Notice and Effective Date. Any Participant desiring to effect a
transfer of its interest shall give written notice of each such proposed
transfer to the Lessee, the Agent and each other Participant at least five (5)
Business Days prior to such proposed transfer, setting forth the name of such
proposed transferee, the percentage or interest to be retained by such
Participant, if any, and the date on which such transfer is proposed to become
effective. All reasonable out-of-pocket costs (including, without limitation,
legal expenses) incurred by the Lessor, the Agent or any Participant in
connection with any such disposition by a Participant under this Section 12.1
shall be borne by such transferring Participant. In the event of a transfer
under this Section 12.1, any expenses incurred by the transferee in connection
with its review of the Operative Documents and its investigation of the
transactions contemplated thereby shall be borne by such transferee or the
relevant Participant, as they may determine, but shall not be considered costs
and expenses which the Lessee is obligated to pay or reimburse under Section 9.
Any such proposed transfer shall become effective upon the later of(i) the date
proposed in the transfer notice referred to above and (ii) the date on which all
conditions to such transfer set forth in this Section 12.1 shall have been
satisfied.
(b) Assumption of Obligations. Any transferee pursuant to this Section 12.1
shall execute and deliver to the Agent and the Lessee an Assignment and
Acceptance in substantially the form attached as Exhibit J ("Assignment and
Acceptance"), duly executed by such transferee and the transferring Participant,
and a letter in substantially the form of the Participant's Letter attached
hereto as Exhibit K ("Participant's Letter"), and thereupon the obligations of
the transferring Participant under the Operative Documents shall be
proportionately released and reduced to the extent of such transfer. Upon any
such transfer as above provided, the transferee shall be deemed to be bound by
all obligations (whether or not yet accrued) under, and to have become a party
to, all Operative Documents to which its transferor was a party, shall be deemed
the pertinent
39
"Participant" for all purposes of the Operative Documents and shall be deemed to
have made that portion of the payments pursuant to this Participation Agreement
previously made or deemed to have been made by the transferor represented by the
interest being conveyed; and each reference herein and in the other Operative
Documents to the pertinent "Participant" shall thereafter be deemed a reference
to the transferee, to the extent of such transfer, for all purposes. Upon any
such transfer, the Agent shall deliver to each Participant, the Lessor and the
Lessee a new Schedule I and Schedule II to this Agreement, revised to reflect
the relevant information for such new Participant and the Commitment of such new
Participant (and the revised Commitment of the transferor Participant if it
shall not have transferred its entire interest).
(c) Employee Benefit Plans. No Participant may make any such assignment,
conveyance or transfer to or in connection with any arrangement or understanding
in any way involving any employee benefit plan (or its related trust), as
defined in Section 3(3) of ERISA, or with the assets of any such plan (or its
related trust), as defined in Section 4975(e)(1 ) of the Code.
(d) Representations. Notwithstanding anything to the contrary set forth
above, no Participant may assign, convey or transfer its interest to any Person,
unless such Person shall have delivered to the Agent and the Lessee a
certificate confirming the accuracy of the representations and warranties set
forth in Section 8 with respect to such Person (other than as such
representation or warranty relates to the execution and delivery of Operative
Documents) and representing that such Person has, independently and without
reliance upon the Agent, any other Participant or, except to the extent of the
Lessee's representations made under the Operative Documents when made, the
Lessee, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into this transaction,
the Property and the Lessee and made its own decision to enter into this
transaction.
(e) Amounts; Agent's Fee. Any transfer of a Participation Interest shall be
in a principal amount which is equal to or greater than $2,000,000. Each
transferring Participant shall pay to the Agent a transfer fee of $2,500.
(f) Applicable Law. Such transfer shall comply with Applicable Law and
shall not require registration under any securities law applicable thereto.
(g) Effect. From and after any transfer of its Participation Interest the
transferring Participant shall be released, to the extent assumed by the
transferee, from its liability and obligations hereunder and under the other
Operative Documents to which such transferor is a party in respect of
obligations to be performed on or after the date of such transfer. Upon any
transfer by a Participant as above provided, any such transferee shall be deemed
a "Participant" for all purposes of such documents and each reference herein to
a Participant shall thereafter be deemed a reference to such transferee for all
purposes to the extent of such transfer, except as the context may otherwise
require. Notwithstanding any transfer as provided in this Section 12.1, the
transferor shall be entitled to all benefits accrued and all fights vested prior
to such transfer, including, without limitation, fights to indemnification under
this Participation Agreement or any other Operative Document.
40
SECTION 12.2. Covenants and
Agreements of Participants.
(a) Participations. Each
Participant covenants and
agrees that it will not
grant Participations in its
Participation Interest to
any Person (a
"Sub-Participant") unless
such participation complies
with Applicable Law and does
not require registration
under any securities law
applicable thereto and such
Sub-Participant (i) is a
bank or other financial
institution and (ii)
represents and warrants, in
writing, to such Participant
for the benefit of the
Participants, the Lessor and
the Lessee that (A) no part
of the funds used by it to
acquire an interest in any
Participation Interest
constitutes assets of any
"employee benefit plan" (as
defined in Section 3(3) of
ERISA) which is subject to
Title I of ERISA, or "plan"
(as defined in Section
4975(e)(1) of the Code) and
(B) such Sub-Participant is
acquiring its interest for
investment purposes without
a view to the distribution
thereof. Any such Person
shall require any transferee
of its interest in its
Participation Interest to
make the representations and
warranties set forth in the
preceding sentence, in
writing, to such Person for
its benefit and the benefit
of the Participants, the
Lessor and Lessee. In the
event of any such sale by a
Participant of a
participating interest in
its Participation Interest
to a Sub-Participant, such
participant's obligations
under this Participation
Agreement and under the
other Operative Documents
shall remain unchanged, such
Participant shall remain
solely responsible for the
performance thereof, such
Participant shall remain the
holder of its Participation
Interest, for all purposes
under this Participation
Agreement and under the
other Operative Documents,
and the Lessor, the Agent
and, except as set forth in
Section 12.2(b), the Lessee
shall continue to deal
solely and directly with
such Participant in
connection with such
Participant's rights and
obligations under this
Participation Agreement and
under the other Operative
Documents.
(b) Transferee Indemnities.
Each Sub-Participant shall
be entitled to the benefits
of Sections 13.5, 13.6, and
13.7 and 13.10 with respect
to its participation in the
Participation Interests
outstanding from time to
time; provided that no
Sub-Participant shall be
entitled to receive any
greater amount pursuant to
such Sections than the
transferor Participant would
have been entitled to
receive in respect of the
amount of the participation
transferred by such
transferor Participant to
such Sub-Participant had no
such transfer or
participation occurred.
SECTION 12.3. Future Participants.
Each Participant shall be deemed
to be bound by and, upon
compliance with the requirements
of this Section 12, will be
entitled to all of the benefits
of the provisions of, this
Participation Agreement.
SECTION 13.
