<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 6, 1997
REGISTRATION NO. 333-43619
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UNITED DEFENSE INDUSTRIES, INC.
<TABLE>
<S> <C> <C>
DELAWARE 3795 52-2059782
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
<TABLE>
<S> <C> <C>
Iron Horse Investors, L.L.C. Delaware 52-2059783
UDLP Holdings Corp. Delaware 52-2059780
United Defense, L.P. Delaware 54-1693796
</TABLE>
1525 WILSON BOULEVARD, SUITE 700
ARLINGTON, VIRGINIA 22209-2411
(703) 312-6100
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
FRANCIS RABORN
1525 WILSON BOULVARD, SUITE 700
ARLINGTON, VIRGINIA 22209-2411
(703) 312-6100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT OF SERVICE)
COPIES TO:
MARK A. STEGEMOELLER
LATHAM & WATKINS
SEARS TOWER, SUITE 5800
CHICAGO, ILLINOIS 60606
(312) 876-7700
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
8 3/4% Senior Subordinated Notes
due 2007...................................... $200,000,000 100% $200,000,000 $59,000
Subsidiary Guarantees of the 8 3/4% Senior
Subordinated Notes due 2007................... -- -- -- (2)
</TABLE>
(1) Estimated solely for the purposes of calculating the amount of the
registration fee pursuant to Rule 457.
(2) Pursuant to Rule 457(n), no separate registration fee is payable with
respect to the subsidiary guarantees.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF THE INFORMATION
REQUIRED BY PART I OF FORM S-4
<TABLE>
<CAPTION>
FORM S-4 ITEM NO. AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
- ------------------------------------------------------------------- --------------------------------------------------------
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front
Cover Page Prospectus................................. Outside Front Cover Page; Cross Reference Sheet; Inside
Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................ Inside Front Cover Page; Outside Back Cover Page
3. Risk Factors, Ratio of Earnings to Fixed Charges and
other Information..................................... Prospectus Summary; Risk Factors; Unaudited Pro Forma
Financial Data; Selected Historical Financial Data
4. Terms of the Transaction................................ The Exchange Offer; Certain Federal Income Tax
Considerations; Plan of Distribution; Description of
the Notes; The Acquisition
5. Pro Forma Financial Information......................... Unaudited Pro Forma Financial Data
6. Material Contacts with the Company Being Acquired....... Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters......... Not Applicable
8. Interests of Named Experts and Counsel.................. Not Applicable
9. Disclosure of Commission Position on Indemnification for
Securities Act
Liabilities........................................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants............. Not Applicable
11. Incorporation of Certain Information by Reference....... Not Applicable
12. Information with Respect to S-2 or S-3 Registrants...... Not Applicable
13. Incorporation of Certain Information by Reference....... Not Applicable
14. Information with Respect to Registrants Other Than S-3
or S-2 Registrants.................................... Prospectus Summary; Risk Factors; The Exchange Offer;
Use of Proceeds; Capitalization; Unaudited Pro Forma
Financial Data; Management's Discussion and Analysis
of Financial Condition and Results of Operations;
Business; Management; Principal Stockholders; Certain
Transactions; Description of Certain Indebtedness;
Description of the Notes; Financial Statements
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF THE INFORMATION
REQUIRED BY PART I OF FORM S-4
<TABLE>
<CAPTION>
FORM S-4 ITEM NO. AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
- ------------------------------------------------------------------- --------------------------------------------------------
<C> <S> <C>
C. INFORMATION ABOUT THE COMPANY TO BE ACQUIRED
15. Information with Respect to S-3 Companies............... Not Applicable
16. Information with Respect to S-2 or S-3 Companies........ Not Applicable
17. Information with Respect to Companies Other Than S-2 or
S-3 Companies......................................... Not Applicable
D. VOTING AND MANAGEMENT
18. Information if Proxies, Consents or Authorizations are
to be Solicited....................................... Not Applicable
19. Information if Proxies, Consents or Authorizations are
not to be Solicited or in an Exchange Offer........... Management; Certain Transactions; Principal Stockholders
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
OFFER TO EXCHANGE
8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 (THE "EXCHANGE NOTES")
FOR ALL OUTSTANDING 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 (THE "PRIVATE
NOTES")
OF
UNITED DEFENSE INDUSTRIES, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
UNLESS EXTENDED.
--------------------------
United Defense Industries, Inc. (the "Company") is offering (the "Exchange
Offer"), upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its 8 3/4% Senior
Subordinated Notes Due 2007 (the "Exchange Notes"), which exchange has been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a registration statement of which this Prospectus is a part (the
"Registration Statement"), for each $1,000 principal amount of its outstanding
8 3/4% Senior Subordinated Notes Due 2007 (the "Private Notes"), of which
$200,000,000 in aggregate principal amount was issued on October 6, 1997 and is
outstanding as of the date hereof. The form and terms of the Exchange Notes are
the same as the form and terms of the Private Notes except that (i) the exchange
will have been registered under the Securities Act, and, therefore, the Exchange
Notes will not bear legends restricting the transfer thereof and (ii) holders of
the Exchange Notes will not be entitled to certain rights of holders of the
Private Notes under the Registration Rights Agreement (as defined), which rights
will terminate upon the consummation of the Exchange Offer. The Exchange Notes
will evidence the same indebtedness as the Private Notes (which they replace)
and will be entitled to the benefits of the Indenture (as defined). The Private
Notes and the Exchange Notes are sometimes referred to herein collectively as
the "Notes." See "The Exchange Offer" and "Description of the Notes."
The Exchange Notes will bear interest at the same rate and on the same terms
as the Private Notes. Consequently, the Exchange Notes will bear interest at the
rate of 8 3/4% per annum and the interest thereon will be payable semi-annually
on May 15 and November 15 of each year, commencing May 15, 1998. The Exchange
Notes will bear interest from and including the date of issuance of the Private
Notes (October 6, 1997). Holders whose Private Notes are accepted for exchange
will be deemed to have waived the right to receive any interest accrued on the
Private Notes.
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after November 15, 2002, at the redemption prices set
forth herein plus accrued and unpaid interest thereon to the applicable
redemption date. In addition, at any time prior to November 15, 2000, the
Company may redeem up to 35% of the original aggregate principal amount of the
Notes at a redemption price equal to 108.75% of the principal amount thereof
plus accrued and unpaid interest thereon to the redemption date, with the net
cash proceeds of one or more Public Equity Offerings (as defined); provided that
at least 65% of the original aggregate principal amount of the Notes remains
outstanding immediately after each such redemption. The Notes will also be
redeemable by the Company in the event of a Change of Control (as defined) at
any time prior to November 15, 2002, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium (as defined), plus accrued
and unpaid interest thereon to the redemption date.
In the event of a Change of Control, if the Company does not redeem all of
the Notes, each holder of the Notes will have the right, at the holder's option,
to require the Company to purchase the Notes at a price equal to 101% of the
principal amount thereof plus accrued and unpaid interest thereon to the
purchase date. See "Description of the Notes." No assurance can be given that
the Company will have the financial resources to satisfy the amounts due upon a
Change of Control.
The Notes will be general unsecured obligations of the Company subordinate
in right of payment to all existing and future Senior Debt (as defined) of the
Company, including all obligations under the Senior Credit Facility. The Notes
will be guaranteed on a senior subordinated basis by the Company's parent, Iron
Horse Investors, L.L.C. ("Iron Horse"), UDLP, UDLP Holdings Corp. and each of
the Company's other subsidiaries that are also guarantors under the Senior
Credit Facility (collectively, the "Guarantors"). The guarantees will be full,
unconditional and on a joint and several basis, subject to applicable law. As of
November 30, 1997, the Company had approximately $428.5 million of Senior Debt
outstanding (excluding outstanding letters of credit of approximately $157.0
million and unused commitments of approximately $111.0 million under the Senior
Credit Facility, $50.0 million of which is available only to fund the repayment
of the Seller Note) and $50.0 million outstanding under the Seller Note (which
is PARI PASSU in right of payment with the Notes and will mature on the third
anniversary of the Acquisition). See "Description of the Notes--Subordination"
and "Capitalization." After consummation of the Transactions (as defined),
indebtedness represented approximately 80% of the Company's total
capitalization.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
THE COMPANY WILL ACCEPT FOR EXCHANGE ANY AND ALL VALIDLY TENDERED PRIVATE
NOTES NOT WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS THE EXCHANGE OFFER IS EXTENDED BY THE COMPANY IN ITS SOLE
DISCRETION (THE "EXPIRATION DATE"). TENDERS OF PRIVATE NOTES MAY BE WITHDRAWN AT
ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. THE
EXCHANGE OFFER IS NOT CONDITIONED UPON ANY MINIMUM PRINCIPAL AMOUNT OF PRIVATE
NOTES BEING TENDERED FOR EXCHANGE. PRIVATE NOTES MAY BE TENDERED ONLY IN
INTEGRAL MULTIPLES OF $1,000. IN THE EVENT THE COMPANY TERMINATES THE EXCHANGE
OFFER AND DOES NOT ACCEPT FOR EXCHANGE ANY PRIVATE NOTES, THE COMPANY WILL
PROMPTLY RETURN ALL PREVIOUSLY TENDERED PRIVATE NOTES TO THE HOLDERS THEREOF.
--------------------------
The date of this Prospectus is , 1998
<PAGE>
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an affiliate of the Company within the meaning of Rule 405 under
the Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act; PROVIDED that the holder is acquiring
the Exchange Notes in the ordinary course of its business and is not
participating, and had no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Private Notes
wishing to accept the Exchange Offer must represent to the Company, as required
by the Registration Rights Agreement, that such conditions have been met. The
Company believes that, to its knowledge, none of the registered holders of the
Private Notes is an affiliate (as such term is defined in Rule 405 under the
Securities Act) of the Company.
Prior to the Exchange Offer, there has been no public market for the Private
Notes. The Company does not intend to list the Exchange Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active market for the Exchange Notes
will develop. To the extent that a market for the Exchange Notes does develop,
the market value of the Exchange Notes will depend on market conditions (such as
yields on alternative investments), general economic conditions, the Company's
financial condition and certain other factors. Such conditions might cause the
Exchange Notes, to the extent that they are traded, to trade at a significant
discount from face value. See "Risk Factors--Absence of Public Market for the
Notes."
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer may be deemed to be an
"underwriter" within the meaning of the Securities Act. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Private Notes where such
Private Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has indicated its intention
to make this Prospectus (as it may be amended or supplemented) available to any
broker-dealer for use in connection with any such resale for the period required
by the Securities Act. See "Plan of Distribution."
The Company will not receive any proceeds from, and has agreed to bear the
expenses of, the Exchange Offer. No underwriter is being used in connection with
this Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
2
<PAGE>
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS OFFERING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS IN
CONNECTION THEREWITH. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM. THE
COMPANY EXPECTS THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE EXCHANGE OFFER
WILL BE ISSUED IN THE FORM OF ONE OR MORE FULLY REGISTERED GLOBAL NOTES THAT
WILL BE DEPOSITED WITH, OR ON BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC" OR
THE "DEPOSITARY") AND REGISTERED IN ITS NAME OF CEDE & CO., AS ITS NOMINEE.
BENEFICIAL INTERESTS IN THE GLOBAL NOTE REPRESENTING THE EXCHANGE NOTES WILL BE
SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS
MAINTAINED BY THE DEPOSITARY AND ITS PARTICIPANTS. AFTER THE INITIAL ISSUANCE OF
SUCH GLOBAL NOTE, EXCHANGE NOTES IN CERTIFICATED FORM WILL BE ISSUED IN EXCHANGE
FOR THE GLOBAL NOTE IN ACCORDANCE WITH THE TERMS AND CONDITIONS SET FORTH IN THE
INDENTURE. SEE "DESCRIPTION OF NOTES--BOOK ENTRY, DELIVERY AND FORM."
NOTICE REGARDING FORWARD-LOOKING INFORMATION
This Prospectus includes "forward-looking statements." All statements other
than statements of historical facts included in this Prospectus, including,
without limitation, the statements under "Prospectus Summary," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" and located elsewhere herein regarding industry prospects and the
Company's business plans, opportunities and financial position are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from the Company's
expectations ("Cautionary Statements") are disclosed in the Prospectus,
including, without limitation, in conjunction with the forward-looking
statements in this Prospectus under "Risk Factors."
All subsequent written and oral forward-looking statements attributable to
the Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN
THIS PROSPECTUS. FOR PURPOSES OF THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE
REQUIRES, THE "COMPANY" REFERS TO UNITED DEFENSE INDUSTRIES, INC. AND ITS
CONSOLIDATED SUBSIDIARIES, INCLUDING UNITED DEFENSE, L.P. ("UDLP"), AFTER GIVING
EFFECT TO THE TRANSACTIONS (AS DEFINED), AND HISTORICAL REFERENCES TO THE
COMPANY INCLUDE THE BUSINESSES CONDUCTED BY UDLP PRIOR TO GIVING EFFECT TO THE
TRANSACTIONS AND THE BUSINESSES CONDUCTED BY THE PREDECESSORS OF UDLP THAT WERE
CONTRIBUTED TO UDLP UPON ITS FORMATION ON JANUARY 1, 1994. ALL REFERENCES TO
"PRO FORMA" FINANCIAL INFORMATION GIVE EFFECT TO THE TRANSACTIONS, AS FURTHER
DESCRIBED UNDER "UNAUDITED PRO FORMA FINANCIAL DATA."
THE COMPANY
The Company is a leading supplier of tracked, armored combat vehicles and
weapons delivery systems to the U.S. Department of Defense and a number of
allied military forces worldwide. The Company's products include critical
elements of the U.S. military's tactical force structure. The Bradley Fighting
Vehicle, recognized as one of the best-performing weapons systems in U.S.
history, is the only domestically produced vehicle able to fulfill the dual role
of troop transport and armored fighting vehicle. The Company has maintained its
prime contractor position on the Bradley program since production began in 1981,
and has added a number of technology-based upgrades and derivative vehicles that
continue to extend the program's life-cycle. Building on over twenty years of
experience on the M109 self-propelled howitzer and upgrades, the Company is also
the prime contractor for the development of the Crusader Field Artillery System.
The U.S. Army has identified the Crusader as its planned multi-billion dollar
next-generation field artillery system and the largest U.S. military vehicle
development program of this decade. For the twelve months ended September 30,
1997, the Company had pro forma revenues of approximately $1.2 billion, pro
forma operating income of $53.2 million and a pro forma net loss of $7.0
million. With respect to the net loss and operating income, purchase accounting
for the Transactions is not yet complete and these amounts are subject to
adjustment upon completion of that process. See "Unaudited Pro Forma Financial
Data." For the same twelve month period the Company had pro forma EBITDA (as
defined) of $127.1 million.
The Company enjoys strong, long-standing customer relationships as a result
of its advanced design, engineering and manufacturing capabilities, competitive
cost structure, diversified product portfolio, demonstrated upgrade
capabilities, and reputation for program quality and service. Management
believes that these characteristics provide a key competitive advantage in
obtaining upgrade production contracts and in pursuing other domestic and
international business opportunities with new and existing customers. In
addition to the Bradley Fighting Vehicle and the M109 howitzer, the Company
serves as the prime contractor for a number of mission critical military
programs, several of which have spanned decades. The Company has been the prime
contractor for several of these programs, including the M113 armored personnel
carrier since 1960, the M88 tank recovery vehicle since 1960, and the U.S.
Navy's Mk45 naval gun system since 1968. The Company is currently performing
under more than 30 active contracts with original funded values in excess of $25
million each. The Company had a firm funded backlog of more than $1.6 billion as
of November 30, 1997, a substantial majority of which is derived from
sole-source, prime contracts.
Management believes that the emphasis of the U.S. Department of Defense on
enhancing military preparedness within a declining procurement budget
environment has resulted and will continue to result in increased emphasis on
upgrading and extending the life of existing equipment and systems, including
those currently supplied by the Company. Management believes this trend favors
large, established
4
<PAGE>
contractors such as the Company that are qualified to perform sole-source
contracts for product design, development, manufacture, field service and
support and subsequent upgrades.
The Company organizes its operations into three business areas: Armored
Combat Vehicles, Armament Systems and International.
ARMORED COMBAT VEHICLES. This business area is comprised of the Ground
Systems, Paladin Production and Steel Products Divisions of the Company.
GROUND SYSTEMS. The Company is the leading U.S. developer and manufacturer
of medium/light tracked, armored combat vehicles, including the Bradley family
of vehicles and derivatives (such as the Multiple Launch Rocket System carrier,
the Fire Support Vehicle, the Command and Control Vehicle and the Stinger
Fighting Vehicle), M109 self-propelled howitzers, M992 Field Artillery
Ammunition Supply Vehicles, M88 Recovery Vehicles, Grizzly Breaching Vehicles,
M9 Armored Combat Earthmovers, the M113 family of troop transport vehicles and
derivatives, M8 Armored Gun System and LVTP7 Amphibious Assault Vehicles.
PALADIN PRODUCTION. Through an innovative private sector/public sector
partnership, the Company has partnered with the U.S. government to upgrade the
M109 howitzer to the A6 configuration, known as the Paladin, creating a
comprehensive and integrated package with modern battlefield capabilities.
STEEL PRODUCTS. The Company is the largest U.S. designer and producer of
track shoes for armored combat vehicles and components for suspension systems.
The Company manufactures these products for nearly all of the tracked, armored
combat vehicles produced in the U.S., including vehicles manufactured by its
competitors. The Company also performs upgrades of the M113 family of vehicles
through a cooperative relationship with the U.S. Army.
ARMAMENT SYSTEMS. The Company provides integrated weapons delivery systems,
subsystems and services to the U.S. armed forces and military customers
worldwide.
CRUSADER. The Company is the prime contractor and systems integrator for
the Crusader under a $1.1 billion Demonstration and Validation contract, which
is presently scheduled to be completed in 2001, and expects to become the prime
contractor for the $1.0 billion Engineering and Manufacturing Development phase
presently scheduled to begin in 2000. Management believes the expertise acquired
through the design, development and engineering phases would give the Company a
significant advantage in securing the $1.3 billion Low Rate Initial Production
phase scheduled to begin in 2004 and any Full Rate Production contract
ultimately awarded, if necessary funding is appropriated and the U.S. Army
continues to proceed with the Crusader.
NAVAL PROGRAMS. Since 1940, the Company has designed, developed and
manufactured advanced guns and missile-launching systems for the U.S. Navy. The
Company is the sole-source, prime contractor of the Mk45 five-inch naval gun,
the U.S. Navy's primary gun for surface vessels, and produces the Mk41 Vertical
Launching System, the Navy's primary surface vessel missile launcher, under a
work-split agreement with Lockheed Martin Corporation. The Company is also
actively involved in the development and testing of several new naval guns and
missile launch systems, and provides complete overhaul, repair and maintenance
of naval ordnance at the recently privatized Naval Ordnance Station at
Louisville, Kentucky.
INTERNATIONAL. The Company has expanded its international presence over the
past several years, and its International Division operates joint ventures in
Saudi Arabia and Turkey and co-production programs in Japan, Korea and Pakistan.
The joint ventures have been awarded contracts to provide logistics support and
training, vehicle modernization upgrades and new tracked, armored combat vehicle
production. The Company provides training, technology and production kits to its
co-production partners and assists them in building domestic production
capability.
5
<PAGE>
In addition to the International Division's operations, the Company had
export sales directly and through the U.S. government's Foreign Military Sales
program, comprising $194.2 million of 1996 revenues. Management believes the
international market offers attractive opportunities to leverage established
programs, which the Company is actively pursuing in a number of countries
including Canada, Egypt, Israel, Kuwait, Malaysia, Spain, Taiwan and Thailand,
although opportunities in Asia may be reduced or deferred by recent economic and
political turmoil in that region.
BUSINESS STRENGTHS
The Company attributes its performance to several factors, including the
following:
COMPREHENSIVE CAPABILITIES IN ARMORED COMBAT VEHICLES. For more than half a
century, the Company has remained at the forefront in the design, development
and upgrade of medium/light tracked, armored combat vehicles, beginning with the
primary amphibious vehicle used in World War II, followed in 1960 by the M113,
the main troop transport vehicle used by the U.S. and other militaries with over
80,000 vehicles delivered worldwide. In 1981, the Company began initial
production as the sole-source, prime contractor for the Bradley Fighting
Vehicle. Management believes that these and other successes resulted from the
Company's proven, comprehensive design and engineering experience in simulation,
systems integration, armor, mobility and survivability, its demonstrated ability
to infuse "information dominance technologies" into combat systems for enhanced
information gathering, analysis and application in the battlefield environment,
its demonstrated manufacturing and upgrade capability, and its reputation for
service in the field.
ABILITY TO LEVERAGE SYSTEMS INTEGRATION EXPERTISE INTO LONG-TERM
PROGRAMS. The Company's experience and technological expertise afford it a
continued position as team leader and prime systems integrator for the programs
in which it participates, and positions the Company for the development and
integration of other complex, critical weapons systems. For example, management
believes the Company's position as the systems integrator on the Crusader played
a significant role in the Company's recent success in being named gun weapons
systems integrator for the Naval Surface Fire Support program, with
responsibility for the development and integration of a new naval gun system.
Management also believes that these capabilities create advantages in marketing
to international customers seeking products compatible with systems used by the
U.S. military.
LARGE, INSTALLED BASE OFFERS SIGNIFICANT LIFE-CYCLE OPPORTUNITIES. The U.S.
military is under budgetary constraints that provide incentives to upgrade and
overhaul existing systems and vehicles to maximize system life. The Company's
resident knowledge of its extensive domestic and international installed base of
vehicles affords significant opportunities, through modernization upgrades,
derivative vehicles that expand program capabilities, and logistical support
services and spares, to effectively extend product life for many years after
development. For example, the Bradley Fighting Vehicle has undergone three
generations of upgrades and has fostered a number of derivatives, and the
Company has upgraded its M109 howitzers to the A6 Paladin configuration and its
M88 recovery vehicles to the Hercules configuration. Management believes these
upgrades and derivatives, which comprise a substantial amount of the Company's
funded backlog, are more predictable sources of revenue and cash flow than new
products.
STRONG INTERNATIONAL PRESENCE AND GROWTH POTENTIAL. In contrast to the
declining U.S. procurement budget, military budgets of certain foreign
governments have expanded due to general economic growth or regional
geo-political pressures. Management believes the Company's proven design,
development, engineering and manufacturing capabilities for the U.S. military
have been the foundation for its International Division and export business. For
example, management believes the domestic M113 program and prior co-production
programs for Armored Infantry Fighting Vehicles in Europe were the basis for the
award of contracts for similar vehicles to the Company's Turkish joint venture.
Management also believes that the Company's existing product breadth and
established manufacturing platforms provide it with certain cost advantages over
smaller foreign competitors when pursuing typical lower volume foreign
contracts.
6
<PAGE>
INNOVATIVE PUBLIC/PRIVATE TEAMING RELATIONSHIPS. The Company has
established relationships with key constituencies, including the U.S. Army, U.S.
Navy and the Office of the Secretary of Defense, and is one of the leaders in
working with the U.S. Department of Defense to rationalize the U.S. defense
industrial base. The Company operates a significant portion of the recently
privatized Louisville Naval Ordnance Station, and is partnering with the
Letterkenny Army Depot to upgrade the M109 howitzer to the A6 Paladin
configuration. The Company also has partnering arrangements with another U.S.
government depot to upgrade the M113, the M88 and breaching vehicles. The
Company believes these arrangements demonstrate the success that can be achieved
through public/private partnerships.
STRONG MANAGEMENT TEAM AND EXPERIENCED INVESTOR. The Company has a highly
experienced and committed management team that has successfully adapted the
Company's cost structures and manufacturing operations to the declining U.S.
Department of Defense procurement budget and the significant transformation to a
lower volume, higher technology manufacturing capability. Senior management has
an average of more than 19 years with the Company and substantially all of the
senior management team was directly involved with the initial formation and
integration of UDLP in January 1994. Management will be given the opportunity to
participate in the Company's potential success through an equity-based incentive
program and direct investment. In addition, the management of the Company is
complemented by the support of The Carlyle Group, an active investor in the
defense and aerospace industries.
BUSINESS STRATEGY
Management intends to enhance its leading market position through the
successful execution of the following objectives:
CONTINUING TO PROVIDE PRODUCTS AND SERVICES ACROSS PROGRAM LIFE-CYCLES. The
Company intends to continue to leverage its extensive range of products and
services across entire program life-cycles through new technology developments,
follow-on products, derivative vehicles, upgrades, logistics support and
training. For example, the Company was recently awarded a Low Rate Initial
Production contract for the third generation of upgrades to the Bradley Fighting
Vehicle, the A3 configuration, which will incorporate a new core electronic
architecture, including, among others, combat identification systems,
situational awareness and battlefield digitization. In addition, the Company
plans to continue building on the successful Bradley Fighting Vehicle program by
further expanding its family of vehicles to include new armored vehicles, such
as a maintenance vehicle, a treatment and transport vehicle, an engineering
squad vehicle and a battle command vehicle.
CAPITALIZING ON THE CRUSADER OPPORTUNITY. The Crusader program represents
an important opportunity with the potential to become one of the U.S. Army's
largest procurement programs over the next decade. The Company plans to devote
all necessary resources to establish the Crusader's capabilities and develop
successful prototypes in the Demonstration and Validation phase and to win, if
awarded, the Engineering and Manufacturing Development and Low Rate Initial
Production contracts. The Company's objective is to fully demonstrate the
Company's engineering and cost-effective production qualifications so that the
Company will be the sole-source, prime contractor for the Crusader if necessary
funding is appropriated and the U.S. Army proceeds to Full Rate Production.
PURSUING KEY INTERNATIONAL OPPORTUNITIES. The Company plans to capitalize
on its established program base and expertise, and on its extensive
international joint venture and co-production experience, in order to expand
export sales and establish new joint ventures and co-production programs.
Management believes this strategy will require minimal additional capital, and
has the potential to diversify the Company's business base and enhance overall
margins.
7
<PAGE>
PARTICIPATING IN THE PUBLIC/PRIVATE DEFENSE INDUSTRIAL BASE
CONSOLIDATION. The Company intends to continue working closely with its U.S.
government customers to rationalize the public/private defense industrial base.
Potential opportunities include further privatizations such as the outsourcing
of logistics and training support and additional depot partnering relationships
with the U.S. Department of Defense.
MODERNIZING THE U.S. ARMY NATIONAL GUARD. A large portion of the U.S.
Army's tracked, armored combat vehicle fleet is in the National Guard. The
modernization of equipment and systems used by the National Guard generally lags
behind that of the active armed services. The Company is pursuing a directed
procurement program to assist the National Guard in obtaining funding for
upgrades of its Bradley Fighting Vehicles, M113 family of vehicles and M9
Armored Combat Earthmovers.
IDENTIFYING STRATEGIC ACQUISITION OPPORTUNITIES. Management expects that
the continuing consolidation in the U.S. defense industry will result in
strategic opportunities for the Company. The Company intends to be proactive in
this environment and, on an opportunistic basis, pursue acquisitions both
domestically and abroad that management believes will complement its key
business strengths or further expand its capabilities.
THE INVESTOR
The Carlyle Group (together with its affiliates, "Carlyle") is a Washington,
D.C.-based private merchant bank founded in 1987 and currently manages several
investment funds, including a $1.3 billion private equity fund. Carlyle has made
over 30 investments in select industries, including defense, aerospace,
information technology and related services. Some of these investments include
Howmet Corporation, a leading supplier of cast turbine engine components for the
jet aircraft and industrial gas power generation markets; BDM International,
Inc. (NASDAQ: BDMI), a multinational information technology company and provider
of professional services to the U.S. Department of Defense and other government
agencies (which Carlyle has agreed to sell to TRW, Inc.); Federal Data
Corporation, a supplier of information technology services and products to the
U.S. government; Magnavox Electronic Systems Company, a leading electronics
systems supplier to the U.S. government and prime contractors (later sold to
Hughes Electronics Corporation); GDE Systems Inc., a leading supplier of mission
planning and information systems as well as test equipment to the U.S.
government and prime contractors (later sold to Tracor, Inc.); Power Paragon
Inc., a leading supplier of power distribution systems to the U.S. government
and prime contractors (later sold to SPD Inc.); and Vought Aircraft Company, a
leading supplier of major aircraft structures and subassemblies for commercial
and military aircraft (later sold to Northrop Grumman Corporation).
THE TRANSACTIONS
United Defense Industries, Inc. was formed by Carlyle in August 1997 to
acquire UDLP from FMC Corporation ("FMC"), Harsco Corporation ("Harsco") and
Harsco UDLP Corporation (collectively with FMC and Harsco, the "Sellers"). On
October 6, 1997 pursuant to a Purchase Agreement among the Sellers and the
Company dated as of August 25, 1997 (the "Acquisition Agreement"), the Company
acquired 100% of the Sellers' respective partnership interests in UDLP (the
"Acquisition"). As part of the Acquisition, UDLP acquired certain assets of
FMC's Corporate Technology Center ("CTC") in San Jose, California and hired
certain FMC legal, audit and governmental affairs personnel. The aggregate
purchase price paid in the Acquisition was approximately $850.0 million (the
"Purchase Price"), plus related fees and expenses estimated to be approximately
$30.0 million. The Purchase Price and such fees and expenses were funded with
(i) $200.0 million of Senior Subordinated Notes due 2007 (the "Private Notes");
(ii) borrowings of $457.0 million under a senior credit facility (the "Senior
Credit Facility"), which facility includes $495.0 million of term loan
facilities (the "Term Loan Facilities") and a $230.0 million revolving credit
facility (the "Revolving Credit Facility"); (iii) approximately $173.0 million
of cash common equity (the "Equity Contribution"), representing an investment in
the Company by an investor group formed by Carlyle, including Carlyle and
management; and (iv) a $50.0 million senior subordinated note payable to
8
<PAGE>
the Sellers (the "Seller Note"). The Purchase Price is subject to adjustment
based on the balance sheet of UDLP as of October 6, 1997 (the "Closing Date").
If any such adjustment results in a decrease in the Purchase Price, borrowings
under the Senior Credit Facility will be correspondingly reduced. If the
Purchase Price is increased, the borrowings under the Revolving Credit Facility
will be correspondingly increased. This purchase price adjustment is currently
being negotiated by the Sellers and the Company. See "The Acquisition." If
certain consents and acknowledgments are obtained, the Company will pay to the
Sellers $50.0 million in cash in lieu of issuing the Seller Note, and the
borrowings under the Term Loan Facilities would be increased by $50.0 million to
effect such payment. See "Description of Certain Indebtedness." The Acquisition,
the borrowings under the Senior Credit Facility, the issuance of the Private
Notes, the Seller Note, the Equity Contribution and the payment of the related
fees and expenses are referred to herein as the "Transactions." For a
description of the Acquisition Agreement and related agreements, see "The
Acquisition."
The following table illustrates the sources and uses of funds in connection
with the Transactions:
($ IN MILLIONS)
<TABLE>
<CAPTION>
SOURCES OF FUNDS AMOUNT USES OF FUNDS AMOUNT
- -------------------------------------- ----------- -------------------------------------- -----------
<S> <C> <C> <C>
Revolving Credit Facility(1).......... $ 12.0 Acquisition Purchase Price............ $ 850.0
Term Loan Facilities(2)............... 445.0 Estimated Fees and Expenses........... 30.0
The Private Notes..................... 200.0
Seller Note(2)........................ 50.0
Equity Contribution................... 173.0
----------- -----------
Total Sources..................... $ 880.0 Total Uses............................ $ 880.0
----------- -----------
----------- -----------
</TABLE>
- ------------------------
(1) On the Closing Date, the Revolving Credit Facility had a remaining borrowing
availability of approximately $64.0 million after giving effect to the
issuance of approximately $154.0 million of letters of credit to replace
outstanding letters of credit on or promptly after the Closing Date.
(2) The Company believes that the Seller Note, which is due three years after
the Closing Date, will be prepaid within one year from the Closing Date with
$50.0 million of additional borrowings under the Term Loan Facilities.
9
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer................ The Company is hereby offering to exchange $1,000
principal amount of Exchange Notes for each $1,000
principal amount of Private Notes that are properly
tendered and accepted. The Company will issue Exchange
Notes on or promptly after the Expiration Date. As of
the date hereof, there is $200,000,000 aggregate
principal amount of Private Notes outstanding. See "The
Exchange Offer."
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer in exchange
for Private Notes may be offered for resale, resold and
otherwise transferred by a holder thereof (other than
(i) a broker-dealer who purchases such Exchange Notes
directly from the Company to resell pursuant to Rule
144A or any other available exemption under the
Securities Act or (ii) a person that is an affiliate of
the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the
registration and prospectus delivery provisions of the
Securities Act; PROVIDED that the holder is acquiring
Exchange Notes in the ordinary course of its business
and is not participating, and had no arrangement or
understanding with any person to participate, in the
distribution of the Exchange Notes. Each broker-dealer
that receives Exchange Notes for its own account in
exchange for Private Notes, where such Private Notes
were acquired by such broker-dealer as a result of
market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act meeting
the requirements of the Securities Act in connection
with any resale of such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the
Exchange Offer may be deemed to be an "underwriter"
within the meaning of the Securities Act. The Letter of
Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. See "The Exchange
Offer--Resale of the Exchange Notes."
Registration Rights Agreement..... The Private Notes were sold by the Company on October 6,
1997 (the "Closing Date") to Lehman Brothers Inc., BT
Alex. Brown Incorporated and Chase Securities Inc. (the
"Initial Purchasers") pursuant to a Purchase Agreement,
dated October 1, 1997, by and among the Company and the
Initial Purchasers (the "Purchase Agreement"). The
Initial Purchasers subsequently sold the Private Notes
to third parties. See "The Exchange Offer--Purpose of
the Exchange Offer." The Initial Purchasers have
informed the Company that the entire initial allotment
sold to them on October 6, 1997 was subsequently sold
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
to third parties but that the Initial Purchasers, from
time to time, hold Notes as part of their market making
activities. Pursuant to the Purchase Agreement, the
Company and the Initial Purchasers entered into a
Registration Rights Agreement, dated as of October 6,
1997 (the "Registration Rights Agreement"), which grants
the holders of the Private Notes certain exchange and
registration rights. The Exchange Offer is intended to
satisfy such rights, which will terminate upon the
consummation of the Exchange Offer. The holders of the
Exchange Notes will not be entitled to any exchange or
registration rights with respect to the Exchange Notes.
See "The Exchange Offer--Termination of Certain Rights."
Expiration Date................... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1998, unless the
Exchange Offer is extended by the Company in its sole
discretion, in which case the term "Expiration Date"
shall mean the latest date and time to which the
Exchange Offer is extended. See "The Exchange
Offer--Expiration Date; Extensions; Amendments."
Accrued Interest on the Exchange
Notes and the Private Notes..... The Exchange Notes will bear interest from and including
the date of issuance of the Private Notes (October 6,
1997). Holders whose Private Notes are accepted for
exchange will be deemed to have waived the right to
receive any interest accrued on the Private Notes. See
"The Exchange Offer--Interest on the Exchange Notes."
Conditions to the Exchange
Offer........................... The Exchange Offer is subject to the condition that, in
the reasonable judgment of the Company, it does not
violate applicable law, rules or regulations or an
applicable interpretation of the staff of the
Commission. The Exchange Offer is not conditioned upon
any minimum aggregate principal amount of Private Notes
being tendered for exchange. See "The Exchange
Offer--Conditions."
Procedures for Tendering Private
Notes........................... Each holder of Private Notes wishing to accept the
Exchange Offer must complete, sign and date the Letter
of Transmittal, or a facsimile thereof, in accordance
with the instructions contained herein and therein, and
mail or otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Private Notes and any
other required documentation to Norwest Bank Minnesota,
National Association, as exchange agent (the "Exchange
Agent"), at the address set forth herein. By executing
the Letter of Transmittal, the holder will represent to
and agree with the Company that, among other things, (i)
the Exchange Notes to be acquired by such holder of
Private Notes in connection with the Exchange Offer are
being acquired by such holder in the ordinary course of
its business, (ii) such holder has no arrangement or
understanding with any person to participate in a
distribution of the Exchange Notes, (iii) that if such
holder is a broker-dealer registered under the Exchange
Act or is
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
participating in the Exchange Offer for the purposes of
distributing the Exchange Notes, such holder will comply
with the registration and prospectus delivery
requirements of the Securities Act in connection with a
secondary resale transaction of the Exchange Notes
acquired by such person and cannot rely on the position
of the staff of the Commission set forth in no-action
letters (see "The Exchange Offer--Resale of the Exchange
Notes"), (iv) such holder understands that a secondary
resale transaction described in clause (iii) above and
any resales of Exchange Notes obtained by such holder in
exchange for Private Notes acquired by such holder
directly from the Company should be covered by an
effective registration statement containing the selling
securityholder information required by Item 507 or Item
508, as applicable, of Regulation S-K of the Commission
and (v) such holder is not an "affiliate", as defined in
Rule 405 under the Securities Act, of the Company. Any
broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the
Exchange Offer may be deemed to be an "underwriter"
within the meaning of the Securities Act. If the holder
is a broker-dealer that will receive Exchange Notes for
its own account in exchange for Private Notes that were
acquired as a result of market-making activities or
other trading activities, such holder will be required
to acknowledge in the Letter of Transmittal that such
holder will deliver a prospectus meeting the
requirements of the Securities Act in connection with
any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, such
holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
See "The Exchange Offer--Procedures for Tendering. "
Special Procedures for Beneficial
Owners.......................... Any beneficial owner whose Private Notes are registered
in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender such
Private Notes in the Exchange Offer should contact such
registered holder promptly and instruct such registered
holder to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such owner's
own behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering such
owner's Private Notes, either make appropriate
arrangements to register ownership of the Private Notes
in such owner's name or obtain a properly completed bond
power from the registered holder. The transfer of
registered ownership may take considerable time and may
not be able to be completed prior to the Expiration
Date. See "The Exchange Offer-- Procedures for
Tendering."
Guaranteed Delivery Procedures.... Holders of Private Notes who wish to tender their
Private Notes and whose Private Notes are not
immediately available or who cannot deliver their
Private Notes, the Letter of Transmittal or any other
documentation required by the Letter of Transmittal
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
to the Exchange Agent prior to the Expiration Date must
tender their Private Notes according to the guaranteed
delivery procedures set forth under "The Exchange
Offer--Guaranteed Delivery Procedures."
Acceptance of the Private Notes
and Delivery of the Exchange
Notes........................... Subject to the satisfaction or waiver of the conditions
to the Exchange Offer, the Company will accept for
exchange any and all Private Notes that are properly
tendered in the Exchange Offer prior to the Expiration
Date. The Exchange Notes issued pursuant to the Exchange
Offer will be delivered within five business days
following the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Withdrawal Rights................. Tenders of Private Notes may be withdrawn at any time
prior to the Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders."
Certain Federal Income Tax
Considerations.................. The exchange of Private Notes for Exchange Notes will be
treated as a "non-event" for federal income tax
purposes. As a result, no material federal income tax
consequences will result to holders exchanging Private
Notes for Exchange Notes. See "Certain Federal Income
Tax Considerations."
Exchange Agent.................... Norwest Bank Minnesota, National Association is serving
as the Exchange Agent in connection with the Exchange
Offer.
</TABLE>
THE EXCHANGE NOTES
The Exchange Offer applies to the entire aggregate principal amount of the
Private Notes. The form and terms of the Exchange Notes are the same as the form
and terms of the Private Notes except that (i) the exchange will have been
registered under the Securities Act and, therefore, the Exchange Notes will not
bear legends restricting the transfer thereof and (ii) holders of the Exchange
Notes will not be entitled to certain rights of holders of the Private Notes
under the Registration Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued under,
and be entitled to the benefits of, the Indenture. For further information and
for definitions of certain capitalized terms used below, see "Description of the
Notes."
<TABLE>
<S> <C>
Interest Payment Dates:........... Interest on the Exchange Notes will accrue from the date
of original issuance (the "Issue Date") and will be
payable semi- annually on May 15 and November 15,
commencing May 15, 1998.
Maturity Date:.................... November 15, 2007.
Optional Redemption:.............. The Exchange Notes will be redeemable at the option of
the Company, in whole or in part, at any time on or
after November 15, 2002, at the redemption prices set
forth herein, plus accrued and unpaid interest, thereon
to the applicable redemption date. In addition, at any
time prior to November 15, 2000, the Company may redeem
up to 35% of the original aggregate principal amount of
the Notes at a redemption price equal to 108.75% of the
principal amount thereof plus accrued and unpaid
interest to the redemption date, with the net cash
proceeds of one or more Public Equity Offerings,
provided that at least 65% of the original aggregate
principal amount of the
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Notes remains outstanding immediately after each such
redemption. See "Description of the Notes--Optional
Redemption."
Change of Control:................ Upon a Change of Control (as defined), (i) the Company
will have the option, at any time on or prior to
November 15, 2002, to redeem the Exchange Notes in whole
but not in part, at a redemption price equal to 100% of
the principal amount thereof plus the Applicable Premium
(as defined), plus accrued and unpaid interest, thereon
to the redemption date, and (ii) if the Company does not
so redeem the Exchange Notes, each holder will have the
right, at the holder's option, to require the Company to
purchase the Exchange Notes at a price equal to 101% of
the principal amount thereof plus accrued and unpaid
interest, thereon to the purchase date. See "Description
of the Notes--Repurchase at the Option of
Holders--Change of Control."
Ranking:.......................... The Exchange Notes will be general unsecured obligations
of the Company subordinate in right of payment to all
existing and future Senior Debt of the Company, and
senior in right of payment to or PARI PASSU with all
other indebtedness of the Company. As of November 30,
1997, the Company had approximately $428.5 million of
Senior Debt outstanding (excluding outstanding letters
of credit of approximately $157.0 million and unused
commitments of approximately $111.0 million under the
Senior Credit Facility, $50.0 million of which is
available only to fund the repayment of the Seller Note)
and $50.0 million outstanding under the Seller Note
(which is PARI PASSU in right of payment with the
Exchange Notes and will mature on the third anniversary
of the Closing Date, although the Company expects the
Seller Note to be prepaid prior to the first anniversary
of the Closing Date). See "Description of the
Notes--Subordination" and "Capitalization."
Guarantees:....................... The Company's payment obligations under the Exchange
Notes will be jointly and severally guaranteed on a
senior subordinated basis by the Guarantors (the
"Guarantees"). The Guarantee's will be full,
unconditional and on a joint and several basis, subject
to applicable law. The Guarantors will be the Company's
parent Iron Horse Investors, L.L.C., the Company's
wholly-owned subsidiary UDLP Holdings Corp., which is
the general partner of UDLP and UDLP and each of the
Company's other subsidiaries that are also guarantors
under the Senior Credit Facility. See "Description of
the Notes--Guarantees."
Certain Covenants:................ The indenture pursuant to which the Exchange Notes will
be issued (the "Indenture") contains certain covenants
that, among other things, limit the ability of the
Company and certain of its Subsidiaries to (i) incur
additional indebtedness and issue preferred stock; (ii)
pay dividends or make certain other restricted payments;
(iii) enter into transactions with affiliates; (iv) make
certain asset dispositions; (v) merge or consolidate or
transfer substantially all of its assets; (vi) encumber
assets under certain circumstances; (vii) restrict
dividends and other payments from subsidiaries; (viii)
engage in sale and leaseback transactions; (ix) issue
Capital Stock (as defined) of Controlled Subsidiaries
(as defined); or (x) engage in certain business
activities. See "Description of the Notes--Certain
Covenants."
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
In addition, under certain circumstances, the Company
will be required to offer to purchase the Notes at a
price equal to 100% of the principal amount thereof plus
accrued and unpaid interest, thereon to the date of
purchase, with the proceeds of certain Asset Sales (as
defined). See "Description of the Notes--Asset Sales."
</TABLE>
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE NOTES, SEE "RISK FACTORS."
15
<PAGE>
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following table presents summary unaudited consolidated pro forma
financial data of the Company and should be read in conjunction with the
"Unaudited Pro Forma Financial Data" and the notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical consolidated financial statements of UDLP, together with the
related notes thereto, included elsewhere in this Prospectus. The following
summary unaudited pro forma consolidated financial data for the year ended
December 31, 1996, the nine months ended September 30, 1996 and 1997 and the
twelve months ended September 30, 1997, give effect to the Transactions as if
such transactions had occurred on January 1, 1996 with respect to the pro forma
income statement and other data, and as of September 30, 1997 with respect to
the pro forma balance sheet data. See "The Acquisition." The Company accounts
for inventory using the LIFO method and incurred non-cash LIFO charges of $6.3
million, $7.1 million, $8.0 million and $7.2 million for the year ended December
31, 1996, the nine months ended September 30, 1996 and 1997 and the twelve
months ended September 30, 1997, respectively. The pro forma consolidated
financial data set forth below is not necessarily indicative of the results that
actually would have been achieved had such transactions been consummated as of
the dates indicated or that may be achieved in the future.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, TWELVE MONTHS
DECEMBER 31, ---------------------- ENDED SEPTEMBER
1996 1996 1997 30, 1997
------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C>
($ IN MILLIONS, EXCEPT RATIO DATA)
INCOME STATEMENT DATA:
Revenue................................................ $ 1,019.7 $ 738.6 $ 906.5 $ 1,187.6
Total expenses......................................... 985.0 711.5 875.0 1,148.5
Earnings from foreign affiliates....................... 31.9 31.3 13.5 14.1
------------ ---------- ---------- ---------------
Income from operations............................... 66.6 58.4 45.0 53.2
Interest expense....................................... 66.1 49.6 49.6 66.1
Other (income) expense................................. (2.0) (2.2) (1.4) (1.2)
------------ ---------- ---------- ---------------
Income (loss) before income taxes.................... 2.5 11.0 (3.2) (11.7)
Provision (benefit) for income taxes................... 1.0 4.4 (1.3) (4.7)
------------ ---------- ---------- ---------------
Net income (loss).................................... $ 1.5 $ 6.6 $ (1.9) $ (7.0)
------------ ---------- ---------- ---------------
------------ ---------- ---------- ---------------
OTHER DATA:
EBITDA(1).............................................. $ 140.3 $ 113.2 $ 100.0 $ 127.1
Depreciation and amortization.......................... 73.7 54.8 55.0 73.9
Capital expenditures................................... 22.4 16.5 20.1 26.0
Ratio of earnings to fixed charges(3).................. -- 1.1:1 -- --
Ratio of EBITDA to cash interest expense(2)............ 2.0x
Ratio of total debt to EBITDA.......................... 5.6x
BALANCE SHEET DATA:
Working capital........................................ $ (0.5)
Total assets........................................... 1,306.1
Total debt............................................. 707.0
Stockholder's equity................................... 173.0
</TABLE>
- ------------------------
(1) EBITDA represents income from operations plus depreciation and amortization.
EBITDA is not a measure of performance or financial condition under
generally accepted accounting principles, but is presented to provide
additional information related to debt service capability. EBITDA should not
be considered in isolation or as a substitute for other measures of
financial performance or liquidity under generally accepted accounting
principles. While EBITDA is frequently used as a measure of operations and
the ability to meet debt service requirements, it is not necessarily
comparable to other similarly titled captions of other companies due to the
potential inconsistencies in the method of calculation.
(2) For purposes of this computation, cash interest expense consists of pro
forma interest expense before amortization of deferred financing costs of
$2.0 million.
(3) Pro forma earnings were insufficient to cover fixed charges in the amount of
$1.3 million, $2.8 million and $11.9 million for the year ended December 31,
1996, the nine months ended September 30, 1997 and the twelve month period
ended September 30, 1997.
16
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following table presents summary consolidated historical financial data
and should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical consolidated
financial statements of UDLP, together with the related notes thereto, included
elsewhere in this Prospectus. The historical consolidated financial data for the
nine months ended September 30, 1996 and 1997 have been derived from UDLP's
unaudited interim consolidated financial statements which, in the opinion of
management, reflect all material adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such data.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<CAPTION>
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue..................................................... $ 1,076.3 $ 967.6 $ 1,029.3 $ 745.9 $ 913.9
Cost of sales(1)............................................ 809.8 746.7 820.8 595.8 755.0
Selling, general and administrative(2)...................... 131.8 122.7 128.4 90.0 91.4
Research and development.................................... 16.3 12.4 12.9 9.1 12.1
--------- --------- --------- --------- ---------
Total expenses............................................ 957.9 881.8 962.1 694.9 858.5
Earnings from foreign affiliates(3)......................... 12.4 21.4 31.9 31.3 13.5
--------- --------- --------- --------- ---------
Income from operations.................................... 130.8 107.2 99.1 82.3 68.9
Other (income) expense...................................... (2.6) (1.9) (1.9) (2.2) (1.5)
--------- --------- --------- --------- ---------
Income before income taxes................................ 133.4 109.1 101.0 84.5 70.4
Provision for income taxes(4)............................... 3.9 1.4 2.8 -- 1.5
--------- --------- --------- --------- ---------
Net income................................................ $ 129.5 $ 107.7 $ 98.2 $ 84.5 $ 68.9
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OTHER DATA:
EBITDA(5)................................................... $ 159.8 $ 133.9 $ 138.1 $ 111.1 $ 97.9
Net cash provided by operating activities................... 166.0 94.7 81.1 56.7 119.2
Net cash (used in) provided by investing activities......... (17.1) (50.8) (7.0) (4.6) 6.3
Net cash (used in) financing activities..................... (118.5) (74.9) (75.0) (53.0) (114.4)
Depreciation and amortization............................... 29.0 26.7 39.0 28.8 29.0
Capital expenditures........................................ 18.3 24.1 22.4 16.5 20.1
Ratio of earnings to fixed charges(6)....................... 38.1:1 26.4:1 23.6:1 25.6:1 19.2:1
BALANCE SHEET DATA:
Working capital............................................. $ 4.2 $ 11.3 $ 46.6 $ 48.4 $ 3.1
Total assets................................................ 479.9 569.6 645.0 601.7 612.1
Partners' capital........................................... 123.7 156.4 179.6 187.9 131.0
</TABLE>
- --------------------------
(1) Cost of sales includes consumption of inventory under the LIFO method and
includes charges relating to changes in cost as applied to inventory on-hand
("non-cash LIFO charges") of $5.6 million, $5.9 million and $6.3 million for
the years ended December 31, 1994, 1995 and 1996, respectively, and $7.1
million and $8.0 million for the nine months ended September 30, 1996 and
1997, respectively. Cost of sales for the year ended December 31, 1996 and
nine months ended September 30, 1996 includes a $14.3 million favorable
settlement from the U.S. government on a government procurement contract.
Cost of sales for the nine months ended September 30, 1997 includes
approximately $13.5 million of non-cash charges recorded for the quarter
ended September 1997 for changes in estimated contract profitability related
to contractual issues with customers and other matters resulting from the
periodic reassessment of the estimated profitability of contracts in
progress.
(2) Selling, general and administrative expense for the year ended December 31,
1994 includes a $7.4 million charge related to conforming Harsco's
historical accounting policy to UDLP's accounting for inventory.
(3) Earnings from foreign affiliates for the year ended December 31, 1996 and
nine months ended September 30, 1996 includes a $3.8 million increase as a
result of a change of accounting method for the investment in the Company's
Saudi Arabia joint venture, FMC Arabia Limited, from the cost method to the
equity method.
(4) UDLP was taxed as a partnership for the periods presented.
(5) EBITDA represents income from operations plus depreciation and amortization.
EBITDA is not a measure of performance or financial condition under
generally accepted accounting principles, but is presented to provide
additional information related to debt service capability. EBITDA should not
be considered in isolation or as a substitute for other measures of
financial performance or liquidity under generally accepted accounting
principles.
17
<PAGE>
While EBITDA is frequently used as a measure of operations and the ability
to meet debt service requirements, it is not necessarily comparable to other
similarly titled captions of other companies due to potential
inconsistencies in the method of calculation. See Note (6) to "Selected
Historical Financial Data" for information concerning the Company's net cash
provided by operating activities, net cash used in investing activities and
net cash used in financing activities for the periods indicated.
(6) For purposes of calculating the ratios of earnings to fixed charges,
"earnings" represents income before income taxes less the excess, if any, of
the equity in earnings of joint ventures over dividends received plus fixed
charges. "Fixed charges" consists of interest expense, including
amortization of deferred financing costs, plus that portion of operating
lease rental expense (33%) which management believes is representative of
the interest component of lease expense.
18
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS BEFORE
DECIDING TO MAKE AN INVESTMENT IN THE NOTES OFFERED HEREBY.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE
The Company incurred significant indebtedness as a result of the
Transactions and following consummation of the Transactions, approximately 80%
of the Company's total capitalization was represented by indebtedness. See "The
Acquisition." At November 30, 1997, the Company's consolidated total
indebtedness was approximately $678.5 million (excluding outstanding letters of
credit of approximately $157.0 million). The Indenture and the Senior Credit
Facility permit the Company to incur additional Indebtedness, subject to certain
limitations. For the year ended December 31, 1996 and the nine months ended
September 30, 1997, the Company's earnings would have been insufficient to cover
fixed charges by $1.3 million and $2.8 million, respectively. For the twelve
months ended September 30, 1997, the Company had pro forma revenues of
approximately $1.2 billion, pro forma operating income of $53.2 million and a
pro forma net loss of $7.0 million. With respect to the net loss and operating
income, purchase accounting for the Transactions is not yet complete and these
amounts are subject to adjustment upon completion of that process. See
"Unaudited Pro Forma Financial Data." The Company's ability to make scheduled
payments of the principal of, or interest on, or to refinance its indebtedness
(including the Notes) depends on its future performance, which to a certain
extent is subject to economic, financial, competitive, political and other
factors beyond its control. Based upon the current level of operations,
management believes that available cash flow, together with available borrowings
under the Senior Credit Facility and other sources of liquidity, should be
adequate to meet the Company's anticipated requirements for working capital,
capital expenditures, interest payments on the Notes and scheduled principal
payments under the Senior Credit Facility. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity, Capital
Resources and Financial Condition." There can be no assurance, however, that the
Company's cash flow will be sufficient to satisfy such requirements. If the
Company is unable to generate sufficient cash flow from operations in the future
to service its debt and make necessary capital expenditures, the Company may be
required to refinance all or a portion of its existing debt, including the
Notes, to sell assets or to obtain additional financing. There can be no
assurance that any such additional financing could be achieved. The Notes are
unsecured obligations of the Company. The Senior Credit Facility, however, is
secured by a lien on all assets (present, future, tangible and intangible) of
the Company and its domestic subsidiaries and by a pledge of all of the stock of
its domestic subsidiaries and two-thirds of the stock of its foreign
subsidiaries and joint ventures.
The Company's high level of debt will have several important effects on its
future operations, including the following: (i) the Company will have
significant cash requirements to service debt, reducing funds available for
operations, capital expenditures, research and development, acquisitions and
future business opportunities, and increasing the Company's vulnerability to
adverse general economic and industry conditions, all of which could be
exacerbated by the uncertainty inherent in government contracts and foreign
operations and the future of military expenditures (as described below) and (ii)
the financial covenants and other restrictions contained in the Senior Credit
Facility and other agreements relating to the Company's Senior Debt and in the
Indenture require the Company to meet certain financial tests and restrict its
ability to borrow additional funds, to dispose of assets or to pay cash
dividends.
SUBORDINATION AND RANKING OF THE NOTES AND THE GUARANTEES
The Notes and the Guarantees are general unsecured obligations of the
Company and the Guarantors, respectively, and are subordinate in right of
payment to all Senior Debt, including all indebtedness of the Company and the
Guarantors under the Senior Credit Facility. The Guarantees will be full,
unconditional and on a joint and several basis, subject to applicable law. As of
November 30, 1997, approximately $428.5 million of Senior Debt (excluding
outstanding letters of credit of approximately
19
<PAGE>
$157.0 million) was outstanding and the Company had no senior subordinated
indebtedness outstanding other than the Notes and the Seller Note. On November
30, 1997, the Company had approximately (i) $61.0 million available for
borrowing under the Revolving Credit Facility and (ii) $50.0 million available
for borrowing under the Term Loan Facilities solely to fund the repayment of the
Seller Note. The Indenture permits the Company and the Guarantors to incur
additional Senior Debt, provided certain conditions are met, and the Company and
the Guarantors expect from time to time to incur additional Senior Debt. In
addition, the Indenture permits Senior Debt to be secured. By reason of the
subordination provisions of the Indenture, in the event of the insolvency,
liquidation, reorganization, dissolution or other winding-up of the Company or
the Guarantors or upon a default in payment with respect to, or the acceleration
of, or if a judicial proceeding is pending with respect to any default under,
any Senior Debt, the lenders under the Senior Credit Facility and other
creditors who are holders of Senior Debt must generally be paid in full before a
holder of the Notes and the Guarantees may be paid. In addition, the Seller Note
matures and must be paid prior to the maturity of the Notes. Accordingly, there
may be insufficient assets remaining after such payments to pay amounts due on
the Notes and the Guarantees. See "Description of the Notes--Subordination."
RISKS OF FURTHER REDUCTIONS OR CHANGES IN MILITARY EXPENDITURES
Sales under contracts with the U.S. government's Department of Defense (the
"DoD"), including U.S. government Foreign Military Sales ("FMS") or under
subcontracts that identified the DoD as the ultimate purchaser, represented
approximately 90% of the Company's sales in 1996. The U.S. defense budget has
declined significantly since the mid-1980s, resulting in a slowing of new
program starts, program delays and program cancellations. The reduction in the
U.S. defense budget has caused most defense-related government contractors to
experience declining revenues, increased pressure on operating margins and, in
some cases, net losses. The Company has been adversely affected by these
reductions, and underwent a significant restructuring and consolidation of its
tracked combat vehicle manufacturing operations which began in 1994 and was
substantially completed in 1996.
The loss or significant curtailment of the Company's material U.S. or
international military contracts (including without limitation those identified
in "Business--Products and Systems"), or the failure to renew or replace
material contracts upon expiration or completion as a result of budget cuts or
for other reasons, would materially and adversely affect the Company's financial
condition, results of operations and debt service capability. While a major
portion of the Company's revenues have historically been derived from the
production of new vehicles and the development of systems, in recent years and
for the foreseeable future, a growing majority of its revenues have been and are
likely to be earned through the upgrading of existing vehicles and systems, with
correspondingly less revenues anticipated in the areas of new vehicle production
and development in the near term. There is also a risk that the U.S. Army could
elect to have any portion of its upgrade or overhaul work currently performed by
the Company, instead performed by the U.S. Army's own industrial facilities,
known as depots. A significant decline in military expenditures of the U.S.
government or certain foreign countries, particularly expenditures allocated to
the upgrading of any such country's military vehicles and armament systems,
could materially adversely affect the Company's financial condition, results of
operations and debt service capability.
The current Demonstration and Validation contract for the Crusader, an
advanced field artillery system for the U.S. Army, is for the design and
development of the Crusader including delivery of two prototype self-propelled
howitzers and resupply vehicles. While this contract is scheduled to continue
into 2001, no assurance can be given that the Company will complete performance
under the contract. Budget constraints could result in Congress not
appropriating the funding contemplated by this contract. Additionally, the
technical challenges associated with the Crusader may result in performance
requirements that are cost prohibitive and ultimately result in the U.S. Army
pursuing other alternatives for modernization. Finally, geo-political
circumstances or a shift in the U.S. Army's or the U.S. government's current
mission or strategy with respect to the U.S. Army could result in the U.S. Army
20
<PAGE>
reassessing its conflict and combat mission priorities and developing a new
strategy that either does not require a new howitzer vehicle or instead requires
a further upgrade of existing vehicles. If the U.S. Army decides to produce the
Crusader, full scale production would not be expected to commence until at least
2005, and there can be no assurance that the Company will be named the prime
contractor or otherwise participate in what could be a major competition for
future production. Failure to secure future contract awards for Crusader
development and production or loss or curtailment of any Crusader contract or
the funding therefore could have a material adverse effect on the Company's
financial condition, results of operations and debt service capability.
UNCERTAINTY INHERENT IN GOVERNMENT CONTRACTS
Companies engaged primarily in supplying defense-related equipment and
services to U.S. government agencies are subject to certain business risks
peculiar to the defense industry. These risks include the ability of the U.S.
government to unilaterally suspend its contractors from receiving new contracts
in the event of certain violations of law or regulations. All of the Company's
U.S. government contracts are, by their terms, subject to termination by the
U.S. government either for its convenience or for the default of the contractor.
In addition, certain costs and expenses are not allowable charges under U.S.
government contracts. The Company, as a U.S. government contractor, is subject
to financial audits and other reviews by the U.S. government of performance of,
and the accounting and general practices relating to, U.S. government contracts.
Costs and prices under such contracts may be subject to adjustment based upon
the results of such audits and reviews. Like most large government contractors,
the Company is audited and reviewed on a continual basis. Although adjustments
arising from such audits and reviews have not had a material adverse effect on
the Company's financial condition, results of operations or debt service
capability in the past, there can be no assurance that the effects of future
audits and reviews will not have such material adverse effects. See
"Business--Government Contracts; Regulatory Matters."
Congress usually appropriates funds for a given program on an annual basis
even though contract performance may take more than one year. Consequently, at
the outset of a major program, the contract is usually partially funded, and
additional monies are normally committed to the contract by the procuring agency
only as appropriations are made by Congress for future government fiscal years.
Failure of Congress to appropriate expected funding for the Company's programs
could have a material adverse effect on the Company's financial condition,
results of operations and debt service capability.
Additionally, approximately two-thirds of the Company's 1996 revenues were
derived from fixed-price contracts. Inherent in such contracts is the risk that
if a bid is submitted and a contract is subsequently awarded, actual performance
costs may exceed the projected costs on which the fixed contract prices were
based. To the extent that actual costs exceed such projected costs, the
Company's profitability could be materially adversely affected. See
"Business--Major Customers" and "--Government Contracts; Regulatory Matters."
TECHNOLOGY IMPLEMENTATION RISKS
The Company, like all defense businesses, is subject to risks associated
with uncertain cost factors related to scarcity of technologically necessary
components and human resources (such as software engineers and information
resource professionals), the frequent need to bid on programs in advance of
design completion (which may result in unforeseen technological difficulties
and/or cost overruns), the substantial time and effort required for design and
development, design complexity and the constant necessity for design
improvement. For example, the Company is currently the prime contractor to
develop the Crusader. To build the Crusader, the Company must integrate a number
of sophisticated technologies while meeting challenging performance requirements
and aggressive timetables. The integration of this array of diverse technologies
involves complex tasks, many of which have not been previously attempted. The
nature and complexity of the Crusader system is such that final confirmation of
the ability of the system to function in the intended manner cannot be assured.
As a result, there is a risk that the Crusader
21
<PAGE>
may not proceed into the next contracting phase or eventual production, which
could have a material adverse effect on the Company's financial condition,
results of operations and debt service capability.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND JOINT VENTURES
The Company participates in unconsolidated joint ventures in Turkey and
Saudi Arabia and in selected co-production programs in several other countries.
The Company's export sales, including FMS, totaled $194.2 million in 1996,
representing approximately 19% of the Company's revenues. In addition, the
Company's earnings from foreign affiliates were $14.1 million for the twelve
months ended September 30, 1997, representing approximately 11.1% of pro forma
EBITDA (as defined). These proportions of revenue and EBITDA were higher in
certain prior periods. The Company's strategy includes expansion of its
international operations and export sales. In connection with its international
operations and export sales, the Company is subject to risks associated with
operating in and selling to foreign countries, including (i) devaluations and
fluctuations in currency exchange rates; (ii) changes in or interpretations of
foreign regulations that may adversely affect the Company's ability to sell
certain products or repatriate profits to the United States; (iii) imposition of
limitations on conversions of foreign currencies into dollars; (iv) remittance
of dividends and other payments by foreign subsidiaries or joint ventures; (v)
imposition or increase of withholding and other taxes on remittances and other
payments by foreign subsidiaries; (vi) hyperinflation or political instability
in certain foreign countries; (vii) imposition or increase of investment and
other restrictions or requirements by foreign governments; (viii) the potential
imposition of trade or foreign exchange restrictions or increased tariffs; and
(ix) U.S. arms export control regulations and policies which govern the
Company's ability to supply foreign affiliates and customers. To the extent the
Company expands its international operations, these and other risks associated
with international operations are likely to increase. Although such risks have
not had a material adverse effect on the Company financial condition, results of
operations or debt service capability in the past, no assurance can be given
that such risks will not have any such material adverse effect on the Company in
the future.
The Company has contracts with government customers in Eastern Asia
(including the governments of Japan, Taiwan and Thailand) and with Samsung, a
large South Korean conglomerate. The Company also has accounts receivable from
Samsung and is scheduled to receive periodic payments from its government
customers in Eastern Asia. The Company's shipments to customers in this region
are in certain cases supported by letters of credit, the largest of which has
been issued by a major Korean bank. In addition, the Company's Turkish joint
venture, FNSS-Turkey, has been seeking a contract with the government of
Malaysia that would satisfy, in part, FNSS-Turkey's "offset" obligations,
described below. There can be no assurance that the Company's counterparties in
Asia will meet their obligations under existing contracts or that any such
non-performance or the recent economic and political turmoil in this region will
not have a material adverse effect on the Company's financial condition, results
of operations or debt service capability.
The Company is facing certain additional risks associated with its Turkish
joint venture, FMC-Nurol Savunma Sanayii A.S. ("FNSS-Turkey"), which was formed
for the purpose of providing vehicles and services to the Undersecretariat for
Defense Industries of Turkey ("SSM"). First, FNSS-Turkey is required by its
agreement with SSM to achieve a significant level of export sales from Turkey,
(which are required in order to fulfill "offset" requirements) by 2000 or pay a
penalty of 9% of the unsatisfied amounts of these offset obligations to SSM.
Such payment could be as high as $32.0 million if further offset sales are not
completed. There is no assurance that FNSS-Turkey will be able to successfully
fulfill its offset obligations. Second, the vehicle production agreement between
FNSS-Turkey and the Turkish government gives the government the right to
terminate the agreement "if the interest of [FNSS-Turkey] shall devolve upon any
person or corporation." The Company does not expect the Turkish government to
assert the view that this provision entitles it to terminate the joint venture
agreement, although no assurance can be given that the Turkish government will
not do so. See "The Acquisition." Third, SSM has been unable to supply certain
22
<PAGE>
components to FNSS-Turkey according to an agreed schedule, which has resulted in
production delays. While FNSS-Turkey has recently executed an extension to the
contract production schedule, FNSS-Turkey's financial results may be unfavorably
impacted and royalty and dividend payments to the Company could be reduced as a
result of any future delays or extensions, and the value of such royalties and
dividends could be materially adversely affected by the impact of any further
deterioration in the value of the Turkish lira against the U.S. dollar unless
pricing concessions are made in connection with any such extension. Termination
of the vehicle production agreement, or adverse resolution of any of the matters
discussed above, could have a material adverse effect on the Company's financial
condition, results of operations and debt service capability. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Joint
Ventures--FNSS-Turkey."
The Company also faces certain additional risks associated with its Saudi
Arabian joint venture, FMC Arabia Limited ("FMC-Arabia"), including budgetary
pressures on Saudi defense spending. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Joint Ventures--FMC-Arabia."
NOVATION OF U.S. GOVERNMENT CONTRACTS
The U.S. government has preliminarily indicated that, on account of the
Acquisition, the Company should enter into a novation agreement with the U.S.
government and UDLP in order to continue to be recognized as the contractor
under its U.S. government contracts. A novation agreement is typically entered
between the U.S. government, a contractor who transfers its assets (including
its contracts) to a successor-in-interest, and that successor-in-interest.
Applicable U.S. government regulations do not expressly require parties to enter
into a novation agreement upon a transfer of control of a contractor, as opposed
to the assignment of contracts. The U.S. government has from time to time taken
the position that such agreements must be entered between the seller of the U.S.
government contracts business and the buyer of the business, even when no change
in business form (but only a change in ownership of the business) has occurred,
and the Company believes that contractors often determine that their interests
are best served by acquiescence to the U.S. government's interpretation. The
novation process typically takes a matter of weeks or months, and can require up
to or more than a year, to complete and would not be completed in any event
prior to the consummation of the Exchange Offer. The Company knows of no reason
why it could not successfully complete negotiation and execution of any novation
agreement that might be required, but the Company can offer no assurance that
such an agreement would ultimately be obtained. Failure to obtain any required
novation could have a material adverse effect on the Company's financial
condition, results of operations and debt service capability.
COMPETITION
Declining defense budgets and increasing pressures for cost reductions have
precipitated a major consolidation in the defense industry. This consolidation
has resulted in program cancellations, scope reductions and delays in contract
funding or awards. The combination of increased competition and reduced funding
have contributed, in some cases, to significant predatory pricing tactics
throughout the industry in competitive bidding situations. Because some of the
Company's current and potential competitors have significantly greater resources
than the Company, the Company's ability to compete effectively in the
consolidating defense industry could be adversely impacted. See "Business--
Competition."
Approximately 90% of the Company's sales are derived from contracts with the
U.S. government (including FMS sales) and its prime contractors. Generally more
than 80% of these sales are represented by sole-source directed procurement
contracts, with the balance derived from competitive bidding. The Company from
time to time encounters significant competition for its contracts, particularly
internationally from other companies, some of which have financial, technical,
marketing, manufacturing, distribution and other resources substantially greater
than those of the Company. The Company's ability to compete for
23
<PAGE>
these contracts depends to a large extent on the effectiveness and
innovativeness of its research and development programs, its ability to offer
better program performance than its competitors at a lower cost to the U.S.
government customer, and its readiness in facilities, equipment and personnel to
undertake the programs for which it competes.
In addition to competing for specific programs with other companies, the
Company and its programs are subject to competition for availability of U.S.
government funding in a declining procurement environment. This competition
could result in curtailment or elimination of Company programs, even if those
programs are meeting their functional objectives and even if other programs
receiving continued or increased funding are completely unrelated to such
Company programs.
The Company obtains military contracts through the process of competitive
offers and through sole-source negotiations. While most of the Company's
historical revenues have been derived from sole-source negotiations, contracts
from which the Company has derived and expects to derive a significant portion
of its sales (including contracts relating to certain program opportunities
discussed or referenced herein) were or will be obtained through competitive
bidding. There can be no assurance that the Company will continue to be
successful in having its bids accepted or, if accepted, that awarded contracts
will generate sufficient sales to result in profitability for the Company. Also,
even as to those programs which the U.S. government has historically awarded to
the Company on a sole-source basis, the U.S. government may in the future
determine to shift such programs to a competitive bidding process. There can be
no assurance that the Company will continue to be successful in remaining the
sole-source contractor on various programs.
The U.S. Navy is testing a "mega-prime" procurement approach in an attempt
to reduce costs and development time. This procurement method would require a
single "mega-prime" contractor to deliver an entire and completed system to the
U.S. Navy. This procurement approach may eventually apply to substantial
portions of the U.S. Navy's budget in the future, and affect some or all of the
Company's major U.S. Navy programs. Such an arrangement would require the
Company to team with a "mega-prime" contractor and compete for participation on
teams, which would in turn compete against other such teams for large future
programs. The U.S. Army is pursuing major development programs in areas such as
future scout vehicles and future combat systems which may require teaming with
other major contractors to compete successfully. There can be no assurance that
the Company will successfully team with other contractors, that any team in
which the Company participates would be awarded any such "mega-prime" or major
U.S. Army contracts, or that such arrangements would not have a material adverse
effect on the Company's financial condition, results of operations and debt
service capability.
There can be no assurance that the Company will continue to compete
successfully for specific program opportunities or for appropriation funding in
a declining procurement environment, or that competition will not have a
material adverse effect on the Company's financial condition, results of
operations and debt service capability.
BUSINESS RISKS RELATED TO THE MK41 VERTICAL LAUNCHING SYSTEM
The Company participates in the Mk41 Vertical Launching System ("VLS")
through arrangements with Lockhead Martin Corporation ("L-M"). VLS procurements
by the U.S. Navy, which include launchers and related components for
installation on the Navy's own vessels and also for installation on certain
foreign naval vessels arranged via U.S. Government FMS sales, have since 1991
been governed by a Navy-approved worksplit agreement with L-M pursuant to which
the Company supplies launcher components as a subcontractor to L-M, but under
prices and terms which are to a substantial degree negotiated directly between
the Company and the Navy. The Company's current VLS production contract will
expire in 2001 and will be substantially complete by the end of 1998. The
Company is presently engaged in negotiations with the Navy and L-M regarding the
Navy's next VLS procurement, which would involve production work for the Company
from 1998 through 2002. Such negotiations have been marked by substantial
disagreement regarding price and payment terms, and there can be no assurance
that the
24
<PAGE>
negotiations will result in a contract award to the Company. Also, even in the
event of a favorable outcome in the current negotiations, there can be no
assurance that the Navy would, in any future VLS procurement, continue to adhere
to the worksplit arrangement, or that in the event that the Navy were instead to
shift to a competitive procurement strategy, the Company would then prevail
against L-M or any other bidder.
Regarding potential direct foreign sales of VLS, the Company has since 1987
participated in cooperative foreign sales efforts with L-M pursuant to a series
of agreements between them. L-M currently disputes whether such an agreement is
in effect between the two companies, and if so, the extent and precise mechanics
of any such cooperative obligations. The Company believes and asserts to L-M
that such an agreement remains in effect, and believes that L-M continues to a
significant degree to conduct its pertinent behavior in accordance with the
agreement. There can be no assurance, however, that the parties' dispute might
not deteriorate in the future, nor that the Company would prevail, either
legally with respect to L-M or competitively regarding potential foreign sales,
in such event.
VARIABILITY IN QUARTERLY AND ANNUAL PERFORMANCE
The Company's operating performance and cash flow are dependent, to a
material extent, upon the timing and amounts of U.S. government contracts and
the work performed thereunder. Because the amounts payable under the Company's
government contracts are substantial, the award or expiration of one or more
contracts, or the timing for manufacturing and delivery of products under such
contracts and schedules, can materially affect the Company's operating results
and cash flow for the periods affected by such contracts. The Company's
operating results and cash flow can also be materially affected by the timing
and amounts of dividends received from the Company's foreign joint ventures,
which has generally resulted in higher earnings during the first quarter of the
year when such dividends are received. For example, dividends from FNSS-Turkey
were $23.8 million in 1996, but declined to $5.3 million in 1997. Therefore,
results for any particular period may vary significantly, and should not be
considered indicative of longer term results. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview--Variability
in Quarterly and Annual Performance."
BACKLOG
The Company's backlog represents orders under contracts which are primarily
with the U.S. government. The U.S. government enjoys broad rights to
unilaterally modify or terminate such contracts. Accordingly, most of the
Company's backlog is subject to modification and termination at the U.S.
government's discretion. In addition, funding for orders from the U.S.
government is subject to approval on an annual basis by Congress pursuant to the
appropriations process. The Company's funded backlog as of November 30, 1997 was
approximately $1.58 billion compared to approximately $1.55 billion as of
November 30, 1996. There can be no assurance that the Company's backlog will
become revenues in any particular period or at all. Further, there can be no
assurance that any contract included in backlog that does become revenue will be
profitable.
CONCENTRATION OF OWNERSHIP
Entities controlled by Carlyle hold, in the aggregate, substantially all of
the voting power of Iron Horse, the Company's parent. TCG Holdings, L.L.C., a
limited liability company formed by Carlyle, is the 100% beneficial owner of
Iron Horse. Consequently, Carlyle can control the election of the directors of
the Company and the outcome of all matters submitted to a vote of the Company's
stockholders.
LACK OF INDEPENDENT OPERATING HISTORY
Prior to the Acquisition, UDLP was managed by FMC. FMC provided an array of
services to the Company including payroll and management of employee service
related costs, such as human resource information network, medical, dental, life
insurance, pension, 401(k) plan administration and workers
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compensation. The cost of these services were billed back to the Company based
on actual usage. Additionally, FMC provided general and administrative services
including tax, treasury, legal, audit and insurance. The cost for these services
were allocated back to the Company. After the Acquisition, the Company operates
independently of FMC and needs to provide these services internally or obtain
them from other sources. Upon consummation of the Acquisition, the Company
entered into a Transition Services Agreement pursuant to which FMC is providing
certain of these services at costs consistent with past practices to the
Company. See "The Acquisition." There can be no assurance that the actual cost
incurred in operating the Company will not exceed historical charges or that
upon termination of the Transition Services Agreement the Company will be able
to obtain similar services on comparable terms. There can be no assurance that
the Company will be able to operate effectively as an independent company or
achieve the performance attained when it was owned by FMC and Harsco.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local laws and
regulations relating to, among other things, emissions to air, discharges to
water, the handling and disposal of hazardous and solid wastes and the cleanup
of hazardous substances ("Environmental Laws"). The Company continually assesses
its compliance status and other obligations with respect to Environmental Laws
and believes that its operations currently are in substantial compliance with
Environmental Laws. Based on historical experience and its expectation that a
significant portion of its ongoing environmental costs are recoverable from
other parties or allowable as contract costs pursuant to the terms of many of
the Company's contracts with the U.S. government, the Company does not believe
that its obligations under Environmental Laws will have a material adverse
effect on the Company's financial condition, results of operation or debt
service capability. There can be no assurance, however, that the Company will
not incur material unrecoverable or unallowable costs in the future, including
as a result of changes in Environmental Laws or changes in the Company's
obligations under Environmental Laws, nor can any assurance be given that
environmental costs expected to be reimbursed by other parties or allowed as
charges in U.S. government contracts will be reimbursed or allowed as expected.
See "Management's Discussion and Analysis of Financial Condition and Result of
Operations--Environmental Matters" and "Business--Environmental Matters."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture restricts, among other things, the Company's and the
Guarantors' ability to incur additional indebtedness, create liens, pay
dividends or make other restricted payments, consummate certain asset sales,
enter into certain transactions with affiliates, incur indebtedness that is
subordinate in right of payment to any Senior Debt and senior in right of
payment to the Notes or the Guarantees, as the case may be, impose restrictions
on the ability of a subsidiary to pay dividends or make certain payments to the
Company, merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the assets of
the Company. In addition, the Senior Credit Facility contains other and more
restrictive covenants and prohibits the Company from prepaying its other
indebtedness (including the Notes). See "Description of the Notes--Certain
Covenants" and "Description of Certain Indebtedness--Senior Credit Facility."
The Senior Credit Facility also requires the Company to maintain specified
financial ratios and satisfy certain financial condition tests. The Company's
ability to meet those financial ratios and tests can be affected by events
beyond its control, and there can be no assurance that the Company will meet
those tests. A breach of any of the foregoing covenants could result in a
default under the Senior Credit Facility and/or the Indenture. Upon the
occurrence of an event of default under the Senior Credit Facility, the lenders
thereunder could elect to declare all amounts outstanding under the Senior
Credit Facility, together with accrued and unpaid interest, to be immediately
due and payable, which would, in turn, result in an event of default under the
Indenture.
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LIMITATION ON CHANGE OF CONTROL OFFER
Upon the occurrence of a Change of Control, if the Company does not exercise
its right to purchase the Notes, each holder of Notes will have the right to
require the Company to purchase all or a portion of such holder's Notes at a
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest thereon to the purchase date. If a Change of Control were to occur,
there can be no assurance that the Company would have sufficient financial
resources, or would be able to arrange financing, to pay the repurchase price
for all Notes tendered by holders thereof. Further, the provisions of the
Indenture may not afford holders of Notes protection in the event of a highly
leveraged transaction, reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect holders of Notes, if
such transaction does not result in a Change of Control. In addition, the terms
of the Senior Credit Facility prohibit the Company from optionally purchasing
any Notes and also identify certain events that would constitute a Change of
Control that would result in a termination of the Senior Credit Facility. Any
future credit agreements or agreements relating to other Indebtedness to which
the Company or the Guarantors become a party may contain similar restrictions
and provisions. In the event a Change of Control occurs at a time when there are
outstanding obligations under the Senior Credit Facility, the Company could seek
the consent of its lenders to the purchase of Notes or could attempt to
refinance such outstanding obligations. If the Company does not obtain such
consent or repay such obligations, the Company would remain effectively
prohibited from offering to purchase Notes. In such case, the Company's failure
to offer to purchase Notes could become an Event of Default under the Indenture,
which would, in turn, constitute a further default under the Senior Credit
Facility and may constitute a default under the terms of other Indebtedness that
the Company or the Guarantors may enter into from to time. See "Description of
Certain Indebtedness--Senior Credit Facility" and "Description of the Notes--
Repurchase at the Option of Holders--Change of Control."
FRAUDULENT CONVEYANCE RISKS
The incurrence by the Company of the indebtedness evidenced by the Notes and
by the Guarantors of the obligations represented by the Guarantees is subject to
review under relevant U.S. federal and state fraudulent conveyance statutes
("Fraudulent Conveyance Statutes") in a bankruptcy case or a lawsuit by or on
behalf of creditors of the Company or the Guarantors. The statutes provide that
if a court determines that at the time the Notes were issued and the proceeds
applied, (i) the Company issued the Notes and applied the proceeds with the
intent of hindering, delaying or defrauding creditors or (ii) the Company or the
Guarantors received less than a reasonably equivalent value or fair
consideration for issuing the Notes or the Guarantees, respectively, and, after
so applying the proceeds, the Company or a Guarantor (A) was insolvent or
rendered insolvent by reason of such transactions, (B) was engaged in a business
or transaction for which its assets constituted unreasonably small capital or
(C) intended to incur, or believed that it would incur, debts beyond its ability
to pay as they matured (as the foregoing terms are defined in or interpreted
under Fraudulent Conveyance Statutes), such court could subordinate all or a
part of the Notes or the Guarantees to existing and future indebtedness of the
Company or the Guarantors, recover any payments made on the Notes or the
Guarantees or take other action detrimental to the holders of the Notes,
including, under certain circumstances, invalidating the Notes or the
Guarantees.
Based upon financial information and analysis, each of the Company and the
Guarantors believes that the indebtedness and obligations evidenced by the
Private Notes and the Guarantees were incurred and proceeds of the Notes were
used for proper purposes and in good faith. Each of the Company and the
Guarantors believes that at the time of, and after giving effect to, the
incurrence of the indebtedness and obligations evidenced by the Private Notes
and the Guarantees, it was solvent and had sufficient capital to carry on its
business and to pay its debts as they mature. No assurance can be given,
however, that a court would concur with such beliefs and positions. The measure
of insolvency for these purposes will vary depending upon the law of the
jurisdiction being applied. Generally, a company will be considered insolvent
for these purposes if the company is unable to pay its debts as they become due
in the usual course of its business or the sum of the company's debts is greater
than all of the company's property at a fair valuation or if the present fair
salable value of the company's assets is less than the amount that will be
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required to pay its probable liability on its existing debts as they become
absolute and mature. In rendering their opinion on the validity of the Private
Notes and the Guarantees, counsel for the Company and the Guarantors and counsel
for the Initial Purchasers expressed no opinion as to the effect of Fraudulent
Conveyance Statutes or laws affecting the enforcement of creditors' rights
generally.
The holders of the Notes will have the benefit of the Guarantees. However,
the Guarantees will be limited to the maximum amount which the Guarantors are
permitted to guarantee under applicable law. As a result, a Guarantor's
liability under its Guarantee could be reduced to zero, depending upon the
amount of other obligations of the Guarantors. Notwithstanding such provision,
such Guarantee may be subject to review by a court under relevant Fraudulent
Conveyance Statutes and, if a court makes certain findings, it could take
certain actions detrimental to the holders of the Notes. The Guarantees may also
be released under certain circumstances. See "Description of the
Notes--Guarantees."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
There is no existing market for the Notes and, although the Notes are
expected to be eligible for trading in the PORTAL market, there can be no
assurance as to the liquidity of any markets that may develop for the Notes, the
ability of holders of the Notes to sell their Notes, or the prices at which
holders would be able to sell their Notes. Future trading prices of the Notes
will depend on many factors, including, among other things, the Company's
ability to effect the Exchange Offer, prevailing interest rates, the Company's
operating results and the market for similar securities. The Initial Purchasers
have advised the Company that they currently intend to make a market in the
Notes offered hereby; however, the Initial Purchasers are not obligated to do so
and any market making may be discontinued at any time without notice. The
Company does not intend to apply for listing of the Notes on any securities
exchange or the Nasdaq National Market.
FAILURE TO EXCHANGE PRIVATE NOTES
Exchange Notes will be issued in exchange for Private Notes only after
timely receipt by the Exchange Agent of such Private Notes, a properly completed
and duly executed Letter of Transmittal and all other required documentation.
Therefore, holders of Private Notes desiring to tender such Private Notes in
exchange for Exchange Notes should allow sufficient time to ensure timely
delivery. Neither the Exchange Agent nor the Company is under any duty to give
notification of defects or irregularities with respect to tenders of Private
Notes for exchange. Private Notes that are not tendered or are tendered but not
accepted will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof. In addition, any
holder of Private Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Private Notes, where such
Private Notes were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. Any broker-dealer that
resells Exchange Notes that were received by it for its own account pursuant to
the Exchange Offer may be deemed to be an "underwriter" within the meaning of
the Securities Act. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. To the extent
that Private Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Private Notes could be
adversely affected due to the limited amount, or "float," of the Private Notes
that are expected to remain outstanding following the Exchange Offer. Generally,
a lower "float" of a security could result in less demand to purchase such
security and could, therefore, result in lower prices for such security. For the
same reason, to the extent that a large amount of Private Notes are not tendered
or are tendered and not accepted in the Exchange Offer, the trading market for
the Exchange Notes could be adversely affected. See "Plan of Distribution" and
"The Exchange Offer."
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Notes were sold by the Company on the Closing Date to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently sold the Private Notes, and the Company and the Initial Purchasers
entered into the Registration Rights Agreement on October 6, 1997. Pursuant to
the Registration Rights Agreement, the Company agreed that, unless the Exchange
Offer is not permitted by applicable law or Commission policy, it would file
with the Commission a registration statement under the Securities Act (a
"Registration Statement") with respect to the Exchange Notes within 120 days
after the Closing Date and use its best efforts to cause such Registration
Statement to become effective under the Securities Act within 180 days after the
Closing Date. A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement. The Registration Statement is intended to
satisfy certain of the Company's obligations under the Registration Rights
Agreement and the Purchase Agreement.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder (other than (i) a broker-dealer who
purchases such Exchange Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) any
such holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) who exchanges Private Notes for Exchange Notes in the
ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement with any person to participate, in a
distribution of the Exchange Notes, will be allowed to resell Exchange Notes to
the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in the distribution of the Exchange Notes or is a broker-dealer,
such holder cannot rely on the position of the staff of the Commission
enumerated in certain no-action letters issued to third parties and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction, unless an exemption from registration
is otherwise available. Each broker-dealer that receives Exchange Notes for its
own account in exchange for Private Notes, where such Private Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer may be deemed to be an
"underwriter" within the meaning of the Securities Act. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection of
resales of Exchange Notes received in exchange for Private Notes where such
Private Notes were acquired by such broker-dealer as a result of market-making
or other trading activities. Pursuant to the Registration Rights Agreement the
Company has agreed to make this Prospectus, as it may be amended or supplemented
from time to time, available to broker-dealer for use in connection with any
resale for the period required by the Securities Act. See "Plan of
Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and the Letter of Transmittal, the Company will accept any and all Private Notes
validly tendered and not withdrawn prior to the Expiration Date. The Company
will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000
principal amount of outstanding Private Notes surrendered pursuant to the
Exchange Offer. Private Notes may be tendered only in integral multiples of
$1,000.
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The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Notes will not
be entitled to any of the rights of holders of Private Notes under the
Registration Rights Agreement, which rights will terminate upon the consummation
of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as
the Private Notes (which they replace) and will be issued under, and be entitled
to the benefits of, the Indenture, which also authorized the issuance of the
Private Notes, such that both series of Notes will be treated as a single class
of debt securities under the Indenture.
As of the date of this Prospectus, $200,000,000 in aggregate principal
amount of the Private Notes are outstanding and registered in the name of Cede &
Co., as nominee for DTC. Only a registered holder of the Private Notes (or such
holder's legal representative or attorney-in-fact) as reflected on the records
of the Trustee under the Indenture may participate in the Exchange Offer. There
will be no fixed record date for determining registered holders of the Private
Notes entitled to participate in the Exchange Offer.
Holders of the Private Notes do not have any appraisal or dissenters' rights
under the Indenture in connection with the Exchange Offer. The Company intends
to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Securities Exchange Act of 1934 as amended (the "Exchange Act"), and
the rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Private Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Private Notes for the purposes of receiving the Exchange Notes from the
Company.
Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) notify the
Exchange Agent of any extension by oral or written notice, (ii) mail to the
registered holders an announcement thereof and (iii) issue a press release or
other public announcement which shall include disclosure of the approximate
number of Private Notes deposited to date, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if any
conditions set forth below under "--Conditions" shall not have been satisfied,
to terminate the Exchange Offer by giving oral or written notice of such delay,
extension or termination to the Exchange Agent. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof to the registered holders. If the Exchange
Offer is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders, and
the Company will extend the Exchange Offer for a period of five
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to ten business days, depending upon the significance of the amendment and the
manner of disclosure to the registered holders, if the Exchange Offer would
otherwise expire during such five to ten business day period.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at a rate equal to 8 3/4% per annum.
Interest on the Exchange Notes will be payable semi-annually on May 15 and
November 15 of each year, commencing May 15, 1998. Holders of Exchange Notes
will receive interest from the date of initial issuance of the Private Notes.
Holders of Private Notes that are accepted for exchange will be deemed to have
waived the right to receive any interest accrued on the Private Notes.
PROCEDURES FOR TENDERING
Only a registered holder of Private Notes may tender such Private Notes in
the Exchange Offer. To tender in the Exchange Offer, a holder of Private Notes
must complete, sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of Transmittal,
and mail or otherwise deliver such Letter of Transmittal or such facsimile to
the Exchange Agent at the address set forth below under "--Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Private Notes must be received by the Exchange Agent along with the Letter
of Transmittal, (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Private Notes, if such procedure is
available, into the Exchange Agent's account at the Depositary pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the holder must comply with
the guaranteed delivery procedures described below.
The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner(s) of the Private Notes whose Private Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such owner's name or
obtain a properly completed bond power from the registered holder. The transfer
of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed by
an Eligible Institution (as defined below) unless the Private Notes tendered
pursuant thereto are tendered (i) by a registered holder who has not completed
the box entitled "Special Issuance Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. In the event that signatures on a
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Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be made by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of
the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Private Notes listed therein, such Private Notes must be endorsed
or accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such Private Notes.
If the Letter of Transmittal or any Private Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Private Notes. All
questions as to the validity, form, eligibility (including time of receipt),
compliance with conditions, acceptance and withdrawal of tendered Private Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Private Notes not properly tendered or any Private Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Private Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Private Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Private Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Private Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived.
While the Company has no present plan to acquire any Private Notes that are
not tendered in the Exchange Offer or to file a registration statement to permit
resales of any Private Notes that are not tendered pursuant to the Exchange
Offer, the Company reserves the right in its sole discretion to purchase or make
offers for any Private Notes that remain outstanding subsequent to the
Expiration Date or, as set forth below under "--Conditions," to terminate the
Exchange Offer and to the extent permitted by applicable law, purchase Private
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
By tendering, each holder of Private Notes will represent to the Company
that, among other things, (i) Exchange Notes to be acquired by such holder of
Private Notes in connection with the Exchange Offer are being acquired by such
holder in the ordinary course of business of such holder, (ii) such holder has
no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iii) such holder acknowledges and agrees
that any person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on the
position of the staff of the Commission set forth in certain no-action letters,
(iv) such holder understands that a secondary resale transaction described in
clause (iii) above and any resales of Exchange Notes obtained by such holder in
exchange for Private Notes acquired by such holder directly from the Company
should be covered by an effective registration statement containing the selling
securityholder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and
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(v) such holder is not an "affiliate," as defined in Rule 405 under the
Securities Act, of the Company. If the holder is a broker-dealer that will
receive Exchange Notes for such holder's own account in exchange for Private
Notes that were acquired as a result of market-making activities or other
trading activities, such holder will be required to acknowledge in the Letter of
Transmittal that such holder will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, such holder will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer may be deemed to be an
"underwriter" within the meaning of the Securities Act.
RETURN OF PRIVATE NOTES
If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are withdrawn
or are submitted for a greater principal amount than the holders desire to
exchange, such unaccepted, withdrawn or non-exchanged Private Notes will be
returned without expense to the tendering holder thereof (or, in the case of
Private Notes tendered by book-entry transfer into the Exchange Agent's account
at the Depositary pursuant to the book-entry transfer procedures described
below, such Private Notes will be credited to an account maintained with the
Depositary) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Notes at the Depositary for purposes of the Exchange Offer within
two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make book-
entry delivery of Private Notes by causing the Depositary to transfer such
Private Notes into the Exchange Agent's account at the Depositary in accordance
with the Depositary's procedures for transfer. However, although delivery of
Private Notes may be effected through book-entry transfer at the Depositary, the
Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address set forth below under
"--Exchange Agent" on or prior to the Expiration Date or pursuant to the
guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company
setting forth the name and address of the holder, the certificate
number(s) of such Private Notes and the principal amount of Private Notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within five New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or a facsimile thereof),
together with the certificate(s) representing the Private Notes in proper
form for transfer or a Book-Entry Confirmation, as the case may be, and
any other documents required by the Letter of Transmittal, will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof), as
well as the certificate(s) representing all tendered Private Notes in
proper form for transfer and all other documents required by the Letter
of Transmittal are received by the Exchange Agent within five New York
Stock Exchange trading days after the Expiration Date.
33
<PAGE>
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Private Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Private Notes) and (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Private Notes were tendered (including any required signature guarantees). All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company in its sole discretion, whose
determination shall be final and binding on all parties. Any Private Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Private Notes so withdrawn are validly retendered. Properly withdrawn
Private Notes may be retendered by following one of the procedures described
above under "The Exchange Offer--Procedures for Tendering" at any time prior to
the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Private Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Private Notes, if the Exchange Offer violates applicable
law, rules or regulations or an applicable interpretation of the staff of the
Commission.
If the Company reasonably determines that such condition (that the Exchange
Offer not violate applicable law, rules, regulations or interpretation of the
Staff) is not satisfied, the Company may (i) refuse to accept any Private Notes
and return all tendered Private Notes to the tendering holders or (ii) extend
the Exchange Offer and retain all Private Notes tendered prior to the expiration
of the Exchange Offer, subject, however, to the rights of holders to withdraw
such Private Notes (see "--Withdrawal of Tenders").
LIQUIDATED DAMAGES
The Company, the Guarantors and the Initial Purchaser entered into a
registration rights agreement (the "Registration Rights Agreement") dated as of
October 6, 1997, pursuant to which each of the Company and the Guarantors agreed
that they will, at their cost, for the benefit of the Holders, (i) to the extent
not prohibited by any applicable law or applicable interpretation of the staff
of the Commission (A) prepare and, on or prior to 120 days (the "Filing Date")
after the date of original issuance of the Private Notes (the "Issue Date"),
file with the Commission a Registration Statement under the Securities Act with
respect to an offer by the Company to the holders of the Private Notes (the
"Exchange Offer") to issue and deliver to such holders, in exchange for the
Private Notes, a like principal amount of notes (the "Exchange Notes")
guaranteed on a senior subordinated basis by each of the Subsidiary Guarantors,
and identical to the Private Notes in all material respects, except that the
such notes will not have provisions regarding restrictions on transfer, (B) use
their best efforts to cause the Registration Statement relating to the Exchange
Offer to be declared effective by the Commission under the Securities Act on or
prior to 180 days after the Issue Date, and (C) commence the Exchange Offer and
use their best efforts to issue, on or prior to the date (the "Consummation
Date") that is 30 days immediately following the date that the Exchange
Registration Statement shall have been declared effective, the Exchange Notes.
The offer and sale of the Exchange Notes pursuant to the Exchange Offer shall be
registered pursuant to the Securities Act on an appropriate form (the "Exchange
Registration Statement") and duly registered or qualified
34
<PAGE>
under all applicable state securities or Blue Sky laws and will comply with all
applicable tender offer rules and regulations under the Exchange Act and state
securities or Blue Sky laws. The Exchange Offer shall not be subject to any
condition, other than that the Exchange Offer does not violate any applicable
law or interpretation of the staff of the Commission.
If (i) the Company and the Guarantors are not permitted to file the Exchange
Offer Registration Statement or to consummate the Exchange Offer because the
Exchange Offer is not permitted by any applicable law or applicable
interpretation of the Staff of the Commission or (ii) any holder of a Private
Note notifies the Company on or prior to the 20th day following the Issue Date
that (A) such holder is prohibited by law or Commission policy from
participating in the Exchange Offer, (B) Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the Prospectus
contained in the Exchange Registration Statement is not appropriate or available
for such resales by such holder or (C) such holder is a broker-dealer and owns
Private Notes acquired directly from the Company or any of its Affiliates (each
such event referred to in clauses (i) and (ii), a "Shelf Filing Event"), the
Company and the Guarantors shall at their own expense use their best efforts to
cause to be filed on or prior to 30 days after the date on which the Company
determines that it is not required to file the Exchange Offer Registration
Statement pursuant to clause (i) above or 30 days after the date on which the
Company receives the notice specified in clause (ii) above, a shelf registration
statement pursuant to Rule 415 under the Act (which may be an amendment to the
Exchange Offer Registration Statement (in either event, the "Shelf Registration
Statement")), relating to all Private Notes the holders of which have provided
to the Company in writing, within 15 days after receipt of a request therefor,
the information specified in item 507 of Regulation S-K of the Act and such
other information as the Company shall reasonably request and shall use their
best efforts to have the Shelf Registration Statement declared effective by the
Commission on or prior to 90 days after the filing thereof. In such
circumstances, the Company and the Guarantors shall use their best efforts to
keep the Shelf Registration Statement continuously effective under the
Securities Act, until (A) two years following the Issue Date or (B) if sooner,
the date immediately following the date that all Transfer Restricted Notes (as
defined) covered by the Shelf Registration Statement have been sold pursuant
thereto or otherwise cease to be Transfer Restricted Notes (the "Effectiveness
Period").
For purposes of the foregoing, a "Transfer Restricted Note" means each
Private Note, until the earliest to occur of (a) the date on which such Private
Note is exchanged in the Exchange Offer and entitled to be resold to the public
by the holder thereof without complying with the prospectus delivery
requirements of the Act, (b) the date on which such Private Note has been
disposed of in accordance with a Shelf Registration Statement, (c) the date on
which such Private Note is disposed of by a broker-dealer pursuant to the "Plan
of Distribution" section hereof (including delivery of the Prospectus
contemplated therein) or (d) the date on which such Private Note is distributed
to the public pursuant to Rule 144 under the Act.
If the Company and the Guarantors fail to comply with the above provisions
or if the Exchange Offer Registration Statement or the Shelf Registration
statement fails to become effective, then, liquidated damages (the "Liquidated
Damages") shall become payable in respect of the Private Notes as follows:
If (i) any Registration Statement required by the Registration Rights
Agreement is not filed with the Commission on or prior to the date specified
for such filing in the Registration Rights Agreement, (ii) any such
Registration Statement has not been declared effective by the Commission on
or prior to the date specified for such effectiveness in the Registration
Rights Agreement (the "EFFECTIVENESS TARGET DATE"), (iii) the Exchange Offer
has not been consummated within 30 Business Days after the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement or
(iv) any Registration Statement required by the Registration Rights
Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable in connection with resales of Transfer
Restricted Notes during the periods specified herein and is not succeeded
within 30 days by another effective Registration Statement by a
post-effective amendment to such Registration Statement that cures such
failure and that is itself declared effective immediately; PROVIDED THAT
such Registration
35
<PAGE>
Statement shall not cease to be effective or useable in connection with
resales of Transfer Restricted Securities for more than 30 days in any
calendar year (each such event referred to in clauses (i) through (iv), a
"REGISTRATION DEFAULT"), then the Company and the Guarantors hereby jointly
and severally agree to pay liquidated damages to each holder of Transfer
Restricted Notes with respect to the first 90-day period immediately
following the occurrence of such Registration Default, in an amount equal to
$.05 per week per $1,000 principal amount of Transfer Restricted Notes held
by such holder for each week or portion thereof that the Registration
Default continues. The amount of the liquidated damages shall increase by an
additional $.05 per week per $1,000 in principal amount of Transfer
Restricted Notes with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of liquidated
damages of $.25 per week per $1,000 principal amount of Transfer Restricted
Notes; PROVIDED THAT the Company and the Guarantors shall in no event be
required to pay liquidated damages for more than one Registration Default at
any given time. Notwithstanding anything to the contrary set forth herein,
(1) upon filing of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or,
if applicable, the Shelf Registration Statement), in the case of (ii) above,
(3) upon consummation of the Exchange Offer, in the case of (iii) above, or
(4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange
Offer Registration Statement (and/or, if applicable, the Shelf Registration
Statement) to again be declared effective or made usable in the case of (iv)
above, the liquidated damages payable with respect to the Transfer
Restricted Notes as a result of such clause (i), (ii), (iii) or (iv), as
applicable, shall cease.
All accrued liquidated damages shall be paid by wire transfer of
immediately available funds or by federal funds check and to holders of
certificated securities by wire transfer to the accounts specified by them
or by mailing checks to their registered addresses if no such accounts have
been specified. All obligations of the Company set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted Note
at the time such security ceases to be a Transfer Restricted Note shall
survive until such time as all such obligations with respect to such
security shall have been satisfied in full.
No holder of Transfer Restricted Notes shall be entitled to Liquidated
Damages payable in connection with any Shelf Registration Statement unless and
until such holder shall have provided certain information reasonably requested
by the Company for use in connection with such Shelf Registration Statement.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which will be available upon request to the Company.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Private Notes eligible to participate in the Exchange
Offer will terminate upon consummation of the Exchange Offer except with respect
to the Company's continuing obligations (i) to indemnify such holders (including
any broker-dealers) and certain parties related to such holders against certain
liabilities (including liabilities under the Securities Act), (ii) to provide,
upon the request of any holder of a transfer-restricted Private Note, the
information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Private Notes pursuant to Rule 144A and (iii) to provide
copies of the latest version of the Prospectus to broker-dealers upon their
request for the period required by the Securities Act.
36
<PAGE>
EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as Exchange
Agent of the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL: IN PERSON:
Norwest Bank Minnesota, Northstar East Bldg.
National Association 608 2nd Ave. S.
Corporate Trust Operations 12th Floor
P.O. Box 1517 Corporate Trust Ser.
Minneapolis, MN 55480-1517 Minneapolis, MN
BY HAND OR OVERNIGHT COURIER: BY FACSIMILE FOR ELIGIBLE INSTITUTIONS
ONLY:
Norwest Bank Minnesota, (612) 667-4927
National Association CONFIRM RECEIPT OF NOTICE OF
Corporate Trust Operations GUARANTEED DELIVERY BY TELEPHONE:
Norwest Center (612) 667-9764
Sixth and Marquette
Minneapolis, MN 55479-0113
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A
FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$300,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and the Trustee, accounting and legal fees and printing costs,
among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Private Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
CONSEQUENCE OF FAILURES TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take, and the Company takes no position with respect
to the advisability of the Exchange Offer.
37
<PAGE>
The Private Notes that are not exchanged for the Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Private
Notes may be resold only (i) to a person whom the seller reasonably believes is
a QIB in a transaction meeting the requirements of Rule 144A, (ii) in a
transaction meeting the requirements of Rule 144 under the Securities Act, (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (v) to the Company
or (vi) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any state of the United States
or any other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
USE OF PROCEEDS
The proceeds from the sale of the Private Notes were used in part to finance
the Acquisition and related fees and expenses. See "The Acquisition."
The Company will not receive any proceeds from the Exchange Offer. In
consideration for issuing the Exchange Notes as contemplated in this Prospectus,
the Company will receive in exchange Private Notes in like principal amount, the
terms of which are identical to the Exchange Notes except that (i) the exchange
will have been registered under the Securities Act, and, therefore, the Exchange
Notes will not bear legends restricting the transfer thereof and (ii) holders of
the Exchange Notes will not be entitled to certain rights of holders of the
Private Notes under the Registration Rights Agreement, which rights will
terminate upon the consummation of the Exchange Offer. The Private Notes
surrendered in exchange for Exchange Notes will be retained by the Company and
the Exchange Offer will not result in any increase in the indebtedness of the
Company.
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
at September 30, 1997, as adjusted to give pro forma effect to the Transactions.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
-----------------------
<S> <C>
($ IN MILLIONS)
Revolving Credit Facility(1)............................................................. $ 12.0
Term Loan Facilities(2).................................................................. 445.0
8 3/4% Senior Subordinated Notes due 2007................................................ 200.0
Seller Note(2)........................................................................... 50.0
------
Total Debt........................................................................... 707.0
Stockholder's Equity..................................................................... 173.0
------
Total Capitalization................................................................. $ 880.0
------
------
</TABLE>
- ------------------------
(1) At November 30, 1997, the Revolving Credit Facility had a remaining
borrowing availability of approximately $61.0 million, after giving effect
to the issuance of approximately $157.0 million of letters of credit.
(2) The Company believes that the Seller Note, which is due three years after
the Closing Date, will be prepaid within one year after the Closing Date
with $50.0 million of additional borrowings under the Term Loan Facilities.
38
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited consolidated pro forma financial data of the Company
for the year ended December 31, 1996, for the nine months ended September 30,
1996 and 1997, and as of and for the twelve months ended September 30, 1997,
give effect to the Transactions, (and certain related assumptions described in
the notes hereto) and the application of the proceeds therefrom as if such
transactions occurred on January 1, 1996, with respect to the pro forma income
statement and other data, and as of September 30, 1997 with respect to the pro
forma balance sheet data. See "The Acquisition."
The consolidated pro forma adjustments are based upon currently available
information and upon certain assumptions that management believes are
reasonable. The Acquisition will be accounted for by the Company under the
purchase method of accounting. The adjustments included in the unaudited pro
forma financial data represent the Company's preliminary determination of those
adjustments based on available information, although no appraisal or other
valuation has yet been completed and such adjustments do not include many of the
effects of purchase accounting. For example, an allocation of the purchase price
to increase the carrying value of inventories, intangible assets other than
goodwill, and property, plant and equipment would result in a reduction in the
amount assigned to goodwill and likely would result in an earlier recognition of
cost charged to operating results as compared to goodwill amortization.
Management is in the process of determining the fair value of the assets and
liabilities of the Company. Management expects the final valuation of assets and
liabilities to be completed by the time it is required to provide December 31,
1997 financial statements. Management believes there will be differences between
the preliminary allocation and the final allocation, and these differences could
have a material effect on operating results but management does not expect any
such differences to materially affect cash flow. There can be no assurance that
the actual adjustments will not differ significantly from the pro forma
adjustments reflected in the pro forma financial data.
The unaudited consolidated pro forma financial data are not necessarily
indicative of either future results of operations or results that might have
been achieved if the Transactions had been consummated as of the indicated
dates. The unaudited pro forma financial data should be read in conjunction with
the historical financial statements of UDLP, together with the related notes
thereto, included elsewhere in this Prospectus.
The Company accounts for inventory using the LIFO method and incurred
non-cash LIFO charges of $6.3 million, $7.1 million, $8.0 million and $7.2
million for the year ended December 31, 1996, the nine months ended September
30, 1996 and 1997, and the twelve months ended September 30, 1997, respectively.
39
<PAGE>
UNAUDITED PRO FORMA INCOME STATEMENT AND OTHER DATA
TWELVE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
STATEMENT ADJUSTMENTS STATEMENT
----------- ----------- -----------
<S> <C> <C> <C>
($ IN MILLIONS)
INCOME STATEMENT DATA:
Revenue................................................................ $ 1,197.3 $ 1.3(a) $ 1,187.6
(11.0)(b)
Cost of sales.......................................................... 980.0 1.1(a) 981.1
Selling, general and administrative.................................... 129.8 0.4(a) 115.2
(15.0)(b)
Research and development............................................... 15.9 1.6(a) 17.5
Amortization of goodwill............................................... -- 34.7(c) 34.7
----------- ----------- -----------
Total expenses....................................................... 1,125.7 22.8 1,148.5
Earnings from foreign affiliates....................................... 14.1 -- 14.1
----------- ----------- -----------
Income from operations............................................... 85.7 (32.5) 53.2
Interest expense....................................................... -- 66.1(d) 66.1
Other (income) expense................................................. (1.2) -- (1.2)
----------- ----------- -----------
Income before income taxes........................................... 86.9 98.6 (11.7)
Provision for income taxes............................................. 4.3 (9.0)(e) (4.7)
----------- ----------- -----------
Net income........................................................... $ 82.6 $ (89.6) $ (7.0)
----------- ----------- -----------
----------- ----------- -----------
OTHER DATA:
EBITDA (f)............................................................. $ 127.1
Depreciation and amortization (g)...................................... 73.9
Capital expenditures................................................... 26.0
Ratio of earnings to fixed charges (h)................................. --
</TABLE>
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
STATEMENT ADJUSTMENTS STATEMENT
----------- ----------- -----------
<S> <C> <C> <C>
($ IN MILLIONS)
INCOME STATEMENT DATA:
Revenue................................................................ $ 1,029.3 $ 1.4(a) $ 1,019.7
(11.0)(b)
Cost of sales.......................................................... 820.8 1.3(a) 822.1
Selling, general and administrative.................................... 128.4 0.4(a) 113.8
(15.0)(b)
Research and development............................................... 12.9 1.5(a) 14.4
Amortization of goodwill............................................... -- 34.7(c) 34.7
----------- ----------- -----------
Total expenses....................................................... 962.1 22.9 985.0
Earnings from foreign affiliates....................................... 31.9 -- 31.9
----------- ----------- -----------
Income from operations............................................... 99.1 (32.5) 66.6
Interest expense....................................................... -- 66.1(d) 66.1
Other (income) expense................................................. (1.9) (0.1)(a) (2.0)
----------- ----------- -----------
Income (loss) before income taxes.................................... 101.0 (98.5) 2.5
Provision (benefit) for income taxes................................... 2.8 (1.8)(e) 1.0
----------- ----------- -----------
Net income (loss).................................................... $ 98.2 $ (96.7) $ 1.5
----------- ----------- -----------
----------- ----------- -----------
OTHER DATA:
EBITDA (f)............................................................. $ 140.3
Depreciation and amortization (g)...................................... 73.7
Capital expenditures................................................... 22.4
Ratio of earnings to fixed charges (h)................................. --
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT AND OTHER DATA.
40
<PAGE>
UNAUDITED PRO FORMA INCOME STATEMENT AND OTHER DATA
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
STATEMENT ADJUSTMENTS STATEMENT
----------- ----------- -----------
<S> <C> <C> <C>
($ IN MILLIONS)
INCOME STATEMENT DATA:
Revenue ............................................................... $ 913.9 $ 0.9(a) $ 906.5
(8.3)(b)
Cost of sales.......................................................... 755.0 0.8(a) 755.8
Selling, general and administrative.................................... 91.4 80.1
(11.3)(b)
Research and development............................................... 12.1 1.0(a) 13.1
Amortization of goodwill............................................... -- 26.0(c) 26.0
----------- ----------- -----------
Total expenses....................................................... 858.5 16.5 875.0
Earnings from foreign affiliates....................................... 13.5 -- 13.5
----------- ----------- -----------
Income from operations............................................... 68.9 (23.9) 45.0
Interest expense....................................................... -- 49.6(d) 49.6
Other (income) expense................................................. (1.5) 0.1(a) (1.4)
----------- ----------- -----------
Income before income taxes........................................... 70.4 (73.6) (3.2)
Provision for income taxes............................................. 1.5 (2.8)(e) (1.3)
----------- ----------- -----------
Net income........................................................... $ 68.9 $ (70.8) $ (1.9)
----------- ----------- -----------
----------- ----------- -----------
OTHER DATA:
EBITDA (f)............................................................. $ 100.0
Depreciation and amortization (g)...................................... 55.0
Capital expenditures................................................... 20.1
Ratio of earnings to fixed charges (h)................................. --
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
STATEMENT ADJUSTMENTS STATEMENT
----------- ----------- -----------
<S> <C> <C> <C>
($ IN MILLIONS)
INCOME STATEMENT DATA:
Revenue................................................................ $ 745.9 $ 1.0(a) $ 738.6
(8.3)(b)
Cost of sales.......................................................... 595.8 1.0(a) 596.8
Selling, general and administrative.................................... 90.0 78.7
(11.3)(b)
Research and development............................................... 9.1 0.9(a) 10.0
Amortization of goodwill............................................... -- 26.0(c) 26.0
----------- ----------- -----------
Total expenses....................................................... 694.9 16.6 711.5
Earnings from foreign affiliates....................................... 31.3 -- 31.3
----------- ----------- -----------
Income from operations............................................... 82.3 (23.9) 58.4
Interest expense....................................................... 49.6(d) 49.6
Other (income) expense................................................. (2.2) (2.2)
----------- ----------- -----------
Income before income taxes........................................... 84.5 (73.5) 11.0
Provision for income taxes............................................. 0.0 4.4(e) 4.4
----------- ----------- -----------
Net income........................................................... $ 84.5 $ (77.9) $ 6.6
----------- ----------- -----------
----------- ----------- -----------
OTHER DATA:
EBITDA (f)............................................................. $ 113.2
Depreciation and amortization (g)...................................... 54.8
Capital expenditures................................................... 16.5
Ratio of earnings to fixed charges (h)................................. 1.1:1
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT AND OTHER DATA.
41
<PAGE>
NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT AND OTHER DATA
(a) To reflect the operations of CTC acquired by UDLP pursuant to the
Acquisition Agreement.
(b) To reflect (i) elimination of charges to the Company by FMC for general and
administrative services including tax, treasury, legal, audit, and
insurance, net of the incremental cost to be incurred for such services
after the Acquisition, and (ii) inclusion of the anticipated management fee
to be charged to the Company by Carlyle after the Acquisition. Amounts
associated with the Transition Services Agreement are not a component of
this pro-forma adjustment because such amounts are reflected in the
historical statements and are expected to continue after the Acquisition.
The requirement that the net cost savings be shared with the customer on
cost-reimbursable and negotiated fixed price contracts, in both of which
contract types, sales value is determined based on cost plus profit, is
reflected by a reduction in revenues.
(c) To reflect amortization of goodwill associated with the Acquisition over an
estimated life of 15 years. Actual goodwill amortization is expected to
differ after completion of an asset valuation and application of purchase
accounting adjustments. See Note (a) of "Notes to Unaudited Pro Forma
Balance Sheet."
(d) To reflect interest expense and other expenses related to the Senior Credit
Facility, the Notes and the Seller Note. Interest expense associated with
the Senior Credit Facility was calculated based on an average interest rate
of 8.33% per year. Interest expense associated with the Notes and the Seller
Note was calculated based on an interest rate of 8.75% per year. A change of
1/8% in the interest rate on the Senior Credit Facility would result in a
change in interest expense of $.6 million and $.45 million, for the twelve
month and nine month periods, respectively. A portion of the change in
interest expense could be offset by an interest rate swap agreement on $160
million of the senior debt, which effectively changes that amount of
variable rate debt to fixed rate debt.
Interest expense includes the following:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1996
AND SEPTEMBER 30, AND SEPTEMBER 30,
1997 1997
--------------------- ---------------------
($ IN MILLIONS)
<S> <C> <C>
Senior Credit Facility............................. $ 38.1 $ 28.6
The Notes.......................................... 17.5 13.1
Seller Note........................................ 4.4 3.3
Fees related to the Senior Credit Facility......... 4.1 3.1
----- -----
64.1 48.1
Amortization of deferred financing costs........... 2.0 1.5
----- -----
$ 66.1 $ 49.6
----- -----
----- -----
</TABLE>
(e) To reflect the estimated provision for income taxes assuming an effective
income tax rate of 40% after the Acquisition. This amount includes the tax
effect of all pro forma adjustments and the tax effect of accounting for the
Company as if it were a C Corporation.
(f) EBITDA represents income from operations plus depreciation and amortization.
EBITDA is not a measure of performance or financial condition under
generally accepted accounting principles, but is presented to provide
additional information related to debt service capability. EBITDA should not
be considered in isolation or as a substitute for other measures of
financial performance or liquidity under generally accepted accounting
principles. While EBITDA is frequently used as a measure of operations and
the ability to meet debt service requirements, it is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation.
42
<PAGE>
(g) Amortization includes amounts related to an Advance Agreement entered into
with the U.S. Department of Defense in 1994. See "Management's Discussion
and Analysis of Financial Condition and Results of
Operations--Overview--Advance Agreement." Actual depreciation and
amortization are expected to differ from the pro forma amounts presented
after completion of an asset valuation and application of purchase
accounting adjustments. See Note (a) of "Notes to Unaudited Pro Forma
Balance Sheet."
(h) Pro forma earnings were insufficient to cover fixed charges in the amount of
$1.3 million, $2.8 million, and $11.9 million for the year ended December
31, 1996, the nine months ended September 30, 1997 and the twelve months
ended September 30, 1997.
43
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
STATEMENT ADJUSTMENTS(A) STATEMENT
---------- -------------- ----------
<S> <C> <C> <C>
($ IN MILLIONS)
ASSETS
Current Assets:
Cash and marketable securities.................... $ 11.1 $ (0.4)(c) $ 10.7
Short-term investments............................ -- -- --
Trade receivables................................. 77.9 1.7(b) 79.8
0.2(c)
Inventories....................................... 330.2 (4.1)(b) 366.3
0.5(c)
39.7(d)
Other current assets.............................. 4.8 0.1(c) 4.9
---------- -------------- ----------
Total Current Assets............................ 424.0 37.7 461.7
Investments in affiliated companies............... 10.8 -- 10.8
Net property, plant and equipment................. 101.2 1.1(c) 102.3
Patents and deferred charges...................... 25.8 0.2(c) 42.4
16.4(e)
Goodwill.......................................... -- 520.7(d) 520.7
Prepaid pension cost.............................. 50.3 117.9(d) 168.2
---------- -------------- ----------
Total Assets.................................... $ 612.1 $ 694.0 $ 1,306.1
---------- -------------- ----------
---------- -------------- ----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable, trade and other................. $ 56.4 $ 0.2(c) $ 56.6
Advanced payments................................. 274.1 274.1
Accrued and other liabilities..................... 84.5 (0.4)(b) 85.2
1.1(c)
Due to FMC Corporation............................ 5.8 -- 5.8
Current maturities of long-term debt.............. -- 40.5(f) 40.5
---------- -------------- ----------
Total Current Liabilities....................... 420.8 41.4 462.2
Long-term debt, less current maturities........... -- 666.5(f) 666.5
Accrued pension cost.............................. 31.1 (31.1)(d) --
Accrued postretirement benefit cost............... 29.2 (24.8)(d) 4.4
---------- -------------- ----------
Total Liabilities............................... 481.1 652.0 1,133.1
Stockholder's Equity:
Capital stock..................................... -- 173.0(g) 173.0
Partners' capital................................. 131.0 (131.0)(h) --
---------- -------------- ----------
Total Stockholder's Equity...................... 131.0 42.0 173.0
---------- -------------- ----------
Total Liabilities and Stockholder's Equity...... $ 612.1 $ 694.0 $ 1,306.1
---------- -------------- ----------
---------- -------------- ----------
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA BALANCE SHEET.
44
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(a) A purchase accounting valuation of the Company's assets and liabilities has
not been completed. Upon completion of such valuation, the Company will
allocate the purchase price to the Company's assets and liabilities, both
tangible and intangible, with the excess of the cost over the fair value of
the net assets acquired allocated to goodwill. Management expects that,
based on such allocation, additional purchase accounting adjustments will be
made to the Company's assets and liabilities and, among other adjustments,
property, plant, and equipment will increase and goodwill will decrease from
the amounts presented herein.
(b) To reflect adjustments pursuant to the Acquisition Agreement.
(c) To reflect CTC assets acquired and liabilities assumed by the Company
pursuant to the Acquisition Agreement.
(d) To reflect purchase accounting adjustments as follows:
<TABLE>
<CAPTION>
($ IN
MILLIONS)
<S> <C>
Inventories.................................................................... $ 39.7
Goodwill....................................................................... 520.7
Prepaid pension cost........................................................... 117.9
Accrued pension cost........................................................... (31.1)
Accrued postretirement cost.................................................... (24.8)
</TABLE>
The adjustment to inventories is to increase inventories for the difference
between inventories valued at LIFO and FIFO. The adjustment to prepaid
pension cost, accrued pension cost, and accrued postretirement benefit cost
adjusts historical balances to the difference between the assets of the
plans and the related projected benefit obligations. The adjustment to
goodwill is to record the remaining excess of acquisition cost over the net
assets acquired. See Note (a) above.
(e) To reflect deferred financing costs associated with the Senior Credit
Facility and the Notes.
(f) To reflect the financing of the Acquisition as follows:
<TABLE>
<CAPTION>
($ IN
MILLIONS)
<S> <C>
Senior Credit Facility......................................................... $ 457.0
The Notes...................................................................... 200.0
Seller Note.................................................................... 50.0
-------------
707.0
Less current maturities........................................................ 40.5
-------------
$ 666.5
-------------
-------------
</TABLE>
(g) To reflect the Equity Contribution.
(h) To reflect the elimination of partners' capital.
45
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data of UDLP as of and for the years ended December 31, 1994 (the year of
inception), 1995 and 1996, which have been derived from financial statements
audited by Ernst & Young LLP, independent auditors. The selected historical
financial data as of and for the years ended December 31, 1992 and 1993 have
been derived from unaudited financial statements of FMC's Defense Systems Group
and Harsco's BMY Combat Systems Division. The selected historical consolidated
financial data as of and for the nine months ended September 30, 1996 and 1997
have been derived from unaudited interim consolidated financial statements
which, in the opinion of management, reflect all material adjustments,
consisting only of normal recurring adjustments, except as described below,
necessary for a fair presentation of such data. The following information should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the historical consolidated financial
statements of UDLP, together with the related notes thereto, included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
--------------------------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR OPERATIONS(1)
------------------------------------------
<CAPTION>
FMC HARSCO FMC HARSCO
1992 1992 1993 1993 1994 1995 1996 1996
--------- --------- --------- --------- --------- --------- --------- ---------
($ IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................................. $ 1,111.8 $ 384.9 $ 639.9 $ 348.0 $ 1,076.3 $ 967.6 $ 1,029.3 $ 745.9
Cost of sales(2)........................ 861.5 313.1 468.4 258.6 809.8 746.7 820.8 595.8
Selling, general and
administrative(3)..................... 72.7 31.9 49.8 23.2 131.8 122.7 128.4 90.0
Research and development................ 21.0 1.8 11.4 2.1 16.3 12.4 12.9 9.1
--------- --------- --------- --------- --------- --------- --------- ---------
Total expenses........................ 955.2 346.8 529.6 283.9 957.9 881.8 962.1 694.9
Earnings from foreign affiliates(4)..... 16.2 -- 10.3 -- 12.4 21.4 31.9 31.3
--------- --------- --------- --------- --------- --------- --------- ---------
Income from operations................ 172.8 38.1 120.6 64.1 130.8 107.2 99.1 82.3
Other (income) expense.................. (7.1) 7.0 (2.3) (0.5) (2.6) (1.9) (1.9) (2.2)
--------- --------- --------- --------- --------- --------- --------- ---------
Income before income taxes............ 179.9 31.1 122.9 64.6 133.4 109.1 101.0 84.5
Provision for income taxes(5)........... 64.6 12.4 30.4 23.4 3.9 1.4 2.8 --
--------- --------- --------- --------- --------- --------- --------- ---------
Net income............................ $ 115.3 $ 18.7 $ 92.5 $ 41.2 $ 129.5 $ 107.7 $ 98.2 $ 84.5
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
OTHER DATA(6):
EBITDA(6)............................... $ 159.8 $ 133.9 $ 138.1 $ 111.1
Depreciation and amortization........... $ 26.5 $ 9.2 $ 23.9 $ 9.1 29.0 26.7 39.0 28.8
Capital expenditures.................... 18.0 4.8 17.8 5.1 18.3 24.1 22.4 16.5
Ratio of earnings to fixed charges(7)... 38.1:1 26.4:1 23.6:1 25.6:1
Net cash provided by operating
activities............................ 166.0 94.7 81.1 56.7
Net cash (used in) provided by investing
activities............................ (17.1) (50.8) (7.0) (4.6)
Net cash used in financing activities... (118.5) (74.9) (75.0) (53.0)
BALANCE SHEET DATA:
Working capital......................... $ (56.6) $ 37.6 $ 2.2 $ 13.2 $ 4.2 $ 11.3 $ 46.6 $ 48.4
Total assets............................ 311.2 197.8 439.7 177.4 479.9 569.6 645.0 601.7
Partners' capital(8).................... 39.5 53.0 66.8 90.3 123.7 156.4 179.6 187.9
<CAPTION>
<S> <C>
1997
---------
<S> <C>
INCOME STATEMENT DATA:
Revenue................................. $ 913.9
Cost of sales(2)........................ 755.0
Selling, general and
administrative(3)..................... 91.4
Research and development................ 12.1
---------
Total expenses........................ 858.5
Earnings from foreign affiliates(4)..... 13.5
---------
Income from operations................ 68.9
Other (income) expense.................. (1.5)
---------
Income before income taxes............ 70.4
Provision for income taxes(5)........... 1.5
---------
Net income............................ $ 68.9
---------
---------
OTHER DATA(6):
EBITDA(6)............................... $ 97.9
Depreciation and amortization........... 29.0
Capital expenditures.................... 20.1
Ratio of earnings to fixed charges(7)... 19.2:1
Net cash provided by operating
activities............................ 119.2
Net cash (used in) provided by investing
activities............................ 6.3
Net cash used in financing activities... (114.4)
BALANCE SHEET DATA:
Working capital......................... $ 3.1
Total assets............................ 612.1
Partners' capital(8).................... 131.0
</TABLE>
- --------------------------
(SEE FOOTNOTES ON FOLLOWING PAGE)
46
<PAGE>
- --------------------------
(FOOTNOTES FROM PREVIOUS PAGE)
(1) Prior to the formation of UDLP effective January 1, 1994, respective
portions of the business were operated by FMC and Harsco. There was no
change in the basis of assets contributed or liabilities assumed at the
formation of UDLP. However, the financial information for 1992 and 1993 is
based on the accounting principles followed by each of FMC and Harsco prior
to the formation of UDLP, which differ in certain respects from the
accounting principles of UDLP.
(2) Cost of sales includes non-cash LIFO charges of $5.6 million, $5.9 million
and $6.3 million for the years ended December 31, 1994, 1995 and 1996,
respectively, and $7.1 million and $8.0 million for the nine months ended
September 30, 1996 and 1997, respectively. Cost of sales for the year ended
December 31, 1996 and nine months ended September 30, 1996 includes a $14.3
million favorable settlement from the U.S. government on a government
procurement contract. Cost of sales for the nine months ended September 30,
1997 includes approximately $13.5 million of non-cash charges recorded for
the quarter ended September 1997 for changes in estimated contract
profitability related to contractual issues with customers and other matters
resulting from the periodic reassessment of the estimated profitability of
contracts in progress.
(3) Selling, general and administrative expense for the year ended December 31,
1994 includes a $7.4 million charge related to conforming Harsco's
historical accounting policy to UDLP's accounting for inventory.
(4) Earnings from foreign affiliates for the year ended December 31, 1992
includes a $5.9 million increase as a result of a change in accounting
method for the investment in FNSS-Turkey from the equity method to the cost
method. Earnings from foreign affiliates for the year ended December 31,
1996 and nine months ended September 30, 1996 includes a $3.8 million
increase as a result of a change of accounting method for the investment in
FMC-Arabia from the cost method to the equity method.
(5) Income taxes are presented prior to the formation of UDLP as if the
operations were taxed as C corporations. After the formation of UDLP, income
passed to FMC and Harsco and is taxable at the partner level, except for
taxes payable on the income of UDLP's Foreign Sales Corporation subsidiary.
(6) EBITDA represents income from operations plus depreciation and amortization.
EBITDA is not a measure of performance or financial condition under
generally accepted accounting principles, but is presented to provide
additional information related to debt service capability. EBITDA should not
be considered in isolation or as a substitute for other measures of
financial performance or liquidity under generally accepted accounting
principles. While EBITDA is frequently used as a measure of operations and
the ability to meet debt service requirements, it is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation. EBITDA information
is not presented for periods prior to the formation of UDLP because
management believes such information is not meaningful.
(7) For purposes of calculating the ratios of earnings to fixed charges,
"earnings" represents income before income taxes less the excess, if any, of
the equity in earnings of joint ventures over dividends received plus fixed
charges. "Fixed charges" consists of interest expense, including
amortization of deferred financing costs, plus that portion of operating
lease rental expense (33%) which management believes is representative of
the interest component of lease expense. Ratios of earnings to fixed charges
are not presented for periods prior to the formation of UDLP because they
are not meaningful due to differences in capital structure.
(8) Prior to the formation of UDLP, the amounts represent the divisional equity
of the predecessor operations of FMC and Harsco, respectively.
47
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and related notes, and the other financial information,
included elsewhere in this Prospectus. Unless otherwise indicated, the following
discussion does not give effect to the Transactions or include pro forma
financial information.
OVERVIEW
BUSINESS ENVIRONMENT
Approximately 90% of the Company's 1996 sales were to the U.S. government,
primarily to agencies of the DoD (including FMS sales), or through subcontracts
with other government contractors. The U.S. defense budget has been declining in
real terms since the mid-1980s, resulting in some delays in new program starts,
program stretch-outs and program cancellations. These budget declines have
adversely affected the Company's sales and earnings. However, the rate of budget
declines has recently slowed and management believes that, while the DoD budget
may continue to decline, any such declines in the near term should be at a lower
rate than the rate of decline over the last decade. The majority of the
Company's programs are funded under the Weapon & Tracked Combat Vehicles
("W&TCV") procurement budget, which includes personal and crew-served weapons
and heavy TCVs, in addition to the medium/light class of TCVs that the Company
produces. The W&TCV procurement reached its peak in the early 1980s, with over
$6.0 billion in procurement funding for the U.S. government's fiscal year ended
September 30 ("Fiscal"), 1983. The W&TCV procurement budget thereafter declined
substantially as the Cold War receded and then ended, reaching $0.9 billion for
Fiscal 1993 and Fiscal 1994. Such expenditures have been in the $1.1 billion to
$1.5 billion range for Fiscal 1995 through Fiscal 1997.
CONTRACTING PROCESS
Government procurement initiatives for significant new armaments programs
(including major upgrades) are generally completed in four primary sequential
phases, each of which generally constitutes a separate authorization decision
and a separate, progressively larger, business opportunity. The first award is a
Demonstration and Validation ("DemVal") contract, for construction of prototypes
and demonstration of performance capabilities and advantages. The second phase
is an Engineering and Manufacturing Development ("EMD") contract, to demonstrate
the ability to manufacture the systems cost-effectively on a large scale. The
third phase, Low Rate Initial Production ("LRIP"), introduces the system into
production for and delivery to U.S. government customers for final evaluation
prior to the fourth phase, which is Full Rate Production ("FRP"). There is
frequently competitive bidding at one or more phases, although the prime
contractor at the DemVal and/or EMD phases often has a competitive advantage in
successfully bidding on the LRIP and FRP phases. Each phase also represents a
separate opportunity for the U.S. military to prioritize programs and reassess
budgetary authority, and the annual appropriation for each phase also requires
separate Congressional approval.
PRODUCT LIFE-CYCLES
The Company's major products typically undergo a product life-cycle from
early development to mature production, including aftermarket support and
upgrades. During this life-cycle, it is not uncommon for next generation or
competing systems to begin to capture U.S. defense budget dollars. This has
typically resulted in line-item budget dollar shifts between programs. For
example, while the Company's production of the M109 self-propelled howitzer has
declined as the program has evolved toward the end of its life-cycle, the
Company's production of the A6 Paladin and development work for the Crusader has
increased. Export sales and foreign joint venture and co-production businesses
tend to mitigate the effect of these trends and extend product life cycles, as
mature U.S. vehicles and systems frequently continue to
48
<PAGE>
be attractive to international customers, allowing exporters to leverage their
experience and capital base. See "Business--Products and Systems" and
"--Backlog."
RESTRUCTURING
In October 1994, the Company entered into an advance agreement ("Advance
Agreement") with the DoD. Under the terms of the Advance Agreement, the Company
is permitted to defer certain costs that were incurred from January 1, 1994
through June 30, 1996 associated with consolidation and restructuring of its
Ground Systems Division businesses. Costs deferred are being allocated ratably
to contracts with the U.S. Department of Defense for thirty-six months beginning
January 1, 1996. As of December 31, 1996, consolidation and restructuring costs
incurred amounted to $38.3 million and are included in patents and deferred
charges in the Company's balance sheet. Amortization relating to the Advance
Agreement for the period ended December 31, 1996 was $12.7 million and is
expected to continue at $12.7 million annually for 1997 and 1998. Because the
costs incurred are allowable as costs under the Company's U.S. government
contracts, they are generally reflected in the Company's pricing. The Company
regularly considers other consolidation and cost reduction opportunities in
response to declines in program spending or program changes and completions. For
example, the Company has been consolidating certain operations from one of its
California facilities to its York, Pennsylvania facility, with the transfer
scheduled to be complete in the first quarter of 1998. Management considers it
unlikely that any of these opportunities will approach the magnitude of the
consolidation described above, or that any such opportunities will result in a
related advance agreement with the DoD.
VARIABILITY IN QUARTERLY AND ANNUAL PERFORMANCE
The Company's operating performance frequently varies significantly from
period to period, depending upon the timing, contract type and export sales,
and, in particular, the award or expiration of one or more contracts, and the
timing of manufacturing and delivery of products under such contracts. As a
result, period-to-period comparisons may show substantial increases and
decreases disproportionate to underlying business activity, and results for any
given period should not be considered indicative of longer term results.
Performance can also be materially affected by the timing and amount of
dividends from the Company's Turkish and Saudi joint ventures, which has
generally resulted in higher earnings during the first quarter of the year when
such dividends are received.
TAXES
The Company will be taxed as a corporation for federal income tax purposes
on the consolidated income of the Company and its wholly-owned subsidiary, UDLP
Holdings Corp. As a limited partnership, UDLP's income or loss passes through to
its partners (the Company and UDLP Holdings Corp.), and is taxable at the
partner level. Accordingly, the income and loss of UDLP will be included in the
Company's consolidated income. For federal income tax purposes, the income of
UDLP's subsidiaries will generally be taxable at the subsidiary level.
EXPORT SALES
Export sales, including FMS, to foreign governments transacted through the
U.S. government, were $194.2 million, $216.4 million and $433.2 million during
1996, 1995 and 1994, respectively. The substantial decline in 1995 from 1994 was
due primarily to the completion of a Bradley Fighting Vehicle contract for Saudi
Arabia in early 1995. Substantially all of the Company's export sales are made
in U.S. dollars. In certain cases, the Company arranges to provide letters of
credit to support advance payments that are received against future deliveries
and in certain cases to provide performance guarantees.
Increasingly, foreign governments have been demanding offset obligations
when they award contracts. An offset involves purchasing goods or services from
or otherwise providing value to the customer's
49
<PAGE>
country. If the obligations are not met, the Company must pay a penalty to the
foreign government for not meeting the obligations. As of June 30, 1997 the
Company's offset exposure for foreign purchases was approximately $8.0 million,
excluding offset obligations for the Company's foreign joint ventures. The
Company has yet to incur a penalty on any of its offset obligations.
IMPACT OF YEAR 2000
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in normal
business activity.
Based on a recent assessment, the Company determined that it will be
required to modify or replace significant portions of its software so that its
computer systems will function properly with respect to dates in the year 2000
and thereafter. The Company presently believes that with modifications to
existing software and conversions to new software, the year 2000 issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
year 2000 issue could have a material impact on the operations of the Company.
The Company also is currently surveying its supplier base to verify that the
suppliers have addressed the year 2000 issue.
The Company will utilize both internal and external resources to replace or
reprogram and test the software for the year 2000 issue. The Company anticipates
completing its year 2000 projects by the 2nd Quarter 1999, which is prior to any
impact on operating systems. The total cost of year 2000 projects is estimated
at $28 million and is being funded through operating cash flows. The Company
expects to capitalize the majority of cost attributable to the purchase and
implementation of new hardware and software. The remaining cost will be expensed
as incurred. Through December 31, 1997, the Company has incurred approximately
$5 million related to the assessment of the year 2000 issue and implementation
of plans to replace or modify its operating systems.
The costs of the project and the date on which the Company believes it will
complete the year 2000 projects are based on management's best estimates, which
were derived utilizing numerous assumptions of future events, including the
continued availability of certain resources. There can be no guarantee that
these estimates will be achieved and actual results could differ materially from
those anticipated. Specific factors that might cause such material differences
include, but are not limited to, the success of implementing new systems, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 ("NINE MONTHS 1997") COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1996 ("NINE MONTHS 1996")
REVENUE. Revenue increased $168 million, or 22.5%, to $913.9 million for
the Nine Months 1997 from $745.9 million for the Nine Months 1996. The primary
reasons for the increase were the ramp-up of the Crusader program, revenue from
the Company's involvement in the August 1996 privatization of the Louisville
Naval Ordnance Station, an increase in sales resulting from the M109 A6 Paladin
upgrade contract, the shipment of amphibious assault vehicles under a contract
with Brazil, and initial shipments of M113 armored personnel carriers under a
contract with Thailand. These increases were partially offset by lower sales of
armored gun and composite armored vehicle development systems, which were
essentially complete in 1996.
50
<PAGE>
GROSS PROFIT. Gross profit increased $8.8 million, or 5.9%, to $158.9
million for the Nine Months 1997 from $150.1 million for the Nine Months 1996.
Gross margin declined to 17.4% of sales for the Nine Months 1997 from 20.1% for
the Nine Months 1996. Gross profit for the Nine Months 1997 was favorably
impacted by increased sales of new production units compared to the Nine Months
1996, and higher award fees on the Crusader program. This improvement was more
than offset by approximately $13.5 million of non-cash charges recorded for the
quarter ended September 1997 for changes in estimated contract profitability
related to contractual issues with customers and other matters resulting from
the periodic reassessment of the estimated profitability of contracts in
progress. Additionally, gross profit for the Nine Months 1996 was favorably
impacted by a $14.3 million price adjustment with the U.S. government on a gun
and mount procurement contract. Gross profits were negatively impacted by a
non-cash LIFO charge of $8.0 million for the Nine Months 1997 and $7.1 million
for the Nine Months 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1.4 million, or 1.6%, to $91.4 million for
the Nine Months 1997 from $90.0 million for the Nine Months 1996. The increase
is attributed to higher agent commissions related to foreign contracts,
increased bid and proposal activity for the pursuit of new contracts, the costs
associated with installing new automated business systems, and the costs related
to the operation of the Louisville Naval Ordnance Station in 1997. Substantially
offsetting these increases were the realization of the benefits of the
consolidation of the Ground Systems Division business and the reclassification
of certain costs in the Armament Systems Division business from general and
administrative to cost of sales.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased $3.0 million, or 33.0%, to $12.1 million for the Nine Months 1997 from
$9.1 million for the Nine Months 1996. The majority of the increased expense was
for development work on new launching systems for the U.S. Navy, as well as
modest spending increases on most other programs.
EARNINGS RELATED TO INVESTMENTS IN FOREIGN AFFILIATES. Earnings from
foreign affiliates decreased $17.8 million, or 56.9%, to $13.5 million for the
Nine Months 1997 from $31.3 million for the Nine Months 1996. This decrease was
due to an $18.5 million decrease in dividends received from FNSS-Turkey,
primarily as a result of fire-related destruction of part of its production
facility in February 1996. This decrease was partially offset by an increase of
$0.7 million in earnings for the Nine Months 1997 primarily from the positive
impact of a new contract at FMC-Arabia. This increase from FMC-Arabia would have
been $4.6 million excluding the impact on the Nine Months 1996 of changing the
accounting method for this investment from the cost method to the equity method
beginning January 1996.
NET INCOME. As a result of the foregoing, including the $17.8 million
decline in earnings from foreign affiliates discussed earlier, net income
decreased $15.6 million, or 18.5%, to $68.9 million for the Nine Months 1997
from $84.5 million for the Nine Months 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
REVENUE. Revenue increased $61.8 million, or 6.4%, to $1,029.3 million for
1996 from $967.6 million for 1995. The primary reasons for the increase were
increased revenue from the Crusader program, the continued ramp-up of sales on
the M109 A6 Paladin upgrade program, sales on a new contract to privatize the
operations of the Louisville Naval Ordnance Station and increased sales on the
Mk41 VLS after resumption of production on the program. These increases were
partially offset by lower sales due to a reduction of deliveries of new
production units for tracked combat vehicle product lines, notably foreign sales
of M109 howitzers.
GROSS PROFIT. Gross profit decreased $12.4 million, or 5.6%, to $208.5
million for 1996 from $220.9 million for 1995. Gross margin declined to 20.3% of
sales for 1996 from 22.8% of sales for 1995. The decrease in gross margin was
due to a shift from a greater percentage of sales of higher margin new
production units in 1995 to a greater percentage of lower margin engineering
development and vehicle
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upgrade program sales in 1996. Also, royalties declined $9.0 million in 1996 due
to a significant curtailment in deliveries by the joint venture in FNSS-Turkey
as a result of fire-related destruction of part of its production facility in
February 1996. These reductions were partially offset by the favorable impact of
the 1996 settlement of a $14.3 million claim with the U.S. government on a gun
and mount procurement contract. Gross profits were negatively impacted by
non-cash LIFO charges of $6.3 million in 1996 and $5.9 million in 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $5.8 million, or 4.7%, to $128.5 million for
1996 from $122.7 million for 1995. The increase was due primarily to increases
in employee benefit related costs, increased staffing costs related to the
ramp-up of the Crusader program and increased costs related to operation of the
Louisville Naval Ordnance Station, partially offset by reductions of expenses
resulting from realization of the benefits of the consolidation of the Ground
Systems Division business.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased $0.4 million, or 3.5%, to $12.9 million for 1996 from $12.4 million
for 1995.
EARNINGS RELATED TO INVESTMENTS IN FOREIGN AFFILIATES. Earnings from
foreign affiliates increased $10.5 million, or 49.2%, to $31.9 million for 1996
from $21.4 million for 1995. Dividends received from FNSS-Turkey increased $3.9
million as a result of the shipment of more profitable units, while earnings
related to FMC-Arabia increased by $6.6 million, of which $3.8 million was due
to the effect of changing from the cost method to the equity method for this
investment beginning January 1996 and $2.8 million was due to increased sales at
FMC-Arabia.
NET INCOME. As a result of the foregoing, net income decreased $9.5
million, or 8.8%, to $98.2 million for 1996 from $107.7 million for 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
REVENUE. Revenue decreased $108.7 million, or 10.1%, to $967.6 million for
1995 from $1,076.3 million for 1994. The primary reason for the decrease was
lower sales of new tracked combat vehicles, principally due to the completion of
a multi-year Bradley Fighting Vehicle production contract in early 1995. These
decreases in sales were partially offset by increased sales of Bradley Fighting
Vehicle upgrades and M109 upgrades, and increased engineering development
revenues related to the Crusader and the Bradley A3 programs.
GROSS PROFIT. Gross profit decreased $45.6 million, or 17.1%, to $220.9
million for 1995 from $266.4 million for 1994. Gross margin decreased to 22.8%
of sales for 1995 from 24.8% of sales for 1994. The reduction in the gross
margin was due primarily to a shift from a greater percentage of sales of higher
margin new production units in 1994 to engineering development and vehicle
upgrade program sales in 1995. The gross margin in 1995 also was adversely
impacted by a loss provision on an amphibious assault vehicle contract with
Brazil, which management expected at the time of signing. The Company completed
delivery on this contract in 1997. Gross profits were negatively impacted by
non-cash LIFO charges of $5.9 million for 1995 and $5.6 million for 1994.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $9.1 million, or 6.9%, to $122.7 million for
1995 from $131.8 million for 1994. The decrease was due in part to personnel
reductions resulting from the consolidation of the Ground Systems Division
business. Selling, general and administrative expenses in 1994 also were
unfavorably impacted by $7.4 million of costs previously capitalized in
inventories under Harsco's historical accounting policy but charged against
income after formation of the partnership to conform with UDLP's accounting
policy of charging such costs to expense as incurred.
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RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
decreased $3.9 million, or 23.8%, to $12.4 million for 1995 from $16.3 million
for 1994. This decrease was primarily due to reductions in research and
development spending, consistent with overall spending reductions by the
Company.
EARNINGS RELATED TO INVESTMENTS IN FOREIGN AFFILIATES. Earnings from
foreign affiliates increased $8.9 million, or 71.5%, to $21.4 million for 1995
from $12.5 million for 1994. Dividends received from FNSS-Turkey increased $7.4
million due to increased vehicle deliveries and a more favorable product mix and
FMC-Arabia recorded its initial dividend income of $1.5 million in 1995.
NET INCOME. As a result of the foregoing, net income decreased $21.9
million, or 16.9%, to $107.7 million in 1995 from $129.5 million in 1994.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
The Company's liquidity requirements depend on a number of factors relative
to the timing of production and deliveries under its U.S. government and direct
foreign sales ("DFS") contracts. The Company generally receives progress
payments on U.S. government contracts, including Foreign Military Sales, and it
generally negotiates for the payment of advances from customers on DFS
contracts. Advances on DFS contracts vary depending on the specific programs
involved while progress payments on U.S. government contracts are at a
percentage of contract expenditures. These payments reduce the need for
Company-financed working capital, and changes in working capital between periods
are frequently due to program status changes and the level of such payments for
the specific programs by period. Cash and net assets from the Company's
subsidiaries and joint ventures are not restricted by contract, regulatory
authority or the organizational documents of the Company, or its subsidiaries or
joint ventures, except that the Company's joint ventures require unanimous vote
of the joint venture parties prior to distributions. Although it has not yet
done so, the Company's Turkish joint venture may limit its cash distributions to
the Company if it does not meet its offset obligations and is required to pay
the resulting penalty. See "--Joint Ventures--FNSS-Turkey."
CASH PROVIDED BY OPERATING ACTIVITIES. Cash provided by operating
activities was $119.2 million for the Nine Months 1997 compared to $56.7 million
for the Nine Months 1996. The Nine Months 1996 was adversely impacted by a $83.6
million increase in inventories, primarily the result of an inventory build-up
to support a DFS program in Thailand and FMS programs in Austria and Brazil, and
the VLS launcher program. The Nine Months 1996 also was adversely impacted by a
$38.2 million decrease in accounts payable due to the timing of spending and the
payment cycle for major subcontractors for the Crusader program.
Cash provided by operating activities was $81.1 million, $94.7 million and
$166.0 million for the years ended December 31, 1996, 1995 and 1994,
respectively. The decrease in cash from operations in 1996 as compared to 1995
was primarily the result of changes in inventories, accounts payable and
advanced payments. The inventory build-up for 1996 of $113.5 million was
primarily the result of the same programs that affected the Nine Months 1996
while the increase in 1995 was the result of a $49.3 million inventory build-up
to support a program to build a component for a submarine and the VLS launcher
program. The negative impact on cash from operations of increased inventories
was partially offset by increased advanced payments of $64.7 million in 1996,
predominantly related to the various programs with increased inventories. Also
impacting cash from operations for 1995 was the favorable effect of higher
levels of accounts payable of $23.3 million in 1995 due to a difference in the
timing of spending. Accounts payable returned to more normal levels in 1996
thereby adversely affecting 1996 operating cash flow by approximately $26.7
million. Operating cash flow for 1995 also was adversely impacted by
approximately $23.5 million of costs related to the consolidation and
restructuring of the Ground Systems Division businesses. This program incurred
its highest expenditures in 1996.
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The decrease in cash from operations in 1995 as compared to 1994 resulted
primarily from lower net income, the changes in inventories, restructuring
costs, accounts payable, and advanced payments in 1995 as discussed above, and
an increase in accrued and other liabilities in 1994. The increase in accrued
and other liabilities in 1994 resulted from the establishment of
employee-related accruals such as workers compensation since the initial
formation of UDLP in January 1994 and the increase in a reserve to reimburse the
government on a large production contract.
CASH USED IN INVESTING ACTIVITIES. Cash used in investing activities for
each period primarily reflects the Company's capital spending and short-term
investments with FMC. Capital spending was $20.1 million for the Nine Months
1997 compared to $16.5 million for the Nine Months 1996. Capital spending was
$22.4 million, $24.1 million and $18.3 million during the years ended December
31, 1996, 1995 and 1994, respectively. Capital spending is primarily related to
spending for information technology and telecommunications equipment, simulation
labs and expenditures relating to the Ground Systems Division consolidation.
Capital expenditures for 1997 are expected to reach approximately $28 million,
including significant outlays for a new integrated business information system
during the second half of the year. The Company anticipates that its capital
spending will be approximately $27.0 million in 1998 addressing, among other
things, "year 2000" matters.
FINANCING ACTIVITIES AND CAPITAL RESOURCES. Prior to the Acquisition, UDLP
was financed primarily with cash flow from operations. Most of the operating
cash flow not reinvested in the business was distributed to FMC and Harsco.
Concurrently with the Acquisition, the Company entered into the Senior Credit
Facility, consisting of $495.0 million of term loans, of which $445.0 million
was outstanding initially, and a $230.0 million revolving credit facility, of
which $12.0 million in borrowings and approximately $154.0 million in letters of
credit were outstanding initially, and under which approximately $64.0 million
were available for additional revolving credit borrowings. As of November 30,
1997, the outstanding term loans had been reduced by $28.5 million. The Company
also issued the Notes and the $50.0 million Seller Note, which is expected to be
repaid with $50.0 million of additional term loans under the Senior Credit
Facility. If any adjustment results in a decrease in the Purchase Price for the
Acquisition, borrowings under the Term Loan Facilities will be correspondingly
reduced. If the Purchase Price is increased, the borrowings under the Revolving
Credit Facility will be correspondingly increased. See "The Acquisition" and
"Capitalization" for information relating to the financing for the Acquisition,
and "Description of Certain Indebtedness".
The Company has no operations independent from its subsidiaries. All of the
subsidiary Guarantors are directly or indirectly wholly-owned and all such
Guarantors have guaranteed the Notes on a full, unconditional and joint and
several basis. Any non-guarantor subsidiaries have assets, equity, income and
cash flows on an individual and combined basis less than 3% of related pro forma
amounts of the Company.
Based upon its current level of operations, management believes that the
Company's cash flow from operations, together with available borrowings under
the Senior Credit Facility, will be adequate to meet its anticipated
requirements for working capital, capital expenditures, research and development
expenditures, and interest payments and scheduled principal payments on its
indebtedness (including the Senior Credit Facility and the Notes). There can be
no assurance, however, that the Company's business will continue to generate
cash flow from operations at or above current levels. If the Company is unable
to generate sufficient cash flow from operations in the future to service its
debt, it may be required to sell assets, reduce capital expenditures, refinance
all or a portion of its existing debt (including the Notes) or obtain additional
financing. The Company's ability to make scheduled principal payments to pay
interest or to refinance its indebtedness (including the Notes) depends on its
future performance and financial results, which, to a certain extent, are
subject to general economic, financial, competition, legislative, regulatory,
and other factors beyond its control. There can be no assurance that sufficient
funds will be available to enable the Company to service its indebtedness,
including the Notes, or make necessary capital expenditures.
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NEW BASIS OF ACCOUNTING AND ACCOUNTING STANDARD NOT YET ADOPTED
The basis of the Company's assets and liabilities will be adjusted upon the
application of purchase accounting pursuant to the Acquisition on October 6,
1997. Accordingly, the Company's future consolidated financial position and
results of operations will not be comparable to historical financial
information. The Company anticipates changing the method of determining
inventory cost after the Acquisition from the last in, first out basis to the
actual production cost basis. The effect of these adjustments and the change in
the method of determining inventory costs on future operating results has not
been determined. See note (g) of Notes to Unaudited Pro Forma Income Statement
and Other Data.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosure about Segments of an Enterprise and Related Information." This
Statement requires financial and descriptive information about reportable
operating segments in interim and annual financial reports. It also established
the standards for related disclosures about products and services, geographic
areas of operation and major customers. The Statement is effective for financial
statements for periods beginning after December 15, 1997. The Company does not
expect the impact of adopting this new accounting standard to be significant.
INFLATION
The effect of inflation on the Company's sales and earnings has historically
been minimal. Although a majority of the Company's sales are made under
long-term contracts, the selling prices of such contracts, established for
deliveries in the future, generally reflect estimated costs to be incurred in
these future periods. In addition, some contracts provide for price adjustments
through escalation clauses. Management believes the Company's risks associated
with fixed-price contracts have primarily been associated with estimating
program requirements, rather than the impact of price changes on those
requirements.
JOINT VENTURES
FNSS-TURKEY
The Company's investment in FNSS-Turkey is carried at cost since there is
uncertainty regarding the Company's ability to control the repatriation of
earnings. Royalties are reported as revenues, while dividends are reported as
earnings from foreign affiliates. Dividends and royalties are paid in U.S.
dollars.
Turkey has experienced high inflation and its currency, the Turkish lira,
has consistently fallen in value over several years against the U.S. dollar.
FNSS-Turkey receives payments from SSM in Turkish lira, and pricing under the
contract is calculated annually based on scheduled product deliveries pursuant
to a formula designed to adjust such pricing for, among other things,
fluctuations in the value of the Turkish lira against the U.S. dollar. Upon
receipt of such payments, FNSS-Turkey promptly converts Turkish lira into hard
currency. As a result, management believes that the terms of FNSS-Turkey's
contract with the Turkish government have generally protected FNSS-Turkey
against the impact of the devaluation of the Turkish lira. However, FNSS-Turkey
is adversely affected by depreciation of the Turkish lira if there is a delay in
payment after calculation of pricing under the contract. For example, when a
delivery schedule is delayed, FNSS-Turkey is adversely affected unless a pricing
adjustment is negotiated to give effect to any devaluation in the Turkish lira
between the time the products were priced under the contract and the delayed
delivery date. Such an adjustment was made after protracted negotiations when
delivery schedules were first extended in 1996.
In February 1996, a fire occurred at the FNSS-Turkey vehicle production
facility which destroyed a warehouse and the majority of production parts on
site. The plant resumed production in late 1996; however, the work stoppage
caused by the fire had a significant negative impact on royalties received from
FNSS-Turkey in 1996 and has negatively impacted dividends received to date in
1997. The Turkish
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government, which is responsible for delivering turrets for one of the vehicle
models produced by FNSS-Turkey, has experienced difficulties in meeting the
production schedule and, as a result, has paid FNSS-Turkey for a number of
vehicles that are parked and awaiting delivery of turrets. The Turkish
government has refused to continue this practice, and has agreed to a revised
delivery schedule along with corresponding pricing adjustments, which management
believes will not have a material impact on royalty and dividend receipts.
FNSS-Turkey is required by its agreement with SSM to achieve a significant
level of export sales by 2000 to meet the 'offset' requirements of the contract
or pay a penalty of 9% of the unpaid offset obligations to SSM. Such payment
could be as high as $32.0 million if no additional offset sales are completed. A
potential award which would approximately halve the remaining liability is being
pursued, but is unlikely to be realized, if at all, earlier than 1999 due to the
current economic turmoil in Asia. There can be no assurance that FNSS-Turkey
will be able to complete this potential sale or fulfill its offset obligations.
Management believes that the time frame for meeting the offset deadline may be
extended to some extent to accommodate changes in the production schedule.
FMC-ARABIA
FMC-Arabia has two major FMS contracts through the DoD to provide services
to the Royal Saudi Land Forces Infantry Corps, one for Contractor Logistical
Support ("CLS") and the other for M113 modernization. The M113 contract will
deplete the authorized funding amount by the end of the first quarter of 1998.
The CLS program has already executed a demobilization order which has resulted
in an 80% reduction in the training work force, and the current CLS contract is
scheduled to expire in the first quarter of 1998. Additional funding for both
programs is contemplated in an amendment to the pertinent agreement between the
U.S. and Saudi Arabian governments, which covers both contracts, but the
amendment has not received final approval. The receipt of such approval has been
slower than management expected. If additional funding is not authorized by the
end of the first quarter of 1998, both of FMC-Arabia's contracts will be
terminated. Even if such authorization is received, management does not believe
funding for the CLS program will be restored to historical levels.
FMC-Arabia is treated as a partnership for United States tax purposes. UDLP
is the beneficiary of a "tax holiday," granted by the Kingdom of Saudi Arabia,
with respect to its proportionate share of FMC-Arabia's income and loss. The
"tax holiday" granted by the Kingdom of Saudi Arabia expires in April 1999, and
the Company is attempting to extend the tax holiday beyond April 1999. Due to
the uncertainty of extending the tax holiday, UDLP may incur taxes on its
proportionate share of FMC-Arabia's income at the Saudi Arabian statutory tax
rate of up to 45% beginning in April 1999, although the Company should be
eligible for a foreign tax credit with respect to such taxes.
ENVIRONMENTAL MATTERS
The Company's operations are subject to Environmental Laws. The Company
spends certain amounts annually to maintain compliance with Environmental Laws
and to remediate contamination, as required by certain Environmental Laws.
Operating and maintenance costs associated with environmental compliance and
prevention of contamination at the Company's facilities are a normal, recurring
part of operations, are not significant relative to total operating costs or
cash flows, and are generally allowable as contract costs under the Company's
contracts with the U.S. government ("Allowable Costs"). Such costs have not been
material in the past and, based on information presently available to the
Company and on Environmental Laws and U.S. government policies relating to
Allowable Costs in effect at this time (all of which are subject to change), are
not expected to have a material adverse effect on the Company's financial
condition, results of operations or debt service capability.
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As with compliance costs, a significant portion of the Company's
expenditures for remediation at its facilities consists of Allowable Costs.
Management believes that it has sufficient reserves to cover remediation costs
that are not allowable costs under its U.S. government contracts ("Non-Allowable
Costs") and does not expect that such costs will materially adversely affect the
Company's financial condition or debt service capability.
Based on historical experience, the Company expects that a significant
percentage of the total remediation and compliance costs associated with its
facilities will continue to be Allowable Costs. In addition, pursuant to the
terms of the Acquisition Agreement, the Sellers are required to reimburse the
Company for 75% of certain remediation costs relating to operations prior to the
Closing Date, that are Non-Allowable Costs. There can be no assurance, however,
that the Sellers will reimburse the Company promptly or at all for future
compliance and remediation costs or that the U.S. government will allow as
Allowable Costs in the Company's contracts all or a significant portion of such
future environmental costs. The Company's financial condition, results of
operations and debt service capability could be materially and adversely
impacted where the Company does not receive full and prompt reimbursements from
the Sellers under the Acquisition Agreement, or contract costs in respect of
environmental matters are not allowed by the U.S. government as expected. For
additional information regarding environmental matters, see
"Business--Environmental Matters."
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BUSINESS
OVERVIEW
The Company is a leading supplier of tracked, armored combat vehicles and
weapons delivery systems to the U.S. Department of Defense and a number of
allied military forces worldwide. The Company's products include critical
elements of the U.S. military's tactical force structure. The Bradley Fighting
Vehicle, recognized as one of the best-performing weapons systems in U.S.
history, is the only domestically produced vehicle able to fulfill the dual role
of troop transport and armored fighting vehicle. The Company has maintained its
prime contractor position on the Bradley program since production began in 1981,
and has added a number of technology-based upgrades and derivative vehicles that
continue to extend the program's life-cycle. Building on over twenty years of
experience on the M109 self-propelled howitzer and upgrades, the Company is also
the prime contractor for the development of the Crusader Field Artillery System.
The U.S. Army has identified the Crusader as its planned multi-billion dollar
next-generation field artillery system and the largest U.S. military vehicle
development program of this decade. For the twelve months ended September 30,
1997, the Company had pro forma revenues of approximately $1.2 billion, pro
forma operating income of $53.2 million and a pro forma net loss of $7.0
million. With respect to the net loss and operating income, purchase accounting
for the transaction is not yet complete and these amounts are subject to
adjustment upon completion of that process. See "Unaudited Pro Forma Financial
Data." For the same twelve month period, the Company had pro forma EBITDA (as
defined) of $127.1 million.
The Company enjoys strong, long-standing customer relationships as a result
of its advanced design, engineering and manufacturing capabilities, competitive
cost structure, diversified product portfolio, demonstrated upgrade
capabilities, and reputation for program quality and service. Management
believes that these characteristics provide a key competitive advantage in
obtaining upgrade production contracts and in pursuing other domestic and
international business opportunities with new and existing customers. In
addition to the Bradley Fighting Vehicle and the M109 howitzer, the Company
serves as the prime contractor for a number of mission critical military
programs, several of which have spanned decades. The Company has been the prime
contractor for several of these programs, including the M113 armored personnel
carrier since 1960, the M88 tank recovery vehicle since 1960, and the U.S.
Navy's Mk45 naval gun system since 1968. The Company is currently performing
under more than 30 active contracts with original funded values in excess of $25
million each. The Company had a firm funded backlog of more than $1.6 billion as
of November 30, 1997, a substantial majority of which is derived from
sole-source, prime contracts.
Management believes that the emphasis of the U.S. Department of Defense on
enhancing military preparedness within a declining procurement budget
environment has resulted and will continue to result in increased emphasis on
upgrading and extending the life of existing equipment and systems, including
those currently supplied by the Company. Management believes this trend favors
large, established contractors such as the Company that are qualified to perform
sole-source contracts for product design, development, manufacture, field
service and support and subsequent upgrades.
BUSINESS STRENGTHS
The Company attributes its performance to several factors, including the
following:
COMPREHENSIVE CAPABILITIES IN ARMORED COMBAT VEHICLES. For more than half a
century, the Company has remained at the forefront in the design, development
and upgrade of medium/light tracked, armored combat vehicles, beginning with the
primary amphibious vehicle used in World War II, followed in 1960 by the M113,
the main troop transport vehicle used by the U.S. and other militaries with over
80,000 vehicles delivered worldwide. In 1981, the Company began initial
production as the sole-source, prime contractor for the Bradley Fighting
Vehicle. Management believes that these and other successes resulted from the
Company's proven, comprehensive design and engineering experience in simulation,
systems integration, armor, mobility and survivability, its demonstrated ability
to infuse "information dominance technologies" into combat systems for enhanced
information gathering, analysis and application in the battlefield
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environment, its demonstrated manufacturing and upgrade capability, and its
reputation for service in the field.
ABILITY TO LEVERAGE SYSTEMS INTEGRATION EXPERTISE INTO LONG-TERM
PROGRAMS. The Company's experience and technological expertise afford it a
continued position as team leader and prime systems integrator for the programs
in which it participates, and positions the Company for the development and
integration of other complex, critical weapons systems. For example, management
believes the Company's position as the systems integrator on the Crusader played
a significant role in the Company's recent success in being named gun weapons
systems integrator for the Naval Surface Fire Support program, with
responsibility for the development and integration of a new naval gun system.
Management also believes that these capabilities create advantages in marketing
to international customers seeking products compatible with systems used by the
U.S. military.
LARGE, INSTALLED BASE OFFERS SIGNIFICANT LIFE-CYCLE OPPORTUNITIES. The U.S.
military is under budgetary constraints that provide incentives to upgrade and
overhaul existing systems and vehicles to maximize system life. The Company's
resident knowledge of its extensive domestic and international installed base of
vehicles affords significant opportunities, through modernization upgrades,
derivative vehicles that expand program capabilities, and logistical support
services and spares, to effectively extend product life for many years after
development. For example, the Bradley Fighting Vehicle has undergone three
generations of upgrades and has fostered a number of derivatives, and the
Company has upgraded its M109 howitzers to the A6 Paladin configuration and its
M88 recovery vehicles to the Hercules configuration. Management believes these
upgrades and derivatives, which generally comprise a majority of the Company's
funded backlog (including substantially all of the backlog of the Ground Systems
Division and the Palladin Production Division, See "--Backlog"), are more
predictable sources of revenue and cash flow than new products.
STRONG INTERNATIONAL PRESENCE AND GROWTH POTENTIAL. In contrast to the
declining U.S. procurement budget, military budgets of certain foreign
governments have expanded due to general economic growth or regional
geo-political pressures. Management believes the Company's proven design,
development, engineering and manufacturing capabilities for the U.S. military
have been the foundation for its International Division and export business. For
example, management believes the domestic M113 program and prior co-production
programs for Armored Infantry Fighting Vehicles in Europe were the basis for the
award of contracts for similar vehicles to the Company's Turkish joint venture.
Management also believes that the Company's existing product breadth and
established manufacturing platforms provide it with certain cost advantages over
smaller foreign competitors when pursuing typical lower volume foreign
contracts.
INNOVATIVE PUBLIC/PRIVATE TEAMING RELATIONSHIPS. The Company has
established relationships with key constituencies, including the U.S. Army, U.S.
Navy and the Office of the Secretary of Defense, and is one of the leaders in
working with the U.S. Department of Defense to rationalize the U.S. defense
industrial base. The Company operates a significant portion of the recently
privatized Louisville Naval Ordnance Station, and is partnering with the
Letterkenny Army Depot to upgrade the M109 howitzer to the A6 Paladin
configuration. The Company also has partnering arrangements with another U.S.
government depot to upgrade the M113, the M88 and breaching vehicles. The
Company believes these arrangements demonstrate the success that can be achieved
through public/private partnerships.
STRONG MANAGEMENT TEAM AND EXPERIENCED INVESTOR. The Company has a highly
experienced and committed management team that has successfully adapted the
Company's cost structures and manufacturing operations to the declining U.S.
Department of Defense procurement budget and the significant transformation to a
lower volume, higher technology manufacturing capability. Senior management has
an average of more than 19 years with the Company and substantially all of the
senior management team was directly involved with the initial formation and
integration of UDLP in January 1994. Management will be given the opportunity to
participate in the Company's potential success through an equity-based incentive
program and direct investment. In addition, the management of the
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Company is complemented by the support of The Carlyle Group, an active investor
in the defense and aerospace industries.
BUSINESS STRATEGY
Management intends to enhance its leading market position through the
successful execution of the following objectives:
CONTINUING TO PROVIDE PRODUCTS AND SERVICES ACROSS PROGRAM LIFE-CYCLES. The
Company intends to continue to leverage its extensive range of products and
services across entire program life-cycles through new technology developments,
follow-on products, derivative vehicles, upgrades, logistics support and
training. For example, the Company was recently awarded a Low Rate Initial
Production contract for the third generation of upgrades to the Bradley Fighting
Vehicle, the Bradley A3 configuration which will incorporate a new core
electronic architecture, including, among others, combat identification systems,
situational awareness and battlefield digitization. In addition, the Company
plans to continue building on the successful Bradley Fighting Vehicle program by
further expanding its family of vehicles to include new armored vehicles, such
as a maintenance vehicle, a treatment and transport vehicle, an engineering
squad vehicle and a battle command vehicle.
CAPITALIZING ON THE CRUSADER OPPORTUNITY. The Crusader program represents
an important opportunity with the potential to become one of the U.S. Army's
largest procurement programs over the next decade. The Company plans to devote
all necessary resources to establish the Crusader's capabilities and develop
successful prototypes in the Demonstration and Validation phase and to win, if
awarded, the Engineering and Manufacturing Development and Low Rate Initial
Production contracts. The Company's objective is to fully demonstrate the
Company's engineering and cost-effective production qualifications so that the
Company will be the sole-source, prime contractor for the Crusader if necessary
funding is appropriated and the U.S. Army proceeds to Full Rate Production. For
a discussion of the Crusader Program, see "--Armament Systems Division."
PURSUING KEY INTERNATIONAL OPPORTUNITIES. The Company plans to capitalize
on its established program base and expertise, and on its extensive
international joint venture and co-production experience, in order to expand
export sales and establish new joint ventures and co-production programs.
Management believes this strategy will require minimal additional capital, and
has the potential to diversify the Company's business base and enhance overall
margins.
PARTICIPATING IN THE PUBLIC/PRIVATE DEFENSE INDUSTRIAL BASE
CONSOLIDATION. The Company intends to continue working closely with its U.S.
government customers to rationalize the public/private defense industrial base.
Potential opportunities include further privatizations such as the outsourcing
of logistics and training support and additional depot partnering relationships
with the U.S. Department of Defense.
MODERNIZING THE U.S. ARMY NATIONAL GUARD. A large portion of the U.S.
Army's tracked, armored combat vehicle fleet is in the National Guard. The
modernization of equipment and systems used by the National Guard generally lags
behind that of the active armed services. The Company is pursuing a directed
procurement program to assist the National Guard in obtaining funding for
upgrades of its Bradley Fighting Vehicles, M113 family of vehicles and M9
Armored Combat Earthmovers.
IDENTIFYING STRATEGIC ACQUISITION OPPORTUNITIES. Management expects that
the continuing consolidation in the U.S. defense industry will result in
strategic opportunities for the Company. The Company intends to be proactive in
this environment and, on an opportunistic basis, pursue acquisitions both
domestically and abroad that management believes will complement its key
business strengths or further expand its capabilities.
The Company is a Delaware corporation and UDLP is a Delaware limited
partnership. The principal address of each is 1525 Wilson Boulevard, Suite 700,
Arlington, Virginia 22209-2411 and the telephone number of each is (703)
312-6100.
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PRODUCTS AND SYSTEMS
The Company has five principal divisions, which are currently organized into
three major business areas: Armored Combat Vehicles, Armament Systems and
International. The table below summarizes the Company's principal products and
systems. A "sole-source" contractor is the sole provider of specified products
and systems to the customer, whether manufactured by the Company or integrated
from other sources. A "prime contractor" has a direct contract with the
customer, rather than another contractor.
<TABLE>
<CAPTION>
SCOPE
------------------------------
SOLE- PRIME
SOURCE CONTRACTOR DESCRIPTION
------ --------------- ---------
<S> <C> <C> <C> <C>
ARMORED COMBAT VEHICLES:
GROUND SYSTEMS
- Bradley Fighting Vehicle # # -
- BFV derivatives # # -
- M109 Self-Propelled Howitzers -
#
- M992 Field Artillery # # -
Ammunition Supply Vehicle
- M88 Recovery Vehicles # # -
- M113 Armored Personnel Carrier -
#
- M9 Armored Combat Earthmover # # -
- Linear Obstacle Breacher* # # -
- M8 Armored Gun System -
#
- LVTP7 Amphibious Assault -
Vehicle #
- Composite Armored Vehicle* -
#
PALADIN PRODUCTION
- M109 A6 Paladin Howitzer # # -
STEEL PRODUCTS
- M113 Vehicle Upgrades -
#
- Vehicle Components -
#
ARMAMENT SYSTEMS:
- Crusader* # # -
- Mk45 Naval Gun System # # -
- Mk41 Vertical Launching System # -
- Vertical Gun for Advanced -
Ships*
- Concentric Canister Launcher* -
- Cocoon Launcher* -
- Advanced Gun Technologies* -
INTERNATIONAL:
- FMC-Arabia Joint Venture # # -
- FNSS-Turkey Joint Venture # # -
- Co-Production Programs -
* INDICATES NEW PRODUCTS AND SYSTEMS CURRENTLY BEING DEVELOPED BY THE COMPANY.
<CAPTION>
<S> <C>
ARMORED C
GROUND
- Tracked, armored vehicle with 25mm cannon, TOW missiles,
stabilized turret and troop transport capabilities; current
development focus is on the A3 upgrade program
- Includes the Multiple Launch Rocket System carrier, Fire
Support Vehicle, Command and Control Vehicle, Stinger
Fighting Vehicle and others
- Highly mobile field artillery system capable of delivering a
rapid and high volume of firepower
- Provides transport of ammunition, supplies and personnel to
the battlefield in support of the M109
- Provides recovery of impaired tanks through its towing,
lifting and pulling capabilities
- Troop transport vehicle; recent activity limited to upgrades
by the Steel Products Division and export sales
- Fully-tracked, 18-ton, aluminum armored vehicles for use on
the battlefield to bulldoze, rough grade, excavate, haul and
scrape
- The Grizzly is designed to clear mines and other complex
obstacles
- Lightweight, highly maneuverable armored gun systems,
capable of high speeds and can be air dropped from a C130
aircraft
- Landing vehicle tracked personnel amphibious assault vehicle
- Fully operational, advanced technology demonstration vehicle
PALADIN
- Remanufacture and upgrade M109 with new turret and armament
system
STEEL P
- Vehicle conversion, upgrade and manufacturing
- Largest U.S. producer of cast and forged track shoes for
armored combat vehicles and components for suspension
systems
ARMAMENT
- Development of an integrated and fully-automated two-vehicle
rapid deployment system consisting of a 155mm,
self-propelled howitzer and an armored resupply vehicle
- Production, overhaul and support of the 5-inch (127mm),
54-caliber, fully-automated naval gun
- Mechanical components for naval missile launcher deploying
anti-air Standard, Tomahawk, anti-submarine and ship
self-defense Sea Sparrow missiles; produced in conjunction
with Lockheed Martin
- Next generation naval gun system consisting of an automated
magazine containing two 155mm barrels and an extensive
quantity of projectiles, and capable of shooting long ranges
at high rates of fire
- Missile launching system with integral gas management system
design and ship-fit flexibility
- Launcher designed to provide above-deck ship self-defense
missile capabilities
- Electromagnetic and electrothermal chemical technologies for
guns
INTERNATI
- 51% beneficial interest in venture that provides logistics
support and training to the Royal Saudi Land Forces, and has
been contracted to upgrade and modernize Saudi Arabia's
fleet of M113s
- 51% interest in venture that produces and sells armored
combat vehicles to the Turkish army under license from the
Company
- Co-production programs including the M113, MLRS carrier,
LVTP7 and contractor logistic support in Japan, Korea and
Pakistan under license from the Company
* INDICAT
</TABLE>
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The revenues generated by each of the Company's principal products and
systems in each of the past three years are set forth below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
($ IN MILLIONS)
ARMORED COMBAT VEHICLES:
GROUND SYSTEMS:
Bradley Fighting Vehicle and Derivatives..................................... $ 329.4 $ 270.8 $ 308.1
M88 Armored Recovery Vehicle................................................. 42.1 4.3 75.5
M109 Self-Propelled Howitzer................................................. 198.3 105.2 40.1
M9 Armored Combat Earthmover................................................. 23.4 87.2 37.1
M113 Armored Personnel Carrier............................................... 30.8 22.0 9.8
Other........................................................................ 146.6 97.2 85.3
--------- --------- ---------
770.6 586.7 555.9
PALADIN PRODUCTS............................................................... 4.7 57.7 102.1
STEEL PRODUCTS................................................................. 75.2 58.4 62.4
ARMAMENT SYSTEMS:
Crusader..................................................................... 17.7 101.9 137.2
Mk41 Vertical Launching System............................................... 49.5 23.4 46.4
Mk45 Naval Gun System........................................................ 78.8 59.7 32.0
Overhaul, Repair, Maintenance and Other...................................... 77.9 66.5 102.0
--------- --------- ---------
223.9 251.5 317.6
INTERNATIONAL.................................................................... 49.3 49.3 42.0
Intercompany Eliminations........................................................ (47.4) (36.0) (50.7)
--------- --------- ---------
TOTAL REVENUE.................................................................... $ 1,076.3 $ 967.6 $ 1,029.3
--------- --------- ---------
--------- --------- ---------
</TABLE>
ARMORED COMBAT VEHICLES. The Ground Systems Division ("GSD") is a leading
prime contractor of land-based military systems for the U.S. government and
serves certain foreign military customers. GSD's capabilities include systems
integration expertise, advanced engineering and technology development
capabilities and flexible manufacturing and systems-conversion capacity for
medium/light and certain heavy tracked combat vehicles. The Company also offers
a full range of logistics support and training capabilities for vehicles it
produces. The Company believes that its broad product line, its ability to
service a vehicle throughout its life and its established prime contractor
status provide a foundation for sustained, long-term programs.
TRACKED COMBAT VEHICLES ("TCV"). TCVs are highly mobile vehicles that can
cross natural and man-made obstacles and urban terrain in all weather
conditions, while under fire from enemy combat forces. The U.S. Army and Marines
use tracked combat vehicles for four basic missions: (i) close combat, where the
combination of tanks, scout vehicles, fighting vehicles, armored personnel
carriers and command and control vehicles provide the capability to present an
integrated and flexible combat front to face enemy forces at close range; (ii)
fire support, by providing lethal indirect firepower through self-propelled
armament and multiple launch rocket systems; (iii) combat support, including the
provision of operational assistance, such as crossing barriers, clearing or
laying obstacles and recovering disabled systems; and (iv) amphibious assaults,
in which amphibious assault vehicles are able to initiate attack from the sea
and continue the attack on land.
TCVs are classified into two weight classes: medium/light and heavy. The
Company produces and services vehicles primarily in the medium/light class.
Medium/light vehicles weigh less than 40 tons and normally are fabricated from
aluminum. The medium/light class of vehicles made its first appearance
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during World War II, with an amphibious assault vehicle produced by the Company.
Since then, this vehicle class has expanded to include fighting vehicles,
self-propelled artillery and specialty vehicles.
THE BRADLEY FIGHTING VEHICLE ("BFV"). The Company has been the sole-source,
prime contractor of the BFV to the U.S. Army since its initial production in
1981. Management believes that the Company's resident knowledge of the BFV,
gained through years of experience in developing and manufacturing the vehicle,
gives it a significant competitive advantage in pursuing upgrade opportunities
for the BFV, developing derivatives and leveraging international sales
opportunities. The latest fielded version, the BFV A2, is a tracked armored
vehicle with a 25mm cannon, TOW missiles and a stabilized turret, and is the
only domestically produced vehicle able to fulfill the dual role of troop
transport and armored fighting vehicle. Weighing 35 tons, the BFV is outfitted
with armor and day/night sights, and can transport up to nine people safely
across rough terrain. The vehicle's combination of lethality, survivability and
tactical and strategic mobility has established it as a critical component of
the U.S. government's full-spectrum warfare strategy. A total of 6,742 BFVs have
been built, of which 400 were for the Saudi Arabian Army.
The BFV's mobility and fire power, as well its combination of both defensive
and offensive capabilities, were most recently demonstrated in Operation Desert
Storm ("ODS"). As a result of the live-combat experiences of ODS, the Company
has developed an upgrade kit, named the BFV A2 ODS. This kit features eye-safe
laser range finders, restowage, missile counter-measures and the addition of
mounting provisions for the Battlefield Combat Identification System, a
capability designed to electronically identify whether targets are friend or
foe, thus reducing the risk of friendly fire casualties. Since 1995, the
Company's BFV-related revenues have been derived primarily from such upgrades
and sales of the derivative products and support services described below.
The BFV A3, currently under development, incorporates all of the
improvements made to the BFV A2 ODS, as well as providing enhancements to
situation awareness capability, lethality, survivability and sustainability. The
U.S. Army is currently upgrading a portion of its fleet of BFVs to the A2 ODS
configuration, and has announced plans to further upgrade a portion of its fleet
to the BFV A3 configuration. The LRIP contract for the BFV A3 was signed in July
1997, with deliveries scheduled from late 1998 through 1999.
BFV DERIVATIVES AND SUPPORT. The BFV has served as a platform for a number
of derivative vehicles developed by the Company. One such derivative, the
Multiple Launch Rocket System ("MLRS") carrier, was developed to provide a
carrier for a long-range rocket artillery system and is outfitted with rockets,
a launcher and fire control system developed and produced by Lockheed Martin
Vought Systems. The Company was awarded a contract to initiate an MLRS
remanufacture program, with the first delivery completed in August 1997. Another
derivative, the Fire Support Vehicle, supports armor and mechanized forces by
pinpointing enemy targets using laser technology, which allows more accurate and
timely calls for fire from the artillery. The Company is building the Fire
Support Vehicle under an EMD contract awarded in 1995 and recently received an
LRIP contract for 22 additional vehicles. The Command and Control Vehicle
("C2V") is a self-contained vehicle that keeps pace with armored maneuver forces
while providing the crew with a protected environment. The Company was awarded
an LRIP contract for 5 C2Vs in 1996 with customer options for 41 systems to be
delivered between 1998 and 2001. The Stinger Fighting Vehicle integrates the BFV
with Stinger missiles and adds improvements to turret fire control, target
acquisition subsystems and survivability. The Company is under an LRIP contract
for delivery of 85 such vehicles through 1998. Several other BFV derivatives are
in the early stages of development. In addition, the Company plans to build on
the successful BFV program by expanding the BFV family of vehicles in the future
to include new armored vehicles such as a maintenance vehicle, a treatment and
transport vehicle, an engineering squad vehicle and a battle command vehicle.
In addition to the development and manufacture of BFV derivatives, the
Company provides BFV upgrade kits and field services. Kits allow for the upgrade
of BFVs to incorporate advancements in technology such as the ODS enhancements
discussed above. The Company also deploys experts to provide on-site training
and advice to customers, complete maintenance and repairs, and assess the
necessity of
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<PAGE>
replacement parts. GSD is also under contract with the U.S. Army's Simulation,
Training and Instrumentation Command for the development and demonstration of a
prototype multi-purpose simulator/trainer for the BFV family of vehicles.
M109 SELF-PROPELLED HOWITZER ("M109"). The M109 has been the most
widely-used field artillery vehicle for the U.S. military and certain foreign
governments since it was first produced by the Company in 1974. The M109 is
widely recognized for its ability to deliver rapid and high volume artillery
support and maximize survivability through mobility. The latest generation of
the M109, the M109A6 Paladin (described below), is the most advanced M109
upgrade fielded today. The Company also designs and produces unique
configurations of the M109 for, and offers M109 servicing and training to,
various foreign governments including Austria, Egypt, Greece, Korea and Taiwan,
with a number of funded contracts in place.
M992 FIELD ARTILLERY AMMUNITION SUPPLY VEHICLE ("FAASV"). The single
mission of the FAASV, the battlefield partner of the M109, is to safely
transport ammunition, supplies and personnel to howitzer artillery vehicles on
the battlefield during both firing and non-firing conditions. By utilizing
synchronized and semi-automated resupply strategies and mechanisms to carry the
M109 ammunition, the FAASV enables the howitzer to remain in the field longer
and thereby increase its lethality. The FAASV accommodates all standard 155mm
rounds and its heavily armored chassis provides ballistic protection to its
munition supply crew. The Company is currently operating under a full rate
production ("FRP") contract for 96 vehicles scheduled to be delivered in 1998
and 1999.
M88 ARMORED RECOVERY VEHICLE ("M88"). The M88 currently has an installed
base of more than 3,240 vehicles, including more than 70 M88A2 ("Hercules")
models, throughout the world. The M88 performs towing, lifting and pulling tasks
in the recovery of impaired tanks or in basic tank maintenance. With the
deployment at the beginning of this decade of the heavier M1 tanks by the U.S.
Army, in 1991 the Company began the development effort for the Hercules upgrade.
The Hercules is the only recovery vehicle worldwide that can safely recover
70-ton tanks (for example, the M1A1/A2), and has established itself as a
critical element in the upkeep of a modern tank force. The U.S. Army has been
awarding annual contracts for M88 upgrades over the past several years, and in
June 1997, the U.S. Army awarded the Company a contract to upgrade 24 of its
M88s to the Hercules configuration.
M113 ARMORED PERSONNEL CARRIER ("M113"). The M113 has been the main troop
transport vehicle used by the U.S. military and allied governments throughout
the world, with more than 80,000 units delivered since initial production in
1960. The Company has produced various M113 models in cooperation with U.S.
allies, including production of various configurations of the Armored Infantry
Fighting Vehicle, historically produced in Europe and currently by FNSS-Turkey.
The U.S. Army, which received its last delivery of new M113s from the Company in
1992, continues to upgrade its M113s to the latest A3 configuration. The
installed base of M113s includes a number of derivative vehicles worldwide, and
the Company is currently engaged in M113 upgrade programs in several countries
around the world. This upgrade work currently occurs in the Company's Steel
Products Division (described below), and continues to be a significant source of
current and potential future revenues for the Company because of the large
number of M113s currently in existence. Management expects the U.S. Army to
modernize a portion of its M113 fleet to the A3 configuration over the next
several years, and believes the National Guard may also implement an M113
modernization program.
M9 ARMORED COMBAT EARTHMOVER ("M9 ACE"). The M9 ACE is an 18-ton,
fully-tracked, aluminum armored vehicle, used on the battlefield to bulldoze,
rough grade, excavate, haul and scrape. With a crew of one, the multi-purpose M9
ACE can attain road speeds of up to 35 miles per hour, and unlike a standard
bulldozer, requires no transport vehicle. The M9 ACE can serve as the prime
mover of vehicles weighing up to 39,000 pounds and can clear debris left in the
wake of battles or civil disasters. The Company recently entered into an FRP
contract for 51 vehicles, to be delivered through 1999, with a customer option
for 51 additional vehicles.
LINEAR OBSTACLE BREACHER ("GRIZZLY"). First delivered in 1995, the Grizzly
is a 70-ton vehicle designed to clear mines and other obstacles. Mounted on a
modified M1 chassis, the Grizzly features a mine-clearing blade
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<PAGE>
outfitted with complex software that provides automatic depth control. It is
also equipped with a power-driven arm for digging, grappling and lifting, as
well as external cameras for vision and remote operation, with full electronic
integration. Management believes that Grizzly will be a critical component of
modern battle strategy because of the prevalent use of complex obstacles such as
land mines and other low-cost defense mechanisms by hostile nations. The Company
recently completed its $70.0 million DemVal phase for the U.S. government, and
was awarded the $129.0 million EMD phase through 2001.
OTHER GSD PROGRAMS. The M8 Armored Gun System ("AGS") is a highly
maneuverable, 25-ton light tank capable of being air dropped from a C130
aircraft. The AGS is outfitted with an automatically loaded, lightweight 105mm
cannon that fires all NATO standard and enhanced ammunition at the rate of 12
rounds per minute. Due to cuts in defense funding, the U.S. government has
canceled its AGS program; however, the Company is pursuing opportunities for
sale of the AGS internationally. The LVTP7 Amphibious Assault Vehicle ("LVTP7")
has been the U.S. Marine Corps' amphibious assault vehicle for over two decades
with more than 1,500 vehicles delivered. The Company is currently producing 57
kits for delivery to Samsung Aerospace for final assembly in Korea. The Company
believes that there may also be future upgrade opportunities for the United
States Marine Corps' fleet of LVTP7s.
