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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
COMMISSION FILE NUMBER 0-26247
VERITAS SOFTWARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0507675
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1600 PLYMOUTH STREET 94043
MOUNTAIN VIEW, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (650) 335-8000
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of February 29, 2000, 393,597,951 shares of the Registrant's common
stock were outstanding. The number of shares of common stock outstanding
reflects the three-for-two stock split announced by the board of directors of
the Registrant on January 27, 2000 and paid as a stock dividend on March 3, 2000
to stockholders of record on February 18, 2000. The aggregate market value of
the common stock held by non-affiliates of the Registrant as of February 29,
2000 was approximately $31,290,581,886.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive proxy statement, to be delivered to
stockholders in connection with the Registrant's Annual Meeting of Stockholders,
are incorporated by reference into Part III of this Form 10-K.
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TABLE OF CONTENTS
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PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 16
Item 3. Legal Proceedings........................................... 17
Submission of Matters to a Vote of Security Holders
Item 4. Matters..................................................... 17
PART II
Market for the Registrant's Common Equity and Related
Item 5. Stockholder Matters......................................... 18
Item 6. Selected Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition
Item 7. and Results of Operations................................... 20
Quantitative and Qualitative Disclosures About Market
Item 7A. Risk........................................................ 37
Item 8. Financial Statements and Supplementary Data................. 39
Changes in and Disagreements with Accountants on Accounting
Item 9. and Financial Disclosure.................................... 40
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 40
Item 11. Executive Compensation...................................... 40
Security Ownership of Certain Beneficial Owners and
Item 12. Management.................................................. 40
Item 13. Certain Relationships and Related Transactions.............. 40
PART IV
Exhibits, Financial Statement Schedules, and Reports on Form
Item 14. 8-K......................................................... 41
Signatures............................................................. 46
Financial Statements................................................... 47
Exhibits...............................................................
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PART I
ITEM 1. BUSINESS
This annual report on Form 10-K contains forward-looking statements, within
the meaning of Section 21E of the Securities Exchange Act of 1934 and Section
27A of the Securities Act of 1933, that involve risks and uncertainties. These
forward-looking statements include statements regarding our expectations,
beliefs, intentions or strategies regarding the future. All these
forward-looking statements are based on information available to us at this
time, and we assume no obligation to update any of these statements. Actual
results could differ from those projected in these forward-looking statements as
a result of factors identified under "Factors That May Affect Future Results."
We urge you to review and consider the various disclosures made by us in this
report, and those detailed from time to time in our reports and filings with the
SEC, that attempt to advise you of the risks and factors that may affect our
future results.
OVERVIEW
VERITAS is a leading independent supplier of storage management software.
Storage management software has grown significantly in importance and market
impact during the last few years. Computing operations have moved from being
part of the infrastructural background of a business enterprise to being a
critical component in the success of a business, particularly given businesses'
requirements that data remain protected and accessible at all times. VERITAS
products assist businesses by making sure that their data is protected, can be
accessed at all times, and can be managed and used in compliance with business
policies. Since our products help to improve the levels of centralization,
control, automation and manageability in computing environments, they allow
information technology, or IT, managers to be significantly more effective with
constrained resources and limited budgets. More specifically, our products offer
protection against data loss and file corruption, allow rapid recovery after
disk or computer system failure, enable IT managers to work efficiently with
large numbers of files, and make it possible to manage data distributed on large
networks of computer systems without harming productivity or interrupting users.
In addition, our products provide continuous availability of data in clustered
computer systems that share disk resources to maintain smooth business
operations. Our products are highly scalable in order to keep up with the rapid
growth of data and technologies deployed in businesses. In summary, our products
help our customers manage their data storage in complex and diverse computing
environments efficiently and cost-effectively.
We develop and sell products for most popular operating systems, including
versions of UNIX and Windows NT. Our software solutions are used by customers
across a broad spectrum of industries, including many leading global
corporations and e-commerce businesses. We also provide a full range of services
to assist our customers in planning and implementing their storage management
solutions.
We market our products and services to end users either directly or through
original equipment manufacturers and indirect sales channels such as resellers,
value-added resellers, hardware distributors, application software vendors and
systems integrators. Some of our customers include:
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ORIGINAL EQUIPMENT
MANUFACTURERS INDIRECT SALES CHANNELS DIRECT SALES
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Compaq AVCOM Technologies Amazon.com
Dell Ingram Micro American Airlines
EMC Corporation Merisel AT&T
Hewlett-Packard Tech Data Bank of America
Fujitsu-Siemens British Telecom
Microsoft eBay
NEC e*Trade
SGI Ford Motor Company
StorageTek GTE
Sun Microsystems Lucent
Morgan Stanley & Co.
Oracle
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The demand for storage management solutions is fueled by a number of
factors. These factors include the rapid increase in the number of internet
users and the number of businesses doing business online, as well as the
continuing automation of traditional business processes. The widespread use of
business computer applications, coupled with the explosion of corporate data,
has exceeded the ability of current computing architectures to handle
availability, scalability and manageability issues. A new storage-centric
architecture, called storage area networking, or SAN, has emerged to handle
these issues. A storage area network is a high-speed computing network that
directly connects storage hardware devices, such as storage arrays, clustered
servers, disk drives and tape drives, to client and server computers. The
typical SAN infrastructure is capable of handling more data and transactions
faster than a traditional network, can grow along with a business' needs, and is
more cost-effective than traditional network architectures. We are a leading
innovator in developing SAN technology and taking our SAN-capable products to
businesses that can benefit from them.
A key competitive factor for businesses today is whether their critical
data and related applications are available without interruption 24 hours a day,
seven days a week. Our products are designed to enable continuous productivity
for computing environments ranging from the desktop computer to the large
enterprise data center, including storage area networks.
In 1999, we acquired the Network & Storage Management Group of Seagate
Software, Inc., which we refer to as the NSMG business. Before our acquisition
of the NSMG business, we focused primarily on sales of storage management
software to the UNIX platform. Our purchase of the NSMG business enabled us to
offer products that are targeted primarily at the Windows NT market, which
represented another large market for storage management products. In 1999, we
also acquired TeleBackup Systems, Inc., which we refer to as TeleBackup, and
NuView, Inc., which we refer to as NuView. Our acquisitions of the NSMG
business, TeleBackup and NuView contributed to the increase in the number of our
full-time employees, which grew from 945 to 2,974 during 1999. The acquisition
of these businesses has created new challenges for us, including the general
integration of the businesses and product lines. The products shown below
include products acquired from the NSMG business, TeleBackup and NuView.
RECENT DEVELOPMENTS
On March 29, 2000, VERITAS, Seagate Technology, Inc. and an investor group
including Seagate Technology's management group announced a transaction in which
we will acquire all of the shares of our common stock held by Seagate
Technology, certain other securities and cash. We are not acquiring Seagate
Technology's disc drive business or any other Seagate Technology operating
business.
In the transaction, we will issue to the Seagate Technology stockholders
approximately 109.3 million shares of our common stock for approximately 128
million shares of VERITAS common stock held by Seagate Technology. In addition,
we will issue shares of our common stock for certain other securities held by
Seagate Technology at the closing date and, at our election, we may also issue
shares of our common stock for up to $750 million in retained cash at the
closing date.
We will be indemnified for liabilities, including tax liabilities and other
matters that may arise in connection with the transaction. The transaction is
intended to qualify as a tax-free reorganization.
For a detailed discussion of the transaction and the related risks, please
refer to our Form 8-K that will be filed with the SEC on or about April 3, 2000,
as well as the joint proxy statement/prospectus to be filed by both Seagate
Technology and us in connection with the transaction.
PRODUCTS
We offer a wide range of leading storage management software solutions. We
have developed our products to manage the explosive growth of data and the
growing complexity and size of networked environments that exist today. Our
products allow businesses to back up their data, improve the management of their
data, and increase data availability. We also offer several integrated solutions
that further simplify storage management.
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Data protection
We offer products designed to ensure reliable information backup and
restore. Our leading products that protect information include:
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VERITAS NetBackup VERITAS NetBackup has the flexibility and scalability needed
to protect the mission critical data of businesses with
thousands or even tens of thousands of computer systems. It
provides easily configured centralized backup scheduling,
user-directed backups and restores, automated distribution
and installation of client software over a network, and easy
configuration of users' computers. It supports all major
platforms, including UNIX, Windows NT, Novell NetWare and
Linux, and includes support for storage area networks.
VERITAS NetBackup BusinesServer VERITAS NetBackup BusinesServer is a backup and recovery
solution designed for small to mid-size UNIX and high-end
Windows NT installations, and for the many IT operations
that run a combination of the two. It combines strong
performance with an intuitive interface not normally found
in UNIX solutions.
VERITAS Backup Exec VERITAS Backup Exec provides easy-to-use backup and restore
functions, including scheduled automated unattended data
backup operations. It supports Windows NT, Windows 2000 and
Windows 95/98, and has a large array of options to protect
data contained in popular applications such as Microsoft
Outlook and Novell NetWare.
VERITAS TeleBackup VERITAS TeleBackup is an easy-to-use and secure backup and
disaster recovery tool for portable and desktop computers in
remote offices and telecommuting work locations. It supports
users running Sun Solaris, HP-UX and Windows NT servers, and
Windows 95/98 and Windows NT client workstations.
VERITAS Global Data Manager VERITAS Global Data Manager centrally manages VERITAS
NetBackup, VERITAS NetBackup BusinesServer and VERITAS
Backup Exec servers at different geographic locations that
are part of a business' intranet or wide area network. Its
benefits include increased flexibility and control, global
scalability, uninterrupted global operations and reduced
management costs.
VERITAS Storage Migrator VERITAS Storage Migrator, formerly called VERITAS HSM,
increases the availability of critical business data by
ensuring that only frequently used information is kept
online permanently. It migrates infrequently-used data from
online devices to lower cost secondary storage, and recalls
that migrated data to primary online storage when accessed
by users or applications. Separate UNIX and Windows NT
versions of this product are available.
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File and volume management
We offer products designed to improve the manageability and performance of
business critical data. Our principal management and performance products
include:
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VERITAS Volume Manager VERITAS Volume Manager allows for easy to use online disk
storage management for business computing environments. It
provides the tools needed to protect against data loss due
to hardware failure, to accelerate system performance by
allowing files to be spread across multiple disks and to
allow IT managers to reconfigure data locations without
interrupting users.
VERITAS File System VERITAS File System enables fast system recovery, generally
within seconds, from operating system failure or disruption.
It gives mission-critical servers mainframe-level
capabilities by providing superior performance, data
integrity, high availability and online manageability.
VERITAS Foundation Suite VERITAS Foundation Suite combines VERITAS Volume Manager and
VERITAS File System. These two products provide key benefits
independently, but together they take advantage of each
other's specialized disk and data management capabilities to
improve performance, availability and manageability.
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High availability, clustering and replication
We offer products that make businesses' key applications more available in
complex computing environments. These products include:
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VERITAS Cluster Server VERITAS Cluster Server is a comprehensive availability
management solution that maximizes data and application
availability by using proactive management of planned and
unplanned downtime. It reduces the cost of high availability
through a single standby system that protects the
availability of dozens of servers. It is also useful in
storage area networks.
VERITAS ClusterX for Microsoft VERITAS ClusterX for Microsoft Cluster Service, or MSCS,
Cluster Service addresses the management and deployment of multiple
distributed Windows NT clustered computers. It lets users
control the installation, configuration and ongoing
management of multiple MSCS clustered computers from a
single console.
VERITAS ClusterX for WLBS VERITAS ClusterX for WLBS focuses on managing Windows NT
Load Balancing Service servers and improves their
availability, reliability, scalability and performance. It
lets users manage all aspects of enterprise-wide Windows NT
Load Balancing Service clustered computers from a single
console.
VERITAS FirstWatch for Sun VERITAS FirstWatch for Sun provides simple and robust
failover management for the Sun Solaris environment. Fault
detection, isolation and recovery are automated to achieve
rapid restoration of application services in the event of a
failure. An entire application or selected application
services, configured into logical service groups, can be
failed over to a backup system.
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VERITAS Storage Replicator for Volume VERITAS Storage Replicator for Volume Manager helps
Manager businesses ensure that the most current data is available at
all global locations. It is a robust, flexible,
multi-purpose data replication tool designed for enterprise
environments. It integrates with VERITAS Volume Manager to
provide exceptional recoverability and manageability.
VERITAS Storage Replicator for File VERITAS Storage Replicator for File Systems is a robust,
Systems flexible, general purpose data replication tool designed for
use in enterprise environments. It ensures that data written
to one server is reliably replicated to other participating
servers, so that all updates are available for use in active
file systems across all servers.
VERITAS Replication Exec VERITAS Replication Exec delivers flexible and intelligent
data replication for Windows NT environments. It can
efficiently and automatically duplicate files or file
systems at any number of locations for complete data
protection or information distribution. It offers
centralized management, high replication performance,
minimal system requirements, both real-time and
schedule-based replication, and selectable bandwidth usage.
It can also replicate remote data to a central site for
centralized backup.
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Application solutions
Businesses need integrated solutions to optimize their storage management
strategies. Our principal products offering these integrated solutions include:
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VERITAS Desktop Management Suite VERITAS Desktop Management Suite centralizes the management
of distributed network desktop computers by automating tasks
such as operating system and software distribution, hardware
and software inventory, application metering, backup and
remote control. It reduces the total cost of managing
network desktop computers and standardizes the
administration of desktop computers across the enterprise.
VERITAS ManageExec VERITAS ManageExec is a powerful, simple and scaleable
solution for managing the behavior of different types of
networks worldwide from one central location. It
automatically monitors, analyzes and reports on Windows NT
and Novell NetWare systems health, establishes profiles of
normal server and application behavior and sends alerts when
these profiles are not met. As a result, problems that once
may have resulted in computer failure are now resolved
before network users are affected.
VERITAS NerveCenter VERITAS NerveCenter is an event management solution that
helps to ensure high levels of network and application
availability by identifying critical problems and launching
corrective measures automatically. It functions across all
common network devices and applications in UNIX and Windows
NT systems.
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VERITAS WinINSTALL VERITAS WinINSTALL allows businesses to automate software
distribution and standardize versions of software on all
desktop computers across the business enterprise in Windows
95/98, Windows NT and Windows 2000 networks.
VERITAS WinLAND VERITAS WinLAND collects detailed information about a
computer workstation's hardware, its configuration and its
software. It allows users to automatically identify software
on each computer workstation and to scan for and collect
detailed information from unknown files.
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VERITAS Editions
We have also integrated our solutions in a range of product suites
optimized for specific applications including Oracle, Sybase, NFS, SAP and
web-based environments. Our integrated solutions, which we call VERITAS
Editions, include:
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VERITAS Database Edition for Oracle VERITAS Database Edition for Oracle, available in several
configurations, is an integrated suite of several VERITAS
products to deliver improved performance, enhanced
manageability and continuous database access to support the
extremely complex and demanding work of database
administrators operating Oracle servers.
VERITAS Database Edition for Sybase VERITAS Edition for Sybase is an integrated suite of several
VERITAS solutions combined with specialized software agents
to support the increasingly complex Sybase database
environment. Certified by Sybase as the only solution to run
Sybase data servers on file systems, it increases system
performance and manageability.
VERITAS Edition for NFS VERITAS Edition for Network File System, or NFS, is a
comprehensive and cost-effective solution to deliver
superior performance and higher availability for
SPARC/Solaris servers in computing environments that run
both UNIX and Windows. It also meets the demand for improved
manageability of these complex networks, and helps to ensure
efficient workflow for users.
VERITAS Edition for SAP VERITAS Edition for SAP, the enterprise management system
used by many global businesses, is an integrated suite of
VERITAS products optimized to deliver high performance,
easier manageability, and continuous access for SAP
environments using Oracle database servers running on
Solaris. It bundles all the advanced features of the
Database Edition for Oracle with the flexibility and
robustness of VERITAS Cluster Server.
VERITAS Edition for Web VERITAS Edition for Web is designed to optimize the
availability, performance and manageability of web servers,
particularly for internet service providers, or ISPs, and
corporate web server administrators. Based on VERITAS data
and storage management technologies and customized for
SPARC/Solaris systems, it allows web servers to function
effectively as business critical productivity tools.
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SERVICES
Our customer service and support organization provides customers with
maintenance, technical support, consulting and training services. We believe
that providing a high level of customer service and technical support is
critical to customer satisfaction and our success. Most of our customers have
support agreements
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with us that provide for fixed fee, renewable annual maintenance consisting of
technical and emergency support, and minor product upgrades free of charge. Our
service group provides the following services:
Maintenance and technical support
We offer seven day-a-week, 24-hour telephone support, as well as electronic
mail and fax customer support. Our customers can choose from a variety of
support packages to address their specific needs, ranging from one-time incident
charges to comprehensive support services with a dedicated single point of
contact at VERITAS for some of our applications. Additional customer support is
provided by some of our value-added resellers, system integrators and original
equipment manufacturers.
Consulting
We believe that most customers need assistance before product selection and
not just for the implementation of purchased products. Therefore, we offer
strategy and analysis consulting services for planning the management and
control of enterprise computing in specific customer environments. In addition,
we offer services to assist customers with product implementation. As part of
our broad range of services, we believe we offer particular expertise in
analyzing network security threats and security policy integrity.
Training
We have a worldwide customer education and training organization, which
offers training that enables customers to utilize our products, reduces the need
for technical support and provides customers with a means to optimize their
personnel investment by allowing their technical staff access to high quality,
comprehensive instruction. The focus of this organization is aligned with our
strategy to offer end-to-end storage management solutions by providing
instruction from highly-experienced training professionals either at the
customer's location or at one of our multi-platform classrooms.
MARKETING, SALES AND DISTRIBUTION
We market our products and related services through original equipment
manufacturers and a combination of other distribution channels such as direct
sales, resellers, value-added resellers, hardware distributors, application
software vendors and systems integrators. Original equipment manufacturers
incorporate our products into their operating systems on a bundled basis or
license them to third parties as an optional product. In most cases, we receive
a user license fee for each copy sublicensed by the original equipment
manufacturer to third parties. We provide our software products to customers
under non-exclusive license agreements, including shrink-wrap licenses for
certain products. As is customary in the software industry, in order to protect
our intellectual property rights, we do not sell or transfer title to our
software products to customers. We enter into both object-code only and
source-code licenses of our products.
Microsoft relationship
In August 1996, we entered into a development and license agreement with
Microsoft under which we agreed to develop a version of our Volume Manager
product, which Microsoft has called Logical Disk Manager, to be ported to and
embedded in version 5.0 of Microsoft's Windows NT operating system, which now
has been released as Windows 2000. We do not receive royalties with respect to
sales by Microsoft of the embedded product. Our products may not become
available for use in, and Microsoft is not required to use our products in,
future versions of Windows NT. We cannot assure you that we will realize any
benefits from the inclusion of this embedded product in Windows 2000 or future
versions of Windows NT. In addition, we authored several other customized
versions of our products to be packaged with Windows 2000, such as the backup
application, NetBackup, the Removable Storage Services, and the software
distribution feature, which was licensed by Microsoft as WinINSTALL LE and is an
abridged version of VERITAS WinINSTALL.
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Sun Microsystems relationship
In January 1997, we entered into a development, license and distribution
agreement with Sun Microsystems that provided a new distribution channel for our
products. We developed a specialized, integrated version of VERITAS Volume
Manager that is bundled with some of Sun Microsystems' storage technologies. The
agreement also provided for the license of full versions of some of our products
and add-on modules to Sun Microsystems for bundling with some Sun Microsystems
products. In August 1998, we amended the agreement and granted Sun Microsystems
a license to distribute and sub-license VERITAS NetBackup, VERITAS Storage
Migrator and some of the VERITAS Editions. This license is non-exclusive except
with respect to certain named resellers for which Sun Microsystems retained
exclusive distribution rights. We may not be able to deliver our products to Sun
Microsystems in a timely manner despite the dedication of resources to the
development of the products. Also, simultaneous sales efforts by Sun
Microsystems and ourselves with respect to our products could create channel
conflicts. Sun Microsystems is not obligated to sell any of our products under
this agreement.
In November 1999, we announced that Sun Professional Services would be
providing our packaged professional services as well as our custom consulting.
This is designed to enable Sun Microsystems' and our customers to maximize their
system availability through optimal configurations and reliable installations.
We cannot assure you that this arrangement will be successful.
Hewlett-Packard relationship
In November 1997, we entered into a marketing, engineering and distribution
agreement with Hewlett-Packard, under which Hewlett-Packard will offer some of
the components of the lite versions, or functional subsets of VERITAS Volume
Manager, VERITAS Cluster Volume Manager, VERITAS NetBackup and VERITAS File
System with the HP-UX operating system. We will not receive royalties with
respect to the lite version of the VERITAS File System embedded in the HP-UX
operating system. Hewlett-Packard has become our reseller with respect to some
of our products, including full feature versions of the above named products,
and we have offered full feature products and value-added products to the HP-UX
installed customer base. We may not be able to deliver our products to
Hewlett-Packard in a timely manner. Also, it is possible that our deliverables
and Hewlett-Packard deliverables under the agreement may not be synchronized in
a timely and successful manner, and that Hewlett-Packard may not be an effective
reseller of our products. The simultaneous sales efforts by Hewlett-Packard and
ourselves with respect to our products could create some channel conflicts.
Hewlett-Packard is not obligated to sell our products under this agreement.
In the fourth quarter of 1999, we dedicated personnel to define and build
versions of our products that meet the needs specific to the Hewlett-Packard
marketplace, and to further focus our sales and marketing efforts on the
Hewlett-Packard sales channel. We cannot assure you that this strategy will be
successful.
Sales, marketing and support organization
During 1999, we continued to build our sales, marketing and customer
support organization with a focus on delivering our products to resellers,
integrators and end users and integrating the sales force of the NSMG business.
We have sales subsidiaries in Australia, Canada, Japan, Germany, France, the
Netherlands, Sweden, Switzerland and the United Kingdom. We have direct sales
personnel in North America, Europe, Asia and the Pacific Rim. We also have
resellers located in North America, Europe, Asia Pacific, South America and the
Middle East.
We expect to increase the number of our sales, marketing and customer
support employees in the future to expand our direct sales efforts to resellers
and end users. We may not have the necessary resources to accomplish this. It is
also possible that we will not be able to establish and expand these new
distribution channels successfully or complete the integration of our sales and
marketing efforts successfully. We expect to hire additional sales employees in
all regions in 2000. Competition for qualified sales, technical and other
personnel is intense, and we may not be able to attract, assimilate or retain
additional highly qualified employees in the future. We also may not be able to
manage our growth effectively.
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Concentration of customers
In 1999 and 1997, no customer accounted for more than 10% of our net
revenue. Revenue from Sun Microsystems accounted for 12% of our net revenue in
1998.
COMPETITION
The markets in which we compete are intensely competitive and rapidly
changing. Our principal competition in the storage management products area
consists of internal development groups of current and prospective original
equipment manufacturer customers, which have the resources and capability to
develop their own storage management solutions. Relationships between us and the
competitors are complex. We have taken a pioneering role with many of our
products and technologies. While we may compete with another company for a share
of the market, we also may be involved with them, for example, in an effort to
set standards for storage area networking technology that benefits the entire
industry. The products of some original equipment manufacturers in the operating
systems arena include packaged data protection and management applications and
features that we compete with. They include:
- Compaq Computer. Compaq sells several hardware clustering solutions. It
also resells ours and other vendors' backup software, and markets UNIX
system software that includes file and volume management products.
- Hewlett-Packard. HP markets a clustering product, MC ServiceGuard, and a
backup product, Omniback.
- IBM. IBM markets backup, file and volume management products. Its disk
management and clustering products are primarily used with the AIX
operating system.
- Microsoft. The file system in Microsoft Windows NT competes with VERITAS
File System, and the Microsoft Cluster Server with our clustering
products.
- Sun Microsystems. Sun has the Solstice Disk Suite, which competes with
VERITAS Volume Manager, but also has an OEM agreement for the VERITAS
product. Sun markets a competing file system, Unix File System to run on
their version of the UNIX operating system, which is called Solaris, but
resells VERITAS File System as well.
We also encounter competition from other third party software vendors and
hardware companies offering products that incorporate some of the features
provided by our products, and from disk controller and disk subsystem
manufacturers that have included or may include similar features.
Our primary competitors in the storage management products area include the
following, grouped by product type:
Backup and data protection
- Computer Associates, Cheyenne division, for its ARCserve product
- EMC for its Enterprise Data Manager product
- Hewlett-Packard for its Omniback product
- IBM for its ADSTAR Distributed Storage Manager product and its Tivoli
division
- Legato Systems for its BudTool, NetWorker and GEMS products
- Sterling Software for its Alexandria Network Librarian product
- StorageTek for its REELbackup product
File and volume management
- Hewlett-Packard for its Logical Volume Manager
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<PAGE> 12
- IBM for its file system and Logical Volume Manager
- Microsoft for the NT File system
- Sun Microsystems for its Solstice Disk Suite and Unix File System
Clustering and replication
- EMC for its Symmetrix Remote Data Facility replication product
- Hewlett-Packard for its MC ServiceGuard product
- Legato Systems for its FullTime HA Plus and FullTime Clusters
- Microsoft for its Microsoft Cluster Server
- Sun Microsystems for its Sun Cluster product
Our competitors in the areas of remote backup technologies and electronic
data vaulting services include Atrieva, Connected Corp., Core Data and STAC Inc.
These competitors are Windows NT-centric and differ in the degree of system
backup and recovery provided to users, with some companies offering data file
set backup and recovery capability only.
The principal competitive factors in our industry include price, product
functionality, product integration, platform coverage and ability to scale,
worldwide sales infrastructure and global technical support. We believe we
compete favorably in each of these areas relative to our competitors.
Many of our competitors have greater financial, technical, sales, marketing
and other resources than we do, as well as greater name recognition and a larger
installed customer base. We expect that the market for storage management
software, which has been large and fragmented historically, will become more
consolidated with larger companies being better positioned to compete in such an
environment in the long term. As the storage management software market
continues to develop, a number of companies with greater resources than ours
could attempt to increase their presence in this market by acquiring or forming
strategic alliances with our competitors or business partners.
Our success will depend on our ability to adapt to these competing forces,
to develop more advanced products more rapidly and less expensively than our
competitors, and to educate potential customers as to the benefits of licensing
our products rather than developing their own products. Our future and existing
competitors could introduce products with superior features, scalability and
functionality at lower prices than our products and could also bundle existing
or new products with other more established products in order to compete with
us. In addition, because there are relatively low barriers to entry for the
software market, we expect additional competition from other established and
emerging companies. Increased competition is likely to result in price
reductions, reduced gross margins and loss of market share, any of which could
harm our business.
RESEARCH AND DEVELOPMENT
Our research and development efforts have been directed toward developing
new products for UNIX and Windows NT, developing new features and functionality
for existing products, integrating products in the existing product line and
porting new and existing products to different operating systems.
Our major research and development initiatives include:
- Additional integration of the full family of storage management products,
including further integration of VERITAS Volume Manager, VERITAS File
System and VERITAS NetBackup;
- Development of additional Linux versions of our products;
- Development of additional clustering products; and
- Development of additional storage area network products.
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<PAGE> 13
Each of these initiatives involves technical and competitive challenges,
which we may not be able to overcome successfully.
Development work under Microsoft and Sun Microsystems agreements
Our agreement with Microsoft requires us to develop a version of our Volume
Manager product, which Microsoft has called Logical Disk Manager, to be ported
to and embedded in Windows 2000, which is effectively version 5.0 of Windows NT.
The agreement also requires us to develop a disk management graphical user
interface designed specifically for Windows NT. Microsoft is providing funding
for a significant portion of the development expenses for this product payable
in quarterly increments. In order to perform under the agreement, we have hired
additional personnel with expertise in the Windows NT operating system
environment and are devoting capital investment and resources to complete this
project successfully.
Our agreements with Sun Microsystems and Hewlett-Packard also impose
development obligations on us. We are required to commit staffing to our
projects with these original equipment manufacturers. We may not have the
resources necessary to perform our obligations under these agreements and our
development efforts may not be as successful as planned.
Size and location of research and development group
As of December 31, 1999, our research and development staff consisted of
767 employees located at our Mountain View, California headquarters and at our
other facilities in North America. In addition, our subsidiary in Pune, India
employed 186 engineers.
Research and development expenditures
We had research and development expenses of $94.5 million in 1999, $40.2
million in 1998 and $25.2 million in 1997. These amounts exclude $104.2 million
in 1999 and $0.6 million in 1998 for in-process research and development charges
in connection with acquisitions. We believe that technical leadership is
essential to our success and expect to continue to commit substantial resources
to research and development. Our future success will depend in large part on our
ability to enhance existing products, respond to changing customer requirements
and develop and introduce new products in a timely manner that keep pace with
technological developments and emerging industry standards. We continue to make
substantial investments in undisclosed new products, which may or may not be
successful. We may not complete these research and development efforts
successfully and therefore, future products may not be available on a timely
basis or achieve market acceptance.
Need to hire research and development personnel
We need to hire additional research and development personnel to complete
new products on a timely basis, including the adaptation of our products to
Windows NT and performance of obligations to key original equipment manufacturer
partners. The market for these personnel is very competitive and we cannot
assure you that we can hire them on a timely basis or at all. We may consider
acquiring and purchasing technology to achieve some of our objectives, but we
may not be able to accomplish this successfully.
Effect of technological advances
From time to time, we or our competitors may announce new products,
capabilities or technologies that have the potential to replace or shorten the
life cycles of our existing products. Announcements of currently planned or
other new products could cause customers to defer purchasing our existing
products. We have from time to time in the past experienced delays of up to
several months due to the complex nature of software developed by us and other
software developers for whose systems or applications we offer products. We
could experience delays in connection with our current or future product
development activities. Any of these delays could harm our business.
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<PAGE> 14
PROPRIETARY RIGHTS
Measures we take to protect our intellectual property
We regard some of the features of our internal operations, software and
documentation as proprietary and rely on contract, copyright, patent, trademark
and trade secret laws, confidentiality procedures and other measures to protect
our proprietary information. Other than the patents acquired in the NSMG and
TeleBackup combinations as described below, we currently hold no patents
applicable to our current business, although we have filed several applications
for patents. Existing copyright and trade secret laws afford only limited
protection.
As part of our confidentiality procedures, we generally enter into
non-disclosure agreements with our employees, distributors and corporate
partners, and license agreements with respect to our software, documentation and
other proprietary information. These licenses are generally non-transferable and
have a perpetual term.
Infringement risks
We make source code available for some of our products. The provision of
source code may increase the likelihood of misappropriation or other misuse of
our intellectual property. We also license some of our products under shrink
wrap license agreements that are not signed by licensees and therefore may be
unenforceable under the laws of some jurisdictions. In addition, the laws of
some foreign countries do not protect our proprietary rights to the same extent
as do the laws of the United States. Thus, protection of our proprietary rights
may not be adequate. Our competitors also could independently develop technology
similar to our technology.
Litigation risks
We are not aware that our products, trademarks or other proprietary rights
infringe the proprietary rights of third parties. However, from time to time, we
receive notices from third parties asserting that we have infringed their
patents or other intellectual property rights. We may find it necessary or
desirable in the future to obtain licenses from third parties relating to one or
more of our products or relating to current or future technologies. Third
parties could assert infringement claims against us in the future with respect
to current or future products. Any assertion could require us to enter into
royalty arrangements or result in costly litigation. As the number of software
products in the industry increases and the functionality of these products
further overlap, we believe that software developers may become increasingly
subject to infringement claims. We expect any claims, with or without merit,
could be time consuming and expensive to defend.
It may be possible for a third party to copy or otherwise obtain and use
our products or technology without authorization, or to develop similar
technology independently. Policing unauthorized use of our products is difficult
and, although we are unable to determine the extent to which piracy of our
software products exists, we expect software piracy could be a persistent
problem.
Trademarks
VERITAS and the VERITAS logo are registered trademarks in the United
States. Our other trademarks include:
- - VERITAS Backup Exec;
- - VERITAS Cluster Server;
- - VERITAS Cluster Volume Manager;
- - VERITAS ClusterX;
- - VERITAS Database Edition for Oracle(R);
- - VERITAS Database Edition for Sybase(R);
- - VERITAS Desktop Management Suite;
- - VERITAS Edition for NFS(R);
- - VERITAS Edition for SAP(R);
- - VERITAS Edition for Web;
- - VERITAS File System;
- - VERITAS First Watch for Sun(R);
- - VERITAS Foundation Suite;
- - VERITAS Global Data Manager;
- - VERITAS ManageExec;
- - VERITAS NerveCenter;
- - VERITAS NetBackup;
- - VERITAS NetBackup BusinesServer;
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<PAGE> 15
- - VERITAS Replication Exec;
- - VERITAS Storage Migrator;
- - VERITAS Storage Replicator for File Systems;
- - VERITAS Storage Replicator for Volume
Manager;
- - VERITAS TeleBackup;
- - VERITAS Volume Manager;
- - VERITAS WinINSTALL; and
- - VERITAS WinLAND.
Patents and patent applications
We have 16 U.S. patents and 8 patent applications, including patents and
rights to patent applications acquired from the NSMG business, TeleBackup and
NuView. Any patents obtained may not provide substantial protection or be of
commercial benefit to us. It is also possible that their validity will be
challenged.
EMPLOYEES
As of December 31, 1999, we had 2,974 full-time employees, including 953 in
research and development, 1,694 in sales, marketing, consulting and customer
support and 327 in finance and administrative services. We expect to hire a
significant number of new employees in 2000, particularly in research and
development and in sales, marketing, consulting and customer support. We have
not entered into any collective bargaining agreement with our employees, and
believe that our relations with our employees are good. We believe that our
future success will depend in part upon the continued service of our key
employees and on our continued ability to hire and retain qualified personnel.
We may not be able to retain our key employees and may not be successful in
attracting and retaining sufficient numbers of qualified personnel to conduct
our business in the future.
EXECUTIVE OFFICERS
The following table sets forth information with respect to persons who
served as our executive officers as of December 31, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Mark Leslie.................... 54 Chief Executive Officer and Chairman of the Board
Geoffrey W. Squire............. 52 Executive Vice President and Vice-Chairman of the Board
Fred van den Bosch............. 52 Executive Vice President, Engineering and Director
Peter J. Levine................ 39 Executive Vice President, Strategic Operations
Paul A. Sallaberry............. 43 Executive Vice President, Worldwide Sales
Kenneth E. Lonchar............. 42 Senior Vice President, Finance and Chief Financial Officer
Jay A. Jones................... 45 Senior Vice President, Chief Administrative Officer and
Secretary
</TABLE>
Mr. Leslie is our Chief Executive Officer and Chairman of the Board. Mr.
Leslie has served as Chief Executive Officer of VERITAS or our predecessors
since 1990 and as a director since 1988. Mr. Leslie is also Chairman of the
Board of Versant Corporation, an object management solutions company, and serves
on the board of directors of Brocade Communications Systems, Inc., a supplier of
storage area network software, and on the board of directors of Keynote Systems,
Inc., a supplier of Internet performance measurement and diagnostic services.
Mr. Squire has served as Executive Vice President and Vice Chairman of the
Board of VERITAS or our predecessors since April 1997, when VERITAS merged with
OpenVision Technologies, Inc. Mr. Squire became a director of OpenVision in 1994
and was appointed Chief Executive Officer of OpenVision in July 1995. From
November 1994 to June 1995, he was President and Chief Operating Officer at
OpenVision. Mr. Squire was President of the U.K. Computing Services and Software
Association in 1994 and, in 1995, was elected as the founding President of the
European Information Services Association. Mr. Squire also serves as a director
of Industri-Mathematik International Corp.
Mr. van den Bosch has served as Executive Vice President, Engineering of
VERITAS or our predecessors since July 1997. Mr. van den Bosch served as our
Senior Vice President, Engineering from 1991
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<PAGE> 16
to July 1997 and was appointed as a director in February 1996. From 1970 until
1990, he served in various positions with Philips Information Systems, including
Director of Technology.
Mr. Levine has served as our Executive Vice President, Strategic Operations
since December 1999, after serving as Senior Vice President, Strategic
Operations of VERITAS or our predecessors from January 1999 to December 2000 and
Senior Vice President, OEM Sales from December 1997 to December 1998. Mr. Levine
served as a senior executive of VERITAS from 1995 to December 1997.
Mr. Sallaberry has served as our Executive Vice President, Worldwide Sales
since December 1999 after serving as Senior Vice President, Worldwide Sales of
VERITAS or our predecessors from July 1997 to December 1999, and Vice President,
North American Sales from April 1997 to July 1997. Mr. Sallaberry was
OpenVision's Senior Vice President of Sales from 1992 until 1994. Mr. Sallaberry
rejoined OpenVision in 1995 as Senior Vice President of North American
Operations.
Mr. Lonchar has served as Chief Financial Officer of VERITAS or our
predecessors since April 1997 and as our Senior Vice President, Finance since
January 1999. Mr. Lonchar served as our Vice President, Finance from April 1997
until January 1999. Mr. Lonchar was Chief Financial Officer and Senior Vice
President of OpenVision from December 1995 until the merger with VERITAS in
April 1997. Prior to joining OpenVision, Mr. Lonchar was Vice President, Finance
and Administration and Chief Financial Officer of Microtec Research, Inc., a
publicly-traded software company, for seven years. Mr. Lonchar is a certified
public accountant. Mr. Lonchar also serves on the board of directors of Geoworks
Corporation, a provider of mobile e-commerce and information services and
software.
Mr. Jones has served as Senior Vice President, Chief Administrative Officer
and Secretary of VERITAS or our predecessors since January 1999. Mr. Jones
served as our Vice President, General Counsel and Secretary from April 1997 to
January 1999. Mr. Jones joined OpenVision as General Counsel in 1993 and was
appointed Vice President, General Counsel and Secretary in 1994 and served in
those capacities until the merger with VERITAS in April 1997. Mr. Jones is a
member of the California Bar Association.
ITEM 2. PROPERTIES
Our executive offices are located in Mountain View, California. Our
principal facilities are located in Mountain View, California and Heathrow,
Florida. Large portions of our facilities are occupied under leases that expire
at various times through 2012. The table below shows the approximate square
footage of the premises that we lease as of December 31, 1999, excluding
approximately 39 executive suites.
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
LOCATION FOOTAGE
-------- -----------
<S> <C>
North America
California............................................. 281,946
Colorado............................................... 26,951
Florida................................................ 139,904
Georgia................................................ 8,863
Illinois............................................... 10,027
Maryland............................................... 4,685
Massachusetts.......................................... 37,760
Minnesota.............................................. 62,420
New Jersey............................................. 11,125
North Carolina......................................... 8,836
Texas.................................................. 12,660
Virginia............................................... 12,441
Washington............................................. 32,848
Canada................................................. 18,526
-------
Total North America................................. 668,992
-------
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
LOCATION FOOTAGE
-------- -----------
<S> <C>
Europe
France................................................. 8,264
Germany................................................ 31,619
Ireland................................................ 10,000
Sweden................................................. 4,225
United Kingdom......................................... 65,000
-------
Total Europe........................................ 119,108
-------
Asia
Australia.............................................. 5,747
China.................................................. 6,907
Hong Kong.............................................. 2,580
India.................................................. 33,229
Japan.................................................. 3,462
Malaysia............................................... 2,840
Singapore.............................................. 670
-------
Total Asia.......................................... 55,425
-------
Total.......................................... 843,525
=======
</TABLE>
California facilities exclude approximately 44,361 square feet of space
that we sublease to others. Illinois facilities exclude approximately 17,135
square feet of unoccupied space, and Florida facilities exclude approximately
5,000 square feet of unoccupied space. Facilities in England exclude
approximately 8,365 square feet of space that we sublease to others.
We recently amended and revised our operating lease arrangement for a new
425,000 square foot campus facility in Mountain View, California. We expect to
occupy this facility beginning in the second quarter of 2001. We also recently
entered into an operating lease arrangement for our existing facilities in
Roseville, Minnesota. We expect to improve and expand our existing facilities of
approximately 62,000 square feet and to develop adjacent property adding
approximately 260,000 square feet to the campus. We expect the first phase of
approximately 142,000 square feet to be completed in the second quarter of 2001.
ITEM 3. LEGAL PROCEEDINGS
We are not subject to any material legal proceedings at this time. We may
in the future become a party to various legal proceedings arising in the
ordinary course of our business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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<PAGE> 18
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
PRICE RANGE OF COMMON STOCK
Our common stock is listed on the Nasdaq National Market under the symbol
"VRTS." The table below shows the range of reported last sale prices on the
Nasdaq National Market for our common stock, including our predecessor
corporation, for the periods indicated. We have adjusted all prices to reflect
our stock splits effected as stock dividends through March 6, 2000.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1998
First Quarter............................................ $ 8.76 $ 6.09
Second Quarter........................................... 9.66 7.61
Third Quarter............................................ 12.92 9.33
Fourth Quarter........................................... 14.22 5.82
1999
First Quarter............................................ $19.65 $13.55
Second Quarter........................................... 21.59 14.25
Third Quarter............................................ 35.67 20.86
Fourth Quarter........................................... 95.42 32.95
</TABLE>
As of February 29, 2000, there were approximately 552 holders of record of
our common stock. Brokers and other institutions hold many of such shares on
behalf of stockholders. We estimate the total number of stockholders represented
by these record holders to be approximately 102,000.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently anticipate that we will retain future earnings, if any, to fund
development and growth of our business and do not anticipate paying any cash
dividends in the foreseeable future.
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<PAGE> 19
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data are derived from our
consolidated financial statements. Share and per share data applicable to prior
periods has been restated to give retroactive effect to our stock splits
effected as stock dividends through March 6, 2000. This data should be read in
conjunction with the consolidated financial statements and notes thereto, and
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
--------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Total net revenue...................... $ 596,112 $210,865 $121,125 $ 72,746 $ 47,826
Amortization of developed technology... 35,659 -- -- -- --
Amortization of goodwill and other
intangibles.......................... 510,943 -- -- -- --
Acquisition and restructuring costs.... 11,000 -- 8,490 -- --
In-process research and development.... 104,200 600 -- 2,200 --
Income (loss) from operations.......... (475,237) 53,668 20,076 11,858 1,193
Net income (loss)...................... (502,958) 51,648 22,749 12,129 2,371
Net income (loss) per share -- basic... $ (1.59) $ 0.24 $ 0.11 $ 0.06 $ 0.01
Net income (loss) per
share -- diluted..................... $ (1.59) $ 0.22 $ 0.10 $ 0.06 $ 0.01
Number of shares used in computing per
share amounts -- basic............... 316,892 211,558 205,300 193,617 181,590
Number of shares used in computing per
share amounts -- diluted............. 316,892 232,519 222,716 209,228 193,780
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
---------- -------- -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital...................... $ 631,036 $198,842 $188,578 $ 67,413 $ 23,451
Total assets......................... 4,233,277 349,117 241,880 94,524 48,100
Long-term obligations................ 451,640 100,773 100,911 1,468 6,205
Accumulated deficit.................. (532,374) (29,416) (81,064) (103,813) (115,942)
Stockholders' equity................. 3,393,061 169,854 104,193 74,955 23,602
</TABLE>
In 1999, we acquired the NSMG business, TeleBackup and NuView. Because we
accounted for the NSMG, TeleBackup and NuView acquisitions using the purchase
method of accounting, we recorded developed technology, goodwill and other
intangible assets of approximately $3,754.9 million in total. These assets are
being amortized over their estimated useful life of four years, and result in
charges to operations of approximately $234.8 million per quarter. We also
recorded one-time non-cash charges of $104.2 million in our statements of
operations in 1999, related to the write-off of in-process research and
development. We also recorded a one-time restructuring charge in 1999 of $11.0
million related primarily to costs for our duplicative facilities that we plan
to vacate.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-K contains forward-looking statements that involve numerous
risks and uncertainties which are described throughout this Form 10-K. Such
forward-looking statements consist of statements that are not purely historical,
including, without limitation, statements regarding our expectations, beliefs,
intentions or strategies regarding the future. The actual results that VERITAS
achieves may differ materially from those anticipated by any forward-looking
statements due to risks and uncertainties such as those described below under
"Factors That May Affect Future Results."
OVERVIEW
VERITAS is a leading independent supplier of storage management software.
Storage management software has grown significantly in importance and market
impact during the last few years. Computing operations have moved from being
part of the infrastructural background of a business enterprise to being a
critical component in the success of a business, particularly given businesses'
requirements that data remain protected and accessible at all times. Our
products help our customers manage complex and diverse computing environments
efficiently and cost-effectively, by making sure that their data is protected,
can be accessed at all times, and can be managed and used in compliance with
business policies. Our products help to improve the levels of centralization,
control, automation and manageability in computing environments, they allow
information technology, or IT, managers to be significantly more effective with
constrained resources and limited budgets. Our products offer protection against
data loss and file corruption, allow rapid recovery after disk or computer
system failure, enable IT managers and end users to work efficiently with large
numbers of files, and make it possible to manage data distributed on large
networks of computer systems without harming productivity or interrupting users.
They provide continuous availability of data in clustered computer systems that
share disk resources to maintain smooth business operations and are highly
scalable in order to keep up with the rapid growth of data and technologies
deployed in businesses.
We develop and sell products for most popular operating systems, including
versions of UNIX and Windows NT. Our software solutions are used by customers
across a broad spectrum of industries, including many leading global
corporations and e-commerce businesses. We also provide a full range of services
to assist our customers in planning and implementing their storage management
solutions.
We market our products and services to original equipment manufacturers and
end user customers through a combination of direct sales and indirect sales
channels such as resellers, value-added resellers, hardware distributors,
application software vendors and systems integrators.
We derive user license fee revenue from shipments of our software products
to end-user customers through direct sales channels, indirect sales channels and
original equipment manufacturer customers. Our original equipment manufacturer
customers either bundle our products with the original equipment manufacturer
products licensed by such original equipment manufacturers or offer them as
options. Some original equipment manufacturers also resell our products. We
receive a royalty each time the original equipment manufacturer licenses to a
customer a copy of the original equipment manufacturer's products that
incorporates one or more of our products. Our license agreements with our
original equipment manufacturer customers generally contain no minimum sales
requirements and we cannot assure you that any original equipment manufacturer
will either commence or continue shipping operating systems incorporating our
products in the future. When we enter into new agreements with original
equipment manufacturer customers and resellers, a significant period of time may
elapse before we realize any associated revenue, due to development work that we
must generally undertake under these agreements and the time needed for the
sales and marketing organizations within these customers and distributors to
become familiar with and gain confidence in our products. Approximately 20%, 26%
and 29% of our net revenue was generated from original equipment manufacturer
business during 1999, 1998 and 1997.
Our services revenue consists of fees derived from annual maintenance
agreements, from consulting and training services and from porting fees.
Original equipment manufacturer maintenance agreements covering our products
provide for technical and emergency support and minor unspecified product
upgrades for a fixed annual fee. Maintenance agreements covering products that
are licensed through channels other than original
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<PAGE> 21
equipment manufacturers provide for technical support and unspecified product
upgrades for an annual service fee based on the number of user licenses
purchased and the level of service subscribed. Porting fees consist of fees
derived from porting and other non-recurring engineering efforts when we port,
or adapt, our storage management products to an original equipment
manufacturer's operating system and when we develop new product features or
extensions of existing product features at the request of a customer. In most
cases, we retain the rights to technology derived from porting and non-recurring
engineering work and therefore generally perform this work on a relatively low,
and sometimes negative, margin.
We have made, and intend to continue to make, substantial investments in
porting our products to new operating systems, including Windows NT. The success
of Windows NT product development efforts depends in part on receipt of
development funding from third parties, including Microsoft, and failure to
receive such funding could hamper our efforts to extend our products into the
Windows NT market. The porting and development process requires substantial
capital investment and our allocation of substantial employee resources to this
effort, and our added focus on Windows NT development in recent years has
required, and will continue to require, us to hire additional personnel. Under
an agreement with Microsoft, we have agreed to develop a functional subset of
our Volume Manager product that will be ported to and embedded in Windows NT.
The agreement also requires us to develop a disk management graphical user
interface designed specifically for Windows NT. Microsoft has provided us with
significant funding toward this development effort. We recognize revenue under
our development contract with Microsoft on a percentage-of-completion basis
consistent with our policy for revenue recognition for other similar agreements.
The payment terms in the Microsoft agreement do not directly correlate to the
timing of development efforts and therefore revenue recognition does not
directly correlate to contract billings. The Microsoft agreement requires us to
expand our marketing and sales operations to deal with higher volume markets in
which we have limited experience.
Our international sales are generated primarily through our international
sales subsidiaries. International revenue, most of which is collectible in
foreign currencies, accounted for approximately 24% of our total revenue in
1999, 26% of our total revenue in 1998 and 27% of our total revenue in 1997. Our
international revenue increased 167% to $144.9 million in 1999 from $54.2
million in 1998, and 65% from $32.8 million in 1997. Since much of our
international operating expenses are also incurred in local currencies, which is
the foreign subsidiaries' functional currency, the relative impact of exchange
rates on net income or loss is less than the impact on revenues. Although our
operating and pricing strategies take into account changes in exchange rates
over time, our operating results may be affected in the short term by
fluctuations in foreign currency exchange rates. Our international subsidiaries
purchase licenses for resale from the parent company resulting in intercompany
receivables and payables. These receivables and payables are carried on our
books in the foreign currency that existed at the time of the transaction. These
receivables and payables are eliminated for financial statement reporting
purposes. Prior to elimination, the amounts carried in foreign currencies are
converted to the functional currency at the then current rate, or "marked to
market", which may give rise to currency remeasurement gains and losses. Such
gains or losses are recognized on our statement of operations as a component of
other income, net. To date, such gains or losses have not been material.
We believe that our success depends upon continued expansion of our
international operations. We currently have sales and service offices and
resellers located in North America, Europe, Asia Pacific, South America and the
Middle East and a development center in India. International expansion will
require us to establish additional foreign offices, hire more personnel and
recruit new international resellers, resulting in the diversion of significant
management attention and the expenditure of financial resources. To the extent
that we are unable to meet these additional requirements, growth in
international sales will be limited, which would have an adverse effect on our
business, operating results and financial condition. International operations
also subject us to a number of risks inherent in developing and selling products
outside the United States, including potential loss of developed technology,
limited protection of intellectual property rights, imposition of government
regulation, imposition of export duties and restrictions, cultural differences
in the conduct of business, and political and economic instability. Furthermore,
some global markets, including Asia, Russia and Latin America, are currently
undergoing significant economic turmoil that could result in deferral of
purchase of information technology products and services by potential customers
located in such markets, thereby further limiting our ability to expand
international operations.
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<PAGE> 22
On May 28, 1999, we acquired the Network & Storage Management Group
business of Seagate Software, Inc., which we refer to as NSMG. On June 1, 1999
we acquired TeleBackup Systems, Inc., which we refer to as TeleBackup. On August
10, 1999, we acquired certain assets of NuView, Inc., which we refer to as
NuView. In the following paragraphs, all share and per share data have been
restated to give retroactive effect to our stock splits effected as stock
dividends through March 6, 2000.
The NSMG business develops and markets software products and provides
related services enabling information technology professionals to manage
distributed network resources and to secure and protect enterprise data. Its
products offer features such as system backup, disaster recovery, migration,
replication, automated client protection, storage resource management,
scheduling, event correlation and desktop management. In connection with the
NSMG acquisition, in consideration for the contribution of assets and
liabilities related to the NSMG business by Seagate Technology, Inc., Seagate
Software, Inc., and their respective subsidiaries, and based on the average
closing price of our common stock of $20.26 per share for 5 days before and
after June 7, 1999, the measurement date for the transaction, we issued
155,583,486 shares of our common stock to Seagate Software, Inc. and issued
options to purchase 15,626,358 shares of our common stock to our employees who
were former NSMG employees. We accounted for the NSMG acquisition using the
purchase method of accounting, and we are incurring charges of $221.5 million
per quarter primarily related to the amortization of developed technology,
goodwill and other intangibles over their estimated useful life of four years.
The total NSMG purchase price was $3,464.5 million and included $3,151.4 million
for the issuance of our common stock, $269.7 million for the exchange of options
to purchase our common stock and $43.4 million of acquisition-related costs. The
purchase price was allocated, based on an independent valuation, to goodwill of
$3,015.8 million, distribution channels of $233.8 million, original equipment
manufacturer agreements of $23.4 million, developed technology of $233.7
million, assembled workforce of $12.8 million, trademarks of $22.8 million,
in-process research and development of $101.2 million, net deferred tax
liabilities of $179.5 million, other intangibles of $1.5 million and tangible
net liabilities assumed of $1.0 million. For 1999, we recorded $482.5 million
for the amortization of goodwill and other intangibles, and $34.1 million for
the amortization of developed technology related to this acquisition.
Acquisition-related costs consist of direct transaction costs of $20.0
million, operating lease commitments on duplicative facilities of $8.2 million
and involuntary termination benefits of $15.2 million. Non-cash charges included
in the acquisition-related costs approximate $11.7 million. At December 31,
1999, $17.4 million in direct transaction costs, $0.3 million in operating lease
commitments on duplicative facilities and $1.8 million in involuntary
termination benefits were paid against the acquisition-related costs accrual and
$11.7 million of non-cash involuntary termination benefits were charged against
the acquisition-related costs accrual. The remaining acquisition-related costs
accrual of $12.2 million is anticipated to be utilized primarily for servicing
operating lease payments or negotiated buyout of operating lease commitments,
the lease terms of which will expire at various times through the year 2013. In
addition, we recorded a restructuring charge of $11.0 million in 1999 as a
result of the NSMG acquisition. This restructuring charge related to exit costs
with respect to duplicative facilities that we plan to vacate, which include
$0.9 million of write-off of redundant equipment and leasehold improvements, and
involuntary termination benefits. Involuntary termination benefits relate to the
salary and fringe benefit expense for terminated employees in research and
development. The involuntarily terminated employees represented 2% of the global
workforce. At December 31, 1999, $0.9 million in severance costs were paid
against the restructuring charge accrual and $0.9 million of write-off of
redundant equipment and leasehold improvements had been written off. The
remaining restructuring charge accrual of $9.2 million is anticipated to be
utilized primarily for servicing operating lease payments or negotiated buyout
of operating lease commitments, the lease terms of which will expire at various
times through the year 2012.
TeleBackup designs, develops and markets software solutions for local and
remote backup and recovery of electronic information stored on networked, remote
and mobile personal computers. TeleBackup became our wholly-owned subsidiary in
exchange for the issuance of 6,842,795 shares of either our common stock or
exchangeable shares to the holders of TeleBackup common shares and the exchange
of options to purchase 154,706 shares of our common stock to our employees who
were former employees of TeleBackup. We accounted for the TeleBackup acquisition
using the purchase method of accounting, and we are incurring
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<PAGE> 23
charges of $9.0 million per quarter primarily related to the amortization of
developed technology, goodwill and other intangibles over their estimated useful
life of four years. Based on the average closing price of our common stock of
$19.60 per share for 5 days before and after June 1, 1999, the measurement date
for the transaction, the total purchase price for TeleBackup was $143.1 million.
The TeleBackup purchase price included $134.1 million related to the issuance of
our common stock, $2.8 million for the issuance of options to purchase our
common stock and $6.2 million in acquisition-related costs. The acquisition
costs of $6.2 million consist primarily of direct transaction costs and
involuntary termination benefits. At December, 1999, of the total $6.2 million
acquisition costs, we paid $5.3 million in direct transaction costs with the
majority of the remaining $0.9 million anticipated to be utilized by August
2000. The purchase price was allocated, based on an independent valuation, to
goodwill of $133.1 million, distribution channels of $1.0 million, original
equipment manufacturer agreements of $2.1 million, developed technology of $6.6
million, assembled workforce of $0.3 million, trademarks of $1.3 million,
in-process research and development of $1.9 million, net deferred tax
liabilities of $3.0 million and tangible net liabilities assumed of $0.2
million. For 1999, we recorded $20.1 million for amortization of goodwill and
other intangibles, and $1.0 million for the amortization of developed technology
related to this acquisition.
Under an asset purchase agreement, we acquired certain assets of NuView,
including its Windows NT cluster management solution, Cluster X, for a total
cost of approximately $67.9 million. We accounted for the acquisition using the
purchase method of accounting, and we are incurring charges of $4.3 million per
quarter primarily related to the amortization of developed technology, goodwill
and other intangibles over their estimated useful life of four years. The
purchase price included $47.7 million related to the issuance of our common
stock, $0.8 million for the issuance of options to purchase our common stock to
former NuView employees, $0.2 million in acquisition-related costs and $19.2
million payable in cash, of which $11.4 million has been paid. The purchase
price was allocated, based on an independent valuation, to goodwill of $62.6
million, developed technology of $2.4 million, assembled workforce of $0.6
million, trademarks of $0.3 million, covenant-not-to-compete of $0.9 million and
in-process research and development of $1.1 million. For 1999, we recorded $8.1
million for amortization of goodwill and other intangibles, and $0.3 million for
the amortization of developed technology related to this acquisition.
On April 25, 1997, we merged with OpenVision Technologies, Inc. which we
refer to as OpenVision. The OpenVision merger was accounted for as a "pooling of
interests" for financial reporting purposes. As a result of the OpenVision
merger, we incurred charges to operations of $8.5 million in 1997, consisting of
approximately $4.2 million for transaction fees and professional services, $1.9
million for contract terminations and asset write-offs and $2.4 million for
other costs incident to the OpenVision merger. Of the total charge, $1.2 million
resulted from the write-down of redundant assets and facilities, primarily
consisting of intangible assets related to a prior acquisition that became
redundant as a result of OpenVision having a similar product line. The remaining
$7.3 million, involving banking, legal and accounting fees and other direct
costs and payments in connection with the elimination of duplicative facilities,
was fully paid as of December 31, 1999.
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<PAGE> 24
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items in
our statements of operations expressed as a percentage of total revenue.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net revenue:
User license fees......................................... 84% 80% 79%
Services.................................................. 16 20 21
--- --- ---
Total net revenue................................. 100 100 100
Cost of revenue:
User license fees......................................... 4 4 4
Services.................................................. 6 10 10
Amortization of developed technology...................... 6 -- --
--- --- ---
Total cost of revenue............................. 16 14 14
--- --- ---
Gross profit................................................ 84 86 86
Operating expenses:
Selling and marketing..................................... 37 36 35
Research and development.................................. 16 19 21
General and administrative................................ 6 5 7
Amortization of goodwill and other intangibles............ 86 -- --
Acquisition and restructuring costs....................... 2 -- 7
In-process research and development....................... 17 -- --
--- --- ---
Total operating expenses.......................... 164 60 70
--- --- ---
Income from operations...................................... (80) 26 16
Interest and other income, net.............................. 4 6 4
Interest expense............................................ (2) (3) (1)
--- --- ---
Income before income taxes.................................. (78) 29 19
Provision for income taxes.................................. 6 4 1
--- --- ---
Net income.................................................. (84)% 25% 18%
=== === ===
</TABLE>
Net Revenue
Net revenue increased 183% to $596.1 million in 1999 from $210.9 million in
1998, when it increased 74% from $121.1 million in 1997. While we believe that
the percentage increases in net revenue achieved in these periods are not
necessarily indicative of future results, we expect net revenue to continue to
grow in 2000. Our revenue comprises user license fees and service revenue.
User License Fees. User license fees increased 197% to $498.0 million in
1999 from $167.7 million in 1998, when it increased 75% from $95.7 million in
1997. The increase in 1999 was primarily the result of the acquisition of NSMG
in the second quarter of 1999, continued growth in market acceptance of our
software products, a greater volume of large end-user transactions, increased
revenue from original equipment manufacturers, or OEMs, resales of bundled and
unbundled products and the introduction of new products. The increase in 1998
was primarily the result of the continued growth in market acceptance of our
software products, a greater volume of large end-user transactions, increased
revenue from OEM resales of bundled and unbundled products and the introduction
of new products. In particular, our user license fees from storage products
increased by approximately 187% in 1999 from 1998, and accounted for 86% of user
license fees in 1999, 88% of user license fees in 1998 and 89% of user license
fees in 1997.
Service Revenue. We derive our service revenue is derived primarily from
contracts for software maintenance and technical support and, to a lesser
extent, consulting services, training services and porting
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<PAGE> 25
fees. Porting fees are derived from funded development efforts that are
typically associated with our agreements with original equipment manufacturers.
Service revenue increased 127% to $98.1 million in 1999, from $43.2 million in
1998, when it increased 70% from $25.4 million in 1997. The increases in both
1999 and 1998 were primarily due to increased sales of service and support
contracts on new licenses, renewal of service and support contracts on existing
licenses, an increase in demand for consulting and training services and, to a
lesser extent in 1999, the acquisition of NSMG in the second quarter of 1999. We
expect that service revenue will continue to grow as a percentage of our net
revenue.
Cost of Revenue
Cost of revenue increased 221% to $94.6 million in 1999 from $29.5 million
in 1998, when it increased 79% from $16.4 million in 1997. Gross margin on user
license fees is substantially higher than gross margin on service revenue,
reflecting the low materials, packaging and other costs of software products
compared with the relatively high personnel costs associated with providing
maintenance, technical support, consulting, training services and development
efforts. Cost of service revenue also varies based upon the mix of maintenance,
technical support, consulting and training services.
Cost of User License Fees (including amortization of developed
technology). Cost of user license fees consists primarily of royalties, media,
manuals and distribution costs. Also included in the cost of revenue is the
amortization of developed technology acquired in the NSMG, TeleBackup and NuView
acquisitions. The estimated useful life of the developed technology acquired is
four years and we expect the amortization to be approximately $15.1 million per
quarter. Cost of user license fees (including amortization of developed
technology) increased 541% to $56.4 million in 1999 from $8.8 million in 1998,
and increased 86% in 1998 from $4.7 million in 1997. The increase in 1999 was
primarily the result of the amortization of developed technology, and to a
lesser extent, a larger percentage of license fees being generated from the sale
of products with higher royalty rates. We pay royalties for certain technology
licensed from others and incorporated in our products. The increase in 1998 was
primarily the result of a larger percentage of license fees being generated from
the sale of products with higher royalty rates. Gross margin on user license
fees decreased to 89% in 1999 and remained constant at 95% in 1998 and 1997. The
decrease in gross margin on user license fees in 1999 was due to the
amortization of developed technology. If we excluded the amortization of
developed technology from the cost of user license fees, the gross margin would
have been 96% in 1999. The gross margin on user license fees may vary from
period to period based on the license revenue mix and certain products having
higher royalty rates than other products. We do not expect gross margin on user
license fees to increase.
Cost of Service Revenue. Cost of service revenue consists primarily of
personnel-related costs in providing maintenance, technical support, consulting
and training to customers, and development efforts in porting. Cost of service
revenue increased 85% to $38.2 million in 1999 from $20.7 million in 1998, and
increased 76% in 1998 from $11.7 million in 1997. Gross margin on service
revenue was 61% in 1999, 52% in 1998 and 54% in 1997. The increase in absolute
dollars was due primarily to personnel additions in our customer support,
training and consulting organizations, in anticipation of increased demand for
such services. The gross margin improvement in 1999 was the result of increased
productivity and higher service revenue growth due to support fees from a larger
installed customer base.
Operating Expenses
The NSMG and the TeleBackup acquisitions have contributed to increases in
all operating expense categories. However, due to the integration that has taken
place to date, it is not possible to quantify the portion of the increase that
is related directly to these acquisitions.
Selling and Marketing. Selling and marketing expenses consist primarily of
salaries, related benefits, commissions, consultant fees and other costs
associated with our sales and marketing efforts. Selling and marketing expenses
increased 191% to $222.0 million in 1999 from $76.4 million in 1998, and
increased 78% in 1998 from $42.9 million in 1997. Selling and marketing expenses
as a percentage of net revenue remained relatively consistent at 37% in 1999,
36% in 1998 and 35% in 1997. The increase in absolute dollars is primarily
attributable to increased sales and marketing staffing and, to a lesser extent,
increased costs associated with
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<PAGE> 26
new marketing programs. We intend to continue to expand our global sales and
marketing infrastructure, and accordingly, we expect our selling and marketing
expenses to increase in absolute dollars but not necessarily change
significantly as a percentage of net revenue in the future.
Research and Development. Research and development expenses consist
primarily of salaries, related benefits, third-party consultant fees and other
engineering related costs. Research and development expenses increased 135% to
$94.5 million in 1999 from $40.2 million in 1998, and increased 60% in 1998 from
$25.2 million in 1997. The increases were due primarily to increased staffing
levels associated with new hires and our acquisitions and expansion of
development efforts for new technology. As a percentage of net revenue, research
and development expenses decreased to 16% in 1999 from 19% in 1998 and 21% in
1997. We believe that a significant level of research and development investment
is required to remain competitive, and expect these expenses will continue to
increase in absolute dollars in future periods and may increase slightly as a
percentage of net revenue. Research and development expenses can be expected to
fluctuate from time to time to the extent that we make periodic incremental
investments in research and development and our level of revenue fluctuates.
General and Administrative. General and administrative expenses consist
primarily of salaries, related benefits and fees for professional services, such
as legal and accounting services. General and administrative expenses increased
225% to $34.2 million in 1999 from $10.5 million in 1998, and increased 31% in
1998 from $8.0 million in 1997. General and administrative expenses as a
percentage of revenue were 6% in 1999, 5% in 1998 and 7% in 1997. The increases
in absolute dollars in 1999 and 1998 were due to additional personnel costs,
including additional personnel related to the acquisitions in the second quarter
of 1999, and, to a lesser extent, to an increase in the provision for the
allowance for doubtful accounts and other expenses associated with enhancing our
infrastructure to support expansion of our operations. We expect general and
administrative expenses to increase in absolute dollars, but not to change
significantly as a percentage of net revenue, as we expand our operations.
Amortization of goodwill and other intangibles. Amortization of goodwill
and other intangibles was $510.9 million in 1999. This amount for the most part
represents seven months of amortization of goodwill, distribution channels,
trademarks and other intangibles assets recorded upon the acquisitions of NSMG
and TeleBackup and five months of amortization of goodwill and other intangibles
assets recorded upon the acquisition of NuView. The estimated useful life of the
goodwill and the other intangibles is four years and we expect the amortization
to be approximately $219.7 million per quarter.
Acquisition and restructuring costs. In 1999, upon the acquisition of NSMG,
we recorded a one-time charge to acquisition and restructuring costs of $11.0
million, which included approximately $9.7 million in exit costs with respect to
duplicative facilities that we plan to vacate and approximately $1.3 million in
severance benefits.
Acquisition and restructuring costs are summarized below (in thousands):
<TABLE>
<CAPTION>
CASH PAYMENTS OR
PROVISION NON-CASH CHARGES FROM ACCRUED AS OF
RECORDED AT ACQUISITION DATE TO DECEMBER 31,
ACQUISITION DATE DECEMBER 31, 1999 1999
---------------- --------------------- --------------
<S> <C> <C> <C>
Cancellation of facility leases and other
contracts................................. $ 8,717 $ -- $8,717
Involuntary termination benefits............ 1,335 (897) 438
Write off of redundant equipment and
leasehold improvements.................... 948 (948) --
------- ------- ------
$11,000 $(1,845) $9,155
======= ======= ======
</TABLE>
Of the accrued balance as of December 31, 1999, $8.7 million relates to
servicing operating lease payments or negotiated buyout of operating lease
commitments on duplicative facilities, the lease terms of which will expire at
various times through the year 2012. The remaining $0.4 million is expected to
be utilized by May 2000.
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<PAGE> 27
In 1997, as a result of the OpenVision merger, we incurred charges of $8.5
million, consisting of approximately $4.2 million for transaction fees and
professional services, $1.9 million for contract terminations and asset
write-offs and $2.4 million for other costs incident to the OpenVision merger.
Of the total charge, $1.2 million resulted from the write-down of redundant
assets and facilities, primarily consisting of intangible assets related to a
prior acquisition which were redundant as a result of OpenVision having a
similar product line. The remaining $7.3 million, involving banking, legal and
accounting fees and other direct costs in connection with the elimination of
duplicative facilities, was fully paid as of December 31, 1999.
In-Process Research and Development. In-process research and development
was $104.2 million in 1999. This amount represents one-time charges of $101.2
million recorded upon the acquisition of NSMG in May 1999, $1.9 million recorded
upon the acquisition of TeleBackup in June 1999 and $1.1 million recorded upon
the acquisition of certain assets of NuView in August 1999.
We obtained outside valuations for these acquisitions, and values were
assigned to developed technology, in-process research and development and other
intangibles. The fair value of the in-process research and development for each
of the acquisitions was determined using the income approach, which discounts
expected future cash flows from projects under development to their net present
value. Each project was analyzed to determine the characteristics and
applications of the technology; the complexity, cost and time to complete the
remaining development efforts; any alternative future use or current
technological feasibility; and the stage of completion. The projected future
cash flows from the projects under development were based on management's
estimates of revenues and operating profits related to the projects. Revenues on
the projects related to in-process research and development were estimated to
begin in 1999 through 2003, with the majority of the revenues occurring between
2000 and 2002. The risk-adjusted discount rate applied to after-tax cash flows
was 20%, compared to an estimated weighted-average cost of capital of 15%. We
believe the amounts determined for in-process research and development are
representative of fair value and do not exceed the amounts an independent third
party would pay for the projects assumed.
The total charge for in-process research and technology was estimated to be
$101.2 million, for the NSMG acquisition, completed in May 1999. Seven
in-process research and development projects were identified and valued, with
two projects under the data protection product group that accounted for
approximately 71% of the value assigned to in-process research and development.
The data protection software products provide backup and restore functions,
including scheduled automated unattended data backup operations. The remaining
products identified and valued were under the application solutions and
replication product groups. The application solutions software provides
scaleable solution for managing the behavior of different types of networks
worldwide from one central location and the replication software products
deliver flexible and intelligent data replication for Windows NT environments.
Costs to complete all of the NSMG in-process research and development projects
were estimated to be $6.0 million. At the date of acquisition, the development
of all products ranged from 48% to 90% complete and averaged approximately 76%
complete, with expected completion dates through December 1999. At December 31,
1999, the completion and release of some products have been delayed through May
2000. We do not expect the delays to have any significant impacts on our return
on investments, results of operations or financial position. At December 31,
1999, we estimate approximately $1.5 million to complete the development of the
in-process research and development projects acquired from NSMG.
All in-process research and development projects related to the TeleBackup
and NuView acquisitions were individually insignificant and were completed or
abandoned as of December 31, 1999.
Interest and Other Income, Net. Interest and other income, net increased to
$23.3 million in 1999 from $11.8 million in 1998, and $4.9 million in 1997. The
increases were due primarily to increased amounts of interest income
attributable to the higher level of funds available for investment, primarily
from the issuance of the convertible subordinated notes in October 1997 and
August 1999 and, to a lesser extent, from the net cash provided by operating
activities. Foreign exchange transaction gains and losses that are included in
other income, net, have not had a significant effect on our results of
operations.
Interest Expense. Interest expense increased to $15.7 million in 1999 from
$5.7 million in 1998, and $1.2 million in 1997. Interest expense in 1999, 1998
and 1997 consists primarily of interest accrued under the
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<PAGE> 28
1.856% convertible subordinated notes due 2006 issued in August 1999 and the
5.25% convertible subordinated notes due 2004 issued in October 1997.
Income Taxes. We had effective tax rates of negative 8% in 1999, positive
14% in 1998 and positive 4% in 1997. Our 1999 effective tax rate was negative
and differed from the combined federal and state statutory rates primarily due
to acquisition related charges that were non-deductible for tax purposes. Our
1998 and 1997 effective tax rates were lower than the combined federal and state
statutory rates primarily due to the utilization of federal net operating loss
carryforwards, other credit carryforwards and reduction of the valuation
allowance on deferred income taxes, offset by the impact of state and foreign
taxes.
New Accounting Pronouncements. In December 1998, the AICPA issued SOP 98-9,
Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain
Transactions. SOP 98-9 amends SOP 97-2 Software Revenue Recognition to require
recognition of revenue using the "residual method" when certain criteria are
met. We will be required to implement these provisions of SOP 98-9 for our
fiscal year ending December 31, 2000. SOP 98-9 also amends SOP 98-4, an earlier
amendment to SOP 97-2, which extended the deferral of the application of certain
passages of SOP 97-2. We do not believe the impact of SOP 98-9 will be material
to our financial position, results of operations or cash flows.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, or SFAS, No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. We will be required to
implement SFAS No. 133 as of the beginning of our fiscal year 2001. Our foreign
currency exchange rate hedging activities have been insignificant to date and we
do not believe that the impact of SFAS No. 133 will be material to our financial
position, results of operations or cash flows.
LIQUIDITY AND CAPITAL RESOURCES
Our cash, cash equivalents and short-term investments totaled $692.4
million at December 31, 1999 and represented 69% of our net tangible assets.
Cash and cash equivalents are highly liquid with original maturities of ninety
days or less. Short-term investments consist mainly of investment grade
commercial paper, medium-term notes, corporate notes, government securities and
market auction preferreds. At December 31, 1999, we had $451.6 million of
long-term obligations and stockholders' equity was approximately $3,393.1
million.
Net cash provided from operating activities was $144.0 million in 1999,
$62.8 million in 1998 and $26.8 million in 1997. The increase in 1999 cash
provided by operating activities resulted primarily from income after
adjustments to exclude non-cash charges, including amortization of intangibles
related to acquisition activities, partially offset by an increase in accounts
receivable, as a result of our overall revenue growth. The increase in 1998 cash
provided by operating activities resulted primarily from net income and
increases in accounts payable, accrued liabilities and deferred revenue
balances, partially offset by an increase in accounts receivable and prepaid
expenses, reflecting our overall growth.
Our investing activities used cash of $577.0 million in 1999 primarily due
to the net increase in short-term and long-term investments of $505.2 million,
purchases of property and equipment of $59.7 million and purchase of certain
assets of NuView. Our investing activities used cash of $13.4 million in 1998
primarily due to capital expenditures of $23.4 million. Our investing activities
used cash of $71.1 million in 1997 primarily due to the net increase of
short-term investments of $65.0 million, and capital expenditures of $6.2
million.
Financing activities provided cash of $443.1 million in 1999 from the net
proceeds of $334.1 million related to the issuance of the 1.856% convertible
subordinated notes in August 1999 and $109.0 million from the issuance of common
stock under our employee stock plans. Financing activities provided cash of
$14.0 million in 1998, arising from the issuance of common stock under our
employee stock plans. Financing activities provided cash of $102.9 million in
1997, primarily from the net proceeds of $97.5 million related to the issuance
of the 5.25% convertible subordinated notes in October 1997 and issuance of
common stock of $5.8 million under our employee stock plans.
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<PAGE> 29
In October 1997, we issued $100.0 million of 5.25% convertible subordinated
notes due 2004 (the "5.25% notes"), for which we received net proceeds of $97.5
million. We and our wholly-owned subsidiary, VERITAS Operating Corporation, are
co-obligors on the 5.25% notes. The 5.25% notes provide for semi-annual interest
payments of $2.6 million each May 1 and November 1. The 5.25% notes are
convertible into shares of our common stock at any time prior to the close of
business on the maturity date, unless previously redeemed or repurchased, at a
conversion price of $9.56 per share, subject to adjustment in certain events,
equivalent to a conversion rate of 104.65 shares of common stock per $1,000
principal amount at maturity. On or after November 5, 2002, the 5.25% notes will
be redeemable over a period of time until maturity at our option at declining
premiums to par. The debt issuance costs are being amortized over the term of
the 5.25% notes using the interest method.
In August 1999, we and our wholly-owned subsidiary, VERITAS Operating
Corporation, issued $465.8 million, aggregate principal amount at maturity, of
1.856% convertible subordinated notes due 2006 (the "1.856% notes") for which we
received net proceeds of approximately $334.1 million. The interest rate of
1.856% together with the accrual of original issue discount represent a yield to
maturity of 6.5%. VERITAS and VERITAS Operating Corporation are co-obligors on
the 1.856% notes. The 1.856% notes provide for semi-annual interest payments of
$4.3 million each February 13 and August 13, commencing February 13, 2000. The
1.856% notes are convertible into shares of our common stock at any time prior
to the close of business on the maturity date, unless previously redeemed or
repurchased, at a conversion price of $35.80 per share, subject to adjustment in
certain events, equivalent to an initial conversion rate of 27.934 shares of
common stock per $1,000 principal amount at maturity. On or after August 16,
2002, the 1.856% notes will be redeemable over a period of time until maturity
at our option at the issuance price plus accrued original issue discount and any
accrued interest. The debt issuance costs are being amortized over the term of
the 1.856% notes using the interest method. We expect to use the net proceeds
from these 1.856% notes issuance for general corporate purposes, including
working capital expenditures and possible acquisitions of companies or
technology, although there are no current agreements or negotiations pending
with respect to any material acquisitions. Pending these uses, we intend to
invest the net proceeds in short-term interest-bearing, investment grade
securities.
Following the issuance of the 1.856% notes, we have a ratio of long-term
debt to total capitalization at December 31, 1999 of approximately 12%. As a
result of this additional indebtedness, our principal and interest payment
obligations increased substantially. The degree to which we will be leveraged
could materially and adversely affect our ability to obtain financing for
working capital, acquisitions or other purposes and could make us more
vulnerable to industry downturns and competitive pressures. We will require
substantial amounts of cash to fund scheduled payments of principal and interest
on our indebtedness, including the 5.25% notes and the 1.856% notes, future
capital expenditures and any increased working capital requirements. If we are
unable to meet our cash requirements out of cash flow from operations, we cannot
assure you that we will be able to obtain alternative financing.
During the first quarter of 2000, we amended and revised our existing lease
agreement for new corporate campus facilities in Mountain View, California.
These facilities will replace certain facilities we currently lease in Mountain
View. The new corporate campus facilities will be developed in one phase for a
total of 425,000 square feet and will provide space for sales, marketing,
administration and research and development functions. The lease term for these
facilities is five years beginning in March 2000, with an option to extend the
lease term for two successive periods of one year each. We have an option to
purchase the property (land and facilities) for $139.4 million or, at the end of
the lease, to arrange for the sale of the property to a third party with us
retaining an obligation to the owner for the difference between the sale price
and the guaranteed residual value up to $123.8 million if the sales price is
less than this amount, subject to certain provisions of the lease. We anticipate
occupying the new corporate campus facilities and beginning the lease payments
in the second quarter of 2001. The lease agreement requires us to maintain
specified financial covenants such as earnings before interest, taxes,
depreciation and amortization (EBITDA), debt on EBITDA and quick ratio, all of
which we were in compliance with as of December 31, 1999.
During the first quarter of 2000, we signed a lease agreement for our
existing facilities in Roseville, Minnesota. We will improve and expand our
existing facilities of approximately 62,000 square feet and will
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develop adjacent property adding approximately 260,000 square feet to the
campus, with the first phase of approximately 142,000 square feet being
completed in the second quarter of 2001. The facilities will provide space for
research and development functions. The lease term for these facilities is five
years beginning in March 2000, with an option to extend the lease term for two
successive periods of one year each. We have an option to purchase the property
(land and facilities) for $40 million or, at the end of the lease, to arrange
for the sale of the property to a third party with us retaining an obligation to
the owner for the difference between the sale price and the guaranteed residual
value up to $34.3 million if the sales price is less than this amount, subject
to certain provisions of the lease. We anticipate occupying the new corporate
campus facilities and beginning the lease payments in the second quarter of
2001.
We believe that our current cash, cash equivalents and short-term
investment balances and cash flow from operations will be sufficient to meet our
working capital and capital expenditure requirements for at least the next 12
months. After that time, we may require additional funds to support our working
capital requirements or for other purposes and may seek to raise such additional
funds through public or private equity financing or from other sources. We
cannot assure you that additional financing will be available at all or that if
available, we will be able to obtain it on terms favorable to us.
RECENT DEVELOPMENTS
On March 29, 2000, VERITAS, Seagate Technology, Inc. and an investor group
including Seagate Technology's management group announced a transaction in which
we will acquire all of the shares of our common stock held by Seagate
Technology, certain other securities and cash. We are not acquiring Seagate
Technology's disc drive business or any other Seagate Technology operating
business.
In the transaction, we will issue to the Seagate Technology stockholders
approximately 109.3 million shares of our common stock for approximately 128
million shares of VERITAS common stock held by Seagate Technology. In addition,
we will issue shares of our common stock for certain other securities held by
Seagate Technology at the closing date and, at our election, we may also issue
shares of our common stock for up to $750 million in retained cash at the
closing date.
We will be indemnified for liabilities, including tax liabilities and other
matters that may arise in connection with the transaction. The transaction is
intended to qualify as a tax-free reorganization.
For a detailed discussion of the transaction and the related risks, please
refer to our Form 8-K that will be filed with the SEC on or about April 3, 2000,
as well as the joint proxy statement/prospectus to be filed by both Seagate
Technology and us in connection with the transaction.
YEAR 2000 COMPLIANCE
Some currently installed computer systems and software products are unable
to distinguish between twentieth century dates and twenty-first century dates
because such systems may have been developed using two digits rather than four
to determine the applicable year. For example, computer programs that have date-
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000. As a result, some companies' software and computer systems may
need to be upgraded or replaced to comply with these Year 2000 requirements.
We believe our software products and services are "Year 2000 ready" -- that
is, they are capable of adequately distinguishing twenty-first century dates
from twentieth century dates. New products are being designed and tested to be
Year 2000 ready. Although our products have undergone, or will undergo, our
normal quality testing procedures, there can, however, be no assurance that our
products will contain all necessary date code changes. Furthermore, use of our
products in connection with other products that are not Year 2000 ready,
including non-compliant hardware, software and firmware, may result in the
inaccurate exchange of dates and result in performance problems or system
failure. In addition, original equipment manufacturer derivative versions of our
older products may not be Year 2000 ready. To date, we have received no
complaints regarding material Year 2000 compliance of our products.
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Although we have not been a party to any litigation or arbitration
proceeding to date that involves Year 2000 compliance issues with our products
or services, there can be no assurance that we will not in the future be
required to defend our products or services in such proceedings, or to negotiate
resolutions of claims based on Year 2000 issues. The costs of defending and
resolving Year 2000 related disputes, regardless of the merits of such disputes,
and any liability we have for Year 2000 related damages, including consequential
damages, could harm on our business.
To date, we have not encountered any material problems in this regard with
our computer systems or any other equipment that might be subject to such
problems.
FACTORS THAT MAY AFFECT FUTURE RESULTS
In addition to other information in this Annual Report on Form 10-K, the
following factors should be considered carefully in evaluating VERITAS and our
business.
We face many new difficulties managing a larger company
The NSMG and TeleBackup acquisitions have created new challenges for us. If
we fail to meet those challenges, our business and quarterly and annual results
of operations could be adversely affected and the value of your investment could
decline. We grew rapidly before the NSMG and TeleBackup acquisitions. After
these acquisitions, our workforce was approximately twice the size of our
workforce prior to the acquisitions. This growth is likely to strain our
management control systems and resources, including decision support,
accounting, management information systems and facilities. We must continue to
improve our financial and management controls and our reporting systems and
procedures to manage our employees and to obtain additional facilities.
We might fail to integrate the businesses of VERITAS, NSMG and TeleBackup
Product line integration will be difficult. We must integrate the
independent businesses of NSMG and TeleBackup with our own. If we fail to
integrate them, our business and our quarterly and annual results of operations
may be adversely affected. One key issue will be the integration of our products
with those of NSMG and TeleBackup. This product line integration will involve
consolidating products with duplicative functionality, coordinating research and
development activities, and converging the technologies supporting the various
products. For example, the VERITAS NetBackup product and VERITAS Backup Exec
products share many features and functions. Technology convergence will be
particularly difficult because our products lack a common technology
architecture. In particular, products formerly associated with NSMG were not
designed for the degree of scalability that our legacy products were designed
for, nor for use on a variety of operating systems.
Other business integration issues, if not satisfactorily resolved, could
have a material negative impact on our business. Other problems inherent in
integrating our businesses include:
- maintaining brand recognition for key products formerly associated with
NSMG, such as VERITAS Backup Exec, and with TeleBackup, such as VERITAS
TeleBackup, while migrating customer identification of these brands to
VERITAS;
- resolving channel conflicts that may arise between our original equipment
manufacturer and direct sales channels and the retail channels acquired
in the NSMG acquisition;
- coordinating, integrating and streamlining geographically dispersed
operations, such as engineering facilities in California, Minnesota,
Florida, North Carolina, Maryland, Colorado, Massachusetts, Washington,
Canada and India; and
- coping with customers' uncertainty about continued support for
duplicative products.
The integration will be expensive and is likely to interrupt our ordinary
business activities. Any of these risks could harm our business and quarterly
and annual results of operations.
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Management and employee integration issues, if not satisfactorily resolved,
could harm our business. Potential management and employee integration problems
include:
- resolving differences between the corporate cultures of VERITAS, NSMG and
TeleBackup; and
- integrating the management teams of all three companies successfully.
We will incur significant accounting charges in connection with the NSMG,
TeleBackup and NuView acquisitions that will reduce our earnings immediately
and in the future
The significant costs of integration associated with the NSMG, TeleBackup
and NuView acquisitions increase the risk that we will not realize the
anticipated benefits. Because we accounted for these acquisitions using purchase
method of accounting, we recorded non-cash charges of $104.2 million in our
statements of operations in 1999, related to the write-off of in-process
research and development. We also recorded goodwill and other intangible assets
of approximately $3,754.9 million. This amount will be amortized over four
years, and will result in charges to operations of approximately $234.8 million
per quarter. We also recorded a restructuring charge in 1999 of $11.0 million
related primarily to costs for our duplicative facilities that we plan to
vacate. These costs are in addition to the liability for the estimated costs to
vacate duplicative facilities of the NSMG business.
We have a significant amount of debt that we may be unable to service or repay
In October 1997, we issued $100.0 million in aggregate principal amount of
5.25% convertible subordinated notes due 2004. In August 1999, we issued $465.8
million aggregate principal amount at maturity of 1.856% convertible
subordinated notes due 2006. The annual interest payments on our outstanding
notes as of December 31, 1999 are $5.3 million and $8.6 million respectively,
which we expect to fund from cash flow from operations. We will need to generate
substantial amounts of cash from our operations to fund interest payments and to
repay the principal amount of debt when it matures, while at the same time
funding capital expenditures and our other working capital needs. If we do not
have sufficient cash to repay our debts as they become due, we may be unable to
refinance our debt on reasonable terms or at all. For example, the notes could
be declared immediately due and payable if we do not make timely payments. While
our cash flow has been sufficient to fund interest payments to date, if we
cannot meet our debt obligations from the cash generated by our business, we may
not be able to develop and sell new products, respond to changing business or
economic conditions adequately, make acquisitions or otherwise fund our
business.
Our operating results may fluctuate significantly as a result of factors
outside our control, which could cause the market price of our notes and of our
securities to decline
Fluctuations in our results of operations are likely to affect the market
price of our common stock and subordinated notes in a manner that may be
unrelated to our long-term operating performance. The more likely it is that
market prices of our securities will fluctuate, the riskier is your decision to
buy, sell or hold our securities. In addition, the number of factors that could
affect our results of operation makes an investment in our securities riskier
than many other investments. Our revenues in any quarter will depend
substantially on orders we receive and ship in that quarter. In addition, we
typically receive a significant portion of orders in any quarter during the last
two weeks of the quarter, and we cannot predict whether those orders will be
placed, fulfilled and shipped in that period. If we have lower revenue than we
expect, we probably will not be able to reduce our operating expenses quickly in
response. Therefore, any significant shortfall in revenues or delay of customer
orders could have an immediate adverse effect on our operating results in that
quarter. The results of operations of VERITAS, and of the NSMG and TeleBackup
businesses we recently acquired, have
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fluctuated in the past, and our operating results are likely to fluctuate
significantly in the future. Factors that could affect our results of operations
include:
- the timing and magnitude of sales through original equipment
manufacturers;
- the unpredictability of the timing and level of sales to large
distributors in the retail channel and our direct sales force, which tend
to generate sales later in our quarters than original equipment
manufacturer sales;
- the timing and magnitude of large orders;
- the timing and amount of our marketing, sales and product development
expenses;
- the introduction, timing and market acceptance of new products;
- the timing of revenue recognition for sales of software products and
services;
- changes in data storage and networking technology or introduction of new
operating system upgrades by original equipment manufacturers, which
could require us to modify our products or develop new products;
- the relative growth rates of the Windows NT and UNIX markets;
- the rate of adoption of Microsoft's release of Windows 2000 by users;
- pricing policies and distribution terms; and
- the timing and magnitude of acquisitions.
We depend on large orders with lengthy sales cycles for a significant portion
of our revenues
Our revenues for a quarter could fluctuate significantly based on whether a
large order near the end of a quarter is closed or delayed. Customer orders can
range in value from a few thousand to a few million dollars. The length of time
between initial contact with a potential customer and sale of a product, or our
sales cycle, outside the retail channel is typically complex and lengthy, so it
can last from three to nine months. These direct sales also represent our
largest orders. Therefore, our revenues for a period are likely to be affected
by the timing of larger orders, which makes that revenue difficult to predict.
The factors that could delay or defer an order, include:
- time needed for technical evaluations of our software by customers;
- customer budget restrictions;
- customer internal review and testing procedures; and
- engineering work needed to integrate our software with the customers'
systems.
We may be unable to hire and retain needed sales and engineering personnel
Our personnel needs are more acute than those facing most companies. We
need to hire additional sales, engineering, service and administrative
personnel. If we are unable to hire and retain these employees, our business and
quarterly and annual results of operations would be adversely affected.
Competition for people with the skills we require is intense. Additions of new
personnel and departures of existing personnel could disrupt our business and
may result in the departure of other employees. We also depend on the continued
service of our key personnel. Even though we have entered into employment
agreements with key management personnel, these agreements cannot prevent their
departure. We do not have key person life insurance covering any of our
personnel, nor do we currently intend to obtain any of this insurance.
We distribute our products through multiple distribution channels, each of
which is subject to risks
Historically, we sold products through original equipment manufacturers and
through direct sales. As a result of the NSMG and TeleBackup acquisitions,
however, we also have a retail distribution channel as well.
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If we fail to manage our distribution channels successfully, our business and
quarterly and annual results of operations would be adversely affected.
Retail distribution. Some of the software products of the former NSMG
business are sold primarily in the retail channel. As a result, we face
different challenges than we face in selling most of our other products. For
example:
- the VERITAS brand does not have the same level of recognition in the
retail channel;
- retail distribution typically involves shorter product life cycles; and
- the retail channel has higher risks of product returns, higher marketing
expenses and less predictable market demand.
Moreover, our retail distributors have no obligation to continue selling
the products previously sold by NSMG and TeleBackup and may terminate our
relationship at any time.
Direct sales. We also depend on our direct sales force to sell our
products. This involves a number of risks, including:
- longer sales cycles for direct sales;
- our need to hire, train, retain and motivate our sales force; and
- the length of time it takes our new sales representatives to become
productive.
Original equipment manufacturers. A portion of our revenue is expected to
come from original equipment manufacturers that incorporate our storage
management software into systems they sell. We have no control over the shipping
dates or volumes of systems the original equipment manufacturers ship and they
have no obligation to ship systems incorporating our software. They also have no
obligation to recommend or offer our software products exclusively or at all.
They have no minimum sales requirements and can terminate our relationship at
any time. These original equipment manufacturers also could choose to develop
their own storage management products internally and incorporate those products
into their systems in lieu of our products. Finally, the original equipment
manufacturers that we do business with compete with one another. To the extent
that one of our of original equipment manufacturer customers views the products
we have developed for another original equipment manufacturer as competing with
its products, it may decide to stop doing business with us, which could harm our
business.
Development agreements for original equipment manufacturers. We have
important original equipment manufacturer agreements with Hewlett-Packard, Sun
Microsystems, Microsoft, Dell, Seagate Technology and Compaq Computer. Under
these agreements we develop "lite" versions of our products to be included in
these original equipment manufacturers' systems software and products.
Developing products for these original equipment manufacturers causes us to
divert significant resources from other activities that are also important to
our business. If these "lite" versions do not result in substantial revenue, our
business could be harmed.
Our distribution channels could conflict with one another
We have many different distribution channels. If we cannot use these
distribution channels efficiently, our business and quarterly and annual results
of operations could be adversely affected. Our original equipment manufacturers,
resellers and direct sales force might target similar sales opportunities, which
could lead to inefficient allocation of sales resources. We may also try to sell
full versions of the products to customers of the original equipment
manufacturers for whom we have developed "lite" versions of our products. This
would result in us marketing similar products to end-users. These overlapping
sales efforts could also harm our relationships with our original equipment
manufacturers and other sales channels and result in them being less willing to
market our products aggressively. If our indirect sales decline, we would need
to accelerate our investments in alternative distribution channels. We may not
be able to do this in a timely manner, or at all.
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Our development agreements with Microsoft could cause us to lose customers
We have important agreements with Microsoft under which we develop software
for its Windows operating system. Microsoft is not obligated under the
agreements to include our software in any of its future releases of Windows
2000. If for any reason our software is not included in the future, we will lose
our expected opportunity to market additional products to the Windows 2000 or
Windows NT installed customer base, as well as suffer negative publicity. In
addition, we would lose a part of the investment we have made in developing
products for inclusion in Windows 2000.
Microsoft could develop competing products
Microsoft can also develop enhancements to and derivative products from our
software products that are embedded in Windows 2000 or Windows NT products. If
Microsoft develops any enhancements or derivative products, or enhances its own
base products with equivalent functionality, Microsoft could choose to compete
with us.
Sales of a small number of product lines make up a substantial portion of our
revenue
For the foreseeable future, we expect to derive a substantial majority of
our revenue from a limited number of software products. If many customers do not
purchase these products as a result of competition, technological change or
other factors, our revenue would decrease and our business and quarterly and
annual results of operations would be adversely affected. For example, in 1999
and 1998 we derived approximately 86% and 88% of our of our license revenue from
storage management products, including VERITAS Volume Manager, VERITAS File
System, VERITAS NetBackup and VERITAS Backup Exec from May 29, 1999. Also, our
VERITAS NetBackup and VERITAS Backup Exec products perform some overlapping
functions. Customers may select one product over the other, resulting in reduced
revenue for the product not selected. Therefore, we may not receive the same
aggregate level of revenue from these products as we have received in the past.
Our products have relatively short life cycles
Our software products have a limited life cycle and it is difficult to
estimate when they will become obsolete. This makes it difficult for us to
forecast revenue and makes your investment more risky. If we do not develop and
introduce new products before our existing products have completed their
lifecycles, we would not be able to sustain our level of sales. In addition, to
succeed, many customers must adopt our new products early in each product's
lifecycle. Therefore, if we do not attract sufficient customers early in a
product's life, we may not realize the amount of revenue we anticipated for the
product. We cannot be sure that we will continue to be successful in marketing
our key products.
We derive significant revenues from only a few customers
For 1999 and 1997 no customer accounted for greater than 10% of our net
revenue. In 1998 we derived 12% of our revenue from sales to Sun Microsystems.
If Sun Microsystems, or any other significant customer, were to reduce its
purchases from us, our revenue and therefore our business would be harmed unless
we were to increase sales to other customers substantially. We do not have a
contract with Sun Microsystems or any other customer that requires the customer
to purchase any specified number of software licenses from us. Therefore, we
cannot be sure that these customers will continue to purchase our products at
current levels.
We face uncertainties porting products to new operating systems and developing
new products
Some of our products operate primarily on the UNIX computer operating
system. We are currently redesigning, or porting, these products to operate on
the Windows NT operating system. We are also developing new products for UNIX
and for Windows NT. TeleBackup's products operate on the Sun Solaris version of
UNIX, the Windows and Windows NT operating systems. We intend to port the
TeleBackup products to other UNIX operating systems and subsequent releases of
Windows NT. We may not be able to accomplish any of this work quickly or
cost-effectively. These activities require substantial capital investment,
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substantial employee resources and the cooperation of the owners of the
operating systems to or for which the products are being ported or developed.
Our porting and development work for the Windows NT market has required us to
hire additional personnel with Windows NT expertise and to devote engineering
resources to these projects. We must obtain from operating system owners a
source code license to certain portions of the operating system software to port
some of our products to or develop products for the operating system. Operating
system owners have no obligation to assist in these porting or development
efforts. If they do not grant us a license or if they do not renew our license,
we would not be able to expand our product line easily into other areas. For
example, we rely on a source code license from Microsoft with respect to our
Windows NT development projects. Microsoft is under no obligation to renew the
source code license, which is subject to annual renewal.
The market for VERITAS TeleBackup is unproven
VERITAS TeleBackup, which is designed to back up data for remote personal
computer users, represents new technology that has no proven market. A market
may not develop for this product or similarly unproven products in the future.
This could harm our business because our investment in TeleBackup, and any
additional development and marketing costs, would be lost, and any expected
revenue opportunities would not materialize.
We face intense competition on several fronts
We face a variety of tough competitors, principal among which are:
- internal development groups within original equipment manufacturers that
provide storage management functions to support their systems;
- other software vendors and hardware companies that offer products with
some of our products' features, such as controller and disk subsystem
manufacturers;
- hardware and software vendors that offer storage application products;
- hardware and software vendors that offer high availability and clustering
products; and
- software vendors focused on remote backup technologies and electronic
data vaulting services.
Many of our competitors have greater financial, technical sales, marketing
and other resources than we do and could attempt to increase their presence in
the storage management market by acquiring or forming strategic alliances with
other competitors or business partners.
Expanding our international sales depends on economic stability in regions
that have been unstable
An investment in our securities is riskier than an investment in many other
companies because we plan to expand in overseas markets such as Asia, Russia and
Latin America that have experienced significant economic turmoil in recent
years. Continued turmoil could adversely affect our plans to increase sales in
these regions. Economic recession could also affect our ability to maintain or
increase sales in these or other regions in the future. Our concern is that
recession in these markets could lead to:
- restrictions on government spending imposed by the International Monetary
Fund;
- customers' reduced access to working capital to fund software purchases;
and
- reduced bank lending or other sources of financing for customers and
potential customers.
Any of these factors could cause foreign customers to reduce their purchase
of our products substantially.
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Our foreign-based operations and sales create special problems that could hurt
our results
An investment in our securities is riskier than an investment in most
businesses because we have significant offshore operations, including
development facilities, sales personnel and customer support operations. For
example, as of December 31, 1999, we had approximately 186 engineers located in
Pune, India, performing product development work. These offshore operations are
subject to risks, including:
- potential loss of developed technology through piracy, misappropriation,
or more lax laws regarding intellectual property protection;
- imposition of governmental controls, including trade restrictions;
- fluctuations in currency exchange rates and economic instability;
- longer payment cycles for sales in foreign countries;
- difficulties in staffing and managing the offshore operations;
- seasonal reductions in business activity in the summer months in Europe
and other countries; and
- political unrest, particularly in areas in which we have facilities.
In addition, our international sales are denominated in local currency,
creating risk of foreign currency translation gains and losses that could harm
our quarterly and annual results of operations. If we generate profits or losses
in foreign countries, our effective income tax rate could also be adversely
affected. Currency instability in Asia and other financial markets may make our
products more expensive than products sold by other vendors that are priced in
one of the affected currencies. Therefore, customers in these markets may choose
not to purchase our products.
Our growth strategy is riskier than others because it is based upon
acquisitions of other businesses
An investment in our securities is riskier than investments in many other
companies because we plan to continue to pursue our strategy of growth through
acquisition. We have grown aggressively through acquisitions in the past and
expect to pursue acquisitions in the future.
Acquisitions involve a number of special risks and challenges, including:
- diversion of management attention, particularly in the case of multiple
concurrent acquisitions;
- integration of the acquired company's operations and employees with an
existing business;
- incorporation of technology into existing product lines;
- loss of key employees; and
- presentation of a unified corporate image.
In the past, we have lost certain employees of acquired companies whom we
desired to retain. In some cases, the integration of the operations of acquired
companies took longer than we anticipated. In addition, if the employees of
target companies remain geographically apart from our existing staff, we may not
realize some or all of the anticipated economies of scale.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN EXCHANGE RATE SENSITIVITY
We do not use derivative financial instruments for speculative purposes. We
engage in exchange rate hedging from time to time but this activity has been
insignificant to date and we do not hold or issue foreign exchange contracts for
trading purposes. Our international sales are generated primarily through our
international sales subsidiaries. Most international revenue outside the United
States and Canada is collectible in foreign currencies. Since much of our
international operating expenses are also incurred in local currencies, which is
the foreign subsidiaries functional currency, the impact of exchange rates on
net income or loss is
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relatively less than the impact on revenue. Although our operating and pricing
strategies take into account changes in exchange rates over time, our results of
operations may be affected significantly in the short term by fluctuations in
foreign currency exchange rates. Our international subsidiaries purchase
licenses for resale from the parent company resulting in intercompany
receivables and payables. These receivables and payables are carried on these
foreign subsidiaries' books at the historical local currency that existed at the
time of the transaction. These receivables and payables are eliminated for
financial statement reporting purposes. Prior to elimination, the amounts
carried in foreign currencies are converted to the functional currency at the
then current rate or "marked to market." The marked to market process may give
rise to currency remeasurement gains and losses. These gains or losses are
recognized on our statement of operations as a component of other income, net.
To date, any such gains or losses have not been material. We do not believe our
total exposure is significant.
INTEREST RATE SENSITIVITY
Our exposure to market risk for changes in interest rates relates primarily
to our investment portfolio and long-term debt obligations. Our primary
investment objective is to preserve principal while at the same time maximizing
yields without significantly increasing risk. Our portfolio includes money
markets funds, commercial paper, medium-term notes, corporate notes, government
securities and market auction preferreds. The diversity of our portfolio helps
us to achieve our investment objective. As of December 31, 1999, approximately
91% of our investment portfolio is composed of investments with original
maturities of one year or less and approximately 16% of our investment portfolio
matures less than 90 days from the date of purchase.
Long-term debt of $451.0 million consists of 5.25% convertible subordinated
notes due 2004 of $100.0 million (the "5.25% notes") and 1.856% convertible
subordinated notes due 2006 of $351.0 million (the "1.856% notes"). The interest
rate of 1.856% on the 1.856% notes together with the accrual of original issue
discount represent a yield to maturity of 6.5%. The nominal interest rate on
these notes is fixed and the notes provide for semi-annual interest payments of
approximately $2.6 million each May 1 and November 1 for the 5.25% notes and
approximately $4.3 million each February 13 and August 13 for the 1.856% notes.
The notes are convertible into our common stock at any time prior to the close
of business on the maturity date, unless previously redeemed or repurchased,
subject to adjustment in certain events.
The following table presents the amounts of our cash equivalents,
investments and long-term debt that may be subject to interest rate risk and the
average interest rates as of December 31, 1999 by year of maturity (dollars in
thousands):
<TABLE>
<CAPTION>
2001 AND FAIR VALUE
2000 THEREAFTER 1999 TOTAL TOTAL 1998 TOTAL
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Cash equivalents and short-term
investments:
Fixed rate....................... $625,435 -- $625,435 $ 625,435 $183,413
Average fixed rate............... 5.82% -- 5.82% 5.82% 5.36%
Variable rate.................... $ 11,713 -- $ 11,713 $ 11,713 $ 20,659
Average variable rate............ 5.87% -- 5.87% 5.87% 5.55%
Total cash equivalents and
short-term investments:
Investments...................... $637,148 -- $637,148 $ 637,148 $204,072
Average rate..................... 5.82% -- 5.82% 5.82% 5.38%
Long-term investments:
Fixed rate....................... $ 65,036 -- $ 65,036 $ 65,036 $ 31,925
Average fixed rate............... 5.33% -- 5.33% 5.33% 5.45%
Long-term debt:
Fixed rate....................... -- $451,044 $451,044 $2,260,147 $100,000
Average fixed rate............... -- 6.22% 6.22% 6.22% 5.25%
</TABLE>
38
<PAGE> 39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ANNUAL FINANCIAL STATEMENTS
Our financial statements required by this item are submitted as a separate
section of the Form 10-K. See Item 14(a)(1) for a listing of financial
statements provided in the section titled "Financial Statements."
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following selected quarterly data should be read in conjunction with
the Consolidated Financial Statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this Form 10-K. This information has been derived from
unaudited consolidated financial statements of VERITAS that, in our opinion,
reflect all recurring adjustments necessary to fairly present this information
when read in conjunction with our Consolidated Financial Statements and Notes
thereto appearing in the section titled "Financial Statements." The results of
operations for any quarter are not necessarily indicative of the results to be
expected for any future period. Share and per share data applicable to prior
periods have been restated to give retroactive effect to our stock splits
effected as stock dividends through March 6, 2000.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER FISCAL YEAR
-------- --------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
FISCAL 1999
Total net revenue....................... $ 71,904 $ 114,648 $ 183,401 $ 226,159 $ 596,112
Gross profit............................ 63,422 98,561 151,465 188,109 501,557
Income (loss) before income taxes....... 21,092 (157,601) (175,135) (155,924) (467,568)
Net income (loss)....................... 13,583 (162,329) (183,576) (170,636) (502,958)
Net income (loss) per share -- basic.... $ 0.06 $ (0.59) $ (0.48) $ (0.44) $ (1.59)
Net income (loss) per
share -- diluted...................... $ 0.06 $ (0.59) $ (0.48) $ (0.44) $ (1.59)
Number of shares used in computing per
share amounts basic................... 215,199 275,467 384,846 389,410 316,892
Number of shares used in computing per
share amounts diluted................. 239,111 275,467 384,846 389,410 316,892
FISCAL 1998
Total net revenue....................... $ 39,082 $ 48,113 $ 56,545 $ 67,125 $ 210,865
Gross profit............................ 32,616 40,191 48,702 59,895 181,404
Income before income taxes.............. 11,103 11,239 16,355 21,092 59,789
Net income.............................. 9,055 8,541 12,593 21,459 51,648
Net income per share -- basic........... $ 0.04 $ 0.04 $ 0.06 $ 0.10 $ 0.24
Net income per share -- diluted......... $ 0.04 $ 0.04 $ 0.05 $ 0.09 $ 0.22
Number of shares used in computing per
share amounts -- basic................ 208,951 210,879 212,530 213,827 211,558
Number of shares used in computing per
share amounts -- diluted.............. 229,227 231,095 235,467 234,188 232,519
</TABLE>
In the second quarter of 1999, we acquired the NSMG business and
TeleBackup. In the third quarter of 1999, we acquired NuView. Because we
accounted for the NSMG, TeleBackup and NuView acquisitions using the purchase
method of accounting, we recorded developed technology, goodwill and other
intangible assets of approximately $3,754.9 million in total. These assets are
amortized over their estimated useful life of four years, and result in charges
to operations of approximately $234.8 million per quarter. As a result of these
acquisitions, in the second quarter of 1999 we recorded approximately $76.6
million of amortization of developed technology, goodwill and other intangibles,
one-time non-cash charges of $103.1 million related to the write-off of
in-process research and development and a one-time restructuring charge of $11.0
million related primarily to costs for our duplicative facilities that we plan
to vacate. In the third quarter of 1999 we recorded a one-time non-cash charges
of $1.1 million related to the write-off of in-process research and
39
<PAGE> 40
development and in the third quarter and the fourth quarter of 1999 we recorded
approximately $234.8 million of amortization of developed technology, goodwill
and other intangibles related to these acquisitions.
Our operating results have fluctuated in the past, and may fluctuate
significantly in the future, depending on a number of factors, including the
timing and magnitude of sales of our products through original equipment
manufacturers, investment in new products and new distribution channels, the
timing and level of sales to resellers and direct end-users, the introduction,
timing and market acceptance of new products, the timing of license fee payments
and receipt of funding for porting, and other factors. For further background on
fluctuating operating results, see "Factors That May Affect Future
Results -- Our operating results may fluctuate significantly as a result of
factors outside our control, which could cause the market price of our notes and
our securities to decline."
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
Information with respect to directors may be found in the section captioned
"Election of Directors" appearing in the definitive proxy statement to be
delivered to stockholders in connection with the 2000 Annual Meeting of
Stockholders. Such information is incorporated herein by reference.
EXECUTIVE OFFICERS
Information with respect to executive officers may be found in Item 1.
Business.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item may be found in the section captioned
"Executive Compensation" appearing in the definitive proxy statement to be
delivered to stockholders in connection with the 2000 Annual Meeting of
Stockholders. Such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item may be found in the section captioned
"Security Ownership of Certain Beneficial Owners and Management" appearing in
the definitive proxy statement to be delivered to stockholders in connection
with the 2000 Annual Meeting of Stockholders. Such information is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item may be found in the section captioned
"Related Party Transactions" appearing in the definitive proxy statement to be
delivered to stockholders in connection with the 2000 Annual Meeting of
Stockholders. Such information is incorporated herein by reference.
40
<PAGE> 41
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. FINANCIAL STATEMENTS
The following are included in item 8 and are filed as part of this Annual
Report on Form 10-K:
- Consolidated Balance Sheets as of December 31, 1999 and 1998
- Consolidated Statements of Operations for the years ended December 31,
1999, 1998 and 1997
- Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997
- Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997
- Notes to Consolidated Financial Statements
- Report of Ernst & Young LLP, Independent Auditors
2. FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule for the years ended December 31,
1999, 1998 and 1997 should be read in conjunction with the consolidated
financial statements of VERITAS Software Corporation filed as part of this
Annual Report on Form 10-K:
- Schedule II -- Valuation and Qualifying Accounts
Schedules other than that listed above have been omitted since they are
either not required, not applicable, or because the information required is
included in the consolidated financial statements or the notes thereto.
3. EXHIBITS
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
EXHIBIT -------------------------- FILED
NUMBER EXHIBIT DESCRIPTION FORM DATE NUMBER HEREWITH
- ------- ------------------- ----- --------- ------- --------
<C> <S> <C> <C> <C> <C>
2.01 Amended and Restated Agreement and Plan of S-4 04/19/99 2.01
Reorganization by and among VERITAS Software
Corporation, formerly VERITAS Holding Corporation
("VERITAS"), VERITAS Operating Corporation,
formerly VERITAS Software Corporation ("VOC"),
Seagate Technology, Inc., Seagate Software, Inc.
("Seagate Software") and Seagate Software Network &
Storage Management Group, Inc.
2.02 Amended and Restated Combination Agreement by and S-4 04/19/99 2.02
between VOC and TeleBackup Systems, Inc.
3.01 Amended and Restated Certificate of Incorporation 8-A 06/02/99 3.01
of VERITAS
3.02 Certificate of Amendment of Amended and Restated 8-A 06/02/99 3.02
Certificate of Incorporation of VERITAS
3.03 Amended and Restated Bylaws of VERITAS 8-A 06/02/99 3.03
4.01 Registration Rights Agreement between VOC and 10-Q 06/30/99 4.01
Warburg, Pincus Investors, L.P. dated April 25,
1997
</TABLE>
41
<PAGE> 42
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
EXHIBIT -------------------------- FILED
NUMBER EXHIBIT DESCRIPTION FORM DATE NUMBER HEREWITH
- ------- ------------------- ----- --------- ------- --------
<C> <S> <C> <C> <C> <C>
4.02 Nomination Agreement between VOC and Warburg, 10-Q 06/30/99 4.02
Pincus Investors, L.P. dated April 25, 1997
4.03 Indenture dated as of October 1, 1997 between VOC 10-Q 06/30/99 4.03
and State Street Bank and Trust Company of
California, N.A.
4.04 Amended and Restated First Supplemental Indenture S-1 07/27/99 4.04
dated July 30, 1999 by and among VERITAS, VOC and
State Street Bank and Trust of California, N.A.
4.05 Registration Rights Agreement dated as of October 10-Q 09/30/99 4.07
1, 1997 between VOC and UBS Securities LLC
4.06 Form of Rights Agreement between VERITAS and the S-4 04/19/99 4.06
Right Agent, which includes as Exhibit A the form
of Certificate of Designations of Series A Junior
Participating Preferred Stock, as Exhibit B the
Form of Right Certificate and as Exhibit C the
Summary of Rights to Purchase Preferred Shares
4.07 Form of Registration Rights Agreement between S-4 04/19/99 4.07
VERITAS and Seagate Software
4.08 Form of Stockholder Agreement between VERITAS, VOC, S-4 04/19/99 4.08
Seagate Software and Seagate Technology
4.09 Form of Specimen Stock Certificate S-1 10/22/93 4.01
4.10 Form of Indenture among VERITAS, VOC State Street S-1 07/27/99 4.10
Bank and Trust Company of California, N.A., as
Trustee
10.01+ Development and License Agreement between Seagate S-4 04/19/99 10.01
Technology and VERITAS
10.02+ Cross License Agreement and OEM Agreement between S-4 04/19/99 10.02
Seagate Software Information Management Group, Inc.
and VERITAS
10.03 VERITAS 1993 Equity Incentive Plan, as amended S-4 04/19/99 10.03
10.04 VERITAS 1993 Employee Stock Purchase Plan, as S-4 04/19/99 10.04
amended
10.05 VERITAS 1993 Directors Stock Option Plan, as X
amended
10.06 OpenVision Technologies, Inc. 1996 Employee Stock S-4 03/24/97 10.19
Purchase Plan, as amended
10.07 Office building sublease dated February 27, 1998, 10-Q 09/30/98 10.14
by and between VOC and Space Systems/Loral, Inc.
10.08 Office building lease dated April 30, 1998, by and 10-Q 09/30/98 10.15
between VOC and Ryan Companies US, Inc.
10.09* VERITAS' 1997 Chief Executive Officer Compensation 10-K 12/31/97 10.05
Plan
10.10* VERITAS' 1997 Executive Officer Compensation Plan 10-K 12/31/97 10.06
10.11 Form of Key Employee Agreement S-4 04/19/99 10.11
10.12 Office Building Lease, dated September 2, 1994, as 10-K 12/31/94 10.09
amended, by and between VOC and John Arriliaga and
Richard T. Peery regarding property located in
Mountain View, California
</TABLE>
42
<PAGE> 43
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
EXHIBIT -------------------------- FILED
NUMBER EXHIBIT DESCRIPTION FORM DATE NUMBER HEREWITH
- ------- ------------------- ----- --------- ------- --------
<C> <S> <C> <C> <C> <C>
10.13 Amendment No 1. to Office Building Lease dated May 10-K 12/31/97 10.12
28, 1997 by and between VOC and John Arriliaga and
Richard T. Peery
10.14 Agreement dated November 7, 1996 between VERITAS S-4 03/24/97 10.12
Software India Pvt. Ltd. and Talwalkar & Talwalkar
and Mr. Rajendra Dattatraya Pathak, Mrs. Kamal
Trimbak Nighojkar, Mrs. Bakul Prabhakar Pathak,
Mrs. Nalini Manohar Saraf, Mr. Narhar Vaman Pandit,
Mr. Madhav Narhar Pandit, Ms. Madhavi Damodar
Thite, and Ms. Medha Narhar Pandit relating to the
development of certain premises in Pune, India
10.15 Form of Indemnification Agreement entered into S-4 04/19/99 10.15
between VERITAS and each of its directors and
executive officers
10.16 Amendment No. 1 to Cross-License and OEM Agreement S-4 04/19/99 10.16
between Seagate Software Information Management
Group, Inc. and VERITAS
10.17 Participation Agreement dated April 23, 1999 by and S-1 07/27/99 10.17
among VOC, First Security Bank, National
Association, as "Owner Trustee," various banks and
other lending institutions which are parties
thereto from time to time as "Holders," various
banks and other lending institutions which are
parties thereto from time to time as "Lenders,"
NationsBank, N.A., as "Agent" for the Lenders and
the Holders, and various parties thereto from time
to time as "Guarantors"
10.18 Grant Deed dated April 23, 1999 recording grant of S-1 07/27/99 10.20
real property to First Security Bank, National
Association as "Owner Trustee" by Fairchild
Semiconductor Corporation of California
10.19 Memorandum of Lease Agreement and Lease Supplement S-1 07/27/99 10.21
No. 1 and Deed of Trust dated April 23, 1999 among
VOC, First Security Bank, National Association and
Chicago Title Company
10.20 Memorandum of Lease Agreement and Lease Supplement S-1 07/27/99 10.22
No. 2 and Deed of Trust dated April 23, 1999 among
VOC, First Security Bank, National Association and
Chicago Title Company
10.21 Collateral Assignment of Sublease dated April 23, S-1 07/27/99 10.23
1999 made by VOC to First Security Bank, National
Association
10.22 Sublease Agreement dated April 23, 1999 by and S-1 07/27/99 10.24
between VOC and Fairchild Semiconductor Corporation
of California
10.23 Certificate re: Representations and Warranties S-1 07/27/99 10.25
dated April 20, 1999 by Fairchild Semiconductor
Corporation of California and addressed to VOC
</TABLE>
43
<PAGE> 44
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
EXHIBIT -------------------------- FILED
NUMBER EXHIBIT DESCRIPTION FORM DATE NUMBER HEREWITH
- ------- ------------------- ----- --------- ------- --------
<C> <S> <C> <C> <C> <C>
10.24 Security Agreement dated April 23, 1999 between S-1 07/27/99 10.26
First Security Bank, National Bank, as "Owner
Trustee" and NationsBank, N.A., as Agent for the
"Lenders" and the "Holders"
10.25 Form of Agreement of Purchase and Sale by and S-1 07/27/99 10.27
between Fairchild Semiconductor Corporation of
California and VOC
10.26 First Amendment dated April 14, 1999 and Agreement S-1 07/27/99 10.28
of Purchase and Sale dated March 29, 1999 by and
between Fairchild Semiconductor Corporation of
California and VOC
10.27 Agency Agreement between VOC and First Security S-1 07/27/99 10.29
Bank, National Association, as "Owner Trustee"
10.28 Master Lease Agreement dated April 23, 1999 between S-1 07/27/99 10.30
First Security Bank, National Association and VOC
10.29 First Amendment and Restatement of Certain X
Operative Agreements and Other Agreements dated
March 3, 2000 among VOC, the various parties to the
participation agreement and other operative
agreements from time to time, as the "Guarantors,"
First Security Bank, National Association, as
"Owner Trustee," the various banks and other
lending institutions which are parties to the
participation agreement and other operative
agreements from time to time, as the "Holders," and
Bank of America, N.A., as successor to NationsBank,
N.A.
10.30 Joinder Agreement dated March 3, 2000 by and X
between VERITAS and Bank of America, N.A.
10.31 Joinder Agreement dated March 3, 2000 by and X
between OpenVision International, Ltd. and Bank of
America, N.A.
10.32 Joinder Agreement dated March 3, 2000 by and X
between VERITAS Software Global Corporation
(formerly known as Seagate Software Network &
Storage Management Group, Inc.) and Bank of
America, N.A.
10.33 Participation Agreement dated March 9, 2000 by and X
among VOC, various parties thereto from time to
time as "Guarantors," First Security Bank, National
Association, as "Owner Trustee," various banks and
other lending institutions which are parties
thereto from time to time as "Holders," various
banks and other lending institutions which are
parties thereto from time to time as "Lenders," and
Bank of America, N.A. as "Agent" for the Lenders
and the Holders.
10.34 Master Lease Agreement dated March 9, 2000 between X
First Security Bank, National Association, and VOC
10.35 Construction Agency Agreement dated March 9, 2000 X
between VOC and First Security Bank, National
Association
</TABLE>
44
<PAGE> 45
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
EXHIBIT -------------------------- FILED
NUMBER EXHIBIT DESCRIPTION FORM DATE NUMBER HEREWITH
- ------- ------------------- ----- --------- ------- --------
<C> <S> <C> <C> <C> <C>
10.36 Trust Agreement dated March 9, 2000 between the X
several holders from time to time as parties
thereto, as "Holders," and First Security Bank,
National Association, as "Owner Trustee"
10.37 Credit Agreement dated March 9, 2000 among First X
Security Bank, National Association, as "Owner
Trustee," the several lenders from time to time as
parties thereto, and Bank of America, N.A.
10.38 Security Agreement dated March 9, 2000 between X
First Security Bank, National Association, as
"Owner Trustee," and Bank of America, N.A.,
accepted and agreed to by VOC
21.01 Subsidiaries of the Registrant X
23.01 Consent of Independent Auditors X
27.01 Financial Data Schedule (EDGAR only) X
</TABLE>
- ---------------
* Management contract, compensatory plan or arrangement.
+ Confidential treatment has been granted with respect to certain portions of
this document.
(b) Reports on Form 8-K
<TABLE>
<CAPTION>
DATE OF REPORT ITEM(S) DESCRIPTION
- -------------- ------- -----------
<C> <C> <S>
10/15/99 5, 7 VERITAS announced financial results for its third quarter
ended September 30, 1999 and included the press release.
</TABLE>
45
<PAGE> 46
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Mountain View, State of
California, on the 29th day of March 2000.
VERITAS Software Corporation
Registrant
/s/ KENNETH E. LONCHAR
--------------------------------------
Kenneth E. Lonchar
Senior Vice President, Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
PRINCIPAL EXECUTIVE OFFICER AND DIRECTOR:
/s/ MARK LESLIE Chief Executive Officer and March 29, 2000
- ----------------------------------------------------- Chairman of the Board
Mark Leslie
PRINCIPAL FINANCIAL OFFICER AND PRINCIPAL
ACCOUNTING OFFICER:
/s/ KENNETH E. LONCHAR Senior Vice President, Finance March 29, 2000
- ----------------------------------------------------- and Chief Financial Officer
Kenneth E. Lonchar
ADDITIONAL DIRECTORS:
/s/ GEOFFREY W. SQUIRE Vice Chairman of the Board March 29, 2000
- -----------------------------------------------------
Geoffrey W. Squire
/s/ FRED VAN DEN BOSCH Director March 29, 2000
- -----------------------------------------------------
Fred van den Bosch
/s/ STEVEN BROOKS Director March 29, 2000
- -----------------------------------------------------
Steven Brooks
/s/ WILLIAM H. JANEWAY Director March 29, 2000
- -----------------------------------------------------
William H. Janeway
/s/ JOSEPH D. RIZZI Director March 29, 2000
- -----------------------------------------------------
Joseph D. Rizzi
/s/ GREGORY B. KERFOOT Director March 29, 2000
- -----------------------------------------------------
Gregory B. Kerfoot
/s/ STEPHEN J. LUCZO Director March 29, 2000
- -----------------------------------------------------
Stephen J. Luczo
</TABLE>
46
<PAGE> 47
FINANCIAL STATEMENTS
As required under Item 8. Financial Statements and Supplementary Data, the
consolidated financial statements of the Company are provided in this separate
section. The consolidated financial statements included in this section are as
follows:
<TABLE>
<CAPTION>
FINANCIAL STATEMENT DESCRIPTION PAGE
------------------------------- ----
<S> <C>
Consolidated Balance Sheets As of December 31, 1999 and
1998...................................................... 48
Consolidated Statements of Operations-Years Ended December
31, 1999, 1998 and 1997................................... 49
Consolidated Statements of Stockholders' Equity-Years Ended
December 31, 1999, 1998 and 1997.......................... 50
Consolidated Statements of Cash Flows-Years Ended December
31, 1999, 1998 and 1997................................... 51
Notes to Consolidated Financial Statements.................. 52
Report of Ernst & Young LLP, Independent Auditors........... 68
</TABLE>
47
<PAGE> 48
VERITAS SOFTWARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
---------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 148,244 $139,086
Short-term investments.................................... 544,137 72,040
Accounts receivable, net of allowance for doubtful
accounts of $5,693 and $2,572, respectively............ 132,180 52,697
Deferred income taxes..................................... 23,803 4,272
Other current assets...................................... 13,381 9,237
---------- --------
Total current assets.............................. 861,745 277,332
Long-term investments....................................... 65,036 31,925
Property and equipment, net................................. 76,958 26,518
Goodwill and other intangibles, net......................... 3,226,749 4,005
Deferred income taxes....................................... -- 7,928
Other assets................................................ 2,789 1,409
---------- --------
$4,233,277 $349,117
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 30,229 $ 4,958
Accrued compensation and benefits......................... 35,560 11,267
Accrued acquisition and restructuring costs............... 24,202 478
Other accrued liabilities................................. 41,727 10,718
Income taxes payable...................................... 6,804 13,424
Customer advances......................................... 5,208 --
Deferred revenue.......................................... 86,979 37,645
---------- --------
Total current liabilities......................... 230,709 78,490
Convertible subordinated notes.............................. 451,044 100,000
Deferred income taxes....................................... 157,867 --
Other non-current liabilities............................... 596 773
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value:
10,000 shares authorized: none issued and
outstanding........................................... -- --
Common stock, $.001 par value:
500,000 shares authorized; 390,898 and 214,329 shares
issued and outstanding at December 31, 1999 and
1998.................................................. 391 214
Additional paid-in capital................................ 3,926,554 199,644
Accumulated deficit....................................... (532,374) (29,416)
Deferred compensation..................................... -- (32)
Accumulated other comprehensive loss...................... (1,510) (556)
---------- --------
Total stockholders' equity........................ 3,393,061 169,854
---------- --------
$4,233,277 $349,117
========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
48
<PAGE> 49
VERITAS SOFTWARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Net revenue:
User license fees....................................... $ 498,014 $167,703 $ 95,714
Services................................................ 98,098 43,162 25,411
--------- -------- --------
Total net revenue............................... 596,112 210,865 121,125
Cost of revenue:
User license fees....................................... 20,735 8,798 4,731
Services................................................ 38,161 20,663 11,714
Amortization of developed technology.................... 35,659 -- --
--------- -------- --------
Total cost of revenue........................... 94,555 29,461 16,445
--------- -------- --------
Gross profit.............................................. 501,557 181,404 104,680
Operating expenses:
Selling and marketing................................... 221,989 76,392 42,868
Research and development................................ 94,477 40,239 25,219
General and administrative.............................. 34,185 10,505 8,027
Amortization of goodwill and other intangibles.......... 510,943 -- --
Acquisition and restructuring costs..................... 11,000 -- 8,490
In-process research and development..................... 104,200 600 --
--------- -------- --------
Total operating expenses........................ 976,794 127,736 84,604
--------- -------- --------
Income (loss) from operations............................. (475,237) 53,668 20,076
Interest and other income, net............................ 23,328 11,821 4,889
Interest expense.......................................... (15,659) (5,700) (1,206)
--------- -------- --------
Income (loss) before income taxes......................... (467,568) 59,789 23,759
Provision for income taxes................................ 35,390 8,141 1,010
--------- -------- --------
Net income (loss)......................................... $(502,958) $ 51,648 $ 22,749
========= ======== ========
Net income (loss) per share -- basic...................... $ (1.59) $ 0.24 $ 0.11
========= ======== ========
Net income (loss) per share -- diluted.................... $ (1.59) $ 0.22 $ 0.10
========= ======== ========
Number of shares used in computing per share
amounts -- basic........................................ 316,892 211,558 205,300
========= ======== ========
Number of shares used in computing per share
amounts -- diluted...................................... 316,892 232,519 222,716
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
49
<PAGE> 50
VERITAS SOFTWARE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES ACCUMULATED
COMMON STOCK ADDITIONAL RECEIVABLE OTHER
---------------- PAID-IN ACCUMULATED FROM DEFERRED COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT STOCKHOLDERS COMPENSATION INCOME (LOSS)
------- ------ ---------- ----------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996......... 202,676 $203 $ 179,207 $(103,813) $(282) $(97) $ (263)
Components of comprehensive income:
Net income (loss)................ -- -- -- 22,749 -- -- --
Foreign currency translation
adjustment..................... -- -- -- -- -- -- (303)
Total comprehensive income..... -- -- -- -- -- -- --
Exercise of stock options.......... 3,750 4 3,266 -- -- -- --
Issuance of common stock under
employee stock purchase plan..... 1,147 1 2,506 -- -- -- --
Payments on notes receivable from
stockholders..................... -- -- -- -- 282 -- --
Amortization of deferred
compensation..................... -- -- -- -- -- 33 --
Tax benefit related to stock
options.......................... -- -- 700 -- -- -- --
------- ---- ---------- --------- ----- ---- -------
BALANCE AT DECEMBER 31, 1997......... 207,573 208 185,679 (81,064) -- (64) (566)
Components of comprehensive income:
Net income (loss)................ -- -- -- 51,648 -- -- --
Foreign currency translation
adjustment..................... -- -- -- -- -- -- 10
Total comprehensive income..... -- -- -- -- -- -- --
Exercise of stock options.......... 5,547 5 10,398 -- -- -- --
Issuance of common stock under
employee stock purchase plan..... 1,209 1 3,567 -- -- -- --
Amortization of deferred
compensation..................... -- -- -- -- -- 32 --
------- ---- ---------- --------- ----- ---- -------
BALANCE AT DECEMBER 31, 1998......... 214,329 214 199,644 (29,416) -- (32) (556)
Components of comprehensive income:
Net income (loss)................ -- -- -- (502,958) -- -- --
Foreign currency translation
adjustment..................... -- -- -- -- -- -- (954)
Total comprehensive income..... -- -- -- -- -- -- --
Exercise of stock options.......... 11,909 12 101,940 -- -- -- --
Issuance of common stock under
employee stock purchase plan..... 798 1 6,973 -- -- -- --
Issuance of common stock related to
the NSMG acquisition............. 155,583 156 3,151,196 -- -- -- --
Issuance of options to purchase
shares of common stock related to
the NSMG acquisition............. -- -- 281,418 -- -- -- --
Issuance of common stock related to
the TeleBackup acquisition....... 6,842 7 134,095 -- -- -- --
Issuance of options to purchase
shares of common stock related to
the TeleBackup acquisition....... -- -- 2,762 -- -- -- --
Issuance of common stock related to
the NuView acquisition........... 1,436 1 48,526 -- -- -- --
Amortization of deferred
compensation..................... -- -- -- -- -- 32 --
------- ---- ---------- --------- ----- ---- -------
BALANCE AT DECEMBER 31, 1999......... 390,898 $391 $3,926,554 $(532,374) $ -- $ -- $(1,510)
======= ==== ========== ========= ===== ==== =======
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
BALANCE AT DECEMBER 31, 1996......... $ 74,955
Components of comprehensive income:
Net income (loss)................ 22,749
Foreign currency translation
adjustment..................... (303)
----------
Total comprehensive income..... 22,446
Exercise of stock options.......... 3,270
Issuance of common stock under
employee stock purchase plan..... 2,507
Payments on notes receivable from
stockholders..................... 282
Amortization of deferred
compensation..................... 33
Tax benefit related to stock
options.......................... 700
----------
BALANCE AT DECEMBER 31, 1997......... 104,193
Components of comprehensive income:
Net income (loss)................ 51,648
Foreign currency translation
adjustment..................... 10
----------
Total comprehensive income..... 51,658
Exercise of stock options.......... 10,403
Issuance of common stock under
employee stock purchase plan..... 3,568
Amortization of deferred
compensation..................... 32
----------
BALANCE AT DECEMBER 31, 1998......... 169,854
Components of comprehensive income:
Net income (loss)................ (502,958)
Foreign currency translation
adjustment..................... (954)
----------
Total comprehensive income..... (503,912)
Exercise of stock options.......... 101,952
Issuance of common stock under
employee stock purchase plan..... 6,974
Issuance of common stock related to
the NSMG acquisition............. 3,151,352
Issuance of options to purchase
shares of common stock related to
the NSMG acquisition............. 281,418
Issuance of common stock related to
the TeleBackup acquisition....... 134,102
Issuance of options to purchase
shares of common stock related to
the TeleBackup acquisition....... 2,762
Issuance of common stock related to
the NuView acquisition........... 48,527
Amortization of deferred
compensation..................... 32
----------
BALANCE AT DECEMBER 31, 1999......... $3,393,061
==========
</TABLE>
See accompanying notes to consolidated financial statements.
