Exhibit 10.15
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PARTICIPATION AGREEMENT
among
KMC TELECOM V, INC.,
TELECOM V INVESTOR TRUST 2000-A,
WILMINGTON TRUST COMPANY,
in its individual capacity and as
Trustee
and
THE INVESTORS
party hereto
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Dated as of June 28, 2000
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PARTICIPATION AGREEMENT, dated as of June 28, 2000, among KMC TELECOM
V, INC., a Delaware corporation (the "Lessee"); TELECOM V INVESTOR TRUST 2000-A,
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a Delaware business trust (the "Lessor"); WILMINGTON TRUST COMPANY, in its
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individual capacity (in such capacity, the "Trust Company") and as trustee of
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the Lessor (in such capacity, the "Trustee"); and the INVESTORS party hereto.
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Capitalized terms used but not otherwise defined in this Agreement shall have
the meanings set forth in Annex A hereto, and the rules of usage set forth in
Annex A hereto shall apply to this Agreement.
Preliminary Statement
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A. The Lessee and Qwest have entered into the MGS Agreement, pursuant
to which the Lessee has agreed to provide the MGS Services to Qwest.
B. The Lessee has entered into the Equipment Purchase Agreement with
Qwest, pursuant to which the Lessee has agreed to purchase the Equipment, which
equipment will be used to provide the MGS Services.
C. The Lessee has entered into the Co-Location Agreements, the
Services Agreements, the Operating Agreement and certain other Project
Contracts, pursuant to which the Lessee will obtain space to locate the
Equipment, operational and maintenance services and other goods and services
required in connection with the operation of the Equipment.
D. The Investors desire to cause the Lessor to purchase the Equipment
from the Lessee and lease the Equipment to the Lessee pursuant to the Lease.
E. Concurrently with the execution and delivery of this Agreement,
the Investors and the Trust Company are executing and delivering the Trust
Agreement, pursuant to which the Investors have authorized the Lessor to, among
other things and subject to the terms and conditions thereof and hereof,
purchase the Equipment from the Lessee and lease the Equipment to the Lessee
pursuant to the Lease.
F. Pursuant to the Security Documents, the obligations of the Lessee
under the Lease and the other Operative Documents will be secured by the
Collateral specified therein.
In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. BASIC TRANSACTIONS
1.1 Equipment Purchase and Lease. On the Closing Date and subject to
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the terms and conditions of this Agreement (i) each Investor will make an
Investor Contribution to the Lessor in an amount equal to its Investor
Contribution Commitment, (ii) the Lessor will purchase all right, title and
interest of Lessee in and to each item of Equipment pursuant to the Xxxx of Sale
and (iii) the Lessor will simultaneously lease all of its right, title and
interest in such Equipment to the Lessee by executing and delivering the Lease.
1.2 Operative Documents. On the Closing Date, each of the respective
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parties thereto shall execute and deliver the Security Agreement, the Stock
Pledge Agreement, the Consents to Assignment and the Security Deposit Agreement
and such other documents, instruments, certificates and opinions of counsel as
agreed to by the parties hereto.
SECTION 2. THE CLOSING
2.1 Closing Date. All documents and instruments required to be
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delivered on the Closing Date shall be delivered at the offices of Xxxxxxx
Xxxxxxx & Xxxxxxxx, 425 Lexington Avenue, New York, New York, or at such other
location as may be determined by the Investor and the Lessee.
2.2 Trust Company Authorization. Each Investor agrees that the
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satisfaction or waiver of the conditions contained in Section 3 on the Closing
Date shall constitute, without further act, authorization and direction by such
Investor to the Trust Company to take on behalf of the Lessor the actions
specified in Section 2.1 of the Trust Agreement.
SECTION 3. CONDITIONS PRECEDENT
3.1 Closing Conditions Precedent to Each Financing Party. The
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obligations of the Financing Parties to consummate the transactions contemplated
hereby are subject to the fulfillment to the satisfaction of, or waiver by, the
Financing Parties of the following conditions precedent on the date specified by
the Lessee as the proposed Closing Date:
(a) Transaction Documents. (i) Each Operative Document to be
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entered into on or prior to the Closing Date shall have been duly
authorized, executed and delivered by the parties thereto and shall be in
full force and effect, and each Financing Party shall have received a fully
executed copy of such Operative Document.
(ii) Each Project Contract to be entered into on or
prior to the Closing Date shall be in form and substance
satisfactory to the Investor, and shall have been duly
authorized, executed and delivered by the parties thereto and
shall be in full force and effect, and each Financing Party
shall have received a fully executed copy of such Project
Contract.
(b) Taxes. All taxes, fees and other charges in connection
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with the execution, delivery, and, where applicable, recording, filing and
registration of the Transaction Documents shall have been paid or
provisions for such payment shall have been made by the Lessee.
(c) Actions to Perfect Liens. All filings, recordings,
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registrations and other actions, including the filing of duly executed UCC
Financing Statements, necessary to establish, protect and preserve the
Lessor's valid and first priority lien on, and perfected security interest
in, all right, title, estate and interest in and to the
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respective Collateral thereunder, on the terms set forth in the Security
Documents (which filings, etc., are listed on Schedule 3.1(c)), shall have
been duly made or taken on or prior to the Closing Date, or the Lessee
shall have made arrangements satisfactory to the other parties hereto to
cause such filings, recordings, registrations and other actions to be made
or taken promptly after the Closing Date. The Lessor shall have, on the
terms set forth in the Security Documents, a first priority lien on, and
perfected security interest in, the Collateral, and the Collateral shall be
free and clear of all other Liens except Permitted Liens.
(d) Lien Searches. Each Investor shall have received the
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results of recent searches of Uniform Commercial Code, judgment and tax
lien filings with respect to the personal property of the Lessee, and the
results of such searches shall be satisfactory to each Investor.
(e) Governmental Actions. Each Financing Party shall have
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received an Officer's Certificate of the Lessee, dated the Closing Date:
(i) confirming that all material Governmental Actions necessary for the
use, leasing, ownership and operation of the Equipment and the performance
of the MGS Services, and all Governmental Actions necessary for the routine
maintenance of the Equipment, are identified in Schedule 3.1(e); (ii)
attaching copies of all Governmental Actions necessary for the use,
leasing, ownership and operation of the Equipment and the performance of
the MGS Services, and all Governmental Actions necessary for the routine
maintenance of the Equipment, that have been obtained on or prior to the
Closing Date (which Governmental Actions are set forth on Part A of
Schedule 3.1(e)), and stating that all such Governmental Actions have been
duly obtained and are in full force and effect on the Closing Date and,
except as specified on Part A of Schedule 3.1(e), are not subject to any
appeal or further proceeding; and (iii) stating that the Lessee has no
reason to believe that all Governmental Actions necessary for the use,
leasing, ownership and operation of the Equipment and the performance of
the MGS Services, and all Governmental Actions necessary for the routine
maintenance of the Equipment, that have not been obtained on or prior to
the Closing Date (which Governmental Actions are set forth on Part B of
Schedule 3.1(e)) will not be obtained in the ordinary course of business on
or prior to the date such Governmental Actions will be required to permit
the timely use, leasing, ownership, operation and routine maintenance of
the Equipment and the performance of the MGS Services.
(f) Legal Requirements. The transactions contemplated by the
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Transaction Documents do not and will not violate in any respect any Legal
Requirements and do not and will not subject any Financing Party to any
adverse regulatory prohibitions or constraints.
(g) Authorization Proceedings and Documents of the Lessee.
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Each Financing Party shall have received: (i) a certified copy of the
resolutions or minutes or other appropriate documents evidencing the
corporate actions of the Lessee authorizing the execution, delivery and
performance of the Transaction
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Documents to which it is a party, certified by the Secretary or an
Assistant Secretary of the Lessee as of the Closing Date, which certificate
shall state that such resolutions or minutes or other appropriate documents
have not been amended, modified, revoked or rescinded; (ii) an incumbency
certificate of the Lessee regarding the officers thereof authorized to
execute and deliver on its behalf any Transaction Document to which it is a
party and any other documents and agreements to be delivered in connection
therewith, certified by the Secretary or an Assistant Secretary of the
Lessee as of the Closing Date; and (iii) true and complete copies of the
articles of incorporation, by-laws and any other organizational documents
of the Lessee, certified as of the Closing Date as complete and correct
copies thereof by the Secretary or an Assistant Secretary of the Lessee.
(h) Officer's Certificates of the Lessee. Each Financing Party
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shall have received an Officer's Certificate of the Lessee, dated the
Closing Date, stating that: (i) the representations and warranties of the
Lessee contained in the Transaction Documents to which it is a party are
true and accurate in all material respects on and as of the Closing Date,
except to the extent such representations and 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; (ii) all conditions precedent required to be fulfilled on the
Closing Date have been fulfilled; and (iii) no Default or Event of Default
has occurred and is continuing.
(i) Authorization Proceedings and Documents of the Trust
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Company. Each Financing Party shall have received: (i) a copy of the
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resolutions of the Board of Directors of the Trust Company authorizing the
execution, delivery and performance of the Transaction Documents to which
the Trust Company is a party, certified by the Secretary or an Assistant
Secretary of the Trust Company as of the Closing Date, which certificate
shall state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded; (ii) a certificate of the Trust Company,
dated the Closing Date, as to the incumbency and signature of the officers
of the Trust Company executing any Transaction Documents to which the Trust
Company is a party and any other documents and agreements to be delivered
in connection therewith, executed by the President or any Vice President,
Assistant Vice President, Trust Officer and the Secretary or any Assistant
Secretary of the Trust Company; (iii) true and complete copies of the
articles of incorporation and by-laws of the Trust Company, certified as of
the Closing Date as complete and correct copies thereof by the Secretary or
an Assistant Secretary of the Trust Company; and (iv) evidence satisfactory
to such Financing Party as to the qualification of (or absence of any
requirement for qualification of) the Trust Company in each jurisdiction in
which any Equipment is located.
(j) Officer's Certificate of the Trust Company. Each
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Financing Party shall have received an Officer's Certificate of the Trust
Company, dated the
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Closing Date, stating that the respective representations and warranties of
the Lessor and the Trust Company contained in the Transaction Documents to
which it is a party are true and accurate in all material respects on and
as of the Closing Date, except to the extent such representations and
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.
(k) Legal Opinions. Each Financing Party shall have received
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the following executed legal opinions, dated the Closing Date and addressed
to it, each in form and substance reasonably satisfactory to each Financing
Party:
(i) (a) the opinion of Xxxxxx Xxxx & Xxxxxx LLP,
special New York counsel to the Lessee and KMC, and (b) the opinion of
Xxxxxx Xxxx & Xxxxxx LLP, special regulatory counsel to the Lessee, as
to certain regulatory matters;
(ii) the opinion of Potter, Xxxxxxxx & Xxxxxxx LLP,
special Delaware counsel to the Trust Company, the Lessor and the
Security Agent;
(iii) an opinion of Xxxx Xxxx, Esq., internal counsel to
Qwest.
(l) No Default. There shall not have occurred and be
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continuing any Default or Event of Default.
(m) Fees. Each Financing Party shall have received the fees
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payable to it on the Closing Date in connection with the transactions
contemplated by the Operative Documents.
(n) Reference Pro Forma. Each Investor shall have received
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the Reference Pro Forma which shall, in form and substance, be satisfactory
to each Investor.
(o) Telecommunications Consultant's Report. Each Investor
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shall have received a copy of the report of the Telecommunications
Consultant in form and substance satisfactory to such Investor.
(p) Financial Statements: No Material Adverse Change. The
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Investor shall have received: (i) a copy of the most recent audited
financial statements of KMC and (ii) a copy of the most recent unaudited
financial statements of each of the Lessee and KMC, each certified as of
the Closing Date by a Responsible Officer of such entity. Each of such
financial statements shall be satisfactory to each Investor, and no
material adverse change shall have occurred in the business, operations or
financial condition of the Lessee, KMC since the date of such financial
statements. No material adverse change shall have occurred in the business,
operations or financial condition of Qwest since the date of its most
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recent annual report on Form 10-K405 filed with the Securities and Exchange
Commission.
(q) Insurance. All insurance required to be maintained by the
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Borrower under Section 13 of the Lease and each Project Contract to which
the Lessee is a party shah be in full force and effect and the Financing
Parties shall have received evidence thereof in the form of certificates of
insurance signed in each case by the insurer or an agent authorized to bind
the insurer.
(r) Appraisal. Each Investor shall have received a copy of the
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Appraisal in form and substance satisfactory to the Investor.
(s) Officer's Certificate of Owest. Each Investor shall have
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received an Officer's Certificate of Qwest dated as of the Closing Date
stating that no default has been declared under, and Qwest has not
exercised any right of early termination with respect to, the MGS Agreement
or the Original MGS Agreement.
(t) Equity Contribution to Lessee. KMC shall have made the
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Lessee Equity Contribution to be made by it on or prior to the Closing
Date, in the amount of $15 million and shall have delivered to the
Investors a written commitment to make an additional Lessee Equity
Contribution in accordance with the terms of Section 5.1(k).
