EXHIBIT 10.53
PARTICIPATION AGREEMENT
Dated as of July 16, 2001
among
ELECTRONIC ARTS REDWOOD, INC., as the Lessee,
ELECTRONIC ARTS, INC.,
as the Guarantor,
FLATIRONS FUNDING, LIMITED PARTNERSHIP
as the Lessor,
SELCO SERVICE CORPORATION
and
SELCO REDWOOD, LLC,
as the New Partners of the Lessor,
VICTORY RECEIVABLES CORPORATION,
as the Note Purchaser,
THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH,
as the Conduit Agent,
THE VARIOUS LIQUIDITY BANKS,
THE VARIOUS TRANCHE B BANKS,
and
KEYBANK NATIONAL ASSOCIATION
as the Agent
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS; INTERPRETATION 2
Section 1.1 Definitions; Interpretation 2
ARTICLE II DOCUMENTATION DATE; FUNDING DATES 3
Section 2.1 Documentation Date
(a) Participation Agreement 3
(b) Partnership Interests Purchase Agreement 3
(c) Master Termination Agreements 3
(d) Note Purchase Agreement 3
(e) Liquidity Documentation 3
(f) The Lessee's Resolutions and Incumbency Certificate, etc 3
(g) The Guarantor's Resolutions and Incumbency Certificate, etc. 3
(h) Resolutions and Incumbency Certificate, etc on behalf of the Lessor. 4
(i) The New Partners' Resolutions and Incumbency Certificate, etc. 4
Section 2.2 Funding Dates 4
ARTICLE III ISSUANCE OF NOTES, FUNDING OF THE TRANCHE B LOAN
AND FUNDING OF THE EQUITY INVESTMENT; PURCHASES OF
NOTES; APPLICATION OF PROCEEDS OF NOTES, THE
TRANCHE B LOAN AND THE EQUITY INVESTMENT 5
Section 3.1 Commitment of the Lessor to Issue Notes. 5
Section 3.2 Commitment to Make Note Purchases 6
Section 3.3 Commitment of the Tranche B Banks to Fund the Tranche B Loan. 6
Section 3.4 Commitment of the New Partners to Fund the Equity Investment. 6
Section 3.5 Notice Procedures with respect to the Funding of Advances under
the Notes, the Tranche B Loan and the Equity Investment 7
Section 3.6 Use of Proceeds of Notes, Tranche B Loan and Equity Investment 8
Section 3.7 Commitment of the Liquidity Banks 8
ARTICLE IV CALCULATION OF BASIC RENT AND SUPPLEMENTAL RENT;
DETERMINATION OF NOTE RATE; BREAKAGE EXPENSES,
INCREASED COSTS, ETC.; TAXES; FEES 9
Section 4.1 Rent 9
Section 4.2 Calculation of Basic Rent 10
Section 4.3 Breakage Expenses; Yield Maintenance Premium 12
Section 4.4 Increased Costs, Etc. 13
-i-
TABLE OF CONTENTS
(continued)
Section 4.5 Change of Circumstances. 14
Section 4.6 Taxes 14
Section 4.7 Replacement of Affected Parties 16
Section 4.8 Fees 17
Section 4.9 Calculation of Interest and Fees 17
Section 4.10 Method of Payment 18
Section 4.11 Non-Business Day Payments 18
Section 4.12 Assignment of Basic Rent and Other Payments 18
ARTICLE V CERTAIN INTENTIONS OF THE PARTIES 18
Section 5.1 Nature of Transaction 18
Section 5.2 Amounts Due Hereunder and Under the Master Lease 19
Section 5.3 Allocation of Payment Obligations; Payment to Agent 20
ARTICLE VI CONDITIONS PRECEDENT TO FUNDING DATES 21
Section 6.1 Conditions Precedent to the Initial Funding Date 21
(a) Funding Notice 21
(b) Operative Documents to be Delivered on the Initial Funding Date 21
(c) Precautionary Deed of Trust 22
(d) Deed of Trust 22
(e) Opinion of Counsel to Lessee and Guarantor 22
(f) Initial Appraisal 22
(g) Environmental Audit 23
(h) Conveyance Instruments 23
(i) The Lessee's Responsible Officer's Certificate 23
(j) Guarantor's Responsible Officer's Certificate 23
(k) UCC Financing Statements 23
(l) Recordation of Conveyance Instruments and Financing Statements 23
(m) Property Survey 24
(n) Title Policies 24
(o) Evidence of Property Insurance 24
(p) Governmental Approvals 24
(q) Requirements of Law 24
(r) No Event of Default 24
-ii-
TABLE OF CONTENTS
(continued)
(s) Administration Agreement 25
(t) Representation and Warranties 25
(u) Litigation 25
(v) Available Commitments; Maximum Amount of Notes and Equity
Investment 25
(w) Taxes 25
(x) No Material Adverse Effect. 25
(y) Fees. 25
(z) Opinion of Counsel to the Lessor and the New Partners 25
(aa) The Lessor's Responsible Officer's Certificate 26
(bb) The New Partners' Responsible Officer's Certificates 26
(cc) Other Documents 26
Section 6.2 Conditions Precedent to all Accretion Funding Dates 26
(a) Representations and Warranties 26
(b) No Event of Default. 27
(c) Operative Documents 27
Section 6.3 Closing 27
ARTICLE VII REPRESENTATIONS 27
Section 7.1 Representations and Warranties of the Lessee and the Guarantor 27
(a) Corporate Authority 27
(b) Litigation, etc. 28
(c) Burdensome Obligations; Compliance with Other Instruments,
Laws; No Defaults; Permits 28
(d) Government Regulation 29
(e) Margin Regulations 29
(f) Certain Tax Matters 30
(g) Liens 30
(h) Financial Matters 30
(i) Changes, etc 31
(j) Employee Benefit Plans 31
(k) Insurance 32
(l) Labor Matters 32
-iii-
TABLE OF CONTENTS
(continued)
(m) Environmental Protection 32
(n) Copyrights, Patents and Trademarks 33
(o) Title 33
(p) Full Disclosure; Pro Forma Effect of Overall Transaction 33
(q) Seniority 33
(r) Compliance of Property with Requirements of Law 34
(s) Plans and Specifications, Utilities, etc. 34
(t) No Adverse Proceedings 34
(u) Master Lease 34
(v) Conveyance Instruments 34
(w) Private Offering 34
Section 7.2 Representations and Warranties of the Guarantor and the Lessee as
of each Funding Date after the Initial Funding Date 35
(a) Representations and Warranties 35
(b) Liens 35
(c) Absence of Default, Etc. 35
Section 7.3 Representations and Warranties of the Note Purchaser 35
(a) ERISA 35
(b) Corporate Existence 35
(c) Corporate and Governmental Authorization; No Contravention 35
(d) No Lessor Liens 35
(e) Validity 35
(f) Private Offering 36
Section 7.4 Representations and Warranties of the New Partners 36
(a) ERISA 36
(b) Corporate and Governmental Authorization; No Contravention 36
(c) Validity 36
(d) Litigation 36
(e) Private Offering 37
Section 7.5 Representations and Warranties of the Lessor 37
(a) Jurisdiction of Organization, Chief Executive Office, Etc. 37
(b) Corporate Existence 37
-iv-
TABLE OF CONTENTS
(continued)
(c) Corporate and Governmental Authorization; No Contravention 37
(d) No Lessor Liens 37
(e) Validity 37
(f) Litigation 38
(g) Private Offering 38
(h) Certain Tax Matters 38
Section 7.6 Representations and Warranties of each Tranche B Bank and each
Liquidity Bank 39
(a) Existence 39
(b) Authorization; Validity 39
(c) Private Offering 39
ARTICLE VIII COVENANTS 39
Section 8.1 Affirmative Covenants of Guarantor and Lessee 39
(a) Conduct of Business 39
(b) Insurance 40
(c) Records and Accounts 40
(d) Reports 40
(e) Right to Inspect Premises and Records 42
(f) Payment of Liabilities 43
(g) Payment of Charges and Indebtedness 43
(h) Material Change in Business 43
(i) Compliance with Securities Laws 43
(j) Application of Proceeds 43
(k) Environmental Protection 44
(l) Ownership of the Lessee 44
(m) Notice of Change in Name, Identity or Address 44
(n) Further Assurances 44
(o) No Disposition of the Property 45
(p) Defense of Title 45
Section 8.2 Negative Covenants 45
(a) Limitations on Indebtedness 45
(b) Limitation on Liens, Etc 45
-v-
TABLE OF CONTENTS
(continued)
(c) Asset Dispositions 45
(d) Mergers, Acquisitions, Etc 46
(e) Investments. 46
(f) Dividends, Redemptions, Etc 47
(g) Employee Benefit Plans 47
(h) Prohibited Uses of Proceeds 48
(i) Transactions with Affiliates 48
(j) Additional Activities Prohibited 48
Section 8.3 Financial Covenants 48
(a) Consolidated Net Worth 48
(b) Fixed Charge Coverage Ratio. 49
(c) Total Consolidated Debt to Total Consolidated Capital. 49
(d) Quick Ratio. 49
ARTICLE IX COVENANTS OF THE LESSOR, THE NEW PARTNERS, THE
NOTE PURCHASER, THE TRANCH B BANKS AND THE
LIQUIDITY BANKS 49
Section 9.1 General Covenants of the New Partners, the Lessor and the Note
Purchaser 49
Section 9.2 Specific Covenants of the Lessor 50
Section 9.3 Specific Covenants of the New Partners 50
Section 9.4 Specific Covenant of the Note Purchaser 51
Section 9.5 Other Covenants of the Lessor Parties 51
Section 9.6 Notices Under the Note Purchase Agreement and the Liquidity
Documentation 52
ARTICLE X PAYMENT OF CERTAIN EXPENSES; OPTIONAL APPRAISALS 52
Section 10.1 Transaction Expenses 52
Section 10.2 Stamp Taxes 52
Section 10.3 Note Purchase Agreement and Related Obligations 52
Section 10.4 Optional Appraisals 52
ARTICLE XI APPLICATION OF PAYMENTS 53
Section 11.1 Consenting Parties; Voting Rights of Lessor Parties in Connection
with Direction of the Agent 53
-vi-
TABLE OF CONTENTS
(continued)
Section 11.2 Application of Payments made by the Lessee and Guarantor
Pursuant to the Operative Documents prior to the Occurrence and Continuance of
any Event of Default 53
Section 11.3 Application of Funds Upon the Occurrence and Continuance of
any Event of Default 54
Section 11.4 Application of Funds Upon Exercise of the Remarketing Option 54
Section 11.5 Casualty or Condemnation Proceeds 55
Section 11.6 Construction of Local Laws 55
ARTICLE XII ASSIGNMENTS AND TRANSFERS BY LESSOR, TRANCHE B
BANKS, LIQUIDITY BANKS AND NOTE PURCHASER 55
Section 12.1 Acknowledgment of Grant of Security Interest to the Agent;
Assignments 55
Section 12.2 Assignments by Note Purchaser, etc 56
Section 12.3 Participations and Sub-Participations 57
Section 12.4 Disclosure of Information 57
Section 12.5 Limitation on Assignment 57
ARTICLE XIII INDEMNIFICATION 57
Section 13.1 General Indemnification: 57
Section 13.2 Environmental Indemnity 60
Section 13.3 Proceedings in Respect of Claims 61
Section 13.4 General Tax Indemnity 62
(a) Indemnification 62
(b) Contests 62
(c) Reimbursement 65
(d) Payments 66
(e) Reports 66
(f) Verification 66
(g) Tax Ownership 67
(h) Structural Impositions and Prior Impositions 68
(i) Lessor as Indemnitee 68
Section 13.5 Indemnity Payments in Addition to Master Lease Obligations 68
ARTICLE XIV AGENT; PLEDGED PROPERTY 69
Section 14.1 Appointment and Duties of the Agent 69
-vii-
TABLE OF CONTENTS
(continued)
Section 14.2 Rights of the Agent 69
Section 14.3 Lack of Reliance on the Agent 71
Section 14.4 Resignation of the Agent 71
Section 14.5 Successor Agent by Merger 71
Section 14.6 Eligibility of the Agent 72
Section 14.7 Collection of Payments 72
Section 14.8 Pledged Property 72
ARTICLE XV MISCELLANEOUS 73
Section 15.1 Survival of Agreements 73
Section 15.2 No Broker, etc. 73
Section 15.3 Notices 73
Section 15.4 Counterparts 74
Section 15.5 Amendments 74
Section 15.6 Headings, etc. 75
Section 15.7 Parties in Interest 75
Section 15.8 Governing Law 75
Section 15.9 Severability 75
Section 15.10 Liability Limited 76
Section 15.11 Further Assurances 76
Section 15.12 Submission to Jurisdiction. 76
Section 15.13 Waiver of Jury Trial 76
Section 15.14 No Bankruptcy Petition Against the Note Purchaser 77
Section 15.15 Limited Recourse to the New Partners, the Note Purchaser and the
Lessor 77
Section 15.16 Confidentiality. 78
Section 15.17 Renewal of Commitment under the Liquidity Agreement. 78
Section 15.18 Tax Representation; Tax Forms 78
ARTICLE XVI RELATIONSHIP BETWEEN MASTER LEASE AND OTHER
OPERATIVE DOCUMENTS 79
Section 16.1 Conflicts with Master Lease in General 79
Section 16.2 Specific Provisions of the Master Lease 79
-viii-
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT (as amended, restated or otherwise modified and in
effect from time to time, this "Participation Agreement"), dated as of July
16,2001, is entered into by and among ELECTRONIC ARTS REDWOOD, INC., a Delaware
corporation, as the lessee (in such capacity, together with its permitted
successors and assigns, the "Lessee"); ELECTRONIC ARTS, INC., a Delaware
corporation, as the guarantor (in such capacity, together with its permitted
successors and assigns, the "Guarantor"); FLATIRONS FUNDING, LIMITED
PARTNERSHIP, a Delaware limited partnership, as the lessor (in such capacity,
together with its permitted successors and assigns, the "Lessor"); SELCO SERVICE
CORPORATION, an Ohio corporation doing business in California as Ohio SELCO
Service Corporation, and SELCO REDWOOD, LLC, a Delaware limited liability
company, as the new partners of the Lessor (in such capacity, together with
their permitted successors and assigns, the "New Partners"); VICTORY RECEIVABLES
CORPORATION, a Delaware corporation, as the note purchaser (in such capacity,
together with its permitted successors and assigns, the `Note Purchaser"); THE
BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH, as the agent for the Note
Purchaser and the administrative agent for the Liquidity Banks (in such
capacities, together with its permitted successors and assigns, the "Conduit
Agent"); the financial institutions (including, without limitation, those
certain financial institutions denoted as "Liquidity Banks" appearing on the
signature pages hereof) which are parties to this Participation Agreement and
the Liquidity Documentation from time to time (such financial institutions to be
referred to collectively as the "Liquidity Banks"); the financial institutions
(including, without limitation, those certain financial institutions denoted as
"Tranche B Banks" appearing on the signature pages hereof) which are parties to
this Participation Agreement from time to time (such financial institutions to
be referred to collectively as the "Tranche B Banks"); and KEYBANK NATIONAL
ASSOCIATION, as the agent for the Lessor, the Note Purchaser, the Conduit Agent,
the Liquidity Banks and the Tranche B Banks (in such capacity, together with its
permitted successors and assigns, the "Agent"). Capitalized terms used herein
and not otherwise defined herein shall have the meanings specified in Appendix
A.
WITNESSETH:
WHEREAS, the Lessee, the Guarantor, the Lessor, the New Partners, the Note
Purchaser, the Conduit Agent, the Liquidity Banks, the Tranche B Banks and the
Agent have entered into this Participation Agreement for the purpose of setting
forth the terms and conditions pursuant to which the Lessor would continue to
provide a lease facility to the Lessee; and
WHEREAS, in order for the Lessor to continue to provide such lease facility to
the Lessee upon the terms and subject to the conditions set forth herein and in
the other Operative Documents, (a) the New Partners shall first acquire the
entire ownership interest in the Lessor from the Existing Partners pursuant to
the Partnership Interests Purchase Agreement with a combination of their own
funds through the funding by the New Partners of the Equity Investment and, as
necessary, funds advanced by the Note Purchaser to the New Partners under one or
more Notes issued by the Lessor on behalf of the New Partners to the Note
Purchaser on the Initial Funding Date pursuant to the Note Purchase Agreement
and funds advanced by the Tranche B Banks pursuant to this Participation
Agreement (which Note and Tranche B Loan
funds, if any, shall be disbursed concurrently to the New Partners as a
partnership distribution), (b) the Lessor shall refinance all existing
Indebtedness owed by the Lessor to the Existing Lenders pursuant to the Existing
Credit Agreement by issuing one or more Notes to the Note Purchaser on the
Initial Funding Date pursuant to the Note Purchase Agreement and borrowing funds
in the form of a Tranche B Loan from the Tranche B Banks pursuant to this
Participation Agreement, and using the proceeds of such Notes and Tranche B Loan
to repay such existing Indebtedness, (c) the Lessor shall continue to lease the
Property (consisting of the land described in Exhibit A (as more fully defined
in Appendix A, the "Land") and the ln1provements thereon) owned by the Lessor to
the Lessee pursuant to the terms and conditions of the Master Lease (as amended
by Amendment No.2 dated as of the date hereof), and (d) the Lessor shall
reaffirm its grant to the Lessee of the Lessee's right to purchase such Property
upon the terms and conditions set forth in the Master Lease; and
WHEREAS, the Lessor and certain of the other Lessor Parties will have certain
rights and remedies under the Master Lease, including, without limitation, the
right to receive payments of Rent thereunder; and
WHEREAS, in order to finance the funds to be advanced under the Notes by the
Note Purchaser pursuant to the Note Purchase Agreement, the Note Purchaser,
pursuant to the Liquidity Documentation, may from time to time request Loans
from the Liquidity Banks or sell Percentage Interests in the obligations
evidenced by the Notes to the Liquidity Banks; and
WHEREAS, to secure the obligations of the Lessee to the Lessor under the
Operative Documents, the Lessee has, under each of the Master Lease, the
Precautionary Deed of Trust and the Precautionary Financing Statements, granted
a security interest in and Lien on all of its right and interest in and to the
Property covered by the Master Lease; and
WHEREAS, to secure the obligations of the Lessor pursuant to the Operative
Documents, the Lessor has, pursuant to the Deed of Trust, granted a security
interest in and a Lien on all of its right and interest in and to the Property
and the Master Lease and has assigned all of its right and interest in and to
the Precautionary Deed of Trust and the Precautionary Financing Statements to
the Agent; and
WHEREAS, the Guarantor has agreed to guarantee the Obligations of the Lessee
inasmuch as the Guarantor will derive substantial direct and indirect benefits
from the continued leasing of the Property by the Lessor to the Lessee.
NOW, THEREFORE, in consideration of the mutual agreements contained in this
Participation Agreement and the other Operative Documents and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
Section 1.1 Definitions: Interpretation Unless the context shall otherwise
require, capitalized terms used and not defined herein and in the other
Operative Documents shall have
2
the meanings assigned thereto in Appendix A hereto for all purposes hereof, and
the rules of interpretation set forth in Appendix A hereto shall apply to this
Participation Agreement and the other Operative Documents.
ARTICLE II
DOCUMENTATION DATE; FUNDING DATES
Section 2.1 Documentation Date. The Documentation Date (the "Documentation
Date") shall occur on the earliest date on which the following conditions
precedent shall have been satisfied or waived:
(a) Participation Agreement. This Participation Agreement shall have been duly
authorized, executed and delivered by the parties hereto.
(b) Partnership Interests Purchase Agreement. The Partnership Interests Purchase
Agreement shall have been duly authorized, executed and delivered by the parties
thereto.
(c) Master Termination Agreements. The Master Termination Agreements shall have
been duly authorized, executed and delivered by the parties thereto.
(d) Note Purchase Agreement. The Note Purchase Agreement shall have been duly
authorized, executed and delivered by the parties thereto.
(e) Liquidity Documentation. All Liquidity Documentation shall have been duly
authorized, executed and delivered by the parties thereto.
(f) The Lessee's Resolutions and Incumbency Certificate, etc. The Lessee shall
have delivered to the Lessor Parties (i) a certificate of its Secretary or an
Assistant Secretary attaching and certifying as to (A) the resolutions of its
Board of Directors duly authorizing the execution, delivery and performance by
it of the Operative Documents to which it is a party, (B) its certificate of
incorporation and by-laws, 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 certificate of good standing with respect to it issued
by the Secretary of State of the state of its incorporation and for the
jurisdiction in which the Property is located, no earlier than fifteen (15) days
prior to the Documentation Date.
(g) The Guarantor's Resolutions and Incumbency Certificate, etc. The Guarantor
shall have delivered to the Lessor Parties (i) a certificate of its Secretary or
an Assistant Secretary attaching and certifying as to (A) the resolutions of its
Board of Directors duly authorizing the execution, delivery and performance by
it of the Operative Documents to which it is a party, (B) its certificate of
incorporation and by-laws, 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 certificate of good standing with respect to it issued
by the Secretary of State of the state of its incorporation and for the
jurisdiction in which the Property is located no earlier than fifteen (15) days
prior to the Documentation Date.
3
(h) Resolutions and Incumbency Certificate, etc on behalf of the Lessor. The
general partner of the Lessor shall have delivered to the other Lessor Parties a
certificate of the Secretary or an Assistant Secretary attaching and certifying
as to (i) the resolutions of the Board of Directors of the general partner duly
authorizing the execution, delivery and performance by the Lessor of the
Operative Documents to which it is a party, (ii) the Lessor's certificate of
limited partnership and currently effective Limited Partnership Agreement, and
(iii) the incumbency and signature of persons authorized to execute and deliver
on behalf of the Lessor the Operative Documents to which the Lessor is a party,
no earlier than fifteen (15) days prior to the Documentation Date.
(i) The New Partners' Resolutions and Incumbency Certificate, etc. Each New
Partner shall have delivered to the other Lessor Parties (as applicable) (i) a
certificate of its Secretary or an Assistant Secretary attaching and certifying
as to (A) the resolutions of its Board of Directors or Members duly authorizing
the execution, delivery and performance by it (on behalf of itself and/or the
Lessor) of the Operative Documents to which it and/or the Lessor is a party, (B)
its certificate of incorporation and by-laws or operating agreement (as
applicable), and (C) the incumbency and signature of persons authorized to
execute and deliver on its behalf and/or the Lessor the Operative Documents to
which it and/or the Lessor is a party; and (ii) if available, a certificate of
good standing with respect to it issued by the Secretary of State of the state
of its organization, no earlier than fifteen (15) days prior to the
Documentation Date.
Section 2.2 Funding Dates.
(a) The dates on which the funds are to be advanced under the Notes (and, with
respect to the Initial Funding Date, the funding of the Equity Investment and
the funding of the Tranche B Loan shall be made) shall be referred to herein and
in other Operative Documents as the "Funding Dates" and each, a "Funding Date".
(b) The Funding Date with respect to the financing of the acquisition of the
Partnership Interests and the refinancing of outstanding Indebtedness under the
Existing Credit Agreement (the "Initial Funding Date") shall be July 16, 2001
(or such other Business Day selected by the New Partners with the consent of the
Lessee which in no event shall be earlier than the first Business Day after the
Documentation Date) subject to the satisfaction (or waiver by the appropriate
Lessor Parties) of the conditions set forth in Section 6.1 herein.
(c) Subject to Section 3.5(b) below, each Funding Date with respect to the
funding of the Accreted Amounts (as defined in Section 3. 1 (a)(ii) below)
(each, an "Accretion Funding Date") shall occur on each Basic Rent Payment Date
during the Lease Term, subject to the satisfaction (or waiver by the appropriate
Lessor Parties) of the conditions set forth in Section 6.2 herein.
4
ARTICLE III
ISSUANCE OF NOTES, FUNDING OF THE TRANCHE B LOAN AND FUNDING OF THE
EQUITY INVESTMENT; PURCHASES OF NOTES; APPLICATION OF PROCEEDS OF
NOTES, THE TRANCHE B LOAN AND THE EQUITY INVESTMENT
Section 3.1 Commitment of the Lessor to Issue Notes.
(a) Subject to the terms and conditions hereof, and pursuant to the relevant
provisions of the Note Purchase Agreement:
(i) on the Initial Funding Date, the Lessor shall issue one or more Notes which
after application of the Security Deposit set forth in Section 3.1(c) below,
shall be in an aggregate principal amount of $96,737,192.60, the proceeds of
which (together with the proceeds of the Equity Investment and the Tranche B
Loan) shall be used by the New Partners to purchase the Partnership Interests
from the Existing Partners pursuant to the Partnership Interests Purchase
Agreement and to refinancing the outstanding Indebtedness under the Existing
Credit Agreement. Upon the payment by the Note Purchaser of the initial purchase
price of the Notes in accordance with Section 3.5(d) hereof, such payment
obligation of the Note Purchaser for such initial Notes shall be deemed to have
been satisfied in full.
(ii) Subject to Section 3.1(b) hereof, on each Accretion Funding Date, and
provided that the Lessee shall have paid to the Lessor the Security Deposit as
provided in Section 3.1(c) hereof, the Note Purchaser shall advance funds to the
Lessor under the Notes in an aggregate principal amount equal to $386,463.46
(each such amount, the "Accreted Amount"). If, as of any Accretion Funding Date,
the Aggregate Note Purchase Commitment is insufficient to support such Accreted
Amount, the Lessee shall make a non-recourse loan to the Agent (a "Lessee Loan")
in a principal amount equal to the amount by which the Aggregate Note Purchase
Commitment is insufficient to pay the Accreted Amount then due and payable,
whereupon the non-supported Accreted Amount to be paid on such date shall be
paid instead from the proceeds of the Lessee Loan. The Agent and the Lessee
shall agree upon the rate of interest and the maturity date of each Lessee Loan
at the time each such Lessee Loan is made.
(b) The maximum aggregate principal amount outstanding under the Notes at any
time shall not exceed $105,318,627.45 (such amount, the "Aggregate Note Purchase
Commitment"); provided, however, in the event that additional allocated portions
of the "Commitments" (as defined in the Liquidity Agreement) of the Liquidity
Banks are obtained from time to time in accordance with Section 3.7 hereof, the
Aggregate Note Purchase Commitment shall increase to an amount calculated by
dividing the then aggregate Liquidity Bank "Commitments" by 1.02 (one and two
one-hundredths); and, provided, further, that in no event shall the Aggregate
Note Purchase Commitment exceed $119,925,000. In the event that any such
increase in the Liquidity Bank "Commitments" are effected by the inclusion of an
additional Liquidity Bank, each such additional Liquidity Bank must be an
"Eligible Assignee" under, and comply with the provisions with respect to
assignee "Banks" and "Purchasers" in, both the Liquidity Agreement and the Asset
Purchase Agreement, respectively. Whether or not
5
any such increase in the Liquidity Bank "Commitments" are effected by an
increase in the allocated portion of the "Commitments" of existing Liquidity
Banks, appropriate amendments to the schedules to the Liquidity Documentation to
reflect the changed percentages of the Liquidity Banks shall be agreed to by the
Liquidity Banks as one of the conditions to the increase. For accounting
purposes, all funds advanced to the Lessor under the Notes pursuant to the Note
Purchase Agreement shall constitute debt.
(c) On the Initial Funding Date, the Lessee shall make a payment to the Lessor
in an amount of $23,187,807.40 (such amount, the "Security Deposit"), the
proceeds of which shall be used by the Lessor to retire a portion of the
outstanding balance of the Notes (in the aggregate principal amount of such
Security Deposit so paid). Upon payment of the Security Deposit by the Lessee
pursuant to this Section 3.1 (c), the Agent, on behalf of the Lessor shall apply
the proceeds of the Security Deposit to repay funds advanced under the Notes in
an aggregate principal amount equal to the amount of the Security Deposit so
paid and, thereafter, such repaid funds shall no longer be outstanding for any
purpose, including the calculation of the Note Interest Amount under Section
4.2(a) hereof. After such repayment, however, the aggregate principal amount
outstanding under the Notes will be increased on each Accretion Funding Date to
reflect the funds advanced to the Lessor under the Notes on such Funding Date
for the Accreted Amount.
Section 3.2 Commitment to Make Note Purchases. Subject to the terms and
conditions hereof and the terms and conditions of the Note Purchase Agreement,
the Note Purchaser shall purchase the Note or Notes issued on the Initial
Funding Date and on each Accretion Funding Date and shall advance funds under
the Notes as provided for herein. Notwithstanding the foregoing, the Note
Purchaser shall not be required to purchase the Notes to be issued on the
Initial Funding Date or to advance funds to be advanced to or for the benefit of
the New Partners under such Notes on the Initial Funding Date unless the New
Partners simultaneously fund the Equity Investment to be made on the Initial
Funding Date and the Tranche B Banks simultaneously advance the Tranche B Loan
to be advanced on the Initial Funding Date.
Section 3.3 Commitment of the Tranche B Banks to Fund the Tranche B Loan.
Subject to the terms and conditions hereof, including, without limitation, the
delivery of the Funding Notice, on the Initial Funding Date, the Tranche B Banks
shall fund the entire Tranche B Loan in the amount of $20,000,000.00 (such
amount, the "Aggregate Tranche B Commitment"). For accounting purposes, the
Tranche B Loan made by the Tranche B Banks hereunder shall constitute debt. The
proceeds of the Tranche B Loan (together with the proceeds of the Equity
Investment and the Notes) shall be used by the New Partners to purchase the
Partnership Interests from the Existing Partners pursuant to the Partnership
Interests Purchase Agreement and to refinancing the outstanding Indebtedness
under the Existing Credit Agreement. Notwithstanding the foregoing, the Tranche
B Banks shall not be required to advance the Tranche B Loan on the Initial
Funding Date unless the New Partners simultaneously fund the Equity Investment
to be made on the Initial Funding Date and the Note Purchaser simultaneously
purchases the Notes to be issued by the Lessor on the Initial Funding Date and
advances the funds to be advanced under such Notes on the Initial Funding Date.
Section 3.4 Commitment of the New Partners to Fund the Equity Investment.
Subject to the terms and conditions hereof, including, without limitation, the
delivery of the Funding
6
Notice, on the Initial Funding Date, the New Partners shall fund the entire
Equity Investment in the amount of $5,075,000 (such amount, the "Aggregate
Equity Investment Commitment"). The proceeds of the Equity Investment shall be
used by the New Partners to purchase the Partnership Interests from the Existing
Partners. For accounting purposes, the Equity Investment made by the Lessor
hereunder shall constitute equity. Notwithstanding the foregoing, the New
Partners shall not be required to fund the Equity Investment on the Initial
Funding Date unless the Note Purchaser simultaneously purchases the Notes to be
issued by the Lessor on the Initial Funding Date and advances the funds to be
advanced under such Notes on the Initial Funding Date and the Tranche B Banks
simultaneously advance the Tranche B Loan to be advanced on the Initial Funding
Date;
Section 3.5 Notice Procedures with respect to the Funding of Advances under the
Notes. the Tranche B Loan and the Equity Investment.