50
<PAGE> 51
VERITAS SOFTWARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ (502,958) $ 51,648 $ 22,749
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 24,126 7,346 3,113
Amortization of goodwill and other intangibles.......... 510,943 -- --
Amortization of developed technology.................... 35,659 -- --
In-process research and development..................... 104,200 600 --
Restructuring costs..................................... 948 -- 1,218
Amortization of original issue discount on convertible
notes................................................. 5,402 -- --
Deferred income taxes................................... (36,775) (8,000) (4,200)
Changes in operating assets and liabilities, net of
effects of business acquisitions:
Accounts receivable................................... (77,174) (22,127) (14,601)
Other receivable...................................... 22,935 -- --
Other assets.......................................... (3,367) (8,136) (267)
Accounts payable...................................... 19,389 3,469 (208)
Accrued compensation and benefits..................... 17,539 4,611 3,480
Accrued acquisition and restructuring costs........... (15,269) -- --
Other accrued liabilities............................. 10,169 2,525 2,387
Income taxes payable.................................. (8,956) 10,694 3,779
Customer advances and deferred revenue................ 37,203 20,167 9,370
---------- --------- ---------
Net cash provided by operating activities................... 144,014 62,797 26,820
Cash flows from investing activities:
Purchases of investments.................................. (764,097) (284,819) (144,907)
Investment maturities..................................... 258,891 296,048 79,921
Payment received on note.................................. -- -- 108
Purchase of property and equipment........................ (59,671) (23,424) (6,181)
Cash acquired from Seagate Software....................... 1,044 -- --
Cash acquired from TeleBackup............................. 1,493 -- --
Purchase of NuView, Inc. ................................. (11,400) -- --
Purchase of Frontier Software Devel. Pvt. Ltd. ........... (1,325) -- --
Purchase of Windward Technologies, Inc. .................. -- (1,250) --
Purchase of other businesses and technologies............. (1,900) -- --
---------- --------- ---------
Net cash used for investing activities...................... (576,965) (13,445) (71,059)
Financing activities:
Proceeds from issuance of common stock.................... 108,926 13,971 5,777
Net proceeds from issuance of convertible debt............ 334,137 -- 97,500
Payments of notes payable................................. -- -- (612)
Payments on notes receivable from stockholders............ -- -- 282
---------- --------- ---------
Net cash provided by financing activities................... 443,063 13,971 102,947
Effect of exchange rate changes............................. (954) 134 (490)
---------- --------- ---------
Net increase in cash and cash equivalents................... 9,158 63,457 58,218
Cash and cash equivalents at beginning of year.............. 139,086 75,629 17,411
---------- --------- ---------
Cash and cash equivalents at end of year.................... $ 148,244 $ 139,086 $ 75,629
========== ========= =========
Supplemental disclosures:
Cash paid for interest.................................... $ 5,300 $ 5,521 $ --
========== ========= =========
Cash paid for income taxes................................ $ 15,834 $ 6,245 $ 1,703
========== ========= =========
Supplemental schedule of noncash investing and financing
transactions:
Issuance of common stock and options for business
acquisitions............................................ $3,618,161 $ -- $ --
========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
51
<PAGE> 52
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VERITAS Software Corporation (the Company), a Delaware corporation, is a
leading independent supplier of storage management software. The Company's
products help its customers manage complex and diverse computing environments
efficiently and cost-effectively by making sure that their data is protected,
can be accessed at all times, and can be managed and used in compliance with
business policies. The Company's products help to improve the levels of
centralization, control, automation and manageability in computing environments,
they allow information technology, or IT, managers to be more effective with
constrained resources and limited budgets. Its products offer protection against
data loss and file corruption, allow rapid recovery after disk or computer
system failure, enable IT managers and end users to work efficiently with large
numbers of files, and make it possible to manage data distributed on large
networks of computer systems without harming productivity or interrupting users.
In addition, the Company's products provide continuous availability of data in
clustered computer systems that share disk resources to maintain smooth business
operations. Its products are highly scalable in order to keep up with the rapid
growth of data and technologies deployed in businesses. The Company develops and
sells products for all popular operating systems, including versions of UNIX and
Windows NT. Its software solutions are used in a broad spectrum of industries,
including many leading global corporations and e-commerce businesses. The
Company also provides a full range of services to assist its customers in
planning and implementing their storage management solutions. The Company
markets its products and services to original equipment manufacturers and end
user customers through a combination of direct sales and indirect sales channels
such as resellers, value-added resellers, hardware distributors, application
software vendors and systems integrators.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
Stock splits
On June 7, 1999, the Company announced a two-for-one stock split in the
form of a stock dividend paid on July 8, 1999 to stockholders of record on June
18, 1999. On October 14, 1999, the Company announced a three-for-two split in
the form of a stock dividend paid on November 19, 1999 to stockholders of record
on November 2, 1999. On January 27, 2000, the Company announced a three-for-two
split in the form of a stock dividend paid on March 3, 2000 to stockholders of
record on February 18, 2000. All share and per share data have been restated to
give retroactive effect to the these stock splits.
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 consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash, Cash Equivalents and Short-Term Investments
Cash and cash equivalents include cash and highly liquid investments with
insignificant interest rate risk and with original maturities of three months or
less when purchased. The Company invests its excess cash in diversified
instruments maintained primarily in U.S. financial institutions in an effort to
preserve principal and to maintain safety and liquidity.
Short-term investments include investments with original maturities of one
year or less when purchased. The Company has determined its short-term
investments are held to maturity under the provisions of
52
<PAGE> 53
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", (SFAS No. 115) and accordingly such
amounts are recorded at amortized cost.
At December 31, 1999, amortized cost approximated fair value for all cash
equivalents and short-term investments. To date, there have been no significant
realized or unrealized gains or losses on the short-term investments.
Long-Term Investments
Investments with remaining maturities greater than one year from date of
purchase are classified as long-term. The Company accounts for its long-term
investments in accordance with SFAS No. 115 and these investments are classified
as held to maturity as of the balance sheet date. At December 31, 1999,
amortized cost approximated fair value for all long-term investments and, to
date, there have been no significant realized or unrealized gains or losses on
the Company's long-term investments.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization
are calculated using the straight-line method over the estimated useful lives
or, in the case of leasehold improvements, the term of the related lease, if
shorter. The estimated useful lives of furniture and equipment and computer
equipment is generally three to five years. The Company also depreciates a
building located in India over fifteen years. Depreciation and amortization of
property and equipment charged to costs and expenses was approximately $23.1
million for the year ended December 31, 1999, $6.9 million for the year ended
December 31,1998 and $3.1 million for the year ended December 31,1997.
Goodwill and other intangibles
Goodwill represents the excess of the purchase price of net tangible and
intangible assets acquired in business combinations over their estimated fair
value. Other intangibles mainly represent distribution channels, original
equipment manufacturer agreements, developed technology, assembled workforce and
trademarks acquired in business combinations. Goodwill and other intangibles are
being amortized on a straight-line basis over their estimated useful life of
four years. The Company reviews goodwill and other intangibles to assess
recoverability from future operations using undiscounted cash flows. In
management's opinion, no material impairment exists at December 31, 1999.
Accumulated amortization of goodwill and other intangibles was $548.6 million as
of December 31, 1999 and $0.5 million as of December 31, 1998.
Revenue Recognition
In October of 1997 the Accounting Standards Executive Committee issued
Statement of Position (SOP) 97-2 "Software Revenue Recognition", which has been
amended by SOP 98-4 and SOP 98-9. These statements set forth generally accepted
accounting principles for recognizing revenue on software transactions. SOP
97-2, as amended by SOP 98-4, was effective for revenue recognized under
software license and service arrangements beginning January 1, 1998. SOP 98-9
amends SOP 97-2 and requires recognition of revenue using the "residual method"
when certain criteria are met. The implementation of these provisions of SOP
98-9 will be effective for the Company's fiscal year ending December 31, 2000.
The Company does not believe the impact of SOP 98-9 will be material to its
financial position, results of operations and cash flows.
The Company derives revenue from software licenses and customer support and
other services. Service revenue includes contracts for software maintenance and
technical support, consulting, training, and porting fees. In software
arrangements that include rights to multiple software products and/or services,
the Company allocates the total arrangement fee among each of the deliverables
based on the relative fair value of each of the deliverables, determined based
on vendor-specific objective evidence of fair value.
53
<PAGE> 54
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company recognizes revenue from licensing of software products to an
end user upon delivery of the software product to the customer, unless the fee
is not fixed or determinable, or collectibility is not considered probable. For
licensing of the Company's software to OEMs, revenue is not recognized until the
software is sold by the OEM to an end-user customer. For licensing of the
Company's software through our indirect sales channels, revenue is recognized
when the software is sold by the reseller, value-added reseller or distributor
to an end-user customer. The Company considers all arrangements with payment
terms extending beyond twelve months and other arrangements with payment terms
longer than normal not to be fixed or determinable. If collectibility is not
considered probable, revenue is recognized when the fee is collected.
Customer support revenue is recognized on a straight-line basis over the
period that the support is provided. Other software service arrangements are
evaluated to determine whether those services are essential to the functionality
of the other elements of the arrangement. When software services are considered
essential, revenue under the arrangement is recognized using contract
accounting. When software services are not considered essential, the revenue
allocable to the software services is recognized as the services are performed.
The Company generally considers software services essential unless the software
is paid for before the services commence and the services are limited to
training or normal installation.
Revenue is recognized using contract accounting for arrangements involving
customization or modification of the software or where software services are
considered essential to the functionality of the software. Revenue from these
software arrangements is recognized using the percentage-of-completion method
with progress-to-completion measured using labor cost inputs.
Software Development Costs
Under Statement of Financial Accounting Standards No. 86 "Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,"
certain software development costs incurred subsequent to the establishment of
technological feasibility are capitalized and amortized over the estimated lives
of the related products. Technological feasibility is established upon
completion of a working model, which is typically demonstrated by initial beta
shipment. The period between the achievement of technological feasibility and
the general release of the Company's products has been of short duration. As of
December 31, 1999 such capitalizable software development costs were
insignificant and all software development costs have been charged to research
and development expense in the accompanying consolidated statements of
operations.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of investments in debt
securities and trade receivables. The Company primarily invests its excess cash
in commercial paper rated A-1/P-1, medium-term notes, corporate notes,
government securities, market auction preferreds with approved financial
institutions, and other specific money market instruments of similar liquidity
and credit quality. The Company is exposed to credit risks in the event of
default by the financial institutions or issuers of investments to the extent
recorded on the balance sheet. The Company generally does not require
collateral. The Company maintains allowances for credit losses, and such losses
have been within management's expectations. For the years ended December 31,
1999 and 1997 no customer accounted for greater than 10% of revenues. For the
year ended December 31, 1998, one customer accounted for approximately 12% or
$25.8 million of the Company's revenue.
Net Income Per Share
Basic earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common shares and dilutive
potential common shares outstanding during the period. Dilutive common shares
consist of
54
<PAGE> 55
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
employee stock options using the treasury stock method and common shares issued
assuming conversion of the convertible subordinated notes, if dilutive.
Accounting for Stock-Based Compensation
The Company accounts for employee stock based compensation in accordance
with APB Opinion No. 25 "Accounting for Stock Issued to Employees" and related
interpretations. Pro forma net income and net income per share disclosures
required by Statement of Financial Accounting Standards No. 123, Accounting for
Stock Based Compensation", are included in Note 9.
Translation of Foreign Currencies
Assets and liabilities of certain foreign subsidiaries, whose functional
currency is the local currency, are translated at year-end exchange rates.
Income and expense items are translated at the average rates of exchange
prevailing during the year. The adjustment resulting from translating the
financial statements of such foreign subsidiaries is reflected as a separate
component of stockholder's equity. Certain other transaction gains or losses,
which have not been material, are reported in results of operations.
Impairment of Long-Lived Assets
The Company reviews the assets for impairment and determines whether an
event or change in facts and circumstances indicates that the carrying amount of
property and equipment or other long-lived assets may not be recoverable. The
Company determines recoverability of the assets by comparing the carrying amount
of the asset to net future undiscounted cash flows that the asset is expected to
generate. The impairment recognized is the amount by which the carrying amount
exceeds the fair market value of the asset. No events or changes in facts and
circumstances occurred during the year that would indicate that any impairment
of assets existed.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No.
133). SFAS No. 133 establishes methods of accounting for derivative financial
instruments and hedging activities related to those instruments as well as other
hedging activities. The Company will be required to implement SFAS No. 133 as of
the beginning of its fiscal year 2001. The Company's exchange rate hedging
activities have been insignificant to date and the Company does not believe the
impact of SFAS No. 133 will be material to its financial position, results of
operations or cash flows.
In December 1998, the AICPA issued SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions". SOP 98-9
amends SOP 97-2 "Software Revenue Recognition" to require recognition of revenue
using the "residual method" when certain criteria are met. The Company will be
required to implement these provisions of SOP 98-9 for its fiscal year ending
December 31, 2000. SOP 98-9 also amends SOP 98-4, an earlier amendment to SOP
97-2, which extended the deferral of the application of certain passages of SOP
97-2. The Company does not believe the impact of SOP 98-9 will be material to
the Company's financial position, results of operations or cash flows.
NOTE 2. BUSINESS COMBINATIONS
On May 28, 1999, the Company acquired the Network & Storage Management
Group business of Seagate Software, Inc., which the Company refers to as "NSMG."
The NSMG business develops and markets software products and provides related
services enabling information technology professionals to manage distributed
network resources and to secure and protect enterprise data. Its products offer
features such as system backup, disaster recovery, migration, replication,
automated client protection, storage resource
55
<PAGE> 56
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
management, scheduling, event correlation and desktop management. In connection
with the NSMG acquisition, in consideration for the contribution of assets and
liabilities related to the NSMG business by Seagate Technology, Inc., Seagate
Software, Inc., and their respective subsidiaries, and based on the average
closing price of our common stock of $20.26 per share for 5 days before and
after June 7, 1999, the measurement date for the transaction, the Company issued
155,583,486 shares of its common stock to Seagate Software, Inc. and issued
options to purchase 15,626,358 shares of its common stock to its employees who
were former NSMG employees. The Company accounted for the NSMG acquisition using
the purchase method of accounting, and incurs charges of $221.5 million per
quarter primarily related to the amortization of developed technology, goodwill
and other intangibles over their estimated useful life of four years. The total
NSMG purchase price was $3,464.5 million and included $3,151.4 million for the
issuance of our common stock, $269.7 million for the exchange of options to
purchase our common stock and $43.4 million of acquisition-related costs. The
purchase price was allocated, based on an independent valuation, to goodwill of
$3,015.8 million, distribution channels of $233.8 million, original equipment
manufacturer agreements of $23.4 million, developed technology of $233.7
million, assembled workforce of $12.8 million, trademarks of $22.8 million,
in-process research and development of $101.2 million, net deferred tax
liabilities of $179.5 million, other intangibles of $1.5 million and tangible
net liabilities assumed of $1.0 million. For 1999, the Company recorded $482.5
million for the amortization of goodwill and other intangibles, and $34.1
million for the amortization of developed technology related to this
acquisition. The Consolidated Statements of Operations include the results of
operations of NSMG subsequent to the acquisition date.
Acquisition-related costs consist of direct transaction costs of $20.0
million, operating lease commitments on duplicative facilities of $8.2 million
and involuntary termination benefits of $15.2 million. Non-cash charges included
in the acquisition-related costs approximate $11.7 million. At December 31,
1999, $17.4 million in direct transaction costs, $0.3 million in operating lease
commitments on duplicative facilities and $1.8 million in involuntary
termination benefits were paid against the acquisition-related costs accrual and
$11.7 million of non-cash involuntary termination benefits were charged against
the acquisition-related costs accrual. The remaining acquisition-related costs
accrual of $12.2 million is anticipated to be utilized primarily for servicing
operating lease payments or negotiated buyout of operating lease commitments,
the lease terms of which will expire at various times through the year 2013. In
addition, the Company recorded a restructuring charge of $11.0 million in 1999
as a result of the NSMG acquisition. This restructuring charge related to exit
costs with respect to duplicative facilities that the Company plans to vacate,
which include $0.9 million of write-off of redundant equipment and leasehold
improvements, and involuntary termination benefits. Involuntary termination
benefits relate to the salary and fringe benefit expense for terminated
employees in research and development. Involuntarily terminated employees
represented approximately 2% of the global workforce. At December 31, 1999, $0.9
million in severance costs were paid against the restructuring charge accrual
and $0.9 million of write-off of redundant equipment and leasehold improvements
had been written off. The remaining restructuring charge accrual of $9.2 million
is anticipated to be utilized primarily for servicing operating lease payments
or negotiated buyout of operating lease commitments, the lease terms of which
will expire at various times through the year 2012.
On June 1, 1999 the Company acquired TeleBackup Systems, Inc., which the
Company refers to as "TeleBackup." TeleBackup designs, develops and markets
software solutions for local and remote backup and recovery of electronic
information stored on networked, remote and mobile personal computers.
TeleBackup became a wholly owned subsidiary of the Company in exchange for the
issuance of 6,842,795 shares of either its common stock or exchangeable shares
to the holders of TeleBackup common shares and the exchange of options to
purchase 154,706 shares of its common stock to its employees who were former
employees of TeleBackup. The Company accounted for the TeleBackup acquisition
using the purchase method of accounting, and incurs charges of $9.0 million per
quarter primarily related to the amortization of developed technology, goodwill
and other intangibles over their estimated useful life of four years. Based on
the average closing price of our common stock of $19.60 per share for 5 days
before and after June 1, 1999, the
56
<PAGE> 57
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
measurement date for the transaction, the total purchase price for TeleBackup
was $143.1 million. The TeleBackup purchase price included $134.1 million
related to the issuance of our common stock, $2.8 million for the issuance of
options to purchase our common stock and $6.2 million in acquisition-related
costs. The acquisition costs of $6.2 million consist primarily of direct
transaction costs and involuntary termination benefits. At December, 1999, of
the total $6.2 million acquisition costs, the Company paid $5.3 million in
direct transaction costs with the majority of the remaining $0.9 million
anticipated to be utilized by May 2000. The purchase price was allocated, based
on an independent valuation, to goodwill of $133.1 million, distribution
channels of $1.0 million, original equipment manufacturer agreements of $2.1
million, developed technology of $6.6 million, assembled workforce of $0.3
million, trademarks of $1.3 million, in-process research and development of $1.9
million, net deferred tax liabilities of $3.0 million and tangible net
liabilities assumed of $0.2 million. For 1999, the Company recorded $20.1
million for amortization of goodwill and other intangibles, and $1.0 million for
the amortization of developed technology related to this acquisition. The
Consolidated Statements of Operations include the results of operations of
TeleBackup subsequent to the acquisition date.
On August 10, 1999, the Company acquired certain assets of NuView, Inc.,
which the Company refers to as "NuView". Under an asset purchase agreement, the
Company acquired certain assets of NuView, including its Windows NT cluster
management solution, Cluster X, for a total cost of approximately $67.9 million.
The Company accounted for the acquisition using the purchase method of
accounting, and incurs charges of $4.3 million per quarter primarily related to
the amortization of developed technology, goodwill and other intangibles over
their estimated useful life of four years. The purchase price included $47.7
million related to the issuance of the Company's common stock, $0.8 million for
the issuance of options to purchase the Company's common stock to former NuView
employees, $0.2 million in acquisition-related costs and $19.2 million payable
in cash, of which $11.4 million has been paid. The purchase price was allocated,
based on an independent valuation, to goodwill of $62.6 million, developed
technology of $2.4 million, assembled workforce of $0.6 million, trademarks of
$0.3 million, covenant-not-to-compete of $0.9 million and in-process research
and development of $1.1 million. For 1999, the Company recorded $8.1 million for
amortization of goodwill and other intangibles, and $0.3 million for the
amortization of developed technology related to this acquisition. The
Consolidated Statements of Operations include the results of operations of
NuView subsequent to the acquisition date.
The following unaudited pro forma summary results of operations data have
been prepared assuming that the NSMG, TeleBackup and NuView acquisitions had
occurred at the beginning of the periods presented. The consolidated results are
not necessarily indicative of results of future operations nor of results that
would have occurred had the acquisitions been consummated as of the beginning of
the periods presented. The pro forma information excludes the impact of the
one-time charges related to in-process research and development costs of $104.2
million and the restructuring charges of $11.0 million recorded in 1999 (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Net revenue.......................................... $ 700,027 $ 409,998
========= =========
Net loss............................................. $(738,049) $(814,993)
========= =========
Basic and diluted net loss per share................. $ (1.93) $ (2.18)
========= =========
</TABLE>
Effective April 25, 1997, the Company merged with OpenVision, a
publicly-held company that provided storage management applications and services
for client/server computing environments. This transaction was accounted for as
a pooling of interests. Approximately 65,745,000 shares of the Company's common
stock were issued in the OpenVision merger and the Company reserved
approximately 9,780,000 shares of its common stock for issuance pursuant to the
assumption of outstanding options, warrants and other rights to purchase
OpenVision common stock.
57
<PAGE> 58
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following information shows revenue and net income of the separate
companies during the periods preceding the merger (in thousands):
<TABLE>
<CAPTION>
1997
--------
<S> <C>
Net revenue:
VERITAS................................................... $ 12,454
OpenVision................................................ 13,156
Combined company.......................................... 95,515
--------
$121,125
========
Net income:
VERITAS................................................... $ 3,752
OpenVision................................................ 1,665
Combined company.......................................... 17,332
--------
$ 22,749
========
</TABLE>
Note: April 1, 1997 was used as an approximation of the effective date of
the Merger.
As a result of the OpenVision merger, the Company incurred charges to
operations of $8.5 million during the second quarter of 1997, consisting of
approximately $4.2 million for transaction fees and professional services, $1.9
million for contract terminations and asset write-offs and $2.4 million for
other costs incident to the merger. Of the total charge, $1.2 million resulted
from the write-down of redundant assets and facilities, primarily consisting of
intangible assets related to a prior acquisition which became redundant as a
result of OpenVision having a similar product line. The remaining $7.3 million,
involving banking, legal and accounting fees and other direct costs and payments
in connection with the elimination of duplicative facilities, was fully paid as
of December 31, 1999.
NOTE 3. CASH, CASH EQUIVALENTS AND INVESTMENTS
Cash, cash equivalents and short-term investments consist of the following
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Cash and cash equivalents:
Cash................................................. $ 55,233 $ 6,893
Money market funds................................... 5,234 172
Commercial paper..................................... 77,771 132,021
Corporate notes...................................... 10,006 --
-------- --------
Cash and cash equivalents.............................. 148,244 139,086
-------- --------
Short-term investments:
Commercial paper..................................... 207,465 1,357
Market auction preferreds............................ 11,713 20,659
Government securities................................ 91,599 --
Corporate notes...................................... 233,360 50,024
-------- --------
Short-term investments................................. 544,137 72,040
-------- --------
Cash, cash equivalents and short-term investments...... $692,381 $211,126
======== ========
</TABLE>
58
<PAGE> 59
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Long-term investments consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
------- -------
<S> <C> <C>
Long-term investments:
Government securities................................. $18,838 $ 9,497
Medium-term corporate notes........................... 46,198 22,428
------- -------
Long-term investments................................... $65,036 $31,925
======= =======
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and consisted of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Furniture and equipment................................ $ 24,176 $ 6,962
Computer equipment..................................... 96,828 34,251
Building............................................... 1,445 1,008
Leasehold improvements................................. 17,266 3,765
-------- --------
139,715 45,986
Less -- accumulated depreciation and amortization...... (62,757) (19,468)
-------- --------
Property and equipment, net............................ $ 76,958 $ 26,518
======== ========
</TABLE>
NOTE 5. CONVERTIBLE SUBORDINATED NOTES
In October 1997, the Company issued $100.0 million of 5.25% convertible
subordinated notes due 2004 (the "5.25% notes"), for which the Company received
net proceeds of $97.5 million. The Company and its wholly-owned subsidiary,
VERITAS Operating Corporation, are co-obligors on the 5.25% notes. The 5.25%
notes provide for semi-annual interest payments of $2.6 million each May 1 and
November 1. The 5.25% notes are convertible into shares of the Company's common
stock at any time prior to the close of business on the maturity date, unless
previously redeemed or repurchased, at a conversion price of $9.56 per share,
subject to adjustment in certain events, equivalent to a conversion rate of
104.65 shares of common stock per $1,000 principal amount at maturity. On or
after November 5, 2002, the 5.25% notes will be redeemable over the period of
time until maturity at our option at declining premiums to par. The debt
issuance costs are being amortized over the term of the 5.25% notes using the
interest method. The fair value of the 5.25% notes as of December 31, 1999 was
$1,000.9 million.
In August 1999, the Company and its wholly-owned subsidiary, VERITAS
Operating Corporation, issued $465.8 million, aggregate principal amount at
maturity, of 1.856% convertible subordinated notes due 2006 (the "1.856% notes")
for which the Company received net proceeds of approximately $334.1 million. The
interest rate of 1.856% together with the accrual of original issue discount
represent a yield to maturity of 6.5%. VERITAS and VERITAS Operating Corporation
are co-obligors on the 1.856% notes. The 1.856% notes provide for semi-annual
interest payments of $4.3 million each February 13 and August 13, commencing
February 13, 2000. The 1.856% notes are convertible into shares of the Company's
common stock at any time prior to the close of business on the maturity date,
unless previously redeemed or repurchased, at a conversion price of $35.80 per
share, subject to adjustment in certain events, equivalent to a conversion rate
of 27.934 shares of common stock per $1,000 principal amount at maturity. On or
after August 16, 2002, the 1.856% notes will be redeemable over the period of
time until maturity at the Company's option at issuance price plus accrued
original issue discount and any accrued interest. The debt issuance costs are
being amortized over the
59
<PAGE> 60
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
term of the 1.856% notes using the interest method. The fair value of the 1.856%
notes as of December 31, 1999 was $1,259.3 million.
NOTE 6. SUMMARY FINANCIAL INFORMATION OF SUBSIDIARY
VERITAS and its wholly-owned subsidiary, VERITAS Operating Corporation, are
co-obligors on VERITAS' 5.25% convertible subordinated notes due 2004 and 1.856%
convertible subordinated notes due 2006. In accordance with Staff Accounting
Bulletin No. 53, Financial Statement Requirements in Filings Involving the
Guarantee of Securities by the Parent, VERITAS provides the following unaudited
summary financial information with respect to VERITAS Operating Corporation. The
following presents the operations of, and the assets held by, the legal entity
VERITAS Operating Corporation and does not necessarily, nor is it intended to,
represent the operations of VERITAS Operating Corporation had it continued as a
separate entity absent the NSMG acquisition (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total net revenue........................................... $451,095 $210,865
Amortization of goodwill and other intangibles.............. 28,441 --
In-process research and development......................... 3,000 --
Acquisition and restructuring costs......................... -- --
Income from operations...................................... 96,714 53,668
Net income.................................................. 65,488 51,648
BALANCE SHEET DATA:
Working capital............................................. $530,672 $198,842
Goodwill and other intangibles.............................. 199,590 --
Total assets................................................ 987,359 349,117
Long-term obligations....................................... 451,629 100,773
Retained earnings (accumulated deficit)..................... 36,072 (29,416)
Stockholders' equity........................................ 433,478 169,854
</TABLE>
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company currently has operating leases for its facilities through
October 31, 2012. Rental expense under operating leases was approximately $15.6
million, $6.1 million and $4.3 million for the years ended December 31, 1999,
1998, and 1997, respectively. In addition to the basic rent, the Company is
responsible for all taxes, insurance and utilities related to the facilities.
The approximate minimum lease payments as of December 31, 1999 are as follows
(in thousands):
<TABLE>
<S> <C>
2000.............................................. $ 23,549
2001.............................................. 21,453
2002.............................................. 18,195
2003.............................................. 17,039
2004.............................................. 15,267
Thereafter........................................ 39,599
--------
Minimum lease payments............................ $135,102
========
</TABLE>
In the ordinary course of business, various lawsuits and claims have been
filed against the Company. While the outcome of these matters is currently not
determinable, management believes that the ultimate resolution of these matters
will not have a material adverse effect on the Company's consolidated financial
position, results of operations or cash flows.
60
<PAGE> 61
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. BENEFIT PLANS
The Company has adopted a retirement savings plan (the VERITAS Software
401(k) Plan), qualified under Section 401(k) of the Internal Revenue Code, which
is a pretax savings plan covering substantially all United States employees.
Under the plan employees may contribute up to 20% of their pretax salary,
subject to certain limitations. Employees are eligible to participate beginning
the first day of the month following their date of hire. The Company matches
approximately 50% of the employee contributions up to $2,500 per year and
contributed approximately $3.1 million in 1999. For 1998 and 1997, the Company
matched approximately 25% of the employee contributions up to $1,200 per year
and contributed approximately $0.6 million in 1998 and $0.3 million in 1997.
NOTE 9. STOCK COMPENSATION PLANS
At December 31, 1999, the Company had three stock-based compensation plans,
which are described below. The Company applies APB Opinion No. 25 and related
interpretations in accounting for its plans. Since the exercise price of options
granted under such plans is generally equal to the market value on the date of
grant, no compensation cost has been recognized for grants under its stock
option plans and stock purchase plans. If compensation cost for the Company's
stock-based compensation plans had been determined consistent with SFAS No. 123,
the Company's net income (loss) and earnings (loss) per share would have been
reduced to the pro forma amounts indicated below (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
1999 1998 1997
--------- ------- -------
<S> <C> <C> <C>
Net income (loss)
As reported....................................... $(502,958) $51,648 $22,749
Pro forma......................................... $(540,474) $32,102 $12,358
Basic earnings (loss) per share
As reported....................................... $ (1.59) $ 0.24 $ 0.11
Pro forma......................................... $ (1.71) $ 0.15 $ 0.06
Diluted earnings (loss) per share
As reported....................................... $ (1.59) $ 0.22 $ 0.10
Pro forma......................................... $ (1.71) $ 0.14 $ 0.06
</TABLE>
SFAS No. 123 is only applicable to options granted subsequent to January 1,
1995. As a result, the pro forma effect of adopting SFAS No. 123 is not fully
reflected until the year ending December 31, 1999.
Stock Option Plans
The Company has two stock option plans. The Company's 1993 Equity Incentive
Plan (the 1993 Plan) provides for the issuance of either incentive or
nonstatutory stock options to employees and consultants of the Company. The
options generally are granted at the fair market value of the Company's common
stock at the date of grant, expire ten years from the date of grant, vest over a
four-year period and are exercisable immediately upon vesting. The Company has
reserved 89,596,000 shares of common stock for issuance under the 1993 Plan. The
Company has also reserved 2,531,250 shares for issuance under the Company's 1993
Director's Stock Option Plan (the Director's Plan). Generally options expire ten
years from date of grant, vest over the term of each directors board membership
and are exercisable immediately upon vesting. As of December 31, 1999,
39,840,353 shares were available for future grant under the plans.
For the pro forma amounts determined under SFAS No. 123, as set forth
above, the fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1999, 1998 and 1997: risk-free interest rates
averaging 5.55% in 1999, 5.15% in 1998 and 6.19% in 1997; a dividend yield of
0.0% for all years; a weighted-average expected
61
<PAGE> 62
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
life of 5 years for all years; and a volatility factor of the expected market
price of the Company's common stock of 0.65 for 1999, 0.65 for 1998 and 0.60 for
1997.
A summary of the status of the Company's stock option plans (including the
options assumed in the Acquisitions and the Merger) as of December 31, 1999,
1998 and 1997 and changes during the years ended on those dates is presented
below (number of shares in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year...... 36,948 $ 4.88 34,601 $2.86 25,817 $1.58
Granted............................... 16,717 $23.36 10,469 $9.76 14,369 $4.68
Assumed in business combinations...... 15,896 $ 3.40 -- $ -- -- $ --
Exercised............................. (11,909) $ 3.21 (5,547) $1.88 (3,474) $0.92
Forfeited............................. (3,230) $ 9.07 (2,575) $4.03 (2,111) $2.94
-------- ------ ------- ----- ------- -----
Outstanding at end of year............ 54,422 $10.28 36,948 $4.88 34,601 $2.86
======== ====== ======= ===== ======= =====
Options exercisable at year end....... 22,625 15,201 11,516
Weighted-average fair value of options
Granted during the year............. $ 13.93 $ 5.75 $ 2.69
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999 (number of shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- --------------------------
WEIGHTED-
NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED-
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 1999 LIFE PRICE 1998 PRICE
- --------------- -------------- ----------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
$ 0.01 - $ 1.66 5,637 5.34 $ 0.99 5,326 $ 0.98
$ 1.68 - $ 2.42 6,285 6.91 $ 2.06 4,243 $ 2.08
$ 2.43 - $ 3.68 5,964 6.81 $ 2.73 3,641 $ 2.68
$ 3.70 - $ 4.79 7,265 8.01 $ 4.49 3,058 $ 4.55
$ 4.84 - $ 8.58 6,319 7.88 $ 6.31 2,779 $ 6.08
$ 8.70 - $11.33 5,519 8.48 $10.11 1,795 $10.01
$12.00 - $17.56 6,286 9.24 $16.09 973 $15.69
$17.94 - $21.81 7,891 9.50 $20.67 775 $20.35
$23.33 - $62.83 3,001 9.74 $37.87 35 $30.35
$72.12 - $72.13 255 9.96 $72.13 -- $72.13
------ ---- ------ ------ ------
$ 0.01 - $72.13 54,422 7.97 $10.28 22,625 $ 4.63
====== ==== ====== ====== ======
</TABLE>
EMPLOYEE STOCK PURCHASE PLANS
Under the Company's 1993 Employee Stock Purchase Plan (the 1993 Purchase
Plan), the Company is authorized to issue up to 21,910,295 shares of common
stock to its full-time employees, nearly all of whom are eligible to
participate. Under the terms of the 1993 Purchase Plan, employees can choose to
have up to 10% of their wages withheld to purchase the Company's common stock.
The purchase price of the stock is 85% of the lower of the subscription date
fair market value and the purchase date fair market value.
62
<PAGE> 63
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Substantially all of the eligible employees have participated in the either
the 1993 Purchase Plan or the 1996 Purchase Plan in 1999, 1998 and 1997. Under
the 1993 Purchase Plan, the Company issued 796,495 shares to employees in 1999,
764,573 shares in 1998, and 672,075 shares in 1997.
In accordance with APB 25, the Company does not recognize compensation cost
related to employee purchase rights under the Plan. To comply with the pro forma
reporting requirements of SFAS No. 123, compensation cost is estimated for the
fair value of the employees' purchase rights using the Black-Scholes
option-pricing model with the following assumptions for these rights granted in
1999, 1998 and 1997: a dividend yield of 0.0% for all years; an expected life
ranging up to 2 years for all years; an expected volatility factor of 0.65 in
1999, 0.65 in 1998 and 0.60 in 1997; and risk-free interest rates ranging from
4.57% to 5.77% in 1999, from 5.14% to 5.39% in 1998 and from 5.27% to 5.84% in
1997. The weighted-average fair value of the purchase rights granted was $8.70
in 1999, $3.15 in 1998 and $2.06 in 1997.
NOTE 10. STOCKHOLDERS' EQUITY
On October 4, 1998, the Board of Directors of the Company adopted a
Stockholder Rights Plan, declaring a dividend of one preferred share purchase
right (a Right) for each outstanding share of common stock, par value $0.001 per
share, of VERITAS. The rights are initially attached to the Company's common
stock and will not trade separately. If a person or group acquires 20 percent or
more of the Company's common stock, or announces an intention to make a tender
offer for the Company's common stock the consummation of which would result in
acquiring 20 percent or more of the Company's common stock, then the rights will
be distributed and will then trade separately from the common stock. Each Right
entitles the registered holder to purchase from the Company one one-hundredth of
a share of Series A Junior Participating Preferred Stock, par value $0.001 per
share, of the Company. The rights expire October 5, 2008, unless the expiration
date is extended or unless the rights are earlier redeemed or exchanged by the
Company.
The Company is authorized to issue up to 10,000,000 shares of undesignated
preferred stock. No such preferred shares have been issued to date.
Total common shares reserved for issuance at December 31, 1999 under all
stock compensation plans are 114,037,545 shares (see Note 9).
NOTE 11. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Federal
Current............................................ $ 64,452 $11,858 $ 539
Deferred........................................... (35,245) (8,075) (3,500)
State
Current............................................ 9,340 2,514 1,939
Deferred........................................... (5,077) 75 (700)
Foreign.............................................. 1,920 1,769 2,732
-------- ------- -------
Total...................................... $ 35,390 $ 8,141 $ 1,010
======== ======= =======
</TABLE>
The tax benefits associated with the disqualifying disposition of stock
options or employee stock purchase plan shares reduced the income taxes
currently payable by $63.0 million for 1999. Such benefits are credited to
additional paid-in capital when realized.
63
<PAGE> 64
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The provision for income taxes differs from the amount computed by applying
the federal statutory rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Federal tax at statutory rate............................... 35.0% 35.0% 35.0%
Benefit of loss carryforwards............................... -- (9.3) (35.9)
State taxes................................................. (0.9) 4.2 5.4
Foreign taxes............................................... (0.4) 3.0 9.4
Change in valuation allowance............................... -- (13.4) (17.7)
Acquisition and restructuring costs......................... -- -- 6.5
In-process research and development charge and
non-deductible goodwill................................... (42.2) -- --
Alternative minimum tax, net................................ -- -- 2.3
Tax credits................................................. 0.5 (7.1) --
Other....................................................... 0.4 1.2 (0.7)
----- ----- -----
Total............................................. (7.6)% 13.6% 4.3%
===== ===== =====
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.................. $ 26,946 $ 23,276 $ 22,499
Reserves and accruals not currently deductible.... 28,315 6,146 2,205
Acquired intangibles.............................. 12,521 1,895 2,114
Tax credit carryforwards.......................... 2,861 -- 2,246
Other............................................. 2,170 1,655 887
--------- -------- --------
Total................................... 72,813 32,972 29,951
Valuation allowance............................... (11,602) (20,772) (25,751)
--------- -------- --------
Net deferred tax assets........................... $ 61,211 $ 12,200 $ 4,200
========= ======== ========
Deferred tax liabilities:
Acquired intangibles.............................. (195,275) -- --
--------- -------- --------
Net deferred tax assets (liabilities)............. $(134,064) $ 12,200 $ 4,200
========= ======== ========
</TABLE>
The valuation allowance decreased by approximately $9.2 million in 1999,
$5.0 million in 1998 and $13.6 million in 1997. As of December 31, 1999, the
$11.6 million valuation allowance reflected above relates to the tax benefits of
certain assets acquired with the acquisition of NSMG and will be credited to
goodwill if realized.
As of December 31, 1999, the Company had federal tax loss carryforwards of
approximately $74.0 million and federal tax credit carryforwards of
approximately $2.9 million. The federal tax loss carryforwards will expire in
2008 through 2011, and the federal tax credit carryforwards will expire in 2003
through 2014, if not utilized. Because of the change in ownership provisions of
the Internal Revenue Code, a substantial portion of the Company's net operating
loss and credit carryforwards may be subject to annual limitations. The annual
limitation may result in the expiration of net operating loss and credit
carryforwards before utilization.
Management has determined based on the Company's history of prior earnings,
its expectations for the future and the extended period over which the benefits
of certain deferred tax assets will be realized, as well as
64
<PAGE> 65
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the limitations on its ability to utilize certain net operating loss
carryforwards, that a valuation allowance continues to be necessary.
The realization of the Company's deferred tax assets, which relate
primarily to net operating loss carryforwards and temporary differences is
dependent on generating sufficient taxable income in future periods. Although
realization is not assured, management believes it is more likely than not that
the net deferred tax assets will be realized.
NOTE 12. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings (loss) per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Numerator:
Net income (loss)............................... $(502,958) $ 51,648 $ 22,749
========= ======== ========
Denominator:
Weighted-average shares......................... 316,892 211,558 205,300
--------- -------- --------
Denominator for basic earnings (loss) per
share........................................ 316,892 211,558 205,300
Common stock equivalents........................ -- 20,961 17,416
--------- -------- --------
Denominator for diluted earnings (loss) per
share........................................ 316,892 232,519 222,716
========= ======== ========
Basic earnings (loss) per share................... $ (1.59) $ 0.24 $ 0.11
========= ======== ========
Diluted earnings (loss) per share................. $ (1.59) $ 0.22 $ 0.10
========= ======== ========
</TABLE>
Common stock equivalents included in the denominator for purposes of
computing diluted earnings per share do not include 10,465,067 shares issuable
upon conversion of the 5.25% convertible subordinated notes and 13,010,144
shares issuable upon conversion of the 1.856% convertible subordinated notes, as
their effect would be anti-dilutive for all periods presented (see Note 5). In
1999, common stock equivalents included in the denominator for purposes of
computing diluted earnings per share do not include 39,406,524 potential common
shares, all related to employee stock options, as their effect would be
anti-dilutive.
NOTE 13. SIGNIFICANT DEVELOPMENT AND LICENSE AGREEMENTS
In January 1997 the Company entered into a cross-license and development
arrangement with Sun Microsystems whereby each party granted the other a
royalty-based license to bundle or resell substantially all then-available
products of both companies. Under this arrangement, 5% of each royalty dollar
received by the Company is to be set aside to fund future "best efforts",
non-recurring engineering services to be performed by the Company at the
direction of Sun. Under these NRE projects, the scope of which is mutually
agreed to by both parties, Sun bears the risk of the development effort. In
accordance with SFAS No. 68 the Company has recognized a liability equal to 5%
of each royalty dollar received from Sun under this arrangement. The liability
to Sun as of December 31, 1999 was $1.2 million. As of December 31, 1998 there
was no liability to Sun. The liability to Sun as of December 31, 1997 was $0.2
million.
NOTE 14. SEGMENT INFORMATION
The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS No.
131), in fiscal 1998. SFAS No. 131 supersedes Statement of Financial Accounting
Standards No. 14, "Financial Reporting for Segments of a Business Enterprise"
and establishes standards for reporting information about operating segments.
Operating segments are defined as components of an enterprise about which
separate financial information is available
65
<PAGE> 66
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
that is evaluated regularly by the chief operating decision maker, or group, in
deciding how to allocate resources and in assessing performance.
The Company operates in one segment, storage management solutions. The
Company's products and services are sold throughout the world, through direct,
OEM, reseller and distributor channels. The Company's chief operating decision
maker, the chief executive officer, evaluates the performance of the Company
based upon stand-alone revenue of product channels and the geographic regions of
the segment and does not receive discrete financial information about asset
allocation, expense allocation or profitability from the Company's storage
products or services.
Geographic information (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
User license fees(1):
United States.................................... $372,485 $121,910 $ 67,888
Europe(2)........................................ 94,986 33,172 12,971
Other(3)......................................... 30,543 12,621 14,855
-------- -------- --------
Total.................................... $498,014 $167,703 $ 95,714
======== ======== ========
Services(1):
United States.................................... $ 78,756 $ 34,759 $ 20,463
Europe(2)........................................ 15,450 7,869 4,865
Other(3)......................................... 3,892 534 83
-------- -------- --------
Total.................................... $ 98,098 $ 43,162 $ 25,411
======== ======== ========
Total net revenue........................ $596,112 $210,865 $121,125
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------
1999 1998 1997
---------- ------- -------
<S> <C> <C> <C>
Long-lived assets(4):
United States..................................... $3,289,545 $25,202 $ 9,412
Europe(2)......................................... 11,918 3,644 1,114
Other(3).......................................... 2,244 380 67
---------- ------- -------
Total..................................... $3,303,707 $29,226 $10,593
========== ======= =======
</TABLE>
- ---------------
(1) License and Service revenues are attributed to geographic regions based on
location of customers.
(2) Europe includes the Middle East and Africa.
(3) Other consists of Canada, Latin America, Japan and the Asia Pacific region.
(4) Long-lived assets include all long-term assets except those specifically
excluded under SFAS No. 131, such as deferred income taxes and financial
instruments. Reconciliation to total assets reported (in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------
1999 1998 1997
---------- -------- --------
<S> <C> <C> <C>
Total long-lived assets........................... $3,303,707 $ 29,226 $ 10,593
Other assets, including current................... 929,570 319,891 231,287
---------- -------- --------
Total consolidated assets............... $4,233,277 $349,117 $241,880
========== ======== ========
</TABLE>
66
<PAGE> 67
VERITAS SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
No customer represented 10% or more of the Company's net revenue in 1999 and
1997. One customer represented approximately 12% or $25.8 million of the
Company's net revenue in 1998.
NOTE 15. RELATED PARTY TRANSACTIONS
The Company paid $0.8 million in 1998 and $6.7 million in 1999 in service
fees related to the acquisition of NSMG to Donaldson, Lufkin & Jenrette (DLJ), a
company affiliated with a director of the Company until February 1999. The
Company had no outstanding receivable or payable balance with DLJ at December
31, 1999.
NOTE 16. SUBSEQUENT EVENTS (UNAUDITED)
During the first quarter of 2000, the Company amended and revised its
existing lease agreement, originally signed in the second quarter of 1999, for
new corporate campus facilities in Mountain View, California. These facilities
will replace certain facilities the Company currently leases in Mountain View.
The new corporate campus facilities will be developed in one phase for a total
of 425,000 square feet and will provide space for sales, marketing,
administration and research and development functions. The lease term for these
facilities is five years beginning in March 2000, with an option to extend the
lease term for two successive periods of one year each. The revised total
approximate minimum lease payments for these facilities for the next five years
will be $0 for 2000, $5.3 million for 2001, $10.6 million for 2002 and $10.3
million for 2003 and 2004. The Company has an option to purchase the property
(land and facilities) for $139.4 million or, at the end of the lease, to arrange
for the sale of the property to a third party with the Company retaining an
obligation to the owner for the difference between the sales price and the
guaranteed residual value up to $123.8 million if the sales price is less than
this amount, subject to certain provisions of the lease. The Company anticipates
occupying the new corporate campus facilities and beginning the lease payments
in the second quarter of 2001. The lease agreement requires the Company to
maintain specified financial covenants such as and earnings before interest,
taxes, depreciation and amortization (EBITDA), debt on EBITDA and quick ratio,
all of which the Company was in compliance with as of December 31, 1999.
During the first quarter of 2000, the Company signed a lease agreement for
its existing facilities in Roseville, Minnesota. The Company will improve and
expand its existing facilities of 62,000 square feet and will develop adjacent
property adding 260,000 square feet to the campus, with the first phase of
142,000 square feet being completed in the second quarter of 2001. The
facilities will provide space for research and development functions. The lease
term for these facilities is five years beginning in March 2000, with an option
to extend the lease term for two successive periods of one year each. The total
approximate minimum lease payments for these facilities for the next five years
will be $0.6 million in 2000, $1.9 million in 2001 and $2.9 million in 2002,
2003 and 2004. The Company has an option to purchase the property (land and
facilities) for $40 million or, at the end of the lease, to arrange for the sale
of the property to a third party with the Company retaining an obligation to the
owner for the difference between the sales price and the guaranteed residual
value up to $34.3 million if the sales price is less than this amount, subject
to certain provisions of the lease. The Company anticipates occupying the new
corporate campus facilities and beginning the lease payments in the second
quarter of 2001.
On March 29, 2000, the Company, Seagate Technology, Inc. and an investor
group including Seagate Technology's management group announced a transaction in
which the Company will acquire all of the shares of its common stock held by
Seagate Technology, certain other securities and cash. The Company is not
acquiring Seagate Technology's disc drive business or any other Seagate
Technology operating business.
In the transaction, the Company will issue to the Seagate Technology
stockholders approximately 109.3 million shares of its common stock for
approximately 128 million shares of the Company's common stock held by Seagate
Technology. In addition, the Company will issue shares of its common stock for
certain other securities held by Seagate Technology at the closing date and, at
the Company's election, the Company may also issue shares of its common stock
for up to $750 million in retained cash at the closing date.
The Company will be indemnified for liabilities, including tax liabilities
and other matters that may arise in connection with the transaction. The
transaction is intended to qualify as a tax-free reorganization.
67
<PAGE> 68
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Stockholders and Board of Directors
VERITAS Software Corporation
We have audited the accompanying consolidated balance sheets of VERITAS
Software Corporation as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1999. Our audits also
included the financial statement schedule listed in the index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 VERITAS
Software Corporation at December 31, 1999 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/s/ ERNST & YOUNG LLP
San Jose, California
January 25, 2000
68
<PAGE> 69
VERITAS SOFTWARE CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
PROVISION
FROM CHARGED TO
BALANCE AT BUSINESSES OPERATING BALANCE AT
BEGINNING OF YEAR ACQUIRED EXPENSES DEDUCTIONS(1) END OF YEAR
----------------- ---------- ---------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31,
1999....................... $2,572 $1,477 $2,425 $781 $5,693
Year ended December 31,
1998....................... $1,597 $ -- $1,032 $ 57 $2,572
Year ended December 31,
1997....................... $ 697 $ -- $ 900 $ -- $1,597
</TABLE>
- ---------------
(1) Deductions related to the allowance for doubtful accounts represent amounts
written off against the allowance.
69
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
EXHIBIT -------------------------- FILED
NUMBER EXHIBIT DESCRIPTION FORM DATE NUMBER HEREWITH
- ------- ------------------- ----- --------- ------- --------
<C> <S> <C> <C> <C> <C>
2.01 Amended and Restated Agreement and Plan of S-4 04/19/99 2.01
Reorganization by and among VERITAS Software
Corporation, formerly VERITAS Holding Corporation
("VERITAS"), VERITAS Operating Corporation,
formerly VERITAS Software Corporation ("VOC"),
Seagate Technology, Inc., Seagate Software, Inc.
("Seagate Software") and Seagate Software Network &
Storage Management Group, Inc.
2.02 Amended and Restated Combination Agreement by and S-4 04/19/99 2.02
between VOC and TeleBackup Systems, Inc.
3.01 Amended and Restated Certificate of Incorporation 8-A 06/02/99 3.01
of VERITAS
3.02 Certificate of Amendment of Amended and Restated 8-A 06/02/99 3.02
Certificate of Incorporation of VERITAS
3.03 Amended and Restated Bylaws of VERITAS 8-A 06/02/99 3.03
4.01 Registration Rights Agreement between VOC and 10-Q 06/30/99 4.01
Warburg, Pincus Investors, L.P. dated April 25,
1997
4.02 Nomination Agreement between VOC and Warburg, 10-Q 06/30/99 4.02
Pincus Investors, L.P. dated April 25, 1997
4.03 Indenture dated as of October 1, 1997 between VOC 10-Q 06/30/99 4.03
and State Street Bank and Trust Company of
California, N.A.
4.04 Amended and Restated First Supplemental Indenture S-1 07/27/99 4.04
dated July 30, 1999 by and among VERITAS, VOC and
State Street Bank and Trust of California, N.A.
4.05 Registration Rights Agreement dated as of October 10-Q 09/30/99 4.07
1, 1997 between VOC and UBS Securities LLC
4.06 Form of Rights Agreement between VERITAS and the S-4 04/19/99 4.06
Right Agent, which includes as Exhibit A the form
of Certificate of Designations of Series A Junior
Participating Preferred Stock, as Exhibit B the
Form of Right Certificate and as Exhibit C the
Summary of Rights to Purchase Preferred Shares
4.07 Form of Registration Rights Agreement between S-4 04/19/99 4.07
VERITAS and Seagate Software
4.08 Form of Stockholder Agreement between VERITAS, VOC, S-4 04/19/99 4.08
Seagate Software and Seagate Technology
4.09 Form of Specimen Stock Certificate S-1 10/22/93 4.01
4.10 Form of Indenture among VERITAS, VOC State Street S-1 07/27/99 4.10
Bank and Trust Company of California, N.A., as
Trustee
10.01+ Development and License Agreement between Seagate S-4 04/19/99 10.01
Technology and VERITAS
10.02+ Cross License Agreement and OEM Agreement between S-4 04/19/99 10.02
Seagate Software Information Management Group, Inc.
and VERITAS
10.03 VERITAS 1993 Equity Incentive Plan, as amended S-4 04/19/99 10.03
</TABLE>
70
<PAGE> 71
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
EXHIBIT -------------------------- FILED
NUMBER EXHIBIT DESCRIPTION FORM DATE NUMBER HEREWITH
- ------- ------------------- ----- --------- ------- --------
<C> <S> <C> <C> <C> <C>
10.04 VERITAS 1993 Employee Stock Purchase Plan, as S-4 04/19/99 10.04
amended
10.05 VERITAS 1993 Directors Stock Option Plan, as X
amended
10.06 OpenVision Technologies, Inc. 1996 Employee Stock S-4 03/24/97 10.19
Purchase Plan, as amended
10.07 Office building sublease dated February 27, 1998, 10-Q 09/30/98 10.14
by and between VOC and Space Systems/Loral, Inc.
10.08 Office building lease dated April 30, 1998, by and 10-Q 09/30/98 10.15
between VOC and Ryan Companies US, Inc.
10.09* VERITAS' 1997 Chief Executive Officer Compensation 10-K 12/31/97 10.05
Plan
10.10* VERITAS' 1997 Executive Officer Compensation Plan 10-K 12/31/97 10.06
10.11 Form of Key Employee Agreement S-4 04/19/99 10.11
10.12 Office Building Lease, dated September 2, 1994, as 10-K 12/31/94 10.09
amended, by and between VOC and John Arriliaga and
Richard T. Peery regarding property located in
Mountain View, California
10.13 Amendment No 1. to Office Building Lease dated May 10-K 12/31/97 10.12
28, 1997 by and between VOC and John Arriliaga and
Richard T. Peery
10.14 Agreement dated November 7, 1996 between VERITAS S-4 03/24/97 10.12
Software India Pvt. Ltd. and Talwalkar & Talwalkar
and Mr. Rajendra Dattatraya Pathak, Mrs. Kamal
Trimbak Nighojkar, Mrs. Bakul Prabhakar Pathak,
Mrs. Nalini Manohar Saraf, Mr. Narhar Vaman Pandit,
Mr. Madhav Narhar Pandit, Ms. Madhavi Damodar
Thite, and Ms. Medha Narhar Pandit relating to the
development of certain premises in Pune, India
10.15 Form of Indemnification Agreement entered into S-4 04/19/99 10.15
between VERITAS and each of its directors and
executive officers
10.16 Amendment No. 1 to Cross-License and OEM Agreement S-4 04/19/99 10.16
between Seagate Software Information Management
Group, Inc. and VERITAS
10.17 Participation Agreement dated April 23, 1999 by and S-1 07/27/99 10.17
among VOC, First Security Bank, National
Association, as "Owner Trustee," various banks and
other lending institutions which are parties
thereto from time to time as "Holders," various
banks and other lending institutions which are
parties thereto from time to time as "Lenders,"
NationsBank, N.A., as "Agent" for the Lenders and
the Holders, and various parties thereto from time
to time as "Guarantors"
10.18 Grant Deed dated April 23, 1999 recording grant of S-1 07/27/99 10.20
real property to First Security Bank, National
Association as "Owner Trustee" by Fairchild
Semiconductor Corporation of California
</TABLE>
71
<PAGE> 72
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
EXHIBIT -------------------------- FILED
NUMBER EXHIBIT DESCRIPTION FORM DATE NUMBER HEREWITH
- ------- ------------------- ----- --------- ------- --------
<C> <S> <C> <C> <C> <C>
10.19 Memorandum of Lease Agreement and Lease Supplement S-1 07/27/99 10.21
No. 1 and Deed of Trust dated April 23, 1999 among
VOC, First Security Bank, National Association and
Chicago Title Company
10.20 Memorandum of Lease Agreement and Lease Supplement S-1 07/27/99 10.22
No. 2 and Deed of Trust dated April 23, 1999 among
VOC, First Security Bank, National Association and
Chicago Title Company
10.21 Collateral Assignment of Sublease dated April 23, S-1 07/27/99 10.23
1999 made by VOC to First Security Bank, National
Association
10.22 Sublease Agreement dated April 23, 1999 by and S-1 07/27/99 10.24
between VOC and Fairchild Semiconductor Corporation
of California
10.23 Certificate re: Representations and Warranties S-1 07/27/99 10.25
dated April 20, 1999 by Fairchild Semiconductor
Corporation of California and addressed to VOC
10.24 Security Agreement dated April 23, 1999 between S-1 07/27/99 10.26
First Security Bank, National Bank, as "Owner
Trustee" and NationsBank, N.A., as Agent for the
"Lenders" and the "Holders"
10.25 Form of Agreement of Purchase and Sale by and S-1 07/27/99 10.27
between Fairchild Semiconductor Corporation of
California and VOC
10.26 First Amendment dated April 14, 1999 and Agreement S-1 07/27/99 10.28
of Purchase and Sale dated March 29, 1999 by and
between Fairchild Semiconductor Corporation of
California and VOC
10.27 Agency Agreement between VOC and First Security S-1 07/27/99 10.29
Bank, National Association, as "Owner Trustee"
10.28 Master Lease Agreement dated April 23, 1999 between S-1 07/27/99 10.30
First Security Bank, National Association and VOC
10.29 First Amendment and Restatement of Certain X
Operative Agreements and Other Agreements dated
March 3, 2000 among VOC, the various parties to the
participation agreement and other operative
agreements from time to time, as the "Guarantors,"
First Security Bank, National Association, as
"Owner Trustee," the various banks and other
lending institutions which are parties to the
participation agreement and other operative
agreements from time to time, as the "Holders," and
Bank of America, N.A., as successor to NationsBank,
N.A.
10.30 Joinder Agreement dated March 3, 2000 by and X
between VERITAS and Bank of America, N.A.
10.31 Joinder Agreement dated March 3, 2000 by and X
between OpenVision International, Ltd. and Bank of
America, N.A.
</TABLE>
72
<PAGE> 73
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
EXHIBIT -------------------------- FILED
NUMBER EXHIBIT DESCRIPTION FORM DATE NUMBER HEREWITH
- ------- ------------------- ----- --------- ------- --------
<C> <S> <C> <C> <C> <C>
10.32 Joinder Agreement dated March 3, 2000 by and X
between VERITAS Software Global Corporation
(formerly known as Seagate Software Network &
Storage Management Group, Inc.) and Bank of
America, N.A.
10.33 Participation Agreement dated March 9, 2000 by and X
among VOC, various parties thereto from time to
time as "Guarantors," First Security Bank, National
Association, as "Owner Trustee," various banks and
other lending institutions which are parties
thereto from time to time as "Holders," various
banks and other lending institutions which are
parties thereto from time to time as "Lenders," and
Bank of America, N.A. as "Agent" for the Lenders
and the Holders.
10.34 Master Lease Agreement dated March 9, 2000 between X
First Security Bank, National Association, and VOC
10.35 Construction Agency Agreement dated March 9, 2000 X
between VOC and First Security Bank, National
Association
10.36 Trust Agreement dated March 9, 2000 between the X
several holders from time to time as parties
thereto, as "Holders," and First Security Bank,
National Association, as "Owner Trustee"
10.37 Credit Agreement dated March 9, 2000 among First X
Security Bank, National Association, as "Owner
Trustee," the several lenders from time to time as
parties thereto, and Bank of America, N.A.
10.38 Security Agreement dated March 9, 2000 between X
First Security Bank, National Association, as
"Owner Trustee," and Bank of America, N.A.,
accepted and agreed to by VOC
21.01 Subsidiaries of the Registrant X
23.01 Consent of Independent Auditors X
27.01 Financial Data Schedule (EDGAR only) X
</TABLE>
- ---------------
* Management contract, compensatory plan or arrangement.
+ Confidential treatment has been granted with respect to certain portions of
this document.
73
<PAGE> 1
EXHIBIT 10.05
VERITAS SOFTWARE CORPORATION
1993 DIRECTORS STOCK OPTION PLAN
AS ADOPTED OCTOBER 1, 1993, AMENDED JANUARY 26, 1994, AMENDED
OCTOBER 19, 1994, AMENDED APRIL 20, 1995, AMENDED APRIL 17, 1996,
AMENDED JANUARY 12, 1997, AMENDED APRIL 15, 1999 AND AMENDED
OCTOBER 14, 1999 (EFFECTIVE JANUARY 1, 1999)
1. PURPOSE. This Stock Option Plan (this "Plan") is established to provide
equity incentives for nonemployee members of the Board of Directors of VERITAS
Software Corporation, a corporation organized under the laws of the State of
Delaware, any successor corporation thereto and any corporation that assumes the
Plan (the "Company") who are described in Section 6.1 below, by granting such
persons options to purchase shares of stock of the Company.
2. ADOPTION AND SHAREHOLDER APPROVAL. This Plan shall become effective on
the date that it is adopted by the Board of Directors (the "Board") of the
Company. This Plan shall be approved by the affirmative vote or written consent
of the holders of a majority of the outstanding shares of Common Stock of the
Company, within twelve months after the date this Plan is adopted by the Board.
Upon the effective date of this Plan, options under this Plan ("Options") may be
granted provided that, in the event that shareholder approval is not obtained
within the time period provided herein, this Plan, and all Options granted
hereunder, shall terminate. No Option that is issued as a result of any increase
in the number of shares authorized to be issued under this Plan shall be
exercised prior to the time such increase has been approved by the shareholders
of the Company and all such Options granted pursuant to such increase shall
similarly terminate if such shareholder approval is not obtained.
3. TYPES OF OPTIONS AND SHARES. Options granted under this Plan shall be
nonqualified stock options ("NQSOs"). The shares of stock that may be purchased
upon exercise of Options granted under this Plan (the "Shares") are shares of
the Common Stock of the Company or any successor security.
4. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan is 562,500 Shares, subject to
adjustment as provided in this Plan. If any Option is terminated for any reason
without being exercised in whole or in part, the Shares thereby released from
such Option shall be available for purchase under other Options subsequently
granted under this Plan. At all times during the term of this Plan, the Company
shall reserve and keep available such number of Shares as shall be required to
satisfy the requirements of outstanding Options under this Plan. The numbers of
Shares represented in this Plan are stated as of January 1, 1999, and therefore
do not reflect the two-for-one stock split announced by the Board on June 7,
1999 and paid as a stock dividend on July 8, 1999 to stockholders of record on
June 18, 1999.
<PAGE> 2
5. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "Committee"). As used in this Plan, references to the Committee shall
mean either such Committee or the Board if no committee has been established.
The interpretation by the Committee of any of the provisions of this Plan or any
Option granted under this Plan shall be final and binding upon the Company and
all persons having an interest in any Option or any Shares purchased pursuant to
an Option.
6. ELIGIBILITY AND AWARD FORMULA.
6.1 ELIGIBILITY. Options may be granted only to directors of the Company
who are not employees of the Company or any Parent, Subsidiary or Affiliate of
the Company, as those terms are defined in Section 17 below (each an
"Optionee"). Directors who are consultants and independent contractors of the
Company or of any Parent, Subsidiary or Affiliate of the Company are eligible to
participate in the Directors Plan.
6.2 INITIAL GRANT. Each Optionee who is first elected or reelected to
the Board after the effective date of the Company's registration statement (the
"Registration Statement") filed with, and declared effective by, the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Securities Act") on or after January 1, 1999 will automatically be
granted an option for 25,000 Shares on the later of (i) the date such Optionee
is first elected or reelected to the Board or (ii) the date his or her most
recent prior option becomes fully vested as to all Shares or terminates (whether
such option was granted under this Plan, the Company's 1993 Equity Incentive
Plan or otherwise) (the "Initial Grant"). An Optionee who has received an
Initial Grant or a Succeeding Grant prior to any assumption of this Plan shall
not be granted an Initial Grant. The Board will have the discretion to increase
the number of Shares subject to the Initial Grant to 54,000 Shares without
shareholder approval.
6.3 SUCCEEDING GRANTS. On the anniversary date of his or her most recent
prior option (whether such option was granted under this Plan, the Company's
1993 Equity Incentive Plan or otherwise) Optionee will automatically be granted
an Option for 6,500 Shares, provided that Optionee is still a member of the
Board (a "Succeeding Grant"). Notwithstanding the foregoing, an Optionee shall
not receive a Succeeding Grant earlier than the first anniversary of his or her
Initial Grant. The Board will have the discretion to increase the number of
Shares subject to a Succeeding Grant to 13,500 Shares without shareholder
approval.
6.4 MAXIMUM SHARES. The maximum number of Shares that may be issued to
any one director under this Plan is 108,000. No grant will be made, however, if
such grant will cause the number of Shares issued or subject to outstanding
Options under this Plan to exceed the number specified in Section 4 above.
7. TERMS AND CONDITIONS OF OPTIONS. Subject to the following and to Section
6 above:
<PAGE> 3
7.1 FORM OF OPTION GRANT. Each Option granted under this Plan shall be
evidenced by a written Stock Option Grant ("Grant") in such form (which need not
be the same for each Optionee) as the Committee shall from time to time approve,
which Grant shall comply with and be subject to the terms and conditions of this
Plan.
7.2 VESTING. The date an Optionee is first elected or reelected to the
Board for the first time, as to the Initial Grant, and the date a Succeeding
Grant is granted, is referred to in this Plan as the "Start Date" for such
Option. Each Initial Grant granted prior to January 1, 1999 will vest as to
3,375 Shares subject to it on the last day of each calendar quarter (not to
exceed 13,500 Shares per year); provided that Optionee attended at least one
Board meeting during such quarter and provided further that the Board meeting
Optionee attended occurred after the date of grant. Each Initial Grant granted
on or after January 1, 1999 will vest as to 521 Shares subject to it on the last
day of each calendar month (not to exceed 6,250 Shares per year). Each
Succeeding Grant granted prior to January 1, 1999 will vest as to 844 Shares
subject to it on the last day of each calendar quarter (not to exceed 3,375
Shares per year); provided that Optionee attended at least one Board meeting
during such quarter and provided further that the Board meeting Optionee
attended occurred after the date of grant. Each Succeeding Grant granted on or
after January 1, 1999 will vest as to 135 Shares per calendar month (not to
exceed 1,625 Shares per year). Initial Grants granted on or after April 17, 1996
and Succeeding Grants shall be exercisable immediately upon grant for a period
of ten years. Exercised unvested Shares shall be subject to a right of
repurchase in the Company at the original purchase price that lapses as such
Shares vest. Each Option will fully vest as to any Shares that remain unvested
on the day immediately preceding the tenth anniversary of the Start Date of such
Option. Each outstanding Option shall be exercisable and vest in accordance with
the Grant by which it was originally granted.
7.3 EXERCISE PRICE. The exercise price of an Option shall be the Fair
Market Value (as defined in Section 17.4) of the Shares, at the time that the
Option is granted.
7.4 TERMINATION OF OPTION. Except as provided below in this Section,
this Option shall terminate and may not be exercised if Optionee ceases to be a
member of the Board or a consultant of the Company. The date on which Optionee
ceases to be a member of the Board or a consultant of the Company shall be
referred to as the "Termination Date."
(a) Termination Generally. If Optionee ceases to be a member of the
Board or a consultant of the Company for any reason except death or disability,
this Option, to the extent (and only to the extent) that it would have been
exercisable by Optionee on the Termination Date, may be exercised by Optionee
within six (6) months after the Termination Date, but in no event later than the
Expiration Date.
(b) Death or Disability. If Optionee ceases to be a member of the
Board or a consultant of the Company because of the death of Optionee or the
disability of Optionee within the meaning of Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended, (the "Code") this Option, to the extent (and
only to the extent) that it would
<PAGE> 4
have been exercisable by Optionee on the Termination Date, may be exercised by
Optionee (or Optionee's legal representative) within twelve (12) months after
the Termination Date, but in no event later than the Expiration Date.
8. EXERCISE OF OPTIONS.
8.1 NOTICE. Options may be exercised only by delivery to the Company of
an exercise agreement in a form approved by the Committee, stating the number of
Shares being purchased, the restrictions imposed on the Shares and such
representations and agreements regarding the Optionee's investment intent and
access to information as may be required by the Company to comply with
applicable securities laws, together with payment in full of the exercise price
for the number of Shares being purchased.
8.2 PAYMENT. Payment for the Shares may be made (a) in cash or by check;
(b) by surrender of shares of Common Stock of the Company that have been owned
by Optionee for more than six (6) months (and which have been paid for within
the meaning of SEC Rule 144 and, if such shares were purchased from the Company
by use of a promissory note, such note has been fully paid with respect to such
shares) or were obtained by the Optionee in the open public market, having a
Fair Market Value equal to the exercise price of the Option; (c) by waiver of
compensation due or accrued to Optionee for services rendered; (d) provided that
a public market for the Company's stock exists, through a "same day sale"
commitment from Optionee and a broker-dealer that is a member of the National
Association of Securities Dealers (a "NASD Dealer") whereby Optionee irrevocably
elects to exercise the Option and to sell a portion of the Shares so purchased
to pay for the exercise price and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the exercise price directly to the
Company; (e) provided that a public market for the Company's stock exists,
through a "margin" commitment from Optionee and a NASD Dealer whereby Optionee
irrevocably elects to exercise the Option and to pledge the Shares so purchased
to the NASD Dealer in a margin account as security for a loan from the NASD
Dealer in the amount of the exercise price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; or (f) by any combination of the foregoing.
8.3 WITHHOLDING TAXES. Prior to issuance of the Shares upon exercise of
an Option, Optionee shall pay or make adequate provision for any federal or
state withholding obligations of the Company, if applicable.
8.4 LIMITATIONS ON EXERCISE. Notwithstanding the exercise periods set
forth in the Grant, exercise of an Option shall always be subject to the
following limitations:
(a) An Option shall not be exercisable unless such exercise is in
compliance with the 1933 Securities Act and all applicable state securities
laws, as they are in effect on the date of exercise.
<PAGE> 5
(b) The Committee may specify a reasonable minimum number of Shares
that may be purchased on any exercise of an Option, provided that such minimum
number will not prevent Optionee from exercising the full number of Shares as to
which the Option is then exercisable.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of Optionee, an
Option shall be exercisable only by Optionee or by Optionee's guardian or legal
representative, unless otherwise permitted by the Committee. No Option may be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the rights
of a shareholder with respect to any Shares subject to an Option until the
Option has been validly exercised. No adjustment shall be made for dividends or
distributions or other rights for which the record date is prior to the date of
exercise, except as provided in this Plan. The Company shall provide to each
Optionee a copy of the annual financial statements of the Company, at such time
after the close of each fiscal year of the Company as they are released by the
Company to its shareholders.
11. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration,
the number of Shares available under this Plan, the maximum number of Shares
that can be granted to a director and the number of Shares subject to
outstanding Options, the number of Shares vesting per quarter or per month and
the exercise price per Share of such Options shall be proportionately adjusted,
subject to any required action by the Board or shareholders of the Company and
compliance with applicable securities laws; provided, however, that no
certificate or scrip representing fractional shares shall be issued upon
exercise of any Option and any resulting fractions of a Share shall be ignored;
provided further, however, that in the event that the number of shares of Common
Stock of the Company is changed by a stock dividend or a stock split without
consideration, the Board will have the discretion not to proportionately adjust
the number of Shares subject to each Initial Grant and the number of Shares
subject to each Succeeding Grant, and the number of Shares to vest per month
subject to such Initial Grants and Succeeding Grants.
12. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan shall confer on any Optionee any right to continue as a director
or a consultant of the Company.
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of Shares
upon exercise of any Options shall be subject to and conditioned upon compliance
with all applicable requirements of law, including without limitation compliance
with the 1933 Securities Act, any required approval by the Commissioner of
Corporations of the State of California, compliance with all other applicable
state securities laws and compliance with the requirements of any stock exchange
or national market system on which the
<PAGE> 6
Shares may be listed. The Company shall be under no obligation to register the
Shares with the Securities and Exchange Commission or to effect compliance with
the registration or qualification requirement of any state securities laws,
stock exchange or national market system.
14. ACCELERATION OF OPTIONS BY SUCCESSORS. In the event of a dissolution or
liquidation of the Company, a merger in which the Company is not the surviving
corporation, the sale of substantially all of the assets of the Company, or any
other transaction which qualifies as a "corporate transaction" under Section 424
of the Code wherein the shareholders of the Company give up all of their equity
interest in the Company (except for the acquisition of all or substantially all
of the outstanding shares of the Company) the vesting of all options granted
pursuant to the Plan will accelerate and the options will become exercisable in
full prior to the consummation of such event at such times and on such
conditions as the Committee determines.
15. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan but not the terms of any outstanding option;
provided, however, that the Committee shall not, without the approval of the
shareholders of the Company, increase the total number of Shares available under
this Plan (except by operation of the provisions of Sections 4 and 11 above) or
change the class of persons eligible to receive Options. In any case, no
amendment of this Plan may adversely affect any then outstanding Options or any
unexercised portions thereof without the written consent of Optionee.
16. TERM OF PLAN. Options may be granted pursuant to this Plan from time to
time within a period of ten (10) years from the date this Plan is adopted by the
Board of Directors.
17. CERTAIN DEFINITIONS. As used in this Plan, the following terms shall
have the following meanings:
17.1 "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of the
granting of the Option, each of such corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
17.2 "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of
granting of the Option, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
17.3 "Affiliate" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under
<PAGE> 7
common control with") means the possession, direct or indirect, of the power to
cause the direction of the management and policies of the corporation, whether
through the ownership of voting securities, by contract or otherwise.
17.4 "Fair Market Value" shall mean the fair market value of the Shares
as determined by the Committee from time to time in good faith. If a public
market exists for the Shares, the Fair Market Value shall be the average of the
last reported bid and asked prices for the common stock of the Company on the
last trading day prior to the date of determination, or, in the event the common
stock of the Company is listed on the Nasdaq National Market, the Fair Market
Value shall be the average of the high and low prices of the common stock on the
option grant date as quoted on the Nasdaq National Market and reported in The
Wall Street Journal.
<PAGE> 8
INITIAL GRANT
VERITAS SOFTWARE CORPORATION
DIRECTORS NONQUALIFIED STOCK OPTION GRANT
Optionee:
------------------------------------
Address:
------------------------------------
Total Shares Subject to Option: 25,000
------------------------------------
Exercise Price Per Share:
------------------------------------
Date of Grant:
------------------------------------
Expiration Date:
------------------------------------
1. GRANT OF OPTION. VERITAS SOFTWARE CORPORATION, a Delaware corporation
(the "Company"), has granted to the optionee named above ("Optionee") an option
(this "Option") to purchase the total number of shares of Common Stock of the
Company set forth above (the "Shares") at the exercise price per share set forth
above (the "Exercise Price"), subject to all of the terms and conditions of this
Grant and the Company's 1993 Directors Stock Option Plan, as amended through
October 14, 1999 (the "Plan"). Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to them in the Plan.
2. EXERCISE PERIOD OF OPTION. Subject to the terms and conditions of the
Plan and this Grant, this Option shall be exercisable immediately upon the Date
of Grant and thereafter, subject to earlier termination in accordance with
Section 4 below. This Option shall be exercisable until the Expiration Date,
subject to earlier termination in accordance with Section 4 below. Shares that
are exercised but that have not yet vested in accordance with this Section 2
("Unvested Shares"), shall be subject to a right of repurchase in the Company at
the Exercise Price that lapses as such exercised Shares vest. Subject to the
terms and conditions of the Plan and this Grant, this Option will vest as to 521
Shares subject to it on the last day of each calendar month (not to exceed 6,250
Shares per year). This Option shall fully vest as to any Shares that remain
unvested on the day immediately preceding the tenth anniversary of the Start
Date.
3. RESTRICTION ON EXERCISE. This Option may not be exercised unless such
exercise is in compliance with the 1933 Securities Act, and all applicable state
securities laws, as they are in effect on the date of exercise, and the
requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed at the time of exercise. Optionee
understands that the Company is under no obligation to register,
<PAGE> 9
VERITAS Software Corporation
Director's Nonqualified
Stock Option Grant
Initial Grant
qualify or list the Shares with the SEC, any state securities commission or any
stock exchange or national market system to effect such compliance. No
fractional shares shall be issued upon exercise of this Option.
4. TERMINATION OF OPTION. Except as provided below in this Section, this
Option shall terminate and may not be exercised on or after the date Optionee
ceases to be a Board Member or a consultant of the Company. The date on which
Optionee ceases to be a Board Member or a consultant of the Company shall be
referred to as the "Termination Date."
4.1 Termination Generally. If Optionee ceases to be a Board Member
or a consultant of the Company for any reason except for Optionee's death or
disability, within the meaning of Section 22(e)(3) of the Code, this Option, to
the extent (and only to the extent) that it is vested in accordance with Section
2 above on the Termination Date, may be exercised by Optionee within six (6)
months after the Termination Date, but in no event later than the Expiration
Date.
4.2 Death or Disability. If Optionee ceases to be a Board Member or
a consultant of the Company because of the death of Optionee or the disability
of Optionee, within the meaning of Section 22(e)(3) of the Code, this Option, to
the extent (and only to the extent) that it is vested in accordance with Section
2 above on the Termination Date, may be exercised by Optionee (or Optionee's
legal representative) within twelve (12) months after the Termination Date, but
in no event later than the Expiration Date.
5. MANNER OF EXERCISE.
5.1 Exercise Agreement. This Option shall be exercisable by
delivery to the Company of an executed written Directors Stock Option Exercise
Agreement in the form attached hereto as Exhibit A, or in such other form as may
be approved by the Board or the committee thereof that administers the Plan,
which shall set forth Optionee's election to exercise some or all of this
Option, the number of Shares being purchased, any restrictions imposed on the
Shares and such other representations and agreements as may be required by the
Company to comply with applicable securities laws.
5.2 Payment. Payment for the Shares may be made (a) in cash or by
check; (b) by surrender of shares of Common Stock of the Company that have been
owned by Optionee for more than six (6) months (and which have been paid for
within the meaning of SEC Rule 144 and, if such shares were purchased from the
Company by use of a promissory note, such note has been fully paid with respect
to such shares) or were obtained by Optionee in the open public market; (c) by
waiver of compensation due or accrued to Optionee for services rendered; (d)
provided that a public market for the Company's stock exists, through a "same
day sale" commitment from Optionee and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD Dealer") whereby Optionee
irrevocably elects to exercise the Option and to sell a portion of the Shares so
purchased to pay for the Exercise Price and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the Exercise Price directly to
the Company; (e) provided that a
-2-
<PAGE> 10
public market for the Company's stock exists, through a "margin" commitment from
Optionee and an NASD Dealer whereby Optionee irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount of the
Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the Exercise Price directly to the Company; or (f) by any
combination of the foregoing.
5.3 Withholding Taxes. Prior to the issuance of the Shares upon
exercise of this Option, Optionee shall pay or make adequate provision for any
applicable federal or state withholding obligations of the Company.
5.4 Issuance of Shares. Provided that such notice and payment are
in form and substance satisfactory to counsel for the Company, the Company shall
cause the Shares to be issued in the name of Optionee or Optionee's legal
representative.
6. COMPANY'S RIGHT OF REPURCHASE. The Company reserves a right to
repurchase Unvested Shares at the Exercise Price at any time within ninety (90)
days after Optionee's Termination Date for cash and/or cancellation of purchase
money indebtedness.
7. NONTRANSFERABILITY OF OPTION. During the lifetime of Optionee, this
Option shall be exercisable only by Optionee or by Optionee's guardian or legal
representative, unless otherwise permitted by the Committee. No Option may be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution.
8. INTERPRETATION. Any dispute regarding the interpretation of this
Grant shall be submitted by Optionee or the Company to the Board or the
committee thereof that administers the Plan, which shall review such dispute at
its next regular meeting. The resolution of such a dispute by the Board or
committee shall be final and binding on the Company and on Optionee. Nothing in
the Plan or this Grant shall confer on Optionee any right to continue as a Board
Member, employee, officer or consultant of the Company.
-3-
<PAGE> 11
9. ENTIRE AGREEMENT. The Plan and the Directors Stock Option Exercise
Agreement are incorporated herein by this reference. This Grant, the Plan and
the Directors Stock Option Exercise Agreement constitute the entire agreement of
the parties hereto and supersede all prior undertakings and agreements with
respect to the subject matter hereof.
VERITAS SOFTWARE CORPORATION
By:
---------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents
that Optionee has read and understands the terms and provisions thereof, and
accepts this Option subject to all the terms and conditions of the Plan and this
Grant. Optionee acknowledges that there may be adverse tax consequences upon
exercise of this Option or disposition of the Shares and that Optionee should
consult a qualified tax advisor prior to such exercise or disposition.
---------------------------------
Optionee
-4-
<PAGE> 12
INITIAL GRANT
EXHIBIT A
VERITAS SOFTWARE CORPORATION
DIRECTORS STOCK OPTION EXERCISE AGREEMENT
This Agreement is made this ___ day of ____________, _____ between
VERITAS Software Corporation (the "Company"), and the optionee named below
("Optionee") with respect to the Directors Nonqualified Stock Option Grant dated
as of the Date of Option Grant set forth below (the "Grant") issued to Optionee
under the Company's 1993 Directors Stock Option Plan, as amended through October
14, 1999 (the "Plan"). Capitalized terms used herein that are not defined herein
have the definitions ascribed to them in the Plan or the Grant.
Optionee:
-----------------------------------------------
Social Security Number:
-----------------------------------------------
Address:
-----------------------------------------------
Number of Shares Purchased:
-----------------------------------------------
Price per Share:
-----------------------------------------------
Aggregate Purchase Price:
-----------------------------------------------
Date of Option Grant:
-----------------------------------------------
Optionee hereby delivers to the Company the Aggregate Purchase Price, to the
extent permitted in the Grant, as follows (check as applicable and complete):
[ ] in cash or check in the amount of $_________, receipt of which is
acknowledged by the Company;
[ ] by delivery of ________ fully-paid, nonassessable and vested shares of
the Common Stock of the Company owned by Optionee for at least six (6)
months prior to the date hereof (and which have been paid for within the
meaning of SEC Rule 144), or obtained by Optionee in the open public
market, and owned free and clear of all liens, claims, encumbrances or
security interests, valued at the current Fair Market Value of $______ per
share;
<PAGE> 13
VERITAS Software Corporation
Director's Nonqualified
Stock Option Grant
Initial Grant
[ ] by the waiver hereby of compensation due or accrued to Optionee for
services rendered in the amount of $______________;
[ ] through a "same-day-sale" commitment, delivered herewith, from Optionee
and the NASD Dealer named therein in the amount of $____________; or
[ ] through a "margin" commitment, delivered herewith from Optionee and the
NASD Dealer named therein in the amount of $______________.
Optionee hereby also delivers to the Company (i) this executed Agreement. If the
Option is being exercised with respect to Shares in which the Option has not yet
vested, Optionee hereby also delivers to the Company two (2) copies of a blank
Stock Power and Assignment Separate from Stock Certificate in the form of
Exhibit 1 attached hereto (the "Stock Powers"), both executed by Optionee (and
Optionee's spouse, if any).
Upon its receipt of the Aggregate Purchase Price and all the documents to be
executed and delivered by Optionee to the Company under the above paragraph, the
Company will issue a duly executed stock certificate evidencing the Shares in
the name of Optionee to be placed in escrow as provided in Section 3 below until
expiration or termination of the Company's Repurchase Option described in
Section 2 below.
The Company and Optionee hereby agree as follows:
1. PURCHASE OF SHARES. On this date and subject to the terms and
conditions of this Agreement, Optionee hereby exercises the Grant with respect
to the Number of Shares Purchased set forth above of the Company's Common Stock
(the "Shares") at an aggregate purchase price equal to the Aggregate Purchase
Price set forth above and the Price per Share set forth above. The term "Shares"
refers to the Shares purchased under this Agreement and includes all securities
received in replacement of the Shares and as a result of stock dividends or
stock splits in respect of the Shares.
2. COMPANY'S RIGHT OF REPURCHASE. On the terms and conditions set forth
in this Section, the Company, or its assignee, reserves the right to repurchase
Shares that are exercised pursuant to this Agreement that are not vested, in
accordance with Section 2 of the Grant, on Optionee's Termination Date (the
"Unvested Shares") (the "Repurchase Option") if Optionee ceases to be a Board
Member or a consultant to the Company for any reason, or no reason, including
without limitation Optionee's death, disability within the meaning of Code
Section 22(3)(3), voluntary resignation or termination by the Company with or
without cause.
2.1 Termination and Termination Date. The Committee shall have
discretion to determine whether Optionee has ceased to be a Board Member or a
consultant to the Company and Optionee's Termination Date.
2.2 Exercise of Repurchase Option. At any time within ninety (90)
days after the Optionee's Termination Date, the Company, or its assignee, may
elect to repurchase the
<PAGE> 14
Optionee's Unvested Shares by giving Optionee written notice of the Company's
exercise of the Repurchase Option.
2.3 Calculation of Repurchase Price. The Company or its assignee
shall have the option to repurchase from Optionee (or from Optionee's personal
representative as the case may be) the Unvested Shares at the Optionee's
Exercise Price, proportionately adjusted for any stock split or similar change
in the capital structure of the Company as set forth in Section 11 of the Plan.
2.4 Payment of Repurchase Price. The repurchase price shall be
payable, at the option of the Company or its assignee, by check or by
cancellation of all or a portion of any outstanding indebtedness of Optionee to
the Company or such assignee, or by any combination thereof. The repurchase
price shall be paid without interest within sixty (60) days after exercise of
the Repurchase Option.
2.5 Right of Termination Unaffected. Nothing in this Agreement
shall be construed to limit or otherwise affect in any manner whatsoever the
right or power of the Company (or any Parent or Subsidiary of the Company) to
terminate Optionee's relationship with Company (or the Parent or Subsidiary of
the Company) at any time, for any reason or no reason, with or without cause.
3. ESCROW. As security for Optionee's faithful performance of this
Agreement, Optionee agrees, immediately upon receipt of the stock certificate(s)
evidencing the Shares, to deliver such certificate(s), together with the Stock
Powers executed by Optionee and by Optionee's spouse, if any (with the date and
number of Shares left blank), to the Secretary of the Company or other designee
of the Company ("Escrow Holder"), who is hereby appointed to hold such
certificate(s) and Stock Powers in escrow and to take all such actions and to
effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Agreement. Optionee and the Company agree that
Escrow Holder will not be liable to any party to this Agreement (or to any other
party) for any actions or omissions unless Escrow Holder is grossly negligent or
intentionally fraudulent in carrying out the duties of Escrow Holder under this
Agreement. Escrow Holder may rely upon any letter, notice or other document
executed by any signature purported to be genuine and may rely on the advice of
counsel and obey any order of any court with respect to the transactions
contemplated by this Agreement. The Shares will be released from escrow upon
termination in full of the Repurchase Option. At Optionee's request, the Escrow
Holder will release the Shares from escrow after the Shares have vested.
4. REPRESENTATIONS OF OPTIONEE. Optionee represents and warrants to the
Company that Optionee acknowledges that Optionee has received, read and
understood the Plan and the Grant and agrees to abide by and be bound by their
terms and conditions.
5. COMPLIANCE WITH SECURITIES LAWS. Optionee understands that the Shares
have been registered on Form S-8 under the 1933 Securities Act.
6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
<PAGE> 15
6.1 Legends. Optionee understands and agrees that the Company will
place the legends set forth below or similar legends on any stock certificate(s)
evidencing the Shares, together with any other legends that may be required by
state or federal securities laws, the Company's Articles of Incorporation or
Bylaws, any other agreement between Optionee and the Company.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT
OF REPURCHASE OPTION HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S) AS
SET FORTH IN A DIRECTORS STOCK OPTION EXERCISE AGREEMENT BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH RIGHT
OF REPURCHASE IS BINDING ON TRANSFEREES OF THESE SHARES.
6.2 Stop-Transfer Instructions. Optionee understands and agrees
that, to ensure compliance with the restrictions imposed by this Agreement, the
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
6.3 Refusal to Transfer. The Company will not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares, or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares have been so transferred.
7. TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF
THE SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR
ANY TAX ADVICE. IN PARTICULAR, OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED
WITH OPTIONEE'S TAX ADVISORS CONCERNING THE ADVISABILITY OF FILING A SECTION
83(b) ELECTION WITH THE INTERNAL REVENUE SERVICE.
7.1 Section 83(b) Election for Unvested Shares. With respect to
Unvested Shares, which are subject to the Repurchase Option, unless an election
is filed by Optionee with the Internal Revenue Service (and, if necessary, the
proper state taxing authorities), within 30 days of the purchase of the Unvested
Shares, electing pursuant to Section 83(b) of the Internal Revenue Code (and
similar state tax provisions, if applicable) to be taxed currently on any
difference between the Exercise Price of the Unvested Shares and their Fair
Market Value on the date of purchase, there may be a recognition of taxable
income to the Optionee, measured by the excess, if any, of the Fair Market Value
of the Unvested Shares at the time they cease to be Unvested Shares, over the
Exercise Price of the Unvested Shares. A Section 83(b) election form is attached
hereto as Exhibit 4.
<PAGE> 16
8. ENTIRE AGREEMENT. The Plan and Grant are incorporated herein by
reference. This Agreement, the Plan and the Grant constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and are governed by California law except for that body of law
pertaining to conflict of laws.
9. TITLE. Optionee desires to take title to the Shares as follows:
( )Individual, as separate property
( )Husband and wife, as community property
( )Husband and wife, as Joint Tenants
( )Husband and wife, as Tenants in Common
The exact spelling of name(s) under which title to the Shares is to be
taken is:_______________________________________________________________________
________________________________________________________________________________
Submitted by: Accepted by:
OPTIONEE: VERITAS SOFTWARE CORPORATION
-----------------------------------
(print name)
- --------------------------------------------- By
(signature) --------------------------
Dated: Dated
-------------------------------------- -----------------------
<PAGE> 17
LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Copy of Optionee's Check or other Evidence of Optionee's Payment of
Exercise Price
Exhibit 3: Section 83(b) Election
<PAGE> 18
INITIAL GRANT
EXHIBIT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
<PAGE> 19
INITIAL GRANT
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Directors Stock
Option Exercise Agreement dated as of _______________, _____, (the "Agreement"),
the undersigned hereby sells, assigns and transfers unto
_______________________________, shares of the Common Stock of VERITAS Software
Corporation (the "Company"), standing in the undersigned's name on the books of
the Company represented by Certificate No(s). ______ delivered herewith, and
does hereby irrevocably constitute and appoint the Secretary of the Company as
the undersigned's attorney-in-fact, with full power of substitution, to transfer
said stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS THERETO.
Dated: _______________, ______
OPTIONEE
-----------------------------
(Signature)
-----------------------------
(Please Print Name)
-----------------------------
(Spouse's Signature, if any)
-----------------------------
(Please Print Spouse's Name)
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this Stock Power and Assignment is to enable the Company to
acquire the shares upon exercise of its "Repurchase Option" set forth in the
Agreement without requiring additional signatures on the part of the Optionee or
Optionee's Spouse, if any.
<PAGE> 20
INITIAL GRANT
EXHIBIT 2
COPY OF OPTIONEE'S CHECK OR OTHER EVIDENCE
OF OPTIONEE'S PAYMENT OF EXERCISE PRICE
<PAGE> 21
INITIAL GRANT
EXHIBIT 3
SECTION 83(b) ELECTION
<PAGE> 22
[FOR REGULAR INCOME TAX - NONQUALIFIED OPTIONS]
ELECTION UNDER SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include the excess, if any, of the
fair market value of the property described below at the time of transfer over
the amount paid for such property, as compensation for services in the
calculation of regular gross income.
1. TAXPAYER'S NAME:
-------------------------------------------------
TAXPAYER'S ADDRESS:
-------------------------------------------------
-------------------------------------------------
SOCIAL SECURITY NUMBER:
-------------------------------------------------
2. The property with respect to which the election is made is described as
follows: _______ shares of Common Stock of VERITAS Software Corporation
(the "Company") which were transferred upon Taxpayer's exercise of an
option granted by the Company to Taxpayer in connection with the
performance of Taxpayer's services for the Company.
3. The date on which the shares were transferred pursuant to the exercise of
the option was ________, _____ and this election is made for calendar year
_____.
4. The shares received upon exercise of the option are subject to the
following restrictions: The Company may repurchase all or a portion of the
shares at the Taxpayer's original purchase price under certain conditions
at the time of Taxpayer's termination of services with the Company.
5. The fair market value of the shares (without regard to restrictions other
than restrictions which by their terms will never lapse) was $___ per
share at the time of exercise of the option.
6. The amount paid for such shares upon exercise of the option was $___ per
share.
7. The Taxpayer has submitted a copy of this statement to the Company.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
THE DATE OF TRANSFER OF THE SHARES, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED WITHOUT
THE CONSENT OF THE IRS.
Dated:
--------------------------- ------------------------------------
Taxpayer's Signature
-2-
<PAGE> 23
SUCCEEDING
GRANT
GRANT NO.:
VERITAS SOFTWARE CORPORATION
DIRECTORS NONQUALIFIED STOCK OPTION GRANT
Optionee:
Social Security Number:
Address:
Total Shares Subject to Option:
Exercise Price Per Share:
Date of Grant:
Expiration Date:
1. GRANT OF OPTION. VERITAS SOFTWARE CORPORATION, a Delaware corporation
(the "Company"), has granted to the optionee named above ("Optionee") an option
(this "Option") to purchase the total number of shares of Common Stock of the
Company set forth above (the "Shares") at the exercise price per share set forth
above (the "Exercise Price"), subject to all of the terms and conditions of this
Grant and the Company's 1993 Directors Stock Option Plan, as amended through
October 14, 1999 (the "Plan"). Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to them in the Plan.
2. EXERCISE PERIOD OF OPTION. Subject to the terms and conditions of the
Plan and this Grant, this Option shall be exercisable immediately upon the Date
of Grant and thereafter, subject to earlier termination in accordance with
Section 4 below. This Option shall be exercisable until the Expiration Date,
subject to earlier termination in accordance with Section 4 below. Shares that
are exercised but that have not yet vested in accordance with this Section 2
("Unvested Shares"), shall be subject to a right of repurchase in the Company at
the Exercise Price that lapses as such exercised Shares vest. Subject to the
terms and conditions of the Plan and this Grant, this Option will vest as to 135
Shares per calendar month (not to exceed 1,625 Shares per year). This Option
shall fully vest as to any Shares that remain unvested on the day immediately
preceding the tenth anniversary of the Start Date.
<PAGE> 24
VERITAS Software Corporation
Director's Nonqualified
Stock Option Grant
Succeeding Grant
3. RESTRICTION ON EXERCISE. This Option may not be exercised unless such
exercise is in compliance with the 1933 Securities Act, and all applicable state
securities laws, as they are in effect on the date of exercise, and the
requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed at the time of exercise. Optionee
understands that the Company is under no obligation to register, qualify or list
the Shares with the SEC, any state securities commission or any stock exchange
or national market system to effect such compliance. No fractional shares shall
be issued upon exercise of this Option.
4. TERMINATION OF OPTION. Except as provided below in this Section, this
Option shall terminate and may not be exercised on or after the date Optionee
ceases to be a Board Member or a consultant of the Company. The date on which
Optionee ceases to be a Board Member or a consultant of the Company shall be
referred to as the "Termination Date."
4.1 Termination Generally. If Optionee ceases to be a Board Member
or a consultant of the Company for any reason except for Optionee's death or
disability, within the meaning of Section 22(e)(3) of the Code, this Option, to
the extent (and only to the extent) that it is vested in accordance with Section
2 above on the Termination Date, may be exercised by Optionee within six (6)
months after the Termination Date, but in no event later than the Expiration
Date.
4.2 Death or Disability. If Optionee ceases to be a Board Member or
a consultant of the Company because of the death of Optionee or the disability
of Optionee, within the meaning of Section 22(e)(3) of the Code, this Option, to
the extent (and only to the extent) that it is vested in accordance with Section
2 above on the Termination Date, may be exercised by Optionee (or Optionee's
legal representative) within twelve (12) months after the Termination Date, but
in no event later than the Expiration Date.
5. MANNER OF EXERCISE.
5.1 Exercise Agreement. This Option shall be exercisable by
delivery to the Company of an executed written Directors Stock Option Exercise
Agreement in the form attached hereto as Exhibit A, or in such other form as may
be approved by the Board or the committee thereof that administers the Plan,
which shall set forth Optionee's election to exercise some or all of this
Option, the number of Shares being purchased, any restrictions imposed on the
Shares and such other representations and agreements as may be required by the
Company to comply with applicable securities laws.
5.2 Payment. Payment for the Shares may be made (a) in cash or by
check; (b) by surrender of shares of Common Stock of the Company that have been
owned by Optionee for more than six (6) months (and which have been paid for
within the meaning of SEC Rule 144 and, if such shares were purchased from the
Company by use of a promissory note, such note has been fully paid with respect
to such shares) or were obtained by Optionee in the open public market; (c) by
waiver of compensation due or accrued to Optionee for services rendered; (d)
provided that a public market for the Company's stock exists, through a
-2-
<PAGE> 25
"same day sale" commitment from Optionee and a broker-dealer that is a member of
the National Association of Securities Dealers (an "NASD Dealer") whereby
Optionee irrevocably elects to exercise the Option and to sell a portion of the
Shares so purchased to pay for the Exercise Price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the Exercise Price
directly to the Company; (e) provided that a public market for the Company's
stock exists, through a "margin" commitment from Optionee and an NASD Dealer
whereby Optionee irrevocably elects to exercise the Option and to pledge the
Shares so purchased to the NASD Dealer in a margin account as security for a
loan from the NASD Dealer in the amount of the Exercise Price, and whereby the
NASD Dealer irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or (f) by any combination of the
foregoing.
5.3 Withholding Taxes. Prior to the issuance of the Shares upon
exercise of this Option, Optionee shall pay or make adequate provision for any
applicable federal or state withholding obligations of the Company.
5.4 Issuance of Shares. Provided that such notice and payment are
in form and substance satisfactory to counsel for the Company, the Company shall
cause the Shares to be issued in the name of Optionee or Optionee's legal
representative.
6. COMPANY'S RIGHT OF REPURCHASE. The Company reserves a right to
repurchase Unvested Shares at the Exercise Price at any time within ninety (90)
days after Optionee's Termination Date for cash and/or cancellation of purchase
money indebtedness.
7. NONTRANSFERABILITY OF OPTION. During the lifetime of Optionee, this
Option shall be exercisable only by Optionee or by Optionee's guardian or legal
representative, unless otherwise permitted by the Committee. No Option may be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution.
8. INTERPRETATION. Any dispute regarding the interpretation of this
Grant shall be submitted by Optionee or the Company to the Board or the
committee thereof that administers the Plan, which shall review such dispute at
its next regular meeting. The resolution of such a dispute by the Board or
committee shall be final and binding on the Company and on Optionee. Nothing in
the Plan or this Grant shall confer on Optionee any right to continue as a Board
Member, employee, officer or consultant of the Company.
-3-
<PAGE> 26
9. ENTIRE AGREEMENT. The Plan and the Directors Stock Option Exercise
Agreement are incorporated herein by this reference. This Grant, the Plan and
the Directors Stock Option Exercise Agreement constitute the entire agreement of
the parties hereto and supersede all prior undertakings and agreements with
respect to the subject matter hereof.
VERITAS SOFTWARE CORPORATION
By:
-----------------------------------
Name: Ken Lonchar
----------------------------------
Title: Chief Financial Officer
----------------------------------
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents
that Optionee has read and understands the terms and provisions thereof, and
accepts this Option subject to all the terms and conditions of the Plan and this
Grant. Optionee acknowledges that there may be adverse tax consequences upon
exercise of this Option or disposition of the Shares and that Optionee should
consult a qualified tax advisor prior to such exercise or disposition.
---------------------------------
Optionee
-4-
<PAGE> 27
EXHIBIT A
VERITAS SOFTWARE CORPORATION
DIRECTORS STOCK OPTION EXERCISE AGREEMENT
This Agreement is made this ___ day of ____________, _____ between
VERITAS Software Corporation (the "Company"), and the optionee named below
("Optionee") with respect to the Directors Nonqualified Stock Option Grant dated
as of the Date of Option Grant set forth below (the "Grant") issued to Optionee
under the Company's 1993 Directors Stock Option Plan, as amended through October
14, 1999 (the "Plan"). Capitalized terms used herein that are not defined herein
have the definitions ascribed to them in the Plan or the Grant.
Optionee:
----------------------------------------
Social Security Number:
----------------------------------------
Address:
----------------------------------------
Number of Shares Purchased:
----------------------------------------
Price per Share:
----------------------------------------
Aggregate Purchase Price:
----------------------------------------
Date of Option Grant:
----------------------------------------
Optionee hereby delivers to the Company the Aggregate Purchase Price, to the
extent permitted in the Grant, as follows (check as applicable and complete):
[ ] in cash or check in the amount of $_________, receipt of which is
acknowledged by the Company;
<PAGE> 28
[ ] by delivery of ________ fully-paid, nonassessable and vested shares of
the Common Stock of the Company owned by Optionee for at least six (6)
months prior to the date hereof (and which have been paid for within the
meaning of SEC Rule 144), or obtained by Optionee in the open public
market, and owned free and clear of all liens, claims, encumbrances or
security interests, valued at the current Fair Market Value of $______ per
share;
[ ] by the waiver hereby of compensation due or accrued to Optionee for
services rendered in the amount of $______________;
[ ] through a "same-day-sale" commitment, delivered herewith, from Optionee
and the NASD Dealer named therein in the amount of $____________; or
[ ] through a "margin" commitment, delivered herewith from Optionee and the
NASD Dealer named therein in the amount of $______________.
Optionee hereby also delivers to the Company (i) this executed Agreement. If the
Option is being exercised with respect to Shares in which the Option has not yet
vested, Optionee hereby also delivers to the Company two (2) copies of a blank
Stock Power and Assignment Separate from Stock Certificate in the form of
Exhibit 1 attached hereto (the "Stock Powers"), both executed by Optionee (and
Optionee's spouse, if any).
Upon its receipt of the Aggregate Purchase Price and all the documents to be
executed and delivered by Optionee to the Company under the above paragraph, the
Company will issue a duly executed stock certificate evidencing the Shares in
the name of Optionee to be placed in escrow as provided in Section 3 below until
expiration or termination of the Company's Repurchase Option described in
Section 2 below.
The Company and Optionee hereby agree as follows:
1. PURCHASE OF SHARES. On this date and subject to the terms and
conditions of this Agreement, Optionee hereby exercises the Grant with respect
to the Number of Shares Purchased set forth above of the Company's Common Stock
(the "Shares") at an aggregate purchase price equal to the Aggregate Purchase
Price set forth above and the Price per Share set forth above. The term "Shares"
refers to the Shares purchased under this Agreement and includes all securities
received in replacement of the Shares and as a result of stock dividends or
stock splits in respect of the Shares.
2. COMPANY'S RIGHT OF REPURCHASE. On the terms and conditions set forth
in this Section, the Company, or its assignee, reserves the right to repurchase
Shares that are exercised pursuant to this Agreement that are not vested, in
accordance with Section 2 of the Grant, on Optionee's Termination Date (the
"Unvested Shares") (the "Repurchase Option") if Optionee ceases to be a Board
Member or a consultant to the Company for any reason, or no reason, including
without limitation Optionee's death, disability within the meaning of Code
Section 22(3)(3), voluntary resignation or termination by the Company with or
without cause.
-2-
<PAGE> 29
2.1 Termination and Termination Date. The Committee shall have
discretion to determine whether Optionee has ceased to be a Board Member or a
consultant to the Company and Optionee's Termination Date.
2.2 Exercise of Repurchase Option. At any time within ninety (90)
days after the Optionee's Termination Date, the Company, or its assignee, may
elect to repurchase the Optionee's Unvested Shares by giving Optionee written
notice of the Company's exercise of the Repurchase Option.
2.3 Calculation of Repurchase Price. The Company or its assignee
shall have the option to repurchase from Optionee (or from Optionee's personal
representative as the case may be) the Unvested Shares at the Optionee's
Exercise Price, proportionately adjusted for any stock split or similar change
in the capital structure of the Company as set forth in Section 11 of the Plan.
2.4 Payment of Repurchase Price. The repurchase price shall be
payable, at the option of the Company or its assignee, by check or by
cancellation of all or a portion of any outstanding indebtedness of Optionee to
the Company or such assignee, or by any combination thereof. The repurchase
price shall be paid without interest within sixty (60) days after exercise of
the Repurchase Option.
2.5 Right of Termination Unaffected. Nothing in this Agreement
shall be construed to limit or otherwise affect in any manner whatsoever the
right or power of the Company (or any Parent or Subsidiary of the Company) to
terminate Optionee's relationship with Company (or the Parent or Subsidiary of
the Company) at any time, for any reason or no reason, with or without cause.
3. ESCROW. As security for Optionee's faithful performance of this
Agreement, Optionee agrees, immediately upon receipt of the stock certificate(s)
evidencing the Shares, to deliver such certificate(s), together with the Stock
Powers executed by Optionee and by Optionee's spouse, if any (with the date and
number of Shares left blank), to the Secretary of the Company or other designee
of the Company ("Escrow Holder"), who is hereby appointed to hold such
certificate(s) and Stock Powers in escrow and to take all such actions and to
effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Agreement. Optionee and the Company agree that
Escrow Holder will not be liable to any party to this Agreement (or to any other
party) for any actions or omissions unless Escrow Holder is grossly negligent or
intentionally fraudulent in carrying out the duties of Escrow Holder under this
Agreement. Escrow Holder may rely upon any letter, notice or other document
executed by any signature purported to be genuine and may rely on the advice of
counsel and obey any order of any court with respect to the transactions
contemplated by this Agreement. The Shares will be released from escrow upon
termination in full of the Repurchase Option. At Optionee's request, the Escrow
Holder will release the Shares from escrow after the Shares have vested.
4. REPRESENTATIONS OF OPTIONEE. Optionee represents and warrants to the
Company that Optionee acknowledges that Optionee has received, read and
understood the Plan and the Grant and agrees to abide by and be bound by their
terms and conditions.
-3-
<PAGE> 30
5. COMPLIANCE WITH SECURITIES LAWS. Optionee understands that the Shares
have been registered on Form S-8 under the 1933 Securities Act.
6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
6.1 Legends. Optionee understands and agrees that the Company will
place the legends set forth below or similar legends on any stock certificate(s)
evidencing the Shares, together with any other legends that may be required by
state or federal securities laws, the Company's Articles of Incorporation or
Bylaws, any other agreement between Optionee and the Company.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT
OF REPURCHASE OPTION HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S) AS
SET FORTH IN A DIRECTORS STOCK OPTION EXERCISE AGREEMENT BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH RIGHT
OF REPURCHASE IS BINDING ON TRANSFEREES OF THESE SHARES.
6.2 Stop-Transfer Instructions. Optionee understands and agrees
that, to ensure compliance with the restrictions imposed by this Agreement, the
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
6.3 Refusal to Transfer. The Company will not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares, or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares have been so transferred.
7. TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF
THE SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR
ANY TAX ADVICE. IN PARTICULAR, OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED
WITH OPTIONEE'S TAX ADVISORS CONCERNING THE ADVISABILITY OF FILING A SECTION
83(b) ELECTION WITH THE INTERNAL REVENUE SERVICE.
7.1 Section 83(b) Election for Unvested Shares. With respect to
Unvested Shares, which are subject to the Repurchase Option, unless an election
is filed by Optionee with the Internal Revenue Service (and, if necessary, the
proper state taxing authorities), within 30 days of the purchase of the Unvested
Shares, electing pursuant to Section 83(b) of the Internal Revenue Code (and
similar state tax provisions, if applicable) to be taxed currently on any
-4-
<PAGE> 31
difference between the Exercise Price of the Unvested Shares and their Fair
Market Value on the date of purchase, there may be a recognition of taxable
income to the Optionee, measured by the excess, if any, of the Fair Market Value
of the Unvested Shares at the time they cease to be Unvested Shares, over the
Exercise Price of the Unvested Shares. A Section 83(b) election form is attached
hereto as Exhibit 4.
8. ENTIRE AGREEMENT. The Plan and Grant are incorporated herein by
reference. This Agreement, the Plan and the Grant constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and are governed by California law except for that body of law
pertaining to conflict of laws.
9. TITLE. Optionee desires to take title to the Shares as follows:
( )Individual, as separate property
( )Husband and wife, as community property
( )Husband and wife, as Joint Tenants
( )Husband and wife, as Tenants in Common
The exact spelling of name(s) under which title to the Shares is to be
taken is:_______________________________________________________________________
________________________________________________________________________________
Submitted by: Accepted by:
OPTIONEE: VERITAS SOFTWARE CORPORATION
-----------------------------------
(print name)
- --------------------------------------------- By:
(signature) --------------------------
Dated: Dated:
-------------------------------------- -----------------------
-5-
<PAGE> 32
LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Copy of Optionee's Check or other Evidence of Optionee's Payment
of Exercise Price
Exhibit 3: Section 83(b) Election
-6-
<PAGE> 33
EXHIBIT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
<PAGE> 34
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Directors Stock
Option Exercise Agreement dated as of _______________, _____, (the "Agreement"),
the undersigned hereby sells, assigns and transfers unto
_______________________________, shares of the Common Stock of VERITAS Software
Corporation (the "Company"), standing in the undersigned's name on the books of
the Company represented by Certificate No(s). ______ delivered herewith, and
does hereby irrevocably constitute and appoint the Secretary of the Company as
the undersigned's attorney-in-fact, with full power of substitution, to transfer
said stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS THERETO.
Dated: ,
----------------, ------
OPTIONEE
-----------------------------
(Signature)
-----------------------------
(Please Print Name)
-----------------------------
(Spouse's Signature, if any)
-----------------------------
(Please Print Spouse's Name)
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this Stock Power and Assignment is to enable the Company to
acquire the shares upon exercise of its "Repurchase Option" set forth in the
Agreement without requiring additional signatures on the part of the Optionee or
Optionee's Spouse, if any.
<PAGE> 35
EXHIBIT 2
COPY OF OPTIONEE'S CHECK OR OTHER EVIDENCE
OF OPTIONEE'S PAYMENT OF EXERCISE PRICE
<PAGE> 36
EXHIBIT 3
SECTION 83(b) ELECTION
<PAGE> 37
[FOR REGULAR INCOME TAX - NONQUALIFIED OPTIONS]
ELECTION UNDER SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include the excess, if any, of the
fair market value of the property described below at the time of transfer over
the amount paid for such property, as compensation for services in the
calculation of regular gross income.
1. TAXPAYER'S NAME:
-----------------------------------------------
TAXPAYER'S ADDRESS:
-----------------------------------------------
-----------------------------------------------
SOCIAL SECURITY NUMBER:
-----------------------------------------------
2. The property with respect to which the election is made is described as
follows: _______ shares of Common Stock of VERITAS Software Corporation
(the "Company") which were transferred upon Taxpayer's exercise of an
option granted by the Company to Taxpayer in connection with the
performance of Taxpayer's services for the Company.
3. The date on which the shares were transferred pursuant to the exercise of
the option was ________, _____ and this election is made for calendar year
_____.
4. The shares received upon exercise of the option are subject to the
following restrictions: The Company may repurchase all or a portion of the
shares at the Taxpayer's original purchase price under certain conditions
at the time of Taxpayer's termination of services with the Company.
5. The fair market value of the shares (without regard to restrictions other
than restrictions which by their terms will never lapse) was $___ per
share at the time of exercise of the option.
6. The amount paid for such shares upon exercise of the option was $___ per
share.
7. The Taxpayer has submitted a copy of this statement to the Company.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
THE DATE OF TRANSFER OF THE SHARES, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED WITHOUT
THE CONSENT OF THE IRS.
Dated:
------------------------- -----------------------------------
Taxpayer's Signature
-2-
<PAGE> 1
EXHIBIT 10.29
FIRST AMENDMENT AND RESTATEMENT OF
CERTAIN OPERATIVE AGREEMENTS AND OTHER AGREEMENTS
Dated as of March 3, 2000
among
VERITAS OPERATING CORPORATION,
as the Construction Agent and as the Lessee,
THE VARIOUS PARTIES TO THE PARTICIPATION AGREEMENT AND OTHER
OPERATIVE AGREEMENTS FROM TIME TO TIME,
as the Guarantors,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, except as expressly stated in the Operative Agreements,
but solely as the Owner Trustee under the VS Trust 1999-1,
THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS
WHICH ARE PARTIES TO THE PARTICIPATION AGREEMENT AND OTHER
OPERATIVE AGREEMENTS FROM TIME TO TIME,
as the Holders,
THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS
WHICH ARE PARTIES TO THE PARTICIPATION AGREEMENT AND OTHER
OPERATIVE AGREEMENTS FROM TIME TO TIME,
as the Lenders,
and
BANK OF AMERICA, N.A.,
as succesor to NATIONSBANK, N.A.,
as the Agent for the Secured Parties
- --------------------------------------------------------------------------------
BANK OF AMERICA, N.A. and KEY BANK,
as Agents,
and
THE BANK OF NOVA SCOTIA, COMERICA BANK - CALIFORNIA,
UNION BANK OF CALIFORNIA, N.A., and WELLS FARGO BANK,
NATIONAL ASSOCIATION,
as Co-Agents.
- --------------------------------------------------------------------------------
<PAGE> 2
FIRST AMENDMENT AND RESTATEMENT OF
CERTAIN OPERATIVE AGREEMENTS AND OTHER AGREEMENTS
This FIRST AMENDMENT AND RESTATEMENT OF CERTAIN OPERATIVE AGREEMENTS AND
OTHER AGREEMENTS (this "Amendment") dated as of March 3, 2000, is by and among
VERITAS OPERATING CORPORATION (formerly known as Veritas Software Corporation),
a Delaware corporation (the "Lessee" or the "Construction Agent"); the various
parties listed on the signature pages hereto as guarantors (subject to the
definition of Guarantors in Appendix A to the Participation Agreement referenced
below, individually a "Guarantor" and collectively, the "Guarantors"); FIRST
SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not
individually but solely as the Owner Trustee under the VS Trust 1999-1 (the
"Owner Trustee" or the "Lessor"); the various banks and other lending
institutions listed on the signature pages hereto (subject to the definition of
Lenders in Appendix A to the Participation Agreement referenced below,
individually, a "Lender" and collectively, the "Lenders"); BANK OF AMERICA,
N.A., a national banking association, which is the successor to NationsBank,
N.A., as the agent for the Lenders and respecting the Security Documents, as the
agent for the Lenders and the Holders, to the extent of their interests (in such
capacity, the "Agent"); and the various banks and other lending institutions
listed on the signature pages hereto as holders of certificates issued with
respect to the VS Trust 1999-1 (subject to the definition of Holders in Appendix
A to the Participation Agreement referenced below, individually, a "Holder" and
collectively, the "Holders"). Capitalized terms used in this Amendment but not
otherwise defined herein shall have the meanings set forth in Appendix A to the
Participation Agreement (hereinafter defined).
W I T N E S S E T H
WHEREAS, the parties to this Amendment are parties to that certain
Participation Agreement dated as of April 23, 1999 (the "Participation
Agreement"), certain of the parties to this Amendment are parties to that
certain Credit Agreement dated as of April 23, 1999 (the "Credit Agreement"),
certain of the parties to this Amendment are parties to that certain Trust
Agreement dated as of April 23, 1999 (the "Trust Agreement"), certain of the
parties to this Amendment are parties to that certain Master Lease Agreement
dated as of April 23, 1999 (the "Lease") and certain of the parties to this
Amendment are parties to the other Operative Agreements relating to a $72
million tax retention operating lease facility (the "Facility") that has been
established in favor of the Lessee;
WHEREAS, the Lessee has requested certain modifications to the
Participation Agreement, the Credit Agreement, the Trust Agreement, the Security
Agreement, the Lease and the other Operative Agreements in connection with the
Lessee's request to increase the size of the Facility from $72 million to $139.4
million and to add additional banks and other lending institutions as Lenders
(each, a "New Lender") and/or Holders (each, a "New Holder");
WHEREAS, the Lessee has requested a waiver of certain covenants and
related non-compliance with certain reporting requirements and other agreements
and obligations under the Participation Agreement and the other Operative
Agreements;
<PAGE> 3
WHEREAS, the Financing Parties have agreed to the requested modifications
and waivers on the terms and conditions set forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
PARTICIPATION AGREEMENT
1. Appendix A to the Participation Agreement is hereby amended to
modify or add the following defined terms as follows:
"Applicable Percentage" shall mean for Eurodollar Loans, Eurodollar Holder
Advances and Commitment Fees, the appropriate applicable percentages
corresponding to the Pricing Level in effect as of the most recent Calculation
Date as shown below:
<TABLE>
<CAPTION>
=================================================================================================
Applicable Applicable
Ratio of Funded Applicable Percentage for Percentage for
Pricing Level Indebtedness Percentage for Eurodollar Commitment
To EBITDA Eurodollar Holder Fee
Loans Advances
- --------------- ---------------------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
I Funded Indebtedness/ 1.25% 2.25% .30%
EBITDA </= .75
- --------------- ---------------------------- ----------------- ---------------- -----------------
II Funded Indebtedness/EBITDA 1.50% 2.50% .375%
> .75 but </= 1.25
- --------------- ---------------------------- ----------------- ---------------- -----------------
III Funded Indebtedness/EBITDA 1.75% 2.75% .45%
> 1.25 but </= 2.00
- --------------- ---------------------------- ----------------- ---------------- -----------------
IV Funded Indebtedness/EBITDA 2.00% 3.00% .50%
> 2.00
=================================================================================================
</TABLE>
The Applicable Percentage for Eurodollar Loans, Eurodollar Holder Advances
and the Commitment Fees shall, in each case, be determined and adjusted on the
date (the "Calculation Date") by which the compliance certificate is required to
be delivered to the Agent in accordance with the provisions of Section
8.3A(a)(iii) of the Participation Agreement; provided, however, that (i) the
Applicable Percentage from the Initial Closing Date through February 9, 2000
shall be based on Pricing Level II (as shown above), (ii) the Applicable
Percentage from February 9, 2000 through March 3, 2000 shall be based on Pricing
Level I (as shown above), (iii) the Applicable Percentage on March 3, 2000 shall
be based on Pricing Level III (as shown
2
<PAGE> 4
above) and shall remain at Pricing Level III until the next occurring
Calculation Date and, thereafter, the Pricing Level shall be determined as shown
above, and (iv) if the Lessee fails to provide the annual and quarterly
compliance certificates required pursuant to Sections 8.3A(a)(iii) of the
Participation Agreement to the Agent on or before such Calculation Date, the
Applicable Percentage, in each case, from such Calculation Date shall be based
on Pricing Level IV until such time that such compliance certificates are
provided whereupon the Pricing Level shall be determined as specified herein.
Each Applicable Percentage shall be effective from one Calculation Date until
the next Calculation Date. Any adjustment in the Applicable Percentage shall be
applicable to all existing Eurodollar Loans and Eurodollar Holder Advances as
well as any new Eurodollar Loans and Eurodollar Holder Advances made or issued.
"Expiration Date" shall mean either (a) the Basic Term Expiration Date or
(b) the last day of the applicable Renewal Term; provided, in no event shall the
Expiration Date be later than March 3, 2007, unless such later date has been
expressly agreed to in writing by each of the Lessor, the Lessee, the Agent, the
Lenders and the Holders.
"Holder Commitments" shall mean $4,182,000, as such amount may be
increased or reduced from time to time in accordance with the provisions of the
Operative Agreements; provided, if there shall be more than one (1) Holder, the
Holder Commitment of each Holder shall be as set forth in Schedule I to the
Trust Agreement as such Schedule I may be amended and replaced from time to
time.
"Lender Commitments" shall mean $135,218,000, as such amount may be
increased or reduced from time to time in accordance with the provisions of the
Operative Agreements; provided, if there shall be more than one (1) Lender, the
Lender Commitment of each Lender shall be as set forth in Schedule 2.1 to the
Credit Agreement as such Schedule 2.1 may be amended and replaced from time to
time.
"Leverage Ratio" shall mean, as of the end of each fiscal quarter of the
Lessee, with respect to the Credit Parties and their Consolidated Subsidiaries
on a consolidated basis, the ratio of (a) Funded Indebtedness on such date to
(b) EBITDA for the twelve month period ending on such date.
"Majority Secured Parties" shall mean at any time, Lenders and Holders
whose Loans and Holder Advances outstanding represent at least fifty-one percent
(51%) of (a) the aggregate Advances outstanding or (b) to the extent there are
no Advances outstanding, the sum of the aggregate Holder Commitments plus the
aggregate Lender Commitments; provided, however, any amendment to Section
8.3A(h)(iii) shall require the consent of Lenders and Holders whose Loans and
Holder Advances outstanding represent at least sixty-six and two-thirds percent
(66 2/3%) of (x) the aggregate Advances outstanding or (y) to the extent there
are no Advances outstanding, the sum of the aggregate Holder Commitments plus
the aggregate Lender Commitments.
"Material Domestic Subsidiary" shall mean any Domestic Subsidiary which
has either (i) for the fiscal year of such Domestic Subsidiary most recently
ended, total annual revenues of at least $1,000,000 or (ii) total assets of at
least $5,000,000; provided, that (a) the aggregate total
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<PAGE> 5
assets (as determined in accordance with GAAP) at any time of all Domestic
Subsidiaries of the Credit Parties (taken as a whole) that are excluded from
this definition of "Material Domestic Subsidiary" and are not otherwise
Guarantors shall not exceed $50,000,000 and (b) the aggregate annual revenues
for the most recently ended fiscal years of all Domestic Subsidiaries of the
Credit Parties (taken as a whole) that are excluded from this definition of
"Material Domestic Subsidiary" and are not otherwise Guarantors shall not exceed
$10,000,000.
"Permitted Acquisition" shall mean a statutory merger, the acquisition of
all of the Capital Stock of another Person or all or substantially all of the
assets of another Person, provided that each of the following conditions are
satisfied: (a) prior to such acquisition, the Lessee shall deliver to the Agent
and the Majority Secured Parties a Pro Forma Compliance Certificate
demonstrating that after giving effect to such acquisition on a pro forma basis,
as if such acquisition had occurred on the first day of the twelve month period
ending on the last day of the Lessee's most recently completed fiscal year, the
Credit Parties would have been in compliance with all the financial covenants
set forth in Section 8.3A(h) of the Participation Agreement, (b) the acquisition
is consummated pursuant to a negotiated acquisition agreement and involves the
purchase of a business similar to the business of the Lessee as of the Initial
Closing Date, (c) after giving effect to the acquisition, the representations
and warranties set forth in Section 6 hereof shall be true and correct in all
material respects on and as of the date of such acquisition with the same effect
as though made on and as of such date and (d) no Default or Event of Default
exists and is continuing or would result from such acquisition.
"Permitted Investments" shall mean Investments which are (i) cash and Cash
Equivalents; (ii) accounts receivable created, acquired or made by the Lessee or
any of its Consolidated Subsidiaries in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; (iii)
Investments consisting of Capital Stock, obligations, securities or other
property received by the Lessee or any of its Consolidated Subsidiaries in
settlement of accounts receivable (created in the ordinary course of business)
from bankrupt obligors; (iv) Investments existing as of the Closing Date and set
forth in Schedule 8.3B(f); (v) advances or loans to directors, officers,
employees, agents, customers or suppliers that do not exceed $5,000,000 in the
aggregate at any one time outstanding for the Lessee and its Consolidated
Subsidiaries; (vi) Permitted Acquisitions; (vii) Investments in any other
Person, other than Permitted Acquisitions, provided that, in the event any
particular Investment exceeds $20,000,000, such Investment shall only be
permitted if each of the following conditions are satisfied: (a) after giving
effect to the Investment, the representations and warranties set forth in
Section 6.2 of the Participation Agreement shall be true and correct in all
material respects on and as of the date of such Investment with the same effect
as though made on and as such date, (b) no Default or Event of Default would
result from such Investment and (c) the Lessee shall have provided the Agent
with satisfactory evidence demonstrating that after giving effect to any such
Investment on a pro forma basis, as if such transaction had occurred on the last
day of the Lessee's most recently completed fiscal quarter, the Credit Parties
and their Subsidiaries would have been in compliance with all the financial
covenants set forth in Section 8.3A(h) of the Participation Agreement; and
(viii) such other Investments as are reasonably acceptable to the Agent.
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"Roseville Lease Financing" shall mean the transactions contemplated by
the Roseville Participation Agreement and the other Operative Agreements, as
such term is defined in the Roseville Participation Agreement.
"Roseville Participation Agreement" shall mean that certain Participation
Agreement dated as of March 3, 2000 (as amended, modified, extended,
supplemented, restated and/or replaced from time to time) as yet undated and to
be entered into among VSC, the various parties thereto from time to time, as
guarantors, First Security Bank, National Association, as Owner Trustee under
the VS Trust 2000-1, the various banks and other lending institutions parties
thereto from time to time, as lenders, the various banks and other lending
institutions parties thereto from time to time, as holders of certificates
issued with respect to the VS Trust 2000-1, and Bank of America, N.A., as agent.
2. Section 5.4(k) of the Participation Agreement is hereby amended to
read as follows:
(k) since the date of the most recent audited financial statements of
the Lessee, there shall not have occurred any event, condition or state of
facts which shall have or could reasonably be expected to have a Material
Adverse Effect, other than as specifically contemplated by the Operative
Agreements;
3. Section 5.3(t) of the Participation Agreement is hereby deleted.
4. The parenthetical phrase reading "(including without limitation the
Incorporated Representations and Warranties)" in the first sentence of Section
5.5 of the Participation Agreement is hereby deleted.
5. Section 5.10 of the Participation Agreement is hereby amended to
read as follows:
5.10 JOINDER AGREEMENT REQUIREMENTS.
The Parent and each Material Domestic Subsidiary of each Credit Party
formed or acquired subsequent to the Initial Closing Date shall become a
Guarantor and shall satisfy the following conditions within thirty (30) days
after its formation or acquisition (or, in the case of a Domestic Subsidiary
that was not a Material Domestic Subsidiary at the time of its formation or
acquisition, within thirty (30) days after such Domestic Subsidiary becomes a
Material Domestic Subsidiary of any Credit Party):
(a) the Parent or such Material Domestic Subsidiary, as the case
may be, shall execute and deliver to the Agent a Joinder Agreement in the
form attached hereto as Exhibit K;
(b) the Parent or such Material Domestic Subsidiary, as the case
may be, shall have delivered to the Agent (x) an Officer's Certificate of
the Parent or such Material Domestic Subsidiary, as the case may be, in
the form attached hereto as Exhibit C, (y) a certificate of the Secretary
or an Assistant Secretary of the Parent or such Material
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<PAGE> 7
Domestic Subsidiary, as the case may be, in the form attached hereto as
Exhibit D and (z) good standing certificates (or local equivalent) from
the respective states where the Parent or such Material Domestic
Subsidiary, as the case may be, is incorporated or organized and where the
principal place of business of the Parent or such Material Domestic
Subsidiary, as the case may be, is located as to its good standing in each
such state;
(c) the Parent or such Material Domestic Subsidiary, as the case
may be, shall have delivered to the Agent an opinion of counsel
(reasonably acceptable to the Agent) in the form attached hereto as
Exhibit H-1 or such other form as is reasonably acceptable to the Agent
and the Parent or such Material Domestic Subsidiary, as the case may be;
and
(d) the Agent shall have received such other documents,
certificates and information as the Agent shall have reasonably requested.
Notwithstanding any provision of this Section 5.10 or any other Operative
Agreement to the contrary, in the event that either (i) the aggregate total
assets (as determined in accordance with GAAP) of all Domestic Subsidiaries of
the Credit Parties (when taken as a whole) that are not Material Domestic
Subsidiaries and are not otherwise Guarantors exceeds $50,000,000, or (ii) the
aggregate annual revenues for the most recently ended fiscal years of all
Domestic Subsidiaries of the Credit Parties (taken as a whole) that are not
Material Domestic Subsidiaries and are not otherwise Guarantors exceeds
$10,000,000, the Credit Parties shall cause additional Domestic Subsidiaries to
become Guarantors and satisfy the conditions set forth in subsections (a)-(d) of
this Section 5.10 such that neither the level of aggregate assets nor the level
of aggregate revenues, as the case may be, attributable to such Domestic
Subsidiaries that are not Material Domestic Subsidiaries and are not otherwise
Guarantors shall no longer exceed the aggregate levels of assets and revenues
set forth in clauses (i) and (ii) of this sentence, respectively.
6. Section 6.1(f) of the Participation Agreement is hereby amended to
read as follows:
(f) No Default or Event of Default under the Operative Agreements
attributable to it has occurred and is continuing;
7. The following is hereby added as Section 6B.9 of the Participation
Agreement:
6B.9 ADDITIONAL GUARANTOR WAIVERS.
(a) The provisions of Section 6B of the Participation Agreement
shall remain in full force and effect notwithstanding (i) any release of
any Credit Party from any liability with respect to the Company
Obligations; or (ii) any release or subordination of any real or personal
property now or hereafter held by the Agent as security for the
performance of the Company Obligations;
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(b) Each Guarantor expressly waives any and all benefits which
might otherwise be available to it under California Civil Code Sections
2809, 2810, 2819, 2839, 2845, 2849, 2850, 2899 and 3433;
(c) Each Guarantor hereby waives any and all defenses, including
but not limited to such Guarantor's defense of estoppel discussed in Union
Bank vs. Gradsky (1968) 265 Cal.App.2d 40, based upon a foreclosure
against all or any part of the real property security for the indebtedness
evidenced by the Notes or Holder Certificates pursuant to the power of
sale contained in any Operative Agreement as opposed to proceeding by way
of judicial foreclosure. Such Guarantor waives all rights and defenses
arising out of an election of remedies by the Agent, even though that
election of remedies, such as a nonjudicial foreclosure with respect to
security for a guaranteed obligation, has destroyed such Guarantor's
rights of subrogation and reimbursement by the operation of Section 580d
of the California Code of Civil Procedure or otherwise;
(d) Each Guarantor hereby waives all rights and defenses that such
Guarantor may have because any of the Company Obligations are secured by
real property. This means, among other things: (1) The Agent may collect
from any Guarantor without first foreclosing on any real or personal
property collateral pledged by any other Person, including without
limitation, Lessee or any of its Subsidiaries; (2) If the Agent forecloses
on any real property collateral pledged by any Guarantor: (A) the amount
of debt may be reduced only by the price for which the collateral is sold
at the foreclosure sale, even if the collateral is worth more than the
sale price, (B) the Agent may collect from any Guarantor even if the
Agent, by foreclosing on the real property collateral, has destroyed any
right such Guarantor may have to collect from any other Credit Party. This
is an unconditional and irrevocable waiver of any rights and defenses any
Guarantor may have because the Company Obligations are secured by real
property. These rights and defenses include, but are not limited to, any
rights or defenses based upon Section 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure.
(e) In the case of a power of sale foreclosure under any Operative
Agreement, the fair market value of the real property collateral shall be
conclusively deemed to be the amount of the successful bid at the
foreclosure sale. Each Guarantor waives any rights or benefits it may now
or hereafter have to a fair value hearing under Section 580a of the
California Code of Civil Procedure. The Agent shall have absolutely no
obligation to make a bid at any foreclosure sale, but rather may make no
bid or bid any amount which the Agent, in its sole discretion, deems
appropriate.
(f) The Agent acknowledges that the provisions of this Section
6B.9 are intended to constitute a waiver of any rights and defenses any
Guarantor may now or hereafter have as a "guarantor" to the extent any
Operative Agreement executed by such Guarantor is construed to be in whole
or in part a guaranty of the Company Obligations.
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8. Section 7.4 of the Participation Agreement is hereby amended to read
as follows:
During the Commitment Period, the Lessee agrees to pay or to cause to be
paid to the Agent for the account of (a) the Lenders, respectively, a commitment
fee (the "Lender Commitment Fee") equal to the product of the average daily
Available Commitment of each Lender during the applicable portion of the
Commitment Period multiplied by a per annum rate equal to the Applicable
Percentage (determined as of the applicable Calculation Date) for the Lender
Commitment Fee and (b) the Holders, respectively, a commitment fee (the "Holder
Commitment Fee") equal to the product of the average daily Available Holder
Commitment of each Holder during the applicable portion of the Commitment Period
multiplied by a per annum rate equal to the Applicable Percentage (determined as
of the applicable Calculation Date) for the Holder Commitment Fee. Such
Commitment Fees shall be calculated on the basis of a year of three hundred
sixty (360) days for the actual days elapsed and shall be payable quarterly in
arrears on each Commitment Fee Payment Date. If all or a portion of any such
Commitment Fee shall not be paid when due, such overdue amount shall bear
interest, payable by the Lessee on demand, at a rate per annum equal to the ABR
(or in the case of overdue amounts relating to Holder Commitment Fees, the ABR
plus 1.00%) plus two percent (2%) from the date of such non-payment until such
amount is paid in full.
9. Section 8.3(h) of the Participation Agreement is hereby amended to
read as follows:
(h) The Lessee hereby covenants and agrees that as of Completion (i) the
aggregate Property Cost shall not exceed $139,400,000 and (ii) each parcel
of the Property shall be a Permitted Facility.
10. Section 8.3(k) of the Participation Agreement is hereby amended to
read as follows:
(k) Beginning with the fiscal quarter of the Lessee that begins on
January 1, 2000 and ends on March 31, 2000, and for each fiscal quarter of
the Lessee thereafter, Lessee shall furnish to the Agent a written notice
setting forth the Lessee's calculation, in reasonable detail, of the ratio
of Funded Indebtedness to EBITDA as of the last day of each such period
and the level of EBITDA for such fiscal quarter of the Lessee in the form
of the officer's compliance certificate provided in Schedule 8.3A(a)(iii)
and by the date required pursuant to Section 8.3A(a)(iii).