3.2 Closing Conditions Precedent to the Lessee. The obligations of the
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Lessee under the Operative Documents are subject to the fulfillment to the
satisfaction of, or waiver by, the Lessee of the following conditions precedent
on the date specified by the Lessee as the proposed Closing Date:
(a) Operative Documents. Each of the Operative Documents
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entered into on or prior to the Closing Date shall have been duly
authorized, executed and delivered by the parties thereto and shall be in
full force and effect, and the Lessee shall have received a fully executed
copy of each of the Operative Documents.
(b) Certain Documents. The Lessee shall have received copies
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of the documents referred to in Sections 3.1(i), (j) and (r).
(c) Legal Opinions. The Lessee shall have received the
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executed legal opinions referred to in clauses (i), (ii) and (iii) of
Section 3.1(k) addressed to it.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Lessee. The Lessee
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represents and warrants to each of the other parties hereto as of the Closing
Date as follows:
(a) Organization: Powers. The Lessee (i) is a corporation
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duly formed, validly existing and in good standing under the laws of the
State of Delaware; (ii)
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has all requisite corporate power, authority and legal right to own, lease
and operate the Equipment and other property and assets it purports to own
or lease and to carry on its business as now being conducted and as
proposed to be conducted in respect of the Equipment; (iii) is duly
qualified and authorized to do business in each jurisdiction where such
qualification is required, except where the failure so to qualify would not
materially and adversely affect the Lessee's ability to perform its
obligations under the Transaction Documents; and (iv) has all requisite
corporate power and authority to execute, deliver and perform its
obligations under each Transaction Document and each other agreement or
instrument contemplated thereby to which it is a party.
(b) Authorization and No Legal Bar. The execution, delivery
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and performance by the Lessee of each Transaction Document to which it is a
party and the consummation of any of the transactions contemplated thereby
(i) have been duly authorized by all requisite corporate action and (ii)
will not (A) violate, result in the breach of or constitute a default
under, any Legal Requirement or Requirement of Law or Contractual
Obligation applicable to or binding on it as of the date hereof or (B)
result in or require the creation or imposition of any Lien (other than a
Permitted Lien) upon or with respect to any of the Collateral.
(c) Enforceability. Each Transaction Document to which the
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Lessee is a party has been duly executed and delivered by the Lessee and
constitutes a legal, valid and binding obligation of the Lessee enforceable
against the Lessee in accordance with its terms, except as such
enforceability (i) may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditor's rights and remedies generally and (ii) is subject to general
principles of equity (regardless of whether enforceability is considered in
a proceeding in equity or at law).
(d) Consents. No consent (except as listed on Part B of
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Schedule 3.1(e)) or other action by any holder or trustee of any
indebtedness or other obligations of the Lessee or by any other Person is
or will be required by the Lessee in connection with the execution,
delivery and performance by the Lessee of each Transaction Document to
which it is a party and the consummation of any of the transactions
contemplated thereby, except such as have been made or obtained and are in
full force and effect.
(e) Financial Statements. The financial statements of the
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Lessee furnished to the Financing Parties pursuant to Section 3.1(p) fairly
present, and each financial statement of the Lessee delivered on or after
the Closing Date pursuant to this Agreement will fairly present, the
financial condition and results of operations and cash flows of the Lessee
as of such dates and for such periods. All such financial statements were
or will be prepared in accordance with GAAP. The Lessee does not and will
not have any material liabilities, direct or contingent except as has been
or, in the case of financial statements to be delivered after the
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Closing Date pursuant to this Agreement, will be, disclosed in such
financial statements.
(f) Business. The Lessee has not engaged in any business or
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activity other than in connection with the development, acquisition,
leasing, operation and financing of the Equipment, and the Lessee has no
obligations or liabilities other than those directly related to the conduct
of such business.
(g) Litigation. Except as set forth on Schedule 4.1(g) and
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which could not, individually or in the aggregate, result in a Material
Adverse Effect, there is no (i) injunction, writ, preliminary restraining
order or other order of any nature by an arbitrator, court or any other
Governmental Authority against the Lessee or KMC or, to the knowledge of
the Lessee, against any other Material Project Participant in connection
with the transactions provided for in the Transaction Documents, or (ii)
action, suit, arbitration, investigation or proceeding at law or in equity
by or before any arbitrator, court or any Governmental Authority pending
against the Lessee, KMC or the Equipment or, to the best of the Lessee's
knowledge, threatened against the Lessee, KMC or the Equipment or against
any other Material Project Participant in connection with the transactions
provided for in the Transaction Documents.
(h) Compliance with Law. Except as set forth on Schedule
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4.1(h) and with respect to which arrangements reasonably satisfactory to
each Investor have been made, the Lessee and the Equipment are in material
compliance with all Legal Requirements, all Governmental Actions applicable
to either the Lessee or the Equipment and all material terms and provisions
of all Project Contracts.
(i) No Default. No Event of Default or Default has occurred
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and is continuing.
(j) Federal Reserve Regulations. Neither the Lessee nor KMC
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is engaged, directly or indirectly, principally, or as one of its important
activities, in the business of extending, or arranging for the extension
of, credit for the purposes of purchasing or carrying any margin stock,
within the meaning of Regulation T, U or X of the Board of Governors of the
Federal Reserve System. No part of the proceeds of any loans will be used
for "purchasing" or "carrying" any "margin stock" as so defined, or for
extending credit to others for the purpose of purchasing or carrying margin
stock, or for any purpose which would violate, or cause a violation of, any
such regulation.
(k) Investment Company Act. The Lessee is not an "investment
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company" as defined in, or subject to regulation under, the Investment
Company Act.
(l) Taxes. The Lessee has filed, or caused to be filed, all
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Federal, state, local and foreign tax and information returns that are
required to have been
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filed by it in any jurisdiction, and has paid all taxes shown to be due and
payable on such returns and all other taxes and assessments payable by it,
to the extent the same have become due and payable, except to the extent
there is a good faith contest thereof by appropriate proceedings by the
Lessee which are described on Schedule 4.1(1) and for which the Lessee
shall have set aside adequate reserves to the extent required by GAAP.
(m) Equipment. The Lessor and the Lessee have good title to,
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or a valid leasehold interest in, the Equipment, subject to no Liens other
than Permitted Liens.
(n) Trademarks, Patents and Licenses. No licenses, trademarks,
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patents oragreements with respect to the usage of technology or software,
other than any thereof which have been obtained and are in full force and
effect and have been validly assigned to the Lessor pursuant to the
Security Documents, are necessary for the operation and maintenance of the
Equipment and the performance of the MGS Services in accordance with the
Transaction Documents and all applicable Governmental Actions and Legal
Requirements.
(o) ERISA and Employees. The Lessee does not sponsor,
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maintain, administer, contribute to, participate in, or have any obligation
to contribute to or any liability under, any employee benefit plan within
the meaning of Section 3(3) of ERISA nor since the date which is six years
immediately preceding the Closing Date has the Lessee established,
sponsored, maintained, administered, contributed to, participated in, had
any obligation to contribute to or liability under, any such plan. The
Lessee and each ERISA Affiliate are in compliance in all material respects
with all applicable provisions of ERISA and the Code and all other laws
applicable to such plans, including the Age Discrimination in Employment
Act, the Americans With Disabilities Act and Title VII of the Civil Rights
Act
(p) Governmental Actions. (i) All material Governmental
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Actions necessary for the operation, use, leasing and ownership of the
Equipment and the performance of the MGS Services, and all Governmental
Actions necessary for the routine maintenance of the Equipment, are
identified in Schedule 3.1(e); (ii) all Governmental Actions necessary for
the operation of the Equipment and the performance of the MGS Services, and
all Governmental Actions necessary for the routine maintenance of the
Equipment, that have been obtained on or prior to the Closing Date (which
Governmental Actions are set forth on Part A of Schedule 3.1(e)) have been
duly obtained and are in full force and effect on the Closing Date and,
except as specified on Part A of Schedule 3.1(e), are not subject to any
appeal or further proceeding; and (iii) the Lessee has no reason to believe
that all Governmental Actions necessary for the operation, use, leasing,
ownership and routine maintenance of the Equipment and the performance of
the MGS Services that have not been obtained on or prior to the Closing
Date (which Governmental Actions are set forth on Part B of Schedule
3.1(e)) will not be obtained in the ordinary course of business on or prior
to the date such Governmental Actions will
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be required to permit the timely operation, use, leasing, ownership and
routine maintenance of the Equipment and the performance of the MGS
Services.
(q) Interim Services. Until such time as the Lessee shall
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have obtained all approvals and certifications necessary to enable it to
deliver the MGS Services directly, it shall be entitled, pursuant to the
Services Agreement, to purchase such services from various affiliated
parties at cost. The rights granted to the Lessee pursuant to the Services
Agreement, together with those Governmental Actions listed on Part A of
Schedule 3.1(e), are sufficient to allow the Lessee to operate and maintain
(either directly or through the use of affiliated subcontractors party to
the Services Agreement) the Equipment and perform the MGS Services in
accordance with all Requirements of Law and the provisions of the MGS
Agreement and the other Transaction Documents.
(r) Sufficiency of Project Contracts. The services to be
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performed, the materials to be supplied and the property interests and
other rights granted pursuant to the Project Contracts (and those licenses,
trademarks and patents described in Section 4.1(n) which have been
obtained, are in full force and effect and have been validly assigned to
the Lessor), comprise substantially all of the services, materials and
property interests and other rights required (including sufficient power
and other utility services and sufficient physical space and access) for
the installation, operation and maintenance of the Equipment and the
performance of the MGS Services in accordance with the Transaction
Documents. Upon the exercise by the Lessor of its remedies under the Lease
and its rights under the Security Documents with respect to such Project
Contracts and such licenses, trademarks and patents, Lessor or its assignee
or designee will have rights to substantially all of the services,
materials and property interests and other rights required for the
installation, operation and maintenance of the Equipment and the
performance of the MGS Service in accordance with the Transaction
Documents.
(s) Regulation of Financing Parties. No Financing Party will,
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solely by reason of (A) the leasing, operation or maintenance of the
Equipment by the Lessee, (B) the ownership of the Equipment by the Lessor
or the leasing of the Equipment by the Lessor to the Lessee as contemplated
by the Transaction Documents or (C) any other transaction contemplated by
any Transaction Document (but solely for so long as the Financing Parties
act in the capacity of passive investors and the MGS Services are provided
by an entity or entities that hold the required Governmental Approvals to
provide such services), be or otherwise become, or be required to be
certified as, a "Competitive Local Exchange Carrier", or "Incumbent Local
Exchange Carrier" or "Telecommunications Carrier" under the Act (including
any of the rules and regulations under any thereof) or otherwise subject to
regulation by any state public service commission (including any of the
rules and regulations under any thereof).
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(t) Security Documents. Upon the execution and delivery
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thereof, the Lease, the Security Agreement and the Security Deposit
Agreement will be effective to create, in favor of the Lessor, legally
valid and enforceable liens on and security interests in all right, title,
estate and interest of the Lessee in and to the Collateral described
therein and, on or prior to the Closing Date, all necessary recordings and
filings will have been executed and delivered to the Lessor or its designee
in proper form for filing, registration or recordation so that, when filed,
registered or recorded by the Lessor or its designee, the liens and
security interests created by each of such Security Documents will
constitute perfected liens on and security interests in all right, title,
estate and interest of the Lessee in and to the Collateral described
therein (other than any item of Collateral as to which a lien or security
interest cannot be perfected by filing or recording), prior and superior to
all other Liens except Permitted Liens. Upon the execution and delivery of
the Stock Pledge Agreement and the delivery to, and dominion and control
of, the Lessor over, the capital stock thereby pledged to the Lessor, the
Stock Pledge Agreement will be effective to create, in favor of the Lessor,
a valid and enforceable Lien on and security interest in and to the Pledged
Stock, prior and superior to all other Liens except Permitted Liens. The
recordings and filings shown on Schedule 3.1(c) are all the recordings and
filings necessary as of the Closing Date in order to establish, protect and
perfect in favor of the Lessor the liens on and security interests in the
right, title, estate and interest of the Lessee in and to the Collateral
described in the Security Documents (other than any item of Collateral as
to which a security interest cannot be perfected by filing or recording).
(u) Full Disclosure. None of the information furnished in
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writing by the Lessee or KMC or any of their Affiliates to any Financing
Party or to the Telecommunications Consultant pursuant to any of the
Transaction Documents or otherwise in connection with the negotiation,
execution and delivery of any thereof (excluding the Reference Pro Forma),
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein
when made, in light of the circumstances under which they were made, not
misleading. As of the Closing Date, there is no fact known to the Lessee
which the Lessee has not disclosed to the Investor in writing prior to the
Closing Date which could reasonably be expected to have a Material Adverse
Effect. The Reference Pro Forma was prepared by the Lessee in good faith
and represents, in the opinion of the Lessee, reasonable projections on the
Closing Date of the future performance of the Lessee based on reasonable
assumptions.
