<PAGE>
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT
UNDER
SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED DECEMBER 31, 1993 COMMISSION FILE NUMBER 33-7264
------------------------
FIRST BRANDS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
Delaware 06-1171404
State of Incorporation (IRS Employer Identification No.)
</TABLE>
83 Wooster Heights Rd., Building 301
P.O. Box 1911
Danbury, Connecticut
06813-1911
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
203-731-2300
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [x] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<S> <C>
CLASS OUTSTANDING AT DECEMBER 31, 1993
COMMON STOCK, $.01 PAR VALUE 21,941,559 SHARES
</TABLE>
________________________________________________________________________________
<PAGE>
FIRST BRANDS CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Income For the Three Month Periods Ended December 31, 1993 and
1992............................................................................................... 3
Consolidated Condensed Statements of Income For the Six Month Periods Ended December 31, 1993 and
1992............................................................................................... 4
Consolidated Condensed Balance Sheets December 31, 1993 and June 30, 1993........................... 5
Consolidated Condensed Statement of Stockholders' Equity -- For the Six Month Period Ended December
31, 1993........................................................................................... 6
Consolidated Condensed Statements of Cash Flows -- For the Six Month Periods Ended December 31, 1993
and 1992........................................................................................... 7
Notes to Consolidated Condensed Financial Statements................................................ 8-11
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.......
12-14
Independent Accountants' Report..................................................................... 15
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.............................................................................. 16
Items 2-6................................................................................................ 16-19
SIGNATURE................................................................................................ 20
</TABLE>
2
<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, 1993 DECEMBER 31, 1992
----------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
(UNAUDITED)
<S> <C> <C>
Net sales.............................................. $ 270,393 $ 268,018
Cost of goods sold..................................... 166,633 170,759
Selling, general and administrative expenses........... 63,160 61,041
Amortization and other depreciation.................... 6,109 4,499
Interest expense....................................... 5,322 5,711
Discount on sale of receivables........................ 1,019 1,058
Other income (expense), net............................ (267) 195
Income before provision for income taxes............... 27,883 25,145
Provision for income taxes............................. 11,491 10,260
Net income............................................. $ 16,392 $ 14,885
Net income per common share and common equivalent share
(Note 6):............................................ $ 0.74 $ 0.68
Weighted average common and common equivalent shares
outstanding (Note 6)................................. 22,162 21,843
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, 1993 DECEMBER 31, 1992
----------------- -----------------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C>
Net sales.............................................. $ 550,206 $ 537,015
Cost of goods sold..................................... 339,602 337,682
Selling, general and administrative expenses........... 128,452 124,759
Amortization and other depreciation.................... 11,896 10,034
Interest expense....................................... 10,664 12,183
Discount on sale of receivables........................ 2,024 2,185
Other income (expense), net............................ (288) 204
Income before provision for income taxes............... 57,280 50,376
Provision for income taxes............................. 24,516 20,486
Net income............................................. $ 32,764 $ 29,890
Net income per common share and common equivalent share
(Note 6):............................................ $ 1.48 $ 1.37
Weighted average common and common equivalent shares
outstanding (Note 6)................................. 22,097 21,821
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1993 JUNE 30, 1993
----------------- -------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents...................................................... $ 9,718 $ 11,672
Accounts and notes receivable -- net........................................... 96,262 85,257
Inventories.................................................................... 166,685 177,148
Prepaid expenses............................................................... 3,738 5,674
Total current assets................................................. 276,403 279,751
Property, plant and equipment (net of accumulated depreciation of $80,501 and
$69,570)..................................................................... 253,286 252,372
Patents, trademarks, proprietary technology and other intangibles (net of
accumulated amortization of $185,630 and $177,621)........................... 240,898 247,226
Deferred charges and other assets (net of accumulated amortization of $46,215
and $45,078)................................................................. 24,000 27,455
Total assets......................................................... $ 794,587 $ 806,804
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable.................................................................. $ 10,162 $ 178
Current maturities of long-term debt........................................... 4,808 5,079
Accrued income and other taxes................................................. 29,490 26,035
Accounts payable............................................................... 25,928 82,298
Accrued liabilities............................................................ 120,871 130,535
Total current liabilities............................................ 191,259 244,125
Long-term debt................................................................. 229,003 226,250
Deferred taxes payable......................................................... 18,750 9,651
Deferred gain on sale of assets................................................ 6,246 7,107
Other long-term obligations.................................................... 12,971 14,218
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value, 10,000,000 shares authorized; none
issued.................................................................. -- --
Common stock, $0.01 par value, 50,000,000 shares authorized; issued 21,941,559
shares at December 31, 1993 and 21,827,878 shares at June 30, 1993........... 219 218
Capital in excess of par value................................................. 114,934 112,535
Cumulative foreign currency translation adjustment............................. (2,880) (1,690)
Retained earnings.............................................................. 224,085 194,390
Total stockholders' equity........................................... 336,358 305,453
Total liabilities and stockholders' equity........................... $ 794,587 $ 806,804
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
CUMULATIVE
CAPITAL FOREIGN
COMMON IN EXCESS CURRENCY
STOCK OF TRANSLATION RETAINED
PAR VALUE PAR VALUE ADJUSTMENT EARNINGS TOTAL
--------- --------- ------------ -------- --------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance as of June 30, 1993........................ $ 218 $ 112,535 $ (1,690) $194,390 $305,453
Exercise of Stock Options.......................... 1 2,399 -- -- 2,400
Common Stock Dividends............................. -- -- -- (3,069) (3,069)
Net Income......................................... -- -- -- 32,764 32,764
Foreign Currency Translation Adjustment............ -- -- (1,190) -- (1,190)
Balance as of December 31, 1993.................... $ 219 $ 114,934 $ (2,880) $224,085 $336,358
</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1993 DECEMBER 31, 1992
----------------- -----------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................................ $ 32,764 $ 29,890
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................ 21,027 18,045
Deferred income taxes................................................ 9,240 3,790
Change in non-cash current assets and liabilities:
(Increase) in accounts receivable.................................... (10,590) (15,516)
Decrease in inventories.............................................. 10,705 8,488
Decrease in prepaid expenses......................................... 2,354 1,956
Increase (Decrease) in accrued income and other taxes................ 3,063 (7,852)
(Decrease) in accounts payable....................................... (56,683) (39,888)
(Decrease) in accrued liabilities.................................... (10,297) (14,975)
Other changes........................................................ (513) (2,221)
Total adjustments............................................... (31,694) (48,173)
Net cash provided (used) for operating activities......................... 1,070 (18,283)
----------------- -----------------
Cash flows from investing activities:
Capital expenditures................................................. (12,298) (17,490)
Patents and other proprietary technology............................. -- (1,950)
Net cash (used) for investing activities............................. (12,298) (19,440)
Cash flows from financing activities:
Increase in revolving credit borrowings, net......................... 5,500 7,400
Increase in other borrowings, net.................................... 9,222 9,872
Repayment of term loan............................................... (2,379) (2,379)
Sale of accounts receivable, net..................................... -- 20,000
Dividends paid....................................................... (3,069) (1,520)
Net cash provided by financing activities................................. 9,274 33,373
Net (Decrease) in cash and cash equivalents............................... (1,954) (4,350)
Cash and cash equivalents at beginning of period.......................... 11,672 12,516
Cash and cash equivalents at end of period................................ $ 9,718 $ 8,166
</TABLE>
See accompanying notes to consolidated condensed financial statements.
7
<PAGE>
FIRST BRANDS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements include all adjustments (all of which were of a
normal recurring nature) necessary to fairly present the results of operations
for the interim periods. Certain prior year amounts have been reclassified to
conform with the current year's presentation. All material intercompany
transactions and balances have been eliminated. Due to the seasonal nature of
some of its product lines, primarily in the Company's antifreeze/coolant
business, the sales of which are concentrated in the first half of the Company's
fiscal year, the results of operations for the six month period ended December
31, 1993 and the balance sheet at December 31, 1993 are not indicative of the
results for a full year.
First Brands Corporation ('First Brands' or the 'Company') is engaged in
the development, manufacture, marketing and sales of consumer products under
branded and private labels. Principal branded products include: GLAD and
GLAD-LOCK (plastic wrap and bags), PRESTONE (antifreeze/coolant and car care
products), STP (oil and fuel treatment and other specialty automotive products);
SIMONIZ (car waxes and polishes) and SCOOP AWAY and EVER CLEAN (clumping cat
litter products).
ACCOUNTING CHANGES
The Company provides certain medical and life insurance benefits for
retirees and their eligible dependents. Employees who have reached the age of
55, and have met the Company's minimum service requirements, become eligible for
these benefits. The medical and life insurance benefits available are partially
contributory in nature, and it is the Company's practice to fund these benefits
as incurred. Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 -- Employers' Accounting for Postretirement
Benefits Other than Pensions (SFAS No. 106). SFAS No. 106 requires that
companies accrue the projected future cost of providing postretirement benefits
during the period that employees render the services necessary to be eligible
for such benefits. The Company has elected to recognize the cumulative effect of
the change to SFAS No. 106 by amortizing the transition obligation of
$16,767,000 over 20 years. While the adoption of this standard does have an
impact on the Company's reported net income, it does not impact First Brand's
cash flows because the Company intends to continue its current practice of
paying the cost of postretirement benefits as incurred.
The Company's accumulated postretirement benefit obligation (the transition
obligation) at July 1, 1993 is comprised of the following components (in
thousands):
<TABLE>
<S> <C>
Accumulated postretirement benefit obligations:
Retirees.............................................................................. $ (8,656)
Fully eligible active plan participants............................................... (2,506)
Active plan participants not fully eligible................................................ (5,605)
Total............................................................................ (16,767)
Unrecognized transition obligation......................................................... 16,767
Net amount recognized in balance sheet..................................................... $ 0
</TABLE>
The components of the Company's net periodic postretirement benefit cost
for the three and six months ended December 31, 1993 were as follows (in
thousands):
1
<PAGE>
FIRST BRANDS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, 1993 DECEMBER 31, 1993
----------------- -----------------
<S> <C> <C>
Service cost -- benefits earned................................. $ 95 $ 190
Interest cost on accumulated postretirement benefit
obligation.................................................... 327 654
Amortization of transition obligation........................... 210 420
Net periodic postretirement benefit cost................... $ 632 $ 1,264
</TABLE>
The discount rate used in determining the accumulated postretirement
benefit obligation was 8%. The assumed health care cost trend rate used to
measure the accumulated postretirement benefit obligation was 13%, trending down
1% per year after fiscal year 1995 to an ultimate rate of 7% in fiscal year
2001. A one-percentage-point increase in the assumed health care cost trend rate
for each year would increase the accumulated postretirement benefit obligation
as of July 1, 1993 by approximately $750,000 and would have increased the
postretirement benefit expense for the six month period by approximately
$60,000.
CHANGE IN ACCOUNTING ESTIMATE
As a result of the trend of declining long-term interest rates, the Company
remeasured its pension obligation during October of 1993. The requirement of
Financial Accounting Standards Board Statement No. 87 -- Employers' Accounting
for Pensions (SFAS No. 87) to adjust the discount rate in line with current and
expected to be available interest rates on high quality fixed-income bonds has
resulted in a decision by the Company to reduce its assumed discount rate from
9.0%, which was used at June 30, 1993, to a rate of 8.0%. In addition, the
Company has also reduced its expected long-term rate of return on plan assets
from 10.0% to 9.5% and its expected rate of increase in future compensation
levels from 4.75% to 4.5%. Based upon these revised assumptions, the Company's
projected benefit obligation increased by $8,400,000, and the Company's annual
pension cost increased by $800,000.
INVENTORIES
Inventories were comprised of:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1993
------------ --------
(IN THOUSANDS)
<S> <C> <C>
Raw materials................................................................ $ 25,243 $ 28,344
Work-in-process.............................................................. 6,144 5,272
Finished goods............................................................... 135,298 143,532
Total.............................................................. $166,685 $177,148
</TABLE>
2
<PAGE>
FIRST BRANDS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
2. LONG-TERM DEBT
First Brands had long-term debt outstanding as of December 31, 1993 and
June 30, 1993 as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1993
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Senior Debt:
$165,000,000 Revolving Credit Facility, 4 year term expiring June, 1995, interest at
prime rate, LIBOR plus 3/4% or CD rate plus 7/8%; commitment fee of .35% on unused
portion............................................................................. $ 51,000 $ 45,500
10 year Term Loan, expiring November, 2001, interest at 90 day LIBOR plus 2%.......... 33,312 35,692
Other................................................................................. 4,499 5,137
Subtotal............................................................................ 88,811 86,329
Less: current maturities......................................................... (4,808) (5,079)
Senior Debt...................................................................... 84,003 81,250
Subordinated Debt:
9 1/8% Senior Subordinated Notes Due 1999........................................ 100,000 100,000
13 1/4% Subordinated Notes Due 2001.............................................. 45,000 45,000
Subordinated Debt........................................................... 145,000 145,000
Total Long Term Debt................................................... $229,003 $ 226,250
</TABLE>
The Revolving Credit Facility has no compensating balance requirements,
however it does have restrictive covenants, the most significant of which
include the maintenance of certain minimum levels for the ratio of current
assets to current liabilities, interest coverage and the ratio of total
liabilities to equity.
The 13 1/4% Subordinated Note Purchase Agreement (the 'Note Purchase
Agreement') requires the principal amount to be paid in annual installments,
subject to reduction for prior repurchases, of $9,000,000 on July 1, 1997 and on
each July 1 thereafter through the year 2001. The 9 1/8% Notes contain
limitations on the Company's right to incur additional debt. Both the 9 1/8%
Notes Indenture and the Note Purchase Agreement have restrictive covenants or
limitations on the payment of dividends, the distribution of capital stock or
the redeeming of capital stock, as well as limitations on Company and subsidiary
debt and limitations on the sale of assets.
First Brands was in compliance with all the covenants of all debt
agreements at December 31, 1993.
3. ACCOUNTS RECEIVABLE
In May 1992, the Company entered into a $100,000,000 extendable three year
agreement to sell fractional ownership interest, without recourse, in a defined
pool of eligible trade accounts receivable. As of December 31, 1993 the entire
$100,000,000 had been sold. The amounts sold are reflected as a reduction in
accounts receivable on the accompanying balance sheet. The costs associated with
this program are recorded on the Consolidated Condensed Statement of Income as
'Discount on sale of receivables'.
4. NOTES PAYABLE
Notes payable at December 31, 1993 of $10,162,000 consisted of a
$10,000,000 unsecured domestic line of credit and international subsidiaries'
working capital borrowings with local lenders. The Company's international
working capital credit facilities aggregated $20,295,000 at December 31, 1993
and are generally secured by the assets of the respective international
subsidiary, with approximately $1,476,000 of the availability at one subsidiary
being guaranteed by First Brands Corporation (U.S.).
3
<PAGE>
FIRST BRANDS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
5. TAXES
The provision for income taxes for the three and six months ended December
31, 1993 and 1992 consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
------------------ ------------------
1993 1992 1993 1992
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Federal................................................ $ 4,632 $ 6,000 $10,937 $11,822
State.................................................. 1,067 1,428 2,477 2,813
Foreign................................................ 718 933 1,862 2,062
Total current..................................... 6,417 8,361 15,276 16,697
Deferred:
Federal................................................ 4,196 1,614 7,778 3,171
State.................................................. 963 385 1,632 756
Foreign................................................ (85) (100) (170) (138)
Total deferred.................................... 5,074 1,899 9,240 3,789
Total Provision.............................. $11,491 $10,260 $24,516 $20,486
</TABLE>
In August 1993, the U.S. Congress enacted legislation which increased the
corporate federal income tax rate from 34% to 35%, retroactive to January 1,
1993. As a result of the increased rate, tax expense for the first quarter was
increased by $980,000 reflecting the net impact of remeasuring the Company's
June 30, 1993 deferred tax assets and liabilities, and current taxes payable.
6. EARNINGS PER SHARE
Net income per share has been computed using the weighted average number of
common shares and common share equivalents outstanding for the periods.
4
<PAGE>
FIRST BRANDS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis of the consolidated results of
operations for the three and six month periods ended December 31, 1993 should be
read in conjunction with the accompanying unaudited Consolidated Condensed
Financial Statements and related Notes. The Company is primarily engaged in the
development, manufacture, marketing and sale of branded and private label
consumer products for the home and automotive markets. The Company's products
which include 'GLAD', 'GLAD-LOCK' 'PRESTONE', 'STP', 'SIMONIZ', 'SCOOP AWAY' and
'EVER CLEAN' can be found in large mass merchandise stores, chain supermarkets
and other retail outlets. The Company believes that the significant market
positions occupied by its products are attributable to brand name recognition,
comprehensive product offerings, continued product innovation, strong emphasis
on vendor support and aggressive advertising and promotion.
Because of the seasonality in some of its product lines, primarily in the
Company's antifreeze/coolant business, the sales of which are concentrated in
the first half of the Company's fiscal year, the results of operations for any
interim period and the balance sheet as of the end of any interim period are not
indicative of a full year's operations nor the financial condition of First
Brands at the end of any subsequent period.
RESULTS OF OPERATIONS
The following table sets forth the percentages of net sales of the Company
represented by the components of income and expense for the three and six month
periods ended December 31, 1993 and 1992.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
--------------- ---------------
1993 1992 1993 1992
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales.................................................................. 100.0% 100.0% 100.0% 100.0%
Cost of goods sold......................................................... 61.6 63.7 61.7 62.9
Gross profit............................................................... 38.4 36.3 38.3 37.1
Selling, general, and administrative expenses.............................. 23.4 22.8 23.3 23.2
Amortization and other depreciation........................................ 2.2 1.7 2.2 1.9
Interest expense........................................................... 2.0 2.1 1.9 2.3
Discount on sale of receivables............................................ 0.4 0.4 0.4 0.4
Other income (expense), net................................................ (0.1) 0.1 (0.1) 0.1
Income before provision for income taxes................................... 10.3 9.4 10.4 9.4
Provision for income taxes................................................. 4.2 3.8 4.4 3.8
Net income................................................................. 6.1% 5.6% 6.0% 5.6%
</TABLE>
QUARTER AND SIX MONTHS ENDED DECEMBER 31, 1993 COMPARED TO
THE QUARTER AND SIX MONTHS ENDED DECEMBER 31, 1992
First Brands' consolidated sales for the three month period ended December
31, 1993 were $270,393,000, 101% of last year's $268,018,000, bringing six month
revenues to $550,206,000, 102% of last year's $537,015,000. Total sales for the
quarter and six months were above last year, due to higher sales of GLAD-LOCK
zipper bags, cat litter and other automotive products. The comparative
performance of overall plastic wrap and bag sales, was affected by the impact
last year of the introduction of line extensions and advanced buying in the
prior year before a price increase took effect in the third quarter of fiscal
1993. Higher volume sales in the antifreeze/coolant business were offset by
reduced selling prices reflecting the Company's new marketing program.
Cost of goods sold for the three and six month periods, respectively, were
$166,633,000, 98% of last year's and $339,602,000, 101% of last year. The
increased costs for the three and six month periods resulted from the higher
sales volumes, which were offset by lower manufacturing and polyethylene resin
costs and a reduction in the Company's rent expense, due to renegotiated rental
agreements.
<PAGE>
Gross profit for the quarter of $103,760,000 (38.4% of sales) was 107% of
last year's $97,259,000 (36.3% of sales). For the six month period, gross profit
of $210,604,000 (38.3% of sales) was 106% of last year's $199,333,000 (37.1% of
sales). The higher gross profit dollars and margin, for the quarter and six
months, are due to the increase in sales, enhanced productions efficiencies, a
favorable sales mix of plastic wrap and bag products, and the benefit from the
aforementioned reduction in resin cost and rent expense.
Selling, general and administrative expenses were $63,160,000 and
$128,452,000 for the three and six months, respectively, 103% of the comparable
periods last year. The increase in both periods reflects higher advertising
expenditures, as well as increased consumer promotion spending in the plastic
wrap and bag business, which was partially offset by the elimination of certain
consumer rebate programs in the automotive area.
Amortization and other depreciation expense of $6,109,000, was 136% of last
year's three month period, and $11,896,000 119% of last year's six month period.
The increase for the quarter and year to date, principally reflects the
write-down of certain fixed assets expected to be sold this year. Interest
expense of $5,322,000 and $10,664,000 for the three and six month periods,
respectively, was 93% and 88% of prior year levels due to lower debt levels and
reduced rates. Discount on sale of receivables reflects the costs associated
with the sale of a fractional ownership interest, without recourse, in a defined
pool of the Company's eligible trade accounts receivable.
In August 1993, the U.S. Congress enacted legislation which increased the
corporate federal income tax rate from 34% to 35%, retroactive to January 1,
1993. The Company's provision for income taxes for the second quarter was
$11,491,000, 112% of last year's $10,260,000. Year-to-date, the provision for
income taxes was $24,516,000, 120% of last year's $20,486,000. The increased tax
expense reflects higher pre-tax income, along with the higher effective tax
rate. Year-to-date, tax expense reflects the net impact that the new tax rate
had on the Company's June 30, 1993 deferred tax assets and liabilities, and
current taxes payable.
FINANCIAL CONDITION
Worldwide credit facilities in place at December 31, 1993 aggregated
$195,902,000 of which $134,272,000 was available, but unused. The Company does
not expect to borrow significantly beyond its current debt level over the next
twelve months.
The Company's current forecast for the 1994 fiscal year reflects capital
expenditures of approximately $40,000,000 and fixed payments (interest,
principal, discount on sale of receivables and lease payments) of approximately
$56,000,000.
Based on the Company's ability to generate funds from operations and the
availability of credit under its financing facilities, management believes it
will have the funds necessary to meet all of its described financing
requirements and all other financial obligations.
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
First Brands' independent certified public accountants have made a limited
review of the financial information furnished herein in accordance with
standards established by the American Institute of Certified Public Accountants.
The Independent Accountants' Report is presented on Page 15 of this report.
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
The Board of Directors
First Brands Corporation:
We have reviewed the consolidated condensed balance sheet of First Brands
Corporation and subsidiaries as of December 31, 1993, and the related
consolidated condensed statements of income for the three and six-month periods
ended December 31, 1993 and 1992 and the consolidated condensed statements of
cash flows for the six-month periods ended December 31, 1993 and 1992, and the
consolidated condensed statement of stockholders' equity for the six month
period ended December 31, 1993. These financial statements are the
responsibility of the company's management.
We conduct our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated condensed financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of First Brands Corporation and
subsidiaries as of June 30, 1993, and the related consolidated statement of
income, stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated August 11, 1993, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated condensed balance
sheet as of June 30, 1993, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ KPMG PEAT MARWICK
KPMG Peat Marwick
New York, New York
February 1, 1994
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Submitted at the Annual Meeting of Stockholders, November 5, 1993.
1) Election of three Directors, each to serve for a three-year term
expiring on the date of the Annual Meeting of Stockholders in 1996 and until a
successor is elected and qualified:
<TABLE>
<CAPTION>
ABSTENTIONS AND
NAME FOR WITHHELD BROKER NON-VOTES
- ---------------------------------------------------------- ---------- --------- ----------------
<S> <C> <C> <C>
Alfred E. Dudley.......................................... 19,214,122 36,221 0
Alan C. Egler............................................. 19,213,822 36,521 0
James R. McManus.......................................... 19,213,952 36,391 0
</TABLE>
2) Ratification of selection by the Board of Directors of KPMG Peat Marwick
as independent auditors:
<TABLE>
<CAPTION>
ABSTENTIONS AND
FOR AGAINST BROKER NON-VOTES
---------- --------- ----------------
<S> <C> <C> <C>
19,198,277 26,128 25,938
</TABLE>
3) Authorization of The 1994 Long Term Incentive Plan (the 'Plan') for
certain key employees of the Company:
<TABLE>
<CAPTION>
ABSTENTIONS AND
FOR AGAINST BROKER NON-VOTES
---------- --------- ----------------
<S> <C> <C> <C>
17,605,009 1,404,315 241,019
</TABLE>
The Plan authorizes the issuance of up to 1,090,000 shares of Common Stock
thereunder; awards of incentive stock options ('ISOs'), as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the 'Code'), non-qualified
stock options ('NQSOs'), i.e., stock options that do not qualify as ISOs,
restricted shares of Common Stock ('Restricted Stock') and Limited Stock
Appreciation Rights ('LSARs') may be granted to eligible employees of the
Company. The Plan is administered by the Compensation Committee of the Board of
Directors, which determines the employees to whom awards are granted, the number
of shares of Common Stock covered by such awards and the terms of such awards.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBIT INDEX:
1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------------ -------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.1 (a) -- Amended and Restated Credit Agreement, dated as of September 20, 1991, among the Company,
Manufacturers Hanover Trust Company, as Agent, and Several Lenders parties thereto. Incorporated by
reference to Exhibit 10.1 to Form S-1 filed by Registrant on February 7, 1992.
(b) -- Commitment Transfer Supplement thereto, dated as of October 28, 1991. Incorporated by reference to
Exhibit 10.1(b) to form 10-K filed by Registrant on September 25, 1992.
(c) -- Amendment and Consent thereto, dated as of February 25, 1992. Incorporated by reference to Exhibit
10.1(c) to form 10-K filed by Registrant on September 25, 1992.
(d) -- Second Amendment and Consent thereto, dated as of May 18, 1992. Incorporated by reference to Exhibit
10.1(d) to form 10-K filed by Registrant on September 25, 1992.
(e) -- Third Amendment thereto, dated as of November 5, 1992. Incorporated by reference to Exhibit 10.1(e)
to form 10-K filed by Registrant on September 28, 1993.
(f) -- Commitment Transfer Supplement thereto, dated as of May 26, 1993. Incorporated by reference to
Exhibit 10.1(f) to form 10-K filed by Registrant on September 28, 1993.
10.2* -- Leasing Agreement between the Company and Citicorp North America, Inc., relating to its Glad Plastic
Bag and Wrap facility in Cartersville, Georgia, dated as of November 16, 1993.
10.3 (a) -- Loan and Security Agreement between the Company and The CIT Group/Equipment Financing, Inc.,
relating to certain equipment now located primarily at the Company's GLAD Plastic Bag and Wrap
facility in Amherst, Virginia, dated as of November 18, 1991. Incorporated by reference to Exhibit
10.4(a) to Form S-1 filed by Registrant on February 7, 1992.
(b) -- Supplement thereto, dated as of November 18, 1991. Incorporated by reference to Exhibit 10.4(b) to
Form S-1 filed by Registrant on February 7, 1992.
(c) -- Amendment and Consent thereto, dated as of May 18, 1992. Incorporated by reference to Exhibit
10.4(c) to form 10-K filed by Registrant on September 25, 1992.
(d) -- Second Amendment Agreement thereto, dated as of June 19, 1992. Incorporated by reference to Exhibit
10.4(d) to form 10-K filed by Registrant on September 25, 1992.
(e) -- Third Amendment Agreement thereto, dated as of October 8, 1992. Incorporated by reference to Exhibit
10.4(e) to form 10-K filed by Registrant on September 28, 1993.
(f) -- Fourth Amendment Agreement thereto, dated as of October 16, 1992. Incorporated by reference to
Exhibit 10.4(f) to form 10-K filed by Registrant on September 28, 1993.
10.4 -- Consent by The CIT Group/Equipment Financing, Inc. to the redemption of $100,000,000 of Company's 12
1/2% Senior Subordinated Debentures due September 1, 1998 and issuance of $100,000,000 of Senior
Subordinated Notes due April 1, 1999, dated February 21, 1992. Incorporated by reference to Exhibit
10.5 to form 10-K filed by Registrant on September 25, 1992.
10.5 -- Contract to Buy and Sell Property among The Connecticut National Bank as Owner Trustee, First Brands
Corporation, The CIT Group/Equipment Financing, Inc. and The CIT Group/Sales Financing, Inc.,
relating to equipment now located primarily at the Company's Plastic Bag and Wrap facility in
Amherst, Virginia, dated November 18, 1991. Incorporated by reference to Exhibit 10.5 to Form S-1
filed by Registrant on February 7, 1992.
10.6* -- Equipment Lease Agreement between the Company and PNC Leasing Corp, relating to its Glad Plastic Bag
and Wrap facility in Rogers, Arkansas, dated as of October 15, 1993.
10.7 -- Purchase Agreement, dated as of December 23, 1991, between the Company and Pitney Bowes Credit
Corporation, relating to the sale and leaseback of equipment at the Company's GLAD Plastic Wrap and
Bag facility in Rogers, Arkansas. Incorporated by reference to Exhibit 10.8 to Form S-1 filed by
Registrant on February 7, 1992.
10.8 -- Equipment Lease Agreement, dated as of December 23, 1991, between Pitney Bowes Credit Corporation
and Company, relating to the sale and leaseback of equipment at the Company's GLAD Plastic Wrap and
Bag facility in Rogers, Arkansas. Incorporated by reference to Exhibit 10.9 to Form S-1 filed by
Registrant on February 7, 1992.
10.9 -- Purchase Agreement, dated as of June 25, 1992, between the Company and NationsBanc Leasing
Corporation of Georgia, relating to the sale and leaseback of certain equipment at the Company's GLAD
plastic wrap and bag facility in Amherst, Virginia. Incorporated by reference to Exhibit 10.13 to
form 10-K filed by Registrant on September 25, 1992.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------------ -------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.10 (a) -- Equipment Lease Agreement, dated as of June 25, 1992, between the Company and NationsBanc Leasing
Corporation of Georgia, relating to the sale and leaseback of certain equipment at the Company's GLAD
plastic wrap and bag facility in Amherst, Virginia. Incorporated by reference to Exhibit 10.14 to
form 10-K filed by Registrant on September 25, 1992.