PALADIN PRODUCTION DIVISION ("PPD"). PPD manufactures the M109A6 Paladin
vehicle in partnership with the Letterkenny Army Depot, where it has located its
production facility. The A6 Paladin is the latest and most advanced howitzer in
the U.S. Army inventory and is steadily replacing prior generations of M109s.
With its increased firepower and use of computerized navigation and gun
positioning, the A6 Paladin upgrade provides a comprehensive and integrated
package with modern battlefield capabilities.
In addition to a multi-year contract for 713 upgrades (448 of which have
been completed through August 1997), PPD has recently negotiated a contract with
the U.S. Army for the upgrade of another 37 vehicles through May 1999 bringing
the total up to 750, and the U.S. Army has exercised an option for 72 additional
vehicles which will extend the delivery period to May 2000. Management also
believes that the Company has opportunities for international Paladin sales.
PPD conducts the Paladin program through an innovative partnership with the
U.S. Army Depot at Letterkenny, Pennsylvania. The Company's facility provides
component parts for U.S. Army depot work, integrates sub-systems and components,
including new GSD-fabricated turrets, and provides systems technical support for
the U.S. Army artillery crews.
The Company's experience in the manufacture of M109s gives the Company the
background necessary to pursue opportunities in the upgrade of M109s to the A6
configuration, the manufacture of follow-on and upgrade kits, and the provision
of spare parts and training. The Company is now pursuing a Fleet Management
initiative, which is an integrated program providing engineering support, spare
parts supply, inventory management and distribution and training and field
maintenance support for the U.S. Army's fleet of M109 vehicles.
STEEL PRODUCTS DIVISION ("SPD"). SPD's primary businesses are the
production of track and suspension components for armored vehicles, and
performing major upgrades of M113 armored vehicles for the U.S. Army. SPD is the
largest producer of track and suspension components in the U.S., and has been
designated by the U.S. Army as the design agent for nearly all track in the U.S.
inventory. Approximately one third of SPD's track products are sold to
international customers.
The M113 upgrade business involves the upgrade of existing M113 vehicles
into the A3 configuration, and involves a variety of manufacturing and
engineering operations. The Company entered into a partnering arrangement in
1997 with the Anniston Army Depot, which will perform any necessary upgrades of
the M113 awarded by the U.S. Army and the National Guard, as described above.
SPD's conversion technology, including a complete technical data and tooling
package, can also be applied to M113 fleets elsewhere in the world.
ARMAMENT SYSTEMS DIVISION ("ASD"). ASD provides integrated weapon delivery
system products and services to the armed forces of the United States and
military customers worldwide. The division provides armament design,
development, production, and support as well as advanced technology research and
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development. Specifically, ASD designs, develops and manufactures advanced guns
and missile-launching systems for the U.S. Navy, and is the prime contractor and
systems integrator in the development of the U.S. Army's next generation
self-propelled howitzer, the Crusader. Additionally, ASD provides complete
overhaul, repair and maintenance of naval ordnance.
CRUSADER. The Crusader is an integrated and automated two-vehicle system
consisting of a 155-mm, self-propelled howitzer and a resupply vehicle. The
Company is the sole-source, prime contractor and systems integrator responsible
for the design and development of the Crusader, including delivery of two
prototype systems, under a $1.1 billion DemVal contract, which is presently
scheduled to be completed in 2001. The Company expects to become the
sole-source, prime contractor for the $1.0 billion EMD phase presently scheduled
to begin in 2000. The Company would then seek to become the sole-source prime
contractor for the $1.3 billion LRIP phase presently scheduled to begin in 2004.
Management believes the expertise acquired through the DemVal and EMD phases
would give the Company a significant advantage in securing a contract for the
LRIP and ultimately the FRP phase if necessary funding is appropriated and the
U.S. Army continues to proceed with the Crusader.
The Crusader is designed to achieve the U.S. Army's stated objectives for
the next-generation howitzer. These specifications include: (i) increased
mobility; (ii) increased lethality; (iii) improved survivability; and (iv)
better sustainability. The Crusader is being designed to be the first howitzer
capable of keeping pace with the maneuver strike force, including M1 tanks and
BFVs. The Crusader is also being designed to provide substantially greater
responsiveness and high rates of fire through long-range and accurate firings
enabled by the vehicle's advanced autoloading technology and actively-cooled
cannon, thereby giving it a multiple round simultaneous impact capability. This
firing capability is being designed to allow commanders to extend and dominate
the battle space and set a higher tempo for land operations. The Crusader is
being designed to enhance survivability and allow the vehicle to be run by a
three person crew compared to the four person crew required for the M109. The
Crusader is being developed with an embedded digitized command, control,
communications and intelligence for enhanced situational awareness, and for new
capabilities for battlefield movement and resupply.
As prime contractor, it is the Company's role to integrate all Crusader
modules, manage the entire program and develop key components, including the
advanced gun system. Gun system and autoloader technologies have historically
been a core capability of ASD, developed through its long history with Naval gun
systems.
NAVAL SYSTEMS. The U.S. Navy is implementing a variety of programs to
increase its ability to support land forces, with pronounced changes expected to
occur in the surface fleet. The U.S. Navy plans for additional missile launcher
firepower in its surface combatant ship building program for the 21st century
("SC 21"). The identity of contractors and scope of terms for any production of
launchers for the SC 21 program have not been determined, although significant
competition will exist for any SC 21 contract. In addition, the U.S. Navy plans
to bolster surface land attack capability with modifications to existing ships.
The U.S. Navy's focus on land attack warfare is spurring the development of new
and modified weapon systems, including (i) a modified naval gun system, the Mk45
Mod4; (ii) a new 155mm gun system; (iii) integrating land attack missiles into
VLS, requiring new cannisters and missile integration; and (iv) new or modified
launching systems. The Company expects that the design, engineering and
production of these systems will be the primary focus of naval ordnance
manufacturers for the foreseeable future.
MK45 NAVAL GUN SYSTEM ("MK45"). The Mk45 is the U.S. Navy's sole 5-inch gun
system, with more than 150 systems installed. The U.S. Navy installs one 5-inch
gun for every Arleigh Burke DDG 51 ("DDG 51") class destroyer built. The U.S.
Navy has indicated that, over the next five years, it expects to require
approximately 15 new Mk45s to be installed on newly constructed DDG 51
destroyers. The U.S. Navy recently awarded the Company a sole-source, prime
development contract to upgrade Mk45 guns from Mod2 to Mod4 configuration, which
extends the Mk45's range and improves surface fire support capability.
Furthermore, the U.S. government recommends that foreign allied navies have
compatible armaments, and has recently increased its support for the Company's
efforts to place Mk45s on foreign ships. Management believes the improvements
included in the Mod4 configuration will make the Mk45
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more competitive internationally. The Company is also the lead agent for the gun
weapons systems integration for the Naval Surface Fire Support program, with
responsibility for the development and integration of a new naval gun system
which includes managing the interfaces of other components with the gun weapons
system.
MK41 VERTICAL LAUNCHING SYSTEM ("VLS"). The VLS is the U.S. Navy's primary
missile launcher on surface combatants, firing the anti-air Standard Missile,
strike mission-related Tomahawk missile, anti-submarine VLASROC, and ship
self-defense Sea Sparrow missile. The VLS is manufactured under a work-split
agreement (scheduled to expire in 1999) with Lockheed Martin, which is the prime
contractor of the VLS launcher. The Company is the designated mechanical
subcontractor and, separately from the work-split agreement, is the sole-source,
prime provider of VLS canisters, which hold a variety of missiles. The U.S. Navy
places the VLS, like the Mk45, on all DDG 51s, each of which contains twelve
8-cell VLS modules. Management believes the foreign market is likely to require
a significant number of VLS systems in the future, representing a potential
growth opportunity for the Company.
OVERHAUL, REPAIR, MAINTENANCE AND OTHER. The Company, the U.S. Navy and the
local government recently privatized a significant portion of the Naval Ordnance
Station, Louisville ("United Defense Louisville"), where the Company previously
had no operations. United Defense Louisville provides service for the Mk45 and
smaller caliber gun mounts, guided missile launching systems, surface vessel
torpedo tubes, gun fire control systems, target and decoy launchers and other
U.S. Navy equipment. United Defense Louisville's operations remain primarily
keyed to the engineering, repair, upgrade, maintenance and logistic support of
U.S. Navy shipboard guns and related ordnance systems, although at a reduced
scale compared to the U.S. Navy's operation of United Defense Louisville prior
to privatization. United Defense Louisville services are supported by the
Company's broad-based naval ordnance design, production and overhaul experience.
INTERNATIONAL DIVISION. The International Division specializes in the
operation of joint ventures and management of selected co-production programs in
countries throughout the world. The International Division does not represent
all of the international export opportunities and international sales of the
Company, many of which are in other divisions; the International Division
includes only joint ventures and certain co-production programs requiring
specialized international management expertise. Current operations include joint
ventures in Turkey and Saudi Arabia, in each of which the Company owns a 51%
interest, and co-production programs in Japan, Korea and Pakistan. The
International Division also has co-production, upgrade and rebuild programs
under development for several other countries.
The Company's objective in setting up a joint venture or co-production
program is to provide the host country with an indigenous production capability
that will utilize the Company's developed programs, adapted to local
requirements. The International Division uses project financing, letters of
credit and offsets to structure programs that meet unique customer needs.
FMC-ARABIA. The joint venture was formed in 1994 to pursue defense
contracts within the Kingdom of Saudi Arabia. The Company's 51% interest in the
joint venture is a beneficial interest, but record ownership has remained with
FMC for administrative convenience. The initial contract was to provide
logistics support and training to the Royal Saudi Land Forces Infantry Corps for
BFVs previously purchased from the Company. This contract is scheduled to be
complete in the first quarter of 1998. FMC-Arabia has submitted a 3-year
contract proposal for follow-on with substantially the same scope as the
existing contract. In early 1997, FMC-Arabia was awarded a 3-year contract to
commence the modernization of 523 of Saudi Arabia's M113s (out of a fleet of
approximately 1700 vehicles) to an A3 configuration and to design and construct
a facility to perform the work, with the first vehicle deliveries to be
scheduled for mid-1998. Both the future logistics support contract and the M113
modernization contract are subject to funding authorization from Saudi Arabia
and there can be no assurance that such authorization will be obtained. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Joint Ventures--FMC-Arabia."
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FNSS-TURKEY. The joint venture was formed in 1987 to pursue armored combat
vehicle sales to the Turkish Army. Four types of armored vehicles using a common
chassis are included in the contract: personnel carrier, fighting vehicle, tow
missile vehicle and mortar vehicle. The initial production contract began in
August 1989 and required FNSS-Turkey to deliver 1,698 vehicles, of which
approximately 1,444 have been delivered to date. At the request of the Turkish
government, the contract was modified in 1996 to extend the production and the
delivery timetable to August 1999; however, due to problems with Turkish
government furnished equipment, this completion date has been further extended.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Joint Ventures-- FNSS-Turkey."
OTHER PROGRAMS. The Company is currently involved with co-production
programs in Japan, Korea and Pakistan. Current co-production programs include
the M113, MLRS carrier, LVTP7, and contractor logistics support. Under these
arrangements, the Company provides training, technology and production kits to
these countries until a domestic production capability is established, after
which the Company continues to license its technology to the local manufacturer.
RESEARCH AND DEVELOPMENT AND ENGINEERING CAPABILITIES
The Company's ability to compete for defense contracts depends to a large
extent on the effectiveness and innovativeness of its research and development
programs. Among the DoD's procurement requirements is the research and
development of new technologies for application to new weapon systems and
upgrades.
The Company's engineering capability has been a critical component of its
success. The Company's experience in simulation, systems integration, armor,
mobility, survivability and armaments, as well as its software development,
engineering and electronics capabilities have allowed the Company to stay at the
forefront of the development, manufacture and upgrade of its products.
While most research and development is done at each of the Company's
divisions, the Company also conducts some of its more sophisticated research and
development at its Corporate Technology Center located in Santa Clara,
California. CTC, which employs 45 engineering and research professionals (many
of whom hold advanced degrees), provides state-of-the-art modeling simulation
and testing to support UDLP's design, integration and production efforts.
The Company has a number of systems in the early stages of development,
which could provide long-term potential opportunities subject to successful
development and testing, Congressional spending authorization and selection of
the Company's products over those developed by competitors. The Vertical Gun for
Advanced Ships ("VGAS") is the U.S. Navy's next-generation gun system and
includes two 155mm barrels with a large number of projectiles in an automated
magazine. The VGAS could replace or augment the Mk45 on future surface
combatants. The Concentric Canister Launcher is a candidate for the U.S. Navy's
next-generation launch system and could replace the current VLS. It has an
integral gas management system design in which each cell is an individual
launcher. The Composite Armored Vehicle integrates composite structures and
lightweight armors into a fully-operational, advanced technology demonstration
vehicle. The Company successfully completed this competitively awarded
demonstration vehicle contract in 1997. The Cocoon Launcher is an on-deck system
designed to launch the ship self-defense Evolved Sea Sparrow Missile. The
Company has also invested in, and has received development contracts for,
Electromagnetic and Electrothermal Chemical technologies related to advanced gun
technologies, electric drive technologies and various advanced survivability
technologies, including active defense.
GOVERNMENT CONTRACTS; REGULATORY MATTERS
Management expects that for the foreseeable future approximately 90% of the
Company's sales will continue to result from contracts with the U.S. government,
either directly, through prime contractors or pursuant to the U.S. government's
Foreign Military Sales program. The Company's U.S. government business is
performed under cost-plus contracts (cost-plus-fixed-fee,
cost-plus-incentive-fee, or cost-plus-award-fee) and under fixed-price contracts
(firm fixed-price, fixed-price incentive, or fixed-price-level-of-effort).
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Cost-plus-fixed-fee contracts provide for reimbursement of costs, to the
extent that such costs are allowable, and the payment of a fixed "fee", which is
essentially the profit negotiated between the contractor and the U.S.
government. Cost-plus-incentive-fee and cost-plus-award-fee contracts provide
for increases or decreases in the contract fee, within specified limits, based
upon actual results as compared to contractual targets for such factors as cost,
quality, schedule and performance. Cost-plus contracts accounted for more than
one-third of the Company's business in 1996.
Under firm fixed-price contracts, the Company agrees to perform certain work
for a fixed price and, accordingly, realizes all the benefit or detriment
resulting from decreases or increases in the costs of performing the contract.
Fixed-price incentive contracts are fixed-price contracts providing for
adjustment of profit and establishment of final contract prices by a formula
based on the relationship which final costs bear to target cost.
Fixed-price-level-of-effort contracts are generally structured with a fixed
price per labor hour subject to the customer's labor hour needs up to a contract
cap. Fixed-price contracts accounted for approximately two-thirds of the
Company's business in 1996. Almost all of the Company's fixed-price contracts in
1996 were firm fixed-price contracts.
Under U.S. government regulations, certain costs, including certain
financing costs, portions of research and development costs, lobbying expenses,
certain types of legal expenses and certain marketing expenses related to the
preparation of bids and proposals and FMS sales, are not allowable. The U.S.
government also regulates the methods under which costs are allocated to U.S.
government contracts.
U.S. government contracts are, by their terms, subject to termination by the
U.S. government either for its convenience or default by the contractor.
Cost-plus contracts provide that, upon termination, the contractor is entitled
to reimbursement of its allowable costs, and if the termination is for
convenience, a total fee proportionate to the percentage of the work completed
under the contract. Fixed-price contracts provide for payment upon termination
for items delivered to and accepted by the U.S. government, and, if the
termination is for convenience, for payment of fair compensation of work
performed plus the costs of settling and paying claims by terminated
subcontractors, other settlement expenses, and a reasonable profit on the costs
incurred. If a contract termination is for default, however, (i) the contractor
is paid an amount agreed upon for completed and partially completed products and
services accepted by the U.S. government; (ii) the U.S. government is not liable
for the contractor's costs with respect to unaccepted items, and is entitled to
repayment of advance payments and progress payments, if any, related to the
terminated portion of the contract; and (iii) the contractor may be liable for
excess costs incurred by the U.S. government in procuring undelivered items from
another source.
In addition to the right of the U.S. government to terminate, U.S.
government contracts are conditioned upon the continuing availability of
Congressional appropriations. Congress usually appropriates funds for a given
program on a September 30 fiscal year basis, even though contract performance
may take many years. Consequently, at the outset of a major program, the
contract is usually partially funded, and additional monies are normally
committed to the contract by the procuring agency only as appropriations are
made by Congress for future fiscal years.
Generally, the Company's DemVal, EMD and LRIP phase programs are performed
under cost-plus contracts, while the FRP phase is awarded on a firm fixed-price
basis.
There are two principal contracting methods used to export defense
equipment: Direct Foreign Sales and Foreign Military Sales. In a DFS, the
contractor sells directly to the foreign country and assumes all risks in the
transaction. In an FMS sale, the sale is funded for, contracted by and made to
the U.S. government which in turn sells the product to the foreign country.
Licenses are required from U.S. government agencies for DFS exports from the
U.S. of nearly all of the Company's products. Certain of the Company's products
may not be exported to certain countries.
In common with other companies which derive a substantial portion of their
sales from contracts with the U.S. government for defense-related products, the
Company is subject to business risks, including changes in governmental
appropriations, national defense policies or regulations, and availability of
funds. Any of these factors could materially adversely affect the Company's
business with the U.S. government in the future.
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COMPETITION
With respect to certain products and programs, the Company competes with one
or more companies, most of which are multinational firms with substantial
resources and capital. The Company from time to time faces competition from a
number of competitors, both domestic and foreign, and in the tracked, armored
combat vehicle market, the Company encounters General Dynamics Corporation most
frequently. The Company's ability to compete for defense contracts depends to a
large extent on the effectiveness and innovativeness of its research and
development programs, its ability to offer better program performance than its
competitors at a lower cost to its government customers, and its readiness in
facilities, equipment and personnel to undertake the programs for which it
competes. In some instances, programs are sole-sourced by the U.S. government to
a single supplier, and in other cases involve a prime contractor and multiple
suppliers. In cases where the Company is the sole-source provider, there may be
other suppliers who have the capability to compete for the programs involved,
but they can only enter or reenter the market if the U.S. government should
choose to reopen the particular program to competition.
The Company's customers, particularly depots, often compete for after-market
business, such as Steel Products Division upgrade work and various overhaul and
servicing work performed by the Company.
Management believes that the Company will continue to be able to compete
successfully based upon the quality, technological advancement and cost
competitiveness of its products and services. However, all defense contractors
are competing for a limited amount of budgeted funding.
MAJOR CUSTOMERS
The Company's sales are predominantly derived from contracts with agencies
of the U.S. government. The various government customers exercise largely
independent purchasing decisions. Sales to the U.S. government generally are not
regarded as constituting sales to one customer. Instead, each contracting entity
(including multiple contracting entities within the U.S. Army and U.S. Navy) is
considered to be a separate customer. The Company's largest programs,
representing approximately 30%, 13% and 10% of 1996 revenues were the BFV
programs (including derivatives and represented by multiple contracts through
multiple entities within the U.S. Army, with no such contract representing more
than 13% of 1996 revenues), the Crusader program and the Paladin program,
respectively.
BACKLOG
As of November 30, 1997 and November 30, 1996, the Company's funded backlog
was approximately $1.6 billion. Funded backlog does not include the awarded but
unfunded portion of total contract values. This backlog provides management with
a useful tool to project sales and plan its business on an on-going basis;
however, no assurance can be given that the Company's backlog will become
revenues in any particular period or at all. A substantial majority of this
backlog is expected to be earned as revenues by the end of 1998.
<TABLE>
<CAPTION>
FUNDED BACKLOG AS OF NOVEMBER 30,
----------------------------------------
<S> <C> <C>
1997 1996
------------------- -------------------
<CAPTION>
($ IN MILLIONS)
<S> <C> <C>
Ground Systems Division............................ $ 817.4 $ 778.3
Armament Systems Division.......................... 488.4 438.5
Paladin Products Division.......................... 166.5 240.2
International Division............................. 93.0 124.1
Steel Products Division............................ 45.0 77.3
Headquarters, Elimination and Other................ (57.6) (79.7)
-------- --------
Total............................................ $ 1,552.7 $ 1,578.7
-------- --------
-------- --------
</TABLE>
INTELLECTUAL PROPERTY
Although the Company owns a number of patents and has filed applications for
additional patents, it does not believe that its operations depend upon its
patents. In addition, the Company's U.S. government contracts generally license
it to use patents owned by others. Similar provisions in the U.S. government
contracts awarded to other companies make it impossible for the Company to
prevent the use by other
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companies of its patents in most domestic work. Additionally, the Company owns
certain data rights in its products under certain of its government contracts.
The protection of data developed by the Company from use by other government
contractors is from time to time a source of negotiation between the Company and
the U.S. government, and the extent of the Company's data rights in any
particular product generally depends upon the degree to which that product was
developed by Company, rather than U.S. government funds. The Company routinely
enters into confidentiality and non-disclosure agreements with its employees to
protect its trade secrets.
EMPLOYEES
At November 30, 1997, the Company had approximately 5,626 employees and
approximately 280 contract workers (excluding employees of the foreign joint
ventures). Approximately 1,680 of these employees at five locations are
represented by six unions, including the Glass, Moulders, Pottery, Plastics and
Allied Workers (Anniston); the International Association of Machinists
(Louisville and San Jose); the United Automobile, Aerospace and Agricultural
Implement Workers (Minneapolis); the International Guards (Minneapolis); the
International Brotherhood of Teamsters (San Jose); and the United Steelworkers
(York). These contracts are scheduled to expire between February 1998 and April
2000. The Company considers its relations with its employees to be generally
good, and has not experienced a work stoppage since 1986.
PROPERTIES
The table below sets forth certain information with respect to the Company's
manufacturing facilities and properties.
<TABLE>
<CAPTION>
LOCATION LEASED/OWNED BUSINESS CONDUCTED(1) SQUARE FOOTAGE
- ---------------------------------------------- ------------------ -------------------------- -----------------
<S> <C> <C> <C>
Arlington, VA................................. Leased HQ 16,218
Anniston, AL.................................. Leased SPD 100,000
Anniston, AL.................................. Owned SPD 356,000
Aiken, SC..................................... Leased GSD 21,000
Aiken, SC..................................... Owned GSD 189,000
Aberdeen, SD.................................. Owned ASD 105,000
Chambersburg, PA.............................. Govt. Owned PPD 90,000
Fayette County, PA............................ Leased GSD 176,600
Fridley, MN................................... Govt. Owned ASD 1,712,240
Fridley, MN................................... Owned ASD 326,023
Louisville, KY................................ Leased ASD 1,047,800
Orlando, FL................................... Leased GSD 4,860
San Benito, CA................................ Leased GSD 1,218acres
San Jose, CA
1125 Coleman................................ Leased* GSD 675,600
1205 Coleman................................ Leased* CTC 119,000
1450 Coleman................................ Leased* GSD 36,600
340 Brokaw.................................. Leased* GSD 4,400
328 Brokaw.................................. Leased* GSD 138,200
2830 De La Cruz............................. Leased GSD 86,785
2890 De La Cruz............................. Leased GSD 68,708
215 Devcon.................................. Leased GSD 48,700
150 Brokaw.................................. Leased GSD 48,666
York County, PA............................... Owned GSD 946,901
</TABLE>
- ------------------------
* Indicates properties at which FMC is the lessor.
(1) Indicates whether property is used for corporate headquarters ("HQ") or used
by the Armament Systems Division, Ground Systems Division, Paladin
Production Division, Steel Products Division or Corporate Technology Center.
The U.S. Navy is currently in the process of divesting its Fridley,
Minnesota facility that has historically been provided rent free to the Company
for production of systems and spares for the U.S. government. The divestiture
requires that the facility be available for use by the Company for government
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production through 2000. The Company has the right of first refusal in the sale
of the facility and the U.S. government has made an offer to sell its portion of
the Fridley facility to the Company and negotiations relating to this offer have
commenced. Depending on the outcome of these negotiations, the Company's
historical occupancy costs associated with its operations at this facility and
any lease obligations associated with operating after a sale of the facility may
be affected. The Company is considering alternatives to a purchase including the
sale of its portion of the facility with a leaseback of the portion it occupies.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The Company's manufacturing operations require raw materials, primarily
aluminum and steel, which are purchased in the open market and are normally
available from a number of suppliers. The Company also purchases a variety of
electronic and mechanical components for which the Company has multiple
commercial sources. The Company has not experienced any significant delays in
obtaining timely deliveries of essential raw materials.
ENVIRONMENTAL MATTERS
The Company's operations are subject to Environmental Laws. The Company
continually assesses its compliance status and other obligations with respect to
Environmental Laws and believes that its operations currently are in substantial
compliance with Environmental Laws. Based on historical experience, the Company
does not believe that its obligations under Environmental Laws will have a
material adverse effect on the Company's financial condition, results of
operation or debt service capability. There can be no assurance, however, that
the Company will not incur material costs in the future as a result of changes
in Environmental Laws or changes in the Company's obligations under
Environmental Laws.
Pursuant to the terms of the Acquisition Agreement, the Company has retained
responsibility for environmental compliance at its facilities and may also incur
significant remediation costs, portions of which are reimbursable by the U.S.
government and the Sellers, associated with historical releases of hazardous
substances and wastes at the facilities. Based on certain U.S. government
contracting statutes and regulations, the Company expects that a significant
portion of such environmental compliance and remediation costs will be Allowable
Costs. In addition, under the environmental indemnification provisions of the
Acquisition Agreement, the Sellers will retain responsibility for 75% of certain
remediation costs relating to periods prior to the Closing Date that are
Non-Allowable Costs. Based on historical experience, the Company expects that a
significant percentage of the total remediation and compliance costs associated
with its facilities will continue to be Allowable Costs. There can be no
assurance, however, that the Sellers will reimburse the Company promptly or at
all for future environmental costs or that the U.S. government will allow as
Allowable Costs in the Company's contracts all or a significant portion of such
future environmental costs. In such an event, the Company's financial condition,
results of operation and debt service capability could be materially and
adversely affected. For a more detailed discussion of the environmental
indemnification provisions of the Acquisition Agreement, see "The Acquisition."
Following is a summary of the principal environmental issues associated with
the Company's facilities:
SAN JOSE FACILITIES. The Sellers have conducted and expect to conduct in
the future soil and groundwater investigation and remediation at the San Jose
facilities to address historical releases of solvents and other substances. The
California Regional Water Quality Control Board has issued administrative orders
that govern the investigation and remediation. The Company and the California
Department of Toxic Substances Control ("DTSC") has issued an order pursuant to
the Resource Conservation and Recovery Act ("RCRA"), under which investigation
and remediation are under way at a second section of the property. The Company
submitted a RCRA Facility Investigation report to the DTSC in December 1996,
which was approved in August 1997, and the Company expects that FMC will need to
conduct significant additional investigative and remedial work at the property.
The Acquisition Agreement provides that the Sellers will be responsible for 100%
of all uninsured remediation costs incurred at the San Jose facilities but will
be entitled to reimbursement from the Company for 78% of such costs, subject to
certain limitations including a reimbursement ceiling of $16.7 million. The
Company, in turn, expects to
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be able to recover such costs from the U.S. government pursuant to the terms of
a settlement agreement among FMC, the Company and DoD (the "Environmental
Advance Agreement") under the terms of which 78% of remediation costs and 100%
of compliance costs incurred by the Company at the San Jose facilities will be
allowable as contract costs in the Company's contracts.
FRIDLEY, YORK AND ANNISTON FACILITIES. At the Company's York and Anniston
facilities, the Company has investigated soil and groundwater contamination, and
in some cases, has undertaken remediation. On the portion of the Fridley
facility that is owned by the Company, the Company is conducting soil and
groundwater remediation to address solvent contamination. Additional
investigative and remedial activities have been conducted by the U.S. Navy on
certain Navy-owned portions of the Fridley facility. At the Company's York
facility, soil and groundwater investigation and remediation are underway,
including efforts related to contamination caused by a former on-site wastewater
treatment plant. The groundwater remediation at the Fridley and York facilities
focuses on preventing off-site migration of contaminants. The Anniston facility
is the site of century-old forge and foundry operations, and soil and
groundwater sampling has detected elevated levels of petroleum hydrocarbons at
the facility. The Company is evaluating whether additional investigative or
remedial activity will be required at this facility. The majority of costs
associated with current remediation efforts at these facilities are considered
to be Allowable Costs. In addition, under the Environmental Indemnity, the
Sellers will reimburse the Company for 75% of Non-Allowable Costs associated
with environmental remediation or noncompliance at these facilities where such
Non-Allowable Costs arise out of pre-closing operations, so long as the Sellers
are notified of the indemnified matters within three years of the Closing Date.
LOUISVILLE FACILITY. The Louisville facility, which is among the facilities
that the Company leases from the U.S. government, has been the site of
manufacturing operations since the 1940s and is believed to have soil and
groundwater contamination from such historical operations. The Company is the
express beneficiary of an indemnification provision that provides that the U.S.
government is responsible for all remediation costs incurred with respect to the
Louisville facility other than those related to the Company's occupancy of the
facility, and the provision creates a rebuttable presumption that environmental
contamination discovered at the facility is not related to the Company's
occupancy.
CERCLA OBLIGATIONS. The Company is subject to liability under the
Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA")
and similar state statutes for investigation and remediation of environmental
contamination of off-site locations at which it has arranged for the disposal of
hazardous substances. The Company has been notified that it is a potentially
responsible party in certain actions brought under CERCLA or similar state
statues and is attempting to resolve these matters. The Company has been named a
potentially responsible party (a "PRP") under CERCLA at four locations involving
its Fridley facility. The first location is in Fridley, Minnesota. This facility
is jointly owned by the UDLP and the U.S. Navy. Remediation is currently
underway to reduce groundwater contamination, which could extend for several
decades and to remediate an on-site landfill. The Company currently estimates
the cost of remediation at $300,000 per year for these projects, assuming no new
remediation efforts are required. The U.S. Navy is also in the process of
installing a treatment plant for the plant's storm sewer, which should be
completed by 1998 and the Company is providing on-site technical support for
this effort. The other sites at which the Company or a subsidiary has been named
a PRP are three landfills to which UDLP sent waste in the past. Each of these
sites has been issued a Letter of Compliance under the State of Minnesota
Landfill Cleanup Program and UDLP is currently being reimbursed a portion of its
expenditure from the clean-up of these landfills. Based on historical
experience, management does not expect that liability for CERCLA costs, either
individually or in the aggregate, will have a material adverse effect on the
Company's financial condition, results of operation or debt service capability.
LEGAL PROCEEDINGS
ALLIANT TECHSYSTEMS CLAIM. Alliant Techsystems Inc. ("Alliant Tech"), a
subcontractor to UDLP in connection with UDLP's Paladin howitzer prime contract,
has asserted a claim against UDLP alleging wrongful termination of that
subcontract by UDLP. UDLP maintains that it terminated the Alliant Tech
subcontract work in accordance with its termination rights under the applicable
subcontract agreement and
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pursuant to a corresponding U.S. Army termination for convenience of the portion
of UDLP's prime contract that covered the pertinent components supplied by
Alliant Tech. In a letter dated September 19, 1996, Alliant Tech asserted its
intention to pursue this claim against UDLP for approximately $17 million in
damages. In October 1997, UDLP and Alliant Tech settled Alliant Tech's claim for
certain costs under the termination for convenience provisions of the
subcontract. Alliant retained the right to pursue breach of contract claims
against UDLP but no litigation has commenced. Management believes that UDLP has
a valid defense to any such claim. However, no assurances can be given that UDLP
will be successful in its defense of this claim, in the event that the claim
were further pursued by Alliant.
LITIGATION RETAINED BY SELLERS. UDLP is subject to, or involved in, certain
litigation and governmental investigations (the "Retained Litigation Matters")
for which the Sellers have retained responsibility and agreed to indemnify UDLP
and the Company for any liabilities relating to these proceedings. See "The
Acquisition." The Retained Litigation Matters include, among other proceedings,
a "QUI TAM" action asserted against FMC, the general partner of UDLP prior to
the Acquisition and the former owner of a portion of UDLP's business, which
relates to the conduct of the Ground Systems Division of UDLP prior to the
formation of UDLP in 1994.
The QUI TAM action was filed under seal in 1986 in the U.S. District Court
for the Northern District of California by Henry Boisvert, a former employee of
FMC (the "relator"), and is captioned UNITED STATES EX REL. HENRY J. BOISVERT V.
FMC. The complaint alleges that the BFV failed to meet certain specifications
contained in the BFV program contract and alleges the existence of certain other
material and design defects. Trial of the case commenced on December 15, 1997
and is expected to continue into January 1998.
Management does not believe that the Retained Litigation Matters will have a
material adverse effect upon the financial condition or results of operations of
UDLP because Sellers have agreed to indemnify UDLP and the Company for all
losses and liabilities directly attributable to the Retained Litigation Matters.
However, no assurances can be made that the Sellers will perform their
indemnification obligations if these matters are adversely determined or that
such adverse determination would not otherwise be disruptive to the Company's
business.
OTHER MATTERS. UDLP, in its ordinary course of business, is party to
various other legal proceedings, some of which are covered by insurance.
Management believes these these are routine in nature and incidental to its
operations. Management believes that the outcome of such proceedings to which
UDLP currently is a party will not have material adverse effects upon its
operations, financial condition or liquidity.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The following table sets forth certain information with respect to the
members of the Board of Directors and the executive officers of the Company.
Executive officers of the Company are chosen by the Board of Directors and serve
at its discretion. The Board of Directors does not maintain any committees.
<TABLE>
<CAPTION>
YEARS WITH
NAME(1) POSITION AGE COMPANY(2)
- ------------------------------ ------------------------------------------------------------- --- -----------------
<S> <C> <C> <C>
William E. Conway, Jr......... Chairman 48 --
Allan M. Holt................. Director 45 --
Peter J. Clare................ Director 32 --
Frank C. Carlucci............. Director 67 --
J.H. Binford Peay, III........ Director 57 --
Thomas W. Rabaut.............. President, Chief Executive Officer, Director 49 20
David V. Kolovat.............. Vice President, General Counsel and Secretary 53 9
Francis Raborn................ Director, Vice President and Chief Financial Officer 54 20
Arthur L. Roberts............. Vice President, General Manager--International Division 57 30
Frederick M. Strader.......... Vice President, General Manager--Armament Systems Division 44 17
Dennis A. Wagner, III......... Vice President, Business Development and Marketing 47 16
Peter C. Woglom............... Vice President, General Manager--Ground Systems Division 52 24
</TABLE>
- ------------------------
(1) Prior to the Acquisition, Allan M. Holt was the sole director and President
of the Company. Other directors and officers listed above were elected
following the Acquisition.
(2) Includes the Company and its predecessors.
WILLIAM E. CONWAY, JR. was elected as a Director of the Company in 1997. He
has been a Managing Director of The Carlyle Group, a Washington, D.C.-based
private merchant bank, since 1987. Mr. Conway was Senior Vice President and
Chief Financial Officer of MCI Communications Corporation from 1984 until 1987,
and was a Vice President and Treasurer of MCI from 1981 to 1984. Mr. Conway
presently serves on the Board of Directors of GTS Duratek, Inc., Howmet
International Inc., Nextel Communications, Inc., Tracor Inc. and several
privately held companies.
ALLAN M. HOLT was elected as a Director of the Company in 1997. He is a
Managing Director of The Carlyle Group, a Washington, D.C.-based private
merchant bank which he joined in 1991. Mr. Holt was previously with Avenir
Group, a private investment and advisory group, and from 1984 to 1987 was
Director of Planning and Budgets at MCI Communications Corporation, which he
joined in 1982. Mr. Holt currently serves on the boards of several privately
held companies.
PETER J. CLARE was elected as a Director of the Company in 1997. He is
currently a Principal with The Carlyle Group, a Washington, D.C.-based private
merchant bank which he joined in 1992. Mr. Clare was previously with First City
Capital, a private investment group. From 1987 to 1989, he worked in the mergers
and acquisitions and merchant banking groups at Prudential-Bache. Mr. Clare
currently serves on the boards of several privately held companies.
FRANK C. CARLUCCI was elected as a Director of the Company in 1997. He is
Chairman of The Carlyle Group, a Washington, D. C. based merchant bank. Prior to
joining The Carlyle Group in 1989, Mr.
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<PAGE>
Carlucci served as Secretary of Defense from 1987-1989. Previously he had served
as President Reagan's National Security Advisor in 1987. Mr. Carlucci serves on
the following corporate boards: Ashland Inc.; IRI International Corp.; Kaman
Corporation; Neurogen Corporation; Northern Telecom Limited; The Quaker Oats
Company; SunResorts, Ltd., N.V.; Texas Biotechnology Corporation; Pharmacia &
Upjohn, Inc.; Westinghouse Electric Corporation; and the Board of Trustees for
the RAND Corporation and the Advisory Committee of East New York Savings Bank.
J.H. BINFORD PEAY, III was elected as a Director of the Company in 1997.
General Peay is a career U.S. Army officer who attained the rank of four star
general and retired from the Army on October 1, 1997. He is the former
Commander-in-Chief of the U.S. Central Command (1994-1997) and also served as
Vice Chief of Staff, United States Army (1993-1994). Prior to serving as Vice
Chief of Staff, he was Deputy Chief of Staff for Operations and Plans,
Department of the Army and Senior Army Member, U.S. Military Committee, United
Nations in Washington, D. C. (1991-1993) and was Commanding General, 101st
Airborne Division (Air Assault) at Ft. Campbell, Kentucky (1989 to 1991).
THOMAS W. RABAUT has been President and Chief Executive Officer of UDLP
since its formation in 1994. Before joining UDLP, Mr. Rabaut worked at FMC since
1977 and held several executive positions including General Manager of FMC's
Steel Products Division from 1986 to 1988, Operations Director and then Vice
President and General Manager of FMC's Ground Systems Division from 1988 to
1993, and General Manager of FMC's Defense Systems Group, overseeing operations
in the U.S., Turkey, Pakistan, and Saudi Arabia for U.S. and allied armies,
navies, and marines from 1993 to 1994. In 1994, he was also elected Vice
President of FMC. Mr. Rabaut graduated from the U.S. Military Academy at West
Point and from the Harvard Business School.
DAVID V. KOLOVAT has been Vice President and General Counsel of UDLP since
its formation in 1994. He has also served as FMC's Associate General Counsel in
charge of defense business legal work from 1988 until consummation of the
Acquisition. Mr. Kolovat served as Vice President and General Counsel of
Premisys, Inc. from 1986 to 1988, during which Premisys was acquired by Pacific
Telesis Corp., and from 1984 to 1986 as Vice President and General Counsel of
Robot Defense Systems, Inc. Mr. Kolovat received his undergraduate degree from
the University of Iowa and his law degree from Stanford Law School.
FRANCIS RABORN was elected as a Director of the Company in 1997. He has been
Vice President and Chief Financial Officer of UDLP since its formation in 1994,
with responsibility for financial, contract, administrative and government
compliance matters. Mr. Raborn joined FMC in 1977 and held a variety of
financial and accounting positions including Controller of FMC's Defense Systems
Group from 1985 to 1993 and Controller of FMC's Special Products Group from 1979
to 1985. Mr. Raborn received a B.S. in Economics from the University of
Pennsylvania's Wharton School and an MBA from UCLA.
ARTHUR L. ROBERTS has been Vice President and General Manager--International
Division of UDLP since its formation in 1994. His responsibilities include
management of joint ventures in Turkey and Saudi Arabia, ongoing co-production
programs in Pakistan and Japan and development of new co-production programs in
Malaysia and Korea. Prior to joining UDLP, Mr. Roberts was General Manager of
FMC's Defense Systems International Division since 1993. Mr. Roberts held a
number of positions at FMC since 1967, including management of the Turkey joint
venture program from its initial proposal in 1988 through 1992. Mr. Roberts
holds a bachelor's degree in mechanical engineering from Yale University and an
MBA from Harvard Business School.
FREDERICK M. STRADER has been Vice President and General Manager--Armament
Systems Division of UDLP since May 1994. Prior to joining UDLP, Mr. Strader was
Division Manager of FMC's Agricultural Machinery Division from October 1992 to
May 1994, and Manager of FMC's Strategic Planning Group from September 1991 to
October 1992. Prior thereto, he held a number of operations, planning and
financial positions at the Steel Products Division of FMC. Mr. Strader received
his BA degree from Ripon College and his MBA degree from the Wharton School at
University of Pennsylvania.
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<PAGE>
DENNIS A. WAGNER, III has been Vice President, Business Development and
Marketing of UDLP since its formation in 1994 with responsibility for the
development and coordination of worldwide strategies for the design,
manufacture, and sale of combat vehicles, amphibious assault vehicles, and
armament systems for the U.S. and Allied armed forces. Mr. Wagner joined FMC's
Defense Systems Group in 1981 and held a number of marketing and management
positions, including Division General Manager of FMC's Steel Products Division
from 1989 to 1994 and Program Director for the M113 family of vehicles from 1987
to 1989. Mr. Wagner received a BS in General Engineering from the U.S. Military
Academy and an MBA in Finance from the University of Detroit.
PETER C. WOGLOM has been Vice President and General Manager--Ground Systems
Division of UDLP since 1994. Prior thereto, he held a number of line and
executive positions at FMC after joining FMC in 1973, including Vice President
and General Manager of FMC's Ground Systems Division from 1993 to 1994, and Vice
President and Director, Business Strategies and Initiatives for FMC's Defense
Systems Group from 1990 to 1993. Mr. Woglom received BSCE and Master of
Engineering degrees from Cornell University and an MBA from the University of
Pittsburgh.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
paid by the Company for services rendered for the year ended December 31, 1996
to the Chief Executive Officer and to each of the four other most highly
compensated executive officers of the Company (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
RESTRICTED
NAME AND PRINCIPAL OTHER ANNUAL STOCK ALL OTHER
POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) AWARDS(4) COMPENSATION(5)
- -------------------------- --------- ---------- ------------ ---------------- ---------------- ----------------
Thomas W. Rabaut.......... 1996 $ 322,091 $ 171,525 $ -- $ -- $ --
President and CEO
Peter C. Woglom........... 1996 234,665 79,648 -- 284,500 --
Vice President,
General Manager-- Ground
Systems
Frederick M. Strader...... 1996 183,990 99,770 -- 213,375 --
Vice President,
General Manager--
Armament Systems
David V. Kolovat(6)....... 1996 202,196 63,078 -- -- --
Vice President, General
Counsel and Secretary
Arthur L. Roberts......... 1996 177,619 68,320 -- -- --
Vice President,
General Manager--
International
</TABLE>
- ------------------------
(1) Includes matching contributions under the Company's 401(k) plan for salaried
employees or the FMC 401(k) plan in which the individual participated prior
to the Acquisition.
(2) The FMC management incentive plans in which the employee participated prior
to the Acquisition. Such plans provided for both annual and three-year
incentive bonuses.
(3) Amounts less than $50,000 or 10% the Named Executive Officer's compensation
are excluded.
(4) Includes options to purchase and shares of restricted stock of FMC pursuant
to FMC plans in which the Named Executive Officer participated prior to the
Acquisition.
(5) The Named Executive Officers participated in FMC's stock option plan. In
1996 Mr. Kolovat exercised 6,400 shares and realized $195,800 of value and
Mr. Roberts exercised 4,300 shares and realized $265,876 of value. Messrs.
Rabaut, Woglom, Strader, Kolovat and Roberts had $609,525, $296,663,
$463,325, $71,250 and $369,550 of value, respectively, in exercisable
in-the-money options at the end of 1996. Such Named Executive Officers had
$291,194, $99,600, $145,910, $160,813 and $132,200, respectively, of
presently unexercisable FMC options at such date that will vest upon
consummation of the Acquisition.
(6) 1996 compensation was paid by FMC. Mr. Kolovat became an employee of the
Company upon consummation of the Acquisition.
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<PAGE>
EMPLOYMENT AGREEMENTS
The Company expects to enter into employment agreements with certain key
executive officers, including terms for salary, bonus opportunity, insurance,
severance and non-competition.
RETIREMENT PLAN
Each Named Executive Officer is covered under the UDLP Defense Segment
Pension Plan (the "Pension Plan") described below. The following table shows the
estimated annual pension benefits under the Pension Plan, including amounts
attributable to the Supplemental Retirement and Savings Plan ("SERP") described
below for the specified compensation and years of service.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
FOR YEARS OF SERVICE INDICATED
FINAL AVERAGE ----------------------------------------------------------
EARNINGS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
--------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 150,000........................ $ 31,552 $ 42,070 $ 52,587 $ 63,104 $ 73,622
250,000........................ 54,052 72,070 90,087 108,104 126,122
350,000........................ 76,552 102,070 127,587 153,104 178,622
450,000........................ 99,052 132,070 165,087 198,104 231,122
550,000........................ 121,552 162,070 202,587 243,104 283,622
650,000........................ 144,052 192,070 240,087 288,104 336,122
900,000........................ 200,302 267,070 333,837 400,604 467,372
1,150,000....................... 256,552 342,070 427,587 513,104 598,622
1,300,000....................... 290,302 387,070 483,837 580,604 677,372
1,450,000....................... 324,052 432,070 540,087 648,104 756,122
</TABLE>
Compensation included in the final average earnings for the pension benefit
computation includes base annual salary and annual bonuses but excludes payments
for most other compensation. Unreduced retirement pension benefits are
calculated pursuant to the Pension Plan's benefit formula as an individual life
annuity payable at age 65. Benefits may also be payable as a joint and survivor
annuity or a level income option. Final average earnings in the above table
means the average of covered remuneration for the highest 60 consecutive
calendar months out of the 120 calendar months immediately preceding retirement.
Benefits applicable to a number of years of service or final average earnings
different from those in the above table are equal to the sum of (A) 1 percent of
allowable Social Security Covered Compensation ($29,304 for a participant
retiring at age 65 in 1997) times years of credited service and (B) 1.5 percent
of the difference between final average earnings and allowable Social Security
Covered Compensation times years of credited service. ERISA limits the annual
benefits that may be paid from a tax-qualified retirement plan. Accordingly, as
permitted by ERISA, the Company has adopted supplemental arrangements to
maintain total benefits upon retirement at the levels shown in the table.
Messrs. Rabaut, Woglom, Strader, Kolovat and Roberts currently have 20, 24, 17,
9 and 30 years of service under the Pension Plan, respectively.
The Company will also maintain a SERP designed to provide unfunded
supplemental retirement benefits to certain Executive Officers of the Company.
The SERP will be designed to provide the selected employees a benefit at
retirement equal to the benefit the participant would have received under the
401(k) plan and the pension plan if the Code and such plan did not require the
exclusion of certain compensation from the determination of benefits under those
plans. SERP benefits will be offset by amounts the participant receives from
certain other plans and Social Security. All Named Executive Officers will
likely participate in the SERP.
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<PAGE>
TRANSACTION INCENTIVE PAYMENTS
The Company instituted an additional incentive plan in 1997 for the Named
Executive Officers and certain other employees granting them significant
incentive bonuses upon a successful sale of the Company. The Sellers paid the
amounts under this plan. The incentives paid to the Named Executive Officers
were as follows:
TRANSACTIONS INCENTIVE PAYMENT
<TABLE>
<CAPTION>
PERFORMANCE
NAME INCENTIVE PREMIUM INCENTIVE
- ------------------------------------------------------------------------ -------------------- -----------------
<S> <C> <C>
Thomas W. Rabaut........................................................ $ 250,000 $ 250,000
President and CEO
Peter C. Woglom......................................................... 150,000 150,000
Vice President, General Manager--Ground Systems
Frederick M. Strader.................................................... 150,000 150,000
Vice President, General Manager--Armament Systems
David V. Kolovat........................................................ 100,000 --
Vice President, General Counsel and Secretary
Arthur L. Roberts....................................................... 100,000 --
Vice President, General Manager--International
</TABLE>
SEVERANCE ARRANGEMENTS
In June 1997, the Company entered into executive compensation agreements
with fourteen management employees, including each Named Executive Officer.
These agreements generally provide that in the event the executive's employment
is terminated by the Company other than for "cause" or by the executive with
"good reason" (each as defined therein) within 2 years following a "sale of the
company" (as defined therein) including the Acquisition, the executive will be
entitled to (i) a payment equal to a multiple (ranging from one to three) of the
executive's base pay and target bonus; (ii) Company-paid outplacement services;
and (iii) the right to continue to participate in the Company's health, life and
accidental death and dismemberment and long-term disability benefits plan for
one year (or three years in the case of Mr. Rabaut) at the rates in effect for
active employees.
The Company also maintains a severance plan that generally covers most
salaried and non-union hourly employees, and provides severance payments in the
event of the employee's involuntary termination of employment due to a reduction
in force. Severance payments are calculated as a percentage (up to 100% maximum)
of base pay.
STOCK OPTION PLAN
The Company is adopting an option plan for key employees of the Company,
pursuant to which options to purchase an aggregate of approximately 8% of the
Company's fully-diluted common stock at the Closing Date will be granted,
subject to vesting requirements based on performance and/or length of service
after the options are granted. The Company intends to adopt a stock purchase
plan, pursuant to which the Named Executive Officers will purchase stock of UDI.
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<PAGE>
CERTAIN TRANSACTIONS
Prior to the Acquisition, UDLP contracted with FMC for various
administrative and support services, including computer services, systems and
programming, data communications, employee relocation support, payroll
processing, research and development, insurance and general management support.
During the years ended December 31, 1994, 1995 and 1996 and the nine months
ended September 30, 1997, UDLP paid $42.4 million, $39.8 million, $35.2 million
and $22.3 million, respectively, to FMC for such support. This contract was
terminated at or prior to the Closing Date. The Company also leases office and
manufacturing facilities in San Jose, California from FMC. Under the lease
agreement during the years ended December 31, 1994, 1995 and 1996, UDLP paid
$4.2 million, $3.9 million and $3.7 million, respectively. In connection with
the Acquisition, UDLP amended the lease to provide for a $4.0 million annual
base rent.
UDLP sales of inventory to FMC during the years ended December 31, 1994,
1995 and 1996 and the nine months ended September 30, 1997 were $2.8 million,
$1.5 million, $1.1 million and $0.9 million, respectively. Management believes
that such transactions were consummated on terms substantially similar to those
that would arise in transactions with unrelated third parties. Sales to Harsco
were not material.
During 1995, UDLP entered into an agreement with FMC and Harsco whereby
UDLP's excess cash balances of up to $40 million were invested with FMC.
Interest on these funds was earned based on the average monthly cost of FMC's
U.S. dollar revolver-related short-term borrowings for such month. In addition,
UDLP made short-term loans, not to exceed ninety days, to FMC at rates equal to
FMC's average overnight borrowing rate for the period of the loan. Interest on
all loans to FMC totaled $1.8 million and $1.1 million in 1996 and 1995,
respectively. This agreement terminated on the Closing Date.
Concurrently with the closing of the Acquisition, the Company entered into a
management agreement (the "Management Agreement") with TCG Holdings, L.L.C. (or
another affiliate of Carlyle) for certain management and financial advisory
services to be provided to the Company and its subsidiaries. The Management
Agreement provides for the payment to Carlyle an annual management fee of $2.0
million. In addition, the Company may retain Carlyle or any third party for the
provision of certain corporate administrative services or transactional services
on terms and conditions to be agreed upon including fees for assisting the
Company with the future acquisitions, dispositions, financing transactions and
other similar transactions. Pursuant to the Management Agreement, Carlyle
received a fee of $4.5 million and will receive an additional $2.0 million in
1998 for advisory and other services provided in connection with the
Transactions.
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<PAGE>
PRINCIPAL STOCKHOLDERS
All of the capital stock of the Company is held by Iron Horse.
The following table sets forth certain information regarding the beneficial
ownership of Iron Horse by each person known by the Company to be the owner of
5% or more of Iron Horse's equity interests ("Units"), by each person who is a
director or Named Executive Officer of the Company and by all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF ALL OUTSTANDING
BENEFICIAL OWNER(1) UNITS UNITS
- -------------------------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
TCG Holdings, L.L.C.(2)(3)............................................................ 1,000 100.0%
William E. Conway, Jr.(3)............................................................. -- *
Allan M. Holt(3)...................................................................... -- *
Peter J. Clare(3)..................................................................... -- *
Frank C. Carlucci(3).................................................................. -- *
J.H. Binford Peay, III(4)............................................................. -- *
Thomas Rabaut(4)...................................................................... -- *
Peter C. Woglom(4).................................................................... -- *
Frederick M. Strader(4)............................................................... -- *
David V. Kolovat(4)................................................................... -- *
Francis Raborn(4)..................................................................... -- *
Arthur L. Roberts(4).................................................................. -- *
All Directors and Executive Officers as a group (12 persons).......................... -- *
</TABLE>
- ------------------------
* Denotes less than 1% beneficial ownership.
(1) Beneficial ownership is determined in accordance with the rules of the SEC.
Except as otherwise indicated, each beneficial owner has the sole power to
vote, as applicable, and to dispose of all Units owned by such beneficial
owner.
(2) Carlyle Partners II, L.P., a Delaware limited partnership, Carlyle Partners
III, L.P., a Delaware limited partnership, Carlyle International Partners
II, L.P., a Cayman Islands limited partnership, Carlyle International
Partners III, L.P., a Cayman Islands limited partnership, and certain
additional partnerships formed by Carlyle (collectively, the "Investment
Partnerships") and certain investors with respect to which TC Group, L.L.C.
or an affiliate exercises investment discretion and management constitute
all of the members of Iron Horse. TC Group, L.L.C. is the sole general
partner of the Investment Partnerships and TCG Holdings, L.L.C., a Delaware
limited liability company, is the sole managing member of TC Group, L.L.C.
(3) The address of such person is c/o The Carlyle Group, 1001 Pennsylvania
Avenue, N.W., Washington, D.C. 20004.
(4) The address of such person is c/o United Defense Industries, Inc., 1525
Wilson Boulevard, Suite 700, Arlington, Virginia 22209-2411.
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<PAGE>
THE ACQUISITION
ACQUISITION AGREEMENT
The Company entered into the Acquisition Agreement with the Sellers on
August 25, 1997 for the acquisition by the Company of all of FMC's and Harsco's
respective partnership interests in UDLP. The aggregate Purchase Price paid in
the Acquisition was $850.0 million. The Company paid the Purchase Price with
$800.0 million of cash and the Seller Note. The Purchase Price is subject to
adjustment following the closing based upon the difference (if any) between the
net worth of UDLP as of the Closing Date (as adjusted as provided in the
Acquisition Agreement) and the adjusted net worth of UDLP as of June 30, 1997.
If any adjustment results in a decrease in the Purchase Price for the
Acquisition, borrowings under the Term Loan Facilities will be correspondingly
reduced. If the Purchase Price is increased, the borrowings under the Revolving
Credit Facility will be correspondingly increased. Sellers and the Company are
currently negotiating this adjustment.
The Seller Note is subordinate in right of payment to all existing and
future Senior Indebtedness (as defined in the Seller Note) and PARI PASSU in
right of payment with all other senior subordinated indebtedness of the Company,
including the Notes. For a description of the terms of the Seller Note, see
"Description of Certain Indebtedness--Seller Note."
The Acquisition Agreement contains representations, warranties and covenants
of the Sellers concerning the business of UDLP and its subsidiaries. The Sellers
have agreed to indemnify UDLP and the Company and their respective affiliates
and each of their respective officers, directors and employees for certain
breaches of representations or covenants of the Sellers contained in the
Acquisition Agreement and for certain liabilities relating to the business of
UDLP being retained by the Sellers, including certain litigation to which UDLP
is a party or which relates to the business of UDLP prior to the Closing Date.
For a discussion of certain litigation being retained by the Sellers, see
"Business--Legal Proceedings." Subject to limited exceptions, no claims under
such indemnity may be asserted by UDLP or the Company for breach of any
representation or warranty unless the aggregate amount of all such claims
asserted by UDLP or the Company exceed $10.0 million, in which event the Sellers
shall only be obligated to indemnify the Company and UDLP for the amount of such
claims in excess of $10.0 million. The aggregate recovery of UDLP and the
Company for breaches of the representations and warranties of the Sellers
contained in the Acquisition Agreement is limited to 10% of the Purchase Price
(as adjusted).
The Acquisition Agreement also provides for the allocation as between the
Sellers and the Company of costs and liabilities relating to certain
environmental matters in connection with the business of UDLP prior to the
Closing Date ("Pre-Closing Environmental Matters"). The Acquisition Agreement
provides that FMC will be responsible for 100% of all remediation costs incurred
at UDLP's San Jose/Santa Clara facilities and will be entitled to reimbursement
by the Company or UDLP for 78% of such uninsured costs subject to certain
limitations. Management believes that most of UDLP's share of these costs will
be allowable as contract costs under its contracts with the U.S. government
pursuant to the Environmental Advance Agreement among FMC, UDLP and DoD. The
parties agreed in the Environmental Advance Agreement to the allocation of
remediation costs between defense and commercial activities at UDLP's San
Jose/Santa Clara Facilities and established that, subject to certain
limitations, 78% of such allowable costs will be subject to recovery from the
U.S. government through UDLP's cost plus contracts. The aggregate amount of
remediation costs related to the San Jose/Santa Clara facilities for which the
Company is required to reimburse FMC is capped by the Acquisition Agreement at
$16.7 million with certain limitations on yearly expenditures. With respect to
all other real property owned or leased by the Company or otherwise relating to
UDLP's business, the Company and UDLP will be responsible for all costs of
remediation relating to Pre-Closing Environmental Matters and will be entitled
to reimbursement from the Sellers of 75% of all such costs which (i) are not
allowable costs under applicable U.S. government contracting statutes and
regulations; (ii) relate to matters of which the Sellers are notified in writing
before the third anniversary of the Closing Date; and (iii) are identified on or
before the tenth
83
<PAGE>
anniversary of the Closing Date. For additional information concerning these
environmental matters, see "Business--Environmental Matters."
OTHER ANCILLARY AGREEMENTS
Concurrently with the Company's acquisition of UDLP, UDLP acquired certain
assets of, and assumed certain liabilities related to, FMC's Corporate
Technology Center in San Jose, California. CTC is presently a separate business
unit of FMC which provides research and testing services to UDLP and certain
other FMC commercial business units. No additional consideration is required to
be paid for CTC, and FMC agreed to purchase $9.0 million of services from CTC,
in the aggregate, in the three years following the Closing Date. At the closing
of the Acquisition, UDLP, FMC and Harsco entered into several ancillary
agreements relating to the period following the closing. These ancillary
agreements include (i) a Transition Services Agreement; (ii) a Technology and
Environmental Services Agreement; (iii) the FMC and Harsco Intellectual Property
Agreements; and (iv) a lease for certain real property in San Jose. Under the
Transition Services Agreement, FMC provides certain services to UDLP, in a
manner and amount historically provided prior to the closing pursuant to a
management services agreement. The Transition Services Agreement will continue
for a term of six months from the Closing Date or such shorter or longer term as
the parties may agree. The services to be provided to the Company are expected
to include, among other things, accounts payable, accounting processing,
benefits administration, payroll processing, insurance, employee relocation,
expatriate employee administration and human resource information systems. The
Technology and Environmental Services Agreement sets forth the terms and
conditions pursuant to which FMC will purchase certain services from CTC after
the closing. The Intellectual Property Agreements grant UDLP a license to use in
UDLP's business certain intellectual property which was retained by FMC and
Harsco at the time UDLP was formed, as well as certain intellectual property
used by CTC on or prior to the Closing Date. The Intellectual Property
Agreements also grant FMC and Harsco a license to use the intellectual property
which was transferred to UDLP at the time of formation for uses outside of
UDLP's core business. FMC also leases to UDLP the land, buildings, fixtures and
improvements at the San Jose facility currently used by UDLP and CTC for an
aggregate annual base rent of approximately $4.0 million and the payment of
certain expenses relating to the operation and maintenance of such facilities.
The lease has an initial term of four years, and UDLP has an option to renew the
lease for a portion of the premises for one additional four-year term.
The production agreement between FNSS-Turkey and the Turkish government
gives the government the right to terminate the agreement "if the interest of
[FNSS-Turkey] shall devolve upon any person or corporation." The Company does
not expect the Turkish government to assert the view that this provision
entitles it to terminate the joint venture agreement, although no assurance can
be given that the Turkish government will not do so.
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<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR CREDIT FACILITY
In connection with the Acquisition, the Company entered into a new senior
secured credit agreement that closed contemporaneously with the offering of the
Private Notes. The Senior Credit Facility is among the Company, Iron Horse,
various lending institutions including Lehman Commercial Paper Inc. and
Citibank, N.A. as Documentation Agents, and Bankers Trust Company as
Administrative Agent and as Syndication Agent. The Senior Credit Facility
consists of an "A Term Loan Facility" in an aggregate principal amount of $150.0
million, a "B Term Loan Facility" in an aggregate principal amount of $175.0
million, a "C Term Loan Facility" in an aggregate principal amount of $170.0
million and a Revolving Credit Facility in an aggregate principal amount of
$230.0 million, including subfacilities for letters of credit and swingline
loans.
Loans made pursuant to the A Term Loan Facility ("A Term Loans") mature six
years after the closing date of the Senior Credit Facility (the "Senior Credit
Facility Closing Date"), with equal quarterly amortization payments of $6.25
million.
Loans made pursuant to the B Term Facility ("B Term Loans") mature eight
years from the Senior Credit Facility Closing Date and during the first six
successive one year periods following the Senior Credit Facility Closing Date
require annual amortization equal to 1% of the initial aggregate principal
amount of B Term Loans (payable in four equal quarterly installments per year).
The remaining aggregate principal amount of B Term Loans incurred is subject to
equal quarterly amortization payments during the seventh and eighth years after
the Senior Credit Facility Closing Date.
Loans made pursuant to the C Term Facility ("C Term Loans") mature nine
years from the Senior Credit Facility Closing Date and during the first eight
successive one year periods following the Senior Credit Facility Closing Date
require annual amortization equal to 1% of the initial aggregate principal
amount of C Term Loans (payable in four equal quarterly installments per year).
The remaining aggregate principal amount of C Term Loans incurred is subject to
equal quarterly amortization payments in the ninth year.
Loans made pursuant to the Revolving Credit Facility ("Revolving Loans")
will be utilized for general corporate and working capital requirements and for
transaction fees in connection with the Acquisition. The Revolving Credit
Facility will be available for the issuance of standby and trade letters of
credit (collectively "Letters of Credit") to support obligations of the Company
and its subsidiaries in types to be specified in the credit documentation.
Maturities for Letters of Credit will not exceed twelve months, renewable
annually thereafter and, in any event, will not extend beyond the fifth business
day prior to the maturity of the A Term Loan Facility. At no time will (x) the
aggregate principal amount of Revolving Loans outstanding pursuant to the
Revolving Credit Facility exceed $150.0 million or (y) the aggregate principal
amount of Revolving Loans together with any outstanding Letters of Credit and
any unpaid drawings with respect thereto exceed the commitments then in effect
pursuant to the Revolving Credit Facility. The Revolving Credit Facility matures
on the date that the A Term Loan Facility matures.
All outstanding loans under the Senior Credit Facility are guaranteed by
Iron Horse and certain of the Company's subsidiaries and are secured by a lien
on all the assets (present and future, tangible and intangible) of the Company
and its domestic subsidiaries and by a pledge of all of the stock of the Company
and its domestic subsidiaries and two-thirds of the stock of certain of the
Company's foreign subsidiaries and joint ventures.
Mandatory prepayments and reductions of outstanding principal amounts under
the Senior Credit Facility are required upon the occurrence of certain events.
All outstanding loans under the Senior Credit Facility bear interest at the
Company's option at (i) the base rate in effect from time to time plus an
applicable margin ranging from 1 1/4% to 1 3/4% depending on
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the type of loan or (ii) LIBOR (adjusted for maximum reserves) as determined by
the agent for the respective interest period, plus an applicable margin between
2 1/4% and 2 3/4%, depending on the type of loan.
The Senior Credit Facility contains customary covenants restricting the
incurrence of debt, encumbrances on and sales of assets, limitations on mergers
and certain acquisitions, limitations on changes of control, provisions for the
maintenance of certain financial ratios and various other financial covenants
and restrictions.
SELLER NOTE
In connection with the Acquisition, the Company issued the Seller Note to
the Sellers in an aggregate principal amount of $50.0 million. The Seller Note
bears interest at the same rate per annum as the Notes, payable quarterly in
arrears on the last business day of each calendar quarter. The Seller Note is
guaranteed by each entity that guaranteed the Notes and has substantially the
same covenants and default provisions as the Notes, provided, however, that the
maturity of the Seller Note may be accelerated only in the event of acceleration
of the maturity of the Senior Credit Facility and the Notes. The Seller Note is
subordinate in right of payment to all existing and future Senior Indebtedness
(as defined in the Seller Note) and PARI PASSU in right of payment with all
other senior subordinated or subordinated indebtedness of the Company, including
the Notes.
The Seller Note matures on the third anniversary of the issuance thereof and
will be subject to a mandatory prepayment (with such prepayment expected to be
made with the proceeds of term loans under the Senior Credit Facility) of
outstanding principal and interest upon the receipt by the Company of certain
consents or in certain other circumstances. The Company anticipates that
mandatory prepayment of the Seller Note will likely occur within one year of
issuance. If the Company suffers damages or losses in connection with the
failure to receive certain consents as a result of the change in control of
UDLP, the Company would have certain rights of set-off against payment on the
Seller Note for such damages or losses.
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DESCRIPTION OF THE NOTES
GENERAL
The Notes were issued pursuant to an Indenture (the "Indenture") by and
among the Company, the Guarantors and Norwest Bank Minnesota, N.A., as trustee
(the "Trustee"), in a private transaction that is not subject to the
registration requirements of the Securities Act. See "Notice to Investors." The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust
Indenture Act"). The Notes are subject to all such terms, and Holders of Notes
are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of the material provisions of the Indenture does
not purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. Copies
of the proposed form of Indenture and Registration Rights Agreement are
available as set forth below under "Additional Information." The definitions of
certain terms used in the following summary are set forth below under "--Certain
Definitions." For purposes of this summary, the term "Company" refers only to
United Defense Industries, Inc. and not to any of its Subsidiaries.
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all current and future Senior Debt. The
Notes rank PARI PASSU in right of payment with the Seller Note and with all
other senior subordinated Indebtedness of the Company issued in the future, if
any, and senior in the right of payment to all subordinated Indebtedness of the
Company issued in the future, if any. As of September 30, 1997, on a pro forma
basis after giving effect to the Transactions, the Company would have had
approximately $457.0 million of Senior Debt outstanding (excluding outstanding
letters of credit of approximately $154.0 million and unused commitments of
approximately $114.0 million under the Senior Credit Facility, $50.0 million of
which will be available only to fund the repayment of the Seller Note) and $50.0
million of PARI PASSU Indebtedness outstanding under the Seller Note (which will
mature on the third anniversary of the Acquisition, although the Company
believes the Seller Note will be prepaid prior to the first anniversary of the
Acquisition). The Indenture permits the incurrence of additional Senior Debt in
the future.
As of the Issue Date, all of the Company's Subsidiaries were Restricted
Subsidiaries, except for FNSS-Turkey, which is an Unrestricted Subsidiary. Under
certain circumstances, the Company will be able to designate other current or
future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will
not be subject to any of the restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $300.0 million,
$200.0 million of which were issued in connection with the issuance of the
Private Notes, and mature on November 15, 2007. Interest on the Notes accrues at
the rate of 8 3/4% per annum and is payable semi-annually in arrears on May 15
and November 15, commencing on May 15, 1998, to Holders of record on the
immediately preceding May 1 and November 1. Additional amounts may be issued in
one or more series from time to time subject to the limitations set forth under
the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock" and restrictions contained in the Senior Credit Facility and
any other agreement to which the Company is a party at the time of such
issuance. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal and premium, if any, on the Notes
will be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York or, at the option of the Company,
payment of interest may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
PROVIDED that all payments of principal, premium and interest with respect to
Notes the Holders of which have given wire transfer instructions to the Company
will be required to be made by wire transfer of immediately available funds to
the accounts specified by the Holders thereof. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of
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the Trustee maintained for such purpose. The Notes will be issued in
denominations of $1,000 and integral multiples thereof.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Notes is
subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full, in cash or Cash Equivalents, of all Senior Debt, whether
outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full, in cash or Cash Equivalents, of all Obligations due in respect
of such Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt (whether or not
an allowable claim)) before the Holders of Notes will be entitled to receive any
payment with respect to the Notes, and until all Obligations with respect to
Senior Debt are paid in full, in cash or Cash Equivalents, any distribution to
which the Holders of Notes would be entitled shall be made to the holders of
Senior Debt (except that Holders of Notes may receive and retain (i) Permitted
Junior Securities and (ii) payments made from the trust described under "--Legal
Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under
"--Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of
the principal of, premium, if any, or interest on Designated Senior Debt occurs
and is continuing beyond any applicable period of grace or (ii) any other
default occurs and is continuing with respect to Designated Senior Debt that
permits holders of the Designated Senior Debt as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the Company or the holders of any Designated
Senior Debt. Payments on the Notes may and shall be resumed (a) in the case of a
payment default, upon the date on which such default is cured or waived and (b)
in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated. No new period of payment blockage
may be commenced unless and until (i) 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium, if any, and interest on the Notes that
have come due have been paid in full in cash. No nonpayment default that existed
or was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice
unless such default shall have been waived for a period of not less than 90
days.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. The Indenture limits,
subject to certain financial tests, the amount of additional Indebtedness,
including Senior Debt, that the Company and its Restricted Subsidiaries can
incur. See "--Certain Covenants-- Incurrence of Indebtedness and Issuance of
Preferred Stock."
GUARANTEES
The Company's payment obligations under the Notes are fully, unconditionally
and jointly and severally guaranteed (the "Guarantees") by the Guarantors. The
Guarantee of each Guarantor is subordinated to the prior payment in full of all
Senior Debt of such Guarantor (none of which, other than guarantees under the
Senior Credit Facility, was outstanding on a pro forma basis as of September 30,
1997), and the amounts for which the Guarantors are liable under the guarantees
issued from time to time
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with respect to Senior Debt. The obligations of each Guarantor under its
Guarantee is limited to the maximum amount the Guarantors are permitted to
guarantee under applicable law. See, however, "Risk Factors--Fraudulent
Conveyance Matters."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) the Person formed by or surviving any such consolidation or merger
(if other than such Guarantor) assumes all the obligations of such Guarantor
pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, under the Notes and the Indenture; (ii) immediately
after giving effect to such transaction, no Default or Event of Default exists;
and (iii) except in the case of the merger of a Guarantor with or into another
Guarantor or the Company, the Company would be permitted by virtue of the
Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect
to such transaction, to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the covenant described
above under the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock."
Upon (i) the release by the lenders under the Senior Credit Facility,
related documents and future refinancings thereof of all guarantees of a
Guarantor and all Liens on the property and assets of such Guarantor relating to
such Indebtedness, or (ii) the sale or disposition of a Guarantor (or all or
substantially all of its assets) to an entity which is not a Subsidiary of the
Company, which is otherwise in compliance with the Indenture, such Guarantor
shall be deemed released from all its obligations under the Indenture and its
Guarantee; PROVIDED, HOWEVER, that any such termination shall occur only to the
extent that all obligations of such Guarantor under the Senior Credit Facility
and all of its guarantees of, and under all of its pledges of assets or other
security interests which secure, Indebtedness of the Company shall also
terminate upon such release, sale or transfer.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Guarantee; PROVIDED THAT the
Net Proceeds of such sale or other disposition are applied in accordance with
the applicable provisions of the Indenture. See "--Repurchase at the Option of
Holders--Asset Sales."
OPTIONAL REDEMPTION
The Notes are not be redeemable at the Company's option prior to November
15, 2002. Thereafter, the Notes are subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on November 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------- ------------------
<S> <C>
2002...................................................................... 104.375%
2003...................................................................... 102.917%
2004...................................................................... 101.458%
2005 and thereafter....................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to November 15, 2000, the
Company may on any one or more occasions redeem up to 35% of the aggregate
principal amount of the Notes at a redemption price of 108.75% of the principal
amount thereof, plus accrued and unpaid interest to the redemption date, with
the net cash proceeds of any Public Equity Offering; PROVIDED that at least 65%
of the aggregate principal amount of Notes originally issued on the Issue Date
remain outstanding immediately after each occurrence
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of such redemption; and PROVIDED, further, that each such redemption shall occur
within 90 days of the date of the closing of such Public Equity Offering.
At any time on or prior to November 15, 2002, the Notes may also be redeemed
in whole but not in part at the option of the Company upon the occurrence of a
Change of Control, upon not less than 30 nor more than 60 days prior notice (but
in no event more than 90 days after the occurrence of such Change of Control),
at a redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium, plus accrued and unpaid interest, thereon to the redemption
date (the "Redemption Date") (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date). The Company may not redeem Notes pursuant to this paragraph if it has
made a Change of Control Offer with respect to such Change of Control.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; PROVIDED
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon, if any, to the purchase date (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company will mail
a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the date
specified in such notice, which date shall be no earlier than 30 days and no
later than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"), pursuant to the procedures required by the Indenture and
described in such notice. The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so
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tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; PROVIDED THAT each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Indenture
provides that, prior to complying with the provisions of this covenant, but in
any event within 60 days following a Change of Control, the Company will either
repay all outstanding Senior Debt or obtain the requisite consents, if any,
under all agreements governing outstanding Senior Debt to permit the repurchase
of Notes required by this covenant. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Indenture requires that if the Senior Credit Facility is in effect, or
any amounts are owing thereunder, at the time of the occurrence of a Change of
Control, prior to the mailing of the notice to holders described in the third
preceding paragraph, but in any event within 30 days following any Change of
Control, the Company covenants to (i) repay in full all Obligations under the
Senior Credit Facility or offer to repay in full Obligations under the Senior
Credit Facility and repay the Obligations under the Senior Credit Facility of
each lender who has accepted such offer or (ii) obtain the requisite consent
under the Senior Credit Facility to permit the repurchase of the Notes as
described above. The Company must first comply with the covenant described in
the preceding sentence before it shall be required to purchase Notes in the
event of a Change of Control; PROVIDED that the Company's failure to purchase
Notes in the event of a Change of Control after complying with the covenant
described in the preceding sentence constitutes an Event of Default described in
clause (iv) under the caption "--Events of Default and Remedies" below if not
cured within 30 days after the notice required by such clause. As a result of
the foregoing, a holder of the Notes may not be able to compel the Company to
purchase the Notes unless the Company is able at the time to refinance all of
the Obligations outstanding under the Senior Credit Facility or obtain requisite
consents under the Senior Credit Facility.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
ASSET SALES
The Company will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless (i) the Company or such Restricted
Subsidiary receives consideration at the time of such Asset Sale at least equal
to the fair market value, or at least equal to 95% of the fair market value in
the case of a sale and leaseback transaction permitted by the covenant described
below under the caption "--Certain Covenants--Sale and Leaseback Transactions"
(in each case as specified in an Officers' Certificate with respect to any Asset
Sale of less than $3.0 million and as determined by the Board of Directors in
good faith with respect to any Asset Sales in excess of $3.0 million), of the
assets or Equity Interests issued or sold or otherwise disposed of and (ii) at
least 75% (100% in the case of lease payments) of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
Cash Equivalents; PROVIDED that the amount of (x) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or any Restricted Subsidiary of the Company (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes or
any Guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y)
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any securities, notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are converted by the Company or
such Restricted Subsidiary into cash (to the extent of the cash received) within
30 days after consummation of such Asset Sale, shall be deemed to be cash for
purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the Restricted Subsidiary, as applicable, may apply such Net
Proceeds, at its option, (a) to repay Indebtedness under any Credit Facility
(and to correspondingly permanently reduce the commitments with respect thereto
in the case of revolving borrowings) or (b) to the acquisition of a controlling
interest in another business, the making of a capital expenditure or the
acquisition of other assets that are not current assets, in each case, in
Permitted Businesses. Pending the final application of any such Net Proceeds,
the Company may temporarily reduce Indebtedness under any Credit Facility or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph shall be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company shall be required to make an offer (after complying with
any asset sale offer requirement pursuant to the terms of any Senior Debt
permitted to be incurred in accordance with the Indenture, and PRO RATA in
proportion to the principal amount (or accreted value, if applicable)
outstanding in respect of any asset sale offer required by the terms of the
Seller Note and any other PARI PASSU Indebtedness incurred in accordance with
the Indenture) to all Holders of Notes (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds (after giving effect to any asset sale
offer required under the terms of any Senior Debt or PARI PASSU Indebtedness as
aforesaid), the Company may use any remaining Excess Proceeds for general
corporate purposes including payment of Subordinated Obligations. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
A PRO RATA basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset at zero. This paragraph shall apply, but the
preceding paragraph shall not apply, to the sale or liquidation of an interest
in a Permitted Joint Venture or FNSS-Turkey pursuant to the exercise of call or
rights by any party thereto, or the sale or other disposition of property or
assets of a Permitted Joint Venture or FNSS-Turkey, in accordance with the terms
of the agreement or agreements (as amended) governing such Permitted Joint
Venture or FNSS-Turkey.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company) or to the
direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate (other than Equity Interests
of the Company or a Restricted Subsidiary in a Restricted Subsidiary or
Permitted Joint Venture) of the Company; (iii) make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Subordinated Obligations, except a payment of interest or principal at
Stated Maturity; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above
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being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company or any of its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (ii), (iii), (iv), (vi), (vii), (viii) or (ix) of the next
succeeding paragraph), is less than the sum of (i) 50% of the Consolidated
Net Income of the Company for the period (taken as one accounting period)
from the beginning of the first fiscal quarter immediately following the
Issue Date to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (ii) 100% of the aggregate Net
Cash Proceeds received by the Company as a contribution to its common equity
capital or from the issue or sale since the Issue Date of Equity Interests
of the Company (other than Disqualified Stock), or of Disqualified Stock or
debt securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or convertible
debt securities) sold to a Restricted Subsidiary of the Company and other
than Disqualified Stock or convertible debt securities that have been
converted into Disqualified Stock), plus (iii) to the extent not already
included in Consolidated Net Income of the Company for such period without
duplication, any Restricted Investment that was made by the Company or any
of its Restricted Subsidiaries after the Issue Date is sold for cash or
otherwise liquidated or repaid for cash, or any Unrestricted Subsidiary
which is designated as an Unrestricted Subsidiary subsequent to the Issue
Date is sold for cash or otherwise liquidated or repaid for cash, the lesser
of (A) the cash return of capital with respect to such Restricted Investment
or Unrestricted Subsidiary (less the cost of disposition, if any) and (B)
the initial amount of such Restricted Investment or amount deemed to
constitute an Investment in such Unrestricted Subsidiary.
The foregoing provisions shall not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of Subordinated Obligations or Equity Interests of the Company in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Company) of, other Equity
Interests of the Company (other than any Disqualified Stock); PROVIDED that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase or other acquisition of Subordinated Obligations with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the
payment of any dividend or distribution by a Restricted Subsidiary of the
Company or by a Permitted Joint Venture, (A) in the case of a Restricted
Subsidiary that is not a Permitted Joint Venture, to the holders of its common
Equity Interests so long as the Company or such Restricted Subsidiary receives
at least its pro rata share of such dividend or distribution in accordance with
its Equity Interests, and (B) in the case of a Permitted Joint Venture, to the
holders of its Equity Interests so long as such dividend or distribution is made
in accordance with the terms of the agreement or agreements or applicable legal
requirements governing such Permitted Joint Venture and the Company and/or the
applicable Restricted Subsidiary or Restricted Subsidiaries holding such
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Equity Interests receive its or their share of such dividend or distribution as
contemplated by such agreement or agreements or applicable legal requirements;
(v) any payment by the Company or any Restricted Subsidiary of the Company, or
any payment of a dividend or distribution by the Company to Iron Horse the
proceeds of which are used, (a) in connection with repurchases of Equity
Interests or Subordinated Obligations of the Company or Iron Horse following the
death, disability or termination of employment of members of management of the
Company or any Subsidiary of the Company or any Permitted Joint Venture, and (b)
of amounts (to the extent such payments would otherwise constitute Restricted
Payments) required to be paid by the Company or any of its Restricted
Subsidiaries or Iron Horse to participants in employee benefit plans upon
termination of employment by such participants, as provided in the documents
related thereto, in an aggregate amount (for both clauses (a) and (b)) not to
exceed $3.0 million in any fiscal year; PROVIDED that any unused amounts may be
carried over to any subsequent fiscal year subject to a maximum amount of $6.0
million in any fiscal year; PROVIDED, FURTHER, that such amount in any fiscal
year may be increased by an amount not to exceed (A) the cash proceeds from the
sale of Equity Interests of the Company (or from the sale of Equity Interests of
Iron Horse to the extent such proceeds are contributed to the Company by Iron
Horse) to members of management, directors or consultants of the Company and its
Subsidiaries that occurs after the Issue Date (to the extent the cash proceeds
from the sale of such Equity Interests have not otherwise been applied to the
payment of Restricted Payments by virtue of clause (c) of the preceding
paragraph) plus (B) the cash proceeds of key man life insurance policies
received by the Company and its Restricted Subsidiaries after the Issue Date
less (C) the amount of any Restricted Payments previously made pursuant to
clauses (A) and (B); and PROVIDED, FURTHER that the cancellation of Indebtedness
owing to the Company or Iron Horse from members of management of the Company or
any of its Restricted Subsidiaries in connection with a repurchase of Equity
Interests of the Company or Iron Horse will not be deemed to constitute a
Restricted Payment for purposes of this covenant or any other provision of the
Indenture; (vi) repurchases of Equity Interests of the Company or a Restricted
Subsidiary deemed to occur upon exercise of stock options if such Equity
Interests represent a portion of the exercise price of such options; (vii)
Restricted Investments in Subsidiaries or Permitted Joint Ventures that are made
with Excluded Contributions; (viii) other Restricted Payments in an aggregate
amount since the Issue Date not to exceed $10.0 million; (ix) the declaration
and payment of dividends to holders of any class or series of Designated
Preferred Stock issued after the Issue Date; PROVIDED, HOWEVER, that for the
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date of issuance of such
Designated Preferred Stock, after giving effect to such issuance on a pro forma
basis, the Company and its Restricted Subsidiaries would have had a Fixed Charge
Coverage Ratio greater than 2.0 to 1.0; and (x) payments required pursuant to
any indenture or agreement governing Subordinated Obligations in respect of any
Change of Control or Asset Sale, provided that payment has theretofore been made
with respect to all Notes tendered in response to a Change of Control Offer or
Asset Sale Offer, as applicable, PROVIDED that, with respect to clauses (ii),
(iii), (v), (viii), (ix) and (x) above, no Default or Event of Default shall
have occurred and be continuing immediately after such transaction.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary of the Company, pursuant to the Restricted Payment. The fair market
value of any non-cash Restricted Payment shall be determined by the Board of
Directors of the Company whose resolution with respect thereto shall be
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an Independent Financial Advisor if such fair market value
exceeds $10.0 million. Not later than five Business Days after making any
Restricted Payment in excess of $2.0 million, the Company shall deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
the covenant described above under the caption "--Certain Covenants--Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
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INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and that the
Company shall not issue any Disqualified Stock and shall not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock; PROVIDED,
HOWEVER, that the Company or any Restricted Subsidiary that is a Guarantor may
incur Indebtedness (including Acquired Debt) or the Company may issue shares of
Disqualified Stock if the Company's Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.0 to 1.0, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant shall not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness under one or more
Credit Facilities and related guarantees under any such Credit Facility;
PROVIDED that the sum of the aggregate principal amount of all such
Indebtedness outstanding under such Credit Facilities after giving effect to
such incurrence, does not exceed an amount equal to $505.0 million minus an
amount (the "Reduction Amount") equal to the difference between (a) $50.0
million and (b) the amount of Indebtedness incurred under the Senior Credit
Facility to repay the Seller Note (provided that if the computation of the
Reduction Amount results in a negative amount, the Reduction Amount shall be
deemed to be zero);
(ii) the incurrence by the Company or any Restricted Subsidiary of
revolving credit Indebtedness under one or more Credit Facilities, letters
of credit and related guarantees under any such Credit Facility; PROVIDED
that the aggregate principal amount of all revolving Indebtedness (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Restricted Subsidiaries
thereunder) outstanding under such Credit Facilities after giving effect to
such incurrence, does not exceed the greater of (a) $220.0 million and (b)
the Borrowing Base, less the aggregate amount of Asset Sale proceeds applied
to permanently reduce the availability of revolving credit Indebtedness
under such Credit Facilities pursuant to the provisions described under the
caption "--Asset Sales;"
(iii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness (which Indebtedness is not contemplated to be
repaid with the proceeds of the Offering) other than Indebtedness described
in clause (i), (ii) or (viii) of this paragraph;
(iv) the incurrence by the Company of Indebtedness represented by the
Private Notes and the Exchange Notes issued in exchange for the Private
Notes and the incurrence by the Guarantors of the Guarantees;
(v) the incurrence by the Company of Indebtedness represented by the
Seller Note and the incurrence by the Guarantors of guarantees thereof;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace Indebtedness incurred pursuant to this
clause (vi), not to exceed $15.0 million at any time outstanding;
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(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in respect of
Indebtedness described in the first paragraph of this covenant or clause
(iii), (iv) or (v) of this paragraph;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; PROVIDED, HOWEVER, that (x) any
subsequent event or issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary of the Company and (y) any sale or other transfer of
any such Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary of the Company that is a Guarantor shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company
or such Restricted Subsidiary, as the case may be, that was not permitted by
this clause (viii);
(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred in the normal course of business or
as required by any Credit Facility for the purpose of fixing or hedging
currency, commodity or interest rate risk (including with respect to any
floating rate Indebtedness that is permitted by the terms of the Indenture
to be outstanding) in connection with the conduct of their respective
businesses and not for speculative purposes;
(x) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Restricted Subsidiary of the Company or a
Permitted Joint Venture that was permitted to be incurred by another
provision of this covenant "--Incurrence of Indebtedness and Issuance of
Preferred Stock," PROVIDED that any such guarantee of Indebtedness is a
Permitted Investment or otherwise permitted by the covenant described above
under the caption "--Certain Covenants-- Restricted Payments";
(xi) Indebtedness incurred by the Company or any Restricted Subsidiary
under performance bonds, letter of credit obligations to provide security
for worker's compensation claims, payment obligations in connection with
self-insurance or similar requirements and bank overdrafts incurred in the
ordinary course of business; PROVIDED that any Obligations arising in
connection with such bank overdraft Indebtedness is extinguished within five
Business Days;
(xii) Indebtedness incurred by the Company or any Restricted Subsidiary
arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, from guarantees or letters of credit,
surety bonds or performance bonds securing any Obligations of the Company or
any Restricted Subsidiary pursuant to such agreements, in any case incurred
in connection with the disposition of any business, assets, Subsidiary or
Permitted Joint Venture (including, without limitation, an Asset Sale) other
than guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets, Subsidiary or Permitted Joint Venture
(including, without limitation, an Asset Sale) for the purpose of financing
such acquisition, in a principal amount not to exceed the gross proceeds
(with proceeds other than cash or Cash Equivalents being valued at the fair
market value thereof as determined by the Board of Directors in good faith)
actually received by the Company or any Restricted Subsidiary in connection
with such dispositions;
(xiii) the incurrence of Non-Recourse Indebtedness (A) by Permitted
Joint Ventures or (B) constituting Acquired Debt of a Restricted Subsidiary
not incurred in connection with such Restricted Subsidiary becoming a
Restricted Subsidiary; and
(xiv) the incurrence by the Company or any of its Restricted
Subsidiaries or any Permitted Joint Ventures of additional Indebtedness in
an aggregate principal amount (or accreted value, as applicable) at any time
outstanding, which may, but need not, be incurred under a Credit Facility,
not to exceed $50.0 million.
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For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xiv) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness shall be treated as
having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof. Accrual of interest, the accretion of accreted value and
the payment of interest in the form of additional Indebtedness will not be
deemed to be an incurrence of Indebtedness for purposes of this covenant.
LIENS
The Company will not, and will not permit any of its Restricted Subsidiaries
to, create, incur, assume or otherwise cause or suffer to exist or become
effective any Lien of any kind securing Indebtedness or trade payables (other
than Permitted Liens) upon any of their property or assets, now owned or
hereafter acquired, unless all payments due under the Indenture and the Notes
are secured on an equal and ratable basis with the obligations so secured until
such time as such obligations are no longer secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company or the Company to (i)(x) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (y) pay any Indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the Issue Date, or as amended thereafter on terms,
taken as a whole, no less favorable to the Holders of the Notes than the terms
of such Indebtedness as in effect on the Issue Date, (b) the Senior Credit
Facility as in effect as of the Issue Date, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, PROVIDED that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are no more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in the Senior
Credit Facility as in effect on the Issue Date, (c) the Indenture and the Notes,
(d) applicable law (including without limitation the laws of any jurisdiction
governing any Permitted Joint Venture), (e) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, PROVIDED that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (f) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business, (g) purchase money obligations
for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired, (h) Indebtedness of Guarantors, PROVIDED that such Indebtedness was
permitted to be incurred pursuant to the Indenture, (i) Permitted Refinancing
Indebtedness, PROVIDED that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive than
those contained in the agreements governing the Indebtedness being refinanced,
(j) secured Indebtedness otherwise permitted to be incurred pursuant to the
provisions of the covenant described under the caption "--Certain
Covenants--Liens" that limit the right of the debtor to dispose of the assets
securing such Indebtedness, (k) customary net worth provisions contained in
leases and other agreements entered into in the ordinary course of business, (l)
customary restrictions with respect to a Restricted Subsidiary pursuant
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to an agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Restricted Subsidiary,
(m) provisions with respect to dividends and the disposition or distribution of
assets or property, or transactions between or among the joint venture and the
parties to such joint venture (including loans), in joint venture agreements and
other similar agreements, (n) any other instrument governing Indebtedness
incurred on or after the Issue Date or any refinancing thereof that is incurred
in accordance with the Indenture, PROVIDED that the encumbrance or restriction
contained in any such Indebtedness or any such refinancing thereof is no more
restrictive and no more unfavorable to the holders of the Notes than that
contained in the Senior Credit Facility as in effect on the Issue Date, (o)
restrictions on cash or other deposits or net worth imposed by customers under
contracts entered into in the ordinary course of business, (p) Non-Recourse
Indebtedness of any Permitted Joint Venture or other Indebtedness of a Permitted
Joint Venture permitted to be incurred under the Indenture, and (q) the Seller
Note.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Company will not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States of America, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Notes
and the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately before and after such transaction
no Default or Event of Default shall have occurred; and (iv) except in the case
of a merger of the Company with or into a Restricted Subsidiary of the Company,
the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of covenant described above under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
LIMITATION ON CAPITAL STOCK OF CONTROLLED SUBSIDIARIES
The Company will not, if such action would cause a Restricted Subsidiary not
to be a Controlled Subsidiary, (i) sell, pledge, hypothecate or otherwise convey
or dispose of any Capital Stock of a Controlled Subsidiary (other than Liens on
such Capital Stock securing Obligations under Senior Debt) or (ii) permit any of
its Controlled Subsidiaries to issue any Capital Stock, other, in any such case,
than to the Company or a Controlled Subsidiary. The foregoing restrictions shall
not apply to an Asset Sale made in compliance with the covenant described above
under the caption "--Asset Sales" or the issuance or sale of Capital Stock of or
by a Controlled Subsidiary that will result in the establishment of a Permitted
Joint Venture.
GUARANTEES OF CERTAIN INDEBTEDNESS
The Company will not permit any of its Restricted Subsidiaries, directly or
indirectly, to guarantee the payment of any Indebtedness under any Credit
Facility under which the Company is a borrower or under which a Restricted
Subsidiary is a borrower and guarantees Indebtedness of the Company under any
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Credit Facility, unless such Restricted Subsidiary, the Company and the Trustee
execute and deliver a supplemental indenture evidencing such Guarantee of the
Notes, such Guarantee to be a senior subordinated unsecured obligation of such
Restricted Subsidiary. Neither the Company nor any Guarantor shall be required
to make a notation on the Notes to reflect any such subsequent Guarantee.
Nothing in this covenant shall be construed to permit any Restricted Subsidiary
of the Company to incur Indebtedness otherwise prohibited by the covenant
described above under the caption "--Certain Covenants-- Incurrence of
Indebtedness and Issuance of Preferred Stock".
TRANSACTIONS WITH AFFILIATES
The Company will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate of any such
Person (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (x) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $3.0 million, a resolution of its
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of its
Board of Directors and (y) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an Independent Financial
Advisor; PROVIDED that none of the following shall be deemed to be Affiliate
Transactions: (a) any employment agreement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business of the Company or
such Restricted Subsidiary, as the case may be; (b) transactions between or
among (A) the Company and/or its Restricted Subsidiaries that are Guarantors,
Controlled Subsidiaries and/or Permitted Joint Ventures, and (B) any such entity
and any other Restricted Subsidiaries or between or among such other Restricted
Subsidiaries, which in the case of clause (B) are on terms that are no less
favorable to the Company and/or such Subsidiary than those that would have been
obtained in a comparable transaction by the Company and/or such Subsidiary with
an unrelated Person; (c) Restricted Payments that are permitted by the covenant
described above under the caption "--Certain Covenants--Restricted Payments";
(d) fees and compensation paid to members of the Board of Directors of the
Company and any of its Restricted Subsidiaries and Permitted Joint Ventures in
their capacity as such, to the extent such fees and compensation are reasonable
and customary; (e) advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business and consistent with past practices; (f) provision of administrative or
management services by the Company, its Subsidiaries or Permitted Joint Ventures
or any of their officers to any of their respective Subsidiaries or Permitted
Joint Ventures in the ordinary course of business; (g) arm's length transactions
entered into in the ordinary course of business between or among the Company,
any Restricted Subsidiary or any Permitted Joint Venture and any Affiliate of
the Company; (h) transactions contemplated by any agreement as in effect as of
the Issue Date or any amendment thereto so long as any such amendment is not
disadvantageous to the Holders of the Notes in any material respect and so long
as the amounts paid by the Company and the Restricted Subsidiaries under any
such amended agreement do not exceed the amounts payable by the Company and the
Restricted Subsidiaries on the Issue Date; and (i) fees, compensation and
benefits paid to, and indemnity provided on behalf of, officers, directors or
employees of the Company or any of its Restricted Subsidiaries, as determined by
the Board of Directors of the Company or of any such Restricted Subsidiary, to
the extent such fees, compensation and benefits are reasonable and customary.
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SALE AND LEASEBACK TRANSACTIONS
The Company will not, and will not permit any of its Restricted Subsidiaries
to, enter into any sale and leaseback transaction; PROVIDED THAT the Company may
enter into a sale and leaseback transaction if (i) the Company could have
incurred Indebtedness in an amount equal to the Attributable Debt relating to
such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph or clause (vi) or (xiv) of the second
paragraph of the covenant described above under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" and (ii)
the gross cash proceeds of such sale and leaseback transaction are at least
equal to 95% of the fair market value (as determined in good faith by the Board
of Directors and set forth in an Officers' Certificate delivered to the Trustee)
of the property that is the subject of such sale and leaseback transaction and
(iii) the transfer of assets in such sale and leaseback transaction is permitted
by, and the Company applies the proceeds of such transaction in compliance with,
the covenant described above under the caption
"--Asset Sales."
NO SENIOR SUBORDINATED DEBT
The Indenture provides that, notwithstanding any other provision thereof,
(i) the Company will not incur, create, issue, assume, guarantee or otherwise
become liable directly or indirectly for any Indebtedness (including Acquired
Debt) that is expressly subordinate or junior in right of payment to any Senior
Debt and senior in any respect in right of payment to the Notes and (ii) no
Guarantor will incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness (including Acquired Debt) that is expressly
subordinate or junior in right of payment to any Senior Debt of a Guarantor and
senior in any respect in right of payment to the Guarantees, it being understood
that Indebtedness will not be considered senior to other Indebtedness solely by
reason of being secured.
BUSINESS ACTIVITIES
The Company will not, and the Company will not permit any of its Restricted
Subsidiaries to, directly or indirectly, engage in any line of business other
than a Permitted Business, except to such extent as would not be material to the
Company and its Restricted Subsidiaries taken as a whole.
PAYMENTS FOR CONSENT
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
REPORTS
The Indenture provides that whether or not the Company is required by the
rules and regulations of the SEC, so long as any Notes are outstanding and
irrespective of whether the Exchange Offer Registration Statement or the Shelf
Registration Statement has been declared effective by the SEC, the Company will
furnish to each of the Holders of Notes within the time periods specified in the
SEC's rules and regulations, beginning with annual financial information for the
year ended December 31, 1997, (i) all quarterly and annual financial information
that would be required to be contained in a filing with the SEC on Forms 10-Q
and 10-K if the Company were required to file such financial information,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations " that describes the financial condition and results of
operations of the Company and any consolidated Restricted Subsidiaries and, with
respect to the annual information only, reports thereon by the Company's
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independent public accountants (which shall be firm(s) of established national
reputation) and (ii) all information that would be required to be filed with the
SEC on Form 8-K if the Company were required to file such reports. In addition,
whether or not required by the rules and regulations of the SEC, the Company
shall file a copy of all such information and reports with the SEC for public
availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. For so long as any Notes remain outstanding, the Company and the
Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest with
respect to, the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (ii) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Company or any of its
Restricted Subsidiaries to comply with the provisions described under the
caption "--Certain Covenants--Merger, Consolidation, or Sale of Assets"; (iv)
failure by the Company or any of its Restricted Subsidiaries for 30 days after
notice to comply with the provisions described under the captions "--Asset
Sales," "--Repurchase at the Option of Holders--Change of Control," "--Certain
Covenants--Restricted Payments," or "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock"; (v) failure by the Company or any
of its Restricted Subsidiaries for 60 days after notice to comply with any of
its other agreements in the Indenture or the Notes; (vi) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the Issue Date, which
default (a) is caused by a failure to pay principal of such Indebtedness at
final maturity prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates without
duplication $10.0 million or more; (vii) failure by the Company or any of its
Significant Subsidiaries to pay final judgments aggregating in excess of $10.0
million (excluding amounts covered by insurance), which judgments are not paid,
discharged or stayed for a period of 60 days; (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries and (ix) except as permitted by the Indenture, any Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
its Guarantee (other than by reason of the termination of the Indenture or the
release of any such Guarantee in accordance with the Indenture).
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company or any Significant Subsidiary, all
outstanding Notes will become due and payable without further action or notice.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
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In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the principal intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to the optional redemption provisions of the Indenture, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law upon the acceleration of the Notes. If an Event of Default
occurs prior to November 15, 2002 by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding the prohibition on redemption of the Notes prior to November 15, 2002,
then the premium specified in the Indenture shall also become immediately due
and payable to the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator, partner, member or stockholder
of the Company or any Subsidiary of the Company or any Permitted Joint Venture
or any Guarantor, or of any member, partner or stockholder of any such entity,
as such, shall have any liability for any obligations of the Company under the
Notes or the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, on such Notes
when such payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "--Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the
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applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the Issue Date,
there has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such opinion of counsel shall confirm
that, the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance had
not occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which the Company
or any of its Restricted Subsidiaries is a party or by which the Company or any
of its Restricted Subsidiaries is bound; (vi) the Company must have delivered to
the Trustee an opinion of counsel to the effect that after the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (vii) the Company must deliver to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
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Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders") or (viii) make any change in
the foregoing amendment and waiver provisions. In addition, any amendment to the
provisions of Article 10 of the Indenture (which relate to subordination) will
require the consent of the Holders of at least 75% in aggregate principal amount
of the Notes then outstanding if such amendment would adversely affect the
rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's or any Guarantor's obligations to Holders of Notes
in the case of a merger or consolidation, to make any change that would provide
any additional rights or benefits to the Holders of Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; HOWEVER, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue or
resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to United Defense
Industries, Inc., 1525 Wilson Boulevard, Suite 700, Arlington, VA 22209-2411,
Attention: Chief Financial Officer.
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BOOK-ENTRY, DELIVERY AND FORM
The Notes will be represented by one or more global notes in registered,
global form without interest coupons (the "Global Note"). The Global Note
initially will be deposited upon issuance with the Trustee as custodian for the
Depositary, in New York, New York, and registered in the name of the Depositary
or its nominee, in each case for credit to an account of a direct or indirect
participant as described below.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of the Depositary or to a successor of the
Depositary or its nominee. Beneficial interests in the Global Notes may not be
exchanged for Notes in certificated form except in the limited circumstances
described below. See "--Depositary Procedures--Exchange of Book-Entry Notes for
Certificated Notes."
Transfer of beneficial interests in the Global Notes will be subject to the
applicable rules and procedures of the Depositary and its direct or indirect
participants, which may change from time to time.
The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
DEPOSITARY PROCEDURES
The Depositary has advised the Company that the Depositary is a
limited-purpose trust company created to hold securities for its participating
organizations (collectively, the "Participants") and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of Participants. The Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to the Depositary's system is also available to other entities such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of the Depositary only through
the Participants or Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of the Depositary are recorded on the records of the Participants and
Indirect Participants.
The Depositary has also advised the Company that pursuant to procedures
established by it, (i) upon deposit of the Global Notes, the Depositary will
credit the accounts of Participants designated by the Initial Purchasers with
portions of the principal amount of Global Notes and (ii) ownership of such
interests in the Global Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to Participants) or by Participants and the Indirect Participants
(with respect to other owners of beneficial interests in the Global Notes).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interest in a Global Note to such persons may be limited to
that extent. Because the Depositary can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having a beneficial interest in a Global Note to pledge such
interest to persons or entities that do not participate in the Depositary
system, or otherwise take actions in respect of such interests, may be affected
by the lack of physical certificate evidencing such interests. For certain other
restrictions on the transferability of the Notes see, "--Depositary
Procedures--Exchange of Book-Entry Notes for Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal, premium and interest on a Global Note
registered in the name of the Depositary or its nominee will be payable by the
Trustee to the depositary or its nominee in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the
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Trustee will treat the persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Company, the Trustee nor any agent of the Company or the Trustee has or will
have any responsibility or liability for (i) any aspect of the Depositary's
records or any Participant's or Indirect Participant's records relating to or
payments made on account of beneficial ownership interests in the Global Notes,
or for maintaining, supervising or reviewing any of the Depositary's records or
any Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Notes or (ii) any other matter relating to the
actions and practices of the Depositary or any of its Participants or Indirect
Participants.
The Depositary has advised the Company that its current practices, upon
receipt of any payment in respect of securities such as the Notes (including
principal and interest), is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in principal amount of beneficial interests in the relevant
security such as the Global Notes as shown on the records of the Depositary.
Payments by Participants and the Indirect Participants to the beneficial owners
of Notes will be governed by standing instructions and customary practices and
will not be the responsibility of the Depositary, the Trustee or the Company.
Neither the Company nor the Trustee will be liable for any delay by the
Depositary or its Participants in identifying the beneficial owners of the
Notes, and the Company and the Trustee may conclusively rely on and will be
protected in relying on instructions from the Depositary or its nominee as the
registered owner of the Notes for all purposes.
Interests in the Global Note will trade in the Depositary's Same-Day Funds
Settlement System and secondary market trading activity in such interests will,
therefore, settle in immediately available funds, subject in all cases to the
rules and procedures of the Depositary and its Participants.
Transfers between Participants in the Depositary will be effective in
accordance with the Depositary's procedures, and will be settled in same-day
funds.
The Depositary has advised the Company that it will take any action
permitted to be taken by a Holder of Notes only at the direction of one or more
Participants to whose account the Depositary interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Notes as to which such Participant or Participants has or have given
direction. However, if there is an Event of Default under the Notes, the
Depositary reserves the right to exchange Global Notes for legended Notes in
certificated form, and to distribute such Notes to its Participants.
The information in this section concerning the Depositary and its bookentry
systems has been obtained from sources that the Company believes to be reliable,
but the Company takes no responsibility for the accuracy thereof.
Although the Depositary has agreed to the foregoing procedures to facilitate
transfers of interests in the Global Note among Participants in the Depositary
it is under no obligation to perform or to continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by the Depositary or
its respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form if (i) the Depositary (A) notifies the Company that it is
unwilling or unable to continue as depository for the Global Note and the
Company thereupon fails to appoint a successor depository or (B) has ceased to
be a clearing agency registered under the Exchange Act or (ii) the Company, at
its option, notifies the Trustee in writing that it elects to cause issuance of
the Notes in certificated form. In addition, beneficial interests in a Global
Note may be exchanged for certificated Notes upon request but only upon at least
20 days prior written notice given to the Trustee by or on behalf of the
Depositary in accordance with customary procedures. In all
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cases, certificated Notes delivered in exchange for any Global Note or
beneficial interest therein will be registered in names, and issued in any
approved denominations, requested by or on behalf of the Depositary (in
accordance with its customary procedures).
CERTIFICATED NOTES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of certificated Notes. Upon any such issuance,
the Trustee is required to register such certificated Notes in the name of, and
cause the same to be delivered to, such person or persons (on the nominee of any
thereof). In addition, if (i) the Company notifies the Trustee in writing that
the Depositary is no longer willing or able to act as a depository and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Notes in the form of certificated Notes under the Indenture,
then, upon surrender by the Global Note Holder of its Global Note, Notes in such
form will be issued to each person that the Global Note Holder and the
Depository identify as being the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Note (including principal, premium, if any, and interest) be made by
wire transfer of immediately available funds to the accounts specified by the
Global Note Holder. With respect to certificated Notes, the Company will make
all payments of principal, premium, if any, and interest by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. The Company expects that secondary trading in the
certificated Notes will also be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control "
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED THAT
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"APPLICABLE PREMIUM" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1)
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the redemption price of such Note at November 15, 2002 (such redemption price
being described under the caption "--Optional Redemption") plus (2) all required
interest payments due on such Note through November 15, 2002, computed using a
discount rate equal to the Treasury Rate plus 87.5 basis points, over (B) the
principal amount of such Note.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than in the ordinary course of business (PROVIDED that the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole will be
governed by the covenants described above under the captions "--Repurchase at
the Option of Holders--Change of Control" and "--Certain Covenants--Merger,
Consolidation, or Sale of Assets" and not by the provisions of the covenant
described above under the caption "--Repurchase at the Option of Holders--Asset
Sales"), and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any the Company's Restricted Subsidiaries,
in the case of either clause (i) or (ii), whether in a single transaction or a
series of related transactions (a) that have a fair market value in excess of
$2.0 million or (b) for Net Proceeds in excess of $2.0 million. Notwithstanding
the foregoing: (i) a transfer of assets by the Company to a Restricted
Subsidiary of the Company that is a Guarantor or to a Controlled Subsidiary or
by a Restricted Subsidiary of the Company to the Company or to another
Restricted Subsidiary of the Company that is a Guarantor or to a Controlled
Subsidiary, (ii) an issuance or sale of Equity Interests by a Restricted
Subsidiary of the Company to the Company or to another Restricted Subsidiary of
the Company that is a Guarantor, and (iii) (A) a Permitted Investment
(including, without limitation, a Permitted Investment in a Permitted Joint
Venture) or (B) a Restricted Payment that is permitted by the covenant described
above under the caption "--Certain Covenants--Restricted Payments" will not be
deemed to be Asset Sales.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"BORROWING BASE" means, as of any date, an amount equal to the sum of (a)
90% of the net book value of the accounts receivable of the Company and its
Restricted Subsidiaries as of such date resulting from sales in the United
States of America, including sales pursuant to the U.S. Foreign Military Sales
program (provided that no accounts receivable shall be included in such
calculation if such receivable or any portion thereof is unpaid for more than 90
days after the date such receivable arises or is created), and (b) 60% of the
net book value of the inventory, including work-in-process and raw goods (less
progress payments or advanced payments from customers with respect to such
inventory), owned by the Company and its Restricted Subsidiaries as of such
date, all calculated on a consolidated basis and in accordance with GAAP. To the
extent that information is not available as to the amount of accounts receivable
or inventory as of a specific date, the Company may utilize the most recent
available quarterly or annual financial report for purposes of calculating the
Borrowing Base.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participation, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership (whether general or limited) or membership interests and
(iv) any other interest or
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participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) the local currency
of any jurisdiction in which any Permitted Joint Venture conducts business,
(iii) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof having
maturities of not more than one year from the date of acquisition, (iv)
certificates of deposit and eurodollar time deposits with maturities of not more
than one year from the date of acquisition, bankers' acceptances with maturities
of not more than one year from the date of acquisition and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $250.0 million and a Thompson Bank Watch Rating of "B" or
better, (v) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (iii) and (iv) above
entered into with any financial institution meeting the qualifications specified
in clause (iv) above, (vi) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or one of the two highest ratings from
Standard & Poor's Rating Group with maturities of not more than six months from
the date of acquisition, and (vii) money market funds at least 95% of the assets
of which are comprised of assets specified in clauses (i) through (vi).
"CHANGE OF CONTROL" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group") together with any Affiliates thereof (whether or
not otherwise in compliance with the provisions of the Indenture) unless
immediately following such sale, lease, exchange or other transfer in compliance
with the Indenture such assets are owned, directly or indirectly, by the Company
or a Restricted Subsidiary of the Company that is a Guarantor; (ii) the approval
by the holders of Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of the Indenture); (iii) the acquisition in one
or more transactions, of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) by (x) any Person or Group (other than a Group the
majority in economic interests and voting or similar rights is owned by
Permitted Holders) that either (A) beneficially owns (within the meaning of Rule
13d-3 under the Exchange Act), directly or indirectly, (I) at least 30% (or, in
the case of a transaction or transactions approved before the consummation of
same by a majority of the directors of the Company, 35%) of the Company's then
outstanding voting securities entitled to vote on a regular basis for the board
of directors of the Company and (II) a greater beneficial interest than the
Permitted Holders, or (B) otherwise has the ability to elect, directly or
indirectly, a majority of the members of the Company's board of directors,
including without limitation by the acquisition of revocable proxies for the
election of directors; or (iv) the first day on which a majority of the members
of the Company's board of directors are not Continuing Directors. Clause (i) of
the definition of "Change of Control" includes a sale, lease, exchange or other
transfer of "all or substantially all" of the assets of the Company to a Group.
There is little case law interpreting the phrase "all or substantially all" in
the context of an indenture. Because there is no precise established definition
of this phrase, the ability of a holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, exchange or other transfer
of all or substantially all of the Company's assets to a Person or a Group may
be uncertain.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) Fixed Charges of such Person and its Restricted
Subsidiaries for such period, to the extent that any such Fixed Charges were
deducted in computing such Consolidated Net Income, plus (iv) depreciation and
amortization (including amortization of goodwill, other intangibles and other
asset write-ups resulting from the application of purchase accounting but
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excluding amortization of prepaid cash expenses that were paid in a prior period
commencing after the Issue Date) of such Person and its Restricted Subsidiaries
for such period to the extent that such depreciation and amortization were
deducted in computing such Consolidated Net Income, plus (v) LIFO charges of
such Person and its Restricted Subsidiaries for such period, plus (vi) other
non-cash items reducing Consolidated Net Income (excluding any such charge which
requires an accrual of or a cash reserve for cash charges for any future
period), plus (vii) cash received with respect to any non-cash item previously
deducted from Consolidated Net Income pursuant to clause (viii) below and minus
(viii) non-cash items increasing such Consolidated Net Income for such period
(including without limitation under any LIFO credit and excluding any reversal
of any non-cash item to the extent such reversed non-cash item previously
reduced an addition to Consolidated Cash Flow pursuant to the parenthetical to
clause (vi) above). Notwithstanding the foregoing, the provision for taxes on
the income or profits of, and the depreciation and amortization and other
non-cash charges of, a Restricted Subsidiary of the referent Person shall be
added to Consolidated Net Income to compute Consolidated Cash Flow only to the
extent (and in same proportion) that the Net Income of such Restricted
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary, and
without direct or indirect restriction pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted Subsidiary or its
stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
(for such period, on a consolidated basis, determined in accordance with GAAP);
PROVIDED THAT (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
that is a Guarantor, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, and (iv) the cumulative effect of a change in accounting principles
shall be excluded. For purposes of the calculation in clause (c) of the covenant
described under the caption "--Certain Covenants--Restricted Payments" only, the
calculation of Consolidated Net Income shall exclude the effects of any
amortization of goodwill, research and development, inventory and other asset
write-ups, in each case as reflected on the Company's opening consolidated
balance sheet after giving effect to the Acquisition as a result of the
application of purchase accounting, with the amount of such exclusion (the
"Excluded Amount") being reduced by an amount equal to the product of (A) the
Excluded Amount and (B) the average effective consolidated federal, state and
local income tax rate of the Company applied by the Company in its consolidated
financial statements in accordance with GAAP over the period of determination
expressed as a decimal.
"CONSOLIDATED TANGIBLE ASSETS" means, with respect to any Person as of any
date, the amount which, in accordance with GAAP, would be set forth under the
caption "Total Assets" (or any like caption) on a consolidated balance sheet of
such Person and its Restricted Subsidiaries, less all intangible assets,
including, without limitation, goodwill, organization costs, patents,
trademarks, copyrights, franchises and research and development costs.
"CONTINUING DIRECTOR" means, as of any date of determination, any member of
the Company's board of directors who (i) was a member of the Company's board of
directors on the date of the Indenture or (ii) was nominated for election or
elected to such board of directors with the approval of a majority of the
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Continuing Directors who were members of such board of directors at the time of
such nomination or election.
"CONTROLLED SUBSIDIARY" of the Company means a Restricted Subsidiary of the
Company (i) (x) 90% or more of the total Equity Interests or other ownership
interests of which (other than Capital Stock constituting directors' qualifying
shares or interests held by directors or shares or interest required to be held
by foreign nationals, in each case to the extent mandated by applicable law) is
at the time owned by the Company (directly or through one or more Controlled
Subsidiaries of the Company), and (y) the remaining Equity Interests or other
ownership interest of which (other than Capital Stock constituting directors'
qualifying shares or interests held by directors or shares or interests required
to be held by foreign nationals, in each case to the extent mandated by
applicable law) is at the time owned by members of management of the Company or
any of its Restricted Subsidiaries, directors of the Company or any of its
Restricted Subsidiaries or consultants or suppliers to or customers of the
Company or any of its Restricted Subsidiaries and (ii) of which the Company
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies, whether through the ownership of voting securities,
by agreement or otherwise.
"CREDIT FACILITIES" means, with respect to the Company or any Restricted
Subsidiary, one or more debt facilities (including, without limitation, the
Senior Credit Facility) or commercial paper facility with banks or other
institutional lenders providing for revolving credit loans, other borrowings
(including term loans), receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice (or both) would be an Event of Default.
"DESIGNATED PREFERRED STOCK" means Preferred Stock of the Company that is
issued for cash (other than to a Restricted Subsidiary) and is so designated as
Designated Preferred Stock, pursuant to an Officers' Certificate executed by the
principal executive officer and the principal financial officer of the Company,
on the issuance date thereof.
"DESIGNATED SENIOR DEBT" means (i) any Indebtedness outstanding under the
Senior Credit Facility and (ii) any other Senior Debt permitted hereunder the
principal amount of which is $25.0 million or more and that has been designated
by the Company as "Designated Senior Debt."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature, except to the extent that such Capital Stock is solely
redeemable with, or solely exchangeable for, any Capital Stock of such Person
that is not Disqualified Stock.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCLUDED CONTRIBUTIONS" means net cash proceeds received by the Company
after the Issue Date from (a) capital contributions and (b) the private sale of
common stock of the Company to Carlyle or its Affiliates, in each case
designated as Excluded Contributions pursuant to an Officers' Certificate
executed by the principal executive officer and the principal financial officer
of the Company on the date such capital contributions are made or the date such
Equity Interests are sold, as the case may be, the cash proceeds of which are
excluded from the calculation set forth in clause (c) of the first paragraph of
the covenant described above under the caption "--Certain Covenants--Restricted
Payments".
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"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Restricted
Subsidiaries (other than Indebtedness under the Senior Credit Facility and the
Notes) in existence on the Issue Date, until such amounts are repaid.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings under any
Credit Facility) or issues preferred stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but on or
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense (net of interest
income) of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued (including, without limitation, original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations) but excluding amortization of debt
issuance costs, (ii) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period, (iii) any interest expense
on Indebtedness of another Person (excluding the Company or any Restricted
Subsidiary) that is guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such guarantee or Lien is called upon)
and (iv) the product of (a) all dividend payments, whether or not in cash, on
any series of Preferred Stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company (other than Disqualified Stock) and other than
dividends paid or accrued for the benefit of the Company or a Restricted
Subsidiary; PROVIDED that with respect to any series of Preferred Stock that is
Disqualified Capital Stock or Designated Preferred Stock that has not paid cash
dividends during such period but accrues dividends according to its terms during
any period prior to the maturity date of the Notes, cash dividends will be
deemed to have been paid with respect to such series of Disqualified or
Designated Preferred Stock during such period, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"FNSS-TURKEY" means FMC-Nurol Savunma Sanayii A.S., the Company's 51%-owned
Turkish joint venture.
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"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, the statements and pronouncements of
the Financial Accounting Standards Board and such other statements by such other
entities as have been approved by a significant segment of the accounting
profession, which are applicable at the Issue Date.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"GUARANTEE" means the guarantee of the Notes by each of the Guarantors
pursuant to Article 11 of the Indenture and in the form of guarantee endorsed on
the form of Note attached as Exhibit A to the Indenture and any additional
guarantee of the Notes to be executed by any Restricted Subsidiary of the
Company pursuant to the covenant described above under the caption "--Certain
Covenants--Guarantees of Certain Indebtedness."
"GUARANTORS" means (i) each of (a) United Defense, L.P., (after consummation
of the Acquisition), (b) UDLP Holdings Corp. and (c) Iron Horse Investors,
L.L.C., (ii) each of the Company's Subsidiaries which becomes a guarantor of the
Notes pursuant to the covenant described above under "--Certain
Covenants--Guarantees of Certain Indebtedness" and (iii) each of the Company's
Subsidiaries executing a supplemental indenture in which such Subsidiary agrees
to be bound by the terms of the Indenture; PROVIDED that any Person constituting
a Guarantor as described above shall cease to constitute a Guarantor when its
respective Guarantee is released in accordance with the terms thereof.
"HEDGING OBLIGATIONS" means, with respect to any Person, the net payment
Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements in the ordinary course of business designed to
protect such Person against fluctuations in commodity prices, interest rates or
currency exchange rates.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense, customer advance, progress
payment or trade payable, if and to the extent any of the foregoing indebtedness
(other than letters of credit and Hedging Obligations) would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
as well as all Indebtedness of others secured by a Lien on any asset of such
Person (whether or not such Indebtedness is assumed by such Person) and, to the
extent not otherwise included, the guarantee by such Person of any Indebtedness
of any other Person. The amount of any Indebtedness outstanding as of any date
shall be (i) the accreted value thereof, in the case of any Indebtedness that
does not require current payments of interest, and (ii) the principal amount
thereof, together with any interest thereon that is more than 30 days past due,
in the case of any other Indebtedness.
"INDEPENDENT FINANCIAL ADVISOR" means a reputable accounting, appraisal or
investment banking firm that is, in the reasonable judgment of the Board of
Directors, qualified to perform the task for which such firm has been engaged
hereunder and disinterested and independent with respect to the Company and its
Affiliates.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other Obligations),
advances of assets or capital contributions, purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP. If the Company or any of its
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Restricted Subsidiaries sells or otherwise disposes of any Equity Interests of
any direct or indirect Restricted Subsidiary or Permitted Joint Venture of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a direct or indirect Restricted Subsidiary or Permitted
Joint Venture of the Company, the Company or such Restricted Subsidiary, as the
case may be, shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Equity Interests of
such Restricted Subsidiary or Permitted Joint Venture not sold or disposed of in
an amount determined as provided in the final paragraph of the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
"INVESTMENTS" shall exclude extensions of trade credit by the Company and the
Restricted Subsidiaries on commercially reasonable terms in the ordinary course
of business.
"ISSUE DATE" means the date on which the Private Notes were first issued and
delivered.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
any asset and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds or Cash Equivalents
received by the Company or any of its Restricted Subsidiaries in respect of any
Asset Sale (including, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale), net
of all costs relating to such Asset Sale (including, without limitation, legal,
accounting, investment banking and brokers fees, and sales and underwriting
commissions) and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements) and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP. Net proceeds shall not include Asset Sale proceeds payable
to a holder of Capital Stock of any Permitted Joint Venture other than the
Company or any of its Restricted Subsidiaries in accordance with the terms of
the joint venture agreement or similar agreements governing such Permitted Joint
Venture.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (other than Permitted Joint
Ventures), (a) provides any guarantee or credit support of any kind (including
any undertaking, guarantee, indemnity, agreement or instrument that would
constitute Indebtedness) or (b) is directly or indirectly liable (as a guarantor
or otherwise), and (ii) the incurrence of which will not result in any recourse
against any of the assets of the Company or its Restricted Subsidiaries (other
than Permitted Joint Ventures).
"OBLIGATIONS" means any principal, premium, if any, interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or its Restricted Subsidiaries whether or
not a claim for post-filing interest is allowed in such proceeding), penalties,
fees, charges, expenses, indemnifications, reimbursement obligations, damages
(including Liquidated Damages), guarantees and other liabilities or amounts
payable under the documentation governing any Indebtedness or in respect
thereof.
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"PERMITTED BUSINESS" means the lines of business conducted by the Company
and its Subsidiaries on the date of the Acquisition and businesses reasonably
related thereto and reasonable extensions thereof, serving governmental,
commercial or other customers.
"PERMITTED HOLDERS" or "CARLYLE" means TC Group, L.L.C., a Delaware limited
liability company, and its Affiliates, and any successors thereof that are
Permitted Holders.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Controlled Subsidiary or in a Restricted Subsidiary of the Company that is a
Guarantor; (b) any Investment in Cash Equivalents; (c) any Investment by the
Company or any Restricted Subsidiary of the Company in a Person engaged in a
Permitted Business, if as a result of such Investment (i) such Person becomes a
Controlled Subsidiary or a Restricted Subsidiary that is a Guarantor or (ii)
such Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or a Controlled Subsidiary or a Restricted Subsidiary that is a Guarantor; (d)
any Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "--Repurchase at the Option of Holders--Asset
Sales"; (e) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company; (f) Investments
arising in connection with Hedging Obligations that are incurred in the ordinary
course of business consistent with past practices, for the purpose of fixing or
hedging currency, commodity or interest rate risk (including with respect to any
floating rate Indebtedness that is permitted by the terms of the Indenture to be
outstanding) in connection with the conduct of the business of the Company and
its Subsidiaries; (g) loans or advances to employees in an aggregate principal
amount not to exceed $500,000 at any time outstanding; (h) any Investment
acquired by the Company or any of its Restricted Subsidiaries (x) in exchange
for any other Investment or accounts receivable held by the Company or any such
Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such other
Investment or accounts receivable or (y) as a result of a foreclosure by the
Company or any of its Restricted Subsidiaries with respect to any Investment or
other transfer of title with respect to any Investment in default; (i) loans and
advances to officers, directors and employees for business-related travel
expenses, moving expenses and other similar expenses, in each case incurred in
the ordinary course of business; (j) Investments the payment for which consists
of Equity Interests of the Company (exclusive of Disqualified Stock); PROVIDED,
HOWEVER, that such Equity Interests will not increase the amount available for
Restricted Payments under clause (c) of the first paragraph of the covenant
described above under the caption "--Certain Covenants--Restricted Payments";
(k) any Investments by the Company or any Restricted Subsidiary of the Company
in Permitted Joint Ventures made after the Issue Date having an aggregate fair
market value, when taken together with all other Investments made pursuant to
this clause (k) that are at the time outstanding, not exceeding in the aggregate
10% of the Consolidated Tangible Assets of the Company as of the last day of the
most recent full fiscal quarter ending immediately prior to the date of such
Investment (with the fair market value of each Investment being measured at the
time made and without giving effect to subsequent changes in value); (l) any
Investment existing on the Issue Date; and (m) other Investments by the Company
or any of its Restricted Subsidiaries in any Person having an aggregate fair
market value, when taken together with all other Investments made pursuant to
this clause (m) that are at the time outstanding, not to exceed $25.0 million at
the time of such Investment (with the fair market value being measured at the
time made and without giving effect to subsequent changes in value).
"PERMITTED JOINT VENTURE" means any joint venture, partnership or other
Person designated by the Board of Directors, and until designation by the Board
of Directors to the contrary, (i) at least 50% of whose Capital Stock with
voting power under ordinary circumstances to elect directors (or Persons having
similar or corresponding powers and responsibilities) is at the time owned
(beneficially or directly) by the Company and/or by one or more Restricted
Subsidiaries of the Company and if the Company and/or such Restricted Subsidiary
or Subsidiaries owns more than 50% of the Capital Stock of the Permitted Joint
Venture, such Permitted Joint Venture is a Restricted Subsidiary of the Company,
(ii) all of whose
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Indebtedness is Non-Recourse Indebtedness or otherwise permitted to be incurred
by such entity pursuant to clause (ii) and/or (xiv) of the second paragraph of
the covenant described above under the caption "--Certain Covenants--Incurrence
of Indebtedness and Issuance of Preferred Stock" and (iii) which is engaged in a
Permitted Business. Any such designation or designation to the contrary shall be
evidenced to the Trustee by promptly filing with the Trustee a copy of the
resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to a
greater extent than, the Notes are subordinated to Senior Debt pursuant to the
Indenture.
"PERMITTED LIENS" means (i) Liens on assets of the Company or any of its
Restricted Subsidiaries to secure Senior Debt permitted by the Indenture to be
incurred; (ii) Liens on the assets of the Company or any of the Guarantors to
secure Hedging Obligations with respect to Indebtedness under any Credit
Facility permitted by the Indenture to be incurred; (iii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with the
Company or any Restricted Subsidiary of the Company; PROVIDED that such Liens
were in existence prior to the contemplation of such merger or consolidation and
do not extend to any assets other than those of the Person merged into or
consolidated with the Company; (iv) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary of the Company,
PROVIDED that such Liens were in existence prior to the contemplation of such
acquisition and only extend to the property so acquired; (v) Liens existing on
the Issue Date; (vi) Liens to secure any Permitted Refinancing Indebtedness
incurred to refinance any Indebtedness secured by any Lien referred to in the
foregoing clauses (i) through (v), as the case may be, at the time the original
Lien became a Permitted Lien; (vii) Liens in favor of the Company or any
Restricted Subsidiary that is a Guarantor; (viii) Liens incurred in the ordinary
course of business of the Company or any Restricted Subsidiary of the Company
with respect to obligations that do not exceed $10.0 million in the aggregate at
any one time outstanding and that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than trade
credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Restricted
Subsidiary; (ix) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds, deposits to secure the performance of
bids, trade contracts, government contracts, leases or licenses or other
obligations of a like nature incurred in the ordinary course of business
(including, without limitation, landlord Liens on leased properties); (x) Liens
for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently prosecuted, PROVIDED that any reserve or
other appropriate provision as shall be required to conform with GAAP shall have
been made therefor; (xi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (vi) of the second paragraph of the covenant
described above under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" covering only the assets acquired
with such Indebtedness; (xii) carriers', warehousemen's, mechanics', landlords'
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business in respect of obligations not overdue for a period in excess of 60 days
or which are being contested in good faith by appropriate proceedings promptly
instituted and diligently prosecuted; PROVIDED that any reserve or other
appropriate provision as shall be required to conform with GAAP shall have been
made therefor; (xiii) easements, rights-of-way, zoning and similar restrictions
and other similar encumbrances or title defects incurred, or leases or subleases
granted to others, in the ordinary course of business, which do not in any case
materially detract from the value of the property subject thereto or do not
interfere with or adversely affect in any material respect the ordinary conduct
of the business of the Company and its Restricted Subsidiaries taken as a whole;
(xiv) Liens in favor of customs and revenue authorities to secure payment of
customs duties in connection with the importation of goods in the ordinary
course of business and other similar Liens arising in the ordinary
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<PAGE>
course of business; and (xv) leases or subleases granted to third Persons not
interfering with the ordinary course of business of the Company or any of its
Restricted Subsidiaries, (xvi) Liens (other than any Lien imposed by ERISA or
any rule or regulation promulgated thereunder) incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance, and other types of social security; (xvii) deposits, in
an aggregate not to exceed $250,000, made in the ordinary course of business to
secure liability to insurance carriers; (xviii) Liens for purchase money
obligations (including refinancings thereof) permitted under the covenant
described above under the caption "-- Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock", PROVIDED that (A) the
Indebtedness secured by any such Lien is permitted under the covenant described
above under the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock" and (B) any such Lien encumbers only the asset so
purchased; (xix) any interest or title of a lessor or sublessor under any
operating lease; (xx) Liens under licensing agreements for use of intellectual
property entered into in the ordinary course of business; (xxi) Liens on the
assets of a Permitted Joint Venture securing Non-Recourse Indebtedness; (xxii)
Liens securing industrial revenue bonds; (xxiii) Liens in favor of the Trustee
under the Indenture and any substantially equivalent Lien granted to any trustee
or similar institution under any indenture for Senior Debt permitted by the
terms of the Indenture; (xxiv) Liens securing reimbursement obligations with
respect to letters of credit which encumber documents and other property
relating to such letters of credit and the products and proceeds thereof; (xxv)
Liens arising out of consignment or similar arrangements for the sale of goods
entered into by the Company or any Subsidiary in the ordinary course of business
in accordance with past practices; (xxvi) any interest or title of a lessor in
the property subject to any lease, whether characterized as capitalized or
operating other than any such interest or title resulting from or arising out of
a default by the Company or any Subsidiary of its obligations under such lease;
(xxvii) Liens arising from filing UCC financing statements for precautionary
purposes in connection with true leases of personal property that are otherwise
permitted under the applicable indenture and under which the Company or any
Subsidiary is lessee; (xxviii) Liens on assets or capital stock of Unrestricted
Subsidiaries; and (xxix) any attachment or judgment Lien not constituting an
Event of Default under clause (vii) of the first paragraph of the section
described above under the caption "Events of Default and Remedies."
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); PROVIDED that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued and unpaid interest on, any Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable fees and
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or a Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
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"PREFERRED STOCK" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such person over the holder so the
other Capital Stock issued by such Person.
"PUBLIC EQUITY OFFERING" means any underwritten primary public offering of
the Voting Stock of the Company pursuant to an effective registration statement
(other than a registration statement on Form S-4, Form S-8, or any successor or
similar form) under the Securities Act.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referenced
Person that is not an Unrestricted Subsidiary; PROVIDED that, on the Issue Date,
all Subsidiaries of the Company (other than FNSS-Turkey) shall be Restricted
Subsidiaries of the Company.
"SEC" means the Securities and Exchange Commission.
"SELLER NOTE" means the Senior Subordinated Note, if any, outstanding on the
Issue Date that was issued by the Company to certain former partners of United
Defense, L.P., as in effect on the Issue Date.
"SENIOR CREDIT FACILITY" means that certain Credit Agreement, to be dated as
of October 6, 1997, by and among United Defense Industries, Inc., Iron Horse
Investors, L.L.C., various lending institutions including Lehman Brothers
Commercial Paper Inc. and Citibank, N.A. (as Documentation Agents), and Bankers
Trust Company (as Administration Agent and as Syndication Agent) providing for
up to $495.0 million of term loan borrowings and $230.0 million of revolving
credit borrowings and letters of credit in each case, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, restated,
refunded, replaced or refinanced from time to time and any agreement (and
related documents) governing Indebtedness incurred to refund or refinance credit
extensions and commitments then outstanding or permitted to be outstanding under
such Senior Credit Facility or a successor Credit Facility, whether by the same
or any other lender or group of lenders. The Company shall promptly notify the
Trustee of any other lender or group of lenders. The Company shall promptly
notify the Trustee of any such refunding or refinancing of the existing Senior
Credit Facility.
"SENIOR DEBT" means (i) indebtedness of the Company for money borrowed and
all obligations, whether direct or indirect, under guarantees, letters of
credit, foreign currency or interest rate swaps, foreign exchange contracts,
caps, collars, options, hedges or other agreements or arrangements designed to
protect against fluctuations in currency values or interest rates, other
extensions of credit, expenses, fees, reimbursements, indemnities and all other
amounts (including interest at the contract rate accruing on or after the filing
of any petition in bankruptcy or reorganization relating to the Company whether
or not a claim for post-filing interest is allowed in such proceeding) owed by
the Company under, or with respect to, the Senior Credit Facility or any other
Credit Facility, (ii) the principal of and premium, if any, and accrued and
unpaid interest, whether existing on the date hereof or hereafter incurred, in
respect of (A) indebtedness of the Company for money borrowed, (B) express
written guarantees by the Company of indebtedness for money borrowed by any
other Person, (C) indebtedness evidenced by notes, debentures, bonds, or other
instruments of indebtedness for the payment of which the Company is responsible
or liable, by guarantees or otherwise, (D) obligations of the Company for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (E) obligations of the Company under any agreement
to lease, or any lease of, any real or personal property which, in accordance
with GAAP, is classified on the Company's consolidated balance sheet as a
liability, and (F) obligations of the Company under interest rate swaps, caps,
collars, options and similar arrangements and foreign currency hedges and (iii)
modifications, renewals, extensions, replacements, refinancings and refundings
of any such indebtedness, obligations or guarantees, unless, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding, it
is expressly provided that such indebtedness, obligations or guarantees, or such
modifications, renewals, extensions, replacements, refinancings or refundings
thereof,
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are not superior in right of payment to the Notes; PROVIDED that Senior Debt
will not be deemed to include (a) any obligation of the Company to any
Subsidiary (other than obligations pledged pursuant to the Senior Credit
Facility, as security for the obligations of the Company thereunder), (b) any
liability for federal, state, local or other taxes owed or owing by the Company,
(c) advance payments and progress payments to customers and any accounts payable
or other liability to trade creditors arising in the ordinary course of
business, (d) any Indebtedness, guarantee or obligation of the Company which is
expressly subordinate or junior by its terms in right of payment to any other
Indebtedness, guarantee or obligation of the Company, (e) Indebtedness with
respect to the Seller Note, (f) that portion of any Indebtedness incurred in
violation of the covenant described above under the caption "--Certain
Covenants-- Incurrence of Indebtedness and Issuance of Capital Stock" or (g)
Indebtedness of the Company which is classified as non-recourse in accordance
with GAAP or any unsecured claim arising in respect thereof by reason of the
application of section 1111(b)(1) of the Bankruptcy Code.
"SIGNIFICANT SUBSIDIARY" means each Restricted Subsidiary of the Company
that is a "significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X
under the Securities Act and the Exchange Act (as such regulation is in effect
on the date hereof).
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBORDINATED OBLIGATIONS" means any Indebtedness of the Company which is
expressly subordinated or junior in right of payment to the Notes.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person, (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or an entity described in clause (i) and
related to such Person or (b) the only general partners of which are such Person
or of one or more entities described in clause (i) and related to such Person
(or any combination thereof) and (iii) any limited liability company, the sole
managing member or the majority of the managing members of which are Persons
described in clause (i) or (ii).
"TREASURY RATE" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market date)) most nearly equal to the
period from the Redemption Date to November 15, 2002; provided, however, that if
the period from the Redemption Date to November 15, 2002 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the Redemption Date to November 15, 2002
is less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company (including
any newly acquired or newly formed Subsidiary of the Company) that is designated
by the Board of Directors as an Unrestricted Subsidiary and (ii) any Subsidiary
of an Unrestricted Subsidiary; but only to the extent that the Subsidiary
described in clause (i) and each of its Subsidiaries at the time of designation
and thereafter (a) have no Indebtedness other than Non-Recourse Indebtedness;
(b) are not party to any agreement, contract,
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arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained, in light of all the circumstances, at the
time from Persons who are not Affiliates of the Company; (c) are Persons with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Persons' financial condition or to
cause such Persons to achieve any specified levels of operating results; (d)
have not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Company or any of its Restricted Subsidiaries and
(e) do not own any Capital Stock of or own or hold any Lien on any property of,
the Company or any Restricted Subsidiary of the Company. The Board of Directors
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if
(x) immediately after giving effect to such designation, the Company is able to
incur at least $1.00 of additional Indebtedness under the first paragraph of the
covenant described above under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock", (y) immediately before and
immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing and (z) the Company certifies that
such designation complies with the covenant described above under the caption
"-- Certain Covenants--Restricted Payments." Any such designation by the Board
of Directors shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions. If, at any time, any Unrestricted Subsidiary would fail to
meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred as of
such date.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" means (i) a Restricted Subsidiary of the Company,
100% of the outstanding Capital Stock and other Equity Interests of which (other
than Capital Stock constituting directors' qualifying shares or interests held
by directors or shares or interests required to be held by foreign nationals, in
each case to the extent mandated by applicable law) is directly or indirectly
owned by the Company or by one or more Wholly Owned Subsidiaries of the Company.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Latham & Watkins, counsel to the Company, the following
discussion describes the material federal income tax consequences expected to
result to holders whose Private Notes are exchanged for Exchange Notes in the
Exchange Offer. Such opinion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service ("the Service") will not take a contrary view,
and no ruling from the Service has been or will be sought with respect to the
Exchange Offer. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify the statements and
conclusions set forth herein. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences to holders. Certain holders
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations, and persons who are not
citizens or residents of the United States) may be subject to special rules not
discussed below. EACH HOLDER OF PRIVATE NOTES SHOULD CONSULT ITS OWN TAX ADVISOR
AS TO THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING PRIVATE NOTES FOR EXCHANGE
NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN
LAWS.
The exchange of Private Notes for Exchange Notes will be treated as a
"non-event" for federal income tax purposes. As a result, no material federal
income tax consequences will result to holders exchanging Private Notes for
Exchange Notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer may be deemed to be an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with the resales of Exchange Notes received in exchange for
Private Notes where such Private Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that for the period required by the Securities Act, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer that
requests such document in the Letter of Transmittal for use in connection with
any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers or any other persons. Exchange Notes received by broker- dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealers and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders of Private Notes (including any broker-dealers), and
certain parties related to such holders, against certain liabilities, including
liabilities under the Securities Act.
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LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Latham & Watkins, Chicago, Illinois.
EXPERTS
The consolidated financial statements of United Defense, L.P., the balance
sheet of United Defense Industries, Inc. (a wholly-owned subsidiary of Iron
Horse Investors, L.L.C.), and the consolidated balance sheet of Iron Horse
Investors L.L.C. appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein, and are included herein in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Rights Agreement on
Form S-4 under the Securities Act with respect to the Exchange Notes offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits and undertakings contained in the
Registration Statement. For further information with respect to the Company and
the Exchange Notes offered hereby, reference is made to the Registration
Statement, including the exhibits thereto and the financial statements, notes
and schedules filed as a part thereof. As a result of the Exchange Offer, the
Company will become subject to the informational requirements of the Exchange
Act. The Registration Statement (and the exhibits and schedules thereto), as
well as the periodic reports and other information filed by the Company with the
Commission, may be inspected and copied at the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, New York, New York 10048 and Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies of such
materials may be obtained from the Public Reference Section of the Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
its public reference facilities in New York, New York and Chicago, Illinois at
the prescribed rates. The Commission also maintains a web site (located at
http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference.
Pursuant to the Indenture, the Company has agreed to furnish to the Trustee
and to registered holders of the Exchange Notes, without cost to the Trustee or
such registered holders, copies of all reports and other information that would
be required to be filed by the Company with the Commission under the Exchange
Act, whether or not the Company is then required to file reports with the
Commission. As a result of this Exchange Offer, the Company will become subject
to the periodic reporting and other informational requirements of the Exchange
Act. In the event that the Company ceases to be subject to the information
requirements of the Exchange Act, the Company has agreed that, so long as any
Exchange Notes remain outstanding, it will file with the Commission (but only if
the Commission at such time is accepting such voluntary filings) and distribute
to holders of the Notes copies of the financial information that would have been
contained in such annual reports and quarterly reports, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," that would have been required to be filed with the Commission
pursuant to the Exchange Act. The Company will also furnish such other reports
as it may determine or as may be required by law.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
IRON HORSE INVESTORS, L.L.C.
Report of Independent Auditors................................................... F-2
Consolidated Balance Sheet as of September 30, 1997.............................. F-3
Note to Consolidated Financial Statements........................................ F-4
UNITED DEFENSE INDUSTRIES, INC.
Report of Independent Auditors................................................... F-5
Balance Sheet as of September 30, 1997........................................... F-6
Note to Financial Statements..................................................... F-7
UNITED DEFENSE, L.P.
Report of Independent Auditors................................................... F-8
Consolidated Balance Sheets as of December 31, 1995 and 1996 and September 30,
1997 (unaudited)............................................................... F-9
Consolidated Statements of Income for the Years Ended December 31, 1994, 1995 and
1996 and Nine Months Ended September 30, 1996 and 1997 (unaudited)............. F-10
Consolidated Statements of Partners' Capital for the Years Ended December 31,
1994, 1995 and 1996 and Nine Months Ended September 30, 1997................... F-11
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995
and 1996 and Nine Months Ended September 30, 1996 and 1997..................... F-12
Notes to Consolidated Financial Statements....................................... F-13
</TABLE>
The Company has no operations independent from its subsidiaries. All of the
Guarantors are directly or indirectly wholly-owned and all such Guarantors have
guaranteed the Notes on a full, unconditional and joint and several basis. Any
non-guarantor subsidiaries have assets, equity, income and cash flows on an
individual and combined basis less than 3% of related pro forma amounts of the
Company.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Members
Iron Horse Investors, L.L.C.
We have audited the accompanying consolidated balance sheet of Iron Horse
Investors, L.L.C. as of September 30, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated balance sheet. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
balance sheet presentation. We believe that our audit of the consolidated
balance sheet provides a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of Iron Horse
Investors, L.L.C. at September 30, 1997 in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
Washington, DC
February 4, 1998
F-2
<PAGE>
IRON HORSE INVESTORS, L.L.C.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
Cash................................................................................ $ 1,000
---------
Total assets.................................................................. $ 1,000
---------
---------
LIABILITIES AND MEMBER'S CAPITAL
Member's capital $ 1,000
Total liabilities and member's capital........................................ $ 1,000
---------
---------
</TABLE>
See accompanying note.
F-3
<PAGE>
IRON HORSE INVESTORS, L.L.C.
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997
1. ORGANIZATION
Iron Horse Investors, L.L.C. (the Company) is newly formed limited liability
company formed in Delaware and capitalized on September 8, 1997. The
consolidated balance sheet includes the assets of the Company and its
wholly-owned subsidiary, United Defense Industries Inc., a Delaware corporation.
In October 1997, the Company was funded with $173 million of equity capital
from Carlyle Fund Investment Partnerships which was invested in United Defense
Industries, Inc. On October 6, 1997, United Defense Industries, Inc. acquired
(the Acquisition) 100% of the partnership interest of United Defense, L.P. (the
Partnership) in a transaction that will be accounted for as a purchase business
combination. The Acquisition was for an aggregate purchase price, subject to
provisions for adjustments, of $850 million.
There have been no operations of the Company as of September 30, 1997.
Accordingly, statements of the Company's operations and cash flows have not been
included herein.
United Defense Industries, Inc. funded the Acquisition, including fees and
expenses incurred in connection with the Acquisition, from the equity capital
referred to above and $925 million of debt facilities.
F-4
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
United Defense Industries, Inc.
We have audited the accompanying balance sheet of United Defense Industries,
Inc. (a wholly-owned subsidiary of Iron Horse Investors, L.L.C.) as of September
30, 1997. This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of United Defense Industries, Inc. at
September 30, 1997 in conformity with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Washington, DC
February 4, 1998
F-5
<PAGE>
UNITED DEFENSE INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF IRON HORSE INVESTORS, L.L.C.)
BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
Cash................................................................................ $ 1,000
---------
Total assets.................................................................. $ 1,000
---------
---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Stockholder's equity:
Common stock, par value $.01 per share
Authorized--400,000 shares; Issued and outstanding--100,000 shares.............. $ 1,000
---------
Total liabilities and stockholder's equity.................................... $ 1,000
---------
---------
</TABLE>
See accompanying note.
F-6
<PAGE>
UNITED DEFENSE INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF IRON HORSE INVESTORS, L.L.C.)
NOTE TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997
1. ORGANIZATION
United Defense Industries, Inc. (the Company) is a newly formed corporation
incorporated in Delaware and capitalized on September 8, 1997. The Company is
100% owned by Iron Horse Investors, L.L.C. The Company was formed to acquire
(the Acquisition) directly or indirectly 100% of the partnership interests of
United Defense, L.P. (the Partnership). The Partnership designs, develops and
manufactures various tracked armored combat vehicles and a wide spectrum of
weapons delivery systems for the armed forces of the United States and nations
around the world.
On October 6, 1997, the Company acquired 100% of the partnership interests
of the Partnership in a transaction that will be accounted for as a purchase
business combination. The acquisition of the partnership interests were for an
aggregate purchase price, subject to provisions for adjustment, of $850 million.
There have been no operations of the Company as of September 30, 1997.
Accordingly, statements of the Company's operations and cash flows have not been
included herein.
The Company funded the Acquisition, including fees and expenses incurred in
connection with the Acquisition, from a combination of approximately $173
million equity capital from Iron Horse Investors, L.L.C. and $925 million of
debt facilities.
F-7
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Partners
United Defense, L.P.
We have audited the accompanying consolidated balance sheets of United
Defense, L.P. and its subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, partners' capital, and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of United Defense,
L.P. and its subsidiaries at December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
Washington, DC
January 15, 1997
F-8
<PAGE>
UNITED DEFENSE, L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and marketable securities.......................................... $ 896 $ 23 $ 11,107
Short-term investment with FMC Corporation.............................. 30,350 19,497 --
Trade receivables....................................................... 98,929 85,483 77,883
Inventories (Note 3).................................................... 232,285 345,738 330,192
Other current assets.................................................... 9,165 4,021 4,776
---------- ---------- -------------
Total current assets...................................................... 371,625 454,762 423,958
Investments in affiliated companies....................................... 7,662 7,192 10,869
Property, plant and equipment (Note 4).................................... 475,891 466,493 460,776
Less--accumulated depreciation............................................ 360,087 359,163 359,590
---------- ---------- -------------
Net property, plant and equipment....................................... 115,804 107,330 101,186
Patents and deferred charges (Note 5)..................................... 39,132 34,194 25,841
Prepaid pension cost (Note 6)............................................. 35,381 41,501 50,284
---------- ---------- -------------
Total assets.............................................................. $ 569,604 $ 644,979 $ 612,138
---------- ---------- -------------
---------- ---------- -------------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable, trade and other....................................... $ 98,385 $ 71,723 $ 56,454
Advanced payments....................................................... 194,276 258,990 274,072
Accrued and other liabilities........................................... 62,698 72,400 84,508
Due to FMC Corporation for current services............................. 5,011 5,094 5,787
---------- ---------- -------------
Total current liabilities................................................. 360,370 408,207 420,821
Accrued pension cost (Note 6)............................................. 17,765 25,641 31,069
Accrued postretirement benefit cost (Note 7).............................. 35,036 31,493 29,246
---------- ---------- -------------
Total liabilities......................................................... 413,171 465,341 481,136
Commitments and contingencies (Notes 9, 11, 12 and 13)
Partners' capital:
FMC Corporation......................................................... 122,989 136,889 106,649
Harsco Corporation...................................................... 33,444 42,749 24,353
---------- ---------- -------------
Total partners' capital................................................... 156,433 179,638 131,002
---------- ---------- -------------
Total liabilities and partners' capital................................... $ 569,604 $ 644,979 $ 612,138
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
See accompanying notes.
F-9
<PAGE>
UNITED DEFENSE, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- ----------------------
1994 1995 1996 1996 1997
------------ ---------- ------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Sales.......................................... $ 1,076,259 $ 967,553 $ 1,029,333 $ 745,922 $ 913,925
Costs and expenses:
Cost of sales.................................. 809,813 746,701 820,845 595,757 754,977
Selling, general and administrative expenses... 131,822 122,675 128,455 89,992 91,413
Research and development....................... 16,311 12,422 12,853 9,143 12,096
------------ ---------- ------------ ---------- ----------
Total expenses............................... 957,946 881,798 962,153 694,892 858,486
Earnings related to investments in foreign
affiliates................................... 12,471 21,393 31,916 31,243 13,521
------------ ---------- ------------ ---------- ----------
Income from operations........................... 130,784 107,148 99,096 82,273 68,960
Other income (expense):
Interest....................................... 2,569 2,744 1,933 2,024 1,456
Miscellaneous, net............................. 52 (798) -- 195 --
------------ ---------- ------------ ---------- ----------
Income before income taxes....................... 133,405 109,094 101,029 84,492 70,416
Provision for income taxes (Note 2).............. 3,878 1,429 2,859 -- 1,523
------------ ---------- ------------ ---------- ----------
Net income....................................... $ 129,527 $ 107,665 $ 98,170 $ 84,492 $ 68,893
------------ ---------- ------------ ---------- ----------
------------ ---------- ------------ ---------- ----------
</TABLE>
See accompanying notes.
F-10
<PAGE>
UNITED DEFENSE, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(IN THOUSANDS)
<TABLE>
<CAPTION>
FMC HARSCO TOTAL
---------- ---------- -----------
<S> <C> <C> <C>
Initial partnership contributions as of January 1, 1994...................... $ 124,740 $ 29,600 $ 154,340
Distributions 1994........................................................... (90,117) (70,054) (160,171)
1994 net income.............................................................. 69,736 59,791 129,527
---------- ---------- -----------
Balance, December 31, 1994................................................... 104,359 19,337 123,696
Distributions 1995........................................................... (37,117) (37,811) (74,928)
1995 net income.............................................................. 55,747 51,918 107,665
---------- ---------- -----------
Balance, December 31, 1995................................................... 122,989 33,444 156,433
Distributions 1996........................................................... (36,999) (37,966) (74,965)
1996 net income.............................................................. 50,899 47,271 98,170
---------- ---------- -----------
Balance, December 31, 1996................................................... 136,889 42,749 179,638
Distributions (Unaudited).................................................... (63,719) (50,690) (114,409)
Liabilities transferred from FMC (Unaudited)................................. (1,872) (1,248) (3,120)
Net income nine months ended September 30, 1997 (Unaudited).................. 35,351 33,542 68,893
---------- ---------- -----------
Balance, September 30, 1997 (Unaudited)...................................... $ 106,649 $ 24,353 $ 131,002
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes.
F-11
<PAGE>
UNITED DEFENSE, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------- ----------------------
1994 1995 1996 1996 1997
---------- ---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.......................................... $ 129,527 $ 107,665 $ 98,170 $ 84,492 $ 68,893
Adjustments for noncash components of net income:
Depreciation...................................... 28,993 26,728 26,327 19,316 19,331
Amortization of restructuring costs............... -- -- 12,667 9,500 9,673
Other............................................. 78 (3,543) 519 (4,560) (7,636)
Changes in assets and liabilities:
Trade receivables............................... 7,401 (17,678) 13,446 33,217 7,600
Inventories..................................... (2,609) (49,320) (113,453) (83,632) 15,546
Other current assets............................ (964) 780 5,144 6,052 (745)
Prepaid pension cost............................ (5,898) (3,446) (6,120) (3,006) (8,783)
Restructuring costs............................. (7,044) (23,498) (7,778) (7,778) --
Accounts payable, trade and other............... (2,290) 23,327 (26,662) (38,237) (15,278)
Advanced payments............................... (8,613) 28,859 64,714 27,725 15,082
Accrued and other liabilities................... 21,912 4,038 9,702 (2,306) 11,626
Due to FMC Corporation for current services..... 2,513 2,498 83 13,033 693
Accrued pension cost............................ 6,072 5,419 7,876 -- 5,428
Accrued postretirement benefit cost............. (3,069) (7,171) (3,543) 2,875 (2,247)
---------- ---------- ----------- ---------- ----------
Cash provided by operating activities............... 166,009 94,658 81,092 56,691 119,183
---------- ---------- ----------- ---------- ----------
INVESTING ACTIVITIES
Capital spending.................................... (18,259) (24,124) (22,396) (16,504) (20,125)
Disposal of property, plant and equipment........... 1,138 3,640 4,543 3,302 6,938
Short-term investment with FMC Corporation.......... -- (30,350) 10,853 8,600 19,497
---------- ---------- ----------- ---------- ----------
Cash (used) provided in investing activities........ (17,121) (50,834) (7,000) (4,602) 6,310
---------- ---------- ----------- ---------- ----------
FINANCING ACTIVITIES
Cash contributions from Partners.................... 41,670
Partner distributions............................... (160,171) (74,928) (74,965) (52,985) (114,409)
---------- ---------- ----------- ---------- ----------
Cash used in financing activities................... (118,501) (74,928) (74,965) (52,985) (114,409)
---------- ---------- ----------- ---------- ----------
Increase (decrease) in cash and marketable
securities........................................ 30,387 (31,104) (873) (896) 11,084
Cash and marketable securities, beginning of
period............................................ 1,613 32,000 896 896 23
---------- ---------- ----------- ---------- ----------
Cash and marketable securities, end of period....... $ 32,000 $ 896 $ 23 $ -- $ 11,107
---------- ---------- ----------- ---------- ----------
---------- ---------- ----------- ---------- ----------
</TABLE>
See accompanying notes.
F-12
<PAGE>
UNITED DEFENSE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
1. FORMATION OF UNITED DEFENSE, L.P.
On January 28, 1994, FMC Corporation (FMC) and Harsco Corporation (Harsco)
announced completion of a series of agreements to combine certain assets and
liabilities of FMC's Defense Systems Group (DSG) and Harsco's BMY Combat Systems
Division (BMY). The effective date of the combination was January 1, 1994. The
combined company, United Defense, L. P. (the partnership), operates as a limited
partnership. FMC is the Managing General Partner with a 60% equity interest and
Harsco Defense Holding is a Limited Partner holding a 40% equity interest.
The partnership designs, develops and manufactures various tracked armored
combat vehicles and a wide spectrum of weapons delivery systems for the armed
forces of the United States and nations around the world.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements include the accounts of the partnership and its
wholly owned subsidiaries. Intercompany accounts and transactions are eliminated
in consolidation.
The financial information presented as of any date other than December 31
has been prepared from the books and records without audit. In the opinion of
management, the accompanying unaudited financial statements contain all
adjustments, consisting only of normal recurring adjustments, except as
described herein, necessary to present fairly the partnership's financial
position as of September 30, 1997, the results of its operations and its cash
flows for the nine months ended September 30, 1997 and 1996, and the changes in
partners' capital for the nine months ended September 30, 1997. The results of
operations presented are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997.
SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes, in particular, estimates of contract cost and revenues used
in the earnings recognition process. Actual results could differ from those
estimates.
REVENUE RECOGNITION FOR CONTRACTS-IN-PROGRESS
Sales are recognized on most production contracts as deliveries are made or
accepted. Sales under cost reimbursement contracts for research, engineering,
prototypes, repair and maintenance and certain other contracts are recorded as
costs are incurred and include estimated fees in the proportion that costs
incurred to date bear to total estimated costs. Changes in estimates for sales
and profits are recognized in the period in which they are determinable using
the cumulative catch-up method. Claims are considered in the estimated contract
performance at such time as realization is probable. Any anticipated losses on
contracts are charged to operations as soon as they are determinable.
During 1996, the partnership recognized a $14.3 million reduction in cost of
sales as a result of a settlement with the U.S. government on the cost of a
component supplied by the U.S. government on a
F-13
<PAGE>
UNITED DEFENSE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
group of related contracts. Cost of sales for the nine months ended September
30, 1997 includes approximately $13.5 million of non-cash charges recorded for
the quarter ended September 1997 for changes in estimated contract profitability
related to contractual issues with customers and other matters resulting from
the periodic reassessment of the estimated profitability of contracts in
progress.
INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is
determined on the last-in, first-out (LIFO) basis, except for inventories
relating to long-term contracts. Inventoried costs relating to long-term
contracts not valued on the LIFO basis are stated at the actual production cost
incurred to date, reduced by amounts recognized as cost of sales. The costs
attributed to units delivered under contracts are based on gross margins
expected to be realized over the life of the related contract. Gross margins are
based on the estimated revenue less the estimated cost of all units expected to
be produced over the life of the related contract.
Inventory costs include manufacturing overhead. Costs normally associated
with general and administrative functions, independent research and bid and
proposal are expensed as incurred.
BMY had followed the accounting practice of capitalizing general and
administrative expense in inventory. To conform with the partnership's
accounting policy and the agreement between FMC and Harsco, $7.4 million of such
expenses, which were included in the inventory contributed by Harsco, were
charged against income during 1994.
INVESTMENTS IN AFFILIATED COMPANIES
The investment in a majority owned foreign joint venture in Turkey is
carried at cost since there is uncertainty regarding the partnership's ability
to control this venture or to repatriate earnings. Income is recognized as
dividends are received. The partnership had accounted for its investment in a
foreign joint venture in Saudi Arabia at cost through 1995 because of
uncertainties as to the long-term prospects for this venture. In 1996,
consistent with a significant expansion of the venture's business and positive
long-term prospects for the business, the partnership changed from the cost to
the equity method. The impact on the partnership's results of operations was not
material. Equity in earnings from this venture was $3.8 million for the year
ended December 31, 1996 and $3.1 million and $8.2 million for the nine months
ended September 30, 1996 and 1997. Dividends received related to investments
accounted for using the cost method were $12.5 million, $21.4 million and $28.1
million during the years ended December 31, 1994, 1995 and 1996, respectively
and $28.1 million and $5.3 million for the nine months ended September 30, 1996
and 1997.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation is provided
principally on the sum-of-the-years digits and straight-line methods over
estimated useful lives of the assets (land improvements-- twenty years;
buildings--twenty to thirty-five years; and machinery and equipment--three to
twelve years). Gains and losses realized upon sale or retirement of assets are
included in other income.
F-14
<PAGE>
UNITED DEFENSE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Maintenance and repairs are expensed as incurred. Expenditures that extend
the useful life of property, plant and equipment or increase its productivity
are capitalized and depreciated.
ADVANCED PAYMENTS RECEIVED FROM CUSTOMERS
Amounts advanced by customers as deposits on orders not yet billed and
progress payments on contracts-in-progress are recorded as current liabilities.
FINANCIAL INSTRUMENTS
The fair values of financial instruments approximated their carrying values
at December 31, 1995 and 1996. Fair values have been determined through
information obtained from market sources and management estimates.
ENVIRONMENTAL
Under the Participation Agreement between FMC and Harsco each partner
generally is financially accountable to the partnership for environmental
conditions occurring prior to formation of the partnership at facilities or
properties previously operated or used in their respective businesses, to the
extent that costs incurred are not recovered from third parties or not covered
by environmental accruals contributed by the parties at formation. At December
31, 1995 and 1996, $4.9 million and $4.2 million, respectively, of the FMC
contributed accruals and $1.7 million and $1.4 million, respectively, of the
Harsco contributed accruals are unused.
INCOME TAXES
As a limited partnership, income or loss passes to the partners and is
taxable at that level, except for taxes payable on the income of the
partnership's Foreign Sales Corporation (FSC) subsidiary. The FSC paid income
taxes amounting to $3.6 million, $3.5 million and $1.8 million during 1994, 1995
and 1996, respectively.
CASH FLOWS
Marketable securities consists of investments with initial maturities of
three months or less.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENT
Effective January 1, 1994 the partnership adopted the provisions of FAS 112,
"Employer's Accounting for Postemployment Benefits." This statement requires
accrual of liabilities for postemployment benefits provided to former or
inactive employees, their beneficiaries, and covered dependents after
employment, but before retirement, if those liabilities can be reasonably
estimated. Adoption of FAS 112 resulted in a charge to the partnership's 1994
earnings amounting to $826,000.
RECLASSIFICATIONS
Certain prior-year amounts have been reclassified in the accompanying
financial statements to conform with the current year's presentation.
F-15
<PAGE>
UNITED DEFENSE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
3. INVENTORIES
Inventories consist predominantly of costs for contracts in process and are
valued as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
At actual production cost............................. $ 25,751 $ 12,590 $ --
At cost, determined on a last-in, first out basis..... 206,534 333,148 330,192
---------- ---------- -------------
$ 232,285 $ 345,738 $ 330,192
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
The current replacement cost of LIFO inventories exceeded their recorded
values by approximately $25.4 million, $31.7 million, and $39.7 million at
December 31, 1995 and 1996 and September 30, 1997, respectively.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
Buildings............................................................. $ 53,272 $ 55,305
Machinery and equipment............................................... 395,468 382,573
Land and improvements................................................. 16,798 17,008
Construction in progress.............................................. 10,353 11,607
---------- ----------
475,891 466,493
Less: Accumulated depreciation........................................ 360,087 359,163
---------- ----------
Net property, plant and equipment..................................... $ 115,804 $ 107,330
---------- ----------
---------- ----------
</TABLE>
5. ADVANCE AGREEMENT
In October 1994 the partnership entered into an Advance Agreement with the
U.S. Department of Defense. Under the terms of the Agreement, the partnership is
permitted to defer certain costs associated with consolidation and restructuring
of its ground systems businesses that are incurred from January 1, 1994 through
September 30, 1996. Costs deferred will then be allocated ratably to contracts
with the Department of Defense for thirty-six months beginning January 1, 1996.
As of December 31, 1995 and 1996, consolidation and restructuring costs deferred
amount to $30.5 million and $38.3 million, respectively, and are included in
patents and deferred charges in the accompanying balance sheet. Accumulated
amortization as of December 31, 1996 was $12.7 million. Costs amortized during
the year ended December 31, 1996 and the nine months ended September 30, 1996
and 1997 were $12.7 million, $9.5 million and $9.7 million, respectively.
F-16
<PAGE>
UNITED DEFENSE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
6. RETIREMENT PLANS
Substantially all of the partnership's domestic employees are covered by
retirement plans. Plans covering salaried employees provide pension benefits
based on years of service and compensation. Plans covering hourly employees
generally provide benefits of stated amounts for each year of service.
The partnership's funding policy is to make contributions based on the
projected unit credit method and to limit contributions to amounts that are
currently deductible for tax purposes.
The following table summarizes the assumptions used and the components of
the net pension cost for the years ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Assumptions:
Weighted average discount rate............................. 8.00% 8.00% 8.00%
Rates of increase in future compensation levels............ 5.00% 5.00% 5.00%
Weighted average expected long-term asset return........... 9.60% 9.62% 9.62%
Components: (IN THOUSANDS)
Service cost................................................ $ 9,976 $ 8,744 $ 9,191
Interest cost on projected benefit obligation.............. 16,967 18,008 19,826
Actual return on plan assets--investment gains............. (6,106) (76,878) (61,135)
Net amortization and deferral.............................. (16,238) 55,886 34,918
------------ ------------ ------------
Net pension cost............................................. $ 4,599 $ 5,760 $ 2,800
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
As part of the partnership's downsizing and consolidation program, an
incentive benefit package, which lowered the early retirement penalty, was
offered to salaried and non-union hourly employees who were at least fifty-five
years of age with ten or more years of service. In addition to the voluntary
program, early retirement penalties were also adjusted for certain salaried and
hourly employees affected by the downsizing and consolidation
Pension expense includes a $3.8 million, $3.7 million and $1.2 million
charge related to special termination benefits (early retirement incentive) and
a $0.9 million, $1.0 million and $0.4 million curtailment charge included in net
amortization and deferral relating to the elimination of employees for 1994,
1995 and 1996, respectively.
F-17
<PAGE>
UNITED DEFENSE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
6. RETIREMENT PLANS (CONTINUED)
The funded status of the plans and prepaid or accrued pension cost
recognized in the partnership's financial statements as of December 31, 1995 and
1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
------------------------ ------------------------
OVER- UNDER- OVER- UNDER-
FUNDED FUNDED FUNDED FUNDED
PLANS PLANS PLANS PLANS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Actuarial present value of benefits for service rendered to
date:
Accumulated benefit obligation based on salaries to date,
including vested benefits of $197,675 for 1995 and $219,217
for 1996................................................... $ (102,852) $ (108,287) $ (106,965) $ (125,579)
Additional benefits based on estimated future salary
levels..................................................... -- (32,366) -- (37,115)
----------- ----------- ----------- -----------
Projected benefit obligation................................. (102,852) (140,653) (106,965) (162,694)
Plan assets at fair market value (1)......................... 182,507 153,565 208,380 175,830
----------- ----------- ----------- -----------
Plan assets in excess of projected benefit obligation........ 79,655 12,912 101,415 13,136
Unrecognized net transition asset............................ (10,640) 1,575 (8,512) 1,179
Unrecognized prior-service cost.............................. 2,776 7,535 5,756 6,550
Unrecognized net gain........................................ (36,410) (39,787) (57,158) (46,506)
----------- ----------- ----------- -----------
Net prepaid (accrued) pension cost........................... $ 35,381 $ (17,765) $ 41,501 $ (25,641)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
- --------------------------
(1) Primarily equities, bonds and fixed income securities.
7. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
Substantially all of the partnership's employees are covered by
postretirement health care and life insurance benefit programs. Employees
generally become eligible for the retiree benefit plans when they meet minimum
retirement age and service requirements. The cost of providing most of these
benefits is shared with retirees. The partnership has reserved the right to
change or eliminate these benefit plans.
During 1995, the partnership's medical contributions for certain hourly
employees were capped. This change, effective January 1, 1995, reduced the
benefit obligation by $9.9 million, amortizable over the remaining years of
service to full eligibility. Postretirement expenses in 1995 and 1996 include a
$0.9 million gain.
Postretirement expense in 1995 includes a $2.8 million curtailment gain as a
result of the partnership's downsizing and consolidation program.
The partnership funds a trust for retiree health and life benefits for
employees previously covered under the FMC benefit plans. During 1995, the
partnership began funding for benefits previously covered under the Harsco plan.
Actuarial assumptions used to determine costs and the benefit obligation
include a discount rate of 8% and weighted average expected return on long-term
assets of 9% for 1994, 1995, and 1996. The assumed rate of future increases in
per capita cost of health care benefits was 10% in 1995 and 1996, decreasing to
F-18
<PAGE>
UNITED DEFENSE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
7. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS (CONTINUED)
6% by the year 2001 and after. Increasing the health care cost trend rates by
one percentage point would increase the accumulated benefit obligation by
approximately $2.8 million and would increase annual service and interest costs
by approximately $0.3 million.
The following table summarizes the components of net postretirement benefit
cost for the years ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost............................................................ $ 1,372 $ 1,412 $ 1,174
Interest cost on accumulated postretirement benefit obligation.......... 4,576 3,935 4,159
Actual return on plan assets--investment (gains) losses................. 364 (4,468) (4,916)
Net amortization and deferral........................................... (2,203) (1,685) 981
--------- --------- ---------
Net periodic postretirement benefit cost................................ $ 4,109 $ (806) $ 1,398
--------- --------- ---------
--------- --------- ---------
</TABLE>
The funded status of the plans and accrued postretirement benefit cost
recognized in the partnership's financial statements as of December 31, 1995 and
1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
Accumulated postretirement obligation:
Retirees...................................................................... $ (33,135) $ (35,734)
Fully eligible active participants............................................ (5,244) (5,515)
Other active participants..................................................... (14,433) (14,905)
---------- ----------
Accumulated postretirement benefit obligation................................... (52,812) (56,154)
Plan assets at fair market value (1)............................................ 32,164 38,630
---------- ----------
Accumulated postretirement benefit obligation in excess of plan assets.......... (20,648) (17,524)
Unrecognized net gains.......................................................... (14,388) (13,969)
---------- ----------
Accrued postretirement benefit cost............................................. $ (35,036) $ (31,493)
---------- ----------
---------- ----------
</TABLE>
- ------------------------
(1) Primarily equities and fixed income securities.
8. EMPLOYEES' THRIFT AND STOCK PURCHASE PLAN
Substantially all of the partnership's employees are eligible to participate
in the partnership's defined contribution savings plans designed to comply with
the requirements of the Employee Retirement Income Security Act of 1974 (ERISA)
and Section 401(k) of the Internal Revenue Code. Charges against income for
matching contributions to the plans were $6.2 million, $6.6 million and $7.7
million in 1994, 1995 and 1996, respectively.
9. COMMITMENTS AND CONTINGENT LIABILITIES
The partnership leases office space, plants and facilities, and various
types of manufacturing, data processing and transportation equipment. Rent
expense for 1994, 1995 and 1996 was $10.8 million, $12.8
F-19
<PAGE>
UNITED DEFENSE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
9. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
million and $12.9 million, respectively. Minimum future rentals under
noncancellable leases, excluding a related party lease (See Note 12), are
estimated to be payable $8.4 million in 1997, $6.4 million in 1998, $3.5 million
in 1999, $0.6 million in 2000, $0.5 million in 2001, and $0.6 million
thereafter. The real estate leases generally provide for payment of property
taxes, insurance and repairs by the partnership.
The partnership is subject to claims and suits arising in the ordinary
course of its operations. In the opinion of management, the ultimate resolution
of any current pending legal proceedings will not have a material effect on the
partnership's financial position or results of operations.
At December 31, 1996, the partnership has outstanding letters of credit in
the amount of $80.1 million as collateral for performance on long-term
contracts.
10. PARTNERS' CAPITAL
Under the agreements of formation of the partnership, FMC and Harsco were
required to contribute net assets with an historical net book value of $154.3
million.
The agreement provides for allocation of profits and losses and distribution
of available cash generally on the basis of the partner's equity ownership
interests, after giving effect to a limited partner preferred distribution and
certain other items as agreed to by the partners. Under the terms of the
partnership agreement the partnership is required to make quarterly tax
distributions to each partner equal to the product of (i) such partner's share
of the adjusted taxable income of the partnership times (ii) 40%. In addition,
the partnership is required to make certain other distributions to the partners.
Such required distributions are also made with reference to the partnership's
adjusted taxable income.
FMC has the option to purchase or cause the partnership to purchase Harsco's
interest in the partnership for 110% of the appraised value of Harsco's interest
in the partnership subject to adjustment, as provided for in the partnership
agreement. Harsco has the option to require the partnership to purchase its
interest in the partnership for 95% of the appraised value of its partnership
interest similarly subject to adjustment as provided for in the partnership
agreement.
11. SIGNIFICANT CUSTOMER AND EXPORT SALES
Sales to various agencies of the U.S. Government aggregated $614.9 million,
$719.1 million and $819.9 million during 1994, 1995 and 1996, respectively. At
December 31, 1995 and 1996, trade accounts receivable from the U.S. Government
totaled $77.4 million and $44.1 million, respectively. Export sales, including
sales to foreign governments transacted through the U.S. Government, were $433.2
million, $216.3 million and $194.2 million during 1994, 1995 and 1996,
respectively. The geographic regions in which the Company transacts its export
sales are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1994 1995 1996
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Europe........................................................... $ 43.8 $ 9.4 $ 51.0
Far East......................................................... 207.9 155.3 115.7
Middle East...................................................... 181.5 51.6 27.5
--------- --------- ---------
Total........................................................ $ 433.2 $ 216.3 $ 194.2
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-20
<PAGE>
UNITED DEFENSE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
12. RELATED PARTY TRANSACTIONS
The partnership has contracted with FMC for various administrative and
support services. These services include computer services, systems and
programming, data communications, employee relocation support, payroll
processing, insurance and general management support. During the years ended
December 31, 1994, 1995 and 1996, the partnership paid $42.4 million, $39.8
million and $35.2 million, respectively, to FMC for their support.
The partnership leases office and manufacturing facilities in San Jose,
California from FMC. Under the lease agreement monthly rent payments are
comprised of fixed base rent plus depreciation on the facilities. Fixed base
rent is $2.0 million per year and the lease expires December 31, 2003. During
1994, 1995 and 1996 the partnership incurred rent amounting to $4.2 million,
$3.9 million and $3.7 million, respectively, under this lease.
Sales of inventory to FMC during 1994, 1995 and 1996 amounted to $2.8
million, $1.5 million and $1.1 million, respectively. Management believes that
such transactions were consummated on terms substantially similar to those that
would arise in transactions with third parties.
During 1995, the partnership entered into an agreement with FMC and Harsco
whereby the partnership's excess cash balances up to $40 million are invested
with FMC. Interest on these funds is earned based on the average monthly cost of
FMC's U.S. dollar revolver-related short-term borrowings for such month. In
addition, the partnership may offer short-term loans, not to exceed ninety days,
to the partners if funds are not immediately needed for working capital.
Interest on short-term borrowings is equal to LIBOR without premium. Interest on
all loans to FMC totaled $1.1 million and $1.8 million in 1995 and 1996.
13. EVENT SUBSEQUENT TO DATE OF AUDITOR'S REPORT
Alliant Techsystems Inc. ("Alliant Tech"), a subcontractor to the
partnership in connection with the partnership's Paladin howitzer prime
contract, has asserted a claim against the partnership alleging wrongful
termination of that subcontract by the partnership. The partnership maintains
that it terminated the Alliant Tech subcontract work in accordance with its
termination rights under the applicable subcontract agreement and pursuant to a
corresponding U.S. Army termination for convenience of the portion of the
partnership's prime contract that covered the pertinent components supplied by
Alliant Tech. Alliant Tech has asserted in writing its intention to pursue this
claim against the partnership for approximately $17 million in damages, but no
litigation has commenced. Management believes that the partnership has a valid
defense to this claim. However, no assurances can be given that the partnership
will be successful in its defense of this claim, in the event that the claim
were further pursued by Alliant.
F-21
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
the Prospectus, and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to its date. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
securities other than the securities to which it relates. This Prospectus does
not constitute an offer to sell or the solicitation of an offer to buy such
securities in any circumstances in which such offer or solicitation is unlawful.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.............................. 4
Risk Factors.................................... 19
The Exchange Offer.............................. 29
Use of Proceeds................................. 38
Capitalization.................................. 38
Unaudited Pro Forma Financial Data.............. 39
Selected Historical Financial Data.............. 46
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 48
Business........................................ 58
Management...................................... 75
Certain Transactions............................ 81
Principal Stockholders.......................... 82
The Acquisition................................. 83
Description of Certain Indebtedness............. 85
Description of the Notes........................ 87
Certain Federal Income Tax Considerations....... 121
Plan of Distribution............................ 121
Legal Matters................................... 122
Experts......................................... 122
Available Information........................... 122
Index to Financial Statements................... F-1
</TABLE>
UNITED DEFENSE
INDUSTRIES, INC.
8 3/4% SENIOR SUBORDINATED
NOTES DUE 2007
FOR ALL OUTSTANDING
8 3/4 SENIOR SUBORDINATED
NOTES DUE 2007
---------------------
PROSPECTUS
---------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II:
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company is a Delaware corporation and its Bylaws and Certificate of
Incorporation provide for indemnification of its directors, officers, employees
and agents to the fullest extent permitted by the Delaware General Corporation
Law (the "DGCL"), as the same exists or may hereafter be amended. Section 145 of
the DGCL provides in relevant part that a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that such person is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful.
In addition, Section 145 of the DGCL provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper. Delaware law further provides that nothing in the above-described
provisions shall be deemed exclusive of any other rights to indemnification or
advancement of expenses to which any person may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 102(b)(7) of the DGCL eliminates the liability of a corporation's
directors to a corporation or its stockholders, except for liabilities related
to a breach of duty of loyalty, actions not in good faith, and certain other
liabilities.
ITEM 21 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
+2.1 Purchase Agreement dated as of August 25, 1997 among FMC Corporation, Harsco Corporation, Harsco UDLP
Corporation and Iron Horse Acquisition Corp. (a copy of the schedules to this agreement will be
furnished supplementally upon request of the Commission).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
2.2 Supplemental Agreement No. 1 to Purchase Agreement dated as of August 25, 1997 among FMC Corporation,
Harsco Corporation, Harsco UDLP Corporation and Iron Horse Acquisition Corp.
+3.1 a Certificate of Incorporation of Iron Horse Acquisition Corp. (n/k/a) United Defense Industries, Inc.
+3.1 b Certificate of Amendment of Certificate of Incorporation Before Payment of Any Part of the Capital of
Iron Horse Acquisition Corp. (n/k/a United Defense Industries, Inc.)
+3.1 c Certificate of Amendment of the Certificate of Incorporation of United Defense Industries, Inc.
+3.2 By-laws of United Defense Industries, Inc.
+3.3 Certificate of Incorporation of UDLP Holdings Corp.
+3.4 By-laws of UDLP Holdings Corp.
+3.5 Amended and Restated Agreement of Limited Partnership of United Defense, L.P.
+3.6 Certificate of Amendment to Certificate of Limited Partnership of United Defense, L.P.
+3.7 Certificate of Formation of Iron Horse Investors, L.L.C.
+3.8 Limited Liability Company Agreement of Iron Horse Investors, L.L.C.
+4.1 Indenture dated as of October 6, 1997 among United Defense Industries, Inc., United Defense, L.P., UDLP
Holdings Corp. and Norwest Bank Minnesota, National Association
+4.2 Specimen Certificate of 8 3/4% Senior Subordinated Notes due 2007 (included in Exhibit 4.1 hereto)
+4.3 Purchase Agreement dated October 1, 1997 among United Defense Industries, Inc., UDLP Holdings Corp.,
Iron Horse Investors, L.L.C., United Defense, L.P., Lehman Brothers Inc., BT Alex. Brown Incorporated
and Chase Securities Inc.
+4.4 Registration Rights Agreement dated as of October 6, 1997 among United Defense Industries, Inc., United
Defense, L.P., UDLP Holdings Corp., Iron Horse Investors, L.L.C., Lehman Brothers Inc., BT Alex. Brown
Incorporated and Chase Securities Inc.
4.5 Credit Agreement dated as of October 6, 1997 among Iron Horse Investors, L.L.C., United Defense
Industries, Inc., various lending institutions party thereto, Citicorp USA, Inc. and Lehman Commercial
Paper Inc. as Documentation Agents, and Bankers Trust Company as Administrative Agent and as
Syndication Agent
4.6 Purchaser Note dated October 6, 1997 among United Defense Industries, Inc., United Defense, L.P., UDLP
Holdings Corp., FMC Corporation, Harsco Corporation and Harsco UDLP
5.1 Form of Opinion of Latham & Watkins regarding the validity of the Exchange Notes
8.1 Form of Tax Opinion of Latham & Watkins.
10.1 Lease Agreement dated as of June 1, 1994 among Calhoun Economic Development Council and United Defense,
L.P.
10.2 Facilities contract number DAAC67-93-C-0021 dated April 21, 1993 among FMC Corporation and LetterKenney
Army Depot for the use of the government owned facility located at Building 56 and 4 acres of land on
LetterKenney Army Depot, Chambersburg, PA 17201. Assignment of rights from FMC Corporation to United
Defense, L.P. accomplished by modification P00001.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.3 Sub-Lease Agreement among the Louisville/Jefferson County Development Authority, Inc. and United
Defense, L.P., as amended by that certain First Amendment to Sublease of Real and Personal Property
Agreement among the Louisville/Jefferson County Development Authority, Inc. and United Defense, L.P.
10.4 Facilities contract number N00024-93-E-8521, dated November 16, 1992 among United Defense, L.P.,
Armament Systems Divisions and the U.S. Government Naval Sea Systems Command for the use of the
government owned facility located at 4800 East River Road, Minneapolis, MN 55459.
10.5 Lease Agreement dated January 22, 1996 among Lewis F. Holmes III and United Defense, L.P.
10.6 Lease Agreement dated November 1, 1993 among Brier Hill Steel Company, Inc. and Harsco Corporation, as
amended by that certain Lease Novation Agreement among Harsco Corporation, Brier Hill Steel Company,
Inc. and United Defense, L.P. and by that certain Lease Modification dated June 17, 1996 among United
Defense, L.P. and Brier Hill Steel Company, Inc.
10.7 Lease Agreements dated June 1, 1989 among The Equitable Life Assurance Society of the United States and
FMC Corporation (Buildings A and C).
10.8 Lease Agreement dated May 23, 1979 among Devcon Investment Co. and FMC Corporation, as amended by
Amendment No. 1 to Lease dated November 25, 1985 among Santa Clara Property Associates, as successor to
the original lessor and FMC Corporation, as amended by Amendment to Lease dated February 9, 1987 among
Santa Clara Property Associates and FMC Corporation, as amended by Third Amendment to Lease dated
September 6, 1996 among California State Teachers' Retirement System, as Successor-In-Interest to the
lessor and FMC Corporation.
10.9 Intentionally Deleted.
10.10 Lease Agreement dated February 16, 1984 among John Arrillaga, Trustee, Richard T. Peery, Trustee and
FMC Corporation, as amended by Amendment to Lease dated February 9, 1987 among Santa Clara Property
Associates, as successor landlord and FMC Corporation, as amended by the Second Amendment to Lease
dated September 6, 1996 among California Teachers' Retirement System as successor landlord and FMC
Corporation.
+10.11 Transition Services Agreement dated as of October 6, 1997 among FMC Corporation, United Defense, L.P.
and United Defense Industries, Inc.
+10.12 Technology and Environmental Services Agreement dated as of October 6, 1997 among FMC Corporation and
United Defense Industries, Inc.
+10.13 Amended and Restated Lease Agreement dated as of October 6, 1997 among FMC Corporation and United
Defense, L.P.
+10.14 Amended and Restated Harsco Intellectual Property Agreement dated as of October 6, 1997 among Harsco
Corporation and United Defense, L.P.
+10.15 Amended and Restated FMC Intellectual Property Agreement dated as of October 6, 1997 among FMC
Corporation and United Defense, L.P.
+10.16 Management Agreement dated October 6, 1997 among United Defense Industries, Inc., United Defense, L.P.
and TC Group Management, L.L.C.
12.1 Statement Regarding Computation of Earnings to Fixed Charges
12.2 Statement Regarding Computation of Pro Forma Ratio of Earnings to Fixed Charges
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
+21.1 Subsidiaries of United Defense Industries, Inc.
23.1 Consent of Latham & Watkins (included in their opinion filed as Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, Independent Auditors
+24.1 Power of Attorney of Registrants (included on signature page to this Registration Statement on Form
S-4)
25.1 Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939 of Norwest
Bank Minnesota, National Association
+27.1 Financial Data Schedule
+99.1 Form of Letter of Transmittal
+99.2 Form of Notice of Guaranteed Delivery
+99.3 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9
</TABLE>
- ------------------------
+ Previously filed
(b) Financial Statement Schedules:
Schedules are omitted because of the absence of the conditions under which
they are required or because the information required by such omitted schedules
is set forth in the financial statements or the notes thereto.
ITEM 22. UNDERTAKINGS
(a) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities hereunder through use of a prospectus
which is part of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1993;
II-4
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement of
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1993, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, there unto duly
authorized, in Arlington, Virginia on February 5, 1998.
<TABLE>
<S> <C> <C>
UNITED DEFENSE INDUSTRIES, INC. ("UDI")
and the Guarantors listed on Annex A
(the "Guarantors")
By /s/ FRANCIS RABORN
------------------------------------------
Francis Raborn
CHIEF FINANCIAL OFFICER
AND PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER OF UDI AND EACH OF THE GUARANTORS
</TABLE>
S-1
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Francis
Raborn and David V. Kolovat, and each of them, such person's true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign
this Registration Statement, and any and all amendments thereto (including pre-
and post-effective amendments) or any registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and to file the same, with exhibits and
schedules thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
necessary or desirable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ WILLIAM E. CONWAY, JR.*
- ------------------------------ Chairman of the Board of
William E. Conway, Jr. UDI
/s/ FRANK C. CARLUCCI*
- ------------------------------ Director of UDI
Frank C. Carlucci
/s/ J. H. BINFORD PEAY, III*
- ------------------------------ Director of UDI
J. H. Binford Peay, III
Director of UDI and sole
director of UDLP
Holdings Corp. (for UDLP
/s/ ALLAN M. HOLT* Holdings Corp. itself
- ------------------------------ and as the corporate February 5, 1998
Allan M. Holt general partner of
United Defense, L.P.)
and Iron Horse Investors
L.L.C.
/s/ PETER J. CLARE*
- ------------------------------ Director of UDI
Peter J. Clare
/s/ THOMAS W. RABAUT* President, Chief Executive
- ------------------------------ Officer and Director of
Thomas W. Rabaut UDI
/s/ FRANCIS RABORN
- ------------------------------ Director of UDI
Francis Raborn
S-2
<PAGE>
NAME DATE
------------------------- -------------------
*By: /s/ FRANCIS RABORN February 5, 1998
-------------------------
Francis Raborn
ATTORNEY-IN-FACT
S-3
<PAGE>
ANNEX A
IRON HORSE INVESTORS, L.L.C.
UDLP HOLDINGS CORP.
UNITED DEFENSE, L.P.
S-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
+2.1 Purchase Agreement dated as of August 25, 1997 among FMC Corporation, Harsco Corporation, Harsco UDLP
Corporation and Iron Horse Acquisition Corp. (a copy of the schedules to this agreement will be
furnished supplementally upon request of the Commission).
2.2 Supplemental Agreement No. 1 to Purchase Agreement dated as of August 25, 1997 among FMC Corporation,
Harsco Corporation, Harsco UDLP Corporation and Iron Horse Acquisition Corp.
+3.1 a Certificate of Incorporation of Iron Horse Acquisition Corp. (n/k/a) United Defense Industries, Inc.
+3.1 b Certificate of Amendment of Certificate of Incorporation Before Payment of Any Part of the Capital of
Iron Horse Acquisition Corp. (n/k/a United Defense Industries, Inc.)
+3.1 c Certificate of Amendment of the Certificate of Incorporation of United Defense Industries, Inc.
+3.2 By-laws of United Defense Industries, Inc.
+3.3 Certificate of Incorporation of UDLP Holdings Corp.
+3.4 By-laws of UDLP Holdings Corp.
+3.5 Amended and Restated Agreement of Limited Partnership of United Defense, L.P.
