<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED APRIL 2, 2000
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: 0-11674
LSI LOGIC CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-2712976
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
1551 MCCARTHY BOULEVARD
MILPITAS, CALIFORNIA 95035
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(408) 433-8000
(REGISTRANT'S TELEPHONE NUMBER)
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 [ ]
As of May 4, 2000, there were 306,972,942 of the registrant's Common Stock,
$.01 par value, outstanding.
<PAGE> 2
LSI LOGIC CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
PAGE
NO.
------
PART I . FINANCIAL INFORMATION
<S> <C> <C>
Item 1 Financial Statements
Consolidated Condensed Balance Sheets - March 31, 2000 and December 31, 1999 3
Consolidated Condensed Statements of Operations - Three-Month Periods Ended
March 31, 2000 and 1999 4
Consolidated Condensed Statements of Cash Flows - Three-Month Periods Ended
March 31, 2000 and 1999 5
Notes to Consolidated Condensed Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results of
Operations 14
Item 3 Quantitative and Qualitative Disclosures About Market Risk 21
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 22
Item 5 Other Information 22
Item 6 Exhibits and Reports on Form 8-K 22
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
LSI LOGIC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands, except per-share amounts) 2000 1999
------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 299,594 $ 250,603
Short-term investments 568,635 410,730
Accounts receivable, less allowances of $7,220 and $11,346 396,758 275,620
Inventories 255,146 243,896
Deferred tax assets 66,212 66,212
Prepaid expenses and other current assets 75,554 41,223
------------- -------------
Total current assets 1,661,899 1,288,284
Property and equipment, net 1,255,417 1,323,501
Goodwill and other intangibles 281,787 293,631
Other assets 314,817 301,189
------------- -------------
Total assets $ 3,513,920 $ 3,206,605
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 195,185 $ 189,293
Accrued salaries, wages and benefits 74,040 77,277
Other accrued liabilities 112,878 110,229
Income tax payable 57,358 41,536
Current portion of long-term obligations 1,788 56,996
------------- -------------
Total current liabilities 441,249 475,331
------------- -------------
Deferred tax liabilities 75,771 75,771
Other long-term obligations 980,528 793,461
------------- -------------
Total long-term obligations and deferred tax liabilities 1,056,299 869,232
------------- -------------
Commitments and contingencies (Note 12)
Minority interest in subsidiaries 6,074 6,210
------------- -------------
Stockholders' equity:
Preferred shares; $.01 par value; 2,000 shares authorized -- --
Common stock; $.01 par value; 450,000 shares authorized; 306,611 and
299,572 shares outstanding 3,066 2,996
Additional paid-in capital 1,324,021 1,271,093
Retained earnings 521,795 435,552
Accumulated other comprehensive income 161,416 146,191
------------- -------------
Total stockholders' equity 2,010,298 1,855,832
------------- -------------
Total liabilities and stockholders' equity $ 3,513,920 $ 3,206,605
============= =============
</TABLE>
See notes to unaudited consolidated condensed financial statements.
3
<PAGE> 4
LSI LOGIC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(In thousands, except per share amounts) 2000 1999
--------- ---------
<S> <C> <C>
Revenues $ 615,186 $ 463,617
--------- ---------
Costs and expenses:
Cost of revenues 365,500 301,891
Research and development 80,229 76,523
Selling, general and administrative 70,240 61,489
Restructuring of operations and other non-recurring items, net 2,781 (1,977)
Amortization of intangibles 11,836 11,207
--------- ---------
Total costs and expenses 530,586 449,133
--------- ---------
Income from operations 84,600 14,484
Interest expense (10,893) (10,580)
Interest income and other, net 7,129 1,736
Gain on sale of equity securities 34,172 --
--------- ---------
Income before income taxes and
cumulative effect of change in accounting principle 115,008 5,640
Provision for income taxes 28,765 1,630
--------- ---------
Income before cumulative effect of change in accounting principle 86,243 4,010
Cumulative effect of change in accounting principle -- (91,774)
--------- ---------
Net income/(loss) $ 86,243 $ (87,764)
========= =========
Basic earnings per share:
Income before cumulative effect of change in accounting principle $ 0.28 $ 0.01
Cumulative effect of change in accounting principle -- (0.32)
--------- ---------
Net income/(loss) $ 0.28 $ (0.31)
========= =========
Diluted earnings per share:
Income before cumulative effect of change in
Accounting principle $ 0.25 $ 0.01
Cumulative effect of change in accounting principle -- (0.31)
--------- ---------
Net income/(loss) $ 0.25 $ (0.30)
========= =========
Shares used in computing per share amounts:
Basic 302,682 288,244
========= =========
Diluted 349,159 293,540
========= =========
</TABLE>
See notes to unaudited consolidated condensed financial statements.
4
<PAGE> 5
LSI LOGIC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(In thousands) 2000 1999
----------- -----------
<S> <C> <C>
Operating activities:
Net income/(loss) $ 86,243 $ (87,764)
Adjustments:
Depreciation and amortization 93,166 94,300
Write-off of unamortized preproduction costs -- 97,356
Non-cash restructuring charges/(benefits), net 2,781 (2,533)
Gain on sale of equity securities (34,172) --
Changes in:
Accounts receivable (122,668) (39,293)
Inventories (12,159) 5,372
Prepaid expenses and other assets (25,184) 9,597
Accounts payable 6,856 (12,329)
Accrued and other liabilities 16,049 (29,062)
----------- -----------
Net cash provided by operating activities 10,912 35,644
----------- -----------
Investing activities:
Purchase of debt and equity securities available-for-sale (401,472) (82,616)
Maturities and sales of debt and equity
securities available-for-sale 279,727 64,620
Purchases of equity securities (4,035) --
Proceeds from sale of equity securities 29,914 --
Purchases of property and equipment, net of retirement (23,710) (9,948)
----------- -----------
Net cash used in investing activities (119,576) (27,944)
----------- -----------
Financing activities:
Proceeds from borrowings 500,000 345,000
Repayment of debt obligations (375,423) (365,996)
Debt issuance costs (15,300) (9,488)
Issuance of common stock, net 51,894 5,110
----------- -----------
Net cash provided by/(used in) financing activities 161,171 (25,374)
----------- -----------
Effect of exchange rate changes on cash and cash equivalents (3,516) (521)
----------- -----------
Increase/(decrease) in cash and cash equivalents 48,991 (18,195)
----------- -----------
Cash and cash equivalents at beginning of period 250,603 210,306
----------- -----------
Cash and cash equivalents at end of period $ 299,594 $ 192,111
=========== ===========
</TABLE>
See notes to unaudited consolidated condensed financial statements.
5
<PAGE> 6
LSI LOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments, except for the restructuring and other
non-recurring charges as discussed in Note 2), necessary to present fairly the
financial information included therein. While the Company believes that the
disclosures are adequate to make the information not misleading, it is suggested
that these financial statements be read in conjunction with the audited
consolidated financial statements and accompanying notes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
For financial reporting purposes, the Company reports on a 13 or 14 week
quarter with a year ending December 31. For presentation purposes, the
consolidated condensed financial statements refer to the quarter's calendar
month end for convenience. The results of operations for the quarter ended March
31, 2000 are not necessarily indicative of the results to be expected for the
full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
condensed financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from these estimates.
NOTE 2 - RESTRUCTURING AND OTHER NON-RECURRING ITEMS
On February 22, 2000, the Company entered into an agreement with a third
party to outsource certain testing services presently performed by the Company
at its Fremont facility. The agreement provides for the sale and transfer of
certain test equipment and related peripherals for total proceeds of
approximately $10.7 million. The Company recorded a loss of approximately $2.2
million associated with the agreement.
In March of 2000, the Company recorded approximately $1.1 million of
non-cash compensation related expenses resulting from a Separation Agreement
entered into during the quarter with a former employee and a $0.5 million
benefit for the reversal of reserves established in the second quarter of 1999
for merger related expenses in connection with the merger with SEEQ Technology,
Inc. ("SEEQ") discussed below.
Integration of SEEQ
- -------------------
In connection with the merger with SEEQ on June 22, 1999 accounted for as a
pooling of interest, the Company recorded approximately $2.9 million in
restructuring charges and $5.5 million in merger-related expenses which included
$0.5 million recorded by SEEQ in the first quarter of 1999. The merger expenses
related primarily to investment banking and other professional fees directly
attributable to the merger with SEEQ. The restructuring charge was comprised of
$1.9 million in write-downs of fixed assets which were duplicative to the
combined company, $0.5 million of exit costs relating to non-cancelable building
lease contracts and a $0.5 million provision for severance costs related to the
involuntary termination of certain employees. The exit costs and employee
severance costs were recorded in accordance with EITF No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity." The fixed and other asset write-downs were recorded in accordance
with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." The restructuring actions as outlined by
the restructuring plan were completed. Approximately $0.5 million of severance
was paid to three employees terminated during 1999. During the three months
ended March 31, 2000, approximately $480,000 of lease payments were made related
to the non-cancelable building lease contracts.
6
<PAGE> 7
The following table sets forth the SEEQ restructuring reserves as of June
22, 1999, the merger date, and activity against the reserve since then:
<TABLE>
<CAPTION>
Balance Balance
Balance December 31, March 31,
(In thousands) June 22, 1999 Utilized 1999 Utilized 2000
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Write-down of fixed assets(a) $ 1,854 $ (1,854) $ -- -- $ --
Non-cancelable building lease contracts 490 (10) 480 (480) --
Payments to employees for severance 516 (516) -- -- --
------------- ------------- ------------- ------------- -------------
Total $ 2,860 $ (2,380) $ 480 -- $ --
============= ============= ============= ============= -------------
</TABLE>
(a) The amount utilized represents a write-down of fixed assets due to
impairment. The amount was accounted for as a reduction of the assets and
did not result in a liability.
NOTE 3 - LICENSE AGREEMENT
In the second quarter of 1999, the Company and Silterra Malaysia Sdn. Bhd.
(formerly known as Wafer Technology (Malaysia) Sdn. Bhd.) ("Silterra") entered
into a technology transfer agreement under which the Company grants licenses to
Silterra with respect to certain of the Company's wafer fabrication technologies
and provides associated manufacturing training and related services. In
exchange, the Company receives cash and equity consideration valued at $120
million over three years for which transfers and obligations of the Company are
scheduled to occur. The Company transferred technology to Silterra valued at $6
million in total for the three months ended March 31, 2000. The amount was
recorded as an offset to the Company's R&D expenses. In addition, the Company
provided engineering training with a value of $1 million for the three months
ended March 31, 2000. The amount was recorded as an offset to cost of revenues.
NOTE 4 - INVESTMENTS
All highly liquid investments purchased with an original maturity of ninety
days or less are considered to be cash equivalents and are classified as
held-to-maturity. Marketable short-term investments are generally classified and
accounted for as available-for-sale. Management determines the appropriate
classification of debt and equity securities at the time of purchase and
reassesses the classification at each reporting date. Investments in debt and
equity securities classified as held-to-maturity are reported at amortized cost
plus accrued interest, and securities classified as available-for-sale are
reported at fair value with unrealized gains and losses, net of related tax,
recorded as a separate component of comprehensive income in shareholders' equity
until realized. Interest and amortization of premiums and discounts for debt and
equity securities are included in interest income. Gains and losses on
securities sold are determined based on the specific identification method and
are included in other income. For all investment securities, unrealized losses
that are other than temporary are recognized in net income. The Company does not
hold these securities for speculative or trading purposes. The Company also
holds investments in restricted shares of technology companies. These
non-marketable shares are recorded at cost.
As of March 31, 2000 and December 31, 1999, the Company held $119 million
and $55 million of debt securities, respectively, that were included in cash and
cash equivalents and $569 million and $411 million of debt and equity
securities, respectively, that were classified as short-term investments on the
Company's consolidated balance sheet. Debt securities consisted primarily of
U.S. and foreign corporate debt securities, commercial paper, auction rate
preferred stock, overnight deposits, certificate of deposit, and U.S. government
and municipal agency securities. Unrealized holding gains and losses of
held-to-maturity securities and available-for-sale debt securities were not
significant and accordingly the amortized cost of these securities approximated
fair market value at March 31, 2000 and December 31, 1999. Contract maturities
of these securities were within one year as of March 31, 2000. Realized gains
and losses for held-to-maturity securities and available-for-sale debt
securities were not significant for the three month periods ended March 31, 2000
and 1999.
At March 31, 2000 and December 31, 1999, the Company had marketable equity
securities with an aggregate carrying value of $192 million and $153 million,
$60 million and $25 million of which were classified as short-term
7
<PAGE> 8
investments on the Company's consolidated balance sheet, respectively. The
remaining balance was included in other long-term assets. The unrealized gain of
$112 million and $90 million, net of the related tax effect of $60 million and
$48 million, on these equity securities was included in accumulated
comprehensive income as of March 31, 2000 and December 31, 1999, respectively.
In the third quarter of 1999, the Company adopted a program of regular selling
of marketable equity securities. During the three month period ended March 31,
2000, the Company sold equity securities for approximately $30 million in the
open market, realizing a pre-tax gain of approximately $27 million. In addition,
the Company realized a pre-tax gain of approximately $7 million associated with
equity securities of a certain technology company that were acquired by another
technology company during the three month period ended March 31, 2000.
NOTE 5 - DERIVATIVE FINANCIAL INSTRUMENTS
The Company has foreign subsidiaries, which operate and sell the Company's
products in various global markets. As a result, the Company is exposed to
changes in foreign currency exchange rates and interest rates. The Company
utilizes various hedge instruments, primarily forward contracts and currency
option contracts, to manage its exposure associated with firm intercompany and
third-party transactions and net asset and liability positions denominated in
non-functional currencies. The Company does not hold derivative financial
instruments for speculative or trading purposes.
The Company enters into forward contracts to hedge firm asset and liability
positions and cash flows denominated in non-functional currencies. The following
table summarizes by major currency the forward exchange contracts outstanding as
of March 31, 2000 and December 31, 1999. The buy amount represents the U.S.
dollar equivalent of commitments to purchase foreign currencies, and the sell
amount represents the U.S. dollar equivalent of commitments to sell foreign
currencies. Foreign currency amounts were translated at rates current at March
31, 2000 and December 31, 1999. These contracts will expire through December
2000.
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 2000 1999
------------- -------------
<S> <C> <C>
Buy/(Sell):
Japanese Yen $ 38,761 $ 22,194
Netherlands Guilder 25,210 43,145
Japanese Yen (14,649) (3,397)
</TABLE>
These forward contracts are considered identifiable hedges, and recognition
of gains and losses is deferred until settlement of the underlying commitments.
Realized gains and losses are recorded as other income or expense when the
underlying exposure materializes or the hedged transaction is no longer expected
to occur. Realized gains and losses included in interest income and other were
not significant for the three month periods ended March 31, 2000 and 1999.
Currency option contracts are treated as hedges of third-party yen revenue
exposures. At March 31, 2000, total outstanding purchased currency option
contracts were $195 million. These contracts expire in various dates through
December 2000. At December 31, 1999, there were no purchased currency option
contracts outstanding. Recognition of gains is deferred until the exposure
underlying the option is recorded. Option premiums are amortized over the lives
of the contracts. Realized gains and losses are recorded as an offset to revenue
and were not significant for the three month periods ended March 31, 2000 and
1999. There were no deferred premiums outstanding as of December 31, 1999. The
deferred premiums on all outstanding options were $7.3 million as of March 31,
2000, and are included in other current assets.
During the three months ended March 31, 2000, the Company hedged its
minority equity position in a publicly traded company. The hedge took the form
of a cashless collar and was constructed as a series of purchased put and sold
call options, with the cost of the purchased puts exactly offset by the premium
earned on the sold calls. The collar expired on March 16, 2000.
8
<PAGE> 9
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. It further provides criteria for derivative instruments to be
designated as fair value, cash flow and foreign currency hedges and establishes
respective accounting standards for reporting changes in the fair value of the
instruments. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000 pursuant to the issuance of SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133," which deferred the effective date of
SFAS No. 133 by one year. Upon adoption of SFAS No. 133, the Company will be
required to adjust hedging instruments to fair value in the balance sheet, and
recognize the offsetting gain or loss as transition adjustments to be reported
in net income or other comprehensive income, as appropriate, and presented in a
manner similar to the cumulative effect of a change in accounting principle.
While the Company believes the adoption of this statement will not have a
significant effect on the Company's results of operations, the impact of the
adoption of SFAS No. 133 as of the effective date cannot be reasonably estimated
at this time.
NOTE 6 - BALANCE SHEET DETAIL
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 2000 1999
------------- -------------
<S> <C> <C>
Inventories:
Raw materials $ 21,599 $ 20,294
Work-in-process 104,276 139,698
Finished goods 129,271 83,904
------------- -------------
$ 255,146 $ 243,896
============= =============
</TABLE>
NOTE 7 -DEBT
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 2000 1999
------------- -------------
<S> <C> <C>
Notes payable to banks $ 95 $ 379,823
Convertible Subordinated Notes 845,000 345,000
Capital lease obligations 3,470 3,948
------------- -------------
848,565 728,771
Current portion of long-term debt, capital
lease obligations and Short-term borrowings (1,788) (56,996)
------------- -------------
Long-term debt and capital lease obligations $ 846,777 $ 671,775
============= =============
</TABLE>
On February 18, 2000, the Company issued $500 million of 4% Convertible
Subordinated Notes (the "2000 Convertible Notes") due in 2005. The 2000
Convertible Notes are subordinated to all existing and future senior debt, are
convertible at any time following issuance into shares of the Company's common
stock at a conversion price of $70.2845 per share and are redeemable at the
Company's option, in whole or in part, at any time on or after February 20,
2003. Each holder of the 2000 Convertible Notes has the right to cause the
Company to repurchase all of such holder's convertible notes at 100% of their
principal amount plus accrued interest upon the occurrence of certain events and
in certain circumstances. Interest is payable semiannually. The Company paid
approximately $15.3 million for debt issuance costs related to the 2000
Convertible Notes. The debt issuance costs are being amortized using the
interest method. The net proceeds from the 2000 Convertible Notes were used to
repay bank debt outstanding with a balance of approximately $380 million as of
December 31, 1999 as described below.
During March of 1999, the Company issued $345 million of 4 1/4% Convertible
Subordinated Notes (the "1999 Convertible Notes") due in 2004. The 1999
Convertible Notes are subordinated to all existing and future senior debt, are
convertible 60 days following issuance into shares of the Company's common stock
at a conversion price of
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<PAGE> 10
$15.6765 per share and are redeemable at the option of the Company, in whole or
in part, at any time on or after March 20, 2002. Each holder of the convertible
notes has the right to cause the Company to repurchase all of such holder's
convertible notes at 100% of their principal amount plus accrued interest upon
the occurrence of certain events and in certain circumstances. Interest is
payable semiannually. The Company paid approximately $9.5 million for debt
issuance costs related to the 1999 Convertible Notes. The amount was capitalized
in other assets and is being amortized over the life of the 1999 Convertible
Notes using the interest method. The net proceeds of the 1999 Convertible Notes
were used to repay existing debt obligations as described below.
On August 5, 1998, the Company entered into a credit agreement with ABN AMRO
Bank N.V. ("ABN AMRO"). The credit agreement was restated and superseded by the
Amended and Restated Credit Agreement dated as of September 22, 1998 by and
among the Company, LSI Logic Japan Semiconductor, Inc. ("JSI"), ABN AMRO and
thereafter syndicated to a group of lenders determined by ABN AMRO and the
Company. The credit agreement consisted of two credit facilities: a $575 million
senior unsecured reducing revolving credit facility ("Revolver"), and a $150
million senior unsecured revolving credit facility ("364-day Facility").
On August 5, 1998, the Company borrowed $150 million under the 364-day
Facility and $485 million under the Revolver. On December 22, 1998, the Company
borrowed an additional $30 million under the Revolver. The credit facilities
allowed for borrowings at adjustable rates of LIBOR/TIBOR with a 1.25% spread.
As of March 31, 1999, the spread changed to 1%. Interest payments are due
quarterly. The 364-day Facility expired on August 3, 1999 by which time
borrowings outstanding were fully paid in accordance with the credit agreement.
The Revolver is for a term of four years with the principal reduced quarterly
beginning on December 31, 1999. In November 1999, an amendment was made to the
credit agreement whereby mandatory repayments would not exceed the amount
necessary to reduce the commitment to $241 million. The Revolver includes a term
loan sub-facility in the amount of 8.6 billion yen made available to JSI over
the same term. The yen term loan sub-facility is for a period of four years with
no required payments until it expires on August 5, 2002. Pursuant to the
restated credit agreement, on August 30, 1998, JSI repaid its existing 11.4
billion yen ($79.2 million) credit facility and borrowed 8.6 billion yen ($84
million at December 31, 1999) bearing interest at adjustable rates. In March of
1999, the Company repaid the full $150 million outstanding under the 364-day
Facility and $186 million outstanding under the Revolver using the proceeds from
the 1999 Convertible Notes as described above. Borrowings outstanding under the
Revolver including the yen sub-facility were approximately $380 million as of
December 31, 1999. The Company repaid the outstanding balance for the Revolver
in February 2000. As of December 31, 1999, the interest rate for the Revolver
and the yen sub-facility was 7.07% and 1.29%, respectively.
In accordance with the terms of its existing credit agreement, the Company
must comply with certain financial covenants related to profitability, tangible
net worth, liquidity, senior debt leverage, debt service coverage and
subordinated indebtedness. As of March 31, 2000 and December 31, 1999, the
Company was in compliance with these covenants.
NOTE 8 -RECONCILIATION OF BASIC AND DILUTED EARNINGS PER SHARE
A reconciliation of the numerators and denominators of the basic and diluted
per share amount computations as required by SFAS No. 128 "Earnings Per Share"
("EPS") is as follows:
10
<PAGE> 11
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------------------------------------------------
2000 1999
------------------------------------- ---------------------------------------
Per-Share Per-Share
(In thousands except per share amounts) Income* Shares+ Amount Income* Shares+ Amount
-------- ------- --------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income before cumulative
effect of change in accounting
principle $ 86,243 302,682 $ 0.28 $ 4,010 288,244 $ 0.01
-------- --------
Cumulative effect of change
in accounting principle -- -- (91,774) 288,244 (0.32)
Net income/(loss) available to
Common stockholders 86,243 302,682 0.28 (87,764) 288,244 (0.31)
-------- --------
Effect of dilutive securities:
Stock options 24,469 5,296
4 1/4% Convertible
Subordinated Notes 2,750 22,008 -- --
Diluted EPS:
Net income before cumulative
effect of change in accounting
principle (adjusted for assumed
conversion of debt) 88,993 349,159 0.25 4,010 293,540 0.01
-------- --------
Cumulative effect of change in
Accounting principle -- -- -- (91,774) 293,540 (0.31)
-------- --------
Net income/(loss) available to
Common stockholders $ 88,993 349,159 $ 0.25 $(87,764) 293,540 $ (0.30)
-------- --------
</TABLE>
* Numerator
+ Denominator
Of the total options outstanding, approximately 24,000 shares and 15,380,000
shares were excluded from the computation of diluted shares for the three months
ended March 31, 2000 and 1999, respectively, because the exercise prices of
these options were greater than the average market price of common shares for
the respective three month periods. The exercise price of these options was
$66.13 at March 31, 2000 and ranged from $12.50 to $20.94 at March 31, 1999,
respectively. For the three months ended March 31, 2000, common equivalent
shares of 3,442,231 and interest expense of $1,750,000, net of taxes associated
with the 2000 Convertible Notes were excluded from the calculation of diluted
shares because of their antidilutive effect on earnings per share. For the three
months ended March 31, 1999, common equivalent shares of 2,529,594 and interest
expense of $305,469, net of taxes associated with the 1999 Convertible Notes
(See Note 7), were excluded from the calculation of diluted shares because of
their antidilutive effect on earnings per share.
NOTE 9 - COMPREHENSIVE INCOME
Comprehensive income is defined as a change in equity of a company during a
period from transactions and other events and circumstances excluding
transactions resulting from investments by owners and distributions to owners.
The primary difference between net income and comprehensive income, for the
Company, arises from foreign currency translation adjustments and unrealized
gains on available-for-sale securities, net of applicable taxes. Comprehensive
income for the current reporting period and comparable period in the prior year
is as follows:
<TABLE>
<CAPTION>
Three months ended March 31,
(In thousands) 2000 1999
------------- -------------
<S> <C> <C>
Comprehensive income/(loss) $ 96,292 $ (89,426)
============= =============
</TABLE>
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<PAGE> 12
NOTE 10 -SEGMENT REPORTING
The Company operates in two reportable segments: the Semiconductor segment
and the Storage Area Network ("SAN") Systems segment. In the Semiconductor
segment, the Company designs, develops, manufactures and markets integrated
circuits, including application-specific integrated circuits, (commonly known in
the industry as ASICs), application-specific standard products and related
products and services. Semiconductor design and service revenues include
engineering design services, licensing of our advanced design tools software,
and technology transfer and support services. The Company's customers use these
services in the design of increasingly advanced integrated circuits
characterized by higher levels of functionality and performance. In the SAN
Systems segment, the Company designs, manufactures, markets and supports high
performance data storage management and storage systems solutions and a complete
line of Redundant Array of Independent Disk ("RAID") systems, subsystems and
related software.
The following is a summary of operations by segment for the three month
ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
Three month ended
March 31,
(In thousands) 2000 1999
------------- -------------
<S> <C> <C>
REVENUES:
Semiconductor $ 530,387 $ 396,107
SAN Systems 84,799 67,510
------------- -------------
Total $ 615,186 $ 463,617
============= =============
INCOME FROM OPERATIONS:
Semiconductor $ 73,001 $ 8,900
SAN Systems 11,599 5,584
------------- -------------
Total $ 84,600 $ 14,484
============= =============
</TABLE>
Intersegment revenues for the periods presented above were not significant.
Restructuring of operations and other non-recurring items were included in the
Semiconductor segment.
One customer represented approximately 12% of the Company's total
consolidated revenues for the three months ended March 31, 2000. No customers
represented 10% or more of the Company's total consolidated revenues for the
three month period ended March 31, 1999. In the Semiconductor segment, one
customer represented approximately 11% of total Semiconductor revenues for the
three months ended March 31, 2000. No customers represented 10% or more of total
Semiconductor revenues for the three months ended March 31, 1999. In the SAN
Systems segment, there were four customers with revenues representing
approximately 24%, 23%, 18% and 11% of total SAN Systems revenues for the three
months ended March 31, 2000, respectively. During the three months ended March
31, 1999, there were three customers with revenues representing approximately
27%, 23% and 19% of total SAN systems revenues, respectively.
The following is a summary of total assets by segment as of March 31, 2000
and December 31, 1999:
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 2000 1999
------------- -------------
<S> <C> <C>
TOTAL ASSETS:
Semiconductor $ 3,321,424 $ 3,051,865
SAN Systems 192,496 154,740
------------- -------------
Total $ 3,513,920 $ 3,206,605
============= =============
</TABLE>
12
<PAGE> 13
Revenues from domestic operations were $361 million, representing 59% of
consolidated revenues, for the first quarter of 2000 compared to $281 million,
representing 61% of consolidated revenues, for the same period of 1999.
NOTE 11 -LEGAL MATTERS
A discussion of certain pending legal proceedings is included in Item 3 of
the Company's Annual Report on Form 10-K for the year ended December 31, 1999.
The information provided therein remains unchanged.
The Company is a party to other litigation matters and claims which are
normal in the course of its operations, and while the results of such
litigations and claims cannot be predicted with certainty, the final outcome of
such matters is not expected to have a significant adverse effect on the
Company's consolidated financial position or results of operations.
NOTE 12 -COMMITMENTS AND CONTINGENCIES
In March 2000, the Company entered into a master lease and security
agreement with a group of companies ("Lessor") for up to $250 million for
certain wafer fabrication equipment. Each lease supplement pursuant to the
transaction will have a lease term of three years with two consecutive renewal
options. The Company may, at the end of any lease term, return, or purchase at a
stated amount all the equipment. Upon return of the equipment, the Company must
pay the Lessor a termination value. There were no significant gains or losses
from these leasing transactions for the three months ended March 31, 2000.
Through March 31, 2000, the Company has drawn down $53 million as the first
supplement pursuant to the agreement. Minimum rental payments under these
operating leases, including option periods, are $12.0 million in 2001, $11.4
million in 2002, $9.4 million in 2003, $8.6 million in 2004 and $2.1 million in
2005. Under this lease, the Company is required to maintain compliance with
certain financial covenants. The Company was in compliance with these covenants
as of March 31, 2000.
NOTE 13 -SUBSEQUENT EVENTS
On April 13, 2000, the Company entered into an Asset Purchase Agreement with
NeoMagic Corporation ("NeoMagic"). Under the agreement, the Company acquired
certain tangible and intangible assets associated with NeoMagic's DVD Drive
Electronics line of business for consideration of approximately $14.5 million in
cash. The acquisition is intended to enhance and accelerate the Company's
set-top decoder and DVD product offerings. The acquisition will be accounted for
as a purchase. In addition, the Company offered employment to former NeoMagic
engineers in the United States and United Kingdom.
On April 27, 2000, the Company entered into an Asset Purchase Agreement with
Cacheware, Inc. ("Cacheware"). Under the agreement, the Company acquired certain
tangible and intangible assets associated with Cacheware's storage area network
("SAN") business for consideration of approximately $23 million in cash. The
acquisition is intended to provide a key technology to enhance the Company's SAN
solutions for fault tolerant applications while providing a roadmap for
integrating the functionality into the Company's RAID controllers. The
acquisition will be accounted for as a purchase. In addition, the Company
offered employment to former Cacheware engineers in the United States.
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
We believe that our future operating results will continue to be subject to
quarterly variations based upon a wide variety of factors detailed in Risk
Factors in Part I of our Annual Report on Form 10-K for the year ended December
31, 1999. These factors include, among others:
- Cyclical nature of both the semiconductor and SAN systems industries and
the markets addressed by our products;
- Availability and extent of utilization of manufacturing capacity;
- Price erosion;
- Competitive factors;
- Timing of new product introductions;
- Changes in product mix;
- Fluctuations in manufacturing yields;
- Product obsolescence;
- Business and product market cycles;
- Economic and technological risks associated with our acquisition and
alliance activities; and
- The ability to develop and implement new technologies.
Our operating results could also be impacted by sudden fluctuations in
customer requirements, currency exchange rate fluctuations and other economic
conditions affecting customer demand and the cost of operations in one or more
of the global markets in which we do business. We operate in a technologically
advanced, rapidly changing and highly competitive environment. We predominantly
sell custom products to customers operating in a similar environment.
Accordingly, changes in the conditions of any of our customers may have a
greater impact on our operating results and financial condition than if we
predominantly offered standard products that could be sold to many purchasers.
While we cannot predict what effect these various factors may have on our
financial results, the aggregate effect of these and other factors could result
in significant volatility in our future performance. To the extent our
performance may not meet expectations published by external sources, public
reaction could result in a sudden and significantly adverse impact on the market
price of our securities, particularly on a short-term basis.
We have international subsidiaries and distributors which operate and sell
our products globally. Further, we purchase a substantial portion of our raw
materials and manufacturing equipment from foreign suppliers and incur labor and
other operating costs in foreign currencies, particularly in our Japanese
manufacturing facilities. As a result, we are exposed to the risk of changes in
foreign currency exchange rates or declining economic conditions in these
countries. We utilize forward exchange and purchased currency option contracts
to manage our exposure associated with net asset and liability positions and
cash flows denominated in non-functional currencies. (See Note 5 of the Notes to
Unaudited Consolidated Condensed Financial Statements referred to hereafter as
"Notes.") There is no assurance that these hedging transactions will eliminate
exposure to currency rate fluctuations that could affect our operating and/or
cash flows.
Our corporate headquarters and some of our manufacturing facilities are
located near major earthquake faults. As a result, in the event of a major
earthquake, we could suffer damages which could significantly and adversely
affect our operating results and financial condition.
While management believes that the discussion and analysis in this report is
adequate for a fair presentation of the information, we recommend that you read
this discussion and analysis in conjunction with our Annual Report on Form 10-K
for the year ended December 31, 1999.
Statements in this discussion and analysis include forward looking
information statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934,
as amended. These statements involve known and unknown risks and uncertainties.
Our actual results in
14
<PAGE> 15
future periods may be significantly different from any future performance
suggested in this report. Risks and uncertainties that may affect our results
may include, among others:
- Fluctuations in the timing and volumes of customer demand;
- Currency exchange rates;
- Availability and utilization of our manufacturing capacity;
- Timing and success of new product introductions; and
- Unexpected obsolescence of existing products.
We operate in an industry sector where security values are highly volatile
and may be influenced by economic and other factors beyond our control. See
additional discussion contained in "Risk Factors" set forth in Part I of our
Annual Report on Form 10-K for the year ended December 31, 1999.
RESULTS OF OPERATIONS
On January 25, 2000, we announced a two-for-one common stock split, which
was declared by the Board of Directors as a 100% stock dividend payable to
stockholders of record on February 4, 2000 as one new share of common stock for
each share held on that date. The newly issued common stock shares were
distributed on February 16, 2000. In the following discussion and analysis, all
references to number of shares, per share amounts and market prices of our
common stock have been restated to give retroactive recognition to the
two-for-one common stock split announced on January 25, 2000 for all periods
presented.
Where more than one significant factor contributed to changes in results
from year to year, we have quantified material factors throughout the MD&A where
practicable.
REVENUE. We operate in two reportable segments: the Semiconductor segment
and the Storage Area Network ("SAN") Systems segment. In the Semiconductor
segment, we design, develop, manufacture and market integrated circuits,
including application-specific integrated circuits, (commonly known in the
industry as ASICs), application-specific standard products and related products
and services. Semiconductor design and service revenues include engineering
design services, licensing of our advanced design tools software, and technology
transfer and support services. Our customers use these services in the design of
increasingly advanced integrated circuits characterized by higher levels of
functionality and performance. In the SAN Systems segment, we design,
manufacture, market and support high-performance data storage management and
storage systems solutions and a complete line of Redundant Array of Independent
Disk ("RAID") systems, subsystems and related software.
(See Note 10 of the Notes.)
Total revenues for the first quarter of 2000 increased $151.6 million or 33%
to $615.2 million from $463.6 million for the same period of 1999 on a
consolidated basis. Revenues for the Semiconductor segment increased $134.3
million or 34% to $530.4 million for the first quarter of 2000 from $396.1
million for the same period of 1999. Significant factors which contributed to
this revenue growth included increased demand for products used in
communications applications and network computing applications in the U. S. and
Europe. We expect demand for products used in communications and network
computing applications, specifically networking and broadband including optical
switching, wireless, set-top boxes and other applications, to remain strong for
the rest of the year based primarily on expected growth of the Internet
infrastructure and wireless communications applications. Revenues for the SAN
Systems segment increased $17.3 million or 26% to $84.8 million for the first
quarter of 2000 from $67.5 million for the same period of 1999 due to
introduction of new products and continued growth in older ones primarily as a
result of rapid growth of the Internet. There were no significant intersegment
revenues during the periods presented.
One customer represented 12% of our total consolidated revenues for the
three month period ended March 31, 2000. No customers represented 10% or more of
our total consolidated revenues for the three month period ended March 31, 1999.
In the Semiconductor segment, one customer represented 11% of total
Semiconductor revenues for the three month period ended March 31, 2000. No
customers represented 10% or more of total Semiconductor
15
<PAGE> 16
revenues for the three month period ended March 31, 1999. In the SAN Systems
segment, there were four customers with revenues representing 24%, 23%, 18% and
11% of total SAN Systems revenues for the three month period ended March 31,
2000. For the three month period ended March 31, 1999, there were three
customers with revenues representing 27%, 23% and 19% of total SAN Systems
revenues.
Revenues from domestic operations were $361 million, representing 59% of
consolidated revenues, for the first quarter of 2000 compared to $281 million,
representing 61% of consolidated revenues, for the same period of 1999.
OPERATING COSTS AND EXPENSES. Key elements of the consolidated statements of
operations, expressed as a percentage of revenues, were as follows:
<TABLE>
<CAPTION>
Three month period
ended March 31,
CONSOLIDATED: 2000 1999
-------- --------
<S> <C> <C>
Gross profit margin 41% 35%
Research and development 13% 17%
Selling, general and administrative 11% 13%
Income from operations 14% 3%
</TABLE>
Key elements of the statement of operations for the Semiconductor and SAN
Systems segments, expressed as a percentage of revenues, were as follows:
<TABLE>
<CAPTION>
Three month period
ended March 31,
SEMICONDUCTOR SEGMENT: 2000 1999
-------- --------
<S> <C> <C>
Gross profit margin 41% 36%
Research and development 14% 18%
Selling, general and administrative 11% 14%
Income from operations 14% 2%
</TABLE>
<TABLE>
<CAPTION>
Three month period
ended March 31,
SAN SYSTEMS SEGMENT: 2000 1999
-------- --------
<S> <C> <C>
Gross profit margin 36% 30%
Research and development 7% 10%
Selling, general and administrative 13% 9%
Income from operations 14% 8%
</TABLE>
GROSS MARGIN. We have advanced wafer manufacturing operations in Oregon,
Colorado, California and Japan. This allows us to maintain our ability to
provide products to customers with minimal disruption in the manufacturing
process due to economic and geographic risks associated with each geographic
location. During 1999, we entered into a technology transfer agreement with
Silterra Malaysia Sdn. Bhd. (formerly known as Wafer Technology (Malaysia) Sdn.
Bhd.) ("Silterra") under which we grant licenses to Silterra with respect to
certain of our wafer fabrication technologies and provide associated
manufacturing training and related services. In exchange, we will receive cash
and equity consideration valued at $120.0 million over three years during which
transfers and the performance of our obligations are scheduled to occur. (See
Note 3 of the Notes.) During the first quarter of 2000, we provided engineering
training in accordance with the agreement. The engineering training was valued
at $1.0 million and was recorded as a credit to cost of revenues. No such
benefit was recorded during the first quarter of 1999. We will provide an
additional $5.0 million of engineering training over the remaining contract term
of two years, which will be recorded as a credit to cost of revenues.
The gross margin percentage increased to 41% in the first quarter of 2000
from 35% in the same period of 1999 on a consolidated basis. The gross margin
percentage for the Semiconductor segment was 41% in the first quarter of 2000
compared to 36% in the same period of 1999. The increase primarily reflected a
combination of the following factors:
16
<PAGE> 17
- Increased production capacity utilization at our fabrication facility in
Gresham, Oregon, which commenced operations in December of 1998; and
- Our focus on higher margin products used in communications and network
computing applications.
The increase in the gross margin was offset in part by a $11.1 million
charge associated with the elimination of a non-strategic product area. The
increase was also offset in part by an increase in compensation related
expenses.
The gross margin percentage for the SAN Systems segment was 36% in the first
quarter of 2000 compared to 30% in the same period of 1999. The increase was
primarily attributable to the following factors:
- Increased revenues in higher margin products in the first quarter of 2000;
and
- Lower manufacturing variances in the first quarter of 2000 compared to
the same period of 1999.
The increase in gross margin for SAN Systems segment was offset in part by
increased compensation related expenses.
Our operating environment, combined with the resources required to operate
in the semiconductor industry, requires that we manage a variety of factors.
These factors include, among other things:
- Product mix;
- Factory capacity and utilization;
- Manufacturing yields;
- Availability of certain raw materials;
- Terms negotiated with third-party subcontractors; and
- Foreign currency fluctuations.
These and other factors could have a significant effect on our gross margin
in future periods. We are targeting our overall gross margin percentage to
increase to 48% by the end of 2000.
Changes in the relative strength of the yen may have a greater impact on our
gross margin than other foreign exchange fluctuations due to our wafer
fabrication operations in Japan. Although the yen strengthened (the average yen
exchange rate for the first quarter of 2000 appreciated 10% from the same period
of 1999), the effect on gross margin and net income was not significant because
yen-denominated sales offset a substantial portion of yen-denominated costs
during the period. Moreover, we hedged a portion of our remaining yen exposure.
(See Note 5 of the Notes.) Future changes in the relative strength of the yen or
mix of foreign-denominated revenues and costs could have a significant effect on
our gross margin or operating results.
RESEARCH AND DEVELOPMENT. Research and development ("R&D") expenses
increased $3.7 million or 5% to $80.2 million during the first quarter of 2000
as compared to $76.5 million during the same period of 1999 on a consolidated
basis. R&D expenses for the Semiconductor segment increased $4.4 million or 6%
to $74.2 million in the first quarter of 2000 from $69.8 million in the same
period of 1999. The increase was primarily attributable to expenditures related
to the continued development of advanced sub-micron products and process
technologies and increased compensation expenses. The increase was offset in
part by a $6.0 million research and development benefit associated with a
technology transfer agreement entered into with Silterra in Malaysia during
1999. (See Note 3 of the Notes.) No benefit was recorded during the first
quarter of 1999. We will receive an additional $44.0 million in cash from
Silterra over the remaining contract term of two years as consideration for
technology to be transferred. The benefit will be recorded to research and
development.
R&D expenses for the SAN Systems segment decreased $0.6 million or 10% to
$6.1 million in the first quarter of 2000 from to $6.7 million in the same
period of 1999.
17
<PAGE> 18
As a percentage of revenues, R&D expenses were 13% in the first quarter of
2000 as compared to 17% in the same period of 1999 on a consolidated basis. R&D
expenses as a percentage of revenues for the Semiconductor segment decreased to
14% in the first quarter of 2000 from 18% in the same period of 1999. R&D
expenses as a percentage of revenues for the SAN Systems segment also decreased
to 7% in the first quarter of 2000 from 10% in the same period of 1999. As we
continue our commitment to technological leadership in our markets, we are
targeting our R&D investment in 2000 to be approximately 14% of revenues on a
consolidated basis.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
("SG&A") expenses increased $8.7 million or 14% to $70.2 million during the
first quarter of 2000 as compared to $61.5 million in the same period of 1999 on
a consolidated basis. SG&A expenses for the Semiconductor segment increased $4.0
million or 7% to $59.4 million in the first quarter of 2000 from $55.4 million
in the same period of 1999. SG&A expenses for the SAN Systems segment increased
$4.8 million or 78% to $10.9 million in the first quarter of 2000 from $6.1
million in the same period of 1999. The increase in SG&A was primarily
attributable to an increase in compensation and commission expenses for sales
personnel.
As a percentage of revenues, SG&A expenses decreased to 11% in the first
quarter of 2000 from 13% in the same period of 1999 on a consolidated basis.
SG&A expenses as a percentage of revenues for the Semiconductor segment
decreased to 11% in the first quarter of 2000 from 14% in the same period of
1999. SG&A expenses as a percentage of revenues for the SAN Systems segment
increased to 13% in the first quarter of 2000 from 9% in the same period of
1999. We expect that SG&A expenses as a percentage of revenues will remain
relatively flat at approximately 11% of revenues on a consolidated basis in
2000.
RESTRUCTURING OF OPERATIONS AND OTHER NON-RECURRING ITEMS. We recorded
restructuring of operations and other non-recurring net charges of $2.8 million
during the first quarter of 2000. The net charges reflected the combination of
the following:
- On February 22, 2000, we entered into an agreement with a third party to
outsource certain testing services presently performed by the Company at
its Fremont facility. The agreement provides for the sale and transfer
of certain test equipment and related peripherals for total proceeds of
approximately $10.7 million. The Company recorded a loss of
approximately $2.2 million associated with the agreement. (See Note 2
of the Notes.)
- In March of 2000, the Company recorded approximately $1.1 million of
non-cash compensation related expenses resulting from a Separation
Agreement entered into during the quarter with a former employee and a
$0.5 million benefit for the reversal of reserves established in the
second quarter of 1999 for merger related expenses in connection with
the merger with SEEQ Technology, Inc. ("SEEQ") discussed below.
On June 22, 1999, we and SEEQ were combined in a transaction accounted for
as a pooling of interest. For description of the business combination, see our
Annual Report on Form 10-K for the year ended December 31, 1999.
The restructuring of operations and other non-recurring net benefit of $2.0
million recorded in the three month period ended March 31, 1999 consisted of
$2.5 million of reversal of restructuring reserves originally established in the
third quarter of 1998 and $0.5 million of merger expenses booked by SEEQ. For
description of the restructuring program established in 1998, see our Annual
Report on Form 10-K for the year ended December 31, 1999. For a discussion of
SEEQ integration expenses, see Note 2 of the Notes.
AMORTIZATION OF INTANGIBLES. Amortization of goodwill and other intangibles
increased $0.6 million or 6% to $11.8 million in the first quarter of 2000 from
$11.2 million in the same period of 1999. The increase was primarily related to
additional amortization of goodwill associated with the acquisition of ZSP
Corporation ("ZSP") in April of 1999. For description of the acquisition of ZSP,
see our Annual Report on Form 10-K for the year ended December 31, 1999.
18
<PAGE> 19
INTEREST EXPENSE. Interest expense increased $0.3 million to $10.9 million
in the first quarter of 2000 from $10.6 million in the same period of 1999. The
increase was primarily attributable to increased debt outstanding during the
first quarter of 2000 as compared to the same period of 1999 and higher interest
rates on the remaining balance of $575 million senior unsecured reducing
revolving credit facility (the "Revolver"). (See Note 7 of the Notes.)
INTEREST INCOME AND OTHER, NET. Interest income and other increased $5.4
million to $7.1 million in the first quarter of 2000 from $1.7 million in the
same period of 1999. The increase was primarily attributable to approximately
$6.0 million higher interest income in the first quarter of 2000 as compared to
the same period of 1999 due to higher average balance of interest-generating
cash, cash equivalents and short-term investments and higher interest rates
during the first quarter of 2000, offset in part by increased foreign exchange
losses in the first quarter of 2000 as compared to the same period of 1999. The
lower average balances of interest-generating cash, cash equivalents and
short-term investments in the first quarter of 1999 resulted primarily from cash
outlays associated with the purchase of Symbios, Inc. ("Symbios") in August of
1998. For description of the acquisition of Symbios, see our Annual Report on
Form 10-K for the year ended December 31, 1999.
GAIN ON SALE OF EQUITY SECURITIES. In the third quarter of 1999, we adopted
a program of regular selling of marketable equity securities. During the first
quarter of 2000, we sold certain marketable equity securities for $29.9 million
in the open market, realizing a pre-tax gain of approximately $27.4 million. We
also recognized a $6.8 million pre-tax gain associated with equity securities of
a certain technology company that was acquired by another technology company.
There was no sale of marketable equity securities during the first quarter of
1999.
PROVISION FOR INCOME TAXES. The Company recorded a provision for income
taxes for the first quarter of 2000 and 1999 with an effective rate of 25% and
29%, respectively. The first quarter rate in 1999 was primarily impacted by the
acquisition of SEEQ. Our effective rate can be above or below the U.S. statutory
rate due to non-deductible in-process research and development ("IPR&D") and
merger and restructuring charges offset in part by earnings of our foreign
subsidiaries taxed at lower rates and the utilization of prior loss carryovers
and other tax credits.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE In April 1998, the
Accounting Standards Executive Committee ("AcSEC") released Statement of
Position ("SOP") No. 98-5, "Reporting on the Costs of Start-up Activities." The
SOP became effective for fiscal years beginning after December 15, 1998 and
required companies to expense all costs incurred or unamortized in connection
with start-up activities. Accordingly, we expensed the unamortized preproduction
balance of $91.8 million associated with the Gresham manufacturing facility in
Oregon, net of tax, on January 1, 1999 and have presented it as a cumulative
effect of a change in accounting principle in accordance with SOP No. 98-5.
FINANCIAL CONDITION AND LIQUIDITY
Cash, cash equivalents and short-term investments increased $206.9 million
or 31% to $868.2 million as of March 31, 2000 from $661.3 million as of December
31, 1999. The increase was primarily a result of proceeds from issuance of the
2000 Convertible Notes, net of repayment of the existing debt, and proceeds from
our employee stock option and purchase plans, partially offset by capital
expenditures. The increase was also attributable to proceeds from the sale of
marketable equity securities in the open market. In the third quarter of 1999,
we adopted a program of regular selling of marketable equity securities.
Short-term investments include $60 million of marketable equity securities which
we plan to sell within the next 12 months. (See Note 4 of the Notes.)
WORKING CAPITAL. Working capital increased $407.7 million or 50% to $1.2
billion as of March 31, 2000 from $813.0 million as of December 31, 1999. The
increase was primarily a result of the following factors:
- $157.9 million higher short-term investments primarily attributable to
$121.7 million of purchases of debt and equity securities, net of sales
and maturities, with the proceeds from the 2000 Convertible Notes and
$35.0
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<PAGE> 20
million of marketable equity securities reclassified from long-term
assets as we plan to sell them within the next 12 months;
- $121.1 million higher net accounts receivable primarily due to increased
revenue and the timing of shipments when comparing the first quarter of
2000 to the fourth quarter of 1999. Shipments during the fourth quarter
of 1999 were more linear throughout the quarter whereas during the first
quarter of 2000, shipments increased towards the end of the quarter; and
- $55.2 million lower current portion of long-term obligations resulting
from repayment of the Revolver. (See Note 7 of the Notes.)
CASH AND CASH EQUIVALENTS PROVIDED BY OPERATING ACTIVITIES. During the first
quarter of 2000, we generated $10.9 million of net cash and cash equivalents
from operating activities compared to $35.6 million generated during the first
quarter of 1999. The decrease in net cash and cash equivalents provided by
operating activities was primarily attributable to an increase in accounts
receivable, inventories, prepaid expenses and other assets. The increase in
inventories reflects the expectation of continued higher sales in 2000. The
increase in prepaid expenses and other assets was primarily attributable to
$10.7 million of fixed assets held for sale reclassified to current assets from
fixed assets (see Note 2 of the Notes) and a $7.3 million increase in
capitalized premiums on currency option contracts, net of amortization, during
the period. Option premiums are amortized over the lives of the contracts. (See
Note 5 of the Notes.)
The decreased net cash from operations during the first quarter of 2000 as
compared to the same period of 1999 was offset in part by higher net income
(before depreciation and amortization, write-off of unamortized preproduction
costs, non-cash restructuring charges and gains and losses on stock
investments), an increase in accounts payable and accrued and other liabilities.
The increase in accounts payable was due to timing of invoice receipt and
payment. The increase in accrued and other liabilities was primarily
attributable to higher income tax payable due to a provision for income taxes
for the current period, net of payment.
CASH AND CASH EQUIVALENTS USED IN INVESTING ACTIVITIES. Net cash and cash
equivalents used in investing activities was $119.6 million in the first quarter
of 2000, compared to $27.9 million in the same period of 1999. The increase in
net cash used in investing activities was primarily attributable to higher
purchases of debt and equity securities available-for-sale and others, net of
maturities and sales. The increase was also attributable to higher capital
expenditures.
We believe that maintaining technological leadership in the highly
competitive worldwide semiconductor industry requires substantial ongoing
investment in advanced manufacturing capacity. Net capital additions were $23.7
million in the first quarter of 2000 and $9.9 million in the same period of
1999. In order to maintain our position as a technological market leader, we
expect to increase the level of capital expenditures to $450 million in 2000
which includes approximately $200 million associated with the master lease and
security agreement discussed in Note 12 of the Notes.
CASH AND CASH EQUIVALENTS PROVIDED BY FINANCING ACTIVITIES. Net cash and
cash equivalents provided by financing activities during the first quarter of
2000 totaled $161.2 million compared to $25.4 million used in the same period of
1999. The increase was primarily attributable to proceeds from the 2000
Convertible Notes, net of repayment of the Revolver (see Note 7 of the Notes)
and higher proceeds from our employee stock option and purchase plans during the
period. The increase was offset in part by debt issuance costs paid associated
with the 2000 Convertible Notes.
On February 18, 2000, we issued the 2000 Convertible Notes due in 2005. The
2000 Convertible Notes are subordinated to all existing and future senior debt,
are convertible at anytime following issuance into shares of our common stock at
a conversion price of $70.2845 per share and are redeemable at our option, in
whole or in part, at any time on or after February 20, 2003. Each holder of the
2000 Convertible Notes has the right to cause us to repurchase all of such
holder's convertible notes at 100% of their principal amount plus accrued
interest upon the occurrence of certain events and in certain circumstances.
Interest is payable semiannually. We paid approximately
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$15.3 million for debt issuance costs related to the 2000 Convertible Notes. The
debt issuance costs are being amortized using the interest method. We used the
net proceeds from the 2000 Convertible Notes to repay bank debt outstanding with
a balance of $380 million as of December 31, 1999. (See Notes 7 of the Notes.)
The remaining balance of the proceeds was used to augment our growing cash
position and to further strengthen of our liquidity position.
During March of 1999, we issued the 1999 Convertible Notes due in 2004. The
1999 Convertible Notes are subordinated to all existing and future senior debt,
are convertible in 60 days following issuance into shares of our common stock at
a conversion price of $15.6765 per share and are redeemable at our option, in
whole or in part, at any time on or after March 20, 2002. Each holder of the
1999 Convertible Notes has the right to cause us to repurchase all of such
holder's convertible notes at 100% of their principal amount plus accrued
interest upon the occurrence of certain events and in certain circumstances.
Interest is payable semiannually. We paid approximately $9.5 million for debt
issuance costs related to the 1999 Convertible Notes. The debt issuance costs
are being amortized using the interest method. We used the net proceeds from the
1999 Convertible Notes to repay existing debt obligations. (See Notes 7 of the
Notes.)
In accordance with the terms of our existing credit arrangement, we must
comply with certain financial covenants related to profitability, tangible net
worth, liquidity, senior debt leverage, debt service coverage and subordinated
indebtedness. As of March 31, 2000, we were in compliance with these covenants.
In order to remain competitive, we must continue to make significant
investments in new facilities and capital equipment. We may seek additional
equity or debt financing from time to time. We believe that our existing liquid
resources and funds generated from operations, combined with funds from such
financing and our ability to borrow funds, will be adequate to meet our
operating and capital requirements and obligations through the foreseeable
future. However, we cannot be certain that additional financing will be
available on favorable terms. Moreover, any future equity or convertible debt
financing will decrease the percentage of equity ownership of existing
stockholders and may result in dilution, depending on the price at which the
equity is sold or the debt is converted.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. It further provides criteria for derivative instruments to be
designated as fair value, cash flow and foreign currency hedges, and establishes
respective accounting standards for reporting changes in the fair value of the
instruments. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000 pursuant to the issuance of SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133," which deferred the effective date of
SFAS No. 133 by one year. Upon adoption of SFAS No. 133, we will be required to
adjust hedging instruments to fair value in the balance sheet, and recognize the
offsetting gain or loss as transition adjustments to be reported in net income
or other comprehensive income, as appropriate, and presented in a manner similar
to the cumulative effect of a change in accounting principle. While we believe
the adoption of this statement will not have a significant effect on our results
of operations, the impact of the adoption of SFAS No. 133 as of the effective
date cannot be reasonably estimated at this time.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in the market risk disclosures during
the three month period ended March 31, 2000 as compared to the discussion in
Part II of our Annual Report on Form 10-K for the year ended December 31, 1999.
21
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PART II
ITEM 1.LEGAL PROCEEDINGS
Reference is made to Item 3, Legal Proceedings, of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999 for a discussion
of certain pending legal proceedings. The information provided at such reference
regarding those matters remains unchanged. The Company continues to believe that
the final outcome of such matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations. No assurance
can be given, however, that these matters will be resolved without the Company
becoming obligated to make payments or to pay other costs to the opposing
parties, with the potential for having an adverse effect on the Company's
financial position or its results of operations.
ITEM 5. OTHER INFORMATION
Proposals of stockholders intended to be presented at the Company's 2001
annual meeting of stockholders must be received at the Company's principle
executive offices not later than November 24, 2000 in order to be included in
the Company's proxy statement and form of proxy relating to the 2001 annual
meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits
27.1 Financial Data Schedules
10.23 Master Lease and Security Agreement
(b) Reports on Form 8-K
On January 26, 2000, pursuant to Item 5 to report information set forth in
the Registrant's press release dated January 25, 2000.
On February 15, 2000, pursuant to Item 7 to file the Underwriting Agreement
dated February 14, 2000 between LSI Logic Corporation and J.P. Morgan
Securities, Inc., and related documents.
On February 24, 2000, pursuant to Item 7 to file the Subordinated Indenture
and Supplemental Indenture both dated February 15, 2000, between LSI Logic
Corporation and State Street Bank of California, N.A., as trustee.
On April 27, 2000, pursuant to Item 5 to report information set forth in the
Registrant's press release dated April 25, 2000.
22
<PAGE> 23
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.
LSI LOGIC CORPORATION
(Registrant)
Date: May 15, 2000 By /s/ R. Douglas Norby
------------------------------
R. Douglas Norby
Executive Vice President Finance &
Chief Financial Officer
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<PAGE> 24
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
27.1 Financial Data Schedule
10.23 Master Lease and Security Agreement
24
<PAGE> 1
EXHIBIT 10.23
AMENDED AND RESTATED PARTICIPATION AGREEMENT
THIS AMENDED AND RESTATED PARTICIPATION AGREEMENT (this "Agreement"
herein), dated as of April 18, 2000, is entered into by and among:
(1) LSI LOGIC CORPORATION, a Delaware corporation ("Lessee");
(2) ABN AMRO BANK N.V., KEYBANK NATIONAL ASSOCIATION, FBTC
LEASING CORP. and each other financial institution from time to time
listed as a lessor in Schedule I hereto, as amended from time to time
(in such capacity, such financial institutions to be referred to
collectively as "Lessors");
(3) ABN AMRO BANK N.V., as agent for Lessors (in such capacity,
"Lessor Agent");
(4) Each of the financial institutions from time to time listed
as a participant in Schedule I hereto, as amended from time to time
(such financial institutions to be referred to collectively as the
"Participants"); and
(5) ABN AMRO BANK N.V., as agent for the Participants (in such
capacity, "Agent").
RECITALS
A. The Participation Agreement, dated as of March 31, 2000 (the
"Existing Participation Agreement"), among Lessee, ABN AMRO Bank N.V., as the
original Lessor and Participant, Lessor Agent and Agent, provided for a certain
lease facility is to be provided to Lessee by Lessors and Participants as
follows:
(1) Lessors would (a) acquire the equipment identified in Exhibit
A and certain other equipment identified by Lessee and approved by
Lessor Agent prior to March 31, 2001 (as more fully defined in Schedule
1.01, collectively, the "Equipment"), (b) lease the Equipment to Lessee,
(c) make advances to finance certain related expenses and (d) grant to
Lessee the right to purchase the Equipment; and
(2) The Participants would participate in such lease facility by
(a) funding the acquisition price to be paid by Lessors for the
Equipment and the other advances to be made by Lessors and (b) acquiring
participation interests in the rental and certain other payments to be
made by Lessee.
B. Lessee and Participants have requested that the Existing
Participation Agreement be amended in certain respects at the time additional
parties become Lessors and Participants, and Lessee, Lessors, Lessor Agent, the
Participants and Agent are willing to amend the Existing Participation Agreement
upon the terms and subject to the conditions set forth herein. For
<PAGE> 2
convenience of reference, the parties wish to restate the Existing Participation
Agreement as so amended in its entirety.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree that the Existing
Participation Agreement shall be amended and restated as of the date hereof to
read in its entirety as follows:
SECTION 1. INTERPRETATION.
1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Operative Document, each term set forth in Schedule 1.01, when used in
this Agreement or any other Operative Document, shall have the respective
meaning given to that term in Schedule 1.01 or in the provision of this
Agreement or other document, instrument or agreement referenced in Schedule
1.01.
1.02. Rules of Interpretation. Unless otherwise indicated in this
Agreement or any other Operative Document, the rules of interpretation set forth
in Schedule 1.02 shall apply to this Agreement and the other Operative
Documents.
SECTION 2. LEASE FACILITY.
2.01. Acquisition, Lease, Amount Limitations, Etc.
(a) Lease Agreement, Purchase Agreement, Etc. On or prior to the
date specified by Lessee pursuant to Subparagraph 2.03(a) for the
acquisition by Lessors of the Equipment identified in Lease Supplement
No. 1 (the "Closing Date"), Lessors and Lessee shall execute (i) a lease
agreement in the form of Exhibit B (such lease agreement, together with
all Lease Supplements thereto, collectively the "Lease Agreement"),
pursuant to which Lessors agree to lease to Lessee the Equipment,
together with all Related Goods, Related Agreements and Related Permits
(as more fully defined in Schedule 1.01, the "Property"), (ii) a
Purchase Agreement in the form of Exhibit C (the "Purchase Agreement"),
pursuant to which Lessors grant to Lessee the right to purchase the
Equipment, and (iii) the other agreements to be executed and delivered
by them pursuant to Paragraph 3.01 and Schedule 3.01.
(b) Acquisition and Other Advances . Subject to the terms and
conditions of this Agreement (including the limitations set forth in
Subparagraph 2.01(c)), Lessors shall, at the request of Lessee:
(i) On the Closing Date, make advances (with funds
provided by the Participants) (1) to purchase each item of
Equipment identified in Lease Supplement No. 1 together with all
Related Goods, Related Agreements and
2
<PAGE> 3
Related Permits for the lesser of (A) 105% of the Purchase Date
Appraised Value of such item of Equipment and (B) the Acquisition
Price and Permitted Installation Expenses with respect to such
item of Equipment (the "Initial Acquisition Advance"), and (2) to
pay Permitted Transaction Expenses (an "Expense Advance"); and
(ii) From time to time during the period (the "Commitment
Period") beginning on the Closing Date and ending on the earlier
of March 30, 2001 and the date, if any, on which Lessee cancels
the commitments hereunder in their entirety pursuant to
Subparagraph 2.08(a) (such earlier date to be referred to as the
"Commitment Termination Date"), make advances (with funds
provided by the Participants) (1) to purchase each item of
Equipment which has been delivered to a Property Site and
installed or is ready for installation during the Installation
Period for which such advance is requested and all Related Goods,
Related Agreements and Related Permits for the lesser of (A) 105%
of the Purchase Date Appraised Value of such item of Equipment
and (B) the Acquisition Price and Permitted Installation Expenses
for such item of Equipment (an "Additional Acquisition Advance")
or (2) to pay Permitted Transaction Expenses (an "Expense
Advance");
provided, however, that at the time the Initial Acquisition Advance and
any Additional Acquisition Advances are made, Agent shall only disburse
to Lessee or the Suppliers of the Equipment to be purchased by Lessors
with such Acquisition Advance the portion of the Acquisition Prices for
such Equipment paid by Lessee or required to be paid to the Suppliers
under such Acquisition Agreements at or prior to the time such Equipment
is purchased by Lessors (each such portion of the Acquisition Price for
any portion of the Equipment to be referred to as the "Paid Acquisition
Price" for such portion of the Equipment), and the portion of the
Acquisition Prices for such Equipment which has not been paid to the
Suppliers of such Equipment (each such portion of the Acquisition Price
for any portion of the Equipment to be referred to as the "Unpaid
Acquisition Price" for such portion of the Equipment) shall be disbursed
to Lessor Agent to be held as Cash Collateral in accordance with the
terms and conditions set forth in the Lease Agreement. The portion of
any Acquisition Advance representing the Unpaid Acquisition Price for
any Equipment shall not be disbursed to Lessee until Lessee has
delivered to Lessor Agent the items set forth in clause (ii)(B) and
clause (iv) of Subparagraph 2.01(c).