(b) -- First Amendment thereto, dated as of March 30, 1993. Incorporated by reference to Exhibit 10.15(b)
to form 10-K filed by Registrant on September 28, 1993.
10.11 -- Purchase Agreement, dated as of June 25, 1993, between the Company and NationsBanc Leasing
Corporation, relating to the sale and leaseback of certain equipment at the Company's GLAD plastic
wrap and bag facility in Amherst, Virginia. Incorporated by reference to Exhibit 10.16 to form 10-K
filed by Registrant on September 28, 1993.
10.12 -- Equipment Lease Agreement, dated as of June 25, 1993, between the Company and NationsBanc Leasing
Corporation, relating to the sale and leaseback of certain equipment at the Company's GLAD plastic
wrap and bag facility in Amherst, Virginia. Incorporated by reference to Exhibit 10.17 to form 10-K
filed by Registrant on September 28, 1993.
10.13 (a) -- Sales Agreement, dated as of January 1, 1989 between Union Carbide Chemicals & Plastics Company,
Inc. (formerly Union Carbide Corporation) and the Company, (confidential treatment has been granted
with respect to certain portions of the Sales Agreement; such portions were omitted and filed
separately with the Securities and Exchange Commission). Incorporated by reference to Exhibit
10.22(b) to Form 10-K filed by Registrant on September 19, 1989.
(b) -- Sales Agreement, dated March 1, 1991, between Union Carbide Chemicals and Plastics Company Inc. and
the Company, (confidential treatment has been granted with respect to certain portions of the Sales
Agreement, such portions were omitted and filed separately with the Securities and Exchange
Commission). Incorporated by reference to Post-Effective Amendment No. 1 to Form S-1 filed by
Registrant on June 12, 1991.
10.14 -- Subordinated Notes Registration Rights Agreement, dated as of July 1, 1986, between the Company and
Metropolitan Life Insurance Company, the current note holders. Incorporated by reference to Exhibit
10(xii) to form S-1 filed by Registrant on July 15, 1986.
10.15 -- Underwriting Agreement among the Company, certain stockholders and The First Boston Corporation and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner and Smith Incorporated as representatives of the
Several Underwriters, relating to 8,400,000 shares of Common Stock of the Company. Incorporated by
reference to Exhibit 1.1 to Form S-1 filed by Registrant on March 5, 1991.
10.16 -- Subscription Agreement among the Company, certain stockholders and Credit Suisse First Boston
Limited and Merrill Lynch International Limited as Managers, relating to 2,110,000 shares of Common
Stock of the Company. Incorporated by reference to Exhibit 1.2 to Form S-1 filed by Registrant on
March 5, 1991.
10.17 -- Underwriting Agreement, dated as of February 26, 1992, between the Company and The First Boston
Corporation, relating to $100,000,000 in 9 1/8% Senior Subordinated Notes due 1999. Incorporated by
reference to Exhibit 10.19 to form 10-K filed by Registrant on September 25, 1992.
10.18 (a) -- Pooling and Servicing Agreement, dated as of May 21, 1992, between the Company, First Brands Funding
Inc and Chemical Bank, as Trustee, relating to First Brands Funding Master Trust trade
receivables-backed financing. Incorporated by reference to Exhibit 10.20 (a) to form 10-K filed by
Registrant on September 25, 1992.
(b) -- Variable Funding Supplement thereto, dated as of May 21, 1992. Incorporated by reference to Exhibit
10.20(b) to form 10-K filed by Registrant on September 25, 1992.
(c)* -- Amendment No. 1 thereto, dated as of December 22, 1993.
10.19 -- Asset Purchase and Sale Agreement, dated as of May 21, 1992, between the Company, First Brands
Funding Inc and Chemical Bank, as Trustee, relating to First Brands Funding Master Trust trade
receivables-backed financing. Incorporated by reference to Exhibit 10.21 to form 10-K filed by
Registrant on September 25, 1992.
10.20 -- Asset Purchase and Sale Agreement, dated as of May 21, 1992, between the Company and Himolene
Incorporated, relating to First Brands Funding Master Trust trade receivables-backed financing.
Incorporated by reference to Exhibit 10.22 to form 10-K filed by Registrant on September 25, 1992.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------------ -------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.21* -- Amended and Restated Letter of Credit Reimbursement Agreement, dated as of December 2, 1993, between
the Company, First Brands Funding Inc, Westdeutsche Landesbank Girozentrale, The Long-Term Credit
Bank of Japan, Limited, and First Brands Funding Master Trust, amending and restating the Letter of
Credit Reimbursement Agreement, dated as of May 21, 1992, relating to First Brands Funding Master
Trust trade receivables-backed financing.
10.22 -- Amended Long-Term Incentive Plan. Incorporated by reference to Exhibit 10.34 to Form 10-K filed by
Registrant on September 12, 1990.
15* -- Accountants' Acknowledgement.
24 -- Consent of KPMG Peat Marwick. Incorporated by reference to Exhibit 23 to form 10-K filed by
Registrant on September 28, 1993.
</TABLE>
-----------------
* Filed herewith
B. REPORTS ON FORM 8-K
None.
4
<PAGE>
SIGNATURE
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.
FIRST BRANDS CORPORATION
(REGISTRANT)
By: /S/ DONALD A. DESANTIS
...................................
DONALD A. DESANTIS
CHIEF FINANCIAL OFFICER
(PRINCIPAL ACCOUNTING
AND DULY AUTHORIZED OFFICER)
Date: February 10th, 1994
5
<PAGE>
EXHIBIT 10.2
CONFORMED COPY
- --------------------------------------------------------------------------------
LEASING AGREEMENT
DATED AS OF NOVEMBER 16, 1993
BETWEEN
CITICORP NORTH AMERICA, INC.,
AS LESSOR
AND
FIRST BRANDS CORPORATION,
AS LESSEE
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(LEASING AGREEMENT)
<TABLE>
<CAPTION>
SECTION PAGE
- ----------------------------------------------------------------------------------------------------------- ----
<C> <S> <C>
1. Agreement for Lease of the Equipment................................................................. 1
2. Lease Term........................................................................................... 1
3. Rent................................................................................................. 3
4. Conditions Precedent to Leasing...................................................................... 4
5. Use of the Equipment................................................................................. 6
6. Relocation of the Equipment.......................................................................... 11
7. Insurance............................................................................................ 13
8. Indemnity............................................................................................ 15
9. Termination.......................................................................................... 21
10. Loss or Destruction of the Equipment................................................................. 25
11. Representations and Warranties of Lessee............................................................. 27
12. Events of Default.................................................................................... 31
13. Rights of Lessor upon an Event of Default............................................................ 35
14. Divisible Lease...................................................................................... 38
15. Purchase of the Equipment............................................................................ 38
16. Financial Information and Covenants.................................................................. 39
17. Status of this Leasing Agreement..................................................................... 42
18. Mortgages............................................................................................ 43
19. Disclaimer of Warranties............................................................................. 43
20. Assignment by Lessor................................................................................. 44
21. Lessee Subletting and Assignment..................................................................... 44
22. Further Assurances................................................................................... 45
23. Estoppel Certificates................................................................................ 46
24. Miscellaneous........................................................................................ 46
-- Signature Lines................................................................................... 48
</TABLE>
<TABLE>
<S> <C>
Appendix A Definitions
Schedules
Schedule A Equipment
Schedule B Land
Schedule ll(g) Location of the Equipment
Schedule ll(m) Environmental Compliance
Exhibits
Exhibit A Form of Officer's Certificate
Exhibit B Form of Landlord or Mortgagee Waiver
Exhibit C Form of Insurance Certificate
</TABLE>
1
<PAGE>
LEASING AGREEMENT
Leasing Agreement, dated as of November 16, 1993, by and between CITICORP
NORTH AMERICA, INC., a Delaware corporation (formerly known as Citicorp
Industrial Credit, Inc. and herein called 'Lessor'), having an address at 450
Mamaroneck Avenue, Harrison, New York 10528, and FIRST BRANDS CORPORATION, a
Delaware corporation (herein called 'Lessee'), having an address at 83 Wooster
Heights Road, Danbury, Connecticut 06813-1911. Capitalized terms not otherwise
defined herein are defined in Appendix A hereto (such definitions to be equally
applicable to both singular and plural forms of the term defined).
In consideration of the mutual covenants hereinafter contained, Lessor and
Lessee agree as follows:
1. Agreement for Lease of the Equipment. (a) Subject to the terms and
conditions of this Leasing Agreement, Lessor hereby leases to Lessee and Lessee
leases from Lessor the Equipment. If this Leasing Agreement is deemed at any
time to be one intended as security, Lessee agrees that the Equipment shall
secure the indebtedness set forth herein. The parties further agree to treat
this Leasing Agreement as a lease for accounting and, except as provided herein,
other legal purposes and as a financing arrangement for tax purposes.
(b) Lessor hereby covenants that, so long as no Event of Default has
occurred and is continuing, Lessee shall be entitled to the uninterrupted use
and quiet enjoyment of the Equipment on the terms and conditions herein
provided.
(c) So long as no Event of Default has occurred and is continuing, Lessor
hereby authorizes Lessee to exercise in the name of and on behalf of Lessor the
right and power to deal with each manufacturer or supplier of the Equipment or
any Part thereof and the right to receive and enforce against such manufacturer
or supplier all rights, powers, privileges and benefits of Lessor with respect
to such manufacturer or supplier, under any express or implied warranty or
indemnity or otherwise.
2. Lease Term.
(a) Basic Term. The Equipment is leased (subject to Lessee's termination
rights under Sections 9 and 15 hereof) for a base term of three (3) years (the
'Basic Term'), commencing on the Basic Term Commencement Date and for up to four
(4) consecutive one year terms thereafter (the 'Renewal Terms'), unless Lessee
notifies Lessor in writing of its intent not to renew this Leasing Agreement at
least 90 days prior to the expiration of the Basic Term or the then current
Renewal Term. Upon the expiration of the Basic Term and any Renewal Term, the
Equipment shall, at Lessee's sole election, either be (i) sold to an unrelated
third person by Lessee pursuant to Section 9(c) hereof, (ii) purchased by Lessee
pursuant to Section 15(a) hereof, (iii) leased to an unrelated third person
pursuant to Section 9(d) hereof, (iv) in the case of the expiration of the
first, second or third Renewal Term, leased by Lessee from Lessor for an
additional Renewal Term in accordance with the first sentence of this Section
2(a) or (v) in the case of the expiration of the fourth Renewal Term, leased by
Lessee from Lessor for a mutually agreed upon period pursuant to Sections 2(b)
and 3(b) hereof. If Lessee fails to elect one of the options referred to above,
or if Lessee fails to consummate any of the options referred to in items (i),
(iii), (iv) or (v) above, Lessee shall be deemed to have elected to purchase the
Equipment pursuant to Section 15(a) hereof.
(b) Extended Term. After expiration of all of the Renewal Terms, Lessee
shall have the option to extend the term of this Leasing Agreement for one or
more Extended Terms. In the event Lessee desires to extend the term of this
Leasing Agreement Lessee shall give written notice (the 'Extension Notice') to
Lessor not less than (i) 150 days prior to the expiration of the fourth Renewal
Term or (ii) 90 days prior to the expiration of the then current Extended Term.
The Extension Notice shall set forth the number of months of the applicable
Extended Term, but in no event shall the Initial Extended Term exceed 24 months.
Promptly after receipt of the Extension Notice relating to the Initial Extended
Term the parties shall commence the process to determine the Fair Market Rental
Value of the Equipment for such Extended Term. Lessee may elect to extend the
term of this Leasing Agreement for the period set forth in the Extension Notice
by giving written notice to Lessor prior to the earlier of (A) the fifth (5th)
day after the Equipment's Fair Market Rental Value for such Extended Term is
determined, or (B) the 90th day prior to the expiration of the fourth Renewal
Term or the then current Extended Term. If Lessee fails to properly give such
notice and make such election, Lessee shall be deemed to
2
<PAGE>
have elected not to extend the term of this Leasing Agreement pursuant to this
Section 2(b) and shall (1) during the fourth Renewal Term, elect one of the
other options provided in Section 2(a) hereof to the extent still available, or
(2) during an Extended Term, be deemed to have elected to purchase the Equipment
pursuant to Section 15(b) hereof.
3. Rent.
(a) Basic Term and Renewal Term Rent. Lessee shall pay Basic Rent during
the Basic Term and the Renewal Terms quarterly in arrears on the sixteenth
(16th) day of each February, May, August and November, commencing on February
16, 1994 (the 'Payment Dates'). If any Payment Date shall not occur on a
Business Day, such payment shall be due and payable on the immediately preceding
Business Day.
(b) Extended Term Rent. If Lessee elects to exercise its option to extend
the term of this Leasing Agreement pursuant to Section 2(b) hereof, Lessee shall
pay Extended Term Rent during the applicable Extended Term monthly in arrears on
each Extended Term Payment Date during such Extended Term.
(c) Additional Rent. Lessee shall also pay to Lessor any and all Additional
Rent, promptly as the same shall become due and owing, including any late
payment payable as provided in Section 3(d) hereof. If Lessor is entitled to
payment of indemnities under the Operative Documents, Break Costs or Illegality
Costs, Lessor shall determine the amount of such indemnities, Break Costs or
Illegality Costs and promptly notify Lessee of such amount, and if requested,
provide to Lessee a calculation thereof in reasonable detail. Such notification
shall be conclusive and binding for all purposes, absent manifest error. In
determining such amount, Lessor may use any method of averaging and attribution
that it (in its sole and absolute discretion) shall deem applicable, provided,
that such method is reasonably consistent with methods used by Lessor in other
similar circumstances. Lessee shall pay all amounts specified in such
notification no later than 15 days after receipt of such notification.
Lessor shall use its reasonable efforts (consistent with its internal
policies and legal and regulatory restrictions) to avoid the imposition of, or
to eliminate any, Break Costs or Illegality Costs; provided, that Lessor shall
not be required to take any action which, in its judgment, would be
disadvantageous to Lessor; and provided, further, that the foregoing shall not
in any way affect the rights of Lessor or the obligations of Lessee with respect
to any such costs.
(d) Late Payment. If Lessor shall not receive payment of Rent or any other
payment to be made by Lessee to Lessor hereunder when due, Lessee shall pay to
Lessor, as Additional Rent, interest (to the extent permitted by law) on such
overdue amount from and including the due date thereof to but excluding the date
of payment thereof at a per annum rate equal to the sum of (i) the Percentage
Rental Factor, plus (ii) either (A) the LIBO Rate, or (B) the Alternative Rate,
as applicable.
(e) Economic Payment. Upon the expiration of the Basic Term and, if
applicable, upon the sale of any Item(s) pursuant to Section 9(c) hereof, the
appropriate Economic Payment shall be made by Lessee or Lessor, as the case may
be, to the other.
(f) Manner of Payment. All payments of Rent and all other payments made by
Lessee to Lessor pursuant to this Leasing Agreement shall be paid to Lessor in
lawful money of the United States in immediately available funds by wire
transfer to Lessor's Account No. 3076-4992 at Citibank, N.A., 399 Park Avenue,
New York, New York 10043 or such other account that Lessor may designate in
writing.
4. Conditions Precedent to Leasing. The obligations of Lessor to lease the
Equipment to Lessee hereunder are subject to the fulfillment to the satisfaction
of Lessor on or prior to the Basic Term Commencement Date of the following
conditions precedent:
(a) Documents. Lessor shall have received executed counterparts of this
Leasing Agreement, the License Agreement, the Amendment to the Support
Agreement, the Amendment to the Plant Lease, the Sublease and the Termination
Agreement. All of such documents shall be in scope and substance satisfactory to
Lessor and its counsel, Chadbourne & Parke.
(b) Financing Statements; Recordings. Appropriate UCC financing statements
covering the Equipment (and/or amendments to existing UCC financing statements,
in form and substance
3
<PAGE>
satisfactory to Lessor) shall have been executed by Lessee and delivered to
Lessor with respect to each jurisdiction designated by Lessor prior to the Basic
Term Commencement Date.
(c) Lessee's Opinion. Lessor shall have received a favorable opinion of
Kirkland & Ellis, special counsel to Lessee, dated the Basic Term Commencement
Date, addressed to it and in form and substance satisfactory to it.
(d) Insurance. Lessee shall have furnished to Lessor hereof certificate(s)
signed by Marsh & McLennan or other independent insurance brokers or an
authorized representative of an insurer satisfactory to Lessor showing the
insurance maintained by Lessee pursuant to Section 7 hereof, including a
specification of the amounts of casualty and liability insurance maintained by
Lessee pursuant to Section 7 hereof, and the risks covered thereby, and stating
that such insurance is in full force and effect with no outstanding claims for
amounts in excess of $1,000,000 thereunder and all premiums due and payable with
respect thereto have been paid in full. Lessee shall also furnish to Lessor an
officer's certificate in the form of Exhibit A hereto signed by an authorized
officer of Lessee.
(e) Appraisal. Lessor shall have received a report prepared by the
Appraiser, in form and substance satisfactory to Lessor and Lessee.
(f) Environmental Compliance. Lessor shall have received a memorandum,
satisfactory to it as to its scope and methodology and as to its contents,
concerning actual and contingent liabilities of Lessee and/or Lessor as to
environmental matters relating to the Facility (including under CERCLA),
prepared by McLaren Hart Environmental Engineering Corporation for the benefit
of Lessor.
(g) Lessee Representations and Warranties. The representations and
warranties of Lessee contained herein shall be true and accurate on and as of
the Basic Term Commencement Date with the same effect as though made on and as
of the Basic Term Commencement Date except to the extent that such
representations and warranties specifically relate solely to an earlier date (in
which event such representations and warranties shall have been true and
accurate on and as of such earlier date).
(h) Certificates. Lessor shall have received a certificate of Lessee,
signed by an authorized officer of Lessee, dated the Basic Term Commencement
Date, addressed to Lessor and certifying as to the matters stated in Section
4(g) hereof and that Lessee has performed in all material respects the covenants
required to be performed by Lessee prior to the Basic Term Commencement Date
under this Agreement.
(i) No Violation of Applicable Law. The transactions contemplated by the
Operative documents shall not violate any applicable Law.
(j) Original Lease. The Original Lease (and those documents reasonably
designated by Lessor and Lessee relating thereto) shall have been terminated.
(k) Other. Lessee shall have delivered such other documents, certificates,
opinions and evidence of corporate and governmental action as Lessor may have
requested.
5. Use of the Equipment.
(a) General. Lessee shall not use any of the Equipment or allow the same to
be used for any unlawful purpose. Lessee shall use such reasonable precautions
as it uses with respect to its other owned and leased property to prevent loss
or damage to the Equipment and to prevent injury to third persons or property of
third persons. Lessee shall cooperate fully with Lessor and all insurance
companies providing insurance under Section 7 hereof in the investigation and
defense of any claims and suits. Lessee shall comply and shall cause all persons
operating the Equipment to comply with all insurance policy conditions and,
subject to Section 5(e) hereof, with all statutes, decrees, ordinances and
regulations regarding acquiring, registering, leasing, insuring, using,
operating, and disposing of the Equipment, including all local, state and
federal environmental laws and regulations of whatever kind which relate in any
way to the use and operation of the Equipment. On or prior to each Anniversary
Date, Lessee shall deliver to Lessor a certificate signed by an authorized
officer of Lessee certifying that Lessee is in compliance with all of the
provisions of this Agreement relating to the use and location of the Equipment.
Upon the request of Lessor at any other time, Lessee shall promptly advise
Lessor in writing where all the Equipment leased hereunder as of such date is
located.
4
<PAGE>
(b) Inspection. Lessor or any authorized representative of Lessor may, at
Lessor's expense, during reasonable business hours and on reasonable prior
notice from time to time inspect the Equipment wherever the same shall be
located; provided, however, that all information obtained in connection with any
such inspection shall be subject to reasonable confidentiality arrangements and
requirements prescribed by Lessee. No inspection pursuant to this Section 5(b)
shall unreasonably interfere in any material manner with the use, operation or
maintenance of the Equipment or the normal conduct of Lessee's business and
Lessee shall not be required to undertake or incur any additional expense or
liability in connection therewith.
(c) Designation of Ownership. Lessee upon written request from Lessor, or
if necessary or advisable under applicable law, shall attach to each unit of
Equipment in a place designated by Lessor (or if no such place has been
designated, in a prominent place), a sign, stencil, plaque, or legend disclosing
the ownership of Lessor in the Equipment.
(d) Maintenance and Operation. Lessee, at its own cost and expense, shall
maintain, operate, repair, use and dispose of the Equipment, and make all
Modifications and rebuilds (described in Section 5(h) hereof), in a manner
consistent with Lessee's general practice as generally applicable to its other
owned and leased equipment without discrimination against the Equipment and in
accordance with good industry practice, manufacturers' warranty requirements and
specifications and Lessee's established operation, maintenance and repair
programs so as to keep the Items in good working order, ordinary wear and tear
excepted, and, subject to Section 5(e) hereof, so as to comply with all
applicable Laws or applicable Governmental Actions and so as not to incur
liability (whether or not there is a lack of compliance) under any such Law or
Governmental Action. Lessor shall not be required to maintain, repair or replace
any Item or Part thereof and Lessee hereby waives the right, however arising, to
(i) require Lessor to maintain, repair or replace any Item or Part thereof, or
(ii) make repairs at the expense of Lessor pursuant to any applicable Law at any
time in effect.
(e) Contest of Requirements of Law. If, with respect to any requirement of
applicable Law or any Governmental Action relating to the use, operation or
maintenance of any Item, (i) Lessee is contesting diligently and in good faith
by appropriate proceedings such requirement or Governmental Action or (ii)
compliance with such requirement or Governmental Action shall have been excused
or a waiver, extension or forbearance exempting Lessee from such requirement or
Governmental Action shall have been obtained or (iii) Lessee shall be making a
good faith effort and shall be diligently taking appropriate steps to comply
with such requirement or Governmental Action; then the failure by Lessee to
comply with such requirement or Governmental Action shall not constitute an
Event of Default hereunder; provided, however, that such contest or
noncompliance does not involve (A) any significant risk of (1) foreclosure,
forfeiture or loss of the Equipment or any Part thereof or (2) criminal
liability being imposed on Lessor; or (B) any substantial likelihood of (1) the
sale of, or the creation of any Lien (other than a Permitted Lien) on, the
Equipment or any Part thereof, (2) the extension of the ultimate imposition of
such applicable Law beyond the last day of the Term, (3) any interference with
the use, possession or disposition of the Equipment or any Part thereof or (4)
any significant risk of subjecting Lessor to unindemnified liability. Lessee
shall provide Lessor with notice of any contest of the type described in clause
(i) above in detail sufficient to enable Lessor to ascertain whether such
contest may have any material adverse effect of the type described in the above
proviso.
(f) Replacement of Parts. Lessee may, at its own cost and expense, remove
in the ordinary course of maintenance, service, repair, overhaul or testing, any
Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, or
damaged; provided, however, that Lessee, except as otherwise provided in Section
5(g) hereof will (i) at its own cost and expense, replace such Parts promptly
and in no event later than the end of the Term and (ii) make such replacements
of Parts as required to fulfill its obligations specified in Section 5(d)
hereof. All replacement Parts shall be free and clear of all Liens (except for
Permitted Liens), and shall be in as good operating condition as the Parts
replaced, assuming such replaced Parts were in the condition and repair required
to be maintained by the terms hereof); and shall have a value, utility,
remaining useful life and estimated residual value at least equal to the Parts
replaced (assuming that such replaced Parts have been maintained in accordance
with the requirements of Section 5(d) hereof); provided, that such replacement
does not decrease in any manner the value, utility, remaining useful life or
estimated residual value of the Item which is subject to the
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replacement. All Parts at any time removed from any Item shall remain the
property of Lessor, no matter where located, until such time as such Parts shall
be replaced by Parts which have been incorporated or installed in or attached to
such Item and which meet the requirements for replacement Parts specified above.
Immediately upon any replacement Part becoming incorporated or installed in or
attached to any Item as above provided, without further act (subject only to
Permitted Liens), (a) such replacement Part shall become subject to this Leasing
Agreement and be deemed part of the Item for all purposes hereof to the same
extent as the Parts originally incorporated or installed in or attached to such
Item, and (b) the replaced Part shall no longer be deemed part of the Item or
subject to this Leasing Agreement and shall be free and clear of all interests
of Lessor. Lessee shall inform Lessor of all such replacements of any Equipment.
Lessee and Lessor shall execute and file such instruments as the other party may
reasonably request to confirm the foregoing (including, without limitation, UCC
financing and termination statements).
(g) Alterations and Modifications. Lessee shall make (or cause to be made)
at its own cost and expense Modifications to each Item required by applicable
Law or applicable Governmental Action and may at its own cost and expense make
any other Modifications that it deems necessary or appropriate; provided that
such Modifications (other than Modifications required by applicable Law or
applicable Governmental Action) do not decrease in any manner the utility,
remaining useful life or estimated residual value of such Item; and provided,
further, that such Modifications (i) do not create any Lien on the Equipment or
any Part thereof, except for Permitted Liens and (ii) are installed or made in a
workmanlike manner and in compliance with all applicable Laws and applicable
Governmental Actions and in accordance with insurance policies required to be
maintained by Lessee pursuant to Section 7 hereof. With respect to Modifications
which (i) are required by applicable Law or applicable Governmental Action, (ii)
cannot be removed from the Item without material injury or damage to the Item or
any Part thereof or (iii) the financing of which was arranged or provided by
Lessor, such Modifications shall, without further act, become subject to this
Leasing Agreement and Lessor's interest in the Item. With respect to
Modifications that are neither required by applicable Law or applicable
Governmental Action or financed by Lessor and which can be removed from the Item
without material injury or damage to the Item or Part thereof ('Lessee
Modifications'), title to such Lessee Modifications shall, without further act,
vest in Lessee, not subject to this Leasing Agreement or Lessor's interests
hereunder; provided, however, that Lessee shall, at its sole cost and expense,
remove such Lessee Modification upon Lessor's request. Lessee shall, at its sole
cost and expense, immediately at the time of removal of any Lessee Modification,
repair all damage caused to any Item or Part by such removal so that the Item
after such removal shall comply in all material respects with Section 5(d)
hereof. Any or all Lessee Modifications may, at Lessor's sole option and by
delivering to Lessee written notice prior to the termination of this Leasing
Agreement, be purchased by Lessor at the Fair Market Value thereof at the
termination of this Leasing Agreement if (i) such Lessee Modification(s) have
not been removed from the Item(s) and (ii) Lessee has not exercised its rights
to purchase such Item(s) pursuant to the terms of this Leasing Agreement.
(h) Rebuilds. Lessee may, so long as no Default or Event of Default shall
have occurred and be continuing, and prior to the expiration of the Basic Term
of this Leasing Agreement, rebuild any Item if, after such rebuild, such rebuilt
Item and all Parts thereof are owned by Lessor and leased to Lessee hereunder.
All rebuilds for which Lessee seeks funding from Lessor shall be subject to
credit review and approval by Lessor in its sole and absolute discretion. The
cost of all approved rebuilds paid by Lessor shall be added to the Unamortized
Value, if any, of the Item at the time the rebuilt Item is delivered and
accepted. The number of quarters over which the Acquisition Cost of the rebuilt
Item may be amortized shall be the number of quarters remaining in the
Amortization Period as of such date of delivery and acceptance.
(i) Records. Lessee shall maintain throughout the Term, and keep on file at
its offices, a current operating manual and a complete set of plans and
specifications with respect to the Items and Parts thereof, and in any event
reflecting all Parts incorporated or installed in or attached or added to the
Items and all alterations made with respect to the Items. Unless the Items shall
have been purchased by Lessee or a third party in accordance with this
Agreement, upon the earlier of the expiration of the Term or the exercise of
remedies pursuant to Section 13 hereof, Lessee shall deliver to Lessor a
complete set, current as of such date of return or exercise of remedies, of such
plans and specifications
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and all work drawings and similar documents with respect to the Items, including
each then current operating manual with respect to such Item and all Parts
thereof.
(j) Liens. Lessee shall not directly or indirectly create, incur, assume or
suffer to exist any Lien on or with respect to the Equipment or any Part
thereof, except for Permitted Liens. Lessee shall, immediately and at its own
cost and expense, commence such actions as may be necessary to duly remove and
discharge any such Lien.
(k) Environmental Compliance. Lessee shall address in a reasonable and
timely manner, consistent with all applicable Laws and good engineering
practice, those environmental issues identified in the 'Executive Summary'
section of the McLaren Hart Environmental Engineering Corporation Phase I
Environmental Assessment Report (dated August 1993) (the 'Phase I Report').
Lessee shall, from time to time and otherwise upon request from Lessor, provide
status reports to Lessor with respect to the items identified in the 'Executive
Summary' of the Phase I Report. Further, Lessee shall address in a reasonable
and timely manner, consistent with all applicable Laws and good engineering
practice, any other material issues hereafter identified involving contamination
of air, water, or soil. Lessee shall, from time to time, and otherwise upon
request from Lessor, provide status reports to Lessor with respect to such other
material environmental issues.
