================================================================================
LEASE AGREEMENT
Dated as of June 1, 2000
between
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity, except as expressly
provided herein, but solely as Owner Trustee,
Lessor,
and
SWEETHEART CUP COMPANY INC.,
Lessee,
relating to
Manufacturing Equipment
================================================================================
THIS LEASE HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL
COUNTERPART MARKED "ORIGINAL XXXXXXXXXXX XX. 0" XXXXX XXXXXXXXXX CHATTEL PAPER
WITHIN THE MEANING OF THE UNIFORM COMMERCIAL CODE. SEE SECTION 18 HEREOF FOR
INFORMATION CONCERNING THE RIGHTS OF HOLDERS OF THE VARIOUS COUNTERPARTS OF THIS
LEASE.
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I Definitions and Usage................................................1
ARTICLE II Lease of Equipment..................................................1
ARTICLE III Term and Rent......................................................1
SECTION 3.01. Basic Term and Renewal Term......................1
(a) Basic Term................................1
(b) Basic Rent................................1
SECTION 3.02. Supplemental Rent................................2
SECTION 3.03. Method of Payment................................2
SECTION 3.04. Late Payment.....................................2
SECTION 3.05. Net Lease........................................3
ARTICLE IV Disclaimer of Warranties............................................4
SECTION 4.01. Disclaimer of Warranties.........................4
ARTICLE V Liens; Quiet Enjoyment...............................................5
SECTION 5.01. Liens............................................5
SECTION 5.02. Quiet Enjoyment..................................5
SECTION 5.03. Personal Property................................5
ARTICLE VI Operation; Maintenance..............................................6
SECTION 6.01. Operation........................................6
SECTION 6.02. Maintenance......................................6
SECTION 6.03. Replacement of Parts.............................6
SECTION 6.04. Relocation.......................................7
(a) Within the United States..................7
(b) Outside the United States.................8
SECTION 6.05. Modification.....................................8
SECTION 6.06. Warranty Assignments.............................9
SECTION 6.07. Property Fire Protection.........................9
ARTICLE VII Early Termination.................................................10
SECTION 7.01. Termination for Obsolescence or Business
Purposes........................................10
SECTION 7.02. Lessor Election to Retain Equipment.............10
SECTION 7.03. Qualifying Bids.................................10
(a) Solicitation of Bids.....................10
(b) Procedure If No Sale.....................11
SECTION 7.04. Rescission by Lessee............................11
SECTION 7.05. Sale Pursuant to Qualifying Bid.................11
TABLE OF CONTENTS
-----------------
(continued)
Page
----
SECTION 7.06. Payment Lessee; Notice; Termination of Lease....11
ARTICLE VIII Return of Equipment..............................................12
SECTION 8.01. Return of Equipment.............................12
SECTION 8.02. Severable Modifications.........................14
ARTICLE IX Damage; Application of Payments; Restoration of Equipment..........15
SECTION 9.01. Event of Loss...................................15
(a) Notice of Event of Loss..................15
(b) Lessee Alternatives......................15
SECTION 9.02. Application of Payments Upon an Event of Loss...16
SECTION 9.03. Loss, Damage, Seizure, Requisition, Application of
Payments Not Relating to an Event of Loss.......16
SECTION 9.04. Application of Payments During Payment Default,
Bankruptcy Default or Lease Event of Default....17
SECTION 9.05. Restoration of the Equipment....................17
SECTION 9.06. Event of Loss with respect to All Components at a
Site............................................18
ARTICLE X Environmental Matters...............................................18
SECTION 10.01. Environmental Covenants.........................18
SECTION 10.02. EH&S Reporting..................................19
SECTION 10.03. Waiver..........................................20
ARTICLE XI Sublease and Assignment............................................20
SECTION 11.01. Sublease........................................20
SECTION 11.02. Assignment and Merger...........................22
ARTICLE XII Inspection........................................................22
ARTICLE XIII Lease Events of Default..........................................22
SECTION 13.01. Lease Events of Default.........................22
ARTICLE XIV Remedies..........................................................24
SECTION 14.01. Effect of Lease Event of Default................24
SECTION 14.02. Determinations of Fair Market Sales Value and Fair
Market Rental Value.............................27
SECTION 14.03. No Relief from Termination......................28
SECTION 14.04. Remedies Cumulative.............................28
TABLE OF CONTENTS
-----------------
(continued)
Page
----
ARTICLE XV Right To Cure......................................................28
ARTICLE XVI Purchase Options..................................................29
SECTION 16.01. Early Buyout Option.............................29
(a) Option to Purchase.......................29
(b) Conveyance...............................29
(c) Deferred EBO Payment Amount..............29
SECTION 16.02. End of Term Purchase Option.....................30
(a) Return Notice............................30
(b) Election to Purchase.....................30
(c) Payment; Conditions......................30
(d) Reconveyance.............................30
SECTION 16.03. Renewal Option..................................31
(a) Renewal Option...........................31
(b) Computation of Renewal Term Basic Rent...31
(c) Adjustment of Stipulated Loss Value......31
(d) Amendments to this Lease.................31
ARTICLE XVII Further Assurances...............................................32
SECTION 17.01. Further Action by Lessee........................32
SECTION 17.02. Environmental, Health and Safety Program........32
(a) EH&S Program.............................32
(b) Provision of Copy........................32
(c) Review...................................32
ARTICLE XVIII Chattel Paper...................................................33
SECTION 18.01. Chattel Paper...................................33
ARTICLE XIX Insurance.........................................................33
SECTION 19.01. Insurance.......................................33
(a) Coverage.................................33
(b) Endorsements.............................34
(c) Certifications...........................35
(d) Insurance Report.........................35
(e) General..................................36
SECTION 19.02. Adjustment of Claims; Payment...................36
(a) No Event of Default......................36
(b) Application of Payments during Existence of
a Lease Event of Default.................37
SECTION 19.03. Additional Insurance by Lessor and Lessee.......37
TABLE OF CONTENTS
-----------------
(continued)
Page
----
ARTICLE XX Owner Trustee; Owner Participant...................................37
SECTION 20.01. Successor Trustee; Co-trustee...................37
SECTION 20.02. Owner Trustee Not Acting in Individual Capacity.38
ARTICLE XXI Collateral........................................................38
SECTION 21.01. Collateral......................................38
ARTICLE XXII Miscellaneous....................................................38
SECTION 22.01. Documentary Conventions.........................38
SECTION 22.02. Revision of Lease Supplements...................38
SECTION 22.03. True Lease......................................38
SECTION 22.04. City of Chicago.................................39
LEASE AGREEMENT
LEASE AGREEMENT (this "Lease") dated as of June 1, 2000,
between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity,
except as expressly provided herein, but solely as Owner Trustee under the Trust
Agreement, as lessor ("Lessor"), and SWEETHEART CUP COMPANY INC., as lessee
("Lessee").
In consideration of the mutual covenants and agreements
contained herein. Lessor and Lessee agree as follows:
ARTICLE I
Definitions and Usage
---------------------
Unless the context otherwise requires, terms used herein shall
have the meanings assigned to them in Appendix A to the Participation Agreement,
which also contains rules as to usage.
ARTICLE II
Lease of Equipment
------------------
Immediately upon execution and delivery of all the Operative
Documents on or prior to the Closing Date, without necessity of any further act
or evidence by either party hereto, the Equipment subject to any Lease
Supplement delivered on the Closing Date shall be deemed examined and accepted
by Lessee for all purposes and shall be deemed delivered and leased by Lessor to
Lessee for the Basic Term as provided in the respective Lease Supplement and
herein.
ARTICLE III
Term and Rent
-------------
SECTION 3.01. Basic Term and Renewal Term.
---------------------------
(a) Basic Term. The Basic Term for the Equipment shall
commence on the Basic Term Commencement Date and end on the Basic Term
Expiration Date, or on such earlier date as this Lease with respect to the
Equipment may be terminated in accordance with the provisions hereof.
(b) Basic Rent. (i) Lessee shall pay to Lessor an installment
of Basic Rent on each Rent Payment Date during the Basic Term for the Equipment
set forth in any Lease Supplement, subject to adjustment under Article IX of the
Participation Agreement (which
1
Article is incorporated by reference herein as if fully set forth herein), equal
to the amount of Basic Rent specified for such Rent Payment Date in Schedule
II-A to such Lease Supplement as the same may be amended from time to time in
accordance with the terms hereof. If a Renewal Term is entered into pursuant to
Section 16.03, Lessee shall pay to Lessor an installment of Renewal Term Basic
Rent on each Rent Payment Date during the Renewal Term for the Equipment set
forth in the relevant Lease Supplement equal to the amount of Renewal Term Basic
Rent determined pursuant to Section 16.03 hereof as specified for such Rent
Payment Date in the relevant schedule to such Lease Supplement, as the same may
be amended from time to time in accordance with the terms hereof.
(ii) The Lease Supplements will indicate how and to what
extent any installment of Basic Rent and Renewal Term Basic Rent is to be
allocated for federal income tax purposes, including the amount of Basic Rent
that shall be allocated to each calendar year during the Basic Term and any
initial rent holiday. It is the intention of Lessor and Lessee that the
allocations of Basic Rent set forth in the Lease Supplement constitutes specific
allocations of fixed rent within the meaning of Treas. Reg. sec.
1.467-1(c)(2)(ii).
(iii) If a Renewal Term is entered into pursuant to Section
16.03, the Renewal Term Basic Rent will be payable quarterly in arrears and
allocated to the quarterly period ending on the date of such payment. Lessor and
Lessee agree that each installment of Renewal Term Basic Rent will be accrued
over the period commencing on the immediately preceding Rent Payment Date or the
first day of the applicable Renewal Term, as applicable, and ending on the Rent
Payment Date on which such arrears payment is scheduled to be made.
SECTION 3.02. Supplemental Rent. Lessee shall pay,or cause to
be paid, promptly to Lessor, or to whomever shall be entitled thereto as
expressly provided herein or in any other Operative Document, any and all
Supplemental Rent (i) payable in connection with the payment of Stipulated Loss
Value as and when the same shall become due and owing, (ii) any interest payable
at the Overdue Rate as provided in Section 3.04 and (iii) all other amounts of
Supplemental Rent within 15 days after written demand or such other relevant
period as set forth in any Operative Document.
SECTION 3.03. Method of Payment. All Rent payable to Lessor
shall be paid by Lessee to Lessor at the Owner Trustee Office, or at such other
place in the United States as Lessor shall specify to Lessee in writing on at
least 5 Business Days' notice; provided, however, that, in the case of payments
pursuant to Article VI of the Participation Agreement or any Tax Indemnity
Agreement, payment shall be made to whomever shall be entitled thereto at the
place designated in Schedule I to the Participation Agreement with respect to
such Person. Each payment of Rent shall be made by Lessee in funds with
immediate value prior to 12:00 noon, New York time to the designated account, on
the date when such payment shall be due.
SECTION 3.04. Late Xxxxxxx.Xx the event any Rent shall not be
paid by Lessee on its due date, Lessee shall pay to Lessor or the relevant Owner
Participant, as the case may be, on demand, as Supplemental Rent, interest (to
the extent permitted by Applicable Laws)
2
on such overdue amount from the due date thereof to the date of payment thereof
at the Overdue Rate.