(c) Acceptance or Rejection of Property.
(i) Prior to each Acquisition Advance, Lessee shall have
selected and arranged for the purchase, delivery and
installation of the Property for which such Acquisition Advance
is requested as more fully set forth in Subparagraph 4.01(u).
Such Property shall become subject to the Lease Agreement as of
the time of such Acquisition Advance. Lessors hereby appoint and
authorize Lessee to act as Lessors' agent to inspect, test and
accept or reject the Property in accordance with the Acquisition
Agreements for the Property. Acting in such capacity, Lessee
shall (1) inspect and test each item of Property after its
delivery and installation
3
<PAGE> 4
and (2) accept or reject such Property. Lessee shall have full
responsibility for performing the foregoing and agrees that none
of Lessors or any other Lessor Party shall have any liability
for any of the foregoing; provided, however, that Lessors'
obligation to acquire any Property hereunder and lease such
Property to Lessee pursuant to the Lease Agreement is subject to
the conditions set forth in this Agreement and the other
Operative Documents. Lessee acknowledges and agrees that the
duty of Lessee to inspect and accept or reject Property in
accordance with the applicable Acquisition Agreements pursuant
to this Subparagraph 2.01(c) is to be performed by Lessee on
behalf of Lessors as the purchasers of the Property and shall
not affect Lessee's acceptance of the Property pursuant to
Subparagraph 2.01(b) of the Lease Agreement. All Property
accepted by Lessee pursuant to Subparagraph 2.01(b) of the Lease
Agreement shall be subject to the terms of the Lease Agreement
and the other Operative Documents unless and until such Property
is purchased by Lessee, a Designated Purchaser or an Assignee
Purchaser pursuant to the Purchase Agreement, notwithstanding
any rejection by Lessee or failure by Lessee to accept such
Property in accordance with the applicable Acquisition
Agreements pursuant to this Subparagraph 2.01(c).
(ii) On the first Business Day of each month immediately
following any month in which Lessee accepts or rejects any
Property pursuant to this Subparagraph 2.01(c) (or, in the case
of any Property accepted by Lessee prior to the date hereof, on
the Closing Date), Lessee shall deliver to Lessor Agent each the
following:
(A) An irrevocable written notice, in form and
substance satisfactory to Lessor Agent, setting forth the
Property so accepted or rejected and indicating whether
such Property was accepted or rejected; and
(B) For all Property identified in such report as
having been accepted, (1) a Certificate of Acceptance in
the form of Exhibit H, appropriately completed and duly
executed by Lessee (an "Acquisition Agreement Acceptance
Certificate"), and (2) such Uniform Commercial Code
releases and other documents, instruments and agreements
as Lessor Agent may reasonably request to release or
evidence the release of any Lien the Suppliers or any
other Person had in such Property (other than any Lien
created in favor of any Lessor Party pursuant to this
Agreement or the other Operative Documents).
(iii) Not later than ninety (90) days following any
rejection of any Property pursuant to this Subparagraph 2.01(c),
Lessee shall purchase such Property pursuant to Paragraph 2.02
of the Purchase Agreement or replace such Property pursuant to
Subparagraph 3.01(b) of the Lease Agreement.
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<PAGE> 5
(iv) Lessee shall accept or reject all of the Property
pursuant this Subparagraph 2.01(c) not later than six (6) months
after the Commitment Termination Date. If Lessee fails to deliver
to Lessor Agent a notice of acceptance or rejection for any of
the Property on or prior to such date, Lessee shall be deemed to
have accepted such Property and to have made the representations
and warranties set forth in an Acquisition Agreement Acceptance
Certificate with respect to such Property. If any such Property
is so deemed to have been accepted, Lessee shall, not later than
five (5) Business Days after such date, deliver to Lessor Agent
each of the items set forth in clause (ii)(B) for all such
Property, together with such Uniform Commercial Code search
certificates from the jurisdictions in which Uniform Commercial
Code financing statements and fixture filings are to be filed
with respect to the Property reflecting no other financing
statements or filings which evidence Liens of other Persons in
the Property which are prior to the Liens granted to the Lessor
Parties in the Operative Documents.
(d) Amount Limitations. The Initial Acquisition Advance and each
Additional Acquisition Advance (collectively, the "Acquisition
Advances") and each Expense Advance made by Lessors (the Acquisition
Advances and the Expense Advances to be referred to collectively as the
"Advances") shall be subject to the following limitations:
(i) The amount of the Initial Acquisition Advance shall
not exceed the lesser of (A) the aggregate Purchase Date
Appraised Values of the Property purchased by Lessors on the
Closing Date and (B) the aggregate Acquisition Prices and
Permitted Installation Expenses for the Property purchased by
Lessors on the Closing Date which has been delivered to a
Property Site and has been installed or is ready for
installation;
(ii) The aggregate amount of the Additional Acquisition
Advances made during each Installation Period shall not exceed
the lesser of (A) the aggregate Purchase Date Appraised Values
for the Property purchased by Lessors during such Installation
Period and (B) the aggregate Acquisition Prices and Permitted
Installation Expenses for such Property which has been delivered
to a Property Site and has been installed or is ready for
installation during such Installation Period; and
(iii) The aggregate amount of all Advances made by Lessors
(including all Acquisition Advances and Expense Advances) shall
not exceed the lesser of (A) Two Hundred Fifty Million Dollars
($250,000,000) (the "Total Commitment") and (B) the sum of the
following (1) the Expiration Date Appraised Values of the
Property with respect to the then applicable Scheduled Expiration
Date for the Lease Supplement to which such Property is subject
plus (2) all payments of the Fixed Component of Base Rent
scheduled to be made by Lessee pursuant to each Lease Supplement
prior to its Scheduled Expiration Date.
5
<PAGE> 6
2.02 Participation Agreement.
(a) Advances. Subject to the terms and conditions of this
Agreement, each Participant severally, unconditionally and irrevocably
agrees with Lessors to participate in each Advance made by Lessors in an
amount equal to such Participant's Proportionate Share of such Advance;
provided, however, that the aggregate amount of each Participant's
Proportionate Share of all Advances shall not exceed such Participant's
Commitment. Each Participant shall fund its Proportionate Share of each
Advance as provided in Subparagraph 2.05(a). The amount of each Advance
shall be included in the Outstanding Lease Amount of a Lease Supplement
and shall be allocated to the Tranche A Portion, the Tranche B Portion
and, to the extent necessary or reasonably prudent, the Equity Portion
of such Lease Supplement in order to have the Lease Agreement classified
as an operating lease under GAAP, including FASB 13, and set forth in a
schedule attached to such Lease Supplement, which schedule shall be
approved by Lessee and Lessor Agent; provided, however, that none of the
Equity Portion of such Lease Supplement shall be allocated to any
Participant which has not previously agreed to be an Equity Participant.
Each Participant's Proportionate Share of the Outstanding Lease Amount
of such Lease Supplement shall consist of such Participant's Tranche A
Portion, Tranche B Portion and Equity Portion as set forth in a schedule
attached to such Lease Supplement.
(b) Payments. In consideration of each Participant's
participation in each Advance made by Lessors, such Participant shall
participate in the payments made by Lessee under this Agreement and the
other Operative Documents as provided in Paragraph 2.06.
(c) Other Rights of Participants and Agent.
(i) Until all amounts payable to Agent and Participants
under this Agreement and the other Operative Documents are paid
in full, Lessee shall deliver all notices under this Agreement
and the other Operative Documents to Agent at the office or
facsimile number and during the hours specified in Paragraph
7.01. Any notice specified in this Agreement or the other
Operative Documents to be delivered to Lessor Agent may be
delivered to Agent, and Lessor Agent shall promptly deliver
copies of any notices it receives from Lessee to Agent. Agent
shall promptly furnish to each Lessor and Participant copies of
each such notice and, in the case of each request for an Advance,
shall notify each Participant of the amount of its Proportionate
Share of the Advance requested thereby.
(ii) Lessors and Lessor Agent are not agents for
Participants or Agent and may exercise or refrain from
exercising their rights under this Agreement and the other
Operative Documents in their discretion; provided, however that,
until all amounts payable to Agent and Participants under this
Agreement and the other Operative Documents are paid in full,
(A) Lessors and Lessor Agent shall, subject to the limitations
set forth in Section 6, be required to act or to refrain from
acting
6
<PAGE> 7
upon instructions of the Required Participants as provided
in Paragraph 6.03 and (B) Agent may exercise any or all of the
rights and remedies of Lessors and Lessor Agent, and shall be
entitled to the other benefits afforded Lessors and Lessor Agent,
under this Agreement and the other Operative Documents and all
notices and other deliveries to be made to any Lessor or Lessor
Agent by or on behalf of Lessee shall be made to Agent.
(iii) Neither Agent nor any Participant shall have any
right, title or interest in the Property, except for Lessors'
ownership interest in the Property as a result of their
acquisition of the Property pursuant to the Operative Documents
and the Lien in the Property granted to Agent, for the benefit of
the Participants, in the Lessor Security Agreement.
(iv) Subject to Section 6, each Lessor and Lessor Agent
shall perform each of its obligations under the Operative
Documents, including all obligations owed to Agent or any
Participant.
2.03. Advance Requests, Etc.
(a) Initial Advance Request. Lessee shall request Lessors to
purchase the Property identified in Lease Supplement No. 1 and advance
the Permitted Transaction Expenses (the "Initial Advance") by delivering
to Agent an irrevocable written request in the form of Exhibit D,
appropriately completed (the "Initial Advance Request"), which
specifies, among other things:
(i) The amount of the Initial Acquisition Advance, which
shall be in the amount of the lesser of (A) the aggregate
Purchase Date Appraised Values of the Property identified in
Lease Supplement No. 1 and (B) the aggregate Acquisition Prices
and Permitted Installation Expenses for such Property;
(ii) The amount of the Permitted Transaction Expenses to
be paid with the proceeds of any Expense Advance; and
(iii) The date of the Initial Advance, which shall be a
Business Day on or prior to March 31, 2000.
(b) Additional Advance Requests. Lessee shall request Lessors to
make an Additional Acquisition Advance or an additional Expense Advance
by delivering to Agent an irrevocable written request in the form of
Exhibit E, appropriately completed (an "Additional Advance Request"),
which specifies, among other things:
(i) The amount of such Advance, which (A) shall be in the
minimum amount of $5,000,000 (or, if less, the Unused Total
Commitment), and (B) in the case of an Additional Acquisition
Advance, when aggregated with all prior Additional Acquisition
Advances made during the same Installation Period, shall not
exceed the lesser of (y) the aggregate Purchase Date Appraised
Values of all Property purchased or to be purchased with the
proceeds of such Additional
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<PAGE> 8
Acquisition Advances which has been delivered to a Property Site
and has been installed or is ready for installation during such
Installation Period and (z) the aggregate Acquisition Prices and
Permitted Installation Expenses for all such Property;
(ii) The date of such Advance, which shall be the last
Business Day of any fiscal month prior to or as of the Commitment
Termination Date;
(iii) In the case of an Additional Acquisition Advance,
each item of Equipment to be purchased including the Supplier,
model, serial number, delivery date, internal order number,
Acquisition Price, Unpaid Acquisition Price, Permitted
Installation Expenses, Purchase Price Appraised Value, Expiration
Date Appraised Values and the Property Site where such Property
will be installed; and
(iv) In the case of an Expense Advance, the Permitted
Transaction Expenses to be paid with the proceeds of such Expense
Advance.
(c) Delivery of Advance Requests. Etc. Lessee shall deliver (i)
the Initial Advance Request to Agent at least three (3) Business Days
before the Closing Date, and (ii) each Additional Advance Request to
Agent at least three (3) Business Days before the date of the requested
Advance. The Initial Advance Request and each Additional Advance
Requests (collectively, "Advance Requests") shall be delivered by
first-class mail or facsimile as required by Subparagraph 2.02(c) and
Paragraph 7.01; provided, however, that Lessee shall promptly deliver to
Agent the original of any Advance Request initially delivered by
facsimile.
2.04. Fees.
(a) Agent's Fees. Lessee shall pay to Agent, for its own
account, agent's fees in the amounts and at the times set forth in the
Agent's Letter (the "Agent's Fees").
(b) Commitment Fees. Lessee shall pay to Agent, for the ratable
benefit of the Participants as provided in clause (ii) of Subparagraph
2.06(c), commitment fees (the "Commitment Fees") equal to the per annum
percentage which is determined pursuant to the Pricing Grid of the daily
average Unused Total Commitment for the period beginning on the date of
this Agreement and ending on the Commitment Termination Date. Lessee
shall pay the Commitment Fees in arrears on the last Business Day in
each March, June, September and December (commencing June 30, 2000) and
on the Commitment Termination Date (or if the Total Commitment is
cancelled on a date prior to such day, on such prior date).
2.05. Funding of Advances.
(a) Participant Funding and Disbursement. Subject to the terms
and conditions of this Agreement, each Participant shall, before 12:00
noon (Chicago time) on the date of each Advance, make available to Agent
at its office specified in Paragraph 7.01, in same day or immediately
available funds, such Participant's
8
<PAGE> 9
Proportionate Share of such Advance. After Agent's receipt of such funds
and upon fulfillment of the applicable conditions set forth in Section
3, Agent will promptly disburse such funds on behalf of Lessors, in same
day or immediately available funds, as directed by Lessee in the Advance
Request for such Advance.
(b) Participant Failure to Fund. No Lessor Party shall have any
obligation to make an Advance requested hereunder in an amount which
exceeds the aggregate amount of funds actually received by Agent from
the Participants on account of their respective Proportionate Shares of
such Advance.
(c) Participants' Obligations Several. The failure of any
Participant to fund its Proportionate Share of any Advance shall not
relieve any other Participant of its obligation hereunder to fund its
Proportionate Share of such Advance, and no Participant shall be
responsible for the failure of any other Participant to fund its
Proportionate Share of any Advance on the date of such Advance.
2.06. Sharing of Payments.
(a) Outstanding Lease Amount. Payments applied to reduce the
Outstanding Lease Amount of any Lease Supplement (or, if a Lease
Supplement has not been executed with respect to any Installation
Period, the Advances made during such Installation Period) shall be
shared among the Participants as follows:
(i) Each payment of the Outstanding Lease Amount of any
Lease Supplement derived from the Fixed Component of Base Rent
for such Lease Supplement (including any payment of the Fixed
Component of Base Rent required to be made pursuant to
Subparagraph 2.02(b) of the Lease Agreement in connection with
the exercise of any Renewal Option) shall be paid to the Tranche
A Participants pro rata according to their respective Outstanding
Participation Amounts in such Lease Supplement at the time of
such payment.
(ii) Each payment of the Outstanding Lease Amount of any
Lease Supplement or Installation Period derived from the purchase
price paid by Lessee (or an Assignee Purchaser) to purchase the
Property subject to such Lease Supplement or Installation Period
pursuant to the Purchase Agreement shall be shared: first, by the
Tranche A Participants and the Tranche B Participants pro rata
according to their respective Outstanding Participation Amounts
in such Lease Supplement or Installation Period at the time of
such payment; and second, if any amounts remain after all
Outstanding Tranche A Participation Amounts and all Outstanding
Tranche B Participation Amounts in such Lease Supplement or
Installation Period are paid in full, by the Equity Participants
pro rata according to their respective Outstanding Equity
Participation Amounts in such Lease Supplement or Installation
Period at the time of such payment.
(iii) Each payment of the Outstanding Lease Amount of any
Lease Supplement or Installation Period derived from the Residual
Value Guaranty
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Amount applicable to such Lease Supplement or Installation
Period paid by Lessee pursuant to the Purchase Agreement shall be
shared: first, by the Tranche A Participants pro rata according
to their respective Outstanding Tranche A Participation Amounts
in such Lease Supplement or Installation Period at the time of
such payment; second, if any amounts remain after all Outstanding
Tranche A Participation Amounts in such Lease Supplement or
Installation Period are paid in full, by the Tranche B
Participants pro rata according to their respective Outstanding
Tranche B Participation Amounts in such Lease Supplement or
Installation Period at the time of such payment; and third, if
any amounts remain after all Outstanding Tranche A Participation
Amounts and all Outstanding Tranche B Participation Amounts in
such Lease Supplement or Installation Period are paid in full, by
the Equity Participants pro rata according to their respective
Outstanding Equity Participation Amounts in such Lease Supplement
or Installation Period at the time of such payment.
(iv) Each payment of the Outstanding Lease Amount of any
Lease Supplement or Installation Period derived from:
(A) the purchase price paid by a Designated
Purchaser to purchase the Property subject to such Lease
Supplement or Installation Period pursuant to the Purchase
Agreement;
(B) The Indemnity Amount paid by Lessee with
respect to such Lease Supplement or Installation Period
pursuant to the Purchase Agreement;
(C) Casualty Proceeds or Condemnation Proceeds
related to any of the Property subject to such Lease
Supplement or Installation Period; or
(D) the purchase price paid by any other Person to
purchase the Property subject to such Lease Supplement or
Installation Period (whether after the retention of such
Property by Lessors following the Expiration Date for such
Lease Supplement, upon foreclosure or otherwise);
shall be shared: first by the Tranche B Participants pro rata
according to their respective Outstanding Tranche B Participation
Amounts in such Lease Supplement or Installation Period at the
time of such payment; second, if any amounts remain after all
Outstanding Tranche B Participation Amounts in such Lease
Supplement or Installation Period are paid in full, by the
Tranche A Participants pro rata according to their respective
Outstanding Tranche A Participation Amounts in such Lease
Supplement or Installation Period at the time of such payment;
and third, if any amounts remain after all Outstanding Tranche B
Participation Amounts and all Outstanding Tranche A Participation
Amounts in such Lease Supplement or Installation Period are paid
in full, by the Equity Participants pro rata according to their
respective Outstanding Equity Participation
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Amounts in such Lease Supplement or Installation Period at the
time of such payment.
(b) Variable Component of Base Rent. Each payment applied to the
Variable Component of Base Rent of any Lease Supplement (or, if a Lease
Supplement has not been executed with respect to any Installation
Period, such Installation Period) shall be shared among the Participants
as follows: first, to the Tranche A Participants and the Tranche B
Participants pro rata according to the respective Outstanding
Participation Amounts in such Lease Supplement or Installation Period so
funded by such Tranche A Participants and Tranche B Participants; and
second, if any amounts remain after the Tranche A Participants and the
Tranche B Participants have received full payment of the Variable
Component of Base Rent which has accrued with respect to their
respective Outstanding Participation Amounts in such Lease Supplement or
Installation Period, to the Equity Participants pro rata according to
the respective Outstanding Participation Amounts in such Lease
Supplement or Installation Period so funded by such Equity Participants.
(c) Supplemental Rent. Each payment applied to Supplemental Rent
among the Lessor Parties shall be shared among the Lessor Parties as
follows:
(i) Each payment applied to Agent's Fees shall be solely
for the account of Agent.
(ii) Each payment applied to Commitment Fees shall be
shared as follows: first, by the Tranche A Participants and the
Tranche B Participants pro rata according to their respective
Proportionate Shares; and second, if any amounts remain after the
Tranche A Participants and the Tranche B Participants have
received full payment of the Commitment Fees which have accrued
with respect to their respective Commitments, by the Equity
Participants pro rata according to their respective Proportionate
Shares.
(iii) Each payment applied to reimburse any Lessor Party
for any fees, costs and expenses incurred by such Lessor Party
shall be solely for the account of such Lessor Party.
(iv) Each payment of interest and yield pursuant to
Subparagraph 2.07(c) shall be shared among the Lessor Parties
owed the amount upon which such interest accrues pro rata
according to (A) the respective amounts so owed such Lessor
Parties and (B) the dates on which such amounts became owing to
such Lessor Parties.
(v) All other payments under this Agreement and the other
Operative Documents shall be for the benefit of the Person or
Persons specified.
(d) Disproportionate Payments, Etc. If any Participant shall
obtain any payment (whether voluntary, involuntary, through the exercise
of any right of setoff, or
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otherwise) on account of amounts owed to it in excess of its ratable
share of payments on account of such amounts obtained by all
Participants entitled to such payments, such Participant shall forthwith
purchase from the other Participants such participations in the payments
to be made under the Operative Documents as shall be necessary to cause
such purchasing Participant to share the excess payment ratably with
each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Participant,
such purchase shall be rescinded and each other Participant shall repay
to the purchasing Participant the purchase price to the extent of such
recovery together with an amount equal to such other Participant's
ratable share (according to the proportion of (i) the amount of such
other Participant's required repayment to (ii) the total amount so
recovered from the purchasing Participant) of any interest or other
amount paid or payable by the purchasing Participant in respect of the
total amount so recovered. Lessee agrees that any Participant so
purchasing a participation from another Participant pursuant to this
Subparagraph 2.06(d) may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of setoff) with
respect to such participation as fully as if such Participant were the
direct creditor of Lessee in the amount of such participation.
2.07. Other Payment Terms.
(a) Place and Manner of Payments by Lessee. Lessee shall make all
payments due to any Lessor Party under this Agreement and the other
Operative Documents by payments to Agent, for the account of such
Person, at Agent's office, located at the address specified in Paragraph
7.01, with each payment due to a Participant to be for the account of
such Participant's Applicable Participating Office. Lessee shall make
all payments in lawful money of the United States and in same day or
immediately available funds not later than 11:00 a.m. (Chicago time) on
the date due. Agent shall promptly disburse to the appropriate Person
each such payment received by Agent for such Person.
(b) Date. Whenever any payment due under this Agreement or any
other Operative Document shall fall due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day, and
such extension of time shall be included in the computation of Rent,
interest or fees, as the case may be, unless such next Business Day
falls in another calendar month, in which case such payment shall be due
on the immediately preceding Business Day.
(c) Late Payments. If any amounts required to be paid by Lessee
under this Agreement or any other Operative Document (including Rent,
interest, fees or other amounts) remain unpaid after such amounts are
due and after the expiration of any applicable grace period, Lessee
shall pay interest and yield on the aggregate, outstanding balance of
such amounts from the date due until those amounts are paid in full at a
per annum rate equal to the Base Rate plus two percent (2.0%), such rate
to change from time to time as the Base Rate shall change; provided,
however, that, if an Event of Default has occurred and the Rental Rate
applicable to the Outstanding Lease Amount of any Lease Supplement is
being calculated at the Applicable Margin described in the proviso to
the
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definition of "Applicable Margin," this Subparagraph 2.07(c) shall not
apply to late payments applied to the Outstanding Lease Amount of such
Lease Supplement.
(d) Application of Payments. Unless an Event of Default has
occurred and is continuing, Lessee may specify that any payment be
applied to any amount then due and owing under the Operative Documents
in a written notice given to Agent at the time such payment is made.
Upon an Event of Default or if Lessee does not so specify the
application of any payment, payments under this Agreement and the other
Operative Documents shall be applied first to unpaid fees, costs,
expenses and other Supplemental Rent then due and payable under this
Agreement or any other Operative Document, second to the accrued
Variable Component of Base Rent then due and payable under this
Agreement or any other Operative Document and finally to the Fixed
Component of Base Rent or otherwise to reduce the Outstanding Lease
Amount of the Lease Supplements.
(e) Failure to Pay Agent. Unless Agent shall have received notice
from Lessee at least one (1) Business Day prior to the date on which any
payment is due to Lessors or the Participants under this Agreement or
the other Operative Documents that Lessee will not make such payment in
full, Agent may assume that Lessee has made such payment in full to
Agent on such date and Agent may, in reliance upon such assumption,
cause to be distributed to the appropriate Persons on such due date an
amount equal to the amount then due such Persons. If and to the extent
Lessee shall not have so made such payment in full to Agent, each such
Person shall repay to Agent forthwith on demand such amount distributed
to such Person together with interest thereon, for each day from the
date such amount is distributed to such Person until the date such
Person repays such amount to Agent, at (i) the Federal Funds Rate for
the first three (3) days and (ii) the Base Rate plus two percent (2.0%)
thereafter, such rate to change from time to time as the Base Rate shall
change. A certificate of Agent submitted to any Person with respect to
any amounts owing by such Person under this Subparagraph 2.07(e) shall
be conclusive absent manifest error.
2.08. Commitment Reductions.
(a) Reduction or Cancellation of Total Commitment. Lessee may, at
any time prior to the Commitment Termination Date, upon three (3)
Business Days written notice to Agent, permanently reduce the Total
Commitment by the amount of Five Million Dollars ($5,000,000) or an
integral multiple of One Million Dollars ($1,000,000) in excess thereof
or cancel the Total Commitment in its entirety.
(b) Effect of Commitment Reductions. From the effective date of
any reduction of the Total Commitment, the Commitment Fees shall be
computed on the basis of the Total Commitment as so reduced. Once
reduced or cancelled, the Total Commitment may not be increased or
reinstated without the prior written consent of all Lessors and
Participants. Any reduction of the Total Commitment pursuant to this
Paragraph 2.08 shall be applied ratably to reduce each Participant's
Commitment pro rata in accordance with its Proportionate Share.
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2.09. Reallocation of Outstanding Lease Amount upon Renewal. Upon the
exercise by Lessee of any Renewal Option with respect to any Lease Supplement on
the terms and conditions set forth in Subparagraph 2.02(b) of the Lease
Agreement, if required in order to have the Lease Agreement and the other
Operative Documents classified as an operating lease under GAAP, including FASB
13, the Outstanding Lease Amount of such renewed Lease Supplement (after any
payment of the Fixed Component of Base Rent required in order to exercise such
Renewal Option) shall be reallocated among the Tranche A Portion, the Tranche B
Portion and, to the extent necessary or reasonably prudent, the Equity Portion
of such renewed Lease Supplement and the Fixed Component of Base Rent and the
Residual Value Guaranty Amount shall be redetermined for such renewed Lease
Supplement and an amendment to such Lease Supplement setting forth such amounts
shall be executed as approved by Lessee and Lessor Agent; provided, however,
that none of the Equity Portion of such renewed Lease Supplement shall be
reallocated to any Participant which was not an Equity Participant prior to the
exercise of such Renewal Option.
2.10. Nature of the Transactions. Lessee and the Lessor Parties intend
that the transactions evidenced by this Agreement and the other Operative
Documents constitute operating leases pursuant to GAAP, including FASB 13, for
accounting purposes and loans secured by the Property for other purposes,
including federal, state and local income tax purposes and for the purposes of
commercial law and bankruptcy law. Lessee and the Lessor Parties intend that the
Operative Documents have the dual form referred to in the first sentence of this
paragraph, notwithstanding the use of the lease form alone.
(a) Tax Treatment. For purposes of all income, franchise and
other taxes imposed upon or measured by income, Lessee and Lessor
Parties intend that the transactions evidenced by the Operative
Documents shall be treated as loans by the Participants (through
Lessors) to Lessee secured by the Property, with Lessee as owner of the
Property. Lessee and the Lessor Parties shall take reporting positions
on their respective returns, reports and statements which are consistent
with such treatment, unless required to do otherwise by an appropriate
taxing authority after the completion of judicial proceedings at which
Lessee has had a full and complete opportunity to present its position
or after a clearly applicable change in applicable Governmental Rules;
provided, however, that if an appropriate taxing authority or a clearly
applicable change in applicable Governmental Rules requires any Lessor
Party to take such an inconsistent position, such Lessor Party shall
promptly notify Lessee.
(b) Other Legal Treatment. For purposes of commercial law and
bankruptcy law, Lessee and Lessor Parties also intend that the
transactions evidenced by the Operative Documents shall be treated as
loans by the Participants (through Lessors) to Lessee secured by the
Property, with Lessee as owner of the Property. Consistent with such
treatment, Lessee and the Lessor Parties intend that, among other things
for such purposes, (i) the Advances be treated as loans to Lessee by the
Participants (through Lessors); (ii) the Advances be secured by the
Property and the Lessor Parties have the rights and remedies of secured
lenders; (iii) the Variable Component of Base Rent be treated as
interest and yield on the Advances; (iv) Lessee be required to pay on
the Expiration Date for each Lease Supplement only the Residual Value
Guaranty Amount,
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the Indemnity Amount and the other amounts applicable to such Lease
Supplement (or, if a Lease Supplement has not been executed with respect
to any Installation Period, the Advances made during such Installation
Period) required by clause (ii) of Subparagraph 4.06(a) of the Purchase
Agreement if Lessee exercises the Marketing Option in accordance with
the Purchase Agreement (or clause (iii) of Subparagraph 4.06(a) if
Lessors are retaining the Property); and (v) Lessee be required to pay
on the Termination Date the Outstanding Lease Amount of each Lease
Supplement (or, if a Lease Supplement has not been executed with respect
to any Installation Period, the Advances made during such Installation
Period) and all other amounts outstanding under this Agreement and the
other Operative Documents (including amounts required by clause (i) of
Subparagraph 4.06(a) of the Purchase Agreement) if the Lease Agreement
is terminated after an Event of Default occurs under the Lease Agreement
or if Lessee fails to or is otherwise not entitled to exercise the
Marketing Option in accordance with the Purchase Agreement.
(c) No Reliance by Lessee. Lessee acknowledges and agrees that no
Lessor Party has made any representations or warranties to Lessee
concerning the tax, accounting or legal characteristics of the Operative
Documents and that Lessee has obtained and relied upon such tax,
accounting and legal advice concerning the Operative Documents as it
deems appropriate.
2.11. Security and Subordination.
(a) Lessee Obligations.
(i) To the extent that the transactions evidenced by the
Lease Agreement, Purchase Agreement and other Operative Documents
are treated as loans by the Participants (through Lessors) to
Lessee secured by the Property, with Lessee as owner of the
Property pursuant to Paragraph 2.10, the Lessee Obligations shall
be secured by the Property Collateral as provided in Paragraph
2.06 of the Lease Agreement.
(ii) In addition to the Property Collateral, the Lessee
Obligations shall be secured by the Cash Collateral that is the
portion of any Acquisition Advance equal to the aggregate Unpaid
Acquisition Prices of the Equipment purchased with such
Acquisition Advance which is disbursed to Lessor Agent and that
continues to be held as Cash Collateral until it is to be
disbursed in accordance with the Lease Agreement.
(iii) Lessee shall deliver to Agent such additional
security agreements, pledge agreements, lessor consents and
estoppels (containing appropriate mortgagee and lender protection
language) and other instruments, agreements, certificates,
opinions and documents (including Uniform Commercial Code
financing statements and fixture filings and landlord waivers) as
Agent may reasonably request to (A) grant, perfect, maintain,
protect and evidence security interests in favor of Lessors for
the benefit of the Lessor Parties in the Property
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Collateral and Cash Collateral prior to the Liens or other
interests of any Person, except in the case of Property
Collateral for Permitted Property Liens; and (B) otherwise
establish, maintain, protect and evidence the rights provided to
Lessors and Agent in the Property Collateral. Lessee shall
cooperate in all commercially reasonable respects with Agent and
perform all additional acts reasonably requested by Agent to
effect the purposes of this Subparagraph 2.11(a)(iii).
(iv) The Lessee Obligations arising under this Agreement
and the other Operative Documents shall be "Designated Senior
Debt" for the purposes of any indenture or other document
creating or evidencing Subordinated Debt and such Subordinated
Debt shall be subordinated to the Lessee Obligations on terms no
more favorable to the holders of Subordinated Debt than those
attached as Exhibit I hereto.
(b) Lessor Obligations.
(i) The Lessor Obligations shall be secured by a Security
Agreement in the form of Exhibit F, duly executed by Lessors and
Lessor Agent (the "Lessor Security Agreement").
(ii) Lessors and Lessor Agent shall deliver to Agent such
additional security agreements, pledge agreements, lessor
consents and estoppels (containing appropriate mortgagee and
lender protection language) and other instruments, agreements,
certificates, opinions and documents (including Uniform
Commercial Code financing statements and fixture filings and
landlord waivers) as Agent may reasonably request to (A) grant,
perfect, maintain, protect and evidence security interests in
favor of Agent in Lessors' rights in the Property Collateral and
Cash Collateral prior to the Liens or other interests of any
Person; and (B) otherwise establish, maintain, protect and
evidence the rights provided to Agent in the Property Collateral
and Cash Collateral. Lessors and Lessor Agent shall cooperate in
all commercially reasonable respects with Agent and perform all
additional acts reasonably requested by Agent to effect the
purposes of this Subparagraph 2.11(b)(ii).
(iii) Lessee hereby consents to the Lessor Security
Agreement, the Liens granted to Agent therein, and all other
Liens granted to Agent in any of the Operative Documents and the
Property to secure the Lessor Obligations.
2.12. Change of Circumstances.
(a) Inability to Determine Rates. If, on or before the first day
of any Rental Period for any Portion, (i) any Participant shall advise
Agent that the LIBOR Rental Rate for such Rental Period cannot be
adequately and reasonably determined due to the unavailability of funds
in or other circumstances affecting the London interbank market or (ii)
any Participant shall advise Agent that the LIBOR Rental Rate for such
Rental
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Period does not adequately and fairly reflect the cost to such
Participant of funding its share of such Portion, Agent shall
immediately give notice of such condition to Lessee, Lessors and the
other Participants. After the giving of any such notice (and until Agent
shall otherwise notify Lessee and Lessors that the circumstances giving
rise to such condition no longer exist), the LIBOR Rental Rate shall be
unavailable and the Rental Rate for each new Rental Period shall be the
Alternate Rental Rate.
(b) Illegality. If, after the date of this Agreement, the
adoption of any Governmental Rule, any change in any Governmental Rule
or the application or requirements thereof (whether such change occurs
in accordance with the terms of such Governmental Rule as enacted, as a
result of amendment or otherwise), any change in the interpretation or
administration of any Governmental Rule by any Governmental Authority,
or compliance by any Lessor or Participant with any request or directive
(whether or not having the force of law) of any Governmental Authority,
except for any such adoption or change publicly announced prior to the
date of this Agreement (a "Change of Law") shall make it unlawful or
impossible for any Lessor or Participant to fund or maintain its portion
of the Outstanding Lease Amount of any Lease Supplement (or, if a Lease
Supplement has not been executed with respect to any Installation
Period, the Advances made during such Installation Period) at the LIBOR
Rental Rate, such Lessor or Participant shall immediately notify Agent
and Agent shall immediately notify Lessee and the other Lessors and
Participants of such Change of Law. After the giving of any such notice
(and until Agent shall otherwise notify Lessee and Lessors that such
Change of Law is no longer in effect), the LIBOR Rental Rate shall be
unavailable and the Rental Rate for each Rental Period shall be the
Alternate Rental Rate.
(c) Increased Costs. If, after the date of this Agreement, any
Change of Law:
(i) Shall subject any Lessor or Participant to any tax,
duty or other charge with respect to the Outstanding Lease Amount
of any Lease Supplement (or, if a Lease Supplement has not been
executed with respect to any Installation Period, the Advances
made during such Installation Period), or shall change the basis
of taxation of Base Rent payments by Lessee to any Lessor or
Participant under this Agreement or any other Operative Document
(except for changes in the rate of taxation on the overall net
income of any Lessor or Participant that exceed the rate of
taxation that would have been imposed had the transactions
contemplated by the Operative Documents been characterized as
loans); or
(ii) Shall impose, modify or hold applicable any reserve
(excluding any Reserve Requirement or other reserve to the extent
included in the calculation of the LIBOR Rental Rate), special
deposit or similar requirement against assets held by, deposits
or other liabilities in or for the account of, advances or loans
by, or any other acquisition of funds by any Lessor or
Participant for its portion of the Outstanding Lease Amount of
any Lease Supplement (or, if a Lease Supplement has not been
executed with respect to any Installation Period, the Advances
made during such Installation Period); or
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(iii) Shall impose on any Lessor or Participant any other
condition related to the Outstanding Lease Amount of any Lease
Supplement (or, if a Lease Supplement has not been executed with
respect to any Installation Period, the Advances made during such
Installation Period), the Base Rent payable with respect thereto
or such Lessor's or Participant's commitments hereunder;
And the effect of any of the foregoing is to increase the cost to such
Lessor or Participant of funding or maintaining its portion of the
Outstanding Lease Amount of any Lease Supplement or Installation Period
or commitments or to reduce any amount receivable by such Lessor or
Participant hereunder; then Lessee shall from time to time within twenty
(20) days after written demand by such Lessor or Participant, pay to
such Lessor or Participant additional amounts sufficient to reimburse
such Lessor or Participant for such increased costs or to compensate
such Lessor or Participant for such reduced amounts; provided, however,
that Lessee shall have no obligation to make any payment to any
demanding party under this Subparagraph 2.12(c) on account of any such
increased costs or reduced amounts relating to any Rental Period that
ended more than six (6) months prior to such demanding party's first
demand for payment (or, if any increased costs or reduced amounts do not
relate to a particular Rental Period, on account of any such increased
costs or reduced amounts about which the demanding party first knew or
should have known more than six (6) months prior to its first demand for
payment). A certificate setting forth in reasonable detail the amount of
such increased costs or reduced amounts, submitted by such Lessor or
Participant to Lessee shall constitute prima facie evidence of such
costs or amounts. The obligations of Lessee under this Subparagraph
2.12(c) shall survive the payment and performance of the Lessee
Obligations and the termination of this Agreement.
(d) Capital Requirements. If any Lessor or Participant determines
that (i) any Change of Law occurring after the date of this Agreement
affects the amount of capital required to be maintained by such Person
or any other Person controlling such Person (a "Capital Adequacy
Requirement") and (ii) the amount of capital maintained by such Person
or such other Person which is attributable to or based upon the
Advances, the commitments or this Agreement must be increased as a
result of such Change of Law (taking into account such Person's or such
other Person's policies with respect to capital adequacy), Lessee shall
pay to such Person or such other Person, within twenty (20) days after
written demand of such Person, such amounts as such Person or such other
Person reasonably shall determine are necessary to compensate such
Person or such other Person for the increased costs to such Person or
such other Person of such increased capital; provided, however, that
Lessee shall have no obligation to make any payment to any demanding
party under this Subparagraph 2.12(d) on account of any such increased
costs relating to any Rental Period that ended more than twelve (12)
months prior to such demanding party's first demand for payment (or, if
any increased costs do not relate to a particular Rental Period, on
account of any such increased costs about which the demanding party
first knew or should have known more than twelve (12) months prior to
its first demand for payment). A certificate of any Lessor or
Participant setting forth in reasonable detail the computation of any
such increased costs, delivered by such Person to Lessee, shall
constitute prima facie evidence of such increased costs. The obligations
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of Lessee under this Subparagraph 2.12(d) shall survive the payment and
performance of the Lessee Obligations and the termination of this
Agreement.
(e) Mitigation. If any Lessor or Participant becomes aware of (i)
any Change of Law which will make it unlawful or impossible for such
Person to fund or maintain its portion of the Outstanding Lease Amount
of any Lease Supplement or Installation Period at the LIBOR Rental Rate
or (ii) any Change of Law or other event or condition which will
obligate Lessee to pay any amount pursuant to Subparagraph 2.12(c) or
Subparagraph 2.12(d), such Person shall notify Lessee and Agent thereof
as promptly as practical. If any Person has given notice of any such
Change of Law or other event or condition and thereafter becomes aware
that such Change of Law or other event or condition has ceased to exist,
such Person shall notify Lessee and Agent thereof as promptly as
practical. Each Person affected by any Change of Law which makes it
unlawful or impossible for such Person to fund or maintain its portion
of the Outstanding Lease Amount of any Lease Supplement or Installation
Period at the LIBOR Rental Rate or to which Lessee is obligated to pay
any amount pursuant to Subparagraph 2.12(c) or Subparagraph 2.12(d)
shall use reasonable commercial efforts (including changing the
jurisdiction of its Applicable Participating Office) to avoid the effect
of such Change of Law or to avoid or materially reduce any amounts which
Lessee is obligated to pay pursuant to Subparagraph 2.12(c) or
Subparagraph 2.12(d) if, in the reasonable opinion of such Person, such
efforts would not adversely affect such Person or be contrary to such
Person's normal banking practices.
2.13. Taxes on Payments.
(a) Payments Free of Taxes. All payments made by Lessee under
this Agreement and the other Operative Documents shall be made free and
clear of, and without deduction or withholding for or on account of, any
present or future Indemnified Taxes, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority. If any
Indemnified Taxes are required to be withheld from any amounts payable
to any Lessor Party hereunder or under the other Operative Documents,
the amounts so payable to such Lessor Party shall be increased to the
extent necessary to yield to such Lessor Party (after payment of all
Indemnified Taxes) the Base Rent or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and
the other Operative Documents. Whenever any Indemnified Taxes are
payable by Lessee, as promptly as possible thereafter, Lessee shall send
to Agent for its own account or for the account of such Lessor or
Participant, as the case may be, a certified copy of an original
official receipt received by Lessee showing payment thereof. If Lessee
fails to pay any Indemnified Taxes when due to the appropriate taxing
authority or fails to remit to Agent the required receipts or other
required documentary evidence, Lessee shall indemnify the Lessor Parties
for any incremental taxes, interest or penalties that may become payable
by the Lessor Parties as a result of any such failure. The obligations
of Lessee under this Subparagraph 2.13(a) shall survive the payment and
performance of the Lessee Obligations and the termination of this
Agreement.
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(b) Withholding Exemption Certificates. On or prior to the date
any Lessor or Participant becomes a party to this Agreement, any such
Lessor or Participant which is not organized under the laws of the
United States of America or a state thereof shall deliver to Lessee and
Agent two duly completed copies of United States Internal Revenue
Service Form W-8BEN or W-8ECI (or successor applicable form), as the
case may be, certifying in each case that such Lessor or Participant, as
the case may be, is entitled to receive payments under this Agreement
and the other Operative Documents without deduction or withholding of
any United States federal income taxes. Each Person which delivers to
Lessee and Agent a Form W-8BEN or W-8ECI pursuant to the immediately
preceding sentence further undertakes to deliver to Lessee and Agent two
further copies of Form W-8BEN or W-8ECI (or successor applicable forms),
or other manner of certification or procedure, as the case may be, on or
before the date that any such form expires or becomes obsolete or after
the occurrence of any event requiring a change in the most recent form
previously delivered by it to Lessee and Agent, and such extensions or
renewals thereof as may reasonably be requested by Lessee or Agent,
certifying in the case of a Form W-8BEN or W-8ECI that such Person is
entitled to receive payments under this Agreement and the other
Operative Documents without deduction or withholding of any United
States federal income taxes, unless in any such cases an event
(including without limitation any change in treaty, law or regulation)
has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which
would prevent a Lessor or Participant from duly completing and
delivering any such form with respect to it and such Lessor or
Participant advises Lessee and Agent that it is not capable of receiving
payments without any deduction or withholding of United States federal
income tax.
(c) Mitigation. If any Lessor Party claims any additional amounts
to be payable to it pursuant to this Paragraph 2.13, such Lessor Party
shall use reasonable commercial efforts to file any certificate or
document requested in writing by Lessee (including copies of Internal
Revenue Service Form W-8BEN (or successor forms) reflecting a reduced
rate of withholding) or to change the jurisdiction of its Applicable
Participating Office if the making of such a filing or such change in
the jurisdiction of its Applicable Participating Office would avoid the
need for or materially reduce the amount of any such additional amounts
which may thereafter accrue and if, in the reasonable opinion of a
Participant, in the case of a change in the jurisdiction of its
Applicable Participating Office, such change would not adversely affect
such Person or be contrary to such Person's normal banking practices.
(d) Tax Returns. Nothing contained in this Paragraph 2.13 shall
require any Lessor Party to make available any of its tax returns (or
any other information relating to its taxes which it deems to be
confidential).
2.14. Funding Loss Indemnification. If (a) Lessee shall pay any Portion
of the Outstanding Lease Amount of any Lease Supplement (or, if a Lease
Supplement has not been executed with respect to any Installation Period, the
Advances made during such Installation Period) on any day other than the last
day of a Rental Period therefor (whether an optional payment, a mandatory
payment or otherwise), (b) Lessee shall cancel or otherwise fail to
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consummate any Advance Request which has been delivered to Agent (whether as a
result of the failure to satisfy any applicable conditions or otherwise) or (c)
at the request of Lessee, any affected Participant shall be replaced pursuant to
clause (d) or (e) of Paragraph 2.15 on any day other than the last day of a
Rental Period for the Outstanding Participation Amount being assigned to a
replacement Participant, Lessee shall, within twenty (20) days after written
demand by any Lessor or Participant, reimburse such Person for and hold such
Person harmless from all reasonable costs and losses incurred by such Person as
a result of such payment, cancellation or failure; provided, however, that
Lessee shall have no obligation to make any payment to any demanding Person
under this Paragraph 2.14 on account of any such costs or losses unless Lessee
receives notice of such costs and losses from the demanding Person within six
(6) months after they are incurred or realized. Lessee understands that such
costs and losses may include, without limitation, losses incurred by a Lessor or
Participant as a result of funding and other contracts entered into by such
Person to fund its portion of the Outstanding Lease Amount (or, if a Lease
Supplement has not been executed with respect to any Installation Period, the
Advances made during such Installation Period) of any Lease Supplement or
Installation Period. Each Person demanding payment under this Paragraph 2.14
shall deliver to Lessee, with a copy to Agent, a certificate setting forth the
amount of costs and losses for which demand is made, which certificate shall set
forth in reasonable detail the calculation of the amount demanded. Such a
certificate so delivered to Lessee shall constitute prima facie evidence of such
costs and losses. The obligations of Lessee under this Paragraph 2.14 shall
survive the payment and performance of the Lessee Obligations and the
termination of this Agreement.
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2.15. Replacement of Participants. If any Participant shall (a) become a
Defaulting Participant more than one (1) time in a period of twelve (12)
consecutive months, (b) continue as a Defaulting Participant for more than five
(5) Business Days at any time, (c) deliver, pursuant to Subparagraph 2.12(a), a
notice that any LIBOR Rental Rate cannot be adequately and reasonably determined
or that any LIBOR Rental Rate does not adequately and fairly reflect the cost to
such Participant of funding its share of any Portion and such a notice is not
delivered by any other Participant, (d) deliver, pursuant to Subparagraph
2.12(b), a notice of a Change of Law which does not affect any other
Participant, or (e) demand any payment under Subparagraph 2.12(c), 2.12(d) or
2.13(a) for a reason which is not applicable to any other Participant, then
Agent may (or upon the written request of Lessee if no Event of Default has
occurred and is continuing, shall) replace such Participant (the "affected
Participant"), or cause such affected Participant to be replaced, with another
financial institution (the "replacement Participant") satisfying the
requirements of an Eligible Assignee under Subparagraph 7.05(b), by having the
affected Participant sell and assign all of its rights and obligations under
this Agreement and the other Operative Documents to the replacement Participant
pursuant to Subparagraph 7.05(b); provided, however, that if Lessee seeks to
exercise such right, it must do so within sixty (60) days after it first
receives notice of the event, condition or demand giving rise to such right, and
no Lessor Party shall have any obligation to identify or locate a replacement
Participant for Lessee. Upon receipt by any affected Participant of a written
notice from Agent stating that Agent is exercising the replacement right set
forth in this Paragraph 2.15, such affected Participant shall sell and assign
all of its rights and obligations under this Agreement and the other Operative
Documents to the replacement Participant pursuant to an Assignment Agreement and
Subparagraph 7.05(b) for a purchase price equal to the sum of its portion of the
Outstanding Lease Amount of each Lease Supplement (or, if a Lease Supplement has
not been executed with respect to any Installation Period, the Advances made
during such Installation Period), the accrued and unpaid portion of the Base
Rent relating to such portion, all amounts payable under Paragraph 2.14, and its
ratable share of all fees to which it is entitled.
SECTION 3. CONDITIONS PRECEDENT.
3.01. Initial Acquisition Advance. The obligations of Lessors to
purchase Property with the Initial Acquisition Advance (and the obligations of
the Participants to fund their respective Proportionate Shares of the Initial
Acquisition Advance) are subject to receipt by Agent, on or prior to the Closing
Date, of each item listed in Schedule 3.01, each in form and substance
reasonably satisfactory to Agent, and with sufficient copies for, Agent and each
Lessor and Participant.
3.02. Additional Acquisition Advances. The obligations of Lessors to
make each Additional Acquisition Advance (and the obligations of the
Participants to fund their respective Proportionate Shares of such Additional
Acquisition Advance) are subject to satisfaction of the conditions set forth in
Paragraph 3.01 and Schedule 3.01 (unless such conditions were previously
satisfied at the time of the Initial Acquisition Advance or have been
permanently waived) and receipt by Agent, on or prior to the date of such
Additional Acquisition Advance, of each of the following, each in form and
substance reasonably satisfactory to Agent, and with sufficient copies for,
Agent and each Lessor and Participant:
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(a) An Additional Advance Request, appropriately completed, duly
executed and delivered by Lessee in accordance with Subparagraph
2.03(b);
(b) Bills of sale for all Property to be purchased with the
proceeds of such Additional Acquisition Advance, identifying such
Property by Supplier, model, serial number, delivery date, internal
order number, Acquisition Price and the Property Site where such
Property will be installed and showing Lessors as purchaser;
(c) Such Uniform Commercial Code financing statements and fixture
filings, or amendments to the Uniform Commercial Code financing
statements and fixture filings previously filed, for filing in such
jurisdictions as Agent may reasonably request to perfect the Liens
created in such Property in favor of the Lessor Parties pursuant to the
Operative Documents;
(d) Such Uniform Commercial Code releases and other documents,
instruments and agreements as Agent may reasonably request to release or
evidence the release of any Lien the Suppliers or any other Person had
in such Property (other than any Permitted Property Liens); and
(e) If the Property to be purchased with the proceeds of such
Additional Acquisition Advance was not included in the Closing Date
Appraisal, an Appraisal of such Property on or as of a recent date prior
to such Additional Acquisition Advance that assesses at that time (i)
the Fair Market Value and remaining useful life of such Property on such
date and (ii) the Fair Market Value and remaining useful life of such
Property on the original Scheduled Expiration Date for the Lease
Supplement in which such Property will be included and each subsequent
Scheduled Expiration Date assuming such Scheduled Expiration Date is
extended by the exercise of each Renewal Option.
3.03. Expense Advances. The obligations of Lessors to make each Expense
Advance (and the obligations of the Participants to fund their respective
Proportionate Shares of such Advance) are subject to (a) satisfaction of the
conditions set forth in Paragraph 3.01 and Schedule 3.01 (unless such conditions
were previously satisfied at the time of the Initial Acquisition Advance or have
been permanently waived) and (b) receipt by Agent pursuant to Subparagraph
2.03(a) of the Initial Advance Request (in the case of any Expense Advance
requested to be made on the Closing Date) or receipt by Agent pursuant to
Subparagraph 2.03(b) of the Additional Advance Request (in the case of any
Expense Advance requested to be made after the Closing Date), each such Advance
Request appropriately completed and duly executed by Lessee.
3.04. Other Conditions Precedent. The occurrence of each Credit Event
(including the making of each Advance by Lessors and the funding of each Advance
by the Participants) is subject to the further conditions that, on the date such
Credit Event is to occur and after giving effect to such Credit Event, the
following shall be true and correct:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 and in the other Operative Documents are true and correct
in all material respects as if
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made on such date (except for representations and warranties expressly
made as of a specified date, which shall be true as of such date); and
(b) No Default has occurred and is continuing or will result from
such Credit Event.
The submission by Lessee to Agent of each Advance Request, Notice of Rental
Period Selection, Notice of Renewal Option Exercise, Notice of Partial Purchase
Option Exercise, Notice of Term Purchase Option Exercise and Notice of Marketing
Option Exercise shall be deemed to be a representation and warranty by Lessee
that each of the statements set forth above in this Paragraph 3.04 is true and
correct as of the date of such request and notice.
3.05. Covenant to Deliver. Unless a condition is waived by Agent, Lessee
agrees (not as a condition but as a covenant) to deliver to Agent each item
required to be delivered to Agent as a condition to each Advance if such Advance
is made. Lessee expressly agrees that the making of any Advance prior to the
receipt by Agent of any such item shall not constitute a waiver by Agent or any
Lessor or Participant of Lessee's obligation to deliver such item, unless
expressly waived in writing by Agent.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
4.01. Lessee's Representations and Warranties. In order to induce the
Lessor Parties to enter into this Agreement and the other Operative Documents to
which they are parties, Lessee hereby represents and warrants to the Lessor
Parties as follows:
(a) Organization and Powers. Each of Lessee and its Significant
Subsidiaries is a corporation or partnership duly organized or formed,
as the case may be, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or formation, is qualified to
do business and is in good standing in each jurisdiction in which the
failure so to qualify or be in good standing would result in a Material
Adverse Effect and has all requisite power and authority to own its
assets and carry on its business and, with respect to Lessee, to
execute, deliver and perform its obligations under the Operative
Documents.
(b) Authorization: No Conflict. The execution, delivery and
performance by Lessee of the Operative Documents to which it is a party
have been duly authorized by all necessary corporate action of Lessee
and do not and will not (i) contravene the terms of the certificate or
articles, as the case may be, of incorporation and the bylaws of Lessee
or result in a breach of or constitute a material default under any
material Contractual Obligation to which Lessee is a party or by which
it or its properties may be bound or affected; or (ii) violate in any
material respect any provision of Governmental Rule binding on or
affecting Lessee.
(c) Binding Obligation. The Operative Documents to which Lessee
is a party constitute, or when delivered under this Agreement will
constitute, legal, valid and
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binding obligations of Lessee, enforceable against Lessee in
accordance with their respective terms, except to the extent the
enforceability thereof would be subject to bankruptcy, insolvency,
receivership or similar laws providing relief from creditors, or
principles of equity generally.
(d) Governmental Consents. No authorization, consent, approval,
license, exemption of, or filing or registration with, any Governmental
Authority, or approval or consent of any other Person, is required for
the due execution, delivery or performance by Lessee of any of the
Operative Documents.
(e) No Defaults. Neither Lessee nor any of its Significant
Subsidiaries is in default under any material Contractual Obligation or
Governmental Rule to which it is a party or by which it or its
properties may be bound which, individually or together with all such
defaults, could reasonably be expected to have a Material Adverse
Effect.
(f) Title to Properties. Lessee and each Significant Subsidiary
has good record and marketable title in fee simple to, or valid
leasehold interests in, all real property necessary or used in the
ordinary conduct of their respective businesses, except for such defects
in title as could not, individually or in the aggregate, have a Material
Adverse Effect. The property of Lessee and its Significant Subsidiaries
is subject to no Liens, other than Liens permitted under Subparagraph
5.04(a).
(g) Litigation. Except as set forth in Schedule 4.01(g), there
are no actions, suits or proceedings pending or, to the best of Lessee's
knowledge, threatened against or affecting Lessee or any of its
Significant Subsidiaries or the properties of Lessee or any of its
Significant Subsidiaries before any Governmental Authority or arbitrator
which is likely to be determined adversely to Lessee or any such
Subsidiary and would be reasonably likely to result in a Material
Adverse Effect.
(h) Compliance with Consents and Licenses. Every consent required
by Lessee or any Significant Subsidiary (including those required under
or pursuant to any Environmental Law) in connection with the conduct of
its business and the ownership, use, exploitation or occupation of its
property and assets has been obtained and is in full force and effect
and there has not been any default in the observance of the conditions
and restrictions (if any) imposed in, or in connection with, any of the
same, except where the failure to obtain any of the foregoing would not
reasonably be expected to have a Material Adverse Effect.
(i) Compliance with Environmental Law. Except as set forth in
Schedule 4.01(i), to the best of Lessee's knowledge after due
investigation, (i) the properties of Lessee and its Subsidiaries do not
contain and have not previously contained (at, under, or about any such
property) any Hazardous Substances or other contamination (A) in amounts
or concentrations that constitute or constituted a violation of, or
could give rise to liability under, any Environmental Laws, in either
case where such violation or liability could reasonably be expected to
result in a Material Adverse Effect, (B) which could interfere with the
continued operation of such property, or (C) which could
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materially impair the fair market value thereof; and (ii) there
has been no transportation or disposal of Hazardous Substances from, nor
any release or threatened release of Hazardous Substances at or from,
any property of Lessee or any of its Subsidiaries in violation of or in
any manner could give rise to liability under any Environmental Laws,
where such violation or liability, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.
(j) Governmental Regulation. Neither Lessee nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Investment Company Act
of 1940, the Interstate Commerce Act, any state public utilities code or
any other federal or state statute or regulation limiting its ability to
incur Indebtedness.
(k) ERISA.
(i) Except as specifically disclosed to the Lessor Parties
in writing prior to the date of this Agreement: (A) each Plan is
in compliance in all material respects with the applicable
provisions of ERISA, the IRC and other Governmental Rules; (B)
there are no pending, or to the best knowledge of Lessee,
threatened, claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has
resulted or could reasonably be expected to result in a Material
Adverse Effect; (C) there has been no prohibited transaction or
other violation of the fiduciary responsibility rule with respect
to any Plan which could reasonably result in a Material Adverse
Effect; (D) no ERISA Event has occurred or is reasonably expected
to occur with respect to any Pension Plan; (E) no Pension Plan
has any Unfunded Pension Liability; (F) Lessee has not incurred,
nor does it reasonably expect to incur, any liability under Title
IV of ERISA with respect to any Pension Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (G) no trade
or business (whether or not incorporated under common control
with Lessee within the meaning of Section 414(b), (c), (m) or (a)
of the IRC) maintains or contributes to any Pension Plan or other
Plan subject to Section 412 of the IRC; and (H) neither Lessee
nor any entity under common control with Lessee in the preceding
sentence has ever contributed to any Multiemployer Plan.
(ii) All employer and employee contributions required by
any applicable Governmental Rule in connection with all Foreign
Plans have been made, or, if applicable, accrued, in accordance
with the country-specific accounting practices. The fair market
value of the assets of each funded Foreign Plan, the liability of
each insurer for any Foreign Plan funded through insurance or the
book reserve established for any Foreign Plan, together with any
accrued contributions, is sufficient to procure or provide for
the accrued benefit obligations, as of the date hereof, with
respect to all current and former participants in such Foreign
Plan according to the actuarial assumptions and valuations most
recently used to determine employer contributions to such Foreign
Plan, which actuarial assumptions are commercially reasonable.
Each
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Foreign Plan required to be registered has been registered
and has been maintained in good standing with applicable
Governmental Authorities. Each Foreign Plan reasonably complies
in all material respects with all applicable Governmental Rules.
(l) Significant Subsidiaries. The name and ownership of each
Significant Subsidiary of Lessee on the date of this Agreement is as set
forth in Schedule 4.01(l). All of the outstanding capital stock of, or
other interest in, each such Significant Subsidiary has been validly
issued, and is fully paid and nonassessable.
(m) Margin Regulations. Lessee is not engaged in the business of
extending credit for the purpose of purchasing or carrying "margin
stock" (within the meaning of Regulation U of the FRB). No part of the
proceeds of the Advances will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock.
(n) Taxes. Lessee and its Significant Subsidiaries have filed all
Federal and other material tax returns and reports required to be filed,
and have paid all Federal and other material taxes, assessments, fees
and other Governmental Charges levied or imposed upon them or their
properties, income or assets otherwise due and payable, except those
which are being contested in good faith by appropriate proceedings and
for which adequate reserves have been provided in accordance with GAAP.
There is no proposed tax assessment against Lessee or any Significant
Subsidiary except those for which adequate reserves have been provided
in accordance with GAAP.
(o) Patents and Other Rights. Each of Lessee and its Significant
Subsidiaries possesses all permits, franchises, licenses, patents,
trademarks, trade names, service marks, copyrights and all rights with
respect thereto, free from maintenance and operation of its business,
except where the failure to obtain any of the foregoing would not
reasonably be expected to have a Material Adverse Effect.
(p) Insurance. The properties of Lessee and its Significant
Subsidiaries are insured against losses and damages of the kinds and in
amounts which are deemed prudent by Lessee in its reasonable business
judgment and within the general parameters customary among similarly
situated businesses in the industry, and such insurance is maintained
with financially sound and reputable insurance companies or pursuant to
a plan or plans or self-insurance to such extent as is usual for
companies of similar size engaged in the same or similar businesses and
owning similar properties.
(q) Financial Statements. The audited Financial Statements of
Lessee and its Subsidiaries for the fiscal year ended in December 1999,
are complete and correct and fairly present the financial condition of
Lessee and its Subsidiaries as at such date and the results of
operations of Lessee and its Subsidiaries for the period covered by such
statements, in each case in accordance with GAAP consistently applied.
Since the last day of the fiscal year ended in December 1999, there has
been no Material Adverse Effect.
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(r) Liabilities. Neither Lessee nor any of its Significant
Subsidiaries has any material liabilities, fixed or contingent, that are
not reflected in the Financial Statements referred to in Subparagraph
4.01(q), in the notes thereto or otherwise disclosed in writing to the
Lessor Parties, other than liabilities arising in the ordinary course of
business since December 31, 1999.
(s) Labor Disputes. Etc. There are no strikes, lockouts or other
labor disputes against Lessee or any of its Significant Subsidiaries,
or, to the best of Lessee's knowledge, threatened against or affecting
Lessee or any of its Significant Subsidiaries, which may result in a
Material Adverse Effect.
(t) Solvency. Lessee and its Subsidiaries on a consolidated
basis are Solvent.
(u) The Property.
(i) Prior to or as of the date of each Acquisition
Advance, Lessee (A) selected the Suppliers from which the
Property was to be acquired with such Acquisition Advance, (B)
selected the Property to be acquired with such Acquisition
Advance from such Suppliers (including the determination of
Lessee's needs and the fitness of the Property for such needs),
(C) negotiated and executed Acquisition Agreements for the
purchase of such Property, (D) either purchased such Property or
assigned the Acquisition Agreement for such Property to Lessors
by an assignment agreement in form and substance satisfactory to
Lessor Agent, (E) arranged for the delivery and installation of
such Property at a Property Site, (F) received delivery of all of
such Property at such Property Site, and (G) paid the Paid
Acquisition Price portion (if any) of the Acquisition Price
indicated for each item of Equipment as set forth in the Advance
Request for such Acquisition Advance. The Unpaid Acquisition
Price for each item of Equipment to be purchased with an
Acquisition Advance is set forth in the Advance Request for such
Acquisition Advance.
(ii) At the time any Property is sold by Lessee to
Lessors, Lessee will have (A) good and valid title to such
Property, free and clear of all Liens and all other interests of
other Persons other than Lessor Liens, and (B) full right and
power, without the consent or approval of any other Person, to
(1) use the Property itself and (2) sell or lease the Property to
any other Person.
(iii) At the time any Property is purchased by Lessors
from any Supplier as requested by Lessee in any Advance Request,
Lessors will acquire good and valid title to such Property, free
and clear of all Liens and all other interests of other Persons
(except for the interests of Lessee and Lessor Liens).
(iv) Prior to or as of the date of any Acquisition
Advance, (A) all of the Property to be purchased with such
Acquisition Advance will have been delivered to Lessee at the
Property Site specified in the Advance Request for such
Acquisition Advance and not been removed by Lessee from such
Property Site,
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(B) none of such Property will have been attached to such
Property Site or any other real property in a manner that would
cause such Property to constitute real property, and (C) no
Person having any interest in such Property Site has any Lien or
ownership or other interest in such Property.
(v) All of the Property complies in all material respects
with all applicable Governmental Rules and Insurance
Requirements.
(v) Chief Executive Office. Lessee's chief executive office is
located at 1551 McCarthy Boulevard, Milpitas, California 95035, or such
other location to which Lessee has Lessee has relocated its chief
executive office in accordance with Subparagraph 5.02(i).