INDEMNIFICATION
SECTION 13.1. General
Indemnification. The Lessee
agrees, whether or not any of the
transactions contemplated hereby
shall be consummated, to assume
liability for, and to indemnify,
protect, defend, save and keep
harmless each Indemnitee, on an
After Tax Basis, from and
against, any and all Claims that
may be imposed on, incurred by or
asserted against such Indemnitee
(whether because of action or
omission by such Indemnitee or
otherwise), whether or not such
Indemnitee shall also be
indemnified as to any such Claim
by any other Person and whether
or not
41
such Claim arises or accrues prior to
the Closing Date or after the
Expiration Date, in any way relating
to or arising out of:
(a) any of the Operative
Documents or any of the
transactions contemplated
thereby or any violation
thereof, and any amendment,
modification or waiver in
respect thereof;
(b) the Property, the Lease or any part
thereof or interest therein;
(c) the purchase, design,
construction, preparation,
installation, inspection,
delivery, non-delivery,
acceptance, rejection,
ownership, management,
possession, operation,
rental, lease, sublease,
repossession, maintenance,
repair, alteration,
modification, addition or
substitution, storage,
transfer of title,
redelivery, use, financing,
refinancing, disposition,
operation, condition, sale
(including, without
limitation, any sale
pursuant to Sections 16.2,
16.3, 16.4, 17.2(c), 17.2(e)
or 17.4 of the Lease or any
sale pursuant to Articles XX
or XXII of the Lease, return
or other disposition of all
or any part or any interest
in the Property or the
imposition of any Lien (or
incurring of any liability
to refund or pay over any
amount as a result of any
Lien) thereon, including,
without limitation: (1)
Claims or penalties arising
from any violation of
federal, state or local law,
nile, regulation or order or
in tort (strict liability or
otherwise), (2) latent or
other defects, whether or
not discoverable, (3) any
Claim based upon a violation
or alleged violation of the
terms of any restriction,
easement, condition or
covenant or other matter
affecting title to the
Property, (4) the making of
any Modifications in
violation of any standards
imposed by any insurance
policies required to be
maintained by Lessee
pursuant to the Lease which
are in effect at any time
with respect to the Property
or any part thereof, (5) any
Claim for patent, trademark
or copyright infringement,
and (6) Claims arising from
any public improvements with
respect to the Property
resulting in any charge or
special assessments being
levied against the Property
or any plans to widen,
modify or realign any street
or highway adjacent to the
Property;
(d) [reserved];
(e) the breach by the
Lessee of any covenant,
representation or warranty
made by it or deemed made by
it in any Operative Document
or any certificate required
to be delivered by any
Operative Document;
(f) the retaining or
employment of any broker,
finder or financial advisor
by the Lessee to act on its
behalf in connection with
this Participation
Agreement, or the incurring
of any fees or commissions
to which the Lessor might be
subjected by virtue of
entering into the
transactions contemplated by
this Participation Agreement;
(g) the existence of any Lien
on or with respect to the
Property, any Basic Rent or
Supplemental Rent, title
thereto, or any interest
therein including any Liens
which arise out of the
possession, use, occupancy,
construction, repair or
rebuilding of the Property
or by reason of labor or
materials furnished or
claimed to have been
furnished to the Lessee, the
Lessor or any of their
contractors or agents or by
reason of the financing of
the Property or
Modifications constructed by
the Lessee, except Lessor
Liens and Liens in favor of
the Agent or the Lessor; or
42
(h) the transactions
contemplated by the Lessee
hereby or by any other
Operative Document, in
respect of the application
of Parts 4 and 5 of Subtitle
B of Title I of ERISA and
any prohibited transaction
described in Section 4975(c)
of the Code (other than any
Claim resulting from a
breach of representation or
warranty of the Lessor or
any Participant);
provided, however, the Lessee shall not
be required to indemnify (x) the
Lessor for any Claim to the extent
arising from any misrepresentation by
the Lessor under Section 8.1 (e) or
(l) or from the failure by the Lessor
to comply with SectiOn 10.3 (a), or
(y) any Indemnitee under this Section
13.1 for any of the following: (1) any
Claim to the extent resulting from the
willful misconduct or gross negligence
of such Indemnitee (it being
understood that the Lessee shall be
required to indemnify an Indemnitee
even if the ordinary (but not gross)
negligence of such Indemnitee caused
or contributed to such Claim), (2) any
Claim resulting from Lessor Liens
which the Lessor is responsible for
discharging under the Operative
Documents, (3) any Claim to the extent
attributable to acts or events
occurring after the expiration of the
Term or the termination of the
Lessee's right to possess and control
the Property (but not any claim to the
extent attributable to acts or events
occurring prior to or during the Term
or occurring at any time that the
Lessee is in actual possession or
control of the Property), (4) any
Imposition or other claims for Taxes,
and (5) any Claims of the type(s)
described in Sections 13.2 (only with
respect to claims in respect of a
decline in the Fair Market Sales Value
of the Property as a result of an
event described in Section 13.2(b) and
the Lessee's exercise of the
Remarketing Option), 13.6, 13.7, 13.8
and 13.10. It is expressly understood
and agreed that the indemnity provided
for herein shall survive the
expiration or termination of and shall
be separate and independent from any
remedy under the Lease or any other
Operative Document. Without limiting
the express rights of any Indemnitee
under this Section 13.1, this Section
13.1 shall be construed as an
indemnity only and not a guaranty of
residual value of the Property or as a
guaranty of the Participation
Interests.
SECTION 13.2. End of Term
Indemnity.
(a) If the Lessee elects
the Remarketing Option and
there would, after giving
effect to the proposed
remarketing transactions, be
a Shortfall Amount, then
prior to the Maturity Date
and as a condition to the
Lessee's fight to complete
the remarketing of the
Property pursuant to Section
22.1 of the Lease, the
Lessee shall cause to be
delivered to the Lessor at
least 30 days prior to the
Expiration Date, at the
Lessee's sole cost and
expense, a report from an
appraiser selected by the
Lessor and reasonably
satisfactory to the Agent
and the Required
Participants in form and
substance satisfactory to
the Lessor, the Agent-and
the Required Participants
(the "End of the Term
Report") which shall state
the appraiser's conclusions
as to the reason for any
decline in the Fair Market
Sales Value of the Property
from that anticipated for
such date in the Appraisal
delivered on the Closing
Date.
(b) Prior to the Expiration
Date, the Lessee shall pay
to the Lessor an amount (not
to exceed the Shortfall
Amount) equal to the portion
of the Shortfall Amount that
the End of the Term Report
demonstrates was the result
of a decline in the Fair
Market Sales Value of the
Property due to:
43
(i) extraordinary wear and tear, excessive usage, failure to
maintain, to repair, to restore, to rebuild or to replace, failure to
comply with the Lease and all applicable laws, failure to use, workmanship,
method of installation or removal or maintenance, repair, rebuilding or
replacement (excepting in each case ordinary wear and tear);
(ii) any Modification made to, or any rebuilding of, the Property
or any part thereof by the Lessee; or
(iii) the existence of any Hazardous ActiVity, Hazardous
Substance or Environmental Violations; or
(iv) any restoration or rebuilding carried out by the Lessee; or
(v) any condemnation of any portion of the Property pursuant to
Article XV of the Lease; or
(vi) any use of the Property or any part thereof by the Lessee
other than as permitted by the Operative Documents; or
(vii) any grant, release, dedication, transfer, annexation or
amendment made pursuant to Section 12.2 of the Lease; or
(viii) the failure of the Lessor to have good and marketable fee
title to the Property free and clear of all Liens (including Permitted
Liens) and exceptions to title, except Lessor Liens.
SECTION 13.3. Environmental Indemnity. Without limitation of the other
-------------------------
provisions of this Section 13, the Lessee hereby agrees to indemnify, hold
------------
harmless and defend each Indemnitee from and against any and all claims
(including without limitation third party claims for personal injury or real or
personal property damage), losses (including but not limited to any loss of
value of the Property), damages, liabilities, fines, penalties, charges,
administrative and judicial proceedings (including informal proceedings) and
orders, judgments, remedial action, requirements, enforcement actions of any
kind, and all reasonable and documented costs and expenses incurred in
connection therewith (including but not limited to reasonable and documented
attorneys' and/or paralegals' fees and expenses), including, but not limited to,
all costs incurred in connection with any investigation or monitoring of site
conditions or any clean-up, remedial, removal or restoration work by any
federal, state or local government agency, which such Indemnitee becomes subject
to because of its involvement with the Property, the transactions contemplated
by the Operative Documents or any other matter referred to in paragraphs (a)
through (i) of Section 13.1 arising in whole or in part, out of:
-----
(a) the presence on or under the Property or the Facility of any
Hazardous Substances, or any Releases or discharges of any Hazardous Substances
on, under, from or onto the Property or the Facility;
44
(b) any activity, including,
without limitation,
construction, carried on or
undertaken on or off the
Facility, and whether by the
Lessee, the Lessor or any
predecessor in title or any
employees, agents,
contractors or
subcontractors of the
Lessee, the Lessor (if such
activity was undertaken with
the consent or at the
direction of the Lessee) or
any predecessor in title, or
any other Persons (including
such Indemnitee), in
connection with the
handling, treatment,
removal, storage,
decontamination, cleanup,
transport or disposal of any
Hazardous Substances that at
any time are located or
present on or under or that
at any time migrate, flow,
percolate, diffuse or in any
way move onto or under the
Property or the Facility;
(c) loss of or damage to
any property or the
environment (including,
without limitation, cleanup
costs, response costs,
remediation and removal
costs, cost of corrective
action, costs of financial
assurance, fines and
penalties and natural
resource damages), or death
or injury to any Person, and
all expenses associated with
the protection of wildlife,
aquatic species, vegetation,
flora and fauna, and any
mitigative action required
by or under Environmental
Laws;
(d) any claim concerning lack
of compliance with
Environmental Laws, or any
act or omission causing an
environmental condition that
requires remediation or
would allow any Governmental
Authority to record a Lien
on the land records;
(e) any residual
contamination on or under
the Facility, or affecting
any natural resources, or
any contamination of any
property or natural
resources arising in
connection with the
generation, use, handling,
storage, transport or
disposal of any such
Hazardous Substances, and
irrespective of whether any
of such activities were or
will be undertaken in
accordance with applicable
Environmental Laws; or
(f) any material
inaccuracies,
misrepresentations,
misstatements, and omissions
and any conflicting
information contained in or
omitted from any
environmental audit
previously delivered to the
Lessor or the Agent in
connection with the Fab 2
Real Property Participation
Agreement;
provided, however, the Lessee shall not
be required to indemnify any
Indemnitee under this Section 13.3 for
(1) any Claim to the extent resulting
from the willful misconduct or gross
negligence of such Indemnitee (it
being understood that the Lessee shall
be required to indemnify an Indemnitee
even if the ordinary (but not gross)
negligence of such Indemnitee caused
or contributed to such Claim), (2)
subject to the provisions Section 15.2
of the Lease, any Claim to the extent
attributable to acts or events
occurring after the expiration of the
Term or the termination of the
Lessee's right to possess and control
the Property (but not any claim to the
extent attributable to acts or events
occurring prior to or during the Term
or occurring at any time that the
Lessee is in actual possession or
control of the Property), (3) any
Imposition or other claims for Taxes
of the type(s) described in Section
13.5 or (4) any Claims of the type(s)
described in Sections 13.2 (only with
respect to claims in respect of a
decline in the Fair Market Sales Value
of the Property and the Lessee's
exercise of the Remarketing Option),
13.6, 13.7, 13.8 and 13.10. It is
expressly understood and agreed that
the indemnity provided for herein
shall survive the expiration or
termination of and shall be separate
and independent from any remedy under
the Lease or any other Operative
Document.