SECTION 3.05. Net Lease. THIS LEASE IS A NET LEASE (AND
EXPENSES ASSOCIATED WITH THE INSTALLATION, SERVICING, MAINTENANCE AND OPERATION
OF THE EQUIPMENT SHALL BE FOR THE ACCOUNT OF LESSEE, WHETHER OR NOT SO STATED
HEREIN), AND, NOTWITHSTANDING ANY PROVISION OF THIS LEASE OR OF ANY OTHER
OPERATIVE DOCUMENT TO THE CONTRARY, LESSEE'S OBLIGATION TO MAKE ALL PAYMENTS OF
RENT AS AND WHEN THE SAME SHALL BECOME DUE AND PAYABLE IN ACCORDANCE WITH THE
TERMS OF THIS LEASE AND ANY OTHER OPERATIVE DOCUMENT SHALL BE ABSOLUTE AND
UNCONDITIONAL AND SHALL NOT BE SUBJECT TO (I) ANY ABATEMENT OR DIMINUTION BY
SET-OFF, DEDUCTION, COUNTERCLAIM, RECOUPMENT, AGREEMENT, DEFENSE, SUSPENSION,
DEFERMENT, INTERRUPTION OR OTHERWISE, (II) ANY INSOLVENCY, BANKRUPTCY,
REORGANIZATION OR SIMILAR PROCEEDINGS BY OR AGAINST LESSEE, OR (III) ANY OTHER
CIRCUMSTANCE, HAPPENING OR EVENT WHATSOEVER, WHETHER OR NOT SIMILAR TO ANY OF
THE FOREGOING; NOR SHALL ANY OF THE OBLIGATIONS OF LESSEE TO PAY RENT HEREUNDER
BE OTHERWISE AFFECTED BY REASON OF ANY DEFECT IN THE TITLE TO, OR ANY DEFECT IN
OR LACK OF FITNESS FOR USE OF OR ANY DAMAGE TO OR LOSS, OR LOSS OF THE USE OF OR
DESTRUCTION OR THEFT OF, ALL OR ANY PART OF THE EQUIPMENT FROM ANY CAUSE
WHATSOEVER, THE PROHIBITION OF THE USE OR POSSESSION BY LESSEE OF, OR ANY OUSTER
OR DISPOSSESSION BY PARAMOUNT TITLE OR OTHERWISE OF ALL OR ANY PART OF THE
EQUIPMENT, THE INTERFERENCE WITH SUCH USE OR POSSESSION BY ANY GOVERNMENTAL
AUTHORITY OR OTHER PERSON, OR THE INVALIDITY OR UNENFORCEABILITY OR THE
DISAFFIRMANCE OF THIS LEASE, ANY OF THE OTHER OPERATIVE DOCUMENTS OR ANY
AGREEMENT RELATED THERETO, OR BY REASON OF ANY FAILURE BY LESSOR OR ANY OTHER
PERSON TO PERFORM ANY OF ITS OBLIGATIONS HEREIN OR THEREIN CONTAINED, OR BY
REASON OF ANY LIENS ON ALL OR ANY PART OF THE EQUIPMENT, OR FOR ANY OTHER CAUSE
WHETHER SIMILAR OR DISSIMILAR TO THE FOREGOING AND, UNTIL SUCH TIME AS ALL RENT
REQUIRED TO BE PAID UNDER THIS LEASE OR ANY OTHER OPERATIVE DOCUMENT SHALL HAVE
BEEN PAID, NEITHER THIS LEASE NOR THE PARTICIPATION AGREEMENT SHALL TERMINATE
NOR SHALL LESSEE BE RELEASED, RELIEVED OR DISCHARGED FROM ITS OBLIGATION TO
MAKE, AND NOR SHALL IT SUSPEND OR DISCONTINUE, ANY PAYMENT OF RENT FOR ANY
REASON WHATSOEVER (EXCEPT AS MAY BE EXPRESSLY PROVIDED HEREIN), IT BEING THE
INTENTION OF THE PARTIES HERETO THAT ALL RENT PAYABLE BY LESSEE HEREUNDER SHALL
CONTINUE TO BE PAYABLE IN ALL EVENTS IN THE MANNER AND AT THE TIMES HEREIN AND
IN THE PARTICIPATION AGREEMENT PROVIDED UNLESS THE OBLIGATION TO PAY THE SAME
SHALL BE TERMINATED PURSUANT TO THE EXPRESS PROVISIONS OF THIS LEASE. IN THAT
CONNECTION, LESSEE HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAWS,
ANY AND ALL RIGHTS WHICH IT MAY NOW
3
HAVE OR WHICH MAY AT ANY TIME HEREAFTER BE CONFERRED UPON IT, BY STATUTE OR
OTHERWISE, TO TERMINATE, CANCEL, QUIT OR SURRENDER THIS LEASE EXCEPT IN
ACCORDANCE WITH THE EXPRESS TERMS HEREOF AND AGREES THAT IF, FOR ANY REASON
WHATSOEVER, THIS LEASE SHALL BE TERMINATED IN WHOLE OR IN PART BY OPERATION OF
LAW OR OTHERWISE EXCEPT AS SPECIFICALLY PROVIDED HEREIN OR IN ANY DOCUMENT
MODIFICATION, LESSEE WILL NONETHELESS PAY TO LESSOR (OR TO WHOSOEVER SHALL BE
ENTITLED THERETO AS EXPRESSLY PROVIDED HEREIN) AN AMOUNT EQUAL TO EACH BASIC
RENT AND SUPPLEMENTAL RENT PAYMENT AT THE TIME SUCH PAYMENT WOULD HAVE BECOME
DUE AND PAYABLE IN ACCORDANCE WITH THE TERMS HEREOF AND OF THE PARTICIPATION
AGREEMENT HAD SUCH TERMINATION NOT OCCURRED. EACH PAYMENT OF RENT MADE BY LESSEE
SHALL BE FINAL AND LESSEE WILL NOT SEEK OR HAVE ANY RIGHT TO RECOVER ALL OR ANY
PART OF SUCH PAYMENT FROM LESSOR. NOTHING CONTAINED IN THIS SECTION 3.05 SHALL
PREVENT LESSEE FROM BRINGING A SEPARATE ACTION FOR DAMAGES SUFFERED BY LESSEE AS
A RESULT OF THE BREACH BY ANY PERSON OF ANY OBLIGATION OWED BY IT TO LESSEE OR
FOR EQUITABLE RELIEF TO OBTAIN COMPLIANCE WITH SUCH OBLIGATION. NOTHING IN THIS
LEASE SHALL BE CONSTRUED AS A GUARANTEE BY LESSEE OF ANY RESIDUAL VALUE IN THE
EQUIPMENT.
ARTICLE IV
Disclaimer of Warranties
------------------------
SECTION 4.01. Disclaimer of Warranties. LESSEE HAS SELECTED
THE EQUIPMENT, AND AS BETWEEN LESSOR AND LESSEE, DELIVERY OF THE EQUIPMENT
PURSUANT TO ARTICLE II SHALL BE CONCLUSIVE PROOF OF ACCEPTANCE BY LESSEE OF THE
EQUIPMENT AS BEING IN COMPLIANCE WITH ALL REQUIREMENTS OF THIS LEASE, AND LESSOR
LEASES AND LESSEE TAKES THE EQUIPMENT AND EACH COMPONENT PART THEREOF "AS IS"
AND LESSEE ACKNOWLEDGES THAT NEITHER THE TRUST COMPANY, LESSOR NOR ANY OWNER
PARTICIPANT HAS MADE, NOR SHALL BE DEEMED TO HAVE MADE, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE, COMPLIANCE WITH
SPECIFICATIONS, CONDITION, MERCHANTABILITY, DESIGN, QUALITY, DURABILITY,
OPERATION OR FITNESS FOR USE OR PURPOSE OF THE EQUIPMENT OR ANY COMPONENT PART
THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE EQUIPMENT OR ANY COMPONENT PART THEREOF OR OTHERWISE. IT BEING
AGREED THAT ALL RISKS INCIDENT THERETO ARE TO BE BORNE, AS BETWEEN LESSOR AND
LESSEE, BY LESSEE IN
4
THE EVENT OF ANY DEFECT OR DEFICIENCY IN THE EQUIPMENT OR ANY COMPONENT PART
THEREOF, OF ANY NATURE WHETHER PATENT OR LATENT, AND THAT NEITHER LESSOR NOR ANY
OWNER PARTICIPANT SHALL HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT
THERETO, except that Trust Company hereby (i) represents, warrants and covenants
that on the Closing Date the Equipment shall be free of Lessor Liens
attributable to it, and (ii) agrees that it will not directly or indirectly
create, incur, assume or suffer to exist any Lessor Lien attributable to it.
Nothing contained in this Article IV shall in any way diminish or otherwise
affect any right Lessee may have with respect to the Equipment against any third
Person.
ARTICLE V
Liens; Quiet Enjoyment
----------------------
SECTION 5.01. Liens. Lessee shall not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Equipment or any Component or part thereof, or title thereto or any interest
therein except Permitted Liens. Lessee will promptly, at its own expense, take
such action as may be necessary duly to discharge any Lien other than Permitted
Liens.
SECTION 5.02. Quiet Enjoyment. Notwithstanding any other
provision of this Lease, so long as no Lease Event of Default shall have
occurred and be continuing, as between Lessee and Lessor, Lessee shall have the
exclusive right to possession, operation and control of all the Equipment and
neither Lessor nor any Person acting or claiming through Lessor will interfere
with the peaceful and quiet enjoyment, operation and possession of the use or
nonuse of the Equipment by Lessee in accordance with the terms hereof.
SECTION 5.03. Personal Property. Lessee and Lessor agree for
the purposes of the Transactions that the Equipment and every Component or part
thereof are and shall be considered as and shall remain personal and not real
property or fixtures to all Persons and for all purposes. Lessee and Lessor
agree that the Equipment, every Component, and every part thereof are severed
and shall be and shall remain severed from any real property and are readily
movable and, even if physically attached to such property, it is the intention
of Lessee and Lessor that the Equipment, and every Component or part thereof (i)
shall retain the character of personal property, (ii) shall be removable, (iii)
shall be treated as personal property with respect to the rights of all Persons
whomsoever, (iv) shall not become part of any real property and (v) by virtue of
its nature as personal property, shall not be affected in any way by any
instrument dealing with any real property.
5
ARTICLE VI
Operation; Maintenance
----------------------
SECTION 6.01. Operation. Lessee shall not use the Equipment
or permit any third party to use the Equipment:
(i) for any purpose other than its intended purpose;
(ii) in any manner other than in the same manner and with the
same care as used by Lessee with respect to similar equipment owned or
leased by Lessee;
(iii) in breach of (x) any material Applicable Laws or (y) any
license, permit or authorization relating to the Equipment or to Lessee
issued by any Governmental Authority having jurisdiction over the
Equipment or Lessee, unless the validity thereof is being contested in
good faith and by a Permitted Contest.
SECTION 6.02. Maintenance.(a) Lessee at its own expense shall
at all times during the Term applicable to the Equipment inspect, maintain,
service, repair and overhaul the Equipment so as to keep it (i) in good
operating condition and good physical condition, ordinary wear and tear
excepted, (ii) in compliance with applicable insurance policies and in a manner
and frequency required by applicable manufacturers' warranties, if any, and
(iii) maintain the Equipment under a preventive maintenance program by qualified
personnel (who may be employees of Lessee) who possess a working knowledge of
the mechanical operation of the Equipment including electrical systems, motors,
drives, controls, accessories, lubricants and all other items necessary to make
the machine operate at the same rate of production as of the date of delivery
under this Lease and in the same manner and with the same care as used by Lessee
with similar equipment owned or leased by Lessee, and as such specifications may
be adjusted by Modifications under this Lease, subject to ordinary wear and tear
(with respect to the Equipment, the "Applicable Specifications"). The Equipment
shall be, moreover, inspected, maintained, serviced, repaired, overhauled and
preserved by Lessee in compliance with all material requirements of Applicable
Laws, and Lessee will (at its expense) provide all maintenance and service and
make all repairs necessary for such purpose. Lessor shall not be obliged in any
way to maintain, alter, repair, rebuild, overhaul or replace the Equipment.
(b) Lessee shall maintain in proper order all appropriate
books, records, service manuals, operating manuals, blueprints, and title
documents in connection with the Equipment and provide all such books, records
and documents to Lessor at the date of return. Lessee shall maintain or cause to
be maintained all records, logs and other materials required to be maintained in
respect of the Equipment by Applicable Laws and upon written request promptly
furnish or cause to be furnished to Lessor such information as may be required
to enable Lessor to file any reports required to be filed by Lessor or the Owner
Participant with any Governmental Authority because of Lessor's ownership or
interest in the Equipment.
SECTION 6.03. Replacement of Parts. If any parts that were
originally incorporated or installed in or attached to or constituting a part of
the Equipment at the time of
6
delivery thereof hereunder, or any parts thereafter incorporated or installed in
or attached to or constituting a part of the Equipment in replacement of or
substitution for such original parts, shall become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or otherwise permanently
rendered unfit for use, Lessee, at its own expense, shall as soon as practicable
replace such parts, or cause the same to be replaced, by replacement parts which
are free of all Liens (other than Permitted Liens) and the removal and the
replacement shall be performed in such manner and with replacement parts of such
quality, that the Equipment shall be in as good an operating condition as, and
have a fair market and expected residual value, remaining economic useful life
and utility at least equal to the fair market and expected residual value,
remaining economic useful life and utility of, the Equipment prior to such
replacement of parts (assuming the Equipment was, at the time of such
replacement of parts in the condition and state of repair required by the terms
hereof) and shall constitute "Leased Equipment" as defined in the Intercreditor
Agreement. All parts at any time removed from the Equipment or any Component
shall remain the property of Lessor and subject to this Lease, no matter where
located, until such time as such parts shall be replaced by parts which have
been incorporated or installed in or attached to or made a part of the Equipment
and which meet the requirements for replacement parts specified above; provided,
however, that parts that have been removed from the Equipment or any Component
and that have no value other than scrap value shall be released from this Lease
and all other Operative Documents immediately upon their removal from the
Equipment or any Component, and may be disposed of by Lessee (at its expense)
prior to the installation of the replacement part. Immediately upon a
replacement part becoming incorporated or installed in or attached to the
Equipment as above provided, without further act, (i) the replaced part shall
become the property of Lessee, and shall no longer be subject to this Lease or
any other Operative Document, shall be free and clear of all rights of Lessor,
and shall no longer be part of the Equipment hereunder, and (ii) such
replacement part shall become the property of Lessor with title held by Lessor
and shall be subject to this Lease and all other Operative Documents and shall
be deemed part of the Equipment for all purposes to the same extent as the parts
originally incorporated or installed in or attached to the Equipment. Lessee may
transfer parts of any Component to another Component in a manner consistent with
its normal operating practices so long as such transfer does not change the
identity of the Equipment involved or reduce by more than a de minimis amount
the fair market or expected residual value, utility or remaining economic useful
life of the Equipment. The foregoing notwithstanding, if any replacement part
shall have been PPE Collateral, the replaced part, upon release from this Lease,
shall be subject to the Security Agreement and constitute PPE Collateral.
SECTION 6.04. Relocation.