(w) Disclosure. None of the representations or warranties made by
Lessee in the Operative Documents as of the date of such representations
and warranties, and none of the statements contained in any exhibit,
report, statement or certificate furnished by or on behalf of Lessee or
any of its Subsidiaries to any of the Lessor Parties in connection with
the Operative Documents, contains any untrue statement of a material
fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading in any material
respect as of the time when made or delivered.
Lessee shall be deemed to have reaffirmed, for the benefit of the Lessor
Parties, each representation and warranty contained in this Paragraph 4.01 on
and as of the date of each Credit Event (except for representations and
warranties expressly made as of a specified date, which shall be true in all
material respects as of such date).
4.02. Lessors' Representations and Warranties. In order to induce
Lessee, Agent and the Participants to enter into this Agreement and the other
Operative Documents to which they are parties, each Lessor hereby represents and
warranties to Lessee, Agent and the Participants as follows:
(a) Due Incorporation, Qualification, etc. Such Lessor (i) is
duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization and (ii) has the power and authority to
own, lease and operate its properties and carry on its business as now
conducted and as contemplated herein.
(b) Authority. The execution, delivery and performance by such
Lessor of each Operative Document executed, or to be executed, by such
Lessor and the consummation of the transactions contemplated thereby (i)
are within the power of such Lessor and (ii) have been duly authorized
by all necessary actions on the part of such Lessor.
(c) Enforceability. Each Operative Document executed, or to be
executed, by such Lessor has been, or will be, duly executed and
delivered by such Lessor and constitutes, or will constitute, a legal,
valid and binding obligation of such Lessor,
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enforceable against such Lessor in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights generally
and general principles of equity.
(d) Non-Contravention. The execution and delivery by such Lessor
of the Operative Documents executed by such Lessor and the performance
and consummation of the transactions contemplated thereby do not (i)
violate any provision of any Governmental Rule binding on or affecting
such Lessor; (ii) contravene the terms of any charter, bylaws or other
organizational documents of such Lessor or result in the breach or the
acceleration of, or entitle any other Person to accelerate (whether
after the giving of notice or lapse of time or both), any Contractual
Obligation of such Lessor; or (iii) result in the creation or imposition
of any Lien (or the obligation to create or impose any Lien) upon any
property, asset or revenue of such Lessor (except such Liens as may be
created in favor of any Lessor Party pursuant to this Agreement or the
other Operative Documents).
(e) Approvals. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Authority
or other Person (including, without limitation, the shareholders of any
Person) is required in connection with the execution and delivery of the
Operative Documents executed by such Lessor and the performance and
consummation of the transactions contemplated thereby, except such as
have been made or obtained and are in full force and effect.
(f) Litigation. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending
or, to the knowledge of such Lessor, threatened against such Lessor at
law or in equity in any court or before any other Governmental Authority
which (i) is reasonably likely (alone or in the aggregate) to impair or
adversely affect the Property or materially and adversely affect the
ability of such Lessor to perform its obligations under the Operative
Documents to which it is a party or (ii) seeks to enjoin, either
directly or indirectly, the execution, delivery or performance by such
Lessor of the Operative Documents or the transactions contemplated
thereby.
(g) Other Regulations. Such Lessor is not subject to regulation
under the Investment Company Act of 1940, the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act,
any state public utilities code or to any other Governmental Rule
limiting its ability to incur indebtedness.
(h) Chief Executive Office. Such Lessor's chief executive office
(if such Lessor is organized in the United States) or major executive
office in the United States (if such Lessor is organized outside the
United States) is located at the location listed in Schedule I.
4.03. Participants' Representations and Warranties. In order to induce
Lessee, Lessors and Agent to enter into this Agreement and the other Operative
Documents to which they are
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parties, each Participant hereby represents and warranties to Lessee,
Lessors and Agent as follows:
(a) Due Incorporation, Qualification, etc. Such Participant (i)
is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and (ii) has the
power and authority to own, lease and operate its properties and carry
on its business as now conducted and as contemplated herein.
(b) Authority. The execution, delivery and performance by such
Participant of each Operative Document executed, or to be executed, by
such Participant and the consummation of the transactions contemplated
thereby (i) are within the power of such Participant and (ii) have been
duly authorized by all necessary actions on the part of such
Participant.
(c) Enforceability. Each Operative Document executed, or to be
executed, by such Participant has been, or will be, duly executed and
delivered by such Participant and constitutes, or will constitute, a
legal, valid and binding obligation of such Participant, enforceable
against such Participant in accordance with its terms, except as limited
by bankruptcy, insolvency or other laws of general application relating
to or affecting the enforcement of creditors' rights generally and
general principles of equity.
(d) Non-Contravention. The execution and delivery by such
Participant of the Operative Documents executed by such Participant and
the performance and consummation of the transactions contemplated
thereby do not (i) violate any provision of any Governmental Rule
binding on or affecting such Participant; (ii) contravene the terms of
any charter, bylaws or other organizational documents of such
Participant or result in the breach or the acceleration of, or entitle
any other Person to accelerate (whether after the giving of notice or
lapse of time or both), any Contractual Obligation of such Participant;
or (iii) result in the creation or imposition of any Lien (or the
obligation to create or impose any Lien) upon any property, asset or
revenue of such Participant (except such Liens as may be created in
favor of any Lessor Party pursuant to this Agreement or the other
Operative Documents).
(e) Approvals. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Authority
or other Person (including, without limitation, the shareholders of any
Person) is required in connection with the execution and delivery of the
Operative Documents executed by such Participant and the performance and
consummation of the transactions contemplated thereby, except such as
have been made or obtained and are in full force and effect.
(f) Litigation. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending
or, to the knowledge of such Participant, threatened against such
Participant at law or in equity in any court or before any other
Governmental Authority which (i) is reasonably likely (alone or in the
aggregate) to impair or adversely affect the Property or materially and
adversely affect the ability of such Participant to perform its
obligations under the Operative Documents to which it is a
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party or (ii) seeks to enjoin, either directly or indirectly, the
execution, delivery or performance by such Participant of the Operative
Documents or the transactions contemplated thereby.
(g) Own Account. Such Participant is acquiring its participation
interest hereunder for its own account for investment and not with a
view to any distribution (as such term is used in Section 2(11) of the
Securities Act of 1933) thereof, and, if in the future it should decide
to dispose of its participation interest, it understands that it may do
so only in compliance with the Securities Act of 1933 and the rules and
regulations of the Securities and Exchange Commission thereunder and any
applicable state securities laws.
SECTION 5. COVENANTS.
5.01. Lessee's Affirmative Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following affirmative
covenants, unless Required Participants shall otherwise consent in writing:
(a) Financial Statements and Other Reports. Lessee will furnish
to the Agent in sufficient copies for distribution to the other Lessor
Parties:
(i) As soon as available and in any event within fifty
(50) days after the end of each of the first three fiscal
quarters of each fiscal year, the consolidated Financial
Statements of Lessee and its Subsidiaries for such fiscal
quarter, prepared in accordance with GAAP consistently applied,
all in reasonable detail;
(ii) As soon as available and in any event within one
hundred (100) days after the end of each fiscal year, the
consolidated Financial Statements of Lessee and its Subsidiaries
for such fiscal year, prepared in accordance with GAAP
consistently applied, all in reasonable detail, and accompanied
by a report thereon of PricewaterhouseCoopers LLP or another firm
of independent certified public accountants of recognized
national standing, which report shall be unqualified as to scope
of audit or the status of Lessee and its Subsidiaries as a going
concern;
(iii) Together with the Financial Statements required
pursuant to clauses (i) and (ii) of this Subparagraph 5.01(a), a
compliance certificate of a Responsible Officer of Lessee (a
"Compliance Certificate") which (A) states that such Financial
Statements fairly present the financial condition of Lessee and
its Subsidiaries as at the last day of the fiscal quarter or
fiscal year covered by such Financial Statements and the results
of operations of Lessee and its Subsidiaries for such quarter or
year and have been prepared in accordance with GAAP consistently
applied, subject to normal, year-end audit adjustments in the
case of the Financial Statements for any fiscal quarter; (B)
states that no Default has
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occurred and is continuing, or, if any such Default has
occurred and is continuing, a statement as to the nature thereof
and what action Lessee proposes to take with respect thereto; and
(C) sets forth, for the fiscal quarter or fiscal year covered by
such Financial Statements or as of the last day of such quarter
or year, the calculation of the financial ratios and tests
provided in Paragraph 5.03;
(iv) As soon as available and in any event within fifty
(50) days after the end of each fiscal quarter, a certificate of
a Responsible Officer of Lessee (a "Pricing Ratio Certificate")
which sets forth the calculation of the Pricing Ratio as of the
last day of such quarter;
(v) Promptly after the giving, sending or filing thereof,
copies of all reports, if any, which Lessee or any of its
Subsidiaries sends generally to any class of holders of its
respective capital stock or other securities and of all reports
or filings, if any, by Lessee or any of its Subsidiaries with the
SEC or any national securities exchange;
(vi) Promptly after Lessee has knowledge or becomes aware
thereof, notice of the occurrence or existence of any Default;
(vii) Prompt written notice of any action, event or
occurrence that could reasonably be expected to result in a
Material Adverse Effect due to environmental liability under
Environmental Laws;
(viii) Prompt written notice of all actions, suits and
proceedings before any Governmental Authority or arbitrator
pending, or to the best of Lessee's knowledge, threatened against
or affecting Lessee or any of its Subsidiaries which (A) if
adversely determined would involve an aggregate liability of
$25,000,000 or more in excess of amounts covered by third-party
insurance, or (B) otherwise may have a Material Adverse Effect;
(ix) Promptly after Lessee has knowledge or becomes aware
thereof, (A) notice of the occurrence of any ERISA Event,
together with a copy of any notice of such ERISA Event to the
PBGC, and (B) the details concerning any action taken or proposed
to be taken by the IRS, PBGC, Department of Labor or other Person
with respect thereto;
(x) Promptly upon the commencement or increase of
contributions to, the adoption of, or an amendment to, a Plan by
Lessee or an ERISA Affiliate, if such commencement or increase of
contributions, adoption, or amendment will result in a net
increase in unfunded liability to Lessee or an ERISA Affiliate in
excess of $10,000,000, a calculation of the net increase in
unfunded liability;
(xi) Promptly after filing or receipt thereof by Lessee or
any ERISA Affiliate, copies of the following:
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(A) Any notice received from the PBGC of intent to
terminate or have a trustee appointed to administer any
Pension Plan;
(B) Any notice received from the sponsor of a
Multiemployer Plan concerning the imposition, delinquent
payment, or amount of withdrawal liability;
(C) Any demand by the PBGC under Subtitle D of
Title IV of ERISA; and
(D) Any notice received from the IRS regarding the
disqualification of a Plan intended to qualify under
Section 401(a) of the IRC;
(xii) Within forty-five (45) days of the date thereof, or,
if earlier, on the date of delivery of any Financial Statements
pursuant to clause (i) or (ii) of Subparagraph 5.01(a), notice of
any change in accounting policies or financial reporting
practices by Lessee or any of its Significant Subsidiaries that
is expected to affect (or has affected) materially under U.S.
GAAP the consolidated financial condition of Lessee and its
Subsidiaries;
(xiii) Promptly after the occurrence thereof, notice of
any labor controversy resulting in or threatening to result in
any strike, work stoppage, boycott, shutdown or other material
labor disruption against or involving Lessee or any of its
Subsidiaries which could result in a Material Adverse Effect;
(xiv) Upon the request from time to time of any Lessor
Party (through Agent), the Swap Termination Values, together with
a description of the method by which such values were determined,
relating to any then-outstanding Rate Contracts to which Lessee
or any of its Subsidiaries is party;
(xv) Prompt written notice of any change in Lessee's
fiscal year;
(xvi) Prompt written notice of any Person or Subsidiary
not identified on Schedule 4.01(l) that becomes a Significant
Subsidiary after the date of this Agreement;
(xvii) Prompt written notice of any other condition or
event which has resulted, or that could reasonably be expected to
result, in a Material Adverse Effect; and
(xviii) Such other information respecting the operations,
properties, business or condition (financial or otherwise) of
Lessee or its Significant Subsidiaries as any Lessor Party
(through Agent) may from time to time reasonably request.
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Each notice pursuant to clauses (vi) - (xviii) of this Subparagraph
5.01(a) shall be accompanied by a written statement by a Responsible
Officer of Lessee setting forth details of the occurrence referred to
therein, and stating what action Lessee proposes to take with respect
thereto.
(b) Preservation of Corporate Existence. Etc. Lessee shall and
shall cause each Significant Subsidiary to:
(i) Preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state
or jurisdiction of incorporation or formation, except (A) in
connection with transactions permitted by Paragraph 5.02 and (B)
in the case of any Subsidiary to the extent that the failure to
obtain or maintain the foregoing would not reasonably be expected
to have a Material Adverse Effect;
(ii) Preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits,
licenses and franchises necessary or desirable in the normal
conduct of its business, except to the extent that the failure to
obtain or maintain the foregoing would not reasonably be expected
to have a Material Adverse Effect;
(iii) Use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill,
except in the case of any Significant Subsidiary to the extent
that the failure to obtain or maintain the foregoing would not
reasonably be expected to have a Material Adverse Effect; and
(iv) Preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation
of which could reasonably be expected to have a Material Adverse
Effect.
(c) Payment of Taxes. Etc. Lessee will, and will cause each of
its Significant Subsidiaries to, pay and discharge all material taxes,
fees, assessments and other Governmental Charges imposed upon it or upon
its properties or assets prior to the date on which penalties attach
thereto, and all lawful and material claims for labor, materials and
supplies which, if unpaid, might become a Lien upon any properties or
assets of Lessee or any Significant Subsidiary, except to the extent
such taxes, fees, assessments or other Governmental Charges, or such
claims, are being contested in good faith by appropriate proceedings and
are adequately reserved against in accordance with GAAP.
(d) Licenses. Lessee will, and will cause each of its
Significant Subsidiaries to, obtain and maintain all licenses,
authorizations, consents, filings, exemptions, registrations and other
governmental approvals necessary in connection with the execution,
delivery and performance of the Operative Documents, the consummation of
the transactions therein contemplated or the operation and conduct of
its business and
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ownership of its properties, except to the extent that the
failure to obtain or maintain the foregoing would not reasonably be
expected to have a Material Adverse Effect.
(e) Maintenance of Property. Except as otherwise permitted under
Subparagraph 5.02(c) or Subparagraph 5.02(d), Lessee shall, and shall
cause each Subsidiary to, maintain and preserve all its property which
is used or useful in its business in good working order and condition in
all material respects, ordinary wear and tear excepted.
(f) Insurance. In addition to the insurance requirements set
forth in the Lease Agreement with respect to the Property, Lessee shall
maintain, and shall cause each Significant Subsidiary to maintain, with
financially sound and reputable independent insurers, insurance with
respect to its properties and business against losses and damages of the
kinds and in amounts which are deemed prudent by Lessee in its
reasonable business judgment and within the general parameters customary
among similarly situated businesses in the industry.
(g) Compliance with Laws. Lessee shall comply, and shall cause
each Significant Subsidiary to comply, in all material respects with the
requirements of all Environmental Laws and all applicable laws, rules,
regulations and orders of any Governmental Authority having jurisdiction
over it or its business.
(h) Compliance with ERISA.
(i) Lessee shall, and shall cause each of its ERISA
Affiliates to: (A) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the
IRC and other federal or state law; (B) cause each Plan which is
qualified under Section 401(a) of the IRC to maintain such
qualification; and (C) make all required contributions to any
Plan subject to Section 412 of the IRC.
(ii) Neither Lessee nor any of its Significant
Subsidiaries shall (A) engage in any transaction prohibited by
any Governmental Rule applicable to any Foreign Plan, (B) fail to
make full payment when due of all amounts due as contributions to
any Foreign Plan or (C) otherwise fail to comply with the
requirements of any Governmental Rule applicable to any Foreign
Plan, where singly or cumulatively, the above would be reasonably
likely to have a Material Adverse Effect.
(i) Inspection of Property and Books and Records. Lessee shall
maintain and shall cause each Significant Subsidiary to maintain proper
books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of Lessee and
such Significant Subsidiary. Lessee shall permit, and shall cause each
Significant Subsidiary to permit, representatives and independent
contractors of any Lessor Party to visit and inspect any of their
respective properties, to examine their
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respective corporate, financial and operating records, and make
copies thereof or abstracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective directors,
officers, and independent public accountants, all at the expense of
Lessee and at such reasonable times during normal business hours and as
often as may be reasonably desired, upon reasonable advance notice to
Lessee; provided, however, that (i) unless an Event of Default shall
have occurred and be continuing, (A) Lessee shall be responsible under
this Subparagraph 5.01(i) for the costs and expenses of Agent only, (B)
all inspections, visits, examinations and other actions permitted or
authorized hereunder shall be coordinated only through Lessee, and (C)
physical inspections of the Property and any Property Site shall be made
on two weeks' prior notice and shall occur no more frequently than
semiannually in the case of inspections by Agent and no more frequently
than annually otherwise, and (ii) when an Event of Default exists any
Lessor Party may make any visit, inspection or examination or take any
other action authorized hereunder at the expense of Lessee at any time
during normal business hours, without advance notice and without being
subject to any of the other restrictions described in clause (i).
(j) Use of Proceeds. The proceeds of the Acquisition Advances
shall be used solely to pay the Acquisition Prices and Permitted
Installation Expenses for the Property and the proceeds of the Expense
Advances shall be used solely to pay Permitted Transaction Expenses.
(k) Further Assurances and Additional Acts. Lessee will execute,
acknowledge, deliver, file, notarize and register at its own expense all
such further agreements, instruments, certificates, documents and
assurances and perform such acts as Agent, Required Participants shall
deem necessary or appropriate to effectuate the purposes of the
Operative Documents, and promptly provide the Agent with evidence of the
foregoing satisfactory in form and substance to Agent and Required
Participants.
5.02. Lessee's Negative Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following negative
covenants, unless Required Participants shall otherwise consent in writing:
(a) Liens. Lessee will not, and will not permit any of its
Significant Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon or with respect to any of their properties, revenues or
assets, whether now owned or hereafter acquired, other than (i)
Permitted Liens and (ii) other Liens that, in the aggregate at any time,
secure obligations in an amount not in excess of ten percent (10%) of
Consolidated Total Assets determined as of the last day of the
immediately preceding fiscal quarter (or fiscal year, as the case may
be); provided, however, that the foregoing exceptions shall not be
construed to permit any Liens, except for Permitted Property Liens, in
any of the Property.
(b) Change in Nature of Business. Lessee will not, and will not
permit any of its Significant Subsidiaries to, engage in any material
line of business other than the electronics business and other
businesses incidental or reasonably related thereto.
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(c) Restrictions on Fundamental Changes. Lessee will not, and
will not permit any of its Significant Subsidiaries to, merge with or
consolidate into, or acquire all or substantially all of the assets of,
any Person, or sell, transfer, lease or otherwise dispose of (whether in
one transaction or in a series of transactions) all or substantially all
of its assets, except that:
(i) Any of Lessee's Significant Subsidiaries may merge
with, consolidate into or transfer all or substantially all of
its assets to another of Lessee's Significant Subsidiaries or to
Lessee and in connection therewith such Significant Subsidiary
(other than Lessee) may be liquidated or dissolved, provided that
(A) if the transaction involves Lessee, Lessee shall be the
surviving Person, and (B) if any transaction shall be between a
non-wholly owned Significant Subsidiary and a wholly-owned
Significant Subsidiary, the wholly-owned Significant Subsidiary
shall be the continuing or surviving Person, and provided further
that no Material Adverse Effect or Default shall result
therefrom;
(ii) Lessee or any of its Significant Subsidiaries may
sell or dispose of assets in accordance with the provisions of
Subparagraph 5.02(d);
(iii) Lessee or any of its Significant Subsidiaries may
make any investment or Acquisition permitted by Subparagraph
5.02(e); and
(iv) Lessee may merge with or consolidate into any other
Person, provided that (A) Lessee is the surviving Person, and (B)
no such merger or consolidation shall be made while there exists
a Default or if a Default or Material Adverse Effect would occur
as a result thereof.
(d) Sales of Assets. Lessee will not, and will not permit any of
its Significant Subsidiaries to, convey, sell, lease, transfer, or
otherwise dispose of, or part with control of (whether in one
transaction or a series of transactions) any assets (including any
shares of stock in any Subsidiary or other Person), except:
(i) Sales or other dispositions of inventory in the
ordinary course of business;
(ii) Sales or other dispositions of assets in the ordinary
course of business which have become worn out or obsolete or
which are promptly being replaced;
(iii) Sales of accounts receivable to financial
institutions not affiliated with Lessee; provided that (A) the
discount rate shall not at any time exceed ten percent (10%), (B)
the amount of all accounts receivable permitted to be sold in any
fiscal quarter shall not exceed twenty percent (20%) of the
consolidated accounts receivable of Lessee and its Subsidiaries,
determined as of the last of the
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immediately preceding fiscal quarter (or fiscal year, as the
case may be), and (C) the sole consideration received for such
sales shall be cash;
(iv) Sales of equipment to be leased back to Lessee in
conjunction with a "synthetic lease" of such equipment, provided
that the "principal" of such financing does not exceed
$250,000,000 (including any Equipment sold and leased back
pursuant to the Operative Documents);
(v) Sales or other dispositions of assets outside the
ordinary course of business which do not constitute Substantial
Assets (as defined below); and
(vi) Sales or other dispositions of Permitted Investments;
Provided, however, that the foregoing exceptions shall not be construed
to permit any sales, leases, transfers or other disposals of any of the
Property, except as expressly permitted by the Lease Agreement. For
purposes of clause (v) above, a sale, lease, transfer or other
disposition of assets shall be deemed to be of "Substantial Assets" if
such assets, when added to all other assets conveyed, sold, leased,
transferred or otherwise disposed of in any period of four consecutive
fiscal quarters (other than assets sold in the ordinary course of
business or pursuant to clause (iii) above or Property sold pursuant to
the Operative Documents), shall exceed ten percent (10%) of Consolidated
Total Assets as determined as of the last day of the fiscal quarter of
Lessee immediately preceding the date of determination.
(e) Loans and Investments. Lessee will not, and will not permit
any of its Significant Subsidiaries to, extend any credit to, guarantee
the obligations of or make any investments in or acquire any interest
in, any Person, other than in connection with:
(i) Extensions of credit in the nature of accounts
receivable or notes receivable arising from the sales of goods or
services in the ordinary course of business;
(ii) Permitted Investments;
(iii) Additional purchases of or investments in the stock
of, or guarantees of the obligations of, Subsidiaries;
(iv) Employee loans and guarantees in accordance with
Lessee's usual and customary practices with respect thereto;
(v) Any Acquisition; or
(vi) Additional investments not exceeding, in the
aggregate with all such investments, $300,000,000 during the
period from the date of this Agreement through the last Scheduled
Expiration Date of any Lease Supplement;
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provided that in the case of an Acquisition referred to in clause (v)
above or an investment referred to in clause (vi) above, no such
Acquisition or investment shall be made while there exists a Default or
if a Default or Material Adverse Effect would occur as a result thereof.
(f) Distributions. Lessee will not declare or pay any dividends
in respect of its capital stock, or purchase, redeem, retire or
otherwise acquire for value any of its capital stock now or hereafter
outstanding, return any capital to its shareholders as such, or make any
distribution of assets to its shareholders as such, or permit any of its
Subsidiaries to purchase, redeem, retire, or otherwise acquire for value
any stock of Lessee, except that Lessee may:
(i) Declare and deliver dividends and distributions
payable only in common stock of Lessee;
(ii) Purchase shares of its capital stock from time to
time in connection with the issuance of shares under Lessee's
employee stock option plans;
(iii) Purchase, redeem, retire, or otherwise acquire
shares of its capital stock with the proceeds received from a
substantially concurrent issue of new shares of its capital
stock; and
(iv) In addition to the dividends, purchases, redemptions,
retirements and other acquisitions permitted by the foregoing
clauses (i) through (iii) above, declare and deliver dividends
and distributions, and purchase, redeem, retire, or otherwise
acquire shares of its capital stock, in an aggregate amount not
exceeding $100,000,000 in any period of four consecutive fiscal
quarters.
(g) Transactions with Related Parties. Lessee will not, and will
not permit any of its Significant Subsidiaries to, enter into any
transaction, including the purchase, sale or exchange of property or the
rendering of any services, with any Affiliate, any officer or director
thereof or any Person which beneficially owns or holds twenty percent
(20%) or more of the equity securities, or twenty percent (20%) or more
of the equity interest, thereof (a "Related Party"), or enter into,
assume or suffer to exist, or permit any Significant Subsidiary to enter
into, assume or suffer to exist, any employment or consulting contract
with any Related Party, except (i) a transaction or contract which is in
the ordinary course of Lessee's or such Significant Subsidiary's
business, including a transaction in the ordinary course of business
between or among Lessee and one or more of its Subsidiaries, and (ii)
any other transaction which is upon fair and reasonable terms not less
favorable to Lessee or such Significant Subsidiary than it would obtain
in a comparable arm's length transaction with a Person not a Related
Party. For purposes of this Subparagraph 5.02(g), the sale, transfer or
disposition of more than thirty percent (30%) of its assets (in any
transaction or a series of related transactions) by Lessee or any
Significant Subsidiary shall be deemed to be outside the ordinary course
of business.
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(h) Accounting Changes. Lessee will not, and will not suffer or
permit any of its Significant Subsidiaries to make any significant
change in accounting treatment or reporting practices, except as
required or permitted by GAAP (or, in the case of any Significant
Subsidiary domiciled in a jurisdiction other than the United States, in
accordance with generally accepted accounting principles and practices
in such jurisdiction).
(i) Chief Executive Office. Lessee shall not change its chief
executive office unless Lessee has given Agent not less than thirty (30)
days prior written notice and Lessee has executed and filed such Uniform
Commercial Code financing statements as Agent may reasonably request
during such thirty-day period to protect the security interests of the
Lessor Parties granted by the Operative Documents.
5.03. Lessee's Financial Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following financial
covenants, unless Required Participants shall otherwise consent in writing:
(a) Consolidated Total Debt to Total Capital. Lessee will
maintain a ratio of Consolidated Total Debt to Total Capital of not more
than 0.50 to 1.0 as of the last day of each fiscal quarter.
(b) Quick Ratio. Lessee will maintain a ratio of Consolidated
Quick Assets to Consolidated Current Liabilities of not less than 1.25
to 1.00 as of the last day of each fiscal quarter.
(c) Minimum Consolidated Tangible Net Worth. Lessee will maintain
Consolidated Tangible Net Worth (exclusive of the cumulative translation
adjustment account as reported in the consolidated balance sheet of
Lessee and its Subsidiaries as of such date) as of the end of each
fiscal quarter of not less than (i) $1,198,926,000 plus (ii) one hundred
percent (100%) of the net proceeds received by Lessee or any Subsidiary
from the sale or issuance of equity securities (including equity
securities issued upon the conversion of Subordinated Debt) to any
Person other than Lessee or any Subsidiary after December 31, 1999, plus
(iii) eighty percent (80%) of the sum of Consolidated Net Income, if
such sum is positive, for each fiscal quarter elapsed after December 31,
1999, minus (iv) the net value of Lessee stock not exceeding
$250,000,000 in aggregate amount repurchased by Lessee pursuant to
employee stock ownership and purchase plans (provided that Lessee shall
not so repurchase stock in an aggregate amount which exceeds five
percent (5%) of its stock outstanding as of the last day of such fiscal
quarter).
(d) Debt Service Coverage Ratio. Lessee will maintain a ratio of
(i) Consolidated EBITDA to (ii) the sum of Consolidated CMLTD, plus
Consolidated Interest Expense, plus Capitalized Interest, that is not
less than 2.00 to 1.00 for any period of four consecutive fiscal
quarters, calculated as of the end of such period.
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(e) Subordinated Debt. Lessee will not, and will not permit any
of its Subsidiaries to, make any voluntary or optional payment or
repayment on, redemption, exchange or acquisition for value of (other
than any such payment, repayment, redemption, exchange or acquisition
which would not constitute a payment for purposes of Section 13.10 of
the subordination provisions attached hereto as Exhibit I), or any
sinking fund or similar payment with respect to, any Subordinated Debt
(a "restricted payment") if a Default shall then exist or would occur as
a result thereof. In no event shall any restricted payment be made if
the ratio of Consolidated Quick Assets to Consolidated Current
Liabilities is less than 1.50 to 1.00 as of the last day of the fiscal
quarter immediately preceding such restricted payment and after giving
effect to such restricted payment. At or prior to the time notice of
such restricted payment is given to the holders of Subordinated Debt (or
if no such notice is required, prior to the time of such restricted
payment), Lessee shall give written notice to Agent of the maximum
amount of such restricted payment and of the satisfaction of the
foregoing condition.
5.04. Lessors' Covenants. Until the termination of this Agreement and
the satisfaction in full by Lessors of all Lessor Obligations, each Lessor and
Lessor Agent will comply, and will cause compliance, with the following
covenants, unless Lessee and Required Participants shall otherwise consent in
writing:
(a) Use of Proceeds. Lessors shall use the proceeds of all
amounts delivered to Lessors by Participants pursuant to Subparagraph
2.05(a) solely to fund Advances.
(b) Lessor Liens. No Lessor or Lessor Agent shall create, incur,
assume or permit to exist any Lessor Lien (other than any Lien granted
to Agent or any Participant pursuant to the Operative Documents to
secure the Lessor Obligations) and each Lessor shall promptly discharge,
at its sole cost and expense, any Lessor Lien on the Property
attributable to such Lessor or Lessor Agent (other than any Liens
granted to Agent or any Participant pursuant to the Operative Documents
to secure the Lessor Obligations); provided, however, that no Lessor or
Lessor Agent shall be required so to discharge any such Lessor Lien if
the same is being (or promptly will be) contested in good faith by
appropriate proceedings diligently prosecuted, provided that any such
contest suspends the enforcement of such Lessor Lien and is completed
and all Lessor Liens are discharged on or prior to the Expiration Date
for the Lease Supplement to which such Property is subject or at the
time the Property is purchased by Lessee pursuant to any Term Purchase
Option or Partial Purchase Option.
(c) Property Disposition. No Lessor shall sell, lease, transfer
or otherwise dispose of its right, title and interest in the Property
and the Operative Documents except as provided in Subparagraph 2.12(b)
or Subparagraph 7.05(c) hereof or in the Purchase Agreement or after
retaining the Property following the Expiration Date.
(d) Chief Executive Office. No Lessor shall change its chief
executive office (if such Lessor is organized in the United States) or
its major executive office in the United States (if such Lessor is
organized outside the United States) without giving Agent prompt written
notice.
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5.05. Participants' Covenants. Each Participant covenants that it will
not fund its portion of any Advance with the assets of any "employee benefit
plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA
or any "plan" (as defined in Section 4975(e)(1) of the IRC.
SECTION 6. LESSORS, LESSOR AGENT, AGENT AND THEIR RELATIONS WITH PARTICIPANTS.
6.01. Appointment of Lessor Agent and Agent. Each Lessor hereby appoints
and authorizes Lessor Agent to act as its agent hereunder and under the other
Operative Documents with such powers as are expressly delegated to Lessor Agent
by the terms of this Agreement and the other Operative Documents, together with
such other powers as are reasonably incidental thereto. Each Participant hereby
appoints and authorizes Agent to act as its agent hereunder and under the other
Operative Documents with such powers as are expressly delegated to Agent by the
terms of this Agreement and the other Operative Documents, together with such
other powers as are reasonably incidental thereto. Neither Lessor Agent nor any
Lessor is an agent for the Participants or Agent, and neither this Agreement nor
any other Operative Document shall be construed to constitute or evidence a
partnership among the Lessor Parties or otherwise to impose upon any Lessor,
Lessor Agent or Agent any fiduciary duty.
6.02. Powers and Immunities. None of Lessors, Lessor Agent or Agent
shall have any duties or responsibilities except those expressly set forth in
this Agreement or in any other Operative Document, be a trustee for any
Participant or have any fiduciary duty to any Participant. Notwithstanding
anything to the contrary contained herein, none of Lessors, Lessor Agent or
Agent shall be required to take any action which is contrary to this Agreement
or any other Operative Document or any applicable Governmental Rule. None of
Lessors, Lessor Agent, Agent or any Participant shall be responsible to any
Participant for any recitals, statements, representations or warranties made by
Lessee or any of its Subsidiaries contained in this Agreement or in any other
Operative Document, for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Operative Document
or for any failure by Lessee or any of its Subsidiaries to perform their
respective obligations hereunder or thereunder. Lessors, Lessor Agent and Agent
may employ agents and attorneys-in-fact and shall not be responsible to any
Participant for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. None of Lessors, Lessor
Agent or Agent nor any of their respective directors, officers, employees,
agents or advisors shall be responsible to any Participant for any action taken
or omitted to be taken by it or them hereunder or under any other Operative
Document or in connection herewith or therewith, except for its or their own
gross negligence or willful misconduct. Except as otherwise provided under this
Agreement, Lessors, Lessor Agent and Agent shall take such action with respect
to the Operative Documents as shall be directed by the Required Participants.
6.03. Reliance. Lessors, Lessor Agent and Agent shall be entitled to
rely upon any certificate, notice or other document (including any cable,
telegram, facsimile or telex) believed by it in good faith to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
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accountants and other experts selected by Lessors, Lessor Agent or Agent with
reasonable care. As to any other matters not expressly provided for by this
Agreement, none of Lessors, Lessor Agent or Agent shall be required to take any
action or exercise any discretion, but shall be required to act or to refrain
from acting upon instructions of the Required Participants and shall in all
cases be fully protected by the Participants in acting, or in refraining from
acting, hereunder or under any other Operative Document in accordance with the
instructions of the Required Participants, and such instructions of the Required
Participants and any action taken or failure to act pursuant thereto shall be
binding on all of the Participants and Lessors.
6.04. Defaults. None of Lessors, Lessor Agent or Agent shall be deemed
to have knowledge or notice of the occurrence of any Default unless such Lessor,
Lessor Agent or Agent has received a written notice from a Participant or
Lessee, referring to this Agreement, describing such Default and stating that
such notice is a "Notice of Default". If any Lessor, Lessor Agent and Agent
receive such a notice of the occurrence of a Default, Agent shall give prompt
notice thereof to the Participants. Lessors, Lessor Agent and Agent shall take
such action with respect to such Default as shall be reasonably directed by the
Required Participants; provided, however, that until Lessors, Lessor Agent and
Agent shall have received such directions, Lessors, Lessor Agent or Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default as it shall deem advisable in the best
interest of the Participants.
6.05. Indemnification. Without limiting the Obligations of Lessee
hereunder, each Participant agrees to indemnify Lessors, Lessor Agent and Agent
(to the extent not previously reimbursed by Lessee), ratably in accordance with
such Participant's Proportionate Share, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may at any time
be imposed on, incurred by or asserted against Lessors or Agent in any way
relating to or arising out of this Agreement or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
or the enforcement of any of the terms hereof or thereof; provided, however,
that no Participant shall be liable to any Lessor, Lessor Agent or Agent for any
of the foregoing to the extent they arise from such Person's gross negligence or
willful misconduct. Lessors, Lessor Agent or Agent shall be fully justified in
refusing to take or in continuing to take any action hereunder unless it shall
first be indemnified to its satisfaction by the Participants 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 obligations of each Participant under
this Paragraph 6.05 shall survive the payment and performance of the Lessee
Obligations, the termination of this Agreement and any Participant ceasing to be
a party to this Agreement (with respect to events which occurred prior to the
time such Participant ceased to be a Participant hereunder).
6.06. Non-Reliance. Each Participant represents that it has,
independently and without reliance on Lessors, Lessor Agent, Agent or any other
Participant, and based on such documents and information as it has deemed
appropriate, made its own appraisal of the business, prospects, management,
financial condition and affairs of Lessee and the Subsidiaries and its own
decision to enter into this Agreement and agrees that it will, independently and
without reliance upon Lessors, Lessor Agent, Agent or any other Participant, and
based on such documents and
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information as it shall deem appropriate at the time, continue to make its own
appraisals and decisions in taking or not taking action under this Agreement or
any other Operative Document. None of Lessors, Lessor Agent or Agent nor any of
their respective affiliates nor any of their respective directors, officers,
employees, agents or advisors shall (a) be required to keep any Participant
informed as to the performance or observance by Lessee or any of its
Subsidiaries of the obligations under this Agreement or any other document
referred to or provided for herein or to make inquiry of, or to inspect the
properties or books of Lessee or any of its Subsidiaries; (b) have any duty or
responsibility to provide any Participant with any credit or other information
concerning Lessee or any of its Subsidiaries which may come into the possession
of any Lessor, Lessor Agent or Agent, except for notices, reports and other
documents and information expressly required to be furnished to the Participants
by Lessors, Lessor Agent or Agent hereunder; or (c) be responsible to any
Participant for (i) any recital, statement, representation or warranty made by
Lessee or any officer, employee or agent of Lessee in this Agreement or in any
of the other Operative Documents, (ii) the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any Operative
Document, (iii) the value or sufficiency of the Property or the validity or
perfection of any of the liens or security interests intended to be created by
the Operative Documents, or (iv) any failure by Lessee to perform its
obligations under this Agreement or any other Operative Document.
6.07. Resignation or Removal of Lessor Agent or Agent. Lessor Agent may
resign at any time by giving thirty (30) days prior written notice thereof to
Lessee and Lessors, and Lessor Agent may be removed at any time with or without
cause by the Lessors. Upon any such resignation or removal, the Lessors shall
have the right to appoint a successor Lessor Agent, which Lessor Agent, if not a
Participant, shall be reasonably acceptable to Lessee; provided, however, that
Lessee shall have no right to approve a successor Lessor Agent if a Default has
occurred and is continuing. Agent may resign at any time by giving thirty (30)
days prior written notice thereof to Lessee and the Participants, and Agent may
be removed at any time with or without cause by the Required Participants. Upon
any such resignation or removal, the Required Participants shall have the right
to appoint a successor Agent, which Agent, if not a Participant, shall be
reasonably acceptable to Lessee; provided, however, that Lessee shall have no
right to approve a successor Agent if a Default has occurred and is continuing.
Upon the acceptance of any appointment as Lessor Agent or Agent hereunder by a
successor Lessor Agent or successor Agent, such successor Lessor Agent or
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Lessor Agent or retiring
Agent, and the retiring Lessor Agent or retiring Agent shall be discharged from
the duties and obligations thereafter arising hereunder. After any resignation
or removal hereunder as Lessor Agent or Agent, the provisions of this Section 6
and any other provision of this Agreement or any other Operative Document which
by its terms survives the termination of this Agreement shall continue in effect
for the benefit of such retiring Lessor Agent or retiring Agent in respect of
any actions taken or omitted to be taken by it while it was acting as Lessor
Agent or Agent.
6.08. Authorization. Lessor Agent is hereby authorized by Lessors to
execute, deliver and perform, each of the Operative Documents to which Lessor
Agent is or is intended to be a party and each Lessor agrees to be bound by all
of the agreements of Lessor Agent contained in the Operative Documents. Agent is
hereby authorized by the Participants to execute, deliver
and perform, each of the Operative Documents to which Agent is or is intended to
be a party and
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each Participant agrees to be bound by all of the agreements of Agent contained
in the Operative Documents. Without limiting the generality of the foregoing,
Lessors and the Participants expressly authorize Lessor Agent and Agent to
execute and deliver to Lessee such Uniform Commercial Code releases and other
documents, instruments and agreements as Lessee may reasonably request to
release its Liens in, and to transfer to Lessee Lessors' right, title and
interest in and to (a) any Replaced Property replaced pursuant to Subparagraph
3.01(b) of the Lease Agreement and (b) any Property purchased by Lessee, an
Assignee Purchaser or a Designated Purchaser pursuant to Paragraph 2.01,
Paragraph 2.02 or Paragraph 3 of the Purchase Agreement.
6.09. Lessors, Lessor Agent and Agent in their Individual Capacities.
Lessors, Lessor Agent, Agent and their respective affiliates may make loans to,
accept deposits from and generally engage in any kind of banking or other
business with Lessee and its Subsidiaries and affiliates as though Lessors were
not Lessors hereunder, Lessor Agent were not Lessor Agent hereunder and Agent
were not Agent hereunder. With respect to Advances, if any, made by Lessor Agent
or Agent in its capacity as a Participant, Lessor Agent or Agent in its capacity
as a Participant shall have the same rights and powers under this Agreement and
the other Operative Documents as any other Participant and may exercise the same
as though it were not Lessor Agent or Agent, and the terms "Participant" or
"Participants" shall include Lessor Agent or Agent in its capacity as a
Participant.
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SECTION 7. MISCELLANEOUS
7.01. Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lessee, any Lessor or Participant, Lessor Agent or Agent under this Agreement or
the other Operative Documents shall be in writing and faxed, mailed or
delivered, if to Lessee, Lessor Agent or Agent, at its respective facsimile
number or address set forth below or, if to any Lessor or Participant, at the
address or facsimile number specified beneath the heading "Address for Notices"
under the name of such Lessor or Participant in Part B of Schedule I (or to such
other facsimile number or address for any party as indicated in any notice given
by that party to the other parties). All such notices and communications shall
be effective (a) when sent by an overnight service of recognized standing, on
the Business Day following the deposit with such service; (b) when mailed, first
class postage prepaid and addressed as aforesaid through the United States
Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d)
when faxed, upon confirmation of receipt; provided, however, that any Advance
Request, Notice of Rental Period Selection, Notice of Renewal Exercise Option,
Notice of Partial Purchase Option Exercise, Notice of Term Purchase Option
Exercise, Notice of Marketing Option Exercise or Notice of Expiration Date
Purchase Option Exercise delivered to Agent shall not be effective until
received by Agent.
Lessee: LSI Logic Corporation
1551 McCarthy Blvd.
Milpitas, CA 95035
Attn: Anita Prasad, Treasurer
Mail Stop D106
Tel. No: (408) 954-4489
Fax. No: (408) 433-6896
Lessor
Agent: ABN AMRO Bank N.V.
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
Tel. No: (212) 314-1724
Fax. No: (212) 314-1709
Agent: ABN AMRO Bank N.V.
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
Tel. No: (212) 314-1724
Fax. No: (212) 314-1709
Each Advance Request, Notice of Rental Period Selection, Notice of Renewal
Option Exercise, Notice of Partial Purchase Option Exercise, Notice of Term
Purchase Option Exercise, Notice of
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Marketing Option Exercise and Notice of Expiration Date Purchase Option Exercise
shall be given by Lessee to Agent's office located at its address referred to
above during its normal business hours; provided, however, that any such notice
received by Agent after 1:00 p.m. (Chicago time) on any Business Day shall be
deemed received by Agent on the next Business Day. In any case where this
Agreement authorizes notices, requests, demands or other communications by
Lessee to any Lessor Party to be made by telephone or facsimile, any Lessor
Party may conclusively presume that anyone purporting to be a person designated
in any incumbency certificate or other similar document received by such Lessor
Party is such a person.
7.02. Expenses. Lessee shall pay promptly upon receipt of an invoice
therefor, whether or not any Advance is made hereunder, (a) all reasonable fees
and expenses, including reasonable attorneys' fees and expenses, incurred by
Lessor Agent and Agent in connection with (i) the preparation, negotiation,
execution and delivery of this Agreement and the other Operative Documents, (ii)
the consummation of the transactions contemplated by, the exercise of their
duties under and any other actions reasonably taken by them in connection with
this Agreement and the other Operative Documents, and (iii) the preparation,
negotiation, execution and delivery of amendments and waivers hereunder and
thereunder, and (b) all reasonable fees and expenses, including reasonable
attorneys' fees and expenses, incurred by the Lessor Parties in the enforcement
or attempted enforcement of any of the Lessee Obligations or in preserving any
of the Lessor Parties' rights and remedies (including all such fees and expenses
incurred in connection with any "workout" or restructuring affecting the
Operative Documents or the Lessee Obligations or any bankruptcy or similar
proceeding involving Lessee or any of its Subsidiaries). The obligations of
Lessee under this Paragraph 7.02 shall survive the payment and performance of
the Lessee Obligations and the termination of this Agreement.
7.03. Indemnification. To the fullest extent permitted by law, Lessee
agrees to protect, indemnify, defend and hold harmless, on an after-tax basis,
the Lessor Parties and the other Indemnitees from and against any and all
liabilities, losses, damages or expenses of any kind or nature (including
Indemnified Taxes but not other taxes) and from any suits, claims or demands
(including in respect of or for reasonable attorney's fees and other expenses)
arising on account of or in connection with any matter or thing or action or
failure to act by Indemnitees, or any of them, arising out of or relating to the
Operative Documents, any transaction contemplated thereby or the Property,
including any use by Lessee of the Property or the Advances, except (a) to the
extent such liability arises from the willful misconduct or gross negligence of
such Indemnitee, (b) for the normal administrative expenses of Indemnitees in
performing their obligations under the Operative Documents (except as otherwise
expressly provided therein) and (c) any liabilities, losses, damages or expenses
owed to Lessee (provided that the exception in this clause (c) shall not excuse
Lessee from making any payment or performing any other obligation it is required
to make or perform under any of the Operative Documents or by any applicable
Governmental Rule). Upon receiving knowledge of any suit, claim or demand
asserted by a third party that any Lessor Party believes is covered by this
indemnity, such Lessor Party shall give Lessee notice of the matter and an
opportunity to defend it, at Lessee's sole cost and expense, with legal counsel
reasonably satisfactory to such Lessor Party. Such Lessor Parties may also
require Lessee to defend the matter. Any failure or delay of any Lessor Party to
notify Lessee of any such suit, claim or demand shall not relieve Lessee of its
obligations under this Paragraph 7.03 but shall reduce such obligations to the
extent of any increase in those obligations
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caused solely by any failure or delay which is unreasonable. The obligations of
Lessee under this Paragraph 7.03 shall survive the payment and performance of
the Lessee Obligations and the termination of this Agreement.
7.04. Waivers; Amendments. Any term, covenant, agreement or condition of
this Agreement or any other Operative Document may be amended or waived if such
amendment or waiver is in writing and is signed by Lessee and the Required
Participants; provided, however that:
(a) Any amendment, waiver or consent which (i) increases the
Total Commitment, (ii) extends the Commitment Termination Date or,
except as otherwise provided in Subparagraph 2.02(b) of the Lease
Agreement, the Scheduled Expiration Date for any Lease Supplement, (iii)
reduces the Fixed Component of Base Rent (except as otherwise provided
in Paragraph 2.09 hereof and Subparagraph 2.02(b) of the Lease
Agreement), the Rental Rate or any fees or other amounts payable for the
account of the Participants hereunder or under the other Operative
Documents, (iv) postpones any date scheduled for any payment of Base
Rent or any fees or other amounts payable for the account of all
Participants hereunder or thereunder, (v) amends Paragraph 2.06 or this
Paragraph 7.04, (vi) amends the definitions of Required Participants,
Tranche A Proportionate Share or Tranche B Proportionate Share, or (vii)
except as otherwise provided in Paragraph 6.08, releases any Lessor's or
Agent's interest in any substantial part of the Property, must be in
writing and signed or approved in writing by all Participants;
(b) Any amendment, waiver or consent which (i) increases or
decreases the Proportionate Share (other than any allocation or
reallocation of a Participant's Tranche A Proportionate Share, Tranche B
Proportionate Share or Equity Proportionate Share as provided in
Subparagraph 2.02(a) and Paragraph 2.09 of the Participation Agreement
or Subparagraph 2.02(b) of the Lease Agreement) or Commitment of any
Participant, or (ii) allocates or reallocates any of the Equity Portion
of any Lease Supplement to any Participant which was not an Equity
Participant prior to such allocation or reallocation, must be in writing
and signed by such Participant; and
(c) Any amendment, waiver or consent which affects the rights or
obligations of Lessor Agent or Agent must be in writing and signed by
Lessor Agent or Agent, as the case may be.
No failure or delay by any Lessor Party in exercising any right under this
Agreement or any other Operative Document shall operate as a waiver thereof or
of any other right hereunder or thereunder nor shall any single or partial
exercise of any such right preclude any other further exercise thereof or of any
other right hereunder or thereunder. Unless otherwise specified in such waiver
or consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
7.05. Successors and Assigns.
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(a) Binding Effect. This Agreement and the other Operative
Documents shall be binding upon and inure to the benefit of Lessee,
Lessors, the Participants, Lessor Agent, Agent and their respective
permitted successors and assigns. All references in this Agreement to
any Person shall be deemed to include all successors and assigns of such
Person.
(b) Participant Assignments.
(i) Any Participant may, at any time, sell and assign to
any other Participant or any Eligible Assignee (individually, an
"Assignee Participant") all or a portion of its rights and
obligations under this Agreement and the other Operative
Documents (such a sale and assignment to be referred to herein as
an "Assignment") pursuant to an assignment agreement in the form
of Exhibit G (an "Assignment Agreement"), executed by each
Assignee Participant and such assignor Participant (an "Assignor
Participant") and delivered to Agent for its acceptance and
recording in the Register; provided, however, that:
(A) Without the written consent of Agent and, if no
Default has occurred and is continuing, Lessee (which
consent of Agent and Lessee shall not be unreasonably
withheld), no Participant may make any Assignment to any
Person which is not, immediately prior to such Assignment,
a Participant hereunder or an Affiliate thereof acting
through an office or branch located in the United States;
(B) Without the written consent of Agent and, if no
Default has occurred and is continuing, Lessee (which
consent of Agent and Lessee shall not be unreasonably
withheld), no Participant may make any Assignment to any
Person if, after giving effect to such Assignment, the
Commitment of such Participant or such Assignee
Participant would be less than Ten Million Dollars
($10,000,000) (except that a Participant may make an
Assignment which reduces its Commitment to zero without
the written consent of Agent or Lessee);
(C) Without the written consent of Agent and, if no
Default has occurred and is continuing, Lessee (which
consent of Agent and Lessee shall not be unreasonably
withheld), no Tranche A Participant or Tranche B
Participant may make any Assignment of any of such
Participant's Outstanding Tranche A Participation Amount
or Outstanding Tranche B Participation Amount in any Lease
Supplement (or, if a Lease Supplement has not been
executed with respect to any Installation Period, the
Advances made during such Installation Period) which does
not assign and delegate an equal pro rata interest in both
the Outstanding Tranche A Participation Amounts and the
Outstanding Tranche B Participation Amounts of such
Participant in all Lease Supplements and Installation
Periods, including (1) such Participant's Outstanding
Tranche A Participation Amounts and Outstanding Tranche B
Participation Amounts
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in all Lease Supplements, (2) such Participant's Tranche A
Percentages and Tranche B Percentages in all Lease
Supplements, and (3) such Participant's other rights,
duties and obligations relating to the Tranche A Portions
and the Tranche B Portions of all Lease Supplements under
this Agreement and the other Operative Documents; or
(D) Without the written consent of Agent and, if no
Default has occurred and is continuing, Lessee (which
consent of Agent and Lessee shall not be unreasonably
withheld), no Equity Participant may make any Assignment
of any of such Participant's Outstanding Equity
Participation Amount in any Lease Supplement (or, if a
Lease Supplement has not been executed with respect to any
Installation Period, the Advances made during such
Installation Period) which does not assign and delegate an
equal pro rata interest in the Outstanding Equity
Participation Amounts in all Lease Supplements and
Installation Periods, including (1) such Participant's
Outstanding Equity Participation Amounts in all Lease
Supplements, (2) such Participant's Equity Percentages in
all Lease Supplements, and (3) such Participant's other
rights, duties and obligations relating to the Equity
Portions of all Lease Supplements under this Agreement and
the other Operative Documents.
Upon such execution, delivery, acceptance and recording of each
Assignment Agreement and satisfaction of the conditions set forth
in Subparagraph 7.05(b)(iii), from and after the Assignment
Effective Date determined pursuant to such Assignment Agreement,
(y) each Assignee Participant thereunder shall be a Participant
hereunder with a Commitment and an Outstanding Participation
Amount, Tranche A Percentage, Tranche B Percentage, Equity
Percentage (if applicable) and Proportionate Share in each Lease
Supplement (or, if a Lease Supplement has not been executed with
respect to any Installation Period, in the Advances made during
such Installation Period) as set forth on Attachment 1 to such
Assignment Agreement (under the caption "Commitment, Outstanding
Participation Amount, Tranche Percentages and Proportionate
Shares After Assignment") and shall have the rights, duties and
obligations of such a Participant under this Agreement and the
other Operative Documents, and (z) the Assignor Participant
thereunder shall be a Participant with a Commitment and an
Outstanding Participation Amount, Tranche A Percentage, Tranche B
Percentage, Equity Percentage (if applicable) and Proportionate
Share in each Lease Supplement (or, if a Lease Supplement has not
been executed with respect to any Installation Period, in the
Advances made during such Installation Period) as set forth on
Attachment 1 to such Assignment Agreement (under the caption
"Commitment, Outstanding Participation Amount, Tranche
Percentages and Proportionate Shares After Assignment") , or, if
the Assignor's Commitment and Outstanding Participation Amount in
each Lease Supplement and Installation Period has been reduced to
zero, the Assignor Participant shall cease to be a Participant
and to have any obligation to fund any portion of any Advance;
provided, however, that any such Assignor Participant which
ceases to be a
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Participant shall continue to be entitled to the benefits of any
provision of this Agreement which by its terms survives the
termination of this Agreement. Each Assignment Agreement shall be
deemed to amend Schedule I and each Lease Supplement to the
extent, and only to the extent, necessary to reflect the addition
of each Assignee Participant, the deletion of each Assignor
Participant which reduces its Commitment and Outstanding
Participation Amount in each Lease Supplement and Installation
Period to zero and the resulting adjustment of Commitments,
Outstanding Participation Amounts, Tranche A Percentages, Tranche
B Percentages, Equity Percentages (if applicable) and
Proportionate Shares in each Lease Supplement arising from the
purchase by each Assignee Participant of all or a portion of the
rights and obligations of an Assignor Participant under this
Agreement and the other Operative Documents. Nothing in this
Subparagraph 7.05(b) shall be deemed to restrict the allocation
or reallocation by Lessor Agent of the Outstanding Lease Amount
of any Lease Supplement to the Tranche A Portion, the Tranche B
Portion or the Equity Portion of such Lease Supplement pursuant
to Subparagraph 2.02(a) and Paragraph 2.09 hereof and
Subparagraph 2.02(b) of the Lease Agreement. Each Assignee
Participant which was not previously a Participant hereunder and
which is not incorporated under the laws of the United States of
America or a state thereof shall, within three (3) Business Days
of becoming a Participant, deliver to Lessee and Agent two duly
completed copies of United States Internal Revenue Service Form
W-8BEN or W-8ECI (or successor applicable form), as the case may
be, certifying in each case that such Participant is entitled to
receive payments under this Agreement without deduction or
withholding of any United States federal income taxes.
(ii) Agent shall maintain at its address referred to in
Paragraph 7.01 a copy of each Assignment Agreement delivered to
it and a register (the "Register") for the recordation of the
names and addresses of the Participants and the Commitment and
Outstanding Participation Amount, Tranche A Percentage, Tranche B
Percentage, Equity Percentage (if applicable) and Proportionate
Share of each Participant in each Lease Supplement (or, if a
Lease Supplement has not been executed with respect to any
Installation Period, in Advances made during such Installation
Period) from time to time. The entries in the Register shall be
conclusive in the absence of manifest error, and Lessee, Agent
and the Participants may treat each Person whose name is recorded
in the Register as the owner of the interests recorded therein
for all purposes of this Agreement. The Register shall be
available for inspection by Lessee or any Participant at any
reasonable time and from time to time upon reasonable prior
notice.
(iii) Upon its receipt of an Assignment Agreement executed
by an Assignor Participant and an Assignee Participant (and, to
the extent required by clause (i) of this Subparagraph 7.05(b),
by Agent and Lessee), together with payment to Agent by Assignor
Participant of a registration and processing fee of $3,000, Agent
shall (A) promptly accept such Assignment Agreement and (B) on
the Assignment Effective Date determined pursuant thereto record
the information contained therein in the Register and give notice
of such acceptance and
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recordation to Lessors, the Participants and Lessee. Agent may,
from time to time at its election, prepare and deliver to
Lessors, the Participants and Lessee a revised Schedule I and
schedules to the Lease Supplements reflecting the names,
addresses and respective Proportionate Shares of all Participants
then parties hereto.
(iv) Subject to Subparagraph 7.13(h), the Lessor Parties
may disclose the Operative Documents and any financial or other
information relating to Lessee or any Subsidiary to each other or
to any potential Assignee Participant.
(c) Lessor Assignments. Each Lessor may, upon one (1) month's
prior written notice to Lessee and Agent, sell and assign all of its
right, title and interest in the Property and its rights, powers,
privileges, duties and obligations under this Agreement and the other
Operative Documents, provided that:
(i) If such sale and assignment is effected after either
(A) the occurrence of a Change of Law which makes it unlawful or
unreasonably burdensome for such Lessor to hold legal or
beneficial title to the Property or to perform its obligations
and duties under this Agreement and the other Operative Documents
or (B) the resignation or removal of the Lessor Agent or Agent
which was the Lessor Agent or Agent at the time such Lessor
became a Lessor, the purchaser/assignee (a "successor Lessor")
shall be either (1) a Participant or an Eligible Assignee which
is a multi-asset Person having substantial assets beyond its
interest in the Property and the Operative Documents or (2) a
Person approved as provided in clause (ii) below; or
(ii) If such sale and assignment is effected in any other
circumstance, a successor Lessor shall be a Person that is (A) a
financial institution or a Person controlled by a financial
institution and (B) approved in writing by Lessor Agent, Agent,
Required Participants and, if no Default has occurred and is
continuing, Lessee (which consents of Lessor Agent, Agent,
Required Participants and Lessee shall not be unreasonably
withheld); and
(iii) The successor Lessor executes such documents,
instruments and agreements as may reasonably be necessary to
evidence its agreement to assume all of the obligations and
duties of a Lessor under this Agreement and the other Operative
Documents.
Upon the consummation of any such sale and assignment, (A) a successor
Lessor shall become a "Lessor" and shall succeed to and become vested
with all the rights, powers, privileges, duties and obligations of a
Lessor under this Agreement and the other Operative Documents and (B)
the retiring Lessor shall be discharged from the duties and obligations
of a Lessor thereafter arising under this Agreement and the other
Operative Documents. After any retiring Lessor's discharge as a Lessor,
the provisions of Section 6 and any other provision of this Agreement or
any other Operative Document which by its
53
<PAGE> 54
terms survives the termination of this Agreement shall continue in
effect for its benefit in respect of any actions taken or omitted to be
taken by it while it was acting as a Lessor.
7.06. Setoff. In addition to any rights and remedies of the Participants
provided by law, each Participant shall have the right, with the prior written
consent of Agent, but without prior notice to or consent of Lessee, any such
notice and consent being expressly waived by Lessee to the extent permitted by
applicable law, upon the occurrence and during the continuance of an Event of
Default, to set-off and apply against the Lessee Obligations any amount owing
from such Participant to Lessee. The aforesaid right of set-off may be exercised
by such Participant against Lessee or against any trustee in bankruptcy, debtor
in possession, assignee for the benefit of creditors, receiver or execution,
judgment or attachment creditor of Lessee or against anyone else claiming
through or against Lessee or such trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, receiver, or execution, judgment or
attachment creditor, notwithstanding the fact that such right of set off shall
not have been exercised by such Participant prior to the occurrence of an Event
of Default. Each Participant agrees promptly to notify Lessee after any such
set-off and application made by such Participant, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
7.07. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the parties hereto and their permitted successors and assigns
hereunder, any benefit or legal or equitable right, remedy or claim under or by
virtue of this Agreement or under or by virtue of any provision herein.
7.08. Partial Invalidity. If at any time any provision of this Agreement
or any other Operative Document is or becomes illegal, invalid or unenforceable
in any respect under the law or any jurisdiction, neither the legality, validity
or enforceability of the remaining provisions of this Agreement or the other
Operative Documents nor the legality, validity or enforceability of such
provision under the law of any other jurisdiction shall in any way be affected
or impaired thereby.
7.09. JURY TRIAL. EACH OF LESSEE AND THE LESSOR PARTIES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY AS TO ANY ISSUE RELATING TO THE OPERATIVE DOCUMENTS IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OPERATIVE
DOCUMENT.
7.10. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
7.11. No Joint Venture, Etc. Neither this Agreement nor any other
Operative Document nor any transaction contemplated hereby or thereby shall be
construed to (a) constitute a partnership or joint venture between Lessee and
any Lessor Party or (b) impose upon any Lessor Party any agency relationship
with or fiduciary duty to Lessee.
54
<PAGE> 55
7.12. Usury Savings Clause. Nothing contained in this Agreement or any
other Operative Documents shall be deemed to require the payment of interest or
other charges by Lessee in excess of the amount the applicable Lessor Parties
may lawfully charge under applicable usury laws. In the event any Lessor Party
shall collect monies which are deemed to constitute interest which would
increase the effective interest rate to a rate in excess of that permitted to be
charged by applicable law, all such sums deemed to constitute excess interest
shall, upon such determination, at the option of Lessor Agent, be returned to
Lessee or credited against other Lessee Obligations.
7.13. Confidentiality. No Lessor Party shall disclose to any Person any
information with respect to Lessee or any of its Subsidiaries which is furnished
pursuant to this Agreement or under the other Operative Documents, except that
any Lessor Party may disclose any such information (a) to its own directors,
officers, employees, auditors, counsel and other advisors and to its Affiliates
to the extent reasonably determined by such Lessor Party to be necessary for the
administration or enforcement of the Operative Documents; (b) to any other
Lessor Party; (c) which is otherwise available to the public; (d) if required or
appropriate in any report, statement or testimony submitted to any Governmental
Authority having or claiming to have jurisdiction over such Lessor Party; (e) if
required in response to any summons or subpoena; (f) in connection with any
enforcement by any Lessor Party of its rights under this Agreement or the other
Operative Documents or any litigation among the parties relating to the
Operative Documents or the transactions contemplated thereby; (g) to comply with
any Requirement of Law applicable to such Lessor Party; (h) to any Assignee
Participant or any prospective Assignee Participant, provided that such Assignee
Participant or prospective Assignee Participant agrees to be bound by this
Paragraph 7.13; or (i) otherwise with the prior consent of Lessee; provided,
however, that (i) any Lessor Party served with any summons or subpoena demanding
the disclosure of any such information shall use reasonable efforts to notify
Lessee promptly of such summons or subpoena if not prohibited by any requirement
of law and, if requested by Lessee and not disadvantageous to such Lessor Party,
to cooperate with Lessee in obtaining a protective order restricting such
disclosure, and (ii) any disclosure made in violation of this Agreement shall
not affect the obligations of Lessee and its Subsidiaries under this Agreement
and the other Operative Documents.