(a) With respect to the purchase of the Notes, the funding of the advances to be
made under such Notes, the funding of the Tranche B Loan, and the funding of the
Equity Investment, the Lessee shall give the Agent, for the benefit of the New
Partners, the Lessor, the Tranche B Banks and the Note Purchaser (as
applicable), prior written notice delivered not later than 7:30 a.m., New York
time, one Business Day prior to the proposed Funding Date specifying: (i) the
proposed Funding Date, (ii) the principal amount to be advanced on such Funding
Date under the Notes, (iii) with respect to the Initial Funding Date, the
principal amount to be advanced in the form of the Tranche B Loan on such
Funding Date, (iv) with respect to the Initial Funding Date, the amount of the
Equity Investment to be funded on such Funding Date and (v) to the extent the
proceeds are not used by the New Partners to acquire the Partnership Interests
or to refinancing the outstanding Indebtedness under the Existing Credit
Agreement, the application of the proceeds of such funds advanced under the
Notes, the Tranche B Loan and the Equity Investment towards payment of the
Transaction Expenses. The Funding Notice shall be in the form of Exhibit B.
(b) With respect to the funds to be advanced under the Notes on each Accretion
Funding Date, provided that the Lessee shall have paid the Security Deposit
pursuant to Section 3.1(c) hereof, such funds shall be in the amount set forth
in Section 3. 1 (a)(ii) hereof and shall be used to increase the Outstanding
Lease Balance such that the Outstanding Lease Balance at the Maturity Date shall
be equal to the appraised value of the Property on the Initial Funding Date as
set forth in the Initial Appraisal. Unless the Lessee provides the Lessor and
the Note Purchaser with ten (10) Business Day's prior written notice to the
contrary, the Lessee shall be deemed to have requested the funds to be advanced
on each Accretion Funding Date.
(c) Upon satisfaction or waiver of the conditions precedent to each advance
under the Notes, and with respect to the Initial Funding Date, the funding of
the Equity Investment and the Tranche B Loan, set forth in Article VI hereof,
the Note Purchaser shall advance such funds under the Notes, the Tranche B Banks
shall advance the Tranche B Loan and the New Partners shall fund the Equity
Investment, in each case in accordance with the allocation provisions set forth
above.
(d) All remittances made by the Note Purchaser, the Tranche B Banks and the New
Partners on the Initial Funding Date shall be made on such Initial Funding Date
in
7
immediately available federal funds by wire transfer to the accounts specified
in the Funding Notice and in Schedule 1 hereof. All remittances received by the
Conduit Agent from funds advanced under the Notes in the principal amount of the
Accreted Amount on each Accretion Funding Date shall be applied to the account
of the Note Purchaser for a partial or total offset (in the amount of such
remittance) of the Note Interest Amount due on such date. To the extent, if any,
that the Accreted Amount on such Accretion Funding Date exceeds the Note
Interest Amount due on such date, such excess shall be paid (i) to the Lessee
provided no Default or Event of Default has occurred and is continuing, and (ii)
upon the occurrence and continuance of any Default or Event of Default, as set
forth in Section 11.3(c) hereof.
(e) The Funding Notice and each advance of funds made on each Accretion Funding
Date shall be irrevocable and binding on the Lessee and the Lessee shall
indemnify the Note Purchaser (and each of the Liquidity Banks, if applicable)
and, with respect to the Initial Funding Date, the Lessor and each of the
Tranche B Banks, against any actual loss or expense incurred by the Note
Purchaser (or any Liquidity Bank, if applicable), the Tranche B Banks, the New
Partners and/or the Lessor, as a result of the Notes not being issued and/or
funds not being advanced thereunder, the Tranche B Loan not being funded in
accordance therewith, and the Equity Investment not being funded in accordance
therewith (other than as a result of a breach of this Participation Agreement by
the Note Purchaser, any Liquidity Bank, any Tranche B Bank, the New Partners
and/or the Lessor, as applicable; provided however that any such breach shall
not limit or adversely affect the indemnification hereunder of any non-breaching
party) including any actual loss or expense incurred by the Note Purchaser, the
Liquidity Banks, the Tranche B Banks, the New Partners and/or the Lessor, as the
case may be, by reason of the liquidation or reemployment of funds or the
termination of any hedging arrangements acquired or requested by the Note
Purchaser, the Liquidity Banks, the Tranche B Banks, the New Partners and/or the
Lessor, to fund the purchase of such Notes and the funds to be advanced
thereunder, the Tranche B Loan and the Equity Investment (as applicable).
Section 3.6 Use of Proceeds of Notes. Tranche B Loan and Equity Investment. The
proceeds of the funds advanced under the Notes on the Initial Funding Date, the
Tranche B Loan funded on the Initial Funding Date and the Equity Investment
funded on the Initial Funding Date shall be applied to finance the Acquisition
and Refinancing Costs. The proceeds of the funds advanced under the Notes on any
Accretion Funding Date shall, in the manner provided in Section 3.5(d) above, be
used to repay the then-accreted portion of the Outstanding Lease Balance
occurring as a result of the funding by the Lessee of the Security Deposit.
Section 3.7 Commitment of the Liquidity Banks. Subject to the terms and
conditions set forth herein and in the other Operative Documents, (a) the
Liquidity Banks shall severally, but not jointly, make available Loans (as
defined in the Liquidity Agreement) in an aggregate principal amount not to
exceed (x) as of the Initial Funding Date, $107,425,000 and (y) at any time
during which the allocated portion of the "Commitment" (as defined in the
Liquidity Agreement) of one or more existing Liquidity Bank shall have been
increased and/or one or additional financial institutions shall have agreed to
become a Liquidity Bank in accordance with Section 15.5 hereof, $119,925,000,
plus all accrued discount on all related Commercial Paper (as such amount may be
adjusted pursuant to the Liquidity Agreement) less the aggregate principal
amount of outstanding Percentage Interest purchased by the Liquidity Banks
pursuant to the Asset Purchase Agreement, and (b) each of the Liquidity Banks
shall, at the times set forth
8
therein, duly perform their respective obligations set forth herein and under
the applicable Operative Documents to which such Person is a party.
ARTICLE IV
CALCULATION OF BASIC RENT AND SUPPLEMENTAL RENT; DETERMINATION OF
NOTE RATE; BREAKAGE EXPENSES, INCREASED COSTS, ETC.; TAXES; FEES
Section 4.1 Rent.
(a) Basic Rent shall be equal to the sum of the Note Interest Amount, the
Tranche B Interest Amount and the Yield Amount, and shall be payable by Lessee
on each Basic Rent Payment Date pursuant to the terms and conditions set forth
in the Master Lease.
(b) The Lessee shall pay as Supplemental Rent hereunder the following:
(i) If the Lessee acquires the Lessor's interest in and to the Property pursuant
to clauses (iv) through (vi) of Section 14 of the Master Lease or exercises its
Purchase Option pursuant to Section 13.1(a) of the Master Lease, then the Lessee
will pay, as Supplemental Rent hereunder and under the other Operative
Documents, an amount equal to the Outstanding Lease Balance.
(ii) If a third party or parties acquires the Lessor's interest in and to the
Property pursuant to Section 12.1 of the Master Lease, then the Lessee shall
pay, or cause to be paid, in the case of proceeds received pursuant to Section
12.1 of the Master Lease, as Supplemental Rent, the Gross Sales Proceeds (as
determined in accordance with Section 12.1 of the Master Lease).
(iii) If the Remarketing Option is exercised pursuant to Section 12.1 of the
Master Lease, then the Lessee shall pay, as Supplemental Rent whether or not a
sale of the Property occurs, an amount equal to the Maximum Recourse Amount (if
any) (determined in accordance with Section 12.1 of the Master Lease).
(iv) Without duplication of any of the foregoing, whenever any make whole
premium, yield maintenance premium or brokerage cost is due on any of the Notes,
the Tranche B Loan, any Liquidity Loans or Equity Investment pursuant to Section
4.3, 4.4, 4.5 or 4.6 hereof or any UpFront Fees, Commitment Fees, Renewal Fees,
Structuring Fees, Administrative Fees or other fees due to any Lessor Party
under the Operative Documents, the Lessee shall pay to the Lessor the same
amount hereunder as Supplemental Rent.
(v) Additional Rent (as defined in the Master Lease).
(vi) All other amounts (other than Basic Rent, the amounts set forth in clauses
(i) -(v) above and interest (if any) on the Lessee Loans) due or to become due
(or expressed to be due or to become due) from the Lessee under the Master Lease
and the other Operative Documents.
9
The Lessee shall pay to the Lessor or any other Person entitled thereto any and
all Supplemental Rent promptly as the same shall become due and payable or, if
no date is specified for the payment of any such amount, within five (5)
Business Days after written demand of the Lessor or any other Lessor Party to
whom such amount is payable.
(c) The Lessor Parties hereby acknowledge that the Notes, the Tranche B Loan,
any Liquidity Loans and the Equity Investment may be prepaid with the proceeds
of the Supplemental Rent payments due pursuant hereto and pursuant to the Master
Lease, with the proceeds of such payments applied in accordance with the
provisions of Article XI hereof, subject in any event to compliance with Section
4.3 hereof and to the timely application of such Supplemental Rent pursuant to
the relevant provisions of Article XI hereof.
Section 4.2 Calculation of Basic Rent.
(a) The Note Interest Amount portion of Basic Rent with respect to the
outstanding principal amount of the Notes shall be computed based upon one of
the rates set forth below:
(i) To the extent that the Note Purchaser is funding advances under the Notes by
issuance of Commercial Paper, the Note Interest Amount portion of Basic Rent
with respect to the amounts outstanding under the Notes shall be computed
based upon the CP Rate as in effect from time to time plus fifteen one
hundredths of one percent (.15 %); and
(ii) To the extent the Note Purchaser is not funding advances under the Notes by
issuance of Commercial Paper or the Notes have been purchased by the Liquidity
Banks pursuant to the Liquidity Documentation, the Note Interest Amount portion
of Basic Rent with respect to the amounts outstanding under the Notes shall be
computed as follows: (A) until such time as a Liquidity Loan based upon a one
(1) month LIBOR rate can be advanced by the Liquidity Banks pursuant to the
Liquidity Documents, the Alternate Rate, and (B) thereafter, one of the
following two rates as selected by the Note Purchaser (or if the Notes have been
purchased by the Liquidity Banks pursuant to the Liquidity Documentation, the
Agent) in its reasonable discretion: (x) the one (1) month LIBOR rate as in
effect from time to time (adjusted for reserve requirements in effect on the
first day of each period for which a payment is due) plus the Applicable Margin;
or (y) if the one (1) month LIBOR rate is not available for any reason, the
Alternate Rate.
The aggregate amount payable in accordance with this Section 4.2(a) with respect
to all Notes as of any Basic Rent Payment Date shall be the "Note Interest
Amount" payable as of such date.
(b) The Tranche B Interest Amount portion of Basic Rent with respect to the
outstanding principal amount of the Tranche B Loan shall be computed based upon
either (i) the one (l) month LIBOR rate as in effect from time to time, adjusted
for reserve requirements in effect on the first day of each period for which a
payment is due, plus the Applicable Margin or (B) if the one (1) month LIBOR
rate is not available or cannot be determined for the reasons set forth in
Section 4.5 herein, the Alternate Rate. The aggregate amount payable in
accordance
10
with this Section 4.2(b) with respect to the Equity Investment as of any Basic
Rent Payment Date shall be the "Tranche B Interest Amount" payable as of such
date.
(c) The Yield Amount portion of Basic Rent payable with respect to the Equity
Investment shall be computed based upon either (i) the one (1) month LIBOR rate
as in effect from time to time, adjusted for reserve requirements in effect on
the first day of each period for which a payment is due, plus two percent
(2.00%) or (ii) if the one (1) month LIBOR rate is not available or cannot be
determined for the reasons set forth in Section 4.5 herein, the Alternate Rate.
Notwithstanding the foregoing, for the period beginning on the Initial Funding
Date and ending on the first Basic Rent Payment Date, the Yield Amount portion
of Basic Rent payable with respect to the outstanding Equity Investment shall be
computed based upon the Alternate Rate or such other rate as agreed upon between
the Lessee and the Lessor immediately prior to the Initial Funding Date. The
aggregate amount payable in accordance with this Section 4.2(b) with respect to
the Equity Investment as of any Basic Rent Payment Date shall be the "Yield
Amount" payable as of such date.
(d) All calculations of Basic Rent shall be performed by the Agent based on the
information provided to it pursuant to Section 5.3. Such information shall be
provided to the Lessee and the Guarantor no later than 5 :00 p.m., New York
time, on the third (3rd) Business Day prior to the relevant Basic Rent Payment
Date, together with reasonable detail supporting the calculations made. The
Guarantor and Lessee shall promptly acknowledge receipt of such calculations in
writing to the Agent. Such calculations shall be deemed final in the absence of
manifest error. The Guarantor and the Lessee shall be entitled to rely on any
calculation of Basic Rent performed by the Agent, and to deal directly with the
Agent in connection with the verification of such calculations.
(e) Except with respect to payments made pursuant to Sections 4.3, 4.4, 4.6,
13.1, 13.3 and 13.5, proceeds derived upon exercise of the Remarketing Option
(which shall be remitted to the Agent to be distributed as provided in Article
XI hereof), to the extent that a payment of Basic Rent or Supplemental Rent is
made other than on a Basic Rent Payment Date, upon the request of the Lessee,
the proceeds of any such payment (such receipts, "Prepayments") shall be
deposited in a special, segregated account which shall be an Eligible Account
held in the name of, and under the sole dominion and control of the Agent (the
"Prepayment Account").
Funds in the Prepayment Account shall be invested by the Agent, at the direction
and for the benefit of the Lessee, in Cash Equivalents maturing no later than
the next succeeding Basic Rent Payment Date. The Agent is hereby authorized, in
making or disposing of any investment permitted by this Section, to deal with
itself (in its individual capacity) or with anyone or more of its Affiliates,
whether it or such Affiliate is acting as an agent of the Agent or for any third
person or dealing as a principal for its own account; provided, however, that
all such dealings between the Agent and anyone or more of its Affiliates shall
be conducted on an arm's-length, commercially reasonable basis.
The Lessee may, at its discretion, provide written instructions to the Agent as
to timing and application of moneys in the Prepayment Account, so long as any
money so withdrawn shall be used for the payment of Rent. Absent any written
instruction from the Lessee to the Agent or if a Default or an Event of Default
shall have occurred and be continuing,
11
the Agent shall withdraw money from the Prepayment Account and apply such amount
to the payment of Basic Rent and Supplemental Rent as such Rent becomes due, but
only to the extent that such Rent would otherwise, in the ordinary course under
the Operative Documents, be paid by the Lessee to the Agent for application and
allocation in accordance with the Operative Documents. The Agent acknowledges
and agrees that the Lessee and the Guarantor shall be entitled to assume, and
rely on such assumption, that the Agent will properly apply and allocate any
amount withdrawn from the Prepayment Account pursuant to the Lessee's written
instructions (if any, and absent any Default or Event of Default) and the
procedures and allocations under the Operative Documents. Any amount remaining
in the Prepayment Account upon the Financing Termination Date or the Maturity
Date (as applicable) and the full satisfaction of the Obligations under the
Operative Documents shall be promptly withdrawn from the Prepayment Account and
returned to the Lessee.
Section 4.3 Breakage Expenses: Yield Maintenance Premium.
(a) If, with respect to the amounts outstanding under the Notes, the Tranche B
Loan or the outstanding portion of the Equity Investment, (i) interest or
principal is repaid or prepaid (including as a result of acceleration) in each
case (A) subject to Section 4.2( e) above, on a date other than a Basic Rent
Payment Date applicable thereto (including, without limitation, the Maturity
Date) or (B) in an amount other than the amount currently due, or (ii) Lessee
shall cancel or otherwise fail to consummate any funding requested under a
Funding Notice which has been delivered to the Agent (whether as a result of the
failure to satisfy any applicable conditions or otherwise) or shall fail to make
any prepayment after notice has been given to the Agent, then the Lessee shall
hold such Lessor Parties harmless from, and pay as Supplemental Rent to the
Agent for the benefit of such Lessor Parties, as their respective interests may
appear, within five (5) Business Days following demand therefor (which demand
shall be accompanied by one or more certificates contemplated by Section 4.3( c)
below), all actual costs and losses incurred by such Lessor Parties as a result
of such payment, cancellation or failure.
(b) Without duplication of the foregoing, and subject to Section 4.2(e) above,
in the event that any Lessor Party shall incur any loss or expense (including
any loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such party or the termination of any hedging
arrangements) to make, continue or maintain any portion of the principal amount
of its investment as the result of a breach by the Lessee or the Guarantor under
the Operative Documents, such Lessor Party shall deliver a notice accompanied by
a certificate as contemplated by Section 4.3( c) below, regarding such loss or
expenses. The Lessee shall, within thirty (30) days of receipt of such notice,
pay directly to the Agent for the benefit of such Lessor Party as Supplemental
Rent, an amount, reasonably determined to be equal to the excess, if any, of (A)
the amount such Lessor Party would have received if its investment had been made
or continued based on the interest rate borne by the relevant instrument over
(B) the amount realized by such party from re-employing the funds.
(c) A certificate (describing in reasonable detail the calculation of the yield
maintenance or other amount, as applicable, to be paid under this Section 4.3)
submitted by the applicable Lessor Party to the Lessee (with a copy to the
Agent) shall, absent demonstrable error, be final and conclusive.
12
Section 4.4 Increased Costs. etc. If after the date hereof any change in
applicable law or regulation or in the interpretation or administration thereof
by any Governmental Authority charged with the interpretation or administration
thereof (whether or not having the force of law) (i) shall subject any Lessor
Party to, or increase the net amount of, any tax, levy, impost, duty, charge,
fee, deduction or withholding with respect to any Note, the Tranche B Loan, any
Liquidity Loan or the Equity Investment (or any portion thereof), or the funding
of (or agreement to provide funding for) such Notes, Tranche B Loan, Liquidity
Loans or the Equity Investment, or shall change the basis of taxation of
payments to the Lessor Parties or any other fees or amounts payable under the
Operative Documents or in connection with the Overall Transaction (excluding (x)
with respect to the New Partners and, except to the extent any of the Lessor's
rights under this Section 4.4 shall inure to the benefit of the Note Purchaser
(and its successors and assigns) pursuant to Section 13.4(i) of this
Participation Agreement, the Lessor, any Taxes or other items specifically
excluded from the definition of Impositions, and (y) with respect to any Lessor
Party other than the New Partners and, except to the extent any of the Lessor's
rights under this Section 4.4 shall inure to the benefit of the Note Purchaser
(and its successors and assigns) pursuant to Section 13.4(i) of this
Participation Agreement, the Lessor, any Taxes (A) attributable to changes in
the rate of general corporate, franchise, net income or other income tax imposed
on such Lessor Party by the jurisdiction in which such Lessor Party either
maintains its applicable lending office or is otherwise subject to tax other
than as a result of the transactions contemplated by the Operative Documents or
in connection with the Overall Transaction or (B) that would not have been
imposed but for the failure of such Lessor Party to comply with any
certification, information, documentation or other reporting requirement;
provided that the exclusions described in clauses (x) and (y) above shall not
include Structural Impositions or Prior Impositions), (ii) shall impose, modify
or deem applicable any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, such
Lessor Party that would affect the amount of capital required or reasonably
expected to be maintained by such Lessor Party or any Person directly or
indirectly controlling such parties, and such Lessor Party reasonably and in
good faith determines that the rate of return on its or such controlling
Person's capital as a consequence of its obligations under or in respect of the
Operative Documents or in connection with the Overall Transaction is reduced to
a level below that which such party would have achieved but for the occurrence
of any such circumstance by an amount deemed by such party to be material, or
(iii) shall impose on such Lessor Party any other condition (other than a
condition involving administrative matters such as additional reporting
requirements to any such Governmental Authority) affecting this Participation
Agreement, any other Operative Document, the funding (or agreement to provide
funding hereunder) or the Overall Transaction, and the result of any of the
foregoing shall be to increase the cost to such Lessor Party of, or to reduce
the amount of any sum received or receivable by such Lessor Party in respect of,
making, continuing or maintaining (or its obligation to make, continue or
maintain) its investments in the respective instruments .( or providing funding
therefor) by an amount reasonably determined in good faith by such Lessor Party
to be material, then the Lessee shall pay to the Agent for the benefit of the
Lessor Party, as Supplemental Rent, such additional amount or amounts, as will
compensate such Lessor Party on an After Tax Basis for such increase or
reduction upon demand by such party. Each such Lessor Party shall within thirty
(30) days of such Lessor Party's discovery of such event, notify the Lessee in
writing of the occurrence of any such event, such notice to state, in reasonable
detail, the reasons therefor and the calculation of the additional amount
required fully to compensate such party for such
13
increased costs or reduced amount. Such additional amount shall be payable by
the Lessee to the Agent for the benefit of such claiming party within fifteen
(15) Business Days of its receipt of such notice and such notice shall, in the
absence of manifest error, be conclusive and binding on the Lessee.
Notwithstanding any other provision of this Participation Agreement, any amount
of Taxes that would, but for this sentence, give rise to both Supplemental Rent
payable to the Lessor or the New Partners pursuant to this Section 4.4 and an
indemnity payment obligation in favor of the Lessor or the New Partners pursuant
to Section 13.4 shall be governed solely by the provisions of Section 13.4;
provided, however, that this sentence is intended to apply Section 13.4 to Taxes
subject to an actual indemnity payment obligation pursuant to both Section 4.4
and Section 13.4, but not to diminish any claim for indemnification (or
Supplemental Rent) pursuant to this Section 4.4 that would not give rise to an
actual indemnity payment obligation pursuant to Section 13.4.
Section 4.5 Change of Circumstances.
(a) If, on or before the first day of any Rent Period, the Lessor, any Tranche B
Bank or any Liquidity Bank shall advise the Agent that the one (1) month LIBOR
rate cannot be adequately and reasonably determined due to the unavailability of
funds in or other circumstances generally affecting the London interbank market,
the Agent shall immediately give notice of such condition to the other
Transaction Parties. After the giving of any such notice (and until the Agent
shall otherwise notify the Lessee that the circumstances giving rise to such
condition no longer exist), the rates to be paid by the Lessee pursuant to
Section 4.2(a)(ii) and.4.2(b) herein (as applicable) as of the first day of the
next Basic Rent Payment Date shall be the Alternate Rate.
(b) If, after the date of this Participation Agreement, as the result of the
adoption of any Requirement of Law, any change in any Requirement of Law or the
application or requirements thereof (whether such change occurs in accordance
with the terms of such Requirement of Law as enacted, as a result of amendment
or otherwise), any change in the interpretation or administration of any
Requirement of Law by any Governmental Authority, or any request or directive
(whether or not having the force of law) of any Governmental Authority (each a
"Change of Law"), it shall become unlawful or impossible for the Lessor, any
Tranche B Bank or any Liquidity Bank to fund or maintain its portion of the
Outstanding Lease Balance at the one (1) month LIBOR rate, such Person shall
immediately notify the Agent and the Agent shall immediately notify the other
Transaction Parties of such Change of Law. After the giving of any such notice
(and until the Agent shall otherwise notify the Lessee and the Lessor that such
Change of Law is no longer in effect), the one (1) month LIBOR rate shall be
unavailable and the rates to be paid by the Lessee pursuant to Section
4.2(a)(ii) and.4.2(b) herein (as applicable) as of the next Basic Rent Payment
Date shall be the Alternate Rate.
Section 4.6 Taxes. All payments of Basic Rent, Supplemental Rent, principal of,
and interest or yield on, the Notes, the Tranche B Loan, the Liquidity Loans and
the Equity Investment and all other amounts payable hereunder and under the
Master Lease shall be made free and clear of and without deduction for any
present or future income, excise, stamp, transfer or franchise taxes and other
taxes, fees, duties, withholdings or other charges of any nature whatsoever
(including interest and penalties) now or hereafter imposed by any Governmental
Authority or taxing authority thereof ("Taxes"), but excluding (x) with respect
to the New
14
Partners and, except to the extent any of the Lessor's rights under this Section
4.6 shall inure to the benefit of the Note Purchaser (and its successors and
assigns) pursuant to Section 13.4(i) of this Participation Agreement, the
Lessor, any Taxes or other items, in each case, specifically excluded from the
definition of Impositions, and (y) with respect to any Lessor Party other than
those described in clause (x) preceding in the circumstances therein, franchise
taxes and other taxes imposed on or measured by the net income of, as the case
may be, of such Lessor Party (or its applicable lending office) by its
jurisdiction of incorporation or the jurisdiction in which it maintains its
applicable lending office, provided that the exclusions described in clauses (x)
and (y) above shall not include Structural Impositions or Prior Impositions (in
each case, such non- excluded Taxes being called "Other Taxes"). In the event
that any withholding or deduction from any payment to be made by the Lessee
hereunder is required in respect of any Taxes pursuant to any applicable law,
rule or regulation, then the Lessee will:
(a) pay as Supplemental Rent directly to the relevant Governmental Authority or
taxing authority the full amount required to be so withheld or deducted;
(b) forward to the Agent for the benefit of the relevant Lessor Party official
receipts or other documentation reasonably satisfactory to such Lessor Party
evidencing such payment to such authority; and
(c) with respect to Other Taxes, pay to the Agent for the benefit of the
relevant Lessor Party such additional amount or amounts as is necessary to
ensure that the net amount actually received by such Lessor Party will equal the
full amount such Lessor Party would have received had no such withholding or
deduction been required.
Moreover, if any Other Taxes are directly asserted against any Lessor Party with
respect to any payment received by such Lessor Party, such Lessor Party may pay
such Other Taxes and the Lessee will pay to the Agent for the benefit of such
Lessor Party, as Supplemental Rent, within fifteen (15) Business Days after
receipt of a written demand therefor (accompanied by a written statement
describing in reasonable detail the amount so payable) from such Lessor Party
such additional amounts (including any interest, reasonable expenses and any
penalties incurred in connection therewith) as are necessary in order that the
net after-tax amount received by such Person after the payment of such Other
Taxes (including any Taxes on such additional amount) shall equal the amount
such Person would have received had such Other Taxes not been asserted plus
interest on such additional amounts at the Alternate Rate calculated from the
date of payment of such Other Taxes by such Lessor Party to the date of payment
of such additional amounts by the Lessee.
If the Lessee fails to pay any Other Taxes when due to the appropriate taxing
authority or fails to remit to the Agent for the benefit of the relevant Lessor
Party the required receipts or other required documentary evidence, then the
Lessee shall indemnify such Lessor Party for any incremental Taxes, interest,
penalties and reasonable expenses that may become payable by such Lessor Party
as a result of any such failure.
Notwithstanding any other provision of this Participation Agreement, any amount
of Taxes that would, but for this sentence, give rise to both Supplemental Rent
payable to the Lessor or the New Partners pursuant to this Section 4.6 and an
indemnity payment obligation in
15
favor of the Lessor or the New Partners pursuant to Section 13.4 shall be
governed solely by the provisions of Section 13.4; provided, however, that this
sentence is intended to apply Section 13.4 to Taxes subject to an actual
indemnity payment obligation pursuant to both Section 4.6 and Section 13.4, but
not to diminish any claim for indemnification (or Supplemental Rent) pursuant to
this Section 4.6 that would not give rise to an actual indemnity payment
obligation pursuant to Section 13.4.
Section 4.7 Replacement of Affected Parties.
(a) If any Tranche B Bank or Liquidity Bank (an "Affected Party") makes demand
upon the Lessee for amounts pursuant to Section 4.3. 4.4 or 4.6 hereof, then the
Lessee may (x) request such Affected Party to, and such Affected Party shall
upon such request, use reasonable efforts consistent with legal and regulatory
restrictions to designate another lending office acceptable to such Affected
Party in its sole discretion for its investment (with the object of avoiding the
consequences of such events) or (y) give notice (a "Replacement Notice") in
writing to such Tranche B Bank, Liquidity Bank, the Note Purchaser, the Conduit
Agent and the Agent of its intention to replace such Affected Party with an
Eligible Assignee designated in such Replacement Notice, if such replacement
would result in the elimination or reduction of charges similar to those being
claimed by the Affected Party. Any replacement of a Tranche B Bank or a
Liquidity Bank pursuant to the foregoing provisions must be acceptable to the
Note Purchaser and the Conduit Agent in their sole discretion (including,
without limitation, for Rating Agency concerns).
(b) With respect to a Replacement Notice involving a Liquidity Bank, the Note
Purchaser and the Conduit Agent shall, in the exercise of their sole discretion
and within thirty (30) days of their receipt of a Replacement Notice with
respect to one of the Liquidity Banks, notify the Lessee and the Affected Party
whether the designated Eligible Assignee is satisfactory to the Note Purchaser
and the Conduit Agent; and if either shall fail to give such notice, the
Eligible Assignee shall be deemed rejected. With respect to a Replacement Notice
involving a Tranche B Bank, the Agent shall, in the exercise of its sole
discretion and within thirty (30) days of its receipt of a Replacement Notice
with respect to one of the Tranche B Banks, notify the Lessee and the Affected
Party whether the designated Eligible Assignee is satisfactory to the Agent; and
if the Agent shall fail to give such notice, the Eligible Assignee shall be
deemed rejected.
(c) Upon approval of the designated Eligible Assignee as aforesaid, the Affected
Party shall assign its rights and obligations under the Operative Documents to
such Eligible Assignee and, as a condition of such assignment, the Affected
Party shall receive payment in full of all outstanding Liquidity Loans and all
other amounts due it under the Operative Documents.
(d) In the event the Note Purchaser and the Conduit Agent or the Agent (as
applicable) do not approve the replacement of the Affected Party with the
designated Eligible Assignee, the Lessee shall have the option to designate
another Eligible Assignee pursuant to Section 4.7(a) and Section 4.7(b) above.
16
Section 4.8 Fees.
(a) The Lessee shall pay to the Agent for the benefit of the Tranche B Banks,
the Liquidity Banks and the New Partners, a one-time up front fee equal to
thirty-five one-hundredths of one percent (.35%) of the Aggregate Tranche B
Commitment, the allocated portion of the "Commitments" (as defined in the
Liquidity Agreement) and the Aggregate Equity Investment Commitment (as
applicable) provided by each Tranche B Bank (including KeyBank), Liquidity Bank
(including KeyBank) and New Partner (the "Upfront Fees"). The Lessee shall pay
the Up front Fees in advance on the Initial Funding Date as a Transaction
Expense.