6. Relocation of the Equipment. (a) Subject to the last sentence of this
Section 6(a) and the other terms and conditions of this Agreement and so long as
no Default or Event of Default shall have occurred and be continuing and there
is no breach of Section 5(i) hereof with respect to the Item or Part in
question, Lessee may change the location of any Item or Part thereof from its
then current location to another location in the United States or Canada owned
or leased by Lessee without the consent of Lessor; provided that (i) Lessee
shall notify Lessor of such change of location no later than 30 days following
such change in location (except in the case of a change in location to Canada
where notice shall be given at least 60 days prior to such change), which notice
shall specify the actions taken by Lessee to protect Lessor's interest in such
Items or Parts as contemplated hereunder, and (ii) if the real property on which
the Item or Part thereof is relocated is subject to a lease or mortgage which
does not permit the removal of such Item or Part at any time free and clear of
any Lien on the part of the lessor or mortgagee of such real property, Lessee
shall, within 30 days following such change in location, provide Lessor with a
landlord's or mortgagee's waiver in substantially the form attached hereto as
Exhibit B permitting such removal. Lessee shall make such filings or recordings
as are necessary to protect, in light of such changed location, Lessor's
perfected, first priority interest in the Item or Parts thereof as contemplated
hereunder and such other filings or recordings and take such other action as
Lessor deems reasonably necessary in connection therewith; provided that, in any
event, in the case of relocation of the Item or Part thereof to Canada, Lessee
will make all such filings and recordings prior to such relocation in a manner
reasonably satisfactory to Lessor and, if the Acquisition Cost of the Items or
Parts being moved to Canada exceeds $5 million, Lessee shall deliver to Lessor
an opinion of counsel, which opinion and counsel is reasonably acceptable to
Lessor, to the effect that the Lessor has a first priority perfected security
interest in such Items or Parts. Subject to the last sentence of this Section
6(a), so long as no Default or Event of Default shall have occurred and be
continuing, Lessee may, without the consent of Lessor, deliver possession of any
Item or Part thereof to the manufacturer thereof or to any person for testing,
service, repair, maintenance or overhaul work on such Item or Part or for
alterations or modifications in or additions to such Item or Part thereof to the
extent required or permitted by this Leasing Agreement; provided that Lessee
shall not deliver such Item or Part to any such Person if there is a significant
risk that a Lien (other than a Permitted Lien) will attach to such Item or Part.
Notwithstanding anything to the contrary contained herein, Lessee shall not be
permitted to relocate any Item or Part thereof for any reason whatsoever for the
duration of any applicable cure period described in Section 12 hereof if such
cure period has been triggered by a Default.
(b) (i) Upon the expiration of the Basic Term or the first, second or third
Renewal Term, unless Lessee has elected to renew the term of the lease hereunder
pursuant to Section 2(a) hereof, (ii) upon the expiration of the fourth Renewal
Term, unless Lessee shall have elected to (A) extend the term of the lease
hereunder pursuant to Section 2(b) hereof or (B) purchase all (and not less than
all) of the Equipment pursuant to Section 15(a) hereof, or (iii) if a Default or
an Event of Default shall have occurred and be continuing, in any event, at
Lessor's sole election and request, Lessee shall, at its sole
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cost and expense, immediately relocate all Items and Parts thereof previously
relocated pursuant to Section 6(a) hereof to the Plant or a location of a third
person, as designated by Lessor. In pursuing its rights and remedies under
Section 13 hereof, Lessor, at its sole election, may designate Lessee as
Lessor's agent to sell or relet the previously relocated Items and Parts thereof
to another person. If Lessor elects to lease to another person the previously
relocated Items and Parts thereof in place at the site of relocation, Lessee
shall provide to Lessor or its designee (x) access to the plant and the site (by
lease, license or other means and upon terms acceptable to Lessor in its sole
and absolute discretion) at which such Items and Parts are located and (y) all
other documents, consents, waivers or other items Lessor or its designee may
require (including any landlord's or mortgagee's waiver), in order that Lessor
may lease the Items and Parts thereof to such other person at such location.
7. Insurance.
(a) Maintenance of Insurance. Lessee agrees that it shall bear all risk of
loss, damage to or destruction of the Facility. Lessee shall obtain or cause to
be obtained and maintain for the entire term of this Leasing Agreement, at its
own expense:
(i) Property Insurance: Property insurance against loss or damage to
the Equipment and the Facility by fire, lightning, flood, theft, vandalism
and all other perils customarily covered by the 'all risk' endorsement then
in use with respect to other insurance maintained by Lessee, in amounts
with respect to the Equipment at any time not less than the Unamortized
Value of the Equipment except that said insurance against loss or damage by
flood shall be in an amount at any time not less than $50,000,000.
(ii) Public Liability Insurance: General public liability insurance
against claims for bodily injury, death or property damage in the same
amounts as that insurance coverage maintained by Lessee with respect to
Lessee's owned equipment of the same types as the Equipment leased
hereunder, but in no event shall such coverage be less than $10,000,000 for
any one occurrence.
(iii) Workers' Compensation Insurance: Workers' compensation insurance
to the extent required by the laws of the United States of America and the
State of Georgia.
(iv) Other Insurance. Such other insurance as Lessee may maintain with
respect to other owned or leased equipment used in similar locations.
Such insurance shall be in such form and with such insurers as shall
be reasonably satisfactory to Lessor, shall provide for deductible amounts
(by self-insurance or otherwise) not to exceed $1,000,000 in the case of
the insurance described in clauses (i) and (ii) of this Section 7(a) and
(other than workers' compensation) shall name Lessor or its assigns and
Lessee as additional insureds as their respective interests may appear with
respect to liability insurance and shall name Lessor and Lessee as loss
payees with respect to property insurance.
(b) Certain Policy Provisions. Each policy referred to in Section 7(a)
hereof shall provide that it will not (i) be cancelled or (ii) be reduced or
materially changed in either case in any manner that adversely affects the
interests of Lessor under this Leasing Agreement and the other Operative
Documents except, in the case of the events specified in the foregoing clause
(i) or (ii) after not less than 30 days' prior written notice to Lessor and any
other additional insureds (or 10 days' prior written notice in the case of
cancellation for non-payment of premiums) and shall provide (either expressly or
by reason of the absence of restrictions) that the interests of Lessor and any
other additional insureds contemplated hereunder shall not be invalidated by any
act or negligence of Lessee or Lessor or any person or entity having an interest
in the Facility nor by occupancy or use of the Facility for purposes more
hazardous than permitted by such policy nor by any foreclosure or other
proceedings relating to the Facility. No insurer under a policy described in
this Section 7 shall have any right or recovery or subrogation against Lessor or
any recourse against it for payment of any premiums or for assessments under any
mutual form of policy. Each policy (other than workers' compensation and
automobile liability) shall also (a) expressly provide that all of the
provisions thereof, except the limits of liability thereunder (which limits
shall be applicable to all insureds as a group) and liability for premiums
(which shall be solely a liability of Lessee), shall operate in the same manner
as if they were a separate policy covering each insured, (b) provide that
property insurance proceeds for any loss shall be payable to Lessor, (c) be
primary without right of contribution from any other insurance carried by
Lessor, (d)
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permit Lessor to make payments to effect the continuation of such insurance
coverage upon notice of cancellation due to nonpayment of premium, and (e)
provide that the insurers shall waive any rights of subrogation against Lessor.
(c) Insurance: Notice of Occurrence. Lessee shall deliver to Lessor (i) on
the Basic Term Commencement Date and within 90 days after the end of each fiscal
year of Lessee a certificate of insurance in the form of Exhibit C attached
hereto or, if reasonably requested by Lessor, other evidence satisfactory to
Lessor that the insurance coverage required by this Section 7 is in effect, (ii)
promptly upon any material change that adversely affects the interests of Lessor
under this Leasing Agreement and the other Operative Documents in the terms or
provisions of any such insurance policies, a description of such change. Lessee
shall not obtain or carry separate insurance concurrent in form or contributing
in the event of loss with that required by this Section 7 unless Lessor is a
named insured therein, with loss payable as provided herein. Lessee shall
immediately notify Lessor whenever any such separate insurance is obtained and
shall deliver to Lessor the certificates evidencing the same. Lessee shall give
Lessor prompt notice of (x) any damage to or loss of any Item or Part thereof in
an amount in excess of $1,000,000 or (y) any occurrence arising from the
possession, use or operation of the Facility resulting in (1) serious bodily
injury to a person not covered by workers' compensation insurance, (2) death or
(3) damage to property in an amount in excess of $1,000,000.
(d) No Effect on Lessee's Obligations. The requirements of this Section 7
shall not be construed to negate or modify Lessee's obligations under Section 8
hereof.
8. Indemnity.
(a) Lessee agrees to indemnify and hold harmless Lessor, any employee of
Lessor and any parent, Subsidiary or affiliate of Lessor and any of their
respective successors and assigns (collectively, the 'Indemnitees') against any
and all claims, demands and liabilities of whatsoever nature (including, without
limitation, all negligence, tort and strict liability claims and claims under
any Federal, state or local laws and regulations regarding hazardous wastes and
claims arising from the use, discharge or disposal of any chemical elements,
compounds or other materials or hazardous waste in, over, adjacent to or about
the Facility or any part thereof, or the soil or water supply underneath or
adjacent to the Facility or any part thereof, or the air supply in, over,
adjacent to or about the Facility or any part thereof), judgments, suits and all
legal proceedings, and all costs and expenses (including litigation expenses)
(collectively, 'claims') for, including, relating to, in connection with or in
any way arising out of:
(i) the delivery, acquisition, manufacture, financing, construction,
lease, sublease, installation, possession, use, non-use, misuse, operation,
transportation, repair, control, storage, maintenance, transfer of title,
abandonment, importation, exportation or other application or disposition
of all or any part of any interest in the Facility;
(ii) any and all costs, charges, damages or expenses for royalties and
claims and expenses arising out of or necessitated by the assertion of any
claim or demand based upon any infringement or alleged infringement of any
patent, trademark, copyright or other right, by or in respect of any of the
Equipment; provided, however, that Lessor will to the extent permissible
make available to Lessee Lessor's rights under any similar indemnification
arising by contract or operation of law from the manufacturer of such
Equipment;
(iii) any and all Taxes, whether assessed, levied against or payable
by Lessor or otherwise, with respect to the Equipment or the acquisition,
financing, transportation, purchase, storage, repair, sale, rental, use,
operation, control, ownership or disposition of the Equipment or measured
in any way by the value thereof or by the business of, investment in, or
ownership by Lessor with respect thereto, or imposed with respect to the
Operative Documents or any transactions contemplated by, and any payments
arising under, the Operative Documents, excluding, however:
(A) Taxes which are imposed on, based on, or measured by gross or
net income, capital or net worth of the Indemnitee, including, but not
limited to, alternative or add-on minimum Taxes, capital gains Taxes,
and Taxes on preference items; provided, however:
(1) if Lessee moves the Equipment, or any part thereof, to
Canada and the Canadian Taxes that would otherwise be excluded under
this clause (A) exceed the amount of Taxes
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that would have been excluded under this clause (A) if the Equipment
had remained in Georgia, such excess shall not be excluded under this
clause (A);
(2) there shall not be excluded under this clause (A) any sales,
use, receipts or property Taxes;
(3) there shall not be excluded under this clause (A) any Tax
levied, assessed or imposed directly upon the value of the Equipment,
or on the value of any present or future improvements to the
Equipment;
(B) Taxes which are imposed as a result of the bankruptcy of such
Indemnitee, or a voluntary or involuntary sale, transfer, assignment or
other disposition, whether prior to, during or after the Term, by such
Indemnitee of any interest in the Equipment or any part thereof unless
such sale, transfer, assignment or other disposition shall have occurred
in connection with an Event of Default; provided, however, that there
shall not be excluded under this clause (B) any Taxes imposed as a
result of any transaction described in or allowed by this Leasing
Agreement other than any transaction described solely in Section 20
hereof;
(C) Any interest, penalties, additions to Tax, or fines imposed as
a result of the failure of the Indemnitee to timely and properly file
any Return (defined in Section 8(f)(i) hereof) or pay any Tax, so long
as Lessee has complied with its obligations under Sections 8(f)(i) and
(ii) hereof with respect to such Return or Tax, as the case may be,
prior to the time such Return or Tax, as the case may be, was due;
(iv) any violation, or alleged violation, by Lessee of this Leasing
Agreement or of any contracts or agreements to which Lessee is a party or
by which it is bound, or any laws, rules, regulations, orders, writs,
injunctions, decrees, consents, approvals, exemptions, authorizations,
licenses and withholdings of objection, of any governmental or public body
or authority and all other requirements having the force of law applicable
at any time to the Equipment or any action or transaction by Lessee with
respect thereto or pursuant to this Leasing Agreement, including, but not
limited to, any costs, expenses or liabilities arising from the violation
of any local, state or federal environmental laws or regulations of
whatever kind which relate in any way to the use of the Equipment; or
(v) claims for injury to or death of persons and for damage to
property at the Facility or at other locations where the Equipment shall
have been relocated pursuant to Section 6(a) hereof.
(b) Without limiting the generality of Section 8(a) hereof, Lessee hereby
agrees to indemnify each of the Indemnitees and agrees to hold each of the
Indemnitees harmless from and against any and all claims paid, incurred or
suffered by, or asserted against, any of the Indemnitees for, with respect to,
or as a direct or indirect result of, the presence on or under or the escape,
seepage, leakage, spillage, discharge, emission, or release from the Facility of
any hazardous material, including, without limitation, any claims asserted or
arising under CERCLA, any so-called 'Superfund' or 'Superlien' law, or any other
Federal, state or local statute, law, ordinance, code, rule, regulation or
standards of conduct concerning any hazardous material, regardless of whether or
not caused by, or within the control of, Lessee; excluding, however, claims
arising from the presence, escape, seepage, leakage, spillage, discharge,
emission or release of any hazardous material (an 'Event'), which claims arise
solely from an Event which Lessee establishes is due to the act or omission of
any person whose occupancy of the Facility arises after the termination of this
Leasing Agreement (an 'Excepted User'), and is not due to or based on any act or
omission of Lessee or any other party occurring prior to the first occupancy of
the Facility by an Excepted User, or any condition of the Facility or any
portion thereof arising prior to such occupancy.
(c) In case any claim shall be brought against any Indemnitee for which
such Indemnitee is entitled to indemnification hereunder, such Indemnitee shall
notify Lessee of the commencement thereof (but the failure to do so shall not
relieve Lessee of its obligation to indemnify such Indemnitee except to the
extent that Lessee or its insurer is prejudiced as a result of such failure).
Subject to the rights of insurers under policies of insurance maintained by or
for the benefit of Lessee, Lessee shall have the right, at its cost and expense,
to investigate and, if Lessee states in writing to the Indemnitee and expressly
sets forth in such writing that, based on the facts and circumstances as then
known that Lessee is obligated
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to so indemnify (with Lessee reserving its right to take a contrary position
based on factual circumstances which may be subsequently learned by Lessee,
which position Lessee will immediately disclose to such Indemnitee), the right,
in its sole discretion and at its own expense, to defend or compromise any claim
for which indemnification is sought under this Section 8 (in its own name or in
the name of the Indemnitee), and the Indemnitee shall, at Lessee's cost and
expense, cooperate with all reasonable requests of Lessee in connection
therewith; provided, however, that Lessee shall not be entitled to assume and
control the defense of any such action, suit or proceeding if such action, suit
or proceeding involves the potential imposition of criminal liability on such
Indemnitee but shall nevertheless be responsible for the costs and expenses
associated therewith; provided, further, that any legal counsel appointed by
Lessee is reasonably acceptable to the Indemnitee; and provided, further, in the
event of an action, suit or proceeding contemplated by the first proviso above,
Lessee may nevertheless participate at its own cost and expense in such action,
suit or proceeding. Where Lessee or its insurers undertake the defense of an
Indemnitee, no additional costs, legal fees or expenses of such Indemnitee in
connection with the defense of such claim shall be indemnified hereunder unless
such costs, fees or expenses were incurred at the request of Lessee or such
insurers or such costs, fees and expenses were reasonably incurred by such
Indemnitee prior to the assumption of the defense by Lessee or its insurer.
Subject to the requirements of any policy of insurance, an Indemnitee may
participate at its own expense in any judicial proceeding controlled by Lessee
pursuant to the preceding provisions; provided, that such party's participation
does not, in the opinion of counsel (which will be reasonably acceptable to
Lessor) to Lessee or its insurers, interfere with such control; and such
participation shall not constitute a waiver of the indemnification provided in
this Section 8. Lessee shall not be liable for any settlement of any claim
without its consent, but if any such claim is settled with the consent of Lessee
or if there be final judgment for the claimant in any such claim, Lessee shall
indemnify and hold harmless each Indemnitee from and against any loss or
liability by reason of such settlement or judgment to the extent required under
Sections 8(a) and 8(b) hereof. The obligations of Lessee under this Section 8
shall survive any termination of this Leasing Agreement. Payments due from
Lessee to each Indemnitee pursuant to this Section 8 shall be made directly to
such Indemnitee. This Section 8 constitutes a separate agreement with respect to
each Indemnitee (acceptance of which by any Indemnitee other than Lessor is
hereby waived). The rights and indemnity of each Indemnitee hereunder are
expressly made for the benefit of and shall be enforceable by such Indemnitee
notwithstanding the fact that such Indemnitee is no longer a party to this
Leasing Agreement or was not a party to this Leasing Agreement at the outset. In
the event Lessee is required to make any payment under this Section 8, Lessee
shall pay the person indemnified an amount which, on an After-Tax Basis, shall
be equal to the amount of such payment. To the extent that the foregoing
undertakings may be unenforceable for any reason, Lessee agrees to make the
maximum contribution to the payment and satisfaction of each claim which is
permissible under applicable Law.
(d) To the extent that an Indemnitee in fact receives indemnification
payments from Lessee under the indemnification provisions of this Section 8, and
so long as no Default or Event of Default has occurred and is continuing, Lessee
shall be subrogated, to the extent of such indemnity paid, to such Indemnitee's
rights, with respect to the transaction or event requiring or giving rise to
such indemnity.
(e) In the case of any claim indemnified by Lessee hereunder which is
covered by a policy of insurance maintained by Lessee, each Indemnitee agrees to
cooperate with the insurers in the exercise of their rights to investigate,
defend or compromise such claim as may be required to retain the benefits of
such insurance with respect to such claim.
(f) (i) Except as provided in Section 8(f)(ii) hereof, Lessee shall prepare
any report, return or statement required to be filed with respect to any Taxes
that are subject to indemnification under this Section 8 (a 'Return'). Lessee
shall file such Return in its own name, furnishing a copy to Lessor, unless
Lessee is not permitted by law to file such Return in its own name. If Lessee is
not permitted to file such Return in its own name, Lessee shall notify Lessor in
writing of the filing requirement and furnish such Return to Lessor within a
reasonable time before such Return must be filed and Lessor shall file such
Return in its own name. Lessee shall pay any Tax attributable to such Return (x)
to the relevant Taxing Authority, if Lessee files such Return in its own name,
or (y) to Lessor, to the extent that Lessor files such Return in its own name,
in each case not later than the time such Return is required to be filed.
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(ii) If any Return must include items relating to taxes not subject to
indemnification under this Section 8, Lessee shall notify Lessor in writing of
such filing requirement and furnish to Lessor the information needed to prepare
such Return as it relates to Taxes that are subject to indemnification under
this Section 8 within a reasonable period of time before such Return is required
to be filed. Lessor shall prepare and file such Return on the basis of the
information provided by Lessee. Lessee shall pay any Taxes subject to
indemnification under this Section 8 that are shown on such Return to Lessor not
later than the time such Return is required to be filed by Lessor.
(iii) Lessee shall pay any other Tax for which Lessee is liable pursuant to
this Section 8 to any Indemnitee in immediately available funds within 30 days
of demand by such Indemnitee; provided, that the Indemnitee may not demand
payment of any such Tax (A) prior to giving notice of such Tax to Lessee in
accordance with Section 8(c) hereof or (B) while Lessee is contesting such Tax
under Section 5(e) hereof. Any such demand shall be in writing and shall
describe in reasonable detail the basis for such demand including the facts upon
which the right to payment is based, a computation of the amount payable, and a
copy of any notice received by such Indemnitee with respect to the Tax.
(g) The indemnity set forth in this Section 8 shall not extend to any claim
to the extent directly resulting from the gross negligence or willful misconduct
of any Indemnitee, which shall in no event be deemed to have occurred as a
result of a failure of any Indemnitee to file a Return or pay any Tax unless
Lessee has complied with its obligations with respect to such Return or Tax, as
the case may be, under Sections 8(f)(i) and (ii) hereof prior to the time such
Return or Tax was due.
(h) If an Indemnitee shall obtain a refund, credit, or other offset of any
Taxes paid by Lessee pursuant to this Section 8 and such Indemnitee shall have
actually benefited from any such refund, credit or offset, such Indemnitee shall
promptly pay to Lessee (i) the amount of such refund, credit or other offset,
together with any interest received by such Indemnitee on account of such
refund, credit or other offset, and (ii) the net amount of any Taxes saved by
the Indemnitee as a result of the payment to Lessee of amounts described in this
Section 8(h), net of any Taxes payable by such Indemnitee with respect to such
refund, credit or other offset. For purposes of this Section 8(h), a refund,
credit or other offset shall not include the claiming or use of any foreign tax
credit.
9. Termination.
(a) Generally. Subject to the provisions of this Section 9, Lessee may
terminate the lease of (i) any Item (a 'Partial Lease Termination') hereunder by
selling such Item, or (ii) all (and not less than all) Items (a 'Total Lease
Termination') by selling or leasing all (and not less than all) such Items, in
either case, to a person unrelated to Lessor or Lessee as hereinafter
contemplated and upon satisfaction of all of the requirements of this Section 9.
All Partial Lease Terminations pursuant to this Section 9 shall be subject to
the Maximum Aggregate Termination Amount. No Partial Lease Termination shall be
permitted if, immediately after such termination, and after taking into account
all previous Partial Lease Terminations, the applicable Maximum Aggregate
Termination Amount would be exceeded. A Total Lease Termination may occur only
on the third, fourth, fifth, sixth or seventh Anniversary Date. A Partial Lease
Termination may occur only on a Payment Date. It shall be a condition to the
right to terminate this Leasing Agreement pursuant to this Section 9 that, on
the date of the notice described in Section 9(b) hereof, no Default or Event of
Default shall have occurred and be continuing. Notwithstanding anything to the
contrary contained herein, Lessee shall not be permitted to terminate this
Leasing Agreement pursuant to this Section 9 with respect to any or all Items
for the duration of any applicable cure period described in Section 12 hereof if
such cure period has been triggered by a Default. Lessee shall be responsible
for any and all costs and expenses relating to or arising out of the lease or
sale of Items pursuant to this Section 9, including, without limitation, all
removal, transportation, repair, cleaning, storage, delivery or similar costs
and expenses.
(b) Notice of Termination. Lessee shall deliver written notice to Lessor
(i) at least 30 days prior to a Payment Date with respect to a Partial Lease
Termination and (ii) at least 90 days prior to an Anniversary Date commencing
with the third Anniversary Date with respect to a Total Lease Termination (such
Payment Date or Anniversary Date, as the case may be, the 'Termination Date').
Such notice shall be signed by an authorized officer of Lessee, identifying the
Termination Date and, as the case may be, (x) in the case of a Partial Lease
Termination or Total Lease Termination pursuant to a proposed sale, the proposed
sale price and the terms of the proposed sale or (y) in the case of a Total
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Lease Termination pursuant to a proposed lease, the terms of the proposed lease.
In addition to the notice, Lessee shall provide a certificate signed by an
authorized officer of Lessee, stating that Lessee shall not, directly or
indirectly, use such Item(s) in Lessee's business at any time subsequent to the
Partial Lease Termination or the Total Lease Termination, as the case may be.
After delivery of the notice and the certificate referred to above, Lessee, on
behalf of and in cooperation with Lessor, shall proceed directly with
negotiating the sale of the Item(s), or the lease of all (and not less than all)
Items, as the case may be, to the person unrelated to Lessor or Lessee and,
subject to the satisfaction of all of the other provisions of this Section 9,
Lessor shall execute and transmit to Lessee all papers needed to effectuate such
sale or lease. Lessee may, at its option by written notice to Lessor, revoke any
such notice of termination, in which event this Leasing Agreement shall not
terminate and Lessee shall bear the reasonable out of pocket costs and expenses
incurred by Lessor in connection therewith.
(c) Termination Pursuant to a Sale. In arranging a Partial Lease
Termination or Total Lease Termination by sale pursuant to this Section 9,
Lessee shall use its best efforts to obtain sale proceeds not less than the Fair
Market Value of the Item(s) subject to the sale. If Lessor and Lessee cannot
agree upon such Fair Market Value they shall utilize the Appraisal Procedure to
determine the Fair Market Value. If the proposed sale price specified in the
notice referred to in Section 9(b) hereof is less than the Unguaranteed Residual
with respect to such Item(s), Lessee shall not proceed to sell such Item(s)
until it has received the consent of Lessor, which consent shall not be
unreasonably withheld.
In connection with any sale pursuant to this Section 9(c), Lessee shall
make a payment to Lessor on the applicable Termination Date with respect to the
Item(s) being sold in a sum equal to (i) the Proceeds of Sale, plus (ii)
Additional Rent, if any, plus (iii) the Economic Payment, if any. The lease of
the Item(s) and Lessee's obligation to pay Rent hereunder shall continue until
such payment is received by Lessor, or Lessor's assignee, and shall thereupon
terminate. If the Proceeds of Sale of the Item(s) are less than the Unamortized
Value of the Item(s) at the time of the termination of the lease of such Item(s)
hereunder, but equal to or greater than the Unguaranteed Residual, Lessee shall
forthwith pay as Additional Rent an amount equal to the difference between the
amount of the Proceeds of Sale and such Unamortized Value. If the Proceeds of
Sale of the Item(s) are less than the Unguaranteed Residual, Lessee shall at the
same time pay Lessor as Additional Rent a sum equal to the Unamortized Value of
such Item(s) less the Unguaranteed Residual, plus any Contingent Rent due for
the Item(s); provided, however, that the amount of any Contingent Rent due will
not be greater than the amount by which the Unguaranteed Residual exceeds such
Proceeds of Sale. Subject to the penultimate sentence of this paragraph, if the
Proceeds of Sale of the Item(s) are greater than the Unamortized Value of such
Item(s) at the time of the termination of the lease of such Item(s) hereunder,
Lessor, in consideration of Lessee's agreement hereunder to repair, maintain and
insure the Equipment, shall as an adjustment of Rent forthwith pay to Lessee or,
at the option of Lessee, credit Lessee's account in an amount equal to the
difference between said Proceeds of Sale and said Unamortized Value, subject,
however, to satisfaction of the Economic Payment. If for any quarter funds are
payable by Lessor to Lessee under this Section 9(c), the amount so payable may
be deducted by Lessee from funds payable during the same quarter by Lessee for
Rent of the Equipment. Notwithstanding anything to the contrary contained
herein, in the event a deficiency arises because Lessor does not receive the
Unguaranteed Residual in connection with the sale of an Item, to the extent that
in any prior or subsequent sale of any Item, Proceeds of Sale were received or
will be received in excess of the Unguaranteed Residual of such Item, such
excess Proceeds of Sale shall be paid to Lessor to the extent of such
deficiency, with respect to future sales, upon the sale of any Item, and with
respect to prior Item sales resulting in excess Proceeds of Sale, at the time
the deficiency arises. Any Proceeds of Sale of the Equipment in excess of the
Unamortized Value of the Equipment after the expiration of the lease terms of
all Items shall be for the account of Lessee.
(d) Termination Pursuant to a Lease. In arranging a Total Lease Termination
by lease pursuant to this Section 9(d) (a 'Replacement Lease'), (i) the terms of
the Replacement Lease and the lessee under such Replacement Lease shall be
acceptable to Lessor in its sole and absolute discretion and (ii) Lessee shall
use its best efforts to obtain quarterly rent payments not less than the Fair
Market Rental Value of all of the Items. If the parties cannot agree upon such
Fair Market Rental Value, they shall utilize an Appraisal Procedure to determine
the Fair Market Rental Value of all of the Items. The quarterly rent payments to
be paid by the person unrelated to Lessor or Lessee shall include an
amortization
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component which shall amortize an amount equal to the Unguaranteed Residual over
a period of not greater than 24 months and a mutually agreed yield component. In
connection with any lease pursuant to this Section 9(d), Lessee shall make a
payment to Lessor on the applicable Termination Date (which shall not be prior
to the third Anniversary Date) in a sum equal to (x) the Unamortized Value of
the Items as of such Termination Date less the Unguaranteed Residual, plus (y)
any Contingent Rent and Additional Rent due for the Items, plus (z) the Economic
Payment, if any. The lease of the Items and Lessee's obligation to pay Rent
hereunder shall continue until such payment is received by Lessor, or Lessor's
assignee, and shall thereupon terminate. At such time, the term of the
Replacement Lease shall commence. All rent payments received from the person
unrelated to Lessor or Lessee shall be for the account of Lessor; provided,
however, that once Lessor has received rent payments sufficient to provide
Lessor with an amount equal to the sum of (1) the Unguaranteed Residual on the
applicable Termination Date, plus (2) a current yield factor on such
Unguaranteed Residual calculated at the mutually agreed rate referred to above
in this Section 9(d), (A) all remaining rent payments received from the person
unrelated to Lessor or Lessee shall be for the account of Lessee and (B) Lessee
shall assume all of Lessor's obligations under the Replacement Lease and execute
all documents requested by Lessor to reflect such assumption.
10. Loss or Destruction of the Equipment. (a) Lessee hereby assumes all
risks of loss or damage to the Equipment howsoever the same may be caused.