7.14. Effect on Existing Participation Agreement. Lessee and the Lessor
Parties agree that on and after the date that this Agreement is executed by all
parties hereto, this Agreement shall amend, restate in its entirety and replace,
without notation, the Existing Participation Agreement; provided, however, that
nothing contained herein shall (i) operate as a waiver of any right, power or
remedy of any Lessor Party under the Existing Participation Agreement or any
other Operative Document or (ii) extinguish or impair any Lessee Obligations
under the Existing Participation Agreement or any other Operative Document
except to the extent any such Lessee Obligation is actually satisfied by Lessee;
and provided, further, that all Advances outstanding under the Existing
Participation Agreement shall remain outstanding and shall be deemed to have
been made under this Agreement on a pro rata basis by the Participants hereunder
in accordance with their respective Proportionate Shares.
[The first signature page follows.]
55
<PAGE> 56
IN WITNESS WHEREOF, Lessee, Lessors, Lessor Agent, the Participants and
Agent have caused this Amended and Restated Participation Agreement to be
executed as of the day and year first above written.
LESSEE: LSI LOGIC CORPORATION
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
LESSORS: ABN AMRO BANK N.V.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
KEYBANK NATIONAL ASSOCIATION
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
FBTC LEASING CORP.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
LESSOR AGENT: ABN AMRO BANK N.V.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
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<PAGE> 57
AGENT: ABN AMRO BANK N.V.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
PARTICIPANTS: ABN AMRO BANK N.V.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
BANK ONE, N.A.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
BANQUE NATIONALE DE PARIS
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
THE DAI-ICHI KANGYO BANK, LTD.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
FIRST SECURITY BANK, N.A.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
S-2
<PAGE> 58
FBTC LEASING CORP.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
THE FUJI BANK, LIMITED
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
KEYBANK NATIONAL ASSOCIATION
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
NATIONAL CITY BANK
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
UNION BANK OF CALIFORNIA, N.A.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
S-3
<PAGE> 59
SCHEDULE I
LESSORS AND PARTICIPANTS
PART A
COMMITMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Participant Commitment Amount Proportionate Share Type of Commitment
of Each Advance
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ABN AMRO Bank N.V. $43,000,000 17.2% Tranche A, Tranche B
and Equity
- -------------------------------------------------------------------------------------------------
The Industrial Bank of 35,000,000 14.0% Tranche A and Tranche B
Japan, Limited
- -------------------------------------------------------------------------------------------------
Bank One, N.A. 25,000,000 10.0% Tranche A and Tranche B
- -------------------------------------------------------------------------------------------------
Banque Nationale de 25,000,000 10.0% Tranche A and Tranche B
Paris
- -------------------------------------------------------------------------------------------------
First Security Bank, 25,000,000 10.0% Tranche A and Tranche B
N.A.
- -------------------------------------------------------------------------------------------------
KeyBank National 25,000,000 10.0% Tranche A, Tranche B
Association and Equity
- -------------------------------------------------------------------------------------------------
The Fuji Bank, Limited 23,179,500 9.2718% Tranche A
- -------------------------------------------------------------------------------------------------
The Dai-Ichi Kangyo 15,000,000 6.0%
Bank, Ltd.
- -------------------------------------------------------------------------------------------------
National City Bank 15,000,000 6.0% Tranche A and Tranche B
- -------------------------------------------------------------------------------------------------
Union Bank of 15,000,000 6.0% Tranche A and Tranche B
California, N.A.
- -------------------------------------------------------------------------------------------------
FBTC Leasing Corp. 3,820,500 1.5282% Tranche B and Equity
- -------------------------------------------------------------------------------------------------
TOTAL $250,000,000 100.0%
- -------------------------------------------------------------------------------------------------
</TABLE>
I-1
<PAGE> 60
PART B - ADDRESSES, ETC.
ABN AMRO BANK N.V. (as a Lessor and a Participant)
Applicable Participating Office:
ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, CA 94111
Address for Advance Requests, Notices of Rental Period Selection and Notices of
Renewal Option Exercise:
ABN AMRO Bank N.V.
208 South LaSalle Street, Suite 1500
Chicago, IL 60604-1003
Attn: Loan Administration
Tel. No.: (312) 992-5153
Fax No.: (312) 992-5158
Address for all other notices:
ABN AMRO Bank N.V.
208 South LaSalle Street, Suite 1500
Chicago, IL 60604-1003
Attn: Credit Administration
Tel. No.: (312) 992-5110
Fax No.: (312) 992-5111
With a copy of all notices to:
ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, CA 94111
Attn: Richard DaCosta
Tel. No.: (415) 984-3718
Fax No.: (415) 362-3524
ABN AMRO Bank N.V.
135 South LaSalle Street, Suite 740
Chicago, IL 60603
Attn: Elizabeth McClellan
Tel. No.: (312) 904-2809
Fax No.: (312) 904-6217
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<PAGE> 61
Wiring Instructions:
ABN AMRO Bank N.V.
New York, New York
RT/ABA No.: 026009580
F/O ABN AMRO Bank N.V. Chicago CPU
Account No.: 650-001-1789-41
Reference: LSI Logic Corporation Synthetic Lease
Major Executive Office in United States:
ABN AMRO Bank N.V.
208 South LaSalle Street, Suite 1500
Chicago, IL 60604-1003
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<PAGE> 62
BANK ONE, N.A. (as a Participant)
Applicable Participating Office:
Bank One, N.A.
One Bank One Plaza, 10th Floor
Chicago, IL 60670
Address for Advance Requests, Notices of Rental Period Selection and Notices of
Renewal Option Exercise:
Bank One, N.A.
One Bank One Plaza, 10th Floor
Chicago, IL 60670
Attn: Maryse Theodule
Tel. No: (312) 732-2259
Fax No: (312) 732-4840
Address for all other notices:
Bank One, N.A.
777 S. Figueroa Street, 4th Floor
Los Angeles, CA 90017
Attn: James P. Moore
Tel. No: (213) 683-4966
Fax No: (213) 683-4949
Wiring Instructions:
Bank One, N.A.
Chicago, Illinois
ABA No.: 071000013
Account No.: 4811 5286 0000
For Further Credit To: LS2 OSD Money Transfer Incoming Account
Reference: LSI Logic Corporation
Attn: Maryse Theodule
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<PAGE> 63
BANQUE NATIONALE DE PARIS (as a Participant)
Applicable Participating Office:
Banque Nationale de Paris
180 Montgomery Street, 3rd Floor
San Francisco, CA 94104
Address for Advance Requests, Notices of Rental Period Selection and Notices of
Renewal Option Exercise:
Banque Nationale de Paris
180 Montgomery Street, 3rd Floor
San Francisco, CA 94104
Attn: Don Hart, Vice President - Treasury
Tel. No: (415) 956-2511
Fax No: (415) 989-9041
Address for all other notices:
Banque Nationale de Paris
180 Montgomery Street, 3rd Floor
San Francisco, CA 94104
Attn: Rafael Lumanlan, Vice President
Tel. No: (415) 956-0707
Fax No: (415) 296-8954
Wiring Instructions:
The Federal Reserve Bank of New York
ABA No.: 026007689 Banque Nationale de Paris
Beneficiary: BNP San Francisco
Account No.: 14334000176
Reference: Principal paydown (or commitment fee, interest payment, or etc.)
By order: LSI Synthetic Lease
Attn: Peggy Tatum
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<PAGE> 64
THE DAI-ICHI KANGYO BANK, LTD. (as a Participant)
Applicable Participating Office:
The Dai-Ichi Kangyo Bank, Ltd.
One World Trade Center, Suite 4911
New York, NY 10038
Address for Advance Requests, Notices of Rental Period Selection and Notices of
Renewal Option Exercise:
The Dai-Ichi Kangyo Bank, Ltd.
One World Trade Center, Suite 4911
New York, NY 10048
Attn: Wendy Yuen and/or Adolfo Aguirre
Tel. No: (212) 432-6691
Fax No: (212) 524-0049
Address for all other notices:
The Dai-Ichi Kangyo Bank, Ltd.
One World Trade Center, Suite 4911
New York, NY 10048
Attn: Nelson Chang or Anne Marie Heverin
Tel. No: (212) 432-8341 or (212) 432-8471
Fax No: (212) 524-0579
Wiring Instructions:
The Dai-Ichi Kangyo Bank, New York
ABA No.: 026-004-307
Account No.: H10-740-014132
Reference: LSI Logic Corporation
Attn: Loan Operation Department
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<PAGE> 65
FIRST SECURITY BANK, N.A. (as a Participant)
Applicable Participating Office:
First Security Bank, N.A.
4949 Meadows Road, Suite 150
Lake Oswego, OR 97035
Address for Advance Requests, Notices of Rental Period Selection and Notices of
Renewal Option Exercise:
First Security Bank, N.A.
P.O. Box 7666
Boise, ID 83705
Attn: Mary Wissel, Commercial Loan Accounting Center
Tel. No: (208) 393-4046
Fax No: (208) 393-4540
Address for all other notices:
First Security Bank, N.A.
4949 Meadows Road, Suite 150
Lake Oswego, OR 97035
Attn: Janice K. Sauer, Vice President
Tel. No: (503) 675-3255
Fax No: (503) 675-3209
Wiring Instructions:
First Security Bank, N.A.
Boise, IDR
ABA No.: 124-1000-80
Account No.: 209-091-0429
For Further Credit To: Commercial Loan Accounting
Reference: LSI Logic Corporation
Attn: Mary Wissel
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<PAGE> 66
THE FUJI BANK, LIMITED (as a Participant)
Applicable Participating Office:
The Fuji Bank, Limited
333 South Hope Street, Suite 3900
Los Angeles, CA 90071
Address for Advance Requests, Notices of Rental Period Selection and Notices of
Renewal Option Exercise:
The Fuji Bank, Limited
333 South Hope Street, Suite 3900
Los Angeles, CA 90071
Attn: Linda Zhong
Tel. No: (213) 253-4137
Fax No: (213) 253-4178
Address for all other notices:
The Fuji Bank, Limited
333 South Hope Street, Suite 3900
Los Angeles, CA 90071
Attn: Mano Mylvaganam
Tel. No: (213) 253-4130
Fax No: (213) 253-4178
Wiring Instructions:
Bankers Trust Company
New York, New York
ABA No.: 021-001-033
Account Name: The Fuji Bank, Ltd., Los Angeles Agency
Account No.: 0440-02840
Reference: LSI Logic Corporation
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<PAGE> 67
FBTC LEASING CORP. (as a Lessor and a Participant)
Applicable Participating Office:
FBTC Leasing Corp.
Two World Trade Center, 79th Floor
New York, NY 10048
Address for Advance Requests, Notices of Rental Period Selection and Notices of
Renewal Option Exercise:
FBTC Leasing Corp.
Two World Trade Center, 79th Floor
New York, NY 10048
Attn: Paula Kamuda or Gail Hall
Tel. No: (212) 898-2532 or (212) 898-2441
Fax No: (212) 775-7276
Address for all other notices:
FBTC Leasing Corp.
Two World Trade Center, 79th Floor
New York, NY 10048
Attn: Carl Marcantonio or Colin Monaghan
Tel. No: (212) 898-2439 or (212) 898-2484
Fax No: (212) 775-7276
Wiring Instructions:
Fuji Bank and Trust Company
ABA No.: 02600-8905
Account Name: FBTC Leasing Corp.
Account No.: 001-900269
Additional Information:
Attention: Gail Hall
Reference: LSI Logic Corporation
Chief Executive Office/Major Executive Office in United States:
FBTC Leasing Corp.
Two World Trade Center, 79th Floor
New York, NY 10048
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<PAGE> 68
THE INDUSTRIAL BANK OF JAPAN, LIMITED (as a Participant)
Applicable Participating Office:
The Industrial Bank of Japan, Limited
One Market Street
Spear Street Tower, Suite 1610
San Francisco, CA 94105-1000
Address for Advance Requests, Notices of Rental Period Selection and Notices of
Renewal Option Exercise:
The Industrial Bank of Japan, Limited
1251 Avenue of the Americas
New York, NY 10020
Attn: Richard Emmich
Tel. No: (212) 282-3000
Fax No: (212) 282-4480
Address for all other notices:
The Industrial Bank of Japan, Limited
One Market Street
Spear Street Tower, Suite 1610
San Francisco, CA 94105-1000
Attn: Joe Endoso
Tel. No: (415) 693-1822
Fax No: (415) 982-1917
Wiring Instructions:
The Industrial Bank of Japan, Limited
New York, NY 10020
ABA No.: 026-008-345
Account No.: 00290661
For Further Credit To: LSI Logic
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<PAGE> 69
KEYBANK NATIONAL ASSOCIATION (as a Lessor and a Participant)
Applicable Participating Office:
KeyBank National Association
700 Fifth Avenue, 46th Floor
Seattle, WA 98104
Address for Advance Requests, Notices of Rental Period Selection and Notices of
Renewal Option Exercise:
KeyBank National Association
431 East Parkcenter Boulevard
Boise, ID 83705
Attn: Specialty Services Team
Tel. No: (800) 297-5518
Fax No: (800) 297-5495
Address for all other notices:
KeyBank National Association
700 Fifth Avenue, 46th Floor
Seattle, WA 98104
Attn: Mary K. Young
Tel. No: (206) 684-6085
Fax No: (206) 684-6035
Wiring Instructions:
KeyBank National Association
Seattle, WA
ABA No.: 125000574
Account No.: 01500163
Reference: LSI Logic
Attn: Specialty Services
Chief Executive Office:
KeyBank National Association
700 Fifth Avenue, 46th Floor
Seattle, WA 98104
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<PAGE> 70
NATIONAL CITY BANK (as a Participant)
Applicable Participating Office:
National City Bank
P. O. Box 36000
Louisville, KY 40233-6000
Address for all notices:
National City Bank
1900 East Ninth Street, Locator 01-2071
Cleveland, OH 44114-3484
Attn: Rachel Marotta
Tel. No:
Fax No: (216) 575-2426
Wiring Instructions:
National City Bank
ABA No.: 041-000-124
Account Name: Commercial Loan Operations
Account No.: 151-804
Reference: LSI Logic Corporation
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<PAGE> 71
UNION BANK OF CALIFORNIA, N.A. (as a Participant)
Applicable Participating Office:
Union Bank of California, N.A.
350 California Street, 10th Floor
San Francisco, CA 94104
Address for Advance Requests, Notices of Rental Period Selection and Notices of
Renewal Option Exercise:
Union Bank of California, N.A.
Syndication Participation Group
1980 Saturn Street
Monterey Park, CA 91755
Attn: Gohar Karapetvan
Tel. No: (213) 720-2679
Fax No: (213) 724-6198
Address for all other notices:
Union Bank of California, N.A.
350 California Street, 10th Floor
San Francisco, CA 94104
Attn: Glenn Leyrer
Tel. No.: (415) 705-7578
Fax No.: (415) 705-7111
Wiring Instructions:
Union Bank of California, N.A.
1980 Saturn Street
Monterey Park, CA 91755
ABA No.: 122-0000-496
Account No.: 070196431
Reference: LSI Logic Corporation
Attn: 192 Note Center
I-13
<PAGE> 72
SCHEDULE II
PRICING GRID
(For Commitment Fees and LIBOR Rental Rates)
<TABLE>
<CAPTION>
TRANCHE A AND
PRICING TRANCHE B EQUITY
PRICING PERIOD APPLICABLE APPLICABLE
RATIO LEVEL COMMITMENT FEES MARGIN MARGIN
----- ----- --------------- ------ ------
<S> <C> <C> <C> <C>
</=0.75 1 0.200% 1.000% 2.000%
>0.75,
</=1.50 2 0.250% 1.125% 2.250%
>1.50 3 0.300% 1.375% 2.500%
</TABLE>
EXPLANATION
1. The initial Pricing Period shall commence on the date of this Agreement
and end on the date Lessee delivers to Agent the Pricing Ratio
Certificate for the two fiscal quarter period ending June 30, 2000.
During such initial Pricing Period, the Commitment Fee applicable to the
Tranche A Commitments and the Tranche B Commitments shall be 0.225%, the
Commitment Fee applicable to the Equity Commitments shall be 0.300%, the
Tranche A and Tranche B Applicable Margin shall be 1.125% and the Equity
Applicable Margin shall be 2.250%.
2. Except for the initial Pricing Period, the Commitment Fees and the
Applicable Margin for the LIBOR Rental Rate will be set for each Pricing
Period and will vary depending upon whether such period is a Level 1
Period, a Level 2 Period or a Level 3 Period.
3. Each Pricing Period after the initial Pricing Period will be a Level 1
Period, a Level 2 Period, or a Level 3 Period depending upon the Pricing
Ratio calculated on an annualized basis for the most recent consecutive
two-quarter period ending on the last day of the quarter that ended
prior to the first day of such Pricing Period.
4. If the Applicable Margin has not yet been determined for a Pricing
Period on the date any Rental Period commences or any Base Rent is
payable with respect to any Lease Supplement (or, if a Lease Supplement
has not been executed with respect to any Installation Period, the
Advances made during such Installation Period), the Variable Component
of Base Rent shall accrue and be paid on such Lease Supplement or
Installation Period calculated on the basis of the Applicable Margin for
the applicable
II-1
<PAGE> 73
Tranche during the prior Pricing Period. When the Applicable Margin is
determined for such Pricing Period, accrued but unpaid Variable
Component of Base Rent on the Outstanding Lease Amount of such Lease
Supplement during such Pricing Period shall be recalculated on the basis
of such Applicable Margin, but Agent and Participants shall not be
required to refund any excess payment of the Variable Component of Base
Rent and Lessee shall not be required to make any additional payment of
Variable Component of Base Rent with respect to any Lease Supplement or
Installation Period on which the Variable Component of Base Rent was
paid during such Pricing Period prior to determination of the Applicable
Margin.
II-2
<PAGE> 74
SCHEDULE 1.01
DEFINITIONS
"ABN AMRO" shall mean ABN AMRO Bank N.V.
"Acquisition" shall mean any transaction or series of related
transactions for the purpose of or resulting in (a) the acquisition, directly or
indirectly, of all or substantially all of the assets of a Person or of any
business or division of a Person, (b) the acquisition, directly or indirectly,
of all or substantially all of the capital stock, obligations or other
securities of or interest in a Person, or (c) a merger or consolidation or any
other combination by Lessee or any Subsidiary with another Person.
"Acquisition Advances" shall have the meaning given to that term in
Subparagraph 2.01(d) of the Participation Agreement.
"Acquisition Agreements" shall mean the purchase agreements with the
Suppliers of the Property pursuant to which Lessee has agreed to purchase the
Property.
"Acquisition Agreement Acceptance Certificate" shall have the meaning
given to that term in Subparagraph 2.01(c) of the Participation Agreement.
"Acquisition Price" shall mean (a) with respect to all of the Property,
the total purchase price payable by Lessee for all of the Property and (b) with
respect to any portion of the Property, the total purchase price payable by
Lessee for such portion of the Property.
"Additional Acquisition Advances" shall have the meaning given to that
term in Subparagraph 2.01(b) of the Participation Agreement.
"Additional Advance Request" shall have the meaning given to that term
in Subparagraph 2.03(b) of the Participation Agreement.
"Advance Requests" shall have the meaning given to that term in
Subparagraph 2.03(c) of the Participation Agreement.
"Advances" shall have the meaning given to that term in Subparagraph
2.01(d) of the Participation Agreement.
"Affiliate" shall mean any Person which, directly or indirectly,
controls, is controlled by or is under common control with another Person. For
purposes of the foregoing, "control" with respect to any Person shall mean the
possession, directly or indirectly, of the power (a) to vote twenty-five percent
(25%) or more of the securities having ordinary voting power for the election of
directors of such Person, or (b) to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
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"Agent" shall mean ABN AMRO, acting in its capacity as Agent for the
Participants under the Operative Documents.
"Agent's Fees" shall have the meaning given to that term in Subparagraph
2.04(a) of the Participation Agreement.
"Agent's Letter" shall mean the letter agreement dated as of March 31,
2000, between Lessee and Agent.
"Alternate Rental Rate" shall mean, for any Rental Period (or portion
thereof), the per annum rate equal to the Base Rate in effect from time to time
during such period plus the Applicable Margin, such rate to change from time
during such period as the Base Rate or Applicable Margin shall change.
"Applicable Margin" shall mean:
(a) The per annum margin which is determined pursuant to
the Pricing Grid and added to the LIBO Rate with respect to the
LIBOR Rental Rate; or
(b) Zero percent (0%) per annum with respect to the
Alternate Rental Rate;
provided, however, that each Applicable Margin set forth in subparagraphs (a)
and (b) of this definition shall be increased by two percent (2.0%) per annum on
the date an Event of Default occurs and shall continue at such increased rate
unless and until such Event of Default is cured or waived in accordance with
this Agreement. The Applicable Margins shall be determined as provided in the
Pricing Grid and may change for each Pricing Period.
"Applicable Participating Office" shall mean, with respect to any
Participant, (a) initially, its office designated as such in Part B of Schedule
I (or, in the case of any Participant which becomes a Participant by an
assignment pursuant to Subparagraph 7.05(b) of the Participation Agreement, its
office designated as such in the applicable Assignment Agreement) and (b)
subsequently, such other office or offices as such Participant may designate to
Agent as the office at which such Participant's interest in the Lease Agreement
will thereafter be maintained and for the account of which all payments of Rent
and other amounts payable to such Participant under the Operative Documents will
thereafter be made.
"Appraisal" shall mean an appraisal of the Property or a portion thereof
in a form satisfactory to Agent, prepared by an independent appraiser that (a)
has experience with property of the same general type as the Property and (b) is
approved by Agent and the selection of such appraiser and the terms of
engagement are consented to by Lessee at the time such appraiser is selected for
a particular Appraisal, such consent of Lessee not to be unreasonably withheld.
The parties acknowledge that, among other reasons, an appraiser's failure to
perform in accordance with an engagement letter delivered for an Appraisal
previously delivered pursuant to the Operative Documents shall be sufficient
basis for Lessee to withhold its consent, including any delay in delivering an
Appraisal required with respect to an Additional Acquisition Advance after
Lessee provided all information specified in Schedule 3.02(e) with respect to
each item of
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Equipment to be included in such Appraisal not less than twenty-one (21) days
prior to the date such Additional Acquisition Advance was requested to be made.
"Assignee Participant" shall have the meaning given to that term in
Subparagraph 7.05(b) of the Participation Agreement.
"Assignee Purchaser" shall have the meaning given to that term in
Subparagraph 5.03(b)of the Purchase Agreement.
"Assignment" shall have the meaning given to that term in Subparagraph
7.05(b) of the Participation Agreement.
"Assignment Agreement" shall have the meaning given to that term in
Subparagraph 7.05(b) of the Participation Agreement.
"Assignment Effective Date" shall have, with respect to each Assignment
Agreement, the meaning set forth therein.
"Assignor Participant" shall have the meaning given to that term in
Subparagraph 7.05(b) of the Participation Agreement.
"Assumed Appraisal" shall have the meaning given to that term in
Subparagraph 3.02(h) of the Purchase Agreement.
"Bankruptcy Code" shall mean Title 11 of the United States Code entitled
"Bankruptcy."
"Base Rate" shall mean, on any day, the greater of (a) the Prime Rate in
effect on such date and (b) the Federal Funds Rate for such day plus one-half
percent (0.50%).
"Base Rent" shall have the meaning given to that term in Subparagraph
2.03(a) of the Lease Agreement.
"Business Day" shall mean any day on which (a) commercial banks are not
authorized or required to close in San Francisco, California, Chicago, Illinois,
or New York, New York and (b) if such Business Day is related to a LIBOR Rental
Rate, dealings in Dollar deposits are carried out in the London interbank market
and commercial banks are open for business in London.
"Capital Adequacy Requirement" shall have the meaning given to that term
in Subparagraph 2.12(d) of the Participation Agreement.
"Capitalized Interest" shall mean interest that is incurred or accrued
in any period and added to the cost of the asset in connection with which such
interest is incurred.
"Capital Lease" shall mean, for any Person, any lease of property
(whether real, personal or mixed) which, in accordance with GAAP, would, at the
time a determination is made, be required to be recorded as a capital lease in
respect of which such Person is liable as lessee.
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"Cash Collateral" shall have the meaning given to that term in Paragraph
2.06(b) of the Lease Agreement.
"Casualty" shall mean any damage to, destruction of or decrease in the
value of all or any portion of any of the Property as a result of fire, flood,
earthquake or other natural cause and any other cause typically covered by an
all risks extended coverage policy of insurance.
"Casualty and Condemnation Proceeds" shall mean all awards, damages,
compensation, reimbursement and other payments made or to be made to Lessee or
Lessor Agent from any insurer, Governmental Authority or other Person (other
than Lessee or any Lessor Party) on account of any Casualty or Condemnation.
"Change of Control" shall mean (a) the acquisition after the date hereof
by any person or group of persons (within the meaning of Section 13 or 14 of the
Securities Exchange Act of 1934 (as amended, the "Exchange Act")) of (i)
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC
under the Exchange Act) of thirty percent (30%) or more of the outstanding
equity securities of Lessee entitled to vote for members of the Board of
Directors of Lessee, or (ii) all or substantially all of the assets of Lessee;
or (b) during any period of twelve (12) consecutive calendar months, individuals
who are directors of Lessee on the first day of such period ("Initial
Directors") and any directors of Lessee who are specifically approved by
two-thirds of the Initial Directors and previously-approved Directors shall
cease to constitute a majority of the Board of Directors of Lessee before the
end of such period
"Change of Law" shall have the meaning given to that term in
Subparagraph 2.12(b) of the Participation Agreement.
"Closing Date" shall have the meaning given to that term in Subparagraph
2.01(a) of the Participation Agreement.
"Closing Date Appraisal" shall mean, with respect to the Property
described in Exhibit A, an Appraisal that assesses on or as of a recent date
prior to the Closing Date (a) the Fair Market Value and remaining useful life of
such Property on such date and (b) the Fair Market Value and remaining useful
life of such Property on the original Scheduled Expiration Date for the Lease
Supplement in which such Property will be included and each subsequent Scheduled
Expiration Date assuming such Scheduled Expiration Date is extended by the
exercise of each Renewal Option.
"Collateral" shall mean the Property Collateral, the Cash Collateral and
all other property in which any Lessor Party has a Lien to secure any of the
Lessee Obligations.
"Commitment" shall mean, with respect to any Participant at any time,
the amount set opposite such Participant's name on Part A of Schedule I or, if
such amount is reduced pursuant to Subparagraph 2.08 of the Participation
Agreement, the amount to which so reduced.
"Commitment Fees" shall have the meaning given to that term in
Subparagraph 2.04(b) of the Participation Agreement.
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"Commitment Period" shall have the meaning given to that term in
Subparagraph 2.01(b) of the Participation Agreement.
"Commitment Termination Date" shall have the meaning given to that term
in Subparagraph 2.01(b) of the Participation Agreement.
"Compliance Certificate" shall have the meaning given to that term in
clause (iii) of Subparagraph 5.01(a) of the Participation Agreement.
"Condemnation" shall mean any condemnation, requisition, confiscation,
seizure or other taking or sale of the use, access, occupancy or other right in
or to all or any portion of any of the Property (whether 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 Governmental
Authority or other Person having the power of eminent domain or by or on account
of an eviction by paramount title or any transfer made in lieu of any such
proceeding or action. A "Condemnation" shall be deemed to have occurred on the
earliest of the dates that use, access, occupancy or other right is taken.
"Conforming Bid" shall have the meaning given to that term in
Subparagraph 3.02(c) of the Purchase Agreement.
"Consolidated CMLTD" shall mean, as of any date of determination, the
portion of long-term indebtedness coming due in the current quarter and the next
succeeding three-quarter period as determined in accordance with GAAP.
"Consolidated Current Liabilities" shall mean, as of any date of
determination, the sum of current liabilities of Lessee and its Subsidiaries on
a consolidated basis, as determined in accordance with GAAP, plus (without
duplication) Guaranty Obligations with respect to that portion of the underlying
obligations which come due within one year of such date of determination.
"Consolidated EBITDA" shall mean, for any period, Consolidated Net
Income plus Consolidated Interest Expense plus income tax expense plus
depreciation expense and amortization expense, which were deducted in
determining Consolidated Net Income, of Lessee and its Subsidiaries on a
consolidated basis, as determined in accordance with GAAP.
"Consolidated Interest Expense" shall mean, for any period, interest
expense (including interest expense attributable to Capital Leases) of Lessee
and its Subsidiaries on a consolidated basis, as determined in accordance with
GAAP.
"Consolidated Net Income" shall mean, for any period, the net income of
Lessee and its Subsidiaries on a consolidated basis for such period taken as a
single accounting period, as determined in accordance with GAAP.
"Consolidated Quick Assets" shall mean, as of any date of determination,
the sum of all unencumbered and unrestricted (except those encumbered or
restricted in favor of the Agent or the Lessor Parties as security for the
Lessee Obligations) cash, cash equivalents and net accounts
1.01-5
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receivable classified as current assets according to GAAP, of Lessee and its
Subsidiaries on a consolidated basis, as determined in accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean, as of any date of
determination, Consolidated Total Assets minus Consolidated Total Liabilities,
minus (a) all assets which would be classified in a separate account as
intangible assets in accordance with GAAP, including goodwill, organizational
expense, research and development expense, capitalized software, patent
applications, patents, trademarks, trade names, brands, copyrights, trade
secrets, customer lists, licenses, franchises and covenants not to compete, (b)
all unamortized debt discount and expense and (c) all treasury stock; provided,
however, that to the extent otherwise included in the amount set forth in the
foregoing clause (a) of this definition, there shall be excluded from such
amount the sum of (i) all engineering costs incurred in connection with the
development of major production capabilities at new manufacturing facilities or
refurbishment of an existing facility or with respect to introducing a new
manufacturing process to existing or new manufacturing facilities and which are
classified as a fixed asset and capitalized on the consolidated balance sheet of
Lessee in accordance with GAAP and (ii) amounts representing the capitalized
portion of the acquisition and development costs of software necessary for the
operation of the business of Lessee and its Subsidiaries, as shown on the
consolidated balance sheet of Lessee.
"Consolidated Total Assets" shall mean, as of any date of determination,
the total assets of Lessee and its Subsidiaries on a consolidated basis, as
determined in accordance with GAAP.
"Consolidated Total Debt" shall mean, as of any date of determination,
all Indebtedness of Lessee and its Subsidiaries on a consolidated basis, as
determined in accordance with GAAP.
"Consolidated Total Liabilities" shall mean, as of any date of
determination, the total liabilities of Lessee and its Subsidiaries on a
consolidated basis, as determined in accordance with GAAP.
"Contractual Obligation" of any Person shall mean, any indenture, note,
lease, loan agreement, security, deed of trust, mortgage, security agreement,
guaranty, instrument; contract, agreement or other form of contractual
obligation or undertaking to which such Person is a party or by which such
Person or any of its property is bound.
"Credit Event" shall mean the making of each Advance, the exercise of
any Renewal Option under the Lease Agreement, the exercise of the Partial
Purchase Option under the Purchase Agreement or the exercise of the Marketing
Option under the Purchase Agreement.
"Current Appraisal" shall have the meaning given to that term in
Subparagraph 3.02(h) of the Purchase Agreement.
"Default" shall mean an Event of Default or any event or circumstance
not yet constituting an Event of Default which, with the giving of notice or the
lapse of any period of time or both would become an Event of Default.
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<PAGE> 80
"Defaulting Participant" shall mean a Participant which has failed to
fund its portion of any Advance which it is required to fund under the
Participation Agreement and has continued in such failure for three (3) Business
Days after written notice from Agent.
"Designated Purchaser" shall have the meaning given to that term in
Subparagraph 3.02(e) of the Purchase Agreement.
"Dollars" and "$" shall mean the lawful currency of the United States of
America and, in relation to any payment under the Operative Documents, same day
or immediately available funds.
"Eligible Assignee" shall mean a commercial bank having a combined
capital and surplus of at least $100,000,000, or another financial institution
which is a qualified institutional buyer as defined in Rule 144A under the
Securities Act of 1933, as amended, that is acting through a branch or agency or
an office located in the United States.
"Environmental Laws" shall mean all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directives, requests, licenses, authorizations
and permits of, and agreements with (including consent decrees), any
Governmental Authorities, in each case relating to or imposing liability or
standards of conduct concerning public health, safety and environmental
protection matters, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Clean Air Act, the Federal Water
Pollution Control Act of 1972, the Solid Waste Disposal Act, the Federal
Resource Conservation and Recovery Act, the Toxic Substances Control Act, the
Emergency Planning and Community Right-to-Know Act, the California Hazardous
Waste Control Law, the California Solid Waste Management, Resource Recovery and
Recycling Act, the California Water Code and the California Health and Safety
Code.
"Equipment" shall have the meaning given to that term in Subparagraph
2.01(a) of the Lease Agreement.
"Equity Capital" shall mean, as of any date of determination,
Consolidated Total Assets minus Consolidated Total Liabilities (exclusive of the
cumulative translation adjustment account as reported in the consolidated
balance sheet of Lessee and its Subsidiaries as of such date).
"Equity Participant" shall mean, at any time with respect to any Lease
Supplement (or, if a Lease Supplement has not been executed with respect to any
Installation Period, the Advances made during such Installation Period), a
Lessor having an Outstanding Equity Participation Amount in such Lease
Supplement at such time.
"Equity Percentage" shall mean, with respect to each Participant and any
Lease Supplement (or, if a Lease Supplement has not been executed with respect
to any Installation Period, the Advances made during such Installation Period),
a fraction (expressed as a percentage rounded to the eighth digit to the right
of the decimal point), the numerator of which is such Participant's Outstanding
Equity Participation Amount in such Lease Supplement or Installation
1.01-7
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Period on such date and the denominator of which is the Outstanding Lease Amount
of such Lease Supplement or Installation Period on such date.
"Equity Portion" shall mean, (a) with respect to any Advance without
reference to any Participant, the portion of such Advance equal to the Equity
Proportionate Share of such Advance and (b) with respect to any Advance with
reference to any Participant, the portion of such Advance equal to such
Participant's Equity Percentage of such Advance.
"Equity Proportionate Share" shall mean, with respect to any Lease
Supplement (or, if a Lease Supplement has not been executed with respect to any
Installation Period, the Advances made during such Installation Period), an
amount equal to the difference between (a) one hundred percent (100%) and (b)
the sum of the Tranche A Proportionate Share and the Tranche B Proportionate
Share for such Lease Supplement or Installation Period.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) which is under common control with Lessee within the meaning of
Section 4001(a)(14) of ERISA and Sections 414(b), (c) and (m) of the IRC.
"ERISA Event" shall mean (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by Lessee or any ERISA Affiliate from a Pension
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) the filing of a notice of intent to terminate, the treatment of a
plan amendment as a termination under Section 4041 or 4041A of ERISA or the
commencement of proceedings by the PBGC to terminate a Pension Plan subject to
Title IV of ERISA; (d) a failure by Lessee or any ERISA Affiliate to make
required contributions to a Pension Plan or other Plan subject to Section 412 of
the IRC; (e) an event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; (f) the imposition of
any liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon Lessee or any ERISA Affiliate; or
(g) an application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code with respect to any Pension Plan.
"Event of Default" shall have the meaning given to that term in
Paragraph 5.01 of the Lease Agreement.
"Existing Lease Agreement" shall have the meaning given to that term in
Recital B of the Lease Agreement.
"Existing Lessor Security Agreement" shall have the meaning given to
that term in Recital B of the Lessor Security Agreement.
"Existing Participation Agreement" shall have the meaning given to that
term in Recital A of the Participation Agreement.
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"Existing Purchase Agreement" shall have the meaning given to that term
in Recital B of the Purchase Agreement.
"Expense Advances" shall have the meaning given to that term in
Subparagraph 2.01(b) of the Participation Agreement.
"Expiration Date" shall mean, with respect to any Lease Supplement, the
earlier of (a) the Scheduled Expiration Date for such Lease Supplement under the
Lease Agreement, as such date may be extended by the exercise of any Renewal
Option under Subparagraph 2.02(b) of the Lease Agreement, and (b) the
Termination Date for such Lease Supplement under the Lease Agreement, if such
Lease Supplement is terminated prior to its Scheduled Expiration Date in
accordance with its terms.
"Expiration Date Appraised Value" shall mean, with respect to any
Property, the Fair Market Value of such Property as of the original Scheduled
Expiration Date for the Lease Supplement in which such Property is included and
each subsequent Scheduled Expiration Date assuming such Scheduled Expiration
Date is extended by the exercise of each Renewal Option, as determined by an
Appraisal as of a recent date prior to the date such Property is purchased by
Lessors or by a Renewal Date Appraisal Update as of a recent date prior to the
date such Renewal Option is exercised. In determining the Expiration Date
Appraised Values with respect to any Property, the Fair Market Value of such
Property shall be the value to be realized when such Property is sold on an
individual basis independent of the business of Lessee in a competitive and open
market and with appropriate market exposure.
"Expiration Date Purchase Option" shall have the meaning given to that
term in Subparagraph 3.01(b) of Purchase Agreement.
"Fair Market Value" shall mean, with respect to any of the Property or
any portion thereof, the maximum reasonable amount (not less than zero) that
would be paid in cash in an arm's-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, for the ownership of the Property or such
portion.
"FASB 13" shall mean Financial Accounting Standards Board Statement No.
13, together with any GAAP interpretations thereof. If FASB 13 changes after the
Closing Date such that the allocation of the Outstanding Lease Amount of any
Lease Supplement among the Tranche A Portion, the Tranche B Portion or the
Equity Portion or the determination of the Fixed Component of Base Rent and the
Residual Value Guaranty Amount for such Lease Supplement would be calculated in
a different manner or with different components, Lessee and the Lessor Parties
agree to negotiate in good faith to amend the applicable Operative Documents in
such respects as are necessary to provide for off-balance sheet accounting
treatment for Lessee and the same economic risk and return to the Participants
as in effect prior to such change in FASB 13; provided, however, that, until
Lessee and the Lessor Parties so amend the Operative Documents, the allocation
of the Outstanding Lease Amount of each Lease Supplement among the Tranche A
Portion, the Tranche B Portion or the Equity Portion and the Fixed Component of
Base Rent and
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the Residual Value Guaranty Amount for each Lease Supplement shall be calculated
in accordance with FASB 13 as in effect immediately prior to such change.
"Federal Funds Rate" shall mean, for any day, the rate per annum set
forth in the weekly statistical release designated as H.15 (519), or any
successor publication, published by the Federal Reserve Board (including any
such successor publication, "H.15 (519)") for such day opposite the caption
"Federal Funds (Effective)". If on any relevant day, such rate is not yet
published in H.15 (519), the rate for such day shall be the rate set forth in
the daily statistical release designated as the Composite 3:30 p.m. Quotations
for U.S. Government Securities, or any successor publication, published by the
Federal Reserve Bank of New York (including any such successor publication, the
"Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds
Effective Rate". If on any relevant day, such rate is not yet published in
either H.15 (519) or the Composite 3:30 p.m. Quotations, the rate for such day
shall be the arithmetic means, as determined by Agent, of the rates quoted to
Agent for such day by three (3) Federal funds brokers of recognized standing
selected by Agent for overnight Federal funds transactions.
"Financial Statements" shall mean, with respect to any accounting period
for any Person, statements of income, shareholders' equity and cash flows of
such Person for such period, and a balance sheet of such Person as of the end of
such period, setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year if such period is less than a
full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding annual audit, all prepared in reasonable detail and in
accordance with GAAP.
"Fixed Component" shall have the meaning given to that term in
Subparagraph 2.03(a) of the Lease Agreement.
"Foreign Plan" shall mean any employee benefit plan maintained by Lessee
or any of its Subsidiaries which is mandated or governed by any Governmental
Rule of any Governmental Authority other than the United States.
"FRB" shall mean the Board of Governors of the Federal Reserve System,
and any Governmental Authority succeeding to any of its principal functions.
"GAAP" shall mean generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
date of determination.
"Governmental Authority" shall mean any domestic or foreign national,
state or local government, any political subdivision thereof, any department,
agency, authority or bureau of any of the foregoing, or any other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without limitation, the
Federal Deposit Insurance Corporation, the FRB, the Comptroller of the Currency,
any central bank or any comparable authority.
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"Governmental Charges" shall mean, with respect to any Person, all
levies, assessments, fees, claims or other charges imposed by any Governmental
Authority upon such Person or any of its property or otherwise payable by such
Person.
"Governmental Rule" shall mean any law, rule, regulation, ordinance,
order, code, interpretation, judgment, decree, directive, guidelines, policy or
similar form of decision of any Governmental Authority.
"Guaranty Obligation" shall mean, as applied to any Person, any direct
or indirect liability, contingent or otherwise, of that Person:
(a) With respect to any Indebtedness, lease (other than an
operating lease), dividend, or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any property constituting direct or
indirect security therefor, or (ii) to advance or provide funds (A) for
the payment or discharge of any such primary obligation, or (B) to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, or
(iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation, or (iv) otherwise to assure or hold harmless the holder of
any such primary obligation against loss in respect thereof;
(b) (i) With respect to letters of credit, acceptances, bank
guaranties, surety bonds or similar instruments issued for the account
of that Person or as to which that Person is otherwise liable for
reimbursement of drawings, or (ii) as a partner or joint venturer in any
partnership or joint venture;
(c) With respect to "synthetic" leases; or
(d) Net obligations with respect to Rate Contracts, other than
Rate Contracts entered into in connection with a bona fide hedging
operation that provides offsetting benefits to such Person.
"Hazardous Substances" shall mean any toxic or hazardous substances,
materials, wastes, contaminants or pollutants, including asbestos, PCBs,
petroleum products and byproducts, and any substances defined or listed as
"hazardous substances," "hazardous materials," "hazardous wastes" or "toxic
substances" (or similarly identified), regulated under or forming the basis for
liability under any applicable Environmental Law.
"Indebtedness" shall mean, for any Person, without duplication:
(a) All indebtedness or other obligations of such Person for
borrowed money;
(b) All obligations of such Person for the deferred purchase
price of property or services (including obligations under credit
facilities which secure or finance such
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purchase price and obligations under "synthetic" leases), other than
trade payables incurred by such Person in the ordinary course of its
business on ordinary terms;
(c) All obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses;
(d) All indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are
limited to repossession or sale of such property);
(e) All obligations under Capital Leases;
(f) All Guaranty Obligations other than Guaranty Obligations
described in clauses (a)(iii) and (a)(iv) of the definition of "Guaranty
Obligation" where the primary obligor is a Subsidiary; and
(g) All indebtedness of another Person secured by any Lien upon
or in property owned by the Person for whom Indebtedness is being
determined, whether or not such Person has assumed or become liable for
the payment of such indebtedness of such other Person; provided, that if
such indebtedness is not assumed and recourse is limited solely to such
property, the Indebtedness incurred hereunder shall be valued at the
lesser of the principal amount of the obligation so secured or the fair
market value of the property subject to such Lien.
"Indemnified Taxes" shall mean all income taxes, stamp taxes, sales
taxes, use taxes, rental taxes, gross receipts taxes, property (tangible and
intangible) taxes, franchise taxes, excise taxes, value added taxes, turnover
taxes, withholding taxes and other taxes and Governmental Charges, together with
any and all assessments, penalties, fines, additions and interest thereon,
except:
(a) Any tax or other Governmental Charge (other than taxes or
Governmental Charges that are, or are in the nature of, sales, use,
rental, value added, transfer or property taxes with respect to the
Property or any transfer thereof) that are based on or measured by gross
or net income or gross or net receipts (including any minimum taxes or
taxes on, measured by or in the nature of capital, net worth, excess
profits, items of tax preference, capital stock, franchise, business
privilege or doing business taxes); provided, that this clause (a) 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;
(b) Any tax or other Governmental Charge that has not become a
Lien on any of the Property and that Lessee is contesting pursuant to
Paragraph 3.10 of the Lease Agreement (but only while Lessee is so
contesting such tax or Governmental Charge);
(c) Any tax or other Governmental Charge that is imposed upon an
Indemnitee as a result of the gross negligence or willful misconduct of
such Indemnitee
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itself, but not taxes or other Governmental Charges imposed as a result
of ordinary negligence of such Indemnitee;
(d) Any tax or other Governmental Charge to the extent it relates
to any act, event or omission that occurs with respect to the Property
after the termination of the Lease Agreement, redelivery or sale of the
Property in accordance with the terms of the Operative Documents and
payment by Lessee of all amounts due under the Operative Documents,
unless and to the extent such tax or Governmental Charge is attributable
to actions, omissions or events occurring in connection with the
exercise of remedies following an Event of Default; provided, that this
exclusion shall not apply to taxes or Governmental Charges that are
related to or arising from payments made under the Operative Documents,
or events, acts or omissions occurring or matters arising prior to or
simultaneous with the time set forth above; or
(e) Any tax or other Governmental Charge imposed on an Indemnitee
as a result of the failure of such Indemnitee to file any return or
report timely and in the form prescribed by Governmental Rules and to
pay any tax or Governmental Charge other than any withholding or other
tax which may be paid by Lessee directly;
(f) Any tax or other Governmental Charge imposed on an Indemnitee
as a result of a breach of a representation, warranty or covenant in the
Operative Documents by such Indemnitee or an Affiliate thereof (unless
caused by Lessee's breach of its representations, warranties or
covenants);
(g) Any tax or other Governmental Charge to the extent that such
tax or Governmental Charge is actually reimbursed to the Indemnitee by a
Person other than an Affiliate of such Indemnitee;
(h) Any tax or other Governmental Charge imposed on an Indemnitee
with respect to or after any voluntary transfer, sale, financing or
other voluntary disposition by any Lessor Party (other than in
connection with (1) the exercise by Lessee of its Term Purchase Option,
Partial Purchase Option, Expiration Date Purchase Option or any other
termination option or other purchase of Property by Lessee or its
Designated Assignee or exercise by Lessee of the Marketing Option, (2)
the occurrence of an Event of Default, (3) a Casualty or Condemnation
affecting the Property, or (4) an assignment, sublease, modification or
addition to the Property) of any interest in the Property or any
interest in, or created pursuant to, the Operative Documents or any
voluntary transfer of any interest of a Lessor Party other than with
respect to any transfer made pursuant to Paragraph 2.15 of the
Participation Agreement or otherwise requested by Lessee, as provided in
Paragraph 7.05(c) of the Participation Agreement or in connection with
the syndication of the Lessee Obligations after the Closing Date, an
Event of Default or the bankruptcy or insolvency of such Lessor Party;
(i) Any gift, inheritance or estate tax or similar Governmental
Charge;
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(j) Any tax or other Governmental Charge imposed on an Indemnitee
to the extent a credit or other reduction in taxes or Governmental
Charges is actually received by such Indemnitee as an offset against, or
reduction in a liability for, taxes or Governmental Charges that are not
Indemnified Taxes (but only to the extent that such credit is not taken
into account in calculating the indemnity payment on an after-tax
basis);
(k) Any tax or other Governmental Charge imposed on or with
respect to an Indemnitee as a result of transactions or activities of
such Indemnitee unrelated to the transactions or activities referred to
in or contemplated by the Operative Documents;
(l) Any tax or other Governmental Charge imposed on a direct or
indirect transferee, successor or assignee of a Lessor Party to the
extent of the excess of such tax or Governmental Charges over the amount
of such tax or Governmental Charge that would have been imposed had
there not been a transfer by the original Lessor Party of an interest
arising under the Operative Documents; provided, that there shall not be
excluded under this clause (l) any such tax or Governmental Charge if
the direct or indirect transferee, successor or assignee of such Lessor
Party acquired its interest pursuant to Paragraph 2.15 of the
Participation Agreement or otherwise at the request of Lessee, pursuant
to Paragraph 7.05(c) of the Participation Agreement or in connection
with the syndication of the Lessee Obligations after the Closing Date,
an Event of Default or the bankruptcy or insolvency of such Lessor
Party;
(m) Any tax which is a withholding tax if such tax is imposed in
respect of payments to a Lessor Party that is required to deliver a
United States Internal Revenue Service Form W-8BEN or W-8ECI if such
form is not effective to entitle such Lessor Party to receive payment
under the Operative Documents without deduction or withholding of United
States federal income tax as a result of an act or omission of such
Lessor Party or such Lessor Party does not otherwise comply with
Subparagraph 2.13(b) of the Participation Agreement;
provided, however, that, the exclusions in clauses (a), (h) and (k)
shall not apply to the extent that such taxes or Governmental Charges
exceed the amount of such taxes or Governmental Charges that would have
been imposed had the transactions contemplated by the Operative
Documents been characterized as a loan secured by the Property; and
provided, further, that any tax or Governmental Charge excluded from the
definition of "Indemnified Tax" in any one of the foregoing clauses (a)
through (m) shall not be construed as constituting an Indemnified Tax by
any provision of the aforementioned clauses.
"Indemnitees" shall mean the Lessor Parties and their Affiliates and
their respective directors, officers, employees, agents and advisors.
"Indemnity Amount" shall have the meaning given to that term in
Subparagraph 3.02(g) of the Purchase Agreement.
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"Initial Acquisition Advance " shall have the meaning given to that term
in Subparagraph 2.01(b) of the Participation Agreement.
"Initial Advance" shall have the meaning given to that term in
Subparagraph 2.03(a) of the Participation Agreement.
"Initial Advance Request" shall have the meaning given to that term in
Subparagraph 2.03(a) of the Participation Agreement.
"Initial Bid" shall have the meaning given to that term in Subparagraph
3.02(b) of the Purchase Agreement.
"Initial Marketing Period" shall have the meaning given to that term in
Subparagraph 3.02(b) of the Purchase Agreement.
"Installation Period" shall mean any of four quarterly periods during
which Property is delivered or installed at a Property Site, with the first
Installation Period commencing on April 2, 2000, and ending on July 2, 2000, the
second Installation Period commencing on July 3, 2000, and ending on October 1,
2000, the third Installation Period commencing on October 2, 2000, and ending on
December 31, 2000, and the fourth Installation Period commencing on January 1,
2001, and ending on April 1, 2001, provided, however, that no Installation
Period shall extend beyond the Commitment Termination Date.
"Insurance Requirements" shall mean all terms, conditions and
requirements imposed by the policies of insurance which Lessee is required to
maintain by the Operative Documents.
"IRC" shall mean the Internal Revenue Code of 1986.
"IRS" shall mean the Internal Revenue Service, or any successor thereto.
"Lease Agreement" shall have the meaning given to that term in
Subparagraph 2.01(a) of the Participation Agreement.
"Lease Supplement" shall have the meaning given to that term in
Subparagraph 2.01(a) of the Lease Agreement.
"Lease Supplement Date" shall mean, with respect to any Lease
Supplement, the Closing Date with respect to Lease Supplement No. 1 and the last
day of the Installation Period for which any subsequent Lease Supplement is
delivered.
"Lease Supplement Term" shall mean, with respect to each Lease
Supplement, the period (a) beginning on the Closing Date for Lease Supplement
No. 1 and the Lease Supplement Date for each other Lease Supplement and (b)
ending on the Expiration Date of such Lease Agreement.
"Lessee" shall mean LSI Logic Corporation, acting in its capacity as
Lessee under the Operative Documents.
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"Lessee Obligations" shall mean and include all liabilities and
obligations owed by Lessee to any Lessor Party under any of the Operative
Documents of every kind and description and however arising (whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising), including the obligation of Lessee to pay Rent with respect
to any Lease Supplement (or, if a Lease Supplement has not been executed with
respect to any Installation Period, the Advances made during such Installation
Period), to pay the Residual Value Guaranty Amount, Indemnity Amount and/or
Outstanding Lease Amount with respect to any Lease Supplement or Installation
Period and to pay all interest, fees, charges, expenses, attorneys' fees and
accountants' fees chargeable to Lessee or payable by Lessee under the Operative
Documents.
"Lessee Security Documents" shall mean and include the Lease Agreement
and all other instruments, agreements, certificates, opinions and documents
(including Uniform Commercial Code financing statements and fixture filings and
landlord waivers) delivered to any Lessor Party in connection with any
Collateral or to secure the Lessee Obligations.
"Lessor Agent" shall mean ABN AMRO, acting in its capacity as agent for
the Lessors under the Operative Documents.
"Lessors" shall mean ABN AMRO Bank N.V., KeyBank National Association,
FBTC Leasing Corp. and each other financial institution from time to time listed
as a lessor in Schedule I hereto, as amended from time to time, each acting in
its capacity as a Lessor under the Operative Documents.
"Lessor Liens" shall mean any Lien, true lease or sublease or
disposition of title in any of the Property arising as a result of (a) any claim
against any Lessor Party not resulting from or related to the transactions
referred to in the Operative Documents, (b) any act or omission of any Lessor
Party in violation of or not permitted by any of the terms of the Operative
Documents, (c) any claim against any Lessor Party with respect to taxes,
transaction expenses or other obligations against which Lessee is not required
to indemnify the Lessor Parties pursuant to the Operative Documents, (d) any
claim against any Lessor Party arising out of any transfer or assignment by any
Lessor Party of all or any portion of the interest of such Lessor Party in the
Property or the Operative Documents unless permitted pursuant to and in
accordance with any of the Operative Documents, or (e) any Liens granted by any
Lessor or Lessor Agent to Agent or any Participant to secure the Lessor
Obligations.
"Lessor Obligations" shall mean and include all liabilities and
obligations owed by Lessors to Agent or any Participant under any of the
Operative Documents of every kind and description and however arising (whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising), including the obligation of Lessors to share payments
made by Lessee to Lessors under the Operative Documents as provided in Paragraph
2.06 of the Participation Agreement.
"Lessor Parties" shall mean Lessors, Lessor Agent, the Participants and
Agent.
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"Lessor Security Agreement" shall have the meaning given to that term in
Subparagraph 2.11(b) of the Participation Agreement.
"LIBO Rate" shall mean, with respect to any Rental Period for any
Portion of the Outstanding Lease Amount for any Lease Supplement (or, if a Lease
Supplement has not been executed with respect to any Installation Period, the
Advances made during such Installation Period), a rate per annum equal to the
quotient (rounded upward if necessary to the nearest 1/100 of one percent) of
(a) the arithmetic mean (rounded upward if necessary to the nearest 1/16 of one
percent) of the rates per annum appearing on Telerate Page 3750 (or any
successor publication) on the second Business Day prior to the first day of such
Rental Period at or about 11:00 A.M. (London time) (for delivery on the first
day of such Rental Period) for a term comparable to such Rental Period (or for a
term of one (1) month for any Rental Period that is less than one (1) month but
is at least seven (7) days), divided by (b) one minus the Reserve Requirement in
effect from time to time. If for any reason rates are not available as provided
in clause (a) of the preceding sentence, the rate to be used in clause (a) shall
be, at Agent's discretion, (i) the rate per annum at which Dollar deposits are
offered to ABN AMRO in the London interbank market or (ii) the rate at which
Dollar deposits are offered to ABN AMRO in, or by ABN AMRO to major banks in,
any offshore interbank market selected by Agent, in each case on the second
Business Day prior to the commencement of such Rental Period at or about 10:00
A.M. (New York time) (for delivery on the first day of such Rental Period) for a
term comparable to such Rental Period (or for a term of one (1) month for any
Rental Period that is less than one (1) month but is at least seven (7) days)
and in an amount approximately equal to ABN AMRO's Proportionate Share of the
applicable Portion, as the case may be. The LIBO Rate shall be adjusted
automatically as of the effective date of any change in the Reserve Requirement.
"LIBOR Rental Rate" shall mean, for any Rental Period and Portion of any
Lease Supplement (or, if a Lease Supplement has not been executed with respect
to any Installation Period, the Advances made during such Installation Period),
the per annum rate equal to the LIBO Rate for such Rental Period and Portion,
plus the Applicable Margin, such rate to change from time to time during such
period as the Applicable Margin shall change.
"Lien" shall mean any mortgage, deed of trust, pledge, security
interest, assignment, deposit arrangement, charge or encumbrance, lien
(statutory or other), or other preferential arrangement (including any
conditional sale or other title retention agreement, or any financing lease
having substantially the same economic effect as any of the foregoing or any
agreement to give any security interest, but excluding any operating lease,
regardless of whether precautionary filings are made in respect thereof under
Section 9408 of the California Uniform Commercial Code).
"Liquidation Appraised Value" shall mean, with respect to any Property,
the Fair Market Value of such Property as of the original Scheduled Expiration
Date for the Lease Supplement in which such Property is included and each
subsequent Scheduled Expiration Date assuming such Scheduled Expiration Date is
extended by the exercise of each Renewal Option, as determined by a Renewal Date
Appraisal Update as of a recent date prior to the date such Renewal Option is
exercised. In determining the Liquidation Appraised Values with respect to any
Property, the
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Fair Market Value of such Property shall be the gross proceeds which could be
expected from the sale of such Property held under orderly conditions given a
period of time in which to find a purchaser considering a complete sale of all
of the Property subject to such Lease Supplement, as is, where is, and with all
sales made free and clear of all Liens.
"Marketing Option" shall have the meaning given to that term in
Subparagraph 3.01(a) of the Purchase Agreement.
"Marketing Option Event of Default" shall mean any Event of Default
other than a Non-Marketing Option Event of Default.
"Material Adverse Effect" shall mean (a) an adverse change in, or an
adverse effect upon, the operations, business, properties, condition (financial
or otherwise) or prospects of Lessee or Lessee and its Subsidiaries, taken as a
whole, which could reasonably be expected to result in a breach of any of the
covenants contained in Paragraph 5.03 of the Participation Agreement; (b) an
adverse effect upon the legality, validity, binding effect or enforceability of
any Operative Document or any Lessor Party's security interests, Liens or other
rights in the Property and the Collateral or the perfection or priority of such
security interests, Liens or rights; or (c) an adverse effect which reduces the
value of the Property and the Collateral by ten percent (10%) in the aggregate
(other than as a result of ordinary wear and tear, depreciation or changes in
the market for such Property).
"maturity" shall mean, with respect to any Rent, interest, fee or other
amount payable by Lessee under the Operative Documents, the date such Rent,
interest, fee or other amount becomes due, whether upon the stated maturity or
due date, upon acceleration or otherwise.
"Modifications" shall have the meaning given to that term in
Subparagraph 3.01(c) of the Lease Agreement.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
"Non-Marketing Option Event of Default" shall mean an Event of Default
arising only under Subparagraph 5.01(o) of the Lease Agreement.
"Notice of Expiration Date Purchase Option Exercise" shall have the
meaning given to that term in Paragraph 3.01 of the Purchase Agreement.
"Notice of Marketing Option Exercise" shall have the meaning given to
that term in Paragraph 3.01 of the Purchase Agreement.
"Notice of Partial Purchase Option Exercise" shall have the meaning
given to that term in Subparagraph 2.02(a) of the Purchase Agreement.
"Notice of Renewal Option Exercise" shall have the meaning given to that
term in Subparagraph 2.02(b) of the Lease Agreement.
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"Notice of Rental Period Selection" shall have the meaning given to that
term in Subparagraph 2.03(a) of the Lease Agreement.
"Notice of Term Purchase Option Exercise" shall have the meaning given
to that term in Subparagraph 2.01(a) of the Purchase Agreement.
"Operative Documents" shall mean and include the Participation
Agreement, the Lease Agreement, the Purchase Agreement, the Lessee Security
Documents, the Lessor Security Agreement and the Agent's Letter; all other
notices, requests, certificates, documents, instruments and agreements delivered
to any Lessor Party pursuant to Paragraph 3.01 or 3.02 of the Participation
Agreement; and all notices, requests, certificates, bills of sale, documents,
instruments and agreements delivered to any Lessor Party in connection with any
of the foregoing on or after the date of the Participation Agreement. (Without
limiting the generality of the preceding definition, the term "Operative
Documents" shall include all written waivers, amendments and modifications to
any of the notices, requests, certificates, documents, instruments and
agreements referred to therein.)
"Outstanding Equity Amount" shall mean, on any date with respect to any
Lease Supplement (or, if a Lease Supplement has not been executed with respect
to any Installation Period, the Advances made during such Installation Period),
the remainder of (a) the sum of the Equity Portions of all Advances made on or
prior to such date with respect to such Lease Supplement or Installation Period,
minus (b) the sum of all Reduction Payments paid on or prior to such date to be
applied to the Equity Portion of the Outstanding Lease Amount of such Lease
Supplement or Installation Period.
"Outstanding Equity Participation Amount" shall mean, with respect to
any Equity Participant on any date with respect to any Lease Supplement (or, if
a Lease Supplement has not been executed with respect to any Installation
Period, the Advances made during such Installation Period), the remainder of (a)
such Participant's Equity Portion of all Advances made on or prior to such date
with respect to such Lease Supplement or Installation Period, minus (b) such
Participant's share of all Reduction Payments paid on or prior to such date to
be applied to the Equity Portion of the Advances made with respect to such Lease
Supplement or Installation Period.
"Outstanding Lease Amount" shall mean, on any date with respect to any
Lease Supplement (or, if a Lease Supplement has not been executed with respect
to any Installation Period, the Advances made during such Installation Period),
the remainder of (a) the sum of all Advances made by Lessors on or prior to such
date with respect to such Lease Supplement or Installation Period, minus (b) the
sum of all Reduction Payments paid on or prior to such date to be applied to
such Lease Supplement or Installation Period.
"Outstanding Participation Amount" shall mean, with respect to any
Participant on any date with respect to any Lease Supplement (or, if a Lease
Supplement has not been executed with respect to any Installation Period, the
Advances made during such Installation Period), the remainder of (a) the sum of
the portions of all Advances funded by such Participant on or prior to such date
with respect to such Lease Supplement or Installation Period, minus (b) the sum
of
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such Participant's share of all Reduction Payments paid to be applied to the
Outstanding Lease Amount of such Lease Supplement or Installation Period on or
prior to such date.
"Outstanding Tranche A Amount" shall mean, on any date with respect to
any Lease Supplement (or, if a Lease Supplement has not been executed with
respect to any Installation Period, the Advances made during such Installation
Period), the remainder of (a) the sum of the Tranche A Portions of all Advances
made on or prior to such date with respect to such Lease Supplement or
Installation Period, minus (b) the sum of all Reduction Payments paid on or
prior to such date to be applied to the Tranche A Portion of the Outstanding
Lease Amount of such Lease Supplement or Installation Period.
"Outstanding Tranche A Participation Amount" shall mean, with respect to
any Tranche A Participant on any date with respect to any Lease Supplement (or,
if a Lease Supplement has not been executed with respect to any Installation
Period, the Advances made during such Installation Period), the remainder of (a)
such Participant's Tranche A Portion of all Advances made on or prior to such
date with respect to such Lease Supplement or Installation Period, minus (b)
such Participant's share of all Reduction Payments paid on or prior to such date
to be applied to the Tranche A Portion of the Advances made with respect to such
Lease Supplement or Installation Period.
"Outstanding Tranche B Amount" shall mean, on any date with respect to
any Lease Supplement (or, if a Lease Supplement has not been executed with
respect to any Installation Period, the Advances made during such Installation
Period), the remainder of (a) the sum of the Tranche B Portions of all Advances
made on or prior to such date with respect to such Lease Supplement or
Installation Period, minus (b) the sum of all Reduction Payments paid on or
prior to such date to be applied to the Tranche B Portion of the Outstanding
Lease Amount of such Lease Supplement or Installation Period.
"Outstanding Tranche B Participation Amount" shall mean, with respect to
any Tranche B Participant on any date with respect to any Lease Supplement (or,
if a Lease Supplement has not been executed with respect to any Installation
Period, the Advances made during such Installation Period), the remainder of (a)
such Participant's Tranche B Portion of all Advances made on or prior to such
date with respect to such Lease Supplement or Installation Period, minus (b)
such Participant's share of all Reduction Payments paid on or prior to such date
to be applied to the Tranche B Portion of the Advances made with respect to such
Lease Supplement or Installation Period.