+3.6 Certificate of Amendment to Certificate of Limited Partnership of United Defense, L.P.
+3.7 Certificate of Formation of Iron Horse Investors, L.L.C.
+3.8 Limited Liability Company Agreement of Iron Horse Investors, L.L.C.
+4.1 Indenture dated as of October 6, 1997 among United Defense Industries, Inc., United Defense, L.P., UDLP
Holdings Corp. and Norwest Bank Minnesota, National Association
+4.2 Specimen Certificate of 8 3/4% Senior Subordinated Notes due 2007 (included in Exhibit 4.1 hereto)
+4.3 Purchase Agreement dated October 1, 1997 among United Defense Industries, Inc., UDLP Holdings Corp.,
Iron Horse Investors, L.L.C., United Defense, L.P., Lehman Brothers Inc., BT Alex. Brown Incorporated
and Chase Securities Inc.
+4.4 Registration Rights Agreement dated as of October 6, 1997 among United Defense Industries, Inc., United
Defense, L.P., UDLP Holdings Corp., Iron Horse Investors, L.L.C., Lehman Brothers Inc., BT Alex. Brown
Incorporated and Chase Securities Inc.
4.5 Credit Agreement dated as of October 6, 1997 among Iron Horse Investors, L.L.C., United Defense
Industries, Inc., various lending institutions party thereto, Citicorp USA, Inc. and Lehman Commercial
Paper Inc. as Documentation Agents, and Bankers Trust Company as Administrative Agent and as
Syndication Agent
4.6 Purchaser Note dated October 6, 1997 among United Defense Industries, Inc., United Defense, L.P., UDLP
Holdings Corp., FMC Corporation, Harsco Corporation and Harsco UDLP
5.1 Form of Opinion of Latham & Watkins regarding the validity of the Exchange Notes
8.1 Form of Tax Opinion of Latham & Watkins.
10.1 Lease Agreement dated as of June 1, 1994 among Calhoun Economic Development Council and United Defense,
L.P.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.2 Facilities contract number DAAC67-93-C-0021 dated April 21, 1993 among FMC Corporation and LetterKenney
Army Depot for the use of the government owned facility located at Building 56 and 4 acres of land on
LetterKenney Army Depot, Chambersburg, PA 17201. Assignment of rights from FMC Corporation to United
Defense, L.P. accomplished by modification P00001.
10.3 Sub-Lease Agreement among the Louisville/Jefferson County Development Authority, Inc. and United
Defense, L.P., as amended by that certain First Amendment to Sublease of Real and Personal Property
Agreement among the Louisville/Jefferson County Development Authority, Inc. and United Defense, L.P.
10.4 Facilities contract number N00024-93-E-8521, dated November 16, 1992 among United Defense, L.P.,
Armament Systems Divisions and the U.S. Government Naval Sea Systems Command for the use of the
government owned facility located at 4800 East River Road, Minneapolis, MN 55459.
10.5 Lease Agreement dated January 22, 1996 among Lewis F. Holmes III and United Defense, L.P.
10.6 Lease Agreement dated November 1, 1993 among Brier Hill Steel Company, Inc. and Harsco Corporation, as
amended by that certain Lease Novation Agreement among Harsco Corporation, Brier Hill Steel Company,
Inc. and United Defense, L.P. and by that certain Lease Modification dated June 17, 1996 among United
Defense, L.P. and Brier Hill Steel Company, Inc.
10.7 Lease Agreements dated June 1, 1989 among The Equitable Life Assurance Society of the United States and
FMC Corporation (Buildings A and C).
10.8 Lease Agreement dated May 23, 1979 among Devcon Investment Co. and FMC Corporation, as amended by
Amendment No. 1 to Lease dated November 25, 1985 among Santa Clara Property Associates, as successor to
the original lessor and FMC Corporation, as amended by Amendment to Lease dated February 9, 1987 among
Santa Clara Property Associates and FMC Corporation, as amended by Third Amendment to Lease dated
September 6, 1996 among California State Teachers' Retirement System, as Successor-In-Interest to the
lessor and FMC Corporation.
10.9 Intentionally Deleted.
10.10 Lease Agreement dated February 16, 1984 among John Arrillaga, Trustee, Richard T. Peery, Trustee and
FMC Corporation, as amended by Amendment to Lease dated February 9, 1987 among Santa Clara Property
Associates, as successor landlord and FMC Corporation, as amended by the Second Amendment to Lease
dated September 6, 1996 among California Teachers' Retirement System as successor landlord and FMC
Corporation.
+10.11 Transition Services Agreement dated as of October 6, 1997 among FMC Corporation, United Defense, L.P.
and United Defense Industries, Inc.
+10.12 Technology and Environmental Services Agreement dated as of October 6, 1997 among FMC Corporation and
United Defense Industries, Inc.
+10.13 Amended and Restated Lease Agreement dated as of October 6, 1997 among FMC Corporation and United
Defense, L.P.
+10.14 Amended and Restated Harsco Intellectual Property Agreement dated as of October 6, 1997 among Harsco
Corporation and United Defense, L.P.
+10.15 Amended and Restated FMC Intellectual Property Agreement dated as of October 6, 1997 among FMC
Corporation and United Defense, L.P.
+10.16 Management Agreement dated October 6, 1997 among United Defense Industries, Inc., United Defense, L.P.
and TC Group Management, L.L.C.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
12.1 Statement Regarding Computation of Earnings to Fixed Charges
12.2 Statement Regarding Computation of Pro Forma Ratio of Earnings to Fixed Charges
+21.1 Subsidiaries of United Defense Industries, Inc.
23.1 Consent of Latham & Watkins (included in their opinion filed as Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, Independent Auditors
+24.1 Power of Attorney of Registrants (included on signature page to this Registration Statement on Form
S-4)
25.1 Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939 of Norwest
Bank Minnesota, National Association
+27.1 Financial Data Schedule
+99.1 Form of Letter of Transmittal
+99.2 Form of Notice of Guaranteed Delivery
+99.3 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9
</TABLE>
- ------------------------
+ Previously filed
<PAGE>
SUPPLEMENTAL AGREEMENT NO. 1 TO PURCHASE AGREEMENT
THIS SUPPLEMENTAL AGREEMENT NO. 1 TO PURCHASE AGREEMENT (this
"AGREEMENT"), dated as of August 25, 1997, is entered into by and among FMC
Corporation, a Delaware corporation, Harsco Corporation, a Delaware corporation,
Harsco UDLP Corporation, a Pennsylvania business corporation (together with FMC
Corporation and Harsco Corporation, "SELLERS"), and Iron Horse Acquisition
Corp., a Delaware corporation ("BUYER"). Capitalized terms used and not
otherwise defined in Section 6 below or otherwise herein have the meaning
ascribed to such terms in the Purchase Agreement (as defined below).
WHEREAS, Sellers and Buyer are parties to a Purchase Agreement (the
"PURCHASE AGREEMENT"), dated as of the date hereof;
WHEREAS, this Agreement contemplates the issuance of a Special Note
under certain specified circumstances, which Special Note is intended to provide
Buyer security against any Loss resulting from a Call Election, a Liquidation
Election, a Purported Turkish Termination, a Joint Venture Termination, a
License Agreement Termination or other Adverse Legal Consequences (collectively,
"Loss Events" and each, a "Loss Event") as applicable, but which is not intended
to provide any compensation or security with respect to any Losses resulting
from any other factors, including the performance of UDLP or FNSS, changes
within SSM and/or the government of Turkey and the scheduled expiration of the
Turkish Procurement Contract; and
WHEREAS, Sellers and Buyer intend this Agreement to supplement and
modify the terms of the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. MODIFICATION OF THE INITIAL PURCHASE PRICE. Pursuant to Section
1(b) of the Purchase Agreement, the Initial Purchase Price is $850,000,000
payable in immediately available funds at the Closing. Notwithstanding the
terms of Section 1(b) of the Purchase Agreement, and any other provision of the
Purchase Agreement to the contrary, Sellers and Buyer hereby agree that unless
Sellers have obtained a Nurol Waiver and a Turkish Acknowledgment prior to the
Closing, the Initial Purchase Price shall be modified to consist of (i)
$800,000,000 payable in immediately available funds at the Closing and (ii) a
note in the aggregate principal amount of $50,000,000, in form and substance
reasonably satisfactory to Sellers and Buyer, containing the terms and
conditions specified on EXHIBIT A hereto (the "SPECIAL NOTE") deliverable to
Sellers at the Closing.
2. MANDATORY PREPAYMENT OF SPECIAL NOTE. Upon the first to occur of
any of the following events, the aggregate principal amount outstanding under
the Special Note and all accrued and unpaid interest thereon will become
immediately due and payable, subject to the rights of set-off in Section 3:
<PAGE>
(a) the occurrence of both (i) a Nurol Waiver or a Nurol Revocation
and (ii) a Turkish Acknowledgment;
(b) the consummation of an initial public offering of shares of
common equity interests or other securities equivalent thereto of UDLP;
(c) the consummation of (i) the sale of UDLP to one or more parties
pursuant to which such party or parties acquire greater than 50% of the
equity interests, capital stock or other securities of UDLP (whether by
merger, consolidation, sale or transfer of equity interests, capital stock
or other securities or otherwise) or (ii) the sale of all or substantially
all of UDLP's assets, in either case whether in one transaction or a series
of related transactions;
(d) the consummation of a sale of all or substantially all of UDLP's
Turkish business or UDLP's interests in FNSS not pursuant to a Call or a
Liquidation;
(e) the consummation of the Call pursuant to the terms of Section
11.4 of the Joint Venture Agreement; and
(f) the substantial completion of the Liquidation pursuant to the
terms of Section 11.4 of the Joint Venture Agreement.
3. RIGHT OF SET-OFF. Upon the maturity of the Special Note, whether
at scheduled maturity or pursuant to the mandatory prepayment provisions of
Section 2 or pursuant to acceleration (the "SET-OFF DATE"), Buyer shall have the
right to assert a set-off against any and all amounts due under the Special Note
the amount of any Loss that Buyer shall have incurred as a result of a Loss
Event. If Buyer desires to assert such a Loss, Buyer shall provide to Sellers
(as soon as possible, and in any event within 30 days after the Set-Off Date in
the case of a mandatory prepayment of Note or acceleration and on or before the
Set-Off Date in the case of scheduled maturity) a written statement (a "SET-OFF
STATEMENT") setting forth in reasonable detail the amount of any asserted Loss,
the basis of Buyer's asserted right to set-off of any such Loss and a detailed
statement of how any such Loss is a result of a Loss Event. Sellers may contest
the amount or validity and propriety of any item of Loss set forth on the
Set-Off Statement by giving written notice thereof to Buyer within 60 days after
receipt of the Set-Off Statement. No amount of Loss specified on any Set-Off
Statement shall be valid or proper unless it is set forth in reasonable detail
on such Set-Off Statement, and the amount of any Loss on any such Set-Off
Statement not contested by Sellers in such a written notice of Sellers shall be
conclusively deemed to be valid and proper. The amount of any Loss specified in
a Set-Off Statement which is so contested shall be resolved pursuant to the
arbitration provisions set forth on SCHEDULE 29(b) of the Purchase Agreement.
In determining the existence or amount of a Loss, the arbitrators will be
entitled to take into account any substituted business of UDLP or its Affiliates
in Turkey which in reality offsets or compensates UDLP for any Loss resulting
from a Loss Event. Interest shall continue to accrue on the principal amount of
the Special Note which was not paid based on any Loss specified in a Set-Off
Statement which is subject to arbitration as provided above and shall be payable
to Sellers if and when such amount is determined to have not been properly
set-off but shall not be payable with respect to any such amount which is
determined to have been properly set-off.
<PAGE>
4. LIMITATIONS ON RIGHT OF SET-OFF. Notwithstanding anything to the
contrary in Section 3 above, the right of Buyer to a set-off as specified in
Section 3 above is subject to the following limitations. If there has occurred
a Purported Turkish Termination and subsequently, in any final and
non-appealable adjudication, it is determined by a court, agency or other
tribunal of competent jurisdiction that such Purported Turkish Termination was
impermissible, wrongful, unlawful or otherwise improper, then the amount of Loss
set-off in connection with the applicable Set-Off Statement shall be
redetermined by the arbitrators pursuant to the arbitration provisions set forth
on SCHEDULE 29(b) of the Purchase Agreement and any reduction shall be paid
(with accrued interest thereon) to Sellers.
5. COVENANTS.
(a) In anticipation of or in the event of a Loss Event, Sellers shall
have the right to participate in any and all negotiations, discussions,
meetings and other communications relating to the Loss Event or potential
Loss Event, as applicable, and shall have the right to approve of any and
all settlements, agreements or other arrangements made in connection
therewith (such approval not to be unreasonably withheld or delayed).
(b) In anticipation of or in the event of a Loss Event, subject to
Seller's rights pursuant to clause (a) above, Buyer shall and shall cause
its Affiliates to use all commercially reasonable efforts to (a) obtain a
Nurol Revocation in the most cost-effective and expeditious manner
practicable (provided that the costs thereof to UDLP or Buyer shall
constitute a loss subject to rights of set-off) and (b) otherwise act in
good faith to minimize any Loss in respect of any such Loss Event.
(c) Buyer and UDLP will use all commercially reasonable efforts to
maximize the value (exclusive of any rights of set-off under this
Agreement) of UDLP's Turkish business and FNSS, whether or not in
connection with either a Call or a Liquidation, as applicable, including
(if required under appropriate circumstances) permitting the assignment of
FNSS's rights under the Manufacturing License Agreement (other than to a
competitor of UDLP) and/or extending the term of the Manufacturing License
Agreement on commercially reasonable terms.
(d) Buyer shall deliver to Sellers at Buyer's sole cost and expense
(so long as Sellers hold any portion of the outstanding principal amount of
the Special Note or so long as any arbitration proceeding contemplated by
Section 3 above is not finally resolved, whichever is later, and in the
form regularly prepared in the ordinary course):
(i) as soon as available after the end of each monthly
accounting period in each fiscal year, unaudited statements of income
and cash flows of FNSS for such monthly period and for the period from
the beginning of the fiscal year to the end of such month, and
unaudited balance sheets of FNSS as of the end of such monthly period;
(ii) within 90 days after the end of each fiscal year, statements
of income and cash flows of FNSS for such fiscal year, and balance
sheets of UDLP's Turkish business and/or FNSS as of the end of such
fiscal year;
-3-
<PAGE>
(iii) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning
significant aspects of FNSS' operations or financial affairs given to
Buyer or UDLP by their independent accountants (and not otherwise
contained in other materials provided hereunder);
(iv) an annual budget with respect to FNSS for each fiscal year
as and when prepared in the ordinary course, and promptly upon
preparation thereof any other significant budgets prepared by UDLP
with respect thereto;
(v) with reasonable promptness, such other information and
financial data concerning FNSS as Sellers may reasonably request.
(e) So long as Sellers hold any portion of the outstanding principal
amount of the Special Note or so long as any arbitration proceeding
contemplated by Section 3 above is not finally resolved, whichever is
later, Sellers shall be entitled at their election to designate one person
to serve as an observer at meetings of the board of directors of FNSS and
Buyer shall use its reasonable best efforts to permit such person to attend
all meetings of the board of directors of FNSS.
6. DEFINITIONS. As used in this Agreement (including the Exhibits
hereto), the following definitions shall apply:
"ADVERSE LEGAL CONSEQUENCES" shall mean Losses to Buyer or UDLP, under
Turkish law or the Turkish Contracts, resulting from or caused by the change of
control and ownership at Closing without the prior consent of SSM or Nurol.
"CALL" means the sale by UDLP of all of the shares of FNSS owned by it
to Nurol pursuant to the provisions of Section 11.4(iii) and 11.4(A) of the
Joint Venture Agreement.
"CALL ELECTION" means the delivery of written notice within the time
periods permitted by the Joint Venture Agreement by Nurol to UDLP indicating
that Nurol has exercised its rights under Section 11.4(iii) and Section 11.4(A)
of the Joint Venture Agreement with respect to the Call.
"FNSS" means FMC-Nurol Savunma Sanayii A.S. and its successors.
"JOINT VENTURE AGREEMENT" means the Restated Joint Venture Agreement
of FMC-Nurol Savunma Sanayii A.S., as amended by Amendment 1 to the Restated
Joint Venture Agreement dated July 1, 1997.
"LICENSE AGREEMENT TERMINATION" shall mean the termination of the
Manufacturing License Agreement pursuant to Article IX.A thereof as a result of
the change of control and ownership effected by Closing (it being understood
that UDLP will not permit FNSS to terminate the Manufacturing License Agreement
so long as UDLP remains in control of FNSS).
"LIQUIDATION" means the liquidation and dissolution of FNSS pursuant
to the provisions of Section 11.4(iii) and 11.4(B) of the Joint Venture
Agreement.
-4-
<PAGE>
"LIQUIDATION ELECTION" means the delivery of written notice within the
time periods permitted by the Joint Venture Agreement by Nurol to UDLP
indicating that Nurol has exercised its rights under Section 11.4(iii) and
Section 11.4(B) of the Joint Venture Agreement with respect to the Liquidation.
"LOSS" means a diminution in value, if any, of UDLP's equity interest
in FNSS or other Turkish business interests, taking into account any related
royalties, management fees or other payments or distributions received or to be
received, including as a result of a Call or a Liquidation, taken as a whole and
on a going-concern basis, from the date hereof to the applicable measurement
date, as a result of a Loss Event, and any diminution in value of UDLP's Turkish
business interests due to a License Agreement Termination, or any costs or
expenses incurred by UDLP or Buyer to obtain a Nurol Waiver, Nurol Revocation or
Turkish Acknowledgment or to avoid or mitigate Loss from a Loss Event, but shall
not include any Losses as a result of any other unrelated factors, including the
performance of UDLP or FNSS, changes within SSM and/or the government of Turkey
and the scheduled expiration of the Turkish Procurement Contract.
"MANUFACTURING LICENSE AGREEMENT" means the Manufacturing License
Agreement, dated August 3, 1989, by and between UDLP and FNSS, as amended.
"NUROL" means Nurol Inasaat ve Ticaret A.S. and its successors.
"NUROL REVOCATION" means, after delivery by Nurol to UDLP of a Call
Election or a Liquidation Election, (i) a written agreement of Nurol that it
will not pursue the Call or the Liquidation, as applicable, and (ii) the earlier
of the expiration or waiver of any rights to make a Termination Election or the
passage of 365 days after Closing where Nurol has not made a Termination
Election.
"NUROL WAIVER" means either (i) a written agreement of Nurol that it
will make neither a Call Election nor a Liquidation Election nor a Termination
Election or (ii) (x) the passage of one hundred twenty days after Closing
without Nurol having made a Call Election or a Liquidation Election and (y) the
earlier of the expiration or waiver of any rights to make a Termination Election
or the passage of 365 days after Closing where Nurol has not made a Termination
Election.
"PURPORTED TURKISH TERMINATION" means a written notice delivered to
UDLP by SSM or its agent stating that SSM has canceled the Turkish Procurement
Contract pursuant to Section 19.1.3 of the Turkish Procurement Contract as a
result of the change of control and ownership effected at Closing.
"SSM" means the Under Secretariat for Defense Industries of Turkey.
"TERMINATION ELECTION" shall mean an election by Nurol to terminate
the Joint Venture Agreement pursuant to Article 18 thereof as a result of the
change of control and ownership effected by the Closing.
-5-
<PAGE>
"TURKISH ACKNOWLEDGMENT" means either (i) a letter or other writing
from SSM acknowledging the transaction between Sellers and Buyer that evidences
the intention of SSM to continue the Turkish Production Contract despite the
change of ownership and control effected by the Closing or (ii) the passage of
365 days after Closing where SSM has not made a Purported Turkish Termination.
"TURKISH CONTRACTS" shall mean the Turkish Procurement Contract, the
Manufacturing License Agreement and the Joint Venture Agreement, collectively.
"TURKISH PROCUREMENT CONTRACT" means the Contract between the Under
Secretariat for Defense Industries and FNSS.
"UDLP" means United Defense, L.P. and its successors.
7. AMENDMENT AND WAIVER. No modification, amendment or waiver of
any provision of this Agreement shall be effective against any party hereto
unless such modification, amendment or waiver is approved in writing by such
party. The failure of any party hereto to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
8. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
9. ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
10. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable the
respective successors and assigns of each of the parties hereto.
11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts (including by means of telecopied signature pages), each of which
shall be an original and all of which taken together shall constitute one and
the same agreement.
12. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to any party hereto at the address indicated in the
-6-
<PAGE>
Purchase Agreement, or at such address or to the attention of such other person
as the recipient party has specified by prior written notice to the sending
party. Notices shall be deemed to have been given hereunder when delivered
personally, three days after deposit in the U.S. mail and one day after deposit
with a reputable overnight courier service.
13. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Illinois, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.
14. DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings
and captions of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement. The use of the word "including" herein
shall mean "including without limitation."
15. SOLE REMEDY. The rights of set-off as provided in this Agreement
shall be the exclusive right and remedy of Buyer for any alleged Loss resulting
from any Loss Event (it being understood, however, that Buyer shall only be
entitled to a set-off under the circumstances, in the events contemplated by and
pursuant to the provisions of Sections 3 and 4 above). Other than as set forth
in this Agreement, Sellers shall have no liability whatsoever for any amount
claimed to be set-off pursuant to the terms of this Agreement or in excess of
the amount, if any, available to be set-off hereunder from time to time.
* * * * *
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first written above.
FMC CORPORATION
By: /s/ J. Paul McGrath
-----------------------------------
Its: Senior Vice President
-----------------------------------
HARSCO CORPORATION
By: /s/ Leonard A. Campanaro
-----------------------------------
Its: Senior Vice President and Chief
Financial Officer
-----------------------------------
HARSCO UDLP CORPORATION
By: /s/ Leonard A. Campanaro
-----------------------------------
Its: Treasurer
-----------------------------------
IRON HORSE ACQUISITION CORP.
By: /s/ Allan M. Holt
-----------------------------------
Its: President
-----------------------------------
-8-
<PAGE>
EXHIBIT A -- TERMS OF THE SPECIAL NOTE
BORROWER: The entity that issues the Senior Debt and Sub Notes.
PRINCIPAL AMOUNT: $50,000,000
MATURITY: The final maturity of the Special Note shall be 3 years from
the Closing Date.
RANKING: The payment of principal of, premium, if any, and interest
on the Special Note will be subordinate and subject in right
of payment to all existing and future Senior Indebtedness
(to be defined) and senior in right of payment with all
other senior subordinated or subordinated indebtedness of
Borrower. Initially Senior Indebtedness will consist
principally of Borrower's bank facility and subordinated
indebtedness will consist principally of $225 million of
senior subordinated notes (the "SENIOR NOTES"), and the
parties will agree to appropriate protections to preserve
equivalent type of ranking in connection with future debt
incurrences.
GUARANTIES: Each person who guarantees Borrower's Sub Debt (each a
"GUARANTOR" and, collectively, the "GUARANTORS") shall be
required to provide a guaranty of all amounts owing under
the Special Note (the "GUARANTIES"), equivalent in ranking
and terms to the Guarantees of the Sub Debt.
INTEREST RATES: Outstanding principal on the Special Note shall bear
interest at a rate per annum the same rate per annum as the
Senior Notes, and shall be payable quarterly in arrears on
the last business day of each calendar quarter. Interest
will also be payable at the time of repayment of the Special
Note and at maturity.
COVENANTS: The Special Note will have substantially the same covenants
and default provisions as the Senior Notes; PROVIDED,
HOWEVER, that the maturity of the Special Note may be
accelerated only in the event of acceleration of the Senior
Debt and the Senior Notes.
SUBORDINATION: As required by senior lenders (equivalent to the Sub Debt).
<PAGE>
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- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
IRON HORSE INVESTORS, L.L.C.,
UNITED DEFENSE INDUSTRIES, INC.,
VARIOUS LENDING INSTITUTIONS,
CITICORP USA, INC.
and
LEHMAN COMMERCIAL PAPER INC.,
as DOCUMENTATION AGENTS,
and
BANKERS TRUST COMPANY,
as ADMINISTRATIVE AGENT and
as SYNDICATION AGENT
------------------------------------
Dated as of October 6, 1997
------------------------------------
$725,000,000
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- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
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SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . . 1
1.01 Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Minimum Borrowing Amounts, etc. . . . . . . . . . . . . . . . . . 4
1.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . 4
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . . 5
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.06 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . . 8
1.08 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.09 Interest Periods. . . . . . . . . . . . . . . . . . . . . . . . . 9
1.10 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . . . 10
1.11 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.12 Change of Lending Office. . . . . . . . . . . . . . . . . . . . . 13
1.13 Replacement of Lenders. . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2. Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . 15
2.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . 15
2.02 Letter of Credit Requests; Notices of Issuance. . . . . . . . . . 15
2.03 Agreement to Repay Letter of Credit Drawings. . . . . . . . . . . 16
2.04 Letter of Credit Participations . . . . . . . . . . . . . . . . . 16
2.05 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3. Fees; Commitments. . . . . . . . . . . . . . . . . . . . . . . . 20
3.01 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.02 Voluntary Reduction of Commitments. . . . . . . . . . . . . . . . 21
3.03 Mandatory Adjustments of Commitments, etc.. . . . . . . . . . . . 21
SECTION 4. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . 22
4.02 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . 23
4.03 Method and Place of Payment . . . . . . . . . . . . . . . . . . . 30
4.04 Net Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . 32
5.01 Conditions Precedent to Initial Borrowing Date. . . . . . . . . . 32
5.02 Conditions Precedent to a Subsequent Borrowing Date . . . . . . . 38
5.03 Conditions Precedent to All Credit Events . . . . . . . . . . . . 39
<PAGE>
SECTION 6. Representations, Warranties and Agreements . . . . . . . . . . . 39
6.01 Corporate Status. . . . . . . . . . . . . . . . . . . . . . . . . 39
6.02 Corporate Power and Authority . . . . . . . . . . . . . . . . . . 40
6.03 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.04 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.05 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . 40
6.06 Governmental Approvals. . . . . . . . . . . . . . . . . . . . . . 41
6.07 Investment Company Act. . . . . . . . . . . . . . . . . . . . . . 41
6.08 Public Utility Holding Company Act. . . . . . . . . . . . . . . . 41
6.09 True and Complete Disclosure. . . . . . . . . . . . . . . . . . . 41
6.10 Financial Condition; Financial Statements . . . . . . . . . . . . 42
6.11 Security Interests. . . . . . . . . . . . . . . . . . . . . . . . 43
6.12 Consummation of Certain Transactions. . . . . . . . . . . . . . . 43
6.13 Tax Returns and Payments. . . . . . . . . . . . . . . . . . . . . 43
6.14 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . 44
6.15 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.16 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 45
6.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . 45
6.18 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.19 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.20 Compliance with Statutes, etc.. . . . . . . . . . . . . . . . . . 47
6.21 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.22 Special Purpose Corporations. . . . . . . . . . . . . . . . . . . 47
SECTION 7. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . 47
7.01 Information Covenants . . . . . . . . . . . . . . . . . . . . . . 48
7.02 Books, Records and Inspections. . . . . . . . . . . . . . . . . . 50
7.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.04 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 51
7.05 Corporate Franchises. . . . . . . . . . . . . . . . . . . . . . . 51
7.06 Compliance with Statutes, etc.. . . . . . . . . . . . . . . . . . 51
7.07 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.08 Good Repair . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.09 End of Fiscal Years; Fiscal Quarters. . . . . . . . . . . . . . . 53
7.10 Additional Security; Further Assurances . . . . . . . . . . . . . 53
7.11 Interest Rate Agreement . . . . . . . . . . . . . . . . . . . . . 54
7.12 Compliance with Environmental Laws. . . . . . . . . . . . . . . . 54
7.13 FNSS Disposition. . . . . . . . . . . . . . . . . . . . . . . . . 55
7.14 FMC Arabia. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.15 Notices of Assignment . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 8. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . 56
8.01 Changes in Business . . . . . . . . . . . . . . . . . . . . . . . 56
(ii)
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8.02 Consolidation, Merger, Sale or Purchase of Assets, etc. . . . . . 57
8.03 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.04 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.05 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . 61
8.06 Advances, Investments and Loans . . . . . . . . . . . . . . . . . 61
8.07 Limitation on Creation of Subsidiaries. . . . . . . . . . . . . . 63
8.08 Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.09 Dividends, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.10 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . 65
8.11 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . 65
8.12 Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.13 Minimum Consolidated Net Worth. . . . . . . . . . . . . . . . . . 66
8.14 Minimum Consolidated EBITDA . . . . . . . . . . . . . . . . . . . 67
8.15 Limitation On Issuance of Stock . . . . . . . . . . . . . . . . . 67
SECTION 9. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 67
9.01 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.02 Representations, etc. . . . . . . . . . . . . . . . . . . . . . . 67
9.03 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.04 Default Under Other Agreements. . . . . . . . . . . . . . . . . . 68
9.05 Bankruptcy, etc.. . . . . . . . . . . . . . . . . . . . . . . . . 68
9.06 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.07 Security Documents. . . . . . . . . . . . . . . . . . . . . . . . 69
9.08 Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.09 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.10 Ancillary Agreements. . . . . . . . . . . . . . . . . . . . . . . 70
9.11 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 11. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
11.01 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . 99
11.02 Nature of Duties . . . . . . . . . . . . . . . . . . . . . . . . 99
11.03 Lack of Reliance on the Agents . . . . . . . . . . . . . . . . .100
11.04 Certain Rights of the Agents . . . . . . . . . . . . . . . . . .100
11.05 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . .100
11.06 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . .100
11.07 The Agents in Their Individual Capacity. . . . . . . . . . . . .101
11.08 Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . .101
11.09 Resignation by the Administrative Agent. . . . . . . . . . . . .101
(iii)
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SECTION 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . .102
12.01 Payment of Expenses, etc.. . . . . . . . . . . . . . . . . . . .102
12.02 Right of Setoff. . . . . . . . . . . . . . . . . . . . . . . . .103
12.03 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .103
12.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . .104
12.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . .106
12.06 Payments Pro Rata. . . . . . . . . . . . . . . . . . . . . . . .106
12.07 Calculations; Computations . . . . . . . . . . . . . . . . . . .107
12.08 Governing Law; Submission to Jurisdiction; Venue; Waiver of
Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . .107
12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .108
12.10 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . .108
12.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . . .108
12.12 Amendment or Waiver. . . . . . . . . . . . . . . . . . . . . . .108
12.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . .109
12.14 Domicile of Loans. . . . . . . . . . . . . . . . . . . . . . . .109
12.15 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . .109
12.16 Lender Register. . . . . . . . . . . . . . . . . . . . . . . . .110
SECTION 13. Holdings Guaranty . . . . . . . . . . . . . . . . . . . . . . .111
13.01 The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . .111
13.02 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . .111
13.03 Nature of Liability. . . . . . . . . . . . . . . . . . . . . . .111
13.04 Independent Obligation . . . . . . . . . . . . . . . . . . . . .112
13.05 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . .112
13.06 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . .113
13.07 Subordination. . . . . . . . . . . . . . . . . . . . . . . . . .113
13.08 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . .113
13.09 Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . .114
(iv)
<PAGE>
ANNEX I -- Commitments
ANNEX II -- Addresses
ANNEX III -- Subsidiaries
ANNEX IV -- Real Properties
ANNEX V -- Existing Indebtedness
ANNEX VI -- ERISA
ANNEX VII -- Liens
ANNEX VIII -- Existing Investments
ANNEX IX -- Intentionally Left Blank
ANNEX X -- EBITDA Adjustments
ANNEX XI -- Approvals
ANNEX XII -- Litigation
EXHIBIT A -- Form of Notice of Borrowing
EXHIBIT B-1 -- Form of A Term Note
EXHIBIT B-2 -- Form of B Term Note
EXHIBIT B-3 -- Form of C Term Note
EXHIBIT B-4 -- Form of Revolving Note
EXHIBIT B-5 -- Form of Swingline Note
EXHIBIT C -- Form of Letter of Credit Request
EXHIBIT D -- Form of Section 4.04 Certificate
EXHIBIT E-1 -- Form of Opinion of Latham & Watkins
EXHIBIT E-2 -- Form of Opinion of White & Case
EXHIBIT F -- Form of Officers' Certificate
EXHIBIT G -- Form of Subsidiary Guaranty
EXHIBIT H -- Form of Pledge Agreement
EXHIBIT I -- Form of Security Agreement
EXHIBIT J -- Form of Consent Letter
EXHIBIT K -- Form of Assignment Agreement
(v)
<PAGE>
CREDIT AGREEMENT, dated as of October 6, 1997, among IRON HORSE
INVESTORS, L.L.C., a Delaware limited liability company, UNITED DEFENSE
INDUSTRIES, INC., a Delaware corporation, the lenders from time to time party
hereto (each, a "Lender" and, collectively, the "Lenders"), CITICORP USA, INC.
and LEHMAN COMMERCIAL PAPER INC., as Documentation Agents (the "Documentation
Agents") and BANKERS TRUST COMPANY, as Administrative Agent and as Syndication
Agent (the "Administrative Agent" and together with the Documentation Agents,
collectively, the "Agents"). Unless otherwise defined herein, all capitalized
terms used herein and defined in Section 10 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Lenders are willing to make available to the Borrower the credit
facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. AMOUNT AND TERMS OF CREDIT.
1.01 COMMITMENT. Subject to and upon the terms and conditions
herein set forth, each Lender severally agrees to make a loan or loans (each, a
"Loan" and, collectively, the "Loans") to the Borrower, which Loans shall be
drawn, to the extent such Lender has a commitment under such Facility, under the
A Term Facility, the B Term Facility, the C Term Facility and the Revolving
Facility, as set forth below:
(a) Loans under the A Term Facility (each, an "A Term Loan" and,
collectively, the "A Term Loans") (i) shall be made only pursuant to a
drawing (x) on the Initial Borrowing Date in an aggregate amount equal
to $100,000,000 and (y) in a minimum aggregate amount of $10 million
on each of up to two Business Days on or prior to the A Termination
Date, (ii) except as hereinafter provided, may, at the option of the
Borrower, be incurred and maintained as, and/or converted into, Base
Rate Loans or Eurodollar Loans provided that all A Term Loans made as
part of the same Borrowing shall, unless specifically provided herein,
consist of A Term Loans of the same Type and (iii) shall not exceed in
aggregate principal amount for any Lender at the time of incurrence
thereof the A Term Commitment, if any, of such Lender as in effect on
such date. Once repaid, A Term Loans may not be reborrowed.
<PAGE>
(b) Loans under the B Term Facility (each, a "B Term Loan" and,
collectively, the "B Term Loans") (i) shall be made pursuant to a
single drawing on the Initial Borrowing Date, (ii) except as
hereinafter provided, may, at the option of the Borrower, be incurred
and maintained as, and/or converted into, Base Rate Loans or
Eurodollar Loans provided that all B Term Loans made as part of the
same Borrowing shall, unless specifically provided herein, consist of
B Term Loans of the same Type and (iii) shall not exceed in aggregate
principal amount for any Lender at the time of incurrence thereof the
B Term Commitment, if any, of such Lender as in effect on such date.
Once repaid, B Term Loans may not be reborrowed.
(c) Loans under the C Term Facility (each, a "C Term Loan" and,
collectively, the "C Term Loans") (i) shall be made pursuant to a
single drawing on the Initial Borrowing Date, (ii) except as
hereinafter provided, may, at the option of the Borrower, be incurred
and maintained as, and/or converted into, Base Rate Loans or
Eurodollar Loans provided that all C Term Loans made as part of the
same Borrowing shall, unless specifically provided herein, consist of
C Term Loans of the same Type and (iii) shall not exceed in aggregate
principal amount for any Lender at the time of incurrence thereof the
C Term Commitment, if any, of such Lender as in effect on such date.
Once repaid, C Term Loans may not be reborrowed.
(d) Loans under the Revolving Facility (each, a "Revolving Loan"
and, collectively, the "Revolving Loans") (i) shall be made at any
time and from time to time after the Initial Borrowing Date and prior
to the A/RF Maturity Date, (ii) except as hereinafter provided, may,
at the option of the Borrower, be incurred and maintained as, and/or
converted into, Base Rate Loans or Eurodollar Loans provided that all
Revolving Loans made as part of the same Borrowing shall, unless
otherwise specifically provided herein, consist of Revolving Loans of
the same Type, (iii) may be repaid and reborrowed in accordance with
the provisions hereof, (iv) shall not exceed (giving effect to any
incurrence thereof and the use of the proceeds of such incurrence) for
any Lender in aggregate principal amount at any time outstanding that
amount which, when combined with such Lender's Adjusted RF Percentage
of the sum of (x) the Letter of Credit Outstandings at such time and
(y) the outstanding principal amount of Swingline Loans at such time,
equals the Revolving Commitment of such Lender and (v) shall not
exceed in aggregate principal amount at any time outstanding that
amount which, when combined with the aggregate principal amount of all
Swingline Loans then outstanding, equals the Maximum RL Amount.
(e) Subject to and upon the terms and conditions herein set
forth, the Swingline Lender agrees to make at any time and from time
to time after the Initial
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<PAGE>
Borrowing Date and prior to the Swingline Expiry Date, a loan or loans
to the Borrower (each, a "Swingline Loan" and, collectively, the
"Swingline Loans"), which Swingline Loans (i) shall be made and
maintained as Base Rate Loans, (ii) may be repaid and reborrowed in
accordance with the provisions hereof, (iii) shall not exceed (giving
effect to any incurrence thereof and the use of the proceeds of such
incurrence) in aggregate principal amount at any time outstanding that
amount which, when combined with the aggregate principal amount of all
Revolving Loans made by Non-Defaulting Lenders then outstanding and
the Letter of Credit Outstandings at such time, equals the Adjusted
Total Revolving Commitment then in effect (after giving effect to any
changes thereto on such date) and (iv) shall not exceed in aggregate
principal amount at any time outstanding the Maximum Swingline Amount
or, when added to the outstanding principal amount of Revolving Loans
then outstanding, the Maximum RL Amount. The Swingline Lender will
not make a Swingline Loan after it has received written notice from
the Required Lenders that one or more of the applicable conditions to
Credit Events specified in Section 5.03 are not then satisfied until
such conditions are satisfied.
(f) On any Business Day, the Swingline Lender may, in its sole
discretion, give notice to the RF Lenders that its outstanding
Swingline Loans shall be funded with a Borrowing of Revolving Loans
(PROVIDED that each such notice shall be deemed to have been
automatically given upon the occurrence of an Event of Default under
Section 9.05 or upon the exercise of any of the remedies provided in
the last paragraph of Section 9), in which case a Borrowing of
Revolving Loans constituting Base Rate Loans (each such Borrowing, a
"Mandatory Borrowing") shall be made on the immediately succeeding
Business Day by all RF Lenders PRO RATA based on each RF Lender's
Adjusted RF Percentage, and the proceeds thereof shall be applied
directly to repay the Swingline Lender for such outstanding Swingline
Loans. Each RF Lender hereby irrevocably agrees to make Base Rate
Loans upon one Business Day's notice pursuant to each Mandatory
Borrowing in the amount and in the manner specified in the preceding
sentence and on the date specified in writing by the Swingline Lender
notwithstanding: (i) that the amount of the Mandatory Borrowing may
not comply with the Minimum Borrowing Amount otherwise required
hereunder, (ii) whether any conditions specified in Section 5.03 are
then satisfied, (iii) whether a Default or an Event of Default has
occurred and is continuing, (iv) the date of such Mandatory Borrowing
and (v) the amount of the Total Revolving Commitment at such time. In
the event that any Mandatory Borrowing cannot for any reason be made
on the date otherwise required above (including, without limitation,
as a result of the commencement of a proceeding under the Bankruptcy
Code in respect of the Borrower), each RF Lender (other than BTCo)
hereby agrees that it shall forthwith purchase from the Swingline
Lender (without recourse or warranty) such assignment of the
outstanding Swingline Loans as shall be necessary to cause the RF
Lenders to share in such Swingline
-3-
<PAGE>
Loans ratably based upon their respective Adjusted RF Percentages,
PROVIDED that all interest payable on the Swingline Loans shall be for
the account of the Swingline Lender until the date the respective
assignment is purchased and, to the extent attributable to the
purchased assignment, shall be payable to the RF Lender purchasing
same from and after such date of purchase.
1.02 MINIMUM BORROWING AMOUNTS, ETC. The aggregate principal
amount of each Borrowing shall not be less than the Minimum Borrowing Amount.
More than one Borrowing may be incurred on any day, provided that at no time
shall there be outstanding more than fifteen Borrowings of Eurodollar Loans.
1.03 NOTICE OF BORROWING. (a) Whenever the Borrower desires to
incur Loans under any Facility (excluding Borrowings of Swingline Loans and
Mandatory Borrowings), it shall give the Administrative Agent at its Notice
Office, prior to 12:00 Noon (New York time), at least three Business Days' prior
written notice (or telephonic notice promptly confirmed in writing) of each
proposed incurrence of Eurodollar Loans and at least one Business Day's prior
written notice (or telephonic notice promptly confirmed in writing) of each
proposed incurrence of Base Rate Loans. Each such notice (each, a "Notice of
Borrowing") shall be in the form of Exhibit A and shall be irrevocable and shall
specify (i) the Facility pursuant to which such incurrence is being made, (ii)
the aggregate principal amount of the Loans to be made pursuant to such
incurrence, (iii) the date of incurrence (which shall be a Business Day) and
(iv) whether the respective Borrowing shall consist of Base Rate Loans or
Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially
applicable thereto. The Administrative Agent shall promptly give each Lender
written notice (or telephonic notice promptly confirmed in writing) of each
proposed incurrence of Loans of such Lender's proportionate share thereof and of
the other matters covered by the Notice of Borrowing.
(b) (i) Whenever the Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give the Swingline Lender, prior to 2:00
P.M. (New York time) on the day such Swingline Loan is to be made, written
notice (or telephonic notice promptly confirmed in writing) of each Swingline
Loan to be made hereunder. Each such notice shall be irrevocable and shall
specify in each case (x) the date of such Borrowing (which shall be a Business
Day) and (y) the aggregate principal amount of the Swingline Loan to be made
pursuant to such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice
specified in Section 1.01(f), with the Borrower irrevocably agreeing, by its
incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set
forth in such Section 1.01(f).
(c) Without in any way limiting the obligation of the Borrower
to confirm in writing any telephonic notice permitted to be given hereunder, the
Administrative Agent,
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the Swingline Lender (in the case of a Borrowing of Swingline Loans), or the
Letter of Credit Issuer (in the case of the issuance of Letters of Credit), as
the case may be, may prior to receipt of written confirmation act without
liability upon the basis of and consistent with such telephonic notice, believed
by the Administrative Agent, the Swingline Lender or the Letter of Credit Issuer
in good faith to be from an Authorized Officer of the Borrower. In each such
case, the Borrower hereby waives the right to dispute the Administrative
Agent's, the Swingline Lender's or the Letter of Credit Issuer's record of the
terms of such telephonic notice, unless such record reflects gross negligence or
willful misconduct on the part of the Administrative Agent, the Swingline Lender
or the Letter of Credit Issuer, as the case may be.
1.04 DISBURSEMENT OF FUNDS. (a) No later than 1:00 P.M. (New
York time) on the date specified in each Notice of Borrowing or 2:00 P.M. (New
York time) on the date specified in a notice described in Section 1.03(b)(i),
each Lender with a Commitment under the respective Facility will make available
its PRO RATA share of each Borrowing requested to be made on such date or in the
case of Swingline Loans, the Swingline Lender shall make available the full
amount thereof in the manner provided below. All such amounts shall be made
available to the Administrative Agent in Dollars and immediately available funds
at the Payment Office and the Administrative Agent promptly will make available
to the Borrower by depositing to its account at the Payment Office or as
otherwise directed in the applicable Notice of Borrowing the aggregate of the
amounts so made available in the type of funds received. Unless the
Administrative Agent shall have been notified by any Lender prior to the date of
the proposed incurrence that such Lender does not intend to make available to
the Administrative Agent its portion of the Borrowing or Borrowings to be made
on such date, the Administrative Agent may assume that such Lender has made such
amount available to the Administrative Agent on such date, and the
Administrative Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made
available to the Administrative Agent by such Lender and the Administrative
Agent has made available same to the Borrower, the Administrative Agent shall be
entitled to recover such corresponding amount from such Lender. If such Lender
does not pay such corresponding amount forthwith upon the Administrative Agent's
demand therefor, the Administrative Agent may notify the Borrower, and, upon
receipt of such notice, the Borrower shall promptly pay such corresponding
amount to the Administrative Agent. The Administrative Agent shall also be
entitled to recover on demand from such Lender or the Borrower, as the case may
be, interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Administrative Agent to the
Borrower to the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to (x) if paid by such Lender,
the overnight Federal Funds Effective Rate or (y) if paid by the Borrower, the
then applicable rate of interest, calculated in accordance with Section 1.08,
for the respective Loans.
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(b) Nothing herein shall be deemed to relieve any Lender from
its obligation to fulfill its commitments hereunder or to prejudice any rights
which the Borrower may have against any Lender as a result of any default by
such Lender hereunder.
1.05 NOTES. (a) The Borrower's obligation to pay the principal
of, and interest on, the Loans made to it by each Lender shall be evidenced (i)
if A Term Loans, by a promissory note substantially in the form of Exhibit B-1
with blanks appropriately completed in conformity herewith (each, an "A Term
Note" and, collectively, the "A Term Notes"), (ii) if B Term Loans, by a
promissory note substantially in the form of Exhibit B-2 with blanks
appropriately completed in conformity herewith (each, a "B Term Note" and,
collectively, the "B Term Notes"), (iii) C Term Loans, by a promissory note
substantially in the form of Exhibit B-3 with blanks appropriately completed in
conformity herewith (each, a "C Term Note" and, collectively, the "C Term
Notes"), (iv) if Revolving Loans, by a promissory note substantially in the form
of Exhibit B-4 with blanks appropriately completed in conformity herewith (each,
a "Revolving Note" and, collectively, the "Revolving Notes") and (v) if
Swingline Loans, by a promissory note substantially in the form of Exhibit B-5,
with blanks appropriately completed in conformity herewith (the "Swingline
Note").
(b) The A Term Note issued to each Lender that makes any A Term
Loan shall (i) be executed by the Borrower, (ii) be payable to the order of such
Lender and be dated the Initial Borrowing Date, (iii) be in a stated principal
amount equal to the A Term Commitment of such Lender (or in the case of a new A
Term Note issued pursuant to Section 1.13 or 12.04, the A Term Loans and A Term
Commitment, if any, of the assignee Lender) and be payable in the principal
amount of A Term Loans evidenced thereby, (iv) mature on the A/RF Maturity Date,
(v) bear interest as provided in the appropriate clause of Section 1.08 in
respect of the Base Rate Loans and Eurodollar Loans, as the case may be,
evidenced thereby, (vi) be subject to mandatory repayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this Agreement and the
other Credit Documents.
(c) The B Term Note issued to each Lender that makes any B Term
Loan shall (i) be executed by the Borrower, (ii) be payable to the order of such
Lender and be dated the Initial Borrowing Date, (iii) be in a stated principal
amount equal to the B Term Loans made by such Lender on the Initial Borrowing
Date (or in the case of a new B Term Note issued pursuant to Section 1.13 or
12.04, the respective B Term Loans evidenced thereby at the time of issuance)
and be payable in the principal amount of B Term Loans evidenced thereby, (iv)
mature on the B Maturity Date, (v) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans,
as the case may be, evidenced thereby, (vi) be subject to mandatory repayment as
provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement
and the other Credit Documents.
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(d) The C Term Note issued to each Lender that makes any C Term
Loan shall (i) be executed by the Borrower, (ii) be payable to the order of such
Lender and be dated the Initial Borrowing Date, (iii) be in a stated principal
amount equal to the C Term Loans made by such Lender on the Initial Borrowing
Date (or in the case of a new C Term Note issued pursuant to Section 1.13 or
12.04, the respective C Term Loans evidenced thereby at the time of issuance)
and be payable in the principal amount of C Term Loans evidenced thereby, (iv)
mature on the Final Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
mandatory repayment as provided in Section 4.02 and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.
(e) The Revolving Note issued to each RF Lender shall (i) be
executed by the Borrower, (ii) be payable to the order of such RF Lender and be
dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to
the Revolving Commitment of such RF Lender and be payable in the principal
amount of the Revolving Loans evidenced thereby, (iv) mature on the A/RF
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this Agreement and the
other Credit Documents.
(f) The Swingline Note issued to the Swingline Lender shall (i)
be executed by the Borrower, (ii) be payable to the order of the Swingline
Lender and be dated the Initial Borrowing Date, (iii) be in a stated principal
amount equal to the Maximum Swingline Amount and be payable in the principal
amount of Swingline Loans evidenced thereby, (iv) mature on the Swingline Expiry
Date, (v) bear interest as provided in Section 1.08 in respect of the Base Rate
Loans evidenced thereby, (vi) be subject to mandatory prepayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this Agreement and the
other Credit Documents.
(g) Each Lender will note on its internal records the amount of
each Loan made by it and each payment in respect thereof and will, prior to any
transfer of any of its Notes, endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation shall not affect the Borrower's obligations in respect of such
Loans.
1.06 CONVERSIONS. The Borrower shall have the option to convert
on any Business Day all or a portion at least equal to the applicable Minimum
Borrowing Amount of the outstanding principal amount of the Loans (other than
Swingline Loans which at all times shall be maintained as Base Rate Loans) owing
pursuant to a single Facility into a Borrowing or Borrowings pursuant to such
Facility of another Type of Loan provided that
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(i) no partial conversion of a Borrowing of Eurodollar Loans shall reduce the
outstanding principal amount of the Eurodollar Loans made pursuant to such
Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii)
Base Rate Loans may not be converted into Eurodollar Loans when a Default under
Section 9.01 or an Event of Default is in existence on the date of the proposed
conversion if the Administrative Agent or the Required Lenders shall have
determined in its or their sole discretion not to permit such conversion and
(iii) Borrowings of Eurodollar Loans resulting from this Section 1.06 shall be
limited in number as provided in Section 1.02. Each such conversion shall be
effected by the Borrower giving the Administrative Agent at its Notice Office,
prior to 12:00 Noon (New York time), at least three Business Days' (or one
Business Day's, in the case of a conversion into Base Rate Loans) prior written
notice (or telephonic notice promptly confirmed in writing) (each, a "Notice of
Conversion") specifying the Loans to be so converted (including the relevant
Facility), the Type of Loans to be converted into and, if to be converted into a
Borrowing of Eurodollar Loans, the Interest Period to be initially applicable
thereto. The Administrative Agent shall give each Lender prompt notice of any
such proposed conversion affecting any of its Loans.
1.07 PRO RATA BORROWINGS. All Loans under this Agreement (other
than Swingline Loans) shall be made by the Lenders PRO RATA on the basis of
their A Term Commitments, B Term Commitments, C Term Commitments or Revolving
Commitments, as the case may be, PROVIDED, that each Mandatory Borrowing shall
be funded on the basis of their Adjusted RF Percentages, if any. It is
understood that no Lender shall be responsible for any default by any other
Lender in its obligation to make Loans hereunder and that each Lender shall be
obligated to make the Loans provided to be made by it hereunder, regardless of
the failure of any other Lender to fulfill its commitments hereunder.
1.08 INTEREST. (a) The unpaid principal amount of each Base
Rate Loan shall bear interest from the date of the Borrowing thereof until the
earlier of repayment or conversion thereof and maturity (whether by acceleration
or otherwise) at a rate per annum which shall at all times be the Applicable
Base Rate Margin plus the Base Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall
bear interest from the date of the Borrowing thereof until the earlier of
repayment or conversion thereof and maturity (whether by acceleration or
otherwise) at a rate per annum which shall at all times be the Applicable
Eurodollar Margin plus the relevant Eurodollar Rate.
(c) All overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall bear interest at a rate per annum equal to the Base Rate in
effect from time to time plus the sum of (i) 2% and (ii) the Applicable Base
Rate Margin provided that principal in respect of
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Eurodollar Loans shall bear interest from the date the same becomes due (whether
by acceleration or otherwise) until the end of the Interest Period then
applicable to such Eurodollar Loan at a rate per annum equal to 2% in excess of
the rate of interest applicable thereto on such date.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on the last
Business Day of each January, April, July and October, (ii) in respect of each
Eurodollar Loan, on the last day of each Interest Period applicable thereto and,
in the case of an Interest Period in excess of three months, on each date
occurring at three month intervals after the first day of such Interest Period
and (iii) in respect of each Loan, on any prepayment or conversion (on the
amount prepaid or converted), at maturity (whether by acceleration or otherwise)
and, after such maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 12.07(b).
(f) The Administrative Agent, upon determining the interest rate
for any Borrowing of Eurodollar Loans for any Interest Period, shall promptly
notify the Borrower and the Lenders thereof.
1.09 INTEREST PERIODS. (a) At the time the Borrower gives a
Notice of Borrowing or Notice of Conversion in respect of the making of, or
conversion into, a Borrowing of Eurodollar Loans (in the case of the initial
Interest Period applicable thereto) or prior to 12:00 Noon (New York time) on
the third Business Day prior to the expiration of an Interest Period applicable
to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving
the Administrative Agent written notice (or telephonic notice promptly confirmed
in writing) of the Interest Period applicable to such Borrowing, which Interest
Period shall, at the option of the Borrower, be a one, two, three, six or, to
the extent available to all Lenders with a Commitment under the respective
Facility and so long as the Administration Agent consents thereto, nine or
twelve month period. Notwithstanding anything to the contrary contained above:
(i) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date
of any conversion from a Borrowing of Base Rate Loans) and each
Interest Period occurring thereafter in respect of such Borrowing
shall commence on the day on which the next preceding Interest Period
expires;
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(ii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business
Day of such calendar month;
(iii) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, PROVIDED that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of
the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(iv) no Interest Period with respect to a Borrowing of Revolving
Loans shall extend beyond the A/RF Maturity Date;
(v) no Interest Period with respect to any Term Loans under a
Facility may be elected that would extend beyond any date upon which a
Scheduled Repayment is required to be made in respect of such Term
Loans if, after giving effect to the selection of such Interest
Period, the aggregate principal amount of Term Loans maintained under
the respective Facility as Eurodollar Loans with Interest Periods
ending after such date would exceed the aggregate principal amount of
Term Loans under such Facility permitted to be outstanding after such
Scheduled Repayment; and
(vi) no Interest Period may be elected at any time when a Default
under Section 9.01 or an Event of Default is then in existence if the
Administrative Agent or the Required Lenders shall have determined in
its or their sole discretion not to permit such election.
(b) If upon the expiration of any Interest Period, the Borrower
has failed to (or may not) elect a new Interest Period to be applicable to the
respective Borrowing of Eurodollar Loans as provided above, the Borrower shall
be deemed to have elected to convert such Borrowing into a Borrowing of Base
Rate Loans effective as of such expiration.
1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that
(x) in the case of clause (i) below, the Administrative Agent or (y) in the case
of clauses (ii) and (iii) below, any Lender shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period that, by reason of any changes arising after the date
of this Agreement affecting the interbank Eurodollar market, adequate
and fair means do not exist for ascertaining the applicable interest
rate on the basis provided for in the definition
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of Eurodollar Rate or the making or continuance of any Eurodollar Loan
has become impracticable as a result of a contingency occurring after
the Effective Date which materially and adversely affects the
interbank Eurodollar market;
(ii) at any time, that such Lender shall incur increased costs or
reductions in the amounts received or receivable hereunder with
respect to any Eurodollar Loans (other than taxes covered by Section
4.04 and any increased cost or reduction in the amount received or
receivable resulting from the imposition of or a change in the rate of
taxes or similar charges) because of (x) any change since the
Effective Date in any applicable law, governmental rule, regulation,
guideline or order (or in the interpretation or administration thereof
and including the introduction of any new law or governmental rule,
regulation, guideline or order) (such as, for example, but not limited
to, a change in official reserve requirements, but, in all events,
excluding reserves required under Regulation D to the extent included
in the computation of the Eurodollar Rate) and/or (y) other
circumstances affecting the interbank Eurodollar market or the
position of such Lender in such market; or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has become unlawful by compliance by such Lender in
good faith with any law, governmental rule, regulation, guideline or
order (or would conflict with any such governmental rule, regulation,
guideline or order not having the force of law but with which such
Lender customarily complies even though the failure to comply
therewith would not be unlawful);
then, and in any such event, such Lender (or the Administrative Agent in the
case of clause (i) above) shall (x) on such date and (y) within ten Business
Days of the date on which such event no longer exists give notice (by telephone
confirmed in writing) to the Borrower and to the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to
each of the other Lenders). Thereafter (x) in the case of clause (i) above,
Eurodollar Loans shall no longer be available until such time as the
Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice by the Administrative Agent no longer
exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower
with respect to Eurodollar Loans which have not yet been incurred shall be
deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the
Borrower shall pay to such Lender, within 10 Business Days after Borrower's
receipt of written demand therefor, such additional amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise
as such Lender in its reasonable discretion shall determine after consultation
with the Borrower) as shall be required to compensate such Lender for such
increased costs or reductions in amounts receivable hereunder (a written notice
as to the additional amounts owed to such Lender, describing the basis for such
increased costs and showing the calculation thereof, submitted to the Borrower
by such Lender shall, absent manifest error, be final and conclusive and
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binding upon all parties hereto) and (z) in the case of clause (iii) above, the
Borrower shall take one of the actions specified in Section 1.10(b) as promptly
as possible and, in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii), the Borrower may (and in the
case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii), the
Borrower shall within the time period required by law) either (x) if the
affected Eurodollar Loan is then being made pursuant to a Borrowing, cancel said
Borrowing by giving the Administrative Agent telephonic notice (confirmed
promptly in writing) thereof on the same date that the Borrower was notified by
a Lender pursuant to Section 1.10(a)(ii) or (iii), or (y) if the affected
Eurodollar Loan is then outstanding, upon at least three Business Days' notice
to the Administrative Agent, require the affected Lender to convert each such
Eurodollar Loan into a Base Rate Loan (which conversion, in the case of the
circumstances described in Section 1.10(a)(iii), shall occur no later than the
last day of the Interest Period then applicable to such Eurodollar Loan (or such
earlier date as shall be required by applicable law)); PROVIDED, that if more
than one Lender is affected at any time, then all affected Lenders must be
treated the same pursuant to this Section 1.10(b). Each Lender, upon
determining in good faith that any additional amounts will be payable pursuant
to this Section 1.10(b), will give prompt written notice thereof to the
Borrower, which notice shall set forth the basis of the calculation of such
additional amounts, although the failure to give any such notice shall not
release or diminish the Borrower's obligations to pay additional amounts
pursuant to this Section 1.10(b) upon the subsequent receipt of such notice.
(c) If any Lender shall have determined that the adoption or
effectiveness of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, in each case
after the Effective Date, or compliance by such Lender or its parent corporation
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency first
made after the Effective Date, has or would have the effect of reducing the rate
of return on such Lender's or its parent corporation's capital or assets as a
consequence of its commitments or obligations hereunder to a level below that
which such Lender or its parent corporation could have achieved but for such
adoption, effectiveness, change or compliance (taking into consideration such
Lender's or its parent corporation's policies with respect to capital adequacy),
then from time to time, within 10 Business Days after demand by such Lender
(with a copy to the Administrative Agent), the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender or its parent
corporation for such reduction. Each Lender, upon determining in good faith
that any additional amounts will be payable pursuant to this Section 1.10(c),
will give prompt written notice thereof to the Borrower, which notice shall
describe the basis for such claim and set forth in reasonable
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detail the calculation of such additional amounts, although the failure to give
any such notice shall not release or diminish any of the Borrower's obligations
to pay additional amounts pursuant to this Section 1.10(c) upon the subsequent
receipt of such notice.
1.11 COMPENSATION. (a) The Borrower shall compensate each
Lender, upon its written request (which request shall set forth the basis for
requesting such compensation and reasonably detailed calculations thereof), for
all reasonable losses, expenses and liabilities (including, without limitation,
any loss, expense or liability incurred by reason of the liquidation or
reemployment of deposits or other funds required by such Lender to fund its
Eurodollar Loans but excluding in any event the loss of anticipated profits)
which such Lender may sustain: (i) if for any reason (other than a default by
such Lender or the Administrative Agent) a Borrowing of Eurodollar Loans does
not occur on a date specified therefor in a Notice of Borrowing or Notice of
Conversion (whether or not withdrawn by the Borrower or deemed withdrawn
pursuant to Section 1.10(a)); (ii) if any prepayment, repayment or conversion of
any of its Eurodollar Loans occurs on a date which is not the last day of an
Interest Period applicable thereto; (iii) if any prepayment of any of its
Eurodollar Loans is not made on any date specified in a notice of prepayment
given by the Borrower; or (iv) as a consequence of (x) any other default by the
Borrower to repay its Eurodollar Loans when required by the terms of this
Agreement or (y) an election made pursuant to Section 1.10(b).
(b) Notwithstanding anything in this Agreement to the contrary,
to the extent any notice or request required by Section 1.10, 1.11, 2.05 or 4.04
is given by any Lender more than 180 days after such Lender obtained, or
reasonably should have obtained, knowledge of the occurrence of the event giving
rise to the additional costs, reductions in amounts, losses, taxes or other
additional amounts of the type described in such Section, such Lender shall not
be entitled to compensation under Section 1.10, 1.11, 2.05 or 4.04 for any
amounts incurred or accruing prior to the giving of such notice to the Borrower.
1.12 CHANGE OF LENDING OFFICE. Each Lender agrees that, upon
the occurrence of any event giving rise to the operation of Section 1.10(a)(ii)
or (iii), 1.10(c), 2.05 or 4.04 with respect to such Lender, it will, if
requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any Loans
or Letter of Credit participations affected by such event, PROVIDED that such
designation is made on such terms that such Lender and its lending office suffer
no material economic, legal or regulatory disadvantage, with the object of
avoiding the consequence of the event giving rise to the operation of any such
Section. Nothing in this Section 1.12 shall affect or postpone any of the
obligations of the Borrower or the right of any Lender provided in Section 1.10,
2.05 or 4.04.
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1.13 REPLACEMENT OF LENDERS. (x) Upon the occurrence of any event
giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c),
Section 1.11, Section 2.05 or Section 4.04 with respect to any Lender which
results in such Lender charging to the Borrower increased costs materially in
excess of those being charged generally by the Lenders, (y) if a Lender becomes
a Defaulting Lender and/or (z) in the case of a refusal by a Lender to consent
to a proposed change, waiver, discharge or termination with respect to this
Agreement which has been approved by the Required Lenders, the Borrower shall
have the right, if no Default under Section 9.01 or Event of Default then
exists, to replace such Lender (the "Replaced Lender") with one or more other
Eligible Transferee or Transferees, none of whom shall constitute a Defaulting
Lender at the time of such replacement (collectively, the "Replacement Lender")
reasonably acceptable to the Administrative Agent, provided that (i) at the time
of any replacement pursuant to this Section 1.13, the Replacement Lender shall
enter into one or more Assignment Agreements pursuant to Section 12.04(b) (and
with all fees payable pursuant to said Section 12.04(b) to be paid by the
Replacement Lender) pursuant to which the Replacement Lender shall acquire all
of the Commitments and outstanding Loans of, and in each case participations in
Letters of Credit by, the Replaced Lender and, in connection therewith, shall
pay to (x) the Replaced Lender an amount equal to the sum of (A) an amount equal
to the principal of, and all accrued and unpaid interest on, all outstanding
Loans of the Replaced Lender, (B) an amount equal to all Unpaid Drawings that
have been funded by (and not reimbursed to) such Replaced Lender, together with
all accrued and unpaid interest with respect thereto at such time and (C) an
amount equal to all accrued and unpaid Fees owing to the Replaced Lender
pursuant to Section 3.01, (y) the Letter of Credit Issuer an amount equal to
such Replaced Lender's Adjusted RF Percentage (for this purpose, and for the
purposes of clause (z) below, determined as if the adjustment described in
clause (y) of the immediately succeeding sentence had been made with respect to
such Replaced Lender) of any Unpaid Drawing (which at such time remains an
Unpaid Drawing) to the extent such amount was not theretofore funded by such
Replaced Lender and (z) the Swingline Lender, any portion of a Mandatory
Borrowing as to which the Replaced Lender is then in default, and (ii) all
obligations of the Borrower owing to the Replaced Lender (other than those
specifically described in clause (i) above in respect of which the assignment
purchase price has been, or is concurrently being, paid) shall be paid in full
to such Replaced Lender by the Borrower concurrently with such replacement.
Upon the execution of the respective Assignment Agreements, the payment of
amounts referred to in clauses (i) and (ii) above and, if so requested by the
Replacement Lender, delivery to the Replacement Lender of the appropriate Note
or Notes executed by the Borrower, (x) the Replacement Lender shall become a
Lender hereunder and the Replaced Lender shall cease to constitute a Lender
hereunder, except with respect to indemnification provisions applicable to the
Replaced Lender under this Agreement, which shall survive as to such Replaced
Lender and (y) in the case of a replacement of a Defaulting Lender with a
Non-Defaulting Lender, the Adjusted RF Percentages of the respective Lenders and
the Adjusted Total Revolving Commitment shall be automatically adjusted at such
time to give effect to such replacement.
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SECTION 2. LETTERS OF CREDIT.
2.01 LETTERS OF CREDIT. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request that the Letter of Credit
Issuer at any time and from time to time on or after the Initial Borrowing Date
and prior to the fifth Business Day prior to the A/RF Maturity Date to issue,
for the account of the Borrower and in support of (x) trade obligations of the
Borrower and its Subsidiaries incurred in the ordinary course of business
(letters of credit issued for such purposes, "Trade Letters of Credit") and (y)
any other lawful purposes of the Borrower and its Subsidiaries (letters of
credit issued for such purposes, "Standby Letters of Credit"), and subject to
and upon the terms and conditions herein set forth, the Letter of Credit Issuer
agrees to issue from time to time, irrevocable letters of credit denominated in
Dollars and issued on a sight basis only, in such form as may be approved by the
Letter of Credit Issuer and the Administrative Agent. "Letters of Credit" shall
include Trade Letters of Credit, Standby Letters of Credit and Existing Letters
of Credit (each of which Existing Letters of Credit shall be deemed issued for
all purposes of this Agreement on the Initial Borrowing Date).
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall
be issued if after giving effect thereto the sum of the Letter of Credit
Outstandings plus the aggregate principal amount of all Revolving Loans made by
Non-Defaulting Lenders then outstanding and Swingline Loans then outstanding
would exceed the Adjusted Total Revolving Commitment at such time; (ii) each
Standby Letter of Credit shall have an expiry date occurring not later than
three years after such Letter of Credit's date of issuance although (i) Standby
Letters of Credit issued to replace and/or support letters of credit existing on
the Initial Borrowing Date shall have an expiry equal to the then expiry of the
letter of credit being replaced or supported and (ii) any Standby Letter of
Credit may be extendable for successive periods of up to 12 months, but not
beyond the third Business Day next preceding the A/RF Maturity Date, on terms
acceptable to the Letter of Credit Issuer and in no event shall any Standby
Letter of Credit have an expiry date occurring later than the third Business Day
next preceding the A/RF Maturity Date; and (iii) each Trade Letter of Credit
shall have an expiry date occurring not later than (x) 180 days after such
Letter of Credit's date of issuance or (y) the date three Business Days prior to
the A/RF Maturity Date.
2.02 LETTER OF CREDIT REQUESTS; NOTICES OF ISSUANCE.
(a) Whenever it desires that a Letter of Credit be issued, the Borrower shall
give the Administrative Agent and the Letter of Credit Issuer written notice
(including by way of facsimile transmission) in the form of Exhibit C thereof
prior to 1:00 P.M. (New York time) at least three Business Days (or such shorter
period as may be acceptable to the Letter of Credit Issuer) prior to the
proposed date of issuance (which shall be a Business Day) (each, a "Letter of
Credit Request"), which Letter of Credit Request shall include any other
documents that the Letter of Credit Issuer customarily requires in connection
therewith.
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(b) The Letter of Credit Issuer shall, promptly after each
issuance of a Standby Letter of Credit by it, give the Administrative Agent,
each RF Lender and the Borrower written notice of the issuance of such Standby
Letter of Credit, accompanied by a copy of such Letter of Credit. The
Administrative Agent will send to each RF Lender, upon each Letter of Credit Fee
payment date, a report setting forth for the relevant period the daily aggregate
Letter of Credit Outstandings during such period (based, to the extent relating
to Letters of Credit not issued by BTCo, upon information supplied to the
Administrative Agent by the Borrower).
2.03 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The
Borrower hereby agrees to reimburse the Letter of Credit Issuer, by making
payment to the Administrative Agent at the Payment Office, for any payment or
disbursement made by the Letter of Credit Issuer under any Letter of Credit
(each such amount so paid or disbursed until reimbursed, an "Unpaid Drawing")
promptly after, and in any event within three Business Days after the date on
which, the Borrower is notified by the Letter of Credit Issuer of such payment
or disbursement with interest on the amount so paid or disbursed by the Letter
of Credit Issuer, to the extent not reimbursed prior to 1:00 P.M. (New York
time) on the date of such payment or disbursement, from and including the date
paid or disbursed to but not including the date the Letter of Credit Issuer is
reimbursed therefor at a rate per annum which shall be the Base Rate plus the
Applicable Base Rate Margin as in effect from time to time (plus an additional
2% per annum if not reimbursed by the third Business Day after the date of such
notice of payment or disbursement), such interest also to be payable on demand.
(b) The Borrower's obligation under this Section 2.03 to
reimburse the Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower may have or have had against the Letter of
Credit Issuer, the Administrative Agent or any Lender, including, without
limitation, any defense based upon the failure of any drawing under a Letter of
Credit to conform substantially to the terms of the Letter of Credit or any
non-application or misapplication by the beneficiary of the proceeds of such
drawing provided that the Borrower shall not be obligated to reimburse the
Letter of Credit Issuer for any wrongful payment made by the Letter of Credit
Issuer under a Letter of Credit as a result of acts or omissions constituting
willful misconduct or gross negligence on the part of the Letter of Credit
Issuer as determined by a court of competent jurisdiction.
2.04 LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon the
issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of
Credit Issuer shall be deemed to have sold and transferred to each other RF
Lender, and each such RF Lender (each, a "Participant") shall be deemed
irrevocably and unconditionally to have purchased and received from such Letter
of Credit Issuer, without recourse or warranty, an undivided
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interest and participation, to the extent of such Participant's Adjusted RF
Percentage, in such Letter of Credit, each substitute letter of credit, each
drawing made thereunder and the obligations of the Borrower under this Agreement
with respect thereto (although the Letter of Credit Fee shall be payable
directly to the Administrative Agent for the account of the RF Lenders as
provided in Section 3.01(c) and the Participants shall have no right to receive
any portion of any Facing Fees) and any security therefor or guaranty pertaining
thereto. Upon any change in the Adjusted RL Percentages pursuant to Section
1.13 and/or 12.04(b) and/or as a result of a Lender Default, it is hereby agreed
that, with respect to all outstanding Letters of Credit and Unpaid Drawings,
there shall be an automatic adjustment to the participations pursuant to this
Section 2.04 to reflect the new Adjusted RF Percentages of all of the Lenders
with Revolving Commitments as a result thereof.
(b) In determining whether to pay under any Letter of Credit,
the Letter of Credit Issuer shall not have any obligation relative to the
Participants other than to determine that any documents required to be delivered
under such Letter of Credit have been delivered and that they substantially
comply on their face with the requirements of such Letter of Credit. Any action
taken or omitted to be taken by the Letter of Credit Issuer under or in
connection with any Letter of Credit if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for the Letter of Credit
Issuer any resulting liability.
(c) In the event that the Letter of Credit Issuer makes any
payment under any Letter of Credit and the Borrower shall not have reimbursed
such amount in full to the Letter of Credit Issuer pursuant to Section 2.03(a),
the Letter of Credit Issuer shall promptly notify the Administrative Agent, and
the Administrative Agent shall promptly notify each Participant of such failure,
and each Participant shall promptly and unconditionally pay to the
Administrative Agent for the account of the Letter of Credit Issuer, the amount
of such Participant's Adjusted RF Percentage of such payment in Dollars and in
same day funds provided that no Participant shall be obligated to pay to the
Administrative Agent its Adjusted RF Percentage of such unreimbursed amount for
any wrongful payment made by the Letter of Credit Issuer under a Letter of
Credit as a result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer. If the Administrative
Agent so notifies any Participant prior to 11:00 A.M. (New York time) on any
Business Day, such Participant shall make available to the Administrative Agent,
such Participant's Adjusted RF Percentage of the amount of such payment on such
Business Day in same day funds. If and to the extent such Participant shall not
have so made its Adjusted RF Percentage of the amount of such Unpaid Drawing
available to the Administrative Agent, such Participant agrees to pay to the
Administrative Agent for the account of the Letter of Credit Issuer, forthwith
on demand such amount, together with interest thereon, for each day from such
date until the date such amount is so paid to the Administrative Agent at the
overnight Federal Funds Effective Rate. The failure of any Participant to so
pay to the Administrative Agent its Adjusted RF Percentage
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of any Unpaid Drawing shall not relieve any other Participant of its obligation
hereunder to so pay to the Administrative Agent its Adjusted RF Percentage of
any Unpaid Drawing on the date required, as specified above, but no Participant
shall be responsible for the failure of any other Participant to so pay to the
Administrative Agent such other Participant's Adjusted RF Percentage of any such
payment.
(d) Whenever the Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Administrative Agent has received for
the account of the Letter of Credit Issuer any payments from the Participants
pursuant to clause (c) above, the Letter of Credit Issuer shall pay to the
Administrative Agent and the Administrative Agent shall promptly pay to each
Participant which has paid its Adjusted RF Percentage thereof, in Dollars and in
same day funds, an amount equal to such Participant's Adjusted RF Percentage of
the principal amount thereof and interest thereon accruing after the purchase of
the respective participations.
(e) The obligations of the Participants to make payments to the
Administrative Agent for the account of the Letter of Credit Issuer with respect
to Letters of Credit shall be irrevocable and not subject to counterclaim,
set-off or other defense or any other qualification or exception whatsoever
(provided that no Participant shall be required to make payments resulting from
the Administrative Agent's gross negligence or willful misconduct) and shall be
made in accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which any Credit Party or any of their Subsidiaries may have at any time
against a beneficiary named in a Letter of Credit, any transferee of any
Letter of Credit (or any Person for whom any such transferee may be
acting), any Agent, the Letter of Credit Issuer, any Lender or other
Person, whether in connection with this Agreement, any Letter of Credit,
the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Borrower and the
beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
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(v) the occurrence of any Default or Event of Default.
(f) To the extent the Letter of Credit Issuer is not indemnified
by the Borrower, the Participants will reimburse and indemnify the Letter of
Credit Issuer, in proportion to their respective RF Percentages, for and against
any and all liabilities, obligations, losses, damages, penalties, claims,
actions, judgments, costs, expenses or disbursements of whatsoever kind or
nature which may be imposed on, asserted against or incurred by the Letter of
Credit Issuer in performing its respective duties in any way relating to or
arising out of its issuance of Letters of Credit; PROVIDED that no Participants
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Letter of Credit Issuer's gross negligence or willful
misconduct.
2.05 INCREASED COSTS. If at any time after the Effective Date,
the adoption or effectiveness of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Letter of Credit
Issuer or any Participant with any request or directive (whether or not having
the force of law) first made by any such authority, central bank or comparable
agency, in each case after the Effective Date, shall either (i) impose, modify
or make applicable any reserve, deposit, capital adequacy or similar requirement
against Letters of Credit issued by the Letter of Credit Issuer or such
Participant's participation therein, or (ii) shall impose on the Letter of
Credit Issuer or any Participant any other conditions affecting this Agreement,
any Letter of Credit or such Participant's participation therein; and the result
of any of the foregoing is to increase the cost to the Letter of Credit Issuer
or such Participant of issuing, maintaining or participating in any Letter of
Credit, or to reduce the amount of any sum received or receivable by the Letter
of Credit Issuer or such Participant hereunder (other than any increased cost or
reduction in the amount received or receivable resulting from the imposition of
or a change in the rate of taxes or similar charges), then, within 10 Business
Days of Borrower's receipt of a written demand to the Borrower by the Letter of
Credit Issuer or such Participant (a copy of which notice shall be sent by the
Letter of Credit Issuer or such Participant to the Administrative Agent), the
Borrower shall pay to the Letter of Credit Issuer or such Participant such
additional amount or amounts as will compensate the Letter of Credit Issuer or
such Participant for such increased cost or reduction. A certificate submitted
to the Borrower by the Letter of Credit Issuer or such Participant, as the case
may be (a copy of which certificate shall be sent by the Letter of Credit Issuer
or such Participant to the Administrative Agent), setting forth the basis for,
and reasonably detailed calculations of, the determination of such additional
amount or amounts necessary to compensate the Letter of Credit Issuer or such
Participant as aforesaid shall be conclusive and binding on the Borrower absent
manifest error, although the failure to deliver any such certificate shall not
release or diminish any
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of the Borrower's obligations to pay additional amounts pursuant to this Section
2.05 upon the subsequent receipt thereof.
SECTION 3. FEES; COMMITMENTS.
3.01 FEES. (a) The Borrower agrees to pay to the
Administrative Agent a commitment commission (the "TL Commitment Commission")
for the account for each Lender with an A Term Commitment that is a
Non-Defaulting Lender for the period from and including the Initial Borrowing
Date to but not including the date on which the Total A Term Commitment has been
terminated, computed for each day at a rate per annum equal to the Applicable CC
Percentage for such day on the A Term Commitment on such day of such Lender.
Such TL Commitment Commission shall be due and payable in arrears on the last
Business Day of each January, April, July and October on the date upon which the
Total A Term Commitment is terminated.
(b) The Borrower agrees to pay to the Administrative Agent a
commitment commission ("RL Commitment Commission") for the account of each RF
Lender that is a Non-Defaulting Lender for the period from and including the
Initial Borrowing Date to but not including the date upon which the Total
Revolving Commitment has been terminated, computed for each day at the rate per
annum equal to the Applicable CC Percentage for such day on the Unutilized
Revolving Commitment on such day of such Lender. Such RL Commitment Commission
shall be due and payable in arrears on the last Business Day of each January,
April, July and October and on the date upon which the Total Revolving
Commitment is terminated.
(c) The Borrower agrees to pay to the Administrative Agent, for
the account of each RF Lender that is a Non-Defaulting Lender, PRO RATA on the
basis of their respective Adjusted RF Percentages, a fee in respect of each
Letter of Credit (the "Letter of Credit Fee") computed for each day at a per
annum rate equal to 1/4 of 1% less than the Applicable Eurodollar Margin for
Revolving Loans on such day multiplied by the Stated Amount of all Letters of
Credit outstanding on such day. Accrued Letter of Credit Fees shall be due and
payable quarterly in arrears on the last Business Day of each January, April,
July and October of each year and on the date upon which the Total Revolving
Commitment is terminated.
(d) The Borrower agrees to pay to the Letter of Credit Issuer a
fee in respect of each Letter of Credit issued by it (the "Facing Fee") computed
for each day at the rate of 1/4 of 1% per annum on the Stated Amount of all
Letters of Credit outstanding on such day, provided that in no event shall the
annual Facing Fee with respect to any Letter of Credit be less than $500.
Accrued Facing Fees shall be due and payable quarterly in arrears on the last
Business Day of each January, April, July and October of each year and on the
date upon which the Total Revolving Commitment is terminated.
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(e) The Borrower agrees to pay directly to the Letter of Credit
Issuer upon each issuance of, payment under, and/or amendment of, a Letter of
Credit such amount as shall at the time of such issuance, payment or amendment
be the administrative charge which the Letter of Credit Issuer is customarily
charging for issuances of, payments under or amendments of, letters of credit
issued by it.
(f) The Borrower shall pay to (x) each Agent on the Initial
Borrowing Date, for its own account and/or for distribution to the Lenders, such
fees as heretofore agreed by the Borrower and the Agents and (y) the
Administrative Agent, for its own account, such other fees as agreed to between
the Borrower and the Administrative Agent, when and as due.
(g) All computations of Fees shall be made in accordance with
Section 12.07(b).
3.02 VOLUNTARY REDUCTION OF COMMITMENTS. (a) Upon at least one
Business Day's prior written notice (or telephonic notice confirmed in writing)
to the Administrative Agent at its Notice Office (which notice shall be deemed
to be given on a certain day only if given before 2:00 P.M. (New York time) on
such day and shall be promptly transmitted by the Administrative Agent to each
of the Lenders), the Borrower shall have the right, without premium or penalty,
to terminate or partially reduce the Total Unutilized Revolving Commitment
provided that (x) any such partial reduction shall apply to proportionately and
permanently reduce the Revolving Commitment of each Lender, (y) no such
reduction shall reduce any Non-Defaulting Lender's Revolving Commitment in an
amount greater than the then Unutilized Revolving Commitment of such Lender and
(z) any partial reduction pursuant to this Section 3.02 shall be in the amount
of at least $1,000,000.
(b) At any time after the Initial Borrowing Date and prior to
the A Termination Date upon at least one Business Day's prior written notice to
the Administrative Agent at its Notice Office (which notice the Administrative
Agent shall promptly transmit to each of the Lenders), the Borrower shall have
the right, without premium or penalty, to terminate all or any portion of the
remaining Total A Term Commitment. The amount of any reduction or termination
of the Total A Term Commitment effected pursuant to this Section 3.02(b) and/or
Section 3.03(b)(ii) and/or Section 3.03(b)(iii) shall be applied to reduce the
remaining Scheduled Repayments of A Term Loans PRO RATA based upon the then
remaining amount of each such Scheduled Repayment.
3.03 MANDATORY ADJUSTMENTS OF COMMITMENTS, ETC. (a) The Total
Commitment (and the A Term Commitment, B Term Commitment, C Term Commitment and
Revolving Commitment of each Lender) shall terminate in its entirety on the
Expiration Date unless the Initial Borrowing Date has occurred on or before such
date.
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(b) The Total A Term Commitment shall (i) be reduced on the date
any A Term Loans are incurred in an amount equal to the aggregate principal
amount of A Term Loans so incurred, (ii) terminate in its entirety (to the
extent not theretofore terminated) at 5:00 P.M. (New York time) on the A
Termination Date, whether or not any A Term Loans are incurred on such date and
(iii) until terminated in full, be reduced on each day on which Term Loans are
required to be repaid pursuant to Sections 4.02(A)(c), (d), (e), (f) and/or (g)
by the amount, if any, by which the amount required to be applied pursuant to
said Sections (determined as if an unlimited amount of Term Loans were actually
outstanding) exceeds the aggregate principal amount of Term Loans being repaid.
(c) Each of the Total B Term Commitment and Total C Term
Commitment shall terminate in its entirety on the Initial Borrowing Date (after
giving effect to the making of B Term Loans and C Term Loans on such date).
(d) The Total Revolving Commitment shall terminate in its
entirety on the A/RF Maturity Date.
(e) To the extent gross cash proceeds from the issuance of the
Senior Subordinated Notes exceed $200,000,000 the Total Term Commitment shall,
before Term Loans are extended on the Initial Borrowing Date, be permanently
reduced by such excess amount. Any reduction to the Total Term Commitment
pursuant to the immediately preceding sentence shall be applied PRO RATA to the
Total B Term Commitment and Total C Term Commitment and shall reduce the
Scheduled Repayments of the respective Term Loan Facilities PRO RATA based upon
the amount of such Scheduled Repayments.
(f) Each partial reduction of the Commitments under a Facility
pursuant to this Section 3.03 shall apply proportionately to the Commitment
under such Facility of each Lender.
SECTION 4. PAYMENTS.
4.01 VOLUNTARY PREPAYMENTS. The Borrower shall have the right
to prepay Loans in whole or in part, without premium or penalty, from time to
time on the following terms and conditions: (i) the Borrower shall give the
Administrative Agent at the Payment Office written notice (or telephonic notice
promptly confirmed in writing) of its intent to prepay the Loans, whether such
Loans are A Term Loans, B Term Loans, C Term Loans, Revolving Loans or Swingline
Loans, the amount of such prepayment and (in the case of Eurodollar Loans) the
specific Borrowing(s) pursuant to which made, which notice shall be given by the
Borrower prior to 3:00 P.M. (New York time) on the Business Day prior to the
date of such prepayment (or in the case of Swingline Loans on the day of
prepayment), and which notice shall promptly be transmitted by the
Administrative Agent to each of the Lenders; (ii) (x) each partial prepayment of
any Borrowing (other than a Borrowing of
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Swingline Loans) shall be in an aggregate principal amount of at least
$1,000,000 and (y) each partial prepayment of Swingline Loans shall be in an
aggregate principal amount of at least $250,000, provided that no partial
prepayment of Eurodollar Loans made pursuant to a Borrowing shall reduce the
aggregate principal amount of the Loans outstanding pursuant to such Borrowing
to an amount less than the Minimum Borrowing Amount applicable thereto; (iii)
each prepayment in respect of any Loans made pursuant to a Borrowing shall be
applied PRO RATA among such Loans provided that at the Borrower's election in
connection with any prepayment of Revolving Loans pursuant to this Section 4.01,
such prepayment shall not be applied to any Revolving Loans of a Defaulting
Lender; and (iv) each prepayment of Term Loans pursuant to this Section 4.01
shall be applied to A Term Loans (in an amount equal to the A TF Percentage of
such prepayment), B Term Loans (in an amount equal to the B TF Percentage of
such prepayment) and C Term Loans (in an amount equal to the C TF Percentage of
such prepayment) and shall reduce the remaining Scheduled Repayments of each of
the A Term Loans, the B Term Loans and the C Term Loans (x) first, in direct
order of maturity to those Scheduled Repayments which will be due and payable
within twelve months after the date of the respective payment and (y) second, to
the extent in excess thereof, on a PRO RATA basis (based upon the then remaining
principal amount of each such Scheduled Repayment).
4.02 MANDATORY PREPAYMENTS.
(A) REQUIREMENTS:
(a) (i) If on any date (and after giving effect to all other
repayments on such date) the sum of the aggregate outstanding principal amount
of Revolving Loans made by Non-Defaulting Lenders, the principal amount of
Swingline Loans and the Letter of Credit Outstandings exceeds the Adjusted Total
Revolving Commitment as then in effect, the Borrower shall repay on such date
the principal of outstanding Swingline Loans and, after all Swingline Loans have
been repaid in full, Revolving Loans of Non-Defaulting Lenders in an aggregate
amount equal to such excess. If, after giving effect to the repayment of all
outstanding Swingline Loans and Revolving Loans of Non-Defaulting Lenders, the
Letter of Credit Outstandings exceeds the Adjusted Total Revolving Commitment
then in effect, the Borrower shall pay to the Administrative Agent an amount in
cash and/or Cash Equivalents equal to such excess and the Administrative Agent
shall hold such payment as security for the obligations of the Borrower in
respect of Letters of Credit pursuant to a cash collateral agreement to be
entered into in form and substance reasonably satisfactory to the Administrative
Agent (which shall permit certain investments in Cash Equivalents reasonably
satisfactory to the Administrative Agent, until all proceeds are applied to the
secured obligations or until all Letters of Credit so secured expire undrawn or
are otherwise terminated or all drawings thereunder are paid, at which time such
amount shall be returned to the Borrower). In addition, if on any date the
aggregate outstanding principal amount of Swingline Loans and Revolving Loans
exceeds the Maximum RL Amount, the Borrower
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shall repay the principal of Swingline Loans, and after all Swingline Loans have
been repaid in full, Revolving Loans of Non-Defaulting Banks in an amount equal
to such excess.
(ii) If on any date the aggregate outstanding principal amount
of the Revolving Loans made by a Defaulting Lender exceeds the Revolving
Commitment of such Defaulting Lender, the Borrower shall repay principal of
Revolving Loans of such Defaulting Lender in an amount equal to such excess.
(b) (i) On each date set forth below, the Borrower shall repay
the principal amount of A Term Loans set forth opposite such date (each such
repayment, together with each repayment of B Term Loans required by clause
(b)(ii) below and each repayment of C Term Loans required by clause (b)(iii)
below, as the same may be reduced as provided in Sections 3.02(b), 4.01 and
4.02(B), a "Scheduled Repayment"):
Date Amount
---- ------
January 31, 1998 $6,250,000
April 30, 1998 $6,250,000
July 31, 1998 $6,250,000
October 31, 1998 $6,250,000
January 31, 1999 $6,250,000
April 30, 1999 $6,250,000
July 31, 1999 $6,250,000
October 31, 1999 $6,250,000
January 31, 2000 $6,250,000
April 30, 2000 $6,250,000
July 31, 2000 $6,250,000
October 31, 2000 $6,250,000
January 31, 2001 $6,250,000
April 30, 2001 $6,250,000
July 31, 2001 $6,250,000
October 31, 2001 $6,250,000
January 31, 2002 $6,250,000
April 30, 2002 $6,250,000
July 31, 2002 $6,250,000
October 31, 2002 $6,250,000
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Date Amount
---- ------
January 31, 2003 $6,250,000
April 3, 2003 $6,250,000
July 31, 2003 $6,250,000
A/RF Maturity Date $6,250,000
(ii) On each date set forth below, the Borrower shall repay
the principal amount of B Term Loans set forth opposite such date:
Date Amount
---- ------
January 31, 1998 $437,500
April 30, 1998 $437,500
July 31, 1998 $437,500
October 31, 1998 $437,500
January 31, 1999 $437,500
April 30, 1999 $437,500
July 31, 1999 $437,500
October 31, 1999 $437,500
January 31, 2000 $437,500
April 30, 2000 $437,500
July 31, 2000 $437,500
October 31, 2000 $437,500
January 31, 2001 $437,500
April 30, 2001 $437,500
July 31, 2001 $437,500
October 31, 2001 $437,500
January 31, 2002 $437,500
April 30, 2002 $437,500
July 31, 2002 $437,500
October 31, 2002 $437,500
January 31, 2003 $437,500
April 30, 2003 $437,500
July 31, 2003 $437,500
October 31, 2003 $437,500
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Date Amount
---- ------
January 31, 2004 $20,562,500
April 30, 2004 $20,562,500
July 31, 2004 $20,562,500
October 31, 2004 $20,562,500
January 31, 2005 $20,562,500
April 30, 2005 $20,562,500
July 31, 2005 $20,562,500
B Maturity Date $20,562,500
(iii) On each date set forth below, the Borrower shall repay
the principal amount of C Term Loans set forth opposite such date:
Date Amount
---- ------
January 31, 1998 $425,000
April 30, 1998 $425,000
July 31, 1998 $425,000
October 31, 1998 $425,000
January 31, 1999 $425,000
April 30, 1999 $425,000
July 31, 1999 $425,000
October 31, 1999 $425,000
January 31, 2000 $425,000
April 30, 2000 $425,000
July 31, 2000 $425,000
October 31, 2000 $425,000
January 31, 2001 $425,000
April 30, 2001 $425,000
July 31, 2001 $425,000
October 31, 2001 $425,000
January 31, 2002 $425,000
April 30, 2002 $425,000
July 31, 2002 $425,000
October 31, 2002 $425,000
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Date Amount
---- ------
January 31, 2003 $425,000
April 30, 2003 $425,000
July 31, 2003 $425,000
October 31, 2003 $425,000
January 31, 2004 $425,000
April 30, 2004 $425,000
July 31, 2004 $425,000
October 31, 2004 $425,000
January 31, 2005 $425,000
April 30, 2005 $425,000
July 31, 2005 $425,000
October 31, 2005 $425,000
January 31, 2006 $39,100,000
April 30, 2006 $39,100,000
July 31, 2006 $39,100,000
Final Maturity Date $39,100,000
(c) On the third Business Day following the date of receipt
thereof by Holdings and/or any of its Subsidiaries of the Net Cash Proceeds from
any Asset Sale, an amount equal to 100% of the Net Cash Proceeds from such Asset
Sale shall be applied as a mandatory repayment of principal of the then
outstanding Term Loans, PROVIDED that up to an aggregate of $15,000,000 per year
(but no more than $40,000,000 in the aggregate for all Asset Sales after the
Initial Borrowing Date) of the Net Cash Proceeds from Asset Sales shall not be
required to be used to so repay Term Loans to the extent the Borrower elects, as
hereinafter provided, to cause such Net Cash Proceeds to be reinvested in
Reinvestment Assets (a "Reinvestment Election"). The Borrower may exercise its
Reinvestment Election (within the parameters specified in the preceding
sentence) with respect to an Asset Sale if (x) no Default or Event of Default
exists and (y) the Borrower delivers a Reinvestment Notice to the Administrative
Agent no later than three Business Days following the date of the consummation
of the respective Asset Sale, with such Reinvestment Election being effective
with respect to the Net Cash Proceeds of such Asset Sale equal to the
Anticipated Reinvestment Amount specified in such Reinvestment Notice.
(d) On the date of the receipt thereof by Holdings and/or any of
its Subsidiaries, an amount equal to 100% of the proceeds (net of underwriting
discounts and commissions and other reasonable costs associated therewith) of
the incurrence of Indebtedness by Holdings or any of its Subsidiaries (other
than Indebtedness permitted by Section 8.04), shall be applied as a mandatory
repayment of principal of the then outstanding Term Loans.
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(e) On the date of the receipt thereof by Holdings or the
Borrower, an amount equal to the EP Percentage of the proceeds (net of
underwriting discounts and commissions and other reasonable costs associated
therewith) of any sale or issuance of its equity or any equity contribution
(other than equity issued to management and other employees of Holdings and its
Subsidiaries) shall be applied as a mandatory repayment of principal of the then
outstanding Term Loans.
(f) On each date which is 90 days after the last day of each
fiscal year of the Borrower (commencing with the fiscal year ending on
December 31, 1998), 75% (or, if the Leverage Ratio on the last day of such
fiscal year is less than 4.0:1.0, 50%) of Excess Cash Flow for the fiscal year
then last ended (or in the case of the fiscal year ending on December 31, 1998,
the period commencing on the Initial Borrowing Date and ending on December 31,
1998) shall be applied as a mandatory repayment of principal of the then
outstanding Term Loans.
(g) On the Reinvestment Prepayment Date with respect to a
Reinvestment Election, an amount equal to the Reinvestment Prepayment Amount, if
any, for such Reinvestment Election shall be applied as a repayment of the
principal amount of the then outstanding Term Loans.
(h) On the third Business Date following the date of the receipt
thereof by Holdings and/or any of its Subsidiaries, an amount equal to 100% of
any price adjustment in respect of the Acquisition shall be applied (i) to the
extent such amount is less than $15,000,000, as a mandatory repayment of
principal of outstanding Revolving Loans (but shall not permanently reduce Total
Revolving Commitment) and (ii) to the extent such amount exceeds $15,000,000,
such excess portion shall be applied as a mandatory repayment of principal of
then outstanding Term Loans PRO RATA among same on the basis of the outstanding
principal amount thereof.
(i) To the extent not theretofore repaid pursuant to the
provisions of this Agreement, (i) all then outstanding Swingline Loans shall be
repaid in full on the Swingline Expiry Date and (ii) all outstanding Swingline
Loans and Revolving Loans shall be repaid in full upon the termination of the
Total Revolving Commitment.
(B) APPLICATION:
(a) Each mandatory repayment of Term Loans required to be made
pursuant to Section 4.02(A) shall be applied (i) (except in the cases of
Sections 4.02(A)(b) and (h)) to the outstanding A Term Loans, if any, in an
amount equal to the A TF Percentage of such prepayment, to the outstanding B
Term Loans, if any, in an amount equal to the B TF Percentage of such prepayment
and to the outstanding C Term Loans, if any, in an amount
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equal to the C TF Percentage of such prepayment and (ii) to reduce the then
remaining Scheduled Repayments of the respective Facility (x) in the case of any
mandatory repayment pursuant to Sections 4.02(A)(c), (d), (g) and/or (h) on a
PRO RATA basis (based upon the then remaining Scheduled Repayments of the
respective Facility) and (y) in the case of any mandatory repayments pursuant to
Sections 4.02(A)(e) and (f), (I) first, in direct order of maturity to those
Scheduled Repayments which will be due and payable within 12 months after the
date of the respective payment and (II) second, to the extent in excess thereof,
on a PRO RATA basis (based upon the then remaining principal amount of each
such Scheduled Repayment).
(b) With respect to each prepayment of Loans required by Section
4.02, the Borrower may designate the Types of Loans which are to be prepaid and
the specific Borrowing(s) under the affected Facility pursuant to which made
PROVIDED that (i) if any prepayment of Eurodollar Loans made pursuant to a
single Borrowing shall reduce the outstanding Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount for such
Borrowing, such Borrowing shall be immediately converted into Base Rate Loans;
(ii) each prepayment of any Loans under a Facility shall be applied PRO RATA
among such Loans; and (iii) except for the differing treatments of Defaulting
Lenders and Non-Defaulting Lenders as expressly provided in Section 4.02(A)(a),
each prepayment of any Eurodollar Loans made pursuant to a Borrowing shall be
applied PRO RATA among such Eurodollar Loans. In the absence of a designation
by the Borrower as described in the preceding sentence, the Administrative Agent
shall, subject to the above, make such designation in its sole discretion with a
view, but no obligation, to minimize breakage costs owing under Section 1.11.
(c) Notwithstanding anything to the contrary contained in
Section 4.02(B)(a), with respect to any mandatory repayments of B Term Loans or
C Term Loans otherwise required pursuant to Section 4.02(A), if on or prior to
the date the respective mandatory repayment is otherwise required to be made
pursuant to such Section, the Borrower has given the Administrative Agent
written notification that the Borrower has elected, in its sole discretion, to
give each Lender with a B Term Loan or C Term Loan, as the case may be, the
right to waive such Lender's rights to receive its PRO RATA percentage of such
repayment (any such repayment, a "Specified Repayment"), the Administrative
Agent shall notify such Lenders thereof and the amount required to be applied to
each such Lender's B Term Loans and/or C Term Loans, as the case may be,
pursuant to the Specified Repayment. In the event any such Lender desires to
waive its right to receive any or all of its percentage of the Specified
Repayment, such Lender shall so advise in writing the Administrative Agent no
later than 5:00 P.M. (New York time) two Business Days after the date of such
notice from the Administrative Agent, which reply shall also include the amount,
if any, of its portion of the Specified Repayment that such Lender still desires
to receive. If any such Lender does not reply to the Administrative Agent
within the two Business Day period or responds but does not specify the amount
of the Specified
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Repayment that such Lender wishes to receive, if any, such Lender will be deemed
to have elected to receive 100% of the Specified Repayment. In the event that
any such Lender waives its right to any such Specified Repayment, the
Administrative Agent shall apply 100% of the amount so waived by such Lenders to
repay the A Term Loans as otherwise provided in this Section 4.02(B) but not to
reduce the Total A Term Commitment. All payments of the B Term Loans and C Term
Loans shall be made PRO RATA among same reduced for any Lender who has waived
any of its portion of a Specified Repayment by the amount so waived.
4.03 METHOD AND PLACE OF PAYMENT. Except as otherwise
specifically provided herein, all payments under this Agreement shall be made to
the Administrative Agent for the ratable account of the Lenders entitled
thereto, not later than 1:00 P.M. (New York time) on the date when due and shall
be made in immediately available funds and in Dollars at the Payment Office, it
being understood that written notice by the Borrower to the Administrative Agent
to make a payment from the funds in the Borrower's account at the Payment Office
shall constitute the making of such payment to the extent of such funds held in
such account. Any payments under this Agreement which are made later than 1:00
P.M. (New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.
4.04 NET PAYMENTS. (a) All payments made by any Credit Party
hereunder or under any Note will be made without setoff, counterclaim or other
defense. Except as provided in Section 4.04(b), all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments
(but excluding, except as provided in the second succeeding sentence, any tax
imposed on or measured by the net income or net profits of a Lender pursuant to
the laws of the jurisdiction in which it is organized or the jurisdiction in
which the principal office or applicable lending office of such Lender is
located or any subdivision thereof or therein) and all interest, penalties or
similar liabilities with respect to such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges (all such non-excluded taxes, levies,
imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower
agrees to pay the full amount of such Taxes, and such additional amounts as may
be necessary so that every payment of all amounts due under this Agreement or
under any Note, after withholding or deduction for or on account of any Taxes,
will not be less than the amount provided for herein or in such Note. If any
amounts are payable in respect of Taxes pursuant to the
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preceding sentence, the Borrower agrees to reimburse each Lender, upon the
written request of such Lender, for taxes imposed on or measured by the net
income or net profits of such Lender pursuant to the laws of the jurisdiction in
which such Lender is organized or in which the principal office or applicable
lending office of such Lender is located or under the laws of any political
subdivision or taxing authority of any such jurisdiction in which such Lender is
organized or in which the principal office or applicable lending office of such
Lender is located and for any withholding of taxes as such Lender shall
determine are payable by, or withheld from, such Lender, in respect of such
amounts so paid to or on behalf of such Lender pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Lender
pursuant to this sentence. The Borrower will furnish to the Agent within 45
days after the date the payment of any Taxes is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by the Borrower. The
Borrower agrees to indemnify and hold harmless each Lender, and reimburse such
Lender upon its written request, for the amount of any Taxes so levied or
imposed and paid by such Lender.
(b) Each Lender that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes agrees to deliver to the Borrower and the Agent on or prior to the
Effective Date, or in the case of a Lender that is an assignee or transferee of
an interest under this Agreement pursuant to Section 1.13 or 12.04 (unless the
respective Lender was already a Lender hereunder immediately prior to such
assignment or transfer), on the date of such assignment or transfer to such
Lender, (i) two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms) certifying to such Lender's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement and under any Note, or (ii)
if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (i) above, (x) a certificate substantially in the form of
Exhibit D (any such certificate, a "Section 4.04 Certificate") and (y) two
accurate and complete original signed copies of Internal Revenue Service Form
W-8 (or successor form) certifying to such Lender's entitlement to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement and under any Note. In addition, each
Lender agrees that from time to time after the Effective Date, when a lapse in
time or change in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will deliver to the Borrower and the
Administrative Agent two new accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section 4.04
Certificate, as the case may be, and such other forms as may be required in
order to confirm or establish the entitlement of such Lender to a continued
exemption from or reduction in United States withholding tax with respect to
payments under this Agreement and any Note, or it shall immediately notify the
Borrower and the Administrative Agent of its inability to deliver any such Form
or Certificate, in which case such Lender shall not
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be required to deliver any such Form or Certificate pursuant to this Section
4.04(b). Notwithstanding anything to the contrary contained in Section 4.04(a),
but subject to Section 12.04(b) and the immediately succeeding sentence, (x) the
Borrower shall be entitled, to the extent it is required to do so by law, to
deduct or withhold income or similar taxes imposed by the United States (or any
political subdivision or taxing authority thereof or therein) from interest,
Fees or other amounts payable hereunder for the account of any Lender which is
not a United States person (as such term is defined in Section 7701(a)(30) of
the Code) for U.S. Federal income tax purposes to the extent that such Lender
has not provided to the Borrower U.S. Internal Revenue Service Forms that
establish a complete exemption from such deduction or withholding and (y) the
Borrower shall not be obligated pursuant to Section 4.04(a) hereof to gross-up
payments to be made to a Lender in respect of income or similar taxes imposed by
the United States if (I) such Lender has not provided to the Borrower the
Internal Revenue Service Forms required to be provided to the Borrower pursuant
to this Section 4.04(b) or (II) in the case of a payment, other than interest,
to a Lender described in clause (ii) above, to the extent that such Forms do not
establish a complete exemption from withholding of such taxes. Notwithstanding
anything to the contrary contained in the preceding sentence or elsewhere in
this Section 4.04 and except as set forth in Section 12.04(b), the Borrower
agrees to pay any additional amounts and to indemnify each Lender in the manner
set forth in Section 4.04(a) (without regard to the identity of the jurisdiction
requiring the deduction or withholding) in respect of any Taxes deducted or
withheld by it as described in the immediately preceding sentence as a result of
any changes after the Effective Date in any applicable law, treaty, governmental
rule, regulation, guideline or order, or in the interpretation thereof, relating
to the deducting or withholding of such Taxes.
SECTION 5. CONDITIONS PRECEDENT.
5.01 CONDITIONS PRECEDENT TO INITIAL BORROWING DATE. The
obligation of the Lenders to make Loans, and of the Letter of Credit Issuer to
issue Letters of Credit, on the Initial Borrowing Date is subject to the
satisfaction of each of the following conditions at such time:
(a) EFFECTIVENESS; NOTES. (i) The Effective Date shall have
occurred and (ii) there shall have been delivered to the Administrative Agent
for the account of each Lender the appropriate Note or Notes executed by the
Borrower, in each case, in the amount, maturity and as otherwise provided
herein.
(b) OPINIONS OF COUNSEL. The Administrative Agent shall have
received opinions, addressed to each Agent and each of the Lenders and dated the
Initial Borrowing Date, from (i) Latham & Watkins, special counsel to the Credit
Parties, which opinion shall cover the matters contained in Exhibit E-1 hereto,
(ii) White & Case, special counsel to the Agents, which opinion shall cover the
matters contained in Exhibit E-2 hereto and (iii) such
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local counsel, if any, satisfactory to the Administrative Agent as it may
request, which opinions shall cover the perfection of the security interests
granted pursuant to the Mortgages and such other matters incident to the
transactions contemplated herein as the Agents may reasonably request and shall
be in form and substance satisfactory to the Agents.
(c) CORPORATE PROCEEDINGS. (I) The Administrative Agent shall
have received a certificate, dated the Initial Borrowing Date, signed by the
President or any Vice-President of the Borrower in the form of Exhibit F with
appropriate insertions and deletions, together with (x) copies of the
certificate of incorporation, by-laws or other organizational documents of each
Credit Party, (y) the resolutions of each Credit Party referred to in such
certificate and all of the foregoing (including each such certificate of
incorporation and by-laws) shall be satisfactory to the Administrative Agent and
(z) a statement that all of the applicable conditions set forth in Sections
5.01(h) and (i) and 5.03 exist as of such date.
(II) On the Initial Borrowing Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Credit Documents shall
be reasonably satisfactory in form and substance to the Administrative Agent,
and the Administrative Agent shall have received all information and copies of
all certificates, documents and papers, including good standing certificates and
any other records of corporate proceedings and governmental approvals, if any,
which the Agents may have reasonably requested in connection therewith, such
documents and papers, where appropriate, to be certified by proper corporate or
governmental authorities.
(d) PLANS; ETC. On or prior to the Initial Borrowing Date,
there shall have been made available to the Administrative Agent true and
correct copies of:
(i) all Plans (and for each Plan that is required to file an
annual report on Internal Revenue Service Form 5500-series, a copy of the
most recent such report (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information), and for each Plan
that is a "single-employer plan," as defined in Section 4001(a)(15) of
ERISA, the most recently prepared actuarial valuation therefor) and any
other "employee benefit plans," as defined in Section 3(3) of ERISA, and
any other material agreements, plans or arrangements, with or for the
benefit of current or former employees of Holdings, the Borrower or any of
its Subsidiaries or any ERISA Affiliate (provided that the foregoing shall
apply in the case of any multiemployer plan, as defined in 4001(a)(3) of
ERISA, only to the extent that any document described therein is in the
possession of Holdings, the Borrower or any
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Subsidiary of the Borrower or any ERISA Affiliate or reasonably available
thereto from the sponsor or trustee of any such plan);
(ii) any collective bargaining agreements or any other similar
agreement or arrangements covering the employees of Holdings or any of its
Subsidiaries;
(iii) all agreements entered into by Holdings or any Subsidiary
governing the terms and relative rights of its capital stock;
(iv) any material agreement with respect to the management of
Holdings or any of its Subsidiaries;
(v) any material employment agreements entered into by Holdings
or any of its Subsidiaries; and
(vi) any tax sharing, tax allocation and other similar
agreements entered into by Holdings and/or any of its Subsidiaries with any
entity not a Credit Party;
with all of the foregoing to be reasonably satisfactory to the Administrative
Agent.
(e) ADVERSE CHANGE, ETC. Since August 24, 1997, nothing shall
have occurred, and the Administrative Agent shall not have become aware of any
facts or conditions not previously known, in each case which the Administrative
Agent shall determine (a) is reasonably likely to have, a material adverse
effect on the rights or remedies of the Lenders or the Agents hereunder or under
any other Credit Document, or on the ability of the Credit Parties taken as a
whole to perform their obligations under the Credit Documents or (b) has had or
is reasonably likely to have a Material Adverse Effect.
(f) LITIGATION. There shall be no actions, suits or proceedings
pending or threatened (a) with respect to the Transaction, this Agreement or any
other Credit Document or (b) which the Administrative Agent shall determine has
had or is reasonably likely to have (i) a Material Adverse Effect or (ii) a
material adverse effect on the rights or remedies of the Lenders or the Agents
hereunder or under any other Credit Document or on the ability of the Credit
Parties taken as a whole to perform their obligations under the Credit
Documents.
(g) APPROVALS. Except as set forth on Annex XI, all material
necessary governmental and third party approvals in connection with the
Transaction and/or the Credit Documents shall have been obtained and remain in
effect (other than immaterial approvals and/or consents with respect to the
Acquisition), and all applicable waiting periods shall have expired without any
action being taken by any competent authority which restrains or
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prevents such transactions or imposes, in the reasonable judgment of the
Administrative Agent, materially adverse conditions upon the consummation of the
Transaction.
(h) CAPITALIZATION. (I) On or prior to the Initial Borrowing
Date, (i) the Initial Investors shall have contributed approximately $173
million in cash to Holdings as a common equity contribution (the "Equity
Contribution") in compliance with the Equity Documents and all applicable law
and, as a result thereof, Carlyle and Carlyle Affiliates shall own not less than
67% of all of the issued and outstanding equity of Holdings, (ii) Holdings shall
have contributed the full amount received by it pursuant to preceding clause (i)
to the capital of the Borrower as a common equity contribution, (iii) the
Borrower shall have utilized the full amount of such cash contribution to make
payments owing in connection with the Transaction prior to, or concurrently
with, the utilization of any proceeds of Loans for such purpose and (iv) the
amount of the Equity Contribution, when aggregated with the cash proceeds of the
issuance or incurrence of the Senior Subordinated Notes, the Seller Note, the
Term Loans and Revolving Loans of up to $15 million, shall be sufficient to
consummate the Acquisition and to pay all fees and expenses arising in
connection with the Transaction.
(II) On or prior to the Initial Borrowing Date, (i) the Borrower
shall have received gross cash proceeds of at least $200 million from the
issuance by the Borrower of the Senior Subordinated Notes and shall have
utilized the full amount of such cash proceeds to make payments owing in
connection with the Transaction prior to, or concurrently with, the utilization
of any proceeds of Loans for such purpose.
(i) CONSUMMATION OF THE ACQUISITION, ETC. (I) On or prior to
the Initial Borrowing Date, (i) the Acquisition, including all of the terms and
conditions thereof, shall have been duly approved by the board of directors and
(if required by applicable law) the shareholders of Holdings, the Borrower and
the Sellers and (ii) the Acquisition shall have been consummated in accordance
with the Acquisition Documents and all applicable laws.
(II) On or prior to the Initial Borrowing Date, the
Administrative Agent shall have received true and correct copies of each of the
Transaction Documents certified as such by an Authorized Officer of the
Borrower, each of which shall have been duly authorized, executed and delivered
by the parties thereto and shall be in full force and effect and in form and
substance (including all terms and conditions thereof) satisfactory to the
Administrative Agent. On or prior to the Initial Borrowing Date, all conditions
precedent set forth in the Acquisition Documents and the Equity Documents shall
have been satisfied and not waived (unless waived with the consent of the
Administrative Agent).
(j) SUBSIDIARY GUARANTY. Each Domestic Subsidiary (other than
any Inactive Subsidiary) existing on the Initial Borrowing Date shall have duly
authorized, executed and delivered a Subsidiary Guaranty in the form of Exhibit
G hereto (as modified, amended or
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supplemented from time to time in accordance with the terms hereof and thereof,
the "Subsidiary Guaranty"), and the Subsidiary Guaranty shall be in full force
and effect.
(k) SECURITY DOCUMENTS. (I) Each Credit Party shall have each
duly authorized, executed and delivered a Pledge Agreement in the form of
Exhibit H (as modified, amended or supplemented from time to time in accordance
with the terms thereof and hereof, the "Pledge Agreement") and shall have
delivered to the Collateral Agent, as pledgee thereunder, all of the
certificates representing the Pledged Securities referred to therein, endorsed
in blank or accompanied by executed and undated stock powers, and the Pledge
Agreement shall be in full force and effect.
(II) Each Credit Party shall have each duly authorized, executed
and delivered a Security Agreement substantially in the form of Exhibit I (as
modified, supplemented or amended from time to time, the "Security Agreement")
covering all of such Credit Party's present and future Security Agreement
Collateral, in each case together with:
(i) executed copies of Financing Statements (Form UCC-1) in
appropriate form for filing under the UCC of each jurisdiction as may be
necessary to perfect the security interests purported to be created by the
Security Agreement;
(ii) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, each of recent date listing all effective
financing statements that name any Credit Party as debtor and that are
filed in the jurisdictions referred to in clause (i), together with copies
of such financing statements (none of which shall cover the Collateral
except (x) those with respect to which appropriate termination statements
executed by the secured lender thereunder have been filed or delivered to
the Administrative Agent and (y) to the extent evidencing Permitted Liens);
(iii) evidence of the completion of or arrangements for all other
recordings and filings of, or with respect to, the Security Agreement as
may be necessary or, in the reasonable opinion of the Collateral Agent,
desirable to perfect the security interests intended to be created by the
Security Agreement; and
(iv) evidence that all other actions necessary or, in the
reasonable opinion of the Collateral Agent, desirable to perfect and
protect the security interests purported to be created by the Security
Agreement have been taken;
and the Security Agreement shall be in full force and effect.
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(III) The Collateral Agent shall have received:
(i) fully executed counterparts of deeds of trust, mortgages and
similar documents, in each case in form and substance reasonably
satisfactory to the Collateral Agent (as amended, modified or
supplemented from time to time in accordance with the terms thereof
and hereof, each a "Mortgage" and, collectively, the "Mortgages") with
respect to each of the Mortgaged Properties, and arrangements
reasonably satisfactory to the Collateral Agent shall be in place to
provide that counterparts of such Mortgages shall be recorded on the
Initial Borrowing Date in all places to the extent necessary or
desirable, in the reasonable judgment of the Collateral Agent,
effectively to create a valid and enforceable first priority mortgage
Lien, subject only to Permitted Liens, on each such Mortgaged Property
in favor of the Collateral Agent (or such other trustee as may be
required or desired under local law) for the benefit of the Agents and
the Lenders; and
(ii) mortgagee title insurance policies (or binding commitments
to issue such title insurance policies) issued by title insurers
reasonably satisfactory to the Collateral Agent (the "Mortgage
Policies") in amounts reasonably satisfactory to the Collateral Agent
and assuring the Collateral Agent that the Mortgages are valid and
enforceable first priority mortgage Liens on the respective Mortgaged
Properties, free and clear of all defects and encumbrances except
Permitted Liens, and such Mortgage Policies shall be in form and
substance reasonably satisfactory to the Collateral Agent and (A)
shall include (to the extent available in the respective jurisdiction
of each Mortgaged Property) an endorsement for future advances under
this Agreement, the Notes and the Mortgages, and for such other
matters that the Collateral Agent in its discretion may reasonably
request and (B) shall not include an exception for mechanics' liens.
(l) SOLVENCY. The Borrower shall have delivered to the
Administrative Agent, a solvency opinion, dated the Initial Borrowing Date, in
form and substance satisfactory to the Administrative Agent from Valuation
Research setting forth the conclusions that, after giving effect to the
Transaction and the incurrence of all the financings contemplated herein,
Holdings and its Subsidiaries taken as a whole are not insolvent and will not be
rendered insolvent by the indebtedness incurred in connection therewith, and
will not be left with unreasonably small capital with which to engage in their
businesses and will not have incurred debts beyond their ability to pay such
debts as they mature.
(m) INSURANCE POLICIES. The Collateral Agent shall have
received evidence of insurance complying with the requirements of Section 7.03
for the business and properties of Holdings and its Subsidiary Guarantors, in
form and substance reasonably satisfactory to the Administrative Agent and, with
respect to all casualty insurance, naming the Collateral Agent as an additional
insured and/or loss payee, and stating that such insurance
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shall not be cancelled or revised without at least 30 days' prior written notice
by the insurer to the Collateral Agent.
(n) EXISTING INDEBTEDNESS. On the Initial Borrowing Date and
after giving effect to the Transaction and the Loans then incurred, neither
Holdings nor any of its Subsidiaries shall have any preferred stock or
Indebtedness outstanding except for (i) the Loans, (ii) the Senior Subordinated
Notes, (iii) the Seller Note, (iv) the Indebtedness set forth on Annex V hereto
and (v) up to $3,000,000 of additional Indebtedness not described in clauses
(i)-(iv) above) (the amounts specified in clauses (iv) and (v), the "Existing
Indebtedness"), with all of the Existing Indebtedness (x) to remain outstanding
without any default or events of default existing thereunder as of the Initial
Borrowing Date or arising as a result of the Transaction and (y) to be
satisfactory to the Administrative Agent as to amount and terms and conditions.
(o) CONSENT LETTER. The Administrative Agent shall have
received a letter from CT Corporation System, substantially in the form of
Exhibit J hereto, indicating its consent to its appointment by each Credit Party
as its agent to receive service of process.
(p) FEES. The Borrower shall have paid to the Agents and the
Lenders all Fees and expenses agreed upon by such parties to be paid on or prior
to the Initial Borrowing Date.
5.02 CONDITIONS PRECEDENT TO A SUBSEQUENT BORROWING DATE. The
obligation of the Lenders to make A Term Loans on a Subsequent Borrowing Date is
subject at the time of such incurrence of A Term Loans, to the satisfaction of
the following conditions:
(a) Either (i) the Borrower shall have obtained all consents,
approvals and/or agreements, in each case on terms and conditions satisfactory
to the Administrative Agent, with the government of Turkey (and all agencies
thereof, including, without limitation, the Under Secretariat for Defense
Industries), FNSS and Nurol Inasaat ve Ticaret A.S. (collectively, the "Turkish
Entities") evidencing the Turkish Entities' acknowledgement of the Acquisition
and consent to the change of ownership and control effected thereby; or (ii) the
one year anniversary of the Initial Borrowing Date shall have occurred without
any interruption during such year in the payments to UDLP pursuant to the
Turkish JV Agreement; or (iii) the Borrower is then required pursuant to the
terms of the Seller Note Documents to repay the Seller Note in an amount not
less than the amount of the requested Borrowing of A Term Loans.
(b) There shall have been no material amendment, modification or
change (other than any amendment, modification or change satisfactory to the
Administrative Agent) to the Turkish JV Agreement which is materially adverse to
the interests of the Lenders.
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5.03 CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The obligation
of each Lender to make Loans (including Loans made on the Initial Borrowing
Date) and the obligation of the Letter of Credit Issuer to issue any Letter of
Credit is subject, at the time of each such Credit Event, to the satisfaction of
the following conditions:
(a) NOTICE OF BORROWING; LETTER OF CREDIT REQUEST. The
Administrative Agent shall have received a Notice of Borrowing meeting the
requirements of Section 1.02 or a Letter of Credit Request meeting the
requirements of Section 2.02, as the case may be.
(b) NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of
each Credit Event and also after giving effect thereto, (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties made by
any Credit Party contained herein or in the other Credit Documents shall be true
and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event, except to the extent that such representations and warranties
expressly relate to an earlier date.
The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by the Borrower that all of the
applicable conditions specified in Section 5.01 (in the case of Credit Events
occurring on the Initial Borrowing Date), 5.02 (in the case of A Term Loans
incurred on the Second Borrowing Date) and/or 5.03, as the case may be, exist as
of that time. All of the certificates, legal opinions and other documents and
papers referred to in Section 5.01, unless otherwise specified, shall be
delivered to the Administrative Agent for the account of each of the Lenders
and, except for the Notes, in sufficient counterparts for each of the Lenders
and shall be reasonably satisfactory in form and substance to the Administrative
Agent.
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order
to induce the Lenders to enter into this Agreement and to make the Loans and
issue and/or participate in Letters of Credit provided for herein, each of
Holdings and the Borrower makes the following representations and warranties to,
and agreements with, the Lenders, all of which shall survive the execution and
delivery of this Agreement and the making of the Loans:
6.01 CORPORATE STATUS. Each of Holdings and its Subsidiaries
(i) is a duly organized and validly existing corporation, partnership and/or
limited liability company and is in good standing, in each case under the laws
of the jurisdiction of its organization and has the organizational power and
authority to own its property and assets and to transact the business in which
it is engaged and (ii) is duly qualified and is authorized to do business and,
to the extent relevant, is in good standing in all jurisdictions where it is
required to be so qualified and where the failure to be so qualified, authorized
or in good standing is reasonably likely to have a Material Adverse Effect.
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6.02 CORPORATE POWER AND AUTHORITY. Each Credit Party has the
organizational power and authority to execute, deliver and carry out the terms
and provisions of the Credit Documents to which it is a party and has taken all
necessary action to authorize the execution, delivery and performance of the
Credit Documents to which it is a party. Each Credit Party has duly executed and
delivered each Credit Document to which it is a party and each such Credit
Document constitutes the legal, valid and binding obligation of such Person
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (regardless of whether
enforcement is sought in equity or at law).
6.03 NO VIOLATION. Neither the execution, delivery or
performance by any Credit Party of the Credit Documents to which it is a party
nor compliance with the terms and provisions thereof, (i) will contravene any
applicable provision of any law, statute, rule, regulation, order, writ,
injunction or decree of any court or governmental instrumentality, (ii) will
conflict or be inconsistent with or result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under, or (other
than pursuant to the Security Documents) result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property or
assets of Holdings or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust or other material agreement or instrument to
which Holdings or any of its Subsidiaries is a party or by which it or any of
its property or assets are bound or to which it may be subject or (iii) will
violate any provision of the organizational documents (including by-laws) of
Holdings or any of its Subsidiaries.
6.04 LITIGATION. Except as set forth in Annex XII, there are no
actions, suits or proceedings pending or, to the best of its knowledge,
threatened with respect to Holdings or any of its Subsidiaries (i) that have, or
that could reasonably be expected to have, a Material Adverse Effect or (ii)
that have, or that could reasonably be expected to have, a material adverse
effect on (a) the rights or remedies of the Lenders or on the ability of the
Credit Parties taken as a whole to perform their obligations under the other
Credit Documents or (b) the consummation of the Transaction.
6.05 USE OF PROCEEDS; MARGIN REGULATIONS . (a) The proceeds of
all Term Loans incurred on the Initial Borrowing Date shall be utilized (i) to
finance the Acquisition and (ii) to pay certain fees and expenses relating to
the Transaction. The proceeds of all A Term Loans incurred on the Second
Borrowing Date shall be utilized solely to repay the Seller Note.
(b) (i) The proceeds of all Revolving Loans and all Swingline
Loans may be used after the Initial Borrowing Date for general corporate and
working capital purposes provided that no more than $15,000,000 of the proceeds
of Revolving Loans may be used
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for the purposes described in the first sentence of Section 6.05(a), and
PROVIDED FURTHER that after the Total Term Commitment has terminated, Revolving
Loans may also be used to refinance the Seller Note.
(c) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate the provisions of Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System and no part of the proceeds of
any Loan will be used to purchase or carry any Margin Stock or to extend credit
for the purpose of purchasing or carrying any Margin Stock.
6.06 GOVERNMENTAL APPROVALS. Except for filings and recordings
in connection with the Security Documents and to the extent any Notices are
required to be filed, no order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with, or exemption by, any
foreign or domestic governmental or public body or authority, or any subdivision
thereof, is required to authorize or is required in connection with (i) the
execution, delivery and performance of any Credit Document or (ii) the legality,
validity, binding effect or enforceability of any Credit Document except, in any
such case, as expressly provided herein or in the Security Documents.
6.07 INVESTMENT COMPANY ACT. Neither Holdings nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.08 PUBLIC UTILITY HOLDING COMPANY ACT . Neither Holdings nor
any of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
6.09 TRUE AND COMPLETE DISCLOSURE. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
Holdings or any of its Subsidiaries in writing to the Agents or any Lender for
purposes of or in connection with this Agreement or any transaction contemplated
herein is, and all other such factual information (taken as a whole) hereafter
furnished by or on behalf of any Credit Party in writing to the Lenders
hereunder will be, true and accurate in all material respects on the date as of
which such information is dated or certified and not incomplete by omitting to
state any material fact necessary to make such information (taken as a whole)
not misleading at such time in light of the circumstances under which such
information was provided. The projections and PRO FORMA financial information
contained in such materials are based on good faith estimates and assumptions
believed by Holdings and the Borrower to be reasonable at the time made, it
being recognized by the Lenders that such projections as to future events are
not to be viewed as facts and that actual results during the period or
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periods covered by any such projections may differ from the projected results.
There is no fact known to Holdings or any of its Subsidiaries (other than
matters relating to general economic conditions or conditions affecting the
Business generally) which would have a Material Adverse Effect, which has not
been disclosed herein or in such other documents, certificates and statements
furnished to the Lenders for use in connection with the transactions
contemplated hereby.
6.10 FINANCIAL CONDITION; FINANCIAL STATEMENTS. (a) On and as
of the Initial Borrowing Date, on a PRO FORMA basis after giving effect to the
Transaction and all Indebtedness incurred, and to be incurred (including,
without limitation, the Loans and the Senior Subordinated Notes), and Liens
created, and to be created, by each Credit Party in connection therewith, (x)
the fair valuation of all of the tangible and intangible assets of Holdings and
its Subsidiaries (on a consolidated basis) will exceed their debts, (y) Holdings
and its Subsidiaries will not have incurred or intended to incur debts beyond
their ability to pay such debts as such debts mature and (z) Holdings and its
Subsidiaries will not have unreasonably small capital with which to conduct
their business. For purposes of this Section 6.10, "debt" means any liability
on a claim, and "claim" means (i) right to payment whether or not such a right
is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(b) The consolidated balance sheet of UDLP at December 31, 1996
and June 30, 1997 and the related consolidated statements of operations and cash
flows of UDLP for the fiscal year or the six-month period, as the case may be,
ended as of said dates, which, in the case of the annual financial statements,
have been audited by Ernst & Young LLP independent certified public accountants,
who delivered an unqualified opinion in respect therewith, copies of all of
which have heretofore been furnished to each Lender, present fairly the
consolidated financial position of UDLP and its Subsidiaries at the dates of
said statements and the results for the periods covered thereby in accordance
with GAAP, except to the extent provided in the notes to said financial
statements and, in the case of the June 30, 1997 financial statements, subject
to normal year-end audit adjustment. All such financial statements have been
prepared in accordance with GAAP and practices consistently applied except to
the extent provided in the notes to said financial statements. The PRO FORMA
consolidated balance sheet of the Borrower as of June 30, 1997, a copy of which
has heretofore been furnished to each Lender, presents a good faith estimate of
the consolidated PRO FORMA financial condition of the Borrower (after giving
effect to the Transaction) as at the date thereof. Nothing has occurred since
June 30, 1997 that has had or is reasonably likely to have a Material Adverse
Effect.
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(c) Except as reflected in the financial statements described in
Section 6.10(b) or in the footnotes thereto, there were as of the Initial
Borrowing Date no liabilities or obligations with respect to Holdings or any of
its Subsidiaries of a nature (whether absolute, accrued, contingent or otherwise
and whether or not due) which, either individually or in aggregate, would be
material to Holdings and its Subsidiaries taken as a whole, except as incurred
in the ordinary course of business consistent with past practices.
6.11 SECURITY INTERESTS. On and after the Initial Borrowing
Date, each of the Security Documents creates, as security for the obligations
purported to be secured thereby, a valid and enforceable security interest in
and Lien on all of the Collateral subject thereto, superior to and prior to the
rights of all third Persons and subject to no other Liens (other than Permitted
Liens relating thereto), in favor of the Collateral Agent for the benefit of the
Secured Creditors, which have been (or will be within the time required by the
Credit Documents) perfected under applicable law. No filings or recordings are
required in order to perfect, or continue the perfection of, the security
interests created under any Security Document except for filings or recordings
required in connection with any such Security Document (other than the Pledge
Agreement) which (x) shall have been made upon or prior to (or are the subject
of arrangements, reasonably satisfactory to the Administrative Agent, for filing
on or promptly after the date of) the execution and delivery thereof and/or (y)
constitute supplemental filings in respect of after acquired property or
continuation statements.
6.12 CONSUMMATION OF CERTAIN TRANSACTIONS. As of the Initial
Borrowing Date, the Acquisition and the Equity Contribution shall have been
consummated in accordance with the material terms and conditions of the
respective Transaction Documents and all applicable laws. All applicable
waiting periods with respect thereto have or, prior to the time when required,
will have, expired without, in all such cases, any action being taken by any
competent authority which restrains, prevents, or imposes material adverse
conditions upon the consummation of the Acquisition and/or Equity Contribution.
All representations and warranties (except by Persons other than Holdings or the
Borrower) set forth in the Transaction Documents and, to the knowledge of
Holdings and the Borrower, all representations and warranties made by all other
Persons in the Transaction Documents were true and correct in all material
respects as of the time such representations and warranties were made and shall
be true and correct in all material respects as of the Initial Borrowing Date as
if such representations and warranties were made on and as of such date, except
to the extent such representations and warranties expressly relate to an earlier
date.
6.13 TAX RETURNS AND PAYMENTS. Each of Holdings and its
Subsidiaries has filed all federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it which have become due, except for
those contested in good faith and adequately disclosed and fully provided for on
the financial statements of Holdings, the Borrower and their
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respective Subsidiaries if and to the extent required by generally accepted
accounting principles. Each of Holdings and its Subsidiaries have at all times
paid, or have provided adequate reserves (in the good faith judgment of the
management of the Borrower) for the payment of, all federal, state and foreign
income taxes applicable for all prior fiscal years which are still open for
audit and for the current fiscal year to date. There is no action, suit,
proceeding, investigation, audit, or claim now pending or, to the knowledge of
Holdings or the Borrower, threatened by any authority regarding any taxes
relating to Holdings or any of its Subsidiaries which is reasonably likely to
have a Material Adverse Effect.
6.14 COMPLIANCE WITH ERISA. (a) (i) Annex VI sets forth each
Plan and Multiemployer Plan; (ii) except as set forth on Annex VI, each Plan
(and each related trust, insurance contract or fund) is in substantial
compliance with its terms and with all applicable laws, including without
limitation ERISA and the Code; each Plan (and each related trust, if any) which
is intended to be qualified under Section 401(a) of the Code has received a
determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable
Event has occurred with respect to a Plan; to the knowledge of Borrower, no
Multiemployer Plan is insolvent or in reorganization; no Plan has an Unfunded
Current Liability which, when added to the aggregate amount of Unfunded Current
Liabilities with respect to all other Plans, exceeds $10,000,000; no Plan which
is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated
funding deficiency, within the meaning of such sections of the Code or ERISA,
or has applied for or received a waiver of an accumulated funding deficiency or
an extension of any amortization period, within the meaning of Section 412 of
the Code or Section 303 or 304 of ERISA; all contributions required to be made
with respect to a Plan or a Multiemployer Plan have been timely made; neither
Holdings, the Borrower nor any Subsidiary of the Borrower nor any ERISA
Affiliate has incurred any material liability (including any indirect,
contingent or secondary liability) to or on account of a Plan or a Multiemployer
Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201,
4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or
reasonably expects to incur any such liability under any of the foregoing
sections with respect to any Plan or any Multiemployer Plan; no condition exists
which presents a material risk to Holdings, the Borrower or any Subsidiary of
the Borrower or any ERISA Affiliate of incurring a liability to or on account of
a Plan or, to the knowledge of Borrower, of any Multiemployer Plan pursuant to
the foregoing provisions of ERISA and the Code; no proceedings have been
instituted to terminate or appoint a trustee to administer any Plan which is
subject to Title IV of ERISA; no action, suit, proceeding, hearing, audit or
investigation with respect to the administration, operation or the investment of
assets of any Plan (other than routine claims for benefits) is pending, expected
or threatened; using actuarial assumptions and computation methods consistent
with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of
Holdings, the Borrower and its Subsidiaries and its ERISA Affiliates to all
Multiemployer Plans in the event of a complete withdrawal there-
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from, as of the close of the most recent fiscal year of each such Plan ended
prior to the date of the most recent Credit Event, would not exceed $10,000,000;
except as would not result in a material liability, each group health plan (as
defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which
covers or has covered employees or former employees of Holdings, the Borrower,
any Subsidiary of the Borrower, or any ERISA Affiliate has at all times been
operated in compliance with the provisions of Part 6 of subtitle B of Title I of
ERISA and Section 4980B of the Code; no lien imposed under the Code or ERISA on
the assets of Holdings, the Borrower or any Subsidiary of the Borrower or any
ERISA Affiliate exists or is reasonably likely to arise on account of any Plan;
and Holdings, the Borrower and its Subsidiaries may cease contributions to or
terminate any employee benefit plan maintained by any of them without incurring
any material liability.
(ii) Each Foreign Pension Plan has been maintained in
substantial compliance with its terms and with the requirements of any and all
applicable laws, statutes, rules, regulations and orders and has been
maintained, where required, in good standing with applicable regulatory
authorities. All contributions required to be made with respect to a Foreign
Pension Plan have been timely made. Neither Holdings, the Borrower nor any of
its Subsidiaries has incurred any obligation in connection with the termination
of or withdrawal from any Foreign Pension Plan. The present value of the
accrued benefit liabilities (whether or not vested) under each Foreign Pension
Plan, determined as of the end of the Borrower's most recently ended fiscal year
on the basis of actuarial assumptions, each of which is reasonable, did not
exceed the current value of the assets of such Foreign Pension Plan allocable to
such benefit liabilities by more than $1,000,000.
6.15 SUBSIDIARIES. On and as of the Initial Borrowing Date and
after giving effect to the consummation of the Transaction, (i) Holdings has no
direct Subsidiaries other than the Borrower and (ii) the Borrower has no
Subsidiaries other than those Subsidiaries listed on Annex III. Annex III
correctly sets forth, as of the Initial Borrowing Date and after giving effect
to the Transaction, the percentage ownership (direct and indirect) of the
Borrower in each class of capital stock of each of its Subsidiaries and also
identifies the direct owner thereof.
6.16 INTELLECTUAL PROPERTY. Each of Holdings and its
Subsidiaries owns or holds a valid license to use all the patents, trademarks,
service marks, trade names, technology, know-how, copyrights, licenses,
franchises and formulas or rights with respect to the foregoing, that are used
in the operation of the business of Holdings or such Subsidiary as presently
conducted and are material to such business where the failure to own or hold a
valid license is reasonably likely to have a Material Adverse Effect.
6.17 ENVIRONMENTAL MATTERS. (a) Each of Holdings and its
Subsidiaries is in compliance with all applicable Environmental Laws governing
its business for which failure to comply is reasonably likely to have a Material
Adverse Effect, and neither Holdings
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nor any of its Subsidiaries is liable for any material penalties, fines or
forfeitures for failure to comply with any of the foregoing in the manner set
forth above. All licenses, permits, registrations or approvals required for the
business of Holdings and each of its Subsidiaries, as conducted as of the
Initial Borrowing Date, under any Environmental Law have been secured and each
of Holdings and its Subsidiaries is in substantial compliance therewith, except
such licenses, permits, registrations or approvals the failure to secure or to
comply therewith is not reasonably likely to have a Material Adverse Effect.
Neither Holdings nor any of its Subsidiaries is in any respect in noncompliance
with, breach of or default under any applicable writ, order, judgment,
injunction, or decree to which Holdings or such Subsidiary is a party or which
could affect the ability of Holdings or such Subsidiary to operate any real
property and no event has occurred and is continuing which, with the passage of
time or the giving of notice or both, would reasonably be expected to constitute
noncompliance, breach of or default thereunder, except in each such case, such
noncompliance, breaches or defaults as are not reasonably likely to, in the
aggregate, have a Material Adverse Effect. There are as of the Initial
Borrowing Date no Environmental Claims pending or, to the best knowledge of
Holdings or the Borrower threatened, which (i) question the validity, term or
entitlement of the Borrower or any Subsidiary for any permit, license, order or
registration required for the operation of any facility which the Borrower or
any of its Subsidiaries currently operates and (ii) wherein any decision, ruling
or finding is reasonably likely to have a Material Adverse Effect. There are no
facts, circumstances, conditions or occurrences concerning the business or
operations of the Borrower or any of its Subsidiaries, or any Real Property at
any time owned or operated by the Borrower or any of its Subsidiaries or on any
property adjacent to any such Real Property that could reasonably be expected
(i) to form the basis of an Environmental Claim against Holdings, any of its
Subsidiaries or any of their respective Real Property or (ii) to cause any such
currently owned or operated Real Property to be subject to any restrictions on
the ownership, occupancy, use or transferability of such Real Property under any
Environmental Law, except in each such case, such Environmental Claims or
restrictions that individually, or in the aggregate, are not reasonably likely
to have a Material Adverse Effect.
(b) Hazardous Materials have not at any time been (i) generated,
used, treated or stored on, or transported to or from, any Real Property owned
or operated by Holdings or any of its Subsidiaries or (ii) released on or from
any such Real Property, in each case where such occurrence or event individually
or in the aggregate is reasonably likely to have a Material Adverse Effect.
6.18 PROPERTIES. Holdings and each of its Subsidiaries have
good and marketable title to, or a validly subsisting leasehold interest in, all
material properties owned and used by them, including all Real Property
reflected in the consolidated balance sheets of UDLP at December 31, 1996
referred to in Section 6.10(b), free and clear of all Liens, other than (i) as
referred to in the consolidated balance sheet or in the notes thereto
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or (ii) otherwise permitted by Section 8.03. Annex IV contains a true and
complete list of each Real Property owned or leased by the Borrower or any of
its Subsidiaries (with an annual base rental obligation in excess of $250,000)
as of the Initial Borrowing Date and after giving effect to the Transaction, and
the type of interest therein held by Holdings or the respective Subsidiary.
6.19 LABOR RELATIONS. No Credit Party is engaged in any unfair
labor practice that could reasonably be expected to have a Material Adverse
Effect. There is (i) no unfair labor practice complaint pending against any
Credit Party or, to the best of its knowledge, threatened against any of them,
before the National Labor Relations Board, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against any Credit Party or, to the best of its knowledge, threatened
against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending
against any Credit Party or, to the best of its knowledge, threatened against
any Credit Party and (iii) no union representation question existing with
respect to the employees of any Credit Party and no union organizing activities
are taking place, except with respect to any matter specified in clause (i),
(ii) or (iii) above, either individually or in the aggregate, such as is not
reasonably likely to have a Material Adverse Effect.
6.20 COMPLIANCE WITH STATUTES, ETC. Each of Holdings and each
of its Subsidiaries is in compliance with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property, except such non-compliance as is not reasonably
likely to, individually or in the aggregate, have a Material Adverse Effect.
6.21 SUBORDINATION. The subordination provisions contained in
the Senior Subordinated Notes and the Seller Note Documents are enforceable by
the Lenders against the Borrower and the holders of such Senior Subordinated
Notes or the Seller Note, as the case may be, and all Obligations of the
Borrower are or will be within the definition of "Senior Indebtedness" included
in such provisions of the Senior Subordinated Note Documents and the Seller Note
Documents.
6.22 SPECIAL PURPOSE CORPORATIONS. Each of Holdings and the
Borrower was formed to effect the Transaction. Prior to the consummation of the
Transaction, (i) Holdings had no significant assets (other than the capital
stock of the Borrower) or liabilities and (ii) the Borrower had no significant
assets or liabilities (other than those liabilities under the Acquisition
Documents).
SECTION 7. AFFIRMATIVE COVENANTS. Holdings and the Borrower
hereby covenant and agree that for so long as this Agreement is in effect and
until the Commitments have terminated, no Letters of Credit or Notes are
outstanding and the Loans
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and Unpaid Drawings, together with interest, Fees and all other Obligations
(other than any indemnities described in Section 12.13 which are not then owing)
incurred hereunder, are paid in full:
7.01 INFORMATION COVENANTS. Holdings will furnish to each
Lender:
(a) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the close
of each fiscal year of the Borrower, the audited consolidated balance sheet of
the Borrower and its Subsidiaries, as at the end of such fiscal year and the
related consolidated statements of operations and of cash flows for such fiscal
year, in each case commencing with the year ended December 31, 1998, setting
forth comparative consolidated figures for the preceding fiscal year, and
examined by independent certified public accountants of recognized national
standing whose opinion shall not be qualified as to the scope of audit and as to
the status of the Borrower or any Subsidiary Guarantor as a going concern,
together with a certificate of such accounting firm stating that in the course
of its regular audit of the business of the Borrower and its Subsidiaries, which
audit was conducted in accordance with generally accepted auditing standards, no
Default or Event of Default which has occurred and is continuing has come to
their attention or, if such a Default or Event of Default has come to their
attention a statement as to the nature thereof.
(b) QUARTERLY FINANCIAL STATEMENTS. Within 45 days after the
close of each of the first three quarterly accounting periods in each fiscal
year, the unaudited consolidated balance sheet of the Borrower and its
Subsidiaries, as at the end of such quarterly period and the related unaudited
consolidated statements of operations and of cash flows for such quarterly
period and for the elapsed portion of the fiscal year ended with the last day of
such quarterly period, and in each case, commencing with the quarter ending
March 31, 1999, setting forth comparative consolidated figures for the related
periods in the prior fiscal year, all of which shall be in reasonable detail and
certified by the chief financial officer or controller of the Borrower, subject
to changes resulting from audit and normal year-end audit adjustments.
(c) MONTHLY REPORTS. Within 30 days after the end of each
monthly accounting period of each fiscal year (other than the last monthly
accounting period in such fiscal year) the unaudited consolidated balance sheet
of the Borrower and its Subsidiaries, as at the end of such period and the
related unaudited consolidated statements of operations and cash flows for such
period, and commencing with the January 1999 report, setting forth comparative
figures for the corresponding period of the previous year, all of which shall be
certified by the chief financial officer or controller of the Borrower subject
to changes resulting from audit and normal year-end audit adjustments.
(d) BUDGETS; ETC. Not more than 30 days after the commencement
of each fiscal year of the Borrower, a consolidated budget of the Borrower and
its Subsidiaries in
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reasonable detail for each of the twelve months of such fiscal year as
customarily prepared by management for its internal use setting forth, with
appropriate discussion, the principal assumptions upon which such budgets are
based. Together with each delivery of consolidated financial statements
pursuant to Sections 7.01(a) and (b), a comparison of the current year-to-date
financial results against the budgets required to be submitted pursuant to this
clause (d) shall be presented.
(e) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Sections 7.01(a), (b) and (c), a
certificate of the chief financial officer, controller or other Authorized
Officer of the Borrower to the effect that no Default or Event of Default exists
or, if any Default or Event of Default does exist, specifying the nature and
extent thereof, which certificate (x) in the case of the certificate delivered
pursuant to Sections 7.01(a) and (b), shall set forth the calculations required
to establish (I) the Leverage Ratio for the Test Period ending on the last day
of the fiscal period covered by such financial statements and (II) whether
Holdings and its Subsidiaries were in compliance with the provisions of Sections
8.11, 8.12, 8.13 and 8.14 as at the end of such fiscal period, and (y) in the
case of the certificate delivered pursuant to Section 7.01(a), for each year
commencing with the year ending December 31, 1998, shall set forth the amount of
the Excess Cash Flow for the relevant period ending on the last day of the
fiscal year covered by such financial statements.
(f) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event
within ten Business Days after any officer of Holdings or the Borrower obtains
knowledge thereof, notice of (x) the occurrence of any event which constitutes a
Default or Event of Default which notice shall specify the nature thereof, the
period of existence thereof and what action Holdings or the Borrower proposes to
take with respect thereto and (y) the commencement of, or any significant
adverse development in, any litigation or governmental proceeding pending
against Holdings or any of its Subsidiaries which is reasonably likely to have a
Material Adverse Effect or is reasonably likely to have a material adverse
effect on the ability of the Credit Parties to perform their obligations under
the Credit Documents.
(g) ENVIRONMENTAL MATTERS. Promptly after obtaining knowledge
of any of the following (but only to the extent (A) not disclosed in an
environmental report delivered to the Administrative Agent on or prior to the
Initial Borrowing Date and (B) that any of the following could reasonably be
expected to (x) have a Material Adverse Effect, either individually or in the
aggregate, or (y) result in a remedial cost to UDLP (I) in respect of
liabilities not otherwise covered by existing indemnities, in excess of
$2,000,000 or (II) in respect of liabilities covered by existing indemnities, in
excess of $20,000,000), written notice of:
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(i) any pending or threatened Environmental Claim against
Holdings or any of its Subsidiaries or any Real Property owned or operated
by the Borrower or any of its Subsidiaries;
(ii) any condition or occurrence on any Real Property owned or
operated by the Borrower or any of its Subsidiaries that (x) results in
noncompliance by Holdings or any of its Subsidiaries with any applicable
Environmental Law or (y) is reasonably likely to result in an Environmental
Claim against Holdings or any of its Subsidiaries or any such Real
Property;
(iii) any condition or occurrence on any Real Property owned or
operated by the Borrower or any of its Subsidiaries that is reasonably
likely to result in such Real Property being subject to any restrictions on
the ownership, occupancy, use or transferability by Holdings or its
Subsidiary, as the case may be, of its interest in such Real Property under
any Environmental Law; and
(iv) the taking of any removal or remedial action in response to
the actual or alleged presence of any Hazardous Material on any Real
Property owned or operated by the Borrower or any of its Subsidiaries.
All such notices shall describe in reasonable detail the nature of the claim,
investigation, condition, occurrence or removal or remedial action and Holdings'
or the relevant Subsidiary's response or proposed response thereto. In
addition, the Borrower agrees to provide the Lenders with such detailed reports
relating to any of the matters set forth in clauses (i)-(iv) above as may
reasonably be requested by the Administrative Agent or the Required Lenders.
(h) OTHER INFORMATION. Promptly upon transmission thereof, (i)
copies of any filings and registrations with, and reports to, the Securities and
Exchange Commission or any successor thereto (the "SEC") by Holdings or any of
its Subsidiaries, (ii) copies of all financial statements, proxy statements,
notices and reports as Holdings or any of its Subsidiaries shall send generally
to analysts and the holders of the Senior Subordinated Notes in their capacity
as such holders (to the extent not otherwise delivered to the Lenders pursuant
to this Agreement) and with reasonable promptness, such other information or
documents (financial or otherwise) as the Administrative Agent on its own behalf
or on behalf of the Required Lenders may reasonably request from time to time.
7.02 BOOKS, RECORDS AND INSPECTIONS. Holdings will, and will
cause its Subsidiaries to, permit, upon reasonable notice to the chief financial
officer, controller or any other Authorized Officer of the Borrower, officers
and designated representatives of the Administrative Agent or the Required
Lenders to visit and inspect any of the properties or assets of Holdings and any
of its Subsidiaries in their possession and to examine the
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books of account of Holdings and any of its Subsidiaries and discuss the
affairs, finances and accounts of Holdings and of any of its Subsidiaries with,
and be advised as to the same by, its and their officers and independent
accountants, all at such reasonable times and intervals and to such reasonable
extent as the Administrative Agent or the Required Lenders may desire.
7.03 INSURANCE. Holdings will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance with
reputable and solvent insurers in such amounts, covering such risks and
liabilities and with such deductibles or self-insured retentions as are in
accordance with normal industry practice (which, in any event, shall not include
earthquake insurance for leased office, lab and shop space). Holdings will, and
will cause each of its Subsidiaries to, furnish to the Administrative Agent on
the Initial Borrowing Date and thereafter annually, upon request of the
Administrative Agent, a summary of the insurance carried together with
certificates of insurance and other evidence of such insurance, if any, naming
the Collateral Agent as an additional insured and/or loss payee, to the extent
of its interests therein.
7.04 PAYMENT OF TAXES. Holdings will pay and discharge, and
will cause each of its Subsidiaries to pay and discharge, all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
profits, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, would become a
Lien or charge upon any material properties of Holdings or any of its
Subsidiaries, PROVIDED that neither Holdings nor any Subsidiary shall be
required to pay any such tax, assessment, charge, levy or claim which is being
contested in good faith and by proper proceedings if it has maintained adequate
reserves (in the good faith judgment of the management of Holdings) with respect
thereto in accordance with GAAP.
7.05 CORPORATE FRANCHISES. Holdings will do, and will cause
each Subsidiary to do, or cause to be done, all things reasonably necessary to
preserve and keep in full force and effect its existence and to preserve its
material rights and franchises, other than those the failure to preserve which
could not reasonably be expected to have a Material Adverse Effect, PROVIDED
that any transaction permitted by Section 8.02 will not constitute a breach of
this Section 7.05.
7.06 COMPLIANCE WITH STATUTES, ETC. The Borrower will, and will
cause each Subsidiary to, comply with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property other than those the non-compliance with which is not reasonably
likely to have a Material Adverse Effect or have a material adverse effect on
the ability of the Credit Parties to perform their obligations under the Credit
Documents.
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7.07 ERISA. As soon as possible and, in any event, within ten
(10) days after Holdings or the Borrower knows or has reason to know of the
occurrence of any of the following, the Borrower will deliver to each of the
Lender a certificate of the chief financial officer of the Borrower setting
forth the full details as to such occurrence and the action, if any, that
Holdings, the Borrower, any Subsidiary or any ERISA Affiliate is required or
proposes to take, together with any notices required or proposed to be given to
or filed with or by Holdings, the Borrower, any Subsidiary, any ERISA Affiliate,
the PBGC, a Plan or Multiemployer Plan participant or the Plan administrator
with respect thereto: that a Reportable Event has occurred (except to the
extent that the Borrower has previously delivered to the Lender a certificate
and notices (if any) concerning such event pursuant to the next clause hereof);
that a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a
Plan subject to Title IV of ERISA is subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof), and an event described in subsection .62, .63, .64, .65, .66,
.67 or .68 of PBGC Regulation Section 4043 is reasonably expected to occur with
respect to such Plan within the following 30 days; that an accumulated funding
deficiency, within the meaning of Section 412 of the Code or Section 302 of
ERISA, has been incurred or an application may reasonably be expected to be or
has been made for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code or Section 303 or 304 of ERISA
with respect to a Plan; that any contribution required to be made with respect
to a Plan, Multiemployer Plan or Foreign Pension Plan has not been timely made;
that a Plan or Multiemployer Plan has been or may be reasonably be expected to
be terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; that a Plan has an Unfunded Current Liability which, when added to the
aggregate amount of Unfunded Current Liabilities with respect to all other
Plans, exceeds the aggregate amount of such Unfunded Current Liabilities that
existed on the Initial Borrowing Date by $10,000,000; that proceedings may
reasonably be expected to be or have been instituted to terminate or appoint a
trustee to administer a Plan which is subject to Title IV of ERISA; that a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Multiemployer Plan; that Holdings, the Borrower,
any Subsidiary of the Borrower or any ERISA Affiliate will or may reasonably be
expected to incur any material liability (including any indirect, contingent, or
secondary liability) to or on account of the termination of or withdrawal from a
Plan or Multiemployer Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or
4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or
4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA or with respect to
a group health plan (as defined in Section 607(1) of ERISA or Section
4980B(g)(2) of the Code) under Section 4980B of the Code; or that Holdings, the
Borrower or any Subsidiary of the Borrower may incur any material liability
pursuant to any employee welfare benefit plan (as defined in Section 3(1) of
ERISA) that provides benefits to retired employees or other former employees
(other than as required by Section 601 of ERISA) or any Plan or any Foreign
Pension Plan in addition to the
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liability that existed on the Initial Borrowing Date pursuant to any such plan
or plans. Upon request by any Lender, the Borrower will deliver to such Lender
a complete copy of the annual report (on Internal Revenue Service Form
5500-series) of each Plan (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information) required to be filed with the
Internal Revenue Service. In addition to any certificates or notices delivered
to the Lenders pursuant to the first sentence hereof, copies of any records,
documents or other information required to be furnished to the PBGC, and any
material notices received by Holdings, the Borrower, any Subsidiary of the
Borrower or any ERISA Affiliate with respect to any Plan, Multiemployer Plan or
Foreign Pension Plan shall be delivered to the Lender no later than ten days
after the date such records, documents and/or information has been furnished to
the PBGC or such notice has been received by Holdings, the Borrower, the
Subsidiary or the ERISA Affiliate, as applicable.
7.08 GOOD REPAIR. Holdings will, and will cause each of its
Subsidiaries to, ensure that its material properties and equipment used or
useful in its business are kept in good repair, working order and condition,
normal wear and tear excepted, and, subject to Section 8.05, that from time to
time there are made in such properties and equipment all needful and proper
repairs, renewals, replacements, extensions, additions, betterments and
improvements thereto, to the extent and in the manner useful or customary for
companies in similar businesses.
7.09 END OF FISCAL YEARS; FISCAL QUARTERS. Holdings will, for
financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries', fiscal years and fourth fiscal quarters to end on December 31 of
each year and (ii) each of its, and each of its Subsidiaries', first three
fiscal quarters to end on the last day of March, June and September of each
year.
7.10 ADDITIONAL SECURITY; FURTHER ASSURANCES. (a) Holdings
will cause the Borrower and the Subsidiary Guarantors to grant to the Collateral
Agent security interests and mortgages in owned Real Property with a fair market
value of $5,000,000 or more acquired after the Initial Borrowing Date as may be
reasonably requested from time to time by the Administrative Agent and/or the
Required Lenders (collectively, the "Additional Mortgages"). All such security
interests and mortgages shall be granted pursuant to documentation reasonably
satisfactory in form and substance to the Administrative Agent and shall
constitute valid and enforceable Liens superior to and prior to the rights of
all third Persons and subject to no other Liens except Permitted Liens. The
Additional Mortgages or instruments related thereto shall be duly recorded or
filed in such manner and in such places as are required by law to establish,
perfect, preserve and protect the Liens in favor of the Collateral Agent
required to be granted pursuant to the Additional Mortgages and all taxes, fees
and other charges payable in connection therewith shall be paid in full.
Furthermore, Holdings shall cause to be delivered to the Collateral Agent such
opinions of
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counsel, title insurance and other related documents as may be reasonably
requested by the Administrative Agent to assure itself that this Section 7.10(a)
has been complied with.
(b) Holdings will, and will cause its Subsidiaries to, at the
expense of the Borrower make, execute, endorse, acknowledge, file and/or deliver
to the Collateral Agent from time to time such vouchers, invoices, schedules,
confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, reports and other assurances or
confirmatory instruments and take such further steps relating to the collateral
covered by any of the Security Documents as the Collateral Agent may reasonably
require.
(c) Prior to the 60 day after the Initial Borrowing Date, the
Borrower shall have delivered to the Collateral Agent surveys, in form and
substance satisfactory to the Collateral Agent, of the Mortgaged Properties,
dated a recent date and certified in a manner acceptable to the Collateral Agent
by a licensed surveyor satisfactory to the Collateral Agent.
(d) Each of the Credit Parties agrees that each action required
above by this Section 7.10(a) and (b) shall be completed as soon as possible,
but in no event later than 60 days after such action is requested to be taken by
the Administrative Agent, the Collateral Agent or the Required Lenders, as the
case may be, PROVIDED that in no event shall the Borrower be required to take
any action, other than using its reasonable commercial efforts without any
material expenditure, to obtain consents from third parties with respect to its
compliance with this Section 7.10.
7.11 INTEREST RATE AGREEMENT. The Borrower (x) will, no later
than the date occurring 90 days after the Initial Borrowing Date, enter into
Interest Rate Agreements which cover for at least three years from the Initial
Borrowing Date at least 35% of the outstanding Term Loans establishing a ceiling
on the Eurodollar Rate of 9% on terms reasonably satisfactory to the
Administrative Agent and (y) may enter into Interest Rate Agreements which cover
additional amounts of outstanding Term Loans on terms (and in such amounts)
reasonably satisfactory to the Administrative Agent.
7.12 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a)(i) The Borrower
will comply, and will cause each of its Subsidiaries to comply, with all
Environmental Laws applicable to the ownership, lease or use of all Real
Property now or hereafter owned, leased or operated by the Borrower or any of
its Subsidiaries, will promptly pay or cause to be paid all costs and expenses
incurred in connection with such compliance, and will keep or cause to be kept
all such Real Property free and clear of any Liens imposed pursuant to such
Environmental Laws and (ii) neither the Borrower nor any of its Subsidiaries
will generate, use, treat, store, release or dispose of, or permit the
generation, use, treatment, storage, release or disposal of Hazardous Materials
on any Real Property now or hereafter
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owned, leased or operated by the Borrower or any of its Subsidiaries, or
transport or permit the transportation of Hazardous Materials to or from any
such Real Property, except to the extent that the failure to comply with the
requirements specified in clause (i) or (ii) above, either individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect. If
legally required to do so under any applicable directive or order of any
governmental agency, the Borrower agrees to undertake, and cause each of its
Subsidiaries to undertake, any clean up, removal, remedial or other action
necessary to remove and clean up any Hazardous Materials from any Real Property
owned, leased or operated by the Borrower or any of its Subsidiaries in
accordance with, in all material respects, the requirements of all applicable
Environmental Laws and in accordance with, in all material respects, such orders
and directives of all governmental authorities, except to the extent that the
Borrower or such Subsidiary is contesting such order or directive in good faith
and by appropriate proceedings and for which adequate reserves have been
established to the extent required by GAAP; PROVIDED that it will not constitute
a breach of this Section 7.12 if a Person other than the Borrower and its
Subsidiaries takes such action on behalf of the Borrower and its Subsidiaries.
(b) At the request of the Administrative Agent or the Required
Lenders at any time and from time to time during the continuance of an Event of
Default, upon the reasonable belief by the Administrative Agent that the
Borrower or any of its Subsidiaries has breached in any material respect any
representation or covenant herein with respect to any environmental matters
affecting any Mortgaged Property and such breach is continuing and/or a notice
has been provided under Section 7.01(g), the Borrower will provide, at its sole
cost and expense (or will cause the relevant Subsidiary to provide at its sole
cost and expense), an environmental site assessment report reasonable in scope
concerning any Mortgaged Property that is the subject of the breach or notice of
the Borrower or its Subsidiaries, prepared by an environmental consulting firm
reasonably acceptable to the Administrative Agent, indicating the presence or
Release or absence of Hazardous Materials on or from any such Mortgaged Property
and the potential cost of any removal or remedial action in connection with any
Hazardous Materials on such Mortgaged Property. If the Borrower fails to
provide the same after thirty days' notice and the Event of Default is
continuing, the Administrative Agent may order the same, and the Borrower shall
grant and hereby grants to the Administrative Agent and the Lenders and their
agents access to such Mortgaged Property and specifically grants the
Administrative Agent and the Lenders an irrevocable non-exclusive license,
subject to the rights of tenants, to undertake such an assessment all at the
Borrower's reasonable expense, which assessments, if obtained, will be provided
to the Borrower.
7.13 FNSS DISPOSITION. The Borrower will cause UDLP to apply
the proceeds from an FNSS Disposition consummated while the Seller Note is
outstanding to the repayment of the Seller Note (to the extent required by the
terms of the Seller Note).
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7.14 FMC ARABIA. Upon the request of the Administrative Agent
or the Required Lenders, the Borrower and/or UDLP will require FMC Corporation
to transfer record ownership of the interests in FMC Arabia beneficially owned
by UDLP to UDLP free and clear of all Liens at any time no adverse tax
consequences would result therefrom.
7.15 NOTICES OF ASSIGNMENT. At any time, upon the written
request, and in the sole discretion, of the Required Lenders, each Credit Party
shall promptly, and in any event within 5 Business Days of the delivery of such
written request, deliver to the Administrative Agent duly completed Notices of
Assignment (the "Notices") pursuant to the provisions of the Assignment of
Claims Act of 1940, 31 U.S.C. Section 3727(c), with respect to each material
contract of a Credit Party with the U.S. government or any branch, agency,
bureau or subdivision thereof and, until otherwise directed by the Required
Lenders, shall thereafter update each such Notice, and provide (and update)
Notices with respect to any additional contracts between a Credit Party and the
U.S. government or any branch, agency, bureau or subdivision thereof. Upon the
occurrence and during the continuation of any Event of Default, the Required
Banks may direct the Administrative Agent to file Notices with respect to any or
all of the contracts of the Credit Parties with the U.S. government or any
branch, agency, bureau or subdivision thereof. After any such filing and for so
long as an Event of Default is continuing, the Credit Parties shall take all
action necessary to maintain such filings and to make filings with respect to
any additional material contracts between a Credit Party and the U.S. government
or any branch, agency, bureau or subdivision thereof.
SECTION 8. NEGATIVE COVENANTS. Holdings and the Borrower hereby
covenant and agree that for so long as this Agreement is in effect and until the
Commitments have terminated, no Letters of Credit or Notes are outstanding and
the Loans and Unpaid Drawings, together with interest, Fees and all other
Obligations (other than any indemnities described in Section 12.13 which are not
then owing) incurred hereunder, are paid in full:
8.01 CHANGES IN BUSINESS. (a) The Borrower will not permit at
any time the business activities taken as a whole conducted by the Borrower and
its Subsidiaries to be materially different from the business activities taken
as a whole (including incidental activities) conducted by the Borrower and its
Subsidiaries on the Initial Borrowing Date (after giving effect to the
Transaction) and businesses reasonably related thereto and reasonable extensions
thereof targeted to governmental, commercial and other customers (the
"Business").
(b) Holdings will not engage in any business other than its
ownership of the capital stock of, and the management of, the Borrower, provided
that Holdings may engage in those activities that are incidental to (x) the
maintenance of its corporate existence in compliance with applicable law, (y)
legal, tax and accounting matters in connection with
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any of the foregoing activities and (z) the entering into, and performing its
obligations under, this Agreement and the other Documents to which it is a
party.
8.02 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC.
Holdings will not, and will not permit any Subsidiary to, wind up, liquidate or
dissolve its affairs, or enter into any transaction of merger or consolidation,
or convey, sell, lease or otherwise dispose of all or any part of its property
or assets (other than inventory or obsolete equipment or excess equipment no
longer needed in the conduct of the business in the ordinary course of business)
or purchase, lease or otherwise acquire all or any part of the property or
assets of any Person (other than purchases or other acquisitions of inventory,
leases, materials and equipment in the ordinary course of business) or agree to
do any of the foregoing at any future time without a contingency relating to
obtaining any required approval hereunder, except that the following shall be
permitted:
(a) any Subsidiary of the Borrower may be merged or consolidated
with or into, or be liquidated into, the Borrower or a Subsidiary Guarantor
(so long as the Borrower or such Subsidiary Guarantor is the surviving
corporation), or all or any part of its business, properties and assets may
be conveyed, leased, sold or transferred to the Borrower or any Subsidiary
Guarantor, PROVIDED that neither the Borrower nor any Subsidiary Guarantor
may be a party to any merger, consolidation or liquidation otherwise
permitted by this clause (a) involving a Person that is not a Wholly-Owned
Subsidiary other than in a Permitted Acquisition;
(b) capital expenditures to the extent within the limitations
set forth in Section 8.05 hereof;
(c) the investments, acquisitions and transfers or dispositions
of properties permitted pursuant to Section 8.06;
(d) each of the Borrower and any Subsidiary may lease (as
lessee) real or personal property in the ordinary course of business (so
long as such lease does not create a Capitalized Lease Obligation not
otherwise permitted by Section 8.04(d) or would not violate Section 8.07);
(e) licenses or sublicenses by the Borrower and its Subsidiaries
of intellectual property in the ordinary course of business, PROVIDED, that
such licenses or sublicenses shall not interfere with the business of the
Borrower or any Subsidiary;
(f) other sales or dispositions of assets to the extent that the
aggregate Net Cash Proceeds received from all such sales and dispositions
permitted by this clause (f) shall not exceed $55 million in the aggregate
and $25 million in any fiscal year
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of the Borrower, PROVIDED that (x) each such sale shall be in an amount at
least equal to the fair market value thereof and for proceeds consisting of
at least 75% cash (with the assumption of Indebtedness and the sale for
cash within 30 days of receipt of securities received counted as cash) and
(y) the Net Cash Proceeds of any such sale are applied to repay the Loans
to the extent required by Section 4.02(A)(c), and, PROVIDED FURTHER, that
the sale or disposition of the capital stock of any Subsidiary of the
Borrower shall be prohibited unless it is for all of the outstanding
capital stock of such Subsidiary owned by the Borrower and its
Subsidiaries;
(g) the Acquisition;
(h) leases and subleases permitted under Section 8.03(g);
(i) the transfer of the stock of FMC Arabia to a new Subsidiary
to preserve tax benefits; and
(j) involuntary sales of interests in Joint Ventures and Foreign
Subsidiaries pursuant to mandatory puts, calls and similar arrangements (to
the extent in effect on the date hereof in the case of the Existing Joint
Ventures).
8.03 LIENS. Holdings will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of Holdings or any such Subsidiary whether now owned or hereafter
acquired, or sell any such property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets
(including sales of accounts receivable or notes with recourse to Holdings or
any of its Subsidiaries) or assign any right to receive income, except:
(a) Liens for taxes not yet delinquent or Liens for taxes being
contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Borrower)
have been established;
(b) Liens in respect of property or assets of the Borrower or
any of its Subsidiaries imposed by law which were incurred in the ordinary
course of business, such as carriers', warehousemen's and mechanics'
Liens, statutory landlord's Liens, and other similar Liens arising in the
ordinary course of business, and (x) which do not in the aggregate
materially detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of the Borrower or
any of its Subsidiaries or (y) which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing
the forfeiture or sale of the property or asset subject to such Lien;
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(c) Liens created by or pursuant to this Agreement or the other
Credit Documents;
(d) Liens created pursuant to Capital Leases permitted by
Section 8.04(c).
(e) Liens arising from judgments, decrees or attachments and
Liens securing appeal bonds arising from judgments, in each case in
circumstances not constituting an Event of Default under Section 9.09;
(f) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance
and return-of-money bonds and other similar obligations incurred in the
ordinary course of business (exclusive of obligations in respect of the
payment for borrowed money);
(g) leases or subleases granted to others not interfering in any
material respect with the business of the Borrower or any of its
Subsidiaries;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of Holdings or any of its Subsidiaries;
(i) Liens arising from UCC financing statements regarding leases
permitted by this Agreement;
(j) (x) receipt of progress payments and advances from customers
in the ordinary course of business to the extent same creates a Lien on the
related inventory and (y) purchase money Liens securing payables arising
from the purchase by the Borrower or any Subsidiary Guarantor of any
equipment or goods in the normal course of business, PROVIDED that such
payables shall not constitute Indebtedness;
(k) any interest or title of a lessor under any lease permitted
by this Agreement;
(l) Liens in existence on, and which are to continue in effect
after, the Initial Borrowing Date which are listed, and the property
subject thereto described in, Annex VII, without giving effect to any
extension or renewal thereof; and
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(m) Liens arising pursuant to purchase money mortgages or
security interests securing Indebtedness representing the purchase price
(or financing of the purchase price within 90 days after the respective
purchase) of assets acquired by the Borrower or any Subsidiary Guarantor
after the Initial Borrowing Date, PROVIDED that (x) any such Liens attach
only to the assets so acquired, (y) the Indebtedness secured by any such
Lien does not exceed 100%, nor is less than 70%, of the lesser of the fair
market value or purchase price of the property being purchased at the time
of the incurrence of such Indebtedness and (z) all Indebtedness secured by
Liens created pursuant to this clause (m) shall not exceed $15,000,000 at
any time outstanding.
8.04 INDEBTEDNESS. Holdings will not, and will not permit any
of its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(b) Indebtedness owing by (i) any Subsidiary Guarantor to
another Subsidiary Guarantor or the Borrower and/or (ii) the Borrower to
any Subsidiary Guarantor;
(c) Capitalized Lease Obligations of the Borrower and its
Subsidiary Guarantors initially incurred after the Initial Borrowing Date,
PROVIDED that the aggregate Capitalized Lease Obligations under all Capital
Leases entered into after Initial Borrowing Date shall not exceed
$15,000,000;
(d) Indebtedness under Interest Rate Agreements to the extent
entered into in compliance with Section 7.11;
(e) Indebtedness incurred pursuant to purchase money mortgages
permitted by Section 8.03(m);
(f) Indebtedness of the Borrower evidenced by the Senior
Subordinated Notes and the guaranty of such Indebtedness by the Guarantors;
(g) Indebtedness of the Borrower evidenced by the Seller Note in
an aggregate principal amount not to exceed $50,000,000, less the aggregate
amount of all repayments of principal thereon effected after the Initial
Borrowing Date, and the guaranty of such Indebtedness by the Guarantors;
(h) Existing Indebtedness, without giving effect to any
subsequent extension, renewal or refinancing thereof;
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(i) Contingent Obligations (including under letters of credit
and other guaranties) of the Borrower and its Subsidiaries with respect to
Indebtedness and other obligations of Joint Ventures and Foreign
Subsidiaries in an aggregate amount at any time outstanding which, when
added to all investments, loans and advances made pursuant to Section
8.06(j) and then outstanding, is not in excess of the Investment Basket;
(j) letters of credit under which the Borrower is the account
party denominated in other than Dollars in an aggregate amount not in
excess of the equivalent of $25,000,000; and
(k) additional unsecured Indebtedness of the Borrower and the
Subsidiary Guarantors not to exceed an aggregate outstanding principal
amount of $10,000,000 at any time.
8.05 CAPITAL EXPENDITURES. (a) Holdings will not, and will not
permit any of its Subsidiaries to, incur Consolidated Capital Expenditures,
provided that the Borrower and its Subsidiaries may make Consolidated Capital
Expenditures not to exceed in the aggregate (x) $12,000,000 during the period
from the Initial Borrowing Date to the end of its fiscal year ending December
31, 1997, (y) $32,000,000 during each of its next two subsequent fiscal years
and (z) $30,000,000 during each subsequent fiscal year thereafter.
(b) In the event that the maximum amount which is permitted to
be expended in respect of Consolidated Capital Expenditures during any fiscal
year pursuant to Section 8.05(a) (without giving effect to this clause (b)) is
not fully expended during such fiscal year, the maximum amount which may be
expended during the immediately succeeding fiscal year pursuant to Section
8.05(a) shall be increased by such unutilized amount up to a maximum increase in
any fiscal year of not more than $10,000,000.
8.06 ADVANCES, INVESTMENTS AND LOANS. Holdings will not, and
will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to any
Person, except:
(a) the Borrower or any Subsidiary may invest in cash and Cash
Equivalents;
(b) the Borrower and any Subsidiary may acquire and hold
receivables owing to them, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms and/or reasonable extensions thereof;
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(c) the intercompany Indebtedness described in Section 8.04(b)
shall be permitted;
(d) loans and advances to officers, directors and employees in
the ordinary course of business (x) for relocation purposes and (y)
otherwise in an aggregate principal amount not to exceed $500,000 at any
time outstanding shall be permitted;
(e) the Borrower and each Subsidiary may acquire and own
investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in settlement
of delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(f) Interest Rate Agreements entered into pursuant to Section
7.11 shall be permitted;
(g) advances, loans and investments in existence on the
Effective Date and listed on Annex VIII, without giving effect to any
additions thereto or replacements thereof, shall be permitted;
(h) the Borrower and each Subsidiary may make capital
contributions to any of their Subsidiaries to the extent a Subsidiary
Guarantor;
(i) Subsidiaries may be established or created in accordance
with the provisions of Section 8.07;
(j) the Borrower or any Subsidiary may enter into, invest in
(including contributions of cash, copyrights, patents and other
intellectual property, and the use of personnel and/or the issuance of
non-exclusive licenses of intellectual property) and make Loans and
advances to Joint Ventures and Foreign Subsidiaries in an aggregate amount
(calculated without regard to any write-downs or write-offs and excluding
the value of the use of personnel and/or non-exclusive licenses of
intellectual property) at any time outstanding (x) not in excess of (A) the
Investment Basket at such time less (B) $15 million and (y) which, when
added to the aggregate amount of all Contingent Obligations then
outstanding pursuant to Section 8.04(i), is not in excess of the Investment
Basket at such time;
(k) the Borrower or any Subsidiary Guarantor may maintain the
loans to and investments in the Existing Joint Ventures and Foreign
Subsidiaries which are outstanding on the Initial Borrowing Date;
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(l) the Borrower or any Subsidiary Guarantor may acquire assets
from, or all of the equity interests in, any Person engaged in the Business
for cash consideration not exceeding $30 million in the aggregate, provided
that the Borrower shall be in compliance on a PRO FORMA basis with all the
Covenants contained in this Agreement after giving effect to each such
acquisition (a "Permitted Acquisition"); and
(m) loans and investments not otherwise permitted by the
foregoing clauses (a) through (l), provided that the aggregate amount of
the loans and investments made pursuant to this clause (m) shall not exceed
$5,000,000.
8.07 LIMITATION ON CREATION OF SUBSIDIARIES. Holdings will not,
and will not permit any Subsidiary Guarantor to, establish, create or acquire
any direct Subsidiary and will not permit any Inactive Subsidiary to acquire
assets or commence business; PROVIDED that, the Borrower and its Subsidiaries
shall be permitted to establish, create or acquire (x) Wholly-Owned
Subsidiaries, and/or an Inactive Subsidiary may cease to continue to be an
Inactive Subsidiary so long as (i) 100% of the capital stock of such new
Subsidiary is pledged pursuant to the Pledge Agreement and the certificates
representing such stock, together with stock powers duly executed in blank, are
delivered to the Collateral Agent and (ii) such new Subsidiary or former
Inactive Subsidiary, if in each case a Domestic Subsidiary, executes a
counterpart of the Subsidiary Guaranty, the Pledge Agreement and the Security
Agreement, in each case on the same basis (and to the same extent) as such
Subsidiary or former Inactive Subsidiary would have executed such Credit
Documents if it were a Credit Party on the Initial Borrowing Date and (y) Joint
Ventures and Foreign Subsidiaries to the extent otherwise permitted hereunder.
8.08 MODIFICATIONS. Holdings will not, and will not permit any
of its Subsidiaries to:
(a) make (or give any notice in respect thereof) any voluntary
or optional payment or prepayment or redemption or acquisition for value of
(including, without limitation, by way of depositing with the trustee with
respect thereto money or securities before due for the purpose of paying
when due) or exchange of the Senior Subordinated Notes, the Seller Note or
any Existing Indebtedness;
(b) amend or modify (or permit the amendment or modification of)
in any manner adverse to the interests of the Lenders, any provisions of
any Senior Subordinated Note Documents or any Seller Note Document; and/or
(c) amend, modify or change in any manner adverse to the
interests of the Lenders the organizational documents (including by-laws)
of any Credit Party or any agreement entered into by the Borrower with
respect to its capital stock, or any
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Acquisition Document or enter into any new agreement in any manner adverse
to the interests of the Lenders with respect to the capital stock of the
Borrower.
8.09 DIVIDENDS, ETC. (a) Holdings will not, and will not
permit any of its Subsidiaries to, declare or pay any dividends (other than
dividends payable solely in capital stock of such Person) or return any capital
to, its stockholders, members and/or other owners or authorize or make any other
distribution, payment or delivery of property or cash to its stockholders,
members and/or other owners as such, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, for a consideration, any shares of any class of
its capital stock or other ownership interests now or hereafter outstanding (or
any warrants for or options or stock appreciation rights in respect of any of
such shares), or set aside any funds for any of the foregoing purposes, or
permit any of its Subsidiaries to purchase or otherwise acquire for
consideration any shares of any class of the capital stock or other ownership
interests of Holdings or any other Subsidiary, as the case may be, now or
hereafter outstanding (or any options or warrants or stock appreciation rights
issued by such Person with respect to its capital stock) (all of the foregoing
"Dividends"), except that:
(i) Holdings may pay Dividends in connection with a
recapitalization or other restructuring of its capital provided that (i)
all such Dividends will be paid to Carlyle and/or Carlyle Affiliates and
(ii) the amount of Dividends so paid shall be not in excess of the proceeds
of substantially contemporaneous equity issuances to Carlyle and/or Carlyle
Affiliates;
(ii) any Subsidiary of the Borrower may pay dividends or return
capital or make distributions and other similar payments with regard to its
capital stock or other membership interests to the Borrower or to a
Subsidiary of the Borrower; and
(iii) each of Holdings and the Borrower may redeem or repurchase
its membership interests or stock from officers, employees and directors
(or their estates) upon the death, permanent disability, retirement or
termination of employment of any such Person or otherwise in accordance
with any stock option plan or any employee stock ownership plan, PROVIDED
that (x) no Default or Event of Default is then in existence or would
arise therefrom and (y) the aggregate amount of all cash paid in respect
of all such shares and interests so redeemed or repurchased in any
calendar year does not exceed $2,000,000.
(b) Holdings will not, and will not permit any of its
Subsidiaries to, create or otherwise cause or suffer to exist (other than as a
result of a requirement of law) any encumbrance or restriction which prohibits
or otherwise restricts (A) the ability of any Subsidiary to (a) pay dividends or
make other distributions or pay any Indebtedness owed to Holdings or any
Subsidiary, (b) make loans or advances to Holdings or any Subsidiary, (c)
transfer any of its properties or assets to Holdings or any Subsidiary or (B)
the ability
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of Holdings or any other Subsidiary of Holdings to create, incur, assume or
suffer to exist any Lien upon its property or assets to secure the Obligations,
other than prohibitions or restrictions existing under or by reason of: (i)
this Agreement, the other Credit Documents and the Senior Subordinated Note
Documents; (ii) applicable law; (iii) customary non-assignment provisions
entered into in the ordinary course of business and consistent with past
practices; (iv) any restriction or encumbrance with respect to a Subsidiary
imposed pursuant to an agreement which has been entered into for the sale or
disposition of all or substantially all of the capital stock or assets of such
Subsidiary, so long as such sale or disposition is permitted under this
Agreement; and (v) Liens permitted under Sections 8.03(d) and (m) and any
documents or instruments governing the terms of any Indebtedness or other
obligations secured by any such Liens, PROVIDED that such prohibitions or
restrictions apply only to the assets subject to such Liens.
8.10 TRANSACTIONS WITH AFFILIATES. Holdings will not, and will
not permit any Subsidiary to, enter into any transaction or series of
transactions after the Initial Borrowing Date whether or not in the ordinary
course of business, with any Affiliate other than on terms and conditions
substantially as favorable to Holdings or such Subsidiary as would be obtainable
by Holdings or such Subsidiary at the time in a comparable arm's-length
transaction with a Person other than an Affiliate, PROVIDED that the foregoing
restrictions shall not apply to (i) the Management Agreement, (ii) employment
arrangements entered into in the ordinary course of business with officers of
Holdings and its Subsidiaries and (iii) customary fees paid to members of the
Board of Directors of Holdings and of its Subsidiaries.
8.11 INTEREST COVERAGE RATIO. The Borrower will not permit the
ratio of (i) Consolidated EBITDA to (ii) Consolidated Interest Expense for any
Test Period ending on the last day of any fiscal quarter set forth below to be
less than the ratio set forth opposite such fiscal quarter:
FISCAL QUARTER ENDING: RATIO
---------------------- -----
December 31, 1997
through September 30, 2000 1.75:1.00
December 31, 2000
through September 30, 2001 1.80:1.00
December 31, 2001
through September 30, 2002 2.00:1.00
December 31, 2002
through September 30, 2003 2.20:1.00
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December 31, 2003
through September 2004 2.30:1.00
December 31, 2004
through September 2005 2.50:1.00
Thereafter 2.70:1.00
8.12 LEVERAGE RATIO. The Borrower will not permit the Leverage
Ratio determined as at the end of any Test Period ending on the last day of any
fiscal quarter set forth below, to be more than the ratio set forth opposite
such fiscal quarter:
FISCAL QUARTER ENDING: RATIO
---------------------- -----
December 31, 1997
through September 30, 2000 6.25:1.00
December 31, 2000
through September 30, 2001 5.75:1.00
December 31, 2001
through September 30, 2002 5.25:1.00
December 31, 2002
through September 30, 2003 4.75:1.00
December 31, 2003
through September 30, 2004 4.25:1.00
December 31, 2004
through September 30, 2005 3.75:1.00
Thereafter 3.25:1.00
8.13 MINIMUM CONSOLIDATED NET WORTH. The Borrower will not
permit Consolidated Net Worth at any time to be less than $25,000,000.
8.14 MINIMUM CONSOLIDATED EBITDA. The Borrower will not permit
Consolidated EBITDA for any Test Period ending on the last day of any fiscal
quarter set forth below to be less than the amount set forth opposite such
fiscal quarter:
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FISCAL QUARTER ENDING: AMOUNT
---------------------- ------
December 31, 1997
through September 30, 1998 $116,000,000
December 31, 1998
through September 30, 1999 $112,000,000
December 31, 1999
through September 30, 2001 $100,000,000
Thereafter $104,000,000
8.15 LIMITATION ON ISSUANCE OF STOCK. Holdings will not permit
any of its Subsidiaries, directly or indirectly, to issue any shares of its
capital stock or other securities (or warrants, rights or options to acquire
shares or other equity securities), except (i) for replacements of then
outstanding shares of capital stock, (ii) for stock splits, stock dividends and
similar issuances which do not decrease the percentage ownership of the Borrower
and its Subsidiaries taken as a whole in any class of the capital stock of such
Subsidiary, (iii) for issuances to the Borrower or any of its Subsidiaries in
connection with the creation of new Wholly-Owned Subsidiaries permitted under
Section 8.07 and (iv) to qualify directors to the extent required by applicable
law.
SECTION 9. EVENTS OF DEFAULT. Upon the occurrence of any of the
following specified events (each, an "Event of Default"):
9.01 PAYMENTS. The Borrower shall (i) default in the payment
when due of any principal of the Loans or any Unpaid Drawing or (ii) default,
and such default shall continue for three or more Business Days, in the payment
when due of any interest on the Loans or any Fees or any other amounts owing
hereunder or under any other Credit Document; or
9.02 REPRESENTATIONS, ETC. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or in
any statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect on the date
as of which made or deemed made; or
9.03 COVENANTS. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 7.11 or 8, or (b) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in Section 9.01,
9.02 or clause (a) of this Section 9.03)
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contained in this Agreement and such default shall continue unremedied for a
period of at least 30 days after written notice to the defaulting party by the
Administrative Agent or the Required Lenders; or
9.04 DEFAULT UNDER OTHER AGREEMENTS. (a) Holdings or any of
its Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than the Obligations or the Seller Note) beyond the period
of grace, if any, applicable thereto or (ii) default in the observance or
performance of any agreement or condition relating to any such Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause any such Indebtedness to become due prior to its stated
maturity; or (b) any such Indebtedness of Holdings or any of its Subsidiaries
shall be declared to be due and payable (or shall be required to be prepaid as a
result of a default thereunder or of an event of the type that constitutes an
Event of Default) prior to the stated maturity thereof, PROVIDED that it shall
not constitute an Event of Default pursuant to this Section 9.04 unless the
aggregate principal amount of all Indebtedness referred to in clauses (a) and
(b) above exceeds $10,000,000 in the aggregate at any one time; or
9.05 BANKRUPTCY, ETC. Holdings or any of its Material
Subsidiaries shall commence a voluntary case concerning itself under Title 11 of
the United States Code entitled "Bankruptcy", as now or hereafter in effect, or
any successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against Holdings or any of its Material Subsidiaries and the petition
is not controverted within 20 days, or is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
Holdings or any of its Material Subsidiaries; or Holdings or any of its Material
Subsidiaries commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to Holdings or any of its Material Subsidiaries; or there is
commenced against Holdings or any of its Material Subsidiaries any such
proceeding which remains undismissed for a period of 60 days; or Holdings or any
of its Material Subsidiaries is adjudicated insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding is entered;
Holdings or any of its Material Subsidiaries suffers any appointment of any
custodian or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 days; or Holdings or any of its
Material Subsidiaries makes a general assignment for the benefit of creditors;
or any corporate action is taken by Holdings or any of its Material Subsidiaries
for the purpose of effecting any of the foregoing; or
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9.06 ERISA. (a) Any Plan or Multiemployer Plan shall fail to
satisfy the minimum funding standard required for any plan year or part thereof
under Section 412 of the Code or Section 302 of ERISA or a waiver of such
standard or extension of any amortization period is sought or granted under
Section 412 of the Code or Section 303 or 304 of ERISA, a Reportable Event shall
have occurred, a contributing sponsor (as defined in Section 4001(a)(13) of
ERISA) of a Plan subject to Title IV of ERISA shall be subject to the advance
reporting requirement of PBGC Regulation Section 4043.61 (without regard to
subparagraph (b)(1) thereof) and an event described in subsection .62, .63, .64,
.65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be reasonably
expected to occur with respect to such Plan within the following 30 days, any
Plan which is subject to Title IV of ERISA shall have had or is likely to have a
trustee appointed to administer such Plan, any Plan or Multiemployer Plan which
is subject to Title IV of ERISA is, shall have been or is likely to be
terminated or to be the subject of termination proceedings under ERISA, any Plan
shall have an Unfunded Current Liability, a contribution required to be made
with respect to a Plan, Multiemployer Plan or a Foreign Pension Plan has not
been timely made, Holdings, the Borrower or any Subsidiary of the Borrower or
any ERISA Affiliate has incurred or is likely to incur any liability to or on
account of a Plan or Multiemployer Plan under Section 409, 502(i), 502(l), 515,
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971
or 4975 of the Code or on account of a group health plan (as defined in Section
607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the
Code, or Holdings, the Borrower or any Subsidiary of the Borrower has incurred
or is likely to incur liabilities pursuant to one or more employee welfare
benefit plans (as defined in Section 3(1) of ERISA) that provide benefits to
retired employees or other former employees (other than as required by Section
601 of ERISA) or Plans or Foreign Pension Plans; (b) there shall result from any
such event or events the imposition of a lien, the granting of a security
interest, or a liability or a material risk of incurring a liability; and (c)
such lien, security interest or liability, individually, and/or in the
aggregate, in the opinion of the Required Lenders, has had, or is reasonably
likely to have, a Material Adverse Effect; or
9.07 SECURITY DOCUMENTS. (a) Except in each case to the extent
resulting from the negligent or willful failure of the Collateral Agent,
any Security Document shall cease to be, in any material respect, in full force
and effect, or shall cease, in any material respect, to give the Collateral
Agent the Liens, powers and privileges purported to be created thereby in favor
of the Collateral Agent, or (b) any Credit Party shall default in the due
performance or observance of any material term, covenant or agreement on its
part to be performed or observed pursuant to any such Security Document and such
default shall continue unremedied for a period of at least 30 days after written
notice to the respective Credit Party by the Administrative Agent; or
9.08 GUARANTY. Any of the Guaranties or any material provision
thereof shall cease to be in full force and effect, or any Guarantor or any
Person acting by or on
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behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under any Guaranty; or
9.09 JUDGMENTS. One or more judgments or decrees shall be
entered against Holdings or any of its Subsidiaries involving a liability (to
the extent not paid or covered by insurance) in excess of $10,000,000 in the
aggregate for all such judgments and decrees for Holdings and its Subsidiaries
and all such judgments and decrees in excess of such amount shall not have been
vacated, discharged or stayed or bonded pending appeal within 60 days from the
entry thereof; or
9.10 ANCILLARY AGREEMENTS. Any default or defaults shall occur
under any of the Ancillary Agreements which individually or in the aggregate is
reasonably likely to have a Material Adverse Effect; or
9.11 CHANGE OF CONTROL. A Change of Control shall occur and be
continuing;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent shall, upon the written
request of the Required Lenders, by written notice to the Borrower and Holdings,
take any or all of the following actions, without prejudice to the rights of the
Administrative Agent or any Lender to enforce its claims against any Guarantor
or the Borrower, except as otherwise specifically provided for in this Agreement
(PROVIDED that, if an Event of Default specified in Section 9.05 shall occur
with respect to the Borrower, the result which would occur upon the giving of
written notice by the Administrative Agent as specified in clauses (i) and (ii)
below shall occur automatically without the giving of any such notice): (i)
declare the Total Commitment terminated, whereupon the Commitment of each Lender
shall forthwith terminate immediately and any Commitment Commission shall
forthwith become due and payable without any other notice of any kind; (ii)
declare the principal of and any accrued interest in respect of all Loans and
all obligations owing hereunder (including Unpaid Drawings) and thereunder to
be, whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; (iii) enforce, as Collateral Agent (or direct the
Collateral Agent to enforce), any or all of the Liens and security interests
created pursuant to the Security Documents; (iv) terminate any Letter of Credit
which may be terminated in accordance with its terms; and (v) direct the
Borrower to pay (and the Borrower hereby agrees upon receipt of such notice, or
upon the occurrence of any Event of Default specified in Section 9.05 in respect
of the Borrower, it will pay) to the Collateral Agent at the Payment Office such
additional amounts of cash, to be held as security for the Borrower's
reimbursement obligations in respect of Letters of Credit then outstanding equal
to the aggregate Stated Amount of all Letters of Credit then outstanding.