45
SECTION 13.4. Proceedings in
Respect of Claims. With respect
to any amount that the Lessee is
requested by an Indemnitee to pay
by reason of Section 13.1 or
13.3, such Indemnitee shall, if
so requested by the Lessee and
prior to any payment, submit such
additional information to the
Lessee as the Lessee may
reasonably request and which is
in the possession of such
Indemnitee to substantiate
properly the requested payment.
In case any action, suit or
proceeding shall be brought
against any Indemnitee, such
Indemnitee shall notify the
Lessee of the commencement
thereof, and the Lessee shall be
entitled, at its expense, to
participate in, and, to the
extent that the Lessee desires
to, assume and control the
defense thereof; provided,
however, that the Lessee shall
have acknowledged in writing its
obligation to fully indemnify
such Indemnitee in respect of
such action, suit or proceeding,
and the Lessee shall keep such
Indemnitee fully apprised of the
status of such action, suit or
proceeding and shall provide such
Indemnitee with all information
with respect to such action, suit
or proceeding as such Indemnitee
shall reasonably request, and
provided further, that the Lessee
shall not be entitled to assume
and control the defense of any
such action, suit or proceeding
if and to the extent that, (A) in
the reasonable opinion of such
Indemnitee, (x) such action, suit
or proceeding involves any
possibility of imposition of
criminal liability or any risk of
material civil liability on such
Indemnitee or will involve a
material risk of the sale,
forfeiture or loss of, or the
creation of any Lien (other than
a Permitted Lien) on the Property
or any part thereof unless, in
the case of civil liability or
Lien, the Lessee shall have
posted a bond or other security
satisfactory to the relevant
Indemnitee in respect to such
risk or (y) the control of such
action, suit or proceeding would
involve an actual or potential
conflict of interest, (B) such
proceeding involves Claims not
fully indemnified by the Lessee
which the Lessee and the
Indemnitee have been unable to
sever from the indemnified
claim(s), or (C) an Event of
Default under the Lease has
occurred and is continuing. The
Indemnitee may participate in a
reasonable manner at its own
expense and with its own counsel
in any proceeding conducted by
the Lessee in accordance with the
foregoing. The Lessee shall not
enter into any settlement or
other compromise with respect to
any Claim which is entitled to be
indemnified under Section 13.1 or
13.3 without the prior written
consent of the Indemnitee which
consent shall not be unreasonably
withheld in the case of a money
settlement not involving an
admission of liability of such
Indemnitee.
Each Indemnitee shall at the
expense of the Lessee cooperate
with and supply the Lessee with
such information and documents
reasonably requested by the
Lessee as are necessary or
advisable for the Lessee to
participate in any action, suit
or proceeding to the extent
permitted by Section 13.1 or
13.3. Unless an Event of Default
under the Lease shall have
occurred and be continuing, no
Indemnitee shall enter into any
settlement or other compromise
with respect to any Claim which
is entitled to be indemnified
under Section 13.1 or 13.3
without the prior written consent
of the Lessee, which consent
shall not be unreasonably
withheld, unless such Indemnitee
waives its right to be
indemnified under Section 13.1 or
13.3 with respect to such Claim.
Upon payment in full of any Claim
by the Lessee pursuant to Section
13.1 or 13.3 to or on behalf of
an Indemnitee, the Lessee,
without any further action, shall
be subrogated to any and all
claims that such Indemnitee may
have relating thereto (other than
claims in respect of insurance
policies maintained by such
Indemnitee at its own expense),
and such Indemnitee shall execute
such instruments of assignment
and conveyance, evidence of
claims and payment and such other
46
documents, instruments and agreements
as may be necessary to preserve any
such claims and otherwise cooperate
with the Lessee and give such further
assurances as are necessary or
advisable to enable the Lessee
vigorously to pursue such claims.
Any amount payable to an
Indemnitee pursuant to Section
13.1 or 13.3 shall be paid to
such Indemnitee promptly upon
receipt of a written demand
therefor from such Indemnitee,
accompanied by a written
statement describing in
reasonable detail the basis for
such indemnity and the
computation of the amount so
payable and, if requested by the
Lessee, such determination shall
be verified by a nationally
recognized independent accounting
firm mutually acceptable to the
Lessee and the Indemnitee at the
expense of the Lessee.
SECTION 13.5. General Impositions
Indemnity.
(a) Indemnification. The
Lessee shall pay and assume
liability for, and does
hereby agree to indemnify,
protect and defend the
Property and all
Indemnitees, and hold them
harmless against, all
Impositions on an After Tax
Basis.
(b) Payments. (i) Subject to
the terms of Section
13.5(f), the Lessee shall
pay or cause to be paid all
Impositions directly to the
taxing authorities where
feasible and otherwise to
the Indemnitee, as
appropriate, and the Lessee
shall at its own expense,
upon such Indemnitee's
reasonable request, furnish
to such Indemnitee copies of
official receipts or other
satisfactory proof
evidencing such payment.
(ii) In the case of
Impositions for which
no contest is conducted
pursuant to Section
13.5(f) and which the
Lessee pays directly to
the taxing authorities,
the Lessee shall pay
such Impositions prior
to the latest time
permitted by the
relevant taxing
authority for timely
payment. In the case of
Impositions for which
the Lessee reimburses
an Indemnitee, the
Lessee shall do so
within twenty (20) days
after receipt by the
Lessee of demand by
such Indemnitee
describing in
reasonable detail the
nature of the
Imposition and the
basis for the demand
(including the
computation of the
amount payable), but in
no event shall the
Lessee be required to
pay such reimbursement
prior to ten (10) days
before the latest time
permitted by the
relevant taxing
authority for timely
payment. In the case of
Impositions for which a
contest is conducted
pursuant to Section
13.5(f), the Lessee
shall pay such
Impositions or
reimburse such
Indemnitee for such
Impositions, to the
extent not previously
paid or reimbursed
pursuant to subsection
(a), prior to the
latest time permitted
by the relevant taxing
authority for timely
payment after
conclusion of all
contests under Section
13.5(f).
(iii) At the Lessee's
request, the amount of
any indemnification
payment by the Lessee
pursuant to subsection
(a) shall be verified
and certified by an
independent public
accounting firm
mutually acceptable to
the Lessee and the
Indemnitee. The fees
and expenses of such
independent public
accounting firm shall
be paid by the Lessee
unless such
verification shall
result in an adjustment
in the Lessee's favor
of 5% or more of the
payment as computed by
the Indemnitee, in
which case such fee
shall be paid by the
Indemnitee.
47
(c) Reports and
Returns. (i) The
Lessee shall be
responsible for
preparing and
filing any real
and personal
property or ad
valorem tax
returns in respect
of the Property.
In case any other
report or tax
return shall be
required to be
made with respect
to any obligations
of the Lessee
under or arising
out of subsection
(a) and of which
the Lessee has
knowledge or
should have
knowledge, the
Lessee, at its
sole cost and
expense, shall
notify the
relevant
Indemnitee of such
requirement and
(except if such
Indemnitee
notifies the
Lessee that such
Indemnitee intends
to file such
report or return)
(A) to the extent
required or
permitted by and
consistent with
Applicable Law,
make and file in
its own name such
return, statement
or report; and (B)
in the case of any
other such return,
statement or
report required to
be made in the
name of such
Indemnitee, advise
such Indemnitee of
such fact and
prepare such
return, statement
or report for
filing by such
Indemnitee or,
where such return,
statement or
report shall be
required to
reflect items in
addition to any
obligations of the
Lessee under or
arising out of
subsection (a),
provide such
Indemnitee at the
Lessee's expense
with information
sufficient to
permit such
return, statement
or report to be
properly made with
respect to any
obligations of the
Lessee under or
arising out of
subsection (a).
Such Indemnitee
shall, upon the
Lessee's request
and at the
Lessee's expense,
provide any data
maintained by such
Indemnitee (and
not otherwise
available to or
within the control
of the Lessee)
with respect to
the Property which
the Lessee may
reasonably require
to prepare any
required tax
returns or
reports. Each
Indemnitee agrees
to use its best
efforts to send to
the Lessee a copy
of any written
request or other
notice that the
Indemnitee
receives with
respect to any
reports or returns
required to be
filed with respect
to the Property or
the transactions
contemplated by
the Operative
Documents, it
being understood
that no Indemnitee
shall have any
liability for
failure to provide
such copies.