11. Section 8.3(s) of the Participation Agreement is hereby amended to
read as follows:
(s) Each Credit Party hereby covenants and agrees (i) to cause the
Parent and each Material Domestic Subsidiary of each Credit Party formed
or acquired after the Initial Closing Date to execute a Joinder Agreement
and to observe the terms of Sections 5.10(a)-(d), all within thirty (30)
days of the formation or acquisition of the Parent or such Material
Domestic Subsidiary, as the case may be (or, in the case of a Domestic
Subsidiary that was not a Material Domestic Subsidiary at the time of its
formation or
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acquisition, within thirty (30) days after such Domestic Subsidiary
becomes a Material Domestic Subsidiary of any Credit Party), and (ii) to
cause such additional Domestic Subsidiaries of any Credit Party to execute
a Joinder Agreement and observe the terms of Section 5.10(a)-(d) as
required in accordance with Section 5.10.
12. The following is hereby added as Section 8.3(u) of the Participation
Agreement:
(u) If any credit facility, loan agreement or other financing
arrangement extended to any Credit Party or any Affiliate of any Credit
Party, other than pursuant to the Operative Agreements and other than
Indebtedness permitted under Sections 8.3B(a)(iii) and (vii), is ever
secured by any collateral, the Secured Parties shall share on a pari-passu
basis (based on the respective amounts outstanding under the Operative
Agreements relative to the amounts outstanding under any such credit
facility, loan agreement or other financing arrangement) in all such
collateral.
13. The following is hereby added as clause (xi) of Section 8.3A(a) of
the Participation Agreement:
(xi) Reports and financial statements required to be delivered
pursuant to subsections (a)(i), (a)(ii) and (a)(vii)(i) of this Section
8.3A(a) shall be deemed to have been delivered on the date on which such
report is posted on the Securities and Exchange Commission's website on
the internet at the website address www.sec.gov or the Free Edgar website
on the internet at the website www.freeedgar.com and after Lessee has
provided written notice to the Agent, each Lender and each Holder that
such report or financial statement has been so posted; provided that
Lessee shall deliver paper copies of such reports and financial statements
to the Agent and any Lender or Holder that requests Lessee to deliver such
paper copies until written notice to cease delivering paper copies is
given by the Agent or such Lender or Holder; provided further that,
notwithstanding the foregoing, Lessee shall be required to deliver paper
copies to each of the Agent and any Lender or Holder of any other
documentation required pursuant to this Section 8.3A(a). The Agent shall
have no obligation to request the delivery or to maintain copies of the
reports referred to in subsections (a)(i), (a)(ii) and (a)(vii)(i) of this
Section 8.3A(a) or to monitor compliance by Lessee with any such request
for delivery and each Lender or Holder shall be solely responsible for
requesting delivery to it or maintaining copies of such reports and
financial statements.
14. Section 8.3A(h) of the Participation Agreement is hereby amended to
read as follows:
(h) FINANCIAL COVENANTS.
(i) Leverage Ratio. The Leverage Ratio, as of the last day of each
fiscal quarter of the Lessee, shall be less than or equal to:
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(A) From the Initial Closing Date to and including
September 30, 2000, 2.50 to 1.0;
(B) From October 1, 2000 to and including September
30, 2001, 2.25 to 1.0; and
(C) From October 1, 2001 and thereafter, 2.0 to 1.0.
(ii) EBITDA. EBITDA, for each period set forth below, as shown on
the financial statements of Credit Parties and their Consolidated
Subsidiaries delivered pursuant to Section 8.3(A)(a)(i) and (ii), shall
not be less than (i) $200,000,000 for each twelve month period ending
December 31, 1999, March 31, 2000, June 30, 2000 and September 30, 2000,
(ii) $250,000,000 for each twelve month period ending December 31, 2000,
March 31, 2001, June 30, 2001 and September 30, 2001 (iii) $375,000,000
for each twelve month period ending December 31, 2001, March 31, 2002,
June 30, 2002 and September 30, 2002, and (iv) $500,000,000 for each
twelve month period ending as of December 31, 2002 and each March 31, June
30, September 30 and December 31 thereafter.
(iii) Quick Ratio. The Quick Ratio, as of the last day of each
fiscal quarter of the Lessee, shall be greater than or equal to 1.50 to
1.0.
15. Section 8.3B(a) of the Participation Agreement is hereby amended to
read as follows:
(a) INDEBTEDNESS.
No Credit Party will, nor will it permit any of its Consolidated
Subsidiaries to, contract, create, incur, assume or permit to exist any
Indebtedness, except:
(i) Indebtedness arising under this Participation Agreement
and the other Operative Agreements;
(ii) Indebtedness of a Credit Party and its Consolidated
Subsidiaries set forth in Schedule 8.3B(a)(ii) (and renewals, refinancings
and extensions thereof on terms and conditions no less favorable to such
Person than such existing Indebtedness);
(iii) purchase money Indebtedness (including obligations in
respect of Capital Leases) hereafter incurred by a Credit Party or any of
its Consolidated Subsidiaries to finance the purchase of fixed assets
provided that (i) the total of all such Indebtedness for all such Persons
taken together (including any such Indebtedness referred to in subsection
(ii) above) shall not exceed (A) during fiscal year 1999 and 2000, an
aggregate principal amount of $25,000,000 at any one time outstanding and
(B) at any time subsequent to fiscal year 2000, $40,000,000 at any one
time outstanding; (ii) such Indebtedness when incurred shall not exceed
the purchase price of the asset(s) financed; and (iii) no such
Indebtedness
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shall be refinanced for a principal amount in excess of the principal
balance outstanding thereon at the time of such refinancing;
(iv) other unsecured Indebtedness (exclusive of Indebtedness
permitted under subsection (v) and subsection (vi) of this Section
8.3B(a)) of the Credit Parties and their Consolidated Subsidiaries in an
aggregate amount not to exceed $300,000,000 on terms and conditions
satisfactory in form and substance to the Majority Secured Parties;
provided, however, the amount of Indebtedness permitted under this
subsection (iv) shall be reduced by an amount equal to the sum of (a) the
aggregate outstanding Loans (as such term is defined in Appendix A to the
Roseville Participation Agreement) under the Roseville Lease Financing,
plus (b) the aggregate outstanding Holder Advances (as such term is
defined in Appendix A to the Roseville Participation Agreement) under the
Roseville Lease Financing, plus (c) accrued and unpaid Interest or Holder
Yield (in each case, as defined in Appendix A to the Roseville
Participation Agreement) due and owing on such Loans or Holder Advances,
plus (d) any other amounts due and owing by the Lessee or the Construction
Agent to any Person under the Roseville Lease Financing;
(v) the Subordinated Debt;
(vi) Indebtedness of a Credit Party consisting of unsecured
convertible subordinated debentures on terms and conditions (including,
without limitation, the subordination terms) reasonably acceptable to the
Agent, and any renewal, refinancings or extensions thereof on terms and
conditions (including, without limitation, the subordinations terms)
reasonably acceptable to the Agent; and
(vii) Indebtedness arising under the Roseville Lease
Financing.
16. Section 11.6 of the Participation Agreement is hereby amended to
read as follows:
Each and every Indemnified Person shall at all times have the rights and
benefits, and the Indemnity Provider shall have the obligations, in each case
provided pursuant to the Operative Agreements with respect to environmental
matters, violations of any Environmental Law, any Environmental Claim or other
loss of or damage to any property or the environment relating to any Property,
the Lease, the Agency Agreement or the Indemnity Provider (including without
limitation the rights and benefits provided pursuant to Section 11.1(c)).
LEASE AGREEMENT
17. Section 2.2 of the Lease is hereby amended to read as follows:
2.2 LEASE TERM.
The basic term of this Lease with respect to each Property (the
"Basic Term") shall begin upon the Property Closing Date for such Property (in
each case the "Basic Term Commencement Date") and shall end on March 3, 2005
(the "Basic Term Expiration Date"), unless
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the Basic Term is earlier terminated or the term of this Lease is renewed (as
described below) in accordance with the provisions of this Lease.
Notwithstanding the foregoing, Lessee shall not be obligated to pay Basic Rent
until the Rent Commencement Date with respect to such Property.
Upon the written request of Lessee and with the consent of all of
the Financing Parties, in their sole discretion, the term of this Lease for each
Property may be extended for up to two (2) additional terms each of one (1)
year's duration from the Basic Term Expiration Date (each, a "Renewal Term");
provided, that the expiration date for the final Renewal Term for each Property
shall not be later than March 3, 2007, unless such later expiration date has
been expressly agreed to, at the request of Lessee, in writing by each of the
Lessor, the Agent, the Lenders and the Holders in their sole discretion.
18. The second sentence of Section 14.3(a) of the Lease is hereby
amended to read as follows:
All such insurance shall be at the cost and expense of Lessee and provided
by nationally recognized, financially sound insurance companies having a
rating by A.M. Best's Key Rating Guide of at least an (i) A- and a
Financial Performance Rating of at least a IX (regarding all hazard
insurance coverages) and (ii) A- and a Financial Performance Rating of at
least a IX (regarding all liability insurance coverages).
19. Section 15.2(b) of the Lease is hereby amended to read as follows:
(b) In light of the environmental condition of the Property (which
includes the Land) existing as of the Property Closing Date (the
"Pre-Existing Environmental Conditions"), the presence of Pre-Existing
Hazardous Substances on the Property (which includes the Land) shall not
violate the terms of this Lease. Responsibility for the cleanup and/or
remediation of the Pre-Existing Environmental Conditions shall be
allocated pursuant to the terms of the Purchase Agreement and the
Indemnity Agreement; provided, notwithstanding any of the provisions of
the Lease or any of the Operative Agreements, to the extent any
Pre-Existing Environmental Condition is not addressed by any third party
pursuant to the Purchase Agreement and/or the Indemnity Agreement so as to
remediate such Pre-Existing Environmental Condition in accordance with the
applicable Environmental Laws, then Lessee shall be responsible for the
cleanup and/or remediation of such Pre-Existing Environmental Condition in
accordance with the applicable terms of the Operative Agreements including
without limitation Section 15.2(c). Lessee shall in all events be
responsible for the environmental indemnification of the Financing Parties
in accordance with the Participation Agreement.
CREDIT AGREEMENT
20. Schedule 2.1 of the Credit Agreement is hereby deemed amended and
restated in its entirety to read as Schedule 2.1 attached hereto as EXHIBIT 1.
21. Section 7.7 of the Credit Agreement is hereby amended to read as
follows:
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0.1 INDEMNIFICATION.
The Lenders agree to indemnify the Agent, in its capacity as such (to the
extent not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so), ratably according to their respective Commitment Percentages
in effect on the date on which indemnification is sought under this Section 7.7
(or, if indemnification is sought after the date upon which the Commitments
shall have terminated and the Loans shall have been paid in full, ratably in
accordance with their Commitment Percentages immediately prior to such date),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including without limitation at any time
following the payment of the Notes) be imposed on, incurred by or asserted
against any of them in any way relating to or arising out of, the Commitments,
this Agreement, any of the other Operative Agreements or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by any of them
under or in connection with any of the foregoing; provided, that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the Agent. The
agreements in this Section 7.7 shall survive the payment of the Notes and all
other amounts payable hereunder.
TRUST AGREEMENT
22. Schedule I of the Trust Agreement is hereby deemed amended and
restated in its entirety to read as Schedule I attached hereto as EXHIBIT 2.
WAIVERS
23. The Financing Parties hereby
(a) waive the requirement pursuant to Section 8.3(k) of the Participation
Agreement (as in effect prior to the effective date of this Amendment) that, on
or before the first Business Day of the fiscal quarters of the Lessee beginning
July 1, 1999, October 1, 1999 and January 1, 2000, respectively, the Lessee
provide to the Agent written notice of Lessee's calculation of the ratio of
Funded Indebtedness to EBITDA and the level of EBITDA for the fiscal quarter of
the Lessee immediately preceding such dates;
(b) waive the requirement pursuant to Section 8.3A(a)(ii) of the Participation
Agreement that the Lessee provide quarterly financial statements within 45 days
after the end of the fiscal quarters of the Lessee ending July 31, 1999 and
October 31, 1999 and the certificate of the Lessee's chief financial officer
described in such Section 8.3A(a)(ii) and Section 8.3A(a)(iii);
(c) waive Lessee's failure to cause each of Veritas Software Corporation
(formerly known as Veritas Holding Corporation), as Parent, and Seagate Software
Network & Storage Management Group, Inc. and OpenVision International, Inc., as
Domestic Subsidiaries of the Lessee or the Parent, to become Guarantors and to
otherwise comply with the provisions of
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Sections 5.10 and 8.3(s) of the Participation Agreement within thirty (30) days
after such entity's formation or acquisition by the Lessee or the Parent;
(d) waive Lessee's failure to notify the Agent of the change of Lessee's name
effective as of May 28, 1999, as required pursuant to Section 8.3(i) of the
Participation Agreement;
(e) waive Lessee's failure to submit to the Agent the terms and conditions of
those certain 1.856% Convertible Subordinated Notes due 2006 in the aggregate
principal amount at maturity of $465,750,000 issued under that certain Indenture
dated as of August 13, 1999 by and among VERITAS Software Corporation, VERITAS
Operating Corporation and State Street Bank and Trust Company of California,
N.A., as trustee, and that certain First Supplemental Indenture dated as of
August 17, 1999 by and among VERITAS Software Corporation, VERITAS Operating
Corporation and State Street Bank and Trust Company of California, N.A., as
trustee, prior to their issuance, as required pursuant to Section 8.3B(a)(vi)of
the Participation Agreement; and
(f) agree that the Lessee's failure to comply with the provisions of Sections
8.3(k), 8.3A(a)(ii), 8.3A(a)(iii), 5.10, 8.3(s), 8.3(i) and 8.3B(a)(vi) of the
Participation Agreement for the periods and on the dates set forth in the
preceding subsections (a) through (e) only shall not constitute a Lease Default
or Lease Event of Default under Section 17.1(l)(iii) of the Lease Agreement or a
Credit Agreement Default or Credit Agreement Event of Default under Section 6(f)
of the Credit Agreement.
24. The waivers set forth herein are one-time waivers and shall not be
construed to be waivers as to future compliance with Sections 8.3(k),
8.3A(a)(ii), 8.3A(a)(iii), 5.10, 8.3(s), 8.3(i) or 8.3B(a)(vi) of the
Participation Agreement at all times after the effective date of this Agreement
(including, except as expressly provided herein, the fiscal quarter of the
Lessee beginning January 1, 2000) or the Lessee's obligation to comply fully
with any other duty, term, condition or covenant contained in any of the
Operative Agreements.
MISCELLANEOUS
25. This Amendment shall be effective upon satisfaction of the following
conditions:
(a) execution and delivery of this Amendment by the parties hereto
and execution and delivery of such other documents, agreements or
instruments deemed necessary or advisable by the Agent; and
(b) (i) receipt by the Agent of an officer's certificate of the
Lessee and the Construction Agent (in form and in substance reasonably
satisfactory to the Agent) certifying that a resolution has been adopted
by Lessee's Board of Directors approving and authorizing the execution,
delivery, and performance of this Amendment, specifying that no Default or
Event of Default shall have occurred and be continuing, specifying that
the representations and warranties of Lessee set forth in the
Participation Agreement are true and correct (except for any such
representations and warranties which relate solely to an earlier time) and
certifying as to the incumbency of the officer of Lessee executing
14
<PAGE> 16
this Amendment and (ii) receipt by the Agent of an officer's certificate
of each Credit Party (other than the Lessee and the Construction Agent)
certifying that the execution, delivery and performance of this Amendment
has been duly approved and authorized by such Credit Party's Board of
Directors, such officer's certificate to be in form and substance
reasonably satisfactory to the Agent and certifying as to the incumbency
of the officer of such Credit Party executing this Amendment; and
(c) receipt by the Agent of legal opinions of counsel to the
Credit Parties relating to this Amendment in form and substance reasonably
satisfactory to the Agent.
26. Each New Lender hereby acknowledges, agrees and confirms that, by
its execution of this Amendment, such New Lender will be deemed to be a party to
the Participation Agreement, the Credit Agreement and such other of the
Operative Agreements as are necessary or desirable to accomplish the purposes of
this Amendment and each of the other Operative Agreements. Each New Lender
further acknowledges, agrees and confirms that it shall have all of the
obligations of a Lender under any of the Operative Agreements as if such New
Lender had executed such Operative Agreement, and agrees to be bound by all of
the terms, provisions and conditions applicable to a Lender contained in any
Operative Agreement.
27. Each New Holder hereby acknowledges, agrees and confirms that, by
its execution of this Amendment, such New Holder will be deemed to be a party to
the Participation Agreement, the Trust Agreement and such other of the Operative
Agreements as are necessary or desirable to accomplish the purposes of this
Amendment and each of the other Operative Agreements. Each New Holder further
acknowledges, agrees and confirms that it shall have all of the obligations of a
Holder under any of the Operative Agreements as if such New Holder had executed
such Operative Agreement, and agrees to be bound by all of the terms, provisions
and conditions applicable to a Holder contained in any Operative Agreement.
28. Except as modified hereby, all of the terms and provisions of the
Operative Agreements (including Schedules and Exhibits) shall remain in full
force and effect.
29. The Lessee agrees to pay all reasonable costs and expenses of the
Agent in connection with the preparation, execution and delivery of this
Amendment, including without limitation the reasonable fees and expenses of
Moore & Van Allen, PLLC.
30. This Amendment may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and it shall
not be necessary in making proof of this Amendment to produce or account for
more than one such counterpart.
31. This Amendment shall be deemed to be a contract made under, and for
all purposes shall be construed in accordance with the laws of the State of New
York.
[The remainder of this page has been left blank intentionally.]
15
<PAGE> 17
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amendment to be duly executed and delivered as of the date first above
written.
VERITAS OPERATING CORPORATION
(formerly known as Veritas Software
Corporation), as the Construction
Agent and as the Lessee
By: /s/ KEN LONCHAR
----------------------------------
Name: Ken Lonchar
Title: Senior Vice President and
Chief Financial Officer
VERITAS SOFTWARE CORPORATION (formerly
known as Veritas Holding Corporation),
as a Guarantor
By: /s/ KEN LONCHAR
----------------------------------
Name: Ken Lonchar
Title: Senior Vice President and
Chief Financial Officer
SEAGATE SOFTWARE NETWORK & STORAGE
MANAGEMENT GROUP, INC., as a Guarantor
By: /s/ KEN LONCHAR
----------------------------------
Name: Ken Lonchar
Title: Senior Vice President and
Chief Financial Officer
OPENVISION INTERNATIONAL, INC., as a
Guarantor
By: /s/ KEN LONCHAR
----------------------------------
Name: Ken Lonchar
Title: Senior Vice President and
Chief Financial Officer
[signature pages continue]
<PAGE> 18
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, except
as expressly stated herein, but solely
as the Owner Trustee under the
VS Trust 1999-1
By: /s/ VAL T. ORTON
----------------------------------
Name: Val T. Orton
Title: Vice President
<PAGE> 19
BANK OF AMERICA, N.A. (which is the
successor to NationsBank, N.A.), as a
Holder, as a Lender and as the Agent
By: /s/ DOUGLAS T. MECKELNBURG
----------------------------------
Name: Douglas T. Meckelnburg
Title: Vice President
<PAGE> 20
COMERICA BANK - CALIFORNIA, as a
Holder and as a Lender
By: /s/ ROBERT E. WAYS
----------------------------------
Name: Robert E. Ways
Title: Corporate Banking Officer
<PAGE> 21
KEYBANK NATIONAL--ASSOCIATION, as a
Holder and as a Lender
By: /s/ MARY K. YOUNG
----------------------------------
Name: Mary K. Young
Title: Assistant Vice President
<PAGE> 22
FLEET NATIONAL BANK, as a Lender
By: /s/ WILLIAM E. RURODE, JR.
----------------------------------
Name: William E. Rurode, Jr.
Title: Executive Vice President
<PAGE> 23
THE BANK OF NOVA SCOTIA, as a Lender
By: /s/ CHRISTOPHER OSBORN
----------------------------------
Name: Christopher Osborn
Title: Director
<PAGE> 24
THE FUJI BANK, LIMITED, as a Lender
By: /s/ FUKUDA, MASAHITO
----------------------------------
Name: Mr. Fukuda, Masahito
Title: Senior Vice President and
Group Head
<PAGE> 25
FBTC LEASING CORP., as a Lender
By: /s/ MASATOSHI KAISHITA
----------------------------------
Name: Masatoshi Kaishita
Title: Treasurer
<PAGE> 26
UNION BANK OF CALIFORNIA, N.A., as a
Holder and as a Lender
By: /s/ GLENN LEYRER
----------------------------------
Name: Glenn Leyrer
Title: Vice President
<PAGE> 27
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as a Holder and as a Lender
By: /s/ ERIC C. HOUSER
----------------------------------
Name: Eric C. Houser
Title: Vice President
<PAGE> 28
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
as a Lender
By: /s/ KEN IWATA
----------------------------------
Name: Ken Iwata
Title: Senior Vice President and
Manager
<PAGE> 29
IBJTC LEASING CORPORATION-BSC, as a
Holder
By: /s/ TOMOKO AOKI
----------------------------------
Name: Tomoko Aoki
Title: Vice President
[signature pages end]
<PAGE> 30
EXHIBIT 1
Schedule 2.1
<TABLE>
<CAPTION>
Tranche A Tranche B
Commitment Commitment
---------- ----------
Name and Address of Lenders Amount/Percentage Amount/Percentage
- --------------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Bank of America, N.A. $17,726,639 14.786% $2,267,361 14.786%
555 California Street, 41st Floor
Mail Code: CA5-705-41-01
San Francisco, CA 94104
Attention: Doug Meckelnburg
Telephone: (415) 953-9155
Telecopy: (415) 622-0632
Comerica Bank - California $13,760,000 11.478% $1,760,000 11.478%
800 Oak Grove Avenue
Menlo Park, CA 94025
Attention: Rob Ways
Telephone: (650) 462-6056
Telecopy: (650) 462-6058
KeyBank National Association $17,726,639 14.786% $2,267,361 14.786%
700 Fifth Avenue, 46th Floor
Seattle, WA 98104
Attention: Mary K. Young
Telephone: (206) 684-6085
Telecopy: (206) 684-6035
Fleet National Bank $9,752,577 8.135% $1,247,423 8.135%
Information Technology Division
Mail Code: CA FML Palo Alto
435 Tasso Street, Suite 250
Palo Alto, CA 94301
Attention: Sarabelle Hitchner,
Vice President
Telephone: (650) 470-4180
Telecopy: (650) 853-1425
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
Tranche A Tranche B
Commitment Commitment
---------- ----------
Name and Address of Lenders Amount/Percentage Amount/Percentage
- --------------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C>
The Bank of Nova Scotia $14,185,568 11.833% $1,814,432 11.833%
Atlanta Agency
600 Peachtree Street,
N.E. Suite 2700
Atlanta, GA 30308
Attention: Joseph Legista,
Loan Officer
Telephone: (404) 877-1563
Telecopy: (404) 888-8998
The Fuji Bank, Limited $9,752,577 8.135% $0 0%
333 South Hope Street, 39th Floor
Los Angeles, CA 90071
Attention: Linda Zhong, Clerk
Telephone: (213) 253-4137
Telecopy: (213) 253-4178
FBTC Leasing Corp. $0 0% $1,247,423 8.135%
2 World Trade Center
New York, NY 10048
Attention: Carl Marcantonio
Telephone: (212) 898-2439
Telecopy: (212) 775-7276
Union Bank of California, N.A. $13,760,000 11.478% $1,760,000 11.478%
1980 Saturn Street
Monterey Park, CA 91755
Attention: Gohar Karapetyan,
Vice President
Telephone: (323)720-2679
Telecopy: (323)724-6198
Wells Fargo Bank, National $13,760,000 11.478% $1,760,000 11.478%
Association
201 3rd Street, 8th Floor
San Francisco, CA 94301
Attention: Rosanna Roxas
Telephone: (415)477-5390
Telecopy: (415) 979-0675
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
Tranche A Tranche B
Commitment Commitment
---------- ----------
Name and Address of Lenders Amount/Percentage Amount/Percentage
- --------------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
The Industrial Bank of Japan, $9,460,000 7.891% $1,210,000 7.891%
Limited
1251 Avenue of the Americas
New York, NY 10020
Attention: Richard Emmich,
Vice President
Telephone: (212) 282-3000
Telecopy: (212) 282-4478
TOTAL $119,884,000 100% $15,334,000 100%
</TABLE>
<PAGE> 33
SCHEDULE 1
HOLDER COMMITMENTS
<TABLE>
<CAPTION>
Holder Commitment
-----------------
Name of Holder Amount/Percentage
-------------- -----------------
<S> <C> <C>
Bank of America, N.A. $1,206,000 28.8379%
555 California Street, 41st Floor
Mail Code: CA5-705-41-01
San Francisco, CA 94104
Attention: Doug Meckelnburg
Telephone: (415) 953-9155
Telecopy: (415) 622-0632
KeyBank National Association $1,206,000 28.838%
700 Fifth Avenue, 46th Floor
Seattle, WA 98104
Attn: Mary K. Young
Telephone: (206)684-6085
Telecopy: (206)684-6035
Comerica Bank - California $480,000 11.478%
800 Oak Grove Avenue
Menlo Park, CA 94025
Attention: Rob Ways
Telephone: (650) 462-6056
Telecopy: (650) 462-6058
Union Bank of California, N.A. $480,000 11.478%
1980 Saturn Street
Monterey Park, CA 91755
Attention: Gohar Karapetyan,
Vice President
Telephone: (323)720-2679
Telecopy: (323)724-6198
Wells Fargo Bank, National Association $480,000 11.478%
201 3rd Street, 8th Floor
San Francisco, CA 94301
Attention: Rosanna Roxas
Telephone: (415)477-5390
Telecopy: (415) 979-0675
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
Holder Commitment
-----------------
Name of Holder Amount/Percentage
-------------- -----------------
<S> <C> <C>
IBJTC Leasing Corporation-BSC $330,000 7.891%
1251 Avenue of the Americas
New York, NY 10020
Attention: Virginia Fino
Telephone: (212) 282-3588
Telecopy: (212) 282-4492
TOTAL $4,182,000 100%
</TABLE>
<PAGE> 1
EXHIBIT 10.30
JOINDER AGREEMENT
(Pursuant to Section 5.10(a) of the Participation Agreement)
THIS JOINDER AGREEMENT (as amended, modified, supplemented, restated
and/or replaced from time to time, the "Agreement"), dated as of March 3, 2000,
is by and between VERITAS SOFTWARE CORPORATION (formerly known as Veritas
Holding Corporation), a Delaware corporation (the "Company"), and BANK OF
AMERICA, N.A. (as successor to NationsBank, N.A.), as the Agent for the Lenders
and respecting the Security Documents, as the Agent for the Lenders and the
Holders, to the extent of their interests (the "Agent"). Capitalized terms not
otherwise defined herein shall have the meanings set forth therefor in the
Participation Agreement dated as of April 23, 1999 (as amended, modified,
supplemented, restated and/or replaced from time to time, the "Participation
Agreement") among VERITAS OPERATING CORPORATION (formerly known as Veritas
Software Corporation), as the Construction agent and the Lessee, the various
parties thereto from time to time, as the Guarantors, First Security Bank,
National Association, as the Owner Trustee under the VS Trust 1999-1, the
various banks and other lending institutions which are parties thereto from time
to time, as the Lenders, the various banks and other lending institutions which
are parties thereto from time to time, as the Holders, and the Agent.
The Company is either a Domestic Subsidiary or the Parent, and,
consequently, the Credit Parties are required by Section 8.3(s) of the
Participation Agreement to cause the Company to become a "Guarantor".
Accordingly, the Company hereby agrees as follows with the Agent, for
the benefit of the Financing Parties:
1. The Company hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Company will be deemed to be a party to the
Participation Agreement and a "Guarantor" for all purposes of the Participation
Agreement and all other Operative Agreements, and shall have all of the
obligations of a Guarantor under the Operative Agreements as if the Company had
executed the Participation Agreement. The Company hereby ratifies, as of the
date hereof, and agrees to be bound by, all of the terms, provisions and
conditions applicable to the Guarantors contained in the Operative Agreements.
Without limiting the generality of the foregoing terms of this paragraph 1, the
Company hereby (i) jointly and severally together with the other Guarantors,
guarantees to each Financing Party, as provided in Sections 6B.1 through 6B.8 of
the Participation Agreement, the prompt payment and performance of the Company
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise) strictly in accordance with the terms
thereof.
2. (a) The provisions of Section 6B of the Participation Agreement shall
remain in full force and effect notwithstanding (i) any release of any Credit
Party from any liability with respect to the Company Obligations; or (ii) any
release or subordination of any real or personal
<PAGE> 2
property now or hereafter held by the Agent as security for the performance of
the Company Obligations:
(b) The Company expressly waives any and all benefits which might
otherwise be available to it under California Civil Code Sections 2809, 2810,
2819, 2839, 2845, 2849, 2850, 2899 and 3433;
(c) The Company hereby waives any and all defenses, including but
not limited to the Company's defense of estoppel discussed in Union Bank vs.
Gradsky (1968) 265 Cal.App.2d 40, based upon a foreclosure against all or any
part of the real property security for the indebtedness evidenced by the Notes
or Holder Certificates pursuant to the power of sale contained in any Operative
Agreement as opposed to proceeding by way of judicial foreclosure. The Company
waives all rights and defenses arising out of an election of remedies by the
Agent, even though that election of remedies, such as a nonjudicial foreclosure
with respect to security for a guaranteed obligation, has destroyed the
Company's rights of subrogation and reimbursement by the operation of Section
580d of the California Code of Civil Procedure or otherwise;
(d) The Company hereby waives all rights and defenses that the
Company may have because any of the Company Obligations are secured by real
property. This means, among other things: (1) The Agent may collect from the
Company without first foreclosing on any real or personal property collateral
pledged by any other Person, including without limitation, Lessee or any of its
Subsidiaries; (2) If the Agent forecloses on any real property collateral
pledged by any Credit Party: (A) the amount of debt may be reduced only by the
price for which the collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price, (B) the Agent may collect from any
Credit Party even if the Agent, by foreclosing on the real property collateral,
has destroyed any right the Company may have to collect from any other Credit
Party. This is an unconditional and irrevocable waiver of any rights and
defenses the Company may have because the Company Obligations are secured by
real property. These rights and defenses include, but are not limited to, any
rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California
Code of Civil Procedure.
(e) In the case of a power of sale foreclosure under any
Operative Agreement, the fair market value of the real property collateral shall
be conclusively deemed to be the amount of the successful bid at the foreclosure
sale. The Company waives any rights or benefits it may now or hereafter have to
a fair value hearing under Section 580a of the California Code of Civil
Procedure. The Agent shall have absolutely no obligation to make a bid at any
foreclosure sale, but rather may make no bid or bid any amount which the Agent,
in its sole discretion, deems appropriate.
(f) The Agent acknowledges that the provisions of this Section
6B.9 are intended to constitute a waiver of any rights and defenses the Company
may now or hereafter have as a "guarantor" to the extent any Operative Agreement
executed by the Company is construed to be in whole or in part a guaranty of the
Company Obligations.
<PAGE> 3
3. THE COMPANY HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES TO THE
PROVISIONS OF SECTION 12.7 OF THE PARTICIPATION AGREEMENT, INCLUDING WITHOUT
LIMITATION THOSE PROVISIONS REGARDING GOVERNING LAW, SUBMISSION TO JURISDICTION,
WAIVER OF JURY TRIAL AND VENUE. THIS PROVISION HAS BEEN SPECIFICALLY REVIEWED BY
THE COMPANY.
4. The chief executive office and principal place of business of the
Company are located at the location(s) set forth on Schedule 1 attached hereto.
5. All notices and other communications to be delivered to the Company
shall be directed to the Company at its address set forth in Section 12.2 of the
Participation Agreement or such other address as may be specified, in accordance
with the terms of the Participation Agreement, by the Company from time to time.
6. The Company hereby waives acceptance by the Financing Parties of the
guaranty by the Company under Sections 6B.1 through 6B.8 of the Participation
Agreement upon the execution of this Agreement by the Company.
7. This Agreement may be executed in multiple counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.
8. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its authorized officers, and the Agent, for the benefit of the
Financing Parties, has caused the same to be accepted by its authorized officer,
as of the day and year first above written.
VERITAS SOFTWARE CORPORATION
(formerly known as Veritas Holding Corporation)
By: /s/ KEVIN OLSON
----------------------------------
Name: Kevin Olson
Title: Treasurer
Acknowledged and accepted:
BANK OF AMERICA, N.A.,
as the Agent
By: /s/ DOUGLAS T. MECKELNBURG
----------------------------------
Name: Douglas T. Meckelnburg
Title: Vice President
<PAGE> 5
Schedule 1
VERITAS Software Corporation
1600 Plymouth Street
Mountain View, California 94043
<PAGE> 1
EXHIBIT 10.31
JOINDER AGREEMENT
(Pursuant to Section 5.10(a) of the Participation Agreement)
THIS JOINDER AGREEMENT (as amended, modified, supplemented, restated
and/or replaced from time to time, the "Agreement"), dated as of March 3, 2000,
is by and between OPENVISION INTERNATIONAL, LTD., a Delaware corporation (the
"Company"), and BANK OF AMERICA, N.A. (as successor to NationsBank, N.A.), as
the Agent for the Lenders and respecting the Security Documents, as the Agent
for the Lenders and the Holders, to the extent of their interests (the "Agent").
Capitalized terms not otherwise defined herein shall have the meanings set forth
therefor in the Participation Agreement dated as of April 23, 1999 (as amended,
modified, supplemented, restated and/or replaced from time to time, the
"Participation Agreement") among VERITAS OPERATING CORPORATION (formerly known
as Veritas Software Corporation), as the Construction agent and the Lessee, the
various parties thereto from time to time, as the Guarantors, First Security
Bank, National Association, as the Owner Trustee under the VS Trust 1999-1, the
various banks and other lending institutions which are parties thereto from time
to time, as the Lenders, the various banks and other lending institutions which
are parties thereto from time to time, as the Holders, and the Agent.
The Company is either a Domestic Subsidiary or the Parent, and,
consequently, the Credit Parties are required by Section 8.3(s) of the
Participation Agreement to cause the Company to become a "Guarantor".
Accordingly, the Company hereby agrees as follows with the Agent, for
the benefit of the Financing Parties:
1. The Company hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Company will be deemed to be a party to the
Participation Agreement and a "Guarantor" for all purposes of the Participation
Agreement and all other Operative Agreements, and shall have all of the
obligations of a Guarantor under the Operative Agreements as if the Company had
executed the Participation Agreement. The Company hereby ratifies, as of the
date hereof, and agrees to be bound by, all of the terms, provisions and
conditions applicable to the Guarantors contained in the Operative Agreements.
Without limiting the generality of the foregoing terms of this paragraph 1, the
Company hereby (i) jointly and severally together with the other Guarantors,
guarantees to each Financing Party, as provided in Sections 6B.1 through 6B.8 of
the Participation Agreement, the prompt payment and performance of the Company
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise) strictly in accordance with the terms
thereof.
2. (a) The provisions of Section 6B of the Participation Agreement shall
remain in full force and effect notwithstanding (i) any release of any Credit
Party from any liability with respect to the Company Obligations; or (ii) any
release or subordination of any real or personal
<PAGE> 2
property now or hereafter held by the Agent as security for the performance of
the Company Obligations:
(b) The Company expressly waives any and all benefits which might
otherwise be available to it under California Civil Code Sections 2809, 2810,
2819, 2839, 2845, 2849, 2850, 2899 and 3433;
(c) The Company hereby waives any and all defenses, including but not
limited to the Company's defense of estoppel discussed in Union Bank vs. Gradsky
(1968) 265 Cal.App.2d 40, based upon a foreclosure against all or any part of
the real property security for the indebtedness evidenced by the Notes or Holder
Certificates pursuant to the power of sale contained in any Operative Agreement
as opposed to proceeding by way of judicial foreclosure. The Company waives all
rights and defenses arising out of an election of remedies by the Agent, even
though that election of remedies, such as a nonjudicial foreclosure with respect
to security for a guaranteed obligation, has destroyed the Company's rights of
subrogation and reimbursement by the operation of Section 580d of the California
Code of Civil Procedure or otherwise;
(d) The Company hereby waives all rights and defenses that the
Company may have because any of the Company Obligations are secured by real
property. This means, among other things: (1) The Agent may collect from the
Company without first foreclosing on any real or personal property collateral
pledged by any other Person, including without limitation, Lessee or any of its
Subsidiaries; (2) If the Agent forecloses on any real property collateral
pledged by any Credit Party: (A) the amount of debt may be reduced only by the
price for which the collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price, (B) the Agent may collect from any
Credit Party even if the Agent, by foreclosing on the real property collateral,
has destroyed any right the Company may have to collect from any other Credit
Party. This is an unconditional and irrevocable waiver of any rights and
defenses the Company may have because the Company Obligations are secured by
real property. These rights and defenses include, but are not limited to, any
rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California
Code of Civil Procedure.
(e) In the case of a power of sale foreclosure under any Operative
Agreement, the fair market value of the real property collateral shall be
conclusively deemed to be the amount of the successful bid at the foreclosure
sale. The Company waives any rights or benefits it may now or hereafter have to
a fair value hearing under Section 580a of the California Code of Civil
Procedure. The Agent shall have absolutely no obligation to make a bid at any
foreclosure sale, but rather may make no bid or bid any amount which the Agent,
in its sole discretion, deems appropriate.
(f) The Agent acknowledges that the provisions of this Section 6B.9
are intended to constitute a waiver of any rights and defenses the Company may
now or hereafter have as a "guarantor" to the extent any Operative Agreement
executed by the Company is construed to be in whole or in part a guaranty of the
Company Obligations.
<PAGE> 3
3. THE COMPANY HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES TO THE
PROVISIONS OF SECTION 12.7 OF THE PARTICIPATION AGREEMENT, INCLUDING WITHOUT
LIMITATION THOSE PROVISIONS REGARDING GOVERNING LAW, SUBMISSION TO JURISDICTION,
WAIVER OF JURY TRIAL AND VENUE. THIS PROVISION HAS BEEN SPECIFICALLY REVIEWED BY
THE COMPANY.
4. The chief executive office and principal place of business of the
Company are located at the location(s) set forth on Schedule 1 attached hereto.
5. All notices and other communications to be delivered to the Company
shall be directed to the Company at its address set forth in Section 12.2 of the
Participation Agreement or such other address as may be specified, in accordance
with the terms of the Participation Agreement, by the Company from time to time.
6. The Company hereby waives acceptance by the Financing Parties of the
guaranty by the Company under Sections 6B.1 through 6B.8 of the Participation
Agreement upon the execution of this Agreement by the Company.
7. This Agreement may be executed in multiple counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.
8. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its authorized officers, and the Agent, for the benefit of the
Financing Parties, has caused the same to be accepted by its authorized officer,
as of the day and year first above written.
OPENVISION INTERNATIONAL, LTD.
By: /s/ KEVIN OLSON
----------------------------------
Name: Kevin Olson
Title: Treasurer
Acknowledged and accepted:
BANK OF AMERICA, N.A.,
as the Agent
By: /s/ DOUGLAS T. MECKELNBURG
----------------------------------
Name: Douglas T. Meckelnburg
Title: Vice President
<PAGE> 5
Schedule 1
OpenVision International, Ltd.
1600 Plymouth Street
Mountain View, California 94043
<PAGE> 1
EXHIBIT 10.32
JOINDER AGREEMENT
(Pursuant to Section 5.10(a) of the Participation Agreement)
THIS JOINDER AGREEMENT (as amended, modified, supplemented, restated
and/or replaced from time to time, the "Agreement"), dated as of March 3, 2000,
is by and between SEAGATE SOFTWARE NETWORK & STORAGE MANAGEMENT GROUP, INC. a
Delaware corporation (the "Company"), and BANK OF AMERICA, N.A. (as successor to
NationsBank, N.A.), as the Agent for the Lenders and respecting the Security
Documents, as the Agent for the Lenders and the Holders, to the extent of their
interests (the "Agent"). Capitalized terms not otherwise defined herein shall
have the meanings set forth therefor in the Participation Agreement dated as of
April 23, 1999 (as amended, modified, supplemented, restated and/or replaced
from time to time, the "Participation Agreement") among VERITAS OPERATING
CORPORATION (formerly known as Veritas Software Corporation), as the
Construction agent and the Lessee, the various parties thereto from time to
time, as the Guarantors, First Security Bank, National Association, as the Owner
Trustee under the VS Trust 1999-1, the various banks and other lending
institutions which are parties thereto from time to time, as the Lenders, the
various banks and other lending institutions which are parties thereto from time
to time, as the Holders, and the Agent.
The Company is either a Domestic Subsidiary or the Parent, and,
consequently, the Credit Parties are required by Section 8.3(s) of the
Participation Agreement to cause the Company to become a "Guarantor".
Accordingly, the Company hereby agrees as follows with the Agent, for
the benefit of the Financing Parties:
1. The Company hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Company will be deemed to be a party to the
Participation Agreement and a "Guarantor" for all purposes of the Participation
Agreement and all other Operative Agreements, and shall have all of the
obligations of a Guarantor under the Operative Agreements as if the Company had
executed the Participation Agreement. The Company hereby ratifies, as of the
date hereof, and agrees to be bound by, all of the terms, provisions and
conditions applicable to the Guarantors contained in the Operative Agreements.
Without limiting the generality of the foregoing terms of this paragraph 1, the
Company hereby (i) jointly and severally together with the other Guarantors,
guarantees to each Financing Party, as provided in Sections 6B.1 through 6B.8 of
the Participation Agreement, the prompt payment and performance of the Company
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise) strictly in accordance with the terms
thereof.
2. (a) The provisions of Section 6B of the Participation Agreement shall
remain in full force and effect notwithstanding (i) any release of any Credit
Party from any liability with respect to the Company Obligations; or (ii) any
release or subordination of any real or personal
<PAGE> 2
property now or hereafter held by the Agent as security for the performance of
the Company Obligations:
(b) The Company expressly waives any and all benefits which might
otherwise be available to it under California Civil Code Sections 2809, 2810,
2819, 2839, 2845, 2849, 2850, 2899 and 3433;
(c) The Company hereby waives any and all defenses, including but not
limited to the Company's defense of estoppel discussed in Union Bank vs. Gradsky
(1968) 265 Cal.App.2d 40, based upon a foreclosure against all or any part of
the real property security for the indebtedness evidenced by the Notes or Holder
Certificates pursuant to the power of sale contained in any Operative Agreement
as opposed to proceeding by way of judicial foreclosure. The Company waives all
rights and defenses arising out of an election of remedies by the Agent, even
though that election of remedies, such as a nonjudicial foreclosure with respect
to security for a guaranteed obligation, has destroyed the Company's rights of
subrogation and reimbursement by the operation of Section 580d of the California
Code of Civil Procedure or otherwise;
(d) The Company hereby waives all rights and defenses that the
Company may have because any of the Company Obligations are secured by real
property. This means, among other things: (1) The Agent may collect from the
Company without first foreclosing on any real or personal property collateral
pledged by any other Person, including without limitation, Lessee or any of its
Subsidiaries; (2) If the Agent forecloses on any real property collateral
pledged by any Credit Party: (A) the amount of debt may be reduced only by the
price for which the collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price, (B) the Agent may collect from any
Credit Party even if the Agent, by foreclosing on the real property collateral,
has destroyed any right the Company may have to collect from any other Credit
Party. This is an unconditional and irrevocable waiver of any rights and
defenses the Company may have because the Company Obligations are secured by
real property. These rights and defenses include, but are not limited to, any
rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California
Code of Civil Procedure.
(e) In the case of a power of sale foreclosure under any Operative
Agreement, the fair market value of the real property collateral shall be
conclusively deemed to be the amount of the successful bid at the foreclosure
sale. The Company waives any rights or benefits it may now or hereafter have to
a fair value hearing under Section 580a of the California Code of Civil
Procedure. The Agent shall have absolutely no obligation to make a bid at any
foreclosure sale, but rather may make no bid or bid any amount which the Agent,
in its sole discretion, deems appropriate.
(f) The Agent acknowledges that the provisions of this Section 6B.9
are intended to constitute a waiver of any rights and defenses the Company may
now or hereafter have as a "guarantor" to the extent any Operative Agreement
executed by the Company is construed to be in whole or in part a guaranty of the
Company Obligations.
<PAGE> 3
3. THE COMPANY HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES TO THE
PROVISIONS OF SECTION 12.7 OF THE PARTICIPATION AGREEMENT, INCLUDING WITHOUT
LIMITATION THOSE PROVISIONS REGARDING GOVERNING LAW, SUBMISSION TO JURISDICTION,
WAIVER OF JURY TRIAL AND VENUE. THIS PROVISION HAS BEEN SPECIFICALLY REVIEWED BY
THE COMPANY.
4. The chief executive office and principal place of business of the
Company are located at the location(s) set forth on Schedule 1 attached hereto.
5. All notices and other communications to be delivered to the Company
shall be directed to the Company at its address set forth in Section 12.2 of the
Participation Agreement or such other address as may be specified, in accordance
with the terms of the Participation Agreement, by the Company from time to time.
6. The Company hereby waives acceptance by the Financing Parties of the
guaranty by the Company under Sections 6B.1 through 6B.8 of the Participation
Agreement upon the execution of this Agreement by the Company.
7. This Agreement may be executed in multiple counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.
8. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its authorized officers, and the Agent, for the benefit of the
Financing Parties, has caused the same to be accepted by its authorized officer,
as of the day and year first above written.
SEAGATE SOFTWARE NETWORK &
STORAGE MANAGEMENT GROUP, INC.
By: /s/ KEVIN OLSON
----------------------------------
Name: Kevin Olson
Title: Treasurer
Acknowledged and accepted:
BANK OF AMERICA, N.A.,
as the Agent
By: /s/ DOUGLAS T. MECKELNBURG
----------------------------------
Name: Douglas T. Meckelnburg
Title: Vice President
<PAGE> 5
Schedule 1
Seagate Software Network & Storage Management Group, Inc.
1600 Plymouth Street
Mountain View, California 94043
<PAGE> 1
EXHIBIT 10.33
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
Dated as of March 9, 2000
among
VERITAS OPERATING CORPORATION
as the Construction Agent and as the Lessee,
THE VARIOUS PARTIES HERETO FROM TIME TO TIME,
as the Guarantors,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, except as expressly
stated herein, but solely as the Owner Trustee
under the VS Trust 2000-1,
THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE PARTIES
HERETO FROM TIME TO TIME, as the Holders,
THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE PARTIES
HERETO FROM TIME TO TIME, as the Lenders,
and
BANK OF AMERICA, N.A.,
as the Agent for the Lenders
and respecting the Security Documents,
as the Agent for the Lenders and the Holders,
to the extent of their interests
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. THE LOANS........................................................................1
SECTION 2. HOLDER ADVANCES..................................................................2
SECTION 3. SUMMARY OF TRANSACTIONS..........................................................2
3.1. Operative Agreements............................................................2
3.2. Property Purchase...............................................................2
3.3. Construction of Improvements; Commencement of Basic Rent........................3
3.4. Ratable Interests of the Lenders................................................3
SECTION 4. THE CLOSINGS.....................................................................3
4.1. Initial Closing Date............................................................3
4.2. Initial Closing Date; Property Closing Dates; Acquisition Advances;
Construction Advances...........................................................3
SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT; REPORTING REQUIREMENTS ON COMPLETION
DATE; THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS....................4
5.1. General.........................................................................4
5.2. Procedures for Funding..........................................................4
5.3. Conditions Precedent for the Lessor, the Agent, the Lenders and the Holders
Relating to the Initial Closing Date and the Advance of Funds for the
Acquisition of a Property.......................................................7
5.4. Conditions Precedent for the Lessor, the Agent, the Lenders and the Holders
Relating to the Advance of Funds after the Acquisition Advance.................11
5.5. Additional Reporting and Delivery Requirements on Completion Date and on
Construction Period Termination Date...........................................13
5.6. The Construction Agent Delivery of Construction Budget Modifications...........14
5.7. Restrictions on Liens..........................................................14
5.8. Payments.......................................................................14
5.9. Unilateral Right to Increase the Holder Commitments and the
Lender Commitments.............................................................14
5.10. Joinder Agreement Requirements................................................15
5.11. Property Cost as of the Rent Commencement Date................................16
SECTION 6. REPRESENTATIONS AND WARRANTIES..................................................16
6.1. Representations and Warranties of the Borrower.................................16
6.2. Representations and Warranties of the Credit Parties...........................18
SECTION 6B. GUARANTY.......................................................................24
6B.1. Guaranty of Payment and Performance...........................................24
6B.2. Obligations Unconditional.....................................................24
6B.3. Modifications.................................................................25
6B.4. Waiver of Rights..............................................................25
6B.5. Reinstatement.................................................................26
6B.6. Remedies......................................................................26
6B.7. Limitation of Guaranty........................................................26
6B.8. Payment of Amounts to the Agent...............................................27
SECTION 7. PAYMENT OF CERTAIN EXPENSES.....................................................28
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
7.1. Transaction Expenses...........................................................28
7.2. Brokers' Fees..................................................................30
7.3. Certain Fees and Expenses......................................................30
7.4. Commitment Fee.................................................................30
SECTION 8. OTHER COVENANTS AND AGREEMENTS..................................................31
8.1. Cooperation with the Construction Agent or the Lessee..........................31
8.2. Covenants of the Owner Trustee and the Holders.................................31
8.3. Credit Party Covenants, Consent and Acknowledgment.............................33
8.3A. Affirmative Covenants.........................................................37
8.3B. Negative Covenants............................................................42
8.4. Sharing of Certain Payments....................................................46
8.5. Grant of Easements, etc........................................................47
8.6. Appointment by the Agent, the Lenders, the Holders and the Owner Trustee.......47
8.7. Collection and Allocation of Payments and Other Amounts........................48
8.8. Release of Properties, etc.....................................................51
SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT............................................51
9.1. The Construction Agent's and the Lessee's Credit Agreement Rights..............51
9.2. The Construction Agent's and the Lessee's Trust Agreement Rights...............52
SECTION 10. TRANSFER OF INTEREST...........................................................53
10.1. Restrictions on Transfer......................................................53
10.2. Effect of Transfer............................................................53
SECTION 11. INDEMNIFICATION................................................................54
11.1. General Indemnity.............................................................54
11.2. General Tax Indemnity.........................................................57
11.3. Increased Costs, Illegality, etc..............................................61
11.4. Funding/Contribution Indemnity................................................63
11.5. EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT LIABILITY, ETC.......64
11.6. Additional Provisions Regarding Environmental Indemnification.................64
11.7. Additional Provisions Regarding Indemnification...............................65
11.8. Indemnifications Provided by the Owner Trustee in Favor of the Other
Indemnified Persons...........................................................65
SECTION 12. MISCELLANEOUS..................................................................66
12.1. Survival of Agreements........................................................66
12.2. Notices.......................................................................66
12.3. Counterparts..................................................................68
12.4. Terminations, Amendments, Waivers, Etc.; Unanimous Vote Matters...............68
12.5. Headings, etc.................................................................69
12.6. Parties in Interest...........................................................70
12.7. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; VENUE........70
12.8. Severability..................................................................70
12.9. Liability Limited.............................................................71
12.10. Rights of the Credit Parties.................................................72
12.11. Further Assurances...........................................................72
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
12.12. Calculations under Operative Agreements......................................73
12.13. Confidentiality..............................................................73
12.14. Financial Reporting/Tax Characterization.....................................73
12.15. Set-off......................................................................73
</TABLE>
<PAGE> 5
SCHEDULES
Schedule 8.3A(a)(iii) - Form of Officer's Compliance Certificate
Schedule 8.3B(a)(ii) - Schedule of Indebtedness
Schedule 8.3B(e) - Schedule of Insignificant Lines of Business
Schedule 8.3B(f) - Schedule of Investments
EXHIBITS
A - Form of Requisition - Sections 4.2, 5.2, 5.3 and 5.4
B - Form of Outside Counsel Opinion for the Lessee - Section 5.3(j)
C - Form of Officer's Certificate - Section 5.3(z)
D- Form of Secretary's Certificate - Section 5.3(aa)
E - Form of Officer's Certificate - Section 5.3(bb)
F - Form of Secretary's Certificate - Section 5.3(cc)
G - Form of Outside Counsel Opinion for the Owner Trustee - Section 5.3(dd)
H - Form of Outside Counsel Opinion for the Lessee - Section 5.3(ee)
I - Form of Officer's Certificate - Section 5.5
J - Description of Material Litigation - Section 6.2(d)
Appendix A - Rules of Usage and Definitions
<PAGE> 6
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of March 9, 2000 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Agreement") is by and among VERITAS OPERATING CORPORATION (formerly known
as Veritas Software Corporation), a Delaware corporation (the "Lessee" or the
"Construction Agent"); the various parties hereto from time to time as
guarantors (subject to the definition of Guarantors in Appendix A hereto,
individually, a "Guarantor" and collectively, the "Guarantors"); FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not individually (in
its individual capacity, the "Trust Company"), except as expressly stated
herein, but solely as the Owner Trustee under the VS Trust 2000-1 (the "Owner
Trustee", the "Borrower" or the "Lessor"); the various banks and other lending
institutions which are parties hereto from time to time as holders of
certificates issued with respect to the VS Trust 2000-1 (subject to the
definition of Holders in Appendix A hereto, individually, a "Holder" and
collectively, the "Holders"); the various banks and other lending institutions
which are parties hereto from time to time as lenders (subject to the definition
of Lenders in Appendix A hereto, individually, a "Lender" and collectively, the
"Lenders"); and BANK OF AMERICA, N.A., a national banking association, as the
agent for the Lenders and respecting the Security Documents, as the agent for
the Lenders and the Holders, to the extent of their interests (in such capacity,
the "Agent"). Capitalized terms used but not otherwise defined in this Agreement
shall have the meanings set forth in Appendix A hereto.
In consideration of the mutual agreements herein contained and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto hereby agree as follows:
SECTION 1. THE LOANS.
Subject to the terms and conditions of this Agreement and the other
Operative Agreements and in reliance on the representations and warranties of
each of the parties hereto contained herein or made pursuant hereto, the Lenders
have agreed to make Loans to the Lessor from time to time in an aggregate
principal amount of up to the aggregate amount of the Commitments of the Lenders
in order for the Lessor to acquire the Properties and certain Improvements, to
develop and construct certain Improvements in accordance with the Construction
Agency Agreement and the terms and provisions hereof and for the other purposes
described herein, and in consideration of the receipt of proceeds of the Loans,
the Lessor will issue the Notes. The Loans shall be made and the Notes shall be
issued pursuant to the Credit Agreement. Pursuant to Section 5 of this Agreement
and Section 2 of the Credit Agreement, the Loans will be made to the Lessor from
time to time at the request of the Construction Agent in consideration for the
Construction Agent agreeing for the benefit of the Lessor, pursuant to the
Construction Agency Agreement, to acquire the Properties, to acquire the
Equipment, to construct certain Improvements and to cause the Lessee to lease
the Properties, each in accordance with the Construction Agency Agreement and
the other Operative Agreements. The
<PAGE> 7
Loans and the obligations of the Lessor under the Credit Agreement shall be
secured by the Collateral.
SECTION 2. HOLDER ADVANCES.
Subject to the terms and conditions of this Agreement and the other
Operative Agreements and in reliance on the representations and warranties of
each of the parties hereto contained herein or made pursuant hereto, on each
date Advances are requested to be made in accordance with Section 5 hereof, each
Holder shall make a Holder Advance on a pro rata basis to the Lessor with
respect to the VS Trust 2000-1 based on its Holder Commitment in an amount in
immediately available funds such that the aggregate of all Holder Advances at
all times shall be no less than three percent (3%) of the amount of all
outstanding Advances; provided, that no Holder shall be obligated for any Holder
Advance in excess of its pro rata share of the Available Holder Commitment. The
aggregate amount of Holder Advances shall be up to the aggregate amount of the
Holder Commitments. No prepayment or any other payment with respect to Advances
shall be permitted such that the aggregate Holder Advances with respect to such
outstanding Advance is less than three percent (3%) of all outstanding Advances,
except in connection with termination or expiration of the Term or in connection
with the exercise of remedies relating to the occurrence of a Lease Event of
Default. The representations, warranties, covenants and agreements of the
Holders herein and in the other Operative Agreements are several, and not joint
or joint and several. The Holder Advances and the obligations of the Lessor
under the Trust Agreement shall be secured by the Collateral.
SECTION 3. SUMMARY OF TRANSACTIONS.
3.1. OPERATIVE AGREEMENTS.
On the date hereof, each of the respective parties hereto and thereto
shall execute and deliver this Agreement, the Lease, the Construction Agency
Agreement, the Credit Agreement, the Notes, the Trust Agreement, the
Certificates, the Security Agreement, each applicable Mortgage Instrument and
such other documents, instruments, certificates and opinions of counsel as
agreed to by the parties hereto.
3.2. PROPERTY PURCHASE.
On each Property Closing Date and subject to the terms and conditions of
this Agreement (a) the Holders will each make a Holder Advance in accordance
with Sections 2 and 5 of this Agreement and the terms and provisions of the
Trust Agreement, (b) the Lenders will each make Loans in accordance with
Sections 1 and 5 of this Agreement and the terms and provisions of the Credit
Agreement, (c) the Lessor will purchase and acquire good and marketable title to
the applicable Property, identified by the Construction Agent, in each case
pursuant to a Deed or Bill of Sale, as the case may be, and grant the Agent a
lien on such Property by execution of the required Security Documents, (d) the
Agent, the Lessee and the Lessor shall execute and deliver
2
<PAGE> 8
a Lease Supplement relating to such Property and (e) the Basic Term shall
commence with respect to such Property.
3.3. CONSTRUCTION OF IMPROVEMENTS; COMMENCEMENT OF BASIC RENT.
Construction Advances will be made with respect to particular
Improvements to be constructed and with respect to ongoing Work regarding the
Equipment and construction of particular Improvements, in each case, pursuant to
the terms and conditions of this Agreement and the Construction Agency
Agreement. The Construction Agent will act as a construction agent on behalf of
the Lessor respecting the Work regarding the Equipment, the construction of such
Improvements and the expenditures of the Construction Advances related to the
foregoing. The Construction Agent shall promptly notify the Lessor upon
Completion of the Improvements and the Lessee shall commence to pay Basic Rent
as of the Rent Commencement Date.
3.4. RATABLE INTERESTS OF THE LENDERS.
Each Lender agrees at all times (a) to hold the same ratable portion of
the aggregate Lender Commitment for Tranche A Loans and the aggregate Lender
Commitment for Tranche B Loans and (b) to make advances consistent with such
committed amounts referenced in Section 3.4(a) in accordance with the
requirements of the Operative Agreements.
SECTION 4. THE CLOSINGS.
4.1. INITIAL CLOSING DATE.
All documents and instruments required to be delivered on the Initial
Closing Date shall be delivered at the offices of Moore & Van Allen, PLLC, Bank
of America Corporate Center, 100 North Tryon Street, 47th Floor, Charlotte,
North Carolina, or at such other location as may be determined by the Lessor,
the Agent and the Lessee.
4.2. INITIAL CLOSING DATE; PROPERTY CLOSING DATES; ACQUISITION
ADVANCES; CONSTRUCTION ADVANCES.
The Construction Agent shall deliver to the Agent a requisition (a
"Requisition"), in the form attached hereto as Exhibit A or in such other form
as is satisfactory to the Agent, in its reasonable discretion, in connection
with (a) the Transaction Expenses and (b) each Acquisition Advance pursuant to
Section 5.3 and (c) each Construction Advance pursuant to Section 5.4. No
Requisition shall be required for the Lenders and the Holders to make Advances
pursuant to or in connection with Sections 7.1(a), 7.1(b) and 11.8.
3
<PAGE> 9
SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT;
REPORTING REQUIREMENTS ON COMPLETION DATE;
THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS.
5.1. GENERAL.
(a) To the extent funds have been advanced to the Lessor as Loans
by the Lenders and to the Lessor as Holder Advances by the Holders, the
Lessor will use such funds from time to time in accordance with the
terms and conditions of this Agreement and the other Operative
Agreements (i) according to the directions of the Construction Agent to
acquire the Properties in accordance with the terms of this Agreement,
the Construction Agency Agreement and the other Operative Agreements,
(ii) to make Advances to the Construction Agent to permit the
acquisition, testing, engineering, installation, development,
construction, modification, design, and renovation, as applicable, of
the Properties (or components thereof) in accordance with the terms of
the Construction Agency Agreement and the other Operative Agreements,
and (iii) to pay Transaction Expenses and other disbursements payable by
the Lessor under Section 11.8.
(b) In lieu of the payment of interest on the Loans and Holder
Yield on the Holder Advances on any Scheduled Interest Payment Date with
respect to any Property during the period prior to the Rent Commencement
Date with respect to such Property and subject to Section 5.9, (i) each
Lender's Loan shall automatically be increased by the amount of interest
accrued and unpaid on such Loan for such period (except to the extent
that at any time such increase would cause such Lender's Loan to exceed
such Lender's Available Commitment, in which case the Lessee shall pay
such excess amount to such Lender in immediately available funds on the
date such Lender's Available Commitment was exceeded), and (ii) each
Holder's Holder Advance shall automatically be increased by the amount
of Holder Yield accrued and unpaid on such Holder Advance for such
period (except to the extent that at any time such increase would cause
the Holder Advance of such Holder to exceed such Holder's Available
Holder Commitment, in which case the Lessee shall pay such excess amount
to such Holder in immediately available funds on the date the Available
Holder Commitment of such Holder was exceeded). Such increases in a
Lender's Loan and a Holder's Holder Advance shall occur without any
disbursement of funds by any Person.
5.2. PROCEDURES FOR FUNDING.
(a) The Construction Agent shall designate the date for Advances
hereunder in accordance with the terms and provisions hereof; provided,
however, it is understood and agreed that no more than two (2) Advances
(excluding any conversion and/or continuation of any Loan or Holder
Advance) may be requested during any calendar month and no such
designation from the Construction Agent is required for funding of
Transaction Expenses and other disbursements payable by the Lessor
pursuant to or in connection with Section 11.8; provided, further, the
Construction Agent shall deliver to the Agent on the first Business Day
of each month following an Acquisition Advance
4
<PAGE> 10
with respect to a Property until the Completion Date with respect to
such Property, a Requisition for any Construction Advance requested with
respect to such Property for the immediately preceding month. Not less
than (i) three (3) Business Days prior to the date that the first
Advance is requested hereunder and (ii) three (3) Business Days prior to
the date on which any subsequent Acquisition Advance (or on the first
Business Day of the month, in the case of a Construction Advance) is to
be made, the Construction Agent shall deliver to the Agent, (A) with
respect to the date that the first Advance is requested hereunder and
each subsequent Acquisition Advance, a Requisition as described in
Section 4.2 hereof (including without limitation a legal description of
the Land, if any, a schedule of the Improvements, if any, and a schedule
of the Equipment, if any, acquired or to be acquired on such date, and a
schedule of the Work, if any, to be performed, each of the foregoing in
a form reasonably acceptable to the Agent) and (B) with respect to each
Construction Advance, a Requisition identifying (among other things) the
Property to which such Construction Advance relates.
(b) Each Requisition shall: (i) be irrevocable, (ii) request
funds in an amount that is not in excess of the total aggregate of the
Available Commitments plus the Available Holder Commitments at such
time, and (iii) request that the Holders make Holder Advances and that
the Lenders make Loans to the Lessor for the payment of Transaction
Expenses, Property Acquisition Costs (in the case of an Acquisition
Advance) or other Property Costs (in the case of a Construction Advance)
that have previously been incurred or are to be incurred on the date of
such Advance to the extent such were not subject to a prior Requisition,
in each case as specified in the Requisition.
(c) Subject to the satisfaction of the conditions precedent set
forth in Sections 5.3 or 5.4, as applicable, on the Property Closing
Date or the date on which the Construction Advance is to be made, as
applicable, (i) the Lenders shall make Loans based on their respective
Lender Commitments to the Lessor in an aggregate amount equal to
ninety-seven percent (97%) of the Requested Funds specified in any
Requisition plus any additional amount of Transaction Expenses as
referenced in Sections 7.1(a) and 7.1(b) and any additional amount
respecting any indemnity payment as referenced in Section 11.8, unless
any such funding of Transaction Expenses or any indemnity payment is
declined in writing by each Lender and each Holder (such decision to be
in the sole discretion of each Lender and each Holder) ratably between
the Tranche A Lenders and the Tranche B Lenders with the Tranche A
Lenders funding eighty-five and one-half of one percent (85.5%) of the
Requested Funds and the Tranche B Lenders funding eleven and one-half of
one percent (11.5%) of the Requested Funds), up to an aggregate
principal amount equal to the aggregate of the Available Commitments,
(ii) the Holders shall make Holder Advances based on their respective
Holder Commitments in an aggregate amount equal to three percent (3%) of
the balance of the Requested Funds specified in such Requisition plus
any additional amount of Transaction Expenses as referenced in Sections
7.1(a) and 7.1(b) and any additional amount respecting any indemnity
payment as referenced in Section 11.8, unless any such funding of
Transaction Expenses or any indemnity payment is declined in writing by
each Lender and each Holder (such decision to be in the sole discretion
of each Lender and each Holder), up to
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the aggregate advanced amount equal to the aggregate of the Available
Holder Commitments; and (iii) the total amount of such Loans and Holder
Advances made on such date shall (x) be used by the Lessor to pay
Property Costs including Transaction Expenses within three (3) Business
Days of the receipt by the Lessor of such Advance or (y) be advanced by
the Lessor on the date of such Advance to the Construction Agent or the
Lessee to pay Property Costs, as applicable. Notwithstanding that the
Operative Agreements state that Advances shall be directed to the
Lessor, each Advance shall in fact be directed to the Construction Agent
(for the benefit of the Lessor) and applied by the Construction Agent
(for the benefit of the Lessor) pursuant to the requirements imposed on
the Lessor under the Operative Agreements.
(d) With respect to an Advance obtained by the Lessor to pay for
Property Costs and/or Transaction Expenses or other costs payable under
Section 11.8 hereof and not expended by the Lessor for such purpose on
the date of such Advance, such amounts shall be held by the Lessor (or
the Agent on behalf of the Lessor) until the applicable closing date or
payment date or, if such closing date or payment date does not occur
within three (3) Business Days of the date of the Lessor's receipt of
such Advance, shall be applied regarding the applicable Advance to repay
the Lenders and the Holders and, subject to the terms hereof, and of the
Credit Agreement and the Trust Agreement, shall remain available for
future Advances. Any such amounts held by the Lessor (or the Agent on
behalf of the Lessor) shall be subject to the lien of the Security
Agreement.
(e) All Operative Agreements which are to be delivered to the
Lessor, the Agent, the Lenders or the Holders shall be delivered to the
Agent, on behalf of the Lessor, the Agent, the Lenders or the Holders,
and such items (except for Notes, Certificates, Bills of Sale, the
chattel paper originals, with respect to which in each case there shall
be only one original) shall be delivered with originals sufficient for
the Lessor, the Agent, each Lender and each Holder. All other items
which are to be delivered to the Lessor, the Agent, the Lenders or the
Holders shall be delivered to the Agent, on behalf of the Lessor, the
Agent, the Lenders or the Holders, and such other items shall be held by
the Agent. To the extent any such other items are requested in writing
from time to time by the Lessor, any Lender or any Holder, the Agent
shall provide a copy of such item to the party requesting it.
(f) Notwithstanding the completion of any closing under this
Agreement pursuant to Sections 5.3 or 5.4, each condition precedent in
connection with any such closing may be subsequently enforced by the
Agent (unless such has been expressly waived in writing by the Agent).
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5.3. CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND
THE HOLDERS RELATING TO THE INITIAL CLOSING DATE AND THE ADVANCE
OF FUNDS FOR THE ACQUISITION OF A PROPERTY.
The obligations (i) on the Initial Closing Date of the Lessor, the
Agent, the Lenders and the Holders to enter into the transactions contemplated
by this Agreement, including without limitation the obligation to execute and
deliver the applicable Operative Agreements to which each is a party on the
Initial Closing Date, (ii) on the Initial Closing Date of the Holders to make
Holder Advances, and of the Lenders to make Loans in order to pay Transaction
Expenses and (iii) on a Property Closing Date for the purpose of providing funds
to the Lessor necessary to pay the Transaction Expenses and to acquire a
Property (an "Acquisition Advance"), in each case (with regard to the foregoing
Sections 5.3(i), (ii) and (iii)) are subject to the satisfaction or waiver of
the following conditions precedent on or prior to the Initial Closing Date or
the applicable Property Closing Date, as the case may be (to the extent such
conditions precedent require the delivery of any agreement, certificate,
instrument, memorandum, legal or other opinion, appraisal, commitment, title
insurance commitment, lien report or any other document of any kind or type,
such shall be in form and substance satisfactory to the Agent, in its reasonable
discretion; notwithstanding the foregoing, the obligations of each party shall
not be subject to any conditions contained in this Section 5.3 which are
required to be performed by such party):
(a) the correctness of the representations and warranties of the
parties to this Agreement contained herein, in each of the other
Operative Agreements and each certificate delivered pursuant to any
Operative Agreement on each such date;
(b) the performance by the parties to this Agreement of the
material obligations of their respective agreements contained herein and
in the other Operative Agreements to be performed by them on or prior to
each such date;
(c) the Agent shall have received a fully executed counterpart
copy of the Requisition, appropriately completed;
(d) title to each such Property shall conform to the
representations and warranties set forth in Section 6.2(l) hereof;
(e) the Construction Agent shall have delivered to the Agent a
good standing certificate for the Construction Agent in the state where
each such Property is located, the Deed with respect to the Land and
existing Improvements (if any), and a copy of the Bill of Sale with
respect to the Equipment (if any), respecting such of the foregoing as
are being acquired on each such date with the proceeds of the Loans and
Holder Advances or which have been previously acquired with the proceeds
of the Loans and Holder Advances and such Land, existing Improvements
(if any) and Equipment (if any) shall be located in an Approved State;
(f) there shall not have occurred and be continuing any Default
or Event of Default under any of the Operative Agreements (other than a
Default that would be cured
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upon application of the proceeds of such Advance, provided that such
proceeds are so applied or provision reasonably satisfactory to the
Agent shall have been made such that the proceeds will be so applied)
and no Default or Event of Default under any of the Operative Agreements
will have occurred after giving effect to the Advance requested by each
such Requisition;
(g) the Construction Agent shall have delivered to the Agent
title insurance commitments to issue policies respecting each such
Property, with such endorsements as the Agent deems necessary, in favor
of the Lessor and the Agent from a title insurance company acceptable to
the Agent, but only with such title exceptions thereto as are acceptable
to the Agent;
(h) the Construction Agent shall have delivered to the Agent an
environmental site assessment respecting each such Property prepared by
an independent recognized professional reasonably acceptable to the
Agent and evidencing no pre-existing environmental condition with
respect to which there is more than a remote risk of loss;
(i) the Construction Agent shall have delivered to the Agent a
Survey respecting the Property;
(j) unless such an opinion has previously been delivered with
respect to a particular state, the Construction Agent shall have caused
to be delivered to the Agent a legal opinion in the form attached hereto
as Exhibit B or in such other form as is acceptable to the Agent with
respect to local law real property issues respecting the state in which
each such Property is located addressed to the Lessor, the Agent, the
Lenders and the Holders, from counsel located in the state where each
such Property is located, prepared by counsel acceptable to the Agent
and a separate flood hazard certificate respecting each such Property
prepared by an independent recognized professional acceptable to the
Agent;
(k) the Agent shall be satisfied that the acquisition, ground
leasing and/or holding of each such Property and the execution of the
Mortgage Instrument and the other Security Documents will not materially
and adversely affect the rights of the Lessor, the Agent, the Holders or
the Lenders under or with respect to the Operative Agreements;
(l) the Construction Agent shall have delivered to the Agent
invoices for, or other reasonably satisfactory evidence of, the various
Transaction Expenses;
(m) the Construction Agent shall have caused to be delivered to
the Agent a Mortgage Instrument (in such form as is reasonably
acceptable to the Agent, with revisions as necessary to conform to
applicable state law), Lessor Financing Statements and Lender Financing
Statements respecting each such Property, all fully executed and in
recordable form;
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(n) the Lessee shall have delivered to the Agent with respect to
each such Property the Lease (in form suitable for recording) and a
Lease Supplement;
(o) with respect to each Acquisition Advance, the sum of the
Available Commitment plus the Available Holder Commitment (after
deducting the Unfunded Amount, if any, and after giving effect to the
Acquisition Advance) will be sufficient to pay all amounts payable
therefrom;
(p) [RESERVED];
(q) [RESERVED];
(r) the Construction Agent shall have delivered to the Agent a
preliminary Construction Budget for each such Property, if applicable;
(s) the Construction Agent shall have provided evidence to the
Agent of insurance with respect to each such Property as provided in the
Lease;
(t) [RESERVED];
(u) (i) the Agent shall cause Uniform Commercial Code lien
searches, tax lien searches and judgment lien searches regarding the
Lessee to be conducted (and copies thereof to be delivered to the Agent)
in such jurisdictions as reasonably determined by the Agent by a
nationally recognized search company acceptable to the Agent and (ii)
the Construction Agent shall cause the liens referenced in such lien
searches which are objectionable to the Agent to be either removed or
otherwise handled in a manner reasonably satisfactory to the Agent;
(v) all taxes, fees and other charges in connection with the
execution, delivery, recording, filing and registration of the Operative
Agreements and/or documents related thereto shall have been paid or
provisions for such payment shall have been made to the satisfaction of
the Agent;
(w) in the opinion of the Agent and its respective counsel, the
transactions contemplated by the Operative Agreements do not and will
not subject the Lessor, the Lenders, the Agent or the Holders to any
adverse regulatory prohibitions, constraints, penalties or fines;
(x) each of the Operative Agreements to be entered into on such
date shall have been duly authorized, executed and delivered by the
parties thereto, and shall be in full force and effect, and the Agent
shall have received a fully executed copy of each of the Operative
Agreements;
(y) since the date of the most recent audited financial
statements (as delivered pursuant to the requirements of the Lessee
Credit Agreement) of the Lessee, there shall
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<PAGE> 15
not have occurred any event, condition or state of facts which shall
have or could reasonably be expected to have a Material Adverse Effect,
other than as specifically contemplated by the Operative Agreements;
(z) as of the Initial Closing Date only, the Agent shall have
received an Officer's Certificate, dated as of the Initial Closing Date,
of the Lessee in the form attached hereto as Exhibit C or in such other
form as is acceptable to the Agent stating that (i) each and every
representation and warranty of each Credit Party contained in the
Operative Agreements to which it is a party is true and correct on and
as of the Initial Closing Date; (ii) no Default or Event of Default has
occurred and is continuing under any Operative Agreement; (iii) each
Operative Agreement to which any Credit Party is a party is in full
force and effect with respect to it; and (iv) each Credit Party has duly
performed and complied with all covenants, agreements and conditions
contained herein or in any Operative Agreement required to be performed
or complied with by it on or prior to the Initial Closing Date;
(aa) as of the Initial Closing Date only, the Agent shall have
received (i) a certificate of the Secretary or an Assistant Secretary of
each Credit Party, dated as of the Initial Closing Date, in the form
attached hereto as Exhibit D or in such other form as is acceptable to
the Agent attaching and certifying as to (1) the resolutions of its
Board of Directors duly authorizing the execution, delivery and
performance by such Credit Party of each of the Operative Agreements to
which it is or will be a party, (2) its certificate of incorporation
certified as of a recent date by the Secretary of State of its state of
incorporation and its by-laws and (3) the incumbency and signature of
persons authorized to execute and deliver on its behalf the Operative
Agreements to which it is or will be a party and (ii) a good standing
certificate (or local equivalent) from the appropriate office of the
respective states where such Credit Party is incorporated and where the
principal place of business of such Credit Party is located as to its
good standing in each such state;
(bb) as of the Initial Closing Date only, the Agent shall have
received an Officer's Certificate of the Lessor dated as of the Initial
Closing Date in the form attached hereto as Exhibit E or in such other
form as is acceptable to the Agent, stating that (i) each and every
representation and warranty of the Lessor contained in the Operative
Agreements to which it is a party is true and correct on and as of the
Initial Closing Date, (ii) each Operative Agreement to which the Lessor
is a party is in full force and effect with respect to it and (iii) the
Lessor has duly performed and complied with all covenants, agreements
and conditions contained herein or in any Operative Agreement required
to be performed or complied with by it on or prior to the Initial
Closing Date;
(cc) as of the Initial Closing Date only, the Agent shall have
received (i) a certificate of the Secretary, an Assistant Secretary,
Trust Officer or Vice President of the Trust Company in the form
attached hereto as Exhibit F or in such other form as is acceptable to
the Agent, attaching and certifying as to (A) the signing resolutions
duly authorizing the execution, delivery and performance by the Lessor
of each of the Operative Agreements to which it is or will be a party,
(B) its articles of association or
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other equivalent charter documents and its by-laws, as the case may be,
certified as of a recent date by an appropriate officer of the Trust
Company and (C) the incumbency and signature of persons authorized to
execute and deliver on its behalf the Operative Agreements to which it
is a party and (ii) a good standing certificate from the Office of the
Comptroller of the Currency;
(dd) as of the Initial Closing Date only, counsel for the Lessor
acceptable to the Agent shall have issued to the Lessee, the Holders,
the Lenders and the Agent its opinion in the form attached hereto as
Exhibit G or in such other form as is reasonably acceptable to the
Agent;
(ee) as of the Initial Closing Date only, the Construction Agent
shall have caused to be delivered to the Agent a legal opinion in the
form attached hereto as Exhibit H or in such other form as is acceptable
to the Agent, addressed to the Lessor, the Agent, the Lenders and the
Holders, from Brobeck, Phleger & Harrison LLP;
(ff) [RESERVED];
(gg) [RESERVED]; and
(hh) as of the Property Closing Date for any Property subject to
the Purchase Agreement, the Construction Agent shall have caused to be
delivered to the Agent copies of the Contracts, the Permits, the Records
and the Warranties, in each case as defined in Article I of the Purchase
Agreement.
5.4. CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND
THE HOLDERS RELATING TO THE ADVANCE OF FUNDS AFTER THE
ACQUISITION ADVANCE.
The obligations of the Holders to make Holder Advances, and the Lenders
to make Loans in connection with all requests for Advances subsequent to the
acquisition of a Property (and to pay the Transaction Expenses in connection
therewith) are subject to the satisfaction or waiver of the following conditions
precedent (to the extent such conditions precedent require the delivery of any
agreement, certificate, instrument, memorandum, legal or other opinion,
appraisal, commitment, title insurance commitment, lien report or any other
document of any kind or type, such shall be in form and substance satisfactory
to the Agent, in its reasonable discretion; notwithstanding the foregoing, the
obligations of each party shall not be subject to any conditions contained in
this Section 5.4 which are required to be performed by such party):
(a) the correctness on the date of such Advance of the
representations and warranties of the parties to this Agreement
contained herein, in each of the other Operative Agreements and in each
certificate delivered pursuant to any Operative Agreement;
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(b) the performance by the parties to this Agreement of their
respective agreements contained herein and in the other Operative
Agreements to be performed by them on or prior to each such date;
(c) the Agent shall have received a fully executed counterpart of
the Requisition, appropriately completed;
(d) based upon the applicable Construction Budget which shall
satisfy the requirements of this Agreement, the Available Commitments
and the Available Holder Commitment (after deducting the Unfunded
Amount) will be sufficient to complete the Improvements;
(e) there shall not have occurred and be continuing any Default
or Event of Default under any of the Operative Agreements (other than a
Default that would be cured upon application of the proceeds of such
Advance, provided that such proceeds are so applied or provision
reasonably satisfactory to the Agent shall have been made such that the
proceeds will be so applied) and no Default or Event of Default under
any of the Operative Agreements will have occurred after giving effect
to the Construction Advance requested by the applicable Requisition;
(f) the title insurance policy delivered in connection with the
requirements of Section 5.3(g) shall provide for (or shall be endorsed
to provide for) insurance in an amount at least equal to the maximum
total Property Cost indicated by the Construction Budget referred to in
subparagraph (d) above and there shall be no title change or exception
objectionable to the Agent in its reasonable discretion;
(g) prior to or in connection with any request for an Advance for
Hard Costs respecting any Property, the Construction Agent shall have
delivered to the Agent copies of the Plans and Specifications and the
final Construction Budget for the applicable Improvements;
(h) the Construction Agent shall have delivered to the Agent
invoices for, or other reasonably satisfactory evidence of, any
Transaction Expenses that are to be paid with the Advance;
(i) the Construction Agent shall have delivered, or caused to be
delivered to the Agent, invoices, Bills of Sale or other documents
reasonably acceptable to the Agent, in each case with regard to any
Equipment or other components of such Property then being acquired with
the proceeds of the Loans and Holder Advances and naming the Lessor as
purchaser and transferee;
(j) all taxes, fees and other charges in connection with the
execution, delivery, recording, filing and registration of the Operative
Agreements shall have been paid or provisions for such payment shall
have been made to the reasonable satisfaction of the Agent;
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(k) since the date of the most recent audited financial
statements of the Lessee, there shall not have occurred any event,
condition or state of facts which shall have or could reasonably be
expected to have a Material Adverse Effect, other than as specifically
contemplated by the Operative Agreements;
(l) in the good faith opinion of the Agent and its counsel, the
transactions contemplated by the Operative Agreements do not and will
not subject the Lessor, the Lenders, the Agent or the Holders to any
adverse regulatory prohibitions, constraints, penalties or fines;
(m) [Reserved]; and
(n) prior to or in connection with any request for an Advance for
Hard Costs respecting any Property, the Construction Agent shall have
caused an Appraisal regarding such Property to be provided to the Agent
from an appraiser selected by the Agent.
5.5. ADDITIONAL REPORTING AND DELIVERY REQUIREMENTS ON COMPLETION DATE
AND ON CONSTRUCTION PERIOD TERMINATION DATE.
On or prior to the Completion Date for each Property, the Construction
Agent shall deliver to the Agent an Officer's Certificate in the form attached
hereto as Exhibit I or in such other form as is acceptable to the Agent
specifying (a) the address for such Property, (b) the Completion Date for such
Property, (c) detailed, itemized documentation supporting the asserted Property
Cost figures and (d) that all representations and warranties of the Construction
Agent and Lessee in each of the Operative Agreements and each certificate
delivered pursuant thereto are true and correct as of the Completion Date. The
Agent shall have the right to contest the information contained in such
Officer's Certificate. Furthermore, on or prior to the Completion Date for each
Property, the Construction Agent shall deliver or cause to be delivered to the
Agent (unless previously delivered to the Agent) originals of the following,
each of which shall be in form and substance acceptable to the Agent, in its
reasonable discretion: (w) a title insurance endorsement regarding the title
insurance policy delivered in connection with the requirements of Section
5.3(g), but only to the extent such endorsement is necessary to provide for
insurance in an amount at least equal to the maximum total Property Cost and, if
endorsed, the endorsement shall not include a title change or exception
objectionable to the Agent; (x) an as-built survey for such Property, (y) ACCORD
Evidence of Insurance and/or a certified copy of the insurance policies
respecting such Property as required hereunder and under the Lease Agreement,
and (z) if reasonably requested by the Agent, amendments to the Lessor Financing
Statements executed by the appropriate parties. In addition, on the Completion
Date for such Property the Construction Agent covenants and agrees that the
recording fees, documentary stamp taxes or similar amounts required to be paid
in connection with the related Mortgage Instrument shall be paid in an amount
required by applicable law, subject, however, to the obligations of the Lenders
and the Holders to fund such costs to the extent required pursuant to Section
7.1.
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5.6. THE CONSTRUCTION AGENT DELIVERY OF CONSTRUCTION BUDGET
MODIFICATIONS.
The Construction Agent covenants and agrees to deliver to the Agent each
month notification of any modification to any Construction Budget regarding any
Property if such modification increases the cost to construct such Property;
provided no Construction Budget may be increased unless (a) the title insurance
policies referenced in Section 5.3(g) are also modified or endorsed, if
necessary, to provide for insurance in an amount that satisfies the requirements
of Section 5.4(f) of this Agreement and (b) after giving effect to any such
amendment, the Construction Budget remains in compliance with the requirements
of Section 5.4(d) of this Agreement.
5.7. RESTRICTIONS ON LIENS.
On each Property Closing Date, the Construction Agent shall cause each
Property acquired by the Lessor on such date to be free and clear of all Liens
except those referenced in Sections 6.2(r)(i) and 6.2(r)(ii). On each date a
Property is either sold to a third party in accordance with the terms of the
Operative Agreements or, pursuant to Section 22.1(a) of the Lease Agreement,
retained by the Lessor, the Lessee shall cause such Property to be free and
clear of all Liens (other than Lessor Liens and such other Liens that are
expressly set forth as title exceptions on the title commitment issued under
Section 5.3(g) with respect to such Property, to the extent such title
commitment has been approved by the Agent).
5.8. PAYMENTS.
All payments of principal, interest, Holder Advances, Holder Yield and
other amounts to be made by the Construction Agent or the Lessee under this
Agreement or any other Operative Agreements (excluding Excepted Payments which
shall be paid directly to the party to whom such payments are owed) shall be
made to the Agent at the office designated by the Agent from time to time in
Dollars and in immediately available funds, without setoff, deduction, or
counterclaim. Subject to the definition of "Interest Period" in Appendix A
attached hereto, whenever any payment under this Agreement or any other
Operative Agreements shall be stated to be due on a day that is not a Business
Day, such payment may be made on the next succeeding Business Day, and such
extension of time in such case shall be included in the computation of interest,
Holder Yield and fees payable pursuant to the Operative Agreements, as
applicable and as the case may be.
5.9. UNILATERAL RIGHT TO INCREASE THE HOLDER COMMITMENTS AND THE
LENDER COMMITMENTS.
Notwithstanding any other provision of any Operative Agreement or any
objection by any Person (including without limitation any objection by any
Credit Party), (a) each Holder, in its sole discretion, may unilaterally elect
to increase its Holder Commitment in order to fund amounts due and owing
pursuant to Sections 7.1(a), 7.1(b) and/or 11.8, and such other amounts payable
by the Lessor during the Construction Period pursuant to the Operative
Agreements, and (b) each Lender, in its sole discretion, may unilaterally elect
to increase its Lender Commitment
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in order to fund amounts due and owing pursuant to Sections 7.1(a), 7.1(b)
and/or 11.8, and such other amounts payable by the Lessor during the
Construction Period pursuant to the Operative Agreements.
5.10. JOINDER AGREEMENT REQUIREMENTS.
Each Material Domestic Subsidiary of each Credit Party formed or
acquired subsequent to the Initial Closing Date shall become a Guarantor and
shall satisfy the following conditions within thirty (30) days after its
formation or acquisition (or, in the case of a Domestic Subsidiary that was not
a Material Domestic Subsidiary at the time of its formation or acquisition,
within thirty (30) days after such Domestic Subsidiary becomes a Material
Domestic Subsidiary of any Credit Party):
(a) such Material Domestic Subsidiary shall execute and deliver
to the Agent a Joinder Agreement in the form attached hereto as Exhibit
K;
(b) such Material Domestic Subsidiary shall have delivered to the
Agent (x) an Officer's Certificate of such Material Domestic Subsidiary
in the form attached hereto as Exhibit C, (y) a certificate of the
Secretary or an Assistant Secretary of such Material Domestic Subsidiary
in the form attached hereto as Exhibit D and (z) good standing
certificates (or local equivalent) from the respective states where such
Material Domestic Subsidiary is incorporated or organized and where the
principal place of business of the Parent or such Material Domestic
Subsidiary is located as to its good standing in each such state;
(c) such Material Domestic Subsidiary shall have delivered to the
Agent an opinion of counsel (reasonably acceptable to the Agent) in the
form attached hereto as Exhibit H-1 or such other form as is reasonably
acceptable to the Agent and such Material Domestic Subsidiary; and
(d) the Agent shall have received such other documents,
certificates and information as the Agent shall have reasonably
requested.
Notwithstanding any provision of this Section 5.10 or any other
Operative Agreement to the contrary, in the event that either (i) the aggregate
total assets (as determined in accordance with GAAP) of all Domestic
Subsidiaries of the Credit Parties (when taken as a whole) that are not Material
Domestic Subsidiaries and are not otherwise Guarantors exceeds $50,000,000, or
(ii) the aggregate annual revenues for the most recently ended fiscal years of
all Domestic Subsidiaries of the Credit Parties (taken as a whole) that are not
Material Domestic Subsidiaries and are not otherwise Guarantors exceeds
$10,000,000, the Credit Parties shall cause additional Domestic Subsidiaries to
become Guarantors and satisfy the conditions set forth in subsections (a)-(d) of
this Section 5.10 such that neither the level of aggregate assets nor the level
of aggregate revenues, as the case may be, attributable to such Domestic
Subsidiaries that are not Material Domestic Subsidiaries and are not otherwise
Guarantors shall no longer exceed the
<PAGE> 21
aggregate levels of assets and revenues set forth in clauses (i) and (ii) of
this sentence, respectively.
5.11. PROPERTY COST AS OF THE RENT COMMENCEMENT DATE.
Upon receipt of the Officer's Certificate from the Construction Agent
pursuant to Section 5.5, the Agent shall promptly deliver a notice to the Lessee
specifying the amount allocable to the Property Cost respecting the Land, as
identified on any Lease Supplement relating to Land, and the amount allocable to
the Property Cost respecting the Improvements, as identified on any Lease
Supplement relating to Improvements. Such amounts identified by the Agent shall
be conclusive, absent manifest error.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
6.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
Effective as of the Initial Closing Date and the date of each Advance,
the Trust Company in its individual capacity and as the Borrower, as indicated,
represents and warrants to each of the other parties hereto as follows,
provided, that the representations in the following paragraphs (h), (j) and (k)
are made solely in its capacity as the Borrower:
(a) It is a national banking association and is duly organized
and validly existing and in good standing under the laws of the United
States of America and has the power and authority to enter into and
perform its obligations under the Trust Agreement and (assuming due
authorization, execution and delivery of the Trust Agreement by the
Holders) has the corporate and trust power and authority to act as the
Owner Trustee and to enter into and perform the obligations under each
of the other Operative Agreements to which the Trust Company or the
Owner Trustee, as the case may be, is or will be a party and each other
agreement, instrument and document to be executed and delivered by it on
or before such Closing Date in connection with or as contemplated by
each such Operative Agreement to which the Trust Company or the Owner
Trustee, as the case may be, is or will be a party;
(b) The execution, delivery and performance of each Operative
Agreement to which it is or will be a party, either in its individual
capacity or (assuming due authorization, execution and delivery of the
Trust Agreement by the Holders) as the Owner Trustee, as the case may
be, has been duly authorized by all necessary action on its part and
neither the execution and delivery thereof, nor the consummation of the
transactions contemplated thereby, nor compliance by it with any of the
terms and provisions thereof (i) does or will require any approval or
consent of any trustee or holders of any of its indebtedness or
obligations, (ii) does or will contravene any Legal Requirement relating
to its banking or trust powers, (iii) does or will contravene or result
in any breach of or constitute any default under, or result in the
creation of any Lien upon any of its property under, (A) its charter or
by-laws, or (B) any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, bank loan or credit agreement
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or other agreement or instrument to which it is a party or by which it
or its properties may be bound or affected, which contravention, breach,
default or Lien under clause (B) would materially and adversely affect
its ability, in its individual capacity or as the Owner Trustee, to
perform its obligations under the Operative Agreements to which it is a
party or (iv) does or will require any Governmental Action by any
Governmental Authority regulating its banking or trust powers;
(c) The Trust Agreement and, assuming the Trust Agreement is the
legal, valid and binding obligation of the Holders, each other Operative
Agreement to which the Trust Company or the Owner Trustee, as the case
may be, is or will be a party have been, or on or before such Closing
Date will be, duly executed and delivered by the Trust Company or the
Owner Trustee, as the case may be, and the Trust Agreement and each such
other Operative Agreement to which the Trust Company or the Owner
Trustee, as the case may be, is a party constitutes, or upon execution
and delivery will constitute, a legal, valid and binding obligation
enforceable against the Trust Company or the Owner Trustee, as the case
may be, in accordance with the terms thereof;
(d) There is no action or proceeding pending or, to its
knowledge, threatened to which it is or will be a party, either in its
individual capacity or as the Owner Trustee, before any Governmental
Authority that, if adversely determined, would materially and adversely
affect its ability, in its individual capacity or as the Owner Trustee,
to perform its obligations under the Operative Agreements to which it is
a party or would question the validity or enforceability of any of the
Operative Agreements to which it is or will become a party;
(e) It, either in its individual capacity or as the Owner
Trustee, has not assigned or transferred any of its right, title or
interest in or under the Lease, the Construction Agency Agreement or its
interest in any Property or any portion thereof, except in accordance
with the Operative Agreements;
(f) No Default or Event of Default under the Operative Agreements
attributable to it has occurred and is continuing;
(g) Except as otherwise contemplated in the Operative Agreements,
the proceeds of the Loans and Holder Advances shall not be applied by
the Owner Trustee, either in its individual capacity or as the Owner
Trustee, for any purpose other than the purchase and/or lease of the
Properties, the acquisition, installation and testing of the Equipment,
the construction of Improvements and the payment of Transaction Expenses
and the fees, expenses and other disbursements referenced in Sections
7.1(a) and 7.1(b) of this Agreement, in each case which accrue prior to
the Rent Commencement Date with respect to a particular Property;
(h) Neither the Owner Trustee nor any Person authorized by
the Owner Trustee to act on its behalf has offered or sold any interest
in the Trust Estate or the Notes, or in any similar security relating to
a Property, or in any security the offering of
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which for the purposes of the Securities Act would be deemed to be part
of the same offering as the offering of the aforementioned securities
to, or solicited any offer to acquire any of the same from, any Person
other than, in the case of the Notes, the Agent, and neither the Owner
Trustee nor any Person authorized by the Owner Trustee to act on its
behalf will take any action which would subject, as a direct result of
such action alone, the issuance or sale of any interest in the Trust
Estate or the Notes to the provisions of Section 5 of the Securities Act
or require the qualification of any Operative Agreement under the Trust
Indenture Act of 1939, as amended;
(i) The Owner Trustee's principal place of business, chief
executive office and office where the documents, accounts and records
relating to the transactions contemplated by this Agreement and each
other Operative Agreement are kept are located at 79 South Main Street,
Salt Lake City, Utah 84111;
(j) The Owner Trustee is not engaged principally in, and does not
have as one (1) of its important activities, the business of extending
credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System of the United States), and no part of the
proceeds of the Loans or the Holder Advances will be used by it to
purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock or for any
purpose that violates, or is inconsistent with, the provisions of
Regulations G, T, U, or X of the Board of Governors of the Federal
Reserve System of the United States;
(k) The Owner Trustee is not an "investment company" or a company
controlled by an "investment company" within the meaning of the
Investment Company Act;
(l) Each Property is free and clear of all Lessor Liens
attributable to the Owner Trustee, either in its individual capacity or
as the Owner Trustee; and
(m) The Owner Trustee, in its trust capacity, is not a party to
any documents, instruments or agreements other than the Operative
Agreements executed by the Owner Trustee, in its trust capacity.
6.2. REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES.
Effective as of the Initial Closing Date, the date of each Advance, the
date each Domestic Subsidiary or Parent, as the case may be, delivers a Joinder
Agreement and the Rent Commencement Date, each Credit Party represents and
warrants to each of the other parties hereto that:
(a) The Lessee has delivered to the Agent the financial
statements and other reports referred to in Section 8.3A(a)(i) and (ii)
hereof;
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(b) The execution and delivery by each Credit Party of this
Agreement and the other applicable Operative Agreements as of such date
and the performance by each Credit Party of its respective obligations
under this Agreement and the other applicable Operative Agreements are
within the corporate, partnership or limited liability company (as the
case may be) powers of each Credit Party, have been duly authorized by
all necessary corporate action on the part of each Credit Party
(including without limitation any necessary shareholder action), have
been duly executed and delivered, have received all necessary
governmental approval, and do not and will not (i) violate any Legal
Requirement which is binding on any Credit Party or any of its
Subsidiaries, (ii) contravene or conflict with, or result in a breach
of, any provision of the Articles of Incorporation, By-Laws or other
organizational documents of any Credit Party or any of its Subsidiaries
or of any agreement, indenture, instrument or other document which is
binding on any Credit Party or any of its Subsidiaries or (iii) result
in, or require, the creation or imposition of any Lien (other than
pursuant to the terms of the Operative Agreements) on any asset of any
Credit Party or any of its Subsidiaries;
(c) This Agreement and the other applicable Operative Agreements
executed prior to and as of such date by any Credit Party, constitute
the legal, valid and binding obligation of such Credit Party, as
applicable, enforceable against the such Credit Party, as applicable, in
accordance with their terms. Each Credit Party has executed the various
Operative Agreements required to be executed by such Credit Party as of
such date;
(d) There are no material actions, suits or proceedings pending
or, to our knowledge, threatened against any Credit Party in any court
or before any Governmental Authority (nor shall any order, judgment or
decree have been issued or proposed to be issued by any Governmental
Authority to set aside, restrain, enjoin or prevent the full performance
of any Operative Agreement or any transaction contemplated thereby) that
(i) concern any Property or any Credit Party's interest therein, (ii)
question the validity or enforceability of any Operative Agreement or
any transaction described in the Operative Agreements or (iii) shall
have or could reasonably be expected to have a Material Adverse Effect;
provided, for purposes of disclosure, the Credit Parties have described
the litigation set forth on Exhibit J;
(e) No Governmental Action by any Governmental Authority or other
authorization, registration, consent, approval, waiver, notice or other
action by, to or of any other Person pursuant to any Legal Requirement,
contract, indenture, instrument or agreement or for any other reason is
required to authorize or is required in connection with (i) the
execution, delivery or performance of any Operative Agreement, (ii) the
legality, validity, binding effect or enforceability of any Operative
Agreement, (iii) the acquisition, ownership, construction, completion,
occupancy, operation, leasing or subleasing of any Property or (iv) any
Advance, in each case, except those which have been obtained and are in
full force and effect;
(f) Upon the execution and delivery of the Lease and each
Lease Supplement to the Lease, (i) the Lessee will have unconditionally
accepted the Property subject to the
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Lease Supplement and will have a valid and subsisting leasehold interest
in such Property, subject only to the Permitted Liens, and (ii) no
offset will exist with respect to any Rent or other sums payable under
the Lease;
(g) Except as otherwise contemplated by the Operative Agreements,
the Construction Agent shall not use the proceeds of any Holder Advance
or Loan for any purpose other than the purchase and/or lease of the
Properties, the acquisition, installation and testing of the Equipment,
the construction of Improvements and the payment of Transaction
Expenses, in each case which accrue prior to the Rent Commencement Date
with respect to a particular Property;
(h) All information (including without limitation the financial
statements and other reports delivered to the Agent pursuant to Section
8.3A(a)(i) and (ii)) heretofore or contemporaneously herewith furnished
by each Credit Party or its Subsidiaries to the Agent, the Owner
Trustee, any Lender or any Holder for purposes of or in connection with
this Agreement and the transactions contemplated hereby is, and all
information hereafter furnished by or on behalf of each Credit Party or
its Subsidiaries to the Agent, the Owner Trustee, any Lender or any
Holder pursuant hereto or in connection herewith will be, true and
accurate in every material respect on the date as of which such
information is dated or certified, and such information, taken as a
whole, does not and will not omit to state any material fact necessary
to make such information, taken as a whole, not misleading;
(i) The principal place of business, chief executive office and
office of the Construction Agent and the Lessee where the documents,
accounts and records relating to the transactions contemplated by this
Agreement and each other Operative Agreement are kept are located at
1600 Plymouth Street, Mountain View, California 94043;
(j) The representations and warranties of each Credit Party set
forth in any of the Operative Agreements are true and correct in all
material respects on and as of each such date as if made on and as of
such date. Each Credit Party is in all material respects in compliance
with its respective obligations under the Operative Agreements and there
exists no Default or Event of Default under any of the Operative
Agreements which is continuing and which has not been cured within any
cure period expressly granted under the terms of the applicable
Operative Agreement or otherwise waived in accordance with the
applicable Operative Agreement. No Default or Event of Default will
occur under any of the Operative Agreements as a result of, or after
giving effect to, the Advance requested by the Requisition on the date
of each Advance;
(k) As of each Property Closing Date, the date of each
subsequent Advance and the Rent Commencement Date only, each Property
then being financed consists of (i) unimproved Land or (ii) Land and
existing Improvements thereon which Improvements are either suitable for
occupancy at the time of acquisition or will be constructed, renovated,
modified or demolished in accordance with the terms of this Agreement.
Each
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Property then being financed is located at the location set forth on the
applicable Requisition, each of which is in one (1) of the Approved
States;
(l) As of each Property Closing Date, the date of each subsequent
Advance and the Rent Commencement Date only, the Lessor has good and
marketable fee simple title to each Property, subject only to (i) such
Liens referenced in Sections 6.2(r)(i) and 6.2(r)(ii) on the applicable
Property Closing Date and (ii) subject to Section 5.7, Permitted Liens
after the applicable Property Closing Date;
(m) As of each Property Closing Date, the date of each subsequent
Advance and the Rent Commencement Date only, no portion of any Property
is located in an area identified as a special flood hazard area by the
Federal Emergency Management Agency or other applicable agency, or if
any such Property is located in an area identified as a special flood
hazard area by the Federal Emergency Management Agency or other
applicable agency, then flood insurance has been obtained for such
Property in accordance with Section 14.2(b) of the Lease and in
accordance with the National Flood Insurance Act of 1968, as amended;
(n) As of each Property Closing Date, the date of each subsequent
Advance and the Rent Commencement Date only, each Property complies with
all Insurance Requirements and all standards of Lessee with respect to
similar properties owned by Lessee;
(o) As of each Property Closing Date, the date of each subsequent
Advance and the Rent Commencement Date only, each Property complies with
all Legal Requirements as of such date (including without limitation all
zoning and land use laws and Environmental Laws), except to the extent
that failure to comply therewith, individually or in the aggregate,
shall not have and could not reasonably be expected to have a Material
Adverse Effect;
(p) As of each Property Closing Date, the date of each subsequent
Advance and the Rent Commencement Date only, all utility services and
facilities necessary for the construction and operation of the
Improvements and the installation and operation of the Equipment
regarding each Property (including without limitation gas, electrical,
water and sewage services and facilities) are available at the Land or
will be constructed prior to the Completion Date for such Property;
(q) As of each Property Closing Date, the date of each subsequent
Advance and the Rent Commencement Date only, acquisition, installation
and testing of the Equipment (if any) and construction of the
Improvements (if any) to such date shall have been performed in a good
and workmanlike manner, substantially in accordance with the applicable
Plans and Specifications;
(r) (i) The Security Documents create, as security for the
Obligations (as such term is defined in the Security Agreement),
valid and enforceable security
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interests in, and Liens on, all of the Collateral, in favor of
the Agent, for the ratable benefit of the Lenders and the
Holders, as their respective interests appear in the Operative
Agreements, and such security interests and Liens are subject to
no other Liens other than (A) Liens that are expressly set forth
as title exceptions on the title commitment issued under Section
5.3(g) with respect to the applicable Property, to the extent
such title commitment has been approved by the Agent and (B) from
and after the applicable Property Closing Date, Permitted Liens.
Upon recordation of the Mortgage Instrument in the real estate
recording office in the applicable Approved State identified by
the Construction Agent or the Lessee, the Lien created by the
Mortgage Instrument in the real property described therein shall
be a perfected first priority mortgage Lien on such real property
in favor of the Agent, for the ratable benefit of the Lenders and
the Holders, as their respective interests appear in the
Operative Agreements. To the extent that the security interests
in the portion of the Collateral comprised of personal property
can be perfected by filing in the filing offices in the
applicable Approved States or elsewhere identified by the
Construction Agent or the Lessee, upon filing of the Lender
Financing Statements in such filing offices, the security
interests created by the Security Agreement shall be perfected
first priority security interests in such personal property in
favor of the Agent, for the ratable benefit of the Lenders and
the Holders, as their respective interests appear in the
Operative Agreements;
(ii) The Lease Agreement creates, as security for the
obligations of the Lessee under the Lease Agreement, valid and
enforceable security interests in, and Liens on, each Property
leased thereunder, in favor of the Lessor, and such security
interests and Liens are subject to no other Liens other than
Liens that are expressly set forth as title exceptions on the
title commitment issued under Section 5.3(g) with respect to the
applicable Property, to the extent such title commitment has been
approved by the Agent. Upon recordation of the Lease Agreement in
the real estate recording office in the applicable Approved State
identified by the Construction Agent or the Lessee, the Lien
created by the Lease Agreement in the real property described
therein shall be a perfected first priority mortgage Lien on such
real property in favor of the Agent, for the ratable benefit of
the Lenders and the Holders, as their respective interests appear
in the Operative Agreements. To the extent that the security
interests in the portion of any Property comprised of personal
property can be perfected by the filing in the filing offices in
the State of California or elsewhere identified by the
Construction Agent or the Lessee upon filing of the Lessor
Financing Statements in such filing offices, a security interest
created by the Lease Agreement shall be perfected first priority
security interests in such personal property in favor of the
Lessor, which rights pursuant to the Lessor Financing Statements
are assigned to the Agent, for the ratable benefit of the Lenders
and the Holders, as their respective interests appear in the
Operative Agreements;
(s) The Plans and Specifications for each Property will be
prepared prior to the commencement of construction in accordance with
all applicable Legal Requirements
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(including without limitation all applicable Environmental Laws and
building, planning, zoning and fire codes), except to the extent the
failure to comply therewith, individually or in the aggregate, shall not
have and could not reasonably be expected to have a Material Adverse
Effect. Upon completion of the Improvements for the Property in
accordance with the applicable Plans and Specifications, such
Improvements will be within any building restriction lines and will not
encroach in any manner onto any adjoining land (except as permitted by
express written easements, which have been approved by the Agent);
(t) As of the Rent Commencement Date only, each Property shall be
improved in accordance with the applicable Plans and Specifications in a
good and workmanlike manner and shall be operational;
(u) [Reserved];
(v) Each Credit Party has (i) initiated a review and assessment
of all areas within its and each of its Subsidiaries' business and
operations (including those affected by suppliers, vendors and customers
of each Credit Party and its Subsidiaries) that could be adversely
affected by the Year 2000 Problem, (ii) developed a plan and timeline
for addressing the Year 2000 Problem on a timely basis and (iii) to
date, implemented that plan in accordance with that timetable. Based on
the foregoing, each Credit Party believes that all computer applications
(including those of suppliers, vendors and customers of each Credit
Party and its Subsidiaries) that are material to its or any of its
Subsidiaries' business and operations are able to perform properly
date-sensitive functions for all dates before and after January 1, 2000
(that is, be "Year 2000 Compliant"), except to the extent that a failure
to do so shall not have and could not reasonably be expected to have a
Material Adverse Effect; and
(w) As of September 30, 1999, all of the following had occurred
(in the order designated below):
(i) the merger of Merger Sub with and into the Lessee
occurred (making the Lessee a wholly-owned Subsidiary of the
Parent) in accordance with the terms of the Reorganization
Agreement and applicable law;
(ii) each share of Capital Stock of the Lessee was
converted into one share of Capital Stock of the Parent in
accordance with the terms of the Reorganization Agreement and
applicable law; and
(iii) the Parent acquired all of the Capital Stock of NSMG
and the NSMG Business in accordance with the terms of the
Reorganization Agreement and applicable law.
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SECTION 6B. GUARANTY
6B.1. GUARANTY OF PAYMENT AND PERFORMANCE.
Subject to Section 6B.7, each Guarantor hereby, jointly and severally,
unconditionally guarantees to each Financing Party the prompt payment and
performance of the Company Obligations in full when due (whether at stated
maturity, as a mandatory prepayment, by acceleration or otherwise) or when such
is otherwise to be performed; provided, notwithstanding the foregoing, the
obligations of the Guarantors under this Section 6B shall not constitute a
direct guaranty of the indebtedness of the Lessor evidenced by the Notes but
rather a guaranty of the Company Obligations arising under the Operative
Agreements. This Section 6B is a guaranty of payment and performance and not of
collection and is a continuing guaranty and shall apply to all Company
Obligations whenever arising. All rights granted to the Financing Parties under
this Section 6B shall be subject to the provisions of Section 8.2(h) and 8.6.
6B.2. OBLIGATIONS UNCONDITIONAL.
Each Guarantor agrees that the obligations of the Guarantors hereunder
are absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Operative Agreements, or
any other agreement or instrument referred to therein, or any substitution,
release or exchange of any other guarantee of or security for any of the Company
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety, guarantor or
co-obligor, it being the intent of this Section 6B.2 that the obligations of the
Guarantors hereunder shall be absolute and unconditional under any and all
circumstances. Each Guarantor agrees that this Section 6B may be enforced by the
Financing Parties without the necessity at any time of resorting to or
exhausting any other security or collateral and without the necessity at any
time of having recourse to the Notes, the Certificates or any other of the
Operative Agreements or any collateral, if any, hereafter securing the Company
Obligations or otherwise and each Guarantor hereby waives the right to require
the Financing Parties to proceed against the Construction Agent, the Lessee or
any other Person (including without limitation a co-guarantor) or to require the
Financing Parties to pursue any other remedy or enforce any other right. Each
Guarantor further agrees that it hereby waives any and all right of subrogation,
indemnity, reimbursement or contribution against the Lessee and the Construction
Agent or any other Guarantor of the Company Obligations for amounts paid under
this Section 6B until such time as the Loans, Holder Advances, accrued but
unpaid interest, accrued but unpaid Holder Yield and all other amounts owing
under the Operative Agreements have been paid in full. Without limiting the
generality of the waiver provisions of this Section 6B, each Guarantor hereby
waives any rights to require the Financing Parties to proceed against the
Construction Agent, the Lessee or any co-guarantor or to require Lessor to
pursue any other remedy or enforce any other right. Each Guarantor further
agrees that nothing contained herein shall prevent the Financing Parties from
suing on any Operative Agreement or foreclosing any security interest in or Lien
on any collateral, if any, securing the Company Obligations or from exercising
any other rights available to it under any Operative Agreement, or any other
instrument of security, if any, and the exercise of any of the aforesaid rights
and the completion of any foreclosure proceedings shall not constitute a
discharge
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of any Guarantor's obligations hereunder; it being the purpose and intent of
each Guarantor that its obligations hereunder shall be absolute, independent and
unconditional under any and all circumstances; provided that any amounts due
under this Section 6B which are paid to or for the benefit of any Financing
Party shall reduce the Company Obligations by a corresponding amount (unless
required to be rescinded at a later date). Neither any Guarantor's obligations
under this Section 6B nor any remedy for the enforcement thereof shall be
impaired, modified, changed or released in any manner whatsoever by an
impairment, modification, change, release or limitation of the liability of the
Construction Agent or the Lessee or by reason of the bankruptcy or insolvency of
the Construction Agent or the Lessee. Each Guarantor waives any and all notice
of the creation, renewal, extension or accrual of any of the Company Obligations
and notice of or proof of reliance by any Financing Party upon this Section 6B
or acceptance of this Section 6B. Each Guarantor also expressly waives any and
all benefits under the California Civil Code Sections 2787 to 2855, inclusive.
The Company Obligations shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this Section 6B. All dealings between the Construction Agent, the Lessee
and any of the Guarantors, on the one hand, and the Financing Parties, on the
other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon this Section 6B.
6B.3. MODIFICATIONS.
Each Guarantor agrees that (a) all or any part of the security now or
hereafter held for the Company Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) no Financing Party shall have
any obligation to protect, perfect, secure or insure any such security
interests, liens or encumbrances now or hereafter held, if any, for the Company
Obligations or the properties subject thereto; (c) the time or place of payment
of the Company Obligations may be changed or extended, in whole or in part, to a
time certain or otherwise, and may be renewed or accelerated, in whole or in
part; (d) the Construction Agent, the Lessee and any other party liable for
payment under the Operative Agreements may be granted indulgences generally; (e)
any of the provisions of the Notes, the Certificates or any of the other
Operative Agreements may be modified, amended or waived; (f) any party
(including any co-guarantor) liable for the payment thereof may be granted
indulgences or be released; and (g) any deposit balance for the credit of the
Construction Agent, the Lessee or any other party liable for the payment of the
Company Obligations or liable upon any security therefor may be released, in
whole or in part, at, before or after the stated, extended or accelerated
maturity of the Company Obligations, all without notice to or further assent by
such Guarantor, which shall remain bound thereon, notwithstanding any such
exchange, compromise, surrender, extension, renewal, acceleration, modification,
indulgence or release.
6B.4. WAIVER OF RIGHTS.
Each Guarantor expressly waives to the fullest extent permitted by
applicable law: (a) notice of acceptance of this Section 6B by any Financing
Party and of all extensions of credit or other Advances to the Construction
Agent and the Lessee by the Lenders pursuant to the terms of the Operative
Agreements; (b) presentment and demand for payment or performance of any of the
Company Obligations; (c) protest and notice of dishonor or of default with
respect to the Company
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Obligations or with respect to any security therefor; (d) notice of any
Financing Party obtaining, amending, substituting for, releasing, waiving or
modifying any security interest, lien or encumbrance, if any, hereafter securing
the Company Obligations, or any Financing Party's subordinating, compromising,
discharging or releasing such security interests, liens or encumbrances, if any;
and (e) all other notices to which such Guarantor might otherwise be entitled.
Notwithstanding anything to the contrary herein, (i) each Guarantor's payments
hereunder shall be due five (5) Business Days after written demand by the Agent
for such payment (unless the Company Obligations are automatically accelerated
pursuant to the applicable provisions of the Operative Agreements in which case
the Guarantors' payments shall be automatically due) and (ii) any modification
of the Operative Agreements which has the effect of increasing the Company
Obligations shall not be enforceable against a Guarantor unless such Guarantor
executes the document evidencing such modification or otherwise reaffirms its
guaranty in writing in connection with such modification.
6B.5. REINSTATEMENT.
The obligations of the Guarantors under this Section 6B shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Company Obligations is rescinded or
must be otherwise restored by any holder of any of the Company Obligations,
whether as a result of any proceedings in bankruptcy or reorganization or
otherwise, and each Guarantor agrees that it will indemnify each Financing Party
on demand for all reasonable costs and expenses (including, without limitation,
reasonable fees of counsel) incurred by any Financing Party in connection with
such rescission or restoration, including without limitation any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
6B.6. REMEDIES.
The Guarantors agree that, as between the Guarantors, on the one hand,
and each Financing Party, on the other hand, the Company Obligations may be
declared to be forthwith due and payable as provided in the applicable
provisions of the Operative Agreements (and shall be deemed to have become
automatically due and payable in the circumstances provided therein)
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or preventing such Company Obligations from becoming automatically
due and payable) as against any other Person and that, in the event of such
declaration (or such Company Obligations being deemed to have become
automatically due and payable), such Company Obligations (whether or not due and
payable by any other Person) shall forthwith become due and payable by the
Guarantors in accordance with the applicable provisions of the Operative
Agreements.
6B.7. LIMITATION OF GUARANTY.
Notwithstanding any provision to the contrary contained herein or in any
of the other Operative Agreements, to the extent the obligations of any
Guarantor shall be adjudicated to be invalid or unenforceable for any reason
(including without limitation because of any applicable
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state or federal law relating to fraudulent conveyances or transfers) then the
obligations of such Guarantor hereunder shall be limited to the maximum amount
that is permissible under applicable law (whether federal or state and including
without limitation the Bankruptcy Code).
Subject to Section 6B.5, upon the satisfaction of the Company
Obligations in full, regardless of the source of payment, the Guarantors'
obligations hereunder shall be deemed satisfied, discharged and terminated other
than indemnifications set forth herein that expressly survive.
6B.8. PAYMENT OF AMOUNTS TO THE AGENT.
Each Financing Party hereby instructs each Guarantor, and each Guarantor
hereby acknowledges and agrees, that until such time as the Loans and the Holder
Advances are paid in full and the Liens evidenced by the Security Agreement and
the Mortgage Instruments have been released any and all Rent (excluding Excepted
Payments which shall be payable to each Holder or other Person as appropriate)
and any and all other amounts of any kind or type under any of the Operative
Agreements due and owing or payable to any Person shall instead be paid directly
to the Agent (excluding Excepted Payments which shall be payable to each Holder
or other Person as appropriate) or as the Agent may direct from time to time for
allocation and distribution in accordance with the procedures set forth in
Section 8.7 hereof.
6B.9 ADDITIONAL GUARANTOR WAIVERS.
(a) The provisions of Section 6B of the Participation Agreement
shall remain in full force and effect notwithstanding (i) any release of
any Credit Party from any liability with respect to the Company
Obligations; or (ii) any release or subordination of any real or
personal property now or hereafter held by the Agent as security for the
performance of the Company Obligations;
(b) Each Guarantor expressly waives any and all benefits which
might otherwise be available to it under California Civil Code Sections
2809, 2810, 2819, 2839, 2845, 2849, 2850, 2899 and 3433;
(c) Each Guarantor hereby waives any and all defenses, including
but not limited to such Guarantor's defense of estoppel discussed in
Union Bank vs. Gradsky (1968) 265 Cal.App.2d 40, based upon a
foreclosure against all or any part of the real property security for
the indebtedness evidenced by the Notes or Holder Certificates pursuant
to the power of sale contained in any Operative Agreement as opposed to
proceeding by way of judicial foreclosure. Such Guarantor waives all
rights and defenses arising out of an election of remedies by the Agent,
even though that election of remedies, such as a nonjudicial foreclosure
with respect to security for a guaranteed obligation, has destroyed such
Guarantor's rights of subrogation and reimbursement by the operation of
Section 580d of the California Code of Civil Procedure or otherwise;
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(d) Each Guarantor hereby waives all rights and defenses that
such Guarantor may have because any of the Company Obligations are
secured by real property. This means, among other things: (1) The Agent
may collect from any Guarantor without first foreclosing on any real or
personal property collateral pledged by any other Person, including
without limitation, Lessee or any of its Subsidiaries; (2) If the Agent
forecloses on any real property collateral pledged by any Guarantor: (A)
the amount of debt may be reduced only by the price for which the
collateral is sold at the foreclosure sale, even if the collateral is
worth more than the sale price, (B) the Agent may collect from any
Guarantor even if the Agent, by foreclosing on the real property
collateral, has destroyed any right such Guarantor may have to collect
from any other Credit Party. This is an unconditional and irrevocable
waiver of any rights and defenses any Guarantor may have because the
Company Obligations are secured by real property. These rights and
defenses include, but are not limited to, any rights or defenses based
upon Section 580a, 580b, 580d, or 726 of the California Code of Civil
Procedure.
(e) In the case of a power of sale foreclosure under any
Operative Agreement, the fair market value of the real property
collateral shall be conclusively deemed to be the amount of the
successful bid at the foreclosure sale. Each Guarantor waives any rights
or benefits it may now or hereafter have to a fair value hearing under
Section 580a of the California Code of Civil Procedure. The Agent shall
have absolutely no obligation to make a bid at any foreclosure sale, but
rather may make no bid or bid any amount which the Agent, in its sole
discretion, deems appropriate.
(f) The Agent acknowledges that the provisions of this Section
6B.9 are intended to constitute a waiver of any rights and defenses any
Guarantor may now or hereafter have as a "guarantor" to the extent any
Operative Agreement executed by such Guarantor is construed to be in
whole or in part a guaranty of the Company Obligations.
SECTION 7. PAYMENT OF CERTAIN EXPENSES.
7.1. TRANSACTION EXPENSES.
(a) The Lessor agrees on the Initial Closing Date, to pay, or
cause to be paid, all Transaction Expenses arising from the Initial
Closing Date, including without limitation all reasonable fees, expenses
and disbursements of the various legal counsels for the Lessor and the
Agent in connection with the transactions contemplated by the Operative
Agreements and incurred in connection with such Initial Closing Date,
the initial fees and expenses of the Owner Trustee due and payable on
such Initial Closing Date, all fees, taxes and expenses for the
recording, registration and filing of documents and all other reasonable
fees, expenses and disbursements incurred in connection with such
Initial Closing Date; provided, however, the Lessor shall pay such
amounts described in this Section 7.1(a) only if funds are made
available by the Lenders and the Holders in an amount sufficient to
allow such payment and without regard to whether such amounts are
referenced in any Requisition. On the Initial Closing Date after
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satisfaction of the conditions precedent for such date (excluding the
requirement that a Requisition be delivered), the Holders shall make
Holder Advances and the Lenders shall make Loans to the Lessor to pay
for the Transaction Expenses, fees, expenses and other disbursements
referenced in this Section 7.1(a).
(b) Assuming no Default (other than a Default that would be cured
upon application of the proceeds of such Advance, provided such proceeds
are so applied or provision reasonably satisfactory to the Agent shall
have been made such that such proceeds will be so applied) or Event of
Default shall have occurred and be continuing and only for the period
prior to the Rent Commencement Date, the Lessor agrees on each Property
Closing Date, on the date of any Construction Advance and on the
Completion Date to pay, or cause to be paid, all Transaction Expenses
including without limitation all reasonable fees, expenses and
disbursements of the various legal counsels for the Lessor and the Agent
in connection with the transactions contemplated by the Operative
Agreements and billed in connection with such Advance or such Completion
Date, all amounts described in Section 7.1(a) of this Agreement which
have not been previously paid, the annual fees and reasonable
out-of-pocket expenses of the Owner Trustee, all fees, expenses and
disbursements incurred with respect to the various items referenced in
Sections 5.3, 5.4 and/or 5.5 (including without limitation any premiums
for title insurance policies and charges for any updates to such
policies) and all other reasonable fees, expenses and disbursements in
connection with such Advance or such Completion Date including without
limitation all expenses relating to and all fees, taxes and expenses for
the recording, registration and filing of documents and during the
Commitment Period, all fees, expenses and costs referenced in Sections
7.3(a), 7.3(b), 7.3(d) and 7.4; provided, however, the Lessor shall pay
such amounts described in this Section 7.1(b) only if funds are made
available by the Lenders and the Holders in an amount sufficient to
allow such payment and without regard to whether such amounts are
referenced in any Requisition. On each Property Closing Date, on the
date of any Construction Advance or any Completion Date, after
satisfaction of the conditions precedent for such date (excluding the
requirement that a Requisition be delivered), the Holders shall make a
Holder Advance and the Lenders shall make Loans to the Lessor to pay for
the Transaction Expenses, fees, expenses and other disbursements
referenced in this Section 7.1(b).
(c) All fees payable pursuant to the Operative Agreements shall
be calculated on the basis of a year of three hundred sixty (360) days
for the actual days elapsed.
(d) The Lessor shall use commercially reasonable efforts to cause
invoices respecting the Transaction Expenses set forth in this Section
7.1 of legal counsel and other professional service providers retained
by the Lessor to be provided to the Lessee; provided, however, the
failure of the Lessor to cause such invoices to be provided shall in no
way excuse or otherwise affect the payment obligations for such
Transaction Expenses.
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7.2. BROKERS' FEES.
The Lessee agrees to pay or cause to be paid any and all brokers' fees,
if any, including without limitation any interest and penalties thereon, which
are payable in connection with the transactions contemplated by this Agreement
and the other Operative Agreements.
7.3. CERTAIN FEES AND EXPENSES.
The Lessee agrees to pay or cause to be paid (a) the $5,000 initial and
$5,000 annual Owner Trustee's fee and all reasonable expenses of the Owner
Trustee and any co-trustees (including without limitation reasonable counsel
fees and expenses) or any successor owner trustee and/or co-trustee, for acting
as the owner trustee under the Trust Agreement, (b) all reasonable costs and
expenses incurred by the Credit Parties, the Agent, the Lenders, the Holders or
the Lessor in entering into any Lease Supplement and any future amendments,
modifications, supplements, restatements and/or replacements with respect to any
of the Operative Agreements, whether or not such Lease Supplement, amendments,
modifications, supplements, restatements and/or replacements are ultimately
entered into, or giving or withholding of waivers of consents hereto or thereto,
which have been requested by any Credit Party, the Agent, the Lenders, the
Holders or the Lessor, (c) all reasonable costs and expenses incurred by the
Credit Parties, the Agent, the Lenders, the Holders or the Lessor in connection
with any exercise of remedies under any Operative Agreement or any purchase of
any Property by the Credit Parties or any third party and (d) all reasonable
costs and expenses incurred by the Construction Agent, the Lessee, the Agent,
the Lenders, the Holders or the Lessor in connection with any transfer or
conveyance of any Property, whether or not such transfer or conveyance is
ultimately accomplished.
7.4. COMMITMENT FEE.
During the Commitment Period, the Lessee agrees to pay or to cause to be
paid to the Agent for the account of (a) the Lenders, respectively, a commitment
fee (the "Lender Commitment Fee") equal to the product of the average daily
Available Commitment of each Lender during the applicable portion of the
Commitment Period multiplied by a per annum rate equal to the Applicable
Percentage for the Lender Commitment Fee and (b) the Holders, respectively, a
commitment fee (the "Holder Commitment Fee") equal to the product of the average
daily Available Holder Commitment of each Holder during the applicable portion
of the Commitment Period multiplied by a per annum rate equal to the Applicable
Percentage for the Holder Commitment Fee. Such Commitment Fees shall be
calculated on the basis of a year of three hundred sixty (360) days for the
actual days elapsed and shall be payable quarterly in arrears on each Commitment
Fee Payment Date. If all or a portion of any such Commitment Fee shall not be
paid when due, such overdue amount shall bear interest, payable by the Lessee on
demand, at a rate per annum equal to the ABR (or in the case of overdue amounts
relating to Holder Commitment Fees, the ABR plus 1.00%) plus two percent (2%)
from the date of such non-payment until such amount is paid in full.
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SECTION 8. OTHER COVENANTS AND AGREEMENTS.
8.1. COOPERATION WITH THE CONSTRUCTION AGENT OR THE LESSEE.
The Holders, the Lenders, the Lessor (at the direction of the Majority
Secured Parties) and the Agent shall, at the expense of and to the extent
reasonably requested by the Construction Agent or the Lessee (but without
assuming additional liabilities on account thereof and only to the extent such
is acceptable to the Holders, the Lenders, the Lessor (at the direction of the
Majority Secured Parties) and the Agent in their reasonable discretion),
cooperate with the Construction Agent or the Lessee in connection with the
Construction Agent or the Lessee satisfying its covenant obligations contained
in the Operative Agreements including without limitation at any time and from
time to time, promptly and duly executing and delivering any and all such
further instruments, documents and financing statements (and continuation
statements related thereto).
8.2. COVENANTS OF THE OWNER TRUSTEE AND THE HOLDERS.
Each of the Owner Trustee and the Holders hereby agrees that so long as
this Agreement is in effect:
(a) Neither the Owner Trustee (in its trust capacity or in its
individual capacity) nor any Holder will create or permit to exist at
any time, and each of them will, at its own cost and expense, promptly
take such action as may be necessary duly to discharge, or to cause to
be discharged, all Lessor Liens on the Properties attributable to it;
provided, however, that the Owner Trustee and the Holders shall not be
required to so discharge any such Lessor Lien while the same is being
contested in good faith by appropriate proceedings diligently prosecuted
so long as such proceedings shall not materially and adversely affect
the rights of the Lessee under the Lease and the other Operative
Agreements or involve any material danger of impairment of the Liens of
the Security Documents or of the sale, forfeiture or loss of, and shall
not interfere with the use or disposition of, any Property or title
thereto or any interest therein or the payment of Rent;
(b) Without prejudice to any right under the Trust Agreement of
the Owner Trustee to resign (subject to the requirement set forth in the
Trust Agreement that such resignation shall not be effective until a
successor shall have agreed to accept such appointment), or the Holders'
rights under the Trust Agreement to remove the institution acting as the
Owner Trustee (after consent to such removal by the Agent as provided in
the Trust Agreement), each of the Owner Trustee and the Holders hereby
agrees with the Lessee and the Agent (i) not to terminate or revoke the
trust created by the Trust Agreement except as permitted by Article VIII
of the Trust Agreement, (ii) not to amend, supplement, terminate or
revoke or otherwise modify any provision of the Trust Agreement in such
a manner as to adversely affect the rights of any such party without the
prior written consent of such party and (iii) to comply with all of the
terms of the Trust Agreement, the nonperformance of which would
adversely affect such party;
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(c) The Owner Trustee or any successor may resign or be removed
by the Holders as the Owner Trustee, a successor Owner Trustee may be
appointed and a corporation may become the Owner Trustee under the Trust
Agreement, only in accordance with the provisions of Article IX of the
Trust Agreement and, with respect to such appointment, with the consent
of the Lessee (so long as there shall be no Lease Event of Default that
shall have occurred and be continuing), which consent shall not be
unreasonably withheld or delayed;
(d) The Owner Trustee, in its capacity as the Owner Trustee under
the Trust Agreement, and not in its individual capacity, shall not
contract for, create, incur or assume any Indebtedness, or enter into
any business or other activity or enter into any contracts or
agreements, other than pursuant to or under the Operative Agreements;
(e) The Holders will not instruct the Owner Trustee to take any
action in violation of the terms of any Operative Agreement;
(f) Neither any Holder nor the Owner Trustee shall (i) commence
any case, proceeding or other action with respect to the Owner Trustee
under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization,
arrangement, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (ii) seek appointment of a
receiver, trustee, custodian or other similar official with respect to
the Owner Trustee or for all or any substantial benefit of the creditors
of the Owner Trustee; and neither any Holder nor the Owner Trustee shall
take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in this
paragraph;
(g) The Owner Trustee shall give prompt notice to the Lessee, the
Holders and the Agent if the Owner Trustee's principal place of business
or chief executive office, or the office where the records concerning
the accounts or contract rights relating to any Property are kept, shall
cease to be located at 79 South Main Street, Salt Lake City, Utah 84111,
or if it shall change its name; and
(h) The Owner Trustee shall take or refrain from taking such
actions and grant or refrain from granting such approvals with respect
to the Operative Agreements and/or relating to any Property in each case
as directed in writing by the Agent (until such time as the Loans are
paid in full, and then by the Majority Holders) or, in connection with
Sections 8.5 and 9.2 hereof, the Lessee; provided, however, that
notwithstanding the foregoing provisions of this subparagraph (h) the
Owner Trustee, the Agent, the Lenders and the Holders each acknowledge,
covenant and agree that neither the Owner Trustee nor the Agent shall
act or refrain from acting, regarding each Unanimous Vote Matter, until
such party has received the approval of each Lender and each Holder
affected by such matter.
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8.3. CREDIT PARTY COVENANTS, CONSENT AND ACKNOWLEDGMENT.
(a) Each Credit Party acknowledges and agrees that the Owner
Trustee, pursuant to the terms and conditions of the Security Agreement
and the Mortgage Instruments, shall create Liens respecting the various
personal property, fixtures and real property described therein in favor
of the Agent. Each Credit Party hereby irrevocably consents to the
creation, perfection and maintenance of such Liens until such liens are
subject to release in accordance with this Agreement and the other
Operative Agreements. Each Credit Party shall, to the extent reasonably
requested by any of the other parties hereto, cooperate with the other
parties in connection with their covenants herein or in the other
Operative Agreements and shall from time to time duly execute and
deliver any and all such future instruments, documents and financing
statements (and continuation statements related thereto) as any other
party hereto may reasonably request.
(b) The Lessor hereby instructs each Credit Party, and each
Credit Party hereby acknowledges and agrees, that until such time as the
Loans and the Holder Advances are paid in full and the Liens evidenced
by the Security Agreement and the Mortgage Instruments have been
released (i) any and all Rent (excluding Excepted Payments which shall
be payable to each Holder or other Person entitled thereto) and any and
all other amounts of any kind or type under any of the Operative
Agreements due and owing or payable to any Person shall instead be paid
directly to the Agent (excluding Excepted Payments which shall be
payable to each Holder or other Person entitled thereto) or as the Agent
may direct from time to time for allocation and distribution in
accordance with the procedures set forth in Section 8.7 hereof, (ii) all
rights of the Lessor under the Lease shall be exercised by the Agent and
(iii) each Credit Party shall cause all notices, certificates, financial
statements, communications and other information which are delivered, or
are required to be delivered, to the Lessor, to also be delivered at the
same time to the Agent.