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SECTION 10. DEFINITIONS. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"A Term Commitment" shall mean, with respect to each Lender, the
amount, if any, set forth opposite such Lender's name on Annex I hereto directly
below the column entitled "A Term Commitment" as the same may be (x) reduced or
terminated from time to time pursuant to Section 3.02, 3.03 and/or 9 or (y)
adjusted from time to time as a result of assignments to or from such Lender
pursuant to Section 1.13 and/or 12.04
"A Term Facility" shall mean the Facility evidenced by the Total
A Term Commitment.
"A Term Loan" shall have the meaning provided in Section 1.01(a).
"A Term Note" shall have the meaning provided in Section 1.05(a).
"A Termination Date" shall mean the third anniversary of the
Initial Borrowing Date.
"A TF Percentage" shall mean, at any time of determination
thereof, a fraction (expressed as a percentage) the numerator of which is equal
to the sum of (x) the aggregate principal amount of A Term Loans outstanding at
such time and (y) the Total A Term Commitment at such time and the denominator
of which is equal to the sum of (x) the aggregate principal amount of Term Loans
outstanding at such time and (y) the Total A Term Commitment at such time
provided that at any time that no A Term Loans are outstanding (including upon
the application of only a portion of any required prepayment of Term Loans under
Section 4.02(A)), the A TF Percentage shall be zero.
"Acquisition" shall mean the acquisition by the Borrower directly
and indirectly of all the outstanding partnership interests of UDLP pursuant to
the Acquisition Documents.
"Acquisition Agreement" shall mean the Purchase Agreement, dated
as of August 25, 1997 among FMC Corporation, Harsco Corporation, Harsco UDLP
Corporation and United Defense Industries, Inc. (f/k/a Iron Horse Acquisition
Corp.), as supplemented.
"Acquisition Documents" shall mean the Acquisition Agreement and
all other material agreements and documents relating to the Acquisition
(including the Ancillary Agreements), as same may be amended, modified or
supplemented from time to time pursuant to the terms hereof and thereof.
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"Additional Mortgages" shall have the meaning provided in Section
7.10.
"Adjusted Cash Flow" for any fiscal year shall mean Consolidated
Net Income for such fiscal year (after provision for taxes) PLUS (without
duplication) the amount of all net non-cash charges (including, without
limitation, depreciation, deferred tax expense, non-cash interest expense,
amortization and other non-cash charges) that were deducted in arriving at
Consolidated Net Income for such fiscal year to the extent not representing a
cash payment to be made in the future, MINUS (without duplication) (x) the
amount of all non-cash gains and gains from sales of assets (other than sales of
inventory and equipment in the normal course of business) that were added in
arriving at Consolidated Net Income for such fiscal year and (y) the positive
difference, if any, between actual taxes paid in respect of such fiscal year and
tax expense deducted in arriving at Consolidated Net Income for such fiscal
year.
"Adjusted RF Percentage" shall mean (x) at a time when no Lender
Default exists, for each Lender, such Lender's RF Percentage and (y) at a time
when a Lender Default exists (i) for each Lender that is a Defaulting Lender,
zero and (ii) for each Lender that is a Non-Defaulting Lender, the percentage
determined by dividing such Lender's Revolving Commitment at such time by the
Adjusted Total Revolving Commitment at such time, it being understood that all
references herein to Revolving Commitments and the Adjusted Total Revolving
Commitment at a time when the Total Revolving Commitment has been terminated
shall be references to the Revolving Commitments or Adjusted Total Revolving
Commitment, as the case may be, in effect immediately prior to such termination,
PROVIDED that (A) no Lender's Adjusted RF Percentage shall change upon the
occurrence of a Lender Default from that in effect immediately prior to such
Lender Default if after giving effect to such Lender Default, and any repayment
of Revolving Loans and Swingline Loans at such time pursuant to Section
4.02(A)(a) or otherwise, the sum of (i) the aggregate outstanding principal
amount of Revolving Loans of all Non-Defaulting Lenders, plus (ii) the aggregate
outstanding principal amount of all Swingline Loans, plus (iii) the aggregate
amount of Letter of Credit Outstandings, exceeds the Adjusted Total Revolving
Commitment; (B) the changes to the Adjusted RF Percentage that would have become
effective upon the occurrence of a Lender Default but that did not become
effective as a result of the preceding clause (A) shall become effective on the
first date after the occurrence of the relevant Lender Default on which the sum
of (i) the aggregate outstanding principal amount of the Revolving Loans of all
Non-Defaulting Lenders, plus (ii) the aggregate outstanding principal amount of
all Swingline Loans, plus (iii) the aggregate amount of Letter of Credit
Outstandings is equal to or less than the Adjusted Total Revolving Commitment;
and (C) if (i) a Non-Defaulting Lender's Adjusted RF Percentage is changed
pursuant to the preceding clause (B) and (ii) any repayment of such Lender's
Revolving Loans, Swingline Loans or Unpaid Drawings that were made during the
period commencing after the date of the relevant Lender Default and ending on
the date of such change to its Adjusted RF Percentage must be returned to the
Borrower as a preferential
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or similar payment in any bankruptcy or similar proceeding of the Borrower, then
the change to such Non-Defaulting Lender's Adjusted RF Percentage effected
pursuant to said clause (B) shall be reduced to that positive change, if any, as
would have been made to its Adjusted RF Percentage if (x) such repayments had
not been made and (y) the maximum change to its Adjusted RF Percentage would
have resulted in the sum of the outstanding principal of Revolving Loans made by
such Lender plus such Lender's new Adjusted RF Percentage of the outstanding
principal amount of Swingline Loans and of Letter of Credit Outstandings
equalling such Lender's Revolving Commitment at such time.
"Adjusted Total Revolving Commitment" shall mean at any time the
Total Revolving Commitment less the aggregate Revolving Commitments of all
Defaulting Lenders.
"Administrative Agent" shall have the meaning provided in the
first paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to Section 11.09.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors of such corporation or (ii) to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Agents" shall have the meaning provided in the first paragraph
of this Agreement.
"Agreement" shall mean this Credit Agreement, as the same may be
from time to time further modified, amended and/or supplemented.
"Ancillary Agreements" shall have the meaning provided in the
Acquisition Agreement.
"Anticipated Reinvestment Amount" shall mean, with respect to any
Reinvestment Election, the amount specified in the Reinvestment Notice delivered
by the Borrower in connection therewith as the amount of the Net Cash Proceeds
from the related Asset Sale that the Borrower intends to use to purchase,
construct or otherwise acquire Reinvestment Assets.
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"Applicable Base Rate Margin" shall mean (i) in the case of A
Term Loans, Revolving Loans and Swingline Loans, 1.25% LESS the Margin Reduction
Discount, if any, (ii) in the case of B Term Loans, 1.50% LESS the Margin
Reduction Discount, if any, and (iii) in the case of C Term Loans, 1.75% LESS
the Margin Reduction Discount, if any.
"Applicable CC Percentage" shall mean (i) .25% at any time that
the Applicable Eurodollar Margin for Revolving Loans is 1.125%; (ii) .375% at
any time the Applicable Eurodollar Margin for Revolving Loans is greater than
1.125% but less than 2.00%; and (iii) .50% at all other times.
"Applicable Eurodollar Margin" shall mean (i) in the case of A
Term Loans and Revolving Loans, 2.25% LESS the Margin Reduction Discount, if
any, (ii) in the case of B Term Loans, 2.50% LESS the Margin Reduction Discount,
if any, and (iii) in the case of C Term Loans, 2.75% LESS the Margin Reduction
Discount, if any.
"A/RF Maturity Date" shall mean the sixth anniversary of the
Initial Borrowing Date.
"Asset Sale" shall mean and include (x) the sale, transfer or
other disposition by Holdings or any Subsidiary to any Person other than the
Borrower or any Subsidiary Guarantor of any asset of the Borrower or such
Subsidiary (other than sales, transfers or other dispositions in the ordinary
course of business of inventory and/or obsolete or excess equipment) and/or (y)
the receipt by Holdings or any Subsidiary of any insurance, condemnation or
similar proceeds in connection with a casualty or taking of any of its assets in
excess of the costs incurred by Holdings and its Subsidiaries in respect of such
event and of repairing or replacing the assets so damaged, destroyed or taken
but in all cases only to the extent that the aggregate Net Cash Proceeds of all
such sales, transfers, dispositions and receipts after the Initial Borrowing
Date are in excess of $10 million.
"Assignment Agreement" shall mean the Assignment Agreement in the
form of Exhibit K (appropriately completed).
"Authorized Officer" shall mean any senior officer of Holdings or
the Borrower designated as such in writing to the Administrative Agent by
Holdings or by the Borrower.
"Average Daily Amount of Revolving Loans" for any Test Period
shall mean the average daily outstanding principal amount of Revolving Loans
during such Test Period.
"B Maturity Date" shall mean the eighth anniversary of the
Initial Borrowing Date.
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"B Term Commitment" shall mean, with respect to each Lender, the
amount, if any, set forth opposite such Lender's name on Annex I hereto directly
below the column entitled "B Term Commitment" as the same may be terminated
pursuant to Section 3.03.
"B Term Facility" shall mean the Facility evidenced by the Total
B Term Commitment.
"B Term Loan" shall have the meaning provided in Section 1.01(b).
"B Term Note" shall have the meaning provided in Section 1.05(a).
"B TF Percentage" shall mean, at any time of determination
thereof, a fraction (expressed as a percentage) the numerator of which is equal
to the aggregate principle amount of B Term Loans outstanding at such time and
the denominator of which is equal to the sum of (x) the aggregate principle
amount of Term Loans outstanding at such time and, if any A Term Loans are then
outstanding, (y) the Total A Term Commitment at such time, PROVIDED that the B
TF Percentage shall be readjusted for any required repayment of Term Loans under
Section 4.02(A) at such time, if any, that no A Term Loans remain outstanding.
"Bankruptcy Code" shall have the meaning provided in Section
9.05.
"Base Rate" at any time shall mean the higher of (i) the rate
which is 1/2 of 1% in excess of the Federal Funds Effective Rate and (ii) the
Prime Lending Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the
rates provided in Section 1.08(a).
"Borrower" shall mean United Defense Industries, Inc., a Delaware
corporation.
"Borrowing" shall mean the incurrence of (i) Swingline Loans by
the Borrower from the Swingline Lender on a given date or (ii) one Type of Loan
pursuant to a single Facility by the Borrower from the Lenders having
Commitments with respect to such Facility on a PRO RATA basis on a given date
(or resulting from conversions on a given date), having in the case of
Eurodollar Loans the same Interest Period; PROVIDED that Base Rate Loans
incurred pursuant to Section 1.10(b) shall be considered part of any related
Borrowing of Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company in its individual
capacity.
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"Business" shall have the meaning provided in Section 8.01(a).
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in Dollar deposits in the interbank Eurodollar market.
"C Term Commitment" shall mean, with respect to each Lender, the
amount, if any, set forth opposite such Lender's name on Annex I hereto directly
below the column entitled "C Term Commitment" as the same may be terminated
pursuant to Section 3.03.
"C Term Facility" shall mean the Facility evidenced by the Total
C Term Commitment.
"C Term Loan" shall have the meaning provided in Section 1.01(c).
"C Term Note" shall have the meaning provided in Section 1.05(a).
"C TF Percentage" shall mean, at any time of determination
thereof, a percentage equal to 100% minus the sum of the A TF Percentage at such
time and the B TF Percentage at such time.
"Capital Lease" as applied to any Person shall mean any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in conformity with GAAP, is accounted for as a capital lease on the balance
sheet of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of the Borrower or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Carlyle" shall mean TC Group L.L.C. (which operates under the
trade name "the Carlyle Group"), a Delaware limited liability company.
"Carlyle Affiliate" shall mean any entity controlled directly or
indirectly by Carlyle.
"Cash Equivalents" shall mean (i) securities issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality
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thereof (PROVIDED that the full faith and credit of the United States of America
is pledged in support thereof) having maturities of not more than one year from
the date of acquisition, (ii) Dollar denominated time deposits, certificates of
deposit and bankers' acceptances of (x) any Lender that is a domestic commercial
bank of recognized standing having capital and surplus in excess of $500,000,000
or (y) any bank (or the parent company of such bank) whose short-term commercial
paper rating from Standard & Poor's Ratings Services, a division of McGraw-Hill,
Inc. ("S&P") is at least A-1 or the equivalent thereof or from Moody's Investors
Service, Inc. ("Moody's") is at least P-1 or the equivalent thereof (any such
bank, an "Approved Bank"), in each case with maturities of not more than one
year from the date of acquisition, (iii) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications specified
in clause (ii) above, (iv) commercial paper issued by any Approved Bank or by
the parent company of any Approved Bank and commercial paper issued by, or
guaranteed by, any industrial or financial company with a short-term commercial
paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or
the equivalent thereof by Moody's, or guaranteed by any industrial company with
a long term unsecured debt rating of at least A or A2, or the equivalent of each
thereof, from S&P or Moody's, as the case may be, and in each case maturing
within six months after the date of acquisition, (v) marketable direct
obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either S&P or
Moody's, and (vi) investments in money market funds substantially all of whose
assets are comprised of securities of the type described in clauses (i) through
(v) above.
"Cash Proceeds" shall mean, with respect to any Asset Sale, the
aggregate cash payments (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, but only as and
when so received) received by the Borrower and/or any Subsidiary from such Asset
Sale.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 ET
SEQ.
"Change of Control" shall mean, at any time and for any reason
whatsoever, (a) Holdings shall cease to own directly 100% on a fully diluted
basis of the economic and voting interest in the Borrower's capital stock other
than up to 10% of such capital stock (on a fully diluted basis) representing
stock issued or issuable to management pursuant to stock option plans or (b)
Carlyle and Carlyle Affiliates shall cease to have beneficial ownership (within
the meaning of Rule 13d-3 of the Exchange Act) on a fully diluted basis in the
aggregate (i) prior to any public offerings by Holdings of at least $40,000,000
of its capital stock or membership interests (a "PO"), at least 51% of the
economic and voting
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interest in Holdings' capital stock and/or membership interests or on and after
a PO, at least 30% of the voting interests in Holdings capital stock and/or
membership interests or such higher percentage that exceeds the highest
percentage of Holdings' capital stock and/or membership interests owned by any
other person or group (as defined in Section 13(d) of the Exchange Act) or (c)
the Board of Directors of Holdings shall cease to consist of a majority of
Continuing Directors or (d) a "change of control" or similar event shall occur
as provided in the Senior Subordinated Note Indenture.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in each
of the Security Documents.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Lenders.
"Commitment" shall mean, with respect to each Lender, such
Lender's Term Commitment and Revolving Commitment.
"Commitment Commission" shall mean the RL Commitment Commission
and the TL Commitment Commission.
"Consolidated Capital Expenditures" shall mean, for any period,
the aggregate of all cash expenditures (including in all events all amounts
expended under Capital Leases but excluding any amount representing capitalized
interest) by the Borrower and its Subsidiaries during that period that, in
conformity with GAAP, are or are required to be included in the property, plant
or equipment reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries, PROVIDED that Consolidated Capital Expenditures shall in any event
(x) exclude the purchase price paid in cash in connection with the acquisition
of any Person (including through the purchase of all of the capital stock or
other ownership interests of such Person or through merger or consolidation) to
the extent allocable to property, plant and equipment and (y) exclude amounts
expended to acquire Reinvestment Assets.
"Consolidated Debt" shall mean, as of any date of determination,
(i) the aggregate stated balance sheet amount of all Indebtedness of the
Borrower and its Subsidiaries on a consolidated basis as determined in
accordance with GAAP plus (ii) any Indebtedness for borrowed money of any other
Person as to which the Borrower and/or any
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of its Subsidiaries has created a guarantee or other Contingent Obligation (but
only to the extent of such guarantee or other Contingent Obligation).
"Consolidated EBIT" shall mean, for any period, (A) the sum of
the amounts for such period of (i) Consolidated Net Income, (ii) provisions for
taxes based on income, (iii) Consolidated Interest Expense, (iv) amortization or
write-off of deferred financing costs to the extent deducted in determining
Consolidated Net Income and (v) losses on sales of assets (excluding sales in
the ordinary course of business) and other extraordinary losses and other
one-time charges LESS (B) the sum of (i) any cash payments made in such period
in respect of an event as to which a one-time non-cash charge was previously
incurred and (ii) gains on sales of assets (excluding sales in the ordinary
course of business) and other extraordinary gains and other one-time non-cash
gains, all as determined on a consolidated basis in accordance with GAAP.
"Consolidated EBITDA" shall mean, for any period, the sum of the
amounts for such period of (i) Consolidated EBIT, (ii) depreciation expense,
(iii) amortization expense including any amortization or write-off related to
the write-up of any assets as a result of purchase accounting and (iv) LIFO
charges, provided that (A) Consolidated EBITDA for any Test Period ending on or
prior to June 30, 1998 shall mean the sum of (x) Consolidated EBITDA of the
Borrower for the period commencing October 6, 1997 and ending on such date, as
determined without regard to this proviso, PLUS (y) the amounts set forth in
Annex X hereto as applicable to Consolidated EBITDA for such Test Period and (B)
when determining the Leverage Ratio, Consolidated EBITDA for any Test Period
during which a Permitted Acquisition is consummated shall be determined on a PRO
FORMA basis as if such Permitted Acquisition was consummated on the first day of
such Test Period.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including the portion that is attributable to Capital Leases
in accordance with GAAP) of the Borrower and its Subsidiaries on a consolidated
basis with respect to all outstanding Indebtedness of the Borrower and its
Subsidiaries (including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and without duplication net costs and/or net benefits under
Interest Rate Agreements, but excluding, however, amortization of deferred
financing costs to the extent included in total interest expense) less (y) the
interest income of such Persons for such period PROVIDED that Consolidated
Interest Expense for any Test Period ending on or prior to June 30, 1998 shall
mean Consolidated Interest Expense for such Test Period as determined without
regard to this proviso that is annualized.
"Consolidated Net Income" shall mean for any period, the net
income (or loss) of the Borrower and its Subsidiaries on a consolidated basis
for such period taken as a single accounting period determined in conformity
with GAAP, PROVIDED that there shall
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be excluded from the calculation thereof (without duplication) (i) the income
(or loss) of any Person (other than Subsidiaries of the Borrower) in which any
other Person (other than the Borrower or any of its Subsidiaries) has a joint
interest, except to the extent of the amount of dividends or other distributions
actually paid to the Borrower or any of its Subsidiaries by such Person during
such period, (ii) the income (or loss) of any Person accrued prior to the date
it becomes a Subsidiary of the Borrower or is merged into or consolidated with
the Borrower or any of its Subsidiaries or that Person's assets are acquired by
the Borrower or any of its Subsidiaries and (iii) the income of any Subsidiary
of the Borrower to the extent that the declaration or payment of dividends or
similar distributions by that Subsidiary of that income is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Subsidiary.
"Consolidated Net Worth" shall mean, at any time for the
determination thereof, all amounts which, in conformity with GAAP, would be
included under the caption "total shareholders' equity" (or any like caption) on
a consolidated balance sheet of the Borrower and its Subsidiaries as at such
date, PROVIDED that any amortization of purchase accounting write-ups for
inventory, property, plant and equipment, and in-place research and development
shall be excluded from the calculation of Consolidated Net Worth.
"Contingent Obligations" shall mean as to any Person any
obligation of such Person guaranteeing or intending to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof,
PROVIDED, HOWEVER, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated maximum of the Contingent Obligation or, if none, the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if there is no stated or determinable amount
of the primary obligation, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
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"Continuing Directors" shall mean the directors of Holdings on
the Initial Borrowing Date and each other director if such director's nomination
for the election to the Board of Directors of Holdings is recommended by a
majority of the then Continuing Directors.
"Credit Documents" shall mean this Agreement, the Notes, the
Security Documents, the Subsidiary Guaranty and any documents executed in
connection therewith.
"Credit Event" shall mean and include the making of a Loan or the
issuance of a Letter of Credit.
"Credit Party" shall mean Holdings, the Borrower and the
Subsidiary Guarantors.
"Deemed ECF" shall mean for any fiscal year of Holdings any
prepayments of the principal of Term Loans made during such year pursuant to
Section 4.01.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" shall mean any Lender with respect to which a
Lender Default is in effect.
"Dividends" shall have the meaning provided in Section 8.09.
"Documentation Agents" shall have the meaning provided in the
first paragraph of this Agreement.
"Documents" shall mean, collectively, the Credit Documents and
the Transaction Documents.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"Domestic Subsidiary" shall mean each Subsidiary of the Borrower
that is not a Foreign Subsidiary.
"Effective Date" shall have the meaning provided in Section
12.10.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other institutional "accredited investor" as defined in
SEC Regulation D.
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"Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than internal
reports prepared by the Borrower or any of its Subsidiaries solely in the
ordinary course of such Person's business and not in response to any third party
action or request of any kind) or proceedings relating in any way to any
Environmental Law or any permit issued, or any approval given, under any such
Environmental Law (hereafter, "Claims"), including, without limitation, (a) any
and all Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and (b) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials arising from alleged injury
or threat of injury to health, safety or the environment.
"Environmental Law" means any applicable Federal, state, foreign
or local statute, law, rule, regulation, ordinance, code and rule of common law
now or hereafter in effect and in each case as amended, and any binding judicial
or administrative interpretation thereof, including any binding judicial or
administrative order, consent decree or judgment, relating to the environment or
Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 ET SEQ.; the
Toxic Substances Control Act, 15 U.S.C. Section 7401 ET SEQ.; the Clean Air
Act, 42 U.S.C. Section 7401 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C.
Section 3808 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 ET
SEQ.; and any applicable state and local or foreign counterparts or equivalents.
"EP Percentage" shall mean in the case of (i) equity issued to,
or equity contributions made by, Persons (or controlling or controlled
affiliates thereof) who are owners of the equity of Holdings on the Initial
Borrowing Date, except for any such issuance or contribution described in the
following clause (ii), 50%, (ii) equity issued to, or equity contributions made
by, any Person (whether or not an existing shareholder of Holdings) that are to
be utilized solely for investments in privatizations, co-productions, Joint
Ventures and Foreign Subsidiaries, 0% and (iii) all other equity issuances and
equity contributions, 100%.
"Equity Contribution" shall have the meaning provided in Section
5.01(h).
"Equity Documents" shall mean all the agreements governing or
relating to the Equity Contribution.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at
the date of this
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Agreement and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section
3(9) of ERISA) which together with Holdings, the Borrower or a Subsidiary of the
Borrower would be deemed to be a "single employer" (i) within the meaning of
Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of the Borrower
or a Subsidiary of the Borrower being or having been a general partner of such
person.
"Eurodollar Loans" shall mean each Loan bearing interest at the
rates provided in Section 1.08(b).
"Eurodollar Rate" shall mean with respect to each Interest Period
for a Eurodollar Loan, (i) the offered quotation to first-class banks in the
interbank Eurodollar market by the Administrative Agent for dollar deposits of
amounts in same day funds comparable to the outstanding principal amount of the
Eurodollar Loans for which an interest rate is then being determined with
maturities comparable to the Interest Period to be applicable to such Eurodollar
Loans, determined as of 10:00 A.M. (New York time) on the date which is two
Business Days prior to the commencement of such Interest Period divided (and
rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage
equal to 100% minus the then stated maximum rate of all reserve requirements
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves) applicable to any member bank of the Federal Reserve System
in respect of Eurocurrency liabilities as defined in Regulation D (or any
successor category of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in Section 9.
"Excess Cash Flow" shall mean, for any period, the remainder of
(i) Adjusted Cash Flow for such period, plus (ii) to the extent not included in
(i) above, any amounts received by Holdings and its Subsidiaries in settlement
of, or in payment of any judgments resulting from, actions, suits or proceedings
with respect to Holdings and/or its Subsidiaries from the first day to the last
day of such period, minus (iii) the sum of (x) the amount of Consolidated
Capital Expenditures made in compliance with Section 8.05 during such period
(less any amount thereof financed through the incurrence of Indebtedness), (y)
any repayments or prepayments during such period of the principal amount of Term
Loans, except prepayments of the principal amount of Term Loans made pursuant to
Sections 4.02(A)(c), (d), (e), (f) and/or (g) and (z) the net amount of
investments, loans and advances made pursuant to Section 8.06 during such period
(giving effect to any return on any such investment, loan or advance) except to
the extent made in reliance on clause (ii) of the definition of Investment
Basket.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Existing Indebtedness" shall have the meaning provided in
Section 5.01(n).
"Existing Joint Ventures" shall mean each of FNSS and FMC Arabia.
"Existing Letters of Credit" shall mean each letter of credit
outstanding on the Initial Borrowing Date that is (x) issued by a Person that
becomes a Lender hereunder on or prior to the Initial Borrowing Date, (y) to
remain outstanding after the Initial Borrowing Date and (z) listed on Annex V,
Part II, hereto, it being understood that each such letter of credit shall
retain the expiry applicable to it on the Initial Borrowing Date and may be
extendable upon expiry for successive periods of up to 12 months, but not beyond
the third Business Day prior to the A/RF Maturity Date, on terms acceptable to
the respective Letter of Credit Issuer and the Administrative Agent.
"Expiration Date" shall mean November 26, 1997.
"Facility" shall mean any of the credit facilities established
under this Agreement, I.E., the A Term Facility, the B Term Facility, the C Term
Facility or the Revolving Facility.
"Facing Fee" shall have the meaning provided in Section 3.01(d).
"Federal Funds Effective Rate" shall mean for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Administrative Agent from three Federal
Funds brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to
in, Section 3.01.
"Final Maturity Date" shall mean the ninth anniversary of the
Initial Borrowing Date.
"FMC Arabia" shall mean FMC Arabia Limited, a limited liability
company organized under the laws of the Kingdom of Saudi Arabia.
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"FNSS" shall mean FMC-Nurol Savunma Sanayii A.S. and its
successors.
"FNSS Disposition" shall mean any disposition of all or
substantially all of UDLP's Turkish businesses or of any of the UDLP interests
in FNSS, including pursuant to a Call or Liquidation (as both terms are defined
in the Seller Note).
"Foreign Pension Plan" shall mean any plan, fund (including,
without limitation, any superannuation fund) or other similar program
established or maintained outside the United States of America by Holdings, the
Borrower or any one or more of its Subsidiaries primarily for the benefit of
employees of the Borrower or such Subsidiaries residing outside the United
States of America, which plan, fund or other similar program provides, or
results in, retirement income, a deferral of income in contemplation of
retirement or payments to be made upon termination of employment, and which plan
is not subject to ERISA or the Code.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower
which is not incorporated or organized in the United States or any State or
territory thereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect on the date of this Agreement; it being
understood and agreed that determinations in accordance with GAAP for purposes
of Section 8, including defined terms as used therein, are subject (to the
extent provided therein) to Section 12.07(a).
"Guaranteed Creditors" shall mean and include each of the Agents,
the Collateral Agent, the Lenders and each party (other than any Credit Party)
party to an Interest Rate Agreement to the extent that such party constitutes a
Secured Creditor.
"Guaranteed Obligations" shall mean (i) the principal and
interest on each Note issued by the Borrower, and Loans made, under this
Agreement and all reimbursement obligations and Unpaid Drawings with respect to
Letters of Credit, together with all the other obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities (including, without
limitation, indemnities, fees and interest thereon) of the Borrower to any
Lender or any Agent and/or the Collateral Agent now existing or hereafter
incurred under, arising out of or in connection with this Agreement or any other
Credit Document and the due performance and compliance with all the terms,
conditions and agreements contained in the Credit Documents by the Borrower and
(ii) all obligations (including obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due) and liabilities
of the Borrower owing under any Interest Rate Agreement entered into by the
Borrower with a Secured Creditor, whether now in existence or hereafter arising,
and the due performance and compliance with all terms, conditions and agreements
contained therein.
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"Guarantor" shall mean Holdings and each Subsidiary Guarantor.
"Guaranty" shall mean and include each of the Holdings Guaranty
and the Subsidiary Guaranty.
"Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contains, electric fluid containing levels of polychlorinated biphenyls, and
radon gas and (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous waste," "hazardous
materials," "extremely hazardous waste," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law.
"Holdings" shall mean Iron Horse Investors, L.L.C., a Delaware
limited liability company.
"Holdings Guaranty" shall mean the guaranty of Holdings pursuant
to Section 13.
"Inactive Subsidiary" shall mean any Subsidiary of the Borrower
that owns (and continues to own) no assets (other than nominal assets, which
shall not include any partnership interest in UDLP) and is (and continues to be)
inactive.
"Indebtedness" of any Person shall mean, without duplication, (i)
all indebtedness of such Person for borrowed money, (ii) the deferred purchase
price of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (iii) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such indebtedness has been assumed (to the extent of the fair market
value of such property), (v) all Capitalized Lease Obligations of such Person,
(vi) all obligations of such Person to pay a specified purchase price for goods
or services whether or not delivered or accepted, I.E., take-or-pay and similar
obligations, (vii) all net obligations of such Person under Interest Rate
Agreements and (viii) all Contingent Obligations of such Person, (other than
Contingent Obligations arising from the guaranty by such Person of the
obligations of the Borrower and/or its Subsidiaries to the extent such
guaranteed obligations do not constitute Indebtedness and are otherwise
permitted hereunder), PROVIDED that Indebtedness shall not include trade
payables, accrued expenses and receipt of progress and advance payments, in each
case arising in the ordinary course of business.
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"Initial Borrowing Date" shall mean the date upon which the
initial Borrowing of Loans occurs.
"Initial Investors" shall mean Carlyle, Carlyle Affiliates and
the other owners of the capital stock of Holdings on the Initial Borrowing
Date, after giving effect to the Transaction.
"Interest Period" with respect to any Loan shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Agreement" shall mean any interest rate swap
agreement, any interest rate cap agreement, any interest rate collar agreement
or other similar agreement or arrangement designed to protect the Borrower or
any Subsidiary against fluctuations in interest rates.
"Investment Basket" shall mean at any time (i) $30 million plus
(ii) 25% (or, if the Leverage Ratio on the last day of such fiscal year is less
than 4.0:1.0, 50%) of aggregate Excess Cash Flow for each period (an "ECF
Period") then ended for which Excess Cash Flow had been, at the time, determined
for purposes of Section 4.02(A)(f) and as to which at least 90 days have passed
since the end of such period plus (iii) 25% (or if the Leverage Ratio on the
last day of such fiscal year is less than 4.0:1.0, 50%) of aggregate Deemed ECF
for each ECF Period plus (iv) if the Leverage Ratio at the end of the last Test
Period then ended was less than 4.0:1.0, $50 million plus (v) only in the case
of any determination prior to the 90th day following the fiscal year ending
December 31, 1998, the lesser of $7,500,000 and 25% of the principal payments of
Term Loans made pursuant to Section 4.01 after the Initial Borrowing Date and on
or prior to December 31, 1997.
"Joint Venture" means any Person formed for the purpose of
exploiting business opportunities to the extent, in the case of any Person
organized or created under the laws of the United States or any State thereof,
less than 80% of the ownership interests therein are owned directly and
indirectly by the Borrower, and shall include in any event the Existing Joint
Ventures to the extent the Borrower continues to own directly and indirectly
less than 80% of the ownership interest therein.
"Leasehold" of any Person means all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Lender" shall have the meaning provided in the first paragraph
of this Agreement.
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"Lender Default" shall mean (i) the refusal (which has not been
retracted) of a Lender to make available its portion of any incurrence of Loans
or to fund its portion of any unreimbursed payment under Section 2.04(c) or (ii)
a Lender having notified the Administrative Agent and/or the Borrower that it
does not intend to comply with the obligations under Section 1.01 or under
Section 2.04(c), in the case of either clause (i) or (ii) as a result of the
appointment of a receiver or conservator with respect to such Lender at the
direction or request of any regulatory agency or authority.
"Lender Register" shall have the meaning provided in Section
12.16.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(c).
"Letter of Credit Issuer" shall mean (i) BTCo, (ii) with respect
to each Existing Letter of Credit, the Lender issuing same and (iii) any Lender
which at the request of the Borrower and with the consent of the Administrative
Agent agrees in such Lender's sole discretion to become a Letter of Credit
issuer for the purpose of issuing Letters of Credit pursuant to Section 2.
"Letter of Credit Outstandings" shall mean, at any time, the sum
of, without duplication, (i) the aggregate Stated Amount of all outstanding
Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in
respect of all Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in
Section 2.02(a).
"Leverage Ratio" shall mean, at any date of determination, the
ratio of (x) the sum of (i) Consolidated Debt on such date less the outstanding
principal amount of Revolving Loans on such date included in Consolidated Debt
plus (ii) the Average Daily Amount of Revolving Loans for the Test Period ended
on such date to (y) Consolidated EBITDA for the Test Period ending on such date.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof).
"Loan" shall have the meaning provided in Section 1.01.
"Management Agreement" shall mean the management agreement with
Carlyle and/or Carlyle Affiliates, as in effect on the Initial Borrowing Date.
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"Mandatory Borrowing" shall have the meaning provided in Section
1.01(f).
"Margin Reduction Discount" shall mean zero, PROVIDED that the
Margin Reduction Discount shall be increased to .25%, .625%, .875% or 1.125%,
per annum as the case may be, as specified in clauses (i), (ii), (iii) or (iv)
below, at any time after the Initial Borrowing Date, when, and for so long as,
the ratio set forth in such clause has been satisfied as at the end of the then
Relevant Test Periods:
(i) the Margin Reduction Discount shall be .25% per annum in the
event that as of the end of the Relevant Test Period the Leverage Ratio is
equal to or greater than 4.50 to 1 but less than 4.75 to 1; or
(ii) the Margin Reduction Discount shall be .625% per annum in
the event that as of the end of the Relevant Test Period the Leverage Ratio
is equal to or greater than 4.25 to 1 but less than 4.50 to 1;
(iii) the Margin Reduction Discount shall be .875% per annum
in the event that as of the end of the Relevant Test Period the Leverage
Ratio is equal to greater than 3.75 to 1 but less than 4.25 to 1; and
(iv) the Margin Reduction Discount shall be 1.125% per annum (or,
in the case of B Term Loans or C Term Loans, 1.00%) in the event that as of
the end of the Relevant Test Period the Leverage Ratio is less than 3.75 to
1.
The Leverage Ratio shall be determined for the Relevant Test Period, by delivery
of an officer's certificate of the Borrower to the Lenders pursuant to Section
7.01(e), which certificate shall set forth the calculation of the Leverage
Ratio. The Margin Reduction Discount so determined shall apply, except as set
forth below, from the date on which such officer's certificate is delivered to
the Administrative Agent to the earlier of (x) the date on which the next
certificate is delivered to the Administrative Agent pursuant to Section 7.01(e)
and (y) the 45th day following the end of the fiscal quarter in which such first
certificate was delivered to the Administrative Agent (or the 90th day if such
fiscal quarter was the last fiscal quarter of a fiscal year). Notwithstanding
anything to the contrary contained above, the Margin Reduction Discount shall be
zero (x) if no officer's certificate has been delivered to the Lenders pursuant
to Section 7.01(e) which sets forth the Leverage Ratio for the Relevant Test
Period or the financial statements upon which any such calculations are based
have not been delivered, until such a certificate and/or financial statements
are delivered and (y) at all times when there shall exist a Default under
Section 9.01 or an Event of Default. It is understood and agreed that the
Margin Reduction Discount as provided above shall in no event be cumulative and
only the Margin Reduction Discount available pursuant to any of clause (i),
(ii), (iii) or (iv) if any, contained in this definition shall be applicable.
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"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on
the business, property, assets, liabilities or condition (financial or
otherwise) of (x) Holdings and its Subsidiaries taken as a whole after giving
effect to the Transaction and (y) for purposes of Section 5.01, the Business.
"Material Subsidiary" shall mean any Subsidiary having gross
assets at any time with a value of at least 5% of consolidated gross assets of
the Borrower and its Subsidiaries and/or gross revenues for the last four fiscal
quarters of at least 5% of the consolidated gross revenues of the Borrower and
its Subsidiaries.
"Maximum RL Amount" shall mean at any time $150 million.
"Maximum Swingline Amount" shall mean the lesser of $20,000,000
and the amount of the Total Revolving Commitment.
"Minimum Borrowing Amount" shall mean (i) for Term Loans,
Revolving Loans and Swingline Loans maintained as Base Rate Loans, $250,000 and
(ii) for Term Loans and Revolving Loans maintained as Eurodollar Loans,
$1,000,000.
"Mortgage" shall have the meaning provided in Section
5.01(k)(III).
"Mortgage Policies" shall have the meaning provided in Section
5.01(k)(III).
"Mortgaged Properties" shall mean the Real Property of UDLP and
its Subsidiaries listed on Annex IV and designated as "Mortgaged Properties"
therein.
"Multiemployer Plan" shall mean any multiemployer plan as defined
in section 4001(a)(3) of ERISA which is contributed to by (or to which there is
an obligation to contribute of) Holdings or any of its Subsidiaries or an ERISA
Affiliate and each such plan for the five year period immediately following the
latest date on which Holdings, any such Subsidiary or ERISA Affiliate
contributed to or had an obligation to contribute to such plan.
"Net Cash Proceeds" shall mean, with respect to any Asset Sale,
the Cash Proceeds resulting therefrom net (without duplication) of expenses of
sale (including payment of principal, premium and interest of Indebtedness
secured by the assets the subject of the Asset Sale and required to be, and
which is, repaid under the terms thereof as a result of such Asset Sale), and
incremental taxes paid or payable as a result thereof and other amounts owing to
governmental entities as a result of such sale, it being understood that the Net
Cash Proceeds from an FNSS Disposition consummated while the Seller Note
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is outstanding will be reduced by the amount of the proceeds of such FNSS
Disposition applied to repay the Seller Note.
"Non-Defaulting Lender" shall mean a Lender that is not a
Defaulting Lender.
"Note" shall mean and include each A Term Note, each B Term Note,
each C Term Note, each Revolving Note and the Swingline Note.
"Notice" shall have the meaning provided in Section 7.15.
"Notice of Borrowing" shall have the meaning provided in Section
1.03.
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent
at 130 Liberty Street, New York, New York or such other office as the
Administrative Agent may designate to the Borrower in writing from time to time.
"Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time existing,
owing to the Administrative Agent, the Collateral Agent, the Documentation
Agents or any Lender pursuant to the terms of this Agreement or any other Credit
Document.
"Participant" shall have the meaning provided in Section 2.04(a).
"Payment Office" shall mean the office of the Administrative
Agent at 130 Liberty Street, New York, New York or such other office as the
Administrative Agent may designate to the Borrower in writing from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisition" shall have the meaning provided in
Section 8.06(l).
"Permitted Liens" shall mean Liens described in Section 8.03.
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or other
enterprise or any government or political subdivision or any agency, department
or instrumentality thereof.
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"Plan" shall mean any pension plan as defined in Section 3(2) of
ERISA (other than a multiemployer plan as defined in Section 3(37) of ERISA),
which is maintained or contributed to by (or to which there is an obligation to
contribute of) Holdings or any of its Subsidiaries or an ERISA Affiliate, and
each such plan for the five year period immediately following the latest date on
which Holdings, any such Subsidiary of the Borrower or an ERISA Affiliate
maintained, contributed to or had an obligation to contribute to such plan.
"Pledge Agreement" shall have the meaning provided in Section
5.01(k)(I).
"Pledged Securities" shall mean all the Pledged Securities as
defined in the Pledge Agreement.
"Prime Lending Rate" shall mean the rate which Bankers Trust
Company announces from time to time as its prime lending rate, the Prime Lending
Rate to change when and as such prime lending rate changes. The Prime Lending
Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer. Bankers Trust Company may make
commercial loans or other loans at rates of interest at, above or below the
Prime Lending Rate.
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 ET SEQ.
"Real Property" of any Person shall mean all of the right, title
and interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing margin requirements.
"Reinvestment Assets" shall mean any assets to be employed in the
business of the Borrower and its Subsidiaries as described in Section 8.01.
"Reinvestment Election" shall have the meaning provided in
Section 4.02(A)(c).
"Reinvestment Notice" shall mean a written notice signed by an
Authorized Officer of the Borrower stating that the Borrower, in good faith,
intends and expects to use
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all or a specified portion of the Net Cash Proceeds of an Asset Sale to
purchase, construct or otherwise acquire Reinvestment Assets.
"Reinvestment Prepayment Amount" shall mean, with respect to any
Reinvestment Election, the amount, if any, on the Reinvestment Prepayment Date
relating thereto by which (a) the Anticipated Reinvestment Amount in respect of
such Reinvestment Election exceeds (b) the aggregate amount thereof expended by
Holdings and its Subsidiaries to acquire Reinvestment Assets.
"Reinvestment Prepayment Date" shall mean, with respect to any
Reinvestment Election, the earliest of (i) the date, if any, upon which the
Administrative Agent, on behalf of the Required Lenders, shall have delivered a
written termination notice to the Borrower, provided that such notice may only
be given while an Event of Default under 9.01 exists, (ii) the date occurring
360 days after such Reinvestment Election and (iii) the date on which the
Borrower shall have determined not to proceed with the purchase, construction or
other acquisition of Reinvestment Assets with the related Anticipated
Reinvestment Amount.
"Relevant Test Period" shall mean, at any time, the Test Period
ending on the last day of the then most recently ended fiscal quarter of the
Borrower with respect to which an officer's certificate has been delivered to
the Lenders pursuant to Section 7.01(e).
"Replaced Lender" shall have the meaning provided in Section
1.13.
"Replacement Lender" shall have the meaning provided in Section
1.13.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA
other than those events as to which the 30-day notice period is waived under
subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.
"Required Lenders" shall mean Non-Defaulting Lenders the
outstanding principal amount of Term Loans of which plus the Revolving
Commitments (or, if the Total Revolving Commitment has been terminated, the
Revolving Commitment immediately prior to such termination) of which constitute
greater than 50% of the sum of the total outstanding principal amount of Term
Loans and of the Revolving Commitments (or, if the Total Revolving Commitment
has been terminated, the Revolving Commitment immediately prior to such
termination) of all Non-Defaulting Lenders.
"Required TF Lenders" with respect to the A Term Facility, the B
Term Facility or the C Term Facility, respectively, shall mean Lenders the sum
of whose out-
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standing Term Loans under such Facility represents an amount greater than 50% of
the sum of all outstanding Term Loans under such Facility.
"Revolving Commitment" shall mean, with respect to each Lender,
the amount set forth opposite such Lender's name in Annex I hereto directly
below the column entitled "Revolving Commitment," as the same may be (x) reduced
or terminated from time to time pursuant to Section 3.02, 3.03 and/or 9 or (y)
adjusted from time to time as a result of assignments to or from such Lender
pursuant to Section 1.13 and/or 12.04.
"Revolving Facility" shall mean the Facility evidenced by the
Total Revolving Commitment.
"Revolving Loan" shall have the meaning provided in Section
1.01(d).
"Revolving Note" shall have the meaning provided in Section
1.05(a).
"RF Lender" shall mean at any time each Lender with a Revolving
Commitment or with outstanding Revolving Loans.
"RF Percentage" shall mean at any time for each RF Lender, the
percentage obtained by dividing such Lender's Revolving Commitment by the Total
Revolving Commitment provided that if the Total Revolving Commitment has been
terminated, the RF Percentage of each RF Lender shall be determined by dividing
such RF Lender's Revolving Commitment immediately prior to such termination by
the Total Revolving Commitment immediately prior to such termination.
"RL Commitment Commission" shall have the meaning provided in
Section 3.01(b).
"Scheduled Repayment" shall have the meaning provided in Section
4.02(A)(b).
"SEC" shall have the meaning provided in Section 7.01(h).
"SEC Regulation D" shall mean Regulation D as promulgated under
the Securities Act of 1933, as amended, as the same may be in effect from time
to time.
"Section 4.04 Certificate" shall have the meaning provided in
Section 4.04(b)(ii).
"Secured Creditor" shall mean and include any Secured Creditor as
defined in any Security Document.
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"Security Agreement" shall have the meaning provided in Section
5.01(k)(II).
"Security Agreement Collateral" shall mean all "Collateral" as
defined in the relevant Security Agreement.
"Security Documents" shall mean the Pledge Agreement, the
Security Agreement, each Mortgage and each Additional Mortgage, if any.
"Seller" shall have the meaning provided in the Acquisition
Agreement.
"Seller Note" shall mean the promissory note issued by the
Borrower to FMC Corporation, Harsco Corporation and/or Harsco UDLP Corporation
in the principal amount of $50,000,000 pursuant to the Acquisition Agreement,
which promissory note shall be consistent with the term sheet attached to the
Supplemental Agreement No. 1, dated as of August 25, 1997, to the Acquisition
Agreement and otherwise on terms and conditions satisfactory to the
Administrative Agent.
"Seller Note Documents" shall mean all agreements (including
Supplemental Agreement No. 1, dated as of August 25, 1997, to the Acquisition
Agreement), instruments governing and/or evidencing the Seller Note.
"Senior Subordinated Note Documents" shall mean and include each
of the documents, instruments (including the Senior Subordinated Notes) and
other agreements entered into by the Borrower (including, without limitation,
the Senior Subordinated Note Indenture and any documents in respect of any
Senior Subordinated Notes issued upon the exchange offer as contemplated by the
Senior Subordinated Note Indenture) relating to the issuance by the Borrower of
the Senior Subordinated Notes, as in effect on the Initial Borrowing Date and as
the same may be entered into, supplemented, amended or modified from time to
time in accordance with the terms hereof and thereof.
"Senior Subordinated Note Indenture" shall mean an Indenture
entered into by and between the Borrower and Norwest Bank Minnesota, N.A., as
trustee thereunder, with respect to Senior Subordinated Notes as in effect on
the Initial Borrowing Date and as the same may be executed, modified, amended or
supplemented from time to time in accordance with the terms hereof and thereof.
"Senior Subordinated Notes" shall mean the Senior Subordinated
Notes due 2007 in an initial aggregate amount of $200,000,000 and issued by the
Borrower under the Senior Subordinated Note Indenture and all Senior
Subordinated Notes with substantially similar terms issued upon the exchange
offer as contemplated in the Senior Subordinated Note Indenture, as in effect on
the Initial Borrowing Date and as the same may be issued,
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supplemented, amended or modified from time to time in accordance with the terms
thereof and hereof.
"Specified Repayment" shall have the meaning provided in Section
4.02(B)(c).
"Standby Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Stated Amount" of each Letter of Credit shall mean the maximum
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"Subsequent Borrowing Date" shall mean each date occurring after
the Initial Borrowing Date and on or prior to the A Termination Date on which A
Term Loans are incurred to refinance all or a portion of the Seller Note.
"Subsidiary" of any Person shall mean and include (i) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person directly
or indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time, provided that
"Subsidiary" shall in no event include any Joint Venture or any Foreign
Subsidiary. Unless otherwise expressly provided, all references herein to
"Subsidiary" shall mean a Subsidiary of Holdings.
"Subsidiary Guarantors" shall mean each Domestic Subsidiary other
than Inactive Subsidiaries.
"Subsidiary Guaranty" shall have the meaning provided in Section
5.01(j).
"Supermajority Lenders" shall mean Non-Defaulting Lenders the
outstanding principal amount of Term Loans of which plus the Revolving
Commitments (or, if the Total Revolving Commitment has been terminated, the
Revolving Commitment immediately prior to such termination) of which constitute
greater than 75% of the sum of the total outstanding principal amount of Term
Loans and of the Revolving Commitments (or, if the Total Revolving Commitment
has been terminated, the Revolving Commitment immediately prior to such
termination) of all Non-Defaulting Lenders.
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"Swingline Expiry Date" shall mean the date which is five
Business Days prior to the A/RF Maturity Date.
"Swingline Lender" shall mean BTCo or, in the event BTCo ceases
to be Swingline Lender upon agreement with the Borrower, any Lender which at the
request of the Borrower and the consent of the Administrative Agent agrees in
such Lender's sole discretion to become the Swingline Lender.
"Swingline Loan" shall have the meaning provided in Section
1.01(e).
"Swingline Note" shall have the meaning provided in Section
1.05(a).
"Taxes" shall have the meaning provided in Section 4.04(a).
"Term Commitment" shall mean for any Lender the sum of its A Term
Commitment, its B Term Commitment and its C Term Commitment.
"Term Loans" shall mean, collectively, the A Term Loans, the B
Term Loans and the C Term Loans.
"Test Period" shall mean at any time (i) for any determination
made on or prior to September 30, 1998, the period (taken as one accounting
period) from the Initial Borrowing Date to the last day of the fiscal quarter of
the Borrower then ending or then last ended and (ii) for any determination made
thereafter, the four consecutive fiscal quarters of the Borrower (taken as one
accounting period) then ending or then last ended.
"TL Commitment Commission" shall the meaning provided in Section
3.01(a).
"Total A Term Commitment" shall mean the sum of the A Term
Commitments of each of the Lenders.
"Total B Term Commitment" shall mean the sum of the B Term
Commitments of each of the Lenders.
"Total C Term Commitment" shall mean the sum of the C Term
Commitments of each of the Lenders.
"Total Commitment" shall mean the sum of the Total A Term
Commitment, the Total B Term Commitment, the Total C Term Commitment and the
Total Revolving Commitment.
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"Total Revolving Commitment" shall mean the sum of the Revolving
Commitments of each of the Lenders.
"Total Term Commitment" shall mean, at any time, the sum of the
Total A Term Commitment, Total B Term Commitment and Total C Term Commitment.
"Total Unutilized Revolving Commitment" shall mean, at any time,
(i) the Total Revolving Commitment at such time less (ii) the sum of the
aggregate principal amount of all Revolving Loans and Swingline Loans at such
time plus the Letter of Credit Outstandings at such time.
"Trade Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Transaction" shall mean (i) the consummation of the Equity
Contribution, (ii) the consummation of the Acquisition, (iii) the issuance of
the Senior Subordinated Notes and (iv) the incurrence of Term Loans and issuance
of Letters of Credit, if any, on the Initial Borrowing Date.
"Transaction Documents" shall mean the Acquisition Documents, the
Equity Documents and the Senior Subordinated Note Documents.
"Turkish JV Agreement" shall mean the Restated Joint Venture
Agreement of FNSS, dated as of July 1, 1997, as in effect on the date hereof.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, I.E., a Base Rate Loan or Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code.
"UDLP" shall mean United Defense, L.P., a Delaware limited
partnership.
"Unfunded Current Liability" of any Plan shall mean the amount,
if any, by which the actuarial present value of the accumulated plan benefits
under the Plan as of the close of its most recent plan year, determined in
accordance with actuarial assumptions at such time consistent with Statement of
Financial Accounting Standards No. 87, exceeds the market value of the assets
allocable thereto.
"Unpaid Drawing" shall have the meaning provided in Section
2.03(a).
"Unutilized Revolving Commitment" for any RF Lender at any time
shall mean the excess of (i) the Revolving Commitment of such Lender over (ii)
the sum of (x) the aggregate outstanding principal amount of Revolving Loans and
Swingline Loans made
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by such Lender plus (y) an amount equal to such Lender's Adjusted RF Percentage
of the Letter of Credit Outstandings at such time.
"U.S." shall mean the United States of America.
"Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary
of such Person to the extent all of the capital stock or other ownership
interests in such Subsidiary, other than directors' qualifying shares, is owned
directly or indirectly by such Person.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile transmission,
telegraph or cable.
SECTION 11. THE AGENT.
11.01 APPOINTMENT. The Lenders hereby designate BTCo as
Administrative Agent (for purposes of this Section 11, the terms "Administrative
Agent" shall include BTCo in its capacity as Syndication Agent pursuant to this
Agreement and as Collateral Agent pursuant to the Security Documents) to act as
specified herein and in the other Credit Documents. The Lenders hereby
designate Citibank, N.A. and Lehman Commercial Paper Inc. as Documentation
Agents to act as specified herein and in the other Credit Documents. Each
Lender hereby irrevocably authorizes, and each holder of any Note by the
acceptance of such Note shall be deemed irrevocably to authorize, any Agent to
take such action on its behalf under the provisions of this Agreement, the other
Credit Documents and any other instruments and agreements referred to herein or
therein and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of each Agent by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. Each Agent may perform any of their duties hereunder by or through
their respective officers, directors, agents, employees or affiliates.
11.02 NATURE OF DUTIES. The Agents shall not have any duties or
responsibilities except those expressly set forth in this Agreement and the
Security Documents. No Agent nor or any of its respective officers, directors,
agents, employees or affiliates shall be liable for any action taken or omitted
by them hereunder or under any other Credit Document or in connection herewith
or therewith, unless caused by their gross negligence or willful misconduct.
The duties of the Agents shall be mechanical and administrative in nature; the
Agents shall not have by reason of this Agreement or any other Credit Document a
fiduciary relationship in respect of any Lender or the holder of any Note; and
nothing in this Agreement or any other Credit Document, expressed or implied, is
intended to or shall be so construed as to impose upon the Agents any
obligations in respect of this Agreement or any other Credit Document except as
expressly set forth herein or therein.
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11.03 LACK OF RELIANCE ON THE AGENTS. Independently and without
reliance upon the Agents, each Lender and the holder of each Note, to the extent
it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of Holdings and
its Subsidiaries in connection with the making and the continuance of the Loans
and the taking or not taking of any action in connection herewith and (ii) its
own appraisal of the creditworthiness of Holdings and its Subsidiaries and,
except as expressly provided in this Agreement, the Agents shall not have any
duty or responsibility, either initially or on a continuing basis, to provide
any Lender or the holder of any Note with any credit or other information with
respect thereto, whether coming into its possession before the making of the
Loans or at any time or times thereafter. The Agents shall not be responsible
to any Lender or the holder of any Note for any recitals, statements,
information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith or for the
execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of this Agreement or any other Credit
Document or the financial condition of Holdings and its Subsidiaries or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement or any other Credit
Document, or the financial condition of Holdings and its Subsidiaries or the
existence or possible existence of any Default or Event of Default.
11.04 CERTAIN RIGHTS OF THE AGENTS. If the Agents shall request
instructions from the Required Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, the Agents shall be entitled to refrain from such act or taking such
action unless and until the Agents shall have received instructions from the
Required Lenders; and the Agents shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, neither any Lender nor
the holder of any Note shall have any right of action whatsoever against the
Agents as a result of the Agents acting or refraining from acting hereunder or
under any other Credit Document in accordance with the instructions of the
Required Lenders.
11.05 RELIANCE. Each of the Agents shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, certificate, telex, teletype, facsimile or telecopier
message, cablegram, radiogram, order or other document or telephone message
signed, sent or made by any Person that such Agent believed to be the proper
Person, and, with respect to all legal matters pertaining to this Agreement and
any other Credit Document and its duties hereunder and thereunder, upon advice
of counsel selected by such Agent.
11.06 INDEMNIFICATION. To the extent the Agents are not
reimbursed and indemnified by the Borrower, each Defaulting Lender (to the
extent so able) and the Non-Defaulting Lenders will reimburse and indemnify the
Agents, in proportion to their respective Loans and Commitments, for and against
any and all liabilities, obligations, losses,
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damages, penalties, claims, actions, judgments, costs, expenses or disbursements
of whatsoever kind or nature which may be imposed on, asserted against or
incurred by the Agents in performing their respective duties hereunder or under
any other Credit Document, in any way relating to or arising out of this
Agreement or any other Credit Document; PROVIDED that no Lender shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
gross negligence or willful misconduct of any Agent.
11.07 THE AGENTS IN THEIR INDIVIDUAL CAPACITY. With respect to
its obligation to make Loans under this Agreement, the Agents shall have the
rights and powers specified herein for a "Lender" and may exercise the same
rights and powers as though it were not performing the duties specified herein;
and the term "Lenders," "Required Lenders," "holders of Notes" or any similar
terms shall, unless the context clearly otherwise indicates, include the Agents
in their individual capacity. The Agents may accept deposits from, lend money
to, and generally engage in any kind of banking, trust or other business with
any Credit Party or any Affiliate of any Credit Party as if it were not
performing the duties specified herein, and may accept fees and other
consideration from Holdings, or any other Credit Party for services in
connection with this Agreement and otherwise without having to account for the
same to the Lenders.
11.08 HOLDERS. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
a written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Administrative Agent. Any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee, assignee or indorsee, as the
case may be, of such Note or of any Note or Notes issued in exchange therefor.
11.09 RESIGNATION BY THE ADMINISTRATIVE AGENT. (a) The
Administrative Agent may resign from the performance of all its functions and
duties hereunder and/or under the other Credit Documents at any time by giving
15 Business Days' prior written notice to the Borrower and the Lenders. Such
resignation shall take effect upon the appointment of a successor Administrative
Agent pursuant to clauses (b) and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the Required Lenders
shall appoint a successor Administrative Agent hereunder or thereunder who shall
be a commercial bank or trust company reasonably acceptable to the Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent, with the
consent of the Bor-
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rower, shall then appoint a successor Administrative Agent who shall serve as
Administrative Agent hereunder or thereunder until such time, if any, as the
Required Lenders appoint a successor Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed
pursuant to clause (b) or (c) above by the 30th Business Day after the date such
notice of resignation was given by the Administrative Agent, the Administrative
Agent's resignation shall become effective and the Required Lenders shall
thereafter perform all the duties of the Administrative Agent hereunder and/or
under any other Credit Document until such time, if any, as the Required Lenders
appoint a successor Administrative Agent as provided above.
(e) Either Documentation Agent may resign from the performance
of all of its functions and duties hereunder and/or under the other Credit
Documents at any time by giving 5 Business Days' prior written notice to the
Lenders. Such resignation shall take effect at the end of such 5 Business Days.
SECTION 12. MISCELLANEOUS.
12.01 PAYMENT OF EXPENSES, ETC. The Borrower agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Administrative Agent in
connection with the negotiation, preparation, execution and delivery of the
Credit Documents and the documents and instruments referred to therein and any
amendment, waiver or consent relating thereto (including, without limitation,
the reasonable fees and disbursements of White & Case) and of the Agents and
each of the Lenders in connection with the enforcement of the Credit Documents
and the documents and instruments referred to therein (including, without
limitation, the reasonable fees and disbursements of counsel for the Agents and
for each of the Lenders, provided that, except in the case of a bankruptcy of
any Credit Party, no more than one counsel for the Agents and the Lenders may be
used in any jurisdiction); (ii) pay and hold each of the Lenders harmless from
and against any and all present and future stamp and other similar taxes with
respect to the foregoing matters and save each of the Lenders harmless from and
against any and all liabilities with respect to or resulting from any delay or
omission (other than to the extent attributable to such Lender) to pay such
taxes; and (iii) indemnify each Lender (including in its capacity as Agent or
Letter of Credit Issuer), its officers, directors, employees, representatives
and agents from and hold each of them harmless against any and all losses,
liabilities, claims, damages or expenses incurred by any of them as a result of,
or arising out of, or in any way related to, or by reason of, (a) any
investigation, litigation or other proceeding (whether or not the Agents or any
Lender is a party thereto and whether or not any such investigation, litigation
or other proceeding is between or among the Agents, any Lender, any Credit Party
or any third Person or otherwise) related to the entering into and/or
performance of any Document
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or the use of the proceeds of any Loans hereunder or the Transaction or the
consummation of any transactions contemplated in any Credit Document, or (b) the
actual or alleged presence of Hazardous Materials in the air, surface water or
groundwater or on the surface or subsurface of any Real Property owned or at any
time operated by the Borrower or any of its Subsidiaries, the release,
generation, storage, transportation, handling or disposal of Hazardous Materials
at any location, whether or not owned or operated by the Borrower or any of its
Subsidiaries, the non-compliance of any Real Property with foreign, federal,
state and local laws, regulations, and ordinances (including applicable permits
thereunder) applicable to any Real Property, or any Environmental Claim asserted
against the Borrower, any of its Subsidiaries or any Real Property owned or at
any time operated by Holdings or any of its Subsidiaries, including, in each
case, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified or of any other Indemnitee who is
such Person or an affiliate of such Person).
12.02 RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, if an Event of Default then exists, each Lender
is hereby authorized at any time or from time to time, without presentment,
demand, protest or other notice of any kind to any Credit Party or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special but not trust
accounts) and any other Indebtedness at any time held or owing by such Lender
(including, without limitation, by branches and agencies of such Lender wherever
located) to or for the credit or the account of any Credit Party against and on
account of the Obligations and liabilities of such Credit Party to such Lender
under this Agreement or under any of the other Credit Documents, including,
without limitation, all interests in Obligations of such Credit Party purchased
by such Lender pursuant to Section 12.06(b), and all other claims of any nature
or description arising out of or connected with this Agreement or any other
Credit Document, irrespective of whether or not such Lender shall have made any
demand hereunder and although said Obligations, liabilities or claims, or any of
them, shall be contingent or unmatured.
12.03 NOTICES. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied, faxed, cabled or delivered, if to a
Credit Party, at the address specified opposite its signature below or in the
other relevant Credit Documents, as the case may be; if to any Lender, at its
address specified for such Lender on Annex II hereto; or, at such other address
as shall be designated by any party in a written notice to the other parties
hereto.
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All such notices and communications shall be mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, and shall be effective when
received.
12.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, PROVIDED that neither the Borrower
nor Holdings may assign or transfer any of its rights or obligations hereunder
without the prior written consent of the Lenders. Each Lender may at any time
grant participations in any of its rights hereunder or under any of the Notes to
another financial institution, PROVIDED that in the case of any such
participation, the participant shall not have any rights under this Agreement or
any of the other Credit Documents (the participant's rights against such Lender
in respect of such participation to be those set forth in the agreement executed
by such Lender in favor of the participant relating thereto) and all amounts
payable by the Borrower hereunder shall be determined as if such Lender had not
sold such participation, except that the participant shall be entitled to the
benefits of Sections 1.10, 2.05 and 4.04 of this Agreement to the extent that
such Lender would be entitled to such benefits if the participation had not been
entered into or sold, and, PROVIDED FURTHER, that no Lender shall transfer,
grant or assign any participation under which the participant shall have rights
to approve any amendment to or waiver of this Agreement or any other Credit
Document except to the extent such amendment or waiver would (i) extend the
final scheduled maturity of any Loan or Note in which such participant is
participating (it being understood that any waiver of the application of any
prepayment or the method of any application of any prepayment to, the
amortization of the Term Loans shall not constitute an extension of the final
maturity date), or reduce the rate or extend the time of payment of interest or
Fees thereon (except in connection with a waiver of the applicability of any
post-default increase in interest rates), or reduce the principal amount
thereof, or increase such participant's participating interest in any Commitment
over the amount thereof then in effect (it being understood that a waiver of any
Default or Event of Default or of a mandatory reduction in the Total Commitment,
or a mandatory prepayment, shall not constitute a change in the terms of any
Commitment), (ii) release all or substantially all of the Collateral or (iii)
consent to the assignment or transfer by any Credit Party of any of its rights
and obligations under this Agreement or any other Credit Document.
(b) Notwithstanding the foregoing, (x) any Lender may assign all
or a portion of its outstanding A Term Loans, B Term Loans and/or C Term Loans
and/or A Term Commitment and/or Revolving Commitment and its rights and
obligations hereunder to (i) one or more Lenders and/or Affiliates of such
Lender which are Eligible Transferees or (ii) in the case of any Lender that is
a fund that invests in loans, any other fund that invests in loans and is
managed and/or advised by the same investment advisor of such Lender or by an
Affiliate of such investment advisor, and (y) with the consent of the
Administrative Agent and the Borrower (which consents shall not be unreasonably
withheld), any Lender may assign all or a portion of its outstanding A Term
Loans, B Term Loans and/or C Term
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Loans its A Term Commitment and/or Revolving Commitment) and its rights and
obligations hereunder to one or more Eligible Transferees (treating any fund
that invests in loans and any other fund that invests in loans and is managed
and/or advised by the same investment advisor of such fund or by an Affiliate of
such investment advisor of such fund or by an Affiliate of such investment
advisor as a single Eligible Transferee). No assignment pursuant to the
immediately preceding sentence shall to the extent such assignment represents an
assignment to an institution other than one or more Lenders hereunder, be in an
aggregate amount less than $5,000,000 unless the entire Commitment of the
assigning Lender is so assigned. If any Lender so sells or assigns all or a
part of its rights hereunder or under the Notes, any reference in this Agreement
or the Notes to such assigning Lender shall thereafter refer to such Lender and
to the respective assignee to the extent of their respective interests and the
respective assignee shall have, to the extent of such assignment (unless
otherwise provided therein), the same rights and benefits as it would if it were
such assigning Lender. Each assignment pursuant to this Section 12.04(b) shall
be effected by the assigning Lender and the assignee Lender executing an
Assignment Agreement and giving the Administrative Agent written notice thereof.
At the time of any such assignment, (i) either the assigning or the assignee
Lender shall pay to the Administrative Agent a nonrefundable assignment fee of
$3,500, (ii) Annex I shall be deemed to be amended to reflect the Commitments
and Loans of the respective assignee (which shall result in a direct reduction
to the Commitment or Commitments of the assigning Lender) and of the other
Lenders, and (iii) upon surrender of the old Notes the Borrower will, at its own
expense, issue new Notes to the respective assignee and to the assigning Lender
in conformity with the requirements of Section 1.05, PROVIDED FURTHER that such
transfer or assignment will not become effective until recorded by the
Administrative Agent on the Lender Register pursuant to Section 12.16. To the
extent of any assignment pursuant to this Section 12.04(b) to a Person which is
not already a Lender hereunder and which is not a United States Person (as such
term is defined in Section 7701(a)(30) of the Code) for Federal income tax
purposes, the respective assignee Lender shall provide to the Borrower and the
Administrative Agent the appropriate Internal Revenue Service Forms (and, if
applicable, a Section 4.04 Certificate) described in Section 4.04(b). To the
extent that an assignment pursuant to this Section 12.04(b) would, at the time
of such assignment, result in increased costs under Section 1.10, 1.11, 2.05, or
4.04 from those being charged by the respective assigning Lender prior to such
assignment, then the Borrower shall not be obligated to pay such increased costs
(although the Borrower shall be obligated to pay any other increased costs of
the type described above resulting from changes after the date of the respective
assignment). Nothing in this clause (b) shall prevent or prohibit any Lender
from pledging its Notes or Loans to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank and, with the
consent of the Administrative Agent and the Borrower, any Lender which is a fund
may pledge all or any portion of its Loans and Notes to its trustee in support
of its obligations to its trustee.
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(c) Notwithstanding any other provisions of this Section 12.04,
no transfer or assignment of the interests or obligations of any Lender
hereunder or any grant of participation therein shall be permitted if such
transfer, assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
State.
(d) Each Lender initially party to this Agreement hereby
represents, and each Person that became a Lender pursuant to an assignment
permitted by this Section 12 will, upon its becoming party to this Agreement,
represent that it is an Eligible Transferee which makes or invests in loans in
the ordinary course of its business and that it will make or acquire Loans for
its own account in the ordinary course of such business, PROVIDED that subject
to the preceding clauses (a) and (b), the disposition of any promissory notes or
other evidences of or interests in Indebtedness held by such Lender shall at all
times be within its exclusive control.
12.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of any Agent or any Lender in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
any Credit Party and any Agent or any Lender shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege
hereunder or under any other Credit Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which any Agent or any
Lender would otherwise have. No notice to or demand on any Credit Party in any
case shall entitle any Credit Party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
Agents or the Lenders to any other or further action in any circumstances
without notice or demand.
12.06 PAYMENTS PRO RATA. (a) The Administrative Agent agrees
that promptly after its receipt of each payment from or on behalf of any Credit
Party in respect of any Obligations of such Credit Party hereunder, it shall
distribute such payment to the Lenders (other than any Lender that has expressly
waived its right to receive its pro rata share thereof) PRO RATA based upon
their respective shares, if any, of the Obligations with respect to which such
payment was received.
(b) Each of the Lenders agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans or Fees, of a sum which with respect to the related sum or sums
received by other Lenders is in a greater proportion than the total of such
Obligation then owed and due to such Lender bears to the total of such
Obligation then
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owed and due to all of the Lenders immediately prior to such receipt, then such
Lender receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations of the respective
Credit Party to such Lenders in such amount as shall result in a proportional
participation by all of the Lenders in such amount, PROVIDED that if all or any
portion of such excess amount is thereafter recovered from such Lender, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained herein,
the provisions of the preceding Sections 12.06(a) and (b) shall be subject to
the express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders.
12.07 CALCULATIONS; COMPUTATIONS. (a) The financial statements
to be furnished to the Lenders pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Lenders), PROVIDED that (x) except as otherwise
specifically provided herein, all computations of Excess Cash Flow and all
computations determining compliance with Sections 8.11 through 8.14, inclusive,
including definitions used therein, shall utilize accounting principles and
policies in effect at the time of the preparation of, and in conformity with
those used to prepare, the December 31, 1996 historical financial statements of
UDLP delivered to the Lenders pursuant to Section 6.10(b) and (y) that if at any
time such computations utilize accounting principles different from those
utilized in the financial statements furnished to the Lenders, such financial
statements shall be accompanied by reconciliation work-sheets.
(b) All computations of interest and Fees hereunder shall be
made on the actual number of days elapsed over a year of 365 or 366 days, as the
case may be, provided that interest on Eurodollar Loans shall be calculated on
the actual number of days elapsed over a year of 360 days.
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER
OF JURY TRIAL. (a) This Agreement and the other Credit Documents and the
rights and obligations of the parties hereunder and thereunder shall be
construed in accordance with and be governed by the law of the state of New
York. Any legal action or proceeding with respect to this Agreement or any
other Credit Document may be brought in the courts of the State of New York
sitting in the Borough of Manhattan or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, each
Credit Party hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each Credit Party further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified
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mail, postage prepaid, to each Credit Party located outside New York City and by
hand delivery to each Credit Party located within New York City, at its address
for notices pursuant to Section 12.03, such service to become effective 30 days
after such mailing. Each Credit Party hereby irrevocably designates appoints
and empowers CT Corporation System, with offices on the date hereof located at
1633 Broadway, New York, New York 10019, as its agent for service of process in
respect of any such action or proceeding. Nothing herein shall affect the right
of the Administrative Agent, any Lender to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
any Credit Party in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement or any other Credit Document brought in the courts referred to in
clause (a) above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
(c) Each of the parties to this Agreement hereby irrevocably
waives all right to a trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Agreement, the other Credit Documents or the
transactions contemplated hereby or thereby.
12.09 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set
of counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Administrative Agent.
12.10 EFFECTIVENESS. This Agreement shall become effective on
the date (the "Effective Date") on which Holdings, the Borrower and each of the
Lenders shall have signed a copy hereof (whether the same or different copies)
and shall have delivered the same to the Administrative Agent at the Payment
Office of the Administrative Agent or, in the case of the Lenders, shall have
given to the Administrative Agent telephonic (confirmed in writing), written
telex or facsimile transmission notice (actually received) at such office that
the same has been signed and mailed to it.
12.11 HEADINGS DESCRIPTIVE. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
12.12 AMENDMENT OR WAIVER. Neither this Agreement nor any terms
hereof may be changed, waived, discharged or terminated unless such change,
waiver, discharge or termination is in writing signed by the Borrower, Holdings
and the Required Lenders,
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PROVIDED that no such change, waiver, discharge or termination shall, without
the consent of each Lender (other than a Defaulting Lender) directly affected
thereby, (i) extend the A TF Maturity Date, the B TF Maturity Date, the C TF
Maturity Date or the RF Maturity Date (it being understood that any waiver of
any prepayment of, or the method of application of any prepayment to the
amortization of, the Loans shall not constitute any such extension), or extend
any stated maturity of any Letter of Credit beyond the A/RF Maturity Date, or
reduce the rate or extend the time of payment of interest (other than as a
result of waiving the applicability of any post-default increase in interest
rates) or Fees thereon, or reduce the principal amount thereof, or increase the
Commitment of any Lender over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of a mandatory
reduction in the Total Commitment or an adjustment of the Adjusted RF
Percentages as a result of a Defaulting Lender shall not constitute a change in
the terms of any Commitment of any Lender), (ii) amend, modify or waive any
provision of this Section 12.12, (iii) reduce the percentage specified in, or
(except to give effect to any additional facilities hereunder) otherwise modify,
the definition of Required Lenders, (iv) consent to the assignment or transfer
by the Borrower or Holdings of any of its rights and obligations under this
Agreement or (v) release all or substantially all of the Collateral; PROVIDED
FURTHER, that no such change, waiver, discharge or termination shall, (x)
without the consent of the Required TF Lenders under a Facility, amend the
definition of Required TF Lenders or amend, waive or reduce any Scheduled
Repayment applicable to such Facility, (y) without the consent of the Letter of
Credit Issuer or the Administrative Agent, as the case may be, amend any
provision of Section 2 or 11, as the case may be or (z) without the consent of
the Supermajority Lenders, release UDLP from the Subsidiary Guaranty.
12.13 SURVIVAL. All indemnities set forth herein including,
without limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.06 or 12.01 shall
survive the execution and delivery of this Agreement and the making and
repayment of the Loans.
12.14 DOMICILE OF LOANS. Each Lender may transfer and carry its
Loans at, to or for the account of any branch office, subsidiary or affiliate of
such Lender, PROVIDED that the Borrower shall not be responsible for costs
arising under Section 1.10, 2.05 or 4.04 resulting from any such transfer (other
than a transfer pursuant to Section 1.12) to the extent not otherwise applicable
to such Lender prior to such transfer.
12.15 CONFIDENTIALITY. Each of the Lenders agrees that it will
use its best efforts not to disclose without the prior consent of the Borrower
(other than to its employees, auditors, counsel or other professional advisors,
to affiliates or to another Lender if the Lender or such Lender's holding or
parent company in its sole discretion determines that any such party should have
access to such information) any information with respect to Holdings or any of
its Subsidiaries which is furnished pursuant to this Agreement and which is
designated by Holdings or the Borrower to the Lenders in writing as
confidential;
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PROVIDED, that any Lender may disclose any such information (a) as has become
generally available to the public, (b) as may be required or appropriate in any
report, statement or testimony submitted to any municipal, state or Federal
regulatory body having or claiming to have jurisdiction over such Lender or to
the Federal Reserve Board or the Federal Deposit Insurance Corporation or
similar organizations (whether in the United States or elsewhere) or their
successors or to the NAIC, (c) as may be required or appropriate in response to
any summons or subpoena or in connection with any litigation (notice of which
will be promptly sent to the Borrower to the extent permitted by Law), (d) in
order to comply with any law, order, regulation or ruling applicable to such
Lender, and (e) to any prospective transferee in connection with any
contemplated transfer of any of the Notes or any interest therein by such
Lender; PROVIDED, that such prospective transferee is notified of the
confidentiality requirements relating thereto and agrees to abide by such
requirements. No Lender shall be obligated or required to return any materials
furnished by Holdings or any Subsidiary. The Borrower and Holdings hereby agree
that the failure of a Lender to comply with the provisions of this Section 12.15
shall not relieve the Credit Parties of any of their obligations to such Lender
under this Agreement and the other Credit Documents.
12.16 LENDER REGISTER. The Borrower hereby designates the
Administrative Agent to serve as the Borrower's agent, solely for purposes of
this Section 12.16, to maintain a register (the "Lender Register") on which it
will record the Commitments from time to time of each of the Lender, the Loans
made by each of the Lender and each repayment in respect of the principal amount
of the Loans of each Lender. Failure to make any such recordation, or any error
in such recordation shall not affect the Borrower's obligations in respect of
such Loans. With respect to any Lender, the transfer of the Commitments of such
Lender and the rights to the principal of, and interest on, any Loan made
pursuant to such Commitments shall not be effective until such transfer is
recorded on the Lender Register maintained by the Administrative Agent with
respect to ownership of such Commitments and Loans and prior to such recordation
all amounts owing to the transferor with respect to such Commitments and Loans
shall remain owing to the transferor. The registration of assignment or
transfer of all or part of any Commitments and Loans shall be recorded by the
Administrative Agent on the Lender Register only upon the acceptance by the
Administrative Agent of a properly executed and delivered Assignment Agreement
pursuant to Section 12.04(b). The Borrower agrees to indemnify the
Administrative Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Administrative Agent in performing its duties under this Section
12.16 (but excluding such losses, claims, liabilities or liabilities incurred by
reason of the Administrative Agent's gross negligence or willful misconduct).
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<PAGE>
SECTION 13. HOLDINGS GUARANTY.
13.01 THE GUARANTY. In order to induce the Lenders to enter
into this Agreement and to extend credit hereunder and in recognition of the
direct benefits to be received by Holdings from the proceeds of the Loans and
the issuance of the Letters of Credit, Holdings hereby unconditionally and
irrevocably guarantees, as primary obligor and not merely as surety the full and
prompt payment when due, whether upon maturity, acceleration or otherwise, of
any and all of the Guaranteed Obligations. If any of the Guaranteed Obligations
becomes due and payable hereunder, Holdings unconditionally promises to pay such
indebtedness to the Guaranteed Creditors, or order, on demand, together with any
and all expenses which may be incurred by the Guaranteed Creditors in collecting
any of the Guaranteed Obligations. If claim is ever made upon any Guaranteed
Creditor for repayment or recovery of any amount or amounts received in payment
or on account of any of the Guaranteed Obligations and any of the aforesaid
payees repays all or part of said amount by reason of (i) any judgment, decree
or order of any court or administrative body having jurisdiction over such payee
or any of its property or (ii) any settlement or compromise of any such claim
effected by such payee with any such claimant (including the Borrower), then and
in such event Holdings agrees that any such judgment, decree, order, settlement
or compromise shall be binding upon Holdings, notwithstanding any revocation of
this Guaranty or any other instrument evidencing any liability of the Borrower,
and Holdings shall be and remain liable to the aforesaid payees hereunder for
the amount so repaid or recovered to the same extent as if such amount had never
originally been received by any such payee.
13.02 BANKRUPTCY. Additionally, Holdings unconditionally and
irrevocably guarantees the payment of any and all of the Guaranteed Obligations
to the Guaranteed Creditors whether or not due or payable by the Borrower upon
the occurrence in respect of the Borrower of any of the events specified in
Section 9.05, and unconditionally promises to pay such indebtedness on demand,
in lawful money to the United States.
13.03 NATURE OF LIABILITY. The liability of Holdings hereunder
is exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations whether executed by Holdings, any other guarantor or by
any other party, and the liability of Holdings hereunder is not affected or
impaired by (a) any direction as to application of payment by the Borrower or by
any other party, or (b) any other continuing or other guaranty or undertaking as
to the Guaranteed Obligations, or (c) any payment on or in reduction of any such
other guaranty or undertaking, or (d) any dissolution, termination or increase,
decrease or change in personnel by the Borrower, or (e) any payment made to the
Guaranteed Creditors on the Guaranteed Obligations which any such Guaranteed
Creditor repays to the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
Holdings waives any right
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to the deferral or modification of its obligations hereunder by reason of any
such proceeding.
13.04 INDEPENDENT OBLIGATION. The obligations of Holdings
hereunder are independent of the obligations of any other guarantor, any other
party or the Borrower, and a separate action or actions may be brought and
prosecuted against Holdings whether or not action is brought against any other
guarantor, any other party or the Borrower and whether or not any other
guarantor, any other party or the Borrower be joined in any such action or
actions. Holdings waives, to the full extent permitted by law, the benefit of
any statute of limitations affecting its liability hereunder or the enforcement
hereof. Any payment by the Borrower or other circumstance which operates to
toll any statute of limitations as to the Borrower shall operate to toll the
statute of limitations as to Holdings.
13.05 AUTHORIZATION. Holdings authorizes the Guaranteed
Creditors without notice or demand (except as shall be required by applicable
statute and cannot be waived), and without affecting or impairing its liability
hereunder, from time to time to:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew, increase, accelerate or
alter, any of the Guaranteed Obligations (including any increase or
decrease in the rate of interest thereon), any security therefor, or any
liability incurred directly or indirectly in respect thereof, and the
Guaranty herein made shall apply to the Guaranteed Obligations as so
changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any of
those hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors,
the Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
substitute the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to its creditors other than
the Guaranteed Creditors;
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(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Guaranteed Creditors
regardless of what liability or liabilities of the Borrower remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement, any other Credit Document or any of the
instruments or agreements referred to herein or therein, or otherwise
amend, modify or supplement this Agreement, any other Credit Document or
any of such other instruments or agreements; and/or
(h) take any other action which would, under otherwise
applicable principles of common law, give rise to a legal or equitable
discharge of Holdings from its liabilities under this Guaranty.
13.06 RELIANCE. It is not necessary for the Guaranteed
Creditors to inquire into the capacity or powers of the Borrower or the
officers, directors, partners or agents acting or purporting to act on their
behalf, and any Guaranteed Obligations made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
13.07 SUBORDINATION. Any of the indebtedness of the Borrower
now or hereafter owing to Holdings is hereby subordinated to the Guaranteed
Obligations of the Borrower; and if the Administrative Agent so requests at a
time when an Event of Default exists, all such indebtedness of the Borrower to
Holdings shall be collected, enforced and received by Holdings for the benefit
of the Guaranteed Creditors and be paid over to the Administrative Agent on
behalf of the Guaranteed Creditors on account of the Guaranteed Obligations, but
without affecting or impairing in any manner the liability of Holdings under the
other provisions of this Guaranty. Prior to the transfer by Holdings of any
note or negotiable instrument evidencing any of the indebtedness of the Borrower
to Holdings, shall mark such note or negotiable instrument with a legend that
the same is subject to this subordination. Without limiting the generality of
the foregoing, Holdings hereby agrees with the Guaranteed Creditors that it will
not exercise any right of subrogation which it may at any time otherwise have as
a result of this Guaranty (whether contractual, under Section 509 of the
Bankruptcy Code or otherwise) until all Guaranteed Obligations have been
irrevocably paid in full in cash.
13.08 WAIVER. (a) Holdings waives any right (except as shall be
required by applicable statute and cannot be waived) to require any Guaranteed
Creditor (i) proceed against the Borrower, any other guarantor or any other
party, (ii) proceed against or exhaust any security held from the Borrower, any
other guarantor or any other party or (iii) pursue any other remedy in any
Guaranteed Creditor's power whatsoever. Holdings waives any defense based on or
arising out of any defense of the Borrower, any other guarantor or any other
party, other than payment in full of the Guaranteed Obligations, based
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on or arising out the disability of the Borrower, any other guarantor or any
other party, or the unenforceability of the Guaranteed Obligations or any part
thereof from any cause, or the cessation from any cause of the liability of the
Borrower than payment in full of the Guaranteed Obligations. The Guaranteed
Creditors may, at their election, foreclose on any security held by the
Collateral Agent or any other Guaranteed Creditor by one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is commercially
reasonable (to the extent such sale is permitted by applicable law), or exercise
any other right or remedy the Guaranteed Creditors may have against the Borrower
or any other party, or any security, without affecting or impairing in any way
the liability of Holdings hereunder except to the extent the Guaranteed
Obligations have been paid.
(b) Holdings waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
Guaranteed Obligations. Holdings assumes all responsibility for being and
keeping itself informed of the Borrower's financial condition and assets, and of
all other circumstances, bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which Holdings assumes
and incurs hereunder, and agrees that the Guaranteed Creditors shall have no
duty to advise Holdings of information known to them regarding such
circumstances or risks.
13.09 ENFORCEMENT. The Guaranteed Creditors agree that this
Guaranty may be enforced only by the action of the Administrative Agent or the
Collateral Agent, in each case acting upon the instructions of the Required
Lenders and no Guaranteed Creditor shall have any right individually to seek to
enforce or to enforce this Guaranty or to realize upon the security to be
granted by the Security Documents, it being understood and agreed that such
rights and remedies may be exercised by the Administrative Agent or the
Collateral Agent for the benefit of the Creditors upon the terms of this
Guaranty and the Security Documents.
* * *
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IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
1001 Pennsylvania Avenue, N.W. IRON HORSE INVESTORS, L.L.C.
Suite 220 South
Washington, D.C. 20004
Telecopy No.: 202-347-9250 By: /s/ Allan M. Holt
Attention: Allan M. Holt Name: Allan M. Holt
Title: Chairman
1001 Pennsylvania Avenue, N.W. UNITED DEFENSE INDUSTRIES, INC.
Suite 220 South
Washington, D.C. 20004
Telecopy No.: 202-347-9250 By: /s/ Peter Clare
Attention: Allan M. Holt Name: Peter Clare
Title: Secretary
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
and as Syndication Agent
By: /s/ Anthony LoGrippo
Name: Anthony LoGrippo
Title: Vice President
CITICORP USA, INC.,
Individually and as a Documentation Agent
By: /s/ Thomas M. Hatsch
Name: Thomas M. Hatsch
Title: Attorney-In-Fact
<PAGE>
LEHMAN COMMERCIAL PAPER INC.,
Individually and as a Documentation Agent
By: /s/ Authorized Signatory
Name:
Title:
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By: /s/ Authorized Signatory
Name:
Title:
THE BANK OF NOVA SCOTIA
By: /s/ J.R. Trimble
Name: J.R. Trimble
Title: Senior Relationship Manager
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE
By: /s/ Sean Mounier
Name: Sean Mounier
Title: First Vice President
By: /s/ Marcus Edward
Name: Marcus Edward
Title: Vice President
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Attila Koc
Name: Attila Koc
Title: First Vice President
FLEET NATIONAL BANK
By: /s/ Robert C. Rubino
Name: Robert C. Rubino
Title: Senior Vice President
MERITA BANK LTD NEW YORK BRANCH
By: /s/ Frank Maffei
Name: Frank Maffei
Title: Vice President
By: /s/ Clifford Abramsky
Name: Clifford Abramsky
Title: Vice President
NATIONAL CITY BANK
By: /s/ Andrew J. Walshaw
Name: Andrew J. Walshaw
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Sarah J. May
Name: Sarah J. May
Title: Assistant Vice President
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Thomas Colwell
Name: Thomas Colwell
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Alan F. Lyster, Jr.
Name: Alan F. Lyster, Jr.
Title: Vice President
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By: /s/ Beatrice Kossodo
Name: Beatrice Kossodo
Title: Senior Vice President
SANWA BUSINESS CREDIT CORPORATION
By: /s/ Gregory R. Cooper
Name: Gregory R. Cooper
Title: Vice President
BANKBOSTON, N.A.
By: /s/ Gregory R. D. Clark
Name: Gregory R. D. Clark
Title: Managing Director
<PAGE>
NATEXIS BANQUE BFCE, formerly BANQUE
FRANCAISE DU COMMERCE EXTERIEUR
By: /s/ Kevin Dooley
Name: Kevin Dooley
Title: Vice President
By: /s/ William C. Maier
Name: William C. Maier
Title: Vice President-Group Manager
CORESTATES BANK, N.A.
By: /s/ John D. Brady
Name: John D. Brady
Title: Assistant Vice President
CREDITANSTALT CORPORATE FINANCE, INC.
By: /s/ Greg Roux
Name: Greg Roux
Title: Vice President
By: /s/ James F. McCann
Name: James F. McCann
Title: Vice President
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By: /s/ Richard W. Conroy
Name: Richard W. Conroy
Title: Vice President
By: /s/ Ben Marzouk
Name: Ben Marzouk
<PAGE>
Title: Vice President
FIRST SOURCE FINANCIAL LLP
FIRST SOURCE FINANCIAL INC., its
Agent/Manager
By: /s/ James W. Wilson
Name: James W. Wilson
Title: Senior Vice President
FIRST UNION NATIONAL BANK
By: /s/ Michael P. Doherty
Name: Michael P. Doherty
Title: Vice President
HELLER FINANCIAL, INC.
By: /s/ Linda W. Wolf
Name: Linda W. Wolf
Title: Senior Vice President
IMPERIAL BANK
By: /s/ Ray Vadalma
Name: Ray Vadalma
Title: Senior Vice President
THE ROYAL BANK OF CANADA
By: /s/ Michael Korina
Name: Michael Korina
Title: Senior Manager
<PAGE>
SOUTHERN PACIFIC THRIFT &
LOAN ASSOCIATION
By: /s/ Chris Kelleher
Name: Chris Kelleher
Title: Vice President
ALLSTATE LIFE INSURANCE COMPANY
By: /s/ Judith P. Greffin
Name: Judith P. Greffin
Title: Authorized Signatory
By: /s/ Ronald A. Mendel
Name: Ronald A. Mendel
Title: Authorized Signatory
PRIME INCOME TRUST
By: /s/ Rafael Scolari
Name: Rafael Scolari
Title: Vice President, Portfolio Manager
ING HIGH INCOME PRINCIPAL PRESERVATION
OFFERING, L.P.
ING CAPITAL ADVISORS, INC.,
as Investment Advisor
By: /s/ Kathleen A Lenarcic
Name: Kathleen A. Lenarcic
Title: Vice President & Portfolio Manager
MASSACHUSETTS MUTUAL
<PAGE>
By: /s/ John B. Wheeler
Name: John B. Wheeler
Title: Managing Director
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ James R. Dingler
Name: James R. Dingler
Title: Assistant Vice President
OAK HILL SECURITIES FUND, L.P.
By: OAK HILL SECURITIES GENPAR, L.P.,
its General Partner
By: OAK HILL SECURITIES MGP, INC.,
its General Partner
By: /s/ Scott D. Krase
Name: Scott D. Krase
Title: Vice President
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO (A UNIT OF THE CHASE
MANHATTAN BANK)
By: /s/ Richard W. Stewart
Name: Richard W. Stewart
Title: Managing Director
<PAGE>
ROYALTON COMPANY
By: PACIFIC INVESTMENT MANAGEMENT
COMPANY, as its Investment Advisor
By: /s/ Raymond Kennedy
Name: Raymond Kennedy
Title: Vice President
PILGRIM AMERICA PRIME RATE TRUST
By: /s/ Michael J. Bacevich
Name: Michael J. Bacevich
Title: Vice President
PPM AMERICA INC.
By: /s/ Michael DiRe
Name: Michael DiRe
Title: Managing Director
PARIBAS CAPITAL FUNDING LLC
By: /s/ Eric A. Green
Name: Eric A. Green
Title: Director
<PAGE>
ANNEX I
-------
<TABLE>
<CAPTION>
COMMITMENTS
-----------
A Term B Term C Term Revolving
Lender Commitment Commitment Commitment Commitment
------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Bankers Trust Company $9,868,421.05 $86,739,130.43 $84,260,869.57 $15,131,578.95
Citicorp USA, Inc. $9,868,421.05 $_____________ $_____________ $15,131,578.95
Lehman Commercial Paper Inc. $9,868,421.05 $ 5,072,463.77 $ 4,927,536.23 $15,131,578.95
Bank of America N.T. & S.A. $8,684,210.57 $_____________ $_____________ $13,315,789.43
Prime Income Trust $____________ $10,652,173.91 $10,347,826.09 $_____________
Oak Hill Securities Fund, L.P. $____________ $10,652,173.91 $10,347,826.09 $_____________
Pilgrim America Prime Rate Trust $____________ $10,652,173.91 $10,347,826.09 $_____________
The Bank of New York $6,710,526.32 $_____________ $_____________ $10,289,473.68
Corestates Bank, N.A. $6,710,526.32 $_____________ $_____________ $10,289,473.68
The First National Bank of Chicago $6,710,526.32 $_____________ $_____________ $10,289,473.68
The Royal Bank of Canada $6,710,526.32 $_____________ $_____________ $10,289,473.68
Southern Pacific Thrift & Loan
Assocation $6,710,526.32 $_____________ $_____________ $10,289,473.68
Appaloosa Limited Partnership $____________ $ 8,115,942.03 $ 7,884,057.97 $_____________
ING Capital Advisors, Inc. $____________ $ 3,043,478.26 $ 2,956,521.74 $_____________
Massachusetts Mutual $____________ $ 8,115,942.03 $ 7,884,057.97 $_____________
PPM America, Inc. $____________ $ 8,115,942.03 $ 7,884,057.97 $_____________
The Bank of Nova Scotia $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
BankBoston, N.A. $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
Banque Francaise du Commerce
Exterieur $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
Banque Paribas $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
Compagnie Financiere de CIC $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
Credit Lyonnais New York Branch $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
</TABLE>
<PAGE>
ANNEX I
Page 2
<TABLE>
<S> <C> <C> <C> <C>
CreditAnstaldt Corporate
Finance, Inc. $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
Dresdner Bank, AG $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
Fleet National Bank $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
First Source Financial Inc. $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
First Union National Bank $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
Heller Financial, Inc. $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
Imperial Bank $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
Merita Bank Ltd New York Branch $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
The Mitsubishi Trust and Banking
Corporation $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
National City Bank $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
PNC Bank, N.A. $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
Sanwa Business Credit Corporation $4,342,105.26 $_____________ $_____________ $ 6,657,894.74
Allstate Life Insurance Company $____________ $ 5,072,463.77 $ 4,927,536.23 $_____________
Metropolitan Life $____________ $ 5,072,463.77 $ 4,927,536.23 $_____________
Octagon Credit Investors $____________ $ 5,072,463.77 $ 4,927,536.23 $_____________
KZH Soleil $____________ $ 5,072,463.77 $ 4,927,536.23 $_____________
Royalton Company $____________ $ 3,550,724.64 $ 3,449,275.36 $_____________
Total: $150,000,000.00 $175,000,000.00 $170,000,000.00 $230,000,000.00
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
<PAGE>
ANNEX II
--------
ADDRESSES
---------
Allstate Life Insurance Company
Allstate Plaza West
Northbrook, IL 60062
Attention: Jane Nelson
Telephone No.: (847) 402-5000
Telecopier No.: (847) 402-5199
Appaloosa Limited Partnership
51 JFK Parkway
Short Hills, NJ 07078
Attention: Jim Bolin
Telephone No.: (201) 376-5400
Telecopier No.: (201) 376-5415
Bank of America National Trust &
Savings Association
335 Madison Avenue
New York, New York 10017
Attention: Elizabeth Borow
Telephone No.: 212-503-8236
Telecopier No.: 212-503-7502
<PAGE>
ANNEX II
Page 2
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Anthony Logrippo
Telephone. No.: 212-250-4886
Telecopier No.: 212-250-7218
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Attention: John Podkowsky
Telephone No.: 212-559-3540
Telecopier No.: 212-793-1290
BankBoston, N.A.
100 Federal Street
Diversified Finance
Boston, MA 02110
Attention: Gregory Clark
Telephone No.: (617) 434-8223
Telecopier No.: (617) 434-4929
Banque Francaise du Commerce Exterieur
645 Fifth Avenue
New York, NY 10022
Attention: Bill Maier
Telephone No.: (212) 872-5050
Telecopier No.: (212) 872-5045
<PAGE>
ANNEX II
Page 3
Compagnie Financiere de CIC
et de L'Union Europeenne
520 Madison Avenue - 37th Floor
New York, NY 10022
Attention: Brian O'Leary
Telephone No.: (212) 715-4422
Telecopier No.: (212) 715-4535
Corestates Bank, N.A.
1339 Chestnut Street
Philadelphia, PA 19107
Attention: John Brady
Telephone No.: (215) 973-2160
Telecopier No.: (215) 973-6745
CreditAnstalt Corporate Finance, Inc.
4 Embarcadero Center
Suite 1630
San Francisco, CA 94111
Attention: Greg Roux
Telephone No.: (415) 788-1371
Telecopier No.: (415) 788-0622
Credit Lyonnais New York Branch
1301 Avenue of the Americas
18th Floor
New York, NY 10019
Attention: Attila Koc
Telephone No.: (212) 261-7358
Telecopier No.: (212) 459-3176
<PAGE>
ANNEX II
Page 4
Dresdner Bank, AG
75 Wall Street
New York, NY 10005
Attention: Peter Kay
Telephone No.: (212) 429-3203
Telecopier No.: (212) 429-2781
First Source Financial LLP
2850 West Golf Road
5th Floor
Rolling Meadows, IL 60008
Attention: Mike Danehl
Telephone No.: (847) 734-2059
Telecopier No.: (847) 734-7910
Fleet National Bank
One Federal Street
Mail Stop: MA OF 0308
Boston, MA 02110
Attention: Robert Rubino
Telephone No.: (617) 346-4853
Telecopier No.: (617) 346-4806
with a copy to:
One Landmark Square
12th Floor
Stamford, CT 06904
Attention: Gary Kearns
Telephone No.: (203) 358-2029
Telecopier No.: (203) 358-6111
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
<PAGE>
ANNEX II
Page 5
Attention: Ann Kalaska
Telephone No.: (312) 732-1028
Telecopier No.: (312) 732-3596
with a copy to:
153 West 51st Street
New York, NY 10019
Attention: Lynn Dillon
Telephone No.: (212) 373-1373
Telecopier No.: (212) 373-1403
Attention: Amy Golz
Telephone No.: (212) 373-1023
Telecopier No.: (212) 373-1180
First Union National Bank
301 South College Street, 19th Floor
TW 18
Charlotte, NC 28288
Attention: Dave Sozio
Telephone No.: (704) 760-5943
Telecopier No.: (704) 760-3300
Attention: Kevin McGrath
Telephone No.: (704) 760-5920
Telecopier No.: (704) 760-3300
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attention: Kathy Inorio
Telephone No.: (312) 441-7775
Telecopier No.: (312) 441-7357
<PAGE>
ANNEX II
Page 6
Imperial Bank
9920 S. La Cienega Blvd, 14th Fl.
Inglewood, CA, 90301
Attention: John Faivace
Telephone No.: (310) 417-5676
Telecopier No.: (310) 417-5997
ING High Income Principal Preservation
333 South Grand Avenue
Los Angeles, CA 90071
Attention: Kathleen Lenarcic
Telephone No.: (213) 346-3971
Telecopier No.: (213) 346-3995
KZH-Soleil Corporation
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Virginia Conway
Telephone No.: (212) 946-7575
Telecopier No.: (212) 946-7776
Lehman Commercial Paper Inc.
3 World Financial Center
New York, New York 10285
Attention: Dennis Dee
Telephone No.: 212-566-4059
Telecopier No.: 212-528-0819
Attention: Michelle Swanson
Telephone No.: 212-526-0330
Telecopier No.: 212-528-0819
<PAGE>
ANNEX II
Page 7
Merita Bank Ltd New York Branch
437 Madison Avenue
21st Floor
New York, NY 10022
Attention: Frank Maffei
Telephone No.: (212) 318-9561
Telecopier No.: (212) 318-9318
Massachusetts Mutual
1295 State Street
Springfield, MA 01111
Attention: John Wheeler
Telephone No.: (413) 744-6228
Telecopier No.: (413) 744-2022
Metropolitan Life
334 Madison Street
Convent Station, NJ 07691
Attention: James Dingler
Telephone No.: (201) 254-3206
Telecopier No.: (201) 254-3050
National City Bank
National City Center
1900 East Ninth Street - Location #2102
Cleveland, OH 44114
Attention: Andrew Walshaw
Telephone No.: (216) 575-2193
Telecopier No.: (216) 575-9396
Oak Hill Securities
65 East 55th St., 32nd Floor
New York, NY 10022
Attention: Scott Krase
Telephone No.: (212) 326-1551
Telecopier No.: (212) 593-3596
<PAGE>
ANNEX II
Page 8
Octagon Credit Investors
380 Madison Avenue
12th Floor
New York, NY 10017
Attention: Richard Stewart
Telephone No.: (212) 622-3070
Telecopier No.: (212) 622-3797
Paribas Capital Funding LLC
787 Seventh Avenue
New York, NY 10019
Attention: Eric Green
Telephone No.: (212) 841-2535
Telecopier No.: (212) 841-2144
Pilgrim America Prime Rate Trust
Pilgrim America Prime Income Trust
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004
Attention: Tim Hunt
Telephone No.: (602) 417-8257
Telecopier No.: (602) 417-8327
<PAGE>
ANNEX II
Page 9
PNC Bank, National Association
Fifth Avenue and Wood Street
Suite 3140
Pittsburgh, PA 15522
Attention: Jim Fink
Telephone No.: (412) 762-8746
Telecopier No.: (412) ________
with a copy to:
345 Park Avenue - 29th Floor
New York, NY 10154
Attention: Tom Colwell
Telephone No.: (212) 409-3700
Telecopier No.: (212) 409-3737
PPM America Inc.
225 West Wacker Drive
Suite 1200
Chicago, IL 60606
Attention: Michael Dire
Telephone No.: (312) 634-2500
Telecopier No.: (312) 634-0054
Prime Income Trust
Two World Trade Center
New York, NY 10048
Attention: Rafael Scolari
Telephone No.: (212) 392-5686
Telecopier No.: (212) 392-5345
<PAGE>
ANNEX II
Page 10
Royal Bank of Canada
1 Financial Square
Old Slip and Front Street
24th Floor
New York, NY 10005
Attention: Michael Korine
Telephone No.: (212) 428-6258
Telecopier No.: (212) 428-6459
Royalton Company
840 Newport Center Drive
Newport Beach, CA 92658
Attention: Jason Roziak
Telephone No.: (714) 640-3407
Telecopier No.: (714) 725-6839
Sanwa Business Credit Corporation
One South Wacker Drive
Suite 2800
Chicago, IL 60606
Attention: Greg Cooper
Telephone No.: (312) 853-1401
Telecopier No.: (312) 782-6035
Southern Pacific Thrift & Loan Association
12300 Wilshire Blvd.
Suite 200
Los Angeles, CA 90025
Attention: Chris Kelleher
Telephone No.: (310) 442-3351
Telecopier No.: (310) 207-4067
<PAGE>
ANNEX II
Page 11
The Bank of New York
One Wall Street
New York, NY 10286
Attention: David Seigel
Telephone No.: (212) 635-6899
Telecopier No.: (212) 635-6434
Attention: Helen Sarro
Telephone No.: (212) 635-7196
Telecopier No.: (212) 635-7345
Attention: Alan Lyster
Telephone No.: (212) 635-6895
Attention: Helen Sarrow
Telephone No.: (212) 635-6898
Telecopier No.: (212) 635-6434
The Bank of Nova Scotia
One Liberty Plaza
New York, NY 10006
Attention: James Trimbel
Telephone No.: (212) 225-5011
Telecopier No.: (212) 225-5090
The Mitsubishi Trust and Banking Corporation
520 Madison Avenue
26th Floor
New York, NY 10022
Attention: David Lerner
Telephone No.: (212) 891-8371
Telecopier No.: (212) 644-6825
<PAGE>
ANNEX II
Page 12
ANNEX X
ADDED EBITDA
Test Period Ending: Amount
------------------- ------
December 31, 1997 $100,600,000 plus September EBITDA
(as defined below)
March 31, 1998 $ 50,900,000 plus September EBITDA
June 30, 1998 September EBITDA
September EBITDA shall mean the Consolidated EBITDA of UDLP for the quarter
ending September 30, 1997 as provided to the Administrative Agent no later
than 60 days after the Initial Borrowing Date by the Borrower, provided same
is calculated on a basis satisfactory to the Administrative Agent.
<PAGE>
ANNEX III
SUBSIDIARIES OF BORROWER
Class of Stock
and
Name Percentage Ownership Direct Owner
- ---- -------------------- ------------
United Defense, L.P. 100% Borrower - 99%
UDLP Holdings Corp. - 1%
UDLP Holdings Corp. Common - 100% Borrower
UDLP International, Inc. Common - 100% United Defense, L.P.
<PAGE>
ANNEX IV
REAL PROPERTIES
MORTGAGED PROPERTIES:
1. Aiken, SC - Subject to the exceptions specified in the applicable title
commitment, Lot #1 in the Aiken Airport Industrial Park and the entrance
road between Lots #1 and #2 of the Aiken Airport Industrial Park.
2. Minneapolis, MN - Subject to the exceptions specified in the applicable
title commitment, the properties approximately comprising Sections
Thirty-four and Twenty- seven, Township Thirty, Range Twenty-four, Anoka
County, Minnesota.
3. West Manchester Township, PA - Subject to the exceptions specified in the
applicable title commitment, the three tracts of land situate in West
Manchester Township, York County, Pennsylvania.
4. Anniston, AL - Subject to the exceptions specified in the applicable
title commitment, the properties approximately comprising Sections 1
and 12 in Township 16 South in Range 7 East, Lot Number Nine of
Section 12, Township 16, Range 8 East, and Lots 1 and 17 inclusive in
Block 10, and certain parts of Lots 18 and 19, lying South of Eulaton
road and Lots 1, 2, 3 and 4 in Block 9 of the Pipe Works Subdivision,
excluding the building known as the "Schoolhouse" and the approximately
8 acres of land thereunder or appurtenant thereto conveyed in Huron
Valley Steel on August 15, 1997.
Owned Property:
1. Aberdeen, SD - Subject to the exceptions specified in the applicable
title commitment, the properties comprising approximately 21.5 acres
in Brown County, South Dakota, described as FMC Outlet 1, located in
the West Half of the Southeast Quarter of Section 8, Township 123 North,
Range 63, West of the Fifth P.M., except the public roadway thereof.
LEASED PROPERTIES:
1. Louisville, KY - Subject to the exceptions therefrom specified in the
applicable Sublease of Real and Personal Property, the Naval Surface
Welfare Center in Louisville, Kentucky.
2. Fridley, MN - Subject to the exceptions therefrom specified in the
contract #N00024-93-E-8521, the Naval Industrial Reserve Ordnance Plan
in Fridley, Minnesota.
<PAGE>
3. San Jose, CA -
LEASED FROM FMC:
Subject to the exceptions therefrom specified in the applicable Lease,
the following properties:
a. 1105 Coleman Avenue
b. 1115 Coleman Avenue
c. 1125 Coleman Avenue
d. 1450 Coleman Avenue
e. 328 Brokaw
f. 340 Brokaw
g. Certain offices and lab space at 1205 Coleman Avenue (the Corporate
Technology Center)
LEASE FROM OTHER LANDLORDS:
a. 2830 De La Cruz
b. 2890 De La Cruz
c. 215 Devcon
d. 150 Brokaw
4. Aiken, SC - Subject to the exceptions therefrom specified in the
Sublease and Assignment of Option to Purchase Aiken, South Carolina
Facilities, Lots 2 and 3 of the Aiken Airport Industrial Park.
5. Fayette County, PA - Lease from Brier Hill Steel Company of 40.94 acres
at 300 University Drive, Lemont Furnace, Fayette County.
6. Anniston, AL - Lease on plant for M113 upgrade work until May 31, 1998,
and options to extend in five successive periods of one year each.
7. Arlington, VA - Office lease for world headquarters.
<PAGE>
ANNEX V
INDEBTEDNESS
PART I: INDEBTEDNESS
1. Industrial Revenue Bond with respect to the lease for the property in
Aiken, South Carolina.
2. Guaranties - See attached page.
3. Surety Bonds - See attached page.
4. Letters of Credit of Bank of America
Current
($000)
Opening Bank Number Beneficiary Amount Expiry
- ------------ ------ ----------- ------- ------
Bank of America C7335016 Norwegian Army 399 9/16/98
Material Command
Bank of America C7274563 Egyptian Tank Plant 115 7/15/97
Bank of America C7278772 Korea Heavy Ind. & 91 10/31/97
Const.
Bank of America C7288185 Egyptian Tank Plant 63 12/30/97
Bank of America C7278051 Royal Thai Army 5,166 12/31/97
Bank of America C7278040 Royal Thai Army 4,272 9/30/99
Bank of America C7274574 Egyptian Tank Plant 1,180 10/15/97
Bank of America C7305616 Gov. of A.R.E. 20,528 8/31/98
Bank of Amercia C7288196 Egyptian Tank Plant 625 12/31/97
Bank of America C7305627 Gov. of A.R.E. 3,289 1/15/99
Bank of America 119314A Toxic Substance Control 481 4/30/98
Division
5. Other Letters of Credit - See attached pages.
<PAGE>
PART II: EXISTING LETTERS OF CREDIT
- -----------------------------------
Current
($000)
OPENING BANK NUMBER BENEFICIARY AMOUNT EXPIRY
- ------------ ------ ----------- ------ ------
Corestates Bank 519512-P Capital Blue Cross 86 6/30/98
Corestates Bank 514418-P Capital Blue Cross 92 10/31/97
Corestates Bank 513888-P PA Dept. Environmental 70 4/30/98
Corestates Bank 401166-P Banco Bilbao Vizcaya 7,000 3/31/00
Admiral/Ship
Construction
<PAGE>
PARENT GUARANTEES
<TABLE>
<CAPTION>
UDLP Gtys.xis DATE: 10/3/97 Replaces: 9/29/97 FMC "Backstop" Calculation
- ------------- ------- -------
BENEFICIARY
-----------
Purpose & Original Date Dates
Name Number Division Amt.($000) Opened Expiry Amended
- ---- ------ -------- ---------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Rafael Ordnance - FMC Import 2,737 10-Jun-96 31-Oct-97
Israel UDLP-C
Swiss Ordnance Enterpr. - FMC Performance 413 7-Apr-97 31-May-98
Switzerland UDLP-C
Hagglunds Vehicle AB - FMC Performance 11,000 28-Apr-97 31-Dec-05
Sweden UDLP-C
Hagglunds Vehicle AB - FMC Performance 4,000 28-Apr-97 31-Dec-05
Sweden UDLP-C
Minowitz Mfg. Co. - FMC Import 838 17-Apr-97 30-Jan-98
USA UDLP-C
Commonwealth of Australia - FMC A/P 701 20-May-97 31-Mar-98
------
Australia UDLP-C
Total - All 19,689
------
------
</TABLE>
<PAGE>
SURETY BONDS
- ------------
<TABLE>
<CAPTION>
UDLP Gtys.xis DATE: 10/3/97 Replaces: 9/29/97 FMC "Backstop" Calculation
- --------------------- ------- -------
BENEFICIARY OPENING SURETY CO.
----------- ------------------
Purpose & Original Date Curr. Bal. Dates
Name Contract No. Name Number Division Amt.($000) Opened Expiry $000 Amended
- ---- ------------ ---- ------ -------- ---------- ------ ------ ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PA D.O.T. - Hauling American Home FMC-90457 Guarantee - 2
USA Permit York
U.S. Customs Duty Ins. Co. of PA FMC-92324 Guarantee -
Drawback FMC
U.S. Customs Import Bond Ins. Co. of PA FMC-92327 Guarantee -
FMC
Totals 2
</TABLE>
<PAGE>
STANDBY LETTERS OF CREDIT
-------------------------
<TABLE>
<CAPTION>
UDLP Gtys.xis DATE: 10/3/97 Replaces: 9/29/97 FMC "Backstop" Calculation
- ------------- ------- -------
OPENING BANK ADVISING BANK & BENEFICIARY
- ------------ ---------------------------
Purpose & Original Date Curr. Bal. Dates
Name/Number Name Number Division Amt.($000) Opened Expiry $000 Amended
- ----------- ---- ------ -------- ---------- ------ ------ ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chase Bank/ Gov. of A.R.E. - Armaments YORK 15-Jan-98 1,932 10/1: reduced to
P750439 $1,932
Chase Bank/ Greek Min. Nat'l. Defense YORK 1-Jun-02 1,534
P383909
Chase Bank/ Hellenic Min. of Defense YORK 30-Dec-99 12,777
P383834
Chase Bank/ Hellenic Min. of Defense YORK 30-Jan-00 2,555
P383885
Chase Bank/ Gov. of A.R.E. - Armaments YORK 15-Jan-98 6
P750759
Chase Bank/ Gov. of A.R.E. - Armaments YORK 15-Jan-98 6
P751646
Chase Bank/ Dept. of Environ. Protection YORK 11/30/1997 878
P754356 Evergreen
Chase Bank/ Talpai Economic & Cultural YORK 1-Mar-99 36,823
P358182
</TABLE>
<PAGE>
STANDBY LETTERS OF CREDIT
-------------------------
<TABLE>
<CAPTION>
UDLP Gtys.xis DATE: 10/3/97 Replaces: 9/29/97 FMC "Backstop" Calculation
- ------------- ------- -------
OPENING BANK ADVISING BANK & BENEFICIARY
- ------------ ---------------------------
Purpose & Original Date Curr. Bal. Dates
Name/Number Name Number Division Amt.($000) Opened Expiry $000 Amended
- ----------- ---- ------ -------- ---------- ------ ------ ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chase Bank/ DSAA - Greek Navy ASD 31-Aug-98 1,669
P258243
Chase Bank/ Defense Procure. INT'L. 30-Oct-98 2,310
-----
P362767 Agency - Korea
SUB-TOTAL CHASE 60,490
First Maryland/ Samsung Aerospace Ind. - YORK 731 31-Mar-98 586
901222 Korea
First Maryland/ Samsung Aerospace Ind. - YORK 423 15-Nov-97 423
5960222 Korea
First Maryland/ Samsung Aerospace Ind. - YORK 172 30-Aug-97 0 Expired:
8/30/97
5960223 Korea
First Maryland/ Royal Thai Army - YORK 615 2-Mar-99 615
900511 Thailand
First Maryland/ Royal Thai Army - YORK 1,845 2-Mar-99 1,845
900519 Thailand
</TABLE>
<PAGE>
STANDBY LETTERS OF CREDIT
-------------------------
<TABLE>
<CAPTION>
UDLP Gtys.xis DATE: 10/3/97 Replaces: 9/29/97 FMC "Backstop" Calculation
- ------------- ------- -------
OPENING BANK ADVISING BANK & BENEFICIARY
- ------------ ---------------------------
Purpose & Original Date Curr. Bal. Dates
Name/Number Name Number Division Amt.($000) Opened Expiry $000 Amended
- ----------- ---- ------ -------- ---------- ------ ------ ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Maryland/ Royal Thai Army - YORK 3,141 2-Sep-00 3,141
901287 Thailand
First Maryland/ Royal Thai Army - YORK 1,047 22-Aug-01 1,047
-----
901288 Thailand
SUB-TOTAL FIRST MD 7,657
-----
-----
Societe Generale/ Samsung Aerospace Ind. - INT'L. 14,507 10/1/1998 13,917
------
IC70503 Korea Evergreen
SUB-TOTAL SOCIETE GEN. 13,917
------
Credit Suisse/ National Union Fire Insur. EPA-Phil. 1/31/1998 10,680
------
TS10023715 Co./USA 10,680 Evergreen
SUB-TOTAL CREDIT SUISSE 10,680
------
Svenska Bank/ Minn. Polution Control ASD 4/25/98 1,491
-----
972083 Authority Evergreen
SUB-TOTAL SVENSKA BANK 1,491
-----
GRAND TOTAL - ALL 94,235
------
</TABLE>
<PAGE>
ANNEX VI
--------
ERISA
-----
PLANS:
- -----
1. United Defense CSD Salaried Employees Pension Plan
2. United Defense CSD Union Employees Pension Plan (determination letter under
the name "BMY Hourly Employees Pension Plan")
3. FMC Corporation Retirement Plan for Certain Employees - Northern Ordnance
Division
4. FMC Corporation Retirement Plan for hourly Employees - Northern Ordnance
Division
5. FMC Corporation Retirement Plan for Hourly Employees - Steel Products
Division of Anniston, Alabama
6. FMC Corporation Retirement Plan for Hourly Employees - Louisville
7. FMC Corporation Retirement Plan for Hourly Employees - San Jose
8. UDLP Excess Pension Plan
9. UDLP Supplemental Retirement and Savings Plan
10. UDLP Louisville Union Employees' Thrift Plan
11. UDLP Salaried Employees Plan (401(k))
12. UDLP 401(k) Plan for Employees Covered by a Collective Bargaining Agreement
13. United Defense Limited Partnership York Plan (401(k))
14. United Defense, L.P. Severance Plan
15. Defense Segment Plan
16. UDLP Fayette County Plan Benefit - health care and prescription drug plan
provided through Pennsylvania Builders Association Benefit Trust and Life
Insurance program provided through Hartford Insurance
<PAGE>
ANNEX VII
---------
LIENS
-----
1. See attached pages.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF EXISTING LIENS
DEBTOR SECURED PARTY FILE # FILING DATE JURISDICTION COLLATERAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
United Defense, L.P. Hewlett-Packard Co. 94136617 7/5/94, as amended on State of California Equipment referenced in
1105 Coleman 1360 Kifer Road 8/12/94 Financing Agreement Number
Santa Clara, CA 95052 Sunnyvale, CA 94086 on 412413075
Expires 7/5/99
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense Konica Processing 9433360437 11/4/94 State of California 2 Copiers; 2 Base/
P.O. Box 367 Ground Systems P.O. Box 1039 2 Finishers
Division Syracuse, NY 13201
San Jose, CA 95103 Expires 11/4/99
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense LP GTE Leasing Corporation 94-ST-01282-01 6/2/94 York County, 1 NEAX 2400 Integrated
Combat Systems Division, 11711 N. Meridian Pennsylvania Communication System
R.D. #6 Street, Suite 510 Prothonotary
York, PA 17405 Carmel, IN 46032-4548
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense LP Deere Credit, Inc. 96-ST-02936-01 12/23/96 York County, John Deere Wheel
P.O. Box 15512 P.O. Box 65090, Pennsylvania Loader Backhoe w/Cab
York, PA 17405 1415 28th Street Prothonotary
West Des Moines, IA 50265
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense LP El Camino Resources,Ltd. 97-ST-00493-01 3/6/97 York County, Equipment Leased
Wolf Church Road 21051 Warner Center Lane Pennsylvania under Master Lease
York, PA 17405 Woodland Hills, CA 91367 Prothonotary No. 2411
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense, A Limited Toyota Motor Credit 625-1995 7/26/95 Fayette County, (6) Forklifts
Partnership Corporation Pennsylvania
300 University Drive P.O. Box 3457 Prothonotary
Lemont Furnace, PA 15456 Torrance, CA 90510-3457
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense LP GTE Leasing Corporation 23171522 5/31/94 State of 1 NEAX 2400 Integrated
Combat Systems Division, 11711 N. Meridian Pennsylvania Communication System
R.D. #6 Street, Suite 510
York, PA 17405 Carmel, IN 46032-4548 Expires on 5/31/99
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF EXISTING LIENS
DEBTOR SECURED PARTY FILE # FILING DATE JURISDICTION COLLATERAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
United Defense, A Limited Toyota Motor Credit 24520183 07/27/95 State of (6) Forklifts
Partnership Corporation Pennsylvania
300 University Drive P.O. Box 3457
Lemont Furnace, PA 15456 Torrance, CA 90510-3457 Expires on 7/27/00
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense LP Deere Credit, Inc. 26201534 12/26/96 State of John Deere Wheel
P.O. Box 15512 P.O. Box 65090, 1415 Pennsylvania Loader Backhoe w/Cab
York, PA 17405 28th Street
West Des Moines, IA 50265 Expires on 12/26/01
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense LP El Camino Resources, Ltd. 26430421 3/6/97 State of Equipment Leased
Wolf Church Road 21051 Warner Center Pennsylvania under Master Lease
York, PA 17405 Lane No. 2411
Woodland Hills, CA 91367 Expires on 03/6/02
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense L.P. Norwest Equipment 1814730 1/4/96 State of Equipment
4800 East River Road Finance, Inc., as Minnesota
Minneapolis, MN 55421 Assignee of Winthrop
Resources Corporation
733 Marquette Avenue
Minneapolis, MD 55479
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense L.P. Norwest Equipment 1814553 1/3/96 State of Equipment
4800 East River Road Finance, Inc., as Minnesota
Minneapolis, MN 55421 Assignee of Winthrop
Resources Corporation
733 Marquette Avenue
Minneapolis, MD 55479
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense L.P. Norwest Equipment 1832600 3/15/96 State of Equipment
4800 East River Road Finance, Inc., as Minnesota
Minneapolis, MN 55421 Assignee of Winthrop
Resources Corporation
733 Marquette Avenue
Minneapolis, MD 55479
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF EXISTING LIENS
DEBTOR SECURED PARTY FILE # FILING DATE JURISDICTION COLLATERAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
United Defense L.P. (FMC Copelco Credit 9404117371 4/11/94 State of Virginia (2) Copiers and (2)
Corporation) Corporation Fax Machines
1525 Wilson Boulevard, #700 One Maynard Drive
Arlington, VA 22209 Park Ridge, NJ 07656
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense L.P. Citicorp Dealer Finance 9606287082 6/28/96 State of Virginia (1) 1996 Baker Model
1525 Wilson Boulevard, #700 450 Mamaroneck Avenue #BRT35
Arlington, VA 22209 Harrison, NY 10528
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense L.P. Associates Commercial 9611227327 11/22/96 State of Virginia Lift Truck and Back-
2600 Eltham Avenue, Suite Corp., as Assignee of up Alarm
107, Norfolk, VA 23513 Atlantic Lift Systems, Inc.
8001 Ridgepoint Drive
Irving, TX 75063-3117
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense L.P. Citicorp Dealer Finance B 96-27089 6/26/96 State of Alabama (1) 1996 Baker Model
1525 Wilson Boulevard, 450 Mamaroneck Avenue #BRT35
Suite #700 Arlington, VA Harrison, NY 10528
22209
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense L.P. Sanwa Leasing B 96-40640 9/27/96 State of Alabama Savin Copiers
2101 West 10th Street Corporation
Anniston, AL 36201 P.O.Box 7023
Troy, MI 48007
- -----------------------------------------------------------------------------------------------------------------------------------
United Defense L.P. (FMC Copelco Credit 53658 4/11/94 Arlington County, (2) Copiers and (2)
Corporation) Corporation Virginia Fax Machines
1525 Wilson Boulevard, #700 One Maynard Drive
Arlington, VA 22209 Park Ridge, NJ 07656
</TABLE>
<PAGE>
ANNEX VIII
----------
EXISTING INVESTMENTS
--------------------
None
<PAGE>
ANNEX IX
--------
INTENTIONALLY LEFT BLANK
<PAGE>
ANNEX X
-------
ADDED EBITDA
------------
TEST PERIOD ENDING: AMOUNT
- ------------------ ------
December 31, 1997 $100,600,000 plus September EBITDA (as
defined below)
March 31, 1998 $50,900,000 plus September EBITDA
June 30, 1998 September EBITDA
September EBITDA shall mean the Consolidated EBITDA of UDLP for the quarter
ending September 30, 1997 as provided to the Administrative Agent no later than
60 days after the Initial Borrowing Date by the Borrower, provided same is
calculated on a basis satisfactory to the Administrative Agent.
<PAGE>
ANNEX XI
--------
APPROVALS
---------
1. Under Section 11.4(iii) of Amendment No. 1 to the Restated Joint Venture
Agreement of FMC-Nurol Savunma Sanayii A.S. ("FNSS"), dated as of July 1,
1997, if there is a material change in the ownership or control of UDLP or
if UDLP sells all or substantially all of its assets, then Nurol Inasaat ve
Ticaret A.S. shall have the option, at its election, (a) to purchase all of
UDLP's shares of FNSS or (b) cause the liquidation and dissolution of FNSS.
In addition, under Section 18.1, either party may terminate the joint
venture agreement if there is a "substantial change in ownership" of either
party. Under Section 18.2, such termination "shall cause the dissolution of
[FNSS]," and the parties agree to vote for FNSS's liquidation.
2. Article 19 of production contract between the Undersecretariat for Defense
Industries of Turkey ("SSM") and FNSS states that SSM may terminate the
production contract "if the interest of [FNSS] shall devolve upon any
person or corporation . . .." Termination procedures and rights are not
expressly addressed. This contract is governed by Turkish law, but the
English version of the contract prevails.
3. Section 10.2 of the Teaming Agreement between Computing Devices Canada Ltd.
and UDLP, dated as of July 18, 1996, states that "[i]n the event either
party shall become owned by or merge with a competitor of the other party,
the other party shall have the right to terminate this Agreement within
thirty (30) days notice of such event by either party."
4. As a result of the consummation of the Acquisition and the other
transactions contemplated by the Acquisition Documents, contracts between
UDLP and the United States Government or any other agency, division or
instrumentality thereof may require a novation pursuant to Section
42.1204(c) of the Federal Acquisition Regulation or similar regulation or
statute.
5. Article X.2. of the Evolved SeaSparrow Missile Cooperative Program
Agreement states that "there shall be no assignment or other transfer of
this Agreement to any purchaser or assignee described in Article X.1. of
this Agreement without the prior written approval of all of the
non-assigning Parties . . .." Article X.1 refers to a purchaser or
assignee of all of the assets of any Party or "all or a substantial portion
of the ESSM Assets of any Party."
<PAGE>
ANNEX XII
---------
LITIGATION
----------
1. Alliant Techsystems Claims - Alliant Techsystem's subcontract to supply
fire control components for the Paladin Horwitzer was partially terminate
pursuant to Army direction in May 1996. In correspondence with UDLP,
Alliant asserts that it intends to seek $17 million in damages from UDLP by
virtue of the termination. UDLP believes that Alliant's sole recourse is to
seek a contract termination settlement from the U.S. Government.
Discussions between the parties are ongoing regarding the termination.
<PAGE>
PURCHASER NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH
LAWS OR PURSUANT TO AN EXEMPTION THEREFROM.
UNITED DEFENSE INDUSTRIES, INC.
8 3/4% SUBORDINATED NOTE
DUE OCTOBER 6, 2000
$50,000,000 October 6, 1997
UNITED DEFENSE INDUSTRIES, INC., a Delaware corporation ("Payor"), for
value received, promises to pay to FMC Defense Corp., a Wyoming corporation
("Payee"), the principal amount of Fifty Million Dollars ($50,000,000), together
with accrued interest thereon, calculated and payable as set forth below in this
Note. The principal and interest on this Note is payable in lawful money of the
United States of America at such place in the United States as Payee may from
time to time designate in writing to Payor.
This Note is made pursuant to (i) that certain Purchase Agreement (the
"Purchase Agreement"), dated as of August 25, 1997, by and among Payee, Harsco
Corporation, Harsco UDLP Corporation and Payor and (ii) that certain
Supplemental Agreement No. 1 to Purchase Agreement (the "Supplemental
Agreement"), dated as of
<PAGE>
August 25, 1997, by and among Payee, Harsco Corporation, Harsco UDLP Corporation
and Payor. All capitalized terms used herein and not defined herein shall have
the meanings assigned to such terms in either the Purchase Agreement or the
Supplemental Agreement.
1. PAYMENT OF PRINCIPAL AND INTEREST.
1.1. CALCULATION AND PAYMENT OF INTEREST.
Subject to the provisions of Section 4 below, interest on the
principal balance of this Note outstanding from time to time until paid in full
shall accrue at the rate of eight and three-quarters percent (8 3/4%) per annum,
computed on the basis of a 360 day year of twelve 30-day months, commencing on
the date hereof. Payment of such interest shall be made quarterly in arrears
beginning on December 31, 1997 and thereafter on the last Business Day of each
calendar quarter until the Maturity Date.
1.2. PAYMENT ON MATURITY DATE. Subject to the right of set-off of
Payor set forth in Section 4 hereof (which incorporates the provisions of
Section 3 of the Supplemental Agreement), the principal balance of, and any
accrued and unpaid interest on, this Note shall be due and payable on October 6,
2000 (the "Maturity Date").
1.3. MANDATORY PREPAYMENT. Notwithstanding the provisions of Section
1.2 hereof, upon the first to occur of any of the following events, the
aggregate principal amount outstanding under this Note and all accrued and
unpaid interest thereon will become immediately due and payable, subject to the
right of set-off of Payor set forth in Section 4 hereof (which incorporates the
provisions of Section 3 of the Supplemental Agreement):
(a) the occurrence of both (i) a Nurol Waiver or a Nurol
Revocation and (ii) a Turkish Acknowledgment;
2
<PAGE>
(b) the consummation of an initial public offering of
shares of common equity interests or other securities equivalent thereto of
UDLP;
(c) the consummation of (i) the sale of UDLP to one or more
parties pursuant to which such party or parties acquire greater than 50% of
the equity interests, capital stock or other voting securities of UDLP
(whether by merger, consolidation, sale or transfer of equity interests,
capital stock or other voting securities or otherwise) or (ii) the sale of
all or substantially all of UDLP's assets, in either case whether in one
transaction or a series of related transactions; PROVIDED, HOWEVER, it
shall not be an event requiring mandatory prepayment of this Note pursuant
to this Section 1.3 if the transferee of such interests, capital stock,
other securities or assets is or becomes a Guarantor and agrees to assume
Payor's obligations hereunder; provided that such transferor shall not be
released from its obligations under this Note by reason of such transfer;
(d) the consummation of a sale or other disposition of all
or substantially all of UDLP's Turkish business or UDLP's interests in FNSS
not pursuant to a Call or a Liquidation other than to an Affiliate of UDLP;
(e) the consummation of the Call pursuant to the terms of
Section 11.4 of the Joint Venture Agreement; and
(f) the substantial completion of the Liquidation pursuant
to the terms of Section 11.4 of the Joint Venture Agreement.
1.4. OPTIONAL PREPAYMENT. Payor may, at its option, at any time,
without premium or penalty, prepay all or any portion of this Note.
3
<PAGE>
1.5. PRECEDENCE. Any prepayment of this Note shall be applied as
follows: FIRST, to payment of accrued and unpaid interest; and SECOND, to
payment of principal. Upon any partial prepayment, at the request either of
Payee or Payor, this Note shall be surrendered to Payor in exchange for a
substitute note, which shall set forth the revised principal amount. In the
event that this Note is prepaid in its entirety, this Note shall be surrendered
to Payor for cancellation.
1.6. PAYMENT ONLY ON BUSINESS DAYS. Any payment hereunder which, but
for this Section 1.6, would be payable on a day which is not a Business Day,
shall instead be due and payable on the Business Day next following such date
for payment.
2. DEFAULT PROVISIONS
2.1. EVENTS OF DEFAULT. An "Event of Default" under this Note shall
be deemed to occur if:
(a) Payor defaults in the payment when due of interest on
this Note and such default continues for a period of thirty (30) days
(whether or not prohibited by Section 5 hereof);
(b) Payor defaults in the payment when due of the principal
amount of this Note (whether or not prohibited by Section 5 hereof); or
(c) Any "Event of Default" as defined in Section 6.01 of
the Indenture occurs and shall not have been waived.
2.2. ACCELERATION. If (i) an Event of Default specified in Section
2.1 hereof shall have occurred and be continuing, (ii) the full amount of all
principal and interest outstanding under the Senior Subordinated Notes becomes
due and payable pursuant to Section 6.02 of the Indenture and (iii) the entire
principal amount of the Senior Debt has become due and
4
<PAGE>
payable by acceleration or otherwise, Payee may declare the principal amount of
this Note and all accrued and unpaid interest on this Note to be due and payable
immediately. Upon such declaration this Note shall become due and payable
immediately. Notwithstanding the foregoing, if (i) an "Event of Default"
specified in clause (h) or (i) of Section 6.01 of the Indenture occurs with
respect to Payor or any Significant Subsidiary (as defined in the Indenture),
(ii) the full amount of all principal and interest outstanding under the Senior
Subordinated Notes becomes due and payable pursuant to Section 6.02 of the
Indenture and (iii) the entire principal amount of the Senior Debt has become
due and payable by acceleration or otherwise, this Note shall be due and payable
immediately without further action or notice. Payee hereby agrees that, upon
any rescission of acceleration of the Senior Subordinated Notes by the holders
thereof pursuant to Section 6.02 of the Indenture, any acceleration of this Note
by Payee and the consequences thereof shall automatically be rescinded without
further notice or action.
2.3. REMEDIES. If the principal amount of this Note becomes due and
payable pursuant to Section 2.2, Payee may pursue any available remedy to
collect the payment of principal and interest on this Note or to enforce the
performance of any provision of this Note; PROVIDED, HOWEVER, Payee shall not be
entitled to, and specifically waives its right to obtain, any remedy not also
granted or available to the holders of the Subordinated Notes pursuant to the
terms of the Indenture; and PROVIDED, FURTHER, that no claim may be made by
Payee with respect to any breach of any covenant contained in Section 3.1, 3.3,
3.4 or 3.6 hereof (except to the extent that the holders of the Senior
Subordinated Notes or the Trustee (as defined in the Indenture) have asserted
claims (other than accelerating the Senior Subordinated Notes) for breach under
corresponding provisions of the Indenture) unless and
5
<PAGE>
until an Event of Default shall have occurred under Section 2.1 hereof and Payee
is entitled to accelerate the maturity of this Note pursuant to Section 2.2
hereof.
3. COVENANTS.
3.1. PAYMENT OF NOTE. (a) Payor shall pay or cause to be paid the
principal of and interest on this Note on the dates and in the manner provided
in this Note. Principal and interest shall be considered paid on the date due
if the Payee receives such amount due on or before 5:00 p.m. EST on the date
such payment is due.
(b) Payor shall pay interest (including post-petition interest
in any proceeding under the Bankruptcy Code) on overdue principal at the rate
equal to 1% per annum in excess of the then applicable interest rate on this
Note to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under the Bankruptcy Code) on overdue installments of
interest (without regard to any applicable grace period) at the same rate to the
extent lawful.
3.2. REPORTS; COMPLIANCE CERTIFICATE. Payor shall deliver to the
Payee duplicate copies of any and all reports required to be delivered to the
Holders (as defined in the Indenture) and the Trustee (as defined in the
Indenture) pursuant to Section 4.03 of the Indenture, at such time and in such
manner as delivered to the Holders or the Trustee thereunder, and Payor shall
deliver to Payee duplicate copies of any and all certificates (including
Officer's Certificates) delivered to the Trustee or the Holders pursuant to
Section 4.04 of the Indenture, at such time and in such manner as delivered to
the Trustee or the Holders (as applicable) thereunder.
3.3. COMPLIANCE WITH CERTAIN COVENANTS. Payor hereby covenants and
agrees for
6
<PAGE>
the benefit of Payee to comply with the covenants set forth in Sections 4.05,
4.07, 4.08. 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.17, 4.18 and 11.03 of the
Indenture.
3.4. NO SENIOR SUBORDINATED DEBT. Notwithstanding any other provision
hereof, (i) Payor shall not incur, create, issue, assume, guarantee or otherwise
become liable directly or indirectly for any Indebtedness (including Acquired
Debt (as defined in the Indenture)) that is expressly subordinate or junior in
right of payment to any Senior Debt and senior in any respect in right of
payment to the Note, and (ii) no Guarantor shall incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness (including Acquired
Debt) that is expressly subordinate or junior in right of payment to any Senior
Debt of a Guarantor and senior in any respect in right of payment to the
Purchaser Note Guarantee (as defined hereafter) of such Guarantor, it being
understood that Indebtedness will not be considered senior to other Indebtedness
solely by reason of being secured.
3.5. REPORTS. Subject to any applicable confidentiality obligations,
Payor hereby agrees to deliver to Payee at Payor's sole cost and expense (so
long as Payee holds any portion of the outstanding principal amount of this Note
or so long as any arbitration proceeding contemplated by Section 3 of the
Supplemental Agreement is not finally resolved, whichever is later, and in the
form regularly prepared in the ordinary course):
(a) as soon as available after the end of each monthly
accounting period in each fiscal year, unaudited statements of income and
cash flows of FNSS for such monthly period and for the period from the
beginning of the fiscal year to the end of such month, and unaudited
balance sheets of FNSS as of the end of such monthly period;
7
<PAGE>
(b) within 90 days after the end of each fiscal year,
statements of income and cash flows of FNSS for such fiscal year, and
balance sheets of UDLP's Turkish business and/or FNSS as of the end of such
fiscal year;
(c) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of FNSS' operations or financial affairs given to Payor or UDLP by
their independent accountants (and not otherwise contained in the other
materials provided hereunder);
(d) an annual budget with respect to FNSS for each fiscal
year as and when prepared in the ordinary course, and promptly upon
preparation thereof any other significant budgets prepared by UDLP with
respect thereto; and
(e) with reasonable promptness, such other information and
financial data concerning FNSS as Payee may reasonably request.
3.6. WAIVER OF STAY, EXTENSION AND USURY LAWS. Payor covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Note; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to
8
<PAGE>
Payee, but shall suffer and permit the execution of every such power as though
no such law had been enacted.
3.7. ASSET SALE OFFER. If and to the extent that Payor is required to
make an Asset Sale Offer (as defined in the Indenture) pursuant to Section 4.10
of the Indenture, Payor shall offer, pro rata in proportion to the principal
amount (or accreted value, if applicable) outstanding in respect of the Senior
Subordinated Notes and any other Indebtedness that is PARI PASSU with this Note
and contains provisions requiring any such asset sale offer, to purchase for
cash or repay in cash the maximum principal amount of this Note which may be
repurchased or repaid out of the Excess Proceeds (as defined in the Indenture).
Any such offer shall be made on a pro rata basis with any Asset Sale Offer in
respect of the Senior Subordinated Notes and any such offer in respect of any
other Indebtedness which is PARI PASSU with this Note and contains terms
requiring such an asset sale offer, based on the proportionate principal amount
of this Note, the Senior Subordinated Notes and such other PARI PASSU
Indebtedness.
4. RIGHT OF SETOFF. Payee hereby agrees, by acceptance of this
Note, that Payor shall have the right to assert a set-off against any and all
amounts due under this Note the amount of any Loss (as defined in the
Supplemental Agreement) that Payor shall have incurred, pursuant to Section 3 of
the Supplemental Agreement and subject to such other terms and conditions as are
set forth in the Supplemental Agreement. If the principal amount of this Note
is reduced as a result of any such set-off, such reduction shall be deemed to be
made effective as of the date such Loss is determined to have been incurred and
all interest that may have accrued on the portion of the principal amount of
this Note so cancelled as a result of such set-off shall likewise be deemed
cancelled in accordance with the provisions of
9
<PAGE>
this Section 4. In the event that Payor asserts that it has incurred a Loss and
has so notified Payee, but the existence and/or amount of such Loss has not been
finally determined in accordance with Section 3 of the Supplemental Agreement,
then interest shall continue provisionally to accrue on the principal amount of
this Note equal to the Loss asserted, but such interest (the "Suspended
Interest") shall not be payable (and failure to pay such interest shall not
constitute an Event of Default hereunder) until the Payor's entitlement to
set-off such Loss (or any portion thereof) is finally determined. If all or any
portion of the asserted Loss is finally determined to be properly set off
against this Note, then the portion of the Suspended Interest attributable
thereto shall be deemed cancelled and shall not be payable; and if all or any
portion of the asserted Loss is finally determined not to be properly set-off
against this Note then the portion of the Suspended Interest attributable
thereto shall be paid within five Business Days after such final determination
is made.
5. SUBORDINATION
5.1. AGREEMENT TO SUBORDINATE. Payor and Payee agree that the payment
of principal of and interest on this Note is subordinated in right of payment,
to the extent and in the manner provided in this Section 5, to the prior payment
in full, in cash or Cash Equivalents (as defined in the Indenture), of all
Senior Debt (whether outstanding on the date hereof or hereafter created,
incurred, assumed or guaranteed), and that the subordination is for the benefit
of the holders of Senior Debt.
5.2. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to
creditors of Payor in a liquidation or dissolution of Payor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to Payor
or its property, in an assignment for the benefit of creditors or any
marshalling of Payor's assets and liabilities:
10
<PAGE>
(a) the holders of Senior Debt shall be entitled to receive
payment in full, in cash or Cash Equivalents, of all Obligations (as
defined in the Indenture) due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt (whether or not an allowable
claim)) before Payee shall be entitled to receive any payment with respect
to this Note (except that Payee may receive and retain Permitted Junior
Securities (as defined in the Indenture)); and
(b) until all Obligations with respect to Senior Debt (as
provided in subsection (a) above) are paid in full, in cash or Cash
Equivalents, any distribution to which Payee would be entitled but for this
Section 5 shall be made to the holders of Senior Debt except that Payee may
receive and retain Permitted Junior Securities, as their interests may
appear.
5.3. DEFAULT ON DESIGNATED SENIOR DEBT. Payor may not make any
payment upon or in respect of or distribution to the Payee in respect of
Obligations with respect to this Note and may not acquire this Note from Payee
for cash or property (other than Permitted Junior Securities) until all
principal and other Obligations with respect to the Senior Debt have been paid
in full in cash or Cash Equivalents if:
(a) a default in the payment of the principal of, premium, if
any, or interest on Designated Senior Debt (as defined in the Indenture)
occurs and is continuing beyond any applicable grace period in the
agreement, indenture or other document governing such Designated Senior
Debt; or
(b) a default, other than a payment default, on Designated
Senior Debt occurs and is continuing that then permits holders of the
Designated Senior Debt as to which
11
<PAGE>
such default relates to accelerate its maturity and the Payee receives a
notice of the default (a "Payment Blockage Notice") from Payor or any
Representative (as defined in the Indenture) of the holders of any
Designated Senior Debt, which notice states it is a Payment Blockage Notice
under this Note. If the Payee receives any such Payment Blockage Notice,
no subsequent Payment Blockage Notice shall commence or be effective for
purposes of this Section unless and until (i) 360 days shall have elapsed
since the effectiveness of the immediately prior Payment Blockage Notice
and (ii) all scheduled payments of principal and interest on this Note that
have come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage
Notice to Payee shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default shall have been waived for a period of
not less than 90 days.
Payor may and shall resume payments on and distributions in respect of
this Note and may acquire it upon:
(1) in the case of a payment default, the date on which the default is
cured or waived, and
(2) in the case of a default referred to in Section 5.3(b) hereof, the
earlier of (A) the date on which such nonpayment default is cured or
(B) 179 days after notice is received if the maturity of such
Designated Senior Debt has not been accelerated;
if this Section 5 otherwise permits the payment, distribution or acquisition at
the time of such payment, distribution or acquisition.
12
<PAGE>
5.4. ACCELERATION OF NOTE. If payment of this Note is accelerated
because of an Event of Default, Payor shall promptly notify holders of Senior
Debt of the acceleration.
5.5. NOTICE BY PAYOR. Payor shall promptly notify Payee of any facts
known to Payor that would cause a payment of any Obligations with respect to
this Note to violate this Section 5, but failure to give such notice shall not
affect the subordination of this Note to the Senior Debt as provided in this
Section 5.
5.6. SUBROGATION. After all Senior Debt is paid in full in cash or
Cash Equivalents and until this Note is paid in full, Payee shall be subrogated
(equally and ratably with all other Indebtedness PARI PASSU with this Note,
including the Senior Subordinated Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to Payee have been applied to the payment of
Senior Debt. A distribution made under this Section 5 to holders of Senior Debt
that otherwise would have been made to Payee is not, as between Payor and Payee,
a payment by Payor on this Note.
5.7. RELATIVE RIGHTS. This Section 5 defines the relative rights of
Payee and holders of Senior Debt. Nothing in this Note shall:
(a) impair, as between Payor and Payee, the obligation of Payor,
which is absolute and unconditional, to pay principal of and interest on
this Note in accordance with its terms;
(b) affect the relative rights of Payee and creditors of Payor
other than their rights in relation to holders of Senior Debt; or
13
<PAGE>
(c) prevent Payee from exercising its available remedies upon a
Default or Event of Default, subject to the rights of holders and owners of
Senior Debt to receive distributions and payments otherwise payable to
Payee.
If Payor fails because of this Section 5 to pay principal of or
interest on this Note on the due date, the failure after any applicable grace
period has elapsed is still a Default or an Event of Default.
5.8. SUBORDINATION MAY NOT BE IMPAIRED BY PAYOR. No right of any
holder of Senior Debt to enforce the subordination of the Indebtedness evidenced
by this Note shall be impaired by any act or failure to act by Payor or Payee or
by the failure of Payor or Payee to comply with this Note.
5.9. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a
distribution is to be made or a notice given to holders of Senior Debt, the
distribution may be made and the notice given to the Representative (as defined
in the Indenture) of such Senior Debt. Upon any payment or distribution of
assets of Payor referred to in this Section 5, Payee shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to Payee for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Debt and other Indebtedness of Payor, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 5.
5.10. FURTHER ACTION TO EFFECT SUBORDINATION. Payor and Payee agree to
take such further action as may be necessary or appropriate to effectuate the
subordination as provided in this Section 5.
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5.11. AMENDMENTS. The provisions of this Section 5 shall not be
amended or modified without the written consent of the Representatives under the
Senior Credit Facility and all other Designated Senior Debt.
5.12. CONTINUED EFFECTIVENESS. The terms of this Note, the
subordination effected hereby, and the rights and other obligations of Payee or
the holders of Senior Debt arising hereunder, shall not be affected, modified or
impaired in any manner or to any extent by: (i) any amendment or modification of
or supplement to any Credit Facility (as defined in the Indenture) (to the
extent not prohibited by this Note); (ii) the validity and enforceability of any
of such documents; or (iii) any exercise or non-exercise of any right, power or
remedy under or in respect of the Senior Debt or the Obligations evidenced by
this Note or any of the instruments or documents referred to in clause (i)
above. Payee hereby acknowledges that the provisions of this Note are intended
to be enforceable at all times, whether before the commencement of, in
connection with or premised on the occurrence of a Proceeding (as defined in the
Indenture).
5.13. NO CONTEST; NO SECURITY. Payee agrees that it will not at any
time contest the validity, perfection, priority or enforceability of the Senior
Debt, any Credit Facility or the security interest securing any Credit Facility.
The Payee shall not accept any collateral as security for the Obligations in
respect of this Note at any time.
5.14. CUMULATIVE RIGHTS; NO WAIVERS. Subject to Section 5.12 hereof,
each and every right, remedy and power granted to any Representative for any
Senior Debt hereunder shall be cumulative and in addition to any other right,
remedy or power specifically granted herein, in the related Senior Debt or now
or hereafter existing in equity, at law, by virtue of statute or otherwise, and
may be exercised by any Representative for the Senior Debt or the
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<PAGE>
holders of any Senior Debt, from time to time, concurrently or independently and
as often and in such order as any Representative or the holders of Senior Debt
may deem expedient (subject to the limits provided in Section 5.3 with respect
to payment blockages). Any failure or delay on the part of the Representative
for Senior Debt or the holders of Senior Debt in exercising any such right,
remedy or power, or abandonment or discontinuance of steps to enforce the same,
shall not operate as a waiver thereof or affect the rights of any Representative
or the holders of Senior Debt thereafter to exercise the same, and any single or
partial exercise of any such right, remedy or power shall not preclude any other
or further exercise thereof or the exercise of any other right, remedy or power,
and no such failure, delay, abandonment or single or partial exercise of the
rights of any Representative of Senior Debt or the holders of Senior Debt
hereunder shall be deemed to establish a custom or course of dealing or
performance among the parties hereto.
5.15. EXTENT OF SUBORDINATION. Payor and Payee agree that it is the
intent of the parties that the Obligations under this Note be subordinated in
right of payment to the Obligations in respect of the Senior Debt (including,
without limitation, all Designated Senior Debt) to the same extent that the
Senior Subordinated Notes are subordinated to the Obligations in respect of the
Senior Debt (including, without limitation, the Designated Senior Debt) as
provided in the Indenture. Accordingly, this Note shall be interpreted to give
effect to such intention, and to the extent that the terms of Article 10 of the
Indenture or Section 11.07 of the Indenture shall be amended, modified or
waived, the corresponding provisions of this Section 5 and Section 6.3 hereof
shall be deemed to be automatically amended, modified or waived without further
action on the part of Person in order to give effect to the intent of the
parties expressed in the immediately preceding sentence.
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6. GUARANTEES.
6.1. ISSUANCE OF GUARANTEES; INITIAL GUARANTORS. Each Person who is
or becomes a Guarantor of the Senior Subordinated Notes pursuant to the
Indenture shall guarantee this Note and the Obligations of Payor hereunder (such
guarantee being referred to as a "Purchaser Note Guarantee") to the same extent
that such Guarantor has guaranteed the Senior Subordinated Notes by delivering
to Payee a guarantee in the form attached as Annex A hereto. Each of the
Initial Guarantors has jointly and severally, unconditionally guaranteed this
Note and the Obligations of Payor hereunder by executing and delivering to Payee
such form of guarantee. Each Guarantor hereby agrees that its Purchaser Note
Guarantee shall remain in full force and effect notwithstanding any failure to
endorse on this Note a notation of such Purchaser Note Guarantee. If an officer
whose signature is on this Note or on such Purchaser Note Guarantee ceases to
hold such office following execution of this Note or such Purchaser Note
Guarantee, this Note and such Purchaser Note Guarantee shall be valid
nevertheless.
6.2. RELEASE FOLLOWING RELEASE OF GUARANTEE OF SENIOR SUBORDINATED
NOTES. In the event that a Guarantor's guarantee of the Obligations under the
Senior Subordinated Notes is released pursuant to the terms of the Indenture,
such Guarantor's Purchaser Note Guarantee shall be deemed to be automatically
released and discharged to the extent that such Guarantor's guarantee of the
Obligations under the Senior Subordinated Notes has been so released. Upon
delivery by Payor to Payee of an Officer's Certificate (as defined in the
Indenture) to the effect that a Guarantor's guarantee of the Obligations under
the Senior Subordinated Notes has been released, the Payee shall execute any
documents reasonably required in order to evidence the release of such
Guarantor's Purchaser Note Guarantee.
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Any Guarantor not released from its Obligations under its Purchaser Note
Guarantee shall remain liable for the full amount of principal and interest on
this Note as provided in this Section 6.
6.3. SUBORDINATION OF GUARANTEES. The Obligations of each Guarantor
under its Purchaser Note Guarantee shall be junior and subordinated to the prior
payment in full of all Senior Debt of such Guarantor, and the amounts for which
the Guarantors will be liable under the guarantees issued from time to time with
respect to Senior Debt, on the same basis as the Obligations in respect of this
Note are junior and subordinated to Senior Debt. For the purposes of the
foregoing sentence, Payee shall have the right to receive and/or retain payments
by any of the Guarantors only at such times as they may receive and/or retain
payments in respect of this Note pursuant to terms hereof, including Article 5
hereof. Consistent with the subordination of the Purchaser Note Guarantees, for
purposes of any applicable fraudulent transfer or similar laws, Indebtedness
incurred under any Credit Facility will be deemed to have been incurred prior to
the incurrence by any Guarantor of its liability under its Purchaser Note
Guarantee.
6.4. LIMITATION ON GUARANTOR LIABILITY. For purposes hereof, each
Guarantor's liability shall be limited to the lesser of (i) the aggregate amount
of the Obligations of the Payor under this Note and (ii) the amount, if any,
which would not have (A) rendered such Guarantor "insolvent" (as such term is
defined in the Bankruptcy Code and in the Debtor and Creditor Law of the State
of New York) or (B) left such Guarantor with unreasonably small capital at the
time its Purchaser Note Guarantee was entered into; PROVIDED, that it will be a
presumption in any lawsuit or other proceeding in which a Guarantor is a party
that the amount guaranteed pursuant to such Guarantor's Purchaser Note Guarantee
is the amount set
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forth in clause (i) above unless any creditor, or representative of creditors of
such Guarantor, or debtor in possession or trustee in bankruptcy of the
Guarantor, otherwise proves in such a lawsuit that the aggregate liability of
the Guarantor is the amount set forth in clause (ii) above. In making any
determination as to solvency or sufficiency of capital of a Guarantor in
accordance with the previous sentence, the right of such Guarantor to
contribution from other Guarantors, and any other rights such Guarantor may
have, contractual or otherwise, shall be taken into account.
In order to provide for just and equitable contribution among the
Guarantors, by becoming a Guarantor, each Guarantor shall be deemed to agree,
INTER SE, that in the event any payment or distribution is made by any Guarantor
(a "Funding Guarantor") under its Purchaser Note Guarantee, such Funding
Guarantor shall be entitled to a contribution from all other Guarantors in a PRO
RATA amount based on the Adjusted Net Assets (as defined in the Indenture) of
each Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging Payor's obligations
with respect to this Note or any other Guarantor's Obligations with respect to
its Purchaser Note Guarantee.
7. CERTAIN DEFINITIONS
"AFFILIATE" of any Person (defined in more detail below) means
any other Person directly or indirectly controlling, controlled by, or under
common control with, such Person.
"BANKRUPTCY CODE" means Title 11, United States Code, or any
similar federal, state or foreign law for the relief of debtors.
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"BUSINESS DAY" means each day other than Saturdays, Sundays and
days when commercial banks are authorized or required by law to be closed for
business in New York, New York.
"CALL" means the sale by UDLP of all of the shares of FNSS owned
by it to Nurol pursuant to the provisions of Section 11.4(iii) and 11.4(A) of
the Joint Venture Agreement.
"CALL ELECTION" means the delivery of written notice within the
time periods permitted by the Joint Venture Agreement by Nurol to UDLP
indicating that Nurol has exercised its rights under Section 11.4(iii) and
Section 11.4(A) of the Joint Venture Agreement with respect to the Call.
"CREDIT FACILITIES" means, with respect to Payor or any
Restricted Subsidiary (as defined in the Indenture), one or more debt facilities
(including, without limitation, the Senior Credit Facility) or commercial paper
facilities with banks or other institutional lenders providing for revolving
credit loans, other borrowings (including term loans), receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"DEFAULT" means any event that is or with the passage of time or
the giving of notice (or both) would be an Event of Default.
"EVENT OF DEFAULT" means any of the occurrences specified under
Sections 2.1(a) through 2.1(c) of this Note.
"FNSS" means FMC-Nurol Savunma Sanayii A.S. and its successors.
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"GUARANTOR" means (i) each of (a) United Defense, L.P., (b) UDLP
Holdings Corp. and (c) Iron Horse Investors, L.L.C., (ii) each of Payor's
Subsidiaries which becomes a guarantor of the Senior Subordinated Notes pursuant
to Section 4.19 of the Indenture and (iii) each of Payor's Subsidiaries (as
defined in the Indenture) executing a supplemental indenture in which such
Subsidiary agrees to be bound by the terms of the Indenture; PROVIDED that any
Person constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Guarantee is released in accordance with the terms
hereof.
"INDEBTEDNESS" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations (as defined in the
Indenture) or the balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations (as defined in the Indenture),
except any such balance that constitutes an accrued expense, customer advance,
progress payment or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, as well as all Indebtedness of others secured by a Lien (as defined in the
Indenture) on any asset of such Person (whether or not such Indebtedness is
assumed by such Person), and, to the extent not otherwise included, the
guarantee by such Person of any Indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
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"INDENTURE" means that certain Indenture of Payor dated as of
October 6, 1997 among Payor, UDLP, UDLP Holdings Corp., Iron Horse Investors,
L.L.C., and Norwest Bank Minnesota, N.A., as trustee (the "Trustee"), as the
same may hereafter be amended from time to time.
"INITIAL GUARANTORS" means (i) UDLP, (ii) UDLP Holdings Corp. and
(iii) Iron Horse Investors, L.L.C.
"JOINT VENTURE AGREEMENT" means the Restated Joint Venture
Agreement of FMC-Nurol Savunma Sanayii A.S., as amended by Amendment 1 to the
Restated Joint Venture Agreement dated July 1, 1997.
"LIQUIDATION" means the liquidation and dissolution of FNSS
pursuant to the provisions of Section 11.4(iii) and 11.4(B) of the Joint Venture
Agreement.
"LIQUIDATION ELECTION" means the delivery of written notice
within the time periods permitted by the Joint Venture Agreement by Nurol to
UDLP indicating that Nurol has exercised its rights under Section 11.4(iii) and
Section 11.4(B) of the Joint Venture Agreement with respect to the Liquidation.
"NUROL" means Nurol Inasaat ve Ticaret A.S. and its successors.
"NUROL REVOCATION" means, after delivery by Nurol to UDLP of a
Call Election or a Liquidation Election, (i) a written agreement of Nurol that
it will not pursue the Call or the Liquidation, as applicable, and (ii) the
earlier of the expiration or waiver of any rights to make a Termination Election
or the passage of 365 days after Closing where Nurol has not made a Termination
Election.
"NUROL WAIVER" means either (i) a written agreement of Nurol that
it will make neither a Call Election nor a Liquidation Election nor a
Termination Election or (ii)(x)
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the passage of one hundred twenty days after Closing without Nurol having made a
Call Election or a Liquidation Election and (y) the earlier of the expiration or
waiver of any rights to make a Termination Election or the passage of 365 days
after Closing where Nurol has not made a Termination Election.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PURPORTED TURKISH TERMINATION" means a written notice delivered
to UDLP or FNSS by SSM or it agent stating that SSM has canceled the Turkish
Production Contract pursuant to Section 19.1.3 of the Turkish Production
Contract as a result of the change of control and ownership effected at Closing.
"RESTRICTED SUBSIDIARY" has the meaning set forth in the
Indenture.
"SSM" means the Under Secretariat for Defense Industries of
Turkey.
"SENIOR CREDIT FACILITY" means that certain Credit Agreement
dated as of the date hereof by and among Payor, Iron Horse Investors, L.L.C.,
various lending institutions including Lehman Brothers Commercial Paper Inc. and
Citicorp USA, Inc. (as Documentation Agents), and Bankers Trust Company (as
Administration Agent and as Syndication Agent), including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, restated,
refunded, replaced or refinanced from time to time and any agreement (and
related documents) governing Indebtedness incurred to refund or refinance credit
extensions and commitments then outstanding or permitted to be outstanding under
such Senior Credit Facility or a successor Credit Facility, whether by the same
or any other
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lender or group of lenders. Payor shall promptly notify Payee of any other
lender or group of lenders. Payor shall promptly notify Payee of any such
refunding or refinancing of the existing Senior Credit Facility.
"SENIOR DEBT" means (i) indebtedness of Payor (and its Restricted
Subsidiaries, as applicable) for money borrowed and all obligations, whether
direct or indirect, under guarantees, letters of credit, foreign currency or
interest rate swaps, foreign exchange contracts, caps, collars, options, hedges
or other agreements or arrangements designed to protect against fluctuations in
currency values or interest rates, other extensions of credit, expenses, fees,
reimbursements, indemnities and all other amounts (including interest at the
contract rate accruing on or after the filing of any petition in bankruptcy or
reorganization relating to Payor (and its Restricted Subsidiaries, as
applicable) whether or not a claim for post-filing interest is allowed in such
proceeding) owed by Payor (and its Restricted Subsidiaries, as applicable)
under, or with respect to, the Senior Credit Facility or any other Credit
Facility, (ii) the principal of and premium, if any, and accrued and unpaid
interest, whether existing on the date hereof or hereafter incurred, in respect
of (A) indebtedness of Payor (and its Restricted Subsidiaries, as applicable)
for money borrowed, (B) express written guarantees by Payor (and its Restricted
Subsidiaries, as applicable) of indebtedness for money borrowed by any other
Person, (C) indebtedness evidenced by notes, debentures, bonds, or other
instruments of indebtedness for the payment of which Payor (and its Restricted
Subsidiaries, as applicable) is responsible or liable, by guarantees or
otherwise, (D) obligations of Payor (and its Restricted Subsidiaries, as
applicable) for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (E) obligations of Payor (and
its Restricted Subsidiaries, as applicable) under any agreement
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to lease, or any lease of, any real or personal property which, in accordance
with GAAP (as defined in the Indenture), is classified on Payor's consolidated
balance sheet as a liability, and (F) obligations of Payor (and its Restricted
Subsidiaries, as applicable) under interest rate swaps, caps, collars, options
and similar arrangements and foreign currency hedges and (iii) modifications,
renewals, extensions, replacements, refinancing and refundings of any such
indebtedness, obligations or guarantees, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is
expressly provided that such indebtedness, obligations or guarantees, or such
modifications, renewals, extensions, replacements, refinancing or refundings
thereof, are not superior in right of payment to the Senior Subordinated Notes;
PROVIDED that Senior Debt will not be deemed to include (a) any obligation of
Payor or any Restricted Subsidiary of Payor to any Subsidiary (other than
obligations pledged pursuant to the Senior Credit Facility, as security for the
obligations of Payor (and its Restricted Subsidiaries, as applicable
thereunder), (b) any liability for federal, state, local or other taxes owed or
owing by Payor or any Restricted Subsidiary of Payor, as applicable),
(c) advance payments and progress payments to customers and any accounts payable
or other liability to trade creditors arising in the ordinary course of
business, (d) any Indebtedness, guarantee or obligation of Payor or any
Restricted Subsidiary of Payor which is expressly subordinate or junior by its
terms in right of payment to any other Indebtedness, guarantee or obligation of
Payor or any Restricted Subsidiary of Payor, (e) Indebtedness with respect to
the Senior Subordinated Notes, (f) that portion of any Indebtedness incurred in
violation of Section 4.09 of the Indenture or (g) Indebtedness of Payor or any
Restricted Subsidiary of Payor which is classified as non-recourse in accordance
with GAAP or any
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unsecured claim arising in respect thereof by reason of the application of
section 1111(b)(1) of the Bankruptcy Code (as defined in the Indenture).
"SENIOR SUBORDINATED NOTES" means (i) the 8 3/4% Senior
Subordinated Notes Due 2007 issued by Payor as of the date hereof pursuant to
the Indenture (the "Original Notes"), (ii) the Exchange Notes (as defined in the
Indenture) to be issued in exchange for the Original Notes and (iii) such other
notes or other evidence of indebtedness issued in exchange for the Original
Notes or Exchange Notes or issued in connection with any repayment or
refinancing of the Original Notes or the Exchange Notes.
"TERMINATION ELECTION" shall mean an election by Nurol to
terminate the Joint Venture Agreement pursuant to Article 18 thereof as a result
of the change of control and ownership effected by the Closing.
"TURKISH ACKNOWLEDGMENT" means either (i) a letter or other
writing from SSM acknowledging the transaction between Sellers and Buyer that
evidences the intention of SSM to continue the Turkish Production Contract
despite the change of ownership and control effected by the Closing or (ii) the
passage of 365 days after Closing where SSM has not made a Purported Turkish
Termination.
"TURKISH PRODUCTION CONTRACT" means the contract between the
Under Secretariat for Defense Industries and FNSS.
"UDLP" means United Defense, L.P., a Delaware limited
partnership.
8. MISCELLANEOUS
8.1. SECTION HEADINGS. The section headings contained in this Note
are for reference purposes only and shall not affect the meaning or
interpretation of this Note.
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8.2. AMENDMENT AND WAIVER. Subject to Section 5.14 hereof and the
last sentence of this Section 8.2, no provision of this Note may be amended or
waived unless Payor shall have obtained the written agreement of Payee and, as
to amendments to Sections 1.1, 1.2, 1.3, 2.2, 2.3, 5 or 6.3 hereof or any
amendment hereof that would have the effect of increasing the principal amount
of this Note (unless there are no amounts and no commitments outstanding under
the Senior Credit Facility), the lenders under the Senior Credit Facility. No
failure or delay in exercising any right, power or privilege hereunder shall
imply or otherwise operate as a waiver of any rights of Payee, nor shall any
single or partial exercise thereof preclude any other or future exercise thereof
or the exercise of any other right, power or privilege. Notwithstanding the
foregoing, in the event that the holders of the Senior Subordinated Notes agree
to modify or waive any provision of the Indenture incorporated by reference in
this Note, such provisions shall be deemed to be modified or waived herein to
the same extent and in the same manner, as if such provision was modified or
waived by Payee.
8.3. GOVERNING LAW. This Note shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to any
conflicts of laws principles thereof that would otherwise require the
application of the law of any other jurisdiction. Any dispute with respect to
this Note that relates to the relative rights and interests of Payor and Payee
hereunder (including any dispute relating to Section 4 hereof or the terms of
the Purchase Agreement or the Supplemental Agreement) and does not affect or
impact the relative right(s) or interests of Payee, on the one hand, and the
holders of the Senior Debt, the Trustee (as defined in the Indenture) or the
holders of the Senior Subordinated Notes, on the other hand, shall be resolved
in accordance with Section 29 of
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the Purchase Agreement. Any dispute that affects or impacts the relative rights
and interests of Payee, on the one hand, and the holders of the Senior Debt, the
Trustee (as defined in the Indenture) or the holders of the Senior Subordinated
Notes, on the other hand, shall be brought in the courts of the State of New
York or of the United States for the Southern District of New York, and, by
execution and delivery of this Note or the acknowledgement attached hereto, each
of Payor and Payee hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts.
8.4. LOST, STOLEN, DESTROYED OR MUTILATED NOTE. Upon receipt of
evidence reasonably satisfactory to Payor of the loss, theft, destruction or
mutilation of this Note and of indemnity arrangements reasonably satisfactory to
Payor from or on behalf of the holder of this Note, and upon surrender or
cancellation of this Note if mutilated, Payor shall make and deliver a new note
of like tenor in lieu of such lost, stolen, destroyed or mutilated Note, at
Payee's expense.
8.5. WAIVER OF PRESENTMENT, ETC. Except as otherwise provided herein,
presentment, demand, protest, notice of dishonor and all other notices are
hereby expressly waived by Payor.
8.6. USURY. Nothing contained in this Note shall be deemed to
establish or require the payment of a rate of interest in excess of the
maximum rate legally enforceable. If the rate of interest called for under
this Note at any time exceeds the maximum rate legally enforceable, the rate
of interest required to be paid hereunder shall be automatically reduced to
the maximum rate legally enforceable. If such interest rate is so reduced
and thereafter the maximum rate legally enforceable is increased, the rate of
interest required to be paid
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hereunder shall be automatically increased to the lesser of the maximum rate
legally enforceable and the rate otherwise provided for in this Note.
8.7. NOTICES. Any notice, request, instruction or other document to
be given hereunder by either party to the other shall be in writing and shall be
deemed given when received and shall be (i) delivered personally or (ii) mailed
by certified mail, postage prepaid, return receipt requested or (iii) delivered
by Federal Express or a similar overnight courier or (iv) sent via facsimile
transmission to the fax number given below, as follows:
IF TO PAYOR, ADDRESSED TO:
United Defense Industries, Inc.
c/o TC Group, L.L.C.
1001 Pennsylvania Avenue, N.W.
Suite 220S
Washington, DC 20004
Attention: Allan M. Holt
Fax Number: (202) 347-9250
WITH A COPY TO:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, DC 20004-2505
Attention: Bruce E. Rosenblum
Fax Number: (202) 637-2201
IF TO PAYEE, ADDRESSED TO:
FMC Defense Corp.
c/o FMC Corporation
200 East Randolph Drive
Chicago, Illinois 60601
Attention: J. Paul McGrath
Fax Number: (312) 861-6012
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WITH A COPY TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Glen E. Hess, P.C.
Fax Number: (312) 861-2200
or to such other place and with such other copies as either party may designate
as to itself by written notice to the other party. In the event that any notice
under this Note is required to be made on or as of a day which is not a Business
Day, then such notice shall not be required to be made until the first day
thereafter which is a Business Day.
8.8. ASSIGNMENT. Payee may not assign this Note to any Person other
than an Affiliate of Payee without the prior written consent of Payor (which
consent shall not be unreasonably withheld).
8.9. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS. No past, present or future director, officer, employee,
incorporator, partner, member or stockholder of Payor, any Subsidiary of Payor,
any Permitted Joint Venture (as defined in the Indenture) or any Guarantor, or
any member, partner or stockholder of any such entity, as such (other than the
Guarantors, as such), shall have any liability for any Obligations of Payor
under this Note or for any claim based on, in respect of, or by reason of, such
Obligations or their creation. Payee waives and releases all such liability.
The waiver and release are part of the consideration for issuance of this Note.
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IN WITNESS WHEREOF, Payor has executed and delivered this Note as
of the date hereinabove first written.
UNITED DEFENSE INDUSTRIES, INC.
By: /s/ Allan M. Holt
-----------------
Name: Allan M. Holt
Title: President
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ACKNOWLEDGMENT
FMC Corporation, Payee under the attached 8 3/4% Subordinated
Note, dated as of October 6, 1997 (the "Note") hereby acknowledges the
provisions of this Note (including, without limitation, Sections 4 and 5) and
agrees to be bound by the provisions thereof.
FMC DEFENSE CORP.
By: /s/ Daniel W. Schuchardt
-----------------------------------
Title: Assistant Treasurer
-----------------------------------
Name: Daniel W. Schuchardt
-----------------------------------
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[LATHAM & WATKINS LETTERHEAD]
February 5, 1997
United Defense Industries, Inc.
1525 Wilson Boulevard, Suite 700
Arlington, Virginia 22209-2411
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
In connection with the registration of $200,000,000 aggregate principal
amount of its 8-3/4% Senior Subordinated Notes due 2007, Series B (the "New
Notes") by United Defense Industries, Inc., a corporation incorporated under
the laws of the State of Delaware (the "Company"), together with guarantees
of the New Notes (the "Guarantees") by UDLP Holdings Corp., a Delaware
corporation, Iron Horse Investors, L.L.C., a Delaware limited liability
company, and United Defense, L.P., a Delaware limited partnership
(collectively, the "Guarantors"), on Form S-4 filed with the Securities and
Exchange Commission (the "Commission") on December 31, 1997 (the
"Registration Statement"), you have requested our opinion with respect to the
matters set forth below. The New Notes will be issued pursuant to an
indenture (the "Indenture"), dated as of October 6, 1997, among the Company
and Norwest Bank Minnesota, National Association, as trustee (the "Trustee").
The New Notes will be issued in exchange for the Company's outstanding 8-3/4%
Senior Subordinated Notes due 2007, Series A (the "Old Notes") on the terms
set forth in the prospectus contained in the Registration Statement and the
Letter of Transmittal filed as an exhibit thereto (the "Exchange Offer").
In our capacity as your special counsel, we have made such legal and
factual examinations and inquiries, including an examination of originals or
copies certified or otherwise
<PAGE>
United Defense Industries, Inc.
February 5, 1997
Page 2
identified to our satisfaction of such documents, corporate records and
instruments, as we have deemed necessary or appropriate for purposes of this
opinion.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity to authentic original documents of all documents submitted to us
as copies.
We are opining herein as to the effect on the subject transactions only
of the internal laws of the State of New York and the General Corporation Law
of the State of Delaware and we express no opinion with respect to the
applicability thereto, or the effect thereon, of the laws of any other
jurisdiction or, in the case of Delaware, any other laws, or as to any
matters of municipal law or the laws of any local agencies within any state.
Subject to the foregoing and the other matters set forth herein, it is
our opinion that, as of the date hereof:
1. The New Notes, when duly executed, issued, authenticated and
delivered in accordance with the terms of the Exchange Offer and the
Indenture, will be legally valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms.
2. The Guarantees, when duly executed and delivered and when the New
Notes are duly executed, issued, authenticated and delivered in accordance
with the terms of the Exchange Offer and the Indenture, will be legally valid
and binding obligations of the Guarantors, enforceable against the Guarantors
in accordance with their terms.
The opinions rendered in paragraphs 1 and 2 above are subject to the
following exceptions, limitations and qualifications: (i) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting the rights and remedies of
creditors; (ii) the effect of general principles of equity, whether
enforcement is considered in a proceeding in equity or at law, and the
discretion of the court before which any proceeding therefor may be brought
and (iii) we express no opinion concerning the enforceability of the waiver
of rights or defenses contained in Section 4.06 of the Indenture.
To the extent that the obligations of the Company and the Guarantors
under the Indenture may be dependent upon such matters, we have assumed for
purposes of this opinion that (i) the Trustee is validly existing and in good
standing under the laws of its jurisdiction of organization; (ii) the Trustee
has been duly qualified to engage in the activities contemplated by the
Indenture; (iii) the Trustee is in compliance generally, and with respect
<PAGE>
United Defense Industries, Inc.
February 5, 1997
Page 3
to acting as Trustee under the Indenture, with all applicable laws and
regulations; and (iv) the Trustee has the requisite organizational and other
power and authority to perform its obligations under the Indenture.
We have not been requested to express and, with your knowledge and
consent, do not render any opinion with respect to the applicability to the
obligations of the Company or the Guarantors under the New Notes, the
Guarantees or the Indenture of Sections 547 and 548 of Title 11 of the
Bankruptcy Reform Act of 1978, as amended, or applicable state law
(including, without limitation, Article 10 of the New York Debtor & Creditor
Law) relating to fraudulent transfers and obligations.
We consent to your filing this opinion as an exhibit to the Registration
Statement and to the reference to our firm contained under the heading "Legal
Matters".
Very truly yours,
/s/ Latham & Watkins
<PAGE>
EXHIBIT 8.1
[LATHAM & WATKINS LETTERHEAD]
February 5, 1998
United Defense Industries, Inc.
1525 Wilson Boulevard, Suite 700
Arlington, Virginia 22209-2241
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
You have requested our opinion concerning the material federal income
tax consequences of the exchange of 8 3/4% Senior Subordinated Notes due
2007, Series B of United Defense Industries, Inc. (the "Company") which have
been registered under the Securities Act of 1933, as amended, for outstanding
8 3/4% Senior Subordinated Notes due 2007, Series A of the Company, in
connection with the Registration Statement on Form S-4 filed herewith (the
"Registration Statement").
The facts, as we understand them, and upon which with your permission we
rely in rendering the opinion expressed herein, are set forth in the
Registration Statement. Based on such facts, it is our opinion that the
material federal income tax consequences are accurately set forth under the
heading "Certain Federal Income Tax Considerations" in the Registration
Statement. No opinion is expressed as to any matter not discussed therein.
This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters all of which are
subject to change either prospectively or retroactively. Also, any variation
or difference in the facts from those set forth in the Registration Statement
may affect the conclusions stated herein.
<PAGE>
United Defense Industries, Inc.
February 5, 1998
Page 2
This opinion is rendered to you solely for use in connection with the
Registration Statement. We consent to your filing this opinion as an exhibit
to the Registration Statement, and to the reference to our firm under the
headings "Certain Federal Income Tax Considerations" and "Legal Matters."
Very truly yours,
/s/ Latham & Watkins
----------------------------
<PAGE>
STATE OF ALABAMA
CALHOUN COUNTY
LEASE AGREEMENT
This lease agreement is made and entered into on November 18, 1994, by and
between CALHOUN COUNTY ECONOMIC DEVELOPMENT COUNCIL, a public corporation,
("Lessor"), and UNITED DEFENSE LP, a Delaware partnership, ("Lessee").
ARTICLE 1. DEMISE, DESCRIPTION, USE, TERM, AND RENT
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, that
certain property, hereinafter called the "leased premises", situated in the City
of Anniston, Calhoun County, Alabama, and described as follows:
SEE ATTACHED PROPERTY DESCRIPTION
commencing on June 1, 1994, and ending on May 31, 1998 for the rent payable as
specified in Article 2.
ARTICLE 2. RENT
MINIMUM RENT
2.01. Lessee shall pay Lessor at P.O. Box 2283, Anniston, AL 36202, or
at such other place as the Lessor shall designate from time to time in writing,
as rent for the leased premises, as follows:
(a) Twenty Thousand Eight Hundred Thirty-three and 33/100
($20,883.33) per month, payable on the first day of each month during the term
of this Lease.
EFFECT OF DEFAULT IN RENT AND OTHER PAYMENTS
2.02. If Lessee defaults in the payment of any installment of rent
hereunder, such installment shall bear interest at the rate of 12 percent per
annum from the day it is due until actually paid. In like manner, all other
obligations, benefits, and moneys which may become due to Lessor from Lessee
under the terms hereof, or which are paid by Lessor because of Lessee's default
hereunder, shall bear interest at the rate of 12 percent per annum from the due
date until paid, or, in the case of sums paid by Lessor, because of Lessee's
default hereunder, from the date such payments are made by Lessor until the date
Lessor is reimbursed by Lessee therefor.
ARTICLE 3. TAXES AND ASSESSMENTS
ADDITIONAL RENT - PAYMENTS IN LIEU OF SCHOOL TAXES
3.01. (a) Lessor and Lessee acknowledge that, under present law, the
leased premises, so long as it is owned by the Lessor is exempt from ad valorem
taxation by the State of Alabama
<PAGE>
or any other political or taxing subdivision thereof, including Calhoun County.
Nonetheless, the Lessee hereby agrees to make annual additional rent payments to
the Anniston City School System and the Calhoun County School System in amounts
equal to the respective ad valorem school systems. Such annual payments shall
be due on December 31, 1994 and on each December 31 thereafter so long as the
Lease remains in effect. The amount of each such annual payment shall be
determined by the Tax Assessor of Calhoun County, Alabama. Lessor shall provide
the Lessee with written notice of the amount of each such annual payment at
least thirty (30) days prior to the due date thereof.
Lessor acknowledges that the obligation of the Lessee to make the payment of
additional rent provided for in this section is conditioned upon the Leased
premises remaining exempt from ad valorem taxation throughout the period of time
to which such payment is referable. If, as a result of a change in law prior to
the termination of this Lease Agreement, the Leased premises become subject to
ad valorem taxes, the Lessee shall pay such taxes as additional rent.
HOLD HARMLESS CLAUSE
3.02. Lessee agrees to and shall protect and hold harmless Lessor and
the leased premises for liability for any and all personal property taxes,
personal property assessments, and personal property charges, together with any
interest, penalties, or other sums thereby imposed, and from any sale or other
proceeding to enforce payment thereof. This section is for the benefit of the
parties hereto and is not given to protect third parties.
SEPARATE ASSESSMENTS OF PERSONAL PROPERTY
3.03. During the term hereof, Lessee shall cause all taxes,
assessments, and other charges levied on or imposed on any of its personal
property situated in, on or about the leased premises to be levied on Lessee.
TAXES EXCLUDED
3.04. Nothing herein contained requires, or shall be construed to
require, Lessee (or any of its subtenants) to pay any property, gift, estate,
inheritance, or other tax assessed against Lessor or its heirs or successors and
assigns, or any income or other tax, assessment, charge, or levy on the rent
payable by Lessor under this lease.
ARTICLE 4. INSURANCE
4.01. Lessee agrees to and shall, within seven (7) days from the date
hereof, secure from a good and responsible company or companies doing insurance
business in the State of Alabama and maintain during the entire term of this
lease, the following insurance coverage:
(1) Public liability insurance in the minimum amount of One Million
and 00/100 Dollars ($1,000,000.00) for loss from an accident resulting in bodily
injury to or death of persons, and One Million and 00/100 Dollars
($1,000,000.00) for loss from an accident resulting
2
<PAGE>
in damage to or destruction of property; and umbrella insurance coverage in the
amount of an additional One Million and 00/100 Dollars ($1,000,000.00).
(2) Fire and extended coverage insurance on Lessee's fixtures, goods,
wares, and merchandise in or on the leased premises, with coverage in an amount
of not less than its full replacement value.
4.02. Lessor agrees to and shall, within seven (7) days from the date
hereof, secure from a good and responsible company or companies doing insurance
business in the State of Alabama and maintain during the entire term of this
lease, the following insurance coverage:
(1) Fire and extended coverage insurance in an amount of not less
than 100% of the value of the leased premises and other improvements on the
leased premises, provided that insurance in that percentage can be obtained,
and, if not, then to the highest percentage that can be obtained less than the
said 100%, but in no event will said coverage be less than One Million Five
Hundred Thousand and 00/100 Dollars ($1,500,000.00).
(2) In the event that Lessor shall cause any work on the leased
premises to be done pursuant to the provisions of this Article 4, before said
work shall commence, it shall secure public liability insurance in the minimum
amount of One Million and 00/100 Dollars ($1,000,000.00) for loss from an
accident resulting in bodily injury to or death of persons, and One Million and
00/100 Dollars ($1,000,000.00) for loss from an accident resulting in damage to
or destruction of property; and umbrella insurance coverage to aggregate at
least an additional One Million and 00/100 Dollars ($1,000,000.00).
ADDITIONAL INSUREDS
4.03. Lessor and Lessee agree that the other shall be named as an
additional insured on the aforementioned policies of insurance with respect to
this lease only.
PROOF OF COVERAGE
4.04. Lessee and Lessor shall supply to each other appropriate
certificates of insurance evidencing such insurance which shall be delivered to
Lessor and Lessee.
PROTECTION AGAINST CANCELLATION
4.05. Proof must also be given by Lessor and Lessee, pursuant to
Paragraph 4.04, that each of the policies provided for in this article expressly
provides that the policy shall not be canceled or altered without 10 days' prior
written notice to the Lessor and Lessee.
FAILURE TO SECURE
4.06. If either party at any time during the term hereof should fail to
secure or maintain the foregoing insurance, the other party shall be permitted
to obtain such insurance in the defaulting party's name or as the agent of the
defaulting party and shall be compensated by the
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<PAGE>
defaulting party for the cost of the insurance premiums. The defaulting party
shall pay the other party interest on paid insurance premiums at the rate of 12
percent per annum computed from the date written notice is received that the
premiums have been paid.
PROCEEDS
4.07. Proceeds from any such policy or policies on the leased premises
shall be payable to Lessor, who shall use such proceeds to make repairs as
provided below.
FIRE AND CASUALTY DAMAGE
4.08. If the building or other improvements on the leased premises
should be damaged or destroyed by fire, flood, or other casualty, Lessee shall
give immediate written notice thereof to Lessor.
DESTRUCTION
(1) If the building on the leased premises should be totally
destroyed by fire, flood, tornado or other casualty or if it should be so
damaged that rebuilding or repairs cannot reasonably be completed within one
hundred (100) working days from the date of written notification by Lessee to
Lessor of the occurrence of the damage, this lease shall terminate and rent
shall be abated for the unexpired portion of this lease, effective as of the
date of said written notification.
PARTIAL DAMAGE
(2) If the building or other improvements on the lease premises
should be damaged by fire, flood, or other casualty, but not to such an extent
that rebuilding or repairs cannot reasonably be completed within one hundred
(100) working days from the date of written notification by Lessee to Lessor of
the occurrence of the damage, this lease shall not terminate, but Lessor shall,
if the casualty has occurred prior to the final six (6) months of the lease term
at their sole cost and risk proceed forthwith to rebuild or repair such building
and other improvements to substantially the same condition in which they existed
prior to such damage. If the casualty occurs during the final six (6) months of
the lease term, Lessor shall not be required to rebuild or repair such damage.
If the building and other improvements are to be rebuilt or repaired and are
untenantable in whole or in part following such damage, the rent payable
hereunder during the period in which they are untenantable shall be adjusted
equitably. In the event that Lessor should fail to complete such rebuilding or
repairs within one hundred (100) working days from the date of written
notification by Lessee to Lessor of the occurrence of the damage, Lessee may at
its option terminate this lease by written notification at such time to Lessor,
whereon all rights and obligations hereunder shall cease.
ARTICLE 5. UTILITIES
5.01. Lessee shall during the term hereof pay all charges for
telephone, gas electricity, sewage, and water used in or on the leased premises
and for the removal of rubbish therefrom
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<PAGE>
immediately on becoming due and shall hold Lessor harmless from any liability
therefor. Lessee further agrees to pay all charges for repairs to water meters
on the leased premises whether necessitated by ordinary wear and tear,
temperature extremes, accident, or any other causes. Such payments shall be
made immediately on become due.
ARTICLE 6. WASTE AND NUISANCE
6.01. Lessee shall not commit, or suffer to be committed, any waste on
the leased premises, nor shall he maintain, commit, or permit the maintenance or
commission of any nuisance on the leased premises or use the leased premises for
any unlawful purpose.