----------
(a) Within the United States. At the Closing Date, the
Equipment and each Component or part thereof shall be located at the Sites as
specified on Schedule I to the Lease Supplement. After the Closing Date, as long
as the Equipment is being operated in compliance with Section 6.01 and
maintained in compliance with Section 6.02 and no Material Default has occurred
and is continuing, Lessee may, without the consent of Lessor, relocate the
Equipment or any Component or part thereof during the Term to any location in
the continental United States of America; provided, that
7
(i) Lessee shall, not less than 10 Business Days prior to such
relocation, inform Lessor in writing of any relocation, the specific
Components to be moved, the state and county of the new location,
whether the new location is owned or leased by Lessee or subject to the
rights of any mortgagee, all in reasonable detail;
(ii) if any Component is to be relocated outside the state
(or, if appropriate, the county) in which such Component was delivered
on the Closing Date, Lessee shall, on or prior to such relocation,
ensure that any filings necessary to protect the interests of Lessor in
the Equipment at such new location are timely made or corrected;
(iii) if (x) an aggregate of $25,000,000 or greater of
Components (measured by its Designated Value) is moved to any location
(other than a Site, prior to such relocation) Lessor and Lessee shall
enter into a ground lease and ground sublease with respect to such new
location on terms comparable to the existing Site Leases and Site
Subleases, or (y) if less than an aggregate of $25,000,000 of
Components (measured by its Designated Value) is moved to a location
other than a Site or a property subject to a Site Lease, Lessee shall
return such Equipment to a location subject to a Site Lease prior to
the end of the Term or, promptly upon the occurrence of a Lease Event
of Default;
(iv) if an aggregate of $25,000,000 or greater of Components
(measured by its Designated Value) is moved to any location (other than
a Site prior to such relocation), at Lessee's expense, there shall have
been conducted at such location an environmental review pursuant to
Environmental Laws, which review shall be reasonably satisfactory to
each Owner Participant, (taking into account to the extent relevant,
the environmental review conducted on behalf of Lessor prior to the
Closing;
(v) Lessee shall not relocate Components with an aggregate
value in excess of $25,000,000 to Lessee's facility located in Conyers,
Georgia; and
(vi) at any time that Lessee removes all Components from a
Site which is subject to a Site Lease, such Site Lease shall be
terminated.
(b) Outside the United States. Lessee may not relocate,
or permit the relocation of, the Equipment or any Component or part thereof to
a place outside the continental United States of America.
SECTION 6.05. Modification. (a) Lessee shall at its expense,
from time to time make any Modification to the Equipment required by Applicable
Laws or by any insurance requirements. So long as no Material Default has
occurred and is continuing, Lessee, at its expense, from time to time may make
any Modification to the Equipment that Lessee may deem desirable in the conduct
of its business; provided, however, that Lessee shall not have the right (i) to
make any such Modification that diminishes by more than a de minimis amount the
fair market or expected residual value, utility and remaining economic useful
life of the Equipment to an independent third-party user, below the fair market
or expected residual value, utility, or remaining economic useful life thereof
immediately prior to such Modification, assuming the
8
Equipment was then in the condition required to be maintained by the terms of
this Lease, or (ii) cause the Equipment to become Limited Use Property.
(b) Immediately upon each Modification having been made:
(i) in the case of any Nonseverable Modification, the
Modification shall, effective on the date such Modification shall have
been incorporated into the Equipment, become the property of Lessor
with title being held by Lessor and shall be subject to this Lease and
all other Operative Documents; and
(ii) in the case of each Severable Modification, Lessee shall
hold title to such Modification and the Modification shall remain the
property of Lessee and shall not become subject to this Lease or any
other Operative Document; provided, that Severable Modifications that
remain at the Scheduled Expiration Date so modified (or remain as of
any earlier termination of this Lease with respect to the Equipment)
shall be subject to the provisions of Section 8.02.
Modifications that, pursuant to this Section 6.05(b), become subject to this
Lease, shall be deemed part of the applicable Component and the Equipment for
all purposes. Modifications that do not become subject to this Lease pursuant to
this Section 6.05(b) shall not be deemed a part of the applicable Component and
the Equipment.
(c) Subject to compliance with Applicable Laws, Lessee may
remove, at its expense, any Severable Modification which has not become subject
to this Lease pursuant to Section 6.05(b) or which Lessor has not elected to
purchase pursuant to Section 8.02, provided, that, unless Lessee shall have
given notice of its election to purchase the Equipment pursuant to Article XVI,
Lessee, at its expense and prior to the Scheduled Expiration Date (or any
earlier termination of this Lease), shall repair any damage to the Equipment
caused by such removal such that the Equipment is returned to the condition
required hereunder.
SECTION 6.06. Warranty Assignments.(a) Lessee hereby assigns,
transfers and conveys to Lessor all its right, title and interest in, to and
under all existing and assignable warranties, if any, relating to the Equipment
(all such warranties, the "Assigned Warranties").
(b) The assignment pursuant to clause (a) of this Section6.06
is a present assignment and shall be effective immediately upon execution of
this Lease. Notwithstanding the foregoing assignment, so long as no Material
Default shall have occurred and be continuing, Lessor shall not be entitled to
exercise or receive any proceeds of the exercise of, and Lessee shall be
entitled to exercise and receive all proceeds of the exercise of any of the
claims, rights, powers, privileges, remedies and other benefits in respect of
the Assigned Warranties (including the right to receive all moneys due or to
become due under or arising out of the Assigned Warranties).
SECTION 6.07. Property Fire Protection. Lessee shall maintain
at all facilities where Equipment is located fire security systems and
procedures as required under Lessee's insurance policies.
9
ARTICLE VII
Early Termination
-----------------
SECTION 7.01. Termination for Obsolescence or Business
Purposes. Subject to Section 7.04, so long as no Material Default shall have
occurred and be continuing, at any time during the Basic Term on or after the
third anniversary of the Basic Term Commencement Date, Lessee may, not more than
once during any twelve month period, upon 90 days' prior written irrevocable
notice to Lessor, terminate the Lease with respect to the Equipment, if Lessee
certifies by a certificate of Lessee's Chief Financial Officer to Lessor that
the Equipment has become (x) obsolete, operationally uneconomic or surplus to
its needs as determined by Lessee in its sole discretion or (y) operationally
uneconomic due to a change in any Applicable Laws. The termination shall become
effective on any Stipulated Loss Value Date selected by Lessee occurring at
least 90 days after such notice (the "Termination Date").
SECTION 7.02. Lessor Election to Retain Equipment. In the case
of a termination described in Section 7.01, at any time within 45 days after
notice from Lessee of its election to terminate this Lease with respect to the
Equipment, Lessor may give Lessee notice of its irrevocable election to retain
the Equipment. If Lessor shall have elected to retain the Equipment in
accordance with the preceding sentence, on the Termination Date Lessee shall pay
to Lessor any Overdue Rent due with respect to the Equipment as of such
Termination Date and any unpaid Supplemental Rent due on or prior to such
Termination Date, but will not be required to pay Stipulated Loss Value with
respect to the Equipment. On such Termination Date Lessee shall deliver the
Equipment to Lessor pursuant to the requirements of Article VIII, and the
Equipment shall cease to be leased hereunder.
SECTION 7.03. Qualifying Bids.
---------------
(a) Solicitation of Bids. In the case of a termination
described in Section 7.01, during the period from the giving of such notice of
termination until 10 Business Days prior to the Termination Date and so long as
Lessor shall not have exercised its option pursuant to Section 7.02 to retain
the Equipment, Lessee, as agent for Lessor and at Lessee's expense, shall use
its commercially reasonable efforts to obtain the highest possible bids from
Persons other than, except with the prior consent of each Owner Participant,
Lessee, Guarantor or their Affiliates to purchase the Equipment on the
Termination Date. Lessee shall notify Lessor in writing, at least 10 Business
Days prior to the Termination Date, of the amount and terms of each such bid
that has theretofore been submitted and the name and address of the party
submitting such bid. Lessee shall certify to Lessor that such bidder is not an
Affiliate of Lessee or Guarantor (unless previously consented to by the Owner
Participants). Each such bid shall be a bona fide bid for payment in full in
cash (such a bid is referred to herein as a "Qualifying Bid"). Lessee shall
deliver to Lessor, on reasonable request, periodic reports of Lessee's progress
in finding a bidder for the Equipment subject to the termination notice. Lessor
shall have the right, directly or through agents or brokers, to solicit bids,
but shall be under no duty to solicit bids or to inquire into the efforts of
Lessee to obtain bids.
10
(b) Procedure If No Sale. If Lessor has not elected to retain
the Equipment pursuant to Section 7.02 and no Qualifying Bids are received as of
the Termination Date, this Lease shall continue in full force and effect as to
the Equipment, notwithstanding Lessee's prior written notice pursuant to Section
7.01. Such continuation shall not constitute a revocation pursuant to Section
7.01 or Section 7.04 nor prejudice in any way Lessee's right to terminate the
Lease as of a later date as to the Equipment.
SECTION 7.04. Rescission by Lessee. If Lessor has not elected
to retain the Equipment pursuant to Section 7.02, and at least one Qualifying
Bid has been received as of the scheduled Termination Date, Lessee may
nevertheless at any time no later than 45 days prior to the scheduled
Termination Date, rescind its notice of termination as to the Equipment. The
total number of such rescissions and elections to continue to lease during the
Basic Term shall not exceed one. Lessee shall reimburse, on an After-Tax Basis,
Lessor and the Owner Participants, for all reasonable costs and expenses
incurred in connection with any such rescission of a notice of termination.
SECTION 7.05. Sale Pursuant to Qualifying Bid. If (i) Lessee
shall have received a Qualifying Bid on or prior to the tenth Business Day
before the Termination Date, and (ii) Lessor shall have received from Lessee
notice of the highest Qualifying Bid and shall have received from the bidder
that shall have submitted the highest Qualifying Bid for the Equipment
immediately available funds of the amount specified in such bid, Lessor shall on
the Termination Date, subject to the receipt of the amounts payable pursuant to
Section 7.06 hereof, transfer to such bidder all of Lessor's right, title and
interest to the Equipment "as-is, where-is" without representation or warranty
except as to the absence of any Lessor Liens on the Equipment to which such bid
relates. On such Termination Date, Lessee shall deliver the Equipment to the
purchasing bidder pursuant to the requirements of Article VIII, and the
Equipment shall cease to be leased hereunder. Any funds received by Lessee for
the Equipment shall be immediately paid over to Lessor without deduction,
set-off or adjustment of any kind. Lessee and Lessor shall execute and deliver
such documents evidencing such transfer and take such further action as the
purchaser shall reasonably request. Lessee shall pay, on an After-Tax Basis, all
reasonable costs and expenses incurred in connection with any transfer of, or
attempt to find a Qualifying Bid for, the Equipment pursuant to this Article
VII.
SECTION 7.06. Payment Lessee; Notice; Termination of Lease. In
the case of any termination described in Section 7.01, unless Lessor has elected
to retain the Equipment being terminated pursuant to Section 7.02, on the
Termination Date, Lessee shall pay to Lessor the sum of:
(a) any Overdue Rent due with respect to the Equipment as of
such Termination Date; plus
(b) any Supplemental Rent due and unpaid as of such
Termination Date (including any amounts for reasonable costs and
expenses payable by Lessee as required in Section 7.05); plus
11
(c) the excess, if any, of (i) the Stipulated Loss Value as of
such Termination Date over (ii) the net proceeds actually realized on
any sale thereof and paid over to Lessor, as the case may be, pursuant
to Section 7.05.
Upon payment by Lessee of all required amounts as to the
Equipment, the obligation of Lessee to pay Rent with respect to the Equipment
shall terminate, the Equipment shall no longer be subject to this Lease and the
Term with respect to the Equipment shall terminate.