"Paid Acquisition Price" shall have the meaning given to that term in
Subparagraph 2.01(b) of the Participation Agreement.
"Partial Purchase Date" shall have the meaning given to that term in
Subparagraph 2.02(a) of the Purchase Agreement.
"Partial Purchase Option" shall have the meaning given to that term in
Paragraph 2.02 of the Purchase Agreement.
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"Participants" shall mean the financial institutions from time to time
listed in Schedule I to the Participation Agreement (as amended from time to
time pursuant to Subparagraph 7.05(b) of the Participation Agreement or
otherwise), acting in their capacities as Participants under the Operative
Documents.
"Participation Agreement" shall mean the Amended and Restated
Participation Agreement, dated as of April 18, 2000 among Lessee and the Lessor
Parties.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" shall mean any-employee pension benefit plan covered by
Title IV of ERISA (other than a Multiemployer Plan) that is maintained for
employees of Lessee or any ERISA Affiliate or with regard to which Lessee or an
ERISA Affiliate is a contributing sponsor within the meaning of Sections
4001(a)(13) or 4069 of ERISA.
"Permitted Installation Expenses" shall mean, with respect to any
Property, the costs and expenses payable by Lessee in connection with and
directly related to shipping such Property to a Property Site (including
insurance of such Property in transit), installation of such Property at a
Property Site and warranties or maintenance plans for such Property which were
not included in the Acquisition Price for such Property.
"Permitted Investments" shall mean any investments selected by Lessee in
accordance with its Corporate Cash Investment Policy as adopted by Lessee on
August 16, 1996 (as the same may be amended from time to time with the approval
of Agent); provided that any investments not meeting the standards set forth in
such Corporate Cash Investment Policy shall nevertheless be deemed to be
"Permitted Investments' if they do not exceed at any time, in the aggregate, ten
percent (10%) of all Permitted Investments at such time.
"Permitted Liens" shall mean:
(a) Liens which may at any time be granted in favor of any Lessor
Party to secure the Lessee Obligations;
(b) Liens in existence as of the date of this Agreement listed on
Schedule 5.02(a), and any substitutions or renewals thereof, provided
that (i) any substitute or renewal Lien is limited to the property
encumbered by the existing Lien, and (ii) the principal amount of the
obligations secured thereby is not increased;
(c) Liens for current taxes, assessments or other Governmental
Charges which are not delinquent or remain payable without any penalty
or which are being contested in good faith via appropriate proceedings,
with appropriate reserves established therefor in accordance with GAAP;
(d) Liens in connection with workers' compensation, unemployment
insurance or other social security obligations;
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(e) Mechanics', workers', materialmen's, landlords', carriers' or
other like Liens arising in the ordinary and normal course of business
with respect to obligations which are not past due or which are being
contested in good faith via appropriate proceedings, with appropriate
reserves established therefor in accordance with GAAP;
(f) Purchase money security interests (including by way of
installment sales and title retention agreements) in personal or real
property hereafter acquired when the security interest is granted
contemporaneously with such acquisition (or within nine months
thereafter), Liens created to secure the cost of construction or
improvement of property and Liens created to secure Indebtedness
incurred to finance such purchase price or cost (including Liens of
Lessee in favor of the United States or any state, or any department,
agency, instrumentality or political subdivision thereof, securing any
real property or other assets in connection with the financing of
industrial revenue bond facilities or of any equipment or other property
designed primarily for the purpose of air or water pollution control);
provided that (i) any such Lien shall attach only to the property so
purchased. constructed or improved, together with attachments and
accessions thereto, and rents, proceeds, products, substitutions,
replacements and profits thereof and attachments and accessories
thereto, and (ii) the amount of Indebtedness secured by any such Lien
shall not exceed the purchase or construction price of such property
plus transaction costs and financing charges relating to the acquisition
or construction thereof;
(g) Liens arising from attachments or similar proceedings,
pending litigation, judgments or taxes or assessments in any such event
whose validity or amount is being contested in good faith by appropriate
proceedings and for which adequate reserves have been established and
are maintained in accordance with GAAP;
(h) Liens arising in the ordinary course of business or by
operation of law, not securing Indebtedness, but securing such
obligations as (i) judgments or awards, which (A) are covered by
applicable insurance or (B) have been outstanding less than thirty (30)
consecutive days, (ii) interests of landlords or lessors under leases of
real or personal property entered into in the ordinary course of
business arising by contract or operation of law, (iii) Liens in favor
of customs and revenue authorities which secure payment of customs in
connection with the importation of goods, (iv) Liens which constitute
rights of set-off of a customary nature or bankers' liens on amounts on
deposit, whether arising by contract or by operation of law, in
connection with arrangements entered into with depository institutions
in the ordinary course of business, (v) such minor defects,
irregularities, encumbrances, easements, rights of way, and clouds on
title as normally exist with respect to similar properties which do not,
individually or in the aggregate, materially impair the property
affected thereby or the use thereof and (vi) subleases, licenses, and
sublicenses granted to third parties, the granting of which does not
result in a Material Adverse Effect;
(i) Liens securing reimbursement obligations of Lessee under
documentary letters of credit; provided that such Liens shall attach
only to documents relating to such letters of credit, goods covered
thereby and products and proceeds thereof;
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(j) Liens on insurance policies or the proceeds of insurance
policies incurred solely to secure the financing of premiums owing with
respect thereto;
(k) Liens existing on property (including the proceeds and
accessions thereto) acquired by Lessee (including Liens on assets of any
corporation at the time it becomes a Subsidiary), but excluding any
Liens created in contemplation of any such acquisition;
(l) Liens encumbering customary initial deposits and margin
deposits, and other Liens that are within the general parameters
customary in the industry and incurred in the ordinary course of
business in connection with Rate Contracts or portfolio investments
maintained with financial intermediaries; and
(m) Permitted Property Liens in the Property.
"Permitted Property Liens" shall have the meaning given to that term in
Subparagraph 3.07(a) of the Lease Agreement.
"Permitted Transaction Expenses" shall mean the following costs and
expenses to the extent payable by Lessee in connection with and directly related
to the preparation, execution and delivery of the Operative Documents and the
transactions contemplated thereby:
(a) The reasonable fees and expenses of counsel for Lessor Agent
and Agent incurred in connection with the preparation, negotiation,
execution and delivery of the Operative Documents;
(b) The reasonable fees and expenses incurred in recording,
registering or filing any of the Operative Documents;
(c) The reasonable costs and other expenses relating to the
closing of the transactions contemplated by the Operative Documents on
the Closing Date, the date of any Advance or any Lease Supplement Date;
(d) The reasonable fees and expenses of required appraisals; and
(e) The reasonable costs and expenses of syndication (excluding
fees payable by Agent to Participants under Agent's Letter).
"Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, an
unincorporated association, a limited liability company, a joint venture, a
trust or other entity or a Governmental Authority.
"Plan" shall mean an employee benefit plan (as defined in Section 3(3)
of ERISA) which Lessee or any ERISA Affiliate sponsors or maintains, or to which
Lessee or any ERISA Affiliate makes, is making, or is obligated to make
contributions, and includes any Pension Plan.
"Portion" shall mean a portion of the Outstanding Lease Amount of any
Lease Supplement (or, if a Lease Supplement has not been executed with respect
to any Installation
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Period, the Advances made during such Installation Period) as determined
pursuant to Subparagraph 2.03(a) of the Lease Agreement. Prior to the end of any
Installation Period and at any time thereafter when the Outstanding Lease Amount
of any Lease Supplement is not divided into two or more Portions pursuant to
Subparagraph 2.03(a) of the Lease Agreement, any reference to a Portion shall
mean the total Outstanding Lease Amount of such Lease Supplement or Installation
Period.
"Pricing Grid" shall mean Schedule II to the Participation Agreement.
"Pricing Period" shall mean (a) the period which commences on the date
of this Agreement and ends on the date Lessee delivers to Agent the Pricing
Ratio Certificate for the two fiscal quarter period ending June 30, 2000, (b)
the period which commences on the day following the last day of the first
Pricing Period and ends on the last day of the current fiscal quarter, and (c)
each consecutive calendar quarter thereafter which commences on the day
following the last day of the immediately preceding calendar quarter and ends on
the last day of that calendar quarter.
"Pricing Ratio" shall mean, as of the last day of any fiscal quarter,
the ratio of (a) Senior Debt as of such date to (b) annualized Consolidated
EBITDA for such fiscal quarter and the immediately preceding fiscal quarter.
"Pricing Ratio Certificate" shall have the meaning given to that term in
clause (iv) of Subparagraph 5.01(a) of the Participation Agreement.
"Prime Rate" shall mean the per annum rate publicly announced by ABN
AMRO from time to time at its Chicago Office. The Prime Rate is determined by
ABN AMRO from time to time as a means of pricing credit extensions to some
customers and is neither directly tied to any external rate of interest or index
nor necessarily the lowest rate of interest charged by ABN AMRO at any given
time for any particular class of customers or credit extensions. Any change in
the Base Rate resulting from a change in the Prime Rate shall become effective
on the Business Day on which each change in the Prime Rate occurs.
"Property" shall have the meaning given to that term in Paragraph 2.01
of the Lease Agreement.
"Property Collateral" shall have the meaning given to that term in
Paragraph 2.06(a) of the Lease Agreement.
"Property Site" shall mean any of the following locations where the
Property may be delivered and installed: (a) 23400 Northeast Glisan Street,
Gresham, Oregon; (b) 3105 Alfred Street, Santa Clara, California; and (c) 1635
Aeroplaza Drive, Colorado Springs, Colorado.
"Proportionate Share" shall mean for each Participant (a) with respect
to each Advance, the percentage set forth under the caption "Proportionate
Share" opposite such Participant's name on Part A of Schedule I, and (b) with
respect to each Lease Supplement, the percentage set forth under the caption
"Proportionate Share" opposite such Participant's name on the schedule attached
to each Lease Supplement, or if changed, such percentage as may be set forth for
such
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Participant in the Register. The Proportionate Share of each Participant with
respect to any Advance or Lease Supplement shall equal the sum of such
Participant's Tranche A Proportionate Share, Tranche B Proportionate Share and
Equity Proportionate Share with respect to such Advance or Lease Supplement.
"Purchase Agreement" shall have the meaning given to that term in
Subparagraph 2.01(a) of the Participation Agreement.
"Purchase Date Appraised Value" shall mean, with respect to any
Property, the Fair Market Value of such Property on the date such Property is
purchased by Lessors, as determined by the Closing Date Appraisal or any
Appraisal delivered by Lessors pursuant to Paragraph 3.02(e) of the
Participation Agreement. In determining the Purchase Date Appraised Values with
respect to any Property, the Fair Market Value of such Property shall include
Permitted Installation Expenses.
"Purchase Documents" shall have the meaning given to that term in
Subparagraph 4.01(a) of the Purchase Agreement.
"Purchaser" shall have the meaning given to that term in Subparagraph
4.01(a) of the Purchase Agreement.
"Rate Contracts" shall mean interest rate swaps, caps, floors and
collars, currency swaps, or other similar financial products designed to provide
protection against fluctuations in interest, currency or exchange rates.
"Reduction Payments" shall mean, with respect to each Lease Supplement
(or, if a Lease Supplement has not been executed with respect to any
Installation Period, the Advances made during such Installation Period), each of
the following to the extent paid by or on behalf of Lessee or otherwise applied
to reduce the Outstanding Lease Amount of such Lease Supplement or Installation
Period pursuant to the Operative Documents:
(a) The Fixed Component of Base Rent for such Lease Supplement;
(b) Casualty and Condemnation Proceeds received with respect to
Property subject to such Lease Supplement or Installation Period;
(c) The purchase price paid for the Property subject to such
Lease Supplement or Installation Period (or any portion thereof) by
Lessee, an Assignee Purchaser or a Designated Purchaser pursuant to the
Purchase Agreement;
(d) The Residual Value Guaranty and Indemnity Amount paid by
Lessee pursuant to the Purchase Agreement with respect to such Lease
Supplement or Installation Period;
(e) Any proceeds received by Lessee from any sale of the Property
subject to such Lease Supplement or Installation Period after the
Expiration Date for such Lease Supplement or the Termination Date of
such Installation Period if such Property is
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retained by Lessors after such Expiration Date or Termination Date
pursuant to the applicable Purchase Agreement; and
(f) Any proceeds received by any Lessor Party from the exercise
of any of its remedies under the Operative Documents after the
occurrence of an Event of Default under the Lease Agreement.
"Register" shall have the meaning given to that term in Subparagraph
7.05(b)(ii) of the Participation Agreement.
"Related Agreements" shall mean all agreements and general intangibles
(in each case, excluding Related Goods), now or hereafter necessary for the use,
operation or maintenance of any Property or otherwise relating to any Property,
including (a) the Acquisition Agreements, (b) all records, files, insurance
policies, guarantees and warranties relating to such Property, and (c) all
computer software and intellectual property, guaranties and warranties and
documents relating to such Property.
"Related Goods" shall mean (a) all goods other than the Equipment
financed by any Acquisition Advance, (b) all spare parts for the Equipment and
all other goods now or hereafter intended for the repair, replacement,
alteration, addition or improvement of or to any of the Property, (c) all
operation manuals, service manuals, maintenance manuals and other materials
regarding the operation, service or maintenance of the Equipment provided by the
Suppliers of the Equipment or others and (d) all books and records relating to
the Property in any and all tangible forms.
"Related Permits" shall mean all licenses, authorizations, certificates,
consents, approvals and other permits, now or hereafter necessary for the use,
operation or maintenance of the Property or otherwise relating to the Property.
"Renewal Date Appraised Value" shall mean, with respect to any Property,
the Fair Market Value of such Property on or as of a recent date prior to the
third anniversary of the Closing Date (in the case of the exercise of the first
Renewal Option) or the fourth anniversary of the Closing Date (in the case of
the exercise of the second Renewal Option), as determined by a Renewal Date
Appraisal Update.
"Renewal Date Appraisal Update" shall mean a "desktop" Appraisal
performed without any inspection or testing of the Property to update the
Closing Date Appraisal and any Appraisal delivered pursuant to Subparagraph
3.02(e) of the Participation Agreement based on an update of the information
previously provided in connection with the earlier Appraisal of the applicable
Property and current market conditions to be delivered at the time Lessee
exercises any Renewal Option that assesses on or as of a recent date prior to
the third anniversary of the Closing Date (in the case of the exercise of the
first Renewal Option) or the fourth anniversary of the Closing Date (in the case
of the exercise of the second Renewal Option) (a) the Fair Market Value and
remaining useful life of all of the Property subject to the Lease Supplement
being renewed and (ii) the Fair Market Value and remaining useful life of such
Property on the Scheduled Expiration Date for such Lease Supplement as extended
by the exercise of such Renewal Option and
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assuming such Scheduled Expiration Date is extended by the exercise of any
further Renewal Option.
"Renewal Option" shall have the meaning given to that term in
Subparagraph 2.02(b) of the Lease Agreement.
"Rent" shall mean collectively Base Rent and Supplemental Rent.
"Rental Periods" shall mean, with respect to any Portion of any Lease
Supplement (or, if a Lease Supplement has not been executed with respect to any
Installation Period, the Advances made during such Installation Period), the
time period determined pursuant to Subparagraph 2.03(a) of the Lease Agreement
which commences on the first day of such Portion and ends on the last day of
such time period, and thereafter, each subsequent time period determined
pursuant to Subparagraph 2.03(a) of the Lease Agreement which commences on the
last day of the immediately preceding time period and ends on the last day of
that time period.
"Rental Rate" shall have the meaning given to that term in Subparagraph
2.03(a) of the Lease Agreement.
"Replaced Property" shall have the meaning given to that term in
Subparagraph 3.01(b) of the Lease Agreement.
"Replacement Property " shall have the meaning given to that term in
Subparagraph 3.01(b) of the Lease Agreement.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations promulgated thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
"Required Participants" shall mean (a) at any time the aggregate
Outstanding Lease Amounts of all Lease Supplements are greater than $0,
Participants whose aggregate Outstanding Participation Amounts in all Lease
Supplements equal or exceed fifty-one percent (51%) or more of the aggregate
Outstanding Lease Amounts of all Lease Supplements at such time and (b) at any
time the aggregate Outstanding Lease Amounts of all Lease Supplements are $0,
Participants whose Proportionate Shares equal or exceed fifty-one percent (51%).
"Requirement of Law" applicable to any Person shall mean (a) any
Governmental Rule applicable to such Person, (b) any license, permit, approval
or other authorization granted by any Governmental Authority to or for the
benefit of such Person or (c) any judgment, decision or determination of any
Governmental Authority or arbitrator, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any of its
property is subject.
"Reserve Requirement" shall mean, with respect to any day in any Rental
Period for any Lease Supplement (or, if a Lease Supplement has not been executed
with respect to any Installation Period, the Advances made during such
Installation Period), the aggregate of the reserve requirement rates (expressed
as a decimal) in effect on such day for eurocurrency funding (currently referred
to as "Eurocurrency liabilities" in Regulation D of the FRB) maintained by a
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member bank of the Federal Reserve System. As used herein, the term "reserve
requirement" shall include, without limitation, any basic, supplemental or
emergency reserve requirements imposed on any Participant by any Governmental
Authority.
"Residual Value Guaranty Amount" shall have the meaning given to that
term in Subparagraph 3.02(g) of the Purchase Agreement.
"Responsible Officer" shall mean, with respect to any Person, the chief
executive officer, the president, the chief financial officer or the treasurer
of such Person, or any other senior officer of such Person having substantially
the same authority and responsibility; or, with respect to compliance with
financial covenants, the chief financial officer or the treasurer of any such
Person, or any other senior officer of such Person involved principally in the
financial administration or controllership function of such Person and having
substantially the same authority and responsibility.
"Scheduled Expiration Date" shall have the meaning given to that term in
Paragraph 2.02 of the Lease Agreement.
"Scheduled Rent Payment Date" shall have the meaning given to that term
in Subparagraph 2.03(a) of the Lease Agreement.
"SEC" shall mean the Securities and Exchange Commission, or any
successor thereto.
"Secondary Marketing Period" shall have the meaning given to that term
in Subparagraph 3.02(b) of the Purchase Agreement.
"Senior Debt" shall mean all Indebtedness, other than Subordinated Debt,
of Lessee and its Subsidiaries on a consolidated basis.
"Significant Subsidiary" shall mean, at any time, any Subsidiary of
Lessee having at such time total assets, as of the last day of the preceding
fiscal quarter, having a net book value in excess of $10,000,000 (exclusive of
intercompany assets and liabilities), based upon Lessee's most recent annual or
quarterly Financial Statements delivered to Agent under Subparagraph 5.01(a).
"Solvent" shall mean, with respect to any Person, that as of the date of
determination, (a) the then fair saleable value of the property of such Person
is (i) greater than the total amount of liabilities (including reasonably
anticipated liabilities with respect to contingent obligations) of such Person
and (ii) greater than the amount that will be required to pay the probable
liabilities on such Person's then existing debts as they become absolute and
matured considering all financing alternatives and potential asset sales
reasonably available to such Person, and (b) such Person has not incurred and
does not intend to incur, or does not believe that it will incur, debts beyond
its ability to pay such debts as they become due.
"Subordinated Debt" shall mean any Indebtedness of Lessee or any of its
Subsidiaries the stated maturity date of any scheduled principal payment of
which is not earlier than the first anniversary of the last Scheduled Expiration
Date of any Lease Supplement and which is
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subordinated on terms and conditions reasonably acceptable to Required
Participants; provided, that any Subordinated Debt having subordination
provisions no more favorable to the holder than those attached as Exhibit I
hereto shall be deemed to be reasonably acceptable to Required Participants for
the purposes hereof. Without limiting the foregoing, the terms of such
Subordinated Debt shall not include any requirement that the holders thereof
approve the issuance of the Senior Debt or Designated Senior Debt (as defined in
Exhibit I) entitled to the benefit of such subordination provisions.
"Subsidiary" shall mean any corporation, association, partnership, joint
venture or other business entity of which more than fifty percent (50%) of the
voting stock or other equity interest is owned directly or indirectly by any
Person or one or more of the other Subsidiaries of such Person or a combination
thereof.
"Supplemental Rent" shall have the meaning given to such term in
Subparagraph 2.03(b) of the Lease Agreement.
"Suppliers shall mean the manufacturers, vendors and other Persons with
whom Lessee has entered into Acquisition Agreements for the purchase of the
Property.
"Swap Termination Value" shall mean, in respect of any one or more Rate
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Rate Contracts, (a) for any date on or after
the date such Rate Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Rate Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Rate Contracts (which may include any Participant).
"Termination Date" shall mean, with respect to each Lease Supplement
(or, if a Lease Supplement has not been executed with respect to any
Installation Period, the Advances made during such Installation Period), (a) the
date set forth in a Notice of Term Purchase Option as the Scheduled Rent Payment
Date on which such Lease Supplement or Installation Period will be terminated by
Lessee pursuant to Paragraph 4.01 of the Lease Agreement and the Property
subject to such Lease Supplement will be purchased by Lessee pursuant to Section
2 of the Purchase Agreement or (b) the date set forth in a written notice
delivered by Lessor Agent to Lessee pursuant to Subparagraph 5.03(a) or 5.04(a)
of the Lease Agreement after the occurrence of an Event of Default thereunder as
the date on which such Lease Supplement or Installation Period will be
terminated.
"Term Purchase Option" shall have the meaning given to that term in
Paragraph 2.01 of the Purchase Agreement.
"Total Capital" shall mean the sum of Equity Capital, Senior Debt and
Subordinated Debt.
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"Total Commitment" shall mean the amount set forth as such in
Subparagraph 2.01(d) of the Participation Agreement or, if such amount is
reduced pursuant to Subparagraph 2.08(a) of the Participation Agreement, the
amount to which so reduced.
"Tranche A Participant" shall mean, at any time with respect to any
Lease Supplement (or, if a Lease Supplement has not been executed with respect
to any Installation Period, the Advances made during such Installation Period),
any Participant having an Outstanding Tranche A Participation Amount in such
Lease Supplement or Installation Period at such time.
"Tranche A Percentage" shall mean, with respect to each Participant and
any Lease Supplement (or, if a Lease Supplement has not been executed with
respect to any Installation Period, the Advances made during such Installation
Period), a fraction (expressed as a percentage rounded to the eighth digit to
the right of the decimal point), the numerator of which is such Participant's
Outstanding Tranche A Participation Amount in such Lease Supplement or
Installation Period on such date and the denominator of which is the Outstanding
Lease Amount of such Lease Supplement or Installation Period on such date.
"Tranche A Portion" shall mean, (a) with respect to any Advance without
reference to any Participant, the portion of such Advance equal to the Tranche A
Proportionate Share of such Advance and (b) with respect to any Advance with
reference to any Participant, the portion of such Advance equal to such
Participant's Tranche A Percentage of such Advance.
"Tranche A Proportionate Share" shall mean, with respect to any Lease
Supplement (or, if a Lease Supplement has not been executed with respect to any
Installation Period, the Advances made during such Installation Period), an
amount equal to not less than eighty-five percent (85%) of the Outstanding Lease
Amount of such Lease Supplement or Installation Period as determined in order to
have the Lease Agreement classified as an operating lease under GAAP, including
FASB 13, and set forth in a schedule attached to such Lease Supplement, which
schedule shall be approved by Lessee and Lessor Agent at the time the Lease
Supplement is executed and on the date that it is amended in connection with the
exercise of any Renewal Option.
"Tranche B Participant" shall mean, at any time with respect to any
Lease Supplement (or, if a Lease Supplement has not been executed with respect
to any Installation Period, the Advances made during such Installation Period),
any Participant having an Outstanding Tranche B Participation Amount in such
Lease Supplement or Installation Period at such time.
"Tranche B Percentage" shall mean, with respect to each Participant and
any Lease Supplement (or, if a Lease Supplement has not been executed with
respect to any Installation Period, the Advances made during such Installation
Period), a fraction (expressed as a percentage rounded to the eighth digit to
the right of the decimal point), the numerator of which is such Participant's
Outstanding Tranche B Participation Amount in such Lease Supplement or
Installation Period on such date and the denominator of which is the Outstanding
Lease Amount of such Lease Supplement or Installation Period on such date.
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"Tranche B Portion" shall mean, (a) with respect to any Advance without
reference to any Participant, the portion of such Advance equal to the Tranche B
Proportionate Share of such Advance and (b) with respect to any Advance with
reference to any Participant, the portion of such Advance equal to such
Participant's Tranche B Percentage of such Advance.
"Tranche B Proportionate Share" shall mean, with respect to any Lease
Supplement (or, if a Lease Supplement has not been executed with respect to any
Installation Period, the Advances made during such Installation Period), an
amount equal to not more than twelve percent (12%) of the Outstanding Lease
Amount of such Lease Supplement or Installation Period as determined in order to
have the Lease Agreement classified as an operating lease under GAAP, including
FASB 13, and set forth in a schedule attached to such Lease Supplement, which
schedule shall be approved by Lessee and Lessor Agent at the time the Lease
Supplement is executed and on the date that it is amended in connection with the
exercise of any Renewal Option.
"Unfunded Pension Liability" shall mean the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Plan pursuant to Section 412 of the IRC for the applicable plan year.
"United States" and "U.S." each shall mean the United States of America.
"Unpaid Acquisition Price" shall have the meaning given to that term in
Subparagraph 2.01(b) of the Participation Agreement.
"Unused" shall mean, with respect to the Total Commitment at any time,
the remainder of (a) the Total Commitment at such time minus (b) the aggregate
amount of all Advances made prior to such time.
"Variable Component" shall have the meaning given to that term in
Subparagraph 2.03(a) of the Lease Agreement.
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SCHEDULE 1.02
RULES OF INTERPRETATION
(a) GAAP. Unless otherwise expressly provided in any Operative Document,
all accounting terms used in the Operative Documents shall be construed, and all
accounting and financial computations thereunder shall be computed, in
accordance with GAAP. If GAAP changes after the date of the Participation
Agreement such that any covenants contained in the Operative Documents would
then be calculated in a different manner or with different components, Lessee
and the Lessor Parties agree to negotiate in good faith to amend the applicable
Operative Documents in such respects as are necessary to conform those covenants
as criteria for evaluating Lessee's financial condition to substantially the
same criteria as were effective prior to such change in GAAP; provided, however,
that, until Lessee and the Lessor Parities so amend the Operative Documents, all
such covenants shall be calculated in accordance with GAAP as in effect
immediately prior to such change.
(b) Headings. Headings in each of the Operative Documents are for
convenience of reference only and are not part of the substance thereof.
(c) Plural Terms. All terms defined in any Operative Document in the
singular form shall have comparable meanings when used in the plural form and
vice versa.
(d) Time. All references in each of the Operative Documents to a time of
day shall mean Chicago, Illinois time, unless otherwise indicated.
(e) Governing Law. The Operative Documents were executed by Lessee and
the Lessor Parties in the State of California, which state the parties agree has
a substantial relationship to the parties and to the underlying transaction
embodied hereby. Accordingly, in all respects, including, without limiting the
generality of the foregoing, matters of interpretation, validity, enforceability
and performance, unless otherwise provided in any Operative Document, each of
the Operative Documents and the obligations arising thereunder shall be governed
by, and construed in accordance with, the laws of the State of California and
any applicable law of the United States of America, except to the extent that
law requires that perfection and the effect of perfection or nonperfection of
the security interests created pursuant to the Operative Documents be governed
by the laws of the state in which the Property is located. Except as provided in
the immediately preceding sentence, Lessee hereby unconditionally and
irrevocably waives, to the fullest extent permitted by law, any claim to assert
that the law of any jurisdiction other than California governs this Agreement
and the other Operative Documents.
(f) Interpretation. The Operative Documents are the result of
negotiations among, and have been reviewed by Lessee and each Lessor Party and
their respective counsel. Accordingly, the Operative Documents shall be deemed
to be the product of all parties hereto, and no ambiguity shall be construed in
favor of or against Lessee or any Lessor Party.
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(g) Entire Agreement. The Operative Documents, taken together,
constitute and contain the entire agreement of Lessee and the Lessor Parties and
supersede any and all prior agreements, negotiations, correspondence,
understandings and communications among the parties, whether written or oral,
respecting the subject matter thereof (including the commitment letter dated as
of March 9, 2000, between Lessee and Agent).
(h) Calculation of Base Rent, Interest and Fees. All calculations of
Base Rent, interest and fees under the Operative Documents for any period (i)
shall include the first day of such period and exclude the last day of such
period and (ii) shall be calculated on the basis of a year of 360 days for
actual days elapsed, except that during any period that Base Rent or any
interest is to be calculated based upon the Base Rate, such Base Rent or
interest shall be calculated on the basis of a year of 365 or 366 days, as
appropriate, for actual days elapsed.
(i) References.
(i) References in any Operative Document to "Recitals,"
"Sections," "Paragraphs," "Subparagraphs," "Articles," "Exhibits" and
"Schedules" are to recitals, sections, paragraphs, subparagraphs,
articles, exhibits and schedules therein and thereto unless otherwise
indicated.
(ii) References in any Operative Document to any document,
instrument or agreement (A) shall include all exhibits, schedules and
other attachments thereto, (B) shall include all documents, instruments
or agreements issued or executed in replacement thereof if such
replacement is permitted hereby, and (C) shall mean such document,
instrument or agreement, or replacement or predecessor thereto, as
amended, modified and supplemented from time to time and in effect at
any given time if such amendment, modification or supplement is
permitted hereby.
(iii) References in any Operative Document to any Governmental
Rule (A) shall include any successor Governmental Rule, (B) shall
include all rules and regulations promulgated under such Governmental
Rule (or any successor Governmental Rule), and (C) shall mean such
Governmental Rule (or successor Governmental Rule) and such rules and
regulations, as amended, modified, codified or reenacted from time to
time and in effect at any given time.
(iv) References in any Operative Document to any Person in a
particular capacity (A) shall include any permitted successors to and
assigns of such Person in that capacity and (B) shall exclude such
Person individually or in any other capacity.
(j) Other Interpretive Provisions. The words "hereof," "herein" and
"hereunder" and words of similar import when used in any Operative Document
shall refer to such Operative Document as a whole and not to any particular
provision of such Operative Document. The words "include" and "including" and
words of similar import when used in any Operative Document shall not be
construed to be limiting or exclusive. In the event of any inconsistency between
the terms of the Participation Agreement and the terms of any other Operative
Document, the terms of the Participation Agreement shall govern.
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SCHEDULE 3.01
CONDITIONS PRECEDENT TO INITIAL ADVANCE
A. PRINCIPAL OPERATIVE DOCUMENTS.
(1) The Participation Agreement, duly executed by Lessee, each Lessor,
Lessor Agent, each Participant and Agent;
(2) The Lease Agreement, duly executed by Lessee, Lessor Agent and each
Lessor, together with Lease Supplement No. 1 thereto, duly executed by Lessee
and Lessor Agent;
(3) The Purchase Agreement, duly executed by Lessee, Lessor Agent and
each Lessor; and
(4) The Lessor Security Agreement, duly executed by Lessor Agent, each
Lessor and Agent.
B. LESSEE CORPORATE DOCUMENTS.
(1) The Certificate of Incorporation of Lessee, certified as of a recent
date prior to the Closing Date by the Secretary of State of Delaware;
(2) A Certificate of Good Standing for Lessee, certified as of a recent
date prior to the Closing Date by the Secretary of State of Delaware;
(3) A certificate of the Secretary or an Assistant Secretary of Lessee,
dated the Closing Date, certifying (a) that attached thereto is a true and
correct copy of the Bylaws of Lessee as in effect on the Closing Date; (b) that
attached thereto are true and correct copies of resolutions duly adopted by the
Board of Directors of Lessee and continuing in effect, which (i) authorize the
execution, delivery and performance by Lessee of the Operative Documents
executed or to be executed by Lessee and the consummation of the transactions
contemplated thereby and (ii) designate the officers authorized to so execute
and deliver the Operative Documents on behalf of Lessee; and (c) that there are
no proceedings for the dissolution or liquidation of Lessee;
(4) A certificate of the Secretary or an Assistant Secretary of Lessee,
dated the Closing Date, certifying the incumbency, signatures and authority of
the officers of Lessee authorized to execute, deliver and perform the Operative
Documents and all other documents, instruments or agreements related thereto
executed or to be executed by Lessee; and
(5) Certificates of Good Standing (or comparable certificates) for
Lessee, certified as of a recent date prior to the Closing Date by the
Secretaries of State (or comparable official) of California, Colorado and Oregon
and each other jurisdiction in which Lessee is qualified to do
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business and has assets with a net book value in excess of $10,000,000
(exclusive of intercompany assets and liabilities).
C. FINANCIAL STATEMENTS, FINANCIAL CONDITION, ETC.
(1) A copy of the audited consolidated Financial Statements of Lessee
for the fiscal year ended in December 1999 prepared by PricewaterhouseCoopers
LLP and a copy of the unqualified opinion delivered by such accountants in
connection with such Financial Statements;
(2) A copy of the 10-K report filed by Lessee with the Securities and
Exchange Commission for the fiscal year ended in December 1999; and
(3) Such other financial, business and other information regarding
Lessee, or any of its Subsidiaries as Agent or any Participant may reasonably
request, including information as to possible contingent liabilities, tax
matters, environmental matters and obligations for employee benefits and
compensation.
D. COLLATERAL DOCUMENTS.
(1) Such Uniform Commercial Code financing statements and fixture
filings (appropriately completed and executed) for filing in such jurisdictions
as Agent may reasonably request to perfect the Liens granted to Lessor Agent and
Agent in the Lessee Security Documents, the Lessor Security Agreement and the
other Operative Documents;
(2) Such Uniform Commercial Code termination statements (appropriately
completed and executed) for filing in such jurisdictions as Agent may reasonably
request to terminate any financing statement evidencing Liens of other Persons
in the Collateral which are prior to the Liens granted to Lessor Agent and Agent
in the Lessee Security Documents, the Lessor Security Agreement and the other
Operative Documents, except for any such prior Liens which are expressly
permitted by the Operative Documents to be prior;
(3) Uniform Commercial Code search certificates from the jurisdictions
in which Uniform Commercial Code financing statements and fixture filings are to
be filed pursuant to item D(1) above evidencing the filing of such financing
statements and fixture filings and reflecting no other financing statements or
filings which evidence Liens of other Persons in the Collateral which are prior
to the Liens granted to Lessors and Agent in the Lessee Security Documents, the
Lessor Security Agreement and the other Operative Documents, except for any such
prior Liens (a) which are expressly permitted by the Operative Documents to be
prior or (b) for which Agent has received a termination statement pursuant to
item D(2) above;
(4) Such other documents, instruments and agreements as Agent may
reasonably request to establish and perfect the Liens granted to any Lessor
Party in the Lessee Security Documents, the Lessor Security Agreement and the
other Operative Documents;
3.01-2
<PAGE> 109
(5) A preliminary title report or other evidence reflecting the Persons
owning each Property Site and having other interests in such Property Site;
(6) Such landlord waivers, and other consents and estoppels, with
appropriate mortgagee protection language, as are requested by Agent, each duly
executed by the appropriate Person; and
(7) Such other evidence as Agent may request to establish that the Liens
granted to Agent or any Participant in the Lessee Security Documents, the Lessor
Security Agreement and the other Operative Documents are perfected and prior to
the Liens of other Persons in the Collateral, except for any such Liens which
are expressly permitted by the Operative Documents to be prior.
E. OPINIONS.
(1) A favorable written opinion of Latham & Watkins, counsel to Lessee,
dated the Closing Date, addressed to Lessor Agent and Agent, for the benefit of
Agent and the Participants, and covering such legal matters as Agent may
reasonably request and otherwise in form and substance reasonably satisfactory
to Agent; and
(2) A favorable written opinion of the General Counsel of Lessee, dated
the Closing Date, addressed to Lessor Agent and Agent, for the benefit of Agent
and the Participants, and covering such legal matters as Agent may reasonably
request and otherwise in form and substance reasonably satisfactory to Agent.
F. OTHER ITEMS.
(1) The Initial Advance Request, appropriately completed and duly
executed by Lessee;
(2) A Closing Date Appraisal for the Property, dated as of a recent date
prior to the Closing Date;
(3) With respect to any Property to be purchased by Lessors on the
Closing Date from Lessee, a full warranty bill of sale transferring Lessee's
right, title and interest in such Property to Lessors, duly executed by Lessee,
and such other documents, instruments and agreements as Lessor Agent shall
reasonably request to evidence such transfer on the terms set forth in the
Operative Documents;
(4) With respect to any Property to be purchased by Lessors on the
Closing Date directly from a Supplier, the bills of sale for such Property
showing Lessors as the purchaser, duly executed by the Suppliers of the
Property;
(5) If there is no Unpaid Acquisition Price for any Equipment to be
purchased by Lessors on the Closing Date, an Acquisition Agreement Acceptance
Certificate, appropriately
3.01-3
<PAGE> 110
completed and duly executed by Lessee with respect to such Equipment, and
receipts evidencing the payment by Lessee of the Acquisition Price for such
Equipment, duly executed by the Supplier of such Equipment;
(6) Certificates of insurance evidencing the insurance Lessee is
required to maintain pursuant to Paragraph 3.03 of the Lease Agreement;
(7) A certificate of the chief financial officer or treasurer of Lessee,
addressed to Agent and dated the Closing Date, certifying that:
(a) The representations and warranties set forth in Paragraph
4.01 of the Participation Agreement and in the other Operative Documents
are true and correct in all material respects as of such date (except
for such representations and warranties made as of a specified date,
which shall be true in all material respects as of such date); and
(b) No Default has occurred and is continuing as of such date.
(8) All fees and expenses payable to the Lessor Parties on or prior to
the Closing Date (including all Agent's Fees);
(9) All reasonable fees and expenses of counsel for Lessor Agent and
Agent through the Closing Date;
(10) Copies of all documents creating or evidencing Subordinated Debt;
and
(11) Such other evidence as Agent may reasonably request to establish
the accuracy and completeness of the representations and warranties and the
compliance with the terms and conditions contained in the Operative Documents.
3.01-4
<PAGE> 111
SCHEDULE 3.02(e)
INFORMATION TO BE DELIVERED TO APPRAISER
1. Detailed description of Equipment (including estimated number of
chambers or modules, if applicable)
2. Manufacturer
3. Model
4. Serial number
5. Tool identification number
6. Delivery date
7. Expected in-service date
8. Internal order number
9. Acquisition Price
10. Permitted Installation Expenses
11. Purchase Date Appraisal Value
12. Unpaid Acquisition Price
13. Operational use of Equipment
3.02(e)-1
<PAGE> 112
SCHEDULE 4.01(g)
LITIGATION
Reference is made to Lessee in Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 20, 2000.
4.01(g)-1
<PAGE> 113
SCHEDULE 4.01(i)
ENVIRONMENTAL MATTERS
None.
4.01(i)-1
<PAGE> 114
SCHEDULE 4.01(l)
SIGNIFICANT SUBSIDIARIES
LSI Logic Corporation of Canada, Inc.
LSI Logic Europe
LSI Logic Hong Kong Holdings
LSI Logic Hong Kong, Ltd.
LSI Logic Japan Semiconductor, Inc.
LSI Logic KK
LSI Logic Storage Systems, Inc.
Mint Technology
Symbios International, Inc.
4.01(l)-1
<PAGE> 115
SCHEDULE 5.02(a)
EXISTING LIENS
THE INDUSTRIAL BANK OF JAPAN LEASING
Master Lease Agreement and Master Purchase Agreement dated June 16, 1995 and
leasing transactions thereunder in connection with JPY 15 billion synthetic
lease.
5.02(a)-1
<PAGE> 116
EXHIBIT A
EQUIPMENT
A-1
<PAGE> 117
EXHIBIT B
LEASE AGREEMENT
B-1
<PAGE> 118
EXHIBIT C
PURCHASE AGREEMENT
C-1
<PAGE> 119
EXHIBIT D
INITIAL ADVANCE REQUEST
[Date]
ABN AMRO Bank N.V.
as Agent
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Participation Agreement, dated as
of March 31, 2000 (the "Participation Agreement"), among LSI Logic Corporation
("Lessee"), ABN AMRO Bank N.V. and each other financial institution listed as a
lessor in Schedule I to the Participation Agreement, as lessors (in such
capacity, collectively "Lessors"), ABN AMRO Bank N.V., as agent for Lessors (in
such capacity, "Lessor Agent"), the financial institutions listed in Schedule I
to the Participation Agreement (the "Participants") and ABN AMRO Bank N.V., as
agent for the Participants (in such capacity, "Agent"). Unless otherwise
indicated, all terms defined in the Participation Agreement have the same
respective meanings when used herein.
2. Pursuant to Subparagraph 2.03(a) of the Participation Agreement,
Lessee hereby irrevocably requests Lessors to make the Initial Advance as
follows:
(a) The Initial Acquisition Advance:
(i) The amount of the Initial Acquisition Advance shall be
$___________;
(ii) Set forth in Attachment A hereto is a schedule of
each item of Equipment to be purchased with the Initial
Acquisition Advance, including the Supplier, model, serial
number, delivery date, internal order number, Acquisition Price,
Unpaid Acquisition Price, Permitted Installation Expenses,
Purchase Date Appraised Value and the Property Site where such
Equipment has been delivered;
(iii) Lessee hereby certifies to the Lessor Parties that
(A) the amount of the Initial Acquisition Advance requested
above, together with th does not exceed the lesser of (y) the
aggregate Purchase Date Appraised Values of all Equipment
identified in Attachment A and (z) the aggregate Acquisition
Prices and Permitted Installation Expenses for such Equipment,
(B) such Equipment has been delivered to the Property Site
identified in Attachment A and has been installed or is ready for
installation; and
(iv) With respect to the portion of the Initial
Acquisition Advance requested above which represents Permitted
Installation Expenses, Lessee hereby certifies to the Lessor
Parties that (A) Lessee will use such portion of the Initial
D-1
<PAGE> 120
Acquisition Advance to pay Permitted Installation Expenses for
the Equipment identified in Attachment A, and (B) all such costs
and expenses are Permitted Installation Expenses which are now
due and payable.
(b) An Expense Advance:
(i) The amount of such Expense Advance shall be
$___________;
(ii) Set forth in Attachment B hereto is a schedule of the
Permitted Transaction Expenses to be paid with such Expense
Advance; and
(iii) Lessee hereby certifies to the Lessor Parties that
(A) Lessee will use the proceeds of such Expense Advance to pay
the costs and expenses identified in Attachment B, and (B) all
such costs and expenses are Permitted Transaction Expenses which
are now due and payable.
(c) The date of the Initial Advance shall be ___________, which
date is on or prior to March 31, 2000.
3. Lessee hereby certifies to the Lessor Parties that, on the date of
this Initial Advance Request and after giving effect to the use of the Initial
Advance as described above:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other Operative
Documents are true and correct in all material respects as if made on
such date (except for representations and warranties expressly made as
of a specified date, which shall be true in all material respects as of
such date); and
(b) No Default has occurred and is continuing.
4. Lessee hereby agrees to reimburse each Lessor and Participant for,
and hold such Lessor and Participant harmless from, all reasonable costs and
losses incurred by such Participant as a result of any cancellation or other
failure to consummate this Initial Advance Request (whether as a result of the
failure to satisfy any applicable conditions or otherwise) within twenty (20)
days after written demand by such Lessor and Participant; provided, however,
that Lessee shall have no obligation to make any payment to any demanding party
on account of such costs and losses unless Lessee receives notice of such costs
or losses from the demanding party within six (6) months after they are incurred
or realized. Lessee understand that such costs and losses may include, without
limitation, losses incurred by a Lessor or Participant as a result of funding
and other contracts entered into by such party to fund its portion of the
Initial Advance requested in this Initial Advance Request. Each party demanding
payment under this Paragraph 4 shall deliver to Lessee, with a copy to Agent, a
certificate setting forth the amount of costs and losses for which demand is
made, which certificate shall set forth in reasonable detail the calculation of
the amount demanded. Such a certificate so delivered to Lessee shall constitute
prima facie evidence of such costs and losses.
D-2
<PAGE> 121
5. Except for such portion of the Initial Acquisition Advance
representing the aggregate Unpaid Acquisition Price of all Equipment identified
in Attachment A which shall be disbursed to Lessor Agent to be held as Cash
Collateral, please disburse the proceeds of the Initial Advance to:_____________
________________________________________________________________________________
_______________________________________________________________________________.
IN WITNESS WHEREOF, Lessee has executed this Initial Advance Request on
the date set forth above.
LSI LOGIC CORPORATION
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
D-3
<PAGE> 122
EXHIBIT E
ADDITIONAL ADVANCE REQUEST
[Date]
ABN AMRO Bank N.V.
as Agent
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Amended and Restated Participation
Agreement, dated as of April 18, 2000 (the "Participation Agreement"), among LSI
Logic Corporation ("Lessee"), ABN AMRO Bank N.V., KeyBank National Association,
FBTC Leasing Corp. and each other financial institution listed as a lessor in
Schedule I to the Participation Agreement, as lessors (in such capacity,
collectively "Lessors"), ABN AMRO Bank N.V., as agent for Lessors (in such
capacity, "Lessor Agent"), the financial institutions listed in Schedule I to
the Participation Agreement (the "Participants") and ABN AMRO Bank N.V., as
agent for the Participants (in such capacity, "Agent"). Unless otherwise
indicated, all terms defined in the Participation Agreement have the same
respective meanings when used herein.
2. Pursuant to Subparagraph 2.03(b) of the Participation Agreement,
Lessee hereby irrevocably requests Lessors to make an Advance as follows:
(a) If an Additional Acquisition Advance is requested:
(i) The amount of such Additional Acquisition Advance
shall be $___________;
(ii) Set forth in Attachment A hereto is a schedule of
each item of Equipment to be purchased with such Additional
Acquisition Advance, including the Supplier, model, serial
number, delivery date, internal order number, Acquisition Price,
Unpaid Acquisition Price, Permitted Installation Expenses,
Purchase Date Appraised Value and the Property Site where such
Property will be installed;
(iii) Lessee hereby certifies to the Lessor Parties that
(A) the amount of the Additional Acquisition Advance requested
above , when aggregated with all prior Additional Acquisition
Advances made during the Installation Period ending , does not
exceed the lesser of (y) the aggregate Purchase Date Appraised
Values of all Property previously purchased or to be purchased
with the proceeds of such Additional Acquisition Advances and (z)
the aggregate Acquisition Prices and Permitted Installation
Expenses for all such Property, and (B) all Equipment identified
on Attachment A has been delivered to
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<PAGE> 123
the Property Site identified in Attachment A and has been
installed or is ready for installation during the Installation
Period ending _______________;
(iv) With respect to the portion of the Additional
Acquisition Advance requested above which represents Permitted
Installation Expenses, Lessee hereby certifies to the Lessor
Parties that (A) Lessee will use such portion of the Additional
Acquisition Advance to pay Permitted Installation Expenses for
the Equipment identified in Attachment A, and (B) all such costs
and expenses are Permitted Installation Expenses which are now
due and payable.
(b) If an Expense Advance is requested:
(i) The amount of such Expense Advance shall be
$___________;
(ii) Set forth in Attachment B hereto is a schedule of the
Permitted Transaction Expenses to be paid with such Expense
Advance; and
(iii) Lessee hereby certifies to the Lessor Parties that
(A) Lessee will use the proceeds of such Expense Advance to pay
the costs and expenses identified in Attachment B, (B) all such
costs and expenses are Permitted Transaction Expenses which are
now due and payable, and (C) no prior Expense Advance has been
requested to pay any such costs and expenses.
(c) The date of the Advance shall be ___________, which date is
prior to the Commitment Termination Date.
3. Lessee hereby certifies to the Lessor Parties that, on the date of
this Additional Advance Request and after giving effect to the use of such
Advance as described above:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other Operative
Documents are true and correct in all material respects as if made on
such date (except for representations and warranties expressly made as
of a specified date, which shall be true in all material respects as of
such date); and
(b) No Default has occurred and is continuing.
4. Except for such portion of the Additional Acquisition Advance
representing the aggregate Unpaid Acquisition Price of all Equipment identified
in Attachment A which shall be disbursed to Lessor Agent to be held as Cash
Collateral, please disburse the proceeds of such Advance to:__________________
________________________________________________________________________________
_______________________________________________________________________________.
E-2
<PAGE> 124
IN WITNESS WHEREOF, Lessee has executed this Additional Advance Request
on the date set forth above.
LSI LOGIC CORPORATION
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
E-3
<PAGE> 125
EXHIBIT F
LESSOR SECURITY AGREEMENT
<PAGE> 126
EXHIBIT G
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT, dated as of the date set forth at the top of
Attachment 1 hereto, by and among:
(1) The party designated under item A of Attachment I hereto as
the Assignor Participant ("Assignor Participant"); and
(2) Each party designated under item B of Attachment I hereto as
an Assignee Participant (individually, an "Assignee Participant").
RECITALS
A. Assignor Participant is one of the "Participants" in an Amended and
Restated Participation Agreement dated as of April 18, 2000, among LSI Logic
Corporation ("Lessee"), ABN AMRO Bank N.V., KeyBank National Association, FBTC
Leasing Corp. and each other financial institution listed as a lessor in
Schedule I to the Participation Agreement (in such capacity, collectively
"Lessors"), ABN AMRO Bank N.V., as agent for Lessors (in such capacity, "Lessor
Agent"), Assignor Participant and the other institutions parties thereto as
"Participants" (collectively, the "Participants") and ABN AMRO Bank N.V., as
agent for the Participants (in such capacity, "Agent"). (Such Participation
Agreement, as amended, supplemented or otherwise modified in accordance with its
terms from time to time to be referred to herein as the "Participation
Agreement").
B. Assignor Participant wishes to sell, and each Assignee Participant
wishes to purchase, all or a portion of Assignor Participant's rights under the
Participation Agreement pursuant to Subparagraph 7.05(b) of the Participation
Agreement.
AGREEMENT
Now, therefore, the parties hereto hereby agree as follows:
1. Definitions. Except as otherwise defined in this Assignment
Agreement, all capitalized terms used herein and defined in the Participation
Agreement have the respective meanings given to those terms in the Participation
Agreement.
2. Sale and Assignment. Subject to the terms and conditions of this
Assignment Agreement, Assignor Participant hereby agrees to sell, assign and
delegate to each Assignee Participant and each Assignee Participant hereby
agrees to purchase, accept and assume the rights, obligations and duties of a
Participant under the Participation Agreement and the other Operative Documents
equal to the Commitment, Outstanding Participation Amount, the Tranche A
Percentage, Tranche B Percentage, Equity Percentage (if applicable) and
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<PAGE> 127
Proportionate Share with respect to each Lease Supplement (or, if a Lease
Supplement has not been executed with respect to any Installation Period, the
Advances made during such Installation Period) set forth under the captions
"Commitments, Outstanding Participation Amounts, Tranche Percentages and
Proportionate Shares Assigned" opposite such Assignee Participant's name on Part
A of Attachment I hereto. Such sale, assignment and delegation shall become
effective on the date designated in Part C of Attachment I hereto (the
"Assignment Effective Date"), which date shall be, unless Agent shall otherwise
consent, at least five (5) Business Days after the date following the date
counterparts of this Assignment Agreement are delivered to Agent in accordance
with Paragraph 3 hereof.
3. Assignment Effective Notice. Upon (a) receipt by Agent of five (5)
counterparts of this Assignment Agreement (to each of which is attached a fully
completed Attachment 1), each of which has been executed by Assignor Participant
and each Assignee Participant (and, to the extent required by clause (i) of
Subparagraph 7.05(b) of the Participation Agreement, by Lessee and Agent) and
(b) payment to Agent of the registration and processing fee specified in clause
(iii) of Subparagraph 7.05(b) of the Participation Agreement, Agent will
transmit to Lessors, Lessor Agent, Lessee, Assignor Participant and each
Assignee Participant an Assignment Effective Notice substantially in the form of
Attachment 2 hereto, fully completed (an "Assignment Effective Notice").
4. Assignment Effective Date. At or before 12:00 noon (local time of
Assignor Participant) on the Assignment Effective Date, each Assignee
Participant shall pay to Assignor Participant, in immediately available or same
day funds, an amount equal to the purchase price, as agreed between Assignor
Participant and such Assignee Participant (the "Assignment Purchase Price") for
the respective Outstanding Participation Amount, Tranche A Percentage, Tranche B
Percentage, Equity Percentage (if applicable) and Proportionate Share of each
Lease Supplement (or, if a Lease Supplement has not been executed with respect
to any Installation Period, the Advances made during such Installation Period)
purchased by such Assignee Participant hereunder. Effective upon receipt by
Assignor Participant of the Assignment Purchase Price payable by each Assignee
Participant, the sale, assignment and delegation to such Assignee Participant of
such Commitment and such Outstanding Participation Amount, the Tranche A
Percentage, Tranche B Percentage, Equity Percentage (if applicable) and
Proportionate Share with respect to each Lease Supplement or Installation Period
as described in Paragraph 2 hereof shall become effective.
5. Payments After the Assignment Effective Date. Assignor Participant
and each Assignee Participant hereby agree that Agent shall, and hereby
authorize and direct Agent to, allocate amounts payable under the Participation
Agreement and the other Operative Documents as follows:
(a) All payments applied to reduce the Outstanding Lease Amount
of any Lease Supplement (or, if a Lease Supplement has not been executed
with respect to any Installation Period, the Advances made during such
Installation Period) after the Assignment Effective Date with respect to
each Outstanding Participation Amount, Tranche A Percentage, Tranche B
Percentage, Equity Percentage (if applicable) and Proportionate Share of
such Lease Supplement or Installation Period assigned to an
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<PAGE> 128
Assignee Participant pursuant to this Assignment Agreement shall be
payable to such Assignee Participant.
(b) All Base Rent with respect to any Lease Supplement (or, if a
Lease Supplement has not been executed with respect to any Installation
Period, the Advances made during such Installation Period), interest,
fees and other amounts accrued after the Assignment Effective Date with
respect to the Commitment and each Outstanding Participation Amount,
Tranche A Percentage, Tranche B Percentage, Equity Percentage (if
applicable) and Proportionate Share of such Lease Supplement or
Installation Period assigned to an Assignee Participant pursuant to this
Assignment Agreement shall be payable to such Assignee Participant.
Assignor Participant and each Assignee Participant shall make any separate
arrangements between themselves which they deem appropriate with respect to
payments between them of amounts paid under the Operative Documents on account
of the Commitment or the Outstanding Participation Amount, Tranche A Percentage,
Tranche B Percentage, Equity Percentage (if applicable) and Proportionate Share
with respect to any Lease Supplement (or, if a Lease Supplement has not been
executed with respect to any Installation Period, the Advances made during such
Installation Period) assigned to such Assignee Participant, and neither Agent
nor Lessee shall have any responsibility to effect or carry out such separate
arrangements.
6. Delivery of Copies of Operative Documents. Concurrently with the
execution and delivery hereof, Assignor Participant will provide to each
Assignee Participant (if it is not already a party to the Participation
Agreement) conformed copies of all documents delivered to Assignor Participant
on or prior to the Closing Date in satisfaction of the conditions precedent set
forth in the Participation Agreement and all documents delivered to Assignor
Participant with respect to any Lease Supplement (or, if a Lease Supplement has
not been executed with respect to any Installation Period, the Advances made
during such Installation Period) in which Assignor Participant is assigning its
Outstanding Participation Amount, Tranche A Percentage, Tranche B Percentage,
Equity Percentage (if applicable) and Proportionate Share.
7. Further Assurances. Each of the parties to this Assignment Agreement
agrees that at any time and from time to time upon the written request of any
other party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order to
effect the purposes of this Assignment Agreement.
8. Further Representations, Warranties and Covenants. Assignor
Participant and each Assignee Participant further represent and warrant to and
covenant with each other, Lessors, Agent and the other Participants as follows:
(a) Other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned hereby free
and clear of any adverse claim, Assignor Participant makes no
representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection
with the Participation Agreement or the other Operative Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Participation
G-3
<PAGE> 129
Agreement or the other Operative Documents furnished or the Collateral
or any security interest therein.
(b) Assignor Participant makes no representation or warranty and
assumes no responsibility with respect to the financial condition of
Lessee or any of its obligations under the Participation Agreement or
any other Operative Documents.
(c) Each Assignee Participant confirms that it has received a
copy of the Participation Agreement and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into this Assignment Agreement.
(d) Each Assignee Participant will, independently and without
reliance upon Lessors, Agent, Assignor Participant or any other
Participant and based upon such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Participation Agreement and the
other Operative Documents.
(e) Each Assignee Participant appoints and authorizes Agent to
take such action as Agent on its behalf and to exercise such powers
under the Participation Agreement and the other Operative Documents as
Agent is authorized to exercise by the terms thereof, together with such
powers as are reasonably incidental thereto, all in accordance with
Section 6 of the Participation Agreement.
(f) Each Assignee Participant (i) affirms that each of the
representations and warranties set forth in Paragraph 4.03 of the
Participation Agreement is true and correct with respect to such
Participant and (ii) agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the
Participation Agreement and the other Operative Documents are required
to be performed by it as a Participant.
(g) Each Assignee Participant represents and warrants that, as of
the date hereof, it would not have any basis for demanding any payment
under Subparagraph 2.12(c) or Subparagraph 2.12(d) of the Participation
Agreement or, to its knowledge, under Subparagraph 2.13(a) of the
Participation Agreement.
(h) Part B of Attachment 1 hereto sets forth administrative
information with respect to each Assignee Participant.
9. Effect of this Assignment Agreement. On and after the Assignment
Effective Date, (a) each Assignee Participant shall be a Participant with a
Commitment and an Outstanding Participation Amount, Tranche A Percentage,
Tranche B Percentage, Equity Percentage (if applicable) and Proportionate Share
in each Lease Supplement (or, if a Lease Supplement has not been executed with
respect to any Installation Period, the Advances made during such Installation
Period) as set forth under the caption "Commitments, Outstanding Participation
Amounts, Tranche Percentages and Proportionate Shares After Assignment" opposite
such Assignee Participant's name in Part A of Attachment 1 hereto and shall have
the rights, duties
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<PAGE> 130
and obligations of such a Participant under the Participation Agreement and the
other Operative Documents and (b) Assignor Participant shall be a Participant
with a Commitment and an Outstanding Participation Amount, Tranche A Percentage,
Tranche B Percentage, Equity Percentage (if applicable) and Proportionate Share
in such Lease Supplement or Installation Period as set forth under the caption
"Commitments, Outstanding Participation Amounts, Tranche Percentages and
Proportionate Share After Assignment" opposite Assignor Participant's name in
Part A of Attachment 1 hereto and shall have the rights, duties and obligations
of such a Participant under the Participation Agreement and the other Operative
Documents, or, if Assignor Participant's Commitment and Outstanding
Participation Amounts in each Lease Supplement and Installation Period have been
reduced to zero, Assignor Participant shall cease to be a Participant and shall
have no further obligation to fund any portion of any Advance.
10. Miscellaneous. This Assignment Agreement shall be governed by, and
construed in accordance with, the laws of the State of California. Paragraph
headings in this Assignment Agreement are for convenience of reference only and
are not part of the substance hereof.
G-5
<PAGE> 131
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective duly authorized officers as of the
date set forth in Attachment 1 hereto.
______________________________, as
Assignor Participant
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
____________________________, as an
Assignee Participant
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
____________________________, as an
Assignee Participant
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
____________________________, as an
Assignee Participant
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
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<PAGE> 132
CONSENTED TO AND ACKNOWLEDGED BY:
- ------------------------------
as Lessee
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
- -----------------------------,
as Agent
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
ACCEPTED FOR RECORDATION IN REGISTER:
- ------------------------------,
As Agent
By:
---------------------------------
Name:
----------------------------
Title:
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<PAGE> 133
ATTACHMENT 1
TO ASSIGNMENT AGREEMENT
COMMITMENTS, OUTSTANDING PARTICIPATION AMOUNTS,
TRANCHE PERCENTAGES AND PROPORTIONATE SHARES
<TABLE>
<CAPTION>
Commitments and Proportionate Share Commitments and Proportionate Shares
of Each Advance Assigned of Each Advance After Assignment
--------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C>
Proportionate Share Proportionate Share
Commitments of Each Advance Commitments of Each Advance
Assignor Participant:
- ---------
- ---------
- ---------
Assignee Participants:
- ---------
- ---------
- ---------
- ---------
</TABLE>
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<PAGE> 134
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Lease Supplement No.
Outstanding Participation Amount, Tranche Percentages and
Proportionate Shares Assigned
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a) Tranche A (a) Tranche B (a) Equity
Outstanding Outstanding Outstanding
Participation Participation Participation
Amount Amount Amount
(b) Tranche A (b) Tranche B (b) Equity
Percentage Percentage Percentage
(c) Tranche A (c) Tranche B (c) Equity
Proportionate Proportionate Proportionate
Share Share Share
(if applicable)
- -------------------------------------------------------------------------------------
Assignor Participant:
- -------------------------------------------------------------------------------------
- ---------
- -------------------------------------------------------------------------------------
- ---------
- -------------------------------------------------------------------------------------
- ---------
- -------------------------------------------------------------------------------------
Assignee Participants:
- -------------------------------------------------------------------------------------
- ---------
- -------------------------------------------------------------------------------------
- ---------
- -------------------------------------------------------------------------------------
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- -------------------------------------------------------------------------------------
- ---------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
Lease Supplement No.
Tranche Percentages and
Proportionate Shares After Assignment
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a) Tranche A (a) Tranche B (a) Equity
Outstanding Outstanding Outstanding
Participation Amount Participation Participation Amount
(b) Tranche A Amount (b) Equity
Percentage (b) Tranche B Percentage
(c) Tranche A Percentage (c) Equity
Proportionate Share (c) Tranche B Proportionate Share
Proportionate Share (if applicable)
- ---------------------------------------------------------------------------------------
Assignor Participant:
- ---------------------------------------------------------------------------------------
- ---------
- ---------------------------------------------------------------------------------------
- ---------
- ---------------------------------------------------------------------------------------
- ---------
- ---------------------------------------------------------------------------------------
Assignee Participants:
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- ---------
- ---------------------------------------------------------------------------------------
- ---------
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- ---------
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- ---------
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- ---------------------------------------------------------------------------------------
</TABLE>
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PART B
[Assignee Participant (as [a Lessor and] a Participant)]
Applicable Participating Office:
Address for notices:
Telephone No:
Telecopier No:
Wiring Instructions:
[Lessor's Chief Executive Office/
Major Executive Office in the United States]
[Assignee Participant (as [a Lessor and] a Participant)]
Applicable Participating Office:
Address for notices:
Telephone No:
Telecopier No:
Wiring Instructions:
[Lessor's Chief Executive Office/
Major Executive Office in the United States]
G(1)-3
<PAGE> 136
PART C
ASSIGNMENT EFFECTIVE DATE ________, ____
G(1)-4
<PAGE> 137
ATTACHMENT 2
TO ASSIGNMENT AGREEMENT
FORM OF
ASSIGNMENT EFFECTIVE NOTICE
Reference is made to the Amended and Restated Participation Agreement,
dated as of April 18, 2000, among LSI Logic Corporation ("Lessee"), ABN AMRO
Bank N.V., KeyBank National Association, FBTC Leasing Corp. and each other
financial institution listed as a lessor in Schedule I to the Participation
Agreement (in such capacity, collectively "Lessors"), ABN AMRO Bank N.V., as
agent for Lessors (in such capacity, "Lessor Agent"), the financial institutions
parties thereto as "Participants" (the "Participants") and ABN AMRO Bank N.V.,
as agent for the Participants (in such capacity, "Agent"). Agent hereby
acknowledges receipt of five executed counterparts of a completed Assignment
Agreement, a copy of which is attached hereto. [Note: Attach copy of Assignment
Agreement.] Terms defined in such Assignment Agreement are used herein as
therein defined.