(c) No Credit Party shall consent to or permit any amendment,
supplement or other modification of the terms or provisions of any
Operative Agreement except in accordance with Section 12.4 of this
Agreement.
(d) The Lessee hereby covenants and agrees to cause an Appraisal
or reappraisal (in form and substance satisfactory to the Agent and from
an appraiser selected by the Agent) to be issued respecting any Property
as reasonably requested by the Agent from time to time (i) at each and
every time as such shall be required to satisfy any regulatory
requirements imposed on the Agent, the Lessor, the Trust Company, any
Lender and/or any Holder and (ii) after the occurrence of an Event of
Default.
(e) The Lessee hereby covenants and agrees that, except for
amounts payable as Basic Rent, any and all payment obligations owing
from time to time under the Operative Agreements by any Person to the
Agent, any Lender, any Holder or any other Person shall (without further
action) be deemed to be Supplemental Rent obligations payable by the
Lessee in accordance with the terms and conditions of this Agreement and
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the other Operative Agreements. Without limitation, such obligations of
the Lessee shall include the Supplement Rent obligations pursuant to
Section 3.3 of the Lease, arrangement fees, administrative fees,
participation fees, commitment fees, unused fees, prepayment penalties,
breakage costs, indemnities, trustee fees and transaction expenses
incurred by the parties hereto in connection with the transactions
contemplated by the Operative Agreements.
(f) At any time the Lessor or the Agent is entitled under the
Operative Agreements to possession of a Property or any component
thereof, each of the Construction Agent and the Lessee hereby covenants
and agrees, at its own cost and expense, to assemble and make the same
available to the Agent (on behalf of the Lessor).
(g) The Lessee hereby covenants and agrees that, respecting each
Property, Non-Integral Equipment financed under the Operative Agreements
may constitute up to, but shall not exceed, ten percent (10%) of the
aggregate Advances extended at or prior to such time with respect to
such Property.
(h) The Lessee hereby covenants and agrees that as of Completion
(i) the aggregate Property Cost shall not exceed $40,000,000 and (ii)
each parcel of the Property shall be a Permitted Facility.
(i) The Lessee hereby covenants and agrees that it shall give
prompt notice to the Agent if the Lessee's principal place of business
or chief executive office, or the office where the records concerning
the accounts or contract rights relating to any Property are kept, shall
cease to be located at 1600 Plymouth Street, Mountain View, California
94043 or if it shall change its name.
(j) Unless the Agent otherwise agrees in writing, the Lessee
hereby covenants and agrees that the aggregate Property Cost of
Non-Integral Equipment purchased for any reason by the Lessee prior to
the Expiration Date shall not exceed ten percent (10%) of the aggregate
Property Cost for all Properties funded during the Commitment Period.
(k) Beginning with the fiscal quarter of the Lessee that begins
on January 1, 2000 and ends on March 31, 2000, and for each fiscal
quarter of the Lessee thereafter, the Lessee shall furnish to the Agent
a written notice setting forth the Lessee's calculation, in reasonable
detail, of the ratio of Funded Indebtedness to EBITDA as of the last day
of each such period and the level of EBITDA for such fiscal quarter of
the Lessee, such written notice to be provided in the form of the
officer's compliance certificate provided in Schedule 8.3A(a)(iii) and
by the date required pursuant to Section 8.3A(a)(iii).
(l) The Lessee hereby covenants and agrees that the rights of the
Lessee under this Agreement and the Lease shall not impair or in any way
diminish the obligations of the Construction Agent and/or the rights of
the Lessor under the Construction Agency Agreement.
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(m) Each Credit Party shall promptly notify the Agent, or cause
the Agent to be promptly notified, upon such Credit Party gaining
knowledge of the occurrence of any Default or Event of Default which is
continuing at such time. In any event, such notice shall be provided to
the Agent within ten (10) days of when such Credit Party gains such
knowledge.
(n) Until all of the obligations under the Operative Agreements
have been finally and indefeasibly paid and satisfied in full and the
Commitments and the Holder Commitments terminated each Credit Party,
unless consent has been obtained from the Majority Secured Parties,
will:
(i) except as permitted by Sections 8.3A and 8.3B,
preserve and maintain its separate legal existence and all
rights, franchises, licenses and privileges necessary to the
conduct of its business, and qualify and remain qualified as a
foreign corporation (or partnership, limited liability company or
other such similar entity, as the case may be) and authorized to
do business in each jurisdiction in which the failure to do so
qualify would have a Material Adverse Effect;
(ii) pay and perform all obligations of the Credit Parties
under the Operative Agreements and pay and perform (A) all taxes,
assessments and other governmental charges that may be levied or
assessed upon it or any of its property, and (B) all other
indebtedness, obligations and liabilities in accordance with
customary trade practices, which if not paid would have a
Material Adverse Effect; provided that any Credit Party may
contest any item described in this Section 8.3(n)(ii) in good
faith so long as adequate reserves are maintained with respect
thereto in accordance with GAAP;
(iii) to the extent failure to do so would have a Material
Adverse Effect, observe and remain in compliance with all
applicable Laws and maintain in full force and effect all
Governmental Actions, in each case applicable to the conduct of
its business; keep in full force and effect all licenses,
certifications or accreditations necessary for any Facility to
carry on its business; and not permit the termination of any
insurance reimbursement program available to any Facility; and
(iv) provided that the Agent, the Lenders and the Holders
use reasonable efforts to minimize disruption to the business of
the Credit Parties, permit representatives of the Agent or any
Lender or Holder, from time to time, to visit and inspect its
properties; inspect, audit and make extracts from its books,
records and files, including without limitation management
letters prepared by independent accountants; and discuss with its
principal officers, and its independent accountants, its
business, assets, liabilities, financial condition, results of
operations and business prospects.
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(o) [RESERVED].
(p) Promptly after obtaining any required architectural approvals
by any business park or any other applicable entity with oversight
responsibility for the applicable Improvements, the Construction Agent
shall deliver to the Agent copies of the same.
(q) Each Credit Party will promptly notify the Agent in the event
such Credit Party discovers or determines that any computer application
(including those of any supplier, vendor or customer of such Credit
Party or any of its Subsidiaries) that is material to such Credit
Party's or any of its Subsidiaries' business and operations is not Year
2000 Compliant, except to the extent that such failure shall not have
and could not reasonably be expected to have a Material Adverse Effect.
(r) Each Credit Party hereby covenants and agrees that, except
for amounts payable as Basic Rent, any and all payment obligations owing
from time to time under the Operative Agreements by any Person to the
Agent, any Lender, any Holder or any other Person shall (without further
action) be deemed to be Supplemental Rent obligations payable by the
Lessee and guaranteed by the other Credit Parties. Without limitation,
such obligations of the Credit Parties shall include without limitation
arrangement fees, administrative fees, unused fees, breakage costs,
indemnities, trustee fees and transaction expenses incurred by the
parties hereto in connection with the transactions contemplated by the
Operative Agreements.
(s) Each Credit Party hereby covenants and agrees (i) to cause
each Material Domestic Subsidiary of each Credit Party formed or
acquired after the Initial Closing Date to execute a Joinder Agreement
and to observe the terms of Sections 5.10(a)-(d), all within thirty (30)
days of the formation or acquisition of such Material Domestic
Subsidiary (or, in the case of a Domestic Subsidiary that was not a
Material Domestic Subsidiary at the time of its formation or
acquisition, within thirty (30) days after such Domestic Subsidiary
becomes a Material Domestic Subsidiary of any Credit Party), and (ii) to
cause such additional Domestic Subsidiaries of any Credit Party to
execute a Joinder Agreement and observe the terms of Section 5.10(a)-(d)
as required in accordance with Section 5.10.
(t) The Lessee hereby covenants and agrees that it will (i) cause
the Improvements to be constructed by, and use commercially reasonable
efforts to cause the demolition of existing improvements to be performed
by, a Contractor that is a licensed general contractor, and that shall
carry insurance of the types and in the minimum amounts set forth in
Section 14.2(c) of the Lease, under a maximum fixed price contract, and
(ii) cause such Contractor to retain licensed consultants, engineers,
architects and subcontractors, all of whom shall carry insurance of the
types and in the minimum amounts set forth in Section 14.2(c) of the
Lease, in connection with the construction of Improvements and the
demolition of existing improvements in accordance with the terms and
conditions of the Operative Agreements.
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(u) If any credit facility, loan agreement or other financing
arrangement extended to any Credit Party or any Affiliate of any Credit
Party, other than pursuant to the Operative Agreements and other than
Indebtedness permitted under Sections 8.3B(a)(iii) and (vii), is ever
secured by any collateral, the Secured Parties shall share on a
pari-passu basis (based on the respective amounts outstanding under the
Operative Agreements relative to the amounts outstanding under any such
credit facility, loan agreement or other financing arrangement) in all
such collateral.
8.3A. AFFIRMATIVE COVENANTS.
(a) INFORMATION COVENANTS.
The Credit Parties will furnish, or cause to be furnished, to the Agent
on behalf of the Lenders:
(i) Annual Financial Statements. As soon as available, and
in any event within 90 days after the close of each fiscal year of the
Lessee, a consolidated and consolidating balance sheet and income
statement of the Credit Parties and their Consolidated Subsidiaries as
of the end of such fiscal year, together with related consolidated and
consolidating statements of operations and retained earnings and of cash
flows for such fiscal year, in each case setting forth in comparative
form consolidated and consolidating figures for the preceding fiscal
year, all such financial information described above to be in reasonable
form and detail and audited by independent certified public accountants
of recognized national standing reasonably acceptable to the Agent and
whose opinion shall be to the effect that such financial statements have
been prepared in accordance with GAAP (except for changes with which
such accountants concur) and shall not be limited as to the scope of the
audit or qualified as to the status of the Credit Parties and their
Consolidated Subsidiaries as a going concern or any other material
qualifications or exceptions.
(ii) Quarterly Financial Statements. As soon as available,
and in any event within 45 days after the close of each fiscal quarter
of the Credit Party (other than the fourth fiscal quarter, in which case
90 days after the end thereof) a consolidated and consolidating balance
sheet and income statement of the Credit Parties and their Consolidated
Subsidiaries as of the end of such fiscal quarter, together with related
consolidated and consolidating statements of operations and retained
earnings and of cash flows for such fiscal quarter, in each case setting
forth in comparative form consolidated and consolidating figures for the
corresponding period of the preceding fiscal year, all such financial
information described above to be in reasonable form and detail and
reasonably acceptable to the Agent, and accompanied by a certificate of
the chief financial officer of the Lessee to the effect that such
quarterly financial statements fairly present in all material respects
the financial condition of the Credit Parties and their Consolidated
Subsidiaries and have been prepared in accordance with GAAP, subject to
changes resulting from audit and normal year-end audit adjustments.
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(iii) Officer's Certificate. At the time of delivery of
the financial statements provided for in Sections 8.3A(a)(i) and
8.3A(a)(ii) above, a certificate of the chief financial officer of the
Lessee or the Parent, as applicable, substantially in the form of
Schedule 8.3A(a)(iii), (i) demonstrating compliance with the financial
covenants contained in Section 8.3(k) by calculation thereof as of the
end of each such fiscal period and (ii) stating that no Default or Event
of Default exists, or if any Default or Event of Default does exist,
specifying the nature and extent thereof and what action the Credit
Parties propose to take with respect thereto.
(iv) Annual Business Plan and Budgets. At least 30 days
prior to the end of each fiscal year of the Lessee, beginning with the
fiscal year ending December 31, 1999, an annual budget of the Parent and
its Consolidated Subsidiaries containing, among other things, pro forma
financial statements for the next fiscal year.
(v) Accountant's Certificate. Within 120 days after the
close of each fiscal year of the Lessee, a certificate of the
accountants conducting the annual audit stating that they have reviewed
this Credit Agreement and stating further whether, in the course of
their audit, they have become aware of any Default or Event of Default
and, if any such Default or Event of Default exists, specifying the
nature and extent thereof.
(vi) Auditor's Reports. Promptly upon receipt thereof, a
copy of any other report or "management letter" submitted by independent
accountants to the Parent or any of its Consolidated Subsidiaries in
connection with any annual, interim or special audit of the books of
such Person.
(vii) Reports. Promptly upon transmission or receipt
thereof, (i) copies of any filings and registrations with, and reports
to or from, the Securities and Exchange Commission, or any successor
agency, and copies of all financial statements, proxy statements,
notices and reports as the Parent or any Consolidated Subsidiary shall
send to its shareholders or to a holder of any Indebtedness owed by the
Parent or any Consolidated Subsidiary in its capacity as such a holder
and (ii) upon the request of the Agent, all reports and written
information to and from the United States Environmental Protection
Agency, or any state or local agency responsible for environmental
matters, the United States Occupational Health and Safety
Administration, or any state or local agency responsible for health and
safety matters, or any successor agencies or authorities concerning
environmental, health or safety matters.
(viii) ERISA. Upon the Parent, any of its Consolidated
Subsidiaries or any ERISA Affiliate obtaining knowledge thereof, the
Lessee will give written notice to the Agent promptly (and in any event
within five Business Days) of: (i) any event or condition, including,
but not limited to, any Reportable Event, that constitutes, or might
reasonably lead to, an ERISA Event; (ii) with respect to any
Multiemployer Plan, the receipt of notice as prescribed in ERISA or
otherwise of any withdrawal liability assessed against a Credit Party or
any of its Consolidated Subsidiaries or any ERISA Affiliates, or of a
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determination that any Multiemployer Plan is in reorganization or
insolvent (both within the meaning of Title IV of ERISA); (iii) the
failure to make full payment on or before the due date (including
extensions) thereof of all amounts which a Credit Party or any of its
Consolidated Subsidiaries or any ERISA Affiliate is required to
contribute to each Plan pursuant to its terms and as required to meet
the minimum funding standard set forth in ERISA and the Code with
respect thereto; or (iv) any change in the funding status of any Plan
that could have a Material Adverse Effect, together with a description
of any such event or condition or a copy of any such notice and a
statement by the chief financial officer of the Lessee briefly setting
forth the details regarding such event, condition, or notice, and the
action, if any, which has been or is being taken or is proposed to be
taken by a Credit Party or any of its Consolidated Subsidiaries with
respect thereto. Promptly upon request, the Lessee shall furnish the
Agent and the Lenders with such additional information concerning any
Plan as may be reasonably requested, including, but not limited to,
copies of each annual report/return (Form 5500 series), as well as all
schedules and attachments thereto required to be filed with the
Department of Labor and/or the Internal Revenue Service pursuant to
ERISA and the Code, respectively, for each "plan year" (within the
meaning of Section 3(39) of ERISA).
(ix) Environmental.
(A) Upon the reasonable written request of the Agent, the
Lessee will furnish or cause to be furnished to the Agent, at the
Lessee's expense, a report of an environmental assessment of
reasonable scope, form and depth, (including, where appropriate,
invasive soil or groundwater sampling) by a consultant reasonably
acceptable to the Agent as to the nature and extent of the
presence of any Hazardous Materials on any Real Properties and as
to the compliance by a Credit Party or any of its Consolidated
Subsidiaries with Environmental Laws at such Real Properties. If
the Lessee fails to deliver such an environmental report within
seventy-five (75) days after receipt of such written request then
the Agent may arrange for same, and the Credit Parties hereby
grant to the Agent and their representatives access to the Real
Properties to reasonably undertake such an assessment (including,
where appropriate, invasive soil or groundwater sampling). The
reasonable cost of any assessment arranged for by the Agent
pursuant to this provision will be payable by the Credit Parties
on demand (except that during the Construction Period, such cost
shall be paid by Lessor; provided, however, the Lessor shall pay
such amounts described in this Section 8.3A(a)(ix) only if funds
are made available by the Lenders and the Holders in an amount
sufficient to allow such payment) and added to the obligations
secured by the Security Documents.
(B) The Lessee and its Consolidated Subsidiaries will
conduct and complete all investigations, studies, sampling, and
testing and all remedial, removal, and other actions necessary to
address all Hazardous Materials on, from or affecting any of the
Real Properties to the extent necessary to be in compliance with
all Environmental Laws and with the validly issued orders and
directives of all
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Governmental Authorities with jurisdiction over such Real
Properties to the extent any failure could have a Material
Adverse Effect.
(x) Other Information. With reasonable promptness upon any
such request, such other information regarding the business, properties
or financial condition of a Credit Party and any of its Consolidated
Subsidiaries as the Agent or the Majority Secured Parties may reasonably
request.
(xi) Reports and financial statements required to be
delivered pursuant to subsections (a)(i), (a)(ii) and (a)(vii)(i) of
this Section 8.3A(a) shall be deemed to have been delivered on the date
on which such report is posted on the Securities and Exchange
Commission's website on the internet at the website address www.sec.gov
or the Free Edgar website on the internet at the website
www.freeedgar.com and after Lessee has provided written notice to the
Agent, each Lender and each Holder that such report or financial
statement has been so posted; provided that Lessee shall deliver paper
copies of such reports and financial statements to the Agent and any
Lender or Holder that requests Lessee to deliver such paper copies until
written notice to cease delivering paper copies is given by the Agent or
such Lender or Holder; provided further that, notwithstanding the
foregoing, Lessee shall be required to deliver paper copies to each of
the Agent and any Lender or Holder of any other documentation required
pursuant to this Section 8.3A(a). The Agent shall have no obligation to
request the delivery or to maintain copies of the reports referred to in
subsections (a)(i), (a)(ii) and (a)(vii)(i) of this Section 8.3A(a) or
to monitor compliance by Lessee with any such request for delivery and
each Lender or Holder shall be solely responsible for requesting
delivery to it or maintaining copies of such reports and financial
statements.
(b) PRESERVATION OF EXISTENCE AND FRANCHISES.
Each of the Credit Parties will, and will cause each of its
Consolidated Subsidiaries to, do all things necessary to preserve and
keep in full force and effect its existence, rights, franchises and
authority, except in connection with any Permitted Acquisition.
(c) BOOKS AND RECORDS.
Each of the Credit Parties will, and will cause each of its
Consolidated Subsidiaries to, keep complete and accurate books and
records of its transactions in accordance with good accounting practices
on the basis of GAAP (including the establishment and maintenance of
appropriate reserves).
(d) COMPLIANCE WITH LAW.
Each of the Credit Parties will, and will cause each of its
Consolidated Subsidiaries to, comply with all laws, rules, regulations
and orders, and all applicable restrictions imposed by all Governmental
Authorities, applicable to it and its Property if noncompliance
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with any such law, rule, regulation, order or restriction could have a
Material Adverse Effect.
(e) PAYMENT OF TAXES AND OTHER INDEBTEDNESS.
Subject to Lessee's permitted contest rights under Section 11.2
hereof and Section 13.1 of the Lease, each of the Credit Parties will,
and will cause each of its Consolidated Subsidiaries to, pay and
discharge (a) all taxes, assessments and governmental charges or levies
imposed upon it, or upon its income or profits, or upon any of its
properties, before they shall become delinquent, (b) all lawful claims
(including claims for labor, materials and supplies) which, if unpaid,
might give rise to a Lien upon any of its properties, and (c) except as
prohibited hereunder, all of its other Indebtedness as it shall become
due; provided, however, that a Credit Party and any of its Consolidated
Subsidiaries shall not be required to pay any such tax, assessment,
charge, levy, claim or Indebtedness which is being contested in good
faith by appropriate proceedings and as to which adequate reserves
therefor have been established in accordance with GAAP, unless the
failure to make any such payment (i) could give rise to an immediate
right to foreclose on a Lien securing such amounts or (ii) could have a
Material Adverse Effect.
(f) MAINTENANCE OF PROPERTY.
Each of the Credit Parties will, and will cause each of its
Consolidated Subsidiaries to, maintain and preserve its properties and
equipment material to the conduct of its business in good repair,
working order and condition, normal wear and tear and casualty and
condemnation excepted, and will make, or cause to be made, in such
properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements
thereto as may be needed or proper, to the extent and in the manner
customary for companies in similar businesses.
(g) PERFORMANCE OF OBLIGATIONS.
Each of the Credit Parties will, and will cause each of its
Consolidated Subsidiaries to, perform in all material respects all of
its obligations under the terms of all material agreements, indentures,
mortgages, security agreements or other debt instruments to which it is
a party or by which it is bound.
(h) FINANCIAL COVENANTS.
(i) Leverage Ratio. The Leverage Ratio, as of the last day of
each fiscal quarter of the Lessee, shall be less than or equal to:
(A) From the Initial Closing Date to and
including September 30, 2000, 2.50 to 1.0;
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(B) From October 1, 2000 to and including
September 30, 2001, 2.25 to 1.0; and
(C) From October 1, 2001 and thereafter, 2.0 to
1.0.
(ii) EBITDA. EBITDA, for each period set forth below, as shown on
the financial statements of Credit Parties and their Consolidated
Subsidiaries delivered pursuant to Section 8.3(A)(a)(i), shall not be
less than (i) $200,000,000 for each twelve month period ending December
31, 1999, March 31, 2000, June 30, 2000 and September 30, 2000, (ii)
$250,000,000 for each twelve month period ending December 31, 2000,
March 31, 2001, June 30, 2001 and September 30, 2001 (iii) $375,000,000
for each twelve month period ending December 31, 2001, March 31, 2002,
June 30, 2002 and September 30, 2002, and (iv) $500,000,000 for each
twelve month period ending as of December 31, 2002 and each March 31,
June 30, September 30 and December 31 thereafter.
(iii) Quick Ratio. The Quick Ratio, as of the last day of each
fiscal quarter of the Lessee, shall be greater than or equal to 1.50 to
1.0.
8.3B. NEGATIVE COVENANTS.
(a) INDEBTEDNESS.
No Credit Party will, nor will it permit any of its Consolidated
Subsidiaries to, contract, create, incur, assume or permit to exist any
Indebtedness, except:
(i) Indebtedness arising under this Participation
Agreement and the other Operative Agreements;
(ii) Indebtedness of a Credit Party and its Consolidated
Subsidiaries set forth in Schedule 8.3B(a)(ii) (and renewals,
refinancings and extensions thereof on terms and conditions no less
favorable to such Person than such existing Indebtedness);
(iii) purchase money Indebtedness (including obligations
in respect of Capital Leases) hereafter incurred by a Credit Party or
any of its Consolidated Subsidiaries to finance the purchase of fixed
assets provided that (i) the total of all such Indebtedness for all such
Persons taken together (including any such Indebtedness referred to in
subsection (ii) above) shall not exceed (A) during fiscal year 1999 and
2000, an aggregate principal amount of $25,000,000 at any one time
outstanding and (B) at any time subsequent to fiscal year 2000,
$40,000,000 at any one time outstanding; (ii) such Indebtedness when
incurred shall not exceed the purchase price of the asset(s) financed;
and (iii) no such Indebtedness shall be refinanced for a principal
amount in excess of the principal balance outstanding thereon at the
time of such refinancing;
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(iv) other unsecured Indebtedness (exclusive of
Indebtedness permitted under subsection (v) and subsection (vi) of this
Section 8.3B(a)) of the Credit Parties and their Consolidated
Subsidiaries in an aggregate amount not to exceed $300,000,000 on terms
and conditions satisfactory in form and substance to the Majority
Secured Parties; provided, however, the amount of Indebtedness permitted
under this subsection (iv) shall be reduced by an amount equal to the
sum of (a) the aggregate outstanding Loans, plus (b) the aggregate
outstanding Holder Advances, plus (c) accrued and unpaid Interest or
Holder Yield due and owing on such Loans or Holder Advances, plus (d)
any other amounts due and owing by the Lessee or the Construction Agent
to any Person under any Operative Agreement;
(v) the Subordinated Debt;
(vi) Indebtedness of a Credit Party consisting of
unsecured convertible subordinated debentures on terms and conditions
(including, without limitation, the subordination terms) reasonably
acceptable to the Agent, and any renewal, refinancings or extensions
thereof on terms and conditions (including, without limitation, the
subordinations terms) reasonably acceptable to the Agent; and
(vii) Indebtedness arising under the Mountain View Lease
Financing.
(b) LIENS.
No Credit Party will, nor will it permit any of its Consolidated
Subsidiaries to contract, create, incur, assume or permit to exist any
Lien with respect to any of its Property, whether now owned or after
acquired, except for Permitted Liens.
(c) NATURE OF BUSINESS.
No Credit Party will, nor will it permit any of its Consolidated
Subsidiaries to, substantively alter the character or conduct of its
business from that conducted as of the Initial Closing Date or engage in
any business other than the business conducted as of the Initial Closing
Date other than activities in the systems management software business
substantially similar or related to such businesses.
(d) CONSOLIDATION, MERGER, DISSOLUTION, ETC.
No Credit Party will, nor will it permit any Consolidated
Subsidiaries to, enter into any transaction of merger or consolidation
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution); provided that, notwithstanding the foregoing provisions of
this Section 8.3B(d), (a) the Lessee may merge or consolidate with any
of its Consolidated Subsidiaries provided that (i) the Lessee shall be
the continuing or surviving corporation, and (ii) after giving effect to
such transaction, no Default or Event of Default arises, (b) any
Consolidated Subsidiary of the Lessee may be merged or consolidated with
or into any other Consolidated Subsidiary of the Lessee provided that
after giving effect to such
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transaction no Default or Event of Default exists and (c) any
Wholly-Owned Subsidiary of the Lessee may dissolve, liquidate or wind up
its affairs at any time provided that such dissolution, liquidation or
winding up, as applicable, could not have a Material Adverse Effect.
(e) ASSET DISPOSITIONS.
No Credit Party will, nor will it permit any of its Consolidated
Subsidiaries to, sell, lease, transfer or otherwise dispose of any
Property (including, without limitation, pursuant to any sale/leaseback
transaction or securitization transaction) other than (i) the sale of
assets in the ordinary course of business for fair consideration, (ii)
the sale or disposition of assets no longer used or useful in the
conduct of such Person's business and (iii) the sale by NSMG for fair
consideration of those lines of business identified on Schedule 8.3B(e).
(f) INVESTMENTS.
No Credit Party will, nor will it permit any of its Consolidated
Subsidiaries to, make Investments in or to any Person, except for
Permitted Investments.
(g) RESTRICTED PAYMENTS.
No Credit Party will, nor will it permit any of its Consolidated
Subsidiaries to, directly or indirectly, declare, order, make or set
apart any sum for or pay any Restricted Payment, except (i) to make
dividends payable solely in the same class of Capital Stock of such
Person so long as no Default or Event of Default exists and is
continuing or would be directly or indirectly caused as a result
thereof, (ii) to make dividends or other distributions payable to the
Lessee (directly or indirectly through Subsidiaries), (iii) prior to the
Reorganization, the repurchase by the Lessee of outstanding shares of
Capital Stock of the Lessee so long as no Default or Event of Default
exists and is continuing or would be directly or indirectly caused as a
result thereof and (iv) after the Reorganization, the repurchase by the
Parent of outstanding shares of Capital Stock of the Parent so long as
no Default or Event of Default exists and is continuing or would be
directly or indirectly caused as a result thereof.
(h) OTHER INDEBTEDNESS.
No Credit Party will, nor will it permit any of its Consolidated
Subsidiaries to, (i) after the issuance thereof, amend or modify (or
permit the amendment or modification of) any of the terms of any
Indebtedness of a Credit Party or any of its Consolidated Subsidiaries
if such amendment or modification would add or change any terms in a
manner adverse to such Credit Party or any of its Consolidated
Subsidiaries, or shorten the final maturity or average life to maturity
or require any payment to be made sooner than originally scheduled or
increase the interest rate applicable thereto or change any
subordination provision thereof or (ii) make (or give any notice with
respect thereto) any voluntary or optional payment or prepayment or
redemption or acquisition for value of
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(including without limitation, by way of depositing money or securities
with the trustee with respect thereto before due for the purpose of
paying when due), refund, refinance or exchange of any other
Indebtedness of a Credit Party or any of its Consolidated Subsidiaries.
(i) TRANSACTIONS WITH AFFILIATES.
No Credit Party will, nor will it permit any of its Consolidated
Subsidiaries to, enter into or permit to exist any transaction or series
of transactions with any officer, director, shareholder, Subsidiary or
Affiliate of such Person other than (a) transactions permitted by
Section 8.3B(d), Section 8.3B(f) or Section 8.3B(g), (b) normal
compensation and reimbursement of expenses of officers and directors,
(c) any employment agreement (including customary benefits thereunder)
that is entered into in the ordinary course of business and (d) other
transactions which are entered into in the ordinary course of such
Person's business on terms and conditions substantially as favorable to
such Person as would be obtainable by it in a comparable arms-length
transaction with a Person other than an officer, director, shareholder,
Subsidiary or Affiliate.
(j) FISCAL YEAR; ORGANIZATIONAL DOCUMENTS.
No Credit Party will, nor will it permit any of its Consolidated
Subsidiaries to, (a) change its fiscal year without having first
provided 30 days prior written notice to the Agent, or (b) amend, modify
or change its articles of incorporation (or corporate charter or other
similar organizational document) or bylaws (or other similar document)
in any manner that would reasonably be likely to adversely affect the
rights of the Lenders and Holders without the prior written consent of
the Majority Secured Parties.
(k) LIMITATION ON RESTRICTED ACTIONS.
No Credit Party will, nor will it permit any of its Consolidated
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 such Person to (a) pay dividends or make any other
distributions on such Person's Capital Stock or with respect to any
other interest or participation in, or measured by, its profits, (b) pay
any Indebtedness or other obligation owed to a Credit Party or any of
its Consolidated Subsidiaries, (c) make loans or advances to Credit
Party or any of its Consolidated Subsidiaries, (d) sell, lease or
transfer any of its properties or assets to a Credit Party or any of its
Consolidated Subsidiaries, except (in respect of any of the matters
referred to in clauses (a)-(d) above) for such encumbrances or
restrictions existing under or by reason of (i) this Participation
Agreement and the other Operative Agreements or (ii) applicable law.
(l) OWNERSHIP OF SUBSIDIARIES
Notwithstanding any other provisions of this Credit Agreement to
the contrary, the Credit Parties will not, nor will they permit any of
their Consolidated Subsidiaries to, (i)
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permit any Person (other than the Parent, the Lessee or any Wholly-Owned
Subsidiary of the Lessee) to own any Capital Stock of any Subsidiary of
a Credit Party, (ii) permit any Subsidiary of a Credit Party to issue
any shares of preferred Capital Stock or (iii) permit, create, incur,
assume or suffer to exist any Lien on any Capital Stock of any
Subsidiary of a Credit Party.
(m) SALE LEASEBACKS.
No Credit Party will, nor will it permit any of its Consolidated
Subsidiaries to, directly or indirectly, become or remain liable as
lessee or as guarantor or other surety with respect to any lease,
whether an Operating Lease or a Capitalized Lease, of any Property
(whether real, personal or mixed), whether now owned or hereafter
acquired, (a) which such Credit Party or any of its Consolidated
Subsidiaries has sold or transferred or is to sell or transfer to a
Person which is not a Credit Party or any of its Consolidated
Subsidiaries or (b) which a Credit Party or any of its Consolidated
Subsidiaries intends to use for substantially the same purpose as any
other Property which has been sold or is to be sold or transferred by
such Credit Party or its Consolidated Subsidiaries to another Person
which is not a Credit Party or any of its Consolidated Subsidiaries in
connection with such lease.
(n) NO FURTHER NEGATIVE PLEDGES.
No Credit Party will, nor will it permit any of its Consolidated
Subsidiaries to, enter into, assume or become subject to any agreement
prohibiting or otherwise restricting the creation or assumption of any
Lien upon its properties or assets, whether now owned or hereafter
acquired, or requiring the grant of any security for any obligation if
security is given for any other obligation, except pursuant to this
Participation Agreement and the other Operative Agreements.
(o) CAPITAL EXPENDITURES.
The Credit Parties hereby agree that the Credit Parties and their
Consolidated Subsidiaries will not make any Capital Expenditures if any
Default or Event of Default has occurred and is continuing or would be
directly or indirectly caused as a result thereof.
8.4. SHARING OF CERTAIN PAYMENTS.
Except for Excepted Payments, the parties hereto acknowledge and agree
that all payments due and owing by any Credit Party to the Lessor under the
Lease or any of the other Operative Agreements shall be made by such Credit
Party directly to the Agent as more particularly provided in Section 8.7 hereof.
The Lessor, the Holders, the Agent, the Lenders and the Credit Parties
acknowledge the terms of Section 8.7 of this Agreement regarding the allocation
of payments and other amounts made or received from time to time under the
Operative Agreements and agree, that all such payments and amounts are to be
allocated as provided in Section 8.7 of this Agreement.
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8.5. GRANT OF EASEMENTS, ETC.
The Owner Trustee, the Agent, the Lenders and the Holders hereby agree
that, so long as no Event of Default shall have occurred and be continuing, the
Lessee may take the following actions in the name and stead of the Owner Trustee
(but at Lessee's sole cost and expense) in connection with the transactions
contemplated by the Construction Agency Agreement, the Lease or the other
Operative Agreements, (i) grant easements and other rights in the nature of
easements with respect to any Property, (ii) release existing easements or other
rights in the nature of easements which are for the benefit of any Property,
(iii) execute and deliver to any Person any instrument appropriate to confirm or
effect such grants or releases, and (iv) execute and deliver to any Person such
other documents or materials in connection with the acquisition, development,
construction, testing or operation of any Property, including without limitation
reciprocal easement agreements, construction contracts, operating agreements,
development agreements, plats, replats or subdivision documents; provided, that
each of the agreements referred to in this Section 8.5 shall be entered into
consistent with Lessee's practices with respect to other properties owned by the
Lessee and shall be on commercially reasonable terms so as not to diminish the
fair market value of any Property. The Owner Trustee shall, upon Lessee's
reasonable request, promptly execute and deliver any instrument necessary or
appropriate to confirm such grant, release, dedication or transfer to any Person
permitted under this Section 8.5.
8.6. APPOINTMENT BY THE AGENT, THE LENDERS, THE HOLDERS AND THE OWNER
TRUSTEE.
The Holders hereby appoint the Agent to act as collateral agent for the
Holders in connection with the Lien granted by the Security Documents to secure
the Holder Amount. The Lenders and the Holders acknowledge and agree and direct
that the rights and remedies of the beneficiaries of the Lien of the Security
Documents shall be exercised by the Agent on behalf of the Lenders and the
Holders as directed from time to time by the Majority Secured Parties or,
pursuant to Sections 8.2(h) and 12.4, all of the Lenders and the Holders, as the
case may be; provided, in all cases, the Agent shall allocate payments and other
amounts received in accordance with Section 8.7. The Agent is further appointed
to provide notices under the Operative Agreements on behalf of the Owner Trustee
(as determined by the Agent, in its reasonable discretion), to receive notices
under the Operative Agreements on behalf of the Owner Trustee and (subject to
Sections 8.5 and 9.2) to take such other action under the Operative Agreements
on behalf of the Owner Trustee as the Agent shall determine in its reasonable
discretion from time to time. The Agent hereby accepts such appointments. For
purposes hereof, the provisions of Section 7 of the Credit Agreement, together
with such other terms and provisions of the Credit Agreement and the other
Operative Agreements as required for the full interpretation and operation of
Section 7 of the Credit Agreement are hereby incorporated by reference as if
restated herein for the mutual benefit of the Agent and each Holder as if each
Holder were a Lender thereunder. Outstanding Holder Advances and outstanding
Loans shall each be taken into account for purposes of determining Majority
Secured Parties. Further, the Agent shall be entitled to take such action on
behalf of the Owner Trustee as is delegated to the Agent under any Operative
Agreement (whether express or implied) as may be reasonably incidental thereto.
The parties hereto hereby agree to the provisions contained in this Section
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8.6. Any appointment of a successor agent under Section 7.9 of the Credit
Agreement shall also be effective as an appointment of a successor agent for
purposes of this Section 8.6.
8.7. COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS.
(a) Each Credit Party has agreed pursuant to Section 5.8 and
otherwise in accordance with the terms of this Agreement to pay to (i)
the Agent any and all Rent (excluding Excepted Payments) and any and all
other amounts of any kind or type under any of the Operative Agreements
due and owing or payable to any Person and (ii) each Person as
appropriate the Excepted Payments. Promptly after receipt, the Agent
shall apply and allocate, in accordance with the terms of this Section
8.7, such amounts received from any Credit Party and all other payments,
receipts and other consideration of any kind whatsoever received by the
Agent pursuant to the Security Agreement or otherwise received by the
Agent, the Holders or any of the Lenders in connection with the
Collateral, the Security Documents or any of the other Operative
Agreements. Ratable distributions among the Lenders and the Holders
under this Section 8.7 shall be made based on (in the case of the
Lenders) the ratio of the outstanding Loans to the aggregate Property
Cost and (in the case of the Holders) the ratio of the outstanding
Holder Advances to the aggregate Property Cost. Ratable distributions
among the Tranche A Lenders under this Section 8.7 shall be made based
on the ratio of the individual Tranche A Lender's Commitment for Tranche
A Loans to the aggregate of all the Tranche A Lenders' Commitments for
Tranche A Loans. Ratable distributions among the Tranche B Lenders under
this Section 8.7 shall be made based on the ratio of the individual
Tranche B Lender's Commitment for Tranche B Loans to the aggregate of
all the Tranche B Lenders' Commitments for Tranche B Loans. Ratable
distributions among the Lenders (in situations where the Tranche A
Lenders are not differentiated from the Tranche B Lenders) shall be made
based on the ratio of the individual Lender's Commitment to the
aggregate of all the Lenders' Commitments. Ratable distributions among
the Holders under this Section 8.7 shall be based on the ratio of the
individual Holder's Holder Commitment to the aggregate of all the
Holders' Holder Commitments.
(b) Payments and other amounts received by the Agent from time to
time in accordance with the terms of subparagraph (a) shall be applied
and allocated as follows (subject in all cases to Section 8.7(c)):
(i) Any such payment or amount identified as or deemed to
be Basic Rent shall be applied and allocated by the Agent first,
ratably to the Lenders and the Holders for application and
allocation to the payment of interest on the Loans and thereafter
the principal of the Loans which is due and payable on such date
and to the payment of accrued Holder Yield with respect to the
Holder Advances and thereafter the portion of the Holder Advances
which is due on such date; and second, if no Default or Event of
Default has occurred and is continuing, any excess shall be paid
to such Person or Persons as the Lessee may designate; provided,
that if a Default or Event of Default has occurred and is
continuing, such excess (if any) shall instead be held by the
Agent until the earlier of (I) the
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first date thereafter on which no Default or Event of Default
shall be continuing (in which case such payments or returns shall
then be made to such other Person or Persons as the Lessee may
designate) and (II) the Maturity Date or the Expiration Date, as
the case may be (or, if earlier, the date of any Acceleration),
in which case such amounts shall be applied and allocated in the
manner contemplated by Section 8.7(b)(iv).
(ii) If on any date the Agent or the Lessor shall receive
any amount in respect of (A) any Casualty or Condemnation
pursuant to Sections 15.1(a) or 15.1(g) of the Lease (excluding
any payments in respect thereof which are payable to the Lessee
in accordance with the Lease), or (B) the Termination Value in
connection with the delivery of a Termination Notice pursuant to
Article XVI of the Lease, or (C) the Termination Value in
connection with the exercise of the Purchase Option under Section
20.1 of the Lease or the exercise of the option of the Lessor to
transfer the Properties to the Lessee pursuant to Section 20.3 of
the Lease, or (D) any payment required to be made or elected to
be made by the Construction Agent to the Lessor pursuant to the
terms of the Construction Agency Agreement, then in each case,
the Lessor shall be required to pay such amount received (1) if
no Acceleration has occurred, to prepay the principal balance of
the Loans and the Holder Advances, on a pro rata basis, a portion
of such amount to be distributed to the Lenders and the Holders
or (2) if an Acceleration has occurred, to apply and allocate the
proceeds respecting Sections 8.7(b)(ii)(A) through 8.7(b)(ii)(D)
in accordance with Section 8.7(b)(iii) hereof.
(iii) An amount equal to any payment identified as
proceeds of the sale or other disposition (or lease upon the
exercise of remedies) of the Properties or any portion thereof,
whether pursuant to Article XXII of the Lease or the exercise of
remedies under the Security Documents or otherwise, the execution
of remedies set forth in the Lease and any payment in respect of
excess wear and tear pursuant to Section 22.3 of the Lease
(whether such payment relates to a period before or after the
Construction Period Termination Date) shall be applied and
allocated by the Agent first, ratably to the payment of the
principal and interest of the Tranche B Loans then outstanding,
second, ratably to the payment to the Holders of the outstanding
principal balance of all Holder Advances plus all outstanding
Holder Yield with respect to such outstanding Holder Advances,
third, to the extent such amount exceeds the maximum amount to be
returned pursuant to the foregoing provisions of this paragraph
(iii), ratably to the payment of the principal and interest of
the Tranche A Loans then outstanding, fourth, to any and all
other amounts owing under the Operative Agreements to the Lenders
under the Tranche B Loans, fifth, to any and all other amounts
owing under the Operative Agreements to the Holders, sixth, to
any and all other amounts owing under the Operative Agreements to
the Lenders under the Tranche A Loans, and seventh, to the extent
moneys remain after application and allocation pursuant to
clauses first through sixth above, to the Owner Trustee for
application and allocation to any and all other amounts owing to
the Holders or the Owner Trustee
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and as the Holders shall determine; provided, where no Event of
Default shall exist and be continuing and a prepayment is made
for any reason with respect to less than the full amount of the
outstanding principal amount of the Loans and the outstanding
Holder Advances, the proceeds shall be applied and allocated
ratably to the Lenders and to the Holders.
(iv) An amount equal to (A) any such payment identified as
a payment of the Maximum Amount or any payment pursuant to
Section 22.1(b) of the Lease (or otherwise) of the Maximum
Residual Guarantee Amount (and any such lesser amount as may be
required by Section 22.1(b) of the Lease) in respect of the
Properties and (B) any other amount payable upon any exercise of
remedies after the occurrence of an Event of Default not covered
by Sections 8.7(b)(i) or 8.7(b)(iii) above (including without
limitation any amount received in connection with an Acceleration
which does not represent proceeds from the sale or liquidation of
the Properties) and (C) any other amount payable to any Guarantor
pursuant to Section 6B, shall be applied and allocated by the
Agent first, ratably, to the payment of the principal and
interest balance of Tranche A Loans then outstanding, second,
ratably to the payment of the principal and interest balance of
the Tranche B Loans then outstanding, third, ratably to the
payment of the principal balance of all Holder Advances plus all
outstanding Holder Yield with respect to such outstanding Holder
Advances, fourth, to the payment of any other amounts owing to
the Lenders hereunder or under any of the other Operative
Agreement, and fifth, to the extent moneys remain after
application and allocation pursuant to clauses first through
fourth above, to the Owner Trustee for application and allocation
to Holder Advances and Holder Yield and any other amounts owing
to the Holders or the Owner Trustee as the Holders shall
determine.
(v) An amount equal to any such payment identified as
Supplemental Rent shall be applied and allocated by the Agent to
the payment of any amounts then owing to the Agent, the Lenders,
the Holders and the other parties to the Operative Agreements (or
any of them) (other than any such amounts payable pursuant to the
preceding provisions of this Section 8.7(b)) as shall be
determined by the Agent in its reasonable discretion; provided,
however, that Supplemental Rent received upon the exercise of
remedies after the occurrence and continuance of an Event of
Default in lieu of or in substitution of the Maximum Residual
Guarantee Amount or as a partial payment thereon shall be applied
and allocated as set forth in Section 8.7(b)(iv).
(vi) The Agent in its reasonable judgment shall identify
the nature of each payment or amount received by the Agent and
apply and allocate each such amount in the manner specified
above.
(c) Upon the payment in full of the Loans, the Holder Advances
and all other amounts then due and owing by the Owner Trustee hereunder
or under any Credit
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Document and the payment in full of all other amounts then due and owing
to the Lenders, the Holders, the Agent, the Owner Trustee and the other
Financing Parties pursuant to the Operative Agreements, any moneys
remaining with the Agent shall be returned to the Lessee. In the event
of an Acceleration it is agreed that, prior to the application and
allocation of amounts received by the Agent in the order described in
Section 8.7(b) above or any distribution of money to the Lessee, any
such amounts shall first be applied and allocated to the payment of (i)
any and all sums advanced by the Agent in order to preserve the
Collateral or to preserve its Lien thereon, (ii) the expenses of
retaking, holding, preparing for sale or lease, selling or otherwise
disposing or realizing on the Collateral, or of any exercise by the
Agent of its rights under the Security Documents, together with
reasonable attorneys' fees and expenses and court costs and (iii) any
and all other amounts reasonably owed to the Agent under or in
connection with the transactions contemplated by the Operative
Agreements (including without limitation any accrued and unpaid
administration fees).
8.8. RELEASE OF PROPERTIES, ETC.
If the Lessee shall at any time purchase any Property pursuant to the
Lease, or the Construction Agent shall purchase any Property pursuant to the
Construction Agency Agreement, or if any Property shall be sold in accordance
with Article XXII of the Lease, then, upon satisfaction by the Owner Trustee of
its obligation to prepay the Loans, Holder Advances and all other amounts owing
to the Lenders and the Holders under the Operative Agreements, the Agent is
hereby authorized and directed to release such Properties from the Liens created
by the Security Documents to the extent of its interest therein. In addition,
upon the termination of the Commitments and the Holder Commitments and the
payment in full of the Loans, the Holder Advances and all other amounts owing by
the Owner Trustee and the Lessee hereunder or under any other Operative
Agreement the Agent is hereby authorized and directed to release all of the
Properties from the Liens created by the Security Documents to the extent of its
interest therein. Upon request of the Owner Trustee following any such release,
the Agent shall, at the sole cost and expense of the Lessee, execute and deliver
to the Owner Trustee and the Lessee such documents as the Owner Trustee or the
Lessee shall reasonably request to evidence such release.
SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT.
9.1. THE CONSTRUCTION AGENT'S AND THE LESSEE'S CREDIT AGREEMENT RIGHTS.
Notwithstanding anything to the contrary contained in the Credit
Agreement, the Agent, the Lenders, the Holders, the Credit Parties and the Owner
Trustee hereby agree that, prior to the occurrence and continuation of any
Default or Event of Default, the Construction Agent or the Lessee, as the case
may be, shall have the following rights:
(a) the right to designate an account to which amounts funded
under the Operative Agreements shall be credited pursuant to Section
2.3(a) of the Credit Agreement;
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(b) the right to terminate or reduce the Commitments pursuant to
Section 2.5(a) of the Credit Agreement;
(c) the right to exercise the conversion and continuation options
pursuant to Section 2.7 of the Credit Agreement;
(d) the right to receive any notice and any certificate, in each
case issued pursuant to Section 2.11(a) of the Credit Agreement;
(e) the right to replace any Lender pursuant to Section 2.11(b)
of the Credit Agreement;
(f) the right to approve any successor agent pursuant to Section
7.9 of the Credit Agreement;
(g) the right to consent to any assignment by a Lender to which
the Lessor has the right to consent pursuant to Section 9.8 of the
Credit Agreement; and
(h) the right to notice of and the opportunity to cure any Credit
Agreement Event of Default within the applicable period set forth in
Section 6 of the Credit Agreement (except that the Lessee shall not have
any additional right to cure any Credit Agreement Event of Default that
is also a Lease Event of Default beyond such cure rights as are
expressly set forth in Section 17 of the Lease).
9.2. THE CONSTRUCTION AGENT'S AND THE LESSEE'S TRUST AGREEMENT RIGHTS.
Notwithstanding anything to the contrary contained in the Trust
Agreement, the Credit Parties, the Owner Trustee and the Holders hereby agree
that, prior to the occurrence and continuation of any Default or Event of
Default, the Construction Agent or the Lessee, as the case may be, shall have
the following rights:
(a) the right to exercise the conversion and continuation options
pursuant to Section 3.8 of the Trust Agreement;
(b) the right to receive any notice and any certificate, in each
case issued pursuant to Section 3.9(a) of the Trust Agreement;
(c) the right to replace any Holder pursuant to Section 3.9(b) of
the Trust Agreement;
(d) the right to exercise the removal options contained in
Section 9.1 of the Trust Agreement; provided, however, that no removal
of the Owner Trustee and appointment of a successor Owner Trustee by the
Holders pursuant to Section 9.1 of the
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Trust Agreement shall be made without the prior written consent (not to
be unreasonably withheld or delayed) of the Lessee.
SECTION 10. TRANSFER OF INTEREST.
10.1. RESTRICTIONS ON TRANSFER.
Each Lender may participate, assign or transfer all or a portion of its
interest hereunder and under the other Operative Agreements in accordance with
Sections 9.7 and 9.8 of the Credit Agreement; provided, each participant,
assignee or transferee must obtain the same ratable interest in Tranche A Loans,
Tranche A Commitments, Tranche B Loans and Tranche B Commitments (and to the
extent the selling Lender is also a Holder (or an Affiliate of a Holder), each
such participant, assignor or transferee must also obtain the same ratable
interest in and to the Holder Advances, Holder Commitments and the Trust
Estate); provided further, that each Lender that participates, assigns or
transfers all or a portion of its interest hereunder and under the other
Operative Agreements shall deliver to the Agent a copy of each Assignment and
Acceptance (as referenced in Section 9.8 of the Credit Agreement) for purposes
of maintaining the Register. The Holders may, directly or indirectly, assign,
convey or otherwise transfer any of their right, title or interest in or to the
Trust Estate or the Trust Agreement with the prior written consent of the Agent
and the Lessee (which consent shall not be unreasonably withheld or delayed) and
in accordance with the terms of Section 11.8(b) of the Trust Agreement;
provided, to the extent the selling Holder is also a Lender (or an Affiliate of
a Lender), each such assignee, receiver of a conveyance or other transferee must
also obtain the same ratable interest in and to the Tranche A Loans, Tranche A
Commitments, Tranche B Loans and Tranche B Commitments. The Owner Trustee may,
subject to the rights of the Lessee under the Lease and the other Operative
Agreements and to the Lien of the applicable Security Documents but only with
the prior written consent of the Agent (which consent may be withheld by the
Agent in its sole discretion) and (provided, no Default or Event of Default has
occurred and is continuing) with the consent of the Lessee, directly or
indirectly, assign, convey, appoint an agent with respect to enforcement of, or
otherwise transfer any of its right, title or interest in or to any Property,
the Lease, the Trust Agreement and the other Operative Agreements (including
without limitation any right to indemnification thereunder), or any other
document relating to a Property or any interest in a Property as provided in the
Trust Agreement and the Lease. The provisions of the immediately preceding
sentence shall not apply to the obligations of the Owner Trustee to transfer
Property to the Lessee or a third party purchaser pursuant to Article XXII of
the Lease upon payment for such Property in accordance with the terms and
conditions of the Lease. No Credit Party may assign any of the Operative
Agreements or any of their respective rights or obligations thereunder or with
respect to any Property in whole or in part to any Person without the prior
written consent of the Agent, the Lenders, the Holders and the Lessor.
10.2. EFFECT OF TRANSFER.
From and after any transfer effected in accordance with this Section 10,
the transferor shall be released, to the extent of such transfer, from its
liability hereunder and under the other
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documents to which it is a party in respect of obligations to be performed on or
after the date of such transfer; provided, however, that any transferor shall
remain liable hereunder and under such other documents to the extent that the
transferee shall not have assumed the obligations of the transferor thereunder.
Upon any transfer by the Owner Trustee, a Holder or a Lender as above provided,
any such transferee shall assume the obligations of the Owner Trustee, the
Holder or the Lender, as the case may be, and shall be deemed an "Owner
Trustee", "Holder", or "Lender", as the case may be, for all purposes of such
documents and each reference herein to the transferor shall thereafter be deemed
a reference to such transferee for all purposes, except as provided in the
preceding sentence. Notwithstanding any transfer of all or a portion of the
transferor's interest as provided in this Section 10, the transferor shall be
entitled to all benefits accrued and all rights vested prior to such transfer
including without limitation rights to indemnification under any such document.
SECTION 11. INDEMNIFICATION.
11.1. GENERAL INDEMNITY.
Subject to and limited by in all respects by the provisions of Sections
11.6 through 11.8 and whether or not any of the transactions contemplated hereby
shall be consummated, the Indemnity Provider hereby assumes liability for and
agrees to defend, indemnify and hold harmless each Indemnified Person on an
After Tax Basis from and against any Claims, which may be imposed on, incurred
by or asserted against an Indemnified Person by any third party, including
without limitation Claims arising from the negligence of an Indemnified Person
(but not to the extent such Claims arise from the gross negligence or willful
misconduct of such Indemnified Person itself, as determined by a court of
competent jurisdiction, as opposed to gross negligence or willful misconduct
imputed to such Indemnified Person) in any way relating to or arising or alleged
to arise out of the execution, delivery, performance or enforcement of this
Agreement, the Lease or any other Operative Agreement or on or with respect to
any Property or any component thereof, including without limitation Claims in
any way relating to or arising or alleged to arise out of (a) the financing,
refinancing, purchase, acceptance, rejection, ownership, design, construction,
refurbishment, development, delivery, acceptance, nondelivery, leasing,
subleasing, possession, use, occupancy, operation, maintenance repair,
modification, transportation, condition, sale, return, repossession (whether by
summary proceedings or otherwise), or any other disposition of any Property or
any part thereof, including without limitation the acquisition, holding or
disposition of any interest in the Property, lease or agreement comprising a
portion of any thereof; (b) any latent or other defects in any Property or any
portion thereof whether or not discoverable by an Indemnified Person or the
Indemnity Provider; (c) a violation of Environmental Laws, Environmental Claims
or other loss of or damage to any property or the environment relating to the
Property, the Lease, the Construction Agency Agreement or the Indemnity
Provider; (d) the Operative Agreements, or any transaction contemplated thereby;
(e) any breach by the Indemnity Provider of any of its representations or
warranties under the Operative Agreements to which the Indemnity Provider is a
party or failure by the Indemnity Provider to perform or observe any covenant or
agreement to be performed by it under any of the Operative Agreements; (f) the
transactions contemplated hereby or by any
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other Operative Agreement, in respect of the application of Parts 4 and 5 of
Subtitle B of Title I of ERISA; (g) personal injury, death or property damage,
including without limitation Claims based on strict or absolute liability in
tort; and (h) any fees, expenses and/or other assessments by any business park
or any other applicable entity with oversight responsibility for the applicable
Property.
If a written Claim is made against any Indemnified Person or if any
proceeding shall be commenced against such Indemnified Person (including without
limitation a written notice of such proceeding), for any Claim, such Indemnified
Person shall promptly notify the Indemnity Provider in writing and shall not
take action with respect to such Claim without the consent of the Indemnity
Provider for thirty (30) days after the receipt of such notice by the Indemnity
Provider; provided, however, that in the case of any such Claim, if action shall
be required by law or regulation to be taken prior to the end of such period of
thirty (30) days, such Indemnified Person shall endeavor to, in such notice to
the Indemnity Provider, inform the Indemnity Provider of such shorter period,
and no action shall be taken with respect to such Claim without the consent of
the Indemnity Provider before seven (7) days before the end of such shorter
period; provided, further, that the failure of such Indemnified Person to give
the notices referred to in this sentence shall not diminish the Indemnity
Provider's obligation hereunder except to the extent such failure precludes in
all respects the Indemnity Provider from contesting such Claim.
If, within thirty (30) days of receipt of such notice from the
Indemnified Person (or such shorter period as the Indemnified Person has
notified the Indemnity Provider is required by law or regulation for the
Indemnified Person to respond to such Claim), the Indemnity Provider shall
request in writing that such Indemnified Person respond to such Claim, the
Indemnified Person shall, at the expense of the Indemnity Provider, in good
faith conduct and control such action (including without limitation by pursuit
of appeals) (provided, however, that (A) if such Claim, in the Indemnity
Provider's reasonable discretion, can be pursued by the Indemnity Provider on
behalf of or in the name of such Indemnified Person, the Indemnified Person, at
the Indemnity Provider's request, shall allow the Indemnity Provider to conduct
and control the response to such Claim and (B) in the case of any Claim (and
notwithstanding the provisions of the foregoing subsection (A)), the Indemnified
Person may request the Indemnity Provider to conduct and control the response to
such Claim (with counsel to be selected by the Indemnity Provider and consented
to by such Indemnified Person, such consent not to be unreasonably withheld;
provided, however, that any Indemnified Person may retain separate counsel at
the expense of the Indemnity Provider in the event of a conflict of interest
between such Indemnified Person and the Indemnity Provider)) by, in the sole
discretion of the Person conducting and controlling the response to such Claim
(1) resisting payment thereof, (2) not paying the same except under protest, if
protest is necessary and proper, (3) if the payment be made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and judicial
proceedings, or (4) taking such other action as is reasonably requested by the
Indemnity Provider from time to time.
The party controlling the response to any Claim shall consult in good
faith with the non-controlling party and shall keep the non-controlling party
reasonably informed as to the conduct of the response to such Claim; provided,
that all decisions ultimately shall be made in the
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discretion of the controlling party. The parties agree that an Indemnified
Person may at any time decline to take further action with respect to the
response to such Claim and may settle such Claim if such Indemnified Person
shall waive its rights to any indemnity from the Indemnity Provider that
otherwise would be payable in respect of such Claim (and any future Claim, the
pursuit of which is precluded by reason of such resolution of such Claim) and
shall pay to the Indemnity Provider any amount previously paid or advanced by
the Indemnity Provider pursuant to this Section 11.1 by way of indemnification
or advance for the payment of an amount regarding such Claim.
Notwithstanding the foregoing provisions of this Section 11.1, an
Indemnified Person shall not be required to take any action and the Indemnity
Provider shall not be permitted to respond to any Claim in its own name or that
of the Indemnified Person unless (A) the Indemnity Provider shall have agreed to
pay and shall pay to such Indemnified Person on demand and on an After Tax Basis
all reasonable costs, losses and expenses that such Indemnified Person actually
incurs in connection with such Claim, including without limitation all
reasonable legal, accounting and investigatory fees and disbursements and, if
the Indemnified Person has informed the Indemnity Provider that it intends to
contest such Claim (whether or not the control of the contest is then assumed by
the Indemnity Provider), the Indemnity Provider shall have agreed that the Claim
is an indemnifiable Claim hereunder, (B) in the case of a Claim that must be
pursued in the name of an Indemnified Person (or an Affiliate thereof), the
amount of the potential indemnity (taking into account all similar or logically
related Claims that have been or could be raised for which the Indemnity
Provider may be liable to pay an indemnity under this Section 11.1) exceeds
$25,000 (or such lesser amount as may be subsequently agreed between the
Indemnity Provider and the Indemnified Person), (C) the Indemnified Person shall
have reasonably determined that the action to be taken will not result in any
material danger of sale, forfeiture or loss of the Property, or any part thereof
or interest therein, will not interfere with the payment of Rent, and will not
result in risk of criminal liability, (D) if such Claim shall involve the
payment of any amount prior to the resolution of such Claim, the Indemnity
Provider shall provide to the Indemnified Person an interest-free advance in an
amount equal to the amount that the Indemnified Person is required to pay (with
no additional net after-tax cost to such Indemnified Person) prior to the date
such payment is due, (E) in the case of a Claim that must be pursued in the name
of an Indemnified Person (or an Affiliate thereof), the Indemnity Provider shall
have provided to such Indemnified Person an opinion of independent counsel
selected by the Indemnity Provider and reasonably satisfactory to the
Indemnified Person stating that a reasonable basis exists to contest such Claim
(or, in the case of an appeal of an adverse determination, an opinion of such
counsel to the effect that the position asserted in such appeal will more likely
than not prevail) and (F) no Event of Default shall have occurred and be
continuing. In no event shall an Indemnified Person be required to appeal an
adverse judicial determination to the United States Supreme Court. In addition,
an Indemnified Person shall not be required to contest any Claim in its name (or
that of an Affiliate) if the subject matter thereof shall be of a continuing
nature and shall have previously been decided adversely by a court of competent
jurisdiction pursuant to the contest provisions of this Section 11.1, unless
there shall have been a change in law (or interpretation thereof) and the
Indemnified Person shall have received, at the Indemnity Provider's expense, an
opinion of independent counsel selected by the Indemnity Provider and reasonably
acceptable to the Indemnified Person stating that as a result
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of such change in law (or interpretation thereof), it is more likely than not
that the Indemnified Person will prevail in such contest. In no event shall the
Indemnity Provider be permitted to adjust or settle any Claim without the
consent of the Indemnified Person to the extent any such adjustment or
settlement involves, or is reasonably likely to involve, any performance by or
adverse admission by or with respect to the Indemnified Person.
11.2. GENERAL TAX INDEMNITY.
(a) Subject to and limited by in all respects the provisions of
Sections 11.6 through 11.8 and Section 3.9(a) of the Trust Agreement,
the Indemnity Provider shall pay and assume liability for, and does
hereby agree to indemnify, protect and defend each Property and all
Indemnified Persons, and hold them harmless against, all Impositions on
an After Tax Basis, and all payments pursuant to the Operative
Agreements shall be made free and clear of and without deduction for any
and all present and future Impositions.
(b) Notwithstanding anything to the contrary in Section 11.2(a)
hereof, the following shall be excluded from the indemnity required by
Section 11.2(a) (collectively, the "Excluded Taxes"):
(i) Taxes (other than Taxes that are, or are in the nature
of, sales, use, rental, value added, transfer or property taxes)
that are imposed on a Indemnified Person (other than the Lessor,
the Owner Trustee and the Trust) by the United States federal
government that are based on or measured by the net income
(including without limitation taxes based on capital gains and
minimum taxes) of such Person; provided, that this clause (i)
shall not be interpreted to prevent a payment from being made on
an After Tax Basis if such payment is otherwise required to be so
made;
(ii) Taxes (other than Taxes that are, or are in the
nature of, sales, use, rental, value added, transfer or property
taxes) that are imposed on any Indemnified Person (other than the
Lessor, the Owner Trustee and the Trust) by any state or local
jurisdiction or taxing authority within any state or local
jurisdiction and that are based upon or measured by the net
income (including without limitation taxes based on capital gains
and minimum taxes) of such Person; provided, however, that the
Indemnity Provider shall not have any obligation to indemnify any
Indemnified Person for any California unitary tax obligations of
the Indemnified Person that are not attributable to the payments
received under the Operative Agreements or otherwise attributable
to the transactions contemplated thereby; provided, further, that
such Taxes shall not be excluded under this subparagraph (ii) to
the extent such Taxes would have been imposed had the location,
possession or use of any Property in, the location or the
operation of the Lessee in, or the Lessee's making payments under
the Operative Agreements from, the jurisdiction imposing such
Taxes been the sole connection between such Indemnified Person
and the jurisdiction imposing such Taxes; provided, further, that
this clause (ii) shall not be interpreted to prevent a payment
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from being made on an After Tax Basis if such payment is
otherwise required to be so made;
(iii) any Tax to the extent it relates to any act, event
or omission that occurs after the termination of the Lease and
redelivery or sale of the Property in accordance with the terms
of the Lease (but not any Tax that relates to such termination,
redelivery or sale and/or to any period prior to such
termination, redelivery or sale); and
(iv) any Taxes which are imposed on an Indemnified Person
as a result of the gross negligence or willful misconduct of such
Indemnified Person itself, as determined by a court of competent
jurisdiction (as opposed to gross negligence or willful
misconduct imputed to such Indemnified Person), but not Taxes
imposed as a result of ordinary negligence of such Indemnified
Person;
(c) (i) Subject to the terms of Section 11.2(f), the Indemnity
Provider shall pay or cause to be paid all Impositions directly
to the taxing authorities where feasible and otherwise to the
Indemnified Person, as appropriate, and the Indemnity Provider
shall at its own expense, upon such Indemnified Person's
reasonable request, furnish to such Indemnified Person copies of
official receipts or other satisfactory proof evidencing such
payment.
(ii) In the case of Impositions for which no contest is
conducted pursuant to Section 11.2(f) and which the Indemnity
Provider pays directly to the taxing authorities, the Indemnity
Provider shall pay such Impositions prior to the latest time
permitted by the relevant taxing authority for timely payment. In
the case of Impositions for which the Indemnity Provider
reimburses an Indemnified Person, the Indemnity Provider shall do
so within thirty (30) days after receipt by the Indemnity
Provider of demand by such Indemnified Person describing in
reasonable detail the nature of the Imposition and the basis for
the demand (including without limitation the computation of the
amount payable), accompanied by receipts or other reasonable
evidence of such demand. In the case of Impositions for which a
contest is conducted pursuant to Section 11.2(f), the Indemnity
Provider shall pay such Impositions or reimburse such Indemnified
Person for such Impositions, to the extent not previously paid or
reimbursed pursuant to subsection (a), prior to the latest time
permitted by the relevant taxing authority for timely payment
after conclusion of all contests under Section 11.2(f).
(iii) At the Indemnity Provider's request, the amount of
any indemnification payment by the Indemnity Provider pursuant to
subsection (a) shall be verified and certified by an independent
public accounting firm mutually acceptable to the Indemnity
Provider and the Indemnified Person. The fees and expenses of
such independent public accounting firm shall be paid by the
Indemnity Provider unless such verification shall result in an
adjustment in the Indemnity Provider's favor of fifteen percent
(15%) or more of the payment as
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computed by the Indemnified Person, in which case such fee shall
be paid by the Indemnified Person.
(d) The Indemnity Provider shall be responsible for preparing and
filing any real and personal property or ad valorem tax returns in
respect of each Property and any other tax returns required for the
Owner Trustee respecting the transactions described in the Operative
Agreements. In case any other report or tax return shall be required to
be made with respect to any obligations of the Indemnity Provider under
or arising out of subsection (a) and of which the Indemnity Provider has
knowledge or should have knowledge, the Indemnity Provider, at its sole
cost and expense, shall notify the relevant Indemnified Person of such
requirement and (except if such Indemnified Person notifies the
Indemnity Provider that such Indemnified Person intends to prepare and
file such report or return) (A) to the extent required or permitted by
and consistent with Legal Requirements, make and file in the Indemnity
Provider's name such return, statement or report; and (B) in the case of
any other such return, statement or report required to be made in the
name of such Indemnified Person, advise such Indemnified Person of such
fact and prepare such return, statement or report for filing by such
Indemnified Person or, where such return, statement or report shall be
required to reflect items in addition to any obligations of the
Indemnity Provider under or arising out of subsection (a), provide such
Indemnified Person at the Indemnity Provider's expense with information
sufficient to permit such return, statement or report to be properly
made with respect to any obligations of the Indemnity Provider under or
arising out of subsection (a). Such Indemnified Person shall, upon the
Indemnity Provider's request and at the Indemnity Provider's expense,
provide any data maintained by such Indemnified Person (and not
otherwise available to or within the control of the Indemnity Provider)
with respect to each Property which the Indemnity Provider may
reasonably require to prepare any required tax returns or reports.
(e) As between the Indemnity Provider on one hand, and each
Financing Party on the other hand, the Indemnity Provider shall be
responsible for, and the Indemnity Provider shall indemnify and hold
harmless each Financing Party (without duplication of any
indemnification required by subsection (a)) on an After Tax Basis
against, any obligation for United States or foreign withholding taxes
or similar levies, imposts, charges, fees, deductions or withholdings
(collectively, "Withholdings") imposed in respect of the interest
payable on the Notes, Holder Yield payable on the Certificates or with
respect to any other payments under the Operative Agreements (all such
payments being referred to herein as "Exempt Payments" to be made
without deduction, withholding or set off) (and, if any Financing Party
receives a demand for such payment from any taxing authority or a
Withholding is otherwise required with respect to any Exempt Payment,
the Indemnity Provider shall discharge such demand on behalf of such
Financing Party); provided, however, that the obligation of the
Indemnity Provider under this Section 11.2(e) shall not apply to:
(i) Withholdings on any Exempt Payment to any Financing
Party which is a non-U.S. Person unless such Financing Party is,
on the date hereof (or
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on the date it becomes a Financing Party hereunder) and on the
date of any change in the principal place of business or the
lending office of such Financing Party, entitled to submit a Form
1001 (relating to such Financing Party and entitling it to a
complete exemption from Withholding on such Exempt Payment) or
Form 4224 or is otherwise subject to exemption from Withholding
with respect to such Exempt Payment (except where the failure of
the exemption results from a change in the principal place of
business of the Lessee; provided if a failure of exemption for
any Financing Party results from a change in the principal place
of business or lending office of any other Financing Party, then
such other Financing Party shall be liable for any Withholding or
indemnity with respect thereto), or
(ii) Any U.S. Taxes imposed solely by reason of the
failure by a non-U.S. Person to comply with applicable
certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity or
connections with the United States of America of such non-U.S.
Person if such compliance is required by statute or regulation of
the United States of America as a precondition to relief or
exemption from such U.S. Taxes.
For the purposes of this Section 11.2(e), (A) "U.S. Person" shall mean a
citizen, national or resident of the United States of America, a
corporation, partnership or other entity created or organized in or
under any laws of the United States of America or any State thereof, or
any estate or trust that is subject to Federal income taxation
regardless of the source of its income, (B) "U.S. Taxes" shall mean any
present or future tax, assessment or other charge or levy imposed by or
on behalf of the United States of America or any taxing authority
thereof or therein, (C) "Form 1001" shall mean Form 1001 (Ownership,
Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America and (D) "Form 4224" shall mean
Form 4224(R) (Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United States)
of the Department of Treasury of the United States of America (or in
relation to either such Form such successor and related forms as may
from time to time be adopted by the relevant taxing authorities of the
United States of America to document a claim to which such Form
relates). Each of the Forms referred to in the foregoing clauses (C) and
(D) shall include such successor and related forms as may from time to
time be adopted by the relevant taxing authorities of the United States
of America to document a claim to which such Form relates.
If a Financing Party or an Affiliate with whom such Financing
Party files a consolidated tax return (or equivalent) subsequently
receives the benefit in any country of a tax credit or an allowance
resulting from U.S. Taxes with respect to which it has received a
payment of an additional amount under this Section 11.2(e), such
Financing Party will pay to the Indemnity Provider such part of that
benefit as in the opinion of such Financing Party will leave it (after
such payment) in a position no more and no less favorable than it would
have been in if no additional payment had been required to be paid,
provided always that (i) such Financing Party will be the sole judge of
the amount of any such benefit and of the date on which it is received,
(ii) such Financing Party will
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have the absolute discretion as to the order and manner in which it
employs or claims tax credits and allowances available to it and (iii)
such Financing Party will not be obliged to disclose to the Indemnity
Provider any information regarding its tax affairs or tax computations.
Each non-U.S. Person that shall become a Financing Party after
the date hereof shall, upon the effectiveness of the related transfer or
otherwise upon becoming a Financing Party hereunder, be required to
provide all of the forms and statements referenced above or other
evidences of exemption from Withholdings.
(f) If a written Claim is made against any Indemnified Person or
if any proceeding shall be commenced against such Indemnified Person
(including without limitation a written notice of such proceeding), for
any Impositions, the provisions in Section 11.1 relating to notification
and rights to contest shall apply; provided, however, that the Indemnity
Provider shall have the right to conduct and control such contest only
if such contest involves a Tax other than a Tax on net income of the
Indemnified Person and can be pursued independently from any other
proceeding involving a Tax liability of such Indemnified Person.
11.3. INCREASED COSTS, ILLEGALITY, ETC.
(a) If, due to either (i) the introduction of or any change in or
in the interpretation of any law or regulation or (ii) the compliance
with any guideline or request hereafter adopted, promulgated or made by
any central bank or other governmental authority (whether or not having
the force of law), there shall be any increase in the cost to any
Financing Party of agreeing to make or making, funding or maintaining
Advances, then the Lessee shall from time to time, upon demand by such
Financing Party (with a copy of such demand to the Agent but subject to
the terms of Section 2.11 of the Credit Agreement and 3.9 of the Trust
Agreement, as the case may be), pay to the Agent for the account of such
Financing Party additional amounts sufficient to compensate such
Financing Party for such increased cost. A certificate as to the amount
of such increased cost, submitted to the Lessee and the Agent by such
Financing Party, shall be conclusive and binding for all purposes,
absent manifest error.
(b) If any Financing Party determines that compliance with any
law or regulation or any guideline or request from any central bank or
other governmental authority (whether or not having the force of law,
but in each case promulgated or made after the date hereof) affects or
would affect the amount of capital required or expected to be maintained
by such Financing Party or any corporation controlling such Financing
Party and that the amount of such capital is increased by or based upon
the existence of such Financing Party's commitment to make Advances and
other commitments of this type or upon the Advances, then, upon demand
by such Financing Party (with a copy of such demand to the Agent but
subject to the terms of Section 2.11 of the Credit Agreement and 3.9 of
the Trust Agreement), the Lessee shall pay to the Agent for the account
of such Financing Party, from time to time as specified by such
Financing Party,
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additional amounts sufficient to compensate such Financing Party or such
corporation in the light of such circumstances, to the extent that such
Financing Party reasonably determines such increase in capital to be
allocable to the existence of such Financing Party's commitment to make
such Advances. A certificate as to such amounts submitted to the Lessee
and the Agent by such Financing Party shall be conclusive and binding
for all purposes, absent manifest error.
(c) Without limiting the effect of the foregoing, the Lessee
shall pay to each Financing Party on the last day of the Interest Period
therefor so long as such Financing Party is maintaining reserves against
"Eurocurrency liabilities" under Regulation D an additional amount
(determined by such Financing Party and notified to the Lessee through
the Agent) equal to the product of the following for each Eurodollar
Loan or Eurodollar Holder Advance, as the case may be, for each day
during such Interest Period:
(i) the principal amount of such Eurodollar Loan or
Eurodollar Holder Advance, as the case may be, outstanding on
such day; and
(ii) the remainder of (x) a fraction the numerator of
which is the rate (expressed as a decimal) at which interest
accrues on such Eurodollar Loan or Eurodollar Holder Advance, as
the case may be, for such Interest Period as provided in the
Credit Agreement or the Trust Agreement, as the case may be (less
the Applicable Percentage), and the denominator of which is one
(1) minus the effective rate (expressed as a decimal) at which
such reserve requirements are imposed on such Financing Party on
such day minus (y) such numerator; and
(iii) 1/360.
(d) Without affecting its rights under Sections 11.3(a), 11.3(b)
or 11.3(c) or any other provision of any Operative Agreement, each
Financing Party agrees that if there is any increase in any cost to or
reduction in any amount receivable by such Financing Party with respect
to which the Lessee would be obligated to compensate such Financing
Party pursuant to Sections 11.3(a) or 11.3(b), such Financing Party
shall use reasonable efforts to select an alternative office for
Advances which would not result in any such increase in any cost to or
reduction in any amount receivable by such Financing Party; provided,
however, that no Financing Party shall be obligated to select an
alternative office for Advances if such Financing Party determines that
(i) as a result of such selection such Financing Party would be in
violation of any applicable law, regulation, treaty, or guideline, or
would incur additional costs or expenses or (ii) such selection would be
inadvisable for regulatory reasons or materially inconsistent with the
interests of such Financing Party.
(e) With reference to the obligations of the Lessee set forth in
Sections 11.3(a) through 11.3(d), the Lessee shall not have any
obligation to pay to any Financing Party amounts owing under such
Sections for any period which is more than one (1) year prior to the
date upon which the request for payment therefor is delivered to the
Lessee.
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(f) Notwithstanding any other provision of this Agreement, if any
Financing Party shall notify the Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts
that it is unlawful, for any Financing Party to perform its obligations
hereunder to make or maintain Eurodollar Loans or Eurodollar Holder
Advances, as the case may be, then (i) each Eurodollar Loan or
Eurodollar Holder Advance, as the case may be, will automatically, at
the earlier of the end of the Interest Period for such Eurodollar Loan
or Eurodollar Holder Advance, as the case may be, or the date required
by law, convert into an ABR Loan or an ABR Holder Advance, as the case
may be, and (iii) the obligation of the Financing Parties to make,
convert or continue Eurodollar Loans or Eurodollar Holder Advances, as
the case may be, shall be suspended until the Agent shall notify the
Lessee that such Financing Party has determined that the circumstances
causing such suspension no longer exist.
(g) If, with respect to any Advances consisting of Eurodollar
Loans and Eurodollar Holder Advances requested by the Borrower, the
Agent or the Majority Secured Parties shall have determined in good
faith (which determination shall, save for manifest error, be conclusive
and binding upon the Borrower) that (a) deposits of sufficient amount
and maturity for funding such Advances are not available to the Lenders
or the Holders in the relevant market in the ordinary course of business
or (b) by reason of circumstances affecting the relevant market,
adequate and fair means do not exist for ascertaining the rate of
interest to be applicable to such Advances, then (i) the Agent or the
Majority Secured Parties, as the case may be, shall promptly give notice
thereof to the Borrower, (ii) the notice requesting such Borrowing
shall, unless the Borrower otherwise notifies the Agent, automatically
be amended to request ABR Loans and ABR Holder Advances instead of
Eurodollar Loans and Eurodollar Holder Advances, and (iii) no Lender or
Holder, as the case may be, shall be under any obligation to make
additional Eurodollar Loans and Eurodollar Holder Advances to the
Borrower, unless and until the Agent shall have notified the Borrower
that such Eurodollar Loans and Eurodollar Holder Advances are again
available hereunder.
11.4. FUNDING/CONTRIBUTION INDEMNITY.
Subject to the provisions of Section 2.11(a) of the Credit Agreement and
3.9(a) of the Trust Agreement, as the case may be, the Lessee agrees to
indemnify each Financing Party and to hold each Financing Party harmless from
any loss or reasonable expense which such Financing Party may sustain or incur
as a consequence of (a) any default in connection with the drawing of funds for
any Advance, (b) any default in making any prepayment after a notice thereof has
been given in accordance with the provisions of the Operative Agreements or (c)
the making of a voluntary or involuntary payment of Eurodollar Loans or
Eurodollar Holder Advances, as the case may be, on a day which is not the last
day of an Interest Period with respect thereto. Such indemnification shall be in
an amount equal to the excess, if any, of (x) the amount of interest or Holder
Yield, as the case may be, which would have accrued on the amount so paid, or
not so borrowed, accepted, converted or continued for the period from the date
of such payment or of
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such failure to borrow, accept, convert or continue to the last day of such
Interest Period (or, in the case of a failure to borrow, accept, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable Eurodollar Rate plus the Applicable
Percentage for such Loan or Holder Advance, as the case may be, for such
Interest Period over (y) the amount of interest (as determined by such Financing
Party in its reasonable discretion) which would have accrued to such Financing
Party on such amount by (i) (in the case of the Lenders) reemploying such funds
in loans of the same type and amount during the period from the date of payment
or failure to borrow to the last day of the then applicable Interest Period (or,
in the case of a failure to borrow, the Interest Period that would have
commenced on the date of such failure) and (ii) (in the case of the Holders)
placing such amount on deposit for a comparable period with leading banks in the
relevant interest rate market. This covenant shall survive the termination of
the Operative Agreements and the payment of all other amounts payable hereunder.
11.5. EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT
LIABILITY, ETC.
SUBJECT TO AND LIMITED BY IN ALL RESPECTS THE PROVISIONS OF SECTION 11.6
THROUGH 11.8 AND WITHOUT LIMITING THE GENERALITY OF THE INDEMNIFICATION
PROVISIONS OF ANY AND ALL OF THE OPERATIVE AGREEMENTS, EACH PERSON PROVIDING
INDEMNIFICATION OF ANOTHER PERSON UNDER ANY OPERATIVE AGREEMENT HEREBY FURTHER
EXPRESSLY RELEASES EACH BENEFICIARY OF ANY SUCH INDEMNIFICATION FROM ALL CLAIMS
FOR LOSS OR DAMAGE, DESCRIBED IN ANY OPERATIVE AGREEMENT, CAUSED BY ANY ACT OR
OMISSION ON THE PART OF ANY SUCH BENEFICIARY ATTRIBUTABLE TO THE ORDINARY
NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH
BENEFICIARY, AND INDEMNIFIES, EXONERATES AND HOLDS EACH SUCH BENEFICIARY FREE
AND HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS,
CLAIMS, LOSSES, COSTS, LIABILITIES, DAMAGES AND EXPENSES (INCLUDING WITHOUT
LIMITATION ATTORNEY'S FEES AND EXPENSES), DESCRIBED ABOVE, INCURRED BY ANY SUCH
BENEFICIARY (IRRESPECTIVE OF WHETHER ANY SUCH BENEFICIARY IS A PARTY TO THE
ACTION FOR WHICH INDEMNIFICATION UNDER THIS AGREEMENT OR ANY OTHER OPERATIVE
AGREEMENT IS SOUGHT) ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE (WHETHER SOLE OR
CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY.
11.6. ADDITIONAL PROVISIONS REGARDING ENVIRONMENTAL INDEMNIFICATION.
Each and every Indemnified Person shall at all times have the rights and
benefits, and the Indemnity Provider shall have the obligations, in each case
provided pursuant to the Operative Agreements with respect to environmental
matters, violations of any Environmental Law, any Environmental Claim or other
loss of or damage to any property or the environment relating to
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any Property, the Lease, the Construction Agency Agreement or the Indemnity
Provider (including without limitation the rights and benefits provided pursuant
to Section 11.1(c)).
11.7. ADDITIONAL PROVISIONS REGARDING INDEMNIFICATION.
Notwithstanding the provisions of Sections 11.1, 11.2 and 11.5 (other
than with respect to matters concerning environmental indemnification referenced
in Section 11.6), (a) the Owner Trustee shall be the only beneficiary of the
provisions set forth in Sections 11.1, 11.2 and 11.5 (again, subject to the
immediately preceding parenthetical phrase) with respect to each Property solely
for the period prior to the earlier to occur of the applicable Completion Date
or Construction Period Termination Date for such Property, as applicable, and
(b) such limited rights of indemnification referenced in Section 11.7(a) (to the
extent relating to third-party claims) shall be limited to third-party claims
caused by or resulting from the Indemnity Provider's acts or omissions and/or
all other Persons acting by, through or under the Indemnity Provider. After the
earlier to occur of the applicable Completion Date or Construction Period
Termination Date for such Property, as applicable, each Indemnified Person shall
be a beneficiary of the provisions set forth in Sections 11.1, 11.2 and 11.5.
11.8. INDEMNIFICATIONS PROVIDED BY THE OWNER TRUSTEE IN FAVOR OF THE
OTHER INDEMNIFIED PERSONS.
To the extent the Indemnity Provider is not obligated to indemnify each
Indemnified Person with respect to the various matters described in this Section
11.8, the Owner Trustee shall provide such indemnities (but only to the extent
amounts sufficient to pay such indemnity are funded by the Lenders and the
Holders) in favor of each Indemnified Person in accordance with this Section
11.8 and shall pay all such amounts owed with respect to this Section 11.8 with
amounts advanced by the Lenders and the Holders (a) to the extent, but only to
the extent, amounts are available therefor with respect to the Available
Commitments and the Available Holder Commitments (subject to the rights of the
Lenders and the Holders to increase their respective commitment amounts in
accordance with the provisions of Sections 5.9) and (b) unless each Lender and
each Holder has declined in writing to fund such amount. Notwithstanding any
other provision in any other Operative Agreement to the contrary, all amounts so
advanced shall be deemed added (ratably, based on the ratio of the Property Cost
for each Property individually to the Aggregate Property Cost of all Properties
at such time) to the Property Cost of all Properties then subject to the terms
of the Operative Agreements.
Whether or not any of the transactions contemplated hereby shall be
consummated, the Owner Trustee hereby assumes liability for and agrees to
defend, indemnify and hold harmless each Indemnified Person on an After Tax
Basis from and against any Claims, which may be imposed on, incurred by or
asserted against an Indemnified Person by any third party, including without
limitation Claims arising from the negligence of an Indemnified Person (but not
to the extent such Claims arise from the gross negligence or willful misconduct
of such Indemnified Person itself, as determined by a court of competent
jurisdiction, as opposed to gross negligence or willful misconduct imputed to
such Indemnified Person or breach of such Indemnified Person's obligations under
this Agreement, the Lease or any other Operative Agreement) in any
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way relating to or arising or alleged to arise out of the execution, delivery,
performance or enforcement of this Agreement, the Lease or any other Operative
Agreement or on or with respect to any Property or any component thereof,
including without limitation Claims in any way relating to or arising or alleged
to arise out of the matters set forth in Sections 11.1(a) through 11.1(h).
The Owner Trustee shall pay and assume liability for, and does hereby
agree to indemnify, protect and defend each Property and all Indemnified
Persons, and hold them harmless against, all Impositions on an After Tax Basis,
and all payments pursuant to the Operative Agreements shall be made free and
clear of and without deduction for any and all present and future Impositions.
Notwithstanding anything to the contrary in this paragraph, the Excluded Taxes
shall be excluded from the indemnity provisions afforded by this paragraph.
THE INDEMNITY OBLIGATIONS UNDERTAKEN BY THE OWNER TRUSTEE PURSUANT TO
THIS SECTION 11.8 ARE IN ALL RESPECTS SUBJECT TO THE LIMITATIONS ON LIABILITY
REFERENCED IN SECTION 12.9.
SECTION 12. MISCELLANEOUS.
12.1. SURVIVAL OF AGREEMENTS.
The representations, warranties, covenants, indemnities and agreements
of the parties provided for in the Operative Agreements, and the parties'
obligations under any and all thereof, shall survive the execution and delivery
of this Agreement, the transfer of any Property to the Owner Trustee, the
acquisition of any Property (or any of its components), the construction of any
Improvements, the Completion of any Property, any disposition of any interest of
the Owner Trustee in any Property or any interest of the Holders in the Trust
Estate, the payment of the Notes and any disposition thereof and shall be and
continue in effect notwithstanding any investigation made by any party and the
fact that any party may waive compliance with any of the other terms, provisions
or conditions of any of the Operative Agreements. Except as otherwise expressly
set forth herein or in other Operative Agreements, the indemnities of the
parties provided for in the Operative Agreements shall survive the expiration or
termination of any thereof.
12.2. NOTICES.
All notices required or permitted to be given under any Operative
Agreement shall be in writing. Notices may be served by certified or registered
mail, postage paid with return receipt requested; by private courier, prepaid;
by telex, facsimile, or other telecommunication device capable of transmitting
or creating a written record; or personally. Mailed notices shall be deemed
delivered five (5) days after mailing, properly addressed. Couriered notices
shall be deemed delivered when delivered as addressed, or if the addressee
refuses delivery, when presented for delivery notwithstanding such refusal.
Telex or telecommunicated notices shall be deemed delivered when receipt is
either confirmed by confirming transmission equipment or
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acknowledged by the addressee or its office. Personal delivery shall be
effective when accomplished. Unless a party changes its address by giving notice
to the other party as provided herein, notices shall be delivered to the parties
at the following addresses:
If to the Construction Agent or the Lessee, or to any Guarantor,
to such entity at the following address:
VERITAS Operating Corporation
1600 Plymouth Street
Mountain View, California 94043
Attention: Jay Jones, Esq.
Telephone: (650) 335-8647
Telecopy: (650) 526-2525
If to the Owner Trustee, to it at the following address:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Val T. Orton,
Vice President
Telephone: (801) 246-5300
Telecopy: (801) 246-5053
If to the Holders, to each such Holder at the address set forth
for such Holder on Schedule I of the Trust Agreement.
If to the Agent, to it at the following address:
Bank of America, N.A.
555 California Street, 41st Floor
Mail Code CA5-705-41-01
San Francisco, CA 94104
Attention: Doug Meckelnburg
Telephone: (415) 953-9155
Telecopy: (415) 622-0632
If to any Lender, to it at the address set forth for such Lender
in Schedule 2.1 of the Credit Agreement.
From time to time any party may designate additional parties
and/or another address for notice purposes by notice to each of the
other parties hereto. Each notice hereunder shall be effective upon
receipt or refusal thereof.
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12.3. COUNTERPARTS.
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one (1) and the same
instrument.
12.4. TERMINATIONS, AMENDMENTS, WAIVERS, ETC.; UNANIMOUS VOTE MATTERS.
Each Basic Document may be terminated, amended, supplemented, waived or
modified only by an instrument in writing signed by, subject to Article VIII of
the Trust Agreement regarding termination of the Trust Agreement, the Majority
Secured Parties, the Agent and each Credit Party (to the extent such Credit
Party is a party to such Basic Document); provided, to the extent no Default or
Event of Default shall have occurred and be continuing, the Majority Secured
Parties shall not amend, supplement, waive or modify any provision of any Basic
Document in such a manner as to adversely affect the rights of any Credit Party
without the prior written consent (not to be unreasonably withheld or delayed)
of such Credit Party. Each Operative Agreement which is not a Basic Document may
be terminated, amended, supplemented, waived or modified only by an instrument
in writing signed by the parties thereto and (without the consent of any other
Financing Party) the Agent. In addition, the Unanimous Vote Matters shall
require the consent of each Lender and each Holder affected by such matter.
Notwithstanding the foregoing, no such termination, amendment,
supplement, waiver or modification shall, without the consent of the Agent and,
to the extent affected thereby, each Lender and each Holder (collectively, the
"Unanimous Vote Matters") (i) reduce the amount of any Note or any Certificate,
extend the scheduled date of maturity of any Note, extend the scheduled
Expiration Date, extend any payment date of any Note or Certificate, reduce the
stated rate of interest payable on any Note, reduce the stated Holder Yield
payable on any Certificate (other than as a result of waiving the applicability
of any post-default increase in interest rates or Holder Yields), modify the
priority of any Lien in favor of the Agent under any Security Document,
subordinate any obligation owed to such Lender or Holder, reduce any Lender
Commitment Fees or any Holder Commitment Fees payable to such Lender or Holder
(as the case may be) under this Participation Agreement, extend the scheduled
date of payment of any Lender Commitment Fees or any Holder Commitment Fees
payable to such Lender or Holder (as the case may be), fund any Advance
referenced in Section 2.1 of the Construction Agency Agreement in excess of the
then current aggregate sum of the Available Commitments and the Available Holder
Commitments, elect to decline the funding of any Transaction Expense with
respect to Sections 7.1(a) or 7.1(b), elect to decline the funding of any
indemnity payment by the Owner Trustee with respect to Section 11.8 or increase
the amount or extend the expiration date of such Lender's Commitment or the
Holder Commitment of such Holder, or (ii) terminate, amend, supplement, waive or
modify any provision of this Section 12.4 or reduce the percentages specified in
the definitions of Majority Lenders, Majority Holders or Majority Secured
Parties, or consent to the assignment or transfer by the Owner Trustee of any of
its rights and obligations under any Credit Document or release a material
portion of the Collateral (except in accordance with Section 8.8) or release any
Credit Party from its obligations under any Operative Agreement or otherwise
alter any payment obligations of any Credit Party to the
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Lessor or any Financing Party under the Operative Agreements, or (iii)
terminate, amend, supplement, waive or modify any provision of Section 7 of the
Credit Agreement (which shall also require the consent of the Agent), or (iv)
eliminate the automatic option under Section 5.3(b) of the Construction Agency
Agreement requiring that the Construction Agent pay certain liquidated damages
in exchange for the conveyance of a Property to the Construction Agent, or (v)
permit the extension of the Construction Period beyond the date that is two (2)
years from the Initial Closing Date. Any such termination, amendment,
supplement, waiver or modification shall apply equally to each of the Lenders
and the Holders and shall be binding upon all the parties to this Agreement. In
the case of any waiver, each party to this Agreement shall be restored to its
former position and rights under the Operative Agreements, and any Default or
Event of Default waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to any subsequent or other Default or Event of Default,
or impair any right consequent thereon.
If at a time when the conditions precedent set forth in the Operative
Agreements to any Loan are, in the opinion of the Majority Lenders, satisfied,
any Lender shall fail to fulfill its obligations to make such Loan (any such
Lender, a "Defaulting Lender") then, for so long as such failure shall continue,
the Defaulting Lender shall (unless the Lessee and the Majority Lenders,
determined as if the Defaulting Lender were not a "Lender", shall otherwise
consent in writing) be deemed for all purposes relating to terminations,
amendments, supplements, waivers or modifications under the Operative Agreements
to have no Loans, shall not be treated as a "Lender" when performing the
computation of Majority Lenders or Majority Secured Parties, and shall have no
rights under this Section 12.4; provided that any action taken pursuant to the
second paragraph of this Section 12.4 shall not be effective as against the
Defaulting Lender.
If at a time when the conditions precedent set forth in the Operative
Agreements to any Holder Advance are, in the opinion of the Majority Holders,
satisfied, any Holder shall fail to fulfill its obligations to make such Holder
Advance (any such Holder, a "Defaulting Holder") then, for so long as such
failure shall continue, the Defaulting Holder shall (unless the Lessee and the
Majority Holders, determined as if the Defaulting Holder were not a "Holder",
shall otherwise consent in writing) be deemed for all purposes relating to
terminations, amendments, supplements, waivers or modifications under the
Operative Agreements to have no Holder Advances, shall not be treated as a
"Holder" when performing the computation of Majority Holders or Majority Secured
Parties, and shall have no rights under this Section 12.4; provided that any
action taken pursuant to the second paragraph of this Section 12.4 shall not be
effective as against the Defaulting Holder.
12.5. HEADINGS, ETC.
The Table of Contents and headings of the various Articles and Sections
of this Agreement are for convenience of reference only and shall not modify,
define, expand or limit any of the terms or provisions hereof.
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12.6. PARTIES IN INTEREST.
Except as expressly provided herein, none of the provisions of this
Agreement are intended for the benefit of any Person except the parties hereto.
12.7. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
VENUE.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal action
or proceeding with respect to this Agreement or any other Operative
Agreement may be brought in the courts of the State of California in
Santa Clara County or of the United States for the Northern District of
California, and, by execution and delivery of this Agreement, each of
the parties to this Agreement hereby irrevocably accepts for itself and
in respect of its property, generally and unconditionally, the
nonexclusive jurisdiction of such courts. Each of the parties to this
Agreement 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 mail, postage
prepaid, to it at the address set out for notices pursuant to Section
12.2, such service to become effective three (3) days after such
mailing. Nothing herein shall affect the right of any party to serve
process in any other manner permitted by Law or to commence legal
proceedings or to otherwise proceed against any party in any other
jurisdiction.
(b) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY,
TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, WAIVES TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY OTHER
OPERATIVE AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
(c) Each of the parties to this Agreement 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 Operative Agreement
brought in the courts referred to in subsection (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.
12.8. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or
70
<PAGE> 76
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12.9. LIABILITY LIMITED.
(a) The Lenders, the Agent, the Credit Parties, the Owner Trustee
and the Holders each acknowledge and agree that the Owner Trustee is
(except as otherwise expressly provided herein or therein) entering into
this Agreement and the other Operative Agreements to which it is a party
(other than the Trust Agreement and to the extent otherwise provided in
Section 6.1 of this Agreement), solely in its capacity as trustee under
the Trust Agreement and not in its individual capacity and that the
Trust Company shall not be liable or accountable under any circumstances
whatsoever in its individual capacity for or on account of any
statements, representations, warranties, covenants or obligations stated
to be those of the Owner Trustee, except for its own gross negligence or
willful misconduct and as otherwise expressly provided herein or in the
other Operative Agreements.
(b) Anything to the contrary contained in this Agreement,
the Credit Agreement, the Notes or in any other Operative Agreement
notwithstanding, no Exculpated Person shall be personally liable in any
respect for any liability or obligation arising hereunder or in any
other Operative Agreement including without limitation the payment of
the principal of, or interest on, the Notes, or for monetary damages for
the breach of performance of any of the covenants contained in the
Credit Agreement, the Notes, this Agreement, the Security Agreement or
any of the other Operative Agreements. The Lenders, the Holders and the
Agent agree that, in the event any remedies under any Operative
Agreement are pursued, neither the Lenders, the Holders nor the Agent
shall have any recourse against any Exculpated Person, for any
deficiency, loss or Claim for monetary damages or otherwise resulting
therefrom and recourse shall be had solely and exclusively against the
Trust Estate (excluding Excepted Payments) and the Credit Parties (with
respect to the Credit Parties' obligations under the Operative
Agreements); but nothing contained herein shall be taken to prevent
recourse against or the enforcement of remedies against the Trust Estate
(excluding Excepted Payments) in respect of any and all liabilities,
obligations and undertakings contained herein and/or in any other
Operative Agreement. Notwithstanding the provisions of this Section,
nothing in any Operative Agreement shall: (i) constitute a waiver,
release or discharge of any indebtedness or obligation evidenced by the
Notes and/or the Certificates arising under any Operative Agreement or
secured by any Operative Agreement, but the same shall continue until
paid or discharged; (ii) relieve any Exculpated Person from liability
and responsibility for (but only to the extent of the damages arising by
reason of): active waste knowingly committed by any Exculpated Person
with respect to any Property, any fraud, gross negligence or willful
misconduct on the part of any Exculpated Person; (iii) relieve any
Exculpated Person from liability and responsibility for (but only to the
extent of the moneys misappropriated, misapplied or not turned over) (A)
except for Excepted Payments, misappropriation or misapplication by the
Lessor (i.e., application in a manner contrary to any of the Operative
Agreements) of any insurance proceeds or condemnation
71
<PAGE> 77
award paid or delivered to the Lessor by any Person other than the
Agent, (B) except for Excepted Payments, any deposits or any escrows or
amounts owed by the Construction Agent under the Construction Agency
Agreement held by the Lessor or (C) except for Excepted Payments, any
rent or other income received by the Lessor from any Credit Party that
is not turned over to the Agent; or (iv) affect or in any way limit the
Agent's rights and remedies under any Operative Agreement with respect
to the Rents and rights and powers of the Agent under the Operative
Agreements or to obtain a judgment against the Lessee's interest in the
Properties or the Agent's rights and powers to obtain a judgment against
the Lessor or any Credit Party (provided, that no deficiency judgment or
other money judgment shall be enforced against any Exculpated Person
except to the extent of the Lessor's interest in the Trust Estate
(excluding Excepted Payments) or to the extent the Lessor may be liable
as otherwise contemplated in clauses (ii) and (iii) of this Section
12.9(b)).
12.10. RIGHTS OF THE CREDIT PARTIES.
If at any time all obligations (i) of the Owner Trustee under the Credit
Agreement, the Security Documents and the other Operative Agreements and (ii) of
the Credit Parties under the Operative Agreements have in each case been
satisfied or discharged in full, then the Credit Parties shall be entitled to
(a) terminate the Lease and guaranty obligations under Section 6B and (b)
receive all amounts then held under the Operative Agreements and all proceeds
with respect to any of the Properties. Upon the termination of the Lease and
Section 6B pursuant to the foregoing clause (a), the Lessor shall transfer to
the Lessee all of its right, title and interest free and clear of the Lien of
the Lease, the Lien of the Security Documents and all Lessor Liens in and to any
Properties then subject to the Lease and any amounts or proceeds referred to in
the foregoing clause (b) shall be paid over to the Lessee.
12.11. FURTHER ASSURANCES.
The parties hereto shall promptly cause to be taken, executed,
acknowledged or delivered, at the sole expense of the Lessee, all such further
acts, conveyances, documents and assurances as the other parties may from time
to time reasonably request in order to carry out and effectuate the intent and
purposes of this Participation Agreement, the other Operative Agreements and the
transactions contemplated hereby and thereby (including without limitation the
preparation, execution and filing of any and all Uniform Commercial Code
financing statements, filings of Mortgage Instruments and other filings or
registrations which the parties hereto may from time to time request to be filed
or effected). The Lessee, at its own expense and without need of any prior
request from any other party, shall take such action as may be necessary
(including without limitation any action specified in the preceding sentence),
or (if the Owner Trustee shall so request) as so requested, in order to maintain
and protect all security interests provided for hereunder or under any other
Operative Agreement. In addition, in connection with the sale or other
disposition of any Property or any portion thereof, the Lessee agrees to execute
such instruments of conveyance as may be reasonably required in connection
therewith.
72
<PAGE> 78
12.12. CALCULATIONS UNDER OPERATIVE AGREEMENTS.
The parties hereto agree that all calculations and numerical
determinations to be made under the Operative Agreements by the Owner Trustee
shall be made by the Agent and that such calculations and determinations shall
be conclusive and binding on the parties hereto in the absence of manifest
error.
12.13. CONFIDENTIALITY.
Each Financing Party agrees to keep confidential any information
furnished or made available to it by any Credit Party or any of its Subsidiaries
pursuant to this Agreement that is marked confidential; provided that nothing
herein shall prevent any Financing Party from disclosing such information (a) to
any other Financing Party or any Affiliate of any Financing Party, or any
officer, director, employee, agent, or advisor of any Financing Party or
Affiliate of any Financing Party, (b) to any other Person if reasonably
incidental to the administration of the credit facility provided herein, (c) as
required by any law, rule, or regulation, (d) upon the order of any court or
administrative agency, (e) upon the request or demand of any regulatory agency
or authority, (f) that is or becomes available to the public or that is or
becomes available to any Financing Party other than as a result of a disclosure
by any Financing Party prohibited by this Agreement, (g) in connection with any
litigation to which such Financing Party or any of its Affiliates may be a
party, (h) to the extent necessary in connection with the exercise of any remedy
under this Agreement or any other Operative Agreement, and (i) subject to
provisions substantially similar to those contained in this Section, to any
actual or proposed participant or assignee.
12.14. FINANCIAL REPORTING/TAX CHARACTERIZATION.
Lessee agrees to obtain advice from its own accountants and tax counsel
regarding the financial reporting treatment and the tax characterization of the
transactions described in the Operative Agreements. Lessee further agrees that
Lessee shall not rely upon any statement of any Financing Party or any of their
respective Affiliates and/or Subsidiaries regarding any such financial reporting
treatment and/or tax characterization.
12.15. SET-OFF.
In addition to any rights now or hereafter granted under applicable Law and not
by way of limitation of any such rights, upon and after the occurrence of any
Event of Default and during the continuance thereof, the Lenders, the Holders,
their respective Affiliates and any assignee or participant of a Lender or a
Holder in accordance with the applicable provisions of the Operative Agreements
are hereby authorized by the Credit Parties at any time or from time to time,
without notice to the Credit Parties or to any other Person, any such notice
being hereby expressly waived, to set-off and to appropriate and to apply any
and all deposits (general or special, time or demand, including without
limitation indebtedness evidenced by certificates of deposit, whether matured or
unmatured) and any other indebtedness at any time held or owing by the Lenders,
the Holders, their respective Affiliates or any assignee or participant of a
Lender or a Holder in
73
<PAGE> 79
accordance with the applicable provisions of the Operative Agreements to or for
the credit or the account of any Credit Party against and on account of the
obligations of any Credit Party under the Operative Agreements irrespective of
whether or not (a) the Lenders or the Holders shall have made any demand under
any Operative Agreement or (b) the Agent shall have declared any or all of the
obligations of any Credit Party under the Operative Agreements to be due and
payable and although such obligations shall be contingent or unmatured.
Notwithstanding the foregoing, neither the Agent nor any other Financing Party
shall exercise, or attempt to exercise, any right of setoff, banker's lien, or
the like, against any deposit account or property of any Credit Party held by
the Agent or any other Financing Party, without the prior written consent of the
Majority Secured Parties, and any Financing Party violating this provision shall
indemnify the Agent and the other Financing Parties from any and all costs,
expenses, liabilities and damages resulting therefrom. The contractual
restriction on the exercise of setoff rights provided in the foregoing sentence
is solely for the benefit of the Agent and the Financing Parties and may not be
enforced by any Credit Party.
[signature pages follow]
74
<PAGE> 80
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
CONSTRUCTION AGENT
AND LESSEE: VERITAS OPERATING CORPORATION, as the
Construction Agent and as the Lessee
By: /s/ KEN LONCHAR
------------------------------------
Name: Ken Lonchar
Title: Senior Vice President and
Chief Financial Officer
GUARANTORS: VERITAS SOFTWARE CORPORATION, as a
Guarantor
By: /s/ KEN LONCHAR
------------------------------------
Name: Ken Lonchar
Title: Senior Vice President and
Chief Financial Officer
<PAGE> 81
SEAGATE SOFTWARE NETWORK & STORAGE
MANAGEMENT GROUP, INC. as a Guarantor
By: /s/ KEN LONCHAR
------------------------------------
Name: Ken Lonchar
Title: Senior Vice President and
Chief Financial Officer
<PAGE> 82
OPENVISION INTERNATIONAL, INC., as a
Guarantor
By: /s/ KEN LONCHAR
------------------------------------
Name: Ken Lonchar
Title: Senior Vice President and
Chief Financial Officer
<PAGE> 83
OWNER TRUSTEE
AND LESSOR: FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, except
as expressly stated herein, but
solely as the Owner Trustee under the
VS Trust 2000-1
By: /s/ VAL T. ORTON
------------------------------------
Name: Val T. Orton
Title: Vice President
<PAGE> 84
AGENT: BANK OF AMERICA, N.A., as the Agent
By: /s/ DOUGLAS T. MECKELNBURG
----------------------------------
Name: Douglas T. Meckelnburg
Title: Vice President
<PAGE> 85
HOLDERS AND LENDERS: BANK OF AMERICA, N.A., as a Holder and
as a Lender
By: /s/ DOUGLAS T. MECKELNBURG
----------------------------------
Name: Douglas T. Meckelnburg
Title: Vice President
<PAGE> 86
KEYBANK NATIONAL ASSOCIATION, as a
Holder and as a Lender
By: /s/ MARY K. YOUNG
----------------------------------
Name: Mary K. Young
Title: Assistant Vice President
<PAGE> 87
UNION BANK OF CALIFORNIA, N.A., as a
Holder and as a Lender
By: /s/ GLENN LEYRER
----------------------------------
Name: Glenn Leyrer
Title: Vice President
<PAGE> 88
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as a Holder and as a Lender
By: /s/ ERIC C. HOUSER
----------------------------------
Name: Eric C. Houser
Title: Vice President
<PAGE> 89
Schedule 8.3A(a)(iii)
[FORM OF OFFICER'S COMPLIANCE CERTIFICATE]
For the fiscal quarter ended _________________, ______.
I, ______________________, _____________________ of VERITAS OPERATING
CORPORATION (the "Lessee") hereby certify that, to the best of my knowledge and
belief, with respect to that certain Participation Agreement dated as of March
9, 2000 (as amended, modified, restated or supplemented from time to time, the
"Participation Agreement"; all of the defined terms in the Credit Agreement are
incorporated herein by reference) among the Lessee, the Lessor, the Guarantors,
the Lenders, the Holders and Bank of America, N. A., as Agent:
a. The company-prepared financial statements which accompany this
certificate are true and correct in all material respects and
have been prepared in accordance with GAAP applied on a
consistent basis, subject to changes resulting from normal
year-end audit adjustments.
b. Since ___________ (the date of the last similar certification,
or, if none, the Initial Closing Date) no Default or Event of
Default has occurred; and
Delivered herewith are detailed calculations demonstrating compliance by
the Credit Parties with the financial covenants contained in Section 8.3A (h) of
the Participation Agreement, and setting forth the ratio of Funded Indebtedness
to EBITDA and level of EBITDA, pursuant to Section 8.3(k) of the Participation
Agreement as of the end of the fiscal period referred to above.
This ______ day of ___________, ______.
VERITAS OPERATING CORPORATION
By: ____________________________________
Name: __________________________________
Title: _________________________________
<PAGE> 90
Attachment to Officer's Certificate
COMPUTATION OF FINANCIAL COVENANTS
<PAGE> 91
Schedule 8.3B(a)(ii)
[SCHEDULE OF INDEBTEDNESS]
1. $100,000,000 5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
2. LETTER OF CREDIT FOR $231,000 IN FAVOR OF SSI
3. $465,750,000 1.856% CONVERTIBLE SUBORDINATED NOTES DUE 2006
<PAGE> 92
Schedule 8.3B(e)
[SCHEDULE OF INSIGNIFICANT LINES OF BUSINESS]
None
<PAGE> 93
Schedule 8.3B(f)
[SCHEDULE OF INVESTMENTS]
None
<PAGE> 94
EXHIBIT A
REQUISITION FORM
(Pursuant to Sections 4.2, 5.2, 5.3 and 5.4 of the Participation Agreement)
VERITAS OPERATING CORPORATION, a Delaware corporation (the "Company")
hereby certifies as true and correct and delivers the following Requisition to
BANK OF AMERICA, N.A., as the agent for the Lenders (hereinafter defined) and
respecting the Security Documents, as the agent for the Lenders and the Holders
(hereinafter defined), to the extent of their interests (the "Agent"):
Reference is made herein to that certain Participation Agreement dated
as of March 9, 2000 (as amended, modified, extended, supplemented, restated
and/or replaced from time to time, the "Participation Agreement") among the
Company, in its capacity as the Lessee and as the Construction Agent, the
various parties thereto from time to time, as the guarantors (the "Guarantors"),
First Security Bank, National Association, as the Owner Trustee, the various
banks and other lending institutions which are parties thereto from time to
time, as holders (the "Holders"), the various banks and other lending
institutions which are parties thereto from time to time, as lenders (the
"Lenders"), and the Agent. Capitalized terms used herein but not otherwise
defined herein shall have the meanings set forth therefor in the Participation
Agreement.
Check one:
____ INITIAL CLOSING DATE: _________________
(three (3) Business Days prior notice required for Advance)
____ PROPERTY CLOSING DATE:_________________
(three (3) Business Days prior notice required for Advance)
____ CONSTRUCTION ADVANCE DATE:_____________
(three (3) Business Days prior notice required for Advance)
1. Transaction Expenses and other fees, expenses and disbursements under
Sections 7.1(a) or 7.1(b) of the Participation Agreement and any and all
other amounts contemplated to be financed under the Participation
Agreement including without limitation any Work, broker's fees, taxes,
recording fees and the like (with supporting invoices or closing
statement attached):
A-1
<PAGE> 95
Party to Whom Amount Owed
Amount is Owed (in U.S. Dollars)
-------------- -----------------
-------------- -----------------
-------------- -----------------
-------------- -----------------
-------------- -----------------
-------------- -----------------
2. Description of Land (which shall be a legal description of the Land in
connection with an Advance to pay Property Acquisition Costs): See
attached Schedule 1
3. Description of Improvements: See attached Schedule 2
4. Description of Equipment: See attached Schedule 3
5. Description of Work: See attached Schedule 4
6. Aggregate Loans and Holder Advances requested since the Initial Closing
Date with respect to each Property for which Advances are requested
under this Requisition (listed on a Property by Property basis),
including without limitation all amounts requested under this
Requisition: [IDENTIFY ON A PROPERTY BY PROPERTY BASIS]
$______________ [Property]
In connection with this Requisition, the Company hereby requests that
the Lenders make Loans to the Lessor in the amount of $______________ and that
the Holders make Holder Advances to the Lessor in the amount of
$________________. The Company hereby certifies (i) that the foregoing amounts
requested do not exceed the total aggregate of the Available Commitments plus
the Available Holder Commitments and (ii) each of the provisions of the
Participation Agreement applicable to the Loans and Holder Advances requested
hereunder have been complied with as of the date of this Requisition.
The Company requests the Loans be allocated as follows:
$______________ ABR Loans
$______________ Eurodollar Loans
The Company requests the Holder Advances be allocated as follows:
$______________ ABR Holder Advances
$______________ Eurodollar Holder Advances
A-2
<PAGE> 96
The Company has caused this Requisition to the executed by its duly
authorized officer as of this _____ day of __________, ______.
VERITAS OPERATING CORPORATION
By: ____________________________________
Name: __________________________________
Title: _________________________________
A-3
<PAGE> 97
Schedule 1
Description of Land
(Legal Description and Street Address)
A-4
<PAGE> 98
Schedule 2
Description of Improvements
A-5
<PAGE> 99
Schedule 3
Description of Equipment
<TABLE>
<CAPTION>
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General Description Make Model Serial Number
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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</TABLE>
A-6
<PAGE> 100
Schedule 4
Work
Work Performed for which the Advance is requested:
--------------------------------------------------------------
--------------------------------------------------------------
A-7
<PAGE> 101
EXHIBIT B
[Outside Counsel Opinion for the Lessee]
(Pursuant to Section 5.3(j) of the
Participation Agreement)
------------, ------
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
Re: Synthetic Lease Financing Provided in favor of VERITAS Operating
Corporation
Dear Sirs:
We have acted as special counsel to VERITAS Operating Corporation, a Delaware
corporation (the "Lessee"), and the various parties thereto from time to time,
as guarantors (individually, a "Guarantor" and collectively, the "Guarantors";
individually, the Lessee and each Guarantor may be referred to herein as a
"Credit Party" or collectively, as the "Credit Parties"), in connection with
certain transactions contemplated by the Participation Agreement dated as of
March 9, 2000 (the "Participation Agreement"), among the Lessee, the Guarantors,
First Security Bank, National Association, as the Owner Trustee (the "Owner
Trustee"), the various banks and other lending institutions which are parties
thereto from time to time, as holders (the "Holders"), the various banks and
other lending institutions which are parties thereto from time to time, as
lenders (the "Lenders") and Bank of America, N.A., as the agent for the Lenders
and respecting the Security Documents, as the agent for the Lenders and the
Holders, to the extent of their interests (the "Agent"). This opinion is
delivered pursuant to Section 5.3(j) of the Participation Agreement. All
capitalized terms used herein, and not otherwise defined herein, shall have the
meanings assigned thereto in Appendix A to the Participation Agreement.
In connection with the foregoing, we have examined originals, or copies
certified to our satisfaction, of [IDENTIFY THE APPLICABLE OPERATIVE AGREEMENTS,
INCLUDING EACH MORTGAGE INSTRUMENT, RELATED UCC FIXTURE FILINGS, ADDITIONAL UCCS
(HEREINAFTER DEFINED), DEEDS AND MEMORANDA OF LEASE] and such other corporate
documents and records of the Credit Parties, certificates of public officials
and representatives of the Credit Parties as to certain factual matters, and
such other instruments and documents which we have deemed necessary or advisable
to examine for the purpose of this opinion. With respect to such examination, we
have assumed (i) the statements of fact made in all such certificates, documents
and instruments are true, accurate and complete; (ii) except as to the Credit
Parties, the due authorization, execution and delivery of the Operative
Agreements by the parties thereto; (iii) the genuineness of all signatures
(except as to the Credit Parties), the authenticity and completeness of all
documents, certificates, instruments, records and corporate records submitted to
us as originals and the conformity to the original instruments of all documents
submitted to us as copies, and the
B-1
<PAGE> 102
authenticity and completeness of the originals of such copies; (iv) except as to
the Credit Parties, that all parties have all requisite corporate power and
authority to execute, deliver and perform the Operative Agreements; and (v)
except as to the Credit Parties, the enforceability of the Mortgage Instrument,
the Memorandum of Lease and the UCC financing statements against all parties
thereto.
Based on the foregoing, and having due regard for such legal considerations as
we deem relevant, and subject to the limitations and assumptions set forth
herein, including without limitation the matters set forth in the last two (2)
paragraphs hereof, we are of the opinion that:
(a) The Mortgage Instrument and Memorandum of Lease are enforceable in
accordance with their respective terms, except as limited by laws generally
affecting the enforcement of creditors' rights, which laws will not materially
prevent the realization of the benefits intended by such documents.
(b) Each form of Mortgage Instrument and UCC fixture filing relating
thereto, attached hereto as Schedules 1 and 2, respectively, is in proper form
for filing and recording with the offices of [IDENTIFY THE RECORDING OFFICES OF
THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED]. Upon
filing of each Mortgage Instrument and UCC fixture filing in [IDENTIFY THE
RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE
LOCATED], the Agent will have a valid, perfected lien and security interest in
that portion of the Collateral described in such Mortgage Instrument or UCC
fixture filing to the extent such Collateral is comprised of real property
and/or fixtures.
(c) The forms of UCC financing statements relating to the Security
Documents, attached hereto as Schedule 3 (the "Additional UCCs"), are in proper
form for filing and recording with the offices of [IDENTIFY (i) THE RECORDING
OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED
AND (ii) THE SECRETARY OF STATE WHERE THE PROPERTIES ARE TO BE LOCATED]. Upon
filing of the Additional UCCs in [IDENTIFY (i) THE RECORDING OFFICES OF THE
RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED AND (ii) THE
SECRETARY OF STATE WHERE THE PROPERTIES ARE TO BE LOCATED], the Agent will have
a valid, perfected lien and security interest in that portion of the Collateral
which can be perfected by filing UCC-1 financing statements under Article 9 of
the UCC.
(d) Each form of Deed and Memorandum of Lease is in appropriate form for
filing and recording with the [IDENTIFY THE RECORDING OFFICES OF THE RESPECTIVE
COUNTY CLERKS FOR THE COUNTIES WHERE THE PROPERTIES ARE TO BE LOCATED].
(e) Each Memorandum of Lease, when filed and recorded with the [IDENTIFY
THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS FOR THE COUNTIES WHERE THE
PROPERTIES ARE TO BE LOCATED], will have been filed and recorded in all public
offices in the State of [__________] in which filing or recording is necessary
to provide constructive notice of the Lease to third Persons and to establish of
record the interest of the Lessor thereunder as to the Properties described in
each such Memorandum of Lease.
B-2
<PAGE> 103
(f) Title to the Properties located in the State of [___________] may be
held in the name of the Owner Trustee as follows: First Security Bank, National
Association, not individually, but solely as the Owner Trustee under the VS
Trust 2000-1.
(g) The execution and delivery by First Security Bank, National
Association, individually or as the Owner Trustee, as the case may be, of the
Operative Agreements to which it is a party and compliance by First Security
Bank, National Association, individually or as the Owner Trustee, with all of
the provisions thereof do not and will not contravene any law, rule or
regulation of [IDENTIFY THE STATE].
(h) By reason of their participation in the transaction contemplated
under the Operative Agreements, none of the Agent, the Lenders, the Holders or
the Owner Trustee has to (a) qualify as a foreign corporation in [IDENTIFY THE
STATE], (b) file any application or any designation for service of process in
[IDENTIFY THE STATE] or (c) pay any franchise, income, sales, excise, stamp or
other taxes of any kind to [IDENTIFY THE STATE].
(i) The provisions in the Operative Agreements concerning Rent,
interest, fees, prepayment premiums and other similar charges do not violate the
usury laws or other similar laws regulating the use or forbearance of money of
[IDENTIFY THE STATE].
(j) If the transactions contemplated by the Operative Agreements are
characterized as a lease transaction by a court of competent jurisdiction, the
Lease and the applicable Lease Supplement shall demise to the Lessee a valid
leasehold interest in the Properties described in such Lease Supplement.
(k) If the transactions contemplated by the Operative Agreements are
characterized as a loan transaction by a court of competent jurisdiction, the
combination of the Mortgage Instruments, the Deeds, the Lease and the applicable
Lease Supplements (and the other Operative Agreements incorporated therein by
reference) are sufficient to create a valid, perfected lien or security interest
in the Properties therein described, enforceable as a mortgage in [IDENTIFY THE
STATE].
This opinion is limited to the matters stated herein and no opinion is implied
or may be inferred beyond the matters stated herein. This opinion is based on
and is limited to the laws of the State of [___________] and the federal laws of
the United States of America. Insofar as the foregoing opinion relates to
matters of law other than the foregoing, no opinion is hereby given.
B-3
<PAGE> 104
This opinion is for the sole benefit of the Lessee, the Construction Agent, the
Guarantors, the Owner Trustee, the Holders, the Lenders, the Agent and their
respective successors and assigns and may not be relied upon by any other person
other than such parties and their respective successors and assigns without the
express written consent of the undersigned. The opinions expressed herein are as
of the date hereof and we make no undertaking to amend or supplement such
opinions if facts come to our attention or changes in the current law of the
jurisdictions mentioned herein occur which could affect such opinions.
Very truly yours,
[LESSEE'S OUTSIDE COUNSEL]
B-4
<PAGE> 105
Distribution List
Bank of America, N.A., as the Agent, a Holder and a Lender
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as additional Holders
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as additional Lenders
VERITAS Operating Corporation, as the Construction Agent and the Lessee
The various parties to the Participation Agreement from time to time, as the
Guarantors
First Security Bank, National Association, not individually, but solely as the
Owner Trustee under the VS Trust 2000-1
B-5
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Schedule 1
Form of Mortgage Instrument
B-6
<PAGE> 107
Schedule 2
Forms of UCC Fixture Filings
B-7
<PAGE> 108
Schedule 3
Forms of UCC Financing Statements
B-8
<PAGE> 109
EXHIBIT C
VERITAS OPERATING CORPORATION
OFFICER'S CERTIFICATE
(Pursuant to Section 5.3(z) of the Participation Agreement)
VERITAS OPERATING CORPORATION, a Delaware corporation (the "Company"),
DOES HEREBY CERTIFY as follows:
1. Each and every representation and warranty of each Credit Party
contained in the Operative Agreements to which it is a party is
true and correct on and as of the date hereof.
2. No Default or Event of Default has occurred and is continuing
under any Operative Agreement.
3. Each Operative Agreement to which any Credit Party is a party is
in full force and effect with respect to it.
4. The Company has duly performed and complied with all covenants,
agreements and conditions contained in the Participation
Agreement (hereinafter defined) or in any Operative Agreement
required to be performed or complied with by it on or prior to
the date hereof.
Capitalized terms used in this Officer's Certificate and not otherwise defined
herein have the respective meanings ascribed thereto in the Participation
Agreement dated as of March 9, 2000 among the Company, as the Lessee and as the
Construction Agent, the various parties thereto from time to time, as guarantors
(the "Guarantors"), First Security Bank, National Association, as the Owner
Trustee, the various banks and other lending institutions which are parties
thereto from time to time, as holders (the "Holders"), the various banks and
other lending institutions which are parties thereto from time to time, as
lenders (the "Lenders") and Bank of America, N.A., as the agent for the Lenders
and respecting the Security Documents, as the agent for the Lenders and the
Holders, to the extent of their interests (the "Agent").
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly
executed and delivered as of this _____ day of __________, ______.
VERITAS OPERATING CORPORATION
By: ____________________________________
Name: __________________________________
Title: _________________________________
C-1
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EXHIBIT D
[NAME OF CREDIT PARTY]
SECRETARY'S CERTIFICATE
(Pursuant to Section 5.3(aa) of the Participation Agreement)
[NAME OF CREDIT PARTY], a Delaware corporation (the "Company") DOES
HEREBY CERTIFY as follows:
1. Attached hereto as Schedule 1 is a true, correct and complete
copy of the resolutions of the Board of Directors of the Company
duly adopted by the Board of Directors of the Company on
__________. Such resolutions have not been amended, modified or
rescinded since their date of adoption and remain in full force
and effect as of the date hereof.
2. Attached hereto as Schedule 2 is a true, correct and complete
copy of the Articles of Incorporation of the Company on file in
the Office of the Secretary of State of __________. Such Articles
of Incorporation have not been amended, modified or rescinded
since their date of adoption and remain in full force and effect
as of the date hereof.
3. Attached hereto as Schedule 3 is a true, correct and complete
copy of the Bylaws of the Company. Such Bylaws have not been
amended, modified or rescinded since their date of adoption and
remain in full force and effect as of the date hereof.
4. The persons named below now hold the offices set forth opposite
their names, and the signatures opposite their names and titles
are their true and correct signatures.
<TABLE>
<CAPTION>
Name Office Signature
---- ------ ---------
<S> <C> <C>
------------------- ----------------------- ----------------------
------------------- ----------------------- ----------------------
</TABLE>
D-1
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IN WITNESS WHEREOF, the Company has caused this Secretary's Certificate
to be duly executed and delivered as of this _____ day of ___________, ______.
[NAME OF CREDIT PARTY]
By: ____________________________________
Name: __________________________________
Title: _________________________________
D-2
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Schedule 1
Board Resolutions
D-3
<PAGE> 113
Schedule 2
Articles of Incorporation
D-4
<PAGE> 114
Schedule 3
Bylaws
D-5
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EXHIBIT E
FIRST SECURITY BANK, NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE
(Pursuant to Section 5.3(bb) of the Participation Agreement)
FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not individually (except with respect to paragraph 1 below, to the
extent any such representations and warranties are made in its individual
capacity) but solely as the owner trustee under the VS Trust 2000-1 (the "Owner
Trustee"), DOES HEREBY CERTIFY as follows:
1. Each and every representation and warranty of the Owner Trustee
contained in the Operative Agreements to which it is a party is
true and correct on and as of the date hereof.
2. Each Operative Agreement to which the Owner Trustee is a party is
in full force and effect with respect to it.
3. The Owner Trustee has duly performed and complied with all
covenants, agreements and conditions contained in the
Participation Agreement (hereinafter defined) or in any Operative
Agreement required to be performed or complied with by it on or
prior to the date hereof.
Capitalized terms used in this Officer's Certificate and not otherwise defined
herein have the respective meanings ascribed thereto in the Participation
Agreement dated as of March 9, 2000 (the "Participation Agreement") among
VERITAS Operating Corporation, as the Lessee and as the Construction Agent, the
various parties thereto from time to time, as guarantors (the "Guarantors"), the
Owner Trustee, the various banks and other lending institutions which are
parties thereto from time to time, as holders (the "Holders"), the various banks
and other lending institutions which are parties thereto from time to time, as
lenders (the "Lenders") and Bank of America, N.A., as the agent for the Lenders
and respecting the Security Documents, as the agent for the Lenders and the
Holders, to the extent of their interests (the "Agent").
E-1
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IN WITNESS WHEREOF, the Owner Trustee has caused this Officer's
Certificate to be duly executed and delivered as of this _____ day of
__________, ______.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually,
except as expressly stated herein,
but solely as the Owner Trustee
under the VS Trust 2000-1
By: ____________________________________
Name: __________________________________
Title: _________________________________
E-2
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EXHIBIT F
FIRST SECURITY BANK, NATIONAL ASSOCIATION
SECRETARY'S CERTIFICATE
(Pursuant to Section 5.3(cc) of the Participation Agreement)
CERTIFICATE OF ASSISTANT SECRETARY
I, ______________________, duly elected and qualified Assistant
Secretary of the Board of Directors of First Security Bank, National Association
(the "Association"), hereby certify as follows:
1. The Association is a National Banking Association duly organized,
validly existing and in good standing under the laws of the United States. With
respect thereto the following is noted:
A. Pursuant to Revised Statutes 324, et seq., as amended, 12
U.S.C. 1, et seq., the Comptroller of the Currency charters and
exercises regulatory and supervisory authority over all National
Banking Associations;
B. On December 9, 1881, the First National Bank of Ogden, Utah was
chartered as a National Banking Association under the laws of the
United States and under Charter No. 2597;
C. On October 2, 1922, in connection with a consolidation of The
First National Bank of Ogden, Ogden, Utah, and The Utah National
Bank of Ogden, Ogden, Utah, the title was changed to "The First &
Utah National Bank of Ogden"; on January 18, 1923, The First &
Utah National Bank of Ogden changed its title to "First Utah
National Bank of Ogden"; on January 19, 1926, the title was
changed to "First National Bank of Ogden"; on February 24, 1934,
the title was changed to "First Security Bank of Utah, National
Association"; on June 21, 1996, the title was changed to "First
Security Bank, National Association"; and
D. First Security Bank, National Association, Ogden, Utah, continues
to hold a valid certificate to do business as a National Banking
Association.
2. The Association's Articles of Association, as amended, are in
full force and effect, and a true, correct and complete copy is attached hereto
as Schedule A and incorporated herein by reference. Said Articles were last
amended October 20, 1975, as required by law on notice at a duly called special
meeting of the shareholders of the Association.
F-1
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3. The Association's By-Laws, as amended, are in full force and
effect; and a true, correct and complete copy is attached hereto as Schedule B
and incorporated herein by reference. Said By-Laws, still in full force and
effect, were adopted September 17, 1942, by resolution, after proper notice of
consideration and adoption of By-Laws was given to each and every shareholder,
at a regularly called meeting of the Board of Directors with a quorum present.
4. Pursuant to the authority vested in it by an Act of Congress
approved December 23, 1913 and known as the Federal Reserve Act, as amended, the
Federal Reserve Board (now the Board of Governors of the Federal Reserve System)
has granted to the Association now known as "First Security Bank, National
Association" of Ogden, Utah, the right to act, when not in contravention of
State or local law, as trustee, executor, administrator, registrar of stocks and
bonds, guardian of estates, assignee, receiver, committee of estates of
lunatics, or in any other fiduciary capacity in which State banks, trust
companies or other corporations which come into competition with National Banks
are permitted to act under the laws of the State of Utah; and under the
provisions of applicable law, the authority so granted remains in full force and
effect.
5. Pursuant to authority vested by Act of Congress (12 U.S.C. 92a
and 12 U.S.C. 481, as amended) the Comptroller of the Currency has issued
Regulation 9, as amended, dealing, in part, with the Fiduciary Powers of
National Banks, said regulation providing in subparagraph 9.7 (a) (1-2):
(1) The board of directors is responsible for the proper exercise of
fiduciary powers by the Bank. All matters pertinent thereto,
including the determination of policies, the investment and
disposition of property held in fiduciary capacity, and the
direction and review of the actions of all officers, employees,
and committees utilized by the Bank in the exercise of its
fiduciary powers, are the responsibility of the board. In
discharging this responsibility, the board of directors may
assign, by action duly entered in the minutes, the administration
of such of the Bank's fiduciary powers as it may consider proper
to assign to such director(s), officer(s), employee(s) or
committee(s) as it may designate.
(2) No fiduciary account shall be accepted without the prior
approval of the board, or of the director(s), officer(s), or
committee(s) to whom the board may have designated the
performance of that responsibility. . . .
6. A Resolution relating to Exercise of Fiduciary Powers was adopted
by the Board of Directors at a meeting held July 26, 1994 at which time there
was a quorum present; said resolution is still in full force and effect and has
not been rescinded. Said resolution is attached hereto as Schedule C and
incorporated herein by reference.
F-2
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7. A Resolution relating to the Designation of Officers and
Employees to Exercise Fiduciary Powers was adopted by the Trust Policy Committee
at a meeting held February 7, 1996 at which time a quorum was present; said
resolution is still in full force and effect and has not been rescinded. Said
resolution is attached hereto as Schedule D and is incorporated herein by
reference.
8. Attached hereto as Schedule E and incorporated herein by
reference, is a listing of facsimile signatures of persons authorized (herein
"Authorized Signatory or Signatories") on behalf of the Association and its
Trust Group to act in exercise of its fiduciary powers subject to the
resolutions in Paragraphs 6 and 7, above.
9. The principal office of the First Security Bank, National
Association, Trust Group and of its departments, except for the St. George,
Utah, Ogden, Utah, and Provo, Utah, branch offices, is located at 79 South Main
Street, Salt Lake City, Utah 84111 and all records relating to fiduciary
accounts are located at such principal office of the Trust Group or in storage
facilities within Salt Lake County, Utah, except for those of the Ogden, Utah,
St. George, Utah, and Provo, Utah, branch offices, which are located at said
office.
10. Each Authorized Signatory (i) is a duly elected or appointed,
duly qualified officer or employee of the Association; (ii) holds the office or
job title set forth below his or her name on the date hereof; (iii) and the
facsimile signature appearing opposite the name of each such officer or employee
is a true replica of his or her signature.
F-3
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IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Association this __________ day of _________________, ______.
(SEAL)
----------------------------------------
R. James Steenblik
Senior Vice President
Assistant Secretary
F-4
<PAGE> 121
Schedule A
Articles of Association
F-5
<PAGE> 122
Schedule B
Bylaws
F-6
<PAGE> 123
Schedule C
Resolution Relating to
Exercise of Fiduciary Powers
F-7
<PAGE> 124
Schedule D
Resolution Relating to the
Designation of Officers and Employees
To Exercise Fiduciary Powers
F-8
<PAGE> 125
Schedule E
Authorized Signatory or Signatories
F-9
<PAGE> 126
EXHIBIT G
[Outside Counsel Opinion for the Owner Trustee]
(Pursuant to Section 5.3(dd) of the
Participation Agreement)
-----------, ------
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
Re: Trust Agreement dated as of March 9, 2000
Dear Sirs:
We have acted as special counsel for First Security Bank, National
Association, a national banking association, in its individual capacity ("FSB")
and in its capacity as trustee (the "Owner Trustee") under the Trust Agreement
dated as of March 9, 2000 (the "Trust Agreement") by and among it and the
various banks and other lending institutions which are parties thereto from time
to time, as holders (the "Holders"), in connection with the execution and
delivery by the Owner Trustee of the Operative Agreements to which it is a
party. Except as otherwise defined herein, the terms used herein shall have the
meanings set forth in Appendix A to the Participation Agreement dated as of
March 9, 2000 (the "Participation Agreement") by and among VERITAS Operating
Corporation (the "Lessee"), the various parties thereto from time to time, as
guarantors (the "Guarantors"), First Security Bank, National Association, as the
Owner Trustee, the Holders, the various banks and other lending institutions
which are parties thereto from time to time, as lenders (the "Lenders") and Bank
of America, N.A., as the agent for the Lenders and respecting the Security
Documents, as the agent for the Lenders and the Holders, to the extent of their
interests (the "Agent").