(b) The Lessee shall pay to the Agent, for the ratable benefit of the Liquidity
Banks to be paid pro rata based upon each Liquidity Bank's Percentage,
commitment fees (the "Commitment Fees") equal to one-half of one percent (.50%)
of the Liquidity Banks' average daily unused allocated portion of the
"Commitment" (as defined in the Liquidity Agreement). The Lessee shall pay the
Commitment Fees in arrears on each Basic Rent Payment Date in each March, June,
September and December (commencing on September 12,2001) and on the Maturity
Date (or if the Overall Transactions are terminated on a date prior to such
date, on such prior date); provided, however, the payment of Commitment Fees due
on September 12,2001 shall be prorated to reflect the number of days from the
Documentation Date to September 12, 2001. The Commitment Fees shall constitute
Supplemental Rent for the purposes of the Operative Documents.
(c) The Lessee shall pay to the Agent, for the ratable benefit of the Liquidity
Banks to be paid pro rata based upon each Liquidity Bank's Percentage, renewal
fees (the "Renewal Fees") equal to one-quarter of one percent (.25%) of the
allocated portion of the "Commitments" (as defined in the Liquidity Agreement)
renewed by each Liquidity Bank (including KeyBank). The Lessee shall pay the
Renewal Fees in advance on each anniversary of the Initial Funding Date. The
Renewal Fees shall constitute Supplemental Rent for the purposes of the
Operative Documents. No additional fees shall be payable to the Liquidity Banks
pursuant to the Liquidity Documentation.
(d) The Lessee shall pay to the Agent for the benefit of the Structuring Agent a
one-time structuring fee (the "Structuring Fee") as set forth in the Proposal.
The Lessee shall pay the Structuring Fee in advance on the Initial Funding Date
as a Transaction Expense.
(e) The Lessee shall pay to the Agent for its own account an annual
administrative fee (the "Administrative Fee") equal to the greater of (i)
$20,000 or (ii) $3,000 per Tranche B Bank and Liquidity Bank. The Lessee shall
pay the Administrative Fees in advance on each anniversary of the Initial
Funding Date. The Administrative Fees shall constitute Supplemental Rent for the
purposes of the Operative Documents.
Section 4.9 Calculation of Interest and Fees. All calculations of the Note
Interest Amount, the Tranche B Interest Amount, the Yield Amount, any other
forms of interest or fees under this Participation Agreement and the other
Operative Documents for any period, unless otherwise specified herein or
therein, shall (a) include the first day of such period and exclude the last day
of such period and (b) be calculated on the basis of a year of 360 days for
actual days elapsed, except that during any period any of the foregoing amounts
is calculated based upon the
17
Alternate Rate, such amount shall be calculated on the basis of a year of 365 or
366 days, as appropriate, for actual days elapsed.
Section 4.10 Method of Payment. Each payment of Basic Rent or Supplemental Rent
payable by the Lessee pursuant hereto and pursuant to the Master Lease or any
other Operative Document shall be made by wire transfer prior to 2:00 p.m., New
York time on the date due, to the relevant account specified on Schedule I
hereof in immediately available funds consisting of Dollars. Payments received
after 2:00 p.m., New York time, on the date due shall, solely for the purpose of
Section 18 of the Master Lease, be deemed to have been received on such day;
provided, however, that for the purpose of the second sentence of Section 7(g)
of the Master Lease, such payments shall be deemed to have been received on the
next succeeding Business Day and subject to interest at the Overdue Rate as
provided in such Section 7(g) of the Master Lease.
Section 4.11 Non-Business Day Payments. If any Basic Rent Payment Date falls on
a day that is not a Business Day, the amount of Basic Rent otherwise due on such
Basic Rent Payment Date shall instead be due on the next succeeding Business Day
and Basic Rent shall be recalculated as if such next succeeding Business Day
were such Basic Rent Payment Date.
Section 4.12 Assignment of Basic Rent and Other Payments. The Lessor hereby
irrevocably directs that each payment of Basic Rent, Supplemental Rent, interest
(if any) on the Lessee Loans, Outstanding Lease Balance, Purchase Option Price,
and Maximum Recourse Amount payable by the Lessee under the Master Lease or any
other Operative Document shall be made for its account to or as directed by the
Agent pursuant to the payment instructions set forth in Schedule I hereof and
applied in accordance with the relevant provisions of Article XI hereof. To the
extent that the Lessee shall have timely made such payments in full in
immediately available funds to the Agent or as directed by the Agent, the
Lessee's obligation with respect to such payment under the Operative Documents
shall be deemed satisfied in the amount of such payment and none of the Lessee
Parties shall be responsible for any undue delay or failure on the part of the
Agent in remitting the appropriate amounts to the other Lessor Parties or any
other Person entitled to such payment.
ARTICLE V
CERTAIN INTENTIONS OF THE PARTIES
Section 5.1 Nature of Transaction.
(a) The parties hereto intend that, with respect to the Property and the Master
Lease, (i) for financial accounting purposes with respect to the Lessee, (x) the
Master Lease will be treated as an "operating lease" pursuant to Statement of
Financial Accounting Standards (SFAS) No. 13, as amended, (y) the Lessor will be
treated as the owner and the lessor of the Property to which it holds title
subject to the Master Lease and the Lessee will be treated as the lessee of the
Property, (ii) for federal and all state and local income tax purposes and
bankruptcy purposes, (A) the Master Lease will be treated as a financing
arrangement, (B) the Note Purchaser with respect to the Notes, the Tranche B
Banks with respect to the Tranche B Loans, the Liquidity Banks with respect to
the Liquidity Loans, and the New Partners with respect to the
18
Equity Investment will be deemed to be lenders making loans to the Lessee in an
aggregate amount equal to the Outstanding Lease Balance, which loans are
secured, inter alia, by the Property subject to the Master Lease, and (C) the
Lessee under the Master Lease will be treated as the owner of the Property and
will be entitled to all tax benefits ordinarily available to an owner of
property like such Property for such tax purposes, and (iii) all risks relating
to environmental matters shall be borne by the Lessee in accordance with the
provisions of this Participation Agreement and the Environmental Indemnity
Agreement.
(b) The parties hereto intend that, for federal, state, local and foreign tax
and regulatory purposes, the Notes, the Tranche B Loan, any Liquidity Loans and
the Equity Investment will be Indebtedness of the Lessee secured, inter alia, by
the Property and the rights to payment of Rent under the Master Lease, and agree
to treat the Notes, the Tranche B Loan, any Liquidity Loans and the Equity
Investment accordingly for all such purposes.
(c) Notwithstanding anything else to the contrary set forth herein, each
Transaction Party acknowledges and agrees that none of the other Transaction
Parties has made any representations or warranties concerning the tax,
accounting or (except as otherwise expressly contained in this Participation
Agreement or other Operative Documents) legal characteristics of the Operative
Documents and that each Transaction Party, respectively, has obtained and relied
upon such tax, accounting and legal advice concerning the Operative Documents as
it deems appropriate.
(d) Specifically, without limiting the generality of the foregoing, the parties
hereto intend and agree that in the event of any insolvency or receivership
proceedings or a petition under the United States bankruptcy laws or any other
applicable insolvency laws or statutes of the United States of America or any
state or commonwealth thereof affecting the Lessee or any other Transaction
Party or any collection actions, the transactions evidenced by the Operative
Documents are loans made to the Lessee by the New Partners through the Lessor
(using their own funds as well as funds provided by the Note Purchaser, the
Tranche B Banks and/or the Liquidity Banks as unrelated third party lenders).
(e) In furtherance of the intent of the parties as set forth in this Section
5.1, the Lessee hereby absolutely, unconditionally and irrevocably (i) agrees to
pay in full when due (after giving effect to any applicable grace period),
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise, all amounts owing to the Lessor Parties (including all such
amounts which would become due but for the operation of the automatic stay under
Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. ss.362(a), and
the operation of Sections 502(b) and 506(b) of the United States Bankruptcy
Code, 11 U.S.C. ss.502(b) and ss.506(b>>, and (ii) indemnifies and holds
harmless the Lessor Parties for any and all costs and expenses (including
reasonable attorneys' fees and expenses) incurred by such Person in enforcing
any rights under this Section 5.1.
Section 5.2 Amounts Due Hereunder and Under the Master Lease. Anything else
herein or elsewhere to the contrary notwithstanding, it is the intention of the
Transaction Parties that: (i) the amount and timing of installments of Basic
Rent due and payable from time to time from the Lessee hereunder and under the
Master Lease shall be equal to the aggregate payments due and payable in respect
of the amounts outstanding under the Notes, the Tranche B Loan, the
19
Liquidity Loans and the outstanding portion of the Equity Investment on each
Basic Rent Payment Date then due and payable; (ii) if the Lessee elects to
purchase all of the Property under the Master Lease or becomes obligated to
purchase all of the Property pursuant thereto, the Outstanding Lease Balance,
all accrued and unpaid Basic Rent, Supplemental Rent, interest (if any) on the
Lessee Loans, and all other obligations of the Lessee owing to the Lessor
Parties or any other Person under the Operative Documents shall be paid in full
by the Lessee; and (iii) if the Lessee properly elects the Remarketing Option
under the Master Lease, the Lessee shall only be required to pay to the Lessor
all accrued and unpaid Basic Rent, Supplemental Rent, interest (if any) on the
Lessee Loans, the Gross Sales Proceeds of the sale of the Property, the
corresponding Maximum Recourse Amount and any amounts due pursuant to Articles
XI and XIII hereof and Section 12.1 of the Master Lease (subject to Section
12.1(n) of the Master Lease) (which aggregate amount may be less than the
Outstanding Lease Balance); and (iv) upon an Event of Default resulting in the
obligations of the Lessee becoming due and payable, the amounts then due and
payable by the Lessee under the Master Lease shall include all amounts necessary
to pay in full the Outstanding Lease Balance, plus all accrued and unpaid Rent
(including, without duplication, Supplemental Rent) plus all other amounts then
due from Lessee to the Lessor Parties, or any other Person under the Operative
Documents. Amounts payable to the Lessor pursuant to Section 5.2(ii) or (iii)
hereof shall be remitted to the Agent upon receipt by the Lessee or any other
Person and shall be applied upon receipt thereof in accordance with the
provisions of Article XI hereof.
Section 5.3 Allocation of Payment Obligations: Payment to Agent.
(a) The Note Purchaser and the Lessor shall submit to the Agent no later than 5
:00 p.m., New York time, on the fourth (4th) Business Day prior to each Basic
Rent Payment Date, a summary of the Basic Rent payments due in respect of the
amounts outstanding under the Notes and the outstanding portion of the Equity
Investment, together with reasonable detail supporting the calculations made. In
addition, the Agent shall calculate the amounts outstanding under the Tranche B
Loan and any Liquidity Loans. The Agent shall prepare and distribute to the Note
Purchaser, the Tranche B Banks, the Liquidity Banks, the Lessor, the Lessee and
the Guarantor, no later than three (3) Business Days prior to each Basic Rent
Payment Date, an invoice with respect to the Basic Rent payable as of such date,
which invoice shall set forth, inter alia, the aggregate amount of Basic Rent
payable by the Lessee as of the upcoming Basic Rent Payment Date together with a
detailed description of the allocation of Basic Rent to each outstanding type of
instrument, with such amounts further allocated to reflect the amounts payable
by the Lessee and the interest rates payable on such instrument. Such invoice
shall further specify the relevant payment instructions. Notwithstanding the
foregoing, any delay or failure on the part of the Agent to deliver the invoice
shall neither extinguish nor diminish Lessee's obligations to pay the Basic Rent
due and payable on the applicable Basic Rent Payment Date.
(b) Except as otherwise expressly set forth in this Participation Agreement or
any other Operative Documents, all payments to be made by the Lessee or any
other Lessee Party shall be paid to the Agent for the benefit of, and
disbursement to, the Lessor Party for whose account such payment has been made,
and payment to the Agent shall, as between such Lessee Party and such Lessor
Party, constitute payment to such Lessor Party.
20
ARTICLE VI
CONDITIONS PRECEDENT TO FUNDING DATES
Section 6.1 Conditions Precedent to the Initial Funding Date. The obligation of
the New Partners to acquire the Partnership Interests, the Lessor to issue the
Notes specified in Section 3.1, the Tranche B Banks to advance the Tranche B
Loan specified in Section 3.3, the New Partners to fund the Equity Investment
specified in Section 3.4, the Note Purchaser (or the Liquidity Banks if the Note
Purchaser does not) to purchase such Notes and fund amounts thereunder or
Percentage Interests and the obligation of the Lessor to amend the lease of the
Property to the Lessee pursuant to the Master Lease are subject to the
satisfaction (or waiver by the appropriate Lessor Parties) of each of the
following conditions precedent (such satisfaction or waiver to be evidenced by
the purchase of the Partnership Interests, the purchase of the Notes and the
funding of the advances thereunder, the funding of the Tranche B Loan and the
funding of the Equity Investment on the Initial Funding Date unless otherwise
documented in writing by the appropriate parties):
(a) Funding Notice. The Agent, for the benefit of the Lessor Parties, shall have
received a fully executed counterpart of the Funding Notice substantially in the
form of Exhibit B attached hereto with respect to the issuance of the Notes and
the funding of the advances thereunder, the funding of the Tranche B Loan and
the funding of the Equity Investment to finance the Acquisition and Refinancing
Costs. The delivery of such Funding Notice and the acceptance by the Lessee of
the application of the proceeds of the initial funds made available pursuant to
the issuance of the Notes by the Note Purchaser, the funding of the Tranche B
Loan and the funding of the Equity Investment to purchase the Partnership
Interests and refinance the outstanding Indebtedness under the Existing Credit
Agreement shall constitute a representation and warranty by the Lessee that on
such Funding Date (both immediately before and after giving effect to the
application of the proceeds under the Notes, the Tranche B Loan and the Equity
Investment), the statements made in Section 7.1 and 7.2 are true and correct in
all material respects.
(b) Operative Documents to be Delivered on the Initial Funding Date.
(i) Participation Agreement. Each of the parties hereto shall have duly executed
and delivered this Participation Agreement.
(ii) Partnership Interests Purchase Agreement. The New Partners and the Existing
Partners shall have duly executed and delivered the Partnership Interests
Purchase Agreement in the form of Exhibit C-l attached hereto, to be dated as of
the Initial Funding Date, pursuant to which the New Partners shall acquire the
Partnership Interests in the Lessor from the Existing Partners.
(iii) Master Termination Agreements. The Lessor, DKB (as agent for the Existing
Lenders), the Lessee, the Guarantor, Merrill Leasing, Xxxxxxx Xxxxx, Xxxxxxx and
the Existing Lenders shall have duly executed and delivered the Master
Termination Agreement (Debt) in the form of Exhibit C-2 attached hereto, and the
Lessor, the Existing Partners, DKB (in
21
various capacities) and The Dai-Ichi Kangyo Bank, Limited, San Francisco Agency
shall have duly executed and delivered the Master Termination Agreement (Equity)
in the form of Exhibit C-3, each to be dated the Initial Funding Date, pursuant
to which the parties thereto shall, inter alia, (A) acknowledge that all amounts
outstanding under the various documents, instruments and agreements referenced
therein as "Documents" have been paid in full by the Lessor, and (B) effective
immediately upon such repayment, terminate such "Documents" upon the terms and
subject to the conditions set forth therein.
(iv) Amendment No.2 to Master Lease. The Lessee and the Lessor shall have duly
executed and delivered Amendment No.2 in the form of Exhibit D attached hereto,
such Amendment No.2 to be dated as of the Initial Funding Date.
(v) Guaranty. The Guarantor shall have duly authorized, executed and delivered
the Guaranty in the form of Exhibit E attached hereto, with respect to the
guaranty by the Guarantor of obligations of the Lessee under the Operative
Documents, such Guaranty to be dated as of the Initial Funding Date.
(vi) Environmental Indemnity Agreement. The Lessee shall have duly authorized,
executed and delivered the Environmental Indemnity Agreement in the form of
Exhibit F attached hereto, such Environmental Indemnity Agreement to be dated as
of the Initial Funding Date.
(vii) Liquidity Documentation. Each of the parties to the Liquidity
Documentation shall have duly authorized, executed and delivered such
agreements, each to be dated as of the Initial Funding Date, and the conditions
precedent set forth therein shall have been satisfied or waived as provided for
therein.
(c) Precautionary Deed of Trust. The Precautionary Deed of Trust substantially
in the form of Exhibit G attached hereto shall have been executed and delivered
by the Lessee, such document to be dated as of the Initial Funding Date.
(d) Deed of Trust. The Lessor shall have executed and delivered the Deed of
Trust to the Agent substantially in the form of Exhibit H attached hereto, such
instrument to be dated as of the Initial Funding Date.
(e) Opinion of Counsel to Lessee and Guarantor. The Agent on behalf of the
Lessor Parties shall have received an opinion of Xxxxxxx Coie LLP, counsel to
the Lessee and the Guarantor, to be dated as of the Initial Funding Date, as to
the matters set forth in Exhibit I. which opinion shall be acceptable in form
and substance to the Lessor Parties. By its execution hereof, each of the Lessee
and the Guarantor expressly instruct such counsel to execute and deliver such
opinion to the Persons designated in the preceding sentence and, if requested by
the Note Purchaser or the Liquidity Banks, the Rating Agencies.
(f) Initial Appraisal. The Agent on behalf of the Lessor Parties shall have
received the Initial Appraisal of the Property dated as of a date that is
satisfactory to the Lessor Parties and in form and substance satisfactory to the
Lessor Parties in their sole discretion.
22
(g) Environmental Audit. The Agent on behalf of the Lessor Parties shall have
received the results of an Environmental Audit with respect to the Property
which is dated no earlier than thirty (30) days prior to the Initial Funding
Date, which Environmental Audit shall be satisfactory in form and substance to
the Lessor Parties in their sole discretion.
(h) Conveyance Instruments. On or prior to the Initial Funding Date, the Agent
on behalf of the Lessor Parties shall have received evidence satisfactory to
them that appropriate Conveyance Instruments have been executed and delivered
and, if deemed necessary or desirable by any such Person or its counsel,
recorded in such jurisdictions as such Person may request, in order to perfect
the interests of the Agent in the Master Lease and the Property.
(i) The Lessee's Responsible Officer's Certificate. The Agent on behalf of the
Lessor Parties shall have received a Responsible Officer's Certificate of the
Lessee, substantially in the form of Exhibit J attached hereto, dated as of the
Initial Funding Date, stating that to such Responsible Officer's knowledge (i)
each and every representation and warranty of the Lessee contained in each
Operative Document to which it is a party is true and correct in all material
respects on and as of the Initial Funding Date, except to the extent such
representation or warranty relates solely to an earlier date, in which case such
representation or warranty shall have been true and correct on and as of such
earlier date, (ii) no Default or Event of Default 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 conditions contained herein or in any other Operative
Document required to be performed or complied with by it on or prior to such
Initial Funding Date.
(j) Guarantor's Responsible Officer's Certificate. The Agent on behalf of the
Lessor Parties shall have received a Responsible Officer's Certificate of the
Guarantor in substantially the form of Exhibit K attached hereto, dated as of
the Initial Funding Date stating that to such Responsible Officer's knowledge
(i) each and every representation and warranty of the Guarantor contained in
each Operative Document to which it is a party is true and correct in all
material respects on and as of the Initial Funding Date, except to the extent
such representation or warranty relates solely to an earlier date, in which case
such representation or warranty shall have been true and correct on and as of
such earlier date, (ii) no Default or Event of Default has occurred and is
continuing, (iii) each Operative Document to which the Guarantor is a party is
in full force and effect with respect to it, and (iv) the Guarantor has duly
performed and complied with all conditions contained herein or in any other
Operative Document required to be performed or complied with by it on or prior
to such Initial Funding Date.
(k) UCC Financing: Statements. On or prior to the Initial Funding Date, the
Lessee shall have delivered to the Agent on behalf of the Lessor Parties all UCC
Financing Statements relating to the Property and other security interests
granted under the Operative Documents, as the Lessor Parties may reasonably
request in order to protect the interests of the Lessor Parties under the
Operative Documents to the extent the Master Lease, Precautionary Deed of Trust,
Deed of Trust, Conveyance Instruments or other Operative Documents constitute
security agreements.
(l) Recordation of Conveyance Instruments and Financing Statements. The Agent on
behalf of the Lessor Parties shall have received evidence reasonably
satisfactory to
23
each of them that (i) the Precautionary Deed of Trust, (ii) the Deed of Trust,
and (iii) the UCC Financing Statements have been or are being recorded in a
manner sufficient to properly perfect each of their respective interests
therein.
(m) Property Survey. On or prior to the Initial Funding Date, the Lessee shall
have delivered to Agent on behalf of the Lessor Parties copies of the ALTA/1999
(Urban) Survey with respect to the Property (the "ALTA Property Survey"), which
survey shall be reasonably satisfactory to the Lessor Parties.
(n) Title Policies. On or prior to the Initial Funding Date, the Lessee shall
have delivered to the Agent on behalf of the Lessor Parties a commitment from
the Title Company to deliver (x) at the Lessor's sole discretion, either an ALTA
extended owner's title insurance policy or endorsements to any existing owner's
title insurance policy covering the Property in favor of the Lessor and (y) at
the Lessor's sole discretion, either an ALTA extended lender's title insurance
policy or endorsements to any existing lender's title insurance policy covering
the Property in favor of the Lessor and the Agent. The owner's policy described
in clause (x} shall (i) be subject only to Permitted Exceptions, (ii) be in an
amount not less than the Aggregate Commitment Amount, (iii) be reasonably
satisfactory to the Lessor Parties and (iv) contain comprehensive, mechanics
liens, zoning, recharacterization endorsements, pending disbursements
endorsements and such other endorsements reasonably requested by the Lessor
Parties. The lender's policy described in clause (y} shall (i) be subject only
to Permitted Exceptions, (ii) be in an amount not less than the Aggregate
Commitment Amount, (iii) be reasonably satisfactory to the Lessor Parties and
(iv) contain revolving credit, variable rate, comprehensive, fraudulent
conveyances, doing business, mechanics liens, zoning, pending disbursement
endorsements and such other endorsements reasonably requested by the Lessor
Parties.
(o) Evidence of Property Insurance. The Agent on behalf of the Lessor Parties
shall have received evidence that the insurance maintained by the Lessee with
respect to the Property as of the Initial Funding Date satisfies the
requirements set forth in Section 10 of the Master Lease, setting forth the
respective coverage, limits of liability, carrier, policy number and period of
coverage.
(p) Governmental Approvals. All necessary Governmental Actions required by any
Requirement of Law for the purpose of (i) authorizing the New Partners and the
Lessor to enter into the transactions contemplated by the Operative Documents as
of the Initial Funding Date, or (ii) authorizing the Lessee or the Guarantor to
execute and deliver the Operative Documents to which it is a party and perform
its obligations thereunder, shall have been obtained or made and be in full
force and effect.
(q) Requirements of Law. 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 Transaction Parties to any adverse regulatory prohibitions or
constraints.
(r) No Event of Default. There shall not have occurred and be continuing any
Default or Event of Default, and no Default or Event of Default will have
occurred after giving effect to the issuance of the Notes and the funding of the
advances thereunder, the purchase
24
thereof by the Note Purchaser or the Liquidity Banks as of the Initial Funding
Date, the funding of the Tranche B Loan as of the Initial Funding Date or the
funding of the Equity Investment as of the Initial Funding Date.
(s) Administration Agreement. The Administration Agreement shall have been
executed and delivered by all parties thereto substantially in the form of
Exhibit L attached hereto.
(t) Representation and Warranties. On the Initial Funding Date, the
representations and warranties of the Lessee, the Guarantor and the Lessor
Parties contained herein and in each of the other Operative Documents shall be
true and correct in all material respects 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 in all material respects on and as of such earlier date.
(u) Litigation. On the Initial Funding Date, there shall not be any actions,
suits or proceedings pending or, to the knowledge of the Lessee or the
Guarantor, threatened with respect to the Lessee, the Guarantor or the Property
(i) that are reasonably likely to reduce the Fair Market Value of the Property
or the ability of the Lessee or the Guarantor to fulfill their obligations under
the Operative Documents or have a material adverse effect on the title to, or
the use or operation of all or any portion of the Property or (ii) that question
the validity of the Operative Documents or the rights or remedies of the Lessor
Parties with respect to the Lessee, the Guarantor or the Property under the
Operative Documents.
(v) Available Commitments: Maximum Amount of Notes and Equity Investment. After
giving effect to the purchase of the Notes and the funding of the advances
thereunder, the funding of the Tranche B Loan and the funding of the Equity
Investment requested to be issued and made pursuant to the Funding Notice
delivered as of the Initial Funding Date, and the application of the proceeds
thereof (including, without limitation, to the acquisition by the New Partners
of the Partnership Interests), the Outstanding Lease Balance shall not exceed
the Aggregate Commitment Amount.
(w) Taxes. All taxes, fees and other charges in connection with the execution,
delivery, recording, filing and registration of the Operative Documents to be
delivered as of the Initial Funding Date shall have been paid or provisions for
such payment shall have been made by the Lessee to the reasonable satisfaction
of the Lessor Parties.
(x) No Material Adverse Effect, After giving effect to the purchase of the Notes
and the funding of the advances thereunder, the funding of the Tranche B Loan
and the funding of any portion of the Equity Investment, there shall be no
change with respect the Property or the financial condition of the Lessee or the
Guarantor that would have a Material Adverse Effect.
(y) Fees. The Agent on behalf of each Tranche B Bank, Liquidity Bank and the
Structuring Agent shall have received from the Lessee fees in the amounts
required pursuant to Section 4.8 hereof.
(z) Opinion of Counsel to the Lessor and the New Partners. The Agent on behalf
of the Lessor Parties shall have received an opinion from each of (i) Xxxxxx,
Xxxxxxxxxx &
25
Sutcliffe LLP and (ii) Xxxxxxxx, Xxxx & Xxxxx, LLP, as counsel to the New
Partners and the Lessor, each to be dated as of the Initial Funding Date, which
opinions shall be acceptable in form and substance to the other Lessor Parties.
By its execution hereof, each of the New Partners and the Lessor expressly
instructs such counsel to execute and deliver such opinions to the Persons
designated in the preceding sentence and, if requested by the Note Purchaser or
the Liquidity Banks, the Rating Agencies.
(aa) The Lessor's Responsible Officer's Certificate. The Agent on behalf of the
other Lessor Parties shall have received a Responsible Officer's Certificate of
the general partner of the Lessor, dated as of the Initial Funding Date, stating
that to such Responsible Officer's knowledge (i) each and every representation
and warranty of the Lessor contained in each Operative Document to which it is a
party is true and correct in all material respects on and as of the Initial
Funding Date, except to the extent such representation or warranty relates
solely to an earlier date, in which case such representation or warranty shall
have been true and correct on and as of such earlier 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 conditions
contained herein or in any other Operative Document required to be performed or
complied with by it on or prior to such Initial Funding Date.
(bb) The New Partners' Responsible Officer's Certificates. The Agent on behalf
of the other Lessor Parties shall have received a Responsible Officer's
Certificate of each New Partner, dated as of the Initial Funding Date, stating
that to such Responsible Officer's knowledge (i) each and every representation
and warranty of such New Partner contained in each Operative Document to which
it is a party is true and correct in all material respects on and as of the
Initial Funding Date, except to the extent such representation or warranty
relates solely to an earlier date, in which case such representation or warranty
shall have been true and correct on and as of such earlier date, (ii) each
Operative Document to which such New Partner is a party is in full force and
effect with respect to it, and (iii) such New Partner has duly performed and
complied with all conditions contained herein or in any other Operative Document
required to be performed or complied with by it on or prior to such Initial
Funding Date.
(cc) Other Documents. The Lessee and the Guarantor shall have delivered or
caused to be delivered such other documents as the Lessor Parties may reasonably
request.
Section 6.2 Conditions Precedent to all Accretion Funding Dates. The obligation
of the Lessor to fund the advances under the Notes with respect to the funding
of the Accreted Amounts are subject to the satisfaction (or waiver by the
appropriate Lessor Parties) of each of the following conditions precedent (such
satisfaction or waiver to be evidenced by the funding of the advances under the
Notes on such Funding Date unless otherwise documented in writing by the
appropriate parties):
(a) Representations and Warranties. The representations and warranties of the
Guarantor and the Lessee set forth in the Operative Documents (including the
representations and warranties set forth in Sections 7.1 and 7.2) shall be 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 acceptence
by the Lessor
26
of the proceeds of such funding shall constitute a representation and warranty
on such Funding Date (both immediately before and after giving effect to the
funding of such advances under the Notes and the application of the proceeds
thereof), the statements made in Section 7.2 hereof are true and correct in all
material respects.
(b) No Event of Default. No Event of Default has occurred and is continuing or
will result from such funding.
(c) Operative Documents. All of the Operative Documents are in full force and
effect.
Section 6.3 Closing. All documents, instruments and agreements required to be
delivered on the Initial Funding Date shall be delivered to the offices of
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000, or at such other location as may be determined by the
Transaction Parties.
ARTICLE VII
REPRESENTATIONS
Section 7.1 Representations and Warranties of the Lessee and the Guarantor. Each
of the Guarantor and the Lessee hereby represents and warrants, as of the
Initial Funding Date, to the Lessor Parties as follows:
(a) Corporate Authority.
(i) Incorporation: Good Standing. Each of the Guarantor and the Lessee (A) is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, (B) has all requisite
corporate power and authority and legal right to own and operate its property,
as to the Lessee, to lease the property it operates as lessee, and to conduct
its business as now conducted and as presently contemplated, and (C) is in good
standing as a foreign corporation and is duly authorized to do business in each
jurisdiction where such qualification is necessary except where a failure to be
so qualified would not have a Material Adverse Effect. Except as provided in
Subsection (c )(iv) hereof, the Lessee and the Guarantor each has full power and
authority and holds all requisite governmental licenses, permits and other
approvals to enter into and perform its Obligations under the Operative
Documents to which it is a party and, as to the Lessee, to own and hold under
lease its rights in the Property and to conduct its business substantially as
currently conducted by it.