4.2 Representations and Warranties of the Lessor. The Lessor
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represents and warrants to each of the other parties hereto as follows:
(a) Authorization; No Conflict. The execution, delivery and
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performance of each Operative Document to which it is a party has been duly
authorized by all necessary action on its part and neither the execution
and delivery thereof by the Lessor, nor the consummation of the
transactions contemplated
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thereby by the Lessor, nor compliance by it with any of the terms and
provisions thereof (i) requires or will require any approval (which
approval has not been obtained) of any party or approval or consent of any
trustee or holders of any indebtedness or obligations of the Lessor; (ii)
contravenes or will contravene any Legal Requirement or Requirement of Law
applicable to or binding on it as of the date hereof; (iii) does or will
contravene or result in any breach of or constitute any default under, or
result in the creation of any Lien on any of its property under, any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, bank loan or credit agreement or other material agreement or
material instrument to which it is a party or by which it or its properties
may be bound; or (iv) does or will require any Governmental Action by any
Governmental Authority.
(b) Enforceability. Each Operative Document to which it is a
--------------
party has been duly executed and delivered by it and constitutes, or upon
execution and delivery will constitute, a legal, valid and binding
obligation enforceable against it in accordance with the terms thereof
except as such enforceability (i) may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights and remedies generally and (ii) is subject
to general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(c) Litigation. No litigation, investigation or proceeding of
----------
or before any arbitrator or Governmental Authority is pending or threatened
by or against the Lessor (i) with respect to any of the Operative Documents
or any of the transactions contemplated hereby or thereby or (ii) that
would reasonably be expected to have a Material Adverse Effect on the
assets, liabilities, operations, business or financial condition of the
Lessor.
(d) No Assignment. The Lessor has not assigned or transferred
-------------
any of its right, title or interest in or under, any Operative Document or
the Equipment, except in accordance with the Operative Documents.
(e) Principal Place of Business. The Trust's principal place
---------------------------
of business, chief executive office and office where the documents,
accounts and records relating to the transactions contemplated by this
Agreement and each other Operative Document are kept is located at the
offices of the Trust Company in Wilmington, Delaware.
4.3 Representations and Warranties of the Trust Company. The Trust
---------------------------------------------------
Company represents and warrants to each of the other parties hereto that:
(a) Due Organization. etc. It is a Delaware banking
----------------------
corporation duly organized and validly existing and in good standing under
the laws of the State of Delaware and has the power and authority to enter
into and perform its obligations under the Trust Agreement and has the
corporate power and authority to act as the trustee under the Trust
Agreement and to enter into and perform the obligations
12
under each of the other Operative Documents to which Trust Company or the
Lessor, as the case may be, is or will be a party and each other agreement,
instrument and document to be executed and delivered by it on or before the
Closing Date in connection with or as contemplated by each such Operative
Document to which the Trust Company or the Lessor, as the case may be, is
or will be a party.
(b) Authorization; No Conflict. The execution, delivery and
--------------------------
performance of each Operative Document to which it or (assuming due
authorization, execution and delivery of the Trust Agreement by the
Investors) the Lessor, as the case may be, is a party has been duly
authorized by all necessary action on its part and neither the execution
and delivery thereof; nor the consummation of the transactions contemplated
thereby, nor compliance by it with any of the terms and provisions thereof
(i) does or will require any approval or consent of any trustee or holders
of any of its indebtedness or obligations; (ii) does or will contravene any
current United States federal law, governmental rule or regulation relating
to its banking or trust powers; (iii) does or will contravene or result in
any breach of or constitute any default under, or result in the creation of
any Lien upon any of its property under, its charter or by-laws, or any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, bank loan or credit agreement or other agreement or instrument to
which it is a party or by which it or its properties may be bound or
affected; or (iv) does or will require any Governmental Action by any
Governmental Authority of the United States or the State of Delaware
regulating its banking or trust powers.
(c) Trust Company Enforceability. etc. The Trust Agreement
----------------------------------
and, assuming the Trust Agreement is the legal, valid and binding
obligation of each Investor, each other Operative Document to which Trust
Company or the Lessor, as the case may be, is a party have been, or on or
before the Closing Date will be, duly executed and delivered by Trust
Company or the Lessor, as the case may be, and the Trust Agreement and each
such other Operative Document to the extent entered into by the Trust
Company constitutes, or upon execution and delivery will constitute, a
legal, valid and binding obligation enforceable against Trust Company in
accordance with the terms thereof except as such enforceability (A) may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting the enforcement of creditors' rights and
remedies generally and (B) is subject to general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law).
(d) Litigation. No action, investigation, suit or proceeding
----------
of or before any arbitrator or Governmental Authority is pending or
threatened by or against the Trust Company with respect to any of the
Operative Documents to which it is or will be a party or any of the
transactions contemplated hereby or thereby.
4.4 Representations and Warranties of Each Investor. Each Investor
-----------------------------------------------
represents and warrants to each of the other parties hereto as of the Closing
Date as follows:
13
(a) Due Organization, etc. It is a duly organized and validly
---------------------
existing corporation or limited liability company in good standing under
the laws of the jurisdiction in which it is incorporated and has the power
and authority to carry on its business as now conducted and to enter into
and perform its obligations under this Agreement, each Operative Document
to which it is a party and each other agreement, instrument and document
executed and delivered by it on the Closing Date in connection with or as
contemplated by each such Operative Document to which it is or will be a
party.
(b) Authorization; No Conflict. The execution, delivery and
--------------------------
performance of each Operative Document to which it is a party has been duly
authorized by all necessary action on its part and neither the execution
and delivery thereof by the Investor, nor the consummation of the
transactions contemplated thereby by the Investor, nor compliance by it
with any of the terms and provisions thereof (i) requires or will require
any approval of (which approval has not been obtained) the shareholders of,
or approval or consent of any trustee or holders of any indebtedness or
obligations of the Investor, (ii) contravenes or will contravene any Legal
Requirement applicable to or binding on it as of the date hereof, (ill)
does or will contravene or result in any breach of or constitute any
default under, its articles of incorporation or by-laws, any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract, bank
loan or credit agreement or other agreement or instrument to which it is a
party or by which it or its properties may be bound or result in the
creation of any Lessor Lien upon the Equipment; or (iv) does or will
require any Governmental Action by any Governmental Authority.
(c) Enforceability. Each Operative Document to which it is a
--------------
party has been duly executed and delivered by it and constitutes, or upon
execution and delivery will constitute, a legal, valid and binding
obligation enforceable against it in accordance with the terms thereof
except as such enforceability (A) may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights and remedies generally and (B) is subject
to general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(d) ERISA. It is making the Investor Contribution contemplated
-----
to be made by it hereunder for its own account and with its general
corporate assets in the ordinary course of its business, and such general
corporate assets are either: (i) not assets of any Employee Benefit Plan
(or its related trust) which is subject to Title I of ERISA of Section 4975
of the Code; or (ii) assets of any Employee Benefit Plan (or its related
trust) which is subject to Title I of ERISA or Section 4975 of the Code,
but there is available an exemption from the prohibited transaction rules
under Section 406(a) of ERISA and Section 4975 of the Code and such
exemption is immediately applicable to each transaction contemplated by the
Operative Documents to the extent that any other party to such transaction
is a "party in interest" as defined in Section 3(14) of ERISA with respect
to such plan assets.
14
SECTION 5. COVENANTS
5.1 Affirmative Covenants of the Lessee. Unless and until the Lease
-----------------------------------
has terminated and all obligations payable under the Transaction Documents have
been paid in full, the Lessee covenants and agrees that:
(a) Maintenance of Existence and Governmental Action. The
------------------------------------------------
Lessee shall at all times (i) preserve and maintain in full force and
effect (A) its existence as a corporation and its good standing under the
laws of the State of Delaware and (B) its qualification to do business in
each jurisdiction in which the character of the properties owned or leased
by it or in which the transaction of its business as conducted or proposed
to be conducted makes such qualification necessary and (ii) except as
otherwise expressly permitted in the Transaction Documents, obtain and
maintain in full force and effect all material Governmental Actions and
other consents and approvals (and cause to be obtained and maintained in
full force and effect all requisite Governmental Actions held by any
affiliate party to the Services Agreement) required at any time in
connection with the use, leasing, maintenance, ownership or operation of
the Equipment.
(b) Inspection of Books and Records. The Lessee shall keep
-------------------------------
proper books and records and accounts in accordance with GAAP and in
compliance in all material respects with all applicable Legal Requirements,
Requirements of Law and Governmental Actions and make the same available
for inspection by the Investor.
(c) Financial Statements: Equipment Reports. The Lessee shall
---------------------------------------
furnish to each Investor:
(i) as soon as available, but in any event within 120
days after the end of each fiscal year of the Lessee, the annual
consolidating financial statements of KMC and its subsidiaries
(including the Lessee) prepared in accordance with GAAP and
audited by independent certified public accountants of
recognized standing in the U.S.;
(ii) as soon as available, but in any event within 60
days after the end of each of the first three quarterly periods
of each fiscal year of the Lessee, the unaudited financial
statements of the Lessee for such quarter and the portion of the
fiscal year through the end of each such quarter, prepared in
accordance with GAAP, certified by a Responsible Officer of the
Lessee as being fairly stated in all material respects (subject
to normal year-end audit adjustments); and
(iii) within ten days after the end of each calendar
month during the first [nine months] of the Term and with ten
days after the end of each third calendar month thereafter
during the Term, an Equipment Report for the relevant one or
three-month period.
15
Each time the financial statements of the Lessee are delivered under clauses (i)
and (ii) of this Section 5.1(c), a certificate signed by a Responsible Officer
of the Lessee shall be delivered along with such financial statements,
certifying that such Responsible Officer has made or caused to be made a review
of the transactions and financial condition of the Lessee during the relevant
fiscal period and that such review has not, to the best of such Responsible
Officer's knowledge, disclosed the existence of any event or condition which
constitutes a Default or an Event of Default or if any such event or condition
existed or exists, the nature thereof and the corrective actions that the Lessee
has taken or proposes to take with respect thereto.
(d) Compliance with Laws. The Lessee shall comply with, and
--------------------
shall ensure that the Equipment is operated in compliance with, and shall
make such alterations to the Equipment as may be required for compliance
with, all applicable Legal Requirements and Governmental Actions, except
where non-compliance would not reasonably be expected to have a Material
Adverse Effect.
(e) Notices. Promptly upon obtaining knowledge thereof, the
-------
Lessee shall give notice to the Lessor and the Investor of:
(i) any Default or Event of Default, or any incipient
default by the Lessee under any Project Contract, together with
a description of any action being taken or proposed to be taken
with respect thereto;
(ii) any action, suit, arbitration or litigation, or
receipt of formal notice of any investigation by any
Governmental Authority, involving or affecting the Lessee or the
Equipment (A) involving $1,000,000 or more, (B) seeking any
injunctive, declaratory or other equitable relief that, if
adversely determined, would reasonably be expected to have a
Material Adverse Effect, or (C) instituted for the purpose of
revoking, terminating, suspending, withdrawing, modifying or
withholding any Governmental Action which, if successful, would
reasonably be expected to have a Material Adverse Effect;
(iii) any casualty, damage or loss to the Equipment,
whether or not insured, through fire, theft, other hazard or
casualty, involving a probable loss of $250,000 or more, or any
curtailment of operation of the Equipment that would be
reasonably expected to last more than seven days;
(iv) any cancellation or receipt of written notice of
threatened or potential cancellation of any insurance required
under the Insurance Requirements;
(v) the initiation of any Condemnation proceeding
involving the Equipment or any material portion thereof;
16
(vi) receipt of any termination notice under any
Material Project Contract; and
(vii) any material upgrade or other Modification to the
Equipment (including any software with respect thereto).
(f) Insurance Certificate. Within 30 days after the end of
---------------------
each Fiscal Year, the Lessee shall submit to the Investor a certificate
certifying that insurance meeting the Insurance Requirements is in full
force and effect and that all premiums then due in respect of such
insurance have been paid.
(g) Taxes. The Lessee will pay and discharge promptly when
-----
due all material Taxes and governmental charges imposed upon it or upon its
income or profits or in respect of its property, in each case before the
same shall become delinquent or in default and before penalties accrue
thereon, unless and to the extent the same are being contested in good
faith by appropriate proceedings and adequate reserves with respect thereto
shall, to the extent required by GAAP, have been set aside, and failure to
pay or comply with the contested item could not reasonably be expected to
result in a Material Adverse Effect.