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records and other instruments
as we have deemed necessary or advisable for the purpose of rendering this
opinion.
Based upon the foregoing, we are of the opinion that:
1. FSB is a national banking association duly organized, validly
existing and in good standing under the laws of the United States of America and
each of FSB and the Owner Trustee has under the laws of the State of Utah and
federal banking law the power and authority to enter into and perform its
obligations under the Trust Agreement and each other Operative Agreement to
which it is a party.
2. The Owner Trustee is the duly appointed trustee under the Trust
Agreement.
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3. The Trust Agreement has been duly authorized, executed and
delivered by one (1) of the officers of FSB and, assuming due authorization,
execution and delivery by the Holders, is a legal, valid and binding obligation
of the Owner Trustee (and to the extent set forth therein, against FSB),
enforceable against the Owner Trustee (and to the extent set forth therein,
against FSB) in accordance with its terms, and the Trust Agreement creates under
the laws of the State of Utah for the Holders the beneficial interest in the
Trust Estate it purports to create and is a valid trust under the laws of the
State of Utah.
4. The Operative Agreements to which it is party have been duly
authorized, executed and delivered by FSB, and, assuming due authorization,
execution and delivery by the other parties thereto, are legal, valid and
binding obligations of FSB, enforceable against FSB in accordance with their
respective terms.
5. The Operative Agreements to which it is party have been duly
authorized, executed and delivered by the Owner Trustee, and, assuming due
authorization, execution and delivery by the other parties thereto, are legal,
valid and binding obligations of the Owner Trustee, enforceable against the
Owner Trustee in accordance with their respective terms. The Notes and
Certificates have been duly issued, executed and delivered by the Owner Trustee,
pursuant to authorization contained in the Trust Agreement, and the Certificates
are entitled to the benefits and security afforded by the Trust Agreement in
accordance with its terms and the terms of the Trust Agreement.
6. The execution and delivery by each of FSB and the Owner Trustee
of the Trust Agreement and the Operative Agreements to which it is a party, and
compliance by FSB or the Owner Trustee, as the case may be, with all of the
provisions thereof do not and will not contravene any Laws applicable to or
binding on FSB, or as the Owner Trustee, or contravene the provisions of, or
constitute a default under, its charter documents or by-laws or, to our
knowledge after due inquiry, any indenture, mortgage contract or other agreement
or instrument to which FSB or Owner Trustee is a party or by which it or any of
its property may be bound or affected.
7. The execution and delivery of the Operative Agreements by each of
FSB and the Owner Trustee and the performance by each of FSB and the Owner
Trustee of their respective obligations thereunder does not require on or prior
to the date hereof the consent or approval of, the giving of notice to, the
registration or filing with, or the taking of any action in respect of any
Governmental Authority or any court.
8. Assuming that the trust created by the Trust Agreement is treated
as a grantor trust for federal income tax purposes within the contemplation of
Section 671 through 678 of the Internal Revenue Code of 1986, there are no fees,
taxes, or other charges (except taxes imposed on fees payable to the Owner
Trustee) payable to the State of Utah or any political subdivision thereof in
connection with the execution, delivery or performance by the Owner Trustee, the
Agent, the Lenders, the Lessee or the Holders, as the case may be, of the
Operative Agreements or in connection with the acquisition of any Property by
the Owner Trustee or in connection with the making by any Holder of its
investment in the Trust or its acquisition of the beneficial
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interest in the Trust Estate or in connection with the issuance and acquisition
of the Certificates, or the Notes, and neither the Owner Trustee, the Trust
Estate nor the trust created by the Trust Agreement will be subject to any fee,
tax or other governmental charge (except taxes on fees payable to the Owner
Trustee) under the laws of the State of Utah or any political subdivision
thereof on, based on or measured by, directly or indirectly, the gross receipts,
net income or value of the Trust Estate, by reason of the creation or continued
existence of the trust under the terms of the Trust Agreement pursuant to the
laws of the State of Utah or the Owner Trustee's performance of its duties under
the Trust Agreement.
9. There is no fee, tax or other governmental charge under the laws
of the State of Utah or any political subdivision thereof in existence on the
date hereof on, based on or measured by any payments under the Certificates,
Notes or the beneficial interest in the Trust Estate, by reason of the creation
of the trust under the Trust Agreement pursuant to the laws of the State of Utah
or the Owner Trustee's performance of its duties under the Trust Agreement
within the State of Utah.
10. Upon the filing of the financing statement on form UCC-1 with the
Utah Division of Corporations and Commercial Code, the Agent's security interest
in the Trust Estate, for the benefit of the Lenders and the Holders, will be
perfected, to the extent that such perfection is governed by Article 9 of the
Uniform Commercial Code as in effect in the State of Utah (the "Utah UCC").
Your attention is directed to the Utah UCC, which provides, in part,
that a filed financing statement which does not state a maturity date or which
states a maturity date of more than five (5) years is effective only for a
period of five (5) years from the date of filing, unless within six (6) months
prior to the expiration of said period a continuation statement is filed in the
same office or offices in which the original statement was filed. The
continuation statement must be signed by the secured party, identify the
original statement by file number and state that the original statement is still
effective. Upon the timely filing of a continuation statement, the effectiveness
of the original financing statement is continued for five (5) years after the
last date to which the original statement was effective. Succeeding continuation
statements may be filed in the same manner to continue the effectiveness of the
original statement.
The foregoing opinions are subject to the following assumptions, exceptions and
qualifications:
A. We are attorneys admitted to practice in the State of Utah and in
rendering the foregoing opinions we have not passed upon, or purported to pass
upon, the laws of any jurisdictions other than the State of Utah and the federal
banking law governing the banking and trust powers of FSB. In addition, without
limiting the foregoing we express no opinion with respect to (i) federal
securities laws, including the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of
1939, as amended, (ii) Title 49 of the United States Code Annotated (previously
the Federal Aviation Act of 1958), as amended, (iii) the Federal Communications
Act of 1934, as amended, or (iv) state securities or blue sky laws. Insofar as
the foregoing opinions relate to the legality, validity, binding effect and
enforceability of the documents involved in these transactions, which by their
terms are governed
G-3
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by the laws of a state other than Utah, we have assumed that the laws of such
state (as to which we express no opinion), are in all material aspects identical
to the laws of the State of Utah.
B. The opinions set forth in paragraphs 3, 4, and 5 above are
subject to the qualification that enforceability of the Trust Agreement and the
other Operative Agreements to which FSB and the Owner Trustee are parties, in
accordance with their respective terms, may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, receivership or similar laws affecting
enforcement of creditors' rights generally, and (ii) general principles of
equity, regardless of whether such enforceability is considered in a proceeding
in equity or at law.
C. As to the documents involved in these transactions, we have
assumed that each is a legal, valid and binding obligation of each party
thereto, other than FSB or the Owner Trustee, and is enforceable against each
such party in accordance with their respective terms.
D. We have assumed that all signatures, other than those of the
Owner Trustee or FSB, on documents and instruments involved in these
transactions are genuine, that all documents and instruments submitted to us as
originals are authentic, and that all documents and instruments submitted to us
as copies conform with the originals, which facts we have not independently
verified.
E. We do not purport to be experts in respect of, or express any
opinion concerning laws, rules or regulations applicable to the particular
nature of the equipment or property involved in these transactions.
F. We have made no investigation of, and we express no opinion
concerning, the nature of the title to any part of the equipment or property
involved in these transactions or the priority of any mortgage or security
interest.
G. We have assumed that the Participation Agreement and the
transactions contemplated thereby are not within the prohibitions of Section 406
of the Employee Retirement Income Security Act of 1974.
H. In addition to any other limitation by operation of law upon the
scope, meaning, or purpose of this opinion, the opinions expressed herein speak
only as of the date hereof. We have no obligation to advise the recipients of
this opinion (or any third party) and make no undertaking to amend or supplement
such opinions if facts come to our attention or changes in the current law of
the jurisdictions mentioned herein occur which could affect such opinions the
legal analysis, a legal conclusion or any information confirmation herein.
I. This opinion is for the sole benefit of the Lessee, the
Construction Agent, the Guarantors, the Owner Trustee, the Holders, the Lenders,
the Agent and their respective successors and assigns in matters directly
related to the Participation Agreement or the transaction contemplated
thereunder and may not be relied upon by any other person other than such
parties and their respective successors and assigns without the express written
consent of
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the undersigned. The opinions expressed in this letter are limited to the matter
set forth in this letter, and no other opinions should be inferred beyond the
matters expressly stated.
Very truly yours,
RAY, QUINNEY & NEBEKER
M. John Ashton
G-5
<PAGE> 131
Distribution List
Bank of America, N.A., as the Agent, a Holder and a Lender
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as additional Holders
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as additional Lenders
VERITAS Operating Corporation, as the Construction Agent and the Lessee
The various parties to the Participation Agreement from time to time, as the
Guarantors.
First Security Bank, National Association, not individually, but solely as the
Owner Trustee under the VS Trust 2000-1.
G-6
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EXHIBIT H
[In-House and Outside Counsel Opinion for the Lessee]
(Pursuant to Section 5.3(ee) of the Participation Agreement)
[Form of In-House Counsel Opinion for the Lessee]
____________, 2000
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
Re: Synthetic Lease Financing Provided in favor of VERITAS Operating
Corporation
Ladies and Gentlemen:
I have acted as general counsel to VERITAS Operating Corporation, a
Delaware corporation (the "Lessee") in connection with certain transactions
contemplated by the Participation Agreement dated as of March 9, 2000 (the
"Participation Agreement"), among the Lessee, the various parties thereto from
time to time as guarantors (the "Guarantors"), First Security Bank, National
Association, as the Owner Trustee (the "Owner Trustee"), the various banks and
other lending institutions which are parties thereto from time to time, as
holders (the "Holders"), the various banks and other lending institutions which
are parties thereto from time to time, as lenders (the "Lenders") and Bank of
America, N.A., as the agent for the Lenders and respecting the Security
Documents, as the agent for the Lenders and the Holders, to the extent of their
interests (the "Agent"). This opinion is delivered pursuant to Section 5.3(ee)
of the Participation Agreement. All capitalized terms used herein, and not
otherwise defined herein, shall have the meanings assigned thereto in Appendix A
to the Participation Agreement.
In connection with the foregoing, I have examined originals, or copies certified
to my satisfaction, of such corporate documents and records of the Lessee,
certificates of public officials and representatives of the Lessee as to certain
factual matters, and such other instruments and documents which I have deemed
necessary or advisable to examine for the purpose of this opinion. With respect
to such examination, I have assumed (i) the statements of fact made in all such
certificates, documents and instruments are true, accurate and complete; (ii)
the genuineness of all signatures (other than the signatures of persons signing
on behalf of the Lessee) and (iii) the authenticity and completeness of all
documents, certificates, instruments, records and corporate records submitted to
us as originals and the conformity to the original instruments of all documents
submitted to us as copies, and the authenticity and completeness of the
originals of such copies.
Based on the foregoing, and having due regard for such legal
considerations as I deem relevant, and subject to the limitations and
assumptions set forth herein, I am of the opinion that:
H-1
<PAGE> 133
1. Lessee has the corporate power and authority to conduct its
business as presently conducted.
2. Lessee (i) is not subject to, or is exempt from, regulation under
(A) the Federal Power Act, the Public Utility Holding Company Act of 1935 or
other federal or state laws and regulations applicable to public utilities, (B)
any federal or state laws and regulations applicable to banks, finance companies
and other financial institutions, or (C) any other federal or state laws and
regulations limiting Lessee's ability to borrow money; and (ii) is not an
investment company or a company controlled by an investment company, within the
meaning of the Investment Company Act of 1940.
This opinion is limited to the matters stated herein and no opinion is implied
or may be inferred beyond the matters stated herein. This opinion is based on
and is limited to the laws of the State of California and the federal laws of
the United States of America. Insofar as the foregoing opinion relates to
matters of law other than the foregoing, no opinion is hereby given.
This opinion is for the sole benefit of the addressees and their respective
successors and assigns and may not be relied upon by any other person other than
such parties and their respective successors and assigns without the express
written consent of the undersigned. The opinions expressed herein are as of the
date hereof and I make no undertaking to amend or supplement such opinions if
facts come to my attention or changes in the current law of the jurisdictions
mentioned herein occur which could affect such opinions.
Very truly yours,
Jay Jones
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<PAGE> 134
Distribution List
First Security Bank, National Association, individually, and as the Lessor, the
Borrower and the Owner Trustee
Bank of America, N.A., as the Agent, a Lender and a Holder
H-3
<PAGE> 135
[BROBECK, PHLEGER & HARRISON LETTERHEAD]
____________, 2000
To Each of the Parties Listed
on Schedule A Attached Hereto
Re: VERITAS Operating Corporation Synthetic Lease Financing
Ladies and Gentlemen:
We have acted as special counsel to VERITAS Operating
Corporation, a Delaware corporation ("LESSEE"), in connection with the execution
and delivery of the documents listed below, each dated the date hereof unless
otherwise specified below, related to the funding on the date hereof of a
synthetic lease (off-balance sheet) financing in the total funded amount of
$40,000,000 for the acquisition of certain land and improvements and the
development of corporate facilities to be located in Roseville, Minnesota (the
"Transaction").
For purposes of this opinion, we have examined the following
documents:
1. Master Lease Agreement by and between First Security Bank, National
Association, a national banking association, not in its individual
capacity, but solely as Trustee of the VS Trust 2000-1 ("LESSOR"), and
Lessee (the "LEASE");
2. Participation Agreement by and among the Lessee, Lessor, the holders of
Certificates issued with respect to the VS Trust 2000-1 (the "HOLDERS"),
the lenders party thereto ("LENDERS"), and Bank of America, N.A., as
agent for the Lenders and the Holders ("AGENT") (the "PARTICIPATION
AGREEMENT");
3. Construction Agency Agreement between Lessor and Lessee;
4. Trust Agreement between the Holders and Lessor;
5. Credit Agreement between the Lenders, Lessor and Agent;
6. The Tranche A Notes and the Tranche B Notes;
7. Security Agreement between Lessor and Agent, as accepted and agreed to
by Lessee;
<PAGE> 136
To Each of the Parties ____________, 2000
Listed on Schedule A Page 2
Attached Hereto
8. (a) a UCC-1 financing statement to be filed with the California
Secretary of State executed by VERITAS Operating Corporation
("VERITAS"), as debtor, in favor of Agent, as secured party relating to
the Collateral encumbered by such a security interest as arises under
the Security Agreement (collectively, the "LESSEE SECURITY AGREEMENT
FINANCING STATEMENTS");
(b) a UCC-1 financing statement to be filed with the California
Secretary of State executed by Lessor, as debtor, in favor of Agent, as
secured party relating to the Collateral encumbered by such a security
interest as arises under the Security Agreement ( the "LESSOR SECURITY
AGREEMENT FINANCING STATEMENT") (the Lessee Security Agreement Financing
Statements and the Lessor Security Agreement Financing Statement are
collectively referred to herein as the "SECURITY AGREEMENT FINANCING
STATEMENTS"); and
(c) a UCC-1 financing statement to be filed with the California
Secretary of State executed by Veritas, as debtor, in favor of Lessor,
as secured party, relating to the Collateral encumbered by such a
security interest as arises under the Lease (collectively, the "LEASE
FINANCING STATEMENTS") (collectively with (a) and (b), the "FINANCING
STATEMENTS" with each a "FINANCING STATEMENT").
The documents listed above as documents 2-6 are collectively
referred to herein as the "LOAN DOCUMENTS" and the documents listed above as
documents 7-8 are collectively referred to herein as the "SECURITY DOCUMENTS."
Together, the Lease, the Loan Documents and the Security Documents are
collectively referred to herein as the "OPERATIVE DOCUMENTS." This opinion is
being delivered to you pursuant to Section 5.3(ee) of the Participation
Agreement. The Agent, Lenders and Holders are sometimes collectively referred to
herein as the "LENDER PARTIES." Unless otherwise defined herein, capitalized
terms used and not defined herein shall have the meanings given to them in
Appendix A of the Participation Agreement.
For purposes of this opinion, we have examined the following
documents:
1. Executed copies of the Operative Documents;
2. An executed copy of the Certificate of Lessee ("CERTIFICATE OF
LESSEE"), executed by Jay A. Jones, the Secretary of Lessee, for the benefit of
the undersigned, dated ____________, 2000 a copy of which is attached hereto as
Exhibit A;
3. A copy of the Certificate of Incorporation of Lessee,
certified by the Delaware Secretary of State on ____________, 2000 and further
certified as current by the Secretary of Lessee on ____________, 2000 ("LESSEE
CERTIFICATE OF INCORPORATION");
<PAGE> 137
To Each of the Parties ____________, 2000
Listed on Schedule A Page 3
Attached Hereto
4. A copy of the Bylaws of Lessee, certified as current by the
Secretary of Lessee on ____________, 2000 ("LESSEE BYLAWS");
5. A Certificate of Good Standing for Lessee, issued on
____________, 2000 by the Secretary of State of the State of Delaware;
6. A Certificate of Good Standing (Foreign Corporation) for
Lessee, issued on ____________, 2000 by the Secretary of State of the State of
California; and
7. A copy of the Unanimous Written Consent by the Board of
Directors of the Lessee, on ______________, certified by the Secretary of Lessee
on ____________, 2000.
The documents listed above as documents 3, 4 and 7 are
collectively referred to herein as the "CONSTITUENT DOCUMENTS."
We represent Lessee only with respect to specific matters and our
relationship with Lessee is such that we have no detailed or continuing
familiarity with any of its day-to-day operations, business or financial
affairs. Although attorneys in our firm have been involved in the governmental
approval process for the Property, we have made no independent review of that
process, nor have we made any physical inspection of the Property, nor have we
undertaken independent investigation respecting any fire or public health laws
or compliance with the regulations of any insurance company. Our opinion is
based exclusively upon a review of the Operative Documents, the Constituent
Documents, the Certificate of Lessee and the Certificates of the Secretaries of
State referred to above, (and for purposes of our opinion in Paragraph 3 below,
any Material Agreements identified in the Certificate of Lessee). In addition,
we have relied upon the representations and warranties of Lessee set forth in
the Certificate of Lessee with respect to the factual determinations underlying
the legal conclusions set forth herein.
Whenever any opinion expressed herein with respect to the
existence or absence of facts is qualified by the phrase "to our current actual
knowledge," such knowledge is limited solely to (i) the representations of
Lessee set forth in the Certificate of Lessee and the Operative Documents, (ii)
an examination of documents in those of our files solely related to the
Transaction and (iii) the actual knowledge of those attorneys in our firm who
have substantively represented Lessee with respect to the Transaction (but not
including any constructive or imputed notice of any information) or who have had
an active involvement in the preparation of this opinion ("PRIMARY LAWYER
GROUP"). We have not attempted to verify independently the representations of
Lessee; and we have not conducted any investigation, nor do we intend to
undertake for purposes of this opinion any investigation, of any facts that may
be ascertained by the examination of all of the other files or attorneys of our
firm or any court files or third parties.
<PAGE> 138
To Each of the Parties ____________, 2000
Listed on Schedule A Page 4
Attached Hereto
In our examination and review we have assumed the genuineness of
all signatures other than the officers of Lessee, the legal capacity of natural
persons, the authenticity of the documents submitted to us as originals, the
conformity to the original documents of all documents submitted to us as
certified, facsimile or photostatic copies, and the authenticity of the
originals of such copies.
The law covered by the opinions expressed herein is limited to
the federal law of the United States and the General Corporation Law of the
State of Delaware, the laws of the State of New York and the laws of the State
of California, in each case as expressly provided below. We express no opinion
with respect to the effect or applicability of the laws of any other
jurisdiction.
For purposes of our opinions expressed in Paragraph 1 below, with
respect to due incorporation, valid existence and good standing of Lessee, we
are relying solely on our review and examination of the certificates received
from the Secretary of State of the State of Delaware, and the Secretary of State
of the State of California, without further investigation of the corporate
records of Lessee. Our opinions expressed in Paragraphs 1 and 2 below relate
solely to the laws of the State of California, the General Corporation Law of
the State of Delaware, and applicable federal laws of the United States, and we
express no opinion in Paragraphs 1 and 2 below with respect to the effect or
applicability of the laws of any other jurisdiction.
Our opinions expressed in clauses (ii) and (iii) of Paragraph 3
below are limited to laws and regulations normally applicable to transactions of
the type contemplated in the Operative Documents and do not extend to licenses,
permits and approvals necessary for the development of the Property or the
conduct of Lessee's business.
Our opinions expressed in Paragraphs 4(a) and 8(a) below relate
solely to the laws of the State of New York (and, in the case of Paragraph 8(a)
insofar as matters of California law are relevant to the opinions relating to
perfection expressed therein, the laws of the State of California), and we
express no opinion in Paragraphs 4(a) and 8(a) below with respect to the effect
or applicability of the laws of any other jurisdiction. Such opinion is limited
to laws and regulations normally applicable to transactions of the type
contemplated in the Operative Documents and do not extend to licenses, permits
and approvals necessary for the conduct of Lessee's business. We have made no
investigation of New York law with respect to the creation of any leasehold
estate, with respect to the creation, perfection or priority of any real estate
lien or security interest in real property, or with respect to the exercise of
any remedies relating to any leasehold estate, real estate lien or security
interest in real property, nor have we consulted with counsel admitted to
practice law in the State of New York regarding such matters, and we express no
opinion herein relating to New York law with respect to any such matters.
<PAGE> 139
To Each of the Parties ____________, 2000
Listed on Schedule A Page 5
Attached Hereto
Our opinions expressed in Paragraphs 4(b), 6, 7, 8(b), 9 and 10
below relate solely to the laws of the State of California (except for the
opinions expressed in Paragraph 11 below which also relate to the federal laws
of the United States), and we express no opinion in Paragraphs 4(b), 6, 7, 8(b),
9 and 10 below with respect to the effect or applicability of the laws of any
other jurisdiction (except as expressly set forth in this sentence). Such
opinions are limited to laws and regulations normally applicable to transactions
involving California real property interests as contemplated in the Operative
Documents. We invite your attention to the fact that the Operative Documents
state that they are governed by the law of the State of New York. We have not,
for purposes of our opinions expressed in Paragraphs 4(b), 6, 7, 8(b), 9 and 10
examined the question of, and express no opinion as to, what law would govern
the interpretation, characterization or enforcement of the Operative Documents,
and our opinions with regard to the Operative Documents in Paragraphs 4(b), 6,
7, 8(b), 9 and 10 respectively, are based on the assumption that the internal
law of the State of California would govern the provisions thereof, and in
addition, in the case of Paragraphs 6 and 7, upon the assumptions set forth
therein, respectively.
Insofar as our opinion expressed in Paragraph 10 below concerns
the law of the State of California limiting the rates of interest legally
chargeable or collectible, we have relied upon our understanding that each of
the Lender Parties (as defined below) is a subsidiary of a bank holding company
or is a bank organized under the laws of the United States or any State thereof
and, as a result thereof, is exempt from the restrictions of Section 1 of
Article XV of the Constitution of the State of California relating to rates of
interest upon the loan of money. We further assume in this regard that all
Advances have been and will be made by each of the Lender Parties for its own
account and without intent to circumvent otherwise applicable interest rate
limitations under California law and that there is no present express or implied
agreement or plan to sell participations or any other interest in the Operative
Documents to any Person other than a Person that also qualifies for an exemption
from the interest rate limitations of California law.
In addition and without limiting the previous six paragraphs, we
express no opinion herein with respect to the effect of any pension, employee
benefit or tax laws, or any zoning or similar land use law, any state or federal
antitrust law, state or federal securities laws. Further, we express no opinion
as to compliance or noncompliance by Lessor, Agent, Holders or Lenders with any
federal, state or other law (i) requiring any of Lessor, Agent, Holders or
Lenders to be licensed as a bank, finance company or other type of financial
institution, (ii) pertaining to matters regulating the assets held by the
Lenders on the basis of portfolio requirements or Lessor's, Agent's, Holders' or
Lenders' capitalization, such as loan limits and capital adequacy requirements,
and (iii) otherwise applicable to Lessor, Agent, Holders or Lenders and relating
to their legal or regulatory status or the nature of their business.
<PAGE> 140
To Each of the Parties ____________, 2000
Listed on Schedule A Page 6
Attached Hereto
In rendering this opinion, with your permission and without
independent investigation (unless otherwise noted), we are making and relying on
the following assumptions:
A. THERE ARE NO DOCUMENTS OR AGREEMENTS THAT WOULD MODIFY OR CONFLICT WITH
THE OPERATIVE DOCUMENTS, BETWEEN OR AMONG ANY OF THE PARTIES THERETO AND/OR ANY
OTHER PERSON OR ENTITY ("Person");
B. EACH OF LESSOR, AGENT, EACH HOLDER AND EACH LENDER IS DULY ORGANIZED,
VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF ITS RESPECTIVE
JURISDICTION OF FORMATION AND ANY OTHER RELEVANT JURISDICTION, AND HAS ALL
REQUISITE POWER AND AUTHORITY TO CARRY ON ITS BUSINESS AS NOW CONDUCTED, TO
ENTER INTO THE OPERATIVE DOCUMENTS TO WHICH IT IS A PARTY AND TO CARRY OUT THE
TERMS AND TO EXERCISE THE REMEDIES OF THE OPERATIVE DOCUMENTS TO WHICH IT IS A
PARTY;
C. ALL OF THE OPERATIVE DOCUMENTS TO WHICH THEY ARE PARTIES, RESPECTIVELY,
HAVE BEEN DULY AUTHORIZED, EXECUTED AND DELIVERED BY LESSOR, AGENT, EACH HOLDER
AND EACH LENDER, AND ALL THE OPERATIVE DOCUMENTS TO WHICH THEY ARE PARTIES,
RESPECTIVELY, ARE LEGAL, VALID, BINDING AND ENFORCEABLE AS TO LESSOR (EXCEPT FOR
PURPOSES OF OUR OPINIONS IN PARAGRAPHS 4 AND 8 BELOW AS SET FORTH IN SUCH
OPINIONS), AGENT, EACH HOLDER AND EACH LENDER; AND
D. LESSOR, AGENT, EACH HOLDER AND EACH LENDER HAS FILED ANY REQUIRED
CALIFORNIA AND NEW YORK STATE FRANCHISE, INCOME OR SIMILAR TAX RETURNS AND HAS
PAID ANY REQUIRED CALIFORNIA AND NEW YORK STATE FRANCHISE, INCOME OR SIMILAR
TAXES.
Based upon the foregoing and our reliance thereon and having regard for
legal considerations which we deem relevant, we are of the opinion that:
1. Lessee is a duly incorporated and validly existing
corporation in good standing under the laws of the State of Delaware, is in good
standing as a foreign corporation in the State of California and has the
corporate power and authority to enter into and perform its obligations under
the Operative Documents to which it is or is to be a party and each other
agreement, instrument and document to be executed and delivered by it in
connection with the transactions contemplated by the Operative Documents.
2. Lessee has taken all necessary corporate action to
authorize the execution, delivery and performance of the Operative Documents to
which it is a party and has duly executed and delivered each Operative Document
to which it is a party.
3. The execution and delivery by Lessee of the Operative
Documents to which it is a party and compliance by Lessee with the material
provisions thereto, do not and will not (i) violate or conflict with the Lessee
Certificate of Incorporation or the Lessee Bylaws, (ii) to our current actual
knowledge, conflict with, or require any consents, authorizations,
registrations, declarations or filings (except as may relate to the perfection
of liens or security interests) by Lessee under, the laws of any state having
applicability to Lessee, as presently in
<PAGE> 141
To Each of the Parties ____________, 2000
Listed on Schedule A Page 7
Attached Hereto
effect and interpreted, or any order of any Governmental Authority applicable to
or binding on Lessee, (iii) conflict with, or require any consents,
authorizations, registrations, declarations or filings (except as may relate to
the perfection of liens or security interests) by Lessee, or any stockholders,
or any trustee or holder of indebtedness, of the Lessee (except for such
approvals and consents which have been already obtained), under the laws of the
State of California or, to our current actual knowledge, the State of New York
having applicability to Lessee, in each case as presently in effect and
interpreted, (iv) to our current actual knowledge, conflict with or constitute a
violation of any court orders, writs, judgments or decrees of any court, or any
arbitrator or governmental agency or authority, (v) constitute a material breach
of any Material Agreement (as defined in the Certificate of Lessee) to which
Lessee is a party or by which Lessee is bound or, to our current actual
knowledge, any other agreement or instrument to which Lessee is a party or by
which Lessee or any of its properties may be bound or affected, or (vi) result
in the creation of any Lien (other than Permitted Liens and Lessor Liens) upon
the Property under the express terms of the Lessee Certificate of Incorporation,
the Lessee Bylaws or, to our current actual knowledge, any other agreement or
instrument to which Lessee is a party or by which any of its properties may be
bound or affected.
4. (a) Under the laws of the State of New York, the
Operative Documents (other than the Lease) to which Lessee and/or Lessor is a
party constitute the legal, valid and binding obligation of Lessee, enforceable
against Lessee and Lessor in accordance with their terms.
(b) Under the laws of the State of California, the
Operative Documents (other than the Lease) to which Lessee and/or Lessor is a
party constitute the legal, valid and binding obligation of Lessee, enforceable
against Lessee and Lessor in accordance with their terms.
5. We have no current actual knowledge of any pending or
threatened actions, suits, litigation or other proceedings against Lessee or the
Property before any court, arbitrator or Governmental Authority that question or
challenge the legality, validity or enforceability of the Operative Documents or
the Transaction, that concern the Property or the Lessee's interest therein or
which, if determined adversely to Lessee, would be likely to have a Material
Adverse Effect (as defined in the Certificate of Lessee) on Lessee.
6. Assuming that the Transaction, insofar as the Lease is
concerned, is recharacterized by a court of competent jurisdiction as a loan
from Lessor to Lessee, (i) the Lease constitutes a legally valid and binding
obligation of Lessee, enforceable against Lessee in accordance with its terms,
and (ii) Lessee's obligations to make the payments characterized as "Basic Rent"
and "Supplemental Rent" under the Lease will entitle Lessor to pursue its rights
and remedies under the Loan Documents against the Collateral covered thereby
upon a material
<PAGE> 142
To Each of the Parties ____________, 2000
Listed on Schedule A Page 8
Attached Hereto
breach of such obligations (provided, however, we express no
opinion as to the nature or characterization of such payments as "Basic Rent" or
"Supplemental Rent" or otherwise).
7. Assuming that the Transaction, insofar as the Lease is
concerned, is characterized by a court of competent jurisdiction as an operating
lease between Lessor and Lessee, (i) the Lease constitutes a legally valid and
binding obligation of Lessee, enforceable against Lessee in accordance with its
terms, (ii) the Lease and the applicable Lease Supplement are in a form
sufficient to demise to Lessee a valid leasehold interest in the Property
described in such Lease Supplement and (iii) the Lessee's obligations to make
the payments characterized as "Basic Rent" and "Supplemental Rent" under the
Lease are enforceable; provided, however, we express no opinion as to the nature
or characterization of such payments as "Basic Rent" or "Supplemental Rent" or
otherwise; and further provided that we express no opinion as to the
enforceability of the Lease remedies obligating Lessee to pay the Termination
Value or any other amount in excess of accrued and unpaid "Basic Rent,"
including, but not limited to, the availability to Lessor of any rights or
remedies under the Lease with respect to payments of "Supplemental Rent", where
a court of competent jurisdiction has not recharacterized the Transaction,
insofar as the Lease is concerned, as a loan from Lessor to Lessee.
8. (a)(i) Under the laws of the State of New York, the
Security Agreement creates in favor of the Agent, for the benefit of the secured
parties named therein, a security interest in the Collateral described therein
to which Article 9 of the New York Uniform Commercial Code ("NYUCC") is
applicable (the "ARTICLE 9 COLLATERAL"). The Security Agreement Financing
Statements are in appropriate form for filing with the California Secretary of
State. Upon the filing of the Security Agreement Financing Statements with the
California Secretary of State, the Agent, as secured party, will have a
perfected security interest in that portion of the Article 9 Collateral in which
a security interest is perfected by the filing of a financing statement with the
California Secretary of State under the NYUCC and Division 9 of the California
Uniform Commercial Code (the "CUCC"). Upon proper filing of the Security
Agreement Financing Statements pursuant to the filing system established under
applicable California law, no other action is necessary under the NYUCC to
perfect such security interests in the Article 9 Collateral.
(ii) Under the laws of the State of New York, the security
interests in the Collateral described in the Lease Financing Statements will be
perfected upon the proper filing of the Lease Financing Statements covering such
Collateral with the California Secretary of State. Upon proper filing of the
Lease Financing Statements pursuant to the filing system established under
applicable California law, no other action is necessary under the NYUCC to
perfect the security interests in the Collateral described in the Lease
Financing Statements.
<PAGE> 143
To Each of the Parties ____________, 2000
Listed on Schedule A Page 9
Attached Hereto
(b)(i) Under the laws of the State of California, the Security
Agreement creates in favor of the Agent, for the benefit of the secured parties
named therein, a security interest in the Article 9 Collateral. The Security
Agreement Financing Statements are in appropriate form for filing with the
California Secretary of State. Upon the filing of the Security Agreement
Financing Statements with the California Secretary of State, the Agent, as
secured party, will have a perfected security interest in that portion of the
Article 9 Collateral in which a security interest is perfected by the filing of
a financing statement with the California Secretary of State under Division 9 of
the CUCC. Upon proper filing of the Security Agreement Financing Statements
pursuant to the filing system established under applicable California law, no
other action is necessary under the CUCC to perfect such security interests in
the Article 9 Collateral.
(ii) Under the laws of the State of California, the security
interests in the Collateral described in the Lease Financing Statements will be
perfected upon the proper filing of the Lease Financing Statements covering such
Collateral with the California Secretary of State. Upon proper filing of the
Lease Financing Statements pursuant to the filing system established under
applicable California law, no other action is necessary under the CUCC to
perfect the security interests in the Collateral described in the Lease
Financing Statements.
9. No Governmental Action by, and no notice to or filing
with, any Governmental Authority is required for the acquisition of the Property
by Lessee or, to our current actual knowledge, Lessor.
10. The Transaction and, particularly, Lessee's obligations to
make payments of "Basic Rent" and "Supplemental Rent" will not violate the usury
laws of the State of California.
The opinions expressed herein with respect to the laws of the
State of New York are subject to and limited by the following qualifications,
assumptions, limitations and exceptions:
(a) THE ENFORCEABILITY OF LESSEE'S AND LESSOR'S OBLIGATIONS UNDER THE
OPERATIVE DOCUMENTS MAY BE SUBJECT TO OR LIMITED BY (i) BANKRUPTCY, INSOLVENCY,
REORGANIZATION, ARRANGEMENT, MORATORIUM, FRAUDULENT TRANSFER AND OTHER SIMILAR
LAWS AFFECTING THE RIGHTS OF CREDITORS GENERALLY; AND (ii) GENERAL EQUITABLE
PRINCIPLES (WHETHER RELIEF IS SOUGHT IN A PROCEEDING AT LAW OR IN EQUITY),
INCLUDING, WITHOUT LIMITATION, CONCEPTS OF MATERIALITY, REASONABLENESS, GOOD
FAITH, AND FAIR DEALING.
(b) WE EXPRESS NO OPINION AS TO PROVISIONS OF THE OPERATIVE DOCUMENTS
PURPORTING TO ESTABLISH AN EVIDENTIARY STANDARD OR TO AUTHORIZE CONCLUSIVE
DETERMINATIONS BY THE AGENT, LENDERS, HOLDERS OR LESSOR (COLLECTIVELY, "Lender
Parties") OR ANY OTHER PERSON OR ALLOWING THE LENDER PARTIES OR ANY OTHER PERSON
TO MAKE DETERMINATIONS IN ITS SOLE DISCRETION.
<PAGE> 144
To Each of the Parties ____________, 2000
Listed on Schedule A Page 10
Attached Hereto
(c) WE ALSO EXPRESS NO OPINION AS TO:
(i) THE ENFORCEABILITY OF PROVISIONS OF THE OPERATIVE DOCUMENTS PURSUANT TO
WHICH LESSEE OR LESSOR AGREES TO MAKE PAYMENTS WITHOUT SET-OFF, DEFENSE OR
COUNTERCLAIM;
(ii) THE ENFORCEABILITY OF PROVISIONS RELATING TO INDEMNIFICATION,
CONTRIBUTION OR EXCULPATION, TO THE EXTENT ANY SUCH PROVISION IS CONTRARY TO
PUBLIC POLICY OR PROHIBITED BY LAW (INCLUDING, WITHOUT LIMITATION, FEDERAL AND
STATE SECURITIES LAWS);
(iii) ANY PROVISION PROVIDING FOR THE EXCLUSIVE JURISDICTION OF A PARTICULAR
COURT OR PURPORTING TO WAIVE RIGHTS TO TRIAL BY JURY, SERVICE OF PROCESS OR
OBJECTIONS TO THE LAYING OF VENUE OR TO FORUM ON THE BASIS OF FORUM NON
CONVENIENS, IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR PERTAINING TO
THE OPERATIVE DOCUMENTS;
(iv) PROVISIONS CONTAINED IN THE OPERATIVE DOCUMENTS PURPORTING TO WAIVE
EITHER ILLEGALITY AS A DEFENSE TO THE PERFORMANCE OF CONTRACT OBLIGATIONS OR ANY
OTHER DEFENSE TO SUCH PERFORMANCE WHICH CANNOT, AS A MATTER OF LAW, BE
EFFECTIVELY WAIVED;
(v) ANY PROVISION OF THE OPERATIVE DOCUMENTS INSOFAR AS IT PROVIDES THAT ANY
PERSON PURCHASING A PARTICIPATION FROM ANY LENDER PARTY OR OTHER PERSON MAY
EXERCISE SET-OFF OR SIMILAR RIGHTS WITH RESPECT TO SUCH PARTICIPATION OR THAT
ANY LENDER PARTY OR OTHER PERSON MAY EXERCISE SET-OFF OR SIMILAR RIGHTS OTHER
THAN IN ACCORDANCE WITH APPLICABLE LAW;
(vi) ANY PROVISION OF THE OPERATIVE DOCUMENTS PERMITTING MODIFICATION THEREOF
ONLY BY MEANS OF AN AGREEMENT IN WRITING SIGNED BY THE PARTIES THERETO;
(vii) ANY PROVISION OF THE OPERATIVE DOCUMENTS REQUIRING PAYMENT OF ATTORNEYS'
FEES, EXCEPT TO THE EXTENT A COURT DETERMINES SUCH FEES TO BE REASONABLE;
(viii) THE EFFECT OF THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF NEW
YORK WHICH LIMITS THE RATES OF INTEREST LEGALLY CHARGEABLE OR COLLECTIBLE;
(ix) ANY PROVISIONS PURPORTING TO EXCLUDE CONFLICT OF LAW
PRINCIPLES UNDER NEW YORK LAW OR OTHERWISE SELECT THE LAWS OF NEW YORK TO GOVERN
ANY OF THE OPERATIVE DOCUMENTS OR ANY SECURITY INTEREST;
(x) ANY PROVISION PURPORTING TO WAIVE ANY RIGHT TO CLAIM PUNITIVE DAMAGES;
(xi) ANY PROVISION PROVIDING FOR ARBITRATION OF DISPUTES; AND
(xii) ANY COLLATERAL WHICH IS AN ACCESSION TO, OR COMMINGLED OR PROCESSED
WITH, OTHER GOODS TO THE EXTENT THAT THE SECURITY INTEREST OF THE LENDER PARTIES
IS LIMITED BY SECTION 9-314 OR 9-315 OF THE NYUCC OR SECTION 9314 OR 9315 OF THE
CUCC.
(d) THE ENFORCEABILITY OF ANY PROVISIONS OF THE OPERATIVE DOCUMENTS WHICH
ARE DEEMED TO CONSTITUTE A SUBORDINATION OF THE RIGHTS OF LESSEE OR LESSOR MAY
BE LIMITED BY EXONERATION AND OTHER DEFENSES SIMILAR TO THOSE THAT MAY BE
ASSERTED BY ANY GUARANTOR.
(e) THE ENFORCEABILITY OF CERTAIN REMEDIAL AND OTHER PROVISIONS OF THE
SECURITY DOCUMENTS, INCLUDING, WITHOUT LIMITATION, CERTAIN OF THE WAIVERS
THEREIN, MAY BE LIMITED BY APPLICABLE STATE AND FEDERAL LAWS (INCLUDING JUDICIAL
DECISIONS), BUT SUCH LAWS DO NOT, IN OUR OPINION (SUBJECT TO THE LIMITATIONS,
QUALIFICATIONS AND ASSUMPTIONS EXPRESSED HEREIN), RENDER ANY SECURITY DOCUMENT,
TAKEN AS A WHOLE, INVALID OR UNENFORCEABLE, AND EACH OF THE
<PAGE> 145
To Each of the Parties ____________, 2000
Listed on Schedule A Page 11
Attached Hereto
SECURITY DOCUMENTS, TAKEN AS A WHOLE, CONTAINS ADEQUATE PROVISIONS FOR THE
PRACTICAL REALIZATION BY THE LENDER PARTIES OF THE MATERIAL RIGHTS AND BENEFITS
AFFORDED THEREBY.
(f) THE EFFECTIVENESS OF ANY FINANCING STATEMENT WILL LAPSE FIVE YEARS FROM
THE DATE THE SAME IS FILED UNLESS A CONTINUATION STATEMENT IS FILED WITHIN SIX
MONTHS PRIOR TO THE EXPIRATION OF THAT FIVE YEAR PERIOD.
(g) UNDER THE NYUCC AND CUCC EVENTS OCCURRING SUBSEQUENT TO THE DATE HEREOF
MAY AFFECT ANY SECURITY INTEREST SUBJECT TO THE NYUCC AND CUCC. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, TO THE EXTENT PROVIDED BY ARTICLE 9 OF THE
NYUCC AND DIVISION 9 OF THE CUCC, ADDITIONAL FILINGS WITH RESPECT TO THE
COLLATERAL MAY BE NECESSARY TO CONTINUE PERFECTION OF ALL OR CERTAIN OF THE
COLLATERAL IF (i) LESSEE OR LESSOR CHANGES ITS NAME (OR ANY OF THE FINANCING
STATEMENTS OTHERWISE BECOMES SERIOUSLY MISLEADING), (ii) ANY ITEM OF COLLATERAL
LOCATED IN CALIFORNIA IS REMOVED FROM THAT STATE OR (iii) LESSEE OR LESSOR
CHANGES THE JURISDICTION IN WHICH ITS CHIEF EXECUTIVE OFFICE IS LOCATED TO A
JURISDICTION OTHER THAN CALIFORNIA.
(h) TO THE EXTENT THAT ANY OF THE COLLATERAL CONSISTS OF OR CONSTITUTES
"PROCEEDS" (AS SUCH TERM IS DEFINED IN SECTION 9-306 OF THE NYUCC), THE SECURITY
INTEREST THEREIN IS LIMITED AND CONDITIONED AS SET FORTH IN SUCH SECTION.
(i) THE OPINIONS EXPRESSED HEREIN WITH RESPECT TO THE CREATION, ATTACHMENT
OR PERFECTION OF ANY SECURITY INTEREST: (i) ARE LIMITED TO THE OPINIONS
EXPRESSED IN PARAGRAPHS 8(a)(i) AND (ii) ABOVE AND TO THE COLLATERAL
SPECIFICALLY DESCRIBED IN THE SECURITY AGREEMENT WHICH IS GOVERNED BY RELEVANT
PROVISIONS AS CURRENTLY IN EFFECT OF ARTICLE 9 OF THE NYUCC (FOR PURPOSES OF
THIS PARAGRAPH ONLY, THE "Covered Collateral"); (ii) DO NOT APPLY TO COLLATERAL
REQUIRING PERFECTION PROCEDURES OTHER THAN THE FILING OF A FINANCING STATEMENT
IN THE OFFICE OF THE CALIFORNIA SECRETARY OF STATE; AND (iii) BY REASON OF THE
OPERATION OF SECTION 9-103 OF THE NYUCC, ARE LIMITED AS TO OUR PERFECTION
OPINIONS IN PARAGRAPHS 8(a)(i) AND (ii) (INSOFAR AS SUCH OPINION GOVERNS GOODS
AND SUCH OTHER ITEMS OF THE COVERED COLLATERAL DESCRIBED IN SECTION 9-103(1)(a)
OF THE NYUCC) TO GOODS AND SUCH OTHER ITEMS LOCATED IN THE STATE OF CALIFORNIA.
WE EXPRESS NO OPINION WITH RESPECT TO THE PRIORITY OF ANY SECURITY INTEREST. WE
HAVE ASSUMED FOR PURPOSES OF THE OPINIONS IN PARAGRAPHS 8(a)(i) AND (ii) ABOVE
THAT THE LESSEE AND LESSOR ARE LOCATED IN CALIFORNIA FOR PURPOSES OF SECTION
9-103(3)(b) AND SECTION 9-103(6)(f) OF THE NYUCC. WE HAVE ALSO ASSUMED FOR
PURPOSES OF SUCH OPINIONS THAT LESSEE AND LESSOR HAVE RIGHTS IN THE COVERED
COLLATERAL WITHIN THE MEANING OF THE NYUCC AND THE CUCC, THAT ALL REQUIRED
CONSENTS OF THIRD PARTIES TO THE GRANT OF SECURITY INTERESTS IN THE COVERED
COLLATERAL HAVE BEEN OBTAINED AND THAT THE LENDER PARTIES (EXCEPT FOR LESSOR
WITH RESPECT TO THE ATTACHMENT AND/OR AND PERFECTION OF LESSOR'S SECURITY
INTERESTS) HAVE GIVEN "VALUE" WITHIN THE MEANING OF THE NYUCC AND THE CUCC. WE
HAVE ASSUMED FOR THE PURPOSES OF OUR OPINIONS IN PARAGRAPH 8(a)(ii) THAT THE
SECURITY INTERESTS (TO WHICH THE LEASE FINANCING STATEMENTS PERTAIN) IN THE
COLLATERAL DESCRIBED IN THE LEASE FINANCING STATEMENTS IN FAVOR OF THE LESSOR
HAVE ATTACHED FOR PURPOSES OF THE NYUCC AND THE CUCC.
<PAGE> 146
To Each of the Parties ____________, 2000
Listed on Schedule A Page 12
Attached Hereto
(j) WE ALSO EXPRESS NO OPINION AS TO THE TITLE OF LESSEE OR LESSOR TO ANY
COLLATERAL OR THE CLASSIFICATION OF THE COLLATERAL.
(k) WE EXPRESS NO OPINION (i) WITH RESPECT TO ANY COLLATERAL OF A TYPE
DESCRIBED IN SECTION 9-401(1)(a) OR (b) OF THE NYUCC OR SECTION 9401(1)(a) OR
(b) OF THE CUCC OR REPRESENTED BY ANY CERTIFICATE OF TITLE AND (ii) AS TO THE
ACCURACY OR COMPLETENESS OF ANY DESCRIPTION OF THE COLLATERAL (INCLUDING THE
SCOPE OF THE TERM "GENERAL INTANGIBLES") OR THE CHARACTERIZATION OF ANY
COLLATERAL AS REAL PROPERTY, PERSONAL PROPERTY, EQUIPMENT OR FIXTURES.
The opinions expressed herein with respect to the laws of the
State of California are subject to and limited by the following qualifications,
assumptions, limitations and exceptions:
(a) OUR OPINIONS ARE SUBJECT TO THE EFFECT OF THE LIMITATIONS IMPOSED BY THE
CUCC RELATING TO OR AFFECTING THE RIGHTS AND REMEDIES AVAILABLE TO SECURED
CREDITORS.
(l) OUR OPINIONS ARE SUBJECT TO THE EFFECT OF JUDICIAL DECISIONS WHICH MAY
PERMIT THE INTRODUCTION OF EXTRINSIC EVIDENCE TO INTERPRET THE TERMS OF WRITTEN
CONTRACTS.
(m) THE LEGALITY, VALIDITY, BINDING NATURE AND ENFORCEABILITY OF OBLIGATIONS
OF LESSEE OR LESSOR UNDER THE OPERATIVE DOCUMENTS MAY BE SUBJECT TO OR LIMITED
BY (1) BANKRUPTCY, INSOLVENCY, REORGANIZATION, ARRANGEMENT, MORATORIUM,
FRAUDULENT TRANSFER AND OTHER SIMILAR LAWS AFFECTING THE RIGHTS OF LANDLORDS AND
OF CREDITORS; (2) GENERAL PRINCIPLES OF EQUITY (WHETHER RELIEF IS SOUGHT IN A
PROCEEDING AT LAW OR IN EQUITY), INCLUDING, WITHOUT LIMITATION, CONCEPTS OF
MATERIALITY, REASONABLENESS, GOOD FAITH AND FAIR DEALING AND THE DISCRETION OF
ANY COURT OF COMPETENT JURISDICTION IN AWARDING SPECIFIC PERFORMANCE OR
INJUNCTIVE RELIEF AND OTHER EQUITABLE REMEDIES; AND (3), WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, IN THE EVENT THAT A COURT APPLIES CALIFORNIA LAW
WHEN INTERPRETING ANY OPERATIVE DOCUMENT, THE EFFECT OF CALIFORNIA COURT
DECISIONS AND STATUTES WHICH INDICATE THAT PROVISIONS OF ANY OPERATIVE DOCUMENT
WHICH PERMIT ANY LENDER PARTY OR ANY OTHER PERSON TO TAKE ACTION OR MAKE
DETERMINATIONS MAY BE SUBJECT TO A REQUIREMENT THAT SUCH ACTION BE TAKEN OR SUCH
DETERMINATIONS BE MADE ON A REASONABLE BASIS IN GOOD FAITH OR THAT IT BE SHOWN
THAT SUCH ACTION IS REASONABLY NECESSARY FOR THE PROTECTION OF SUCH LENDER PARTY
OR SUCH OTHER PERSON.
(n) WITH RESPECT TO OUR OPINION ABOVE CONCERNING ENFORCEMENT OF THE
ASSIGNMENT OF RENTS SET FORTH IN ANY OF THE OPERATIVE DOCUMENTS, WE NOTE THE
LIMITATIONS AND REQUIREMENTS WITH RESPECT TO THE ENFORCEMENT THEREOF SET FORTH
IN SECTION 2938 OF THE CALIFORNIA CIVIL CODE ("CC").
(o) WITH RESPECT TO THE OPINIONS SET FORTH ABOVE, WE NOTE THAT IF ANY OF THE
OBLIGATIONS OF LESSEE UNDER THE LEASE OR ANY OPERATIVE DOCUMENT RELATING THERETO
ARE DETERMINED BY A COURT APPLYING CALIFORNIA LAW TO BE OBLIGATIONS THAT ARE
SECURED BY A DEED OF TRUST OR
<PAGE> 147
To Each of the Parties ____________, 2000
Listed on Schedule A Page 13
Attached Hereto
MORTGAGE ON THE REAL PROPERTY COVERED THEREBY OF WHICH IS LOCATED IN THE STATE
OF CALIFORNIA, SUCH OBLIGATIONS MAY BE AFFECTED BY THE CALIFORNIA
ANTIDEFICIENCY, ONE-ACTION AND RELATED LAWS, AND LAWS RELATING TO DEFAULT CURE
RIGHTS, INCLUDING, WITHOUT LIMITATION, THE FOLLOWING:
(i) SECTION 726 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE ("CCP") PROVIDES
THAT ANY ACTION TO RECOVER ON A DEBT OR OTHER RIGHT SECURED BY A MORTGAGE OR A
DEED OF TRUST ON REAL PROPERTY MUST COMPLY WITH THE REQUIREMENTS OF THAT
SECTION, WHICH REQUIREMENTS RELATE TO AND SPECIFY THE PROCEDURES FOR THE SALE OF
ENCUMBERED PROPERTY, THE APPLICATION OF PROCEEDS, THE RENDITION IN CERTAIN CASES
OF A DEFICIENCY JUDGMENT AND OTHER RELATED MATTERS. IN SUCH AN ACTION OR
PROCEEDING, THE DEBTOR MAY REQUIRE THE CREDITOR TO EXHAUST ALL OF ITS SECURITY
BEFORE A PERSONAL JUDGMENT MAY BE OBTAINED AGAINST THE DEBTOR FOR A DEFICIENCY,
AND FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 726 (INCLUDING AN ATTEMPT
TO EXERCISE A RIGHT TO SET OFF WITH RESPECT TO ANY FUNDS OF THE DEBTOR THAT MAY
BE DEPOSITED WITH THE CREDITOR FROM TIME TO TIME) MAY RESULT IN THE CREDITOR'S
LOSS OF ITS LIEN ON REAL PROPERTY COLLATERAL;
(ii) SECTION 580B OF THE CCP PROVIDES THAT NO DEFICIENCY JUDGMENT SHALL BE
RENDERED UPON A PURCHASE MONEY OBLIGATION IN FAVOR OF THE VENDOR ARISING FROM
THE SALE OF REAL PROPERTY WHERE SUCH PURCHASE MONEY OBLIGATION IS SECURED BY A
LIEN ON THE REAL PROPERTY PURCHASED FROM THE VENDOR OR IN FAVOR OF A LENDER
WHERE THE PROCEEDS OF THE LOAN ARE USED TO PURCHASE A ONE-TO-FOUR FAMILY
DWELLING OCCUPIED ENTIRELY OR IN PART BY THE BORROWER AND WHERE SUCH LOAN IS
SECURED BY A LIEN ON SUCH DWELLING;
(iii) SECTIONS 580A AND 580D OF THE CCP, RESPECTIVELY, WHICH (i) LIMIT ANY
DEFICIENCY AFTER JUDICIAL FORECLOSURE TO THE EXCESS OF THE DEBT OVER THE FAIR
MARKET VALUE OF THE FORECLOSED PROPERTY AT THE TIME OF SALE, AND (ii) PREVENT A
DEFICIENCY JUDGMENT AFTER A NONJUDICIAL OR TRUSTEE'S FORECLOSURE SALE PURSUANT
TO A POWER OF SALE;
(iv) SECTION 2924C OF THE CC PROVIDES FOR CERTAIN DEFAULT CURE RIGHTS
FOLLOWING ACCELERATION OF THE MATURITY OF AN OBLIGATION SECURED BY A DEED OF
TRUST OR MORTGAGE ON REAL PROPERTY, WHICH MAY BE EXERCISED AT ANY TIME WITHIN
THE REINSTATEMENT PERIOD DESCRIBED IN SUCH SECTION;
(v) SECTION 726.5 OF THE CCP AUTHORIZES, UNDER CERTAIN CIRCUMSTANCES, A REAL
ESTATE-SECURED COMMERCIAL LENDER TO WAIVE ITS LIEN AGAINST A PARCEL OF
"ENVIRONMENTALLY IMPAIRED" SECURITY (AS THEREIN DEFINED) AND SUE THE BORROWER
WITHOUT FORECLOSING ON THE REAL PROPERTY COLLATERAL FOR THE LOAN;
(vi) SECTION 9501 OF THE CUCC PRESCRIBES THE RIGHTS AND REMEDIES OF SECURED
CREDITORS WITH BOTH REAL AND PERSONAL PROPERTY SECURITY;
(vii) CCP SECTIONS 729.010 THROUGH 729.090 PROVIDE FOR CERTAIN REDEMPTION AND
OTHER RIGHTS FOLLOWING ANY JUDICIAL FORECLOSURE SALE;
(viii) SECTION 736 OF THE CCP PERMITS A LENDER, UNDER CERTAIN CIRCUMSTANCES, TO
SUE FOR BREACH OF CONTRACT RELATING TO ANY "ENVIRONMENTAL PROVISIONS" (AS
THEREIN DEFINED) CONCERNING REAL
<PAGE> 148
To Each of the Parties ____________, 2000
Listed on Schedule A Page 14
Attached Hereto
PROPERTY SECURITY WITHOUT FORECLOSING ON THE REAL PROPERTY SECURITY OR IN AN
ACTION BROUGHT FOLLOWING FORECLOSURE, WHETHER JUDICIAL OR NON-JUDICIAL; AND
(ix) CC SECTIONS 2924, 2924B AND 2924C REQUIRE THAT CERTAIN PROCEDURES BE
FOLLOWED BY THE HOLDER OF A DEED OF TRUST OR MORTGAGE WITH POWER OF SALE BEFORE
EXERCISING ANY POWER OF SALE THEREUNDER.
(p) THE ENFORCEABILITY OF ANY "ENVIRONMENTAL PROVISION" OF THE OPERATIVE
DOCUMENTS IS ALSO LIMITED BY, AND ALSO SUBJECT TO COMPLIANCE BY THE
BENEFICIARIES THEREUNDER WITH, STATUTORY OR OTHER LEGAL REQUIREMENTS, INCLUDING,
WITHOUT LIMITATION, CCP SECTIONS 564, 726.5 AND 736 AND CC SECTION 2929.5. AS
USED ABOVE, THE TERM "ENVIRONMENTAL PROVISION" HAS THE MEANING SET FORTH IN CCP
SECTION 736(f)(2).
(q) THE EFFECTIVENESS OF THE FINANCING STATEMENTS WILL LAPSE FIVE YEARS FROM
THE DATE THE SAME IS FILED UNLESS A CONTINUATION STATEMENT IS FILED WITHIN SIX
MONTHS PRIOR TO THE EXPIRATION OF THAT FIVE YEAR PERIOD.
(r) TO THE EXTENT PROVIDED BY DIVISION 9 OF THE CUCC, ADDITIONAL FILINGS
WITH RESPECT TO THE COLLATERAL MAY ALSO BE NECESSARY TO CONTINUE PERFECTION OF
THE SECURITY INTEREST IN ALL OR CERTAIN OF THE COLLATERAL IF LESSEE OR LESSOR
CHANGES ITS NAME (OR ANY FINANCING STATEMENT OTHERWISE BECOMES SERIOUSLY
MISLEADING), IF ANY ITEM OF COLLATERAL THAT IS LOCATED IN CALIFORNIA IS REMOVED
FROM THAT STATE OR IF LESSEE OR LESSOR CHANGES THE JURISDICTION IN WHICH ITS
CHIEF EXECUTIVE OFFICE IS LOCATED TO A JURISDICTION OTHER THAN CALIFORNIA.
(s) TO THE EXTENT THAT ANY OF THE COLLATERAL CONSISTS OF OR CONSTITUTES
"PROCEEDS" (AS SUCH TERM IS DEFINED IN SECTION 9306 OF THE CUCC), THE SECURITY
INTEREST THEREIN IS LIMITED AND CONDITIONED AS SET FORTH IN SUCH SECTION 9306.
(t) THE OPINIONS EXPRESSED HEREIN WITH RESPECT TO THE CREATION, ATTACHMENT
OR PERFECTION OF ANY SECURITY INTEREST: (i) ARE LIMITED TO THE OPINIONS
EXPRESSED IN PARAGRAPHS 8(b)(i) AND (ii) ABOVE AND TO THE COLLATERAL
SPECIFICALLY DESCRIBED IN THE SECURITY AGREEMENT WHICH IS GOVERNED BY RELEVANT
PROVISIONS AS CURRENTLY IN EFFECT OF DIVISION 9 OF THE CUCC (FOR PURPOSES OF
THIS PARAGRAPH ONLY, THE "Covered Collateral"); (ii) DO NOT APPLY TO COLLATERAL
REQUIRING PERFECTION PROCEDURES OTHER THAN THE FILING OF A FINANCING STATEMENT
IN THE OFFICE OF THE CALIFORNIA SECRETARY OF STATE; AND (iii) BY REASON OF THE
OPERATION OF SECTION 9103 OF THE CUCC, ARE LIMITED AS TO OUR PERFECTION OPINIONS
IN PARAGRAPHS 8(a)(i) AND (ii) (INSOFAR AS SUCH OPINION GOVERNS GOODS AND SUCH
OTHER ITEMS OF THE COVERED COLLATERAL DESCRIBED IN SECTION 9103(1)(a) OF THE
CUCC) TO GOODS AND SUCH OTHER ITEMS LOCATED IN THE STATE OF CALIFORNIA. WE
EXPRESS NO OPINION WITH RESPECT TO THE PRIORITY OF ANY SECURITY INTEREST. WE
HAVE ASSUMED FOR PURPOSES OF THE OPINIONS IN PARAGRAPHS 8(b)(i) AND (ii) ABOVE
THAT LESSEE AND LESSOR ARE EACH LOCATED IN CALIFORNIA FOR PURPOSES OF SECTION
9103(3)(b) AND SECTION 9103(6)(f) OF THE CUCC. WE HAVE ALSO ASSUMED FOR PURPOSES
OF SUCH OPINIONS THAT LESSEE AND LESSOR EACH HAVE RIGHTS IN THE COVERED
COLLATERAL WITHIN THE MEANING OF THE CUCC, THAT ALL REQUIRED CONSENTS OF THIRD
PARTIES TO THE GRANT OF SECURITY INTERESTS IN THE COVERED COLLATERAL HAVE BEEN
OBTAINED AND THAT THE LENDER PARTIES (EXCEPT FOR LESSOR WITH RESPECT TO THE
<PAGE> 149
To Each of the Parties ____________, 2000
Listed on Schedule A Page 15
Attached Hereto
ATTACHMENT AND/OR AND PERFECTION OF LESSOR'S SECURITY INTERESTS) HAVE GIVEN
"VALUE" WITHIN THE MEANING OF THE CUCC. WE HAVE ASSUMED FOR THE PURPOSES OF OUR
OPINIONS IN PARAGRAPH 8(b)(ii) THAT THE SECURITY INTERESTS (TO WHICH THE LEASE
FINANCING STATEMENTS PERTAIN) IN THE COLLATERAL DESCRIBED IN THE LEASE FINANCING
STATEMENTS IN FAVOR OF THE LESSOR HAVE ATTACHED FOR PURPOSES OF THE CUCC.
(u) WE ALSO EXPRESS NO OPINION (i) AS TO THE TITLE OF THE LESSEE OR LESSOR
TO ANY COLLATERAL OR (ii) AS TO WHETHER THE LEASE CONSTITUTES A SECURITY
INTEREST OR CREATES A SECURITY INTEREST WITHIN THE MEANING OF THE CUCC.
(v) WE EXPRESS NO OPINION (i) WITH RESPECT TO ANY COLLATERAL OF A TYPE
DESCRIBED IN SECTION 9401(1)(a) OR (b) OF THE CUCC OR REPRESENTED BY ANY
CERTIFICATE OF TITLE, (ii) AS TO THE ACCURACY OR COMPLETENESS OF ANY DESCRIPTION
OF THE PROPERTY OR ANY OTHER PROPERTY OR COLLATERAL (INCLUDING THE SCOPE OF THE
TERM "GENERAL INTANGIBLES"), OR THE CHARACTERIZATION OF ANY COLLATERAL AS REAL
PROPERTY, PERSONAL PROPERTY, EQUIPMENT OR FIXTURES AND (iii) AS TO ANY
COLLATERAL WHICH IS AN ACCESSION TO, OR COMMINGLED OR PROCESSED WITH, OTHER
GOODS TO THE EXTENT THAT THE SECURITY INTEREST OF THE LENDER PARTIES IS LIMITED
BY SECTION 9314 OR 9315 OF THE CUCC.
(w) THE RIGHTS OF LENDER PARTIES IN RESPECT OF FIXTURES MAY BE LIMITED BY CC
SECTIONS 1013, 1013.5 AND 1019 AND CUCC SECTION 9313 WHICH CONCERN FIXTURES AND
THEIR REMOVAL EXCEPT TO THE EXTENT THAT APPROPRIATE AGREEMENTS ARE OBTAINED FROM
OWNERS AND ENCUMBRANCERS OF, AND OTHERS CLAIMING AN INTEREST IN, THE REAL
PROPERTY ON WHICH SUCH FIXTURES ARE LOCATED.
(x) WE EXPRESS NO OPINION AS TO WHETHER ANY DIVISIONS OF REAL PROPERTY OR
ANY INTERESTS THEREIN CONTEMPLATED BY THE OPERATIVE DOCUMENTS COMPLY WITH THE
SUBDIVISION MAP ACT (AS DEFINED IN SECTION 66410 OF THE CALIFORNIA GOVERNMENT
CODE) OR ANY CITY, COUNTY OR OTHER LOCAL RULES, ORDINANCES OR REGULATIONS
PROMULGATED BY AUTHORITY THEREOF OR IN CONNECTION THEREWITH.
(y) WE EXPRESS NO OPINION AS TO THE TITLE OF THE LESSEE OR THE LESSOR TO THE
PROPERTY OR ANY IMPROVEMENTS PURSUANT TO THE LEASE.
(z) WE FURTHER ADVISE YOU THAT IF A COURT OF COMPETENT JURISDICTION APPLIES
THE LAWS OF THE STATE OF CALIFORNIA TO A LEASE OF REAL PROPERTY LOCATED IN THE
STATE OF CALIFORNIA, THE OBLIGATIONS OF LESSEE UNDER THE LEASE MAY ALSO BE
AFFECTED UNDER CALIFORNIA LAW BY THE PROVISIONS OF CC SECTIONS 1932 AND 1933
(RELATING, INTER ALIA, TO TERMINATION OF A LEASE UPON CASUALTY TO THE LEASEHOLD
ESTATE) OR BY SECTION 1265.130 OF THE CCP (RELATING TO TERMINATION OF A LEASE
UPON A TAKING OF THE LEASEHOLD ESTATE FOR PUBLIC USE IN CERTAIN CIRCUMSTANCES).
(aa) WE EXPRESS NO OPINION AS TO THE VALIDITY, BINDING NATURE OR
ENFORCEABILITY OF ANY PROVISIONS OF THE OPERATIVE DOCUMENTS THAT:
(i) PURPORT TO WAIVE REGULATORY, CONSTITUTIONAL, STATUTORY OR COMMON LAW
RIGHTS, INCLUDING THE RIGHT TO RECEIVE NOTICE OR TO BE ALLOWED TO CURE,
REINSTATE OR REDEEM IN THE EVENT OF DEFAULT, OR THAT EXPRESSLY OR BY IMPLICATION
WAIVE BROADLY OR VAGUELY STATED RIGHTS,
<PAGE> 150
To Each of the Parties ____________, 2000
Listed on Schedule A Page 16
Attached Hereto
UNKNOWN FUTURE RIGHTS AND DEFENSES TO OBLIGATIONS, IN EACH CASE TO THE EXTENT
SUCH RIGHTS OR DEFENSES ARE NOT WAIVABLE UNDER APPLICABLE LAW;
(ii) PURPORT TO REQUIRE THE LESSEE OR LESSOR TO MAKE PAYMENTS WITHOUT
SET-OFF, DEFENSE OR COUNTERCLAIM;
(iii) SPECIFY THE MANNER OF FORECLOSURE OR EXERCISE OF REMEDIES IN RESPECT OF
DEPOSIT ACCOUNTS INSOFAR AS THE CUCC DOES NOT ADDRESS THE SAME;
(iv) PURPORT TO REQUIRE THE AWARD OR PAYMENT OF ATTORNEYS' FEES, EXPENSES OR
COSTS IN ANY ACTION WHERE ANY PERSON IS NOT THE PREVAILING PARTY, OR THE IMPACT
OF CC SECTION 1717 ET SEQ. ON ANY SUCH PROVISIONS;
(v) PROVIDE THAT RIGHTS OR REMEDIES ARE NOT EXCLUSIVE, THAT EVERY RIGHT OR
REMEDY IS CUMULATIVE AND MAY BE EXERCISED IN ADDITION TO OR WITH ANY OTHER RIGHT
OR REMEDY, THAT THE ELECTION OF SOME PARTICULAR REMEDY OR REMEDIES DOES NOT
PRECLUDE RECOURSE TO ONE OR ANOTHER REMEDY OR THAT FAILURE TO EXERCISE OR DELAY
IN EXERCISING RIGHTS OR REMEDIES WILL NOT OPERATE AS A WAIVER OF ANY SUCH RIGHT
OR REMEDY;
(vi) PROHIBIT WAIVER OF ANY TERMS OR PROVISIONS OF THE OPERATIVE DOCUMENTS
OTHER THAN IN WRITING OR PROHIBIT ORAL MODIFICATIONS THEREOF OR MODIFICATION BY
COURSE OF DEALING TO THE EXTENT SUCH PROVISIONS ARE INCONSISTENT WITH APPLICABLE
LAW;
(vii) ADDRESS ARBITRATION OF DISPUTES;
(viii) PURPORT TO WAIVE STATUTES OF LIMITATION;
(ix) AUTHORIZE LESSOR OR ANY OTHER PERSON TO SET OFF AND APPLY ANY DEPOSITS
AT ANY TIME HELD, AND ANY OTHER INDEBTEDNESS AT ANY TIME OWING, BY LESSEE OR
LESSOR TO OR FOR THE ACCOUNT OF LESSOR;
(x) PURPORT TO LIMIT THE STANDARDS IMPOSED UPON ANY PERSON FOR THE CARE OF
THE COLLATERAL IN SUCH PERSON'S POSSESSION;
(xi) PURPORT TO EXCLUDE CONFLICT OF LAW PRINCIPLES UNDER CALIFORNIA LAW OR
OTHERWISE SELECT THE LAWS OF NEW YORK TO GOVERN ANY OF THE OPERATIVE DOCUMENTS
OR ANY SECURITY INTEREST IN REAL PROPERTY LOCATED IN THE STATE OF CALIFORNIA;
(xii) REQUIRE THE LESSEE OR LESSOR TO PROVIDE HAZARD INSURANCE COVERAGE
AGAINST RISKS IN AN AMOUNT EXCEEDING THE REPLACEMENT VALUE OF ANY IMPROVEMENTS
TO REAL PROPERTY;
(xiii) IMPOSE REQUIREMENTS RESPECTING IMPOUND ACCOUNTS IN CONFLICT WITH
APPLICABLE LAW;
(xiv) PROVIDE FOR THE APPLICATION OF INSURANCE OR CONDEMNATION PROCEEDS TO
REDUCE INDEBTEDNESS;
(xv) PURPORT TO ASSIGN RENTS, ISSUES AND PROFITS ABSOLUTELY AND NOT AS
SECURITY;
(xvi) INDEMNIFY ANY PERSON AGAINST, OR REQUIRE CONTRIBUTIONS TOWARD, THAT
PERSON'S LIABILITY FOR ITS OWN WRONGFUL OR NEGLIGENT ACTS OR WHERE SUCH
INDEMNIFICATION OR CONTRIBUTION IS CONTRARY TO PUBLIC POLICY OR PROHIBITED BY
LAW;
(xvii) PROVIDE FOR PENALTIES, LIQUIDATED DAMAGES, ACCELERATION OF FUTURE
AMOUNTS DUE (OTHER THAN PRINCIPAL) WITHOUT APPROPRIATE DISCOUNT TO PRESENT
VALUE, LATE CHARGES, PREPAYMENT CHARGES AND INCREASED INTEREST RATES UPON
DEFAULT;
<PAGE> 151
To Each of the Parties ____________, 2000
Listed on Schedule A Page 17
Attached Hereto
(xviii) PROVIDE THAT TIME IS OF THE ESSENCE;
(xix) PROVIDE FOR THE CONFESSION OF JUDGMENT;
(xx) ATTEMPT TO CHANGE OR WAIVE RULES OF EVIDENCE OR FIX THE METHOD OR
QUANTUM OF PROOF TO BE APPLIED IN LITIGATION OR SIMILAR PROCEEDINGS;
(xxi) PROVIDE FOR THE EXCLUSIVE JURISDICTION OF A PARTICULAR COURT OR PURPORT
TO WAIVE RIGHTS TO TRIAL BY JURY, SERVICE OF PROCESS OR OBJECTIONS TO THE LAYING
OF VENUE OR TO FORUM ON THE BASIS OF FORUM NON CONVENIENS, IN CONNECTION WITH
ANY LITIGATION ARISING OUT OF OR PERTAINING TO THE OPERATIVE DOCUMENTS;
(xxii) APPOINT ANY LENDER PARTY AS LESSEE'S OR LESSOR'S AGENT OR
ATTORNEY-IN-FACT; OR
(xxiii) ANY PROVISION PURPORTING TO WAIVE ANY RIGHT TO CLAIM PUNITIVE DAMAGES.
(bb) THE ENFORCEABILITY OF ANY PROVISIONS OF THE OPERATIVE DOCUMENTS WHICH
ARE DEEMED TO CONSTITUTE A SUBORDINATION OF THE RIGHTS OF LESSEE OR LESSOR MAY
BE LIMITED BY EXONERATION AND OTHER DEFENSES SIMILAR TO THOSE THAT MAY BE
ASSERTED BY ANY GUARANTOR.
(cc) WITH RESPECT TO THE PROVISIONS OF THE OPERATIVE DOCUMENTS RELATING TO
THE APPLICATION OF CONDEMNATION PROCEEDS, YOU SHOULD BE AWARE THAT CCP SECTION
1265.225 PROVIDES THAT WHERE THERE IS A PARTIAL TAKING OF PROPERTY ENCUMBERED BY
A LIEN, THE LIENHOLDER MAY SHARE IN THE AWARD ONLY TO THE EXTENT DETERMINED BY
THE COURT TO BE NECESSARY TO PREVENT IMPAIRMENT OF THE SECURITY, AND THE LIEN
SHALL CONTINUE UPON THE PART OF THE PROPERTY NOT TAKEN AS SECURITY FOR THE
UNPAID PORTION OF THE INDEBTEDNESS. HOWEVER, THE LIENHOLDER AND THE PROPERTY
OWNER MAY AT ANY TIME AFTER COMMENCEMENT OF THE CONDEMNATION PROCEEDING AGREE
THAT SOME OR ALL OF THE AWARD SHALL BE APPORTIONED TO THE LIENHOLDER ON THE
INDEBTEDNESS.
(dd) NOTWITHSTANDING OUR OPINIONS ABOVE, WE EXPRESS NO OPINION AS TO THE
ENFORCEABILITY OF THE POWER OF SALE (AND THE RELATED REMEDIES OF LESSOR
CONSISTENT WITH THE CHARACTERIZATION OF THE TRANSACTION AS A LOAN) IN THE LEASE,
WHERE A COURT OF COMPETENT JURISDICTION HAS NOT RECHARACTERIZED THE TRANSACTION,
INSOFAR AS THE LEASE IS CONCERNED, AS A LOAN FROM LESSOR TO LESSEE.
(ee) WE WISH TO POINT OUT THAT THE LENDERS, AS HOLDERS OF THE TRANCHE A NOTES
AND TRANCHE B NOTES, MAY BE REQUIRED TO PROVE THE OUTSTANDING AMOUNT THEREOF. WE
FURTHER WISH TO POINT OUT THAT UNDER SECTION 18104 OF THE CALIFORNIA PROBATE
CODE, THE HOLDERS MAY BE REQUIRED TO PROVE THEIR INTERESTS AS BENEFICIARIES
UNDER THE VS TRUST 2000-1.
Without qualification of the opinions rendered above, we express
no opinion as to (i) whether the Lease or any of the other Operative Documents
will be construed to create the legal relationships they purport to create for
purposes of determining the rights and obligations of the parties thereto; (ii)
whether the legal relationships purported to be created by the Lease or any of
the other Operative Documents will be binding and conclusive with respect to the
rights of persons who are not parties thereto; or (iii) whether the legal
relationships purported to be created
<PAGE> 152
To Each of the Parties ____________, 2000
Listed on Schedule A Page 18
Attached Hereto
by the Lease or any of the other Operative Documents will be respected for tax,
accounting, financial or other regulatory purposes.
The opinions expressed herein are solely for your benefit and for
the benefit of your successors and assigns in connection with the Transaction,
and such opinions may not be relied on in any manner or for any purpose by any
other Person. In addition, this opinion is rendered as of the date hereof and
speaks only to the addresses set forth on Schedule A, and it shall not be deemed
to have been updated to any date upon which any such other Person may rely
hereon. Further, we do not undertake to advise you or such other Person of
matters which occur subsequent to the date hereof and which affect the opinions
expressed herein.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 153
SCHEDULE A
BANK OF AMERICA, N.A., as the Agent, a Lender and a Holder
The various banks and other lending institutions parties to the Participation
Agreement from time to time, as additional Lenders
The various banks and other lending institutions parties to the Participation
Agreement from time to time, as Holders
FIRST SECURITY BANK, NATIONAL ASSOCIATION, individually and as Borrower, Lessor
and Owner Trustee
Together with such parties' successors and assigns
<PAGE> 154
EXHIBIT A
CERTIFICATE OF LESSEE
THIS CERTIFICATE OF LESSEE ("Certificate") is made as of
____________, 2000, by VERITAS Operating Corporation, a Delaware corporation
("Lessee"). This Certificate is made for the benefit of Brobeck, Phleger &
Harrison LLP ("BPH") in connection with BPH's opinion (the "Opinion") delivered
to these parties listed in Schedule A attached to the Opinion. Capitalized terms
not defined herein are used herein as defined in the Opinion.
After due inquiry and investigation, the undersigned hereby
represents to and for the benefit of BPH as follows:
1. I am an officer of Lessee (specifically, the Secretary of
Lessee), and I am familiar with the day-to-day operations of Lessee.
2. Lessee is party to no Material Agreements as of the date
hereof (other than the Operative Documents, except as set forth on Schedule 1
hereto. "Material Agreement" means an agreement of Lessee involving borrowed
money in an amount (whether or not funded) in excess of $5,000,000, where Lessee
is a borrower or guarantor of the amount.
3. The Lessee Constituent Documents remain in full force and
effect and have not been altered or amended in any respect.
4. The Operative Documents do not and will not conflict with
any Material Agreement or other indenture, mortgage, deed of trust, contract, or
other material agreement or other instrument to which Lessee is a party or by
which Lessee is bound.
5. Except as set forth on Schedule 2 hereto, the
representations and warranties of Lessee contained in the Operative Documents to
which it is a party are true and correct on and as of the date hereof as though
made on and as of such date.
6. The Operative Documents do not and will not result in the
creation or imposition of any lien on any material asset of Lessee (other than
liens permitted under the Operative Documents).
7. The Operative Documents do not and will not violate or
contravene any judgment, decree, injunction or order of any federal, New York or
California court or other tribunal, or any arbitrator or governmental agency or
authority having jurisdiction over Lessee or the Property of Lessee and by which
Lessee is bound.
8. There are no proceedings pending, threatened or
contemplated for the dissolution, merger, consolidation or liquidation of Lessee
or for the sale of all or substantially all of the assets of Lessee.
9. There are no actions, suits or proceedings pending or, to
the best of my knowledge, threatened against or affecting the Lessee or the
properties of Lessee before any
<PAGE> 155
court, board of arbitration, governmental agency or authority which (i)
challenge or question the validity or enforceability of the Operative Documents
or the rights and remedies of the Lessor with respect to Lessee or the Property
under the Operative Documents, or (ii) which, if determined adversely to Lessee,
would be reasonably likely to have a Material Adverse Effect (as such term is
defined in Appendix A to the Participation Agreement).
10. All tax returns and payments due and owing with respect to
Lessee have been filed with or paid to the proper authorities in the State of
California.
11. The chief executive office of Lessee is located at 1600
Plymouth Street, Mountain View, California.
12. Lessee neither engages or holds itself out as being
engaged primarily, nor proposes to engage primarily, in the business of
investing, reinvesting or trading in securities.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
as Secretary of Lessee (and solely in such capacity) as of the day and year
first above written.
________________________________________
Name: __________________________________
Title: _________________________________
<PAGE> 156
SCHEDULE 1
Material Agreements
$100,000,000 5 1/4% Convertible Subordinated Notes Due November 1, 2004.
<PAGE> 157
EXHIBIT H-1
[Outside Counsel Opinion for the Additional Credit Parties]
(Pursuant to Section 5.10(c) of the Participation Agreement)
------------, ------
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
Re: Synthetic Lease Financing Provided in favor of VERITAS Operating
Corporation
Dear Sirs:
We have acted as special counsel to _________________, a ______________
corporation (the "Joinder Party") in connection with certain transactions
contemplated by the Participation Agreement dated as of March 9, 2000 (the
"Participation Agreement"), among VERITAS Operating Corporation, a Delaware
corporation (the "Lessee"), the various parties thereto from time to time, as
guarantors (the "Guarantors"), First Security Bank, National Association, as the
Owner Trustee (the "Owner Trustee"), the various banks and other lending
institutions which are parties thereto from time to time, as holders (the
"Holders"), the various banks and other lending institutions which are parties
thereto from time to time, as lenders (the "Lenders") and Bank of America, N.A.,
as the agent for the Lenders and respecting the Security Documents, as the agent
for the Lenders and the Holders, to the extent of their interests (the "Agent").
This opinion is delivered pursuant to Section 5.10(c) of the Participation
Agreement. All capitalized terms used herein, and not otherwise defined herein,
shall have the meanings assigned thereto in Appendix A to the Participation
Agreement.
In connection with the foregoing, we have examined originals, or copies
certified to our satisfaction, of the Operative Agreements (including without
limitation that certain Joinder Agreement dated as of __________, _____ (the
"Joinder Agreement"), between the Joinder Party and the Agent, and such other
corporate, partnership or limited liability company documents and records of the
Joinder Party, certificates of public officials and representatives of the
Joinder Party as to certain factual matters, and such other instruments and
documents which we have deemed necessary or advisable to examine for the purpose
of this opinion. With respect to such examination, we have assumed (i) the
statements of fact made in all such certificates, documents and instruments are
true, accurate and complete; (ii) the due authorization, execution and delivery
of the Operative Agreements by the parties thereto other than the Joinder Party;
(iii) the genuineness of all signatures (other than the signatures of persons
signing on behalf of the Joinder Party), the authenticity and completeness of
all documents, certificates, instruments, records and corporate records
submitted to us as originals and the conformity to the original
H-1-1
<PAGE> 158
instruments of all documents submitted to us as copies, and the authenticity and
completeness of the originals of such copies; (iv) that all parties other than
the Joinder Party have all requisite corporate power and authority to execute,
deliver and perform the Operative Agreements; and (v) the enforceability of the
Operative Agreements against all parties thereto other than the Joinder Party.
We have further assumed that the laws of the States of [STATE OF LAWYER'S
ADMISSION] and New York are substantively identical.
Based on the foregoing, and having due regard for such legal considerations as
we deem relevant, and subject to the limitations and assumptions set forth
herein, including without limitation the matters set forth in the last two (2)
paragraphs hereof, we are of the opinion that:
(a) The Joinder Party is a corporation, duly incorporated, validly
existing and in good standing under the laws of ___________________ and has the
power and authority to conduct its business as presently conducted and to
execute, deliver and perform its obligations under the Operative Agreements to
which it is a party. The Joinder Party is duly qualified to do business in all
jurisdictions in which its failure to so qualify would materially impair its
ability to perform its obligations under the Operative Agreements to which it is
a party or its financial position or its business as now and now proposed to be
conducted.
(b) The execution, delivery and performance by the Joinder Party of
the Operative Agreements to which it is a party have been duly authorized by all
necessary corporate action on the part of the Joinder Party and the Operative
Agreements to which the Joinder Party is a party have been duly executed and
delivered by the Joinder Party.
(c) The Operative Agreements to which the Joinder Party is a party
constitute valid and binding obligations of the Joinder Party enforceable
against the Joinder Party in accordance with the terms thereof, subject to
bankruptcy, insolvency, liquidation, reorganization, fraudulent conveyance, and
similar laws affecting creditors' rights generally, and general principles of
equity (regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
(d) The execution and delivery by the Joinder Party of the Operative
Agreements to which it is a party and compliance by the Joinder Party with all
of the provisions thereof do not and will not (i) contravene the provisions of,
or result in any breach of or constitute any default under, or result in the
creation of any Lien (other than Permitted Liens and Lessor Liens) upon any of
its property under, its Articles of Incorporation and By-Laws or any indenture,
mortgage, chattel mortgage, deed of trust, lease, conditional sales contract,
bank loan or credit agreement or other agreement or instrument to which the
Joinder Party is a party or by which it or any of its property may be bound or
affected, or (ii) contravene any Laws or any order of any Governmental Authority
applicable to or binding on the Joinder Party.
(e) No Governmental Action by, and no notice to or filing with, any
Governmental Authority is required for the due execution, delivery or
performance by the Joinder Party of any of the Operative Agreements to which it
is a party or for the acquisition, ownership, construction and completion of the
Properties, except for those which have been obtained.
H-1-2
<PAGE> 159
(f) Except as set forth on Schedule 1 hereto, there are no actions,
suits or proceedings pending or to our knowledge, threatened against the in any
court or before any Governmental Authority, that concern the Properties or the
Joinder Party's interest therein or that question the validity or enforceability
of any Operative Agreement to which the Joinder Party is a party or the overall
transaction described in the Operative Agreements to which the Joinder Party is
a party.
(g) Neither the nature of the Properties, nor any relationship
between the Joinder Party and any other Person, nor any circumstance in
connection with the execution, delivery and performance of the Operative
Agreements to which the Joinder Party is a party is such as to require any
approval of stockholders of, or approval or consent of any trustee or holders of
indebtedness of, the Joinder Party, except for such approvals and consents which
have been duly obtained and are in full force and effect.
(h) Except with respect to (i) perfection and the effect of
perfection or nonperfection of the security interest in the Collateral, and (ii)
usury law, in any action or proceeding arising out of or related to any of the
Operative Agreements in any court of the State of California or in any federal
court sitting in the State of California, such court would recognize and give
effect to the New York choice of law provisions of the Operative Agreements.
This opinion is limited to the matters stated herein and no opinion is
implied or may be inferred beyond the matters stated herein. This opinion is
based on and is limited to the laws of the States of [__________], and the
federal laws of the United States of America. Insofar as the foregoing opinion
relates to matters of law other than the foregoing, no opinion is hereby given.
This opinion is for the sole benefit of the Joinder Party, the Lessee, the
Construction Agent, the Guarantors, the Owner Trustee, the Holders, the Lenders,
the Agent and their respective successors and assigns and may not be relied upon
by any other person other than such parties and their respective successors and
assigns without the express written consent of the undersigned. The opinions
expressed herein are as of the date hereof and we make no undertaking to amend
or supplement such opinions if facts come to our attention or changes in the
current law of the jurisdictions mentioned herein occur which could affect such
opinions.
Very truly yours,
[JOINDER PARTY'S OUTSIDE COUNSEL]
H-1-3
<PAGE> 160
Distribution List
Bank of America, N.A., as the Agent, a Holder and a Lender
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as additional Holders
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as additional Lenders
VERITAS Operating Corporation, as the Construction Agent and the Lessee
The various parties to the Participation Agreement from time to time as
Guarantors
First Security Bank, National Association, not individually, but solely as the
Owner Trustee under the VS Trust 2000-1
____________________________, as the Joinder Party
H-1-4
<PAGE> 161
Schedule 1
(Litigation)
H-1-5
<PAGE> 162
EXHIBIT I
VERITAS OPERATING CORPORATION
OFFICER'S CERTIFICATE
(Pursuant to Section 5.5 of the Participation Agreement)
VERITAS OPERATING CORPORATION, a Delaware corporation (the "Company")
DOES HEREBY CERTIFY as follows:
1. The address for the subject Property is ________________________________
________________________________.
2. The Completion Date for the construction of Improvements at the Property
occurred on ______________.
3. Attached hereto as Schedule 1 is the detailed, itemized documentation
supporting the asserted Property Cost figures.
4. All representations and warranties of the Company in each Operative
Agreement and in each certificate delivered pursuant thereto (including
without limitation the Incorporated Representations and Warranties) are
true and correct as of the Completion Date.
Capitalized terms used in this Officer's Certificate and not otherwise defined
have the respective meanings ascribed thereto in the Participation Agreement
dated as of March 9, 2000 among the Company, as the Lessee and as the
Construction Agent, the various parties thereto from time to time, as guarantors
(the "Guarantors"), First Security Bank, National Association, as the Owner
Trustee, the various banks and other lending institutions which are parties
thereto from time to time, as holders (the "Holders"), the various banks and
other lending institutions which are parties thereto from time to time, as
lenders (the "Lenders"), Bank of America, N.A., as the agent for the Lenders and
respecting the Security Documents, as the agent for the Lenders and the Holders,
to the extent of their interests.
[The remainder of this page has been intentionally left blank.]
I-1
<PAGE> 163
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to
be duly executed and delivered as of this ____ day of ______________, ______.
VERITAS OPERATING CORPORATION
By: ____________________________________
Name: __________________________________
Title: _________________________________
I-2
<PAGE> 164
Schedule I
(Itemized Documentation in Support of Asserted Property Cost)
I-3
<PAGE> 165
EXHIBIT J
[Description of Material Litigation]
(Pursuant to Section 6.2(d) of the Participation Agreement)
The following are matters in which one or more Credit Parties is currently
involved and for which such Credit Party could face liability:
1. On-Line Backup Systems Ltd.
On-Line Backup Systems Ltd. ("On-Line"), a former customer of TeleBackup
Systems, Inc. ("TeleBackup"), a wholly-owned subsidiary of Lessee, filed
a claim against TeleBackup in the Court of Queen's Bench of Alberta,
Judicial Centre of Calgary, on November 23, 1999, alleging breach of
contract, unjust enrichment, misrepresentation and negligence arising
from the purchase by On-Line of certain hardware and software sold by
TeleBackup. TeleBackup filed a statement of defense on January 21, 2000
to deny these allegations, to assert certain contractual defenses and to
claim that the alleged failure of the software arose directly as a
result of On-Line's error in handling the system.
2. Electronic Systems of Richmond.
VERITAS Software Corporation is currently in settlement negotiations
with Electronic Systems of Richmond ("ESR"). ESR alleges that VERITAS
Software Corporation hired certain former employees of ESR in violation
of noncompetition agreements that those employees had with ESR.
J-1
<PAGE> 166
EXHIBIT K
[Form of Joinder Agreement]
(Pursuant to Section 5.10(a) of the Participation Agreement)
THIS JOINDER AGREEMENT (as amended, modified, supplemented, restated
and/or replaced from time to time, the "Agreement"), dated as of _____________,
______, is by and between ___________________, a ___________ (the "Company"),
and Bank of America, N.A., as the Agent for the Lenders and respecting the
Security Documents, as the Agent for the Lenders and the Holders, to the extent
of their interests (the "Agent"). Capitalized terms not otherwise defined herein
shall have the meanings set forth therefor in the Participation Agreement dated
as of March 9, 2000 (as amended, modified, supplemented, restated and/or
replaced from time to time, the "Participation Agreement") among VERITAS
Operating Corporation, as the Construction agent and the Lessee, the various
parties thereto from time to time, as the Guarantors, First Security Bank,
National Association, as the Owner Trustee under the VS Trust 2000-1, the
various banks and other lending institutions which are parties thereto from time
to time, as the Lenders, the various banks and other lending institutions which
are parties thereto from time to time, as the Holders, and the Agent.
The Company is either a Domestic Subsidiary or the Parent, and,
consequently, the Credit Parties are required by Section 8.3(s) of the
Participation Agreement to cause the Company to become a "Guarantor".
Accordingly, the Company hereby agrees as follows with the Agent, for
the benefit of the Financing Parties:
1. The Company hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Company will be deemed to be a party to the
Participation Agreement and a "Guarantor" for all purposes of the Participation
Agreement and all other Operative Agreements, and shall have all of the
obligations of a Guarantor under the Operative Agreements as if the Company had
executed the Participation Agreement. The Company hereby ratifies, as of the
date hereof, and agrees to be bound by, all of the terms, provisions and
conditions applicable to the Guarantors contained in the Operative Agreements.
Without limiting the generality of the foregoing terms of this paragraph 1, the
Company hereby (i) jointly and severally together with the other Guarantors,
guarantees to each Financing Party, as provided in Sections 6B.1 through 6B.8 of
the Participation Agreement, the prompt payment and performance of the Company
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise) strictly in accordance with the terms
thereof.
2. THE COMPANY HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES TO THE
PROVISIONS OF SECTION 12.7 OF THE PARTICIPATION AGREEMENT, INCLUDING WITHOUT
LIMITATION THOSE PROVISIONS REGARDING GOVERNING LAW, SUBMISSION TO JURISDICTION,
WAIVER OF
K-1
<PAGE> 167
JURY TRIAL AND VENUE. THIS PROVISION HAS BEEN SPECIFICALLY REVIEWED BY THE
COMPANY.
3. The chief executive office and principal place of business of the
Company are located at the location(s) set forth on Schedule 1 attached hereto.
4. All notices and other communications to be delivered to the
Company shall be directed to [___________] at its address set forth in Section
12.2 of the Participation Agreement or such other address as may be specified,
in accordance with the terms of the Participation Agreement, by [___________]
from time to time.
5. The Company hereby waives acceptance by the Financing Parties of
the guaranty by the Company under Sections 6B.1 through 6B.8 of the
Participation Agreement upon the execution of this Agreement by the Company.
6. This Agreement may be executed in multiple counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.
7. This Agreement shall be governed by and construed and interpreted
in accordance with the laws of the State oF NEW YORK.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its authorized officers, and the Agent, for the benefit of the
Financing Parties, has caused the same to be accepted by its authorized officer,
as of the day and year first above written.
[COMPANY]
By: ____________________________________
Name: __________________________________
Title: _________________________________
Acknowledged and accepted:
BANK OF AMERICA, N.A.,
as the Agent
By: ____________________________________
Name: __________________________________
Title: _________________________________
K-2
<PAGE> 168
Schedule 1
[Chief Executive Office and
Principal Place of Business of the Company]
K-3
<PAGE> 169
- --------------------------------------------------------------------------------
Appendix A
Rules of Usage, Accounting Terms and Definitions
- --------------------------------------------------------------------------------
I. Rules of Usage
The following rules of usage shall apply to this Appendix A and the Operative
Agreements (and each appendix, schedule, exhibit and annex to the foregoing)
unless otherwise required by the context or unless otherwise defined therein:
(a) Except as otherwise expressly provided, any definitions set forth
herein or in any other document shall be equally applicable to the singular and
plural forms of the terms defined.
(b) Except as otherwise expressly provided, references in any
document to articles, sections, paragraphs, clauses, annexes, appendices,
schedules or exhibits are references to articles, sections, paragraphs, clauses,
annexes, appendices, schedules or exhibits in or to such document.
(c) The headings, subheadings and table of contents used in any
document are solely for convenience of reference and shall not constitute a part
of any such document nor shall they affect the meaning, construction or effect
of any provision thereof.
(d) References to any Person shall include such Person, its
successors, permitted assigns and permitted transferees.
(e) Except as otherwise expressly provided, reference to any
agreement means such agreement as amended, modified, extended, supplemented,
restated and/or replaced from time to time in accordance with the applicable
provisions thereof.
(f) Except as otherwise expressly provided, references to any law
includes any amendment or modification to such law and any rules or regulations
issued thereunder or any law enacted in substitution or replacement therefor.
(g) When used in any document, words such as "hereunder", "hereto",
"hereof" and "herein" and other words of like import shall, unless the context
clearly indicates to the contrary, refer to the whole of the applicable document
and not to any particular article, section, subsection, paragraph or clause
thereof.
(h) References to "including" means including without limiting the
generality of any description preceding such term and for purposes hereof the
rule of ejusdem generis shall not be
Appendix A-1
<PAGE> 170
applicable to limit a general statement, followed by or referable to an
enumeration of specific matters, to matters similar to those specifically
mentioned.
(i) References herein to "attorney's fees", "legal fees", "costs of
counsel" or other such references shall be deemed to include the allocated cost
of in-house counsel.
(j) Each of the parties to the Operative Agreements and their counsel
have reviewed and revised, or requested revisions to, the Operative Agreements,
and the usual rule of construction that any ambiguities are to be resolved
against the drafting party shall be inapplicable in the construction and
interpretation of the Operative Agreements and any amendments or exhibits
thereto.
(k) Capitalized terms used in any Operative Agreements which are not
defined in this Appendix A but are defined in another Operative Agreement shall
have the meaning so ascribed to such term in the applicable Operative Agreement.
II. Accounting Terms
Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Agreement and the other Operative Agreements shall (except as otherwise
expressly provided herein or therein) be made by application of GAAP applied on
a basis consistent with the most recent annual or quarterly financial statements
delivered pursuant to Section 8.3A(a) (or, prior to the delivery of the first
financial statements pursuant to Section 8.3A(a), consistent with the financial
statements as at December 31, 1999); provided, however, if (a) the Credit
Parties shall reasonably object to determining such compliance on such basis at
the time of delivery of such financial statements due to any change in GAAP or
the rules promulgated with respect thereto or (b) the Agent or the Majority
Secured Parties shall so object in writing within 60 days after delivery of such
financial statements, then such calculations shall be made on a basis consistent
with the most recent financial statements delivered by the Credit Parties to the
Lenders as to which no such objection shall have been made.
Notwithstanding the above, the parties hereto acknowledge and agree that, for
purposes of all calculations made under the financial covenants set forth in
Section 8.3A(h) so long as the Lessee shall have provided the Agent with a Pro
Forma Compliance Certificate with respect to any Permitted Acquisition, income
statement items (whether positive or negative) attributable to the Property
acquired in such Permitted Acquisition and any Indebtedness incurred by the
applicable Credit Parties in order to consummate such Permitted Acquisition
shall be included to the extent relating to any period applicable in such
calculations occurring after the date of such Permitted Acquisition (and,
notwithstanding the foregoing, during the first four fiscal quarters following
the date of such Permitted Acquisition, such Permitted Acquisition and any
Indebtedness incurred by the applicable Credit Parties in order to consummate
such Permitted
Appendix A-2
<PAGE> 171
Acquisition (A) shall be deemed to have occurred on the first day of the four
fiscal quarter period immediately preceding the date of such Permitted
Acquisition and (B) if such Indebtedness has a floating or formula rate, then
the implied rate of interest for such Indebtedness for the applicable period
shall be determined by utilizing the rate which is or would be in effect with
respect to such Indebtedness as at the relevant date of determination.
III. Definitions
"ABR" shall mean, for any day, a rate per annum equal to the greater of
(a) the Prime Lending Rate in effect on such day, and (b) the Federal Funds
Effective Rate in effect on such day plus one-half of one percent (0.5%). For
purposes hereof: "Prime Lending Rate" shall mean the rate which the Agent
announces from time to time as its prime lending rate as in effect from time to
time. The Prime Lending Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer. Any Lender
may make commercial loans or other loans at rates of interest at, above or below
the Prime Lending Rate. The Prime Lending Rate shall change automatically and
without notice from time to time as and when the prime lending rate of the Agent
changes. "Federal Funds Effective Rate" shall mean, for any period, a
fluctuating interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions with
members or 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 Agent from three
(3) Federal funds brokers of recognized standing selected by it. Any change in
the ABR due to a change in the Prime Lending Rate or the Federal Funds Effective
Rate shall be effective as of the opening of business on the effective day of
such change in the Prime Lending Rate or the Federal Funds Effective Rate,
respectively.
"ABR Holder Advance" shall mean a Holder Advance bearing a Holder Yield
based on the ABR.
"ABR Loans" shall mean Loans the rate of interest applicable to which is
based upon the ABR.
"Acceleration" shall have the meaning given to such term in Section 6 of
the Credit Agreement.
"ACCORD Evidence of Insurance" shall mean an ACCORD Evidence of
Insurance or other similar evidence of insurance reasonably acceptable to the
Agent.
"Accounts" shall have the meaning given to such term in Section 1 of the
Security Agreement.
Appendix A-3
<PAGE> 172
"Acquisition Advance" shall have the meaning given to such term in
Section 5.3 of the Participation Agreement.
"Acquisition Loan" shall mean any Loan made in connection with an
Acquisition Advance.
"Advance" shall mean a Construction Advance or an Acquisition Advance.
"Affiliate" shall mean, with respect to any Person, any Person or group
acting in concert in respect of the Person in question that, directly or
indirectly, controls or is controlled by or is under common control with such
Person.
"After Tax Basis" shall mean, with respect to any payment to be
received, the amount of such payment increased so that, after deduction of the
amount of all taxes required to be paid by the recipient calculated at the then
maximum marginal rates generally applicable to Persons of the same type as the
recipients with respect to the receipt by the recipient of such amounts (less
any tax savings realized as a result of the payment of the indemnified amount),
such increased payment (as so reduced) is equal to the payment otherwise
required to be made.
"Agent" shall mean Bank of America, N.A., as agent for the Lenders
pursuant to the Credit Agreement, or any successor agent appointed in accordance
with the terms of the Credit Agreement and respecting the Security Documents,
for the Lenders and the Holders, to the extent of their interests.
Appendix A-4
<PAGE> 173
"Applicable Percentage" shall mean for Eurodollar Loans, Eurodollar
Holder Advances and Commitment Fees, the appropriate applicable percentages
corresponding to the Pricing Level in effect as of the most recent Calculation
Date as shown below:
<TABLE>
<CAPTION>
===============================================================================================
Applicable
Applicable Percentage for Applicable
Ratio of Funded Percentage for Eurodollar Percentage for
Pricing Indebtedness Eurodollar Holder Commitment
Level To EBITDA Loans Advances Fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I Funded Indebtedness/ 1.00% 2.00% .25%
EBITDA = .75
- -----------------------------------------------------------------------------------------------
II Funded Indebtedness/EBITDA > 1.25% 2.25% .30%
.75 but = 1.25
- -----------------------------------------------------------------------------------------------
III Funded Indebtedness/EBITDA > 1.50% 2.50% .375%
1.25 but = 2.00
- -----------------------------------------------------------------------------------------------
IV Funded Indebtedness/EBITDA > 1.75% 2.75% .45%
2.00
===============================================================================================
</TABLE>
The Applicable Percentage for Eurodollar Loans, Eurodollar Holder
Advances and the Commitment Fees shall, in each case, be determined and adjusted
on the date (the "Calculation Date") by which the compliance certificate is
required to be delivered to the Agent in accordance with the provisions of
Section 8.3A(a)(iii) of the Participation Agreement; provided, however, that (i)
the Applicable Percentage from the Initial Closing Date shall be based on
Pricing Level III (as shown above) and shall remain at Pricing Level III until
the next occurring Calculation Date and, thereafter, the Pricing Level shall be
determined as shown above, and (ii) if the Lessee fails to provide the annual
and quarterly compliance certificates required pursuant to Sections 8.3A(a)(iii)
of the Participation Agreement to the Agent on or before such Calculation Date,
the Applicable Percentage, in each case, from such Calculation Date shall be
based on Pricing Level IV until such time that such compliance certificates are
provided whereupon the Pricing Level shall be determined as specified herein.
Each Applicable Percentage shall be effective from one Calculation Date until
the next Calculation Date. Any adjustment in the Applicable Percentage shall be
applicable to all existing Eurodollar Loans and Eurodollar Holder Advances as
well as any new Eurodollar Loans and Eurodollar Holder Advances made or issued.
"Appraisal" shall mean, with respect to any Property or the Properties,
taken as a whole, an appraisal to be delivered in connection with the
Participation Agreement or in accordance with the terms of the Lease, in each
case prepared by a reputable appraiser reasonably acceptable to the Agent, which
in the judgment of counsel to the Agent, complies with all of the provisions
Appendix A-5
<PAGE> 174
of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as
amended, the rules and regulations adopted pursuant thereto, and all other
applicable Legal Requirements.
"Appraisal Procedure" shall have the meaning given such term in Section
22.4 of the Lease.
"Approved State" shall mean each of the following: Minnesota and any
other state within the continental United States proposed by the Lessee and
consented to in writing by the Agent.
"Appurtenant Rights" shall mean (a) all agreements, easements, rights of
way or use, rights of ingress or egress, privileges, appurtenances, tenements,
hereditaments and other rights and benefits at any time belonging or pertaining
to the Land underlying the Improvements or the Improvements, including without
limitation the use of any streets, ways, alleys, vaults or strips of land
adjoining, abutting, adjacent or contiguous to the Land and (b) all permits,
licenses and rights, whether or not of record, appurtenant to such Land or the
Improvements.
"Assignment and Acceptance" shall mean the Assignment and Acceptance in
the form attached to the Credit Agreement as Exhibit B.
"Available Commitment" shall mean, as to any Lender at any time, an
amount equal to the excess, if any, of (a) the amount of such Lender's
Commitment over (b) the aggregate principal amount of all Loans made by such
Lender as of such date after giving effect to Section 5.2(d) of the
Participation Agreement (but without giving effect to any other repayments or
prepayments of any Loans hereunder).
"Available Holder Commitments" shall mean an amount equal to the excess,
if any, of (a) the aggregate amount of the Holder Commitments over (b) the
aggregate amount of the Holder Advances made since the Initial Closing Date
after giving effect to Section 5.2(d) of the Participation Agreement (but
without giving effect to any other repayments or prepayments of any Holder
Advances).
"Bankruptcy Code" shall mean Title 11 of the U. S. Code entitled
"Bankruptcy," as now or hereafter in effect or any successor thereto.
"Basic Documents" shall mean the following: the Participation Agreement,
the Construction Agency Agreement, the Trust Agreement, the Certificates, the
Credit Agreement, the Notes, the Lease and the Security Agreement.
"Basic Rent" shall mean, the sum of (a) the Loan Basic Rent and (b) the
Lessor Basic Rent, calculated as of the applicable date on which Basic Rent is
due.
"Basic Term" shall have the meaning specified in Section 2.2 of the
Lease.
"Basic Term Commencement Date" shall have the meaning specified in
Section 2.2 of the Lease.
Appendix A-6
<PAGE> 175
"Basic Term Expiration Date" shall have the meaning specified in Section
2.2 of the Lease.
"Benefited Lender" shall have the meaning specified in Section 9.10(a)
of the Credit Agreement.
"Bill of Sale" shall mean a Bill of Sale regarding Equipment in form and
substance satisfactory to the Agent.
"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States (or any successor).
"Borrower" shall mean the Owner Trustee, not in its individual capacity
but as Borrower under the Credit Agreement.
"Borrowing Date" shall mean any Business Day specified in a notice
delivered pursuant to Section 2.3 of the Credit Agreement as a date on which the
Lessor requests the Lenders to make Loans hereunder.
"Budgeted Total Property Cost" shall mean, at any date of determination
with respect to any Construction Period Property, an amount equal to the
aggregate amount which the Construction Agent in good faith expects to be
expended in order to achieve Completion with respect to such Property.
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in North Carolina or any other states from which
the Agent, any Lender or any Holder funds or engages in administrative
activities with respect to the transactions under the Operative Agreements are
authorized or required by law to close; provided, however, that when used in
connection with a Eurodollar Loan, the term "Business Day" shall also exclude
any day on which banks are not open for dealings in dollar deposits in the
London interbank market.
"Capitalized Lease" shall mean, as applied to any Person, any lease of
property (whether real, personal, tangible, intangible or mixed of such Person)
by such Person as the lessee which would be capitalized on a balance sheet of
such Person prepared in accordance with GAAP.
"Capital Expenditures" shall mean all expenditures of the Credit Parties
and their Consolidated Subsidiaries which, in accordance with GAAP, would be
classified as capital expenditures, including, without limitation, Capitalized
Leases.
"Capital Stock" shall mean any nonredeemable capital stock of any Credit
Party or any of its Subsidiaries, whether common or preferred.
"Cash Equivalents" shall mean (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the
Appendix A-7
<PAGE> 176
full faith and credit of the United States of America is pledged in support
thereof) having maturities of not more than twelve months from the date of
acquisition, (b) U.S. dollar denominated time and demand deposits and
certificates of deposit of (i) any Lender, (ii) any domestic commercial bank
having capital and surplus in excess of $500,000,000 or (iii) any bank whose
short-term commercial paper rating from S&P is at least A-1 or the equivalent
thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank
being an "Approved Bank"), in each case with maturities of not more than 270
days from the date of acquisition, (c) commercial paper and variable or fixed
rate notes issued by any Approved Bank (or by the parent company thereof) or any
variable rate notes issued by, or guaranteed by, any domestic corporation rated
A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent
thereof) or better by Moody's and maturing within six months of the date of
acquisition, (d) repurchase agreements with a bank or trust company (including
any of the Lenders) or recognized securities dealer having capital and surplus
in excess of $500,000,000 for direct obligations issued by or fully guaranteed
by the United States of America in which the Lessee shall have a perfected first
priority security interest (subject to no other Liens) and having, on the date
of purchase thereof, a fair market value of at least 100% of the amount of the
repurchase obligations and (e) Investments, classified in accordance with GAAP
as current assets, in money market investment programs registered under the
Investment Company Act of 1940, as amended, which are administered by reputable
financial institutions having capital of at least $500,000,000 and the
portfolios of which are limited to Investments of the character described in the
foregoing subdivisions (a) through (d).
"Casualty" shall mean any damage or destruction of all or any portion of
the Property as a result of a fire or other casualty.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as
amended by the Superfund Amendments and Reauthorization Act of 1986.
"Certificate" shall mean a Certificate in favor of each Holder regarding
the Holder Commitment of such Holder issued pursuant to the terms and conditions
of the Trust Agreement in favor of each Holder.
"Change of Control" shall mean the occurrence of any of the following
events: (a) prior to the Reorganization, a "person" or a "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act) shall
have acquired beneficial ownership, directly or indirectly, of, or shall have
acquired by contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation, will result in its or their acquisition of,
control over, 30% or more of the outstanding voting stock of the Lessee, (b)
after the Reorganization, (i) the Parent shall fail to own directly 100% of the
outstanding Capital Stock of the Lessee, (ii) a "person" or a "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act)
(other than SSI) shall have acquired beneficial ownership, directly or
indirectly, of, or shall have acquired by contract or otherwise, or shall have
entered into a contract or arrangement that, upon consummation, will result in
its or their acquisition of, control over, 30% or more of the outstanding voting
stock of the Parent or (iii) SSI shall have acquired beneficial ownership,
directly or indirectly, of, or shall have acquired by contract or otherwise, or
shall have
Appendix A-8
<PAGE> 177
entered into a contract or arrangement that, upon consummation, will result in
its acquisition of, control over, 45% or more of the outstanding voting stock of
the Parent or (c) during any period of two consecutive calendar years,
individuals who at the beginning of such period constituted either the board or
the board of directors of the Lessee or the Parent, as the case may be, together
with any new members of such board or board of directors (i) whose elections by
such board or board of directors or whose nomination for election by the
stockholders of the Lessee or the stockholders of the Parent, as the case may
be, was approved by a vote of a majority of the members of such board or board
of directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the directors of the
Lessee or of the Parent, as the case may be, then in office. Notwithstanding the
foregoing in subsection (c), the three new board members appointed to the board
of directors of the Parent in connection with the Reorganization shall be an
acceptable change to the board of directors of the Parent. As used herein,
"beneficial ownership" shall have the meaning provided in Rule 13(d)-3 of the
Securities and Exchange Commission under the Securities Act of 1934.
"Chattel Paper" shall have the meaning given to such term in Section 1
of the Security Agreement.
"Claims" shall mean any and all obligations, liabilities, losses,
actions, suits, penalties, claims, demands, costs and expenses (including
without limitation reasonable attorney's fees and expenses) of any nature
whatsoever.
"Closing Date" shall mean the Initial Closing Date and each Property
Closing Date.
"Code" shall mean the Internal Revenue Code of 1986 together with rules
and regulations promulgated thereunder, as amended from time to time, or any
successor statute thereto.
"Collateral" shall mean all assets of the Lessor, the Construction Agent
and the Lessee, now owned or hereafter acquired, upon which a Lien is purported
to be created by one or more of the Security Documents.
"Commitment" shall mean, as to any Lender, the obligation of such Lender
to make the portion of the Loans to the Lessor in an aggregate principal amount
at any time outstanding not to exceed the amount set forth opposite such
Lender's name on Schedule 2.1 of the Credit Agreement, as such amount may be
increased or reduced from time to time in accordance with the provisions of the
Operative Agreements.
"Commitment Fee" shall mean, collectively, the Holder Commitment Fee and
the Lender Commitment Fee.
"Commitment Fee Payment Date" shall mean the last Business Day of each
March, June, September and December and the last Business Day of the Commitment
Period, or such earlier date as the Commitments shall terminate as provided in
the Credit Agreement or the Holder Commitment shall terminate as provided in the
Trust Agreement.
Appendix A-9
<PAGE> 178
"Commitment Percentage" shall mean, as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such Lender's
Loans then outstanding constitutes of the aggregate principal amount of all of
the Loans then outstanding), and such Commitment Percentage shall take into
account both the Lender's Tranche A Commitment and the Lender's Tranche B
Commitment.
"Commitment Period" shall mean the period from and including the Initial
Closing Date to and including the Construction Period Termination Date, or such
earlier date as the Commitments shall terminate as provided in the Credit
Agreement or the Holder Commitment shall terminate as provided in the Trust
Agreement.
"Company Obligations" shall mean the obligations of VSC, in any and all
capacities under and with respect to the Operative Agreements and each Property.
"Completion" shall mean, with respect to the Properties, such time as
the acquisition, installation, testing and final completion of the Improvements
has been substantially achieved in accordance with the Plans and Specifications,
the Construction Agency Agreement and/or the Lease and in compliance with all
Legal Requirements and Insurance Requirements (except if non-compliance,
individually or in the aggregate, shall not have and could not reasonably be
expected to have a Material Adverse Effect), a certificate of occupancy has been
issued by the appropriate governmental entity and the Lessee shall have the
obligation under the Lease to pay Rent as of such date. If the Lessor purchases
a Property that includes existing Improvements that are to be immediately
occupied by the Lessee without any improvements financed pursuant to the
Operative Agreements, the date of Completion for such Property shall be the
Property Closing Date.
"Completion Date" shall mean, with respect to the Properties, the
earlier of (a) the date on which Completion for the Properties has occurred or
(b) the Construction Period Termination Date.
"Condemnation" shall mean any taking or sale of the use, access,
occupancy, easement rights or title to any Property or any part thereof, wholly
or partially (temporarily or permanently), by or on account of any actual or
threatened eminent domain proceeding or other taking of action by any Person
having the power of eminent domain, including without limitation an action by a
Governmental Authority to change the grade of, or widen the streets adjacent to,
any Property or alter the pedestrian or vehicular traffic flow to any Property
so as to result in a change in access to such Property, or by or on account of
an eviction by paramount title or any transfer made in lieu of any such
proceeding or action.
"Consolidated Subsidiary" shall mean, as to any Person, any Subsidiary
of such Person which under the rules of GAAP consistently applied should have
its financial results consolidated with those of such Person for purposes of
financial accounting statements.
Appendix A-10
<PAGE> 179
"Construction Advance" shall mean an advance of funds to pay Property
Costs pursuant to Section 5.4 of the Participation Agreement.
"Construction Agency Agreement" shall mean the Construction Agency
Agreement, dated on or about the Initial Closing Date between the Construction
Agent and the Lessor.
"Construction Agency Agreement Event of Default" shall mean an "Event of
Default" as defined in Section 5.1 of the Construction Agency Agreement.
"Construction Agent" shall mean VERITAS Operating Corporation, a
Delaware corporation, as the construction agent under the Construction Agency
Agreement.
"Construction Agent Options" shall have the meaning given to such term
in Section 2.1 of the Construction Agency Agreement.
"Construction Budget" shall mean the cost of acquisition, installation,
testing, constructing and developing the Properties as determined by the
Construction Agent in its reasonable, good faith judgment.
"Construction Commencement Date" shall mean, with respect to
Improvements, the date on which construction of such Improvements commences
pursuant to the Construction Agency Agreement.
"Construction Contract" shall mean any contract entered into between the
Construction Agent or the Lessee with a Contractor for the construction of
Improvements or any portion thereof on the Property.
"Construction Loan" shall mean any Loan made in connection with a
Construction Advance.
"Construction Loan Property Cost" shall mean with respect to the
Construction Period Properties at the date of determination, an amount equal to
(a) the aggregate principal amount of Construction Loans made on or prior to
such date with respect to the Properties minus (b) the aggregate principal
amount of prepayments or repayments of the Loans allocated to reduce the
Construction Loan Property Cost of such Properties pursuant to Section 2.6(c) of
the Credit Agreement.
"Construction Period" shall mean, with respect to the Properties, the
period commencing on the Construction Commencement Date and ending on the
Completion Date.
"Construction Period Property" means, at any date of determination, the
Properties as to which the Rent Commencement Date has not occurred on or prior
to such date.
"Construction Period Termination Date" shall mean, subject to the
extension of such date by the Lenders and the Holders, in their sole and
absolute discretion, in accordance with the
Appendix A-11
<PAGE> 180
provisions set forth in Sections 2.l and 2.6(c) of the Construction Agency
Agreement, (a) the earlier of (i) the date that the Commitments have been
terminated in their entirety in accordance with the terms of Section 2.5(a) of
the Credit Agreement, or (ii) the date eighteen (18) months after the Initial
Closing Date or (b) such later date as may be agreed to by the Majority Secured
Parties.
"Contractor" shall mean each entity with whom the Construction Agent or
the Lessee contracts to construct any Improvements or any portion thereof on the
Property.
"Contributed Companies" shall mean NSMG, Seagate Software Limited, a
corporation formed under the laws of the United Kingdom, Seagate Software GmbH,
a corporation formed under the laws of Germany, Seagate Software International
Holdings Ltd., a limited liability company organized under the laws of the
Cayman Islands and Seagate Software Storage Management Group, Inc., a Delaware
corporation.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with any Credit Party, are treated as a single
employer under Section 414 of the Code.
"Co-Owner Trustee" shall have the meaning specified in Section 9.2 of
the Trust Agreement.
"Credit Agreement" shall mean the Credit Agreement, dated on or about
the Initial Closing Date, among the Lessor, the Agent and the Lenders, as
specified therein.
"Credit Agreement Default" shall mean any event or condition which, with
the lapse of time or the giving of notice, or both, would constitute a Credit
Agreement Event of Default.
"Credit Agreement Event of Default" shall mean any event or condition
defined as an "Event of Default" in Section 6 of the Credit Agreement.
"Credit Documents" shall mean the Participation Agreement, the
Construction Agency Agreement, the Credit Agreement, the Notes and the Security
Documents.
"Credit Parties" shall mean the Construction Agent, the Lessee and each
Guarantor.
"Deed" shall mean a warranty deed regarding the Land and/or Improvements
in form and substance satisfactory to the Agent.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Holder" shall have the meaning given to such term in Section
12.4 of the Participation Agreement.
Appendix A-12
<PAGE> 181
"Defaulting Lender" shall have the meaning given to such term in Section
12.4 of the Participation Agreement.
"Deficiency Balance" shall have the meaning given in Section 22.1(b) of
the Lease Agreement.
"Documents" shall have the meaning given to such term in Section 1 of
the Security Agreement.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Domestic Subsidiary" shall mean, with respect to any Person, any
Subsidiary of such Person which is incorporated or organized under the laws of
any State of the United States or the District of Columbia.
"EBITDA" shall mean, for any period, with respect to the Credit Parties
and their Consolidated Subsidiaries on a consolidated basis, without
duplication, the sum of (a) Net Income for such period plus (b) an amount which,
in the determination of Net Income for such period has been deducted for (i)
Interest Expense for such period, (ii) total Federal, state, foreign or other
income taxes for such period, as determined in accordance with GAAP, (iii) all
depreciation and amortization for such period, as determined in accordance with
GAAP, and (iv) during any period within four years of the closing of any
Permitted Acquisition or the Reorganization, all non-cash restructuring charges
for such period taken in connection with such Permitted Acquisition or the
Reorganization (excluding any non-cash charges that require an accrual or
reserve for cash charges for any future period) minus (c) an amount equal to any
software development expenses occurring during such period which have been
classified as a capital expenditure.
"Election Notice" shall have the meaning given to such term in Section
20.1 of the Lease.
"Eligible Assignee" shall mean (i) a Lender or a Holder, as the case may
be; (ii) an Affiliate of a Lender or a Holder, as the case may be; and (iii) any
other Person approved by the Agent and, unless an Event of Default has occurred
and is continuing at the time any assignment is effected in accordance with the
Operative Agreements, the Lessee or the Construction Agent, such approval not to
be unreasonably withheld or delayed by the Lessee or the Construction Agent and
such approval to be deemed given by the Lessee or the Construction Agent if no
objection is received by the assigning Lender or Holder and the Agent from the
Lessee or the Construction Agent within two Business Days after notice of such
proposed assignment has been provided by the assigning Lender or Holder to the
Lessee or the Construction Agent; provided, however, that neither the Lessee or
the Construction Agent nor an Affiliate of the Lessee or the Construction Agent
shall qualify as an Eligible Assignee.
"Employee Benefit Plan" or "Plan" shall mean an employee benefit plan
(within the meaning of Section 3(3) of ERISA, including without limitation any
Multiemployer Plan), or any "plan" as defined in Section 4975(e)(1) of the Code
and as interpreted by the Internal Revenue
Appendix A-13
<PAGE> 182
Service and the Department of Labor in rules, regulations, releases or bulletins
in effect on any Closing Date.
"Environmental Claims" shall mean any investigation, notice, violation,
demand, allegation, action, suit, injunction, judgment, order, consent decree,
penalty, fine, lien, proceeding, or claim (whether administrative, judicial, or
private in nature) arising (a) pursuant to, or in connection with, an actual or
alleged violation of, any Environmental Law, (b) in connection with any
Hazardous Substance, (c) from any abatement, removal, remedial, corrective, or
other response action in connection with a Hazardous Substance, Environmental
Law, or other order of a Tribunal or (d) from any actual or alleged damage,
injury, threat, or harm to health, safety, natural resources, or the
environment.
"Environmental Laws" shall mean any current or future legal requirement
of any Governmental Authority pertaining to (a) the protection of health,
safety, and the indoor or outdoor environment, (b) the conservation, management,
or use of natural resources and wildlife, (c) the protection or use of surface
water and groundwater or (d) 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 or toxic substance or material or (e) pollution (including any
release to land surface water and groundwater) and includes, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42
USC 9601 et seq., 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., 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 App. 1801 et seq.,
Occupational Safety and Health Act of 1970, as amended, 29 USC 651 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., any analogous implementing or successor law, and any
amendment, rule, regulation, order, or directive issued thereunder.
"Environmental Violation" shall mean any activity, occurrence or
condition that violates or threatens (if the threat requires remediation under
any Environmental Law and is not remediated during any grace period allowed
under such Environmental Law) to violate or results in or threatens (if the
threat requires remediation under any Environmental Law and is not remediated
during any grace period allowed under such Environmental Law) to result in
noncompliance with any Environmental Law.
"Equipment" shall mean equipment, apparatus, furnishings, fittings and
personal property of every kind and nature whatsoever purchased, leased or
otherwise acquired using the proceeds of the Loans or the Holder Advances by the
Construction Agent, the Lessee or the Lessor and all improvements and
modifications thereto and replacements thereof, whether or not now owned or
hereafter acquired or now or subsequently attached to, contained in or used or
usable in any way
Appendix A-14
<PAGE> 183
in connection with any operation of any Improvements, including but without
limiting the generality of the foregoing, all equipment described in the
Appraisal including without limitation all heating, electrical, and mechanical
equipment, lighting, switchboards, plumbing, ventilation, air conditioning and
air-cooling apparatus, refrigerating, and incinerating equipment, escalators,
elevators, loading and unloading equipment and systems, cleaning systems
(including without limitation window cleaning apparatus), telephones,
communication systems (including without limitation satellite dishes and
antennae), televisions, computers, sprinkler systems and other fire prevention
and extinguishing apparatus and materials, security systems, motors, engines,
machinery, pipes, pumps, tanks, conduits, appliances, fittings and fixtures of
every kind and description.
"Equipment Schedule" shall mean (a) each Equipment Schedule attached to
the applicable Requisition and (b) each Equipment Schedule attached to the
applicable Lease Supplement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute thereto, as interpreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.
"ERISA Affiliate" shall mean an entity, whether or not incorporated,
which is under common control with any Credit Party or any of its Consolidated
Subsidiaries within the meaning of Section 4001(a)(14) of ERISA, or is a member
of a group which includes any Credit Party or any of its Consolidated
Subsidiaries and which is treated as a single employer under Sections 414(b),
(c), (m), or (o) of the Code.
"Eurocurrency Reserve Requirements" shall mean for any day as applied to
a Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal) of reserve requirements in effect on such day
(including without limitation basic, supplemental, marginal and emergency
reserves under any regulations of the Board or other Governmental Authority
having jurisdiction with respect thereto) dealing with reserve requirements
prescribed on eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D) maintained by a member bank of the Federal Reserve
System.
"Eurodollar Holder Advance" shall mean a Holder Advance bearing a Holder
Yield based on the Eurodollar Rate.
"Eurodollar Loans" shall mean Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan or Eurodollar Holder
Advance comprising part of the same borrowing or advance (including without
limitation conversions, extensions and renewals), for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London
Appendix A-15
<PAGE> 184
time) two Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period. If for any reason such rate is not
available, the term "Eurodollar Rate" shall mean, for any Eurodollar Loan or
Eurodollar Holder Advance for any Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates (rounded upwards,
if necessary, to the nearest 1/100 of 1%). As used herein, "Reuters Screen LIBO
Page" means the display designated as page "LIBO" on the Reuters Monitor Money
Rates Service (or such other page as may replace the LIBO page on that service
for the purpose of displaying London interbank offered rates of major banks)
("RMMRS"). In the event the RMMRS is not then quoting such offered rates,
"Eurodollar Rate" shall mean for the Interest Period for each Eurodollar Loan or
Eurodollar Holder Advance comprising part of the same borrowing or advance
(including without limitation conversions, extensions and renewals), the average
(rounded upward to the nearest one sixteenth (1/16) of one percent (1%)) per
annum rate of interest determined by the office of the Agent (each such
determination to be conclusive and binding) as of two (2) Business Days prior to
the first day of such Interest Period, as the effective rate at which deposits
in immediately available funds in U.S. dollars are being, have been, or would be
offered or quoted by the Agent to major banks in the applicable interbank market
for Eurodollar deposits at any time during the Business Day which is the second
Business Day immediately preceding the first day of such Interest Period, for a
term comparable to such Interest Period and in the amount of the requested
Eurodollar Loan and/or Eurodollar Holder Advance. If no such offers or quotes
are generally available for such amount, then the Agent shall be entitled to
determine the Eurodollar Rate by estimating in its reasonable judgment the per
annum rate (as described above) that would be applicable if such quote or offers
were generally available.
"Event of Default" shall mean a Lease Event of Default, a Construction
Agency Agreement Event of Default or a Credit Agreement Event of Default.
"Excepted Payments" shall mean: (a) all indemnity payments (including
without limitation indemnity payments made pursuant to Section 11 of the
Participation Agreement), whether made by adjustment to Basic Rent or otherwise,
to which the Owner Trustee, any Holder or any of their respective Affiliates,
agents, officers, directors or employees is entitled;
(b) any amounts (other than Basic Rent or Termination Value) payable
under any Operative Agreement to reimburse the Owner Trustee, any Holder or any
of their respective Affiliates (including without limitation the reasonable
expenses of the Owner Trustee, the Trust Company and the Holders incurred in
connection with any such payment) for performing or complying with any of the
obligations of any Credit Party under and as permitted by any Operative
Agreement;
(c) any amount payable to a Holder by any transferee of such interest
of a Holder as the purchase price of such Holder's interest in the Trust Estate
(or a portion thereof);
Appendix A-16
<PAGE> 185
(d) any insurance proceeds (or payments with respect to risks
self-insured or policy deductibles) under liability policies other than such
proceeds or payments payable to the Agent or any Lender;
(e) any insurance proceeds under policies maintained by the Owner
Trustee or any Holder;
(f) Transaction Expenses or other amounts, fees, disbursements or
expenses paid or payable to or for the benefit of the Owner Trustee or any
Holder;
(g) all right, title and interest of any Holder or the Owner Trustee
to any Property or any portion thereof or any other property to the extent any
of the foregoing has been released from the Liens of the Security Documents and
the Lease pursuant to the terms thereof;
(h) upon termination of the Credit Agreement pursuant to the terms
thereof, all remaining property covered by the Lease or Security Documents;
(i) all payments in respect of the Holder Yield;
(j) any payments in respect of interest to the extent attributable to
payments referred to in clauses (a) through (i) above; and
(k) any rights of either the Owner Trustee or the Trust Company to
demand, collect, sue for or otherwise receive and enforce payment of any of the
foregoing amounts, provided that such rights shall not include the right to
terminate the Lease.
"Excess Proceeds" shall mean the excess, if any, of the aggregate of all
awards, compensation or insurance proceeds payable in connection with a Casualty
or Condemnation over the Termination Value paid by the Lessee pursuant to the
Lease with respect to such Casualty or Condemnation.
"Excluded Taxes" shall have the meaning given to such term in Section
11.2(b) of the Participation Agreement.
"Exculpated Persons" shall mean the Trust Company (except with respect
to the representations and warranties and the other obligations of the Trust
Company pursuant to the Operative Agreements expressly undertaken in its
individual capacity, including without limitation the representations and
warranties of the Trust Company pursuant to Section 6.1 of the Participation
Agreement, the obligations of the Trust Company pursuant to Section 8.2 of the
Participation Agreement and the obligations of the Trust Company pursuant to the
Trust Agreement), the Holders (except with respect to the obligations of the
Holders pursuant to the Participation Agreement and the Trust Agreement
expressly undertaken in their respective individual capacities), their officers,
directors, shareholders and partners.
Appendix A-17
<PAGE> 186
"Exempt Payments" shall have the meaning specified in Section 11.2(e) of
the Participation Agreement.
"Expiration Date" shall mean either (a) the Basic Term Expiration Date
or (b) the last day of the applicable Renewal Term; provided, in no event shall
the Expiration Date be later than the annual anniversary of the Initial Closing
Date occurring in the year 2007, unless such later date has been expressly
agreed to in writing by each of the Lessor, the Lessee, the Agent, the Lenders
and the Holders.
"Fair Market Sales Value" shall mean, with respect to the Properties,
taken as a whole, the amount, which in any event, shall not be less than zero
(0), that would be paid in cash in an arms-length transaction between an
informed and willing purchaser and an informed and willing seller, neither of
whom is under any compulsion to purchase or sell, respectively, such Properties.
Fair Market Sales Value shall be determined based on the assumption that, except
for purposes of Section 17 of the Lease, such Properties are in the condition
and state of repair required under Section 10.1 of the Lease and each Credit
Party is in compliance with the other requirements of the Operative Agreements.
"Federal Funds Effective Rate" shall have the meaning given to such term
in the definition of ABR.
"Financing Parties" shall mean the Lessor, the Owner Trustee, in its
trust capacity, the Agent, the Holders and the Lenders.
"Fixtures" shall mean all fixtures relating to the Improvements,
including without limitation all components thereof, located in or on the
Improvements, together with all replacements, modifications, alterations and
additions thereto.
"Force Majeure Event" shall mean any event beyond the control of the
Construction Agent, other than a Casualty or Condemnation, including without
limitation strikes or lockouts (but only when the Construction Agent is legally
prevented from securing replacement labor or materials as a result thereof),
adverse soil conditions, acts of God, adverse weather conditions, inability to
obtain labor or materials after all possible efforts have been expended by the
Construction Agent, governmental activities, civil commotion and enemy action;
but excluding any event, cause or condition that results from the Construction
Agent's financial condition.
"Form 1001" shall have the meaning specified in Section 11.2(e) of the
Participation Agreement.
"Form 4224" shall have the meaning specified in Section 11.2(e) of the
Participation Agreement.