(ii) Authorization. The execution, delivery and perfom1ance of this
Participation Agreement and the other Operative Documents to which it is a party
and the transactions contemplated hereby and thereby (A) are within its
corporate authority and legal right, (B) have been duly authorized by all
necessary corporate proceedings, (C) do not conflict with or result in any
breach or contravention of any provision of law, statute, rule or regulation to
which it is subject or any judgment, order, writ, injunction, license or pem1it
applicable to it which could have a Material Adverse Effect, (D) do not conflict
with any provision of its corporate charter or bylaws of, or any agreement or
other instrument binding upon it, (E) do not require any consent, approval or
authorization of any Governmental Authority or any other
27
Person not a party hereto and (F) do not result in, or require the creation or
imposition of, any Lien on any of its properties other than as contemplated by
the Operative Documents.
(iii) Enforceability. The execution and delivery of this Participation Agreement
and the other Operative Documents to which it is a party will result in valid
and legally binding obligations of it enforceable against it in accordance with
the respective terms and provisions hereof and thereof, except as enforceability
is limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting generally the enforcement of creditors' rights and
except to the extent that availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding therefor may be brought. The Guarantor further specifically
represents that the Guaranty shall be enforceable against it in accordance with
its terms, notwithstanding the occurrence of a bankruptcy or insolvency
proceeding with respect to the Lessee.
(iv) Subsidiaries. The Guarantor and each of its Subsidiaries have only those
Subsidiaries listed on Item 7.1 (a) of Schedule II hereto (as supplemented from
time to time). The Lessee is a wholly-owned Subsidiary of the Guarantor.
(v) Jurisdiction of Organization. Chief Executive Office. Etc The jurisdiction
of incorporation, chief executive office and principal place of business of the
Lessee is specified below its name on Schedule I hereto.
(b) Litigation. etc. Except as disclosed on Item 7.1 (b) of Schedule II hereto,
there is no litigation, at law or in equity, or any proceeding before any
federal, state or municipal board or other governmental or administrative agency
or any arbitration pending or to the knowledge of the Guarantor or the Lessee
threatened which is likely to involve any risk of any judgment or liability not
covered by insurance which may result in a Material Adverse Effect or which may
otherwise result in a Material Adverse Effect, or which seeks to enjoin the
consummation of, or which questions the validity of, any of the transactions
contemplated by this Participation Agreement or any of the other Operative
Documents, and no judgment, decree or order of any court, board or other
governmental or administrative agency or arbitrator has been issued against or
binds the Guarantor, the Lessee or any of their respective Subsidiaries which
has, or could have, a Material Adverse Effect.
(c) Burdensome Obligations: Compliance with Other Instruments. Laws: No
Defaults: Permits.
(i) Except as disclosed on Item 7.1 (c) of Schedule II hereto, neither the
Guarantor nor any of its Subsidiaries, is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation that
has or, to the Guarantor's knowledge, is expected in the future to have a
Material Adverse Effect. Except as disclosed on Item 7.1 (c) of Schedule II
hereto, neither the Guarantor nor any of its Subsidiaries, is a party to any
contract or agreement that has or, to the best of the Guarantor's knowledge, in
the judgment of the Guarantor's officers, could have, a Material Adverse Effect.
(ii) Neither the Guarantor nor the Lessee, is in violation of any provision of
its charter documents, bylaws, or any agreement or instrument to which it is
subject
28
or by which it or any of its properties are bound or any law, decree, order,
judgment, statute, license, rule or regulation (including, without limitation,
all Environmental Laws) in a manner that is reasonably likely to result in the
imposition of substantial penalties that may result in a Material Adverse Effect
or that may otherwise have a Material Adverse Effect.
(iii) No Default or Event of Default has occurred and is continuing.
(iv) Except as set forth on Item 7.1(c) of Schedule II hereto, the Guarantor and
the Lessee have all necessary Permits from or by, have made all necessary
filings with, and have given all necessary notices to, each Governmental
Authority having jurisdiction over it, to the extent required to own and operate
its properties, to lease the properties it operates under lease and to conduct
its business as now conducted or presently proposed to be conducted by it,
except for (x) Permits which can be obtained by the taking of ministerial action
to secure the grant or transfer thereof and where the failure to have such
Permits would not have a Material Adverse Effect and (y) where failure to have
such Permits will not have a Material Adverse Effect.
(v) No authorization or approval or other action by, and no notice to of filing
with, any Governmental Authority or regulatory body or other Person (other than
in connection with the repair, maintenance or renovation of the Property in
accordance with applicable local law) is required for the due execution,
delivery or performance by the Lessee or the Guarantor of any Operative Document
to which it is a party, except as contemplated by the Operative Documents.
(vi) The delivery and performance by each Lessee Party of its obligation under
the Operative Documents to which such Lessee Party is a party do not contravene
or result in a breach of, or constitute a default under any bond, indenture,
deed of trust, mortgage, agreement or any other instrument to which the deed of
trust, mortgage, agreement or any other instrument to which such Lessee Party is
subject or by which the Lessee Party is bound.
(d) Government Regulation. Neither the Guarantor nor the Lessee is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940, in each case as amended and in
effect from time to time, or is subject to any Requirement of Law which
regulates the incurring by the Guarantor or the Lessee of Indebtedness for
borrowed money, including, without limitation, any Requirement of Law relating
to common or contract carriers or to the sale of electricity, gas, steam, water
or other public utility services.
(e) Margin Regulations. Neither the Guarantor nor any of its respective
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying "margin stock" or "margin securities" within the meaning
of Regulation T, U or X issued by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") and does not own any margin stock or margin
securities. Neither the proceeds of the funds advanced under the Notes nor the
Tranche B Loan will not be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security, for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry any
margin security or for
29
any other purpose which might cause the funds advanced under the Notes or the
Tranche B Loan to be considered an advance of "purpose credit" within the
meaning of Regulation U or X of the Federal Reserve Board. The Guarantor will
not take nor permit any of its Subsidiaries or any agent acting on its or their
behalf to take, any action which might cause this Participation Agreement or any
other Operative Document or any document or instrument delivered pursuant to
this Participation Agreement to violate any regulation of the Federal Reserve
Board.
(f) Certain Tax Matters.
(i) The Guarantor and its Subsidiaries have (a) made or filed all material
federal, state, local and foreign income and all other material Tax returns,
reports and declarations required by any jurisdiction to which any of them is
subject or properly filed for and received extensions with respect thereto which
are still in full force and effect and which have been fully complied with in
all material respects, (b) paid all Taxes and other governmental assessments and
charges shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith by appropriate proceedings and for
which adequate reserves, to the extent required by GAAP, have been established
and (c) to the extent required by GAAP, set aside on their books provisions
reasonably adequate for the payment of all estimated taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid Taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Guarantor know of no
basis for any such claim other than Taxes that the Guarantor and its
Subsidiaries are contesting in good faith through appropriate proceedings and
for which appropriate reserves, to the extent required by GAAP, have been
established.
(ii) Except as set forth in Schedule 7.1 (f) of Schedule II hereto, no material
sales, use, excise, transfer or other Tax, fee or imposition shall result from
the sale, transfer or purchase of the Partnership Interests,. except such
material Taxes, fees or impositions that have been paid in full or are insured
as to payment in full by the Title Company.
(g) Liens. Except as set forth on Item 7.1 (g) of Schedule II hereto or as
permitted by Section 8.2(b ), there are no Liens on or rights of third parties
in, nor has there occurred any event which would give any third party a claim to
such a right in, any of the properties or assets of the Guarantor or the Lessee.
The Permitted Exceptions do not and will not materially and adversely affect (1)
the ability of the Lessee or the Guarantor to pay their respective obligations
under the Operative Documents in a timely manner or (2) the use of the Property
for the use currently being made thereof, the operation of the Property as
currently being operated or the value of the Property. Upon execution by the
Lessee and recording thereof of the Precautionary Deed of Trust, and upon
execution and filing of the Precautionary Financing Statements, the Agent will
have a valid first lien on the Lessee's interest in the Property and a valid
security interest in the personal property thereon subject to no Liens, charges
or encumbrances other than the Permitted Exceptions.
(h) Financial Matters. There has been delivered to each of the Lessor Parties a
complete and correct copy of the consolidated balance sheet of the Guarantor as
at the end of the Fiscal Year ended March 31, 2001 and the related consolidated
statements of income, common shareholders' equity and cash flows of the
Guarantor for such Fiscal Year, prepared in each case
30
in accordance with Section 8.1 (d)(iii). together with the accountant' s report
with respect thereto as required by such Section. Such financial statements have
been prepared in accordance with GAAP consistently applied and present fairly
the consolidated financial condition of the Guarantor as at March 31. 2001. and
the results of operations of the Guarantor for the Fiscal Year ended March 31.
2001.
(i) Changes. etc. Except as set forth on Item 7.1 (i) of Schedule II hereto, or
as disclosed in or reflected on the consolidated balance sheet of the Guarantor
as at March 31, 2001 referred to in Section 7.1 (h )(i) no event has occurred
and is continuing which has had or could have a Material Adverse Effect.
(j) Employee Benefit Plans.
(i) In General. Each Employee Benefit Plan has been maintained and operated in
compliance in all material respects with the provisions of ERISA and, to the
extent applicable, the Revenue Code, including but not limited to the provisions
thereunder respecting prohibited transactions. The Guarantor has heretofore
delivered to the Lessor Parties the most recently completed annual report, Form
5500, with all required attachments, with respect to each Guaranteed Pension
Plan.
(ii) Terminability of Welfare Plans. Under each Employee Benefit Plan which is
an employee welfare benefit plan within the meaning of ss.3(1) or ss.3(2)(B) of
ERISA, no benefits are due unless the event giving rise to the benefit
entitlement occurs prior to plan termination (except as required by Title 1,
Part 6 of ERISA). The Guarantor or an ERISA Affiliate, as appropriate, may
terminate each such plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion of the
Guarantor or such ERISA Affiliate without liability to any Person.
(iii) Guaranteed Pension Plans. Each contribution required to be made to a
Guaranteed Pension Plan, without regard to any waiver or extension, whether
required to be made to avoid the incurrence of an accumulated funding
deficiency, the notice of lien provisions of ss.302(f) of ERISA, or otherwise,
has been timely made. No waiver of an accumulated funding deficiency or
extension of amortization periods has been received with respect to any
Guaranteed Pension Plan. No liability to the PBGC (other than required insurance
premiums, all of which have been paid) has been incurred by the Guarantor or any
ERISA Affiliate with respect to any Guaranteed Pension Plan and there has not
been any ERISA Reportable Event, or any other event or condition which presents
a material risk of termination of any Guaranteed Pension Plan by the PBGC, other
than those ERISA Reportable Events or other events or conditions which have been
disclosed in writing to the Lessor Parties and which have not been deemed by any
of the foregoing to pose a material risk of termination of any Guaranteed
Pension Plan by the PBGC. Based on the latest valuation of each Guaranteed
Pension Plan (which in each case occurred within twelve months of the date of
this representation), and on the actuarial methods and assumptions employed for
that valuation, the aggregate benefit liabilities of all such Guaranteed Pension
Plans within the meaning of ss.4001 of ERISA did not exceed the aggregate value
of the assets of all such Guaranteed Pension Plans by more than $500,000,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
31
(iv) Multiemployer Plans. Neither the Guarantor nor any ERISA Affiliate has
incurred any material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan under ss.4201 of ERISA or as a result of a sale of assets
described in ss.4204 of ERISA. Neither the Guarantor nor any ERISA Affiliate has
been notified that any Multiemployer Plan is in reorganization or insolvent
under and within the meaning of ss.4241 or ss.4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been terminated under ss.4041A of
ERISA.
(v) No Prohibited Transactions. Compliance by the parties with the terms of the
Operative Documents will not involve any non-exempt prohibited transactions
under Section 406(a) of ERISA or Section 4975 of the Internal Revenue Code of
1986, as amended.
(k) Insurance. All policies of insurance of any kind or nature owned by or
issued to the Guarantor or any of its Subsidiaries, the lapse of which,
individually or collectively, would have a Material Adverse Effect, are in full
force and effect and are of a nature and provide such coverage as is sufficient
and as is customarily carried by companies of the size and character of the
Guarantor and the Subsidiaries. In addition, all insurance coverage meeting the
requirements of Section 10 of the Master Lease is in full force and effect with
respect to the Property.
(1) Labor Matters. Except as set forth on Item 7.1 (1) of Schedule II hereto,
there are no strikes, grievances, unfair labor practices, written complaints, or
other labor disputes pending or threatened against the Guarantor or its
Subsidiaries except for those strikes, grievances, unfair labor practices,
written complaints or other labor disputes which could not have a Material
Adverse Effect. All payments due from any of the Guarantor or its Subsidiaries
pursuant to the provisions of any collective bargaining agreement have been paid
or accrued as a liability on the books of the Guarantor or such Subsidiaries
unless, in the case of any Subsidiary other than the Lessee, the failure to make
such payment could not reasonably be expected to have a Material Adverse Effect.
(m) Environmental Protection. Except as disclosed on Item 7.1(m) of Schedule II
hereto (which items, individually or in the aggregate, do not constitute a
Material Adverse Environmental Condition): (i) the operations of the Guarantor
and each of its Material Subsidiaries comply in all material respects with all
Environmental Laws, (ii) the Guarantor and each of its Material Subsidiaries
have obtained all material environmental, health and safety Permits necessary
for its operation, and all such Permits are in good standing, with all
applicable applications or renewals being timely filed, and the Guarantor and
each of its Material Subsidiaries are in material compliance with all terms and
conditions of such Permits, (iii) none of the operations of the Guarantor or any
of its Material Subsidiaries is subject to any material proceeding by or before
any Governmental Authority alleging the violation of, or any liability under
any, Environmental Laws, (iv) neither the Guarantor nor any of its Material
Subsidiaries (including all of their present facilities and operations, as well
as its past facilities and operations), is subject to any material outstanding
written order or agreement with any Governmental Authority or Person respecting
(A) any Remedial Action, or (B) any Environmental Claims, (v) to the best of the
Guarantor's knowledge, none of the operations of the Guarantor or any of its
Material Subsidiaries is the subject of any material federal or state
investigation under Environmental Laws including any investigation evaluating
whether any Remedial Action is needed to respond to a Release of any Hazardous
Substance, (vi) none of the
32
operations of the Guarantor or any of its Material Subsidiaries is subject to
any other Environmental Law, which could result in a Material Adverse
Environmental Condition upon such operations, taken as a whole and (vii) neither
the Guarantor nor any of its Material Subsidiaries has received notice that any
Hazardous Substance which anyone of them has Released, generated, transported or
disposed of has been found at any site at which any third party (including any
Governmental Authority) has conducted or is conducting or is required to conduct
any Remedial Action.
(n) Copyrights. Patents and Trademarks. The Guarantor and its Subsidiaries own
or possess all patents, trademarks, service marks, copyrights and licenses, and
all rights with respect to the foregoing, necessary for the conduct of its
business as now conducted. To the best of the Guarantor's and the Lessee's
knowledge, such ownership or possession do not materially conflict with the
rights of others, except for conflicts, which if become the subject of any
action or proceedings brought by any third party, including any Governmental
Authority, would not have a Material Adverse Effect.
(o) Title. The Guarantor and the Lessee have title to its assets reflected in
the balance sheet for the Fiscal Year ended March 31, 2001 referred to in
Section 7.1 (h )(i) (except as set forth on Item 7.1 (0) of Schedule II hereto
and except for assets disposed of since such date in the ordinary course of
business), and none of the properties and assets of the Guarantor or the Lessee
is subject to any Liens, except Liens permitted by this Participation Agreement.
The Guarantor and the Lessee enjoy peaceful and undisturbed possession of the
Property. Neither the Guarantor nor the Lessee nor, to the Guarantor's and the
Lessee's knowledge, any other party to any lease of real property on which
facilities operated by the Guarantor or the Lessor is situated is in default of
its obligations thereunder or has delivered or received any notice of default
under any such lease, nor has any event occurred which, with the giving of
notice, the passage of time or both, would constitute a default under any such
lease, except for any default which would not have a Material Adverse Effect.
(p) Full Disclosure: Pro Forma Effect of Overall Transaction. Neither this
Participation Agreement (including the schedules and exhibits hereto), nor any
of the other Operative Documents, nor any written statement prepared or
furnished by or on behalf of the Guarantor or the Lessee to a Lessor Party in
connection with the negotiation, preparation, execution or performance of this
Participation Agreement and the other Operative Documents contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. There is no fact known to the Guarantor or
the Lessee which the Guarantor or the Lessee has not disclosed to the Lessor
Parties which had or would have a Material Adverse Effect or which would,
immediately after giving effect to the Overall Transaction, cause any of the
representations and warranties of the Guarantor and the Lessee set forth in this
Section 7.1 to be untrue in any material respect or which would cause any of the
statements made herein to be misleading in any material respect.
(q) Seniority. None of the Notes, the Tranche B Loan or the Equity Investment is
subordinate or junior in right of payment, in any manner, to any other
Indebtedness of the Guarantor or any Indebtedness of the Lessee (except as
anticipated under Article XI of this Participation Agreement and other
provisions of the Operative Documents).
33
(r) Compliance of Property with Requirements of Law. The contemplated use of the
Property by the Lessee and its respective agents, assignees, employees, lessees,
licensees and tenants complies in all material respects with all (i)
Requirements of Law (including, all zoning and land use laws and Environmental
Laws) and (ii) Insurance Requirements.
(s) Plans and Specifications, Utilities, etc. All water, sewer, electric, gas,
telephone and drainage facilities for the Property, all other utilities required
to adequately service the Property for its intended use and means of access
between the Property and public highways for pedestrians and motor vehicles are
available pursuant to adequate permits (including any that may be required under
applicable Environmental Laws). All utilities serving the Property are located
in, and vehicular access to the Property is provided by, either public
rights-of-way abutting the Property or Appurtenant Rights. The Property has
adequate rights of access to public ways.
(t) No Adverse Proceedings. There is no action, suit or proceeding (including
any proceeding in condemnation or eminent domain under any Environmental Law or
any proceeding proposing special or other assessments for public improvements or
affecting the Property) pending or, to the best knowledge of the Lessee,
threatened, with respect to the Lessee, its Affiliates or the Property or any
part thereof which adversely affects the title to the Property, or adversely
affects the use, operation or value of, the Property.
(u) Master Lease. Upon the execution and delivery of the Master Lease, (i) the
Lessee will have reaffirmed its unconditional acceptance of the Property covered
thereby and (ii) no right of offset will exist with respect to any Rent or other
sums payable under the Master Lease covering the Property.
(v) Conveyance Instruments. The Conveyance Instruments, when filed and recorded
in the jurisdictions specified in the opinion delivered pursuant to Sections 6.1
(f), will create, inter alia, in favor of the Agent, enforceable Liens of record
and perfected first priority security interests in the Property, subject to
Permitted Exceptions.
(w) Private Offering. Neither the Lessee nor the Guarantor has offered any
interest in this Participation Agreement, the Notes, the Tranche B Loan, the
Equity Investment, the Master Lease, the Rent or any similar security for sale
to, or solicited offers to buy any thereof from, or otherwise directly or
indirectly approached or negotiated with respect thereto with, any prospective
purchaser other than the Note Purchaser, the Tranche B Banks, the New Partners,
the Lessor and the Liquidity Banks, each of which was offered such interest by
the Lessee and the Guarantor in a manner that will not require registration of
such interests under the Securities Acts or the qualification of any of the
Operative Documents under the Trust Indenture Act of 1939, and each of which the
Lessee had reasonable grounds to believe, and as to the Note Purchaser, the New
Partners, the Tranche B Banks, the Lessor and the Liquidity Banks, after
reasonable inquiry does believe, has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
such an investment; and, assuming the truthfulness of the representations by the
other Lessor Parties herein, the issuance, sale and delivery of the Notes, the
funding of the advances thereunder, the funding of the Tranche B Loan and the
funding of the Equity Investment and the interests in this Participation
Agreement represented thereby under the circumstances contemplated by this
Participation Agreement do
34
not require the registration of such Notes, Tranche B Loan, Equity Investment or
interests under the Securities Act or the qualification of any of the Operative
Documents (or of any indenture in respect of any thereof) under the Trust
Indenture Act of 1939, as amended.
Section 7.2 Representations and Warranties of the Guarantor and the Lessee as of
each Funding Date after the Initial Funding Date. Each of the Guarantor and the
Lessee represents and warrants to each of the Lessor Parties as of each Funding
Date after the Initial Funding Date as follows:
(a) Representations and Warranties. The representations and warranties of the
Guarantor and the Lessee set forth in the Operative Documents (including the
representations and warranties set forth in Section 7.1) are true and correct in
all material respects on and as of the 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.
(b) Liens. Neither the Guarantor nor the Lessee has permitted any Liens to be
placed against the Property other than Permitted Liens.
(c) Absence of Default, Etc. No Default or Event of Default has occurred and is
continuing. No Default or Event of Default will occur as a result of, or after
giving effect to, the funding of the advances under the Notes requested by the
Funding Notice on such date.
Section 7.3 Representations and Warranties of the Note Purchaser. The Note
Purchaser represents and warrants to each of the Transaction Parties as follows:
(a) ERISA. It is not and will not be purchasing the Notes or funding the
advances thereunder 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 Revenue Code), nor will any such assets be
used in connection with any other arrangement related to the transactions
contemplated hereby, including the Note Purchase Agreement, the Liquidity
Agreement or the sale of Commercial Paper.
(b) Corporate Existence. It is a corporation duly incorporated, validly existing
and in good standing under the laws of the state of its incorporation.
(c) Corporate and Governmental Authorization: No Contravention. The execution,
delivery and performance by it of this Participation Agreement and each other
Operative Document to which it is or will be a party (i) are within its
corporate powers, (ii) have been duly authorized by all necessary corporate
action, (iii) require no action by or in respect of, or filing with, any
governmental body, agency or official, and (iv) do not contravene, or constitute
a default under, its certificate of incorporation or by-laws.
(d) No Lessor Liens. The Property is free and clear of all Lessor Liens created
by' it (whether voluntary or involuntary).
(e) Validity. This Participation Agreement constitutes the legal, valid and
binding obligation of the Note Purchaser, enforceable against it in accordance
with its terms, and
35
each Operative Document executed by it pursuant hereto will, on the due
execution and delivery thereof, be its legal, valid and binding obligation,
enforceable in accordance with its terms, subject, in each case, as to
enforceability, bankruptcy, insolvency, reorganization and other similar laws
affecting enforcement of creditor rights generally (insofar as any such law
relates to the bankruptcy, insolvency, reorganization or similar event with
respect to it) and, as to the availability of specific performance or other
injunctive relief, subject to the discretionary power of a court to deny such
relief and to general equitable principles.
(f) Private Offering. The Note Purchaser has not offered (or solicited offers
for), and will not offer (or solicit offers for), any interest in this
Participation Agreement, the Notes, the Tranche B Loan, the Equity Investment,
the Master Lease or the Rent, as applicable, in a manner which would require the
registration of such interest, Notes, Tranche B Loan or Equity Investment under
the Securities Act or the qualification of any of the Operative Documents (or of
any indenture in respect of any thereof) under the Trust Indenture Act of 1939,
as amended.
Section 7.4 Representations and Warranties of the New Partners. Effective as of
the date of execution hereof and as of the Initial Funding Date, each New
Partner represents and warrants to each of the other parties hereto as follows:
(a) ERISA. It is not and will not be funding the Equity Investment 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 Revenue Code), nor will any such assets be used in connection with any other
arrangement related to the transactions contemplated hereby.
(b) Corporate and Governmental Authorization: No Contravention. The execution,
delivery and performance by it of this Participation Agreement and each other
Operative Document to which it is or will be a party (i) are within its
corporate or limited liability company powers, as applicable, (ii) have been
duly authorized by all necessary corporate or limited liability company action,
as applicable, (iii) require no action by or in respect of, or filing with, any
governmental body, agency or official, and (iv) do not contravene, or constitute
a default under, its organizational documents.
(c) Validity. This Participation Agreement constitutes the legal, valid and
binding obligation of each New Partner, enforceable against it in accordance
with its terms, and each Operative Document executed by it pursuant hereto will,
on the due execution and delivery thereof, be its legal, valid and binding
obligation, enforceable in accordance with its terms, subject, in each case, as
to enforceability, bankruptcy, insolvency, reorganization and other similar laws
affecting enforcement of creditor rights generally (insofar as any such law
relates to the bankruptcy, insolvency, reorganization or similar event with
respect to it) and, as to the availability of specific performance or other
injunctive relief, subject to the discretionary power of a court to deny such
relief and to general equitable principles.
(d) Litigation. There is no litigation, at law or in equity, or any proceeding
before any federal, state or municipal board or other governmental or
administrative agency or any arbitration pending or, to the knowledge of each
New Partner, threatened which is likely to involve any risk of any material
judgment or liability not covered by insurance or which may
36
otherwise result in a material adverse effect on such New Partner's ability to
perform its obligations under the Operative Documents, or which seeks to enjoin
the consummation of, or which questions the validity of, any of the transactions
contemplated by this Participation Agreement or any of the other Operative
Documents, and no judgment, decree or order of any court, board or other
governmental or administrative agency or arbitrator has been issued against or
binds such New Partner which has, or could have, a material adverse effect on
such New Partner's ability to perform its obligations under the Operative
Documents.
(e) Private Offering. No New Partner has offered (or solicited offers for), nor
will it offer (or solicit offers for), any interest in the Partnership
Interests, this Participation Agreement, the Notes, the Tranche B Loan, the
Equity Investment, the Master Lease or the Rent, as applicable, in a manner
which would require the registration of such interest, Notes, Tranche B Loan or
Equity Investment under the Securities Act or the qualification of any of the
Operative Documents (or of any indenture in respect of any thereof) under the
Trust Indenture Act of 1939, as amended. Furthermore, assuming the truthfulness
of the representations by the other Lessor Parties herein, the issuance, sale
and delivery of the Notes, the funding of the advances thereunder, the funding
of the Tranche B Loan and the funding of the Equity Investment and the interests
in this Participation Agreement represented thereby under the circumstances
contemplated by this Participation Agreement do not require the registration of
such Notes, Tranche B Loan, Equity Investment or interests under the Securities
Act or the qualification of any of the Operative Documents (or of any indenture
in respect of any thereof) under the Trust Indenture Act of 1939, as amended.
Section 7.5 Representations and Warranties of the Lessor. Effective as of the
date of execution hereof and as of the Initial Funding Date, the Lessor
represents and warrants to each of the other parties hereto as follows:
(a) Jurisdiction of Organization. Chief Executive Office. Etc Its jurisdiction
of organization, chief executive office and principal place of business, and the
place where the documents, accounts and records relating to the Overall
Transaction are kept, are located at the location specified below its name on
Schedule I hereto.
(b) Corporate Existence. It is a corporation duly incorporated, validly existing
and in good standing under the laws of the state of its incorporation.
(c) Corporate and Governmental Authorization: No Contravention. The execution,
delivery and performance by it of this Participation Agreement and each other
Operative Document to which it is or will be a party (i) are within its
corporate powers, (ii) have been duly authorized by all necessary corporate
action, (iii) require no action by or in respect of, or filing with, any
governmental body, agency or official, and (iv) do not contravene, or constitute
a default under, its certificate of incorporation or by-laws.
(d) No Lessor Liens. The Property is free and clear of all Lessor Liens created
by it (whether voluntary or involuntary).
(e) Validity. This Participation Agreement constitutes the legal, valid and
binding obligation of the Lessor, enforceable against it in accordance with its
terms, and each
37
Operative Document executed by it pursuant hereto will, on the due execution and
delivery thereof, be its legal, valid and binding obligation, enforceable in
accordance with its terms, subject, in each case, as to enforceability,
bankruptcy, insolvency, reorganization and other similar laws affecting
enforcement of creditor rights generally (insofar as any such law relates to the
bankruptcy, insolvency, reorganization or similar event with respect to it) and,
as to the availability of specific performance or other injunctive relief,
subject to the discretionary power of a court to deny such relief and to general
equitable principles.
(f) Litigation. There is no litigation, at law or in equity, or any proceeding
before any federal, state or municipal board or other governmental or
administrative agency or any arbitration pending or, to the knowledge of the
Lessor, threatened which is likely to involve any risk of any material judgment
or liability not covered by insurance or which may otherwise result in a
material adverse effect on the Lessor's ability to perform its obligations under
the Operative Documents, or which seeks to enjoin the consummation of, or which
questions the validity of, any of the transactions contemplated by this
Participation Agreement or any of the other Operative Documents, and no
judgment, decree or order of any court, board or other governmental or
administrative agency or arbitrator has been issued against or binds the Lessor
which has, or could have, a material adverse effect on the Lessor's ability to
perform its obligations under the Operative Documents.
(g) Private Offering. The Lessor has not offered (or solicited offers for), and
will not offer (or solicit offers for), any interest in this Participation
Agreement, the Notes, the Tranche B Loan, the Equity Investment, the Master
Lease or the Rent, as applicable, in a manner which would require the
registration of such interest, Notes, Tranche B Loan or Equity Investment under
the Securities Act or the qualification of any of the Operative Documents (or of
any indenture in respect of any thereof) under the Trust Indenture Act of 1939,
as amended.
(h) Certain Tax Matters. Each of the Lessor and its Affiliates has (a) made or
filed all material federal, state, local and foreign income and all other
material Tax returns, reports and declarations required by any jurisdiction to
which it is subject or properly filed for and received extensions with respect
thereto which are still in full force and effect and which have been fully
complied with in all material respects, (b) paid all Taxes and other
governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith by
appropriate proceedings and for which adequate reserves, to the extent required
by GAAP, have been established and (c) to the extent required by GAAP, set aside
on their books provisions reasonably adequate for the payment of all estimated
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid Taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Lessor know of no basis for any such claim other than Taxes that the Lessor
and/or its Affiliates are contesting in good faith through appropriate
proceedings and for which appropriate reserves, to the extent required by GAAP,
have been established. Notwithstanding the foregoing, the Lessor shall not be
deemed to have breached any of the representations contained herein made as to
its Affiliates unless such breach would have a material adverse effect on the
Property or the Lessor Parties' security interest, Liens or other rights in the
Property and the Collateral.
38
Section 7.6 Representations and Warranties of each Tranche B Bank and each
Liquidity Bank. Effective as of the date of execution hereof and as of the
Initial Funding Date, each of Tranche B Bank and each Liquidity Bank represents
and warrants to each of the other parties hereto as follows:
(a) Existence. It is validly existing and is duly licensed and qualified to
operate as a banking corporation (or as an agency or branch, if it is an agency
or a branch of a foreign bank) and is in good standing under the laws of the
United States or the State of New York or such other State where it is qualified
to operate in the United States.