(h) Preservation of Security Interests. The Lessee shall
----------------------------------
preserve the security interests granted under the Security Documents and
upon request by the Investor or the Lessor undertake all actions which are
necessary or appropriate in the reasonable judgment of the Investor or the
Lessor to (i) maintain the Lessor's security interest in the Collateral in
full force and effect at all times (including the priority thereof), and
(ii) preserve and protect the Collateral and protect and enforce the
Lessee's rights and title and the rights of the Lessor to the Collateral,
including the making or delivery of all filings and recordations, the
payments of fees and other charges and the issuance of supplemental
documentation. The Lessee hereby authorizes the Lessor to sign and to cause
to be filed any financing or continuation statements required in connection
with the foregoing without the signature of the Lessee to the extent
permitted by applicable law, and to file a carbon, photostatic,
photographic or other reproduction of any Security Document or a Uniform
Commercial Code financing statement. The Lessee shall, as of any date on
which additional filings, registration or other such actions are required,
cause to be delivered to the Financing Parties an opinion of Lessee's
counsel stating that the Lessor's security interest in the Collateral
remains in full force and effect and perfected, and that, as of the date of
such opinion, no further filings, recordations or other actions are or will
be necessary to maintain such security interest as such for the remainder
of the then-elected Term, except as noted in such opinion.
(i) Inspection of Equipment. The Lessee agrees that the
-----------------------
Investors and any consultants engaged by any Investor may inspect any item
of Equipment at its location at any time and from time to time after
reasonable notice (and the reasonable costs and expenses of such Person
incurred in connection with such
17
visit shall be paid by Lessee) so long as such visit does not unreasonably
interfere with the operation or maintenance of the Equipment.
(j) Operation and Maintenance. The Lessee shall, or shall
-------------------------
cause the Operator to, use, maintain and operate the Equipment in
compliance with generally accepted prudent operating and maintenance
practices and the material provisions of all relevant Project Contracts.
(k) Additional Equity. Lessee shall cause KMC to make a
-----------------
Lessee Equity Contribution in the amount of $20,000,000 (in addition to the
amount specified to be contributed pursuant to Section 3.1(t)) no later
than July 31, 2000.
(l) State Certifications. The Lessee shall, as soon as
--------------------
practicable, cause to be issued directly to it all certifications and
approvals required to enable it to directly operate and maintain the
Equipment and perform the MGS Services. As soon as possible after receipt
of the necessary certifications and approvals by the Lessee, the Lessee
shall terminate the portion of the Services Agreement pursuant to which one
or more of its affiliated parties has been providing the corresponding
portion of the MGS Services.
5.2 Negative Covenants of the Lessee. Unless and until the Lease has
--------------------------------
terminated and all obligations payable under the Transaction Documents shall
have been paid in full, the Lessee covenants and agrees that:
(a) Limitation on Fundamental Changes. Subsidiaries and
----------------------------------------------------
Disposition of Assets. The Lessee shall not enter into any transaction of
----------------------
merger or consolidation, change its form of organization or its business,
liquidate or dissolve itself (or suffer any liquidation or dissolution), or
amend its governing instruments in any material respect. The Lessee shall
not have any Subsidiaries, or purchase or otherwise acquire all or
substantially all of the assets of any other Person.
(b) Limitation on Nature of Business. The Lessee shall not
--------------------------------
engage in any business other than the acquisition, leasing, operation,
maintenance and financing of the Equipment as contemplated by the
Transaction Documents.
(c) Limitation on Liens. The Lessee shall not create, incur,
-------------------
assume or suffer to exist any Lien upon the Equipment or any other part of
the Collateral, whether now owned or hereafter acquired, other than
Permitted Liens.
(d) Limitation on Indebtedness. The Lessee shall not create
--------------------------
or incur or suffer to exist any Indebtedness except for: (A) Indebtedness
incurred under the Operative Documents, (B) trade accounts payable (other
than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business so long as such trade accounts payable are
payable within 90 days of the date the respective goods are delivered or
the respective services are rendered and (C) Permitted Intercompany
Obligations.
18
(e) Limitation on Transactions with Affiliates. The Lessee
------------------------------------------
shall not, and shall not permit the Operator to, enter into any transaction
or agreement related to the Equipment with any Affiliate, other than any
Transaction Document in existence on the Closing Date, unless such
transaction or agreement (i) is entered into in the ordinary course of
business on fair and reasonable terms certified by a Responsible Officer of
the Lessee as no less favorable to the Lessee than the Lessee would obtain
in an arm's length transaction with a Person that is not an Affiliate of
the Lessee; or (ii) is otherwise approved by the Required Investors.
(f) Limitation on Amendments to Project Contracts. The Lessee
---------------------------------------------
shall not terminate, amend or modify any Project Contract except with the
prior written consent of the Required Investors; provided that, so long as
--------
no Event of Default has occurred and is continuing, the Lessee may make
immaterial amendments and modifications to any Project Contract without the
consent of the Required Investors.
(g) Limitation on Distributions. The Lessee shall not
---------------------------
request the Security Agent to make, and the Lessee shall not accept, any
transfer from the Distribution Account except transfers that comply with
Section 4.3 of the Security Deposit Agreement. The Lessee shall not make
any distribution or payment on account of any equity interest in the Lessee
except with amounts transferred to the Lessee from the Distribution Account
in accordance with Section 4.3 of the Security Deposit Agreement.
(h) Limitation on Actions Resulting in Regulation of Parties.
--------------------------------------------------------
The Lessee shall not take any action (or omit to take any action which it
has the authority to take) which action (or omission) could reasonably be
expected to result in any Financing Party being deemed by any Governmental
Authority having jurisdiction to be or otherwise becoming or being required
to be certified as, solely by reason of the transactions contemplated by
the Transaction Documents, a "Competitive Local Exchange Carrier" or
"Telecommunications Carrier" (or an affiliate of any thereof) under the Act
or otherwise subject to any regulation relating to any such type of entity
(or affiliates thereof) under any Legal Requirement (including requirements
of any state public service commission).
(i) Hazardous Substances. The Lessee shall not release, emit
--------------------
or discharge into the environment any Hazardous Substances in violation of
any Legal Requirement which could reasonably be expected to have a Material
Adverse Effect.
5.3 Covenants of each Investor, the Lessor, the Trustee and the Trust
-----------------------------------------------------------------
Company. So long as this Agreement is in effect:
--------
(a) Discharge of Liens. Each of the Investors, the Lessor,
------------------
the Trustee and the Trust Company will not create, permit, incur, assume or
suffer to exist at
19
any time, and will, at its own cost and expense, promptly take such action
as may be necessary duly to discharge, or to cause to be discharged, all
Lessor Liens attributable to it or any of its Affiliates; provided,
--------
however, that no such Person shall be required so to discharge any such
-------
Lessor Lien while the same is being contested in good faith by appropriate
proceedings diligently prosecuted so long as such proceedings shall not
involve any material danger of impairment of the Liens of the Security
Documents or of the sale, forfeiture or loss of, and shall not interfere
with the use or disposition of, the Equipment or title thereto or any
interest therein or the payment of Rent.
(b) Trust Agreement. Without prejudice to any right under the
---------------
Trust Agreement of the Trust Company to resign, or the Investors' right
under the Trust Agreement to remove the Trust Company, each of the
Investors, the Trustee and the Trust Company hereby agrees with the Lessee
and other Financing Parties (i) not to terminate or revoke the trust
created by the Trust Agreement so long as the Participation Agreement is in
effect, (ii) not to amend, supplement, terminate or revoke or otherwise
modify any provision of the Trust Agreement or any other Operative Document
without the prior written consent of any party hereto adversely effected by
such amendment and (iii) to comply with all of the terms of the Trust
Agreement.
(c) Successor Trust Company. The Trust Company or any
-----------------------
successor may resign or be removed by the Investor as trustee, a successor
trustee may be appointed, and a corporation may become the trustee under
the Trust Agreement, only in accordance with the provisions of Article 10
of the Trust Agreement and with the consent of the Lessee, which consent
shall not be unreasonably withheld or delayed.
(d) Other Business: Indebtedness. The Lessor shall not (i)
----------------------------
conduct, transact or otherwise engage in, or commit to transact, conduct or
otherwise engage in, any business or operations other than the entry into,
and exercise of rights and performance of obligations in respect of, the
Transaction Documents and other activities incidental or related to the
foregoing, or (ii) own, lease, manage or otherwise operate any properties
or assets other than in connection with the activities described in clause
(i), or incur, create, assume or otherwise suffer to exist any Indebtedness
or other consensual liabilities or financial obligations other than as may
be incurred, created or assumed or as may exist in connection with the
activities described in clause (i).
(e) Change of Principal Place of Business. Each of the
-------------------------------------
Trustee, the Lessor and the Trust Company shall give at least 30 days prior
written notice to the Lessee and the Investor if its principal place of
business or chief executive office, or the office where the records
concerning the accounts or contract rights relating to the Equipment are
kept, shall cease to be located in Wilmington, Delaware or if it shall
change its name.
20
(f) Disposition of Assets. The Lessor shall not convey, sell,
---------------------
lease, assign, transfer or otherwise dispose of any of its property,
business or assets, whether now owned or hereafter acquired, except to the
extent expressly permitted by the Transaction Documents.
(g) Instructions to Trustee. The Investor will not instruct
-----------------------
the Trustee to take any action in violation of the terms of any Operative
Documents.
(h) Compliance with Operative Documents; Actions Under
--------------------------------------------------
Project Contracts. The Lessor shall at all times observe and perform all
------------------
of the covenants, conditions and obligations required to be performed by it
under each Operative Document to which it is a party. Except as expressly
contemplated by the related Consent to Assignment or, following the
occurrence of an Event of Default, in connection with the enforcement of
remedies under the Operative Documents, the Lessor shall not take any
action under any Project Contract.
(i) No Voluntary Bankruptcy. Each of the Lessor, the Trustee
-----------------------
and the Trust Company shall not (i) commence any case, proceeding or other
action under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, arrangement,
winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (ii) seek appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial benefit of its creditors; and each of the Lessor, the Trustee
and the Trust Company shall not take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in this paragraph.
5.4 Quiet Enjoyment. Each party hereto (other than the Lessee)
---------------
covenants that, unless an Event of Default shall have occurred and be
continuing, such party shall not take or cause to be taken any action contrary
to the Lessee's (or any permitted sublessee's) rights under the Lease (or any
permitted sublease) to possession, use and quiet enjoyment of the Equipment or
any part thereof.
SECTION 6. TRANSFERS OF INTEREST IN TRUST ESTATE
6.1 Restrictions on Transfer. Each Investor agrees that it may not
------------------------
assign, convey or otherwise transfer any of its right, title or interest in or
to the Trust Estate or the Trust Agreement except in accordance with following
conditions:
(a) Participations. Any Investor may, in the ordinary course
--------------
of its business and in accordance with the Trust Agreement and applicable
Requirements of Law but without the consent of the Lessee, at any time sell
or otherwise assign (including for security purposes) to one or more banks,
financial institutions or other entities (each, an "Investor Participant")
--------------------
participating interests in all or any part of the Investor Contribution
owing to such Investor, its Investor Contribution
21
Commitment or any other interest of such Investor hereunder and under the
other Operative Documents. In the event of any such sale by an Investor of
a participating interest to an Investor Participant, such Investor's
obligations under this Agreement to the other parties to this Agreement
shall remain unchanged, such Investor shall remain solely responsible for
the performance thereof, such Investor shall remain the holder of its
Investor Contribution for all purposes under this Agreement and the other
Operative Documents and the other Financing Parties shall continue to deal
solely and directly with such Investor in connection with its rights and
obligations under this Agreement and the other Operative Documents. In no
event shall any Investor Participant have any right to enforce any
obligation of the Lessee or the Lessor against the Lessee or the Lessor, as
the case may be, except to the extent such Investor Participant has rights
as a third party beneficiary with respect thereto, or to approve any
amendment or waiver of any provision of this Agreement or any other
Operative Document, or any consent to any departure by any Person
therefrom, except to the extent that such amendment, waiver or consent
would (a) reduce the amount of any Investor Contribution, or postpone the
date of the final maturity of any Investor Contribution, in each case to
the extent subject to such participation or (b) release all or
substantially all of the Collateral. The Lessee also agrees that each
Investor Participant shall be entitled to the benefits of Section 7.2(b),
(c) and (d) with respect to its participation in such Investor Contribution
Commitments and such Investor Contributions outstanding from time to time
as if it was an Investor; provided that, in the case of Section 7.2(d),
--------
such Investor Participant shall have complied with the requirements of said
Section; and provided, further, that no Investor Participant shall be
-------- -------
entitled to receive any greater amount pursuant to any such Section than
the transferor Investor would have been entitled to receive in respect of
the amount of the participation transferred by such transferor Investor to
such Investor Participant had no such transfer occurred.