"Funded Indebtedness" shall mean, with respect to the Lessee and its
Consolidated Subsidiaries determined in accordance with GAAP on a consolidated
basis, without duplication, (a) all obligations for borrowed money of the Lessee
or any of its Consolidated Subsidiaries, (b) all
Appendix A-18
<PAGE> 187
obligations of the Lessee or any of its Consolidated Subsidiaries evidenced by
bonds, debentures, notes or similar instruments, or upon which interest payments
are customarily made, (c) all purchase money Indebtedness of the Lessee or any
of its Consolidated Subsidiaries, including without limitation the principal
portion of all obligations under Capitalized Leases, (d) the maximum amount of
all standby letters of credit issued or bankers' acceptance facilities created
for the account of the Lessee or any of its Consolidated Subsidiaries and,
without duplication, all drafts drawn thereunder (to the extent unreimbursed),
(e) the principal balance outstanding under any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet financing
product to which the Lessee or any of its Consolidated Subsidiaries is a party,
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance with GAAP, (f)
all Indebtedness of another Person of the type referred to in clause (a) - (e)
above secured by (or for which the holder of such indebtedness has an existing
right, contingent or otherwise, to be secured by) any lien on, or payable out of
the proceeds of production from, property owned or acquired by the Lessee or any
of its Consolidated Subsidiaries, whether or not the obligations secured thereby
have been assumed, (g) all Guaranty Obligations of the Lessee or any of its
Consolidated Subsidiaries with respect to Indebtedness of the type referred to
in clauses (a) - (e) above of another Person and (h) Indebtedness of the type
referred to in clauses (a) - (e) above of any partnership or incorporated joint
venture in which the Lessee or any of its Consolidated Subsidiaries is legally
obligated or has a reasonable expectation of being liable with respect thereto.
"GAAP" shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the accounting principles board of the
American Institute of Certified Public Accountants, and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, that are applicable to the circumstances as of the
date of determination.
"Governmental Action" shall mean all permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, written interpretations, decrees, licenses, exemptions, publications,
filings, notices to and declarations of or with, or required by, any
Governmental Authority, or required by any Legal Requirement, and shall include,
without limitation, all environmental and operating permits and licenses that
are required for the full use, occupancy, zoning and operating of the Property.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantors" shall mean the various parties to the Participation
Agreement from time to time, as guarantors of the Construction Agent and the
Lessee with respect to the Operative Agreements and the Properties.
"Guaranty Obligations" shall mean, with respect to any Person, without
duplication, any obligations (other than endorsements in the ordinary course of
business of negotiable instruments
Appendix A-19
<PAGE> 188
for deposit or collection) guaranteeing any Indebtedness of any other Person in
any manner, whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (a) to purchase any such Indebtedness or
other obligation or any property constituting security therefor, (b) to advance
or provide funds or other support for the payment or purchase of such
Indebtedness or obligation or to maintain working capital, solvency or other
balance sheet condition of such other Person (including, without limitation,
maintenance agreements, comfort letters, take or pay arrangements, put
agreements or similar agreements or arrangements) for the benefit of the holder
of Indebtedness of such other Person, (c) to lease or purchase property,
securities or services primarily for the purpose of assuring the owner of such
Indebtedness or (d) to otherwise assure or hold harmless the owner of such
Indebtedness or obligation against loss in respect thereof. The amount of any
Guaranty Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount (or
maximum principal amount, if larger) of the Indebtedness in respect of which
such Guaranty Obligation is made.
"Hard Costs" shall mean all costs and expenses payable for supplies,
materials, labor and profit with respect to the Improvements under any
Construction Contract.
"Hazardous Materials" shall mean any substance, material or waste
defined in or regulated under any Environmental Laws.
"Hazardous Substance" shall mean any of the following: (a) any petroleum
or petroleum product, explosives, radioactive materials, asbestos, formaldehyde,
polychlorinated biphenyls, lead and radon gas; (b) any substance, material,
product, derivative, compound or mixture, mineral, chemical, waste, gas, medical
waste, or pollutant, in each case whether naturally occurring, man-made or the
by-product of any process, that is toxic, harmful or hazardous to the
environment or human health or safety as determined in accordance with any
Environmental Law; or (c) any substance, material, product, derivative, compound
or mixture, mineral, chemical, waste, gas, medical waste or pollutant that would
support the assertion of any claim under any Environmental Law, whether or not
defined as hazardous as such under any Environmental Law.
"Holder Advance" shall mean any advance made by any Holder to the Owner
Trustee pursuant to the terms of the Trust Agreement or the Participation
Agreement.
"Holder Amount" shall mean as of any date, the aggregate amount of
Holder Advances made by each Holder to the Trust Estate pursuant to Section 2 of
the Participation Agreement and Section 3.1 of the Trust Agreement less any
payments of any Holder Advances received by the Holders pursuant to Section 3.4
of the Trust Agreement.
"Holder Commitments" shall mean $1,200,000, as such amount may be
increased or reduced from time to time in accordance with the provisions of the
Operative Agreements; provided, if there shall be more than one (1) Holder, the
Holder Commitment of each Holder shall be as set forth in Schedule I to the
Trust Agreement as such Schedule I may be amended and replaced from time to
time.
Appendix A-20
<PAGE> 189
"Holder Construction Property Cost" shall mean, with respect to the
Construction Period Properties, taken as a whole, at any date of determination,
an amount equal to the outstanding Holder Advances made with respect thereto
under the Trust Agreement.
"Holder Overdue Rate" shall mean the lesser of (a) the then current rate
of Holder Yield respecting the particular amount in question plus two percent
(2%) and (b) the highest rate permitted by applicable law.
"Holder Property Cost" shall mean with respect to the Properties an
amount equal to the outstanding Holder Advances with respect thereto.
"Holder Commitment Fee" shall have the meaning given to such term in
Section 7.4 of the Participation Agreement.
"Holder Yield" shall mean with respect to Holder Advances from time to
time either the Eurodollar Rate plus the Applicable Percentage or the ABR as
elected by the Owner Trustee from time to time with respect to such Holder
Advances in accordance with the terms of the Trust Agreement; provided, however,
(a) upon delivery of the notice described in Section 3.7(c) of the Trust
Agreement, the outstanding Holder Advances of each Holder shall bear a yield at
the ABR applicable from time to time from and after the dates and during the
periods specified in Section 3.7(c) of the Trust Agreement, and (b) upon the
delivery by a Holder of the notice described in Section 11.3(f) of the
Participation Agreement, the Holder Advances of such Holder shall bear a yield
at the ABR applicable from time to time after the dates and during the periods
specified in Section 11.3(f) of the Participation Agreement.
"Holders" shall mean Bank of America, N.A. and shall include the other
banks and financial institutions which may be from time to time holders of
Certificates in connection with the VS Trust 2000-1.
"Hotel Site Option Agreement" shall mean that certain Option Agreement
dated on or about the Initial Closing Date among Ryan Companies US, Inc., Ryan
CP, LLC and VSC.
"Impositions" shall mean any and all liabilities, losses, expenses,
costs, charges and Liens of any kind whatsoever for fees, taxes, levies,
imposts, duties, charges, assessments or withholdings ("Taxes") including but
not limited to (i) real and personal property taxes, including without
limitation personal property taxes on any property covered by the Lease that is
classified by Governmental Authorities as personal property, and real estate or
ad valorem taxes in the nature of property taxes; (ii) sales taxes, use taxes
and other similar taxes (including rent taxes and intangibles taxes); (iii)
excise taxes; (iv) real estate transfer taxes, conveyance taxes, stamp taxes and
documentary recording taxes and fees; (v) taxes that are or are in the nature of
franchise, income, value added, privilege and doing business taxes, license and
registration fees; (vi) assessments on any Property, including without
limitation all assessments for public Improvements or benefits, whether or not
such improvements are commenced or completed within the Term; and (vii) taxes,
Liens, assessments or charges asserted, imposed or assessed by
Appendix A-21
<PAGE> 190
the PBGC or any governmental authority succeeding to or performing functions
similar to, the PBGC; and in each case all interest, additions to tax and
penalties thereon, which at any time prior to, during or with respect to the
Term or in respect of any period for which the Lessee shall be obligated to pay
Supplemental Rent, may be levied, assessed or imposed by any Governmental
Authority upon or with respect to (a) any Property or any part thereof or
interest therein; (b) the leasing, financing, refinancing, demolition,
construction, substitution, subleasing, assignment, control, condition,
occupancy, servicing, maintenance, repair, ownership, possession, activity
conducted on, delivery, insuring, use, operation, improvement, sale, transfer of
title, return or other disposition of such Property or any part thereof or
interest therein; (c) the Notes, other indebtedness with respect to any
Property, or the Certificates, or any part thereof or interest therein; (d) the
rentals, receipts or earnings arising from any Property or any part thereof or
interest therein; (e) the Operative Agreements, the performance thereof, or any
payment made or accrued pursuant thereto; (f) the income or other proceeds
received with respect to any Property or any part thereof or interest therein
upon the sale or disposition thereof; (g) any contract (including the
Construction Agency Agreement) relating to the construction, acquisition or
delivery of the Improvements or any part thereof or interest therein; (h) the
issuance of the Notes or the Certificates; (i) the Owner Trustee, the Trust or
the Trust Estate; or (j) otherwise in connection with the transactions
contemplated by the Operative Agreements.
"Improvements" shall mean, with respect to the construction, renovations
and/or Modifications on any Land, all buildings, structures, Fixtures, and other
improvements of every kind existing at any time and from time to time on or
under the Land purchased or otherwise acquired using the proceeds of the Loans
or the Holder Advances, together with any and all appurtenances to such
buildings, structures or improvements, including without limitation sidewalks,
utility pipes, conduits and lines, parking areas and roadways, and including
without limitation all Modifications and other additions to or changes in the
Improvements at any time, including without limitation (a) any Improvements
existing as of the Property Closing Date as such Improvements may be referenced
on the applicable Requisition and (b) any Improvements made subsequent to such
Property Closing Date.
"Indebtedness" of a Person shall mean, without duplication, such
Person's:
(a) obligations for borrowed money;
(b) obligations representing the deferred purchase price of
Property (whether real, personal, tangible, intangible or mixed) or
services (other than accounts payable arising in the ordinary course of
such Person's business payable on terms customary in the trade);
(c) obligations, whether or not assumed, secured by liens or
payable out of the proceeds or production from property now or hereafter
owned or acquired by such Person;
(d) obligations which are evidenced by notes, acceptances or
other instruments;
Appendix A-22
<PAGE> 191
(e) Capitalized Lease obligations;
(f) net liabilities under interest rate swap, exchange or cap
agreements; and
(g) contingent obligations.
(h) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, or upon which interest
payments are customarily made;
(i) all Guaranty Obligations of such Person with respect to
Indebtedness of another Person (obligations of a Person under an
Operating Lease shall not be considered Indebtedness);
(j) the maximum amount of all standby letters of credit issued
or bankers' acceptances facilities created for account of such Person
and, without duplication, all drafts drawn thereunder (to the extent
unreimbursed);
(k) all preferred Capital Stock issued by such Person and
which by the terms thereof could be (at the request of the holders
thereof or otherwise) subject to mandatory sinking fund payments,
redemption or other acceleration; and
(l) the principal portion of all obligations of such Person
under any synthetic, tax retention operating lease, off-balance sheet
loan or similar off-balance sheet financing product of such Person where
such transaction is considered borrowed money indebtedness for tax but
is classified as an operating lease in accordance with GAAP.
"Indemnified Person" shall mean the Lessor, the Owner Trustee, in its
individual and its trust capacity, the Trust, the Trust Company, the Agent, the
Holders, the Lenders and their respective successors, assigns, directors,
shareholders, partners, officers, employees, agents and Affiliates.
"Indemnity Provider" shall mean, respecting each Property, the Lessee.
"Initial Closing Date" shall mean March 9, 2000.
"Initial Construction Advance" shall mean any initial Advance to pay
for: (a) Property Costs for construction of any Improvements; and (b) the
Property Costs of restoring or repairing any Property which is required to be
restored or repaired in accordance with Section 15.1(e) of the Lease.
"Instruments" shall have the meaning given to such term in Section 1 of
the Security Agreement.
Appendix A-23
<PAGE> 192
"Insurance Requirements" shall mean all terms and conditions of any
insurance policy either required by the Lease to be maintained by the Lessee or
required by the Construction Agency Agreement to be maintained by the
Construction Agent, and all requirements of the issuer of any such policy and,
regarding self insurance, any other requirements of the Lessee.
"Interest Expense" shall mean for any period, with respect to the Credit
Parties and their Consolidated Subsidiaries on a consolidated basis, all
interest expense, including the interest component under Capitalized Leases, as
determined in accordance with GAAP.
"Interest Period" shall mean (a) during the Commitment Period and
thereafter as to any Eurodollar Loan or Eurodollar Holder Advance (i) with
respect to the initial Interest Period, the period beginning on the date of the
first Eurodollar Loan and Eurodollar Holder Advance and ending one (1) month,
two (2) months, three (3) months or six (6) months thereafter, as selected by
the Lessor (in the case of a Eurodollar Loan) or the Owner Trustee (in the case
of a Eurodollar Holder Advance) in its applicable notice given with respect
thereto and (ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan or Eurodollar
Holder Advance and ending one (1) month, two (2) months, three (3) months or six
(6) months thereafter, as selected by the Lessor by irrevocable notice to the
Agent (in the case of a Eurodollar Loan) or by the Owner Trustee (in the case of
a Eurodollar Holder Advance) in each case not less than three (3) Business Days
prior to the last day of the then current Interest Period with respect thereto;
provided, however, that all of the foregoing provisions relating to Interest
Periods are subject to the following: (A) if any Interest Period would end on a
day which is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day (except that where the next succeeding Business Day
falls in the next succeeding calendar month, then on the next preceding Business
Day), (B) no Interest Period shall extend beyond the Maturity Date or the
Expiration Date, as the case may be, (C) where an Interest Period begins on a
day for which there is no numerically corresponding day in the calendar month in
which the Interest Period is to end, such Interest Period shall end on the last
Business Day of such calendar month, (D) there shall not be more than four (4)
Interest Periods outstanding at any one (1) time.
"Investment" means (a) the acquisition (whether for cash, property,
services, assumption of Indebtedness, securities or otherwise) of assets,
Capital Stock, bonds, notes, debentures, partnership, joint ventures or other
ownership interests or other securities of any Person or (b) any deposit with,
or advance, loan or other extension of credit to, any Person (other than
deposits made in connection with the purchase of equipment or other assets in
the ordinary course of business) or (c) any other capital contribution to or
investment in any Person, including, without limitation, any Guaranty
Obligations (including any support for a letter of credit issued on behalf of
such Person) incurred for the benefit of such Person.
"Investment Company Act" shall mean the Investment Company Act of 1940,
as amended, together with the rules and regulations promulgated thereunder.
Appendix A-24
<PAGE> 193
"Joinder Agreement" shall mean a joinder agreement, in the form of
Exhibit K to the Participation Agreement, executed from time to time between the
Parent or a Domestic Subsidiary of any Credit Party and the Agent.
"Land" shall mean a parcel of real property described on (a) the
Requisition issued by the Construction Agent on the Property Closing Date
relating to such parcel and (b) the schedules to each applicable Lease
Supplement executed and delivered in accordance with the requirements of Section
2.4 of the Lease.
"Land Cost" shall mean one hundred percent (100%) of the cost of the
Land for all, but not less than all, the Properties.
"Law" shall mean any statute, law, ordinance, regulation, rule,
directive, order, writ, injunction or decree of any Tribunal.
"Lease" or "Lease Agreement" shall mean the Master Lease Agreement dated
on or about the Initial Closing Date, between the Lessor and the Lessee,
together with any Lease Supplements thereto.
"Lease Default" shall mean any event or condition which, with the lapse
of time or the giving of notice, or both, would constitute a Lease Event of
Default.
"Lease Event of Default" shall have the meaning specified in Section
17.1 of the Lease.
"Lease Supplement" shall mean each Lease Supplement substantially in the
form of Exhibit A to the Lease, together with all attachments and schedules
thereto.
"Legal Requirements" shall mean all foreign, federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting the Owner Trustee, any
Holder, the Lessor, any Credit Party, the Agent, any Lender or any Property,
Land, Improvement, Equipment or the taxation, demolition, construction, use or
alteration of such Improvements, whether now or hereafter enacted and in force,
including without limitation any that require repairs, modifications or
alterations in or to any Property or in any way limit the use and enjoyment
thereof (including without limitation all building, zoning and fire codes and
the Americans with Disabilities Act of 1990, 42 U.S.C. Section 12101 et. seq.,
and any other similar federal, state or local laws or ordinances and the
regulations promulgated thereunder) and any that may relate to environmental
requirements (including without limitation all Environmental Laws), and all
permits, certificates of occupancy, licenses, authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and encumbrances
contained in any instruments which are either of record or known to any Credit
Party affecting any Property or the Appurtenant Rights.
"Lender Commitments" shall mean $38,800,000, as such amount may be
increased or reduced from time to time in accordance with the provisions of the
Operative Agreements; provided, if there shall be more than one (1) Lender, the
Lender Commitment of each Lender
Appendix A-25
<PAGE> 194
shall be as set forth in Schedule 2.1 to the Credit Agreement as such Schedule
2.1 may be amended and replaced from time to time.
"Lender Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdiction in order to procure a security interest in favor of the
Agent in the Collateral subject to the Security Documents.
"Lender Commitment Fee" shall have the meaning given to such term in
Section 7.4 of the Participation Agreement.
"Lenders" shall mean Bank of America, N.A. and shall include the other
banks and financial institutions which may be from time to time party to the
Participation Agreement and the Credit Agreement.
"Lessee" shall have the meaning set forth in the Lease.
"Lessor" shall mean the Owner Trustee, not in its individual capacity,
but as the Lessor under the Lease.
"Lessor Basic Rent" shall mean the scheduled Holder Yield due on the
Holder Advances on any Scheduled Interest Payment Date pursuant to the Trust
Agreement (but not including interest on (a) any such scheduled Holder Yield due
on the Holder Advances prior to the Rent Commencement Date with respect to the
Property to which such Holder Advances relate or (b) overdue amounts under the
Trust Agreement or otherwise).
"Lessor Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdictions in order to protect the Lessor's interest under the
Lease to the extent the Lease is a security agreement or a mortgage.
"Lessor Lien" shall mean any Lien, true lease or sublease or disposition
of title arising as a result of (a) any claim against the Lessor or the Trust
Company, in its individual capacity, not resulting from the transactions
contemplated by the Operative Agreements, (b) any act or omission of the Lessor
or the Trust Company, in its individual capacity, which is not required by the
Operative Agreements or is in violation of any of the terms of the Operative
Agreements, (c) any claim against the Lessor or the Trust Company, in its
individual capacity, with respect to Taxes or Transaction Expenses against which
the Lessee is not required to indemnify the Lessor or the Trust Company, in its
individual capacity, pursuant to Section 11 of the Participation Agreement or
(d) any claim against the Lessor arising out of any transfer by the Lessor of
all or any portion of the interest of the Lessor in the Properties, the Trust
Estate or the Operative Agreements other than the transfer of title to or
possession of any Properties by the Lessor pursuant to and in accordance with
the Lease, the Credit Agreement, the Security Agreement or the Participation
Agreement or pursuant to the exercise of the remedies set forth in Article XVII
of the Lease.
Appendix A-26
<PAGE> 195
"Leverage Ratio" shall mean, as of the end of each fiscal quarter of the
Lessee, with respect to the Credit Parties and their Consolidated Subsidiaries
on a consolidated basis, the ratio of (a) Funded Indebtedness on such date to
(b) EBITDA for the twelve month period ending on such date.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind, including, without
limitation, any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, and any lease in the nature thereof.
"Limited Recourse Amount" shall mean with respect to all the Properties
on an aggregate basis, an amount equal to the sum of the Termination Values with
respect to all the Properties on an aggregate basis on each Payment Date, less
the Maximum Residual Guarantee Amount as of such date with respect to all the
Properties on an aggregate basis.
"Loan Basic Rent" shall mean the scheduled interest due on the Loans on
any Scheduled Interest Payment Date pursuant to the Credit Agreement (but not
including interest on (a) any such Loan due prior to the Rent Commencement Date
with respect to the Property to which such Loan relates or (b) any overdue
amounts under Section 2.8(b) of the Credit Agreement or otherwise).
"Loan Property Cost" shall mean, with respect to the Properties, taken
as a whole, at any date of determination, an amount equal to (a) the aggregate
principal amount all Loans (including without limitation all Acquisition Loans
and Construction Loans) made on or prior to such date with respect to such
Properties minus (b) the aggregate amount of prepayments or repayments as the
case may be of the Loans allocated to reduce the Loan Property Cost of such
Properties pursuant to Section 2.6(c) of the Credit Agreement.
"Loans" shall mean the loans extended pursuant to the Credit Agreement
and shall include both the Tranche A Loans and the Tranche B Loans.
"Majority Holders" shall mean at any time, Holders whose Holder Advances
outstanding represent at least fifty-one percent (51%) of (a) the aggregate
Holder Advances outstanding or (b) to the extent there are no Holder Advances
outstanding, the aggregate Holder Commitments.
"Majority Lenders" shall mean at any time, Lenders whose Loans
outstanding represent at least fifty-one percent (51%) of (a) the aggregate
Loans outstanding or (b) to the extent there are no Loans outstanding, the
aggregate of the Lender Commitments.
"Majority Secured Parties" shall mean at any time, Lenders and Holders
whose Loans and Holder Advances outstanding represent at least fifty-one percent
(51%) of (a) the aggregate Advances outstanding or (b) to the extent there are
no Advances outstanding, the sum of the aggregate Holder Commitments plus the
aggregate Lender Commitments; provided, however, any amendment to Section
8.3A(h)(iii) shall require the consent of Lenders and Holders whose Loans and
Holder Advances outstanding represent at least sixty-six and two-thirds percent
Appendix A-27
<PAGE> 196
(66 2/3%) of (x) the aggregate Advances outstanding or (y) to the extent there
are no Advances outstanding, the sum of the aggregate Holder Commitments plus
the aggregate Lender Commitments.
"Marketing Period" shall mean, if the Lessee has given a Sale Notice in
accordance with Section 20.1 of the Lease, the period commencing on the date
such Sale Notice is given and ending on the Expiration Date.
"Material Adverse Effect" shall mean any event, circumstance,
occurrence, fact, condition or change materially adversely affecting (a) the
acquisition, construction, equipping, financing, operation, maintenance,
leasing, ownership, use or regulatory status of any Property, (b) the business,
assets, properties, financial condition, operations, prospects or rights or
interests of the Credit Parties, on a consolidated basis, which individually or
in the aggregate has caused directly or indirectly Net Income for any fiscal
quarter (plus, within four years of the closing of the Reorganization, to the
extent deducted in the determination of Net Income for such fiscal quarter (x)
non-cash charges taken in such fiscal quarter in connection with the
Reorganization and (y) the write-down of goodwill taken in such fiscal quarter
in connection with the Reorganization) to be less than zero, (c) the value,
utility or useful life of any Property or the use, or ability of the Lessee to
use, any Property for the purpose for which it was intended, (d) the validity or
enforceability of any Operative Agreements or the rights and remedies of the
Agent, the Lenders, the Holders or the Lessor thereunder or (e) the validity,
priority or enforceability of any Lien on any Property created by any of the
Operative Agreements.
"Material Default" shall mean any Default under Sections 17.1(a), (b),
(g), (h), (i), (j) or (l)(i) of the Lease.
"Material Domestic Subsidiary" shall mean any Domestic Subsidiary which
has either (i) for the fiscal year of such Domestic Subsidiary most recently
ended, total annual revenues of at least $1,000,000 or (ii) total assets of at
least $5,000,000; provided, that (a) the aggregate total assets (as determined
in accordance with GAAP) at any time of all Domestic Subsidiaries of the Credit
Parties (taken as a whole) that are excluded from this definition of "Material
Domestic Subsidiary" and are not otherwise Guarantors shall not exceed
$50,000,000 and (b) the aggregate annual revenues for the most recently ended
fiscal years of all Domestic Subsidiaries of the Credit Parties (taken as a
whole) that are excluded from this definition of "Material Domestic Subsidiary"
and are not otherwise Guarantors shall not exceed $10,000,000.
"Maturity Date" shall mean the Expiration Date.
"Maximum Amount" shall mean (a) the Land Cost, plus (b) the product of
eighty-nine and nine tenths percent (89.9%) multiplied by the following: (the
aggregate Termination Value for all, but not less than all, the Properties,
minus the Land Cost, minus all structuring fees payable in connection with the
transactions evidenced by the Operative Agreements to Banc of America Securities
LLC, Bank of America, N.A. and/or any Affiliates of either of the foregoing,
minus accrued, unpaid Holder Yield respecting any and all Construction Period
Properties) minus (c) the accreted value (calculated at a rate of six percent
(6.00%) per annum) of any
Appendix A-28
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payments previously made by the Construction Agent or the Lessee regarding any
and all Construction Period Properties and not reimbursed.
"Maximum Residual Guarantee Amount" shall mean (i) with respect to the
Property constituting the Land, an amount equal to the Land Cost and (ii) with
respect to the Property constituting the Improvements on the Land, the product
of the aggregate Property Cost for all of the Properties (exclusive of the Land
Cost) times eighty-five and one-half of one percent (85.5%), in each case as set
forth in the applicable Lease Supplement.
"Merger Sub" shall mean the newly formed, wholly owned subsidiary of the
Parent formed in connection with the Reorganization.
"Modifications" shall have the meaning specified in Section 11.1(a) of
the Lease.
"Mortgage Instrument" shall mean any mortgage, deed of trust or any
other instrument executed by the Owner Trustee and/or the Lessee in favor of the
Agent (for the benefit of the Lenders and the Holders), and evidencing a Lien on
the Property, in form and substance reasonably acceptable to the Agent.
"Mountain View Lease Event of Default" shall mean a "Lease Event of
Default" as such term is defined in Section 17.1 of that certain Master Lease
Agreement dated as of April 23, 1999 between First Security Bank, National
Association, not individually, but solely as the Owner Trustee under the VS
Trust 1999-1, as lessor, and VSC, as lessee.
"Mountain View Lease Financing" shall mean the transactions contemplated
by the Mountain View Participation Agreement and the other Operative Agreements,
as such term is defined in the Mountain View Participation Agreement.
"Mountain View Participation Agreement" shall mean that certain
Participation Agreement dated as of April 23, 1999 (as amended, modified,
extended, supplemented, restated and/or replaced from time to time) among VSC,
the various parties thereto from time to time, as guarantors, First Security
Bank, National Association, as Owner Trustee under the VS Trust 1999-1, the
various banks and other lending institutions parties thereto from time to time,
as lenders, the various banks and other lending institutions parties thereto
from time to time, as holders of certificates issued with respect to the VS
Trust 1999-1, and Bank of America, N.A., as agent.
"Multiemployer Plan" shall mean a Plan covered by Title IV of ERISA
which is a multiemployer plan as defined in Section 3(37) or 4001(a)(3) of
ERISA.
"Multiple Employer Plan" shall mean a Plan covered by Title IV of ERISA,
other than a Multiemployer Plan, which any Credit Party or any of its
Subsidiaries or any ERISA Affiliate and at least one employer other than a
Credit Party or any of its Subsidiaries or any ERISA Affiliate are contributing
sponsors.
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"Net Income" shall mean for any period, the net income after taxes for
such period of the Credit Parties and their Consolidated Subsidiaries on a
consolidated basis, as determined in accordance with GAAP.
"New Facility" shall have the meaning given to such term in Section 28.1
of the Lease.
"Non-Integral Equipment" shall mean Equipment which (a) is personal
property that is readily removable without causing material damage to the
applicable Property and (b) is not integral or necessary, respecting the
applicable Property, for compliance with Section 8.3 of the Lease or otherwise
to the structure thereof, the mechanical operation thereof, the electrical
systems thereof or otherwise with respect to any aspect of the physical plant
thereof.
"Notes" shall mean those notes issued to the Lenders pursuant to the
Credit Agreement and shall include both the Tranche A Notes and the Tranche B
Notes.
"NSMG" shall mean Seagate Software Network & Storage Management Group,
Inc., a Delaware corporation.
"NSMG Business" shall mean the business of the network software
management group of SSI as set forth in the Reorganization Agreement.
"Obligations" shall have the meaning given to such term in Section 1 of
the Security Agreement.
"Officer's Certificate" with respect to any person shall mean a
certificate executed on behalf of such person by a Responsible Officer who has
made or caused to be made such examination or investigation as is necessary to
enable such Responsible Officer to express an informed opinion with respect to
the subject matter of such Officer's Certificate.
"Operating Lease" shall mean, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the lessee at
any time) of any Property (whether real, personal or mixed) which is not a
Capitalized Lease other than any such lease in which that Person is the lessor.
"Operative Agreements" shall mean the following: the Participation
Agreement, the Construction Agency Agreement, the Trust Agreement, the
Certificates, the Credit Agreement, the Notes, the Lease, the Lease Supplements,
the Joinder Agreements, the Security Agreement, the Mortgage Instruments, the
other Security Documents, the Deeds and Bills of Sale, the Purchase Agreement,
the Hotel Site Option Agreement, the Veritas SNDA and any and all other
agreements, documents and instruments executed in connection with any of the
foregoing.
"Original Executed Counterpart" shall have the meaning given to such
term in Section 5 of Exhibit A to the Lease.
Appendix A-30
<PAGE> 199
"Overdue Interest" shall mean any interest payable pursuant to Section
2.8(b) of the Credit Agreement.
"Overdue Rate" shall mean (a) with respect to the Loan Basic Rent, and
any other amount owed under or with respect to the Credit Agreement or the
Security Documents, the rate specified in Section 2.8(b) of the Credit
Agreement, (b) with respect to the Lessor Basic Rent, the Holder Yield and any
other amount owed under or with respect to the Trust Agreement, the Holder
Overdue Rate, and (c) with respect to any other amount, the amount referred to
in clause (y) of Section 2.8(b) of the Credit Agreement.
"Owner Trustee," "Borrower" or "Lessor" shall mean First Security Bank,
National Association, not individually, except as expressly stated in the
various Operative Agreements, but solely as the Owner Trustee under the VS Trust
2000-1, and any successor, replacement and/or additional Owner Trustee expressly
permitted under the Operative Agreements.
"Parcel Sale Requirements" shall have the meaning given to such term in
Section 20.1 of the Lease.
"Parent" shall mean Veritas Software Corporation (formerly known as
Veritas Holding Corporation), a Delaware corporation.
"Participant" shall have the meaning given to such term in Section 9.7
of the Credit Agreement.
"Participation Agreement" shall mean the Participation Agreement dated
on or about the Initial Closing Date, among the Lessee, the Guarantors, the
Owner Trustee, not in its individual capacity except as expressly stated
therein, the Holders, the Lenders and the Agent.
"Payment Date" shall mean any Scheduled Interest Payment Date and any
date on which interest or Holder Yield in connection with a prepayment of
principal on the Loans or of the Holder Advances is due under the Credit
Agreement or the Trust Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA and any successor thereto.
"Pension Plan" shall mean a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to title IV of ERISA (other than a
Multiemployer Plan), and to which any Credit Party or any ERISA Affiliate may
have any liability, including without limitation any liability by reason of
having been a substantial employer within the meaning of section 4063 of ERISA
at any time during the preceding five (5) years, or by reason of being deemed to
be a contributing sponsor under section 4069 of ERISA.
"Permitted Acquisition" shall mean a statutory merger, the acquisition
of all of the Capital Stock of another Person or all or substantially all of the
assets of another Person, provided that each of the following conditions are
satisfied: (a) prior to such acquisition, the Lessee shall deliver to the
Appendix A-31
<PAGE> 200
Agent and the Majority Secured Parties a Pro Forma Compliance Certificate
demonstrating that after giving effect to such acquisition on a pro forma basis,
as if such acquisition had occurred on the first day of the twelve month period
ending on the last day of the Lessee's most recently completed fiscal year, the
Credit Parties would have been in compliance with all the financial covenants
set forth in Section 8.3A(h) of the Participation Agreement, (b) the acquisition
is consummated pursuant to a negotiated acquisition agreement and involves the
purchase of a business similar to the business of the Lessee as of the Initial
Closing Date, (c) after giving effect to the acquisition, the representations
and warranties set forth in Section 6 hereof shall be true and correct in all
material respects on and as of the date of such acquisition with the same effect
as though made on and as of such date and (d) no Default or Event of Default
exists and is continuing or would result from such acquisition.
"Permitted Facility" shall mean any parcel of real property, together
with any improvements located or to be constructed thereon, identified by the
Construction Agent and reasonably acceptable to the Agent.
"Permitted Investments" shall mean Investments which are (i) cash and
Cash Equivalents; (ii) accounts receivable created, acquired or made by the
Lessee or any of its Consolidated Subsidiaries in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
(iii) Investments consisting of Capital Stock, obligations, securities or other
property received by the Lessee or any of its Consolidated Subsidiaries in
settlement of accounts receivable (created in the ordinary course of business)
from bankrupt obligors; (iv) Investments existing as of the Closing Date and set
forth in Schedule 8.3B(f); (v) advances or loans to directors, officers,
employees, agents, customers or suppliers that do not exceed $5,000,000 in the
aggregate at any one time outstanding for the Lessee and its Consolidated
Subsidiaries; (vi) Permitted Acquisitions; (vii) Investments in any other
Person, other than Permitted Acquisitions, provided that, in the event any
particular Investment exceeds $20,000,000, such Investment shall only be
permitted if each of the following conditions are satisfied: (a) after giving
effect to the Investment, the representations and warranties set forth in
Section 6.2 of the Participation Agreement shall be true and correct in all
material respects on and as of the date of such Investment with the same effect
as though made on and as such date, (b) no Default or Event of Default would
result from such Investment and (c) the Lessee shall have provided the Agent
with satisfactory evidence demonstrating that after giving effect to any such
Investment on a pro forma basis, as if such transaction had occurred on the last
day of the Lessee's most recently completed fiscal quarter, the Credit Parties
and their Subsidiaries would have been in compliance with all the financial
covenants set forth in Section 8.3A(h) of the Participation Agreement; and
(viii) such other Investments as are reasonably acceptable to the Agent.
"Permitted Liens" shall mean:
(a) the respective rights and interests of the parties to the
Operative Agreements as provided in the Operative Agreements;
Appendix A-32
<PAGE> 201
(b) the rights of any sublessee or assignee under a sublease
or an assignment expressly permitted by the terms of the Lease for no
longer than the duration of the Lease;
(c) Liens for Taxes that either are not yet due or are being
contested in accordance with the provisions of Section 13.1 of the
Lease;
(d) Liens arising by operation of law, materialmen's,
mechanics', workmen's, repairmen's, employees', carriers',
warehousemen's and other like Liens relating to the construction of the
Improvements or in connection with any Modifications or arising in the
ordinary course of business for amounts that either are not more than
thirty (30) days past due or are being diligently contested in good
faith by appropriate proceedings, so long as such proceedings satisfy
the conditions for the continuation of proceedings to contest Taxes set
forth in Section 13.1 of the Lease;
(e) Liens of any of the types referred to in clause (d) above
that have been bonded for not less than the full amount in dispute (or
as to which other security arrangements satisfactory to the Lessor and
the Agent have been made), which bonding (or arrangements) shall comply
with applicable Legal Requirements, and shall have effectively stayed
any execution or enforcement of such Liens;
(f) Liens arising out of judgments or awards with respect to
which appeals or other proceedings for review are being prosecuted in
good faith and for the payment of which adequate reserves have been
provided as required by GAAP or other appropriate provisions have been
made, so long as such proceedings have the effect of staying the
execution of such judgments or awards and satisfy the conditions for the
continuation of proceedings to contest Taxes set forth in Section 13.1
of the Lease;
(g) Liens in favor of municipalities to the extent agreed to
by the Lessor or permitted under Section 8.5 of the Participation
Agreement;
(h) Liens and other matters set forth as exceptions on the
title commitment issued under Section 5.3(g) with respect to a
particular Property, to the extent such title commitment has been
approved by the Agent; and
(i) Such other additional matters as may be approved in
writing by Lessor.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, governmental authority or any other entity.
"Plan" shall mean any employee benefit plan (as defined in Section 3(3)
of ERISA) which is covered by ERISA and with respect to which the Lessee or any
of its Consolidated Subsidiaries or any ERISA Affiliate is (or, if such plan
were terminated at such time, would under Section 4069 of ERISA be deemed to be)
an "employer" within the meaning of Section 3(5) of ERISA.
Appendix A-33
<PAGE> 202
"Plans and Specifications" shall mean, with respect to Improvements, the
plans and specifications for such Improvements to be constructed or already
existing, as such Plans and Specifications may be amended, modified or
supplemented from time to time in accordance with the terms of the Operative
Agreements.
"Prime Lending Rate" shall have the meaning given to such term in the
definition of ABR.
"Pro Forma Compliance Certificate" shall mean a certificate of the chief
financial officer of the Lessee delivered to the Agent in connection with any
Permitted Acquisition and containing reasonably detailed calculations, upon
giving effect to the applicable transaction on a pro forma basis, of the
financial covenants set forth in Section 8.3A(h).
"Property" shall mean the Land and/or each item of Equipment and the
various Improvements in each case as more particularly described on any
applicable Lease Supplement, including without limitation each Construction
Period Property and each Property for which the Basic Term has commenced;
provided, however, subject to the following sentence, the Land and/or each item
of Equipment and the various Improvements so described in such Lease Supplements
shall, in the aggregate, constitute the real and personal property more
particularly described on Exhibit B to the Lease. For purposes of Sections 8.3A
and 8.3B of the Participation Agreement only, the term "Property" shall mean any
interest in any kind of property or asset, whatever real, personal or mixed, or
tangible or intangible.
"Property Acquisition Cost" shall mean the cost to the Lessor to
purchase a Property on a Property Closing Date.
"Property Closing Date" shall mean the date on which the Lessor
purchases a Property or, with respect to the first Advance, the date on which
the Lessor seeks reimbursement for Property previously purchased by the Lessor.
"Property Cost" shall mean with respect to the Properties the aggregate
amount (and/or the various items and occurrences giving rise to such amounts) of
the Loan Property Cost plus the Holder Property Cost for such Property (as such
amounts shall be increased equally among all Properties respecting the Holder
Advances and the Loans extended from time to time to pay for the Transaction
Expenses and indemnity payments pursuant to Section 11.8, in each case of the
Participation Agreement).
"Purchase Agreement" shall mean that certain Purchase Agreement dated as
of November 17, 1999 among Ryan Companies US, Inc., a Minnesota corporation, and
Ryan CP, LLC, a Minnesota limited liability company, together as seller, and
Parent, as purchaser.
"Purchase Option" shall have the meaning given to such term in Section
20.1 of the Lease.
Appendix A-34
<PAGE> 203
"Purchasing Lender" shall have the meaning given to such term in Section
9.8(a) of the Credit Agreement.
"Quick Ratio" shall mean, with respect to the Credit Parties and their
Consolidated Subsidiaries on a consolidated basis as of the last day of any
fiscal quarter, the ratio of (a) the sum of (i) cash and Cash Equivalents on
such date plus (ii) the aggregate book value of all accounts receivable on such
date to (b) the sum of (i) current liabilities on such date, as determined in
accordance with GAAP plus (ii) Operating Lease commitments on such date, as
determined in accordance with GAAP plus (iii) the principal balance outstanding
of the Indebtedness permitted under Section 8.3B(a)(iv) on such date.
"Real Properties" shall mean the real properties that the Lessee or any
Consolidated Subsidiary may own or lease (as lessee or sublessee) from third
parties from time to time.
"Register" shall have the meaning given to such term in Section 9.9(a)
of the Credit Agreement.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.
"Release" shall mean any release, pumping, pouring, emptying, injecting,
escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or
emission of a Hazardous Substance.
"Renewal Term" shall have the meaning specified in Section 2.2 of the
Lease.
"Rent" shall mean, collectively, the Basic Rent and the Supplemental
Rent, in each case payable under the Lease.
"Rent Commencement Date" shall mean, regarding each Property, the
Completion Date.
"Reorganization" shall mean that certain plan of reorganization
described in Section 1 of the Reorganization Agreement whereby (i) the Lessee
will become a Wholly Owned Subsidiary of the Parent and each share of Capital
Stock of the Lessee will be converted into one share of Capital Stock of the
Parent and (ii) each of the Contributed Companies shall have become a
Wholly-Owned Subsidiary of the Parent.
"Reorganization Agreement" shall mean that certain Agreement and Plan of
Reorganization dated as of October 5, 1998 by and among VERITAS Operating
Corporation (formerly known as Veritas Software Corporation and including for
all purposes Veritas Surviving Corporation), the Parent, Seagate Technology,
Inc., SSI and Seagate Software Network & Storage Management Group, Inc.
"Reportable Event" shall have the meaning specified in ERISA.
Appendix A-35
<PAGE> 204
"Reportable Event" shall mean a "reportable event" as defined in Section
4043 of ERISA with respect to which the notice requirements to the PBGC have not
been waived.
"Requested Funds" shall mean any funds requested by the Lessee or the
Construction Agent, as applicable, in accordance with Section 5 of the
Participation Agreement.
"Requisition" shall have the meaning specified in Section 4.2 of the
Participation Agreement.
"Responsible Officer" shall mean the Chairman or Vice Chairman of the
Board of Directors, the Chairman or Vice Chairman of the Executive Committee of
the Board of Directors, the President, any Senior Vice President or Executive
Vice President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, or any Assistant Treasurer, except that when used with respect to the
Trust Company or the Owner Trustee, "Responsible Officer" shall also include the
Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer,
the Controller and any Assistant Controller or any other officer of the Trust
Company or the Owner Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Restricted Payment" means (i) any dividend or other payment or
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of the Lessee or any of its Consolidated Subsidiaries, now or
hereafter outstanding (including without limitation any payment in connection
with any dissolution, merger, consolidation or disposition involving the Lessee
or any of its Consolidated Subsidiaries), or to the holders, in their capacity
as such, of any shares of any class of Capital Stock of the Lessee or any of its
Consolidated Subsidiaries, now or hereafter outstanding, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of Capital Stock of the
Lessee or any of its Consolidated Subsidiaries, now or hereafter outstanding and
(iii) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of Capital
Stock of the Lessee or any of its Consolidated Subsidiaries, now or hereafter
outstanding.
"Revenues" shall have the meaning given to such term in Section 17.11 of
the Lease.
"Sale Date" shall have the meaning given to such term in Section 22.1(a)
of the Lease.
"Sale Notice" shall mean a notice given to the Lessor in connection with
the election by the Lessee of its Sale Option.
"Sale Option" shall have the meaning given to such term in Section 20.1
of the Lease.
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<PAGE> 205
"Sale Proceeds Shortfall" shall mean the amount by which the proceeds of
a sale described in Section 22.1 of the Lease are less than the Limited Recourse
Amount with respect to the Properties if it has been determined that the Fair
Market Sales Value of the Properties at the expiration of the term of the Lease
has been impaired by greater than ordinary wear and tear during the Term of the
Lease.
"Scheduled Interest Payment Date" shall mean (a) as to any Eurodollar
Loan or Eurodollar Holder Advance, the last day of the Interest Period
applicable to such Eurodollar Loan or Eurodollar Holder Advance, (except that
with respect to any Eurodollar Loan having an Interest Period of six (6) months
or any Eurodollar Holder Advance with Holder Yield calculated on the basis of
the six (6) month Eurodollar Rate, the term "Scheduled Interest Payment Date"
shall mean each applicable three (3) month anniversary date of such Eurodollar
Loan or Eurodollar Holder Advance) (b) as to any ABR Loan or any ABR Holder
Advance, the fifteenth day of each month, unless such day is not a Business Day
and in such case on the next occurring Business Day and (c) as to all Loans and
Holder Advances, the date of any voluntary or involuntary payment, prepayment,
return or redemption, and the Maturity Date or the Expiration Date, as the case
may be.
"Secured Parties" shall have the meaning given to such term in the
Security Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Security Agreement" shall mean the Security Agreement dated on or about
the Initial Closing Date between the Lessor and the Agent, for the benefit of
the Secured Parties, and accepted and agreed to by the Lessee.
"Security Documents" shall mean the collective reference to the Security
Agreement, the Mortgage Instruments, (to the extent the Lease is construed as a
security instrument) the Lease, the UCC Financing Statements and all other
security documents hereafter delivered to the Agent granting a lien on any asset
or assets of any Person to secure the obligations and liabilities of the Lessor
under the Credit Agreement and/or under any of the other Credit Documents or to
secure any guarantee of any such obligations and liabilities.
"Soft Costs" shall mean all costs which are ordinarily and reasonably
incurred in relation to the acquisition, development, installation,
construction, improvement and testing of the Properties other than Hard Costs,
including without limitation structuring fees, administrative fees, legal fees,
upfront fees, fees and expenses related to appraisals, title examinations, title
insurance, document recordation, surveys, environmental site assessments,
geotechnical soil investigations and similar costs and professional fees
customarily associated with a real estate closing, the Lender Unused Fee, the
Holder Unused Fee, fees and expenses of the Owner Trustee payable or
reimbursable under the Operative Agreements and costs and expenses incurred
pursuant to Sections 7.3(a) and 7.3(b) of the Participation Agreement.
"SSI" shall mean Seagate Software, Inc., a Delaware corporation.
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<PAGE> 206
"Subordinated Debt" shall mean the $100,000,000 5_% Convertible
Subordinated Notes due November 1, 2004 issued by the Lessee pursuant to that
certain Indenture dated on or about October 1, 1997 between the Lessee and State
Street Bank and Trust Company of California, N.A., as trustee.
"Subsidiary" shall mean, as to any Person, any corporation of which at
least a majority of the outstanding stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other 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, or by one (1)
or more Subsidiaries, or by such Person and one (1) or more Subsidiaries.
"Supplemental Amounts" shall have the meaning given to such term in
Section 9.18 of the Credit Agreement.
"Supplemental Rent" shall mean all amounts, liabilities and obligations
(other than Basic Rent) which the Lessee assumes or agrees to pay to the Lessor,
the Trust Company, the Holders, the Agent, the Lenders or any other Person under
the Lease or under any of the other Operative Agreements including without
limitation payments of the Termination Value and the Maximum Residual Guarantee
Amount and all indemnification amounts, liabilities and obligations.
"Survey" shall mean, collectively, that certain survey prepared by
Westwood Professional Services, Inc. for Ryan Companies US., Inc. dated October
18, 1999 and that certain survey prepared by Westwood Professional Services,
Inc. for Ryan Companies US., Inc. dated December 8, 1999.
"Taxes" shall have the meaning specified in the definition of
"Impositions".
"Term" shall mean the Basic Term and each Renewal Term, if any.
"Termination Date" shall have the meaning specified in Section 16.2(a)
of the Lease.
"Termination Event" shall mean (a) with respect to any Pension Plan, the
occurrence of a Reportable Event or an event described in Section 4062(e) of
ERISA, (b) the withdrawal of any Credit Party or any ERISA Affiliate from a
Multiple Employer Plan during a plan year in which it was a substantial employer
(as such term is defined in Section 4001(a)(2) of ERISA), or the termination of
a Multiple Employer Plan, (c) the distribution of a notice of intent to
terminate a Plan or Multiemployer Plan pursuant to Section 4041(a)(2) or 4041A
of ERISA, (d) the institution of proceedings to terminate a Plan or
Multiemployer Plan by the PBGC under Section 4042 of ERISA, (e) any other event
or condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or
Multiemployer Plan, or (f) the complete or partial withdrawal of any Credit
Party or any ERISA Affiliate from a Multiemployer Plan.
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"Termination Notice" shall have the meaning specified in Section 16.1 of
the Lease.
"Termination Value" shall mean the sum of (a) any of (i) with respect to
all Properties, an amount equal to the aggregate outstanding Property Cost for
all the Properties, in each case as of the last occurring Payment Date, or (ii)
with respect to a particular Property, an amount equal to the Property Cost
allocable to such Property, or (iii) with respect to any portion of any Property
for which Lessee has provided a notice of its desire to purchase such portion of
such Property pursuant to Section 20.1 of the Lease, an amount equal to the pro
rata portion of the Property Cost for such Property allocable to such portion of
such Property plus (b) respecting the amounts described in each of the foregoing
subclause (i), (ii) or (iii), as applicable, any and all accrued but unpaid
interest on the Loans and any and all Holder Yield on the Holder Advances
related to the applicable Property Cost, plus (c) to the extent the same is not
duplicative of the amounts payable under clause (b) above, all other Rent and
other amounts then due and payable or accrued under the Construction Agency
Agreement, Lease and/or under any other Operative Agreement (including without
limitation amounts under Sections 11.1 and 11.2 of the Participation Agreement
and all costs and expenses referred to in clause FIRST of Section 22.2 of the
Lease).
"Tranche A Commitments" shall mean the obligation of the Tranche A
Lenders to make the Tranche A Loans to the Lessor in an aggregate principal
amount at any one (1) time outstanding not to exceed the aggregate of the
amounts set forth opposite each Tranche A Lender's name on Schedule 2.1 to the
Credit Agreement, as such amount may be increased or reduced from time to time
in accordance with the provisions of the Operative Agreements; provided, no
Tranche A Lender shall be obligated to make Tranche A Loans in excess of such
Tranche A Lender's share of the Tranche A Commitments as set forth adjacent to
such Tranche A Lender's name on Schedule 2.1 to Credit Agreement.
"Tranche A Lenders" shall mean Bank of America, N.A. and shall include
the several banks and other financial institutions from time to time party to
the Credit Agreement that commit to make the Tranche A Loans.
"Tranche A Loans" shall mean the Loans made pursuant to the Tranche A
Commitment.
"Tranche A Note" shall have the meaning given to it in Section 2.2 of
the Credit Agreement.
"Tranche B Commitments" shall mean the obligation of the Tranche B
Lenders to make the Tranche B Loans to the Lessor in an aggregate principal
amount at any one (1) time outstanding not to exceed the aggregate of the
amounts set forth opposite each Tranche B Lender's name on Schedule 2.1 to the
Credit Agreement, as such amount may be increased or reduced from time to time
in accordance with the provisions of the Operative Agreements; provided, no
Tranche B Lender shall be obligated to make Tranche B Loans in excess of such
Tranche B Lender's share of the Tranche B Commitments as set forth adjacent to
such Tranche B Lender's name on Schedule 2.1 to Credit Agreement.
Appendix A-39
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"Tranche B Lenders" shall mean Bank of America, N.A. and shall include
the several banks and other financial institutions from time to time party to
the Credit Agreement that commit to make the Tranche B Loans.
"Tranche B Loan" shall mean the Loans made pursuant to the Tranche B
Commitment.
"Tranche B Note" shall have the meaning given to it in Section 2.2 of
the Credit Agreement.
"Transaction Expenses" shall mean all Soft Costs and all other costs and
expenses incurred in connection with the preparation, execution and delivery of
the Operative Agreements and the transactions contemplated by the Operative
Agreements including without limitation all costs and expenses described in
Section 7.1 of the Participation Agreement and the following:
(a) the reasonable fees, out-of-pocket expenses and
disbursements of counsel in negotiating the terms of the Operative
Agreements and the other transaction documents, preparing for the
closings under, and rendering opinions in connection with, such
transactions and in rendering other services customary for counsel
representing parties to transactions of the types involved in the
transactions contemplated by the Operative Agreements;
(b) the reasonable fees, out-of-pocket expenses and
disbursements of accountants for any Credit Party in connection with the
transaction contemplated by the Operative Agreements;
(c) any and all other reasonable fees, charges or other
amounts payable to the Lenders, the Agent, the Holders, the Owner
Trustee or any broker which arises under any of the Operative
Agreements;
(d) any other reasonable fee, out-of-pocket expenses,
disbursement or cost of any party to the Operative Agreements or any of
the other transaction documents; and
(e) any and all Taxes and fees incurred in recording or filing
any Operative Agreement or any other transaction document, any deed,
declaration, mortgage, security agreement, notice or financing statement
with any public office, registry or governmental agency in connection
with the transactions contemplated by the Operative Agreement.
"Tribunal" shall mean any state, commonwealth, federal, foreign,
territorial, or other court or government body, subdivision agency, department,
commission, board, bureau or instrumentality of a governmental body.
"Trust" shall mean the VS Trust 2000-1.
"Trust Agreement" shall mean the Trust Agreement dated on or about the
Initial Closing Date between the Holders and the Owner Trustee.
Appendix A-40
<PAGE> 209
"Trust Company" shall mean First Security Bank, National Association, in
its individual capacity, and any successor owner trustee under the Trust
Agreement in its individual capacity.
"Trust Estate" shall have the meaning specified in Section 2.2 of the
Trust Agreement.
"Type" shall mean, as to any Loan, whether it is an ABR Loan or a
Eurodollar Loan.
"UCC Financing Statements" shall mean collectively the Lender Financing
Statements and the Lessor Financing Statements.
"Unanimous Vote Matters" shall have the meaning given it in Section 12.4
of the Participation Agreement.
"Unfunded Amount" shall have the meaning specified in Section 3.2 of the
Construction Agency Agreement.
"Unfunded Liability" shall mean, with respect to any Plan, at any time,
the amount (if any) by which (a) the present value of all benefits under such
Plan exceeds (b) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plan, but only to the extent that such excess represents a potential liability
of the Company or any member of the Controlled Group to the PBGC or such Plan
under Title IV of ERISA.
"Uniform Commercial Code" and "UCC" shall mean the Uniform Commercial
Code as in effect in any applicable jurisdiction.
"United States Bankruptcy Code" shall mean Title 11 of the United States
Code.
"U.S. Person" shall have the meaning specified in Section 11.2(e) of the
Participation Agreement.
"U.S. Taxes" shall have the meaning specified in Section 11.2(e) of the
Participation Agreement.
"Veritas SNDA" shall mean that certain Subordination, Non-Disturbance
and Attornment Agreement dated on or about the Initial Closing Date among the
Agent, the Owner Trustee and the Lessee.
"VSC" shall mean VERITAS Operating Corporation (formerly known as
Veritas Software Corporation), a Delaware corporation, and its successors and
permitted assigns.
"VS Trust 2000-1" shall mean the grantor trust created pursuant to the
terms and conditions of the Trust Agreement.
Appendix A-41
<PAGE> 210
"Wholly Owned Subsidiary" of any Person shall mean any Subsidiary 100%
of whose voting stock or other equity interests is at the time owned by such
Person directly or indirectly through other Wholly Owned Subsidiaries.
"Withholdings" shall have the meaning specified in Section 11.2(e) of
the Participation Agreement.
"Work" shall mean the furnishing of labor, materials, components,
furniture, furnishings, fixtures, appliances, machinery, equipment, tools,
power, water, fuel, lubricants, supplies, goods and/or services with respect to
any Property.
"Year 2000 Compliant" shall have the meaning specified in Section 6.2(v)
of the Participation Agreement.
"Year 2000 Problem" shall mean the risk that computer applications used
by any Credit Party or any of its Subsidiaries or any supplier, vendor or
customer of any Credit Party or any of its Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999.
Appendix A-42
<PAGE> 1
EXHIBIT 10.34
MASTER LEASE AGREEMENT
Dated as of March 9, 2000
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually,
but solely as the Owner Trustee
under the VS Trust 2000-1,
as Lessor
and
VERITAS OPERATING CORPORATION,
as Lessee
This Master Lease Agreement is subject to a security interest in favor of Bank
of America, N.A., as the agent for the Lenders and respecting the Security
Documents, as the agent for the Lenders and the Holders, to the extent of their
interests (the "Agent") under a Security Agreement dated as of March 9, 2000,
between First Security Bank, National Association, not individually, but solely
as the Owner Trustee under the VS Trust 2000-1 and the Agent, as amended,
modified, extended, supplemented, restated and/or replaced from time to time in
accordance with the applicable provisions thereof. This Lease Agreement has been
executed in several counterparts. To the extent, if any, that this Lease
Agreement constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no security
interest in this Lease Agreement may be created through the transfer or
possession of any counterpart other than the original counterpart containing the
receipt therefor executed by the Agent on the signature page hereof.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I ...................................................................................2
1.1 Definitions...................................................................2
1.2 Interpretation................................................................2
ARTICLE II ..................................................................................2
2.1 Property......................................................................2
2.2 Lease Term....................................................................2
2.3 Title.........................................................................3
2.4 Lease Supplements.............................................................3
ARTICLE III .................................................................................3
3.1 Rent..........................................................................3
3.2 Payment of Basic Rent.........................................................4
3.3 Supplemental Rent.............................................................4
3.4 Performance on a Non-Business Day.............................................5
3.5 Rent Payment Provisions.......................................................5
ARTICLE IV ..................................................................................5
4.1 Taxes; Utility Charges........................................................5
ARTICLE V ...................................................................................6
5.1 Quiet Enjoyment...............................................................6
ARTICLE VI ..................................................................................6
6.1 Net Lease.....................................................................6
6.2 No Termination or Abatement...................................................7
ARTICLE VII .................................................................................7
7.1 Ownership of the Properties...................................................7
ARTICLE VIII ................................................................................8
8.1 Condition of the Properties...................................................8
8.2 Possession and Use of the Properties..........................................9
8.3 Integrated Properties........................................................10
ARTICLE IX .................................................................................10
9.1 Compliance With Legal Requirements, Insurance Requirements and Manufacturer's
Specifications and Standards.................................................10
ARTICLE X ..................................................................................11
10.1 Maintenance and Repair; Return...............................................11
10.2 Environmental Inspection.....................................................12
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE XI .................................................................................13
11.1 Modifications................................................................13
ARTICLE XII ................................................................................14
12.1 Warranty of Title............................................................14
ARTICLE XIII ...............................................................................15
13.1 Permitted Contests Other Than in Respect of Indemnities......................15
13.2 Impositions, Utility Charges, Other Matters; Compliance with Legal
Requirements.................................................................15
ARTICLE XIV ................................................................................16
14.1 Public Liability and Workers' Compensation Insurance.........................16
14.2 Permanent Hazard and Other Insurance and Insurance Coverage to be Maintained
by Other Parties.............................................................16
14.3 Coverage.....................................................................17
14.4 Additional Insurance Requirements............................................18
ARTICLE XV .................................................................................19
15.1 Casualty and Condemnation....................................................19
15.2 Environmental Matters........................................................21
15.3 Notice of Environmental Matters..............................................22
ARTICLE XVI ................................................................................22
16.1 Termination Upon Certain Events..............................................22
16.2 Procedures...................................................................23
ARTICLE XVII ...............................................................................23
17.1 Lease Events of Default......................................................23
17.2 Surrender of Possession......................................................26
17.3 Reletting....................................................................27
17.4 Damages......................................................................27
17.5 Power of Sale................................................................28
17.6 Final Liquidated Damages.....................................................28
17.7 Environmental Costs..........................................................29
17.8 Waiver of Certain Rights.....................................................29
17.9 Assignment of Rights Under Contracts.........................................29
17.10 Remedies Cumulative..........................................................29
ARTICLE XVIII ..............................................................................31
18.1 Lessor's Right to Cure Lessee's Lease Defaults...............................31
ARTICLE XIX ................................................................................32
19.1 Provisions Relating to Lessee's Exercise of its Purchase Option..............32
19.2 [Intentionally Omitted]......................................................32
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XX .................................................................................32
20.1 Purchase Option or Sale Option-General Provisions............................32
20.2 Lessee Purchase Option.......................................................33
20.3 Third Party Sale Option......................................................34
ARTICLE XXI ................................................................................35
21.1 [Intentionally Omitted]......................................................35
ARTICLE XXII ...............................................................................35
22.1 Sale Procedure...............................................................35
22.2 Application of Proceeds of Sale..............................................38
22.3 Indemnity for Excessive Wear.................................................38
22.4 Appraisal Procedure..........................................................38
22.5 Certain Obligations Continue................................................39
ARTICLE XXIII ..............................................................................39
23.1 Holding Over.................................................................39
ARTICLE XXIV ...............................................................................40
24.1 Risk of Loss.................................................................40
ARTICLE XXV ................................................................................40
25.1 Assignment...................................................................40
25.2 Subleases....................................................................40
ARTICLE XXVI ...............................................................................41
26.1 No Waiver....................................................................41
ARTICLE XXVII ..............................................................................41
27.1 Acceptance of Surrender......................................................41
27.2 No Merger of Title...........................................................42
ARTICLE XXVIII .............................................................................42
28.1 [RESERVED]...................................................................42
ARTICLE XXIX ...............................................................................42
29.1 Notices......................................................................42
ARTICLE XXX ................................................................................42
30.1 Miscellaneous................................................................42
30.2 Amendments and Modifications.................................................42
30.3 Successors and Assigns.......................................................42
30.4 Headings and Table of Contents...............................................43
30.5 Counterparts.................................................................43
30.6 GOVERNING LAW................................................................43
30.7 Calculation of Rent..........................................................43
</TABLE>
iii
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<TABLE>
<S> <C>
30.8 Recording of Lease...........................................................43
30.9 Allocations between the Lenders and the Holders..............................43
30.10 Limitations on Recourse......................................................44
30.11 WAIVERS OF JURY TRIAL........................................................44
30.12 Exercise of Lessor Rights....................................................44
30.13 SUBMISSION TO JURISDICTION; VENUE............................................44
30.14 USURY SAVINGS PROVISION......................................................45
</TABLE>
EXHIBITS
EXHIBIT A - Lease Supplement No. ____
EXHIBIT B - Legal Description of Property
iv
<PAGE> 6
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, ENFORCEMENT OF THIS INSTRUMENT
IS LIMITED TO A DEBT AMOUNT OF $40,000,000.00 UNDER CHAPTER 287 OF MINNESOTA
STATUTES.
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT dated as of March 9, 2000 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Lease") is between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, having its principal office at 79 South Main Street, Salt
Lake City, Utah 84111, not individually, but solely as the Owner Trustee under
the VS Trust 2000-1, as lessor (the "Lessor"), and VERITAS OPERATING CORPORATION
(formerly known as Veritas Software Corporation), a Delaware corporation, having
its principal place of business at 1600 Plymouth Street, Mountain View,
California 94043, as lessee (the "Lessee").
W I T N E S S E T H:
- - - - - - - - - -
A. WHEREAS, subject to the terms and conditions of the Participation
Agreement and the Construction Agency Agreement, Lessor will (i) purchase
certain real property more particularly described on Exhibit B attached hereto
and made a part hereof, some of which will (or may) have existing Improvements
thereon, from one (1) or more third parties designated by Lessee and (ii) fund
the acquisition, installation, testing, use, development, construction,
operation, maintenance, repair, refurbishment and restoration of the Properties
by the Construction Agent; and
B. WHEREAS, the Basic Term shall commence with respect to each Property
upon the Property Closing Date with respect thereto; provided, Basic Rent with
respect thereto shall not be payable until the applicable Rent Commencement
Date; and
C. WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to
lease from Lessor, each Property; and
D. WHEREAS, Lessor and Lessee intend that for all tax and real estate
purposes this Lease is a financing arrangement by and between Lessee, as debtor,
and the Financing Parties, in their respective capacities as creditors, under
the Participation Agreement; and
E. WHEREAS, the debt secured by this Lease is the same debt as the debt
secured by that certain Mortgage, Assignment of Leases, Security Agreement and
Financing Statement dated of even date herewith executed by Lessee and Owner
Trustee in favor of Agent, for which mortgage registry tax has already been
paid, as evidenced by receipt #____________, and therefore this Lease is an
instrument given as additional security for the same debt for which mortgage
registry tax has been paid, and is exempt from mortgage registry tax pursuant to
Minnesota Statutes Section 287.04(c);
<PAGE> 7
NOW, THEREFORE, in consideration of the foregoing, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
1.1 DEFINITIONS.
For purposes of this Lease, capitalized terms used in this Lease
and not otherwise defined herein shall have the meanings assigned to them in
Appendix A to that certain Participation Agreement dated as of March 9, 2000 (as
amended, modified, extended, supplemented, restated and/or replaced from time to
time in accordance with the applicable provisions thereof, the "Participation
Agreement") among Lessee, the various parties thereto from time to time, as the
Guarantors, Lessor, the various banks and other lending institutions which are
parties thereto from time to time, as the Holders, the various banks and other
lending institutions which are parties thereto from time to time, as the
Lenders, and Bank of America, N.A., as agent for the Lenders and respecting the
Security Documents, as the agent for the Lenders and the Holders, to the extent
of their interests. Unless otherwise indicated, references in this Lease to
articles, sections, paragraphs, clauses, appendices, schedules and exhibits are
to the same contained in this Lease.
1.2 INTERPRETATION.
The rules of usage set forth in Appendix A to the Participation
Agreement shall apply to this Lease.
ARTICLE II
2.1 PROPERTY.
Subject to the terms and conditions hereinafter set forth and
contained in the respective Lease Supplement relating to each Property, Lessor
hereby leases to Lessee and Lessee hereby leases from Lessor, each Property.
2.2 LEASE TERM.
The basic term of this Lease with respect to each Property (the
"Basic Term") shall begin upon the Property Closing Date for such Property (in
each case the "Basic Term Commencement Date") and shall end on the fifth (5th)
annual anniversary of the Initial Closing Date (the "Basic Term Expiration
Date"), unless the Basic Term is earlier terminated or the term of this Lease is
renewed (as described below) in accordance with the provisions of this Lease.
Notwithstanding the foregoing, Lessee shall not be obligated to pay Basic Rent
until the Rent Commencement Date with respect to such Property.
2
<PAGE> 8
Upon the written request of Lessee and with the consent of all of
the Financing Parties, in their sole discretion, the term of this Lease for each
Property may be extended for up to two (2) additional terms each of one (1)
year's duration from the Basic Term Expiration Date (each, a "Renewal Term");
provided, that the expiration date for the final Renewal Term for each Property
shall not be later than the seventh (7th) annual anniversary of the Initial
Closing Date, unless such later expiration date has been expressly agreed to, at
the request of Lessee, in writing by each of Lessor, the Agent, the Lenders and
the Holders in their sole discretion.
2.3 TITLE.
Each Property is leased to Lessee without any representation or
warranty, express or implied, by Lessor and subject to the rights of parties in
possession (if any), the existing state of title (including without limitation
the Permitted Liens) and all applicable Legal Requirements. Lessee shall in no
event have any recourse against Lessor for any defect in Lessor's title to any
Property or any interest of Lessee therein other than for Lessor Liens.
2.4 LEASE SUPPLEMENTS.
On or prior to each Basic Term Commencement Date, Lessee and Lessor
shall each execute and deliver a Lease Supplement for the Property to be leased
effective as of such Basic Term Commencement Date in substantially the form of
Exhibit A hereto.
ARTICLE III
3.1 RENT.
(a) Lessee shall pay Basic Rent in arrears on each Payment Date,
and on any date on which this Lease shall terminate with respect to any
or all Properties during the Term; provided, however, with respect to
the Properties in the aggregate Lessee shall have no obligation to pay
Basic Rent until the Rent Commencement Date (notwithstanding that Basic
Rent for such Property shall accrue from and including the Scheduled
Interest Payment Date immediately preceding such Rent Commencement
Date).
(b) Each payment of Rent payable by Lessee to Lessor under this
Lease or any other Operative Agreement shall be made by Lessee to the
Agent as the designee of Lessor under Section 5.8 of the Participation
Agreement to such account or accounts as the Agent may designate from
time to time prior to 12:00 Noon, Dallas, Texas time, in immediately
available funds consisting of lawful currency of the United States of
America on the date when such payment shall be due. Payments received
after 12:00 p.m., Charlotte, North Carolina time, on the date due shall,
for the purpose of Section 17.1 hereof be deemed received on such day;
provided, however, that for the purposes of the second sentence of
Section 3.3 hereof, such payments shall be deemed received on the
3
<PAGE> 9
next succeeding Business Day and, unless the Agent is otherwise able to
invest or employ such funds on the date received, subject to interest at
the Overdue Rate.
(c) Lessee's inability or failure to take possession of all or
any portion of any Property when delivered by Lessor, whether or not
attributable to any act or omission of Lessor, the Construction Agent,
Lessee or any other Person or for any other reason whatsoever, shall not
delay or otherwise affect Lessee's obligation to pay Rent for such
Property in accordance with the terms of this Lease.
(d) On or prior to each Payment Date, Lessor shall deliver, or
cause to be delivered, to Lessee a notice of the exact amount of the
Basic Rent due on such date (the "Invoice"). For the purposes of this
Section 3.1(d), delivery of the Invoice by facsimile transmission,
receipt confirmed, will be sufficient.
3.2 PAYMENT OF BASIC RENT.
Basic Rent shall be paid absolutely net to Lessor or its
designee, so that this Lease shall yield to Lessor the full amount thereof,
without setoff, deduction or reduction.
3.3 SUPPLEMENTAL RENT.
Lessee shall pay to the Person entitled thereto any and all
Supplemental Rent when and as the same shall become due and payable, and if
Lessee fails to pay any Supplemental Rent within three (3) days after the same
is due, Lessor shall have all rights, powers and remedies provided for herein or
by law or equity or otherwise in the case of nonpayment of Basic Rent. All such
payments of Supplemental Rent shall be in the full amount thereof, without
setoff, deduction or reduction. Lessee shall pay to the appropriate Person, as
Supplemental Rent due and owing to such Person, among other things, on demand,
(a) any and all payment obligations (except for amounts payable as Basic Rent)
owing from time to time under the Operative Agreements by any Person to the
Agent, any Lender, any Holder or any other Person, (b) interest at the
applicable Overdue Rate on any installment of Basic Rent not paid when due
(subject to the applicable grace period) for the period for which the same shall
be overdue and on any payment of Supplemental Rent not paid when due or demanded
by the appropriate Person (subject to any applicable grace period) for the
period from the due date or the date of any such demand, as the case may be,
until the same shall be paid and (c) amounts referenced as Supplemental Rent
obligations pursuant to Section 8.3 of the Participation Agreement. The
expiration or other termination of Lessee's obligations to pay Basic Rent
hereunder shall not limit or modify the obligations of Lessee with respect to
Supplemental Rent. Unless expressly provided otherwise in this Lease, in the
event of any failure on the part of Lessee to pay and discharge any Supplemental
Rent as and when due, Lessee shall also promptly pay and discharge any fine,
penalty, interest or cost which may be assessed or added for nonpayment or late
payment of such Supplemental Rent, all of which shall also constitute
Supplemental Rent. During the Construction Period, such Impositions and utility
charges shall be included in the Property Cost to be paid by Lessor; provided,
however, the Lessor shall pay such amounts
4
<PAGE> 10
described in this Section 3.3 only if funds are made available by the Lenders
and the Holders in an amount sufficient to allow such payment.
3.4 PERFORMANCE ON A NON-BUSINESS DAY.
If any Basic Rent is required hereunder on a day that is not a
Business Day, then such Basic Rent shall be due on the corresponding Scheduled
Interest Payment Date. If any Supplemental Rent is required hereunder on a day
that is not a Business Day, then such Supplemental Rent shall be due on the next
succeeding Business Day.
3.5 RENT PAYMENT PROVISIONS.
Lessee shall make payment of all Basic Rent and Supplemental Rent
when due (subject to the applicable grace periods) regardless of whether any of
the Operative Agreements pursuant to which same is calculated and is owing shall
have been rejected, avoided or disavowed in any bankruptcy or insolvency
proceeding involving any of the parties to any of the Operative Agreements. Such
provisions of such Operative Agreements and their related definitions are
incorporated herein by reference and shall survive any termination, amendment or
rejection of any such Operative Agreements.
ARTICLE IV
4.1 TAXES; UTILITY CHARGES.
Subject to Lessee's rights of permitted contest pursuant to
Section 13.1, Lessee shall pay or cause to be paid all Impositions with respect
to the Properties and/or the use, occupancy, operation, repair, access,
maintenance or operation thereof and all charges for electricity, power, gas,
oil, water, telephone, sanitary sewer service and all other rents, utilities and
operating expenses of any kind or type used in or on any Property and related
real property during the Term. Upon Lessor's request, Lessee shall provide from
time to time Lessor with evidence of all such payments referenced in the
foregoing sentence. Lessee shall be entitled to receive any credit or refund
with respect to any Imposition or utility charge paid by Lessee. Unless an Event
of Default shall have occurred and be continuing, the amount of any credit or
refund received by Lessor on account of any Imposition or utility charge paid by
Lessee, net of the costs and expenses incurred by Lessor in obtaining such
credit or refund, shall be promptly paid over to Lessee. All charges for
Impositions or utilities imposed with respect to any Property for a period
during which this Lease expires or terminates shall be adjusted and prorated on
a daily basis between Lessor and Lessee, and each party shall pay or reimburse
the other for such party's pro rata share thereof. During the Construction
Period, the costs of Impositions and all other utility and other charges or
expenses referenced in this Section 4.1 shall be paid by Lessor; provided,
however, the Lessor shall pay such amounts described in this Section 4.1 only if
funds are made available by the Lenders and the Holders in an amount sufficient
to allow such payment.
5
<PAGE> 11
ARTICLE V
5.1 QUIET ENJOYMENT.
Subject to the rights of Lessor contained in Sections 17.2, 17.3
and 20.3 and the other terms of this Lease and the other Operative Agreements
and so long as no Event of Default shall have occurred and be continuing, Lessee
shall peaceably and quietly have, hold and enjoy each Property for the
applicable Term, free of any claim or other action by Lessor or anyone
rightfully claiming by, through or under Lessor (other than Lessee) with respect
to any matters arising from and after the applicable Basic Term Commencement
Date.
ARTICLE VI
6.1 NET LEASE.
This Lease shall constitute a net lease, and the obligations of
Lessee hereunder are absolute and unconditional. Lessee shall pay all operating
expenses arising out of the use, operation and/or occupancy of each Property.
Any present or future law to the contrary notwithstanding, this Lease shall not
terminate, nor shall Lessee be entitled to any abatement, suspension, deferment,
reduction, setoff, counterclaim, or defense with respect to the Rent, nor shall
the obligations of Lessee hereunder be affected (except as expressly herein
permitted and by performance of the obligations in connection therewith) for any
reason whatsoever, including without limitation by reason of: (a) any damage to
or destruction of any Property or any part thereof; (b) any taking of any
Property or any part thereof or interest therein by Condemnation or otherwise;
(c) any prohibition, limitation, restriction or prevention of Lessee's use,
occupancy or enjoyment of any Property or any part thereof, or any interference
with such use, occupancy or enjoyment by any Person or for any other reason; (d)
any title defect, Lien or any matter affecting title to any Property; (e) any
eviction by paramount title or otherwise; (f) any default by Lessor hereunder;
(g) any action for bankruptcy, insolvency, reorganization, liquidation,
dissolution or other proceeding relating to or affecting the Agent, any Lender,
Lessor, Lessee, any Holder or any Governmental Authority; (h) the impossibility
or illegality of performance by Lessor, Lessee or both; (i) any action of any
Governmental Authority or any other Person; (j) Lessee's acquisition of
ownership of all or part of any Property (except for any such acquisition of
ownership pursuant to and in accordance with the terms of this Lease); (k)
breach of any warranty or representation with respect to any Property or any
Operative Agreement; (l) any defect in the condition, quality or fitness for use
of any Property or any part thereof; or (m) any other cause or circumstance
whether similar or dissimilar to the foregoing and whether or not Lessee shall
have notice or knowledge of any of the foregoing. Notwithstanding the foregoing
provisions, nothing contained in this Section 6.1 shall provide Lessor with any
right to payment by Lessee under this Lease prior to the Completion Date which
is contrary to Lessor's remedies under the Construction Agency Agreement; it
being the express intention of the parties hereto that Lessee's liability
hereunder shall not exceed the liability of the Construction Agent under the
Construction Agency Agreement prior to the Completion Date. The parties intend
that the
6
<PAGE> 12
obligations of Lessee hereunder shall be covenants, agreements and obligations
that are separate and independent from any obligations of Lessor hereunder and
shall continue unaffected unless such covenants, agreements and obligations
shall have been modified or terminated in accordance with an express provision
of this Lease. Lessor and Lessee acknowledge and agree that the provisions of
this Section 6.1 have been specifically reviewed and subjected to negotiation.
6.2 NO TERMINATION OR ABATEMENT.
Lessee shall remain obligated under this Lease in accordance with
its terms and shall not take any action to terminate, rescind or avoid this
Lease, notwithstanding any action for bankruptcy, insolvency, reorganization,
liquidation, dissolution, or other proceeding affecting any Person or any
Governmental Authority, or any action with respect to this Lease or any
Operative Agreement which may be taken by any trustee, receiver or liquidator of
any Person or any Governmental Authority or by any court with respect to any
Person, or any Governmental Authority. Lessee hereby waives all right (a) to
terminate or surrender this Lease (except as permitted hereunder or under the
terms of the Operative Agreements) or (b) to avail itself of any abatement,
suspension, deferment, reduction, setoff, counterclaim or defense with respect
to any Rent. Lessee shall remain obligated under this Lease in accordance with
its terms and Lessee hereby waives any and all rights now or hereafter conferred
by statute or otherwise to modify or to avoid strict compliance with its
obligations under this Lease. Notwithstanding any such statute or otherwise,
Lessee shall be bound by all of the terms and conditions contained in this
Lease.
ARTICLE VII
7.1 OWNERSHIP OF THE PROPERTIES.
(a) Lessor and Lessee intend that for federal and all state and
local income tax purposes, bankruptcy purposes, regulatory purposes,
commercial law and real estate purposes and all other purposes (A) this
Lease will be treated as a financing arrangement, (B) Lessee will be
treated as the beneficial owner of the Properties and will be entitled
to all tax benefits ordinarily available to owners of property similar
to the Properties for such tax purposes and (C) this Lease is intended
by Lessee to be treated as an operating lease for Lessee's financial
statement reporting purposes. Notwithstanding the foregoing, neither
party hereto has made, or shall be deemed to have made, any
representation or warranty as to the availability of any of the
foregoing treatments under applicable accounting rules, tax, bankruptcy,
regulatory, commercial or real estate law or under any other set of
rules. Lessee shall claim the cost recovery deductions associated with
each Property, and Lessor shall not, to the extent not prohibited by
Law, take on its tax return a position inconsistent with Lessee's claim
of such deductions.
(b) For all purposes described in Section 7.1(a), Lessor and
Lessee intend this Lease to constitute a finance lease and not a true
lease. In order to secure the obligations
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of Lessee now existing or hereafter arising under any and all Operative
Agreements, Lessee hereby conveys, grants, assigns, transfers,
hypothecates, mortgages and sets over to Lessor, for the benefit of all
Financing Parties, a first priority security interest (but subject to
the security interest in the assets granted by Lessee in favor of the
Agent in accordance with the Security Agreement) in and lien on all
right, title and interest of Lessee (now owned or hereafter acquired) in
and to all Properties to the extent such is personal property and
irrevocably grants and conveys a lien, deed of trust and mortgage on all
right, title and interest of Lessee (now owned or hereafter acquired) in
and to all Properties to the extent such is a real property. Lessor and
Lessee further intend and agree that, for the purpose of securing the
obligations of Lessee and/or the Construction Agent now existing or
hereafter arising under the Operative Agreements, (i) this Lease shall
be a security agreement and financing statement within the meaning of
Article 9 of the Uniform Commercial Code respecting each of the
Properties and all proceeds (including without limitation insurance
proceeds thereof) to the extent such is personal property and an
irrevocable grant and conveyance of a lien, deed of trust and mortgage
on each of the Properties and all proceeds (including without limitation
insurance proceeds thereof) to the extent such is real property; (ii)
the acquisition of title by Lessor in each Property referenced in
Article II constitutes a grant by Lessee to Lessor of a security
interest, lien, deed of trust and mortgage in all of Lessee's right,
title and interest in and to each Property and all proceeds (including
without limitation insurance proceeds thereof) of the conversion,
voluntary or involuntary, of the foregoing into cash, investments,
securities or other property, whether in the form of cash, investments,
securities or other property, and an assignment of all rents, profits
and income produced by each Property; and (iii) notifications to Persons
holding such property, and acknowledgments, receipts or confirmations
from financial intermediaries, bankers or agents (as applicable) of
Lessee shall be deemed to have been given for the purpose of perfecting
such lien, security interest, mortgage lien and deed of trust under
applicable law. Lessee shall promptly take such actions as Lessor may
reasonably request (including without limitation the filing of Uniform
Commercial Code Financing Statements, Uniform Commercial Code Fixture
Filings, this Lease and the various Lease Supplements and any memoranda
(or short form) of this Lease and the various Lease Supplements) to
ensure that the lien, security interest, lien, mortgage lien and deed of
trust in each Property and the other items referenced above will be
deemed to be a perfected lien, security interest, mortgage lien and deed
of trust of first priority under applicable law and will be maintained
as such throughout the Term.
ARTICLE VIII
8.1 CONDITION OF THE PROPERTIES.
LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH PROPERTY
"AS-IS WHERE-IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR
IMPLIED) BY LESSOR (EXCEPT THAT LESSOR SHALL KEEP EACH PROPERTY FREE AND CLEAR
OF LESSOR LIENS) AND IN EACH CASE
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SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES IN
POSSESSION THEREOF (IF ANY), (C) ANY STATE OF FACTS REGARDING ITS PHYSICAL
CONDITION OR WHICH AN ACCURATE SURVEY MIGHT SHOW, (D) ALL APPLICABLE LEGAL
REQUIREMENTS AND (E) VIOLATIONS OF LEGAL REQUIREMENTS WHICH MAY EXIST ON THE
DATE HEREOF AND/OR THE DATE OF THE APPLICABLE LEASE SUPPLEMENT. NEITHER LESSOR
NOR THE AGENT NOR ANY LENDER NOR ANY HOLDER HAS MADE OR SHALL BE DEEMED TO HAVE
MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) (EXCEPT THAT
LESSOR SHALL KEEP EACH PROPERTY FREE AND CLEAR OF LESSOR LIENS) OR SHALL BE
DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE, VALUE, HABITABILITY,
USE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF ANY
PROPERTY (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR
COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY
PART THEREOF), AND NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR ANY HOLDER
SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREON OR THE FAILURE
OF ANY PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT.
LESSEE HAS OR PRIOR TO THE BASIC TERM COMMENCEMENT DATE WILL HAVE BEEN AFFORDED
FULL OPPORTUNITY TO INSPECT EACH PROPERTY AND THE IMPROVEMENTS THEREON (IF ANY),
IS OR WILL BE (INSOFAR AS LESSOR, THE AGENT, EACH LENDER AND EACH HOLDER ARE
CONCERNED) SATISFIED WITH THE RESULTS OF ITS INSPECTIONS AND IS ENTERING INTO
THIS LEASE SOLELY ON THE BASIS OF THE RESULTS OF ITS OWN INSPECTIONS, AND ALL
RISKS INCIDENT TO THE MATTERS DESCRIBED IN THE PRECEDING SENTENCE, AS BETWEEN
LESSOR, THE AGENT, THE LENDERS AND THE HOLDERS, ON THE ONE HAND, AND LESSEE, ON
THE OTHER HAND, ARE TO BE BORNE BY LESSEE.
8.2 POSSESSION AND USE OF THE PROPERTIES.
(a) At all times following the Completion Date, the Properties
in the aggregate shall constitute a Permitted Facility and shall be used
by Lessee in the ordinary course of its business. Lessee shall pay, or
cause to be paid, all charges and costs required in connection with the
use of the Properties as contemplated by this Lease. Lessee shall not
commit or permit any waste of the Properties or any part thereof.
(b) The address stated in Section 6.2(i) of the Participation
Agreement is the principal place of business and chief executive office
of Lessee (as such terms are used in Section 9-103(3) of the Uniform
Commercial Code of any applicable jurisdiction), and Lessee will provide
Lessor with prior written notice of any change of location of its
principal place of business or chief executive office. Regarding a
particular Property, each Lease Supplement correctly identifies the
initial location of the related Equipment (if any) and Improvements (if
any) and contains an accurate legal description for the related parcel
of Land. The Equipment and Improvements respecting each particular
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Property will be located only at the location identified in the
applicable Lease Supplement.
(c) Lessee will not attach or incorporate any item of Equipment
to or in any other item of equipment or personal property or to or in
any real property in a manner that could give rise to the assertion of
any Lien (in favor of a third party that is prior to the Liens thereon
created by the Operative Agreements) on such item of Equipment by reason
of such attachment or the assertion of a claim that such item of
Equipment has become a fixture and is subject to a Lien in favor of a
third party that is prior to the Liens thereon created by the Operative
Agreements.
(d) On the Basic Term Commencement Date for each Property,
Lessor and Lessee shall execute a Lease Supplement in regard to such
Property which shall contain an Equipment Schedule that has a general
description of the Equipment (if any) which shall comprise the Property,
an Improvement Schedule that has a general description of the
Improvements (if any) which shall comprise the Property and a legal
description of the Land (if any) which shall comprise the Property.
Simultaneously with the execution and delivery of each Lease Supplement,
such Equipment, Improvements, Land, all additional Equipment and all
additional Improvements which are financed under the Operative
Agreements after the Basic Term Commencement Date and the remainder of
such Property shall be deemed to have been accepted by Lessee for all
purposes of this Lease and to be subject to this Lease.
(e) At all times during the Term with respect to each Property,
Lessee will comply with all obligations under and (to the extent no
Event of Default exists and provided that such exercise will not impair
the value, utility or remaining useful life of such Property) shall be
permitted to exercise all rights and remedies under, all operation and
easement agreements and related or similar agreements applicable to such
Property.
8.3 INTEGRATED PROPERTIES.
On the Rent Commencement Date for each Property, Lessee shall, at
its sole cost and expense, cause each such Property to constitute (and for the
duration of the Term continue to constitute) all of the equipment, facilities,
rights, other personal property and other real property necessary or appropriate
to operate, utilize, maintain and control a Permitted Facility in a commercially
reasonable manner.
ARTICLE IX
9.1 COMPLIANCE WITH LEGAL REQUIREMENTS, INSURANCE REQUIREMENTS AND
MANUFACTURER'S SPECIFICATIONS AND STANDARDS.
Subject to the terms of Article XIII relating to permitted
contests, Lessee, at its sole cost and expense, shall (a) comply with all
applicable Legal Requirements (including
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without limitation all Environmental Laws (except as set forth in Section 15.2))
and all Insurance Requirements relating to the Properties, (b) procure, maintain
and comply with all licenses, permits, orders, approvals, consents and other
authorizations required for the acquisition, installation, testing, use,
development, construction, operation, maintenance, repair, refurbishment and
restoration of the Properties and (c) comply with all manufacturer's
specifications and standards, including without limitation the acquisition,
installation, testing, use, development, construction, operation, maintenance,
repair, refurbishment and restoration of the Properties, whether or not
compliance therewith shall require structural or extraordinary changes in any
Property or interfere with the use and enjoyment of any Property, unless the
failure to procure, maintain and comply with such items identified in
subparagraphs (b) and (c), individually or in the aggregate, shall not have and
could not reasonably be expected to have a Material Adverse Effect. Lessor
agrees to take such actions as may be reasonably requested by Lessee in
connection with the compliance by Lessee of its obligations under this Section
9.1. Notwithstanding the foregoing, Lessee shall be deemed to be in compliance
with all Environmental Laws for purposes of this Lease notwithstanding any
Environmental Violation if the severity of such Environmental Violation is less
than federal, state and local standards requiring remediation or removal or, if
such standards are exceeded, remediation or removal is proceeding in accordance
with all applicable Environmental Laws.
ARTICLE X
10.1 MAINTENANCE AND REPAIR; RETURN.
(a) Lessee, at its sole cost and expense, shall maintain each
Property in good condition, repair and working order (ordinary wear and
tear excepted) and make all necessary repairs thereto and replacements
thereof, of every kind and nature whatsoever, whether interior or
exterior, ordinary or extraordinary, structural or nonstructural or
foreseen or unforeseen, in each case as required by Section 9.1 and on a
basis consistent with the operation and maintenance of properties or
equipment comparable in type and function to the applicable Property,
such that such Property is capable of being immediately utilized by a
third party and in compliance with standard industry practice subject,
however, to the provisions of Article XV with respect to Casualty and
Condemnation.
(b) Lessee shall not use or locate any component of any Property
outside of the Approved State therefor. Lessee shall not move or
relocate any component of any Property beyond the boundaries of the Land
described in the Lease Supplement with regard to the Land, except for
the temporary removal of Equipment and other personal property for
repair or replacement.
(c) If any component of any Property becomes worn out, lost,
destroyed, damaged beyond repair or otherwise permanently rendered unfit
for use, Lessee, at its own expense, will within a reasonable time
replace such component with a replacement component which is free and
clear of all Liens (other than Permitted Liens and Lessor
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Liens) and has a value, utility and useful life at least equal to the
component replaced (assuming the component replaced had been maintained
and repaired in accordance with the requirements of this Lease). Except
as otherwise provided in Section 11.1, all components which are added to
any Property shall immediately become the property of (and title thereto
shall vest in) Lessor and shall be deemed incorporated in such Property
and subject to the terms of this Lease as if originally leased
hereunder.
(d) Upon reasonable advance notice, Lessor and its agents shall
have the right to inspect each Property and all maintenance records with
respect thereto at any reasonable time during normal business hours but
shall not, in the absence of an Event of Default, materially disrupt the
business of Lessee.
(e) Lessee shall cause to be delivered to Lessor (at Lessee's
sole expense) one or more additional Appraisals (or reappraisals of
Property) as Lessor may request if any one of Lessor, the Agent, the
Trust Company, any Lender or any Holder is required pursuant to any
applicable Legal Requirement to obtain such Appraisals (or reappraisals)
and upon the occurrence of any Event of Default.
(f) Lessor shall under no circumstances be required to build any
improvements or install any equipment on any Property, make any repairs,
replacements, alterations or renewals of any nature or description to
any Property, make any expenditure whatsoever in connection with this
Lease or maintain any Property in any way. Lessor shall not be required
to maintain, repair or rebuild all or any part of any Property, and
Lessee waives the right to (i) require Lessor to maintain, repair, or
rebuild all or any part of any Property, or (ii) make repairs at the
expense of Lessor pursuant to any Legal Requirement, Insurance
Requirement, contract, agreement, covenant, condition or restriction at
any time in effect.
(g) Lessee shall, upon the expiration or earlier termination of
this Lease with respect to a Property, if Lessee shall not have
exercised its Purchase Option with respect to such Property and
purchased such Property, surrender such Property (i) pursuant to the
exercise of the applicable remedies upon the occurrence of a Lease Event
of Default, to Lessor or (ii) pursuant to the second paragraph of
Section 22.1(a) hereof, to Lessor or the third party purchaser, as the
case may be, subject to Lessee's obligations under this Lease (including
without limitation the obligations of Lessee at the time of such
surrender under Sections 9.1, 10.1(a) through (f), 10.2, 11.1, 12.1,
22.1 and 23.1).
10.2 ENVIRONMENTAL INSPECTION.
If Lessee has not given notice of exercise of its Purchase Option
on the Expiration Date pursuant to Section 20.1 or for whatever reason Lessee
does not purchase a Property in accordance with the terms of this Lease, then
not more than one hundred twenty (120) days nor less than sixty (60) days prior
to the Expiration Date, Lessee shall cause to be delivered to Lessor
environmental site assessments recently prepared (no more than thirty (30) days
prior to the date of delivery) by an independent recognized professional
reasonably acceptable to Lessor,
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and in form, scope and content reasonably satisfactory to Lessor. The cost
incurred respecting such environmental site assessments shall be paid for in
accordance with the provisions set forth in Section 20.3(b).
ARTICLE XI
11.1 MODIFICATIONS.
(a) Lessee at its sole cost and expense, at any time and from
time to time without the consent of Lessor may make modifications,
alterations, renovations, improvements and additions to any Property or
any part thereof and substitutions and replacements therefor
(collectively, "Modifications"), and Lessee shall make any and all
Modifications required to be made pursuant to all Legal Requirements,
Insurance Requirements and manufacturer's specifications and standards;
provided, that: (i) no Modification shall materially impair the value,
utility or useful life of any Property from that which existed
immediately prior to such Modification; (ii) each Modification shall be
done expeditiously and in a good and workmanlike manner; (iii) no
Modification shall adversely affect the structural integrity of any
Property; (iv) to the extent required by Section 14.2(a), Lessee shall
maintain builders' risk insurance at all times when a Modification is in
progress; (v) subject to the terms of Article XIII relating to permitted
contests, Lessee shall pay all costs and expenses and discharge any
Liens arising with respect to any Modification; (vi) each Modification
shall comply with the requirements of this Lease (including without
limitation Sections 8.2 and 10.1); and (vii) except as otherwise
contemplated or provided in any Operative Agreement, no Improvement
shall be demolished or otherwise rendered unfit for use unless Lessee
shall finance the proposed replacement Modification outside of this
lease facility; provided, further, Lessee shall not make any
Modification (unless required by any Legal Requirement) to the extent
any such Modification, individually or in the aggregate, shall have or
could reasonably be expected to have a Material Adverse Effect. Lessee
shall not remove or attempt to remove any Modification from any
Property. Title to each Modification shall vest in Lessee to the extent
such Modification (a) is not financed pursuant to the Operative
Agreements, (b) is not a fixture or other real estate interest, (c) is
readily removable without causing material damage to any Property, (d)
is not required in order for the applicable Property to comply with any
Legal Requirement, any Insurance Requirement or any requirement of
Section 8.3 of this Lease and (e) is not necessary to conform to any
applicable manufacturer's specification and/or standard. Title to all
other Modifications shall immediately and without further action upon
their incorporation into the applicable Property (1) become property of
Lessor, (2) be subject to this Lease and (3) be titled in the name of
Lessor. Lessee at its sole cost and expense shall repair in a good and
workmanlike manner any and all damage done to any Property due to the
removal, detachment, attempted removal or attempted detachment of any
Modification from a Property and all such repairs shall be completed by
the earlier of (a) thirty (30) days after such removal, detachment,
attempted removal or attempted detachment of the applicable Modification
from the applicable Property and (b) the Expiration Date. Lessee
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shall not remove, detach or attempt to remove or detach any Modification
from any Property except in accordance with the provisions of this
Section 11.1. The Lessor acknowledges Lessee's right to finance and to
secure under the Uniform Commercial Code, inventory, furnishings,
furniture, equipment, machinery, leasehold improvements and other
personal property located at the Properties, other than the Equipment
and modifications required to be titled in the name of Lessor and
excluding in all cases fixtures, and Lessor agrees, at Lessee's cost and
expenses, to execute Lessor waiver forms, releases of Lessor Liens and
other similar documentation (in form and substance reasonably
satisfactory to Lessor and the Agent) in favor or any purchase money
seller, lessor or lender who has financed or may finance in the future
such items.
(b) The construction process provided for in the Construction
Agency Agreement is acknowledged by Lessor to be consistent with and in
compliance with the terms and provisions of this Article XI.
ARTICLE XII
12.1 WARRANTY OF TITLE.
(a) Lessee hereby acknowledges and shall cause title in each
Property (including without limitation all Equipment, all Improvements,
all replacement components to each Property and all Modifications, other
than Modifications titled in Lessee's name pursuant to Section 11.1(a))
immediately and without further action to vest in and become the
property of Lessor and to be subject to the terms of this Lease from and
after the date hereof or such date of incorporation into any Property.
Lessee agrees that, subject to the terms of Article XIII relating to
permitted contests, Lessee shall not directly or indirectly create or
allow to remain, and shall promptly discharge at its sole cost and
expense, any Lien, defect, attachment, levy, title retention agreement
or claim upon any Property, any component thereof or any Modifications
(other than Modifications titled in Lessee's name pursuant to Section
11.1(a)) or any Lien, attachment, levy or claim with respect to the Rent
or with respect to any amounts held by Lessor, the Agent, any Lender or
any Holder pursuant to any Operative Agreement, other than Permitted
Liens and Lessor Liens. Lessee shall promptly notify Lessor in the event
it receives actual knowledge that a Lien other than a Permitted Lien or
Lessor Lien has occurred with respect to a Property, the Rent or any
other such amounts, and Lessee represents and warrants to, and covenants
with, Lessor that the Liens in favor of Lessor and/or the Agent created
by the Operative Agreements are (and until the Financing Parties under
the Operative Agreements have been paid in full shall remain) first
priority perfected Liens subject only to Permitted Liens and Lessor
Liens. At all times subsequent to the Basic Term Commencement Date
respecting a Property, Lessee shall (i) cause a valid, perfected, first
priority Lien on each applicable Property to be in place in favor of the
Agent (for the benefit of the Lenders and the Holders) and (ii) file, or
cause to be filed, all necessary documents under the applicable real
property law and Article 9 of the Uniform Commercial Code to perfect
such title and Liens.
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(b) Nothing contained in this Lease shall be construed as
constituting the consent or request of Lessor, expressed or implied, to
or for the performance by any contractor, mechanic, laborer,
materialman, supplier or vendor of any labor or services or for the
furnishing of any materials for any construction, alteration, addition,
repair or demolition of or to any Property or any part thereof. NOTICE
IS HEREBY GIVEN THAT LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY
LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR
TO ANYONE HOLDING A PROPERTY OR ANY PART THEREOF THROUGH OR UNDER
LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR,
SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR
IN AND TO ANY PROPERTY.
ARTICLE XIII
13.1 PERMITTED CONTESTS OTHER THAN IN RESPECT OF INDEMNITIES.
Except to the extent otherwise provided for in Section 11 of the
Participation Agreement, Lessee, on its own or on Lessor's behalf but at
Lessee's sole cost and expense, may contest, by appropriate administrative or
judicial proceedings conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any Legal Requirement,
Imposition or utility charge payable pursuant to Section 4.1 or any Lien,
attachment, levy, encumbrance or encroachment, and Lessor agrees not to pay,
settle or otherwise compromise any such item, provided, that (a) the
commencement and continuation of such proceedings shall suspend the collection
of any such contested amount from, and suspend the enforcement thereof against,
the applicable Properties, Lessor, each Holder, the Agent and each Lender; (b)
there shall be no substantial risk of the imposition of a Lien (other than
Permitted Liens and Lessor Liens) on any Property and no part of any Property
nor any Rent would be in any danger of being sold, forfeited, lost or deferred;
(c) at no time during the permitted contest shall there be a risk of the
imposition of criminal liability or material civil liability on Lessor, any
Holder, the Agent or any Lender for failure to comply therewith; and (d) in the
event that, at any time, there shall be a material risk of extending the
application of such item beyond the end of the Term, then Lessee shall deliver
to Lessor an Officer's Certificate certifying as to the matters set forth in
clauses (a), (b) and (c) of this Section 13.1. Lessor, at Lessee's sole cost and
expense, shall execute and deliver to Lessee such authorizations and other
documents as may reasonably be required in connection with any such contest and,
if reasonably requested by Lessee, shall join as a party therein at Lessee's
sole cost and expense.
13.2 IMPOSITIONS, UTILITY CHARGES, OTHER MATTERS; COMPLIANCE WITH LEGAL
REQUIREMENTS.
Except with respect to Impositions, Legal Requirements, utility
charges and such other matters referenced in Section 13.1 which are the subject
of ongoing proceedings contesting the same in a manner consistent with the
requirements of Section 13.1, Lessee shall cause (a) all
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Impositions, utility charges and such other matters to be timely paid, settled
or compromised, as appropriate, with respect to each Property and (b) each
Property to comply with all applicable Legal Requirements; provided, that during
the Construction Period, the costs of such compliance for any Property shall be
paid by Lessor; provided, further, the Lessor shall pay such amounts described
in this Section 13.2 only if funds are made available by the Lenders and the
Holders in an amount sufficient to allow such payment.
ARTICLE XIV
14.1 PUBLIC LIABILITY AND WORKERS' COMPENSATION INSURANCE.
During the Term for each Property, Lessee shall procure and
carry, at Lessee's sole cost and expense, commercial general liability and
umbrella liability insurance for claims for injuries or death sustained by
persons or damage to property while on such Property or respecting the Equipment
and such other public liability coverages (including automobile liability and
other liability coverages) as are then customarily carried by similarly situated
companies conducting business similar to that conducted by Lessee. Such
insurance shall be on terms and in amounts that are no less favorable than
insurance maintained by Lessee with respect to similar properties and equipment
that it owns and are then carried by similarly situated companies conducting
business similar to that conducted by Lessee, and in no event shall have a
minimum combined single limit per occurrence coverage (i) for commercial general
liability of less than $2,000,000 and (ii) for umbrella liability of less than
$15,000,000. The policies shall name Lessee as the insured and shall be endorsed
to name Lessor, the Holders, the Agent and the Lenders as additional insureds.
The policies shall also specifically provide that such policies shall be
considered primary insurance which shall apply to any loss or claim before any
contribution by any insurance which Lessor, any Holder, the Agent or any Lender
may have in force. In the operation of the Properties, Lessee shall comply with
applicable workers' compensation laws and protect Lessor, each Holder, the Agent
and each Lender against any liability under such laws.
14.2 PERMANENT HAZARD AND OTHER INSURANCE AND INSURANCE COVERAGE TO BE
MAINTAINED BY OTHER PARTIES.
(a) During the Term for each Property, Lessee shall keep such
Property insured against all risk of physical loss or damage by fire and
other risks and shall maintain builders' risk insurance during
construction of any Improvements or Modifications in each case in
amounts no less than the then current replacement value of such Property
(assuming that such Property was in the condition required by the terms
of this Lease immediately prior to such loss) and on terms that (i) are
no less favorable than insurance covering other similar properties owned
by Lessee and (ii) are then carried by similarly situated companies
conducting business similar to that conducted by Lessee. The policies
shall name Lessee as the insured and shall be endorsed to name Lessor
and the Agent (on behalf of the Lenders and the Holders) as a named
additional insured and loss payee, to the extent of their respective
interests; provided, so long as no Material
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Default or Event of Default exists, any loss payable under the insurance
policies required by this Section for losses up to $1,000,000 will be
paid to Lessee.
(b) If, during the Term with respect to a Property the area in
which such Property is located is designated a "flood-prone" area
pursuant to the Flood Disaster Protection Act of 1973, or any amendments
or supplements thereto or is in a zone designated A or V, then Lessee
shall comply with the National Flood Insurance Program as set forth in
the Flood Disaster Protection Act of 1973. In addition, Lessee will
fully comply with the requirements of the National Flood Insurance Act
of 1968 and the Flood Disaster Protection Act of 1973, as each may be
amended from time to time, and with any other Legal Requirement,
concerning flood insurance to the extent that it applies to any such
Property. During the Term, Lessee shall, in the operation and use of
each Property, maintain (i) workers' compensation insurance consistent
with that carried by similarly situated companies conducting business
similar to that conducted by Lessee and containing minimum liability
limits of no less than $100,000 and (ii) automobile liability insurance
in form and substance reasonably satisfactory to Lessor. In the
operation of each Property, Lessee shall comply with workers'
compensation laws applicable to Lessee, and protect Lessor, each Holder,
the Agent and each Lender against any liability under such laws.
(c) Lessee shall cause the general contractor and each
subcontractor hired with respect to the construction of the Improvements
and all other consultants, engineers and architects hired in connection
with any Property to carry general liability insurance, professional
liability insurance (if applicable and if obtainable pursuant to
commercially reasonable efforts), workers compensation insurance and
automobile liability insurance, in each case in form and substance
reasonably satisfactory to Lessor.
14.3 COVERAGE.
(a) As of the date of this Lease and annually thereafter during
the Term, Lessee shall furnish the Agent (on behalf of Lessor and the
other beneficiaries of such insurance coverage) with ACCORD Evidence of
Insurance and, if requested by Lessor, certified copies of insurance
policies showing the insurance required under Sections 14.1 and 14.2 to
be in effect, naming (to the extent of their respective interests)
Lessor, the Holders, the Agent and the Lenders as additional insureds
and loss payees and evidencing the other requirements of this Article
XIV. All such insurance shall be at the cost and expense of Lessee and
provided by nationally recognized, financially sound insurance companies
having a rating by A.M. Best's Key Rating Guide of at least an (i) A-
and a Financial Performance Rating of at least a IX (regarding all
hazard insurance coverages) and (ii) A- and a Financial Performance
Rating of at least a IX (regarding all liability insurance coverages).
Lessee shall cause such evidence of insurance to include a provision for
thirty (30) days' advance written notice by the insurer to the Agent (on
behalf of Lessor and the other beneficiaries of such insurance coverage)
in the event of cancellation or material alteration of such insurance.
If an Event of Default has occurred and is continuing and the Agent (on
behalf of Lessor and the other beneficiaries of such
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insurance coverage) so requests, Lessee shall deliver to the Agent (on
behalf of Lessor and the other beneficiaries of such insurance coverage)
copies of all insurance policies required by Sections 14.1 and 14.2.
(b) Lessee agrees that the insurance policy or policies required
by Sections 14.1, 14.2(a), 14.2(b) and 14.2(c) shall include an
appropriate clause pursuant to which any such policy shall provide that
it will not be invalidated should Lessee or any Contractor, as the case
may be, waive, at any time, any or all rights of recovery against any
party for losses covered by such policy or due to any breach of
warranty, fraud, action, inaction or misrepresentation by Lessee or any
Person acting on behalf of Lessee. Lessee hereby waives any and all such
rights against Lessor, the Holders, the Agent and the Lenders to the
extent of payments made to any such Person under any such policy.
(c) Neither Lessor nor Lessee shall carry separate insurance
concurrent in kind or form or contributing in the event of loss with any
insurance required under this Article XIV, except that Lessor may carry
separate liability insurance at Lessor's sole cost so long as (i)
Lessee's insurance is designated as primary and in no event excess or
contributory to any insurance Lessor may have in force which would apply
to a loss covered under Lessee's policy and (ii) each such insurance
policy will not cause Lessee's insurance required under this Article XIV
to be subject to a coinsurance exception of any kind.
(d) Lessee shall pay as they become due all premiums for the
insurance required by Section 14.1 and Sections 14.2(a) and 14.2(b),
shall renew or replace each policy prior to the expiration date thereof
or otherwise maintain the coverage required by such Sections without any
lapse in coverage; provided, that during the Construction Period, the
cost of such insurance shall be paid by Lessor; provided, further, the
Lessor shall pay such amounts described in this Section 14.3(d) only if
funds are made available by the Lenders and the Holders in an amount
sufficient to allow such payment. Notwithstanding the foregoing, during
the Construction Period, the Construction Agent shall cause the
insurance coverages referenced in Sections 14.1, 14.2(a), 14.2(b) and
14.2(c) to be procured.
14.4 ADDITIONAL INSURANCE REQUIREMENTS.
Not in limitation of any provision of the Operative Agreements
but in addition thereto, Lessee shall obtain any and all additional insurance
policies with regard to the Properties or otherwise with respect to the
transactions contemplated by the Operative Agreements as reasonably requested
from time to time by Lessor.
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ARTICLE XV
15.1 CASUALTY AND CONDEMNATION.
(a) Subject to this Article XV and Article XVI (in the event
Lessee delivers, or is obligated to deliver or is deemed to have
delivered, a Termination Notice), and prior to the occurrence and
continuation of a Material Default or an Event of Default, Lessee shall
be entitled to receive directly (and Lessor hereby irrevocably assigns
to Lessee all of Lessor's right, title and interest in) any condemnation
proceeds, award, compensation or insurance proceeds under Sections
14.2(a) or 14.2(b) hereof to which Lessee or Lessor or any additional
insured Person under Sections 14.2(a) or 14.2(b) may become entitled by
reason of their respective interests in a Property (i) if all or a
portion of such Property is damaged or destroyed in whole or in part by
a Casualty or (ii) if the use, access, occupancy, easement rights or
title to such Property or any part thereof or any appurtenance thereto
is the subject of a Condemnation; provided, however, if a Material
Default or an Event of Default shall have occurred and be continuing or
if such award, compensation or insurance proceeds shall exceed
$1,000,000, then such award, compensation or insurance proceeds shall be
paid directly to Lessor or, if received by Lessee, shall be held in
trust for Lessor, and shall be paid over by Lessee to Lessor and held in
accordance with the terms of this Article XV or, if applicable, applied
to the repayment of the Property Cost in accordance with Section 16 on
the Termination Date. All amounts held by Lessor hereunder on account of
any award, compensation or insurance proceeds either paid directly to
Lessor or turned over to Lessor shall be held as security for the
performance of Lessee's obligations hereunder and under the other
Operative Agreements and when all such obligations of Lessee with
respect to such matters (and all other obligations of Lessee which
should have been satisfied pursuant to the Operative Agreements as of
such date) have been satisfied, all amounts so held by Lessor shall be
paid over to Lessee.
(b) Lessee may appear in any proceeding or action to negotiate,
prosecute, adjust or appeal any claim for any award, compensation or
insurance payment on account of any such Casualty or Condemnation and
shall pay all expenses thereof; provided, that during the Construction
Period, such expenses shall be paid by Lessor; provided, further, the
Lessor shall pay such amounts described in this Section 15.1(b) only if
funds are made available by the Lenders and the Holders in an amount
sufficient to allow such payment. At Lessee's reasonable request, and at
Lessee's sole cost and expense, Lessor and the Agent shall participate
in any such proceeding, action, negotiation, prosecution or adjustment;
provided, that during the Construction Period, such expenses shall be
paid by Lessor; provided, further, the Lessor shall pay such amounts
described in this Section 15.1(b) only if funds are made available by
the Lenders and the Holders in an amount sufficient to allow such
payment. Lessor and Lessee agree that this Lease shall control the
rights of Lessor and Lessee in and to any such award, compensation or
insurance payment.
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(c) If Lessee shall receive notice of a Casualty or a
Condemnation of a Property or any interest therein where damage to the
affected Property is estimated to equal or exceed twenty-five percent
(25%) of the Property Cost of such Property, Lessee shall give notice
thereof to Lessor promptly after Lessee's receipt of such notice. In the
event such a Casualty or Condemnation occurs (regardless of whether
Lessee gives notice thereof), then Lessee shall be deemed to have
delivered a Termination Notice to Lessor and the provisions of Sections
16.1 and 16.2 shall apply.
(d) In the event of a Casualty or a Condemnation (regardless of
whether notice thereof must be given pursuant to paragraph (c)), this
Lease shall terminate with respect to the applicable Property in
accordance with Section 16.1 if Lessee, within thirty (30) days after
such occurrence, delivers to Lessor a notice to such effect.
(e) If pursuant to this Section 15.1 this Lease shall continue in
full force and effect following a Casualty or Condemnation with respect
to the affected Property, Lessee shall, at its sole cost and expense
(subject to reimbursement in accordance with Section 15.1(a)) promptly
and diligently repair any damage to the applicable Property caused by
such Casualty or Condemnation in conformity with the requirements of
Sections 10.1 and 11.1, using the as-built Plans and Specifications or
manufacturer's specifications for the applicable Improvements, Equipment
or other components of the applicable Property (as modified to give
effect to any subsequent Modifications, any Condemnation affecting the
applicable Property and all applicable Legal Requirements), so as to
restore the applicable Property to the same or a greater remaining
economic value, useful life, utility, condition, operation and function
as existed immediately prior to such Casualty or Condemnation (assuming
all maintenance and repair standards have been satisfied). In such
event, title to the applicable Property shall remain with Lessor. Lessor
shall make disbursements from time to time of any award, compensation or
insurance proceeds held by it to Lessee for application to the cost of
restoration subject to the satisfaction of the following conditions: (i)
Lessor shall have received a fully executed counterpart of a requisition
therefor (in form and substance reasonably satisfactory to Lessor),
requesting funds in an amount not exceeding the cost of work completed
or insured since the last disbursement, together with reasonably
satisfactory evidence of the state of completion and of performance of
the work in a good and workman-like manner and in accordance with the
as-built Plans and Specifications, (ii) at the time of any such
disbursement, no Lease Default or Lease Event of Default shall have
occurred and be continuing, and no mechanic's or materialmen's liens
shall have been filed and remain undischarged, except those discharged
by the disbursement of the requested funds or which are otherwise
bonded, (iii) Lessor shall be reasonably satisfied that sufficient funds
are available to complete such restoration and (iv) Lessor shall have
good and marketable title to all Properties, subject only to Permitted
Liens. Provided no Lease Default or Lease Event of Default shall have
occurred and be continuing, any award, compensation or insurance
proceeds remaining after restoration of any Property as herein provided
shall be paid to Lessee.
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(f) In no event shall a Casualty or Condemnation affect Lessee's
obligations to pay Rent pursuant to Article III.
(g) Notwithstanding anything to the contrary set forth in Section
15.1(a) or Section 15.1(e), if during the Term with respect to a
Property a Casualty occurs with respect to such Property or Lessee
receives notice of a Condemnation with respect to such Property, and
following such Casualty or Condemnation, the applicable Property cannot
reasonably be restored, repaired or replaced on or before the day one
hundred eighty (180) days prior to the Expiration Date or the date nine
(9) months after the occurrence of such Casualty or Condemnation (if
such Casualty or Condemnation occurs during the Term) to the same or a
greater remaining economic value, useful life, utility, condition,
operation and function as existed immediately prior to such Casualty or
Condemnation (assuming all maintenance and repair standards have been
satisfied) or on or before such day such Property is not in fact so
restored, repaired or replaced, then Lessee shall be required to
exercise its Purchase Option for such Property on the next Payment Date
(notwithstanding the limits on such exercise contained in Section 20.2)
and pay Lessor the Termination Value for such Property; provided, if any
Default or Event of Default has occurred and is continuing, Lessee shall
also promptly (and in any event within three (3) Business Days) pay
Lessor any award, compensation or insurance proceeds received on account
of any Casualty or Condemnation with respect to any Property; provided,
further, that if no Material Default or Event of Default has occurred
and is continuing, any Excess Proceeds shall be paid to Lessee. If a
Material Default or an Event of Default has occurred and is continuing
and any Loans, Holder Advances or other amounts are owing with respect
thereto, then any Excess Proceeds (to the extent of any such Loans,
Holder Advances or other amounts owing with respect thereto) shall be
paid to Lessor, held as security for the performance of Lessee's
obligations hereunder and under the other Operative Agreements and
applied to such obligations upon the exercise of remedies in connection
with the occurrence of an Event of Default, with the remainder of such
Excess Proceeds in excess of such Loans, Holder Advances and other
amounts owing with respect thereto being distributed to the Lessee.
(h) The provisions of Sections 15.1(a) through 15.1(g) shall not
apply to any Property until after the Construction Period Termination
Date applicable to such Property and the applicable provisions of the
Construction Agency Agreement shall apply to a Casualty or Condemnation
affecting a Construction Period Property.
15.2 ENVIRONMENTAL MATTERS.
Promptly upon Lessee's actual knowledge of the presence of
Hazardous Substances in any portion of any Property or Properties in
concentrations and conditions that constitute an Environmental Violation and
which, in the reasonable opinion of Lessee, the cost to undertake any legally
required response, clean up, remedial or other action will or might result in a
cost to Lessee of more than $50,000, Lessee shall notify Lessor in writing of
such condition. In the event of any Environmental Violation (regardless of
whether notice thereof must be given), Lessee shall, not later than thirty (30)
days after Lessee has actual knowledge of such
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Environmental Violation, either deliver to Lessor a Termination Notice with
respect to the applicable Property or Properties pursuant to Section 16.1, if
applicable, or, at Lessee's sole cost and expense, promptly and diligently
undertake and diligently complete any response, clean up, remedial or other
action (including without limitation the pursuit by Lessee of appropriate action
against any off-site or third party source for contamination) necessary to
remove, cleanup or remediate the Environmental Violation in accordance with all
Environmental Laws. Any such undertaking shall be timely completed in accordance
with prudent industry standards. If Lessee does not deliver a Termination Notice
with respect to such Property pursuant to Section 16.1, Lessee shall, upon
completion of remedial action by Lessee, cause to be prepared by a reputable
environmental consultant acceptable to Lessor a report describing the
Environmental Violation and the actions taken by Lessee (or its agents) in
response to such Environmental Violation, and a statement by the consultant that
the Environmental Violation has been remedied in full compliance with applicable
Environmental Law. Not less than sixty (60) days prior to any time that Lessee
elects to cease operations with respect to any Property or to remarket any
Property pursuant to Section 20.1 hereof or any other provision of any Operative
Agreement, Lessee at its expense shall cause to be delivered to Lessor
environmental site assessments respecting such Property recently prepared (no
more than thirty (30) days prior to the date of delivery) by an independent
recognized professional acceptable to Lessor in its reasonable discretion and in
form, scope and content satisfactory to Lessor in its reasonable discretion.
Notwithstanding any other provision of any Operative Agreement, if Lessee fails
to comply with the foregoing obligation regarding the environmental site
assessments, Lessee shall be obligated to purchase such Property for its
Termination Value and shall not be permitted to exercise (and Lessor shall have
no obligation to honor any such exercise) any rights under any Operative
Agreement regarding a sale of such Property to a Person other than Lessee.
15.3 NOTICE OF ENVIRONMENTAL MATTERS.
Promptly, but in any event within five (5) Business Days from the
date Lessee has actual knowledge thereof, Lessee shall provide to Lessor written
notice of any pending or threatened claim, action or proceeding involving any
Environmental Law or any Release on or in connection with any Property or
Properties. All such notices shall describe in reasonable detail the nature of
the claim, action or proceeding and Lessee's proposed response thereto. In
addition, Lessee shall provide to Lessor, within five (5) Business Days of
receipt, copies of all material written communications with any Governmental
Authority relating to any Environmental Law in connection with any Property.
Lessee shall also promptly provide such detailed reports of any such material
environmental claims as may reasonably be requested by Lessor.
ARTICLE XVI
16.1 TERMINATION UPON CERTAIN EVENTS.
If Lessee has delivered, or is deemed to have delivered, written
notice of a termination of this Lease with respect to the applicable Property to
Lessor in the form described
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in Section 16.2(a) (a "Termination Notice") pursuant to the provisions of this
Lease, then following the applicable Casualty, Condemnation or Environmental
Violation, this Lease shall terminate with respect to the affected Property on
the applicable Termination Date.
16.2 PROCEDURES.
(a) A Termination Notice shall contain: (i) notice of termination
of this Lease with respect to the affected Property on a Payment Date
not more than sixty (60) days after Lessor's receipt of such Termination
Notice (the "Termination Date"); and (ii) a binding and irrevocable
agreement of Lessee to pay the Termination Value for the applicable
Property and purchase such Property on such Termination Date.
(b) On each Termination Date, Lessee shall pay to Lessor the
Termination Value for the applicable Property, and Lessor shall convey
such Property or the remaining portion thereof, if any, to Lessee (or
Lessee's designee), all in accordance with Section 20.2.
ARTICLE XVII
17.1 LEASE EVENTS OF DEFAULT.
If any one (1) or more of the following events (each a "Lease
Event of Default") shall occur:
(a) Lessee shall fail to make payment of (i) any Basic Rent
(except as set forth in clause (ii)) within three (3) days after the
same has become due and payable or (ii) any Termination Value, on the
date any such payment is due and payable, or any payment of Basic Rent
or Supplemental Rent due on the due date of any such payment of
Termination Value, or (iii) any amount due on the Expiration Date;
(b) Lessee shall fail to make payment of any Supplemental Rent
(other than Supplemental Rent referred to in Section 17.1(a)(ii)) or any
other Credit Party shall fail to make any payment of any amount under
any Operative Agreement which has become due and payable within three
(3) days after receipt of notice that such payment is due;
(c) (i) Lessee shall fail to maintain insurance as required by
Article XIV of this Lease or (ii) Lessee shall fail to deliver any
requisite ACCORD Evidence of Insurance or certified copy of any
insurance policy required thereunder when due under the terms hereof and
such failure to deliver shall continue unremedied for a period of ten
(10) days after an officer of Lessee becoming aware of such failure to
deliver, or notice from the Agent of such failure to deliver;
(d) Any representation or warranty made by Lessee set forth in
this Lease or in any other Operative Agreement or in any document
entered into in connection
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herewith or therewith or in any document, certificate or financial or
other statement delivered in connection herewith or therewith shall be
false or inaccurate in any material way when made;
(e) An Construction Agency Agreement Event of Default shall have
occurred and be continuing;
(f) (i) Any Credit Party or any Subsidiary of any Credit Party
shall default (beyond applicable periods of grace and/or notice and
cure) in the payment when due of any principal of or interest on any
Indebtedness having an outstanding principal amount of at least
$10,000,000; or any other event or condition shall occur which results
in a default of any such Indebtedness or enables the holder of any such
Indebtedness or any Person acting on such holder's behalf to accelerate
the maturity thereof; or (ii) any Mountain View Lease Event of Default
shall have occurred and be continuing;
(g) The liquidation or dissolution of any Credit Party, or the
suspension of the business of any Credit Party, or the filing by any
Credit Party of a voluntary petition or an answer seeking
reorganization, arrangement, readjustment of its debts or for any other
relief under the United States Bankruptcy Code, as amended, or under any
other insolvency act or law, state or federal, now or hereafter
existing, or any other action of any Credit Party indicating its consent
to, approval of or acquiescence in, any such petition or proceeding; the
application by any Credit Party for, or the appointment by consent or
acquiescence of any Credit Party of a receiver, a trustee or a custodian
of any Credit Party for all or a substantial part of its property; the
making by Lessee of any assignment for the benefit of creditors; the
admission by any Credit Party in writing of its inability to pay its
debts as they mature or is generally not paying its debts and other
financial obligations as they become due and payable; or any Credit
Party taking any corporate action to authorize any of the foregoing;
(h) The filing of an involuntary petition against any Credit
Party in bankruptcy or seeking reorganization, arrangement, readjustment
of its debts or for any other relief under the United States Bankruptcy
Code, as amended, or under any other insolvency act or law, state or
federal, now or hereafter existing; or the involuntary appointment of a
receiver, a trustee or a custodian of any Credit Party for all or a
substantial part of its property; or the issuance of a warrant of
attachment, execution or similar process against any substantial part of
the property of any Credit Party, and the continuance of any of such
events for ninety (90) days undismissed or undischarged;
(i) The adjudication of any Credit Party as bankrupt or
insolvent;
(j) The entering of any order in any proceedings against any
Credit Party or any Subsidiary of any Credit Party decreeing the
dissolution, divestiture or split-up of any Credit Party or any
Subsidiary of any Credit Party, and such order remains in effect for
more than sixty (60) days;
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(k) Any report, certificate, financial statement or other
instrument delivered to Lessor by or on behalf of any Credit Party
pursuant to the terms of this Lease or any other Operative Agreement is
false or misleading in any material respect when made or delivered;
(l) The Lessee or any other Credit Party shall
(i) default in the due performance or observance of any
term, covenant or agreement contained in Sections 8.3A(b),
8.3A(h), 8.3A(i) or 8.3B(a) through 8.3B(o) of the Participation
Agreement, inclusive;
(ii) default in the due performance or observance of any
term, covenant or agreement contained in Sections 8.3A(a)(i),
(ii), (iii) or (iv) of the Participation Agreement and such
default shall continue unremedied for a period of at least five
(5) days after the earlier of an officer of such Credit Party
becoming aware of such default or notice thereof by the Agent;
or
(iii) default in the due performance or observance by it
of any term, covenant or agreement (other than those referred to
in subsections (a), (b), (c), (l)(i) or (l)(ii) of this Section
17.1) contained in this Lease or any other Operative Agreement
and such default shall continue unremedied for a period of at
least thirty (30) days after the earlier of an officer of such
Credit Party becoming aware of such default or notice thereof by
the Agent; provided, however, that if such default is of a
nature that is not capable of being cured within such thirty
(30) day period, and the Lessee or any other such Credit Party
promptly commences appropriate steps to cure such default within
such thirty (30) day period and continues to pursue such cure
with diligence and good faith thereafter, unless the Agent shall
determine that such delay could reasonably be expected to have a
Material Adverse Effect, such thirty (30) day period shall be
extended for an additional sixty (60) days;
(m) A final judgment or judgments for the payment of money shall
be rendered by a court or courts against any Credit Party or any
Subsidiary of any Credit Party or any of their assets in excess of
$10,000,000 in the aggregate, and (i) the same shall not be discharged
(or provision shall not be made for such discharge), or a stay of
execution thereof shall not be procured, within thirty (30) days from
the date of entry thereof, or (ii) any Credit Party or any such
Subsidiary shall not, within said period of thirty (30) days, or such
longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during
such appeal, or (iii) such judgment or judgments shall not be discharged
(or provisions shall not be made for such discharge) within thirty (30)
days after a decision has been reached with respect to such appeal and
the related stay has been lifted;
(n) Any Credit Party or any member of the Controlled Group shall
fail to pay when due an amount or amounts aggregating in excess of
$5,000,000 which it shall have become liable to pay to the PBGC or to a
Pension Plan under Title IV of ERISA; or
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notice of intent to terminate a Pension Plan or Pension Plans having
aggregate Unfunded Liabilities in excess of $5,000,000 shall be filed
under Title IV of ERISA by any Credit Party or any member of the
Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of
ERISA to terminate or to cause a trustee to be appointed to administer
any such Pension Plan or Pension Plans or a proceeding shall be
instituted by a fiduciary of any such Pension Plan or Pension Plans
against any Credit Party or any member of the Controlled Group to
enforce Section 515 or 4219(c)(5) of ERISA; or a condition shall exist
by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any such Pension Plan or Pension Plans must be
terminated;
(o) Any Change of Control shall occur;
(p) Any Operative Agreement shall cease to be in full force and
effect; or
(q) Except as to any Credit Party which is released in connection
with the Operative Agreements, the guaranty given by any Guarantor under the
Participation Agreement or any material provision thereof shall cease to be in
full force and effect, or any Guarantor or any Person acting by or on behalf of
such Guarantor shall deny or disaffirm such Guarantor's obligations under such
guaranty, or any Guarantor shall default in the due performance or observance of
any term, covenant or agreement on its part to be performed or observed pursuant
to any guaranty;
then, in any such event, Lessor may, in addition to the other rights and
remedies provided for in this Article XVII and in Section 18.1, terminate this
Lease by giving Lessee five (5) days notice of such termination (provided,
notwithstanding the foregoing, this Lease shall be deemed to be automatically
terminated without the giving of notice upon the occurrence of a Lease Event of
Default under Sections 17.1(g), (h) or (i), and this Lease shall terminate, and
all rights of Lessee under this Lease shall cease. Lessee shall, to the fullest
extent permitted by law, pay as Supplemental Rent all reasonable costs and
expenses incurred by or on behalf of Lessor or any other Financing Party,
including without limitation reasonable fees and expenses of counsel, as a
result of any Lease Event of Default hereunder.
A POWER OF SALE HAS BEEN GRANTED IN THIS LEASE. A POWER OF SALE MAY
ALLOW LESSOR TO TAKE THE PROPERTIES AND SELL THE PROPERTIES WITHOUT GOING TO
COURT IN A FORECLOSURE ACTION UPON THE OCCURRENCE OF A LEASE EVENT OF DEFAULT.
17.2 SURRENDER OF POSSESSION.
If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant to
Section 17.1, Lessee shall, upon thirty (30) days written notice, surrender to
Lessor possession of the Properties. Lessor may enter upon and repossess the
Properties by such means as are available at law or in equity, and may remove
Lessee and all other Persons and any and all personal property and Lessee's
equipment and
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personalty and severable Modifications from the Properties. Lessor shall have no
liability by reason of any such entry, repossession or removal performed in
accordance with applicable law. Upon the written demand of Lessor, Lessee shall
return the Properties promptly to Lessor, in the manner and condition required
by, and otherwise in accordance with the provisions of, Section 22.1(c) hereof.
17.3 RELETTING.
If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant to
Section 17.1, Lessor may, but shall be under no obligation to, relet any or all
of the Properties, for the account of Lessee or otherwise, for such term or
terms (which may be greater or less than the period which would otherwise have
constituted the balance of the Term) and on such conditions (which may include
concessions or free rent) and for such purposes as Lessor may determine, and
Lessor may collect, receive and retain the rents resulting from such reletting.
Lessor shall not be liable to Lessee for any failure to relet any Property or
for any failure to collect any rent due upon such reletting.
17.4 DAMAGES.
Neither (a) the termination of this Lease as to all or any of the
Properties pursuant to Section 17.1; (b) the repossession of all or any of the
Properties; nor (c) the failure of Lessor to relet all or any of the Properties,
the reletting of all or any portion thereof, nor the failure of Lessor to
collect or receive any rentals due upon any such reletting, shall relieve Lessee
of its liabilities and obligations hereunder, all of which shall survive any
such termination, repossession or reletting. If any Lease Event of Default shall
have occurred and be continuing and notwithstanding any termination of this
Lease pursuant to Section 17.1, Lessee shall forthwith pay to Lessor all Rent
and other sums due and payable hereunder to and including without limitation the
date of such termination. Thereafter, on the days on which the Basic Rent or
Supplemental Rent, as applicable, are payable under this Lease or would have
been payable under this Lease if the same had not been terminated pursuant to
Section 17.1 and until the end of the Term hereof or what would have been the
Term in the absence of such termination, Lessee shall pay Lessor, as current
liquidated damages (it being agreed that it would be impossible accurately to
determine actual damages) an amount equal to the Basic Rent and Supplemental
Rent that are payable under this Lease or would have been payable by Lessee
hereunder if this Lease had not been terminated pursuant to Section 17.1, less
the net proceeds, if any, which are actually received by Lessor with respect to
the period in question of any reletting of any Property or any portion thereof;
provided, that Lessee's obligation to make payments of Basic Rent and
Supplemental Rent under this Section 17.4 shall continue only so long as Lessor
shall not have received the amounts specified in Section 17.6. In calculating
the amount of such net proceeds from reletting, there shall be deducted all of
Lessor's, any Holder's, the Agent's and any Lender's reasonable expenses in
connection therewith, including without limitation repossession costs, brokerage
or sales commissions, fees and expenses for counsel and any necessary repair or
alteration costs and expenses incurred in preparation for such reletting. To the
extent Lessor receives any damages pursuant to this Section 17.4, such amounts
shall be regarded as amounts paid on account of Rent. Lessee specifically
acknowledges and agrees that its obligations under
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this Section 17.4 shall be absolute and unconditional under any and all
circumstances and shall be paid and/or performed, as the case may be, without
notice or demand and without any abatement, reduction, diminution, setoff,
defense, counterclaim or recoupment whatsoever.
17.5 POWER OF SALE.
Without limiting any other remedies set forth in this Lease,
Lessor and Lessee agree that Lessee has granted, pursuant to Section 7.1(b)
hereof and each Lease Supplement, a Lien against the Properties WITH POWER OF
SALE, and that, upon the occurrence and during the continuance of any Lease
Event of Default, Lessor shall have the power and authority, to the extent
provided by law, after prior notice and lapse of such time as may be required by
law, to foreclose its interest (or cause such interest to be foreclosed) in all
or any part of the Properties.
17.6 FINAL LIQUIDATED DAMAGES.
Subject to the limitations of the Construction Agency Agreement,
if a Lease Event of Default shall have occurred and be continuing, whether or
not this Lease shall have been terminated pursuant to Section 17.1 and whether
or not Lessor shall have collected any current liquidated damages pursuant to
Section 17.4, Lessor shall have the right to recover, by demand to Lessee and at
Lessor's election, and Lessee shall pay to Lessor, as and for final liquidated
damages, but exclusive of the indemnities payable under Section 11 of the
Participation Agreement (which, if requested, shall be paid concurrently), and
in lieu of all current liquidated damages beyond the date of such demand (it
being agreed that it would be impossible accurately to determine actual damages)
the Termination Value. Upon payment of the amount specified pursuant to the
first sentence of this Section 17.6, Lessee shall be entitled to receive from
Lessor, either at Lessee's request or upon Lessor's election, in either case at
Lessee's cost, an assignment of Lessor's entire right, title and interest in and
to the Properties, Improvements, Fixtures, Modifications, Equipment and all
components thereof, in each case in recordable form and otherwise in conformity
with local custom and free and clear of the Lien of this Lease (including
without limitation the release of the Lease and any memoranda of Lease and/or
the Lease Supplement recorded in connection therewith) and any Lessor Liens. The
Properties shall be conveyed to Lessee "AS-IS, WHERE-IS" and in their then
present physical condition. Concurrent with such conveyance, Lessor shall assign
(free and clear of all Lessor Liens but subject to any and all other Liens) to
Lessee all right, title and interest of Lessor in and to the Indemnity Agreement
regarding matters and events arising from and after the date of such assignment
(provided, Lessor shall retain its right, title and interest in and to the
Indemnity Agreement regarding matters and events arising during the period when
Lessor held title to any Property). If any statute or rule of law shall limit
the amount of such final liquidated damages to less than the amount agreed upon,
Lessor shall be entitled to the maximum amount allowable under such statute or
rule of law; provided, however, Lessee shall not be entitled to receive an
assignment of Lessor's interest in the Properties, the Improvements, Fixtures,
Modifications, Equipment or the components thereof unless Lessee shall have paid
in full the Termination Value. Lessee specifically acknowledges and agrees that
its obligations under this Section 17.6 shall be absolute and unconditional
under any and all circumstances and shall be paid and/or
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performed, as the case may be, without notice or demand and without any
abatement, reduction, diminution, setoff, defense, counterclaim or recoupment
whatsoever.