Lessee shall notify Lessor immediately of any loss or of any damage to the
Equipment in an amount in excess of $1,000,000 and shall keep Lessor informed of
all developments and correspondence regarding insurance rights and other rights
and liabilities arising out of the loss or damage. In the event of total
destruction of any of the Equipment or damage beyond repair or the
commandeering, conversion or other such loss of any of the Equipment, or if the
use thereof by Lessee in its regular course of business is prevented by the act
of any third person or persons, or any Governmental Authority, for a period
exceeding ninety (90) days, of if any of the Equipment is attached (other than
on a claim against Lessor but not Lessee) or is seriously damaged and the
attachment is not removed or the Equipment not repaired, as the case may be, in
a period of ninety (90) days (an 'event of loss'), then in any such event and
subject to the provisions of Section 10(b) hereof:
(i) Lessee shall promptly notify Lessor in writing of such fact;
(ii) On the Payment Date next following the earlier of (A) the l80th
day following the occurrence of such event of loss or (B) the receipt of
all insurance proceeds relating to such event of loss ('Loss Payment
Date'), Lessee shall pay to Lessor, or Lessor's assignee, an amount equal
to (1) the Unamortized Value of such Equipment at the time of payment, plus
(2) the Economic Payment, if any;
(iii) The lease of such Equipment shall continue until such payment
has been received by Lessor, or Lessor's assignee, and shall thereupon
terminate; and
(iv) Upon such payment all of Lessor's title to and rights in such
Equipment and any insurance thereon shall automatically pass to Lessee or
its designee.
Any insurance or condemnation proceeds received by Lessee in connection with an
event of loss and prior to the Loss Payment Date shall be placed in escrow for
the benefit of Lessor until Lessee has fulfilled its obligations under clause
(ii) above or Section 10(b) hereof; provided, that if Lessee has elected to
substitute pursuant to Section 10(b) hereof, so long as no Default or Event of
Default shall have occurred and be continuing, such proceeds shall be released
from escrow as necessary to fund the cost of the replacement Item as such costs
arise.
Nothing in this Section 10(a) shall be construed to reduce, forgive or
otherwise limit the obligation of Lessee to pay Rent, including Basic Rent,
Additional Rent and Extended Term Rent, on such dates as it becomes due at any
time subsequent to the event of loss.
(b) Lessee may, prior to the Payment Date next following the 180th day
following the occurrence of an event of loss (the 'Substitution Date'),
substitute no later than the Substitution Date for the Item subject to an event
of loss any item of equipment of the same, similar or improved model or series,
having a value, utility, remaining useful life and estimated residual value at
least equal to, and being in as good operating condition as, the Item to be
replaced assuming such replaced Item was of the value
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and utility and in the condition and repair required by the terms hereof
immediately prior to the event of loss and otherwise complying with all other
requirements of this Leasing Agreement with respect to the Items; provided, that
Lessee shall provide such information as reasonably requested by Lessor
regarding such substitution and, if the Acquisition Cost of the Item(s) being
replaced in connection with an event of loss exceeds $5,000,000, if requested by
Lessor, Lessee shall provide to Lessor prior to the Substitution Date evidence
reasonably satisfactory to Lessor that the replacement Item meets the conditions
set forth in this Section 10(b) (it being agreed that an appraisal in accordance
with the Appraisal Procedure will be reasonably satisfactory evidence);
provided, further, that if Lessee shall fail to perform its obligations to
effect such substitution on or before the Substitution Date, Lessee shall give
Lessor notice to such effect and shall instead make the payments specified in
Section 10(a)(ii) hereof on the Substitution Date.
(c) In the event of any damage or loss to an Item not constituting an event
of loss, Lessee shall promptly repair such Item at its own expense to the
standards required by Section 5(d) hereof and such repairs shall be sufficient
to ensure that the fair market value, utility, remaining useful life and
estimated residual value of the repaired Item is at least equal to that of such
Item prior to such damage or loss.
(d) Payments received by Lessor or Lessee from any Governmental Authority,
insurer or other person as a result of an event of loss shall be applied as
follows (unless the Item(s) subject to the event of loss are being replaced or
substituted in accordance with this Section 10, in which case the payments shall
be made to Lessee):
(i) all such payments shall be promptly paid to Lessor for the Unamortized
Value of the Item(s), Rent due to the Loss Payment Date and the Economic
Payment; and
(ii) the balance, if any, of such payments shall be paid over to, or
retained by, Lessee.
11. Representations and Warranties of Lessee. Lessee represents and
warranties that:
(a) Corporate Existence and Authority. Lessee is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and is duly authorized and empowered to own or hold under lease the
property it purports to own or hold under lease, to transact the business it
transacts and proposes to transact and to execute and deliver this Leasing
Agreement and the other Operative Documents and to perform the terms, conditions
and provisions hereof and thereof. Each such agreement and other document has
been duly authorized, executed and delivered and constitutes a valid, legal and
binding obligation of Lessee, enforceable in accordance with its terms. Lessee
is duly qualified as a foreign corporation and is in good standing in the State
of Georgia. Lessee has not failed to qualify or to be in good standing in any
other jurisdiction where the failure to qualify or to be in good standing would
have a material adverse effect on the business or financial condition of Lessee
or the ability of Lessee to perform its obligations under the Operative
Documents.
(b) No Violation. Lessee is not in violation of any term or provision of
its charter documents or bylaws, or of any indenture, mortgage, lease,
agreement, instrument, judgment, decree, franchise, permit, order, statute or
governmental rule or regulation applicable to it or its property, except
violations which would not materially impair its ability to perform its
obligations under the Operative Documents.
(c) Consents. There are no Governmental Actions or other approvals or
consents relating to Lessee, the Plant or the Equipment required for the
consummation of the transactions contemplated by the Operative Documents or for
the performance or observance of the obligations of Lessee to be performed or
observed under the Operative Documents.
(d) Litigation. There are no suits or proceedings pending or, to the
knowledge of Lessee, threatened against or affecting Lessee or the Equipment
before any Governmental Authority which (i) question the legality, validity or
enforceability of this Leasing Agreement or any other Operative Document or any
other agreements or documents referred to herein or in any other Operative
Document, in each case to which Lessee is or will be a party or (ii) in the
aggregate, could materially and adversely affect Lessee's financial condition,
business or operations or Lessee's ability to perform its obligations under the
Operative Documents.
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(e) Chief Executive Office. The chief executive office (as such term is
used in Article 9 of the UCC) of Lessee is located at 83 Wooster Heights Road,
Danbury, Connecticut 06813-1911.
(f) Governmental Action. All Governmental Actions required for the
execution, delivery and performance by Lessee of the Operative Documents and the
other agreements or documents referred to herein or in any other Operative
Document, in each case to which Lessee is or will be a party, have been obtained
or made or, by the Basic Term Commencement Date, will be obtained or made, and
are or, by the Basic Term Commencement Date, will be in full force and effect
and no such Governmental Actions are subject to any pending or threatened suit,
action, inquiry, investigation, proceeding or appeal (administrative, judicial
or otherwise).
(g) Installation. The Equipment is properly installed in a workmanlike
manner in accordance with applicable Law in all material respects and in
substantial accordance with the plans and specifications therefor, contains no
material (or otherwise significant) structural or systemic defects, is in good
operating condition and is fit for its intended use as contemplated in the
Appraisal. No improvements, modifications or additions to the Equipment are
required in order to render the Equipment complete for its intended use by
Lessor as specified in this Leasing Agreement, nor is Lessee lacking or in
violation of any material Governmental Action from a Governmental Authority
required for the maintenance and operation of the Equipment. The Equipment is
available for use on a 'turn-key' basis and complies with all Legal
Requirements. Except as set forth on Schedule 11(g) hereto, each Item is located
in Cartersville, Georgia as of the Basic Term Commencement Date.
(h) Description of Equipment. The description of the Equipment set forth in
Schedule A hereto is a true and correct description of the Equipment and
describes with sufficient accuracy and in sufficient detail for the purposes of
conveyancing, recording, filing and perfecting security interests in and liens
upon, the Equipment. The description of the Items set forth in Schedule A hereto
sets forth all of the material components necessary to operate the Items as
contemplated by the Appraisal. After giving effect to the transactions
contemplated hereby, Lessor will hold a first perfected security interest in and
to the Equipment, subject only to Permitted Liens.
(i) Taxes. Lessee has paid or will pay all Taxes due with respect to the
Equipment, the Operative Documents and the transactions contemplated therein.
Lessee has filed all Federal, state and local Tax returns which are required to
be filed by it and has paid (prior to their delinquency dates) all Taxes which
have become due pursuant to such returns or pursuant to any assessment received
by it (other than Taxes and assessments the payment of which are being contested
in the manner set forth in Section 5(e) hereof), and Lessee has no knowledge of
any actual or proposed deficiency or additional assessment in connection
therewith which, either in any case or in the aggregate, would be materially
adverse to the financial condition of Lessee. The charges, accruals and reserves
on the books of Lessee with respect to Federal, state and local Taxes for all
open years, and for the current fiscal year, make adequate provision for all
unpaid Tax liabilities for such periods.
(j) ERISA. The transactions contemplated by this Leasing Agreement and the
other Operative Documents will not involve any 'prohibited transaction,' as such
term is defined in Section 4975 of the Code or the Employee Retirement Income
Security Act of 1974, as amended.
(k) Appraisal. All written information supplied by Lessee to the Appraiser
was accurate and complete when given and remains accurate and complete and,
after reviewing the Appraisal, Lessee has no reason to believe that the
Appraiser relied on incorrect, misleading or incomplete information, whether
oral or written.
(l) Title to Land and Plant. Lessee is the owner of good and marketable fee
simple title to the Land and the Plant subject to no Liens, other than Permitted
Liens and the Liens created under the Operative Documents.
(m) Hazardous Material. The use of the Land and the operation of the
Facility thereon is in substantial compliance with all applicable zoning,
environmental protection, land use and building codes, laws, rules, regulations
and ordinances. Lessee has no knowledge of any pending or threatened
governmental or private proceedings or notices of violations against it or the
Facility with respect to the ownership, condition or maintenance of the
Facility, except as disclosed on Schedule 11(m) hereto. To the best of Lessee's
knowledge, no part of the Facility contains any hazardous or toxic waste or
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underground storage tanks except that the Facility contains storage tanks used
to store petroleum, petroleum products, waste water and other non-hazardous and
non-toxic substances. To the best of Lessee's knowledge, the Facility is in
substantial compliance with all material state and federal environmental
standards and requirements. Lessee has not received any notices of violation or
adversary action by regulatory agencies with respect to the Facility regarding
environmental control matters or permit compliance, except as disclosed on
Schedule 11(m) hereto. Hazardous waste has not been transferred onto or disposed
of onto the Facility since September 30, l987.
(n) No Default. Lessee is not in default under any order of any
Governmental Authority relating to the Facility; and Lessee is not subject to or
a party to any order of any Governmental Authority directly or indirectly
affecting the Facility. Lessee is not in violation of any statute or other rule
or regulation of any Governmental Authority, the violation of which might
materially and adversely affect the ability of Lessee to perform its obligations
under this Leasing Agreement and the other Operative Documents.
(o) Support Agreement. The rights and easements granted to Lessor pursuant
to the Support Agreement afford Lessor with all property, easements and other
property rights necessary or required to own the Equipment and operate the
Facility in commercial production, including without limitation adequate storage
and waste disposal facilities, all necessary rights of access, adequate parking,
a sufficient supply of electrical power, water, gas and other utilities for
normal operations and all current applicable Legal Requirements relating to air
and water quality. Lessee owns the property and property rights necessary to
make the conveyance of the easements and the grant of other support obligations
described in the Support Agreement effective and to fulfill its obligations to
provide Lessor with all support services that may be needed by Lessor at the
Plant in connection with the Facility for the term of the Support Agreement.
12. Events of Default. Any of the following acts or occurrences shall
constitute an 'Event of Default' and shall give rise to rights on the part of
Lessor described in Section 13 hereof:
(i) if Lessee shall fail to pay any Rent required to be paid hereunder
within ten days after the date when due; or
(ii) if Lessee shall fail to pay when due any amount specified in
Section 9, 10, 13 or 15 hereof in respect of the termination of this
Leasing Agreement or the purchase or the releasing of the Items; or
(iii) if Lessee shall fail to carry and maintain insurance on or in
respect of the Equipment in accordance with Section 7(a)(i) hereof, or if
Lessee shall fail to carry and maintain insurance on or in respect of the
Equipment in accordance with Section 7 hereof (other than Section 7(a)(i)
hereof) and such failure shall continue for 30 days after the earlier of
(A) Lessee's receipt of notice of any proposed cancellation, reduction,
termination or expiration of any such insurance and (B) the happening of
such cancellation, reduction, termination or expiration; or
(iv) if Lessee shall default in the observance or performance of any
covenant or agreement contained in this Leasing Agreement or in any other
Operative Document and such default shall continue unremedied beyond any
applicable grace or notice period with respect thereto or, if no such grace
or notice period is applicable, for a period of 30 days after a responsible
officer of Lessee either learns of or is notified of such default;
provided, however, that if any such default cannot reasonably be cured by
the payment of money and cannot with diligent efforts be cured within such
30 day period, if Lessee commences promptly to cure the same and thereafter
prosecutes such cure with diligent efforts and if Lessor consents (which
consent shall not be unreasonably withheld), the cure period shall be
extended for one or, with the consent of Lessor (which consent shall not be
unreasonably withheld), more additional 30 day periods of time as may be
necessary for such cure; or
(v) if any representation or warranty made by Lessee in this Leasing
Agreement or any other Operative Document, or made or in any certificate,
document or financial or other written statement required to be furnished
at any time in connection herewith or therewith shall prove to have been
untrue or misleading in any material respect on the date when made, and if
the inaccurate representation or warranty is capable of being cured, such
inaccuracy remains uncured
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for a period of 30 days after receipt by Lessee of a written notice from
Lessor advising Lessee of such inaccuracy; or
(vi) if (x) (A) Lessee or any of its Subsidiaries shall (1) default in
the payment of principal of or interest on any of its Indebtedness, the
facilities of which, individually or in the aggregate, equal or exceed
$20,000,000, or (2) default in the observance or performance of any other
agreement or condition relating to any Indebtedness, the facilities of
which, individually or in the aggregate, equal or exceed $20,000,000, or
contained in any instrument or agreement evidencing, securing or relating
thereto, or (B) any other event shall occur or condition exist, the effect
of which event or condition is to permit the holder or holders of such
Indebtedness to cause such Indebtedness to become due prior to its stated
maturity pursuant to an acceleration upon actions of the lenders
thereunder, and (y) such default shall continue unremedied, or such event
or condition shall exist, for a period of 6 months; or
(vii) if any default, event or condition described in subparagraph
(vi) above shall exist and in connection with such default, event or
condition, (A) an automatic acceleration of the affected Indebtedness
occurs prior to its stated maturity, (B) the holder or holders of the
affected Indebtedness (or any trustee acting on their behalf) accelerate
such Indebtedness prior to its stated maturity or (C) the holder or holders
of the affected Indebtedness (or any trustee acting on their behalf)
exercises any remedies to collect such Indebtedness; or
(viii) (A) if Lessee or any of its Subsidiaries other than a Minor
Subsidiary shall commence any case, proceeding or other action (1) under
any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it, or seeking
to adjudicate it as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, wind-up, liquidation, dissolution, composition or
other relief with respect to it or its debt, or (2) seeking appointment of
a receiver, trustee, custodian or other similar official for it or for all
or any substantial part of its assets; or (B) there shall be commenced
against Lessee or any of its Subsidiaries other than a Minor Subsidiary any
such case, proceeding or other action referred to in clause (A) above which
results in the entry of an order for relief or any such adjudication or
appointment or remains undismissed, undischarged or unbonded for a period
of 60 days; or (C) there shall be commenced against Lessee or any of its
Subsidiaries other than a Minor Subsidiary any case, proceeding or other
action seeking issue of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (D) Lessee or any of its Subsidiaries other than
a Minor Subsidiary shall take any action authorizing, or in furtherance of,
or consenting to, approving of, or acquiescing in, any of the acts set
forth above in this subsection (vii); or (E) Lessee or any of its
Subsidiaries other than a Minor Subsidiary shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as
they come due; or
(ix) if one or more judgments or decrees shall be entered against
Lessee or any of its Subsidiaries involving in the aggregate a liability
(not covered by insurance) of $15,000,000 or more and all such judgments or
decrees shall not have been vacated, satisfied, discharged or suspended
pending appeal by bond or otherwise within 60 days from the date of entry
thereof; or
(x) (A) if any person shall engage in any 'prohibited transaction' (as
defined in Section 406 of ERISA or Section 4975 of the Code) other than a
prohibited transaction that has been specifically authorized or otherwise
permitted by the United States Department of Labor or other Governmental
Authority having jurisdiction therefor, involving any Single Employer Plan
with vested unfunded liabilities equal to or in excess of $15,000,000 or
any Multiemployer Plan, (B) any 'accumulated funding deficiency' (as
defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any such Single Employer Plan, (C) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any such Single Employer Plan, which Reportable Event or institution or
proceedings is, in the reasonable opinion of the Lessor, likely to result
in the termination of such Plan for purposes of Title IV of ERISA and, in
the case of a Reportable Event,
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the continuance of such Reportable Event unremedied for ten days after
notice of such Reportable Event pursuant to Section 4043(a), (c) or (d) of
ERISA is given or the continuance of such proceedings for thirty days after
commencement thereof, as the case may be, (D) any Multiemployer Plan or any
such Single Employer Plan shall terminate for purposes of Title IV of
ERISA, or (E) any other event or condition shall occur or exist with
respect to any Multiemployer Plan or any such Single Employer Plan and in
each case in clauses (A) through (E) above, such event or condition,
together with all other such events or conditions, if any, is likely, in
the reasonable opinion of Lessor, to subject Lessee or any of its
Subsidiaries to any tax, penalty or other liabilities in the aggregate
material amount equal to or in excess of $15,000,000; or
(xi) if one or more judgments, decrees or consent orders shall be
entered against Lessee and/or any of its Subsidiaries and/or the Lessee
and/or any of its Subsidiaries shall become required by law to pay or
expend moneys as a result of violation of laws relating to the protection
of the environment or to comply with any such laws requiring the repair of
damage already done to the environment, and the aggregate amount so
required to be paid by Lessee and its Subsidiaries in connection with all
such judgments, decrees, consent orders and requirements (other than any
such amount (A) covered by insurance, or (B) for which Lessee or any of its
Subsidiaries is indemnified by Union Carbide Corp. or Beatrice Companies
Inc. or (C) the judgment, decree, consent order or requirement with respect
to which is being contested in good faith by appropriate proceedings, so
long as adequate reserves with respect thereto are being maintained in
accordance with GAAP) shall exceed $15,000,000.
13. Rights of Lessor upon an Event of Default.
(a) Election to Terminate. If an Event of Default shall have occurred and
be continuing Lessor may, at Lessor's option, give to Lessee a notice of
election to end the Term of this Leasing Agreement at the expiration of ten days
from the date of such notice. Upon the giving of such notice, the Term of this
Leasing Agreement and the estate hereby granted shall expire and terminate at
the expiration of said ten-day period as fully and completely and with the same
effect as if such date were the date herein fixed for the expiration of the Term
of this Leasing Agreement, and all rights of Lessee hereunder shall expire and
terminate, but Lessee shall remain liable as herein provided.
(b) Entry Upon Premises. If an Event of Default shall have occurred and be
continuing, Lessor shall have the immediate right, whether or not the Term of
this Leasing Agreement shall have terminated by operation of law or shall have
been terminated pursuant to Section 13(a) hereof, to re-enter and repossess the
Equipment by summary proceedings, ejectment, any other legal action or in any
lawful manner Lessor determines to be necessary or desirable. Lessor shall be
under no liability by reason of any such re-entry, repossession or removal. No
such re-entry or repossession of the Equipment shall be construed as an election
by Lessor to terminate the Term of this Leasing Agreement unless a notice of
such termination is given to Lessee pursuant to Section 13(a) hereof, or unless
such termination is decreed by a court or other governmental tribunal of
competent jurisdiction.
(c) Reletting by Lessor. At any time or from time to time after the
re-entry or repossession of the Equipment pursuant to Section 13(b) hereof,
Lessor may (but shall be under no obligation to) sell, at public or private
sale, all or any portion of the Equipment, or otherwise dispose of, hold, use,
operate, lease to others or, subject to Section 13(d) hereof, keep idle the
Equipment, for such term or terms and on such conditions and for such uses as
Lessor, in its sole and absolute discretion, may determine, all free and clear
of any rights of Lessee and, subject to the provisions of Section 13(h) hereof,
without any duty to account to Lessee for such action or inaction or for any
proceeds with respect thereto. Lessor will give notice to Lessee of any
reletting; provided, however, that failure to give notice shall have no effect
on the reletting. Lessor may collect and receive any rents payable by reason of
such reletting.
(d) Mitigation. No expiration or termination of the Term of this Leasing
Agreement pursuant to Section 13(a) hereof, by operation of law or otherwise,
and no re-entry or repossession of the Equipment pursuant to Section 13(b)
hereof or otherwise, and no reletting of the Equipment pursuant to Section 13(c)
hereof or otherwise, shall relieve Lessee of its liabilities and obligations
under this Section 13, all of which shall survive such expiration, termination,
re-entry, repossession or reletting; provided, however, that in the exercise of
its remedies pursuant to this Leasing Agreement, Lessor agrees that it shall use
its best efforts to minimize Lessee's damages.
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(e) Recovery from Lessee. If an Event of Default shall have occurred and be
continuing and the Term of this Leasing Agreement shall not have been terminated
pursuant to Section 13(a) hereof, Lessor shall be entitled to (i) recover from
Lessee, and Lessee will pay to Lessor on demand, (A) all Rent to and including
the date of payment of such amounts and (B) the Economic Payment (if any), and
(ii) declare immediately due and payable all Rent which would otherwise accrue
for the entire unexpired Term of this Leasing Agreement. After payment of all
amounts specified in clauses (i) and (ii) above, Lessor's right to terminate the
Term of this Leasing Agreement for non-payment of Rent pursuant to Section 13(a)
hereof shall cease and all other terms of this Leasing Agreement shall remain in
full force and effect.
(f) Liquidated Damages. At any time after any expiration or termination of
the Term of this Leasing Agreement or re-entry or repossession of the Equipment,
in each case by reason of the occurrence of an Event of Default, Lessor shall be
entitled to recover from Lessee, and Lessee shall pay to Lessor on demand, as
and for liquidated damages and not as a penalty for Lessee's default (it being
agreed that it would be impracticable or extremely difficult to fix the actual
damages), an amount (plus interest thereon, at the rate referred to in Section
3(d) hereof, from the date of demand to the date of payment) equal to the sum of
(i) the Unamortized Value, plus (ii) Additional Rent (if any), plus (iii) the
Economic Payment (if any). If any law shall limit the amount of such liquidated
damages to less than the amount above agreed upon, Lessor shall be entitled to
the maximum amount allowable under such law.
(g) Costs and Expenses. Lessee shall be liable, except as otherwise
provided in this Section 13, for any and all reasonable legal fees and
disbursements and other out-of-pocket costs and expenses incurred by Lessor by
reason of the occurrence of any Default or the exercise of Lessor's remedies
with respect thereto and including all costs and expenses incurred in connection
with the return of the Equipment, as well as all costs and expenses in
connection with safeguarding, refitting, restoring, repairing and reletting the
Equipment.
(h) Excess Recoveries. Notwithstanding anything to the contrary contained
in this Section l3, Lessor shall not, in connection with the exercise of its
remedies, be entitled to receive or retain amounts (whether from the sale of any
of the Equipment, payment of Rent, payment of amounts specified in this Section
13 or otherwise) in excess of the sum of the following: (i) any costs, expenses
or liabilities (including reasonable legal fees and expenses) incurred by Lessor
as a result of, and in connection with, such Event of Default or the exercise by
Lessor of its remedies hereunder; (ii) the Unamortized Value; (iii) (without
duplication) any unpaid Rent; (iv) the Economic Payment; and (v) if Lessee
exercises its option to purchase pursuant to Section l5(a) hereof, an amount
calculated by multiplying the Unamortized Value by the Purchase Option
Percentage. In the event that Lessor receives amounts in excess of the amounts
contemplated by the preceding sentence, Lessor shall promptly pay such excess to
Lessee. All of Lessor's title to and rights in the Equipment (to the extent not
previously transferred) shall automatically pass to Lessee or its designee upon
receipt by Lessor of all of the amounts contemplated in clauses (i) through (v)
above. This Section 13(h) shall survive the termination of this Leasing
Agreement.
14. Divisible Lease. It is the intention of the parties hereto that this
Leasing Agreement shall constitute a lease of personal property. It is the
intention and understanding of the parties hereto that all of the Equipment
constitutes personal property for all purposes of this Leasing Agreement and the
other documents referred to herein and for all purposes of bankruptcy laws of
the United States; provided, however, that nothing herein shall affect the
rights and obligations of Lessor or Lessee under Section 22 hereof, it being
understood that no filing, refiling, recording, re-recording, registration or
re-registration in any office for the filing, recording or registration of
interests in real property shall constitute or be deemed to constitute evidence
or an admission by Lessor or Lessee that the Equipment is real property. All
payments by Lessee to Lessor upon termination of this Leasing Agreement are
entirely allocable to the Equipment. If, notwithstanding the foregoing, any of
the Equipment shall be finally determined to be real property by any court of
competent jurisdiction, (i) such determination shall not in any way affect the
character of any of the remainder of the Equipment as personal property or in
any way affect any payment or obligation of Lessee hereunder with respect to
such remainder and (ii) the amount of any payment or obligation in respect of
Rent and payments upon termination which
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shall be attributed to such portion shall be determined in accordance with the
allocation of the Acquisition Cost for such portion.
15. Purchase of the Equipment.
(a) Optional Purchase. On the third, fourth, fifth, sixth and seventh
Anniversary Dates, Lessee may purchase all (and not less than all) of the
Equipment leased hereunder in the manner and with the consequences hereinafter
set forth. Lessee shall deliver written notice to Lessor at least 90 days prior
to an Anniversary Date, signed by an authorized officer of Lessee, stating its
intent to elect to exercise the option pursuant to this Section 15. The
consummation of the purchase of all (and not less than all) the Equipment by
Lessee must occur on the applicable Anniversary Date. If Lessee elects to
exercise such option, the purchase price for such Equipment at the third,
fourth, fifth and sixth Anniversary Dates shall be due and payable on the
applicable Anniversary Date in an amount equal to the sum of (i) the Unamortized
Value of such Equipment, plus (ii) an amount calculated by multiplying the
Unamortized Value of such Equipment by the Purchase Option Percentage, plus
(iii) Additional Rent (if any), plus (iv) the Economic Payment, if any. On the
seventh Anniversary Date, Lessee may elect to exercise its option to purchase
all (and not less than all) of the Equipment pursuant to this Section 15 by
paying a purchase price equal to (x) twenty percent (20%) of the Acquisition
Cost, plus (y) Additional Rent (if any) plus (z) the Economic Payment, if any.
The purchase price required pursuant to this Section 15 may not be financed by
another lease. The lease of the Equipment and Lessee's obligation to pay Rent
therefor shall continue until the purchase price, any due and unpaid Rent, the
Economic Payment (if any) and any other amounts due hereunder with respect to
such Equipment have been transmitted to Lessor at which time such obligations
shall terminate.
(b) Mandatory Purchase. If Lessee (i) is acquired by, or merges with, any
other entity or if Lessee sells or otherwise transfers all or substantially all
of its assets (including this Leasing Agreement) to any other entity, or (ii)
elects not to further extend the term of this Leasing Agreement beyond a then
current Extended Term, then Lessee shall be obligated to purchase all (and not
less than all) of the Equipment at a purchase price equal to the sum of (i) the
Unamortized Value, plus (ii) an amount equal to one percent (1%) of the
Unamortized Value, plus (iii) Additional Rent (if any), plus (iv) the Economic
Payment (if any). The lease of the Equipment and Lessee's obligation to pay Rent
therefor shall continue until all of the above amounts and any other amounts due
hereunder with respect to the Equipment have been transmitted to Lessor at which
time such obligations shall terminate.
(c) Conveyance of the Equipment. Upon the consummation of the purchase of
all (and not less than all) of the Equipment by Lessee pursuant to Section 15(a)
or 15(b) hereof, Lessor shall convey the Equipment to Lessee on an as-is,
where-is basis, without recourse, representation or warranty of any kind except
as to the absence of Lessor Liens.