(b) Authorization: Validity. The execution, delivery and performance by it of
this Participation Agreement and each other Operative Document to which it is or
will be a party have been duly authorized. This Participation Agreement
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, and each Operative Document executed by it pursuant
hereto will, on the due execution and delivery thereof, be its legal, valid and
binding obligation, enforceable in accordance with its terms, subject, in each
case, as to enforceability, bankruptcy, insolvency, reorganization and other
similar laws affecting enforcement of creditor rights generally (insofar as any
such law relates to the bankruptcy, insolvency, reorganization or similar event
with respect to it) and, as to the availability of specific performance or other
injunctive relief, subject to the discretionary power of a court to deny such
relief and to general equitable principles.
(c) Private Offering. It has not offered (or solicited offers for), and will not
offer (or solicit offers for), any interest held by it in this Participation
Agreement, the Notes, the Tranche B Loan, the Equity Investment, the Master
Lease or the Rent, as applicable, in a manner which would require the
registration of such interest, Notes, Tranche B Loan or Equity Investment under
the Securities Act or the qualification of any of the Operative Documents (or of
any indenture in respect of any thereof) under the Trust Indenture Act of 1939,
as amended.
ARTICLE VIII
COVENANTS
Section 8.1 Affirmative Covenants of Guarantor and Lessee. Each of the Guarantor
and the Lessee hereby agrees for the benefit of the Lessor Parties that, until
all Commitments have terminated and all Obligations have been paid and performed
in full, it will, and, to the extent required, will cause each of its
Subsidiaries to, perform the obligations set forth in this Section 8.1.
(a) Conduct of Business.
(i) Corporate Existence: Maintenance of Properties. The Guarantor will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, material rights, and those of its Subsidiaries
except to the extent that the Guarantor's failure to do so will not have a
Material Adverse Effect; Provided, however, that the corporate existence and
material rights of the Lessee shall always be preserved and kept in full force
and effect. The Guarantor (a) will cause all of its material properties and
those of its
39
Subsidiaries used or useful in the conduct of its business or the business of
its Subsidiaries to be maintained and kept in good condition, repair and working
order and supplied with all reasonably necessary equipment, and (b) will cause
to be made all reasonably necessary repairs, renewals, replacements, betterments
and improvements thereof, all as in the judgment of the Guarantor may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; Provided, however, that
nothing in this Section 8.1 (a) shall prevent the Guarantor from discontinuing
the operation and maintenance of any of its properties or those of its
Subsidiaries if such discontinuance is, in the reasonable discretion of the
Guarantor, desirable in the conduct of its or their business and would not have
a Material Adverse Effect; Provided, further, that the Property shall always be
maintained and operated in accordance with the Master Lease.
(ii) Compliance with Laws, Contracts, Licenses, and Permits. The Guarantor will,
and will cause each of its Subsidiaries to, comply with (A) the applicable laws
and regulations wherever its business is conducted, including all Environmental
Laws which may be in effect from time to time, (B) the provisions of its charter
documents and by-laws, (C) all agreements and instruments by which it or any of
its properties or business may be bound and (D) all applicable decrees, orders,
and judgments; if in each such case failure to comply would have a Material
Adverse Effect. If at any time any authorization, consent, approval, permit or
license from any office, agency or instrumentality of any government shall
become necessary or required in order that the Guarantor may fulfill any of the
Obligations, the Guarantor will promptly take or cause to be taken all
reasonable steps within the power of the Guarantor to obtain such authorization,
consent, approval, permit or license and furnish the Lessor Parties with
evidence thereof.
(b) Insurance. The Guarantor and the Lessee shall keep their respective assets
which are of an insurable character insured by financially sound and reputable
insurers (or make adequate and prudent provisions for self insurance) against
loss or damage (i) to the extent and in the manner customary for companies in
similar businesses similarly situated and (ii) to the extent such coverage is
available on commercially reasonable terms. Without limiting the generality of
the foregoing, the Lessee shall maintain insurance on and with respect to the
Property in accordance with the relevant provisions of the Master Lease.
(c) Records and Accounts. The Guarantor and the Lessee will each (i) keep true
and accurate records and books of account in which full, true and correct
entries will be made in accordance with GAAP, and (ii) maintain adequate
accounts and reserves for all taxes (including income taxes), depreciation,
depletion, obsolescence and amortization of its properties and the properties of
its Subsidiaries, contingencies, and other reserves.
(d) Reports. The Guarantor. shall deliver to the Lessor Parties:
(i) Promptly (but in no event later than five (5) Business Days after obtaining
knowledge thereof) upon any principal officer of the Guarantor or the Lessee
obtaining knowledge of any Default or Event of Default, a certificate of a
Responsible Officer of the Guarantor specifying the nature and period of
existence thereof and what action has been taken, is being taken or is proposed
to be taken with respect thereto.
40
(ii) As soon as available, and in any event within sixty (60) days after the
last day of each of the first three Fiscal Quarters of each Fiscal Year,
commencing with the Fiscal Quarter ending immediately after the Initial Funding
Date the consolidated and consolidating balance sheets of the Guarantor as at
the end of such quarter and the consolidated and consolidating statements of
income, retained earnings and cash flows of the Guarantor for such quarter and
for the portion of the current Fiscal Year then ended, all in reasonable detail
and accompanied by a certificate from the Chief Financial Officer or the Senior
Vice President - Finance of the Guarantor stating that such statements have been
properly prepared in accordance with the books and records of the Guarantor and
fairly present the financial condition and operations of the Guarantor subject
only to normal year-end audit adjustments.
(iii) As soon as available, and in any event within one hundred and five (105)
days after the end of each Fiscal Year, the consolidated and consolidating
balance sheets of the Guarantor as at the end of such year and the consolidated
and consolidating statements of income, retained earnings and cash flows of the
Guarantor for such Fiscal Year, setting forth in each case in comparative form
the consolidated figures for the Guarantor for the previous Fiscal Year (all in
reasonable detail), which consolidated statements of the Guarantor shall be
audited by KPMG, or other independent public accountants of recognized national
standing selected by the Guarantor, and accompanied by a letter of such
accountants that such financial statements have been prepared in accordance with
GAAP .
(iv) Together with the financial statements delivered pursuant to clause (ii)
and clause (iii), a certificate of the Chief Financial Officer or the Senior
Vice President- Finance of the Guarantor setting forth a computation showing
compliance by the Guarantor with the financial tests set forth in Section 8.3
hereof, certifying as to the Lessee's compliance with the maintenance
requirements for the Property set forth in the Master Lease, and stating that
such officer has caused the provisions of this Participation Agreement to be
reviewed and has no knowledge of any Default or Event of Default, or, if such
signing officer has such knowledge, specifying such Default or Event of Default
and the nature thereof, and what action the Guarantor has taken, is taking, or
proposes to take with respect thereto (the "Compliance Certificate").
(v) Promptly upon its receipt thereof, copies of all audit reports (including
so-called "management letters") submitted by independent public accountants in
connection with each annual, interim or special audit of the financial
statements of the Guarantor or any of its Subsidiaries made by such accountants.
(vi) Promptly and in any event within thirty (30) days after the Guarantor, any
of its Subsidiaries or any ERISA Affiliate knows or has reason to know that any
ERISA Reportable Event has occurred.
(vii) Upon request of any Lessor Party, a copy of the most recent actuarial
statement required to be submitted under ss. 103(d) of ERISA and Annual Report,
Form 5500, with all required attachments, in respect of each Guaranteed Pension
Plan and promptly upon receipt or dispatch, any notice, report, demand or letter
sent or received in respect of a Guaranteed Pension Plan under ss.ss.302, 4041,
4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer
Plan, under ss.ss.4041A, 4202, 4219, 4242, or 4245 of ERISA.
41
(viii) Promptly and in any event within thirty (30) days after notice or
knowledge thereof, notice that the Guarantor or any of its Subsidiaries has
become subject to the tax on prohibited transactions imposed by Section 4975 of
the Revenue Code in an amount which has, individually or in the aggregate, a
reasonable likelihood of resulting in a Material Adverse Effect, together with a
copy of Form 530.
(ix) As soon as available, copies of all notices, proxy statements, reports and
financial statements which the Guarantor or any of its Subsidiaries shall send
or make available to its shareholders and all registration statements and
reports which the Guarantor or any of its Subsidiaries shall file with the
Securities and Exchange Commission.
(x) With reasonable promptness. such other information respecting the business.
properties. assets. operations or condition. financial or otherwise. of the
Guarantor or any of its Subsidiaries as from time to time any of the Lessor
Parties may reasonably request.
(e) Right to Inspect Premises and Records. The Guarantor and the Lessee will
agree to all reasonable requests by the Lessor Parties (i) to make extracts from
the books of account and financial records of the Guarantor or the Lessee solely
for its own use in connection with the Obligations of the Lessee and the
Guarantor under the Operative Documents, (ii) to provide the Lessor Parties or
its authorized representatives, during normal business hours or such other time
as agreed upon by the parties, at the offices of the Guarantor, all books and
records for inspections or consultation in connection with the Guarantor's and
Lessee's compliance and performance of the obligations under the Operative
Documents, and (iii) to authorize the Lessor Parties or its authorized
representatives (collectively, the "Inspecting Parties") right of access and
entry on the Property for inspection of any or all components of the Property;
Provided, however, at any time no Default or Event of Default shall have
occurred and be continuing, a Lessor Party shall give the Guarantor and the
Lessee written notice no later than five (5) Business Days prior to the day of
inspection. In connection with any such inspections of the Property, the
Inspecting Parties may conduct, to the extent relevant, environn1ental testing
and sampling. All such inspections shall be at the expense and risk of the
Inspecting Parties, except that if an Event of Default or Default has occurred
and is continuing, the Lessee shall reimburse the Inspecting Parties for the
reasonable costs of such inspections and such inspections shall be at the
Lessee's risk, excluding the gross negligence or willful misconduct of an
Inspecting Party. The Lessee shall furnish to the Inspecting Parties statements
that are, to the best of the Lessee's knowledge after reasonable inquiry,
accurate in all material respects, regarding the condition and state of repair
of the Property at such times as may be reasonably requested; Provided, however,
the Lessor Parties shall not require such statements more than once a year so
long as no Default or Event of Default shall have occurred and be continuing. No
inspection shall unreasonably interfere with the Lessee's operations or the
operations of any other occupant of the Property. None of the Inspecting Parties
shall have any duty to make any such inspection or inquiry and none of the
Inspecting Parties shall incur any liability or obligation by reason of not
making any such inspection or inquiry. None of the Inspecting Parties shall
incur any liability or obligation by reason of making any such inspection or
inquiry unless and to the extent, so long as no Default or Event of Default has
occurred and is continuing at the time of inspection, such Inspecting Party
causes damage to the Property or any property of the Lessee or any other Person
during the course of such inspection.
42
(f) Payment of Liabilities. The Guarantor shall pay and discharge, and shall
cause each of its Subsidiaries to pay and discharge, at or before their maturity
or in accordance with customary trade terms, all of their respective
Indebtedness due and payable, except where such Indebtedness is contested in
good faith and by appropriate proceedings diligently conducted and reserves or
other appropriate provisions, if any, as shall be required by GAAP, shall have
been made therefore, and except to the extent otherwise provided by any
subordination provisions applicable to such Indebtedness, unless, in the case of
the Guarantor or any such Subsidiary other than the Lessee, failure to pay or
discharge such Indebtedness could not reasonably be expected to have a Material
Adverse Effect.
(g) Payment of Charges and Indebtedness. The Guarantor shall, and shall cause
each of its Subsidiaries to, timely file or cause to be filed all tax returns,
and shall timely pay and discharge all taxes and other governmental charges and
assessments, due and payable, and shall pay all claims for labor, materials or
supplies which if unpaid might by law become a Lien or charge upon any property
of the Guarantor or any of its Subsidiaries; provided, however, that any such
taxes and other governmental charges and assessments or claims, the nonpayment
of which would not be reasonably likely to have a Material Adverse Effect, need
not be paid if the validity or amount thereof shall currently be contested in
good faith by appropriate proceedings and if the Guarantor or such Subsidiary
shall, in accordance with GAAP, have set aside on its books adequate reserves
with respect thereto; and provided further, however, that the Guarantor shall,
and shall cause each Subsidiary to, pay all such taxes, governmental charges,
assessments or claims forthwith upon the commencement of proceedings to
foreclose any Lien which may have attached as security therefore. The
obligations of the Guarantor under this Section 8.1(g) with respect to the
filing of tax returns and the payment of taxes, governmental charges,
assessments and claims shall survive the payment, prepayment or redemption of
the Notes, the Tranche B Loan and the Equity Investment and the termination of
this Participation Agreement and the other Operative Documents.
(h) Material Change in Business. The primary business of the Guarantor, the
Lessee and the Guarantor's Subsidiaries shall continue to be developing and
publishing products for interactive electronic media.
(i) Compliance with Securities Laws. Except for non-compliance which,
individually or collectively, does not have a Material Adverse Effect, (i) any
and all purchases or redemptions by the Guarantor and/or any of its Subsidiaries
of any securities issued by the Guarantor or any of its Subsidiaries or any
other Person shall be effected in compliance with all applicable Requirements of
Law, including, but not limited to, the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended, and (ii) any and all offers to
sell and sales of securities or of obligations of the Guarantor or any of its
Subsidiaries evidenced by notes, bonds, debentures or similar instruments, shall
be effected in compliance with all applicable Requirements of Law, including,
but not limited to, the Trust Indenture Act of 1939, as amended.
(j) Application of Proceeds. The proceeds of the Notes, the proceeds of the
Tranche B Loan and the funding of the Equity Investment shall only be used as
contemplated by the Operative Documents.
43
(k) Environmental Protection.
(i) The Guarantor shall, and shall cause each of its Material Subsidiaries to,
(i) comply in all material respects with the requirements of all Environmental
Laws applicable to it, except where such non-compliance could not reasonably be
expected to result in a material impairment in the value of, or a material
liability with respect to the affected premises, (ii) notify the Lessor Parties
promptly in the event of any Release, Environmental Claim or other Adverse
Environmental Condition from, upon or affecting any premises owned or occupied
by the Guarantor or any Material Subsidiary which Release, Environmental Claim
or Adverse Environmental Condition could result in a Material Adverse Effect or
a material impairment of the value of, or a material liability with respect to,
such premises and (iii) promptly forward to the Lessor Parties copies of all
orders, notices, permits, applications or other communications and reports in
connection with any such Release, Environmental Claim or other Adverse
Environmental Condition or any other matter relating to the Environmental Laws
as they may affect such premises which could result in a Material Adverse Effect
or result in a material impairment of the value of, or material liability with
respect to, such premises. The covenants provided for herein shall survive the
payment or redemption of the Notes and the Equity Investment and the termination
of this Participation Agreement and the other Operative Documents.
(ii) The Guarantor shall fully and promptly pay, perform, discharge, defend,
indemnify and hold harmless the Lessor Parties, their respective Subsidiaries
and Affiliates, and the respective managers, members, directors, officers,
employees and agents of any of the foregoing as to any environmental matter as
provided in Article XIII hereof.
(iii) Without limiting the foregoing, the Guarantor and the Lessee will comply
at all times with the environmental provisions of the Participation Agreement
and the Environmental Indemnity Agreement and shall take all actions necessary
or required to preserve all indemnities and other remedies available under the
Participation Agreement and the Environmental Indemnity Agreement.
(1) Ownership of the Lessee. The Guarantor shall at all times maintain direct or
indirect ownership of 100% of the issued and outstanding Stock of the Lessee
(including all rights to subscribe for, purchase (including by conversion of any
other security) or otherwise acquire any such Stock), free and clear of all
Liens.
(m) Notice of Change in Name, Identity or Address. Each of the Guarantor and the
Lessee shall provide the Lessor Parties thirty (30) days prior written notice of
any change in its name, its jurisdiction of organization or the address of its
chief executive office, principal place of business or the office where it keeps
its records concerning its accounts and the Property leased by the Lessee under
the Master Lease.
(n) Further Assurances. The Guarantor and the Lessee shall take or cause to be
taken from time to time all action reasonably necessary to assure that the
intent of the parties pursuant to the Operative Documents is given effect as
contemplated by Section 5.1 hereof, and that the Lessor and the Agent, for the
benefit of the other Lessor Parties, as each such Lessor Party's respective
interests may appear, holds a first priority perfected Lien on the Property and
44
the Master Lease, securing the amounts due thereon or under the Operative
Documents. The Guarantor and the Lessee shall execute and deliver, or cause to
be executed and delivered, to the Lessor Parties from time to time, promptly
upon request therefore, any and all other and further instruments (including
correction instruments and supplemental mortgages and security agreements, as
appropriate) that may be reasonably requested by the Lessor Parties to cure any
deficiency in the execution and delivery of this Participation Agreement or any
other Operative Document to which it is a party.
(o) No Disposition of the Property. The Lessee shall not sell, contract to sell,
assign, lease, transfer, conveyor otherwise dispose of, or permit to be sold,
assigned, leased, transferred, conveyed or otherwise disposed of, the Property
or any part thereof except as expressly permitted by the Operative Documents.
(p) Defense of Title. The Lessee will, at all times, at its own cost and
expense, warrant and defend the title of the Lessor to the Property except with
respect to Lessor Liens.
Section 8.2 Negative Covenants. The Guarantor hereby covenants and agrees,
subject to Section 15.5 hereof, for the benefit of the Lessor Parties from and
after the Documentation Date and until all Commitments have terminated and all
Obligations have been paid and performed in full:
(a) Limitations on Indebtedness. Neither the Guarantor nor any of its
Subsidiaries, including the Lessee, shall create, incur, assume or permit to
exist any Indebtedness except for Indebtedness which, in aggregate, on a pro
forma basis, would not result in a violation by the Guarantor of the financial
covenants set forth in Section 8.3 ("Permitted Indebtedness").
(b) Limitation on Liens, Etc. Neither Guarantor nor any of its Subsidiaries
shall create, incur, assume or permit to exist any Lien on or with respect to
any of its assets or property of any character, whether now owned or hereafter
acquired, except for Permitted Liens.
(c) Asset Dispositions. Neither the Guarantor nor any of its Subsidiaries shall
sell, lease, transfer or otherwise dispose of any of its assets or property,
whether now owned or hereafter acquired, except for the following:
(i) Sales of inventory and products by the Guarantor and its Subsidiaries in the
ordinary course of their businesses;
(ii) Sales of surplus, damaged, worn or obsolete equipment or inventory for not
less than fair market value;
(iii) Sales or other dispositions of Investments permitted by clauses (i) and
(iii) of Section 8.2(e) below for not less than fair market value;
(iv) Sales or assignments of defaulted receivables to a collection agency in the
ordinary course of business;
(v) Licenses by the Guarantor or its Subsidiaries of its patents, copyrights,
trademarks, trade names and service marks in the ordinary course of its business
45
provided that, in each case, the terms of the transaction are terms which then
would prevail in the market for similar transactions between unaffiliated
parties dealing at arm's length;
(vi) Sales or other dispositions of assets and property by the Guarantor to any
of the Guarantor's Subsidiaries or by any of the Guarantor's Subsidiaries to the
Guarantor or any of its other Subsidiaries, provided that, on the date of any
such sale or disposition, the Guarantor and such Subsidiary each reasonably
believes that such sale or disposition is made on terms which are no less
favorable to the Guarantor then would prevail in the market for similar
transactions between unaffiliated parties dealing at arm's length; and
(vii) Other sales, leases, transfers and disposals of assets and property for
not less than fair market value, provided that the net proceeds from any such
sale, lease, transfer or disposal shall not exceed ten percent (10%) of the
consolidated total assets of the Guarantor and its Subsidiaries immediately
prior to such sale, lease, transfer or disposal.
provided, however, that the foregoing exceptions shall not be construed to
permit any sales, leases, transfers or disposals of any of the Property, except
as expressly permitted by the Master Lease or any of the other Operative
Documents.
(d) Mergers, Acquisitions, Etc. Neither the Guarantor nor any of its
Subsidiaries shall consolidate with or merge into any other Person or permit any
other Person to merge into it, establish any new Subsidiary, acquire any Person
as a new Subsidiary or acquire all or substantially all of the assets of any
other Person, except for the following:
(i) Any Subsidiary of the Guarantor (other than the Lessee) may merge or
consolidate with any other Subsidiary of Guarantor;
(ii) Any Subsidiary of the Guarantor (other than the Lessee) may merge or
consolidate with the Guarantor, provided that the Guarantor is the surviving
corporation; and
(iii) The Guarantor may merge or consolidate with any other corporation,
establish a new Subsidiary, acquire any Person as a new Subsidiary or acquire
all or substantially all of the assets of any other Person, provided that (A) in
the case of any merger or consolidation, either (1) the Guarantor is the
surviving corporation or (2) the surviving corporation (y) is a Solvent United
States corporation with a financial condition equal to or better than the
financial condition of the Guarantor immediately prior to such merger or
consolidation and (z) assumes all of the obligations of the Guarantor in a
manner reasonably acceptable to the Consenting Parties; (B) no Default or Event
of Default has occurred and is continuing at the time of such merger,
consolidation, establishment or acquisition or will occur after giving effect to
such merger, consolidation or acquisition; and (C) based upon a pro forma
Compliance Certificate provided to the Agent on behalf of the Lessor Parties
immediately prior to the consummation of any such merger, consolidation or
acquisition, the Guarantor shall continue to be in compliance with each of the
financial covenants set forth in Section 8.3 hereof immediately after giving
effect to such merger, consolidation or acquisition.
(e) Investments. Neither the Guarantor nor any of its Subsidiaries shall make
any Investment except for the following:
46
(i) Investments by the Guarantor and its Subsidiaries in Cash Equivalents;
(ii) Any transaction permitted by Section 8.2(a);
(iii) Money market mutual funds registered with the Securities and Exchange
Commission, meeting the requirements of Rule 2a- 7 promulgated under the
Investment Company Act of 1940;
(iv) Investments listed in Item 8.2(e) of Schedule II hereto existing on the
date of this Participation Agreement;
(v) Investments in Guarantor's Affiliates and Subsidiaries; and
(vi) Other Investments, provided that the Guarantor shall continue to be in
compliance with each of the financial covenants set forth in Section 8.3 hereof
immediately after giving effect to each such Investment, and provided further
that before making any such Investment in an amount greater than $25,000,000,
the Guarantor shall provide the Agent on behalf of the Lessor Parties a pro
forma Compliance Certificate to the effect that such Investment will not
otherwise violate this clause (vi).
(f) Dividends, Redemptions, Etc. Neither the Guarantor nor any of its
Subsidiaries shall (i) pay any dividends or make any distributions on its Stock;
(ii) purchase, redeem, retire, defease or otherwise acquire for value any of its
Stock; (iii) return any capital to any holder of its Stock as such; (iv) make
any distribution of assets, Stock, obligations or securities to any holder of
its Stock as such; or (v) set apart any sum for any such purpose (each act
described in clauses (i), (ii), (iii), (iv) and (v) being a "Distribution");
except under the following conditions:
(A) No Event of Default shall have occurred and be continuing;
(B) The Guarantor shall continue to be in compliance with each of the financial
covenants set forth in Section 8.3 hereof immediately after giving effect to
each such Distribution; and
(C) If the Distribution (in cash or value) is in an amount greater than
$25,000,000, the Guarantor shall have provided to the Agent on behalf of the
Lessor Parties a pro forma Compliance Certificate to the effect that the
Guarantor shall continue to be in compliance with each of its financial
covenants set forth in Section 8.3 hereof immediately after giving effect to
such Distribution.
Notwithstanding the foregoing, a conversion of the Guarantor's Class B Common
Stock into the Guarantor's Class A Common Stock shall not be deemed a
Distribution for the purpose of this Section 8.2(f).
(g) Employee Benefit Plans. Neither the Guarantor nor any ERISA Affiliate will:
47
(i) engage in any "prohibited transaction" within the meaning of ss.406 of ERISA
or ss.4975 of the Revenue Code which could result in a material liability for
the Guarantor or any of its Subsidiaries; or
(ii) permit any Guaranteed Pension Plan to incur an "accumulated funding
deficiency", as such term is defined in ss.302 of ERISA, in excess of
$1,000,000, whether or not such deficiency is or may be waived; or
(iii) fail to contribute to any Guaranteed Pension Plan to an extent which, or
terminate any Guaranteed Pension Plan in a manner which, could result in the
imposition of a lien or encumbrance on the assets of the Guarantor or any of its
Subsidiaries pursuant to ss.302(f) or ss.4068 of ERISA; or
(iv) permit or take any action which would result in the aggregate benefit
liabilities (with the meaning of ss.4001 of ERISA) of all Guaranteed Pension
Plans exceeding the value of the aggregate assets of such plans by more than
$1,000,000, disregarding for this purpose the benefit liabilities and assets of
any such plan with assets in excess of benefit liabilities.
(h) Prohibited Uses of Proceeds. The Guarantor and the Lessee shall not directly
or indirectly, use the proceeds of any financial accommodations provided
hereunder in any manner which would result in a violation of Regulation T, U or
X of the Board of Governors of the Federal Reserve System as now and from time
to time hereafter in effect.
(i) Transactions with Affiliates. The Guarantor shall not and shall not permit
any of its Subsidiaries to, enter into any transaction with any Affiliate on
terms that are less favorable to the Guarantor or such Subsidiary, as the case
may be, than terms which might be obtained at the time from Persons that are not
Affiliates if a Default or Event of Default shall be continuing hereunder
immediately prior to such transaction or would occur under Section 18 of the
Master Lease on a pro forma basis after giving effect to such transaction.
(j) Additional Activities Prohibited. The Lessee shall not engage in any
business or activity, whether or not engaged in for gain or other pecuniary
advantage, other than leasing the Property from the Lessor pursuant to the
Master Lease and leasing from SELCO that certain real property subject to the
December 2000 Lease.
Section 8.3 Financial Covenants. The Guarantor hereby covenants and agrees,
subject to Section 15.5 hereof, for the benefit of the Lessor Parties from and
after the Documentation Date and until all Commitments have terminated and all
Obligations have been paid and performed in full:
(a) Consolidated Net Worth. The Guarantor shall not permit the Consolidated Net
Worth of the Guarantor at any time (such day on which the Consolidated Net Worth
of the Guarantor is measured shall be referred to herein as a "determination
date") which commences after the Documentation Date to be less than the sum on
such determination date of the following:
48
(i) Ninety percent (90%) of the Consolidated Net Worth of the Guarantor as of
September 30, 2000;
plus
(ii) Seventy-five percent (75%) of the sum of the positive net income of the
Guarantor for each quarter after September 30,2000;
plus
(iii) Seventy-five percent (75%) of net equity proceeds (excluding equity issued
through the ESOP or employee stock purchase plans) and equity issued pursuant to
the conversion of debt for each quarter after September 30, 2000.
(b) Fixed Charge Coverage Ratio. The Guarantor shall not permit the ratio of its
Consolidated EBITDAR to Consolidated Fixed Charges as of the end any measurement
period to be less than 3.00:1.00. For purpose of this paragraph, "measurement
period" shall mean, with respect to any four fiscal quarter period, the period
of four fiscal quarters ending on the last day of such fiscal quarter.
(c) Total Consolidated Debt to Total Consolidated Capital. The Guarantor shall
not, at any time, permit its Total Consolidated Debt to exceed sixty percent
(60%) of its Total Consolidated Capital.
(d) Quick Ratio. The Guarantor shall not, at any time, permit the ratio of the
sum its cash and Cash Equivalents and accounts receivables (net reserves) to
Total Consolidated Debt to be less than 1.00: 1.00 for those fiscal quarters
ending on June 30 and September 30 and 1.75:1.00 for those fiscal quarters
ending on December 31 and March 31.
ARTICLE IX
COVENANTS OF THE LESSOR, THE NEW PARTNERS, THE NOTE PURCHASER, THE TRANCH
B BANKS AND THE LIQUIDITY BANKS
Section 9.1 General Covenants of the New Partners. the Lessor and the Note
Purchaser. Each of the New Partners, the Lessor and the Note Purchaser hereby
covenants and agrees, individually and not jointly, that so long as this
Participation Agreement and the other Operative Documents are in effect:
(a) it will not create, incur, assume or suffer to exist any Lessor Lien
attributable to such Person upon the Master Lease or the Property (other than as
contemplated by any of the Operative Documents); and
(b) it will remove, at its sole expense, any Lessor Lien created or incurred by
it and attributable to it upon the Master Lease or the Property (other than such
Liens as are contemplated by any of the Operative Documents).
49
Section 9.2 Specific Covenants of the Lessor. The Lessor hereby covenants and
agrees, for the benefit of the Lessee, that so long as this Participation
Agreement and the other Operative Documents are in effect:
(a) the representations and warranties of the Lessor contained in the Note
Purchase Agreement shall be true and correct in all material respects on and as
of the date of each Note Purchase, 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;
(b) it will comply with each of its covenants set forth in the Note Purchase
Agreement (including, without limitation, (i) to timely present all requests and
information necessary to cause the Note Purchaser to purchase the Notes and fund
the advances to be made thereunder as and when required under the Note Purchase
Agreement and (ii) to not cause an Acceleration Event or an Unmatured
Acceleration Event to occur and be continuing) except to the extent such failure
to comply is a result of a breach by the Guarantor or the Lessee of its
obligations under this Participation Agreement or any of the other Operative
Documents;
(c) when it receives funds from the Note Purchaser or the Tranche B Banks, it
will transmit such funds to the Lessee or as the Lessee may direct without
deduction or offset as and when required under this Participation Agreement and
the other Operative Documents;
(d) when it receives funds from the Lessee, it will transmit such funds to the
Note Purchaser, the Tranche B Banks and the Liquidity Banks (as applicable)
without deduction or offset as and when required under this Participation
Agreement, the Note Purchase Agreement and the other Operative Documents;
(e) it will keep complete and accurate books and records of the transactions
involving the Lessor arising under this Participation Agreement, the Note
Purchase Agreement and the other Operative Documents; and
(f) so long as no Default or Event of Default shall have occurred and be
continuing, it will not assign its Equity Investment or its interest in the
Operative Documents without the prior written consent of the Lessee (which
consent shall not be unreasonably withheld).