(b) Assignments. No Investor may during the Term transfer any
-----------
of its right, title or interest in the Trust Estate without the prior
written consent of the Lessee, which shall not be unreasonably withheld or
delayed, except that any Investor may transfer all or any part of its
interest in the Trust Estate without such consent to a Person (a
"Purchasing Investor") assuming the obligations of such Investor under the
-------------------
Operative Documents with respect to the interest being transferred pursuant
to a transfer instrument substantially in the form of Exhibit A (a
`Transfer Instrument") so long as the Purchasing Investor is either (x)
-------------------
an Affiliate of the transferor Investor which does not otherwise qualify
under clause (y) below, or (y) a Person which meets, or the payment and
performance obligations of which with respect to the interest being
transferred under the Operative Documents are guaranteed (pursuant to a
guaranty substantially in the form of Exhibit B) by a Person (the
"Guarantor") which meets, the following criteria: (1) the tangible net
---------
worth of the Purchasing Investor or Guarantor is at least equal to $50
million calculated in accordance with GAAP and (2) so long as no Event of
Default shall have occurred and be continuing, such Purchasing
22
Investor is not in material litigation with, or a material competitor of,
KMC or any Affiliate of KMC.
(c) Lessee Cooperation. Lessee agrees reasonably to
------------------
cooperate with Investors in connection with the syndication of their
respective interests in the Trust Estate, including the execution and
delivery of such other documents, instruments, notices, opinions,
certificates and acknowledgments as reasonably may be required by such
Investor or the relevant Purchasing Investor or Investor Participant
provided, however that in no event shall Lessee be required to (x) provide
--------
opinions, certifications or acknowledgments that extend beyond the scope of
those delivered as of the Closing Date, or (y) consent to any change that
would adversely affect any of the economic terms of the transactions
contemplated herein.
6.2 Effect of Transfer. From and after any transfer effected in
------------------
accordance with this Section 6.2, the transferor Investor shall be released, to
the extent of such transfer, from its liability hereunder and under the other
documents to which it is a party in respect of obligations to be performed on or
after the date of such transfer. Upon any transfer by an Investor as above
provided, any such transferee shall assume the obligations of the Investor with
respect to the interest being transferred, and shall be deemed an "Investor" for
all purposes of such documents and each reference herein to the transferor shall
thereafter be deemed a reference to such transferee to the extent of the
interest transferred for all purposes. Notwithstanding any transfer of all or a
portion of the transferor's interest as provided in this Section 6.2, the
transferor shall be entitled to all benefits accrued and all rights vested prior
to such transfer including rights to indemnification under any such document.
SECTION 7. INDEMNIFICATION; PAYMENT OF CERTAIN EXPENSES
7.1 General Indemnity. The Lessee, whether or not any of the
-----------------
transactions contemplated hereby shall be consummated, hereby assumes liability
for and agrees to defend, indemnify and hold harmless each Indemnified Person on
an After Tax Basis from and against any Claims or threatened Claims which may be
imposed on, incurred by or asserted against an Indemnified Person in any way
relating to or arising or alleged to arise out of (a) the financing,
refinancing, purchase, acceptance, rejection, trusteeship, design, manufacture,
delivery, acceptance, nondelivery, leasing, subleasing, possession, use,
operation, repair, modification, transportation, condition, sale, return,
repossession (whether by summary proceedings or otherwise), or any other
disposition of the Equipment, or any part thereof; (b) any latent or other
defects in the Equipment whether or not discoverable by an Indemnified Person or
the Lessee; (c) a violation of Environmental Laws, Environmental Claims or other
loss of or damage relating to the Equipment; (d) the Transaction Documents or
any transaction contemplated thereby; (e) any breach by the Lessee of any of its
representations or warranties under the Transaction Documents or failure by the
Lessee to perform or observe any covenant or agreement to be performed by it
under any of the Transaction Documents; and (f) personal injury, death or
property damage relating to the Equipment, including Claims based on strict
liability in tort; provided that the foregoing indemnities in clauses (a)
--------
through (f) shall not, as to any Indemnified Person, apply to
23
Claims to the extent they arise out of or result from (i) the gross negligence
or willful misconduct of such Indemnified Person or any successor, assign,
director, shareholder, partner, officer, employee, agent or Affiliate of such
Indemnified Person as determined in a final, non-appealable judgment by a court
of competent jurisdiction, (ii) any breach of any obligation or representation
or warranty of such Indemnified Person under any Transaction Document, (iii) any
Taxes including any Claim (or any portion of a Claim) made upon an Indemnified
Person by a third party that at its origin is based upon a Tax (other than
amounts necessary to make any payments hereunder on an After Tax Basis, where
the Lessee is otherwise specifically required to make such payments on an After
Tax Basis), (iv) acts or omissions in connection with the ownership,
manufacture, operation or maintenance of the Equipment occurring on or after the
date the Lessee transfers possession of the Equipment to the Lessor or any third
party upon the exercise of remedies pursuant to the Lease and the Security
Documents, except to the extent such Claims are attributable to events that
occurred prior to such transfer (the Lessor agrees to indemnify the Trust
Company for any Claim which would be indemnifiable by the Lessee but for the
provisions of this clause (iv)), or (v) the imposition of any Lessor Lien for
which such Indemnified Person is responsible for discharging under the
Transaction Documents. No Indemnified Person shall settle, compromise or
otherwise pay or agree to pay any claim, damage, loss, liability or expense for
which the Lessee is required to provide indemnification hereunder without the
prior consent of the Lessee, which consent shall not be unreasonably delayed or
withheld. If any claim, action or proceeding for which indemnification by the
Lessee may be sought under a Transaction Document is brought against any
Indemnified Person, such Indemnified Person shall promptly notify the Lessee of
the institution of such claim, action or proceeding and the Lessee shall
thereupon participate in all respects in the defense thereof and have the right,
at its sole option, to elect to assume the defense of such claim, action or
proceeding, including the employment of counsel (reasonably satisfactory at all
times to such Indemnified Person) and payment of expenses. Once the Lessee has
assumed the defense of any such claim, action or proceeding, the Lessee shall no
longer be liable to any such Indemnified Person for any expenses subsequently
incurred thereby in connection with such claim, action or proceeding unless
specifically provided for in the next succeeding sentence. Such Indemnified
Person shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Person unless (i) the employment of such counsel shall have been
authorized in writing by the Lessee in connection with the defense of such Claim
or such fees and expenses relate to the initial examination of such Claim, (ii)
the parties against which such Claim is brought include both such Indemnified
Person and the Lessee and such Indemnified Person reasonably concludes (based
upon the advice of counsel) that there are legal defenses available to it which
are different from or in addition to those available to the Lessee and that such
different or additional defenses conflict therewith (it being understood,
however, that the Lessee shall not, in connection with any one action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to one firm of attorneys acting as local counsel) for all Indemnified
Persons, and such firm shall be designated in writing by the Indemnified
Persons) or (iii) any such Claim is brought by the Lessee or for its benefit, in
which case the reasonable fees and expenses of such counsel shall be borne by
the Lessee and the Lessee shall not have the right to direct the defense of such
Claim on behalf of such Indemnified Person (but it shall retain the right to
direct the defense of such claim, action or proceeding on its own
24
behalf). If the Lessee shall have elected to assume the defense of any such
Claim, then upon the request of the Lessee, the Indemnified Person requesting
payment of indemnity under Section 7.1 shall promptly furnish the Lessee with
copies of any records or documents pertaining to the matter to be indemnified
and, to the extent known by such Indemnified Person, a reasonably detailed
explanation of the circumstances giving rise to the claim of indemnification and
the determination of the amount of the requested indemnity payment upon payment
in full to the Indemnified Person of any indemnity pursuant to Section 7.1, the
Lessee shall be subrogated to any right of such Indemnified Persons in respect
of the matter against which such indemnity has been paid. If the Lessee shall
have elected to assume the defense of any such Claim, upon the written request
at any time and from time to time of the Lessee, the Indemnified Person shall,
at the expense of the Lessee, take such reasonable actions and execute such
documents as are necessary or reasonably appropriate to assist the Lessee in the
preservation and enforcement against third parties of the Lessee's right of
subrogation hereunder. The Lessee shall not settle or compromise any Claim on
behalf of any Indemnified Person without such Indemnified Person's consent if
the settlement or compromise involves any non-monetary relief to be performed,
or admission of guilt or wrongdoing, by such Indemnified Person.
7.2 General Tax Indemnity. (a) (i) The Lessee shall pay and assume
---------------------
liability for, and does hereby agree to indemnify, protect and defend the
Equipment and all Tax Indemnitees, and hold them harmless against, all
Impositions on an After Tax Basis. (ii) Any payment or indemnity to or for the
benefit of any Tax Indemnitee with respect to any Tax which is subject to
indemnification under Section 7.2(a)(i) shall be an amount sufficient, on an
After Tax Basis, to restore the Tax Indemnitee to the same position it would
have been in had such Tax not been incurred or imposed.
(b) All payments to or for the benefit any Financing Party
under the Transaction Documents (including payments of Basic Rent and
Supplemental Rent under the Lease) shall be made free and clear of and
without deduction for any and all present or future Impositions. If the
Lessee, any Financing Party or any other Person ("Applicable Payor") shall
----------------
be required by Law to deduct any Impositions from or in respect of any
amounts payable under this Agreement or any other Operative Document to or
for the benefit of any Financing Party ("Applicable Payee"), (A) the
----------------
amounts payable by such Applicable Payor (as rent, interest or otherwise)
shall be increased by the amount necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this Section 7.2(b)) the Applicable Payee shall receive an
amount equal to the sum it would have received had no such deductions been
made, (B) the Applicable Payor shall make such deductions and (C) the
Applicable Payor shall pay the full amount deducted to the relevant taxing
authority or other Governmental Authority in accordance with all Legal
Requirements. The Lessee will indemnify each Tax Indemnitee on demand for
the full amount of any sums paid by such Tax Indemnitee pursuant to the
second sentence of this Section 7.2(b) on an After Tax Basis and any
liability the Tax Indemnitee may incur or be required to pay.
25
(c) (i) Subject to the terms of Section 7.2(e), the Lessee
shall pay or cause to be paid all Impositions directly to the taxing
authorities where feasible and otherwise to the Tax Indemnitee, as
appropriate, and the Lessee shall at its own expense, upon such Tax
Indemnitee's reasonable request, furnish to such Tax Indemnitee copies of
official receipts or other satisfactory proof evidencing such payment.
(ii) In the case of Impositions for which no contest is
conducted pursuant to Section 7.2(e) and which the Lessee pays directly
to the taxing authorities, the Lessee shall pay such Impositions prior
to the latest time permitted by the relevant taxing authority for timely
payment (other than in the case of withholding taxes, which shall be
paid immediately). In the case of Impositions for which the Lessee
reimburses a Tax Indemnitee, the Lessee shall do so within 20 days after
receipt by the Lessee of demand by such Tax Indemnitee describing in
reasonable detail the nature of the Imposition and the basis for the
demand (including the computation of the amount payable), but in no
event shall the Lessee be required to pay such reimbursement prior to 15
days before the latest time permitted by the relevant taxing authority
for timely payment. In the case of Impositions for which a contest is
conducted pursuant to Section 7.2(e), the Lessee shall pay such
Impositions or reimburse such Tax Indemnitee for such Impositions, to
the extent not previously paid or reimbursed pursuant to subsection (a),
prior to the latest time permitted by the relevant taxing authority for
timely payment after conclusion of all contests under Section 7.2(e)
unless payment shall be required before commencement of such contest, in
which case the Lessee shall pay such Impositions or reimburse the Tax
Indemnitee for such Impositions prior to the latest time permitted by
the relevant taxing authority for timely payment prior to commencement
of such contest.
(iii) The determination of all Impositions to be paid or
indemnified against by the Lessee under this Section 7.2 on an After Tax
Basis shall be made (in good faith) by the Tax Indemnitee. Such
determination shall state with reasonable clarity and detail the basis
for such determination and shall, absent manifest error, be final and
conclusive and binding on the Lessee. In no event shall the Lessee in
connection with this Section 7.2 or for any other purpose whatsoever
under any Operative Document have any right to examine any Tax return or
related books and records of any Tax Indemnitee.
(iv) Impositions imposed with respect to the Equipment for a
billing period during which the Lease expires or terminates with respect
to the Equipment (unless the Lessee has exercised the Purchase Option
with respect to the Equipment) shall be adjusted and prorated on a daily
basis between the Lessee and the Lessor, whether or not such Imposition
is
26
imposed before or after such expiration or termination and each party
shall pay or reimburse the other for each party's pro rata share
thereof.
(d) The Lessee shall be responsible for preparing and filing any real
and personal property or ad valorem tax returns in respect of the
Equipment. In case any other report or tax return shall be required to be
made with respect to any obligations of the Lessee under or arising out of
Section 7.2(a) and of which the Lessee has knowledge, the Lessee, at its
sole cost and expense, shall notify the relevant Tax Indemnitee of such
requirement and (except if such Tax Indemnitee notifies the Lessee that
such Person intends to file such report or return) (A) to the extent
required or permitted by and consistent with Legal Requirements, make and
file in its own name such return, statement or report; and (B) in the case
of any other such return, statement or report required to be made in the
name of such Tax Indemnitee, advise such Tax Indemnitee of such fact and
prepare such return, statement or report for filing by such Tax Indemnitee
or, where such return, statement or report shall be required to reflect
items in addition to any obligations of the Lessee under or arising out of
Section 7.2(a), provide such Tax Indemnitee at the Lessee's expense with
information sufficient to permit such return, statement or report to be
properly made with respect to any obligations of the Lessee under or
arising out of Section 7.2(a). Such Tax Indemnitee shall, upon the Lessee's
request and at the Lessee's expense, provide any data regularly maintained
by such Tax Indemnitee (and not otherwise within the control of the Lessee)
with respect to the Equipment which the Lessee may reasonably require to
prepare any required tax returns or reports.