(d) Income
Inclusions. If as
a result of the
payment or
reimbursement by
the Lessee of any
expenses of the
Lessor or the
payment of any
Transaction
Expenses incurred
in connection with
the transactions
contemplated by
the Operative
Documents, the
Lessor or any
Participant shall
suffer a net
increase in any
federal, state or
local income tax
liability, the
Lessee shall
indemnify such
Persons (without
duplication of any
indemnification
required by
subsection (a)) on
an After Tax Basis
for the amount of
such increase. The
calculation of any
such net increase
shall take into
account any
current or future
tax savings
realized or
reasonably
expected to be
realized by such
person in respect
thereof, as well
as any interest,
penalties and
additions to tax
payable by the
Lessor, or any
Participant or
such Affiliate, in
respect thereof.
(e) Withholding
Taxes. As between
the Lessee on one
hand, and the
Lessor or the
Agent and any
Participant on the
other hand, the
Lessee shall be
responsible for,
and, subject to
the provisions of
Sections 13.5(g)
and (h), the
Lessee shall
indemnify and hold
harmless the
Lessor, the Agent
and the
Participants
(without
duplication of any
indemnification
required by
subsection (a)) on
an After Tax Basis
against, any
obligation for
United States or
foreign
withholding taxes
imposed in respect
of payments with
respect to the
Participation
Interests or with
respect to Rent
payments under the
Lease or payments
of the Asset
Termination Value
or Purchase Option
Price (and, if the
Lessor, the Agent
or any Participant
receives a demand
for such payment
from any taxing
authority, the
Lessee shall
discharge such
demand on behalf
of the Lessor, the
Agent or such
Participant).
Notwithstanding
the foregoing
provisions of this
Section 13.5(e) or
any other
provision of any
Operative Document
to the contrary,
the Lessee shall
not be responsible
for and shall not
be required to
indemnify or
otherwise hold
harmless any
Person from or
against any
withholding tax
48
imposed as a collection device for, or in substitution or lieu of, an income,
franchise or similar tax to the extent such income, franchise or similar tax
would not otherwise be subject to indemnification pursuant to this Section 13.5
(a "Qualified Withholding Tax"). As used herein, Qualified Withholding Taxes
include, without limitation, any withholding taxes arising under Section 871,
881, 1441 or 1442 of the Code and any similar taxes arising under state, local
or foreign law as well as any withholding tax imposed as a collection device
for, or in substitution or lieu of the Imposition that qualifies as an "income
tax" within the meaning of United States Treasury Regulation Section 1.901 -2.
(f) Contests of Impositions. (i) If a written claim is made against any
Indemnitee or if any proceeding shall be commenced against such Indemnitee
(including a written notice of such proceeding), for any Impositions, such
Indemnitee shall promptly notify the Lessee in writing and shall not take action
with respect to such claim or proceeding without the consent of the Lessee for
thirty (30) days after the receipt of such notice by the Lessee; provided,
however, that, in the case of any such claim or proceeding, if action shall be
required by law or regulation to be taken prior to the end of such 30-day
period, such Indemnitee shall, in such notice to the Lessee, inform the Lessee
of such shorter period, and no action shall be taken with respect to such claim
or proceeding without the consent of the Lessee before 2 days before the end of
such shorter period; provided, further, that the failure of such Indemnitee to
give the notices referred to this sentence shall not diminish the Lessee's
obligation hereunder except to the extent such failure precludes the Lessee from
contesting all or part of such claim.
(ii) If, within thirty (30) days of receipt of such notice from the Indemnitee
(or such shorter period as the Indemnitee has notified the Lessee is required by
law or regulation for the Indemnitee to commence such contest), the Lessee shall
request in writing that such Indemnitee contest such Imposition, the Indemnitee
shall, at the expense of the Lessee, in good faith conduct and control such
contest (including, without limitation, by pursuit of appeals) relating to the
validity, applicability or amount of such Impositions (provided, however, that
(A) if such contest involves a tax other than a tax on net income and can be
pursued independently from any other proceeding involving a tax liability of
such Indemnitee, the Indemnitee, at the Lessee's request, shall allow the Lessee
to conduct and control such contest and (B) in the case of any contest, the
Indemnitee may request the Lessee to conduct and control such contest) by, in
the sole discretion of the Person conducting and controlling such contest, (1)
resisting payment thereof, (2) not paying the same except under protest, if
protest is necessary and proper, (3) if the payment be made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and judicial
proceedings, or (4) taking such other action as is reasonably requested by the
Lessee from time to time.
(iii) The party controlling any contest shall consult in good faith with the
non-controlling party and shall keep the non-controlling party reasonably
informed as to the conduct of such contest; provided, that all decisions
ultimately shall be made in the sole discretion of the controlling party except
that no decision shall be made to concede an indemnified issue without the prior
consent of Lessee (which consent shall not be unreasonably withheld). The
parties agree that an Indemnitee may at any time decline to take further action
with respect to the contest of any Imposition and may settle such contest if
such Indemnitee shall waive its fights to any indemnity from the Lessee that
otherwise would be payable in respect of such claim (and any future claim by
49
any taxing authority, the contest of
which is precluded by reason of such
resolution of such claim) and shall
pay to the Lessee any amount
previously paid or advanced by the
Lessee pursuant to this Section 13.5
by way of indemnification or advance
for the payment of an Imposition other
than expenses of such contest.
(iv) Notwithstanding the
foregoing provisions of
this Section 13.5, an
Indemnitee shall not be
required to take any
action and the Lessee
shall not be permitted
to contest any
Impositions in its own
name or that of the
Indemnitee unless (A)
the Lessee shall have
agreed such Imposition
is subject to indemnity
hereunder and shall pay
to such Indemnitee on
demand and on an After
Tax Basis all
reasonable costs,
losses and expenses
that such Indemnitee
actually incurs in
connection with
contesting such
Impositions, including,
without limitation, all
reasonable legal,
accounting and
investigatory fees and
disbursements, (B) in
the case of a claim
that must be pursued in
the name of an
Indemnitee (or an
Affiliate thereof), the
amount of the potential
indemnity (taking into
account all similar or
logically related
claims that have been
or could be raised in
any audit involving
such Indemnitee for
which the Lessee may be
liable to pay an
indemnity under this
Section 13.5) exceeds
$10,000, (C) the
Indemnitee shall have
reasonably determined
that the action to be
taken will not result
in any material danger
of sale, forfeiture or
loss of the Property,
or any part thereof or
interest therein, will
not interfere with the
payment of Rent, and
will not result in risk
of criminal liability,
(D) if such contest
shall involve the
payment of the
Imposition prior to the
contest, the Lessee
shall provide to the
Indemnitee an
interest-free advance
in an amount equal to
the Imposition that the
Indemnitee is required
to pay (with no
additional net
after-tax cost to such
Indemnitee), (E) in the
case of a claim that
must be pursued in the
name of an Indemnitee
(or an Affiliate
thereof), the Lessee
shall have provided to
such Indemnitee an
opinion of independent
tax counsel selected by
the Indemnitee and
reasonably satisfactory
to the Lessee stating
that a reasonable basis
exists to contest such
claim (or, in the case
of an appeal of an
adverse judicial
determination, an
opinion of such counsel
to the effect that
there is substantial
authority for the
position asserted in
such appeal) and (F) no
Event of Default
hereunder shall have
occurred and be
continuing. In no event
shall an Indemnitee be
required to appeal an
adverse judicial
determination to the
United States Supreme
Court. In addition, an
Indemnitee shall not be
required to contest any
claim in its name (or
that of an Affiliate)
if the subject matter
thereof shall be of a
continuing nature and
shall have previously
been decided adversely
by a court of competent
jurisdiction pursuant
to a contest completed
in accordance with the
provisions of this
Section 13.5, unless
there shall have been a
change in law (or
interpretation thereof)
and the Indemnitee
shall have received, at
the Lessee's expense,
an opinion of
independent tax counsel
selected by the
Indemnitee and
reasonably acceptable
to the Lessee stating
that as a result of
such change in law (or
interpretation
thereof), it is more
likely than not that
the Indemnitee will
prevail in such contest.
(g) Documentation of
Withholding Status. Each
Participant (or any
successor thereto or
transferee thereof) that is
organized under the laws of
a jurisdiction outside of
the United States of America
and each Lessor that is
organized under the laws of
a jurisdiction outside of
the United States of America
shall:
(i) on or before the
date it becomes a party
to any Operative
Document, deliver to
the Lessee any
certificates,
documents, or other
evidence that shall be
required by the Code or
Treasury Regulations
issued pursuant thereto
to establish its
50
exemption from United States Federal withholding requirements, including (A) two
valid, duly completed, original copies of Internal Revenue Service Form 1001 or
Form 4224 or successor applicable form, properly and duly executed, certifying
in each case that such party is entitled to receive payments pursuant to the
Operative Documents without deduction or withholding of United States Federal
income taxes, or (B) a valid, duly completed, original copy of Internal Revenue
Service Form W-8 or Form W-9 or applicable successor form, properly and duly
executed, certifying that such party is entitled to an exemption from United
States of America backup withholding tax; and
(ii) so long as it shall be legally entitled to do so, on or before the date
that any such form described above expires or becomes obsolete, or after the
occurrence of any event requiring a change in the most recent such form
previously delivered to the Lessee, deliver to the Lessee two further valid,
duly completed, original copies of any such form or certification, properly and
duly executed.