ARTICLE VIII
Return of Equipment
-------------------
SECTION 8.01. Return of Equipment. On the Scheduled Expiration
Date applicable to the Equipment (or upon any earlier termination of this Lease
with respect to the Equipment), if such Equipment is not purchased by Lessee
pursuant to Article XVI, Lessee (at its sole risk and expense) shall surrender
such Equipment to Lessor and shall comply with each of the following conditions:
(a) at the time of such return, the Equipment shall be free
and clear of all Liens (other than Lessor Liens);
(b) not later than 315 days prior to the Scheduled Expiration
Date in respect of such Equipment (or if earlier, the date the
Equipment is being returned due to an earlier termination of this
Lease), provide a detailed inventory, in English, of all Components of
such Equipment. The inventory shall include, but not be limited to, a
description of the Equipment, the asset number assigned to the
Equipment, and location;
(c) not later than 180 days prior to the Scheduled Expiration
Date in respect of Equipment (or if earlier, the date the Equipment is
being returned due to an earlier termination of this Lease), provide or
cause the vendor(s) or manufacturer(s) to provide, if available, to
Lessor the following documents, in English or, if applicable, the
language in which such documents were provided to Lessee by the
relevant vendor or manufacturer, (i) one set of current and up-to-date
service manuals and operating manuals, including replacements and/or
additions thereto and (ii) one set of documents, detailing the
Equipment's configuration, operating requirements, maintenance records,
and other technical data concerning the set-up and operation of the
Equipment, including replacements and/or additions thereto, such that
all documentation is completely up-to-date and current;
(d) not later than 180 days prior to the Scheduled Expiration
Date in respect of Equipment (or if earlier, the date the Equipment is
being returned due to an earlier termination of this Lease), upon
receiving reasonable notice from Lessor, make such Equipment available
for on-site operational inspections by potential purchasers, under
12
power, and provide technical personnel, power and other requirements
necessary to demonstrate electrical and mechanical systems for the
Equipment of such Equipment;
(e) not later than 180 days prior to the Scheduled Expiration
Date in respect of such Equipment (or if earlier, the date the
Equipment is being returned due to an earlier termination of this
Lease), cause a Technical Expert, acceptable to Lessor (the
"Inspector"), to perform a comprehensive physical inspection, including
testing all material and workmanship of such Equipment, including,
where applicable, an inspection of all screen changers, sensors,
monitors and computer controllers; and if during such inspection,
examination and test, the Inspector finds the Equipment not operating
within any Applicable Specifications or otherwise not in the condition
and state of repair required by the terms hereof, then Lessee shall, at
its own expense, make, within 60 days of the date of inspection, all
necessary repairs to the Equipment in a professional and workmanlike
manner;
(f) have each Component of such Equipment returned with an
in-depth field service report, detailing said inspection as outlined in
clause (e) of this Section 8.01, with such report to certify that the
Equipment has been properly inspected, examined and tested and is
operating within Applicable Specifications;
(g) provide that each Component of such Equipment will be: (i)
returned in the condition required pursuant to Article VI, (ii) cleaned
and cosmetically acceptable, properly removing or treating all
corrosion, and in such condition so that it may be immediately
installed and placed into use in a production environment, (iii)
detoxified or decontaminated, if applicable, to allow for subsequent
use in accordance with Applicable Laws, (iv) in good operating
condition (subject to normal wear and tear), (v) properly identified,
and (vii) returned with such operating and application specific
software used by Lessee at such time to control the Equipment;
(h) ensure that all Components of the Equipment and operations
thereof conform to all laws and health and safety regulations
applicable in the jurisdiction in which such Equipment was located
immediately prior to the time of return and which may be in effect at
the time of return;
(i) ensure that all gears, barrels, screws, and screw flights
and other mechanical corrections are free from any adhesive, abrasive,
or corrosive wear that will prevent any Component from operating within
Applicable Specifications. Where excess wear has occurred, Lessee will
replace such Components or parts thereof before returning the Equipment
to Lessor;
(j)properly remove all Lessee installed markings which are not
necessary for the operation, maintenance or repair of the Equipment;
(k) in the event that Lessor does not elect to operate the
Equipment in the facility where the respective Equipment is then
located, which election shall be made not later than 120 days prior to
the Scheduled Expiration Date or, upon demand if the Lease
13
is terminated by reason of a Lease Event of Default, provide for the
deinstallation and packing of the Equipment to include, but not
limited to, the following: (i) all process fluids shall be removed
from the Equipment and disposed of in accordance with the then current
Environmental Laws (at no time are materials which could be considered
hazardous waste pursuant to any Environmental Law to be shipped with
machinery); (ii) all internal fluids such as lube oil and hydraulic
fluid are to be filled to operating levels; filler caps are to be
secured and disconnected hoses are to be sealed to avoid spillage;
(iii) qualified professionals (which may be employees of Lessee) shall
deinstall and match xxxx each Component; (iv) each Component shall be
packed in a safe and secure manner suitable for shipping by rail or
truck; and (v) Lessee shall provide for transportation of the
Equipment to the closest railhead F.O.B.;
(l) at Lessor's choice, either (i) allow Lessor, at Lessor's
expense, and provided Lessor has provided reasonable notice to Lessee,
to arrange for an on-site auction of the Equipment in an assembled and
functional state. Any such auction will be conducted no more than 60
days prior to Scheduled Expiration Date (or, if earlier, the date the
Equipment is being returned due to an earlier termination of this
Lease) and will be conducted in a manner which will not unreasonably
interfere with Lessee's business operations, or (ii) at the request of
Lessor, provide safe, secure storage, at Lessor's expense, for the
Equipment for 120 days after expiration or earlier termination of the
Lease at an accessible location satisfactory to Lessor; provided,
however, if the Lease is terminated as a result of a Lease Event of
Default, Lessee, at its expense, shall provide such storage for a
period of 120 days; and
(m) if Lessee fails to return any Component of the Equipment
within 30 days following the Scheduled Expiration Date (or, if earlier,
the date the Equipment is being returned due to an earlier termination
of this Lease), then Lessor may demand that Lessee pay the Fair Market
Value of such Component.
If the Equipment is not returned in all material respects on the Scheduled
Expiration Date (or, if earlier, the date the Equipment is being returned due to
an earlier termination of this Lease), as required herein, Basic Rent shall
accrue and be due and payable by Lessee each 30 days thereafter, at a daily rate
equal to the daily equivalent of the greater of (i) 125% of the average Basic
Rent during the Term which has expired and (ii) Fair Market Rent Value.
SECTION 8.02. Severable Modifications. If Lessee has made any
Severable Modification to the Equipment to be surrendered to Lessor pursuant to
Section 8.01, and such Severable Modification has not previously been removed by
Lessee, Lessee shall, not later than 60 days before such surrender, inform
Lessor in writing if Lessee intends to leave such Severable Modification
in place, whereupon Lessor may elect to purchase such Severable Modification for
its then fair market value. If Lessor has not given Lessee written notice of its
election under the preceding sentence at least 30 days prior to the date for the
surrender of the Equipment, Lessee may (i) remove such Severable Modification
prior to such surrender (and shall repair in all material respects any damage
caused by such removal), or (ii) leave such Severable Modification
14
in place, in which case it will become the property of Lessor without further
action on the part of, or further cost to, Lessor.
ARTICLE IX
Damage; Application of Payments; Restoration of Equipment
---------------------------------------------------------
SECTION 9.01. Event of Loss.
-------------
(a) Notice of Event of Loss. Lessee shall, within 5 Business
Days after the occurrence thereof, notify Lessor of any Event of Loss to the
Equipment. Within 30 days of such occurrence, Lessee shall give Lessor and the
Owner Participants written notice stating whether there has been an Event of
Loss with respect to the Equipment. In such notice, Lessee shall (i) describe
the nature and scope of the occurrence giving rise to such Event of Loss, and
(ii) if applicable, specify which of the alternatives set forth in Section
9.01(b) it will pursue. If Lessee fails to provide notice of its election under
this Section 9.01(a) within such 30-day period, Lessee shall be deemed to have
elected the alternative set forth in Section 9.01(b)(ii). If Lessee timely
elects the alternative in Section 9.01(b)(i) and fails to make the required
substitution within the periods prescribed therefor, Lessee shall not be
entitled to make such substitution but shall be required to make the payments
required by Section 9.01(b)(ii) on the last day on which Lessee was entitled to
make the substitution.
(b) Lessee Alternatives. Upon an Event of Loss, Lessee
shall, subject to the restrictions in Section 9.01(a), pursue one of the
alternatives, (i) or (ii), set forth in this Section 9.01(b).
(i) If Lessee elects or is required to effect this alternative
(i), it shall, provided that no Material Default has occurred and is
continuing, within 180 days of the occurrence of the Event of Loss (but
in no event later than the Scheduled Expiration Date with respect to
the Equipment), effect a restoration of the Equipment, which may
include a substitution of Components in the manner and subject to the
conditions specified in Section 9.05 hereof. Once such restoration has
been made and the conditions specified in Section 9.05 have been
satisfied, so long as no Material Default has occurred and is
continuing, Lessor shall transfer all of its rights to any replaced
components of the Equipment to Lessee, and shall remove all Lessor
Liens upon such replaced components, and Lessee shall be subrogated to
all claims of Lessor, if any, against third parties to the extent the
same relate to physical damage to or loss of the Equipment. For all
purposes hereof, the replacement equipment shall, after such
substitution, be part of the property leased hereunder, be "Equipment"
deemed to be the Component replaced subject to the relevant Lease
Supplement. Under this alternative (i), no abatement or reduction shall
be made in the Basic Rent.
(ii) If Lessee elects this alternative (ii), it shall, on the
first Stipulated Loss Value Date falling after the earlier of 5
Business Days after receipt of insurance proceeds or 180 days after the
occurrence of the Event of Loss, pay to Lessor the sum of:
15
(A) the Stipulated Loss Value for the Equipment determined
for such Stipulated Loss Value Date;
(B)any Overdue Rent with respect to the Equipment as of such
Rent Payment Date; and
(C) any Supplemental Rent with respect to the Equipment
due and payable on or before such Stipulated Loss Value Date,
on such Stipulated Loss Value Date as a result of the Event of
Loss.
Once the payment described in the preceding sentence has been
made, Lessor shall transfer to Lessee all of its rights to the Equipment "as-is,
where-is" without representation or warranty except as to the absence of
Lessor's Liens, Lessee shall have no further obligation to make payments of Rent
with respect to the Equipment, and the Term with respect to the Equipment shall
end.
SECTION 9.02. Application of Payments Upon an Event of Loss.
Except as provided in the next sentence of this Section 9.02 or in Section 9.04,
any payments received at any time by Lessor or by Lessee with respect to any
Equipment (including insurance proceeds or warranty payments but excluding
proceeds from insurance policies carried by Lessor or any Owner Participant)
from any Governmental Authority or any other Person as a result of the
occurrence of an Event of Loss with respect to such Equipment shall be applied
as follows:
(a) any such payment received at any time by Lessee shall be
promptly, and in any event within 5 Business Days, paid to Lessor for
application pursuant to the following provisions of this Section 9.02,
except that Lessee may retain any amounts which Lessor shall at the
time be obligated to pay to Lessee pursuant to Article XIX;
(b) so much of such payments as shall not exceed all amounts
required to be paid by Lessee pursuant to Section 9.01(b)(ii) shall be
applied in reduction of Lessee's obligation to pay such amounts if not
already paid by Lessee, or, if already paid by Lessee, shall be applied
to reimburse Lessee for its payment of such amounts; and
(c) the balance, if any, of such payments remaining
thereafter, if they are from insurance carried by Lessee, shall be paid
to Lessee or, if they are from any other Person or source, shall be
divided between Lessor and Lessee in accordance with their respective
interests.
SECTION 9.03. Loss, Damage, Seizure, Requisition, Application
of Payments Not Relating to an Event of Loss. In the event of a loss,
condemnation, confiscation, theft or seizure of, or requisition of title to or
use of, or damage to, the Equipment or any part thereof not resulting in an
Event of Loss, Lessee shall promptly notify Lessor thereof and all obligations
of Lessee under this Lease with respect to the Equipment shall continue to the
same extent as if such event had not occurred. Subject to the provisions of
Section 9.04 and Article XIX, payments received at any time by Lessor or Lessee
from any insurer (under insurance carried by Lessee), any Governmental Authority
or other Person with respect to any loss, condemnation,
16
confiscation, theft or seizure of, or requisition of title to or use of, or
damage to the Equipment not constituting an Event of Loss shall be paid to or
retained by Lessee.
SECTION 9.04. Application of Payments During Payment Default,
Bankruptcy Default or Lease Event of Default. Any amount that shall otherwise be
payable to Lessee pursuant to this Lease arising out of any insurance, warranty,
governmental award or otherwise shall not be paid to Lessee or, if it shall have
been previously paid to Lessee, shall not be retained by Lessee but shall be
paid to Lessor, if at the time of such payment any Material Default shall have
occurred and be continuing. In such event, all such amounts shall be paid to and
held by Lessor in trust as security for the obligations of Lessee to make
payments under any other Operative Document or to pay Rent hereunder or, at
Lessor's option, applied by Lessor toward payment of any of such obligations of
Lessee at the time due hereunder or under such other Operative Document. At such
time as there shall not be continuing any Material Default, all such amounts at
the time held by Lessor in excess of the amount, if any, that Lessor shall have
elected to apply as above provided shall be paid to Lessee.
SECTION 9.05. Restoration of the Equipment. (a) So long as no
Material Default shall have occurred and be continuing, not more frequently than
once in any 12-month period, unless in connection with an Event of Loss, Lessee
may substitute like-kind components in accordance with the terms of this Section
9.05. If Lessee shall elect to substitute pursuant to the preceding sentence,
Lessee shall, at its sole cost and expense, deliver to Lessor without cost to
Lessor a full warranty xxxx of sale for such substituted component of the
Equipment specifically identifying such substituted component, which substituted
component meets (or will meet when the substitution is completed) the following
conditions:
(i) it is free and clear of all Liens (other than Permitted
Liens);
(ii) it (A) is of like-kind with the Component to be replaced,
(B) has a fair market and estimated residual value, utility and
remaining economic useful life at least equal to the fair market and
estimated residual value, utility and remaining economic useful life of
the Component to be replaced, assuming such replaced Component has been
maintained in the condition required by this Lease, (C) is of same or
newer date of manufacture as the replaced Component, (D) shall
constitute "Leased Equipment" as defined in the Intercreditor
Agreement, and (E) such substitution will not adversely affect the fair
market or estimated residual value, utility or remaining economic
useful life of the Equipment (as confirmed by a Technical Expert);
(iii) title to such replacement component has vested in the
Owner Trustee; and
(iv) Lessee shall make all filings necessary to protect the
interests of Lessor in the relevant substituted components concurrently
with consummating such substitution.