16. Financial Information and Covenants.
(a) Financial and Other Information. Lessee shall deliver to Lessor the
following financial and other information:
(i) Promptly (and in no event later than 15 days after the filing thereof)
copies of all regular, periodic and special reports filed by Lessee with the
Securities and Exchange Commission (or any successor authority) pursuant to the
rules and regulations promulgated under the Securities Exchange Act of 1934, as
amended, or any successor statute;
(ii) (A) as soon as available, but in any event within 90 days after the
end of each fiscal year of Lessee, (1) copies of the consolidated balance sheet
of Lessee and its consolidated Subsidiaries as at the end of such fiscal year
and the related statements of consolidated earnings, consolidated stockholders'
equity and changes in consolidated financial position for such fiscal year, in
each case setting forth in comparative form the figures for the previous year,
certified without a going concern or like qualification or qualification arising
out of the scope of the audit, by independent public accountants of nationally
recognized standing; and (2) a statement of earnings for such fiscal year
reflecting a breakdown of Lessee's domestic and international sales in a form
reasonably satisfactory to Lessor; and
(B) as soon as available, but in any event within 45 days after the end of
each fiscal quarter of Lessee, (1) copies of the unaudited consolidated balance
sheet of Lessee and its consolidated Subsidiaries as at the end of such quarter
and the related unaudited statements of consolidated earnings
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and changes in consolidated financial position for such quarter and the portion
of the fiscal year through such quarter, in each case setting forth in
comparative form the figures for the corresponding periods of the previous
fiscal year, certified by the chief financial officer of Lessee as presenting
fairly the financial condition and results of operations of Lessee and its
consolidated Subsidiaries (subject to normal year-end audit adjustments); and
(2) a statement of earnings for such quarter reflecting a breakdown of Lessee's
domestic and international sales in a form reasonably satisfactory to Lessor;
all such financial statements to be complete and correct in all material
respects and prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein (except as approved by
such accountants or officer, as the case may be, and disclosed therein and
except that the financial statements referred to in clauses (A)(ii) and (iii)
and subsection (B) above need not contain footnotes);
(iii) (A) concurrently with the delivery of each set of the financial
statements referred to in Section 16(a)(ii)(A) hereof, a certificate of the
independent public accountants certifying such set of financial statements
stating that, although such examination was not conducted with a view toward
determining whether a Default or Event of Default occurred or existed, in making
the examination necessary for such certification no knowledge was obtained of
any Default or Event of Default (except as specified in such certificate) and
attaching to such certification the calculations prepared by Lessee to support
such statement in respect of Section 16(b) hereof and verifying such
calculations;
(B) concurrently with the delivery of each set of the financial statements
referred to in Sections 16(a)(ii)(A) and (B) hereof, a certificate of the chief
financial officer of Lessee (1) stating that, to the best of such officer's
knowledge, during the period covered by such set of financial statements each of
Lessee and its Subsidiaries has observed or performed in all material respects
all of its covenants and other agreements, and satisfied in all material
respects every condition, contained in this Agreement and the other Operative
Documents to be observed, performed or satisfied by it, and that such officer
has obtained no knowledge of any Default or Event of Default (except as
specified in such certificate) and (2) showing in detail the calculation
supporting such statement in respect of Section 16(b) hereof and, if applicable,
reconciliations to reflect changes in GAAP since the date hereof;
(C) as soon as available, but in any event within 15 days prior to the
beginning of each fiscal year of Lessee, a copy of the consolidated plan and
forecast of Lessee and its consolidated Subsidiaries for the next succeeding
fiscal year; and
(D) promptly such additional financial and other information (including,
without limitation, consolidating financial statements) as Lessor may from time
to time reasonably request, including, without limitation, any financial
compliance certificate and supporting documentation therefor delivered to any
other lender; and
(iv) Equipment Certificate. With each annual balance sheet, a certificate
executed by a duly authorized officer of Lessee to the effect that the Equipment
is in existence and in the condition required under the Lease Agreement;
(b) Consolidated Fixed Charge Coverage Ratio. Lessee will not permit the
Consolidated Fixed Charge Coverage Ratio at the end of any fiscal quarter for
the prior four quarters ending with the then ending fiscal quarter to be less
than 1.00:1.00; provided, however, that Lessee shall not have to satisfy the
foregoing Consolidated Fixed Charge Coverage Ratio requirement if Lessee obtains
an implied senior rating of (i) either A3 or higher from Moody's or A-or higher
from S&P on or before November 16, 1997 or (ii) either Baa3 or higher from
Moody's or BBB-or higher from S&P on or after November 17, l997. If at any time
after the requirement for satisfying the Consolidated Fixed Charge Coverage
Ratio has been eliminated Lessee shall have its implied senior rating downgraded
below the specified ratings for the corresponding time period referred to in
clause (i) or (ii) above, Lessee shall have to once again satisfy the
Consolidated Fixed Charge Coverage Ratio requirement set forth above.
17. Status of this Leasing Agreement.
(a) Lessor and Lessee agree that it is their intention that for Federal,
state and local tax purposes (i) this Leasing Agreement be treated as the
repayment and security provisions of a loan by Lessor to Lessee, (ii) Lessee be
treated as entitled to any benefits of ownership of the Equipment or any part
thereof and (iii) all payments of the Rent during (A) the Basic Term, the
Renewal Terms and the Initial
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Extended Term be treated as payments of principal and interest and (B) any
Additional Extended Term be treated as payments of interest. Each of the parties
hereto agrees that it, and all members of any affiliated group of which it is or
may become a member (whether or not consolidated or combined returns are filed
for such affiliated group for Federal, state or local tax purposes) will file
all tax returns consistent with the intended tax treatment set forth in the
preceding sentence.
(b) Lessor and Lessee intend that this Leasing Agreement be treated by
Lessee, for accounting purposes, as an operating lease.
(c) In the event that this Leasing Agreement and the transactions
contemplated hereby are determined, for any purpose, to be a financing
transaction, then in such event it is the intention of the parties hereto that
(i) this Leasing Agreement shall be treated as a security agreement or other
similar instrument (the 'Security Agreement') from Lessee, as debtor, to Lessor,
as secured party, encumbering the Equipment, and that Lessee, as debtor, hereby
grants to Lessor, as secured party, or any successor thereto, a first and
paramount Lien on and security interest in the Equipment, all additions and
attachments thereto, and replacements and substitutions therefor, and all
proceeds (including proceeds of insurance) of the foregoing, (ii) Lessor shall
have, as a result of such determination, all of the rights, powers and remedies
of a secured party available under applicable Law to take possession of and sell
(whether by foreclosure, power of sale or otherwise) the Equipment, (iii) the
effective date of the Security Agreement shall be the effective date of this
Leasing Agreement, (iv) the recording of an instrument referencing this
provision shall be deemed to be the recording of the Security Agreement and (v)
that the obligations secured by the Security Agreement shall include the
Acquisition Cost of the Equipment and any and all other obligations of and
amounts due from Lessee under the Operative Documents.
18. Mortgages. Each mortgage or deed of trust now or hereafter placed upon
the fee title to the Land or the Plant or on Lessor's interest in the Plant
Lease shall be subject and subordinate in all respects to this Leasing Agreement
and to the leasehold estate created hereby and to any permitted amendments of
this Leasing Agreement.
19. Disclaimer of Warranties. LESSEE AGREES AND ACKNOWLEDGES THAT
ACCEPTANCE OF THE EQUIPMENT FOR LEASE SHALL CONSTITUTE LESSEE'S ACKNOWLEDGMENT
AND AGREEMENT THAT LESSEE HAS FULLY INSPECTED THE EQUIPMENT, AND THAT THE
EQUIPMENT IS IN GOOD ORDER AND CONDITION AND IS OF THE MANUFACTURE, DESIGN,
SPECIFICATIONS AND CAPACITY SELECTED BY LESSEE, THAT LESSEE IS SATISFIED THAT
THE SAME IS SUITABLE FOR ITS PURPOSE, THAT LESSOR IS NOT ENGAGED IN THE SALE OR
DISTRIBUTION OF THE EQUIPMENT, THAT LESSOR HAS NOT SELECTED, MANUFACTURED OR
SUPPLIED SUCH EQUIPMENT, AND THAT LESSOR HAS NOT MADE AND DOES NOT HEREBY MAKE
ANY REPRESENTATION, EXPRESS WARRANTY, IMPLIED WARRANTY, OR COVENANT WHATSOEVER
WITH RESPECT TO TITLE, MERCHANTABILITY, CONDITION, QUALITY, DURABILITY,
SUITABILITY, OPERATION OR FITNESS OF THE EQUIPMENT IN ANY RESPECT OR IN
CONNECTION WITH, OR FOR ANY PURPOSE OR USE OF LESSEE, OR ANY OTHER
REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR CHARACTER, EXPRESS OR
IMPLIED, WITH RESPECT THERETO. Lessor shall, at Lessee's sole expense, take all
action reasonably requested by Lessee to make available to Lessee any rights of
Lessor under any express or implied warranties of any manufacturer or vendor of
the Equipment. The Lessee acknowledges and agrees that neither the manufacturer,
the supplier, nor any salesman, representative or other agent of the
manufacturer or supplier, is an agent of Lessor. No salesman, representative or
agent of the manufacturer or supplier is authorized to waive or alter any term
or condition of this Leasing Agreement and no representation as to the Equipment
or any other matter by the manufacturer or supplier shall in any way affect
Lessee's duty to pay Rent and perform its other obligations as set forth in this
Leasing Agreement.
20. Assignment by Lessor. Lessee acknowledges that Lessor may sell, assign
or grant participations in, all or part of its right, title and interest in the
Equipment as a whole and/or this Leasing Agreement to any person that, on the
date of such transaction, (i) is not a competitor of Lessee or known by Lessor
after due inquiry to be an affiliate of any such competitor (such inquiry to
include consultation with
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Lessee as to whether such person is a competitor or an affiliate of a
competitor), (ii) has a net worth (or a parent that has a net worth) of at least
$50,000,000 and (iii) is an institutional investor; provided, however, that in
no event shall (x) Lessor sell, assign or grant participations to more than four
(4) new participants (it being understood that there will never be more than
five (5) participants (including Lessor)) and (y) any participant hold an
interest in this Leasing Agreement of less than $5,000,000 at the time such
participation is granted; provided, further, that none of the above limitations
shall apply in the event of the exercise by Lessor of any rights and remedies
hereunder after the happening of an Event of Default. In connection with such
assignment, Lessee agrees to execute such documents as Lessor or its assignee
may reasonably request, including notices, acknowledgements and financing
statements. Lessee agrees that UPON NOTICE OF ANY SUCH ASSIGNMENT IT SHALL PAY
DIRECTLY TO SUCH ASSIGNEE (UNLESS OTHERWISE DIRECTED BY LESSOR) WITHOUT
ABATEMENT, DEDUCTION OR SET-OFF ALL AMOUNTS WHICH BECOME DUE HEREUNDER AND
FURTHER AGREES THAT IT WILL NOT ASSERT AGAINST SUCH ASSIGNEE ANY DEFENSE,
COUNTERCLAIM OR SET-OFF FOR ANY REASON WHATSOEVER IN ANY ACTION FOR RENT OR
POSSESSION BROUGHT BY SUCH ASSIGNEE. Upon any such assignment and except as may
otherwise be provided therein: (i) such assignee shall have and be entitled to
any and all rights and remedies of Lessor hereunder; (ii) all references in this
Leasing Agreement to Lessor shall include such assignee; and (iii) such assignee
shall not be chargeable with any obligations or liabilities of Lessor hereunder
arising prior to such assignment. Such assignment shall not diminish any of
Lessee's rights hereunder.
21. Lessee Subletting and Assignment. Subject to the last sentence of this
Section 21 and so long as no Default or Event of Default shall have occurred and
be continuing, Lessee may, without the consent of Lessor, assign or sublease all
of its rights under this Leasing Agreement with respect to all (and not less
than all) Items; provided, however, that (i) Lessee remains primarily liable
under this Leasing Agreement, and the other Operative Documents remain in full
force and effect (the obligations of Lessee being those of a principal and not
as a guarantor or surety for such sublessee's or assignee's performance); (ii)
Lessee gives Lessor written notice of such sublease or assignment at least 30
days prior to such sublease or assignment; (iii) to the extent the location of
the Items is changed, such change is made in compliance with Section 6 hereof;
(iv) the sublease or assignment and the payments thereunder shall be subordinate
in all respects to the payment of all Rent and other payments due and
obligations hereunder from Lessee to Lessor and any lease or other documentation
between Lessee and a sublessee or assignee shall contain provisions acceptable
to Lessor to reflect such subordination; (v) Lessee shall deliver to Lessor a
copy of the sublease or assignment agreements; and (vi) Lessee grants Lessor a
collateral assignment of any sublease and delivers the original of such sublease
to Lessor; provided that Lessee shall have the rights with respect to a
collateral assignment contemplated by clause (vi) except upon the occurrence and
during the continuance of an Event of Default. Notwithstanding anything to the
contrary contained herein, Lessee shall not be permitted to sublet or assign its
rights hereunder during any applicable cure period described in Section 12
hereof if such cure period has been triggered by a Default.
22. Further Assurances. Lessee, at its sole cost and expense, will promptly
and duly execute and deliver to Lessor such further documents and assurances and
take such further actions as Lessor from time to time may reasonably request,
including without limitation, the filing of protective UCC financing statements
in the jurisdictions in which the Equipment is located, in order to carry out
more effectively the intent and purpose of this Leasing Agreement and to
establish and protect the Lessor's interest in the Equipment. FBC, at its sole
cost and expense, will further duly file and record all periodic continuation
statements with respect to all UCC financing statement filings (including
precautionary filings) as and when required by applicable Law or at any earlier
legally effective time requested by Lessor and refile and rerecord any of the
foregoing as may be necessary. Lessee, at its sole cost and expense, will also
file the necessary UCC financing statements prior to any change in name or
address of Lessee's executive offices. Lessee, at its sole cost and expense,
will furnish Lessor with certificates or other evidences of the filings or
recordings or deposits and refilings and rerecordings or redeposits referred to
in this Section 22.
23. Estoppel Certificates. Lessee and Lessor shall, from time to time, upon
not less than 30 days' prior notice from the other party, execute, acknowledge
and deliver a certificate to the other party
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stating that this Leasing Agreement is unmodified and in full force and effect
(or, if there have been modifications, that this Leasing Agreement is in full
force and effect as modified, and setting forth such modifications) and the
dates to which Rent and other charges hereunder have been paid, and stating
whether or not to the best knowledge of the signer of such certificate the other
party is in default in keeping, observing or performing any covenant or
agreement contained in this Leasing Agreement and, if there be a default,
specifying each such default; it being intended that any such certificate
delivered pursuant to this Section 23 may be relied upon by the other party or
any prospective purchaser or mortgagee of its estate, but reliance on such
certificate may not extend to any default as to which the signer shall have had
no actual knowledge, after due inquiry.
24. Miscellaneous.
(a) This Leasing Agreement and all rights hereunder shall be governed by
the laws of the State of New York except to the extent that, pursuant to the
laws of the State of Georgia, the laws of the State of Georgia are mandatorily
applicable.
(b) Lessee agrees to pay or reimburse Lessor for all its reasonable
out-of-pocket costs and expenses incurred in connection with the preparation,
execution and delivery of, and any amendment, supplement or modification to,
this Leasing Agreement and any other documents prepared in connection herewith,
and the consummation of the transactions contemplated hereby and thereby,
including, without limitation, the fees and disbursements of Chadbourne & Parke,
counsel to Lessor.
(c) Each of the parties hereto acknowledges that the other party shall not
by act, delay, omission or otherwise be deemed to have waived any of its rights
or remedies hereunder or under any other instrument given hereunder unless such
waiver is given in writing and the same shall be binding to the extent therein
provided and only upon the parties signing the same. A waiver on any one
occasion shall not be construed as a waiver on any future occasion.
(d) All rights, remedies and powers granted herein, or in any other
instrument given in connection herewith, shall be cumulative and may be
exercised singularly or cumulatively.
(e) This Leasing Agreement constitutes the entire understanding or
agreement between Lessor and Lessee and there is no understanding or agreement,
oral or written, which is not set forth herein. This Leasing Agreement shall be
binding upon and inure to the benefit of the parties hereto, their permitted
successors and assignees. No executory agreement shall be effective to change,
modify or discharge, in whole or in part, this Leasing Agreement, or any other
instrument given in connection herewith unless such agreement is in writing and
signed by Lessor and Lessee.
(f) Notices to Lessee required pursuant to this Leasing Agreement shall be
delivered to First Brands Corporation at 83 Wooster Heights Road, Danbury,
Connecticut 06817, Attention: Leonard A. Dececchis, with a copy to J. Bruce Ipe,
Esq. at the same address, or at such other location as Lessee may direct in
writing. Notices to Lessor required pursuant to this Leasing Agreement shall be
delivered to Citicorp North America, Inc. at 450 Mamaroneck Avenue, Harrison,
New York 10528, Attention: Business Manager, Citicorp Bankers Leasing, with a
copy to Division Counsel, Equipment Leasing and Finance at the same address, or
at such other location as Lessor may direct in writing.
(g) Any provision of this Leasing Agreement which is unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(h) This Leasing Agreement may be executed in counterparts, each of which,
when so executed and delivered, shall constitute an original, fully enforceable
counterpart for all purposes.
(i) Either party shall, at the request of the other, execute, acknowledge
and deliver memoranda of this Leasing Agreement in recordable form.
(j) This Leasing Agreement shall constitute an agreement of lease, and
nothing herein shall be construed as conveying to Lessee any right, title or
interest in the Equipment except as a lessee only. To the extent the law of the
State of Georgia shall be applicable to such matters, it is the intent of the
parties hereto to create an usufruct and not an estate for years.
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(k) The headings and Table of Contents in this Leasing Agreement are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
(l) This Leasing Agreement cannot be cancelled or terminated except as
expressly provided herein. Lessee's obligation to pay all Rent and any other
amounts owing hereunder shall be absolute and unconditional. All obligations of
Lessee shall survive the expiration or termination of this Leasing Agreement to
the extent required for their full observance and performance.
IN WITNESS WHEREOF, Lessor and Lessee have duly executed this Leasing
Agreement as of the day and year first above written.
FIRST BRANDS CORPORATION
By: /s/ Leonard A. DeCecchis
Title: Vice President and
Treasurer
CITICORP NORTH AMERICA, INC.
By: /s/ Joseph M. Gallagher
Title: Vice President
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APPENDIX A
DEFINITIONS
As used in this Leasing Agreement, unless the context otherwise requires,
the following terms shall have the following meanings for all purposes of this
Leasing Agreement:
'Acquisition Cost' of the Equipment shall mean $33,235,651.77. The
Acquisition Cost of each Item shall be as set forth on Schedule A attached
hereto.
'Additional Extended Term' shall mean, if Lessee elects to renew the lease
hereunder in accordance with Section 2(b) hereof, the period commencing on the
day immediately following the last day of the Initial Extended Term or the then
current Additional Extended Term, as the case may be, and ending upon a date
mutually agreed upon between Lessee and Lessor.
'Additional Rent' shall mean (without duplication) any and all amounts,
indemnities, liabilities, Break Costs, Illegality Costs, and other obligations
of any kind of Lessee to Lessor under the Operative Documents, except Basic Rent
and Extended Term Rent, that Lessee assumes and agrees to pay under this Leasing
Agreement or any other Operative Document, including, without limitation,
damages for breach of any covenants, representations, warranties or agreements
herein or therein to Lessor or any other person, costs and expenses incurred by
Lessor by reason of the occurrence of a Default or Event of Default or the
exercise of remedies with respect thereto and payments owing to Lessor in
connection with terminations described in Sections 9 and l5 hereof.
'After-Tax Basis' shall mean, with respect to any payment which is to be
made on such basis, an amount which, after giving effect to (a) all Taxes which
must be paid by the payment recipient as a result of the receipt or accrual of
such payment and (b) any Tax benefits to which the Indemnitee (defined in
Section 8(a) hereof) is entitled for the Taxes or other items for which the
original payment was to have been made, will equal the original payment which
was to have been made on such basis. In calculating a payment on an After-Tax
Basis, the highest marginal Tax rates in effect for, and payable by, the payment
recipient on the date of receipt or accrual shall be used.
'Aggregate Amortization' shall mean an amount equal to the sum total of all
Amortization Figures for all of the periods for which Rent for the Equipment has
been paid.
'Agreement' or 'Leasing Agreement' shall mean this Leasing Agreement, as
the same may be amended, modified or supplemented from time to time.
'Alternative Rate' shall mean the Federal Composite AA Index of 30-Day
Dealer-Placed Commercial Paper (published by the Federal Reserve System), plus
ten basis points; provided, that the Alternative Rate shall only be the
applicable rate hereunder if Lessor determines in its sole discretion that
reasonable means do not exist for ascertaining the applicable Libo Rate and
notifies Lessee of such determination as soon as practicable thereafter.
'Amendment to the Plant Lease' shall mean the Amendment to the Plant Lease
dated as of the date hereof between Lessor and Lessee.
'Amendment to the Support Agreement' shall mean the Amendment to the
Support Agreement dated as of the date hereof between Lessor and Lessee.
'Amortization Figures' shall mean the Quarterly Amortization Figures and
the Monthly Amortization Figures (if any).
'Amortization Period' shall mean the seven year period commencing on the
Basic Term Commencement Date.
'Anniversary Date' shall mean the appropriate anniversary of the Basic Term
Commencement Date.
'Appraisal' shall mean the appraisal referred to in Section 4(g) hereof.
'Appraisal Procedure' shall mean the procedure by which an independent
appraiser shall determine the Fair Market Rental Value, the Fair Market Value or
the Contingent Rent, as the case may be. If Lessor and Lessee cannot agree on an
independent appraiser within ten days of written
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notice from one party hereof to the other party that an appraiser is to be
retained, Lessor and Lessee shall each appoint an independent appraiser within
15 days thereafter, and the two appraisers so appointed shall appoint a third
independent appraiser. The appraisers appointed pursuant to the foregoing
procedure shall, within ten days after appointment of the last appraiser,
independently determine the Fair Market Rental Value, the Fair Market Value or
the Contingent Rent, as the case may be. If Lessor or Lessee shall fail to
appoint an independent appraiser within the above-mentioned 15 day period, then
the appraiser appointed by the other party shall determine the appropriate
value. If a single appraiser is appointed, such appraiser's determination of the
appropriate value shall be final. If three appraisers are appointed, the values
determined by the three appraisers shall be averaged, the value which differs
the most from such average shall be excluded, the remaining two values shall be
averaged and such average shall be final. The fees and expenses of all
appraisers shall be paid by Lessee.
'Appraiser' shall mean Marshall and Stevens Incorporated.
'Basic Rent' shall mean, as to any Payment Date during the Basic Term and
any Renewal Term, the sum of the Quarterly Amortization Figure for the
Equipment, plus an amount computed by multiplying the following:
(i) The Unamortized Value of the Equipment on (A) in the case of the
first Payment Date hereunder, the Basic Term Commencement Date, and (B)
thereafter, the immediately preceding Payment Date (after giving effect to
any payment of Basic Rent on such date), by
(ii) A fraction having a numerator equal to the number of days in such
quarter and a denominator of 360, by
(iii) The Percentage Rental Factor, plus either (A) the LIBO Rate, or
(B) the Alternative Rate, as applicable.
'Basic Term' shall have the meaning set forth in Section 2(a) hereof.
'Basic Term Commencement Date' shall mean November 16, 1993.
'Break Costs' shall mean an amount equal to the amount (if any) required to
compensate Lessor for any losses, costs, or expenses it may reasonably incur as
a result of Lessee's payment of amounts due to Lessor pursuant to Section 9 or
15 hereof in the event Lessee exercises any of its options to either re-lease,
purchase or sell the Equipment on a date other than on a Payment Date or on an
applicable Anniversary Date.
'Business Day' shall mean a day other than a Saturday, Sunday, or other day
on which commercial banks in New York, New York are authorized or required by
law to close; provided, however, that when used in connection with the
determination of a LIBO Rate, the term 'Business Day' shall also exclude any day
on which banks are not open for dealings in deposits in U.S. Dollars on the
London interbank Eurodollar market.
'Capitalized Lease' shall mean (a) any lease of property, real or personal,
the obligations under which are capitalized on a balance sheet of Lessee; and
(b) any other such lease to the extent that the then present value of the
minimum rental commitment thereunder should, in accordance with GAAP, be
capitalized on a balance sheet of Lessee.
'CERCLA' shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act, 42 U.S.C. 9601 et seq. and as further amended from time to
time.
'Code' shall mean the Internal Revenue Code of 1986, as amended, and the
Laws promulgated or issued from time to time thereunder.
'Commonly Controlled Entity' shall mean an entity, whether or not
incorporated, which is under common control with Lessee within the meaning of
Section 414(b) or (c) of the Code.
'Consolidated Fixed Charge Coverage Ratio' shall mean, at any date of
calculation thereof, the ratio of:
(a) the sum of (i) Consolidated Net Income for the prior four quarters
ending on such date, plus (ii) depreciation and amortization for the prior
four quarters ending on such date, plus or
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minus (iii) other non-cash adjustments (i.e., LIFO Reserve Adjustments) for
the prior four quarters ending on such date, plus (iv) Operating Lease
Obligations for the prior four quarters ending on such date, plus (v) the
amount of cash interest expense for the prior four quarters ending on such
date to the extent the same was deducted from net revenues in determining
Consolidated Net Income, to
(b) the sum of (i) the current portion of long-term debt pursuant to
the balance sheet of Lessee (prepared in accordance with GAAP) for the same
date one year prior to the date of calculation; provided, however, to the
extent that such long-term debt has been refinanced with new debt during
the prior four quarters ending on such date of calculation, the appropriate
share of such current portion shall be excluded so long as the entire
current portion of the new debt is scheduled for payment after the date of
calculation, plus (ii) Operating Lease Obligations for the prior four
quarters ending on such date, plus (iii) amounts paid for capital
expenditures for the prior four quarters ending on such date, plus (iv) the
amount of cash interest expense for the prior four quarters ending on such
date to the extent the same was deducted from net revenues in determining
Consolidated Net Income.
'Consolidated Net Income' for any fiscal period of Lessee shall mean
consolidated net income or loss of Lessee and its consolidated Subsidiaries as
it would appear on a consolidated statement of income of Lessee and its
consolidated Subsidiaries for such fiscal period prepared in accordance with
GAAP.
'Contingent Rent' shall mean the amount by which (i) the Proceeds of Sale
of the Equipment pursuant to Section 9(c) hereof, or (ii) rent payments to be
received from a person unrelated to Lessor or Lessee pursuant to Section 9(d)
hereof, are less than they would have been because of abuse, damage,
extraordinary wear and tear or excessive usage. Contingent Rent shall be
determined in the first instance by mutual agreement of Lessor and Lessee within
30 days of receipt by either of notification requiring such a determination. In
the event Lessor and Lessee cannot agree within such 30 day period on the amount
of Contingent Rent due, if any, Contingent Rent shall be determined in
accordance with the Appraisal Procedure.
'Default' shall mean an event or condition which with the giving of notice
or lapse of time, or both, would constitute an Event of Default.
'Economic Payment' shall mean the payment required to be made by Lessee or
Lessor, as the case may be, to the other on the third Anniversary Date in order
to provide an overall return to Lessor under this Leasing Agreement of the LIBO
Rate plus 1.75% through the third Anniversary Date. The Economic Payment shall
be calculated as of each Payment Date during the Basic Term and shall accrue
interest, in the case of the Economic Payment to be made (i) by Lessee to
Lessor, at a per annum rate equal to the LIBO Rate plus the applicable
Percentage Rental Factor, and (ii) by Lessor to Lessee, at a per annum rate
equal to the LIBO Rate. A pro rata portion of the Economic Payment shall be
payable by Lessor or Lessee, as the case may be, to the other with respect to
sales of Item(s) pursuant to Section 9(c) hereof.
'Equipment' shall mean all of the plastic wrap and bag products
manufacturing and other equipment described in Schedule A hereto, together with
any other property or equipment title to which shall have vested in Lessor
pursuant to this Leasing Agreement. In the event that the description of any of
the Equipment in Schedule A conflicts with the description of such Equipment in
the Appraisal, the description set forth in the Appraisal shall control.
'ERISA' shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the Laws promulgated or issued from time to time
thereunder.
'Estimated Residual Amount' shall mean, at the end of the Basic Term,
twenty percent (20%) of the Acquisition Cost.
'Event of Default' shall have the meaning set forth in Section 12 hereof.
'Extended Term' shall mean the Initial Extended Term and any Additional
Extended Terms.
'Extended Term Payment Date' shall mean the twenty-fifth (25th) day of each
calendar month.
'Extended Term Rent' shall mean:
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(i) as to any Extended Term Payment Date during the Initial Extended
Term, if Lessee elects to renew the lease hereunder, rent paid on a monthly
basis in an amount equal to the Fair Market Rental Value of the Equipment,
which in no event shall be less than the sum of (x) an amortization
component which shall amortize the remaining Unamortized Value of the
Equipment in equal monthly amounts over the Initial Extended Term, plus (y)
an amount computed by multiplying the amount in (x) above by the Percentage
Rental Factor; and
(ii) as to any Extended Term Payment Date during any Additional
Extended Term, if Lessee elects to renew the lease hereunder, rent paid on
a monthly basis in an amount equal to 0.5% of the Acquisition Cost of the
Equipment.
'Facility' shall mean collectively the Equipment and all of Lessor's
right, title and interest, now owned or hereafter acquired, in and to the
Land and the Plant (including, without limitation, Lessor's leasehold
interest under the Plant Lease) and the Support Agreement.
'Fair Market Rental Value' and 'Fair Market Value' shall mean the
value that would be sustained in an arm's length transaction between an
informed and willing lessee or purchaser, as the case may be, under no
compulsion to lease or buy, as the case may be, and an informed and willing
lessor or seller, as the case may be, under no compulsion to lease or sell,
as the case may be, both being knowledgeable and neither being under any
compulsion to effectuate the transaction. Fair Market Rental Value and Fair
Market Value shall be determined in the first instance by mutual agreement
of Lessor and Lessee within 30 days of receipt by either of notification
from the other requiring such a determination. Failing agreement within
such 30 day period, Fair Market Rental Value and Fair Market Value shall be
determined in accordance with the Appraisal Procedure.
'GAAP' shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
'Governmental Action' shall mean all permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances,
licenses or exemptions that are required by any applicable Law for the full
use and operation of the Equipment.
'Governmental Authority' shall mean any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
'Illegality Costs' shall mean any amounts as may be necessary to
compensate Lessor for any losses (excluding loss of anticipated profits),
costs, interest and fees incurred by it in making any conversion of the
LIBO Rate to the Alternative Rate.
'Indebtedness' of a person shall mean (i) indebted-ness of such person
for borrowed money and (ii) obligations of such person under leases.