(e) (i) If a written claim is made against any Tax Indemnitee or if
any proceeding shall be commenced against such Tax Indemnitee (including a
written notice of such proceeding), for any Impositions, such Tax
Indemnitee shall promptly notify the Lessee in writing and shall not take
action with respect to such claim or proceeding without the consent of the
Lessee for 30 days after the receipt of such notice by Lessee; provided,
--------
that, in the case of any such claim or proceeding, if action shall be
required by law or regulation to be taken prior to the end of such 30-day
period, such Tax Indemnitee shall, in such notice to the Lessee, inform the
Lessee, and no action shall be taken with respect to such claim or
proceeding without the consent of the Lessee before the end of such shorter
period; provided, further, that the failure of such Tax Indemnitee to give
-------- -------
the notices referred to this sentence shall not diminish the Lessee's
obligation hereunder.
(ii) If, within 30 days of receipt of such notice from the Tax
Indemnitee (or such shorter period as determined pursuant to Section
7.2(e)(i)), the Lessee shall request in writing that such Tax Indemnitee
contest such Imposition, and the tax (including all related taxes that
the Lessee could be responsible for under this Section 7.2) at issue is
at least $50,000, the Tax Indemnitee shall, at the expense of the
Lessee, in good faith conduct and control such contest (including,
without limitation, by
27
pursuit of appeals) relating to the validity, applicability or amount of
such Impositions (provided, however, that (A) if such contest can be
pursued independently from any other proceeding involving a tax
liability of such Tax Indemnitee, the Tax Indemnitee, at the Lessee's
request, shall allow the Lessee to conduct and control such contest and
(B) in the case of any contest that the Lessee is not entitled to
control, the Tax Indemnitee may request the Lessee to conduct and
control such contest if possible or permissible under Legal
Requirements) by, in the sole discretion of the Person conducting and
controlling such contest, (1) resisting payment thereof, (2) not paying
the same except under protest, if protest is necessary and proper, (3)
if the payment be made, using reasonable efforts to obtain a refund
thereof in appropriate administrative and judicial proceedings, or (4)
taking such other action as is reasonably requested by the Lessee from
time to time.
(iii) The party controlling any contest shall consult in good
faith with the non-controlling party and shall keep the non-controlling
party reasonably informed as to the conduct of such contest. No
settlement of any context may be made by the Lessee without the Tax
Indemnitee's written consent, which consent shall not be unreasonably
withheld. The parties agree that a Tax Indemnitee may at any time
decline to take further action with respect to the contest of any
Imposition and may settle such contest if such Tax Indemnitee shall
waive its rights to any indemnity from the Lessee that otherwise would
be payable in respect of such claim (and any future claim by any taxing
authority with respect to other taxable periods that are based, in whole
or in part, upon the resolution of such claim) and shall pay to the
Lessee any amount previously paid or advanced by the Lessee pursuant to
this Section 7.2 by way of indemnification or advance for the payment of
an Imposition.
(iv) Notwithstanding the foregoing provisions of this Section
7.2, a Tax Indemnitee shall not be required to take any action and the
Lessee shall not be permitted to contest any Impositions in its own name
or that of the Tax Indemnitee unless (A) the Lessee shall have agreed to
pay and shall pay to such Tax Indemnitee on demand and on an After Tax
Basis all reasonable costs, losses and expenses that such Tax Indemnitee
actually incurs in connection with contesting such Impositions,
including, without limitation, all reasonable legal, accounting and
investigatory fees and disbursements, (B) the Tax Indemnitee shall have
reasonably determined that the action to be taken will not result in any
material danger of sale, forfeiture or loss of the Equipment, or any
part thereof or interest therein, and will not result in risk of
criminal liability, (C) if such contest shall involve the payment of the
Imposition prior to the contest, the Lessee shall provide to the Tax
Indemnitee an interest-free advance in an amount equal to the Imposition
that the Tax Indemnitee is required to pay (with no additional net
after-tax cost to such Tax Indemnitee), (D) in the case of a
28
claim that must be pursued in the name of an Tax Indemnitee (or an
Affiliate thereof), the Lessee shall have provided to such Tax
Indemnitee an opinion of independent tax counsel selected by the Lessee
and reasonably satisfactory to such Tax Indemnitee stating that a
reasonable basis exists to contest such claim (or, in the case of an
appeal of an adverse determination, an opinion of such counsel to the
effect that there is substantial authority for the position asserted in
such appeal) and (E) no Event of Default shall have occurred and be
continuing unless the Lessee has provided security satisfactory to the
Tax Indemnitee in its good faith discretion. In no event shall a Tax
Indemnitee be required to appeal an adverse judicial determination to
the United States Supreme Court. In addition, a Tax Indemnitee shall not
be required to contest any claim in its name (or that of an Affiliate)
if the subject matter thereof shall be of a continuing nature and shall
have previously been decided adversely by a court of competent
jurisdiction pursuant to the contest provisions of this Section 7.2,
unless there shall have been a change in law (or interpretation thereof)
and the Tax Indemnitee shall have received, at the Lessee's expense, an
opinion of independent tax counsel selected by the Lessee and reasonably
acceptable to the Tax Indemnitee stating that as a result of such change
in law (or interpretation thereof), it is more likely than not that the
Tax Indemnitee will prevail in such contest.
(f) Each Tax Indemnitee agrees to furnish to the Lessee from
time to time such duly executed and properly completed forms that are
reasonably requested by the Lessee in order to claim any reduction of or
exemption from any withholding or other Tax imposed by any taxing authority
in respect of any payments otherwise required to be made by the Lessee
pursuant to the Operative Documents, which reduction or exemption may be
available to such Tax Indemnitee under Legal Requirements (but only if and
to the extent such Tax Indemnitee is legally entitled to furnish such forms
and shall have determined, in its sole discretion, that the providing of
such forms will not adversely affect it).
(g) If as a result of the payment or reimbursement by the
Lessee of any expenses of a Tax Indemnitee or the payment of any
Transaction Expenses incurred in connection with the transactions
contemplated by the Transaction Documents, any Tax Indemnitee shall suffer
a net increase in any federal, state or local income tax liability, the
Lessee shall indemnify such Tax Indemnitees (without duplication of any
indemnification required by Section 7.2(a)) on an After Tax Basis for the
amount of such increase.
7.3 Transaction Costs and Expenses. The Lessee shall, whether or not
------------------------------
the transactions herein contemplated are consummated, pay or cause to be paid
the following (the "Transaction Expenses"):
--------------------
(a) all reasonable out-of-pocket costs and expenses of each
Financing Party (including reasonable fees and disbursements of counsel)
made, paid or
29
incurred in connection with: (i) the preparation, negotiation, execution
and delivery and, where appropriate, authentication, registration and
recordation of the Operative Documents and any other documents and
instruments related hereto or thereto or related to the transactions
contemplated hereby or thereby (including legal opinions); (ii) the
Lessee's exercise of its rights to arrange financing of any Modification,
to replace any Project Contract or to amend or modify its existing
contracts, or to enter into new contracts with respect to the Equipment;
(iii) any amendment or modification to, or the protection or preservation
of any right or claim under, or consent or waiver in connection with, this
Agreement or any other Transaction Document or any such other document or
instrument related hereto or thereto or related to the transactions
contemplated hereby or thereby; (iv) the authentication, registration,
recordation (where appropriate), filing and delivery of evidences of
indebtedness relating to the Secured Obligations and the disbursements
thereof; (v) the enforcement (including with respect to a work out) of this
Agreement and the other Transaction Documents and any other documents and
instruments referred to herein or therein (including the reasonable fees
and disbursements of counsel) and (vi) any syndication by the Investors of
their respective interests in the Trust Estate occurring during the first
180 days after the Closing Date;
(b) the fees and expenses of the Telecommunications Consultant, the
Appraiser and of any other independent expert retained for other services
performed pursuant to this Agreement or any other Transaction Document or
related to the transactions contemplated hereby or thereby;
(c) all reasonable costs and expenses incurred by the Financing Parties
in connection with any purchase of the Equipment by the Lessee pursuant to
the Operative Documents or in connection with the exercise of the Sale
Option;
(d) all fees specified in the Fee Letter at the time and in the manner
required by the Fee Letter;
(e) the initial and annual Trust Company's fee and all expenses of the
Trust Company and any necessary co-trustees (including reasonable counsel
fees and expenses) or any successor owner trustee, for acting as trustee
under the Trust Agreement and performing its obligations thereunder;
(f) the fees and expenses of the Security Agent for performing its
obligations under the Security Deposit Agreement; and
(g) all brokers' fees and any and all stamp, transfer and other similar
taxes, fees and excises, if any, including any interest and penalties,
which are payable in connection with the transactions contemplated by this
Agreement and the other Transaction Documents.
30
7.4 Permitted Contests Other Than in Respect of Impositions. Except
-------------------------------------------------------
to the extent otherwise provided for in Section 7.2, the Lessee, on its own or
on the Lessor's behalf but at the Lessee's sole cost and expense, may contest,
by appropriate administrative or judicial proceedings conducted in good faith
and with due diligence, (i) the amount, validity or application, in whole or in
part, of any applicable Legal Requirement or Requirement of Law or (ii) the
amount, validity, existence or removal of any Lien (other than a Permitted
Lien), and the Lessee agrees not to pay, settle or otherwise compromise any such
item; provided that (a) the commencement and continuation of such proceedings
--------
shall suspend the collection thereof from, and suspend the enforcement thereof
against the Equipment, the Lessee and the Financing Parties; (b) there shall be
no substantial risk that the imposition of a Lien (other than a Permitted Lien)
on the Equipment would result in any part of the Equipment or any Rent or other
amount payable by the Lessee being in any danger of being sold, forfeited, lost
or deferred; (c) at no time during the permitted contest shall there be any risk
of the imposition of criminal liability or a substantial risk of civil liability
on any Financing Party for failure to comply therewith; and (d) there shall not
be a material risk of extending the application of such item beyond the
Expiration Date unless the Lessee has exercised the Purchase Option pursuant to
the Lease at such time. The Lessor, at the Lessee's sole cost and expense,
shall execute and deliver to the Lessee such authorizations and other documents
as may reasonably be required in connection with any such contest and, if
reasonably requested by the Lessee, shall join as a party therein at the
Lessee's sole cost and expense.
7.5 Tax Shelter Registration. The Lessee shall cause the transactions
------------------------
contemplated by the Operative Documents to be registered with the Internal
Revenue Service as a corporate tax shelter. The Lessee agrees to indemnify,
protect and defend each Tax Indemnitee from, and hold them harmless against, any
Impositions resulting from (i) the failure of the Lessee to register such
transactions with the Internal Revenue Service in accordance with the
immediately proceeding sentence, or (ii) the failure to properly so register.
SECTION 8. MISCELLANEOUS
8.1 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 consummation of the transactions contemplated hereby and by
the other Operative Documents and shall be and continue in effect
notwithstanding any investigation made by any party and the fact that any party
may waive compliance with any of the other terms, provisions or conditions of
any of the Operative Documents. Except as otherwise expressly set forth herein
or in other Operative Documents, the indemnities of the parties provided for in
the Operative Documents and the non-recourse provisions of Section 8.8(b) shall
survive the expiration or termination of any thereof.
8.2 Notices. Unless otherwise specifically provided herein, all
-------
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be given in writing by nationally recognized courier service and
any such notice shall become effective five Business Days after being deposited
in the mails, certified or registered with appropriate postage prepaid or one
Business
31
Day after delivery to a nationally recognized courier service specifying
overnight delivery and shall be directed to the address of such Person as
indicated:
If to the Lessee:
KMC Telecom V, Inc.
do KMC Telecom Holdings, Inc.
0000 Xxxxx 000, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: General Counsel
Tel: 000-000-0000
Fax: 000-000-0000
If to the Lessor:
Telecom V Investor Trust 2000-A
do Wilmington Trust Company
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Attn: Corporate Trust Administration
Tel: 000-000-0000
Fax: 000-000-0000
If to the Trustee or the Trust Company:
Wilmington Trust Company
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Attn: Corporate Trust Administration
Tel: 000-000-0000
Fax: 000-000-0000
If to an Investor, at the address set forth for such Investor set
forth on Schedule 1.
From time to time any party may designate a new address for purposes of notice
hereunder by notice to each of the other parties hereto.
8.3 Counterparts. This 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.
8.4 Amendments and Waivers. This Agreement may not be terminated or
----------------------
amended, nor may compliance with any term of this Agreement be waived, except by
an instrument or instruments in writing executed by the Lessee, the Trustee and
the Required Investors.