ARTICLE 7. REPAIRS AND MODIFICATIONS
LESSEE'S DUTY TO REPAIR AND MAINTAIN
7.01. Lessee agrees to keep the leased premises in good order and
repair, reasonable wear and tear (and damage by accident, fire, or other
casualty not resulting from Lessee's negligence) excepted. Lessee further
agrees to keep the leased premises clean, and to repair or replace all broken or
damaged doors, windows, plumbing fixtures and pipes, floors, stairways,
railings, or other portions of the leased premises. Lessee also agrees to
maintain the facilities appurtenant to the leased premises, including entryways
and awnings. Lessee shall keep the said pavements and appurtenances free of ice
and snow and trash and expressly agrees to assume sole liability for accidents
alleged to have been caused by their defective condition. Lessee will not burn
any trash of any kind in or about the building, nor keep or display any
merchandise or otherwise obstruct he sidewalks or areaways adjacent to the
premises without the written consent of Lessor. Lessee shall not use or permit
the use of any portion of said premises as sleeping apartments or lodging rooms.
Lessors shall maintain all pavement and curbing appurtenant to the leased
premises. Lessee agrees to do all maintenance and make all repairs required by
this paragraph in a good and workmanlike manner.
ARTICLE 8. ALTERATIONS, IMPROVEMENTS, AND FIXTURES
8.01. Lessee shall have the right to improve, add to, or alter the
leased premises and to install fixtures thereon with the written consent of
Lessor; provided, however, that he shall not remove any such improvements,
additions, alterations, or fixtures without the prior written consent of Lessor,
and provided further, that on expiration or sooner termination of this lease,
all improvements, including fixtures and any addition, alterations, or repair to
the premises placed on or made to the premises by Lessee during the term hereof,
shall revert to and become the absolute property of Lessor, free and clear of
any and all claims against them by Lessee or any third person, and Lessee hereby
agrees to hold Lessor harmless from any claims that may be made against such
improvements by any third persons. Lessor shall not unreasonably withhold his
consent for Lessee to make nonstructural alterations, additions, and
improvements. PROVIDED, HOWEVER, that Lessee shall be permitted to remove trade
fixtures from the leased premises at any time during the term hereof or within
ten (10) days after the expiration or sooner termination of this lease and not
otherwise if such removal of trade fixtures can be
5
<PAGE>
effected without injury to the leased premises and if any such trade fixture
shall not have become, by the manner in which it is affixed, an integral part of
the leased premises.
8.02. Lessee shall have the right to erect signs on any portion of the
leased premises, including, but not limited to, the exterior walls of the
building, subject to applicable laws and deed restrictions. Lessee shall remove
all signs at the termination of this lease, and shall repair any damage and
close any holes caused by such removal.
ARTICLE 9. QUIET POSSESSION
COVENANT OF QUIET POSSESSION
9.01. Lessor shall, on the commencement date of the term of this Lease
as hereinabove set forth, place Lessee in quiet possession of the leased
premises and shall secure him in the quiet possession thereof against all
persons lawfully claiming the same during the entire lease term and each
extension thereof.
COVENANT REGARDING ENCUMBRANCES
9.02. (1) Lessor covenants that the leased premises are not subject to
any lien, claim, or encumbrance, except as hereinafter set forth, and that it is
not in default or arrears in the making of any payment or the performance of any
obligation relating to the leased premises.
(2) The leased premises are subject to the following:
(a) Mortgage to South Trust Bank of Calhoun County, N.A. dated
January 6th, 1994 in the amount of $1,500,000.00, and recorded in
Book 1905, Page 83, in the Office of the Probate Judge of Calhoun
County, Alabama.
ARTICLE 10. TERMINATION OR EXTENSION
OPTION TO EXTEND
10.01. Lessee is hereby granted and shall, if not at the time in default
under this lease, have an option to extend the term of this Lease in five
successive periods of one year each, but otherwise on the same terms,
covenants, and conditions herein contained.
RENT FOR ADDITIONAL TERM
10.02. The rent for each additional term, which Lessee agrees to pay on
the same basis and in the same periodic installments as the original rent, shall
be the greater of:
(a) the amount of rent which was payable for the next preceding
rental term, whether original or renewal; or
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<PAGE>
(b) the rent due in the preceding subparagraph (a) multiplied by the
Comparative Index and divided by the Base Index.
NOTE: for purposes of the above calculation, the term "Consumer Price Index
shall mean the Consumer Price Index for all Urban Customers, All Cities, as
determined by the United States Department of Labor, Bureau of Labor (1967
equals 100). The term "Comparative Index" shall mean the Consumer Price Index
published for the month of January next preceding the month when LESSEE
exercises its option to renew. The term "Base Index" shall mean the Consumer
Price Index in effect for the month of January of the year in which the previous
term began.
HOW EXERCISED
10.03. This option shall be exercised only by Lessee's delivering to
Lessor in person or by United States certified mail on or before December 1st,
1997, written notice of its election to extend the term of this lease for the
first one-year extension as herein provided; on or before December 1st, 1998,
written notice of its election to further extend the term of this lease for the
second one-year extension as herein provided; on or before December 1st, 1999,
written notice of its election to further extend the term of this lease for the
third one-year extension as herein provided; on or before December 1st 2001,
written notice of its election to further extend the term of this lease for the
fourth one-year extension as herein provided.
EFFECT OF HOLDING OVER
10.04. In the event Lessee does not extend the term of this Lease as
herein provided, and holds over beyond the expiration of the term hereof, such
holding over shall be deemed a month-to-month tenancy only, at the rental of
Thirty Thousand and 00/100 Dollars ($30,000.00) per month, payable on the 1st
day of each and every month thereafter until the tenancy is terminated in a
manner provided by law.
ARTICLE 11. SURRENDER OF PREMISES
11.01. Lessee shall, without demand therefor and at his own cost and
expense within fifteen (15) days after expiration or sooner termination of the
term hereof or of any extended term hereof remove all property belonging to him
and all alterations, additions, or improvements, and fixtures which by the terms
hereof he is permitted to remove; repair all damage to the leased premises
caused by such removal; and restore the eased premises to the condition they
were in prior to the installation of the property so removed. Any property not
so removed shall be deemed to have been abandoned by Lessee and may be retained
or disposed of by Lessor.
SURRENDER
11.02. Lessee agrees to and shall, on expiration or sooner termination
of the term hereof promptly surrender and deliver the leased premises to Lessor
without demand therefor in good condition, ordinary wear and tear and damage by
the elements, fire, or act of God, or by other cause beyond the reasonable
control of Lessee excepted.
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<PAGE>
ARTICLE 12. CONDEMNATION
ALL OF PREMISES
12.01. If during the term of this lease or any extension or renewal
thereof, all of the leased premises should be taken for any public or
quasi-public use under any law, ordinance, or regulation or by right of eminent
domain, or should be sold to the condemning authority under threat of
condemnation, this lease shall terminate and the rent shall be abated during the
unexpired portion of this lease, effective as of the date of the taking of said
premises by the condemning authority.
PARTIAL
12.02. If less than all of the leased premises shall be taken for any
public or quasi-public use under any law ordinance, or regulation, or by right
of eminent domain, or should be sold to the condemning authority under threat of
condemnation, this lease shall not terminate but Lessor shall forthwith at their
sole expense, restore and reconstruct the building and other improvements,
situated on the leased premises, provided such restoration and reconstruction
shall make the same reasonably tenantable and suitable for the uses for which
the premises are leased. The rent payable hereunder during the unexpired
portion of this lease shall be adjusted equitably.
ALLOCATION OF AWARDS
12.03. Lessor and Lessee shall each be entitled to receive and retain
such separate awards and portions of lump-sum awards as may be allocated to
their respective interests in any condemnation proceedings. The termination of
this lease shall not affect the rights of the respective parties to such awards.
ARTICLE 13. DEFAULTS AND REMEDIES
13.01. If Lessee shall allow the rent to be in arrears more than ten
(10) days after written notice of such delinquency, or shall remain in default
under any other condition of this lease for a period of ten (10) days after
written notice from Lessor, or should any other person than Lessee secure
possession of the premises, or any part thereof, by reasons of any receivership,
bankruptcy proceedings, or other operation of law in any manner whatsoever,
Lessor may at its option, without notice to Lessee, terminate this Lease and
declare all rental payments to be made pursuant to this Lease immediately due
and payable, or, in the alternative, Lessor may re-enter and take possession of
said premises and remove all persons and property therefrom, without being
deemed guilty of any manner of trespass, and relet the premises or any part
thereof, for all or any part of the remainder of said term, to a party
satisfactory to Lessor, and at such monthly rental as Lessor may with reasonable
diligence be able to secure. Should Lessor be unable to relet after reasonable
efforts to do so, or should such monthly rental be less than the rental Lessee
was obligated to pay under this lease, or any renewal thereof, plus the expense
of reletting, then Lessee shall pay the amount of such deficiency to Lessor.
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<PAGE>
It is expressly agreed that in the event of default by Lessee hereunder,
Lessor shall have a lien upon all goods, chattels, or personal property of any
description belonging to Lessee which are placed in, or become a part of, the
leased premises, as security for rent due and to become due for the remainder of
the current lease term, which lien shall not be in lieu of or in any way affect
any statutory Lessor's liens given by law, but shall be cumulative thereto; and
Lessee hereby grants to Lessor a security interest in all such personal property
placed in said leased premises for such purposes. This shall not prevent the
sale by Lessee of any merchandise in the ordinary course of business free of
such lien to Lessor. In the event Lessor exercise the option to terminate the
leasehold, and to re-enter and relet the premises as provided in the preceding
paragraph, then Lessor may take possession of all of Lessee's property on the
premises and sell the same at public or private sale after giving Lessee
reasonable notice of the time and place of any public sale or of the time after
which any private sale is to be made, for cash or on credit, or for such prices
and terms as Lessor deem best, with or without having the property present at
such sale. The proceeds of such sale shall be applied first to the necessary
and proper expense of removing, storing and selling such property, then to the
payment of any rent due or to become due under this lease, with the balance, if
any, to be paid to Lessee.
All rights and remedies of Lessor under this lease shall be cumulative, and
none shall exclude any other right or remedy at law. Such rights and remedies
may be exercised and enforced concurrently and whenever and as often as occasion
therefor arises.
DEFAULT BY LESSOR
13.02. If Lessor default in the performance of any term, covenant, or
condition required to be performed by them under this agreement, Lessee may
elect either one of the following:
(1) After not less than ten (10) days' notice to Lessor, Lessee may
remedy such default by any necessary action, and in connection with such remedy
may pay expenses and employ counsel; all reasonable sums expended or obligations
incurred by Lessee in connection therewith shall be paid by Lessor to Lessee on
demand, and on failure of such reimbursement, Lessee may, in addition to any
other right or remedy that Lessee may have, deduct the costs and expenses
thereof from rent subsequently becoming due hereunder; or
(2) Elect to terminate this agreement on giving at least ten (10)
days' notice to Lessor of such intention, thereby terminating this agreement on
the date designated in such notice, unless Lessor shall have cured such default
prior to expiration of the ten (10)-day period.
ARTICLE 14. INSPECTION BY LESSOR
Lessee shall permit Lessor and their agents to enter into and upon the
leased premises at all reasonable times for the purpose of inspecting the same
or for the purpose of maintaining or making repairs or alterations to the
building.
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<PAGE>
ARTICLE 15. ASSIGNMENT AND SUBLEASE
ASSIGNMENT AND SUBLETTING BY LESSEE
15.01. Lessee shall have the right without the prior written consent of
Lessor to assign this Lease, and any interest therein, and to sublet the leased
premises, or any part thereof, or any right or privilege pertinent thereto,
provided each assignee assumes in writing all of Lessee's obligations under this
Lease, and Lessee shall remain liable for each and every obligation under this
Lease.
ASSIGNMENT BY LESSOR
15.02. It is understood that the Lessor contemplates assigning this
Lease or mortgaging the equipment, and that the assignee may assign it. All
rights of the Lessor under this Lease may be assigned, pledged mortgaged,
transferred, or otherwise disposed of, either in whole or in part, without
notice to the Lessee. If the Lessor assigns this Lease or the rentals due or to
become due hereunder or any other interest herein, whether as security for any
of its indebtedness or otherwise, no breach or default by the Lessor hereunder
or pursuant to any other agreement between the Lessor or Lessee, should there be
one, shall excuse performance by the Lessee of any provision hereunder. No such
assignee shall be obligated to perform any duty, covenant, or condition required
to be performed by the Lessor under the terms of this Lease.
SUBORDINATION TO FIRST MORTGAGE
NONDISTURBANCE AND ATTORNMENT
15.03. This Lease shall be subordinate to the mortgage to SouthTrust
Bank of Calhoun County, N.A. set out in Paragraphs 9.02(2)(a), and shall further
become subordinate to any other mortgage of the entire fee interest of the
leased premises if and when a nondisturbance agreement in accordance with the
provisions of this paragraph is entered into in respect to such mortgage. such
nondisturbance agreement shall be in recordable form between Lessee and the
holder of such mortgage binding on such holder and on future holders of such
mortgage which shall provide in substance that so long as this Lease shall be in
effect:
(a) all condemnation awards and proceeds of insurance shall be
applied in the manner provided for in this Lease:
(b) neither such holder nor future holder of such mortgage shall name
or join Lessee as a party defendant of otherwise in any proceeding to enforce,
nor will this Lease or the term hereof be terminated or Lessee's possession of
the leased premises be disturbed (except as permitted by the provisions of this
Lease) or otherwise affected, by the enforcement of any rights given to any
holder of such mortgage, pursuant to the terms, covenants or conditions
contained in such mortgage or any other documents held by any holder or any
rights given to any holder as a matter of law; and
(c) neither such mortgage nor any security instrument in connection
therewith shall cover or be construed as subjecting to the lien
thereof any trade fixtures, signs or
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other personal property at any time furnished or installed by
Lessee of Lessee's subtenants or licensees on the leased
premises, regardless of the manner of attachment thereof. Upon
request of the holder of a mortgage to which this Lease becomes
subordinate, Lessee shall execute, acknowledge and deliver to
such holder an agreement to attorn to such holder as Lessor, is
such holder becomes the Lessor hereunder, and not to make any
payment of rent for a period of more than one month in advance.
If the holder of any first mortgage of the entire fee interest of the
leased premises requires that this Lease have priority over such mortgage,
Lessee shall upon request of such holder, execute, acknowledge and deliver to
such holder an agreement acknowledging such priority. Lessor shall cooperate
fully with Lessee in obtaining a nondisturbance agreement from South Trust Bank,
N.A., and any other holder of a mortgage on the leased premises.
ARTICLE 16. MISCELLANEOUS
NOTICES AND ADDRESSES
16.01. All notices provided to be given under this agreement shall be
given by certified mail or registered mail, addressed to the proper party, at
the following address:
Lessor: CALHOUN COUNTY ECONOMIC DEVELOPMENT COUNCIL
With copy to: Campbell & Hopkins
P.O. Box 2003
Anniston, AL 36202-2003
Attention: James M. Campbell
Lessee: UNITED DEFENSE LP
P.O. Box 1030
Anniston, AL 36202
PARTIES BOUND
16.02. This agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, executors, administrators, legal
representatives, successors, and assigns when permitted by this agreement.
APPLICABLE LAW
16.03. This agreement shall be construed under and in accordance with
the laws of the State of Alabama.
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LEGAL CONSTRUCTION
16.04. In case any one or more of the provisions contained in this lease
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other provision thereof and this lease shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
SOLE AGREEMENT OF THE PARTIES
16.05. This lease constitutes the sole and only agreement of the parties
hereto and supersedes any prior understandings or written or oral agreements
between the parties respecting the subject matter within it.
AMENDMENT
16.06. No amendment, modification, or alteration of the terms hereof
shall be binding unless the same be in writing, dated subsequent to the date
hereof, and duly executed by the parties hereto. NOTE: BOTH PARTIES
ACKNOWLEDGE THAT A TRANSACTIONS CONTEMPLATED WHEREBY LESSOR WILL SELL
APPROXIMATELY 11.25 ACRES OF THE LEASED PREMISES TO AYERS STATE TECHNICAL
COLLEGE, AND WILL CONTEMPORANEOUSLY PURCHASE APPROXIMATELY 9.5 ACRES OF
ADDITIONAL PROPERTY WHICH IT WILL INCLUDE AS PART OF THE LEASED PREMISES.
LESSOR AND LESSEE AGREE TO EXECUTE ALL DOCUMENTS AND TO DO ALL OTHER NECESSARY
ACTS TO ASSIST IN CLOSING OF SAID TRANSACTION SELLING THE 11.25 ACRES, AND TO
AMEND THIS LEASE TO INCLUDE THE 9.5 ACRES AS PART OF THE LEASED PREMISES.
RIGHTS AND REMEDIES CUMULATIVE
16.07. The rights and remedies provided by this lease are cumulative and
the use of any one right or remedy by either party shall not preclude or waive
its right to use any or all other remedies. Said rights and remedies are given
in addition to any other rights the parties may have by law, statute, ordinance,
or otherwise.
WAIVER OF DEFAULT
16.08. No waiver by the parties hereto of any default or breach of any
term, condition, or covenant of this lease shall be deemed to be a waiver of any
other breach of the same or any other term, condition, or covenant contained
herein.
ATTORNEY'S FEES
16.09. In the event Lessor or Lessee breaches any of the terms of this
agreement whereby the party not in default employs attorneys to protect or
enforce its rights hereunder and prevails,
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then the defaulting party agrees to pay the other party reasonable attorney's
fees so incurred by such other party.
EXCUSE
16.10. Neither Lessor nor Lessee shall be required to perform any term,
condition, or covenant in this lease so long as such performance is delayed or
prevented by any acts of God, strikes, lockouts, material or labor restrictions
by any governmental authority, civil riot, floods, and any other cause not
reasonably within the control of the Lessor or Lessee and which by the exercise
of due diligence Lessor or Lessee is unable, wholly or in part, to prevent or
overcome.
TIME OF ESSENCE
16.11. Time is of the essence of this agreement.
EXCULPATION OF LESSOR
16.12. If Lessor shall convey title to the demised premises pursuant to
a sale or exchange of property, the Lessor shall not be liable to Lessee or any
immediate or remote assignee or successor of Lessee as to any act or omission
from and after such conveyance.
IN WITNESS WHEREOF, the undersigned Lessor and Lessee hereto execute this
agreement as of the day and year first above written.
CALHOUN COUNTY ECONOMIC DEVELOPMENT
COUNCIL, Lessor
BY: /s/ William R. Trammell
-----------------------------------------
ITS: Chairman
-----------------------------------------
/s/ Connie E. Bryant
- --------------------
WITNESS
UNITED DEFENSE LP, Lessee
BY: /s/ Elmer Doty
-----------------------------------------
ITS: Division Manager
-----------------------------------------
/s/ Linda J. Schwabe
- --------------------
WITNESS
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PROPERTY DESCRIPTION
Commencing at the SW corner of the NW 1/4 of the SE 1/4 of Section 21, Township
16 South, Range 8 East; thence North 00 deg. 00 min. 45 sec. East a distance of
219.50 ft. to a point; thence South 89 deg. 14 min. East a distance of 25 ft. to
the East right of way of Coleman Road and the point of beginning; thence North
00 deg. 00 min. 45 sec. East a distance of 940.5 ft. along said right of way to
a point; thence South 89 deg. 14 min. East a distance of 1295.00 ft. to a point;
thence South 00 deg. 00 min. 45 sec. West a distance of 1134.73 ft. to a point
on the North right of way Electronics Drive; thence North 89 deg. 14 min. West
along said right of way a distance of 1072.0 ft. to a point; thence North 23
deg. 56 min. West a distance of 214.12 ft. to a point; thence North 89 deg. 14
min. West a distance of 135.4 ft to the point of beginning.
Containing 32.2 acres, more or less, situated, lying and being in the NW 1/4 of
the SE 1/4 of Section 21, Township 16 South, Range 8 East, Calhoun County,
Alabama.
LESS AND EXCEPT: Commencing at the SW corner of the NW 1/4 of the SE 1/4 of
Section 21, Township 16 South, Range 8 East; thence North along the half Section
line a distance of 219.5 ft. to a point; thence East at right angles a distance
of 25 ft. to a point; thence North and parallel to the half Section line a
distance of 940.5 ft. to a point; thence in an Easterly direction at an interior
angel of 89 deg. 15 min. a distance of 1295 ft. to the true point of beginning
of the parcel herein described; thence in a Southerly direction at an interior
angel of 90 deg. 45 min. a distance of 330 ft. to a point; thence in a Westerly
direction at an interior angle of 89 deg. 15 min. a distance of 10 ft. to a
point; thence in an Northerly direction at an interior angle of 90 deg. 45 min.
a distance of 330 ft. to a point; thence in an Easterly direction a distance of
10 ft. to the aforesaid true point of beginning. Containing .075 acres more or
less, lying in the NW 1/4 of the SE 1/4 of Section 21, Township 16 South, Range
8 East, Calhoun County, Alabama.
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FACILITIES USE AGREEMENT
This Facilities Use Agreement, Number DAAC67-93-C-0021, (the "Agreement")
is made and entered into as of this 21st day of April, 1993, by and between the
United States of America ("Government") and FMC Corporation, Paladin Production
Division ("Contractor") (hereinafter collectively referred to as the "Parties").
RECITALS
WHEREAS, Government is the owner of certain real property located in the
County of Franklin, State of Pennsylvania, more particularly described in
Schedule A, attached hereto and incorporated herein by reference (the
"Property"); and
WHEREAS, Government desires to provide the Property to Contractor, and
Contractor desires to use the Property for the purpose of producing supplies and
services for Government in connection with M109A6 Paladin Self-Propelled
Howitzers and for other purposes as described further herein; and
WHEREAS, the providing of the Property by Government will facilitate its
procurement of essential supplies and services and promote the national defense;
and
WHEREAS, the providing of the Property by Government is deemed to be in
support of industrial preparedness programs in the public interest,
NOW, THEREFORE, in consideration of the mutual promises and conditions set
forth herein, Government and Contractor hereby agree as follows:
I. Provision Of Property.
A. PROVISION. The Government hereby provides the Property to FMC, and
FMC hereby agrees to use the Property as provided by Government, upon the terms
and conditions set forth in this Agreement.
B. USE OF PROPERTY. Contractor is authorized to occupy and use the
Property for (1) the production of M109A6 Paladin Self-Propelled Howitzers
pursuant to Contract No. DAAA21 93-C-0044, awarded by the Department of the
Army, AMCCOM, Picatinny Arsenal (the "Contract"), (2) other uses which may be
deemed under federal statute or regulation to be Government use, and (3) such
other work (not considered to be Government use) as the Commander of Letterkenny
Army Depot ("LEAD") approves, consistent with federal statute or regulation.
C. TERM, OPTION TO EXTEND, AND TERMINATION. Notwithstanding any
provision to the contrary herein or in the FAR, the term of this Agreement
("Term") shall be for a period commencing on the date first written above and
ending on December 31, 1999. The parties hereto may by mutual written agreement
extend the use of the Property under this Agreement beyond December 31, 1999 to
permit completion of the Contract. The Government shall use its
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best efforts to ensure that the Property shall be ready and available for
occupancy by Contractor, and cleared of all stored materials and asbestos
containing materials, on or before May 15, 1993.
D. MONTHLY RENT WHERE CONTRACTOR PERFORMS ONLY CONTRACT OR "GOVERNMENT
USE" WORK. As provided in FAR 52.245-9(a), Contractor shall have no obligation
to pay any rent to Government provided that Contractor is performing only work
under the Contract or other work which is deemed to be Government use of the
Property.
E. MONTHLY RENT WHERE CONTRACTOR PERFORMS WORK OTHER THAN CONTRACT OR
"GOVERNMENT USE" WORK. If for any reason Contractor should use the Property for
any purpose other than performing Contract or "Government Use" work, the Monthly
Rent for the Property for every month during which such other work may be
performed shall be $17,533, as adjusted in accordance with the following
formula:
Number of Paladins or M109 Self-Propelled
Howitzers produced, modified, or tested during the
month through other than Contract or Government
Use Work
Monthly Rent = $17,533 x -------------------------------------------------
Total Number of Paladins or M109 Self-Propelled
Howitzers produced, modified or tested during the
month through all work
F. MONTHLY RENT REPORT AND PAYMENT. By the Tenth day of each month,
Contractor shall deliver to Government the Monthly Rental, where appropriate, as
calculated above, together with a statement of (1) the Number of Paladins or
M109 Self-Propelled Howitzers produced, modified, or tested during the past
month through other than Contract or Government Use Work and (2) the Total
Number of Paladins or M109 Self-Propelled Howitzers produced, modified, or
tested during the past month through all work.
II. Special Provisions.
A. REASONABLE ACCESS FOR CONTRACTOR. Government agrees to allow and
provide for reasonable access to the Property, and to place no unreasonable
encumbrance upon Contractor's free use and enjoyment of the Property by
Contractor, Contractor personnel, authorized visitors and any other parties
having reasonable need to go in or upon the Property.
B. LEAD PROVISION OF UTILITIES AND SUPPORT SERVICES. LEAD shall make
available to Contractor all utilities and services set forth below in connection
with Contractor's use of the Property, and the parties hereto shall enter into
appropriate agreements concerning LEAD's provision of such utilities and
services and Contractor's payment to LEAD therefor.
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Water Security Receipt/ Storage
Sewage Traffic Management RR Switching Service
Electricity Fire Protection Safety
Snow Removal Trucking on Site Miscellaneous Maintenance
Guard Service (Gate) Intra-depot Mail Building Maintenance
Fuel/Heating Oil Entomology Services Roads & Grounds
Emergency Ambulance Service Maintenance
C. LEAD PROVISION OF TESTING FACILITIES AND SERVICES. LEAD shall make
available to Contractor the test facilities set forth below in connection with
Contractor's use of the Property, and the parties hereto shall enter into an
appropriate agreement covering LEAD's provision of such testing facilities and
Contractor payment to LEAD therefor.
Test Track
D. INSTALLATIONS, ARRANGEMENTS, REARRANGEMENTS, MODIFICATIONS AND
CONSTRUCTION. Contractor, at its own expense or as otherwise funded under a
separate contract with Government, agrees to construct or install, with prior
written approval of Government, any fixed improvements or structural alterations
or modifications to the Property necessary for Contractor to perform its
obligations under the Contract or in connection with other approved work. This
shall include, but not be limited to, bringing utilities to Building 56 and
providing for separate metering thereof, and making architectural/structural,
mechanical, electrical, or other renovations or alterations to the
Property/facility, and making improvements (including stabilization and
drainage) to any open storage areas to accommodate the work to be performed
under the Contract or other approved work. At the expiration or earlier
termination of this Contract, however, Contractor will not remove any such fixed
improvements or structural alterations or modifications; title to same will pass
to Government.
E. PERIODIC INSPECTIONS. Government reserves the right to perform
periodic preventive maintenance, fire protection and all other types of
inspections of the Property. This shall include, but not be limited to,
Government's right to perform environmental compliance and explosive safety
inspections.
F. CONTRACTING OFFICER'S REPRESENTATIVE. The Contracting Officer
cognizant of the Property shall designate in writing a Contracting Officer's
Representative (hereinafter "COR") to insure that the parties comply with the
terms and conditions of this contract.
G. CONDITION OF PROPERTY. LEAD makes no warranty, express or implied,
regarding the condition or fitness for use of the Property. Notwithstanding the
foregoing, LEAD shall remove identified asbestos-containing materials from
Building 56 prior to Contractor's using the Building and shall perform, prior to
Contractor's use of the same, routine maintenance on and repair the rail siding
at Building 56 to insure its adequacy for operation by Contractor.
PAGE 3
<PAGE>
H. COMPLIANCE WITH LAWS.
1. IN GENERAL. Contractor, at its sole cost and expense, shall
conduct its activities hereunder on the Property in compliance with all
applicable laws, regulations, rules, orders, decrees, permits and agreements,
including without limitation those which are promulgated by the Department of
Defense or any division or related agency thereof, and including without
limitation those which relate to health, safety, environmental protection, waste
disposal, and water and air quality with respect to the use of the Property and
the rights granted hereunder (all of which are hereinafter referred to as the
"Requirements"). Further, Contractor shall conduct its activities in compliance
with all Requirements to which LEAD may be subject with respect to the Property
and LEAD's operations related thereto. The parties agree that to the extent that
any new Requirements are imposed, or any of the existing Requirements are
changed during the term of this Agreement, Contractor retains the right to seek
an equitable adjustment or other appropriate change under the Contract as may be
permitted by law.
2. COOPERATION IN OBTAINING PERMITS. Contractor at its sole expense
shall obtain any and all permits, licenses, and other authorizing documents as
may be necessary for the use and possession of the Property, provided that
Government and LEAD shall cooperate with and give their best efforts to
Contractor to the extent reasonably necessary for Contractor to obtain such
permits, licenses, and other authorizing documents. Contractor shall obtain an
EPA waste generator identification number in its own name.
3. GOVERNMENT DISAPPROVAL OF CONTRACTOR ACTIONS. If the Government
or LEAD unreasonably disapproves or disallows any action that Contractor has
identified as reasonably required in order to meet its obligations under this
Section, Contractor shall be relieved of its obligations pursuant to this clause
for such action and any resulting conditions arising from the failure to take
such action.
I. ENVIRONMENTAL INVESTIGATION AND REMEDIATION.
1. POTENTIAL FOR CONTAMINATION AND INTENT TO APPORTION LIABILITY.
The Parties acknowledge that there is potential that environmental contamination
presently exists on the Property, and hereby express their mutual intent that
the purpose of this Section is to determine the present extent and nature of the
contamination, if any, and to determine, to the extent possible, the source or
sources of such contamination. Specifically, while FMC has agreed herein to
comply with all applicable laws, the Parties agree that it is not their intent
to require Contractor to cleanup or otherwise remediate any contamination which
may exist on or in the vicinity of the Property as of the commencement of this
Agreement.
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<PAGE>
2. CONTRACTOR RESPONSIBILITIES. Contractor shall be responsible for
addressing and correcting to the extent required by applicable laws and
regulations any environmental pollution, contamination and/or damage to the
Property occurring after the effective date of this Agreement and resulting from
Contractor's use and/or possession of the Property on or after the effective
date of this Agreement, regardless of whether (a) such pollution, contamination
or damage is discovered before or after the expiration or termination of this
Agreement, or (b) corrective or response actions continue or are required to
begin after the expiration or termination of this Agreement. Contractor's
obligations pursuant to this paragraph do not extend to any acts of the United
States or its agents. Contractor is not an agent of the United States for
purposes of this exclusion.
3. CONTRACTOR RIGHT TO PERFORM ENVIRONMENTAL INVESTIGATIONS.
Provided Government awards the Contract to Contractor, Contractor shall
undertake a reasonable investigation of the Property, including taking soil and
groundwater samples as may be necessary, prior to the commencement of its use or
occupancy of the Property pursuant to this Agreement to determine the extent,
nature and possible source or sources of contamination, if any, which may
presently exist on the Property prior to Contractor's use or occupancy thereof
pursuant to this Agreement. Further, FMC shall perform a reasonable
environmental investigation of the Property at the conclusion of the Term of
this Agreement to determine the level and extent of contamination, if any, which
may then exist on the Property. Contractor shall provide to LEAD a copy of such
investigation results.
4. RESERVATION OF RIGHTS. Notwithstanding any other provision of
this Agreement, Contractor and the Government hereby reserve any and all rights
and defenses available under law or any other contract between the parties that
may apply to any liability to a third party, including without limitation other
federal, state or local governmental agencies, relating to or arising from
environmental conditions existing on, emanating from or relating to the Property
on the effective date of this Agreement. Nothing in this Agreement shall be
construed to abrogate any such rights and defenses.
5. GOVERNMENT AND LEAD DISCLOSURE OF ENVIRONMENTAL AND HISTORICAL
INFORMATION. Beginning on the effective date of this Agreement, LEAD shall use
its best efforts to provide to Contractor all information within its possession
concerning (a) the historical uses of the Property, (b) the type, quantity and
years during which hazardous substances have been stored, released or disposed
of at the Property prior to the effective date of this Agreement, including a
description of the response actions taken, if any, regarding such substances,
and (c) any other environmental conditions which may exist on the LEAD which may
have an adverse impact upon the Property. Government shall be responsible for
addressing any conditions arising from the use, treatment, storage, disposal,
discharge or release of any emission, waste, effluent, hazardous substance and
contaminant occurring before the effective date of this Agreement.
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J. ENVIRONMENTAL INDEMNIFICATION. As of the effective date of this
Agreement, Contractor shall indemnify, defend and hold the Government harmless
against any and all claims, demands, judgments, administrative actions,
enforcement actions and lawsuits against the Government alleging environmental
pollution, contamination, damage to property or personal injury and/or violation
of any environmental, health or safety law, regulation, permit, order, decree or
agreement, resulting from actions or omissions of contractor during Contractor's
use and/or possession of the Property pursuant to this Agreement. Contractor's
obligation pursuant to this paragraph shall continue regardless of whether such
allegations are made before or after the expiration or termination of this
Agreement. Contractor's obligations pursuant to this cause do not extend to acts
of the United States or its agents. Contractor is not an agent of the United
States for purposes of this exclusion. Contractor shall be relieved of its
obligations pursuant to this clause for any conditions arising from
environmental compliance or remediation activities which Contractor has proposed
to undertake and Government has unreasonably disapproved or disallowed to be
taken on the Property.
K. INDEMNIFICATION FOR THIRD PARTY NON-ENVIRONMENTAL CLAIMS. As of the
effective date of this Agreement, Contractor shall indemnify, defend and hold
the Government harmless against all claims for personal injury to any and all
persons and damage to property of Contractor or any and all other persons
arising from Contractor's use or possession of the Property, provided that: (1)
the provisions of Contractor's related procurement contracts shall govern any
assumption of liability by the Government for claims arising from those
contracts; and (2) indemnification for all claims involving environmental
pollution or contamination shall be governed by the Section of this Agreement,
titled "Environmental Indemnification."
III. Miscellaneous Provisions.
A. HEADINGS. The section headings of this Agreement are inserted only
for reference and do not affect the terms and provisions hereof.
B. INDUSTRIAL READINESS. The Property shall not be subject to or be made
part of any Emergency Production Planning unless otherwise agreed to in writing
by the parties hereto.
C. NOTICES. Except as otherwise provided in this Agreement, any notice
required or permitted to be given hereunder shall be delivered personally or
sent by mail with postage pre-paid to the following addresses or to such other
places as may be designated by the parties hereto from time to time.
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For Contractor: For Government:
Peter F. Scott Melinda N. Finucane
General Manager Attorney-Advisor
Paladin Production Division Letterkenny Army Depot
FMC Corporation SDSLE-CL
2890 De La Cruz Boulevard Chambersburg, PA 17201
Santa Clara, California 95052
D. INCORPORATION BY REFERENCE OF FAR AND DFARS CONTRACT CLAUSES. This
Agreement incorporates the following FAR and DFARS clauses by reference,
pursuant to FAR 52.252-02, with the same force and effect as if they were given
in full text.
DFARS 52.201-7000 Contracting Officer's Representative (Dec 1991)
FAR 52.202-1 Definitions (Sep 1991)
FAR 52.203-1 Officials Not to Benefit (Apr 1984)
FAR 52.203-3 Gratuities (Apr 1984)
FAR 52.203-5 Covenant Against Contingent Fees (Apr 1984)
FAR 52.203-7 Anti-kickback Procedures (Oct 1988)
FAR 52.212-8 Defense Priority and Allocation Requirements (Sep 1990)
FAR 52.212-14 Stop Work Order - Facilities (Aug 1989)
FAR 52.215-1 Examination of Records by Comptroller General (Apr
1984)
FAR 52.215-2 ALT I Audit-Negotiation (Dec 1989) -- Alternate I
(Apr 1984)
FAR 52.215-33 Order of Precedence (Jan 1986)
FAR 52.222-3 Convict Labor (Apr 1984)
FAR 52.222-17 Labor Standards for Construction Work - Facilities
Contracts (Feb 1988)
FAR 52.228-5 Insurance - Work on a Gov't Installation (Sep 1989)
Workmens' Compensation - $100,000
Comp. Gen'l. Liability - $500,000 pers. injury
$200,000 prop. damage
Comp. Auto. Liability - $200,000 per person
$500,000 bodily injury
$ 20,000 prop. damage
FAR 52.232-21 Limitation of Cost (Facilities) (Apr 1984)
FAR 52.233-1 Disputes (Dec 1991)
FAR 52.237-2 Protection of Government Buildings, Equipment and
Vegetation (Apr 1984)
FAR 52.242-1 Notice of Intent to Disallow Costs (Apr 1984)
FAR 52.242-13 Bankruptcy (Apr 1991)
FAR 52.243-2 Changes - Cost Reimbursement (AUG 1987) ALT IV (APR
1984)
FAR 52.245-1 Property Records (Apr 1984)
FAR 52.245-8 Liability for the Facilities (Apr 1984)
FAR 52.245-9 Use and Charges (Apr 1984)
FAR 52.245-11 Government Property (Facilities Use) (Apr. 1984)
FAR 52.246-10 Inspection of Facilities (Apr 1984)
FAR 52.249-11 Termination of Work (Consolidated Facilities or
Facilities Acquisition) (Apr 1984)
FAR 52.249-13 Failure to Perform (Apr 1984)
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FAR 52.249-14 Excusable Delays (Apr 1984)
FAR 52.217-9 Option to Extend the Term of the Contract (Mar 1989)
FAR 52.252-2 Clauses Incorporated by Reference (June 1988)
E. INCORPORATION OF WAGE DECISION. U. S. Department of Labor General Wage
Decision, No. PA 91-16, Modification 5, dated July 24, 1992, pages 1077-1078, is
hereby incorporated into this Agreement.
F. COUNTERPARTS. This Agreement may be signed in counterparts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
FMC CORPORATION DEPARTMENT OF THE ARMY
PALADIN PRODUCTION DIVISION LETTERKENNY ARMY DEPOT
BY /s/ Peter F. Scott BY /s/ Col. Joseph W. Arbuckle
------------------------ -------------------------------
TITLE General Manager TITLE Commander
----------------------- -----------------------------
BY /s/ Ruth Massey
-------------------------------
TITLE Director of Contracting
-----------------------------
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SCHEDULE A -- GOVERNMENT FURNISHED PROPERTY
(AS SHOWN ON MAP BELOW)
PROPERTY APPROXIMATE SIZE
Building 56 90,180 Square Feet
Land Attendant to Building 56 2.44 Acres
Rail Siding at Building 56 620 Linear Feet
Land for Open Storage Space 4.0 Acres
[MAP]
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SUBLEASE OF REAL AND PERSONAL PROPERTY
THIS SUBLEASE OF REAL PERSONAL PROPERTY is made and entered into as of
the 19th day of August, 1996, by and between the LOUISVILLE/JEFFERSON COUNTY
REDEVELOPMENT AUTHORITY, INC., a Kentucky non-profit, non-stock corporation and
local redevelopment authority ("LRA"), with a mailing address of Suite 400, 600
West Main Street, Louisville, Kentucky 40202 and UNITED DEFENSE L.P. ("UDLP"), a
Delaware limited partnership comprised of the BMY Combat Systems Division of
Harsco Corporation, a Delaware corporation, and the Defense Systems Group of FMC
Corporation, a Delaware corporation, with a mailing address of 4800 East River
Road, Minneapolis, Minnesota 55421.
W I T N E S S E T H:
WHEREAS, the Base Realignment and Closure Commission established under
the Act, as hereinafter defined, selected the Naval Ordinance Station,
Louisville, a division of the Naval Surface Warfare Center ("NOSL"), for closure
and privatization in place of the repair, overhaul and remanufacturing work
currently being performed by the United States Navy (the "Navy") at NOSL; and
WHEREAS, the LRA was formed by the City of Louisville and Jefferson
County, acting by and through their respective executive and legislative
branches, to establish a method and means for the privatization in place of
NOSL; and
WHEREAS, The United States of America (the "Government"), acting by
and through the Navy, and the LRA have entered into an interim lease, dated 12
August, 1996 (the "Lease"), for the major portion of the real property
comprising NOSL, including buildings and improvements plus equipment and other
associated personal property necessary for the privatization in place of the
repair, overhaul and remanufacturing work currently being performed by the Navy
at NOSL; and
WHEREAS, the LRA and UDLP have entered into that certain
Privatization Contractor Agreement, dated 19 August, 1996 (the "Agreement"),
with respect to the privatization of a portion of the repair, overhaul and
remanufacturing work currently being performed at NOSL, a copy of the
Agreement is attached hereto as EXHIBIT A and incorporated herein by
reference; and
WHEREAS, UDLP and the Navy have entered into workload contracts to
perform such repair, overhaul and remanufacturing work at NOSL, said Agreement
and said workload contracts requiring certain buildings, improvements, equipment
and other personal property covered by the Lease; and
<PAGE>
WHEREAS, the LRA desires to sublease to UDLP, and UDLP desires to
sublease from the LRA certain portions of the Premises, as that term is defined
in the Lease, and Personal Property, as that term is defined herein and in the
Lease.
NOW, THEREFORE, for and in consideration of the premises and for
other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS. For purposes of this Sublease, as hereinafter
defined, the following words and/or terms shall have the meanings set forth
below and such meanings set forth below and such meanings shall take precedence
over any conflicting meaning of the respective words or terms:
A. "Act" shall mean the Defense Base Closure and Realignment Act of
1990, Pub. L. No. 101-510, 104 Stat. 1808, 10 U.S.C. 2687, as amended, from time
to time.
B. "Additional Premises" shall mean Building L which consists of
199,526 square feet of which 158,516 square feet shall be included in this
Sublease. Except as provided in Section 3 hereof, Building L shall be under
this Sublease through 31 December 1997 on which date this Sublease shall
terminate as to Building L and UDLP shall vacate Building L on or before 31
December 1997 unless UDLP has established a regional, national and international
equipment logistics and maintenance hub in Building L. UDLP shall give the LRA
at least 180 days' prior written notice of its intention to extend this Sublease
as to Building L.
C. "CIWS:" shall mean the Phalanx Close-In-Weapon-System repair,
overhaul and remanufacturing work currently being performed at NOSL. The OEM
for CIWS is HMSC.
D. "Center" shall mean the Gun Center of Excellence to be
established by the LRA at NOSL.
E. "HMSC" shall mean Hughes Missile Systems Company, a Delaware
corporation.
F. "Hot Turnover Date" shall mean the date upon which the
privatization in place at NOSL begins, and NOSL is turned over operationally by
the Navy to the LRA which date is scheduled to be 19 August 1996 or such later
date as determined by the Navy.
G. "Leased Property" shall mean collectively, and as constituted
from time to time, the Primary Premises, the Additional Premises, the Plating
Premises and the Transition Premises as defined herein and the Personal Property
as defined herein and in the Lease.
H. "Non-CIWS Work" shall mean all of the repair, overhaul and
remanufacturing work to be performed for the Navy by UDLP at NOSL which work
does not include the CIWS, RAM and TAS work to be performed by HMSC at NOSL.
<PAGE>
I. "OEM" shall mean the Original Equipment Manufacturer for the
Navy.
J. "Personal Property" shall mean all Personal Property, as that
term is defined in the Lease, required by UDLP to perform the Non-CIWS Work
present at NOSL as of the Hot Turnover Date.
K. "Plating Premises" shall mean Building 117, which consists of
35,940 square feet, Building 118, which consists of 5,310 square feet, Building
136 which consists of 4,000 square feet and Tanks 118A through G.
L. "Primary Premises" shall mean the real property and improvements
more particularly described on EXHIBIT C. to the Lease and Personal Property
located within the Primary Premises and being more particularly described on
EXHIBIT B to the Lease attached hereto and incorporated herein by reference.
M. "Sublease" shall mean this Sublease of Real and Personal
Property, as amended, from time to time, effective as of the Hot Turnover Date.
N. "Transition Premises" shall mean Building F, which consists of
144,786 square feet, and part of Building G, which part consists of 107,504
square feet. Except as provided in Section 3 hereof, Building G shall be under
this Sublease through 30 June 1997, and Building F shall be under this Sublease
through 30 June 1998, and UDLP shall vacate the Transition Premises on or before
30 June 1997 with respect to Building G and on or before 30 June 1998 with
respect to Building F.
2. INCORPORATION OF NAVY LEASE. The Lease between the Navy and the LRA,
as amended from time to time, a copy of which is attached hereto as EXHIBIT B
and incorporated herein by reference, specifically requires that all sublessees
of the LRA, including UDLP, be subject to all of the terms, conditions,
responsibilities and obligations contained in the Lease including, without
limitation, the termination provisions set forth in Paragraph 15 of the Lease.
UDLP hereby acknowledges that as to the Lease Property and during the term of
its occupancy and/or use of the Leased Property or each part thereof as herein
provided, it will be bound by all applicable terms, conditions, responsibilities
and obligations of the Lease with respect to said Leased Property as if it were
the Lessee/Sublessee thereof notwithstanding anything in the Lease to the
contrary including, without limitation, Paragraph 14(j) and the signature page
thereof. Should a conflict arise between a provision of this Sublease and a
provision of the Lease, the provision of the Lease shall take precedence.
Nothing herein shall be deemed to grant to UDLP any rights or privileges greater
than the LRA has received under the Lease. Notwithstanding the foregoing,
nothing in this Sublease shall be construed to limit or modify the
responsibilities and obligations of the Government under Paragraph 14 of the
Lease. UDLP shall indemnify and save harmless the LRA against any and all
claims by the Government or any other person(s), firm(s) or corporation(s)
arising out of UDLP's failure to perform all of the terms, conditions,
responsibilities and obligations contained in the Lease as to the Leased
Property.
<PAGE>
3. SUBLEASE TO UDLP.
A. PRIMARY PREMISES. The LRA does hereby sublease to UDLP, and UDLP
does hereby sublease from the LRA, the Primary Premises, together with the right
of ingress and egress to the Primary Premises across adjacent or nearby roads
leased to the LRA which lead to reasonably convenient public roads and also
together with designated parking to service the use of the Primary Premises.
B. PLATING PREMISES. The LRA does hereby sublease to UDLP, and UDLP
does hereby sublease from the LRA, the Plating Premises together with the right
of ingress and egress to the Plating Premises across adjacent or nearby roads
leased to the LRA which lead to reasonably convenient public roads and also
together with designated parking to service the use of the Plating Premises.
The Plating Premises shall be under this Sublease until 18 August 1998;
provided, however, UDLP may be relieved of its obligations as to the Plating
Premises in the event UDLP shall bring to the LRA a replacement tenant
acceptable to the LRA prior to the termination date of 18 August 1998, which
acceptance of the replacement tenant shall not be unreasonably withheld by the
LRA. UDLP may extend its tenancy of the Plating Premises on a year-to-year
basis upon 180 days' prior written notice thereof to the LRA.
C. TRANSITION PREMISES. The LRA does hereby sublease to UDLP, and
UDLP does hereby sublease from the LRA, the Transition Premises together with
the right of ingress and egress to the Transition Premises across adjacent or
nearby roads leased to the LRA which lead to reasonably convenient public roads
and also together with designated parking to service the use of the Transition
Premises. Building G of the Transition Premises shall be a part of this
Sublease for purposes of rent, as defined in Section 5 hereof, calculation for
sixty (60) days following the date UDLP vacates Building G. UDLP is scheduled
to vacate Building G on or before 30 June 1997; provided, however, the LRA will
agree to terminate Building G from this Sublease in the event of replacement
tenant acceptable to the LRA is found for Building G prior to 30 June 1997
which acceptance of the replacement tenant shall not be unreasonably withheld by
the LRA. Building F of the Transition Premises shall be a part of this Sublease
for purposes of rent calculations for sixty (60) days following the date UDLP
vacates Building F. UDLP is scheduled to vacate Building F on or before 30 June
1998; provided, however, the LRA will agree to terminate Building F from this
Sublease in the event a replacement tenant acceptable to the LRA is found for
Building F prior to 30 June 1998 which acceptance of the replacement tenant
shall not be unreasonably withheld by the LRA.
D. ADDITIONAL PREMISES. The LRA does hereby sublease to UDLP, and
UDLP does hereby sublease form LRA, the Additional Premises together with the
right of ingress and egress to the Additional Premises across adjacent or nearby
roads leased to the LRA which lead to reasonably convenient public roads and
also together with designated parking to service the use of the Additional
Premises. The Additional Premises shall be a part of this Sublease for purposes
of rent calculations for sixty (60) days following the date UDLP vacates the
Additional Premises.
<PAGE>
E. SQUARE FOOTAGE. The square footage subleased by the LRA per
annum to UDLP is shown in a chart set forth on EXHIBIT C. This square footage
may be reduced only as provided in Subsection B. and C. hereof or as otherwise
agreed by the parties.
F. PERSONAL PROPERTY. The LRA does hereby sublease to UDLP, and
UDLP does hereby sublease from the LRA, the Personal Property.
4. ACCESS TO OTHER BUILDINGS. The LRA will assist UDLP in obtaining
necessary temporary access to the Computer Facility located in Building W
through 31 December 1997 subject to approval of the Navy and the LRA; provided
such access shall be subject to reasonable restrictions and will not
unreasonably interfere with the operations of the Navy, the LRA, or any tenants
in Building W. The LRA will assist UDLP in obtaining necessary access to
Buildings 68, 78, 79 105 and 147 subject to approval of the Navy; provided, such
access shall be subject to the restrictions and/or regulations of the Navy.
5. RENTAL.
A. BASE RENT. UDLP shall pay the LRA as Base Rent from 19 August
1996 through 18 August 1997 for the leased Property, the sum of $2.09 per square
foot per annum, and UDLP shall assume the responsibility for the undertaking
and/or costs of Operating and Maintenance ("O&M") associated with the operations
of the Primary Premises, the Additional Premises, the Plating Premises and the
Transition Premises, as constituted, from time to time, plus a pro-rata share of
the Center's operating costs incurred by the LRA. For purposes of this Sublease
O&M costs shall be all those utility, protection, maintenance, repairs and other
costs as to Leased Property required under the Lease, including, without
limitation, those costs described in Paragraphs 10 and 12 of the Lease, and
those items set forth n Sections 7, 9, 10 and 11 of this Sublease.
B. INCREASE IN BASE RENT.
[1] In the event that the ownership of the leased Property is
conveyed to the LRA during the Term or a Renewal Term of this Sublease, as
defined in Section 6 hereof, the Base Rent shall be increased by the LRA on
a per square foot basis per annum to reflect any acquisition costs required
by the Government with respect to the Leased Property to the paid to the
Government by the LRA; provided, however, the LRA shall use its reasonable
best efforts to obtain in a no cost economic development conveyance of the
Leased Property from the Government. Such increase in Base Rent shall be
effective as of the date of the LRA's acquisition of the Leased Property.
[2] The Base Rate beginning in 1998 may be increased by the LRA on a
per square foot basis per annum to reflect the loss of Base Rent, as set
forth in Subsection A hereof, as a result of UDLP's vacating of Building F,
G and L which loss of Base Rent is not offset by replacement tenant Base
Rent; provided, however, the adjustment Base Rent may not exceed the
following amounts per annum:
<PAGE>
YEAR ANNUAL CEILING PER SQUARE FOOT
---- ------------------------------
1998 $2.40
1999 3.07
2000 3.07
C. DECREASE IN BASE RENT. During the Term or a Renewal Term of this
Sublease, as defined in Section 6, hereof, the Base Rent shall be decreased by
the LRA on a per square foot basis per annum effective as of the date of the
occurrence of one or more of the following events:
[1] As of the date a replacement tenant acceptable to the LRA,
which acceptance of the replacement tenant shall not be unreasonably
withheld, for Buildings F. G, or L, all previously occupied by UDLP, said
replacement tenant executes a sublease with the LRA and begins to pay rent
in an amount per square foot per annum equal to or greater than the rent
paid by UDLP per square foot; provided, however, such decrease shall not be
effective as to Building F prior to 31 August 1998, as to Building G prior
to 31 August 1997 and as to Building L prior to 28 February 1998.
[2] As of the date the LRA is to reduce the project financing
rate to below ten percent (10%) per annum for the capitalized costs
associated with the providing of protection, maintenance and repair to NOSL
as required in the lease or as recommended in the NOSL Facility
Privatization and Reuse Plan, dated April 17, 1996;
[3] A of the date any direct principal payments are made on the
project financing referenced in [2] above by UDLP or HMSC which reduces the
amount of principal of such capitalized costs;
[4] As of the date UDLP or HMSC takes any other action or
actions which results in cost savings to the LRA as it carries out its
responsibilities at NOSL under the Lease, this Sublease or the Agreement;
and
[5] As of the date any federal grant is received to defray the
capitalized costs of improving the facilities at NOSL which may be used by
the LRA to reduce principal on the project financing of such capitalized
costs referenced in [2] above.
Notwithstanding anything in this Section 5 to the contrary, the Base
Rent per square foot per annum shall never be reduced below $1.95 per square
foot per annum. The LRA will not enter into a Sublease with any for profit
entity, including HMSC, at a rate lower than the Base Rate set forth herein.
D. PAYMENT OF BASE RENT. The Base Rent for the lease Property shall
be calculated on a per annum basis using the square footage subleased by the LRA
per annum to UDLP as set forth on EXHIBIT C, and such square footage shall be
multiplied by the Base Rent and divided into twelve (12) equal monthly
installments of Base Rent which shall be due and
<PAGE>
payable as of the first day of each calendar month beginning September 1, 1996.
The Base Rent for 19 August 1996 through 19 August 1997 shall be $2,085,636
payable in monthly installments of $173,803 each payable as provided in the
preceding sentence. The Base Rent for the Lease Property form 19 August 1996
through 31 August 1996 in the amount of $75,314.63 shall be paid by UDLP to the
LRA on or before 1 September 1996.
6. TERM. The Term of this Sublease shall be for one year beginning 19
August 1996 and ending 18 August 1997, but this Sublease may be renewed annually
thereafter upon sixty (60) days' prior written notice by UDLP to the LRA with
the Term being coterminous with the length of (i) the workload contract(s) with
the Navy for the Non-CIWS Work and the Additional Work, and (ii) all other work
obtained by UDLP from the Navy and any other customers to performed at the
Center, plus time sufficient to allow an orderly cessation of UDLP's operations
at the Center. UDLP has made certain projections with respect to the complement
of employees to be employed by UDLP at NOSL as more particularly set forth under
the heading "Total United Defense Jobs" on EXHIBIT B to the Agreement, and UDLP
agrees that it will certify to the LRA the actual number of Total United Defense
Jobs as of 19 August of each year of the Term of this Sublease. In making such
certification, UDLP shall be entitle to justify any taking into account the
various provisions of this Agreement, including, but not limited to, Sections
1.D, 19 and 24 thereof. In the event that (i) the Total United Defense Jobs, as
certified by UDLP, and not justified pursuant to the provisions of the Agreement
as aforesaid, drops below such projection by more than ten percent (10%) during
any year of the Term (measured in terms of anniversaries from the Hot Turnover
Date), UDLP shall present to the LRA a written projection revising EXHIBIT B to
the Agreement to reflect UDLP's then current projections with respect to the job
complement of employees employed by UDLP at NOSL projected out at least five (5)
years, If the LRA determines that the projected UDLP job complement is not of a
sufficient number to justify the LRA's continuous of this Sublease, the LRA may
terminate this Sublease as of the end of the lease year of 18 August; provided,
however, any such termination notice shall provide UDLP with at least 180 days
prior written notice of such termination. This Sublease may also be terminated
by the LRA in the event the Navy terminates its workload contract(s) for the
Non-CIWS Work with UDLP at NOSL.
7. INDEMNITY AND INSURANCE. In addition to the indemnity obligations set
forth in Paragraph 16 of the Lease as to the Leased Property, UDLP shall
indemnify and save harmless the LRA against and from any and all claims by an on
behalf of any person(s), firms(s) or corporation(s) arising from the conduct or
management of or from any work or thing whatsoever done in, about or by the
Leased Property, which was not contributed to or caused by or at the instance of
the LRA or its representatives. UDLP shall, at its sole cost and expense, keep
the Leased Property, insured for the benefit of the Government, the LRA and UDLP
in an amount equal to the full replacement value thereof (excluding excavation
and foundation costs), against loss or damage by fire, against all risks covered
by standard extended coverage endorsement, and against such other risks as may
be deemed necessary by the LRA. Notwithstanding Paragraph 17.2.2 and 17.3.1 of
the Lease, UDLP shall carry general/public liability insurance in an amount of
$3,000,000/$5,000,0000. In addition, UDLP will maintain such additional
insurance as required by Paragraph 17 of the Lease. The Government and the LRA
shall be named as
<PAGE>
additional insured under all such insurance policies, and UDLP shall comply with
the requirements of Paragraphs 17.6 and 17.5 of the Lease.
8. NO WARRANTIES. The LRA makes no warranties whatsoever concerning the
Leased Property and all Leased Property provided to UDLP under this Sublease
shall be on an "as is, where is" basis with no warranties whatsoever, with the
exception that, on a continuing basis throughout the term of this Sublease, the
LRA does hereby represent and warrant to UDLP, with respect to the Leased
Property, that the LRA has either the unencumbered ownership of, or a lease from
the Government for, the Leased Property sufficient to provide UDLP the full,
quiet, and unimpaired leasehold enjoyment of the entire Leased Property for the
full term of this Sublease, free and clean of any conflicting right of occupancy
or use by any other person or entity. It is further understood that nothing in
this Section shall diminish or otherwise affect obligations of the parties
relating to environmental indemnities, covenants or releases.
9. TAXES. The LRA shall grant to UDLP the right, at UDLP's sole costs,
to contest any assessment or levy of real or personal property taxes in the name
of an with the cooperation of the LRA. The LRA shall cooperate with and assist
UDLP, at UDLP's sole costs, in applying for tax exemptions and/or tax abatements
with respect to the Leased Property. In the event it is finally determined,
after the exhaustion of administrative and/or judicial appeals, that UDLP is
liable for such assessment or levy of real or personal property taxes, or other
governmental charges, general and special, UDLP shall pay the same as Additional
Rent.
10. UTILITIES AND MAINTENANCE. UDLP shall pay for all water, gas,
electricity and other utilities servicing the Leased Property. UDLP shall
maintain all buildings and improvements, including all structural components,
covered by this Sublease in accordance with generally accepted maintenance
standards subject to inspection by the LRA to determine compliance with such
maintenance standards and consistent with Paragraph 12, of the Lease.
1l. MAINTENANCE OF PERSONAL PROPERTY. UDLP shall maintain Personal
Property furnished by the LRA under this Sublease consistent with Paragraph 12
of the Lease and the Maintenance standards agreed to by the Navy, the LRA and
UDLP. The LRA may, subject to Government Security Restrictions, inspect the
Personal Property from time to time, upon reasonable notice to UDLP, to
determine compliance with the foregoing. In the event that the Navy funds
replacement of such Personal Property, or augmentation of such Personal
Property, to maintain or improve the state of the art of operations, any such
replacement or new Personal Property, will fall under this Sublease to the
extent it is added to or falls under the Lease with the Navy, or is otherwise
transferred to the LRA by the Navy. UDLP shall notify the LRA in advance in
writing in the event UDLP seeks to have the Navy fund replacement of such
Personal Property or the Augmentation of such Personal Property to maintain or
improve the state of the art of operations by UDLP of the Personal Property.
Equipment that is acquired by UDLP that is not such replacement or new Personal
Property, as referenced in the preceding sentence, shall be the property of
UDLP.
12. UTILIZATION OF EQUIPMENT. UDLP will cooperate with other tenants of
NOSL by subcontracting with respect to using certain under-utilized pieces of
Personal Property; provided,
<PAGE>
however, such cooperation shall not (i) require UDLP to incur any capital or
other expenditure to acquire or remove equipment or (ii) unreasonably interfere
with UDLP's production and/or utilization of said equipment. UDLP will
cooperate with the LRA to establish the Workforce Development Training Center at
NOSL and will assist in the providing of "hands on" training.
13. TRANSITION IMPROVEMENTS. UDLP shall perform the transition
improvements required to promote privatization in place at NOSL with respect to
the Primary Premises, listed on EXHIBIT C, and in accordance with the provisions
of Paragraph 5 of the Agreement and as set forth in Appendix Table C-1 of the
NOSL Facility Privatization and Reuse Plan, dated April 17, 1996, a copy of
which is attached as EXHIBIT F to the Agreement. The transition improvements
shall be performed to the Primary Premises n accordance with the Priority set
forth in Appendix Table C-1 aforesaid; provided, however, Priority 3 transition
improvements shall not be required to be performed unless this Sublease is in
effect for a total or more than five (5) years or if such transition
improvements are required under Paragraph 6 of the Lease. The transition
improvements with respect to the Primary Premises shall be performed at the sole
cost and expense of UDLP; provided, however, nothing herein shall deem to
prejudice any right of UDLP to seek reimbursement of such expenses under the
workload contracts, and other contract, agreement or law. The estimated costs
set forth on EXHIBIT F to the Agreement represent the LRA's current best
estimate of the costs for such transition improvements. It is parties' intent
that all such transition improvements be performed in as cost effective a manner
as possible in accordance with all applicable laws, rules, regulations,
ordinances and codes.
14. PERMITS AND LICENSES. UDLP shall obtain all necessary permits and
licenses to carry on its operations at NOSL after the Hot Turnover Date
including, without limitation, the environmental permits required by Paragraph
13.2 of the Lease. The LRA will use its best efforts to assist UDLP in
obtaining such permits and licenses.
15. INCENTIVES. The LRA will use its best efforts to assist UDLP in
obtaining available monetary, tax and other incentives from local, state and
federal governmental authorities and/or agencies.
16. ENVIRONMENTAL MATTERS.
A. DEFINED TERMS. As used in the Sublease, the following terms
shall have the meanings set forth below:
[1] "CERCLA" shall mean the Comprehensive Environmental
Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 USC 9601 ET. SEQ.
[2] "Damages" shall mean all damages, and includes, without
limitation, punitive damages, liabilities, costs, losses, fines, penalties,
demands, claims, personal injury, property damage, cost recovery actions,
lawsuits, administrative proceedings, orders, response action costs,
compliance costs, investigation, operation or
<PAGE>
monitoring expenses, reasonable consultant fees, reasonable attorneys' and
paralegals' fees, and litigation expenses.
[3] "Environmental Assessments" shall mean the inspections and
reports as to environmental matters pertaining to NOSL including, without
limitation, the Environmental Baseline Survey prepared by Brown & Root
Environmental, dated December 1995 for the Navy, and the RCRA Facility
Investigation and the RCRA Facility Assessment.
[4] "Environmental Claim" shall mean any investigation, notice,
violation, demand, allegation, action, suit, injunction, judgment, order,
consent decree, lien, proceeding, complaint, or claim (whether
administrative, judicial, or private in nature) arising (a) pursuant to, or
in connection with, an actual violation of or an alleged violation asserted
by a Governmental Authority or private party of any Environmental Law, (b)
in connection with any Hazardous Material or any Hazardous Material
Activity, (c) from any abatement, removal, remedial, corrective, or other
response action in connection with a Hazardous Material or Environmental
Law or (d) from any actual damage, injury, threat, or harm to the
environment.
[5] "Environmental Law" shall mean any current Legal Requirement
pertaining to (a) the protection of the environment, (b) the protection or
use of surface water and groundwater, (c) the management, manufacture,
possession, presence, use, generation, transportation, treatment, storage,
disposal, Release, threatened Release, abatement, removal, remediation or
handling of, or exposure to, any Hazardous Material or (d) pollution
(including any Release to air, land, surface water, and groundwater), and
includes, without limitation, CERCLA, RCRA, Federal Water Pollution Control
Act, as amended by the Clean Water Act of 1977, 33 USC 1251, et. seq.,
Clean Air Act of 1966, as amended, 42 USC 7401 et. seq., Toxic Substances
Control Act of 1976, 15 USC 2601 et. seq., Hazardous Materials
transportation Act, 49 USC 1801 et. seq., Oil Pollution Act of 1990, 33 USC
2701 et. seq., Emergency Planning and Community Right-to-Know Act of 1986,
42 USC 11001 et. seq., National Environmental Policy Act of 1969, 42 USC
4321 ET. SEQ., Safe Drinking Water Act of 1974, as amended, 42 USC 300(f)
ET. SEQ. all other applicable Federal, state and local environmental laws,
regulations and standards.
[6] "Environmental Performance Provisions" shall mean the
provisions of Paragraph 13 of the Lease.
[7] "Governmental Authority" shall mean any federal, state,
regional, county, or local person or body having governmental or
quasi-governmental authority or subdivision thereof.
[8] "Hazardous Material" shall mean any material classified as a
"hazarded substance" pursuant to CERCLA, as well as any hazardous, solid or
special waste, any pollutant or toxic substance, or other regulated
material under any other
<PAGE>
Environmental Law, and any substance that constitutes or contains gasoline,
diesel fuel or other petroleum hydrocarbons or products or their common
chemical constituents.
[9] "Hazardous Material Activity" shall mean any activity,
event, or occurrence involving a Hazardous Material, including, without
limitation, the manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, release, abatement, removal,
remediation, handling of or corrective or response action to any Hazardous
Material.
[10] "Legal Requirements" shall mean any treaty, convention,
statute, law, regulation, ordinance, Governmental Approval, Injunction,
judgment, order, consent decree, or other requirement of any Governmental
Authority.
[11] 'RCRA" shall mean the Solid Waste Disposal Act, as amended
by the Resource Conservation and Recovery Act of 1976 and Hazardous and
Solid Waste Amendments of 1984, 42 USC 6901 ET. SEQ.
[12] "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing into the environment, including, without limitation,
the abandonment or discarding of barrels, drums, containers, tanks, and
other receptacles containing any hazardous Materials.
B. UDLP'S INDEMNIFICATION OF THE IRA
[1] As used herein, the term "Post-occupancy Condition" shall
mean any activity, omission, event, occurrence, Release, or condition that
was created, caused or contributed to by UDLP, or, to any extent, resulted
from the operation of UDLP's business at the NOSL after the Hot Turnover
Date.
[2] UDLP shall indemnify and hold harmless, the LRA from any
Damages and Environmental Claims to the extent they arise from a
Post-occupancy Condition related to the use production, generation,
storage, treatment, disposal, sale, transfer, transportation or Release of
any Hazardous Material at NOSL by UDLP.
[3] Notwithstanding the above, this indemnification extends only
to that portion of any activities, occurrences, omissions, events, Releases
or conditions created, caused or contributed to by UDLP, its employees,
agents, servants, guests, invitees, and subcontractors.
C. INDEMNIFICATION PROCEDURES.
[1] The LRA shall provide a written and reasonably detailed
notice (the "Indemnity Notice") to UDLP promptly and no later than thirty
(30) days after first learning of facts or circumstances which could
reasonably be anticipated to provide the basis of a claim for
indemnification (the "Indemnity Claim"), provided that an untimely
<PAGE>
Indemnity Notice shall not bar an Indemnity Claim but shall reduce the
UDLP's liability to the extent the delay increases the amount or magnitude
of the Indemnity Claim or to the extent that UDLP's ability to defend the
Indemnity Claim is prejudiced thereby.
[2] UDLP shall have the right to control the defense, response,
proceedings, and any settlement for an Indemnity Claim which arises from a
claim or demand by third party (a "Thirty Party Claim"). No later than ten
(10) days after its receipt of the Indemnity Notice (the "Election Date"),
UDLP shall notify the LRA whether UDLP elects to defend the LRA against the
Third Party Claim. During said ten (10) day period, the LRA may file at
UDLP's expense any pleading the LRA reasonably deems necessary to protect
its interests, provided that such pleading does not result in an adverse
final conclusion of the Third Party Claim or prejudice UDLP's ability to
defend the Third Party Claim.
[3] If UDLP elects by the Election Date to control the defense,
response, proceedings, and any settlement for any Third Party Claim, then
[a] UDLP shall diligently pursue a final conclusion as it
determines to be appropriate.
[b] The LRA shall have the right to monitor and participate
in the defense of the Third Party Claim at its expense; and
[c] UDLP and the LRA shall cooperate reasonably, including
as to contested claims, counterclaims, availability of witnesses and
documents.
[4] If UDLP [i] does not elect by the election date to control
the defense, response, proceedings, and any settlement for any Third Party
Claim or [ii] elects by the Election Period to do so, but fails to
diligently pursue a final conclusion, then:
[a] The LRA shall control the defense, response,
proceedings, and any settlement and shall diligently pursue a final
conclusion as it determines to be appropriate; and,
[b] The LRA shall not consent to any judgment or enter into
any settlement without the written consent of UDLP, which shall not be
unreasonably withheld.
[5] If the Indemnity Claim is not a Third Party Claim, then by
the Election date UDLP shall deliver written notice to the LRA specifying
any dispute of the Indemnity Claim and the basis for any such dispute;
provided, however, that the failure of UDLP to deliver such notice shall
not affect its ability to later dispute its liability for the Indemnity
Claim. If the parties are unable to resolve any such dispute, then the
parties
<PAGE>
shall have all rights and remedies at law or equity, including the right to
commence an action to resolve the dispute.
[6] Any part of the defense, response, proceedings, or
settlement for an Indemnity Claim which involves investigation, study,
sampling, testing, abatement, cleanup, removal, remediation, or other
response action ("Response Action") to remove, remediate, clean up, or
abate any Release, or disposal or Hazardous Materials or a violation of
Environmental Laws shall be conducted in accordance with the Response
Action procedures set forth in D below.
D. RESPONSE ACTION PROCEDURES (UDLP's INDEMNIFICATION OF THE LRA).
[1] The following procedures apply to any Response Action within
the scope of UDLP's indemnification of the LRA ("Indemnified Response").
[a] UDLP shall have the right to implement and control in
accordance with any applicable Environmental Law any Indemnified
Response which may arise;
[b] UDLP shall select one or more environmental engineers
or consultants subject to the reasonable approval of the LRA
("Approved Environmental Consultant") to plan, conduct, coordinate,
and supervise any Indemnified Response which may arise;
[c] UDLP shall arrange for an Approved UDLP Environmental
Consultant to prepare in compliance with any Applicable Environmental
Law a Response Action Plan for an UDLP's Indemnified Response, which
Response Action Plan shall be designed to (a) achieve compliance with
applicable Environmental Laws, (b) minimize the disruption of
operations at NOSL and, (c), in the absence of corrective action or
cleanup level specifications required by applicable Environmental Laws
or Governmental Authority, contain such specifications as reasonably
determined to be practicable by and Approved UDLP Environmental
Consultant;
[d] The LRA shall have the right reasonably to monitor any
Response Action at its own cost and expense. UDLP shall provide a
reasonable opportunity to the LRA for review and comment in advance of
each final Response Action Plan, material Response Action and material
filing with an applicable Governmental Authority. UDLP shall
reasonably address any timely received comment of the LRA, but the
final decision as to any action in connection with the Response Action
Plan, material Response Action or material filing shall be made by
UDLP;
<PAGE>
[e] Each party shall timely provide to the other any
information or document concerning any Indemnified Response reasonably
requested in writing by the other;
[f] If UDLP implements and controls the Indemnified
Response, then UDLP shall have no liability for any costs or expenses
incurred by the LRA in connection with the Indemnified Response,
including but not limited to costs incurred in overseeing, monitoring,
reviewing and commenting on the Indemnified Response.
E. ENVIRONMENTAL PROTECTION PROVISIONS. UDLP shall comply with all
of the Environmental Protection Provisions of the Lease applicable to it as
a Sublease all as set forth in Paragraph 13 of the Lease.
F. Conflicting Protections. In the event of any conflicts between a
provision of this Section 15 and a provision of Paragraph 14 of the Lease
or Part A of EXHIBIT F to the Lease, Paragraph 14 of the Lease and part A
of EXHIBIT F to the Lease shall take precedence.
17. COMPLIANCE WITH LAW. In addition to the requirements of Paragraph 13
of the Lease, UDLP shall comply with all Federal, state and local laws, rules,
regulations and standards which are applicable to the operations of UDLP and its
occupancy of the Leased Property now or hereafter on or about the same existing
at any time during the continuance of this Sublease.
18. DEFAULT. If either party shall be in default in the observance or
performance of any covenant or agreement under this Sublease, including, but not
limited to, the default in the covenant to pay rent, the non-defaulting party
shall give defaulting party notice in writing of the default. Except with
respect to the payment of rent under Section 5 of this Sublease, defaulting
party shall have thirty (30) days after such notice is received to remedy the
default. if defaulting party has not remedied the default within said thirty
(30) days or if defaulting party has not begun, in good faith, to undertake
diligently to remedy the same, within said thirty (30) day period then, the
non-defaulting party shall have the right to terminate this Sublease without
further shall have the right to terminate this Sublease without further notice
to defaulting party, but such termination shall not deprive the non-defaulting
party of any other remedy or action provided by law for the recovery of
possession, rent, damages or equitable relief occasioned by the default. If the
default is with respect to the payment of rent, the LRA shall give UDLP notice
in writing of such default, and UDLP shall have five (5) days after such notice
is received to remedy such default. If the default consists of the failure to
pay rent and UDLP has not remedied the same within said five (5) day cure
period, then, the LRA shall have the right to terminate this Sublease without
further notice to UDLP, but such termination shall not deprive the LRA of any
other remedy or action provided by law for the recovery of possession, rent and
damages occasioned by the default. UDLP shall pay the LRA all costs and charges
incurred in enforcing this Section of the Sublease in collecting delinquent
rent, including reasonable fees of attorneys employees by the LRA in connection
with such enforcement.
<PAGE>
19. COORDINATION OF NOSL FACILITY SERVICES. Notwithstanding the separate
obligations of UDLP to pay (A) for all utilities servicing the Leased Property
as set forth in Section 10 hereof, (B) for the costs of maintaining all
buildings and improvements within the Leased Property as set forth in Section 10
hereof and (C) the costs to maintain the Personal Property as set forth in
Section 11 hereof, the LRA and UDLP agree that it may be in their respective
economic best interests to provide for the payment of such items on a pro rata
basis as the part of a collective operations and Maintenance Contract which may
include the LRA, UDLP, HMSC and the navy operations at NOSL. In such event, the
requirements of Section 10 of this Sublease shall be deemed to be satisfied if
UDLP shall pay the costs associated with such Operations and Maintenance
Contract on a pro rata basis, and this Sublease shall be so amended to reflect
the same. The LRA shall be entitled to a contract administration fee equal to
five percent (5%) of the gross amount of the Operations and Maintenance Contract
for its administration of same.
20. ARBITRATION. All claims, disputes and other matters in question
arising out of, or relating to, this Sublease or the Sublease or the breach
thereof, that have not been resolved amicably by the parties, including, without
limitation, those matters set forth in Section 18 hereof, shall be decided by
arbitration in accordance with KRS Chapter 417 and the Rules of the American
Arbitration Association as existing, from time to time, unless the parties agree
otherwise. Each of the parties may nominate one arbitrator, and the two
arbitrators nominated by the parties shall select a third arbitrator from a list
submitted by the American Arbitration Association. The decision of the panel of
arbitrators shall be final and binding, and judgment may be entered upon it in
accordance with applicable law in any court having jurisdiction thereof. The
award shall be in writing and signed by the arbitrators joining in the award.
The arbitrators shall deliver a copy of the award to each party by certified
mail, return receipt requested. The panel of arbitrators shall deliver its
award within jurisdiction thirty (30) days of the submission to it; provided,
however, this time period may be shortened or extended by the mutual agreement
of the parties. Prior to filing a demand for arbitration, the complaining party
shall file a written notice to the other party setting forth the claims,
disputes or other matters in question, and the parties shall meet within seven
(7) days thereafter to attempt to resolve their differences, and the party to
whom such notice was delivered shall render its decision, in writing, concerning
the claim, dispute or other matters in question within seven (7) days following
such meeting. Notice of the demand for arbitration shall be filed in writing
with the other party to the Sublease and with the American Arbitration
Association within seven (7) days following receipt of the written answer as set
forth in the preceding sentence.
21. AUTHORITY. Each party represents and warrants to the other party that
it has the authority to enter into this Sublease without the prior written
consent or approval of any other person or entity, that the person executing
this Sublease for such party has been duly authorized to execute the same and
that this Sublease shall be binding upon such party in accordance with its
respective terms.
22. LIMITATION ON DAMAGES. Except with respect to Damages and/or
Environmental Claims, as defined in Section 16 hereof, in no event shall either
party be liable to the other party for any indirect, special, consequential,
incidental, multiple, exemplary or punitive damages with
<PAGE>
respect to any dispute or claim which may arise between the parties in
connection with this Sublease or its performance by either party; provided,
however, this Section shall not be construed to limit equitable or injunctive
relief against either party.
23. GENERAL PROVISIONS.
A. GOVERNING LAW. This Sublease is to be governed by and construed
in accordance with the laws of the Commonwealth of Kentucky.
B. PARAGRAPH HEADINGS. The headings of the several paragraphs of
this Sublease are inserted solely for the convenience of reference and are not a
part of and are not intended to govern, limit or aid in the construction of any
term or provision hereof.
C. NOTICES. All notices, requests and other communications
hereunder shall be in writing and shall be deemed to have been given if
personally delivered, sent by facsimile transmission or sent by certified mail,
return receipt requested and postage prepaid, addressed to:
LRA: Louisville/Jefferson County Redevelopment Authority, Inc.
600 West Main Street, Suite 400
Louisville, Kentucky 40202
Attn: President
Copy to: Grover C. Potts, jr.
Wyatt, Tarrant & Combs
2500 Citizens Plaza
Louisville, KY 40202
UDLP: United Defense L.P.
163 Rochester Drive
Louisville, Kentucky 40214
Attn: Michael L. Seale
Copy to: W.W. Warren
United Defense LP
4800 East River Road
Minneapolis, Minnesota 55421
Copy to: Mr. Richard M. Sullivan
Conliffe, Sandmann & Sullivan
621 West Main Street
Louisville, Kentucky 40202
All notices, requests and other communications shall be deemed received on the
date of actual receipt thereof. Either party may change the address or the
designation to which notices are sent under this Section by providing the other
party written notice thereof as provided for herein.
<PAGE>
D. SEVERABILITY. If any provision of this Sublease or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to the other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law in order
to preserve the essential purpose of the Agreement.
E. FURTHER ASSURANCES. Each party hereto agrees to do all acts and
things and to make, execute and deliver such written instruments as shall be
reasonably necessary to carry out the terms and provisions of this Agreement;
provided, however, that the party to whom a request is made to make, execute or
deliver such documents or to perform such additional acts shall not be liable
for any additional costs as a result thereof.
F. OTHER PARTIES. Nothing in this Sublease shall be construed as
giving any person, firm, corporation or other entity, other than the parties
hereto, their successors and assigns, any rights, remedy or claim under or in
respect to this Agreement or any provision thereof.
G. TIME IS OF THE ESSENCE. Time is of the essence with respect to
the performance by the parties of their obligations under this Sublease.
H. COUNTERPART COPIES. This Sublease may be executed in several
counterparts each and every one of which shall be deemed to be an original.
I. NO ASSIGNMENT BY UDLP. UDLP may not assign, sell, convey or
otherwise transfer its rights under this Sublease without the prior written
consent of the LRA; provided, however, no such consent shall be required for any
transfer (i) to another controlled affiliate of FMC Corporation or (ii) to any
entity which is acquiring substantially all of the assets of UDLP; provided,
further, with respect to such assignee no such assignment shall affect the
rights or obligations of the LRA or any assignee hereunder; and, provided,
further, such assignment shall contain no conditions which in any way relieve
the assignee from assuming and being bound to complete the balance of the
Sublease as it exists on the date of assignment as if such assignee had been an
original signatory hereto. Any such assignment shall be subject to Paragraph
5.1 of the Lease.
J. AMENDMENTS. This Sublease may be amended by the parties at any
time.
K. CONFLICTING PROVISIONS. In the event of any conflict between a
provision in this Sublease and a provision in the Agreement, the provision in
this Sublease shall take precedence.
L. COMPLETE AGREEMENT. This Sublease contains the entire
understanding between the parties with respect to matters set forth herein, and
no prior stipulation, agreement or understanding, verbal or otherwise, between
the parties, or their agents, shall be valid or enforceable unless embodied in
the provisions of this Sublease.
<PAGE>
M. WAIVER. No waiver of any provision of this sublease shall be
valid and binding unless in writing and executed in the same manner as the
execution of this Sublease.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Sublease as of
the 19th day of August, 1996 but actually on the date below each signature.
LOUISVILLE/JEFFERSON COUNTY
REDEVELOPMENT AUTHORITY, INC.,
a Kentucky non-profit, non-stock corporation
and local redevelopment authority
By: /s/ Frank Jemley, III
---------------------------------------------
Frank Jemley, III, President
Date: 19 August, 1996
UNITED DEFENSE L.P., a Delaware
limited partnership
By: /s/ Frederick M. Strader
---------------------------------------------
Title: Vice President and General Manager
Date: 19 August, 1996
The undersigned, a duly authorized officer of FMC
Corporation, a Delaware Corporation, General
Partner in United Defense L.P. hereby attests and
certifies that Frederick M. Strader, Vice
President and General Manager of United Defense
L.P. has been delegated the requisite authority by
and on behalf of FMC Corporation to bind United
Defense L.P. to this Sublease in all respects.
FMC CORPORATION, a Delaware
corporation, General Partner
By: /s/ William W. Warren
---------------------------------------------
Title: Assistant Secretary
Date: 19 August, 1996
<PAGE>
PRIMARY PREMISES
EXHIBIT C
- --------------------------------------------------------------------------------
Building No. Square Footage
- ------------ --------------
A 141,139
B 123,284
C 124,998
D 104,990
E South utility area 5,100
0 2,927
23 518
31 1,608
41 518
48 15,817
51 4,148
52 4,148
55 ______
56 ______
62 27
65 4,288
66 4,288
74 6,153
81 566
85 843
87A 3,850
90 5,095
92 4,786
93 4,480
100 259
101 292
103 ______
111 675
113 4,480
120 1,500
125 374
126 374
127 374
128 70
135 500
Oxygen Tank ______
Tanks 60, 61, 95, 98 and 138
Ammonia Tank (West of G)
<PAGE>
- --------------------------------------------------------------------------------
Nitrogen Tank (West of G)
- --------------------------------------------------------------------------------
T31
- --------------------------------------------------------------------------------
Square Footage
--------------
19 August 1996 - 31 December 1997 1,042,818 sq. ft.*
1 January 1998 - 31 December 1998 776,798 sq. ft.**
1 January 1999 - 31 December 1999 632,012 sq. ft.
1 January 2000 - 31 December 2000 632,012 sq. ft.
1 January 2001 - 18 August 2001 632,012 sq. ft.
* Will be reduced by 107,504 square feet as to Building G sixty (60) days
after the building is vacated, if vacated before 31 December 1997.
** Will be reduced by 144,786 square feet as to Building F sixty (60) days
after the building is vacated, if vacated before 31 December 1998.
<PAGE>
EXHIBIT A
PRIVATIZATION CONTRACTOR AGREEMENT
THIS PRIVATIZATION CONTRACTOR AGREEMENT is made and entered into as of
the 19th day of August, 1996, by and between LOUISVILLE/JEFFERSON COUNTY
REDEVELOPMENT AUTHORITY, INC., a Kentucky non-profit, non-stock corporation and
local redevelopment authority ("LRA") , with a mailing address of Suite 400, 600
West Main Street, Louisville, Kentucky 40202 and UNITED DEFENSE L.P. ("UDLP"), a
Delaware limited partnership comprised of the BMY Combat System Division of
Harsco Corporation, a Delaware corporation, and the Defense Systems Group of FMC
Corporation, a Delaware corporation, with a mailing address of 4800 East River
Road, Minneapolis, Minnesota 55421.
W I T N E S S E T H:
WHEREAS, the Base Realignment and Closure Commission, as hereinafter
defined, selected the Naval Ordnance Station, Louisville, a division of the
Naval Surface Warfare Center ("NOSL"), for closure and privatization in place of
the repair, overhaul and remanufacturing work currently being performed by the
United States Navy (the "Navy") at NOSL; and
WHEREAS, the LRA was formed by the City of Louisville and Jefferson
County, acting by and through their respective executive and legislative
branches, to establish a method and means for the privatization in place of
NOSL; and
WHEREAS, UDLP has made a proposal to the LRA with respect to the
privatization of a portion of the repair, overhaul and remanufacturing work
currently being performed at NOSL, and the LRA has selected UDLP as a
privatization contractor for NOSL in accordance with the terms and conditions
set forth herein.
NOW, THEREFORE, for an in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, as hereinafter
defined, the following words and./or terms shall have the meanings set forth
below and such meaning shall take precedence:
A. "AAV" shall mean the Amphibious Assault Vehicle designed and
built by UDLP for the United States Marine Corps.
B. "Act: shall mean the Defense Base Closure and Realignment Act of
1990, Pub. L. No. 101-510, 104 State, 1808, 10 U.S.C. 2687, as amended, from
time to time.
<PAGE>
C. "Agreement" shall mean this Privatization Contractor Agreement,
as amended, from time to time.
D. "Best Efforts: shall mean UDLP's commitment of business
resources, including monetary and personnel resources, sufficient to accord a
high probability of success to the matter in respect of which such commitment is
made, provided, however, that such commitment shall not impair or limit in any
way UDLP's ability to negotiate contracts with its customers and suppliers
containing prices and other terms acceptable to UDLP. It is expressly
understood by the parties that this Agreement does not impose a fiduciary
standard on either party and, notwithstanding the use of the term "best
efforts", no fiduciary relationship exists between the parties to this
Agreement. The only standard governing the conduct of the parties under this
Agreement is one of good faith and fair dealing. Additionally, the parties
agree the term "best efforts" shall not mean or be defined as in the case of IN
RE BETTY ELIZABETH HEARD, 6 Bankr. 876, 6 Bankr. Ct. Dec. (CRR) 1272 (1980).
E. "BRAC" shall mean the Base Realignment and Closure Commission as
established under the Act.
F. "CIWS" shall mean the Gun Center of Excellence to be established
by the LRA at NOSL.
G. "Center" shall mean the Gun Center of Excellence to be
established by the LRA at NOSL.
H. "Core Jobs" shall mean the jobs at NOSL for which employees will
be hired within four (4) months of the Hot Turnover Date, as set out in Section
9 hereof. Core Jobs does not include jobs for which employees will be hired on
or after the Hot Turnover Date to perform the Additional Work.
I. "FOTS" shall mean the Follow-On Technical Support repair and
overhaul of guns and other equipment for use on ships which have been or will be
transferred by the Navy to foreign government navies.
J. "HMSC" shall mean Hughes Missile Systems Company, a Delaware
corporation.
K. "Hot Turnover Date" shall mean the date upon which the
privatization in place at NOSL begins, and NOSL is turned over operationally by
the Navy to the LRA which date is scheduled to be 19 August 1996 or such later
date as determined by the Navy.
L. "NSFS" shall mean the Naval Surface Fire Support program
involving the mark 45 gun upgrade.
M. "Non-CIWS Work" shall mean all of the repair, overhaul and
remanufacturing work to be performed for the Navy by UDLP at NOSL which work
does not include the CIWS, RAM and TAS work to be performed by HMSC at NOSL..
The Non-CIWS
<PAGE>
work performed at NOSL is set forth on EXHIBIT A which is attached hereto and
incorporated herein by reference.
N. "OEM" shall mean the Original Equipment Manufacturer for the
Navy.
O. "Union" shall mean Local Lodge 830 of the International
Association of Machinists and Aerospace Workers, AFL-CIO.
P. "Preferential Hiring Treatment" shall mean giving the right of
first refusal to fill job openings to former NOSL employees who are qualified
for such jobs and who were laid off as a result of the Navy Closing of NOSL.
Q. "RAM" shall mean the Rolling Airframe Missile system repair,
overhaul and remanufacturing work to be performed at NOSL. The OEM for RAM is
HMSC.
R. "Sublease" shall mean the sublease by and between the LRA and
UDLP to be entered into contemporaneously with this Agreement.
S. "TAS" shall mean the mark 23 Target Acquisition System repair,
overhaul and remanufacturing work currently being performed at NOSL. The OEM
for TAS is represented by HMSC.
2. HISTORICAL INFORMATION. NOSL was opened by the Navy in 1941 to
provide depot-level maintenance, overhaul, repair and remanufacturing of small
to large caliber naval guns and gun weapon systems. NOSL is the only remaining
full-service gun and gun weapons system facility in the United States. NOSL
encompasses 92 buildings on 142 acres, more or less, which include a total of
approximately 1,630,000 square feet of production, administrative, supply and
miscellaneous support space. In response to the BRAC recommendation that NOSL
be placed on the 1995 base closure list, the LRA was established to privatize in
place the workload at NOSL. In support of the privatization in place of NOSL,
UDLP and the City of Louisville and Jefferson County entered into a Cooperative
Agreement, dated 3 June 1995 (the "Cooperative Agreement"), in that regard.
3. SELECTION OF UDLP. On 7 March 1996 the LRA designated UDLP to be the
privatization contractor at NOSL to privatize in place the Non-CIWS Work at NOSL
subject to negotiation of a mutually acceptable agreement between the LRA and
UDLP. On March 12, 1996 the LRA notified the Navy of the selection of UDLP as a
privatization contractor at NOSL by facsimile transmission, a copy of which is
attached hereto as EXHIBIT D and incorporated herein by reference.
4. UDLP COMMITMENT TO CENTER. UDLP commits to establishment of the
Center as a world-class gun facility and will use its best efforts to cause the
Center to be successful.. UDLP's "best efforts" shall be governed by the
definition as set forth in Section 1.D. above and will include publicizing the
establishment of the Center in trade publications, and directing the work
planned for the Center described in EXHIBIT C, which is attached hereto and
incorporated herein by reference, to NOSL. UDLP commits to use its best efforts
to seek a
<PAGE>
business relationship with United Parcel Service ("UPS") for the purpose of
establishing a regional, national, and international defense equipment logistics
and maintenance hub at NOSL and, consistent with Section 1.D. above, to commit
sufficient business resources to the relationship to give it a high probability
of success.
5. TRANSITION COSTS. UDLP agrees that, as between the LRA and UDLP, and
without limiting UDLP's ability to recover such costs from the navy and/or other
agency of the U.S. Government, UDLP will be responsible for all transition costs
associated with the performance of the transition improvements as required to be
performed pursuant to Section 13 of the Sublease.
6. EQUITABLE TREATMENT OF RETIREMENT ISSUES. UDLP agrees to use its best
efforts and will cooperate with the LRA in its attempt to find a reasonable
legislative or nonlegislative solution to the retirement benefits issues with
respect to current NOSL employees: provided, however, and subject to any
collective bargaining agreement between UDLP and the Union, it is understood
that UDLP shall have no obligation to pay such retirement benefits paid to
similarly situated employees at other UDLP operations; and provided, further, it
is understood that years of government service will not be used for purposes of
calculating the amount of such benefits.
7. RECOGNITION OF UNION. UDLP reasonably expect to fill a majority of
its Production and Maintenance openings with employees from the bargaining unit
currently represented by the Union. Therefore, UDLP will recognize the Union as
the exclusive bargaining agent for the classifications described below when UDLP
becomes the Employer of record. UDLP will recognize the bargaining unit as all
Production and Maintenance employees excluding Programming, Tool Design, Quality
Assurance, Environmental, guards, supervisors as defined by the National Labor
Relations Act, office and clerical personnel, confidential, professional
employees and all salaried personnel. UDLP agrees to negotiate in good faith
with the Union to reach an agreement concerning the terms and conditions of
employment for members of the bargaining unit of UDLP at NOSL.
8. WAGES AND BENEFITS. UDLP agrees that the wages to be paid to
employees within the UDLP bargaining unit at NOSL will not be less than the
current wages paid to such employees as of the Hot Turnover Date. UDLP agrees
to provide benefits to employees within the UDLP bargaining unit which are
substantially equivalent to the benefits provided by UDLP to its other hourly
employees. UDLP agrees to grant vesting credit to all current employees of NOSL
hired by UDLP for purposes of vesting under pension and/or retirement benefit
plans provided to bargaining unit employees of UDLP at NOSL. (Vesting means
eligibility for the benefit only; years of government service will not be used
for purposes of calculating the amount of the pension benefit.)
9. COMPLEMENT OF EMPLOYEES. As of the Hot Turnover Date, UDLP agrees
that it will give current employees of NOSL Preferential Hiring Treatment, and
that it will hire a minimum of 397 employees from the current NOSL work force to
perform core gun work and other work at NOSL as of the Hot Turnover Date. As of
the Hot Turnover Date, UDLP will
<PAGE>
hire (a) an additional 25 employees from the current work force at NOSL to
perform the plating operations at NOSL; (b) an additional 50 employees from the
current work force at NOSL to perform supply services; and (c) an additional 90
employees from the current work force at NOSL to perform engineering services
relating to the current gun work and other work to be privatized by UDLP at
NOSL. In the aggregate, and as listed as Core Jobs on EXHIBIT B, which is
attached hereto and incorporated herein by reference, UDLP will hire a minimum
of 562 employees from the current NOSL work force as of the Hot Turnover Date to
perform the work described in this Section 9 subject to the future agreement
between the LRA, UDLP and the Navy as to the privatization of jobs referenced in
Section 9(b) and (c) hereof.
10. COMMITMENT FOR ADDITIONAL WORK AT NOSL. As set forth on EXHIBIT B AND
C, UDLP agrees to perform the following categories of work at NOSL: (a) NSFS
engineering work on the MK 45 upgrade backfit; (b) new MK 45 machining work; (c)
MK 45 upgrade backfit work; (d) FOTS repair and overhaul of guns and other
equipment for use on ships which have been or will be transferred by the Navy to
foreign government navies; (e) AAV suspension upgrade work to be performed for
the United States Marine Corps; (f) new MK 96 patrol craft gun work; and (g) the
proposed UDLP/UPS defense equipment logistics and maintenance hub at NOSL as
described in Section 4 hereof. Items (a) through (g) as set forth on Exhibits B
and C are collectively referred to as "Additional Work." The estimated number
of employees to be hired by UDLP to perform the Additional Work commitment at
NOSL is set forth on EXHIBIT B. UDLP agrees that it will give Preferential
Hiring Treatment for the performance of Additional Work to former NOSL employees
who are laid off as a result of the Navy closing at NOSL. The individual
numbers of employees set forth on EXHIBIT B with respect to such Additional Work
constitutes UDLP's reasonable good faith projections as of 28 May 1996.
11. NO TRANSFER OF CORE JOBS FROM NOSL. UDLP agrees that all of the Core
Jobs referenced in Section 9 above shall remain at NOSL and will not be moved or
transferred to any other location by UDLP. UDLP shall use its best efforts and
will encourage the Navy program manager(s) for the Non-CIWS Work to keep all
such Core Jobs at NOSL.
12. NO COMPETITION BY MINNEAPOLIS. UDLP currently operates a facility in
Minneapolis which has the capacity for competing directly with NOSL. UDLP
agrees unconditionally that it will not compete for NON-CIWS Work or the
Additional Work, as described in Sections 9 and 10 above, at Minneapolis. This
provision is not intended to conflict with any prior written agreements which
UDLP has with any labor organizations or any other written agreements which UDLP
currently has.
13. PLATING FUNCTION. UDLP agrees to operate the plating operation
currently operate at NOSL until such time as a commercial plating company,
acceptable to UDLP and the LRA, is selected by the LRA to become the permanent
operator of the plating facility. It is UDLP's intention to market the plating
facility aggressively and to establish a rapid turn around plating operation.
UDLP believes that the rapid turn around plating operation can be established in
conjunction with UPS whose cargo operations are located near NOSL.
<PAGE>
14. INTERNATIONAL FLEET SUPPORT OFFICE. UDLP will establish an
International Fleet Support office at NOSL which will coordinate fleet needs for
UDLP privatized product lines at NOSL and will transfer a minimum of five (5)
UDLP employees to NOSL to staff this office.
15. SUBLEASE. In the case of any conflicting provisions between this
Agreement and the Sublease, the provisions in the Sublease shall be controlling
and shall take priority over the provisions of this Agreement.
16. COOPERATION. The LRA and UDLP, respectively, agree to cooperate with
each other with respect to matters covered by this Agreement. Each party will
provide reasonable assistance to the other party with respect to matters
involving the Navy. With respect to mutual issues concerning the Navy, the
parties will cooperate and present to the Navy a "united front."
17. DEFAULT. If either party shall be in default in the observance or
performance of any covenant or agreement hereunder, including, but not limited
to the default in the covenant to pay rent under the Sublease, the non-
defaulting party shall give to the defaulting party notice in writing of such
default. Except as to the payment of rent under the Sublease, the defaulting
party shall have thirty (30) days after such notice is received to remedy the
default or, if such default may not be remedied within said time period, the
defaulting party shall have begun, in good faith, to undertake to remedy such
default in as short a period of time as possible. An default regarding Section
9 or 10 of this Agreement (taking into account the related provisions hereof,
including but not limited to Sections 1.D., 19, and 24) shall (i) be callable
not more than once within any year (measured in terms of anniversaries from the
Hot Turnover Date), and (ii) not be deemed to occur unless the Total United
Defense Jobs, as projected by UDLP as EXHIBIT B, falls more than ten percent
(10%) below the level specified on EXHIBIT B. In the event that the defaulting
party fails to remedy such default, the non-defaulting party shall have the
right to terminate this Agreement and the Sublease, subject to any applicable
further requirements regarding Sublease termination as set forth in Section 8 of
EXHIBIT D, but such termination shall not deprive the non-defaulting party of
any other action or remedy provided by law for the recovery of damages
occasioned by such default.
18. FORCE MAJEURE. Neither party shall be liable for failure or delay inn
performance under this Agreement or the Sublease which is due to any cause or
occurrence beyond the reasonable control of the party who has failed or delayed
in its performance. Without limiting the generality of the foregoing, such
cause or occurrence shall include strike, lockout work stoppage, war or other
violence, inability to obtain materials and supplies, fire, flood, natural
causes, any laws, proclamation, regulation or action of the U.S. Government
(acting in its contractual or sovereign capacity), interruption of or delay in
transportation, and act of God. In the event of the happening of any such
contingency, the party affected shall give immediate notice thereof to the other
party but not later than two (2) business days after the management of the party
affected shall first become aware of such contingency and shall be relieved from
its performance under this Agreement and the Sublease until such contingency has
been eliminated
<PAGE>
to the extent that the party affected has the ability to resume performance
under this Agreement and the Sublease.
19. ARBITRATION. All claims, disputes and other matters in question
arising out of, or relating to, this Agreement or the Sublease or the breach
thereof, that have not been resolved amicably by the parties, including, without
limitation, those matters set forth in Section 18 hereof, shall be decided by
arbitration in accordance with KRS Chapter 417 and the Rules of the American
Arbitration Association as existing, from time to time, unless the parties agree
otherwise. Each of the parties may nominate one arbitrator, and the two
arbitrators nominated by the parties shall select a third arbitrator from a list
submitted by the American Arbitration Association. The decision of the panel of
arbitrators shall be final and binding, and judgment may be entered upon it in
accordance with applicable law in any court having jurisdiction thereof. The
award shall be in writing and signed by the arbitrators joining in the award.
The arbitrators shall deliver a copy of the award to each party by certified
mail, return receipt requested. The panel of arbitrators shall deliver its
award within thirty (30) days of the submission to it; provided, however, this
time period may be shortened or extended by the mutual agreement of the parties.
Prior to filing a demand for arbitration, the complaining party shall file a
written notice to the other party setting forth the claims, disputes or other
matters in question, and the parties shall meet within seven (7) days thereafter
to attempt to resolve their differences, and the party to whom such notice was
delivered shall render its decision, in writing, concerning the claim, dispute
or other matters in question within seven (7) days following such meeting.
Notice of the demand for arbitration shall be filed in writing with the other
party to the Agreement and with the American Arbitration Association within
seven (7) days following receipt of the written answer as set forth in the
preceding sentence.
20. AUTHORITY. Each party represents and warrants to the other party that
it has the authority to enter into this Agreement without the prior written
consent or approval of any other person or entity, that the person executing
this Agreement for such party has been duly authorized to execute the same and
that this Agreement shall be binding upon such party in accordance with its
respective terms.
21. NO ASSIGNMENT BY UDLP. UDLP may not assign, sell, convey or otherwise
transfer its rights under this Agreement without the prior written consent of
the LRA; provided, however, no such consent shall be required for any transfer
(i) to another controlled affiliate of FMC Corporation or (ii) to any entity
which is acquiring substantially all of the assets of UDLP; provided, further,
with respect to such assignee no such assignment shall affect the rights or
obligations of the LRA or any assignee hereunder; and, provided, further, such
assignment shall contain no conditions which in any way relieve the assignee
from assuming and being bound to complete the balance of the Agreement as it
exists on the date of assignment as if such assignee had been an original
signatory hereto.
22. ENTIRE AGREEMENT. This Agreement supersedes all prior and
contemporaneous agreements and understanding, written or oral, between the
parties hereto with respect thereto. No claim of waiver, modification, consent
or acquiescence with respect to any of
<PAGE>
the provisions of this Agreement shall be made against either party, except on
the basis of a written instrument executed by and on behalf of such parties.
23. UDLP CONTINGENCIES. The commitments and conditions herein as well s
those in the Sublease are subject to (i) the existence and application of
contracts covering the business committed to hereunder, (ii) the terms and
conditions of such contracts and (iii) any actions that may be taken by the U.S.
Government or any other customers that have a significant adverse impact on
UDLP's business; provided, however, UDLP shall use its best efforts to encourage
its customers to direct and/or retain Non-CIWS work and the Additional Work
specified herein at NOSL.
24. ENVIRONMENTAL RELEASE PRIOR TO HOT TURNOVER DATE. UDLP and the LRA
mutually release each other in perpetuity from any and all environmental
response action liability, remediation costs and damage to the environment or
natural resources resulting from or predicated upon hazardous substances,
pollutants, contaminants, toxic substances (including but not limited to
asbestos), petroleum or petroleum derivatives, as those terms are defined under
any law or regulation of the United States, Commonwealth of Kentucky, City of
Louisville or Jefferson County, (collectively referred to as "Environmental
Conditions") existing at or otherwise placed in or upon or disposed of at or
near NOSL prior to the Hot Turnover Date.
25. GENERAL RELEASE PRIOR TO HOT TURNOVER DATE. UDLP and the LRA mutually
release each other in perpetuity from all liability for injury, death, disease,
propety damage or loss, and any labor or employment-related claims or damages
caused by the acts of omissions of the Navy, its employees, servicemen or women,
subcontractors or suppliers, or business guests (other than UDLP or the LRA, or
their repective representatives, employees, or suppliers) at NOSL prior to the
Hot Turnover Date.
26. GOVERNING LAW. This Agreement is to be governed by and construed in
accordance with the laws of the Commonwealth of Kentucky.
27. PARAGRAPH HEADINGS. The headings of the several paragraphs of this
Agreement are inserted solely for the convenience of reference and are not a
part of and are not intended to govern, limit or aid in the construction of any
term or provision hereof.
28. NOTICES. All notices, requests and other communications hereunder
shall be in writing and shall be deemed to have been given if personally
delivered, sent by facsimile transmission or sent by certified mail, return
receipt requested and postage prepaid, addressed to:
LRA: Louisville/Jefferson County Redevelopment Authority, Inc.
600 West Main Street, Suite 400
Louisville, Kentucky 40202
Attn: President
Copy to: Grover C. Potts, Jr.
<PAGE>
Wyatt, Tarrant & Combs
2500 Citizens Plaza
Louisville, KY 40202
UDLP: United Defense L.P.
163 Rochester Drive
Louisville, Kentucky 40214
Attn: Michael L. Seale
Copy to: W.W. Warren
United Defense LP
4800 East River Road
Minneapolis, Minnesota 55421
Copy to: Mr. Richard M. Sullivan
Conliffe, Sandmann & Sullivan
621 West Main Street
Louisville, Kentucky 40202
All notices, requests and other communications shall be deemed received on the
date of actual receipt thereof. Either party may change the address or the
designation to which notices are sent under this Section by providing the other
party written notice thereof as provided for herein.
29. SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provisions
to the other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law in order to preserve the
essential purpose of the Agreement.
30. FURTHER ASSURANCES. Each party hereto agrees to do all acts and
things and to make, execute and deliver such written instruments as shall be
reasonably necessary to carry out the terms and provisions of this Agreement;
provided, however, that the party to whom a request is made to make, execute or
deliver such documents or to perform such additional acts shall not be liable
for any additional costs as a result thereof.
31. OTHER PARTIES. Nothing in this Agreement shall be construed as giving
any person, firm, corporation or other entity, other than the parties hereto,
their successors and assigns, any rights, remedy or claim under or in respect to
this Agreement or any provision thereof.
32. TIME IS OF THE ESSENCE. Time is of the essence with respect to the
performance by UDLP of its obligations under Section 9 of this Agreement.
33. COUNTERPART COPIES. This Agreement may be executed in several
counterparts each and every one of which shall be deemed to be an original.
<PAGE>
34. LIMITATION ON DAMAGES. In no event shall either party be liable to
the other party for any indirect, special, consequential incidental, multiple,
exemplary or punitive damages with respect to any dispute or claim which may
arise between the parties in connection with this Agreement or its performance
by either party; provided, however, this Section shall not be construed to
limit equitable or injunctive relief against either party.
35. WAIVER OF CLAIMS. The LRA and UDLP hereby waive and agree not to
assert against each other any monetary claims, or other claims, action and/or
causes of action (collectively "Claims"), of any kind or nature, either known or
unknown, which either may have now or in the future may have against the other,
arising prior to the date of this Agreement, including as to the LRA, its
employees, its Board of Directors, the City of Louisville or Jefferson County,
and as to UDLP, its officers, employees and Board of Directors including its
partner corporations, including, without limitation, any Claims which either now
has with respect to the Cooperative Agreement, and the LRA and UDLP agree that
from this date forward the Cooperative Agreement shall be deemed to have been
fully satisfied and shall hereinafter be null, void and of no further legal
effect. In interpreting the preceding sentence, the parties specifically agree
that no Claim is waived or released in respect of any act or omission occurring
on or after the date of this Agreement, it being the parties' governing
intention that no Claim or other legal recourse of any nature is waived or
released in respect of this Agreement or the parties' obligations arising
thereunder or with respect thereto.
36. TERM AND TERMINATION. As set forth in Section 3 hereof, UDLP has been
selected as the privatization in place contractor for the Non-CIWS Work at NOSL
such Non-CIWS Work to be performed by UDLP under contract(s) with the Navy.
This Agreement and the Sublease shall be for one year beginning 19 August 1996
and ending 18 August 1997. This Agreement shall be renewed annually thereafter
by UDLP if the Sublease is renewed with the initial plus renewal terms of this
Agreement, in the aggregate, being coterminous with the length of the
contract(s) with the Navy for the Non-CIWS Work, all Additional Work (to the
extent UDLP is successful in using its best efforts to obtain the same) and all
other work obtained by UDLP under contract with the Navy, together with the
orderly cessation of UDLP's operations at the Center. Notwithstanding anything
to the contrary in this Section, it is the intention of the parties that the
equipment and space requirements provided by the LRA to UDLP under the Sublease
shall be as required by UDLP in order to perform all of its contracts with the
Navy for the Non-CIWS Work, the Additional Work and other work obtained by UDLP
from the Navy. The parties recognized that the various contracts between UDLP
and the Navy may be varied as to length. In the event that a specific
contract(s) with the Navy is proposed by UDLP to be performed at NOSL which
requires additional equipment and/or space, the LRA and UDLP agree to use their
respective best efforts to accommodate the performance of such contract(s) at
NOSL. In the event that the Navy decides to terminate contract(s) with UDLP for
specific work at NOSL, the LRA and UDLP will use their respective best efforts
to effectuate such termination with as little disruption to the remaining work
at NOSL as possible. In the event of any such termination by the Navy, UDLP
agrees to cooperate with the LRA, consistent with the terms of the Sublease,
with the transition to other privatization contractors.
<PAGE>
37. CONDITION PRECEDENT. It is understood by the parties that a condition
precedent to the performance by either party of this Agreement on or after the
Hot Turnover Date is the receipt by each respective party of assurances,
satisfactory to each respective party, from the Navy that environmental
remediation will be performed at NOSL and that risk protection will be provided
by the Navy to the LRA, which risk protection will be provided to UDLP through
the Sublease, at such levels as will protect the LRA and UDLP, to their
respective satisfaction, with respect to third party (toxic tort) liability and
response action liability arising from related to or predicated upon any
Environmental Conditions existing at NOSL prior to the Hot Turnover Date.
38. NO ABROGATION OF AGREEMENT. Neither party shall abrogate any term or
condition of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 19 day of August, 1996 but actually on the date below each signature.
LOUISVILLE/JEFFERSON COUNTY REDEVELOPMENT
AUTHORITY, INC., a Kentucky non-profit,
non-stock corporation and local redevelopment
authority
By: /s/ Frank Jemley, III
---------------------------------------------
Frank Jemley, III, President
Date: 19 August, 1996
UNITED DEFENSE L.P., a Delaware limited
partnership
By: /s/ Frederick M. Strader
---------------------------------------------
Title: Vice President and General Manager
Date: 19 August, 1996
The undersigned, a duly authorized officer of
FMC Corporation, a Delaware Corporation,
General Partner in United Defense L.P. hereby
attests and certifies that Frederick M.
Strader, Vice President and
<PAGE>
General Manager of United Defense L.P. has
been delegated the requisite authority by and
on behalf of FMC Corporation to bind United
Defense L.P. to this Sublease in all
respects.
FMC CORPORATION, a Delaware corporation,
General Partner
By: /s/ William W. Warren
---------------------------------------------
Title: Assistant Secretary
Date: 19 August, 1996
<PAGE>
EXHIBIT A
Non-CIWS Work performed at NOSL
Mark 45 5"/54 Gun Mount
-2J Cog, Mod 1, Mod 1 Ordalt Inst, Mod 1 Pier Side, Ordalt
Mfg., Ordalt Prototypes
Mark 75 76mm Gun System
-2J Cog, Overhauls, Pier Side Support
Gun Barrels
-for MK 45, Mk 42, Mk 75
Mark 19 Machine Gun
Mark 11 Salute Mount
Mark 68 20mm Mount
Mark 16 20mm Mount
Mark 2 81mm Mortar
Mark 4 60mm Mortar
Mark 15 CIWS (subcontract work to CIWS operator)
Mark 24 Target Designator Transmitter
Mark 79 Control Panel
Mark 10 Dummy Director
NAVICP 7H Cog Work
Mark 92 Fire Control System CASS/STIR Antenna
Mark 160 Gun Computing System
Mark 46 Optical Site
Mark 32 Surface Vessel Torpedo Tubes
*Mark 23 Target Acquisition System
NATO SeaSparrow Missile Launching System
Mark 36 Decoy Launching System
Mark 17 Turbine Pump Ejection System
Mark 19 Turbine Pump Ejection System
Mark 5 Terrier Launcher System
Ball Valves
*SUBJECT TO AGREEMENT BETWEEN LRA, UDLP ND HMSC
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT B
---------
TOTAL UNITED DEFENSE JOBS AT LOUISVILLE
1996 1997 1998 1999 2000 2001 2002 2003
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Privatized Guns Rep/Overhaul 240 240 190 215 185 195 195 195
Privatized Other Rep/Overhaul 157 157 127 142 122 132 132 132
Privatized Plating 25 25 25 25 25 25 25 25
Privatized Engineering* 90 90 90 90 90 90 90 90
Privatized Supply* 50 50 50 50 50 50 50 50
-- -- -- -- -- -- -- --
Subtotal - Core Jobs 562 562 482 522 472 492 492 492
New Intl Fleet Support Office 5 5 5 5 5 5 5 5
New NSFS Mk 45 Engineering 50 50 50 50 50 50 50 50
New FOTS 50 115 110 100 90 90 90 70
New Mk 45 Machining Work 15 30 30 30 30 30 30
New AAV Susp Upgrade 55 105 105 105 105 105 105
New Patrol Craft Gun (Mk 96) 30 50 50 50 50 50
New NSFS Mk45 Upgrade Bkft 240 240 240 240 240
Jobs from UDLP/UPS Partnrshp unk unk unk unk unk unk unk unk
TOTAL UNITED DEFENSE JOBS 667 802 812 1102 1042 1062 1062 1042
Other Jobs for Reference
- -Hughes CIWS 225 225 225 225 225 225 225 225
- -Hughes Prvtzd Engrg 60 60 60 60 60 60 60 60
- -Navy Engineering 125 125 125 125 125 125 125 125
- -DCMO 25 25 25 25 25 25 25 25
- -Plating New Optr Increment 25 25 25 25 25 25
Total Non-UDLP Jobe 435 435 460 460 460 460 460 460
TOTAL ALL JOBS 1102 1237 1272 1562 1502 1522 1522 1492
Best United Defense Projections as of 19 February 1996.
</TABLE>
OTHER JOBS AT CENTER ARE SHOWN FOR REFERENCE
*Privatization of Engineering, General Services and Supply jobs is subject to
future agreement between the LRA, UDLP and the Navy.
UNITED DEFENSE PRIVATE
<PAGE>
EXHIBIT C
UDLP ADDITIONAL WORK TO BE PERFORMED AT NOSL
Naval Surface Fire Support (NSFS)
This program is divided into two phases.
This 1st phase requires two guns to be upgraded as prototypes in 1996 for later
test. Any used gun which is required for prototyping will be inducted into the
NOSL facility, where disassembly and refurbishment operations will be conducted.
Any modification, new build, or reassembly and test operations will not be
conducted at the Center. No work on new guns which is required for the
prototyping phase will be conducted at the center. The Louisville work will
probably be started as organic Navy work at the Center and finished as UDLP
contract work there. The net job impact of this work after the Hot Turnover
Date is very small since the work must be completed in 1996.
The 2nd phase is planned to begin n 1999, when a Mk 45 gun backfitting program
will start. Current plans indicate that six guns will be upgraded yearly.
While not now in the budget, UDLP would expect to be successful in getting funds
programmed to do 60 total upgrades by 2010. Simultaneously, UDLP would be
building three new guns each year with the improved NSFS capability. UDLP would
do all the manufacturing work for the used guns at the Center (except for actual
modification kits).
The Mk 45 upgrade backfit portion of the NSFS program is expected to generate
240 new jobs at the Center beginning in 1999.
FOLLOW-ON TECHNICAL SUPPORT (FOTS)
This program is a 10 year long effort which is not now funded. VSE Corporation
doing business as a joint venture under the name BAV is expected to be the prime
contractor to the Navy. UDLP intents to be a subcontractor to VSE to perform
certain work.
The intended work which UDLP will conduct at the center is the normal repair,
overhaul and major maintenance of Navy ordnance systems which have historically
been done at NOSL. This work applies to classes of Navy surface combatants
which will be leased or otherwise conveyed to foreign navies and for which
appropriate work is contracted on the FOTS program.
The work UDLP will conduct at the Center will be on large items such as Mk 42
Naval Guns and Mk 112 ASROC Launchers. Each item for repair and overhual will
be separately evaluated for repair at pierside or at the Center.
The original FOTS prime contract was estimated by the US Navy to have a ceiling
value of $1 billion. UDLP estimates that 20% of the work under the contract
will be related to ordnance systems which can be repaired at the Center. This
works out to $20 million per year of work which could be done at the Center.
For market planning purposes, UDLP reduced this to $15
<PAGE>
million yearly. Also for planning purposes, we assume 33% of the work is
out-sourced. This leaves jobs for about 110 new jobs at the Center beginning in
1997.
AMPHIBIOUS ASSAULT VEHICLE (AAV) SUSPENSION UPGRADE
UDLP designed and built all the Marine Corps' AAVs. About 1,300 vehicles exist.
They are the current primary means by which the Marines go ashore in an
amphibious action. A new amphibious vehicle (AAAV) is being developed by the
Marine Corps. The AAAV will not go to production until about 2006. One likely
possibility is that the Marine Corps will upgrade the AAV for use during the
next 10-15 years, until the AAAV comes on-line. In this case, the Marine Corps
will probably try to perform this upgrade themselves in the Albany, Georgia
Depot. A key part of the upgrade is a suspension improvements. UDLP will seek
to perform the suspension upgrade at the Center under a partnership arrangement
with the Albany Depot. Thus UDLP will propose to do the AAV Suspension Upgrade
at the Center.
It is UDLP's understanding that the AAV Suspension Upgrade is in the
Government's budget. UDLP believes it is programmed over 6 years beginning
1997, at a rate of 210 vehicles yearly. UDLP estimates that the new job impact
is 105 employees continuously, beginning in mid-1997.
MK 96 GUN
The Mk 96 gun is a stabilized small caliber gun mount used on patrol craft. It
was developed by NOSL. Only 18 such mounts will have been delivered by the time
the supply of Mk 38 gun carcasses is consumed. There will continue to be a need
for stabilized mounts to be used on PC's. However, options for meeting the
requirement must be developed. Such options include a Mk 96 gun which is build
from scratch, a Mk 75 modified gun, or a 57 mm or 60 mm gun. The worldwide
market for such guns is believed to be about 400 units. The value of each gun
would be about $0.5-1.0 million. All of the work to build this gun would be
performed at the Center. We believe it would spread over about 6 or 7 years.
Substantial international competition will exist. The US would need to jump
start this program by funding sufficient work to design and build test units
which would compete with foreign sources.
NEW MK 45 MACHINING WORK
The new work being identified for placement into the Center consists of certain
existing work currently being conducted by suppliers of UDLP in the Minneapolis
area. It is close tolerance machining work on small to medium-sized components
of the Mk 45 Gun Mount. It will be low volume work on a range of 1000 to 1500
different part numbers, many of them requiring heat treat, plating and painting,
as well as machining.
NSFS ENGINEERING WORK
UDLP intends to employ engineers and other technical support personnel for
certain work on the new NSFS program as well as other Navy programs. The scope
of this work could cover aspect of product development and Life Cycle Support,
such as logistics, analysis, Realiability, Maintainability and Availability
(RM&A), Safety Engineering, Mechanical Engineering, Electrical Engineering,
Environmental, software engineering system engineering, test engineering and
technical services, etc. These personnel will be working on some modifications
<PAGE>
as well as some new design on certain programs which could include guns,
launchers, control systems. networks, sensors, computers and ordnance.
PROPOSED UDLP/UPS MAINTENANCE HUB
United Defense proposes to establish an arrangement with United Parcel Services
("UPS") in which UPS provides transportaion services and UDLP provides repair
services for a broad range of military equipment which would be shipped into
Louisville from around the world. We envision that this would be a rapid
turn-around service which would enable the Navy to reduce the inventory levels
of certain equipment now stocked at various intermediate stocking and control
points throughout the world. UDLP has signed a non-disclosure agreement with
UPS so that the parties can exchange information and explore opportunity. The
next step is the creation and signing of a memorandum of understanding. Target
products will be chosen for exploring the potential benefits to the Navy. UDLP
proposes to consolidate its operations for this venture in L Building.
<PAGE>
FIRST AMENDMENT TO SUBLEASE
OF REAL AND PERSONAL PROPERTY
THIS FIRST AMENDMENT TO SUBLEASE OF REAL AND PERSONAL PROPERTY ("First
Amendment") is made and effective as of the 16th day of October, 1997, except as
herein otherwise provided, by and between the LOUISVILLE/JEFFERSON COUNTY
REDEVELOPMENT AUTHORITY, INC., a Kentucky non-profit, non-stock corporation and
local redevelopment authority ("LRA"), with a mailing address of 163 Rochester
Drive Louisville, KY 40214-2683 and UNITED DEFENSE L.P. ("UDLP"), a Delaware
limited partnership comprised of the BMY Combat Systems Division of Harsco
Corporation, a Delaware corporation, and the Defense Systems Group of FMC
Corporation, a Delaware corporation, with a mailing address of 4800 East River
Road, Minneapolis, Minnesota 55421.
W I T N E S S E T H:
WHEREAS, the LRA and UDLP entered that certain Sublease of Real and
Personal Property, dated 19 August 1996 (the "Sublease"), for the subleasing of
certain real and personal property located at the Greater Louisville Technology
Park ("GLTP"), formerly Naval Ordnance Station, Louisville, Division of the
Naval Surface Warfare Center; and
WHEREAS, the LRA and UDLP have reached certain understandings and
agreements with respect to the acquisition of certain space, buildings, and/or
improvements at GLTP and have reached other understandings and agreements with
respect to the Sublease and desire to memorize said agreements and
understandings in this First Amendment.
NOW, THEREFORE, for and in consideration of the premises, the Sublease
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the LRA and UDLP hereby agree as follows:
1. ADDITIONAL SQUARE FOOTAGE TO BE ADDED TO SUBLEASE. The Primary
Premises sublease by the LRA to UDLP, as defined in Section 1.L. of the Sublease
and as more particularly described on EXHIBIT C to the Sublease, are hereby
amended by adding the following space, buildings and/or improvements in the
square footage and as of the effective dates set forth hereinafter:
- --------------------------------------------------------------------------------
Building Square Feet Effective Date
- -------- ----------- --------------
[1] L5 2,000 1 November, 1996
[2] 96 5,628 1 August 1997
[3] 48
VTC Room 612 1 August 1997
[4] H 13,723 16 October 1997
- --------------------------------------------------------------------------------
<PAGE>
2. SQUARE FOOTAGE TO BE DELETED FROM SUBLEASE. The Primary Premises subleased
by the LRA to UDLP, as defined in this Section 1.L. of the Sublease and as more
particularly described on EXHIBIT C to the Sublease, are hereby amended by
deleting the following space, buildings and/or improvements in the square
footage and as of the effective dates set forth hereinafter:
- --------------------------------------------------------------------------------
Building Square Feet Effective Date
- -------- ----------- --------------
[1] G 107,504 31 August 1997
[2] 48
Basement except
Room 19 9,809 16 October 1997
- --------------------------------------------------------------------------------
3. RENTAL. Base Rent and O & M costs, as defined in Section 5 of the
Sublease, shall be increased or decreased on a per square foot basis or as to O
& M costs by actual costs if available under the Sublease as of the effective
dates set forth in Section 1 and 2, respectively, of this First Amendment.
4. IMPROVEMENT TO BUILDING H. As additional rent for Building H. UDLP
shall perform, at its sole expense, improvements to make Building H into a
state-of-the-art Engineering and Conference Facility in accordance with the
Statement of Work prepared by UDLP and dated 18 February 1997, more particularly
described on EXHIBIT 1 attached hereto and incorporated herein by reference.
Nothing herein shall deem to prejudice any right of UDLP to seek reimbursement
of such expenses under the Workload Contracts, any other contract, agreement or
law.
5. NO FURTHER AMENDMENT. Except as specifically provided herein, the
Agreement has not been amended or modified, and the LRA and UDLP hereby ratify
and affirm that the Sublease is in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Sublease as
of the 16th day of October, 1997 but actually on the date below each signature.
LOUISVILLE/JEFFERSON COUNTY
REDEVELOPMENT AUTHORITY, INC., a
Kentucky non-profit, non-stock
corporation and local redevelopment
authority
By: /s/ Frank Jemley, III
-----------------------------------
Frank Jemley, III, President
Date: October 16, 1997
---------------------------------
<PAGE>
UNITED DEFENSE L.P., a Delaware limited
partnership
By: /s/ Frederick M. Strader
-----------------------------------
Title: Vice President and General
Manager
Date: October 3, 1997
---------------------------------
The undersigned, a duly authorized
officer of FMC Corporation, a Delaware
Corporation, General partner in United
Defense L.P. hereby attests and
certifies that Frederick M. Strader,
Vice President and General Manager of
United Defense L.P. has been delegated
the requisite authority by and on behalf
of FMC Corporation to bind United
Defense L.P. to this Sublease in all
respects.
FMC CORPORATION, a Delaware corporation,
General Partner
By: /s/ William W. Warren
-----------------------------------
Title: Assistant Secretary
Date: October 3, 1997
---------------------------------
<PAGE>
STATE OF KENTUCKY )
) SS
COUNTY OF JEFFERSON )
I, Meredith E. Apple, a Notary Public in and for the State and County
aforesaid, hereby certify that on the 16th day of October, 1997, there appeared
before me Frank Jemley, III, who s the President of Louisville/Jefferson County
Redevelopment Authority, Inc. a Kentucky non-profit, non-stock corporation and
local redevelopment authority, and who executed the foregoing and acknowledged
same on behalf of said corporation.
My commission expires: February 13, 2000.
/s/ Meredith E. Apple
--------------------------------------------------
NOTARY PUBLIC
STATE OF MINNESOTA )
) SS
COUNTY OF HENNIPIN )
I William Warren, a Notary Public in and for the State and County
aforesaid, hereby certify that on the 3rd day of October, 1997, there appeared
before me Frederick M. Strader, in his capacity as Vice President and General
Manager of United Defense L.P., a Delaware limited partnership, who executed the
foregoing and acknowledged same on behalf of said partnership.
My commission expires: January 31, 2000.
/s/ William W. Warren
--------------------------------------------------
NOTARY PUBLIC
<PAGE>
STATE OF MINNESOTA )
) SS
COUNTY OF ANOKA )
I, Jill S. DuPay, a Notary Public in and for the State and County
aforesaid, hereby certify that on the 3rd day of October 1997, there appeared
before me William W. Warren, in his capacity as Assistant Secretary of FMC
Corporation, a Delaware corporation, General Partner of United Defense L.P., a
Delaware limited partnership, who executed the foregoing and acknowledged same
on behalf of said corporation.
My commission expires: January 31, 2000.
/s/ Jill S. Dupay
--------------------------------------------------
NOTARY PUBLIC
<PAGE>
ENGINEERING FACILITY RENOVATION
STATEMENT OF WORK
02/18/1997
Purpose: To renovate H building at the old Naval Ordnance Station into a state
of the are Engineering and Conference facility for United Defense, L.P.
Renovation of the existing structure is to be completed in two phases. Phase I
is for the demolition/renovation of the north section of H - building. The work
involved in renovating the north side of the building represents a small amount
of the south side conference center. Phase 2 consists of construction of a
conference center in the south section of H - building. Due to the volume of
work required in the south section, engineering will be operating in the north
section while construction of the conference center is completed. Please refer
to attached drawings CAF2.
PHASE I REQUIREMENTS
--------------------
1. Replacement of foyer doors
2. Replace of foyer floor
3. Replacement of current cafeteria awning
4. Front entrance landscaping
5. Fill in interior windows in cafeteria managers office
6. Relocation for projection screen on north wall
7. Removal of counters
8. Demolition of current conference room on west wall
9. Removal of televisions located on columns (retained by UD)
10. Replacement of windows (clear glass)
11. Renovation of ceiling and lighting to provide a symmetrical look
12. Removal of all kitchen equipment including fire suppression system
13. Removal of water & gas piping to kitchen equipment
14 Renovation of HVAC system
15. Stub up of power, phone, and computer lines to cubicles
16. Fill in and door modifications to south wall
17 Drywalling of all exposed block walls
18. Repaint entire engineering facility
19. Carpet entire engineering facility
20. Installation of exterior windows in the engineering managers office
21. Installation of card key security system
* In any event, Phase I will not exceed $244,000 in expenditures for the above
listed requirements.
EXHIBIT I
---------
<PAGE>
ENGINEERING FACILITY RENOVATION
STATEMENT OF WORK
02/18/1997
PHASE 2 REQUIREMENTS
--------------------
1. Removal of all kitchen equipment including fire suppression system
2. Removal of all gas, water, and drain line
3. Demolition of all interior walls (except mechanical room)
4. Construction of new restrooms
5. Construction of vending area
6. Construction of secure visitors walkway and entrance from east lot
7. Construction conference room
8. Construction of tiered auditorium (seating for 70 to 80)
9. Fill in of loading dock opening
10. Replacement of existing doors
11. Renovation of ceiling and lighting
12. Installation of audio visual systems
14. Renovation of HVAC system
15. Installation of power, phone, and computer lines
16. Construction of kitchenette in vending area
17. Drywalling of all walls
18. Repaint entire facility
19. Carpet entire facility
20. Landscaping of walkway to east parking lot
This is intended to be used as an informational document roughly explaining the
scope of work and the concept to be finalized by a licensed architect.
* Phase 2 will not be performed until adequate UDLP workload exists at the
Greater Louisville Technology Park to support the listed requirements.
<PAGE>
<TABLE>
<CAPTION>
<S><C>
- --------------------------------------------------------------------------------------------------------------------------
AWARD/CONTRACT 1. THIS CONTRACT IS A RATED ORDER RATING PAGE OF PAGES
UNDER DPAS (15 CFR 350)
- --------------------------------------------------------------------------------------------------------------------------
2. CC (PROC. INST.I) NO. 3. EFFECTIVE DATE 4. REQUISITION PURCHASE REQUEST/
N00024-93-E-8521 BLOCK 20C PROJECT NO. N00024-92-NR-63132/
2-654c-63132
- --------------------------------------------------------------------------------------------------------------------------
5. ISSUED BY N00024 6. ADMINISTERED BY (If other than Item)
NAVAL SEA SYSTEMS COMMAND CODE N68679
DEPARTMENT OF THE NAVY CRITICALITY DESIGNATOR:
WASHINGTON, D.C. 20362-5101 DPRO MINNEAPOLIS
BUYER/SYMBOL: CARLA J. BROWN 4800 EAST RIVER ROAD
PHONE: Area Code 703/602-1264 MINNEAPOLIS, MN 55432-1401
PRE-AWARD SURVEY: NONE
- --------------------------------------------------------------------------------------------------------------------------
7. NAME AND ADDRESS OF CONTRACTOR 8. DELIVER
(NO., STREET, CITY, COUNTY, STATE AND ZIP CODE) N/A
DUNS NO: ( )FOB ORIGIN ()OTHER (SEE BELOW)
FMC CORPORATION --------------------------------------
NAVAL SYSTEMS DIVISION 9. DISCOUNT FOR PROMPT PAYMENT
4800 EAST RIVER ROAD N/A
BOX 59043 --------------------------------------
MINNEAPOLIS, MN 55459-0043 10. SUBMIT INVOICES ITEM 12
TIN NO: (4 COPIES UNLESS
- ------------------------------------------------------------------------------- OTHERWISE SPECIFIED)
CAGE CODE 44114 FACILITY CODE TO ADDRESS SHOWN IN N/A
- --------------------------------------------------------------------------------------------------------------------------
11. SHIP TO/MARK FOR CODE 12. PAYMENT WILL BE MADE BY CODE
(SEE SECTION F OF SCHEDULE) N/A
- --------------------------------------------------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN 14. ACCOUNTING AND APPROPRIATION DATA
COMPETITION N/A
( ) 10 u.s.c. 2304(c)( ) ( ) 41 U.S.C. 253(C)( ) N/A
- --------------------------------------------------------------------------------------------------------------------------
15A ITEM NO. 15B SUPPLIES/SERVICES 15C QTY 15 D UNIT 15 E UNIT PRICE
15 F AMOUNT
SEE PAGE 2
- --------------------------------------------------------------------------------------------------------------------------
15G. TOTAL AMOUNT OF CONTRACT $ 0
- --------------------------------------------------------------------------------------------------------------------------
16. TABLE OF CONTENTS
- --------------------------------------------------------------------------------------------------------------------------
X'd SEC. DESCRIPTION PAGE(S) X'd SEC. DESCRIPTION PAGE(S)
- --------------------------------------------------------------------------------------------------------------------------
PART I - THE SCHEDULE PART II - CONTRACT CLAUSES
- --------------------------------------------------------------------------------------------------------------------------
X A SOLICITATION/CONTRACT FORM 1 X I CONTRACT CLAUSES 16
- -------------------------------------------------------------------------------------------------------------------------
X B SUPPLIES OR SERVICES AND PRICES/COSTS 2 PART III - LIST OF DOCUMENTS, EXHIBITS AND
OTHER ATTACH.
- -------------------------------------------------------------------------------------------------------------------------
X C DESCRIPTION/SPECS/WORK STATEMENT 2 X J LIST OF ATTACHMENTS 23
- --------------------------------------------------------------------------------------------------------------------------
X D PACKAGING AND MARKING 14 PART IV- REPRESENTATIONS AND INSTRUCTIONS
- --------------------------------------------------------------------------------------------------------------------------
X E INSPECTION AND ACCEPTANCE 14 REPRESENTATIONS, CERTIFICATIONS
- ------------------------------------------------------------
X F DELIVERIES OR PERFORMANCE 14 X K AND OTHER STATEMENTS OF OFFERORS 24
- --------------------------------------------------------------------------------------------------------------------------
X G CONTRACT ADMINISTRATION DATA 14 L INSTS., CONDS., AND NOTICES TO OFFERORS
- --------------------------------------------------------------------------------------------------------------------------
X H SPECIAL CONTRACT REQUIREMENTS 14 M EVALUATION FACTORS FOR AWARD
- --------------------------------------------------------------------------------------------------------------------------
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- --------------------------------------------------------------------------------------------------------------------------
17. (X) CONTRACTORS NEGOTIATED AGREEMENT 18. ( ) AWARD (CONTRACTOR IS NOT REQUIRED TO
(Contractor is required to sign this document SIGN THIS DOCUMENT.) Your offer n solicitation Number
and return ____2____ copies to issuing office.) including the additions or changes made by you which
Contractor agrees to furnish and deliver additions or changes are set forth in full above, is
all items or perform all the services set forth hereby accepted as to the items listed above and on any
or otherwise identified above and on any continuation sheets. This award consummates the
continuation sheets for the consideration stated contract which consists of the following documents:
herein. The rights and obligations of the parties (a) the Government solicitation and your offer, and
to this contract shall be subject to and governed (b) this award/contract. No further contractual
by the following documents:(a) this award/contract, document is necessary.
(b) the solicitation, if any, and (c) such
provisions, representations, certifications and
specifications are as are attached or incorporated
by reference herein. (ATTACHMENTS ARE LISTED
HEREIN.)
- --------------------------------------------------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (Type or print) 20A. NAME OF CONTRACTING OFFICER:
& Estimating JEFF S. BRANDT
Jayne A. Schmitt, Director of Contracts CONTRACTING OFFICER
- --------------------------------------------------------------------------------------------------------------------------
19B. NAME OF CONTRACTOR 19C DATE SIGNED 20B. UNITED STATES OF AMERICA 20C. DATE SIGNED
BY: /s/ Jayne A. Schmitt 11/16/92 BY: /s/ Jeff S. Brandt NOV 16 1992
------------------------------------- ---------------------------------------
(SIGNATURE OF PERSON AUTHORIZED TO SIGN) (SIGNATURE OF PERSON AUTHORIZED TO SIGN)
- --------------------------------------------------------------------------------------------------------------------------
NSN 7540-01-152-8069 25-106 STANDARD FORM 26 (REV. 4-85)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
*U.S. GOVERNMENT PRINTING OFFICE: 1983 0-380-498(91) FAR (48 CFR) 53.214(a)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CONTRACT
<PAGE>
N00024-93-E-8521
CONTRACT
[Insert Award/Contract Page]
PART l--THE SCHEDULE
SECTION B--SUPPLIES OR SERVICES AND PRICES/COSTS
Not Applicable.
SECTION C--DESCRIPTION/SPECIFICATIONS/WORK STATEMENT
PART 1 - CONTRACT DESCRIPTION
A. PROPERTY PROVIDED UNDER THIS CONTRACT
(i) This facilities-use contract is entered into to provide Government-owned
property to the contractor for performance of current and anticipated U.S.
Government contracts and subcontracts.
(ii) The Government-owned property, identified in Attachment A to the contract,
is considered to be "facilities" as defined in paragraph (a) of the "Government
Property (Facilities Use)" clause of the contract and is subject to the
provisions of this contract. As of the effective date of this contract or
thereafter, the facilities are under the cognizance of the Naval Sea Systems
Command and are provided to the Contractor for use at its plant in Minneapolis,
MN, provided the facilities identified in Attachment A are not Government
furnished property otherwise accountable to another Government contract. Real
estate summary map 796295 certified by NAVFAC Northern Division 15 July 1992 is
hereby incorporated into this contract by reference and made a part hereof.
B. USE OF PROPERTY
(i) Concurrence for use of the facilities (FAR 45.401) is hereby given on a
non-interference basis by the Contracting Officer of this facilities use
contract to the Contractor for the performance of work under a U.S. Navy
(including U.S. Marines) prime contract or contract modification, or for the
performance of subcontract work under a U.S. Navy (including U.S. Marines) prime
contract.
(ii) The determination as to whether the Contractor's use of the facility in
accordance with paragraph (i) above is to be rent-free or rent-due is a
determination to be made by the Contracting Officer cognizant of the procurement
(FAR 45.4/DFARS 245.4).
(iii) In accordance with FAR 45.401, prior concurrence of the Contracting
Officer cognizant of this contract is required for the use of Government
production and research property accountable to this contract for all work not
covered in paragraph (i) above, whether Government or non-Government.
<PAGE>
N00024-93-E-8521
(iv) In accordance with FAR 45.402, any Contracting Officer desiring to use
Government production and research property accountable to this contract for
work not covered in paragraph (i) above shall obtain the written concurrence of
the Contracting Officer cognizant of this contract prior to authorizing its use
on either a rental or rent free basis. All requests shall be forwarded through
the cognizant ACO. All requests for use under another government prime contract
shall include the following information, as a minimum: (1) request for
proposal/quote or contract number, (2) description of effort, (3) period of
performance, and (4) government agency awarding prime contract, with point of
contact and telephone number. Requests for use under a subcontract shall
contain the above information along with the prime contractor's name and the
proposal number.
(v) In accordance with DFARS 245.405, the contractor may use the Government
production and research property accountable to this contract on work for
foreign governments and international organizations only upon written approval
of the Contracting Officer cognizant of this contract. The contractor shall
insure that the conditions set forth in DFARS 245.405(1) are satisfied prior to
submitting such a request.
(vi) As a general rule, use of Government production and research property for
Government use is on a rent-free basis and non-Government use is on a rental
basis. Any Contracting Officer authorizing the use of Government production and
research property accountable to this contract on contracts under their
cognizance will determine if such use is to be on a rent-free or rental basis.
(vii) In accordance with DFARS 245.405(3), rental charges are waived for use
of Government production and research property accountable to this contract for
commercial contracts with the Government of Canada.
(viii) It is agreed that this contract does not rescind nor alter any
rent-free authorization in contracts that were executed prior to the effective
date of this contract.
(ix) The Contractor will submit a baseline report of all work, whether
Government or non-Government, being performed as of the effective date of this
contract. This report will separate work being performed by major customer,
e.g., Navy, Air Force, commercial, direct foreign sale. This report will
include, as applicable, the prime contract number, the customer, a short
description of the work being performed, and start and completion dates of the
effort. This initial baseline report is due to SEA 0281L via the ACO within
forty-five (45) days of the effective date of this contract and every six (6)
months thereafter at the same time as the submission of the rental computation
required in paragraph D.IV.(a)(l)(a).
C. PROPERTY REPORTING
(i) The Contractor shall submit reports of all property accountable under this
contract to the Commander, Naval Sea Systems Command, ATTN: SEA 654C, via the
Administrative Contracting Officer, with copy to the Contracting Officer (SEA
0281L). The reports shall provide the information described in DD Form 1662
(DOD Property in the Custody of
3
<PAGE>
N00024-93-E-8521
Contractors) pursuant to FAR 45.505-14 and DFARS 245.505-14 and be the result of
a 100% physical inventory, unless waived by the Contracting Officer of this
contract.
(ii) The first report must be provided within ninety (90) days after the
execution of the contract and subsequent reports must be provided on 01 November
annually in each subsequent year this contract is in force.
(iii) The contractor shall provide the Basic Information set forth in FAR
45.505-1 upon the request of the Contracting Officer.
D. IMPLEMENTATION OF FAR 52.245-9 "USE AND CHARGES"
I. RENTAL RATES
The following rental rates are applicable in accordance with the "Use and
Charges" clause of this contract and Table I thereof:
(i) For real property and associated fixtures, it is agreed that an amount of
$2,935,925 per annum is established as a fair and reasonable rental amount for
the first year of this contract based on sound commercial practice as required
by the "Use and Charges" clause. The annual rental amount of $2,935,925 shall
be adjusted annually for inflation/ deflation. The adjustment index shall be
the unadjusted consumer price index for all urban consumers (CPI-U) published by
the U.S. Department of Labor, Bureau of Labor Statistics. The adjustment shall
be the percentage change in the CPI-U in effect on each anniversary month of the
contract from the CPI-U in effect on the preceding anniversary month. The
formula for calculating a new base rent is as follows:
New Base Rent =
Prior Year Base Rent + Prior Year Base Rent x (Current CPI-U - Prior Year CPI-U)
-------------------------------------------------------
Prior Year CPI-U
(ii) For certain plant equipment, set forth in paragraph (ii) of Table I
to the "Use and Charges" clause, the following monthly rates apply:
Age of Equipment Monthly Rental Rate
---------------- -------------------
Under 2 years old 3.00 percent
Over 2 to 3 years old 2.00 percent
Over 3 to 6 years old 1.50 percent
Over 6 to 10 years old 1.00 percent
Over 10 years old 0.75 percent
The age of each item of equipment is determined pursuant to paragraph (ii) of
Table I to the "Use and Charges" clause.
4
<PAGE>
N00024-93-E-8521
(iii) For personal property and equipment not covered in paragraphs (i)
and (ii) of Table I in the "Use and Charges" clause, a rental rate will be
established at not less than the prevailing commercial rate, if any, or in
the absence of such rate, in accordance with the following:
(a) Electronic Test Equipment 2%
(b) Automotive Equipment 2%
(c) Tooling 1%
(d) Test Equipment (other than electronics) 1%
(e) Other personal property and equipment not otherwise 1%
provided for above
II. RENTAL PERIOD
The rental period is six (6) months.
III. MEASUREMENT UNIT OF USE
a. For the purpose of paragraph (c)(4) of the "Use and Charges" clause of this
contract, the measurement unit for real property, industrial plant equipment,
and other plant equipment is as follows:
(1) Fridley manufacturing direct labor hours for all customers under all
contracts and subcontracts for any goods produced or services provided
utilizing, to any extent, real property and associated fixtures provided under
this contract is the measurement unit for determining credit on the real
property and associated fixtures.
(2) Fridley manufacturing direct labor hours for all customers under all
contracts and subcontracts for any goods produced or services performed
utilizing, to any extent, plant equipment as defined in paragraph (j)(ii) of the
"Use and Charges" clause is the measurement unit for determining credit on that
plant equipment.
(3) Fridley manufacturing direct labor hours for all customers under all
contracts and subcontracts for any goods produced or services performed
utilizing, to any extent, plant equipment and personal property, defined in
paragraph (j)(iii) the "Use and Charges" clause is the measurement unit for
determining credit on that plant equipment and personal property.
b. No charge will be made for any of the facilities which have been declared
excess by the Contractor effective on the first of the month following the
declaration of excess.
IV. RENTAL COMPUTATION
(a) The Contractor shall compute the amount of rent for each rental period as
follows:
(1) Real Property (FAR 52.245-9(j)(i))
5
<PAGE>
N00024-93-E-8521
(a) The Contractor shall adjust the rental rate set forth in I(i)
above for the square footage of building space not available for
Contractor use because of use by the Government or designation as
non-use area by the Contractor. The latter area is not to be entered
by Contractor personnel except as needed for maintenance, security and
similar functions. One half of the adjusted rental rate is the full
rental charge for the rental period set forth in II above.
(b) The full rental charge will be reduced by a credit. The credit
is computed by multiplying the full rental charge by a fraction in
which the numerator is the amount of Fridley manufacturing direct
labor hours of use of the facilities by the contractor without charge
during the period and the denominator is the total amount of Fridley
manufacturing direct labor hours of use of the facilities by the
contractor during the rental period.
(c) The rental due for the rental period is the full rental charge
computed in (a) above reduced by the credit computed in (b) above.
(2) Plant Equipment (FAR 52.245-9(j)(ii))
(a) The Contractor shall apply the rental rate set forth in I(ii)
above to the acquisition costs of such facilities for rental period
set forth in II. above to compute the full rental charge for each
rental period.
(b) The full rental charge will be reduced by a credit. The credit
is computed by multiplying the full rental charge by a fraction in
which the numerator is the amount of Fridley manufacturing direct
labor hours of use of the facilities by the Contractor without charge
during the rental period and the denominator is the total amount of
Fridley manufacturing direct labor hours of use of the facilities by
the Contractor during the rental period.
(c) The rental due for the rental period is the full rental charge
computed in (a) above reduced by the credit computed in (b) above.
(3) Plant Equipment and Personal Property (FAR 52.245-9(j)(iii))
(a) The Contractor shall apply the rental rate set forth in I(iii)
above to the acquisition costs for such facilities for the rental
period set forth in II. above to compute the full rental charge for
each rental period.
(b) The full rental charge will be reduced by a credit. The credit is
computed by multiplying the full rental charge by a fraction in which
the numerator is the amount of Fridley manufacturing direct labor
hours of use of the facilities by the Contractor without charge during
the rental period and the denominator is the total amount of Fridley
manufacturing direct labor hours of use of the facilities by the
Contractor during the rental period.
6
<PAGE>
N00024-93-E-8521
(c) The rental due for the rental period is the full rental charge
computed in (a) above reduced by the credit computed in (b) above.
V. CHARGES EXCLUDED
The Contractor will not include in the cost or price of any goods produced or
services performed under any United States Government prime contracts or any
subcontracts, any provision, allowance or charge (i) for the cost of acquisition
of the facilities; (ii) for the amortization or depreciation of the facilities;
or (iii) arising out of authority that may be granted to the Contractor to use
the facilities in the performance of non-Federal Government work or independent
research and development (IR&D) work.
VI. EFFECTIVITY OF USE AND CHARGES
The terms and conditions of the "Use and Charges" clause apply to all contracts
or subcontracts for goods produced or services performed utilizing to any extent
the facilities, as authorized herein, which contracts or subcontracts are
entered into by the Contractor subsequent to the effective date hereof.
VII. RENT PAID REPORT
The Contractor shall report the amount of all rent paid within ninety (90) days
after the close of each rental period. The report will be sent to the
Administrative Contracting Officer. A negative report is required if no rent
was paid.
E. NON-GOVERNMENT USE OF INDUSTRIAL PLANT EQUIPMENT
(i) Use of Industrial Plant Equipment (IPE) for non-Government work is limited
to twenty-five (25) percent of the time IPE is available for use, based on the
contractor's normal work schedule, as represented by scheduled production shift
hours. Non-Government use of all IPE in the base time period will not exceed
twenty-five (25) percent of scheduled production shift hours for all IPE in the
base time period.
(ii) The base time period for determining percentages of non-Government use is
six (6) months.
F. APPLICABILITY OF FAR 52.245-16, "FACILITIES EQUIPMENT MODERNIZATION"
The Government may, at the written request of the Contractor, from time to time
during the course of this contract, replace or modernize items of
Government-owned equipment located at the place set forth in this schedule.
When accountability for such replaced or modernized items has been transferred
to the Contractor under this contract, the "Facilities Equipment Modernization"
clause shall be applicable.
G. IMPLEMENTATION OF FAR 52.245-11(g)(2)
7
<PAGE>
N00024-93-E-8521
Notwithstanding FAR 52.245-11(g)(2) requiring that the normal maintenance
program be submitted "As soon as practicable after the execution of this
contract", the contractor shall submit the initial submission within ninety (90)
days after the effective date of this contract. Annual submissions will also be
submitted on the anniversary of the effective date of this contract. The
original and all annual submissions will be submitted to the Administrative
Contracting Officer for approval, subsequent to the Contracting Officer's
concurrence. Copies shall be submitted concurrently to SEA 654C.
H. ACCOUNTABILITY FOR GOVERNMENT PROPERTY IN POSSESSION OF CONTRACTORS
The Contractor shall maintain Government property records using a system that
is, at a minimum, equivalent to its system for maintaining records of
contractor-owned property.
I. DELEGATION OF AUTHORITY
For the purpose of administration of this contract, the Administrative
Contracting Officer (ACO) is authorized to act for the Contracting Officer in
performing the following functions:
(i) Approve, subsequent to the Contracting Officer's concurrence, the
Contractor's normal maintenance program per FAR 52.245-11. Monitor the
Contractor's compliance with the program.
(ii) Approve, subsequent to the Contracting Officer's concurrence, for a period
not to exceed twelve (12) months, the use of the facilities under this contract
at locations other than those specified in the "Property Provided Under this
Contract" provision of this contract. Provide a copy of each Approval to the
Contracting Officer.
(iii) Per FAR 52.245-9, determine the total cost of the Government property
under the "Property Provided Under This Contract" provision of this contract and
not less than annually modify the contract to revise Attachment A to reflect
property accountable to this contract.
(iv) Receive a written statement from the Contractor of the use of the
facilities and rental due in accordance with FAR 52.245-9 of this contract.
Provide a copy of the statement to the Contracting Officer, SEA 0281L, with the
ACO's verification of the information contained in the statement. Rental checks
must be submitted to the ACO for submission to DFAS-Columbus Center.
(v) Forward the DD Form 1594, Contract Completion Statement, to the Commander,
Naval Sea Systems Command, Attn: SEA 0281L.
(vi) Pursuant to FAR 52.245-11(c)(3), approve the installation, arrangement or
rearrangement of Contractor owned and readily moveable machinery, equipment and
other items on Government furnished premises if the estimated cost of the
installation, arrangement or rearrangement is estimated to cost $100,000, or
less. The Contractor shall obtain the Contracting
8
<PAGE>
N00024-93-E-8521
Officer's written approval for installations, arrangements or rearrangements
estimated to cost more than $100,000.
J. OCCUPATIONAL SAFETY AND HEALTH ACT (OSHA)
(i) Any modifications to any of the property accountable under this contract
that are necessary to meet OSHA requirements are the responsibility of the
Contractor. Title to any non-severable OSHA modifications performed by the
Contractor at Contractor expense shall vest in the Government.
(ii) Pursuant to FAR 52.216-14, "Allowable Cost and Payment--Facilities Use",
the Contractor may include as part of the price or cost under any other
Government contract or subcontract an allocable portion of the costs incurred in
the performance of any OSHA modifications to any of the property accountable
under this contract.
(iii) The Contractor, prior to making any OSHA modifications to any of the
property accountable under this contract, shall obtain the written approval of
the Administrative Contracting Officer.
K. NON-USE OF POLYCHLORINATED BIPHENYLS (PCB) IN ANY HYDRAULIC SYSTEM AFTER 01
JULY 1985
(i) Title 40 Code of Federal Regulations (CFR) Part 761 prohibits the use of
polychlorinated biphenyls (PCB) in any hydraulic system after 01 July 1985.
(ii) For Government Plant Equipment as defined in FAR 45.101 and accountable
under this contract, the Contractor shall comply with the requirements of Title
40 CFR 761. The Contractor will furnish to the Contracting Officer cognizant of
this facilities-use contract, no later than (45) days after the effective date
of this contract, a proposal indicating how the Contractor will demonstrate
compliance with these requirements. The following information will be required
concerning each item of plant equipment that is tested.
1. Navy Identification Number
2. Nomenclature
3. Model
4. Serial Number
5. Acquisition Cost
6. Year Manufactured
7. PCB Level of Hydraulic Fluid
8. Date Tested
9. Name of Testing Firm
10. Quantity of Hydraulic Fluid in Hydraulic System
Compliance must be certified within ninety (90) days of obtaining Contracting
Officer approval of the Contractor's proposal.
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N00024-93-E-8521
L. REMEDIATION ACTIVITIES DOCUMENT STORAGE
(i) A Federal Facilities Agreement under CERCLA Section 120 was signed in
March 1991 between the Government and the Minnesota Pollution Control Agency
(MPCA) and the U.S. Environmental Protection Agency (EPA) addressing
environmental impacts associated with past and present disposal activities at
the NIROP. Section XXII. of the Agreement requires the Government to preserve
all documents contained in the Administrative Record, the Public Information
Repository, and all final primary and secondary documents for a period of ten
(10) years after termination of this agreement.
(ii) A permit has been granted by the Minnesota Pollution Control Agency to
the Contractor (FMC Corporation) and the Government (Department of the Navy)
to operate a hazardous waste container storage facility within the Naval
Industrial Reserve Ordinance Plant and the FMC Naval Systems Division Plant
(collectively referred to as "facility" in the permit). In the permit, the
"facility" is that real property within the security fence surrounding the
plant with the south boundary as the south parking lot north fence as
illustrated on the following Figure 1.
(iii) Under the permit, the permittees are required to maintain records for
all groundwater monitoring wells within the "facility" for the active life of
the "facility". These records include, BUT ARE NOT LIMITED TO, groundwater
monitoring analytical data and water table surface elevations.
(iv) To satisfy the above listed requirements, the Government will assign these
documents to the contractor for retention as well as any subsequent records that
are generated. The Contractor will maintain these documents at the "facility"
in a manner as the Contractor deems appropriate including the option of
microfilming. The expense of maintaining these records and documents shall be
allowable as contractor indirect costs.
[Map]
PART 2 - GENERAL REQUIREMENTS
A. Supersedure (NAVSEA)(SEP 1990)
This contract supersedes contract N00024-87-E-5917.
B. Title of Property - Facilities Use (NAVSEA)(SEP 1990)
Title to each item of the property is now and shall remain in the Government.
Title to parts replaced by the Contractor shall pass to and vest in the
Government upon installation thereof. Neither the property nor any part thereof
shall be or become a fixture by reason of affixation to any realty not owned by
the Government.
SECTION D--PACKAGING AND MARKETING
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N00024-93-E-8521
Not Applicable.
SECTION E--INSPECTION AND ACCEPTANCE
Not Applicable.
SECTION F--DELIVERIES OR PERFORMANCE
This facilities-use contract is for a five (5) year period beginning with the
effective date of the contract and ending five (5) years from the effective date
of the contract.
SECTION G--CONTRACT ADMINISTRATION DATA
Purchasing Office: Naval Sea Systems Command
Representative: Carla J. Brown, NAVSEA 0281L
Telephone (703) 602-1264
Fax (703) 602-8126
SECTION H--SPECIAL CONTRACT REQUIREMENTS
H-1 NAVSEA 5252.202-9101 - ADDITIONAL DEFINITIONS (SEP 1990)
As used throughout this contract, the following terms shall have the meanings
set forth below:
(a) DEPARTMENT - means the Department of the Navy.
(b) REFERENCES TO THE FEDERAL ACQUISITION REGULATION (FAR) - All references to
the FAR in this contract shall be deemed to also reference the appropriate
sections of the DOD FAR Supplement (DFARS), unless clearly indicated otherwise.
(c) REFERENCES TO ARMED SERVICES PROCUREMENT REGULATION OR DEFENSE ACQUISITION
REGULATION - All references in this document to either the Armed Services
Procurement Regulation (ASPR) or the Defense Acquisition Regulation (DAR) shall
be deemed to be references to the appropriate sections of the FAR/DFARS.
H-2 NAVSEA 5252.245-9122 LIENS (SEP 1990)
The Contractor hereby waives its right to any lien upon the property whether
such lien shall rise out of, or be imposed by, custom, usage, statute, the
common law or otherwise.
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N00024-93-E-8521
PART II - CONTRACT CLAUSES
SECTION I-1 - FAR 52.252-2 CLAUSES INCORPORATED BY REFERENCE (JUN 1988)
This contract incorporates one or more clauses by reference, with the same
force and effect as if they were given in full text. Upon request, the
Contracting Officer will make their full text available.
I. FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1) CLAUSES:
FAR
SOURCE TITLE AND DATE
- -------- ---------------
52.201-1 DEFINITIONS (SEPT 1991)
52.203-1 OFFICIALS NOT TO BENEFIT (APR 1984)
52.203-3 GRATUITIES (APR 1984)
52.203-5 COVENANT AGAINST CONTINGENT FEES (APR 1984)
52.203-7 ANTI-KICKBACK PROCEDURES (OCT 1988)
52.203-13 PROCEDUREMENT INTEGRITY -- SERVICE CONTRACTING (SEP
1990) (Applicable to Contracts and BOAs for
services)
52.204-2 SECURITY REQUIREMENTS (APR 1984)
52.212-14 STOP-WORK ORDER -- FACILITIES (AUG 1989)
52.215-1 EXAMINATION OF RECORDS BY COMPTROLLER GENERAL (APR
1984)
52.215-2 AUDIT -- NEGOTIATION (DEC 1989) - ALTERNATE I (APR
1984)
52.215-33 ORDER OF PRECEDENCE (JAN 1986)
52.216-14 ALLOWABLE COST AND PAYMENT -- FACILITIES USE (APR
1984)
52.222-1 NOTICE TO THE GOVERNMENT OF LABOR DISPUTES (APR
1984)
52.222-3 CONVICT LABOR (APR 1984)
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N00024-93-E-8521
52.222-4 CONTRACT WORK HOURS AND SAFETY STANDARDS ACT--
OVERTIME COMPENSATION (MAR 1986)
52.222-18 NOTIFICATION OF EMPLOYEE RIGHTS CONCERNING PAYMENT
OF UNION DUES OR FEES (MAY 1992)
52.222-20 WALSH-HEALEY PUBLIC CONTRACTS ACT (APR 1984)
52.222-26 EQUAL OPPORTUNITY (APR 1984)
52.222-35 AFFIRMATIVE ACTION FOR SPECIAL DISABLED AND VIETNAM
ERA VETERANS (APR 1984)
52.222-36 AFFIRMATIVE ACTION FOR HANDICAPPED WORKERS (APR
1984)
52.222-37 EMPLOYMENT REPORTS ON SPECIAL DISABLED VETERANS AND
VETERANS OF THE VIETNAM ERA (JAN 1988)
52.223-2 CLEAN AIR AND WATER (APR 1984)
52.223-6 DRUG-FREE WORKPLACE (JUL 1990)
52.228-7 INSURANCE -- LIABILITY TO THIRD PERSONS (APR 1984)
52.232-17 INTEREST (JAN 1991)
52.232-21 LIMITATION OF COST (FACILITIES) (APR 1984)
52.232-25 PROMPT PAYMENT (APR 1989)
52.233-1 DISPUTES (DEC 1991)
52.233-3 PROTEST AFTER AWARD (AUG 1989) - ALTERNATE I (JUN
1985)
52.242-1 NOTICE OF INTENT TO DISALLOW COSTS (APR 1984)
52.243-2 CHANGES COST REIMBURSEMENT (AUG 1987) - ALTERNATE IV
(APR 1984)
52.245-8 LIABILITY FOR THE FACILITIES (APR 1984)
52.245-9 USE AND CHARGES (APR 1984)
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N00024-93-E-8521
52.245-11 GOVERNMENT PROPERTY (FACILITIES USE) (APR 1984)
52.245-16 FACILITIES EQUIPMENT MODERNIZATION (APR 1985)
52.246-10 INSPECTION OF FACILITIES (APR 1984)
52.249-13 FAILURE TO PERFORM (APR 1984)
52.253-1 COMPUTER GENERATED FORMS (JAN 1991)
II. DOD FAR SUPPLEMENT (48 CFR CHAPTER 2) CLAUSES:
FAR SUPPLEMENT
SOURCE TITLE AND DATE
- ------ --------------
252.203-7001 SPECIAL PROHIBITION ON
EMPLOYMENT (DEC 1991)
252.223-7002 SAFETY PRECAUTIONS FOR
AMMUNITION AND EXPLOSIVES (DEC 1991)
252.223-7003 CHANGE IN PLACE OF PERFORMANCE -
AMMUNITION AND EXPLOSIVES (DEC 1991)
252.231-7000 SUPPLEMENTAL COST
PRINCIPLES (APR 1991)
I-2 ADDITIONAL CONTRACT CLAUSES
The following clauses are additional contract clauses of this contract.
FAR SUPP 252.233-7004 DRUG-FREE WORKFORCE (SEP 1988)
(a) Definitions.
(1) "Employee in a sensitive position," as used in this clause, means an
employee who has been granted access to classified information; or
employees in other positions that the Contractor determines involve
national security, health or safety, or functions other than the
foregoing requiring a high degree of trust and confidence.
(2) "Illegal drugs," as used in this clause, means controlled substances
included in Schedules I and II, as defined by section 802(6) of Title
21 of the United States Code, the possession of which is unlawful
under Chapter 13 of that Title. The term "illegal drugs" does not
mean the use of a controlled substance pursuant to a valid
prescription or other uses authorized by law.
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N00024-93-E-8521
(b) The Contractor agrees to institute and maintain a program for achieving the
objective of a drug-free work force. While this clause defines criteria for
such a program, contractors are encouraged to implement alternative approaches
comparable to the criteria in paragraph (c) that are designed to achieve the
objectives of this clause.
(c) Contractor programs shall include the following, or appropriate
alternatives:
(1) Employee assistance programs emphasizing high level direction,
education, counseling, rehabilitation, and coordination with available
community resources;
(2) Supervisory training to assist in identifying and addressing illegal
drug use by Contractor employees;
(3) Provision for self-referrals as well as supervisory referrals to
treatment with maximum respect for individual confidentiality
consistent with safety and security issues;
(4) Provision for identifying illegal drug users, including testing on a
controlled and carefully monitored basis. Employee drug testing
programs shall be established taking account of the following:
(i) The Contractor shall establish a program that provides for
testing for the use of illegal drugs by employees in sensitive
positions. The extent of and criteria for such testing shall be
determined by the Contractor based on considerations that
include the nature of the work being performed under the
contract, the employee's duties, the efficient use of Contractor
resources, and the risks to health, safety, or national security
that could result from the failure of an employee adequately to
discharge his or her position.
(ii) In addition, the Contractor may establish a program for employee
drug testing--
(A) When there is a reasonable suspicion that an employee uses
illegal drugs; or
(B) When an employee has been involved in an accident or unsafe
practice;
(C) As part of or as a follow-up to counseling or
rehabilitation for illegal drug use;
(D) As part of a voluntary employee drug testing program.
(iii) The Contractor may establish a program to test applicants
for employment for illegal drug use.
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N00024-93-E-8521
(iv) For the purpose of administering this clause, testing for
illegal drugs may be limited to those substances for which
testing is prescribed by Section 2.1 of Subpart B of the
"Mandatory Guidelines for Federal Workplace Drug Testing
Programs" (53 FR 11980 (April 11, 1988)), issued by the
Department of Health and Human Services.
(d) Contractors shall adopt appropriate personnel procedures to deal with
employees who are found to be using drugs illegally. Contractors shall not
allow any employee to remain on duty or perform in a sensitive position who is
found to use illegal drugs until such time as the Contractor, in accordance with
procedures established by the Contractor, determines that the employee may
perform in such a position.
(e) The provisions of this clause pertaining to drug testing program shall not
apply to the extent they are inconsistent with state or local law, or with an
existing collective bargaining agreement; provided that with respect to the
latter, the Contractor agrees that those issues that are in conflict will be a
subject of negotiation at the next collective bargaining session.
16
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N00024-93-E-8521
PART III--LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS
SECTION J--LIST OF ATTACHMENTS
This contract consists of the following parts and the attachments described in
paragraph J-1 hereof:
I. The Schedule
II. Contract Clauses
III. List of Documents, Exhibits and Other Attachments
J-1 The Attachments forming a part of this contract are as follows:
Attachment A--Government Owned Facilities, 75 pages
17
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N00024-93-E-8521
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS OF OFFERORS
FAR 52.203-4 CONTINGENT FEE REPRESENTATION AND AGREEMENT (APR 1984)
(a) REPRESENTATION. The offeror represents that, except for full-time bona
fide employees working solely for the offeror, the offer or--
(Note: The offeror must check the appropriate boxes. For interpretation of the
representation, including the term "bona fide employee," see subpart 3.4 of the
Federal Acquisition Regulation.)
(1) [ ] has, [X] has not employed or retained any person or company to
solicit or obtain this contract; and
(2) [ ] has, [X] has not paid or agreed to pay to any person or company
employed or retained to solicit or obtain this contract any commission,
percentage, brokerage, or other fee contingent upon or resulting from the
award of this contract.
(b) AGREEMENT. The offeror agrees to provide information relating to the above
Representation as requested by the Contracting Officer and, when subparagraph
(a)(1) or (a)(2) is answered affirmatively, to promptly submit to the
Contracting Officer--
(l) A completed Standard Form 119, Statement of Contingent or Other Fees,
(SF 119); or
(2) A signed statement indicating that the SF 119 was previously submitted
to the same contracting office, including the date and applicable solicitation
or contract number, and representing that the prior SF 119 applies to this offer
or quotation.
FAR 52.204-3 TAXPAYER IDENTIFICATION (SEP 1989)
(a) Definitions.
"Common parent," as used in this solicitation provision, means that
corporate entity that owns or controls an affiliated group of corporations that
files its Federal income tax returns on a consolidated basis, and of which the
offeror is a member.
"Corporate status," as used in this solicitation provision, means a
designation as to whether the offeror is a corporate entity, an unincorporated
entity (e.g., sole proprietorship or partnership), or a corporation providing
medical and health care services.
"Taxpayer Identification Number (TIN)," as used in this solicitation
provision, means the number required by the IRS to be used by the offeror in
reporting income tax and other returns.
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<PAGE>
N00024-93-E-8521
(b) The offeror is required to submit the information required in paragraphs
(c) through (e) of this solicitation provision in order to comply with reporting
requirements of 26 U.S.C. 6041, 6041A, and 6050M and implementing regulations
issued by the Internal Revenue Service (IRS). If the resulting contract is
subject to the reporting requirements described in 4.902(a), the failure or
refusal by the offeror to furnish the information may result in a 20 percent
reduction of payments otherwise due under the contract.
(c) Taxpayer Identification Number (TIN).
[ X ] TIN: 94-0479804
[ ] TIN has been applied for.
[ ] TIN is not required because:
[ ] Offeror is a nonresident alien, foreign
corporation, or foreign partnership that does not have income effectively
connected with the conduct of a trade or business in the U.S. and does not have
an office or place of business or a fiscal paying agent in the U.S.;
[ ] Offeror is an agency or instrumentality of a
foreign government.
[ ] Offeror is an agency or instrumentality of a
Federal, state, or local government;
[ ] Other. State basis.
(d) Corporate Status.
[ ] Corporation providing medical and health care services, or
engaged in the billing and collecting of payments for such services;
[ X ] Other corporate entity;
[ ] Not a corporate entity;
[ ] Sole proprietorship
[ ] Partnership
[ ] Hospital or extended care facility
described in 26 CFR 501(c)(3) that is exempt from taxation under 26 CFR 501(a).
(e) Common Parent.
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<PAGE>
N00024-93-E-8521
[ X ] Offeror is not owned or controlled by a common parent as defined
in paragraph (a) of this clause.
[ ] Name and TIN of common parent:
Name
--------------------
TIN
--------------------
FAR 52.209-5 CERTIFICATION REGARDING DEBARMENT, SUSPENSION, PROPOSED
DEBARMENT, AND OTHER RESPONSIBILITY MATTERS (MAY 1989)
(a)(l) The Offeror certifies, to the best of its knowledge and belief, that-
(i) The Offeror and/or any of its Principals--
(A) Are [ ] are not [ X ] presently debarred, suspended,
proposed for debarment, or declared ineligible for the
award of contracts by any Federal agency;
(B) Have [ ] have not [ X ], within a three-year period
preceding this offer, been convicted of or had a civil
judgment rendered against them for: commission of fraud or a
criminal offense in connection with obtaining, attempting to
obtain, or performing a public (Federal, state, or local)
contract or subcontract; violation of Federal or state
antitrust statutes relating to the submission of offers; or
commission of embezzlement, theft, forgery, bribery,
falsification or destruction of records, making false
statements, or receiving stolen property; and
(C) Are [ ] are not [ X ] presently indicted for, or
otherwise criminally or civilly charged by a governmental
entity with, commission of any of the offenses enumerated
in subdivision (a)(l)(i)(B) of this provision.
(ii) The Offeror has [ ] has not [ X ], within a three-year period
preceding this offer, had one or more contracts terminated for default by any
Federal agency.
(2) "Principals," for the purposes of this certification, means
officers; directors; owners; partners; and, persons having primary management or
supervisory responsibilities within a business entity (e.g., general manager;
plant manager; head of a subsidiary, division, or business segment, and similar
positions).
THIS CERTIFICATION CONCERNS A MATTER WITHIN THE JURISDICTION OF AN AGENCY OF THE
UNITED STATES AND THE MAKING OF A FALSE, FICTITIOUS, OR FRAUDULENT CERTIFICATION
MAY RENDER THE MAKER SUBJECT TO PROSECUTION UNDER SECTION 1001, TITLE 18, UNITED
STATES CODE.
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N00024-93-E-8521
(b) The Offeror shall provide immediate written notice to the Contracting
Officer if, at any time prior to contract award, the Offeror learns that its
certification was erroneous when submitted or has become erroneous by reason of
changed circumstances.
(c) A certification that any of the items in paragraph (a) of this provision
exists will not necessarily result in withholding of an award under this
solicitation. However, the certification will be considered in connection with
a determination of the Offeror's responsibility. Failure of the Offeror to
furnish a certification or provide such additional information as requested by
the Contracting Officer may render the Offeror nonresponsible.
(d) Nothing contained in the foregoing shall be construed to require
establishment of a system of records in order to render, in good faith, the
certification required by paragraph (a) of this provision. The knowledge and
information of an Offeror is not required to exceed that which is normally
possessed by a prudent person in the ordinary course of business dealings.
(e) The certification in paragraph (a) of this provision is a material
representation of fact upon which reliance was placed when making award. If it
is later determined that the Offeror knowingly rendered an erroneous
certification, in addition to other remedies available to the Government, the
Contracting Officer may terminate the contract resulting from this solicitation
for default.
FAR 52.215-6 TYPE OF BUSINESS ORGANIZATION (JUL 1987)
The offeror or quoter, by checking the applicable box, represents that-
(a) It operates as [ X ] a corporation incorporated under the laws of the State
of DELAWARE, [ ] an individual, [ ] a partnership, [ ] a nonprofit
organization, or [ ] a joint venture; or
(b) If the offeror or quoter is a foreign entity, it operates as [ ] an
individual, [ ] a partnership, [ ] a nonprofit organization, [ ] a
joint venture, or [ ] a corporation registered for business in
(Country).
FAR 52.219-1 SMALL BUSINESS CONCERN REPRESENTATION (JAN 1991)
(a) REPRESENTATION. The offeror represents and certifies as part of its
offer that it [ ] is, [ X ] is not a small business concern and that [ ]
all, [ X ] not all end items to be furnished will be manufactured or produced by
a small business concern in the United States, its territories or possessions,
Puerto Rico, or the Trust Territory of the Pacific Islands.
(b) DEFINITION.
"Small business concern," as used in this provision, means a concern,
including its affiliates, that is independently owned and operated, not dominant
in the field of operation in which it is bidding on Government contracts, and
qualified as a small business under the criteria and size standards in this
solicitation.
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N00024-93-E-8521
(c) NOTICE. Under 15 U.S.C. 645(d), any person who misrepresents a firm's
status as a small business concern in order to obtain a contract to be awarded
under the preference programs established pursuant to sections 8(a), 8(d), 9, or
15 of the Small Business Act or any other provision of Federal law that
specifically references section 8(d) for a definition of program eligibility,
shall--
(1) Be punished by imposition of a fine, imprisonment, or both;
(2) Be subject to administrative remedies, including suspension and
debarment; and
(3) Be ineligible for participation in programs conducted under the
authority of the Act.
FAR 52.219-3 WOMEN-OWNED SMALL BUSINESS REPRESENTATION (APR 1984)
(a) REPRESENTATION. The offeror represents that it [ ] is, [ X ] is not a
women-owned small business concern.
(b) DEFINITIONS.
"Small business concern," as used in this provision, means a concern,
including its affiliates, that is independently owned and operated, not dominant
in the field of operation in which it is bidding on Government contracts, and
qualified as a small business under the criteria and size standards in 13 CFR
121.
"Women-owned," as used in this provision, means a small business that
is at least 51 percent owned by a woman or women who are U.S. citizens and who
also control and operate the business.
FAR 52.222-19 WALSH-HEALEY PUBLIC CONTRACTS ACT REPRESENTATION (APR 1984)
The offeror represents as a part of this offer that the offeror is [ ] or is
not [ ] a regular dealer in, or is [ X ] or is not [ ] a manufacturer
of, the supplies offered.
FAR 52.222-21 CERTIFICATION OF NONSEGREGATED FACILITIES (APR 1984)
(a) "Segregated facilities" as used in this provision, means any waiting rooms,
work areas, rest rooms and wash rooms, restaurants and other eating areas, time
clocks, locker rooms and other storage or dressing areas, parking lots, drinking
fountains, recreation or entertainment areas, transportation, and housing
facilities provided for employees, that are segregated by explicit directive or
are in fact segregated on the basis of race, color, religion or national origin,
because of habit, local custom or otherwise.
(b) By the submission of this offer, the offeror certifies that it does not and
will not maintain or provide for its employees any segregated facilities at any
of its establishments, and that it does not and will not permit its employees to
perform their services at any location under its control
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N00024-93-E-8521
where segregated facilities are maintained. The offeror agrees that a breach of
this certification is a violation of the Equal Opportunity clause in the
contract.
(c) The offeror further agrees that (except where it has obtained identical
certifications from proposed subcontractors for specific time periods) it will--
(1) Obtain identical certifications from proposed subcontractors before
the award of subcontracts under which the subcontractor will be subject to the
Equal Opportunity clause;
(2) Retain the certifications in the files; and
(3) Forward the following notice to the proposed subcontractors (except if
the proposed subcontractors have submitted identical certifications for specific
time periods):
NOTICE TO PROSPECTIVE SUBCONTRACTORS OF REQUIREMENT FOR
CERTIFICATIONS OF NONSEGREGATED FACILITIES
A Certification of Nonsegregated Facilities must be submitted before the award
of a subcontract under which the subcontractor will be subject to the Equal
Opportunity clause. The certification may be submitted either for each
subcontract or for all subcontracts during a period (i.e., quarterly,
semiannually, or annually).
NOTE: The penalty for making false statements in offers is prescribed in 18
U.S.C. 1001.
FAR 52.222-22 PREVIOUS CONTRACTS AND COMPLIANCE REPORTS (APR 1984)
The offeror represents that--
(a) It [ X ] has, [ ] has not participated in a previous contract or
subcontract subject either to the Equal Opportunity clause of this solicitation,
the clause originally contained in Section 310 of Executive Order No. 10925, or
the clause contained in Section 201 of Executive Order No. 11114;
(b) It [ X ] has, [ ] has not, filed all required compliance reports; and
(c) Representations indicating submission of required compliance reports,
signed by proposed subcontractors, will be obtained before subcontract awards.
FAR 52.222-25 AFFIRMATIVE ACTION COMPLIANCE (APR 1984)
The offeror represents that (a) it [ X ] has developed and has on file, [ ]
has not developed and does not have on file, at each establishment, affirmative
action programs required by the rules and regulations of the Secretary of Labor
(41 CFR 60-1 and 60-2), or (b) it [ ] has not previously had contracts subject
to the written affirmative action programs requirement of the rules and
regulations of the Secretary of Labor.
FAR 52.223-1 CLEAN AIR AND WATER CERTIFICATION (APR 1984)
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N00024-93-E-8521
The Offeror certifies that--
(a) Any facility to be used in the performance of this proposed contract is
[ ], is not [ X ] listed on the Environmental Protection Agency (EPA) List of
Violating Facilities;
(b) The Offeror will immediately notify the Contracting Officer, before award,
of the receipt of any communication from the Administrator, or a designee, of
the EPA, indicating that any facility that the Offeror proposes to use for the
performance of the contract is under consideration to be listed on the EPA List
of Violating Facilities; and
(c) The Offeror will include a certification substantially the same as this
certification, including this paragraph (c), in every nonexempt subcontract.
FAR 52.223-5 CERTIFICATION REGARDING A DRUG-FREE WORKPLACE (JUL 1990)
(a) Definitions. As used in this provision,
"Controlled substance" means a controlled substance in schedules I through V of
section 202 of the Controlled Substances Act (21 U.S.C. 812) and as further
defined in regulation at 21 CFR 1308.11 - 1308.15.
"Conviction" means a finding of guilt (including a plea of nolo contendere) or
imposition of sentence, or both, by any judicial body charged with the
responsibility to determine violations of the Federal or State criminal drug
statutes.
"Criminal drug statute" means a Federal or non-Federal criminal statute
involving the manufacture, distribution, dispensing, possession or use of any
controlled substance.
"Drug-free workplace" means the site(s) for the performance of work done by the
Contractor in connection with a specific contract at which employees of the
Contractor are prohibited from engaging in the unlawful manufacture,
distribution, dispensing, possession, or use of a controlled substance.
"Employee" means an employee of a Contractor directly engaged in the performance
of work under a Government contract. "Directly engaged" is defined to include
all direct cost employees and any other Contractor employee who has other than a
minimal impact or involvement in contract performance.
"Individual" means an offeror/contractor that has no more than one employee
including the offeror/contractor.
(b) By submission of its offer, the offeror, if other than an individual, who
is making an offer that equals or exceeds $25,000, certifies and agrees, that
with respect to all employees of the offeror to be employed under a contract
resulting from this solicitation, that, it will--no later than 30 calendar days
after contract award (unless a longer period is agreed to in writing), for
contracts of 30 calendar days or more performance duration; or as soon as
possible for contracts
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N00024-93-E-8521
of less than 30 calendar days performance duration, but in any case, by a date
prior to when performance is expected to be completed--
(1) Publish a statement notifying such employees that the unlawful
manufacture, distribution, dispensing, possession or use of a controlled
substance is prohibited in the Contractor's workplace and specifying the actions
that will be taken against employees for violations of such prohibition;
(2) Establish an ongoing drug-free awareness program to inform such
employees about-
(i) The dangers of drug abuse in the workplace;
(ii) The Contractor's policy of maintaining a drug-free workplace;
(iii) Any available drug counseling, rehabilitation, and employee
assistance programs; and
(iv) The penalties that may be imposed upon employees for drug abuse
violations occurring in the workplace;
(3) Provide all employees engaged in performance of the contract with a
copy of the statement required by subparagraph (b)(l) of this provision;
(4) Notify such employees in writing in the statement required by
subparagraph (b)(l) of this provision, that as a condition of continued
employment on the contract resulting from this solicitation, the employee will-
(i) Abide by the terms of the statement; and
(ii) Notify the employer in writing of the employee's conviction under
a criminal drug statute for a violation occurring in the workplace no later than
5 calendar days after such conviction;
(5) Notify the Contracting Officer in writing within 10 calendar days
after receiving notice under subdivision (b)(4)(ii) of this provision, from an
employee or otherwise receiving actual notice of such conviction. This notice
shall include the position title of the employee; and
(6) Within 30 calendar days after receiving notice under subdivision
(b)(4)(ii) of this provision of a conviction, take one of the following actions
within respect to any employee who is convicted of a drug abuse violation
occurring in the workplace:
(i) Take appropriate personnel action against such employee; up to
and including termination; or
25
<PAGE>
N00024-93-E-8521
(ii) Require such employee to satisfactorily participate on a drug
abuse assistance or rehabilitation program approved for such purposes by a
Federal, State, or local health, law enforcement, or other appropriate agency.
(7) Make a good faith effort to maintain a drug-free workplace through
implementation of subparagraphs (b)(l) through (b)(6) of this provision.
(c) By submission of its offer, the offeror, if an individual who is making an
offer of any dollar value, certifies and agrees that the offeror will not engage
in the unlawful manufacture, distribution, dispensing, possession, or use of a
controlled substance in the performance of the contract resulting from this
solicitation.
(d) Failure of the offeror to provide the certification required by paragraphs
(b) or (c) of this provision, renders the offeror unqualified and ineligible for
award. (See FAR 9.104-l(g) and 19.602-l(a)(2)(i).)
(e) In addition to other remedies available to the Government, the
certification in paragraphs (b) or (c) of this provision concerns a matter
within the jurisdiction of an agency of the United States and the making of a
false, fictitious, or fraudulent certification may render the maker subject to
prosecution under Title 18, United States Code, Section 1001.
FAR SUPP 252.219-7000 SMALL DISADVANTAGED BUSINESS CONCERN REPRESENTATION
(DoD CONTRACTS) (DEC 1991)
(a) DEFINITION.
"Small disadvantaged business concern", as used in this provision, means a small
business concern, owned and controlled by individuals who are both socially and
economically disadvantaged, as defined by the U.S. Small Business Administration
at 13 CFR Part 124, the majority of earnings of which directly accrue to such
individuals. This term also means a small business concern owned and controlled
by an economically disadvantaged Indian tribe or Native Hawaiian Organization
which meets the requirements of 13 CFR 124.112 or 13 CFR 124.113, respectively.
In general, 13 CFR Part 124 describes a small disadvantaged business concern as
a small business concern -
(1) Which is at least fifty-one percent unconditionally owned by one or more
socially and economically disadvantaged individuals; or
(2) In the case of any publicly owned business, at least fifty-one percent of
the voting stock is unconditionally owned by one or more socially and
economically disadvantaged individuals, and
(3) Whose management and daily business operations are controlled by one or
more such individuals.
(b) REPRESENTATIONS.
26
<PAGE>
N00024-93-E-8521
Check the category in which your ownership falls --
___ Subcontingent Asian (Asian-Indian) American (U.S. citizen with
origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, or
Nepal)
___ Asian Pacific American (U.S. Citizen with origins from Japan,
China, the Philippines, Vietnam, Korea, Samoa, Guam, U.S. Trust
Territory of the Pacific Islands (Republic of Palau), the Northern
Mariana Islands, Laos, Kampuchea (Cambodia), Taiwan, Burma,
Thailand, Malaysia, Indonesia, Singapore, Brunei, Republic of the
Marshall Islands, or the Federated States of Micronesia)
___ Black American (U.S. Citizen)
___ Hispanic American (U.S. Citizen with origins from South America,
Central America, Mexico, Cuba, the Dominican Republic, Puerto Rico,
Spain or Portugal)
___ Native American (American Indians, Eskimos, Aleuts, or Native
Hawaiians, including Indian Tribes or Native Hawaiian
Organizations)
____ Individual/concern, other than one of the preceding, currently
certified for participation in the Minority Small Business and
Capital Ownership Development Program under section 8(a) of the
Small Business Act
___ Other
(c) CERTIFICATIONS.
Complete the following --
(1) The offeror is is not X a small disadvantaged business concern.
----- ---
(2) The Small Business Administration (SBA) has ____ has not _____ made a
determination concerning the offeror's status as a small disadvantaged business
concern. If the SBA has made such a determination, the date of the
determination was ____ and the offeror--
___ Was found by SBA to be socially and economically disadvantaged and
no circumstances have changed to vary that determination
___ Was found by SBA not to be socially and economically disadvantaged
but circumstances which caused the determination have changed.
(d) NOTIFICATION.
27
<PAGE>
N00024-93-E-8521
Notify the Contracting Officer before contract award if your status as a small
disadvantaged business concern changes.
(e) PENALTIES AND REMEDIES.
Anyone who misrepresents the status of a concern as a small disadvantaged
business for the purpose of securing a contract or subcontract shall--
(1) Be punished by imposition of a fine, imprisonment, or both;
(2) Be subject to administrative remedies, including suspension and disbarment;
and
(3) Be ineligible for participation in programs conducted under the authority
of the Small Business Act.
28
<PAGE>
STATE OF SOUTH CAROLINA ) LEASE AGREEMENT
)
COUNTY OF EDGEFIELD )
THIS LEASE is made and entered into this 22nd day of January, 1996, by
and between Lewis F. Holmes, III (hereinafter "Landlord"), whose address is
Route 2, Box 88, Johnston, South Carolina 29832 and United Defense L.P., a
limited partnership (hereinafter "Tenant"), whose address is 15 Wyndham
Boulevard, Aiken, South Carolina 29801. Tenant submits itself to the
jurisdiction of South Carolina and the venue of Edgefield County.
ARTICLE I.
LEASED PROPERTY
The "Leased Property" consists of the land, building and improvements
(the "Land and Buildings") located on Highway 191 (South) in Edgefield County,
South Carolina. The Leased Property is more particularly described in Exhibit A
attached hereto and made a part hereof.
ARTICLE II.
TERM OF LEASE
Section 2.1. DEMISE: Landlord, for and in consideration of the
rents, covenants and agreements herein contained on the part of the Tenant, has
let and leased and by these presents does let and lease unto Tenant, and Tenant
does hereby take and hire from Landlord, for the Term and any extensions
thereof, the Leased Property.
Section 2.2. TERM: The term of this Lease shall commence upon the
date hereinafter referred to as the "Commencement Date" which shall be the 1st
day of April, 1996, and shall expire at midnight upon the last day of the month
of the Commencement Date, in the second year after the Commencement Date, unless
sooner terminated or extended pursuant to the
1
<PAGE>
terms hereof. Six months prior to the expiration of this hereinafter
referred to as the "Term," this rental agreement may be renewed by the
parties upon mutually agreeable terms. Any extensions granted by Landlord
hereto in anticipation of such a renewal agreement, the granting or non-grant
of such extensions being at the sole discretion of the Landlord, shall
conform to the terms of this lease and remain in full force and effect.
Should Tenant be in good standing and Landlord elect to terminate this month
to month tenancy, Tenant shall be granted a 90-day period within which to
vacate, at the same rental terms during said 90 days.
Section 2.3. TERMINATION. This lease shall terminate at the end of
the Term or any extension thereof, without the necessity of any notice from
either Landlord or Tenant to terminate same. Tenant hereby waives notice to
vacate the Leased Property and agrees that Landlord shall be entitled to the
summary recovery of possession of the Leased Property should Tenant hold over to
the same extent as if statutory notice had been given. In the event Tenant
holds over without the express written consent of Landlord, Tenant shall be
deemed to hold over as a tenant at will. For a period of two (2) months prior
to the expiration of the Term or any extension thereof, Landlord may show the
Leased Property and all parts thereof to prospective tenants and purchasers
during normal business hours, provided, however, that Landlord shall use his
best efforts not to disturb Tenant's use or occupancy thereto.
ARTICLE III.
RENT
Section 3.1. ANNUAL RENT. The Tenant agrees to pay to the Landlord
an "Annual Rent" of Twenty-One Thousand Nine Hundred ($21,900) Dollars per year
in equal monthly installments of One Thousand Eight Hundred Twenty-Five Dollars,
due and payable on or before the third day of each month in advance during the
Term hereof (unless such rent be
2
<PAGE>
abated or diminished as in this Lease elsewhere provided). Annual Rent shall
be apportioned for the current month beginning with the Commencement Date.