(b) Upon transfer of the substitute components and
compliance with the requirements of paragraph (a): (i) the replaced Component
shall become the property of Lessee; (ii) Lessee will be subrogated to all
claims of Lessor, if any, against third parties to the extent the same relate to
physical damage to or loss of the Equipment. For all purposes hereof, the
17
component so substituted shall, after such transfer, (i) be part of the
Equipment hereunder, be subject to the relevant Lease Supplement and all other
Operative Documents, and (ii) be deemed to be the "Component" that was replaced
and to have the same Designated Value as the Component replaced. No such
substitution shall result in any change in Basic Rent.
(c) For Components substituted other than as the result
of an Event of Loss, at the time of transfer of the substitute component, Lessee
shall provide a certificate of its Chief Financial Officer to Lessor certifying
that the Components to be substituted are obsolete, surplus or uneconomic with
respect to their use where the Equipment is located.
(d) During the Term, Lessee may not substitute Components
with a Designated Value in excess of 30% of Lessor's Cost.
Lessee shall pay, on an After-Tax Basis, all costs and
expenses (including reasonable attorneys' fees and disbursements) incurred by
Lessor and the Owner Participants, and for all taxes, fees and other
governmental charges payable in connection with the substitution. whether or not
such substitution is consummated and with respect to any documentation required
to evidence such substitution in accordance with the terms hereof.
SECTION 9.06. Event of Loss with respect to All Components at
a Site. Notwithstanding Section 9.01, in the event all or substantially all of
the Components located at a Site subject to a Site Lease (the "Affected
Components") suffer an Event of Loss (assuming such Affected Components
constituted all of the Equipment), then Lessee, in lieu of declaring an Event of
Loss with respect to all Equipment, may request that Lessor consider terminating
the Lease solely with respect to such Affected Components in exchange for a
partial payment of Stipulated Loss Value. Lessor shall consider and negotiate
any such request, and the terms and conditions thereof, in good faith in light
of the circumstances at the time, including the then location of the Equipment,
its configuration, value and expected useful life, and the integrity, value,
utility and remaining useful life of the remaining Components after giving
effect to a partial termination of the Lease with respect to the Affected
Components.
ARTICLE X
Environmental Matters
---------------------
SECTION 10.01. Environmental Covenants. (a) Until the end of
the Lease Term, Lessee shall take all reasonable efforts pursuant to Lessee's
EH&S Program as set forth in Section 17.02 to ensure (i) that each Site, the
Equipment and PPE Collateral and all aspects thereof comply in all material
respects with all applicable Environmental Laws and Environmental Permits; (ii)
that no Hazardous Substance is released, spilled, emitted or otherwise
discharged ("Spill") at, on or from any Site, the Equipment or PPE Collateral
other than in compliance in all material respects with applicable Environmental
Laws; and (iii) that each Site, the Equipment or PPE Collateral possesses all
required Environmental Permits.
18
(b) In the case of a Spill, Lessee shall undertake and
diligently complete all actions necessary to investigate and, if required by law
or good management practice, remediate the Spill.
(c) Lessee shall notify Owner Participant within 10
Business Days of learning of any of the following: (i) a violation (or
combinations thereof) of Environmental Laws that could result in the Lessee
incurring liabilities in excess of $50,000; (ii) a Spill that results in a
violation of Environmental Laws; (iii) any Environmental Claim asserted against
the Lessee, each Site, the Equipment and PPE Collateral, including any notice
alleging the violation of or liability under Environmental Laws which
individually or in the aggregate could result in liability in excess of $50,000;
or (iv) any fact, circumstance or condition, on or under each Site, the
Equipment and PPE Collateral that could reasonably result in the Lessee
incurring liabilities under Environmental Laws in excess of $50,000.
SECTION 10.02. EH&S Reporting. Lessee shall provide each Owner
Participant and Lessor, within 90 days after the end of each Fiscal Year, a
report certified by Lessee's Environmental Health and Safety ("EH&S") director
and Lessee's Chief Financial Officer summarizing material developments involving
EH&S matters concerning Lessee (the "Annual EH&S Report") and, where
appropriate, a copy of the relevant documents will be provided to each Owner
Participant. The Annual EH&S Report shall include the following:
(a) total operation expenses and capital expenses incurred for
Lessee's ongoing operations to comply with Environmental Laws during
the Fiscal Year just ended at each Site, budgets for such expenses at
each Site for the current fiscal year, and projections for such
expenses for the succeeding fiscal year, which expenses shall also be
included in the annual operating budget provided pursuant to Section
17.02 of this Lease;
(b) any investigation or remediation undertaken during the
prior Fiscal Year to address a Spill or any historic contamination at
any Site (including a description of the contamination, the proposed
action, the expected time line for completion, and a cost estimate);
(c) any inspections of the Sites, the Equipment or the PPE
Collateral by Governmental Authorities regulating EH&S matters during
the Fiscal Year just ended, any notices of violation issued to Lessee
by such regulatory authorities during such Fiscal Year, and a brief
description of each such notice (including the authority issuing the
notice, the subject matter thereof, the relief sought, and whether
Lessee believes that such notice could reasonably result in a fine or
penalty in excess of $50,000);
(d) any administrative and judicial proceedings brought
against Lessee regarding EH&S matters pending at any time during the
Fiscal Year just ended (including the entity bringing the proceeding,
the subject matter thereof, the Sites, the Equipment or the PPE
Collateral involved, the relief sought, and whether Lessee believes
that such proceeding could reasonably result in a fine or penalty in
excess of $50,000);
19
(e) a summary of any violations of Environmental Laws or
Environmental Permits (e.g., excedences of a wastewater discharge or
air-emission parameters), identified by Lessee and reported to a
Governmental Authority during the past Fiscal Year, a brief description
of the violations and whether Lessee believes that such notice or
combination thereof, could reasonably be expected to result in a fine
or penalty in excess of $50,000;
(f) employees' health and safety data, including lost time and
injuries and illnesses reported on the Lessee's OSHA 200 log for the
Fiscal Year just ended, and a comparison with industry-wide data;
(g) a copy of any modifications or enhancements made to the
EH&S Program pursuant to Section 17.02 of the Lease during the Fiscal
Year just ended;
(h) a copy of any EH&S compliance audit and corrective
action documentation prepared pursuant to the Lessee's EH&S Program;and
(i) any legislative, regulatory, or enforcement initiatives of
which Lessee has knowledge concerning EH&S matters that could
reasonably be expected to materially affect Lessee's costs, revenues,
or business plans in the current Fiscal Year or the four succeeding
Fiscal Years.
SECTION 10.03. Waiver. Lessee hereby waives, releases, acquits
and forever discharges Lessor, its agents, employees, representatives and any
other person acting on behalf of Lessor, of and from any Environmental Claims,
actions, causes of action, demands, rights, damages, costs or expenses, whether
direct or indirect, known or unknown, foreseen or unforeseen, which Lessee now
has or which may arise in the future on account of or in any way related to or
in connection with any past, present, or future physical characteristic or
condition of the Sites, the Equipment and PPE Collateral, including without
limitation any Hazardous Substances in, at, on, under or related to the Sites,
the Equipment and the PPE Collateral, or any violation or potential violation of
any Environmental Law, unless and to the extent caused in whole or in part by
Lessor, its agents, representatives and any other person acting on behalf of
Lessor.
ARTICLE XI
Sublease and Assignment
-----------------------
SECTION 11.01. Sublease. Lessee shall have and retain
throughout the Term for the Equipment control over the operation and use of the
Equipment; provided, however, Lessee may without the consent of Lessor, sublease
designated Components thereof during the Term, subject to the following terms
and conditions, at the time the sublease commences:
(a) no Material Default shall have occurred and be continuing;
20
(b) Lessee shall provide Lessor notice of such sublease no
later than 10 days following Lessee's entering into such sublease which
notice shall identify the sublessee, the location of such Components
and the term of the sublease;
(c) Lessee shall remain primarily liable to Lessor for the
performance of all the terms of this Lease and the other Operative
Documents to the same extent as if such sublease had not occurred;
(d)the Guarantor shall remain liable for its obligations under
the Guarantee to the same extent as if such sublease had not occurred;
(e) such sublease shall be in compliance with Applicable Laws
and shall contain operational, maintenance and use covenants at least
as restrictive as those contained herein and shall prohibit any further
subleasing;
(f) such sublease or other arrangement as to any Component
shall not extend beyond the Term;
(g) any rights created thereby in any Component shall be fully
and expressly subject and subordinate in all respects to this Lease;
(h) Lessee shall make all filings necessary to protect the
interests of Lessor in the relevant Components concurrently with
entering into such sublease or other arrangement;
(i) such sublessee is not the subject of any bankruptcy,
insolvency, receivership or other similar proceeding;
(j) at no time may Lessee have under sublease Components
having an aggregate Designated Value of more than 30% of total Lessor's
Cost with sublessees which are not Affiliates of Lessee;
(k) no sublease shall contain purchase options for such
subleased Components;
(l) the sublessee shall not be a tax-exempt entity;
(m) any sublease with a term greater than one year, including
all renewals, of Components with a Designated Value of $1,000,000 or
more and all subleases if Components with a Designated Value in the
aggregate of $5,000,000 or more are subject to sublease shall be
collaterally assigned to Owner Trustee, and the original chattel paper
copy of each such sublease shall be promptly delivered to the Owner
Trustee; and
(n) no such sublease shall adversely affect the fair market
and estimated residual value, utility and remaining economic useful
life of the Equipment.
21
SECTION 11.02. Assignment and Merger. Lessee shall not
assign its interest or obligations in the Lease except in connection with a
merger or consolidation permitted under Section 5.11 of the Participation
Agreement.
ARTICLE XII
Inspection
----------
If no Material Default exists, each Owner Participant and
Lessor shall have the right at their cost and expense on no less than 5 Business
Days prior written notice (if a Material Default exists, at Lessee's cost and
expense on 24 hours prior written notice ) to Lessee or the relevant sublessee,
if any, during normal business hours to (x) inspect the Equipment and (y) visit
the premises where the Equipment is located; provided that such Person shall
agree to comply with any safety and other customary procedures with respect to
visitors necessary to protect the integrity of the manufacturing process and
such inspection or visit shall not interfere with the normal operations of
Lessee or sublessee, if any. Notwithstanding anything to the contrary contained
herein or in any Operative Document, unless a Material Default has occurred and
is continuing or except during the last 12 months of the Term, if Lessee has not
elected to return the Equipment, such inspections, collectively, may be made no
more frequently than once per calendar year. Neither Lessor, nor any Owner
Participant shall have any duty to make such inspection nor incur any liability
or obligation by reason of not making any such inspection.
ARTICLE XIII
Lease Events of Default
-----------------------
SECTION 13.01. Lease Events of Default. The following events
shall constitute Lease Events of Default:
(a) Lessee shall fail to make any payment of Basic Rent or
Renewal Term Basic Rent when due, and any such failure shall continue
unremedied for a period of 5 Business Days; or
(b) Lessee shall fail to make any payment of Stipulated Loss
Value when due, and any such failure shall continue unremedied for a
period of 5 Business Days after receipt by Lessee of written notice
that such payment is due; or
(c) Lessee shall fail to make any payment of Supplemental Rent
(other than items described in clause (a) or (b)), when due, and any
such failure shall continue unremedied for a period of 5 Business Days
after receipt by Lessee of written notice that such payment is due; or
(d) (i) Lessee shall fail to have in effect the minimum
insurance required by Section 19.01(a)(i), (ii), (iii) or (v) of this
Lease; or
22
(ii) Lessee or Guarantor shall fail to perform or observe
any other material covenant or obligation under Article XIX hereof,
or Sections 5.09, 5.10, 5.11 of the Participation Agreement, and any
such failure continues unremedied for a period of 30 days after receipt
by Lessee of written notice thereof; or
(e) either of Lessee or Guarantor shall have failed to perform
or observe any of its covenants or agreements (other than any thereof
dealt with in any other clause of this Article XIII) contained in this
Lease or any other Operative Document and such failure shall continue
unremedied for a period of 30 days after receipt by Lessee or
Guarantor, as the case may be, of written notice of such failure;
provided, that the foregoing shall not constitute a Lease Event of
Default, until expiration of a longer period (not to exceed 90 days
from the expiration of such 30-day period), if prior to the
commencement of such period Lessee or Guarantor, as the case may be,
shall advise Lessor that such default is curable (other than by the
payment of money) which notice shall set forth a proposed cure, and
during such longer period Lessee or Guarantor, as the case may be, is
making diligent efforts to effect such cure; or
(f) any representation or warranty made by Lessee or Guarantor
herein or in any other Operative Document (except the representations
and warranties set forth in any Tax Indemnity Agreement) shall prove to
have been incorrect in any material respect at the time made or given
and remains a misrepresentation or breach of warranty materially
adverse to Lessor or any Owner Participant at the time such
incorrectness is discovered; provided that the foregoing shall not
constitute a Lease Event of Default, if such misrepresentation or
breach of warranty is capable of being cured, remains uncured for a
period of 30 days after Lessee's or Guarantor's, as the case may be,
receipt of written notice advising Lessee or Guarantor, as the case may
be, of such incorrectness and during which time Lessee or Guarantor, as
the case may be, is making diligent efforts to cure such
misrepresentation or breach; or
(g) the Guarantee fails for any reason to be in full force and
effect, is repudiated or rendered inoperative or unenforceable; or
(h) Lessee or Guarantor, as the case may be, shall commence a
voluntary case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect,
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due; or
(i) an involuntary case or other proceeding shall be commenced
against Lessee or Guarantor, as the case may be, seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
23
custodian or other similar official of it or any substantial part of
its property, and an order for relief shall be made in such proceeding
or such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of 90 consecutive days; or
(j) the acceleration of senior indebtedness of Lessee or
Guarantor in an aggregate principal amount in excess of $10,000,000,
now existing or hereafter incurred, including the BA Loan Agreement; or
(k) Lessor shall cease to have a first priority lien on PPE
Collateral subject to the first priority lien on Credit Agreement Term
Loan Equipment Collateral or a second priority lien on Working Capital
Collateral subject to the first priority lien pursuant to the BA Loan
Agreement, or any refinancing or refunding thereof, subject in each
case to Permitted Encumbrances.