32
8.5 Headings, etc. The Table of Contents and headings of the various
--------------
Sections and Subsections of this Agreement are for convenience of reference only
and shall not modify, define, expand or limit any of the terms or provisions
hereof.
8.6 Governing Law. This Agreement shall be governed by the laws of
-------------
the State of New York.
8.7 Severability. Any provision of this 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.
8.8 Liability Limited. (a) The Lessee and each Investor each
-----------------
acknowledge and agree that the Trust Company is (except as otherwise expressly
provided herein or therein) entering into this Agreement and the other Operative
Documents to which it is a party (other than the Trust Agreement), solely in its
capacity as trustee under the Trust Agreement and not in its individual
capacity, and that Trust Company shall not be liable or accountable under any
circumstances whatsoever in its individual capacity for or on account of any
statements, representations, warranties, covenants or obligations stated to be
those of the Trustee, except for its own gross negligence or willful misconduct
and as otherwise expressly provided herein or in the other Operative Documents.
Except as specifically provided in the Trust Agreement and except to the extent
that the Trust Company shall have acted in its individual capacity, all Persons
having any claim against the Lessor or the Trust Company acting in its capacity
as Trustee by reason of the transactions contemplated hereby shall look only to
the Trust Estate for payment or satisfaction thereof (and, without limiting the
foregoing, no Investor shall have any liability for payment or satisfaction of
claims against the Lessor or the Trustee except to the extent any such claim
arises out of or results from the breach by such Investor of its obligations
hereunder or under any other Operative Document).
(b) Except as otherwise expressly provided in this Agreement
and the other Transaction Documents, each of the parties hereto other
than the Lessee (the "Non-Lessee Parties") agrees that all obligations
-------------------
of the Lessee under the Transaction Documents shall be obligations
solely of the Lessee, and each Non-Lessee Party shall have recourse only
to the assets of the Lessee in enforcing such obligations. Except as
otherwise expressly provided in the Participation Agreement and the
other Transaction Documents, each Non-Lessee Party hereby acknowledges
and agrees that none of the partners of the Lessee, their respective
Affiliates and their past, present or future officers, directors,
employees, shareholders, agents or representatives (collectively, the
"Nonrecourse Parties") shall have any liability to any
-------------------
Non-Lessee Party for the payment of any sums now or hereafter owing by
the Lessee under the Transaction Documents or for the performance of any
of the obligations of the Lessee contained therein or shall otherwise be
liable or responsible with respect thereto (such liability, including
such as may arise by operation of law, being hereby expressly waived).
Except as otherwise expressly provided in the other Transaction
Documents, if any Event of
33
Default shall occur and be continuing or if any claim of any Non-Lessee
Party against, or alleged liability to any Non-Lessee Party of, the
Lessee shall be asserted under the Participation Agreement or the other
Transaction Documents, each Non-Lessee Party agrees that it shall not
have the right to proceed directly or indirectly against the Nonrecourse
Parties or against their respective properties and assets for the
satisfaction of any of the obligations of the Lessee under the
Participation Agreement or the other Transaction Documents or of any
such claim or liability or for any deficiency judgment in respect of
such obligation or any such claim or liability or for any deficiency
judgment in respect of such obligation or any such claim or liability.
The foregoing notwithstanding, it is expressly understood and agreed
that nothing contained in this Section 8.8(b) shall be deemed to release
any Nonrecourse Party from liability for its fraudulent actions or
willful misconduct. The foregoing acknowledgments, agreements and waiver
shall be enforceable by any Nonrecourse Party.
8.9 Further Assurances. The parties hereto shall promptly cause to be
------------------
taken, executed, acknowledged or delivered, at the sole expense of the Lessee,
all such further acts, conveyances, documents and assurances as the other
parties may from time to time reasonably request in order to carry out and
effectuate the intent and purposes of this Agreement, the other Operative
Documents and the transactions contemplated hereby and thereby (including,
without limitation, the preparation, execution and filing of any and all Uniform
Commercial Code financing statements and other filings or registrations which
the parties hereto may from time to time request to be filed or effected). The
Lessee, at its own expense, shall take such action as may be reasonably
requested in order to maintain and protect all security interests provided for
hereunder or under any other Operative Document.
8.10 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns.
8.11 No Representation or Warranty. Nothing contained herein, in any
-----------------------------
other Operative Document or in any other materials delivered to the Lessee in
connection with the transactions contemplated hereby or thereby shall be deemed
a representation or warranty by any Financing Party or any of their Affiliates
as to the proper accounting treatment or tax treatment that should be afforded
to the Lease and the Trust's ownership of the Equipment and each Creditor
expressly disclaims any representation or warranty with respect to such matters.
8.12 No Waiver: Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of any Financing Party, any right, remedy,
power or privilege hereunder or under the other Operative Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
8.13 Integration. This Agreement and the other Operative Documents
-----------
represent the agreement of the Lessee, the Lessor and the Financing Parties with
respect to the subject matter
34
hereof and there are no promises, undertakings, representations or warranties by
any Financing Party relative to subject matter hereof not expressly set forth or
referred to herein or in the other Operative Documents.
8.14 Confidentiality. Each Financing Party agrees to hold any
---------------
confidential information that it may receive from the Lessee pursuant to this
Agreement or the other Operative Documents in confidence, except for disclosure:
------
(a) to other Financing Parties; (b) to legal counsel and accountants for the
Lessee or such Financing Party; (c) to other professional advisors to the Lessee
or such Financing Party, provided that the recipient has accepted such
--------
information subject to a confidentiality agreement substantially similar to this
Section 8.14; (d) to regulatory officials having jurisdiction over such
Financing Party; (e) as required by applicable law or legal process, provided
--------
that such Financing Party agrees promptly to notify the Lessee of any such
disclosures unless prohibited by applicable laws, or in connection with any
legal proceeding to which such Financing Party and the Lessee are adverse
parties; or (f) to another financial institution in connection with a
disposition or proposed disposition to that financial institution of all or part
of such Financing Party's interests hereunder and under the Transaction
Documents or a participation interest therein, provided that the recipient has
accepted such information subject to a confidentiality agreement substantially
similar to this Section 8.14. For purposes of the foregoing, "confidential
information" shall mean any information respecting the Lessee reasonably
considered by the Lessee to be confidential, other than (i) information
----------
previously filed with any Governmental Authority and available to the public,
(ii) information previously published in any public medium from a source other
than, directly or indirectly, such Financing Party and (iii) information
previously disclosed by the Lessee to any Person not associated with the Lessee
which is not known to the Financing Parties to have a professional duty of
confidentiality to the Lessee or which has not executed an appropriate
confidentiality agreement with the Lessee. Nothing in this Section 8.14 shall be
construed to create or give rise to any fiduciary duty on the part of any
Financing Party to the Lessee or its Subsidiaries.
8.15 Submission To Jurisdiction: Waivers. The Lessee hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Operative Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States for the Southern
District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Lessee, as the case may
35
be at its address set forth in Section 8.2 or at such other address of
which the Investor shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to xxx in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or
consequential damages.
8.16 Acknowledgments. The Lessee hereby acknowledges that:
---------------
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Operative Documents;
and
(b) no joint venture is created hereby or by the other
Operative Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Financing Parties or among the Lessee and the
Financing Parties.
8.17 WAIVERS OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
---------------------
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT AND FOR
ANY COUNTERCLAIM THEREIN.
8.18 Termination. This Agreement shall terminate when all Secured
-----------
Obligations have been indefeasibly paid in full and the Lease terminated and the
security interest granted under the Security Documents has terminated and the
Collateral has been released.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
KMC TELECOM V, INC.
By: /s/ Xxxxx Xxxx
------------------------------------
Name: Xxxxx Xxxx
Title: Vice President
36
TELECOM V INVESTOR TRUST 2000-A, by and through
Wilmington Trust Company, not in its individual
capacity, but solely as Trustee under the Trust
Agreement
By: /s/ Xxxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: Senior Financial Services Officer
WILMINGTON TRUST COMPANY, in its individual
capacity and as Trustee
By: /s/ Xxxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: Senior Financial Services Officer
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Manager, Operations
CIT LENDING SERVICES CORPORATION
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Name: Xxxxx X. Xxxxx
Title: Managing Director
37
Schedule 1 to the
Participation Agreement
-----------------------
INVESTORS AND INVESTOR CONTRIBUTIONS COMMITMENTS
------------------------------------------------
INVESTORS:
GENERAL ELECTRIC CAPITAL CORPORATION
c/o GE Capital Services Structured Finance Group, Inc.
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Portfolio- Operations/Domestic Telecom
Telephone: (000) 000-0000
Fax: (000) 000-0000
CIT LENDING SERVICES CORPORATION
c/o The CIT Group
00 Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Vice President Legal Services
Attention: Assistant Portfolio Manager
Telephone: (000) 000-0000
Fax: (000) 000-0000
INVESTOR CONTRIBUTION COMMITMENTS:
----------------------------------------------------------------------------------------------
Investor Amount Commitment %
-------- ------ ------------
----------------------------------------------------------------------------------------------
General Electric Capital $100,000,000 68.97%
Corporation
----------------------------------------------------------------------------------------------
CIT Lending Services Corporation $ 45,000,000 31.03%
----------------------------------------------------------------------------------------------
38
Exhibit A to the
Participation Agreement
-----------------------
FORM OF TRANSFER INSTRUMENT
---------------------------
[_________ __, 20_]
Reference is made to the Participation Agreement, dated as of June 28,
2000, among KMC Telecom V Inc., a Delaware corporation, Telecom V Investor Trust
2000-A, a Delaware business trust, Wilmington Trust Company, in its individual
capacity and as trustee of the Lessor and the Investors party thereto (as
amended, supplemented or otherwise modified from time to time, the
"Participation Agreement"). Unless otherwise defined herein, terms used herein
--------------------------
and not otherwise defined shall have the meanings assigned to such terms in
Annex A of the Participation Agreement. ________________ (the "Transferor") and
_________________ (the "Purchasing Investor") agree as follows:
-------------------
(a) The Transferor hereby irrevocably sells and assigns to the
Purchasing Investor without recourse to the Transferor, and the Purchasing
Investor hereby irrevocably purchases and assumes from the Transferor without
recourse to the Transferor, as of the Effective Date (as defined below), [all
of] [ __% of] the Transferor's Investor Contribution (as specified in Schedule
1) and the Transferor's rights and obligations under the Participation Agreement
and the other Operative Documents (the "Transferred Interest").
----------------------
(b) The Transferor (i) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Participation Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Participation Agreement, any other Operative Document or any other
instrument or document furnished pursuant thereto, other than that the
Transferor has not created any adverse claim upon the interest being assigned by
it hereunder and that such interest is free and clear of any such adverse claim
and that it is legally authorized to enter into this Transfer Instrument; and
(ii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Lessee or any other obligor or the
performance or observance by the Lessee or any other obligor of any of their
respective obligations under the Participation Agreement or any other Operative
Document or any other instrument or document furnished pursuant hereto or
thereto.
(c) The Purchasing Investor (i) represents and warrants that it is
legally authorized to enter into this Transfer Instrument; (ii) confirms that it
has received a copy of the Participation Agreement, together with copies of the
financial statements delivered pursuant to the Participation Agreement and such
other documents and information as it has deemed
39
appropriate to make its own credit analysis and decision to enter into this
Transfer Instrument; (iii) agrees that it will, independently and without
reliance upon the Transferor, the Lessor or any other Investor and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the
Participation Agreement, the other Operative Documents or any other instrument
or document furnished pursuant hereto or thereto; (d) appoints and authorizes
the Lessor to take such action as agent on its behalf and to exercise such
powers and discretion under the Participation Agreement, the other Operative
Documents or any other instrument or document furnished pursuant hereto or
thereto as are delegated to the Lessor by the terms thereof, together with such
powers as are incidental thereto; and (e) agrees that it will be bound by the
provisions of the Participation Agreement and the other Operative Documents to
the extent of the Transferred Interest and will perform in accordance with its
terms all the obligations which by the terms of the Participation Agreement and
the other Operative Documents are required to be performed by it as an Investor.
(d) The Purchasing Investor represents, warrants and agrees as of the
Effective Date that it is purchasing the Transferred Interest for its own
account and with its general corporate assets in the ordinary course of its
business, and such general corporate assets are, or will be, either: (i) not
assets of any Employee Benefit Plan (or its related trust) which is subject to
Title I of ERISA or Section 4975 of the Code; or (ii) assets of any Employee
Benefit Plan (or its related trust) which is subject to Title I of ERISA or
Section 4975 of the Code, but there is available an exemption from the
prohibited transaction rules under Section 406(a) of ERISA and Section 4975 of
the Code and such exemption is immediately applicable to each transaction
contemplated by the Operative Documents to the extent that any other party to
such transaction is a "party in interest" as defined in Section 3(14) of ERISA
with respect to such plan assets.