Section 3.2. PLACE OF PAYMENT. Payments of rent are to be made
to the Landlord at the address set forth above, or to such other part at such
other place as shall be designated by the Landlord in writing at least ten
(10) days prior to the next ensuing rent payment date.
Section 3.3. TAXES AND INSURANCE. Landlord shall be responsible
for the payment of 1993 taxes on the Leased property. Future property taxes
shall be apportioned as follows: Landlord shall pay all taxes up to and
equal to the 1993 taxes; Tenant shall be responsible for the payment of any
amount on a yearly basis over and above the 1993 tax bill amount. Tenant
shall be responsible for the securing fire, extended and liability insurance
coverage or its equivalent and shall be maintained on the Leased Property in
the minimum amount of Two Hundred Fifty Thousand and no/100 ($250,000.00)
Dollars naming Landlord as an additional insured and allowing a loss payee
clause to any mortgage company so designated by Landlord.
ARTICLE IV.
TENANT IMPROVEMENTS
Tenant may make any alterations, additions or improvements in or to
the Leased Property but must first have the consent of the Landlord. Consent
shall not be unreasonably withheld. Landlord agrees that Tenant may construct
the premises in accordance with standard storage/warehouse design. Any and all
improvements to the land or buildings shall remain the property of the Landlord
upon the termination of this Lease. Notwithstanding any provision
3
<PAGE>
herein, Tenant shall not be required to obtain the consent of the Landlord to
make any alterations, additions or improvements whose cost does not exceed
Ten Thousand ($10,000.00) Dollars.
ARTICLE V.
PERMITTED USE
The Leased Property may be used by the Tenant for warehouse/storage
facilities, provided, however, that Tenant agrees not to store or warehouse any
toxic or dangerous waste or chemicals.
ARTICLE VI.
ENTRY BY LANDLORD
Section 6.1. INSPECTING. Landlord, its agents or employees, shall
have the right, but shall not be required, to enter the Leased Property at all
reasonable hours for the purpose of making inspections. In no way should such
inspections interfere with or interrupt the business of the Tenant, and such
Inspections shall be arranged prior thereto by the Landlord and Tenant's
Warehouse Manager.
ARTICLE VII.
DEFAULT AND REMEDIES
Section 7.1. EVENTS OF DEFAULT. If (i) Tenant fails to pay when due any
installment of rent; (ii) Tenant fails to keep, perform and observe any other
covenant hereunder; (iii) any Order for Relief from Creditors is entered on
behalf of the Tenant; (iv) Tenant is adjudged insolvent according to law; (v)
any assignment of Tenant's property is made for the benefit of its creditors; or
(vi) Tenant files a petition or a petition is filed against Tenant under any
federal or state bankruptcy law (any of such events being herein called an
"Event of Default"), Landlord shall, with respect to an Event of Default other
than nonpayment of Annual Rent or Additional Rent,
4
<PAGE>
give Tenant notice thereof and Tenant shall have thirty (30) days after the
date of such notice in which to cure such Event of Default. In the event
Tenant fails to pay any installment of Annual Rent or Additional Rent when
due, Tenant shall thirty (30) days from the due date in which to cure such
default by paying all late rent due and any interest due pursuant to Section
14 hereof, but Landlord shall not be required to give any notice of such
default. Tenant shall have ten (10) days from the date of any default to
vacate the premises if he fails to cure said default.
Section 7.2. LANDLORD'S REMEDIES. If any Event of Default occurs and is
not cured within the time allowed hereby for the cure thereof, then Landlord may
exercise any one or more of the following remedies:
(a) Suspend the provision of any or all of the services to be provided by
Landlord to Tenant, without terminating this Lease, until such Event of Default
is remedied;
(b) Without terminating this Lease, seek specific performance of Tenant's
obligations hereunder and, in that connection, Tenant hereby agrees that
Landlord's remedies at law are and will be insufficient to preserve for Landlord
the benefit of this Lease and that monetary damages would not be a sufficient
remedy;
(c) Without terminating this Lease, re-enter the Leased Property (by legal
action if necessary) and proceed to re-let as Tenant's agent all or any part of
the Leased Property as Landlord in its sole discretion may deem necessary or
appropriate, and on such terms, rental and conditions as may, in the reasonable
opinion of Landlord, be commercially reasonable; all rentals received by
Landlord from such re-letting shall be applied FIRST, to Landlord expenses
incurred in connection with any such re-entering or re-letting, including
without limitation, any and all costs and expenses incurred in renovating or
altering space in the Leased Property to make it suitable
5
<PAGE>
for re-letting, brokerage commissions and attorneys fees and other fees
incurred in connection therewith, and advertising costs and expenses; SECOND,
to all other damages and expenses suffered or insured by Landlord as a result
of Tenant's breach hereof; and THIRD, to all rent not paid by Tenant; any
surplus of such rentals shall be held by Landlord without interest and free
from the claims of creditors of Tenant, as security for the continued payment
and performance of Tenant's obligations hereunder until Landlord terminates
this Lease or the Term or Extension Term expires, as applicable, at which
time any amount remaining after full payment to Landlord will be paid over to
Tenant. Unless Landlord has expressly notified Tenant that he is exercising
the right of termination contained in clause (d) of this Section 7.2, the
actions described in this clause (c) shall not be deemed to terminate this
Lease or constitute an acceptance of any attempted or purported surrender by
Tenant of the Leased Property or any part thereof; or
(d) By written notice to Tenant, terminating this Lease, which termination
shall be effective upon the date of such notice, and upon receipt of such
notice, Tenant shall immediately vacate the Leased Property; if Tenant
thereafter remains in possession of the Leased Property, Landlord may institute
dispossessory proceedings. In addition to the foregoing, Landlord may initiate
an action against Tenant for the recovery of all rent due hereunder through the
date of the notice of termination, or the date Tenant vacates the Leased
Property, whichever later occurs, with interest thereon from the date when due
at the rate provided in Section 14. Tenant agrees to hold harmless the Landlord
as against any actions at law or in equity, by any third party, for the Term of
this lease.
Landlord shall also be entitled to recover from Tenant all expenses
including reasonable attorneys fees incurred in connection with enforcement of
Landlord's rights and remedies under this lease.
6
<PAGE>
Section 7.3. DEFAULT BY LANDLORD. In the event of any default by
Landlord, Tenant may exercise any and all remedies available at law or in
equity, including the right of specific enforcement.
ARTICLE VIII.
MAINTENANCE AND SERVICES
Section 8.1. TENANT REPAIRS. Tenant shall, at its sole costs and
expense, maintain in good condition the Leased Property and every part thereof,
and will make all necessary repairs thereto, interior or exterior, structural or
non-structural, ordinary and extraordinary, and unforeseen and foreseen. The
Landlord shall not be required to furnish any services or facilities or to make
any repair or alteration in or to the Leased Property. The Tenant hereby
assumes the full and sole responsibility for the condition, operation, repair,
replacement, maintenance and management of the Leased Property.
Section 8.2. CONDITIONS OF LEASED PROPERTY UPON TERMINATION OF
LEASE. Land and Buildings are to be returned to the Landlord at the end of the
Lease in substantially the same condition as they currently exist, normal wear
and tear excepted.
Section 8.3. UTILITIES. Tenant shall be responsible for and shall
bear the expense of all utilities for the Leased Property, including without
limitation, water, sewer, electricity, gas and telephone.
ARTICLE IX.
ATTORNMENT
Section 9.1. ATTORNMENT. Should Landlord assign this Lease, or
should Landlord grant a mortgage on the Building, and should the holder of such
mortgage succeed to the interest of Landlord, Tenant shall be bound to said
assigns or any such mortgagee under all
7
<PAGE>
the terms, covenants and conditions of this Lease for the balance of the Term
remaining after such succession and any Extension Term elected by Tenant, and
Tenant shall attorn to such succeeding party as its Landlord under this Lease
promptly under any such succession. Tenant agrees that should any party so
succeeding to the interest of Landlord require a separate agreement of
Attornment regarding the matters covered in this Lease, then Tenant shall
enter into any such Attornment agreement, provided the same does not modify
any of the provisions of this Lease and has no adverse effect upon Tenant's
continued occupancy of the Leased Property.
ARTICLE X.
SURRENDER
Section 10.1. SURRENDER OF LEASED PROPERTY. At the expiration or
earlier termination of this Lease, Tenant shall surrender the Leased Property to
Landlord.
ARTICLE XI.
CONDEMNATION
Section 11.1. TOTAL TAKING. In the event that the whole of the
Leased Property shall be condemned or taken in any manner for any public or
quasi-public use, this Lease shall forthwith cease and terminate as of the date
of vesting of title in the condemnor.
Section 11.2. SUBSTANTIAL TAKING. If only a part of the Leased
Property shall be so condemned or taken, but in Tenant's reasonable opinion the
taking makes it economically unfeasible for Tenant to continue to use the Leased
Property in a normal and satisfactory manner for the purpose for which the
Leased Property was used immediately prior to the taking, then Tenant, by giving
thirty (30) days notice to the Landlord, may terminate this Lease effective
thirty (30) days after the date of vesting of title in the condemnor.
8
<PAGE>
Section 11.3. TENANT'S RIGHTS TO SHARE IN AWARD. In the event this
Lease is terminated pursuant to Section 11.1 or Section 11.2, Tenant shall have
no right to share in Landlord's award, but this provision shall not affect
Tenant's right, if any, to pursue its own claim against the condemning
authority. Tenant's right to assert such a claim shall survive the termination
of this Lease.
Section 11.4. PARTIAL TAKING. If only a part of the Leased Property
shall be so condemned or taken and this Lease is not terminated pursuant to
Section 11.1 or Section 11.2, Landlord will, with reasonable diligence and at
its expense, restore the remaining portion of the Leased Property as nearly as
practicable to the same condition as existed prior to such condemnation or
taking, the Annual Rent shall be abated in proportion to the value of the area
of the Leased Property so condemned or taken. In the event of a partial taking,
Tenant shall have no right to share in any award to Landlord by the condemning
authority, but this provision shall not affect Tenant's right, if any, to pursue
its own claim against the condemning authority.
ARTICLE XII.
QUIET ENJOYMENT AND USE
Section 12.1. QUIET ENJOYMENT. Tenant, upon observing, performing
and keeping all the covenants and agreements herein contained, shall and may
lawfully, peaceably and quietly have, hold, use, occupy, possess, and enjoy the
Leased Property for and during all of the Term and Extension Terms, if any,
without disturbance by Landlord, or by any person claiming by, through or under
Landlord.
9
<PAGE>
ARTICLE XIII.
ASSIGNMENT, SUBLETTING AND CHANGE OF OWNERSHIP
Section 13.1. ASSIGNMENT AND SUBLETTING. Tenant shall have the right
to assign this Lease after the prior written consent of the Landlord, which
consent shall not be unreasonably withheld. No assignment or subletting shall
release or discharge Tenant of or from any liability whether past, present or
future under this Lease, and Tenant shall continue fully liable hereunder. For
the purposes of this Lease, any transfer by shareholder or partners of Tenant
holding in the aggregate a majority interest in Tenant to a third party or
parties not related to any current shareholder or partner by blood or marriage
shall be deemed an assignment of this Lease. By acceptance of this privilege,
Tenant expressly agrees not to assign or sublet the premises or any part thereof
to any person or entity who use of the Leased Property would directly or
indirectly compete with the business or businesses of the Landlord or that
entity known as Lewis F. Holmes & Son.
ARTICLE XIV.
MISCELLANEOUS PROVISIONS
Section 14.1. ENTIRE AGREEMENT. This Lease is intended to be the
final and complete expression of the agreement between the parties. All
negotiations and oral agreements of the parties hereto with respect to the
subject matter hereof are merged into this Lease. No amendment of this Lease
shall be binding unless evidenced in writing signed by Landlord and Tenant. All
parties hereto have participated in the negotiations for and preparation of this
Lease. In no event, therefore, shall this Lease be construed more or less
stringently against any party.
10
<PAGE>
Section 14.2. CAPTIONS. The captions of the Articles and Sections of
this Lease are for the convenience and reference only and in no way define,
limit or describe the scope or intent of such Articles and Sections.
Section 14.3. SUCCESSORS AND ASSIGNS. Subject to the provision of
Article XIII hereof governing assignment and subletting, the covenants and
agreements herein contained shall bind and inure to the benefit of the Landlord,
its successors and assigns, and Tenant, its successors and assigns. Nothing
contained in this Lease shall in any manner restrict Landlord's right to assign
or encumber this Lease in its sole discretion.
Section 14.4. PARTIAL INVALIDITY. If any clause or provision of this
Lease is or becomes illegal, invalid or unenforceable because of present or
future law or any rule or regulation of any governmental body or entity, the
intention of the parties hereto is that the remainder of this Lease shall not be
affected thereby.
Section 14.5. NOTICES. Whenever by the terms of this Lease notice
shall be required, necessary or desired to be given, such notice shall be in
writing and shall be deemed effective when delivered by hand against receipt or
on the fifth consecutive calendar day from and after the date upon which it
shall have been deposited, postage prepaid, in the United States Mails,
certified, return receipt requested, to a party at its respective address as set
forth on page 1 of this Lease.
Section 14.6. TIME OF Essence. Time shall be of the essence to the
parties with respect to all provision of this Lease.
Section 14.7. ESTOPPED CERTIFICATE. From time to time and at any
time during the Term or Extension Term thereof, Landlord or Tenant shall, within
twenty (20) days following
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<PAGE>
written request from the other, execute, acknowledge and deliver to the other
a statement in writing certifying: (i) whether this Lease is in full force
and effect and whether there shall have been modifications to this Lease;
(ii) the dates to which all rental and other charges have been paid and
whether any such payment represents payment in advance; and (iii) to the best
knowledge of the individual executing the statement whether any default of
the other party in the performance of any covenant, agreement or condition
has occurred and remains uncured and if such default has occurred, the nature
thereof; it being the intention of the Landlord and Tenant that the statement
to be delivered in accordance herewith may be relied upon by any person to
whom it shall be delivered by the party (Landlord or Tenant, as the case may
be) who initialed the request for said statement, but not to the extent of
any default under this Lease of which the individual executing the statement
shall have no actual knowledge.
Section 14.8. GOVERNING LAW. This Lease and the rights and
obligations of Landlord and Tenant hereunder shall be governed and enforced
under the laws of South Carolina.
Section 14.9. LIMITATION OF LIABILITY. Landlord's liability to
Tenant under this Lease shall be limited to Landlord's interest in the Leased
Property.
Section 14.10. MULTIPLE COUNTERPARTS. This Lease shall be executed in
multiple counterparts, each of which shall be deemed an original and any of
which shall be deemed to be complete of itself and may be introduced into
evidence or used for any purpose without the production of the other copy.
Section 14.11. INTEREST RATE. Any amounts payable by Tenant to
Landlord or by Landlord to Tenant pursuant to the provisions of this Lease and
not paid when due shall bear
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<PAGE>
interest at the rate of ten (10%) per cent per annum, provided that no such
interest shall be charged on rent paid within thirty (30) days of the date
first due.
Section 14.12. PAYMENTS BY LANDLORD. In the event Tenant fails to pay
when due taxes, insurance, costs of repairs, unpaid mechanics or material men,
or any other expenses required to be paid by Tenant under this Lease, if any,
Landlord may, at his option, and without waiving any other rights and remedies
hereunder, pay any of such amounts due on behalf of Tenant, and Tenant shall
immediately reimburse Landlord for such expenses, together with interest at the
rate provided in Section 14.11 hereof from the date of payment by Landlord.
Section 14.13. REMEDIES CUMULATIVE. The remedies herein provided to
Landlord are intended to be cumulative to any other remedies provided by law or
equity.
Section 14.14. WAIVER. The failure of Landlord or Tenant to insist in
any one or more instances upon the strict performance of any covenant of this
Lease, or to exercise any option or right herein contained, shall not be
construed as a waiver or relinquishment for the future of such covenant, right
or option, but the same shall remain in full force and effect unless the
contrary is expressed in writing by Landlord or Tenant.
Section 14.15. RELATIONSHIP OF PARTIES. This Lease in no way creates
the relationship of partners or joint venturers between Landlord and Tenant and
the provisions governing any Percentage Rent provide only a method by which rent
is to be calculated.
Section 14.16. MEMORANDUM OF LEASE. At either party's request, the
other party shall agree to execute a memorandum of this Lease summarizing the
provisions of this Lease. Such memorandum shall be promptly recorded in the
real property records of Edgefield County.
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<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant, by and through their duly
authorized personnel, have caused this Lease to be executed in the name of their
respective entities, sealed and delivered, each one to the other.
WITNESS: LANDLORD
/s/ Authorized Signatory /s/ Lewis F. Holmes, III
- ------------------------------- -----------------------------------
Lewis F. Holmes, III
/s/ Authorized Signatory
- -------------------------------
TENANT
/s/ Authorized Signatory /s/ Jerry Chubb
- ------------------------------- -----------------------------------
United Defense L.P.
/s/ Authorized Signatory by: /s/ Jerry Chubb
- ------------------------------- -----------------------------------
its: Director, Contracts Management
STATE OF SOUTH CAROLINA )
COUNTY OF EDGEFIELD )
PERSONALLY APPEARED BEFORE ME, the undersigned and made oath that
s/he saw the within-named Landlord, sign, seal, and as his act and deed,
deliver the within Lease for the uses and purposes therein mentioned, and
that s/he, with the other witness subscribed above witnessed the execution
thereof.
SWORN TO AND SUBSCRIBED TO BEFORE ME
This 31st day of March, 1994
/s/ Notary Public
- -------------------------------- -----------------------------------
Notary Public for South Carolina Deponent/Witness
My Commission Expires:
STATE OF CALIFORNIA )
COUNTY OF SANTA CLARA )
PERSONALLY APPEARED BEFORE ME, the undersigned and made oath that s/he
saw the within-named Tenant, sign, seal, and as his act and deed, deliver the
within Lease for the uses and purposes therein mentioned, and that s/he, with
the other witness subscribed above witnessed the execution thereof.
SWORN TO AND SUBSCRIBED TO BEFORE ME
This 24th day of March, 1994
/s/ Notary Public
- -------------------------------- -----------------------------------
Notary Public for California Deponent/Witness
My Commission Expires: July 26, 1996
------------------
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LEASE
THIS LEASE, made this 1st day of November, 1993, by and between Brier
Hill Steel Company, Inc., a Pennsylvania corporation having offices at P.O.
Box 386, Route 40, Brier Hill, Pennsylvania, 15415 (hereinafter called
"Lessor"), and Harsco Corporation, a Delaware Corporation, having offices at
350 Poplar Church Road, Camp Hill, Pennsylvania 17011, as the lessee party
and acting for its BMY-Combat Systems Operating Division (hereinafter called
"Harsco").
WITNESSETH:
That Lessor, in consideration of the rents hereinafter covenanted to be
paid by Harsco, and in consideration of the covenants hereinafter stipulated
to be performed by Harsco, and in consideration of the mutual covenants and
agreements, hereinafter mentioned, between Lessor and Harsco, does hereby
demise, let and lease unto Harsco all that certain real property situate in
North Union Township, Fayette County, Pennsylvania, consisting of 40.94 acres
of land and all buildings, structures and improvements located thereon,
including but not limited to two (2) buildings containing 175,000 square feet
of total manufacturing space under roof, which real property and improvements
are more specifically identified and described on Exhibit "A", which is
attached to this Lease and made a part hereof (hereinafter called the
"Premises"). The Premises are leased to Harsco together with all appurtenant
rights and easements, including but not limited to those rights and easements
providing free and uninterrupted ingress and egress between the Premises and
the public streets, roads or highways known as PA Route No. 119 and Mt.
Braddock Road, and those rights and easements necessary to free and
uninterrupted provision of railroad carrier service to the Premises over and
through the existing sidetrack. The Premises also include all fixtures and
equipment presently located at or incorporated into the buildings and
improvements located on the Premises. This Lease is made upon the following
terms, stipulations, covenants, conditions and agreements, all of which the
parties hereto, intending to be legally bound hereby, covenant and agree to
keep and perform.
1. PERSONAL PROPERTY. This Lease and the rent payable hereunder also
include the following miscellaneous items of personal property presently
located at the Premises: One self-propelled floor sweeping machine; all
storage racks; all office equipment and furniture; and the telephone system
used for communication with the guard shack.
2. TERM. Harsco shall have and hold the Premises under this Lease,
subject to the conditions of this Lease, for the full term of three (3)
years, beginning on November 1, 1993 and ending on October 31, 1996
(hereinafter called the "Term"), unless sooner terminated or extended as
hereinafter provided. Harsco's obligation to pay the rent shall commence on
November 1, 1993. Lessor shall deliver possession of the Premises to Harsco
on November 1, 1993. Lessor, however, shall not be liable to Harsco for any
inability to deliver possession to Harsco on said date if Lessor's failure to
deliver possession is due solely to force majeure or any other events or
circumstances which are not within Lessor's control and are not foreseeable
at the time of execution of this Lease. Such events and circumstances
excusing timely delivery of
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possession shall not include any failure by Lessor to remove any third party
in possession of all or any portion of the Premises.
3. USE OF PREMISES. Harsco shall use the Premises as and for a
manufacturing facility for any of the industrial, related and ancillary
operations conducted by Harsco's BMY-Combat Systems Division as part of said
Division's defense contracting business and related commercial manufacturing
business. Harsco shall not use the Premises or any part thereof in any
manner which would (i) materially violate any applicable law or lawful
requirement of public authorities having jurisdiction over the Premises, or
(ii) cause structural injury to any building on the Premises.
4. RENT. Harsco agrees to pay to Lessor for and during the Term, the
sum of Eight Hundred and Forty Thousand and 00/100 ($840,000.00) Dollars, as
rent reserved, which rent shall be payable without demand in advance monthly
installments in the amount of Twenty Three Thousand Three Hundred Thirty
Three and 33/100 ($23,333.33) Dollars each, on the 1st day of every month of
the Term, beginning on November 1, 1993. Whenever under the terms of this
Lease any sum of money is required to be paid by Harsco in addition to such
rent, such sum, at Lessor's option, shall be deemed additional rent and
collectable as such with any installment of rent thereafter falling due
hereunder.
5. OPTION TO RENEW. Provided Harsco is not in default hereunder, Lessor
hereby extends to Harsco four (4) separate options to extend and renew this
Lease for four (4) separate, additional terms of one (1) year each, at the
identical terms and provisions set forth herein, except that the rent shall
be as hereinafter set forth. If Harsco chooses to exercise any of such
options, Harsco must do so by written notice given to Lessor no less than
sixty (60) days prior to expiration of the Term or any then effective renewal
term of this Lease. Subject only to the giving of timely notice to Lessor,
Harsco shall be permitted to exercise its options at any time for any number
of the consecutive renewal terms permitted hereunder. For instance, Harsco
may deliver a notice specifically exercising both the first and second
renewal terms at any time on or before sixty (60) days prior to expiration of
the first year of the Term. Each permitted renewal term shall run from
November 1 of the applicable year to October 31 of the following year. The
rent reserved for each one (1) year renewal term shall be and remain
unchanged in the total amount of Three Hundred Thirty Two Thousand Five
Hundred and 00/100 ($332,500.00) Dollars, and shall be payable without demand
in advance, monthly installments in the amount of Twenty Seven Thousand Seven
Hundred Eight and 33/100 ($27,708.33) Dollars each. Such rental installments
shall be paid on the 1st day of each and every month during any renewal term.
References hereinafter to "the Term" shall include, if applicable, any of
the renewal terms which has been exercised and obtained by Harsco under this
paragraph.
6. TERMINATION BY HARSCO. At any time during the Term, Harsco shall
have the right to unconditionally and without specific cause or justification
terminate this Lease. Termination shall be effective ninety (90) days
following Harsco's notice of termination, at which time Harsco shall
surrender the Premises to Lessor in accordance with paragraph 28 of this
Lease. Harsco's obligation for the payment of rent and for other
performances under this Lease shall terminate on such effective date, but
nothing herein shall be deemed to relieve Harsco from
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the payment of monthly rental installments or other payments falling due
before the effective date of termination. The last such monthly installment
or other payment due Lessor hereunder, however, may be paid by Harsco on a
per diem basis covering any period of less than one (1) full month from the
end of the period covered by the previous installment of rent to the
effective date of termination, or covering the portion of any statement from
Lessor for reimbursement attributable to the period of time prior to the
effective date of termination. Within thirty (30) days following the
effective date of termination, Lessor shall reimburse to Harsco any amounts
paid in advance by Harsco (such as real property taxes) which are
attributable to periods following the effective date of termination.
7. NET LEASE. Lessor and Harsco intend this Lease to be net to Lessor,
so that the monthly rent required hereunder shall be paid in full in all
events, without deduction for any expenses of Harsco in connection with the
Premises, whether such expenses are to be paid by Harsco directly to third
parties or are to be reimbursed by Harsco to Lessor, including but not
limited to:
(a) Harsco's maintenance costs under paragraph 12;
(b) Harsco's utility expenses under paragraph 14;
(c) Harsco's insurance costs under paragraph 15; and
(d) Harsco's real property tax reimbursement of Lessor under
paragraph 16.
8. LATE CHARGES. Harsco agrees to pay to Lessor, as additional rent, a
late charge equal to five (5%) percent of the amount of any installment of
rent or any other sum payable hereunder which is not paid on the date when
due. Such late charge shall be deemed rent for all purposes under this Lease.
9. PEACEFUL ENJOYMENT. Lessor represents and warrants that Lessor holds
good and marketable fee simple title to the Premises, free and clear of liens
and encumbrances and subject only to applicable zoning and land use laws and
ordinances and to easements, conditions, restrictions and reservations of
record, none of which are such that shall impair use and occupancy of the
Premises by Harsco for the purposes set forth in paragraph 3 of this Lease.
Lessor covenants that Harsco shall and may peacefully and quietly have, hold,
occupy, possess and enjoy the Premises for the term hereinabove set forth,
and that Lessor shall defend such possession and enjoyment by Harsco against
all parties; provided, however, that Harsco shall pay the rent and shall
keep, observe and perform all of the other covenants and provisions as
required in this Lease.
10. CONDITION OF PREMISES. Except as otherwise specifically set forth in
this paragraph 10 and in other provisions of this Lease and subject to
Lessor's maintenance obligations under paragraph 12 of this Lease, the
Premises are leased to Harsco by Lessor in "as is" condition. Lessor
represents and warrants to Harsco and covenants with Harsco that the
equipment and building or mechanical systems presently located at the
Premises or incorporated into the improvements located at the Premises shall
be in good repair and operating condition at
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the commencement of this Lease. Such equipment and systems include, but are
not limited to: heating, ventilating and air conditioning systems; plumbing,
including drain lines; electrical service and distribution system; fire
sprinkler system (which shall not be leaking); overhead doors and any related
control systems; cranes, including overhead cranes, with any related control
systems; air compressors and air lines; the oil/water separator tank system;
and the industrial waste water treatment system.
During the first sixty (60) days following commencement of this Lease,
Harsco shall have the opportunity to operate and inspect all of the above
mentioned equipment and systems, and to report any items which are not in
good operating condition and repair to Lessor. Harsco shall not be limited
to one (1) notice reporting all defective items, but may notify Lessor from
time to time within said sixty (60) day period of any defective items, as
they are discovered by Harsco. Promptly upon receipt of any such notice or
notices from Harsco and no later than seventy (70) days following
commencement of this Lease, Lessor, shall, at Lessor's option, either (i)
perform, at Lessor's expense, any and all repairs, maintenance and
replacements necessary to place the reported items in good operating
condition and repair, or (ii) terminate this Lease. Lessor shall notify
Harsco in writing of its decision within seventy (70) days following
commencement of this Lease. If Lessor elects to terminate this Lease,
Harsco, within ten (10) days following receipt of Lessor's notice electing
termination, may, at Harsco's option, elect to forgive Lessor's repair
obligations under this paragraph 10 as to the item or items Lessor refuses to
repair. In such case, Lessor's election to terminate this Lease shall not be
effective, and this Lease shall continue in full force and effect. If Lessor
elects to terminate this Lease under this paragraph 10, Lessor shall be
obligated to refund to Harsco, within fifteen (15) days following such
termination by Lessor, one hundred (100%) percent of the rent and all other
sums paid by Harsco under this Lease for and during the period beginning at
commencement of this Lease and ending at termination of this Lease.
At the end of Harsco's sixty (60) day inspection period, if no notice is
received by Lessor that any items are not in good operating condition and
repair, the taking of possession of the Premises by Harsco shall conclusively
establish that all equipment and systems were, at commencement of this Lease,
in satisfactory operating condition and repair, excepting only latent defects
which could not reasonably be discovered by reasonably prudent inspection
during such sixty (60) day period, and which Harsco can reasonably
demonstrate existed at commencement of this Lease. Subject to the inspection
rights provided in this paragraph, Harsco hereby agrees that it is entering
into this Lease in reliance upon its own knowledge and inspection and without
relying in any way upon any statement, written or verbal, of Lessor, except
as specifically set forth in other provisions of this Lease.
11. ADDITIONAL SECURITY FENCING. The Premises are presently enclosed by
perimeter chain link security fencing, except along the common boundary
between the Premises and the adjoining parcel now or formerly owned by Lessor
and now occupied by Fayette Engineering Company. Prior to commencement of
this Lease, Lessor, at Lessor's expense, will install substantially similar
chain link security fencing along the entire common boundary between the
Premises and the said Fayette Engineering Company property, so that the
entire perimeter of the Premises will be enclosed by security fencing.
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12. MAINTENANCE AND REPAIRS. Lessor covenants and agrees to maintain,
at Lessor's sole cost and expense, the exterior and major structural
components of the Premises, including but not limited to the roof systems of
the buildings, the exterior and/or underground portions of the utilities
services to the Premises which are not the responsibility of the Utility
Companies, any groundwater monitoring wells on the Premises that are required
by law or regulation to be continuously operated or periodically tested, and
the portions of any improved roadways, driveways or entranceways situated on
Lessor's property but to which Harsco does not have exclusive access.
However, Harsco shall be responsible for any required repairs or maintenance
to the above items, (i) arising out of Harsco's operations or activities
other than normal manufacturing processes, or (ii) resulting from the
negligent acts or omissions of Harsco, its employees, agents or invitees.
Harsco covenants and agrees that Harsco will maintain and repair, at Harsco's
sole cost and expense, the interior of the Premises, including but not
limited to, all doors and windows; the interior utility services of the
Premises and any other improved roadways, driveways, entranceways and parking
or storage areas on the premises; plumbing and drain lines; heating, air
conditioning, ventilating and electrical systems; fire sprinkler system;
overhead doors and related control systems; cranes, including the overhead
cranes, and all related control systems; air compressors and air lines; the
oil/water separator tank system; and the industrial waste water treatment
system and all other items which constitute a part of the Premises that are
not part of the specific maintenance duties of Lessor provided herein.
Harsco's obligation to maintain the oil/water separator tank system and the
industrial waste water treatment system shall not include the correction or
remediation of any contamination (see paragraph 23 for definition of this
term) related to said items which may be discovered at any time and results
from any cause other than introduction to the Premises by Harsco's own
operations at the Premises during the Term. Harsco shall likewise have no
responsibility to alter, modify, redesign or replace said items if any agency
having jurisdiction over the Premises under applicable environmental laws
(see paragraph 23 for definition of this term) shall determine, at any time,
that said items may not remain in operation or present at the Premises due to
non-compliance with any applicable environmental law, whether or not the
facts and circumstances representing such non-compliance existed at
commencement of this Lease. Harsco shall be responsible for any snow removal
desired by Harsco.
Lessor represents and warrants to Harsco that Lessor has received no
notices from any authorities having jurisdiction over the Premises that any
conditions exist at the Premises which represent violations of any applicable
zoning, building and land use and safety codes, ordinances or laws, and that
Lessor has no actual knowledge that any such conditions or violations exist
at the Premises. Notwithstanding Harsco's maintenance obligations under this
Lease, Harsco shall have no responsibility for correction, repair or
modification of any such conditions or violations, whether known or unknown
to the parties, which existed at the Premises at commencement of this Lease.
13. IMPROVEMENTS AND ALTERATIONS BY HARSCO. Harsco shall make no
improvements, additions or alterations to the Premises costing, on an
individual basis and not in the aggregate, in excess of Ten Thousand and
00/100 ($10,000.00) Dollars without Lessor's prior written approval.
Lessor's approval shall not be unreasonably withheld, taking into account the
use of the Premises permitted under this Lease and taking into account
Harsco's need to
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establish physical security of its operations at the Premises at a level
deemed satisfactory by Harsco. Any and all improvements, additions and
alterations made to the Premises by Harsco during the Term (except for trade
fixtures and equipment installed by Harsco for use in its operations) shall
become part of the Premises and shall remain with the Premises at termination
or expiration of this Lease. Harsco shall obtain and file a waiver of liens
executed by Harsco's contractor or contractors and shall submit same for
Lessor's approval prior to initiating any work at the Premises costing in
excess of Ten Thousand and 00/100 ($10,000.00) Dollars. Harsco shall pay all
bills for any such work in full, and hereby agrees to indemnify, defend and
save harmless Lessor and the Premises from and against any claims in the
nature of mechanics' liens for work performed by or at Harsco's direction.
The following improvements, additions and alterations to be performed by
Harsco have been approved by Lessor at the time of execution of this Lease:
(a) construction and installation of a heavy vehicle (including
tracked vehicles) test track, including but not limited to
the track itself, a test slope and a fording tank.
(b) installation of suitable signage throughout the Premises and
along the highway frontage, including directional signage and
signage identifying occupancy of the Premises by Harsco and its
BMY-Combat Systems Operating Division.
14. UTILITIES. Harsco covenants and agrees to pay all bills which may
be incurred for water, sewer, electricity, refuse removal and other utilities
consumed by Harsco at the Premises during the Term, and Harsco does hereby
release Lessor from any damage which may result by reason of failure of the
supply of any utility or utilities. Should Harsco fail to pay any bills as
aforesaid, Lessor shall have the right to pay the same and any such amount
paid by Lessor shall be chargeable by Lessor to Harsco as additional rent.
Lessor shall cause all utilities serving the Premises to be separately
metered for the Premises, to the exclusion of any other property or user, and
to be billed directly to Harsco. This shall include, but not be limited to
water, sewer, gas, electricity and refuse removal. Harsco agrees to
establish separate accounts for such utilities.
15. INSURANCE. Harsco shall, at Harsco's sole cost and expense, obtain,
maintain and keep in full force and effect during the Term the following
insurance:
A. "All risk" property insurance which shall insure the Premises
(including any improvements made by Harsco under paragraph 13 hereof) against
fire, storm, theft, vandalism, malicious mischief, sprinkler leakage and such
additional perils as are now or hereafter may be, included in a standard
extended coverage endorsement from time to time in general use in the
Commonwealth of Pennsylvania. Such insurance shall name Lessor as the
primary insured and shall name Harsco as an additional insured, as its
interest may appear. Said policy or policies shall insure the improvements
at the Premises on a replacement cost basis for their full insurable value.
Losses under said policy or policies shall be payable to Lessor. The
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policy shall include an undertaking by the insurer to notify Lessor and
Harsco in writing not less than thirty (30) days prior to any material
change, cancellation or other termination thereof. Such policy shall contain
a deductible in an amount determined by Harsco in Harsco's reasonable
judgment, which shall be subject to Lessor's reasonable approval. At
commencement of this Lease, Harsco shall deliver to Lessor a certificate of
insurance evidencing compliance with the requirements of this paragraph and a
true, accurate and complete copy of the policy. Harsco shall pay all of the
premiums for such insurance, and shall submit to Lessor such proof of payment
of the premiums as may be reasonably requested by Lessor. At no time shall
Harsco be required to provide insurance or any evidence of insurance or to
pay any premiums for any insurance for any period of time following the
effective date of any termination of this Lease by Harsco, or following the
then effective termination or expiration date of the Term. If requested by
Lessor, Harsco will name Lessor's first mortgagee, if any exists at
commencement of this Lease or at any subsequent time, as a loss payee on such
policy of all risk property insurance, under a standard mortgagee clause and
as such mortgagee's interest shall appear. Without incurring any additional
insurance obligation whatsoever to Lessor, Harsco shall maintain all risk
property insurance acceptable to Harsco on its personal property and any
property of others in its care, custody and control, and shall insure its
business interruption exposures at the Premises. No party other than Harsco
shall have any interest in or standing under such personal property and
business interruption insurance, whether or not such insurance is carried or
provided under the same policy to be provided by Harsco insuring the Premises.
B. Comprehensive general liability insurance coverage to include
personal injury, broad form property damage, operations hazard and any
additional coverages desired by Harsco, naming Harsco as the insured and
Lessor as an additional insured, in an amount per occurrence of not less than
One Million and 00/100 ($1,000,000.00) Dollars combined single limit, bodily
injury and property damage coverage. At commencement of this Lease, Harsco
shall deliver to Lessor a certificate evidencing the maintenance of such
liability insurance, which certificate shall include an undertaking by the
insurer to notify Lessor and Harsco in writing not less than thirty (30) days
prior to any material change, cancellation or other termination thereof.
Harsco may obtain any of the insurance required of Harsco with a deductible
or retention deemed reasonable by Harsco.
C. Worker's compensation insurance in form and in an amount as
required by the law of the Commonwealth of Pennsylvania, or alternatively, a
self insurance program selected and maintained by Harsco in compliance with
Pennsylvania law.
All insurance policies required pursuant to this paragraph 15 shall be
taken out with insurers rated B+ or better by A. M. Best Company, of Oldwick,
New Jersey, and who are licensed to do business in the Commonwealth of
Pennsylvania.
In the event Harsco fails to provide any of the insurance Harsco is
required to provide Lessor under this paragraph 15, this shall constitute a
default under this Lease and shall entitle Lessor to the same remedies as for
nonpayment of rent. In the event Harsco fails to make timely payment of any
premiums, for the insurances required herein, Lessor shall have the option to
pay
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the premiums and to be promptly reimbursed for such premiums paid by Harsco.
Any amounts so paid by Lessor shall be deemed additional rent.
Lessor and Harsco each hereby release the other from any and all
liability or responsibility for any direct or consequential loss, injury or
damage to the Premises, or its contents caused by fire or any other casualty
during the Term, even if such fire or other casualty may have been caused by
the negligence (but not the willful act) of the other party or a party for
whom such party may be responsible. Inasmuch, as the above mutual waivers
may preclude the assignment of any aforesaid claim by way of subrogation (or
otherwise) to an insurance company (or any other person), Lessor and Harsco
hereby agree, if required by the policies of insurance required to be
maintained by Harsco under this paragraph 15, to give written notice of the
terms of said mutual waivers, and to have said insurance policies properly
endorsed, if necessary, to prevent the invalidation of said insurance
coverage by reason of such waiver.
16. TAXES. Lessor agrees to pay, during the discount period for each
tax, all real property taxes legally levied, assessed, charged or imposed
upon the Premises by North Union Township, the County of Fayette and Laurel
Highlands School District during the Term. The county and township real
property taxes shall be considered payable for a calendar year of January 1st
to December 31st, and the school real property taxes shall be considered
payable for a fiscal year of July 1st to June 30th. Harsco shall reimburse
Lessor for One Hundred (100%) Percent of the discount amount of all such real
property taxes. Harsco shall make such payments within thirty (30) days
following Harsco's receipt from Lessor of a paid receipt for each tax. If at
any time during the Term, the current tax bill paid by Lessor covers periods
before commencement of the Lease or after the then effective termination date
of the Lease, Harsco's obligation for reimbursement of taxes shall be
prorated on a per diem basis, based on the applicable tax years stated above
and based on the number of days in the Term which are within the tax year for
which any tax bill has been paid by Lessor.
In the event Harsco fails to reimburse Lessor for any taxes as provided
herein, this shall constitute a default under this Lease and shall entitle
Lessor to the same remedies as for nonpayment of rent.
17. INDEMNIFICATION. Harsco covenants and agrees that Harsco will bear,
pay and discharge, when and as the same become due and payable, all judgments
and lawful claims for damages or otherwise against Lessor arising from or in
any way connected with Harsco's use or occupancy of the Premises, and that
Harsco will assume the burden and expense of defending all such law suits and
actions, whether brought before or after the expiration of this Lease, and
will protect, indemnify and save harmless Lessor by reason of or on account
of the use or misuse of the Premises, or any part thereof, by Harsco due to
the negligence of Harsco or Harsco's agents, servants, employees, but not by
reason of or on account of the negligence of Lessor or Lessor's agents,
servants or employees in and about the Premises or in any manner pertaining
to the Premises.
18. DESTRUCTION OF PREMISES - RESTORATION. If, at any time during the
term of this Lease, the Premises are completely or partially destroyed, or
rendered completely
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or partially inaccessible or unusable, by fire, storm or other casualty,
Lessor shall restore the Premises, exclusive of Harsco's personal property
and trade fixtures but inclusive of improvements, additions and alterations
to the Premises made by Harsco in accordance with the terms of this Lease, to
substantially the same condition as existed immediately prior to the damage
by casualty. Unless Harsco terminates this Lease, as hereinafter provided,
Lessor shall be obligated to apply any proceeds obtainable under the
insurance to be provided by Harsco under paragraph 15 of this Lease to
restoration of the Premises, to the extent said insurance proceeds are
attributable to claims for damages to the Premises. Harsco shall have the
option to terminate this Lease upon thirty (30) days notice to Lessor if
completion of restoration of the Premises by Lessor requires or can be
determined by Harsco to require more than ninety (90) days. During
restoration of the Premises, this Lease shall continue if not terminated by
Harsco as aforesaid, but the rent payable by Harsco shall be abated or
reduced to the extent and for such period of time that the Premises or any
portion thereof are not usable by Harsco for the purposes for which the
Premises have been leased.
19. CONDEMNATION OF PREMISES. If the Premises are completely taken in
condemnation by any government or other entity possessing and exercising
powers in the nature of eminent domain (including instances where the
Premises are transferred in lieu of condemnation), this Lease shall terminate
on the effective date of the taking. The taking shall be deemed to have
become effective when Harsco no longer has legal or physical possession of
the Premises or any portion thereof, whichever first occurs. If any portion
of the Premises is taken in condemnation, this Lease shall remain in effect
as to the remaining portion of the Premises, except that Harsco shall have
the option to terminate this Lease if the remaining portion of the Premises
(including the means of access to the Premises and areas not occupied by
building improvements and used for access, parking, storage and similar uses)
is deemed unsuitable by Harsco, in Harsco's sole discretion, for Harsco's
continued operation of its business on the Premises. Harsco may exercise
this option to terminate this Lease by giving written notice to Lessor at any
time which is within thirty (30) days before or after the effective date of
the taking. In such case, this Lease shall terminate on the date Harsco
gives notice to Lessor. If, after a partial condemnation of the Premises,
Harsco does not terminate this Lease, the rent payable by Harsco shall be
abated or reduced to the extent and for such period of time that the portion
of the Premises taken in condemnation is not usable by Harsco. Lessor shall
notify Harsco within three (3) business days of receipt by Lessor of any
notice of condemnation (including any preliminary notice). The entire
condemnation award shall belong to and be paid to Lessor, except that Harsco
shall receive from the award the following:
(a) The sum attributable to any improvements or alterations made to
the Premises by Harsco at Harsco's expense, which improvements
or alterations Harsco has the right to remove from the Premises
pursuant to this Lease but elects not to remove, if any;
(b) The sum attributable to that portion of the award constituting
Harsco's relocation costs, if included in the award; and
(c) Any special damages which by their nature are awardable only to
Harsco
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as lessee and would not, under any circumstances or
under any provisions of this Lease, be awarded to Lessor.
In the event of any condemnation, Harsco shall be permitted to file a
separate claim for any award that may be obtainable by Harsco under the terms
of this Lease, or otherwise.
20. INSPECTION. Lessor and Lessor's authorized agents shall, upon
forty-eight (48) hours prior verbal notice to Harsco's manager in charge of
the Premises, have the right to enter upon the Premises during Harsco's
ordinary business hours to examine the same for any purpose whatsoever,
including determining compliance by Harsco with Harsco's obligations under
this Lease.
21. ASSIGNMENT. Accept as hereinafter provided, Harsco may not assign
this Agreement of Lease or sublet the Premises, or any part thereof, without
the prior written consent of Lessor, which consent shall not be unreasonably
withheld by Lessor. Lessor has been advised by Harsco that Harsco is
presently negotiating with FMC Corporation to establish a joint venture,
partnership or other similar legal entity to combine and jointly operate
certain defense contracting businesses of Harsco's BMY-Combat Systems
Division and certain defense contracting business of FMC Corporation. Lessor
agrees that Harsco shall have the unrestricted right to assign this Lease and
all of Harsco's rights and obligations concerning the Premises and this Lease
to any such joint venture, partnership or other legal entity. Such
assignment shall include all options for renewal terms and all options to
purchase the Premises contained in this Lease. Such assignment shall be
effective immediately upon notice thereof by Harsco to Lessor, and shall
operate as a complete assumption by the new entity of all of Harsco's
obligations as the lessee party under this Lease. If requested by Harsco,
Lessor shall execute, at the time of closing by Harsco and FMC of the
transaction creating such new entity, a complete novation of this lease which
shall effectively substitute the new entity for Harsco as the lessee party
under this Lease, and shall ratify all of the then existing terms and
conditions of this Lease.
22. DEFAULT BY HARSCO. It is hereby expressly understood and agreed
that if Harsco shall:
(a) default in the payment on the date when due of rent, additional
rent, insurance, real property taxes, utilities or any other
monetary obligation of Harsco hereunder; or
(b) desert or vacate the Premises; or
(c) default in the performance of any material term, condition or
covenant of this Agreement of Lease; or
(d) neglect to materially comply with any of the statues,
ordinances, rules, orders, regulations and requirements of the
federal, state and local governments, or of any and all of their
departments and bureaus, applicable to Harsco's activities at
the Premises, except where such compliance is Lessor's
obligation under this Lease; or
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(e) file a petition in bankruptcy or be adjudicated a bankrupt or
insolvent by any court, or make an assignment for the benefit
of creditors, or take advantage of any insolvency act, or if a
receiver or trustee in bankruptcy or a receiver of Harsco's
property shall be appointed;
Then, upon the occurrence of any one of the above defaults and following
fifteen (15) days written notice of default under subparagraph (a) above or
following twenty (20) days written notice of any other default provided
herein from Lessor to Harsco (which notice shall specify the default relied
upon by Lessor) without cure of the default by Harsco within said fifteen
(l5) or twenty (20) day period, whichever is applicable:
(a) it shall be lawful for Lessor to terminate this Lease and to
re-enter the Premises and to repossess, enjoy and have the use
of same, with force or otherwise;
(b) the rent reserved herein for the full remaining Term of the
Lease shall become immediately due and payable, and Lessor
may proceed to collect same, together with any other sums
due and payable by Harsco under this Lease, by any lawful means,
subject only to any mitigation of damages which may be
accomplished by Lessor through reletting of the Premises; and
(c) Harsco shall be deemed in default hereunder for the purpose of
an action in ejectment by Lessor.
If any default by Harsco, other than default in any payment under
subparagraph (a) above, is of such nature that it cannot reasonably be
completely cured within the aforesaid twenty (20) day period, then Harsco
shall not be deemed in default so long as Harsco commences cure of the
default within said twenty (20) day period and thereafter diligently and
continuously pursues cure of such default.
23. ENVIRONMENTAL. Lessor represents and warrants to Harsco that after
reasonable and prudent investigation by Lessor and to the best of Lessor's
knowledge, information and belief, the Premises, including the ground or
soil, the ground water and the improvements located thereon, contain no
hazardous, toxic or otherwise regulated materials, substances or wastes in
quantities or concentrations which require clean up or any remedial action
whatsoever under any federal, state or local law, statute, regulation or
ordinance having as its subject environmental protection or the regulation of
hazardous or toxic substances, materials or wastes, including petroleum
products and derivatives, fractions or components thereof, (hereinafter
called, respectively, "contamination" and "applicable environmental laws").
In the event contamination is found, at any time, to exist at the Premises in
violation of applicable environmental laws from any cause other than the
operations or activities of Harsco at the Premises during the Term, whether
or not the contamination was regulated or deemed contamination at the
commencement of this Lease, Harsco, upon written notice to Lessor, may
terminate this Lease, effective sixty (60) days following said notice unless
within said sixty (60) days said contamination is completely removed or
corrected so as to make the Premises in full
11
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compliance with applicable laws and regulations, in which event said
termination notice becomes null and void and ineffective. Lessor shall
indemnify, defend and hold harmless Harsco from and against any and all
claims, suits, administrative actions or proceedings, fines, penalties,
damages, costs, and losses and other expenses, including attorneys fees and
court costs, and expenses of relocating Harsco's operations or activities
imposed on or suffered at any time by Harsco or Lessor as a result of the
presence, at any time, of contamination at the Premises in violation of
applicable environmental laws from any cause other than Harsco's own
operations or activities at the Premises during the Term, or as the result of
any legal or administrative action or proceeding instituted by any party,
including any government or government agency at any time which is based on
the presence, at any time, of contamination at the Premises in violation of
applicable environmental laws from causes alleged or determined to be other
than Harsco's own operations or activities at the Premises during the Term.
This indemnification shall include, without limitation, the costs of any
investigation, testing, cleanup or other remedial measures, and Lessor shall
be liable to Harsco for the aforesaid losses.
Lessor represents and warrants to Harsco that after reasonable
investigation by Lessor and to the best of Lessor's knowledge, information
and belief that: (i) there are no underground or aboveground storage tanks
(as defined in or regulated under any applicable local, state or federal law,
ordinance, statute or regulation) located in or on the Premises, except those
identified, described or referred to in a certain environmental site
assessment concerning "Fruehauf Corporation Leased Properties", performed by
Eastern Technical Associates under issue date February 19, 1992 for The
Greater Uniontown Industrial Fund ("Environmental Study"), which was prepared
in connection with acquisition of the Premises by Lessor, and a copy of which
was delivered to Harsco by Lessor prior to execution of this Leases; and (ii)
the improvements located on the Premises do not contain any building
materials or components which incorporate asbestos of a kind or type or in
such condition that requires any type of remedial work, including but not
limited to repair, removal or sealing, under any applicable federal, state or
local statutes, laws, ordinances and regulations concerning in any manner the
regulation of asbestos, asbestos safety and exposure to asbestos. If
storage tanks are found to exist at the Premises during the Term, or if
asbestos of type, kind or in a condition requiring remediation as aforesaid
is found to exist at the Premises during the Term, Lessor shall promptly
comply with any and all applicable federal, state or local statutes, laws,
ordinances and regulations concerning same. Such compliance shall be at
Lessor's expense. Lessor shall indemnify defend and hold harmless Harsco
from and against any such costs of compliance and from and against any and
all claims, suits, administrative proceedings, fines, penalties, costs,
losses, damages and other expenses, including claims for exposure to asbestos
by third parties or employees and attorney's fees and court costs, and
expenses of relocating Harsco's operations imposed on or suffered at any time
by Harsco as the result of the presence of such storage tanks or asbestos.
In the event that Harsco performs any work at the Premises under paragraph 13
of this Lease which disturbs any asbestos materials incorporated into the
improvements at the Premises in a manner and to the extent that remediation,
as described above, of such asbestos is required, then such remediation of
any portion of such asbestos actually disturbed by Harsco shall be performed
by Harsco at Harsco's sole cost and expense. Harsco, however, shall not be
obligated to perform such remediation if: (i) Lessor failed to disclose the
presence of such asbestos at the Premises at the time of execution of this
Lease in a manner or under
12
<PAGE>
circumstances which would represent a violation of Lessor's aforesaid
representation and warranty concerning asbestos, or (ii) the need for such
remediation is due primarily to deteriorating condition of the materials or
components containing the asbestos, or to Harsco's ordinary plant operations
at the Premises, rather than to any such work performed by Harsco.
Harsco covenants and agrees not to store, use, dump or dispose of any
hazardous or toxic substances on the Premises in any manner which may cause
the Premises to be in violation of any applicable environmental law or
regulation. Harsco hereby indemnifies and holds Lessor harmless and agrees to
defend Lessor from and against any claims or actions and for the cost of
removal thereof arising from any hazardous or toxic substances introduced to
the Premises as a result of Harsco's occupancy of the Premises. "Hazardous
substances" include "hazardous waste" and "hazardous substances" as defined
by applicable federal and state statutes or regulations. It understood that,
subject to compliance with applicable environmental laws and to Harsco's
obligation of indemnification hereunder, Harsco shall be permitted to use,
store and generate any hazardous substances which are necessary to the
conduct of Harsco's business operations at the Premises.
The representations, warranties and covenants of indemnification
contained in this paragraph are deemed material and continuing and are
intended to survive termination of this Lease.
Lessor hereby authorizes Harsco and its agents, consultants and
contractors to perform, at Harsco's expense and at any time, any
environmental studies of the Premises deemed necessary by Harsco to
establish, for its own purposes, the condition of the Premises at
commencement of this Lease or thereafter during the Term with respect to
environmental compliance. Such environmental studies may include, at
Harsco's option, intrusive studies. If Harsco performs any intrusive
environmental studies, Harsco shall be responsible for returning the Premises
to substantially the same physical condition as the condition existing before
such activities were performed. Harsco agrees to give prior written notice to
Lessor that it intends to perform such environmental studies of the Premises,
and further agrees to deliver to Lessor copies of all reports generated as a
result of any such environmental studies. Lessor shall deliver to Harsco,
before commencement of this Lease, true and complete copies of any
environmental studies, evaluation reports, remedial action recommendations,
proposals for environmental remediation work or reports of completed
environmental remediation work concerning the Premises in possession of
Lessor.
In addition to Harsco's above-mentioned right to terminate this Lease and
subject to the sixty (60) day cure period set forth herein, Harsco shall also
have the right to exclude any area or areas of the Premises subject to the
contamination from active use, occupancy or maintenance by Harsco under this
Lease. Harsco may so exclude any such contaminated portions of the Premises
by providing written notice thereof to Lessor. Upon request of Harsco,
Lessor agrees to execute an addendum to this Lease identifying any excluded
areas and acknowledging that Harsco has chosen not to occupy and use such
areas and that Harsco shall have no maintenance obligation or other
responsibility for such areas. Harsco shall not, however, have the right to
reduction or abatement of rent on account of exclusion of any portion of the
Premises from occupancy by
13
<PAGE>
Harsco through Harsco's decision under this paragraph 23. At Harsco's option
and expense, Harsco may also physically secure any excluded areas by
installing fencing or other physical barriers. At Lessor's option, any such
fencing or physical barriers shall be removed by Harsco at termination of
this Lease.
24. OPTION TO PURCHASE. Lessor hereby grants to Harsco the exclusive
and irrevocable option to purchase the Premises, which may be exercised by
Harsco at any time during the initial three (3) year Term of the Lease, but
shall be effective only on any of the anniversary dates of this Lease
occurring during said three (3) year Term, namely, October 31, 1994, October
31, 1995 or October 31, 1996. Under this option to purchase, the purchase
price for the Premises shall be: (i) One Million Five Hundred Thousand and
00/100 ($1,500,000.00) Dollars if Harsco gives notice during the first year
of the initial Term and exercises the option effective October 31, 1994; or
(ii) One Million Three Hundred Thousand and 00/100 ($1,300,000.00) Dollars,
if Harsco gives notice during the second year of the initial Term, and
exercises the option effective October 31, 1995; or (iii) One Million One
Hundred Thousand and 00/100 ($1,100,000.00) Dollars, if Harsco gives notice
during the third year of the initial Term and exercises the option effective
October 31, 1996. Harsco may exercise the option by giving written notice
thereof to Lessor at any time during the initial three (3) year Term of the
Lease. Within thirty (30) days following Harsco's notice of exercise of the
option to purchase, the parties shall execute a written agreement of sale of
the Premises, which shall be prepared by Harsco and shall be subject to the
approval of Lessor as to compliance with the terms and conditions contained
in this paragraph 24, and shall include the following terms and other terms
which are deemed necessary and are mutually approved by the parties and which
are not inconsistent therewith:
(a) Closing to be held at the Premises or at another mutually
convenient location on or before a date which is thirty
(30) days following the effective date of Harsco's notice of
exercise of the option, which effective date is the anniversary
date of this Lease next immediately subsequent to the date the
notice exercising the option to purchase is delivered to Lessor.
(b) Conveyance by special warranty deed of good and marketable fee
simple title to the Premises (which shall also be insurable by
a title insurance company selected by Harsco at regular rates),
free and clear of liens and encumbrances and subject only to
applicable zoning and land use laws and ordinances and to
easements, conditions, restrictions and reservations of record,
none of which shall, in Harsco's reasonable judgment, impair
the use or value of the Premises as an industrial facility or
threaten the continued use and existence of any improvement on
the Premises.
(c) State and local Realty Transfer Taxes to be paid in equal shares
by the parties.
(d) Payment of the purchase price in full in the form of immediately
available United States funds at closing.
14
<PAGE>
(e) Harsco to remain liable for the payment of rent and other sums
payable under this Lease on a per diem basis through the date of
closing.
(f) Lienable municipal utilities and real property taxes to be
prorated between the parties as of the date of closing, with
county and township taxes to be prorated on a calendar year basis
and school taxes to be prorated on the basis of a July 1st to
June 30th fiscal year. Provided however, all such utilities
and taxes for which Harsco is obligated under this Lease to pay
during the Term of this Lease shall continue to represent
obligations of Harsco.
(g) The deed to be prepared at Lessor's expense, with Harsco to pay
for recording of the deed.
(h) At Harsco's option and expense, a current survey of the Premises
may be made and the legal description in the deed of conveyance
shall conform to such survey.
If Harsco exercises its rights to any one or more of the four one (1)
year extension terms provided for in paragraph 5 of this Lease, the exclusive
and irrevocable option to purchase granted under this paragraph 24 shall be
available to Harsco during the extended term of this Lease. The purchase
price at any time during any of the extension terms shall be One Million One
Hundred Thousand ($1,100,000.00) Dollars. Harsco may give notice of exercise
of the option to purchase at any time during any extension term. As provided
hereinabove, Harsco and Lessor shall execute a contract of sale including the
above specified terms within thirty (30) days following Harsco's notice of
exercise of the option to purchase. Said contract of sale shall also provide
that closing of the purchase and sale shall be held on or before a date which
is sixty (60) days following the date of Harsco's notice of exercise of the
option to purchase. On and after November 1, 1996, which is the beginning of
the first available extension term and so long as Harsco has exercised an
extension term which is then effective, and even if the Lease is not then in
the last of the extension terms which has been exercised by Harsco, there
shall be no restriction whatsoever on the date, effective date and closing
date of and under Harsco's exercise of the option to purchase. At all such
times, Harsco, having exercised the option to purchase, shall be entitled to
close the transaction within sixty (60) days following its notice of exercise
of the option, without restriction or limitation to any particular dates or
anniversary dates occurring during any of the extension terms.
In all cases of purchase of the Premises by Harsco, this Lease shall
terminate on the date of closing.
25. NON-LIMITATION OF REMEDIES. The rights and remedies granted to
Lessor in this Lease, or otherwise existing at law or equity, may be
exercised concurrently, successively, or in the alternative, at Lessor's
discretion.
26. WAIVER OF BREACH. No waiver of a breach of any of the covenants or
conditions of this Agreement of Lease shall be construed to be a waiver of
any succeeding breach
15
<PAGE>
of the same or any other covenant or condition.
27. NOTICE. All notices required or permitted to be given under this
Lease shall be given by United States certified mail, postage prepaid, with
return receipt requested, addressed to the proper party, at the following
addresses, or at such other address either party shall provide in a notice
complying with this Paragraph:
IF TO HARSCO: HARSCO CORPORATION
350 POPLAR CHURCH ROAD
CAMP HILL, PA 17011
ATTN: DEREK C. HATHAWAY, PRESIDENT AND CHIEF OPERATING
OFFICER
IF TO LESS0R: BRIER HILL STEEL COMPANY, INC.
P.O. BOX 76
BROWNSVILLE, PA 15417
ATTN: JAMES R. SNYDER, VICE PRESIDENT
All such notices shall be effective upon receipt or ninety six (96) hours
following their deposit in the United States certified mail, as above
provided, whichever first occurs.
28. SURRENDER OF PREMISES. Upon the expiration or earlier termination
of this Lease, Harsco shall return the Premises to Lessor in substantially
the same condition as the Premises were at the commencement of this Lease,
ordinary wear and tear excepted. All fixtures, equipment, and improvements
(except for Harsco's trade fixtures and equipment) attached to or built into
the Premises by or for Harsco, shall be and remain the property of Lessor.
Harsco shall remove Harsco's personal property and trade fixtures and
equipment, and shall repair any damages to the Premises caused by removal of
trade fixtures and equipment attached to or built into the Premises.
29. TIME IS OF THE ESSENCE. Time is agreed by Lessor and Harsco to be
of the essence of each provision of this Lease.
30. GOVERNING LAW. The construction of this Lease and the rights and
remedies of Lessor and Harsco, shall be governed by the laws of the
Commonwealth of Pennsylvania. This Lease shall be interpreted as if drafted
jointly by and for the parties, and not as if drafted solely or primarily by
or for either party.
31. SEVERABILITY. If any Term or provision of this Lease or application
thereof to any person or circumstance be held invalid, the remainder of the
terms or provisions of this Lease shall not be affected thereby and, to this
end, the parties hereto agree that the terms and provisions of this Lease are
severable.
32. ENTIRE AGREEMENT. This Lease constitutes the sole and only
agreement of
16
<PAGE>
the parties hereto and supersedes any prior understandings or written or oral
agreements between the parties respecting the within subject matter.
33. MODIFICATION. No amendment, modification, alteration or rescission
of the terms hereof shall be binding, unless the same be in writing, dated
subsequent to the date hereof and duly executed by the parties hereto.
34. SUCCESSOR'S BOUND. The provisions of this Agreement of Lease shall
be binding upon and inure to the benefit of the respective successors and
assigns of Lessor and Harsco.
35. RECORDING. At the request of either party, the other party agrees
to execute and acknowledge a memorandum of this Lease, and cooperate in
recording of the same in the public real estate records of Fayette County,
Pennsylvania. Any such memorandum shall be in a form mutually satisfactory to
Lessor and Harsco and shall include appropriate notice that Harsco holds
options to purchase the Premises under this Lease and to extend the Term.
The costs of preparing the memorandum and recording same shall be paid by the
party requesting its execution and recording. Upon expiration or termination
of this Lease, Harsco shall, upon request by Lessor, execute and acknowledge
a recordable document giving appropriate notice of termination of this Lease
and extinguishment of Harsco's option to purchase the Premises.
IN WITNESS WHEREOF, Lessor and Harsco, intending to be legally bound,
have executed this Lease on the day and year first above written.
ATTEST: LESSOR:
BRIER HILL STEEL COMPANY
/s/ Authorized Signatory BY: /s/ James R. Snyder
- ----------------------------- ---------------------------------
ATTEST: HARSCO CORPORATION
/s/ Paul C. Coppock BY: /s/ Derek C. Hathaway
- ----------------------------- ---------------------------------
Paul C. Coppock Derek C. Hathaway
V.P., General Counsel & Secretary President & Chief Operating
Officer
17
<PAGE>
LEASE NOVATION AGREEMENT
THIS AGREEMENT is entered into by and between
Harsco Corporation, a Delaware Corporation with offices at 350 Poplar
Church Road, Carnp Hill, Pennsylvania 17011-8888 (hereinaher called
"Harsco"), and
Brier Hill Steel Company, Inc., a Pennsylvania Corporation, having offices
at P.O. Box 386, Route 40, Brier Hill, Pennsylvania 15415 (hereinafter
called "Lessor"), and
United Defense, L.P., a Delaware limited partnership, with offices at P.O.
Box 15512, York, Pennsylvania, 17405-1512.
WHEREAS, on 1 November 1993, Harsco and Lessor entered into a lease of
certain property located in North Union Township, Fayette County, consisting
of 40.94 acres of land, which premises are more fully described in the said
lease (hereinafter called the ULease"), and
WHEREAS, pursuant to paragraph 21 of the Lease, Harsco has now assigned the
Lease to an entity consisting of Harsco's BMY-Combat Systems and FMC
Corporation's defense contracting business, and
WHEREAS, the parties to the Lease now wish to effect a novation, as required
by paragraph 21,
NOW THEREFORE, the parties hereto agree as follows:
1. Harsco hereby fully and completely delegates its duties and assigns its
rights and obligations under the Lease to United Defense, L.P. and, as a
consequence, hereby relinquishes any and all rights or benefits arising
thereunder.
2. United Defense, L.P. acknowledges and accepts Harsco's delegation and
assignment of the Lease and agrees to perforrn all Harsco's obligations
and accepts all Harsco's liabilities thereunder.
3. Lessor hereby acknowledges and accepts said delegation and assignrnent and
remises, releases and quit claims Harsco from any further duties,
obligations or liabilities of any kind under the Lease.
4. Delete from the preamble the reference to "Harsco Corporation, a Delaware
Corporation, having offices at 350 Poplar Church Road, Camp Hill,
Pennsylvania, 17011," and substitute therefor, "United Defense, L.P., a
Delaware limited partnership, with offices at One Wolps Church Road, York,
Pennsylvania 17405-1512."
5. The parties hereto agree that all rents already paid under the Lease shall
be credited to United Defense, L.P., and that United Defense, L.P. shall
be liable only for the
<PAGE>
outstanding balance of rents owed and payable under paragraph 4 of the
Lease for the remainder of the Term and for the term of any options
executed by United Defense, L.P., as provided for in paragraph 5 of
the Lease.
6. Delete all references thereafter to "Harsco" and substitute therefor
"United Defense, L.P."
7. Paragraph 27, Notices, is hereby modified as follows: delete the reference
to Harsco and substitute therefor, "United Defense, L.P., P.O. Box 15512,
York, PA 17405-1512, ATTN: Legal Department."
8. All other provisions of the Lease shall remain unchanged.
9. This Agreement and the statements, terms and conditions contained herein
shall inure to the benefit of, and may be relied upon by, each of the
three parties hereto, together with their respective legal representatives,
successors and permitted assignees, and shall be binding upon the three
parties hereto, and their respective legal representatives, heirs,
personal representatives, successors and assigns.
10. The Lease and this Agreement together contain the entire understanding of
the parties with respect to the subject matter hereof and supersede any
prior understanding or written or oral agreements by and between the three
parties hereto.
HARSCO CORPORATION ATTEST:
By:/s/ Authorized Signatory /s/ Authorized Signatory
---------------------------- ---------------------------
BRIER HILL STEEL COMPANY, INC. ATTEST:
By:/s/ James R. Snyder /s/ Authorized Signatory
---------------------------- ---------------------------
UNITED DEFENSE, L.P. ATTEST:
By:/s/ Authorized Signatory /s/ Authorized Signatory
---------------------------- ---------------------------
<PAGE>
LEASE MODIFICATION
THIS AGREEMENT made and entered into this 17 day of June 1996, BY AND BETWEEN
United Defense, L.P. (hereinafter referred to as "United Defense, L.P."),
a Delaware limited partnership, with offices at P.O. Box 15512, York,
Pennsylvania 17405-1512, and
Brier Hill Steel Company, Inc. (hereinafter referred to as "Lessor"),
whose address is P.O. Box 386, Route 40, Brier Hill, Pennsylvania 15415.
WITNESSETH:
WHEREAS, on l November 1993, Harsco Corporation (hereinafter "Harsco") and
Lessor entered into a Lease of certain property located in North Union
Township, Fayette County, consisting of 40.94 acres of land, which Premises
are more fully described in the said lease (hereinafter called the "Lease");
and
WHEREAS, in or about March of 1994, Harsco, Lessor and United Defense, L.P.
entered into a Lease Novation Agreement, whereby Lessor consented to Harsco's
assignment of the Lease to United Defense, L.P. in substitution for Harsco;
and
WHEREAS, in the Summer of 1995, Lessor added approximately one thousand six
hundred square feet to the existing improvements on the Premises, as a result
of which on October l, l995 United Defense, L.P. started paying Lessor, and
Lessor started accepting from United Defense, L.P., a total monthly rent of
$24,025.33; and
WHEREAS, United Defense, L.P. and Lessor now wish to amend and modify the
said Lease to reflect the aforesaid increase in the square footage of total
manufacturing space under roof at the Premises; and
WHEREAS, United Defense, L.P. and Lessor also wish to amend and modify the
said Lease further to reflect their desire to increase the number of one year
lease renewal options available to United Defense, L.P. from four separate
one year options to seven separate one year options at a new rental rate per
square foot; and
WHEREAS, United Defense, L.P. and Lessor also wish to amend and modify the
said Lease further to reflect their desire to increase the number of options
to purchase to Premises to match the increased number of lease renewal
options;
NOW THEREFORE, United Defense, L.P. and Lessor agree as follows:
1. Delete the nurnber "175,000" between the words "containing" and "square
feet" in the tenth line of the opening recitation on page one of the
Lease, and insert in lieu thereof the number "176,600".
<PAGE>
2. Delete the number, "Eight Hundred and Forty Thousand and 00/100
($840,000.00) Dollars" in paragraph 4, "RENT" and insert in lieu thereof,
"Eight Hundred Forty-Eight Thousand Nine Hundred Ninety-Five and 88/100
($848,995.88) Dollars".
3. Insert in the first sentence of paragraph 4, "RENT", after the phrase,
". . . in the amount of Twenty Three Thousand Three Hundred Thirty Three
and 33/100 ($23,333.33) Dollars each, . . ." the following, ". . . from
November 1, 1993 through September 1, 1995, and in the amount of Twenty
Four Thousand Twenty-Five and 33/100 ($24,025.33) Dollars each, from
October 1, 1995 through October 1, 1996, . . ."
4. Delete paragraph 5, "OPTION TO RENEW", and substitute in lieu thereof the
following new paragraph 5:
"Provided United Defense, L.P. is not in default hereunder, Lessor hereby
extends to United Defense, L.P. seven (7) separate options to extend and
renew this Lease for seven (7) separate, additional terms for one (1) year
each, at the identical terms and provisions set forth herein, except that the
rent shall be as hereinafter set forth in Table I. If United Defense, L.P.
chooses to exercise any of such options, United Defense, L.P. must do so by
written notice given to Lessor no less than sixty (60) days prior to
expiration of the Term or any then effective renewal term of this Lease.
Subject only to the giving of timely notice to Lessor, United Defense, L.P.
shall be permitted to exercise its option at any time for any number of the
consecutive renewal terms permitted hereunder. For instance, United
Defense, L.P. may deliver a notice specifically exercising both the first and
second renewal terms at any time on or before sixty (60) days prior to
expiration of the first year of the Term. Each permitted renewal term shall
run from November 1 of the applicable year to October 31 of the following
year. The rent reserved for each one (1) year renewal term shall be as
follows in Table I, and shall be payable without demand in advance, in the
monthly installments stated hereinbelow. Such rental installments shall be
paid on the first day of each and every month during any renewal term.
References hereinafter to "the term" shall include, if applicable, any of the
renewal terms which have been exercised and obtained by United Defense, L.P.
under this paragraph.
"Lease rates for the option terms, if exercised, are as follows:
Table I
Option Annual Rate/ Monthly
Number Lease Term Sq. Foot Annual Rent* Installment
1 1 Nov 96 - 31 Oct 97 $1.75 $309,050.00 $25,754.17
2 1 Nov 97 - 31 Oct 98 $1.75 $309,050.00 $25,754.17
3 1 Nov 98 - 31 Oct 99 $1.90 $333,540.00 $27,961.67
4 1 Nov 99 - 31 Oct 00 $1.90 $333,540.00 $27,961.67
5 1 Nov 00 - 31 Oct 01 $1.90 $333,540.00 $27,961.67
6 1 Nov 01 - 31 Oct 02 $2.00 $353,200.00 $29,433.33
<PAGE>
7 1 Nov 02 - 31 Oct 03 $2.00 $353,200.00 $29,433.33
*The "Annual Rent" is the product of the "square feet" stated in paragraph 1
of the Lease, times the "Annual Rate/Sq Foot" stated in Table I of the Lease.
5. In paragraph 24, "OPTION TO PURCHASE", insert the following words or
phrases in the provision beginning near the bottom page 17 of the Lease,
which provision opens with the words, "If United Defense, L.P. exercises
its rights to any one or more . . ."
a. Between the words "the" and "four" in the first sentence (page
17) insert the word "first", such that the provision shall read, in
part, ". . . one or more of the first four one (1) year extension
terms . . ."
b. Between the words "the" and "extension" in the second sentence
(page 18) insert the words "first four", such that the provision
shall read, in part, ". . . at any time during any of the first four
extension terms . . ."
c. Between the second and the third sentences insert the following
sentences:
"If United Defense, L.P. exercises its rights to any one or more
of the next three one (1) year extension terms provided for in
paragraph 5 of this Lease, the exclusive and irrevocable option to
purchase granted under this paragraph 24 shall be available to United
Defense, L.P. during the extended term of this lease. The purchase
price at any time during any of the next three extension terms shall
be One Million Three Hundred Fifty Thousand ($1,350,000.00) Dollars."
d. At the end of paragraph 24, "OPTION TO PURCHASE", insert the
following Table II:
Table II
If Option to Purchase is The Purchase Price for the
Exercised During Lease Term Premises shall be
Basic Term Year 1 1 Nov 93 - 31 Oct 94 $1,500,000.00
Basic Term Year 2 1 Nov 94 - 31 Oct 95 $1,300,000.00
Basic Term Year 3 1 Nov 95 - 31 Oct 96 $1,100,000.00
Option Term 1 1 Nov 96 - 31 Oct 97 $1,100,000.00
Option Term 2 1 Nov 97 - 31 Oct 98 $1,100,000.00
<PAGE>
Option Term 3 1 Nov 98 - 31 Oct 99 $1,100,000.00
Option Term 4 1 Nov 99 - 31 Oct 00 $1,100,000.00
Option Term 5 1 Nov 00 - 31 Oct 01 $1,350,000.00
Option Term 6 1 Nov 01 - 31 Oct 02 $1,350,000.00
Option Term 7 1 Nov 02 - 31 Oct 03 $1,350,000.00
IN WITNESS WHEREOF, the parties intending to be legally bound have executed
this Agreement by signing below.
BRIER HILL STEEL COMPANY, INC. UNITED DEFENSE, L.P.
/s/ James R. Snyder /s/ Peter C. Woglom
- ------------------------------ ----------------------------------------
Name Name
Vice President V.P. & G.M. UDLP Ground Systems Division
- ------------------------------ ----------------------------------------
Title Title
June 4, 1996 June 17, 1996
- ------------------------------ ----------------------------------------
Date Date
/s/ Authorized Signatory /s/ Authorized Signatory
- ------------------------------ ----------------------------------------
Attest Attest
<PAGE>
LEASE
BY AND BETWEEN
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES,
a New York corporation, as Landlord
and
FMC CORPORATION,
a Delaware corporation,
as Tenant
for
BUILDING A
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE 1. DEFINITIONS........................................... 1
1.1. Commencement Date....................................... 1
1.2. Rent Start Date......................................... 1
1.3. Lease Term.............................................. 1
1.4. Property................................................ 1
1.5. Premises................................................ 2
1.6. Permitted Use........................................... 2
1.7. Tenant's Minimum Liability Insurance Coverage........... 2
1.8. Tenant's Allocated Parking Stalls....................... 2
1.9. Retained Real Estate Brokers............................ 2
1.10. Address for Notices..................................... 2
1.11. Lease................................................... 2
1.12. Building C Lease........................................ 2
1.13. Tenant's Allocated Share................................ 2
1.14. Continuing Tenant Default............................... 3
1.15. Additional Definitions.................................. 3
ARTICLE 2. DEMISE AND ACCEPTANCE................................. 3
2.1. Demise of Premises...................................... 3
2.2. Delivery and Acceptance of Possession................... 3
2.3. Construction of Interior Improvements................... 3
2.4. Options to Extend Lease Term............................ 3
ARTICLE 3. RENT.................................................. 5
3.1. Base Monthly Rent....................................... 5
3.2. Additional Rent......................................... 6
3.3. Payment of Rent......................................... 6
3.4. Late Charge and Interest on Rent in Default............. 6
ARTICLE 4. USE OF PREMISES....................................... 7
4.1. Limitation on Type...................................... 7
4.2. Compliance with Laws and Private Restrictions........... 7
4.3. Insurance Requirements.................................. 7
4.4. Outside Areas........................................... 8
4.5. Signs................................................... 8
4.6. Rules and Regulations................................... 8
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4.7. Parking................................................. 8
4.8. Window Coverings........................................ 9
4.9. Outside Sales........................................... 9
ARTICLE 5. TRADE FIXTURES AND LEASEHOLD IMPROVEMENTS............. 9
5.1. Trade Fixtures.......................................... 9
5.2. Leasehold Improvements.................................. 9
5.3. Alterations Required by Law............................. 10
5.4. Landlord's Improvements................................. 11
5.5. Liens................................................... 11
5.6. Modifications to the Premises........................... 11
ARTICLE 6. REPAIR AND MAINTENANCE................................ 12
6.1. Tenant's Obligation to Maintain......................... 12
6.2. Landlord's Obligation to Maintain....................... 12
6.3. Tenant's Obligation to Reimburse........................ 13
6.4. Common Operating Expenses Defined....................... 14
6.5. Control of Common Area.................................. 14
6.6. Tenant's Negligence..................................... 15
ARTICLE 7. WASTE DISPOSAL AND UTILITIES.......................... 15
7.1. Waste Disposal.......................................... 15
7.2. Hazardous Materials..................................... 15
7.3. Utilities............................................... 17
7.4. Compliance with Governmental Regulations................ 17
ARTICLE 8. REAL PROPERTY TAXES................................... 18
8.1. Real Property Taxes Defined............................. 18
8.2. Tenant's Obligation to Reimburse........................ 18
8.3. Taxes on Tenant's Property.............................. 19
ARTICLE 9. INSURANCE............................................. 19
9.1. Tenant's Insurance...................................... 19
9.2. Landlord's Insurance.................................... 20
9.3. Tenant's Obligation to Reimburse........................ 20
9.4. Release and Waiver of Subrogation....................... 20
ARTICLE 10. LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY..... 21
10.1. Limitation on Landlord's Liability...................... 21
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10.2. Limitation on Tenant's Recourse......................... 21
10.3. Indemnification of Landlord............................. 22
ARTICLE 11. DAMAGE TO PREMISES................................... 22
11.1. Landlord's Duty to Restore.............................. 22
11.2. Landlord's Right to Terminate........................... 22
11.3. Tenant's Right to Terminate............................. 23
11.4. Abatement of Rent....................................... 23
ARTICLE 12. CONDEMNATION......................................... 24
12.1. Tenant's Termination Right.............................. 24
12.2. Restoration and Abatement of Rent....................... 24
12.3. Temporary Taking........................................ 24
12.4. Division of Condemnation Award.......................... 24
ARTICLE 13. DEFAULT AND REMEDIES................................. 25
13.1. Events of Tenant's Default.............................. 25
13.2. Landlord's Remedies..................................... 26
13.3. Waiver by Tenant of Certain Remedies.................... 27
13.4. Waiver.................................................. 27
13.5. Limitation on Exercise of Rights........................ 27
ARTICLE 14. ASSIGNMENT AND SUBLETTING............................ 27
14.1. By Tenant............................................... 27
14.2. By Landlord............................................. 29
ARTICLE 15. GENERAL PROVISIONS................................... 30
15.1. Landlord's Right to Enter............................... 30
15.2. Surrender of the Premises............................... 30
15.3. Holding Over............................................ 30
15.4. Subordination........................................... 31
15.5. Tenant's Attornment..................................... 31
15.6. Mortgagee Protection.................................... 31
15.7. Estoppel Certificates and Financial Statements.......... 31
15.8. Force Majeure........................................... 32
15.9. Notices................................................. 32
15.10. Obligation to Act Reasonably........................... 32
15.11. Corporate Authority.................................... 32
15.12. Additional Definitions................................. 32
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15.13. Miscellaneous.......................................... 33
15.14. Termination by Exercise of Right....................... 33
15.15. Brokerage Commissions.................................. 34
15.16. Entire Agreement....................................... 34
15.17. Right of First Offer to Lease.......................... 34
SCHEDULE OF EXHIBITS
EXHIBIT A - SITE PLAN OF PROPERTY
EXHIBIT B - APPROVED PLANS FOR INTERIOR IMPROVEMENTS
EXHIBIT C - INTERIOR IMPROVEMENT AGREEMENT
EXHIBIT D - FORM OF SUBORDINATION AGREEMENT
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<PAGE>
LEASE
(Building A)
THIS LEASE, dated June 1, 1989 for reference purposes only, is made by
and between THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, a New
York corporation ("Landlord"), and FMC CORPORATION, a Delaware corporation
("Tenant").
ARTICLE 1.
DEFINITIONS
1.1. COMMENCEMENT DATE: The term "Commencement Date" shall mean the date
the last signatory to this Lease whose execution is required to make it
binding on Landlord and Tenant shall have executed this Lease.
1.2. RENT START DATE: The term "Rent Start Date" shall mean November 1,
1989; provided, however, that if the Interior Improvements to be constructed
pursuant to the Interior Improvement Agreement attached as EXHIBIT "C" are
not "Substantially Completed" (as defined in EXHIBIT "C") by November 1, 1989
because of delays in construction resulting from "Force Majeure" (as defined
in this paragraph 1.2), then the Rent Start Date shall be extended for one
day for each such day of delay experienced by Tenant in constructing the
Interior Improvements pursuant to EXHIBIT "C". For purposes of this
paragraph, the following shall apply:
A. The term "Force Majeure" shall mean (i) any material default
by Landlord of its obligations under this Lease which delays construction;
(ii) strikes, labor disputes or work stoppages which are not directed solely
at the construction of the Interior Improvements or only because of job
conditions at the Premises but which also affect other construction projects;
(iii) damage to the Interior Improvements or the Premises caused by fire,
earthquake, vandalism or other peril; and (iv) civil commotion, civil unrest,
or acts of war. The term "Force Majeure" shall not include any of the
following: (i) delays caused by the Prime Contractor or any subcontractor,
including delays resulting from contractor default; (ii) inability to obtain
labor, materials, equipment, or reasonable substitutes therefor when ordered;
or (iii) inability to obtain any governmental approval required in connection
with the construction of the Interior Improvements.
B. Tenant shall notify Landlord promptly of the occurrence of
any event of Force Majeure. If Tenant does not notify Landlord in writing of
the occurrence of an event of Force Majeure within five (5) days after such
event has commenced to occur, then the Rent Start Date shall only be extended
by the amount of delay that occurs after Tenant actually gives written notice
to Landlord of the occurrence of the event of Force Majeure in question.
1.3. LEASE TERM: The Lease Term shall commence on the Commencement
Date and shall continue until the tenth (10th) anniversary of the Rent Start
Date (unless the Lease Term is extended pursuant to paragraph 2.4 hereof).
1.4. PROPERTY: The term "Property" shall mean that real property shown
on the site plan attached hereto as EXHIBIT "A" and all improvements now or
hereafter located thereon, including, without limitation, the five (5)
buildings presently located thereon, including, without limitation, the give
(5) buildings presently located thereon, the aggregate gross leasable area of
which is approximately 295,271 square feet (the "Property Gross Leasable
Area"), allocated among the five buildings as shown on the attached EXHIBIT
"A"; provided, however, that Landlord may change the boundaries and
composition of the Property by removing or adding land and/or buildings and
thereafter the term "Property" shall refer to such real property so enlarged
or reduced and the amount of the "Property Gross Leasable Area" shall be
appropriately adjusted.
<PAGE>
1.5. PREMISES: The term "Premises" shall mean the building structure
situated on the Property commonly known as Building A of Airport Technology
Park, 2890 De La Cruz Boulevard, Santa Clara, California, containing
approximately 68,708 square feet of gross leasable area (the "Premises Gross
Leasable Area") located as shown on EXHIBIT "A". Landlord and Tenant agree
that (i) all measurements of gross leasable area contained in this Lease are
conclusively agreed to be correct and binding upon the parties, even if a
subsequent measurement of any one of these areas determines that it is more
or less than the amount of area reflected in this Lease; and (ii) any such
subsequent determination that the area is more or less than shown in this
Lease shall not result in a change in any of the computations of rent,
improvement allowances, or other matters described in this Lease where gross
leasable area is a factor.
1.6. PERMITTED USE: The term "Permitted Use" shall mean the use of the
Premises for (i) research and development, production, sales, and general
administrative offices and other legal uses incidental thereto, and (ii) any
other legal use first approved in writing by Landlord.
1.7. TENANT'S MINIMUM LIABILITY INSURANCE COVERAGE: The term "Tenant's
Minimum Liability Insurance Coverage" shall mean Two Million Five Hundred
Thousand Dollars ($2,500,000).
1.8. TENANT'S ALLOCATED PARKING STALLS: The term "Tenant's Allocated
Parking Stalls" shall mean 274 parking stalls for the non-exclusive use of
Tenant. Notwithstanding the foregoing, or any other provision of this Lease,
the parties acknowledge that although Tenant is allocated a combined total of
620 parking spaces pursuant to this Lease and the Building C Lease, after a
restripping of the parking areas on the Property to increase to 1,155 the
number of spaces available, only a total of 603 spaces shall be available for
Tenant's use. In this regard the parties agree that the total number of
parking spaces allocated for Tenant's use under this Lease and under the
Building C Lease shall be reduced by 17; such spaces shall be proportionably
allocated between the Premises and the premises leased pursuant to the
Building A Lease. Landlord agrees, at the written request of Tenant, to
construct at Landlord's expense 17 additional parking spaces on the Property,
if Landlord can do so at a reasonable cost by relocating or removing
landscaped area or driveways, and the construction of such additional parking
spaces is permitted by all applicable Laws.
1.9. RETAINED REAL ESTATE BROKERS: The term "Retained Real Estate
Brokers" shall mean LaSalle Partners Limited and J.R. Parrish, Inc.
1.10. ADDRESS FOR NOTICES: The term "Address for Notices" shall mean
the following:
A. In the case of Landlord, such term shall mean The Equitable
Life Assurance Society of the United States, One Market Plaza, 1900 Steuart
Tower, San Francisco, California 94105, Attention: Property Management
Department.
B. In the case of Tenant, such term shall mean (i) before the
Commencement Date, its present address which is 881 Martin Avenue, Box 58123,
Santa Clara, California 95052; and (ii) after the Commencement Date, the
address of the Premises which is 2830 De La Cruz Boulevard, Santa Clara,
California 95050.
1.11. LEASE: The term "Lease" shall mean this printed lease, Exhibits
"A" (site plan), "B" (Approved Plans for Interior Improvements), "C"
(Interior Improvement Agreement), "D" (form of subordination agreement), all
of which are attached hereto and incorporated herein by this reference.
1.12. BUILDING C LEASE: The term "Building C Lease" shall mean that
lease dated as of June 1, 1989 between Landlord and Tenant, pursuant to which
Tenant leases from Landlord that certain building identified as Building C on
the site plan attached hereto as EXHIBIT "A" and which contains approximately
86,785 square feet, the address of which is 2830 De La Cruz Boulevard, Santa
Clara, California.
1.13. TENANT'S ALLOCATED SHARE: The term "Tenant's Allocated Share"
shall mean one hundred percent (100%).
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<PAGE>
1.14. CONTINUING TENANT DEFAULT: A "Continuing Tenant Default" shall
be deemed to exist when an "Event of Tenant's Default" (as defined in
paragraph 13.1) has occurred, and the underlying default or breach by Tenant
of its obligations which resulted in such Event of Tenant's Default has not
been completely cured.
1.15. ADDITIONAL DEFINITIONS: As used in this Lease or any addendum or
amendment thereto, the following terms shall have the meanings set forth in
paragraph 15.12: "Agreed Interest Rate", "Common Area", "Law", "Leasehold
Improvements", "Lender", "Private Restrictions" and "Trade Fixtures".
ARTICLE 2.
DEMISE AND ACCEPTANCE
2.1. DEMISE OF PREMISES: Landlord hereby leases to Tenant, and Tenant
leases from Landlord, for the Lease Term upon the terms and conditions of
this Lease, the Premises together with (i) the non-exclusive right to use no
more than the number of Tenant's Allocated Parking Stalls within the Common
Area (subject to the limitations set forth in paragraph 4.7), and (ii) the
non-exclusive right to use the Common Area for ingress to and egress from the
Premises. Tenant's lease of the Premises shall be subject to (i) all Laws,
(ii) all Private Restrictions, easements, and other matters of public record,
and (iii) the reasonable and non-discriminatory rules and regulations from
time to time promulgated by Landlord pursuant to paragraph 4.6.
2.2. DELIVERY AND ACCEPTANCE OF POSSESSION: Landlord shall deliver to
Tenant possession of the Premises on the Commencement Date in their presently
existing condition, broom clean. Tenant shall accept possession of the
Premises in its presently existing condition, "as-is" (except for latent
defects in the structural elements of the Premises), acknowledging that (i)
Tenant intends to do substantial renovation work and construct completely new
interior improvements pursuant to paragraph 2.3 hereof and the Interior
Improvement Agreement attached as EXHIBIT "C", and (ii) Landlord is obligated
to make certain repairs as set forth in the Interior Improvement Agreement.
2.3. CONSTRUCTION OF INTERIOR IMPROVEMENTS: Tenant shall construct
certain improvements for Tenant's use in the Premises pursuant to the terms
of the Interior Improvement Agreement executed concurrently with this Lease
by Landlord and Tenant and attached hereto as EXHIBIT "C".
2.4. OPTIONS TO EXTEND LEASE TERM: Landlord hereby grants to Tenant
two (2) options (each referred to as the "Option") to extend the Lease Term
each for a five (5) year period (the "Option Term"), on the following terms
and conditions:
A. Tenant must give Landlord notice in writing of its exercise
of the Option before the later to occur of (i) the two hundred fortieth
(240th) day before the date of the initial Lease Term (or then extended Lease
Term as the case may be) would end but for said exercise, or (ii) the seventh
(7th) day following the establishment of the fair market rent for the
Premises by appraisal pursuant to subparagraph 2.4F if such appraisal process
is commenced pursuant to subparagraphs 2.4E and 2.4F.
B. Tenant may not exercise the Option at any time that either
of the following is true: (i) a Continuing Tenant Default exists under this
Lease (unless caused by a subTenant of the original Tenant under this Lease
and such original Tenant is using reasonable efforts to cause such default to
be cured) or (ii) a Continuing Tenant Default exists under the Building A
Lease (unless caused by a subTenant or assignee of the original Tenant under
this Lease and such original Tenant is using reasonable efforts to cause such
default to be cured) and the same person or entity is the owner of record of
both the Premises and the real property leased pursuant to the Building C
Lease.
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<PAGE>
C. All terms and conditions of this Lease shall apply during
the Option Term, except that the Base Monthly Rent for the Option Term shall
be determined as provided in subparagraph 2.4D below.
D. The Base Monthly Rent for the Option Term with respect to
the Premises shall be the ninety-five percent (95%) of the fair market rent
for the Premises for the Option Term on the terms contained in this Lease as
of the commencement of the Option Term, determined pursuant to subparagraphs
2.4E and 2.4F. For purposes of this Lease, the term "fair market rent for
the Premises" shall mean the projected going market rent for the Premises as
of the commencement of the Option Term in question, including a provision for
periodic increases of such rent during the Option Term (which increases shall
be established as part of such fair market rent), taking into account the
value of all improvements in the Premises, regardless of whether made by
Landlord or Tenant (except for those Leasehold Improvements that Tenant has
the right to remove at the expiration of the Lease Term).
E. Tenant may not exercise the Option in question unless Tenant
has delivered to Landlord a written request (a "Rent Quote Request") that
Landlord state in writing Landlord's opinion of the fair market rent for the
Premises for the upcoming Option Term in question, which Rent Quote Request
may only be delivered and shall only be effective if delivered (i) no sooner
than fifteen (15) months before the expiration of the Lease Term, and (ii) no
later than thirteen (13) months prior to the expiration of the Lease Term.
After receipt of a Rent Quote Request and no later than twelve (12) months
prior to the expiration of the Lease Term, Landlord shall deliver to Tenant a
written statement setting forth Landlord's opinion of the fair market rent
for the Premises for the Option Term in question (a "Landlord's Rent Quote").
For a period of thirty (30) days following delivery to Tenant of Landlord's
Rent Quote (the "Negotiation Period"), Landlord and Tenant shall confer to
attempt to reach agreement upon the fair market rent for the Premises for the
Option Term in question. If Landlord and Tenant are unable to reach
agreement in writing within the Negotiation Period, for purposes of
establishing the Base Monthly Rent for the Option Term in question, the fair
market rent for the Premises shall be deemed to be the amount stated in
Landlord's Rent Quote unless Tenant delivers to Landlord during the
Negotiation Period a written notice which states the following: (i) Tenant
requires that the fair market rent for the Premises for the Option Term in
question be established by the appraisal process described in subparagraph
2.4F; and (ii) the name, address, and qualifications of the appraiser
selected by Tenant for purposes of the appraisal process described in
subparagraph 2.4F ("Tenant's Appraisal Demand"). If Tenant so timely
delivers to Landlord a Tenant's Appraisal Demand, the Base Monthly Rent for
the Option Term in question shall be established based on the result of the
appraisal process described in subparagraph 2.4F.
F. If Tenant delivers to Landlord a Tenant's Appraisal Demand
during the Negotiation Period, then the fair market rent for the Premises
shall be determined by three (3) real estate appraisers, all of whom shall be
members of the American Institute of Real Estate Appraisers with not less
than five (5) years experience appraising real property (other than
residential or agricultural property) located in Santa Clara County,
California, in accordance with the following procedures:
(1) One of the appraisers shall be the appraiser identified
in Tenant's Appraisal Demand. Within ten (10) days of receipt of Tenant's
Appraisal Demand, Landlord shall select its appraiser and notify Tenant, in
writing, of the name, address and qualifications of an appraiser selected by
it. Failure by Landlord to select a qualified appraiser within said ten (10)
day period shall be deemed a waiver of its right to select a second appraiser
on its own behalf and Tenant shall select a second appraiser on behalf of
Landlord within five (5) days after the expiration of said ten (10) day
period. Within ten (10) days from the date the second appraiser shall have
been appointed, the two (2) appraisers selected by the parties shall appoint
a third appraiser. If the two appraisers fail to select a third qualified
appraiser, the third appraiser shall be selected by the American Arbitration
Association at the request of either party or, if there is then no American
Arbitration Association or if it refuses to perform this function, then at
the request of either Landlord or Tenant, the third appraiser shall be
appointed by the then Presiding Judge of the Superior Court of the State of
California for the County of Santa Clara.
(2) The three (3) appraisers so selected shall meet in San
Jose,
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<PAGE>
California, not later than twenty (20) days following the selection of the
third appraiser. At said meeting the appraisers shall attempt to determine
the fair market rent for the Premises for the Option Term in question.
(3) If the appraisers are unable to complete their
determinations in one meeting, they may continue to consult at such times as
they deem necessary for a fifteen (15) day period from the date of their
first meeting, in an attempt to have at least two (2) of them agree. If, at
the initial meeting or at any time during said fifteen (15) day period, two
(2) or more of the appraisers agree on the fair market rent for the Premises,
such agreement shall be determinative and binding on the parties hereto, and
the agreeing appraisers shall, in simple letter form executed by the agreeing
appraisers, forthwith notify both Landlord and Tenant of the amount set by
such agreement.
(4) If two (2) or more appraisers do not agree within said
fifteen (15) day period as set forth above, then each appraiser shall, within
five (5) days after the expiration of said fifteen (15) day period, submit
his independent appraisal in simple letter form to Landlord and Tenant
stating his determination of the fair market rent for the Premises for the
Option Term in question. Landlord and Tenant shall then determine the fair
market rent for the Premises for the Option Term by determining the average
of the fair market rent set by each of the appraisers; provided, however, if
the lowest appraisal is less than eighty-five percent (85%) of the middle
appraisal then such lowest appraisal shall be disregarded, and/or if the
highest appraisal is greater than one hundred fifteen percent (115%) of the
middle appraisal then such highest appraisal shall be disregarded. If any
appraisal is disregarded, then the average shall be determined by computing
the average set by the other appraisals that have not been disregarded. For
purposes of determining the relative amount of the appraisals to implement
the provisions of this subparagraph requiring that an appraisal be
disregarded if it is too high or too low, the amount of an appraisal that
calls for periodic rent increases based upon an index (E.G., the Consumer
Price Index) shall be determined by assuming that such index will increase at
the same average annual rate during the option period in question that such
index increased on an average annual basis during the five (5) year period
preceding the commencement of the option period in question.
(5) Each party shall bear the fees and expenses of the
appraisers selected by or for it, and the fees and expenses of the third
appraiser shall be borne fifty percent (50%) by Landlord and fifty percent
(50%) by Tenant.
ARTICLE 3.
RENT
3.1. BASE MONTHLY RENT: Commencing on the Rent Start Date and
continuing thereafter throughout the initial Lease Term, Tenant shall pay to
Landlord a monthly rent (which rent is referred to as the "Base Monthly
Rent"), which shall be the following:
A. No Base Monthly Rent shall be payable for the period
beginning on the Rent Start Date and ending on the last day of the sixth
(6th) month of the Lease Term.
B. The Base Monthly Rent for the period beginning on the first
day of the seventh (7th) month of the Lease Term and ending on the last day
of the twenty-fourth (24th) month of the Lease Term is Forty Eight Thousand
Ninety Six Dollars ($48,096) (I.E., $0.70 per square foot per month).
C. The Base Monthly Rent for the period beginning on the first
day of the twenty-fifth (25th) month of the Lease Term and ending on the last
day of the forty-eighth (48th) month of the Lease Term is Fifty Eight
Thousand Four Dollars ($58,402) (I.E., $0.85 per square foot per month).
D. The Base Monthly Rent for the period beginning on the first
day of the forty-ninth (49th) month of the Lease Term and ending on the last
day of the seventy-second
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(72nd) month of the Lease Term is Sixty-One Thousand Eight Hundred
Thirty-Seven Dollars ($61,837.90) (I.E., $0.90 per square foot per month).
E. The Base Monthly Rent for the period beginning on the first
day of the seventy-third (73rd) month of the Lease Term and ending on the
last day of the one hundred twentieth (120th) month of the Lease Term is
Sixty-Five Thousand Two Hundred Seventy-Three Dollars ($65,273) (I.E., $0.95
per square foot per month).
F. For purposes of applying the provisions of this paragraph
3.1, the term "month of the Lease Term" shall mean that period which begins
on that day of the calendar month in question which corresponds to the Rent
Start Date and which continues for thirty (30) or thirty-one (31) days until
the day of the next calendar month which precedes the day in that calendar
month which corresponds to the Rent Start Date. By way of example only, if
it is assumed that the Rent Start Date is September 15, 1989, then for
purposes of this paragraph 3.1 (i) the first month of the Lease Term would
commence September 15 and end on October 14, 1989; and (ii) the seventh (7th)
month of the Lease Term would commence on March 15 and end on April 14, 1990.
3.2. ADDITIONAL RENT: Commencing on the Rent Start Date and
continuing thereafter throughout the Lease Term, Tenant shall pay, as
additional rent (the "Additional Rent"), (i) Tenant's share of Common
Operating Expenses as required by paragraph 6.3, (ii) Tenant's share of the
Real Property Taxes as required by paragraph 8.2, (iii) Landlord's share of
the net consideration received by Tenant upon certain assignments and
sublettings as required by paragraph 14.1, (iv) any late charges or interest
due Landlord pursuant to paragraph 3.4, (v) Tenant's share of the amortized
cost of certain additional improvements as provided in paragraph 5.4, and
(vi) any other charges due Landlord pursuant to this Lease.
3.3. PAYMENT OF RENT: All rent required to be paid in monthly
installments shall be paid in advance on the first day of each calendar month
during the Lease Term. All rent shall be paid in lawful money of the United
States, without any abatement, deduction or offset whatsoever (except as
permitted by paragraphs 11.4 and 12.2), and without any prior demand
therefor, to Landlord at its address set forth above or at such other place
as Landlord may designate from time to time. Tenant's obligation to pay rent
shall be prorated as of the Rent Start Date and at expiration or earlier
termination of the Lease Term such that Tenant shall not be required to pay
Base Monthly Rent or Additional Rent for any period preceding the Rent Start
Date or following the expiration or earlier termination of the Lease Term
(except in the case of a termination of this Lease as a result of an Event of
Tenant's Default).
3.4. LATE CHARGE AND INTEREST ON RENT IN DEFAULT: Tenant acknowledges
that the late payment by Tenant of any monthly installment of Base Monthly
Rent or any Additional Rent will cause Landlord to incur certain costs and
expenses not contemplated under this Lease, the exact amount of which are
extremely difficult or impractical to fix. Such costs and expenses will
include, without limitation, administration and collection costs and
processing and accounting expenses. Therefore, if any such Base Monthly Rent
or Additional Rent is not received by Landlord from Tenant within five (5)
days after Landlord delivers written notice to Tenant that such amount is
delinquent, Tenant shall immediately pay to Landlord a late charge equal to
five percent (5%) of such delinquent rent. Landlord and Tenant agree that
this late charge represents a reasonable estimate of such costs and expenses
and is fair compensation to Landlord for its loss suffered by Tenant's
failure to make timely payment. In no event shall this provision for a late
charge be deemed to grant to Tenant a grace period or extension of time
within which to pay any rent or prevent Landlord from exercising any right or
remedy available to Landlord upon Tenant's failure to pay any rent due under
this Lease in a timely fashion, including the right to terminate this Lease.
If any rent remains delinquent for a period in excess of thirty (30) days
after Landlord delivers written notice to Tenant that such amount is
delinquent, in addition to such late charge, Tenant shall pay to Landlord
interest on any rent that is not paid when due at the Agreed Interest Rate
following the date such amount became due until paid.
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ARTICLE 4.
USE OF PREMISES
4.1. LIMITATION ON TYPE: Tenant shall use the Premises solely for the
Permitted Use (as described in paragraph 1.6). Tenant shall not do or permit
anything to be done in or about the Premises or Common Area which will (i)
interfere with the rights of other occupants of the Property, (ii) cause
structural damage to the Premises and Tenant fails to promptly commence and
diligently pursue to completion the repair of such damage, or (iii) cause
damage to any part of the Premises or Property except to the extent
reasonably necessary for the installation of Tenant's equipment and trade
fixtures and Tenant fails to promptly commence and diligently pursue to
completion the repair of such damage. Tenant shall not operate any equipment
within the Premises which will (i) injure, vibrate or shake the Premises,
(ii) overload existing electrical systems or other mechanical equipment
servicing the Premises, or (iii) impair the efficient operation of the
sprinkler system or the heating, ventilating or air conditioning ("HVAC")
equipment servicing the Premises, or (iv) damage, overload or corrode the
sanitary sewer system. Tenant shall not attach, hang or suspend anything
from the ceiling, roof, walls or columns of the Premises or set any load on
the floor in excess of approved structural limits as defined by Landlord's
architect. Any dust, fumes, or waste products generated by Tenant's use of
the Premises shall be contained and disposed so that they do not (i) create a
fire or health hazard, (ii) damage the Premises, or (iii) interfere with the
businesses of other Tenants of the Property. All noise or odors generated by
Tenant's use of the Premises shall be contained or muffled so that they do
not interfere with the businesses of other Tenants of the Property. Tenant
shall not (i) change the exterior of the Premises (subject to Tenant's right
to install signs pursuant to paragraph 4.5), or (ii) install any equipment or
antennas on or make any penetrations of the exterior or roof of the Premises
without the prior written consent of Landlord. Tenant shall not commit nor
permit to be committed any waste in or about the Premises, and Tenant shall
keep the Premises in a neat, clean, attractive and orderly condition, free of
any objectionable noises, odors, dust or nuisances which may disturb the
quiet enjoyment of other Tenants or occupants of the Property.
Notwithstanding the foregoing restrictions, the parties agree as follows:
A. Tenant may bring military fighting vehicles onto the first
floor of the Premises so long as (i) Tenant puts into place such reinforcing
as is reasonably necessary to upgrade the floor load capacity so that it will
accept such fighting vehicles; and (ii) Tenant repairs any damage to the
Premises caused by the entry of such vehicles.
B. Tenant may install antennas, radio "dishes" or other
electronic equipment reasonably necessary for the conduct of Tenant's
business upon the roof of the Premises so long as (i) such installations are
done in compliance with all Laws and Private Restrictions; (ii) such
installations are accomplished in a manner which does not compromise the
watertight integrity of the roof; (iii) all damage to the Premises caused by
such installation is repaired by Tenant; and (iv) any such equipment is
properly and effectively screened from view in a manner reasonably acceptable
to Landlord.
C. In the event Tenant desires to operate equipment within the
Premises that will or may overload existing mechanical, electrical, or other
systems, Tenant may do so only if it first installs, at its sole cost, all
necessary modifications, repairs or upgrades of existing systems so that such
equipment may be operated without overloading such systems as so modified by
Tenant.
4.2. COMPLIANCE WITH LAWS AND PRIVATE RESTRICTIONS: Tenant shall not
use or permit any person to use the Premises in any manner which violates any
Laws or Private Restrictions. Tenant shall abide by and promptly observe and
comply with all Laws and Private Restrictions and shall indemnify and hold
Landlord harmless from any liability resulting from Tenant's failure to do so.
4.3. INSURANCE REQUIREMENTS: Tenant shall not use or permit any
person to use the Premises or Common Area in any manner which will cause a
cancellation of any insurance policy covering the Premises. Tenant shall not
sell, or permit to be kept, used, or sold in or about
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the Premises any article which may be prohibited by the standard form of fire
insurance policy; provided, however, that Tenant may bring military fighting
vehicles onto the first floor of the Premises as permitted pursuant to
subparagraph 4.1A. Tenant shall comply with all reasonable requirements of
any insurance company, insurance underwriter, or Board of Fire Underwriters
which are necessary to maintain, at reasonable rates, the insurance coverage
carried by Landlord pursuant to this Lease.
4.4. OUTSIDE AREAS: No materials, supplies, storage tanks or
containers, equipment, finished products or semi-finished products, raw
materials, inoperable vehicles or articles of any nature shall be stored upon
or permitted to remain outside of the Premises except in fully fenced and
screened areas outside the Premises which have been designed for such purpose
and have been approved in writing by Landlord for such use by Tenant;
provided, however, that Tenant may bring military fighting vehicles onto the
first floor of the Premises as permitted pursuant to subparagraph 4.1A.
4.5. SIGNS: Tenant shall not place on any portion of the Premises or
the Property any sign, placard, lettering in or on windows, banner, displays
or other advertising or communicative material which is visible from the
exterior of the Premises without the prior written approval of Landlord. All
such approved signs shall strictly conform to all Laws and Private
Restrictions and shall be installed at the expense of Tenant. If Landlord so
elects, Tenant shall, at the expiration or sooner termination of this Lease,
remove all signs installed by it and repair any damage caused by such
removal. Tenant shall at all times maintain such signs in good condition and
repair. Upon Tenant's written request and at Tenant's cost and expense,
Landlord shall remove both of the Airport Technology Park monument signs
located on De La Cruz Boulevard. Subject to Landlord's prior written
approval of Tenant's specific design plan, (i) Tenant shall have the right to
install a monument sign at the entrance to the Premises, and at the two
entrances to Airport Technology Park, and (ii) Tenant shall have the right to
install signs on the exterior of the Premises. Approved signs installed by
Tenant may be illuminated in compliance with the provisions of applicable
laws and Private Restrictions.
4.6. RULES AND REGULATIONS: Landlord may from time to time promulgate
reasonable and nondiscriminatory rules and regulations applicable to all
occupants of the Property for the care and orderly management of the Property
and the safety of its Tenants and invitees. Such rules and regulations shall
be binding upon Tenant upon delivery of a copy thereof to Tenant, and Tenant
agrees to abide by such rules and regulations. If there is a conflict
between the rules and regulations and any of the provisions of this Lease,
the provisions of this Lease shall prevail. Landlord shall not be
responsible for the violation by any other Tenant of the Property of any such
rules and regulations.
4.7. PARKING: Tenant is allocated and shall have the non-exclusive
right to use (without charge in addition to the Base Monthly Rent) no more
than the number of parking spaces contained within the Property described in
paragraph 2.1 for its use and the use of its employees and invitees, the
location of which may be designated from time to time by Landlord but shall
be on the Property and within reasonable proximity to the Premises. Tenant
shall not at any time use or permit its employees or invitees to use more
parking spaces than the number so allocated to Tenant or to park or permit
the parking of its vehicles or the vehicles of others in any portion of the
Property not designated by Landlord as a non-exclusive parking area.
Landlord shall not oversubscribe the parking within the Property, and shall
assure that the total number of spaces committed to the non-exclusive use of
all Tenants of the Property shall not exceed the total number of spaces
within the Common Area. Of the parking spaces allotted to Tenant pursuant to
paragraph 2.1, Tenant shall have the right to designate a reasonable number
of such spaces as reserved spaces for its executives, which shall not exceed
ten percent (10%) of the total of spaces and which shall be in immediate
proximity to the Premises. In the event Tenant elects to install a patio as
set forth in subparagraph 5.6A, the number of parking spaces allocated to
Tenant shall be reduced based upon the square footage of said patio, which at
the time this Lease is executed is anticipated to be a reduction in eight (8)
parking spaces. If Landlord grants to any other Tenant the exclusive right
to use any particular parking space(s), neither Tenant nor its employees or
invitees shall use such spaces. Within ten (10) business days after written
request therefor from Landlord, Tenant shall furnish Landlord with a list of
its and its employees vehicle license numbers and Tenant shall thereafter
notify Landlord of any change in such list within five
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(5) days after each such change occurs. Tenant shall have the right, at
Tenant's option, to provide its employees with stickers or other
identification markers or tags to be affixed to or on the employees'
automobiles or other vehicles, evidencing the right of such employees to use
the parking area. Such stickers shall be subject to prior review and
approval by Landlord, which shall not be unreasonably withheld or delayed.
Tenant shall furnish to Landlord a list of identifying numbers for the
stickers distributed from time to time by Tenant to its employees. If Tenant
elects to use such stickers as provided herein, Tenant shall not be obligated
to furnish Landlord with a list of vehicle license numbers for its employees,
for as long as Tenant maintains such sticker system of identification.
Landlord reserves the right, after having given Tenant reasonable notice, to
have any vehicles owned by Tenant or its employees or invitees utilizing
parking spaces in excess of the parking spaces allowed for Tenant's use to be
towed away at Tenant's cost. All trucks and delivery vehicles shall be (i)
parked at the rear of the Premises, (ii) loaded and unloaded in a manner
which does not interfere with the businesses of other occupants of the
Property, and (iii) permitted to remain on the Property only so long as is
reasonably necessary to complete loading and unloading. In the event
Landlord elects or is required by any Law to limit or control parking in the
Property, whether by validation of parking tickets or any other method of
assessment, Tenant agrees to participate in such validation or assessment
program under such reasonable rules and regulations as are from time to time
established by Landlord, so long as such participation does not result in any
increase in costs to Tenant.
4.8. WINDOW COVERINGS: To the extent Tenant elects to use window
coverings visible from the exterior of the Premises, Tenant shall use the
same window covering to cover all windows Tenant so elects to cover in the
Premises to maintain a consistent and uniform exterior appearance.
4.9. OUTSIDE SALES: Tenant shall not conduct or permit to be
conducted on any portion of the Common Area any sale of any kind, including
(i) any public or private auction, fire sale, going-out-of-business sale,
distress sale or other liquidation sale, or (ii) any so-called "flea market",
open-air market or any other similar activity. Notwithstanding the
foregoing, Tenant shall be allowed to conduct occasional sales outside of the
Premises on that part of the Common Area that is in close proximity to the
Premises so long as each of the following conditions is satisfied with
respect to each such sale: (i) Landlord is given at least two (2) business
days prior written notice of the date of any such sale; (ii) such sale does
not violate any Laws; (iii) such sale is conducted in a manner that does not
interfere with the rights of other occupants of the Property; (iv) Tenant
provides all necessary security, cleans up all debris and repairs any damage
caused by such sale; and (v) the purpose of such sale is to permit employees
of Tenant to purchase or to receive free of charge property of Tenant.
ARTICLE 5.
TRADE FIXTURES AND LEASEHOLD IMPROVEMENTS
5.1. TRADE FIXTURES: Throughout the Lease Term, Tenant shall provide,
install, and maintain in good condition all Trade Fixtures required in the
conduct of its business in the Premises. All Trade Fixtures shall remain
Tenant's property.
5.2. LEASEHOLD IMPROVEMENTS: The following provisions govern
Leasehold Improvements constructed by Tenant:
A. Tenant shall not construct any Leasehold Improvements or
otherwise alter the Premises without Landlord's prior approval if such action
results in the demolition, removal, or material alteration of existing
Improvements (including partitions, wall and floor coverings, ceilings,
lighting fixtures or other utility installations) and if the cost of such
construction or alteration exceeds Fifteen Thousand Dollars ($15,000) per
work of improvement or if the cost of Leasehold Improvements done, under
construction, or for which approval is sought during any calendar quarter
exceeds Twenty-Five Thousand Dollars ($25,000). With respect to any
Leasehold Improvements which must be approved by Landlord pursuant to the
immediately
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preceding sentence, Tenant shall not commence construction of such Leasehold
Improvements until Landlord shall have first approved the plans and
specifications therefor, which approval shall be deemed given if not denied
in writing within ten (10) working days after Landlord shall have received
Tenant's request for such approval. In no event shall Tenant make any
alterations to the Premises which could significantly affect the structural
integrity or the exterior design of the Premises without Landlord's prior
approval.
B. All Leasehold Improvements requiring Landlord's approval
shall be installed by Tenant in substantial compliance with the approved
plans and specifications therefor. All construction undertaken by Tenant
shall be done in accordance with all Laws and in a good and workmanlike
manner using materials of good quality. Tenant shall not commence
construction of any Leasehold Improvements until (i) all required
governmental approvals and pe-rmits shall have been obtained, (ii) all
requirements regarding insurance imposed by this Lease have been satisfied,
and (iii) if reasonably requested by Landlord, Tenant shall have obtained
contingent liability and broad form builders risk insurance in an amount
reasonably satisfactory to Landlord if there are any perils relating to the
proposed construction not covered by insurance carried pursuant to Article 9.
If Landlord so requests in writing with respect to Leasehold Improvements
requiring Landlord's prior approval, Tenant shall inform Landlord of Tenant's
scheduled date for commencement of construction at least five (5) days prior
to such date of commencement.
C. At all times during the Lease Term, (i) Tenant shall
maintain all plans and change orders prepared in connection with the
construction of any Leasehold Improvements which required a building permit
or other governmental approval, and (ii) Tenant shall provide to Landlord
copies of such plans and change orders (and, to the extent Tenant causes such
to be prepared for its own use, "As-Built" plans) at any time that Landlord
requests copies thereof.
D. All Leasehold Improvements shall remain the property of
Tenant during the Lease Term. Tenant shall have the right to remove only the
following kinds of Leasehold Improvements so long as it repairs all damage
caused by the installation thereof and returns the Premises to the condition
existing prior to the installation of such Leasehold Improvements: (i)
built-in cabinets, file drawers and bookcases; (ii) computer room air
conditioning; (iii) canteen equipment; (iv) office cubicle systems; and (v)
ornamental statues. At the expiration or sooner termination of the Lease
Term, all Leasehold Improvements that Tenant does not remove shall be
surrendered to Landlord as a part of the realty and shall then become
Landlord's property, and Landlord shall have no obligation to reimburse
Tenant for all or any portion of the value or cost thereof. However, if
Landlord so requires, at the expiration or earlier termination of the Lease
Term, Tenant shall remove any Leasehold Improvements designated for removal
by Landlord and shall restore the Premises to the condition existing prior to
the installation of such Leasehold Improvements to the extent necessary to
return the Premises to substantially the same condition that existed on the
completion of the Interior Improvements constructed pursuant to EXHIBIT "C",
ordinary wear and tear excepted. Notwithstanding the foregoing:
(1) Tenant shall only be required to remove Leasehold
Improvements for which either of the following is true: (i) such Leasehold
Improvements were not approved in writing by Landlord; or (ii) at the time
approval was given by Landlord, Landlord informed Tenant in writing that
Landlord would require that such Leasehold Improvements be removed at the
termination of the Lease Term.
(2) Tenant may cause interior partitions to be moved,
reconfigured, or removed altogether, or cause interior offices to be deleted
or added, all without the obligation to restore such partitions or interior
offices to any prior condition upon expiration or termination of the Lease.
5.3. ALTERATIONS REQUIRED BY LAW: Tenant shall make any alteration,
addition or change of any sort, whether structural or otherwise, to the
Premises that is required by any Law because of (i) a specific use or change
of use made of the Premises by Tenant (which alteration, addition or change
is not generally required to be made by owners or Tenants of other properties
similar to the Premises), (ii) Tenant's application for any permit or
governmental approval, or (iii) Tenant's construction or installation of any
Leasehold Improvements or Trade Fixtures.
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5.4. LANDLORD'S IMPROVEMENTS: All fixtures, improvements or equipment
which are installed, constructed on or attached to the Property by Landlord
at its expense shall become a part of the realty and belong to Landlord.
Tenant shall pay additional rent in the event Landlord, in its sole
discretion, elects to make any of the following kinds of capital improvements
to the Property: (i) capital improvements required to be constructed in
order to comply with any Law not in effect or applicable to the Property as
of the Commencement Date; (ii) modification of existing or construction of
additional capital improvements or building service equipment for the purpose
of reducing the consumption of utility services or Common Operating Expenses
of the Property; (iii) replacement of capital improvements or building
service equipment existing as of the Commencement Date when required because
of normal wear and tear; and (iv) the amount of "deductibles" paid by
Landlord for the restoration of any part of the Property that has been
damaged to the extent such "deductible" is not included within Common
Operating Expenses. With respect to any expenditure in excess of Fifty
Thousand Dollars ($50,000) for which Landlord seeks contribution pursuant to
this paragraph 5.4 from Tenant, prior to incurring such expense, Landlord
shall notify Tenant of the nature and estimated amount of such expenditure
and, if Tenant so requests, shall provide Tenant with such information upon
which such cost estimate is based for Tenant's approval. The amount of
additional rent Tenant is to pay with respect to each such capital
improvement shall be determined as follows:
A. Tenant shall have the option to pay in cash an amount
equal to Tenant's Allocated Share of all costs paid by Landlord to construct
the improvements in question fairly allocable to the Premises (including
financing costs) in cash within thirty (30) days after the improvement has
been substantially completed and Landlord has notified Tenant of the cost of
such improvement and the amount of Tenant's required contribution. If Tenant
does not exercise such option to pay such amount in cash, then the provisions
of subparagraph 5.4B shall apply.
B. All costs paid by Landlord to construct such
improvement (including financing costs) shall be amortized on a straight line
basis over the useful life of such improvement (determined in accordance with
generally accepted accounting principles) with interest on the unamortized
balance at the then prevailing market rate Landlord would pay if it borrowed
funds to construct such improvement from an institutional lender, and
Landlord shall inform Tenant of the monthly amortization payment required to
so amortize such costs, and shall also provide Tenant with the information
upon which such determination is made. As additional rent, Tenant shall pay
an amount equal to Tenant's Allocated Share of that portion of such monthly
amortization payment fairly allocable to the Premises (as reasonably
determined by Landlord) for each month after such improvement is completed
until the first to occur of (i) the expiration of the Lease Term (as the same
may be extended), or (ii) the end of the term over which such costs were
amortized, which amount shall be due at the same time the Base Monthly Rent
is due.
C. Notwithstanding anything contained in this paragraph
5.4, the additional rent Tenant is to pay with respect to any modification of
existing or construction of additional capital improvements or building
service equipment for the purpose of reducing the consumption of utility
expenses or Common Operating Expenses of the Property shall not for any
period exceed the actual amount of savings in Additional Rent realized by
Tenant as a result of such modification or construction.
5.5. LIENS: Tenant shall keep the Premises and the Property free from
any liens and shall pay when due all bills arising out of any work performed,
materials furnished, or obligations incurred by Tenant, its agents, employees
or contractors relating to the Premises. If any claim of lien is recorded,
Tenant shall bond against or discharge the same within thirty (30) days after
the same has been recorded against the Premises and/or the Property. Should
any lien be filed against the Premises or any action commenced affecting
title to the Premises, the party receiving notice of such lien or action
shall immediately give the other party written notice thereof.
5.6. MODIFICATIONS TO THE PREMISES: Subject to Landlord's prior
written approval, and the provisions of paragraphs 5.2 and 5.3 hereof, Tenant
shall have the right to:
A. Modify the parking area behind the Premises, which area is
highlighted on the attached EXHIBIT "A", to construct a patio;
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B. Install a datalink approximately twenty (20) inches wide
between the Premises and Building A;
C. Install up to a total of four (4) flagpoles allocated
between the front of the Premises and the front of the premises leased
pursuant to the Building A Lease; and
D. Fill in existing loading docks so long as (i) existing
drainage systems serving such loading docks are appropriately capped; (ii)
such fill is accomplished in a manner that the loading docks may be restored
to their condition existing as of the Commencement Date upon expiration of
the Lease Term, and (iii) Tenant agrees to restore such loading docks to the
condition existing as of the Commencement Date upon the expiration of the
Lease Term.
E. Trim or relocate on the Property to a new location approved
by Landlord any trees, shrubs or other landscaping that obscures any sign
installed on the Property by Tenant.
ARTICLE 6.
REPAIR AND MAINTENANCE
6.1. TENANT'S OBLIGATION TO MAINTAIN: Except as otherwise provided in
paragraph 6.2 and in Article 11 regarding the restoration of damage caused by
fire and other perils, Tenant shall, at all times during the Lease Term,
clean, keep, and maintain in good order, condition, and repair the Premises
and every part thereof, through regular inspections and servicing, including,
but not limited to, (i) all plumbing and sewage facilities (including all
sinks, toilets, faucets and drains), and all ducts, pipes, vents or other
parts of the HVAC or plumbing system, (ii) all fixtures, interior walls,
floors, carpets and ceilings, (iii) all windows, doors, entrances, plate
glass, showcases and skylights (including cleaning both interior and exterior
surfaces), (iv) all electrical facilities and all HVAC equipment and other
mechanical systems (including all lighting fixtures, lamps, bulbs, tubes,
fans, vents, exhaust equipment and systems), (v) any automatic fire
extinguisher equipment in the Premises, and (vi) the roof membrane (including
any necessary resurfacing or patching to preserve the membrane or to repair
leaks except that Tenant shall not be required to make any repair to the
extent such repair is required because of Landlord's repair or maintenance of
the structural roof system). Tenant shall replace any damaged or broken
glass in the Premises (including all interior and exterior doors and windows)
with glass of the same kind, size and quality. Tenant shall repair any
damage to the Premises (including exterior doors and windows) caused by
vandalism or any unauthorized entry. Tenant shall maintain continuously
throughout the Lease Term a service contract for the maintenance of all HVAC
equipment serving the Premises with a licensed HVAC repair and maintenance
contractor, which contract provides for the periodic inspection and servicing
of the HVAC equipment at least once every sixty (60) days during the Lease
Term. Tenant shall also maintain continuously throughout the Lease Term a
service contract for the washing of all windows (both interior and exterior
surfaces) in the Premises with a contractor, which contract provides for the
periodic washing of all such windows on such basis as shall keep the exterior
appearance of the Premises in first class condition, but no less frequently
than once every calendar year. If and when Landlord so requests in writing,
Tenant shall furnish Landlord with copies of all such service contracts. All
repairs and replacements required of Tenant shall be promptly made with
materials of good quality. If the work affects the structural parts of the
Premises or if the estimated cost of any item of repair or replacement is in
excess of Fifteen Thousand Dollars ($15,000), then Tenant shall first obtain
Landlord's written approval of the scope of work, plans therefor, and
materials to be used, except in the case of emergency in which event Tenant
shall within a reasonable period of time after performing the work, notify
Landlord of the scope of the work performed and the materials used, and shall
furnish Landlord with the plans therefor.
6.2. LANDLORD'S OBLIGATION TO MAINTAIN: Landlord, at its cost
without right of reimbursement from Tenant, shall be responsible for the
maintenance, repair, and replacement of the structural parts of the Premises
(I.E., foundation, first and second story floor slab and second story floor
deck, load-bearing walls, and structural roof system, but excluding roof
membrane) except to the extent that (i) the same is necessitated by the wrongful
or negligent act or omission
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of Tenant, its subTenants, or their respective agents, employees,
contractors, or invitees, or (ii) reimbursement is permitted pursuant to
paragraph 5.4 hereof. Landlord at its cost without right of reimbursement
from Tenant, shall repair damage to interior improvements and Leasehold
Improvements that have been approved by Landlord pursuant to the terms
hereof, or damage to the roof membrane of the Premises if caused by the
maintenance work required to be performed by Landlord pursuant to the
provisions of this paragraph. Landlord shall repair, maintain, operate and
replace when necessary the Common Area, with such right of reimbursement from
Tenant as is specified in paragraphs 5.4 and 6.3. The parties acknowledge
that the air-conditioning units located on the roof of the Premises were
installed when the Building was constructed and subsequently have not
operated. Landlord agrees to make any repairs necessary to put such units in
good operating condition, if within the six month period following the
Commencement Date, Tenant notifies Landlord in writing of the need for such
repairs. Landlord shall not be responsible for repairs required by an
accident, fire or other peril except as otherwise required by Article 11, or
for damage caused to any part of the Property by any act, negligence or
omission of Tenant or its agents, contractors, employees or invitees.
Landlord may engage contractors of its choice to perform the obligations
required of it by this Article, and the necessity of any expenditure to
perform such obligations shall be at the sole discretion of Landlord.
6.3. TENANT'S OBLIGATION TO REIMBURSE: As additional rent, commencing
on the Rent Start Date and continuing throughout the remainder of the Lease
Term, Tenant shall pay Tenant's Allocated Share of all Common Operating
Expenses fairly allocable to the Premises including (i) all Common Operating
Expenses paid with respect to the maintenance, repair, replacement and use of
the Premises and (ii) a proportionate share (based on the Premises Gross
Leasable Area as a percentage of the Property Gross Leasable Area) of all
Common Area Expenses which relate to the Property in general and are not
fairly allocable to any one building on the Property. Landlord agrees that
it shall not recover from all Tenants of the Property more than one hundred
percent (100%) of the actual Common Operating Expenses incurred by Landlord
for the period in question. As provided in paragraph 3.3, Tenant's
obligation to pay Tenant's Allocated Share of Common Operating Expenses
fairly allocable to the Premises shall be prorated as of the Rent Start Date
and at the expiration or earlier termination of the Lease Term, and if Tenant
has paid any amount on account of Common Operating Expenses relating to a
period that is not within the Lease Term (E.G., prepayment of insurance
premiums for one year), such amount shall be reimbursed to Tenant in
connection with such proration. Payment shall be made by whichever of the
following methods is from time to time designated by Landlord, and Landlord
may change the method of payment at any time so long as (i) Landlord gives
Tenant at least sixty (60) days prior written notice, and (ii) the method is
not changed more than once in any calendar year. Tenant shall pay such share
of the actual Common Operating Expenses incurred or paid by Landlord but not
theretofore billed to Tenant within thirty (30) days after receipt of a
written bill therefor from Landlord, on such periodic basis as Landlord shall
designate, but in no event more frequently than once a month. Alternatively,
(i) Landlord shall deliver to Tenant Landlord's reasonable estimate of the
Common Operating Expenses it anticipates will be paid or incurred for the
calendar year in question, (ii) during such calendar year, Tenant shall pay
such share of the estimated Common Operating Expenses in advance in monthly
installments as required by Landlord due with the installments of Base
Monthly Rent, and (iii) within ninety (90) days after the end of each
calendar year, Landlord shall furnish to Tenant a statement in reasonable
detail of the actual Common Operating Expenses paid or incurred by Landlord
during the just ending calendar year and thereupon there shall be an
adjustment between Landlord and Tenant, with payment to Landlord or credit by
Landlord against the next installment of Base Monthly Rent, as the case may
require, within thirty (30) days after delivery by Landlord to Tenant of said
statement, so that Landlord shall receive the entire amount of Tenant's share
of all Common Operating Expenses for such calendar year and no more. Tenant
and its agents (including accountants) shall have the right at its expense,
exercisable upon reasonable prior written notice to Landlord, to inspect at
Landlord's office during normal business hours Landlord's books and records
as they relate to Common Operating Expenses. Such inspection must be made
within one hundred eighty (180) days of Tenant's receipt of Landlord's annual
statement for the same, and shall be limited to verification of the charges
contained in such statement. Tenant may not withhold payment of such bill
pending completion of such inspection.
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6.4. COMMON OPERATING EXPENSES DEFINED: The term "Common Operating
Expenses" shall mean the sum of the following:
A. All costs and expenses paid or incurred by Landlord in doing
the following (including payments to independent contractors providing
services related to the performance of the following): (i) maintaining,
cleaning, and repairing the exterior surfaces (including painting of exterior
surfaces of buildings not more than once every 5 years) of all buildings
located on the Property; (ii) maintenance of the liability, fire and property
damage insurance covering the Property carried by Landlord pursuant to
paragraph 9.2 (including the payment of commercially reasonable "deductibles"
and the prepayment of premiums for coverage of up to one year); (iii)
maintaining, repairing, operating and replacing when necessary HVAC
equipment, utility facilities and other building service equipment; (iv)
providing utilities to the Common Area (including lighting, trash removal and
water for landscaping irrigation); (v) complying with all applicable Laws and
Private Restrictions; (vi) operating, maintaining, repairing, cleaning,
painting, restripping and resurfacing the Common Area; (vii) replacement or
installation of lighting fixtures, directional or other signs and signals,
irrigation systems, trees, shrubs, ground cover and other plant materials,
and all landscaping in the Common Area; and (viii) depreciation and financing
costs on maintenance and operating machinery and equipment (if owned) and
rental paid for such machinery and equipment (if rented);
B. All additional costs and expenses incurred by Landlord with
respect to the operation, protection, maintenance, repair and replacement of
the Property which pursuant to generally accepted accounting principles would
be considered a current expense and not a capital expenditure;
C. That portion of all compensation (including benefits and
premiums for workers' compensation and other insurance) paid to or on behalf
of employees of Landlord but only to the extent they are involved in the
performance of the work described by subparagraphs A and B above and that is
fairly allocable to the Property;
D. An additional amount equal to a commercially reasonable and
competitive management fee that would be charged by an independent third
party property manager for the management of the Property (except that
Tenant's Allocated Share of such management fee for any period shall not
exceed two percent (2%) of the Base Monthly Rent and Additional Rent payable
by Tenant for the same period); and
E. Notwithstanding anything contained herein, the term "Common
Operating Expenses" shall not include any of the following: (i) mortgage
principle payments; (ii) ground rent and other payments made pursuant to any
ground lease affecting the Property; (iii) the cost of refinancing any loan
secured by the Property; (iv) interest and penalties imposed against Landlord
for late payments by Landlord; (v) legal fees incurred by Landlord in
connection with the negotiation or enforcement of, or litigation in
connection with, any lease affecting the Property; (vi) the cost of any
paintings, sculptures, or other art objects installed on the Property; (vii)
any costs reimbursed to Landlord by insurance or other third party payments
that are not reimbursements by Tenants for their share of Common Operating
Expenses; (viii) brokerage commissions or other costs related to the leasing
of space within the Property; (ix) the cost of any Tenant improvements
installed for the exclusive use of any other Tenant of the Property.
6.5. CONTROL OF COMMON AREA: Landlord shall at all times have
exclusive control of the Common Area. Landlord shall have the right, without
the same constituting an actual or constructive eviction and without
entitling Tenant to any abatement of rent, to: (i) close any part of the
Common Area to the minimum extent reasonably necessary in the reasonable
opinion of Landlord's counsel to prevent a dedication thereof or the accrual
of any prescriptive rights therein; (ii) temporarily close the Common Area to
perform maintenance or for any other reason deemed sufficient by Landlord;
(iii) designate other property outside the boundaries of the Property to
become part of the Property; (iv) construct multi-deck parking structures in
any part of the Common Area; (v) change the shape, size, location, number and
extent of improvements on the Common Area; (vi) select a third party to
maintain and operate any of the Common Area at any time Landlord determines
that the best interests of the Property will be served by having the Common
Area maintained and operated by that third party so long as the fees and
charges of such third party are reasonable and competitive with the fees of
others in the marketplace
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providing the same services; (vii) make changes to the Common Area including,
without limitation, changes in the location of driveways, parking spaces,
parking areas, sidewalks or the direction of the flow of traffic and the site
of the Common Area; and/or (viii) voluntarily change the address of the
Property. Landlord agrees not to change the name of Airport Technology Park
without the prior consent of Tenant. The use of the Common Area shall be
subject to such reasonable regulation and changes therein as Landlord shall
make from time to time. Landlord shall not exercise its rights to control
the Common Area in a manner that would materially interfere with Tenant's use
of the Premises without first obtaining Tenant's approval. Tenant shall keep
the Common Area free and clear of all obstructions created or permitted by
Tenant. If in the opinion of Landlord unauthorized persons are using any of
the Common Area by reason of the presence of Tenant in the Premises, Tenant,
upon demand of Landlord, shall restrain such unauthorized use by appropriate
proceedings. Nothing herein shall affect the right of Landlord at any time
to remove such unauthorized person from the Common Area nor to prohibit the
use of the Common Area by unauthorized persons. In exercising any such
rights described in this paragraph 6.5 regarding the Common Area, Landlord
shall make a reasonable effort to minimize any disruption to Tenant's
business.
6.6. TENANT'S NEGLIGENCE: Anything in this Lease to the contrary
notwithstanding, Tenant shall pay for all damage to the Premises or the
Property caused by the negligent act or omission of Tenant, its employees,
contractors, or invitees, or by the failure of Tenant to discharge promptly
its obligations under this Lease or to comply with the terms of this Lease,
but only to the extent such damage is not covered by insurance proceeds
actually recovered by Landlord. Tenant shall make payment within thirty (30)
days after demand therefor by Landlord.
ARTICLE 7.
WASTE DISPOSAL AND UTILITIES
7.1. WASTE DISPOSAL: Tenant shall store its waste either inside the
Premises or within outside trash enclosures that are (i) fully fenced and
screened in compliance with all Private Restrictions, (ii) designed for such
purpose to be used either exclusively by Tenant or in common with other
occupants of the Property, as designated by Landlord, and (iii) first
approved by Landlord. All entrances to such outside trash enclosures shall
be kept closed, and waste shall be stored in such manner as not to be visible
from the exterior of such outside enclosures. Tenant shall cause all of its
waste to be regularly removed from the Property at Tenant's sole cost.
Tenant shall keep all fire corridors and mechanical equipment rooms in the
Premises free and clear of all obstructions at all times.
7.2. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with
respect to the existence or use of Hazardous Materials on the Property:
A. Landlord hereby makes the following representations to
Tenant, each of which is made to the best of Landlord's knowledge as of the
Commencement Date:
(1) The soil and ground water on or under the Property
does not contain Hazardous Materials in amounts which violate any Hazardous
Materials Laws to the extent that any governmental entity could require
either Landlord or Tenant to take any remedial action or impose any penalties
with respect to such Hazardous Materials.
(2) During Landlord's period of ownership, no litigation
or any administrative proceeding has been brought or threatened, nor any
settlements reached with any governmental or private party, concerning the
actual or alleged presence of Hazardous Materials on or about the Property or
any disposal, release or threatened release of Hazardous Materials in or
about the Property.
(3) During the time that Landlord has owned the Property,
Landlord has received no notice of (i) any violation, or alleged violation,
of any Hazardous Material Law that has not been corrected to the satisfaction
of the appropriate authority, (ii) any pending claims relating to the
presence of Hazardous Material on the Property, or (iii) any pending
investigation
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by any governmental agency concerning the Property relating to Hazardous
Materials.
(4) The Property does not contain any (i) equipment
containing PCBs, or (ii) underground storage tanks.
B. Any handling, transportation, storage, treatment, disposal
or use of Hazardous Materials by Tenant and Tenant's agents, employees,
contractors, invitees or subTenants after the Commencement Date in or about
the Property shall strictly comply with all applicable Hazardous Materials
Laws. Tenant shall indemnify, defend upon demand with counsel reasonably
acceptable to Landlord, and hold harmless Landlord from and against any and
all liabilities, losses, claims, damages, interest, penalties, fines,
monetary sanctions, attorneys' fees, experts' fees, court costs, remediation
costs, investigation costs, and other expenses which result from or arise in
any manner whatsoever out of the use, storage, treatment, transportation,
release, or disposal of Hazardous Materials on or about the Property by
Tenant or Tenant's agents, employees, contractors, invitees or subTenants
after the Commencement Date.
C. If the presence of Hazardous Materials on the Property
caused or permitted by Tenant or Tenant's agents, employees, contractors,
invitees or subTenants after the Commencement Date results in contamination
or deterioration of water or soil resulting in a level of contamination
greater than the levels established as acceptable by any governmental agency
having jurisdiction over such contamination, then Tenant shall promptly take
any and all action necessary to clean up such contamination if required by
Law or as a condition to the issuance or continuing effectiveness of any
governmental approval which relates to the use of the Property or any part
thereof. Tenant shall further be solely responsible for, and shall defend,
indemnify and hold Landlord and its agents harmless from and against, all
claims, costs and liabilities, including attorneys' fees and costs, arising
out of or in connection with any removal, clean-up and restoration work and
materials required hereunder to return the Property to its condition existing
prior to the appearance of such Hazardous Materials.
D. Landlord and Tenant shall each give written notice to the
other as soon as reasonably practicable of (i) any communication received
from any governmental authority concerning Hazardous Materials which relates
to the Property, and (ii) any contamination of the Property by Hazardous
Materials which constitutes a violation of any Hazardous Materials Law.
Landlord and Tenant agree to keep such information confidential, except for
(i) disclosures that are approved by the other party, (ii) disclosures
required by Law or (iii) disclosures to any environmental consultant, lender,
purchaser, prospective purchaser, attorneys for either Landlord or Tenant, or
brokers for either Landlord or Tenant, so long as an agreement of
confidentiality is obtained from a party to whom the disclosure is to be
made, and (iv) disclosures in connection with any litigation or
administrative proceeding in which either Landlord or Tenant is involved.
Tenant and Tenant's agents, employees, contractors, invitees or subTenants
shall not bring Hazardous Materials onto the Property without first obtaining
the written consent of Landlord; provided, however, Tenant may, without being
required to obtain the prior written consent of Landlord, use at the Premises
in small quantities office supplies, cleaning materials and other maintenance
materials that are customarily used in business offices, even though such
supplies and materials may fall within the definition of Hazardous Materials.
At any time during the Lease Term, Tenant shall, within five days after
written request therefor received from Landlord, disclose in writing all
Hazardous Materials that are being used by Tenant on the Property, the nature
of such use, and the manner of storage and disposal.
E. Landlord may cause testing wells to be installed on the
Property, and may cause the ground water to be tested to detect the presence
of Hazardous Material by the use of such tests as are then customarily used
for such purposes. Any such installation of wells or tests shall be done in
a manner which minimizes the interference with Tenant's use of the Premises.
If Tenant so requests, Landlord shall supply Tenant with copies of such test
results. The cost of such tests and of the installation, maintenance, repair
and replacement of such wells shall be paid by Tenant if such tests disclose
the existence of facts which give rise to liability of Tenant pursuant to its
indemnity given in subparagraph 7.2B or 7.2C, and Tenant's liability is
established in a judicial or administrative proceeding, or in an action for
declaratory relief brought by Landlord.
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F. Landlord, at its sole cost, shall comply with all Hazardous
Materials Laws affecting the Property (without right of reimbursement from
Tenant) to the extent that (i) Landlord is legally obligated to do so by such
Laws, and (ii) such compliance (or the cost of such compliance) is not made
the responsibility of Tenant pursuant to subparagraph 7.2B or subparagraph
7.2C. Landlord shall indemnify, defend upon demand with competent counsel,
and hold harmless Tenant from and against any and all liability for response
costs imposed upon Tenant by any governmental agency pursuant to the Federal
Law known as "CERCLA" (more particularly identified in subparagraph 7.2G) and
the comparable California statute (commonly known as the
Carpenter-Presley-Tanner Hazardous Substances Account Act, California Health
and Safety Code Section 25300 et. seq.) that results from the presence of
Hazardous Materials on the Property not caused or contributed to by the use,
storage, treatment, release or disposal of Hazardous Materials on or about
the Property by Tenant, its subTenants, or their respective agents,
employees, contractors, or invitees. Notwithstanding the foregoing, the
indemnity given by Landlord in the immediately preceding sentence shall not
apply with respect to liability caused by any contamination of the Property
by a Hazardous Material that is or has been used, stored, treated, released
or disposed of on the Property by Tenant, its subTenants, or their respective
agents, employees, contractors, or invitees unless Tenant can prove such
contamination was not caused or contributed to by any of such parties.
G. As used herein, the term "Hazardous Material," means any
hazardous or toxic substance, material or waste which is or becomes regulated
by any local governmental authority, the State of California or the United
States Government. The term "Hazardous Material," includes, without
limitation, asbestos, PCBs, petroleum and petroleum products, and any
material or substance which is (i) listed under Article 9 or defined as
hazardous or extremely hazardous pursuant to Article 11 of Title 22 of the
California Administrative Code, Division 4, Chapter 20, (ii) defined as a
"hazardous waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C.
Section 6903), or (iii) defined as a "hazardous substance" pursuant to
Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq. (42 U.S.C. Section
9601). As used herein, the term "Hazardous Material Law" shall mean any
statute, law, ordinance, or regulation of any governmental body or agency
(including the U.S. Environmental Protection Agency, the California Regional
Water Quality Control Board, and the California Department of Health
Services) which regulates the use, storage, release or disposal of any
Hazardous Material.
H. The obligations of Landlord and Tenant under this paragraph
7.2 shall survive the expiration or earlier termination of the Lease Term.
The rights and obligations of Landlord and Tenant with respect to issues
relating to Hazardous Materials are exclusively established by this paragraph
7.2. In the event of any inconsistency between any other part of this Lease
and this paragraph 7.2, the terms of this paragraph 7.2 shall control.
7.3 UTILITIES: Tenant shall promptly pay, as the same become due,
all charges for water, gas, electricity, telephone, sewer service, waste pick-up
and any other utilities, materials or services furnished directly to or used by
Tenant on or about the Premises during the Lease Term, including, without
limitation, (i) meter, use and/or connection fees, hook-up fees, standby fees,
and (ii) penalties for discontinued or interrupted service.
7.4 COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Landlord and Tenant
shall comply with all rules, regulations and requirements promulgated by
national, state or local governmental agencies or utility suppliers
concerning the use of utility services, including any rationing, limitation
or other control. Landlord may voluntarily cooperate in a reasonable manner
with the efforts of all governmental agencies or utility suppliers in
reducing energy or other resource consumption. Tenant shall not be entitled
to terminate this Lease nor to any abatement in rent by reason of such
compliance or cooperation. Tenant agrees at all times to cooperate fully with
Landlord and to abide by all rules, regulations and requirements which
Landlord may prescribe in order to maximize the efficient operation of the
HVAC system and all other utility systems.
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ARTICLE 8.
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REAL PROPERTY TAXES
8.1. REAL PROPERTY TAXES DEFINED: The term "Real Property Taxes" as
used herein shall mean (i) all taxes, assessments, levies, and other charges
of any kind or nature whatsoever, general and special, foreseen and
unforeseen (including all installments of principal and interest required to
pay any existing or future general or special assessments for public
improvements, services or benefits, and any increases resulting from
reassessments or resulting from a change in ownership or any other cause),
now or hereafter imposed by any governmental or quasi-governmental authority
or special district having the direct or indirect power to tax or levy
assessments, which are levied or assessed against, or with respect to the
value, occupancy or use of, all or any portion of the Property (as now
constructed or as may at any time hereafter be constructed, altered, or
otherwise changed) or Landlord's interest therein, the fixtures, equipment
and other property of Landlord, real or personal, that are an integral part
of and located on the Property, the gross receipts, income, or rentals from
the Property, or the use of parking areas, public utilities, or energy within
the Property, (ii) all charges, levies or fees imposed by reason of
environmental regulation or other governmental control of the Property
(excluding costs and expenses for which Landlord is responsible pursuant to
subparagraph 7.2F), and (iii) all costs and fees (including attorneys' fees)
incurred by Landlord in contesting any Real Property Tax and in negotiating
with public authorities as to any Real Property Tax. If at any time during
the Lease Term the method of taxation or assessment of the Property
prevailing as of the Commencement Date shall be altered so that in lieu of or
in addition to any Real Property Tax described above there shall be levied,
assessed or imposed (whether by reason of a change in the method of taxation
or assessment, creation of a new tax or charge, or any other cause) an
alternate or additional tax or charge (i) on the value, use or occupancy of
the Property, (ii) on or measured by the gross receipts, income, or rentals
from the Property, (iii) on Landlord's business of leasing the Property, or
(iv) computed in any manner with respect to the operation of the Property,
then any such tax or charge, however designated, shall be included within the
meaning of the term "Real Property Taxes" for purposes of this Lease. If any
Real Property Tax is based upon property or rents unrelated to the Property,
then only that part of such Real Property Tax that is fairly allocable to the
Property shall be included within the meaning of the term "Real Property
Taxes". Notwithstanding the foregoing, the term "Real Property Taxes" shall
not include estate, inheritance, transfer, gift or franchise taxes of
Landlord or the federal or state net income tax imposed on Landlord's income
from all sources.
8.2. TENANT'S OBLIGATION TO REIMBURSE: As Additional Rent, Tenant shall
pay to Landlord Tenant's Allocated Share of all Real Property Taxes which
become due after the Rent Start Date and during the Lease Term which are
fairly allocable to the Premises, which include (i) all Real Property Taxes
assessed with respect to the value, use or occupancy of the Premises and the
land beneath it, and (ii) a proportionate share (based on the Premises Gross
Leasable Area as a percentage of the Property Gross Leasable Area) of all
Real Property Taxes assessed with respect to the Common Area or with respect
to the Property in general which are not fairly allocable to any one building
on the Property. Tenant shall pay its share of Real Property Taxes (i) within
thirty (30) days after being billed for the same by Landlord, or (ii) no
later than ten (10) days before such Real Property Tax becomes delinquent,
whichever last occurs. If requested by Tenant in writing within one year
from receipt of a bill for Tenant's Allocated Share of Real Property Taxes,
Landlord shall furnish Tenant with such evidence as is reasonably available
to Landlord with respect to the amount of any Real Property Tax which is part
of such bill. Tenant may not withhold payment of such bill pending receipt
and/or review of such evidence. Upon Landlord's election or if any Lender
requires Landlord to impound Real Property Taxes on a periodic basis during
the Lease Term, then Tenant, on notice from Landlord indicating this
requirement, shall pay a sum of money toward its liability under this Article
to Landlord on the same periodic basis in accordance with the Lender's
requirements (if any). Landlord shall impound the Real Property Tax payments
received from Tenant in accordance with the requirements of the Lender (if
any). If any assessments are levied against the Property, Landlord may elect
either to pay the assessment in full or to allow the assessment to go to
bond. If Landlord pays the assessment in full, Tenant shall pay to Landlord
each time payment of Real Property Taxes is made a sum equal to that which
would have been payable (as both principal
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and interest) had Landlord allowed the assessment to go to bond.
Notwithstanding anything to the contrary contained in paragraphs 8.1 and 8.2,
if there is an increase in Real Property Taxes resulting from a "change in
ownership" (as that term is defined in California Revenue and Taxation Code
Section 60, et. seq.) which occurs prior to the fourth (4th) anniversary of
the Commencement Date, then Tenant shall not be obligated to pay any such
increase that results from such "change of ownership".
8.3. TAXES ON TENANT'S PROPERTY: Tenant shall pay before delinquency
any and all taxes, assessments, license fees and public charges levied,
assessed or imposed against Tenant or Tenant's estate in this Lease or the
property of Tenant situated within the Premises which become due during the
Lease Term. Tenant shall furnish Landlord with satisfactory evidence of
these payments within thirty (30) days after receipt of written request
therefor from Landlord.
ARTICLE 9
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INSURANCE
9.1. TENANT'S INSURANCE: Tenant shall maintain insurance complying
with all of the following:
A. Tenant shall procure, pay for and keep in full force and
effect the following:
(1) Commercial general liability insurance, including
property damage, against liability for personal injury, bodily injury, death
and damage to property occurring in or about, or resulting from an occurrence
in or about, the Premises with combined single limit coverage of not less
than the amount of Tenant's Minimum Liability Insurance Coverage set forth in
paragraph 1.8, which insurance shall contain a "contractual liability"
endorsement insuring Tenant's performance of Tenant's obligation to indemnify
Landlord contained in paragraph 10.3;
(2) Plate-glass insurance, at actual replacement cost; and
(3) Fire and property damage insurance against loss caused by
fire, extended coverage perils including steam boiler insurance, sprinkler
leakage, if applicable, vandalism, malicious mischief and such other
additional perils as now are or hereafter may be included in a standard
extended coverage endorsement from time to time in general use in the county
in which the Property is located, insuring Tenant's personal property,
inventory, Trade Fixtures and Leasehold Improvements within the Premises for
the full actual replacement cost thereof.
B. Where applicable and required by Landlord, each policy of
insurance required to be carried by Tenant pursuant to this paragraph
(i) shall name Landlord and such other parties in interest as Landlord
designates as additional insureds; (ii) shall be primary insurance which
provides that the insurer shall be liable for the full amount of the loss up
to and including the total amount of liability set forth in the declarations
without the right of contribution from any other insurance coverage of
Landlord; (iii) shall be in a form satisfactory to Landlord; (iv) shall be
carried with companies reasonably acceptable to Landlord; (v) shall provide
that such policy shall not be subject to cancellation, lapse or change except
after at least thirty (30) days prior written notice to Landlord; (vi) shall
not have a "deductible" in excess of $500,000 or such greater amount as is
approved by Landlord; (vii) shall (to the extent available) contain a waiver
by the insurer of any right to subrogation against Landlord, its agents,
employees and contractors which might arise by reason of any payment under
such policy or by reason of any act or omission of Landlord, its agents,
employees or contractors; and (viii) shall contain a "severability" clause.
If Tenant has in force and effect a blanket policy of liability insurance
with the same coverage for the Premises as described above, as well as other
coverage of other premises and properties of Tenant, or in which Tenant has
some interest, such blanket insurance shall satisfy the requirements hereof.
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C. A certificate of each paid-up policy evidencing the insurance
required to be carried by Tenant pursuant to this paragraph (appropriately
authenticated by the insurer), certifying that such policy has been issued,
providing the coverage required by this paragraph, and containing the
provisions specified herein, shall be delivered to Landlord prior to the time
Tenant or any of its contractors enters the Premises and upon renewal of such
policies, but not less than five (5) days prior to the expiration of the term
of such coverage. If Landlord's insurance advisor reasonably determines at
any time that the amount of coverage required for any policy of insurance
Tenant is to obtain pursuant to this paragraph is not adequate, then Tenant
shall increase such coverage for such insurance to such amount as Landlord's
insurance advisor reasonably deems adequate, not to exceed the level of
coverage commonly carried by comparable businesses similarly situated for
such insurance; provided, however, that Landlord may not require an
adjustment pursuant to this sentence more frequently than once every two (2)
years during the Lease Term.
9.2. LANDLORD'S INSURANCE: Landlord shall have the following
obligations and options regarding insurance:
A. Landlord shall maintain a policy or policies of fire and
property damage insurance in so-called "all risk" form insuring Landlord (and
such others as Landlord may designate) against loss of rents for a period of
not less than six (6) months and from physical damage to the Premises with
coverage of not less than the full replacement cost of (i) the building of
which the Premises are a part, including the structural elements thereof and
all electrical, mechanical, plumbing, and other systems, and (ii) all
Interior Improvements constructed pursuant to the Interior Improvement
Agreement attached as Exhibit "C". Landlord may so insure the Premises
separately, or may insure the Premises with other buildings and improvements
within the Property and/or other property owned by Landlord which Landlord
elects to insure together under the same policy or policies. Such fire and
property damage insurance, at Landlord's election, (i) may be endorsed to
cover loss caused by such additional perils against which Landlord may elect
to insure, including earthquake and/or flood, (ii) shall contain commercially
reasonable "deductibles" which, in the case of earthquake and flood
insurance, may be up to ten percent (10%) of the replacement value of the
property insured or such higher amount as is then commercially reasonable,
(iii) may provide coverage for loss of rents for a period of up to twelve
(12) months, and (iv) may contain additional endorsements or coverage
reasonably required by Landlord or any Lender, including an "agreed amount"
endorsement, demolition insurance (covering the cost of demolishing damaged
improvements or improvements required by Law to be demolished), and
difference in condition coverage. Landlord shall not be required to cause
such insurance to cover any Trade Fixtures, Leasehold Improvements or any
inventory or other personal property of Tenant.
B. Landlord may maintain a policy or policies of commercial
general liability insurance insuring Landlord (and such others as are
designated by Landlord) against liability for personal injury, bodily injury,
death and damage to property occurring or resulting from an occurrence in, on
about the Property, with combined single limit coverage in such amount as
Landlord may from time to time determine is reasonably necessary for its
protection and with commercially reasonable deductibles.
9.3. TENANT'S OBLIGATION TO REIMBURSE: The cost of the insurance
carried by Landlord pursuant to paragraph 9.2 (and any commercially
reasonable "deductible" amount paid by Landlord in connection with the
restoration of any loss and excluded from the coverage of such insurance)
shall be a Common Operating Expense and Tenant shall pay its share thereof as
provided in paragraph 6.3. However, if Landlord's insurance rates for the
Premises are increased at any time during the Lease Term as a result of the
nature of Tenant's use of the Premises, Tenant shall reimburse Landlord for
the full amount of such increase immediately upon receipt of a bill from
Landlord therefor.
9.4. RELEASE AND WAIVER OF SUBROGATION: The parties hereto release
each other, and their respective agents and employees, from any liability for
injury to any person or damage to property that is caused by or results from
any risk insured against under any valid and collectible insurance policy
carried by either of the parties which contains a waiver of subrogation by
the insurer and is in force at the time of such injury or damage, subject to
the following limitations:
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(i) the foregoing provisions shall not apply to the commercial general
liability insurance described by subparagraph 9.1A and 9.1B; and (ii) such
release shall apply to liability resulting from any risk insured against or
covered by self-insurance maintained or provided by Tenant to satisfy the
requirements of paragraph 9.1. This release shall be in effect only so long
as the applicable insurance policy contains a clause to the effect that this
release shall not affect the right of the insured to recover under such
policy. Each party shall use reasonable efforts to cause each insurance
policy obtained by it to provide that the insurer waives all right of
recovery by way of subrogation against the other party and its agents and
employees in connection with any injury or damage covered by such policy.
However, if any insurance policy cannot be obtained with such a waiver of
subrogation, or if such waiver of subrogation is only available at additional
cost and the party for whose benefit the waiver is to be obtained does not
pay such additional cost, then the party obtaining such insurance shall
notify the other party of that fact and thereupon shall be relieved of the
obligation to obtain such waiver of subrogation rights from the insurer with
respect to the particular insurance involved.
ARTICLE 10.
LIMITATION ON LANDLORD'S
LIABILITY AND INDEMNITY
10.1. LIMITATION ON LANDLORD'S LIABILITY: Landlord shall not be liable
to Tenant, nor shall Tenant be entitled to terminate this Lease or to any
abatement of rent, for any injury to Tenant, its agents, employees,
contractors or invitees, damage to Tenant's property, or loss to Tenant's
business resulting from any cause, including without limitation any (i)
failure, interruption or installation of any HVAC or other utility system or
service; (ii) failure to furnish or delay in furnishing any utilities or
services when such failure or delay is caused by Acts of God or the elements,
labor disturbances of any character, any other accidents or other conditions
beyond the reasonable control of Landlord; (iii) limitation, curtailment,
rationing or restriction on the use of water or electricity, gas or any other
form of energy or any services or utility serving the Premises; (iv)
vandalism or forcible entry by unauthorized persons; or (v) penetration of
water into or onto any portion of the Premises or the Common Area through
roof leaks or otherwise. Notwithstanding the foregoing:
A. Subject to paragraph 9.4, Landlord shall be liable for any
such injury, damage or loss which is proximately caused by Landlord's gross
negligence or willful misconduct, of which Landlord has actual notice and a
reasonable opportunity to cure but which it fails to so cure.
B. Tenant shall have the option to terminate this Lease upon
the occurrence of the following: (i) water, electricity, or other utility
service essential to the conduct of Tenant's business in the Premises is
interrupted or substantially impaired for a period of more than two hundred
seventy (270) consecutive days during which time the Premises are rendered
substantially unusable for the conduct of Tenant's business (a "Material
Interruption"); and (ii) the Material Interruption is not caused by the act
or omission of Tenant, its agents, employees or contractors.
10.2. LIMITATION ON TENANT'S RECOURSE: So long as the Landlord is a
corporation, trust, partnership, joint venture, unincorporated association or
other form of business entity, (i) the obligations of Landlord shall not
constitute personal obligations of the officers, directors, trustees,
partners, joint venturers, members, owners, stockholders, or other principals
or representatives of such business entity, and (ii) Tenant shall have
recourse only to the assets of such business entity for the satisfaction of
such obligations and not against the assets of such officers, directors,
trustees, partners, joint venturers, members, owners, stockholders,
principals or representatives, except to the extent of their interests in the
entity that is Landlord. If Landlord is a natural person or persons, Tenant
shall have recourse only to the interest of such natural persons in the
Property for the satisfaction of the obligations of Landlord and shall not
have recourse to any other assets of such natural persons for the
satisfaction of such obligations.
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10.3. INDEMNIFICATION OF LANDLORD: Tenant shall hold harmless,
indemnify and defend Landlord, and its employees, agents and contractors,
with competent counsel, from all liability, penalties, losses, damages,
costs, expenses, causes of action, claims and/or judgments arising by reason
of any death, bodily injury, personal injury or property damage (i) resulting
from any cause or causes whatsoever (other than the negligence or willful
misconduct of Landlord of which Landlord has had notice and a reasonable time
to cure, but which Landlord has failed to cure) occurring in or about or
resulting from an occurrence in or about the Premises, or (ii) resulting from
the negligence or willful misconduct of Tenant, its agents, employees and
contractors, wherever the same may occur, or (iii) resulting from an Event of
Tenant's Default. The provisions of this paragraph shall survive the
expiration or sooner termination of this Lease.
ARTICLE 11.
DAMAGE TO PREMISES
11.1. LANDLORD'S DUTY TO RESTORE: If the Premises are damaged by any
peril after the Commencement Date of this Lease, Landlord shall restore the
Premises unless the Lease is terminated by Landlord pursuant to paragraph
11.2 or by Tenant pursuant to paragraph 11.3. All insurance proceeds
available from the fire and property damage insurance carried by Landlord
pursuant to paragraph 9.2 shall be paid to and become the property of
Landlord. If this Lease is terminated pursuant to either paragraphs 11.2 or
11.3, then all insurance proceeds available from insurance carried by Tenant
which covers loss to property that is Landlord's property or would become
Landlord's property on termination of this Lease shall be paid to and become
the property of Landlord. If this Lease is not so terminated, then upon
receipt of the insurance proceeds (if the loss is covered by insurance) and
the issuance of all necessary governmental permits, Landlord shall commence
and diligently prosecute to completion the restoration of the Premises, to
the extent then allowed by Law, to substantially the same condition in which
the Premises were immediately prior to such damage. Landlord's obligation to
restore shall be limited to the Premises and interior improvements
constructed by Tenant but financed by Landlord pursuant to the Interior
Improvement Agreement as such improvements existed upon completion thereof
excluding any Leasehold Improvements, Trade Fixtures and/or personal property
constructed or installed by Tenant in the Premises. To the extent that
insurance proceeds recovered by Landlord from the insurance carried pursuant
to paragraph 9.2A exceed the amount needed by Landlord to discharge its
restoration obligation pursuant to the immediately preceding sentence,
Landlord shall make such excess insurance proceeds available to Tenant for
the purpose of restoring interior improvements that were constructed by
Tenant and financed by Tenant pursuant to the Interior Improvement Agreement,
so that such improvements may be restored to substantially the same condition
existing as of the date such improvements were initially completed.
11.2. LANDLORD'S RIGHT TO TERMINATE: Landlord shall have the right to
terminate this Lease in the event any of the following occurs, which right
may be exercised only by delivery to Tenant of a written notice of election
to terminate within thirty (30) days after the date of such damage:
A. Either the Property or the Premises is damaged by an Insured
Peril to such an extent that the estimated cost to restore equals or exceeds
eighty percent (80%) of the then actual replacement cost thereof and there
remains less than three (3) years in the Lease Term; provided, however, that
Landlord may not terminate this Lease pursuant to this subparagraph 11.2A if
Tenant at the time of such damage has a then valid written option to extend
the Lease Term and Tenant exercises such option to extend the Lease Term
within fifteen (15) days after Tenant receives Landlord's notice of election
to terminate and such action results in there being more than three (3) years
remaining in the Lease Term (as it has been extended by the Exercise of such
option);
B. Either the Property or the Premises is damaged by an
Uninsured Peril to such an extent that the estimated cost to restore exceeds
two percent (2%) of the actual replacement cost thereof; provided, however,
that Landlord may not terminate this Lease
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pursuant to this paragraph 11.2B if one or more Tenants of the Property agree
in writing to pay the amount by which the cost to restore the damage exceeds
such amount and subsequently deposit such amount with Landlord within thirty
(30) days after Landlord has notified Tenant of its election to terminate
this Lease;
C. The Premises are damaged by any peril within twelve (12)
months of the last day of the Lease Term to such an extent that the estimated
cost to restore equals or exceeds an amount equal to six (6) times the Base
Monthly Rent then due; provided, however, that Landlord may not terminate
this Lease pursuant to this subparagraph 11.2C if Tenant, at the time of such
damage, has a then valid express written option to extend the Lease Term and
Tenant exercises such option to extend the Lease Term within fifteen (15)
days following the date of such damage; or
D. As used herein, the following terms shall have the following
meanings: (i) the term "Insured Peril" shall mean a peril actually insured
against for which the insurance proceeds paid or made available to Landlord
are sufficient (except for any "deductible" amount specified by such
insurance) to restore the Property under the then existing building codes to
the condition existing immediately prior to the damage; and (ii) the term
"Uninsured Peril" shall mean and include any peril not actually insured
against, any peril actually insured against but for which the insurance
proceeds paid or made available to Landlord are for any reason (except for
any "deductible" amount specified by such insurance) insufficient to restore
the Property under then existing building codes to the condition existing
immediately prior to the damage, and any peril actually insured against but
for which the insurance proceeds are not paid or made available to Landlord.
11.3. TENANT'S RIGHT TO TERMINATE: If the Premises are damaged by any
peril and Landlord does not elect to terminate this Lease or is not entitled
to terminate this Lease pursuant to paragraph 11.2, then as soon as
reasonably practicable, Landlord shall furnish Tenant with the written
opinion of Landlord's architect or construction consultant as to when the
restoration work required of Landlord may be completed. Tenant shall have
the right to terminate this Lease in the event any of the following occurs,
which right may be exercised only by delivery to Landlord of a written notice
of election to terminate within thirty (30) days after Tenant receives from
Landlord the estimate of the time needed to complete such restoration:
A. The Premises are damaged by any peril and, in the reasonable
opinion of Landlord's architect or construction consultant, the restoration
of the Premises cannot be substantially completed within two hundred seventy
(270) days after the date of such damage; or
B. The Premises are damaged by any peril within twelve (12)
months of the last day of the Lease Term and in the reasonable opinion of
Landlord's architect or construction consultant the restoration of the
Premises cannot be substantially completed within ninety (90) days after the
date of such damage; or
C. The Premises are not restored within eighteen (18) months
following the date of such damage; provided, however, that if at the time
restoration of the "shell" of the building in which the Premises are located
is substantially completed (excluding Interior Improvements) Landlord
reasonably estimates that Landlord will not be able to complete restoration
of the Premises within such eighteen (18) month period, then at that time
Landlord may offer in writing to Tenant the option to terminate this Lease,
and if Tenant does not exercise such option to terminate the Lease so offered
to Tenant by Landlord, then Tenant may not thereafter elect to terminate this
Lease pursuant to this subparagraph 11.3C.
11.4. ABATEMENT OF RENT: In the event of damage to the Premises which
does not result in the termination of this Lease, the Base Monthly Rent and
the Additional Rent shall be temporarily abated commencing on the date of
damage and continuing through the Period of restoration in proportion to the
degree to which Tenant's use of the Premises is impaired by such damage.
Tenant shall not be entitled to any compensation or damages from Landlord for
loss of Tenant's business or property or for any inconvenience or annoyance
caused by such damage or restoration. Tenant hereby waives the provisions of
Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of the
California Civil Code, and the provisions of any similar law hereinafter
enacted.
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ARTICLE 12.
CONDEMNATION
12.1. TENANT'S TERMINATION RIGHT: Tenant shall have the right to
terminate this Lease if, as a result of any taking by means of the exercise
of the power of eminent domain (including any voluntary sale or transfer by
Landlord to any condemnor under threat of condemnation), (i) ten percent
(10%) or more of the Premises is so taken, or (ii) there is a taking
affecting the Common Area and, as a result of such taking, Landlord cannot
provide parking spaces within reasonable walking distance of the Premises
equal in number to at least ninety percent (90%) of the number of spaces
allocated to Tenant by paragraph 2.1, whether by rearrangement of the
remaining parking areas in the Common Area (including construction of
multi-deck parking structures or restripping for compact cars where permitted
by Law) or by alternative parking facilities on other land. Tenant must
exercise such right within a reasonable period of time, to be effective on
the date that possession of that portion of the Premises or Common Area that
is condemned is taken by the condemnor.
12.2 RESTORATION AND ABATEMENT OF RENT: If any part of the Premises
or the Common Area is taken by condemnation and this Lease is not terminated,
then Landlord shall restore the remaining portion of the Premises and Common
Area to substantially the same condition in which the Premises and Common
Area were immediately prior to such taking, excluding any Leasehold
Improvements, Trade Fixtures and/or personal property constructed or
installed by Tenant; provided, however, that Landlord shall not be obligated
to spend more for such restoration than the amount of any condemnation award
recovered by or pursuant to paragraph 12.3. Thereafter, except in the case
of a temporary taking, (i) as of the date possession is taken the Base
Monthly Rent (but not any Additional Rent) shall be reduced in the same
proportion that the floor area of that part of the Premises so taken (less
any addition thereto by reason of any reconstruction) bears to the original
floor area of the Premises, and (ii) to the extent that Landlord is obligated
to undertake any restoration work as a result of such condemnation, the Base
Monthly Rent shall be further abated in proportion to the extent to which
such restoration work interferes with Tenant's ability to use that part of
the Premises which remains after the condemnation.
12.3 TEMPORARY TAKING: If any portion of the Premises is temporarily
taken for six (6) months or less, this Lease shall remain in effect and
Tenant shall be entitled to recover any condemnation award that is made for
such taking and shall be responsible for restoring the Premises to the
condition existing immediately prior to such temporary taking. If any
portion of the Premises is temporarily taken by condemnation for a period
which exceeds six (6) months or which extends beyond the natural expiration
of the Lease Term, and such taking materially and adversely affects Tenant's
ability to use the Premises for the Permitted Use, then Tenant shall have the
right to terminate this Lease, effective on the date possession is taken by
the condemnor.
12.4. DIVISION OF CONDEMNATION AWARD: Any award made as a result of
any condemnation of the Premises or the Common Area shall belong to and be
paid to Landlord, and Tenant hereby assigns to Landlord all of its right,
title and interest in any such award; provided, however, that Tenant shall be
entitled to recover out of any condemnation award made for a taking of all or
part of the Premises an amount equal to the unamortized cost of all interior
improvements paid for by Tenant constructed pursuant to the Interior
Improvement Agreement and all Leasehold Improvements constructed by Tenant
(amortized on a straight line basis over the initial Lease Term for Interior
Improvements, and over the period from completion of construction until
expiration of the Lease Term for Leasehold Improvements); and provided
further that Tenant shall be entitled to receive any condemnation award that
is made directly to Tenant for the following so long as the award made to
Landlord is not thereby reduced: (i) for the taking of personal property or
Trade Fixtures belonging to Tenant, (ii) for the interruption of Tenant's
business or its moving costs, (iii) for loss of Tenant's goodwill, or
(iv) for any temporary taking where this Lease is not terminated as a result of
such taking. The rights of Landlord and Tenant regarding any condemnation
shall be determined as provided in this Article,
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and each party hereby waives the provisions of Section 1265.130 of the
California Code of Civil Procedure and the provisions of any similar law
hereinafter enacted allowing either party to petition the Superior Court to
terminate this Lease in the event of a partial taking of the Premises.
ARTICLE 13.
DEFAULT AND REMEDIES
13.1. EVENTS OF TENANT'S DEFAULT: Tenant shall be in default of its
obligations under this Lease if any of the following events occurs (an "Event
of Tenant's Default"):
A. Tenant shall have failed to pay Base Monthly Rent or any
Additional Rent when due and such failure is not cured within ten (10) days
after delivery of written notice from Landlord specifying such failure to
pay; or
B. Tenant shall have failed to perform any term, covenant, or
condition of this Lease except those requiring the payment of Base Monthly
Rent or Additional Rent, and Tenant shall have failed to cure such breach
within thirty (30) days after written notice from Landlord specifying the
nature of such breach, or if such breach could not reasonably be cured within
said thirty (30) day period, Tenant shall have failed to commence such cure
within said thirty (30) day period and thereafter continue with due diligence
to prosecute such cure to completion within such time period as is reasonably
needed; or
C. Tenant shall have made a general assignment of its assets
for the benefit of its creditors; or
D. Tenant shall have sublet the Premises or assigned its
interest in the Lease in violation of the provisions contained in Article 14,
whether voluntarily or by operation of law; Landlord shall have notified
Tenant in writing that such Transfer constitutes a violation of the
provisions contained in Article 14, and Tenant does not cause such Transfer
to be rescinded or terminated and possession of the Premises affected by the
Transfer recovered from the Transferee within ninety (90) days after receipt
of such notice; or
E. Tenant shall have permitted the sequestration or attachment
of, or execution on, or the appointment of a custodian or receiver with
respect to, all or any substantial part of the property of Tenant or any
property essential to the conduct of Tenant's business, and Tenant shall have
failed to obtain a return or release of such property within ninety (90) days
thereafter or prior to sale pursuant to such sequestration, attachment or
levy, whichever is earlier; or
F. A court shall have made or entered any decree or order with
respect to Tenant, or Tenant shall have submitted to or sought a decree or
order (or a petition or pleading shall have been filed in connection
therewith) which: (i) grants or constitutes (or seeks) an order for relief,
appointment of a trustee, or confirmation of a reorganization plan under the
bankruptcy laws of the United States; (ii) approves as properly filed (or
seeks such approval of) a petition seeking liquidation or reorganization
under said bankruptcy laws or any other debtor's relief law or statute of the
United States or any state thereof; or (iii) otherwise directs (or seeks) the
winding up or liquidation of Tenant; and such petition, decree or order shall
have continued in effect for a period of ninety (90) or more days; or
G. Tenant shall have failed to deliver documents as required of
it pursuant to paragraph 15.4 or 15.7 within the time periods specified
therein and Tenant shall have failed to cure such default within ten (10)
days after Landlord has delivered to Tenant written notice that Tenant is in
default of its obligations to deliver such documents pursuant to either
paragraph 15.4 or 15.7; or
H. An Event of Tenant's Default has occurred under the Building
C Lease (unless caused by subTenant or assignee of the original Tenant under
this Lease and such original Tenant is using reasonable efforts to cause such
default to be cured) and, at the time
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Tenant is so in default, the Premises and the real property leased to Tenant
pursuant to the Building C Lease are both owned of record by the same person
or entity.
13.2. LANDLORD'S REMEDIES: If an Event of Tenant's Default occurs,
Landlord shall have the following remedies, in addition to all other rights
and remedies provided by any Law or otherwise provided in this Lease, to
which Landlord may resort cumulatively or in the alternative:
A. Landlord may, at Landlord's election, keep this Lease in
effect and enforce by an action at law or in equity all of its rights and
remedies under this Lease, including (i) the right to recover the rent and
other sums as they become due by appropriate legal action, (ii) the right to
make payments required of Tenant or perform Tenant's obligations and be
reimbursed by Tenant for the cost thereof with interest at the Agreed
Interest Rate from the date the sum is paid by Landlord until Landlord is
reimbursed by Tenant, and (iii) the remedies of injunctive relief and
specific performance to compel Tenant to perform its obligations under this
Lease.
B. Landlord may, at Landlord's election, terminate this Lease
by giving Tenant written notice of termination, in which event this Lease
shall terminate on the date set forth for termination in such notice. Any
termination under this subparagraph shall not relieve Tenant from its
obligation to pay sums then due Landlord or from any claim against Tenant for
damages or rent previously accrued or then accruing. In no event shall any
one or more of the following actions by Landlord, in the absence of a written
election by Landlord to terminate this Lease, constitute a termination of
this Lease:
(1) Appointment of a receiver or keeper in order to protect
Landlord's interest hereunder;
(2) Consent to any subletting of the Premises or assignment
of this Lease by Tenant, whether pursuant to the provisions hereof or
otherwise; or
(3) Any other action by Landlord or Landlord's agents
intended to mitigate the adverse effects of any breach of this Lease by
Tenant, including without limitation any action taken to maintain and
preserve the Premises or any action taken to relet the Premises or any
portions thereof, for the account of Tenant and in the name of Tenant.
C. In the event Tenant breaches this Lease and abandons the
Premises, this Lease shall not terminate unless Landlord gives Tenant written
notice of its election to so terminate this Lease. No act by or on behalf of
Landlord intended to mitigate the adverse effect of such breach, including
those described by subparagraphs 13.2B(1), (2) and (3) immediately preceding,
shall constitute a termination of Tenant's right to possession unless
Landlord gives Tenant written notice of termination. Should Landlord not
terminate this Lease by giving Tenant written notice, Landlord may enforce
all its rights and remedies under this Lease, including the right to recover
the rent as it becomes due under the Lease as provided in California Civil
Code Section 1951.4 as in effect on the Commencement Date of this Lease.
D. In the event Landlord terminates this Lease, Landlord shall
be entitled, at Landlord's election, to damages in an amount as set forth in
California Civil Code Section 1951.2 as in effect on the Commencement Date of
this Lease. For purposes of computing damages pursuant to Section 1951.2,
(i) an interest rate equal to the Agreed Interest Rate shall be used where
permitted, and (ii) the term "rent" includes Base Monthly Rent and Additional
Rent. Such damages shall include without limitation:
(1) The worth at the time of award of the amount by which
the unpaid rent for the balance of the term after the time of award exceeds
the amount of such rental loss that Tenant proves could be reasonably
avoided, computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%); and
(2) Any other amount necessary to compensate Landlord for
all detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which in the ordinary course of things would
be likely to result therefrom, including,
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without limitation, the following: (i) expenses for cleaning, repairing or
restoring the Premises; (ii) expenses for altering, remodeling or otherwise
improving the Premises for the purpose of reletting, including installation
of leasehold improvements (whether such installation be funded by a reduction
of rent, direct payment or allowance to a new Tenant, or otherwise); (iii)
broker's fees, advertising costs and other expenses of reletting the
Premises; (iv) costs of carrying the Premises, such as taxes, insurance
premiums, utilities and security precautions; (v) expenses in retaking
possession of the Premises; and (vi) attorneys' fees and court costs incurred
by Landlord in retaking possession of the Premises and in releasing the
Premises or otherwise incurred as a result of Tenant's default.
E. Nothing in this paragraph shall limit Landlord's right to
indemnification from Tenant as provided in paragraph 7.2 and paragraph 10.3.
Any notice given by Landlord in order to satisfy the requirements of
subparagraphs 13.1A or B above shall also satisfy the notice requirements of
California Code of Civil Procedure Section 1161 regarding unlawful detainer
proceedings.
13.3. WAIVER BY TENANT OF CERTAIN REMEDIES: Tenant waives the
provisions of Sections 1932(1), 1941 and 1942 of the California Civil Code
and/or any similar or successor law regarding Tenant's right to terminate
this Lease or to make repairs and deduct the expenses of such repairs from
the rent due under the Lease.
13.4. WAIVER: One party's consent to or approval of any act by the
other party requiring the first party's consent or approval shall not be
deemed to waive or render unnecessary the first party's consent to or
approval of any subsequent similar act by the other party. The receipt by
Landlord of any rent or payment with or without knowledge of the breach of
any other provision hereof shall not be deemed a waiver of any such breach
unless such waiver is in writing and signed by Landlord. No delay or
omission in the exercise of any right or remedy accruing to either party upon
any breach by the other party under this Lease shall impair such right or
remedy or be construed as a waiver of any such breach theretofore or
thereafter occurring. The waiver by either party of any breach of any
provision of this Lease shall not be deemed to be a waiver of any subsequent
breach of the same or of any other provisions herein contained.
13.5. LIMITATION ON EXERCISE OF RIGHTS: At any time that an Event of
Tenant's Default has occurred and remains uncured, (i) it shall not be
unreasonable for Landlord to deny or withhold any consent or approval
requested of it by Tenant which Landlord would otherwise be obligated to
give, and (ii) Tenant may not exercise any option to extend, right to
terminate this Lease, or other right granted to it by this Lease which would
otherwise be available to it.
ARTICLE 14.
ASSIGNMENT AND SUBLETTING
14.1. BY TENANT: The following provisions shall apply to any
assignment, subletting or other transfer by Tenant or any subTenant or
assignee or other successor in interest of the original Tenant (collectively
referred to in this paragraph as "Tenant"):
A. Tenant shall not do any of the following (collectively
referred to herein as a "Transfer"), whether voluntarily, involuntarily or by
operation of laws, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed: (i) sublet all or any
part of the Premises or allow it to be sublet, occupied or used by any person
or entity other than Tenant; (ii) assign its interest in this Lease; (iii)
transfer any right appurTenant to this Lease or the Premises; (iv) mortgage
or encumber the Lease (or otherwise use the Lease as a security device) in
any manner; or (v) terminate or materially amend or modify an assignment,
sublease or other transfer that has been previously approved by Landlord.
Any Transfer so approved by Landlord shall not be effective until Tenant has
delivered to Landlord an executed counterpart of the document evidencing the
Transfer which (i) is in form approved by Landlord, (ii) contains the same
terms and conditions as stated in Tenant's notice given to Landlord pursuant
to subparagraph 14.1B, and (iii) contains the agreement of the proposed
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transferee to assume all obligations of Tenant related to the Transfer
arising after the effective date of such Transfer and to remain jointly and
severally liable therefor with Tenant. Any attempted Transfer without
Landlord's consent shall be voidable at Landlord's option. Landlord's
consent to any one Transfer shall not constitute a waiver of the provisions
of this paragraph 14.1 as to any subsequent Transfer nor a consent to any
subsequent Transfer. No Transfer, even with the consent of Landlord, shall
relieve Tenant of its personal and primary obligation to pay the rent and to
perform all of the other obligations to be performed by Tenant hereunder.
The acceptance of rent by Landlord from any person shall not be deemed to be
a waiver by Landlord of any provision of this Lease nor to be a consent to
any Transfer.
B. Tenant shall give Landlord at least fifteen (15) days prior
written notice of any desired Transfer and of the proposed terms of such
Transfer including but not limited to (i) the name and legal composition of
the proposed transferee; (ii) a current financial statement of the
transferee, financial statements of the transferee covering the preceding
three years if the same exist, and (if available) an audited financial
statement of the transferee for a period ending not more than one year prior
to the proposed effective date of the Transfer, all of which statements are
prepared in accordance with generally accepted accounting principles;
(iii) the nature of the proposed transferee's business to be carried on in
the Premises; (iv) all consideration to be given on account of the Transfer;
(v) a current financial statement of Tenant; and (vi) such other information
as may be reasonably requested by Landlord. Tenant's notice shall not be
deemed to have been served or given until such time as Tenant has provided
Landlord with all information reasonably requested by Landlord pursuant to
this subparagraph 14.1B. Tenant shall immediately notify Landlord of any
modification to the proposed terms of such Transfer.
C. In the event that Tenant seeks to make any Transfer, then
Landlord, by giving Tenant written notice of its election within fifteen (15)
days after Tenant's notice of intent to Transfer has been deemed given to
Landlord, shall have the right to elect (i) to withhold its consent to such
Transfer, as permitted pursuant to subparagraph 14.1A, or (ii) to permit
Tenant to so assign the Lease or sublease such part of the Premises, in which
event Tenant may do so, but without being released of its liability for the
performance of all of its obligations under the Lease, and the following
shall apply:
(1) Subject to subparagraph 14.1C(5), if Tenant assigns its
interest in this Lease in accordance with this subparagraph 14.1C, then
Tenant shall pay to Landlord fifty percent (50%) of all consideration
received by Tenant over and above (i) the assignee's agreement to assume the
obligations of Tenant under this Lease and (ii) all Permitted Transfer Costs
related to such assignment.
(2) Subject to subparagraph 14.1C(5), if Tenant sublets all
or part of the Premises, then Tenant shall pay to Landlord fifty percent
(50%) of the positive difference, if any, between (i) all rent and other
consideration paid by the subTenant to Tenant, less (ii) all rent paid by
Tenant to Landlord pursuant to this Lease which is allocable to the area so
sublet and all Permitted Transfer Costs related to such sublease. Such
amount shall be paid to Landlord on the same basis, whether periodic or in
lump sum, that such rent and other consideration is paid to Tenant by its
subTenant, within seven (7) days after it is received by Tenant.
(3) Tenant's obligations under this subparagraph shall
survive any assignment or sublease. At the time Tenant makes any payment to
Landlord required by this subparagraph, Tenant shall deliver an itemized
statement of the method by which the amount to which Landlord is entitled was
calculated, certified by Tenant as true and correct. Landlord shall have the
right to inspect Tenant's books and records relating to the payments due
pursuant to this subparagraph. Upon request therefor, Tenant shall deliver
to Landlord copies of all bills, invoices or other documents upon which its
calculations are based. Landlord may condition its approval of any Transfer
upon obtaining a certification from both Tenant and the proposed transferee
of all amounts that are to be paid to Tenant in connection with such Transfer.
(4) As used herein, the term "consideration" shall mean any
consideration of any kind received, or to be received, by Tenant as a result
of the Transfer, if such sums are related to Tenant's interest in this Lease
or in the Premises, including payments (in excess of the fair market value
thereof) for Tenant's assets, fixtures, leasehold improvements,
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inventory, accounts, goodwill, equipment, furniture, general intangibles and
any capital stock or other equity ownership interest in Tenant. As used in
this subparagraph, the term "Permitted Transfer Costs" shall mean (i) all
reasonable leasing commissions paid to third parties not affiliated with
Tenant in order to obtain the Transfer in question, (ii) all reasonable
attorneys' fees incurred by Tenant with respect to the Transfer in question,
(iii) the cost of Tenant improvements installed for the use of the subTenant
or assignee to the extent required by such party as a condition to the
Transfer, and (iv) any payments made by Tenant to the transferee to induce it
to enter into the Transfer (e.g., payment of moving expenses).
(5) Notwithstanding anything to the contrary contained in
the foregoing, Landlord shall not participate in excess consideration
received by Tenant from an assignee or subTenant as provided for in
subparagraphs 14.1C(1) and 14.1C(2) unless such assignment or sublease occurs
during an Option Term or, in the case of a sublease, extends into an Option
Term (in which latter event Landlord shall be entitled to its share of the
excess consideration paid during the Option Term).
D. If Tenant is a corporation, any dissolution, merger,
consolidation or other reorganization of Tenant, or the sale or transfer in
the aggregate over the Lease Term of a controlling percentage of the capital
stock of Tenant, shall be deemed a voluntary assignment of Tenant's interest
in this Lease; provided, however, that the foregoing shall not apply to
corporations, the capital stock of which is publicly traded. The phrase
"controlling percentage" means the ownership of and the right to vote stock
possessing more than fifty percent (50%) of the total combined voting power
of all classes of Tenant's capital stock issued, outstanding and entitled to
vote for the election of directors. If Tenant is a partnership, any
withdrawal or substitution (whether voluntary, involuntary or by operation of
law, and whether occurring at one time or over a period of time) of any
partner(s) owning twenty-five percent (25%) or more (cumulatively) of any
interest in the capital or profits of the partnership, or the dissolution of
the partnership, shall be deemed a voluntary assignment of Tenant's interest
in this Lease.
E. Notwithstanding anything contained in this paragraph 14.1,
so long as Tenant otherwise complies with the provisions of paragraph 14.1
Tenant may enter into any one of the following transfers (a "Permitted
Transfer") without Landlord's prior written consent, and Landlord shall not
be entitled to receive any part of any excess rentals or other consideration
resulting therefrom that would otherwise be due to it pursuant to paragraph
14.1C:
(1) Tenant may sublease all or part of the Premises or
assign its interest in this Lease to any corporation which controls, is
controlled by, or is under common control with the original Tenant to this
Lease by means of an ownership interest of more than fifty percent (50%);
(2) Tenant may assign its interest in the Lease to a
corporation which results from a merger, consolidation or other
reorganization in which Tenant is not the surviving corporation, so long as
(i) Tenant demonstrates to Landlord's reasonable satisfaction that the
surviving corporation will have sufficient creditworthiness to provide
adequate assurance of future performance of all of Tenant's obligations under
this Lease, or (ii) the surviving corporation has a net worth at the time of
such assignment that is equal to or greater than the net worth of Tenant
immediately prior to such transaction; and
(3) Tenant may assign this Lease to a corporation which
purchases or otherwise acquires all or substantially all of the assets of
Tenant, so long as (i) Tenant demonstrates to Landlord's reasonable
satisfaction that the acquiring corporation will have sufficient
creditworthiness to provide adequate assurance of future performance of all
of Tenant's obligations under this Lease, or (ii) such acquiring corporation
has a net worth at the time of such assignment that is equal to or greater
than the net worth of Tenant immediately prior to such transaction.