ARTICLE XIV
Remedies
--------
SECTION 14.01. Effect of Lease Event of Default. Upon the
occurrence of any Lease Event of Default and at any time thereafter so long as
the same shall be continuing, Lessor may, at its option, by notice to Lessee,
declare this Lease to be in default (except that, upon the occurrence of a Lease
Event of Default described in clause (h) or (i) of Article XIII, this Lease
shall be deemed declared in default immediately without any further act or
notice by Lessor). At any time thereafter, Lessor may do one or more of the
following with respect to the Equipment as Lessor in its sole discretion shall
elect, to the full extent permitted by Applicable Laws:
(a) Lessor may, by notice to Lessee, terminate or cancel this
Lease.
(b) Lessor may demand that Lessee, and Lessee shall upon
written demand of Lessor, at Lessee's risk and expense, return the
Equipment to Lessor in the manner and condition required by Article
VIII as if the Equipment were being returned at the Scheduled
Expiration Date applicable to the Equipment, and Lessor shall not be
liable for the reimbursement of Lessee for any costs and expenses
incurred by Lessee in connection therewith.
(c) Lessor may, at Lessee's expense, enter upon any location
where the Equipment is located and take immediate possession of any or
all of the Equipment or any part thereof (to the exclusion of Lessee)
and remove the Equipment from the location without liability accruing
to Lessor or its agent for or by reason of such entry or taking of
possession or removal (whether for any damage to property, or the
restoration in respect of such damage, caused by such taking or
otherwise).
(d) Lessor, with respect to any or all Equipment, by notice to
Lessee specifying a payment date not earlier than ten days or more than
30 days from the date of such notice, may require Lessee to pay to
Lessor and Lessee hereby agrees that it will pay
24
to Lessor, on the payment date specified in such notice, as liquidated
damages for loss of a bargain, and not as a penalty, and in lieu of any
further payments of Basic Rent hereunder, an amount (reduced with
respect to the Equipment by any amounts previously paid by Lessee
pursuant to subparagraph (e) below with respect to the Equipment) equal
to the sum of:
(i) all Overdue Rent as of the Stipulated Loss Value
Date next preceding such date for payment specified in such
notice; plus
(ii) an amount equal to the Stipulated Loss Value for
all the Equipment calculated as of the Stipulated Loss Value
Date next preceding the date for payment specified in the
notice; plus
(iii) interest, if any, at the applicable Overdue
Rate on the amount of such Basic Rent and Stipulated Loss
Value from the Stipulated Loss Value Date as of which
Stipulated Loss Value is computed until the date of actual
payment; plus
(iv) all Supplemental Rent payable by Lessee
hereunder before, after or during the exercise of this remedy,
including all reasonable legal fees and expenses and other
costs and expenses incurred by Lessor or any Owner Participant
by reason of the occurrence of any Lease Event of Default or
the exercise of the remedies of Lessor with respect thereto
and interest at the applicable Overdue Rate on all such
Supplemental Rent from the date due until the date of actual
payment.
Upon such payment of liquidated damages Lessor shall transfer to Lessee
"as-is, where-is" (without any representation, recourse or warranty
whatsoever other than the absence of Lessor Liens) Lessor's entire
interest in the Equipment. Lessor and Lessee shall (at Lessee's
expense) execute and deliver such documents evidencing such transfer,
termination and release and take such further action as either party
shall reasonably request to implement such transfer.
(e) Lessor or its agent may sell its interest in the Equipment
pursuant to this subparagraph (e) and, if prior thereto Lessor shall
not have exercised its rights under subparagraph (g) below (unless
Lessor has not been paid thereunder and has rescinded such exercise),
Lessor may demand by notice to Lessee specifying a payment date not
earlier than 15 days from the date of such notice that Lessee pay
Lessor, and Lessee shall pay to Lessor, as liquidated damages for the
loss of a bargain and not as a penalty, in lieu of all Basic Rent with
respect to the Equipment due after the date on which such sale shall
occur, an amount equal to the sum of:
(i) all unpaid Overdue Rent payable or that would
have been payable with respect to the Equipment as of the
Stipulated Loss Value Date next preceding the date on which
such sale shall occur (or, if the sale shall occur on a Rent
Payment Date, as of such Rent Payment Date); plus
25
(ii) all Supplemental Rent for the Equipment payable
by Lessee hereunder before, after or during the exercise of
this remedy, including all reasonable legal fees and expenses
and other costs and expenses incurred by Lessor or any Owner
Participant by reason of the occurrence of any Lease Event of
Default or the exercise of the remedies of Lessor with respect
thereto; plus
(iii) interest on the amounts described in clauses
(i), (ii) and (iv) at the Overdue Rate from the Stipulated
Loss Value Date as of which Stipulated Loss Value shall have
been computed until the date of actual payment; plus
(iv) the excess, if any, of
(A) the Stipulated Loss Value of the
Equipment as of the Stipulated Loss Value Date next
preceding the date on which such sale shall occur
(or, if the sale shall occur on a Stipulated Loss
Value Date, as of such Stipulated Loss Value Date),
over
(B) the net proceeds of such sale.
If Lessor sells its interest in any of the Equipment pursuant this
paragraph (e), this Lease with respect to the Equipment so sold shall
terminate upon such sale. Lessee's obligation to pay liquidated damages
pursuant to this subparagraph (e) shall survive any total or partial
termination of this Lease.
(f) Lessor may hold, use, operate, lease (whether for a period
greater or less than the balance of what would have been the Basic
Term) to others the Equipment, all on such terms and conditions and at
such place or places as Lessor may determine, free and clear of any
rights of Lessee and without any duty to account to Lessee with respect
to such action or inaction or any proceeds with respect thereto.
Lessee's obligation to pay Basic Rent with respect to the Equipment for
any period after Lessee shall have been deprived of control of the
Equipment pursuant to this subparagraph (f) shall be reduced by the net
proceeds, if any, received by Lessor from leasing the Equipment to, or
otherwise permitting its use by, any Person other than Lessee for all
or any portion of such period.
(g) Lessor may, with respect to any or all of the Equipment,
at any time prior to the time that Lessor's interest in the Equipment
shall have been transferred to Lessee pursuant to subparagraph (d)
above or that Lessor's interest in the Equipment is sold by Lessor
pursuant to subparagraph (e) above, demand that Lessee pay to Lessor in
respect of the Equipment, and Lessee shall pay to Lessor on the first
Business Day occurring at least 10 days after, in the case of subclause
(x) or (y) of clause (iv) below, the determination of the Fair Market
Sales Value or Fair Market Rental Value, as the case may be, or, in the
case of subclause (z) of clause (iv) below, the later of the date of
such demand and the date of determination of the amount due thereunder,
as liquidated damages for loss of a bargain and not as a penalty (in
lieu of all payments of Basic Rent becoming due after the payment
date), an amount equal to the sum of:
26
(i) all unpaid Overdue Rent due as of the Stipulated
Loss Value Date for the Equipment next preceding the date of
payment under this subparagraph (g) is due; plus
(ii) all Supplemental Rent with respect to the
Equipment payable by Lessee hereunder before, after or during
the exercise of this remedy, including all reasonable legal
fees and expenses and other costs and expenses incurred by
Lessor, or any Owner Participant by reason of the occurrence
of any Lease Event of Default or the exercise of the remedies
of Lessor with respect thereto; plus
(iii) interest on the amounts described in clause
(i), (ii) and (iv) at the applicable Overdue Rate from the
scheduled payment date to the date of actual payment; plus
(iv) whichever of the following amounts as Lessor, in
its sole discretion, shall specify in such notice for the
Equipment: (x) an amount equal to the excess, if any, of the
Stipulated Loss Value for the Equipment, computed as of the
Stipulated Loss Value Date next preceding the date on which
such payment is due, over the Fair Market Rental Value of the
Equipment for the remainder of the Basic Term after
discounting such Fair Market Rental Value semi-annually
(effective on the Rent Payment Dates) to present worth as of
the scheduled payment date at the Applicable Rate; (y) an
amount equal to the excess, if any, of the sum of Stipulated
Loss Value for the Equipment as of such Stipulated Loss Value
Date over the Fair Market Sales Value of the Equipment; or (z)
an amount equal to the excess of (A) the present value as of
the Rent Payment Date specified in such notice of all
installments of Basic Rent until the end of the Basic Term,
discounting semi-annually at the Applicable Rate, over (B) the
present value as of such Rent Payment Date of the Fair Market
Rental Value of the Equipment until the end of the Basic Term,
discounted semi-annually at the Applicable Rate.
Upon such payment of liquidated damages, the Lease shall terminate with
respect to the Equipment and Lessor and Lessee shall execute and
deliver such documents evidencing such termination as either shall
reasonably request.
(h) Lessor may exercise any remedy available under the
Security Documents and shall apply any net proceeds realized therefrom
toward payment of the amounts due hereunder.
(i) Lessor may (i) exercise any other right or remedy which
may be available to it under Applicable Laws or (ii) proceed by
appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof or to rescind this Lease as to the
Equipment or the Equipment.
SECTION 14.02. Determinations of Fair Market Sales Value and
Fair Market Rental Value. All determinations of Fair Market Sales Value and Fair
Market Rental Value (each, a "Value") pursuant to this Article XIV shall be made
using the Appraisal Procedure;
27
provided, however, anything in this Lease or any Operative Document to the
contrary notwithstanding, (i) if the Equipment has not been returned by Lessee
to Lessor pursuant to the terms hereof, or if the Equipment cannot be
repossessed by Lessor, the Fair Market Sales Value and the Fair Market Rental
Value of the Equipment for purposes of this Article XIV shall be deemed to be
zero, and (ii) if the Equipment has been sold pursuant to this Article XIV, the
Fair Market Sales Value of the Equipment shall be deemed to be the net proceeds
received from the Equipment in such sale.
SECTION 14.03. No Relief from Termination. No termination of
this Lease, in whole or in part, or exercise of any remedy under this Article
XIV shall, except as specifically provided herein. relieve Lessee of any of its
liabilities and obligations under this Article XIV, all of which shall survive
such termination, repossession or exercise of remedy. At any sale of Lessor's
interest in the Equipment or any part thereof pursuant to this Article XIV,
Lessor and any Owner Participant may bid for and purchase such property.
SECTION 14.04. Remedies Cumulative. To the full extent
permitted by Applicable Laws and except as expressly provided herein, each and
every right, power and remedy herein specifically given to Lessor in this Lease
shall be cumulative and shall be in addition to every other right, power and
remedy herein specifically given or now or hereafter existing at law, in equity
or by statute, and each and every right, power and remedy whether specifically
given herein or otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by Lessor, and the exercise
or the beginning of the exercise of any power or remedy shall not be construed
to be a waiver of the right to exercise at the same time or thereafter any other
right, power or remedy. No delay or omission by Lessor or in the exercise of any
right, power or remedy or in the pursuit of any remedy shall impair any such
right, power or remedy or be construed to be a waiver of any default on the part
of Lessee or to be an acquiescence therein. No express or implied waiver by
Lessor of any Lease Event of Default shall in any way be, or be construed to be,
a waiver of any future or subsequent Lease Event of Default. Lessee hereby
waives any mandatory requirement of law, now or hereafter in effect, which might
limit or modify the remedies herein provided, to the extent that such waiver is
effective under Applicable Laws.
ARTICLE XV
Right To Cure
-------------
If Lessee shall fail to make any payment of Rent to be made by
it hereunder or shall fail to perform or comply with any of its other agreements
contained herein or in any other Operative Document or in any other agreement
entered into in connection therewith, Lessor may (but shall not have any duty to
do so) itself make such payment or perform or comply with such agreement, and
the amount of such payment and the amount of the reasonable expenses of Lessor
(including attorney's fees and expenses) incurred in connection with such
payment or the performance of or compliance with such agreement, as the case may
be, together with interest
28
thereon at the Overdue Rate, shall be deemed Supplemental Rent, payable by
Lessee upon written demand.
ARTICLE XVI
Purchase Options
----------------
SECTION 16.01. Early Buyout Option.
-------------------
(a) Option to Purchase. Lessee shall have the right, upon not
less than 180 days nor more than 365 days prior written irrevocable notice to
Lessor, to purchase all but not less than all of the Equipment on the EBO Date
and at the EBO Price set forth in the Lease Supplements. As a condition to such
purchase, Lessee shall be obligated to pay, in addition to the installment of
the EBO Payment Amount for such Equipment due on each EBO Payment Date, (i)
Overdue Rent with respect to such Equipment as of the EBO Date for such
Equipment, and (ii) any other Supplemental Rent due and payable on or prior to
the EBO Date for such Equipment.