17.7 ENVIRONMENTAL COSTS.
If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant to
Section 17.1, Lessee shall pay directly to any third party (or at Lessor's
election, reimburse Lessor) for the cost of any environmental testing and/or
remediation work undertaken respecting any Property, as such testing or work is
deemed appropriate in the reasonable judgment of Lessor, and shall indemnify and
hold harmless Lessor and each other Indemnified Person therefrom. Lessee shall
pay all amounts referenced in the immediately preceding sentence within ten (10)
days of any request by Lessor for such payment. The provisions of this Section
17.7 shall not limit the obligations of Lessee under any Operative Agreement
regarding indemnification obligations, environmental testing, remediation and/or
work.
17.8 WAIVER OF CERTAIN RIGHTS.
If this Lease shall be terminated pursuant to Section 17.1,
Lessee waives, to the fullest extent permitted by Law, (a) any notice of
re-entry or the institution of legal proceedings to obtain re-entry or
possession; (b) any right of redemption, re-entry or possession; (c) the benefit
of any laws now or hereafter in force exempting property from liability for rent
or for debt; and (d) any other rights which might otherwise limit or modify any
of Lessor's rights or remedies under this Article XVII.
17.9 ASSIGNMENT OF RIGHTS UNDER CONTRACTS.
If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant to
Section 17.1, Lessee shall upon Lessor's demand immediately assign, transfer and
set over to Lessor all of Lessee's right, title and interest in and to each
agreement executed by Lessee in connection with the acquisition, installation,
testing, use, development, construction, operation, maintenance, repair,
refurbishment and restoration of the Properties (including without limitation
all right, title and interest of Lessee with respect to all warranty,
performance, service and indemnity provisions), as and to the extent that the
same relate to the acquisition, installation, testing, use, development,
construction, operation, maintenance, repair, refurbishment and restoration of
the Properties or any of them.
17.10 REMEDIES CUMULATIVE.
Lessor shall be entitled to enforce payment of all amounts and
performance of obligations evidenced hereby and to exercise all rights and
powers under this instrument or under any of the other Operative Agreements or
other agreement or any laws now or hereafter in force, notwithstanding some or
all of the obligations evidenced hereby may now or hereafter be otherwise
secured, whether by mortgage, security agreement, pledge, lien, assignment or
otherwise. Neither the acceptance of this instrument nor its enforcement, shall
prejudice or in
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any manner affect Lessor's right to realize upon or enforce any other security
now or hereafter held by the Lessor, it being agreed that Lessor shall be
entitled to enforce this instrument and any other security now or hereafter held
by Lessor in such order and manner as Lessor may determine in its absolute
discretion. No remedy herein conferred upon or reserved to Lessor is intended to
be exclusive of any other remedy herein or by law provided or permitted, but
each shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute. Every
power or remedy given by any of the Operative Agreements to Lessor or to which
it may otherwise be entitled, may be exercised, concurrently or independently,
from time to time and as often as may be deemed expedient by Lessor. In no event
shall Lessor, in the exercise of the remedies provided in this instrument, be
deemed a "mortgagee in possession," and Lessor shall not in any way be made
liable for any act, either of commission or omission, in connection with the
exercise of such remedies.
17.11 ASSIGNMENT OF RENTS AND APPOINTMENT OF RECEIVER.
(a) Upon the occurrence of any Lease Event of Default, the Lessor
may, in addition to all other rights in this Lease, at its option, at any time:
(i) without regard to waste, adequacy of the security or
solvency of the Lessee, apply for, and the Lessee hereby
consents to, the appointment of a receiver of the Property,
whether or not foreclosure proceedings have been commenced, and
whether or not a foreclosure sale has occurred. The receiver
shall have authority to make leases for terms which extend
beyond the receivership; and
(ii) with or without exercising the rights set forth
above, give or require the Lessee to give notice to any or all
tenants under leases authorizing and directing them to pay all
rents under leases for all or any portion of the Property (the
"Revenues") directly to the Lessor.
(b) The exercise of any of the foregoing rights or remedies and
the application of the Revenues pursuant to this Section 17.11 shall not cure or
waive any Lease Event of Default (or notice of default) or invalidate any act
done pursuant to such notice.
(c) Anything in this Lease to the contrary notwithstanding, all
Revenues collected by the Lessor or the receiver each month shall be applied as
follows:
(i) to payment of all reasonable fees of the receiver
approved by the court;
(ii) to payment of all tenant security deposits then
owing to tenants under any of the leases pursuant to the
provisions of Minn. Stat. Section 504.20;
(iii) to payment of all prior or current real estate
taxes and special assessments with respect to the Property, or
if this Lease or any other instrument
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relating to the obligations of Lessee under the Participation
Agreement requires periodic escrow payments for such taxes and
assessments, to the escrow payments then due;
(iv) to payment of all premiums then due for the
insurance required with respect to the Property, or if this
Lease or any other instrument relating to the obligations of
Lessee under the Participation Agreement requires periodic
escrow payments for such premiums, to the escrow payments then
due;
(v) to payment of expenses incurred for normal
maintenance of the Property;
(vi) if received prior to any foreclosure sale of the
Property pursuant to this Lease, to the Lessor for payment of
the indebtedness secured hereby, but no such payment made after
acceleration of the indebtedness secured hereby shall affect
such acceleration;
(vii) if received during or with respect to the period
of redemption after a foreclosure sale of the Property pursuant
to this Lease:
(1) if the purchaser at the foreclosure sale is
not the Lessor, first to the Lessor to the extent of any
deficiency of the sale proceeds to repay the
indebtedness secured hereby, second to the purchaser as
a credit to the redemption price, but if the Property is
not redeemed, then to the purchaser of the Property;
(2) if the purchaser at the foreclosure sale is
the Lessor, to the Lessor to the extent of any
deficiency of the sale proceeds to repay the
indebtedness secured hereby and the balance to be
retained by the Lessor as a credit to the redemption
price, but if the Property is not redeemed, then to the
Lessor, whether or not any such deficiency exists.
The rights and powers of the Lessor and receivers under this Lease and the
application of rents under this Section 17.11 shall continue until expiration of
the redemption period from any foreclosure sale, whether or not any deficiency
remains after a foreclosure sale.
ARTICLE XVIII
18.1 LESSOR'S RIGHT TO CURE LESSEE'S LEASE DEFAULTS.
Lessor, without waiving or releasing any obligation or Lease
Event of Default, may (but shall be under no obligation to) remedy any Lease
Event of Default for the account and at the sole cost and expense of Lessee,
including without limitation the failure by Lessee to maintain the insurance
required by Article XIV, and may, to the fullest extent permitted by law,
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and notwithstanding any right of quiet enjoyment in favor of Lessee, enter upon
any Property, and take all such action thereon as may be necessary or
appropriate therefor. No such entry shall be deemed an eviction of any lessee.
All out-of-pocket costs and expenses so incurred (including without limitation
fees and expenses of counsel), together with interest thereon at the Overdue
Rate from the date on which such sums or expenses are paid by Lessor, shall be
paid by Lessee to Lessor on demand.
ARTICLE XIX
19.1 PROVISIONS RELATING TO LESSEE'S EXERCISE OF ITS PURCHASE OPTION.
Subject to Section 19.2, in connection with any termination of
this Lease with respect to any Property pursuant to the terms of Section 16.2,
or in connection with Lessee's exercise of its Purchase Option, upon the date on
which this Lease is to terminate with respect to any Property, and upon tender
by Lessee of the amounts set forth in Sections 16.2(b) or 20.2, as applicable,
Lessor shall execute and deliver to Lessee (or to Lessee's designee) at Lessee's
cost and expense an assignment (by deed or other appropriate instrument) of
Lessor's entire interest in such Property, in each case in recordable form and
otherwise in conformity with local custom and free and clear of any Lessor Liens
attributable to Lessor but without any other warranties (of title or otherwise)
from Lessor. Such Property shall be conveyed to Lessee "AS-IS, "WHERE-IS" and in
then present physical condition.
19.2 [INTENTIONALLY OMITTED]
ARTICLE XX
20.1 PURCHASE OPTION OR SALE OPTION-GENERAL PROVISIONS.
Not less than one hundred twenty (120) days and no more than one
hundred eighty (180) days prior to the Expiration Date or (respecting the
Purchase Option only) any Payment Date, Lessee may give Lessor irrevocable
written notice (the "Election Notice") that Lessee is electing to exercise
either (a) the option to purchase all, but not less than all, the Properties on
the Expiration Date or on the Payment Date specified in the Election Notice or
in accordance with the Parcel Sale Requirements, the option to purchase at least
one year prior to the Expiration Date one or more, but less than all, the
Properties (or a portion of any Property) on the Payment Date specified in the
Election Notice for purchase (the "Purchase Option") or (b) with respect to an
Election Notice given in connection with the Expiration Date only, the option to
remarket all, but not less than all, the Properties to a Person other than
Lessee or any Affiliate of Lessee and cause a sale of such Properties to occur
on the Expiration Date pursuant to the terms of Section 22.1 (the "Sale
Option"). Regarding the purchase of one or more, but less than all, the
Properties (or a portion of any Property), at Lessee's option and without the
consent of any Financing Party, Lessee may provide irrevocable written notice to
Lessor not less than one hundred twenty (120) days and no more than one hundred
eighty days prior to any Payment Date
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(in all cases at least one year prior to the Expiration Date) that Lessee
desires to purchase one or more, but less than all, the Properties (or a portion
of any Property), if (i) such Property or portion of any Property to be
purchased by Lessee has a separate legal and tax parcel, (ii) the conveyance of
such Property or portion of such Property will not impair the access, use,
occupancy or fair market value of the Properties remaining in the Trust, (iii)
the Properties remaining in the Trust (A) shall constitute one or more legal and
tax parcels, (B) shall contain at least one building, (C) shall be viable as a
separate property in compliance with Legal Requirements and (D) shall have a
fair market value of 100% or more of the Property Cost allocable to such
remaining Properties and (iv) at the time of sale to Lessee of such Property or
portion of any Property, no Default or Event of Default shall have occurred and
be continuing (other than those that will be cured by the payment of the
Termination Value for such Property (or a portion of any Property)) (the terms
referenced in the foregoing subsections (i), (ii), (iii) and (iv), may be
referred to as the "Parcel Sale Requirements"). To the extent the Parcel Sale
Requirements are satisfied, Lessor shall sell such Property or portion of such
Property to Lessee. If Lessee does not give an Election Notice indicating the
Purchase Option or the Sale Option at least one hundred twenty (120) days and
not more than one hundred eighty (180) days prior to the Expiration Date, then,
unless such Expiration Date is the final Expiration Date to which the Term may
be extended, the term of this Lease shall be extended in accordance with Section
2.2 hereof; if such Expiration Date is the final Expiration Date, then Lessee
shall be deemed to have elected the Purchase Option. If Lessee shall either (i)
elect (or be deemed to have elected) to exercise the Purchase Option or (ii)
elect the Sale Option and fail to cause all, but not less than all, the
Properties to be sold in accordance with the terms of Section 22.1 on the
Expiration Date, then in either case Lessee shall pay to Lessor on the date on
which such purchase or sale is scheduled to occur an amount equal to the
Termination Value for all, but not less than all, the Properties (which the
parties do not intend to be a "bargain" purchase price) and, upon receipt of
such amounts and satisfaction of such obligations, Lessor shall transfer to
Lessee all of Lessor's right, title and interest in and to all, but not less
than all, the Properties in accordance with Section 20.2.
20.2 LESSEE PURCHASE OPTION.
Provided, no Default or Event of Default shall have occurred and
be continuing (other than those that will be cured by the payment of the
Termination Value for all the Properties) and provided, that the Election Notice
has been appropriately given specifying the Purchase Option, Lessee shall
purchase all the Properties (or if applicable, and upon satisfaction of all
Parcel Sale Requirements, one or more, but less than all, the Properties or a
portion of any Property pursuant to a notice provided in accordance with Section
20.1) on the Expiration Date or Payment Date at a price equal to the Termination
Value for such Properties (which the parties do not intend to be a "bargain"
purchase price).
Subject to Section 19.2, in connection with any termination of
this Lease with respect to any Property pursuant to the terms of Section 16.2,
or in connection with Lessee's exercise of its Purchase Option, upon the date on
which this Lease is to terminate with respect to a Property or all of the
Properties, and upon tender by Lessee of the amounts set forth in Section
16.2(b) or this Section 20.2, as applicable, Lessor shall execute, acknowledge
(where
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required) and deliver to Lessee, at Lessee's cost and expense, each of the
following: (a) a special or limited warranty Deed conveying each Property to
Lessee free and clear of the Lien of this Lease, the Lien of the Credit
Documents and any Lessor Liens; (b) a Bill of Sale conveying each Property (to
the extent it is personal property) to Lessee free and clear of the Lien of this
Lease, the Lien of the Credit Documents and any Lessor Liens; (c) any real
estate tax affidavit or other document required by law to be executed and filed
in order to record the applicable Deed; and (d) FIRPTA affidavits. All of the
foregoing documentation must be in form and substance reasonably satisfactory to
Lessor. The applicable Property shall be conveyed to Lessee "AS-IS, WHERE-IS"
and in then present physical condition.
If any Property is the subject of remediation efforts respecting
Hazardous Substances at the Expiration Date which could materially and adversely
impact the Fair Market Sales Value of such Property (with materiality determined
in each case in Lessor's reasonable discretion), then Lessee shall be obligated
to purchase each such Property pursuant to Section 20.2.
On the Expiration Date and/or any Payment Date on which Lessee
has elected to exercise its Purchase Option, Lessee shall pay (or cause to be
paid) to Lessor, the Agent and all other parties, as appropriate, the sum of all
costs and expenses incurred by any such party in connection with the election by
Lessee to exercise its Purchase Option and all Rent and all other amounts then
due and payable or accrued under this Lease and/or any other Operative
Agreement.
20.3 THIRD PARTY SALE OPTION.
(a) Provided, that (i) no Default or Event of Default shall have
occurred and be continuing and (ii) the Election Notice has been
appropriately given specifying the Sale Option, Lessee shall undertake
to cause a sale of the Properties on the Expiration Date (all as
specified in the Election Notice) in accordance with the provisions of
Section 22.1 hereof.
(b) In the event Lessee exercises the Sale Option then, as soon
as practicable and in all events not less than sixty (60) days prior to
the Expiration Date, Lessee shall cause to be delivered to Lessor
environmental site assessments for each of the Properties recently
prepared (no more than thirty (30) days old prior to the Sale Date) by
an independent recognized professional reasonably acceptable to Lessor
and in form, scope and content reasonably satisfactory to Lessor. Lessor
(at the direction of the Agent) shall elect whether the costs incurred
respecting the above-referenced environmental site assessments shall be
paid by either (i) sales proceeds from the Properties, (ii) Lessor (but
only the extent amounts are available therefor with respect to the
Available Commitments and the Available Holder Commitments or each
Lender and each Holder approves the necessary increases in the Available
Commitments and the Available Holder Commitments to fund such costs) or
(iii) Lessee; provided, amounts funded by the Lenders and the Holders
with respect to the foregoing shall be added to the Property Cost of
each applicable Property; provided, further, amounts funded by Lessee
with respect to
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the foregoing shall be a part of (and limited by) the Maximum Residual
Guarantee Amount. In the event that Lessor shall not have received such
environmental site assessments by the date sixty (60) days prior to the
Expiration Date or in the event that such environmental assessment shall
reveal the existence of any material violation of Environmental Laws,
other material Environmental Violation or potential material
Environmental Violation (with materiality determined in each case by
Lessor in its reasonable discretion), then Lessee on the Expiration Date
shall pay to Lessor an amount equal to the Termination Value for all the
Properties and any and all other amounts due and owing hereunder. Upon
receipt of such payment and all other amounts due under the Operative
Agreements, Lessor shall transfer to Lessee all of Lessor's right, title
and interest in and to all the Properties in accordance with Section
19.1.
ARTICLE XXI
21.1 [INTENTIONALLY OMITTED].
ARTICLE XXII
22.1 SALE PROCEDURE.
(a) During the Marketing Period, Lessee, on behalf of Lessor,
shall obtain bids for the cash purchase of all the Properties in
connection with a sale to one (1) or more third party purchasers to be
consummated on the Expiration Date or such earlier date as is acceptable
to the Agent and the Lessee (the "Sale Date") for the highest price
available, shall notify Lessor promptly of the name and address of each
prospective purchaser and the cash price which each prospective
purchaser shall have offered to pay for each such Property and shall
provide Lessor with such additional information about the bids and the
bid solicitation procedure as Lessor may reasonably request from time to
time. On the Sale Date, all Properties then subject to this Lease shall
be sold for one aggregate cash price amount for all such Properties,
without differentiation of such amount on a Property-by-Property basis.
All such prospective purchasers must be Persons other than Lessee or any
Affiliate of Lessee. On the Sale Date, Lessee shall pay (or cause to be
paid) to Lessor and all other parties, as appropriate, all Rent and all
other amounts then due and payable or accrued under this Lease and/or
any other Operative Agreement and Lessor (at the direction of the Agent)
shall elect whether the costs and expenses incurred by Lessor and/or the
Agent respecting the sale of one or more Properties shall be paid by
either (i) sales proceeds from the Properties, (ii) Lessor (but only the
extent amounts are available therefor with respect to the Available
Commitments and the Available Holder Commitments or each Lender and each
Holder approves the necessary increases in the Available Commitments and
the Available Holder Commitments to fund such costs and expenses) or
(iii) Lessee; provided, amounts funded by the Lenders and the Holders
with respect to such costs and expenses shall be added to the Property
Cost of each applicable Property; provided, further, amounts funded by
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Lessee with respect to such costs and expenses shall be a part of (and
limited by) the Maximum Residual Guarantee Amount.
Lessor may reject any and all bids and may solicit and obtain
bids by giving Lessee written notice to that effect; provided, however,
that notwithstanding the foregoing, Lessor may not reject any bid
submitted by Lessee if such bid, in the aggregate, is greater than or
equal to the sum of the Limited Recourse Amount for all the Properties,
and represents a bona fide offer from one (1) or more third party
purchasers. If the highest price which a prospective purchaser or the
prospective purchasers shall have offered to pay for all the Properties
on the Sale Date is less than the sum of the Limited Recourse Amount for
all the Properties or if such bids do not represent bona fide offers
from one (1) or more third parties or if there are no bids, Lessor may
elect to retain one or more of the Properties by giving Lessee at least
five (5) Business Days prior written notice of Lessor's election to
retain the same, and promptly upon receipt of such notice, Lessee shall
surrender, or cause to be surrendered, each of the Properties specified
in such notice in accordance with the terms and conditions of Section
10.1. If Lessor does not elect to retain all the Properties, then Lessee
shall cause the sale of all of the Properties to be completed on the
Sale Date in accordance with this Section 22.1 and the maximum liability
of the Lessee with respect thereto shall be as provided pursuant to
Section 22.1(b). Upon acceptance of any bid, Lessor agrees, at Lessee's
request and expense, to execute a contract of sale with respect to such
sale, so long as the same is consistent with the terms of this Article
22 and provides by its terms that it is nonrecourse to Lessor.
Unless Lessor shall have elected to retain one or more of the
Properties pursuant to the provisions of the preceding paragraph, Lessee
shall arrange for Lessor to sell all the Properties free and clear of
the Lien of this Lease and any Lessor Liens, without recourse or
warranty (of title or otherwise), for cash on the Sale Date to the
purchaser or purchasers offering the highest cash sales price, as
identified by Lessee or Lessor, as the case may be. To effect such
transfer and assignment, Lessor shall execute, acknowledge (where
required) and deliver to the appropriate purchaser each of the
following: (a) special or limited warranty Deeds conveying each such
Property (to the extent it is real property titled to Lessor) to the
appropriate purchaser free and clear of the Lien of this Lease, the Lien
of the Credit Documents and any Lessor Liens; (b) a Bill of Sale
conveying each such Property (to the extent it is personal property)
titled to Lessor to the appropriate purchaser free and clear of the Lien
of this Lease, the Lien of the Credit Documents and any Lessor Liens;
(c) any real estate tax affidavit or other document required by law to
be executed and filed in order to record each Deed; and (d) FIRPTA
affidavits, as appropriate. All of the foregoing documentation must be
in form and substance reasonably satisfactory to Lessor. Lessee shall
surrender the Properties so sold or subject to such documents to each
purchaser in the condition specified in Section 10.1, or in such other
condition as may be agreed between Lessee and such purchaser. Neither
Lessor nor Lessee shall take or fail to take any action which would have
the effect of unreasonably discouraging bona fide third party bids for
any Property. If each of the Properties is not either (i) sold on the
Sale Date in accordance with the terms of this
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Section 22.1, or (ii) retained by Lessor pursuant to an affirmative
election made by Lessor pursuant to the second sentence of the second
paragraph of this Section 22.1(a), then (x) Lessee shall be obligated to
pay Lessor on the Sale Date an amount equal to the aggregate Termination
Value for all the Properties less any sales proceeds received by the
Lessor, and (y) Lessor shall transfer each applicable Property to Lessee
in accordance with Section 20.2.
(b) If the Properties are sold on a Sale Date to one (1) or more
third party purchasers in accordance with the terms of Section 22.1(a)
and the aggregate purchase price paid for all the Properties is less
than the sum of the aggregate Property Cost for all the Properties
(hereinafter such difference shall be referred to as the "Deficiency
Balance"), then Lessee hereby unconditionally promises to pay to Lessor
on the Sale Date all Rent and all other amounts then due and owing
pursuant to the Operative Agreements and the lesser of (i) the
Deficiency Balance, or (ii) the Maximum Residual Guarantee Amount for
all the Properties. On a Sale Date if (x) Lessor receives the aggregate
Termination Value for all the Properties from one (1) or more third
party purchasers, (y) Lessor and such other parties receive all other
amounts specified in the last sentence of the first paragraph of Section
22.1(a) and (z) the aggregate purchase price paid for all the Properties
on such date plus the amount paid by Lessee to Lessor pursuant to the
terms of this Section 22.1(b) exceeds the sum of the aggregate Property
Cost for all the Properties, then Lessor shall promptly pay Lessee such
excess. The obligation to pay any such excess to Lessee shall survive
the termination of this Lease. If one or more of the Properties are
retained by Lessor pursuant to an affirmative election made by Lessor
pursuant to the provisions of Section 22.1(a), then Lessee hereby
unconditionally promises to pay to Lessor on the Sale Date all Rent and
all other amounts then due and owing pursuant to the Operative
Agreements and an amount equal to the Maximum Residual Guarantee Amount
for the Properties so retained. Any payment of the foregoing amounts
described in this Section 22.1(b) shall be made together with a payment
of all other amounts referenced in the last sentence of the first
paragraph of Section 22.1(a).
(c) In the event that all the Properties are either sold to one
(1) or more third party purchasers on the Sale Date or retained by
Lessor in connection with an affirmative election made by Lessor
pursuant to the provisions of Section 22.1(a), then in either case on
the applicable Sale Date Lessee shall provide Lessor or such third party
purchaser (unless otherwise agreed by such third party purchaser) with
(i) all non-proprietary permits, certificates of occupancy, governmental
licenses and authorizations necessary to use, operate, repair, access
and maintain each such Property for the purpose it is being used by
Lessee, and (ii) such non-proprietary manuals, permits, easements,
licenses, intellectual property, know-how, rights-of-way and other
rights and privileges in the nature of an easement as are reasonably
necessary or desirable in connection with the use, operation, repair,
access to or maintenance of each such Property for its intended purpose
or otherwise as Lessor or such third party purchaser(s) shall reasonably
request (and a royalty-free license or similar agreement to effectuate
the foregoing on terms reasonably agreeable to Lessor or such third
party purchaser(s), as applicable). All such assignments, licenses,
easements, agreements and other deliveries required by clauses (i)
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and (ii) of this paragraph (c) shall be in form reasonably satisfactory
to Lessor or such third party purchaser(s), as applicable, and shall be
fully assignable (including without limitation both primary assignments
and assignments given in the nature of security) without payment of any
fee, cost or other charge.
22.2 APPLICATION OF PROCEEDS OF SALE.
In the event Lessee receives any proceeds of sale of any
Property, such proceeds shall be deemed to have been received in trust on behalf
of Lessor and Lessee shall promptly remit such proceeds to Lessor. Lessor shall
apply the proceeds of sale of any Property in the following order of priority:
(a) FIRST, to pay or to reimburse Lessor (and/or the Agent, as
the case may be) for the payment of all reasonable costs and expenses
incurred by Lessor (and/or the Agent, as the case may be) in connection
with the sale (to the extent Lessee has not satisfied its obligation to
pay such costs and expenses);
(b) SECOND, so long as the Credit Agreement is in effect and any
Loans or Holder Advances or any amount is owing to the Financing Parties
under any Operative Agreement, to the Agent to be applied pursuant to
intercreditor provisions among Lessor, the Lenders and the Holders
contained in the Operative Agreements; and
(c) THIRD, to Lessee.
22.3 INDEMNITY FOR EXCESSIVE WEAR.
If the proceeds of the sale described in Section 22.1 with
respect to the Properties shall be less than the Limited Recourse Amount with
respect to the Properties, and at the time of such sale it shall have been
reasonably determined (pursuant to the Appraisal Procedure) that the Fair Market
Sales Value of the Properties shall have been impaired by greater than normal
and expected wear and tear during the term of the Lease, Lessee shall pay to
Lessor within ten (10) days after receipt of Lessor's written statement (i) the
amount of such excess wear and tear determined by the Appraisal Procedure or
(ii) the amount of the Sale Proceeds Shortfall, whichever amount is less.
22.4 APPRAISAL PROCEDURE.
For determining the Fair Market Sales Value of the Properties or
any other amount which may, pursuant to any provision of any Operative
Agreement, be determined by an appraisal procedure, Lessor and Lessee shall use
the following procedure (the "Appraisal Procedure"). Lessor and Lessee shall
endeavor to reach a mutual agreement as to such amount for a period of ten (10)
days from commencement of the Appraisal Procedure under the applicable section
of the Lease, and if they cannot agree within ten (10) days, then two (2)
qualified appraisers, one (1) chosen by Lessee and one (1) chosen by Lessor,
shall mutually agree thereupon, but if either party shall fail to choose an
appraiser within twenty (20) days after notice
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from the other party of the selection of its appraiser, then the appraisal by
such appointed appraiser shall be binding on Lessee and Lessor. If the two (2)
appraisers cannot agree within twenty (20) days after both shall have been
appointed, then a third appraiser shall be selected by the two (2) appraisers
or, failing agreement as to such third appraiser within thirty (30) days after
both shall have been appointed, by the American Arbitration Association. The
decisions of the three (3) appraisers shall be given within twenty (20) days of
the appointment of the third appraiser and the decision of the appraiser most
different from the average of the other two (2) shall be discarded and such
average shall be binding on Lessor and Lessee; provided, that if the highest
appraisal and the lowest appraisal are equidistant from the third appraisal, the
third appraisal shall be binding on Lessor and Lessee. The fees and expenses of
the appraiser appointed by Lessee shall be paid by Lessee; the fees and expenses
of the appraiser appointed by Lessor shall be paid by Lessor (such fees and
expenses not being indemnified pursuant to Section 11 of the Participation
Agreement); and the fees and expenses of the third appraiser shall be divided
equally between Lessee and Lessor.
22.5 CERTAIN OBLIGATIONS CONTINUE.
During the Marketing Period, the obligation of Lessee to pay Rent
with respect to the Properties (including without limitation the installment of
Basic Rent due on the Expiration Date) shall continue undiminished until payment
in full to Lessor of the sale proceeds, if any, the Maximum Residual Guarantee
Amount, the amount due under Section 22.3, if any, and all other amounts due to
Lessor or any other Person with respect to all Properties or any Operative
Agreement. Lessor shall have the right, but shall be under no duty, to solicit
bids, to inquire into the efforts of Lessee to obtain bids or otherwise to take
action in connection with any such sale, other than as expressly provided in
this Article XXII.
ARTICLE XXIII
23.1 HOLDING OVER.
If Lessee shall for any reason remain in possession of a Property
after the expiration or earlier termination of this Lease as to such Property
(unless such Property is conveyed to Lessee), such possession shall be as a
tenancy at sufferance during which time Lessee shall continue to pay
Supplemental Rent that would be payable by Lessee hereunder were the Lease then
in full force and effect with respect to such Property and Lessee shall continue
to pay Basic Rent at the lesser of the highest lawful rate and one hundred ten
percent (110%) of the last payment of Basic Rent due with respect to such
Property prior to such expiration or earlier termination of this Lease. Such
Basic Rent shall be payable from time to time upon demand by Lessor and such
additional amount of Basic Rent shall be applied by Lessor ratably to the
Lenders and the Holders based on their relative amounts of the then outstanding
aggregate Property Cost for all Properties. During any period of tenancy at
sufferance, Lessee shall, subject to the second preceding sentence, be obligated
to perform and observe all of the terms, covenants and conditions of this Lease,
but shall have no rights hereunder other than the right, to the extent given by
law to tenants at sufferance, to continue their occupancy and use of such
39
<PAGE> 45
Property. Nothing contained in this Article XXIII shall constitute the consent,
express or implied, of Lessor to the holding over of Lessee after the expiration
or earlier termination of this Lease as to any Property (unless such Property is
conveyed to Lessee) and nothing contained herein shall be read or construed as
preventing Lessor from maintaining a suit for possession of such Property or
exercising any other remedy available to Lessor at law or in equity.
ARTICLE XXIV
24.1 RISK OF LOSS.
Subject to the terms and limitations of the Construction Agency
Agreement, during the Term, unless Lessee shall not be in actual possession of
any Property in question solely by reason of Lessor's exercise of its remedies
of dispossession under Article XVII, the risk of loss or decrease in the
enjoyment and beneficial use of such Property as a result of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise is assumed by Lessee, and Lessor shall in no event be answerable or
accountable therefor, except for Lessor's obligation to advance in accordance
with the terms of this Lease insurance proceeds received by Lessor pursuant to
the coverages referenced in Article XIV.
ARTICLE XXV
25.1 ASSIGNMENT.
(a) Lessee may not assign this Lease or any of its rights or
obligations hereunder or with respect to any Property in whole or in
part to any Person (other than to a wholly-owned Subsidiary of Lessee or
the Parent) without the prior written consent of the Agent, the Lenders,
the Holders and Lessor.
(b) No assignment by Lessee (referenced in this Section 25.1 or
otherwise) or other relinquishment of possession to any Property shall
in any way discharge or diminish any of the obligations of Lessee to
Lessor hereunder and Lessee shall remain directly and primarily liable
under the Operative Agreements as to any rights or obligations assigned
by Lessee or regarding any Property in which rights or obligations have
been assigned or otherwise transferred.
25.2 SUBLEASES.
(a) Promptly, but in any event within five (5) Business Days,
following the execution and delivery of any sublease permitted by this
Article XXV, Lessee shall notify Lessor of the execution of such
sublease and shall collaterally assign such sublease to the Lessor as
security for Lessee's obligations hereunder and under any other
Operative Agreement. Any such collateral assignment shall be in form and
substance reasonably acceptable to the Lessor and the Agent. As of the
date of each Lease Supplement, Lessee
40
<PAGE> 46
shall lease the respective Properties described in such Lease Supplement
from Lessor, and any existing tenant respecting such Property shall
automatically be deemed to be a subtenant of Lessee and not a tenant of
Lessor.
(b) Without the prior written consent of the Agent, any Lender,
any Holder or Lessor and subject to the other provisions of this Section
25.2, Lessee may sublet any Property or portion thereof to any
wholly-owned Subsidiary of Lessee or to any other Person; provided, all
subleasing shall be done on market terms and shall in no way diminish
the fair market value or useful life of any applicable Property.
(c) No sublease (referenced in this Section 25.2 or otherwise) or
other relinquishment of possession to any Property shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder or
diminish the fair market value of any Property. Lessee shall remain
directly and primarily liable under this Lease as to such Property, or
portion thereof, so sublet. During the Basic Term, the term of any such
sublease shall not extend beyond the Basic Term. During any Renewal
Term, the term of any such sublease shall not extend beyond such Renewal
Term. Each sublease shall be expressly subject and subordinate to this
Lease.
ARTICLE XXVI
26.1 NO WAIVER.
No failure by Lessor or Lessee to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy upon a
default hereunder, and no acceptance of full or partial payment of Rent during
the continuance of any such default, shall constitute a waiver of any such
default or of any such term. To the fullest extent permitted by law, no waiver
of any default shall affect or alter this Lease, and this Lease shall continue
in full force and effect with respect to any other then existing or subsequent
default.
ARTICLE XXVII
27.1 ACCEPTANCE OF SURRENDER.
No surrender to Lessor of this Lease or of all or any portion of
any Property or of any part of any thereof or of any interest therein shall be
valid or effective unless agreed to and accepted in writing by Lessor and no act
by Lessor or the Agent or any representative or agent of Lessor or the Agent,
other than a written acceptance, shall constitute an acceptance of any such
surrender.
41
<PAGE> 47
27.2 NO MERGER OF TITLE.
There shall be no merger of this Lease or of the leasehold estate
created hereby by reason of the fact that the same Person may acquire, own or
hold, directly or indirectly, in whole or in part, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate, (b) any right, title or interest in any Property, (c) any Notes, or (d)
a beneficial interest in Lessor.
ARTICLE XXVIII
28.1 [RESERVED]
ARTICLE XXIX
29.1 NOTICES.
All notices required or permitted to be given under this Lease
shall be in writing and delivered as provided in the Participation Agreement.
ARTICLE XXX
30.1 MISCELLANEOUS.
Anything contained in this Lease to the contrary notwithstanding,
all claims against and liabilities of Lessee or Lessor arising from events
commencing prior to the expiration or earlier termination of this Lease shall
survive such expiration or earlier termination. If any provision of this Lease
shall be held to be unenforceable in any jurisdiction, such unenforceability
shall not affect the enforceability of any other provision of this Lease and
such jurisdiction or of such provision or of any other provision hereof in any
other jurisdiction.
30.2 AMENDMENTS AND MODIFICATIONS.
Neither this Lease nor any Lease Supplement may be amended,
waived, discharged or terminated except in accordance with the provisions of
Section 12.4 of the Participation Agreement.
30.3 SUCCESSORS AND ASSIGNS.
All the terms and provisions of this Lease shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
42
<PAGE> 48
30.4 HEADINGS AND TABLE OF CONTENTS.
The headings and table of contents in this Lease are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
30.5 COUNTERPARTS.
This Lease may be executed in any number of counterparts, each of
which shall be an original, but all of which shall together constitute one (1)
and the same instrument.
30.6 GOVERNING LAW.
THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE
EXTENT THE LAWS OF THE STATE WHERE A PARTICULAR PROPERTY IS LOCATED ARE REQUIRED
TO APPLY.
30.7 CALCULATION OF RENT.
All calculation of Rent payable hereunder shall be computed based
on the actual number of days elapsed over a year of three hundred sixty (360)
days or, to the extent such Rent is based on the Prime Lending Rate, three
hundred sixty-five (365) (or three hundred sixty-six (366), as applicable) days.
30.8 RECORDING OF LEASE.
This Lease shall be recorded. Lessor and Lessee shall promptly
record this Lease regarding the property identified on Exhibit B attached hereto
and the subject of any Lease Supplement promptly after the acquisition thereof
in the local filing office with respect thereto and as required under applicable
law to sufficiently evidence this Lease and any such Lease Supplement in the
applicable real estate filing records. Lessor (at the direction of the Agent)
shall elect whether the costs and expenses incurred by Lessor and/or the Agent
respecting the recordation of the above-referenced items shall be paid by either
(i) Lessor (but only the extent amounts are available therefor with respect to
the Available Commitments and the Available Holder Commitments or each Lender
and each Holder approves the necessary increases in the Available Commitments
and the Available Holder Commitments to fund such costs and expenses) or (ii)
Lessee; provided, amounts funded by the Lenders and the Holders with respect to
such costs and expenses shall be added to the Property Cost of each applicable
Property; provided, further, amounts funded by Lessee with respect to such costs
and expenses shall be a part of (and limited by) the Maximum Residual Guarantee
Amount.
30.9 ALLOCATIONS BETWEEN THE LENDERS AND THE HOLDERS.
Notwithstanding any other term or provision of this Lease to the
contrary, the allocations of the proceeds of the Properties and any and all
other Rent and other amounts
43
<PAGE> 49
received hereunder shall be subject to the inter-creditor provisions between the
Lenders and the Holders contained in the Operative Agreements (or as otherwise
agreed among the Lenders and the Holders from time to time).
30.10 LIMITATIONS ON RECOURSE.
Notwithstanding anything contained in this Lease to the contrary,
Lessee agrees to look solely to Lessor's estate and interest in the Properties,
the proceeds of any sale thereof, any insurance proceeds from insurance coverage
required pursuant to the Lease or any condemnation or similar proceeds received
by Lessor in connection with any Property (and in no circumstance to the Agent,
the Lenders, the Holders or otherwise to Lessor) for the collection of any
judgment requiring the payment of money by Lessor in the event of liability by
Lessor, and no other property or assets of Lessor or any shareholder, owner or
partner (direct or indirect) in or of Lessor, or any director, officer,
employee, beneficiary, Affiliate of any of the foregoing shall be subject to
levy, execution or other enforcement procedure for the satisfaction of the
remedies of Lessee under or with respect to this Lease, the relationship of
Lessor and Lessee hereunder or Lessee's use of the Properties or any other
liability of Lessor to Lessee; provided, that Lessor shall be liable in its
individual capacity for (a) its own willful misconduct or gross negligence and
(b) breach of any of its representations and warranties or covenants under the
Operative Agreements. Nothing in this Section shall be interpreted so as to
limit the terms of Sections 6.1 or 6.2 or the provisions of Section 12.9 of the
Participation Agreement.
30.11 WAIVERS OF JURY TRIAL.
EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY, TO
THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS LEASE AND FOR ANY
COUNTERCLAIM THEREIN.
30.12 EXERCISE OF LESSOR RIGHTS.
Lessee hereby acknowledges and agrees that the rights and powers
of Lessor under this Lease have been assigned to the Agent pursuant to the terms
of the Security Agreement and the other Operative Agreements. Lessor and Lessee
hereby acknowledge and agree that (a) the Agent shall, in its discretion, direct
and/or act on behalf of Lessor pursuant to the provisions of Sections 8.2(h) and
8.6 of the Participation Agreement, (b) all notices to be given to Lessor shall
be given to the Agent and (c) all notices to be given by Lessor may be given by
the Agent, at its election.
30.13 SUBMISSION TO JURISDICTION; VENUE.
THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO
SUBMISSION TO JURISDICTION AND VENUE ARE HEREBY INCORPORATED BY REFERENCE
HEREIN, MUTATIS MUTANDIS.
44
<PAGE> 50
30.14 USURY SAVINGS PROVISION.
IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT
IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. TO
THE EXTENT ANY RENT OR PAYMENTS HEREUNDER ARE HEREINAFTER CHARACTERIZED BY ANY
COURT OF COMPETENT JURISDICTION AS THE REPAYMENT OF PRINCIPAL AND INTEREST
THEREON, THIS SECTION 30.14 SHALL APPLY. ANY SUCH RENT OR PAYMENTS SO
CHARACTERIZED AS INTEREST MAY BE REFERRED TO HEREIN AS "INTEREST." ALL
AGREEMENTS AMONG THE PARTIES HERETO ARE HEREBY LIMITED BY THE PROVISIONS OF THIS
PARAGRAPH WHICH SHALL OVERRIDE AND CONTROL ALL SUCH AGREEMENTS, WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY
EVENT OR CONTINGENCY (INCLUDING WITHOUT LIMITATION PREPAYMENT OR ACCELERATION OF
THE MATURITY OF ANY OBLIGATION), SHALL ANY INTEREST TAKEN, RESERVED, CONTRACTED
FOR, CHARGED, OR RECEIVED UNDER THIS LEASE OR OTHERWISE, EXCEED THE MAXIMUM
NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE LAW. IF, FROM ANY POSSIBLE
CONSTRUCTION OF ANY OF THE OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR
AGREEMENT, INTEREST WOULD OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM
NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF
THIS PARAGRAPH AND SUCH AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE
AUTOMATICALLY REDUCED TO THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER
APPLICABLE LAW, WITHOUT THE NECESSITY OF EXECUTION OF ANY AMENDMENT OR NEW
DOCUMENT OR AGREEMENT. IF LESSOR SHALL EVER RECEIVE ANYTHING OF VALUE WHICH IS
CHARACTERIZED AS INTEREST WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR
UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF
THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN
EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, BE APPLIED TO THE REDUCTION OF THE
COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST,
OR REFUNDED TO LESSEE OR ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT SUCH
AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS DEEMED
TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF
THE OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT TO RECEIVE ANY INTEREST
WHICH HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH DEMAND, AND LESSOR DOES NOT
INTEND TO CHARGE OR RECEIVE ANY UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND.
ALL INTEREST PAID OR AGREED TO BE PAID TO LESSOR SHALL, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE
FULL
45
<PAGE> 51
STATED TERM (INCLUDING WITHOUT LIMITATION ANY RENEWAL OR EXTENSION) OF THIS
LEASE SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES NOT EXCEED
THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE LAW.
[signature page follows]
46
<PAGE> 52
IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed and delivered as of the date first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but
solely as the Owner Trustee under
the VS Trust 2000-1, as Lessor
By: /s/ VAL T. ORTON
-------------------------
Name: Val T. Orton
Title: Vice President
STATE OF UTAH )
) ss:
COUNTY OF SALT LAKE )
The foregoing Lease was acknowledged before me, the undersigned Notary
Public, in the County of Salt Lake this _____ day of ______________,
______, by Val T. Orton, as Vice President of FIRST SECURITY BANK,
NATIONAL ASSOCIATION, a national banking association, not individually, but
solely as the Owner Trustee under the VS Trust 2000-1, on behalf of the Owner
Trustee.
[Notarial Seal] /s/ MARK GRAHAM
---------------
Notary Public
My commission expires: Sept. 10, 2002
<PAGE> 53
VERITAS OPERATING CORPORATION, as Lessee
By: /s/ KEN LONCHAR
Name: Ken Lonchar
Title: Senior Vice President and
Chief Financial Officer
STATE OF CALIFORNIA )
) ss:
COUNTY OF SANTA CLARA )
The foregoing Lease was acknowledged before me, the undersigned Notary
Public, in the County of Santa Clara this 3rd day of March, 2000, by Ken
Lonchar, as SVP and CFO of VERITAS OPERATING CORPORATION, a Delaware
corporation, on behalf of the corporation.
[Notarial Seal] /s/ COURTNIE WALKER
--------------------
Notary Public
My commission expires: September 26, 2003
THIS INSTRUMENT DRAFTED BY:
Todd A. Caraway
Moore & Van Allen, PLLC
100 North Tryon, 47th Floor
Charlotte, NC 28202-4003
<PAGE> 54
Receipt of this original
counterpart of the foregoing
Lease is hereby acknowledged
as the date hereof
BANK OF AMERICA, N.A.,
as the Agent
By: /s/ DOUGLAS T. MECKELNBURG
------------------------------
Name: Douglas T. Meckelnburg
Title: Vice President
STATE OF CALIFORNIA )
) ss:
COUNTY OF SAN FRANCISCO )
The foregoing Lease was acknowledged before me, the undersigned Notary
Public, in the County of San Francisco this 22nd day of Feburary, 2000,
by Mary K. Ridenhour, as Corporate Officer of BANK OF AMERICA, N.A., a national
banking association, as the Agent.
[Notarial Seal] /s/ MARY K. RIDENHOUR
------------------------------
Notary Public
My commission expires: June 30, 2000
<PAGE> 55
EXHIBIT A TO THE LEASE
LEASE SUPPLEMENT NO. __
THIS LEASE SUPPLEMENT NO. __ (this "Lease Supplement") dated as of
___________, ______ between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a
national banking association, not individually, but solely as the Owner Trustee
under the VS Trust 2000-1, as lessor (the "Lessor"), and VERITAS OPERATING
CORPORATION, a Delaware corporation, as lessee (the "Lessee").
WHEREAS, Lessor is the owner or will be the owner of the Property
described on Schedule 1 hereto (the "Leased Property") and wishes to lease the
same to Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS; RULES OF USAGE. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in Appendix A to the Participation Agreement,
dated as of March 9, 2000, among Lessee, the various parties thereto from time
to time, as the Guarantors, Lessor, not individually, except as expressly stated
therein, but solely as the Owner Trustee under the VS Trust 2000-1, the various
banks and other lending institutions which are parties thereto from time to
time, as the Holders, the various banks and other lending institutions which are
parties thereto from time to time, as the Lenders, and Bank of America, N.A., as
the Agent for the Lenders and respecting the Security Documents, as the Agent
for the Lenders and Holders, to the extent of their interests, as such may be
amended, modified, extended, supplemented, restated and/or replaced from time to
time.
SECTION 2. THE PROPERTIES. Attached hereto as Schedule 1 is the
description of the Leased Property, with an Equipment Schedule attached hereto
as Schedule 1-A, an Improvement Schedule attached hereto as Schedule 1-B and a
legal description of the Land attached hereto as Schedule 1-C. Effective upon
the execution and delivery of this Lease Supplement by Lessor and Lessee, the
Leased Property shall be subject to the terms and provisions of the Lease.
Without further action, any and all additional Equipment funded under the
Operative Agreements and any and all additional Improvements made to the Land
shall be deemed to be titled to the Lessor and subject to the terms and
conditions of the Lease and this Lease Supplement.
SECTION 3. USE OF PROPERTY. At all times during the Term with respect to
each Property, Lessee will comply with all obligations under and (to the extent
no Event of Default exists and provided, that such exercise will not impair the
value of such Property) shall be permitted to exercise all rights and remedies
under, all operation and easement agreements and related or similar agreements
applicable to such Property.
A-1
<PAGE> 56
SECTION 4. RATIFICATION; INCORPORATION BY REFERENCE. Except as
specifically modified hereby, the terms and provisions of the Lease and the
Operative Agreements are hereby ratified and confirmed and remain in full force
and effect. The Lease is hereby incorporated herein by reference as though
restated herein in its entirety.
SECTION 5. ORIGINAL LEASE SUPPLEMENT. The single executed original of
this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "Original Executed
Counterpart"). To the extent that this Lease Supplement constitutes chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND
CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAW OF THE STATE OF
NEW YORK, EXCEPT TO THE EXTENT THE LAWS OF THE STATE WHERE A PARTICULAR PROPERTY
IS LOCATED ARE REQUIRED TO APPLY.
SECTION 7. COUNTERPART EXECUTION. This Lease Supplement may be executed
in any number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one (1) and the
same instrument.
SECTION 8. MAXIMUM RESIDUAL GUARANTEE AMOUNT. The Maximum Residual
Guarantee Amount shall mean an amount equal to [THE PRODUCT OF THE AGGREGATE
PROPERTY COST FOR ALL OF THE LEASED PROPERTY TIMES _________ PERCENT (__%)].
For purposes of the provisions of this Lease Supplement concerning this
Lease Supplement constituting a security agreement and fixture filing, the
addresses of the debtor (Lessee herein) and the secured party (Lessor herein),
from whom information may be obtained about this Lease Supplement, are as set
forth on the signature pages hereto.
[The remainder of this page has been intentionally left blank.]
A-2
<PAGE> 57
IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of the
date and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but
solely as the Owner Trustee under
the VS Trust 2000-1, as Lessor
By:_________________________________
Name:_______________________________
Title:______________________________
First Security Bank, National
Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Val T. Orton
Vice President
VERITAS OPERATING CORPORATION,
as Lessee
By:_________________________________
Name:_______________________________
Title:______________________________
VERITAS Operating Corporation
1600 Plymouth Street
Mountain View, California 94043
Attn: Jay Jones
Receipt of this original counterpart
of the foregoing Lease Supplement is hereby
acknowledged as the date hereof.
BANK OF AMERICA, N.A., as the Agent
By:_________________________________
Name:_______________________________
Title:______________________________
A-3
<PAGE> 58
Bank of America, N.A.
901 Main Street, 14th Floor
Mail Code TX1-492-14-11
Dallas, Texas 75202-3714
Attention: Otis E. Howard
Telephone: (214) 209-9253
Telecopy: (214) 209-2515
A-4
<PAGE> 59
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of _________________ this _____ day of
______________, ______, by ________________, as __________________ of FIRST
SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not
individually, but solely as the Owner Trustee under the VS Trust 2000-1, on
behalf of the Owner Trustee.
[Notarial Seal] ___________________________________
Notary Public
My commission expires: ____________
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of _________________ this _____ day of
______________, ______, by ________________, as __________________ of VERITAS
OPERATING CORPORATION, a Delaware corporation, on behalf of the corporation.
[Notarial Seal] ___________________________________
Notary Public
My commission expires: ____________
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of ________________ this ____ day of
___________, ______, by _____________, as __________________ of BANK OF AMERICA,
N.A., a national banking association, as the Agent.
[Notarial Seal] ___________________________________
Notary Public
My commission expires: ____________
A-5
<PAGE> 60
SCHEDULE 1
TO LEASE SUPPLEMENT NO. __
(Description of the Leased Property)
A-6
<PAGE> 61
SCHEDULE 1-A
TO LEASE SUPPLEMENT NO. __
(Equipment)
A-7
<PAGE> 62
SCHEDULE 1-B
TO LEASE SUPPLEMENT NO. __
(Improvements)
A-8
<PAGE> 63
SCHEDULE 1-C
TO LEASE SUPPLEMENT NO. __
(Land)
A-9
<PAGE> 64
EXHIBIT B TO THE LEASE
Description of Property Subject to Lease
That certain real property more particularly described on the legal
description attached as Schedule I hereto, together with all Improvements and
Equipment constructed or located thereon from time to time.
B-1
<PAGE> 65
SCHEDULE I
Lots 5, 6 and 7, Block 1, CENTRE POINT BUSINESS PARK, according to the recorded
plat thereof, Ramsey County, Minnesota, except that part of said Lot 5 lying
Northerly of a line described as follows: Commencing at the most northerly
Northwest corner of said Lot 5; thence South 00 degrees 00 minutes 00 seconds
West, assumed bearing, along a West line of said Lot 5 a distance of 46.92 feet
to the beginning of the line to be described; thence North 90 degrees 00 minutes
00 seconds East a distance of 265.37 feet to the Northeasterly line of said Lot
5 and said line there terminating.
B-2
<PAGE> 1
EXHIBIT 10.35
================================================================================
CONSTRUCTION AGENCY AGREEMENT
Dated as of March 9, 2000
between
VERITAS OPERATING CORPORATION,
as the Construction Agent
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as the
Owner Trustee under the VS Trust 2000-1
as the Lessor
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS; RULES OF USAGE.......................................................1
1.1 Definitions......................................................................1
1.2 Interpretation...................................................................2
ARTICLE II APPOINTMENT OF THE CONSTRUCTION AGENT............................................2
2.1 Appointment and Acceptance.......................................................2
2.2 [Intentionally Omitted]..........................................................4
2.3 Term.............................................................................4
2.4 Scope of Authority...............................................................5
2.5 Delegation of Duties.............................................................6
2.6 Covenants of the Construction Agent..............................................6
ARTICLE III THE PROPERTIES..................................................................8
3.1 Construction.....................................................................8
3.2 Amendments; Modifications........................................................8
3.3 Failure to Complete Construction Period Properties...............................9
ARTICLE IV PAYMENT OF FUNDS.................................................................9
4.1 Right to Receive Construction Cost...............................................9
ARTICLE V EVENTS OF DEFAULT................................................................10
5.1 Events of Default...............................................................10
5.2 Damages.........................................................................11
5.3 Remedies; Remedies Cumulative...................................................11
ARTICLE VI THE LESSOR'S RIGHTS.............................................................13
6.1 Exercise of the Lessor's Rights.................................................13
6.2 The Lessor's Right to Cure the Construction Agent's Defaults....................13
ARTICLE VII MISCELLANEOUS..................................................................13
7.1 Notices.........................................................................13
7.2 Successors and Assigns..........................................................13
7.3 GOVERNING LAW...................................................................13
7.4 SUBMISSION TO JURISDICTION; VENUE; WAIVERS......................................14
7.5 Amendments and Waivers..........................................................14
7.6 Counterparts....................................................................14
7.7 Severability....................................................................14
7.8 Headings and Table of Contents..................................................14
7.9 WAIVER OF JURY TRIAL............................................................14
</TABLE>
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CONSTRUCTION AGENCY AGREEMENT
THIS CONSTRUCTION AGENCY AGREEMENT, dated as of March 9, 2000 (as
amended, modified, extended, supplemented, restated and/or replaced from time to
time, the "Agreement"), between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a
national banking association ("FSB"), not individually, but solely as Owner
Trustee under the VS Trust 2000-1 (the "Lessor"), and VERITAS OPERATING
CORPORATION, a Delaware corporation (the "Construction Agent").
PRELIMINARY STATEMENT
A. The Lessor and the Construction Agent are parties to that certain
Lease Agreement dated as of even date herewith (as amended, modified, extended,
supplemented, restated and/or replaced from time to time, the "Lease"), pursuant
to which the Construction Agent, as lessee (in such capacity, the "Lessee") has
agreed to lease certain Land, Improvements and Equipment from the Lessor.
B. In connection with the execution and delivery of the Participation
Agreement, the Lease and the other Operative Agreements, and subject to the
terms and conditions hereof, (i) the Lessor desires to appoint the Construction
Agent as its sole and exclusive agent in connection with the identification and
acquisition of the Properties (provided, title to the Properties shall be held
in the name of the Lessor) and the development, acquisition, installation,
construction and testing of the Improvements and the Equipment in accordance
with the Plans and Specifications and pursuant to the applicable construction
contract and (ii) the Construction Agent desires, for the benefit of the Lessor,
to identify and acquire the Properties and to cause the development,
acquisition, installation, construction and testing of the Improvements, the
Equipment and the other components of the Properties in accordance with the
Plans and Specifications and to undertake such other liabilities and obligations
as are herein set forth.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS; RULES OF USAGE
1.1 DEFINITIONS.
For purposes of this Agreement, capitalized terms used in this
Agreement and not otherwise defined herein shall have the meanings assigned to
them in Appendix A to that certain Participation Agreement dated as of March 9,
2000 (as amended, modified, extended,
<PAGE> 4
supplemented, restated and/or replaced from time to time in accordance with the
applicable provisions thereof, the "Participation Agreement") among the
Construction Agent, the various parties thereto from time to time, as
Guarantors, the Lessor, the various banks and lending institutions parties
thereto from time to time, as Holders, the various banks and lending
institutions parties thereto from time to time, as Lenders, and Bank of America,
N.A., as the agent for the Lenders and respecting the Security Documents, as the
agent for the Lenders and the Holders, to the extent of their interests. Unless
otherwise indicated, references in this Agreement to articles, sections,
paragraphs, clauses, appendices, schedules and exhibits are to the same
contained in this Agreement.
1.2 INTERPRETATION.
The rules of usage set forth in Appendix A to the Participation
Agreement shall apply to this Agreement.
ARTICLE II
APPOINTMENT OF THE CONSTRUCTION AGENT
2.1 APPOINTMENT AND ACCEPTANCE.
Subject to the terms and conditions hereof, the Lessor hereby
irrevocably designates and appoints the Construction Agent as its exclusive
agent and as general contractor, and the Construction Agent accepts such
appointment, in connection with the identification and acquisition from time to
time of the Properties (provided, title to the Properties shall be held in the
name of the Lessor) and the development, acquisition, installation, construction
and testing of the Improvements, the Equipment and the other components of the
Properties in accordance with the Plans and Specifications on the Land, and
pursuant to the terms of the Operative Agreements. Notwithstanding any
provisions hereof or in any other Operative Agreement to the contrary, the
Construction Agent acknowledges and agrees that the Lessor shall advance no more
than the sum of the aggregate Commitment of the Lenders plus the aggregate
amount of the Holder Commitments of the Holders in regard to the Properties
(including without limitation for any and all Advances in the aggregate from the
Lenders under the Credit Agreement and from the Holders under the Trust
Agreement). After the Construction Agent gains knowledge or a reasonable
expectation that the costs for any Property shall exceed the original
Construction Budget (or exceed the Construction Budget as modified in accordance
with the Operative Agreements) for such Property or that Completion for any
Property shall not occur on or prior to the Construction Period Termination
Date, the Construction Agent shall promptly (and in any event within five (5)
Business Days of gaining such knowledge or expectation) notify the Agent in
writing of the same. If at any time prior to the Construction Period Termination
Date, the Lessor or the Agent shall have (x) determined in its respective
reasonable good faith judgment that (i) the sum of the Available Commitments and
the Available Holder Commitments shall be less than the amounts necessary for
Completion of all Properties or (ii) Completion of one or more Properties shall
not occur on or prior to the Construction Period Termination Date or (y)
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received any notice from the Construction Agent as referenced in the preceding
provisions of this paragraph, then in any such case Lessor shall have the option
(at the direction of the Agent) to replace the Construction Agent with a new
construction agent selected by the Lessor (at the direction of the Agent) to
finalize the Completion of the Properties. The cost and expense incurred to
finalize the Completion of the Properties as referenced in the preceding
sentence shall be the responsibility of the Construction Agent and shall be
payable by the Construction Agent on demand; provided, in no event shall the
obligations of the Construction Agent for such costs and expenses exceed the
Maximum Amount; provided, further, amounts expended by the Lessor to finalize
the Completion of the Properties as referenced in the preceding sentence shall
be added to the Property Cost.
Costs in excess of each original Construction Budget (or the
Construction Budget as modified in accordance with the Operative Agreements) in
each case as previously delivered to the Agent for each Property shall not be
the responsibility of the Construction Agent but instead shall be paid by the
Lenders and the Holders to the extent, but only to the extent, that (after
taking into account such excess costs and any other items of excess cost which
are then known to the Construction Agent or are reasonable for the Construction
Agent to expect) the conditions precedent set forth in Section 5.4 of the
Participation Agreement are satisfied.
Subject to the Lenders and the Holders not agreeing to continue making
Advances in accordance with the provisions of the next paragraph and in the
event from time to time (a) the Construction Agent gains knowledge or a
reasonable expectation that the costs for any Property shall exceed the original
Construction Budget (or exceed the Construction Budget as modified in accordance
with the Operative Agreements) or that Completion for any Property shall not
occur on or prior to the Construction Period Termination Date or (b) the Lessor
or the Agent shall have determined in its respective reasonable good faith
judgment that the sum of the Available Commitments and the Available Holder
Commitments shall be less than the amounts necessary for Completion of all
Properties or that Completion of one or more Properties shall not occur on prior
to the Construction Period Termination Date, the Construction Agent shall elect
and comply (within ten (10) days of the Construction Agent gaining such
knowledge or expectation or within ten (10) days of the Lessor or the Agent
making such determination and giving written notice of the same to the
Construction Agent, as referenced in subsections (a) and (b) above of this
paragraph) with one of the options set forth in the following subsections (i) or
(ii) (collectively, the "Construction Agent Options"): (i) the Construction
Agent shall pay to the Lessor, on a date designated by the Lessor, an aggregate
amount equal to (A) the Termination Value for all, but not less than all, the
Properties plus (B) any and all fees and expenses incurred by or on behalf of
the Lessor or the Agent in connection with the Properties (including without
limitation the transfer thereof) and on such date the Lessor shall transfer and
convey to the Construction Agent all right, title and interest of the Lessor in
and to the Properties or (ii) the Construction Agent shall pay to the Lessor, on
a date designated by the Lessor, an aggregate amount equal to the Maximum Amount
and on and after such date, the Construction Agent shall be irrevocably deemed,
without any further action, to have relinquished all right, title and interest
in and to all, but not less than all, the Properties and to have transferred and
conveyed all such right, title and interest to the Lessor. In connection with
any transfer of the Properties as referenced above in this Section 2.1 by the
Lessor to the Construction Agent, the Lessor shall
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execute and deliver to the Construction Agent, at the cost and expense of the
Construction Agent (subject to the limitations described in the next sentence),
each of the following: (w) special or limited warranty Deeds conveying each
Property to the Construction Agent free and clear of the Lien of the Lease, the
Lien of the Credit Documents and any Lessor Liens; (x) a Bill of Sale conveying
each Property (to the extent it is personal property) to the Construction Agent
free and clear of the Lien of the Lease, the Lien of the Credit Documents and
any Lessor Liens; (y) any real estate tax affidavit or other document required
by law to be executed and filed in order to record the applicable Deed; and (z)
FIRPTA affidavits. The Lessor (at the discretion of the Agent) shall elect
whether the out-of-pocket fees and expenses associated with the transfer of the
Properties shall be paid by either (i) sales proceeds from the Properties, (ii)
the Lessor (but only to the extent amounts are available therefor with respect
to the Available Commitments and the Available Holder Commitments or each Lender
and each Holder approves the necessary increases in the Available Commitments
and the Available Holder Commitments to fund such fees and expenses) or (iii)
the Construction Agent; provided, if the Construction Agent funds such fees and
expenses (as referenced in subsection (iii)) then the Maximum Amount will be
reduced accordingly, as more specifically described in the definition of
"Maximum Amount". Amounts funded by the Lenders and the Holders with respect to
the foregoing shall be added to the Property Cost. All of the foregoing
documentation must be in form and substance reasonably satisfactory to the
Lessor. Subject to the foregoing, all, but not less than all, the Properties
shall be conveyed to the Construction Agent "AS-IS", "WHERE-IS" and in then
present physical condition.
In the event the costs in excess of any original Construction Budget
previously delivered to the Agent for any Property are not funded by the Lenders
and the Holders because (after taking into account such excess costs and any
other items of excess cost which are then known to the Construction Agent or are
reasonable for the Construction Agent to expect) the conditions precedent set
forth in Section 5.4 of the Participation Agreement are not satisfied, then if,
but only if, all the Holders and all the Lenders agree at such time, (a) such
excess costs shall be funded and (b) the Holder Commitments and the Lender
Commitments shall be increased accordingly.
2.2 [INTENTIONALLY OMITTED].
2.3 TERM.
This Agreement shall commence on the date hereof and, unless the Lessor
(in its sole discretion) elects otherwise, this Agreement shall terminate on the
Construction Period Termination Date. If this Agreement expires prior to the
Completion of all, but not less than all, the Properties, then the Lessor may
either (i) hire a new construction agent (at the direction of the Agent) to
finalize the Completion of all Properties or (ii) require the Construction Agent
to continue to perform hereunder and to achieve Completion of all Properties.
The cost and expense incurred to finalize the Completion of the Properties as
referenced in the preceding sentence shall be the responsibility of the
Construction Agent and shall be payable by the Construction Agent on demand;
provided, in no event shall the obligations of the Construction Agent for such
costs and expenses exceed the Maximum Amount; provided, further, amounts
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expended by the Lessor to finalize the Completion of the Properties as
referenced in the preceding sentence shall be added to the Property Cost.
2.4 SCOPE OF AUTHORITY.
(a) The Lessor hereby expressly authorizes the Construction
Agent, or any agent or contractor of the Construction Agent, and the
Construction Agent unconditionally agrees for the benefit of the Lessor,
subject to Section 2.4(b), to take all action necessary or desirable for
the performance and satisfaction of any and all of the Lessor's
obligations under any construction agreement and to fulfill all of the
obligations of the Construction Agent including without limitation:
(i) the identification and assistance with the acquisition
of Properties in accordance with the terms and conditions of the
Participation Agreement;
(ii) all design and supervisory functions relating to the
development, acquisition, installation, construction and testing
of the related Improvements, Equipment and other components of
the applicable Property and performing all engineering work
related thereto;
(iii) (A) negotiating, entering into, performing and
enforcing all contracts and arrangements to acquire the
Properties and to procure the equipment necessary to construct
the Properties and (B) negotiating, executing, performing and
enforcing all contracts and arrangements to develop, acquire,
install, construct and test the Improvements, the Equipment and
the other components of the Properties on such terms and
conditions as are customary and reasonable in light of local and
national standards and practices and the businesses in which the
Lessee is engaged;
(iv) obtaining all necessary permits, licenses, consents,
approvals, entitlements and other authorizations, including
without limitation all of the foregoing required for the
Properties and the use and occupancy thereof and those required
under applicable Law (including without limitation Environmental
Laws), from all Governmental Authorities in connection with the
development, acquisition, installation, construction and testing
of the Improvements, the Equipment and the other components of
the Properties substantially in accordance with the Plans and
Specifications;
(v) maintaining all books and records with respect to the
Properties and the construction, operation and management
thereof;
(vi) performing any other acts necessary in connection
with the identification and acquisition of the Properties and the
development, acquisition, installation, construction and testing
of the related Improvements, Equipment and
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all other additional components of the Properties in accordance
with the Plans and Specifications;
(vii) the right to submit notices pursuant to Section 2.3
of the Credit Agreement and to receive the proceeds of Advances
directly from the Agent;
(viii) the right to contest all mechanics' and
materialmens' liens in accordance with the requirements for
Permitted Liens; and
(ix) the right to bring or defend any claims or seek
resolution of disputes arising from Construction Agent's
performance of any of the foregoing actions.
(b) Neither the Construction Agent nor any of its Affiliates or
agents shall enter into any contract or consent to any contract in the
name of the Lessor without the Lessor's prior written consent, such
consent to be given or withheld in the exercise of the Lessor's
reasonable discretion; provided, however, that (i) no such contract will
increase the obligations of the Lessor beyond the obligations of the
Lessor as are expressly set forth in the Operative Agreements and (ii)
each such contract shall expressly limit recourse against the Lessor to
the assets of the VS Trust 2000-1 and shall otherwise be non-recourse to
the Lessor on terms and conditions that are reasonably acceptable to the
Lessor.
(c) Subject to the terms and conditions of this Agreement and the
other Operative Agreements, the Construction Agent shall have sole
management and control over the installation, construction and testing
means, methods, sequences and procedures with respect to the Properties.
2.5 DELEGATION OF DUTIES
The Construction Agent may execute any of its duties under this
Agreement by or through agents, contractors, employees or attorneys-in-fact;
provided, however, that no such delegation shall limit or reduce in any way the
Construction Agent's duties and obligations under this Agreement.
2.6 COVENANTS OF THE CONSTRUCTION AGENT.
The Construction Agent hereby covenants and agrees that it will:
(a) following the Construction Commencement Date for each
Property, cause the development, acquisition, installation, construction
and testing of such Property to be prosecuted in a good and workmanlike
manner, and respecting each Property in accordance with the applicable
Plans and Specifications, the Construction Budget, the applicable
contracts relating to the Improvements, the Equipment, other components
of such Property and procurement of construction materials, the
applicable construction
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contracts, the applicable construction schedule, prevalent industry
practices and otherwise in accordance with Section 3.1 hereof;
(b) [Intentionally Omitted];
(c) cause the Completion Date for any Improvements to occur on or
before the earlier of (i) the date that is eighteen (18) months after
the Initial Closing Date or (ii) the Construction Period Termination
Date, in each case free and clear (by removal or bonding) of Liens or
claims for materials supplied or labor or services performed in
connection with the development, acquisition, installation, construction
or testing thereof, except for Permitted Liens; provided, that the
failure to cause the Completion for any Property by such date shall not
be deemed a breach hereunder if such delay is caused by a Force Majeure
Event and Completion is accomplished within three (3) months of the date
otherwise applicable but for this proviso; provided, further, to the
extent such failure to complete is caused by a Force Majeure Event
extending beyond such three (3) month period, the Construction Agent
shall elect one of the Construction Agent Options set forth in Section
2.1 and, if such election is not made within ten (10) Business Days of
the end of such three (3) month period, the Construction Agent shall be
deemed to have elected to purchase all the Properties for the
Termination Value in accordance with the provisions of Section 2.1;
(d) use its good faith efforts to cause all outstanding punch
list items with respect to such Improvements to be completed promptly
following the Completion Date;
(e) at all times subsequent to the initial Advance respecting a
Property (i) cause good and marketable title to the applicable Property
to vest in the Owner Trustee (ii) cause a valid, perfected, first
priority Lien on the applicable Property to be in place in favor of the
Agent (for the benefit of the Lenders and the Holders), (iii) file all
necessary documents under the applicable real property law and Article 9
of the Uniform Commercial Code to perfect such title and Liens and (iv)
subject to the terms of Article XIII of the Lease relating to Permitted
Contests, not permit Liens (other than Permitted Liens and Lessor Liens)
to be filed or maintained respecting the applicable Property;
(f) no less than five (5) Business Days prior to the scheduled
date for the initial Construction Advance to be made in connection with
any Property, the Construction Agent shall deliver to the Agent (for the
benefit of the Lessor) true, complete and correct copies of the
Construction Budget therefor. Thereafter, the Construction Agent, on a
monthly basis, shall deliver to the Lessor true, correct and complete
copies of any material modifications of the Construction Budget and
progress reports regarding the development, acquisition, installation,
construction and testing of the Properties;
(g) procure insurance for the Properties during the Construction
Period in accordance with the provisions of Article XIV of the Lease;
and
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(h) on or before the Construction Period Termination Date (which
date shall be subject to extension pursuant to the provisions of Section
2.1 in the sole and absolute discretion of the Lenders and the Holders),
cause the Rent Commencement Date to occur with respect to all Properties
or purchase any such Properties for an amount equal to the sum
referenced in Section 5.3(b) hereof and otherwise in compliance with the
other terms and provisions of the Operative Agreements.
ARTICLE III
THE PROPERTIES
3.1 CONSTRUCTION.
The Construction Agent shall cause the Improvements, the Equipment and
all other components of the Properties to be developed, acquired, installed,
constructed and tested in compliance with all Legal Requirements, all Insurance
Requirements, all manufacturer's specifications and standards and the standards
maintained by the Construction Agent for similar properties owned or operated by
the Construction Agent, unless non-compliance, individually or in the aggregate,
shall not have and could not be reasonably expected to have a Material Adverse
Effect.
3.2 AMENDMENTS; MODIFICATIONS.
(a) The Construction Agent may at any time revise, amend or
modify (i) the Plans and Specifications without the consent of the
Lessor; provided, that any such amendment to the Plans and
Specifications does not (x) result in the Completion Date of the
Improvements occurring on or after the Construction Period Termination
Date or (y) result in the cost of all Improvements exceeding the amount
specified in the Construction Budget, as amended from time to time, or
an amount equal to the sum of the then Available Commitments plus the
then Available Holder Commitments (reduced by the amount, if any,
necessary to pay for the cost of construction and development of
Improvements on other Properties which are currently under construction
but have not yet been completed (such amount the "Unfunded Amount")),
and (ii) the Construction Budget and enter into any related amendments,
modifications or supplements without the consent of the Lessor;
provided, that such revisions, amendments or modifications to the Plans
and Specifications or related amendments, modifications or supplements
to the Construction Budget do not result in any increase in total
Property Costs greater than the amount specified in the Construction
Budget, as amended from time to time, or the then Available Commitments
and Available Holder Commitment (reduced by the Unfunded Amount).
(b) The Construction Agent agrees that it will not implement any
revision, amendment or modification to the Plans and Specifications for
any Property if the aggregate effect of such revision, amendment or
modification, when taken together with
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any previous or contemporaneous revision, amendment or modification to
the Plans and Specifications for any Property, would cause a reduction
in the fair market value of the Properties below the Termination Value
therefor when completed, unless such revision, amendment or modification
is required by Legal Requirements or Section 9.1 of the Lease.
3.3 FAILURE TO COMPLETE CONSTRUCTION PERIOD PROPERTIES.
Until termination of the Lease Agreement and the Construction Agency
Agreement, the Construction Agent shall promptly and diligently complete the
development, acquisition, refinancing, installation, construction and testing of
such Construction Period Property substantially in accordance with the Plans and
Specifications and with the terms hereof and cause the Completion Date with
respect to such Construction Period Property to occur on or prior to the
Construction Period Termination Date.
If, prior to the Completion Date with respect to any particular
Property, the Construction Agent shall abandon or permanently discontinue the
construction and development of one or more Construction Period Properties
(which abandonment or permanent discontinuance shall be deemed to have occurred
if no work at any such Construction Period Property site is undertaken or
completed during a period of thirty (30) days or more after construction has
commenced for reasons other than a Force Majeure Event), then the Construction
Agent shall pay to the Lessor, on a date designated by the Lessor, an aggregate
amount equal to the Termination Value of the Properties, and on such date Lessor
shall transfer and convey to the Construction Agent all right, title and
interest of Lessor in and to the Properties, at the cost and expense of the
Construction Agent. The Lessor shall convey such property "AS IS," "WHERE-IS"
and in its then present physical condition to the Construction Agent or its
designee free and clear of Lessor Liens. If Lessor does not require the
Construction Agent to pay such amount, the Construction Agent shall promptly and
diligently complete the development, acquisition, refinancing, installation,
construction and testing of the Construction Period Properties in substantial
accordance with the Plans and Specifications and with the terms hereof and cause
the Completion Date with respect to the Construction Period Properties to occur
on or before the Construction Period Termination Date.
ARTICLE IV
PAYMENT OF FUNDS
4.1 RIGHT TO RECEIVE CONSTRUCTION COST.
(a) In connection with the development, acquisition,
installation, construction and testing of any Property and during the
course of the construction of the Improvements on any Property, the
Construction Agent may request that the Lessor advance funds for the
payment of Property Acquisition Costs or other Property Costs, and the
Lessor will comply with such request to the extent provided for under
the Participation Agreement.
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The Construction Agent and the Lessor acknowledge and agree that the
Construction Agent's right to request such funds and the Lessor's
obligation to advance such funds for the payment of Property Acquisition
Costs or other Property Costs is subject in all respects to the terms
and conditions of the Participation Agreement and each of the other
Operative Agreements. Without limiting the generality of the foregoing
it is specifically understood and agreed that in no event shall the
aggregate amounts advanced by the Lenders and the Holders for Property
Acquisition Costs or other Property Costs and any other amounts due and
owing hereunder or under any of the other Operative Agreements exceed
the sum of the aggregate Commitment of the Lenders plus the aggregate
amount of the Holder Commitments, including without limitation such
amounts owing for (i) development, acquisition, installation,
construction and testing of the Properties or (ii) additional amounts
which accrue or become due and owing under the Credit Agreement or Trust
Agreement as obligations of the Lessor prior to any Completion Date.
(b) The proceeds of any funds made available to the Lessor to pay
Property Acquisition Costs or other Property Costs shall be made
available to the Construction Agent in accordance with the Requisition
relating thereto and the terms of the Participation Agreement. The
Construction Agent will use such proceeds only to pay the Property
Acquisition Costs or other Property Costs set forth in the Requisition
relating to such funds.
ARTICLE V
EVENTS OF DEFAULT
5.1 EVENTS OF DEFAULT.
If any one (1) or more of the following events (each an "Event of
Default") shall occur:
(a) the Construction Agent fails to apply any funds paid by the
Lessor to the Construction Agent in a manner consistent with the
requirements of the Operative Agreements and as specified in the
applicable Requisition for the development, acquisition, installation,
construction and testing of the Properties and related Improvements and
Equipment or otherwise respecting the Properties to the payment of
Property Acquisition Costs or other Property Costs;
(b) the Construction Agent shall fail to make any payment
required pursuant to the terms of this Agreement (including without
limitation pursuant to Sections 2.1 and 3.3) within three (3) Business
Days after the same has become due and payable;
(c) any Event of Default (as such term is defined in Appendix A
to the Participation Agreement) shall have occurred and not be cured
within any cure period expressly permitted under the terms of the
applicable Operative Agreement; and
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(d) the Construction Agent shall fail to observe or perform any
term, covenant or condition of any Operative Agreement other than as set
forth in paragraphs (a), (b) or (c) of this Section 5.1 and such failure
to observe or perform any such term, covenant or condition shall
continue for more than thirty (30) days after the earlier of an officer
of the Construction Agent becoming aware of such default or notice
thereof by the Lessor; provided, however, that if such failure is of a
nature that is not capable of being cured within such thirty (30) day
period, and the Construction Agent promptly commences appropriate steps
to cure such failure within such thirty (30) day period and continues to
pursue such cure with diligence and good faith thereafter, unless Lessor
shall determine that such delay could reasonably be expected to have a
Material Adverse Effect, such thirty (30) day period shall be extended
for an additional sixty (60) days;
then, in any such event, the Lessor may, in addition to the other rights and
remedies provided for in this Agreement, terminate this Agreement by giving the
Construction Agent three (3) days written notice of such termination and upon
the expiration of the time fixed in such notice and the payment of all amounts
owing by the Construction Agent hereunder (including without limitation any
amounts specified under Section 5.3 hereof), this Agreement shall terminate. The
Construction Agent shall pay all costs and expenses incurred by or on behalf of
the Lessor, including without limitation fees and expenses of counsel, as a
result of any Event of Default hereunder.
5.2 DAMAGES.
The termination of this Agreement pursuant to Section 5.1 shall in no
event relieve the Construction Agent of its liability and obligations hereunder,
all of which shall survive any such termination.
5.3 REMEDIES; REMEDIES CUMULATIVE.
(a) If an Event of Default hereunder shall have occurred and be
continuing, the Lessor shall have all rights available to the Lessor
under the Lease and the other Operative Agreements and all other rights
otherwise available at law, equity or otherwise.
(b) Upon the occurrence of an Event of Default, the Lessor shall
have (in addition to its rights otherwise described in this Agreement or
existing at law, equity or otherwise) the option (and shall be deemed
automatically, and without any further action, to have exercised such
option upon the occurrence of any Lease Event of Default arising under
Sections 17.1(g), (h) (i) or (j) of the Lease) to transfer and convey to
the Construction Agent upon a date designated by the Lessor all right,
title and interest of the Lessor in and to any Property or Properties
(including without limitation any Land and/or any Improvements, any
interest in any Improvements, any Equipment and any Property then under
construction) for which the Rent Commencement Date has not yet occurred
(a "Construction Period Property"). On any transfer and conveyance date
specified by the Lessor pursuant to this Section 5.3(b), (i) the Lessor
shall transfer and convey (at the cost
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of the Construction Agent) all right, title and interest of the Lessor
in and to any or all such Construction Period Properties free and clear
of the Lien of the Lease and all Lessor Liens, (ii) the Construction
Agent hereby covenants and agrees that it will accept such transfer and
conveyance of right, title and interest in and to the respective
Construction Period Property or Construction Period Properties and (iii)
the Construction Agent hereby promises to pay to the Lessor, as
liquidated damages (it being agreed that it would be impossible
accurately to determine actual damages), an aggregate amount equal to
the Termination Value of such Construction Period Properties plus other
costs and expenses described in Section 2.1 hereof. The Construction
Agent specifically acknowledges and agrees that its obligations under
this Section 5.3(b), including without limitation its obligations to
accept the transfer and conveyance of Construction Period Properties and
its payment obligations described in subparagraph (iii) of this Section
5.3(b), shall be absolute and unconditional under any and all
circumstances and shall be performed and/or paid, as the case may be,
without notice or demand and without any abatement, reduction,
diminution, setoff, defense, counterclaim or recoupment whatsoever.
Notwithstanding the foregoing provisions of this Section 5.3(b), the
Lessor shall have the right in its sole discretion to rescind any
exercise of its option under this Section 5.3(b) upon the giving of its
written confirmation of such rescission to the Construction Agent on or
prior to the earlier to occur of (a) the actual date of transfer and (b)
the date one hundred and twenty (120) days after the date the Lessor has
given notice of its intent to transfer and convey any Property to the
Construction Agent as referenced above in this Section 5.3(b).
(c) The Construction Agent shall have the right to cure an Event
of Default hereunder with respect to any given Property by purchasing
such Property from the Lessor (to the extent such Event of Default is no
longer continuing with respect to any other Property remaining subject
to this Agreement after such purchase) for an amount equal to the
liquidated damages amount set forth in Section 5.3(b) of this Agreement.
(d) No failure to exercise and no delay in exercising, on the
part of the Lessor, any right, remedy, power or privilege under this
Agreement or under the other Operative Agreements shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
remedy, power or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges provided
in this Agreement are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
12
<PAGE> 15
ARTICLE VI
THE LESSOR'S RIGHTS
6.1 EXERCISE OF THE LESSOR'S RIGHTS.
Subject to the Excepted Payments, the Construction Agent and the Lessor
hereby acknowledge and agree that, subject to and in accordance with the terms
of the Security Agreement made by the Lessor in favor of the Agent, the rights
and powers of the Lessor under this Agreement have been assigned to the Agent.
6.2 THE LESSOR'S RIGHT TO CURE THE CONSTRUCTION AGENT'S DEFAULTS.
The Lessor, without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) remedy any Event of Default
for the account of and at the sole cost and expense of the Construction Agent.
All out-of-pocket costs and expenses so incurred (including without limitation
fees and expenses of counsel), together with interest thereon at the Overdue
Rate from the date on which such sums or expenses are paid by the Lessor, shall
be paid by the Construction Agent to the Lessor on demand.
ARTICLE VII
MISCELLANEOUS
7.1 NOTICES.
All notices required or permitted to be given under this Agreement shall
be in writing and delivered as provided in Section 12.2 of the Participation
Agreement.
7.2 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
Lessor, the Construction Agent and their respective successors and the assigns
of the Lessor. The Construction Agent may not assign this Agreement or any of
its rights or obligations hereunder or with respect to any Property in whole or
in part to any Person without the prior written consent of the Agent, the
Lenders, the Holders and the Lessor.
7.3 GOVERNING LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
13
<PAGE> 16
7.4 SUBMISSION TO JURISDICTION; VENUE; WAIVERS.
The provisions of the Participation Agreement relating to submission to
jurisdiction AND venue are hereby incorporated by reference herein, mutatis
mutandis.
7.5 AMENDMENTS AND WAIVERS.
This Agreement may not be terminated, amended, supplemented, waived or
modified except in accordance with the provisions of Section 12.4 of the
Participation Agreement.
7.6 COUNTERPARTS.
This Agreement may be executed in any number of separate counterparts
and all of said counterparts taken together shall be deemed to constitute one
(1) and the same instrument.
7.7 SEVERABILITY.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
7.8 HEADINGS AND TABLE OF CONTENTS.
The headings and table of contents contained in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
7.9 WAIVER OF JURY TRIAL.
TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, THE LESSOR AND THE
CONSTRUCTION AGENT IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND ANY COUNTERCLAIM
THEREUNDER.
[signature page follows]
14
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
VERITAS OPERATING CORPORATION, as the
Construction Agent
By: /s/ KEN LONCHAR
----------------------------------
Name: Ken Lonchar
Title: Senior Vice President and
Chief Financial Officer
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but
solely as Owner Trustee under the VS
Trust 2000-1, as the Lessor
By: /s/ VAL T. ORTON
----------------------------------
Name: Val T. Orton
Title: Vice President
<PAGE> 1
EXHIBIT 10.36
- --------------------------------------------------------------------------------
TRUST AGREEMENT
dated as of March 9, 2000
between
The Several Holders
from Time to Time Parties Hereto,
as the Holders,
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as the Owner Trustee
- --------------------------------------------------------------------------------
VS TRUST 2000-1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS.......................................................... 1
SECTION 1.1 Definitions................................................ 1
SECTION 1.2 Interpretation............................................. 2
ARTICLE II AUTHORITY TO EXECUTE AND PERFORM VARIOUS DOCUMENTS; DECLARATION
OF TRUST BY TRUST COMPANY.............................................. 2
SECTION 2.1 Authority To Execute and Perform Various Documents......... 2
SECTION 2.2 Declaration of Trust by Trust Company...................... 2
ARTICLE III CONTRIBUTIONS AND PAYMENTS......................................... 3
SECTION 3.1 Procedure for Holder Advances; Certificates................ 3
SECTION 3.2 Holder Yield............................................... 4
SECTION 3.3 Scheduled Return of Holder Advances........................ 5
SECTION 3.4 Early Return of Advances................................... 5
SECTION 3.5 Payments from Trust Estate Only............................ 6
SECTION 3.6 Method of Payment.......................................... 6
SECTION 3.7 Computation of Yield....................................... 6
SECTION 3.8 Conversion and Continuation Options........................ 7
SECTION 3.9 Notice of Amounts Payable.................................. 8
ARTICLE IV COLLECTIONS AND DISTRIBUTIONS....................................... 9
SECTION 4.1 Collections and Remittances by the Owner Trustee........... 9
SECTION 4.2 Priority of Distributions.................................. 9
SECTION 4.3 Excepted Payments.......................................... 9
SECTION 4.4 Distributions after Default................................ 9
ARTICLE V DUTIES OF THE OWNER TRUSTEE..........................................10
SECTION 5.1 Notice of Certain Events...................................10
SECTION 5.2 Action Upon Instructions...................................10
SECTION 5.3 Indemnification............................................11
SECTION 5.4 No Duties Except as Specified In Trust Agreement or
Instructions................................................11
SECTION 5.5 No Action Except Under Specified Documents or
Instructions...............................................11
SECTION 5.6 Absence of Duties..........................................12
ARTICLE VI THE OWNER TRUSTEE...................................................13
SECTION 6.1 Acceptance of Trust and Duties.............................13
SECTION 6.2 Furnishing of Documents....................................13
SECTION 6.3 No Representations or Warranties as to the Properties or
Operative Agreements.......................................13
SECTION 6.4 No Segregation of Moneys; No Interest......................14
SECTION 6.5 Reliance; Advice of Counsel................................14
SECTION 6.6 Liability With Respect to Documents........................14
SECTION 6.7 Not Acting In Individual Capacity..........................15
SECTION 6.8 Books and Records; Tax Returns.............................15
SECTION 6.9 Tax Treatment..............................................15
ARTICLE VII INDEMNIFICATION OF THE OWNER TRUSTEE...............................16
SECTION 7.1 Indemnification Generally..................................16
SECTION 7.2 Compensation and Expenses..................................16
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 7.3 Limitation.................................................16
ARTICLE VIII TERMINATION OF TRUST AGREEMENT....................................16
SECTION 8.1 Termination of Trust Agreement.............................16
SECTION 8.2 Termination at Option of the Holders.......................17
SECTION 8.3 Termination at Option of the Owner Trustee.................17
SECTION 8.4 Actions by the Owner Trustee Upon Termination..............17
SECTION 8.5 Bankruptcy of Holder.......................................18
ARTICLE IX SUCCESSOR OWNER TRUSTEES, CO-OWNER TRUSTEES AND SEPARATE OWNER
TRUSTEES..................................................18
SECTION 9.1 Resignation of the Owner Trustee; Appointment of
Successor.................................................18
SECTION 9.2 Co-Trustees and Separate Trustees..........................19
SECTION 9.3 Notice.....................................................22
SECTION 9.4 Required Consents..........................................22
ARTICLE X AMENDMENTS..........................................................22
SECTION 10.1 Amendments................................................22
SECTION 10.2 Limitation on Amendments..................................22
ARTICLE XI MISCELLANEOUS.......................................................23
SECTION 11.1 No Legal Title to Trust Estate in the Holders.............23
SECTION 11.2 Sale of a Property by the Owner Trustee is Binding........23
SECTION 11.3 Limitations on Rights of Others...........................23
SECTION 11.4 Notices...................................................23
SECTION 11.5 Severability..............................................23
SECTION 11.6 Limitation on the Holders' Liability......................24
SECTION 11.7 Separate Counterparts.....................................24
SECTION 11.8 Successors and Assigns....................................24
SECTION 11.9 Headings..................................................25
SECTION 11.10 Governing Law............................................25
SECTION 11.11 Performance by the Holders...............................25
SECTION 11.12 Conflict with Operative Agreements.......................25
SECTION 11.13 No Implied Waiver........................................25
SECTION 11.14 SUBMISSION TO JURISDICTION; VENUE........................25
SECTION 11.15 Third Party Beneficiary..................................25
SECTION 11.16 Representation and Warranties............................26
SECTION 11.17 Mutilated, Destroyed, Lost or Stolen Certificates........26
</TABLE>
Schedule I - Holder Commitments
EXHIBIT A - Form of Holder Certificate
EXHIBIT B - Form of Assignment and Acceptance
ii
<PAGE> 4
TRUST AGREEMENT
THIS TRUST AGREEMENT, dated as of March 9, 2000 (as amended, modified,
extended, supplemented, restated and/or replaced from time to time, the "Trust
Agreement"), is among the several banks and other financial institutions from
time to time parties to this Trust Agreement (individually, each of the
foregoing may be referred to as a "Holder," and collectively, the foregoing
together with such other persons and entities that become holders hereunder, the
"Holders"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, in its individual
capacity ("Trust Company"), and in its capacity as owner trustee hereunder,
together with its successors and assigns (the "Owner Trustee").
WHEREAS, in order to provide a portion of the funds for carrying out
the other transactions contemplated by the Operative Agreements, each Holder
will make its respective Holder Advances pursuant to this Trust Agreement and
the Participation Agreement (as defined below);
WHEREAS, the Holders desire to provide for the Trust to exist for the
purpose of (a) developing, acquiring, installing, constructing and testing
various Properties and leasing such Properties to Lessee and (b) carrying out
certain transactions contemplated by the Operative Agreements; and
WHEREAS, Trust Company is willing to act as trustee hereunder and to
accept the trust created hereby (the "Trust").
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS.
For purposes of this Trust Agreement (including without limitation the
"WHEREAS" clauses set forth above), capitalized terms used in this Trust
Agreement and not otherwise defined herein shall have the meanings assigned to
them in Appendix A to that certain Participation Agreement dated as of March 9,
2000 (as amended, modified, extended, supplemented, restated and/or replaced
from time to time in accordance with the applicable provisions thereof, the
"Participation Agreement") among VERITAS Operating Corporation, as the Lessee
and the Construction Agent, the various parties thereto from time to time, as
the Guarantor, the Owner Trustee, the various banks and other lending
institutions which are parties thereto from time to time, as the Holders, the
various banks and other lending institutions which are parties thereto from time
to time, as the Lenders, and Bank of America, N.A., as agent for the
<PAGE> 5
Lenders and respecting the Security Documents, as the agent for the Lenders and
the Holders, to the extent of their interests. Unless otherwise indicated,
references in this Trust Agreement to articles, sections, paragraphs, clauses,
appendices, schedules and exhibits are to the same contained in this Trust
Agreement.
SECTION 1.2 INTERPRETATION.
The rules of usage set forth in Appendix A to the Participation
Agreement shall apply to this Trust Agreement.
ARTICLE II
AUTHORITY TO EXECUTE AND PERFORM VARIOUS DOCUMENTS;
DECLARATION OF TRUST BY TRUST COMPANY
SECTION 2.1 AUTHORITY TO EXECUTE AND PERFORM VARIOUS DOCUMENTS.
Each Holder hereby authorizes and directs the Owner Trustee (a) to
execute and deliver, as trustee for and on behalf of each such Holder, each
Operative Agreement to which the Owner Trustee is a party and any other
agreements, instruments, certificates or documents related to the transactions
contemplated hereby to which the Owner Trustee is a party, (b) to take whatever
action shall be required to be taken by the Owner Trustee by the terms of, and
exercise its rights and perform its duties under, each of the documents,
agreements, instruments and certificates referred to in clause (a) above as set
forth in such documents, agreements and certificates, and (c) subject to the
terms of this Trust Agreement, to take such other action in connection with the
foregoing as the Holders may from time to time direct.
SECTION 2.2 DECLARATION OF TRUST BY TRUST COMPANY.
(a) Trust Company hereby declares that it will hold all
estate, right, title and interest of the Owner Trustee in, to and under
each Property, each Holder Advance, the Operative Agreements, any other
property contributed by any Holder and any and all other property or
assets from time to time of the Trust, including without limitation all
amounts of Rent, insurance proceeds and condemnation awards, indemnity
or other payments of any kind (collectively, the "Trust Estate") as the
Owner Trustee upon the trusts set forth herein and for the use and
benefit of each Holder, subject, however, to the provisions of the
Credit Agreement and the Security Documents. The name of the Trust
shall be "VS Trust 2000-1".
(b) The purpose of the Trust is to hold title to the Trust
Estate for the benefit of the Holders and to engage in activities
ancillary and incidental thereto (including, without limitation,
contracting with third parties to engage in business activities for the
benefit of the Trustee Estate) as the Holders shall determine to be
desirable. Except in connection with the foregoing, the Owner Trustee
shall not (i) engage in any business activity, (ii) have any property,
rights or interest, whether real or personal, tangible or
2
<PAGE> 6
intangible, (iii) incur any legal liability or obligation, whether
fixed or contingent, matured or unmatured, other than in the normal
course of the administration of the Trust or (iv) subject any of its
property or assets to any mortgage, Lien, security interest or other
claim or encumbrance, other than in favor of the Lenders or the Holders
pursuant to the provisions of the Operative Agreements and this Trust
Agreement. THIS TRUST IS NOT A BUSINESS TRUST. THE SOLE PURPOSE OF THE
TRUST IS TO ACQUIRE AND HOLD TITLE TO THE TRUST ESTATE, SUBJECT TO THE
RIGHTS OF THE LENDERS, FOR THE BENEFIT OF THE HOLDERS. THE OWNER
TRUSTEE MAY NOT TRANSACT BUSINESS OF ANY KIND WITH RESPECT TO ANY
PROPERTY COMPRISING THE TRUST ESTATE NOR SHALL THIS AGREEMENT BE DEEMED
TO BE, OR CREATE OR EVIDENCE THE EXISTENCE OF A CORPORATION DE FACTO OR
DE JURE, OR A MASSACHUSETTS TRUST, OR ANY OTHER TYPE OF BUSINESS TRUST,
ASSOCIATION OR JOINT VENTURE BETWEEN THE OWNER TRUSTEE, THE HOLDERS,
THE AGENT AND THE LENDERS.
ARTICLE III
CONTRIBUTIONS AND PAYMENTS
SECTION 3.1 PROCEDURE FOR HOLDER ADVANCES; CERTIFICATES.
(a) Upon receipt from Lessee by the Agent of a Requisition,
and subject to the terms and conditions of the Participation Agreement,
the Agent shall request from each Holder its pro rata share of any
Advance and each Holder shall make its pro rata share of any Advance
under the Holder Commitment of such Holder, as set forth on Schedule 1
hereto, on each date Advances are made pursuant to Section 5 of the
Participation Agreement. The Agent may request an Advance under the
Holder Commitments during the Commitment Period on any date that an
Advance may be requested pursuant to the terms of Section 5.2(a) of the
Participation Agreement, provided, that the Agent shall give each
Holder irrevocable notice (which notice must be received by such Holder
no less than three (3) Business Days prior to the requested date of the
Holder Advance) specifying (i) the amount to be advanced (which on any
date shall not be in excess of the then Available Holder Commitment),
(ii) the requested date of advance, (iii) whether the Holder Advance is
to be a Eurodollar Holder Advance or an ABR Holder Advance or a
combination thereof, (iv) if the Holder Advance is to be a combination
of Eurodollar Holder Advances and ABR Holder Advances, the respective
amounts of each type of Holder Advance and (v) the Interest Period
applicable to any Eurodollar Holder Advances. Pursuant to the terms of
the Participation Agreement, the Agent shall be deemed to have
delivered such notice upon the delivery of a notice by the Construction
Agent or Lessee containing such required information.
(b) Upon receipt of any such notice delivered pursuant to
Section 3.1(a), each Holder shall make the amount of its Advance
available to the Agent for the account of the Owner Trustee at the
office of the Agent referred to in Section 12.2 of the Participation
3
<PAGE> 7
Agreement(or at such other address as may be identified by the Agent
from time to time) prior to 12:00 Noon, Dallas, Texas time on the date
requested by Lessee in funds immediately available to the Owner
Trustee.
(c) Holder Yield accruing on each Holder Advance during the
Construction Period with respect to any property shall, subject to the
limitations set forth in Section 5.1(b) of the Participation Agreement,
be added to the amount of the Holder Advance on the relevant Scheduled
Interest Payment Date. On such Scheduled Interest Payment Date, the
Holder Property Cost and Holder Construction Property Cost shall be
increased by the amount of Holder Yield added to the Holder Advance.
(d) The Holder Advances made by each Holder to the Trust
Estate shall be evidenced by a Certificate of the Owner Trustee,
substantially in the form of Exhibit A hereto, issued in the name of
the Holder and in an amount equal to the Holder Commitment of such
Holder. Each Certificate shall (i) be dated on or about the Initial
Closing Date, (ii) be stated to mature on the Maturity Date and (iii)
bear a yield on the unpaid Holder Amount thereof from time to time
outstanding at the Holder Yield.
(e) To the extent that the Owner Trustee, in its capacity as
Borrower under the Credit Agreement, shall have elected to terminate or
reduce the amount of the Commitments pursuant to Section 2.5(a) of the
Credit Agreement, a pro rata election shall be deemed to have been made
with respect to the Holder Commitment. The Holder Commitments
respecting any particular Property shall automatically be reduced to
zero (0) upon the occurrence of the Rent Commencement Date respecting
such Property. On any date on which the Commitments shall be reduced to
zero (0) as a result of a Credit Agreement Event of Default, the Holder
Commitments shall automatically be reduced to zero (0) and the Owner
Trustee shall prepay the Certificates in full for the outstanding
Holder Amount, together with accrued but unpaid Holder Yield thereon
and all other amounts owing under the Certificates.
(f) The Holder Commitment of each Holder may be increased
pursuant to the agreement of such Holder, in its sole and absolute
discretion, in accordance with the provisions set forth in Section 2.1
of the Construction Agency Agreement.
SECTION 3.2 HOLDER YIELD.
(a) Holder Advances shall bear yield payable by the Owner
Trustee and calculated at the rate of Holder Yield applicable from time
to time. The Owner Trustee shall pay to each Holder, from the Trust
Estate, its pro rata portion of Holder Yield on Holder Advances made
hereunder. Payment of Holder Yield to each Holder shall be made in
arrears on each Scheduled Interest Payment Date occurring after the
Rent Commencement Date (but for Holder Yield on any Holder Advance
calculated on the basis of the six (6) month Eurodollar Rate, such
Holder Yield shall be payable in arrears on each applicable three (3)
month anniversary date of such Holder Advance) or as otherwise provided
herein or in Section 2.6 of the Credit Agreement or Section 8.7 of the
Participation Agreement.
4
<PAGE> 8
(b) If (i) all or a portion of Holder Yield shall not be
received by the Holders when due (whether at the stated maturity, by
acceleration or otherwise) or (ii) (A) a replacement Construction Agent
is hired in accordance with the provisions of the Construction Agency
Agreement, (B) Completion of all Properties has not occurred on prior
to the Construction Period Termination Date or (C) the cost of any
Property exceeds the original Construction Budget therefor (or the
applicable Construction Budget modified in accordance with the
Operative Agreements) in each case as previously delivered to the
Agent, such overdue amount (in the case of Section 3.2(b)(i)) or all
Holder Advances, Holder Yield and all other amounts payable hereunder
(in the case of Section 3.2(b)(ii)) shall, without limiting the rights
of the Holders hereunder or under any Operative Agreement, bear
interest at the Holder Overdue Rate, in each case (x) from the date of
nonpayment until paid (whether after or before judgment) (in the case
of Section 3.2(b)(i)) or (y) Completion of all Properties (in the case
of Section 3.2(b)(ii)). All such amounts referenced in this Section
3.2(b) shall be paid upon demand.
SECTION 3.3 SCHEDULED RETURN OF HOLDER ADVANCES.
The outstanding Holder Amount shall be due in full on the Expiration
Date. On each such date and on the Expiration Date, subject to the terms of the
Participation Agreement, the Owner Trustee shall pay to each Holder its portion
of the aggregate Holder Amount then due, together with all accrued but unpaid
Holder Yield and all other amounts due to such Holders from the Owner Trustee
hereunder or under the Operative Agreements.
SECTION 3.4 EARLY RETURN OF ADVANCES.
(a) Subject to Sections 11.2(e), 11.3 and 11.4 of the
Participation Agreement and Section 5.9 of the Credit Agreement, the
Owner Trustee may at any time and from time to time prepay the
Certificates, in whole or in part, without premium or penalty, upon at
least three (3) Business Days' irrevocable notice to the Agent, on
behalf of the Holders, specifying the date and amount of prepayment and
whether the prepayment is of ABR Holder Advances or Eurodollar Holder
Advances or a combination thereof, and, if a combination thereof, the
amount allocable to each. Upon receipt of such notice, the Agent shall
promptly notify the Holders thereof. If such notice is given, the
amount specified in such notice shall be due and payable on the date
specified therein. Amounts prepaid shall not be readvanced, except as
set forth in Section 5.2(d) of the Participation Agreement.
(b) If on any date the Agent or the Owner Trustee shall
receive any payment in respect of (i) any Casualty, Condemnation or
Environmental Violation pursuant to Sections 15.1(a) or 15.1(g) or
Article XVI of the Lease (excluding any payments in respect thereof
which are payable to Lessee in accordance with the Lease), or (ii) the
Termination Value of any Property in connection with the delivery of a
Termination Notice pursuant to Article XVI of the Lease, or (iii) the
Termination Value of any Property or such other applicable amount in
connection with the exercise of a Purchase Option under Article XX of
the Lease or the exercise of the option of the Owner Trustee
5
<PAGE> 9
to transfer the Properties to the Lessee pursuant to Section 20.3 of
the Lease or (iv) any payment required to be made or elected to be made
by the Construction Agent to the Owner Trustee pursuant to the
Construction Agency Agreement, then in each case, the Holders shall
receive proceeds in accordance with Section 8.7(b) of the Participation
Agreement.
(c) Each prepayment of the Certificates pursuant to Section
3.4(a) shall be allocated to reduce the respective Holder Property
Costs of all Properties pro rata according to the Holder Property Costs
of such Properties immediately before giving effect to such prepayment.
Each prepayment of the Certificates pursuant to Section 3.4(b) shall be
allocated to reduce the Holder Property Cost of the Property or
Properties subject to the respective Casualty, Condemnation,
Environmental Violation, termination, purchase, transfer or other
circumstance giving rise to such prepayment.
SECTION 3.5 PAYMENTS FROM TRUST ESTATE ONLY.
All payments to be made by the Owner Trustee under this Trust Agreement
(including without limitation any payments pursuant to Section 11.4 of the
Participation Agreement) shall be made only from the income and proceeds from
the Trust Estate and only to the extent that the Owner Trustee shall have
received income or proceeds from the Trust Estate to make such payments in
accordance with the terms hereof, except as specifically provided in Section
6.1. Each Holder agrees that it will look solely to the income and proceeds from
the Trust Estate to the extent available for payment as herein provided and
that, except as specially provided in any Operative Agreement, Trust Company
shall not be liable to any Holder for any amounts payable under this Trust
Agreement and shall not be subject to any liability under this Trust Agreement.
SECTION 3.6 METHOD OF PAYMENT.
All amounts payable to a Holder pursuant to this Trust Agreement shall
be paid or caused to be paid by the Owner Trustee to, or for the account of,
such Holder, or its nominee, by transferring such amount in immediately
available funds to a bank institution or banking institutions with bank wire
transfer facilities for the account of such Holder or as otherwise instructed in
writing from time to time by such Holder.
SECTION 3.7 COMPUTATION OF YIELD.
(a) Whenever it is calculated on the basis of the Prime
Lending Rate, Holder Yield shall be calculated on the basis of a year
of three hundred sixty-five (365) days (or three hundred sixty-six
(366) days, as the case may be) for the actual days elapsed; and,
otherwise, Holder Yield shall be calculated on the basis of a year of
three hundred sixty (360) days for the actual days elapsed. Any change
in the Holder Yield resulting from a change in the ABR or the
Eurocurrency Reserve Requirements shall become effective as of the
opening of business on the day on which such change becomes effective.
(b) Pursuant to Section 12.12 of the Participation Agreement,
the calculation of Holder Yield under this Section 3.7 shall be made by
the Agent. Each determination
6
<PAGE> 10
of an interest rate by the Agent shall be conclusive and binding on the
Owner Trustee and the Holders in the absence of manifest error.
(c) If the Eurodollar Rate cannot be determined by the Agent
in the manner specified in the definition of the term "Eurodollar
Rate", the Owner Trustee shall give or cause to be given telecopy or
telephonic notice thereof to the Holders as soon as practicable after
receipt of same from the Agent. Commencing on the Scheduled Interest
Payment Date next occurring after the delivery of such notice and
continuing until such time as the Eurodollar Rate can be determined by
the Agent in the manner specified in the definition of such term, all
outstanding Holder Advances shall bear a yield at the ABR. Until such
time as the Eurodollar Rate can be determined by the Agent in the
manner specified in the definition of such term, no further Eurodollar
Holder Advances shall be made or shall be continued as such at the end
of the then current Interest Period nor shall the Owner Trustee have
the right to convert ABR Holder Advances to Eurodollar Holder Advances.
SECTION 3.8 CONVERSION AND CONTINUATION OPTIONS.
(a) The Owner Trustee may elect from time to time to convert
Eurodollar Holder Advances to ABR Holder Advances by giving the Agent
(on behalf of the Holders) at least three (3) Business Days' prior
irrevocable notice of such election, provided, that any such conversion
of Eurodollar Holder Advances may only be made on the last day of an
Interest Period with respect thereto, and provided, further, to the
extent an Event of Default has occurred and is continuing on the last
day of any such Interest Period, the applicable Eurodollar Holder
Advance shall automatically be converted to an ABR Holder Advance. The
Owner Trustee may elect from time to time to convert ABR Holder
Advances to Eurodollar Holder Advances by giving the Agent (on behalf
of the Holders) at least three (3) Business Days' prior irrevocable
notice of such election. Any such notice of conversion to Eurodollar
Holder Advances shall specify the length of the initial Interest Period
or Interest Periods therefor. Upon receipt of any such notice, the
Agent (on behalf of the Holders) shall promptly notify each Holder
thereof. All or any part of outstanding Eurodollar Holder Advances or
ABR Holder Advances may be converted as provided herein, provided, that
(i) no ABR Holder Advance may be converted into a Eurodollar Holder
Advance after the date that is one (1) month prior to the Maturity Date
and (ii) such notice of conversion shall contain an election by the
Owner Trustee of an Interest Period for such Eurodollar Holder Advance
to be created by such conversion and such Interest Period shall be in
accordance with the terms of the definition of the term "Interest
Period" including without limitation subparagraphs (A) through (D)
thereof.
(b) Subject to the restrictions set forth in Section 3.1,
except as otherwise requested by the Owner Trustee upon at least three
(3) Business Days' prior written notice to the Agent (on behalf of the
Holders) in accordance with the notice provisions for the conversion of
ABR Holder Advances to Eurodollar Holder Advances set forth herein and
the applicable provisions of the term "Interest Period" of the length
of the next Interest Period to be applicable to such Eurodollar Holder
Advances, any Eurodollar
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Holder Advance shall be continued as a Eurodollar Holder Advance of the
same Interest Period upon the expiration of the then current Interest
Period with respect thereto without the need for the Owner Trustee to
give notice to the Agent (on behalf of the Holders), provided, that no
Eurodollar Holder Advance may be continued as such after the date that
is one (1) month prior to the Maturity Date, provided, further, no
Eurodollar Holder Advance may be continued as such if an Event of
Default has occurred and is continuing as of the last day of the
Interest Period for such Eurodollar Holder Advance, and provided,
further, that if the Owner Trustee shall fail to give any required
notice as described above or if such continuation is not permitted
pursuant to the preceding proviso or otherwise, such Advances shall
automatically be converted to ABR Advances on the last day of such then
expiring Interest Period.
SECTION 3.9 NOTICE OF AMOUNTS PAYABLE.
(a) In the event that any Holder becomes aware that any
amounts are or will be owed to it pursuant to Sections 11.2 or 11.3 of
the Participation Agreement or that it is unable to make Holder
Advances which bear a yield based on the Eurodollar Rate plus the
Applicable Percentage for Eurodollar Holder Advances, then it shall
promptly notify the Owner Trustee thereof and, as soon as possible
thereafter, such Holder shall submit to the Owner Trustee a certificate
indicating the amount owing to it and the calculation thereof. The
amounts set forth in such certificate shall be prima facie evidence of
the obligations of the Owner Trustee hereunder.
(b) In the event that (i) any Holder shall fail to make
available to the Owner Trustee such Holder's ratable portion of any
Holder Advance (and no Default or Event of Default shall have occurred
and be continuing) or (ii) any Holder delivers to the Owner Trustee a
certificate in accordance with Section 3.9(a), or any Holder is
required to make Holder Advances with Holder Yields calculated at the
ABR in accordance with Section 11.3(d) of the Participation Agreement,
subject to Section 9.2 of the Participation Agreement, the Owner
Trustee may, at the expense of Lessee and in the discretion of the
Owner Trustee, (i) require such Holder to transfer or assign, in whole
or (with such Holder's consent) in part, without recourse (in
accordance with Section 11.8), all or (with such Holder's consent) part
of its interests, rights (except for rights to be indemnified for
actions taken while a party hereunder) and obligations under this
Agreement to a replacement bank or institution if the Owner Trustee
(subject to Section 9.2 of the Participation Agreement) and with the
full cooperation of such Holder) can identify a Person who is ready,
willing and able to be such replacement bank or institution with
respect thereto and such replacement bank or institution (which may be
another Holder) shall assume such assigned obligations, or (ii) during
such time as no Default or Event of Default has occurred and is
continuing, terminate the Holder Commitment of such Holder and prepay
the outstanding Holder Advances of such Holder, provided, however, that
(x) subject to Section 9.2 of the Participation Agreement, the Owner
Trustee or such replacement bank or institution, as the case may be,
shall have paid to such Holder in immediately available funds the
amount of the Holder Advances and Holder Yield accrued to the date of
such payment on the Holder Advances made by it hereunder (and, if such
Holder is also a Lender, the principal and interest on all Loans
accrued and unpaid
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thereon) and (y) such assignment or termination of the Holder
Commitment of the Holder and prepayment of the Holder Advances do not
conflict with any law, rule or regulation or order of any court or
Governmental Authority.
ARTICLE IV
COLLECTIONS AND DISTRIBUTIONS
SECTION 4.1 COLLECTIONS AND REMITTANCES BY THE OWNER TRUSTEE.
The Owner Trustee agrees that, subject to the provisions of this Trust
Agreement and the Operative Agreements, it will during the term of this Trust
administer the Trust Estate and, at the direction of the Holders, take steps to
collect all Rent and other sums payable to the Owner Trustee by Lessee under the
Lease. The Owner Trustee agrees to distribute, or cause to be distributed, all
proceeds received from the Trust Estate in accordance with Article III and
Sections 4.2 and 4.3. The Owner Trustee shall make, or cause to be made, such
distribution promptly upon receipt of such proceeds (provided, such proceeds are
available for distribution) by the Agent (on behalf of the Owner Trustee), it
being understood and agreed that the Owner Trustee shall not be obligated to
make, or to cause to be made, such distribution until the funds for such
distribution have been received by the Agent (on behalf of the Owner Trustee) in
cash or its equivalent reasonably acceptable to the Owner Trustee.
SECTION 4.2 PRIORITY OF DISTRIBUTIONS.
Subject to the terms and requirements of the Operative Agreements, all
payments and amounts received by Trust Company as the Owner Trustee or on its
behalf shall be distributed to the Agent for allocation by the Agent in
accordance with the terms of Section 8.7 of the Participation Agreement.
SECTION 4.3 EXCEPTED PAYMENTS.
Anything in this Article IV or elsewhere in this Trust Agreement to the
contrary notwithstanding, any Excepted Payment received at any time by the Owner
Trustee shall be distributed promptly to the Person entitled to receive such
Excepted Payment. Such funds, if not distributed on the day received, shall be
invested in money market funds authorized to invest in short term securities
issued or guaranteed as to principal and interest by the U.S. Government and
repurchase agreements with respect to such securities, including such funds to
which the Owner Trustee or an Affiliate provides management advice or other
services for a fee. Interest earnings on such funds invested in accordance with
this Section 4.3 shall be paid to the Lessee.
SECTION 4.4 DISTRIBUTIONS AFTER DEFAULT.
Subject to the terms of Section 5.1, the proceeds received by the Owner
Trustee from the exercise of any remedy under the Lease shall be distributed
pursuant to Section 4.2 above. This
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Trust shall cease and terminate in accordance with the terms set forth in
Section 8.1 and upon the final disposition by the Owner Trustee of all of the
Trust Estate pursuant to this Section 4.4.
ARTICLE V
DUTIES OF THE OWNER TRUSTEE
SECTION 5.1 NOTICE OF CERTAIN EVENTS.
In the event the Owner Trustee shall have knowledge of any Default or
Event of Default, the Owner Trustee shall give written notice thereof within
five (5) Business Days to each Holder, Lessee and the Agent unless such Default
or Event of Default no longer exists before the giving of such notice. Subject
to the provisions of Section 5.3 of this Trust Agreement and Sections 8.5 and
9.2 of the Participation Agreement, the Owner Trustee shall take or refrain from
taking such action as the Agent shall direct until such time as the Loans are
paid in full (and as more specifically provided in Sections 8.2(h) and 8.6 of
the Participation Agreement) and thereafter as the Majority Holders shall
direct, in each case by written instructions to the Owner Trustee. If the Owner
Trustee shall have given the Agent and the Holders (and respecting Sections 8.5
and 9.2 of the Participation Agreement, the Lessee) notice of any event and
shall not have received written instructions as above provided within thirty
(30) days after mailing notice of such event to the Agent and the Holders (and
respecting Sections 8.5 and 9.2 of the Participation Agreement, the Lessee), the
Owner Trustee may, but shall be under no duty to, and shall have no liability
for its failure or refusal to, take or refrain from taking any action with
respect thereto, not inconsistent with the provisions of the Operative
Agreements, as the Owner Trustee shall deem advisable and in the best interests
of the Lenders and the Holders. For all purposes of this Trust Agreement, in the
absence of actual knowledge of a Responsible Officer in the Corporate Trust
Department of Trust Company, the Owner Trustee shall be deemed not to have
knowledge of any Default or Event of Default unless a Responsible Officer of the
Corporate Trust Department of Trust Company receives notice thereof given by or
on behalf of a Holder, Lessee or the Agent.
SECTION 5.2 ACTION UPON INSTRUCTIONS.
Subject to the provisions of Sections 5.1 and 5.3, upon the written
instructions of the Agent or the Majority Holders (as applicable), the Owner
Trustee will take or refrain from taking such action or actions as may be
specified in such instructions. If the Owner Trustee is unable to determine
whether any such action or actions that it has been instructed to take by the
Majority Holders or the Lessee is consistent with the provisions of the
Operative Agreements, the Owner Trustee shall give notice in accordance with
Section 11.4 below of such proposed action or actions to the Holders and the
Lessee and unless, within ten (10) Business Days, any of such parties advises
the Owner Trustee in writing that the proposed action or actions are
inconsistent with the provisions of the Operative Agreements (including specific
reference to the particular provisions in question), the Owner Trustee shall be
entitled to presume that the proposed action or actions are not inconsistent
with the provisions of the Operative Agreements and the Owner Trustee shall
proceed in accordance with such instructions. The Owner Trustee and the Holders
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acknowledge that the Owner Trustee is required to take action and to refrain
from taking action with regard to the Credit Agreement as instructed by the
Lessee in accordance with, and as limited by, Section 9.1 of the Participation
Agreement.
SECTION 5.3 INDEMNIFICATION.
The Owner Trustee shall not be required to take or refrain from taking
any action under this Trust Agreement or any other Operative Agreement (other
than the actions specified in the first sentence of Section 5.1 and in the last
sentence of Section 5.4) unless Trust Company shall have been indemnified by
Lessee or, at their election, by the Holders and the Lenders against any
liability, fee, cost or expense (including without limitation reasonable
attorneys' fees and expenses) that may be incurred or charged in connection
therewith, other than such as may result from the willful misconduct, bad faith
or gross negligence of the Owner Trustee. The Owner Trustee shall not be
required to take any action under any Operative Agreement if the Owner Trustee
shall reasonably determine, or shall have been advised by counsel, that such
action is likely to result in personal liability for which the Owner Trustee has
not been and will not be adequately indemnified or is contrary to the terms
hereof or of any Operative Agreement to which the Owner Trustee is a party or is
otherwise contrary to law. The Owner Trustee shall be under no liability with
respect to any action taken or omitted to be taken by the Owner Trustee in
accordance with instructions of the Agent or the Majority Holders pursuant to
Section 5.2.
SECTION 5.4 NO DUTIES EXCEPT AS SPECIFIED IN TRUST AGREEMENT OR
INSTRUCTIONS.
The Owner Trustee shall not have any duty or obligation to manage,
control, use, make any payment in respect of, register, record, insure, inspect,
sell, dispose of or otherwise deal with any Property or any other part of the
Trust Estate, or to otherwise take or refrain from taking any action under or in
connection with any Operative Agreement to which the Owner Trustee is a party,
except as expressly provided by the terms of this Trust Agreement or any other
Operative Agreement or in written instructions from the Agent and/or the
Majority Holders, as applicable, received pursuant to Sections 5.1, 5.2 or 8.4
of this Trust Agreement or Sections 8.2(h) or 8.6 of the Participation Agreement
or from the Lessee pursuant to Sections 8.5 or 9.2 of the Participation
Agreement; and no implied duties or obligations shall be read into this Trust
Agreement against the Owner Trustee. The Owner Trustee shall have no duty or
obligation to supervise or monitor the performance of the Construction Agent
pursuant to the Construction Agency Agreement which for all purposes shall be an
independent contractor. The Owner Trustee nevertheless agrees that it will (in
its individual capacity and at its own cost and expense), promptly take all
action as may be necessary to discharge any Lessor Liens on any part of the
Trust Estate.
SECTION 5.5 NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR
INSTRUCTIONS.
The Owner Trustee agrees that it will not manage, control, use, sell,
dispose of or otherwise deal with any Property or any other part of the Trust
Estate except (a) as required by the terms of the Operative Agreements, (b) in
accordance with the powers granted to, or the authority conferred upon, it
pursuant to this Trust Agreement, (c) in accordance with the express
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terms hereof or with written instructions from the Agent and/or the Majority
Holders, as applicable, pursuant to Sections 5.1, 5.2 or 8.4 or (d) from the
Lessee pursuant to Sections 8.5 or 9.2 of the Participation Agreement.
SECTION 5.6 ABSENCE OF DUTIES.
(a) Except in accordance with written instructions furnished
pursuant to Sections 5.1, 5.2 or 8.4, and without limitation of the
generality of Section 5.4, the Owner Trustee shall not have any duty to
(i) file, record or deposit any Operative Agreement or any other
document, or to maintain any such filing, recording or deposit or to
refile, rerecord or redeposit any such document; (ii) obtain insurance
on any Property or effect or maintain any such insurance, other than to
receive and forward to each Holder and the Agent any notices, policies,
certificates or binders furnished to the Owner Trustee pursuant to the
Lease; (iii) maintain any Property; (iv) pay or discharge any Tax or
any Lien owing with respect to or assessed or levied against any part
of the Trust Estate, except as provided in the last sentence of Section
5.4, other than to forward notice of such Tax or Lien received by the
Owner Trustee to each Holder and the Agent; (v) confirm, verify,
investigate or inquire into the failure to receive any reports or
financial statements of Lessee or any other Person; (vi) inspect any
Property any time or ascertain or inquire as to the performance or
observance of any of the covenants of Lessee or any other Person under
any Operative Agreement with respect to any Property; or (vii) manage,
control, use, sell, dispose of or otherwise deal with any Property or
any part thereof or any other part of the Trust Estate, except as
provided in Section 5.5.
(b) The Owner Trustee, in the exercise or administration of
the trusts and powers hereunder, including without limitation its
obligations under Section 5.2, may, at the reasonable expense of
Lessee, employ agents, attorneys, accountants, and auditors and enter
into agreements with any of them and the Owner Trustee shall not be
liable, either in its individual capacity or in its capacity as the
Owner Trustee, for the default or misconduct of any such agents,
attorneys, accountants or auditors if such agents, attorneys,
accountants or auditors shall have been selected by it in good faith.
Notwithstanding the foregoing, as long as there does not exist any
Lease Event of Default, no such agents, attorneys, accountants or
auditors shall be employed without the prior written consent of the
Lessee, which consent may not be unreasonably withheld or delayed;
provided that such consent shall not be required with respect to the
Owner Trustee's exercise or administration of the trusts and powers
hereunder if the same is required by any amendment, waiver or consent
relating to any Operative Agreement.
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ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.1 ACCEPTANCE OF TRUST AND DUTIES.
The Owner Trustee accepts the trust and duties hereby created and
agrees to perform the same, but only upon the terms of this Trust Agreement. The
Owner Trustee agrees to receive, manage and disburse all moneys constituting
part of the Trust Estate actually received by it as the Owner Trustee in
accordance with the terms of this Trust Agreement. The Owner Trustee shall not
be answerable or accountable under any circumstances, except for (i) its own
willful misconduct, bad faith or gross negligence, (ii) the inaccuracy of any of
its representations or warranties contained in Section 6.3 of this Trust
Agreement or Section 6.1 of the Participation Agreement, (iii) its failure to
perform obligations expressly undertaken by it in the last sentence of Section
5.4 of this Trust Agreement or in Section 8.2(a) of the Participation Agreement,
(iv) Taxes based on or measured by any fees, commissions or compensation
received by it for acting as the Owner Trustee in connection with any of the
transactions contemplated by the Operative Agreements, or (v) its failure to use
ordinary care to receive, manage and disburse moneys actually received by it in
accordance with the terms of the Operative Agreements.
SECTION 6.2 FURNISHING OF DOCUMENTS.
The Owner Trustee will furnish to each Holder and to the Agent,
promptly upon receipt thereof, duplicates or copies of all reports, notices,
requests, demands, opinions, certificates, financial statements and any other
instruments or writings furnished to the Owner Trustee hereunder or under the
Operative Agreements, unless by the express terms of any Operative Agreement a
copy of the same is required to be furnished by some other Person directly to
the Holders and/or the Agent, or the Owner Trustee shall have determined that
the same has already been furnished to the Holders and the Agent.
SECTION 6.3 NO REPRESENTATIONS OR WARRANTIES AS TO THE PROPERTIES
OR OPERATIVE AGREEMENTS.
THE OWNER TRUSTEE MAKES (i) NO REPRESENTATION OR WARRANTY, EITHER
EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE, USE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF), OR ANY
OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO ANY PROPERTY (OR ANY PART THEREOF) AND THE OWNER TRUSTEE SHALL NOT BE
LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF ANY
PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT except that
the Owner Trustee hereby represents, warrants and covenants to each Holder that
it will comply with the last sentence of Section 5.4, and (ii) no representation
or warranty as to the validity or enforceability of any Operative Agreement or
as to the correctness of any statement made by a Person other than the Owner
Trustee or the Owner Trustee contained in any thereof, except that the Owner
Trustee represents, warrants and
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covenants to each Holder that this Trust Agreement has been and each of the
other Operative Agreements which contemplates execution thereof by the Owner
Trustee has been or will be executed and delivered by its officers who are, or
will be, duly authorized to execute and deliver documents on its behalf and is
enforceable against it in accordance with its terms except to the extent such
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
SECTION 6.4 NO SEGREGATION OF MONEYS; NO INTEREST.
Except as otherwise provided herein or in any of the other Operative
Agreements, moneys received by the Owner Trustee hereunder need not be
segregated in any manner except to the extent required by law, and may be
deposited under such general conditions as may be prescribed by law, and neither
Trust Company nor the Owner Trustee shall be liable for any interest thereon,
except as may be agreed to in writing by the Owner Trustee or the Trust Company.
SECTION 6.5 RELIANCE; ADVICE OF COUNSEL.
The Owner Trustee shall not incur any liability to any Person in acting
upon any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper believed by it to
be genuine and believed by it in good faith to be signed by the proper party or
parties. The Owner Trustee may accept and rely upon a certified copy of a
resolution of the board of directors or other governing body of any corporate
party as conclusive evidence that such resolution has been duly adopted by such
body and that the same is in full force and effect. As to any fact or matter the
manner of ascertainment of which is not specifically prescribed herein, the
Owner Trustee may for all purposes hereof rely on an Officer's Certificate of
the relevant party, as to such fact or matter, and such certificate shall
constitute full protection to the Owner Trustee for any action taken or omitted
to be taken by it in good faith in reliance thereon. In the administration of
the trusts hereunder, the Owner Trustee may execute any of the trusts or powers
hereof and perform its powers and duties hereunder directly or through agents or
attorneys and may consult with counsel, accountants and other skilled Persons to
be selected and employed by it, and the Owner Trustee shall not be liable for
anything done, suffered or omitted in good faith by it in accordance with the
advice or opinion of any such counsel, accountants or other skilled Persons and
not contrary to this Trust Agreement.
SECTION 6.6 LIABILITY WITH RESPECT TO DOCUMENTS.
The Owner Trustee, either in its trust or individual capacities, shall
not incur any liability to any Person for or in respect of the recitals herein,
the validity or sufficiency of this Trust Agreement or for the due execution
hereof by each Holder or for the form, character, genuineness, sufficiency,
value or validity of any Property or for or in respect of the validity or
sufficiency of any of the Operative Agreements and the Owner Trustee, either in
its trust or individual capacities, shall in no event assume or incur any
liability, duty or obligation to any
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Person or to any Holder, other than as expressly provided for herein or in any
of the other Operative Agreements.
SECTION 6.7 NOT ACTING IN INDIVIDUAL CAPACITY.
All Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by the Operative Agreements shall look only to the
Trust Estate (or a part thereof, as the case may be) for payment or satisfaction
thereof, except as specifically provided in this Article VI and except to the
extent that the Owner Trustee shall otherwise expressly agree in any Operative
Agreement to which it is a party, including without limitation Section 6.1 and
Section 8.2(a) of the Participation Agreement and the last sentence of Section
5.4 hereof.
SECTION 6.8 BOOKS AND RECORDS; TAX RETURNS.
(a) The Owner Trustee shall be responsible for the keeping of
all appropriate books and records relating to the receipt and
disbursement of all moneys that it may receive hereunder, or under any
other Operative Agreement. The Owner Trustee shall, at the expense of
Lessee, file an application with the Internal Revenue Service for a
taxpayer identification number with respect to the trust created
hereby. The Owner Trustee shall, at the expense of Lessee, prepare or
cause to be prepared and the Owner Trustee shall sign and/or file the
federal fiduciary tax return with respect to Taxes due and payable by
the trust created hereby in connection with the transactions
contemplated hereby and by any other Operative Agreement. Each Holder
shall furnish the Owner Trustee with all such information as may be
reasonably required from such Holder (as such is requested in writing
by the Owner Trustee) in connection with the preparation of such tax
returns. The Owner Trustee shall keep copies of all returns delivered
to or filed by it.
(b) The Owner Trustee, either in its trust or individual
capacities, shall be under no obligation to appear in, prosecute or
defend any action, which in its opinion may require it to incur any
out-of-pocket expense or any liability unless the Owner Trustee shall
be furnished with such reasonable security and indemnity by Lessee (or,
at the election of the Majority Secured Parties, by the Holders and the
Lenders) against such expense or liability as it may require. The Owner
Trustee may, but shall be under no duty to, undertake such action as it
may deem necessary at any and all times, without any further action by
the Agent or any Holder to protect one (1) or more of the Properties
and the rights and interests of the Holders pursuant to the terms of
this Trust Agreement; provided, however, that the Owner Trustee may
obtain reimbursement for the reasonable out-of-pocket expenses and
costs of such actions, undertakings or proceedings from Lessee.
SECTION 6.9 TAX TREATMENT.
Except as otherwise required by applicable law, each of the Holders and
the Owner Trustee, by entering into this Trust Agreement, agrees that it will
file its own federal, state and local income, franchise and other tax returns in
a manner that is consistent with the treatment of
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the trust as a grantor trust. The parties agree that, unless otherwise required
by applicable law, the Holders shall file, or cause to be filed, annual or other
necessary returns, reports and other forms consistent with the characterization
of the trust as a grantor trust for such tax purposes.
ARTICLE VII
INDEMNIFICATION OF THE OWNER TRUSTEE
SECTION 7.1 INDEMNIFICATION GENERALLY.
The Owner Trustee is indemnified for matters related to the
transactions described herein by Lessee pursuant to Section 11 of the
Participation Agreement. Except as may be specifically provided from time to
time hereafter in writing by the Holders, the Owner Trustee shall not have any
right of indemnification from any Holder with respect to the transactions
described herein or in any of the other Operative Agreements.
SECTION 7.2 COMPENSATION AND EXPENSES.
Lessee has agreed to pay the fees and expenses of the Owner Trustee and
the Holder Commitment Fees as provided in Sections 7.3 and 7.4, respectively, of
the Participation Agreement.
SECTION 7.3 LIMITATION.
The Trust Company and the Owner Trustee shall not be required to
exhaust their remedies against the Lessee (or any other liable Person) under the
Operative Agreements before seeking to enforce their rights against the Holders
under this Article VII.
ARTICLE VIII
TERMINATION OF TRUST AGREEMENT
SECTION 8.1 TERMINATION OF TRUST AGREEMENT.
This Trust Agreement and the trusts created hereby shall terminate and
the Trust Estate shall, subject to the provisions of the Participation
Agreement, the other Operative Agreements and Article IV of this Trust
Agreement, be distributed pro rata to the Holders, and this Trust Agreement
shall be of no further force or effect, upon the earliest of (a) the joint
written request of the Majority Holders following the sale or other final
disposition by the Owner Trustee of all property constituting part of the Trust
Estate and the final distribution by the Owner Trustee of all moneys or other
property or proceeds constituting part of the Trust Estate in accordance with
the terms hereof; provided, however, that (except as provided for in the
Operative Agreements) the Trust Estate shall not be subject to sale or other
final disposition by the Owner Trustee prior
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to the payment in full and discharge of the Advances and all other indebtedness
secured by the Mortgage Instruments, Security Agreement and Lease and the
release of the Credit Documents and the Liens granted thereby and the payment in
full of the Holder Amount and Holder Yield thereon and all other amounts owing
to the Holders under any of the Operative Agreements and (b) fifty (50) years
after the date hereof.
SECTION 8.2 TERMINATION AT OPTION OF THE HOLDERS.
Notwithstanding Section 8.1, this Trust Agreement and the trusts
created hereby shall terminate and the Trust Estate shall be distributed pro
rata to the Holders, and this Trust Agreement shall be of no further force and
effect, upon the joint election of the Holders by notice to the Owner Trustee,
if such notice shall be accompanied by the written agreement of each Holder
assuming all the obligations of the Owner Trustee under or contemplated by the
Operative Agreements and all other obligations of the Owner Trustee incurred by
it as trustee hereunder; provided, however, that each Holder agrees for the
express benefit of the Agent and the Lenders, that without the consent of the
Majority Lenders, no such election shall be effective until the Liens and
security interests of the Security Documents on the Collateral shall have been
released and until full payment of the principal of, and interest on the Loans
and all other sums due to the Lenders shall have been made. Such written
agreement shall be reasonably satisfactory in form and substance to the Owner
Trustee and shall release the Owner Trustee from all further obligations of the
Owner Trustee hereunder and under the agreements and other instruments mentioned
in the preceding sentence.
SECTION 8.3 TERMINATION AT OPTION OF THE OWNER TRUSTEE.
At any time that the Lease shall no longer be in full force and effect
and the Agent shall have confirmed in writing to the Owner Trustee that the
Lenders have received payment in full of the principal of and interest on the
Loans and that all other sums due to the Agent and the Lenders under the
Operative Agreements shall have been made, then the Holders hereby authorize the
Owner Trustee to: (a) terminate this Trust Agreement and the trusts created
hereby and (b) distribute and convey the Trust Estate pro rata to the Holders by
executing the necessary transfer documents as contemplated by Section 8.4. The
exercise of such option by the Owner Trustee shall cause this Trust Agreement to
be of no further force and effect and shall release the Owner Trustee from all
further obligations of the Owner Trustee hereunder and under the agreements and
other instruments mentioned in the preceding sentence.
SECTION 8.4 ACTIONS BY THE OWNER TRUSTEE UPON TERMINATION.
Upon termination of this Trust Agreement and the trusts created hereby
pursuant to Sections 8.1, 8.2 or 8.3, the Owner Trustee shall upon notice of
such event take such action as may be necessary or as may be requested by the
Majority Holders to transfer the Trust Estate pro rata to the Holders, including
without limitation the execution of instruments of transfer or assignment with
respect to any of the Operative Agreements to which the Owner Trustee is a
party.
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SECTION 8.5 BANKRUPTCY OF HOLDER.