Section 9.3 Specific Covenants of the New Partners. Each New Partner hereby
covenants and agrees, for the benefit of the Lessee, that so long as this
Participation Agreement and the other Operative Documents are in effect:
(a) they, jointly and severally, will cause the Lessor to comply with each of
its covenants set forth in this Participation Agreement and the other Operative
Documents (including, without limitation, (i) to timely present all requests and
information necessary to cause the Note Purchaser to purchase the Notes and fund
the advances to be made thereunder as and when required under the Note Purchase
Agreement and (ii) to not cause an Acceleration Event or an Unmatured
Acceleration Event to occur and be continuing) except to the extent such failure
to comply is a result of a breach by the Guarantor or the Lessee of its
obligations under this Participation Agreement or any of the other Operative
Documents;
50
(b) when the Lessor receives funds from the Note Purchaser or the Tranche B
Banks, they, jointly and severally, will cause the Lessor to transmit such funds
to the Lessee or as the Lessee may direct without deduction or offset as and
when required under this Participation Agreement and the other Operative
Documents;
(c) when the Lessor receives funds from the Lessee, they, jointly and severally,
will cause the Lessor to transmit such funds to the Note Purchaser, the Tranche
B Banks and the Liquidity Banks (as applicable) without deduction or offset as
and when required under the Note Purchase Agreement and the other Operative
Documents;
(d) they, jointly and severally, will cause the Lessee to keep complete and
accurate books and records of the transactions involving the Lessor arising
under this Participation Agreement, the Note Purchase Agreement and the other
Operative Documents;
(e) the New Partners will not assign their respective Equity Investment or their
respective interests in the Operative Documents without the prior written
consent of the Lessee and the Note Purchaser (which consents shall not be
unreasonably withheld);
(f) they, jointly and severally, will provide the Lessee with copies of (i) each
return, report and declaration filed by the Lessor or Selco Redwood, LLC with
respect to Structural Impositions or Prior Impositions which may be the subject
of an indemnity hereunder, (ii) any communication with a Governmental Authority
with respect to Structural Impositions or Prior Impositions of the Lessor or
Selco Redwood, LLC which may be the subject of an indemnity hereunder and (iii)
any return, report, declaration or communication with a Governmental Authority
with respect to the Lessor or Selco Redwood, LLC which relates to any Imposition
which is a property tax or similar tax; and
(g) they, jointly and severally, agree to execute and file Internal Revenue
Service Form 8832 (and any corresponding state form) with respect to Selco
Redwood, LLC (and thereby elect to treat Selco Redwood, LLC as a corporation for
income and franchise tax purposes) within five (5) days after the date such form
or forms have been provided to the New Partners by the Lessee.
Section 9.4 Specific Covenant of the Note Purchaser. The Note Purchaser hereby
covenants and agrees, for the benefit of the Lessee, that so long as this
Participation Agreement and the other Operative Documents are in effect and no
Event of Default or Default shall have occurred and be continuing, it shall
purchase the Notes and make advances under the Notes in accordance with the
terms and conditions of this Participation Agreement and the Note Purchase
Agreement.
Section 9.5 Other Covenants of the Lessor Parties. To the extent not otherwise
provided above, each of the Lessor Parties severally hereby covenants and
agrees, for the benefit of the Lessee, that so long as this Participation
Agreement and the other Operative Documents are in effect and no Event of
Default or Default shall have occurred and be continuing, it will comply with
each of its covenants set forth in the Operative Documents to which such Person
is a party, except to the extent such failure to comply directly or indirectly
arises out of, or relates to (or is
51
alleged to have arisen out of or be related to) a breach by the Guarantor or the
Lessee of its obligations under this Participation Agreement or any of the other
Operative Documents.
Section 9.6 Notices Under the Note Purchase Agreement and the Liquidity
Documentation. Each of the Lessor and the Note Purchaser hereby agrees that it
shall promptly (but in any event no later than ten (10) Business Days after
delivery thereof), deliver to the Guarantor a copy of each notice sent by it
under the Note Purchase Agreement and the Liquidity Documentation to any other
party thereto.
ARTICLE X
PAYMENT OF CERTAIN EXPENSES; OPTIONAL APPRAISALS
The Lessee agrees, for the benefit of the Lessor, that:
Section 10.1 Transaction Expenses. The Lessee shall pay, or cause to be paid,
from time to time all Transaction Expenses. Transaction Expenses may, subject to
the conditions hereof, be paid with the proceeds of the Notes, the Tranche B
Loan and/or the funding of any portion of the Equity Investment.
Section 10.2 Stamp Taxes. The Lessee shall pay or cause to be paid 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 10.3 Note Purchase Agreement and Related Obligations. The Lessee shall
pay, before the delinquency date thereof, all costs, expenses and other amounts
(other than amounts that, pursuant to the Operative Documents, are specifically
required to be paid by any Lessor Party or that arise out of or in connection
with a default by the Lessor under the Operative Documents that does not
directly or indirectly arise out of or relate to a breach by the Guarantor or
the Lessee of its obligations under any of the Operative Documents) required to
be paid by the Lessor under this Participation Agreement, the Note Purchase
Agreement, any Note, the Asset Purchase Agreement or the Liquidity Agreement.
Section 10.4 Optional Appraisals. If the Lessee elects the Remarketing Option
pursuant to Section 12.1 of the Master Lease, then any Lessor Party may, at the
sole option of each party, respectively, but at the expense and cost of the
Lessee, require reports of one or more independent appraisers selected by the
requesting parties, which reports shall state, in a manner reasonably
satisfactory to the requesting parties, the following:
(a) the appraiser's determination of the Fair Market Value of the Property as of
(i) the day on which the Remarketing Option was elected and (ii) the Financing
Termination Date; and
(b) such other matters as the Lessor Parties may reasonably request.
52
Upon any party's delivery of written notice to the Guarantor that any of the
referenced parties is requiring delivery of appraisals pursuant to this Section
10.4, the Guarantor shall cause such reports to be delivered to the requesting
party no later than thirty (30) days after such notice.
ARTICLE XI
APPLICATION OF PAYMENTS
Section 11.1 Consenting Parties: Voting Rights of Lessor Parties in Connection
with Direction of the Agent.
(a) In accordance with Article XIV hereof and subject to Section 15.5 hereof,
all actions taken by the Agent prior to the occurrence and continuance of an
Event of Default, and all amendments, modifications, consents or approvals with
respect to any Operative Documents, shall be taken solely at the direction of
the Consenting Parties. The Lessee and the Guarantor shall be entitled to rely
on all such actions by the Agent and amendments, modifications, consents and
approvals entered into or provided by the Agent as authorized by the Consenting
Parties without inquiry or investigation.
(b) The "Consenting Parties" shall mean, with respect to amendments,
modifications, consents or approvals with respect to any Operative Document, (i)
at any time the Outstanding Lease Balance is greater than $0, the (x) Note
Purchaser and (y) the other Lessor Parties whose aggregate percentage of the
Outstanding Lease Balance equals or exceeds sixty-six and two-thirds percent
(66-2/3%); and (ii) at any time the Outstanding Lease Balance is $0, (x) the
Note Purchaser and (y) the other Lessor Parties whose portion of the Aggregate
Commitment Amount equals or exceeds sixty-six and two-thirds percent (66-2/3%);
provided, however, that "Consenting Parties" shall not include the Note
Purchaser at any time during which all of the Notes have been funded and/or
purchased by the Liquidity Banks pursuant to the Liquidity Documentation. For
purposes of calculating each Lessor Party's percentage of the Outstanding Lease
Balance or portion of the Aggregate Commitment Amount, so long as the Liquidity
Banks have an obligation to fund the Aggregate Note Purchase Commitment pursuant
to the Liquidity Agreement or have purchased the Notes from the Note Purchaser
pursuant to the Asset Purchase Agreement, each Liquidity Bank shall be deemed to
hold a percentage or portion (as applicable) calculated based upon its
Percentage as provided pursuant to the Asset Purchase Agreement. (Thus, for
example, if the Outstanding Lease Balance is $100,000,000, consisting of
$3,500,000 (principal amount) of Equity Investment, $20,000,000 (principal
amount) of the Tranche B Loan made by one Tranche B Bank and $76,500,000
(principal amount) of outstanding Notes, and each of four Liquidity Banks'
Percentage under the Asset Purchase Agreement is exactly 25%, then the Lessor's
percentage of the Outstanding Lease Balance would be 3.500%, the Tranche B
Bank's percentage of the Outstanding Lease Balance would be 20.000% and each
Liquidity Bank's percentage of the Outstanding Lease Balance would be 19.125%).
Section 11.2 Application of Payments made by the Lessee and Guarantor Pursuant
to the Operative Documents prior to the Occurrence and Continuance of any Event
of Default. Prior to the occurrence and continuance of any Event of Default,
moneys received by the Lessor (or by the Agent on behalf of the Lessor),
including, without limitation, funds deposited in the
53
Prepayment Account, shall be paid to the Person or Persons entitled thereto
after being applied as follows:
(a) Basic Rent shall be applied pro rata to satisfy the obligations of the
Lessor with respect to the Note Interest Amount, the Tranche B Interest Amount,
the Yield Amount and any other costs related to the Notes, the Tranche B Loan
and the Equity Investment.
(b) Interest (if any) on the Lessee Loans;
(c) Payments made pursuant to Sections 4.3, 4.4, 4.6, 4.8, 11.4, 11.5 and
Article XIII hereof shall be applied as specified therein.
(d) All other payments made by or on behalf of the Lessee Parties pursuant to
this Participation Agreement and the other Operative Documents, unless otherwise
specified, shall be applied first, to repay, in full, the Notes and the Tranche
B Loan (together with any other amounts payable to the Note Purchaser, the
Tranche B Banks or the Liquidity Banks, as applicable) pursuant to the Operative
Documents), ratably in accordance with their respective interests, second, if
any amounts remain, to redeem, in full, the Equity Investment (together with any
other amounts payable to the Lessor pursuant to the Operative Documents), and
third, if any amounts remain, to the Lessee and any other Person as the Lessee's
and/or such Person's interest may appear.
Section 11.3 Application of Funds Upon the Occurrence and Continuance of any
Event of Default. Upon the occurrence and continuance of any Event of Default,
moneys received by the Lessor (or by the Agent on behalf of the Lessor) shall be
paid to the Person or Persons entitled thereto after being applied as follows:
(a) Basic Rent shall be applied pro rata to satisfy the obligations of the
Lessor with respect to the Note Interest Amount, the Tranche B Interest Amount,
the Yield Amount and any other costs related to the Notes, the Tranche B Loan
and the Equity Investment.
(b) Payments made pursuant to Sections 4.3, 4.4, 4.6, 4.8, 11.4, 11.5 and
Article XIII hereof shall be applied as specified therein.
(c) All other payments made by or on behalf of the Lessee Parties or received as
remarketing, casualty, sale, foreclosure or other payments or proceeds pursuant
to this Participation Agreement and the other Operative Documents, shall be
applied first, to repay, in full, the Notes and the Tranche B Loan (together
with any other amounts payable to the Note Purchaser, the Tranche B Banks or the
Liquidity Banks, as applicable pursuant to the Operative Documents), ratably in
accordance with their respective interests, second, if any amounts remain, to
redeem, in full, the Equity Investment (together with any other amounts payable
to the Lessor pursuant to the Operative Documents), third, if any amounts
remain, to repay, in full, outstanding interest (if any) on the Lessee Loans,;
and fourth, if any amounts remain, to any other Person as such Person's interest
may appear.
Section 11.4 Application of Funds Upon Exercise of the Remarketing Option. If
the Lessee shall have exercised the Remarketing Option, moneys received by the
Lessor (or by the Agent on behalf of the Lessor) shall be paid to the Person or
Persons entitled thereto after being
54
applied as follows: first, to repay, in full, the Notes (together with any other
amounts payable to the Note Purchaser or the Liquidity Banks, as applicable,
pursuant to the Operative Documents), ratably in accordance with their
respective interests, second, if any amounts remain, to repay, in full, the
Tranche B Loan (together with any other amounts payable to the Tranche B Banks
pursuant to the Operative Documents), ratably in accordance with their
respective interests, third, if any amounts remain, to redeem, in full, the
Equity Investment (together with any other amounts payable to the Lessor
pursuant to the Operative Documents), and fourth, if any amounts remain, to the
Lessee or any other Person as the Lessee's and/or such Person's interest may
appear.
Section 11.5 Casualty or Condemnation Proceeds. Except to the extent such
amounts are returned to the Lessee pursuant to Section 16 of the Master Lease or
Section 16.2(h) hereof, without regard to whether a Default, Event of Default,
Acceleration Event or Unmatured Acceleration Event shall have occurred and be
continuing, Casualty Proceeds or Condemnation Proceeds with respect to the
Property shall be paid to the Person or Persons entitled thereto after being
applied as follows: first, to the ratable repayment in full of the Notes and the
Tranche B Loan (together with any other amounts payable to the Note Purchaser,
the Tranche B Banks or the Liquidity Banks, as applicable) pursuant to the
Operative Documents, ratably in accordance with their respective interests and
second, if any amounts remain, to the redemption of the Equity Investment
(together with any other amounts payable to the Lessor pursuant to the Operative
Documents).
Section 11.6 Construction of Local Laws. It is acknowledged and agreed that the
foreclosure on the Property may give rise to the application of local laws which
require, inter alia, that the proceeds of such foreclosure(s) be applied in a
manner which is not consistent with the application of proceeds specified in
this Article XI. To the extent such inconsistent applications are made in
accordance with applicable law, the parties hereto agree to reallocate the
remaining proceeds in a manner which gives effect to the allocations specified
in this Article XI.
ARTICLE XII
ASSIGNMENTS AND TRANSFERS BY LESSOR, TRANCHE B BANKS, LIQUIDITY BANKS AND
NOTE PURCHASER
Section 12.1 Acknowledgment of Grant of Security Interest to the Agent;
Assignments.
(a) The Lessor, the New Partners, the Guarantor and the Lessee hereby
acknowledge that the right of the Lessor to receive Rent and certain other
rights under the Master Lease are being pledged to the Agent to secure payment
of the Secured Obligations. In addition, in accordance with the terms and
conditions of the Liquidity Documentation, the Notes may be transferred to the
Liquidity Banks or otherwise transferred from time to time. Such transfers shall
be governed by the relevant provisions of the Note Purchase Agreement, and this
Participation Agreement, as the context requires.
(b) Each Tranche B Bank may, at any time, sell and assign to any Eligible
Assignee all or any portion of its rights and obligations under this
Participation Agreement and
55
the other Operative Documents pursuant to an assignment agreement in the form
and substance satisfactory to the Agent; provided, however, that:
(i) Without the written consent of the Lessor, the Agent and, if no Default or
Event of Default has occurred and is continuing, the Lessee (which consent of
the Lessor, the Agent and the Lessee shall not be unreasonably withheld), no
Tranche B Bank may make any assignment to any Person which is not, immediately
prior to such assignment, a Tranche B Bank hereunder or an Affiliate thereof; or
(ii) Without the written consent of the Lessor, the Agent and, if no Default or
Event of Default has occurred and is continuing, the Lessee (which consent of
the Lessor, the Agent and the Lessee shall not be unreasonably withheld), no
Tranche B Bank may make any assignment to any Person if, after giving effect to
such assignment, the portion of the Aggregate Tranche B Commitment of such
Tranche B Bank or such assignee would be less than Five Million Dollars
($5,000,000) (except that a Tranche B Bank may make an assignment which reduces
its portion of the Aggregate Tranche B Commitment to zero without the written
consent of the Lessor, the Agent or the Lessee).
Upon its receipt of a fully executed assignment agreement, together with payment
to the Agent by the assignor Tranche B Bank of a registration and processing fee
of $3,000, the Agent shall (A) promptly accept such assignment agreement and (B)
on the assignment effective date determined pursuant thereto record the
information contained therein in its books and records and give notice of such
acceptance and recordation to the Lessee and the other Lessor Parties. Upon such
execution, delivery, acceptance and recording of each assignment agreement, from
and after the effective date determined pursuant to such assignment agreement,
(y) each assignee thereunder shall be a Tranche B Bank hereunder with a portion
of the Aggregate Tranche B Commitment as set forth in such assignment agreement
and shall have the rights, duties and obligations of such a Tranche B Bank under
this Participation Agreement and the other Operative Documents, and (z) the
assignor Tranche B Bank thereunder shall be a Tranche B Bank with a portion of
the Aggregate Tranche B Commitment as set forth in such assignment agreement,
or, if such Tranche B Bank's portion of the Aggregate Tranche B Commitment has
been reduced to 0%, the assignor shall cease to be a Tranche B Bank; provided,
however, that any such assignor Tranche B Bank which ceases to be a Tranche B
Bank shall continue to be entitled to the benefits of any provision of this
Participation Agreement and the other Operative Documents which by its terms
survives the termination of this Participation Agreement.
(c) Each Liquidity Bank may, at any time, sell and assign to any Eligible
Assignee all or any portion of its rights and obligations under this
Participation Agreement and the other Operative Documents in accordance with the
Liquidity Documentation.
Section 12.2 Assignments by Note Purchaser, etc. Provided the same does not
require registration of the Notes under the Securities Act of 1933, as amended,
the Note Purchaser may, without restriction or formality of any kind: (x)
transfer all or part of its rights, obligations and interest in, to and under
the Notes and the Operative Documents to any Lessor Party or to any
bankruptcy-remote commercial paper conduit sponsored by The Bank of
Tokyo-Mitsubishi, Ltd. and grant a security interest therein to the Collateral
Agent for its commercial paper program; and (y) the Conduit Agent may similarly
transfer any interest it so receives.
56
Section 12.3 Participations and Sub-Participations. Each Lessor Party may at any
time sell to one or more Persons ("Subparticipants") subparticipation interests
in the rights and interests of such Lessor Party under this Agreement and the
other Operative Documents. In the event of any such sale by a Lessor Party of
subparticipation interests, such Lessor Party's obligations under this
Participation Agreement and the other Operative Documents shall remain
unchanged, such Lessor Party shall remain solely responsible for the performance
thereof and the Lessee and the other Lessor Parties shall continue to deal
solely and directly with such Lessor Party in connection with such Lessor
Party's rights and obligations under this Participation Agreement. Any agreement
pursuant to which any such sale is effected may require the selling Lessor Party
to obtain the consent of the Subparticipant in order for such Lessor Party to
agree in writing to any amendment, waiver or consent of a type specified in
Section 15.5(a) of this Participation Agreement but may not otherwise require
the selling Lessor Party to obtain the consent of such Subparticipant to any
other amendment, waiver or consent hereunder. The Lessee agrees that any Lessor
Party which has transferred any subparticipation interest shall, notwithstanding
any such transfer, be entitled to the full benefits accorded such Lessor Party
in this Participation Agreement and the other Operative Documents as if such
Lessor Party had not made such transfer.
Section 12.4 Disclosure of Information. Each Lessor Party may, in connection
with any assignment, sale of a participation, proposed assignment or proposed
sale of a participation by it pursuant to this Article XII, disclose to the
applicable transferee or proposed transferee any information relating to the
Lessee, the Guarantor or the Property in its possession.
Section 12.5 Limitation on Assignment. Except as otherwise provided above or as
contemplated in the Asset Purchase Agreement, no Lessor Party shall assign or
transfer its rights, obligations or interest in, to and under the Operative
Documents without the written consent of the Agent and, if no Default or Event
of Default has occurred and is continuing, the Guarantor (which consent of the
Agent and the Guarantor shall not be unreasonably withheld).
ARTICLE XIII
INDEMNIFICATION
Section 13.1 General Indemnification. The Lessee and the Guarantor jointly and
severally agree, whether or not any of the transactions contemplated hereby
shall be consummated, to assume liability for, and to indemnify, protect,
defend, save and keep harmless each Indemnitee, on an After Tax Basis, from and
against, any and all Claims that may be imposed on, incurred by or asserted
against such Indemnitee (whether because of action or omission by such
Indemnitee or otherwise), whether or not such Indemnitee shall also be
indemnified as to any such Claim by any other Person and whether or not such
Claim arises or accrues prior to the Documentation Date or after the Financing
Termination Date or the Maturity Date (as applicable), in any way relating to or
arising out of:
(a) any of the Operative Documents or any of the transactions contemplated
hereby or pursuant to the Overall Transaction, and any amendment, modification
or waiver in respect thereof including, without limitation, any Claim directly
or indirectly arising out of or relating to, or alleged to directly or
indirectly arise out of or relate to, any fact, circumstance or
57
condition in existence at any time prior to the execution and delivery of this
Participation Agreement (whether or not such fact, circumstance or condition was
known or knowable by the Lessee, the Guarantor or any other Person and
notwithstanding any due diligence or other investigation by any Indemnitee),
(b) the Property 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 any sale pursuant to the Master 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 (1) Claims or penalties
arising from any violation of law 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,
including, but not limited to, the terms set forth in the Redwood Shores
Documents, (4) the making of any Modifications in violation of any standards
imposed by any insurance policies required to be maintained by the Lessee
pursuant to the Master Lease which policies 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 change or special assessments
being levied against the Property or any plans to widen, modify or realign any
street or highway adjacent to the Property, or any Claim for utility "tap-in"
fees;
(d) the breach by the Lessee or the Guarantor 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 or in connection
with the Overall Transaction;
(e) 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;
(f) the existence of any Lien on or with respect to the Property, any
improvements, title thereto, any interest therein or any Basic Rent or
Supplemental Rent, 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, or
any of its contractors or agents or by reason of the financing of any personally
or equipment purchased or leased by the Lessee or Modifications constructed by
the Lessee, except Lessor Liens and Liens created under the Operative Documents
in favor of one or more of the Lessor Parties; .
(g) the transactions contemplated by this Participation Agreement, any other
Operative Document or in connection with the Overall Transaction, 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 Revenue Code;
58
(h) any indemnification claim made against any Liquidity Bank under the
Liquidity Documentation;
(i) the sale of the Partnership Interests by the Existing Partners to the New
Partners, the offer by the New Partners to the Existing Partners to acquire the
Partnership Interests and the acquisition by the New Partners of the Partnership
Interests or the provision of financing therefore pursuant to this Participation
Agreement or the other Operative Documents or any fact, circumstance or
condition directly or indirectly related hereto or thereto (or alleged to
directly or indirectly relate hereto or thereto) (whether or not such fact,
circumstance or condition was known or knowable by the Lessee, the Guarantor or
any other Person and notwithstanding any due diligence or other investigation by
any Indemnitee), including, without limitation, (i) invalid title to the
transferred Partnership Interests or the Property, (ii) Liens against the
Partnership Interests or the Property (other than Permitted Exceptions), (iii)
adverse claims affecting the Partnership Interests or the Property, (iv)
pre-existing actions, suits or claims against the Partnership Interests or the
Property (whether known or unknown), (v) taxes or tax deficiencies against the
Lessor, the Partnership Interests or the Property (whether pre-existing or
arising in connection with the transfer of the Partnership Interests to the New
Partners), (vi) violations of any rules or regulations promulgated by any
Governmental Authority (including federal or state securities laws) arising as a
result of ownership of the Property or the transfer of the Partnership Interests
to the New Partners, and (vii) adverse claims arising under any federal or state
bankruptcy or insolvency laws related to the transfer of the Partnership
Interests to the New Partners; or
(j) to the extent not otherwise provided pursuant to clauses (a) through (i)
above, any Claim directly or indirectly arising out of or relating to the
Pre-existing Transaction;
provided, however, neither the Lessee nor the Guarantor shall be required to
indemnify 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 and the
Guarantor 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 to the extent such Indemnitee is in
breach of any obligation under the Operative Documents to discharge such Liens,
(3) any Claim to the extent solely attributable to acts or events attributable
to such Indemnitee and occurring after the return of the Property or the
Financing Termination Date or the Maturity Date (as applicable) so long as no
Default or Event of Default shall have occurred and be continuing as of the date
of such return, the Financing Termination Date or the Maturity Date (as
applicable), (4) any Claim arising from a breach by such Indemnitee of any
agreement entered into in connection with the assignment or participation of any
interest of such Indemnitee under this Participation Agreement or the other
Operative Documents, (5) Taxes (other than, without duplication of any indemnity
under Section 13.4, Structural Impositions, Prior Impositions and Taxes
necessary for any claim under this Section 13.1 to be indemnified on an
After-Tax Basis) or (6) any Claim arising solely from the failure of such
Indemnitee to comply with laws applicable to banks or their affiliates generally
or the failure of such Indemnitee to file any notice, report, filing or other
document required by any Governmental Authority regulating banks or their
affiliates in connection with such Indemnitee's execution of, and participation
in the transactions contemplated by, the Operative Documents or in connection
with the Overall Transaction. It is expressly understood and agreed that the
59
indemnity provided for herein shall survive the expiration or termination of,
and shall be separate and independent from any remedy under, the Master 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 repayment of the Notes or the redemption of the Equity
Investment.
Section 13.2 Environmental Indemnity. Without limitation of the other provisions
of this Article XIII or the Environmental Indemnity Agreement, the Lessee and
the Guarantor hereby agree, jointly and severally, to indemnify, hold harmless
and defend each Indemnitee from and against any and all claims (including third
party claims for personal injury or real or personal property damage or
diminution of value), losses (including, to the extent the Outstanding Lease
Balance and all other Obligations have not been fully paid, any loss of value of
any Property related thereto), damages, liabilities, fines, penalties, charges,
administrative and judicial proceedings (including any informal proceedings) and
all orders, judgments, remedial action, requirements, enforcement actions of any
kind, and all reasonable and documented costs and expenses incurred in
connection therewith (including reasonable and documented attorneys' and/or
paralegals' fees, experts' fees and expenses), including all costs incurred in
connection with any investigation or monitoring of site conditions or any
Remedial Action, arising in whole or in part, out of:
(a) the presence on or under the Property of any Hazardous Substances, or any
Releases or threat of Release or discharges of any Hazardous Substances on,
under, from or onto the Property;
(b) any Hazardous Activity or activity, including construction, carried on at
the Property, and whether by the Lessee or any predecessor in title or any
employees, agents, contractors or subcontractors of the Lessee or any
predecessor in title, or any other Persons (including such Indemnitee), in
connection with the handling, treatment, removal, storage, decontamination,
clean-up, transport or disposal of any Hazardous Substances that at any time are
Released on, at, from or under or are located or present on or under the
Property,
(c) loss of or damage to any property or the environment (including Remediation
Costs, investigation costs, clean-up costs, response costs, remediation and
removal costs, cost of corrective action, costs of financial assurance, fines
and penalties and natural resource damages and diminution of value), 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, in each case arising from
activities on or conditions with respect to the Property;
(d) any Governmental Claim, Adverse Environmental Condition or any other 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 or Person to record a Lien on the land records, in each
case arising from activities on or conditions with respect to the Property; or
(e) any residual contamination on or under the Property, or affecting any
natural resources, and any contamination of any property or natural resources
arising in connection with
60
the generation, use, handling, storage, transport or disposal of any such
Hazardous Substances from the Property; and irrespective of whether any of such
activities were or will be undertaken in accordance with applicable laws,
regulations, codes and ordinances;
provided, however, neither the Lessee nor the Guarantor shall be required to
indemnify any Indemnitee under this Section 13.2 for (1) any Claim to the extent
resulting from the willful misconduct or gross negligence of such Indemnitee (it
being understood that the Lessee and the Guarantor shall be required to
indemnify an Indemnitee even if the ordinary (but not gross) negligence of such
Indemnitee caused or contributed to such Claim) or (2) any Claim to the extent
solely attributable to acts or events attributable to such Indemnitee first
occurring after the return of all of the Property on the Financing Termination
Date or the Maturity Date (as applicable) so long as no Default or Event of
Default shall have occurred and be continuing as of the date of such return, the
Financing Termination Date or the Maturity Date (as applicable). 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 Master Lease or any other Operative Document.
Section 13.3 Proceedings in Respect of Claims. With respect to any amount that
Lessee or the Guarantor is requested by an Indemnitee to pay by reason of
Section 13.1 or 13.2, such Indemnitee shall, if so requested by Lessee or the
Guarantor, as applicable, and prior to any payment, submit such additional
information to the Lessee or the Guarantor as such Person may reasonably request
and which is in the possession of or available to such Indemnitee to
substantiate properly the requested payment.
In case any action, suit or proceeding shall be brought against any Indemnitee
or any Indemnitee receives written notice of any threatened action, suit or
proceeding, such Indemnitee shall with reasonable promptness notify the
Guarantor of the commencement thereof, and the Guarantor shall be entitled, at
its expense, to participate in, and, to the extent that the Guarantor desires
to, assume and control the defense thereof (with counsel reasonably satisfactory
to such Indemnitee) provided, however, that the Guarantor shall have
acknowledged in writing its obligation to fully indemnify such Indemnitee in
respect of such action, suit or proceeding, and the Guarantor 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 Guarantor 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 risk of imposition of criminal liability or will involve any
material risk of the sale, forfeiture or loss of the Property or any part
thereof not stayed during the pendency of the contest or (y) the control of such
action, suit or proceeding by the Guarantor would involve an actual or potential
conflict of interest, (B) such proceeding involves Claims not fully indemnified
by the Lessee and the Guarantor which the Guarantor and the Indemnitee have been
unable to sever from the indemnified claim(s), or (C) an Event of Default has
occurred and is continuing and the Indemnitee notifies the Guarantor that it
does not want the Guarantor to assume and control such defense. The Indemnitee
will undertake all reasonable efforts to join in the Guarantor's efforts to
sever any such action referred to in clause (B) above. The Indemnitee may
participate in a reasonable manner at its own expense (provided that in the case
of clauses (A), (B) or (C) above, the Guarantor shall pay the reasonable
expenses of such Indemnitee) and
61
with its own counsel in any proceeding conducted by the Guarantor in accordance
with the foregoing. The Guarantor 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 13.2 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 Guarantor, with reasonable
promptness supply the Guarantor with such information and documents reasonably
requested by the Guarantor as are necessary or advisable for the Guarantor to
participate in and, to the extent permitted hereunder, control any action, suit
or proceeding to the extent permitted by Section 13.1 or 13.2. Unless an Event
of Default 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 13.2 without the prior written consent
of the Guarantor, which consent shall not be unreasonably withheld, unless such
Indemnitee waives its right to be indemnified under Section 13.1 or 13.2 with
respect to such Claim.
Upon payment in full, or provision for payment in full reasonably satisfactory
to the Indemnitee, of any Claim by the Lessee or the Guarantor pursuant to
Section 13.1 or.13.2 to or on behalf of an Indemnitee, the Guarantor, without
any further action, shall be subrogated to any and all claims that such
Indemnitee may have relating thereto (other than claims in respect of insurance
policies maintained by such Indemnitee at its own expense), and such Indemnitee
shall execute such instruments of assignment and conveyance, evidence of claims
and payment and such other documents, instruments and agreements as may be
necessary to preserve any such claims and otherwise cooperate with the Guarantor
and give such further assurances as are necessary or advisable to enable the
Guarantor vigorously to pursue such claims.
Any amount payable to an Indemnitee pursuant to Section 13.1 or 13.2 shall be
paid to such Indemnitee promptly upon receipt of a written demand therefore 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.