(h) Limitation on Tax Indemnification. The Lessee shall not be required to
indemnify any Indemnitee, or to pay any increased amounts to any Indemnitee or
tax authority with respect to any Impositions pursuant to this Section 13.5 to
the extent that (i) such Imposition is attributable to such Indemnitee's failure
to comply with the provisions of Section 13.5(g); or (ii) to the extent such
Imposition constitutes or is collected by means of a Qualified Withholding Tax.
(i) Tax Savings. In the event an Indemnitee receives a retired (or similar tax
savings) in respect of any Imposition paid or reimbursed by the Lessee which was
not considered in calculating the After Tax Basis with respect to such payment
or reimbursement by Lessee, such Indemnitee shall within thirty (30) days
thereafter remit the amount of such refund (or tax savings) to the Lessee,
provided that the amount so remitted shall not exceed the lesser of: (i) the
amount received by such Indemnitee as a refund (or tax savings) net of all
reasonable costs and expenses incurred by such Indemnitee in connection with
obtaining and paying such amount; and (ii) (a) the amount of all prior payments
by the Lessee to such Indemnitee with respect to Impositions, plus any refunded
interest, less (b) the amount of all prior payments by the Indemnitee to the
Lessee under this Section 13.5(i).
SECTION 13.6. Funding Losses. If any payment of any Advance representing Tranche
B Participation Interests or any portion of any Tranche B Participation Interest
is made on any day other than the last day of an Interest Period applicable
thereto, or if the Lessee fails to utilize the proceeds of any purchase of
Participation Interests after notice has been given to any Participant in
accordance with Section 3 or 4, the Lessee shall reimburse each Participant
within fifteen (15) days after demand for any resulting loss or expense incurred
by it, including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, provided that such
Participant shall have delivered to the Lessee a certificate as to the amount of
such loss or expense, which certificate shall be conclusive in the absence of
manifest error, and provided further that such loss shall in no event exceed the
interest on the Advances which would have been payable for the balance of such
Interest Period or other period, less the amount actually earned by such
Participant
51
on such Advances. Such Participant will, at the request of the Lessee, furnish
such additional information concerning the determination of such loss as the
Lessee may reasonably request.
SECTION 13.7. Regulation D Compensation. For so long as any Participant is
required to increase its existing reserve percentage against "Eurocurrency
Liabilities" (or any other category of liabilities which include deposits by
reference to which the interest rate on its Participation Interest in any
Advance is determined or any category of extensions of credit or other assets
which includes loans by a non-United States office of such Participant to United
States residents), and, as a result, the cost to such Participant (or its
Funding Office) of purchasing or maintaining its Participation Interest in any
Advance is increased, then such Participant may require the Lessee to pay,
contemporaneously with each payment of interest on the Advances an additional
amount on the Participation Interest of such Participant in the Advances at a
rate per annum up to but not exceeding the excess of (i) (A) the applicable
Eurodollar Rate divided by (B) one minus the Eurocurrency Reserve Requirements
and (ii) the applicable Eurodollar Rate. Any Participant wishing to require
payment of such additional amount (x) shall so notify the Lessee and the Agent,
in which case such additional interest on its Participation Interest in any
Advance shall be payable to such Participant at the place indicated in such
notice with respect to each Interest Period commencing at least three (3)
Business Days after the giving of such notice and (y) shall furnish to the
Lessee at least five (5) Business Days prior to each date on which interest is
payable on the Advance an officer's certificate setting forth the amount to
which such Participant is then entitled under this Section (which shall be
consistent with such Participant's good faith estimate of the level at which the
related reserves are maintained by it). Each such certificate shall be
accompanied by such information as the Lessee may reasonably request as to the
computation set forth therein.
SECTION 13.8. Basis for Determining Interest Rate Inadequate or Unfair. If on or
prior to the first day of any Interest Period:
(a) deposits in dollars (in the applicable amounts) are not being offered to the
Agent in the relevant market for such Interest Period or any Participants shall
advise the Agent that the Eurodollar Rate as determined by the Agent will not
adequately and fairy reflect the cost to such Participant of funding its Tranche
B Participation Interest in any Advance for such Interest Period; or
(b) any Participant determines that, by reason of the adoption, on or after the
date of this Participation Agreement, of any applicable law, rule or regulation,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any
Participant (or its Funding Office) with any request or directive (whether or
not having the force of law) of any such authority, central bank or governmental
agency, it is restricted, directly or indirectly, in the amount it may hold of
(i) a category of liabilities that includes deposits by reference to which, or
on the basis of which, the interest rates applicable to Advances to fund its
Tranche B Participation Interest Commitment based on the Eurodollar Rate are
directly or indirectly determined, or (ii) the category of assets which includes
Advances to fund its Tranche B Participation Interest Commitment based on the
Eurodollar Rate;
52
the Agent shall forthwith give notice thereof to the Lessee and the
Participants, whereupon until the Agent notifies the Lessee that the
circumstances giving rise to such suspension no longer exist, each outstanding
Advance shall begin to bear interest on the last day of the then current
Interest Period applicable thereto at a rate per annum equal to the sum of(i)
the Participants' average cost of funds employed to fund their Tranche B
Participation Interests, as notified to the Agent and the Lessee, plus (ii) the
Applicable Margin for Eurodollar Rate-based Advances at such time.
SECTION 13.9. Illegality. If, on or after the date of this Participation
Agreement, the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the 'interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Participant (or
its Funding Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency, shall
make it unlawful or impossible for any Participant (or its Funding Office) to
purchase, maintain or fund its Participation Interest in any Advance and such
Participant shall so notify the Agent, the Agent shall forthwith give notice
thereof to the other Participants and the Lessee, whereupon until such
Participant notifies the Lessee and the Agent that the circumstances giving rise
to such suspension no longer exist, the obligation of such Participant to
purchase its Participation Interest in any Advance shall be suspended. Before
giving any notice to the Agent pursuant to this Section, such Participant shall,
if practicable, with the consent of the Lessee (which consent shall not
unreasonably be withheld), designate a different Funding Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Participant, be otherwise disadvantageous to such Participant.
If such notice is given (i) the Lessee shall be entitled upon its request to a
reasonable explanation of the factors underlying such notice and (ii) each
outstanding Participation Interest in any Advance of such Participant then
outstanding shall begin to bear interest at the Alternate Base Rate plus the
Applicable Margin for Eurodollar Rate-based Advances either (a) on the last day
of the then current Interest Period applicable to such Advance if such
Participant may lawfully continue to maintain and fund such Participation
Interest to such day or (b) immediately if such Participant shall determine that
it may not lawfully continue to maintain and fund such Participation Interest to
such day. If such notice is given the Lessee may exercise its Purchase Option
under Section 20.1 of the Lease upon not less than ten (10) days' written notice
to the Lessor, the Agent and the Participants.
SECTION 13.10. Increased Cost and Reduced Return. (a) In the event that the
adoption of any applicable law, rule or regulation, or any change therein or in
the interpretation or application thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof or compliance by any Participant with any request or directive after the
date hereof (whether or not having the force of law) of any such authority,
central bank or comparable agency:
(i) does or shall subject such Participant to any additional tax of any kind
whatsoever with respect to the Operative Documents or any purchase of a
Participation Interest in any Advance, or change the basis or the applicable
rate of taxation of payments to such Participant of its Participation Interest
or any other amount payable hereunder (except for the imposition of or change in
any tax on or measured by the overall net income of such Participant including,
without limitation, any tax that qualifies as an "income tax"
53
within the meaning of United States Treasury Regulation Section 1.901-2 and
which is not an Imposition);
(ii) does or shall impose, modify or hold applicable any reserve, special
deposit, insurance assessment, compulsory loan or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any other acquisition of
funds by, any office of such Participant which are not otherwise included in
determination of the rate of interest on Advances hereunder; or
(iii) does or shall impose on such Participant any other condition;
and the result of any of the foregoing is to increase the cost to such
Participant of purchasing or maintaining its Participation Interest in any
Advance or to reduce any amount receivable hereunder with respect thereto, then
in any such case, the Lessee shall promptly pay such Participant, upon its
demand, any additional amounts necessary to compensate such Participant for such
increased cost or reduced amount receivable which such Participant deems to be
material as determined by such Participant.