1. Pursuant to such Assignment Agreement, you are advised that the
Assignment Effective Date will be __________.
2. Pursuant to such Assignment Agreement, each Assignee Participant is
required to pay its Purchase Price to Assignor Participant at or before 12:00
Noon on the Assignment Effective Date in immediately available funds.
Very truly yours,
ABN AMRO Bank N.V.,
as Agent
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
G(2)-1
<PAGE> 138
EXHIBIT H
CERTIFICATE OF ACCEPTANCE NO.
[Date]
ABN AMRO Bank N.V.
as Lessor Agent
Syndication Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to (1) the Amended and Restated Participation
Agreement, dated as of April 18, 2000 (the "Participation Agreement"), among LSI
Logic Corporation ("Lessee"), ABN AMRO Bank N.V., KeyBank National Association,
FBTC Leasing Corp. and each other financial institution listed as a lessor in
Schedule I to the Participation Agreement, as lessors (in such capacity,
collectively "Lessors"), ABN AMRO Bank N.V., as agent for Lessors (in such
capacity, "Lessor Agent"), the financial institutions listed in Schedule I to
the Participation Agreement (the "Participants") and ABN AMRO Bank N.V., as
agent for the Participants (in such capacity, "Agent") and (2) the Amended and
Restated Lease Agreement, dated as of April 18,2000 (the "Lease Agreement"),
between Lessee, Lessor Agent and Lessors. Unless otherwise indicated, all terms
defined in the Participation Agreement have the same respective meanings when
used herein.
2. Pursuant to Subparagraph 2.01(c) of the Participation Agreement,
Lessee hereby confirms that, on or prior to the date hereof, Lessee has accepted
the equipment identified in Schedule 1 hereto (the "Accepted Property") as agent
for Lessors.
3. Lessee hereby certifies to the Lessor Parties that, on the date
hereof:
(a) Lessee has paid the full Acquisition Price and all Permitted
Installation Expenses for the Accepted Property;
(b) Lessee has (i) good and valid title to the Accepted Property,
free and clear of all Liens and all other interests of other Persons
(except for the interests of Lessor Parties pursuant to the Operative
Documents) and (ii) full right and power, without the consent or
approval of any other Person, to (A) use the Accepted Property and (B)
sell or lease the Accepted Property to any other Person;
(c) The Accepted Property is in good condition and repair and in
good working order, free of any material defects. The Accepted Property
is fit for the purposes for which Lessee intends to use it.
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<PAGE> 139
(d) All material licenses, approvals, authorizations, consents,
or permits necessary to be issued by any Governmental Authority for the
operation or use of the Accepted Property by Lessee, Lessors or any
other Person have been obtained and copies of all such licenses,
approvals, authorizations, consents, and permits are attached hereto.
(e) All of the Accepted Property complies with all applicable
Governmental Rules and Insurance Requirements in all material respects.
(f) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other Operative
Documents are true and correct in all material respects as if made on
such date (except for representations and warranties expressly made as
of a specified date, which shall be true in all material respects as of
such date); and
(g) No Default has occurred and is continuing.
4. At the time the Accepted Property was purchased by Lessors, the
Unpaid Acquisition Price for each item of Accepted Property disbursed to Lessor
Agent to be held as Cash Collateral was as set forth in Schedule 1 and the
aggregate amount of all such Cash Collateral now held by Lessor Agent with
respect to the Accepted Property is $_________ (the "Withdrawal Amount"). Please
disburse the Withdrawal Amount to:______________________________________________
________________________________________________________________________________
_______________________________________________________________________________.
IN WITNESS WHEREOF, Lessee has executed this Certificate of Acceptance
on the date set forth above.
LSI LOGIC CORPORATION
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
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<PAGE> 140
EXHIBIT I
SUBORDINATION PROVISIONS
When used in Article 13 below, the following capitalized terms shall
have the meanings set forth below and a cross-reference to any other Article or
Section shall refer to an Article or Section comparable to the Article or
Section which was similarly cross-referenced in Article 13 of the 5 _%
Convertible Subordinated Notes Due 2001:
"Designated Senior Debt" means (i) Senior Debt under the Existing Credit
Agreement, and (ii) any other particular Senior Debt in which the instrument
creating or evidencing the same or the assumption or guarantee thereof (or
related agreements or documents to which the Company is a party) expressly
provides that such Senior Debt shall be "Designated Senior Debt" for purposes of
this Indenture (provided that such instrument, agreement or other document may
place limitations and conditions on the right of such Senior Debt to exercise
the rights of Designated Senior Debt).
"Existing Credit Agreement" means that Amended and Restated Credit
Agreement, dated as of September 22, 1998, among the Company, LSI Logic Japan
Semiconductor, Inc., the lenders from time to time parties thereto (the
"Existing Lenders"), and ABN AMRO Bank N.V., as agent for the Existing Lenders,
as such agreement may be amended, amended and restated, supplemented or
otherwise modified from time to time.
"Indebtedness" means, with respect to any Person, (i) all obligations,
contingent or otherwise, of such Person (a) for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person or only
to a portion thereof), (b) evidenced by a note, debenture, bond or written
instrument (including a purchase money obligation), (c) in respect of leases of
such Person required, in conformity with generally accepted accounting
principles, to be accounted for as capitalized lease obligations on the balance
sheet of such Person and all obligations and other liabilities (contingent or
otherwise) under any lease or related document (including a purchase agreement)
in connection with the lease of real property which provides that such person is
contractually obligated to purchase or cause a third party to purchase the
leased property and thereby guarantee a minimum residual value of the leased
property to the lessor and the obligations of such person under such lease or
related document to purchase or to cause a third party to purchase such leased
property; or (d) in respect of letters of credit (including reimbursement
obligations with respect thereto), local guarantees or bankers' acceptances;
(ii) all obligations of others of the type described in clause (i) above or
clause (iii), (iv) or (v) below assumed by or guaranteed in any manner by such
Person or in effect guaranteed by such Person through an agreement to purchase,
contingent or otherwise (and the obligations of such Person under any such
assumptions, guarantees or other such arrangements); (iii) all obligations
secured by a mortgage, pledge, lien, encumbrance, charge or adverse claim
affecting title or resulting in an encumbrance to which the property or assets
of such Person are subject, whether or not the obligation secured thereby shall
have been assumed by or shall otherwise be such Person's legal liability; (iv)
to the extent not otherwise included, all obligations of such Person under
interest rate and currency swap agreements, cap, floor and collar agreements,
spot and forward contracts and similar agreements and arrangements; and (v) all
obligations,
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<PAGE> 141
contingent or otherwise, of such Person under or in respect of any and all
deferrals, renewals, extensions and refundings of, or amendments, modifications
or supplements to, any liability of the kind described in any of the preceding
clauses (i), (ii), (iii) or (iv).
"Senior Debt" means the principal of, premium, if any, and interest on,
rent payable under, and any other amounts due on or in connection with any and
all Indebtedness of the Company (including, without limitation, fees, costs,
expenses and any interest accruing after the filing of a petition initiating any
proceeding pursuant to any bankruptcy law, but only to the extent allowed or
permitted to the holder of such Indebtedness against the bankruptcy or other
insolvency estate of the Company in such proceeding), whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed, guaranteed or in
effect guaranteed by the Company (including all deferrals, renewals, extensions
or refundings of, or amendments, modifications or supplements to the foregoing);
provided, however, that Senior Debt does not include (w) Indebtedness evidenced
by the Notes, (x) Indebtedness of the Company to any subsidiary of the Company,
a majority of the voting stock of which is owned by the Company except to the
extent such Indebtedness is pledged by such subsidiary as security for any
Senior Debt, (y) accounts payable of the Company to trade creditors arising in
the ordinary course of business, and (z) any particular Indebtedness in which
the instrument creating or evidencing the same or the assumption or guarantee
thereof expressly provides that such Indebtedness shall not be senior in right
of payment to, or is pari passu with, or is subordinated or junior to, the
Notes.
ARTICLE 13
SUBORDINATION
Section 13.1 Notes Subordinated to Senior Debt.
The Company covenants and agrees, and each Holder of Notes, by his
acceptance thereof, likewise covenants and agrees, that the indebtedness
represented by the Notes and the payment of the principal of (and premium, if
any) and interest on each and all of the Notes is hereby expressly subordinate
and junior, to the extent and in the manner hereinafter set forth, in right of
payment to the prior payment in full of all Senior Debt.
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<PAGE> 142
(a) In the event of any distribution of assets of the Company upon any
dissolution, winding up, liquidation or reorganization of the Company, whether
in bankruptcy, insolvency, reorganization or receivership proceedings or upon an
assignment for the benefit of creditors or any other marshalling of the assets
and liabilities of the Company or otherwise, then the holders of all Senior Debt
shall first be entitled to receive payment of the full amount due thereon in
respect of principal (and premium, if any) and interest, or provision shall be
made for such amount in cash or other consideration satisfactory to the Existing
Lenders, before the Holders of any of the Notes are entitled to receive any
payment or distribution of any character, whether in cash, securities or other
property, on account of the principal of (or premium, if any) or interest on the
indebtedness evidenced by the Notes.
For purposes of this Article 13, the words, "cash, securities or other
property" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article 13 with respect
to the Notes to the payment of all Senior Debt which may at the time be
outstanding; provided that (i) the Senior Debt is assumed by the new
corporation, if any, resulting from any reorganization or readjustment, and (ii)
the rights of the holders of Senior Debt (other than leases which are not
assumed by the Company or the new corporation, as the case may be) are not,
without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or dissolution of the Company
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another Person upon the terms and conditions
provided for in Article 7 [merger, consolidation covenant of Indenture] shall
not be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 13.1(a) if such other corporation shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the conditions
stated in Article 7 [merger, consolidation covenant].
(b) In the event of any default in payment of the principal of or
premium, if any, or interest on or rent under, or any other payment obligation
under any Senior Debt beyond any applicable grace period with respect thereto,
then, unless and until all such payments due in respect of such Senior Debt have
been paid in full in cash or other consideration satisfactory to the Existing
Lenders or such default shall have been cured or waived or shall have ceased to
exist, no payment shall be made by the Company with respect to the principal of,
premium, if any, or interest on the Notes or to acquire any of the Notes
(including any repurchase pursuant to the repurchase right of a Holder upon a
Fundamental Change).
(c) In the event (i) any event of default with respect to any Designated
Senior Debt shall have occurred and be continuing permitting the holders of such
Designated Senior Debt (or a trustee or other representative on behalf of the
holders thereof) to declare such Designated Senior Debt due and payable prior to
the date on which it would otherwise have become due and payable, upon written
notice thereof to the Company and
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<PAGE> 143
the Trustee by any holders of such Designated Senior Debt (or a trustee or other
representative on behalf of the holders thereof) (the "Default Notice"), unless
and until such event of default shall have been cured or waived or shall have
ceased to exist and such acceleration shall have been rescinded or annulled, or
(ii) any judicial proceeding shall be pending with respect to any such default
in payment or event of default, then no payment shall be made by the Company,
directly or indirectly, with respect to principal of, premium, if any, or
interest on the Notes (including any repurchase pursuant to the exercise of the
repurchase right of a Holder upon a Fundamental Change) provided, however, that
clause (i) of this paragraph shall not prevent the making of any such payment by
the Company with respect to the Notes for more than 179 days after a Default
Notice shall have been received by the Trustee unless the Designated Senior Debt
in respect of which such event of default exists has been declared due and
payable in its entirety in which case no such payment may be made until such
acceleration has been rescinded or annulled or such Designated Senior Debt has
been paid in full. Notwithstanding the foregoing, no event of default which
existed or was continuing on the date of any Default Notice shall be made the
basis for the giving of a second Default Notice; provided, further, however,
that no subsequent Default Notice shall be effective for purposes of this
Section 13.1(c) unless and until at least 365 days shall have elapsed since the
initial effectiveness of the immediately prior Default Notice.
(d) If the maturity of the Notes is accelerated, no payment may be made
on the Notes until all amounts due or to become due on Senior Debt has been paid
in full in cash or other consideration satisfactory to the Existing Lenders or
until such acceleration has been cured or waived.
(e) In the event that, notwithstanding the foregoing provisions of
Sections 13.1 (a), (b), (c) and (d), any payment on account of principal of or
interest on the Notes shall be made by or on behalf of the Company and received
by the Trustee, by any Holder or by any Paying Agent (or, if the Company is
acting as its own Paying Agent, money for any such payment shall be segregated
and held in trust), at a time when such payment is not permitted by any of such
provisions, then, unless and until all Senior Debt (or Designated Senior Debt,
in the case of Section 13.1(c)) is paid in full in cash or other consideration
satisfactory to the Existing Lenders, or such payment is otherwise permitted to
be made by the provisions of each of Sections 13.1(a), 13.1(b), 13.1(c) and
13.1(d) (subject, in each case, to the provisions of Section 13.7), such payment
on account of principal of or interest on the Notes shall be held in trust for
the benefit of, and shall be immediately paid over to, the holders of Senior
Debt (or Designated Senior Debt, in the case of Section 13.1(c)) or their
representative or representatives or the trustee or trustees under any indenture
under which any instruments evidencing any of the Senior Debt (or Designated
Senior Debt, in the case of Section 13.1(c)) may have been issued, as their
interests may appear.
Regardless of anything to the contrary herein, nothing shall prevent (a)
any payment by the Company or the Trustee to Holders of amounts in connection
with a redemption of Notes if
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<PAGE> 144
(i) notice of such redemption has been given pursuant to Section 11.5 prior to
the receipt by the Trustee of written notice as aforesaid, and (ii) such notice
of redemption is given not earlier than 75 days before the Redemption Date, or
(b) any payment by the Trustee to the Holders of amounts deposited with it
pursuant to Sections 4.1 and 4.2.
Section 13.2 Subrogation.
Subject to the payment in full of all Senior Debt to which the
indebtedness evidenced by the Notes is in the circumstances subordinated as
provided in Section 13.1, the Holders of the Notes (together with the holders of
any other indebtedness of the Company which is subordinate in right of payment
to the payment in full of all Senior Debt, which is not subordinate in right of
payment to the Notes and which by its terms grants such right of subrogation to
the holders thereof) shall be subrogated to the rights of the holders of such
Senior Debt to receive payments or distributions of cash, property or securities
of the Company applicable to such Senior Debt until all amounts owing on the
Notes shall be paid in full, and, as between the Company, its creditors other
than holders of such Senior Debt, and the Holders of the Notes, no such payment
or distribution made to the holders of Senior Debt by virtue of this Article
which otherwise would have been made to the Holders of the Notes shall be deemed
to be a payment by the Company on account of such Senior Debt, it being
understood that the provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders of the Notes, on the
one hand, and the holders of Senior Debt, on the other hand.
Section 13.3 Obligation of Company Unconditional.
Nothing contained in this Article or elsewhere in this Indenture or in
the Notes is intended to or shall impair, as between the Company, its creditors
other than the holders of Senior Debt, and the Holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders of the Notes the principal of (and premium, if any) and interest on the
Notes as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the Holders of
the Notes and creditors of the Company other than the holders of Senior Debt,
nor shall anything herein or therein prevent the Trustee or the Holder of any
Note from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
of the holders of Senior Debt in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
Section 13.4 Modification of Terms of Senior Debt.
Any renewal or extension of the time of payment of any Senior Debt or
the exercise by the holders of Senior Debt of any of their rights under any
instrument creating or evidencing Senior Debt, including without limitation the
waiver of default thereunder, may be made or done all without notice to or
assent from the Holders of the Notes or the Trustee.
No compromise, alteration, amendment, modification, extension, renewal
or other change of, or waiver, consent or other action in respect of, any
liability or obligation under or in respect of, or of any of the terms,
covenants or conditions of any indenture or other instrument under
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<PAGE> 145
which any Senior Debt is outstanding or of such Senior Debt, whether or not such
release is in accordance with the provisions of any applicable document, shall
in any way alter or affect any of the provisions of this Article or of the Notes
relating to the subordination thereof.
Section 13.5 Payments on Notes Permitted.
Nothing contained in this Article or elsewhere in this Indenture, or in
any of the Notes, shall affect the obligation of the Company to make, or prevent
the Company from making, payments of the principal of, or premium, if any, or
interest on the Notes in accordance with the provisions hereof and thereof, or
shall prevent the Trustee or any Paying Agent from applying any moneys deposited
with it hereunder to the payment of the principal of, or premium, if any, or
interest on the Notes, in each case except as otherwise provided in this
Article.
Section 13.6 Effectuation of Subordination by Trustee.
Each Holder of Notes, by his acceptance thereof, authorizes and directs
the Trustee in his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article and appoints the
Trustee his attorney-in-fact for any and all such purposes.
Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee and the Holders of the Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
any such dissolution, winding up, liquidation or reorganization proceeding
affecting the affairs of the Company is pending or upon a certificate of the
trustee in bankruptcy, receiver, assignee for the benefit of creditors,
liquidating trustee or agent or other Person making any payment or distribution,
delivered to the Trustee or to the Holders of the Notes, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, and as to other facts pertinent to the right of such Persons under
this Article, and if such evidence is not furnished, the Trustee may defer any
payment to such Persons pending judicial determination as to the right of such
Persons to receive such payment.
Section 13.7 Knowledge of Trustee.
Notwithstanding the provisions of this Article or any other provisions
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any Senior Debt, of any default in payment of principal, premium
(if any) or interest on any Senior Debt, or of any facts which would prohibit
the making of any payment of moneys to or by the Trustee, or the taking of any
other action by the Trustee, unless and until a Responsible Officer of the
Trustee having responsibility for the administration of the trust established by
this Indenture shall have received written notice thereof from the Company, any
Holder of Notes, any Paying or Conversion Agent of the Company or the holder or
representative of any class of Senior Debt, and, prior to the receipt of any
such written notice, the Trustee shall be entitled in all respects to assume
that no such default or facts exist; provided, however, that unless on the third
Business Day prior to the date upon which by the terms hereof any such moneys
may become payable for any purpose (other than a payment under Article 11) the
Trustee shall have received the notice provided for in this Section 13.7, then,
anything herein contained to the contrary notwithstanding, the Trustee
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shall have full power and authority to receive such moneys and apply the same to
the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such date.
Section 13.8 Trustee's Relation to Senior Debt.
The Trustee shall be entitled to all the rights set forth in this
Article with respect to any Senior Debt at the time held by it, to the same
extent as any other holder of Senior Debt and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of or payments to the
Trustee under or pursuant to Section 6.7.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of Senior Debt shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty
to the holders of Senior Debt and the Trustee shall not be liable to any holder
of Senior Debt if it shall pay over or deliver to Holders, the Company or any
other Person moneys or assets to which any holder of Senior Debt shall be
entitled by virtue of this Article or otherwise.
Section 13.9 Rights of Holders of Senior Debt Not Impaired.
No right of any present or future holder of any Senior Debt to enforce
the subordination herein shall at any time or in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Section 13.10 Certain Conversions Not Deemed Payment.
For the purposes of this Article 13 only, (1) the issuance and delivery
of junior securities upon conversion of Notes in accordance with Article 12
[conversion] shall not be deemed to constitute a payment or distribution on
account of the principal of, premium, if any, or interest (including Liquidated
Damages, if any) on Notes or on account of the purchase or other acquisition of
Notes, and (2) the payment, issuance or delivery of cash (except in satisfaction
of fractional shares pursuant to Section 12.3), property or securities (other
than junior securities) upon conversion of a Note shall be deemed to constitute
payment on account of the principal of, premium, if any, or interest (including
Liquidated Damages, if any) on such Note. For the purposes of this Section
13.10, the term "junior securities" means (a) shares of any stock of any class
of the Company or (b) securities of the Company that are subordinated in right
of payment to all Senior Debt to substantially the same extent as, or to a
greater extent than, the Notes are so subordinated as provided in this Article.
Nothing contained in this Article 13 or elsewhere in this Indenture or in the
Notes is intended to or shall impair, as among the Company, its creditors (other
than holders of Senior Debt) and the Holders, the right, which is absolute and
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unconditional, of the holder of any Note to convert such note in accordance with
Article 12 [conversion].
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED PARTICIPATION AGREEMENT
AMONG
LSI LOGIC CORPORATION,
AS LESSEE
AND
ABN AMRO BANK N.V.,
KEYBANK NATIONAL ASSOCIATION
AND FBTC LEASING CORP.,
AS LESSORS
AND
ABN AMRO BANK N.V.,
AS LESSOR AGENT FOR LESSORS
THE PARTICIPANTS NAMED HEREIN
AND
ABN AMRO BANK N.V.,
AS AGENT FOR THE PARTICIPANTS
APRIL 18, 2000
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
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SECTION 1. INTERPRETATION...............................................................2
1.01. Definitions.........................................................................2
1.02. Rules of Interpretation.............................................................2
SECTION 2. LEASE FACILITY...............................................................2
2.01. Acquisition, Lease, Amount Limitations, Etc.........................................2
2.02 Participation Agreement.............................................................5
2.03. Advance Requests, Etc...............................................................7
2.04. Fees. .............................................................................8
2.05. Funding of Advances.................................................................8
2.06. Sharing of Payments.................................................................9
2.07. Other Payment Terms................................................................12
2.08. Commitment Reductions..............................................................13
2.09. Reallocation of Outstanding Lease Amount upon Renewal..............................13
2.10. Nature of the Transactions.........................................................14
2.11. Security and Subordination.........................................................15
2.12. Change of Circumstances............................................................16
2.13. Taxes on Payments..................................................................19
2.14. Funding Loss Indemnification.......................................................20
2.15. Replacement of Participants........................................................21
SECTION 3. CONDITIONS PRECEDENT........................................................21
3.01. Initial Acquisition Advance........................................................21
3.02. Additional Acquisition Advances....................................................21
3.03. Expense Advances...................................................................22
3.04. Other Conditions Precedent.........................................................22
3.05. Covenant to Deliver................................................................23
SECTION 4. REPRESENTATIONS AND WARRANTIES..............................................23
4.01. Lessee's Representations and Warranties............................................23
4.02. Lessors' Representations and Warranties............................................28
4.03. Participants' Representations and Warranties.......................................29
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SECTION 5. COVENANTS...................................................................31
5.01. Lessee's Affirmative Covenants.....................................................31
5.02. Lessee's Negative Covenants........................................................36
5.03. Lessee's Financial Covenants.......................................................39
5.04. Lessors' Covenants.................................................................40
5.05. Participants' Covenants............................................................41
SECTION 6. LESSORS, LESSOR AGENT, AGENT AND THEIR RELATIONS WITH PARTICIPANTS..........41
6.01. Appointment of Lessor Agent and Agent..............................................41
6.02. Powers and Immunities..............................................................41
6.03. Reliance...........................................................................42
6.04. Defaults...........................................................................42
6.05. Indemnification....................................................................42
6.06. Non-Reliance.......................................................................43
6.07. Resignation or Removal of Lessor Agent or Agent....................................43
6.08. Authorization......................................................................44
6.09. Lessors, Lessor Agent and Agent in their Individual Capacities.....................44
SECTION 7. MISCELLANEOUS...............................................................45
7.01. Notices............................................................................45
7.02. Expenses...........................................................................46
7.03. Indemnification....................................................................46
7.04. Waivers; Amendments................................................................47
7.05. Successors and Assigns.............................................................47
7.06. Setoff.............................................................................51
7.07. No Third Party Rights..............................................................52
7.08. Partial Invalidity.................................................................52
7.09. JURY TRIAL.........................................................................52
7.10. Counterparts.......................................................................52
7.11. No Joint Venture, Etc..............................................................52
7.12. Usury Savings Clause...............................................................52
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7.13. Confidentiality....................................................................53
7.14. Effect on Existing Participation Agreement.........................................53
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SCHEDULES
I Lessors and Participants
II Pricing Grid
1.01 Definitions
1.02 Rules of Interpretation
3.01 Conditions Precedent to Acquisition Advance
4.01(g) Litigation
4.01(i) Environmental Matters
4.01(l) Significant Subsidiaries
5.02(a) Existing Liens
EXHIBITS
A Equipment (Recital A)
B Lease Agreement (2.01(a))
C Purchase Agreement (2.01(a))
D Initial Advance Request (2.03(a))
E Additional Advance Request (2.03(b))
F Lessor Security Agreement (2.10(b))
G Assignment Agreement (7.05(b))
H Acquisition Agreement Acceptance Certificate (2.01(a))
I Subordination Provisions (definition of "Subordinated Debt")
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AMENDED AND RESTATED
LEASE AGREEMENT AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LEASE AGREEMENT AND SECURITY AGREEMENT
(together with all Lease Supplements delivered hereunder, collectively this
"Agreement" herein), dated as of April 18, 2000 is entered into by and among:
(1) LSI LOGIC CORPORATION, a Delaware corporation ("Lessee");
and
(2) ABN AMRO BANK N.V., KEYBANK NATIONAL ASSOCIATION, FBTC
LEASING CORP. and each other financial institution from time to time
listed as a lessor in Schedule I to the Participation Agreement referred
to in Recital B below, as amended from time to time (in such capacity,
such financial institutions to be referred to collectively as
"Lessors"); and
(3) ABN AMRO BANK N.V., as agent for Lessors (in such capacity,
"Lessor Agent").
RECITALS
A. Pursuant to the Participation Agreement referred to in Recital B
below, a certain lease facility is to be provided to Lessee by Lessors and the
other financial institutions which are "Participants" under the Participation
Agreement (such financial institutions to be referred to collectively as the
"Participants") as follows:
(1) Lessors would (a) acquire certain equipment identified by
Lessee and approved by Lessor Agent, (b) lease such equipment to Lessee,
(c) make advances to finance certain related expenses and (d) grant to
Lessee the right to purchase such equipment; and
(2) The Participants would participate in such lease facility by
(a) funding the acquisition price to be paid by Lessors for the
equipment and the other advances to be made by Lessors and (b) acquiring
participation interests in the rental and certain other payments to be
made by Lessee.
B. In connection with the addition of certain parties as Lessors and
Participants, Lessee and Participants have requested that (i) the Participation
Agreement, dated as March 31, 2000, among Lessee, ABN AMRO Bank N.V., as the
original Lessor and Participant, Lessor Agent, the Participants and ABN AMRO
Bank N.V., as agent for the Participants (in such capacity, "Agent"), be amended
and restated by the Amended and Restated Participation Agreement, dated as of
April 18, 2000 (the "Participation Agreement"), among Lessee, Lessors, Lessor
Agent, the Participants and Agent and (ii) the Lease Agreement, dated as of
March 31, 2000 (the "Existing Lease Agreement"), among Lessee, ABN AMRO Bank
N.V., as the original Lessor, and Lessor Agent be amended and restated by this
Agreement, and Lessors and Lessor
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Agent are willing for the Existing Lease Agreement to be amended and restated by
this Agreement setting forth the terms of the lease by Lessors to Lessee of the
property.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree that the Existing
Lease Agreement shall be amended and restated in its entirety as follows:
SECTION 1. INTERPRETATION.
1.01 Definitions. Unless otherwise indicated in this Agreement or any
other Operative Document, each term set forth in Schedule 1.01 to the
Participation Agreement, when used in this Agreement or any other Operative
Document, shall have the respective meaning given to that term in such Schedule
1.01 or in the provision of this Agreement or other document, instrument or
agreement referenced in such Schedule 1.01.
1.02 Rules of Interpretation. Unless otherwise indicated in this
Agreement or any other Operative Document, the rules of interpretation set forth
in Schedule 1.02 to the Participation Agreement shall apply to this Agreement
and the other Operative Documents.
SECTION 2. BASIC PROVISIONS.
2.01. Lease of the Property.
(a) Subject to the acquisition thereof by Lessors pursuant to the
Participation Agreement, either as of the date hereof or during the term
hereof, Lessors agree to lease to Lessee and Lessee agrees to lease from
Lessors the following property (the "Property") to the extent of
Lessors' estate, right, title and interest therein, thereto or
thereunder:
(i) The equipment purchased with each Acquisition Advance,
together with all additions and accessions thereto and all
replacements (including Replacement Property) and substitutions
therefor (collectively, the "Equipment"); and
(ii) All Related Goods, Related Agreements and Related
Permits.
Each item of Property leased hereunder shall be included in a Lease
Supplement in the form of Exhibit A (a "Lease Supplement"),
appropriately completed, duly executed and delivered by Lessee and
accepted by Lessor Agent, on the Closing Date with respect to the
Equipment to be purchased on the Closing Date and on the last Business
Day of an Installation Period with respect to any Property purchased
during such Installation Period; provided, however, that if the Advances
made during any Installation Period shall be less than Fifteen Million
Dollars ($15,000,000), the Property purchased during such
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Installation Period shall be included in the Lease Supplement executed
and delivered for the next succeeding Installation Period.
(b) Lessee hereby agrees that execution and delivery of an
Advance Request for an Acquisition Advance and the application of such
Acquisition Advance to acquire the Property described in such Advance
Request shall, without further act, constitute the irrevocable
acceptance by Lessee of the Property requested to be purchased in such
Advance Request for all purposes of this Agreement and the other
Operative Documents on the terms set forth herein and therein, and that
such Property shall be deemed to be included in the leasehold estate of
this Agreement and shall be subject to the terms and conditions of this
Agreement on the date such Property is purchased by Lessors; provided,
however, that acceptance of any Property for purposes of this Agreement
and the other Operative Documents shall not prevent Lessee from
rejecting such Property for purposes of any Acquisition Agreement if
such rejected Property is purchased or replaced as provided in
Subparagraph 2.01(c) of the Participation Agreement.
2.02. Term.
(a) With respect to each item of Property leased under this
Agreement, the term of such lease shall commence on the date such
Property is purchased by Lessors and shall end on the day prior to the
third anniversary of the Lease Supplement Date for the Lease Supplement
in which such Property is included (such date, as it may be extended
pursuant to Subparagraph 2.02(b) hereof, the "Scheduled Expiration Date"
for such Lease Supplement).
(b) So long as no Event of Default has occurred and is
continuing, Lessee shall have the option, on the terms and conditions
provided herein, to renew any Lease Supplement for up to two (2)
additional terms of one (1) year each (each a "Renewal Option"). A
Renewal Option may be exercised by Lessee with respect to any Lease
Supplement by delivering to Agent not less than thirty (30) days prior
to the Scheduled Expiration Date then applicable to such Lease
Supplement a notice in the form of Exhibit B (a "Notice of Renewal
Option Exercise"), together with a Renewal Date Appraisal Update with
respect to all of the Property then subject to such Lease Supplement.
If, on the basis of such Renewal Date Appraisal Update, (i) the
aggregate Renewal Date Appraised Values of the Property then subject to
such Lease Supplement are less than the Outstanding Lease Amount of such
Lease Supplement or (ii) the ratio of the aggregate Liquidation
Appraised Values of the Property then subject to such Lease Supplement
divided by the sum of the aggregate Outstanding Tranche B Participation
Amounts and Outstanding Equity Participation Amounts for such Lease
Supplement is less than 4.6 to 1.0 (with respect to the exercise of the
first Renewal Option) or 4.0 to 1.0 (with respect to the exercise of the
second Renewal Option), then the exercise of any Renewal Option for such
Lease Supplement shall not be effective unless, on or prior to the
Scheduled Expiration Date applicable to such Lease Supplement prior to
the exercise of such Renewal Option, Lessee makes such additional
payments of the Fixed Component of Base Rent which reduce the
Outstanding Lease Amount of such Lease Supplement to the amount
necessary to eliminate the deficiency under clause (i) and
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increase the ratio described in clause (ii) to at least 4.6 to 1.0 (with
respect to the exercise of the first Renewal Option) or 4.0 to 1.0 (with
respect to the exercise of the second Renewal Option). If required in
order to have this Agreement and the other Operative Documents
classified as an operating lease under GAAP, including FASB 13, on or
prior to the date any Lease Supplement is renewed by exercise of any
Renewal Option, the Outstanding Lease Amount of such renewed Lease
Supplement shall be reallocated among the Tranche A Portion, the Tranche
B Portion and, to the extent necessary or reasonably prudent, the Equity
Portion of such renewed Lease Supplement and the Fixed Component of Base
Rent and the Residual Value Guaranty Amount shall be redetermined for
such renewed Lease Supplement and an amendment to such Lease Supplement
setting forth such amounts shall be executed as approved by Lessee and
Lessor Agent; provided, however, that none of the Equity Portion of such
renewed Lease Supplement shall be reallocated to any Participant which
was not an Equity Participant prior to the exercise of such Renewal
Option.
2.03. Rent.
(a) Base Rent. With respect to each Lease Supplement (or, if a
Lease Supplement has not been executed with respect to any Installation
Period, the Property purchased during such Installation Period):
(i) Lessee shall pay as base rent hereunder ("Base Rent")
for each Rental Period for each Portion of the Outstanding Lease
Amount of such Lease Supplement or Installation Period an amount
equal to the sum of the Variable Component and Fixed Component
for such Rental Period and Portion determined as follows:
(A) "Variable Component" shall mean, with respect
to any Rental Period for any Portion of such Lease
Supplement or Installation Period, the product of (1) the
Rental Rate for such Rental Period and Portion, times (2)
the amount of such Portion during such Rental Period,
times (3) a fraction, the numerator of which is the number
of days in such Rental Period and the denominator of which
is 360. If the Rental Rate shall change during any Rental
Period, the Rental Rate for such Rental Period shall be
the weighted average of the Rental Rates in effect from
time to time during such Rental Period. If the amount of
any Portion shall change during any Rental Period
therefor, the amount of such Portion for such Rental
Period shall be the weighted average of such Portion in
effect from time to time during such Rental Period.
(B) "Fixed Component" shall mean:
(1) With respect to any Rental Period ending
on or prior to the last day of such Installation
Period, zero Dollars ($0.00);
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(2) With respect to any Rental Period
beginning on or after the Lease Supplement Date of
such Lease Supplement, the amount payable on the
last day of each calendar quarter during the Lease
Supplement Term as set forth in such Lease
Supplement, as adjusted in a manner approved by
Lessee and Lessor Agent (y) to take into account
any purchase of less than all of the Property
subject to such Lease Supplement or (z) if required
in connection with the exercise of any Renewal
Option pursuant to Subparagraph 2.02(b); and
(3) Any amount required to be paid with
respect to such Lease Supplement in order to
exercise any Renewal Option pursuant to
Subparagraph 2.02(b).
(ii) For the purposes of calculating the Variable
Component of Base Rent, the Outstanding Lease Amount of such
Lease Supplement or Installation Period shall consist of one or
more Portions and the Lease Supplement Term or Installment Period
shall be divided into Rental Periods for each Portion determined
as follows:
(A) During such Installation Period, the
Outstanding Lease Amount shall consist of a single Portion
in the full amount of the Advances made during such
Installation Period and the period beginning on the first
day of such Installation Period and ending on the last
Business Day of such Installation Period shall consist of
the following Rental Periods:
(1) The period which begins on the first day
of such Installation Period and ends on the last
Business Day in the first fiscal month immediately
following the month in which such Installation
Period begins; and
(2) Each successive period thereafter which
begins on the last day of the immediately preceding
Rental Period and ends one (1) fiscal month
thereafter on the last Business Day of such fiscal
month through and including the last Business Day
of such Installation Period.
(B) On and after the Lease Supplement Date for each
Lease Supplement, Lessee may select the number and amounts
of the Portions into which the Outstanding Lease Amount of
such Lease Supplement is to be divided and the Rental
Period for each such Portion by delivering to Agent at
least three (3) Business Days prior to the last day of
each Rental Period for a Portion an irrevocable written
notice in the form of Exhibit C, appropriately completed
(a "Notice of Rental Period Selection"), subject to the
following:
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(1) Each Portion shall be in an amount not
less than $5,000,000; provided, however, that (y)
the total number of Portions outstanding at any
time for such Lease Supplement shall not exceed two
(2), and (z) the Outstanding Lease Amount of such
Lease Supplement shall consist of a single Portion
in the amount of such Outstanding Lease Amount if
such Outstanding Lease Amount is less than
$5,000,000.
(2) Each Rental Period selected by Lessee
for each Portion pursuant to this clause (B) shall
be one (1), two (2), three (3) or six (6) months;
provided, however, that (w) every Rental Period
shall begin and end on the last Business Day of a
calendar month, except as provided in clause (x)
following, (x) no Rental Period shall end after the
Scheduled Expiration Date for such Lease
Supplement, (y) no Rental Period shall be longer
than one (1) month if an Event of Default has
occurred and is continuing on the date three (3)
Business Days prior to the first day of such Rental
Period and (z) each Rental Period for any Portion
for which Lessee fails to make a selection by
delivering a Notice of Rental Period Selection in
accordance with this clause (B) shall be one (1)
month.
Lessee shall deliver each Notice of Rental Period
Selection as required by Subparagraph 2.02(c) and
Paragraph 7.01 of the Participation Agreement; provided,
however, that Lessee shall promptly deliver the original
of any Notice of Rental Period Selection initially
delivered by facsimile.
(iii) The rental rate for each Rental Period for a Portion
of such Lease Supplement ("Rental Rate") shall be the LIBOR
Rental Rate for such Rental Period and Portion, except as
follows:
(A) With respect to Lease Supplement No. 1, (1) the
first Rental Period shall begin on the Closing Date and
end on (but not include) April 18, 2000, and the Rental
Rate for such Rental Period shall be the per annum rate
equal to the interest rate at which funds are available to
ABN AMRO generally in an amount equal to the Outstanding
Lease Amount of such Lease Supplement or Installation
Period for such Rental Periods, as determined by Agent
(which determination shall be conclusive and binding on
the parties, absent manifest error) plus the Applicable
Margin, such rate to change from time to time as the
Applicable Margin shall change, and (2) the second Rental
Period shall begin on April 18, 2000, and end on (but not
include) April 28, 2000, and the Rental Rate for such
Rental Period shall be the LIBOR Rental Rate for a term of
one (1) month, notwithstanding that such Rental Period is
less than one (1) month;
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(B) If any Rental Period during any Installation
Period is less than one (1) month but at least seven (7)
days, the Rental Rate for such Rental Period shall be the
LIBOR Rental Rate for a term of one (1) month,
notwithstanding that such Rental Period is less than one
(1) month;
(C) If any other Rental Period is less than one (1)
month, the Rental Rate for such Rental Period shall be the
Alternate Rental Rate; and
(D) If any Default has occurred and is continuing
at the time any Rental Period commences or the LIBOR
Rental Rate is unavailable for any Rental Period pursuant
to Subparagraph 2.12(a) or Subparagraph 2.12(b) of the
Participation Agreement, the Rental Rate for such Rental
Period shall be the Alternate Rental Rate.
(iv) Lessee shall pay the Variable Component of Base Rent
in arrears (A) for each Portion of such Lease Supplement or
Installation Period, on the last day of each Rental Period
therefor and, in the case of any Rental Period which exceeds
three (3) months, each day occurring every three (3) months after
the first day of such Rental Period (individually, a "Scheduled
Rent Payment Date" for such Lease Supplement) and (B) for all
Portions of such Lease Supplement, on the Expiration Date for
such Lease Supplement.
(b) Supplemental Rent. Lessee shall pay as supplemental rent
hereunder ("Supplemental Rent") all amounts payable by Lessee under this
Agreement and the other Operative Documents, other than Base Rent for
any Lease Supplement, the purchase price payable by Lessee for any
purchase of the Property subject to any Lease Supplement (or, if a Lease
Supplement has not been executed with respect to any Installation
Period, the Property purchased during such Installation Period) by
Lessee pursuant to the Purchase Agreement and the Residual Value
Guaranty Amount of any Lease Supplement or Installation Period payable
under the Purchase Agreement. Lessee shall pay all Supplemental Rent
amounts on the dates specified in this Agreement and the other Operative
Documents for the payment of such amounts or, if no date is specified
for the payment of any such amount, within twenty (20) days after
written demand of any Lessor or other Person to whom such amount is
payable.
2.04. "As Is" Lease.
(a) Lessee Due Diligence. Lessee has conducted, and will conduct
from time to time with regard to any Property that may purchased with
any Acquisition Advance after the date hereof, all due diligence which
it deems appropriate regarding the Property and agrees that no Lessor
Party has any obligation to conduct any such due diligence.
(b) No Lessor Party Representations. Lessee is leasing the
Property "as is, with all faults" without any representation, warranty,
indemnity or undertaking by any Lessor Party regarding any aspect of the
Property, including (i) the condition or performance of the Property or
the fitness of the Property for any purpose; (ii) title to or
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right to use of the Property, including the existence of any Lien or any
other right, title or interest (including intellectual property right)
in or to any of the Property in favor of any Person; (iii) the value,
usability, design, operation or fitness for use of the Property; (iv)
any latent, hidden or patent defect in the Property; (v) any
restrictions on the use of the Property; (vi) the economics of the
Property; (vii) any Casualty or Condemnation; or (viii) the compliance
of the Property with any applicable Governmental Rule or Insurance
Requirement; provided, however, that any Lessor shall be obligated to
remove Lessor Liens to the extent required in Subparagraph 5.04(b) of
the Participation Agreement.
(c) Express Disclaimers. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, EACH LESSOR AND LESSOR AGENT SPECIFICALLY DISCLAIMS AND
LESSEE SPECIFICALLY WAIVES:
(i) ANY COVENANT OF QUIET ENJOYMENT AND ANY WARRANTY
AGAINST INTERFERENCE OR INFRINGEMENT, EXCEPT AS OTHERWISE
PROVIDED IN SUBPARAGRAPH 5.04(b) OF THE PARTICIPATION AGREEMENT;
(ii) ANY WARRANTY OF MERCHANTABILITY; AND
(iii) ANY WARRANTY THAT THE PROPERTY WILL BE FIT FOR A
PARTICULAR PURPOSE.
2.05. Nature of Transaction. As more fully provided in Paragraph 2.10 of
the Participation Agreement, Lessee and the Lessor Parties intend that the
transactions evidenced by this Agreement and the other Operative Documents
constitute an operating lease pursuant to GAAP, including FASB 13, for
accounting purposes and loans secured by the Property for federal, state and
local income tax purposes and for purposes of commercial law and bankruptcy law.
(If, notwithstanding the intent of the parties, any court concludes that the
transactions evidenced by this Agreement and the other Operative Documents are
subject to Division 10 of the California Commercial Code (or the corresponding
part of the Uniform Commercial Code as adopted in any other state), Lessee and
Lessors agree that such transactions are "finance leases" thereunder.)
2.06. Security and Subordination.
(a) As security for the Lessee Obligations and otherwise to
assure the Lessor Parties the benefits hereof in the event that the
transactions evidenced by this Agreement and the other Operative
Documents are, pursuant to the intent of Lessee and the Lessor Parties,
treated as loans for certain purposes, Lessee hereby irrevocably and
unconditionally assigns and grants to Lessor Agent, for the benefit of
the Lessor Parties, a security interest in all estate, right, title and
interest of Lessee in the following property, whether now owned or
leased or hereafter acquired, (collectively, the "Property Collateral"):
(i) All Equipment;
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(ii) All Related Goods, Related Agreements and Related
Permits; and
(iii) All proceeds of the foregoing, including whatever is
receivable or received when Property Collateral or proceeds are
sold, collected, exchanged, returned, substituted or otherwise
disposed of, whether such disposition is voluntary or
involuntary, including Casualty and Condemnation Proceeds and
other rights to payment and return premiums and insurance
proceeds under insurance with respect to any Property Collateral,
and all rights to payment with respect to any cause of action
affecting or relating to the Property Collateral.
(b) As security for the Lessee Obligations and otherwise to
assure the Lessor Parties the benefits hereof in the event that the
transactions evidenced by this Agreement and the other Operative
Documents are, pursuant to the intent of Lessee and the Lessor Parties,
treated as loans for certain purposes, Lessee hereby irrevocably and
unconditionally assigns and grants to Lessor Agent, for the benefit of
the Lessor Parties, a security interest in all estate, right, title and
interest of Lessee in the following property, whether now owned or
leased or hereafter acquired, (collectively, the "Cash Collateral"):
(i) The deposit account maintained at Lessor Agent in the
name of Lessee into which the portion of any Acquisition Advance
equal to the aggregate Unpaid Acquisition Prices of the Equipment
purchased with such Acquisition Advance is deposited; all cash
and other property maintained in or credited to such account; all
documents, instruments and agreements evidencing the foregoing;
all extensions, renewals, modifications and replacements of the
foregoing; all interest and other amounts payable in connection
therewith; and all other rights of Lessee with respect to the
foregoing; and
(ii) All proceeds of the foregoing, including whatever is
receivable or received when Cash Collateral or proceeds are sold,
collected, exchanged, returned, substituted or otherwise disposed
of, whether such disposition is voluntary or involuntary,
including rights to payment and return premiums and insurance
proceeds under insurance with respect to any Cash Collateral, and
all rights to payment with respect to any cause of action
affecting or relating to the Cash Collateral.
(c) The Lessee Obligations arising under this Agreement and the
other Operative Documents shall be "Designated Senior Debt" for purposes
of any indenture or other document creating or evidencing Subordinated
Debt and such Subordinated Debt shall be subordinated to the Lessee
Obligations on terms no more favorable to the holders of Subordinated
Debt than those attached as Exhibit I to the Participation Agreement.
2.07. Withdrawals of Cash Collateral.
(a) Lessee may not withdraw any Cash Collateral from Lessor Agent
except as provided in this Paragraph 2.07. If no Event of Default has
occurred and is continuing, all Cash Collateral shall be maintained in
time deposit accounts with terms of one (1)
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month. If an Event of Default has occurred and is continuing, all Cash
Collateral shall be maintained in time deposit accounts with terms not
exceeding one (1) week.
(b) If no Event of Default has occurred and is continuing, Lessee
shall be entitled to withdraw Cash Collateral, free and clear of all
liens and security interests in favor of Lessor Parties, from time to
time prior to the date which is six (6) months after the Commitment
Termination Date in an amount equal to the Unpaid Acquisition Price paid
by Lessee to the Supplier of any Equipment upon delivery by Lessee to
Lessor Agent of the items set forth in clause (ii)(B) of Subparagraph
2.01(c) of the Participation Agreement with respect to such Equipment in
form and substance reasonably satisfactory to Lessor Agent, provided
that:
(i) Such withdrawal does not cause the value of the Cash
Collateral then held by Lessor Agent to be less than the
aggregate Unpaid Acquisition Prices for all of the Equipment
which have not been paid to the Suppliers of such Equipment; and
(ii) Lessee gives Lessor Agent not less than three (3)
Business Days prior written notice of such withdrawal; and
(iii) Lessee may not make more than one (1) withdrawal of
Cash Collateral in any fiscal month.
(c) If no Event of Default has occurred and is continuing, Lessee
shall be entitled to withdraw any Cash Collateral remaining six (6)
months after the Commitment Termination Date, free and clear of all
liens and security interests in favor of the Lessor Parties, only upon
compliance by Lessee with the requirements of clause (iv) of
Subparagraph 2.01(c) of the Participation Agreement.
(d) Lessee represents and warrants to the Lessor Parties that (i)
no Person other than Lessee has (or, in the case of after-acquired Cash
Collateral, at the time Lessee acquires rights therein, will have) any
right, title, claim or interest (by way of Lien or otherwise) in,
against or to the Cash Collateral except for Liens granted in favor of
the Lessor Parties to secure the Lessee Obligations, and (ii) Lessor
Agent has (or, in the case of after-acquired Cash Collateral, at the
time Lessee acquires rights therein, will have) a first priority
perfected security interest in the Cash Collateral.
(e) Subject to Lessee's withdrawal rights hereunder, Lessee shall
not sell, encumber or otherwise dispose of or transfer any Cash
Collateral or any right or interest therein.
(f) Subject to Paragraph 3.10 relating to permitted contests,
Lessee shall pay promptly when due all taxes and other Governmental
Charges, all Liens and all other charges now or hereafter imposed upon,
or relating to or affecting the Cash Collateral.
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SECTION 3. OTHER LESSEE AND LESSOR RIGHTS AND OBLIGATIONS.
3.01. Maintenance, Repair, Etc.
(a) General.
(i) Lessee shall not permit any waste of the Property and
shall, at its sole cost and expense, maintain, service and repair
the Property as necessary to (A) maintain the Property in all
material respects, and subject to Subparagraph 3.01(c), in the
condition in which delivered and accepted by Lessee (except for
ordinary wear and tear), in good working order, mechanical
condition and repair and consistent with prudent industry
practice and Lessee's practice regarding other similar equipment;
(B) comply in all material respects with all applicable
Governmental Rules and Insurance Requirements; and (C) maintain
in full force and effect in all material respects all Suppliers'
and manufacturers' warranties and guaranties for the respective
term thereof.
(ii) Lessee shall maintain the Property subject to each
Lease Supplement (or, if a Lease Supplement has not been executed
with respect to any Installation Period, the Property purchased
during such Installation Period) at the Property Site identified
in such Lease Supplement (or the Advance Request for such
Property) at all times during such Installation Period and the
Lease Supplement Term for such Lease Supplement; provided,
however, that Lessee may relocate such Property to any of the
other Property Sites if Lessee has given Lessor Agent written
notice of such relocation not less than thirty (30) days prior to
such relocation and Lessee has executed and filed such Uniform
Commercial Code financing statements and fixture filings and
obtained such landlord waivers as Lessor Agent may reasonably
request to protect the security interests granted in favor of the
Lessor Parties in such Property.
(iii) If any parts of the Property become worn out or
otherwise permanently rendered unfit for use, then Lessee, at its
own expense and within a reasonable time, shall replace such
parts with replacement parts which are free and clear of all
Liens (other than Permitted Property Liens) and have a value,
utility and useful life at least equal to the parts replaced;
provided, however, if any item of Equipment is required to be
replaced by this clause (iii), the replacement of such Equipment
shall comply with the requirements of Subparagraph 3.01(b). All
parts which are added to the Property which are essential to the
operation of such Property or required to comply with applicable
Governmental Rules and Insurance Requirements or which cannot be
detached from the Property without materially interfering with
the operation of the Property or the value, utility or useful
life such Property would have had without the addition thereof,
shall immediately become Replacement Property and shall be deemed
included in the Lease Supplement to which the Property they are
added is included and subject to the terms of such Lease
Supplement as if originally leased thereunder.
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(b) Replacements. If no Event of Default has occurred and is
continuing, Lessee may, at its sole cost and expense, replace any
portion of the Property subject to any Lease Supplement (the "Replaced
Property") with other property subject to such Lease Supplement
("Replacement Property"), provided that:
(i) The Replacement Property is comparable to the Replaced
Property in function and utility, has a value and useful life
equal to or greater than the Replaced Property and is covered by
warranties and guarantees comparable to those for the Replaced
Property, to the extent reasonably available, and the replacement
of the Replaced Property with the Replacement Property does not
adversely affect the utility, value or useful life of or
warranties and guarantees for the other Property in any material
respect; provided, however, that the Replacement Property may be
different in functionality or utility from the Replaced Property
if Lessee delivers an Appraisal to Lessor Agent evidencing that
such Replacement Property has a Fair Market Value on the date
such Replacement Property is transferred to Lessors which is not
less than the Fair Market Value of the Replaced Property on such
date and the Expiration Date Appraised Values of such Replacement
Property are not less than the Expiration Date Appraised Values
of the Replaced Property;
(ii) Except for any Property which is being replaced in
accordance with clause (iii) of Subparagraph 3.01(a) or
Subparagraph 3.04(b), the aggregate amount of all Replaced
Property shall not exceed twenty-five percent (25%) of all
Property subject to the Lease Supplements, calculated on the
basis of the lesser of the Purchase Date Appraised Values and the
Acquisition Prices of the Property; and
(iii) Lessee delivers to Lessor Agent each of the
following with respect to the Replacement Property, each in form
and substance satisfactory to Lessor Agent:
(A) An addendum to such Lease Supplement setting
forth a detailed description of the Replacement Property
(comparable to the description of the Replaced Property)
to be included in such Lease Supplement;
(B) A full warranty bill of sale transferring all
right, title and interest in the Replacement Property to
Lessors, duly executed by Lessee, and such other
documents, instruments and agreements as Lessor Agent
shall reasonably request to evidence such transfer on the
terms set forth in the Operative Documents;
(C) Acquisition Agreement Acceptance
Certificates for the Replacement Property, duly executed
by Lessee;
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(D) Certificates of insurance evidencing that the
Replacement Property is covered by the insurance Lessee is
required to maintain pursuant to Paragraph 3.03 of the
Lease Agreement;
(E) Such Uniform Commercial Code amendments as
Lessor Agent may reasonably request to perfect the
security interests of Lessors in the Replacement Property,
duly executed by Lessee, and evidence that such amendments
have been duly filed in all appropriate jurisdictions;
(F) Such Uniform Commercial Code amendments as
Agent may reasonably request to perfect its security
interest in the Replacement Property, duly executed by
Lessors, and evidence that such amendments have been duly
filed in all appropriate jurisdictions;
(G) Such evidence as Lessor Agent or Agent may
reasonably request (including Uniform Commercial Code
releases, termination statements and search certificates)
to establish that the security interests of the Lessor
Parties in the Replacement Property are perfected and
prior to the interests of all other Persons (except for
Permitted Property Liens); and
(H) Such other evidence as Lessor Agent may
reasonably request to establish that the Replacement
Property complies with the terms and conditions of the
Operative Documents, including the representations and
warranties concerning the Property set forth in
Subparagraph 4.01(u) of the Participation Agreement.
Upon the receipt by Lessor Agent of each of the foregoing in
connection with any Replaced Property and Replacement Property,
Lessors shall execute and deliver to Lessee such Uniform
Commercial Code releases and other documents, instruments and
agreements as Lessee may reasonably request to release their
Liens in the Replaced Property and to transfer their right, title
and interest in the Replaced Property to Lessee.
(c) Modifications. Lessee, at its sole cost and expense, may from
time to time make alterations, renovations, improvements and additions
to the Property subject to any Lease Supplement (and substitutions and
replacements therefor (collectively, "Modifications"); provided that:
(i) No Modification impairs the value, utility or useful
life of the Property or any part thereof from that which existed
immediately prior to such Modification;
(ii) All Modifications are made with reasonable
promptness and, in all cases unless Lessee currently is
exercising either the Term Purchase Option or the Expiration
Date Purchase Option with respect to such Lease Supplement,
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completed not later than one (1) month prior to the Scheduled
Expiration Date for such Lease Supplement;
(iii) All Modifications are made in a good and workmanlike
manner and in compliance in all material respects with all
applicable Governmental Rules and Insurance Requirements;
(iv) Subject to Paragraph 3.10 relating to permitted
contests, Lessee pays all costs and expenses and discharges (or
causes to be insured or bonded over) any Liens arising in
connection with any Modification not later than the earlier of
(A) sixty (60) days after Lessee receives notice of the filing of
same and (B) unless Lessee currently is exercising either the
Term Purchase Option or the Expiration Date Purchase Option with
respect to such Lease Supplement, one (1) month prior to the
Scheduled Expiration Date for such Lease Supplement;
(v) At least one (1) month prior to the commencement of
(A) any Modifications to the Property subject to such Lease
Supplement which are anticipated to cost $2,500,000 or more in
the aggregate, or (B) any Modifications which cause the total of
all Modifications undertaken to the Property subject to such
Lease Supplement during the previous twelve-month period to
exceed an aggregate cost of $5,000,000 Lessee shall deliver to
Lessor Agent, with sufficient copies for Agent and each
Participant, a brief written description of such Modifications;
and
(vi) All Modifications otherwise comply with this
Agreement and the other Operative Documents.
3.02. Risk of Loss. Lessee assumes all risks of loss arising from any
Casualty or Condemnation which arises or occurs prior to the Expiration Date for
any Lease Supplement or while Lessee is in possession of the Property and all
liability for all personal injuries and deaths and damages to property suffered
by any Person or property in connection with the Property which arises or occurs
prior to such Expiration Date or while Lessee is in possession of the Property,
except in each case to the extent any such loss or liability is caused by the
gross negligence or willful misconduct of a Lessor Party. Lessee hereby waives
any and all applicable existing or future Governmental Rules permitting the
termination of this Agreement as a result of any Casualty or Condemnation, and
Lessors and Lessor Agent shall in no event be answerable or accountable for any
risk of loss of or decrease in the enjoyment and beneficial use of the Property
as a result of any such event.
3.03. Insurance.
(a) Coverage. Lessee, at its sole cost and expense, shall carry
and maintain the following insurance coverage:
(i) At all times during each Lease Supplement Term,
commercial liability insurance covering claims for injuries or
death sustained by persons or
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damage to property caused by the Property subject to such
Lease Supplement, and workers' compensation insurance;
(ii) At all times during each Lease Supplement Term,
property insurance covering loss or damage by fire, flood,
earthquake and other risks to the Property subject to such Lease
Supplement in an amount not less than the then current
Outstanding Lease Amount of such Lease Supplement, except with
respect to flood and earthquake insurance which shall be subject
to Lessee's customary blanket policies; and
(iii) At all times during each Lease Supplement Term as
appropriate, such other insurance of the types customarily
carried by a reasonably prudent Person owning or operating
properties similar to the Property subject to such Lease
Supplement in the same geographic area as such Property.
(b) Carriers. Any insurance carried and maintained by Lessee
pursuant to this Paragraph 3.03 shall be underwritten by an insurance
company which (i) has, at the time such insurance is placed and at the
time of each renewal thereof, a general policyholder rating of "A" and a
financial rating of at least 10 from A.M. Best and Company or any
successor thereto (or if there is none, an organization having a similar
national reputation) or (ii) is otherwise approved by Required
Participants.
(c) Terms. Each insurance policy maintained by Lessee pursuant to
this Paragraph 3.03 shall provide as follows, whether through
endorsements or otherwise:
(i) The Lessor Parties shall be named as additional
insureds, in the case of each policy of liability and property
insurance, and Lessor Agent shall be named as additional loss
payee, in the case of each policy of property insurance.
(ii) In respect of the interests of the Lessor Parties in
the policy, the insurance shall not be invalidated by any action
or by inaction of Lessee or by any Person having temporary
possession of the Property while under contract with Lessee to
perform maintenance, repair, alteration or similar work on the
Property, and shall insure the interests of the Lessor Parties
regardless of any breach or violation of any warranty,
declaration or condition contained in the insurance policy by
Lessee, any Lessor Party or any other additional insured (other
than by such additional insured, as to such additional insured);
provided, however, that the foregoing shall not be deemed to (A)
cause such insurance policies to cover matters otherwise excluded
from coverage by the terms of such policies or (B) require any
insurance to remain in force notwithstanding non-payment of
premiums except as provided in clause (iii) below.
(iii) If the insurance policy is cancelled for any reason
whatsoever, or substantial change is made in the coverage that
affects the interests of the Lessor Parties, or if the insurance
coverage is allowed to lapse for non-payment of premium, such
cancellation, change or lapse shall not be effective as to the
Lessor
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Parties for ten (10) days after delivery to Lessor Agent of
written notice from the insurers in the case of any cancellation
for non-payment of premiums and for thirty (30) days after
delivery to Lessor Agent of written notice from the insurers in
the case of any other cancellation, change or lapse.
(iv) No Lessor Party shall have any obligation or
liability for premiums, commissions, assessments, or calls in
connection with the insurance.
(v) The insurer shall waive any rights of set-off or
counterclaim or any other deduction, whether by attachment or
otherwise, that it may have against any Lessor Party.
(vi) The insurance shall be primary without right of
contribution from any other insurance that may be carried by any
Lessor Party with respect to its interest in the Property.
(vii) The insurer shall waive any right of subrogation
against any Lessor Party.
(viii) All provisions of the insurance, except the limits
of liability, shall operate in the same manner as if there were a
separate policy covering each insured party.
(ix) The insurance shall not be invalidated should Lessee
or any Lessor Party waive, in writing, prior to a loss, any or
all rights of recovery against any Person for losses covered by
such policy, nor shall the insurance in favor of any Lessor Party
or Lessee, as the case may be, or their respective rights under
and interests in said policies be invalidated or reduced by any
act or omission or negligence of any Lessee Party or Lessor
Party, as the case may be, or any other Person having any
interest in the Property.
(x) All insurance proceeds with a value of less than the
higher of (1) $10,000,000 and (2) ten percent (10%) of the
outstanding Total Commitment in respect of any loss or occurrence
with respect to the Property shall be paid to and adjusted solely
by Lessee and all other insurance proceeds shall be paid to
Lessor Agent and adjusted jointly by Lessor Agent and Lessee,
except that, from and after the date on which the insurer
receives written notice from Lessor Agent that an Event of
Default has occurred and is continuing (and unless and until such
insurer receives written notice from Lessor Agent that all Events
of Default have been cured), all losses shall be adjusted solely
by, and all insurance proceeds shall be paid solely to, Lessor
Agent.
(xi) Each policy shall contain a standard form mortgagee
endorsement in favor of Lessor Agent.
(d) Evidence of Insurance. Lessee, at its sole cost and expense,
shall furnish to Lessor Agent from time to time upon the request of
Lessor Agent such certificates or
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other documents as Lessor Agent may reasonably request to evidence
Lessee's compliance with the insurance requirements set forth in this
Paragraph 3.03.
(e) Release of Lessor Parties. Lessee hereby waives, releases and
discharges each Lessor Party and its directors, officers, employees,
agents and advisors from all claims whatsoever arising out of any loss,
claim, expense or damage to or destruction covered or coverable by
insurance required under this Paragraph 3.03 except to the extent any
such loss, claim, expense or damage is caused by the gross negligence or
willful misconduct of such Person, notwithstanding that such loss,
claim, expense or damage may have been caused by any such Person, and,
as among Lessee and such Persons, Lessee agrees to look to the insurance
coverage only in the event of such loss.
3.04. Casualty and Condemnation.
(a) Notice. Lessee shall give Agent prompt written notice of the
occurrence of any Casualty affecting, or the institution of any
proceedings for the Condemnation of, the Property or any portion
thereof.
(b) Repair, Replacement or Purchase Option. After the occurrence
of any Casualty or Condemnation affecting the Property subject to any
Lease Supplement or any portion thereof, Lessee shall promptly (i)
repair and restore the affected Property as required by Subparagraph
3.04(c), (ii) replace the affected Property pursuant to Subparagraph
3.01(b), (iii) exercise the Partial Purchase Option and purchase the
affected Property pursuant to the Purchase Agreement or (iv) exercise
the Term Purchase Option and purchase all of the Property pursuant to
the Purchase Agreement. Not later than one (1) month after the
occurrence of any Casualty or Condemnation, Lessee shall deliver to
Agent a written notice indicating which of the foregoing options Lessee
has exercised. If Lessee elects to purchase the affected Property
pursuant to the Partial Purchase Option or all of the Property pursuant
to the Term Purchase Option, such purchase shall be completed within
ninety (90) days after the occurrence of any Casualty or Condemnation.