(b) Conveyance. Upon payment by Lessee of the amounts required
to be paid on the EBO Date for any Equipment pursuant to Section 16.01(a),
Lessor shall execute and deliver such documentation as is reasonably requested
by Lessee to transfer all of Lessor's right, title and interest in and to such
Equipment to Lessee "as-is, where-is", without any representation, recourse or
warranty except as to the absence of Lessor Liens.
(c) Deferred EBO Payment Amount. In the case of any purchase
of the Equipment pursuant to Section 16.01(a), Lessee may, at its option, either
(i) pay the aggregate of all EBO Payment Amounts for such Equipment on the EBO
Date, or (ii) so long as no Lease Default or Lease Event of Default has occurred
and is then continuing, pay each EBO Payment Amount in the installments on the
applicable EBO Payment Date specified in the Lease Supplement.
Lessee shall elect its payment option in the applicable notice
given pursuant to Section 16.01(a). If Lessee elects the option specified in
clause (ii) above, then with respect to the Equipment, on the EBO Date (provided
all payments due thereon have been made):
(i) this Lease shall be deemed terminated as a true lease and
this agreement shall continue as a lease intended for security, mutatis
mutandis, notwithstanding any provision hereof, creating a first
priority security interest in the Equipment securing for Lessor the
obligation of Lessee to make the remaining installments,
(ii) Articles VII, VIII, IX and XVI shall be of no further
force and effect, and
(iii) the Basic Rent shall cease to accrue.
29
Upon payment by Lessee of the last such installment, Owner Trustee shall execute
and deliver to Lessee a release of the security interest so retained. All
reasonable costs and expenses of Owner Trustee or any Owner Participant incurred
in connection with Lessee's election under this Section 16.01(c) shall be paid
by Lessee. Lessee shall, at its own expense, take such action and make such
filings as necessary or appropriate to perfect and protect Lessor's interest in
the Equipment.
SECTION 16.02. End of Term Purchase Option.
---------------------------
(a) Return Notice. Lessee shall notify Lessor in writing not
later than 12 months prior to the Scheduled Expiration Date whether Lessee shall
return the Equipment pursuant to Article VIII hereof or elect to purchase the
Equipment pursuant to this Section 16.02 or renew the term pursuant to Section
16.03. If Lessee fails to deliver such notice as herein required, Lessee shall
be deemed to have elected to not return the Equipment. If Lessee has elected or
is deemed to have elected not to return the Equipment, and Lessee fails to elect
to purchase the Equipment pursuant to Section 16.02(b) hereof or to renew the
term of the Lease pursuant to Section 16.03 hereof, Lessee shall be deemed to
elect to renew the Lease pursuant to Section 16.03 unless no renewal option is
available under the terms of Section 16.03, in which event, Lessee shall be
deemed to have elected to purchase the Equipment pursuant to Section 16.02(b).
All such elections or deemed elections are irrevocable. If Lessee elects or is
deemed to have elected to purchase the Equipment or to renew the term of this
Lease, then Lessee may commence discussions with Lessor as to Fair Market Sales
Value or Fair Market Rental Value of the Equipment, and failing agreement,
either Lessee or Lessor may request a determination of Fair Market Sales Value
or Fair Market Rental Value pursuant to the Appraisal Procedure.
(b) Election to Purchase. Provided Lessee has not elected to
return the Equipment pursuant to Section 16.02(a) or given a Renewal Notice
pursuant to Section 16.03, Lessee shall have the option, upon irrevocable notice
given not less than 90 days prior to the Scheduled Expiration Date applicable to
any Equipment, to purchase (the "Purchase Option") all but not less than all of
Lessor's rights in such Equipment at a price equal to the Fair Market Sales
Value thereof at such Scheduled Expiration Date. Lessee's notice shall specify
Lessee's proposed Fair Market Sales Value for such Equipment. Lessor shall,
within 30 days of receipt of Lessee's notice, inform Lessee as to whether it
agrees with the proposed Fair Market Sales Value. If such price has not been
previously determined, either by agreement or pursuant to the Appraisal
Procedure, then the Fair Market Sales Value shall be determined by the Appraisal
Procedure.
(c) Payment; Conditions. Provided Lessee has elected to
purchase the Equipment pursuant to Section 16.02(b), Lessee shall pay to Lessor,
on the last day of the Term for the Equipment, the agreed-upon Fair Market Sales
Value for the Equipment plus any Overdue Rent as of such date and any other
Supplemental Rent then due and unpaid with respect to such Equipment.
(d) Reconveyance . Upon payment by Lessee of the amounts
called for in paragraph (c) in respect of any Equipment, Lessor shall execute
and deliver such documentation
30
as is reasonably requested by Lessee to transfer all of Lessor's right, title
and interest in and to such Equipment to Lessee "as-is, where-is", without any
representation, recourse or warranty except as to the absence of Lessor Liens.
SECTION 16.03. Renewal Option.
--------------
(a) Renewal Option. So long as no Material Default has
occurred and is continuing and provided Lessee has not elected to return the
Equipment pursuant to Section 16.02(a) or elected to exercise the Purchase
Option pursuant to Section 16.02(b), Lessee shall have the option, upon notice
(a "Renewal Notice") given not less than 90 days prior to the end of the Basic
Term or any Renewal Term applicable to any Equipment, to extend this lease (the
"Renewal Option") in respect of all but not less than all of the Equipment for a
term of 2 years (the "Renewal Term"); provided, however, there shall be a
maximum of 4 successive Renewal Terms; provided, further, that no Renewal Term
may extend beyond the term of any Site Lease nor exceed 80% of the remaining
economic useful life of the Equipment as determined at the beginning of such
Renewal Term by the Appraisal Procedure. If Lessee is deemed to have elected to
renew this Lease, the Renewal Term shall be 2 years.
(b) Computation of Renewal Term Basic Rent. Lessee shall, not
less than 90 days prior to the commencement of each Renewal Term applicable to
such Equipment, inform Lessor of Lessee's calculation of the Fair Market Rental
Value for such Equipment for such Renewal Term. Renewal Term Basic Rent shall be
equal to 105% of the Fair Market Rental Value. If such price has not been
previously determined, either by agreement or pursuant to the Appraisal
Procedure, then Lessor shall, within 30 days of receipt of Lessee's notice,
inform Lessee as to whether it agrees with the proposed Fair Market Rental
Value. If Lessor does not agree, and if Lessee and Lessor are unable to agree,
the Fair Market Rental Value shall be determined by the Appraisal Procedure.
(c) Adjustment of Stipulated Loss Value. During each Renewal
Term, the Stipulated Loss Value for the Equipment as of each Rent Payment Date
during such Renewal Term shall be an amount equal to the Fair Market Sales Value
of such Equipment as determined at the beginning of such Renewal Term, reduced
on a straight-line basis from such Fair Market Sales Value as so determined to
the estimated Fair Market Sales Value of such Equipment at the end of such
Renewal Term (allowing for inflation and deflation). If within 30 days after the
giving by Lessee of the Renewal Notice for a Renewal Term, Lessee and Lessor
shall not have agreed on the Fair Market Sales Value of the Equipment as of the
beginning and end of such Renewal Term, the Fair Market Sales Value shall be
determined by the Appraisal Procedure.
(d) Amendments to this Lease. Lessor and Lessee hereby agree
to enter into an amendment to the Lease on or prior to the end of the Basic Term
or any Renewal Term, as the case may be, applicable to such Equipment in order
to make such changes thereto as may be required to give effect to such Renewal
Term on the terms contemplated hereby.
31
ARTICLE XVII
Further Assurances
------------------
SECTION 17.01. Further Action by Lessee. Lessee and Lessor, at
Lessee's expense, shall promptly and duly execute and deliver to Lessee, each of
the Owner Participants and Lessor, as the case may be, such documents and
assurances and take such further action as Lessor or Lessee, as the case may be,
may from time to time reasonably request in order to carry out the intent of
this Lease and the other Operative Documents and to establish and protect the
rights and remedies created or intended to be created in favor of Lessor
hereunder and thereunder, to establish, perfect and maintain the rights of
Lessor in and to the Equipment. Without limiting the preceding sentence, Lessee
shall record or file counterparts or appropriate memoranda of this Lease or such
financing statements or other documents with respect to this Lease and Lessor
agrees to execute and deliver promptly such of the foregoing financing
statements or other documents as may require execution by Lessor. Lessee, at its
expense, agrees to cause the timely execution, delivery and filing of
continuation statements as to the financing statements theretofore filed so as
to preserve the security interest of the Owner Trustee.
SECTION 17.02. Environmental, Health and Safety Program.
----------------------------------------
(a) EH&S Program. Lessee, at Lessee's sole cost and expense
shall establish, implement and maintain a formal, comprehensive written
environmental, health and safety program ("EH&S Program") aimed at ensuring that
Lessee's operations at the Sites are conducted in compliance with all applicable
Environmental Laws. The EH&S Program shall include: (i) identification of EH&S
concerns associated with Environmental Laws applicable to Lessee's operations;
(ii) adoption and implementation of an EH&S management system to assess and
control the environmental impacts and compliance status of Lessee's operations;
(iii) implementation of periodic EH&S audits by or involving an independent
third-party consultant with documented corrective action responding to audits
(which audits shall be conducted on a frequency of not less than once per 2
years); (iv) employee EH&S committees, for ensuring compliance with
Environmental Laws; and (v) such other requirements as Lessor may reasonably
require from Lessee from time to time. The EH&S Program must involve senior
management, include a formal written corporate EH&S policy, and identify by name
or position the person with overall responsibility for EH&S compliance, as well
as those person(s) who are responsible for specific EH&S areas.
(b) Provision of Copy. Lessee shall, within 120 days of this
Agreement, provide each Owner Participant with a copy of the EH&S Program for
Owner Participant's review and comment. Each Owner Participant will provide
written comments within 90 days of receipt of a copy of the EH&S Program from
Lessee. All reasonable comments made by Owner Participant shall be incorporated
into the final EH&S Program.
(c) Review. During the Term of the Lease, Lessee shall at
least annually review and evaluate the effectiveness of the EH&S Program and
make necessary modifications
32
or enhancements to reduce EH&S impacts and maintain continued compliance with
Environmental Laws.
ARTICLE XVIII
Chattel Paper
-------------
SECTION 18.01. Chattel Paper. To the extent, if any, that this
Lease or any Lease Supplement constitutes chattel paper or other collateral
within the meaning of the Uniform Commercial Code (or other law respecting
security interests) as in effect in any applicable jurisdiction, no security
interest in Lessor's interest under this Lease or any such Lease Supplement may
be created through the transfer or possession of any counterpart of this Lease
or such Lease Supplement other than the original executed counterpart No. 1
hereof or thereof.
ARTICLE XIX
Insurance
---------
SECTION 19.01. Insurance.
---------
(a) Coverage. Without limiting any of the other obligations or
liabilities of Lessee under this Agreement, Lessee shall, during the term of
this Agreement, carry and maintain, at its own expense, at least the minimum
insurance coverage set forth in this Section 19.01. All insurance carried
pursuant to this Section 19.01 shall be placed with such insurers having a
minimum A.M. Best rating of A:X to A-:X, and be in such form, with terms,
conditions, limits and deductibles as shall be reasonably acceptable to Lessor.
(i) All Risk Property Insurance. Lessee shall maintain all
risk property insurance covering each and every component of the
Equipment and the tangible PPE Collateral against physical loss or
damage, including but not limited to fire and extended coverage,
collapse, flood, earth movement and comprehensive boiler and machinery
coverage (including electrical malfunction and mechanical breakdown).
Coverage shall be written for the then current Stipulated Loss Value
for the Equipment and for replacement cost value in an amount
acceptable to Lessor for the PPE Collateral. Such insurance policy
shall contain an agreed amount endorsement waiving any coinsurance
penalty and shall include expediting expense coverage in an amount not
less than $1,000,000.
(ii) Business Interruption. As an extension of the insurance
required under subsection (a)(i), Lessee shall maintain business
interruption insurance in an agreed amount equal to projected net
profits, and continuing expenses (including the lease payments due on
the Equipment). Such coverage shall also provide for contingent
business interruption covering the major suppliers and customers of
Lessee. Such
33
insurance shall also cover service interruption and extra expenses each
in an amount not less than $1,000,000.
(iii) Comprehensive General Liability Insurance. Lessee shall
maintain comprehensive general liability insurance written on an
occurrence basis (i.e. not claims made basis) with a limit of not less
than $1,000,000. Such coverage shall include, but not be limited to,
premises/operations, explosion, collapse, underground hazards, sudden
and accidental pollution, contractual liability, independent
contractors, products/completed operations, property damage and
personal injury liability. Such insurance shall not contain an
exclusion for punitive or exemplary damages where insurable by law.
(iv) Workers' Compensation/Employer's Liability. Lessee shall
maintain Workers' Compensation insurance in accordance with statutory
provisions covering accidental injury, illness or death of an employee
of Lessee while at work or in the scope of his employment with Lessee
and Employer's Liability in an amount not less than $1,000,000. Such
coverage shall not contain any occupational disease exclusions; and
(v) Excess/Umbrella Liability. Lessee shall maintain liability
insurance in an amount not less than $25,000,000 when aggregated with
general liability insurance coverage written on an occurrence basis
(i.e. not claims made basis), providing coverage limits excess of the
insurance limits required under subsections (a)(iii) and (a)(iv)
employer's liability only. Such insurance shall follow form the primary
insurances and drop down in case of exhaustion of underlying limits
and/or aggregates. Such insurance shall not contain an exclusion for
punitive or exemplary damages where insurable under law.