'Initial Extended Term' shall mean, if Lessee elects to extend the
lease hereunder in accordance with Section 2(b) hereof, the period
commencing on the day immediately following the last day of the fourth
Renewal Term and ending on such date as shall be mutually agreed upon
between Lessee and Lessor.
'Item' shall mean the items referred to as Items on Schedule A to this
Leasing Agreement and any substitutions or replacements thereto or
therefor.
'Land' shall mean the tracts or parcels of land located in
Cartersville, Bartow County, Georgia upon which the Plant is situated (or
in the case of easements covered by the Plant Lease, to which such
easements are appurtenant), more particularly described in Schedule B
hereto.
'Law' shall mean any law, statute, rule, regulation, ordinance, order,
directive, code, interpretation, judgment, decree, injunction, writ,
determination, award, permit, license, authorization, direction,
requirement or decision of and agreement with or by any government or
governmental department, commission, board, court, authority, agency,
official or officer, domestic or foreign.
'Leasing Agreement' or 'Agreement' shall mean this Leasing Agreement,
as the same may be amended, modified or supplemented from time to time.
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'Lessor Liens' shall mean any Liens which (a) result from claims
against Lessor not related or connected to the ownership, leasing, use or
operation of the Equipment, its status as lessor under this Leasing
Agreement or any other transaction contemplated by this Leasing Agreement
and the other Operative Documents, or (b) result from an affirmative act of
Lessor to create a Lien and which is neither consented to by Lessee nor
taken in connection with an Event of Default.
'LIBO Rate' shall mean, for each Rent Period, the rate per annum
(rounded upward, if necessary, to the nearest integral multiple of one
one-hundredth of one percent (1/100%)) equal to the quotient of (i) the
rate of interest per annum at which deposits in U.S. Dollars in immediately
available funds are offered to Citibank, N.A. two (2) Business Days prior
to the beginning of such Rent Period by prime banks in the interbank
Eurodollar market as at or about 10:00 a.m., New York City time, for
delivery on the first day of such Rent Period, for a period equal to 90
days during the Basic Term and any Renewal Term and 30 days during any
Extended Term and in an amount equal to the Unamortized Value as of such
date, divided by (ii) the remainder of one (1) minus the decimal equivalent
of the applicable LIBO Rate Reserve Percentage.
'LIBO Rate Reserve Percentage' shall mean the aggregate of the reserve
percentages (expressed as a decimal) established by the Board of Governors
of the Federal Reserve System and any other banking authority for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for a
member bank of the Federal Reserve System in New York City in respect of
liabilities or assets consisting of or including Eurocurrency Liabilities
(as presently defined in Regulation D of the Board of Governors of the
Federal Reserve System or in any other then applicable regulations of the
Board of Governors which prescribes reserve requirements applicable to
Eurocurrency Liabilities as so defined, in each case as in effect from time
to time) having a term equal to 90 days during the Basic Term and any
Renewal Term and 30 days during the Initial Extended Term.
'License Agreement' shall mean the License Agreement dated as of the
date hereof between Lessor and Lessee in respect of the patents and related
technological rights referred to therein, as the same may be amended,
modified or supplemented from time to time.
'Lien' shall mean any mortgage, pledge, lien, encumbrance, easement,
security interest or charge of any kind including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
financing statement filed under the UCC of any jurisdiction.
'Maximum Aggregate Termination Amount' shall mean (i) 10% of the Items
subject to this Leasing Agreement on the date hereof (based upon the
Acquisition Cost thereof) for the period commencing on the Basic Term
Commencement Date and ending on the first Anniversary Date, (ii) an
additional 5% (for an aggregate of l5%) of the Items subject to this
Leasing Agreement on the date hereof (based upon the Acquisition Cost
thereof) for the period commencing on the day immediately following the
first Anniversary Date and ending on the second Anniversary Date, (iii) an
additional 5% (for an aggregate of 20%) of the Items subject to this
Leasing Agreement on the date hereof (based upon the Acquisition Cost
thereof) for the period commencing on the day immediately following the
second Anniversary Date and ending on the third Anniversary Date, and (iv)
an additional 5% (for an aggregate of 25%) of the Items subject to this
Leasing Agreement on the date hereof (based upon the Acquisition Cost
thereof) for the period commencing on the day immediately following the
third Anniversary Date and ending upon the termination of this Leasing
Agreement.
'Minor Subsidiary' shall mean, at any time, any Subsidiary which, as
of the last day of the most recently concluded fiscal quarter of Lessee,
had total assets of $2,000,000 or less.
'Modification' shall mean any addition, alteration, improvement or
modification to any Item, other than original or replacement Parts of such
Item.
'Monthly Amortization Figure' shall mean an amount equal to the
Unamortized Value of the Equipment at the commencement of the Initial
Extended Term divided by the number of months in the Initial Extended Term.
'Moody's' shall mean Moody's Investors Service, Inc.
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'Multiemployer Plan' shall mean a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
'Operating Lease Obligations' shall mean, as of the date of any
determination thereof, the rental commitments of Lessee and its
Subsidiaries under leases for real and/or personal property (net of income
from sub-leases thereof, but including taxes, insurance, maintenance and
similar expenses which the lessee is obligated to pay under the terms of
said leases), whether or not such obligations are reflected as liabilities
or commitments on a consolidated balance sheet of Lessee and its
consolidated Subsidiaries or in the notes thereto, excluding, however,
obligations under Capitalized Leases.
'Operative Documents' shall mean this Leasing Agreement, the License
Agreement, the Termination Agreement, the Plant Lease, the Sublease and the
Support Agreement.
'Original Lease' shall mean that certain Facility Lease Agreement
dated as of September 30, 1987, as amended, between Lessor and Lessee.
'Parts' shall mean all appliances, parts, instruments, appurtenances,
accessories, accessions, furnishings and other equipment and property of
whatever nature which:
(i) are incorporated or installed in or attached to the Equipment on
the Basic Term Commencement Date, or are additions thereto, replacements
thereof or substitutions therefor permitted pursuant to Sections 5 and l0
hereof, or
(ii) may from time to time be incorporated or installed in or attached
to or located on the Equipment and which are required to maintain the
Equipment in the condition required by Section 5 hereof.
'Payment Date' shall have the meaning set forth in Section 3(a)
hereof.
'Percentage Rental Factor' shall mean (i) 1.875% for the period
commencing on the Basic Term Commencement Date and ending on the third
Anniversary Date and (ii) 1.75% thereafter; provided, however, that as to
any payment of Basic Rent due and payable on and after the third Payment
Date following the Basic Term Commencement Date, such figure shall be
reduced to 1.50% if Lessee has obtained and maintained an implied senior
rating of either Baa3 or higher from Moody's or BBB-or higher from S&P;
provided, further, however, that if at any time after the applicable
Percentage Rental Factor has become 1.50% in accordance with the
immediately preceding clause Lessee's implied senior rating drops below the
ratings referred to above, the Percentage Rental Factor shall be
immediately and automatically increased to 1.75% until such time that
Lessee again obtains and maintains an implied senior rating of either Baa3
or higher from Moody's or BBB-or higher from S&P. Any such change hereunder
(whether upward or downward) shall take effect on the next Payment Date
following the date of any applicable change in the aforesaid Moody's or S&P
implied senior rating.
'Permitted Liens' shall mean the following:
(i) the respective rights of Lessor and Lessee as herein provided;
(ii) Lessor Liens;
(iii) Liens for Taxes that either are not yet due and payable or are
being contested in good faith and by appropriate proceedings diligently
conducted, so long as
(A) such proceedings do not subject the Equipment or any Part
thereof to any significant risk of foreclosure, forfeiture or loss or
result in any significant risk of the sale of the Equipment or any Part
thereof, (B) to the extent that the aggregate amount of Liens for Taxes
under this clause (iii) exceeds $l,000,000, Lessee has adequately bonded
such excess or placed a reserve on its books in an amount equal to such
excess, (C) such proceedings do not interfere with the use, possession
or disposition of the Equipment or any Part thereof and (D) such
proceedings do not subject Lessee to any significant risk or any
unindemnified liability;
(iv) materialmen's, mechanics, workman's, repairmen's, employees',
carriers, warehousemen's and other like Liens relating to the Equipment or
any Part thereof or in connection with any Modification or arising in the
ordinary course of business for amounts that are not due in
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accordance with their respective terms or are being contested in good faith
by appropriate proceedings, so long as (A) such proceedings satisfy the
conditions set forth in clauses (iii)(A), (iii)(C) and (iii)(D) above and
(B) to the extent that the aggregate amount of such Liens exceeds $500,000,
Lessee has adequately bonded such excess or placed a reserve on its books
in an amount equal to such excess;
(v) Liens arising out of any judgments or awards against Lessee up to
$l,000,000, unless the judgment secured shall not, within 60 days after the
entry thereof, have been discharged, vacated, reversed or execution thereof
stayed pending appeal; and
(vi) any Lien or Liens not in excess of $500,000 in the aggregate with
respect to which Lessee shall have provided, to the reasonable satisfaction
of Lessor an adequate indemnity bond or other security.
'person' shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency political subdivision thereof.
'Plan' shall mean any pension plan which is covered by Title IV of ERISA
and in respect of which Lessee or a Commonly Controlled Entity is an 'employer'
as defined in Section 3(5) of ERISA or an 'affiliate' of an employer as defined
in Section 407(d)(7) of ERISA.
'Plant' shall mean the building(s) and other improvements and property
(other than the Equipment) situated on the Land, that are subject to the Plant
Lease, together at all times with any and all Parts which may from time to time
be incorporated in such building(s), and other improvements and which shall have
become subject to the Plant Lease.
'Plant Lease' shall mean the Plant Lease dated as of September 30, 1987
between Lessee, as landlord, and Lessor, as tenant, in respect of the Land and
the Plant, as amended by the Amendment to the Plant Lease, as said Plant Lease
may be further amended, modified or supplemented from time to time, including
any memorandum of lease recorded in respect thereof.
'Proceeds of Sale' shall mean the gross purchase price paid by the
purchaser in cash.
'Purchase Option Percentage' shall mean (i) 1.5% at the third Anniversary
Date, (ii) 1.00% at the fourth Anniversary Date, (iii) 0.75% at the fifth
Anniversary Date, (iv) 0.50% at the sixth Anniversary Date and (v) 0% at the
seventh Anniversary Date.
'Quarterly Amortization Figure' shall mean, as of the Basic Term
Commencement Date, $949,590.05. The Quarterly Amortization Figure shall be
appropriately adjusted to reflect (i) the sale of Item(s) pursuant to Section
9(c) hereof or (ii) an event of loss (as defined in Section 10(a) hereof) with
respect to any Item(s).
'Renewal Term' shall have the meaning set forth in Section 2(a) hereof.
'Rent' shall mean the Basic Rent, the Extended Term Rent and the Additional
Rent, collectively.
'Rent Period' shall mean (x) in the case of the Basic Term and any Renewal
Term, (i) the period commencing on the Basic Term Commencement Date and ending
on the last day prior to the first Payment Date, and (ii) thereafter, each
period commencing on any Payment Date and ending on the last day prior to the
next succeeding Payment Date, and (y) in the case of the Extended Term, (i) the
period commencing on the first day of the Initial Extended Term and ending on
the last day prior to the first Extended Term Payment Date, and (ii) thereafter,
each period commencing on any prior Extended Term Payment Date and ending on the
last day prior to the next succeeding Extended Term Payment Date.
'Reportable Event' shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
'Single Employer Plan' shall mean any Plan which is not a Multiemployer
Plan.
'S&P' shall mean Standard & Poor's Corporation.
'Subsidiary' of any person shall mean a corporation or other entity of
which shares of stock or other ownership interests having ordinary voting power
(other than stock or other ownership interests having such power only by reason
of the happening of a contingency) to elect a majority of the directors
8
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of such corporation, or other persons performing similar functions for such
entity, are owned, directly or indirectly by such person.
'Sublease' shall mean the Sublease dated as of the date hereof between
Lessor, as sublessor, and Lessee, as sublessee, as amended, modified or
supplemented from time to time.
'Support Agreement' shall mean the Easement and Support Agreement dated as
of September 30, 1987 between Lessor and Lessee, as amended by Amendment to the
Support Agreement, as said agreement may be further amended, modified or
supplemented from time to time.
'Tax' shall mean any taxes or fees imposed by any Governmental Authority or
taxing authority thereof, including, but not limited to, license, qualification,
filing and registration fees and franchise, excise, stamp, gross income, net
income, receipts, sales, use, occupation, recording, document, property
(personal and real, tangible and intangible), value-added, ad valorem, business
or any other tax of any kind, together with any and all penalties, fines,
additions to tax or interest thereon.
'Term' shall mean the Basic Term, each Renewal Term and each Extended Term,
as the case may be.
'Termination Agreement' shall mean the Termination Agreement dated as of
the date hereof between Lessor and Lessee which terminates the agreements
specified and to the extent provided therein.
'UCC' shall mean the Uniform Commercial Code in effect in the appropriate
jurisdiction.
'Unamortized Value' of the Equipment or any Item, as the case may be, shall
mean the Acquisition Cost of the Equipment or the Item, as the case may be, less
the Aggregate Amortization thereof.
'Unguaranteed Residual' shall mean (i) 14% of the Acquisition Cost for the
period commencing on the Basic Term Commencement Date and ending on the third
Anniversary Date, (ii) 15% of the Unamortized Value for the period commencing on
the day immediately following the third Anniversary Date and ending on the
fourth Anniversary Date, (iii) 16% of the Unamortized Value for the period
commencing on the day immediately following the fourth Anniversary Date and
ending on the fifth Anniversary Date, (iv) 17% of the Unamortized Value for the
period commencing on the day immediately following the fifth Anniversary Date
and ending on the sixth Anniversary Date and (v) 20% of the Unamortized Value
for the period commencing on the day immediately following the sixth Anniversary
Date and ending on the seventh Anniversary Date.
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EXHIBIT 10.6
CONFORMED COPY
EQUIPMENT LEASE AGREEMENT
DATED AS OF OCTOBER 15, 1993
BETWEEN
FIRST BRANDS CORPORATION,
AND
PNC LEASING CORP
EQUIPMENT IN
ROGERS, ARKANSAS
PLASTIC WRAP AND BAG FACILITIES A, B, C AND D
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I
LEASE TERMS................................................................................ 1
1.1 Lease of Equipment......................................................................... 1
(a) Lease.................................................................................. 1
(b) No Representations..................................................................... 1
(c) Rights Against Manufacturer............................................................ 2
1.2 Use........................................................................................ 2
(a) General................................................................................ 2
(b) Installation........................................................................... 2
(c) Quiet Enjoyment; Participant Liens..................................................... 3
1.3 Term....................................................................................... 3
1.4 Rent....................................................................................... 3
(a) Base Rent.............................................................................. 3
(b) Supplemental Rent...................................................................... 4
(c) Payments in General.................................................................... 4
ARTICLE II
COVENANTS.................................................................................. 5
2.1 Net Lease.................................................................................. 5
2.2 General Tax Indemnity...................................................................... 6
2.3 Liens...................................................................................... 12
2.4 Indemnification............................................................................ 13
(a) Scope of Indemnity..................................................................... 13
(b) Insured Claims......................................................................... 14
(c) Claims Procedure....................................................................... 15
(d) Subrogation............................................................................ 16
(e) No Guaranty............................................................................ 16
(f) Survival............................................................................... 16
2.5 Maintenance and Operation.................................................................. 16
2.6 Contest of Requirements of Law............................................................. 17
2.7 Replacement of Parts....................................................................... 17
2.8 Alterations and Modifications.............................................................. 18
2.9 Records.................................................................................... 19
2.10 Inspection................................................................................. 19
2.11 Relocation................................................................................. 20
ARTICLE III
LOSS; INSURANCE............................................................................ 21
3.1 Loss, Destruction, Requisition, etc........................................................ 21
(a) Event of Loss.......................................................................... 21
(b) Repair................................................................................. 23
(c) Application of Payments on an Event of Loss . . 23
3.2 Insurance.................................................................................. 24
(a) Type of Insurance...................................................................... 24
(b) Policies............................................................................... 25
(c) Certificates........................................................................... 26
(d) Self-Insurance......................................................................... 26
(e) Additional Insurance by Lessor and FBC................................................. 27
(f) FBC's Obligations...................................................................... 27
ARTICLE IV
</TABLE>
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<TABLE>
<S> <C> <C>
PURCHASE OPTIONS, OBSOLESCENCE............................................................. 27
4.1 Purchase or Sale Option at End of Term..................................................... 27
4.2 Purchase................................................................................... 28
(a) Purchase Price......................................................................... 28
(b) Title.................................................................................. 28
(c) Closing................................................................................ 28
(d) Designation of Other Purchaser......................................................... 28
4.3 [Intentionally Omitted].................................................................... 28
4.4 Surrender; Non-Purchase Payment............................................................ 29
(a)........................................................................................ 29
(b)........................................................................................ 30
Section 4.5 Cooperation with Sale.......................................................... 31
4.6 Option to Renew............................................................................ 32
(a) Option and Exercise; Term.............................................................. 32
(b) Extended Term Rent..................................................................... 32
(c) Other Provisions....................................................................... 32
4.7 Termination For Obsolete Items............................................................. 32
(a) General................................................................................ 32
(b) Notice of Termination.................................................................. 33
(c) Payments............................................................................... 33
(d) Limitations............................................................................ 34
4.8 Early Termination.......................................................................... 34
(a) General................................................................................ 34
(b) Payments............................................................................... 34
ARTICLE V
ASSIGNMENT AND SUBLEASE.................................................................... 35
5.1 Sublease and Assignment.................................................................... 35
5.2 Special Assignment......................................................................... 35
5.3 Transfers.................................................................................. 35
(a) Restrictions on Transfer................................................................... 35
(b) Lessor Permitted Transfers................................................................. 36
(c) Participation Interests.................................................................... 37
(d) Effect of Transfer......................................................................... 38
(e) No Partial Transfer; Number of Transferees................................................. 38
(f) Cooperation................................................................................ 38
ARTICLE VI
EVENTS OF DEFAULT.......................................................................... 39
6.1 Event of Default........................................................................... 39
6.2 Remedies................................................................................... 40
6.3 Additional Rights of Lessor................................................................ 43
(a) Waivers................................................................................ 43
(b) Performance by Lessor.................................................................. 44
ARTICLE VII
FINANCIAL INFORMATION; FURTHER ASSURANCES.................................................. 44
7.1 Financial and Other Information............................................................ 44
7.2 Further Assurances......................................................................... 45
ARTICLE VIII
CHARACTERIZATION........................................................................... 46
8.1 Characterization........................................................................... 46
ARTICLE IX
FBC REPRESENTATIONS AND WARRANTIES......................................................... 47
</TABLE>
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<TABLE>
<S> <C> <C>
9.1 FBC Representations and Warranties......................................................... 47
(a) Organization........................................................................... 47
(b) No Violation........................................................................... 47
(c) Authority.............................................................................. 47
(d) Consents............................................................................... 48
(e) Enforceability......................................................................... 48
(f) Litigation............................................................................. 48
(g) Chief Executive Office................................................................. 48
(h) Governmental Action.................................................................... 48
(i) Installation........................................................................... 49
(j) Description of Equipment............................................................... 49
(k) Environmental Matters.................................................................. 49
(l) Financial Statements................................................................... 50
(m) Taxes.................................................................................. 50
(n) No Default............................................................................. 50
(o) No Lease Defaults...................................................................... 50
(p) Margin Rules........................................................................... 50
(q) ERISA.................................................................................. 51
(r) No Offer or Solicitation............................................................... 51
(s) No Regulation.......................................................................... 51
(t) Patents and Licenses................................................................... 51
(u) Appraisal.............................................................................. 52
(v) Real Estate............................................................................ 52
(w) Brokers Fees........................................................................... 52
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF LESSOR................................................... 52
10.1 Representations and Warranties of Lessor................................................... 52
(a) Organization........................................................................... 52
(b) Authorization.......................................................................... 52
(c) Enforceability......................................................................... 53
(d) Consents............................................................................... 53
(e) Participant Liens...................................................................... 53
(f) Litigation............................................................................. 53
ARTICLE XI
CONDITIONS PRECEDENT TO LESSOR'S OBLIGATIONS ON THE CLOSING DATE 53
11.1 Conditions Precedent to Lessor's Obligations on the Closing Date........................... 53
(a) Operative Documents.................................................................... 53
(b) Uniform Commercial Code Statements..................................................... 54
(c) Evidence of Authority.................................................................. 54
(d) Opinion................................................................................ 54
(e) Appraisal.............................................................................. 54
(f) FBC Representations and Warranties..................................................... 55
(g) Certificates........................................................................... 55
(h) No Litigation or Governmental Action................................................... 55
(i) No Violation of Applicable Law......................................................... 55
(j) Consents and Approvals................................................................. 55
(k) Insurance.............................................................................. 55
(l) No Material Adverse Change............................................................. 56
(m) Requisition of Use..................................................................... 56
(n) Original Lease......................................................................... 56
(o) Participants Funding................................................................... 56
ARTICLE
</TABLE>
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<TABLE>
<S> <C> <C>
XII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF FBC............................................. 56
12.1 Conditions Precedent to FBC's Obligations.................................................. 56
(a) Operative Documents.................................................................... 57
(b) Representations and Warranties......................................................... 57
(c) Governmental Action.................................................................... 57
(d) Appraisal.............................................................................. 57
(e) Original Lease......................................................................... 57
ARTICLE XIII
MISCELLANEOUS.............................................................................. 58
13.1 Notices and Other Instruments.............................................................. 58
13.2 Separability; Binding Effect; Participation Agreements; Governing Law...................... 58
13.3 Table of Contents and Headings............................................................. 59
13.4 Counterparts............................................................................... 59
13.5 Jurisdiction............................................................................... 59
13.6 Amendments and Waivers..................................................................... 60
13.7 Knowledge.................................................................................. 61
13.8 Confidential Documents..................................................................... 61
13.9 Costs...................................................................................... 62
</TABLE>
APPENDICES, SCHEDULES AND EXHIBITS
<TABLE>
<S> <C>
Appendices
A Definitions
Schedules
1.4(a) Base Rent Schedule
2.3 Scheduled Liens
9.1(i) Equipment Locations
9.1(j) Equipment, Items and Lessor's Cost
9.1(k) Environmental Matters
9.1(t) Patents
11(0) Participants
Exhibits
A Form of Landlord's/Mortgagee's Waiver
B Form of Opinion of FBC's Special Counsel
C.1 Form of Insurance Certificate
C.2 Form of FBC's Insurance Certificate
</TABLE>
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EQUIPMENT LEASE AGREEMENT
EQUIPMENT LEASE AGREEMENT, dated as of October 15, 1993 (this 'Agreement')
between PNC LEASING CORP, a Pennsylvania corporation (together with its
successors and assigns, 'Lessor'), having an address at Sixth Avenue and Wood
Street, 34th Floor, One Oliver Plaza, Pittsburgh, Pennsylvania 15222, and FIRST
BRANDS CORPORATION, a Delaware corporation (herein, together with its successors
and assigns, 'FBC'), having an address at 83 Wooster Heights, Danbury,
Connecticut 06813-1911. Capitalized terms not otherwise defined herein are
defined in Appendix A hereto (such definitions to be equally applicable to both
the singular and plural forms of the term defined). Unless otherwise indicated,
references in this Agreement to sections, paragraphs, clauses, appendices,
schedules and exhibits are to the same contained in or attached to this
Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
LEASE TERMS
1.1 Lease of Equipment.
(a) Lease. In consideration of the rents and covenants herein stipulated to
be paid and performed by FBC and upon the terms and conditions herein specified,
Lessor hereby leases to FBC, and FBC hereby leases from Lessor, the Equipment.
The Equipment is leased to FBC (i) in its present condition without
representation or warranty by Lessor or any Participant, except as provided in
Section 1.2(c) and Article X hereof, and (ii) subject to all Applicable Laws now
or hereinafter in effect.
(b) No Representations. FBC ACKNOWLEDGES THAT IT IS HAS EXAMINED THE
EQUIPMENT, IS FULLY FAMILIAR WITH THE PHYSICAL CONDITION OF THE EQUIPMENT AND
ALL PARTS THEREOF AND HAS RECEIVED THE SAME IN CONDITION FULLY SATISFACTORY TO
IT, AND THAT THE EQUIPMENT AND ALL PARTS THEREOF COMPLY IN ALL RESPECTS WITH ALL
REQUIREMENTS OF THIS AGREEMENT. LESSOR LEASES AND FBC TAKES THE EQUIPMENT 'AS
IS' WITH ALL FAULTS, AND FBC ACKNOWLEDGES THAT NEITHER LESSOR NOR THE
PARTICIPANTS (WHETHER ACTING AS A PARTICIPANT HEREUNDER OR IN ANY OTHER
CAPACITY) HAVE MADE, NOR SHALL BE DEEMED TO HAVE MADE, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE, COMPLIANCE WITH
SPECIFICATIONS OR LEGAL REQUIREMENTS, CONDITION, MERCHANTABILITY, DESIGN,
QUALITY, DURABILITY, OPERATION OR FITNESS FOR USE OR PURPOSE OF THE EQUIPMENT OR
ANY PART THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE EQUIPMENT OR ANY PART THEREOF OR OTHERWISE, IT
BEING AGREED THAT ALL RISKS INCIDENT THERETO ARE TO BE BORNE BY FBC. IN THE
EVENT OF ANY DEFECT OR DEFICIENCY IN THE EQUIPMENT OR ANY PART THEREOF, OF ANY
NATURE, WHETHER PATENT OR LATENT, NEITHER LESSOR NOR THE PARTICIPANTS SHALL HAVE
ANY RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES (INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF
THIS SECTION 1.1(b) HAVE BEEN NEGOTIATED, AND EXCEPT AS PROVIDED IN SECTION
1.2(c) AND ARTICLE X OF THIS AGREEMENT, THE FOREGOING PROVISIONS ARE INTENDED TO
BE A COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATION OR WARRANTY BY LESSOR
OR THE PARTICIPANTS, EXPRESS OR IMPLIED, WITH RESPECT TO THIS AGREEMENT, THE
EQUIPMENT OR ANY PART THEREOF THAT MAY ARISE PURSUANT TO THE UNIFORM COMMERCIAL
CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR OTHERWISE.
(c) Rights Against Manufacturer. So long as no Event of Default has
occurred and is continuing, Lessor hereby authorizes FBC to exercise in the name
of and on behalf of Lessor the right and power to deal with each manufacturer or
supplier of the Equipment or any Part thereof and the right to receive and
enforce against such manufacturer or supplier all rights, powers, privileges and
benefits of Lessor
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with respect to such manufacturer or supplier, under any express or implied
warranty or indemnity or otherwise.
1.2 Use.
(a) General. FBC covenants and agrees that (i) it will not use the
Equipment or any Part thereof for any purpose to which the coverage of the
insurance which FBC is required to maintain hereunder does not apply, and (ii)
subject to Section 2.6 hereof, it will comply in all material respects with all
Applicable Laws relating to the use, operation and maintenance of the Items. FBC
further covenants and agrees that it will not relocate the Items during the term
hereof except in accordance with Section 2.11 hereof.
(b) Installation. The Equipment and all Parts thereof shall be and at all
times remain separately identifiable personal property, severable from any real
estate on which it is located without material damage to such Equipment or Part
thereof. FBC shall not permit the Equipment or any Part thereof to be attached
to, installed in or used, stored or maintained with, any personal property
(except other Equipment) in such manner or under any circumstances that such
Equipment or Part thereof would become an accession to or confused with such
other personal property. FBC shall not permit the Equipment or any Part thereof
to be attached to, installed in or used, stored or maintained with, any real
property in such manner or under such circumstances that any Person would
acquire any rights in such Equipment paramount or equivalent to the rights of
the Lessor by reason of such Equipment or Part thereof being deemed to be real
property or a fixture thereon. FBC will not enter into or be a party to any
lease or mortgage of any real property on which the Equipment or any Part
thereof is or is to be located unless such lease or mortgage permits the removal
of such Equipment or Part at any time free and clear of any Lien on the part of
the lessor or mortgagee, as the case may be, of such real property or unless FBC
obtains a waiver from the lessor or mortgagee that provides, in all significant
respects, Lessor the rights and privileges accorded in the waiver attached as
Exhibit A. In addition, FBC shall not allow the name of any Person (other than
Lessor and any person designated by Lessor) to be placed on the Equipment or any
Part thereof as a designation that might be interpreted as a claim of ownership
or security. Subject to the foregoing, FBC may cause the Equipment or any Part
thereof to be lettered with the names or initials or other insignia customarily
used by FBC on equipment of the same or a similar type for convenience of
identification or to identify the manufacturer.
(c) Quiet Enjoyment; Participant Liens. So long as no Event of Default has
occurred and is continuing hereunder and subject to Lessor's rights under 6.3(b)
hereof, Lessor shall not take any action to interfere with the quiet enjoyment
of the Equipment or any Part thereof by FBC and, subject to Lessor's rights
under 6.3(b) hereof, agrees that it will not directly or indirectly create,
incur, assume or suffer to exist any Participant Lien attributable to it on or
with respect to the Equipment or any Part thereof or this Agreement.
1.3 Term. The base term (the 'Base Term') for the Equipment shall commence
on October 15, 1993 (the 'Base Term Commencement Date') and continue until
October 15, 1997 (the 'Base Termination Date'), unless earlier terminated
pursuant to the provisions hereof.