(b) If any Participant shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency has or would have the effect of
reducing the rate of return on capital of such Participant (or any entity
directly or indirectly controlling such Participant) as a consequence of such
Participant's obligations under the Operative Documents to a level below that
which such Participant (or any entity directly or indirectly controlling such
Participant) could have achieved but for such adoption, change, request or
directive (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Participant to be material, then from time
to time, within 15 days after demand by such Participant (with a copy to the
Agent), the Lessee shall pay to such Participant' such additional amount or
amounts as will compensate such Participant (or its parent) for such reduction.
(c) Each Participant will promptly notify the Lessee and the Agent of any event
of which it has knowledge, occurring after the date hereof, which will entitle
such Participant to compensation pursuant to this Section and will, if
practicable, with the consent of the Lessee (which consent shall not
unreasonably be withheld), designate a different Funding Office or take any
other reasonable action if such designation or action will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Participant, be otherwise disadvantageous to such Participant. A certificate of
any Participant claiming compensation under this Section and setting forth in
reasonable detail its computation of the additional amount or amounts to be paid
to it hereunder shall be conclusive in the absence of manifest error. In
determining such amount, such Participant may use any reasonable averaging and
attribution methods. This Section shall survive
54
the termination of this Participation Agreement and payment of the outstanding
Advances and Participation Interests.
SECTION 13.11. Substitution of Participant. If (i) the obligation of any
Participant to purchase or maintain its Participation Interest has been
suspended pursuant to this Section 13, or (ii) any Participant has demanded
compensation or given notice of its intention to demand compensation under
Section 13.10, the Lessee shall have the right, with the assistance of the
Agent, to seek one or more mutually satisfactory substitute banks or financial
institutions (which may be one or more of the Participants) to replace such
Participant under the Operative Documents.
SECTION 13.12. Indemnity Payments in Addition to Residual Value Guarantee
Amount. The Lessee acknowledges and agrees that its obligations to make
indemnity payments under this Section 13 are separate from, in addition to, and
do not reduce, its obligation to pay the Residual Value Guarantee Amount under
the Lease; provided, that except as otherwise set forth in Section 13.2 hereof,
the Shortfall Amount payable by the Lessee in connection with the Remarketing
Option under the Lease shall not be increased under this Section 13.
SECTION 14.
THE AGENT
SECTION 14.1. Appointment. Each Participant hereby irrevocably designates and
appoints the Agent as the agent of such Lender under this Agreement and the
other Operative Documents, and each Participant irrevocably authorizes the
Agent, in such capacity, to take such action on its behalf under the provisions
of this Agreement and the other Operative Documents and to exercise such powers
and perform such duties as are expressly delegated to the Agent by the terms of
this Agreement and the other Operative Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Participant or any other party to the Operative Documents,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Operative Document or
otherwise exist against the Agent.
SECTION 14.2. Delegation of Duties. The Agent may execute any of its duties
under this Agreement and the other Operative Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
SECTION 14.3. Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (a)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or any other Operative Document
(except for its or such Person's own gross negligence or willful
55
misconduct) or (b)
responsible in any manner to
any of the Participants or
any other party to the
Operative Documents for any
recitals, statements,
representations or
warranties made by the
Lessor or the Lessee or any
officer thereof contained in
this Agreement or any other
Operative Document or in any
certificate, report,
statement or other document
referred to or provided for
in, or received by the Agent
under or in connection with,
this Agreement or any other
Operative Document or for
the value, validity,
effectiveness, genuineness,
enforceability or
sufficiency of this
Agreement or any other
Operative Document or for
any failure of the Lessor or
the Lessee to perform its
obligations hereunder or
thereunder. The Agent shall
not be under any obligation
to any Participant or any
other party to the Operative
Documents to ascertain or to
inquire as to the observance
or performance of any of the
agreements contained in, or
conditions of, this
Agreement or any other
Operative Document, or to
inspect the properties,
books or records of the
Lessor or the Lessee.
SECTION 14.4. Reliance
by Agent. The Agent
shall be entitled to
rely, and shall be
fully protected in
relying, upon any
writing, resolution,
notice, consent,
certificate, affidavit,
letter, telecopy, telex
or teletype message,
statement, order or
other document or
conversation believed
by it to be genuine and
correct and to have
been signed, sent or
made by the proper
Person or Persons and
upon advice and
statements of legal
counsel (including,
without limitation,
counsel to the Lessor
or the Lessee),
independent accountants
and other experts
selected by the Agent.
The Agent shall be
fully justified in
failing or refusing to
take any action under
this Agreement or any
other Operative
Document unless it
shall first receive
such advice or
concurrence of the
Required Participants
as it deems appropriate
or it shall first be
indemnified to its
satisfaction by the
Participants against
any and all liability
and expense which may
be incurred by it by
reason of taking or
continuing to take any
such action. The Agent
shall in all cases be
fully protected in
acting, or in
refraining from acting,
under this Agreement
and the other Operative
Documents in accordance
with a request of the
Required Participants,
and such request and
any action taken or
failure to act pursuant
thereto shall be
binding upon all the
Participants.
SECTION 14.5. Notice of
Default. The Agent
shall not be deemed to
have knowledge or
notice of the
occurrence of any
Default or Event of
Default unless the
Agent has received
notice from a
Participant, the Lessor
or the Lessee
describing such Default
or Event of Default and
stating that such
notice is a "notice of
default". In the event
that the Agent receives
such a notice, the
Agent shall give notice
thereof to the other
parties hereto. Subject
to the provisions of
Section 11 and Section
15.5 hereof, the Agent
shall take such action
with respect to such
Default or Event of
Default as shall be
reasonably directed by
the Required
Participants; provided
that unless and until
the Agent shall have
received such
directions, the Agent
may (but shall not be
obligated to) take such
action, or refrain from
taking such action,
with respect to such
Default or Event of
Default as it shall
deem advisable in the
best interests of the
Participants.
SECTION 14.6.
Non-Reliance on Agent
and Other Participants.
Each Participant
expressly acknowledges
that neither the Agent
nor any of its
officers, directors,
employees, agents,
attorneys-in-fact or
Affiliates has made any
representations or
warranties to it and
that no act by the
Agent hereinafter
taken, including any
review of the affairs
of the Lessor or the
Lessee, shall be deemed
to constitute any
representation or
warranty by the Agent
to any Participant.
Each Participant
represents to the Agent
that it has,
independently and
without reliance upon
the Agent or any other
Participant, and based
on such documents and
information as it has
deemed appropriate,
56
made its own appraisal of and
investigation into the business,
operations, property, financial and
other condition and creditworthiness
of the Lessor, the Lessee and the
Property and made its own decision to
purchase its Participation Interest
hereunder and enter into this
Agreement. Each Participant also
represents that it will, independently
and without reliance upon the Agent,
the Lessor or any other Participant,
and based on such documents and
information as it shall deem
appropriate at the time, continue to
make its own credit analysis,
appraisals and decisions in taking or
not taking action under this Agreement
and the other Operative Documents, and
to make such investigation as it deems
necessary to inform itself as to the
business, operations, property,
financial and other condition and
creditworthiness of the Lessor and the
Lessee. Except for notices, reports
and other documents expressly required
to be furnished to the Participants by
the Agent hereunder, the Agent shall
not have any duty or responsibility to
provide any Participant with any
credit or other information concerning
the business, operations, property,
condition (financial or otherwise),
prospects or creditworthiness of the
Lessor or the Lessee which may come
into the possession of the Agent or
any of its officers, directors,
employees, agents, attorneys4n-fact or
Affiliates.
SECTION 14.7. Indemnification. The
Participants agree to indemnify
the Agent in its capacity as such
(to the extent not reimbursed by
the Lessee and without limiting
the obligation of the Lessee to
do so), ratably according to
their respective Commitment
Percentages in effect on the date
on which indemnification is
sought under this Section 14.7
(or, if indemnification is sought
after the date upon which the
Commitments shall have terminated
and the Participation Interests
shall have been paid in full,
ratably in accordance with their
Commitment Percentages
immediately prior to such date),
from and against any and all
liabilities, obligations, losses,
damages, penalties, actions,
judgments, suits, costs, expenses
or disbursements of any kind
whatsoever which may at any time
(including, without limitation,
at any time following the payment
of the Participation Interests)
be imposed on, incurred by or
asserted against the Agent in any
way relating to or arising out
of, the Commitments, this
Agreement, the Property, any of
the other Operative Documents or
any documents contemplated by or
referred to herein or therein or
the transactions contemplated
hereby or thereby or any action
taken or omitted by any of them
under or in connection with any
of the foregoing; provided that
no Participant shall be liable
for the payment of any portion of
such liabilities, obligations,
losses, damages, penalties,
actions, judgments, suits, costs,
expenses or disbursements
resulting solely from the gross
negligence or willful misconduct
of the Agent. The agreements in
this Section 14.7 shall survive
the payment of the Participation
Interests and all other amounts
payable hereunder.