(c) Repair and Restoration. If Lessee elects to repair and
restore the Property subject to any Lease Supplement following any
Casualty or Condemnation, Lessee shall diligently proceed to repair and
restore such Property to the condition in which it existed immediately
prior to such Casualty or Condemnation and shall complete all such
repairs and restoration as soon as reasonably practicable, but in any
event, unless Lessee currently is exercising either the Term Purchase
Option or the Expiration Date Purchase Option with respect to such Lease
Supplement, not later than one (1) month prior to the Scheduled
Expiration Date for such Lease Supplement. Lessee shall use its own
funds to make such repairs and restoration, except to the extent any
Casualty and Condemnation Proceeds are available and are released to
Lessee for such purpose pursuant to Subparagraph 3.04(f). Lessee's
exercise of the repair and restoration option shall, if Required
Participants direct, be subject to the delivery to Lessor Agent the
following, each in form and substance acceptable to Lessor Agent:
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(i) Evidence that such Property can, in Lessor Agent's
reasonable judgment, with diligent restoration or repair, be
returned to a condition at least equal to the condition thereof
that existed prior to the Casualty or partial Condemnation
causing the loss or damage within the time required by
Subparagraph 3.04(b);
(ii) Evidence that all necessary governmental approvals,
if any, can be timely obtained to allow the repair and
restoration;
(iii) Copies of all contracts for the work;
(iv) A cost breakdown for the work;
(v) Evidence that, upon completion of the work, the value,
utility and useful life of such Property will be at least as
great as it was before the Casualty or Condemnation occurred; and
(vi) Evidence of satisfaction of any additional conditions
that Lessor Agent may reasonably establish to protect the rights
of the Lessor Parties under this Agreement and the other
Operative Documents.
(d) Prosecution of Claims for Casualty and Condemnation Proceeds.
Lessee shall, at its sole cost and expense, proceed promptly and
diligently to prosecute in good faith the settlement or compromise of
any and all claims for Casualty and Condemnation Proceeds; provided,
however, that any settlement or compromise of any such claim shall,
except as otherwise provided in clause (x) of Subparagraph 3.03(c), be
subject to the written consent of Required Participants, which consents
shall not be unreasonably withheld, delayed or conditioned. Lessor Agent
may participate in any proceedings relating to such claims, and, after
the occurrence and during the continuance of any Event of Default,
Lessor Agent is hereby authorized, in its own name or in Lessee's name,
to adjust any loss covered by insurance or any Casualty or Condemnation
claim or cause of action, and to settle or compromise any claim or cause
of action in connection therewith, and Lessee shall from time to time
deliver to Lessor Agent any and all further assignments and other
instruments required to permit such participation.
(e) Assignment of Casualty and Condemnation Proceeds. Subject to
clause (x) of Subparagraph 3.03(c), Lessee hereby absolutely and
irrevocably assigns to Lessors all Casualty and Condemnation Proceeds
and all claims relating thereto. Except as otherwise provided in clause
(x) of Subparagraph 3.03(c), Lessee agrees that all Casualty and
Condemnation Proceeds are to be paid to Lessor Agent and Lessee hereby
authorizes and directs any insurer, Governmental Authority or other
Person responsible for paying any Casualty and Condemnation Proceeds to
make payment thereof directly to Lessor Agent alone, and not to Lessor
Agent and Lessee jointly. If Lessee receives any Casualty and
Condemnation Proceeds payable to Lessor Agent hereunder, Lessee shall
promptly pay over such Casualty and Condemnation Proceeds to Lessor
Agent. Lessee hereby covenants that until such Casualty and Condemnation
Proceeds are so paid over to
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Lessor Agent, Lessee shall hold such Casualty and Condemnation Proceeds
in trust for the benefit of the Lessor Parties and shall not commingle
such Casualty and Condemnation Proceeds with any other funds or assets
of Lessee or any other Person. Except as otherwise provided in clause
(x) of Subparagraph 3.03(c), Lessor Agent may commence, appear in,
defend or prosecute any assigned right, claim or action, and may adjust,
compromise, settle and collect all rights, claims and actions assigned
to Lessors, but shall not be responsible for any failure to collect any
such right, claim or action, regardless of the cause of the failure
unless such failure arises from the gross negligence or willful
misconduct of Lessor Agent.
(f) Use of Casualty and Condemnation Proceeds.
(i) If (A) no Event of Default has occurred and is
continuing, (B) Lessee exercises the repair and restoration
option pursuant to Subparagraphs 3.04(b) and 3.04(c) or the
replacement option pursuant to Subparagraphs 3.04(b) and 3.01(b)
and (C) Lessee complies with any conditions imposed pursuant to
Subparagraph 3.04(c) or Subparagraph 3.01(b), as the case may be,
then Lessor Agent shall release any Casualty and Condemnation
Proceeds received with respect to the Property subject to any
Lease Supplement to Lessee for repair or restoration of such
Property or purchase of Replacement Property, as the case may be.
Any surplus Casualty and Condemnation Proceeds remaining after
the completion of such restoration or the payment of the
Acquisition Price for the Replacement Property, as the case may
be, shall be retained by Lessee.
(ii) If (A) an Event of Default has occurred and is
continuing, (B) Lessee fails to or is unable to comply with any
conditions imposed pursuant to Subparagraph 3.04(c) or
Subparagraph 3.01(b), as the case may be, with respect to the
Property subject to any Lease Supplement, or (C) Lessee elects to
exercise the Term Purchase Option and purchase all of the
Property pursuant to the Purchase Agreement; then, at the
absolute discretion of the Required Participants, regardless of
any impairment of security or lack of impairment of security, but
subject to applicable Governmental Rules governing use of
Casualty and Condemnation Proceeds, if any, Lessor Agent may (1)
apply all or any of the Casualty and Condemnation Proceeds it
receives with respect to the Property subject to such Lease
Supplement to the expenses of Lessor Parties in obtaining such
proceeds; (2) apply the balance to the payment of Rent and/or the
reduction of the Outstanding Lease Amount under such Lease
Supplement, notwithstanding that such amounts are not then due
and payable or that such amounts are otherwise adequately secured
and/or (3) release all or any part of such proceeds to Lessee
upon any restoration conditions Lessor Agent may reasonably
elect.
(iii) Lessor Agent shall apply any Casualty and
Condemnation Proceeds which are to be used to reduce the
Outstanding Lease Amount of any Lease Supplement only on the last
day of a Rental Period for such Lease Supplement unless an Event
of Default has occurred and is continuing.
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(iv) Application of all or any portion of the Casualty and
Condemnation Proceeds, or the release thereof to Lessee, shall
not cure or waive any Event of Default or notice of default or
invalidate any acts done pursuant to such notice.
3.05. Taxes. Subject to Paragraph 3.10 relating to permitted contests,
Lessee shall promptly pay when due all Indemnified Taxes imposed on or payable
by Lessee or any Lessor Party in connection with the Property, this Agreement or
any of the other Operative Documents, or any of the transactions contemplated
hereby or thereby. As promptly as possible after any Indemnified Taxes are
payable by Lessee, Lessee shall send to Lessor Agent for the account of the
applicable Lessor Party a certified copy of an original official receipt
received by Lessee showing payment thereof. If Lessee fails to pay any such
Indemnified Taxes when due to the appropriate taxing authority or fails to remit
to Lessor Agent the required receipts or other required documentary evidence,
Lessee shall indemnify the Lessor Parties for any incremental taxes, interest or
penalties that may become payable by the Lessor Parties as a result of any such
failure. The obligations of Lessee under this Paragraph 3.05 shall survive the
payment and performance of the Lessee Obligations and the termination of this
Agreement.
3.06. Severability. Lessee shall not attach the Property to any Property
Site or to any real property in a manner that would cause the Property to
constitute real property or so as to give any Person having an interest in any
Property Site or such real property any right, title or interest in the
Property.
3.07. Liens, Etc.
(a) Lessee's Covenants. Subject to Paragraph 3.10 relating to
permitted contests, Lessee shall not create, incur, assume or permit to
exist any Lien on or with respect to any of the Property of any
character, whether now owned or hereafter acquired, except for the
following ("Permitted Property Liens"):
(i) Liens in favor of a Lessor Party securing the Lessee
Obligations and other Lessor Liens;
(ii) Liens for current taxes, assessments or other
Governmental Charges which are not delinquent or remain payable
without any penalty;
(iii) Liens of mechanics, materialmen, carriers,
warehousemen and other similar Liens imposed by law incurred in
the ordinary and normal course of business with respect to
obligations which are not past due; and
(iv) Prior to the Commitment Termination Date only, Liens
in favor of a Supplier of any item of Equipment, provided that
such Lien secures only the Unpaid Acquisition Price for such item
of Equipment and extends only to such item of Equipment.
Subject to Paragraph 3.10 relating to permitted contests, Lessee shall
promptly (A) pay all Indebtedness of Lessee and other obligations prior
to the time the non-payment thereof
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would give rise to a Lien on the Property and (B) discharge, at its sole
cost and expense, any Lien on the Property which is not a Permitted
Property Lien.
(b) No Consents. Nothing contained in this Agreement shall be
construed as constituting the consent or request of any Lessor Party,
express 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 the Property or any
part thereof. NOTICE IS HEREBY GIVEN THAT NO LESSOR PARTY IS OR SHALL BE
LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED
TO LESSEE, OR TO ANYONE HOLDING THE 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
ANY LESSOR PARTY IN AND TO THE PROPERTY.
3.08. Subletting. Lessee may, in the ordinary course of business,
sublease the Property subject to any Lease Supplement or any portion thereof to
any Person, provided, that (a) Lessee remains directly and primarily liable for
performing its obligations under this Agreement and all other Lessee
Obligations; (b) each sublease is subject to and subordinated to this Agreement;
(c) each sublease has a term which expires on or prior to the Scheduled
Expiration Date for such Lease Supplement (or, if longer, includes a provision
that the sublease terminates on the Expiration Date for such Lease Supplement if
such Expiration Date occurs prior to the Scheduled Expiration Date for such
Lease Supplement unless Lessee purchases such Property on such Expiration Date
pursuant to the Purchase Agreement); (d) Lessee and each sublessee take all
actions reasonably requested by Lessor Agent and Agent to assure the continuing
perfection and priority of their respective Liens in such Property; (e) no
sublessee uses such Property in a manner substantially different from Lessee's
use of such Property prior to such sublease without the prior written consent of
Lessor Agent, which consents shall not be unreasonably withheld; and (f) no
sublease has a Material Adverse Effect. Any sublease which does not satisfy each
of the requirements of the immediately preceding sentence shall be null and void
as to the Lessor Parties and their successor and assigns. Except for such
permitted subleases, Lessee shall not assign any of its rights or interests
under this Agreement to any other Person without the prior written consent of
the Required Participants.
3.09. Compliance with Governmental Rules and Insurance Requirements.
Lessee, at its sole cost and expense, shall, (a) comply, and cause its agents,
sublessees, assignees, employees, invitees, licensees, contractors and tenants,
and the Property to comply, in all material respects, with all Governmental
Rules and Insurance Requirements relating to the Property (including the use,
operation, maintenance, repair and restoration thereof, whether or not
compliance therewith shall require structural or extraordinary changes therein
or interfere with the use and enjoyment of the Property), and (b) procure,
maintain and comply with in all material respects all licenses, permits, orders,
approvals, consents and other authorizations required for the use, operation,
maintenance, repair and restoration of the Property.
3.10. Permitted Contests. Lessee, at its sole cost and expense, may
contest any alleged Lien on any of the Property, any alleged application of any
Governmental Rule or any alleged
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Governmental Charge, Indebtedness or other obligation which is payable by or on
behalf of Lessee to Persons other than the Lessor Parties or which, if unpaid,
would give rise to a Lien on any of the Property, provided that (a) each such
contest is diligently pursued in good faith by appropriate proceedings; (b) the
commencement and continuation of such proceedings suspends the enforcement of
such Lien or Governmental Rule or the collection of such Governmental Charge,
Indebtedness or obligation; (c) Lessee has established adequate reserves for the
discharge of such Lien, compliance with such Governmental Rule or payment of
such Governmental Charge, Indebtedness or obligation in accordance with GAAP;
(d) the failure to discharge such Lien, comply with such Governmental Rule or
pay such Governmental Charge, Indebtedness or obligation prior to the conclusion
of such contest is not reasonably likely to result in any criminal liability or
civil liability for any Lessor Party; (e) the failure to discharge such Lien,
comply with such Governmental Rule or pay such Governmental Charge, Indebtedness
or obligation is not otherwise reasonably likely to have a Material Adverse
Effect; and (f) unless Lessee currently is exercising either the Term Purchase
Option or the Expiration Date Purchase Option with respect to the Property
subject to any Lease Supplement, any such contest is completed and such Lien is
discharged (either pursuant to such proceedings or otherwise) or the application
of such Governmental Rule or such Governmental Charge, Indebtedness or
obligation is declared invalid, paid or otherwise satisfied not later than one
(1) month prior to the Scheduled Expiration Date for such Lease Supplement.
3.11. Lessor Obligations; Right to Perform Lessee Obligations. No Lessor
Party shall have any obligation to (a) maintain, repair or make any improvements
to the Property, (b) maintain any insurance on the Property, (c) perform any
other obligation of Lessee under this Agreement or any other Lessee Obligation,
(d) make any expenditure on account of the Property (except to make Advances as
required by the Participation Agreement) or (e) take any other action in
connection with the Property, this Agreement or any other Operative Document,
except as expressly provided herein or in another Operative Document; provided
however, that Lessor Agent may, in its sole discretion and without any
obligation to do so, perform any Lessee Obligation not performed by Lessee when
required after giving Lessee prior written notice of Lessor Agent's intention to
perform such Lessee Obligation. Lessor Agent may enter any Property Site or
exercise any other right of Lessee under this Agreement or any other Operative
Document to the extent Lessor Agent determines in good faith that such entry or
exercise is reasonably necessary for Lessor Agent to perform any such Lessee
Obligation not performed by Lessee when required. Lessee shall reimburse Lessor
Agent and the other Lessor Parties, within five (5) Business Days after demand,
for all fees, costs and expenses incurred by them in performing any such
obligation or curing any Default.
3.12. Inspection Rights. During the Lease Supplement Term of any Lease
Supplement, Lessee shall permit any Person designated by Lessor Agent, upon
reasonable notice and during normal business hours, to visit any Property Site
and inspect any of the Property subject to such Lease Supplement in accordance
with Subparagraph 5.01(j) of the Participation Agreement.
SECTION 4. EXPIRATION DATE.
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4.01. Termination by Lessee Prior to Scheduled Expiration Date. Subject
to the terms and conditions of the Purchase Agreement, Lessee may, at any time
prior to the earliest Scheduled Expiration Date for any outstanding Lease
Supplement, terminate this Agreement and purchase all of the Property subject to
the Lease Supplements pursuant to Paragraph 2.01 of the Purchase Agreement.
Lessee shall notify Agent of Lessee's election so to terminate this Agreement
and purchase the Property by delivering to Agent a Notice of Term Purchase
Option Exercise pursuant to and in accordance with the provisions of Paragraph
2.01 of the Purchase Agreement.
4.02. Surrender of Property.
(a) Unless Lessee or any Assignee Purchaser purchases the
Property subject to any Lease Supplement on or before the Expiration
Date for such Lease Supplement pursuant to the Purchase Agreement,
Lessee shall, on such Expiration Date, deliver the Property to Lessor
Agent (or any Designated Purchaser of such Property under the Purchase
Agreement) as required by Subparagraph 4.02(b), subject to compliance by
Lessee on or prior to such date of its obligations under this Agreement
and the other Operative Documents (including the completion of all
Modifications, the completion of all permitted contests and the removal
of all Liens which are not Permitted Property Liens of the types
described in clause (i) or (ii) of Subparagraph 3.07(a)).
(b) In connection with the delivery of any Property required to
be made to Lessor Agent (or any Designated Purchaser of such Property
under the Purchase Agreement), Lessee shall, at its sole cost and
expense:
(i) Properly remove all markings installed on such
Property by Lessee which are not necessary for the operation,
maintenance or repair of the Property;
(ii) Ensure that such Property complies with all
applicable Environmental Laws and other Governmental Rules;
(iii) Return such Property in the condition required by
Subparagraph 3.01(a);
(iv) Obtain and pay for a policy of transit insurance for
the period that such Property is being delivered in an amount
equal to the replacement value of such Property and with Lessor
Agent named as the loss payee on all such policies of insurance;
(v) At least ninety (90) days prior to the Scheduled
Expiration Date of the Lease Supplement to which such Property is
subject, cause a Supplier's representative or qualified
maintenance provider reasonably acceptable to Lessor Agent to
perform a comprehensive test of such Property, and if during such
inspection, examination and test, the authorized inspector finds
such Property not operating within the Supplier's specifications,
then Lessee shall repair or replace such defective Property in
accordance with this Agreement and, after corrective
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measures are completed, Lessee will provide for a follow-up
inspection of such Property by the authorized inspector;
(vi) Provide a comprehensive report which certifies that
the Property has been properly inspected, examined and tested and
is operating within the Supplier's specifications;
(vii) Provide or cause the Supplier or maintenance
provider to provide to Lessor Agent (or any Designated Purchaser
of such Property under the Purchase Agreement) one set of service
manuals and operating manuals and detailing maintenance records
and other technical data concerning the set-up and operation of
such Property, each with all replacements or additions thereto,
such that all such documentation is, to Lessee's knowledge,
completely up-to-date;
(viii) Provide for such Property to be completely
de-installed and severed from the Property Site or any other real
property to which attached by a Supplier's representative or
maintenance provider reasonably acceptable to Lessor Agent in
accordance with the Supplier's recommendations and repair any and
all damage caused to such Property by such severance;
(ix) Assemble such Property and, if requested by Lessor
Agent, surrender such Property to Lessor Agent (or any Designated
Purchaser) at any Property Site; provided that, if Lessor Agent
or any Designated Purchaser requests that such Property be
surrendered at any Property Site, such Property shall be removed
by Lessor Agent or such Designated Purchaser from such Property
Site within thirty (30) days after the Expiration Date of the
Lease Supplement to which such Property is subject and Lessee
shall have no further obligations hereunder with respect to such
Property after it has been removed from such Property Site;
(x) Pack such Property properly for shipment and arrange
for the shipment thereof to any location within the continental
United States specified by Lessor Agent (or any Designated
Purchaser) in a manner consistent with the Supplier's
recommendations; and
(xi) If requested by Lessor Agent (or any Designated
Purchaser), such delivery shall include the assignment by Lessee
to Lessor Agent (or any Designated Purchaser) of any Related
Agreements and, to the extent permitted by Governmental Rule, any
Related Permits by necessary for the use, operation or
maintenance of such Property.
4.03. Holding Over. If Lessee does not purchase the Property subject to
any Lease Supplement on the Expiration Date for such Lease Supplement pursuant
to the Purchase Agreement and fails to surrender any portion of such Property
after such Expiration Date as required by Paragraph 4.02, the Rental Rate shall
no longer apply and Lessee shall pay rent for each day it so fails to surrender
such Property, payable upon demand of Lessor Agent, at a per annum rate equal to
the Alternate Rental Rate plus two percent (2.0%) and shall pay and perform
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all of its other Lessee Obligations under this Agreement and the other Operative
Documents in the same manner as though the Term had not ended; provided,
however, that this Paragraph 4.03 shall not be interpreted to permit such
holding over or to limit any right or remedy of the Lessor Parties for such
holding over.
SECTION 5. DEFAULT.
5.01. Events of Default. The occurrence or existence of any one or more
of the following shall constitute an "Event of Default" hereunder:
(a) Payments. Lessee shall fail to pay (i) when due any amount
payable on the Expiration Date of any Lease Supplement, or (ii) within
five (5) Business Days after the same becomes due, any installment of
Base Rent payable under any Lease Supplement (other than Base Rent
payable on the Expiration Date of such Lease Supplement) or any other
amount payable by Lessee under any of the Operative Documents.
(b) Representations and Warranties. Any representation or
warranty by Lessee made herein or which is contained in any certificate,
document or financial or other statement by Lessee or any Responsible
Officer of Lessee, furnished at any time under or in connection with
this Agreement or any other Operative Document, is false, incorrect or
inaccurate in any material respect, on or as of the date made; provided,
however, that such misrepresentation or breach of warranty shall not
constitute an Event of Default if it is capable of being remedied and
Lessee remedies such misrepresentation or breach of warranty within
thirty (30) days after the earlier of (i) Lessee's written
acknowledgment of such misrepresentation or breach of warranty or (ii)
any written notice by Lessor Agent or Agent to Lessee of such
misrepresentation or breach of warranty.
(c) Failure by Lessee to Perform Certain Covenants. Lessee shall
fail to perform or observe any term, covenant or agreement contained in
Subparagraph 3.07(a) or Paragraph 3.03 or 4.02 hereof or Paragraph 5.02
or 5.03 of the Participation Agreement.
(d) Failure by Lessee to Perform Other Covenants. Lessee shall
fail to perform or observe any other term, covenant or agreement
contained in this Agreement or any other Operative Document on its part
to be performed or observed and any such failure shall remain unremedied
for a period of thirty (30) days after the earlier of (i) Lessee's
written acknowledgment of such failure or (ii) any written notice by
Lessor Agent or Agent to Lessee of such failure; provided, however,
that, except with respect to any failure to perform or observe the
covenants or agreements contained in Subparagraph 3.01(a) or 3.01(c) or
Paragraph 3.04 or 3.08 hereof, such failure shall not constitute an
Event of Default if it is capable of being remedied and Lessee
diligently proceeds to remedy such failure and completes such
remediation within 180 days after such written acknowledgment or notice.
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(e) Insolvency; Voluntary Proceedings. Lessee or any of its
Significant Subsidiaries shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian of itself or
of all or a substantial part of its property, (ii) be unable, or admit
in writing its inability, to pay its debts generally as they mature,
(iii) make a general assignment for the benefit of its or any of its
creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official in
an involuntary case or other proceeding commenced against it, or (vi)
take any action for the purpose of effecting any of the foregoing.
(f) Involuntary Proceedings. Proceedings for the appointment of a
receiver, trustee, liquidator or custodian of Lessee or any of its
Significant Subsidiaries or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to Lessee or
any of its Significant Subsidiaries or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect
shall be commenced and an order for relief entered or such proceeding
shall not be dismissed or discharged within sixty (60) days of
commencement.
(g) Cross-Default. (i) Lessee or any of its Significant
Subsidiaries shall fail to make any payment on account of any
Indebtedness of such Person (other than the Lessee Obligations) when due
(whether at scheduled maturity, by required prepayment, upon
acceleration or otherwise) and such failure shall continue beyond any
period of grace provided with respect thereto, if the aggregate amount
of such Indebtedness exceeds $10,000,000 or the effect of such failure
is to cause, or permit the holder or holders thereof to cause,
Indebtedness of Lessee or any of its Significant Subsidiaries (other
than the Lessee Obligations) in an aggregate amount exceeding
$10,000,000 to become due (whether at scheduled maturity, by required
prepayment, upon acceleration or otherwise) or (ii) Lessee or any of its
Significant Subsidiaries shall otherwise fail to observe or perform any
agreement, term or condition contained in any agreement or instrument
relating to any Indebtedness of such Person (other than the Lessee
Obligations and Indebtedness arising under the Amended and Restated
Credit Agreement, dated as of September 28, 1998, as amended, among
Lessee and LSI Logic Japan Semiconductor, Inc., as borrowers, certain
financial institutions parties thereto, as lenders, and ABN AMRO Bank,
N.V., as agent for such lenders, and the Master Lease Agreement, dated
June 16, 1995, as amended, among LSI Logic Japan Semiconductor, Inc., as
lessee, and certain financial institutions parties thereto, as lessors,
including IBJ Leasing Co., Ltd., as lead lessor), or any other event
shall occur or condition shall exist, and such failure, event or
condition shall continue beyond any period of grace provided with
respect thereto, if the effect of such failure, event or condition is to
cause, or permit the holder or holders thereof to cause, Indebtedness of
Lessee or any of its Significant Subsidiaries (other than the Lessee
Obligations) in an aggregate amount exceeding $10,000,000 to become due
(and/or to be secured by cash collateral).
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(h) Judgments. (i) A final nonappealable judgment or order for
the payment of money against Lessee or any of its Significant
Subsidiaries in an amount of $25,000,000 or more in excess of amounts
covered by third-party insurance shall remain unpaid for ninety (90)
days following the due date for such payment; or (ii) any non-monetary
judgment or order shall be rendered against Lessee or any of its
Significant Subsidiaries which has or would reasonably be expected to
have a Material Adverse Effect.
(i) Process Issued. A warrant of attachment, execution,
distraint, or similar process against any substantial part of the assets
of Lessee or any of its Significant Subsidiaries is issued which remains
undismissed or undischarged for a period of thirty (30) days, if as a
result thereof there is reasonably expected to occur a Material Adverse
Effect.
(j) Seizure. All or a material part of the undertaking, assets,
rights or revenues of Lessee or any of its Significant Subsidiaries are
seized, nationalized, expropriated or compulsorily acquired by or under
the authority of any Governmental Authority.
(k) ERISA. (i) An ERISA Event shall occur with respect to a
Pension Plan which has resulted or could reasonably be expected to
result in liability of Lessee under Title IV of ERISA to the Pension
Plan or PBGC in an aggregate amount in excess of $10,000,000; (ii) the
commencement or increase of contributions to, or the adoption of or the
amendment of a Pension Plan by Lessee which has resulted or could
reasonably be expected to result in an increase in Unfunded Pension
Liability among all Pension Plans in an aggregate amount in excess of
$10,000,000; or (iii) any of the representations and warranties
contained in Subparagraph 4.01(k) of the Participation Agreement shall
cease to be true and correct which, individually or in combination, has
resulted or could reasonably be expected to result in a Material Adverse
Effect.
(l) Operative Documents. Any Operative Document or any material
term thereof shall cease to be, or be asserted by Lessee or any of its
Significant Subsidiaries not to be, a legal, valid and binding
obligation of Lessee or such Significant Subsidiary enforceable in
accordance with its terms.
(m) Dissolution. Etc. Lessee or any of its Significant
Subsidiaries shall (i) liquidate, wind up or dissolve (or suffer any
liquidation, wind-up or dissolution), except to the extent expressly
permitted by clause (i) of Subparagraph 5.02(c) of the Participation
Agreement, (ii) suspend its operations other than in the ordinary course
of business, or (iii) take any corporate action to authorize any of the
actions or events set forth above in this Subparagraph 5.01(m).
(n) Change of Control. Any Change of Control shall occur.
(o) Material Adverse Effect. Any event(s) or condition(s) which
is (are) reasonably likely to have a Material Adverse Effect shall occur
or exist.
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(p) Repurchase of Subordinated Debt. Any event shall occur
permitting the holders of any Subordinated Debt to require the
repurchase of such Subordinated Debt prior to its stated maturity, which
shall not include restricted payments made pursuant to Subparagraph
5.03(e) of the Participation Agreement.
5.02. General Remedies. In all cases, upon the occurrence or existence
of any Event of Default and at any time thereafter unless such Event of Default
is waived, Lessor Agent may, with the consent of the Required Participants, or
shall, upon instructions from the Required Participants, exercise any one or
more of the following rights and remedies (except that the remedy set forth in
the first sentence of Subparagraph 5.02(a) shall be automatic):
(a) Termination of Commitments. If such Event of Default is an
Event of Default of the type described in Subparagraph 5.01(e) or
Subparagraph 5.01(f) affecting Lessee, immediately and without notice
the obligation of Lessors to make Advances and the obligations of the
Participants to fund Advances shall automatically terminate. If such
Event of Default is any other Event of Default, Lessor Agent may by
written notice to Lessee, terminate the obligation of Lessors to make
Advances and the obligations of the Participants to fund Advances.
(b) Possession by Lessor Agent. Lessor Agent may take possession
of the Property. Upon the demand of Lessor Agent, Lessee shall deliver
the Property to Lessor Agent. Lessee shall make such delivery if so
demanded by Lessor Agent, at Lessee's sole cost and expense, in the
manner provided in Subparagraph 4.02(b). Alternatively, Lessor Agent may
enter into any Property Site or any other location where the Property is
located, sever the Property from any Property Site or any other real
property to which attached and take possession of the Property. If
requested by Lessor Agent, Lessee shall assign to Lessor Agent any
Related Agreements and, to the extent permitted by Governmental Rule,
any Related Permits pertaining to the Property.
(c) Specific Performance. Lessor Agent may bring an action in
any court of competent jurisdiction to obtain specific enforcement of
any of the covenants or agreements of Lessee in this Agreement or any of
the other Operative Documents.
(d) Other Rights and Remedies. In addition to the specific rights
and remedies set forth above in this Paragraph 5.02 and in Paragraph
5.03 and Paragraph 5.04, Lessor Agent may exercise any other right,
power or remedy granted or permitted to it by any other Operative
Document or by any applicable Governmental Rule (including the
California Commercial Code), either by suit in equity or by action at
law, or both.
5.03. Lease Remedies. If the transaction evidenced by this Agreement and
the other Operative Documents is treated as a lease, upon the occurrence or
existence of any Event of Default and at any time thereafter unless such Event
of Default is waived, Lessor Agent may, with the consent of the Required
Participants, or shall, upon instructions from the Required Participants,
exercise any one or more of the following rights and remedies in addition to
those rights and remedies set forth in Paragraph 5.02:
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(a) Termination of Lease. Lessor Agent may, by written notice to
Lessee, terminate this Agreement on a Termination Date which is prior to
the Scheduled Expiration Date of any Lease Supplement, subject to
Subparagraph 3.02(1) of the Purchase Agreement. Such Termination Date
shall be the last day of the longest Rental Period then in effect for
any Lease Supplement unless Required Participants shall otherwise
direct. On such Termination Date (which shall then be the Expiration
Date for each Lease Supplement), Lessee shall pay all unpaid Base Rent
accrued under each Lease Supplement through such date, all Supplemental
Rent due and payable on or prior to such date and all other amounts
payable by Lessee on the Expiration Date for each Lease Supplement
pursuant to this Agreement and the other Operative Documents.
(b) Disposition of Property. Lessor Agent may dispose of the
Property by sale, lease or otherwise as permitted by Division 10 of the
California Commercial Code. Lessor Agent may dispose of the Property at
any location permitted by such Division, including on the Lessee's
premises.
(c) Recovery of Damages. Lessors and Lessee agree that it is
difficult to determine the damages that a lessor may sustain as a result
of a lessee breach under a lease agreement. Lessors and Lessee agree
that the following is a reasonable estimate of the damages that Lessors
may sustain as a result of any Event of Default:
(i) If Lessor Agent terminates this Agreement pursuant to
Subparagraph 5.03(a) and disposes of the Property pursuant to
Subparagraph 5.03(b), Lessee shall, upon the demand of Lessor
Agent, pay to Lessor Parties as liquidated damages (A) the sum of
(1) all amounts payable by Lessee on or prior to the date of such
demand (or, if later, the date on which Lessee makes such
payment) pursuant to this Agreement and the other Operative
Documents as provided in Subparagraph 5.03(a), (2) the present
value determined as of the date of such demand of all amounts
that would have been payable by Lessee under this Agreement and
the other Operative Documents thereafter had this Agreement not
been terminated prior to the Scheduled Expiration Date of any
Lease Supplement and (3) all costs and expenses of such
disposition and other incidental damages resulting from the Event
of Default less (B) the sum of (1) all amounts paid by Lessee
pursuant to Subparagraph 5.03(a) hereof and (2) the present value
of all amounts realized and to be realized, or that could, with
reasonable effort, be realized, by the Lessor Parties from such
disposition.
(ii) If Lessor Agent does not terminate this Agreement
pursuant to Subparagraph 5.03(a) or if Lessor Agent terminates
this Agreement pursuant to Subparagraph 5.03(a) but is unable
after exercising all commercially reasonable efforts to dispose
of the Property pursuant to Subparagraph 5.03(b), Lessee shall
pay to the Lessor Parties as liquidated damages (A) the sum of
(1) all amounts payable by Lessee on or prior to the date of such
demand (or, if later, the date on which Lessee makes such
payment) pursuant to this Agreement and the other Operative
Documents as provided in Subparagraph 5.03(a), (2) the present
value of all amounts that would have been payable by Lessee under
this Agreement and
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the other Operative Documents thereafter had this Agreement not
been terminated prior to the Scheduled Expiration Date of any
Lease Supplement and (3) all costs and expenses and other
incidental damages resulting from the Event of Default. If
Lessee pays all amounts payable by it pursuant to this clause
(ii), each Lessor and Lessor Agent shall execute and deliver to
Lessee such Uniform Commercial Code releases and other
documents, instruments and agreements as Lessee may reasonably
request to release Lessors' Liens in the Property and to
transfer its right, title and interest in the Property to
Lessee.
For the purposes of this Subparagraph 5.03(c), the present value on any
date of determination (the "determination date") of any amount payable
on any future date (the "payment date") shall be determined using the
lowest of (x) the LIBOR Rental Rate on the determination date for
deposits in an amount approximately equal to the amount so payable and
for a term approximately the same as the period from the determination
date to the payment date, (y) the Alternate Rental Rate on the
determination date, and (z) the sum of the federal discount rate
established by the Federal Reserve Bank of San Francisco and in effect
on the determination date for advances to member banks plus one percent
(1%).
5.04. Loan Remedies. If the transaction evidenced by this Agreement and
the other Operative Documents is treated as a loan, upon the occurrence or
existence of any Event of Default and at any time thereafter unless such Event
of Default is waived, Lessor Agent may, with the consent of the Required
Participants, or shall, upon instructions from the Required Participants,
exercise any one or more of the following rights and remedies in addition to
those rights and remedies set forth in Paragraph 5.02:
(a) Acceleration of Lessee Obligations. Lessor Agent may, by
written notice to Lessee, terminate this Agreement on a Termination Date
which is prior to the Scheduled Expiration Date of any Lease Supplement,
subject to Subparagraph 3.02(1) of the Purchase Agreement, and declare
all unpaid Lessee Obligations due and payable on such Termination Date.
Such Termination Date shall be the last day of the longest Rental Period
then in effect for any Lease Supplement unless Required Participants
shall otherwise direct. On such Termination Date (which shall then be
the Expiration Date for each Lease Supplement), Lessee shall pay all
unpaid Base Rent accrued under each Lease Supplement through such date,
all Supplemental Rent due and payable on or prior to such date and all
other amounts payable by Lessee on the Expiration Date for each Lease
Supplement pursuant to this Agreement and the other Operative Documents.
(b) Disposition of Property. Lessor Agent may dispose of the
Property by sale, lease or otherwise as permitted by Division 9 of the
California Commercial Code. Lessor Agent may dispose of the Property at
any location permitted by such Division, including on the Lessee's
premises.
(c) Disposition of Cash Collateral. Lessor Agent may collect,
receive, appropriate or realize upon the Cash Collateral or otherwise
foreclose or enforce Lessor Agent's security interest in any or all of
the Cash Collateral in any manner permitted by
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applicable Governmental Rules and apply the proceeds of all Cash
Collateral received by Lessor Agent to the Lessee Obligations.
5.05. Remedies Cumulative. To the extent permitted by law, the rights
and remedies of the Lessor Parties under this Agreement and the other Operative
Documents are cumulative and may be exercised singularly, successively, or
together.
5.06. No Cure or Waiver. Neither the performance by Lessor Agent of any
of Lessee's obligations pursuant to Paragraph 3.11 nor the exercise by Lessor
Parties of any of their other rights and remedies under this Agreement or any
other Operative Document shall constitute a cure or waiver of any Default or
nullify the effect of any notice of default or sale, unless and until all Lessee
Obligations are paid in full.
5.07. Exercise of Rights and Remedies. The rights and remedies provided
to Lessors or Lessor Agent under this Agreement may be exercised by Lessor
Agent, by Agent pursuant to Subparagraph 2.02(c) of the Participation Agreement,
by a court-appointed receiver or by any other Person appointed by any of the
foregoing to act on its behalf. All of the benefits afforded to Lessors or
Lessor Agent under this Agreement and the other Operative Documents shall accrue
to the benefit of Agent to the extent provided in Subparagraph 2.02(c) of the
Participation Agreement.
SECTION 6. MISCELLANEOUS.
6.01. Notices. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lessee, Lessor Agent or any Lessor under this Agreement shall be given as
provided in Subparagraph 2.02(c) and Paragraph 7.01 of the Participation
Agreement.
6.02. Waivers; Amendments. Any term, covenant, agreement or condition of
this Agreement may be amended or waived only as provided in the Participation
Agreement. No failure or delay by any Lessor Party in exercising any right
hereunder shall operate as a waiver thereof or of any other right nor shall any
single or partial exercise of any such right preclude any other further exercise
thereof or of any other right. Unless otherwise specified in any such waiver or
consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
6.03. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Lessor Parties and Lessee and their permitted
successors and assigns; provided, however, that the Lessor Parties and Lessee
shall not sell, assign or delegate their respective rights and obligations
hereunder except as provided herein and in the Participation Agreement.
6.04. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the Lessor Parties and Lessee and their permitted successors and
assigns, any benefit or legal or equitable
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right, remedy or claim under or by virtue of this Agreement or under or by
virtue of any provision herein.
6.05. Partial Invalidity. If at any time any provision of this Agreement
is or becomes illegal, invalid or unenforceable in any respect under the law or
any jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
6.06. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without reference to
conflicts of law rules, except as otherwise provided in Schedule 1.02 of the
Participation Agreement.
6.07. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
6.08. Nature of Lessee's Obligations.
(a) Independent Obligation. The obligations of Lessee to pay the
amounts payable by Lessee under this Agreement and the other Operative
Documents and to perform the other Lessee Obligation are absolute,
unconditional and irrevocable obligations which are separate and
independent of the obligations of the Lessor Parties under this
Agreement and the other Operative Documents and all other events and
circumstances, including the events and circumstances set forth in
Subparagraph 6.08(c).
(b) No Termination or Abatement. This Agreement and the other
Operative Documents and Lessee's obligation to pay Rent and to pay and
perform all other Lessee Obligations shall continue in full force and
effect without abatement notwithstanding the occurrence or existence of
any event or circumstance, including any event or circumstance set forth
in Subparagraph 6.08(c).
(c) Full Payment and Performance. Lessee shall make all payments
under this Agreement and the other Operative Documents in the full
amounts and at the times required by the terms of this Agreement and the
other Operative Documents without setoff, deduction or reduction of any
kind and shall perform all other Lessee Obligations as and when
required, without regard to any event or circumstances whatsoever,
including (i) the condition or performance of the Property or the
fitness of the Property for any purpose; (ii) title to or right to use
of the Property, including the existence of any Lien or any other right,
title or interest (including intellectual property right) in or to any
of the Property in favor of any Person; (iii) the value, usability,
design, operation or fitness for use of the Property; (iv) any latent,
hidden or patent defect in the Property; (v) any restrictions on the use
of the Property; (vi) the economics of the Property; (vii) any Casualty
or Condemnation; (viii) the compliance of the Property with any
applicable Governmental Rule or Insurance Requirement; (ix) any failure
by any Lessor Party to perform any of its obligations under this
Agreement or any other Operative Document; or
32
<PAGE> 185
(x) the exercise by any Lessor Party of any of its remedies under
this Agreement or any other Operative Document; provided, however, that
this Paragraph 6.08 shall not abrogate any right which Lessee may have
to recover damages from any Lessor Party for any gross negligence,
willful misconduct or material breach by such Lessor Party of its
obligations under this Agreement or any other Operative Document.
6.09. Effect on Existing Lease Agreement. Lessee, Lessors and Lessor
Agent agree that on and after the date that this Agreement is executed by all
parties hereto, this Agreement shall amend, restate in its entirety and replace,
without notation, the Existing Lease Agreement; provided, however, that nothing
contained herein shall (i) operate as a waiver of any right, power or remedy of
any Lessor Party under the Existing Lease Agreement or any other Operative
Document or (ii) extinguish or impair any Lessee Obligations under the Existing
Lease Agreement or any other Operative Document except to the extent any such
Lessee Obligation is actually satisfied by Lessee; and provided, further, that
each Lease Supplement outstanding under the Existing Lease Agreement shall
remain outstanding and shall be deemed to have been made under this Agreement.
[The signature page follows.]
33
<PAGE> 186
IN WITNESS WHEREOF, Lessee, Lessors and Lessor Agent have caused this
Amended and Restated Lease Agreement to be executed as of the day and year first
above written.
LESSEE: LSI LOGIC CORPORATION
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
LESSORS: ABN AMRO BANK N.V.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
KEYBANK NATIONAL ASSOCIATION
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
FBTC LEASING CORP.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
LESSOR AGENT: ABN AMRO BANK N.V.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
S-1
<PAGE> 187
EXHIBIT A
LEASE SUPPLEMENT NO. [ ]
[Lease Supplement Date]
ABN AMRO Bank N.V.,
as Agent
Syndication Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to (a) the Amended and Restated Participation
Agreement, dated as of April 18, 2000 (the "Participation Agreement"), among LSI
Logic Corporation ("Lessee"), ABN AMRO Bank N.V., KeyBank National Association,
FBTC Leasing Corp. and each other financial institution listed as a lessor in
Schedule I to the Participation Agreement (in such capacity, collectively
"Lessors"), ABN AMRO Bank N.V., as agent for Lessors (in such capacity, "Lessor
Agent"), the financial institutions listed as Participants in Schedule I to the
Participation Agreement (the "Participants") and ABN AMRO Bank N.V., as agent
for the Participants (in such capacity, "Agent") and (b) the Amended and
Restated Lease Agreement, dated as of April 18, 2000 (the "Lease Agreement"),
among Lessee, Lessors and Lessor Agent. Unless otherwise indicated, all terms
defined in the Participation Agreement have the same respective meanings when
used herein.
2. The Property subject to this Lease Supplement consists of the
Equipment identified in Attachment A hereto and all Related Goods, Related
Agreements and Related Permits with respect to such Equipment. Lessee warrants
that each item of Equipment has been delivered to and is located at the Property
Site specified for such Equipment in Attachment A.
3. The Lease Supplement Term of this Lease Supplement shall commence on
the date hereof and end on [day prior to the third anniversary of the Lease
Supplement Date] (the "Scheduled Expiration Date" of this Lease Supplement),
subject to renewal or early termination as provided in the Lease Agreement.
4. Until reduced by any Reduction Payments applied with respect to this
Lease Supplement, (a) the Outstanding Lease Amount of this Lease Supplement is $
, which is allocated to a Tranche A Portion, a Tranche B Portion and a Equity
Portion as set forth in Attachment B hereto, and (b) the Residual Value Guaranty
Amount of this Lease Supplement is as set forth in Attachment C hereto.
5. Payments of the Fixed Component of Base Rent are due with respect to
this Lease Supplement on the dates and in the amounts set forth in Attachment D
hereto. Other payments of Base Rent and Supplemental Rent are due with respect
to this Lease Supplement as set forth in Paragraph 2.03 of the Lease Agreement.
A-1
<PAGE> 188
6. This Lease Supplement is executed and delivered by Lessee pursuant to
the Lease Agreement. All terms and conditions of the Lease Agreement are
incorporated in and made a part of this Lease Supplement as if they were
expressly set forth in this Lease Supplement. Lessee hereby reaffirms all of the
terms and conditions of the Lease Agreement and the other Operative Documents.
IN WITNESS WHEREOF, Lessee and Lessor Agent has executed this Lease
Supplement on the date set forth above.
LESSEE: LSI LOGIC CORPORATION
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
LESSOR AGENT: ABN AMRO BANK N.V.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
A-2
<PAGE> 189
ATTACHMENT A TO LEASE SUPPLEMENT NO. [ ]
DESCRIPTION OF EQUIPMENT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Description of Serial Number Delivery Date Internal Order Acquisition Unpaid Property
Equipment Supplier Model Number Price Acquisition Price Site
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 190
ATTACHMENT B TO LEASE SUPPLEMENT NO. [ ]
ALLOCATION OF OUTSTANDING LEASE AMOUNT AS OF [LEASE SUPPLEMENT DATE]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Tranche A Portion: $ Tranche B Portion: $ Equity Portion: $
Tranche A Proportionate Share: % Tranche B Proportionate Share: % Equity Proportionate Share: %
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding Outstanding Outstanding
Tranche A Tranche A Tranche B Tranche B Equity Equity
Participant Participation Amount Percentage Participation Amount Percentage Participation Amount Percentage
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 191
ATTACHMENT C TO LEASE SUPPLEMENT NO. [ ]
RESIDUAL VALUE GUARANTY AMOUNT
- --------------------------------------------------------------------------------
Residual Value Guaranty Amount Effective Date
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 192
ATTACHMENT D TO LEASE SUPPLEMENT NO. [ ]
FIXED COMPONENT OF BASE RENT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Payment Date Amount Due
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 193
EXHIBIT B
NOTICE OF RENEWAL OPTION EXERCISE
[Date]
ABN AMRO Bank N.V.,
as Agent
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to (a) that certain Amended and Restated
Participation Agreement, dated as of April 18, 2000 (the "Participation
Agreement"), among LSI Logic Corporation ("Lessee"), ABN AMRO Bank N.V., KeyBank
National Association, FBTC Leasing Corp. and each other financial institution
listed as a lessor in Schedule I to the Participation Agreement (in such
capacity, collectively "Lessors"), ABN AMRO Bank N.V., as agent for Lessors (in
such capacity, "Lessor Agent"), the financial institutions listed as
Participants in Schedule I to the Participation Agreement (the "Participants")
and ABN AMRO Bank N.V., as agent for the Participants (in such capacity,
"Agent") and (b) the Amended and Restated Lease Agreement, dated as of April 18,
2000 (the "Lease Agreement"), among Lessee, Lessors and Lessor Agent. Unless
otherwise indicated, all terms defined in the Participation Agreement have the
same respective meanings when used herein.
2. Pursuant to Subparagraph 2.02(b) of the Lease Agreement, Lessee
hereby notifies the Lessor Parties that Lessee is electing to exercise its
option to renew Lease Supplement No. , dated (the "Subject
Supplement"), for an additional one (1) term expiring .
3. With this Notice of Renewal Option Exercise, Lessee is delivering to
Agent a Renewal Date Appraisal Update of all of the Property currently subject
to the Subject Supplement. On the basis of the Renewal Date Appraised Values:
(a) The aggregate Renewal Date Appraised Values of the Property
subject to the Subject Supplement on the date hereof is [not] less than
the Outstanding Lease Amount of such Lease Supplement [by $ ]:
(b) The ratio of the aggregate Liquidation Appraised Values of
the Property subject to the Subject Supplement on the date hereof
divided by the sum of the aggregate Outstanding Tranche B Participation
Amounts and Outstanding Equity Participation Amounts for the Subject
Supplement is [not] less than [for first Renewal Option: 4.6 to 1.0]
[for second Renewal Option: 4.0 to 1.0] [and payments of the Fixed
Component of Base Rent in the amount of $ (in addition to
payment of any amount set forth in subparagraph (a) above with respect
to the Subject Supplement) are necessary to reduce
B-1
<PAGE> 194
the Outstanding Lease Amount of the Subject Supplement to increase such
ratio to at least [for first Renewal Option: 4.6 to 1.0] [for second
Renewal Option: 4.0 to 1.0]].
4. Lessee hereby certifies to the Lessor Parties that on the date of
this Notice of Renewal Option Exercise:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other Operative
Documents are true and correct in all material respects as if made on
such date (except for representations and warranties expressly made as
of a specified date, which shall be true in all material respects as of
such date); and
(b) No Default has occurred and is continuing.
IN WITNESS WHEREOF, Lessee has executed this Notice of Renewal Option
Exercise on the date set forth above.
LSI LOGIC CORPORATION
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
B-2
<PAGE> 195
EXHIBIT C
NOTICE OF RENTAL PERIOD SELECTION
[Date]
ABN AMRO Bank N.V.,
as Agent
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to (a) the Amended and Restated Participation
Agreement, dated as of April 18, 2000 (the "Participation Agreement"), among LSI
Logic Corporation ("Lessee"), ABN AMRO Bank N.V., KeyBank National Association,
FBTC Leasing Corp. and each other financial institution listed as a lessor in
Schedule I to the Participation Agreement (in such capacity, collectively
"Lessors"), ABN AMRO Bank N.V., as agent for Lessors (in such capacity, "Lessor
Agent"), the financial institutions listed as Participants in Schedule I to the
Participation Agreement (the "Participants") and ABN AMRO Bank N.V., as agent
for the Participants (in such capacity, "Agent"), (b) the Amended and Restated
Lease Agreement, dated as of April 18, 2000 (the "Lease Agreement"), among
Lessee, Lessors and Lessor Agent, and (3) Lease Supplement No. [ ], dated [Lease
Supplement Date], executed and delivered by Lessee (the "Lease Supplement").
Unless otherwise indicated, all terms defined in the Participation Agreement
have the same respective meanings when used herein.
2. [Insert one of the following as appropriate:]
[Pursuant to Subparagraph 2.03(a) of the Lease Agreement, Lessee
hereby irrevocably selects a new Rental Period for a Portion of the Outstanding
Lease Amount of the Lease Supplement as follows:
(a) The Portion for which a new Rental Period is to be selected
is the Portion in the amount of $__________ with a current Rental Period
which began on ________, ____ and ends on __________, ____; and
(b) The next Rental Period for such Portion shall be __________
month[s].]
[Pursuant to Subparagraph 2.03(a) of the Lease Agreement, Lessee
hereby irrevocably elects to divide a Portion of the Outstanding Lease Amount of
such [Lease Supplement into further Portions as follows:
(a) The Portion which is to be divided is the Portion in the
amount of $__________ with a current Rental Period which began on
________, ____ and ends on __________, ____; and
C-1
<PAGE> 196
(b) On the last day of the current Rental Period for such
Portion, such Portion is to be divided into the following Portions with
the following initial Rental Periods:
Portion Rental Period
------------- ------------------
$ month[s]
----------- --------
$ month[s]]
----------- --------
[Pursuant to Subparagraph 2.03(a) of the Lease Agreement, Lessee
hereby irrevocably elects to combine into a single Portion the Portions of the
Outstanding Lease Amount of the Lease Supplement as follows:
(a) The Portions to be combined are in the amounts of
$__________ and $_______, each with a current Rental Period which ends
on __________, ____; and
(b) The initial Rental Period for such newly created Portion
shall be __________ month[s].]
3. Lessee hereby certifies to the Lessor Parties that on the date of
this Notice of Rental Period Selection:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other Operative
Documents are true and correct in all material respects as if made on
such date (except for representations and warranties expressly made as
of a specified date, which shall be true in all material respects as of
such date); and
(b) No Default has occurred and is continuing.
IN WITNESS WHEREOF, Lessee has executed this Notice of Rental Period
Selection on the date set forth above.
LSI LOGIC CORPORATION
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
C-2
<PAGE> 197
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
LEASE AGREEMENT AND SECURITY AGREEMENT
AMONG
LSI LOGIC CORPORATION,
AS LESSEE
AND
ABN AMRO BANK N.V.,
KEYBANK NATIONAL ASSOCIATION
AND FBTC LEASING CORP.,
AS LESSORS
AND
ABN AMRO BANK N.V.,
AS LESSOR AGENT FOR LESSORS
APRIL 18, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS LEASE IS NOT INTENDED TO CONSTITUTE
A TRUE LEASE FOR INCOME TAX PURPOSES
(SEE PARAGRAPH 2.05)
<PAGE> 198
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. INTERPRETATION............................................................2
1.01 Definitions...............................................................2
1.02 Rules of Interpretation...................................................2
SECTION 2. BASIC PROVISIONS..........................................................2
2.01. Lease of the Property.....................................................2
2.02. Term......................................................................3
2.03. Rent......................................................................4
2.04. "As Is" Lease.............................................................7
2.05. Nature of Transaction.....................................................8
2.06. Security and Subordination................................................8
2.07. Withdrawals of Cash Collateral............................................9
SECTION 3. OTHER LESSEE AND LESSOR RIGHTS AND OBLIGATIONS...........................10
3.01. Maintenance, Repair, Etc.................................................10
3.02. Risk of Loss.............................................................14
3.03. Insurance................................................................14
3.04. Casualty and Condemnation................................................16
3.05. Taxes....................................................................19
3.06. Severability.............................................................19
3.07. Liens, Etc...............................................................19
3.08. Subletting...............................................................20
3.09. Compliance with Governmental Rules and Insurance Requirements............21
3.10. Permitted Contests.......................................................21
3.11. Lessor Obligations; Right to Perform Lessee Obligations..................21
3.12. Inspection Rights........................................................22
SECTION 4. EXPIRATION DATE..........................................................22
4.01. Termination by Lessee Prior to Scheduled Expiration Date.................22
4.02. Surrender of Property....................................................22
4.03. Holding Over.............................................................24
SECTION 5. DEFAULT..................................................................24
5.01. Events of Default........................................................24
</TABLE>
-i-
<PAGE> 199
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
5.02. General Remedies.........................................................27
5.03. Lease Remedies...........................................................28
5.04. Loan Remedies............................................................29
5.05. Remedies Cumulative......................................................30
5.06. No Cure or Waiver........................................................30
5.07. Exercise of Rights and Remedies..........................................30
SECTION 6. MISCELLANEOUS............................................................30
6.01. Notices..................................................................30
6.02. Waivers; Amendments......................................................30
6.03. Successors and Assigns...................................................31
6.04. No Third Party Rights....................................................31
6.05. Partial Invalidity.......................................................31
6.06. Governing Law............................................................31
6.07. Counterparts.............................................................31
6.08. Nature of Lessee's Obligations...........................................31
6.09. Effect on Existing Lease Agreement.......................................32
</TABLE>
EXHIBITS
A Lease Supplement (2.01(a))
B Notice of Renewal Option Exercise (2.02(b))
C Notice of Rental Period Selection (2.03(a))
-ii-
<PAGE> 200
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
<PAGE> 201
AMENDED AND RESTATED PURCHASE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AGREEMENT (this "Agreement" herein),
dated as of April 18, 2000, is entered into by and among:
(1) LSI LOGIC CORPORATION, a Delaware corporation ("Lessee");
and
(2) ABN AMRO BANK N.V., KEYBANK NATIONAL ASSOCIATION, FBTC
LEASING CORP. and each other financial institution from time to time
listed as a lessor in Schedule I to the Participation Agreement referred
to in Recital B below, as amended from time to time (in such capacity,
such financial institutions to be referred to collectively as
"Lessors"); and
(3) ABN AMRO BANK N.V., as agent for Lessors (in such capacity,
"Lessor Agent").
RECITALS
A. Pursuant to the Participation Agreement referred to in Recital B
below, a certain lease facility is to be provided to Lessee by Lessors and the
other financial institutions which are "Participants" under the Participation
Agreement (such financial institutions to be referred to collectively as the
"Participants") as follows:
(1) Lessors would (a) acquire certain equipment identified by
Lessee and approved by Lessor Agent, (b) lease such equipment to Lessee,
(c) make advances to finance certain related expenses and (d) grant to
Lessee the right to purchase such equipment; and
(2) The Participants would participate in such lease facility by
(a) funding the acquisition price to be paid by Lessors for the
equipment and the other advances to be made by Lessors and (b) acquiring
participation interests in the rental and certain other payments to be
made by Lessee.
B. In connection with the addition of certain parties as Lessors and
Participants, Lessee and Participants have requested that (i) the Participation
Agreement, dated as March 31, 2000, among Lessee, ABN AMRO Bank N.V., as the
original Lessor and Participant, Lessor Agent, the Participants and ABN AMRO
Bank N.V., as agent for the Participants (in such capacity, "Agent"), be amended
and restated by the Amended and Restated Participation Agreement, dated as of
April 18, 2000 (the "Participation Agreement"), among Lessee, Lessors, Lessor
Agent, the Participants and Agent and (ii) the Purchase Agreement, dated as of
March 31, 2000 (the "Existing Purchase Agreement"), among Lessee, ABN AMRO Bank
N.V., as the original Lessor, and Lessor Agent be amended and restated by this
Agreement, and Lessors and Lessor Agent are willing for the Existing Purchase
Agreement to be amended and restated by this Agreement setting forth the terms
for the purchase of the property by Lessee from Lessors.
<PAGE> 202
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree that the Existing
Purchase Agreement shall be amended and restated in its entirety as follows:
SECTION 1. INTERPRETATION.
1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Operative Document, each term set forth in Schedule 1.01 to the
Participation Agreement, when used in this Agreement or any other Operative
Document, shall have the respective meaning given to that term in such Schedule
1.01 or in the provision of this Agreement or other document, instrument or
agreement referenced in such Schedule 1.01.
1.02. Rules of Interpretation. Unless otherwise indicated in this
Agreement or any other Operative Document, the rules of interpretation set forth
in Schedule 1.02 to the Participation Agreement shall apply to this Agreement
and the other Operative Documents.
SECTION 2. OPTIONAL PURCHASE BY LESSEE DURING THE TERM.
2.01. Term Purchase Option. Subject to the terms and conditions of this
Agreement and the other Operative Documents (including those set forth below in
this Paragraph 2.01), Lessee may, at its option on any Business Day prior to the
earliest Scheduled Expiration Date for any outstanding Lease Supplement,
terminate the Lease Agreement and purchase all of the Property subject to the
Lease Supplements and, if a Lease Supplement has not been executed with respect
to any Installation Period, the Property leased during such Installation Period
(the "Term Purchase Option").
(a) Notice of Term Purchase Option Exercise. Lessee shall notify
Lessors of Lessee's exercise of the Term Purchase Option by delivering
to Agent an irrevocable written notice in the form of Exhibit A(1),
appropriately completed (the "Notice of Term Purchase Option Exercise"),
which states that Lessee is exercising its right to terminate the Lease
Agreement pursuant to Paragraph 4.01 of the Lease Agreement and purchase
all of the Property subject to the Lease Agreement pursuant to this
Paragraph 2.01 and specifies the Business Day on which such termination
and purchase are to occur (which date, after the delivery of such
notice, shall be the Expiration Date for each Lease Supplement and, if a
Lease Supplement has not been executed with respect to any Installation
Period, the Termination Date of such Installation Period). Lessee shall
give the Notice of Term Purchase Option Exercise to Agent at least one
(1) month prior to the Business Day on which such termination and
purchase are to occur. The Notice of Term Purchase Option Exercise shall
be delivered as required by Subparagraph 2.02(c) and Paragraph 7.01 of
the Participation Agreement; provided, however, that Lessee shall
2
<PAGE> 203
promptly deliver the original of any Notice of Term Purchase Option
Exercise initially delivered by facsimile.
(b) Term Purchase Option Purchase Price. Lessee shall pay to
Lessors on the Expiration Date of the Lease Supplements (and, if a Lease
Supplement has not been executed with respect to any Installation
Period, the Termination Date of such Installation Period), as the
purchase price for the Property, an amount equal to the sum of the
Outstanding Lease Amount of each Lease Supplement and the Advances made
during such Installation Period, on such date.
(c) Effect of Certain Events. Lessee may exercise the Term
Purchase Option as provided in this Paragraph 2.01, notwithstanding (i)
the prior election by Lessee to exercise the Partial Purchase Option
pursuant to Paragraph 2.02, the Marketing Option pursuant to Paragraph
3.01 and Paragraph 3.02 or the Expiration Date Purchase Option pursuant
to Paragraph 3.01 and Paragraph 3.03 with respect to the Property
subject to any Lease Supplement or leased during any Installation
Period, provided that Lessee completes the purchase of all of the
Property pursuant to the Term Purchase Option and this Agreement prior
to the earliest Scheduled Expiration Date of any outstanding Lease
Supplement and Lessors have not previously entered into an agreement
with a Designated Purchaser or an Assignee Purchaser to sell the
Property or (ii) the occurrence of any Event of Default or the exercise
by the Lessor Parties of any of their rights or remedies under the
Operative Documents following the occurrence of such Event of Default,
provided that such exercise by Lessee of the Term Purchase Option after
the occurrence of any Event of Default shall not require the Lessor
Parties to cease exercising such rights and remedies unless and until
Lessee completes the purchase of all of the Property pursuant to the
Term Purchase Option and this Agreement.
2.02. Partial Purchase Option. Subject to the terms and conditions of
this Agreement and the other Operative Documents (including those set forth
below in this Paragraph 2.02), Lessee may, at its option on any Business Day
prior to the Scheduled Expiration Date of any Lease Supplement, without
terminating the Lease Agreement, purchase all or a portion of the Property
subject to such Lease Supplement or, if a Lease Supplement has not been executed
with respect to any Installation Period, the Property leased during such
Installation Period (the "Partial Purchase Option").
(a) Notice of Partial Purchase Option Exercise. Lessee shall
notify Lessors of Lessee's exercise of the Partial Purchase Option by
delivering to Agent an irrevocable written notice in the form of Exhibit
A(2), appropriately completed (the "Notice of Partial Purchase Option
Exercise"), which states that Lessee is exercising its right to purchase
all or a portion of the Property subject to any Lease Supplement (or
leased during any Installation Period) prior to the Scheduled Expiration
Date for such Lease Supplement (or the last day of such Installation
Period) pursuant to this Paragraph 2.02 and specifies (i) the portion of
the Property so to be purchased and (ii) the Business Day on which such
purchase is to occur (a "Partial Purchase Date"). Lessee shall give each
Notice of Partial Purchase Option Exercise to Agent at least one (1)
month prior to the Partial Purchase Date on which a purchase is to
occur. Each Notice of Partial Purchase Option Exercise
3
<PAGE> 204
shall be delivered as required by Subparagraph 2.02(c) and Paragraph
7.01 of the Participation Agreement; provided, however, that Lessee
shall promptly deliver the original of any Notice of Partial Purchase
Option Exercise initially delivered by facsimile.
(b) Partial Purchase Option Purchase Price. Lessee shall pay to
Lessors on each Partial Purchase Date, as the purchase price for the
portion of the Property subject to any Lease Supplement (or leased
during any Installation Period) to be purchased on such date, an amount
equal to the portion of the Outstanding Lease Amount of such Lease
Supplement (or the Advances made during such Installation Period) on
such date attributable to such portion of the Property. (For the
purposes of this Subparagraph 2.02(b), the portion of the Outstanding
Lease Amount of such Lease Supplement (or the Advances made during such
Installation Period) on any date attributable to any portion of the
Property shall mean the Acquisition Price for such portion of the
Property as set forth in Lease Supplement (or Advance Request) with
respect to such Property less the pro rata share of all Reduction
Payments applied to reduce the Outstanding Lease Amount of such Lease
Supplement (or the Advances made during such Installation Period) on or
prior to such date.)
(c) Conditions to Exercise of Partial Purchase Option. The
purchase by Lessee on any Partial Purchase Date of any Property subject
to any Lease Supplement or leased during any Installation Period
pursuant to this Paragraph 2.02 is subject to satisfaction of the
following conditions:
(i) The purchase price for such Property, when added to
the sum of the purchase prices for all other Property previously
purchased by Lessee pursuant to the Partial Purchase Option, does
not exceed twenty-five percent (25%) of the sum of the
Outstanding Lease Amounts of all Lease Supplements (and, if a
Lease Supplement has not been executed with respect to any
Installation Period, the Advances made during such Installation
Period) and all Reduction Payments applied to reduce the
Outstanding Lease Amounts of all Lease Supplements (and the
Advances made during any such Installation Period); and
(ii) If such Property does not constitute all of the
Property subject to such Lease Supplement or Installation Period,
the purchase price for the portion of the Property to be
purchased does not exceed twenty-five percent (25%) of the sum of
the Outstanding Lease Amount of such Lease Supplement (or the
Advances made during such Installation Period) and all Reduction
Payments applied to reduce the Outstanding Lease Amount of such
Lease Supplement (or the Advances made during such Installation
Period).