Notwithstanding anything to the contrary in this Section
19.01, (x) Lessee may self-insure (through deductibles, retention or otherwise)
against damage to the Equipment and the PPE Collateral in an amount for any
12-month policy period not greater than $1,000,000, and (y) Lessee may
self-insure (through deductibles, retention or otherwise) against comprehensive
general liability insurance in an amount for any 12-month policy period not
greater than $1,000,000;
(b) Endorsements. Lessee shall cause all insurance policies
carried and maintained in accordance with this Section 19.01 to be endorsed as
follows:
(i) Lessee shall be the named insured and Lessor and Owner
Participants shall be named as additional named insureds with respect
to policies described in subsections (a)(i) and (a)(ii). Lessor shall
be named as loss payee with respect to the insurance described in
subsection (a)(i). Collateral Agent (as defined in the Intercreditor
Agreement) shall be loss payee with respect to the insurance described
in subsection (a)(ii). Such additional named insured and loss payee
status afforded to Lessor, Owner Participants and Collateral Agent in
such insurance policies described in subsections (a)(i) and (a)(ii)
shall apply only with respect to the Equipment and the PPE Collateral.
Lessee shall be the named insured and Lessor and Owner Participants
shall be additional insureds with respect to policies described in
subsections (a)(iii), (a)(iv) to the extent
34
allowed by law, and (a)(v). It shall be understood that any obligation
to pay premiums, shall be the sole obligation of Lessee and not that
of Lessor and Owner Participants; and
(ii) with respect to policies described in subsections (a)(i)
and (a)(ii), the interests of Lessor and Owner Participants shall not
be invalidated by any action or inaction of Lessee, or any other
person, nor by any foreclosure or other proceedings or notice of such
relating to the property and shall insure Lessor and Owner Participants
regardless of any breach or violation by Lessee or any other person, of
any warranties, declarations or conditions of such policies; and
(iii) inasmuch as the liability policies are written to cover
more than one insured, all terms conditions, insuring agreements and
endorsements, with the exception of the limits of liability, shall
operate in the same manner as if there were a separate policy covering
each insured; and
(iv) the insurers thereunder shall waive all rights of
subrogation against Lessor and Owner Participants, any right of setoff
or counterclaim and any other right to deduction, whether by attachment
or otherwise; and
(v) such insurance shall be primary without right of
contribution of any other insurance carried by or on behalf of Lessor
and Owner Participants with respect to their interests as such in the
Equipment; and,
(vi) if such insurance is canceled for any reason whatsoever,
including nonpayment of premium, or any changes are initiated by Lessee
or carrier which affect the interests of Lessor and Owner Participants,
such cancellation or change shall not be effective as to Lessor and
Owner Participants until 30 days, except for non-payment of premium
which shall be 10 days, after receipt by Lessor of written notice sent
by registered mail from such insurer.
(c) Certifications. On the Closing Date, and at each policy
renewal, but not less than annually, Lessee shall provide to Lessor and Owner
Participants approved certification from each insurer or by an authorized
representative of each insurer. Such certification shall identify the
underwriters, the type of insurance, the limits, deductibles, and term thereof
and shall specifically list the special provisions delineated for such insurance
required for this Section 19.01.
(d) Insurance Report. Concurrently with the furnishing of all
certificates referred to in this Section 19.01, Lessee shall furnish Lessor and
Owner Participants with an opinion from an independent insurance broker,
acceptable to Lessor (provided that MJM Global Services, Inc. shall be deemed to
be acceptable to Lessor), stating that all premiums then due have been paid and
that, in the opinion of such broker, the insurance then maintained by Lessee is
in accordance with this section. Furthermore, upon its first knowledge, such
broker shall advise Lessor promptly in writing of any default in the payment of
any premiums or any other act or omission, on the part of any person, which
might invalidate or render unenforceable, in whole or in part, any insurance
provided by Lessee hereunder.
35
(e) General. Lessor shall be entitled, upon reasonable advance
notice, to review Lessee's insurance policies carried and maintained with
respect to the Equipment and the PPE Collateral and Lessee's obligations under
this Section 19.01. Upon request, Lessee shall furnish Lessor with copies of all
insurance policies, binders, and cover notes or other evidence of such
insurance. Notwithstanding anything to the contrary herein, no provision of this
Section 19.01 or any provision of this Agreement shall impose on Lessor and
Owner Participants any duty or obligation to verify the existence or adequacy of
the insurance coverage maintained by Lessee, nor shall Lessor be responsible for
any representations or warranties made by or on behalf of Lessee to any
insurance broker, company or underwriter. Lessor, at its sole option, may obtain
such insurance if not provided by Lessee and in such event, Lessee shall
reimburse Lessor upon demand for the cost thereof together with interest.
SECTION 19.02. Adjustment of Claims; Payment
-----------------------------
(a) No Event of Default. Unless a Material Default shall have
occurred and be continuing, Lessee shall have the exclusive right to negotiate
and adjust all claims against insurers for damage to or loss of the Equipment,
or for third-party public liability with respect to the Equipment, which in each
case, in the reasonable opinion of Lessee, would be for an amount equal to or
less than $5,000,000. With respect to any such claim which in Lessee's
reasonable opinion would be for an amount greater than $5,000,000 Lessee shall
provide Lessor prompt written notice of such claim and Lessor shall within 5
Business Days of receipt of such notice inform Lessee whether Lessor elects to
participate in the negotiation and adjustment of any such claim. If Lessor does
not provide Lessee notice of its election within such 5-Business Day period,
Lessee shall have the exclusive right to negotiate and adjust such claims.
Subject to subsection (b) of this Section 19.02, insurance proceeds of
$5,000,000 or less per occurrence shall be paid to Lessee, or if received by
Lessee may be retained by Lessee. If the property insurance proceeds in respect
of the Equipment for any occurrence are in excess of $5,000,000, such proceeds
shall be paid to Lessor and,
(i) if Lessee has elected to repair or replace the Equipment,
upon the submission by Lessee to Lessor of invoices, contracts, bills
of lading or other sufficient proofs of the costs of each repair or
replacement, Lessor shall promptly pay such proceeds to Lessee to fund
the costs of repairing, restoring or replacing the damaged Components
periodically upon written application from Lessee certifying the amount
of such funding and specifying in reasonable detail the costs to be
incurred, with the remainder being remitted to Lessee upon the
completion of the repair, restoration or replacement,
(ii) if such proceeds were paid as a consequence of an Event
of Loss and Lessee has elected to comply with alternative (ii) of
Section 9.01(b) hereof or Lessor, shall hold such proceeds pending
application as provided in said alternative (ii), or
(iii) if such proceeds were paid as a consequence of an Event
of Loss and Lessee has elected or is required to comply with
alternative (i) of Section 9.01(b) hereof or Lessor shall hold such
proceeds, such proceeds shall be deemed to be cash collateral provided
by Lessee, and Lessor shall pay such proceeds to Lessee periodically
upon
36
written application by Lessee to reimburse Lessee for the cost of
Components replaced to date, with remainder being remitted to Lessee
upon the completion of the substitution.
Any amounts held by Lessor (which amounts shall be held by Lessor, as the case
may be, as security for the obligation of Lessee to make repairs or
replacements, as the case may be) and any proceeds or payments (and net earnings
thereon) remaining after such repairs or replacements have been made shall be
paid to Lessee. Any amounts which are held by Lessor pending payment to Lessee
shall, until paid to Lessee as provided herein be invested by Lessor in
accordance with the provisions of Section 6.06 of the Trust Agreement. Any gain
(including interest received) realized as the result of any such investment (net
of any fees, commissions and other expenses, if any, incurred in connection with
such investment) shall be applied or reinvested in the same manner as the
principal invested.
(b) Application of Payments during Existence of a Lease Event
of Default. Any amount referred to in this Section 19 which is payable to or
retainable by Lessee shall not be paid to or retained by Lessee if at the time
of such payment or retention a Material Default shall have occurred and be
continuing, but shall be held by or paid over to Lessor as security for the
obligations of Lessee under this Lease and, if a Material Default shall have
occurred and be continuing, applied against Lessee's obligations hereunder as
and when due. At such time as there shall not be continuing any such Material
Default, such amount shall be paid to Lessee to the extent not previously
applied in accordance with the preceding sentence.
SECTION 19.03. Additional Insurance by Lessor and Lessee.
Lessee may, at its own expense, carry insurance with respect to its interest in
the Equipment in amounts in excess of that required to be maintained by this
Article XIX; any Owner Participant may carry for its own account at its sole
cost and expense insurance with respect to its interest in the Equipment,
provided that such insurance does not prevent Lessee from carrying the insurance
required or permitted by this Article XIX or adversely affect such insurance or
the cost thereof.
ARTICLE XX
Owner Trustee; Owner Participant
--------------------------------
SECTION 20.01. Successor Trustee; Co-trustee. In the case of
the succession or the appointment of any successor trustee or trustees pursuant
to the terms of the Trust Agreement, such successor or successors shall succeed
to all the rights, duties, powers, and obligations of Lessor hereunder and under
the other Operative Documents and shall (with the other trustees) be deemed to
be Lessor and the legal owner of the Equipment for all purposes hereof and each
reference herein and in the Operative Documents to the "Lessor" shall mean any
such successor trustee or trustees. Lessor or any successor trustee from time to
time serving as Lessor hereunder may from time to time appoint one or more
co-trustees or separate trustees pursuant to the terms of the Trust Agreement to
exercise or hold any of or all the rights, duties and title of Lessor hereunder.
Except for succession pursuant to Section 10 of the Trust Agreement, each such
appointment of any successor trustee, co-trustee or separate trustee shall
require the prior written consent or approval by Lessee and Guarantor. No such
appointment of
37
any successor trustee, co-trustee or separate trustee shall in any way alter the
terms of this Lease or the obligations of Lessee or Lessor hereunder. The
appointment of one successor trustee, co trustee or separate trustee shall not
exhaust the right to appoint further successor trustees, co-trustees and
separate trustees pursuant to the Trust Agreement, but such right may be
exercised repeatedly so long as this Lease may be in effect.
SECTION 20.02. Owner Trustee Not Acting in Individual
Capacity. Lessee acknowledges that Trust Company is entering into this Lease
solely as the Owner Trustee and not, except as expressly provided herein or with
respect to Lessor Liens attributable to it, in its individual capacity, and in
no case whatsoever shall it (or any entity or person acting as successor Owner
Trustee under the Trust Agreement) be personally liable for any obligation or
loss in respect of any of the statements, representations, warranties,
agreements or obligations of the Owner Trustee hereunder, except that the Owner
Trustee shall be liable, in its individual capacity, (a) for its own willful
misconduct or gross negligence; (b) in the case of the inaccuracy of any of its
representations or warranties or the failure to perform any covenant of the
Owner Trustee in its individual capacity contained in or referred to in Section
4.04 of the Participation Agreement or in Section 4.01 hereof; and (c) for the
failure to use ordinary care in the receipt and disbursement of monies actually
received by it under the Operative Documents.
ARTICLE XXI
Collateral
----------
SECTION 21.01. Collateral.Lessee's and Guarantor's obligations
under the Operative Documents are secured by the liens on the PPE Collateral and
the Working Capital Collateral pursuant to and in accordance with the Security
Documents.
ARTICLE XXII
Miscellaneous
-------------
SECTION 22.01. Documentary Conventions. This Agreement shall
be governed by the Documentary Conventions in Appendix A of the Participation
Agreement.
SECTION 22.02. Revision of Lease Supplements. Lessor and
Lessee agree to amend the Lease Supplements to reflect any revisions required by
the terms hereof or any Operative Document as soon as necessary or practical. It
is hereby understood and agreed by the parties hereto that such amendment shall
not be effective without the prior written consent of the Guarantor.
Notwithstanding the preceding sentence, the revisions shall take effect
immediately, whether or not the Lease Supplement has been amended.
SECTION 22.03. True Lease. It is the intention of the parties
hereto that this Lease shall constitute an agreement of true lease for all
purposes, including income tax purposes, such that Lessor will be treated as the
owner and lessor of the Equipment and Lessee will be
38
treated as the lessee of the Equipment, and unless Lessee exercises any of its
rights to purchase the Equipment, nothing herein shall be construed as conveying
to Lessee any title to or ownership of the Equipment, the rights and interest of
Lessee hereunder with respect to and in the Equipment being those of a lessee
only.
SECTION 22.04. City of Chicago. Solely for purposes of the
City of Chicago's Personal Property Lease/Rental Transaction Tax, rental
payments in the amount of $132,739,678.56 shall be apportioned to the lease of
all Components located in the City of Chicago. Payment of such rent shall be
deemed to commence on October 15, 2006 and termination on July 15, 2010.
39
IN WITNESS WHEREOF, the parties hereto have each caused this
Lease Agreement to be duly executed as of the date first above written.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity but solely as Owner
Trustee, as Lessor,
By: ________________________
Name:
Title:
SWEETHEART CUP COMPANY INC.,
as Lessee,
By: ________________________
Name:
Title:
40