14.2. BY LANDLORD: Landlord and its successors in interest shall have
the right to transfer their interest in the Premises and the Property at any
time and to any person or entity. In the event of any such transfer, the
Landlord originally named herein (and, in the case of any subsequent
transfer, the transferor) from the date of such transfer, (i) shall be
automatically relieved, without any further act by any person or entity, of
all liability for the performance of the
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obligations of the Landlord hereunder which may accrue after the date of such
transfer, and (ii) shall be relieved of all liability for the performance of
the obligations of the Landlord hereunder which have accrued before the date
of transfer if its transferee agrees to assume and perform all such
obligations of the Landlord hereunder. After the date of any such transfer,
the term "Landlord" as used herein shall mean the transferee of such interest
in the Premises and the Property.
ARTICLE 15.
GENERAL PROVISIONS
15.1. LANDLORD'S RIGHT TO ENTER: Landlord and its agents may enter the
Premises immediately in case of emergency and otherwise only at such time as
is approved by Tenant which time of Entry shall be within seven (7) days
after Landlord delivers written notice to Tenant requesting approval of a
time to enter, and Landlord may thereafter continue such entry for such
reasonable period of time as is necessary to accomplish Landlord's permitted
purpose for such entry. Landlord may so enter the Premises for the following
purposes: (i) inspecting the same, (ii) posting notices of
non-responsibility, (iii) supplying any service to be provided by Landlord to
Tenant, (iv) showing the Premises to prospective purchasers or mortgagees,
(v) making necessary alterations, additions or repairs, (vi) performing
Tenant's obligations when Tenant has failed to do so after written notice
from Landlord, (vii) placing upon the Premises ordinary "for sale" signs,
(viii) responding to an emergency, and/or (ix) during the last six (6) months
of the Lease Term or at any time when there is a Continuing Tenant Default,
showing the Premises to prospective Tenants and placing upon the Premises
ordinary "for lease" signs. For each of the aforesaid purposes, Landlord may
enter the Premises by means of a master key, and Landlord shall have the
right to use any and all means Landlord may deem necessary and proper to open
the doors of the Premises in an emergency. Any entry into the Premises or
portions thereof obtained by Landlord by any of said means or otherwise shall
not under any circumstances be construed or deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an eviction, actual
or constructive, of Tenant from the Premises or any portion thereof.
15.2. SURRENDER OF THE PREMISES: Immediately prior to the expiration
or upon the sooner termination of this Lease, Tenant shall remove all
Tenant's Trade Fixtures and other personal property, and shall vacate and
surrender the Premises to Landlord in the same condition as existed at the
Commencement Date, except for (i) reasonable wear and tear, (ii) damage
caused by any peril or condemnation, and (iii) contamination by Hazardous
Materials for which Tenant is not responsible pursuant to subparagraphs 7.2B
or 7.2C. In this regard reasonable wear and tear shall be construed to mean
wear and tear caused to the Premises by the natural aging process which
occurs in spite of prudent application of reasonable standards for
maintenance, repair and janitorial practices, and does not include items of
neglected or deferred maintenance. If Landlord so requests, Tenant shall,
prior to the expiration or sooner termination of this Lease, remove any
Leasehold Improvements designated by Landlord and repair all damage caused by
such removal if such removal is required pursuant to paragraph 5.2. If the
Premises are not so surrendered at the termination of this Lease, Tenant
shall be liable to Landlord for all costs incurred by Landlord in returning
the Premises to the required condition, plus interest on all costs incurred
at the Agreed Interest Rate.
15.3. HOLDING OVER: This Lease shall terminate without further notice
at the expiration of the Lease Term. Any holding over by Tenant after
expiration of the Lease Term shall not constitute a renewal or extension of
the Lease or give Tenant any rights in or to the Premises except as expressly
provided in this Lease. Any holding over after such expiration with the
consent of Landlord shall be construed to be a tenancy from month to month on
the same terms and conditions herein specified insofar as applicable except
that Base Monthly Rent shall be increased to an amount equal to one hundred
twenty-five percent (125%) of the Base Monthly Rent required during the last
month of the Lease Term.
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15.4. SUBORDINATION: The following provisions shall govern the
relationship of this Lease to any underlying lease, mortgage or deed of trust
which now or hereafter affects the Property, and any renewal, modification,
consolidation, replacement or extension thereof (a "Security Instrument"):
A. This Lease is subject and subordinate to all Security
Instruments existing as of the Commencement Date. However, if any Lender so
requires, this Lease shall become prior and superior to any such Security
Instrument.
B. At Landlord's election, this Lease shall become subject and
subordinate to any Security Instrument created after the Commencement Date.
Notwithstanding such subordination, Tenant's right to quiet possession of the
Premises shall not be disturbed and the terms of this Lease shall not be
modified so long as Tenant is not in default and performs all of its
obligations under this Lease, unless this Lease is otherwise terminated
pursuant to its terms.
C. No subordination of this Lease to a Security Instrument
pursuant to subparagraphs 15.4A or 15.4B shall be effective until the holder
of a Security Instrument executes a subordination and non-disturbance
agreement in favor of Tenant by which the Lender agrees to be bound by the
immediately preceding sentence.
D. Tenant shall execute any document or instrument required by
Landlord or any Lender to make this Lease either prior or subordinate to a
Security Instrument, which may include such other matters as the Lender
customarily requires in connection with such agreements, including provisions
that (i) the Lender not be liable for any defaults on the part of Landlord
occurring prior to the time the Lender takes possession of the Premises in
connection with the enforcement of its Security Instrument; (ii) the Lender
not be liable for the performance of any obligations contained in the
Interior Improvement Agreement, for the completion of any improvements under
construction or required to be constructed by Landlord; (iii) recourse
against the Lender is limited to its interest in the Premises; (iv) any
notices given by Tenant to Landlord should also be delivered to the Lender;
(v) Tenant shall attorn to any purchaser at a foreclosure sale or a grantee
designated in a deed in lieu of foreclosure; (vi) the Lender shall not be
bound by any rent which Tenant might have paid in advance to any prior
Landlord for a period in excess of one month; (vii) the Lender shall not be
bound by any agreement or modification of the Lease made without the written
consent of the Lender; and (viii) upon request, Tenant shall enter into a new
lease with Lender of the Premises upon the same terms and conditions as the
Lease between Landlord and Tenant, which lease shall cover any unexpired term
of the Lease existing prior to a foreclosure, trustee's sale, or conveyance
in lieu of foreclosure. Tenant's failure to execute any such document or
instrument within ten (10) days after written demand therefor shall
constitute a default by Tenant. Tenant approves as reasonable the form of
subordination and non-disturbance agreement attached to this Lease as
EXHIBIT "D".
15.5. TENANT'S ATTORNMENT: Tenant shall attorn (i) to any purchaser of
the Premises or Property at any foreclosure sale or private sale conducted
pursuant to any security instrument encumbering the Premises and/or the
Property, (ii) to any grantee or transferee designated in any deed given in
lieu of foreclosure, or (iii) to the lessor under any underlying ground lease
should such ground lease be terminated.
15.6. MORTGAGEE PROTECTION: In the event of any default on the part of
the Landlord, Tenant will give notice by registered mail to any Lender or
lessor under any underlying ground lease whose name has been provided to
Tenant and shall offer such Lender or lessor a reasonable opportunity to cure
the default, not to exceed thirty (30) days from the expiration of the time
period granted to Landlord to cure such default; provided, however, that if
such Lender requires additional time to cure a default on the part of
Landlord or to obtain possession of the Premises by power of sale or judicial
foreclosure or other appropriate legal proceedings if obtaining possession is
necessary to effect a cure, the Lender shall be granted such opportunity,
provided that the Lender gives reasonable assurances to Tenant that such
default will be cured.
15.7 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS: At all times
during the Lease Term, Tenant agrees, following any request by Landlord,
promptly to execute and deliver to Landlord an estoppel certificate, (i)
certifying that this Lease is unmodified and in full force and effect or, if
modified, stating the nature of such modification and certifying that this
Lease, as so
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modified, is in full force and effect, (ii) stating the date to which the
rent and other charges are paid in advance, if any, (iii) acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord hereunder or, if there are uncured defaults, specifying the nature
of such defaults and (iv) certifying such other information about the Lease
as may be reasonably required by Landlord. Tenant's failure to deliver an
estoppel certificate within ten (10) days after delivery of Landlord's
request therefor shall be a conclusive admission by Tenant that, as of the
date of the request for such statement, (i) this Lease is unmodified except
as may be represented by Landlord in said request and is in full force and
effect, (ii) there are no uncured defaults in Landlord's performance, and
(iii) no rent has been paid in advance. At any time during the Lease Term
Tenant shall, upon ten (10) days' prior written notice from Landlord, provide
Tenant's most recent financial statement and financial statements covering
the twenty-four (24) month period prior to the date of such most recent
financial statement to any existing Lender or to any potential Lender or
buyer of the Property; provided, however, that if Tenant is a corporation
whose stock is publicly traded, Tenant may satisfy the foregoing requirement
by delivering to the appropriate parties copies of its most recent annual
report prepared to satisfy requirements of the federal securities laws. Such
statements shall be prepared in accordance with generally accepted accounting
principles and, if such is the normal practice of Tenant, shall be audited by
an independent certified public accountant.
15.8. FORCE MAJEURE: Any prevention, delay or stoppage due to strikes,
lockouts, inclement weather, labor disputes, inability to obtain labor,
materials, fuels or reasonable substitutes therefor, governmental
restrictions, regulations, controls, action or inaction, civil commotion,
fire or other acts of God, and other causes beyond the reasonable control of
the party obligated to perform (except financial inability) shall excuse the
performance, for a period equal to the period of any said prevention, delay,
or stoppage, of any obligation hereunder except the obligation of Tenant to
pay rent or any other sums due hereunder.
15.9 NOTICES: Any notice required or desired to be given regarding
this Lease shall be in writing and may be given by personal delivery, by
facsimile telecopy, by courier service, or by mail. A notice shall be deemed
to have been given (i) on the third (3rd) business day after mailing if such
notice was deposited in the United States mail, certified or registered,
postage prepaid, addressed to the party to be served at its address first
above set forth, (ii) when delivered if given by personal delivery, and (iii)
in all other cases when actually received. Either party may change its
address by giving notice of same in accordance with this paragraph.
15.10. OBLIGATION TO ACT REASONABLY: Whenever the consent or approval
of a party to this Lease is required to be obtained before the other party to
this Lease may take an action, such consent or approval shall not be
unreasonably withheld or delayed.
15.11. CORPORATE AUTHORITY: If Tenant is a corporation (or a
partnership), each individual executing this Lease on behalf of said
corporation (or partnership) represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of said corporation in
accordance with the by-laws of said corporation (or partnership in accordance
with the partnership agreement of said partnership) and that this Lease is
binding upon said corporation (or partnership) in accordance with its terms.
If Tenant is a corporation, each of the persons executing this Lease on
behalf of Tenant does hereby covenant and warrant that Tenant is a duly
authorized and existing corporation, that Tenant is qualified to do business
in California and that the corporation has full right and authority to enter
into this Lease.
15.12. ADDITIONAL DEFINITIONS: Any term that is given a special meaning
by a provision in this Lease shall have such meaning when used in this Lease
or any addendum or amendment hereto. As used herein, the following terms
shall have the following meanings:
A. AGREED INTEREST RATE: The term "Agreed Interest Rate" shall
mean that interest rate determined as of the time it is to be applied that is
equal to the lesser of (i) two percent (2%) in excess of the "prime rate",
"reference rate", or "base rate" established by Bank of America (or if Bank
of America shall cease to exist, by the commercial bank with its headquarters
in California that has the greatest net worth among commercial banks
headquartered in California) as it may be adjusted from time to time, or (ii)
the maximum interest rate permitted by law.
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B. COMMON AREA: The term "Common Area" shall mean all areas
and facilities within the Property that are not designated by Landlord for
the exclusive use of Tenant or any other lessee or other occupant of the
Property, including the parking areas, access and perimeter roads, pedestrian
sidewalk, landscaped areas, trash enclosures, recreation areas and the like.
C. LAW: The term "Law" shall mean any judicial decision,
statute, constitution, ordinance, resolution, regulation, rule,
administrative order, or other requirement of any municipal, counting, state,
federal or other government agency or authority having jurisdiction over the
parties to this Lease or the Premises, or both, in effect either at the
Commencement Date of this Lease or any time during the Lease Term, including,
without limitation, any regulation, order or policy of any quasi-official
entity or body (e.g., board of fire examiners, public utilities or special
district).
D. LEASEHOLD IMPROVEMENTS: The term "Leasehold Improvements"
shall mean all improvement, additions, alterations and fixtures installed in
the Premises by Tenant at its expense which are not Trade Fixtures.
E. LENDER: The term "Lender" shall mean any beneficiary,
mortgagee, secured party, lessor, or other holder of any Security Instrument.
F. PRIVATE RESTRICTIONS: The term "Private Restrictions" shall
mean all recorded covenants, conditions and restrictions, reciprocal easement
agreements, and any other recorded instruments affecting the use of the
Premises as they may exist from time to time.
G. TRADE FIXTURES: The term "Trade Fixtures" shall mean
anything affixed to the Premises by Tenant at its expense for purposes of
trade, manufacture, ornament or domestic use (except replacement of similar
work or material originally installed by Landlord) which can be removed
without injury to the Premises unless such thing has, by the manner in which
it is affixed, become an integral part of the Premises; provided, however,
that all of Tenant's signs shall be Trade Fixtures regardless of how affixed
to the Premises.
15.13. MISCELLANEOUS: Should any provision of this Lease prove to be
invalid or illegal, such invalidity or illegality shall in no way affect,
impair or invalidate any other provision hereof, and such remaining
provisions shall remain in full force and effect. Time is of the essence
with respect to the performance of every provision of this Lease in which
time of performance is a factor. The captions used in this Lease are for
convenience only and shall not be considered in the construction or
interpretation of any provision hereof. Any executed copy of this Lease shall
be deemed an original for all purposes. This Lease shall, subject to the
provisions regarding assignment, apply to and bind the respective heirs,
successors, executors, administrators and assigns of Landlord and Tenant.
"Party" shall mean Landlord or Tenant, as the context implies. If Tenant
consists of more than one person or entity, then all members of Tenant shall
be jointly and severally liable hereunder. This Lease shall be construed and
enforced in accordance with the laws of the State of California. The language
in all parts of this Lease shall in all cases be construed as a whole
according to its fair meaning, and not strictly for or against either
Landlord or Tenant. When the context of this Lease requires, the neuter
gender includes the masculine, the feminine, a partnership or corporation or
joint venture, and the singular includes the plural. The terms "shall",
"will" and "agree" are mandatory. The term "may" is permissive. When a
party is required to do something by this Lease, it shall do so at its sole
cost and expense without right of reimbursement from the other party unless
specific provision is made therefor. Where Tenant is obligated not to
perform any act, Tenant is also obligated to use reasonable efforts to
restrain any others within its control from performing said act, including
agents, invitees, contractors, and subcontractors. Landlord shall not become
or be deemed a partner nor a joint venturer with Tenant by reason of the
provisions of this Lease.
15.14. TERMINATION BY EXERCISE OF RIGHT: If this Lease is terminated
pursuant to its terms by the proper exercise of a right to terminate
specifically granted to Landlord or Tenant by this Lease, then this Lease
shall terminate thirty (30) days after the date the right to terminate is
properly exercised (unless another date is specified in that part of the
Lease creating the right, in which event the date so specified for
termination shall prevail), the rent and all other charges due hereunder
shall be prorated as of the date of termination, and neither Landlord nor
Tenant shall
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have any further rights or obligations under this Lease except for those that
have accrued prior to the date of termination. This paragraph does not apply
to a termination of this Lease by Landlord as a result of a default by Tenant.
15.15. BROKERAGE COMMISSIONS: Tenant warrants that it has not had any
dealings with any real estate brokers, leasing agents or salesmen, or
incurred any obligations for the payment of real estate brokerage commissions
or finder's fees which would be earned or due and payable by reason of the
execution of this Lease other than to the Retained Real Estate Brokers.
Landlord shall be responsible for the payment of any commission owed pursuant
to a separate written commission agreement between Landlord and J.R. Parrish,
Inc. for the payment of the commission as a result of the execution of this
Lease.
15.16. ENTIRE AGREEMENT: This Lease constitutes the entire agreement
between the parties, and there are no binding agreements or representations
between the parties except as expressed herein. Tenant acknowledges that
neither Landlord nor Landlord's agent(s) has made any representation or
warranty as to (i) whether the Premises may be used for Tenant's intended use
under existing Law or (ii) the suitability of the Premises or the Common Area
for the conduct of Tenant's business or the condition of any improvements
located thereon. Tenant expressly waives all claims for damage by reason of
any statement, representation, warranty, promise or other agreement of
Landlord or Landlord's agent(s), if any, not contained in this Lease or in
any addendum or amendment hereto. No subsequent change or addition to this
Lease shall be binding unless in writing and signed by the parties hereto.
15.17. RIGHT OF FIRST OFFER TO LEASE: If at any time and from time to
time during the Lease Term Landlord desires to lease all or any portion of
any buildings located on the Property, Landlord shall first give written
notice of such fact to Tenant (an "Offer to Lease"), which shall be
accompanied by the form of lease that Landlord intends to use for the
transaction and the following information regarding the basic business terms
of the transaction (the "Basic Business Terms"): (i) a description of the
premises to be leased; (ii) the term of the proposed lease; (iii) the
improvements Landlord is willing to construct or that it will require to be
constructed; (iv) the method of payment for such improvements; (v) the base
monthly rent for the term; (vi) additional rent to be paid by the Tenant to
the extent not reflected in the form lease; (vii) the estimated commencement
date for the lease term; (viii) any options to extend the lease term and the
rent to be charged during any such extension periods; and (ix) any other
material business terms Landlord elects to specify.
A. Landlord shall lease to Tenant and Tenant shall lease form
Landlord the Premises identified in the Offer to Lease on the Basic Business
Terms stated in the Offer to Lease if: (i) the Premises offered for Lease in
the Offer to Lease consist of an area that is less than 14,000 square feet of
gross leasable area and Tenant notifies Landlord in writing of Tenant's
agreement to lease such Premises on the terms stated in the Offer to Lease
within thirty (30) days after receipt of the Offer to Lease in question; or
(ii) the Premises described in the Offer to Lease consist of an area that is
more than 14,000 square feet and Tenant notifies Landlord in writing of
Tenant's agreement to Lease such premises on the terms stated in the Offer to
Lease within fifteen (15) days after receipt of the Offer to Lease in
question. If Tenant so timely elects to lease the space so offered, Landlord
shall lease to Tenant and Tenant shall lease from Landlord such space on the
following terms:
(1) The Lease of such space shall be on the Basic Business
Terms stated in the Offer to Lease; provided, however, that Tenant's
obligation to pay rent shall not commence until the earlier of: (i) the date
any improvements that Landlord is to construct as set forth in the Basic
Business Terms have been substantially completed, subject to punchlist items;
or (ii) ninety (90) days after the space has been delivered to Tenant vacant
and ready for improvement work, if such improvement work is not to be
performed by Landlord.
(2) The lease of such premises shall be consummated by the
preparation and execution of a written lease, in the form and content of the
form of lease accompanying the Offer to Lease, except as modified to
incorporate the Basic Business Terms set forth in the Offer to Lease and as
expressly provided herein. The lease shall be executed by Landlord and Tenant
as soon as reasonably practicable after Tenant has made its election to
accept the Offer to Lease, but in no event later than forty-five (45) days
thereafter.
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B. If Tenant does not indicate in writing its agreement to lease
the premises offered on the terms contained in the Offer to Lease within the
time period specified in subparagraph 15.17A, then the following shall apply:
(1) Landlord shall have the right to lease such premises to
any third party on the same Basic Business Terms set forth in the Offer to
Lease and such other terms as are contained in the form of lease included
with the Offer to Lease; provided, however, that Landlord may make any
changes to such form of Lease at the request of a prospective Tenant to
induce it to lease such space from Landlord so long as such changes are
commercially reasonable and do not materially change the Basic Business Terms
set forth in the Offer to Lease, and such lease is executed within one
hundred twenty (120) days after the Offer to Lease is delivered to Tenant.
(2) If within one hundred twenty (120) days after the Offer
to Lease is delivered to Tenant, Landlord elects to lease the premises in
question on terms different than the Basic Business Terms stated in the Offer
to Lease, then Landlord shall give notice to Tenant of such election setting
forth the new terms upon which Landlord is willing to so lease the premises
in question (the "Amended Offer to Lease"). Tenant shall have the right to
lease the premises in question upon the terms stated in the Offer to Lease,
as modified by the Amended Offer to Lease, which right may be exercised by
delivering written notice of such election to exercise to Landlord within
five (5) days following delivery to Tenant of the Amended Offer to Lease. If
Tenant does not send written notice to Landlord of its election to lease the
premises in question upon the terms set forth in the Offer to Lease, as
modified by the Amended Offer to Lease, within said five (5) day period, then
Landlord may lease the premises in question to any third party in accordance
with the terms and conditions set forth in the Offer to Lease, as modified by
the Amended Offer to Lease; provided, however, that Landlord may make any
changes to the form of lease included in the Offer to Lease or the Amended
Offer to Lease at the request of a prospective Tenant to induce it to lease
such space from Landlord so long as such changes are commercially reasonable
and do not materially change the Basic Business Terms set forth in the Offer
to Lease, as modified by the Amended Offer to Lease and the lease is executed
within sixty (60) days after the Amended Offer to Lease is delivered to
Tenant.
C. If Tenant is offered the opportunity to lease all or a portion
of any building on the Property and declines to exercise such right, and if
Landlord subsequently enters into a lease with a third party affecting the
space so offered to Tenant, the right of first offer contained in this
paragraph shall thereafter be subject and subordinate to any rights granted
to such third party Tenant with respect to such space, or any other space in
the Property, including rights of first refusal, options to extend, and
options to expand.
D. If Landlord has delivered to Tenant a Offer to Lease and
Tenant has not elected to lease the premises offered on the terms contained
in the Offer to Lease, then if Landlord so requests, Tenant shall deliver to
Landlord or any prospective Tenant a certificate or certificates stating
that: (i) Landlord has complied with the provisions of this paragraph 15.17
and may lease the premises in question pursuant to the Offer to Lease free of
any rights or claims of Tenant; or (ii) Landlord has not complied with the
provisions of this paragraph 15.17 and specifying the manner in which
Landlord has failed to so comply. Such certificate shall be delivered
promptly after request therefor but in no event not more than five (5) days
after request has been delivered to Tenant. Tenant's failure to deliver such
certificate within the required time period shall be deemed an admission upon
which any party may rely that Landlord has complied with the provisions of
this paragraph 15.17 and may lease the premises in question pursuant to the
terms of the Offer to Lease free of any rights or claims by Tenant.
E. Notwithstanding anything to the contrary contained in the
foregoing, Tenant may not exercise its right to lease the space described in
the Offer to Lease, nor, at the option of Landlord, shall a new lease for
such space commence, unless Tenant demonstrates to Landlord's reasonable
satisfaction that Tenant has sufficient creditworthiness to provide adequate
assurance of future performance of all of Tenant's obligations under the new
lease.
F. Within ten (10) days after receipt of written request therefor
from Tenant, Landlord shall inform Tenant in writing of the following with
respect to all leases affecting the Property: (i) the scheduled lease term
expiration date; (ii) any options to extend (including the
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<PAGE>
commencement and termination date of such options to extend); and (iii) such
other information as is reasonably requested by Tenant concerning the status
of leases then affecting the Property as it relates to determining when such
leases will terminate and space become available. In addition, Landlord
shall use reasonable efforts to promptly notify Tenant of the availability of
space within the Property that results from events other than the natural
expiration of a lease term (e.g., termination of a lease resulting from a
Tenant's default or negotiations regarding the rescission of a lease by
mutual consent).
G. The parties acknowledge that (i) paragraph 15.17 of the
Building C Lease contains substantially the same provisions as those set
forth in this paragraph 15.17, and (ii) it is their intention that there be
only one right of first offer to lease that is held and may be exercised by
only one person or entity. If Landlord complies with the provisions of
paragraph 15.17 of this Lease or paragraph 15.17 of the Building C Lease with
respect to a lease of space within the Property to a third party, Landlord
shall be deemed to have satisfied the requirements of both Leases with
respect to this subject. The parties further agree that the right of first
offer to lease set forth in this paragraph 15.17 and in paragraph 15.17 of
the Building C Lease may only be held by one entity who is FMC Corporation or
its successor. If Tenant concurrently assigns its interest in this Lease and
the Building C Lease to the same person or entity pursuant to an assignment
described by subparagraphs 14.1E(2) or (3), such assignment shall not affect
the provisions of this paragraph 15.17. However, if Tenant assigns its
interest in this Lease without concurrently also assignment its interest in
the Building C Lease to the same person or entity pursuant to an assignment
described by subparagraphs 14.1E(2) or (3), then effective upon such
assignment the provisions of this paragraph 15.17 shall terminate and be of
no further force or effect. Notwithstanding the foregoing sentence, if the
Building C Lease has been terminated or if the provisions of paragraph 15.17
of the Building C Lease have terminated because of an assignment of the
Tenant's interest in the Building C Lease, then any subsequent assignment by
Tenant of its interest in this Lease pursuant to an assignment described by
subparagraphs 14.1E(2) or (3) shall not cause the right of first offer to
lease created by this paragraph 15.17 to terminate. The rights created by
this paragraph 15.17 may not be assigned or otherwise transferred to any
third party except in connection with an assignment of all of Tenant's right,
title and interest in this Lease made in compliance with paragraph 14.1
hereof. A sublease shall not affect the rights granted by this paragraph
15.17; provided, however, that no subTenant of Tenant shall have the right to
directly lease the Offered Space from Landlord (although Tenant may exercise
the right of first offer to lease and then sublease to any existing subTenant
pursuant to the terms of the new lease).
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease with the
intent to be legally bound thereby, to be effective as of the Commencement Date
of this Lease.
LANDLORD: TENANT:
THE EQUITABLE LIFE ASSURANCE SOCIETY FMC CORPORATION,
OF THE UNITED STATES, a New York a Delaware corporation
corporation
By: /s/ James Piane By: /s/ Charles Fink
-------------------------------- ------------------------------
Printed Printed
Name: James Piane Name: Charles Fink
------------------------------ ----------------------------
Title: Attorney in Fact Title: V.P. & Group Manager
----------------------------- ---------------------------
By: By:
----------------------------- ---------------------------
Printed Printed
Name: Name:
----------------------------- ---------------------------
Title: Title:
----------------------------- ---------------------------
Dated: Dated:
----------------------------- ---------------------------
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<PAGE>
If Tenant is a CORPORATION, the authorized officers must sign on behalf of
the corporation and indicate the capacity in which they are signing. The
Lease must be executed by the chairman of the board, president or
vice-president AND the secretary, assistant secretary, the chief financial
officer or assistant treasurer, UNLESS the Bylaws or resolution of the Board
of Directors shall otherwise provide, in which event the Bylaws or a
certified copy of the resolution, as the case may be, must be attached to
this Lease.
<PAGE>
EXHIBIT "A"
[MAP]
[MAP]
<PAGE>
EXHIBIT "B"
PLANS AND SPECIFICATIONS
FOR BUILDING "A"
PLANS AND SPECIFICATIONS PREPARED BY DES
SHEET TITLE CURRENT DATE
- ----- ----- ------------
A-1 Title Sheet 6-9-89
A-2 Bldg. "A" - First Floor Plan 6-9-89
A-3 Bldg. "A" - Second Floor Plan 6-5-89
A-4 Bldg. "A" - First Floor Plan
Reflected Ceiling Plan 6-9-89
A-5 Bldg. "A" - Second Floor Plan
Reflected Ceiling Plan 6-9-89
A-6 Bldg. "A" - First Floor
Finish Plan 6-9-89
A-7 Bldg. "A" - Second Floor
Finish Plan 6-9-89
A-8 Bldg. "A" - First Floor
Electrical/Telephone Plan 6-9-89
A-9 Bldg. "A" - Second Floor
Electrical/Telephone Plan 6-9-89
A-10 Details, Interior Elevantions,
Enlarged Shower Plan, Door/Window Schedule 6-9-89
A-11 Details 5-15-89
A-12 Architectural Details
Structural Details 6-9-89
PLANS AND SPECIFICATIONS PREPARED BY HAUGE-RICHARDS ASSOCIATES, LTD.
SHEET TITLE CURRENT DATE
- ----- ----- ------------
D-1 Lobby - Bldgs. "A" & "C"
Plans, Elevations, Details 6-9-89
<PAGE>
EXHIBIT C
INTERIOR IMPROVEMENT AGREEMENT
(Building A)
This Interior Improvement Agreement is made part of that Lease dated for
reference purposes only June 1, 1989 (the "Lease"), by and between THE EQUITABLE
LIFE ASSURANCE SOCIETY OF THE UNITED STATES, a New York corporation ("Landlord")
and FMC Corporation, a Delaware corporation ("Tenant") of approximately 68,708
square feet of gross leasable area located in that building commonly known as
Building A of Airport Technology Park, 2890 De La Cruz Boulevard, Santa Clara,
California.
Landlord and Tenant agree that the following terms are hereby added to the
Lease:
1. DEFINITIONS: As used herein and in the Lease, the following
terms shall have the following meanings:
A. APPROVED PLANS: The term "Approved Plans" shall mean those
final plans, specifications and working drawings described by EXHIBIT "B" to
the Lease.
B. INTERIOR IMPROVEMENTS: The term "Interior Improvements" shall
mean those improvements described by the Approved Plans that Tenant has the
right to construct in the Premises pursuant to paragraph 2 hereof.
C. INTERIOR IMPROVEMENT COSTS: The term "Interior Improvement
Costs" shall mean the following: (i) the total amount due pursuant to the
construction contract entered into by Tenant pursuant to subparagraph 2B
hereof to construct the Interior Improvements; (ii) the cost of all
governmental approvals, permits and fees required as a condition to the
construction of the Interior Improvements; (iii) all utility connection or
use fees; (iv) fees of architects, designers, or engineers for services
rendered in connection with the design and construction of the Interior
Improvements; (v) the cost of payment and performance bonds obtained to
assure completion of the Interior Improvements; and (vi) relocation and
moving expenses incurred by Tenant in connection with Tenant's move to the
Premises. There shall be excluded from Interior Improvement Costs the
following, to the extent not included in the construction contract with the
Prime Contractor referred to in subparagraph 2B hereof: (i) any fee for
Landlord's review of Tenant's plans for the Interior Improvements; (ii)
temporary electricity used during the construction period in connection with
the construction of the Interior Improvements; and (iii) any fees charged by
Tenant or its agents or employees for supervising/reviewing the construction
of the Interior Improvements (excluding overhead and profits of prime
contractor).
D. LANDLORD'S INTERIOR IMPROVEMENT ALLOWANCE: The term "Landlord's
Interior Improvement Allowance" shall mean the maximum amount Landlord is
required to spend toward the payment of the Interior Improvement Costs, which
amount is equal to the product obtained by multiplying (i) Twenty-One Dollars
($21.00) per square foot by (ii) the Premises Gross Leasable Area (expressed in
square feet) of 68,708 square feet, for a total of One Million Four Hundred
Forty-Two Thousand Eight Hundred Eighty-Five Dollars ($1,442,885).
E. SUBSTANTIALLY COMPLETED: The Interior Improvements shall be
deemed to be "Substantially Completed" when (i) Prime Contractor has issued
its written certificate stating that such improvements have been
substantially completed in accordance with the Approved Plans therefor, (ii)
electrified office partitions are installed, and (iii) the Building
Department of the City of Santa Clara has completed its final inspection of
such improvements and has "signed off" the building inspection card approving
such work as complete.
F. PRIME CONTRACTOR: The term "Prime Contractor" shall mean Alacon
Construction, Inc.
<PAGE>
2. CONSTRUCTION OF INTERIOR IMPROVEMENTS: Tenant shall have the right to
construct the Interior Improvements in accordance with the following:
A. Tenant warrants that the Interior Improvements shall be
constructed in a good and workmanlike manner substantially in accordance with
the Approved Plans (as modified by any change orders approved by Landlord and
Tenant pursuant to paragraph 3 hereof) and all Laws. All materials and
equipment furnished shall be fully paid for and be free of liens, chattel
mortgages, and security interests of any kind.
B. The Interior Improvements shall be constructed by Prime
Contractor pursuant to a construction contract between Tenant and Prime
Contractor. Landlord shall have the right to review such form of construction
contract before it is executed. Once the construction contract between Prime
Contractor and Tenant has been executed, Tenant shall not materially amend,
modify or alter the responsibilities of Prime Contractor thereunder without
Landlord's written consent, except for change orders approved pursuant to
paragraph 3 hereof. In purposes connection with the execution of such
construction contract, Tenant shall use reasonable efforts to provide that
all construction or equipment warranties or guarantees obtained by Tenant
shall, to the extent obtainable, provide that such warranties and guarantees
obtained by Tenant shall, to the extent obtainable, provide that such
warranties and guaranties shall also run for the benefit of Landlord. Upon
reasonable written advance request of Landlord, Tenant shall inform Landlord
of all written construction and equipment warranties existing in favor of
Tenant which affect the Interior Improvements. Tenant shall cooperate with
Landlord in enforcing such warranties and in bringing any suit that may be
necessary to enforce liability with regard to any defects.
C. Tenant shall use reasonable efforts to commence construction
of the Interior Improvements as soon as reasonably practicable, and shall
thereafter continuously prosecute such construction to completion.
D. Tenant shall properly obtain, comply with and keep in effect
all permits, licenses and other governmental approvals which are required to
be obtained form governmental bodies in order to construct the Interior
Improvements. Upon reasonable written advance request, Tenant shall promptly
deliver copies of all such permits, licenses and approvals to Landlord.
E. Tenant shall be solely responsible for all aspects of the
construction of the Interior Improvements, including the development and
design thereof as set forth in the Approved Plans, the supervision of the
work of construction, the qualification, financial condition, and performance
of all architects, engineers, contractors, material suppliers, consultants,
and the accuracy of all applications for payment and the proper application
of all disbursement. Landlord is not obligated to supervise, inspect or
inform Tenant or any third party of any aspect of the construction of the
Interior Improvements. Any inspection or review by Landlord is to determine
whether Tenant is properly discharging its obligations to Landlord and may
not be relied upon by Tenant or any third party. Landlord owes no duty of
care to Tenant or any third party to protect against or to inform Tenant or
any third party of, any negligence, faulty, inadequate or defective design or
construction of the Interior Improvements.
3. CHANGES TO APPROVED PLANS FOR INTERIOR IMPROVEMENTS: Neither
Landlord nor Tenant shall have the right to order extra work or change orders
with respect to the Approved Plans or the construction of the Interior
Improvements without the prior written consent of the other. All extra work
or change orders requested by either Landlord or Tenant shall be made in
writing, shall specify the amount of delay or the time saved resulting
therefrom, shall specify any added or reduced cost resulting therefrom, and
shall become effective and a part of the Approved Plans once approved in
writing by both parties. Notwithstanding the foregoing, Tenant's failure to
obtain Landlord's consent to an extra work or change order shall not be an
Event of Tenant's Default if Landlord would have been required to consent to
the change pursuant to the terms hereof.
-2-
<PAGE>
4. PAYMENT OF INTERIOR IMPROVEMENT COSTS: The Interior Improvement Costs
and certain noise attenuating improvement costs shall be paid as follows:
A. Landlord and Tenant desire to improve the Premises so that the
following maximum interior noise levels are achieved for the types of office
space identified: 55 dBA for executive offices and conference rooms; 60 dBA
for staff offices; and 65 dBA for sales and secretarial offices. To achieve
these goals Landlord and Tenant agree to contribute to the cost of
improvements as follows. Tenant at its sole cost and expense shall install
(i) extra sheetrock in the roof and sound attenuating ceiling tiles in second
floor ceilings, and (ii) sheetrock beneath the structural ceiling and above
the suspended ceilings of all the second floor offices, and sprinklers as
required by the City of Santa Clara, along with caulking required in
connection therewith. Landlord at its sole cost and expense shall cause the
sliding glass doors on the second floor to be removed and replaced with
double pane sound attenuating glass windows. In the event upon completion of
all of the work described above in this subparagraph A, the desired noise
levels are not achieved, Landlord agrees to pay for the cost of additional
improvements designed to reduce noise levels; provided Landlord shall not be
required to contribute more than One Hundred Fifty Thousand Dollars
($150,000) for such additional improvements.
B. In addition to those contributions of Landlord described in
subparagraph A above, Landlord shall contribute to the payment of all
Interior Improvement Costs up to an amount equal to Landlord's Interior
Improvement Allowance. If any part of the Landlord's Interior Improvement
Allowance is not used by Tenant, or Tenant does not qualify for a
disbursement pursuant to the provisions of this paragraph 4 with the result
that the entire allowance is not disbursed, there shall nonetheless be no
adjustment in the Base Monthly Rent due from Tenant pursuant to the Lease.
If the Interior Improvement Costs exceed the maximum amount of Landlord's
required contribution, then Tenant shall pay the entire amount of such excess.
C. Landlord and Tenant acknowledge that the construction contract
Tenant will enter into for the construction of the Interior Improvements will
provide for progress payments to Prime Contractor in stages as the work is
completed. Landlord shall pay the full amount of each such progress payment
until all of Landlord's Interior Improvement Allowance is expended.
Thereafter, if the cost of the Interior Improvements exceeds the amount of
Landlord's required contribution for such improvements, then Tenant shall pay
the rest of the progress payments due to Prime Contractor. Landlord shall
pay any progress payment due from Landlord to Prime Contractor within thirty
(30) days after satisfaction of all of the conditions precedent to such
progress payment by Landlord that has been requested by Tenant which are set
forth in subparagraph 4D and 4E hereof. If Landlord fails to pay any such
amount when due, then Tenant may (but without the obligation to do so)
advance such funds on Landlord's behalf, and Landlord shall be obligated to
reimburse Tenant for the amount of funds so advanced on its behalf and all
costs incurred by Tenant in so doing, including all interest at the Agreed
Interest Rate.
D. If Tenant desires to obtain a disbursement from Landlord from
the Landlord's Interior Improvement Allowance for the purpose of paying
Interior Improvement Costs, Tenant shall submit to Landlord a written
itemized statement, signed by Tenant (an "Application for Payment") setting
forth the following: (i) a description of the construction work performed,
materials supplied and/or costs incurred or due for which disbursement is
requested; and (ii) the total amount incurred, expended and/or due for each
requested item less prior disbursements; and (iii) the amount due to be paid
by Landlord from Landlord's Interior Improvement Allowance.
E. Landlord shall have no obligation to make any disbursement
from Landlord's Interior Improvement Allowance at any time that there is a
Continuing Tenant Default (as defined in paragraph 1.14 of the Lease), or
there has occurred an event, omission or failure of conditions which would
constitute an Event of Tenant's Default (as defined in paragraph 13.1 of the
Lease) after notice or lapse of time, or both. In addition, Landlord shall
have the right to condition any disbursement from Landlord's Interior
Improvement Allowance upon Landlord's receipt and approval of the following
with respect to each Application for Payment:
-3-
<PAGE>
(1) The form of Application for Payment and the sufficiency
of the information contained therein;
(2) Bills and invoices and any other documents evidencing the
total amount expended, incurred, or due for any requested contribution to
Interior Improvement Costs;
(3) Evidence of Tenant's use of lien releases acceptable to
Landlord for payments or disbursements to any contractor, subcontractor,
materialmen, supplier, or lien claimant:
(4) Architects, inspectors and/or engineer's periodic
certification and the stage of construction that has been completed and its
conformance to the Approved Plans based upon any such architects, inspectors
and/or engineers periodic, physical inspections of the Premises and Interior
Improvements;
(5) Waivers and releases of mechanics' lien, stop notice
claim, equitable lien claim or other lien claim rights or lien bonds in form
and amount reasonably satisfactory to Landlord;
(6) Evidence of Tenant's compliance with its obligations
pursuant to paragraph 2 hereof;
(7) Any other document, requirement, evidence or information
that Landlord may reasonably request pursuant to any provision of this
Interior Improvement Agreement.
F. Tenant agrees that all disbursements made to Tenant by
Landlord from Landlord's Interior Improvement Allowance shall be used only
for the payment of Interior Improvement Costs and shall be applied as set
forth, and for the purposes described in, the relevant Application for
Payment based upon which the disbursement is made.
5. PUNCHLIST: Within a reasonable period of time after the
Interior Improvements are Substantially Completed, Landlord, Tenant and
Tenant's architect shall together walk through and inspect such improvements
so completed, using reasonable efforts to discover all uncompleted or
defective construction. After such inspection has been completed. Tenant
shall use reasonable efforts to complete and/or repair all "punch list" items
within thirty (30) days thereafter.
6. CONSTRUCTION WARRANTY FOR THE INTERIOR IMPROVEMENTS: Tenant
warrants that the construction of the Interior Improvements will be performed
in accordance with the Approved Plans therefor and all Laws in a good and
workmanlike manner, and that all materials and equipment furnished will
conform to said plans and shall be new and otherwise of good quality. Tenant
shall promptly commence the cure of any breach of such warranty and complete
such cure with diligence at Tenant's cost and expense.
7. OWNERSHIP OF THE INTERIOR IMPROVEMENTS: All of the Interior
Improvements which are constructed with funds of Landlord shall become the
property of Landlord upon installation and shall not be removed or altered by
Tenant. Any part of the Interior Improvements which are constructed by
Landlord with funds of Tenant shall become the property of Tenant upon
installation and Tenant shall have the right to depreciate and claim and
collect investment tax credits in such improvements; provided, however, that
(i) Tenant shall not remove or alter such improvements during the term of the
Lease; (ii) such improvements shall be surrendered to Landlord, and title to
such improvements shall best in Landlord, at the expiration or earlier
termination of the Lease Term; and (iii) in no event shall Landlord have any
obligation to pay Tenant for the cost or value of such improvements.
Notwithstanding the foregoing, Tenant shall have the right to remove only the
following kinds of Interior Improvements so long as it repairs all damage
caused by the installation thereof and returns the Premises to the condition
existing prior to the installation of such Interior Improvements: (i)
built-in cabinets, file drawers and bookcases; (ii) computer room air
conditioning; (iii) canteen equipment; (iv) office cubicle systems; and (v)
ornamental statutes. If both Landlord and Tenant contribute to the cost of
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<PAGE>
constructing the Interior Improvements, Landlord and Tenant shall agree in
writing which of such improvements are to be constructed using Landlord's
funds (and therefore are Landlord's property) and which of them are to be
installed with Tenant's funds (and therefore are Tenant's property during the
Lease Term).
8. DOCUMENTS: Within fifteen (15) days after receiving a written
request from Landlord, Tenant shall deliver to Landlord the most current
version of the following: (i) a complete and correct list showing the name,
address and telephone number of each contractor, subcontractor and principal
materials supplier engaged in connection with the construction of the
Interior Improvements, and the total dollar amount of each contract and
subcontract (including any changes) together with the amounts paid through
the date of the list; (ii) true and correct copies of all executed contracts
and subcontracts identified in the list described in the immediately
preceding clause, including any changes; (iii) a construction progress
schedule; and (iv) any update to any item described in the preceding clauses
which Tenant may have previously delivered to Landlord. Tenant expressly
authorizes Landlord to contact any contractor, subcontractor or materials
supplier to verify any information disclosed in accordance with this
paragraph. Within sixty (60) days after the Interior Improvements have been
Substantially Completed, Tenant shall cause the following to be delivered to
Landlord:
A. Statements from Tenant's architect in form reasonably
satisfactory to Landlord certifying that the Interior Improvements have been
completed substantially in accordance with the Approved Plans and all Laws;
B. A copy of all permanent certificates of occupancy and other
governmental approvals which may be received by Tenant with respect to the
construction of the Interior Improvements;
C. One (1) copy of the Approved Plans, one (1) copy of each extra
work or change order, and one (1) copy of any "As-Built" plans and
specifications for the Interior Improvements, which Tenant may have elected
to cause to be prepared;
D. One (1) copy of all warranties, guaranties, and operational
manuals relating to the Interior Improvements;
E. A copy of a recorded notice of completion relating to the
construction of the Interior Improvements.
9. INDEMNITY: Tenant agrees to indemnify and hold Landlord harmless
from and against all liabilities, claims, actions, damages, costs and
expenses (including attorneys' fees incurred by Landlord in protecting its
interest from the following) arising out of or resulting from construction of
the Interior Improvements, including any mechanics' liens, defective
workmanship or materials and any claim or cause of action of any kind by any
party that Landlord is liable for any act or omission committed or made by
Tenant, its agents, employees, or contractors in connection with the
construction of the Interior Improvements.
10. ROOF AND OTHER WORK: Landlord agrees to cause the structural support
of the roof mounted mechanical units on the Premises to be inspected by Cabak
Randall Jasper Griffiths Associates. If as a result of such inspection,
remedial work is recommended, Landlord shall cause the same to be performed by
Prime Contractor at Landlord's expense, as soon as reasonably practicable.
Landlord agrees to replace, at Landlord's expense, the broken window on the
east side, south end of the second floor of the Premises.
11. EFFECT OF AGREEMENT: In the event of any inconsistency between this
Agreement and the Lease, the terms of this Agreement shall prevail.
-5-
<PAGE>
AS TENANT: AS LANDLORD:
- --------- -----------
FMC CORPORATION, THE EQUITABLE LIFE ASSURANCE
a Delaware corporation SOCIETY OF THE UNITED STATES,
a New York corporation
By: /s/ Charles Fink By: /s/ James Piane
---------------------- -----------------------------
Its: V.P. & Group Manager Its: Attorney in Fact
---------------------- ----------------------------
Dated: June 23, 1989 Dated: 6-23-89
------------------- -------------------------
-6-
<PAGE>
EXHIBIT D
RECORDING REQUESTED BY:
The Equitable Life Assurance
Society of the Untied States
WHEN RECORDED RETURN TO:
Morrison & Foerster
345 California Street
San Francisco, CA 94104-2105
Att'n: Leslie M. Browne
- -------------------------------------------------------------------------------
(Space above this lien for Recorder's use)
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
NOTICE: THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT RESULTS
IN YOUR LEASEHOLD ESTATE IN THE PROPERTY BECOMING SUBJECT TO AND OF
LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY
INSTRUMENT.
THIS AGREEMENT is entered into as of the ______ day of _____________,
1986, by and between THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNTIED STATES,
a New York corporation (the "Beneficiary"), TELEDYNE INDUSTRIES, INC., a
California corporation (the "Lessee") and AIRPORT TECHNOLOGY ASSOCIATES, a
California general partnership (collectively the "Lessor").
W I T N E S S E T H
WHEREAS, Lessee has entered into a certain lease dated June 30, 1986
(the "Lease"), with Lessor covering certain space (the "Premises") located in
and upon the real property described in Exhibit A attached hereto (the
"Property");
WHEREAS, Beneficiary is the holder of a first mortgage loan (the
"Loan") to Lessor in the amount of Thirty One Million Two Hundred Thousand
and/no 100 Dollars ($31,200,000.00) which is secured by a first lien
Construction and Permanent Deed of Trust, Security Agreement and Fixture Filing
with Assignment of Rents (the "Deed of Trust") covering the Property;
WHEREAS, the parties hereto desire expressly to confirm the
subordination of the Lease to the lien of the Deed of Trust, it being a
requirement by Beneficiary that the lien and charge of the Deed of Trust be
unconditionally and at all times prior and superior to the leasehold interests
and estates created by the Lease; and
WHEREAS, Lessee has requested that Beneficiary agree not to disturb
Lessee's possessory rights in the Premises in the event beneficiary should
foreclose the Deed of Trust, provided that Lessee is not in default under the
Lease and provided that Lessee attorns to beneficiary or the purchaser at any
foreclosure or Trustee's sale of the Property.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and of other good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:
<PAGE>
1. Notwithstanding anything to the contrary set forth in the Lease,
the Lease and the leasehold estate created thereby and all of Lessee's rights
thereunder shall be and shall at all times remain subject, subordinate and
inferior to the Deed of Trust and the lien thereof and all rights of Beneficiary
thereunder and to any and all renewals, modifications, consolidations,
replacements and extensions thereof.
2. Lessee hereby declares, agrees and acknowledges that:
a. Beneficiary would not have agreed to recognize the Lease
without this Agreement; and
b. Beneficiary, in making disbursements pursuant to the
agreements evidencing and securing the Loan, is under no obligation or duty to
oversee or direct the application of the proceeds of such disbursements and such
proceeds may be used by Lessor for purposes other than improvement of the
premises.
3. In the event of foreclosure of the Deed of Trust, or upon a
sale of the property encumbered thereby pursuant to the Trustee's power of
sale contained therein, or upon a transfer of said property by deed in lieu
of foreclosure, then so long as Lessee is not in default under any of the
terms, covenants, or conditions of the Lease, the Lease shall continue in
full force and effect as a direct lease between the succeeding owner of the
Property and Lessee, upon and subject to all of the terms, covenants and
conditions of the Lease for the balance of the term of the Lease. Lessee
hereby agrees to attorn to and accept any such successor owner as landlord
under the Lease, and to be bound by and perform all of the obligations
imposed by the Lease, and Beneficiary or any such successor owner of the
Property will not disturb the possession of Lessee, and will be bound by all
of the obligations imposed by the Lease upon the landlord thereunder;
provided, however, that the Beneficiary, or any purchaser at a trustee's or
sheriff's sale or any successor owner of the Property shall not be:
a. liable for any act or omission of a prior landlord
(including the Lessor); or
b. subject to any offsets or defenses which the Lessee might
have against any prior landlord (including the Lessor); or
c. bound by any rent or additional rent which the Lessee might
have paid in advance to any prior landlord (including the Lessor) for a period
in excess of one month; or
d. bound by any agreement or modification of the Lease made
without the written consent of the Beneficiary; or
e. liable or responsible for or with respect to the retention,
application and/or return to Lessee of any security deposit paid to any prior
lessor (including the Lessor), whether or not still held by such prior lessor,
unless and until beneficiary or such other purchaser has actually received for
its own account as lessor the full amount of such security deposit.
Beneficiary acknowledges that it is presently a general partner in
Lessor and that the provisions of this Agreement shall not affect any
obligations it may have under the Lease in its capacity as general partner of
Lessor.
4. Upon the written request of either Beneficiary or Lessee to the
other given at the time of a foreclosure, trustee's sale or deed in lieu
thereof, the parties agree to execute a lease of the Premises upon the same
terms and conditions as the Lease between the Lessor and Lessee, which lease
shall cover any unexpired term of the Lease existing prior to such foreclosure,
trustee' sale or conveyance in lieu of foreclosure.
5. Lessee from and after the date hereof, in the event of any act or
omission by Lessor which would give Lessee the right, either immediately or
after the lapse of time, to terminate the Lease or to claim a partial or total
eviction or to offset against the rental due under the Lease any amount due
Lessee as a result of a breach by Lessor, will not exercise any such
-2-
<PAGE>
right: (a) until it has given written notice of such act to Beneficiary; and
(b) until the same period of time as is given to Lessor under the Lease to
cure such act or omission shall have elapsed following such giving of notice
to beneficiary and following the time when Beneficiary shall have become
entitled under the Deed of Trust to remedy the same.
6. Lessor, as landlord under the Lease and trustor under the Deed
of Trust, agrees for itself and its heirs, successors and assigns, that:
(a) this Agreement does not (i) constitute a waiver by Beneficiary of any of
its rights under the Deed of Trust, and/or (ii) in any way release Lessor
from its obligation to comply with the terms, provisions, conditions,
covenants, agreements and clauses of the Deed of Trust; (b) the provisions of
the Deed of Trust remain in full force and effect and must be complied with
by Lessor; and (c) in the event of a default under the Deed of Trust, Lessee
may pay all rent and all other sums due under the Lease to beneficiary as
provided in this Agreement.
7. Lessee acknowledges that it has notice that the Lease and the
rent and all other sums due thereunder have been assigned or are to be
assigned to Beneficiary as security for the Loan secured by the Deed of
Trust. In the event that Beneficiary notifies Lessee in writing of a default
under the Deed of Trust and demands that Lessee pay its rent and all other
sums due under the Lease to Beneficiary, Lessee agrees that it will honor
such demand and pay its rent and all other sums due under the Lease directly
to the Beneficiary or as otherwise required pursuant to such notice.
8. Any provision of this Agreement to the contrary
notwithstanding, beneficiary shall have no obligation or incur any liability
with respect to the erection and completion of the building in which the
Premises are located or for completion of the Premises or any improvements
for Lessee's use and occupancy.
9. Lessee from and after the date hereof shall send a copy of any
notice or statement under the Lease to Beneficiary at the same time such
notice or statement is sent to the Lessor under the Lease.
10. All notices hereunder shall be deemed to have been duly given if
mailed by United States registered or certified mail, with return receipt
requested, postage prepaid to beneficiary at the following address (or at such
other address as shall be given in writing by Beneficiary to the Lessee) and
shall be deemed complete upon any such mailing:
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
c/o Equitable Real Estate Management, Inc.
1 Market Plaza, 1900 Steuart Street Tower
San Francisco, CA 94105
Attention: Senior Vice President
with a copy to: Mr. Richard Dolson, Senior Vice President
EQUITABLE REAL ESTATE INVESTMENT MANAGEMENT, INC.
3414 PEACHTREE ROAD NE, SUITE 1405
ATLANTA, GEORGIA 30326-1162
11. This Agreement supersedes any inconsistent provisions of the
Lease.
12. Nothing contained in this Agreement shall be construed to
derogate from or in any way impair or affect the lien and charge or
provisions of the Deed of Trust, except as specifically set forth herein.
13. This Agreement shall inure to the benefit of the parties
hereto, their successors and permitted assigns; provided however, that in the
event of the assignment or transfer of the interest of Beneficiary, all
obligations and liabilities of Beneficiary under this Agreement shall
terminate, and thereupon all such obligations and liabilities shall be the
responsibility of the party to whom beneficiary's interest is assigned or
transferred; and provided
-3-
<PAGE>
further that the interest of Lessee under this Agreement may not be assigned
or transferred without the prior written consent of Beneficiary.
14. Lessee agrees that this Agreement satisfies any condition or
requirement in the Lease relating to the granting of a non-disturbance
agreement.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first set forth above.
NOTICE: THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT CONTAINS
A PROVISION WHICH ALLOWS THE PERSON OBLIGATED ON THE LEASE TO OBTAIN
A LOAN, A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN
IMPROVEMENT OF THE PROPERTY.
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
a New York corporation
"Beneficiary"
By
------------------------------
Printed
Name: Richard B. Duffy
---------------------------
Title Assistant Secretary
---------------------------
TELEDYNE INDUSTRIES, INC.
a California corporation
"Lessee"
By
------------------------------
Printed
Name
----------------------------
Title
---------------------------
AIRPORT TECHNOLOGY PARK ASSOCIATES,
a California general partnership
"Lessor"
By Birstaf II,
a California partnership,
General Partner
By
------------------------------
Hudson R. Staffield,
a general partner of
Birstaf II
-4-
<PAGE>
By Birtcher Pacific II
a California general partnership,
a general partner of
Birstaf II
By
------------------------------------
Printed
Name:
----------------------------------
Title
----------------------------------
By The Equitable Life Assurance
Society of the United States,
a New York corporation,
General Partner
By
-------------------------------------
Printed
Name Richard B. Duffy
-----------------------------------
Title Assistant Secretary
-----------------------------------
IT IS RECOMMENDED THAT PRIOR TO THE EXECUTION OF THIS
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT, THE PARTIES CONSULT
WITH THEIR ATTORNEYS WITH RESPECT THERETO.
-5-
<PAGE>
STATE OF )
) ss.
COUNTY OF )
On this ____ day of ____________, in the year 1986, before me, the
undersigned, a Notary Public in and for said State, personally appeared
Richard B. Duffy, personally known to me, or proved to me on the basis of
satisfactory evidence, to be the person who executed the within instrument as
Assistant Secretary, on behalf of The Equitable Life Assurance Society of the
United States, a New York corporation, the corporation therein named, and
acknowledge to me that such corporation executed the within instrument
pursuant to its by-laws or to a resolution of its board of directors.
WITNESS my hand and official seal.
----------------------------------------
NOTARY PUBLIC
STATE OF )
) ss.
COUNTY OF )
On this ____ day of ____________, in the year 1986, before me, the
undersigned, a Notary Public in and for said State, personally appeared
______________________, personally known to me, or proved to me on the basis
of satisfactory evidence, to be the person who executed the within instrument
as ____________________, on behalf of Teledyne Industries, Inc., a California
corporation, the corporation therein named, and acknowledge to me that such
corporation executed the within instrument pursuant to its by-laws or to a
resolution of its board of directors.
WITNESS my hand and official seal.
------------------------------------------
NOTARY PUBLIC
<PAGE>
STATE OF )
) ss.
COUNTY OF )
On this ____ day of ____________, in the year 1986, before me, the
undersigned, a Notary Public in and for said State, personally appeared
Hudson R. Staffield, personally known to me, or proved to me on the basis of
satisfactory evidence, to be the person who executed the within instrument as
a general partner of Birstaf II, a California partnership, and acknowledged
to me that Birstaf II is a general partner of Airport Technology Park
Associates, the California general partnership that executed the within
instrument, and that Birstaf II executed the same as a general partner of
Airport Technology Park Associates.
WITNESS my hand and official seal.
----------------------------------------
NOTARY PUBLIC
STATE OF )
) ss.
COUNTY OF )
On this ____ day of ____________, in the year 1986, before me, the
undersigned, a Notary Public in and for said State, personally appeared
___________________, personally known to me, or proved to me on the basis of
satisfactory evidence, to be the person who executed the within instrument as
the ______________________ of Birtcher Pacific II, a California general
partnership, and acknowledged to me that Birtcher Pacific II is a general
partner of Birstaf II, a California partnership, that Birstaf II is a general
partner of Airport Technology Park Associates, the California general
partnership that executed the within instrument, that Birtcher Pacific II
executed the same as a general partner of Birstaf II, that Birstaf II
executed the same as a general partner of Airport Technology Park Associates,
and that Airport Technology Park Associates executed the same.
WITNESS my hand and official seal.
----------------------------------------
NOTARY PUBLIC
-2-
<PAGE>
STATE OF )
) ss.
COUNTY OF )
On this ____ day of ____________, in the year 1986, before me, the
undersigned, a Notary Public in and for said State, personally appeared
Richard B. Duffy, personally known to me, or proved to me on the basis of
satisfactory evidence, to be the person who executed the within instrument as
the Assistant Secretary of The Equitable Life Assurance Society of the United
States, a New York corporation, and acknowledge to me that The Equitable Life
Assurance Society of the United States is a general partner of Airport
Technology Park Associates, the California general partnership that executed
the within instrument, and that The Equitable Life Assurance Society of the
United States executed the same as a general partner of Airport Technology
Park Associates.
WITNESS my hand and official seal.
----------------------------------------
NOTARY PUBLIC
-3-
<PAGE>
LEASE
BY AND BETWEEN
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES,
a New York corporation, as Landlord
and
FMC CORPORATION,
a Delaware corporation,
as Tenant
for
BUILDING C
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Commencement Date. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Rent Start Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4. Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5. Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6. Permitted Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7. Tenant's Minimum Liability Insurance Coverage. . . . . . . . . . . . 2
1.8. Tenant's Allocated Parking Stalls. . . . . . . . . . . . . . . . . . 2
1.9. Retained Real Estate Brokers . . . . . . . . . . . . . . . . . . . . 2
1.10. Address for Notices . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11. Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12. Building A Lease. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13. Tenant's Allocated Share. . . . . . . . . . . . . . . . . . . . . . 2
1.14. Continuing Tenant Default . . . . . . . . . . . . . . . . . . . . . 3
1.15. Additional Definitions. . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2. DEMISE AND ACCEPTANCE. . . . . . . . . . . . . . . . . . . . . . 3
2.1. Demise of Premises . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2. Delivery and Acceptance of Possession. . . . . . . . . . . . . . . . 3
2.3. Construction of Interior Improvements. . . . . . . . . . . . . . . . 3
2.4. Options to Extend Lease Term . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3. RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1. Base Monthly Rent. . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2. Additional Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3. Payment of Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4. Late Charge and Interest on Rent in Default. . . . . . . . . . . . . 6
ARTICLE 4. USE OF PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1. Limitation on Type . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2. Compliance with Laws and Private Restrictions. . . . . . . . . . . . 7
4.3. Insurance Requirements . . . . . . . . . . . . . . . . . . . . . . . 7
4.4. Outside Areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5. Signs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6. Rules and Regulations. . . . . . . . . . . . . . . . . . . . . . . . 8
4.7. Parking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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<PAGE>
4.8. Window Coverings . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.9. Outside Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 5. TRADE FIXTURES AND LEASEHOLD IMPROVEMENTS. . . . . . . . . . . . 9
5.1. Trade Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2. Leasehold Improvements . . . . . . . . . . . . . . . . . . . . . . . 9
5.3. Alterations Required by Law. . . . . . . . . . . . . . . . . . . . . 10
5.4. Landlord's Improvements. . . . . . . . . . . . . . . . . . . . . . . 11
5.5. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6. Modifications to the Premises. . . . . . . . . . . . . . . . . . . . 11
ARTICLE 6. REPAIR AND MAINTENANCE . . . . . . . . . . . . . . . . . . . . . 12
6.1. Tenant's Obligation to Maintain. . . . . . . . . . . . . . . . . . . 12
6.2. Landlord's Obligation to Maintain. . . . . . . . . . . . . . . . . . 12
6.3. Tenant's Obligation to Reimburse . . . . . . . . . . . . . . . . . . 13
6.4. Common Operating Expenses Defined. . . . . . . . . . . . . . . . . . 13
6.5. Control of Common Area . . . . . . . . . . . . . . . . . . . . . . . 14
6.6. Tenant's Negligence. . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 7. WASTE DISPOSAL AND UTILITIES . . . . . . . . . . . . . . . . . . 15
7.1. Waste Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2. Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3. Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.4. Compliance with Governmental Regulations . . . . . . . . . . . . . . 17
ARTICLE 8. REAL PROPERTY TAXES. . . . . . . . . . . . . . . . . . . . . . . 17
8.1. Real Property Taxes Defined. . . . . . . . . . . . . . . . . . . . . 17
8.2. Tenant's Obligation to Reimburse . . . . . . . . . . . . . . . . . . 18
8.3. Taxes on Tenant's Property . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 9. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.1. Tenant's Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.2. Landlord's Insurance . . . . . . . . . . . . . . . . . . . . . . . . 20
9.3. Tenant's Obligation to Reimburse . . . . . . . . . . . . . . . . . . 20
9.4. Release and Waiver of Subrogation. . . . . . . . . . . . . . . . . . 20
ARTICLE 10. LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY. . . . . . . . 21
10.1. Limitation on Landlord's Liability. . . . . . . . . . . . . . . . . 21
10.2. Limitation on Tenant's Recourse . . . . . . . . . . . . . . . . . . 21
<PAGE>
10.3. Indemnification of Landlord . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 11. DAMAGE TO PREMISES. . . . . . . . . . . . . . . . . . . . . . . 22
11.1. Landlord's Duty to Restore. . . . . . . . . . . . . . . . . . . . . 22
11.2. Landlord's Right to Terminate . . . . . . . . . . . . . . . . . . . 22
11.3. Tenant's Right to Terminate . . . . . . . . . . . . . . . . . . . . 23
11.4. Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 12. CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . . . . . 24
12.1. Tenant's Termination Right. . . . . . . . . . . . . . . . . . . . . 24
12.2. Restoration and Abatement of Rent . . . . . . . . . . . . . . . . . 24
12.3. Temporary Taking. . . . . . . . . . . . . . . . . . . . . . . . . . 24
12.4. Division of Condemnation Award. . . . . . . . . . . . . . . . . . . 24
ARTICLE 13. DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . 25
13.1. Events of Tenant's Default. . . . . . . . . . . . . . . . . . . . . 25
13.2. Landlord's Remedies . . . . . . . . . . . . . . . . . . . . . . . . 26
13.3. Waiver by Tenant of Certain Remedies. . . . . . . . . . . . . . . . 27
13.4. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
13.5. Limitation on Exercise of Rights. . . . . . . . . . . . . . . . . . 27
ARTICLE 14. ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . 27
14.1. By Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.2. By Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 15. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . 30
15.1. Landlord's Right to Enter . . . . . . . . . . . . . . . . . . . . . 30
15.2. Surrender of the Premises . . . . . . . . . . . . . . . . . . . . . 30
15.3. Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
15.4. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15.5. Tenant's Attornment . . . . . . . . . . . . . . . . . . . . . . . . 31
15.6. Mortgagee Protection . . . . . . . . . . . . . . . . . . . . . . . 31
15.7. Estoppel Certificates and Financial Statements . . . . . . . . . . 31
15.8. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
15.9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
15.10. Obligation to Act Reasonably . . . . . . . . . . . . . . . . . . . 32
15.11. Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . 32
15.12. Additional Definitions . . . . . . . . . . . . . . . . . . . . . . 32
15.13. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 33
<PAGE>
15.14. Termination by Exercise of Right . . . . . . . . . . . . . . . . . 33
15.15. Brokerage Commissions . . . . . . . . . . . . . . . . . . . . . . 34
15.16. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.17. Right of First Offer to Lease . . . . . . . . . . . . . . . . . . 34
SCHEDULE OF EXHIBITS
EXHIBIT A - SITE PLAN OF PROPERTY
EXHIBIT B - APPROVED PLANS FOR INTERIOR IMPROVEMENTS
EXHIBIT C - INTERIOR IMPROVEMENT AGREEMENT
EXHIBIT D - FORM OF SUBORDINATION AGREEMENT
<PAGE>
LEASE
(Building C)
THIS LEASE, dated June 1, 1989 for reference purposes only, is made by
and between THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, a New
York corporation ("Landlord"), and FMC CORPORATION, a Delaware corporation
("Tenant").
ARTICLE 1.
DEFINITIONS
1.1. COMMENCEMENT DATE: The term "Commencement Date" shall mean the
date the last signatory to this Lease whose execution is required to make it
binding on Landlord and Tenant shall have executed this Lease.
1.2. RENT START DATE: The term "Rent Start Date" shall mean November 1,
1989; provided, however, that if the Interior Improvements to be constructed
pursuant to the Interior Improvement Agreement attached as EXHIBIT "C" are
not "Substantially Completed" (as defined in EXHIBIT "C") by November 1, 1989
because of delays in construction resulting from "Force Majeure" (as defined
in this paragraph 1.2), then the Rent Start Date shall be extended for one
day for each such day of delay experienced by Tenant in constructing the
Interior Improvements pursuant to EXHIBIT "C". For purposes of this
paragraph, the following shall apply:
A. The term "Force Majeure" shall mean (i) any material default by
Landlord of its obligations under this Lease which delays construction; (ii)
strikes, labor disputes or work stoppages which are not directed solely at
the construction of the Interior Improvements or only because of job
conditions at the Premises but which also affect other construction projects;
(iii) damage to the Interior Improvements or the Premises caused by fire,
earthquake, vandalism or other peril; and (iv) civil commotion, civil unrest,
or acts of war. The term "Force Majeure" shall not include any of the
following: (i) delays caused by the Prime Contractor or any subcontractor,
including delays resulting from contractor default; (ii) inability to obtain
labor, materials, equipment, or reasonable substitutes therefor when ordered;
or (iii) inability to obtain any governmental approval required in connection
with the construction of the Interior Improvements.
B. Tenant shall notify Landlord promptly of the occurrence of any
event of Force Majeure. If Tenant does not notify Landlord in writing of the
occurrence of an event of Force Majeure within five (5) days after such event
has commenced to occur, then the Rent Start Date shall only be extended by
the amount of delay that occurs after Tenant actually gives written notice to
Landlord of the occurrence of the event of Force Majeure in question.
1.3. LEASE TERM: The Lease Term shall commence on the Commencement Date
and shall continue until the tenth (10th) anniversary of the Rent Start Date
(unless the Lease Term is extended pursuant to paragraph 2.4 hereof).
1.4. PROPERTY: The term "Property" shall mean that real property shown
on the site plan attached hereto as EXHIBIT "A" and all improvements now or
hereafter located thereon, including, without limitation, the five (5)
buildings presently located thereon, including, without limitation, the five
(5) buildings presently located thereon, the aggregate gross leasable area of
which is approximately 295,271 square feet (the "Property Gross Leasable
Area"), allocated among the five buildings as shown on the attached EXHIBIT
"A"; provided, however, that Landlord may change the boundaries and
composition of the Property by removing or adding land and/or buildings and
thereafter the term "Property" shall refer to such real property so enlarged
or reduced and the amount of the "Property Gross Leasable Area" shall be
appropriately adjusted.
<PAGE>
1.5. PREMISES: The term "Premises" shall mean the building structure
situated on the Property commonly known as Building C of Airport Technology
Park, 2830 De La Cruz Boulevard, Santa Clara, California, containing
approximately 86,785 square feet of gross leasable area (the "Premises Gross
Leasable Area") located as shown on EXHIBIT "A". Landlord and Tenant agree
that (i) all measurements of gross leasable area contained in this Lease are
conclusively agreed to be correct and binding upon the parties, even if a
subsequent measurement of any one of these areas determines that it is more
or less than the amount of area reflected in this Lease; and (ii) any such
subsequent determination that the area is more or less than shown in this
Lease shall not result in a change in any of the computations of rent,
improvement allowances, or other matters described in this Lease where gross
leasable area is a factor.
1.6. PERMITTED USE: The term "Permitted Use" shall mean the use of the
Premises for (i) research and development, production, sales, and general
administrative offices and other legal uses incidental thereto, and (ii) any
other legal use first approved in writing by Landlord.
1.7. TENANT'S MINIMUM LIABILITY INSURANCE COVERAGE: The term "Tenant's
Minimum Liability Insurance Coverage" shall mean Two Million Five Hundred
Thousand Dollars ($2,500,000).
1.8. TENANT'S ALLOCATED PARKING STALLS: The term "Tenant's Allocated
Parking Stalls" shall mean 347 parking stalls for the non-exclusive use of
Tenant, subject to reduction as set forth in paragraph 5.6A. Notwithstanding
the foregoing, or any other provision of this Lease, the parties acknowledge
that although Tenant is allocated a combined total of 620 parking spaces
pursuant to this Lease and the Building A Lease, after a restripping of the
parking areas on the Property to increase to 1,155 the number of spaces
available, only a total of 603 spaces shall be available for Tenant's use.
In this regard the parties agree that the total number of parking spaces
allocated for Tenant's use under this Lease and under the Building A Lease
shall be reduced by 17; such spaces shall be proportionately allocated
between the Premises and the premises leased pursuant to the Building A
Lease. Landlord agrees, at the written request of Tenant, to construct at
Landlord's expense 17 additional parking spaces on the Property, if Landlord
can do so at a reasonable cost by relocating or removing landscaped area or
driveways, and the construction of such additional parking spaces is
permitted by all applicable Laws.
1.9. RETAINED REAL ESTATE BROKERS: The term "Retained Real Estate
Brokers" shall mean LaSalle Partners Limited and J.R. Parrish, Inc.
1.10. ADDRESS FOR NOTICES: The term "Address for Notices" shall mean the
following:
A. In the case of Landlord, such term shall mean The Equitable
Life Assurance Society of the United States, One Market Plaza, 1900 Steuart
Tower, San Francisco, California 94105, Attention: Property Management
Department.
B. In the case of Tenant, such term shall mean (i) before the
Commencement Date, its present address which is 881 Martin Avenue, Box 58123,
Santa Clara, California 95052; and (ii) after the Commencement Date, the
address of the Premises which is 2830 De La Cruz Boulevard, Santa Clara,
California 95050.
1.11. LEASE: The term "Lease" shall mean this printed lease, Exhibits
"A" (site plan), "B" (Approved Plans for Interior Improvements), "C"
(Interior Improvement Agreement), "D" (form of subordination agreement), all
of which are attached hereto and incorporated herein by this reference.
1.12. BUILDING A LEASE: The term "Building A Lease" shall mean that
lease dated as of June 1, 1989 between Landlord and Tenant, pursuant to which
Tenant leases from Landlord that certain building identified as Building A on
the site plan attached hereto as EXHIBIT "A" and which contains approximately
68,708 square feet, the address of which is 2890 De La Cruz Boulevard, Santa
Clara, California.
1.13. TENANT'S ALLOCATED SHARE: The term "Tenant's Allocated Share"
shall mean one hundred percent (100%).
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1.14. CONTINUING TENANT DEFAULT: A "Continuing Tenant Default" shall be
deemed to exist when an "Event of Tenant's Default" (as defined in paragraph
13.1) has occurred, and the underlying default or breach by Tenant of its
obligations which resulted in such Event of Tenant's Default has not been
completely cured.
1.15. ADDITIONAL DEFINITIONS: As used in this Lease or any addendum or
amendment thereto, the following terms shall have the meanings set forth in
paragraph 15.12: "Agreed Interest Rate", "Common Area", "Law", "Leasehold
Improvements", "Lender", "Private Restrictions" and "Trade Fixtures".
ARTICLE 2.
DEMISE AND ACCEPTANCE
2.1. DEMISE OF PREMISES: Landlord hereby leases to Tenant, and Tenant
leases from Landlord, for the Lease Term upon the terms and conditions of
this Lease, the Premises together with (i) the non-exclusive right to use no
more than the number of Tenant's Allocated Parking Stalls within the Common
Area (subject to the limitations set forth in paragraph 4.7), and (ii) the
non-exclusive right to use the Common Area for ingress to and egress from the
Premises. Tenant's lease of the Premises shall be subject to (i) all Laws,
(ii) all Private Restrictions, easements, and other matters of public record,
and (iii) the reasonable and non-discriminatory rules and regulations from
time to time promulgated by Landlord pursuant to paragraph 4.6.
2.2. DELIVERY AND ACCEPTANCE OF POSSESSION: Landlord shall deliver to
Tenant possession of the Premises on the Commencement Date in their presently
existing condition, broom clean. Tenant shall accept possession of the
Premises in its presently existing condition, "as-is" (except for latent
defects in the structural elements of the Premises), acknowledging that (i)
Tenant intends to do substantial renovation work and construct completely new
interior improvements pursuant to paragraph 2.3 hereof and the Interior
Improvement Agreement attached as EXHIBIT "C", and (ii) Landlord is obligated
to make certain repairs as set forth in the Interior Improvement Agreement.
2.3. CONSTRUCTION OF INTERIOR IMPROVEMENTS: Tenant shall construct
certain improvements for Tenant's use in the Premises pursuant to the terms
of the Interior Improvement Agreement executed concurrently with this Lease
by Landlord and Tenant and attached hereto as EXHIBIT "C".
2.4. OPTIONS TO EXTEND LEASE TERM: Landlord hereby grants to Tenant two
(2) options (each referred to as the "Option") to extend the Lease Term each
for a five (5) year period (the "Option Term"), on the following terms and
conditions:
A. Tenant must give Landlord notice in writing of its exercise of
the Option before the later to occur of (i) the two hundred fortieth (240th)
day before the date the initial Lease Term (or then extended Lease Term as
the case may be) would end but for said exercise, or (ii) the seventh (7th)
day following the establishment of the fair market rent for the Premises by
appraisal pursuant to subparagraph 2.4F if such appraisal process is
commenced pursuant to subparagraphs 2.4E and 2.4F.
B. Tenant may not exercise the Option at any time that either of
the following is true: (i) a Continuing Tenant Default exists under this
Lease (unless caused by a subtenant of the original Tenant under this Lease
and such original Tenant is using reasonable efforts to cause such default to
be cured) or (ii) a Continuing Tenant Default exists under the Building A
Lease (unless caused by a subtenant or assignee of the original Tenant under
this Lease and such original Tenant is using reasonable efforts to cause such
default to be cured) and the same person or entity is the owner of record of
both the Premises and the real property leased pursuant to the Building A
Lease.
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C. All the terms and conditions of this Lease shall apply during
the Option Term, except that the Base Monthly Rent for the Option Term shall
be determined as provided in subparagraph 2.4D below.
D. The Base Monthly Rent for the Option Term with respect to the
Premises shall be the ninety-five percent (95%) of the fair market rent for
the Premises for the Option Term on the terms contained in this Lease as of
the commencement of the Option Term, determined pursuant to subparagraphs
2.4E and 2.4F. For purposes of this Lease, the term "fair market rent for
the Premises" shall mean the projected going market rent for the Premises as
of the commencement of the Option Term in question, including a provision for
periodic increases of such rent during the Option Term (which increases shall
be established as part of such fair market rent), taking into account the
value of all improvements in the Premises, regardless of whether made by
Landlord or Tenant (except for those Leasehold Improvements that Tenant has
the right to remove at the expiration of the Lease Term).
E. Tenant may not exercise the Option in question unless Tenant
has delivered to Landlord a written request (a "Rent Quote Request") that
Landlord state in writing Landlord's opinion of the fair market rent for the
Premises for the upcoming Option Term in question, which Rent Quote Request
may only be delivered and shall only be effective if delivered (i) no sooner
than fifteen (15) months before the expiration of the Lease Term, and (ii) no
later than thirteen (13) months prior to the expiration of the Lease Term.
After receipt of a Rent Quote Request and no later than twelve (12) months
prior to the expiration of the Lease Term, Landlord shall deliver to Tenant a
written statement setting forth Landlord's opinion of the fair market rent
for the Premises for the Option Term in question (a "Landlord's Rent Quote").
For a period of thirty (30) days following delivery to Tenant of Landlord's
Rent Quote (the "Negotiation Period"), Landlord and Tenant shall confer to
attempt to reach agreement upon the fair market rent for the Premises for the
Option Term in question. If Landlord and Tenant are unable to reach
agreement in writing within the Negotiation Period, for purposes of
establishing the Base Monthly Rent for the Option Term in question, the fair
market rent for the Premises shall be deemed to be the amount stated in
Landlord's Rent Quote unless Tenant delivers to Landlord during the
Negotiation Period a written notice which states the following: (i) Tenant
requires that the fair market rent for the Premises for the Option Term in
question be established by the appraisal process described in subparagraph
2.4F; and (ii) the name, address, and qualifications of the appraiser
selected by Tenant for purposes of the appraisal process described in
subparagraph 2.4F ("Tenant's Appraisal Demand"). If Tenant so timely
delivers to Landlord a Tenant's Appraisal Demand, the Base Monthly Rent for
the Option Term in question shall be established based on the result of the
appraisal process described in subparagraph 2.4F.
F. If Tenant delivers to Landlord a Tenant's Appraisal Demand
during the Negotiation Period, then the fair market rent for the Premises
shall be determined by three (3) real estate appraisers, all of whom shall be
members of the American Institute of Real Estate Appraisers with not less
than five (5) years experience appraising real property (other than
residential or agricultural property) located in Santa Clara County,
California, in accordance with the following procedures:
(1) One of the appraisers shall be the appraiser identified in
Tenant's Appraisal Demand. Within ten (10) days of receipt of Tenant's
Appraisal Demand, Landlord shall select its appraiser and notify Tenant, in
writing, of the name, address and qualifications of an appraiser selected by
it. Failure by Landlord to select a qualified appraiser within said ten (10)
day period shall be deemed a waiver of its right to select a second appraiser
on its own behalf and Tenant shall select a second appraiser on behalf of
Landlord within five (5) days after the expiration of said ten (10) day
period. Within ten (10) days from the date the second appraiser shall have
been appointed, the two (2) appraisers selected by the parties shall appoint
a third appraiser. If the two appraisers fail to select a third qualified
appraiser, the third appraiser shall be selected by the American Arbitration
Association at the request of either party or, if there is then no American
Arbitration Association or if it refuses to perform this function, then at
the request of either Landlord or Tenant, the third appraiser shall be
appointed by the then Presiding Judge of the Superior Court of the State of
California for the County of Santa Clara.
(2) The three (3) appraisers so selected shall meet in San
Jose,
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California, not later than twenty (20) days following the selection of the
third appraiser. At said meeting the appraisers shall attempt to determine
the fair market rent for the Premises for the Option Term in question.
(3) If the appraisers are unable to complete their
determinations in one meeting, they may continue to consult at such times as
they deem necessary for a fifteen (15) day period from the date of their
first meeting, in an attempt to have at least two (2) of them agree. If, at
the initial meeting or at any time during said fifteen (15) day period, two
(2) or more of the appraisers agree on the fair market rent for the Premises,
such agreement shall be determinative and binding on the parties hereto, and
the agreeing appraisers shall, in simple letter form executed by the agreeing
appraisers, forthwith notify both Landlord and Tenant of the amount set by
such agreement.
(4) If two (2) or more appraisers do not agree within said
fifteen (15) day period as set forth above, then each appraiser shall, within
five (5) days after the expiration of said fifteen (15) day period, submit
his independent appraisal in simple letter form to Landlord and Tenant
stating his determination of the fair market rent for the Premises for the
Option Term in question. Landlord and Tenant shall then determine the fair
market rent for the Premises for the Option Term by determining the average
of the fair market rent set by each of the appraisers; provided, however, if
the lowest appraisal is less than eighty-five percent (85%) of the middle
appraisal then such lowest appraisal shall be disregarded, and/or if the
highest appraisal is greater than one hundred fifteen percent (115%) of the
middle appraisal then such highest appraisal shall be disregarded. If any
appraisal is disregarded, then the average shall be determined by computing
the average set by the other appraisals that have not been disregarded. For
purposes of determining the relative amount of the appraisals to implement
the provisions of this subparagraph requiring that an appraisal be
disregarded if it is too high or too low, the amount of an appraisal that
calls for periodic rent increases based upon an index (E.G., the Consumer
Price Index) shall be determined by assuming that such index will increase at
the same average annual rate during the option period in question that such
index increased on an average annual basis during the five (5) year period
preceding the commencement of the option period in question.
(5) Each party shall bear the fees and expenses of the
appraisers selected by or for it, and the fees and expenses of the third
appraiser shall be borne fifty percent (50%) by Landlord and fifty percent
(50%) by Tenant.
ARTICLE 3.
RENT
3.1. BASE MONTHLY RENT: Commencing on the Rent Start Date and
continuing thereafter throughout the initial Lease Term, Tenant shall pay to
Landlord a monthly rent (which rent is referred to as the "Base Monthly
Rent"), which shall be the following:
A. No Base Monthly Rent shall be payable for the period beginning
on the Rent Start Date and ending on the last day of the sixth (6th) month of
the Lease Term.
B. The Base Monthly Rent for the period beginning on the first day
of the seventh (7th) month of the Lease Term and ending on the last day of
the twenty-fourth (24th) month of the Lease Term is Sixty-Thousand Seven
Hundred Fifty Dollars ($60,750) (I.E., $0.70 per square foot per month).
C. The Base Monthly Rent for the period beginning on the first day
of the twenty-fifth (25th) month of the Lease Term and ending on the last day
of the forty-eighth (48th) month of the Lease Term is Seventy-Three Thousand
Seven Hundred Sixty-Seven Dollars ($73,767) (I.E., $0.85 per square foot per
month).
D. The Base Monthly Rent for the period beginning on the first day
of the forty-ninth (49th) month of the Lease Term and ending on the last day
of the seventy-second
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(72nd) month of the Lease Term is Seventy-Eight Thousand One Hundred Six
Dollars ($78,106) (I.E., $0.90 per square foot per month).
E. The Base Monthly Rent for the period beginning on the first day
of the seventy-third (73rd) month of the Lease Term and ending on the last
day of the one hundred twentieth (120th) month of the Lease Term is
Eighty-Two Thousand Four Hundred Forty-Six Dollars ($82,446) (I.E., $0.95 per
square foot per month).
F. For purposes of applying the provisions of this paragraph 3.1,
the term "month of the Lease Term" shall mean that period which begins on
that day of the calendar month in question which corresponds to the Rent
Start Date and which continues for thirty (30) or thirty-one (31) days until
the day of the next calendar month which precedes the day in that calendar
month which corresponds to the Rent Start Date. By way of example only, if
it is assumed that the Rent Start Date is September 15, 1989, then for
purposes of this paragraph 3.1 (i) the first month of the Lease Term would
commence September 15 and end on October 14, 1989; and (ii) the seventh (7th)
month of the Lease Term would commence on March 15 and end on April 14, 1990.
3.2. ADDITIONAL RENT: Commencing on the Rent Start Date and continuing
thereafter throughout the Lease Term, Tenant shall pay, as additional rent
(the "Additional Rent"), (i) Tenant's share of Common Operating Expenses as
required by paragraph 6.3, (ii) Tenant's share of Real Property Taxes as
required by paragraph 8.2, (iii) Landlord's share of the net consideration
received by Tenant upon certain assignments and sublettings as required by
paragraph 14.1, (iv) any late charges or interest due Landlord pursuant to
paragraph 3.4, (v) Tenant's share of the amortized cost of certain additional
improvements as provided in paragraph 5.4, and (vi) any other charges due
Landlord pursuant to this Lease.
3.3. PAYMENT OF RENT: All rent required to be paid in monthly
installments shall be paid in advance on the first day of each calendar month
during the Lease Term. All rent shall be paid in lawful money of the United
States, without any abatement, deduction or offset whatsoever (except as
permitted by paragraphs 11.4 and 12.2), and without any prior demand
therefor, to Landlord at its address set forth above or at such other place
as Landlord may designate from time to time. Tenant's obligation to pay rent
shall be prorated as of the Rent Start Date and at expiration or earlier
termination of the Lease Term such that Tenant shall not be required to pay
Base Monthly Rent or Additional Rent for any period preceding the Rent Start
Date or following the expiration or earlier termination of the Lease Term
(except in the case of a termination of this Lease as a result of an Event of
Tenant's Default).
3.4. LATE CHARGE AND INTEREST ON RENT IN DEFAULT: Tenant acknowledges
that the late payment by Tenant of any monthly installment of Base Monthly
Rent or any Additional Rent will cause Landlord to incur certain costs and
expenses not contemplated under this Lease, the exact amount of which are
extremely difficult or impractical to fix. Such costs and expenses will
include, without limitation, administration and collection costs and
processing and accounting expenses. Therefore, if any such Base Monthly Rent
or Additional Rent is not received by Landlord from Tenant within five (5)
days after Landlord delivers written notice to Tenant that such amount is
delinquent, Tenant shall immediately pay to Landlord a late charge equal to
five percent (5%) of such delinquent rent. Landlord and Tenant agree that
this late charge represents a reasonable estimate of such costs and expenses
and is fair compensation to Landlord for its loss suffered by Tenant's
failure to make timely payment. In no event shall this provision for a late
charge be deemed to grant to Tenant a grace period or extension of time
within which to pay any rent or prevent Landlord from exercising any right or
remedy available to Landlord upon Tenant's failure to pay any rent due under
this Lease in a timely fashion, including the right to terminate this Lease.
If any rent remains delinquent for a period in excess of thirty (30) days
after Landlord delivers written notice to Tenant that such amount is
delinquent, in addition to such late charge, Tenant shall pay to Landlord
interest on any rent that is not paid when due at the Agreed Interest Rate
following the date such amount became due until paid.
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ARTICLE 4.
USE OF PREMISES
4.1. LIMITATION ON TYPE: Tenant shall use the Premises solely for the
Permitted Use (as described in paragraph 1.6). Tenant shall not do or permit
anything to be done in or about the Premises or Common Area which will (i)
interfere with the rights of other occupants of the Property, (ii) cause
structural damage to the Premises and Tenant fails to promptly commence and
diligently pursue to completion the repair of such damage, or (iii) cause
damage to any part of the Premises or Property except to the extent
reasonably necessary for the installation of Tenant's equipment and trade
fixtures and Tenant fails to promptly commence and diligently pursue to
completion the repair of such damage. Tenant shall not operate any equipment
within the Premises which will (i) injure, vibrate or shake the Premises,
(ii) overload existing electrical systems or other mechanical equipment
servicing the Premises, or (iii) impair the efficient operation of the
sprinkler system or the heating, ventilating or air conditioning ("HVAC")
equipment servicing the Premises, or (iv) damage, overload or corrode the
sanitary sewer system. Tenant shall not attach, hang or suspend anything
from the ceiling, roof, walls or columns of the Premises or set any load on
the floor in excess of approved structural limits as defined by Landlord's
architect. Any dust, fumes, or waste products generated by Tenant's use of
the Premises shall be contained and disposed so that they do not (i) create a
fire or health hazard, (ii) damage the Premises, or (iii) interfere with the
businesses of other tenants of the Property. All noise or odors generated by
Tenant's use of the Premises shall be contained or muffled so that they do
not interfere with the businesses of other tenants of the Property. Tenant
shall not (i) change the exterior of the Premises (subject to Tenant's right
to install signs pursuant to paragraph 4.5), or (ii) install any equipment or
antennas on or make any penetrations of the exterior or roof of the Premises
without the prior written consent of Landlord. Tenant shall not commit nor
permit to be committed any waste in or about the Premises, and Tenant shall
keep the Premises in a neat, clean, attractive and orderly condition, free of
any objectionable noises, odors, dust or nuisances which may disturb the
quiet enjoyment of other tenants or occupants of the Property.
Notwithstanding the foregoing restrictions, the parties agree as follows:
A. Tenant may bring military fighting vehicles onto the first
floor of the Premises so long as (i) Tenant puts into place such reinforcing
as is reasonably necessary to upgrade the floor load capacity so that it will
accept such fighting vehicles; and (ii) Tenant repairs any damage to the
Premises caused by the entry of such vehicles.
B. Tenant may install antennas, radio "dishes" or other electronic
equipment reasonably necessary for the conduct of Tenant's business upon the
roof of the Premises so long as (i) such installations are done in compliance
with all Laws and Private Restrictions; (ii) such installations are
accomplished in a manner which does not compromise the watertight integrity
of the roof; (iii) all damage to the Premises caused by such installation is
repaired by Tenant; and (iv) any such equipment is properly and effectively
screened from view in a manner reasonably acceptable to Landlord.
C. In the event Tenant desires to operate equipment within the
Premises that will or may overload existing mechanical, electrical, or other
systems, Tenant may do so only if it first installs, at its sole cost, all
necessary modifications, repairs or upgrades of existing systems so that such
equipment may be operated without overloading such systems as so modified by
Tenant.
4.2. COMPLIANCE WITH LAWS AND PRIVATE RESTRICTIONS: Tenant shall not
use or permit any person to use the Premises in any manner which violates any
Laws or Private Restrictions. Tenant shall abide by and promptly observe and
comply with all Laws and Private Restrictions and shall indemnify and hold
Landlord harmless from any liability resulting from Tenant's failure to do so.
4.3. INSURANCE REQUIREMENTS: Tenant shall not use or permit any person
to use the Premises or Common Area in any manner which will cause a
cancellation of any insurance policy covering the Premises. Tenant shall not
sell, or permit to be kept, used, or sold in or about
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the Premises any article which may be prohibited by the standard form of fire
insurance policy; provided, however, that Tenant may bring military fighting
vehicles onto the first floor of the Premises as permitted pursuant to
subparagraph 4.1A. Tenant shall comply with all reasonable requirements of
any insurance company, insurance underwriter, or Board of Fire Underwriters
which are necessary to maintain, at reasonable rates, the insurance coverage
carried by Landlord pursuant to this Lease.
4.4. OUTSIDE AREAS: No materials, supplies, storage tanks or
containers, equipment, finished products or semi-finished products, raw
materials, inoperable vehicles or articles of any nature shall be stored upon
or permitted to remain outside of the Premises except in fully fenced and
screened areas outside the Premises which have been designed for such purpose
and have been approved in writing by Landlord for such use by Tenant;
provided, however, that Tenant may bring military fighting vehicles onto the
first floor of the Premises as permitted pursuant to subparagraph 4.1A.
4.5. SIGNS: Tenant shall not place on any portion of the Premises or
the Property any sign, placard, lettering in or on windows, banner, displays
or other advertising or communicative material which is visible from the
exterior of the Premises without the prior written approval of Landlord. All
such approved signs shall strictly conform to all Laws and Private
Restrictions and shall be installed at the expense of Tenant. If Landlord so
elects, Tenant shall, at the expiration or sooner termination of this Lease,
remove all signs installed by it and repair any damage caused by such
removal. Tenant shall at all times maintain such signs in good condition and
repair. Upon Tenant's written request and at Tenant's cost and expense,
Landlord shall remove both of the Airport Technology Park monument signs
located on De La Cruz Boulevard. Subject to Landlord's prior written
approval of Tenant's specific design plan, (i) Tenant shall have the right to
install a monument sign at the entrance to the Premises, and at the two
entrances to Airport Technology Park, and (ii) Tenant shall have the right to
install signs on the exterior of the Premises. Approved signs installed by
Tenant may be illuminated in compliance with the provisions of applicable
laws and Private Restrictions.
4.6. RULES AND REGULATIONS: Landlord may from time to time promulgate
reasonable and nondiscriminatory rules and regulations applicable to all
occupants of the Property for the care and orderly management of the Property
and the safety of its tenants and invitees. Such rules and regulations shall
be binding upon Tenant upon delivery of a copy thereof to Tenant, and Tenant
agrees to abide by such rules and regulations. If there is a conflict
between the rules and regulations and any of the provisions of this Lease,
the provisions of this Lease shall prevail. Landlord shall not be
responsible for the violation by any other tenant of the Property of any such
rules and regulations.
4.7. PARKING: Tenant is allocated and shall have the non-exclusive
right to use (without charge in addition to the Base Monthly Rent) no more
than the number of parking spaces contained within the Property described in
paragraph 2.1 for its use and the use of its employees and invitees, the
location of which may be designated from time to time by Landlord but shall
be on the Property and within reasonable proximity to the Premises. Tenant
shall not at any time use or permit its employees or invitees to use more
parking spaces than the number so allocated to Tenant or to park or permit
the parking of its vehicles or the vehicles of others in any portion of the
Property not designated by Landlord as a non-exclusive parking area.
Landlord shall not oversubscribe the parking within the Property, and shall
assure that the total number of spaces committed to the non-exclusive use of
all tenants of the Property shall not exceed the total number of spaces
within the Common Area. Of the parking spaces allotted to Tenant pursuant to
paragraph 2.1, Tenant shall have the right to designate a reasonable number
of such spaces as reserved spaces for its executives, which shall not exceed
ten percent (10%) of the total of spaces and which shall be in immediate
proximity to the Premises. In the event Tenant elects to install a patio as
set forth in subparagraph 5.6A, the number of parking spaces allocated to
Tenant shall be reduced based upon the square footage of said patio, which at
the time this Lease is executed is anticipated to be a reduction in eight (8)
parking spaces. If Landlord grants to any other tenant the exclusive right
to use any particular parking space(s), neither Tenant nor its employees or
invitees shall use such spaces. Within ten (10) business days after written
request therefor from Landlord, Tenant shall furnish Landlord with a list of
its and its employees vehicle license numbers and Tenant shall thereafter
notify Landlord of any change in such list within five (5)
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days after each such change occurs. Tenant shall have the right, at Tenant's
option, to provide its employees with stickers or other identification
markers or tags to be affixed to or on the employees' automobiles or other
vehicles, evidencing the right of such employees to use the parking area.
Such stickers shall be subject to prior review and approval by Landlord,
which shall not be unreasonably withheld or delayed. Tenant shall furnish to
Landlord a list of identifying numbers for the stickers distributed from time
to time by Tenant to its employees. If Tenant elects to use such stickers as
provided herein, Tenant shall not be obligated to furnish Landlord with a
list of vehicle license numbers for its employees, for as long as Tenant
maintains such sticker system of identification. Landlord reserves the
right, after having given Tenant reasonable notice, to have any vehicles
owned by Tenant or its employees or invitees utilizing parking spaces in
excess of the parking spaces allowed by Tenant's use to be towed away at
Tenant's cost. All trucks and delivery vehicles shall be (i) parked at the
rear of the Premises, (ii) loaded and unloaded in a manner which does not
interfere with the businesses of other occupants of the Property, and (iii)
permitted to remain on the Property only so long as is reasonably necessary
to complete loading and unloading. In the event Landlord elects or is
required by any Law to limit or control parking in the Property, whether by
validation of parking tickets or any other method of assessment, Tenant
agrees to participate in such validation or assessment program under such
reasonable rules and regulations as are from time to time established by
Landlord, so long as such participation does not result in any increase in
costs to Tenant.
4.8. WINDOW COVERINGS: To the extent Tenant elects to use window
coverings visible from the exterior of the Premises, Tenant shall use the
same window covering to cover all windows Tenant so elects to cover in the
Premises to maintain a consistent and uniform exterior appearance.
4.9. OUTSIDE SALES: Tenant shall not conduct or permit to be conducted
on any portion of the Common Area any sale of any kind, including (i) any
public or private auction, fire sale, going-out-of-business sale, distress
sale or other liquidation sale, or (ii) any so-called "flea market", open-air
market or any other similar activity. Notwithstanding the foregoing, Tenant
shall be allowed to conduct occasional sales outside of the Premises on that
part of the Common Area that is in close proximity to the Premises so long as
each of the following conditions is satisfied with respect to each such sale:
(i) Landlord is given at least two (2) business days prior written notice of
the date of any such sale; (ii) such sale does not violate any Laws; (iii)
such sale is conducted in a manner that does not interfere with the rights of
other occupants of the Property; (iv) Tenant provides all necessary security,
cleans up all debris and repairs any damage caused by such sale; and (v) the
purpose of such sale is to permit employees of Tenant to purchase or to
receive free of charge property of Tenant.
ARTICLE 5.
TRADE FIXTURES AND LEASEHOLD IMPROVEMENTS
5.1. TRADE FIXTURES: Throughout the Lease Term, Tenant shall provide,
install, and maintain in good condition all Trade Fixtures required in the
conduct of its business in the Premises. All Trade Fixtures shall remain
Tenant's property.
5.2. LEASEHOLD IMPROVEMENTS: The following provisions govern Leasehold
Improvements constructed by Tenant:
A. Tenant shall not construct any Leasehold Improvements or
otherwise alter the Premises without Landlord's prior approval if such action
results in the demolition, removal, or material alteration of existing
Improvements (including partitions, wall and floor coverings, ceilings,
lighting fixtures or other utility installations) and if the cost of such
construction or alteration exceeds Fifteen Thousand Dollars ($15,000) per
work of improvement or if the cost of Leasehold Improvements done, under
construction, or for which approval is sought during any calendar quarter
exceeds Twenty-Five Thousand Dollars ($25,000). With respect to any
Leasehold Improvements which must be approved by Landlord pursuant to the
immediately
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preceding sentence, Tenant shall not commence construction of such Leasehold
Improvements until Landlord shall have first approved the plans and
specifications therefor, which approval shall be deemed given if not denied
in writing within ten (10) working days after Landlord shall have received
Tenant's request for such approval. In no event shall Tenant make any
alterations to the Premises which could significantly affect the structural
integrity or the exterior design of the Premises without Landlord's prior
approval.
B. All Leasehold Improvements requiring Landlord's approval shall
be installed by Tenant in substantial compliance with the approved plans and
specifications therefor. All construction undertaken by Tenant shall be done
in accordance with all Laws and in a good and workmanlike manner using
materials of good quality. Tenant shall not commence construction of any
Leasehold Improvements until (i) all required governmental approvals and
permits shall have been obtained, (ii) all requirements regarding insurance
imposed by this Lease have been satisfied, and (iii) if reasonably requested
by Landlord, Tenant shall have obtained contingent liability and broad form
builders risk insurance in an amount reasonably satisfactory to Landlord if
there are any perils relating to the proposed construction not covered by
insurance carried pursuant to Article 9. If Landlord so requests in writing
with respect to Leasehold Improvements requiring Landlord's prior approval,
Tenant shall inform Landlord of Tenant's scheduled date for commencement of
construction at least five (5) days prior to such date of commencement.
C. At all times during the Lease Term, (i) Tenant shall maintain
all plans and change orders prepared in connection with the construction of
any Leasehold Improvements which required a building permit or other
governmental approval, and (ii) Tenant shall provide to Landlord copies of
such plans and change orders (and, to the extent Tenant causes such to be
prepared for its own use, "As-Built" plans) at any time that Landlord
requests copies thereof.
D. All Leasehold Improvements shall remain the property of Tenant
during the Lease Term. Tenant shall have the right to remove only the
following kinds of Leasehold Improvements so long as it repairs all damage
caused by the installation thereof and returns the Premises to the condition
existing prior to the installation of such Leasehold Improvements: (i)
built-in cabinets, file drawers and bookcases; (ii) computer room air
conditioning; (iii) canteen equipment; (iv) office cubicle systems; and (v)
ornamental statues. At the expiration or sooner termination of the Lease
Term, all Leasehold Improvements that Tenant does not remove shall be
surrendered to Landlord as a part of the realty and shall then become
Landlord's property, and Landlord shall have no obligation to reimburse
Tenant for all or any portion of the value or cost thereof. However, if
Landlord so requires, at the expiration or earlier termination of the Lease
Term, Tenant shall remove any Leasehold Improvements designated for removal
by Landlord and shall restore the Premises to the condition existing prior to
the installation of such Leasehold Improvements to the extent necessary to
return the Premises to substantially the same condition that existed on the
completion of the Interior Improvements constructed pursuant to EXHIBIT "C",
ordinary wear and tear excepted. Notwithstanding the foregoing:
(1) Tenant shall only be required to remove Leasehold
Improvements for which either of the following is true: (i) such Leasehold
Improvements were not approved in writing by Landlord; or (ii) at the time
approval was given by Landlord, Landlord informed Tenant in writing that
Landlord would require that such Leasehold Improvements be removed at the
termination of the Lease Term.
(2) Tenant may cause interior partitions to be moved,
reconfigured, or removed altogether, or cause interior offices to be deleted
or added, all without the obligation to restore such partitions or interior
offices to any prior condition upon expiration or termination of the Lease.
5.3. ALTERATIONS REQUIRED BY LAW: Tenant shall make any alteration,
addition or change of any sort, whether structural or otherwise, to the
Premises that is required by any Law because of (i) a specific use or change
of use made of the Premises by Tenant (which alteration, addition or change
is not generally required to be made by owners or Tenants of other properties
similar to the Premises), (ii) Tenant's application for any permit or
governmental approval, or (iii) Tenant's construction or installation of any
Leasehold Improvements or Trade Fixtures.
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5.4. LANDLORD'S IMPROVEMENTS: All fixtures, improvements or equipment
which are installed, constructed on or attached to the Property by Landlord
at its expense shall become a part of the realty and belong to Landlord.
Tenant shall pay additional rent in the event Landlord, in its sole
discretion, elects to make any of the following kinds of capital improvements
to the Property: (i) capital improvements required to be constructed in
order to comply with any Law not in effect or applicable to the Property as
of the Commencement Date; (ii) modification of existing or construction of
additional capital improvements or building service equipment for the purpose
of reducing the consumption of utility services or Common Operating Expenses
of the Property; (iii) replacement of capital improvements or building
service equipment existing as of the Commencement Date when required because
of normal wear and tear; and (iv) the amount of "deductibles" paid by
Landlord for the restoration of any part of the Property that has been
damaged to the extent such "deductible" is not included within Common
Operating Expenses. With respect to any expenditure in excess of Fifty
Thousand Dollars ($50,000) for which Landlord seeks contribution pursuant to
this paragraph 5.4 from Tenant, prior to incurring such expense, Landlord
shall notify Tenant of the nature and estimated amount of such expenditure
and, if Tenant so requests, shall provide Tenant with such information upon
which such cost estimate is based for Tenant's approval. The amount of
additional rent Tenant is to pay with respect to each such capital
improvement shall be determined as follows:
A. Tenant shall have the option to pay in cash an amount equal to
Tenant's Allocated Share of all costs paid by Landlord to construct the
improvements in question fairly allocable to the Premises (including
financing costs) in cash within thirty (30) days after the improvement has
been substantially completed and Landlord has notified Tenant of the cost of
such improvement and the amount of Tenant's required contribution. If Tenant
does not exercise such option to pay such amount in cash, then the provisions
of subparagraph 5.4B shall apply.
B. All costs paid by Landlord to construct such improvement
(including financing costs) shall be amortized on a straight line basis over
the useful life of such improvement (determined in accordance with generally
accepted accounting principles) with interest on the unamortized balance at
the then prevailing market rate Landlord would pay if it borrowed funds to
construct such improvement from an institutional lender, and Landlord shall
inform Tenant of the monthly amortization payment required to so amortize
such costs, and shall also provide Tenant with the information upon which
such determination is made. As additional rent, Tenant shall pay an amount
equal to Tenant's Allocated Share of that portion of such monthly
amortization payment fairly allocable to the Premises (as reasonably
determined by Landlord) for each month after such improvement is completed
until the first to occur of (i) the expiration of the Lease Term (as the same
may be extended), or (ii) the end of the term over which such costs were
amortized, which amount shall be due at the same time the Base Monthly Rate
is due.
C. Notwithstanding anything contained in this paragraph 5.4, the
additional rent Tenant is to pay with respect to any modification of existing
or construction of additional capital improvements or building service
equipment for the purpose of reducing the consumption of utility expenses or
Common Operating Expenses of the Property shall not for any period exceed the
actual amount of savings in Additional Rent realized by Tenant as a result of
such modification or construction.
5.5. LIENS: Tenant shall keep the Premises and the Property free from
any liens and shall pay when due all bills arising out of any work performed,
materials furnished, or obligations incurred by Tenant, its agents, employees
or contractors relating to the Premises. If any claim of lien is recorded,
Tenant shall bond against or discharge the same within thirty (30) days after
the same has been recorded against the Premises and/or the Property. Should
any lien be filed against the Premises or any action commenced affecting
title to the Premises, the party receiving notice of such lien or action
shall immediately give the other party written notice thereof.
5.6. MODIFICATIONS TO THE PREMISES: Subject to Landlord's prior written
approval, and the provisions of paragraphs 5.2 and 5.3 hereof, Tenant shall
have the right to:
A. Modify the parking area behind the Premises, which area is
highlighted on the attached EXHIBIT "A", to construct a patio;
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B. Install a datalink approximately twenty (20) inches wide
between the Premises and Building A;
C. Install up to a total of four (4) flagpoles allocated between
the front of the Premises and the front of the premises leased pursuant to
the Building A Lease; and
D. Fill in existing loading docks so long as (i) existing drainage
systems serving such loading docks are appropriately capped; (ii) such fill
is accomplished in a manner that the loading docks may be restored to their
condition existing as of the Commencement Date upon expiration of the Lease
Term, and (iii) Tenant agrees to restore such loading docks to the condition
existing as of the Commencement Date upon the expiration of the Lease Term.
E. Trim or relocate on the Property to a new location approved by
Landlord any trees, shrubs or other landscaping that obscures any sign
installed on the Property by Tenant.
ARTICLE 6.
REPAIR AND MAINTENANCE
6.1. TENANT'S OBLIGATION TO MAINTAIN: Except as otherwise provided in
paragraph 6.2 and in Article 11 regarding the restoration of damage caused by
fire and other perils, Tenant shall, at all times during the Lease Term,
clean, keep, and maintain in good order, condition, and repair the Premises
and every part thereof, through regular inspections and servicing, including,
but not limited to, (i) all plumbing and sewage facilities (including all
sinks, toilets, faucets and drains), and all ducts, pipes, vents or other
parts of the HVAC or plumbing system, (ii) all fixtures, interior walls,
floors, carpets and ceilings, (iii) all windows, doors, entrances, plate
glass, showcases and skylights (including cleaning both interior and exterior
surfaces), (iv) all electrical facilities and all HVAC equipment and other
mechanical systems (including all lighting fixtures, lamps, bulbs, tubes,
fans, vents, exhaust equipment and systems), (v) any automatic fire
extinguisher equipment in the Premises, and (vi) the roof membrane (including
any necessary resurfacing or patching to preserve the membrane or to repair
leaks except that Tenant shall not be required to make any repair to the
extent such repair is required because of Landlord's repair or maintenance of
the structural roof system). Tenant shall replace any damaged or broken
glass in the Premises (including all interior and exterior doors and windows)
with glass of the same kind, size and quality. Tenant shall repair any
damage to the Premises (including exterior doors and windows) caused by
vandalism or any unauthorized entry. Tenant shall maintain continuously
throughout the Lease Term a service contract for the maintenance of all HVAC
equipment serving the Premises with a licensed HVAC repair and maintenance
contractor, which contract provides for the periodic inspection and servicing
of the HVAC equipment at least once every sixty (60) days during the Lease
Term. Tenant shall also maintain continuously throughout the Lease Term a
service contract for the washing of all windows (both interior and exterior
surfaces) in the Premises with a contractor, which contract provides for the
periodic washing of all such windows on such basis as shall keep the exterior
appearance of the Premises in first class condition, but no less frequently
than once every calendar year. If and when Landlord so requests in writing,
Tenant shall furnish Landlord with copies of all such service contracts. All
repairs and replacements required of Tenant shall be promptly made with
materials of good quality. If the work affects the structural parts of the
Premises or if the estimated cost of any item of repair or replacement is in
excess of Fifteen Thousand Dollars ($15,000), then Tenant shall first obtain
Landlord's written approval of the scope of work, plans therefor, and
materials to be used, except in the case of emergency in which event Tenant
shall within a reasonable period of time after performing the work, notify
Landlord of the scope of the work performed and the materials used, and shall
furnish Landlord with the plans therefor.
6.2. LANDLORD'S OBLIGATION TO MAINTAIN: Landlord, at its cost without
right of reimbursement from Tenant, shall be responsible for the maintenance,
repair, and replacement of the structural parts of the Premises (i.e.,
foundation, first and second story floor slab and second story floor deck,
load-bearing walls, and structural roof system, but excluding roof membrane)
except to the extent that (i) the same is necessitated by the wrongful or
negligent act or omission
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of Tenant, its subtenants, or their respective agents, employees,
contractors, or invitees, or (ii) reimbursement is permitted pursuant to
paragraph 5.4 hereof. Landlord at its cost without right of reimbursement
from Tenant, shall repair damage to interior improvements and Leasehold
Improvements that have been approved by Landlord pursuant to the term hereof,
or damage to the roof membrane of the Premises if caused by the maintenance
work required to be performed by Landlord pursuant to the provisions of this
paragraph. Landlord shall repair, maintain, operate and replace when
necessary the Common Area, with such right of reimbursement from Tenant as is
specified in paragraphs 5.4 and 6.3. Landlord shall not be responsible for
repairs required by an accident, fire or other peril except as otherwise
required by Article 11, or for damage caused to any part of the Property by
any act, negligence or omission of Tenant or its agents, contractors,
employees or invitees. Landlord may engage contractors of its choice to
perform the obligations required of it by this Article, and the necessity of
any expenditure to perform such obligations shall be at the sole discretion
of Landlord.
6.3. TENANT'S OBLIGATION TO REIMBURSE: As additional rent, commencing
on the Rent Start Date and continuing throughout the remainder of the Lease
Term, Tenant shall pay Tenant's Allocated Share of all Common Operating
Expenses fairly allocable to the Premises including (i) all Common Operating
Expenses paid with respect to the maintenance, repair, replacement and use of
the Premises and (ii) a proportionate share (based on the Premises Gross
Leasable Area as a percentage of the Property Gross Leasable Area) of all
Common Area Expenses which relate to the Property in general and are not
fairly allocable to any one building on the Property. Landlord agrees that
it shall not recover from all tenants of the Property more than one hundred
percent (100%) of the actual Common Operating Expenses incurred by Landlord
for the period in question. As provided in paragraph 3.3, Tenant's
obligation to pay Tenant's Allocated Share of Common Operating Expenses
fairly allocable to the Premises shall be prorated as of the Rent Start Date
and at the expiration or earlier termination of the Lease Term, and if Tenant
has paid any amount on account of Common Operating Expenses relating to a
period that is not within the Lease Term (e.g., prepayment of insurance
premiums for one year), such amount shall be reimbursed to Tenant in
connection with such proration. Payment shall be made by whichever of the
following methods is from time to time designated by Landlord, and Landlord
may change the method of payment at any time so long as (i) Landlord gives
Tenant at least sixty (60) days prior written notice, and (ii) the method is
not changed more than once in any calendar year. Tenant shall pay such share
of the actual Common Operating Expenses incurred or paid by Landlord but not
theretofore billed to Tenant within thirty (30) days after receipt of a
written bill therefor from Landlord, on such periodic basis as Landlord shall
designate, but in no event more frequently than once a month. Alternatively,
(i) Landlord shall deliver to Tenant Landlord's reasonable estimate of the
Common Operating Expenses it anticipates will be paid or incurred for the
calendar year in question, (ii) during such calendar year, Tenant shall pay
such share of the estimated Common Operating Expenses in advance in monthly
installments as required by Landlord due with the installments of Base
Monthly Rent, and (iii) within ninety (90) days after the end of each
calendar year, Landlord shall furnish to Tenant a statement in reasonable
detail of the actual Common Operating Expenses paid or incurred by Landlord
during the just ending calendar year and thereupon there shall be an
adjustment between Landlord and Tenant, with payment to Landlord or credit by
Landlord against the next installment of Base Monthly Rent, as the case may
require, within thirty (30) days after delivery by Landlord to Tenant of said
statement, so that Landlord shall receive the entire amount of Tenant's share
of all Common Operating Expenses for such calendar year and no more. Tenant
and its agents (including accountants) shall have the right at its expense,
exercisable upon reasonable prior written notice to Landlord, to inspect at
Landlord's office during normal business hours Landlord's books and records
as they relate to Common Operating Expenses. Such inspection must be made
within one hundred eighty (180) days of Tenant's receipt of Landlord's annual
statement for the same, and shall be limited to verification of the charges
contained in such statement. Tenant may not withhold payment of such bill
pending completion of such inspection.
6.4. COMMON OPERATING EXPENSES DEFINED: The term "Common Operating
Expenses" shall mean the sum of the following:
A. All costs and expenses paid or incurred by Landlord in doing
the following (including payments to independent contractors providing
services related to the
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performance of the following): (i) maintaining, cleaning, and repairing the
exterior surfaces (including painting of exterior surfaces of buildings not
more than once every 5 years) of all buildings located on the Property; (ii)
maintenance of the liability, fire and property damage insurance covering the
Property carried by Landlord pursuant to paragraph 9.2 (including the payment
of commercially reasonable "deductibles" and the prepayment of premiums for
coverage of up to one year); (iii) maintaining, repairing, operating and
replacing when necessary HVAC equipment, utility facilities and other
building service equipment; (iv) providing utilities to the Common Area
(including lighting, trash removal and water for landscaping irrigation); (v)
complying with all applicable Laws and Private Restrictions; (vi) operating,
maintaining, repairing, cleaning, painting, restripping and resurfacing the
Common Area; (vii) replacement or installation of lighting fixtures,
directional or other signs and signals, irrigation systems, trees, shrubs,
ground cover and other plant materials, and all landscaping in the Common
Area; and (viii) depreciation and financing costs on maintenance and
operating machinery and equipment (if owned) and rental paid for such
machinery and equipment (if rented);
B. All additional costs and expenses incurred by Landlord with
respect to the operation, protection, maintenance, repair and replacement of
the Property which pursuant to generally accepted accounting principles would
be considered a current expense and not a capital expenditure;
C. That portion of all compensation (including benefits and
premiums for workers' compensation and other insurance) paid to or on behalf
of employees of Landlord but only to the extent they are involved in the
performance of the work described by subparagraphs A and B above and that is
fairly allocable to the Property;
D. An additional amount equal to a commercially reasonable and
competitive management fee that would be charged by an independent third
party property manager for the management of the Property (except that
Tenant's Allocated Share of such management fee for any period shall not
exceed two percent (2%) of the Base Monthly Rent and Additional Rent payable
by Tenant for the same period); and
E. Notwithstanding anything contained herein, the term "Common
Operating Expenses" shall not include any of the following: (i) mortgage
principle payments; (ii) ground rent and other payments made pursuant to any
ground lease affecting the Property; (iii) the cost of refinancing any loan
secured by the Property; (iv) interest and penalties imposed against Landlord
for late payments by Landlord; (v) legal fees incurred by Landlord in
connection with the negotiation or enforcement of, or litigation in
connection with, any lease affecting the Property; (vi) the cost of any
paintings, sculptures, or other art objects installed on the Property; (vii)
any costs reimbursed to Landlord by insurance or other third party payments
that are not reimbursements by tenants for their share of Common Operating
Expenses; (viii) brokerage commissions or other costs related to the leasing
of space within the Property; (ix) the cost of any tenant improvements
installed for the exclusive use of any other tenant of the Property.
6.5. CONTROL OF COMMON AREA: Landlord shall at all times have exclusive
control of the Common Area. Landlord shall have the right, without the same
constituting an actual or constructive eviction and without entitling Tenant
to any abatement of rent, to: (i) close any part of the Common Area to the
minimum extent reasonably necessary in the reasonable opinion required in the
opinion of Landlord's counsel to prevent a dedication thereof or the accrual
of any prescriptive rights therein; (ii) temporarily close the Common Area to
perform maintenance or for any other reason deemed sufficient by Landlord;
(iii) designate other property outside the boundaries of the Property to
become part of the Property; (iv) construct multi-deck parking structures in
any part of the Common Area; (v) change the shape, size, location, number and
extent of improvements on the Common Area; (vi) select a third party to
maintain and operate any of the Common Area at any time Landlord determines
that the best interests of the Property will be served by having the Common
Area maintained and operated by that third party so long as the fees and
charges of such third party are reasonable and competitive with the fees of
others in the marketplace providing the same services; (vii) make changes to
the Common Area including, without limitation, changes in the location of
driveways, parking spaces, parking areas, sidewalks or the direction of the
flow of traffic and the site of the Common Area; and/or (viii) voluntarily
change the address of the Property. Landlord agrees not to change the name of
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Airport Technology Park without the prior consent of Tenant. The use of the
Common Area shall be subject to such reasonable regulation and changes
therein as Landlord shall make from time to time. Landlord shall not
exercise its rights to control the Common Area in a manner that would
materially interfere with Tenant's use of the Premises without first
obtaining Tenant's approval. Tenant shall keep the Common Area free and
clear of all obstructions created or permitted by Tenant. If in the opinion
of Landlord unauthorized persons are using any of the Common Area by reason
of the presence of Tenant in the Premises, Tenant, upon demand of Landlord,
shall restrain such unauthorized use by appropriate proceedings. Nothing
herein shall affect the right of Landlord at any time to remove such
unauthorized person from the Common Area nor to prohibit the use of the
Common Area by unauthorized persons. In exercising any such rights described
in this paragraph 6.5 regarding the Common Area, Landlord shall make a
reasonable effort to minimize any disruption to Tenant's business.
6.6. TENANT'S NEGLIGENCE: Anything in this Lease to the contrary
notwithstanding, Tenant shall pay for all damage to the Premises or the
Property caused by the negligent act or omission of Tenant, its employees,
contractors, or invitees, or by the failure of Tenant to discharge promptly
its obligations under this Lease or to comply with the terms of this Lease,
but only to the extent such damage is not covered by insurance proceeds
actually recovered by Landlord. Tenant shall make payment within thirty (30)
days after demand therefor by Landlord.
ARTICLE 7.
WASTE DISPOSAL AND UTILITIES
7.1. WASTE DISPOSAL: Tenant shall store its waste either inside the
Premises or within outside trash enclosures that are (i) fully fenced and
screened in compliance with all Private Restrictions, (ii) designed for such
purpose to be used either exclusively by Tenant or in common with other
occupants of the Property, as designated by Landlord, and (iii) first
approved by Landlord. All entrances to such outside trash enclosures shall
be kept closed, and waste shall be stored in such manner as not to be visible
from the exterior of such outside enclosures. Tenant shall cause all of its
waste to be regularly removed from the Property at Tenant's sole cost.
Tenant shall keep all fire corridors and mechanical equipment rooms in the
Premises free and clear of all obstructions at all times.
7.2. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with
respect to the existence or use of Hazardous Materials on the Property:
A. Landlord hereby makes the following representations to Tenant,
each of which is made to the best of Landlord's knowledge as of the
Commencement Date:
(1) The soil and ground water on or under the Property does not
contain Hazardous Materials in amounts which violate any Hazardous Materials
Laws to the extent that any governmental entity could require either Landlord
or Tenant to take any remedial action or impose any penalties with respect to
such Hazardous Materials.
(2) During Landlord's period of ownership, no litigation or any
administrative proceeding has been brought or threatened, nor any settlements
reached with any governmental or private party, concerning the actual or
alleged presence of Hazardous Materials on or about the Property or any
disposal, release or threatened release of Hazardous Materials in or about
the Property.
(3) During the time that Landlord has owned the Property,
Landlord has received no notice of (i) any violation, or alleged violation,
of any Hazardous Material Law that has not been corrected to the satisfaction
of the appropriate authority, (ii) any pending claims relating to the
presence of Hazardous Material on the Property, or (iii) any pending
investigation by any governmental agency concerning the Property relating to
Hazardous Materials.
(4) The Property does not contain any (i) equipment containing
PCBs, or (ii) underground storage tanks.
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B. Any handling, transportation, storage, treatment, disposal or
use of Hazardous Materials by Tenant and Tenant's agents, employees,
contractors, invitees or subtenants after the Commencement Date in or about
the Property shall strictly comply with all applicable Hazardous Materials
Laws. Tenant shall indemnify, defend upon demand with counsel reasonably
acceptable to Landlord, and hold harmless Landlord from and against any and
all liabilities, losses, claims, damages, interest, penalties, fines,
monetary sanctions, attorneys' fees, experts' fees, court costs, remediation
costs, investigation costs, and other expenses which result from or arise in
any manner whatsoever out of the use, storage, treatment, transportation,
release, or disposal of Hazardous Materials on or about the Property by
Tenant or Tenant's agents, employees, contractors, invitees or subtenants
after the Commencement Date.
C. If the presence of Hazardous Materials on the Property caused
or permitted by Tenant or Tenant's agents, employees, contractors, invitees
or subtenants after the Commencement Date results in contamination or
deterioration of water or soil resulting in a level of contamination greater
than the levels established as acceptable by any governmental agency having
jurisdiction over such contamination, then Tenant shall promptly take any and
all action necessary to clean up such contamination if required by Law or as
a condition to the issuance or continuing effectiveness of any governmental
approval which relates to the use of the Property or any part thereof.
Tenant shall further be solely responsible for, and shall defend, indemnify
and hold Landlord and its agents harmless from and against, all claims, costs
and liabilities, including attorneys' fees and costs, arising out of or in
connection with any removal, clean-up and restoration work and materials
required hereunder to return the Property to its condition existing prior to
the appearance of such Hazardous Materials.
D. Landlord and Tenant shall each give written notice to the other
as soon as reasonably practicable of (i) any communication received from any
governmental authority concerning Hazardous Materials which relates to the
Property, and (ii) any contamination of the Property by Hazardous Materials
which constitutes a violation of any Hazardous Materials Law. Landlord and
Tenant agree to keep such information confidential, except for (i)
disclosures that are approved by the other party, (ii) disclosures required
by Law or (iii) disclosures to any environmental consultant, lender,
purchaser, prospective purchaser, attorneys for either Landlord or Tenant, or
brokers for either Landlord or Tenant, so long as an agreement of
confidentiality is obtained from a party to whom the disclosure is to be
made, and (iv) disclosures in connection with any litigation or
administrative proceeding in which either Landlord or Tenant is involved.
Tenant and Tenant's agents, employees, contractors, invitees or subtenants
shall not bring Hazardous Materials onto the Property without first obtaining
the written consent of Landlord; provided, however, Tenant may, without being
required to obtain the prior written consent of Landlord, use at the Premises
in small quantities office supplies, cleaning materials and other maintenance
materials that are customarily used in business offices, even though such
supplies and materials may fall within the definition of Hazardous Materials.
At any time during the Lease Term, Tenant shall, within five days after
written request therefor received from Landlord, disclose in writing all
Hazardous Materials that are being used by Tenant on the Property, the nature
of such use, and the manner of storage and disposal.
E. Landlord may cause testing wells to be installed on the
Property, and may cause the ground water to be tested to detect the presence
of Hazardous Material by the use of such tests as are then customarily used
for such purposes. Any such installation of wells or tests shall be done in
a manner which minimizes the interference with Tenant's use of the Premises.
If Tenant so requests, Landlord shall supply Tenant with copies of such test
results. The cost of such tests and of the installation, maintenance, repair
and replacement of such wells shall be paid by Tenant if such tests disclose
the existence of facts which give rise to liability of Tenant pursuant to its
indemnity given in subparagraph 7.2B or 7.2C, and Tenant's liability is
established in a judicial or administrative proceeding, or in an action for
declaratory relief brought by Landlord.
F. Landlord, at its sole cost, shall comply with all Hazardous
Materials Laws affecting the Property (without right of reimbursement from
Tenant) to the extent that (i) Landlord is legally obligated to do so by such
Laws, and (ii) such compliance (or the cost of such compliance) is not made
the responsibility of Tenant pursuant to subparagraph 7.2B or subparagraph
7.2C. Landlord shall indemnify, defend upon demand with competent counsel,
and
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hold harmless Tenant from and against any and all liability for response
costs imposed upon Tenant by any governmental agency pursuant to the Federal
Law known as "CERCLA" (more particularly identified in subparagraph 7.2G) and
the comparable California statute (commonly known as the
Carpenter-Presley-Tanner Hazardous Substances Account Act, California Health
and Safety Code Section 25300 ET. SEQ.) that results from the presence of
Hazardous Materials on the Property not caused or contributed to by the use,
storage, treatment, release or disposal of Hazardous Materials on or about
the Property by Tenant, its subtenants, or their respective agents,
employees, contractors, or invitees. Notwithstanding the foregoing, the
indemnity given by Landlord in the immediately preceding sentence shall not
apply with respect to liability caused by any contamination of the Property
by a Hazardous Material that is or has been used, stored, treated, released
or disposed of on the Property by Tenant, its subtenants, or their respective
agents, employees, contractors, or invitees unless Tenant can prove such
contamination was not caused or contributed to by any of such parties.
G. As used herein, the term "Hazardous Material," means any
hazardous or toxic substance, material or waste which is or becomes regulated
by any local governmental authority, the State of California or the United
States Government. The term "Hazardous Material," includes, without
limitation, asbestos, PCB's, petroleum and petroleum products, and any
material or substance which is (i) listed under Article 9 or defined as
hazardous or extremely hazardous pursuant to Article 11 of Title 22 of the
California Administrative Code, Division 4, Chapter 20, (ii) defined as a
"hazardous waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C.
Section 6903), or (iii) defined as a "hazardous substance" pursuant to
Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq. (42 U.S.C. Section
9601). As used herein, the term "Hazardous Material Law" shall mean any
statute, law, ordinance, or regulation of any governmental body or agency
(including the U.S. Environmental Protection Agency, the California Regional
Water Quality Control Board, and the California Department of Health
Services) which regulates the use, storage, release or disposal of any
Hazardous Material.
H. The obligations of Landlord and Tenant under this paragraph 7.2
shall survive the expiration or earlier termination of the Lease Term. The
rights and obligations of Landlord and Tenant with respect to issues relating
to Hazardous Materials are exclusively established by this paragraph 7.2. In
the event of any inconsistency between any other part of this Lease and this
paragraph 7.2, the terms of this paragraph 7.2 shall control.
7.3. UTILITIES: Tenant shall promptly pay, as the same become due, all
charges for water, gas, electricity, telephone, sewer service, waste pick-up
and any other utilities, materials or services furnished directly to or used
by Tenant on or about the Premises during the Lease Term, including, without
limitation, (i) meter, use and/or connection fees, hook-up fees, standby
fees, and (ii) penalties for discontinued or interrupted service.
7.4. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Landlord and Tenant
shall comply with all rules, regulations and requirements promulgated by
national, state or local governmental agencies or utility suppliers
concerning the use of utility services, including any rationing, limitation
or other control. Landlord may voluntarily cooperate in a reasonable manner
with the efforts of all governmental agencies or utility suppliers in
reducing energy or other resource consumption. Tenant shall not be entitled
to terminate this Lease nor to any abatement in rent by reason of such
compliance or cooperation. Tenant agrees at all times to cooperate fully with
Landlord and to abide by all rules, regulations and requirements which
Landlord may prescribe in order to maximize the efficient operation of the
HVAC system and all other utility systems.
ARTICLE 8.
REAL PROPERTY TAXES
8.1. REAL PROPERTY TAXES DEFINED: The term "Real Property Taxes" as
used herein shall mean (i) all taxes, assessments, levies, and other charges
of any kind or nature whatsoever, general and special, foreseen and
unforeseen (including all installments of principal and interest
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required to pay any existing or future general or special assessments for
public improvements, services or benefits, and any increases resulting from
reassessments or resulting from a change in ownership or any other cause),
now or hereafter imposed by any governmental or quasi-governmental authority
or special district having the direct or indirect power to tax or levy
assessments, which are levied or assessed against, or with respect to the
value, occupancy or use of, all or any portion of the Property (as now
constructed or as may at any time hereafter be constructed, altered, or
otherwise changed) or Landlord's interest therein, the fixtures, equipment
and other property of Landlord, real or personal, that are an integral part
of and located on the Property, the gross receipts, income, or rentals from
the Property, or the use of parking areas, public utilities, or energy within
the Property, (ii) all charges, levies or fees imposed by reason of
environmental regulation or other governmental control of the Property
(excluding costs and expenses for which Landlord is responsible pursuant to
subparagraph 7.2F), and (iii) all costs and fees (including attorneys' fees)
incurred by Landlord in contesting any Real Property Tax and in negotiating
with public authorities as to any Real Property Tax. If at any time during
the Lease Term the method of taxation or assessment of the Property
prevailing as of the Commencement Date shall be altered so that in lieu of or
in addition to any Real Property Tax described above there shall be levied,
assessed or imposed (whether by reason of a change in the method of taxation
or assessment, creation of a new tax or charge, or any other cause) an
alternate or additional tax or charge (i) on the value, use or occupancy of
the Property, (ii) on or measured by the gross receipts, income, or rentals
from the Property, (iii) on Landlord's business of leasing the Property, or
(iv) computed in any manner with respect to the operation of the Property,
then any such tax or charge, however designated, shall be included within the
meaning of the term "Real Property Taxes" for purposes of this Lease. If any
Real Property Tax is based upon property or rents unrelated to the Property,
then only that part of such Real Property Tax that is fairly allocable to the
Property shall be included within the meaning of the term "Real Property
Taxes". Notwithstanding the foregoing, the term "Real Property Taxes" shall
not include estate, inheritance, transfer, gift or franchise taxes of
Landlord or the federal or state net income tax imposed on Landlord's income
from all sources.
8.2. TENANT'S OBLIGATION TO REIMBURSE: As Additional Rent, Tenant shall
pay to Landlord Tenant's Allocated Share of all Real Property Taxes which
become due after the Rent Start Date and during the Lease Term which are
fairly allocable to the Premises, which include (i) all Real Property Taxes
assessed with respect to the value, use or occupancy of the Premises and the
land beneath it, and (ii) a proportionate share (based on the Premises Gross
Leasable Area as a percentage of the Property Gross Leasable Area) of all
Real Property Taxes assessed with respect to the Common Area or with respect
to the Property in general which are not fairly allocable to any one building
on the Property. Tenant shall pay its share of Real Property Taxes (i) within
thirty (30) days after being billed for the same by Landlord, or (ii) no
later than ten (10) days before such Real Property Tax becomes delinquent,
whichever last occurs. If requested by Tenant in writing within one year
from receipt of a bill for Tenant's Allocated Share of Real Property Taxes,
Landlord shall furnish Tenant with such evidence as is reasonably available
to Landlord with respect to the amount of any Real Property Tax which is part
of such bill. Tenant may not withhold payment of such bill pending receipt
and/or review of such evidence. Upon Landlord's election or if any Lender
requires Landlord to impound Real Property Taxes on a periodic basis during
the Lease Term, then Tenant, on notice from Landlord indicating this
requirement, shall pay a sum of money toward its liability under this Article
to Landlord on the same periodic basis in accordance with the Lender's
requirements (if any). Landlord shall impound the Real Property Tax payments
received from Tenant in accordance with the requirements of the Lender (if
any). If any assessments are levied against the Property, Landlord may elect
either to pay the assessment in full or to allow the assessment to go to
bond. If Landlord pays the assessment in full, Tenant shall pay to Landlord
each time payment of Real Property Taxes is made a sum equal to that which
would have been payable (as both principal and interest) had Landlord allowed
the assessment to go to bond. Notwithstanding anything to the contrary
contained in paragraphs 8.1 and 8.2, if there is an increase in Real Property
Taxes resulting from a "change in ownership" (as that term is defined in
California Revenue and Taxation Code Section 60, ET. SEQ.) which occurs prior
to the fourth (4th) anniversary of the Commencement Date, then Tenant shall
not be obligated to pay any such increase that results from such "change of
ownership".
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8.3. TAXES ON TENANT'S PROPERTY: Tenant shall pay before delinquency
any and all taxes, assessments, license fees and public charges levied,
assessed or imposed against Tenant or Tenant's estate in this Lease or the
property of Tenant situated within the Premises which become due during the
Lease Term. Tenant shall furnish Landlord with satisfactory evidence of
these payments within thirty (30) days after receipt of written request
therefor from Landlord.
ARTICLE 9.
INSURANCE
9.1. TENANT'S INSURANCE: Tenant shall maintain insurance complying with
all of the following:
A. Tenant shall procure, pay for and keep in full force and effect
the following:
(1) Commercial general liability insurance, including property
damage, against liability for personal injury, bodily injury, death and
damage to property occurring in or about, or resulting from an occurrence in
or about, the Premises with combined single limit coverage of not less than
the amount of Tenant's Minimum Liability Insurance Coverage set forth in
paragraph 1.8, which insurance shall contain a "contractual liability"
endorsement insuring Tenant's performance of Tenant's obligation to indemnify
Landlord contained in paragraph 10.3;
(2) Plate-glass insurance, at actual replacement cost; and
(3) Fire and property damage insurance against loss caused by
fire, extended coverage perils including steam boiler insurance, sprinkler
leakage, if applicable, vandalism, malicious mischief and such other
additional perils as now are or hereafter may be included in a standard
extended coverage endorsement from time to time in general use in the county
in which the Property is located, insuring Tenant's personal property,
inventory, Trade Fixtures and Leasehold Improvements within the Premises for
the full actual replacement cost thereof.
B. Where applicable and required by Landlord, each policy of
insurance required to be carried by Tenant pursuant to this paragraph (i)
shall name Landlord and such other parties in interest as Landlord designates
as additional insureds; (ii) shall be primary insurance which provides that
the insurer shall be liable for the full amount of the loss up to and
including the total amount of liability set forth in the declarations without
the right of contribution from any other insurance coverage of Landlord;
(iii) shall be in a form satisfactory to Landlord; (iv) shall be carried with
companies reasonably acceptable to Landlord; (v) shall provide that such
policy shall not be subject to cancellation, lapse or change except after at
least thirty (30) days prior written notice to Landlord; (vi) shall not have
a "deductible" in excess of $500,000 or such greater amount as is approved by
Landlord; (vii) shall (to the extent available) contain a waiver by the
insurer of any right to subrogation against Landlord, its agents, employees
and contractors which might arise by reason of any payment under such policy
or by reason of any act or omission of Landlord, its agents, employees or
contractors; and (viii) shall contain a "severability" clause. If Tenant has
in force and effect a blanket policy of liability insurance with the same
coverage for the Premises as described above, as well as other coverage of
other premises and properties of Tenant, or in which Tenant has some
interest, such blanket insurance shall satisfy the requirements hereof.
C. A certificate of each paid-up policy evidencing the insurance
required to be carried by Tenant pursuant to this paragraph (appropriately
authenticated by the insurer), certifying that such policy has been issued,
providing the coverage required by this paragraph, and containing the
provisions specified herein, shall be delivered to Landlord prior to the time
Tenant or any of its contractors enters the Premises and upon renewal of such
policies, but not less than five (5) days prior to the expiration of the term
of such coverage. If Landlord's insurance advisor reasonably determines at
any time that the amount of coverage required for any
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policy of insurance Tenant is to obtain pursuant to this paragraph is not
adequate, then Tenant shall increase such coverage for such insurance to such
amount as Landlord's insurance advisory reasonably deems adequate, not to
exceed the level of coverage commonly carried by comparable businesses
similarly situated for such insurance; provided, however, that Landlord may
not require an adjustment pursuant to this sentence more frequently than once
every two (2) years during the Lease Term.
9.2. LANDLORD'S INSURANCE: Landlord shall have the following
obligations and options regarding insurance:
A. Landlord shall maintain a policy or policies of fire and
property damage insurance in so-called "all risk" form insuring Landlord (and
such others as Landlord may designate) against loss of rents for a period of
not less than six (6) months and from physical damage to the Premises with
coverage of not less than the full replacement cost of (i) the building of
which the Premises are a part, including the structural elements thereof and
all electrical, mechanical, plumbing, and other systems, and (ii) all
Interior Improvements constructed pursuant to the Interior Improvement
Agreement attached as EXHIBIT "C". Landlord may so insure the Premises
separately, or may insure the Premises with other buildings and improvements
within the Property and/or other property owned by Landlord which Landlord
elects to insure together under the same policy or policies. Such fire and
property damage insurance, at Landlord's election, (i) may be endorsed to
cover loss caused by such additional perils against which Landlord may elect
to insure, including earthquake and/or flood, (ii) shall contain commercially
reasonable "deductibles" which, in the case of earthquake and flood
insurance, may be up to ten percent (10%) of the replacement value of the
property insured or such higher amount as is then commercially reasonable,
(iii) may provide coverage for loss of rents for a period of up to twelve
(12) months, and (iv) may contain additional endorsements or coverage
reasonably required by Landlord or any Lender, including an "agreed amount"
endorsement, demolition insurance (covering the cost of demolishing damaged
improvements or improvements required by Law to be demolished), and
difference in condition coverage. Landlord shall not be required to cause
such insurance to cover any Trade Fixtures, Leasehold Improvements or any
inventory or other personal property of Tenant.
B. Landlord may maintain a policy or policies of commercial
general liability insurance insuring Landlord (and such others as are
designated by Landlord) against liability for personal injury, bodily injury,
death and damage to property occurring or resulting from an occurrence in, or
about the Property, with combined single limit coverage in such amount as
Landlord may from time to time determine is reasonably necessary for its
protection and with commercially reasonable deductibles.
9.3. TENANT'S OBLIGATION TO REIMBURSE: The cost of the insurance
carried by Landlord pursuant to paragraph 9.2 (and any commercially
reasonable "deductible" amount paid by Landlord in connection with the
restoration of any loss and excluded from the coverage of such insurance)
shall be a Common Operating Expense and Tenant shall pay its share thereof as
provided in paragraph 6.3. However, if Landlord's insurance rates for the
Premises are increased at any time during the Lease Term as a result of the
nature of Tenant's use of the Premises, Tenant shall reimburse Landlord for
the full amount of such increase immediately upon receipt of a bill from
Landlord therefor.
9.4. RELEASE AND WAIVER OF SUBROGATION: The parties hereto release each
other, and their respective agents and employees, from any liability for
injury to any person or damage to property that is caused by or results from
any risk insured against under any valid and collectible insurance policy
carried by either of the parties which contains a waiver of subrogation by
the insurer and is in force at the time of such injury or damage, subject to
the following limitations: (i) the foregoing provisions shall not apply to
the commercial general liability insurance described by subparagraph 9.1A and
9.1B; and (ii) such release shall apply to liability resulting from any risk
insured against or covered by self-insurance maintained or provided by Tenant
to satisfy the requirements of paragraph 9.1. This release shall be in
effect only so long as the applicable insurance policy contains a clause to
the effect that this release shall not affect the right of the insured to
recover under such policy. Each party shall use reasonable efforts to cause
each insurance policy obtained by it to provide that the insurer waives all
right of recovery by
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way of subrogation against the other party and its agents and employees in
connection with any injury or damage covered by such policy. However, if any
insurance policy cannot be obtained with such a waiver of subrogation, or if
such waiver of subrogation is only available at additional cost and the party
for whose benefit the waiver is to be obtained does not pay such additional
cost, then the party obtaining such insurance shall notify the other party of
that fact and thereupon shall be relieved of the obligation to obtain such
waiver of subrogation rights from the insurer with respect to the particular
insurance involved.
ARTICLE 10.
LIMITATION ON LANDLORD'S
LIABILITY AND INDEMNITY
10.1. LIMITATION ON LANDLORD'S LIABILITY: Landlord shall not be liable
to Tenant, nor shall Tenant be entitled to terminate this Lease or to any
abatement of rent, for any injury to Tenant, its agents, employees,
contractors or invitees, damage to Tenant's property, or loss to Tenant's
business resulting from any cause, including without limitation any (i)
failure, interruption or installation of any HVAC or other utility system or
service; (ii) failure to furnish or delay in furnishing any utilities or
services when such failure or delay is caused by Acts of God or the elements,
labor disturbances of any character, any other accidents or other conditions
beyond the reasonable control of Landlord; (iii) limitation, curtailment,
rationing or restriction on the use of water or electricity, gas or any other
form of energy or any services or utility serving the Premises; (iv)
vandalism or forcible entry by unauthorized persons; or (v) penetration of
water into or onto any portion of the Premises or the Common Area through
roof leaks or otherwise. Notwithstanding the foregoing:
A. Subject to paragraph 9.4, Landlord shall be liable for any such
injury, damage or loss which is proximately caused by Landlord's gross
negligence or willful misconduct, of which Landlord has actual notice and a
reasonable opportunity to cure but which it fails to so cure.
B. Tenant shall have the option to terminate this Lease upon the
occurrence of the following: (i) water, electricity, or other utility
service essential to the conduct of Tenant's business in the Premises is
interrupted or substantially impaired for a period of more than two hundred
seventy (270) consecutive days during which time the Premises are rendered
substantially unusable for the conduct of Tenant's business (a "Material
Interruption"); and (ii) the Material Interruption is not caused by the act
or omission of Tenant, its agents, employees or contractors.
10.2. LIMITATION ON TENANT'S RECOURSE: So long as the Landlord is a
corporation, trust, partnership, joint venture, unincorporated association or
other form of business entity, (i) the obligations of Landlord shall not
constitute personal obligations of the officers, directors, trustees,
partners, joint venturers, members, owners, stockholders, or other principals
or representatives of such business entity, and (ii) Tenant shall have
recourse only to the assets of such business entity for the satisfaction of
such obligations and not against the assets of such officers, directors,
trustees, partners, joint venturers, members, owners, stockholders,
principals or representatives, except to the extent of their interests in the
entity that is Landlord. If Landlord is a natural person or persons, Tenant
shall have recourse only to the interest of such natural persons in the
Property for the satisfaction of the obligations of Landlord and shall not
have recourse to any other assets of such natural persons for the
satisfaction of such obligations.
10.3. INDEMNIFICATION OF LANDLORD: Tenant shall hold harmless, indemnify
and defend Landlord, and its employees, agents and contractors, with
competent counsel, from all liability, penalties, losses, damages, costs,
expenses, causes of action, claims and/or judgments arising by reason of any
death, bodily injury, personal injury or property damage (i) resulting from
any cause or causes whatsoever (other than the negligence or willful
misconduct of Landlord of which Landlord has had notice and a reasonable time
to cure, but which Landlord has failed to cure) occurring in or about or
resulting from an occurrence in or about the Premises, or
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(ii) resulting from the negligence or willful misconduct of Tenant, its
agents, employees and contractors, wherever the same may occur, or (iii)
resulting from an Event of Tenant's Default. The provisions of this
paragraph shall survive the expiration or sooner termination of this Lease.
ARTICLE 11.
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DAMAGE TO PREMISES
11.1. LANDLORD'S DUTY TO RESTORE: If the Premises are damaged by any
peril after the Commencement Date of this Lease, Landlord shall restore the
Premises unless the Lease is terminated by Landlord pursuant to paragraph
11.2 or by Tenant pursuant to paragraph 11.3. All insurance proceeds
available from the fire and property damage insurance carried by Landlord
pursuant to paragraph 9.2 shall be paid to and become the property of
Landlord. If this Lease is terminated pursuant to either paragraphs 11.2 or
11.3, then all insurance proceeds available from insurance carried by Tenant
which covers loss to property that is Landlord's property or would become
Landlord's property on termination of this Lease shall be paid to and become
the property of Landlord. If this Lease is not so terminated, then upon
receipt of the insurance proceeds (if the loss is covered by insurance) and
the issuance of all necessary governmental permits, Landlord shall commence
and diligently prosecute to completion the restoration of the Premises, to
the extent then allowed by Law, to substantially the same condition in which
the Premises were immediately prior to such damage. Landlord's obligation to
restore shall be limited to the Premises and interior improvements
constructed by Tenant but financed by Landlord pursuant to the Interior
Improvement Agreement as such improvements existed upon completion thereof
excluding any Leasehold Improvements, Trade Fixtures and/or personal property
constructed or installed by Tenant in the Premises. To the extent that
insurance proceeds recovered by Landlord from the insurance carried pursuant
to paragraph 9.2A exceed the amount needed by Landlord to discharge its
restoration obligation pursuant to the immediately preceding sentence,
Landlord shall make such excess insurance proceeds available to Tenant for
the purpose of restoring interior improvements that were constructed by
Tenant and financed by Tenant pursuant to the Interior Improvement Agreement,
so that such improvements may be restored to substantially the same condition
existing as of the date such improvements were initially completed.
11.2. LANDLORD'S RIGHT TO TERMINATE: Landlord shall have the right to
terminate this Lease in the event any of the following occurs, which right
may be exercised only by delivery to Tenant of a written notice of election
to terminate within thirty (30) days after the date of such damage:
A. Either the Property or the Premises is damaged by an
Insured Peril to such an extent that the estimated cost to restore equals or
exceeds eighty percent (80%) of the then actual replacement cost thereof and
there remains less than three (3) years in the Lease Term; provided, however,
that Landlord may not terminate this Lease pursuant to this subparagraph
11.2A if Tenant at the time of such damage has a then valid written option to
extend the Lease Term and Tenant exercises such option to extend the Lease
Term within fifteen (15) days after Tenant receives Landlord's notice of
election to terminate and such action results in there being more than three
(3) years remaining in the Lease Term (as it has been extended by the
Exercise of such option);
B. Either the Property or the Premises is damaged by an
Uninsured Peril to such an extent that the estimated cost to restore exceeds
two percent (2%) of the actual replacement cost thereof; provided, however,
that Landlord may not terminate this Lease pursuant to this paragraph 11.2B
if one or more tenants of the Property agree in writing to pay the amount by
which the cost to restore the damage exceeds such amount and subsequently
deposit such amount with Landlord within thirty (30) days after Landlord has
notified Tenant of its election to terminate this Lease;
C. The Premises are damaged by any peril within twelve (12)
months of the last day of the Lease Term to such an extent that the estimated
cost to restore equals or exceeds
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an amount equal to six (6) times the Base Monthly Rent then due; provided,
however, that Landlord may not terminate this Lease pursuant to this
subparagraph 11.2C if Tenant, at the time of such damage, has a then valid
express written option to extend the Lease Term and Tenant exercises such
option to extend the Lease Term within fifteen (15) days following the date
of such damage; or
D. As used herein, the following terms shall have the
following meanings: (i) the term "Insured Peril" shall mean a peril actually
insured against for which the insurance proceeds paid or made available to
Landlord are sufficient (except for any "deductible" amount specified by such
insurance) to restore the Property under the then existing building codes to
the condition existing immediately prior to the damage; and (ii) the term
"Uninsured Peril" shall mean and include any peril not actually insured
against, any peril actually insured against but for which the insurance
proceeds paid or made available to Landlord are for any reason (except for
any "deductible" amount specified by such insurance) insufficient to restore
the Property under then existing building codes to the condition existing
immediately prior to the damage, and any peril actually insured against but
for which the insurance proceeds are not paid or made available to Landlord.
11.3. TENANT'S RIGHT TO TERMINATE: If the Premises are damaged by any
peril and Landlord does not elect to terminate this Lease or is not entitled
to terminate this Lease pursuant to paragraph 11.2, then as soon as
reasonably practicable, Landlord shall furnish Tenant with the written
opinion of Landlord's architect or construction consultant as to when the
restoration work required of Landlord may be completed. Tenant shall have
the right to terminate this Lease in the event any of the following occurs,
which right may be exercised only by delivery to Landlord of a written notice
of election to terminate within thirty (30) days after Tenant receives from
Landlord the estimate of the time needed to complete such restoration:
A. The Premises are damaged by any peril and, in the
reasonable opinion of Landlord's architect or construction consultant, the
restoration of the Premises cannot be substantially completed within two
hundred seventy (270) days after the date of such damage; or
B. The Premises are damaged by any peril within twelve (12)
months of the last day of the Lease Term and in the reasonable opinion of
Landlord's architect or construction consultant the restoration of the
Premises cannot be substantially completed within ninety (90) days after the
date of such damage; or
C. The Premises are not restored within eighteen (18) months following
the date of such damage; provided, however, that if at the time restoration
of the "shell" of the building in which the Premises are located is
substantially completed (excluding Interior Improvements) Landlord reasonably
estimates that Landlord will not be able to complete restoration of the
Premises within such eighteen (18) month period, then at that time Landlord
may offer in writing to Tenant the option to terminate this Lease, and if
Tenant does not exercise such option to terminate the Lease so offered to
Tenant by Landlord, then Tenant may not thereafter elect to terminate this
Lease pursuant to this subparagraph 11.3C.
11.4. ABATEMENT OF RENT: In the event of damage to the Premises which
does not result in the termination of this Lease, the Base Monthly Rent and
the Additional Rent shall be temporarily abated commencing on the date of
damage and continuing through the Period of restoration in proportion to the
degree to which Tenant's use of the Premises is impaired by such damage.
Tenant shall not be entitled to any compensation or damages from Landlord for
loss of Tenant's business or property or for any inconvenience or annoyance
caused by such damage or restoration. Tenant hereby waives the provisions of
Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of the
California Civil Code, and the provisions of any similar law hereinafter
enacted.
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ARTICLE 12.
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CONDEMNATION
12.1 TENANT'S TERMINATION RIGHT: Tenant shall have the right to
terminate this Lease if, as a result of any taking by means of the exercise
of the power of eminent domain (including any voluntary sale or transfer by
Landlord to any condemnor under threat of condemnation), (i) ten percent
(10%) or more of the Premises is so taken, or (ii) there is a taking
affecting the Common Area and, as a result of such taking, Landlord cannot
provide parking spaces within reasonable walking distance of the Premises
equal in number to at least ninety percent (90%) of the number of spaces
allocated to Tenant by paragraph 2.1, whether by rearrangement of the
remaining parking areas in the Common Area (including construction of
multi-deck parking structures or restripping for compact cars where permitted
by Law) or by alternative parking facilities on other land. Tenant must
exercise such right within a reasonable period of time, to be effective on
the date that possession of that portion of the Premises or Common Area that
is condemned is taken by the condemnor.
12.2 RESTORATION AND ABATEMENT OF RENT: If any part of the Premises
or the Common Area is taken by condemnation and this Lease is not terminated,
then Landlord shall restore the remaining portion of the Premises and Common
Area to substantially the same condition in which the Premises and Common
Area were immediately prior to such taking, excluding any Leasehold
Improvements, Trade Fixtures and/or personal property constructed or
installed by Tenant; provided, however, that Landlord shall not be obligated
to spend more for such restoration than the amount of any condemnation award
recovered by or pursuant to paragraph 12.3. Thereafter, except in the case
of a temporary taking, (i) as of the date possession is taken the Base
Monthly Rent (but not any Additional Rent) shall be reduced in the same
proportion that the floor area of that part of the Premises so taken (less
any addition thereto by reason of any reconstruction) bears to the original
floor area of the Premises, and (ii) to the extent that Landlord is obligated
to undertake any restoration work as a result of such condemnation, the Base
Monthly Rent shall be further abated in proportion to the extent to which
such restoration work interferes with Tenant's ability to use that part of
the Premises which remains after the condemnation.
12.3. TEMPORARY TAKING: If any portion of the Premises is temporarily
taken for six (6) months or less, this Lease shall remain in effect and
Tenant shall be entitled to recover any condemnation award that is made for
such taking and shall be responsible for restoring the Premises to the
condition existing immediately prior to such temporary taking. If any
portion of the Premises is temporarily taken by condemnation for a period
which exceeds six (6) months or which extends beyond the natural expiration
of the Lease Term, and such taking materially and adversely affects Tenant's
ability to use the Premises for the Permitted Use, then Tenant shall have the
right to terminate this Lease, effective on the date possession is taken by
the condemnor.
12.4. DIVISION OF CONDEMNATION AWARD: Any award made as a result of
any condemnation of the Premises or the Common Area shall belong to and be
paid to Landlord, and Tenant hereby assigns to Landlord all of its right,
title and interest in any such award; provided, however, that Tenant shall be
entitled to recover out of any condemnation award made for a taking of all or
part of the Premises an amount equal to the unamortized cost of all interior
improvements paid for by Tenant constructed pursuant to the Interior
Improvement Agreement and all Leasehold Improvements constructed by Tenant
(amortized on a straight line basis over the initial Lease Term for Interior
Improvements, and over the period from completion of construction until
expiration of the Lease Term for Leasehold Improvements); and provided
further that Tenant shall be entitled to receive any condemnation award that
is made directly to Tenant for the following so long as the award made to
Landlord is not thereby reduced: (i) for the taking of personal property or
Trade Fixtures belonging to Tenant, (ii) for the interruption of Tenant's
business or its moving costs, (iii) for loss of Tenant's goodwill, or (iv)
for any temporary taking where this Lease is not terminated as a result of
such taking. The rights of Landlord and Tenant regarding any condemnation
shall be determined as provided in this Article, and each party hereby waives
the provisions of Section 1265.130 of the California Code of Civil
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Procedure and the provisions of any similar law hereinafter enacted allowing
either party to petition the Superior Court to terminate this Lease in the
event of a partial taking of the Premises.
ARTICLE 13.
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DEFAULT AND REMEDIES
13.1 EVENTS OF TENANT'S DEFAULT: Tenant shall be in default of its
obligations under this Lease if any of the following events occurs (an "Event
of Tenant's Default"):
A. Tenant shall have failed to pay Base Monthly Rent or any
Additional Rent when due and such failure is not cured within ten (10) days
after delivery of written notice from Landlord specifying such failure to
pay; or
B. Tenant shall have failed to perform any term, covenant, or
condition of this Lease except those requiring the payment of Base Monthly
Rent or Additional Rent, and Tenant shall have failed to cure such breach
within thirty (30) days after written notice from Landlord specifying the
nature of such breach, or if such breach could not reasonably be cured within
said thirty (30) day period, Tenant shall have failed to commence such cure
within said thirty (30) day period and thereafter continue with due diligence
to prosecute such cure to completion within such time period as is reasonably
needed; or
C. Tenant shall have made a general assignment of its assets
for the benefit of its creditors; or
D. Tenant shall have sublet the Premises or assigned its
interest in the Lease in violation of the provisions contained in Article 14,
whether voluntarily or by operation of law; Landlord shall have notified
Tenant in writing that such Transfer constitutes a violation of the
provisions contained in Article 14, and Tenant does not cause such Transfer
to be rescinded or terminated and possession of the Premises affected by the
Transfer recovered from the Transferee within ninety (90) days after receipt
of such notice; or
E. Tenant shall have permitted the sequestration or attachment
of, or execution on, or the appointment of a custodian or receiver with
respect to, all or any substantial part of the property of Tenant or any
property essential to the conduct of Tenant's business, and Tenant shall have
failed to obtain a return or release of such property within ninety (90) days
thereafter or prior to sale pursuant to such sequestration, attachment or
levy, whichever is earlier; or
F. A court shall have made or entered any decree or order with
respect to Tenant, or Tenant shall have submitted to or sought a decree or
order (or a petition or pleading shall have been filed in connection
therewith) which: (i) grants or constitutes (or seeks) an order for relief,
appointment of a trustee, or confirmation of a reorganization plan under the
bankruptcy laws of the United States; (ii) approves as properly filed (or
seeks such approval of) a petition seeking liquidation or reorganization
under said bankruptcy laws or any other debtor's relief law or statute of the
United States or any state thereof; or (iii) otherwise directs (or seeks) the
winding up or liquidation of Tenant; and such petition, decree or order shall
have continued in effect for a period of ninety (90) or more days; or
G. Tenant shall have failed to deliver documents as required
of it pursuant to paragraph 15.4 or 15.7 within the time periods specified
therein and Tenant shall have failed to cure such default within ten (10)
days after Landlord has delivered to Tenant written notice that Tenant is in
default of its obligations to deliver such documents pursuant to either
paragraph 15.4 or 15.7; or
H. An Event of Tenant's Default has occurred under the
Building A Lease (unless caused by subtenant or assignee of the original
Tenant under this Lease and such original Tenant is using reasonable efforts
to cause such default to be cured) and, at the time Tenant is so
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in default, the Premises and the real property leased to Tenant pursuant to
the Building A Lease are both owned of record by the same person or entity.
13.2. LANDLORD'S REMEDIES: If an event of Tenant's Default occurs,
Landlord shall have the following remedies, in addition to all other rights
and remedies provided by any Law or otherwise provided in this Lease, to
which Landlord may resort cumulatively or in the alternative:
A. Landlord may, at Landlord's election, keep this Lease in
effect and enforce by an action at law or in equity all of its rights and
remedies under this Lease, including (i) the right to recover the rent and
other sums as they become due by appropriate legal action, (ii) the right to
make payments required of Tenant or perform Tenant's obligations and be
reimbursed by Tenant for the cost thereof with interest at the Agreed
Interest Rate from the date the sum is paid by Landlord until Landlord is
reimbursed by Tenant, and (iii) the remedies of injunctive relief and
specific performance to compel Tenant to perform its obligations under this
Lease.
B. Landlord may, at Landlord's election, terminate this Lease
by giving Tenant written notice of termination, in which event this Lease
shall terminate on the date set forth for termination in such notice. Any
termination under this subparagraph shall not relieve Tenant from its
obligation to pay sums then due Landlord or from any claim against Tenant for
damages or rent previously accured or then accruing. In no event shall any
one or more of the following actions by Landlord, in the absence of a written
election by Landlord to terminate this Lease, constitute a termination of
this Lease:
(1) Appointment of a receiver or keeper in order to
protect Landlord's interest hereunder;
(2) Consent to any subletting of the Premises or
assignment of this Lease by Tenant, whether pursuant to the provisions hereof
or otherwise; or
(3) Any other action by Landlord or Landlord's agents
intended to mitigate the adverse effects of any breach of this Lease by
Tenant, including without limitation any action taken to maintain and
preserve the Premises or any action taken to relet the Premises or any
portions thereof, for the account of Tenant and in the name of Tenant.
C. In the event Tenant breaches this Lease and abandons the
Premises, this Lease shall not terminate unless Landlord gives Tenant written
notice of its election to so terminate this Lease. No act by or on behalf of
Landlord intended to mitigate the adverse effect of such breach, including
those described by subparagraphs 13.2B(1), (2) and (3) immediately preceding,
shall constitute a termination of Tenant's right to possession unless
Landlord gives Tenant written notice of termination. Should Landlord not
terminate this Lease by giving Tenant written notice, Landlord may enforce
all its rights and remedies under this Lease, including the right to recover
the rent as it becomes due under the Lease as provided in California Civil
Code Section 1951.4 as in effect on the Commencement Date of this Lease.
D. In the event Landlord terminates this Lease, Landlord shall
be entitled, at Landlord's election, to damages in an amount as set forth in
California Civil Code Section 1951.2 as in effect on the Commencement Date of
this Lease. For purposes of computing damages pursuant to Section 1951.2,
(i) an interest rate equal to the Agreed Interest Rate shall be used where
permitted, and (ii) the term "rent" includes Base Monthly Rent and Additional
Rent. Such damages shall include without limitation:
(1) The worth at the time of award of the amount by which
the unpaid rent for the balance of the term after the time of award exceeds
the amount of such rental loss that Tenant proves could be reasonably
avoided, computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%); and
(2) Any other amount necessary to compensate Landlord for
all detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which in the ordinary course of things would
be likely to result therefrom, including,
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without limitation, the following: (i) expenses for cleaning, repairing or
restoring the Premises; (ii) expenses for altering, remodeling or otherwise
improving the Premises for the purpose of reletting, including installation
of leasehold improvements (whether such installation be funded by a reduction
of rent, direct payment or allowance to a new tenant, or otherwise); (iii)
broker's fees, advertising costs and other expenses of reletting the
Premises; (iv) costs of carrying the Premises, such as taxes, insurance
premiums, utilities and security precautions; (v) expenses in retaking
possession of the Premises; and (vi) attorneys' fees and court costs incurred
by Landlord in retaking possession of the Premises and in releasing the
Premises or otherwise incurred as a result of Tenant's default.
E. Nothing in this paragraph shall limit Landlord's right to
indemnification from Tenant as provided in paragraph 7.2 and paragraph 10.3.
Any notice given by Landlord in order to satisfy the requirements of
subparagraphs 13.1A or B above shall also satisfy the notice requirements of
California Code of Civil Procedure Section 1161 regarding unlawful detainer
proceedings.
13.3. WAIVER BY TENANT OF CERTAIN REMEDIES: Tenant waives the
provisions of Sections 1932(1), 1941 and 1942 of the California Civil Code
and/or any similar or successor law regarding Tenant's right to terminate
this Lease or to make repairs and deduct the expenses of such repairs from
the rent due under the Lease.
13.4. WAIVER: One party's consent to or approval of any act by the
other party requiring the first party's consent or approval shall not be
deemed to waive or render unnecessary the first party's consent to or
approval of any subsequent similar act by the other party. The receipt by
Landlord of any rent or payment with or without knowledge of the breach of
any other provision hereof shall not be deemed a waiver of any such breach
unless such waiver is in writing and signed by Landlord. No delay or
omission in the exercise of any right or remedy accruing to either party upon
any breach by the other party under this Lease shall impair such right or
remedy or be construed as a waiver of any such breach theretofore or
thereafter occurring. The waiver by either party of any breach of any
provision of this Lease shall not be deemed to be a waiver of any subsequent
breach of the same or of any other provisions herein contained.
13.5. LIMITATION ON EXERCISE OF RIGHTS: At any time that an Event of
Tenant's Default has occurred and remains uncured, (i) it shall not be
unreasonable for Landlord to deny or withhold any consent or approval
requested of it by Tenant which Landlord would otherwise be obligated to
give, and (ii) Tenant may not exercise any option to extend, right to
terminate this Lease, or other right granted to it by this Lease which would
otherwise be available to it.
ARTICLE 14.
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ASSIGNMENT AND SUBLETTING
14.1. BY TENANT: The following provisions shall apply to any
assignment, subletting or other transfer by Tenant or any subtenant or
assignee or other successor in interest of the original Tenant (collectively
referred to in this paragraph as "Tenant"):
A. Tenant shall not do any of the following (collectively
referred to herein as a "Transfer"), whether voluntarily, involuntarily or by
operation of laws, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed: (i) sublet all or any
part of the Premises or allow it to be sublet, occupied or used by any person
or entity other than Tenant; (ii) assign its interest in this Lease; (iii)
transfer any right appurtenant to this Lease or the Premises; (iv) mortgage
or encumber the Lease (or otherwise use the Lease as a security device) in
any manner; or (v) terminate or materially amend or modify an assignment,
sublease or other transfer that has been previously approved by Landlord.
Any Transfer so approved by Landlord shall not be effective until Tenant has
delivered to Landlord an executed counterpart of the document evidencing the
Transfer which (i) is in form approved by Landlord, (ii) contains the same
terms and conditions as stated in Tenant's notice given to Landlord pursuant
to subparagraph 14.1B, and (iii) contains the agreement of the proposed
transferee to
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assume all obligations of Tenant related to the Transfer arising after the
effective date of such Transfer and to remain jointly and severally liable
therefor with Tenant. Any attempted Transfer without Landlord's consent
shall be voidable at Landlord's option. Landlord's consent to any one
Transfer shall not constitute a waiver of the provisions of this paragraph
14.1 as to any subsequent Transfer nor a consent to any subsequent Transfer.
No Transfer, even with the consent of Landlord, shall relieve Tenant of its
personal and primary obligation to pay the rent and to perform all of the
other obligations to be performed by Tenant hereunder. The acceptance of
rent by Landlord from any person shall not be deemed to be a waiver by
Landlord of any provision of this Lease nor to be a consent to any Transfer.
B. Tenant shall give Landlord at least fifteen (15) days prior
written notice of any desired Transfer and of the proposed terms of such
Transfer including but not limited to (i) the name and legal composition of
the proposed transferee; (ii) a current financial statement of the
transferee, financial statements of the transferee covering the preceding
three years if the same exist, and (if available) an audited financial
statement of the transferee for a period ending not more than one year prior
to the proposed effective date of the Transfer, all of which statements are
prepared in accordance with generally accepted accounting principles; (iii)
the nature of the proposed transferee's business to be carried on in the
Premises; (iv) all consideration to be given on account of the Transfer; (v)
a current financial statement of Tenant; and (vi) such other information as
may be reasonably requested by Landlord. Tenant's notice shall not be deemed
to have been served or given until such time as Tenant has provided Landlord
with all information reasonably requested by Landlord pursuant to this
subparagraph 14.1B. Tenant shall immediately notify Landlord of any
modification to the proposed terms of such Transfer.
C. In the event that Tenant seeks to make any Transfer, then
Landlord, by giving Tenant written notice of its election within fifteen (15)
days after Tenant's notice of intent to Transfer has been deemed given to
Landlord, shall have the right to elect (i) to withhold its consent to such
Transfer, as permitted pursuant to subparagraph 14.1A, or (ii) to permit
Tenant to so assign the Lease or sublease such part of the Premises, in which
event Tenant may do so, but without being released of its liability for the
performance of all of its obligations under the Lease, and the following
shall apply:
(1) Subject to subparagraph 14.1C(5), if Tenant assigns
its interest in this Lease in accordance with this subparagraph 14.1C, then
Tenant shall pay to Landlord fifty percent (50%) of all consideration
received by Tenant over and above (i) the assignee's agreement to assume the
obligations of Tenant under this Lease and (ii) all Permitted Transfer Costs
related to such assignment.
(2) Subject to subparagraph 14.1C(5), if Tenant sublets
all or part of the Premises, then Tenant shall pay to Landlord fifty percent
(50%) of the positive difference, if any, between (i) all rent and other
consideration paid by the subtenant to Tenant, less (ii) all rent paid by
Tenant to Landlord pursuant to this Lease which is allocable to the area so
sublet and all Permitted Transfer Costs related to such sublease. Such
amount shall be paid to Landlord on the same basis, whether periodic or in
lump sum, that such rent and other consideration is paid to Tenant by its
subtenant, within seven (7) days after it is received by Tenant.
(3) Tenant's obligations under this subparagraph shall
survive any assignment or sublease. At the time Tenant makes any payment to
Landlord required by this subparagraph, Tenant shall deliver an itemized
statement of the method by which the amount to which Landlord is entitled was
calculated, certified by Tenant as true and correct. Landlord shall have the
right to inspect Tenant's books and records relating to the payments due
pursuant to this subparagraph. Upon request therefor, Tenant shall deliver
to Landlord copies of all bills, invoices or other documents upon which its
calculations are based. Landlord may condition its approval of any Transfer
upon obtaining a certification from both Tenant and the proposed transferee
of all amounts that are to be paid to Tenant in connection with such Transfer.
(4) As used herein, the term "consideration" shall mean
any consideration of any kind received, or to be received, by Tenant as a
result of the Transfer, if such sums are related to Tenant's interest in this
Lease or in the Premises, including payments (in excess of the fair market
value thereof) for Tenant's assets, fixtures, leasehold improvements,
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inventory accounts, goodwill, equipment, furniture, general intangibles and
any capital stock or other equity ownership interest in Tenant. As used in
this subparagraph, the term "Permitted Transfer Costs" shall mean (i) all
reasonable leasing commissions paid to third parties not affiliated with
Tenant in order to obtain the Transfer in question, (ii) all reasonable
attorneys' fees incurred by Tenant with respect to the Transfer in question,
(iii) the cost of tenant improvements installed for the use of the subtenant
or assignee to the extent required by such party as a condition to the
Transfer, and (iv) any payments made by Tenant to the transferee to induce it
to enter into the Transfer (E.G., payment of moving expenses).
(5) Notwithstanding anything to the contrary contained in
the foregoing, Landlord shall not participate in excess consideration
received by Tenant from an assignee or subtenant as provided for in
subparagraphs 14.1C(1) and 14.1C(2) unless such assignment or sublease occurs
during an Option Term or, in the case of a sublease, extends into an Option
Term (in which latter event Landlord shall be entitled to its share of the
excess consideration paid during the Option Term).
D. If Tenant is a corporation, any dissolution, merger,
consolidation or other reorganization of Tenant, or the sale or transfer in
the aggregate over the Lease Term of a controlling percentage of the capital
stock of Tenant, shall be deemed a voluntary assignment of Tenant's interest
in this Lease; provided, however, that the foregoing shall not apply to
corporations the capital stock of which is publicly traded. The phrase
"controlling percentage" means the ownership of and the right to vote stock
possessing more than fifty percent (50%) of the total combined voting power
of all classes of Tenant's capital stock issued, outstanding and entitled to
vote for the election of directors. If Tenant is a partnership, any
withdrawal or substitution (whether voluntary, involuntary or by operation of
law, and whether occurring at one time or over a period of time) of any
partner(s) owning twenty-five percent (25%) or more (cumulatively) of any
interest in the capital or profits of the partnership, or the dissolution of
the partnership, shall be deemed a voluntary assignment of Tenant's interest
in this Lease.
E. Notwithstanding anything contained in this paragraph 14.1,
so long as Tenant otherwise complies with the provisions of paragraph 14.1
Tenant may enter into any one of the following transfers (a "Permitted
Transfer") without Landlord's prior written consent, and Landlord shall not
be entitled to receive any part of any excess rentals or other consideration
resulting therefrom that would otherwise be due to it pursuant to paragraph
14.1C:
(1) Tenant may sublease all or part of the Premises or
assign its interest in this Lease to any corporation which controls, is
controlled by, or is under common control with the original Tenant to this
Lease by means of an ownership interest of more than fifty percent (50%);
(2) Tenant may assign its interest in the Lease to a
corporation which results from a merger, consolidation or other
reorganization in which Tenant is not the surviving corporation, so long as
(i) Tenant demonstrates to Landlord's reasonable satisfaction that the
surviving corporation will have sufficient creditworthiness to provide
adequate assurance of future performance of all of Tenant's obligations under
this Lease, or (ii) the surviving corporation has a net worth at the time of
such assignment that is equal to or greater than the net worth of Tenant
immediately prior to such transaction; and
(3) Tenant may assign this Lease to a corporation which
purchases or otherwise acquires all or substantially all of the assets of
Tenant, so long as (i) Tenant demonstrates to Landlord's reasonable
satisfaction that the acquiring corporation will have sufficient
creditworthiness to provide adequate assurance of future performance of all
of Tenant's obligations under this Lease, or (ii) such acquiring corporation
has a net worth at the time of such assignment that is equal to or greater
than the net worth of Tenant immediately prior to such transaction.
14.2. BY LANDLORD: Landlord and its successors in interest shall have
the right to transfer their interest in the Premises and the Property at any
time and to any person or entity. In the event of any such transfer, the
Landlord originally named herein (and, in the case of any subsequent
transfer, the transferor) from the date of such transfer, (i) shall be
automatically relieved, without any further act by any person or entity, of
all liability for the performance of the
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obligations of the Landlord hereunder which may accrue after the date of such
transfer, and (ii) shall be relieved of all liability for the performance of
the obligations of the Landlord hereunder which have accrued before the date
of transfer if its transferee agrees to assume and perform all such
obligations of the Landlord hereunder. After the date of any such transfer,
the term "Landlord" as used herein shall mean the transferee of such interest
in the Premises and the Property.
ARTICLE 15.
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GENERAL PROVISIONS
15.1. LANDLORD'S RIGHT TO ENTER: Landlord and its agents may enter
the Premises immediately in case of emergency and otherwise only at such time
as is approved by Tenant which time of Entry shall be within seven (7) days
after Landlord delivers written notice to Tenant requesting approval of a
time to enter, and Landlord may thereafter continue such entry for such
reasonable period of time as is necessary to accomplish Landlord's permitted
purpose for such entry. Landlord may so enter the Premises for the following
purposes: (i) inspecting the same, (ii) posting notices of
non-responsibility, (iii) supplying any service to be provided by Landlord to
Tenant, (iv) showing the Premises to prospective purchasers or mortgagees,
(v) making necessary alterations, additions or repairs, (vi) performing
Tenant's obligations when Tenant has failed to do so after written notice
from Landlord, (vii) placing upon the Premises ordinary "for sale" signs,
(viii) responding to an emergency, and/or (ix) during the last six (6) months
of the Lease Term or at any time when there is a Continuing Tenant Default,
showing the Premises to prospective tenants and placing upon the Premises
ordinary "for lease" signs. For each of the aforesaid purposes, Landlord may
enter the Premises by means of a master key, and Landlord shall have the
right to use any and all means Landlord may deem necessary and proper to open
the doors of the Premises in an emergency. Any entry into the Premises or
portions thereof obtained by Landlord by any of said means or otherwise shall
not under any circumstances be construed or deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an eviction, actual
or constructive, of Tenant from the Premises or any portion thereof.
15.2. SURRENDER OF THE PREMISES: Immediately prior to the expiration
or upon the sooner termination of this Lease, Tenant shall remove all
Tenant's Trade Fixtures and other personal property, and shall vacate and
surrender the Premises to Landlord in the same condition as existed at the
Commencement Date, except for (i) reasonable wear and tear, (ii) damage
caused by any peril or condemnation, and (iii) contamination by Hazardous
Materials for which Tenant is not responsible pursuant to subparagraphs 7.2B
or 7.2C. In this regard reasonable wear and tear shall be construed to mean
wear and tear caused to the Premises by the natural aging process which
occurs in spite of prudent application of reasonable standards for
maintenance, repair and janitorial practices, and does not include items of
neglected or deferred maintenance. If Landlord so requests, Tenant shall,
prior to the expiration or sooner termination of this Lease, remove any
Leasehold Improvements designated by Landlord and repair all damage caused by
such removal if such removal is required pursuant to paragraph 5.2. If the
Premises are not so surrendered at the termination of this Lease, Tenant
shall be liable to Landlord for all costs incurred by Landlord in returning
the Premises to the required condition, plus interest on all costs incurred
at the Agreed Interest Rate.
15.3. HOLDING OVER: This Lease shall terminate without further notice
at the expiration of the Lease Term. Any holding over by Tenant after
expiration of the Lease Term shall not constitute a renewal or extension of
the Lease or give Tenant any rights in or to the Premises except as expressly
provided in this Lease. Any holding over after such expiration with the
consent of Landlord shall be construed to be a tenancy from month to month on
the same terms and conditions herein specified insofar as applicable except
that Base Monthly Rent shall be increased to an amount equal to one hundred
twenty-five percent (125%) of the Base Monthly Rent required during the last
month of the Lease Term.
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15.4. SUBORDINATION: The following provisions shall govern the
relationship of this Lease to any underlying lease, mortgage or deed of trust
which now or hereafter affects the Property, and any renewal, modification,
consolidation, replacement or extension thereof (a "Security Instrument"):
A. This Lease is subject and subordinate to all Security
Instruments existing as of the Commencement Date. However, if any Lender so
requires, this Lease shall become prior and superior to any such Security
Instrument.
B. At Landlord's election, this Lease shall become subject and
subordinate to any Security Instrument created after the Commencement Date.
Notwithstanding such subordination, Tenant's right to quiet possession of the
Premises shall not be disturbed and the terms of this Lease shall not be
modified so long as Tenant is not in default and performs all of its
obligations under this Lease, unless this Lease is otherwise terminated
pursuant to its terms.
C. No subordination of this Lease to a Security Instrument
pursuant to subparagraphs 15.4A or 15.4B shall be effective until the holder
of a Security Instrument executes a subordination and non-disturbance
agreement in favor of Tenant by which the Lender agrees to be bound by the
immediately preceding sentence.
D. Tenant shall execute any document or instrument required by
Landlord or any Lender to make this Lease either prior or subordinate to a
Security Instrument, which may include such other matters as the Lender
customarily requires in connection with such agreements, including provisions
that (i) the Lender not be liable for any defaults on the part of Landlord
occurring prior to the time the Lender takes possession of the Premises in
connection with the enforcement of its Security Instrument; (ii) the Lender
not be liable for the performance of any obligations contained in the
Interior Improvement Agreement, for the completion of any improvements under
construction or required to be constructed by Landlord; (iii) recourse
against the Lender is limited to its interest in the Premises; (iv) any
notices given by Tenant to Landlord should also be delivered to the Lender;
(v) Tenant shall attorn to any purchaser at a foreclosure sale or a grantee
designated in a deed in lieu of foreclosure; (vi) the Lender shall not be
bound by any rent which Tenant might have paid in advance to any prior
Landlord for a period in excess of one month; (vii) the Lender shall not be
bound by any agreement or modification of the Lease made without the written
consent of the Lender; and (viii) upon request, Tenant shall enter into a new
lease with Lender of the Premises upon the same terms and conditions as the
Lease between Landlord and Tenant, which lease shall cover any unexpired term
of the Lease existing prior to a foreclosure, trustee's sale, or conveyance
in lieu of foreclosure. Tenant's failure to execute any such document or
instrument within ten (10) days after written demand therefor shall
constitute a default by Tenant. Tenant approves as reasonable the form of
subordination and non-disturbance agreement attached to this Lease as Exhibit
"D".
15.5. TENANT'S ATTORNMENT: Tenant shall attorn (i) to any purchaser
of the Premises or Property at any foreclosure sale or private sale conducted
pursuant to any security instrument encumbering the Premises and/or the
Property, (ii) to any grantee or transferee designated in any deed given in
lieu of foreclosure, or (iii) to the lessor under any underlying ground lease
should such ground lease be terminated.
15.6. MORTGAGEE PROTECTION: In the event of any default on the part
of the Landlord, Tenant will give notice by registered mail to any Lender or
lessor under any underlying ground lease whose name has been provided by
Tenant and shall offer such Lender or lessor a reasonable opportunity to cure
the default, not to exceed thirty (30) days from the expiration of the time
period granted to Landlord to cure such default; provided, however, that if
such Lender requires additional time to cure a default on the part of
Landlord or to obtain possession of the Premises by power of sale or judicial
foreclosure or other appropriate legal proceedings if obtaining possession is
necessary to effect a cure, the Lender shall be granted such opportunity,
provided that the Lender gives reasonable assurances to Tenant that such
default will be cured.
15.7. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS: At all times
during the Lease Term, Tenant agrees, following any request by Landlord,
promptly to execute and deliver to Landlord an estoppel certificate, (i)
certifying that this Lease is unmodified and in full force and effect or, if
modified, stating the nature of such modification and certifying that this
Lease, as so
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modified, is in full force and effect, (ii) stating the date to which the
rent and other charges are paid in advance, if any, (iii) acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord hereunder or, if there are uncured defaults, specifying the nature
of such defaults and (iv) certifying such other information about the Lease
as may be reasonably required by Landlord. Tenant's failure to deliver an
estoppel certificate within ten (10) days after delivery of Landlord's
request therefor shall be a conclusive admission by Tenant that, as of the
date of the request for such statement, (i) this Lease is unmodified except
as may be represented by Landlord in said request and is in full force and
effect, (ii) there are no uncured defaults in Landlord's performance, and
(iii) no rent has been paid in advance. At any time during the Lease Term
Tenant shall, upon ten (10) days' prior written notice from Landlord, provide
Tenant's most recent financial statement and financial statements covering
the twenty-four (24) month period prior to the date of such most recent
financial statement to any existing Lender or to any potential Lender or
buyer of the Property; provided, however, that if Tenant is a corporation
whose stock is publicly traded, Tenant may satisfy the foregoing requirement
by delivering to the appropriate parties copies of its most recent annual
report prepared to satisfy requirements of the federal securities laws. Such
statements shall be prepared in accordance with generally accepted accounting
principles and, if such is the normal practice of Tenant shall be audited by
an independent certified public accountant.
15.8. FORCE MAJEURE: Any prevention, delay or stoppage due to
strikes, lockouts, inclement weather, labor disputes, inability to obtain
labor, materials, fuels or reasonable substitutes therefor, governmental
restrictions, regulations, controls, action or inaction, civil commotion,
fire or other acts of God, and other causes beyond the reasonable control of
the party obligated to perform (except financial inability) shall excuse the
performance, for a period equal to the period of any said prevention, delay,
or stoppage, of any obligation hereunder except the obligation of Tenant to
pay rent or any other sums due hereunder.
15.9. NOTICES: Any notice required or desired to be given regarding
this Lease shall be in writing and may be given by personal delivery, by
facsimile telecopy, by courier service, or by mail. A notice shall be deemed
to have been given (i) on the third (3rd) business day after mailing if such
notice was deposited in the United States mail, certified or registered,
postage prepaid, addressed to the party to be served at its address first
above set forth, (ii) when delivered if given by personal delivery, and (iii)
in all other cases when actually received. Either party may change its
address by giving notice of same in accordance with this paragraph.
15.10. OBLIGATION TO ACT REASONABLY: Whenever the consent or approval
of a party to this Lease is required to be obtained before the other party to
this Lease may take an action, such consent or approval shall not be
unreasonably withheld or delayed.
15.11. CORPORATE AUTHORITY: If Tenant is a corporation (or a
partnership), each individual executing this Lease on behalf of said
corporation (or partnership) represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of said corporation in
accordance with the by-laws of said corporation (or partnership in accordance
with the partnership agreement of said partnership) and that this Lease is
binding upon said corporation (or partnership) in accordance with its terms.
If Tenant is a corporation, each of the persons executing this Lease on
behalf of Tenant does hereby covenant and warrant that Tenant is a duly
authorized and existing corporation, that Tenant is qualified to do business
in California and that the corporation has full right and authority to enter
into this Lease.
15.12. ADDITIONAL DEFINITIONS: Any term that is given a special
meaning by a provision in this Lease shall have such meaning when used in
this Lease or any addendum or amendment hereto. As used herein, the
following terms shall have the following meanings:
A. AGREED INTEREST RATE: The term "Agreed Interest Rate"
shall mean that interest rate determined as of the time it is to be applied
that is equal to the lesser of (i) two percent (2%) in excess of the "prime
rate", "reference rate", or "base rate" established by Bank of America (or if
Bank of America shall cease to exist, by the commercial bank with its
headquarters in California that has the greatest net worth among commercial
banks headquartered in California) as it may be adjusted from time to time,
or (ii) the maximum interest rate permitted by law.
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B. COMMON AREA: The term "Common Area" shall mean all areas
and facilities within the Property that are not designated by Landlord for
the exclusive use of Tenant or any other lessee or other occupant of the
Property, including the parking areas, access and perimeter roads, pedestrian
sidewalk, landscaped areas, trash enclosures, recreation areas and the like.
C. LAW: The term "Law" shall mean any judicial decision,
statute, constitution, ordinance, resolution, regulation, rule,
administrative order, or other requirement of any municipal, counting, state,
federal or other government agency or authority having jurisdiction over the
parties to this Lease or the Premises, or both, in effect either at the
Commencement Date of this Lease or any time during the Lease Term, including,
without limitation, any regulation, order or policy of any quasi-official
entity or body (e.g., board of fire examiners, public utilities or special
district).
D. LEASEHOLD IMPROVEMENTS: The term "Leasehold Improvements"
shall mean all improvement, additions, alterations and fixtures installed in
the Premises by Tenant at its expense which are not Trade Fixtures.
E. LENDER: The term "Lender" shall mean any beneficiary,
mortgagee, secured party, lessor, or other holder of any Security Instrument.
F. PRIVATE RESTRICTIONS: The term "Private Restrictions"
shall mean all recorded covenants, conditions and restrictions, reciprocal
easement agreements, and any other recorded instruments affecting the use of
the Premises as they may exist from time to time.
G. TRADE FIXTURES: The term "Trade Fixtures" shall mean
anything affixed to the Premises by Tenant at its expense for purposes of
trade, manufacture, ornament or domestic use (except replacement of similar
work or material originally installed by Landlord) which can be removed
without injury to the Premises unless such thing has, by the manner in which
it is affixed, become an integral part of the Premises; provided, however,
that all of Tenant's signs shall be Trade Fixtures regardless of how affixed
to the Premises.
15.13. MISCELLANEOUS: Should any provision of this Lease prove to be
invalid or illegal, such invalidity or illegality shall in no way affect,
impair or invalidate any other provision hereof, and such remaining
provisions shall remain in full force and effect. Time is of the essence
with respect to the performance of every provision of this Lease in which
time of performance is a factor. The captions used in this Lease are for
convenience only and shall not be considered in the construction or
interpretation of any provision hereof. Any executed copy of this Lease shall
be deemed an original for all purposes. This Lease shall, subject to the
provisions regarding assignment, apply to and bind the respective heirs,
successors, executors, administrators and assigns of Landlord and Tenant.
"Party" shall mean Landlord or Tenant, as the context implies. If Tenant
consists of more than one person or entity, then all members of Tenant shall
be jointly and severally liable hereunder. This Lease shall be construed and
enforced in accordance with the laws of the State of California. The language
in all parts of this Lease shall in all cases be construed as a whole
according to its fair meaning, and not strictly for or against either
Landlord or Tenant. When the context of this Lease requires, the neuter
gender includes the masculine, the feminine, a partnership or corporation or
joint venture, and the singular includes the plural. The terms "shall",
"will" and "agree" are mandatory. The term "may" is permissive. When a
party is required to do something by this Lease, it shall do so at its sole
cost and expense without right of reimbursement from the other party unless
specific provision is made therefor. Where Tenant is obligated not to
perform any act, Tenant is also obligated to use reasonable efforts to
restrain any others within its control from performing said act, including
agents, invitees, contractors, and subcontractors. Landlord shall not become
or be deemed a partner nor a joint venturer with Tenant by reason of the
provisions of this Lease.