The bankruptcy, insolvency or other similar incapacity of any Holder
shall not (i) operate to terminate this Trust Agreement or the trust created
hereby, (ii) entitle such Holder's legal representatives to claim an accounting
or to take any action in any court for a partition or winding up of the Trustee
Estate or (iii) otherwise affect the rights, obligations or liabilities of the
parties hereto. Without the prior written consent of the Agent, no Holder may
withdraw from the trust or obtain possession of, or otherwise exercise remedies
with respect to, the Trust Estate or any portion thereof prior to the
satisfaction and discharge of the Liens of the Security Documents; provided,
however, nothing in this Section 8.5 shall prevent (a) the distribution of any
funds to the Holders in accordance with Section 8 of the Credit Agreement, or
(b) the exercise by the Holders of any remedies with respect to the Excepted
Payments.
ARTICLE IX
SUCCESSOR OWNER TRUSTEES, CO-OWNER TRUSTEES
AND SEPARATE OWNER TRUSTEES
SECTION 9.1 RESIGNATION OF THE OWNER TRUSTEE; APPOINTMENT OF
SUCCESSOR.
(a) The Owner Trustee may resign at any time without cause by
giving at least thirty (30) days' prior written notice to each Holder,
the Agent and Lessee; provided, however, that such resignation shall
not be effective until the acceptance of appointment by a successor
Owner Trustee under Section 9.1(b). The Owner Trustee may be removed
with or without cause at any time by the Majority Holders upon consent
to such removal by the Agent and with sixty (60) days' prior written
notice to the Owner Trustee, a copy of which notice shall be
concurrently delivered by the Majority Holders to the Agent and Lessee.
Any such removal shall be effective upon the acceptance of appointment
by a successor Owner Trustee under Section 9.1(b). In case of the
resignation or removal of the Owner Trustee, the Holders may appoint a
successor Owner Trustee by an instrument signed by the Majority
Holders; provided, however, that such successor Owner Trustee must be
approved by the Agent. In the event the Owner Trustee shall be an
individual, his death or incapacity, or termination of employment
(whether voluntary or involuntary) with First Security Bank, National
Association (or a successor corporate Owner Trustee) shall be treated
as a resignation hereunder and shall be effective immediately. If a
successor Owner Trustee shall not have been appointed within thirty
(30) days after the giving of written notice of such resignation or the
delivery of the written instrument with respect to such removal, the
Owner Trustee or any Holder may apply to any court of competent
jurisdiction to appoint a successor Owner Trustee to act until such
time, if any, as a successor shall have been appointed and shall have
accepted its appointment as above provided. Any successor Owner Trustee
so appointed by such court shall immediately and without further act be
superseded by any successor Owner Trustee appointed as above provided
within one (1) year from the date of the appointment by such court.
18
<PAGE> 22
(b) Any successor Owner Trustee, however appointed, shall
execute and deliver to the predecessor Owner Trustee an instrument
accepting such appointment, and thereupon such successor Owner Trustee,
without further act shall become vested with all the estates,
properties, rights, powers, duties and trusts of the predecessor Owner
Trustee in the trusts hereunder with like effect as if originally named
an Owner Trustee herein; but nevertheless, upon the written request of
such successor Owner Trustee such predecessor Owner Trustee shall
execute and deliver an instrument transferring to such successor Owner
Trustee, upon the trusts herein expressed, all the estates, properties,
rights, powers, duties and trusts of such predecessor Owner Trustee,
and such predecessor Owner Trustee shall duly assign, transfer, deliver
and pay over to such successor Owner Trustee all moneys or other
property then held by such predecessor Owner Trustee upon the trusts
herein expressed.
(c) Any successor Owner Trustee, however appointed, shall be a
bank or trust company incorporated and doing business within the United
States of America and having a combined capital and surplus of at least
$50,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of the Owner Trustee hereunder upon
reasonable or customary terms.
(d) Any corporation into which the Owner Trustee may be merged
or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
Owner Trustee shall be a party, or any corporation to which
substantially all the corporate trust business of the Owner Trustee may
be transferred, shall, subject to the terms of Section 9.1(c), be the
Owner Trustee under this Trust Agreement without further act.
SECTION 9.2 CO-TRUSTEES AND SEPARATE TRUSTEES.
Whenever (a) the Owner Trustee or the Majority Holders shall deem it
necessary or prudent in order either to conform to any law of any jurisdiction
in which all or any part of the Trust Estate shall be situated or to which it
may be subject or to make any claim or bring any suit with respect to the Trust
Estate or any Operative Agreement, (b) the Owner Trustee or the Majority Holders
shall be advised by counsel satisfactory to it that it is so necessary or
prudent, or (c) the Owner Trustee shall have been directed to do so by the
Majority Holders and the Agent, the Owner Trustee and the Holders shall execute
and deliver an agreement supplemental hereto and all other instruments and
agreements, and shall take all other action, necessary or proper to constitute
one (1) or more Persons who need not meet the requirements of Section 9.1(c)
(and the Owner Trustee may appoint one (1) or more of its officers) either as
co-trustee or co-trustees (the "Co-Owner Trustee"), jointly with the Owner
Trustee, of all or any part of the Trust Estate, or as separate trustee or
separate trustees of all or any part of the Trust Estate, and to vest in such
Persons, in such capacity, such title to the Trust Estate or any part thereof
and such rights or duties as may be necessary or desirable, all for such period
and under such terms and conditions as are satisfactory to the Owner Trustee and
the Holders. In accordance with the foregoing:
19
<PAGE> 23
(i) The Owner Trustee shall appoint a Co-Owner Trustee
hereunder in part so that if, under any present or future law of any
state where any Property is located or of any jurisdiction in which it
may be necessary to perform any act in carrying out the trusts herein
created, the Owner Trustee or any of its successors may be incompetent
or unqualified or incapacitated or unwilling to perform certain acts as
such Owner Trustee, then upon the written request of the Owner Trustee
of any of its successors received by any Co-Owner Trustee, all of such
acts required to be performed in such jurisdiction in the execution of
the trust hereby created, shall and will be performed by any Co-Owner
Trustee, or any of his successors, in trust acting alone, as if he or
such successor had been specifically authorized so to do or had been
the sole Owner Trustee hereunder. Any Co-Owner Trustee shall continue
to perform such acts until otherwise directed in writing by the Owner
Trustee or any of its successors. Any request in writing by the Owner
Trustee or any of its successors to the Co-Owner Trustee shall be
sufficient warrant for him to take such action as may be so requested.
(ii) Except as it may be deemed necessary for any Co-Owner
Trustee or any of his successors solely or jointly to execute the
trusts herein created, the Owner Trustee or any of its successors shall
solely have and exercise the powers, and shall be solely charged with
the performance of the duties, hereinbefore declared on the part of the
Owner Trustee to be had, exercised and performed; and any Co-Owner
Trustee shall not be liable therefor. Any Co-Owner Trustee or any
successor to him may delegate to the Owner Trustee or its successor
hereunder the exercise of any power, discretion or otherwise, conferred
by any provision of this Trust Agreement.
(iii) Any act of the Owner Trustee herein required or
authorized shall and will be jointly or separately performed by the
Owner Trustee or its successors hereunder and by any Co-Owner Trustee
or any of his successors appointed hereunder, if such joint performance
or separate performance shall be necessary to the legality of such act
and when so acting all references herein to "First Security Bank,
National Association" shall be deemed to be references to such Co-Owner
Trustee in its individual capacity and all references to "Owner
Trustee" shall be deemed to be references to any Co-Owner Trustee, and
such Co-Owner Trustee shall be entitled to all the protection,
indemnification, immunity and compensation herein provided to the Owner
Trustee acting singly in reference to such acts (subject to the
limitations to such a protection, indemnification, immunity and
compensation set forth herein).
(iv) The Owner Trustee or its successor in trust shall have
and is hereby given the power at any time by an instrument in writing
duly executed by a Vice President, to remove any Co-Owner Trustee or
his successor, from his position as Co-Owner Trustee hereunder. In the
case of death, resignation, removal, incapacity or inability to act
hereunder of the Co-Owner Trustee, or his successor as Co-Owner
Trustee, any adult citizen of the United States of America may be
appointed Co-Owner Trustee hereunder by the person who shall at the
time be a Vice President of the corporation then acting as the Owner
Trustee hereunder by an instrument in writing duly executed, and under
its corporate seal, and, subject to its right to revoke such
appointment or to appoint another person, the Owner Trustee shall
appoint a successor Co-Owner Trustee, such
20
<PAGE> 24
appointment to be immediately effective in case of the death,
resignation, removal or inability or incapacity to act hereunder of the
Co-Owner Trustee. In the event a vacancy occurs in the office of the
Co-Owner Trustee, either by reason of resignation, removal, incapacity
or inability to act and no successor is appointed pursuant to the
foregoing provisions within thirty (30) days after such vacancy occurs,
the Holders and the Agent may jointly appoint a successor to the
Co-Owner Trustee in the same manner as is provided for the appointment
of a successor to the Co-Owner Trustee hereunder.
(v) At any time or times, for the purposes of meeting the
legal requirements of any jurisdiction in which any part of the Trust
Estate hereunder may at the time be located, or to avoid any violation
of law or imposition of taxes not otherwise imposed on the Owner
Trustee, or if the Owner Trustee shall deem it desirable for its own
protection, the Owner Trustee shall have power to appoint one (1) or
more persons (who may be officers of the Owner Trustee either to act as
an additional co-trustee, jointly with the Owner Trustee) of all or any
part of the Trust Estate hereunder, or of any property constituting
part thereof, or to act as separate trustee of any part of the Trust
Estate in either case with such powers as may be provided in the
instrument of appointment and are consistent with the terms hereof, and
to vest in such person or persons in the capacity as aforesaid, any
property, title, right or power deemed necessary or desirable, subject
to the remaining provisions of this Section 9.2.
(vi) Notwithstanding any provision of this Trust Agreement to
the contrary, any additional co-trustee shall act upon and be subject
to the following terms and conditions:
All rights, powers, duties and obligations conferred
or imposed upon the Owner Trustee shall be conferred or
imposed solely upon and solely exercised and performed by the
Owner Trustee except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be
performed the Owner Trustee or the Owner Trustee shall be
incompetent or unqualified to perform such act or acts or to
avoid any violation of law or imposition of taxes not
otherwise imposed on the Owner Trustee, or if the Owner
Trustee shall deem it desirable for its own protection, in
which event such rights, powers, duties and obligations shall
be exercised and performed by such co-trustee or Co-Owner
Trustee.
(vii) No power granted by this Trust Agreement to, or which
this Trust Agreement provides may be exercised by, the Owner Trustee in
respect of the custody, control and management of moneys may be
exercised by any Co-Owner Trustee or any subsequently appointed
co-trustee except jointly with, or with the consent in writing of, the
Owner Trustee for disbursement or application in accordance with the
terms hereof.
(viii) All moneys which may be received or collected by any
Co-Owner Trustee or such subsequently appointed co-trustees shall be
paid over to the Owner Trustee to be distributed in accordance with
this Trust Agreement and the other Operative Agreements.
21
<PAGE> 25
(ix) Any Co-Owner Trustee, or any subsequently appointed
co-trustee to the extent permitted by law, does hereby constitute the
Owner Trustee or its successors hereunder his or her agent or attorney
in fact, with full power and authority to do any and all acts and
things and exercise any and all discretion authorized or permitted by
the Co-Owner Trustee or such subsequently appointed co-trustee, in its
behalf or in its name.
(x) No trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder.
SECTION 9.3 NOTICE.
At all times that a successor Owner Trustee is appointed pursuant to
Section 9.1, an Owner Trustee resigns pursuant to Section 9.1 or the Co-Owner
Trustee, a co-trustee or separate trustee, is appointed pursuant to Section 9.2,
the Holders shall give joint notice of such fact within thirty (30) days of its
occurrence to (x) Lessee, if the Lease is then in effect and (y) the Agent, if
the Credit Agreement is in effect.
SECTION 9.4 REQUIRED CONSENTS.
Notwithstanding the provisions of Section 9.1 and 9.2 above, the Owner
Trustee shall not be removed and no successor Owner Trustee, co-trustee or
separate trustee shall be appointed without the consent of the Agent and, so
long as no Default or Event of Default shall have occurred and be continuing,
the Lessee (which consent shall not unreasonably be withheld or delayed) as long
as the Liens of the Security Documents remain in full force and effect.
ARTICLE X
AMENDMENTS
SECTION 10.1 AMENDMENTS.
This Trust Agreement may be terminated, amended, supplemented, waived
or modified in accordance with Section 12.4 of the Participation Agreement.
SECTION 10.2 LIMITATION ON AMENDMENTS.
Notwithstanding Section 10.1, the Owner Trustee shall not, without the
consent of the Agent execute any amendment that might result in the trusts
created hereunder being terminated prior to the satisfaction and discharge of
the Lien and security interest of the Security Documents on the Collateral or
prior to the payment in full of the principal of, and interest on the Loans and
other than in accordance with the terms of the Credit Agreement.
22
<PAGE> 26
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 NO LEGAL TITLE TO TRUST ESTATE IN THE HOLDERS.
The Holders shall not have legal title to any part of the Trust Estate;
provided, however, that each Holder has a pro rata beneficial interest in the
Trust Estate. No transfer, by operation of law or otherwise, of any right, title
or interest of a Holder in and to the Trust Estate or hereunder shall operate to
terminate this Trust Agreement or the Trust or the trusts hereunder or entitle
any successor or transferee to an accounting or to the transfer to it of legal
title to any part of the Trust Estate.
SECTION 11.2 SALE OF A PROPERTY BY THE OWNER TRUSTEE IS BINDING.
Any sale, transfer, or other conveyance of any Property or any part
thereof by the Owner Trustee made pursuant to the terms of this Trust Agreement
or any other Operative Agreement shall bind the Holders and shall be effective
to sell, transfer and convey all right, title and interest of the Owner Trustee
and the Holders in and to such Property or any part thereof. No purchaser or
other grantee shall be required to inquire as to the authorization, necessity,
expediency or regularity of such sale or conveyance or as to the application of
any sale or other proceeds with respect thereto by the Owner Trustee. Nothing
herein shall be deemed to permit any sale, transfer or other conveyance of the
Property or any part thereof by the Owner Trustee on behalf of the Trust other
than in accordance with the terms of the Operative Agreements.
SECTION 11.3 LIMITATIONS ON RIGHTS OF OTHERS.
Nothing in this Trust Agreement whether express or implied, shall be
construed to give to any Person, other than the Owner Trustee and each Holder,
any legal or equitable right, remedy or claim under or in respect of this Trust
Agreement, any covenants, conditions or provisions contained herein or in the
Trust Estate; but this Trust Agreement shall be held for the sole and exclusive
benefit of the Owner Trustee and the Holders. The Agent shall have the right to
enforce the provisions of Sections 5.1, 5.2, 5.3, 5.4, 6.2, 6.8, 8.1, 8.2, 8.3,
9.1, 9.2, 9.3, 10.1 and 10.2 prior to the payment in full of the principal of
and interest on the Loans and such other amounts due and payable to the Lenders
or the Agent under the Operative Agreements.
SECTION 11.4 NOTICES.
Unless otherwise expressly specified or permitted by the terms hereof,
all notices hereunder shall be given as provided in Section 12.2 of the
Participation Agreement.
SECTION 11.5 SEVERABILITY.
Any provision of this Trust Agreement that may be determined by
competent authority to be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
23
<PAGE> 27
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 11.6 LIMITATION ON THE HOLDERS' LIABILITY.
No Holder shall have any liability for the performance of this Trust
Agreement except as expressly set forth herein.
SECTION 11.7 SEPARATE COUNTERPARTS.
This Trust Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one (1) and the same
instrument.
SECTION 11.8 SUCCESSORS AND ASSIGNS.
(a) All covenants and agreements contained herein shall be
binding upon, and inure to the benefit of, Trust Company, the Owner
Trustee and its successors and assigns and each Holder and its
successors and assigns, all as herein provided. Any request, notice,
direction, consent, waiver or other instrument or action by a Holder
shall bind the successors and assigns of such Holder.
(b) Any Holder may transfer or assign all or any portion of
its right, title and interest in the Trust Estate, this Trust Agreement
and the Certificate of such Holder to an Eligible Assignee in
accordance with the requirements of Section 10.1 of the Participation
Agreement and pursuant to an assignment agreement in substantially the
form of Exhibit B, which assignment agreement shall provide, without
limitation, that the assignee undertakes and assumes all obligations
and covenants of a Holder under this Trust Agreement and the other
Operative Agreements. The Holder proposing the transfer or assignment
shall notify the Owner Trustee, the Agent and Lessee in writing of the
effective date of the transfer or assignment, which effective date
shall be at least three (3) Business Days after the date of such
notification. The cost of issuance of such new Certificates shall be
allocated to the assigning Holder and the assignee as determined by
such parties. The Owner Trustee shall maintain a register showing the
Holders and their respective interests in the Trust Estate and, upon
the occurrence of a permitted assignment pursuant to this Section
11.8(b), shall issue a Certificate to the assignee and, if the
assigning Holder is maintaining an interest hereunder, a new
Certificate to such assigning Holder representing its revised interest
in the Trust Estate. The Owner Trustee shall not recognize any
purported assignment or transfer by a Holder that does not comply with
the terms of this Section 11.8 and any such attempted transfer or
assignment by a Holder in violation of the terms of this Section 11.8
shall be null and void and of no effect.
24
<PAGE> 28
SECTION 11.9 HEADINGS.
The headings of the various articles and sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 11.10 GOVERNING LAW.
THIS TRUST AGREEMENT HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS
BE GOVERNED BY AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE
LAW OF, THE STATE OF UTAH.
SECTION 11.11 PERFORMANCE BY THE HOLDERS.
Any obligation of the Owner Trustee hereunder or under any Operative
Agreement or other document contemplated herein may be performed by the Holders
(or by one (1) of them with the written consent of the other) and any such
performance shall not be construed as a revocation of the trusts created hereby.
SECTION 11.12 CONFLICT WITH OPERATIVE AGREEMENTS.
If this Trust Agreement (or any instructions given by a Holder pursuant
hereto) shall require that any action be taken with respect to any matter and
any other Operative Agreement (or any instructions duly given in accordance with
the terms thereof) shall require that a different action be taken with respect
to such matter, and such actions shall be mutually exclusive, the provisions of
such other Operative Agreement, in respect thereof, shall control.
SECTION 11.13 NO IMPLIED WAIVER.
No term or provision of this Trust Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing entered
into as provided in Section 10.1; and any such waiver of the term hereof shall
be effective only in the specific instance and for the specific purpose given.
SECTION 11.14 SUBMISSION TO JURISDICTION; VENUE.
THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION TO
JURISDICTION AND VENUE ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS
MUTANDIS.
SECTION 11.15 THIRD PARTY BENEFICIARY.
The parties hereto acknowledge and agree that the Lessee is a third
party beneficiary of this Agreement and has all rights attendant thereto.
25
<PAGE> 29
SECTION 11.16 REPRESENTATION AND WARRANTIES.
To induce the Holders to enter into this Agreement and to make the
Holder Advances, each of the Owner Trustee and the Trust Company hereby makes
and affirms the representations and warranties set forth in Section 6.1 of the
Participation Agreement to the same extent as if such representations and
warranties were set forth in this Agreement in their entirety.
SECTION 11.17 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.
If any Certificate shall become mutilated, destroyed, lost or stolen,
the Owner Trustee shall, upon the written request and at the sole cost and
expense of the Holder of such Certificate, issue and deliver in replacement
thereof a new Certificate in the form of Exhibit A hereto, to the same Holder
and dated the same date as the Certificate so mutilated, destroyed, lost or
stolen. The Owner Trustee shall make a notation on each new Certificate of the
amount of all redemptions of Advances and payments of yield theretofore made on
the Certificate so mutilated, destroyed, lost or stolen and the date to which
yield on such old Certificate has been paid. If the Certificate being replaced
has been mutilated, such Certificate shall be surrendered to the Owner Trustee.
If the Certificate being replaced has been destroyed, lost or stolen, the Holder
of such Certificate shall furnish to the Owner Trustee (a) such security or
indemnity as may be required by the Owner Trustee to save the Owner Trustee
harmless and (b) evidence satisfactory to the Owner Trustee of the destruction,
loss or theft of such Certificate and of the ownership thereof.
[signature pages follow]
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized, as of
the date set forth above.
HOLDERS:
BANK OF AMERICA, N.A.
By: /s/ DOUGLAS T. MECKELNBURG
----------------------------------
Name: Douglas T. Meckelnburg
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ MARY K. YOUNG
----------------------------------
Name: Mary K. Young
Title: Assistant Vice President
UNION BANK OF CALIFORNIA, N.A
By: /s/ GLENN LEYRER
----------------------------------
Name: Glenn Leyrer
Title: Vice President
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/ ERIC C. HOUSER
----------------------------------
Name: Eric C. Houser
Title: Vice President
OWNER TRUSTEE:
FIRST SECURITY BANK, NATIONAL ASSOCIATION
By: /s/ VAL T. ORTON
----------------------------------
Name: Val T. Orton
Title: Vice President
(VS Trust 2000-1)
<PAGE> 31
SCHEDULE I
HOLDER COMMITMENTS
<TABLE>
<CAPTION>
Holder Commitment
Name of Holder Amount/Percentage
-------------- -----------------
<S> <C> <C>
Bank of America, N.A. $390,000 32.5%
555 California Street, 41st Floor
Mail Code CA5-705-41-01
San Francisco, CA 94104
Attn: Doug Meckelnburg
Telephone: (415) 953-9155
Telecopy: (415) 622-0632
KeyBank National Association $390,000 32.5%
700 Fifth Avenue, 46th Floor
Seattle, WA 98104
Attention: Mary K. Young
Telephone: (206) 684-6085
Telecopy: (206) 684-6035
Union Bank of California, N.A. $270,000 22.5%
1980 Saturn Street
Monterey Park, CA 91755
Attention: Gohar Karapetyan,
Vice President
Telephone: (323)720-2679
Telecopy: (323)724-6198
Wells Fargo Bank, National Association $150,000 12.5%
201 3rd Street, 8th Floor
San Francisco, CA 94301
Attention: Rosanna Roxas
Telephone: (415)477-5390
Telecopy: (415) 979-0675
TOTAL $1,200,000 100%
</TABLE>
<PAGE> 32
EXHIBIT A
FORM OF HOLDER CERTIFICATE
FIRST SECURITY BANK, NATIONAL ASSOCIATION
TRUSTEE UNDER
TRUST AGREEMENT DATED AS OF March 9, 2000
HOLDER CERTIFICATE
VS TRUST 2000-1
____________, 2000
First Security Bank, National Association, as trustee (herein in such
capacity called the "Owner Trustee") under that certain Trust Agreement dated as
of March 9, 2000 (herein called the "Trust Agreement", the defined terms therein
not otherwise defined herein being used herein with the same meanings), among
the several banks and other financial institutions from time to time parties to
the Trust Agreement as the Holders and the Owner Trustee, hereby certifies for
the benefit of [HOLDER] as follows: (i) this Holder Certificate is a Holder
Certificate referred to in Section 3.1(d) of the Trust Agreement, which Holder
Certificate has been issued by the Owner Trustee pursuant to the Trust Agreement
and (ii) subject to the prior payment of Notes to the extent provided for in
Section 8.7 of the Participation Agreement, and to the assignment, pledge or
mortgage of the Trust Estate to secure the Notes as set forth in the applicable
Operative Agreements, the holder of this Holder Certificate has an undivided
beneficial interest in properties of the Owner Trustee constituting part of the
Trust Estate and is entitled to receive as provided in the Trust Agreement, a
portion of the Rent received or to be received by the Owner Trustee for the
Properties, as well as a portion of certain other payments which may be received
by the Owner Trustee pursuant to the terms of the Operative Agreements as more
particularly set forth therein.
All amounts payable hereunder and under the Trust Agreement shall be
paid only from the income and proceeds from the Trust Estate and only to the
extent that the Owner Trustee (or the Agent on behalf of the Owner Trustee)
shall have received sufficient income or proceeds from the Trust Estate to make
such payments in accordance with the terms of the Trust Agreement, except as
specifically provided in Section 6.1 of the Trust Agreement; and the holder
hereof, by its acceptance of this Holder Certificate, agrees that it will look
solely to the income and proceeds from the Trust Estate to the extent available
for distribution to the holder hereof as provided in the Trust Agreement and
that, except as specifically provided in the Trust
A-1
<PAGE> 33
Agreement, the Owner Trustee is not personally liable to the holder hereof for
any amount payable under this Holder Certificate or the Trust Agreement.
The amounts payable to the holder hereof pursuant to the Trust
Agreement shall be paid or caused to be paid by the Owner Trustee to, or for the
account of, such Holder, or its nominee, by transferring such amount in
immediately available funds to a bank institution or banking institutions with
bank wire transfer facilities for the account of such Holder or as otherwise
instructed in writing from time to time by such Holder.
This Holder Certificate shall mature, and all amounts payable to the
holder hereof pursuant to the Trust Agreement shall be due and payable, on the
Maturity Date.
This Holder Certificate shall bear a yield on the unpaid amount hereof
from time to time outstanding hereunder and under the Trust Agreement at the
Holder Yield as provided in the Trust Agreement. The Holder Yield on this Holder
Certificate shall be computed as provided in the Trust Agreement and shall be
payable at the rates, at the times and from the dates specified in the Trust
Agreement.
From and after the execution of the Participation Agreement, the rights
of the holder of this Holder Certificate under the Trust Agreement as well as
the beneficial interest of the holder of this Holder Certificate in and to the
properties of the Owner Trustee constituting part of the Trust Estate, are
subject and subordinate to the rights of the holders of the Notes to the extent
provided in the applicable Operative Agreements. The Trust Estate has been or
will be assigned, pledged and mortgaged to the Agent, on behalf of the Lenders
and the Holders, as security for the Notes and the Holder Certificates.
Reference is hereby made to the Trust Agreement, the Participation Agreement,
the Credit Agreement, the Security Agreement and the Notes for statements of the
rights of the holder of this Holder Certificate and of the rights of the holders
of, and the nature and extent of the security for, the Notes, as well as for a
statement of the terms and conditions of the trusts created by the Trust
Agreement, to all of which terms and conditions the holder hereof agrees by its
acceptance of this Holder Certificate.
The holder hereof, by its acceptance of this Holder Certificate, agrees
not to transfer this Holder Certificate except in accordance with the terms of
the Trust Agreement and the other Operative Agreements.
THIS HOLDER CERTIFICATE SHALL BE INTERPRETED AND ENFORCED AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, INTERPRETED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW
PROVISIONS) AND DECISIONS OF THE STATE OF UTAH. WHENEVER POSSIBLE EACH PROVISION
OF THIS HOLDER CERTIFICATE SHALL BE INTERPRETED IN SUCH MANNER AS TO BE
EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS HOLDER
CERTIFICATE SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH
PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY,
WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS
OF THIS HOLDER CERTIFICATE.
A-2
<PAGE> 34
[The remainder of this page has been intentionally left blank.]
A-3
<PAGE> 35
IN WITNESS WHEREOF, the undersigned authorized officer of the Owner
Trustee has executed this Holder Certificate as of the date first set forth
above.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION, not
individually, except as
expressly set forth herein,
but solely as the Owner
Trustee under the VS Trust
2000-1
By:
------------------------
Name:
----------------------
Title:
---------------------
<PAGE> 36
EXHIBIT B
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Trust Agreement, dated as of March 9, 2000 (as
amended, supplemented or otherwise modified from time to time, the "Trust
Agreement"), among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its
individual capacity except as stated therein, but solely as the Owner Trustee
under the VS Trust 2000-1 (the "Owner Trustee" or the "Owner Trustee") and the
Holders named therein. Unless otherwise defined herein, terms defined in the
Trust Agreement (or pursuant to Section 1 of the Trust Agreement, defined in
other agreements) and used herein shall have the meanings given to them in or
pursuant to the Trust Agreement.
[____________________] (the "Assignor") and [____________________] (the
"Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), a [___%] interest (the "Assigned Interest")
in and to the Assignor's rights and obligations under the Trust Agreement with
respect to the facility contained in the Trust Agreement as are set forth on
Schedule 1 hereto (the "Assigned Facility"), in a principal amount for the
Assigned Facility as set forth on Schedule 1.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Trust Agreement or any other Operative
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Trust Agreement, any other Operative Agreement or
any other instrument or document furnished pursuant thereto, other than that it
has not created any adverse claim upon the interest being assigned by it
hereunder and that such interest is free and clear of any such adverse claim;
(b) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Owner Trustee or any other obligor or
the performance or observance by the Owner Trustee, or any other obligor of any
of their respective obligations under the Trust Agreement or any other Operative
Agreement or any other instrument or document furnished pursuant hereto or
thereto; and (c) attaches the Certificate held by it evidencing the Assigned
Facility and requests that the Owner Trustee exchange such Certificate for a new
Certificate payable to the Assignee and (if the Assignor has retained any
interest in the Assigned Facility) a new Certificate payable to the Assignor in
the respective amounts which reflect the assignment being made hereby (and after
giving effect to any other assignments which have become effective on the
Effective Date).
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received copies of the Operative Agreements, and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Assignor, the Agent, any other
Holder or the Owner Trustee and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Trust
B-1
<PAGE> 37
Agreement, the other Operative Agreements or any other instrument or document
furnished pursuant hereto or thereto; (d) appoints and authorizes the Agent and
the Owner Trustee, respectively, to take such action as agent on its behalf and
to exercise such powers and discretion under the Trust Agreement, the other
Operative Agreements or any other instrument or document furnished pursuant
hereto or thereto as are delegated to the Agent and the Owner Trustee,
respectively, by the terms thereof, together with such powers as are incidental
thereto; and (e) agrees that it will be bound by the provisions of the Trust
Agreement and the other Operative Agreements to which Assignee is a party and
will perform in accordance herewith all the obligations which by the terms of
the Trust Agreement and the other Operative Agreements to which Assignee is a
party are required to be performed by it as a Holder including without
limitation, if it is organized under the laws of a jurisdiction outside the
U.S., its obligation pursuant to Section 11.2(e) of the Participation Agreement.
4. The effective date of this Assignment and Acceptance shall be
[_________, ____] (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Owner Trustee for
acceptance by it and recording by the Owner Trustee pursuant to Section 11.8(b)
of the Trust Agreement, effective as of the Effective Date (which shall not,
unless otherwise agreed to by the Owner Trustee, be earlier than five (5)
Business Days after the date of such acceptance and recording by the Owner
Trustee).
5. Upon such acceptance and recording, from and after the Effective
Date, the Owner Trustee shall make, or cause to be made, all payments in respect
of the Assigned Interest (including without limitation payments of Holder
Advance, yield, fees and other amounts) to the Assignee whether such amounts
have accrued prior to the Effective Date or accrue subsequent to the Effective
Date. The Assignor and the Assignee shall make all appropriate adjustments in
payments by the Owner Trustee for periods prior to the Effective Date or with
respect to the making of this assignment directly between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a party
to the Trust Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Operative Agreements and shall be bound by the provisions thereof and (b)
the Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Trust
Agreement and the other Operative Agreements.
7. This Assignment and Acceptance shall be governed by, and construed,
INTERPRETED AND ENFORCED in accordance with the laws of the State of UTAH.
B-2
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
[________________________]
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[________________________]
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Consented To:
VERITAS OPERATING CORPORATION, as the
Construction Agent and as the Lessee
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
BANK OF AMERICA, N.A., as the Agent
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not individually, but
solely as the Owner
Trustee under the VS
Trust 2000-1
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
<PAGE> 39
SCHEDULE 1
TO ASSIGNMENT AND ACCEPTANCE
RELATING TO THE TRUST AGREEMENT,
DATED AS OF March 9, 2000 (THE "TRUST AGREEMENT")
AMONG
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
NOT INDIVIDUALLY EXCEPT AS STATED THEREIN,
BUT SOLELY AS THE OWNER TRUSTEE,
AND
THE HOLDERS NAMED THEREIN
Name of Assignor: [_______________]
Name of Assignee: [_______________]
Effective Date of Assignment: [_______________]
<TABLE>
<CAPTION>
Trust Agreement Holder Advance Commitment
Facility Assigned Amount Assigned Percentage Assigned
----------------- --------------- -------------------
<S> <C> <C>
Holder Commitment [$___________] [__________%] of the
Amount pursuant to aggregate Holder Commitment
above-referenced Trust (which is [___%] of the Assignor's
Agreement Holder Commitment)
</TABLE>
[__________________]
By:
----------------------
Name:
--------------------
Title:
-------------------
[__________________]
By:
----------------------
Name:
--------------------
Title:
-------------------
<PAGE> 1
Exhibit 10.37
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
Dated as of March 9, 2000
among
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, except as
expressly stated herein,
but solely as the Owner Trustee
under the VS Trust 2000-1,
as the Borrower,
The Several Lenders
from Time to Time Parties Hereto,
and
BANK OF AMERICA, N.A.,
as the Agent
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS.......................................................1
1.1 Definitions.......................................................1
1.2 Interpretation....................................................1
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS...................................1
2.1 Commitments.......................................................1
2.2 Notes.............................................................2
2.3 Procedure for Borrowing...........................................2
2.4 Lender Commitment Fees............................................3
2.5 Termination or Reduction of Commitments...........................3
2.6 Prepayments and Payments..........................................4
2.7 Conversion and Continuation Options...............................5
2.8 Interest Rates and Payment Dates..................................5
2.9 Computation of Interest...........................................6
2.10 Pro Rata Treatment and Payments..................................7
2.11 Notice of Amounts Payable; Mandatory Assignment..................8
2.12 Increase of Commitments..........................................9
SECTION 3. REPRESENTATIONS AND WARRANTIES....................................9
SECTION 4. CONDITIONS PRECEDENT..............................................9
4.1 Conditions to Effectiveness.......................................9
4.2 Conditions to Each Loan...........................................9
SECTION 5. COVENANTS.........................................................9
5.1 Other Activities..................................................9
5.2 Ownership of Properties, Indebtedness............................10
5.3 Disposition of Assets............................................10
5.4 Compliance with Operative Agreements.............................10
5.5 Further Assurances...............................................10
5.6 Notices..........................................................10
5.7 Discharge of Liens...............................................10
5.8 Trust Agreement..................................................11
5.9 Maintenance of Equity............................................11
SECTION 6. EVENTS OF DEFAULT................................................11
SECTION 7. THE AGENT........................................................14
7.1 Appointment......................................................14
7.2 Delegation of Duties.............................................14
7.3 Exculpatory Provisions...........................................14
7.4 Reliance by the Agent............................................15
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
7.5 Notice of Default................................................15
7.6 Non-Reliance on the Agent and Other Lenders......................16
7.7 Indemnification..................................................16
7.8 The Agent in Its Individual Capacity.............................17
7.9 Successor Agent..................................................17
7.10 Actions of the Agent on Behalf of Holders.......................17
7.11 The Agent's Duty of Care........................................18
SECTION 8. MATTERS RELATING TO PAYMENT AND COLLATERAL.......................18
8.1 Collection and Allocation of Payments and Other Amounts..........18
8.2 Certain Remedial Matters.........................................18
8.3 Excepted Payments................................................18
SECTION 9. MISCELLANEOUS....................................................19
9.1 Amendments and Waivers...........................................19
9.2 Notices..........................................................19
9.3 No Waiver; Cumulative Remedies...................................19
9.4 Survival of Representations and Warranties.......................19
9.5 Payment of Expenses and Taxes....................................19
9.6 Successors and Assigns; Participations and Assignments...........20
9.7 Participations...................................................20
9.8 Assignments......................................................20
9.9 The Register.....................................................22
9.10 Adjustments; Set-off............................................22
9.11 Counterparts....................................................23
9.12 Severability....................................................23
9.13 Integration.....................................................23
9.14 GOVERNING LAW...................................................23
9.15 SUBMISSION TO JURISDICTION; VENUE...............................23
9.16 Acknowledgements................................................23
9.17 WAIVERS OF JURY TRIAL...........................................24
9.18 Nonrecourse.....................................................24
9.19 USURY SAVINGS PROVISION.........................................25
9.20 Third Party Beneficiary.........................................26
9.21 Mutilated, Destroyed, Lost or Stolen Notes......................26
</TABLE>
SCHEDULES
Schedule 2.1 Commitments and Addresses of Lenders
ii
<PAGE> 4
EXHIBITS
Exhibit A-1 Form of Tranche A Note
Exhibit A-2 Form of Tranche B Note
Exhibit B Form of Assignment and Acceptance
iii
<PAGE> 5
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of March 9, 2000 (as amended, modified,
extended, supplemented, restated and/or replaced from time to time, the
"Agreement") is among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, except as expressly stated herein, but solely as the Owner Trustee
under the VS Trust 2000-1 (the "Owner Trustee" or the "Borrower"), the several
banks and other financial institutions from time to time parties to this
Agreement (the "Lenders") and BANK OF AMERICA, N.A., a national banking
association, as a Lender and as the agent for the Lenders (the "Agent").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINITIONS.
For purposes of this Agreement, capitalized terms used in this Agreement
and not otherwise defined herein shall have the meanings assigned to them in
Appendix A to that certain Participation Agreement dated as of March 9, 2000 (as
amended, modified, extended, supplemented, restated and/or replaced from time to
time in accordance with the applicable provisions thereof, the "Participation
Agreement") among VERITAS Operating Corporation, as Lessee and Construction
Agent, the various parties thereto from time to time, as the Guarantors, the
Borrower, the various banks and other lending institutions which are parties
thereto from time to time, as the Holders, the various banks and other lending
institutions which are parties thereto from time to time, as the Lenders, and
the Agent, as agent for the Lenders and respecting the Security Documents, as
the agent for the Lenders and the Holders, to the extent of their interests.
Unless otherwise indicated, references in this Agreement to articles, sections,
paragraphs, clauses, appendices, schedules and exhibits are to the same
contained in this Agreement.
1.2 INTERPRETATION.
The rules of usage set forth in Appendix A to the Participation Agreement
shall apply to this Agreement.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 COMMITMENTS.
(a) Subject to the terms and conditions hereof, each of the Lenders
severally agrees to make the portion of the Tranche A Loans and the Tranche B
Loans to the Borrower from time to time during the Commitment Period in an
amount up to such Lender's Commitment as is set
<PAGE> 6
forth adjacent to such Lender's name in Schedule 2.1 hereto for the purpose of
enabling the Borrower to purchase the Properties and to pay Property Acquisition
Costs, Property Costs and Transaction Expenses, provided, that the aggregate
principal amount at any one (1) time outstanding with respect to each of the
Tranche A Loans and the Tranche B Loans shall not exceed the amount of the
Tranche A Commitments and the Tranche B Commitments respectively. Any
prepayments of the Loans, whether mandatory or at the Borrower's election, shall
not be subject to reborrowing except as set forth in Section 5.2(d) of the
Participation Agreement.
(b) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR
Loans, or (iii) a combination thereof, as determined by the Borrower and
notified to the Agent in accordance with Sections 2.3 and 2.7. In the event the
Borrower fails to provide notice pursuant to Section 2.3, the Loan shall be an
ABR Loan. Further, any Loans by the Lenders on a given date in an aggregate
amount less than $100,000 shall be ABR Loans, unless the remaining Available
Commitment for the Lenders in the aggregate is less than $100,000, in which
case, the Borrower may elect a Eurodollar Loan for such remaining amount.
(c) The Commitment of each Lender to make Tranche A Loans and Tranche B
Loans shall be pro rata.
2.2 NOTES.
The Loans made by each Lender shall be evidenced by promissory notes of
the Borrower, substantially in the form of Exhibit A-1 in the case of the
Tranche A Loans (each, a "Tranche A Note") or Exhibit A-2 in the case of the
Tranche B Loans (each, a "Tranche B Note," and with the Tranche A Notes, the
"Notes"), with appropriate insertions as to payee and date, payable to the order
of such Lender and in a principal amount up to the Tranche A Commitment or
Tranche B Commitment, as the case may be, of such Lender. Each Lender is hereby
authorized to record the date, Type and amount of each Loan made by such Lender,
each continuation thereof, each conversion of all or a portion thereof to
another Type, and the date and amount of each payment or prepayment of principal
thereof on the schedule annexed to and constituting a part of its Note, and any
such recordation shall constitute prima facie evidence of the accuracy of the
information so recorded, provided, that the failure to make any such recordation
or any error in such recordation shall not affect the Borrower's obligations
hereunder or under such Note. Each Note shall (i) be dated the Initial Closing
Date, (ii) be stated to mature on the Maturity Date and (iii) provide for the
payment of principal in accordance with Section 2.6(d) and the payment of
interest in accordance with Section 2.8.
2.3 PROCEDURE FOR BORROWING.
(a) The Borrower may borrow under the Commitments during the Commitment
Period on any Business Day that an Advance may be requested pursuant to the
terms of Section 5.2 of the Participation Agreement, provided, that the Borrower
shall give the Agent irrevocable notice (which must be received by the Agent
prior to 12:00 Noon, Dallas, Texas time, at least three (3) Business Days prior
to the requested Borrowing Date specifying (i) the amount to be
2
<PAGE> 7
borrowed (which on any date shall not be in excess of the then Available Lender
Commitments), (ii) the requested Borrowing Date, (iii) whether the borrowing is
to be of Eurodollar Loans, ABR Loans or a combination thereof, (iv) if the
borrowing is to be a combination of Eurodollar Loans and ABR Loans, the
respective amounts of each Type of Loan and (v) the Interest Period applicable
to each Eurodollar Loan. Pursuant to the terms of the Participation Agreement,
the Borrower shall be deemed to have delivered such notice upon the delivery of
a notice by the Construction Agent or the Lessee containing such required
information. Upon receipt of any such notice from the Borrower, the Agent shall
promptly notify each Lender thereof. Each Lender will make the amount of its pro
rata share of each borrowing available to the Agent for the account of the
Borrower at the office of the Agent specified in Section 9.2 prior to 12:00
Noon, Dallas, Texas time, on the Borrowing Date requested by the Borrower in
funds immediately available to the Agent. Such borrowing will then be made
available to the Borrower by the Agent crediting an account designated, subject
to Section 9.1 of the Participation Agreement, by the Borrower on the books of
such office with the aggregate of the amounts made available to the Agent by the
Lenders and in like funds as received by the Agent. No amount of any Loan which
is repaid or prepaid by the Borrower may be reborrowed hereunder, except as set
forth in Section 5.2(d) of the Participation Agreement.
(b) Interest accruing on each Loan during the Construction Period with
respect to any Property shall, subject to the limitations set forth in Section
5.1(b) of the Participation Agreement be added to the principal amount of such
Loan on the relevant Scheduled Interest Payment Date. On each such Scheduled
Interest Payment Date, the Loan Property Cost and Construction Loan Property
Cost shall be increased by the amount of interest added to the Loans.
2.4 LENDER COMMITMENT FEES.
Promptly after receipt from the Lessee of the payment of the Lender
Commitment Fee payable pursuant to Section 7.4 of the Participation Agreement,
the Agent shall distribute such payments to the Lenders pro rata in accordance
with their respective Commitments.
2.5 TERMINATION OR REDUCTION OF COMMITMENTS.
(a) The Borrower shall have the right, upon not less than three (3)
Business Days' written notice to the Agent, to terminate the Commitments or,
from time to time, to reduce the amount of the Commitments, provided, that (i)
after giving effect to such reduction, the aggregate outstanding principal
amount of the Loans shall not exceed the aggregate Commitments and (ii) such
notice shall be accompanied by a certificate of the Construction Agent stating
that the amount not less than ninety-seven percent (97%) of aggregate Budgeted
Total Property Costs as of the date of such reduction does not exceed the
aggregate amount of Available Commitments as of such date after giving effect to
such reduction. Any such reduction (A) shall be in an amount equal to the lesser
of (1) $1,000,000 (or an even multiple thereof) or (2) the remaining Available
Commitments, (B) shall reduce permanently the Commitments then in effect and (C)
shall be pro rata for the Commitments of all Lenders and pro rata between the
Tranche A Loans and the Tranche B Loans.
3
<PAGE> 8
(b) The Commitments respecting any particular Property shall
automatically be reduced to zero (0) upon the occurrence of the Rent
Commencement Date respecting such Property. On any date on which the Commitments
shall automatically be reduced to zero (0) pursuant to Section 6, the Borrower
shall prepay all outstanding Loans, together with accrued unpaid interest
thereon and all other amounts owing under the Operative Agreements.
2.6 PREPAYMENTS AND PAYMENTS.
(a) Subject to Sections 11.2(e), 11.3 and 11.4 of the Participation
Agreement, the Borrower may at any time and from time to time prepay the Loans,
in whole or in part, without premium or penalty and without setoff, deduction or
counterclaim, upon at least three (3) Business Days' irrevocable notice to the
Agent, specifying the date and amount of prepayment and whether the prepayment
is of Eurodollar Loans, ABR Loans or a combination thereof, and, if a
combination thereof, the amount allocable to each. Upon receipt of any such
notice the Agent shall promptly notify each Lender thereof. If any such notice
is given, the amount specified in such notice shall be due and payable on the
date specified therein. Amounts prepaid may not be reborrowed, and shall reduce
the Commitments and the Available Commitments, except in each case as set forth
in Section 5.2(d) of the Participation Agreement.
(b) If on any date the Agent or the Lessor shall receive any payment in
respect of (i) any Casualty, Condemnation or Environmental Violation pursuant to
Sections 15.1(a) or 15.1(g) or Article XVI of the Lease (excluding any payments
in respect thereof which are payable to the Lessee in accordance with the
Lease), or (ii) the Termination Value of any Property in connection with the
delivery of a Termination Notice pursuant to Article XVI of the Lease, or (iii)
the Termination Value of any Property in connection with the exercise of the
Purchase Option under Article XX of the Lease or the exercise of the option of
the Lessor to transfer the Properties to the Lessee pursuant to Section 20.3 of
the Lease, or (iv) any payment required to be made or elected to be made by the
Construction Agent to the Lessor pursuant to the terms of the Construction
Agency Agreement, then in each case, the Borrower shall pay such amounts to the
Agent and the Agent shall be required to apply and pay such amounts in
accordance with the provisions of Section 8.7(b)(ii) of the Participation
Agreement.
(c) Each prepayment of the Loans pursuant to Section 2.6(a) shall be
allocated to reduce the respective Loan Property Costs of all Properties pro
rata according to the Loan Property Costs of such Properties immediately before
giving effect to such prepayment. Each prepayment of the Loans pursuant to
Section 2.6(b) shall be allocated to reduce the Loan Property Cost of the
Property or Properties subject to the respective Casualty, Condemnation,
Environmental Violation, termination, purchase, transfer or other circumstance
giving rise to such prepayment. Any amounts applied to reduce the Loan Property
Cost of any Construction Period Property pursuant to this paragraph (c) shall
also be applied to reduce the Construction Loan Property Cost of such Property
until such Construction Loan Property Cost has been reduced to zero (0).
4
<PAGE> 9
(d) The outstanding principal balance of the Loans and all other
amounts then due and owing under this Agreement or otherwise with respect to the
Loans shall be due and payable in full on the Maturity Date.
2.7 CONVERSION AND CONTINUATION OPTIONS.
(a) The Borrower may elect from time to time to convert Eurodollar
Loans to ABR Loans by giving the Agent at least three (3) Business Days' prior
irrevocable notice of such election, provided, that any such conversion of
Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto, and provided, further, to the extent an Event of Default has
occurred and is continuing on the last day of any such Interest Period, the
applicable Eurodollar Loan shall automatically be converted to an ABR Loan. The
Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans by
giving the Agent at least three (3) Business Days' prior irrevocable notice of
such election. Upon receipt of any such notice, the Agent shall promptly notify
each Lender thereof. All or any part of outstanding Eurodollar Loans or ABR
Loans may be converted as provided herein, provided, that (i) no ABR Loan may be
converted into a Eurodollar Loan after the date that is one (1) month prior to
the Maturity Date and (ii) such notice of conversion regarding any Eurodollar
Loan shall contain an election by the Borrower of an Interest Period for such
Eurodollar Loan to be created by such conversion and such Interest Period shall
be in accordance with the terms of the definition of the term "Interest Period"
including without limitation subparagraphs (A) through (D) thereof.
(b) Subject to the restrictions set forth in Section 2.3 hereof, except
as otherwise requested by the Borrower upon at least three (3) Business Days'
prior written notice to the Agent, in accordance with the applicable notice
provision for the conversion of ABR Loans to Eurodollar Loans set forth herein,
of the length of the next Interest Period to be applicable to such Loans, any
Eurodollar Loan shall be continued as a Eurodollar Loan of the same Interest
Period upon the expiration of the then current Interest Period with respect
thereto without the need for the Borrower to give notice to the Agent, provided,
that no Eurodollar Loan may be continued as such after the date that is one (1)
month prior to the Maturity Date, provided, further, no Eurodollar Loans may be
continued as such if an Event of Default has occurred and is continuing as of
the last day of the Interest Period for such Eurodollar Loan, and provided,
further, that if the Borrower shall fail to give any required notice as
described above or otherwise herein, or if such continuation is not permitted
pursuant to the proceeding proviso, such Loan shall automatically be converted
to an ABR Loan on the last day of such then expiring Interest Period.
2.8 INTEREST RATES AND PAYMENT DATES.
(a) The Loans outstanding hereunder from time to time shall bear
interest at a rate per annum equal to either (i) with respect to a Eurodollar
Loan, the Eurodollar Rate determined for the applicable Interest Period plus the
Applicable Percentage or (ii) with respect to an ABR Loan, the ABR, as selected
by the Borrower in accordance with the provisions hereof; provided, however, (A)
upon delivery by the Agent of the notice described in Section 2.9(c), the Loans
of each of the Lenders shall bear interest at the ABR applicable from time to
time from and after the
5
<PAGE> 10
dates and during the periods specified in Section 2.9(c), (B) upon the delivery
by a Lender of the notice described in Section 11.3(f) of the Participation
Agreement, the Loans of such Lender shall bear interest at the ABR applicable
from time to time from and after the dates and during the periods specified in
Section 11.3(f) of the Participation Agreement and (C) in such other
circumstances as expressly provided herein, the Loans shall bear interest at the
ABR.
(b) If (i) all or a portion of (A) the principal amount of any Loan,
(B) any interest payable thereon or (C) any other amount payable hereunder shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise) or (ii) (A) a replacement Construction Agent is hired in accordance
with the provisions of the Construction Agency Agreement, (B) Completion of all
Properties has not occurred on or prior to the Construction Period Termination
Date or (C) the cost of any Property exceeds the original Construction Budget
therefor (or the applicable Construction Budget modified in accordance with the
Operative Agreements), in each case as previously delivered to the Agent, such
overdue amount (in the case of Section 2.8(b)(i)) or all Loans, including
without limitation principal and interest, and all other amounts payable
hereunder (in the case of Section 2.8(b)(ii)) shall bear interest at a rate per
annum which is the lesser of (x) the then current rate of interest respecting
such payment or other amount, as the case may be, plus two percent (2%) and (y)
the highest interest rate permitted by applicable law, in each case from the
date of such non-payment until such payment is paid in full (whether after or
before judgment) (in the case of Section 2.8(b)(i)) or Completion of all
Properties (in the case of Section 2.8(b)(ii)). All such amounts referenced in
this Section 2.8(b) shall be paid upon demand.
(c) Interest shall be payable in arrears on the applicable Scheduled
Interest Payment Date (but for any Loan having an Interest Period of six (6)
months, interest shall be payable in arrears on each applicable three (3) month
anniversary date of the commencement of such Loan), provided, that (i) interest
accruing pursuant to paragraph (b) of this Section 2.8 shall be payable from
time to time on demand and (ii) each prepayment of the Loans shall be
accompanied by accrued interest to the date of such prepayment on the amount
prepaid.
2.9 COMPUTATION OF INTEREST.
(a) Whenever it is calculated on the basis of the Prime Lending Rate,
interest shall be calculated on the basis of a year of three hundred sixty-five
(365) days (or three hundred sixty-six (366) days, as the case may be) for the
actual days elapsed; and, otherwise, interest shall be calculated on the basis
of a year of three hundred sixty (360) days for the actual days elapsed. The
Agent shall as soon as practicable notify the Borrower and the Lenders of each
determination of a Eurodollar Rate. Any change in the interest rate on a Loan
resulting from a change in the ABR or the Eurocurrency Reserve Requirements
shall become effective as of the day on which such change becomes effective. The
Agent shall as soon as practicable notify the Borrower and the Lenders of the
effective date and the amount of each such change in interest rate.
6
<PAGE> 11
(b) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower and
the Lenders in the absence of manifest error.
(c) If the Eurodollar Rate cannot in good faith be determined by the
Agent in the manner specified in the definition of the term "Eurodollar Rate",
the Agent shall give telecopy or telephonic notice thereof to the Borrower, the
Lessee and the Lenders as soon as practicable thereafter. Until such time as the
Eurodollar Rate can be determined by the Agent in the manner specified in the
definition of such term, no further Eurodollar Loans shall be made or shall be
continued as such at the end of the then current Interest Period nor shall the
Borrower have the right to convert ABR Loans to Eurodollar Loans.
2.10 PRO RATA TREATMENT AND PAYMENTS.
(a) Each borrowing by the Borrower from the Lenders hereunder and any
reduction of the Commitments of the Lenders shall be made pro rata according to
their respective Commitments. Subject to the provisions of Section 8.7 of the
Participation Agreement and Section 2.11(b) hereof, each payment (including
without limitation each prepayment) by the Borrower on account of principal of
and interest on the Loans shall be made pro rata according to the respective
outstanding principal amounts on the Loans then held by the Lenders. All
payments (including without limitation prepayments) to be made by the Borrower
hereunder and under the Notes, whether on account of principal, interest or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 12:00 Noon, Dallas, Texas time, on the due date thereof to the Agent, for the
account of the Lenders, at the Agent's office specified in Section 9.2, in
Dollars and in immediately available funds. The Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received. If any
payment hereunder becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day; provided,
however, if such payment includes an amount of interest calculated with
reference to the Eurodollar Rate and the result of such extension would be to
extend such payment into another calendar month, then such payment shall be made
on the immediately preceding Business Day. In the case of any extension of any
payment of principal pursuant to the preceding two (2) sentences, interest
thereon shall be payable at the then applicable rate during such extension.
(b) Unless the Agent shall have been notified in writing by any Lender
prior to a borrowing that such Lender will not make its share of such borrowing
available to the Agent, the Agent may assume that such Lender is making such
amount available to the Agent, and the Agent may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
amount is not made available to the Agent by the required time on the Borrowing
Date therefor, such Lender shall pay to the Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Agent. A certificate of the Agent submitted to any Lender with respect to
any amounts owing under this Section 2.10(b) shall be conclusive in the absence
of manifest error. If such Lender's share of such borrowing is not made
available to the Agent by such Lender within three (3) Business Days of such
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Borrowing Date, the Agent shall also be entitled to recover such amount with
interest thereon at the rate as set forth above on demand from the Borrower.
2.11 NOTICE OF AMOUNTS PAYABLE; MANDATORY ASSIGNMENT.
(a) In the event that any Lender becomes aware that any amounts are or
will be owed to it pursuant to Sections 11.2, 11.3 or 11.4 of the Participation
Agreement or that it is unable to make Eurodollar Loans, then it shall promptly
notify the Borrower, the Lessee and the Agent thereof and, as soon as possible
thereafter, such Lender shall submit to the Borrower (with a copy to the Agent)
a certificate indicating the amount owing to it and the calculation thereof. The
amounts set forth in such certificate shall be prima facie evidence of the
obligations of the Borrower hereunder.
(b) In the event (i) any Lender shall fail to make available to the
Agent such Lender's ratable portion of any Advance (and no Default or Event of
Default shall have occurred and be continuing) or (ii) that any Lender delivers
to the Borrower a certificate in accordance with Section 2.11(a) in connection
with amounts payable pursuant to Sections 11.2(e) or 11.3 of the Participation
Agreement or such Lender is required to make Loans as ABR Loans in accordance
with Section 11.3(d) of the Participation Agreement then, subject to Section 9.1
of the Participation Agreement, the Borrower may, at its own expense (provided,
such amounts shall be reimbursed or paid entirely (as elected by the Borrower)
by the Lessee, as Supplemental Rent) and in the discretion of the Borrower, (i)
require such Lender to transfer or assign, in whole or (with such Lender's
consent) in part, without recourse (in accordance with Section 9.8), all or
(with such Lender's consent) part of its interests, rights (except for rights to
be indemnified for actions taken while a party hereunder) and obligations under
this Agreement to a replacement bank or institution if the Borrower (subject to
Section 9.1 of the Participation Agreement), with the full cooperation of such
Lender, can identify a Person who is ready, willing and able to be such
replacement bank or institution with respect thereto and such replacement bank
or institution (which may be another Lender) shall assume such assigned
obligations, or (ii) during such time as no Default or Event of Default has
occurred and is continuing, terminate the Commitment of such Lender and prepay
all outstanding Loans of such Lender; provided, however, that (x) subject to
Section 9.1 of the Participation Agreement, the Borrower or such replacement
bank or institution, as the case may be, shall have paid to such Lender in
immediately available funds the principal of and interest accrued to the date of
such payment on the Loans made by it hereunder and all other amounts owed to it
hereunder (and, if such Lender is also a Holder, all Holder Advances and Holder
Yield accrued and unpaid thereon), (y) any termination of Commitments shall be
subject to the terms of Section 2.5(a) and (z) such assignment or termination of
the Commitment of such Lender and prepayment of Loans does not conflict with any
law, rule or regulation or order of any court or Governmental Authority.
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2.12 INCREASE OF COMMITMENTS.
The Commitment of each Lender may be increased pursuant to the agreement
of such Lender, in its sole and absolute discretion, in accordance with the
provisions set forth in Section 2.1 of the Construction Agency Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and to
make the Loans, each of the Trust Company and the Owner Trustee hereby makes and
affirms the representations and warranties set forth in Section 6.1 of the
Participation Agreement to the same extent as if such representations and
warranties were set forth in this Agreement in their entirety.
SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS TO EFFECTIVENESS.
The effectiveness of this Agreement is subject to the satisfaction of all
conditions precedent set forth in Section 5.3 of the Participation Agreement
required by said Section to be satisfied on or prior to the Initial Closing
Date.
4.2 CONDITIONS TO EACH LOAN.
The agreement of each Lender to make any Loan requested to be made by it
on any date is subject to the satisfaction of all conditions precedent set forth
in Section 5.3 and 5.4 of the Participation Agreement required by said Sections
to be satisfied on or prior to the date of the applicable Loan.
Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date of such Loan that the conditions
contained in this Section 4.2 have been satisfied.
SECTION 5. COVENANTS
So long as any Loan or Note remains outstanding and unpaid or any other
amount is owing to any Lender or the Agent hereunder:
5.1 OTHER ACTIVITIES.
The Borrower shall not conduct, transact or otherwise engage in, or commit
to transact, conduct or otherwise engage in, any business or operations other
than the entry into, and exercise of rights and performance of obligations in
respect of, the Operative Agreements and other activities incidental or related
to the foregoing.
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5.2 OWNERSHIP OF PROPERTIES, INDEBTEDNESS.
The Borrower shall not own, lease, manage or otherwise operate any
properties or assets other than in connection with the activities described in
Section 5.1, or incur, create, assume or suffer to exist any Indebtedness or
other consensual liabilities or financial obligations other than as may be
incurred, created or assumed or as may exist in connection with the activities
described in Section 5.1 (including without limitation the Loans and other
obligations incurred by the Borrower hereunder).
5.3 DISPOSITION OF ASSETS.
The Borrower shall not convey, sell, lease, assign, transfer or otherwise
dispose of any of its property, business or assets, whether now owned or
hereafter acquired, except to the extent expressly contemplated by the Operative
Agreements.
5.4 COMPLIANCE WITH OPERATIVE AGREEMENTS.
The Borrower shall at all times observe and perform all of the covenants,
conditions and obligations required to be performed by it (whether in its
capacity as the Lessor, the Owner Trustee or otherwise) under each Operative
Agreement to which it is a party.
5.5 FURTHER ASSURANCES.
At any time and from time to time, upon the written request of the Agent,
and at the expense of the Borrower (provided, such amounts shall be reimbursed
or paid entirely (as elected by the Borrower) by the Lessee, as Supplemental
Rent), the Borrower will promptly and duly execute and deliver such further
instruments and documents and take such further action as the Agent or the
Majority Lenders may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and the other Operative
Agreements and of the rights and powers herein or therein granted.
5.6 NOTICES.
If on any date, a Responsible Officer of the Borrower shall obtain actual
knowledge of the occurrence of a Default or Event of Default, the Borrower will
give written notice thereof to the Agent within five (5) Business Days after
such date.
5.7 DISCHARGE OF LIENS.
Neither the Borrower nor the Trust Company will create or permit to exist
at any time, and will, at its own expense, promptly take such action as may be
necessary duly to discharge, or cause to be discharged, all Lessor Liens
attributable to it, provided, that the Borrower and the Trust Company shall not
be required to discharge any Lessor Lien while the same is being contested in
good faith by appropriate proceedings diligently prosecuted so long as such
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proceedings shall not involve any material danger of impairment of any of the
Liens contemplated by the Security Documents or of the sale, forfeiture or loss
of, and shall not materially interfere with the disposition of, any Property or
title thereto or any interest therein or the payment of Rent.
5.8 TRUST AGREEMENT.
Without prejudice to any right under the Trust Agreement of the Owner
Trustee to resign, the Owner Trustee (a) agrees not to terminate or revoke the
trust created by the Trust Agreement except as permitted by Article VIII of the
Trust Agreement, (b) agrees not to amend, supplement, terminate, revoke or
otherwise modify any provision of the Trust Agreement in any manner which could
reasonably be expected to have an adverse effect on the rights or interests of
the Agent or the Lenders hereunder or under the other Operative Agreements and
(c) agrees to comply with all of the terms of the Trust Agreement.
5.9 MAINTENANCE OF EQUITY.
At all times during the term of this Agreement, the aggregate amount of
all outstanding Holder Advances shall be at least three percent (3.0%) of the
sum of (i) the aggregate amount of all outstanding Loans and (ii) the aggregate
amount of all outstanding Holder Advances.
SECTION 6. EVENTS OF DEFAULT
Upon the occurrence of any of the following specified events (each an
"Event of Default"):
(a) Except as provided in Sections 6(c), the Borrower shall default in
the payment when due of any principal on the Loans or default in the payment
when due of any interest on the Loans, and in either such case, such default
shall continue for three (3) or more days; or
(b) Except as provided in Sections 6(a) and 6(c), the Borrower shall
default, and such default shall continue for three (3) or more days, in the
payment of any amount owing under any Credit Document; or
(c) (i) The Borrower shall default in the payment of any amount due on
the Maturity Date owing under any Credit Document or (ii) the Borrower shall
default in the payment when due of any principal or interest on the Loans
payable with regard to any obligation of Lessee to pay Termination Value when
due or to pay Basic Rent or Supplemental Rent at such time as any Termination
Value is due; or
(d) The Borrower shall default in the due performance or observance by
it of any term, covenant or agreement contained in any Credit Document to which
it is a party (other than those referred to in paragraphs (a), (b) and (c)
above), provided, that in the case of any such
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default under Sections 5.4, 5.5 or 5.8(c), such default shall have continued
unremedied for a period of at least fifteen (15) days after notice to the
Borrower by the Agent or the Majority Lenders, provided, further, if any such
default under Sections 5.4, 5.5 or 5.8(c) is not capable of remedy within such
fifteen (15) day period but may be remedied with further diligence and if the
Borrower has and continues to pursue diligently such remedy, then the Borrower
shall be granted additional time to pursue such remedy but in no event more than
an additional thirty (30) days.
(e) Any representation, warranty or statement made or deemed made by
the Borrower herein or in any other Credit Document or by the Borrower or the
Lessee in the Participation Agreement, 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
(f) (i) Any Lease Event of Default shall have occurred and be
continuing, or (ii) the Owner Trustee shall default in the due performance or
observance by it of any term, covenant or agreement contained in the
Participation Agreement or in the Trust Agreement to or for the benefit of the
Agent or a Lender, provided, that in the case of this clause (ii) such default
shall have continued unremedied for a period of at least fifteen (15) days after
notice to the Owner Trustee and Lessee by the Agent or the Majority Lenders,
provided, further, that in the case of this clause (ii), such default is not
capable of remedy within such fifteen (15) day period but may be remedied with
further diligence and if the Borrower has and continues to pursue diligently
such remedy, then the Borrower shall be granted additional time to pursue such
remedy but in no event more than an additional thirty (30) days; or
(g) The Borrower shall commence a voluntary case concerning itself
under the Bankruptcy Code; or an involuntary case is commenced against the
Borrower under the Bankruptcy Code and the petition is not contravened within
ten (10) days after commencement of the case or an involuntary case is commenced
against the Borrower and the petition is not dismissed within sixty (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 the Borrower; or the Borrower 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 the Borrower, or there is
commenced against the Borrower any such proceeding which remains undismissed for
a period of sixty (60) days; or the Borrower is adjudicated insolvent or
bankrupt, or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower 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 sixty (60) days; or the Borrower makes
a general assignment for the benefit of creditors; or any corporate or
partnership action is taken by the Borrower for the purpose of effecting any of
the foregoing; or
(h) Any Security Document shall cease to be in full force and effect,
or shall cease to give the Agent the Liens, rights, powers and privileges
purported to be created thereby (including without limitation a first priority
perfected security interest in, and Lien on, all of the Properties), in favor of
the Agent on behalf of the Lenders and the Holders, superior to and prior to the
rights
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of all third Persons and subject to no other Liens (except in each case
to the extent expressly permitted herein or in any Operative Agreement); or
(i) The Lease shall cease to be enforceable against the Lessee; or
(j) One (1) or more judgments or decrees shall be entered against the
Borrower involving a liability of $100,000 or more in the aggregate for all such
judgments and decrees for the Borrower and any such judgments or decrees shall
not have been vacated, discharged or stayed or bonded pending appeal within
sixty (60) days from the entry thereof,
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (g) above with respect to the Borrower, automatically the
Commitments shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement and the Notes
shall immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken: (i) with
the consent of the Majority Lenders, the Agent may, or upon the request of the
Majority Lenders, the Agent shall, by notice to the Borrower declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) with the consent of the Majority Lenders, the
Agent may, or upon the request of the Majority Lenders, the Agent shall, by
notice to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the Notes to be
due and payable forthwith, whereupon the same shall immediately become due and
payable (any of the foregoing occurrences or actions referred to in clause (A)
or (B) above, an "Acceleration"). Except as expressly provided above in this
Section 6, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.
Upon the occurrence of any Event of Default and at any time thereafter so
long as any Event of Default shall be continuing, the Agent shall, upon the
written instructions of the Majority Secured Parties, exercise any or all of the
rights and powers and pursue any and all of the remedies available to it
hereunder and (subject to the terms thereof) under the other Credit Documents,
the Lease and the other Operative Agreements and shall have any and all rights
and remedies available under the Uniform Commercial Code or any provision of
law.
Upon the occurrence of any Event of Default and at any time thereafter so
long as any Event of Default shall be continuing, the Agent may, and upon
request of the Majority Secured Parties shall, proceed to protect and enforce
this Agreement, the Notes, the other Credit Documents and the Lease by suit or
suits or proceedings in equity, at law or in bankruptcy, and whether for the
specific performance of any covenant or agreement herein contained or in
execution or aid of any power herein granted, or for foreclosure hereunder, or
for the appointment of a receiver or receivers for the Property or for the
recovery of judgment for the indebtedness secured thereby or for the enforcement
of any other proper, legal or equitable remedy available under applicable laws.
The Borrower shall be liable for any and all accrued and unpaid amounts
due hereunder before, after or during the exercise of any of the foregoing
remedies, including without limitation
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all reasonable legal fees and other reasonable costs and expenses incurred by
the Agent or any Lender by reason of the occurrence of any Event of Default or
the exercise of remedies with respect thereto.
SECTION 7. THE AGENT
7.1 APPOINTMENT.
Each Lender hereby irrevocably designates and appoints the Agent as the
agent of such Lender under this Agreement and the other Operative Agreements,
and each such Lender irrevocably authorizes the Agent, in such capacity, to
execute the Operative Agreements as agent for and on behalf of such Lender, to
take such action on behalf of such Lender under the provisions of this Agreement
and the other Operative Agreements and to exercise such powers and perform such
duties as are expressly delegated to the Agent by the terms of this Agreement
and other Operative Agreements, together with such other powers as are
reasonably incidental thereto. Without limiting the generality of the foregoing,
each of the Lenders hereby specifically acknowledges the terms and provisions of
the Participation Agreement and directs the Agent to exercise such powers, make
such decisions and otherwise perform such duties as are delegated to the Agent
thereunder without being required to obtain any specific consent with respect
thereto from any Lender, unless the matter under consideration is a Unanimous
Vote Matter or otherwise requires the consent of the Majority Lenders and/or the
Majority Secured Parties. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Operative Agreement or otherwise exist against the Agent.
7.2 DELEGATION OF DUTIES.
The Agent may execute any of its duties under this Agreement and the other
Operative Agreements by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
7.3 EXCULPATORY PROVISIONS.
Neither the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or any other Operative Agreement (except for its or such Person's
own gross negligence or willful misconduct) or (b) responsible in any manner to
any of the Lenders for any recitals, statements, representations or warranties
made by the Borrower or the Lessee or any officer thereof contained in this
Agreement or any other Operative Agreement or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any
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other Operative Agreement or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Operative Agreement or for any failure of the Borrower or the Lessee to perform
its obligations hereunder or thereunder. The Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Operative Agreement, or to inspect the properties, books
or records of the Borrower or the Lessee.
7.4 RELIANCE BY THE AGENT.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any Note, writing, resolution, notice, consent, certificate,
affidavit, letter, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it in good faith to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including without limitation
counsel to the Borrower or the Lessee), independent accountants and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Operative Agreement unless it shall
first receive such advice or concurrence of the Majority Lenders, the Majority
Secured Parties or all Secured Parties, as the case may be, as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
and the other Operative Agreements in accordance with a request of the Majority
Lenders, the Majority Secured Parties or all Secured Parties, as the case may
be, and such and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Notes (or all Secured
Parties, as the case may be).
7.5 NOTICE OF DEFAULT.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received written notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall give notice thereof to the Lenders. The Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Majority Secured Parties; provided, that unless and
until the Agent shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Secured Parties; provided, further, the foregoing shall
not limit (a) the rights of the Majority Secured Parties to elect remedies as
set forth in Section 6 and/or (b) the rights of the Majority Secured Parties or
all Secured Parties, as the case may be, as described in the Participation
Agreement (including without limitation Sections 8.2(h) and 8.6 of the
Participation Agreement).
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7.6 NON-RELIANCE ON THE AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by the Agent hereinafter
taken, including without limitation any review of the affairs of the Borrower or
the Lessee, shall be deemed to constitute any representation or warranty by the
Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and the
Lessee and made its own decision to make its Loans hereunder and enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Operative Agreements, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and the Lessee. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of the
Borrower or the Lessee which may come into the possession of the Agent or any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
7.7 INDEMNIFICATION.
The Lenders agree to indemnify the Agent, in its capacity as such (to the
extent not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so), ratably according to their respective Commitment Percentages
in effect on the date on which indemnification is sought under this Section 7.7
(or, if indemnification is sought after the date upon which the Commitments
shall have terminated and the Loans shall have been paid in full, ratably in
accordance with their Commitment Percentages immediately prior to such date),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including without limitation at any time
following the payment of the Notes) be imposed on, incurred by or asserted
against any of them in any way relating to or arising out of, the Commitments,
this Agreement, any of the other Operative Agreements or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by any of them
under or in connection with any of the foregoing; provided, that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the Agent. The
agreements in this Section 7.7 shall survive the payment of the Notes and all
other amounts payable hereunder.
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7.8 THE AGENT IN ITS INDIVIDUAL CAPACITY.
The Agent and its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower or the Lessee as
though the Agent were not the Agent hereunder and under the other Operative
Agreements. With respect to its Loans made or renewed by it and any Note issued
to it, the Agent shall have the same rights and powers under this Agreement and
the other Operative Agreements as any Lender and may exercise the same as though
it were not the Agent, and the terms "Lender" and "Lenders" shall include the
Agent in its individual capacity.
7.9 SUCCESSOR AGENT.
The Agent may resign at any time as the Agent upon thirty (30) days'
notice to the Lenders, the Borrower and, so long as no Lease Event of Default
shall have occurred and be continuing, the Lessee. If the Agent shall resign as
the Agent under this Agreement, the Majority Lenders shall appoint from among
the Lenders a successor Agent which successor Agent shall be subject to the
approval of the Borrower and, so long as no Lease Event of Default shall have
occurred and be continuing, the Lessee, such approval not to be unreasonably
withheld or delayed. If no successor Agent is appointed prior to the effective
date of the resignation of the resigning Agent, the Agent may appoint, after
consulting with the Lenders and subject to the approval of the Borrower and, so
long as no Lease Event of Default shall have occurred and be continuing, the
Lessee, such approval not to be unreasonably withheld or delayed, a successor
Agent from among the Lenders (or such other Person as shall be acceptable to the
Majority Lenders). If no successor Agent has accepted appointment as the Agent
by the date which is thirty (30) days following a retiring Agent's notice of
resignation, the retiring Agent's notice of resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
the Agent until such time, if any, as the Majority Lenders appoint a successor
Agent, as provided for above. Upon the effective date of such resignation, only
such successor Agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's rights, powers and duties in such capacity shall be terminated.
After any retiring Agent resigns hereunder as the Agent, the provisions of this
Article VII and Section 9.5 shall inure to their respective benefit as to any
actions taken or omitted to be taken by it while it was the Agent under this
Agreement.
7.10 ACTIONS OF THE AGENT ON BEHALF OF HOLDERS.
The parties hereto specifically acknowledge and consent to the Agent's
acting on behalf of the Holders as provided in the Participation Agreement, and,
in any such case, the Lenders acknowledge that the Holders shall be entitled to
vote as "Secured Parties" hereunder to the extent required or permitted by the
Operative Agreements (including without limitation Sections 8.2(h) and 8.6 of
the Participation Agreement).
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<PAGE> 22
7.11 THE AGENT'S DUTY OF CARE.
Other than the exercise of reasonable care to assure the safe custody of
the Collateral while being held by the Agent hereunder or under any other
Operative Agreement, the Agent shall have no duty or liability to preserve
rights pertaining thereto, it being understood and agreed that the Lessee shall
be responsible for preservation of all rights in the Collateral, and the Agent
shall be relieved of all responsibility for the Collateral upon surrendering it
or tendering the surrender of it to the Lessee. The Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially equal to
that which the Agent accords its own property, which shall be no less than the
treatment employed by a reasonable and prudent agent in the industry, it being
understood that the Agent shall not have responsibility for taking any necessary
steps to preserve rights against any parties with respect to any of the
Collateral.
SECTION 8. MATTERS RELATING TO PAYMENT AND COLLATERAL
8.1 COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS.
The Lessee, the Construction Agent, the Agent, the Lenders, the Holders
and the Borrower have agreed pursuant to the terms of Section 8.7 of the
Participation Agreement to a procedure for the allocation and distribution of
certain payments and distributions, including without limitation the proceeds of
Collateral.
8.2 CERTAIN REMEDIAL MATTERS.
Notwithstanding any other provision of this Agreement or any other Credit
Document:
(a) the Borrower shall at all times retain to the exclusion of all
other parties, all rights to Excepted Payments payable to it and to demand,
collect or commence an action at law to obtain such payments and to enforce any
judgment with respect thereto; and
(b) the Borrower and each Holder shall at all times retain the right,
but not to the exclusion of the Agent, (i) to retain all rights with respect to
insurance that Article XIV of the Lease specifically confers upon the "Lessor",
(ii) to provide such insurance as the Lessee shall have failed to maintain or as
the Borrower or any Holder may desire, and (iii) to bring an action to enforce
compliance by the Lessee with the provisions of Articles VIII, IX, X, XI, XIV
and XVII of the Lease.
8.3 EXCEPTED PAYMENTS.
Notwithstanding any other provision of this Agreement or the Security
Documents, any Excepted Payment received at any time by the Agent shall be
distributed promptly to the Person entitled to receive such Excepted Payment.
Such funds, if not distributed on the day received, shall be invested in money
market funds authorized to invest in short term securities issued or
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<PAGE> 23
guaranteed as to principal and interest by the U.S. Government and repurchase
agreements with respect to such securities, including such funds to which the
Owner Trustee or an affiliate provides management advice or other services for a
fee. Interest earnings on such funds invested in accordance with this Section
8.3 shall be paid to the Lessee.
SECTION 9. MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS.
None of the terms or provisions of this Agreement may be terminated,
amended, supplemented, waived or modified except in accordance with the terms of
Section 12.4 of the Participation Agreement.
9.2 NOTICES.
All notices required or permitted to be given under this Agreement shall
be given in accordance with Section 12.2 of the Participation Agreement.
9.3 NO WAIVER; CUMULATIVE REMEDIES.
No failure to exercise and no delay in exercising, on the part of the
Agent or any Lender, any right, remedy, power or privilege hereunder or under
the other Credit Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made by the Borrower under the
Operative Agreements shall survive the execution and delivery of this Agreement
and the Notes and the making of the Loans hereunder.
9.5 PAYMENT OF EXPENSES AND TAXES.
The Borrower agrees to (with funds provided by the Lessee as Supplemental
Rent): (a) pay all reasonable out-of-pocket costs and expenses of (i) the Agent
whether or not the transactions herein contemplated are consummated, in
connection with the negotiation, preparation, execution and delivery of the
Operative Agreements and the documents and instruments referred to therein
(including without limitation the reasonable fees and disbursements of Moore &
Van Allen, PLLC) and any amendment, waiver or consent relating thereto
(including without limitation the reasonable fees and disbursements of counsel
to the Agent) and (ii) the Agent and each of the Lenders in connection with the
enforcement of the Operative Agreements and the documents and instruments
referred to therein (including without
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<PAGE> 24
limitation the reasonable fees and disbursements of counsel for the Agent and
for each of the Lenders) and (b) 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.
9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agent, all future holders of the Notes and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Lender.
9.7 PARTICIPATIONS.
Subject to and in accordance with Section 10.1 of the Participation
Agreement, each Lender may sell participations to one or more Persons (each, a
"Participant") in all or a portion of its rights, obligations or rights and
obligations under the Operative Agreements (including all or a portion of its
Commitment or its Loans); provided, however, that (a) such Lender's obligations
under the Operative Agreements shall remain unchanged, (b) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (c) the Participant shall be entitled to the benefit of the
yield protection provisions contained in Sections 11.2(e), 11.3 and 11.4 of the
Participation Agreement and the right of set-off contained in Section 12.15 of
the Participation Agreement, and (d) the Borrower shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under the Operative Agreements, and such Lender shall retain the
sole right to enforce the obligations of the Borrower relating to its Loans and
its Notes and to approve any amendment, modification, or waiver of any provision
of the Operative Agreements (other than amendments, modifications, or waivers
decreasing the amount of principal of or the rate at which interest is payable
on such Loans or Notes, extending any scheduled principal payment date or date
fixed for the payment of interest on such Loans or Notes, or extending its
Commitment). Reasonably promptly in connection with granting any participation,
the granting Lender shall notify the Borrower, the Lessee and the Agent of the
identity of such Participant; provided, however, that the failure to so notify
any such Parties in a timely manner will not affect the validity of such grant.
Any Lender may furnish any information concerning the Borrower, the Lessee
or any Subsidiaries of the Lessee in the possession of such Lender from time to
time to participants (including prospective participants), subject, however, to
the provisions of Section 12.13 of the Participation Agreement.
9.8 ASSIGNMENTS.
Assignments. (a) Subject to and in accordance with Section 10.1 of the
Participation Agreement, each Lender may assign to one or more Eligible
Assignees all or a portion of its
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<PAGE> 25
rights and obligations under the Operative Agreements (including, without
limitation, all or a portion of its Loans, its Notes, and its Commitment);
provided, however, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or an
assignment of all of a Lender's rights and obligations under the Operative
Agreements, any such partial assignment shall be in an amount at least
equal to $5,000,000 or an integral multiple of $1,000,000 in excess
thereof;
(iii) each such assignment by a Lender shall be of a constant, and
not varying, percentage of all of its rights and obligations under the
Operative Agreements and the Notes; and
(iv) the parties to such assignment shall execute and deliver to the
Agent for its acceptance an Assignment and Acceptance substantially in the
form of Exhibit B hereto, together with any Note subject to such
assignment and a processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights and benefits of a Lender under the
Operative Agreements and the assigning Lender shall, to the extent of such
assignment, relinquish its rights and be released from its obligations under the
Operative Agreements. Upon the consummation of any assignment pursuant to this
Section, the assignor, the Agent and the Borrower shall make appropriate
arrangements so that, if required, new Notes are issued to the assignor and the
assignee. The cost of issuance of such new Notes shall be allocated to the
assignor and the assignee as determined by such parties. If the assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall deliver to the Borrower and the Agent certification as to exemption
from deduction or withholding of Taxes in accordance with Section 11.2(e) of the
Participation Agreement.
(b) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, the Agent shall, if such Assignment and Acceptance has
been completed and is in substantially the form of Exhibit B hereto, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to the parties thereto.
(c) Notwithstanding any other provision set forth in any Operative
Agreement, any Lender may at any time assign and pledge all or any portion of
its Loans and its Notes to any Federal Reserve Bank as collateral security
pursuant to Regulation A and any Operating Circular issued by such Federal
Reserve Bank. No such assignment shall release the assigning Lender from its
obligations hereunder.
(d) Any Lender may furnish any information concerning the Borrower, the
Lessee or any Subsidiaries of the Lessee in the possession of such Lender from
time to time to assignees
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(including prospective assignees), subject, however, to the provisions of
Section 12.13 of the Participation Agreement.
9.9 THE REGISTER.
The Agent shall maintain at its address referred to in Section 12.2 of the
Participation Agreement a copy of each Assignment and Acceptance delivered to
and accepted by it and a register for the recordation of the names and addresses
of the Lenders and the Commitment of, and principal amount of the Loans owing
to, each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent and the Lenders may treat each Person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
9.10 ADJUSTMENTS; SET-OFF.
(a) Except as otherwise expressly provided in Section 8.1 hereof and
Section 8.7 of the Participation Agreement where, and to the extent, one (1)
Lender is entitled to payments prior to other Lenders, if any Lender (a
"Benefitted Lender") shall at any time receive any payment of all or part of its
Loans, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 6(g), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans, or interest thereon,
such Benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loan, or
shall provide such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably with
each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the event of such recovery, but without interest.
(b) In addition to any rights now or hereafter granted under applicable
law or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, the Agent and each Lender is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Borrower 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) and any other Indebtedness at
any time held or owing by the Agent or such Lender (including without limitation
by branches and agencies of the Agent or such Lender wherever located) to or for
the credit or the account of the Borrower against and on account of the
obligations and liabilities of the Borrower to the Agent or such Lender under
this Agreement or under any of the other Operative Agreements, including without
limitation all interests in obligations of the Borrower purchased by any such
Lender pursuant to Section 9.10(a), and all other claims of any nature or
description arising out of or connected with this Agreement or any other
Operative Agreement, irrespective or whether or not the Agent or such
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<PAGE> 27
Lender shall have made any demand and although said obligations, liabilities or
claims, or any of them, shall be contingent or unmatured.
9.11 COUNTERPARTS.
This Agreement may be executed by one (1) or more of the parties to this
Agreement on any number of separate counterparts (including without limitation
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one (1) and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Agent.
9.12 SEVERABILITY.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9.13 INTEGRATION.
This Agreement and the other Credit Documents represent the agreement of
the Borrower, the Agent, and the Lenders with respect to the subject matter
hereof and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Credit Documents.
9.14 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED,
INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
9.15 SUBMISSION TO JURISDICTION; VENUE.
THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION TO
JURISDICTION AND VENUE ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS
MUTANDIS.
9.16 ACKNOWLEDGEMENTS.
The Borrower hereby acknowledges that:
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(a) neither the Agent nor any Lender has any fiduciary relationship
with or duty to the Borrower arising out of or in connection with this Agreement
or any of the other Credit Documents, and the relationship between the Agent
(and the Lenders) and the Borrower, in connection herewith or therewith is
solely that of debtor and creditor; and
(b) no joint venture is created hereby or by the other Credit Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among the Borrower and the Lenders.
9.17 WAIVERS OF JURY TRIAL.
THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
9.18 NONRECOURSE.
In addition to and not in limitation of Section 12.9 of the Participation
Agreement, anything to the contrary contained in this Agreement or in any other
Operative Agreement notwithstanding, no Exculpated Person shall be personally
liable in any respect for any liability or obligation hereunder or under any
other Operative Agreement including without limitation the payment of the
principal of, or interest on, the Notes, or for monetary damages for the breach
of performance of any of the covenants contained in this Agreement, the Notes or
any of the other Operative Agreements. The Agent and the Lenders agree that, in
the event any of them pursues any remedies available to them under this
Agreement, the Notes or any other Operative Agreement, neither the Agent nor the
Lenders shall have any recourse against the Borrower, nor any other Exculpated
Person, for any deficiency, loss or claim for monetary damages or otherwise
resulting therefrom and recourse shall be had solely and exclusively against the
Trust Estate and the Lessee; but nothing contained herein shall be taken to
prevent recourse against or the enforcement of remedies against the Trust Estate
in respect of any and all liabilities, obligations and undertakings contained in
this Agreement, the Notes or any other Operative Agreement. The Agent and the
Lenders further agree that the Borrower shall not be responsible for the payment
of any amounts owing hereunder (excluding principal and interest (other than
Overdue Interest) in respect of the Loans) (such non-excluded amounts,
"Supplemental Amounts") except to the extent that payments of Supplemental Rent
designated by the Lessee for application to such Supplemental Amounts shall have
been paid by the Lessee pursuant to the Lease (it being understood that the
failure by the Lessee for any reason to pay any Supplemental Rent in respect of
such Supplemental Amounts shall nevertheless be deemed to constitute a default
by the Borrower for the purposes of Section 6). Notwithstanding the foregoing
provisions of this Section 9.18, nothing in this Agreement or any other
Operative Agreement shall (a) constitute a waiver, release or discharge of any
obligation evidenced or secured by this Agreement or any other Credit Document,
(b) limit the right of the Agent or any Lender to name the Borrower as a party
defendant in any action or suit for judicial foreclosure and sale under any
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Security Document, or (c) affect in any way the validity or enforceability of
any guaranty (whether of payment and/or performance) given to the Lessor, the
Agent or the Lenders, or of any indemnity agreement given by the Borrower, in
connection with the Loans made hereunder.
9.19 USURY SAVINGS PROVISION.
IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN
STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. TO THE
EXTENT ANY PAYMENTS HEREUNDER ARE HEREINAFTER CHARACTERIZED BY ANY COURT OF
COMPETENT JURISDICTION AS THE REPAYMENT OF PRINCIPAL AND INTEREST THEREON, THE
FOLLOWING PROVISIONS OF THIS SECTION 9.19 SHALL APPLY. ANY SUCH PAYMENTS SO
CHARACTERIZED AS INTEREST MAY BE REFERRED TO HEREIN AS "INTEREST." ALL
AGREEMENTS AMONG THE PARTIES HERETO ARE HEREBY LIMITED BY THE PROVISIONS OF THIS
PARAGRAPH WHICH SHALL OVERRIDE AND CONTROL ALL SUCH AGREEMENTS, WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY
EVENT OR CONTINGENCY (INCLUDING WITHOUT LIMITATION PREPAYMENT OR ACCELERATION OF
THE MATURITY OF ANY OBLIGATION), SHALL ANY INTEREST TAKEN, RESERVED, CONTRACTED
FOR, CHARGED, OR RECEIVED UNDER THIS AGREEMENT OR OTHERWISE, EXCEED THE MAXIMUM
NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE LAW. IF, FROM ANY POSSIBLE
CONSTRUCTION OF ANY OF THE OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR
AGREEMENT, INTEREST WOULD OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM
NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF
THIS PARAGRAPH AND SUCH AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE
AUTOMATICALLY REDUCED TO THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER
APPLICABLE LAW, WITHOUT THE NECESSITY OF EXECUTION OF ANY AMENDMENT OR NEW
DOCUMENT OR AGREEMENT. IF THE AGENT OR ANY LENDER SHALL EVER RECEIVE ANYTHING OF
VALUE WHICH IS CHARACTERIZED AS INTEREST WITH RESPECT TO THE OBLIGATIONS OWED
HEREUNDER OR UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE
IN EXCESS OF THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH
WOULD HAVE BEEN EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, BE APPLIED TO THE
REDUCTION OF THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE
PAYMENT OF INTEREST, OR REFUNDED TO THE BORROWER OR ANY OTHER PAYOR THEREOF, IF
AND TO THE EXTENT SUCH AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE
COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY
AMOUNTS EVIDENCED BY ANY OF THE OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT
TO RECEIVE ANY INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH
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DEMAND, AND NEITHER THE AGENT NOR ANY LENDER INTENDS TO CHARGE OR RECEIVE ANY
UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND. ALL INTEREST PAID OR AGREED TO BE
PAID TO THE AGENT OR ANY LENDER SHALL, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE FULL STATED
TERM (INCLUDING WITHOUT LIMITATION ANY RENEWAL OR EXTENSION) OF THIS AGREEMENT
SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES NOT EXCEED THE
MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE LAW.
9.20 THIRD PARTY BENEFICIARY.
The parties hereto acknowledge and agree that the Lessee is a third party
beneficiary of this Agreement and has all rights attendant thereto.
9.21 MUTILATED, DESTROYED, LOST OR STOLEN NOTES.
If any Note shall become mutilated, destroyed, lost or stolen, the Owner
Trustee shall, upon the written request and at the sole cost and expense of the
holder of such Note, issue a new Note in the form of Exhibit A-1 or Exhibit A-2
hereto, as applicable, payable to the same holder and dated the same date as the
Note so mutilated, destroyed, lost or stolen. The Agent shall make a notation on
each new Note of the amount of all payments or prepayments of principal and
interest theretofore made on the Note so mutilated, destroyed, lost or stolen
and the date to which interest on such old Note has been paid. If the Note being
replaced has become mutilated, such Note shall be surrendered to the Agent and
forwarded to the Owner Trustee by the Agent. If the Note being replaced has been
destroyed, lost or stolen, the holder of such Note shall furnish to the Owner
Trustee and the Agent (a) such security or indemnity as may be required by them
to save the Owner Trustee and the Agent harmless and (b) evidence satisfactory
to the Owner Trustee and the Agent of the destruction, loss or theft of such
Note and of the ownership thereof.
[signature pages to follow]
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<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, except as
expressly stated herein, but solely as
the Owner Trustee under the VS Trust
2000-1
By: /s/ VAL T. ORTON
----------------------------------
Name: Val T. Orton
Title: Vice President
BANK OF AMERICA, N.A., as the Agent and
a Lender
By: /s/ DOUGLAS T. MECKELNBURG
----------------------------------
Name: Douglas T. Meckelnburg
Title: Vice President
KEYBANK NATIONAL ASSOCIATION, as a
Lender
By: /s/ MARY K. YOUNG
----------------------------------
Name: Mary K. Young
Title: Assistant Vice President
UNION BANK OF CALIFORNIA, N.A, as a
Lender
By: /s/ GLENN LEYRER
----------------------------------
Name: Glenn Leyrer
Title: Vice President
<PAGE> 32
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as a Lender
By: /s/ ERIC C. HOUSER
----------------------------------
Name: Eric C. Houser
Title: Vice President
<PAGE> 33
Schedule 2.1
<TABLE>
<CAPTION>
Tranche A Tranche B
Commitment Commitment
---------- ----------
Name and Address of Lenders Amount/Percentage Amount/Percentage
- --------------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Bank of America, N.A. $11,180,000 32.5% $1,430,000 32.5%
555 California Street, 41st Floor
Mail Code: CA5-705-41-01
San Francisco, CA 94104
Attention: Doug Meckelnburg
Telephone: (415) 953-9155
Telecopy: (415) 622-0632
KeyBank National Association $11,180,000 32.5% $1,430,000 32.5%
700 Fifth Avenue, 46th Floor
Seattle, WA 98104
Attention: Mary K. Young
Telephone: (206) 684-6085
Telecopy: (206) 684-6035
Union Bank of California, N.A. $ 7,740,000 22.5% $990,000 22.5%
1980 Saturn Street
Monterey Park, CA 91755
Attention: Gohar Karapetyan,
Vice President
Telephone: (323)720-2679
Telecopy: (323)724-6198
Wells Fargo Bank, National $ 4,300,000 12.5% $550,000 12.5%
Association
201 3rd Street, 8th Floor
San Francisco, CA 94301
Attention: Rosanna Roxas
Telephone: (415)477-5390
Telecopy: (415) 979-0675
TOTAL $34,400,000 100% $4,400,000 100%
</TABLE>
<PAGE> 34
Exhibit A-1
TRANCHE A NOTE
VS Trust 2000-1
____________, 2000
FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but solely as the Owner Trustee
under the VS Trust 2000-1 (the "Borrower"), hereby unconditionally promises to
pay to the order of [LENDER] (the "Lender"), at the office of BANK OF AMERICA,
N.A., located at [__________] or at such other address as may be specified by
BANK OF AMERICA, N.A., in lawful money of the United States of America and in
immediately available funds, on the Maturity Date, the aggregate unpaid
principal amount of all Tranche A Loans made by the Lender to the Borrower
pursuant to Section 2.1 of the Credit Agreement (as defined below). The Borrower
agrees to pay interest in like money at such office on the unpaid principal
amount hereof from time to time outstanding at the rates and on the dates
specified in Section 2.8 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of each Tranche
A Loan made pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal thereof, each continuation thereof and each
conversion of all or a portion thereof to another Type. Each such endorsement
shall constitute prima facie evidence of the accuracy of the information
endorsed. The failure to make any such endorsement or any error in such
endorsement shall not affect the obligations of the Borrower in respect of such
Loan.
This Note (a) is one (1) of the Notes referred to in the Credit Agreement
dated as of March 9, 2000 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the Lender, the other
banks and financial institutions from time to time parties thereto and Bank of
America, N.A., as the Agent, (b) is subject to the provisions of the Credit
Agreement (including without limitation Section 9.18 thereof) and (c) is subject
to optional and mandatory prepayment in whole or in part as provided in the
Credit Agreement. Reference is hereby made to the Credit Documents for a
description of the properties and assets in which a security interest has been
granted, the nature and extent of the security and the guarantees, the terms and
conditions upon which the security interests and each guarantee were granted and
the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one (1) or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
A-1-1
<PAGE> 35
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
[The remainder of this page has been left blank intentionally.]
A-1-2
<PAGE> 36
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but
solely as the Owner Trustee under the VS
Trust 2000-1
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
A-1-3
<PAGE> 37
Exhibit A-2
TRANCHE B NOTE
VS Trust 2000-1
____________, 2000
FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but solely as the Owner Trustee
under the VS Trust 2000-1 (the "Borrower"), hereby unconditionally promises to
pay to the order of [LENDER] (the "Lender") at the office of BANK OF AMERICA,
N.A. located at [__________] or at such other address as may be specified by
BANK OF AMERICA, N.A., in lawful money of the United States of America and in
immediately available funds, on the Maturity Date, the aggregate unpaid
principal amount of all Tranche B Loans made by the Lender to the Borrower
pursuant to Section 2.1 of the Credit Agreement (as defined below). The Borrower
agrees to pay interest in like money at such office on the unpaid principal
amount hereof from time to time outstanding at the rates and on the dates
specified in Section 2.8 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of each Tranche
B Loan made pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal thereof, each continuation thereof and each
conversion of all or a portion thereof to another Type. Each such endorsement
shall constitute prima facie evidence of the accuracy of the information
endorsed. The failure to make any such endorsement or any error in such
endorsement shall not affect the obligations of the Borrower in respect of such
Loan.
This Note (a) is one (1) of the Notes referred to in the Credit Agreement
dated as of March 9, 2000 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the Lender, the other
banks and financial institutions from time to time parties thereto and Bank of
America, N.A., as the Agent, (b) is subject to the provisions of the Credit
Agreement (including without limitation Section 9.18 thereof) and (c) is subject
to optional and mandatory prepayment in whole or in part as provided in the
Credit Agreement. Reference is hereby made to the Credit Documents for a
description of the properties and assets in which a security interest has been
granted, the nature and extent of the security and the guarantees, the terms and
conditions upon which the security interests and each guarantee were granted and
the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one (1) or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
A-2-1
<PAGE> 38
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
[The remainder of this page has been left blank intentionally.]
A-2-2
<PAGE> 39
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but
solely as the Owner Trustee under the VS
Trust 2000-1
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
A-2-3
<PAGE> 40
Exhibit B
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of March 9, 2000 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as the Owner Trustee under the VS Trust 2000-1
(the "Owner Trustee" or the "Borrower"), the Lenders named therein and Bank of
America, N.A., as the Agent. Unless otherwise defined herein, terms defined in
the Credit Agreement (or pursuant to Section 1 of the Credit Agreement, defined
in other agreements) and used herein shall have the meanings given to them in or
pursuant to the Credit Agreement.
[____________________] (the "Assignor") and [_______________] (the
"Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), a [___%] interest (the "Assigned Interest")
in and to the Assignor's rights and obligations under the Credit Agreement with
respect to the credit facility contained in the Credit Agreement as are set
forth on Schedule 1 hereto (the "Assigned Facility"), in a principal amount for
the Assigned Facility as set forth on Schedule 1.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Operative
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Operative Agreement or
any other instrument or document furnished pursuant thereto, other than that it
has not created any adverse claim upon the interest being assigned by it
hereunder and that such interest is free and clear of any such adverse claim;
(b) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower, or any other obligor or the
performance or observance by the Borrower, or any other obligor of any of their
respective obligations under the Credit Agreement or any other Operative
Agreement or any other instrument or document furnished pursuant hereto or
thereto; and (c) attaches the Note held by it evidencing the Assigned Facility
and requests that the Agent exchange such Note for a new Note payable to the
Assignee and (if the Assignor has retained any interest in the Assigned
Facility) a new Note payable to the Assignor in the respective amounts which
reflect the assignment being made hereby (and after giving effect to any other
assignments which have become effective on the Effective Date).
3. The Assignee (a) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (b) confirms that it has received
copies of the Operative Agreements, and such other documents and information as
it has deemed appropriate to make its
B-1
<PAGE> 41
own credit analysis and decision to enter into this Assignment and Acceptance;
(c) agrees that it will, independently and without reliance upon the Assignor,
the Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement, the other Operative
Agreements or any other instrument or document furnished pursuant hereto or
thereto; (d) appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers and discretion under the Credit
Agreement, the other Operative Agreements or any other instrument or document
furnished pursuant hereto or thereto as are delegated to the Agent by the terms
thereof, together with such powers as are incidental thereto; and (e) agrees
that it will be bound by the provisions of the Credit Agreement and the other
Operative Agreements to which Assignee is a party and will perform in accordance
herewith all the obligations which by the terms of the Credit Agreement and the
other Operative Agreements to which Assignee is a party are required to be
performed by it as a Lender including without limitation, if it is organized
under the laws of a jurisdiction outside the U.S., its obligation pursuant to
Section 11.2(e) of the Participation Agreement.
4. The effective date of this Assignment and Acceptance shall be
[________, _____] (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for acceptance by
it and recording by the Agent pursuant to Section 9.9 of the Credit Agreement,
effective as of the Effective Date (which shall not, unless otherwise agreed to
by the Agent, be earlier than five (5) Business Days after the date of such
acceptance and recording by the Agent).
5. Upon such acceptance and recording, from and after the Effective Date,
the Agent shall make all payments in respect of the Assigned Interest (including
without limitation payments of principal, interest, fees and other amounts) to
the Assignee whether such amounts have accrued prior to the Effective Date or
accrue subsequent to the Effective Date. The Assignor and the Assignee shall
make all appropriate adjustments in payments by the Agent for periods prior to
the Effective Date or with respect to the making of this assignment directly
between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a party to
the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Operative Agreements and shall be bound by the provisions thereof and (b)
the Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement and the other Operative Agreements.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED,
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
8. This Assignment and Acceptance may be executed by one (1) or more of
the parties hereto on any number of separate counterparts (including without
limitation by telecopy),
B-2
<PAGE> 42
and all of said counterparts taken together shall be deemed to constitute one
(1) and the same instrument.
B-3
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
[Name of Assignor]
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
[Name of Assignee]
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Consented To:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but
solely as the Owner Trustee under the VS
Trust 2000-1
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
BANK OF AMERICA, N.A., as the Agent
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
[consents required only to the extent expressly provided in Section 9.8
of the Credit Agreement]
B-4
<PAGE> 44
SCHEDULE 1
TO ASSIGNMENT AND ACCEPTANCE
RELATING TO THE CREDIT AGREEMENT,
DATED AS OF MARCH 9, 2000,
AMONG
FIRST SECURITY BANK, NATIONAL ASSOCIATION
NOT INDIVIDUALLY,
BUT SOLELY AS THE OWNER TRUSTEE,
THE LENDERS NAMED THEREIN
AND
BANK OF AMERICA, N.A., AS THE AGENT
FOR THE LENDERS (IN SUCH CAPACITY, THE "AGENT")
Name of Assignor:
-----------------------------
Name of Assignee:
-----------------------------
Effective Date of Assignment:
-----------------
<TABLE>
<CAPTION>
Credit Principal Commitment
Facility Assigned Amount Assigned Percentage Assigned
<S> <C> <C>
---------------- $------------ ------------%
</TABLE>
[Name of Assignor]
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
[Name of Assignee]
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
B-5
<PAGE> 1
Exhibit 10.38
- --------------------------------------------------------------------------------
SECURITY AGREEMENT
Dated as of March 9, 2000
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as the Owner Trustee under
the VS Trust 2000-1
and
BANK OF AMERICA, N.A.
as the Agent for the Lenders and the Holders
and accepted and agreed to by
VERITAS OPERATING CORPORATION
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Definitions.......................................................1
2. Grant of Security Interest........................................3
3. Payment of Obligations............................................5
4. Other Covenants...................................................5
5. Default; Remedies.................................................6
6. Remedies Not Exclusive............................................6
7. Performance by the Agent of the Borrower's Obligations............7
8. Duty of the Agent.................................................7
9. Powers Coupled with an Interest...................................7
10. Execution of Financing Statements................................7
11. Security Agreement Under Uniform Commercial Code.................8
12. Authority of the Agent...........................................8
13. Notices..........................................................9
14. Severability.....................................................9
15. Amendment in Writing; No Waivers; Cumulative Remedies............9
16. Section Headings.................................................9
17. Successors and Assigns..........................................10
18. The Borrower's Waiver of Rights.................................10
19. GOVERNING LAW...................................................10
20. Obligations Are Without Recourse................................10
21. Partial Release; Full Release...................................10
22. Miscellaneous...................................................11
23. Conflicts with Participation Agreement..........................11
24. LESSEE AS A PARTY...............................................11
</TABLE>
i
<PAGE> 3
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of March 9, 2000 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Security Agreement"), is made between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not individually, but solely as
Owner Trustee under the VS Trust 2000-1 (the "Borrower"), and BANK OF AMERICA,
N.A., a national banking association ("Bank"), as agent for (a) the Lenders
(hereinafter defined) under the Credit Agreement dated as of March 9, 2000 (as
amended, modified, extended, supplemented, restated and/or replaced from time to
time, the "Credit Agreement") by and among the Borrower, the lending
institutions from time to time parties thereto (the "Lenders") and Bank as the
agent for the Lenders and (b) the holders of the certificates issued pursuant to
the Trust Agreement dated as of March 9, 2000 (as amended, modified, extended,
supplemented, restated and/or replaced from time to time, the "Trust Agreement")
among the holders from time to time parties thereto (the "Holders") and the
Borrower, in its individual capacity thereunder and in its capacity as Owner
Trustee thereunder. The Lenders and the Holders, together with their successors
and permitted assigns, are collectively referred to hereinafter as the "Secured
Parties" Bank, in its capacity as agent for the Secured Parties is referred to
hereinafter as the "Agent", and this Security Agreement is accepted and agreed
to by VERITAS Operating Corporation, a Delaware corporation.
Preliminary Statement
Pursuant to the Credit Agreement, the Lenders have severally agreed to
make Loans to the Borrower in an aggregate amount not to exceed the aggregate
Lender Commitments upon the terms and subject to the conditions set forth
therein, to be evidenced by the Notes issued by the Borrower under the Credit
Agreement. Pursuant to the Trust Agreement, the Holders have agreed to purchase
the ownership interests of the Trust created thereby in an aggregate amount not
to exceed the aggregate Holder Commitments upon the terms and subject to the
conditions set forth therein, to be evidenced by the Certificates issued by the
Borrower under the Trust Agreement. The Borrower is, or shall be upon the date
of the initial Advance with respect to each Property, the legal and beneficial
owner of such Property.
It is a condition, among others, to the obligation of the Lenders to
make their respective Loans to the Borrower under the Credit Agreement and the
Holders to make their respective Holder Advances under the Trust Agreement that
the Borrower shall have executed and delivered this Security Agreement to the
Agent, for the benefit of the Lenders and the Holders.
NOW, THEREFORE, in consideration of the premises and to induce the
Lenders to make their respective Loans under the Credit Agreement and to induce
the Holders to make their respective Holder Advances under the Trust Agreement,
the Borrower hereby agrees with the Agent, for the benefit of the Lenders and
the Holders, as follows:
<PAGE> 4
1. DEFINITIONS.
(a) As used herein, the following terms shall have the following respective
meanings:
"Accounts" shall mean all "accounts," as such term is defined in the
Uniform Commercial Code, now owned or hereafter acquired by the Borrower,
including without limitation (i) all accounts receivable, other
receivables, book debts and other forms of obligations now owned or
hereafter received or acquired by or belonging or owing to the Borrower,
whether arising out of goods sold or leased or services rendered by it or
from any other transaction (including without limitation any such
obligations which may be characterized as an account under the Uniform
Commercial Code), (ii) all of the Borrower's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods
or services, (iii) all of the Borrower's rights to any goods represented by
any of the foregoing (including without limitation unpaid sellers' rights
of rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), (iv) all monies due or to become
due to the Borrower under all purchase orders and contracts for the sale or
lease of goods or the performance of services or both by the Borrower
(whether or not yet earned by performance on the part of the Borrower) now
or hereafter in existence, including without limitation the right to
receive the proceeds of said purchase orders and contracts, and (v) all
collateral security and guarantees of any kind, now or hereafter in
existence, given by any Person with respect to any of the foregoing.
"Chattel Paper" shall mean any and all "chattel paper," as such term
is defined in the Uniform Commercial Code, now owned or hereafter acquired
by the Borrower, wherever located.
"Documents" shall mean any and all "documents", as such term is
defined in the Uniform Commercial Code, now owned or hereafter acquired by
the Borrower, wherever located, including without limitation each bill of
lading, dock warrant, dock receipt, warehouse receipt or order for the
delivery of goods, and also any other document which in the regular course
of business or financing is treated as adequately evidencing that the
person in possession of it is entitled to receive, hold and dispose of the
document and the goods it covers.
"General Intangibles" shall mean any and all "general intangibles," as
such term is defined in the Uniform Commercial Code, now owned or hereafter
acquired by the Borrower, including without limitation all contracts,
undertakings, or agreements in or under which the Borrower may now or
hereafter have any right (other than any right evidenced by Chattel Paper,
Documents or Instruments), title or interest, including without limitation
any agreements relating to the terms of payment or the terms of performance
of any Account.
"Holders" shall have the meaning specified in the first paragraph of
this Security Agreement.
2
<PAGE> 5
"Instruments" shall mean any and all "instruments", as such term is
defined in the Uniform Commercial Code, now owned or hereafter acquired by
the Borrower, wherever located, including without limitation all
certificated securities, all certificates of deposit, and all notes and
other, without limitation, evidences of indebtedness, other than
instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"Investment Property" shall mean any and all "investment property," as
such term is defined in the Uniform Commercial Code, now owned or hereafter
acquired by the Borrower, wherever located.
"Lenders" shall have the meaning specified in the first paragraph of
this Security Agreement.
"Lessee" shall mean VERITAS Operating Corporation, a Delaware
corporation, its successors, permitted assigns and permitted transferees.
"Obligations" shall mean any and all obligations now existing or
hereafter arising under the Credit Agreement, the Notes, the Trust
Agreement, the Certificates and/or any other Operative Agreement.
(b) Capitalized terms used but not otherwise defined in this Security
Agreement shall have the respective meanings specified in the Credit
Agreement or Appendix A to the Participation Agreement dated as of March 9,
2000 (as amended, modified, extended, supplemented, restated and/or
replaced from time to time in accordance with the applicable provisions
thereof, the "Participation Agreement") among Lessee, the various parties
thereto from time to time, as guarantors, the Borrower, the Holders, the
Lenders and Bank of America, N.A., as agent for the Lenders and respecting
the Security Documents, as the agent for the Lenders and the Holders, to
the extent of their interests.
(c) The rules of usage set forth in Appendix A to the Participation
Agreement shall apply to this Agreement.
2. GRANT OF SECURITY INTEREST.
To secure payment of all the amounts advanced under the Credit Agreement in
connection with the Notes, all the amounts advanced or contributed under the
Trust Agreement in connection with the Certificates and all other amounts now or
hereafter owing to the Lenders, the Holders or the Agent thereunder or under any
other Operative Agreement, THE BORROWER HEREBY CONVEYS, GRANTS, ASSIGNS,
TRANSFERS, HYPOTHECATES, MORTGAGES AND SETS OVER TO THE AGENT FOR THE BENEFIT OF
THE SECURED PARTIES, A FIRST PRIORITY SECURITY INTEREST IN AND LIEN ON THE TRUST
3
<PAGE> 6
ESTATE, WHETHER NOW EXISTING OR HEREAFTER ACQUIRED INCLUDING WITHOUT LIMITATION
THE FOLLOWING:
(a) all right, title and interest of the Borrower in and to the
Operative Agreements now existing or hereafter acquired by the Borrower
(including without limitation all rights to payment and indemnity rights of
the Borrower under the Participation Agreement) (all of the foregoing in
this paragraph (a) being referred to as the "Rights in Operative
Agreements");
(b) all right, title and interest of the Borrower in and to all of the
Equipment;
(c) all right, title and interest of the Borrower in and to all of the
Fixtures;
(d) all the estate, right, title, claim or demand whatsoever of the
Borrower, in possession or expectancy, in and to each Property, Fixture or
Equipment or any part thereof;
(e) all right, title and interest of the Borrower in and to all
substitutes, modifications and replacements of, and all additions,
accessions and improvements to, the Fixtures and Equipment, subsequently
acquired or leased by the Borrower or constructed, assembled or placed by
the Borrower on any Property, immediately upon such acquisition, lease,
construction, assembling or placement, and in each such case, without any
further conveyance, assignment or other act by the Borrower;
(f) all right, title and interest of the Borrower in, to and under
books and records relating to or used in connection with the operation of
one (1) or more Properties or any part thereof; all rights of the Borrower
to the payment of money and all property; and all rights in and to any
causes of action or choses in action now or hereafter existing in favor of
the Borrower and all rights to any recoveries therefrom;
(g) all right, title and interest of the Borrower in and to all
unearned premiums under insurance policies now held or subsequently
obtained by the Lessee relating to one (1) or more Properties and the
Borrower's interest in and to all proceeds of any insurance policies
maintained by or for the benefit of the Borrower, including without
limitation any right to collect and receive such proceeds; and all awards
and other compensation, including without limitation the interest payable
thereon and any right to collect and receive the same, made to the present
or any subsequent owner of any Property for the taking by eminent domain,
condemnation or otherwise, of all or any part of any Property or any
easement or other right therein;
(h) all right, title and interest of the Borrower in and to (i) all
consents, licenses, certificates and other governmental approvals relating
to construction, completion, use or operation of any Property or any part
thereof and (ii) all Plans and Specifications relating to any Property;
4
<PAGE> 7
(i) all right, title and interest of the Borrower in and to all Rent
and all other rents, payments, purchase prices, receipts, revenues, issues
and profits payable under the Lease or pursuant to any other lease with
respect to any Property;
(j) all right, title and interest of the Borrower in and to all
Instruments and Documents;
(k) all right, title and interest of the Borrower in and to all
General Intangibles;
(l) all right, title and interest of the Borrower in and to all
Chattel Paper (including without limitation all rights under the Lease);
(m) all right, title and interest of the Borrower in and to all money,
cash or cash equivalent and bank accounts;
(n) all right, title and interest of the Borrower in and to all
Accounts;
(o) all right, title and interest of the Borrower in and to all
proceeds of letters of credit issued in favor of the Borrower in connection
with any Property;
(p) [Reserved]; and
(q) all right, title and interest of the Borrower in and to all
proceeds, both cash and noncash, of any of the foregoing.
(All of the foregoing property and rights and interests now owned or held
or subsequently acquired by the Borrower and described in the foregoing clauses
(a) through (q) are collectively referred to as the "Trust Property").
TO HAVE AND TO HOLD the Trust Property and the rights and privileges hereby
granted unto the Agent (for the benefit of the Lenders and the Holders) its
successors and assigns for the uses and purposes set forth, until all of the
obligations owing to the Lenders, the Holders and the Agent under the Operative
Agreements are paid in full; provided, that EXCLUDED from the Trust Property at
all times and in all respects shall be all Excepted Payments.
3. PAYMENT OF OBLIGATIONS.
The Borrower shall pay all Obligations in accordance with the terms of the
Credit Agreement, the Notes, the Trust Agreement, the Certificates and the other
Operative Agreements and perform each term to be performed by it under the
Credit Agreement, the Notes, the Trust Agreement, the Certificates and the other
Operative Agreements.
5
<PAGE> 8
4. OTHER COVENANTS.
At any time and from time to time, upon the reasonable written request of
the Agent, and at the expense of the Borrower (with funds provided by the Lessee
for such purpose), the Borrower will promptly and duly execute and deliver such
further instruments and documents and take such further actions as the Agent
reasonably may request for the purposes of obtaining or preserving the full
benefits of this Security Agreement and of the rights and powers granted by this
Security Agreement.
5. DEFAULT; REMEDIES.
(a) If a Credit Agreement Event of Default has occurred and is
continuing:
(i) the Agent, in addition to all other remedies available at law or
in equity, shall have the right forthwith to enter upon any Property (or
any other place where any component of any Property is located at such
time) without charge, and take possession of all or any portion of the
Trust Property, and to re-let the Trust Property and receive the rents,
issues and profits thereof, to make repairs and to apply said rentals
and profits, after payment of all necessary or proper charges and
expenses, on account of the amounts hereby secured (subject to the
Excepted Payments); and
(ii) the Agent, shall, as a matter of right, be entitled to the
appointment of a receiver for the Trust Property, and the Borrower
hereby consents to such appointment and waives notice of any application
therefor.
(b) If a Credit Agreement Event of Default has occurred and is
continuing, the Agent may proceed by an action at law, suit in equity or
other appropriate proceeding, to protect and enforce its rights, whether
for the foreclosure of the Lien of this Security Agreement, or for the
specific performance of any agreement contained herein or for an injunction
against the violation of any of the terms hereof. The proceeds of any sale
of any of the Trust Property shall be applied pursuant to Section 8.7 of
the Participation Agreement. In addition, the Agent may proceed under
Section 11 hereof.
(c) The Borrower hereby waives the benefit of all appraisement,
valuation, stay, extension and redemption laws now or hereafter in force
and all rights of marshalling in the event of any sale of the Trust
Property or any portion thereof or interest therein.
6. REMEDIES NOT EXCLUSIVE.
The Agent shall be entitled to enforce payment of the indebtedness and
performance of the Obligations and to exercise all rights and powers under this
Security Agreement or under any of the other Operative Agreements or other
agreements or any laws now or hereafter in force, notwithstanding some or all of
the Obligations may now or hereafter be otherwise secured,
6
<PAGE> 9
whether by deed of trust, mortgage, security agreement, pledge, Lien, assignment
or otherwise. Neither the acceptance of this Security Agreement nor its
enforcement, shall prejudice or in any manner affect the Agent's right to
realize upon or enforce any other security now or hereafter held by the Agent,
it being agreed that the Agent shall be entitled to enforce this Security
Agreement and any other security now or hereafter held by the Agent in such
order and manner as the Agent may determine in its absolute discretion. No
remedy conferred hereunder or under any other Operative Agreement upon or
reserved to the Agent is intended to be exclusive of any other remedy herein or
therein or by law provided or permitted, but each shall be cumulative and shall
be in addition to every other remedy given hereunder or thereunder or now or
hereafter existing at law or in equity or by statute. Every power or remedy
given by any of the Operative Agreements to the Agent or to which it may
otherwise be entitled, may be exercised, concurrently or independently, from
time to time and as often as may be deemed expedient by the Agent. In no event
shall the Agent, in the exercise of the remedies provided in this Security
Agreement (including without limitation in connection with the assignment of
Rents to the Agent, or the appointment of a receiver and the entry of such
receiver onto all or any part of the Land), be deemed a "mortgagee in
possession" or a "pledgee in possession", and the Agent shall not in any way be
made liable for any act, either of commission or omission, in connection with
the exercise of such remedies.
7. PERFORMANCE BY THE AGENT OF THE BORROWER'S OBLIGATIONS.
If the Borrower fails to perform or comply with any of its agreements
contained herein the Agent, at its option, but without any obligation so to do,
may perform or comply, or otherwise cause performance or compliance, with such
agreement. The expenses of the Agent incurred in connection with actions
undertaken as provided in this Section 7, together with interest thereon at a
rate per annum equal to the Overdue Rate, from the date of payment by the Agent
to the date reimbursed by the Borrower, shall be payable by the Borrower (with
funds provided by the Lessee for such purpose) to the Agent on demand and
constitutes part of the Obligations secured hereby.
8. DUTY OF THE AGENT.
The Agent's sole duty with respect to the custody, safekeeping and physical
preservation of any Trust Property in its possession, under Section 9-207 of the
Uniform Commercial Code or otherwise, shall be to deal with it in the same
manner as the Agent deals with similar property for its own account. Neither the
Agent, any Lender, any Holder nor any of their respective directors, officers,
employees, shareholders, partners or agents shall be liable for failure to
demand, collect or realize upon any of the Trust Property or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Trust Property upon the request of the Borrower or any other Person or to take
any other action whatsoever with regard to the Trust Property or any part
thereof.
7
<PAGE> 10
9. POWERS COUPLED WITH AN INTEREST.
All powers, authorizations and agencies contained in this Security
Agreement are coupled with an interest and are irrevocable until this Security
Agreement is terminated and the Liens created hereby are released.
10. EXECUTION OF FINANCING STATEMENTS.
Pursuant to Section 9-402 of the Uniform Commercial Code, the Borrower
authorizes the Agent at the expense of the Borrower (such amounts to be paid
with funds provided by the Lessee for such purpose) to file financing statements
with respect to the Trust Property under this Security Agreement without the
signature of the Borrower in such form and in such filing offices as the Agent
reasonably determines appropriate to perfect the security interests of the Agent
under this Security Agreement. A carbon, photographic or other reproduction of
this Security Agreement shall be sufficient as a financing statement for filing
in any jurisdiction. For purposes of such financing statement, the Borrower
shall be deemed to be the debtor, and the Agent shall be deemed to be the
secured party. The address of the Borrower is 79 South Main Street, Salt Lake
City, Utah 84111, Attention: Val T. Orton, Vice President, and the address of
the Agent is Bank of America, N.A., 901 Main Street, 14th Floor, Mail Code
TX1-492-14-11, Dallas, Texas 75202-3714, Attention: Mr. Otis E. Howard.
11. SECURITY AGREEMENT UNDER UNIFORM COMMERCIAL CODE.
(a) It is the intention of the parties hereto that this Security
Agreement as it relates to matters of the grant, perfection and priority of
security interests the subject hereof, shall constitute a security
agreement within the meaning of the Uniform Commercial Code of the States
in which the Trust Property is located. If a Credit Agreement Event of
Default shall occur, then in addition to having any other right or remedy
available at law or in equity, the Agent may proceed under the applicable
Uniform Commercial Code and exercise such rights and remedies as may be
provided to a secured party by such Uniform Commercial Code with respect to
all or any portion of the Trust Property which is personal property
(including without limitation taking possession of and selling such
property). If the Agent shall elect to proceed under the Uniform Commercial
Code, then fifteen (15) days' notice of sale of the personal property shall
be deemed reasonable notice and the reasonable expenses of retaking,
holding, preparing for sale, selling and the like incurred by the Agent
shall include, but not be limited to, attorneys' fees and legal expenses.
At the Agent's request, the Borrower shall assemble such personal property
and make it available to the Agent at a place designated by the Agent which
is reasonably convenient to both parties.
(b) The Borrower, upon request by the Agent from time to time, shall
execute, acknowledge and deliver to the Agent one (1) or more separate
security agreements, in form satisfactory to the Agent, covering all or any
part of the Trust Property and will further execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, any financing
statement, affidavit, continuation statement or certificate or other
8
<PAGE> 11
document as the Agent may request in order to perfect, preserve, maintain,
continue or extend the security interest under, and the priority of the
Liens granted by, this Security Agreement and such security instrument. The
Borrower further agrees to pay to the Agent (with funds provided by the
Lessee for such purpose) on demand all reasonable costs and expenses
incurred by the Agent in connection with the preparation, execution,
recording, filing and re-filing of any such document and all reasonable
costs and expenses of any record searches for financing statements the
Agent shall reasonably require. The filing of any financing or continuation
statements in the records relating to personal property or chattels shall
not be construed as in any way impairing the right of the Agent to proceed
against any property encumbered by this Security Agreement.
12. AUTHORITY OF THE AGENT.
The Borrower acknowledges that the rights and responsibilities of the Agent
under this Security Agreement with respect to any action taken by the Agent or
the exercise or non-exercise by the Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Security Agreement shall be governed by the Credit Agreement and
Section 8.6 of the Participation Agreement and by such other agreements with
respect thereto as may exist from time to time (until such time as all amounts
due and owing to the Secured Parties and the Agent under the Operative
Agreements have been paid in full), but the Agent shall be conclusively presumed
to be acting as agent for the Secured Parties with full and valid authority so
to act or refrain from acting, and the Borrower shall be under no obligation, or
entitlement, to make any inquiry respecting such authority.
13. NOTICES.
All notices required or permitted to be given under this Security Agreement
shall be in writing and delivered as provided in Section 12.2 of the
Participation Agreement.
14. SEVERABILITY.
Any provision of this Security Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof.
15. AMENDMENT IN WRITING; NO WAIVERS; CUMULATIVE REMEDIES.
(a) None of the terms or provisions of this Security Agreement may be
waived, amended, supplemented or otherwise modified except in accordance
with the terms of Section 12.4 of the Participation Agreement.
(b) No failure to exercise, nor any delay in exercising, on the part of
the Agent, any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A
9
<PAGE> 12
waiver by the Agent of any right or remedy hereunder on any one (1)
occasion shall not be construed as a bar to any right or remedy which the
Agent would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights
or remedies provided by law.
16. SECTION HEADINGS.
The section headings used in this Security Agreement are for convenience of
reference only and are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.
17. SUCCESSORS AND ASSIGNS.
This Security Agreement shall be binding upon the successors of the
Borrower, and the Borrower shall not assign any of its rights or obligations
hereunder or with respect to any of the Trust Property without the prior written
consent of the Agent. This Security Agreement shall inure to the benefit of the
Agent, the Lenders, the Holders and their respective successors and assigns, in
accordance with their respective interest herein.
18. THE BORROWER'S WAIVER OF RIGHTS.
Except as otherwise set forth herein, to the fullest extent permitted by
law, the Borrower waives the benefit of all laws now existing or that may
subsequently be enacted providing for (a) any appraisement before sale of any
portion of the Trust Property, (b) any extension of the time for the enforcement
of the collection of the indebtedness or the creation or extension of a period
of redemption from any sale made in collecting such debt and (c) exemption of
any portion of the Trust Property from attachment, levy or sale under execution
or exemption from civil process. Except as otherwise set forth herein, to the
fullest extent the Borrower may do so, the Borrower agrees that the Borrower
will not at any time insist upon, plead, claim or take the benefit or advantage
of any law now or hereafter in force providing for any appraisement, valuation,
stay, exemption, extension or redemption, or requiring foreclosure of this
Security Agreement before exercising any other remedy granted hereunder and the
Borrower, for the Borrower and its successors and assigns, and for any and all
Persons ever claiming any interest in the Trust Property, to the extent
permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the Obligations and marshalling in the event of
foreclosure of the Liens hereby created.
19. GOVERNING LAW.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN SECTION 11(a) HEREOF, THIS
SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED,
10
<PAGE> 13
INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
20. OBLIGATIONS ARE WITHOUT RECOURSE.
The provisions of the Participation Agreement relating to limitations on
liability are hereby incorporated by reference herein, Mutatis Mutandis.
21. PARTIAL RELEASE; FULL RELEASE.
The Agent may release for such consideration as it may require any portion
of the Trust Property without (as to the remainder of the Trust Property) in any
way impairing or affecting the Lien, security interest and priority herein
provided for the Agent compared to any other Lien holder or secured party.
Further, the Agent shall execute and deliver to the Borrower such documents and
instruments as may be required to release the Lien and security interest created
by this Security Agreement with respect to the Properties as provided in Section
8.8 of the Participation Agreement or to grant the easements and permit the
other matters provided for in Section 8.5 of the Participation Agreement.
22. MISCELLANEOUS.
(a) This Security Agreement is one (1) of the documents which create
Liens and security interests that secure payment and performance of the
Obligations. The Agent, at its election, may commence or consolidate in a
single action all proceedings to realize upon all such Liens and security
interests. The Borrower hereby waives (i) any objections to the
commencement or continuation of an action to foreclose the Lien of this
Security Agreement or exercise of any other remedies hereunder based on any
action being prosecuted or any judgment entered with respect to the
Obligations or any Liens or security interests that secure payment and
performance of the Obligations and (ii) any objections to the commencement
of, continuation of, or entry of a judgment in any such other action based
on any action or judgment connected to this Security Agreement. In case of
a foreclosure sale, the Trust Property may be sold, at the Agent's
election, in one (1) parcel or in more than one (1) parcel and the Agent is
specifically empowered (without being required to do so, and in its sole
and absolute discretion) to cause successive sales of portions of the Trust
Property to be held.
(b) This Security Agreement may not be amended, waived, discharged or
terminated except in accordance with Section 12.4 of the Participation
Agreement. Upon the prior written consent of the Majority Secured Parties
and unless such matter is a Unanimous Vote Matter, the Agent may release
any portion of the Trust Property or any other security, and grant such
extensions and indulgences in relation to the Obligations secured hereby
without in any manner affecting the priority of the Lien hereof on any part
of the Trust Property.
11
<PAGE> 14
(c) THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO
SUBMISSION TO JURISDICTION AND VENUE ARE HEREBY INCORPORATED BY REFERENCE
HEREIN, MUTATIS MUTANDIS.
23. CONFLICTS WITH PARTICIPATION AGREEMENT.
Notwithstanding any other provision hereof, in the event of any conflict
between the terms of this Security Agreement and the Participation Agreement,
the terms of the Participation Agreement shall govern.
24. LESSEE AS A PARTY.
LESSEE HAS EXECUTED THIS SECURITY AGREEMENT FOR THE PURPOSE OF SUBJECTING
TO THE SECURITY INTERESTS GRANTED HEREUNDER ALL OF ITS RIGHT, TITLE, ESTATE AND
INTEREST, IF ANY, IN AND TO THE TRUST PROPERTY TO SECURE ALL OBLIGATIONS OF ALL
CREDIT PARTIES UNDER THE OPERATIVE AGREEMENTS. ACCORDINGLY, LESSEE HEREBY GRANTS
TO THE AGENT (FOR THE BENEFIT OF THE LENDERS AND THE HOLDERS) A SECURITY
INTEREST IN AND TO ALL OF ITS RIGHT, TITLE, ESTATE AND INTEREST, IF ANY, IN AND
TO THE TRUST PROPERTY (TO THE EXTENT LESSEE HAS ANY RIGHT, TITLE OR INTEREST
THEREIN AND WITHOUT REGARD TO ANY LANGUAGE IN SECTION 2 OR THE DEFINITION OF
"TRUST PROPERTY" OR ANY DEFINITION OF ANY ITEM CONSTITUTING THE TRUST PROPERTY
WHICH OTHERWISE WOULD LIMIT THE TRUST PROPERTY TO THE RIGHT, TITLE AND INTEREST
OF THE BORROWER THEREIN) TO SECURE ALL OBLIGATIONS OF ALL CREDIT PARTIES UNDER
THE OPERATIVE AGREEMENTS. LESSEE ACKNOWLEDGES AND AGREES THAT, UPON THE
OCCURRENCE OF AN EVENT OF DEFAULT, THE AGENT SHALL HAVE THE RIGHT TO EXERCISE
ANY OR ALL OF ITS REMEDIES HEREUNDER AS AGAINST ANY SUCH RIGHT, TITLE, ESTATE OR
INTEREST OF LESSEE IN OR TO THE TRUST PROPERTY.
[signature page follows]
12
<PAGE> 15
IN WITNESS WHEREOF, each of the undersigned have caused the Security
Agreement to be duly executed and delivered as of the date first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but solely as the
Owner Trustee under the VS Trust 2000-1
By: /s/ VAL T. ORTON
----------------------------------
Name: Val T. Orton
Title: Vice President
BANK OF AMERICA, N.A., as the Agent for the
Lenders and the Holders
By: /s/ DOUGLAS T. MECKELNBURG
----------------------------------
Name: Douglas T. Meckelnburg
Title: Vice President
Accepted and Agreed to:
VERITAS OPERATING CORPORATION
By: /s/ KEN LONCHAR
---------------------------------
Name: Ken Lonchar
Title: Senior Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT 21.01
VERITAS SOFTWARE CORPORATION
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION OF
SUBSIDIARY LEGAL NAME INCORPORATION
- --------------------- ---------------
<S> <C> <C> <C> <C>
VERITAS Operating Corporation.................................... Delaware
VERITAS Software (Canada) Inc............................... Canada
VERITAS Japan K.K........................................... Japan
VERITAS Software Pty. Ltd. ................................. Australia
VERITAS Software India Pvt. Ltd............................. India
VERITAS Software Hong Kong Limited.......................... Hong Kong
VERITAS Software Malaysia Sdn. Bhd.......................... Malaysia
VERITAS Software Benelux B.V................................ Netherlands
VRTS Software Corporation Sweden AB......................... Sweden
VERITAS Software GmbH....................................... Switzerland
OpenVision International, Ltd............................... Delaware
VERITAS Software S.A................................... France
VERITAS Software Gmbh.................................. Germany
VERITAS Software Limited............................... United Kingdom
TeleBackup Holdings, Inc.................................... Delaware
TeleBackup Exchangeco Inc.............................. Canada
New Telebackup Systems Inc........................ Canada
VERITAS Software Global Corporation.............................. Delaware
VERITAS Software Holdings Ltd.................................... Ireland
VERITAS Software International Limited...................... Ireland
Seagate Software Storage Management Group, Inc................... Delaware
Seagate Software International Holdings Ltd...................... Cayman Islands
</TABLE>
<PAGE> 1
Exhibit 23.01
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 333-25927, 333-79841, 333-86179) pertaining to the 1985 Stock
Option Plan, 1991 Executive Stock Option Plan, 1993 Equity Incentive Plan, 1993
Directors Stock Option Plan and 1993 Employee Stock Purchase Plan of VERITAS
Software Corporation of our report dated January 25, 2000, with respect to the
consolidated financial statements and schedule of VERITAS Software Corporation
included in the Annual Report (Form 10-K) for the year ended December 31, 1999.
/s/ ERNST & YOUNG LLP
San Jose, California
March 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1999 AND 1998 AND THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999,
1998, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS INCLUDED IN THE FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 148,244
<SECURITIES> 544,137
<RECEIVABLES> 137,873
<ALLOWANCES> 5,693
<INVENTORY> 0
<CURRENT-ASSETS> 861,745
<PP&E> 139,715
<DEPRECIATION> 62,757
<TOTAL-ASSETS> 4,233,277
<CURRENT-LIABILITIES> 230,709
<BONDS> 451,044
0
0
<COMMON> 391
<OTHER-SE> 3,392,670
<TOTAL-LIABILITY-AND-EQUITY> 4,233,277
<SALES> 498,014
<TOTAL-REVENUES> 596,112
<CGS> 20,735
<TOTAL-COSTS> 94,555
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,659
<INCOME-PRETAX> (467,568)
<INCOME-TAX> 35,390
<INCOME-CONTINUING> (502,958)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (502,958)
<EPS-BASIC> (1.59)
<EPS-DILUTED> (1.59)
</TABLE>