1.4 Rent.
(a) Base Rent. FBC hereby agrees to pay in arrears, on each Payment Date
during the Base Term, Base Rent to Lessor for the Items. 'Base Rent' shall mean,
as to any Payment Date during the Base Term, the sum of (i) the product of (A)
Lessor's Cost for each Item then subject to this Agreement, and (B) the
percentage listed in Column 1 of Schedule 1.4(a) hereto with respect to such
Payment Date, and (ii) the product of (A) Lessor's Cost for each Item then
subject to this Agreement, (B) the percentage listed in Column 2 of Schedule
1.4(a) hereto with respect to such Payment Date, and (C) the fraction, the
numerator of which is the Base Term Percentage Rental Factor plus the LIBO Rate,
and the denominator of which is 4. 'Base Term Percentage Rental Factor' shall
mean 1.875%; provided, as to any payment of Base Rent due and payable on and
after October 8, 1994, such figure shall be reduced to 1.45% if prior to the
date of such payment FBC obtained an actual or implied senior rating of either
Baa3 or higher from Moody's Investors Service ('Moody's') or BBB-or higher from
Standard & Poor's Corporation ('S&P') (regardless of whether or not such rating
is maintained). FBC shall pay any Taxes which arise in connection with any Rent
payment to the extent it would have an indemnity obligation
6
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under Section 2.2 for such Taxes and subject to any contest rights FBC has under
Sections 2.2 and 2.6 hereof.
(b) Supplemental Rent. FBC shall pay promptly to Lessor any and all
Supplemental Rent, including Break Costs, as and when the same shall become due
and owing within the period specified herein for such payment and if no due date
therefor is so specified, within five Business Days after demand therefor. In
the event of any failure on the part of FBC to pay any Supplemental Rent, Lessor
shall have all rights, powers and remedies provided for herein or by law or
equity or otherwise in the case of nonpayment of Base Rent. 'Break Costs' shall
mean any loss or cost incurred by Lessor or any Participant resulting from any
payment (whether because of a default or otherwise) on a date other than the
last day of an applicable LIBO Period. The calculation of Break Costs shall be
made by Lessor and each Participant (as applicable), shall be provided to FBC
and shall, absent manifest error, be binding on the parties.
(c) Payments in General. All payments of Rent owed to Lessor shall be made
directly by FBC by wire transfer of immediately available funds on the date such
payment shall be due (or, if such date is not a Business Day, the next Business
Day immediately following such date) to Lessor at its account as set forth on
the execution page hereof or such other account as Lessor shall direct in a
notice to FBC at least ten (10) days prior to the date such payment of Rent is
due.
On or prior to the fifth Business Day prior to the end of a LIBO Period,
FBC shall select a LIBO Period and notify Lessor of such selection (in writing
or by telephonic or facsimile notice confirmed promptly in writing); provided
that if FBC fails to select a LIBO Period or notify Lessor as provided in this
sentence, FBC shall be deemed to have selected a LIBO Period of three months.
The LIBO Rate for a LIBO Period shall be specified by written notification (or
by telephonic or facsimile notice confirmed promptly in writing by telecopy) to
be delivered by Lessor to FBC three Business Days prior to end of the then
current LIBO Period ends and shall set forth the applicable LIBO Rate for the
new LIBO Period. The LIBO Rate shall be computed on the basis of the actual
number of days elapsed (including the first but excluding the day of payment)
over a year of 360 days.
(d) Late Payment. If any Rent shall not be paid when due, FBC shall pay to
Lessor as Supplemental Rent, interest (to the extent permitted by law) on such
overdue amount from and including the due date thereof to but excluding the date
of payment thereof at the Stipulated Interest Rate.
ARTICLE II
COVENANTS
2.1 Net Lease. This Agreement is a net lease and, except as otherwise
expressly provided herein, any present or future law to the contrary
notwithstanding, (i) FBC shall not be entitled to, and FBC waives all rights to,
any abatement, deferral, reduction, set-off, counterclaim, defense or deduction
with respect to any Rent and (ii) the obligations of FBC hereunder shall not be
affected, by reason of: any defect in the condition, quality or fitness for use
of the Equipment or any Part thereof; any damage to or destruction of the
Equipment or any Part thereof; any taking of the Equipment or any Part thereof
by condemnation or otherwise; any prohibition, limitation, restriction or
prevention of FBC's use or enjoyment of the Equipment or any Part thereof, or
any interference with such use or enjoyment by any Person; any default by Lessor
or any Participant hereunder or under any other agreement; any proceeding
relating to Lessor or the Participants; the impossibility or illegality of
performance by Lessor, the Participants, FBC or any of them; any action of any
Governmental Authority; the termination of any Operative Document or any default
thereunder; any breach of warranty or misrepresentation; any set-off,
counterclaim, recoupment, deduction, abatement, suspension, diminution,
reduction, defense or other right which FBC may have against Lessor or any
Participant or anyone else for any reason whatsoever; any change in Tax or other
laws of the United States, or any state thereof, or any political subdivision of
any of them; any change, waiver, extension, indulgence or failure to perform or
comply with, or other action or omission in respect of, any obligation or
liability of Lessor or any Participant contained in this Agreement or any other
agreement between the Lessor, the Participants and FBC; any claim that FBC has
or might have against the Lessor or the Participants; to the extent permitted by
law, any bankruptcy, insolvency, reorganization, composition, adjustment,
7
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dissolution, liquidation or other like proceeding relating to FBC, the Lessor,
the Participants or any of their respective Affiliates, or any action taken with
respect to this Agreement by any trustee or receiver of FBC, the Lessor,
Participants or any of their respective Affiliates, or by any court; any
invalidity or unenforceability or disaffirmance of this Agreement or any
provision hereof or any of the other Operative Documents or any provisions of
any thereof, in each case whether against or by FBC or otherwise, or any
infirmity herein or therein, or lack of right, power or authority of Lessor or
any Participant or any other party to enter into this Agreement, any other
Operative Document or any Participation Agreement, or any doctrine of force
majeure, impossibility, failure of consideration, or any similar legal or
equitable doctrine that FBC's obligation to pay Rent is excused because FBC has
not received and will not receive the benefit for which it bargained; any merger
or consolidation of FBC with any other entity or any sale, lease or transfer of
any or all of the assets of FBC; or any other cause whether similar or
dissimilar to the foregoing and whether or not FBC shall have notice or
knowledge of any of the foregoing, it being the intention of the parties hereto
that the obligations of FBC hereunder shall be absolute and unconditional and
separate and independent covenants and agreements and shall continue unaffected
unless such obligations shall have been modified or terminated pursuant to an
express provision of this Agreement. To the extent permitted by law, FBC agrees
not to terminate, rescind, avoid, cancel, quit or surrender this Agreement or
take any actions to do any of the foregoing, except in accordance with the
express terms hereof. FBC hereby waives, to the extent permitted by Applicable
Law, any and all rights which it may now have or which at any time hereinafter
may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or
surrender this Agreement except in accordance with the express terms hereof or
otherwise to modify or avoid strict compliance with its obligations under this
Agreement. Each payment of Rent or any other sum made by FBC hereunder shall be
final and FBC will not refuse to pay any Rent or other sum due hereunder on the
ground that Lessor or any Participant has breached its obligations hereunder or
under any Participation Agreement for any other reason. Nothing contained herein
shall prohibit FBC from bringing any legal proceeding against Lessor or any
Participant to enforce FBC's rights hereunder or from taking appropriate legal
action against Lessor or any Participant or any other person for damages by
reason of Lessor or any Participant's breach of its obligations hereunder.
2.2 General Tax Indemnity. (a) FBC shall pay, and shall indemnify and hold
harmless each Indemnified Party against, any and all Taxes imposed on or against
such Indemnified Party, FBC, or the Equipment or any Part thereof by any
Federal, state, local or foreign government or subdivision thereof or taxing
authority thereof (a 'Taxing Authority') (i) upon or with respect to the
Equipment or any Part thereof or any interest therein, (ii) upon or with respect
to the acquisition, ownership, rental, use, operation, sale, delivery,
possession, financing, transportation, maintenance, repair, return, storage,
replacement, modification, lease, sublease or disposition of the Equipment or
any Part thereof, (iii) upon or with respect to the rentals, receipts or
earnings arising from the Equipment or any Part thereof or security interests
taken in the context of the other Operative Documents, or (iv) upon or with
respect to this Agreement or any other Operative Documents, excluding, however:
(1) franchise Taxes, conduct of business Taxes and Taxes which are
imposed on, based on, or measured by gross or net income, receipts, capital
or net worth of such Indemnified Party, including, but not limited to,
alternative or add-on minimum Taxes, capital gains Taxes, Taxes on
preference items or withholding Taxes; provided, however, that if FBC moves
any of the Equipment or any Part thereof to a location outside Arkansas,
there shall not be excluded under this Section 2.2(a)(1) Taxes imposed on
gross income or gross receipts of such Indemnified Party by any state,
local or foreign government or taxing authority thereof of the
jurisdiction(s) to which such Equipment or Parts thereof have been moved (a
'New Taxing Authority') to the extent that such Taxes exceed the excess, if
any, of (i) the Taxes excludable under this Section 2.2(a)(1) that would
have been actually imposed on such Indemnified Party in Arkansas if such
Equipment or Parts thereof had remained in Arkansas over (ii) any Taxes
(other than Taxes imposed on gross income or gross receipts) actually
imposed on such Indemnified Party by any New Taxing Authority that are
excluded under this Section 2.2(a)(1); provided further, that there shall
not be excluded under this Section 2.2(a)(1) any sales or use Taxes
(including any Tax imposed under the Arkansas Gross Receipts Act or the
Arkansas Compensating Tax Act);
8
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(2) Taxes which are imposed as a result of the bankruptcy of such
Indemnified Party, or a voluntary or involuntary sale, transfer, assignment
or other disposition, whether prior to, during or after the Term, by such
Indemnified Party of any interest in the Equipment or any Part thereof
unless such sale, transfer, assignment or other disposition shall have
occurred in connection with and during the continuation of an Event of
Default; provided, however, there shall not be excluded under this Section
2.2(a)(2) any Taxes imposed on such Indemnified Party as a result of the
exercise by FBC of a purchase option pursuant to Section 4.1 or a
termination option pursuant to Sections 4.7 or 4.8;
(3) Taxes imposed by any Taxing Authority to the extent such Taxes
would not have been imposed but for the fact that such Indemnified Party
engaged in activities in the jurisdiction of such Taxing Authority
unrelated to the transactions contemplated by this Agreement; provided,
however, that there shall not be excluded under this Section 2.2(a)(3) any
sales or use Taxes; and
(4) Any interest, penalties, additions to tax or fines imposed as a
result of the failure of such Indemnified Party timely and properly to file
any report, return or statement or to comply with the applicable
requirements of any Taxing Authority, unless such failure is attributable
to (i) a prior written agreement between such Indemnified Party and FBC
that FBC shall file such report, return or statement or comply with such
applicable requirement or (ii) the failure of FBC to fulfill its obligation
under Section 2.2(d).
(5) Taxes that result from the gross negligence or willful misconduct
of such Indemnified Party; and
(6) Taxes imposed with respect to a tax period (or any portion of a
tax period) beginning after the earlier of (x) the return of the Equipment
under this Agreement (it being understood that the date the Equipment is
placed in storage as provided in Section 4.4 of the Agreement (and no
longer used by FBC) constitutes the date of return of the Equipment under
this Agreement and (y) the expiration or earlier termination of this
Agreement and the subsequent return of the Equipment to Lessor; provided,
however, there shall not be excluded under this Section 2.2(a)(6) any Taxes
imposed on such Indemnified Party as a result of the exercise by FBC of a
purchase option pursuant to Section 4.1 or a termination option pursuant to
Sections 4.7 and 4.8;
(b) (1) Notwithstanding Section 2.2(a)(1), but subject to the exclusions
provided in (a)(2), (3), (4), (5) and (6) above, if FBC moves any of the
Equipment or any Part thereof to Canada, FBC shall pay, and shall indemnify and
hold harmless each Indemnified Party against, any Taxes imposed by Canada that
are described in the first sentence of Section 2.2(a) ('Canadian Taxes') to the
extent that such Canadian Taxes exceed the amount of Taxes excludable under
Section (a)(1) that would have been actually imposed on such Indemnified Party
if all of the Equipment or any Part thereof had remained in Arkansas. For this
purpose, any Canadian Taxes shall first be reduced by any foreign tax credits
attributable to such Canadian Taxes that are used by any Indemnified Party. To
the extent that any such foreign tax credits have not been used by any
Indemnified Party at the time FBC pays an indemnity under this Section (b), the
Indemnified Party will pay to FBC the amount of any foreign tax credits that are
subsequently used by any Indemnified Party, promptly after such use. Foreign tax
credits shall be considered used in any taxable period to the extent that (i)
the hypothetical Tax liability of such Indemnified Party for such period,
determined by excluding in all periods foreign tax credits related to the
Equipment or any Part thereof and by treating in all periods any income related
to the Equipment or any Part thereof as domestic sourced, exceeds (ii) the
actual Taxes of such Indemnified Party for such period.
(2) For each relevant taxable period, Lessor and each Participant shall
provide to FBC the certificate of an officer of Lessor and such Participant
stating whether or not and to what extent any foreign tax credits attributable
in Canadian Taxes have been used by any Indemnified Party. If, within 30 days
after FBC receives the officer's certificate, FBC so requests, Lessor and each
Participant (as requested by FBC) shall provide to FBC a certificate prepared by
Lessor's and such Participant's (as applicable) regular independent auditors
stating whether or not and to what extent any foreign tax credits attributable
to Canadian Taxes have been used by any Indemnified Party. FBC shall pay any
reasonable out-of pocket costs incurred by Lessor and any Participant in
obtaining the independent auditor's certificate. The officer's certificate shall
be conclusive on the issue of whether any Indemnified
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Party has used any foreign tax credits in a relevant tax period unless FBC
requests an independent auditor's certificate, in which case the independent
auditor's certificate shall be conclusive.
(c) Any payment or indemnity under this Section shall include any amount
necessary to hold such Indemnified Party harmless on an after-tax basis from all
Taxes imposed by any Taxing Authority and required to be paid by such
Indemnified Party with respect to such payment or indemnity.
(d) (1) Except as provided in (2), FBC shall prepare any report, return or
statement required to be filed with respect to any Taxes that are subject to
indemnification under this Section (a 'Return'). FBC shall file such Return,
furnishing a copy to Lessor, unless FBC is not permitted by law to file such
Return. If FBC is not permitted to file such Return, FBC shall notify Lessor of
the filing requirement and furnish such Return to Lessor within a reasonable
time before such Return must be filed and Lessor shall file such Return. FBC
shall pay any Tax attributable to such Return (i) to the relevant Taxing
Authority, if FBC files such Return, or (ii) to Lessor, to the extent that
Lessor files such Return, in each case not later than the time such Return is
required to be filed.
(2) If any Return must include items relating to taxes not subject to
indemnification under this Section, FBC shall furnish to Lessor and each
Participant (to the extent applicable) the information needed to prepare such
Return as it relates to Taxes that are subject to indemnification under this
Section. Lessor and each Participant (as applicable) shall prepare and file such
Return on the basis of the information provided by FBC. FBC shall pay any Taxes
subject to indemnification under this Section that are shown on such Return to
Lessor and each Participant (to the extent applicable) not later than the time
such Return is filed by Lessor or such Participant.
(3) Subject to the provisions of (e), FBC shall pay any other Tax for which
FBC is liable pursuant to this Section to any Indemnified Party in immediately
available funds within 30 days of demand by such an Indemnified Party. Any such
demand shall be in writing and shall describe in reasonable detail the basis for
such demand including the facts upon which the right to payment is based, a
computation of the amount payable, and a copy of any notice received by such
Indemnified Party with respect to the Tax.
(e) If a claim is made against an Indemnified Party for any Taxes as to
which FBC shall have an indemnity obligation under this Section, whether on
audit or otherwise, such Indemnified Party shall notify FBC in writing promptly;
provided that the failure to promptly notify FBC shall not reduce FBC's
obligations hereunder except to the extent FBC is adversely affected by such
failure to notify. The Indemnified Party shall, if requested by FBC in writing
and upon reasonable notice, at FBC's option (i) permit FBC and its advisors, in
good faith and at FBC's expense, to contest such Taxes in the name of such
Indemnified Party or (ii) contest such Taxes in its own name, at FBC's expense
and reasonable good faith direction, keeping FBC fully informed as to the
progress of such contest; provided that the Indemnified Party shall not be
required to contest such Taxes in its own name under clause (ii) without its
consent unless such Taxes may not practicably be contested as contemplated under
clause (i), in which case the Indemnified Party will contest such Taxes as
contemplated under clause (ii) and the other provisions hereof and FBC and the
Indemnified Party shall cooperate to minimize the involvement of the Indemnified
Party to the greatest extent reasonably practicable; provided further that the
expenses of the Indemnified Party to be reimbursed under clause (ii) shall
include Administrative Costs. 'Administrative Costs' shall mean the internal
allocated cost of compensation and benefits (allocated on a reasonable basis) of
any employees of the Indemnified Party for the time spent by any such employees
in connection with such Tax contest (which time shall be reasonably documented).
(1) Such Taxes may be contested by (i) resisting payment thereof, (ii) not
paying the same except under protest, if protest is necessary and proper, or
(iii) if payment shall be made, using reasonable efforts to obtain a refund
thereof in appropriate administrative and judicial proceedings.
(2) FBC shall not be entitled to contest such Taxes (or direct an
Indemnified Party to contest such Taxes) to the extent that such proceedings
would involve any material risk or danger of the sale, forfeiture or loss of the
Equipment, unless FBC shall have provided alternative security to the
Indemnified Party reasonably acceptable thereto.
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(3) FBC shall not be entitled to contest such Taxes (or direct an
Indemnified Party to contest such Taxes) in a judicial proceeding unless FBC
shall have furnished (at FBC's sole expense) to such Indemnified Party an
opinion of tax counsel selected by FBC and reasonably acceptable to the
Indemnified Party ('Tax Counsel') to the effect that a reasonable basis for
contesting such claim exists.
(4) FBC shall not be entitled to contest the imposition of such Taxes
(without Lessor's consent) so long as an Event of Default has occurred and is
continuing, provided that FBC may contest such Taxes if and when such Event of
Default no longer is continuing.
(5) An Indemnified Party shall have the right to consult with FBC on all
decisions relating to indemnified claims FBC contests hereunder.
(f) If an Indemnified Party shall obtain a refund, credit or other offset
of any Taxes paid by FBC pursuant to this Section and such Indemnified Party
shall have actually benefited from any such refund, credit or offset, such
Indemnified Party shall promptly pay to FBC (i) the amount of such refund,
credit or other offset, together with any interest received by such Indemnified
Party on account of such refund, credit or other offset, and (ii) the net amount
of any Federal, state or local income taxes actually saved by such Indemnified
Party in respect of its payment to FBC of amounts referred to in clause (i)
above and its payment to FBC of amounts pursuant to this clause (ii), net of any
taxes payable by such Indemnified Party with respect to the receipt of such
refund.
(g) (1) For purposes of this section, any reference to an 'Indemnified
Party' shall mean and include any and all members of an affiliated group (as
such or any similar term is used under the applicable law) of which such
Indemnified Party is, or may become, a member if consolidated, joint or combined
returns are filed for such affiliated group with respect to the taxes in
question.
(2) For purposes of this agreement, 'Tax' or 'Taxes' shall mean any taxes
or fees imposed by any government or taxing authority thereof, including
license, filing and registration fees and franchise, excise, stamp, gross
income, net income, receipts, sales, use, property (personal and real, tangible
and intangible), value-added tax, ad valorem or any other tax of any kind,
together with any penalties, fines, additions to tax or interest thereon.
(h) At FBC's request, each Indemnified Party shall take (or cause its
Affiliates to take) any reasonable steps to minimize Taxes that would otherwise
be subject to indemnification under this section, provided that FBC will bear
any costs associated with such request, which costs shall include Adminstrative
Costs.
(i) FBC represents and warrants that the acquisition and leasing of the
Equipment is exempt from Arkansas Gross Receipt Taxes and Compensating Taxes.
Lessor shall treat such acquisition and lease as exempt in Arkansas. Lessor
retains its rights to indemnification for any such Arkansas Gross Receipt Taxes
and Compensating Taxes as provided in Section 2.2(a) (subject to the limitations
set out in Sections 2.2(a)(2), 2.2(a)(4), 2.2(a)(5), and 2.2(a)(6) and FBC
acknowledges that such indemnification rights are not limited by Section
2.2(a)(1). FBC represents and warrants that it has a valid Arkansas direct
payment exemption number.
(j) The provisions of this Section shall survive the expiration or
termination of this Agreement.
2.3 Liens. FBC will not directly or indirectly create, incur, assume or
suffer to exist any Lien on or with respect to the Equipment or any Part
thereof, except for Permitted Liens, which shall constitute the following: (i)
the respective rights of Lessor and FBC as herein provided; (ii) Participant
Liens; (iii) Liens for Taxes that either are not yet due and payable or are
being contested in good faith and by appropriate proceedings diligently
conducted, so long as (A) such proceedings do not subject the Equipment or any
Part thereof to any significant risk of foreclosure, forfeiture or loss or
result in any significant risk of the sale of the Equipment or any Part thereof,
(B) to the extent that the aggregate amount of Liens for Taxes under this clause
(iii) exceeds $1,000,000, FBC has adequately bonded such excess or placed a
reserve on its books in an amount equal to such excess, (C) such proceedings do
not interfere with the use, possession or disposition of the Equipment or any
Part thereof and (D) such proceedings do not subject Lessor or the Participants
to any significant risk of any unindemnified liability; (iv) materialmen's,
mechanics', workmen's, repairmen's, employees', carriers', warehousemen's and
other like Liens relating to the Equipment or any Part thereof or in connection
with any Modification or arising in the ordinary course of business for amounts
that are not yet due in
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accordance with their respective terms or are being contested in good faith by
appropriate proceedings, so long as (A) such proceedings satisfy the conditions
set forth in clauses (iii)(A), (iii)(C) and (iii)(D) above and (B) to the extent
that the aggregate amount of such Liens exceeds $500,000, FBC has adequately
bonded such excess or placed a reserve on its books in an amount equal to such
excess; (v) Liens arising out of any judgment or award against FBC up to
$1,000,000, unless the judgment secured shall not, within 60 days after the
entry thereof, have been dis-charged, vacated, reversed or execution thereof
stayed pending appeal; (vi) any Lien or Liens not in excess of $500,000 in the
aggregate with respect to which FBC shall have provided, to the reasonable
satisfaction of Lessor, an adequate indemnity bond or other security and (vii)
Scheduled Liens. FBC will, promptly (and in any event within 10 days of its
discovery of a Lien not excepted above), and, at its own expense, commence such
actions as may be necessary to duly remove and discharge any such Lien.
2.4 Indemnification.
(a) Scope of Indemnity. Except as otherwise expressly stated herein, FBC
hereby assumes liability for, and hereby agrees to pay, protect, indemnify,
defend, save and keep harmless each Indemnified Party from and against, any and
all liabilities, losses, damages, penalties, out-of-pocket costs, expenses and
disbursements (including, without limitation, reasonable legal and investigative
fees and expenses), causes of action, suits, claims, demands or judgments of any
nature (collectively, 'Liabilities'), which may be incurred by or imposed at any
time (whether during the term of this Agreement or thereafter) on any
Indemnified Party or the Equipment or any Part thereof or any interest of any
Indemnified Party therein (whether or not also indemnified against by any other
Person) and in any way relating to or arising out of or alleged to in any way
relate to or arise out of: (i) injury to or death of any person, or damage to or
loss of property, attributable to the Equipment or any Part thereof or connected
with the ownership, use, non-use or condition thereof; (ii) violation or breach
of this Agreement or any other Operative Document by FBC; (iii) any act or
omission of FBC or its agents, contractors, licensees, sublessees or invitees,
or any person for whom FBC is legally responsible; and (iv) the construction,
installation, manufacture, occupancy, acceptance, rejection, possession, use,
operation, leasing, subleasing, condition, maintenance, repair or abandonment of
the Equipment or any Part thereof including, without limitation, claims or
penalties arising from any violation of any Applicable Law, as well as any claim
as the result of latent, patent or other defects, whether or not discoverable by
any Indemnified Party, any claim the insurance as to which is inadequate, any
tort claim or claim for damages, specific performance or equitable relief,
including, without limitation, any claim based on strict liability in tort, or
otherwise, any claim based on products liability, or any claim or liability in
respect of any adverse environmental impact or effect; provided, however, that
the foregoing indemnity shall not extend to any Liabilities:
(A) to the extent directly resulting from the gross negligence or
willful misconduct of any Indemnified Party;
(B) any Taxes, whether or not FBC is required to indemnify the
Indemnified Party therefor under Section 2.2, it being agreed that FBC's
liability for Taxes is set forth in its entirety in Section 2.2;
(C) any Liability directly attributable to acts or events (other than
acts, omissions or events attributable to FBC including, without
limitation, any release of, or any exposure to, Hazardous Materials and
breaches by FBC of this Agreement) occurring entirely after the earlier of
(x) the return of the Equipment under this Agreement (it being understood
that the date the Equipment is placed in storage as provided in Section 4.4
of the Agreement (and no longer used by FBC) constitutes the date of return
of the Equipment under this Agreement) and (y) the expiration or earlier
termination of this Agreement and the subsequent return of the Equipment to
Lessor; or
(D) any Liability to the extent attributable directly to the
noncompliance by any Indemnified Party with any terms of, or any
misrepresentation by any Indemnified Party contained in, any Operative
Document.
(b) Insured Claims. In the case of any Liability indemnified by FBC
hereunder which is covered by a policy of insurance maintained by FBC, each
Indemnified Party agrees to cooperate with the insurers
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in the exercise of their rights to investigate, defend or compromise such
Liability as may be required to retain the benefits of such insurance with
respect to such Liability.
(c) Claims Procedure. In case any action, suit or proceeding shall be
brought against any Indemnified Party for which such Indemnified Party is
entitled to indemnification hereunder, such Indemnified Party shall notify FBC
of the commencement thereof (but the failure to do so shall not relieve FBC of
its obligation to indemnify such Indemnified Party except to the extent that FBC
or its insurer is prejudiced as a result of such failure). Subject to the rights
of insurers under policies of insurance maintained by or for the benefit of FBC,
FBC shall have the right to investigate and, if FBC states in writing to the
Indemnified Party and expressly sets forth in such writing that, based on the
facts and circumstances as then known that FBC is obligated to so indemnify
(with FBC reserving its right to take a contrary position based on factual
circumstances which may be subsequently learned by FBC, which position FBC will
promptly disclose to such Indemnified Party), the right in its sole discretion
to defend or compromise any claim for which indemnification is sought under this
Section 2.4, and at FBC's expense, the Indemnified Party shall cooperate with
all reasonable requests of FBC in connection therewith; provided, however, that
FBC shall not be entitled to assume and control the defense of any such action,
suit or proceeding if such action, suit or proceeding involves the potential
imposition of criminal liability on such Indemnified Party; provided further,
that any legal counsel appointed by FBC is reasonably acceptable to the
Indemnified Party; and provided further, in the event of an action, suit or
proceeding contemplated by the first proviso, FBC may nevertheless participate
at its own expense in such action, suit or proceeding. Where FBC or its insurers
undertake the defense of an Indemnified Party, no additional legal fees or
expenses of such Indemnified Party in connection with the defense of such claim
shall be indemnified hereunder unless such fees or expenses were incurred at the
request of FBC or such insurers. Subject to the requirements of any policy of
insurance, an Indemnified Party may participate at its own expense in any
judicial proceeding controlled by FBC pursuant to the preceding provisions;
provided that such party's participation does not, in the opinion of counsel to
FBC (which will be reasonably acceptable to Lessor) or its insurers, interfere
with such control; and such participation shall not constitute a waiver of the
indemnification provided in this Section 2.4. Notwithstanding anything in this
Section 2.4 to the contrary, in any action, suit or proceeding to which any
Indemnified Party is a party, FBC shall not enter into any settlement or other
compromise with respect to any Liability without the prior written consent of
the Indemnified Party (which consent will not be unreasonably withheld) unless
(i) such settlement fully releases such Indemnified Party or (ii) FBC
acknowledges in a writing satisfactory to such Indemnified Party such
Indemnified Party's right to full indemnification under this Section 2.4 with
respect to such Liability and such settlement is a settlement payable in full
prior to the end of the Term or, if the settlement occurs after the end of the
Term, on the date of the settlement.
(d) Subrogation. To the extent that a Liability indemnified by FBC under
this Section 2.4 is in fact paid in full by FBC and/or an insurer under a policy
of insurance, FBC and/or such insurer, as the case may be, shall be subrogated
to the rights and remedies of the Indemnified Parties on whose behalf such
Liability was paid with respect to the transaction or event giving rise to such
Liability (other than claims in respect of insurance policies maintained by such
Indemnified Party at its own expense). So long as no Event of Default has
occurred and is continuing, should an Indemnified Party receive any amount to
which FBC or its insurer is entitled pursuant to the preceding sentence, such
Indemnified Party shall promptly pay the amount received to FBC.
(e) No Guaranty. Nothing set forth in this Agreement shall constitute a
guarantee by FBC that the Equipment shall have any particular useful life or
residual value.
(f) Survival. Notwithstanding any other provision contained herein, the
obligations of FBC under this Section 2.4 shall survive the expiration or
earlier termination of this Agreement and the other Operative Documents and are
expressly made for the benefit of, and shall be enforceable by, each Indemnified
Party without the necessity of declaring this Agreement to be in default and any
Indemnified Party may initially proceed directly against FBC under this Section
2.4 without first resorting to any other rights of indemnification it may have.
All payments required to be paid pursuant to this Section 2.4 shall be made
directly to, or as otherwise requested by, the Indemnified Party entitled
thereto.