15.14. TERMINATION BY EXERCISE OF RIGHT: If this Lease is terminated
pursuant to its terms by the proper exercise of a right to terminate
specifically granted to Landlord or Tenant by this Lease, then this Lease
shall terminate thirty (30) days after the date the right to terminate is
properly exercised (unless another date is specified in that part of the
Lease creating the right, in which event the date so specified for
termination shall prevail), the rent and all other charges due hereunder
shall be prorated as of the date of termination, and neither Landlord nor
Tenant shall
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have any further rights or obligations under this Lease except for those that
have accrued prior to the date of termination. This paragraph does not apply
to a termination of this Lease by Landlord as a result of a default by Tenant.
15.15. BROKERAGE COMMISSIONS: Tenant warrants that it has not had any
dealings with any real estate brokers, leasing agents or salesmen, or
incurred any obligations for the payment of real estate brokerage commissions
or finder's fees which would be earned or due and payable by reason of the
execution of this Lease other than to the Retained Real Estate Brokers.
Landlord shall be responsible for the payment of any commission owed pursuant
to a separate written commission agreement between Landlord and J.R. Parrish,
Inc. for the payment of the commission as a result of the execution of this
Lease.
15.16. ENTIRE AGREEMENT: This Lease constitutes the entire agreement
between the parties, and there are no binding agreements or representations
between the parties except as expressed herein. Tenant acknowledges that
neither Landlord nor Landlord's agent(s) has made any representation or
warranty as to (i) whether the Premises may be used for tenant's intended use
under existing Law or (ii) the suitability of the Premises or the Common Area
for the conduct of Tenant's business or the condition of any improvements
located thereon. Tenant expressly waives all claims for damage by reason of
any statement, representation, warranty, promise or other agreement of
Landlord or Landlord's agent(s), if any, not contained in this Lease or in
any addendum or amendment hereto. No subsequent change or addition to this
Lease shall be binding unless in writing and signed by the parties hereto.
15.17. RIGHT OF FIRST OFFER TO LEASE: If at any time and from time to
time during the Lease Term Landlord desires to lease all or any portion of
any buildings located on the Property, Landlord shall first give written
notice of such fact to Tenant (an "Offer to Lease"), which shall be
accompanied by the form of lease that Landlord intends to use for the
transaction and the following information regarding the basic business terms
of the transaction (the "Basic Business Terms"): (i) a description of the
premises to be leased; (ii) the term of the proposed lease; (iii) the
improvements Landlord is willing to construct or that it will require to be
constructed; (iv) the method of payment for such improvements; (v) the base
monthly rent for the term; (vi) additional rent to be paid by the tenant to
the extent not reflected in the form lease; (vii) the estimated commencement
date for the lease term; (viii) any options to extend the lease term and the
rent to be charged during any such extension periods; and (ix) any other
material business terms Landlord elects to specify.
A. Landlord shall lease to Tenant and Tenant shall lease form
Landlord the Premises identified in the Offer to Lease on the Basic Business
Terms stated in the Offer to Lease if: (i) the Premises offered for Lease in
the Offer to Lease consist of an area that is less than 14,000 square feet of
gross leasable area and Tenant notifies Landlord in writing of Tenant's
agreement to lease such Premises on the terms stated in the Offer to Lease
within thirty (30) days after receipt of the Offer to Lease in question; or
(ii) the Premises described in the Offer to Lease consist of an area that is
more than 14,000 square feet and Tenant notifies Landlord in writing of
Tenant's agreement to Lease such premises on the terms stated in the Offer to
Lease within fifteen (15) days after receipt of the Offer to Lease in
question. If Tenant so timely elects to lease the space so offered, Landlord
shall lease to Tenant and Tenant shall lease from Landlord such space on the
following terms:
(1) The Lease of such space shall be on the Basic
Business Terms stated in the Offer to Lease; provided, however, that Tenant's
obligation to pay rent shall not commence until the earlier of: (i) the date
any improvements that Landlord is to construct as set forth in the Basic
Business Terms have been substantially completed, subject to punchlist items;
or (ii) ninety (90) days after the space has been delivered to Tenant vacant
and ready for improvement work, if such improvement work is not to be
performed by Landlord.
(2) The lease of such premises shall be consummated by
the preparation and execution of a written lease, in the form and content of
the form of lease accompanying the Offer to Lease, except as modified to
incorporate the Basic Business Terms set forth in the Offer to Lease and as
expressly provided herein. The lease shall be executed by Landlord and Tenant
as soon as reasonably practicable after Tenant has made its election to
accept the Offer to Lease, but in no event later than forty-five (45) days
thereafter.
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B. If Tenant does not indicate in writing its agreement to
lease the premises offered on the terms contained in the Offer to Lease
within the time period specified in subparagraph 15.17A, then the following
shall apply:
(1) Landlord shall have the right to lease such premises
to any third party on the same Basic Business Terms set forth in the Offer to
Lease and such other terms as are contained in the form of lease included
with the Offer to Lease; provided, however, that Landlord may make any
changes to such form of Lease at the request of a prospective tenant to
induce it to lease such space from Landlord so long as such changes are
commercially reasonable and do not materially change the Basic Business Terms
set forth in the Offer to Lease, and such lease is executed within one
hundred twenty (120) days after the Offer to Lease is delivered to Tenant.
(2) If within one hundred twenty (120) days after the
Offer to Lease is delivered to Tenant, Landlord elects to lease the premises
in question on terms different than the Basic Business Terms stated in the
Offer to Lease, then Landlord shall give notice to Tenant of such election
setting forth the new terms upon which Landlord is willing to so lease the
premises in question (the "Amended Offer to Lease"). Tenant shall have the
right to lease the premises in question upon the terms stated in the Offer to
Lease, as modified by the Amended Offer to Lease, which right may be
exercised by delivering written notice of such election to exercise to
Landlord within five (5) days following delivery to Tenant of the Amended
Offer to Lease. If Tenant does not send written notice to Landlord of its
election to lease the premises in question upon the terms set forth in the
Offer to Lease, as modified by the Amended Offer to Lease, within said five
(5) day period, then Landlord may lease the premises in question to any third
party in accordance with the terms and conditions set forth in the Offer to
Lease, as modified by the Amended Offer to Lease; provided, however, that
Landlord may make any changes to the form of lease included in the Offer to
Lease or the Amended Offer to Lease at the request of a prospective tenant to
induce it to lease such space from Landlord so long as such changes are
commercially reasonable and do not materially change the Basic Business Terms
set forth in the Offer to Lease, as modified by the Amended Offer to Lease
and the lease is executed within sixty (60) days after the Amended Offer to
Lease is delivered to Tenant.
C. If Tenant is offered the opportunity to lease all or a
portion of any building on the Property and declines to exercise such right,
and if Landlord subsequently enters into a lease with a third party affecting
the space so offered to Tenant, the right of first offer contained in this
paragraph shall thereafter be subject and subordinate to any rights granted
to such third party tenant with respect to such space, or any other space in
the Property, including rights of first refusal, options to extend, and
options to expand.
D. If Landlord has delivered to Tenant a Offer to Lease and
Tenant has not elected to lease the premises offered on the terms contained
in the Offer to Lease, then if Landlord so requests, Tenant shall deliver to
Landlord or any prospective tenant a certificate or certificates stating
that: (i) Landlord has complied with the provisions of this paragraph 15.17
and may lease the premises in question pursuant to the Offer to Lease free of
any rights or claims of Tenant; or (ii) Landlord has not complied with the
provisions of this paragraph 15.17 and specifying the manner in which
Landlord has failed to so comply. Such certificate shall be delivered
promptly after request therefor but in no event not more than five (5) days
after request has been delivered to Tenant. Tenant's failure to deliver such
certificate within the required time period shall be deemed an admission upon
which any party may rely that Landlord has complied with the provisions of
this paragraph 15.17 and may lease the premises in question pursuant to the
terms of the Offer to Lease free of any rights or claims by Tenant.
E. Notwithstanding anything to the contrary contained in the
foregoing, tenant may not exercise its right to lease the space described in
the Offer to Lease, nor, at the option of Landlord, shall a new lease for
such space commence, unless Tenant demonstrates to Landlord's reasonable
satisfaction that tenant has sufficient creditworthiness to provide adequate
assurance of future performance of all of Tenant's obligations under the new
lease.
F. Within ten (10) days after receipt of written request
therefor from tenant, Landlord shall inform Tenant in writing of the
following with respect to all leases affecting the Property: (i) the
scheduled lease term expiration date; (ii) any options to extend (including
the
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<PAGE>
commencement and termination date of such options to extend); and (iii) such
other information as is reasonably requested by Tenant concerning the status
of leases then affecting the Property as it relates to determining when such
leases will terminate and space become available. In addition, Landlord
shall use reasonable efforts to promptly notify tenant of the availability of
space within the Property that results from events other than the natural
expiration of a lease term (E.G., termination of a lease resulting from a
tenant's default or negotiations regarding the rescission of a lease by
mutual consent).
G. The parties acknowledge that (i) paragraph 15.17 of the
Building A Lease contains substantially the same provisions as those set
forth in this paragraph 15.17, and (ii) it is their intention that there be
only one right of first offer to lease that is held and may be exercised by
only one person or entity. If Landlord complies with the provisions of
paragraph 15.17 of this Lease or paragraph 15.17 of the Building A Lease with
respect to a lease of space within the Property to a third party, Landlord
shall be deemed to have satisfied the requirements of both Leases with
respect to this subject. The parties further agree that the right of first
offer to lease set forth in this paragraph 15.17 and in paragraph 15.17 of
the Building A Lease may only be held by one entity who is FMC Corporation or
its successor. If Tenant concurrently assigns its interest in this Lease and
the Building A Lease to the same person or entity pursuant to an assignment
described by subparagraphs 14.1E(2) or (3), such assignment shall not affect
the provisions of this paragraph 15.17. However, if tenant assigns its
interest in this Lease without concurrently also assignment its interest in
the Building A Lease to the same person or entity pursuant to an assignment
described by subparagraphs 14.1E(2) or (3), then effective upon such
assignment the provisions of this paragraph 15.17 shall terminate and be of
no further force or effect. Notwithstanding the foregoing sentence, if the
Building A Lease has been terminated or if the provisions of paragraph 15.17
of the Building A Lease have terminated because of an assignment of the
tenant's interest in the Building A Lease, then any subsequent assignment by
Tenant of its interest in this Lease pursuant to an assignment described by
subparagraphs 14.1E(2) or (3) shall not cause the right of first offer to
lease created by this paragraph 15.17 to terminate. The rights created by
this paragraph 15.17 may not be assigned or otherwise transferred to any
third party except in connection with an assignment of all of Tenant's right,
title and interest in this Lease made in compliance with paragraph 14.1
hereof. A sublease shall not affect the rights granted by this paragraph
15.17; provided, however, that no subtenant of Tenant shall have the right to
directly lease the Offered Space from Landlord (although Tenant may exercise
the right of first offer to lease and then sublease to any existing subtenant
pursuant to the terms of the new lease).
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease with
the intent to be legally bound thereby, to be effective as of the
Commencement Date of this Lease.
LANDLORD: TENANT:
THE EQUITABLE LIFE ASSURANCE SOCIETY FMC CORPORATION,
OF THE UNITED STATES, a New York a Delaware corporation
corporation
By: /s/ James Piane By: /s/ Charles Fink
------------------------------ -----------------------------
Printed Printed
Name: James Piane Name: Charles Fink
---------------------------- ---------------------------
Title: Attorney in Fact Title: V.P. & Group Manager
-------------------------- --------------------------
By: By:
------------------------------ -----------------------------
Printed Printed
Name: Name:
------------------------------ ---------------------------
Title: Title:
------------------------------ ---------------------------
Dated: Dated:
------------------------------ --------------------------
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If Tenant is a CORPORATION, the authorized officers must sign on behalf of the
corporation and indicate the capacity in which they are signing. The Lease must
be executed by the chairman of the board, president or vice-president AND the
secretary, assistant secretary, the chief financial officer or assistant
treasurer, UNLESS the Bylaws or resolution of the Board of Directors shall
otherwise provide, in which event the Bylaws or a certified copy of the
resolution, as the case may be, must be attached to this Lease.
<PAGE>
EXHIBIT "A"
-----------
[MAP]
[MAP]
<PAGE>
EXHIBIT "B"
PLANS AND SPECIFICATIONS
FOR BUILDING "C"
Plans and Specifications Prepared by DES
- ----------------------------------------
Sheet Title Current Date
- ----- ------- ------------
A-1 Title Sheet 6-9-89
A-2 Bldg. "C" - First Floor Demolition Plan 6-9-89
A-3 Bldg. "C" - Second Floor Demolition Plan 6-5-89
A-4 Bldg. "C" - First Floor Plan 6-9-89
A-5 Bldg. "C" - Second Floor Plan 6-9-89
A-6 Bldg. "C" - Third Floor Plan 6-9-89
A-7 Bldg. "C" - First Floor
Reflected Ceiling Plan 6-9-89
A-8 Bldg. "C" - Second Floor
Reflected Ceiling Plan 6-9-89
A-9 Bldg. "C" - Third Floor
Reflected Ceiling Plan 6-9-89
A-10 Bldg. "C" - First Floor Finish Plan 6-9-89
A-11 Bldg. "C" - Second Floor Finish Plan 6-9-89
A-12 Bldg. "C" - Third Floor Finish Plan 6-9-89
A-13 Bldg. "C" - First Floor
Electrical/Telephone Plan 6-9-89
A-14 Bldg. "C" - Second Floor
Electrical/Telephone Plan 6-9-89
A-15 Bldg. "C" - Third Floor
Electrical/Telephone Plan 6-9-89
A-16 Details, Interior Elevations, Enlarged
Shower Plan, Door & Window Schedule 6-5-89
A-17 Details 6-5-89
A-18 Structural Details, Architectural Details 6-9-89
<PAGE>
Plans and Specifications Prepared by Hague-Richards Associates, Ltd.
- --------------------------------------------------------------------
Sheet Title Current Date
- ----- ------- ------------
DA-1 Lobby Plans
Reflected Ceiling Plans, Elevations, Details 6-9-89
D-1 Third Floor - Architectural Plan Elevations 6-9-89
D-2 Third Floor - Reflected Ceiling Plan 6-9-89
D-3 Third Floor - Elevations 6-9-89
D-4 Third Floor - Details 6-9-89
D-5 Third Floor - Details 6-9-89
D-6 Third Floor - Details 6-9-89
D-9 Third Floor - Finish Legend
Room Finish Schedule 6-9-89
Plans/Specs
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<PAGE>
EXHIBIT C
INTERIOR IMPROVEMENT AGREEMENT
(Building C)
This Interior Improvement Agreement is made part of that Lease dated
for reference purposes only June 1, 1989 (the "Lease"), by and between THE
EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNTIED STATES, a New York corporation
("Landlord") and FMC Corporation, a Delaware corporation ("Tenant") of
approximately 86,785 square feet of gross leasable area located in that
building commonly known as Building C of Airport Technology Park, 2830 De La
Cruz Boulevard, Santa Clara, California.
Landlord and Tenant agree that the following terms are hereby added to
the Lease:
1. DEFINITIONS: As used herein and in the Lease, the
following terms shall have the following meanings:
A. APPROVED PLANS: The term "Approved Plans" shall mean those
final plans, specifications and working drawings described by Exhibit "B" to
the Lease.
B. INTERIOR IMPROVEMENTS: The term "Interior Improvements"
shall mean those improvements described by the Approved Plans that Tenant has
the right to construct in the Premises pursuant to paragraph 2 hereof.
C. INTERIOR IMPROVEMENT COSTS: The term "Interior Improvement
Costs" shall mean the following: (i) the total amount due pursuant to the
construction contract entered into by Tenant pursuant to subparagraph 2B
hereof to construct the Interior Improvements; (ii) the cost of all
governmental approvals, permits and fees required as a condition to the
construction of the Interior Improvements; (iii) all utility connection or
use fees; (iv) fees of architects, designers, or engineers for services
rendered in connection with the design and construction of the Interior
Improvements; (v) the cost of payment and performance bonds obtained to
assure completion of the Interior Improvements; and (vi) relocation and
moving expenses incurred by Tenant in connection with Tenant's move to the
Premises. There shall be excluded from Interior Improvement Costs the
following, to the extent not included in the construction contract with the
Prime Contractor referred to in subparagraph 2B hereof: (i) any fee for
Landlord's review of Tenant's plans for the Interior Improvements; (ii)
temporary electricity used during the construction period in connection with
the construction of the Interior Improvements; and (iii) any fees charged by
Tenant or its agents or employees for supervising/reviewing the construction
of the Interior Improvements (excluding overhead and profits of prime
contractor).
D. LANDLORD'S INTERIOR IMPROVEMENT ALLOWANCE: The term
"Landlord's Interior Improvement Allowance" shall mean the maximum amount
Landlord is required to spend toward the payment of the Interior Improvement
Costs, which amount is equal to the product obtained by multiplying (i)
Twenty-One Dollars ($21.00) per square foot by (ii) the Premises Gross
Leasable Area (expressed in square feet) of 86,785 square feet, for a total
of One Million Eight Hundred Twenty-Two Thousand Four Hundred Eighty-Five
Dollars ($1,822,485).
E. SUBSTANTIALLY COMPLETED: The Interior Improvements shall
be deemed to be "Substantially Completed" when (i) Prime Contractor has
issued its written certificate stating that such improvements have been
substantially completed in accordance with the Approved Plans therefor, (ii)
electrified office partitions are installed, and (iii) the Building
Department of the City of Santa Clara has completed its final inspection of
such improvements and has "signed off" the building inspection card approving
such work as complete.
F. PRIME CONTRACTOR: The term "Prime Contractor" shall mean
Alacon Construction, Inc.
<PAGE>
2. CONSTRUCTION OF INTERIOR IMPROVEMENTS: Tenant shall have the
right to construct the Interior Improvements in accordance with the
following:
A. Tenant warrants that the Interior Improvements shall be
constructed in a good and workmanlike manner substantially in accordance with
the Approved Plans (as modified by any change orders approved by Landlord and
Tenant pursuant to paragraph 3 hereof) and all Laws. All materials and
equipment furnished shall be fully paid for and be free of liens, chattel
mortgages, and security interests of any kind.
B. The Interior Improvements shall be constructed by Prime
Contractor pursuant to a construction contract between Tenant and Prime
Contractor. Landlord shall have the right to review such form of construction
contract before it is executed. Once the construction contract between Prime
Contractor and Tenant has been executed, Tenant shall not materially amend,
modify or alter the responsibilities of Prime Contractor thereunder without
Landlord's written consent, except for change orders approved pursuant to
paragraph 3 hereof. In purposes connection with the execution of such
construction contract, Tenant shall use reasonable efforts to provide that
all construction or equipment warranties or guarantees obtained by Tenant
shall, to the extent obtainable, provide that such warranties and guarantees
obtained by tenant shall, to the extent obtainable, provide that such
warranties and guaranties shall also run for the benefit of Landlord. Upon
reasonable written advance request of Landlord, Tenant shall inform Landlord
of all written construction and equipment warranties existing in favor of
Tenant which affect the Interior Improvements. Tenant shall cooperate with
Landlord in enforcing such warranties and in bringing any suit that may be
necessary to enforce liability with regard to any defects.
C. Tenant shall use reasonable efforts to commence
construction of the Interior Improvements as soon as reasonably practicable,
and shall thereafter continuously prosecute such construction to completion.
D. Tenant shall properly obtain, comply with and keep in
effect all permits, licenses and other governmental approvals which are
required to be obtained form governmental bodies in order to construct the
Interior Improvements. Upon reasonable written advance request, Tenant shall
promptly deliver copies of all such permits, licenses and approvals to
Landlord.
E. Tenant shall be solely responsible for all aspects of the
construction of the Interior Improvements, including the development and
design thereof as set forth in the Approved Plans, the supervision of the
work of construction, the qualification, financial condition, and performance
of all architects, engineers, contractors, material suppliers, consultants,
and the accuracy of all applications for payment and the proper application
of all disbursement. Landlord is not obligated to supervise, inspect or
inform Tenant or any third party of any aspect of the construction of the
Interior Improvements. Any inspection or review by Landlord is to determine
whether Tenant is properly discharging its obligations to Landlord and may
not be relied upon by tenant or any third party. Landlord owes no duty of
care to Tenant or any third party to protect against or to inform Tenant or
any third party of, any negligence, faulty, inadequate or defective design or
construction of the Interior Improvements.
3. CHANGES TO APPROVED PLANS FOR INTERIOR IMPROVEMENTS: Neither
Landlord nor Tenant shall have the right to order extra work or change orders
with respect to the Approved Plans or the construction of the Interior
Improvements without the prior written consent of the other. All extra work
or change orders requested by either Landlord or Tenant shall be made in
writing, shall specify the amount of delay or the time saved resulting
therefrom, shall specify any added or reduced cost resulting therefrom, and
shall become effective and a part of the Approved Plans once approved in
writing by both parties. Notwithstanding the foregoing, tenant's failure to
obtain Landlord's consent to an extra work or change order shall not be an
Event of Tenant's Default if Landlord would have been required to consent to
the change pursuant to the terms hereof.
-2-
<PAGE>
4. PAYMENT OF INTERIOR IMPROVEMENT COSTS: The Interior Improvement
Costs and certain noise attenuating improvement costs shall be paid as
follows:
A. Landlord and Tenant desire to improve the Premises so that
the following maximum interior noise levels are achieved for the types of
office space identified: 55 dBA for executive offices and conference rooms;
60 dBA for staff offices; and 65 dBA for sales and secretarial offices. To
achieve these goals Landlord and Tenant agree to contribute to the cost of
improvements as follows. Tenant at its sole cost and expense shall install
(i) extra sheetrock in the roof and sound attenuating ceiling tiles in third
floor ceilings, and (ii) sheetrock beneath the structural ceiling and above
the suspended ceilings of all the second and third floor offices, and
sprinklers as required by the City of Santa Clara, along with caulking
required in connection therewith. Landlord at its sole cost and expense shall
cause the sliding glass doors on the second and third floor to be removed and
replaced with double pane sound attenuating glass windows. In the event upon
completion of all of the work described above in this subparagraph A, the
desired noise levels are not achieved, Landlord agrees to pay for the cost of
additional improvements designed to reduce noise levels; provided Landlord
shall not be required to contribute more than One Hundred Fifty Thousand
Dollars ($150,000) for such additional improvements.
B. In addition to those contributions of Landlord described in
subparagraph A above, Landlord shall contribute to the payment of all
Interior Improvement Costs up to an amount equal to Landlord's Interior
Improvement Allowance. If any part of the Landlord's Interior Improvement
Allowance is not used by tenant, or Tenant does not qualify for a
disbursement pursuant to the provisions of this paragraph 4 with the result
that the entire allowance is not disbursed, there shall nonetheless be no
adjustment in the Base Monthly Rent due from tenant pursuant to the Lease.
If the Interior Improvement Costs exceed the maximum amount of Landlord's
required contribution, then Tenant shall pay the entire amount of such excess.
C. Landlord and Tenant acknowledge that the construction
contract Tenant will enter into for the construction of the Interior
Improvements will provide for progress payments to Prime Contractor in stages
as the work is completed. Landlord shall pay the full amount of each such
progress payment until all of Landlord's Interior Improvement Allowance is
expended. Thereafter, if the cost of the Interior Improvements exceeds the
amount of Landlord's required contribution for such improvements, then Tenant
shall pay the rest of the progress payments due to Prime Contractor.
Landlord shall pay any progress payment due from Landlord to Prime Contractor
within thirty (30) days after satisfaction of all of the conditions precedent
to such progress payment by Landlord that has been requested by tenant which
are set forth in subparagraph 4D and 4E hereof. If Landlord fails to pay any
such amount when due, then Tenant may (but without the obligation to do so)
advance such funds on Landlord's behalf, and Landlord shall be obligated to
reimburse Tenant for the amount of funds so advanced on its behalf and all
costs incurred by Tenant in so doing, including all interest at the Agreed
Interest Rate.
D. If Tenant desires to obtain a disbursement from Landlord
from the Landlord's Interior Improvement Allowance for the purpose of paying
Interior Improvement Costs, Tenant shall submit to Landlord a written
itemized statement, signed by Tenant (an "Application for Payment") setting
forth the following: (i) a description of the construction work performed,
materials supplied and/or costs incurred or due for which disbursement is
requested; and (ii) the total amount incurred, expended and/or due for each
requested item less prior disbursements; and (iii) the amount due to be paid
by Landlord from Landlord's Interior Improvement Allowance.
E. Landlord shall have no obligation to make any disbursement
from Landlord's Interior Improvement Allowance at any time that there is a
Continuing Tenant Default (as defined in paragraph 1.14 of the Lease), or
there has occurred an event, omission or failure of conditions which would
constitute an Event of Tenant's Default (as defined in paragraph 13.1 of the
Lease) after notice or lapse of time, or both. In addition, Landlord shall
have the right to condition any disbursement from Landlord's Interior
Improvement Allowance
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<PAGE>
upon Landlord's receipt and approval of the following with respect to each
Application for Payment:
(1) The form of Application for Payment and the
sufficiency of the information contained therein;
(2) Bills and invoices and any other documents evidencing
the total amount expended, incurred, or due for any requested contribution to
Interior Improvement Costs;
(3) Evidence of Tenant's use of lien releases acceptable
to Landlord for payments or disbursements to any contractor, subcontractor,
materialmen, supplier, or lien claimant
(4) Architects, inspectors and/or engineer's periodic
certification and the stage of construction that has been completed and its
conformance to the Approved Plans based upon any such architects, inspectors
and/or engineers periodic, physical inspections of the Premises and Interior
Improvements;
(5) Waivers and releases of mechanics' lien, stop notice
claim, equitable lien claim or other lien claim rights or lien bonds in form
and amount reasonably satisfactory to Landlord;
(6) Evidence of Tenant's compliance with its obligations
pursuant to paragraph 2 hereof;
(7) Any other document, requirement, evidence or
information that Landlord may reasonably request pursuant to any provision of
this Interior Improvement Agreement.
F. Tenant agrees that all disbursements made to Tenant by
Landlord from Landlord's Interior Improvement Allowance shall be used only
for the payment of Interior Improvement Costs and shall be applied as set
forth, and for the purposes described in, the relevant Application for
Payment based upon which the disbursement is made.
5. PUNCHLIST: Within a reasonable period of time after the
Interior Improvements are Substantially Completed, Landlord, Tenant and
Tenant's architect shall together walk through and inspect such improvements
so completed, using reasonable efforts to discover all uncompleted or
defective construction. After such inspection has been completed. Tenant
shall use reasonable efforts to complete and/or repair all "punch list" items
within thirty (30) days thereafter.
6. CONSTRUCTION WARRANTY FOR THE INTERIOR IMPROVEMENTS: Tenant
warrants that the construction of the Interior Improvements will be performed
in accordance with the Approved Plans therefor and all Laws in a good and
workmanlike manner, and that all materials and equipment furnished will
conform to said plans and shall be new and otherwise of good quality. Tenant
shall promptly commence the cure of any breach of such warranty and complete
such cure with diligence at Tenant's cost and expense.
7. OWNERSHIP OF THE INTERIOR IMPROVEMENTS: All of the Interior
Improvements which are constructed with funds of Landlord shall become the
property of Landlord upon installation and shall not be removed or altered by
Tenant. Any part of the Interior Improvements which are constructed by
Landlord with funds of Tenant shall become the property of Tenant upon
installation and Tenant shall have the right to depreciate and claim and
collect investment tax credits in such improvements; provided, however, that
(i) Tenant shall not remove or alter such improvements during the term of the
Lease; (ii) such improvements shall be surrendered to Landlord, and title to
such improvements shall best in Landlord, at the expiration or earlier
termination of the Lease Term; and (iii) in no event shall Landlord have any
obligation to pay Tenant for the cost or value of such improvements.
Notwithstanding the foregoing, Tenant shall have the right to remove only the
following kinds of Interior Improvements so long as it repairs all damage
caused by the installation thereof and returns the Premises to the condition
existing
-4-
<PAGE>
prior to the installation of such Interior Improvements: (i) built-in
cabinets, file drawers and bookcases; (ii) computer room air conditioning;
(iii) canteen equipment; (iv) office cubicle systems; and (v) ornamental
statutes. If both Landlord and Tenant contribute to the cost of constructing
the Interior Improvements, Landlord and Tenant shall agree in writing which
of such improvements are to be constructed using Landlord's funds (and
therefore are Landlord's property) and which of them are to be installed with
Tenant's funds (and therefore are Tenant's property during the Lease Term).
8. DOCUMENTS: Within fifteen (15) days after receiving a written
request from Landlord, Tenant shall deliver to Landlord the most current
version of the following: (i) a complete and correct list showing the name,
address and telephone number of each contractor, subcontractor and principal
materials supplier engaged in connection with the construction of the
Interior Improvements, and the total dollar amount of each contract and
subcontract (including any changes) together with the amounts paid through
the date of the list; (ii) true and correct copies of all executed contracts
and subcontracts identified in the list described in the immediately
preceding clause, including any changes; (iii) a construction progress
schedule; and (iv) any update to any item described in the preceding clauses
which Tenant may have previously delivered to Landlord. Tenant expressly
authorizes Landlord to contact any contractor, subcontractor or materials
supplier to verify any information disclosed in accordance with this
paragraph. Within sixty (60) days after the Interior Improvements have been
Substantially Completed, Tenant shall cause the following to be delivered to
Landlord:
A. Statements from Tenant's architect in form reasonably
satisfactory to Landlord certifying that the Interior Improvements have been
completed substantially in accordance with the Approved Plans and all Laws;
B. A copy of all permanent certificates of occupancy and other
governmental approvals which may be received by Tenant with respect to the
construction of the Interior Improvements;
C. One (1) copy of the Approved Plans, one (1) copy of each extra
work or change order, and one (1) copy of any "As-Built" plans and
specifications for the Interior Improvements, which Tenant may have elected
to cause to be prepared;
D. One (1) copy of all warranties, guaranties, and operational
manuals relating to the Interior Improvements;
E. A copy of a recorded notice of completion relating to the
construction of the Interior Improvements.
9. INDEMNITY: Tenant agrees to indemnify and hold Landlord harmless
from and against all liabilities, claims, actions, damages, costs and
expenses (including attorneys' fees incurred by Landlord in protecting its
interest from the following) arising out of or resulting from construction of
the Interior Improvements, including any mechanics' liens, defective
workmanship or materials and any claim or cause of action of any kind by any
party that Landlord is liable for any act or omission committed or made by
Tenant, its agents, employees, or contractors in connection with the
construction of the Interior Improvements.
10. ROOF AND OTHER WORK: Landlord agrees to cause the structural
support of the roof mounted mechanical units on the Premises to be inspected
by Cabak Randall Jasper Griffiths Associates. If as a result of such
inspection, remedial work is recommended, Landlord shall cause the same to be
performed by Prime Contractor at Landlord's expense, as soon as reasonably
practicable.
Landlord agrees to replace, at Landlord's expense, the broken window on
the east side, south end of the second floor of the Premises.
11. EFFECT OF AGREEMENT: In the event of any inconsistency between
this Agreement and the Lease, the terms of this Agreement shall prevail.
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<PAGE>
AS TENANT: AS LANDLORD:
- ---------- ------------
FMC CORPORATION, THE EQUITABLE LIFE ASSURANCE
a Delaware corporation SOCIETY OF THE UNITED STATES,
a New York corporation
By: /s/ Charles Fink By: /s/ James Piane
--------------------------- ---------------------------
Its: V.P. & Group Manager Its: Attorney in Fact
--------------------------- ---------------------------
Dated: June 23, 1989 Dated: 6-23-89
----------------------- ------------------------
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<PAGE>
EXHIBIT D
RECORDING REQUESTED BY:
The Equitable Life Assurance
Society of the Untied States
WHEN RECORDED RETURN TO:
Morrison & Foerster
345 California Street
San Francisco, CA 94104-2105
Att'n: Leslie M. Browne
--------------------------------------------------------------------------
(Space above this lien for Recorder's use)
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
NOTICE: THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
RESULTS IN YOUR LEASEHOLD ESTATE IN THE PROPERTY BECOMING
SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER
OR LATER SECURITY INSTRUMENT.
THIS AGREEMENT is entered into as of the ______ day of
_____________, 1986, by and between THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNTIED STATES, a New York corporation (the "Beneficiary"), TELEDYNE
INDUSTRIES, INC., a California corporation (the "Lessee") and AIRPORT
TECHNOLOGY ASSOCIATES, a California general partnership (collectively the
"Lessor").
W I T N E S S E T H
WHEREAS, Lessee has entered into a certain lease dated June 30,
1986 (the "Lease"), with Lessor covering certain space (the "Premises")
located in and upon the real property described in Exhibit A attached hereto
(the "Property");
WHEREAS, Beneficiary is the holder of a first mortgage loan (the
"Loan") to Lessor in the amount of Thirty One Million Two Hundred Thousand
and/no 100 Dollars ($31,200,000.00) which is secured by a first lien
Construction and Permanent Deed of Trust, Security Agreement and Fixture
Filing with Assignment of Rents (the "Deed of Trust") covering the Property;
WHEREAS, the parties hereto desire expressly to confirm the
subordination of the Lease to the lien of the Deed of Trust, it being a
requirement by Beneficiary that the lien and charge of the Deed of Trust be
unconditionally and at all times prior and superior to the leasehold
interests and estates created by the Lease; and
WHEREAS, Lessee has requested that Beneficiary agree not to disturb
Lessee's possessory rights in the Premises in the event beneficiary should
foreclose the Deed of Trust, provided that Lessee is not in default under the
Lease and provided that Lessee attorns to beneficiary or the purchaser at any
foreclosure or Trustee's sale of the Property.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and of other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
<PAGE>
1. Notwithstanding anything to the contrary set forth in the
Lease, the Lease and the leasehold estate created thereby and all of Lessee's
rights thereunder shall be and shall at all times remain subject, subordinate
and inferior to the Deed of Trust and the lien thereof and all rights of
Beneficiary thereunder and to any and all renewals, modifications,
consolidations, replacements and extensions thereof.
2. Lessee hereby declares, agrees and acknowledges that:
a. Beneficiary would not have agreed to recognize the Lease
without this Agreement; and
b. Beneficiary, in making disbursements pursuant to the
agreements evidencing and securing the Loan, is under no obligation or duty
to oversee or direct the application of the proceeds of such disbursements
and such proceeds may be used by Lessor for purposes other than improvement
of the premises.
3. In the event of foreclosure of the Deed of Trust, or upon a
sale of the property encumbered thereby pursuant to the Trustee's power of
sale contained therein, or upon a transfer of said property by deed in lieu
of foreclosure, then so long as Lessee is not in default under any of the
terms, covenants, or conditions of the Lease, the Lease shall continue in
full force and effect as a direct lease between the succeeding owner of the
Property and Lessee, upon and subject to all of the terms, covenants and
conditions of the Lease for the balance of the term of the Lease. Lessee
hereby agrees to attorn to and accept any such successor owner as landlord
under the Lease, and to be bound by and perform all of the obligations
imposed by the Lease, and Beneficiary or any such successor owner of the
Property will not disturb the possession of Lessee, and will be bound by all
of the obligations imposed by the Lease upon the landlord thereunder;
provided, however, that the Beneficiary, or any purchaser at a trustee's or
sheriff's sale or any successor owner of the Property shall not be:
a. liable for any act or omission of a prior landlord
(including the Lessor); or
b. subject to any offsets or defenses which the Lessee might
have against any prior landlord (including the Lessor); or
c. bound by any rent or additional rent which the Lessee
might have paid in advance to any prior landlord (including the Lessor) for a
period in excess of one month; or
d. bound by any agreement or modification of the Lease made
without the written consent of the Beneficiary; or
e. liable or responsible for or with respect to the
retention, application and/or return to Lessee of any security deposit paid
to any prior lessor (including the Lessor), whether or not still held by such
prior lessor, unless and until beneficiary or such other purchaser has
actually received for its own account as lessor the full amount of such
security deposit.
Beneficiary acknowledges that it is presently a general partner in
Lessor and that the provisions of this Agreement shall not affect any
obligations it may have under the Lease in its capacity as general partner of
Lessor.
4. Upon the written request of either Beneficiary or Lessee to
the other given at the time of a foreclosure, trustee's sale or deed in lieu
thereof, the parties agree to execute a lease of the Premises upon the same
terms and conditions as the Lease between the Lessor and Lessee, which lease
shall cover any unexpired term of the Lease existing prior to such
foreclosure, trustee' sale or conveyance in lieu of foreclosure.
5. Lessee from and after the date hereof, in the event of any act
or omission by Lessor which would give Lessee the right, either immediately
or after the lapse of time, to terminate the Lease or to claim a partial or
total eviction or to offset against the rental due under the Lease any amount
due Lessee as a result of a breach by Lessor, will not exercise any such
-2-
<PAGE>
right: (a) until it has given written notice of such act to Beneficiary; and
(b) until the same period of time as is given to Lessor under the Lease to
cure such act or omission shall have elapsed following such giving of notice
to beneficiary and following the time when Beneficiary shall have become
entitled under the Deed of Trust to remedy the same.
6. Lessor, as landlord under the Lease and trustor under the Deed
of Trust, agrees for itself and its heirs, successors and assigns, that: (a)
this Agreement does not (i) constitute a waiver by Beneficiary of any of its
rights under the Deed of Trust, and/or (ii) in any way release Lessor from
its obligation to comply with the terms, provisions, conditions, covenants,
agreements and clauses of the Deed of Trust; (b) the provisions of the Deed
of Trust remain in full force and effect and must be complied with by Lessor;
and (c) in the event of a default under the Deed of Trust, Lessee may pay all
rent and all other sums due under the Lease to beneficiary as provided in
this Agreement.
7. Lessee acknowledges that it has notice that the Lease and the
rent and all other sums due thereunder have been assigned or are to be
assigned to Beneficiary as security for the Loan secured by the Deed of
Trust. In the event that Beneficiary notifies Lessee in writing of a default
under the Deed of Trust and demands that Lessee pay its rent and all other
sums due under the Lease to Beneficiary, Lessee agrees that it will honor
such demand and pay its rent and all other sums due under the Lease directly
to the Beneficiary or as otherwise required pursuant to such notice.
8. Any provision of this Agreement to the contrary
notwithstanding, beneficiary shall have no obligation or incur any liability
with respect to the erection and completion of the building in which the
Premises are located or for completion of the Premises or any improvements
for Lessee's use and occupancy.
9. Lessee from and after the date hereof shall send a copy of any
notice or statement under the Lease to Beneficiary at the same time such
notice or statement is sent to the Lessor under the Lease.
10. All notices hereunder shall be deemed to have been duly given
if mailed by United States registered or certified mail, with return receipt
requested, postage prepaid to beneficiary at the following address (or at
such other address as shall be given in writing by Beneficiary to the Lessee)
and shall be deemed complete upon any such mailing:
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
c/o Equitable Real Estate Management, Inc.
1 Market Plaza, 1900 Steuart Street Tower
San Francisco, CA 94105
Attention: Senior Vice President
with a copy to: Mr. Richard Dolson, Senior Vice President
EQUITABLE REAL ESTATE INVESTMENT MANAGEMENT, INC.
3414 PEACHTREE ROAD NE, SUITE 1405
ATLANTA, GEORGIA 30326-1162
11. This Agreement supersedes any inconsistent provisions of the
Lease.
12. Nothing contained in this Agreement shall be construed to
derogate from or in any way impair or affect the lien and charge or
provisions of the Deed of Trust, except as specifically set forth herein.
13. This Agreement shall inure to the benefit of the parties
hereto, their successors and permitted assigns; provided however, that in the
event of the assignment or transfer of the interest of Beneficiary, all
obligations and liabilities of Beneficiary under this Agreement shall
terminate, and thereupon all such obligations and liabilities shall be the
responsibility of the party to whom beneficiary's interest is assigned or
transferred; and provided
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<PAGE>
further that the interest of Lessee under this Agreement may not be assigned
or transferred without the prior written consent of Beneficiary.
14. Lessee agrees that this Agreement satisfies any condition or
requirement in the Lease relating to the granting of a non-disturbance
agreement.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first set forth above.
NOTICE: THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
CONTAINS A PROVISION WHICH ALLOWS THE PERSON OBLIGATED ON THE LEASE
TO OBTAIN A LOAN, A PORTION OF WHICH MAY BE EXPENDED FOR OTHER
PURPOSES THAN IMPROVEMENT OF THE PROPERTY.
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
a New York corporation
"Beneficiary"
By
------------------------------
Printed
Name: Richard B. Duffy
----------------------------
Title Assistant Secretary
----------------------------
TELEDYNE INDUSTRIES, INC.
a California corporation
"Lessee"
By
-------------------------------
Printed
Name
-----------------------------
Title
----------------------------
AIRPORT TECHNOLOGY PARK ASSOCIATES,
a California general partnership
"Lessor"
By Birstaf II,
a California partnership,
General Partner
By
------------------------------
Hudson R. Staffield,
a general partner of
Birstaf II
-4-
<PAGE>
By Birtcher Pacific II
a California general partnership,
a general partner of
Birstaf II
By
--------------------------------
Printed
Name:
-----------------------------
Title
-----------------------------
By The Equitable Life Assurance
Society of the United States,
a New York corporation,
General Partner
By
--------------------------------
Printed
Name Richard B. Duffy
------------------------------
Title Assistant Secretary
------------------------------
IT IS RECOMMENDED THAT PRIOR TO THE EXECUTION OF THIS
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT, THE PARTIES CONSULT
WITH THEIR ATTORNEYS WITH RESPECT THERETO.
-5-
<PAGE>
STATE OF )
)ss.
COUNTY OF )
On this ____ day of ____________, in the year 1986, before me, the
undersigned, a Notary Public in and for said State, personally appeared
Richard B. Duffy, personally known to me, or proved to me on the basis of
satisfactory evidence, to be the person who executed the within instrument as
Assistant Secretary, on behalf of The Equitable Life Assurance Society of the
United States, a New York corporation, the corporation therein named, and
acknowledge to me that such corporation executed the within instrument
pursuant to its by-laws or to a resolution of its board of directors.
WITNESS my hand and official seal.
-------------------------------------------
NOTARY PUBLIC
STATE OF )
)ss.
COUNTY OF )
On this ____ day of ____________, in the year 1986, before me, the
undersigned, a Notary Public in and for said State, personally appeared
_________________, personally known to me, or proved to me on the basis of
satisfactory evidence, to be the person who executed the within instrument as
_____________________, on behalf of Teledyne Industries, Inc., a California
corporation, the corporation therein named, and acknowledge to me that such
corporation executed the within instrument pursuant to its by-laws or to a
resolution of its board of directors.
WITNESS my hand and official seal.
-------------------------------------------
NOTARY PUBLIC
<PAGE>
STATE OF )
)ss.
COUNTY OF )
On this ____ day of ____________, in the year 1986, before me, the
undersigned, a Notary Public in and for said State, personally appeared
Hudson R. Staffield, personally known to me, or proved to me on the basis of
satisfactory evidence, to be the person who executed the within instrument as
a general partner of Birstaf II, a California partnership, and acknowledged
to me that Birstaf II is a general partner of Airport Technology Park
Associates, the California general partnership that executed the within
instrument, and that Birstaf II executed the same as a general partner of
Airport Technology Park Associates.
WITNESS my hand and official seal.
-------------------------------------------
NOTARY PUBLIC
STATE OF )
)ss.
COUNTY OF )
On this ____ day of ____________, in the year 1986, before me, the
undersigned, a Notary Public in and for said State, personally appeared
_____________________________, personally known to me, or proved to me on the
basis of satisfactory evidence, to be the person who executed the within
instrument as the __________________ of Birtcher Pacific II, a California
general partnership, and acknowledged to me that Birtcher Pacific II is a
general partner of Birstaf II, a California partnership, that Birstaf II is a
general partner of Airport Technology Park Associates, the California general
partnership that executed the within instrument, that Birtcher Pacific II
executed the same as a general partner of Birstaf II, that Birstaf II
executed the same as a general partner of Airport Technology Park Associates,
and that Airport Technology Park Associates executed the same.
WITNESS my hand and official seal.
-------------------------------------------
NOTARY PUBLIC
-2-
<PAGE>
STATE OF )
)ss.
COUNTY OF )
On this ____ day of ____________, in the year 1986, before me, the
undersigned, a Notary Public in and for said State, personally appeared
Richard B. Duffy, personally known to me, or proved to me on the basis of
satisfactory evidence, to be the person who executed the within instrument as
the Assistant Secretary of The Equitable Life Assurance Society of the United
States, a New York corporation, and acknowledge to me that The Equitable Life
Assurance Society of the United States is a general partner of Airport
Technology Park Associates, the California general partnership that executed
the within instrument, and that The Equitable Life Assurance Society of the
United States executed the same as a general partner of Airport Technology
Park Associates.
WITNESS my hand and official seal.
-------------------------------------------
NOTARY PUBLIC
-3-
<PAGE>
LEASE AGREEMENT
1. PARTIES. The parties to this Lease Agreement (the "Lease") dated
May 23, 1979 are DEVCON INVESTMENT CO., a limited partnership organized under
the laws of the State of California (hereinafter referred to as "Landlord")
and FMC CORPORATION, a Delaware Corporation (hereinafter referred to as
"Tenant").
2. PROPERTY LEASED
A. PREMISES. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord upon the terms and conditions as set forth herein the
following property (hereinafter referred to as the "Premises"):
(1) SPACE. Approximately 48,666 square feet of space to be
contained within the concrete tilt-up building shown as outlined in red in
Exhibit A of this lease, together with exclusive rights over the parking
areas shown as marked, on exhibit A and non-exclusive rights of ingress and
egress over the common areas of the land.
(2) IMPROVEMENTS. The improvements to be constructed on the
Land as set forth in Paragraph 2B(1) "Improvements" below (the
"Improvements").
B. IMPROVEMENTS
(1) PLANS AND SPECIFICATIONS. Landlord agrees to construct
the building and appurtenances set forth in the plans and specifications
attached hereto as Exhibit "B" and to construct the Tenant interiors
(described in Exhibit "C") as directed by the Tenant. In addition to the
basic interior plan as shown and described in Exhibit C of this lease,
Landlord agrees that Tenant shall be allowed an additional amount of $44,000
which amount or portion thereof shall be used for additional interior
improvements. Such additional monies shall at the direction of Tenant, be
used for such general purpose improvements as interior partitioning and
doors, additional electrical and plumbing work, or additional HVAC work. In
the event that Tenant elects to have Landlord expend a portion or all of such
additional allowance, such amounts as are expended shall be amortized over a
7 year period at an interest rate of 10%, paid monthly as
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additional rent. In the event that Tenant elects to exercise its second
option to renew the term of this lease as provided herein, the additional
(amortized amount) rental as herein calculated shall be added to the monthly
installment for purposes of calculating the increase in such monthly
installment to be paid during the 2nd option period. Costs of additional
Tenant interiors shall include all direct and indirect expenses relating to
the construction of said Tenant interiors together with a five percent (5%)
percentage for general and administrative expense and five percent (5%)
percentage for profit. Building, appurtenances and Tenant interiors are
hereinafter collectively referred to as "Improvements."
(2) TIME FOR CONSTRUCTION. Promptly following the execution
of this Lease by Tenant, Landlord shall apply and use its best efforts to
obtain the necessary building permits to allow the construction of the
Improvements. Promptly following the issuance of the necessary building
permits, Landlord shall commence construction in accordance with the plans
and specifications and shall attempt to complete construction by August 1,
1979. However, in the event that Landlord is unable to deliver possession of
such premises by August 1, 1979, Landlord shall diligently complete
construction of the Improvements and deliver possession of the Premises as
promptly as is practicable. (See Exhibit D)
3. TERM. The term of this Lease shall be for a period of two (2)
Lease Years. The term "Lease Years" as used therein shall be a period of
twelve (12) successive calendar months, except that if the term commences on
a day other than the first day of the calendar month, then the initial
fractional month together with the next succeeding twelve (12) calendar
months shall constitute the first Lease Year.
The term of this Lease shall commence upon the earliest of the
following occurrences ("Commencement Date"):
(a) The date of the completion of the Improvements, tender of
possession by written notice given to Tenant, and the issuance of a
Certificate of Occupancy.
(b) The date Tenant takes actual physical possession of the
Premises and the issuance of a Certificate of Occupancy.
(c) The date of the completion of the Improvements, including
utilities hookup (except landscaping and adjacent streets, curbs, and
gutters, providing however that suitable access and parking is provided),
tender of possession by written notice given to Tenant,
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tender of written guarantee by Landlord that uncompleted landscaping,
adjacent streets, curbs, and gutters will be completed within 90 days, and
the issuance by applicable governmental authorities of a Certificate of
Occupancy or such other authorizations as are required in order for Tenant to
enter into physical possession of the Premises. The date of completion of the
Improvements shall be the date upon which the construction of the
Improvements has been completed in substantial conformity with the plans and
specifications as set forth in Exhibits "B" and "C", a Notice of Completion
has been filed with the County Recorder of Santa Clara County, and a
Certificate of Occupancy or its equivalent (including a final building
inspection) concerning the Improvements has been issued by the appropriate
governmental agency.
4. USE OF PREMISES. Tenant shall use the Premises only for the
purposes for which they were designed, to wit: offices, administration,
engineering, personnel, research & development, and only in conformance with
applicable laws for any lawful activity including the manufacturing, storage
and distribution of electronic equipment and requisite office use therewith,
excluding manufacturing or storage activities outside of an enclosed
structure.
5. RENT.
A. BASIC. Tenant shall pay Landlord as rental the sums set
forth in subparagraph B below (the "Monthly Installment") each month in
advance on the first day of each month, commencing on the Commencement Date
and continuing through the term of this Lease, together with such additional
rents as are hereinafter specified. In the event that the Commencement Date
is not on the first day of a calendar month, the monthly rent payable on the
Commencement Date shall be equal to the product obtained by multiplying the
Monthly Installment by the quotient obtained by dividing thirty (30) into the
number of days remaining in such calendar month.
Said rental shall be paid by Tenant without deduction or offset,
prior notice or demand at such place or places as may be noticed from time to
time by Landlord, and Landlord agrees to accept as rental for the use and
occupancy of the Premises said amount.
B. MONTHLY INSTALLMENT. The Monthly Installment of rent
payable for the term of this lease shall be the sum of Twenty-three thousand
ninety-one Dollars ($23,091) per month. The first Monthly Installment shall
be due upon the signing of this Lease by all parties hereto.
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C. LATE CHARGES. In the event Tenant fails to pay the basic
rent or Additional Rent within five (5) days written notice of its being due,
Tenant agrees to pay a late charge of Five Hundred Dollars ($500) which is
not a penalty but Landlord and Tenant agree that in the event of a late
installment it would be impractical or extremely difficult to determine the
extra expenses caused Landlord by such late installment and therefore the
parties agree that said late charge of Five Hundred Dollars ($500) represents
a reasonable compensation to Landlord for such late installment. In no event
shall a late charge be assessed before the 5th day following the date upon
which written notice is given.
D. ADDITIONAL RENT. All taxes, charges, costs and expenses
which Tenant is required to pay hereunder, together with all interest and
penalties that may accrue thereon in the event of Tenant's failure to pay
such amounts, and all damages, reasonable costs, and expenses which Landlord
may incur by reason of any default of Tenant or failure on Tenant's part to
comply with the terms of this Lease, shall be deemed to be additional rent
("Additional Rent") and, in the event of non-payment by Tenant, Landlord
shall have all the rights and remedies with respect thereto as Landlord has
for the non-payment of the rent.
Any payment due from Tenant to Landlord, specifically including
but not limited to the Monthly Installment and Additional Rent (including
late charges), shall bear simple interest at the rate of ten percent (10%)
per annum from the due date thereof to the date of payment.
6. NO ABATEMENT OR TERMINATION OF RENT. It is the intention of the
parties that, except as specifically set forth in Article 17 entitled
"Condemnation" and Article 16 entitled "Damage and Destruction," Tenant
shall, in all months of the Lease Term, pay to Landlord the rent, Additional
Rent and all other sums required herein. Tenant's obligations and covenants,
specifically including, without limitation, Tenant's obligation to pay the
rent, Additional Rent and all other sums required herein, shall be absolute
and shall not be subject to any abatement, refund, termination, diminution or
reduction for any cause or reason whatsoever, save and except as set forth in
Articles 16 and 17. Tenant's obligations and covenants shall not be affected
or discharged by virtue of or because of any present or future governmental
laws, ordinances, or for any other cause or reason whatsoever.
7. SECURITY DEPOSITS. There shall be no security deposit.
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8. POSSESSION. Tenant agrees that in the event of the inability of
Landlord to deliver to Tenant possession of the Premises at the Commencement
Date, Landlord shall not be liable for any damages caused thereby, nor shall
this Lease be void or voidable, but Tenant shall not be liable for rents
until such time as Landlord tenders possession of said Premises to Tenant
completed in accordance with Exhibits "B" and "C" and the working drawings
approved by Tenant. (See Exhibit D) Landlord agrees to give Tenant 10 days
prior notice of the anticipated delivery of possession of the premises to
Tenant.
9. INSPECTION AND ACCESS. Tenant shall permit Landlord and Landlord's
agents to enter the premises with FMC Escort at all reasonable times for the
purposes of inspecting the same, or for the purpose of making repairs that
Tenant has neglected or refused to make in accordance with this Lease; and
also for the purpose of showing the same to persons wishing to lease at any
time within Ninety (90) days prior to the expiration of this Lease, or at any
reasonable time for the purpose of showing the Premises to a prospective
purchaser or lender.
10. TAXES AND OTHER CHARGES.
A. Tenant shall pay and discharge, punctually and when same shall
become due and payable without penalty, all real estate taxes, personal
property taxes, taxes based on vehicles utilizing parking areas in the
Premises, taxes computed or based on rental income (other than federal, state
and municipal income taxes), environmental surcharges, privilege taxes,
excise taxes, business and occupation taxes, gross sales and/or use taxes,
occupational license taxes, water and sewer charges, assessments (including,
but not limited to, its pro rata share of assessments for public improvements
or benefit; and all other governmental impositions and charges of every kind
and nature whatsoever, whether or not now customary or within the
contemplation of the parties hereto and regardless of whether the same shall
be extraordinary or ordinary, general or special, unforeseen or foreseen, or
similar or dissimilar to any of the foregoing (all of the foregoing being
hereinafter collectively called "Tax" or "Taxes") which, at any time during
the Lease Term, shall be applicable to the Premises or assessed, levied or
imposed upon the Premises or become due and payable and a lien or charge upon
the Premises, or any part thereof, under or by virtue of any present or
future laws, statutes, ordinances, regulations or other requirements of any
governmental authority whatsoever. The term
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"Environmental Surcharges" shall include any and all expenses, taxes, charge
or penalties imposed by the Federal Environmental Protection Agency, the
Federal Clean Air Act or any regulations promulgated thereunder, or any other
local, state or federal governmental agency or entity now or hereafter vested
with the power to impose taxes, assessments or other types of surcharges as a
means of controlling or abating environmental pollution in regard to the use,
operation or occupancy of the Premises. It is the intention of the parties
that Landlord shall be free from all such expenses and all such taxes and all
other governmental impositions and charges of every kind and nature
whatsoever. Nothing in this Lease contained shall require Tenant to pay any
franchise, estate, inheritance, transfer or excess profits tax imposed upon
Landlord; provided, however, that if at any time during the Lease Term there
should be levied, assessed and imposed (i) a tax, assessment, levy,
imposition or charge, wholly or partially as a capital levy or otherwise,
based or measured in whole or in part on the rent payable by Tenant under
this Lease, or (ii) a license fee measured by the rent payable by Tenant
under this Lease, or (iii) any other levy in lieu of or equivalent to any Tax
set forth in this Article 10, then all such taxes, assessments, levies, fees,
impositions, or charges shall be paid by Tenant and shall be deemed to be
included within the term "Tax" for the purposes hereof.
B. If by law any Tax is payable or may, at the option of the
taxpayer, be paid in installments, Tenant may whether or not interest shall
accrue on the unpaid balance thereof, pay the same, and any accrued interest
on any unpaid balance thereof, in installments as each installment becomes
due and payable, but in any event, before any fine, penalty, interest or cost
may be added thereto for non-payment of any installment or interest.
C. Any Tax relating to a fiscal period of a taxing authority, a
part of which is within the Lease Term and a part of which is subsequent to
the Lease Term, shall be apportioned and adjusted between Landlord and Tenant
based upon a 365-day year. Such apportionment shall be made whether or not
such Tax shall be assessed, levied, imposed, or shall become a lien upon the
Premises or shall become payable during the Lease Term. With respect to any
Tax for public improvements or benefits which by law is payable or, at the
option of the Landlord, may be paid in installments, Landlord shall pay the
installments thereof which become due and payable subsequent to the
expiration of the Lease Term; and Tenant shall pay all such installments
which become due and payable at any time during the Lease Term even though
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actual payment is postponed beyond the end of the Lease Term by Tenant.
D. Tenant shall furnish to Landlord five (5) days prior to the
last date when any Tax will become delinquent, official receipts or other
proof satisfactory to Landlord evidencing payment thereof, subject to
Paragraph E below.
E. Tenant shall have the right to contest or review the amount or
validity of any such Tax by appropriate legal proceedings (but which is not
to be deemed or construed in any way as relieving, modifying or extending
Tenant's covenant to pay any such Tax at the time and in the manner as
provided in this Article).
F. Any contest as to the validity or amount of any Tax or assessed
valuation upon which such Tax was computed or based, whether before or after
payment, shall be made by Tenant in Tenant's own name, or, if required by
law, in the name of Landlord or both Landlord and Tenant. Landlord shall
cooperate in any such contest, and Tenant shall indemnify and save harmless
Landlord from any and all costs or expenses, including attorney fees, in
connection with any such proceedings brought by Tenant. Tenant shall be
entitled to any refund of any such Tax and penalties or interest thereon
which have been paid by Tenant.
G. The certificate, advice or bill of the appropriate official
(designated by law to make or issue the same or to receive payment of any
such Tax) of the non-payment of any such Tax, shall be conclusive of the fact
that such Tax was due and unpaid at the time of the making or issuance of
such certificate, advice or bill.
H. In the event that Tenant shall fail to pay any such Tax or
other expense which might create a lien against the real property, required
to be paid after the same shall become due and payable, Landlord shall have
the right, at its option, to pay the same with all interest and penalties
thereon, and the amount so paid, with interest thereon from the date of such
payment at the rate of ten percent (10%) per annum, shall be deemed to be
Additional Rent hereunder and shall be due and payable by Tenant on the first
day of the month following the month in which payment by Landlord was made.
Landlord's right to make payment under this Paragraph H is a cumulative right
and shall not be construed to be a waiver of any other rights of Landlord
under law or under this Lease Agreement.
11. INSURANCE.
A. Landlord shall, during the Lease Term, at Tenant's sole
expense, procure
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and keep in force the following insurance coverage, subject to the ordinary
deductible amount of $1,000.00, which amount shall be Tenant's expense:
(1) "All Risk" coverage, including flood insurance but not
including earthquake insurance on the Improvements and all buildings,
improvements, building equipment and fixtures and personal property affixed
or attached to real property located on or in the Premises, including any
buildings or fixtures hereinafter constructed or installed thereon, in the
full amount of the replacement cost thereof. Such full replacement cost
shall be determined by mutual agreement annually, based on actual changes in
replacement cost, on or prior to the anniversary date of the Commencement
Date. If the parties are unable to agree on the full replacement cost, the
matter shall be resolved by arbitration administered by and in accordance
with the rules of the American Arbitration Association in San Jose,
California, provided that the arbitrators selected shall have at least ten
(10) years experience in the real estate appraisal or general contracting
business.
(2) Business interruption insurance insuring that one
hundred percent (100%) of the rent and other sums required to be paid by
Tenant hereunder will be paid to Landlord for a period of twelve (12) months
if the Improvements are destroyed or damaged by a risk insured against by the
"all risk" insurance described above.
B. Tenant shall, during the Lease Term, at Tenant's sole expense,
procure and keep in force the following insurance coverage, or self insure
for the following exposures, under the following terms:
(1) Plate glass insurance
(2) Comprehensive public liability insurance protecting
against any and all liabilities related to the condition, use or occupancy of
the Premises with limits of One Million Dollars ($1,000,000.00) for bodily
injury or death as a result of any one occurrence, and Five Hundred Thousand
Dollars ($500,000) for property damage as a result of any one occurrence. It
is agreed that the limits of insurance specified above are the minimum
amounts required by Landlord and the parties shall agree to revise such
limits from time to time to mutually agreed amounts to meet changed
circumstances, including, but not limited to, changes in purchasing power of
the dollar and changes indicated by the amount of plaintiff's verdicts in
personal injury actions in the county in which the Premises are located. If
the parties are unable
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to agree on the amount by which such limits are to be increased, the
controversy shall be resolved by arbitration administered by and in
accordance with the rules of the American Arbitration Associates in San Jose,
California, provided that the arbitrators selected shall have at least ten
(10) years experience in the liability insurance business.
C. All insurance policies or policies of self insurance required
under the provisions of this Article 11 which are to be acquired by Tenant,
shall name the Landlord, Tenant, and the beneficiary of any mortgage or deed
of trust secured by the Premises as insureds and all payments shall be made
as their interests appear.
D. All policies including policies of self insurance provided for
in this Article 11 which are to be acquired by Tenant, shall be in such form
and with such companies authorized to write insurance in the state in which
the Premises are located as may be approved by Landlord, which approval
Landlord agrees not to unreasonably withhold. Originals of the policies
provided for herein or, in the case of comprehensive public liability
insurance, certificates of insurance evidencing the policy provided for
herein, shall be delivered to Landlord and shall certify that the policy may
not be cancelled or altered without thirty (30) days prior written notice to
Landlord. The certificate required herein shall also certify that (i) the
coverage provided insures performance of the indemnity set forth in Article
12, and (ii) the coverage provided is primary and any coverage by Landlord is
in excess thereto.
E. In those situations whereby Landlord shall obtain and maintain
such insurance coverage and pay premiums therefor, all premiums so paid by
Landlord, together with interest thereon at the rate of ten percent (10%) per
annum from the 30th day following the billing of Tenant for such costs, shall
be deemed Additional Rent hereunder, and shall be paid by Tenant to Landlord
upon demand.
F. In the event that Tenant fails to obtain and maintain any
insurance or provide self insurance as required herein, Landlord may, but
shall not be obligated to, obtain and maintain such insurance coverage and
pay premiums therefor. All premiums so paid by Landlord, together with
interest thereon at the rate of ten percent (10%) per annum from the date of
such payment, shall be deemed Additional Rent hereunder, and shall be paid by
Tenant to Landlord upon demand. Any such expenses and damages shall bear
interest at the rate of ten percent (10%) per annum from the date that the
loss or damage occurs until paid by Tenant.
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12. INDEMNITY AND EXCULPATION. Tenant agrees to indemnify Landlord
and hold Landlord harmless except for the active negligence or willful
misconduct from any and all liability, loss, cost, expenses, attorneys' fees,
or obligations on account of, or arising out of the use, condition or
occupancy of the Premises, Tenant agrees to defend Landlord against any
litigation or threatened litigation relating to any incident relating to the
subject premises to which the Landlord is named as a defendant. It is
understood that Tenant is and shall be in control and possession of the
Premises and that except for the active negligence or willful misconduct
Landlord shall in no event be responsible or liable for any injury or damage
to any property of Tenant or any other person, or for damage or injury to any
other person whatsoever, happening on, in, about or in connection with the
premises, or for any injury or damage to the Premises or any part thereof.
This Lease Agreement is entered into on the express condition that except for
its active negligence or willful misconduct Landlord shall not be liable for,
or suffer loss by reason of, injury to person or property, from whatever
cause, which in any way may be connected with the use, condition or occupancy
of the premises or personal property therein or thereon, including without
limitation, any liability for injury to the person or property of Tenant,
Tenant's agents, officers, employees, invitees, or any other person. The
provisions of this Lease Agreement permitting Landlord to enter and inspect
the Premises are for the purposes of enabling Landlord to become informed as
to whether Tenant is complying with the terms of this Lease Agreement, and
Landlord shall be under no duty to enter and inspect or to perform any of
Tenant's covenants set forth in this Lease Agreement.
13. COMPLIANCE WITH LAWS AND REGULATIONS.
A. Tenant shall, at Tenant's sole cost, comply with all laws,
regulations, rules, orders, ordinances and requirements of all governmental
authorities (including, but not limited to, federal, state, county and city
governments and any department or agency thereof) now in force or which may
hereafter be in force, whether or not the same are now contemplated by the
parties pertaining to the use, condition, occupancy or occupational safety of
the Premises. The judgment of any court of competent jurisdiction after
final appeal or the admission of Tenant in any action or proceeding against
Tenant, whether Landlord be a party thereto or not, that Tenant has violated
any such law, requirement, rule, order, ordinance or regulation in the use,
condition or occupancy of the Premises shall be conclusive of the fact of
such violation by Tenant. Tenant
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shall indemnify and hold Landlord harmless from any and all liability or
obligation arising out of Tenant's failure to comply with any requirement,
law, rule, order, ordinance and regulation of any governmental agency now or
hereafter in force pertaining to the use, condition, occupancy or
occupational safety of the Premises.
14. UTILITIES. Tenant shall pay all utility charges and post
construction connection fees, including, but not limited to, water, gas,
light, heat, power, electricity, telephone or other communication service,
scavenger, trash pickup, sewer, air conditioning or any other service or
utility supplied to or consumed on the Premises, or any tax, fee, levy or
surcharge therefor.
15. ALTERATIONS, REPAIRS AND MAINTENANCE.
A. Tenant agrees that Tenant will not demolish or undertake any
structural alterations of the Improvements, or any part thereof, now existing
or hereafter erected upon the Premises, or make any other alterations which
would change the character of said Improvements or which would weaken or
impair the structural integrity or lessen the value of said Improvements, or
make any alterations, additions, enlargements or improvements thereof without
the prior written consent of Landlord, which shall not be unreasonably
withheld. As a condition for giving its consent, Landlord may require that
Tenant post a completion bond in amount (not to exceed the estimated
construction cost) and form specified by Landlord. As a further condition
for giving its consent, Landlord may require Tenant to agree to restore the
Premises to their original condition at the termination of this Lease.
B. Subject to the provisions of Article 16 relating to
destruction of or damage to the Premises, Tenant shall, at Tenant's own
expense, keep and maintain the entire Premises (excluding roofs and exterior
walls) including, without limiting the generality of the foregoing, the
interior, electrical wiring and connections, plumbing, sewer system, heating
and air conditioning installation, truck doors, storefront, and its pro-rata
share of the common area, sidewalks, landscaping and paving of the Premises
in good condition and repair, excepting ordinary wear and tear. The term
"repair" shall include replacements, restorations, and/or renewals when
necessary, as well as painting and decorating. Except as otherwise provided,
the Tenant's obligation shall extend to all alterations, additions and
improvements to the Premises, all fixtures and appurtenances therein and
thereto, all equipment thereof, including, but not limited to, all machinery,
pipes, plumbing, wiring, gas, steam and electrical fittings, sidewalks,
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paving, water, sewer and gas connections, heating equipment, air conditioning
equipment and machinery, and all other fixtures, machinery and equipment
belonging to or connected with the Premises. Landlord agrees to assume
responsibility for maintaining and repairing the five sprinkler systems but
Tenant shall be responsible for any costs associated with such maintenance or
repair. Tenant shall indemnify and save Landlord harmless against and from
all costs, resulting from Tenant's failure to comply with the foregoing: and
Tenant hereby expressly releases and discharges Landlord of and from any
liability therefor, except for that which results from the active negligence
or willful misconduct of Landlord.
C. Landlord shall, at the request of Tenant, assign to Tenant any
guarantees and warranties received from contractors or equipment suppliers
relating to the constructed or construction of the Improvements.
D. Tenant waives the provisions of any law requiring that
Landlord make repairs except as otherwise provided herein and further waives
the provisions of any law allowing Tenant to make repairs at the expense of
Landlord, except in the case of roof leaks. In the event that Tenant has
given Landlord reasonable notice as to a roof leak, and Landlord has not
responded within a reasonable time, tenant may make such emergency repairs as
are necessary to mitigate damage to premises or to Tenant's possessions
and/or equipment.
E. At the expiration of the term of this Lease, or upon sooner
termination as provided herein, Tenant shall surrender the Premises in good
condition and in as good order and condition as at the commencement of the
Lease Term, normal wear and tear excepted, and all carpeting shampooed and
vinyl floors cleaned and waxed. Nothing provided in this subparagraph shall
diminish or reduce Tenant's obligations under subparagraphs A through D above.
16. DAMAGE AND DESTRUCTION
A. If the Improvements are damaged or destroyed in whole or in
part from any cause (except condemnation), Landlord may, at its option:
(1) Rebuild the Premises to their prior condition, in which
event Tenant agrees that the proceeds of any all insurance policies required
hereinabove shall be applied to the cost of rebuilding. In the event the
insurance proceeds exceed the cost of rebuilding, Landlord shall be entitled
to receive the excess.
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(2) Terminate the Lease provided that the rebuilding cannot
be accomplished within one hundred fifty (150) days after the date of damage
or terminate the Lease should there be no insurance proceeds available for
reconstruction. Provided, however, that in the event that insurance proceeds
are insufficient to rebuild the premises, Tenant may, at Tenant's option, pay
to Landlord in cash no later than the date of commencement of construction
the difference between the insurance proceeds and the contracted cost of
rebuilding, in which case Landlord agrees to rebuild the premises.
(3) Notwithstanding the provisions of paragraphs (1) and (2)
above, Tenant may, by giving Landlord sixty (60) days prior written notice,
terminate the Lease if the Improvements cannot be replaced or restored within
one hundred fifty (150) days after the date of damage.
B. If Landlord does not give tenant notice in writing within
thirty (30) days from the damage or destruction of the Improvements of
Landlord's election to rebuild them, Landlord shall be deemed to have elected
to rebuild the premises and continue the Lease. Tenant hereby expressly
waives the provisions of any law requiring Landlord to make such repairs, or
of any law allowing the Tenant to make such repairs at Landlord's expense
and, without limiting the foregoing, Tenant specifically waives any statutes
which permit Tenant to terminate this Lease upon destruction or to make
repairs at the expense of Landlord.
C. In the event of damage or destruction, whether from an insured
or uninsured casualty, the rent otherwise payable hereunder shall be abated
for the period commencing with the date of damage or destruction and ending
with (1) the date of completion of the repair or restoration, if the Lease is
not terminated or (2) the date of termination of the Lease. The amount of the
abatement shall be in proportion to the square footage of the premises
damaged or destroyed by the casualty.
17. CONDEMNATION.
A. DEFINITION OF TERMS. For the purpose of this Lease the term:
(1) "Taking" means a taking of the Premises or damage thereto
related to the exercise of the power of eminent domain by any agency,
authority, public utility, persons or corporate entity empowered to condemn
property.
(2) "Total Taking" means the taking of the entire Premises or
so much
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of the Premises as to prevent or substantially impair the use thereof by
Tenant for the uses herein specified, but in no event shall Total Taking be
less than twenty percent (20%) of the Premises.
(3) "Partial Taking" means the taking of only a portion of
the Premises which does not constitute a Total Taking.
(4) "Date of Taking" means the date upon which title to the
Premises, or a portion thereof, passes to and vests in the condemnor or the
effective date of any order for possession if issued prior to the date title
vests in the condemnor.
(5) "Award" means the amount of any award made, consideration
paid, or damages ordered as a result of a Taking.
B. RIGHTS. The parties agree that in the event of a Taking all
rights between them or in and to an Award shall be as set forth herein and
Tenant shall have no right to any Award except as set forth herein. Except
as otherwise provided herein and unless and until the Lease is terminated
pursuant to the provisions of this Lease, Tenant shall continue to pay to
Landlord all rent required in this Lease, and Tenant shall faithfully keep
and observe all other terms, conditions, and covenants of this Lease, all
without any claim for any abatement, refund, diminution or reduction or other
expense whatsoever, and there shall be no abatement of rent whatsoever due to
the commencement or threat of commencement of condemnation proceedings or due
to any other cause whatsoever (except as provided in Paragraphs C and D
below).
C. TOTAL TAKING. In the event of a Total Taking during the term
hereof (i) the rights of Tenant in and to the Premises shall cease and
terminate as of the Date of Taking, (ii) Landlord shall refund to Tenant any
prepaid rent, (iii) Tenant shall pay to Landlord any rent or charges due
Landlord under the Lease each prorated as of the Date of Taking, (iv) Tenant
shall be entitled to moving expenses, relocation allowances, business
interruption expenses, and amounts for trade fixtures which have not become
affixed to and become part of the real property, if separately awarded, and
any other amounts separately awarded Tenant, (v) the remainder of the Award
shall be paid to and be the property of Landlord.
D. PARTIAL TAKING. In the event of a Partial Taking during the
term hereof, (i) the rights of Tenant under the Lease and the leasehold
estate of Tenant in and to the portion of the Premises taken shall cease and
terminate as of the Date of Taking, (ii) the remainder of the Award shall be
paid to and be the property of Landlord, (iii) Tenant shall be entitled to
amounts
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for Trade Fixtures which have not become affixed to and become a part of the
real property, if separately awarded, (iv) Tenant shall comply with the
provisions of subparagraph E hereof, and (v) from and after the Date of
Taking the Minimum Rent shall be reduced in the proportion that the building
area of the portion of the Premises taken bears to the total building area of
the Premises prior to the Taking. The value of the Award shall be the total
amount of the Award minus any portion of the Award for consequential damages
minus any portion of the Award attributable to Trade Fixtures of the Tenant.
E. In the event of a Partial Taking, Landlord shall have the
option to either (a) terminate the Lease, in the case where 30% or more of
the building area is taken or (b) within forty-five (45) days after receipt
of the Award proceed to rebuild, repair and restore the remainder of any
building on the Premises affected thereby to a complete independent and
self-contained architectural unit. In the event the Partial Taking causes
the Premises to be reduced in such a manner that the Tenant is unable to
utilize said Premises for the use intended, then Tenant may terminate this
Lease within forty-five (45) days after receipt of the Award upon written
notice to Landlord as more specifically set forth under Article. 21.
18. SUBORDINATION.
A. This Lease and all rights of Tenant under this Lease are and
shall, at the option of Landlord, be subject and subordinate to any mortgage
(including a consolidated mortgage) or deed of trust, which may now or
hereafter effect the Premises, or any part thereof, and to any and all
renewals, modifications, consolidations, replacements and extensions of any
such mortgage or deed of trust.
B. Subject to Paragraph A above, Tenant shall, upon Landlord's
request, execute within fifteen (15) working days following such request (1)
any instrument of subordination presented by Landlord to Tenant necessary to
subordinate this Lease to any such mortgage or deed of trust to be placed on
the Premises, or any part thereof by Landlord and (2) any amendment to this
Lease requested by the lender providing initial permanent financing for the
Improvements provided that any such amendment does not materially affect the
rights of Tenant under this Lease.
19. DEFAULT
A. Upon the breach of this Lease by Tenant or upon any Event of
Default (as
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<PAGE>
defined in this Lease), Landlord shall have the following remedies, in
addition to all other rights and remedies provided by law, to which Landlord
may resort cumulatively, or in the alternative:
(1) Landlord may at Landlord's election reenter the Premises,
and without terminating this Lease, and at any time from time to time, relet
the Premises or any part or parts of them for the account and in the name of
Tenant or otherwise. Landlord may at Landlord's election eject Tenant or any
of Tenant's subtenants, except subtenants approved in writing by Landlord,
assignees, or other persons claiming any right under or through this Lease.
Tenant shall nevertheless pay to Landlord on the due dates specified in this
Lease all the sums required of Tenant under this Lease, less the proceeds of
any sublease or reletting. The expenses allowed Landlord shall include
without limitation: costs paid to retake possession and reasonable costs to
place the Premises in its original condition, costs to secure new tenants
(including broker's commissions) and costs to fulfill all of Tenant's
covenants and conditions to the end of the term. No act by or on behalf of
Landlord under this subparagraph (1) shall constitute a termination of this
Lease unless Landlord gives Tenant written notice of termination.
(2) Landlord shall be entitled, at Landlord's election, to
keep the Lease in full force and effect and to enforce all of its rights and
remedies under the Lease, including the right to recover the rent and other
sums as they become due, plus interest at the rate of ten percent (10%) per
year from the due date of each installment of rent or other sum until paid.
(3) Landlord may, upon default or breach by Tenant, at
Landlord's election, terminate this Lease by giving Tenant 30 days written
notice of termination. On the giving of the notice, all of Tenant's rights
in the Premises and in the leasehold estate shall terminate. Promptly after
notice of termination, Tenant shall surrender and vacate the Premises in
broom-clean condition, and Landlord may reenter and take possession of the
Premises and eject Tenant or any of Tenant's subtenants and/or assignees,
except subtenants and/or assignees approved in writing by Landlord, or other
person or persons claiming any right under or through Tenant or eject some
and not others or eject none. This Lease may also be terminated by a
judgment specifically providing for termination. Any termination under this
paragraph shall not relieve Tenant from the payment of any sum then due to
Landlord or from any claim for breach, damages or rent previously accrued.
In no event shall any one or more of the following actions by Landlord
constitute a termination of this Lease:
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(i) Maintenance, or restoration, or preservation of the
Premises;
(ii) Efforts to relet the Premises;
(iii) Appointment of a receiver in order to protect
Landlord's interest hereunder;
(iv) Consent to any subletting of the Premises by
Tenant, whether pursuant to provisions hereof with concern to subletting or
otherwise;
(v) Any other action by Landlord or Landlord's agents
intended to mitigate the adverse effects of any breach of this Lease by
Tenant.
(4) In the event of termination pursuant to subparagraph (3),
Landlord shall be entitled at Landlord's election to damages in the following
sums:
(i) The worth at the time of the award of the unpaid
rent which has been earned at the time of termination; plus
(ii) The worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until
the time of award exceeds the amount of such rental loss that Tenant proves
could have been reasonably avoided; plus
(iii) The worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental that Tenant proves could be reasonably
avoided; and
(iv) Any other amount necessary to compensate Landlord
for all detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which in the ordinary course of things would
be likely to result therefrom including without limitation the following: (1)
Expenses for cleaning, repairing and restoring the Premises; (2) Expenses for
repairing and repainting and otherwise restoring the Premises for the purpose
of reletting, (whether such be funded by a reduction of rent, direct payment
or allowance to tenant, or otherwise); (3) broker's fees, attorneys' fees,
advertising costs and other expenses of reletting the Premises; (4) Costs of
carrying the Premises such as repairs, restoration, maintenance, taxes and
insurance premiums, utilities and security precautions; (5) Expenses in
retaking possession of the Premises; and (6) Attorneys' fees and court costs.
(v) The "worth at the time of Award" of the amounts
referred
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to in subparagraphs (i) and (ii), above, is computed by allowing interest at
the rate of ten percent (10%) per annum, unless previously calculated herein.
The "worth at the time of Award" of the amount referred to in subparagraph
(iii) above, is computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of Award plus one
percent (1%).
B. A breach of this Lease shall exist if any of the following
events (severally "Event of Default" and collectively "Events of Default")
shall occur:
(1) Default shall have occurred in the payment of rent or
other payment not made upon the date due; (See Exhibit D)
(2) Tenant shall have assigned its assets for the benefit of
its creditors; or
(3) The sequestration or attachment of, or execution on, any
substantial part of the property of Tenant or on any property essential to
the conduct of Tenant's business shall have occurred and Tenant shall have
failed to obtain a return or release of such property within thirty (30) days
thereafter, or prior to sale pursuant to such sequestration, attachment or
levy, whichever is earlier; or
(4) Tenant shall have abandoned or vacated the Premises; or
(5) Tenant shall have failed to perform any term, covenant or
condition contained in this Lease other than nonpayment of monies due
Landlord, where such failure shall not have been cured within fifteen (15)
business days after written notice of such failure; provided that if the
failure cannot be reasonably cured within said fifteen (15) day period,
Tenant shall not be in default if it commences the cure within said ten (10)
day period and diligently prosecutes the cure to completion; or
(6) A court having jurisdiction shall have made or entered
any decree or order; (a) adjudging Tenant to be bankrupt or insolvent; (b)
approving as properly filed a petition seeking reorganization of Tenant or an
arrangement under the bankruptcy laws or any other applicable debtor's relief
law or statute of the United States or any State thereof; (c) appointing a
receiver, trustee or assignee of Tenant in Bankruptcy or insolvency or for
its property; or (d) directing the winding up or liquidation of Tenant; and
such decree or order shall have continued for a period of thirty (30) days;
or Tenant shall have voluntarily submitted to or
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<PAGE>
filed a petition seeking any such decree or order.
20. HOLDING OVER. This Lease shall terminate without further notice
at the expiration of the Lease Term. Any holding over by Tenant after
expiration shall not constitute a renewal or extension or give Tenant any
rights in or to the Premises except as expressly provided in this Lease. Any
holding over after the expiration with the consent of Landlord shall be
construed to be a tenancy from month to month, at one hundred twenty-five
percent (125%) of the existing Rent, and shall otherwise be on the terms and
conditions herein specified insofar as applicable.
21. NOTICES. Any notice required or desired to be given under this
Lease shall be in writing with copies directed as indicated below and shall
be personally served or given by mail. Any notice given by mail shall be
deemed to have been given when forty-eight (48) hours have elapsed from the
time which such notice was deposited in the United States mail, certified or
registered and postage prepaid, addressed to the party to be served with a
copy as indicated herein at the last address given by that party to the other
party under the provisions of this part. At the date of execution of this
Lease, the address of Landlord is:
Devcon Investment Company
425 Lakeside Drive
Sunnyvale, California 94086
with a copy to:
and the address of Tenant is:
FMC CORPORATION
1105 Coleman Avenue
San Jose, California 95108
22. NONASSIGNMENT. Tenant's interest in this Lease is not assignable,
by operation of law or otherwise, nor shall Tenant have the right to sublet
the Premises, transfer any interest of Tenant's therein or permit any use of
the Premises by another party without the prior written consent of Landlord,
which consent Landlord agrees not to unreasonably withhold. A consent to one
subletting, occupation or use by another party shall not be deemed to be a
consent to any subsequent subletting, occupation or use by another party.
Any or subletting without such
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consent hall be void and shall, at the option of Landlord, terminate this
Lease.
Landlord's waiver or consent to any subletting hereunder shall not
relieve Tenant from any obligation under this Lease unless the consent shall
so provide.
23. SUCCESSORS. The covenants and agreements contained in this Lease
shall be binding on the parties hereto and on their respective successors.
24. MORTGAGEE PROTECTION. In the event of any default on the part of
Landlord, Tenant will give notice by registered or certified mail to any
beneficiary of a deed of trust or mortgagee of a mortgage, encumbering the
Premises whose address shall have been furnished it, and shall offer such
beneficiary or mortgagee a reasonable opportunity to cure the default,
including time to obtain possession of the Premises by power of sale or
judicial foreclosure, if such should prove necessary to effect a cure.
25. LANDLORD LOAN OR SALE. Tenant agrees promptly but no later than
fifteen (15) days following request by Landlord to (A) execute and deliver to
Landlord any documents, including estoppel certificates presented to Tenant
by Landlord, (i) certifying that this Lease is unmodified and in full force
and effect, or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect and
the date to which the rent and other charges are paid in advance, if any, and
(ii) acknowledging that there are not, to Tenant's knowledge, any uncured
defaults on the part of Landlord hereunder, or if there are uncured defaults,
stating the nature and status of such defaults, and (iii) evidencing the
status of the Lease as may be required either by a lender making a loan to
Landlord to be secured by deed of trust or mortgage covering the Premises or
a purchaser of the Premises from Landlord and (B) to deliver to Landlord the
current financial statements of Tenant certified by Tenant to be true and
correct, including a balance sheet for the most recent prior fiscal year all
prepared in accordance with generally accepted accounting principles
consistently applied. The only financial statement that Tenant shall be
required to deliver to Landlord pursuant to this clause shall be a current
balance sheet with the opinion of a certified public accountant, if
available, and Tenant shall only be required to deliver such financial
statement when Landlord is engaged in negotiations for a bona fide sale or
refinancing of the Premises. Tenant's failure to deliver an estoppel
certificate promptly following such request shall be conclusive upon Tenant
(a) that this Lease is in full force and effect, without modification except
as may be represented by Landlord, (b) that there are now no uncured
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defaults in Landlord's performance and (c) that no rent has been paid in
advance except those that are set forth in this Lease.
26. SURRENDER OF LEASE NOT MERGER. The voluntary or other surrender
of this Lease by Tenant, or a mutual cancellation thereof, shall not work a
merger and shall, at the option of Landlord, terminate all or any existing
subleases or subtenants, or operate as an assignment to Landlord of any or
all such subleases of subtenants.
27. WAIVER. The waiver of Landlord or Tenant of any breach of any
term, covenant or condition herein contained shall not be deemed to be a
waiver of such term, covenant or condition on any subsequent breach of the
same or any other term, covenant or condition herein contained.
28. WASTE, QUIET CONDUCT AND ENJOYMENT. Tenant shall not commit, or
suffer to be committed, any waste upon the Premises, or any nuisance, or
other acts or things which may disturb, the quiet enjoyment of any occupants
of neighboring properties. Landlord shall not unlawfully disturb the quiet
enjoyment of Tenant.
29. SIGN. Tenant shall not place or permit to be placed any sign or
decoration on the land or the exterior of the building, including the roof,
without the prior written consent of Landlord. Tenant, upon notification by
Landlord shall immediately remove any sign or decoration that Tenant has
placed or permitted to be placed without the prior written consent of
Landlord, and if Tenant fails to so remove such sign or decoration within
five (5) days after Landlord's request, Landlord may enter upon the Premises
and remove said sign or decoration and Tenant agrees to pay to Landlord, as
additional rent, the cost of such removal.
30. WAIVER OF SUBROGATION. Landlord hereby releases Tenant and Tenant
hereby releases Landlord and their respective officers, agents, employees and
servants, from any and all claims and demands for damage, loss, expense or
injury to the Premises, or to the furnishings and fixtures and equipment or
inventory or other property of either Landlord or Tenant in, about, or upon
the Premises, as the case may be, which is caused by or results from perils,
events or happenings which are the subject of insurance carried by the
Landlord or Tenant and in force at the time of any such loss; provided,
however, that such waiver shall be effective only to the extent permitted by
the insurance covering such loss and to the extent such insurance is not
prejudiced thereby or the expense of such insurance is not thereby increased.
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31. OPTION TO RENEW.
A. Provided that Tenant is not in default under the terms of this
Lease at the time of the option exercise, Tenant shall have two (2)
consecutive options to renew the term of this Lease, the first option being
for the term of one (1) additional year, and the second option being for the
term of three (3) additional years. Each of said options shall be exercised
only by written notice delivered to Landlord at least ninety (90) days prior
to the then effective expiration dates of the respective Lease terms. In all
respects, the terms, covenants and conditions of this Lease shall remain
unchanged during the option periods, except that the rental amount shall be
adjusted at the commencement of the second option period in accordance with
paragraph B below.
B. For purposes of adjusting the rental amount during the second
option period, the following shall apply:
(1) "INDEX" shall mean the consumer price index for all urban
consumers for the San Francisco/Oakland metropolitan areas as published by
the United States department of Labor, Bureau of Labor Statistics (1967 = 100
Base).
(2) "INITIAL INDEX" shall mean the index most recently preceding
the commencement date of the Lease term hereof.
(3) "OPTION INDEX" shall mean the index most recently preceding
the commencement of the second option period.
Commencing with the first day of the second option period of this lease,
the monthly installment shall be increased to the sum equal to the product
obtained by multiplying the monthly installment paid during the initial term
of the lease hereof by the quotient obtained by dividing the Index at the
commencement of the 1st month of the lease term hereof into the Option Index,
provided, however, that in no event shall the monthly installment paid during
the second option period be more than 118% of the monthly installment paid
during the initial term of the lease hereof, or less than the monthly
installment paid during the initial term month of the lease hereof.
If, at the commencement of the Option Period, the Department of Labor is
not maintaining such Consumer Price Index tables, then the percentage of base
so indicated by the
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United States government tables then most nearly corresponding thereto, shall
be used for computing the increase in the monthly installment.
32. GENERAL.
A. The paragraph headings used in this Lease are for the purposes
of convenience only. They shall not be construed to limit or extend the
meaning of any part of this Lease.
B. The term Landlord as used in this Lease, so far as the
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner at the time in question of the fee
title of the Premises, and in the event of any transfers or transfers of the
title of such fee, the Landlord herein named (and in case of any subsequent
transfers or conveyances, the then grantor) shall after the date of such
transfer or conveyance be automatically freed and relieved of all liability
with respect to performance of any covenants or obligations on the part of
Landlord contained in this Lease, thereafter to be performed; provided, that
any funds in the hands of Landlord or the then grantor at the time of such
transfer, in which Tenant has an interest, shall be turned over to the
grantee. It being intended that the covenants and obligations contained in
this Lease on the part of Landlord shall, subject as aforesaid, be binding
upon each Landlord, its heirs, personal representatives, successors and
assigns only during its respective period of ownership.
C. Any executed copy of this Agreement shall be deemed an
original for all purposes.
D. Time is of the essence for the performance of each term,
covenant and condition of this Lease.
E. In case any one or more of the provisions contained herein,
except for the payment of rent, shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not effect any provision of this Lease, but this Lease
shall be construed as if such invalid, illegal or unenforceable provision had
not been contained herein. This Lease shall be construed and enforced in
accordance with the laws of the State of California.
F. Whenever the lessor's prior consent, approval or permission is
referred to herein as a condition or requirement, same shall not be
unreasonably withheld.
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G. All references to attorney's fees, costs and expenses herein
shall be deemed to be reasonable attorney's fees, costs and expenses.
H. Landlord's liability under the terms of this Lease insofar as
such liability relates to the obligation of Landlord to perform under the
terms and conditions herein contained shall be limited to the net worth of
the partnership so long as such net worth is equal to or better than that
which exists at the present time, and shall not extend to the personal assets
of the individuals hereunder.
I. The undersigned parties hereby warrant that they have proper
authority and are empowered to execute this lease on behalf of the Landlord
and Tenant respectively.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates set forth below.
LANDLORD
DEVCON INVESTMENT COMPANY
a Limited Partnership
/s/ Authorized Signatory
--------------------------------------
By: /s/ Authorized Signatory
--------------------------------------
--------------------------------------
General Partners
TENANT
FMC CORPORATION
a Delaware Corporation
By: /s/ Authorized Signatory
--------------------------------------
[MAP]
[MAP]
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EXHIBIT D
SUPPLEMENTAL TERMS & CONDITIONS TO
LEASE AGREEMENT BETWEEN DEVCON INVESTMENT COMPANY
AND FMC CORPORATION
LEASE DATED 23 DAY OF MAY, 1979
The following Terms and Conditions are incorporated into subject Lease and
made a part thereof, and in the event of inconsistency, shall prevail
thereover:
1. Notwithstanding any provisions of the Lease, the Tenant shall have
approval authority over issuance of or changes to the reasonable rules
and regulations applicable to common areas, which approval shall not be
unreasonably withheld by the Tenant.
2. The parties to this Lease recognize and agree that there shall not be any
common areas within the leased Premises.
3. POSSESSION
A. If the Landlord, for any reason whatsoever, cannot deliver
possession of the Premises to the Tenant on or before September 1, 1979,
this Lease shall not be void or voidable except at the sole option of
the Tenant, nor shall the Landlord be liable to the Tenant for any loss
or damages resulting therefrom; but in that event, the commencement and
termination dates of the Lease and all other dates effected thereby
shall be extended to conform to the date of the Landlord's delivery of
possession.
B. Notwithstanding the above and without any acceleration of the term
of the Lease, the Landlord agrees that the Tenant shall have the right
to possession of the leased Premises earlier than August 1, 1979 in the
event the Landlord improvements as provided in Exhibit B and C to this
Lease are completed prior to that date. Such early possession,
occupancy and use of the premises shall be subject to payment of an
additional charge of one day's rent for each day of early occupancy as
an incentive and bonus for early completion.
C. Notwithstanding the provision of the Lease entitled "Time for
Construction", the parties agree that in the event possession of the
leased Premises is not delivered to Tenant on or before August 1, 1979,
the Tenant shall be granted one day's rent-free use of leased Premises
for each day of delay in gaining possession after August 1, 1979 up to a
maximum of 30 days. This
<PAGE>
rent-free use, prorated over a thirty-day month, shall be credited
against the first month's rental charge.
4. CREDIT AGAINST FIRST MONTH'S RENTAL CHARGES
The parties to this Lease recognize and agree that the $5,000 deposit given
at the time of execution of the intent to Lease letter of May 11, 1979 and
the deposit of $18,091 made by Tenant with the execution of this Lease
shall be credited against the first month's rental charge.
5. TAXES
A. Notwithstanding the provisions of paragraph 10, if any general or
special assessment is levied and assessed against the Premises, Landlord
can elect to either pay the assessment in full or allow the assessment to
go to bond. If Landlord pays the assessment in full, Tenant shall pay to
Landlord each time a payment of real property taxes is made a sum equal to
that which would have been payable (as both principal and interest) had
Landlord allowed the assessment to go to bond.
B. Tenant's liability to pay real property taxes shall be prorated on the
basis of a 365-day year to account for any fractional portion of a fiscal
tax year included in the term of its commencement and expiration.
C. Landlord shall use its best efforts to cause the Premises to be
separately assessed from other real property owned by Landlord. If
Landlord is unable to obtain a separate assessment, the assessor's
valuation placed on the building and other improvements that are a part of
the Premises shall be used in determining the real property taxes. If this
valuation is not available, the parties shall equitably allocate the real
property taxes between the building and other improvements that are a part
of the Premises and all buildings and other improvements included in the
tax bill. In making the allocation, the parties shall reasonably evaluate
the factors that determine the amount of real property taxes so that the
allocation to the building and other improvements that are a part of the
Premises will not be less than the ratio that the total number of square
feet of the building and other improvements that are a part of the Premises
bears to the total number of square feet in all buildings and other
improvements included in the tax bill.
Real property taxes attributable to land relating to the Premises
shall be determined on the basis of the separate tax bill reflecting the
value of the land upon which the subject premises shall have been
constructed.
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6. INSURANCE
Tenant's liability to pay any insurance provided for within the Lease shall
be prorated on the basis of a 365-day year to account for any fractional
portion of a fiscal insurance billing year included in the term at its
commencement and expiration.
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May 23, 1979
Agreement between FMC Corporation and Devcon Investment Company relative to
excess parking
Relating to that certain Lease between FMC Corporation and Devcon Investment
Company such Lease dated May 23, 1979 pertaining to the premises located on
the southeast corner of Brokaw Road and Bering Drive in the City of San Jose,
it is hereby agreed between Devcon Investment Company and FMC Corporation
that Devcon Investment Company shall allow FMC Corporation the rent-free use
of approximately one acre of land for purposes of accommodating an additional
120 cars, and such rent-free use shall extend for a period coterminous with
the basic lease term described in the subject Lease (i.e., two calendar
years). The consideration for Devcon's allowing FMC to use the subject land
shall be the commitment from FMC Corporation to spend an amount not to exceed
$70,000 for purposes of preparing the subject site for parking according to
the plans and specifications developed and designed by Devcon Investment
Company. FMC Corporation shall not be responsible for any costs in excess of
$70,000, and shall be responsible for only the actual costs up to such level.
At the end of the initial term of two years, FMC Corporation shall release
Devcon from any further obligations relating to the subject parking are and
shall have no further interest in the property. At the expiration of the
subject two-year period, it is the express intent of Devcon Investment
Company to construct an industrial building on the subject parking site in
which in the absence of further agreements with FMC Corporation, FMC
Corporation shall have no interest.
In the event that FMC Corporation chooses to have constructed on the subject
parking site, the improvements related to paving, curbs and gutters, etc., it
shall inform Devcon of its desire, and Devcon shall prepare a set of working
drawings showing the subject improvements. Upon the approval of FMC
Corporation Devcon shall estimate the cost of such improvements whereupon FMC
Corporation shall deposit with Devcon Investment Company the entire sum of
the estimated cost of such improvements. In the event that the estimate
exceeds the actual cost, the difference shall be rebated to FMC Corporation
immediately upon the completion of the subject improvements.
DEVCON INVESTMENT COMPANY FMC CORPORATION
By /s/ Authorized Signatory By /s/ Authorized Signatory
------------------------------- ------------------------------
General Partner
By /s/ Authorized Signatory
-------------------------------
General Partner
By
-------------------------------
General Partner
<PAGE>
May 23, 1979
Letter of Agreement relating to option to lease and a right of first refusal
It is hereby agreed between tenant and landlord under that certain lease
dated May 23, 1979 between FMC Corporation as Tenant and Devcon Investment
Company as Landlord such lease pertaining to the premises located on the
southeast corner of Brokaw Road and Bering Drive in the City of San Jose,
that Tenant shall be granted an option to lease and a right of first refusal
to lease the adjacent building consisting of approximately 48,694 sq. ft.
located on the parcel of land which is shown as outlined in red on the
attached exhibit. FMC shall have the option to lease said premises from
Devcon for a period of thirty (30) days from the execution of the lease as
noted above and a right of first refusal to lease said premises for a period
of fifteen (15) days subsequent to the expiration of the option period.
The option or the right of first refusal shall be exercised on the basis of
the same terms and conditions as the lease noted above insofar as such terms
and conditions are reasonably applicable except that the monthly rental shall
be based upon .475 per sq. ft. per month modified net, multiplied by the
number of square feet within such building (48,694).
In the event that Devcon Investment Company gets an offer from a third party
relative to leasing the subject premises, within the right of first refusal
period, FMC shall have five (5) days in which time to commit itself to
leasing the subject premises on the terms previously specified. In the event
that FMC either declines to lease the subject premises within the time period
or does not respond to the information from Devcon Investment Company within
the specified time, then Devcon Investment Company shall be free to dispose
of the subject premises in any manner that it sees fit without any further
liability to FMC Corporation.
DEVCON INVESTMENT COMPANY FMC CORPORATION
By /s/ Authorized Signatory By /s/ Authorized Signatory
------------------------------- ------------------------------
General Partner
By /s/ Authorized Signatory
-------------------------------
General Partner
By
-------------------------------
General Partner
[MAP]
<PAGE>
AMENDMENT TO LEASE
THIS AMENDMENT NO. 1 TO LEASE is made and entered into this 25th day of
November, 1985 by and between SANTA CLARA PROPERTY ASSOCIATES, a California
general partnership, as successor to the original Lessor, DEVCON INVESTMENT
COMPANY, a California limited partnership, as Lessor, and FMC CORPORATION, a
Delaware corporation, a Lessee.
RECITALS
A. WHEREAS, by Lease dated May 23, 1979, Lessor leased to Lessee
approximately 48,666 plus square feet of that certain building
located at 150 Brokaw Road, San Jose, California, the details of which are
more particularly set forth in said Lease Agreement, and,
B. WHEREAS, said May 23, 1979 Lease Agreement, terminates August 31,
1985 and
C. WHEREAS, it is now the desire of the parties hereto to amend said
Lease Agreement as hereinafter set forth.
AGREEMENT
NOW THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the hereinafter mutual promises, the
parties hereto do agree as follows:
l. INCREASED TERM:
EFFECTIVE November 1, 1985, the term of Lease shall be extended for
an additional 15 month period commencing November 1, 1985 and terminating
January 31, 1987, upon the same term and conditions as said May 23, 1979
Lease Agreement, except for the Basic Monthly Rental which shall be adjusted
as set forth in Paragraph 2 below.
2. RENTAL:
On November 1, 1985, the sum of $9,538.54 shall be due as Basic
Monthly Rental. On December 1, 1985, the sum of $51,099 shall be due, and a
like sum on the first day of each month thereafter for the next twelve months
of the Lease. On December 1, 1986, the sum of $53,533 shall be due, and a
like sum due on the first day of each month thereafter for the remaining term
of the Lease, as extended by the Amendment No. 1 to Lease, or until the
entire additional aggregate rental of $729,793 has been paid.
<PAGE>
OPTION TO RENEW
A. Provided that Tenant is not in default under the terms of this
Lease at the time of the option exercise, Tenant shall have two (2)
consecutive options to renew the term of the Lease, the first option being
for the term of one (1) additional year, and the second option being for the
term of one (1) additional year. Each of said options shall be exercised
only by written notice delivered to Landlord at least ninety (90) days prior
to the then effective expiration dates of the respective Lease terms. In all
respects, the terms, covenants and conditions of this Lease shall remain
unchanged during the option periods; except that the rental amount shall be
adjusted at the commencement of the second option period in accordance with
paragraph B below.
B. For purposes of adjusting the rental amount during each option
periods, the following shall apply:
(1) "Index" shall mean the consumer price index for all urban
consumers for the San Francisco/Oakland metropolitan areas as published by
the United States department of Labor, Bureau of Labor Statistics (1967 = 100
Base).
(2) "Initial Index" shall mean the index most recently
preceding the commencement date of the Lease term, as amended, hereof.
(3) "Option Index" shall mean the index most recently preceding
the commencement of each option period.
Commencing with the first day of each option period of this
lease, the monthly installment shall be increased to the sum equal to the
product obtained by multiplying the current monthly installment by the
quotient obtained by dividing the Index at the commencement of the 1st month
of the lease term hereof into the option Index, provided, however, that in no
event shall the monthly installment paid during each option period be more
than 108% or less than 105% of the monthly installment paid prior to
exercising the option.
EXCEPT AS MODIFIED HEREIN, all other terms, covenants and
conditions of said Lease Agreement shall remain in full force and effect for
the full remaining term thereof.
If, at the commencement of the option period, the Department of
Labor is not maintaining such Consumer Price Index tables, then the
percentage of base so indicated by the
31
<PAGE>
United States government table then most nearly corresponding thereto, shall
be used for computing the increase in the monthly installment.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Amendment No. 1
as of the day and year first hereinabove set forth.
LESSOR LESSEE
SANTA CLARA PROPERTY ASSOCIATES FMC CORPORATION
a California General Partnership a Delaware corporation
By: By:
/s/ RICHARD B. HOWARD /s/ AUTHORIZED SIGNATORY
------------------------------ -----------------------------
Richard B. Howard
Vice President
/s/ JERRY L. DAVIDSON 12/11/85
------------------------------
Jerry L. Davidson
Vice President
32
<PAGE>
AMENDMENT TO LEASE
This is Amendment to Lease, entered into this 9th day of February, 1987, by
and between SANTA CLARA PROPERTY ASSOCIATES, a California General
Partnership, hereinafter referred to as the "Landlord" as Successor to the
original Landlord, DEVCON INVESTMENT COMPANY as Landlord, and FMC
CORPORATION, a Delaware Corporation, hereinafter referred to as the Tenant.
RECITALS
A. Whereas by Lease dated May 23, 1979, and the Amendment to Lease dated
November 25, 1985, Landlord has leased to Tenant approximately
48,666 plus square feet of that certain building located at
150 Brokaw Road, San Jose, California hereinafter referred to as
the Premises". The details of which are more particularly set forth
in said Lease agreement, and Amendment to Lease, and
B. Whereas Landlord and Tenant acknowledge that along with this Amendment
to Lease the parties are simultaneously executing three (3) additional
Amendments to Lease for the Premises known as: 1800 Bering Drive, San
Jose, California, 1830 Bering Drive, San Jose, California, 215 Devcon
Drive, San Jose, California, and,
C. Whereas it is now the desire of the parties hereto to amend said Lease
agreement and Amendment to Lease as hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, provisions and conditions hereinafter set forth, the parties
hereto agree that this Amendment to Lease supersedes the aforementioned
Lease and as such all of the terms and conditions of the Lease shall
remain in full force and effect excepting for the items contained
herein. The changes are as follows:
1. TERM: Paragraph 1, page 1 of the Amendment to Lease dated November 25,
1985 is hereby amended to read as follows: The term of this Lease shall
be for a period of ten (10) years commencing January 1, 1987, and
terminating on December 31, 1996, upon the same terms and conditions as
said November 25, 1985 Amendment to Lease and May 23, 1979 Lease
agreement, except for the terms modified by this Amendment to Lease.
2. Paragraph 2, page 1 of the Amendment to Lease dated November 25, 1985 is
hereby amended to read as follows: The monthly net rental shall be as
follows:
150 BROKAW - 48,666 SQUARE FEET
PERIOD MONTHLY ANNUALLY
January 1, 1987 - December 31, 1987 = $26,766.30 $321,195.60
January 1, 1988 - December 31, 1988 = $26,766.30 $321,195.60
January 1, 1989 - December 31, 1989 = $26,766.30 $321,195.60
January 1, 1990 - December 31, 1990 = $26,766.30 $321,195.60
January 1, 1991 - December 31, 1991 = $26,766.30 $321,195.60
January 1, 1992 - December 31, 1992 = $31,632.90 $379,594.80
January 1, 1993 - December 31, 1993 = $31,632.90 $379,594.80
January 1, 1994 - December 31, 1994 = $36,499.50 $437,994.00
January 1, 1995 - December 31, 1995 = $41,366.10 $496,393.20
January 1, 1996 - December 31, 1996 = $41,366.10 $496,393.20
TOTAL RENT DUE $3,795,948.00
<PAGE>
The above rental shall be paid as stipulated until the total aggregate amount
of $3,795,948.00 has been paid.
3. Paragraph 2B, pages 1 and 2 is deleted in entirety and the
following is added: IMPROVEMENT ALLOWANCE: Landlord and Tenant
acknowledge the parties are simultaneously executing four Amendments to
Lease for the following properties: 1800 Bering Drive, 1830 Bering
Drive, 215 Devcon Drive, 150 Brokaw Road and as such Landlord agrees to
reimburse Tenant an average of $225,000 per property but in no event
shall Landlord's reimbursement to Tenant exceed $425,000 for any one
property up to a total aggregate mount of $900,000 for all four
properties for purposes of Tenant remodeling the existing properties to
suit Tenant's requirements subject to the following provisions: A
minimum aggregate amount of $660,000 must be used for improvements
specifically related to the four buildings. The balance of the
allowance (aggregate) may be used for expenses that may not be directly
related to improvements; those expenses may include (but would not be
limited to) new phone equipment, local-area-networking (for computers),
space planning or architectural fees, movable partitioning, furniture,
etc.
Said total aggregate reimbursement allowance of $900,000 for all four
properties will be paid to Tenant monthly as expenses are incurred.
Reimbursement to Tenant will be made within thirty (30) days of Landlord's
receipt of the invoice. The cumulative reimbursement requests will not
exceed the following schedule:
Cumulative
Invoices Reimbursement
Submitted Through Requests
----------------- -------------
January 31, 1987 $150,000
February 28, 1987 $300,000
March 31, 1987 $450,000
April 30, 1987 $450,000
May 31, 1987 $600,000
June 30, 1987 $750,000
July 31, 1987 $900,000
Landlord and Tenant further acknowledge that Tenant will be solely
responsible for improvements to the Premises under this provision and that
any and all costs above said $900,000 shall be paid by Tenant; however,
nothing contained herein shall relieve Landlord of its responsibility for
alterations, maintenance and repairs in accordance with Paragraph 15 of
Lease.
4. SEISMIC IMPROVEMENTS: Landlord hereby agrees to perform seismic
modifications to the Premises in accordance with Landlord's seismic
consultant's recommendations up to a maximum of $50,000. Landlord will
be solely responsible for any and all costs associated with said
modifications including the restoration of the Premises to its condition
prior to the seismic modifications. Landlord agrees to schedule said
seismic modifications in a manner that will minimize the disruption of
Tenants' use of the Premises.
5. Paragraph 4, page 3 is amended to include the following:
COMPLIANCE, HAZARDOUS AND TOXIC MATERIALS.
(i) Tenant shall not use the Premises or suffer or permit anything
to be done in or about the Premises which will in any way conflict
with any law, rule regulation or requirement of duly constituted
public authorities now in force or which may hereafter be in force,
or the requirements of the Board of Fire Underwriters or other
similar body now or hereafter constituted relating to or affecting
the condition, use or occupancy of the Premises. Tenant shall not
commit any public or private nuisance or any other act or thing
which might or would disturb the quiet enjoyment of any other
tenant of Landlord or any occupant of nearby property.
34
<PAGE>
Tenant shall place no loads upon the floors, walls or ceilings in
excess of the maximum designed load determined by Landlord or which
endanger the structure; nor place any harmful liquids in the
drainage systems; nor dump or store waste materials or refuse or
allow such to remain outside the building proper, except in the
enclosed trash areas provided. Tenant shall not store or permit to
be stored or otherwise place any other material of any nature
whatsoever outside the building,
(ii) In particular, Tenant, at its sole cost, shall comply with
all laws relating to the storage, use and disposal of hazardous,
toxic or radioactive matter, including those materials identified
in Sections 66680 through 66685 of Title 22 of the California
Administrative Code, Division 4, Chapter 30 ("Title 22") as they
may be amended from time to time (collectively "Toxic Materials").
Tenant shall be solely responsible for and shall defend, indemnify
and hold Landlord and its Agents harmless from and against all
claims, costs and liabilities, including attorneys' fees and costs,
arising out of or in connection with its storage, use and disposal
of Toxic Materials. Tenant shall further be solely responsible for
and shall defend, indemnify and hold Landlord and its Agents
harmless from and against any and all claims, costs, and
liabilities, including attorneys' fees and costs, arising out of or
in connection with the removal, clean-up and restoration work and
materials necessary to return the Premises and any other property
of whatever nature to their condition existing prior to the
appearance of the Toxic Materials on the Premises. Tenant's
obligations hereunder shall survive the termination of this Lease.
6. HOLDING OVER: Paragraph 20, page 23, is amended to increase the
holdover rate as follows: The holdover rate shall be increased to one
hundred fifty percent (150%) of the existing rent.
7. Paragraph 31, on pages 26 and 27 of the Lease agreement and paragraph
2A, pages 2 and 3 of the Amendment to Lease are deleted in entirety.
8. REAL ESTATE BROKERS: The parties acknowledge that Grubb & Ellis
Commercial Brokerage and LaSalle Partners are the only brokers involved
in connection with this transaction and that Landlord shall pay a
commission to Brokers in accordance with its separate agreement with
Grubb & Ellis Commercial Brokerage. Said Commission shall be split on a
(50/50) basis between Grubb & Ellis and LaSalle Partners.
9. RENTAL CREDIT: The parties acknowledge that Tenant has paid monies in
excess of rental due in 1987 under Paragraph 2 above, and upon full
execution of said Amendment to Lease, Landlord shall apply the credit
balance to Tenant's future rent payments.
10. SUBORDINATION: Paragraph 18A, page 18 is amended as follows: The end
of the paragraph will conclude with the following sentence, "So long as
Tenant is not in default of the Lease, this Lease shall not be
terminated or modified because of any mortgage or sale of the Premises."
11. DAMAGE AND DESTRUCTION: Paragraph 16A(3), page 15 is amended as
follows: Notwithstanding the provisions of paragraphs (1) and (2) above
and Paragraph 16B below, Tenant may, by giving Landlord sixty (60) days
prior written notice, terminate the Lease if the improvements cannot be
replaced or restored within one hundred fifty (150) days after the date
of damage.
12. PREMISES LEASED STRICTLY ON AS IS" BASIS: The following paragraph is
added to the Lease: It is agreed that the entire 48,666 plus or minus
square foot building leased hereunder is leased strictly on an "as is"
basis, and in its present condition and configuration, without
representation or warranty, express or implied, by Landlord as to the
condition or repair of the Premises, nor as to the use or occupancy
which may be made of the Premises. Landlord shall not be required to
make, nor be responsible for any cost in connection with, any repair,
restoration and/or improvement to the Premises in order for Tenant to
take occupancy of the Premises hereunder or for this Lease to commence,
except as specifically provided in this Amendment to Lease.
35
<PAGE>
13. Paragraph 19B(5), page 23, line 8, is amended as follows: "said fifteen
(15) day period and diligently prosecutes the cure".
14. Paragraph 10I, page 9 is added to Lease as follows: Notwithstanding the
provisions of Paragraph A-H above, if any general or special assessment
is levied and assessed against the Premises, Landlord can elect to
either pay the assessment in full or allow the assessment to go to bond.
If Landlord pays the assessment in full, Tenant shall pay to landlord
each time a payment of real property taxes is made a sum equal to that
which would have been payable (as both principal and interest) had
Landlord allowed the assessment to go to bond.
15. Paragraph 10J, page 9 is added to Lease as follows: Tenant's liability
to pay real property taxes shall be prorated on the basis of a 365-day
year to account for any fractional portion of a fiscal tax year included
in the term of its commencement and expiration.
16. INSURANCE: Paragraph 11B(2), page 10, is amended to increase the
insurance coverage limitations as follows: comprehensive public
liability insurance shall be increased to limits of TWO MILLION FIVE
HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000.00) for bodily injury or
death and for property damage as a result of any one occurrence.
17. Notwithstanding Paragraph 16 (Insurance) above, Paragraph 11B(2), 10 of
Lease is amended by deleting the balance of the paragraph beginning with
the last word in line 6.
18. Paragraph 11C, page 10, line 5 is amended to read "by the Premises as
additional insureds and all payments shall be made".
19. Paragraph 11D, pages 10 and 11, is amended to read as follows: All
policies including policies of self insurance provided for in this
Article 11 which are to be acquired by Tenant, shall be in such form and
with such companies authorized to write insurance in the state in which
the Premises are located as may be approved by Landlord, which approval
Landlord agrees not to unreasonably withhold. Certificates of insurance
evidencing the policy(ies) provided for herein, shall be delivered to
Landlord and shall certify that the policy may not be cancelled or
materially altered without thirty (30) days prior written notice to
Landlord.
20. Paragraph 12, page 11, lines 1 and 2 are amended as follows: "Tenant
agrees to indemnify and hold Landlord harmless except for Landlord's
active negligence."
21. Paragraph 19A(3), pages 19 and 20, lines 5 through 7 is amended to read
as follows: estate shall terminate, and within thirty (30) days after
notice of termination, Tenant shall surrender and vacate the Premises in
the condition required under Paragraph 15, and Landlord may reenter and
take possession of".
22. Paragraph 26, on page 25 is deleted in entirety.
LANDLORD: TENANT:
SANTA CLARA PROPERTY ASSOCIATES FMC CORPORATION
A CALIFORNIA GENERAL PARTNERSHIP A DELAWARE CORPORATION
By: California State Teachers By: /s/ A. M. QUILICI
---------------------------- -----------------------------------
Retirement System, a Partner A. M. Quilici
Title: VICE PRES & GEN MGR - ORD DIV
--------------------------------
/s/ AUTHORIZED SIGNATORY Date: 9 FEB. 1987
---------------------------- ---------------------------------
Date: 2/17/87 By:
--------------------- ------------------------------------
36
<PAGE>
By: Silicon Valley Portfolio Partners, Title:
Ltd., a California Limited ------------------------
Partnership, a Partner Date:
------------------------
By: Grubb & Ellis Investor
Associates II, a California
Limited Partnership, its
General Partner
/s/ AUTHORIZED SIGNATORY
--------------------------------
Date: FEBRUARY 13, 1987
-----------------------
37
<PAGE>
THIRD AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE is dated for reference purposes only as
September 6, 1996, and is part of that Lease dated May 23, 1979 together with
Amendment No. 1 dated November 25, 1985, and Amendment To Lease dated
February 9, 1987 thereto (collectively, the "Lease") by and between
California State Teachers' Retirement System, a retirement system created
pursuant to the laws of the State of California ("Landlord"),
Successor-In-Interest to Santa Clara Property Associates and United Defense,
L.P., a limited partnership managed by FMC Corporation, a Delaware
corporation ("Tenant"), and is made with reference to the following fact:
A. The Premises currently leased by Tenant pursuant to the Lease
consists of 48,666 rentable square feet commonly known as 150 Brokaw Road,
City of San Jose, California.
B. The Lease Term for said Premises currently expires on December 31,
1996.
C. Tenant and Landlord have agreed to extend the Term of the Lease.
NOW, THEREFORE, Landlord and Tenant hereby agree that the Lease Terms
are amended as follows:
1. LEASE TERM: Paragraph 3 is hereby amended to provide that the
Lease Term shall be extended through and including December 31, 1998.
2. RENT: Commencing January 1, 1997, Paragraph 5 is hereby
amended to provide for the Basic Rent as follows:
January 1, 1997 through and including December 31, 1998: $51,099.30 per
month
3. RETAINED REAL ESTATE BROKERS: Tenant warrants that it has not
had any dealings with any real estate brokers or salesmen or incurred any
obligations for the payment of real estate brokerage commissions or finder's
fees which would be earned or due and payable by reason of the execution of
this Lease Amendment. Tenant will defend (with counsel reasonably acceptable
to Landlord) and indemnify Landlord against any claims or awards of brokerage
fees or commissions or finder's fees which are made against or incurred by
Landlord on account of any breach of the foregoing warranty.
4. NOTICES: Paragraph 21 is hereby amended to provide that
notices to Landlord shall be made to:
AMB Institutional Realty Advisors
505 Montgomery Street
5th Floor
San Francisco, Ca 94111
5. CONDITION OF PREMISES: It is agreed that the entire 48,666
square foot Building leased hereunder is leased strictly on an "as is" basis,
and in its present condition and configuration, without representation or
warranty, express or implied, by Landlord as to the condition or repair of
the Premises, nor as to the use or occupancy which may be made of the
Premises. Landlord shall not be required to make, nor be responsible for any
cost in connection with, any repair, restoration and/or improvement to the
Premises in order for Tenant to take occupancy of the Premises hereunder or
for this Lease Term to commence.
6. Except as expressly set forth in this Amendment, all terms and
conditions of the Lease remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Third
Amendment to be effective as of the date first set forth above.
LANDLORD: TENANT:
CALIFORNIA STATE TEACHERS' UNITED DEFENSE, L.P.,
<PAGE>
RETIREMENT SYSTEM, a limited partnership
a retirement system created pursuant managed by FMC Corporation,
to the laws of the State of a Delaware corporation
California
By: AMB Institutional Realty By: /s/ AUTHORIZED SIGNATORY
Advisors, Inc., --------------------------
a California corporation, [Please provide Name]
as Investment Manager
Title: VICE PRESIDENT & GENERAL MANAGER
---------------------------------
[Please provide Title]
By: /s/ JOHN L. ROSSI
-------------------------------
John L. Rossi, Vice President Date: SEPTEMBER 16, 1996
---------------------------------
Date: 9/30/96
-------------------------------
39
<PAGE>
LEASE AGREEMENT
1. PARTIES: The parties to this Lease Agreement (the "Lease") dated
February 16, 1984 are JOHN ARRILLAGA, Trustee, or his Successor Trustee UTA
dated 7/20/77 (JOHN ARRILLAGA SEPARATE PROPERTY TRUST) as amended, and
RICHARD T. PEERY, Trustee, or his Successor Trustee UTA dated 7/20/77
(RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended, (hereinafter referred
to as "Landlord"), and FMC CORPORATION, a Delaware corporation (hereinafter
referred to as "Tenant").
2. PROPERTY LEASED: Landlord hereby leases to Tenant, and Tenant
hereby leases from Landlord upon the terms and conditions as set forth herein
all of that certain building of approximately 48,700 plus or minus square
feet together with parking appurtenant thereto, located at 215 Devcon Drive,
San Jose, California, as shown within the area outlined in Red on Exhibit A
attached hereto and by reference made a part hereof. The Premises leased
hereunder are leased strictly on an "as is" basis, and in the configuration
set forth on Exhibit B attached hereto, and by reference, made a part hereof.
3. TERM: The term of this Lease shall be for a period of THREE
YEARS, FIVE MONTHS, commencing April 1, 1984, and terminating 3 yrs 5 months
thereafter on August 31, 1987.
4. USE OF PREMISES: Tenant shall use the Premises only for the
purpose for which they were designed, to wit: offices, administration,
engineering, personnel, research & development, and only in conformance with
applicable laws for any lawful activity including the manufacturing, storage
and distribution of electronic equipment and requisite office use therewith,
excluding manufacturing or storage activities outside of an enclosed
structure, except with the written consent of the Landlord.
5. RENT:
A. BASIC: Tenant shall pay Landlord as rental the sums set
forth in subparagraph B below (the "Monthly Installments") each month in
advance on the first day of each month, commencing on the commencement date
and continuing through the term of this Lease, together with additional rents
as are hereinafter specified.
Said rental shall be paid by Tenant without deduction or offset,
prior notice or demand at:
PEERY/ARRILLAGA
FILE 1504
PO BOX 60000
SAN FRANCISCO, CA 94160
or such other place or places as may be designated by Landlord from time to
time during the term of this Lease.
B. MONTHLY INSTALLMENT.
(1) On April 1, 1984, the sum of THIRTY THOUSAND FIVE HUNDRED
NINETY THREE DOLLARS ($30,593.00) shall be due, and a like sum due on the
first day of June, July and August, 1984.
(2) On September 1, 1984, the sum of FORTY EIGHT THOUSAND SEVEN
HUNDRED DOLLARS ($48,700.00) shall be due, and a like sum due on the first
day of each month thereafter through and including August 1, 1985.
(3) On September 1, 1985, the sum of FIFTY ONE THOUSAND ONE
HUNDRED THIRTY FIVE DOLLARS ($51,135.00) shall be due and a like sum due on
the first day of each month thereafter through and including August 1, 1986.
(4) On September 1, 1986, the sum of FIFTY THREE THOUSAND FIVE
HUNDRED SEVENTY DOLLARS ($53,570.00) shall be due, and a like sum due on the
first
<PAGE>
day of each month thereafter for the full remaining term hereof, or until the
entire aggregate rental of ONE MILLION NINE HUNDRED NINETY THREE THOUSAND
EIGHT HUNDRED TWENTY FIVE DOLLARS ($1,993,825.00) has been paid.
C. LATE CHARGES: In the event Tenant fails to pay the basic rent
within five (5) days written notice of its being due, Tenant agrees to pay a
late charge of FIVE HUNDRED DOLLARS ($500.00) which is not a penalty, but
Landlord and Tenant agree that in the event of a late installment it would be
impractical or extremely difficult to determine the extra expenses caused
Landlord by such late installment and therefore the parties agree that said
late charge of Five Hundred Dollars ($500.00) represents a reasonable
compensation to Landlord for such late installment. In no event shall a late
charge be assessed before the 5th day following the date upon which written
notice is given.
D. ADDITIONAL RENT. All taxes, charges, costs and expenses
which Tenant is required to pay hereunder, together with all interest and
penalties that may accrue thereon in the event of Tenant's failure to pay
such amounts, which Landlord may incur by reason of any default of Tenant or
failure on Tenant's part to comply with the terms of this Lease, shall be
deemed to be additional rent ("Additional Rent") and, in the event of
non-payment by Tenant, Landlord shall have all the rights and remedies with
respect thereto as Landlord has for the non-payment of the rent.
Any payment due from Tenant to Landlord, specifically
including, but not limited to, the Monthly Installment and Additional Rent
(including late charges), shall bear simple interest at the rate of ten
percent (10%) per annum from the due date thereof to the date of payment.
6. NO ABATEMENT OR TERMINATION OF RENT: It is the intention of the
parties that, except as specifically set forth in Article 17 entitled
"Condemnation" and Article 16 entitled "Damage and Destruction," and Article
32 entitled "Tenant's Right to Terminate Lease", Tenant shall, in all months
of the Lease Term, pay to Landlord the rent, Additional Rent and all other
sums required herein. Tenant's obligations and covenants, specifically
including, without limitation, Tenant's obligation to pay the rent,
Additional Rent and all other sums required herein, shall be absolute and
shall not be subject to any abatement, refund, termination, diminution or
reduction for any cause or reason whatsoever, save and except as set forth in
Articles 16 and 17 and 32. Tenant's obligations and covenants shall not be
affected or discharged by virtue of or because of any present or future
governmental laws, ordinances, or for any other cause or reason whatsoever.
7. SECURITY DEPOSIT: There shall be no security deposit.
8. POSSESSION: Possession of the Premises, and commencement of this
Lease Agreement shall be deemed to occur on April 1, 1984. It is
acknowledged that Tenant is currently in possession of approximately 27,992
square feet of the Premises leased hereunder under separate sublease
agreement as set forth in Paragraph 1 hereof, and that commencement of this
lease with respect to said 27,992 square feed of space is not contingent upon
any improvement, repair or restoration by Landlord, nor upon any other
contingency. In the event Landlord fails to deliver possession of the
remaining 20,708 to Tenant by April 1, 1984, this Lease shall not be void or
voidable, but in such event, this Lease shall commence with respect to 27,992
square feet of space, and the rental and other Additional Rent charges shall
be adjusted so that commencement of payment by Tenant for such Rent and
Additional Rent with respect to the additional 20,708 square feet of space
shall not occur until such time as said 20,708 square feet of space is so
delivered to Tenant by Landlord; provided, however, that such delay in
surrendering said additional 20,708 square feet of space does not exceed one
hundred twenty (120) days (acts of God, strikes, war, utilities, governmental
bodies, weather, and other delays beyond Landlord's control excepted).
9. INSPECTION AND ACCESS. Tenant shall permit Landlord and
Landlord's agents to enter the premises with FMC escort at all reasonable
times for the purposes of inspecting the same, or for the purpose of making
repairs that Tenant has neglected or refused to make in accordance with this
Lease; and also for the purpose of showing the same to persons wishing to
lease at any time within ninety (90) days prior to the expiration of this
Lease, or at
2
<PAGE>
any reasonable time for the purpose of showing the Premises to a prospective
purchaser or lender.
10. TAXES AND OTHER CHARGES.
A. Tenant shall pay and discharge, punctually and when same shall
become due and payable without penalty, all real estate taxes, personal
property taxes, taxes based on vehicles utilizing parking areas in the
Premises, taxes computed or based on rental income (other than federal, state
and municipal income taxes), environmental surcharges, privilege taxes,
excise taxes, business and occupation taxes, gross sales and/or use taxes,
occupational license taxes, water and sewer charges, assessments (including,
but not limited to, its prorata share of assessments for public improvements
or benefit; and all other governmental impositions and charges of every kind
and nature whatsoever, whether or not now customary or within the
contemplation of the parties hereto and regardless of whether the same shall
be extraordinary or ordinary, general or special, unforeseen or foreseen, or
similar or dissimilar to any of the foregoing (all of the foregoing being
hereinafter collectively called "Tax" or "Taxes") which, at any time during
the Lease Term, shall be applicable to the Premises or assessed, levied or
imposed upon the Premises or become due and payable and a lien or charge upon
the Premises, or any part thereof, under or by virtue of any present or
future laws, statutes, ordinances, regulations or other requirements of any
governmental authority whatsoever. The term "Environmental Surcharges" shall
include any and all expenses, taxes, charge or penalties imposed by the
Federal Environmental Protection Agency, the Federal Clean Air act or any
regulations promulgated thereunder, or any other local, state or federal
governmental agency or entity now or hereafter vested with the power to
impose taxes, assessments or other types of surcharges as a means of
controlling or
abating environmental pollution in regard to the use, operation or occupancy
of the Premises. It is the intention of the parties that Landlord shall be
free from all such expenses and all such taxes and all other governmental
impositions and charges of every kind and nature whatsoever. Nothing in this
Lease contained shall require Tenant to pay any franchise, estate,
inheritance, transfer or excess profits tax imposed upon Landlord; provided,
however, that if at any time during the Lease Term there should be levied,
assessed and imposed (i) a tax, assessment, levy, imposition or charge,
wholly or partially as a capital levy or otherwise based or measured in whole
or in part on the rent payable by Tenant under this Lease, or (ii) a license
fee measured by the rent payable by Tenant under this Lease, or (iii) any
other levy in lieu of or equivalent to any Tax set forth in this Article 10,
then all such taxes, assessments, levies, fees, impositions, or charges shall
be paid by Tenant and shall be deemed to be included within the term "Tax"
for the purposes hereof.
B. If by law any Tax is payable or may, at the option of the
taxpayer, be paid in installments, Tenant may whether or not interest shall
accrue on the unpaid balance thereof, pay the same, and any accrued interest
on any unpaid balance thereof, in installments as each installment becomes
due and payable, but in any event, before any fine, penalty, interest or cost
may be added thereto for non-payment of any installment or interest.
C. Any Tax relating to a fiscal period of a taxing authority, a
part of which is within the Lease Term and a part of which is subsequent to
the Lease Term, shall be apportioned and adjusted between Landlord and Tenant
based upon a 365-day year. Such apportionment shall be made whether or not
such Tax shall be assessed, levied, imposed, or shall become a lien upon the
Premises or shall become payable during the Lease Term. With respect to any
Tax for public improvements or benefits which by law is payable or, at the
option of the Landlord, may be paid in installments, Landlord shall pay the
installments thereof which become due and payable subsequent to the
expiration of the Lease Term; and Tenant shall pay all such installments
which become due and payable at any time during the Lease Term even though
actual payment is postponed beyond the end of the Lease Term by Tenant.
D. Tenant shall furnish to Landlord five (5) days prior to the
last date when any Tax will become delinquent, official receipts or other
proof satisfactory to Landlord evidencing payment thereof, subject to
Paragraph E below.
E. Tenant shall have the right to contest or review the amount or
validity of
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any such Tax by appropriate legal proceedings (but which is not to be deemed
or construed in any way as relieving, modifying or extending Tenant's
covenant to pay any such Tax at the time and in the manner as provided in
this Article).
F. Any contest as to the validity or amount of any Tax or
assessed valuation upon which such Tax was computed or based, whether before
or after payment, shall be made by Tenant in Tenant's own name, or, if
required by law, in the name of Landlord or both Landlord and Tenant.
Landlord shall cooperate in any such contest, and Tenant shall indemnify and
save harmless Landlord from any and all costs or expenses, including attorney
fees, in connection with any such proceedings brought by Tenant. Tenant
shall be entitled to any refund of any such Tax and penalties or interest
thereon which have been paid by Tenant.
G. The certificate, advice or bill of the appropriate official
(designated by law to make or issue the same or to receive payment of any
such Tax) of the non-payment of any such Tax, shall be conclusive of the fact
that such Tax was due and unpaid at the time of the making or issuance of
such certificate, advice or bill.
H. In the event that Tenant shall fail to pay any such Tax or
other expense which might create a lien against the real property, required
to be paid after the same shall become due and payable, Landlord shall have
the right, at its option, to pay the same with all interest and penalties
thereon, and the amount so paid, with interest thereon from the date of such
payment at the rate of ten percent (10%) per annum, shall be deemed to be
Additional Rent hereunder and shall be due and payable by Tenant on the first
day of the month following the month in which payment by Landlord was made.
Landlord's right to make payment under this Paragraph H is a cumulative right
and shall not be construed to be a waiver of any other rights of Landlord
under law or under this Lease Agreement.
I. Notwithstanding the provisions of paragraphs A-H above, if any
general or special assessment is levied and assessed against the Premises,
Landlord can elect to either pay the assessment in full or allow the
assessment to go to bond. If Landlord pays the assessment in full, Tenant
shall pay to Landlord each time a payment of real property taxes is made a
sum equal to that which would have been payable (as both principal and
interest) had Landlord allowed the assessment to go to bond.
J. Tenant's liability to pay real property taxes shall be
prorated on the basis of a 365-day year to account for any fractional portion
of a fiscal tax year included in the term of its commencement and expiration.
11. INSURANCE.
A. Landlord shall, during the Lease Term, at Tenant's sole
expense, procure and keep in force the following insurance coverage, subject
to the ordinary deductible amount of $1,000.00, which amount shall be
Tenant's expense:
(1) "All Risk" coverage, including flood insurance but not
including earthquake insurance on the Improvements and all buildings,
improvements, building equipment and fixtures and personal property affixed
or attached to real property located on or in the Premises, including any
buildings or fixtures hereinafter constructed or installed thereon, in the
full amount of the replacement cost thereof. Such full replacement cost
shall be determined by mutual agreement annually, based on actual changes in
replacement cost, on or prior to the anniversary date of the Commencement
Date. If the parties are unable to agree on the full replacement cost, the
matter shall be resolved by arbitration administered by and in accordance
with the rules of the American Arbitration Association in San Jose,
California, provided that the arbitrators selected shall have at least ten
(10) years' experience in the real estate appraisal or general contracting
business.
(2) Business interruption insurance insuring that one hundred
percent (100%) of the rent and other sums required to be paid by Tenant
hereunder will be paid to Landlord for a period of twelve (12) months if the
Improvements are destroyed or damaged by a risk insured against by the "all
risk" insurance described above.
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B. Tenant shall, during the Lease Term, at Tenant's sole expense,
procure and keep in force the following insurance coverage, or self insure
for the following exposures, under the following terms:
(1) Plate glass insurance
(2) Comprehensive public liability insurance protecting against
any and all liabilities related to the condition, use or occupancy of the
Premises with limits of One Million Dollars ($1,000,000.00) for bodily injury
or death as a result of any one occurrence, and Five Hundred Thousand Dollars
($500,000) for property damage as a result of any one occurrence. It is
agreed that the limits of insurance specified above are the minimum amounts
required by Landlord and the parties shall agree to revise such limits from
time to time to mutually agreed amounts to meet changed circumstances,
including, but not limited to, changes in purchasing power of the dollar and
changes indicated by the amount of plaintiff's verdicts in personal injury
actions in the county in which the Premises are located. If the parties are
unable to agree on the amount by which such limits are to be increased, the
controversy shall be resolved by arbitration administered by and in
accordance with the rules of the American Arbitration Associates in San Jose,
California, provided that the arbitrators selected shall have at least ten
(10) years experience in the liability insurance business.
C. All insurance policies or policies of self insurance required
under the provisions of this Article 11 which are to be acquired by Tenant,
shall name the Landlord, Tenant, and the beneficiary of any mortgage or deed
of trust secured by the Premises as insureds and all payments shall be made
as their interests appear.
D. All policies including policies of self insurance provided for
in this Article 11 which are to be acquired by Tenant, shall be in such form
and with such companies authorized to write insurance in the state in which
the Premises are located as may be approved by Landlord, which approval
Landlord agrees not to unreasonably withhold. Originals of the policies
provided for herein or, in the case of comprehensive public liability
insurance, certificates of insurance evidencing the policy provided for
herein, shall be delivered to Landlord and shall certify that the policy may
not be cancelled or altered without thirty (30) days prior written notice to
Landlord. The certificate required herein shall also certify that (i) the
coverage provided insures performance of the indemnity set forth in Article
12, and (ii) the coverage provided is primary and any coverage by Landlord is
in excess thereto.
E. In those situations whereby Landlord shall obtain and maintain
such insurance coverage and pay premiums therefore, all premiums so paid by
Landlord, together with interest thereon at the rate of ten percent (10%) per
annum from the 30th day following the billing of Tenant for such costs, shall
be deemed Additional Rent hereunder, and shall be paid by Tenant to Landlord
upon demand.
F. In the event that Tenant fails to obtain and maintain any
insurance or provide self insurance as required herein, Landlord may, after
ten (10) days written notice to Tenant, but shall not be obligated to, obtain
and maintain such insurance coverage and pay premiums therefor. All premiums
so paid by Landlord, together with interest thereon at the rate of ten
percent (10%) per annum from the date of such payment, shall be deemed
Additional Rent hereunder, and shall be paid by Tenant to landlord upon
demand. Any such expenses and damages shall bear interest at the rate of ten
percent (10%) per annum from the date that the loss or damage occurs until
paid by Tenant.
12. INDEMNITY AND EXCULPATION. Tenant agrees to indemnify Landlord and
hold Landlord harmless except for the active negligence or willful misconduct
from any and all liability, loss, cost, expenses, attorneys' fees, or
obligations on account of, or arising out of the use, condition or occupancy of
the Premises, Tenant agrees to defend Landlord against any litigation or
threatened litigation relating to any incident relating to the subject premises
to which the Landlord is named as a defendant provided, however, this obligation
shall not apply where the Landlord was advised in writing as to the discrepancy
for which the Landlord was responsible under the terms of the Lease. It is
understood that Tenant is and shall be in control and possession of the Premises
and that except for the active negligence or willful misconduct Landlord shall
in no event be responsible or liable for any injury or damage to any property of
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Tenant or any other person, or for damage or injury to any other person
whatsoever, happening on, in, about or in connection with the Premises, or
for any injury or damage to the Premises or any part thereof. This Lease
Agreement is entered into on the express condition that except for its active
negligence or willful misconduct Landlord shall not be liable for, or suffer
loss by reason of, injury to person or property, from whatever cause, which
in any way may be connected with the use, condition or occupancy of the
Premises or personal property therein or thereon, including without
limitation, any liability for injury to the person or property of Tenant,
Tenant's agents, officers, employees, invitees, or any other person. The
provisions of this Lease Agreement permitting Landlord to enter and inspect
the Premises are for the purposes of enabling Landlord to become informed as
to whether Tenant is complying with the terms of this Lease Agreement, and
Landlord shall be under no duty to enter and inspect or to perform any of
Tenant's covenants set forth in this Lease Agreement.
13. COMPLIANCE WITH LAWS AND REGULATIONS.
A. Tenant shall, at Tenant's sole cost, comply with all laws,
regulations, rules, orders, ordinances and requirements of all governmental
authorities (including, but not limited to, federal, state, county and city
governments and any department or agency thereof) now in force or which may
hereafter be in force, whether or not the same are now contemplated by the
parties pertaining to the use, condition, occupancy or occupational safety of
the Premises. The judgment of any court of competent jurisdiction after
final appeal or the admission of Tenant in any action or proceeding against
Tenant, whether Landlord be a party thereto or not, that Tenant has violated
any such law, requirement, rule, order, ordinance or regulation in the use,
condition or occupancy of the Premises shall be conclusive of the fact of
such violation by Tenant. Tenant shall indemnify and hold Landlord harmless
from any and all liability or obligation arising out of Tenant's failure to
comply with any requirement, law, rule, order, ordinance and regulation of
any governmental agency now or hereafter in force pertaining to the use,
condition, occupancy or occupational safety of the Premises.
14. UTILITIES. Tenant shall pay all utility charges and post
construction connection fees, including, but not limited to, water, gas,
light, heat, power, electricity, telephone or other communication service,
scavenger, trash pickup, sewer, air conditioning or any other service or
utility supplied to or consumed on the Premises, or any tax, fee, levy or
surcharge therefor.
15. ALTERATIONS, REPAIRS AND MAINTENANCE.
A. Tenant agrees that Tenant will not demolish or undertake any
structural alterations of the Improvements, or any part thereof, now existing
or hereafter erected upon the Premises, or make any other alterations which
would change the character of said Improvements or which would weaken or
impair the structural integrity or lessen the value of said Improvements, or
make any alterations, additions, enlargements or improvements thereof without
the prior written consent of Landlord, which shall not be unreasonably
withheld. As a condition for giving its consent, Landlord may require that
Tenant post a completion bond in amount (not to exceed the estimated
construction cost) and form specified by Landlord. As a further condition
for giving its consent, Landlord may require Tenant to agree to restore the
Premises to their original condition at the termination of this Lease.
B. Subject to the provisions of Article 16 relating to destruction
of or damage to the Premises, Tenant shall, at Tenant's own expense, keep and
maintain the entire Premises including (excluding roof and exterior walls),
without limiting the generality of the foregoing, the interior, electrical
wiring and connections, plumbing, sewer system, heating and air conditioning
installation, truck doors, storefront, and its pro-rata share of the common
area, sidewalks, landscaping and paving of the Premises in good condition and
repair, excepting ordinary wear and tear. The term "repair" shall include
replacements, restorations, and/or renewals when necessary, as well as painting
and decorating. Except as otherwise provided, The Tenant's obligation shall
extend to all alterations, additions and improvements to the Premises, all
fixtures and appurtenances therein and thereto, all equipment thereof,
including, but not limited to, all machinery, pipes, plumbing, wiring, gas,
steam and electrical fittings, sidewalks, paving, water, sewer and gas
connections, heating equipment, air conditioning equipment and machinery, and
all other fixtures, machinery and equipment belonging to or connected with the
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Premises. Landlord agrees to assume responsibility for maintaining and
repairing the five sprinkler systems but Tenant shall be responsible for any
costs associated with such maintenance or repair. Tenant shall indemnify and
save Landlord harmless against and from all costs, resulting from Tenant's
failure to comply with the foregoing: and Tenant hereby expressly releases
and discharges Landlord of and from any liability therefor, except for that
which results from the active negligence or willful misconduct of Landlord.
C. Landlord shall, at the request of Tenant, assign to Tenant any
guarantees and warranties received from contractors or equipment suppliers
relating to the constructed or construction of the Improvements.
D. Tenant waives the provisions of any law requiring that
Landlord make repairs except as otherwise provided herein and further waives
the provisions of any law allowing Tenant to make repairs at the expense of
Landlord, except in the case of roof leaks. In the event that Tenant has
given Landlord reasonable notice as to a roof leak, and Landlord has not
responded within a reasonable time, Tenant may make such emergency repairs as
are necessary to mitigate damage to Premises or to Tenant's possessions
and/or equipment.
E. At the expiration of the term of this Lease, or upon sooner
termination as provided herein, Tenant shall surrender the Premises in good
condition and in as good order and condition as at the commencement of the
Lease Term, normal wear and tear excepted, and all carpeting shampooed and
vinyl floors cleaned and waxed. Nothing provided in this subparagraph shall
diminish or reduce Tenant's obligations under subparagraphs A through D
above.
16. DAMAGE AND DESTRUCTION.
A. If the Improvements are damaged or destroyed in whole or in
part from any cause (except condemnation), Landlord may, at its option:
(1) Rebuild the Premises to their prior condition, in which event
Tenant agrees that the proceeds of any all insurance policies required
hereinabove shall be applied to the cost of rebuilding. In the event the
insurance proceeds exceed the cost of rebuilding, Tenant shall be entitled to
receive the excess.
(2) Terminate the Lease provided that the rebuilding cannot be
accomplished within one hundred fifty (150) days after the date of damage or
terminate the Lease should there be no insurance proceeds available for
reconstruction. Provided, however, that in the event that insurance proceeds
are insufficient to rebuild the Premises, Tenant may, at Tenant's option, pay
to Landlord in cash no later than the date of commencement of construction
the difference between the insurance proceeds and the contracted cost of
rebuilding, in which case Landlord agrees to rebuild the Premises.
(3) Notwithstanding the provisions of paragraphs (1) and (2)
above, Tenant may, by giving Landlord sixty (60) days prior written notice,
terminate the Lease if the Improvements cannot be replaced or restored within
one hundred fifty (150) days after the date of damage.
B. If Landlord does not give Tenant notice in writing within
thirty (30) days from the damage or destruction of the Improvements of
Landlord's election to rebuild them, Landlord shall be deemed to have elected
to rebuild the Premises and continue the Lease. Tenant hereby expressly
waives the provisions of any law requiring Landlord to make such repairs, or
of any law allowing the Tenant to make such repairs at Landlord's expense
and, without limiting the foregoing, Tenant specifically waives any statutes
which permit Tenant to terminate this Lease upon destruction or to make
repairs at the expense of Landlord.
C. In the event of damage or destruction, whether from an insured or
uninsured casualty, the rent otherwise payable hereunder shall be abated for the
period commencing with the date of damage or destruction and ending with (1) the
date of completion of the repair or restoration, if the Lease is not terminated
or (2) the date of termination of the
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Lease. The amount of the abatement shall be in proportion to the square
footage of the Premises damaged or destroyed by the casualty.
17. CONDEMNATION.
A. DEFINITION OF TERMS. For the purpose of this Lease the term:
(1) "Taking" means a taking of the Premises or damage thereto related
to the exercise of the power of eminent domain by any agency, authority, public
utility, persons or corporate entity empowered to condemn property.
(2) "Total Taking" means the taking of the entire Premises or so much
of the Premises as to prevent or substantially impair the use thereof by Tenant
for the uses herein specified, but in no event shall Total Taking be less than
twenty percent (20%) of the Premises.
(3) "Partial Taking" means the taking of only a portion of the
Premises which does not constitute a Total Taking.
(4) "Date of Taking" means the date upon which title to the Premises,
or a portion thereof, passes to and vests in the condemnor or the effective date
of any order for possession if issued prior to the date title vests in the
condemnor.
(5) "Award" means the amount of any award made, consideration paid,
or damages ordered as a result of a Taking.
B. RIGHTS. The parties agree that in the event of a Taking all
rights between them or in and to an Award shall be as set froth herein and
Tenant shall have no right to any Award except as set forth herein. Except as
otherwise provided herein and unless and until the Lease is terminated pursuant
to the provisions of this Lease, Tenant shall continue to pay to Landlord all
rent required in this Lease, and Tenant shall faithfully keep and observe all
other terms, conditions, and covenants of this Lease, all without any claim for
any abatement, refund, diminution or reduction or other expense whatsoever, and
there shall be no abatement of rent whatsoever due to the commencement or threat
of commencement of condemnation proceedings or due to any other cause whatsoever
(except as provided in Paragraphs C and D below).
C. TOTAL TAKING. In the event of a Total Taking during the term
hereof (i) the rights of Tenant in and to the Premises shall cease and terminate
as of the Date of Taking, (ii) Landlord shall refund to Tenant any prepaid rent,
(iii) Tenant shall pay to Landlord any rent or charges due Landlord under the
Lease each prorated as of the Date of Taking, (iv) Tenant shall be entitled to
moving expenses, relocation allowances, business interruption expenses, and
amounts for trade fixtures which have not become affixed to and become part of
the real property, if separately awarded, and any other amounts separately
awarded Tenant, and (v) the remainder of the Award shall be paid to and be the
property of Landlord.
D. PARTIAL TAKING. In the event of a Partial Taking during the term
hereof, (i) the rights of Tenant under the Lease and the leasehold estate of
Tenant in and to the portion of the Premises taken shall cease and terminate as
of the Date of Taking, (ii) the remainder of the Award shall be paid to and be
the property of Landlord, (iii) Tenant shall be entitled to moving expenses,
relocation allowances, business interruption expenses, and amounts for trade
fixtures which have not become affixed to and become part of the real property,
if the above items are separately awarded, and any other amounts separately
awarded Tenant, (iv) Tenant shall comply with the provisions of subparagraph E
hereof, and (v) from and after the Date of Taking the Minimum Rent shall be
reduced in the proportion that the building area of the portion of the Premises
taken bears to the total building area of the Premises prior to the Taking. The
value of the Award shall be the total amount of the Award minus any portion of
the Award for consequential damages minus any portion of the Award attributable
to Trade Fixtures and other separately allocated costs of the Tenant.
E. In the event of a Partial Taking, Landlord shall have the
option to either (a) terminate the Lease, in the case where 30% or more of
the building area is taken or (b) within forty-five (45) days after receipt
of the Award proceed to rebuild, repair and restore the
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remainder of any building on the Premises affected thereby to a complete
independent and self-contained architectural unit. In the event the Partial
Taking causes the Premises to be reduced in such a manner that the Tenant is
unable to utilize said Premises for the use intended, then Tenant may
terminate this Lease within forty-five (45) days after receipt of the Award
upon written notice to Landlord as more specifically set forth under Article
21.
18. SUBORDINATION.
A. This Lease and all rights of Tenant under this Lease are and
shall, at the option of Landlord, be subject and subordinate to any mortgage
(including a consolidated mortgage) or deed of trust, which may now or
hereafter effect the Premises, or any part thereof, and to any and all
renewals, modifications, consolidations, replacements and extensions of any
such mortgage or deed of trust. If Tenant is not in default, this Lease will
not be terminated.
B. Subject to Paragraph A above, Tenant shall, upon Landlord's
request, execute within fifteen (15) working days following such request (1)
any instrument of subordination presented by Landlord to Tenant necessary to
subordinate this Lease to any such mortgage or deed of trust to be placed on
the Premises, or any part thereof by Landlord and (2) any amendment to this
Lease requested by the lender providing initial permanent financing for the
Improvements provided that any such amendment does not materially affect the
rights of Tenant under this Lease.
19. DEFAULT.
A. Upon the breach of this Lease by Tenant or upon any Event of
Default (as defined in this Lease), Landlord shall have the following
remedies, in addition to all other rights and remedies provided by law, to
which Landlord may resort cumulatively, or in the alternative:
(1) Landlord may at Landlord's election reenter the Premises, and
without terminating this Lease, and at any time from time to time, relet the
Premises or any part or parts of them for the account and in the name of
Tenant or otherwise. Landlord may at Landlord's election eject Tenant or any
of Tenant's subtenants, except subtenants approved in writing by Landlord,
assignees, or other persons claiming any right under or through this Lease.
Tenant shall nevertheless pay to Landlord on the due dates specified in this
Lease all the sums required of Tenant under this Lease, less the proceeds of
any sublease or reletting. The expenses allowed Landlord shall include
without limitation: costs paid to retake possession and reasonable costs to
place the Premises in its original condition, costs to secure new tenants
(including broker's commissions) and costs to fulfill all of Tenant's
covenants and conditions to the end of the term. No act by or on behalf of
Landlord under this subparagraph (1) shall constitute a termination of this
Lease unless Landlord gives Tenant written notice of termination.
(2) Landlord shall be entitled, at Landlord's election, to keep
the Lease in full force and effect and to enforce all of its rights and
remedies under the Lease, including the right to recover the rent and other
sums as they become due, plus interest at the rate of ten percent (10%) per
year from the due date of each installment of rent or other sum until paid.
(3) Landlord may, upon default or breach by Tenant, at Landlord's
election, terminate this Lease by giving Tenant 30 days written notice of
termination. On the giving of the notice, all of Tenant's rights in the
Premises and in the leasehold estate shall terminate and within thirty days
after Notice of Termination. Tenant shall surrender and vacate the Premises
in broom-clean condition, and Landlord may reenter and take possession of the
Premises and eject Tenant or any of Tenant's subtenants and/or assignees,
except subtenants and/or assignees approved in writing by Landlord, or other
person or persons claiming any right under or through Tenant or eject some
and not others or eject none. This Lease may also be terminated by a
judgment specifically providing for termination. Any termination under this
paragraph shall not relieve Tenant from the payment of any sum then due to
Landlord or from any claim for breach, damages or rent previously accrued.
In no event shall any one or more of the following actions by Landlord
constitute a termination of this Lease:
(i) Maintenance, or restoration, or preservation of the
Premises;
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(ii) Efforts to relet the Premises;
(iii) Appointment of a receiver in order to protect
Landlord's interest hereunder;
(iv) Consent to any subletting of the Premises by Tenant,
whether pursuant to provisions hereof with concern to subletting or otherwise;
(v) Any other action by Landlord or Landlord's agents
intended to mitigate the adverse effects of any breach of this Lease by
Tenant.
(4) In the event of termination pursuant to subparagraph (3),
Landlord shall be entitled at Landlord's election to damages in the following
sums:
(i) The worth at the time of the award of unpaid rent
which has been earned at the time of termination; plus
(ii) The worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until
the time of award exceeds the amount of such rental loss that Tenant proves
could have been reasonably avoided; plus
(iii) The worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental that Tenant proves could be reasonably
avoided; and
(iv) Any other amount necessary to compensate Landlord
for all detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which in the ordinary course of things would
be likely to result therefrom including without limitation the following:
(1) Expenses for cleaning, repairing and restoring the Premises; (2) Expenses
for repairing and repainting and otherwise restoring the Premises for the
purpose of reletting, (whether such be funded by a reduction of rent, direct
payment or allowance to tenant, or otherwise); (3) Broker's fees, attorneys'
fees, advertising costs and other expenses of reletting the Premises; (4)
Costs of carrying the Premises such as repairs, restoration, maintenance,
taxes and insurance premiums, utilities and security precautions; (5)
Expenses in retaking possession of the Premises; and (6) Attorneys' fees and
court costs.
(v) The "worth at the time of Award" of the amounts
referred to in subparagraphs (i) and (ii), above, is computed by allowing
interest at the rate of ten percent (10%) per annum, unless previously
calculated herein. The "worth at the time of Award" of the amount referred
to in subparagraph (iii) above, is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of
Award plus one percent (1%).
B. A breach of this Lease shall exist if any of the following
events (severally "Event of Default" and collectively "Events of Default")
shall occur:
(1) Default shall have occurred in the payment of rent or other
payment not made after five (5) days written notice to Tenant;
(2) Tenant shall have assigned its assets for the benefit of its
creditors; or
(3) The sequestration or attachment of, or execution on, any
substantial part of the property of Tenant or on any property essential to
the conduct of Tenant's business shall have occurred and Tenant shall have
failed to obtain a return or release of such property within thirty (30) days
thereafter, or prior to sale pursuant to such sequestration, attachment or
levy, whichever is earlier; or
(4) Tenant shall have abandoned or vacated the Premises; or
(5) Tenant shall have failed to perform any term, covenant or
condition contained in this Lease other than nonpayment of monies due
Landlord, where such failure shall not have been cured within fifteen (15)
business days after written notice of such failure;
10
<PAGE>
provided that if the failure cannot be reasonably cured within said fifteen
(15) day period, Tenant shall not be in default if it commences the cure
within said ten (10) day period and diligently prosecutes the cure to
completion; or
(6) A court having jurisdiction shall have made or entered any
decree or order; (a) adjudging Tenant to be bankrupt or insolvent; (b)
approving as properly filed a petition seeking reorganization of Tenant or an
arrangement under the bankruptcy laws or any other applicable debtor's relief
law or statute of the United States or any State thereof; (c) appointing a
receiver, trustee or assignee of Tenant in Bankruptcy or insolvency or for
its property; or (d) directing the winding up or liquidation of Tenant; and
such decree or order shall have continued for a period of thirty (30) days;
or Tenant shall have voluntarily submitted to or filed a petition seeking any
such decree or order.
20. HOLDING OVER. This Lease shall terminate without further notice at
the expiration of the Lease Term. Any holding over by Tenant after
expiration shall not constitute a renewal or extension or give Tenant any
rights in or to the Premises except as expressly provided in this Lease. Any
holding over after the expiration with the consent of Landlord shall be
construed to be a tenancy from month to month, at one hundred twenty-five
percent (125%) of the existing Rent, and shall otherwise be on the terms and
conditions herein specified insofar as applicable.
21. NOTICES. Any notice required or desired to be given under this
Lease shall be in writing with copies directed as indicated below and shall
be personally served or given by mail. Any notice given by mail shall be
deemed to have been given when forty-eight (48) hours have elapsed from the
time which such notice was deposited in the United States mails, certified or
registered and postage prepaid, addressed to the party to be served with a
copy as indicated herein at the last address given by that party to the other
party under the provisions of this part. At the date of execution of this
Lease, the address of Landlord is:
PEERY & ARRILLAGA
2460 Mission College Blvd.
Suite 101
Santa Clara, CA 95050-1222
with a copy to:
and the address of Tenant is:
OED Manager of Facilities FMC CORPORATION
FMC CORPORATION Western Administrative Offices
P.O. Box 1201 Law Department
San Jose, California 95108 1105 Coleman Avenue
San Jose, California 95106
22. NONASSIGNMENT. Tenant's interest in this Lease is not assignable,
by operation of law or otherwise, nor shall Tenant have the right to sublet
the Premises, transfer any interest of Tenant's herein or permit any use of
the Premises by another party without the prior written consent of Landlord,
which consent Landlord agrees not to unreasonably withhold. A consent to one
subletting, occupation or use by another party shall not be deemed to be a
consent to any subsequent subletting, occupation or use by another party
shall not be deemed to be a consent to any subsequent subletting, occupation
or use by another party. Any or subletting without such consent shall be
void and shall, at the option of Landlord, terminate this Lease.
Landlord's waiver or consent to any subletting hereunder shall not
relieve Tenant from any obligation under this Lease unless the consent shall
so provide.
23. SUCCESSORS. The covenants and agreements contained in this Lease
shall
11
<PAGE>
be binding on the parties hereto and on their respective successors.
24. MORTGAGEE PROTECTION. In the event of any default on the part of
Landlord, Tenant will give notice by registered or certified mail to any
beneficiary of a deed of trust or mortgagee of a mortgage, encumbering the
Premises whose address shall have been furnished it, and shall offer such
beneficiary or mortgagee a reasonable opportunity to cure the default,
including time to obtain possession of the Premises by power of sale or
judicial foreclosure, if such should prove necessary to effect a cure.
25. LANDLORD LOAN OR SALE. Tenant agrees promptly but no latter than
fifteen (15) days following request by Landlord to (A) execute and deliver to
Landlord any documents, including estoppel certificates presented to Tenant
by Landlord, (i) certifying that this Lease is unmodified and in full force
and effect, or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect and
the date to which the rent and other charges are paid in advance, if any, and
(ii) acknowledging that there are not, to Tenant's knowledge, any uncured
defaults on the part of Landlord hereunder, or if there are uncured defaults,
stating the nature and status of such defaults, and (iii) evidencing the
status of the Lease as may be required either by a lender making a loan to
Landlord to be secured by deed of trust or mortgage covering the Premises or
a purchaser of the Premises from Landlord and (B) to deliver to Landlord the
current financial statements of Tenant certified by Tenant to be true and
correct, including a balance sheet for the most recent prior fiscal year all
prepared in accordance with generally accepted accounting principles
consistently applied. The only financial statement that Tenant shall be
required to deliver to Landlord pursuant to this clause shall be a current
balance sheet with the opinion of a certified public accountant, if
available, and Tenant shall only be required to deliver such financial
statement when Landlord is engaged in negotiations for a bona fide sale or
refinancing of the Premises. Tenant's failure to deliver an estoppel
certificate promptly following such request shall be conclusive upon Tenant
(a) that this Lease is in full force and effect, without modification except
as may be represented by Landlord, (b) that there are now no uncured defaults
in Landlord's performance and (c) that no rent has been paid in advance
except those that are set forth in this Lease.
26. SURRENDER OF LEASE NOT MERGER. The voluntary or other surrender of
this Lease by Tenant, or a mutual cancellation thereof, shall not work a
merger and shall, at the option of Landlord, terminate all or any existing
subleases or subtenants, or operate as an assignment to Landlord of any or
all such subleases of subtenants.
27. WAIVER. The waiver of Landlord or Tenant of any breach of any
term, covenant or condition herein contained shall not be deemed to be a
waiver of such term, covenant or condition on any subsequent breach of the
same or any other term, covenant or condition herein contained.
28. WASTE, QUIET CONDUCT AND ENJOYMENT. Tenant shall not commit, or
suffer to be committed, any waste upon the Premises, or any nuisance, or
other acts or things which may disturb, the quiet enjoyment of any occupants
of neighboring properties. Landlord shall not unlawfully disturb the quiet
enjoyment of Tenant.
29. SIGN. Tenant shall not place or permit to be placed any sign or
decoration on the land or the exterior of the building, including the roof,
without the prior written consent of Landlord. Tenant, upon notification by
Landlord shall immediately remove any sign or decoration that Tenant has
placed or permitted to be placed without the prior written consent of
Landlord, and if Tenant fails to so remove such sign or decoration within
five (5) days after Landlord's request, Landlord may enter upon the Premises
and remove said sign or decoration and Tenant agrees to pay to Landlord, as
additional rent, the cost of such removal.
30. WAIVER OF SUBROGATION. Landlord hereby releases Tenant and Tenant
hereby releases Landlord and their respective officers, agents, employees and
servants, from any and all claims and demands for damage, loss, expense or
injury to the Premises, or to the furnishings and fixtures and equipment or
inventory or other property of either Landlord or Tenant in, about, or upon the
Premises, as the case may be, which is caused by or results from perils, events
or happenings which are the subject of insurance carried by the Landlord or
Tenant and in force at the time of any such loss; provided, however, that such
waiver shall be effective
12
<PAGE>
only to the extent permitted by the insurance covering such loss and to the
extent such insurance is not prejudiced thereby or the expense of such
insurance is not thereby increased.
31. GENERAL.
A. The paragraph headings used in this Lease are for the purposes
of convenience only. They shall not be construed to limit or extend the
meaning of any part of this Lease.
B. The term Landlord as used in this Lease, so far as the
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner at the time in question of the fee
title of the Premises, and in the event of any transfers or transfers of the
title of such fee, the Landlord herein named (and in case of any subsequent
transfers or conveyances, the then grantor) shall after the date of such
transfer or conveyance be automatically freed and relieved of all liability
with respect to performance of any covenants or obligations on the part of
Landlord contained in this Lease, thereafter to be performed provided, that
any funds in the hands of Landlord or the then grantor at the time of such
transfer, in which Tenant has an interest, shall be turned over to the
grantee. It being intended that the covenants and obligations contained in
this Lease on the part of Landlord shall, subject as aforesaid, be binding
upon each Landlord, its heirs, personal representatives, successors and
assigns only during its respective period of ownership.
C. Any executed copy of this Agreement shall be deemed an
original for all purposes.
D. Time is of the essence for the performance of each term,
covenant and condition of this Lease.
E. In case any one or more of the provisions contained herein,
except for the payment of rent, shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not effect any provision of this Lease, but this Lease
shall be construed as if such invalid, illegal or unenforceable provision had
not been contained herein. This Lease shall be construed and enforced in
accordance with the laws of the State of California.
F. Whenever the lessor's prior consent, approval or permission is
referred to herein as a condition or requirement, same shall not be
unreasonably withheld.
G. All references to attorney's fees, costs and expenses herein
shall be deemed to be reasonable attorney's fees, costs and expenses.
H. Landlord's liability under the terms of this Lease insofar a
such liability relates to the obligation of Landlord to perform under the
terms and conditions herein contained shall be limited to the net worth of
the partnership so long as such net worth is equal to or better than that
which exists at the present time, and shall not extend to the personal assets
of the individuals hereunder.
I. The undersigned parties hereby warrant that they have proper
authority and are empowered to execute this Lease on behalf of the Landlord
and Tenant respectively.
J. Notwithstanding any provisions of the Lease, the Tenant shall
have approval authority over issuance of or changes to the reasonable rules
and regulations applicable to common areas, which approval shall not be
unreasonably withheld by the Tenant.
K. The parties to this Lease recognize and agree that there shall
not be any common areas within the leased Premises.
L. Insurance:
Tenant's liability to pay any insurance provided for within
the Lease shall be prorated on the basis of a 365-day year to account for any
fractional portion of a fiscal insurance billing year included in the term
its commencement.
13
<PAGE>
32. TENANT'S RIGHT TO TERMINATE LEASE: It is hereby agreed that so
long as Tenant is not in default in any of the terms, covenants and
conditions of this Lease Agreement, Tenant shall have the right to terminate
this Lease Agreement by giving written notice to Landlord of Tenant's
election to so terminate this Lease prior to July 1, 1984, in which event,
this Lease shall terminate on August 31, 1984 subject to the terms and
conditions of this Lease Agreement. In the event Tenant fails to timely
exercise Tenant's right to terminate this Lease, this Paragraph 32 shall be
null and void, and of no further force and effect, and this Lease Agreement
shall continue in full force and effect for the full remaining term hereof,
absent of this Paragraph 32.
33. LEASE SUBJECT TO TERMINATION OF CURRENT LEASE WITH CURRENT TENANT,
AND TERMINATION OF SUBLEASE BETWEEN TENANT AND CURRENT TENANT:
A. LEASE SUBJECT TO TERMINATION OF CURRENT LEASE: It is
understood that the Premises leased hereunder are currently leased by another
tenant (hereinafter referred to as ECS), and that this Lease is subject to
and contingent upon Landlord's obtaining a lease termination agreement
satisfactory to Landlord from ECS on or before April 1, 1984. In the event
said lease termination agreement satisfactory to Landlord is not obtained by
April 1, 1984, this Lease Agreement may be terminated at the option of either
party.
B. TERMINATION OF SUBLEASE BETWEEN TENANT AND CURRENT TENANT:
Tenant is currently subleasing a portion of the Premises hereunder from ECS,
which sublease expires August 31, 1984. It is hereby agreed that upon early
termination of the current lease with ECS, the said sublease between Tenant
and ECS shall terminate, and be of no further force and effect, and this
Lease Agreement shall be deemed the sole and only agreement of Tenant for the
Premises leased hereunder.
34. PREMISES LEASED ON "AS IS" BASIS: It is agreed that the entire
48,700 plus or minus square foot building is leased strictly on an "as is"
basis, and in its present condition and configuration without representation
or warranty by Landlord, express or implied, as to the condition or repair of
the Premises, and that Landlord shall not be required to make nor be
responsible for any cost in connection with any repair, restoration,
alteration and/or improvement to the Premises except as provided in Paragraph
15B herein, in order for Tenant to take occupancy of the Premises leased
hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
20th day of February, 1984.
TENANT: LANDLORD:
FMC CORPORATION JOHN ARRILLAGA SEPARATE
a Delaware corporation PROPERTY TRUST
BY: /s/ Adolph M. Quilici BY: /s/ John Arrillaga
------------------------------- --------------------------------
3/8/84 JOHN ARRILLAGA, TRUSTEE
RICHARD T. PEERY SEPARATE
PROPERTY TRUST
BY: /s/ Richard T. Peery
--------------------------------
RICHARD T. PEERY, TRUSTEE
14
<PAGE>
AMENDMENT TO LEASE
This Amendment to Lease, entered into this 9th of February, 1987, by and
between SANTA CLARA PROPERTY ASSOCIATES, a California General Partnership,
hereinafter referred to as the "Landlord" as Successor to the original
Landlord, John Arrillaga Separate Property Trust and Richard T. Peery
Separate Property Trust as Landlord, and FMC CORPORATION, a Delaware
Corporation, hereinafter referred to as the "Tenant".
RECITALS
A. Whereas by Lease dated February 16, 1984, Landlord has leased to Tenant
approximately 48,700 plus or minus square feet of that certain building
located at 215 Devcon Drive, San Jose, California hereinafter referred to as
the "Premises". The details of which are more particularly set forth in said
Lease agreement, and,
B. Whereas Landlord and Tenant acknowledge that along with this Amendment to
Lease the parties are simultaneously executing three (3) additional
Amendments to Lease for the Premises known as: 1800 Bering Drive, San Jose,
California, 1830 Bering Drive, San Jose, California, 150 Brokaw Road,
San Jose, California, and,
C. Whereas it is now the desire of the parties hereto to amend said Lease
agreement as hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, provisions and conditions hereinafter set forth, the parties
hereto agree that this Amendment to Lease supersedes the aforementioned Lease
and as such all of the terms and conditions of the lease shall remain in full
force and effect excepting for the items contained herein. The changes are
as follows:
1. TERM: Paragraph 3, page 1 is hereby amended to read as follows: The term
of this Lease shall be for a period of ten (10) hears commencing January 1,
1987, and terminating on December 31, 1996, upon the same terms and
conditions as said February 16, 1984 Lease agreement, except for the terms
modified by this Amendment to Lease.
2. Paragraph 5B, page 2 is hereby amended to read as follows: The monthly net
rental shall be as follows:
215 DEVCON DRIVE - 48,700 PLUS OR MINUS SQUARE FEET
PERIOD MONTHLY ANNUALLY
January 1, 1987 - December 31, 1987 = $26,785.00 $321,420.00
January 1, 1987 - December 31, 1987 = $26,785.00 $321,420.00
January 1, 1987 - December 31, 1987 = $26,785.00 $321,420.00
January 1, 1987 - December 31, 1987 = $26,785.00 $321,420.00
January 1, 1987 - December 31, 1987 = $26,785.00 $321,420.00
January 1, 1987 - December 31, 1987 = $31,655.00 $379,860.00
January 1, 1987 - December 31, 1987 = $31,655.00 $379,860.00
January 1, 1987 - December 31, 1987 = $36,525.00 $438,300.00
January 1, 1987 - December 31, 1987 = $41,395.00 $496,740.00
January 1, 1987 - December 31, 1987 = $41,395.00 $496,740.00
---------- -----------
TOTAL RENT DUE $3,798,600.00
<PAGE>
The above rental shall be paid as stipulated until the total aggregate amount
of $3,798,600.00 has been paid.
1. Improvement Allowance: Landlord and Tenant acknowledge the parties are
simultaneously executing four Amendments to Lease for the following
properties: 1800 Bering Drive, 1830 Bering Drive, 215 Devcon Drive, 150
Brokaw Road and as such Landlord agrees to reimburse Tenant an average
of $225,000 per property but in no event shall Landlord's reimbursement
to Tenant exceed $425,000 for any one property up to a total aggregate
amount of $900,000 for all four properties for purposes of Tenant
remodeling the existing properties to suit Tenant's requirements subject
to the following provisions: A minimum aggregate amount of $660,000
must be used for improvements specifically related to the four
buildings. The balance of the allowance (aggregate) may be used for
expenses that may not be directly related to improvements; those
expenses may include (but would not be limited to) new phone equipment,
local-area-networking (for computers), space planning or architectural
fees, movable partitioning, furniture, etc.
Said total aggregate reimbursement allowance of $900,000 for all four
properties will be paid to Tenant monthly as expenses are incurred.
Reimbursement to Tenant will be made within thirty (30) days of Said
total aggregate reimbursement allowance of $900,000 for all four
properties will be Landlord's receipt of the invoice. The cumulative
reimbursement requests will not exceed the following schedule:
CUMULATIVE
INVOICES REIMBURSEMENT
SUBMITTED THROUGH REQUESTS
----------------- ----------
January 31, 1987 $150,000
February 28, 1987 $300,000
March 31, 1987 $450,000
April 30, 1987 $450,000
May 31, 1987 $600,000
June 30, 1987 $750,000
July 31, 1987 $900,000
Landlord and Tenant further acknowledge that Tenant will be solely
responsible for improvements to the Premises under this provision and
that any and all costs above said $900,000 shall be paid by Tenant;
However, nothing contained herein shall relieve Landlord of its
responsibility for alterations, maintenance and repairs in accordance
with Paragraph 15, of Lease.
4. SEISMIC IMPROVEMENTS: Landlord hereby agrees to perform seismic
modifications to the Premises in accordance with Landlord's seismic
consultant's recommendations up to a maximum of $50,000. Landlord will
be solely responsible for any and all costs associated with said
modifications including the restoration of the Premises to its condition
prior to the seismic modifications. Landlord agrees to schedule said
seismic modifications in a manner that will minimize the disruption of
Tenant's use of the Premises.
5. Paragraph 4, on page 1 is amended to include the following:
COMPLIANCE, HAZARDOUS AND TOXIC MATERIALS.
(i) Tenant shall not use the premises or suffer or permit
anything to be done in or about the Premises which will in any way
conflict with any law, rule, regulation or requirement of duly
constituted public authorities now in force or which may hereafter
be in force, or the requirements of the Board of Fire Underwriters
or other similar body now or hereafter constituted relating to or
affecting the condition, use or occupancy of the Premises. Tenant
shall not commit any public or private nuisance or any other act
or thing which might or would disturb the quiet enjoyment of any
other tenant of Landlord or any occupant of nearby property.
Tenant shall place no loads upon the floors, walls or ceilings in
excess
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<PAGE>
of the maximum designed load determined by Landlord or which
endanger the structure; nor place any harmful liquids in the
drainage systems; nor dump or store waste materials or refuse or
allow such to remain outside the building proper, except in the
enclosed trash areas provided. Tenant shall not store or permit to
be stored or otherwise place any other material of any nature
whatsoever outside the building.
(ii) In particular, Tenant, at its sole cost, shall comply with
all laws relating to the storage, use and disposal of hazardous,
toxic or radioactive matter, including those materials identified
in Sections 66680 through 66685 of Title 22 of the California
Administrative Code, Division 4, Chapter 30 ("Title 22") as they
may be amended from time to time (collectively "Toxic Materials").
Tenant shall be solely responsible for and shall defend, indemnify
and hold Landlord and its Agents harmless from and against all
claims, costs and liabilities, including attorneys' fees and
costs, arising out of or in connection with its storage, use and
disposal of Toxic Materials. Tenant shall further be solely
responsible for and shall defend, indemnify and hold Landlord and
its Agents harmless from and against any and all claims, costs,
and liabilities, including attorneys' fees and costs, arising out
of or in connection with the removal, clean-up and restoration
work and materials necessary to return the Premises and any other
property of whatever nature to their condition existing prior to
the appearance of the Toxic Materials on the Premises. Tenant's
obligations hereunder shall survive the termination of this Lease.
6. HOLDING OVER: Paragraph 20, page 21, is amended to increase the
holdover rate as follows: The holdover rate shall be increased to one
hundred fifty percent (150%) of the existing rent.
7. REAL ESTATE BROKERS: The parties acknowledge that Grubb & Ellis
Commercial Brokerage and LaSalle Partners are the only brokers involved
in connection with this transaction and that Landlord shall pay a
commission to Brokers in accordance with its separate agreement with
Grubb & Ellis Commercial Brokerage. Said Commission shall be split on a
(50/50) basis between Grubb & Ellis and LaSalle Partners.
8. RENTAL CREDIT: The parties acknowledge that Tenant has paid monies in
excess of rental due in 1987 under Paragraph 2 above, and upon full
execution of said Amendment to Lease, Landlord shall apply the credit
balance to Tenant's future rent payments.
9. SUBORDINATION: Paragraph 18A, page 16 is amended as follows: The last
sentence in Paragraph 18A is changed to read, "So long as Tenant is not
in default of the Lease, this Lease shall not be terminated or modified
because of any mortgage or sale of the Premises".
10. DAMAGE AND DESTRUCTION: Paragraph 16A(3), page 13 is amended as
follows: Notwithstanding the provisions of Paragraphs (1) and (2) above,
and Paragraph 16B below, Tenant may, but giving Landlord sixty (60) days
prior written notice, terminate the Lease if the improvements cannot be
replaced or restored within one hundred fifty (150) days after the date
of damage.
11. PREMISES LEASE STRICTLY ON "AS IS" BASIS: Paragraph 34, page 27, is
amended to read as follows: It is agreed that the entire 48,700 plus or
minus square foot building leased hereunder is leased strictly on an "as
is" basis, and in its present condition and configuration, without
representation or warranty, express or implied, by Landlord as to the
condition or repair of the Premises, nor as to the use or occupancy
which may be made of the Premises. Landlord shall not be required to
make, nor be responsible for any cost in connection with, any repair,
restoration and/or improvement to the Premises in order for Tenant to
take occupancy of the Premises hereunder or for this Lease to commence,
except as specifically provided in this Amendment to Lease.
12. Paragraph 19B(5), page 20, line 8 is amended as follows: "said fifteen
(15) day period and diligently prosecutes the cure".
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<PAGE>
13. INSURANCE: Paragraph 11B(2), page 8, is amended to increase the
insurance coverage limitations as follows: comprehensive public
liability insurance shall be increased to limits of TWO MILLION FIVE
HUNDRED THOUSAND AND NO/1OO DOLLARS ($2,500,000.00) for bodily injury or
death for property damage as a result of any one occurrence.
14. Notwithstanding Paragraph 13 (Insurance) above, paragraph 11B(2), page 8
of Lease is amended by deleting the balance of the paragraph beginning
with the last word in line 6.
15. Paragraph 11C, on page 8, line 5 is amended to read "by the Premises as
additional insureds and all payments shall be made".
16. Paragraph 11D, pages 8 and 0, is amended to read as follows: All
policies including policies of self insurance provided for in this
Article 11 which are to be acquired by Tenant, shall be in such form and
with such companies authorized to write insurance in the state in which
the Premises are located as may be approved by Landlord, which approval
Landlord agrees not to unreasonably withhold. Certificates of insurance
evidencing the policy(ies) provided for herein, shall be delivered to
landlord and shall certify that the policy may not be canceled or
materially altered without thirty (30) days prior written notice to
Landlord.
17. Paragraph 12, page 9, lines 1 and 2 is amended to read as follows:
"Tenant agrees to indemnify and hold Landlord harmless except for
Landlord's active negligence".
18. Paragraph 19A(3), pages 17 and 18, lines 5 through 7 is amended to read
as follows: "estate shall terminate, and within thirty (30) days after
notice of termination, Tenant shall surrender and vacate the Premises in
the condition required under Paragraph 15, and Landlord may reenter and
take possession of".
19. Paragraph 26, on page 23 is deleted in entirety.
LANDLORD: TENANT:
SANTA CLARA PROPERTY ASSOCIATES FMC CORPORATION,
A CALIFORNIA GENERAL PARTNERSHIP A DELAWARE CORPORATION
By: California State Teachers By: /s/ A. M. Quilici
Retirement System, a Partner ---------------------------------
A. M. Quilici
Title: V.P. & General Mgr. Ord. Div.
------------------------------
Date: 9 Feb. 87
--------------------------------
By: /s/ Authorized Signatory
----------------------------- By:
----------------------------------
Date: 2/17/87
--------------------------- Title:
-------------------------------
By: Silicon Valley Portfolio Partners,
Ltd., a California Limited Date:
--------------------------------
- -------------------------------------
Partnership, a Partner
By: Grubb & Ellis Investor
Associates II, a California
Limited Partnership, its
General Partner
/s/ Authorized Signatory
--------------------------------
Date: February 13, 1987
--------------------------
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<PAGE>
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE is dated for reference purposes only as
September 6, 1996, and is part of that Lease dated February 16, 1984 together
with the Amendment to Lease dated February 9, 1987 thereto (collectively, the
"Lease") by and between CALIFORNIA STATE TEACHERS' RETIREMENT SYSTEM, A
RETIREMENT SYSTEM CREATED PURSUANT TO THE LAWS OF THE STATE OF CALIFORNIA
("Landlord"), Successor-In-Interest to Santa Clara Property Associates and
UNITED DEFENSE, L.P., A LIMITED PARTNERSHIP MANAGED BY FMC CORPORATION, A
DELAWARE CORPORATION ("Tenant"), and is made with reference to the following
facts:
A. The Premises currently leased by Tenant pursuant to the Lease
consists of 48,700 rentable square feet commonly known as 215 Devcon Drive,
City of San Jose, California.
B. The Lease Term for said Premises currently expires on December 31,
1996.
C. Tenant and Landlord have agreed to extend the Term of the Lease.
NOW, THEREFORE, Landlord and Tenant hereby agree that the Lease Terms
are amended as follows:
1. LEASE TERM: Paragraph 3 is hereby amended to provide that the
Lease Term shall be extended through and including December 31, 1998.
2. RENT: Commencing January 1, 1997, Paragraph 5 is hereby
amended to provide for the Basic Rent as follows:
January 1, 1997 through and including December 31, 1998: $51,135.00 per
month
3. RETAINED REAL ESTATE BROKERS: Tenant warrants that it has not
had any dealings with any real estate brokers or salesmen or incurred any
obligations for the payment of real estate brokerage commissions or finder's
fees which would be earned or due and payable by reason of the execution of
this Lease Amendment. Tenant will defend (with counsel reasonably acceptable
to Landlord) and indemnify Landlord against any claims or awards of brokerage
fees or commissions or finder's fees which are made against or incurred by
Landlord on account of any breach of the foregoing warranty.
4. NOTICES: Paragraph 21 is hereby amended to provide that
notices to Landlord shall be made to:
AMB Institutional Realty Advisors
505 Montgomery Street
5th Floor
San Francisco, CA 94111
5. CONDITION OF PREMISES: It is agreed that the entire 48,700
square foot Building leased hereunder is leased strictly on an "as is" basis,
and in its present condition and configuration, without representation or
warranty, express or implied, by Landlord as to the condition or repair of
the Premises, nor as to the use or occupancy which may be made of the
Premises. Landlord shall not be required to make, nor be responsible for any
cost in connection with, any repair, restoration and/or improvement to the
Premises in order for Tenant to take occupancy of the Premises hereunder or
for this Lease Term to commence.
6. Except as expressly set forth in this Amendment, all terms and
conditions of the Lease remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Second Amendment
to be effective as of the date first set forth above.
<TABLE>
<CAPTION>
LANDLORD: TENANT:
CALIFORNIA STATE TEACHERS' UNITED DEFENSE, L.P.,
RETIREMENT SYSTEM A LIMITED PARTNERSHIP
a retirement system created pursuant to the laws MANAGED BY FMC CORPORATION
of the State of California a Delaware corporation
<S> <C>
By: AMB Institutional Realty Advisors, Inc. By: /s/ Authorized Signatory
a California corporation, ------------------------------------
as Investment Manager [Please provide Name]
By: /s/John L. Rossi, Vice President Title: Vice President & General Manager
------------------------------------- --------------------------------
John L. Rossi, Vice President [Please provide Title]
Date: 9/30/96 Date: September 16, 1996
------------------------------------ --------------------------
</TABLE>
<PAGE>
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
UNITED DEFENSE L.P.
($ IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
FIXED CHARGES:
(1/3) of rent expense.................................................. $ 3.6 $ 4.3 $ 4.3 $ 3.3 $ 3.9
Interest expense....................................................... -- -- -- -- --
--------- --------- --------- --------- ---------
Total Fixed Charges.................................................. $ 3.6 $ 4.3 $ 4.3 $ 3.3 $ 3.9
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
ADJUSTED EARNINGS:
Equity earnings--foreign subsidiaries.................................. $ 12.4 $ 21.4 $ 31.9 $ 31.3 $ 13.5
Dividends received from foreign subsidiaries........................... 12.5 21.4 28.1 28.1 13.9
--------- --------- --------- --------- ---------
Equity earnings adjustment (a)......................................... 0.1 0.0 (3.8) (3.2) 0.4
Net income before taxes (b)............................................ 133.4 109.1 101.0 84.5 70.4
Fixed charges (from above) (c)......................................... 3.6 4.3 4.3 3.3 3.9
NUMERATOR: SUM OF (A), (B), & (C)
Adjusted Income & Fixed Charges........................................ 137.1 113.4 101.5 84.6 74.7
--------- --------- --------- --------- ---------
DENOMINATOR:
Fixed charges.......................................................... 3.6 4.3 4.3 3.3 3.9
--------- --------- --------- --------- ---------
RATIO OF EARNINGS TO FIXED CHARGES..................................... 38.1 26.4 23.6 25.6 19.2
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
<PAGE>
EXHIBIT 12.2
PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
UNITED DEFENSE INDUSTRIES, INC.
($ IN MILLIONS)
<TABLE>
<CAPTION>
YEAR
ENDED 9-MONTHS 9-MONTHS 12-MONTHS
DECEMBER SEPTEMBER SEPTEMBER SEPTEMBER
1996 1996 1997 1997
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
FIXED CHARGES:
(1/3) of rent expense ......................... $ 4.3 $ 3.3 $ 3.9 $ 4.9
Interest expense .............................. 66.1 49.6 49.6 66.1
-------- --------- --------- ----------
Total Fixed Charges ........................ $ 70.4 $ 52.9 $ 53.5 $ 71.0
======== ========= ========= ==========
ADJUSTED EARNINGS:
Equity earnings -- foreign subsidiaries ....... $ 31.9 $ 31.3 $ 13.5 $ 14.1
Dividends received from foreign subsidiaries .. 28.1 28.1 13.9 13.9
-------- --------- --------- ----------
Equity earnings adjustments (a)................ (3.8) (3.2) 0.4 (0.2)
Net income before taxes (b).................... 2.5 11.0 (3.2) (11.7)
Fixed charges (from above) (c) ................ 70.4 52.9 53.5 71.0
NUMERATOR: SUM OF (A), (B), & (C)
-------- --------- --------- ----------
Adjusted Income & Fixed Charges ............... 69.1 60.7 50.7 59.1
-------- --------- --------- ----------
DENOMINATOR:
Fixed charges ................................. 70.4 52.9 53.5 71.0
-------- --------- --------- ----------
RATIO OF EARNINGS TO FIXED CHARGES............. 1.0 1.1 0.9 .8
======== ========= ========= ==========
DEFICIT OF EARNINGS TO COVER FIXED CHARGES..... (1.3) -- (2.8) (11.9)
======== ========= ========= ==========
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected Historical
Financial Data" and "Experts" in Amendment 1 to the Registration Statement (No.
333-43619) on Form S-4 and related Prospectus of United Defense Industries, Inc.
to be filed on or about February 5, 1998 for the offer to exchange 8 3/4% Senior
Subordinated Notes due 2007 for all outstanding 8 3/4% Senior Subordinated Notes
due 2007 and to our report dated January 15, 1997 with respect to the
consolidated financial statements of United Defense, L.P., our report dated
February 4, 1998 with respect to the balance sheet of United Defense Industries,
Inc. (a wholly-owned subsidiary of Iron Horse Investors, L.L.C.), and our report
dated February 4, 1998 with respect to the consolidated balance sheet of Iron
Horse Investors, L.L.C.
/S/ ERNST & YOUNG LLP
Washington, DC
February 5, 1998
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
_____________________________
___ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
_____________________________
UNITED DEFENSE INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 52-2059782
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1525 WILSON BOULEVARD, SUITE 700
ARLINGTON, VIRGINIA 22209-2411
(Address of principal executive offices) (Zip code)
_____________________________
8 3/4% SENIOR SUBORDINATED NOTES DUE 2007
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Item 1. GENERAL INFORMATION. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. FOREIGN TRUSTEE. Not applicable.
Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of this
Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1 the
exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28,
1872, by the Comptroller of the Currency to
The Northwestern National Bank of
Minneapolis.*
b. A copy of the certificate of the Comptroller
of the Currency dated January 2, 1934,
approving the consolidation of The
Northwestern National Bank of Minneapolis and
The Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity being
titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January 12,
1943, as to change of corporate title of
Northwestern National Bank and Trust Company
of Minneapolis to Northwestern National Bank
of Minneapolis.*
<PAGE>
d. A copy of the letter dated May 12, 1983 from
the Regional Counsel, Comptroller of the
Currency, acknowledging receipt of notice of
name change effective May 1, 1983 from
Northwestern National Bank of Minneapolis to
Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988
from the Administrator of National Banks for
the Comptroller of the Currency certifying
approval of consolidation and merger
effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with
various other banks under the title of
"Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued
January 2, 1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section
321(b) of the Act.
Exhibit 7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with registration
statement number 333-43005.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 7th day of January, 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
-----------------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE>
EXHIBIT 6
January 7, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
-----------------------------
Curtis D. Schwegman
Assistant Vice President