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SECTION 3. OBLIGATIONS OF LESSEE ON THE EXPIRATION DATE.
3.01. Alternative. Unless Lessee has exercised the Term Purchase Option
or the Partial Purchase Option with respect to all of the Property subject to
any Lease Supplement, on the Expiration Date of each Lease Supplement, Lessee
shall either:
(a) Marketing Option. Cause another Person to complete the
purchase of the Property subject to such Lease Supplement pursuant to
Paragraph 3.02 (the "Marketing Option"); or
(b) Expiration Date Purchase Option. Purchase the Property
subject to such Lease Supplement itself pursuant to Paragraph 3.03 (the
"Expiration Date Purchase Option").
Lessee shall elect either the Marketing Option or the Expiration Date Purchase
Option by delivering to Agent, not more than ten (10) months nor less than six
(6) months prior to the Scheduled Expiration Date for such Lease Supplement,
either (i) a written notice in the form of Exhibit B, appropriately completed
(the "Notice of Marketing Option Exercise"), or (ii) a written notice in the
form of Exhibit C, appropriately completed (the "Notice of Expiration Date
Purchase Option Exercise"); provided, however, that (A) if the time for
exercising the first or second Renewal Option provided in Subparagraph 2.02(b)
of the Lease Agreement has not expired with respect to any Lease Supplement,
Lessee shall be deemed to have elected the first or second Renewal Option
provided in Subparagraph 2.02(b) of the Lease Agreement with respect to such
Lease Supplement, as applicable, if it fails to deliver either notice as
required by this sentence; (B) if the time for exercising the Renewal Options
provided in Subparagraph 2.02(b) of the Lease Agreement has expired with respect
to any Lease Supplement or Lessee fails to comply with the terms and conditions
provided in Subparagraph 2.02(b) of the Lease Agreement with respect to any
Lease Supplement, Lessee shall be deemed to have elected the Expiration Date
Purchase Option with respect to such Lease Supplement if it fails to deliver
either notice as required by this sentence; (C) Lessee's election of the
Expiration Date Purchase Option (whether expressly by a notice so delivered or
implicitly as described in clause (B)) shall be irrevocable; and (D) Lessee may
not elect the Marketing Option if (1) the Expiration Date of such Lease
Supplement has been accelerated to an earlier Termination Date following a
Marketing Option Event of Default under the Lease Agreement or (2) the
conditions set forth in Paragraph 3.04 of the Participation Agreement are not
satisfied on the date Lessee delivers its election notice or on the Expiration
Date for such Lease Supplement (unless, in each case, the only event or
condition causing such conditions not to be so satisfied is the occurrence of a
Non-Marketing Option Event of Default under the Lease Agreement). The Notice of
Marketing Option Exercise or the Notice of Expiration Date Purchase Option
Exercise shall be delivered as required by Subparagraph 2.02(c) and Paragraph
7.01 of the Participation Agreement; provided, however, that Lessee shall
promptly deliver to Lessors the original of any such notice initially delivered
by facsimile.
3.02. Marketing Option.
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(a) General. If Lessee elects to exercise the Marketing Option
with respect to the Property subject to any Lease Supplement by
delivering to Agent a Notice of Marketing Option Exercise pursuant to
Paragraph 3.01, Lessee shall use all reasonable efforts to (i) locate a
purchaser which satisfies the requirements set forth in this Paragraph
3.02, (ii) arrange for such purchaser to purchase such Property on the
Expiration Date for such Lease Supplement for a purchase price which is
not less than the lesser of (A) the sum of the Outstanding Tranche B
Amount and the Outstanding Equity Amount of such Lease Supplement and
(B) the Fair Market Value of such Property and (iii) otherwise comply,
or cause compliance with, the requirements of this Paragraph 3.02 and
the other applicable provisions of this Agreement. Nothing will prevent
Lessee from commencing the marketing of such Property sooner than the
dates set forth in this Paragraph 3.02.
(b) Lessee's Marketing Obligations.
(i) Initial Marketing Period. During the period beginning
on the date Lessee delivers the Notice of Marketing Option
Exercise with respect to the Property subject to any Lease
Supplement and ending on the date which is four (4) months prior
to the Scheduled Expiration Date for such Lease Supplement (the
"Initial Marketing Period"), Lessee shall use reasonable efforts
to solicit Conforming Bids from potential purchasers of such
Property. On or prior to the last day of the Initial Marketing
Period, Lessee shall deliver to Lessor Agent any Conforming Bid
selected by Lessee (the "Initial Bid"). If the purchase price
specified in the Initial Bid is equal to or greater than the sum
of the Outstanding Tranche B Amount and the Outstanding Equity
Amount of such Lease Supplement, Lessors shall accept such bid
and Lessee shall have no further obligations to solicit
additional bids.
(ii) Secondary Marketing Period. If Lessee does not submit
an Initial Bid or if the purchase price specified in the Initial
Bid for the Property subject to any Lease Supplement is less than
the sum of the Outstanding Tranche B Amount and the Outstanding
Equity Amount of such Lease Supplement, Lessors may reject such
bid and Lessee shall, during the period which begins on the day
following the Initial Marketing Period and ends on the date one
(1) month prior to the Scheduled Expiration Date for such Lease
Supplement (the "Secondary Marketing Period"):
(A) Use its best efforts to solicit additional
Conforming Bids, including the engagement of experienced
and knowledgeable brokers;
(B) Furnish to Lessor Agent copies of all bids and
otherwise provide Lessor Agent with such information
relating to the marketing of such Property as Lessor Agent
may reasonably request in writing;
(C) Agree to provide to all potential purchasers
all customary seller's indemnities, representations and
warranties regarding such
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Property (including the title to, except for Lessor
Liens, and condition of such Property);
(D) Furnish to Lessor Agent copies of licenses,
permits and other evidence reasonably requested by Lessor
Agent to establish that no Default has occurred and is
continuing under the Lease Agreement;
(E) Permit Lessor Agent or any potential purchaser
to inspect such Property and the maintenance records for
such Property upon reasonable prior written notice and
during normal business hours and provide to Lessor Agent
or such potential purchaser all information regarding such
Property reasonably requested by Lessor Agent or such
potential purchaser in writing;
(F) Take all other commercially reasonable steps
to secure the best price for such Property; and
(G) Submit to Lessor Agent on or prior to the last
day of the Secondary Marketing Period any Conforming Bid
selected by Lessee with a purchase price which is equal to
or greater than the sum of the Outstanding Tranche B
Amount and the Outstanding Equity Amount of such Lease
Supplement or, if no such Conforming Bid was received by
Lessee, the highest Conforming Bid received by Lessee
during the Secondary Marketing Period.
During the Secondary Marketing Period, Lessor Agent shall have
the right to submit one or more bids or solicit bids from other
Persons.
(c) Conforming Bids. Each bid for the Property subject to any
Lease Supplement must meet each of the following requirements (each such
bid to be referred to herein as a "Conforming Bid"):
(i) The bid may be submitted by any Person other than (A)
a Person which is an Affiliate of Lessee or (B) a Person which
has an agreement (whether express or implied) with Lessee or any
of its Affiliates to sell, lease or otherwise make available to
Lessee or any of its Affiliates any portion of such Property;
(ii) The bidder must agree in writing to purchase such
Property on the Expiration Date for such Lease Supplement for a
purchase price to be paid in cash which is not less than the
lesser of (A) the sum of the Outstanding Tranche B Amount and the
Outstanding Equity Amount for such Lease Supplement on such date
and (B) the Fair Market Value of such Property on such date;
(iii) The bidder must agree to purchase such Property "as
is" without any representations, warranties or indemnities,
except for (A) any representations, warranties or indemnities
provided by Lessors and Lessee pursuant to
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Subparagraph 4.01(b) and (B) any representations, warranties or
indemnities provided by Lessee pursuant to clause (ii)(C) of
Subparagraph 3.02(b);
(iv) The bidder must agree to be bound by the other terms
and conditions of this Agreement applicable to bidders; and
(v) The bidder must be creditworthy, as determined by
Lessee.
(d) Lessors' Obligation to Accept Bids. If, at any time on or
prior to the last day of the Secondary Marketing Period for the Property
subject to any Lease Supplement, Lessee submits to Lessor Agent a
Conforming Bid under this Paragraph 3.02 with a purchase price which is
equal to or greater than the sum of the Outstanding Tranche B Amount and
the Outstanding Equity Amount of such Lease Supplement, Lessors shall
accept such bid. If Lessee submits to Lessor Agent a Conforming Bid
under this Paragraph 3.02 for the Property subject to any Lease
Supplement with a purchase price which is less than the sum of the
Outstanding Tranche B Amount and the Outstanding Equity Amount of such
Lease Supplement, Lessors shall not accept such bid unless so directed
by the Required Participants. If Lessee fails to submit a bid to Lessor
Agent on or prior to the last day of the Secondary Marketing Period for
the Property subject to any Lease Supplement which Lessors are so
required to accept, Lessors shall retain such Property after the
Expiration Date for such Lease Supplement. Lessor Agent shall notify
Lessee of Lessors' election to retain such Property by delivering to
Lessee, at least ten (10) days prior to the Expiration Date for such
Lease Supplement, a written notice of such election.
(e) Purchase Price. If Lessors accept any bid by any Person for
the Property subject to any Lease Supplement, such Person (the
"Designated Purchaser") shall pay to Lessors on the Expiration Date for
such Lease Supplement, as the purchase price for such Property, the
amount set forth in such bid as the purchase price.
(f) Termination of the Marketing Option. Lessee's right to
exercise the Marketing Option with respect to the Property subject to
any Lease Supplement shall immediately terminate and Lessee shall
purchase such Property on the Expiration Date for such Lease Supplement
pursuant to Paragraph 3.03 if (i) Lessee fails to comply with any of its
obligations under this Paragraph 3.02; (ii) a Marketing Option Event of
Default under the Lease Agreement occurs after Lessee delivers the
Notice of Marketing Option Exercise; (iii) the conditions precedent set
forth in Paragraph 3.04 of the Participation Agreement are not satisfied
on the Expiration Date for such Lease Supplement (unless the only event
or condition causing such conditions not to be so satisfied is the
occurrence of a Non-Marketing Option Event of Default under the Lease
Agreement); or (iv) the Designated Purchaser fails to consummate the
purchase of such Property on the Expiration Date for such Lease
Supplement in accordance with its accepted bid and this Agreement,
without regard to the reason for such failure (except as otherwise
provided in the following proviso); provided, however, that, if the
Designated Purchaser fails to consummate the purchase of such Property
on the Expiration Date for such Lease Supplement solely due to any
Lessor's failure to remove Lessor Liens attributable to such
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Lessor and deliver the required bill of sale or other documents required
to be delivered by Lessors hereunder, Lessee's right to exercise the
Marketing Option shall not terminate, Lessee shall not be required to
purchase such Property on such Expiration Date and Lessee's payment
obligations on such Expiration Date shall be limited to the amounts set
forth in clause (ii) of Subparagraph 4.06(a) (determined as if the
purchase by the Designated Purchaser had been consummated).
(g) Residual Value Guaranty Amount and Indemnity Amount. Unless
Lessee's right to exercise the Marketing Option has terminated and
Lessee is required to purchase the Property subject to any Lease
Supplement on the Expiration Date for such Lease Supplement pursuant to
Paragraph 3.03, Lessee shall pay to Lessors on such Expiration Date the
following:
(i) The difference between (A) the Outstanding Lease
Amount of such Lease Supplement and (B) the sum of the
Outstanding Tranche B Amount and the Outstanding Equity Amount of
such Lease Supplement (the "Residual Value Guaranty Amount"); and
(ii) An amount (the "Indemnity Amount") equal to the
decrease, if any, between the Lease Supplement Date and the
Expiration Date for such Lease Supplement in the Fair Market
Value of such Property caused by (A) any representation or
warranty of Lessee or any of its Affiliates regarding such
Property set forth in any of the Operative Documents proving to
be false or inaccurate when made, (B) the existence of, or the
failure of Lessee to pay any Governmental Charge, Indebtedness or
other obligation which might give rise to, any Liens in such
Property (other than Permitted Property Liens), (C) the failure
of Lessee to complete any Modifications to such Property, or (D)
any other failure of Lessee to comply with any of its obligations
regarding such Property set forth in any of the Operative
Documents.
(h) Determination of Fair Market Value and Indemnity Amount. If
the purchase price specified in the Initial Bid for the Property subject
to any Lease Supplement is less than the sum of the Outstanding Tranche
B Amount and the Outstanding Equity Amount of such Lease Supplement,
Lessors may, on or prior to the last day of the Secondary Marketing
Period (if Lessee has not previously delivered to Lessor Agent a
Conforming Bid with a purchase price equal to or greater than the sum of
the Outstanding Tranche B Amount and the Outstanding Equity Amount of
such Lease Supplement), deliver to Lessee a written notice of Lessor
Agent's determination of the current Fair Market Value of such Property
and the Indemnity Amount. To determine such amounts, Lessor Agent shall
obtain Appraisals of the Property which set forth:
(i) A current Appraisal of the Fair Market Value of such
Property in its then existing condition (the "Current
Appraisal"); and
(ii) An Appraisal of the Fair Market Value of such
Property which assumes that (A) all representations and
warranties regarding such Property made
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by Lessee or any of its Affiliates in any of the Operative
Documents were true and correct when made; (B) Lessee has
maintained such Property in compliance with all applicable
Governmental Rules, Insurance Requirements and the Operative
Documents; (C) Lessee has completed all Modifications to such
Property in a good and workmanlike manner and otherwise as
required by the Operative Documents; (D) Lessee has repaired such
Property as required by the Operative Documents following any
Casualty; (E) Lessee has restored such Property as required by
the Operative Documents following any Condemnation; (F) Lessee
has paid all Governmental Charges, Indebtedness and other
obligations which, if unpaid, might give rise to a Lien (other
than a Lessor Lien) on such Property; (G) Lessee has removed all
Liens on such Property except for Permitted Property Liens and
Lessor Liens; and (H) Lessee has performed all of its other
obligations as required by the Operative Documents (the "Assumed
Appraisal").
In the absence of manifest error, (y) the Current Appraisal shall
constitute the current Fair Market Value of such Property and (z) the
difference between the Current Appraisal and the Assumed Appraisal shall
constitute the Indemnity Amount of such Lease Supplement if the Current
Appraisal is less than the Assumed Appraisal.
(i) Lessee Cannot Bind. No Lessor Party shall be bound by any
acts of Lessee, except as expressly provided in this Paragraph 3.02.
(j) Excess Proceeds. If, on the Expiration Date for any Lease
Supplement, after the application by Lessors of all amounts received by
Lessors on such date to the Outstanding Lease Amount of such Lease
Supplement, all unpaid Rent with respect to such Lease Supplement
accrued through or due and payable on or prior to such date and all
other amounts, if any, due and payable by Lessee under the Operative
Documents on or prior to such date, any excess amount remains, Lessors
shall pay such excess amount to Lessee.
(k) Creditworthiness of Designated Purchaser. Lessee assumes all
responsibility for determining the creditworthiness of any potential
purchaser on any bid submitted by Lessee to Lessors hereunder. If, after
any purchase by a Designated Purchaser hereunder, the purchase price
paid by such Designated Purchaser is recovered from any Lessor Party,
Lessee shall reimburse such Lessor Party for such recovery unless such
recovery is due solely to a material misrepresentation or covenant
breach by such Lessor Party.
(l) Exercise of Marketing Option After Non-Marketing Option Event
of Default. If Lessor Agent notifies Lessee pursuant to Subparagraph
5.03(a) or Subparagraph 5.04(a) of the Lease Agreement that the Lease
Agreement is being terminated on a Termination Date which is prior to
the Scheduled Expiration Date of any Lease Supplement and the only basis
for such early termination is the occurrence of a Non-Marketing Option
Event of Default, Lessee may, subject to Paragraph 3.01, elect to
exercise the Marketing Option if, not later than ten (10) Business Days
after it receives from Lessor Agent such notice of early termination, it
(i) delivers to Agent a Notice of
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Marketing Option Exercise, (ii) delivers to Agent United States Treasury
Securities or deposit accounts held and maintained by Agent or the
Participants in an aggregate amount not less than 105% of the Residual
Value Guaranty Amount of such Lease Supplement as cash collateral,
together with a cash collateral agreement, in form and substance
satisfactory to Agent, granting Agent a first priority perfected
security interest in such cash collateral securing the Lessee
Obligations, (iii) delivers to Agent an opinion of Lessee's counsel to
the effect that such cash collateral agreement is a legal, valid and
binding agreement of Lessee, enforceable in accordance with its terms,
and that Agent has a perfected security interest in such cash collateral
and (iv) takes such other actions as may be necessary to grant to Agent
a first priority perfected security interest in such cash collateral in
accordance with such cash collateral agreement. Upon the delivery by
Lessee to Agent of a Notice of Marketing Option Exercise and
satisfaction of the cash collateral requirements set forth in the
preceding sentence of this Subparagraph 3.02(l), the Expiration Date of
such Lease Supplement shall, if the conditions to the exercise of the
Marketing Option set forth in Paragraph 3.01 are satisfied, be extended
to the first Business Day that is six (6) months after the date of
receipt by Agent of such Notice of Marketing Option Exercise; provided,
however, that in no event shall the Expiration Date of such Lease
Supplement be extended beyond the Scheduled Expiration Date of such
Lease Supplement. Any exercise by Lessee of the Marketing Option
pursuant to this Subparagraph 3.02(l) shall be subject to the terms and
conditions otherwise set forth in this Agreement.
(m) Lessors' Obligation to Sell. If Lessors retain the Property
subject to any Lease Supplement after the Expiration Date for such Lease
Supplement for any reason under the Operative Documents without a
foreclosure sale or other disposition in accordance with the California
Commercial Code or other applicable Governmental Rules, Lessor Agent
thereafter shall use commercially reasonable efforts to sell such
Property in a reasonable time to one or more unrelated third parties for
the Fair Market Value of such Property; provided, however that Lessors
shall have no obligation to sell such Property at a time, or in a
manner, that would adversely affect the Lessor Parties' ability to be
paid in full the Outstanding Lease Amount of such Lease Supplement, all
other amounts payable to the Lessor Parties under the Operative
Documents (including reasonable costs of maintaining, managing and
selling such Property) and carrying costs for such Outstanding Lease
Amount and such other amounts accruing at the Base Rate; provided,
however, that if such Expiration Date did not occur as a result of an
Event of Default and Lessee has complied with its obligations under
Paragraph 4.02 of the Lease Agreement regarding delivery of such
Property on or prior to such Expiration Date, Lessee shall have no
further obligations with respect to such Property after such Expiration
Date. Following such sale, Lessor Agent shall pay to Lessee any amounts
received by Lessor Agent in excess of the amounts referred to in the
proviso to the preceding sentence.
3.03. Expiration Date Purchase Option.
(a) General. With respect to any Lease Supplement, if (i) Lessee
elects to exercise the Expiration Date Purchase Option by delivering to
Agent a Notice of
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Expiration Date Purchase Option Exercise pursuant to Paragraph 3.01;
(ii) Lessee elects to exercise the Marketing Option by delivering to
Agent a Notice of Marketing Option Exercise pursuant to Paragraph 3.01
but the Marketing Option terminates pursuant to Subparagraph 3.02(f); or
(iii) Lessee fails to deliver to Agent either notice as required by
Paragraph 3.01 and the time for exercising the Renewal Options provided
in Subparagraph 2.02(b) of the Lease Agreement has expired or Lessee
fails to comply with the terms and conditions provided in Subparagraph
2.02(b) of the Lease Agreement; Lessee shall purchase the Property
subject to such Lease Supplement on the Expiration Date for such Lease
Supplement and otherwise comply, or cause compliance with, the
requirements of this Paragraph 3.03 and the other applicable provisions
of this Agreement.
(b) Purchase Price. If Lessee is purchasing the Property subject
to any Lease Supplement pursuant to the Expiration Date Purchase Option,
Lessee shall pay to Lessors on the Expiration Date for such Lease
Supplement, as the purchase price for such Property, an amount equal to
the Outstanding Lease Amount of such Lease Supplement on such date.
SECTION 4. TERMS OF ALL PURCHASES.
4.01. Representations and Warranties of Lessors and Lessee.
(a) Lessee shall represent and warrant to the Designated
Purchaser (or Lessors if Lessors are to retain the Property) on the
Expiration Date for such Lease Supplement that no Liens are attached to
such Property, except for Lessor Liens. Lessee shall make such
additional representations and warranties as it may be required to make
pursuant to clause (ii) of Subparagraph 3.02(b).
(b) Each Lessor shall represent and warrant to each purchaser of
the Property subject to any Lease Supplement, whether Lessee, an
Assignee Purchaser or a Designated Purchaser (a "Purchaser") on the
Expiration Date for such Lease Supplement (or, in the case of a purchase
of a portion of such Property pursuant to the Partial Purchase Option,
on the applicable Partial Purchase Date) that no Lessor Liens
attributable to such Lessor are attached to such Property (or, in the
case of a purchase of a portion of such Property pursuant to the Partial
Purchase Option, the portion to be purchased). Except for the foregoing
representations and warranties to be made by Lessors on the Expiration
Date for such Lease Supplement (or, in the case of a purchase of a
portion of such Property pursuant to the Partial Purchase Option, on the
applicable Partial Purchase Date), no Lessor Party shall make any
representation or warranty regarding such Property or the sale of such
Property.
(c) Survival of Representations and Warranties. The
representations and warranties of Purchaser, Lessors and Lessee made in
connection with the sale of the Property subject to any Lease Supplement
shall survive for a period of twelve (12) months after the Expiration
Date for such Lease Supplement (or, in the case of a purchase
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of a portion of such Property pursuant to the Partial Purchase Option,
after the applicable Partial Purchase Date). Any claim which any such
party may have at any time against any other such party for a breach of
any such representation or warranty, whether known or unknown, which is
not asserted by written notice within such twelve (12) month-period
shall not be valid or effective, and the party shall have no liability
with respect thereto.
4.02. "As Is" Purchase. All purchases hereunder of the Property subject
to any Lease Supplement shall be "as is, with all faults" and without any
representations, warranties or indemnities except for any representations,
warranties or indemnities provided by Lessee pursuant to clause (ii)(C) of
Subparagraph 3.02(b) or by Lessors or Lessee pursuant to Subparagraph 4.01(b).
Each Purchaser shall specifically acknowledge and agree that Lessors are selling
and such Purchaser is purchasing such Property on an "as is, with all faults"
basis and that such Purchaser is not relying on any representations or
warranties of any kind whatsoever, express or implied, from any Lessor Party,
its agents, or brokers as to any matters concerning such Property (except for
any representations and warranties provided by Lessors pursuant to Subparagraph
4.01(b)), including (a) the condition or performance of such Property or the
fitness of such Property for any purpose; (b) title to or right to use of such
Property, including the existence of any Lien or any other right, title or
interest (including intellectual property right) in or to any of such Property
in favor of any Person; (c) the value, usability, design, operation or fitness
for use of such Property; (d) any latent, hidden or patent defect in such
Property; (e) any restrictions on the use of such Property; (f) the economics of
such Property; (g) any Casualty or Condemnation with respect to such Property;
or (h) the compliance of such Property with any applicable Governmental Rule or
Insurance Requirement.
4.03. Release. Without limiting the foregoing, each Purchaser shall, on
behalf of itself and its successors and assigns, waive its right to recover
from, and forever release and discharge, Lessors and the other Indemnitees from
any and all demands, claims, legal or administrative proceedings, losses,
liabilities, damages, penalties, fines, liens, judgments, costs or expenses
whatsoever (including attorneys' fees and costs), whether direct or indirect,
known or unknown, foreseen or unforeseen, that may arise on account of or in any
way be connected with the physical condition of the Property subject to any
Lease Supplement or any Governmental Rule applicable thereto, including any
Environment Law. Each Purchaser shall expressly waive the benefits of Section
1542 of the California Civil Code, which provides that, "a general release does
not extend to claims which the creditor does not know or expect to exist in his
favor at the time of executing the release, which if known to him must have
materially affected the settlement with the debtor."
4.04. Permits, Approvals, Etc. Lessee shall obtain all permits, licenses
and approvals from and make all required filings with Governmental Authorities
and other Persons, comply and cause compliance with all applicable Governmental
Rules and/or take all other actions required for the marketing, purchase and
sale of the Property subject to any Lease Supplement.
4.05. Costs. Lessee shall pay directly, without deduction from the
purchase price or any other amount payable to Lessors hereunder, all reasonable
costs and expenses of Lessee and Lessor Agent associated with the marketing and
sale of the Property subject to any Lease Supplement, including brokers' fees
and commissions; Uniform Commercial Code and other
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searches; tax and other prorations; fees and expenses of attorneys; appraisal
costs; escrow fees; recording fees; and documentary, transfer and other similar
taxes.
4.06. Lessee's Expiration Date and Partial Purchase Date Payment
Obligations.
(a) Expiration Date. On the Expiration Date of any Lease
Supplement (and, if a Lease Supplement has not been executed with
respect to any Installation Period, the Termination Date of such
Installation Period), Lessee shall pay, or cause to be paid, to Lessors
the following:
(i) Purchase by Lessee. If the Property subject to such
Lease Supplement (or leased during such Installation Period) is
to be purchased by Lessee or an Assignee Purchaser on such date,
(i) the purchase price payable to Lessors, (ii) all unpaid Rent
with respect to such Lease Supplement (or Installation Period)
accrued through or due and payable on or prior to such date and
(iii) all other amounts, if any, due and payable by Lessee under
the Operative Documents on or prior to such date;
(ii) Purchase by a Designated Purchaser. If the Property
subject to such Lease Supplement is to be purchased by a
Designated Purchaser on such date, (i) the Residual Value
Guaranty Amount of such Lease Supplement, (ii) the Indemnity
Amount of such Lease Supplement, (iii) all unpaid Rent with
respect to such Lease Supplement accrued through or due and
payable on or prior to such date and (iv) all other amounts, if
any, due and payable by Lessee under the Operative Documents on
or prior to such date; or
(iii) Retention by Lessors. If the Property subject to
such Lease Supplement is to be retained by Lessors on such date
pursuant to Subparagraph 3.02(d), (i) the Residual Value Guaranty
Amount of such Lease Supplement, (ii) the Indemnity Amount of
such Lease Supplement, (iii) all unpaid Rent with respect to such
Lease Supplement accrued through or due and payable on or prior
to such date and (iv) all other amounts, if any, due and payable
by Lessee under the Operative Documents on or prior to such date.
(b) Partial Purchase Date. On any Partial Purchase Date for any
Property subject to any Lease Supplement (or, if a Lease Supplement has
not been executed with respect to any Installation Period, the Property
leased during such Installation Period), Lessee shall pay, or cause to
be paid, to Lessors (i) the purchase price for the portion of such
Property to be purchased on such date, (ii) all unpaid Rent with respect
to such Lease Supplement (or Installation Period) attributable to such
portion of such Property accrued through or due and payable on or prior
to such date and (iii) all other amounts attributable to such portion of
such Property, if any, due and payable by Lessee under the Operative
Documents on or prior to such date.
4.07. Lessor Liens. Each Lessor shall remove all Lessor Liens
attributable to such Lessor from the Property subject to any Lease Supplement
before the Expiration Date for such
14
<PAGE> 215
Lease Supplement (or, in the case of a purchase of a portion of such Property
pursuant to the Partial Purchase Option, from the portion to be purchased before
the applicable Partial Purchase Date).
4.08. Transfer Documents.
(a) Expiration Date.
(i) Lessors. Subject to receipt by Lessors on the
Expiration Date for any Lease Supplement (and, if a Lease
Supplement has not been executed with respect to any Installation
Period, the Termination Date of such Installation Period) of the
full amount of the following, without any setoff, deduction or
reduction of any kind:
(A) In the case of a transfer to Lessee or an
Assignee Purchaser, all amounts payable to Lessors
pursuant to clause (i) of Subparagraph 4.06(a); or
(B) In the case of a transfer to a Designated
Purchaser, (1) the purchase price payable by the
Designated Purchaser and (2) all amounts payable by Lessee
pursuant to clause (ii) of Subparagraph 4.06(a);
Lessors shall transfer their interest in the Property subject to
such Lease Supplement to Purchaser on the Expiration Date for
such Lease Supplement or the Termination Date of such
Installation Period by executing and delivering to Purchaser a
bill of sale in substantially the form of Exhibit D and such
other documents, instruments and agreements as such Person may
reasonably request.
(ii) Lessee. On the Expiration Date of any Lease
Supplement (and, if a Lease Supplement has not been executed with
respect to any Installation Period, the Termination Date of such
Installation Period), unless Lessee is to purchase the Property
subject to such Lease Supplement (and the Property leased during
such Installation Period), Lessee shall transfer its interest in
such Property to the Designated Purchaser or the Assignee
Purchaser (or Lessors if Lessors are to retain such Property
pursuant to Paragraph 3.02(d)) by executing and delivering to
such Person a Bill of Sale in substantially the form of Exhibit E
and such other documents, instruments and agreements as such
Person may reasonably request.
(b) Partial Purchase Date. Subject to receipt by Lessors on any
Partial Purchase Date of all amounts payable to Lessors pursuant to
Subparagraph 4.06(b), without any setoff, deduction or reduction of any
kind, Lessors shall transfer their interest in the portion of the
Property subject to any Lease Supplement (or, if a Lease Supplement has
not been executed with respect to any Installation Period, the Property
leased during such Installation Period) to be purchased on such date to
Lessee or an Assignee Purchaser,
15
<PAGE> 216
as applicable, by executing and delivering to Lessee or an Assignee
Purchaser, as applicable, a Bill of Sale in substantially the form of
Exhibit D and such other documents, instruments and agreements as Lessee
may reasonably request.
4.09. Casualty and Condemnation Proceeds. If, on the Expiration Date for
any Lease Supplement, any Casualty and Condemnation Proceeds are held by Lessor
Agent in a Repair and Restoration Account or otherwise, Lessor Agent shall (a)
if Lessee is to purchase the Property subject to such Lease Supplement on the
Expiration Date for such Lease Supplement and Lessee shall so direct, apply such
proceeds to the purchase price to be paid by Lessee or (b) in all other cases,
release such proceeds to Lessee; provided, however, that Lessor Agent shall not
have any obligation so to apply or release such proceeds unless Lessee and/or
any Designated Purchaser has complied with all of the terms and conditions of
this Agreement.
4.10. Payments. Purchaser and Lessee shall make all payments in lawful
money of the United States and in same day or immediately available funds not
later than 11:00 a.m. on the date due.
4.11. Further Assurances. Lessee shall, and shall cause any Designated
Purchaser to, execute and deliver such documents, instruments and agreements and
take such other actions as Lessor Agent may reasonably request to effect the
purposes of this Agreement and comply with the terms hereof. Similarly, Lessors
and Lessor Agent shall execute and deliver such documents, instruments and
agreements and take such other actions as Lessee or an Assignee Purchaser or a
Designated Purchaser may reasonably request to effect the purposes of this
Agreement and comply with the terms hereof.
SECTION 5. MISCELLANEOUS.
5.01. Notices. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lessee, Agent, Lessor Agent or any Lessor under this Agreement shall be given as
provided in Subparagraph 2.02(c) and Paragraph 7.01 of the Participation
Agreement.
5.02. Waivers, Amendments. Any term, covenant, agreement or condition of
this Agreement may be amended or waived only as provided in the Participation
Agreement. No failure or delay by any Lessor Party in exercising any right
hereunder shall operate as a waiver thereof or of any other right nor shall any
single or partial exercise of any such right preclude any other further exercise
thereof or of any other right. Unless otherwise specified in any such waiver or
consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
5.03. Successors and Assigns.
(a) General. This Agreement shall be binding upon and inure to
the benefit of the Lessor Parties and Lessee and their permitted
successors and assigns; provided, however, that the Lessor Parties and
Lessee shall not sell, assign or delegate their
16
<PAGE> 217
respective rights and obligations hereunder except as provided in the
Participation Agreement and in Subparagraph 5.03(b).
(b) Assignment by Lessee of Purchase Rights. Lessee may assign to
a third party (an "Assignee Purchaser") its right to purchase the
Property pursuant to the Partial Purchase Option, the Term Purchase
Option or the Expiration Date Purchase Option; provided, however, that
(i) such an assignment shall not relieve Lessee of its obligations to
consummate or cause the consummation of any such purchase in accordance
with the terms of this Agreement and (ii) Lessee assumes all
responsibility for determining the creditworthiness of any such Assignee
Purchaser. If, after any purchase by an Assignee Purchaser hereunder,
the purchase price paid by such Assignee Purchaser is recovered from any
Lessor Party, Lessee shall reimburse such Lessor Party for such recovery
unless such recovery is due solely to a material misrepresentation or
covenant breach by such Lessor Party.
5.04. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the Lessor Parties and Lessee and their permitted successors and
assigns, any benefit or legal or equitable right, remedy or claim under or by
virtue of this Agreement or under or by virtue of any provision herein.
5.05. Partial Invalidity. If at any time any provision of this Agreement
is or becomes illegal, invalid or unenforceable in any respect under the law or
any jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
5.06. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without reference to
conflicts of law rules, except as otherwise provided in Schedule 1.02 to the
Participation Agreement.
5.07. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
5.08. Nature of Lessee's Obligations.
(a) Independent Obligation. The obligations of Lessee to pay the
amounts payable by Lessee under this Agreement and the other Operative
Documents and to perform the other Lessee Obligation are absolute,
unconditional and irrevocable obligations which are separate and
independent of the obligations of the Lessor Parties under this
Agreement and the other Operative Documents and all other events and
circumstances, including the events and circumstances set forth in
Subparagraph 5.08(c).
(b) No Termination or Abatement. This Agreement and the other
Operative Documents and Lessee's obligation to pay all amounts hereunder
and to pay and perform
17
<PAGE> 218
all other Lessee Obligations shall continue in full force and effect
without abatement notwithstanding the occurrence or existence of any
event or circumstance, including any event or circumstance set forth in
Subparagraph 5.08(c).
(c) Full Payment and Performance. Lessee shall make all payments
under this Agreement and the other Operative Documents in the full
amounts and at the times required by the terms of this Agreement and the
other Operative Documents without setoff, deduction or reduction of any
kind and shall perform all other Lessee Obligations as and when
required, without regard to any event or circumstances whatsoever,
including (i) the condition or performance of the Property or the
fitness of the Property for any purpose; (ii) title to or right to use
of the Property, including the existence of any Lien or any other right,
title or interest (including intellectual property right) in or to any
of the Property in favor of any Person; (iii) the value, usability,
design, operation or fitness for use of the Property; (iv) any latent,
hidden or patent defect in the Property; (v) any restrictions on the use
of the Property; (vi) the economics of the Property; (vii) any Casualty
or Condemnation; (viii) the compliance of the Property with any
applicable Governmental Rule or Insurance Requirement; (ix) any failure
by any Lessor Party to perform any of its obligations under this
Agreement or any other Operative Document; or (x) the exercise by any
Lessor Party of any of its remedies under this Agreement or any other
Operative Document; provided, however, that (A) Lessee shall have no
obligation to purchase the Property subject to any Lease Supplement on
the Expiration Date for such Lease Supplement if any Lessor fails to
remove Lessor Liens attributable to such Lessor or deliver the required
deed and bill of sale or other documents required to be delivered by
Lessors hereunder and (B) this Paragraph 5.08 shall not abrogate any
right which Lessee may have to recover damages from any Lessor Party for
any material breach by such Lessor Party of its obligations under this
Agreement or any other Operative Document to the extent permitted
hereunder or thereunder.
(d) The Lessee Obligations arising under this Agreement and the
other Operative Documents shall be "Designated Senior Debt" for purposes of any
indenture or other document creating or evidencing Subordinated Debt and such
Subordinated Debt shall be subordinated to the Lessee Obligations on terms no
more favorable to the holders of Subordinated Debt than those attached as
Exhibit I to the Participation Agreement.
5.09. Effect on Existing Purchase Agreement. Lessee, Lessors and Lessor
Agent agree that on and after the date that this Agreement is executed by all
parties hereto, this Agreement shall amend, restate in its entirety and replace,
without notation, the Existing Purchase Agreement; provided, however, that
nothing contained herein shall (i) operate as a waiver of any right, power or
remedy of any Lessor Party under the Existing Purchase Agreement or any other
Operative Document or (ii) extinguish or impair any Lessee Obligations under the
Existing Purchase Agreement or any other Operative Document except to the extent
any such Lessee Obligation is actually satisfied by Lessee.
[The signature page follows.]
18
<PAGE> 219
IN WITNESS WHEREOF, Lessee, Lessors and Lessor Agent have caused this
Amended and Restated Purchase Agreement to be executed as of the day and year
first above written.
LESSEE: LSI LOGIC CORPORATION
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
LESSORS: ABN AMRO BANK N.V.
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
KEYBANK NATIONAL ASSOCIATION
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
FBTC LEASING CORP.
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
LESSOR AGENT: ABN AMRO BANK N.V.
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
S-1
<PAGE> 220
EXHIBIT A(1)
NOTICE OF TERM PURCHASE OPTION EXERCISE
[Date]
ABN AMRO Bank N.V.
as Agent
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to the following:
(a) The Amended and Restated Participation Agreement, dated as of
April 18, 2000 (the "Participation Agreement"), among LSI Logic
Corporation ("Lessee"), ABN AMRO Bank N.V., KeyBank National
Association, FBTC Leasing Corp. and each other financial institution
listed as a lessor in Schedule I to the Participation Agreement (in such
capacity, collectively "Lessors"), ABN AMRO Bank N.V., as agent for
Lessors (in such capacity, "Lessor Agent"), the financial institutions
listed as Participants in Schedule I to the Participation Agreement (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants
(in such capacity, "Agent");
(b) The Amended and Restated Lease Agreement, dated as of April
18, 2000 (the "Lease Agreement"), among Lessee, Lessors and Lessor
Agent; and
(c) The Amended and Restated Purchase Agreement, dated as of
April 18, 2000 (the "Purchase Agreement"), among Lessee, Lessors and
Lessor Agent.
Unless otherwise indicated, all terms defined in the Participation Agreement
have the same respective meanings when used herein.
2. Pursuant to Subparagraph 4.01(a) of the Lease Agreement and Paragraph
2.01 of the Purchase Agreement, Lessee hereby irrevocably notifies Lessors that
Lessee is exercising its right to terminate the Lease Agreement prior to the
earliest Scheduled Expiration Date of any outstanding Lease Supplement and
purchase all of the Property subject to the Lease Agreement on [_________, ____]
(which date is a Business Day and which date, after the delivery of this notice,
shall be the Expiration Date for each Lease Supplement and, if a Lease
Supplement has not been executed with respect to any Installation Period, the
Termination Date of such Installation Period).
A(1)-1
<PAGE> 221
IN WITNESS WHEREOF, Lessee has executed this Notice of Term Purchase
Option Exercise on the date set forth above.
LSI LOGIC CORPORATION
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
A(2)-2
<PAGE> 222
EXHIBIT A(2)
NOTICE OF PARTIAL PURCHASE OPTION EXERCISE
[Date]
ABN AMRO Bank N.V.
as Agent
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to the following:
(a) The Amended and Restated Participation Agreement, dated as of
April 18, 2000 (the "Participation Agreement"), among LSI Logic
Corporation ("Lessee"), ABN AMRO Bank N.V., KeyBank National
Association, FBTC Leasing Corp. and each other financial institution
listed as a lessor in Schedule I to the Participation Agreement (in such
capacity, collectively "Lessors"), ABN AMRO Bank N.V., as agent for
Lessors (in such capacity, "Lessor Agent"), the financial institutions
listed as Participants in Schedule I to the Participation Agreement (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants
(in such capacity, "Agent");
(b) The Amended and Restated Purchase Agreement, dated as of
April 18, 2000 (the "Purchase Agreement"), among Lessee, Lessors and
Lessor Agent; and
(c) [Lease Supplement No. [ ], dated [Lease Supplement Date]
(the "Lease Supplement"), executed and delivered by Lessee][The
Installation Period commencing on________ (the "Installation Period")].
Unless otherwise indicated, all terms defined in the Participation Agreement
have the same respective meanings when used herein.
2. Pursuant to Paragraph 2.02 of the Purchase Agreement, Lessee hereby
irrevocably notifies Lessors that Lessee is exercising its right to purchase all
or a portion of the Property [subject to the Lease Supplement][leased during the
Installation Period] as follows:
(a) The Property to be purchased is set forth in Attachment 1
hereto; and
(b) The date on which such purchase is to occur is [_________,
____] (which date is a Business Day).
3. Lessee hereby certifies to the Lessor Parties that, on the date of
this notice:
A(2)-1
<PAGE> 223
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other Operative
Documents are true and correct in all material respects as if made on
such date (except for representations and warranties expressly made as
of a specified date, which shall be true in all material respects as of
such date); and
(b) No Default has occurred and is continuing.
IN WITNESS WHEREOF, Lessee has executed this Notice of Partial Purchase
Option Exercise on the date set forth above.
LSI LOGIC CORPORATION
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
A(2)-2
<PAGE> 224
EXHIBIT B
NOTICE OF MARKETING OPTION EXERCISE
[Date]
ABN AMRO Bank N.V.
as Agent
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to the following:
(a) The Amended and Restated Participation Agreement, dated as of
April 18, 2000 (the "Participation Agreement"), among LSI Logic
Corporation ("Lessee"), ABN AMRO Bank N.V., KeyBank National
Association, FBTC Leasing Corp. and each other financial institution
listed as a lessor in Schedule I to the Participation Agreement (in such
capacity, collectively "Lessors"), ABN AMRO Bank N.V., as agent for
Lessors (in such capacity, "Lessor Agent"), the financial institutions
listed as Participants in Schedule I to the Participation Agreement (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants
(in such capacity, "Agent");
(b) The Amended and Restated Purchase Agreement, dated as of
April 18, 2000 (the "Purchase Agreement"), among Lessee, Lessors and
Lessor Agent; and
(c) Lease Supplement No. [ ], dated [Lease Supplement Date] (the
"Lease Supplement"), executed and delivered by Lessee.
Unless otherwise indicated, all terms defined in the Participation Agreement
have the same respective meanings when used herein.
2. Pursuant to Paragraph 3.01 of the Purchase Agreement, Lessee hereby
notifies Lessors that Lessee is electing to exercise the Marketing Option on the
Scheduled Expiration Date for the Lease Supplement of [_____, ____].
3. Lessee hereby certifies to the Lessor Parties that, on the date of
this notice:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other Operative
Documents are true and correct in all material respects as if made on
such date (except for representations and warranties expressly made as
of a specified date, which shall be true in all material respects as of
such date); and
(b) No Default (other than a Non-Marketing Option Event of
Default under the Lease Agreement) has occurred and is continuing.
B-1
<PAGE> 225
IN WITNESS WHEREOF, Lessee has executed this Notice of Marketing Option
Exercise on the date set forth above.
LSI LOGIC CORPORATION
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
B-2
<PAGE> 226
EXHIBIT C
NOTICE OF EXPIRATION DATE PURCHASE OPTION EXERCISE
[Date]
ABN AMRO Bank N.V.
as Agent
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to the following:
(a) The Amended and Restated Participation Agreement, dated as of
April 18, 2000 (the "Participation Agreement"), among LSI Logic
Corporation ("Lessee"), ABN AMRO Bank N.V., KeyBank National
Association, FBTC Leasing Corp. and each other financial institution
listed as a lessor in Schedule I to the Participation Agreement (in such
capacity, collectively "Lessors"), ABN AMRO Bank N.V., as agent for
Lessors (in such capacity, "Lessor Agent"), the financial institutions
listed as Participants in Schedule I to the Participation Agreement (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants
(in such capacity, "Agent");
(b) The Amended and Restated Purchase Agreement, dated as of
April 18, 2000 (the "Purchase Agreement"), among Lessee, Lessors and
Lessor Agent; and
(c) Lease Supplement No. [ ], dated [Lease Supplement Date] (the
"Lease Supplement"), executed and delivered by Lessee.
Unless otherwise indicated, all terms defined in the Participation Agreement
have the same respective meanings when used herein.
2. Pursuant to Paragraph 3.01 of the Purchase Agreement, Lessee hereby
notifies Lessors that Lessee is electing to exercise the Expiration Date
Purchase Option on the Scheduled Expiration Date for the Lease Supplement of
[_____, ____].
IN WITNESS WHEREOF, Lessee has executed this Notice of Expiration Date
Purchase Option Exercise on the date set forth above.
LSI LOGIC CORPORATION
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
C-1
<PAGE> 227
EXHIBIT D
BILL OF SALE
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, ABN AMRO Bank N.V., KeyBank National Association
and FBTC Leasing Corp. (collectively, "Sellers") do hereby sell, transfer and
convey to [Buyer], ("Buyer"), the personal property itemized on SCHEDULE 1
attached hereto and incorporated herein by this reference (the "Property").
Sellers are selling and Buyer is purchasing the Property on an "AS IS,
WITH ALL FAULTS" basis and Buyer is not relying on any representations or
warranties of any kind whatsoever, express or implied, from Sellers, their
agents, or brokers as to any matters concerning the Property including (a) the
condition or performance of the Property or the fitness of the Property for any
purpose; (b) title to or right to use of the Property, including the existence
of any Lien or any other right, title or interest (including intellectual
property right) in or to any of the Property in favor of any Person; (c) the
value, usability, design, operation or fitness for use of the Property; (d) any
latent, hidden or patent defect in the Property; (e) any restrictions on the use
of the Property; (f) the economics of the Property; (g) any Casualty or
Condemnation; or (h) the compliance of the Property with any applicable
Governmental Rule or Insurance Requirement.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLERS SPECIFICALLY
DISCLAIM AND BUYER SPECIFICALLY WAIVES:
(i) ANY COVENANT OF QUIET ENJOYMENT AND ANY WARRANTY AGAINST
INTERFERENCE OR INFRINGEMENT, EXCEPT THAT SELLERS SHALL NOT INTERFERE
WITH BUYER'S ENJOYMENT OF THE PROPERTY;
(ii) ANY WARRANTY OF MERCHANTABILITY; AND
D-1
<PAGE> 228
(iii) ANY WARRANTY THAT THE PROPERTY WILL BE FIT FOR A
PARTICULAR PURPOSE.
Dated: ________, __ SELLERS:
ABN AMRO BANK N.V.
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
KEYBANK NATIONAL ASSOCIATION
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
FBTC LEASING CORP.
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
BUYER:
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
D-2
<PAGE> 229
SCHEDULE 1
PROPERTY
D(1)-1
<PAGE> 230
EXHIBIT E
BILL OF SALE
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, LSI Logic Corporation ("Seller"), does hereby
sell, transfer and convey to [Buyer] ("Buyer"), the personal property itemized
on SCHEDULE 1 attached hereto and incorporated herein by this reference(the
"Property"), which Seller warrants to be free and clear of all liens and
encumbrances (other than Lessor Liens).
Seller does hereby covenant with Buyer that Seller will warrant and
defend the title to the Property unto Buyer, its successors and assigns, against
the claims and demands of all persons whomsoever.
Dated: ________, __ SELLER:
LSI LOGIC CORPORATION
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
E-1
<PAGE> 231
SCHEDULE 1
PROPERTY
E(1)-1
<PAGE> 232
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
AMENDED AND RESTATED
PURCHASE AGREEMENT
AMONG
LSI LOGIC CORPORATION
AND
ABN AMRO BANK N.V.,
KEYBANK NATIONAL ASSOCIATION
AND FBTC LEASING CORP.,
AS LESSORS
AND
ABN AMRO BANK N.V.,
AS LESSOR AGENT FOR LESSORS
APRIL 18, 2000
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE> 233
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. INTERPRETATION............................................................2
1.01. Definitions...............................................................2
1.02. Rules of Interpretation...................................................2
SECTION 2. OPTIONAL PURCHASE BY LESSEE DURING THE TERM...............................2
2.01. Term Purchase Option......................................................2
2.02. Partial Purchase Option...................................................3
SECTION 3. OBLIGATIONS OF LESSEE ON THE EXPIRATION DATE..............................4
3.01. Alternative...............................................................4
3.02. Marketing Option..........................................................5
3.03. Expiration Date Purchase Option..........................................11
SECTION 4. TERMS OF ALL PURCHASES...................................................12
4.01. Representations and Warranties of Lessors and Lessee.....................12
4.02. "As Is" Purchase.........................................................12
4.03. Release..................................................................13
4.04. Permits, Approvals, Etc..................................................13
4.05. Costs....................................................................13
4.06. Lessee's Expiration Date and Partial Purchase Date Payment
Obligations..............................................................13
4.07. Lessor Liens.............................................................14
4.08. Transfer Documents.......................................................14
4.09. Casualty and Condemnation Proceeds.......................................15
4.10. Payments.................................................................15
4.11. Further Assurances.......................................................15
SECTION 5. MISCELLANEOUS............................................................16
5.01. Notices..................................................................16
5.02. Waivers, Amendments......................................................16
5.03. Successors and Assigns...................................................16
5.04. No Third Party Rights....................................................16
5.05. Partial Invalidity.......................................................16
5.06. Governing Law............................................................17
5.07. Counterparts.............................................................17
</TABLE>
-i-
<PAGE> 234
<TABLE>
<CAPTION>
<S> <C> <C>
5.08. Nature of Lessee's Obligations...........................................17
5.09. Effect on Existing Purchase Agreement....................................18
</TABLE>
-ii-
<PAGE> 235
TABLE OF CONTENTS
EXHIBITS
A(1) Notice of Term Purchase Option Exercise (2.01)
A(2) Notice of Partial Purchase Option Exercise (2.02)
B Notice of Marketing Option Exercise (3.01)
C Notice of Expiration Date Purchase Option Exercise (3.02)
D Bill of Sale (Lessors) (4.08(a))
E Bill of Sale (Lessee) (4.08(b))
-ii-
<PAGE> 236
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
<PAGE> 237
AMENDED AND RESTATED
LESSOR SECURITY AGREEMENT
THIS AMENDED AND RESTATED LESSOR SECURITY AGREEMENT (this "Agreement"
herein), dated as of April 18, 2000, is executed by:
(1) ABN AMRO BANK N.V., KEYBANK NATIONAL ASSOCIATION, FBTC
LEASING CORP. and each other financial institution from time to time
listed as a lessor in Schedule I to the Participation Agreement referred
to in Recital B below, as amended from time to time (in such party's
capacity as a lessor and owner of the Lessor Collateral as defined in
Paragraph 2.01 and not in its capacity as a holder of a participation
interest in the rental and certain other payments to be made by Lessee
under the Participation Agreement as defined in the Recitals, such
financial institutions to be referred to collectively as "Lessors"); and
(2) ABN AMRO BANK N.V., as agent for Lessors (in such capacity,
"Lessor Agent");
in favor of
(3) ABN AMRO BANK N.V., as agent for the Participants under the
Participation Agreement (in such capacity, "Agent").
RECITALS
A. Pursuant to the Participation Agreement referred to in Recital B
below, a certain lease facility is to be provided to LSI Logic Corporation, as
Delaware corporation ("Lessee") by Lessors and the other financial institutions
which are "Participants" under the Participation Agreement (such financial
institutions to be referred to collectively as the "Participants") as follows:
(1) Lessors would (a) acquire certain equipment identified by
Lessee and approved by Lessor Agent, (b) lease such equipment to Lessee,
(c) make advances to finance certain related expenses and (d) grant to
Lessee the right to purchase such equipment; and
(2) The Participants would participate in such lease facility by
(a) funding the acquisition price to be paid by Lessors for the
equipment and the other advances to be made by Lessors and (b) acquiring
participation interests in the rental and certain other payments to be
made by Lessee.
B. In connection with the addition of certain parties as Lessors and
Participants, Lessee and Participants have requested that (i) the Participation
Agreement, dated as March 31, 2000, among Lessee, ABN AMRO Bank N.V., as the
original Lessor and Participant, Lessor Agent, the Participants and ABN AMRO
Bank N.V., as agent for the Participants (in such
<PAGE> 238
capacity, "Agent"), be amended and restated by the Amended and Restated
Participation Agreement, dated as of April 18, 2000 (the "Participation
Agreement"), among Lessee, Lessors, Lessor Agent, the Participants and Agent and
(ii) the Lessor Security Agreement, dated as of March 31, 2000 (the "Existing
Lessor Security Agreement"), among Lessee, ABN AMRO Bank N.V., as the original
Lessor, and Lessor Agent be amended and restated by this Agreement, and Lessors,
Lessor Agent and Agent are willing for the Existing Lessor Security Agreement to
be amended and restated by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree that the Existing
Lessor Security Agreement shall be amended and restated in its entirety as
follows:
SECTION 1. INTERPRETATION.
1.01. Definitions. Unless otherwise indicated in this Assignment or any
other Operative Document, each term set forth in Schedule 1.01 to the
Participation Agreement, when used in this Assignment or any other Operative
Document, shall have the respective meaning given to that term in such Schedule
1.01 or in the provision of this Assignment or other document, instrument or
agreement referenced in such Schedule 1.01.
1.02. Rules of Interpretation. Unless otherwise indicated in this
Assignment or any other Operative Document, the rules of interpretation set
forth in Schedule 1.02 to the Participation Agreement shall apply to this
Assignment and the other Operative Documents.
SECTION 2. GRANT OF SECURITY INTEREST.
2.01. Grant. As security for the Lessor Obligations, each Lessor hereby
irrevocably and unconditionally pledges and assigns to Agent, for the benefit of
the Participants and Agent, and grants to Agent, for the benefit of the
Participants and Agent, a security interest in all estate, right, title and
interest of such Lessor, whether now owned or hereafter acquired, in and to the
following property (such estate, right, title and interest in such property
herein, collectively and severally, the "Lessor Collateral"):
(a) Operative Documents. The Participation Agreement, the Lease
Agreement, the Purchase Agreement, the Lessee Security Documents and all
other Operative Documents; all exhibits, schedules and other attachments
thereto; and all documents, instruments or agreements issued or executed
in replacement thereof; each as amended, modified and supplemented from
time to time and in effect at any given time;
(b) Collateral. All Collateral for the Lessee Obligations under
the Operative Documents; and
2
<PAGE> 239
(c) Proceeds. All proceeds of the foregoing (including, without
limitation, whatever is receivable or received when Lessor Collateral or
proceeds are sold, collected, exchanged, returned, substituted or
otherwise disposed of, whether such disposition is voluntary or
involuntary, including rights to payment and return premiums and
insurance proceeds under insurance with respect to any Lessor
Collateral, and all rights to payment with respect to any cause of
action affecting or relating to the Lessor Collateral).
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSORS.
3.01. Representations and Warranties. Each Lessor represents and
warrants to Agent and the Participants as follows:
(a) Such Lessor is the legal and beneficial owner of an undivided
interest in the Lessor Collateral (or, in the case of after-acquired
Lessor Collateral, at the time such Lessor acquires rights in the Lessor
Collateral, will be the legal and beneficial owner of an undivided
interest therein).
(b) Such Lessor has not transferred to any other Person any of
its right, title or interest in the Lessor Collateral, whether by way of
Lien or otherwise.
(c) Such Lessor's chief executive office (if such Lessor is
organized in the United States) or major executive office in the United
States (if such Lessor is not organized in the United States) is located
at the location listed in Schedule I to the Participation Agreement.
3.02. Covenants. Each Lessor hereby covenants to Agent and the
Participants as follows:
(a) Such Lessor shall promptly procure, execute and deliver to
Agent all documents, instruments and agreements and perform all acts
which are necessary or desirable, or which Agent may request, to
establish, maintain, preserve, protect and perfect the Lessor
Collateral, the Lien granted to Agent therein and the first priority of
such Lien or to enable Agent to exercise and enforce its rights and
remedies hereunder with respect to any Lessor Collateral.
(b) Such Lessor shall not sell, transfer or assign any of its
right, title or interest in the Lessor Collateral to any Person (other
than Agent), whether by way of Lien or otherwise.
(c) Without prompt written notice to Agent, such Lessor shall not
change such Lessor's name or chief executive office (if such Lessor is
organized in the United States) or major executive office in the United
States (if such Lessor is not organized in the United States).
3
<PAGE> 240
SECTION 4. RIGHTS AND REMEDIES OF AGENT.
4.01. Authorized Action by Agent. Each Lessor and Lessor Agent hereby
irrevocably appoints Agent as its attorney-in-fact and agrees that Agent may
perform (but Agent shall not be obligated to and shall incur no liability to
Lessors, Lessor Agent or any third party for failure so to do) any act which any
Lessor or Lessor Agent is obligated by this Agreement to perform, and to
exercise such rights and powers as any Lessor or Lessor Agent might exercise
with respect to the Lessor Collateral, including, without limitation, the right
to (a) collect by legal proceedings or otherwise and endorse, receive and
receipt for all dividends, interest, payments, proceeds and other sums and
property now or hereafter payable on or on account of the Lessor Collateral; (b)
enter into any extension, reorganization, deposit, merger, consolidation or
other agreement pertaining to, or deposit, surrender, accept, hold or apply
other property in exchange for the Lessor Collateral; (c) insure, process,
preserve and enforce the Lessor Collateral; (d) make any compromise or
settlement, and take any action it deems advisable, with respect to the Lessor
Collateral; (e) pay any Indebtedness of any Lessor or Lessor Agent relating to
the Lessor Collateral; and (f) execute UCC financing statements. Each Lessor and
Lessor Agent agrees that such care as Agent gives to the safekeeping of its own
property of like kind shall constitute reasonable care of the Lessor Collateral
when in Agent's possession; provided, however, that Agent shall not be required
to make any presentment, demand or protest, or give any notice and need not take
any action to preserve any rights against any prior party or any other Person in
connection with the Lessor Obligations or with respect to the Lessor Collateral.
4.02. Other Rights and Remedies Upon Default. In addition to all other
rights and remedies granted to Agent by this Agreement and the other Operative
Documents, the UCC and other applicable Governmental Rules, Agent may, if any
Lessor or Lessor Agent fails to perform any of the Lessor Obligations, exercise
any one or more of the following rights and remedies: (a) collect, receive,
appropriate or realize upon the Lessor Collateral or otherwise foreclose or
enforce Agent's security interests in any or all Lessor Collateral in any manner
permitted by applicable Governmental Rules or in this Security Agreement; (b)
notify Lessee to make any or all payments to be made by Lessee under the
Operative Documents to Agent; (c) sell or otherwise dispose of any or all Lessor
Collateral at one or more public or private sales, whether or not such Lessor
Collateral is present at the place of sale, for cash or credit or future
delivery, on such terms and in such manner as Agent may determine; (d) require
Lessor Agent to assemble the Lessor Collateral and make it available to Agent at
a place to be designated by Agent; and (e) prior to the disposition of the
Lessor Collateral, store, process, repair or recondition any Lessor Collateral
consisting of goods, perform any obligations and enforce any rights of any
Lessor or Lessor Agent under any Operative Documents or otherwise prepare and
preserve Lessor Collateral for disposition in any manner and to the extent Agent
deems appropriate. In any case where notice of any sale or disposition of any
Lessor Collateral is required, each Lessor and Lessor Agent hereby agrees that
thirty (30) days notice of such sale or disposition is reasonable.
4
<PAGE> 241
SECTION 5. MISCELLANEOUS.
5.01. Notices. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications to or upon any
Lessor, Lessor Agent or Agent under this Agreement shall be given as provided in
Paragraph 7.01 of the Participation Agreement.
5.02. Waivers; Amendments. Any term, covenant, agreement or condition of
this Agreement may be amended or waived only as provided in the Participation
Agreement. No failure or delay by Agent in exercising any right hereunder shall
operate as a waiver thereof or of any other right nor shall any single or
partial exercise of any such right preclude any other further exercise thereof
or of any other right. Unless otherwise specified in any such waiver or consent,
a waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.
5.03. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Lessor Parties and their permitted successors and
assigns; provided, however, that the Lessor Parties shall not sell, assign or
delegate their respective rights and obligations hereunder except as provided in
the Participation Agreement.
5.04. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the Lessor Parties and their permitted successors and assigns, any
benefit or legal or equitable right, remedy or claim under or by virtue of this
Agreement or under or by virtue of any provision herein.
5.05. Partial Invalidity. If at any time any provision of this Agreement
is or becomes illegal, invalid or unenforceable in any respect under the law or
any jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
5.06. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without reference to
conflicts of law rules, except as otherwise provided in Schedule 1.02 of the
Participation Agreement.
5.07. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
5
<PAGE> 242
5.08. Effect on Existing Lessor Security Agreement. Lessors, Lessor
Agent and Agent agree that on and after the date that this Agreement is executed
by all parties hereto, this Agreement shall amend, restate in its entirety and
replace, without notation, the Existing Lessor Security Agreement; provided,
however, that nothing contained herein shall (i) operate as a waiver of any
right, power or remedy of Agent under the Existing Lessor Security Agreement or
any other Operative Document or (ii) extinguish or impair any Lessor Obligations
under the Existing Lessor Security Agreement or any other Operative Document
except to the extent any such Lessor Obligation is actually satisfied by
Lessors; and provided, further, that all security interests granted under the
Existing Lessor Security Agreement shall remain in full force.
[The signature page follows.]
6
<PAGE> 243
IN WITNESS WHEREOF, Lessors and Lessor Agent have caused this Amended
and Restated Lessor Security Agreement to be executed as of the day and year
first above written.
LESSORS: ABN AMRO BANK N.V.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
KEYBANK NATIONAL ASSOCIATION
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
FBTC LEASING CORP.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
LESSOR AGENT: ABN AMRO BANK N.V.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
S-1
<PAGE> 244
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
LESSOR SECURITY AGREEMENT
BY
ABN AMRO BANK N.V.,
KEYBANK NATIONAL ASSOCIATION
AND FBTC LEASING CORP.,
AS LESSORS
AND
ABN AMRO BANK N.V.,
AS LESSOR AGENT FOR LESSORS
IN FAVOR OF
ABN AMRO BANK N.V.,
AS AGENT
APRIL 18, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 299,594
<SECURITIES> 568,635
<RECEIVABLES> 403,978
<ALLOWANCES> (7,220)
<INVENTORY> 255,146
<CURRENT-ASSETS> 1,661,899
<PP&E> 2,319,915
<DEPRECIATION> (1,064,498)
<TOTAL-ASSETS> 3,513,920
<CURRENT-LIABILITIES> 441,249
<BONDS> 0
0
0
<COMMON> 3,066
<OTHER-SE> 2,007,232
<TOTAL-LIABILITY-AND-EQUITY> 3,513,920
<SALES> 615,186
<TOTAL-REVENUES> 615,186
<CGS> 365,500
<TOTAL-COSTS> 365,500
<OTHER-EXPENSES> 165,086
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10,893)
<INCOME-PRETAX> 115,008
<INCOME-TAX> 28,765
<INCOME-CONTINUING> 86,243
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,243
<EPS-BASIC> 0.28
<EPS-DILUTED> 0.25
</TABLE>