Section 13.4 General Tax Indemnity.
(a) Indemnification. The Lessee and the Guarantor, jointly and severally, shall
pay and assume liability for, and do hereby agree to indemnify, protect and
defend the Property, the Partnership Interests and all Tax Indemnitees, and hold
them harmless against, all Impositions on an After Tax Basis.
(b) Contests. If any claim shall be made against any Tax Indemnitee or if any
proceeding shall be commenced against any Tax Indemnitee (including a written
notice of such proceeding) for any Imposition as to which the Lessee or the
Guarantor may have an indemnity obligation pursuant to this Section 13.4, or if
any Tax Indemnitee shall determine that any Imposition to which the Lessee or
the Guarantor may have an indemnity obligation pursuant to this Section 13.4 may
be payable, such Tax Indemnitee shall promptly (and in any event, within fifteen
(15) Business Days) notify the Guarantor in writing (provided that failure to so
notify the Guarantor within fifteen (15) Business Days shall not alter such Tax
Indemnitee's rights under this Section 13.4 except to the extent such failure
precludes or materially adversely affects the
62
ability to conduct a contest of any indemnified Taxes) and shall not take any
action with respect to such claim, proceeding or Imposition without the written
consent of the Guarantor (such consent not to be unreasonably withheld or
unreasonably delayed) for thirty (30) days after the receipt of such notice by
the Guarantor; provided, however, that in the case of any such claim or
proceeding, if such Tax Indemnitee shall be required by law or regulation to
take action prior to the end of such thirty (30) day period, such Tax Indemnitee
shall in such notice to the Guarantor, so inform the Guarantor, and such Tax
Indemnitee shall not take any action with respect to such claim, proceeding or
Imposition without the consent of the Guarantor (such consent not to be
unreasonably withheld or unreasonably delayed) for ten (10) days after the
receipt of such notice by the Guarantor unless such Tax Indemnitee shall be
required by law or regulation to take action prior to the end of such ten (10)
day period.
The Guarantor shall be entitled for a period of thirty (30) days from receipt of
such notice from such Tax Indemnitee (or such shorter period as such Tax
Indemnitee has notified the Guarantor is required by law or regulation for such
Tax Indemnitee to commence such contest), to request in writing that such Tax
Indemnitee contest the imposition of such Tax, at the Guarantor's expense. If
(x) such contest can be pursued in the name of the Guarantor or the Lessee and
independently from any other proceeding involving a Tax liability of such Tax
Indemnitee for which the Lessee and the Guarantor have not agreed to indemnify
such Tax Indemnitee, (y) such contest must be pursued in the name of such Tax
Indemnitee, but can be pursued independently from any other proceeding involving
a Tax liability of such Tax Indemnitee for which the Lessee and the Guarantor
have not agreed to indemnify such Tax Indemnitee or (z) such Tax Indemnitee so
requests, then the Guarantor or such Lessee shall be permitted to control the
contest of such claim, provided that in the case of a contest described in
clause (y) if such Tax Indemnitee determines reasonably and in good faith that
such contest by the Guarantor or the Lessee could have a material adverse impact
on the business or operations of such Tax Indemnitee and provides a written
explanation to the Guarantor of such determination, such Tax Indemnitee may
elect to control or reassert control of the contest, and provided that the
taking control by the Guarantor or the Lessee of any contest shall not alter the
applicable Tax Indemnitee's rights to indemnification hereunder, and provided,
further, that in determining the application of clauses (x) and (y) of the
preceding sentence, each Tax Indemnitee shall take any and all reasonable steps
to segregate claims for any Taxes for which the Lessee and the Guarantor
indemnify hereunder from Taxes for which the Lessee and the Guarantor are not
obligated to indemnify hereunder, so that the Guarantor can control the contest
of the former. In all other claims requested to be contested by the Guarantor,
such Tax Indemnitee shall control the contest of such claim, acting through
counsel selected by such Tax Indemnitee and reasonably acceptable to the
Guarantor. In no event shall the Guarantor be permitted to contest (or such Tax
Indemnitee be required to contest) any claim, (A) if such Tax Indemnitee
provides the Guarantor with a legal opinion of counsel reasonably acceptable to
the Guarantor that such action, suit or proceeding involves a risk of imposition
of criminal liability 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 the Guarantor shall have posted and
maintained a bond or other security reasonably satisfactory to the relevant Tax
Indemnitee in respect to such risk, (B) if an Event of Default has occurred and
is continuing unless the Guarantor shall have posted and maintained a bond or
other security reasonably satisfactory to the relevant Tax Indemnitee in respect
of the Taxes subject to such claim and any and all expenses for which the
Guarantor or the Lessee is responsible hereunder reasonably foreseeable
63
in connection with the contest of such claim, (C) unless the Guarantor shall
have agreed to pay and shall pay, to such Tax Indemnitee on written demand all
reasonable, documented out-of- pocket costs, losses and expenses that such Tax
Indemnitee may incur in connection with contesting such Imposition including all
reasonable legal, accounting and investigatory fees and disbursements and (if
applicable) reasonable, allocable internal overhead costs determined in
accordance with normal bank operating procedures, or (D) if such contest shall
involve the payment of the Tax prior to the contest, unless the Guarantor shall
provide to such Tax Indemnitee an interest-free advance in an amount equal to
the Imposition that such Tax Indemnitee is required to pay (with no additional
net after-tax costs to such Tax Indemnitee). In addition, for contests
controlled by such Tax Indemnitee and claims contested in the name of such Tax
Indemnitee in a public forum, no contest shall be required: (A) unless 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 any or
all such Tax Indemnitees with respect to any period for which the Guarantor or
the Lessee may be liable to pay an indemnity under this Section 13.4(b)) exceeds
(1) with respect to the Lessor or the New Partners, $25,000 and (2) with respect
to any Tax Indemnitee other than the Lessor or the New Partners, $75,000 and (B)
unless, if requested by such Tax Indemnitee, the Guarantor shall have provided
to such Tax Indemnitee an opinion of counsel selected by the Guarantor (which
may be in-house counsel) (except, in the case of income taxes indemnified
hereunder, in which case such opinion shall be an opinion of independent tax
counsel selected by the Guarantor and reasonably acceptable to such Tax
Indemnitee) that a reasonable basis exists to contest such claim. In no event
shall a Tax Indemnitee be required to appeal an adverse judicial determination
to the United States Supreme Court.
The party conducting the contest shall consult in good faith with the
other party and its counsel with respect to the contest of such claim for Taxes
(or claim for refund) but the decisions regarding what actions to be taken shall
be made by the controlling party in its sole judgment; provided, however, that
if such Tax Indemnitee is the controlling party and the Guarantor recommends the
acceptance of a settlement offer made by the relevant Governmental Authority and
such Tax Indemnitee rejects such settlement offer, then the amount for which a
Lessee and the Guarantor will be required to indemnify such Tax Indemnitee with
respect to the Taxes subject to such offer shall not exceed the amount which it
would have owed if such settlement offer had been accepted provided that any Tax
Indemnitee shall be entitled to reject any indemnity payment it would otherwise
be entitled to hereunder if such Tax Indemnitee reasonably determines that
accepting such offer would have an unindemnified impact on such Tax Indemnitee
and provided further that no Tax Indemnitee may reject any such indemnity
payment if the Guarantor agrees to pay to such Tax Indemnitee the amount of such
unindemnified impact, as reasonably determined by such Tax Indemnitee. In
addition, the controlling party shall keep the noncontrolling party reasonably
informed as to the progress of the contest, and shall provide the noncontrolling
party with a copy of (or appropriate excerpts from) any reports or claims issued
by the relevant auditing agents or taxing authority to the controlling party
thereof, in connection with such claim or the contest thereof, provided,
however, that such obligation shall not obligate any Tax Indemnitee to disclose
its tax returns or information or documentation unrelated to such claim or
contest.
Each Tax Indemnitee shall, at the expense of the Lessee and the
Guarantor, supply the Lessee or the Guarantor with such information and
documents reasonably requested by the
64
Lessee or the Guarantor as are necessary or advisable for such Person to
participate in any action, suit or proceeding to the extent permitted by this
Section 13.4(b); provided, however, that such Tax Indemnitee shall not be
required to provide to such Lessee or the Guarantor copies of its tax returns or
any other information, documentation, or materials that it deems to be
confidential or proprietary. Notwithstanding anything in this Section 13.4(b) to
the contrary, no Tax Indemnitee shall enter into any settlement or other
compromise or fail to appeal an adverse ruling with respect to any claim which
is entitled to be indemnified under this Section 13.4 (and with respect to which
contest is required under this Section 13 .4(b) without the prior written
consent of the Guarantor, unless such Tax Indemnitee waives its right to be
indemnified under this Section 13.4 with respect to such claim.
Notwithstanding anything contained herein to the contrary, a Tax
Indemnitee shall not be required to contest (and neither the Lessee nor the
Guarantor shall be permitted to contest in any judicial forum if such contest
could, in a Tax Indemnitee's reasonable judgment, be materially adverse to it) a
claim with respect to the imposition of any Tax if such Tax Indemnitee shall
have waived its right to indemnification under this Section 13.4 with respect to
such claim (and any claim with respect to such year or any other taxable year
the contest of which is precluded or materially adversely affected as a result
of such waiver).
(c) Reimbursement. If(x) a Tax Indemnitee or any Affiliate thereof
actually realizes a refund or reduction of any Taxes in respect of which the
Lessee or the Guarantor has paid an indemnity pursuant to this Section 13.4 or
(y) by reason of the incurrence or imposition of any Tax (or the circumstances
or event giving rise thereto) for which a Tax Indemnitee was indemnified
hereunder or any payment made to or for the account of such Tax Indemnitee by
the Lessee or the Guarantor pursuant to this Section 13.4 or any payment made by
a Tax Indemnitee to the Lessee or the Guarantor by reason of this Section
13.4(c), such Tax Indemnitee at any time actually realizes a reduction in any
Taxes for which neither the Lessee nor the Guarantor are required to indemnify
such Tax Indemnitee pursuant to this Section 13.4, which reduction in Taxes was
not taken into account in computing such payment by the Lessee and the Guarantor
to or for the account of such Tax Indemnitee or by such Tax Indemnitee to the
Lessee and the Guarantor, any such refund or reduction to be determined without
regard to Income Tax Savings, then such Tax Indemnitee shall promptly pay to the
Guarantor (xx) the amount of the net tax savings refund, together with the
amount of any interest received by such Tax Indemnitee on account of such refund
or (yy) an amount equal to such reduction in Taxes, as the case may be, in
either case together with an amount equal to any reduced Taxes payable by such
Tax Indemnitee as a result of such payment; provided that no such payment shall
be made so long as a Default or Event of Default shall have occurred and be
continuing, but shall be paid promptly after cure of such Default or Event of
Default. Notwithstanding the foregoing, no Tax Indemnitee shall be required to
make any payment to the Guarantor or the Lessee pursuant to this Section 13.4(c)
to the extent such payment would exceed, in the aggregate at any time, the
amount of all prior payments made by or on behalf of the Lessee and the
Guarantor to such Tax Indemnitee and/or its Affiliates pursuant to this Section
13.4 that gave rise to such refund or reduction in Taxes. Each Tax Indemnitee
agrees to take such actions as the Guarantor may reasonably request (provided,
in the reasonable good faith judgment of such Tax Indemnitee, such actions would
not result in an adverse effect on such Tax Indemnitee for which such Tax
Indemnitee is not entitled to indemnification from such Lessee and the
Guarantor) and to otherwise act in good faith to claim such refunds and other
available Tax benefits, and take such
65
other actions as may be reasonable to minimize any payment due from the Lessee
and the Guarantor pursuant to this Section 13.4 and to maximize the amount of
any Tax savings available to the Lessee and the Guarantor. The disallowance or
reduction of any refund or other Tax savings with respect to which a Tax
Indemnitee has made a payment to the Lessee under this Section 13.4(c) shall be
treated as a Tax for which the Lessee is obligated to indemnify such Tax
Indemnitee hereunder without regard to the exclusions set forth in the
definition of "Impositions" except the exclusions set forth in clauses (iv),
(v), (vii), (ix) and (xii) of such definition.
(d) Payments. Any Imposition indemnifiable under this Section 13.4
shall be paid directly when due to the applicable taxing authority if direct
payment is practicable and permitted. If direct payment to the applicable taxing
authority is not permitted or is otherwise not made, any amount payable to a Tax
Indemnitee pursuant to Section 13.4 shall be paid within thirty (30) days after
receipt of a written demand therefor from such Tax Indemnitee accompanied by a
written statement describing in reasonable detail the amount so payable, but not
before two (2) Business Days prior to the date that the relevant Taxes are due.
Any payments made pursuant to this Section 13.4 shall be made directly to such
Tax Indemnitee entitled thereto or the Guarantor, as the case may be, in
immediately available funds at such bank or to such account as specified by the
payee in written directions to the payor, or, if no such direction shall have
been given, by check of the payor payable to the order of the payee by certified
mail, postage prepaid at its address as set forth in Schedule I hereto. Upon the
request of any Tax Indemnitee with respect to a Tax that the Guarantor or the
Lessee is required to pay, the Guarantor or the Lessee, as the case may be,
shall furnish to such Tax Indemnitee the original or a certified copy of a
receipt for such Person's payment of such Tax or such other evidence of payment
as is reasonably acceptable to such Tax Indemnitee.
(e) Reports. In the case of any report, return or statement
required to be filed with respect to any Taxes that are subject to
indemnification under this Section 13.4 and of which the Guarantor or the Lessee
has knowledge, the Guarantor or the Lessee, as the case may be, shall promptly
notify such Tax Indemnitee of such requirement and, at the expense of the
Guarantor and the Lessee (i) if the Guarantor or the Lessee, as the case may be,
is permitted (unless otherwise requested by such Tax Indemnitee) by Applicable
Law, timely file such report, return or statement in its own name or (ii) if
such report, return or statement is required to be in the name of or filed by
such Tax Indemnitee or such Tax Indemnitee otherwise requests such report,
return or such statement for filing by such Tax Indemnitee in such manner as
shall be satisfactory to such Tax Indemnitee and send the same to such Tax
Indemnitee for filing no later than fifteen (15) days prior to the due date
therefor. In any case in which such Tax Indemnitee will file any such report,
return or statement, the Guarantor or the Lessee shall, upon written request of
such Tax Indemnitee, provide such Tax Indemnitee with such information as is
reasonably necessary to allow such Tax Indemnitee to file such report, return or
statement.
(f) Verification. At the request of the Guarantor of the Lessee,
the amount of any indemnity payment by the Lessee or the Guarantor or any
payment by a Tax Indemnitee to the Lessee or the Guarantor pursuant to this
Section 13.4 shall be verified and certified by an independent public accounting
firm mutually acceptable to the Lessee or the Guarantor and such Tax Indemnitee.
The costs of such verification shall be borne by the Lessee or the Guarantor
unless such verification shall result in an adjustment in favor of the Lessee or
the Guarantor in an amount greater than the lesser of (i) $10,000, and (ii) ten
percent (10%) of the payment as
66
computed by such Tax Indemnitee, in which case such fee shall be paid by such
Tax Indemnitee. In no event shall the Guarantor or the Lessee have the right to
review such Tax Indemnitee's tax returns or receive any other confidential
information from such Tax Indemnitee in connection with such verification. Any
information provided to such accountants by any Person shall be and remain the
exclusive property of such Person and shall be deemed by the parties to be (and
the accountants will confirm in writing that they will treat such information
as) the private, proprietary and confidential property of such Person, and no
Person other than such Person and the accountants shall be entitled thereto and
all such materials shall be returned to such Person. Such accounting firm shall
be requested to make its determination within thirty (30) days of the
Guarantor's or the Lessee's request for verifications and the computations of
the accounting firm shall be final, binding and conclusive upon the Guarantor,
the Lessee and such Tax Indemnitee absent manifest error. The parties agree that
the sole responsibility of the independent public accounting firm shall be to
verify the amount of a payment pursuant to the Operative Documents or in
connection with the Overall Transaction and that matters of interpretation of
the Operative Documents or the Overall Transaction are not within the scope of
the independent accounting firm's responsibilities.
(g) Tax Ownership. Each Tax Indemnitee represents and warrants
that except as actually required by law it will (i) not claim ownership of (or
any tax benefits, including depreciation, with respect to) the Property for any
income tax purposes, it being understood that the Lessee is and will remain the
owner of the Property leased under the Master Lease for such income tax purposes
and (ii) treat all Notes and all portions of the Equity Investment as
Indebtedness of the Lessee for federal income tax purposes; provided that this
sentence shall not preclude the Lessor from claiming ownership of, and any tax
benefits with respect to, the Property for periods beginning after (x) the
Property has been returned to the Lessor pursuant to the Lessee's exercise of
the Remarketing Option or (y) the Lessor has exercised remedies under Section 19
of the Master Lease and foreclosed or otherwise sold the Property pursuant to
such exercise. If, notwithstanding the income tax intentions of the parties as
set forth herein, any Tax Indemnitee actually receives any income tax
deductions, reductions in income tax or other income tax benefits (collectively,
"Income Tax Savings") as a result of any claim for, or recharacterization
requiring such party to take, any tax benefits attributable to ownership of the
Property for income tax purposes, such Tax Indemnitee shall pay to the
Guarantor, together with an amount equal to any reduced Taxes payable by such
Tax Indemnitee as a result of such payment, the amount of such Income Tax
Savings actually realized by such Tax Indemnitee (less the amount of any
anticipated increase in income tax which is payable as a result of such claim or
recharacterization), provided that the Guarantor and the Lessee shall agree to
reimburse such Tax Indemnitee for any subsequent increase in such Tax
Indemnitee's income taxes resulting from such claim or recharacterization not
taken into account in the payment made to the Guarantor, up to the net amount
paid to the Guarantor by each Tax Indemnitee and provided further, that no
Default or Event of Default shall have occurred and be continuing. The parties
agree that this Section 13.4(g) is intended to require a Tax Indemnitee to make
a payment to the Guarantor if and only if such Tax Indemnitee shall have
actually received any net unanticipated Income Tax Savings with respect to the
Property that would not have been received if such Tax Indemnitee had advanced
funds to the Lessee under an arrangement properly characterized for federal
income tax purposes as a loan secured by thy Property in an amount equal to such
Tax Indemnitee's portion of the Outstanding Lease Balance. Nothing in this
Section 13.4(g) shall be construed to require any Tax Indemnitee to take any
affirmative action to realize any Income Tax
67
Savings if in its sole discretion, exercised in good faith, such action may have
a material adverse effect on such Tax Indemnitee (including as a result of such
position being or being viewed as materially inconsistent with any other tax
position claimed by such Tax Indemnitee for the relevant period or periods).
(h) Structural Impositions and Prior Impositions. Notwithstanding
anything contained in any Operative Document to the contrary, the Lessee and the
Guarantor shall have no right, and the Lessor Parties (other than the New
Partners to the extent, and only to the extent, expressly set forth herein)
shall have no obligation, relating to Structural Impositions or Prior
Impositions imposed upon or with respect to any Indemnitee (other than the New
Partners to the extent, and only to the extent, expressly set forth herein)
pursuant to any provision of this Section 13.4 (including without limitation any
provision relating to contests, reimbursement or the filing of reports) or
otherwise; provided however, for purposes of this sentence, Structural
Impositions and Prior Impositions imposed with respect to the Lessor shall be
treated as imposed with respect to the New Partners to the extent that the
Lessor's rights inure to the benefit of the New Partners pursuant to Section
13.4(i). For the avoidance of doubt, nothing contained in this Section 13.4(h)
shall be construed to diminish any right to indemnity or otherwise of any Lessor
Party, or to relieve either the Lessee or the Guarantor of any indemnification
or other obligation.
(i) Lessor as Indemnitee. Notwithstanding anything contained in
any Operative Document to the contrary, to the extent that the Lessor shall be
an Indemnitee having rights arising under or otherwise relating to Structural
Impositions or Prior Impositions pursuant to Section 4.4 or 4.6 or this Section
13.4, such rights shall inure to the benefit of the Note Purchaser (and its
successors and assigns) or, with the Note Purchaser's consent (not to be
unreasonably withheld), the New Partners. The Lessee and the Guarantor shall
perform all obligations otherwise inuring to the benefit of the Lessor arising
under or relating to such provisions for the benefit of, or (if so directed) as
directed by, the Note Purchaser (and its successors and assigns) or the New
Partners, as applicable, and the Lessor shall otherwise take such actions (and
omit to take such actions) as shall be in the best interests of (or as directed
by) the Note Purchaser (and its successors and assigns) or the New Partners, as
applicable, in connection with their enjoyment of such rights.
Section 13.5 Indemnity Payments in Addition to Master Lease
Obligations. Each of the Lessee and the Guarantor acknowledges and agrees that
the obligations of the Lessee and the Guarantor to make indemnity payments under
this Article XIII are separate from, in addition to, and do not reduce (i) the
Lessee's obligations under the Master Lease and (ii) without duplication, the
indemnities provided in Article IV hereof. Each of the Lessee and the Guarantor
further acknowledges and agrees that the rights to indemnity contained in this
Article XIII are in addition to, and not in limitation of, any rights
(including, without limitation, rights to indemnity) contained in any Operative
Document or otherwise available at law or in equity.
68
ARTICLE XIV
AGENT; PLEDGED PROPERTY
Section 14.1 Appointment and Duties of the Agent.
(a) The Lessor Parties (excluding the Agent) hereby designate and
appoint KeyBank to act as the Agent under the Operative Documents, and such
parties hereby authorize the Agent to take such actions on their behalf under
the provisions of the Operative Documents and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of the
Operative Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
the Operative Documents, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein or in the other
Operative Documents, or any fiduciary relationship with the other Lessor Parties
and no implied covenants, functions or responsibilities shall be read into the
Operative Documents, or otherwise exist against the Agent.
(b) The Agent shall not exercise any rights or remedies under any
of the Operative Documents or give any consent or approve as satisfactory to it
any matters requiring such approval under any of the Operative Documents or
enter into any agreement amending, modifying, supplementing or waiving any
provision of any Operative Document unless it shall have been directed to do so
in writing by the requisite percentages required under the Operative Documents
or, in the absence of an express provision, by the Consenting Parties. The
Lessor and the Guarantor shall be entitled to assume, and rely on such
assumption, that the Agent will be in compliance with the preceding sentence at
all times during which this Participation Agreement and the other Operative
Documents are in effect.
(c) The Agent will prepare continuation statements for the
Financing Statements and the Precautionary Financing Statements. The costs of
such continuation statements shall be paid by the Guarantor.
(d) The Agent shall promptly notify the other Lessor Parties of
any communication it receives from a Lessee Party, and shall promptly provide
the other Lessor Parties with copies of any documents it receives from a Lessee
Party relating to the Overall Transactions.
(e) The Agent shall promptly notify the other Lessor Parties of
any communication relating to the Overall Transaction it receives from any other
Lessor Party, and shall promptly provide such other Lessor Parties with copies
of any documents it receives from a Lessee Party relating to the Overall
Transactions, in each case that it determines is material in its sole
discretion.
Section 14.2 Rights of the Agent.
(a) The Agent may execute any of its duties pursuant to the
Operative Document by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
69
(b) Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates shall (i) be liable for any action
lawfully taken or omitted to be taken by it under or in connection with any
Operative Document or this Participation Agreement except for its gross
negligence or willful misconduct, or (ii) be responsible in any manner to any
Transaction Party for any recitals, statements, representations or warranties
made by the Lessee or the Guarantor or any representative thereof contained in
any Operative Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent or in
connection with, any Operative Document or this Participation Agreement or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of the Operative Documents or this Participation Agreement or for any failure of
the Guarantor or the Lessee to perform their obligations thereunder. Except to
the extent expressly provided in this Participation Agreement or any other
Operative Document to which the Agent is a party, the Agent shall not be under
any obligation to any Transaction Party to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, any Operative Document or this Participation Agreement, or to inspect the
properties, books or records of the Lessee or the Guarantor.
(c) The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, 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, independent accountants
and other experts selected by the Agent. In connection with any request of a
Transaction Party, the Agent shall be fully justified in failing or refusing to
take action under any Operative Document or this Participation Agreement (i) if
such action would, in the reasonable opinion of the Agent, be contrary to law or
the terms of this Participation Agreement or the other Operative Documents, (ii)
if such action is not specifically provided for in such Operative Document or
this Participation Agreement and it shall not have received the consent or
concurrence it deems appropriate or, (iii) if, in connection with taking of any
such action that would constitute an exercise of remedies under such Operative
Document or this Participation Agreement, it shall not first be indemnified to
its satisfaction 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
any Operative Document or this Participation Agreement in accordance with any
such request, and such request and any action taken or failure to act pursuant
thereto shall be binding upon the other Transaction Parties.
(d) The Agent shall not be deemed to have actual, constructive, direct
or indirect knowledge or notice of the occurrence of any Event of Default unless
and until it has received a written notice or a certificate from a Transaction
Party stating that an Event of Default has occurred under the Operative
Documents. The Agent shall have no obligation whatsoever either prior to or
after receiving such notice or certificate to inquire whether an Event of
Default has in fact occurred and shall be entitled to rely conclusively, and
shall be fully protected in so relying, on any such notice or certificates
furnished to it. No provision of this Participation Agreement or any other
Operative Document shall require the Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder or under any Operative Document or in the exercise of any of its
rights or powers, if it shall have
70
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
(e) To the extent that such expenses shall not be reimbursed by the
Lessee or the Guarantor where so required by the terms of the Operative
Documents, the Agent shall be entitled to reimbursement from the other Lessor
Parties (other than the Note Purchaser, the Conduit Agent and the Program
Administrator) for reasonable out-of-pocket expenses, including the reasonable
fees and expenses of its counsel (and any local counsel) and of any experts and
agents, which the Agent may reasonably incur in connection with (i) the
administration of this Participation Agreement and the other Operative
Documents, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, the Property or the Related Security, or (iii) the
exercise or enforcement (whether through negotiations, legal proceedings or
otherwise) of any of the rights of the Agent or the other Transaction Parties
hereunder or under the other Operative Documents.
(f) Notwithstanding any provision herein or in any other Operative
Document to the contrary, with the exception of Section 14.2(b), the Agent shall
not be entitled to any payment or collection from any other Lessor Parties, but
for all fees, expenses and indemnities irrevocably agrees to look solely and
exclusively to the Lessee and the Guarantor.
Section 14.3 Lack of Reliance on the Agent. Each of the Transaction
Parties represents to the Agent that it has, independently and without reliance
upon the Agent and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into the
transactions contemplated by the Operative Documents. Each such party also
represents that it will, independently and without reliance upon the Agent, and
based on such documents and information as it shall deem appropriate at the time
continue to make its own credit decisions with respect to this Participation
Agreement or any of the other Operative Documents.
Section 14.4 Resignation of the Agent. The Agent may resign as Agent upon
thirty (30) days' notice to the Transaction Parties, with any such resignation
to become effective only upon the appointment of a successor Agent hereunder. If
the Agent shall resign as Agent, the Note Purchaser shall appoint a successor
Agent, subject to the consent of the Guarantor if no Event of Default exists
(which consent shall not be unreasonably withheld) and the consent of the
Liquidity Banks. If no successor Agent shall have been so appointed within
thirty (30) days, the resigning Agent or any Lessor Party may petition any court
of competent jurisdiction for the appointment of a new Agent. Upon the
appointment of a successor agent pursuant to this Section 14.4, such successor
agent shall succeed to the rights, powers and duties of the "Agent," and the
term "Agent" shall mean such successor agent, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent or any other Lessor Parties. After any
retiring Agent's resignation hereunder as Agent, the provisions of this
Participation Agreement shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent.
Section 14.5 Successor Agent by Merger. If the Agent consolidates with,
merges or converts into, or transfers substantially all of its assets to another
corporation, the resulting, surviving or transferee corporation, without any
further action, shall be the successor Agent.
71
Section 14.6 Eligibility of the Agent The Agent shall at all times have a
combined capital and surplus of at least $100,000,000 (or a combined capital and
surplus in excess of $50,000,000 and the obligations of which, whether or not in
existence or hereafter incurred, are fully and unconditionally guaranteed by a
corporation organized and doing business under the laws of the United States,
any state or territory thereof or the District of Columbia that has a combined
capital and surplus of at least $100,000,000). If such corporation publishes
reports of condition at least annually, pursuant to law or to requirements of
Federal, State, Territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section 14.6, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of conditions so published. The
Agent shall not be an Affiliate of the Guarantor or the Lessee.
Section 14.7 Collection of Payments Notwithstanding anything in this
Participation Agreement, the Master Lease or the other Operative Documents to
the contrary, all payments under this Participation Agreement, the Master Lease
or under the other Operative Documents, including but not limited to, payments
of Basic Rent, Supplemental Rent, interest (if any) on the Lessee Loans,
Purchase Option Price, Remarketing Proceeds or Maximum Recourse Amount by the
Lessee or the Guarantor under this Participation Agreement, the Master Lease or
the other Operative Documents shall be made directly to the Agent and not the
Lessor. The Agent shall immediately remit such amounts in accordance with the
terms of Article XI of this Participation Agreement or, to the extent such funds
cannot be remitted immediately, shall deposit such funds into an Eligible
Account for distribution as soon as possible in accordance with the terms of
Article XI of this Participation Agreement. Unless specifically provided herein
or in any other Operative Documents that such payment is to be made directly to
a particular Lessor Party or any other Person, upon payment by the Lessee (or
the Guarantor) to the Agent of an amount required to be paid under the Operative
Documents, the Lessee (or the Guarantor) shall be deemed to have satisfied its
obligation with respect to such payment and neither the Lessee nor the Guarantor
shall have any liability or responsibility for the Agent's failure or delay in
remitting such amount to the Person or Persons entitled thereto.
Section 14.8 Pledged Property
(a) Grant of Security Interest in Pledged Property. In furtherance
and not in limitation of any provisions of the Conveyance Instruments, the
Lessor does hereby grant, bargain, sell, convey, mortgage, assign, transfer and
warrant to the Agent under the Operative Documents for the benefit of the Lessor
Parties (other than the New Partners and the Lessor), as their respective
interests may appear, a continuing first priority security interest in and to
all right, title and interest of the Lessor not otherwise conveyed to the Agent
pursuant to the Conveyance Instruments executed by the Lessor in favor of the
Agent for the benefit of the Lessor Parties (other than the New Partners and the
Lessor), whether now owned, or hereafter acquired, in and to the Collateral of
the type described in clause (b) of the definition of "Collateral", including,
without limitation, all right, title and interest in and to any accounts
maintained from time to time by the Agent in which the proceeds of any payments
made to or for the account of the Lessor may be deposited from time to time
(such property, rights and interests being hereinafter collectively called the
"Pledged Property") to secure the repayment of the Secured Obligations.