(e) The effective date of this Transfer Instrument shall be _______
___, 20__ (the "Effective Date").
--------------
(f) From and after the Effective Date, the Lessor shall make all
payments in respect of the Transferred Interest to the Purchasing Investor. The
Transferor and the Purchasing Investor shall make all appropriate adjustments in
payments by the Lessor for periods prior to the Effective Date or with respect
to the making of this assignment directly between themselves.
(g) From and after the Effective Date, (i) the Purchasing Investor
shall be a party to the Participation Agreement and the other Operative
Documents to the extent of the Transferred Interest and, to the extent provided
in this Transfer Instrument, have the rights and obligations of an Investor
thereunder and under the other Operative Documents and shall be bound by the
provisions thereof and (ii) the Transferor shall with respect to the Transferred
Interest, to the extent provided in this Transfer Instrument, relinquish its
rights and be released from its obligations under the Participation Agreement
and the other Operative Documents.
(h) This Transfer Instrument shall be governed by the laws of the
State of New York.
(i) This Transfer Instrument may be executed by one or more of the
parties to this Transfer Instrument on any number of separate counterparts
(including by facsimile
40
transmission), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Transfer
Instrument to be executed as of the date first above written by their respective
duly authorized officers.
41
SCHEDULE 1
TO TRANSFER INSTRUMENT
--------------------------------------------------------------------------------
Name of Transferor:
Name of Purchasing Investor:
Effective Date of Transfer:
Principal Amount of Investor Percentage of Investor
Contribution Transferred Contribution Transferred
---------------------------------------------- -----------------------------------------------
$____________ $____________
[NAME OF PURCHASING INVESTOR] [NAME OF TRANSFEROR]
By By
---------------------------------- ----------------------------------
Name: Name:
Title: Title:
42
Exhibit B to the
Participation Agreement
-----------------------
FORM OF GUARANTEE
GUARANTEE, dated as of June ___, 20__, made by [INVESTOR PARENT], a
_____________ (the "Guarantor"), in favor of KMC TELECOM V, INC., a Delaware
---------
corporation (the "Lessee"); TELECOM V INVESTOR TRUST 2000-A, a Delaware business
------
trust (the "Lessor"); and WILMINGTON TRUST COMPANY, in its individual capacity
------
(in such capacity, the "Trust Company") and as trustee of the Lessor (in such
-------------
capacity, the "Trustee") (the "Guaranteed Parties").
------- ------------------
RECITALS:
--------
A. WHEREAS, the Guarantor is the parent company of
[Transferee Investor] (the "Transferee Investor");
-------------------
B. WHEREAS, the Transferee Investor is a party to the
Participation Agreement, dated as of June 28, 2000 (the "Participation
-------------
Agreement"), among KMC Telecom V, Inc., (the "Lessee"); Telecom V Investor Trust
------
2000-A, (the "Lessor"); Wilmington Trust Company, in its individual capacity (in
------
such capacity, the "Trust Company") and as trustee of the Lessor (in such
-------------
capacity, the `Trustee"); and the other Investors party thereto;
C. WHEREAS, pursuant to 6.1(b) of the Participation
Agreement, this Guarantee is required to be provided by the Guarantor in favor
of the Guaranteed Parties;
NOW, THEREFORE, the parties hereby agree as follows:
1. Defined Terms. (a) Unless otherwise defined herein, capitalized
------- -----
terms used in this Guarantee shall have the meanings assigned to them in Annex A
to the Participation Agreement.
(b) As used herein, "Obligations" means the collective reference to
-----------
all obligations and liabilities of Transferee Investor to the Guaranteed
Parties, whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Operative Documents or any other document made, delivered
or given in connection therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of counsel
to the Guaranteed Parties that are required to be paid by Transferee Investor or
the Guarantor pursuant to the terms of this Agreement or the Operative
Documents).
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Guarantee shall refer to this Guarantee as a whole and
not to any particular provision of this Guarantee, and section and paragraph
references are to this Guarantee unless otherwise specified.
43
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Guarantee. (a) The Guarantor hereby unconditionally and
---------
irrevocably guarantees to the Guaranteed Parties and their respective
successors, endorsees, transferees and assigns, the prompt and complete payment
and performance by Transferee Investor when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations.
(b) The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of counsel) which may
be paid or incurred by the Guaranteed Parties in enforcing, or obtaining advice
of counsel in respect of, any rights with respect to, or collecting, any or all
of the Obligations and/or enforcing any rights with respect to, or collecting
against, the Guarantor under this Guarantee.
(c) No payment or payments made by Transferee Investor or any other
Person or received or collected by the Guaranteed Parties from Transferee
Investor or any other Person by virtue of any action or proceeding or any set-
off or appropriation or application, at any time or from time to time, in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of the Guarantor hereunder which
shall, notwithstanding any such payment or payments (other than payments made by
the Guarantor in respect of the Obligations or payments received or collected
from the Guarantor in respect of the Obligations), remain liable for the
Obligations until the Obligations are paid in full.
(d) The Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Guaranteed Parties on account of its
liability hereunder, it will notify such Guaranteed Parties in writing that such
payment is made under this Guarantee for such purpose.
3. No Subrogation. Notwithstanding any payment or payments made by
--------------
the Guarantor hereunder, or any set-off or application of funds of the Guarantor
by the Guaranteed Parties, the Guarantor shall not be entitled to be subrogated
to any of the rights of the Guaranteed Parties against Transferee Investor or
against any collateral security or guarantee or right of offset held by the
Guaranteed Parties for the payment of the Obligations, nor shall the Guarantor
seek or be entitled to seek any contribution or reimbursement from Transferee
Investor in respect of payments made by the Guarantor hereunder, until all
amounts owing to the Guaranteed Parties by Transferee Investor on account of the
Obligations are paid in full. If any amount shall be paid to the Guarantor on
account of such subrogation rights at any time when all of the Obligations shall
not have been paid in full, such amount shall be held by the Guarantor in trust
for the Guaranteed Parties, segregated from other funds of the Guarantor, and
shall, forthwith upon receipt by the Guarantor, be turned over to the Guaranteed
Parties in the exact form received by the Guarantor (duly indorsed by the
Guarantor to the Guaranteed Parties, if required), to be applied against the
Obligations, whether matured or unmatured, in such order as the Guaranteed
Parties may determine.
4. Amendments, etc. with respect to the Obligations; Waiver of
-----------------------------------------------------------
Rights. The Guarantor shall remain obligated hereunder notwithstanding that,
------
without any reservation of
44
rights against the Guarantor, and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made by the
Guaranteed Parties may be rescinded by such Guaranteed Parties, and any of the
Obligations continued, and the Obligations, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Guaranteed Parties, and the Operative Documents
and any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Guaranteed Parties may deem advisable from time to time, and any guarantee or
right of offset at any time held by the Guaranteed Parties for the payment of
the Obligations may be sold, exchanged, waived, surrendered or released. The
Guaranteed Parties shall not have any obligation to protect, secure, perfect or
insure any Lien at any time held by them as security for the Obligations or for
this Guarantee or any property subject thereto. When making any demand hereunder
against the Guarantor, the Guaranteed Parties may, but shall be under no
obligation to, make a similar demand on Transferee Investor or any other
guarantor, and any failure by the Guaranteed Parties to make any such demand or
to collect any payments from Transferee Investor or any such other guarantor or
any release of Transferee Investor or such other guarantor shall not relieve the
Guarantor of its obligations or liabilities hereunder, and shall not impair or
affect the rights and remedies, express or implied, or as a matter of law, of
any Guaranteed Parties against the Guarantor. For the purposes hereof "demand"
shall include the commencement and continuance of any legal proceedings.
5. Guarantee Absolute and Unconditional. The Guarantor waives any
------------------------------------
and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance of any Guaranteed Party upon this
Guarantee or acceptance of this Guarantee; the Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon this Guarantee; and all
dealings between Transferee Investor or the Guarantor, on the one hand, and the
Guaranteed Parties, on the other, shall likewise be conclusively presumed to
have been had or consummated in reliance upon this Guarantee. The Guarantor
waives diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon Transferee Investor or the Guarantor with respect to
the Obligations. This Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Participation Agreement or any other
Operative Document, any of the Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Guaranteed Parties, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by Transferee Investor against the
Guaranteed Parties, or (c) any other circumstance whatsoever (with or without
notice to or knowledge of Transferee Investor or the Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of Transferee Investor for the Obligations, or of the Guarantor under
this Guarantee, in bankruptcy or in any other instance. When pursuing their
rights and remedies hereunder against the Guarantor, the Guaranteed Parties may,
but shall be under no obligation to, pursue such rights and remedies as they may
have against Transferee Investor or any other Person or against any collateral
security or guarantee for the Obligations or any right of offset with respect
thereto, and any failure by the
45
Guaranteed Parties to pursue such other rights or remedies or to collect any
payments from Transferee Investor or any such other Person or to realize upon
any such collateral security or guarantee or to exercise any such right of
offset, or any release of Transferee Investor or any such other Person or of any
such collateral security, guarantee or right of offset, shall not relieve the
Guarantor of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of the
Guaranteed Parties against the Guarantor. This Guarantee shall remain in full
force and effect and be binding in accordance with and to the extent of its
terms upon the Guarantor and its successors and assigns thereof, and shall inure
to the benefit of the Guaranteed Parties, and their respective successors,
endorsees, transferees and assigns, until all the Obligations and the
obligations of the Guarantor under this Guarantee shall have been satisfied by
payment in full.
6. Reinstatement. This Guarantee shall continue to be effective, or
-------------
be reinstated, as the case may be, if at any time payment, or any part thereof,
of any of the Obligations is rescinded or must otherwise be restored or returned
by the Guaranteed Parties upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of Transferee Investor or upon or as a result of
the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, Transferee Investor or any substantial part of its
property, or otherwise, all as though such payments had not been made.
7. Representations and Warranties. The Guarantor represents and
------------------------------
warrants to the Guaranteed Parties that:
(a) the Guarantor is a [corporation] duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the corporate power and authority and the legal right to own and operate its
property, to lease the property it operates and to conduct the business in which
it is currently engaged,
(b) the Guarantor has the corporate power and authority and the legal
right to execute and deliver, and to perform its obligations under, this
Guarantee, and has taken all necessary corporate action to authorize its
execution, delivery and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding obligation
of the Guarantor enforceable in accordance with its terms, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors' rights
generally, general equitable principles and an implied covenant of good faith
and fair dealing;
(d) the execution, delivery and performance of this Guarantee will not
violate any provision of any Requirement of Law or Contractual Obligation of the
Guarantor and will not result in or require the creation or imposition of any
Lien on any of the properties or revenues of the Guarantor pursuant to any
Requirement of Law or Contractual Obligation of the Guarantor;
(e) no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of any other
Person (including, without
46
limitation, any stockholder or creditor of the Guarantor) is required in
connection with the execution, delivery, performance, validity or enforceability
of this Guarantee; and
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the
Guarantor, threatened by or against the Guarantor or against any of its
properties or revenues with respect to this Guarantee or any of the transactions
contemplated hereby.
8. Notices. All notices, requests and demands to or upon the
-------
Guaranteed Parties or the Guarantor to be effective shall be in writing (or by
telex, fax or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (a) when delivered by hand or (b) if
given by mail, when deposited in the mails by certified mail, return receipt
requested, or (c) if by telex, fax or similar electronic transfer, when sent and
receipt has been confirmed, addressed as follows:
(a) if to the Guaranteed Parties, at their addresses or transmission
numbers for notices provided in the Participation Agreement; and
(b) if to the Guarantor, at its address or transmission number for
notices set forth under its signature below.
The Guaranteed Parties and the Guarantor may change its address and
transmission numbers for notices by notice in the manner provided in this
Section.
9. Severability. Any provision of this Guarantee which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10. Integration This Guarantee represents the agreement of the
-----------
Guarantor with respect to the subject matter hereof and there are no promises or
representations by the Guaranteed Parties relative to the subject matter hereof
not reflected herein.
11. Amendments in Writing: No Waiver: Cumulative Remedies. (a) None
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of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Guarantor and the Guaranteed Parties, provided that any provision of this
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Guarantee may be waived by the Guaranteed Parties in a letter or agreement
executed by the Guaranteed Parties or by telex or facsimile transmission from
the Guaranteed Parties.
(b) No Guaranteed Party shall by any act (except by a written
instrument pursuant to paragraph 12(a) hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of the Guaranteed Parties,
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or
47
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Guaranteed Parties of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which such
Guaranteed Parties would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
12. Section Headings. The section headings used in this Guarantee
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are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
13. Successors and Assigns. This Guarantee shall be binding upon the
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successors and assigns of the Guarantor and shall inure to the benefit of the
Guaranteed Parties and their successors and assigns.
14. Governing Law. This Guarantee shall be governed by the laws of
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the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered by its duly authorized officer as of the day and
year first above written.
[INVESTOR PARENT]
By:
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Name:
Title:
Address for Notices:
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--------------------------------
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Telephone:
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Facsimile:
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