SECTION 14.8. Agent in its
Individual Capacity. The Agent
and its Affiliates may make loans
to, accept deposits from and
generally engage in any kind of
business with the Lessor or the
Lessee as though the Agent were
not the Agent hereunder and under
the other Operative Documents.
With respect to its Participation
Interest purchased by it, the
Agent shall have the same fights
and powers under this Agreement
and the other Operative Documents
as any Participant and may
exercise the same as though it
were not the Agent, and the terms
"Participant" and "Participants"
shall include the Agent in its
individual capacity.
SECTION 14.9. Successor Agent. The
Agent may resign as Agent upon 20
days' notice to the Participants,
the Lessor or the Lessee. If the
Agent shall resign as Agent under
this Agreement and the other
Operative Documents, then the
Required Participants shall
appoint a
57
successor agent for the Participants,
which successor agent shall be a
commercial bank organized under the
laws of the United States of America
or any State thereof or under the laws
of another country which is doing
business in the United States of
America and having a combined capital,
surplus and undivided profits of at
least $100,000,000 (and if no Default
or Event of Default exists, shall be
approved by the Lessee (which consent
shall not be unreasonably withheld)),
whereupon such successor agent shall
succeed to the rights, powers and
duties of the Agent, and the term
"Agent" shall mean such successor
agent effective upon such appointment
and approval, and the former Agent's
rights, powers and duties as Agent
shall be terminated, without any other
or further act or deed on the pan of
such former Agent or any of the
parties to this Agreement. If no
successor Agent has accepted
appointment as Agent by the date which
is 20 days following a resigning
Agent's notice of resignation, the
resigning Agent's resignation shall
nevertheless thereupon become
effective and the Participants shall
perform all of the duties of the Agent
hereunder until such time, if any, as
the Required Participants appoint a
successor Agent as provided above.
After any retiring Agent's resignation
as Agent, all of the provisions of
this Section 14 shall inure to its
benefit as to any actions taken or
omitted to be taken by it while it was
Agent under this Agreement and the
other Operative Documents.
SECTION 15. MISCELLANEOUS
SECTION 15.1. Survival of
Agreements. The representations,
warranties, covenants,
indemnifies and agreements of the
parties provided for in the
Operative Documents, and the
parties' obligations under any
and all thereof, shall survive
the execution and delivery of
this Participation Agreement, the
transfer of the Property to the
Lessor, the construction and
installation of any Equipment,
any disposition of any interest
of the Lessor in the Property,
payment of the Advances and the
Participation Interests and any
disposition thereof and shall be
and continue in effect
notwithstanding any investigation
made by any party and the fact
that any party may waive
compliance with any of the other
terms, provisions or conditions
of any of the Operative
Documents. Except as otherwise
expressly set forth herein or in
other Operative Documents, the
indemnities of the parties
provided for in the Operative
Documents shall survive the
expiration or termination of any
thereof.
SECTION 15.2. No Broker, etc. Each
of the parties hereto represents
to the others that it has not
retained or employed any broker,
finder or financial adviser to
act on its behalf in connection
with this Participation Agreement
or the transactions contemplated
herein, nor has it authorized any
broker, finder or financial
adviser retained or employed by
any other Person so to act. Any
party who is in breach of this
representation shall indemnify
and hold the other parties
harmless from and against any
liability arising out of such
breach of this representation.
SECTION 15.3. Notices. Unless
otherwise specifically provided
herein, all notices, consents,
directions, approvals,
instructions, requests and other
communications required or
permitted by the terms hereof to
be given to any Person shall be
given in writing and delivered
(i) personally, (ii) by a
nationally recognized overnight
courier service, (iii) by mail
(by registered or
58
certified mail, return receipt
requested, postage prepaid) or (iv) by
facsimile, in each case directed to
the address of such Person as
indicated on Schedule II. Any such
notice shall be effective upon receipt
or refusal.
From time to time any party may
designate a new address for
purposes of notice hereunder by
written notice to each of the
other parties hereto in
accordance with this Section.
SECTION 15.4. Counterparts. This
Participation Agreement may be
executed by the parties hereto in
separate counterparts, each of
which when so executed and
delivered shall be an original,
but all such counterparts shall
together constitute but one and
the same instrument.
SECTION 15.5. Amendments. Subject
to the provisions of Section 11
hereof, no Operative Document nor
any of the terms thereof may be
terminated, amended,
supplemented, waived or modified
with respect to the Lessee, the
Lessor, the Agent or any
Participant, except (a) in the
case of a termination, amendment,
supplement, waiver or
modification to be binding on the
Lessee, the Lessor or the Agent,
with the written agreement or
consent of such party, and (b) in
the case of a termination,
amendment, supplement, waiver or
modification to be binding on the
Participants, with the written
agreement or consent of the
Required Participants; provided,
however, that
(x) no such termination,
amendment, supplement,
waiver or modification shall
without written agreement or
consent of each Participant:
(i) modify any of the
provisions of Section
11 of this Agreement or
this Section 15.5,
change the definition
of "Required
Participants" or modify
or waive any provision
of an Operative
Agreement requiring
action by the foregoing;
(ii) amend, modify,
waive or supplement any
of the provisions of
Sections 3.6, 3.7 or
3.10 - 3.20 of this
Agreement or the
representations of such
Participant in Section
8-8- or the covenants
in Sections 7 and 10 of
this Participation
Agreement;
(iii) reduce, modify,
amend or waive any fees
or indemnities in favor
of any Participant,
including without
limitation amounts
payable pursuant to
Section 13 (except that
any Person may consent
to any reduction,
modification, amendment
or waiver of any
indemnity payable to
it);
(iv) modify, postpone,
reduce or forgive, in
whole or in part, any
payment of Rent (other
than pursuant to the
terms of any Operative
Agreement), any payment
in respect of its
Participation Interest,
or any payment of the
Asset Termination
Value, Commitment Fee,
Residual Value
Guarantee Amount,
amounts due pursuant to
Section 22.2 of the
Lease, or interest or,
subject to clause (iii)
above, any other amount
payable under the Lease
or this Participation
Agreement, or modify
the definition or
method of calculation
of Rent (other than
pursuant to the terms
of any Operative
Agreement),
Participation Interest,
Asset Termination
Value, Commitment Fee,
Shortfall Amount,
Residual Value
Guarantee Amount,
Required Supplemental
Payments, Property
Cost, Participant
Balance, Tranche A
59
Participation Interest
Balance, Tranche B
Participation Interest
Balance, or any other
definition which would
affect the amounts to
be advanced or which
are payable under the
Operative Documents; or
(v) consent to
any assignment
of the Lease,
releasing the
Lessee from its
obligations in
respect of the
payments of
Rent and the
Asset
Termination
Value or
changing the
absolute and
unconditional
character of
such
obligation; and
(y) no other
termination,
amendment,
supplement, waiver
or modification
shall, without the
written agreement
or consent of the
Lessor and the
Required
Participants, be
made to the Lease
or Section 6 of
this Participation
Agreement or the
definition of
"Event of Default".
SECTION 15.6. Headings,
etc. The Table of
Contents and headings
of the various Sections
of this Agreement are
for convenience of
reference only and
shall not modify,
define, expand or limit
any of the terms or
provisions hereof.
SECTION 15.7. Parties in
Interest. Except as
expressly provided
herein, none of the
provisions of this
Participation Agreement
are intended for the
benefit of any Person
except the parties
hereto. Subject to the
provisions of Section
25.1 of the Lease, the
Lessee shall not assign
or transfer any of its
rights or obligations
under the Operative
Documents without the
prior written consent
of the Lessor, the
Agent and the
Participants, except
that the Lessee may
without such consent
assign rights or
obligations of the
Lessee under the
Operative Documents to
an Affiliate of the
Lessee, provided that
the Lessee remains
primarily liable with
respect to such
obligations and
provides its full
unconditional and
irrevocable guaranty of
such Affiliate's
obligations under the
Operative Documents,
such guaranty to be in
form and substance
reasonably satisfactory
to the Required
Participants. If the
Lessor, the Agent and
the Participants
consent to any such
assignment or transfer
to a Person not an
Affiliate of the
Lessee, the Lessee
shall remain primarily
liable with respect to
such obligations and
provide its full and
unconditional guaranty
of such Person's
obligations under the
Operative Documents,
such guaranty to be in
form and substance
reasonably satisfactory
to the Required
Participants.
SECTION 15.8. GOVERNING
LAW. THIS PARTICIPATION
AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY
THE LAW OF THE STATE OF
ILLINOIS (EXCLUDING ANY
CONFLICT-OF-LAW OR
CHOICE-OF-LAW RULES
WHICH MIGHT LEAD TO THE
APPLICATION OF THE
INTERNAL LAWS OF ANY
OTHER JURISDICTION) AS
TO ALL MATTERS OF
CONSTRUCTION, VALIDITY
AND PERFORMANCE.
SECTION 15.9.