72
(b) Duty of Care. The Agent shall exercise reasonable care in the
custody and preservation of Pledged Property in its actual possession. At any
time and from time to time, the Agent may at its option file in any
jurisdiction, at the expense of the Lessee and the Guarantor, one or more
financing, continuation and similar statements, and any amendments thereto, with
or (to the extent permitted by Applicable Law) without the signature of the
Lessor, the Lessee or the Guarantor, as the case may be, covering any or all of
the Pledged Property. Each of the Lessor, the Lessee and the Guarantor hereby
agrees to join with the Agent at the Agent's request in executing any such
statements and amendments.
ARTICLE XV
MISCELLANEOUS
Section 15.1 Survival of Agreements. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the
Operative Documents, and the parties' obligations under any and all thereof,
shall survive the execution and delivery of this Participation Agreement, the
transfer of the Partnership Interests to the New Partners, the execution and
delivery by the Lessee and the Lessor of Amendment No.2 and any disposition of
any interest of the Lessor in the Property 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. The indemnities of the parties provided for in
the Operative Documents shall survive the termination of any Operative
Documents.
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. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon any
Transaction Party under this Participation Agreement or the other Operative
Documents shall be in writing and faxed, mailed or delivered, if to such Person,
at its respective facsimile number or address set forth on Schedule I hereto
specified beneath the heading "Address for Notices" under the name of such
Transaction Party (or to such other facsimile number or address for any party as
indicated in any notice given by that party to the other parties). All such
notices and communications shall be effective (a) when sent by Federal Express
or other overnight service of recognized standing, on the Business Day following
the deposit with such service; (b) when mailed, first class postage prepaid and
addressed as aforesaid through the United States Postal Service, upon receipt;
(c) when delivered by hand, upon delivery; and (d) when faxed, upon confirmation
of receipt; provided, however, that any Funding Notice, Purchase Notice or
Remarketing Notice shall not be effective until received by the Lessor or the
Agent. Each Funding Notice, Purchase Notice and Remarketing Notice shall be
given by the Lessee to the Agent's office located at its address referred to
above during its normal business hours; provided, however, that any such notice
received by the Agent on any Business Day after the time specified in the
applicable Operative
73
Document for the giving of such notice (or, if no such time is specified, after
2:00 p.m.) shall be deemed received by the Agent on the next Business Day. In
any case where this Participation Agreement authorizes notices, requests,
demands or other communications by the Lessee or the Guarantor to any Lessor
Party to be made by telephone or facsimile, any Lessor Party may conclusively
presume that anyone purporting to be a person designated in any incumbency
certificate or other similar document received by such Lessor Party is such a
person.
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. Delivery of an executed signature
page hereto by facsimile or other electronic means shall be equally effective as
delivery of an original signature page.
Section 15.5 Amendments. Except as otherwise provided pursuant to Section
11.1 hereof, any term, covenant, agreement or condition of this Participation
Agreement or any other Operative Document may be amended or waived if such
amendment or waiver is in writing and is signed by the Lessor, the Lessee, the
New Partners (if such New Partners are a party to such Operative Document), the
Guarantor (if the Guarantor is a party to such Operative Document) and the
Consenting Parties; provided, however that:
(a) any amendment, waiver or consent which (i) increases the
Aggregate Commitment Amount, the Aggregate Tranche B Commitment, the Aggregate
Note Purchase Commitment or the Aggregate Equity Commitment, (ii) extends the
Maturity Date, (iii) reduces the amount of Basic Rent or any other amounts to be
paid by the Lessee under the Master Lease or any other Operative Documents or
any fees or other amounts payable for the account of the Lessor Parties
hereunder or thereunder, (iv) postpones any date scheduled for any payment of
Basic Rent or any other amounts or any fees or other amounts payable for the
account of the Lessor Parties hereunder or thereunder, (v) amends Article XI or
this Section 15.5, (vi) amends the definition of , `Consenting Parties", (vii)
releases the Lessor's interest in any material part of the Property or in any
Lien thereon in favor of the Lessor Parties, (viii) releases the Lessee or the
Guarantor from its indemnity obligations under the Operative Documents, or (ix)
releases the Guarantor from its obligations under the Guaranty, must be in
writing and signed or approved in writing by all of the Lessor Parties (other
than each individual New Partner whose approval shall be evidenced by the
approval of the Lessor);
(b) any amendment, waiver or consent which increases or decreases the
Commitment of any Lessor Party must be in writing and signed by such Lessor
Party;
(c) any amendment, waiver or consent which affects the rights or
obligations of the Agent, any Tranche B Bank or any Liquidity Bank must be in
writing and signed by the Agent, such Tranche B Bank or such Liquidity Bank, as
applicable;
(d) any amendment, waiver or consent which affects the rights
or obligations of the Note Purchaser must be in writing and signed by the Note
Purchaser;
(e) any amendment, waiver or consent which affects the rights or
obligations of the New Partners must be in writing and signed by each such New
Partner; and
74
(f) any amendment, waiver or consent which terminates this
Participation Agreement or any other Operative Document (except upon payment in
full of the Outstanding Lease Balance and all other Obligations or the effective
exercise and consummation of the Remarketing Option with respect to the Property
in accordance with Section 12 of the Master Lease and payment in full of all
amounts due in accordance therewith), must be in writing and signed by each
Transaction Party.
Notwithstanding the foregoing or any other provision to the contrary
contained in this Participation Agreement or the other Operative Documents, the
parties hereto acknowledge and agree that the aggregate "Commitments" (as
defined in the Liquidity Agreement) of the Liquidity Banks may be increased
without the consent of the Transaction Parties (other than the Note Purchaser)
provided that (a) the Note Purchaser agrees to such amendments as may be
necessary to the Liquidity Documents in order to allow for such increase, (b)
the maximum aggregate "Commitments" of the Liquidity Banks after giving effect
to any such increase does not exceed $119,925,000 plus all accrued discount on
all related Commercial Paper (as such amount may be adjusted pursuant to the
Liquidity Agreement) less the aggregate principal amount of outstanding
Percentage Interest purchased by the Liquidity Banks pursuant to the Asset
Purchase Agreement and (c) no allocated portion (restricted to the dollar
amount) of the "Commitment" of any Liquidity Bank may be increased without the
prior express written consent of such Liquidity Bank.
Section 15.6 Headings, etc. The Table of Contents and headings of the
various Articles and Sections of this Participation Agreement are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.
Section 15.7 Parties in Interest. Except as expressly provided herein,
none of the provisions of this Participation Agreement is intended for the
benefit of any Person except the Transaction Parties. Neither the Lessee nor the
Guarantor shall assign or transfer any of its rights or obligations under the
Operative Documents without the prior written consent of the Transaction
Parties. Except as provided in Section 12.1, the Lessor shall not assign or
transfer any of its rights or obligations under the Operative Documents without
the prior written consent of the Consenting Parties and, so long as no Default
or Event of Default shall have occurred and be continuing, the Guarantor (which
consent, in each case, shall not be unreasonably withheld).
Section 15.8 Governing Law. THIS PARTICIPATION AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF CALIFORNIA (EXCLUDING ANY
CONFLICT -OF-LAW OR CHOICE-OF-LA W 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.
75
Section 15.10 Liabi1ity Limited. None of the Lessor Parties shall have any
obligation to any other party hereto with respect to transactions contemplated
by the Operative Documents, except those obligations of such Person expressly
set forth in the Operative Documents or except as set forth in the instruments
delivered in connection therewith, and none of the Lessor Parties 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 and the Guarantor, 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 preserve the security interests and liens (and the
priority thereof) intended to be created pursuant to this Participation
Agreement, the other Operative Documents, and the transactions thereunder
(including 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 and the Guarantor, upon the written request from any other party to this
Participation Agreement, shall take such action as may be necessary (including
any action specified in the preceding sentence), as so requested, in order to
maintain and protect all security interests provided for hereunder or under any
other Operative Document. Expenses relating to any action to be taken by the
Guarantor or the Lessee pursuant to the preceding sentence shall be the
responsibility of the Guarantor and the Lessee; provided, however, that expenses
relating to any such action with respect to any Lessor Lien shall be paid (or be
promptly reimbursed to the Guarantor or the Lessee, as applicable) by the party
requesting such action.
Section 15.12 Submission to Jurisdiction. The Lessee and the Guarantor
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Northern District of California for purposes of all legal
proceedings arising out of or relating to the Operative Documents or the
transactions contemplated hereby. The Lessee and the Guarantor each irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
Section 15.13 Waiver of Jury Trial. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS PARTICIPATION AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
ANY OF THE PARTIES HERETO. THE PARTIES HERETO HEREBY AGREE THAT THEY WILL NOT
SEEK TO CONSOLIDATE ANY SUCH LITIGATION WITH ANY OTHER LITIGATION IN WHICH A
JURY TRIAL HAS NOT OR CANNOT BE WAIVED. THE PROVISIONS OF THIS SECTION 15.13
HAVE BEEN FULLY NEGOTIATED BY THE PARTIES HERETO AND SHALL BE SUBJECT TO NO
EXCEPTIONS. EACH OF THE LESSEE AND THE GUARANTOR ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH
OTHER PROVISION OF EACH OTHER OPERATIVE DOCUMENT TO WHICH IT IS A PARTY)
76
AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LESSOR PARTIES ENTERING
INTO THIS P ARTICIP ATION AGREEMENT AND EACH SUCH OTHER OPERATIVE DOCUMENT.
Section 15.14 No Bankruptcy Petition Against the Note Purchaser. Each
Transaction Party hereby covenants and agrees, on behalf of itself and each of
its Affiliates, with the Note Purchaser that, prior to the date which is one
year and one day after the payment in full of all commercial paper or other
Indebtedness issued by the Note Purchaser, it will not institute against, or
join any other Person in instituting against, the Note Purchaser any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceedings under the law of the United States or any state of the
United States.
Section 15.15 Limited Recourse to the New Partners, the Note Purchaser and
the Lessor.
(a) Notwithstanding anything to the contrary contained in this
Participation Agreement or any other Operative Document, the obligations of the
Note Purchaser under this Participation Agreement and the other Operative
Documents are solely the corporate obligations of the Note Purchaser and, with
respect to claims made by any other Lessor Party, shall be payable solely to the
extent of funds or property received from the Lessee and/or the Guarantor in
accordance with this Participation Agreement and the other Operative Documents;
provided, however, that the foregoing obligations shall constitute a claim (as
defined in Section 101 of the Bankruptcy Code) upon the Note Purchaser only to
the extent of such funds or property actually received by the Note Purchaser and
not required to repay Commercial Paper. No recourse shall be had for the payment
of any amount owing hereunder or any other obligation or claim arising out of or
based upon this Participation Agreement or any other Operative Document against
any present or former stockholder, manager, member, employee or officer of the
Note Purchaser or, unless such obligation or claim arises from the gross
negligence or willful misconduct of the Note Purchaser, in such capacity or any
employee, officer or director thereof; provided, however, that the foregoing
shall not relieve any such person or entity from any liability they might
otherwise have as a result of fraudulent actions or omissions taken by them.
(b) Notwithstanding anything to the contrary contained in this
Participation Agreement or any other Operative Document, the obligations of the
New Partners and the Lessor under this Participation Agreement and the other
Operative Documents (including, without limitation, with respect to the Lessor,
the Notes) are solely the corporate obligations of the Lessor and the New
Partners, respectively, with respect to claims made by any other Lessor Party,
shall be payable solely to the extent of funds or property received from the
Lessee and/or the Guarantor in accordance with this Participation Agreement and
the other Operative Documents or advanced or to be advanced pursuant to the
Equity Investment; provided, however, that the foregoing obligations shall
constitute a claim (as defined in Section 101 of the Bankruptcy Code) upon the
New Partners or the Lessor (as applicable) only to the extent of such funds or
property actually received by the New Partners or the Lessor (as applicable) and
not required to repay Notes. No recourse shall be had for the payment of any
amount owing hereunder or any other obligation or claim arising out of or based
upon this Participation Agreement or any other Operative Document against any
present or former stockholder, manager, member, employee or officer of the New
Partners or Lessor or, unless such obligation or claim arises from the gross
negligence or willful misconduct of such New Partner or the
77
Lessor (as applicable), in such capacity or any employee, officer or director
thereof; provided, however, that the foregoing shall not relieve any such person
or entity from any liability they might otherwise have as a result of fraudulent
actions or omissions taken by them.
(c) Each Transaction Party agrees that neither the Program
Administrator nor the Conduit Agent shall have any liability hereunder as the
Program Administrator or the Conduit Agent, as the case may be, for the Note
Purchaser or otherwise following its ceasing to act as Program Administrator or
the Conduit Agent for the Note Purchaser.
Section 15.16 Confidentiality. No Lessor Party shall disclose to any
Person any information with respect to the Guarantor or the Lessee which is
furnished pursuant to this Participation Agreement or under any other Operative
Document, except that any Lessor Party may disclose any such information (a) to
its own directors, officers, employees, auditors, counsel and other advisors and
to its Affiliates; (b) to any other Lessor Party; (c) which is otherwise
available to the public; (d) if required or appropriate in any report, statement
or testimony submitted to any Governmental Authority having or claiming to have
jurisdiction over such Lessor Party; (e) if required in response to any summons
or subpoena; (f) in connection with any litigation relating to the Operative
Documents or the transactions contemplated thereby; (g) to comply with any
Requirement of Law applicable to such Lessor Party; (h) to any assignee,
participant or any prospective assignee or participant, provided that. such
Person agrees to be bound by this Section 15.16; or (i) otherwise with the prior
consent of the Guarantor or the Lessee; provided, however, that any disclosure
made in violation of this Participation Agreement shall not affect the
obligations of the Guarantor or the Lessee under this Participation Agreement
and the other Operative Documents.
Section 15.17 Renewal of Commitment under the Liquidity Agreement. The
parties hereto acknowledge and agree that the Agent (and not the "Issuer", the
"Administrator and Program Collateral Agent" or the "Administrative Agent" under
the Liquidity Agreement) is responsible for Liquidity Bank renewals under the
Liquidity Agreement.
Section 15.18 Tax Representation: Tax Forms.
(a) Each Lessor Party represents that, except for any withholding of
U.S. federal income tax which results from the adoption of or a change in
applicable law, regulation or, in each case, the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) (including any statute, treaty, ruling or regulation by a governmental,
judicial or taxing authority), with respect to Indebtedness of the Lessee or any
other party to the Operative Documents for federal income tax purposes (and
assuming that the payments of (x) Basic Rent and (y) Purchase Option Price,
Outstanding Lease Balance or Maximum Recourse Amount, as the case may be, are
treated for federal income tax purposes as payments of interest and principal,
respectively), such Lessor Party is entitled to receive any payments to be made
to it by the Lessee or any other party to the Operative Documents without the
withholding of any U.S. federal income tax and will furnish to the Agent upon
the request of the Lessee such certifications, statements and other documents as
are reasonably requested by the Lessee to evidence such Lessor Party's exemption
from the withholding of any U.S. federal income tax or to enable the Lessee to
comply with any applicable laws or regulations relating thereto.
78
(b) Without limiting the effect of the foregoing Section 15.18(a), if
any Lessor Party is not created or organized under the laws of the United States
or any state or political subdivision thereof, such Lessor Party will furnish to
the Agent upon the request of the Lessee, to the extent required for U.S.
federal income tax purposes, Internal Revenue Service Form W-8 BEN or Form W -8
ECI or any subsequent versions of such forms or successors thereto as evidence
of such Lessor Party's complete exemption from the withholding of U.S. federal
income tax with respect to indebtedness of the Lessee for federal income tax
purposes. Such forms shall be delivered by such Lessor Party (i) on or before
the date such Lessor Party becomes a party to any of the Operative Documents and
promptly before the expiration, obsolescence or invalidity of any form
previously delivered by such Lessor Party and (ii) before or promptly after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to the Lessee pursuant to this Section 15.18, unless, in the
case of either clause (i) or (ii), as a result of the adoption of or a change in
applicable law, regulation or, in each case, the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) (including any statute, treaty, ruling or regulation by a governmental,
judicial or taxing authority), such Lessor Party is not entitled to provide such
a form. The Agent and the Lessee shall be entitled to rely on such forms in its
possession until receipt of any revised or successor form pursuant to the
preceding sentence.
(c) For any period with respect to which any Lessor Party is required
under subsection (a) or (b) above to furnish the Agent with the appropriate
forms described in such subsections but has failed to do so (other than if such
failure is due to the adoption of or a change in applicable law as described in
subsection (a) or (b) above), such Lessor Party shall not be entitled to any
indemnification with respect to Impositions under Section 13.4 hereof,
additional payments with respect to increased costs under Section 4.4 hereof, or
additional payments with respect to Other Taxes under Section 4.6 hereof to the
extent that such Impositions, increased costs or Other Taxes are imposed as a
result of such failure; provided, however, that such limitation on
indemnification shall not apply to Structural Impositions or Prior Impositions,
and this Section 15.18 shall not otherwise be construed to limit any right to
indemnification of any Lessor Party relating to Structural Impositions or Prior
Impositions under any Operative Document or in connection with the Overall
Transaction.
ARTICLE XVI
RELATIONSHIP BETWEEN MASTER LEASE AND OTHER OPERATIVE DOCUMENTS
Section 16.1 Conflicts with Master Lease in General. The parties hereto
acknowledge and agree that in the event there is deemed to be any conflict or
ambiguity between the terms and provisions hereof and in the other Operative
Documents (other than the Master Lease) and the terms and provisions of the
Master Lease, the terms and provisions hereof and/or such other Operative
Documents shall control.
Section 16.2 Specific Provisions of the Master Lease. Without limiting the
generality of the foregoing Section 16.1, with respect to certain terms and
provisions of the Master Lease the parties hereto acknowledge and agree as
follows:
79
(a) The following terms as defined in Section 1 of the Master Lease
are no longer applicable and, to the extent such terms are otherwise defined in
Appendix A, such terms are hereby replaced with the corresponding defined term
set forth in Appendix A (or such other terms as noted below):
(i) "Agreement for Lease";
(ii) "Aircraft";
(iii) "Consent";
(iv) "Consolidated Fixed Charges";
(v) "EBITDAR";
(vi) "Engine";
(vii) "Equipment"
(viii) "Fixed Charge Coverage Ratio";
(ix) "Ground Lease";
(x) "Implied Senior Debt Rating";
(xi) "Indebtedness";
(xii) "Initial Term";
(xiii) "Lien";
(xiv) "Mortgageable Ground Lease";
(xv) "Permitted Liens";
(xvi) "Reconciliation Amount";
(xvii) "Responsible Officer";
(xviii) "Tangible Net Worth"; and
(xix) "Unit Leasing Record";
provided, however, that the terms "Xxxxxxx", "Xxxxxxx Leasing" and "Xxxxxxx
Xxxxx" as used in the Master Lease shall be interpreted to refer to "Agent"
where the context so requires.
(b) The representations, warranties and agreements of the Lessee
contained in Section 2 of the Master Lease are no longer applicable, shall be
disregarded, and are hereby replaced with the provisions set forth in Article
VII hereof.
(c) The covenants and agreements (if any) of the Lessor contained in
Section 3 of the Master Lease providing, inter alia, that the Lessor lease to
the Lessee any property or equipment, when and as the Lessee has need of such
property or equipment shall be construed to only require that the Lessor lease
to the Lessee the Property currently subject to the Master Lease.
(d) Sections 5(a), (b), (c) and (d) of the Master Lease are no longer
applicable and shall be disregarded.
(e) Section 8(i) of the Master Lease is no longer applicable and
shall be disregarded.
(f) Section 9(f) of the Master Lease is no longer applicable and
shall be disregarded.
80
(g) Sections 10 (a), (b), (d) and (e) of the Master Lease are no
longer applicable and shall be disregarded
(h) Sections 10(g) and (h) of the Master Lease are no longer
applicable, shall be disregarded, and are hereby replaced with the following
provisions:
(i) Risk of Loss, Damage or Destruction During the Lease Term or
Following the Occurrence and Continuance of a Default or Event of Default or To
the Extent Arising as a Result of Any of the Lessee's Actions or Failures To
Act. At all times during the Lease Term, the risk of loss of or decrease in the
enjoyment and beneficial use of the Property as a result of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars or
other acts of God, taking, destruction, confiscation, requisition or
commandeering, partial or complete, of or to the Improvements and any part
thereof, however caused or occasioned, shall be borne by the Lessee until the
Property has been returned to the Lessor in accordance with the provisions of
the Master Lease or has been purchased by the Lessee or another Person in
accordance with the provisions of the Master Lease. The Lessee agrees that no
occurrence specified in the preceding sentencing shall impair, in whole or in
part, any obligation of the Lessee hereunder or under the Master Lease,
including the obligation to pay Basic Rent and Supplemental Rent.
(ii) Casualty and Condemnation.
(A) Subject to the provisions of this Section 16.2(h),
including, without limitation, the second paragraph of this subclause
(ii)(A), if all or a portion of the Property is damaged or destroyed
in whole or in part by a Casualty (other than a Casualty constituting
an Event of Loss), any insurance proceeds under the Lessee's policies
payable with respect to such Casualty shall be paid directly to the
Lessee (subject to the provisions of Section 10 of the Master Lease),
or if received by any of the Lessor Parties, shall be paid over to
the Lessee, for the reconstruction, refurbishment and for repair of
the Property and if the use, access, occupancy, easement rights or
title to the Property or any part thereof is the subject of a
Condemnation (other than a Condemnation constituting an Event of
Loss), then any award or compensation relating thereto shall be paid
to the Lessee. All amounts held by the Lessor or any other Lessor
Party on account of any award, compensation or insurance proceeds
either paid directly to any Lessor Party or turned over to any Lessor
Party, in each case in accordance with the preceding sentence, shall
(in the absence of any Default or Event of Default) be paid to the
Lessee for the repair of damage caused by such Casualty or
Condemnation in accordance with subclause (ii)(D) of this Section
16.2(h).
Notwithstanding the foregoing, if any Default, Event of
Default, Acceleration Event or Unmatured Acceleration Event shall
have occurred and be continuing, any award, compensation or insurance
proceeds described above shall be paid directly to the Agent or, if
received by the Lessee, shall be held in trust for the Agent and
shall be paid over by the Lessee to the Agent to be distributed by
the Agent in accordance with the relevant provisions of Article XI
hereof.
81
Furthermore, if any Default shall have occurred and be continuing, any such
award, compensation or insurance proceeds shall be paid directly to the Agent
or, if received by the Lessee, shall be held in trust by the Lessee for the
benefit of the Agent and shall be paid to the Agent for deposit in an Eligible
Account until (i) such Default has been cured, in which case such money shall be
paid to the Lessee for the uses described in the first sentence of this
subclause (ii)(A} or (ii) such Default becomes an Event of Default, in which
case, such money shall be distributed in accordance with the preceding sentence.
(B) The Lessee may appear in any proceeding or action to
negotiate, prosecute, adjust or appeal any claim for any award,
compensation or insurance payment on account of any such Casualty or
Condemnation and shall pay all expenses thereof. At the Lessee's
reasonable request, and at the Lessee's sole cost and expense, the
Lessor Parties shall participate in any such proceeding, action,
negotiation, prosecution or adjustment. The Lessor and the Lessee
agree that this Section 16.2(h) and the Master Lease shall control
the rights of the Lessor and the Lessee in and to any such award or
compensation payment.
(C) If the Lessor or the Lessee shall receive notice of a
Casualty for which the reasonable anticipated cost of restoration
equals or exceeds $1,000,000 (whether individually or in the
aggregate with all other Improvements affected by the event giving
rise to such Casualty) or of an actual, pending or threatened
Condemnation of any Land or Improvements or any interest therein
(other than an interest which is not material), the Lessor or the
Lessee, as the case may be, shall give notice thereof to the other
party and to Agent who will in turn notify the other Lessor Parties
promptly after the receipt of such notice.
(D) If neither the Lessor nor any Lessor Party exercises its
termination rights pursuant to Section 14 of the Master Lease
following an Event of Loss, the Master Lease shall continue in full
force and effect, the Lessee shall, at its sole cost and expense
(and, without limitation, if any award, compensation or insurance
payment is not sufficient to restore such affected Improvement in
accordance with this subclause (ii)(D), the Lessee shall pay the
shortfall), promptly and diligently repair any damage to the Property
caused by such Casualty or Condemnation in conformity with the
requirements of Section 9 of the Master Lease, so as to restore the
Property to at least the same or similar condition, operation,
function and value as existed immediately prior to such Casualty or
Condemnation with such Modifications as the Lessee may elect in
accordance with Section 9 of the Master Lease. In such event, title
to such Property shall remain with the Lessor subject to the terms of
the Master Lease. Upon completion of such restoration, the Lessee
shall furnish the Lessor an architect's certificate of substantial
completion or a Responsible Officer's Certificate confirming that
such restoration has been completed pursuant to the Master Lease.
82
(E) In no event shall a Casualty or Condemnation affect the
Lessee's obligations to pay Basic Rent or Supplemental Rent pursuant
to Section 7 of the Master Lease or otherwise to perform its
obligations and pay any amounts due on the Financing Termination Date
or pursuant to Sections 12, 13 and 18 of the Master Lease.
(F) Any excess Casualty Proceeds or Condemnation Proceeds
received by the Lessor or any of the other Lessor Parties in respect
of a Casualty or Condemnation constituting an Event of Loss with
respect to the Property shall be turned over to the Agent for
application in accordance with the provisions of Section 11.5 hereof;
provided, however, if the Lessee elects to exercise its right to
purchase the Property pursuant to Section 14 of the Master Lease,
then such excess proceeds shall be not be applied pursuant to Section
11.5 hereof and instead, be returned to the Lessee upon payment of
the full purchase price for the Property pursuant to Section 14 of
the Master Lease.
(i) The covenants and agreements of the Lessee with respect to
indemnification, etc. contained in Section 11 of the Master Lease with respect
to Claims for events or occurrences arising after the Documentation Date are no
longer applicable, shall be disregarded, and are hereby replaced with the
provisions set forth in Article XIII hereof.
(j) With respect to the provisions set forth in Section 12 of the
Master Lease, the Lessee and the Lessor hereby acknowledge and agree that unless
the KeyBank Financing Term is extended, failure by the Lessee to deliver a
Remarketing Notice or Purchase Notice on or prior to the date occurring three
hundred and sixty-four (364) days prior to the expiration of the KeyBank
Financing Term shall be deemed to be an election by the Lessee, without
further act thereby, of the Purchase Option described in Section 13.1(a) of the
Master Lease, with such purchase to be consummated on the Financing Termination
Date.
(k) Clauses (i) through (iii) of Section 14(a) of the Master Lease
are no longer applicable and shall be disregarded.
(1) Section 15 of the Master Lease is no longer applicable, shall be
disregarded, and is hereby replaced with the provisions of clauses (i) and (ii)
of Section 16.2(h) hereof.
(m)Sections 17(b), (c) and (d) of the Master Lease are no longer
applicable and shall be disregarded.
(n) All references to "Equipment" or "Unit of Equipment" contained in
the Events of Default set forth in Section 18 of the Master Lease are no longer
applicable and shall be disregarded.
(o) Section 20 of the Master Lease is no longer applicable and shall
be disregarded.
(p) Section 21 of the Master Lease is no longer applicable, shall be
disregarded, and is hereby replaced with the provisions set forth in Article XII
hereof.
83
(q) Section 26 of the Master Lease is no longer applicable, shall be
disregarded, and is hereby replaced with the provisions set forth in Section
8.1(d) hereof.
(r) Section 29 of the Master Lease is no longer applicable and shall
be disregarded.
(s) Section 30(i) of the Master Lease is no longer applicable and
shall be disregarded.
(t) Exhibits Band D of the Master Lease are no longer applicable and
shall be disregarded.
[Signature Page Follows]
84
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.
ELECTRONIC ARTS REDWOOD, INC.
as the Lessee
By: /s/ Xxxxxx Xxxx
---------------
Name : Xxxxxx Xxxx
Title: Chief Financial Officer
85
ELECTRONIC ARTS, INC.,
as the Guarantor
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President - Finance
86
FLATIRONS FUNDING, LIMITED
PARTNERSHIP, as the Lessor
By:____________________________________
SELCO REDWOOD, LLC, its General Partner
By:____________________________________
SELCO Service Corporation, an
Ohio corporation doing business
in California as Ohio SELCO
Service Corporation, its
sole member
By: /s/ Xxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
SELCO SERVICE CORPORATI0N, doing business in California as Ohio SELCO Service
Corporation, as a New Partner
By: /s/ Xxxxxx Xxxxx
------------------------------------
Name: Xxxxxx Xxxxx
Title: Vice President
SELCO REDWOOD, LLC, as a New Partner
By:____________________________________
SELCO Service Corporation, an
Ohio corporation doing business
in California as Ohio SELCO
Service Corporation, its
sole member
By: /s/ Xxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
VICTORY RECEIVABLES CORPORATION, as the Note Purchaser
By: /s/ Xxxxx Xxxx Xxxxxxxxx
-------------------------
Name: Xxxxx Xxxx Xxxxxxxxx
Title: Secretary
KEYBANK NATIONAL ASSOCIATION,
as the Agent,
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Senior Vice President
87
THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH, as the Conduit Agent
By: /s/ Xxxxxx Xxxxx
------------------------------------
Name: Xxxxxx Xxxxx
Title: Vice President
KEYBANK NATIONAL ASSOCIATION,
as a Liquidity Bank
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Senior Vice President
89
FLEET NATIONAL BANK,
as a Liquidity Bank
By: /s/ Xxxx Xxxx
--------------
Name: Xxxx Xxxx
Title: Director
XXXXX FARGO BANK, NATIONAL ASSOCIATION,
as a liquidity Bank
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
THE CHASE MANHATTAN BANK,
as a Liquidity Bank
By: /s/ Xxxxx Xxxxx
-------------------------------
Name: Xxxxx Xxxxx
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION,
as a Liquidity Bank
/s/ Xxxxxxx Xxxxx
-----------------
Name: Xxxxxxx Xxxxx
Title: Vice President
BNP PARIBAS,
as a Liquidity Bank
By: /s/ Xxxxxx Xxxxxx
-------------------------------
Name: Xxxxxx Xxxxxx
Title: Vice President
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Name: Xxxx X. Xxxxxx
Title: Managing Director
KEYBANK NATIONAL ASSOCIATION,
as a Tranche B Bank
By: /s/ Xxxxxx Xxxxxxxx
--------------------
Name: Xxxxxx Xxxxxxxx
Title: Vice President