Severability. Any
provision of this
Participation Agreement
that is prohibited or
unenforceable in any
jurisdiction shall, as
to such jurisdiction,
be ineffective to the
extent of such
prohibition or
unenforceability
without invalidating
the remaining
provisions hereof, and
any such prohibition or
unenforceability in any
jurisdiction shall not
invalidate or render
unenforceable such
provision in any other
jurisdiction.
60
SECTION 15.10. Liability Limited.
(a) The parties hereto agree that
the Lessor shall have no personal
liability whatsoever to the
Lessee, the Agent or any
Participant or their respective
successors and assigns for any
claim based on or in respect of
the Lease or any of the other
Operative Documents or arising in
any way from the transactions
contemplated hereby or thereby;
provided, however, that the
Lessor shall be liable in its
individual capacity (a) for its
own willful misconduct or gross
negligence (or negligence in the
handling of funds), (b) for
liabilities that may result from
its breach of the covenant to
remove Lessor Liens set forth in
Section 10.3, or (c) for any Tax
based on or measured by any fees,
commission or compensation
received by it for acting as the
Lessor as contemplated by the
Operative Documents. It is
understood and agreed that,
except as provided in the
preceding proviso: (i) the Lessor
shall have no personal liability
under any of the Operative
Documents; (ii) all obligations
of the Lessor to the Lessee, the
Agent and the Participants are
solely nonrecourse obligations
and shall be enforceable solely
against the interest of the
Lessor in the Property; and (iii)
all such personal liability of
the Lessor is expressly waived
and released as a condition of,
and as consideration for, the
execution and delivery of the
Operative Documents by the
Lessor. Notwithstanding anything
contained herein, the
restrictions stated in the
preceding provisions of this
Section 15.10(a) shall not apply
to liability of the Lessor
arising because of a breach of
the Lessor's obligation to remove
Lessor Liens or because of its
receiving Advances and failing to
disburse Advances to the Lessee
in accordance with the Operative
Documents, or failure to disburse
proceeds from the sale of the
Property in accordance with this
Lease.
(b) No Participant shall have
any obligation to any other
Participant or to the
Lessee, the Lessor or the
Agent with respect to
transactions contemplated by
the Operative Documents,
except those obligations of
such Participant expressly
set forth in the Operative
Documents or except as set
forth in the instruments
delivered in connection
therewith, and no
Participant shall be liable
for performance by any other
party hereto of such other
party's obligations under
the Operative Documents
except as otherwise so set
forth.
SECTION 15.11. Further Assurances.
The parties hereto shall promptly
cause to be taken, executed,
acknowledged or delivered, at the
sole expense of the Lessee, all
such further acts, conveyances,
documents and assurances as the
other parties may from time to
time reasonably request in order
to carry out and effectuate the
intent and purposes of this
Participation Agreement, the
other Operative Documents, and
the transactions contemplated
hereby and thereby (including,
without limitation, the
preparation, execution and filing
of any and all Uniform Commercial
Code financing statements and
other filings or registrations
which the parties hereto may from
time to time request to be filed
or effected). The Lessee, at its
own expense and without need of
any prior request from any other
party, shall take such action as
may be necessary (including any
action specified in the preceding
sentence), or (if the Lessor
shall so request) as so
requested, in order to maintain
and protect all security
interests provided for hereunder
or under any other Operative
Document.
SECTION 15.12. Submission to
Jurisdiction. The Lessee hereby
submits to the nonexclusive
jurisdiction of the United States
District Court for the Northern
District of Illinois and of any
Illinois state court sitting in
▇▇▇▇ County for purposes of all
legal proceedings arising out of
or relating to the Operative
Documents or the transactions
contemplated hereby. The Lessee
irrevocably waives, to the
fullest extent permitted by law,
any objection which it may now or
61
hereafter have to the laying of the
venue of any such proceeding brought
in such a court and any claim that any
such proceeding brought in such a
court has been brought in an
inconvenient forum.
SECTION 15.13. Confidentiality.
The Lessor, the Agent and each
Participant represent that they
will maintain the confidentiality
of the transactions contemplated
by, and of any written or oral
information provided under, the
Operative Documents by or on
behalf of the Lessee (hereinafter
collectively called "Confidential
Information"), subject to the
Lessor's, the Agent's and each
Participant's (a) obligation to
disclose any such Confidential
Information pursuant to a request
or order under applicable laws
and regulations or pursuant to a
subpoena or other legal process,
(b) right to disclose any such
Confidential Information to its
bank examiners, Affiliates,
auditors, counsel and other
professional advisors and to
other Participants, (c) right to
disclose any such Confidential
Information in connection with
any litigation or dispute
involving the Participants and
the Lessee or any of its
Subsidiaries and Affiliates and
(d) right to provide such
information to Sub-Participants,
prospective Sub-Participants to
which sales of participating
interests are permitted pursuant
to this Participation Agreement
and prospective assignees to
which assignments of interests
are permitted pursuant to this
Participation Agreement, but only
if (i) such Sub-Participant,
prospective Sub-Participant or
prospective assignee agrees in
writing to maintain the
confidentiality of such
information on terms
substantially similar to those of
this Section as if it were a
"Participant" party hereto and
(ii) the Lessee receives copies
of such written agreement prior
to the release of such
information. Notwithstanding the
foregoing, any such information
supplied to a Participant,
Sub-Participant, prospective
Sub-Participant or prospective
assignee under this Participation
Agreement shall cease to be
Confidential Information if it is
or becomes known to such Person
by other than unauthorized
disclosure, or if it becomes a
matter of public knowledge.
SECTION 15.14. WAIVER OF JURY
TRIAL. EACH OF THE LESSEE, THE
AGENT, THE LESSOR, AND EACH
PARTICIPANT HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THE
OPERATIVE DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 15.15. Usury Savings
Clause. Nothing contained in this
Participation Agreement or the
other Operative Documents shall
be deemed to require the payment
of interest or other charges by
the Lessee or any other Person in
excess of the amount which may be
may lawfully be charged under any
applicable usury laws. In the
event that the Lessor or any
other Person shall collect moneys
under the Participation Agreement
or any other Operative Document
which are deemed to constitute
interest (including, without
limitation, the Basic Rent or
Supplemental Rent) which would
increase the effect interest rate
to a rate in excess of that
permitted to be charged by
applicable law, all such sums
deemed to constitute interest in
excess of the legal rate shall,
upon such determination, at the
option of the Person to whom such
payment was made, be returned to
the Person making such payment or
credited against other amounts
owed by the person making such
payment.
[SIGNATURE PAGES FOLLOW]
62
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
VITESSE SEMICONDUCTOR CORPORATION, as Lessee
By:
-------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Vice President, Finance
& Chief Financial Officer
By:
-------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President
ABN AMRO BANK N.V., SAN FRANCISCO INTERNATIONAL
BRANCH, as Agent
By: /s/ ??
-------------------------------------------
Title: V.P & Director
----------------------------------------
By: /s/ ??
-------------------------------------------
Title: ?
----------------------------------------
ABN AMRO BANK N.V., SAN FRANCISCO INTERNATIONAL
BRANCH, as Participant
By: /s/ ??
-------------------------------------------
Title: V.P. & Director
----------------------------------------
By: /s/ ?
-------------------------------------------
Title: ?
----------------------------------------
SCHEDULE I
Commitment
Participant Commitments Percentage
---------------------------------------------------------------------------
ABN AMRO BANK N.V., Tranche A
SAN FRANCISCO Participation
INTERNATIONAL BRANCH Interest: $36,000,000 80.00000000%
Tranche B
Participation
Interest: $ 9,000,000 20.00000000%
----------- -----------
TOTAL COMMITMENT: $45,000,000 $100.00000000%
=========== =============
SCHEDULE II
Notice Information and Funding Offices
Lessee: VITESSE SEMICONDUCTOR CORPORATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President, Finance and Chief
Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Lessor: LEASE PLAN NORTH AMERICA, INC.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Agent: ABN AMRO BANK N.V., SAN FRANCISCO
INTERNATIONAL BRANCH
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President, Director
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Operations Contact:
ABN AMRO BANK N.V., SAN FRANCISCO INTERNATIONAL BRANCH
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Participant: ABN AMRO BANK N.V., SAN FRANCISCO
INTERNATIONAL BRANCH
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Brace W. Swords
Vice President, Director
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Payment
Instructions: Bank: Federal Reserve Bank of New York
Acct: ABN AMRO New York
ABA#: ▇▇▇▇▇▇▇▇▇
Further
Credit to: ABN AMRO San Francisco
Acct#: 6510010545-41
Re: Vitesse Semiconductor
SCHEDULE III
Environmental Matters
Four metal drums were observed on the Property of CTL/▇▇▇▇▇▇▇▇, Inc. Consulting
Engineers("CTL") as disclosed in the Phase I Environmental Site Assessment
prepared by ETL dated June 17, 1996 and delivered to the Lessor and the Agent.
The Lessee has been told that such drums were removed and believees that they
were so removed by the seller of the Property. The Lessee does not know, and can
give no assurances as to, whether such drums were removed and disposed of in
compliance with Environmental Laws.