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2.5 Maintenance and Operation. FBC, at its own cost and expense, shall
maintain, operate, repair and make all Modifications to the Items in a manner
consistent with FBC's general practice as generally applicable to its other
owned and leased equipment without discrimination against the Equipment and in
accordance with good industry practice, manufacturers' warranty requirements and
specifications and FBC's established operation, maintenance and repair programs
so as to keep the Items in good working order, ordinary wear and tear excepted,
and, subject to Section 2.6, so as to comply with all Applicable Laws or
applicable Governmental Actions and so as not to incur liability (whether or not
there is a lack of compliance) under any Environmental Law or otherwise account
for any release of, or exposure to, any Hazardous Materials. Lessor shall not be
required to maintain, repair or replace any Items or Part thereof and FBC hereby
waives the right, however arising, to (i) require Lessor to maintain, repair or
replace any Item or Part thereof, or (ii) make repairs at the expense of Lessor
pursuant to any Applicable Law at any time in effect.
2.6 Contest of Requirements of Law. If, with respect to any requirement of
Applicable Law or any Governmental Action relating to the use, operation or
maintenance of any Item, (i) FBC is contesting diligently and in good faith by
appropriate proceedings such requirement or Governmental Action or (ii)
compliance with such requirement or Governmental Action shall have been excused
or a waiver, extension or forbearance exempting FBC from such requirement or
Governmental Action shall have been obtained or (iii) FBC shall be making a good
faith effort and shall be diligently taking appropriate steps to comply with
such requirement or Governmental Action; then the failure by FBC to comply with
such requirement or Governmental Action shall not constitute an Event of Default
hereunder; provided, however, that such contest or noncompliance does not
involve (A) any significant risk of (1) foreclosure, forfeiture or loss of the
Equipment or any Part thereof or (2) criminal liability being imposed on Lessor
or the Participants; or (B) any substantial likelihood of (1) the sale of, or
the creation of any Lien (other than a Permitted Lien) on, the Equipment or any
Part thereof, (2) the extension of the ultimate imposition of such Applicable
Law beyond the last day of the Term, (3) any interference with the use,
possession or disposition of the Equipment or any Part thereof or (4) any
significant risk of subjecting Lessor or the Participants to unindemnified
liability. FBC shall provide Lessor with notice of any contest of the type
described in clause (i) above in detail sufficient to enable Lessor to ascertain
whether such contest may have any material adverse effect of the type described
in the above proviso.
2.7 Replacement of Parts. FBC may, at its own cost and expense, remove in
the ordinary course of maintenance, service, repair, overhaul or testing, any
Parts, whether or not worn out, lost stolen, destroyed, seized, confiscated, or
damaged; provided, however, that FBC, except as otherwise provided in Section
2.8, will (i) at its own cost and expense, replace such Parts promptly and in no
event later than the end of the Term and (ii) make such replacements of Parts as
required to fulfill its obligations specified in Section 2.5. All replacement
Parts shall be free and clear of all Liens (except for Permitted Liens), and
shall be in as good operating condition as the Parts replaced, assuming such
replaced Parts were in the condition and repair required to be maintained by the
terms hereof; and shall have a value, utility, remaining useful life and
estimated residual value at least equal to the Parts replaced (assuming that
such replaced Parts have been maintained in accordance with the requirements of
Section 2.5); provided that such replacement does not decrease in any manner the
value, utility, remaining useful life or estimated residual value of the Item
which is subject to the replacement. All Parts at any time removed from any Item
shall remain the property of Lessor, no matter where located, until such time as
such Parts shall be replaced by Parts which have been incorporated or installed
in or attached to such Item and which meet the requirements for replacement
Parts specified above. Immediately upon any replacement Part becoming
incorporated or installed in or attached to any Item as above provided, without
further act (subject only to Permitted Liens), (a) such replacement Part shall
become subject to this Agreement and be deemed part of the Item for all purposes
hereof to the same extent as the Parts originally incorporated or installed in
or attached to such Item, and (b) the replaced Part shall no longer be deemed
part of the Item or subject to this Agreement and shall be free and clear of all
interests of Lessor. FBC shall inform Lessor of all such replacements of any
Equipment FBC and Lessor shall execute and file such instruments as the other
party may reasonably request to confirm the foregoing (including, without
limitations, UCC financing and termination statements).
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2.8 Alterations and Modifications. FBC shall make (or cause to be made) at
its own expense Modifications to each Item required by Applicable Law or
applicable Governmental Action and may at its own expense make any other
Modifications that it deems necessary or appropriate; provided that such
Modifications (other than Modifications required by Applicable Law or applicable
Governmental Action) do not decrease in any manner the utility, remaining useful
life or estimated residual value of such Item; and provided further that such
Modifications (i) do not create any Lien on the Equipment or any Part thereof,
except for Permitted Liens and (ii) are installed or made in a workmanlike
manner and in compliance with all Applicable Laws and Governmental Actions and
in accordance with insurance policies required to be maintained by FBC pursuant
to Section 3.2. With respect to Modifications which (i) are required by
Applicable Law or applicable Governmental Action, (ii) cannot be removed from
the Item without material injury or damage to the Item or any Part thereof or
(iii) the financing of which was arranged or provided by Lessor, such
Modifications shall, without further act, become subject to this Agreement and
Lessor's interest in the Item. With respect to Modifications that are neither
required by Applicable Law or applicable Governmental Action or financed by
Lessor and which can be removed from the Item without material injury or damage
to the Item or Part thereof ('FBC Modifications'), FBC Modifications shall,
without further act, vest in FBC, not subject to this Agreement or Lessor's
interests hereunder, and, subject to the last sentence of Section 2.8, FBC shall
remove such FBC Modification prior to the return of any Item or Part to Lessor.
FBC shall, immediately at the time of removal of any FBC Modification, repair
all damage caused to any Item or Part by such removal so that the Item after
such removal shall comply in all material respects with Section 2.5. All FBC
Modifications may, at Lessor's sole option and by delivering to FBC written
notice prior to the date of the return of the Equipment in accordance with this
Agreement, be purchased by Lessor at the Fair Market Sales Value thereof
(established by the Appraisal Procedure) at the end of the Term of such FBC
Modification, if (i) such Modifications have not been removed from the Item and
(ii) FBC has not exercised its rights to purchase such Item pursuant to the
terms of this Agreement.
2.9 Records. FBC shall maintain throughout the Term, and keep on file at
its offices, a current operating manual and a complete set of plans and
specifications with respect to the Items and Parts thereof, and in any event
reflecting all Parts incorporated or installed in or attached or added to the
Items and all alterations made with respect to the Items. Unless the Items shall
have been purchased by FBC or a third party in accordance with this Agreement,
upon the earlier of the expiration of the Term or the exercise of remedies
pursuant to Section 6.2, FBC shall deliver to Lessor a complete set, current as
of such date of return or exercise of remedies, of such plans and specifications
and all work drawings and similar documents with respect to the Items, including
each then current operating manual with respect to such Item and all Parts
thereof.
2.10 Inspection. At all reasonable times during normal business hours
during the Term and on reasonable prior notice to FBC (which, in the absence of
the existence of a Default or Event of Default, shall be at least 5 days notice,
and, if an Event of Default has occurred and is continuing, shall be at least
one days notice), Lessor and the Participants existing on the Closing Date or
their respective designated agents (reasonably satisfactory to FBC) may at their
own expense and risk conduct a visual inspection of the Items and may inspect
the books and records of FBC relating thereto; provided, however, that all
information obtained in connection with any such inspection shall be subject to
confidentiality arrangements and requirements prescribed by FBC. No inspection
pursuant to this Section 2.10 shall interfere in any material manner with the
use, operation or maintenance of the Items or Parts thereof or the normal
conduct of FBC's business and FBC shall not be required to undertake or incur
any additional expense or liability in connection therewith.
2.11 Relocation. Subject to the other terms and conditions of this
Agreement and so long as no Material Default or Event of Default has occurred
and is continuing and there is no breach of Section 2.3 with respect to the Item
or Part in question, FBC may change the location of any Item or Part thereof
from its then current location to another location in the United States or
Canada owned or leased by FBC without the consent of Lessor; provided that (i)
FBC shall notify Lessor of such change of location no later than 30 days
following such change in location (except in the case of a change in location to
Canada where notice shall be given at least 60 days prior to such change), which
notice shall specify the actions taken by FBC to protect Lessor's interest in
such Items or Parts as contemplated hereunder and (ii) if the real property on
which the Item or Part thereof is relocated is subject to a lease
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or mortgage which does not permit the removal of such Item or Part at any time
free and clear of any Lien on the part of the lessor or mortgagee of such real
property, FBC shall, within 30 days following such change in location, provide
Lessor with a landlord's or mortgagee's waiver in substantially the form
attached hereto as Exhibit A permitting such removal. FBC shall make such
filings or recordings as are necessary to protect, in light of such changed
location, Lessor's perfected, first priority interest in the Item or Parts
thereof as contemplated hereunder and such other filings or recordings as Lessor
deems reasonably necessary; provided that, in any event, in the case of
relocation of the Item or Part thereof to Canada, FBC will make all such filings
and recordings prior to such relocation in a manner reasonably satisfactory to
Lessor and, if the Lessor's Cost of the Items or Parts be moved to Canada
exceeds $5 million, FBC shall deliver to Lessor an opinion of counsel, which
opinion and counsel is reasonably acceptable to Lessor, to the effect that the
Lessor has a first priority perfected security interest in such Items or Parts
(provided that such opinions may contain customary assumptions and rely on such
factual information as is deemed appropriate). Notwithstanding anything to the
contrary contained herein, so long as no Event of Default has occurred and is
continuing, FBC may, without the consent of Lessor, deliver possession of any
Item or Part thereof to the manufacturer thereof or to any Person for testing,
service, repair, maintenance or overhaul work on such Item or Part or for
alterations or modifications in or additions to such Item or Part thereof to the
extent required or permitted by this Agreement; provided that FBC shall not
deliver such Item or Part to any such Person if there is a significant risk that
a Lien (other than a Permitted Lien) will attach to such Item or Part.
ARTICLE III
LOSS; INSURANCE
3.1 Loss, Destruction, Requisition, etc.
(a) Event of Loss. Upon the occurrence of an Event of Loss in respect of
any Item, FBC shall promptly give Lessor written notice of such Event of Loss
(which notice shall describe the Event of Loss in reasonable detail) and, within
60 days after such occurrence, FBC shall give written notice to Lessor of its
election to make payment or substitution as provided in clause (i) or (ii) of
this Section 3.1(a); provided, however, that if immediately after the Event of
Loss, (A) the Items then subject to this Agreement (excluding those subject to
the Event of Loss) constitute less than one-third of the Items subject to this
Agreement on the date of this Agreement (based upon the Lessor's Cost thereof)
or (B) the Items then subject to this Agreement (excluding those subject to the
Event of Loss) are not capable of operating together to manufacture plastic bags
in the manner in which such Items were used prior to the Event of Loss without
the addition of additional material item(s) of equipment, then FBC shall either
(x) pay the amount provided in clause (i) with respect to all Items then subject
to this Agreement, (y) elect to substitute in accordance with clause (ii) in
such a manner as the conditions in (A) and (B) above are satisfied or (z)
deliver to Lessor an irrevocable notice and election to purchase on the
Termination Date (as in effect on the date of the Event of Loss) all of the
Items then subject to this Agreement (excluding those subject to the Event of
Loss) in accordance with the terms hereof (and to make payment for those Items
subject to the Event of Loss in accordance with clause (i)); provided further
that FBC shall have no right to substitute under clause (ii) below (A) if a
Material Default or an Event of Default exists on the Substitution Date (defined
below) or (B) during the last 12 months of the Term (as such Term may be
extended pursuant to Section 4.6 hereof prior to the Substitution Date). FBC
shall:
(i) on the Payment Date next following the earlier of (A) the 180th
day following the occurrence of such Event of Loss or (B) the receipt of
all insurance proceeds relating to such Event of Loss (the 'Event of Loss
Payment Date'), pay to Lessor (without duplication) (A) the Termination
Value for such Item determined as of the Event of Loss Payment Date; (B)
all Base Rent and Extended Term Rent for such Item due and owing on or
prior to the Event of Loss Payment Date and (C) all Supplemental Rent
relating to such Item due and owing on the Event of Loss Payment Date; or
(ii) prior to the first anniversary of the date of the Event of Loss
(the 'Substitution Date'), substitute no later than the Substitution Date
for the Item subject to an Event of Loss any item of equipment of the same,
similar or improved model or series, having a value, utility, remaining
useful life and estimated residual value at least equal to, and being in as
good operating condition
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as, the Item to be replaced assuming such replaced Item was of the value
and utility and in the condition and repair required by the terms hereof
immediately prior to the Event of Loss and otherwise complying with all
other requirements of this Agreement with respect to the Items; provided
that FBC shall provide such information as reasonably requested by Lessor
regarding such substitution and, if the Lessor's Cost of the Item(s) being
replaced in connection with an Event of Loss exceeds $5,000,000, if
requested by Lessor, provide to Lessor prior to the Substitution Date
evidence reasonably satisfactory to Lessor that the replacement Item meets
the conditions set forth in this clause (ii) (it being agreed that an
appraisal in accordance with the Appraisal Procedure will be reasonably
satisfactory evidence); provided further that if FBC shall fail to perform
its obligations to effect such substitution on or before the Substitution
Date, FBC shall give Lessor notice to such effect and shall instead
promptly make the payments specified in clause (i) above.
Nothing in this subsection (a) shall be construed to reduce, forgive or
otherwise limit the obligation of FBC to pay Rent, including Base Rent and
Extended Term Rent, on such dates as it becomes due, at any time prior to the
Event of Loss Payment Date but subsequent to the Event of Loss.
At such time as Lessor shall have received the payments specified in clause
(i) above with respect to an Item(s), (1) the obligation of FBC to pay Base Rent
and Extended Term Rent hereunder with respect to such Item(s) for any period
commencing after the Event of Loss Payment Date shall terminate, (2) this
Agreement as regards to such Item(s) shall terminate (except with respect to
obligations and liabilities of FBC under Sections 2.2 and 2.4 hereof, which have
arisen on or prior to such date, which shall survive such termination), and (3)
Lessor will transfer to FBC or, at the direction of FBC, another Person, without
recourse or warranty (except as to the absence of Participant Liens), all of the
Lessor's interest in and to such Item(s) and any insurance proceeds relating
thereto (other than with respect to insurance maintained by the Lessor or
Participants at their own expense), and FBC will be subrogated to all claims of
Lessor and the Participants, if any, against third parties (other than with
respect to insurance maintained by Lessor and the Participants at their own
expense), for damage to or loss of such Item. At such time as FBC shall
substitute for an Item which is the subject of an Event of Loss in accordance
with clause (ii) above, such substituted Item shall, without further act, become
subject to this Agreement and Lessor's interest hereunder, and Lessor shall
transfer to FBC, or at the direction of FBC, another Person, without recourse or
warranty (except as to the absence of Participant Liens), all of Lessor's
interest in and to such Item which is the subject of the Event of Loss and any
insurance proceeds relating thereto (other than with respect to insurance
maintained by Lessor or the Participants at their own expense), and FBC will be
subrogated to all claims of Lessor and the Participants, if any, against third
parties (other than with respect to insurance maintained by Lessor or any
Participant at their own expense) for damage to or loss of such Item.
Any insurance or condemnation proceeds received by FBC in connection with
an Event of Loss and prior to the Event of Loss Payment Date or the Substitution
Date, as applicable, shall be placed in escrow for the benefit of Lessor until
FBC has fulfilled its obligations under clause (i) or (ii) above; provided that
if FBC has elected to substitute in accordance with this Section 3.1, so long as
no Material Default or Event of Default exists, such proceeds shall be released
from escrow as necessary to fund the cost of the replacement Item as such costs
arise.
(b) Repair. In the event of any damage or loss to an Item not constituting
an Event of Loss, FBC shall promptly repair such Item at its own expense to the
standards required by Section 2.5 hereof and such repairs shall be sufficient to
ensure that the fair market value, utility, remaining useful life and estimated
residual value of the repaired Item is at least equal to that of such Item prior
to such damage or loss.
(c) Application of Payments on an Event of Loss. Payments received by
Lessor, any Participant or FBC from any Governmental Authority, insurer or other
Person as a result of an Event of Loss shall be applied as follows (unless the
Item(s) subject to the Event of Loss are being replaced or substituted in
accordance with this Section 3.1, in which case the payments shall be applied as
specified in this Section 3.1):
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(i) all such payments shall be promptly paid to Lessor for application
pursuant to the following provisions of this Section 3.1(c), except that
FBC may retain any amounts that at such time FBC and Lessor agree would be
payable to FBC under the provisions of clauses (ii) or (iii) below;
(ii) so much of such payments (applying any payments from insurers
before any payments from other Persons (including Governmental
Authorities)) as shall not exceed the amount of Termination Value and other
amounts required to be paid by this Section 3.1 as a result of FBC's
election to make the payments specified in Section 3.1(a)(i) shall be
applied in reduction of FBC's obligation to pay such amount if the same has
not already been paid by FBC or, if the same has already been fully paid by
FBC, shall be applied to reimburse FBC for its payment of such amount; and
(iii) the balance, if any, of such payments shall be paid over to, or
retained by, FBC.
3.2 Insurance.
(a) Type of Insurance. FBC will maintain in full force and effect at all
times during the Term at its own expense the following insurance:
(i) 'All Risk' Property Insurance against direct loss of or damage to
the Items due to fire, flood, lightning, boiler explosions and such other
risks, which at the time are customarily included under 'All Risks'
Property Insurance, in amounts sufficient to prevent Lessor, the
Participants or FBC from becoming a co-insurer of any loss and in an amount
not less than the Termination Value (excluding amounts specified in clauses
(b) and (c) of the definition of Termination Value) for the Items, provided
that flood insurance may be maintained in an amount not less than
$50,000,000 covering all properties owned or leased by FBC).
(ii) General public liability insurance against claims for bodily
injury, death or property damage arising out of the Items and in the amount
of $10,000,000 for any one occurrence, whether bodily injury, death or
property damage, or in such greater amounts as shall be reasonably
satisfactory to Lessor.
(iii) Workers' compensation insurance, to the extent required by
Arkansas law (or such other state or province as the Items may be situated
during the term of this Agreement).
(iv) Such other insurance as FBC may maintain with respect to other
owned or leased equipment used in similar locations.
FBC shall cause an insurance broker of national reputation to deliver to
Lessor on the Closing Date a certificate of insurance, executed by an authorized
agent or representative of FBC's insurer, certifying to the existence of and
setting forth in reasonable detail the particulars as to all insurance required
to be maintained by FBC hereunder.
(b) Policies. All insurance described in Section 3.2(a) shall be in such
form and with such insurance companies as shall be satisfactory to Lessor and
shall name Lessor, the Participants and any Persons designated by Lessor and
having an insurable interest in the Items as additional insureds with respect to
liability insurance and lender loss payees with respect to property insurance.
Every policy referred to in Section 3.2(a) (other than any workers' compensation
and automobile liability) shall insure the interest of each named insured
thereunder (other than FBC) regardless of (A) any breach or violation by FBC of
any warranties, declarations or conditions contained in such policies, (B) the
use of the Items or any Part thereof for purposes more hazardous than permitted
by the terms of the policy, (C) any foreclosure or other proceeding or notice of
sale relating to the Items or any Part thereof, or (D) any change in the title
to or ownership of the Items or any Part thereof. No insurer under a policy
described in the preceding sentence shall have any right of recovery or
subrogation against Lessor or the Participants or any recourse against it for
payment of any premiums or for assessments under any mutual form of policy. Each
policy (other than workers' compensation and automobile liability) shall also
(i) expressly provide that all of the provisions thereof, except the limits of
liability thereunder (which limits shall be applicable to all insureds as a
group) and liability for premiums (which shall be solely a liability of FBC),
shall operate in the same manner as if they were a separate policy covering each
insured, (ii) provide that property insurance proceeds for any loss shall be
payable to Lessor, (iii) be primary without right of contribution from any other
insurance carried by Lessor or the Participants, (iv)
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expressly provide that if such insurance is canceled or terminated for any
reason whatever, or any substantial changes made in the coverage which affects
the interest of Lessor the Participants, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation, termination, change or lapse
shall not be effective as to Lessor or the Participants for 30 days after
receipt by Lessor, of written notice from such insurers of such cancellation,
termination, change or lapse, (v) permit Lessor to make payments to effect the
continuation of such insurance coverage upon notice of cancellation due to
nonpayment of premium, and (vi) provide that the insurers shall waive any rights
of subrogation against Lessor and the Participants. Each general public policy
shall (i) in the case of any other insurance purchased by any party other than
FBC be specifically excess over the insurance provided for in such policy, (ii)
expressly provide that if such insurance is canceled or terminated for any
reason whatever, such cancellation, termination or change shall not be effective
as to the Lessor or Participants for 30 days after receipt by Lessor of written
notice from such insurers of such cancellation, termination or change, and (iii)
permit Lessor to make payments to effect the continuation of such insurance
coverage upon notice of cancellation due to non-payment of premium. FBC will (x)
immediately upon receipt of notice from an insurer of any cancellation,
termination, material change or lapse for nonpayment of premium of any policy,
provide immediate telephonic notice thereof, to be confirmed in writing by
facsimile or express service guaranteeing overnight delivery, to Lessor and (y)
cause any insurer under any general public liability policy to provide direct
notice to Lessor of any such cancellation, termination, material change or lapse
prior to the effective date of such cancellation, termination, change or lapse.
(c) Certificates. FBC shall deliver to Lessor certificates of insurance,
reasonably satisfactory to Lessor, evidencing the existence of all insurance
which is required to be maintained by FBC hereunder. Such deliveries shall be
made (i) upon the execution and delivery hereof, (ii) within 120 days of the end
of each fiscal year of FBC, and (iii) upon the reasonable request of Lessor. Any
property insurance required hereunder may be provided under blanket policies,
provided that the Items are specifically covered thereby, such blanket policies
otherwise comply with the provisions of this Section 3.2, and such policies
provide for a reserved amount thereunder with respect to the Items so as to
assure that the amount of insurance required by the provisions of Section 3.2
will be available notwithstanding any losses with respect to other property
covered by such blanket policies.
(d) Self-Insurance. Notwithstanding the provisions of this Section 3.2, FBC
may maintain self-insurance on a non-discriminatory basis with respect to
policies covering its Equipment in up to a maximum of $1,000,000 (the 'Property
Amount') against the risks described in Section 3.2(a)(i) and up to a maximum of
$1,000,000 (the 'Liability Amount') against the risks described in Section
3.2(a)(ii) and the preceding provisions of this Section 3.2 shall not apply to
any such self-insurance maintained by FBC; provided that the Property Amount
shall be reduced to $500,000 and the Liability Amount shall be reduced to
$250,000 during the continuance of one of the following:
(i) a Material Default;
(ii) an Event of Default; or
(iii) the Consolidated Net Worth of FBC is below $50 million as
reflected on FBC's latest balance sheet delivered pursuant to Section 7.1.
Within 30 days following the occurrence of (x) a Material Default or Event of
Default or (y) delivery of FBC of the balance sheet contemplated by Section 7.1
which reflects a Consolidated Net Worth of FBC of below $50 million (and
provided such event in (x) or (y) is continuing on such 30th day), FBC shall
reduce any self-insurance to conform with the proviso to the preceding sentence.
(e) Additional Insurance by Lessor and FBC. FBC may at its own expense and
for its own account carry insurance with respect to its interest in the Items in
amounts in excess of that required to be maintained by this Section 3.2. Lessor
and any Participant may carry for its own account at its sole cost and expense
insurance with respect to its interest in the Items; provided, however, that (i)
Lessor or such Participant has provided FBC with notice that it intends to carry
such insurance (other than with respect to general or 'blanket' type insurance
not specific to the Equipment) and (ii) such insurance does not prevent FBC from
carrying the insurance required or permitted by this Section 3.2 or adversely
affect such insurance or the cost thereof.
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(f) FBC's Obligations. The requirements of and rights under this Section
3.2 shall not in any way negate or modify FBC's obligations under Section 2.4.
ARTICLE IV
PURCHASE OPTIONS, OBSOLESCENCE
4.1 Purchase or Sale Option at End of Term. FBC shall have, at the end of
the Term, the right to elect to either (a) purchase all (but not less than all)
of the Items subject to this Agreement on the Termination Date as provided in
Section 4.2 ('Option 1'); or (b) surrender all (but not less than all) of the
Items subject to this Agreement on the Termination Date to Lessor as provided in
Section 4.4 ('Option 2'). FBC shall give Lessor irrevocable written notice of
FBC's intent to exercise either Option 1 or Option 2 at least 120 days prior to
the Termination Date (subject to the last sentence of Section 4.6(a). If FBC
fails to properly notify Lessor of its election as provided in the preceding
sentence, FBC will be deemed to have irrevocably elected Option 1.
4.2 Purchase.
(a) Purchase Price. The purchase price for any purchase under Option 1
shall be equal to the Purchase Price Percentage of Lessor's Cost of such Items.
(b) Title. If FBC purchases the Items pursuant to Option 1, Lessor need not
convey any better title thereto than existed on the Closing Date, and FBC shall
accept such title subject to (i) the state of title to each Item and Part
thereof on the Closing Date, (ii) the condition of each Item and Part thereof on
the date of purchase, (iii) all charges, liens, security interests and
encumbrances on any Item or Part thereof (other than any Participant Liens) and
(iv) all Applicable Laws.
(c) Closing. On the Purchase Date for any Item purchased by FBC pursuant to
Option 1, FBC shall pay to Lessor the purchase price specified herein for such
Item, together with all Rent and other sums due and payable hereunder to and
including such date of purchase, and Lessor shall upon receipt of the foregoing
amounts deliver to FBC a bill of sale conveying to FBC without recourse or
warranty the title to such interest described in Section 4.2(b) and any other
instruments reasonably necessary to assign such Item or any other property
required to be assigned by Lessor to FBC pursuant hereto. FBC shall pay all
charges incident to any conveyance of the Items to FBC or its designee,
including, without limitation, counsel fees, escrow fees, recording fees and all
Taxes which may be imposed on Lessor by reason of the transfer and which are
payable by FBC pursuant to 2.2. Upon the completion of such purchase, this
Agreement shall terminate, except with respect to obligations and liabilities of
FBC (including obligations under Sections 2.2 and 2.4 hereof), actual or
contingent, which have arisen on or prior to such date, which obligations shall
survive such termination.
(d) Designation of Other Purchaser. If FBC is to purchase the Items
pursuant to Section 4.1(a) of this Agreement, FBC may designate a third party to
which title to any such Item or Items shall be conveyed in accordance with the
terms and conditions of this Agreement; provided that no such designation shall
relieve FBC of any obligations imposed on FBC under this Agreement.
4.3 [Intentionally Omitted].
4.4 Surrender; Non-Purchase Payment.
(a) If FBC has elected Option 2, FBC shall, as directed by Lessor prior to
the Termination Date and at FBC's expense and with reasonable care, (i)
dismantle, remove, crate, insure, ship and return the Items and all Parts
thereof to Lessor to a location, within 500 miles of Rogers, Arkansas (with
respect to any Items or Parts) or 500 miles of such Item's or Part's present
location (with respect to such Item or Part only), in each case reasonably
designated by Lessor or (ii) relinquish possession of the Equipment to Lessor or
its designee and permit Lessor or its designee to use the Equipment in place at
the demised premises (as defined the Site Lease) in conjunction with, and
subject to the terms of, the Site Lease; provided that in the case of clause
(ii), if any Items or Parts have been removed from the demised premises, at the
request of Lessor, FBC shall return such Items or Parts to the demised premises
and, if reassembly of such Items or Parts would result in a material increase in
the value of such Items or Parts and is commercially reasonable, FBC shall
reassemble such Items or Parts. In the case of clause (i), at the time of
delivery of the Items, to the extent FBC has complied with its obligations
hereunder in all material respects, and all Parts thereof to the location
reasonably designated by Lessor, the Items and
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all Parts thereof shall be free and clear of all Liens (other than Participant
Liens), shall be clean and otherwise in the condition required hereby and in as
good operating condition, with all Parts fully functional, as when delivered to
FBC hereunder, ordinary wear and tear excepted, and shall be free of all FBC
advertising or insignia placed thereon. Until such date as the Items and Parts
thereof are delivered to the location designated by Lessor or stored on behalf
of Lessor (and for a period of not more than 90 days following the later of (x)
the Termination Date or (y) the date on which such Equipment is actually
returned to the Lessor), the obligations of FBC under this Agreement (other than
to pay Rent following the Termination Date), including but not limited to the
obligations to insure the Items and all Parts thereof, shall remain in full
force and effect and FBC hereby expressly assumes all risks of loss relating to
the transfer of the Items and all Parts thereof pursuant to this Agreement. FBC
shall deliver to Lessor (or its designee) all plans and specifications,
operating manuals and all other information and documentation necessary or
advisable to be obtained to operate the Items or any Part thereof. If Lessor
provides 60 days notice to FBC prior to the Termination Date, FBC shall defer
such return and will store the Items or any Parts thereof or arrange for storage
of such Items or Parts thereof without charge to Lessor for a period not to
exceed 90 days and, if FBC has in its reasonable judgment suitable storage space
on its premises, requests, FBC shall store the Items or any Parts thereof for an
additional 90 days (the 'Storage Period'). During any such Storage Period, FBC
shall, so long as the Equipment remains in place at the demised premises in
Rogers, Arkansas, bear the costs of maintenance and insurance for the Items or
any Part being stored. If FBC fails to dismantle and deliver the Items or any
Part thereof in accordance with the terms of this Section 4.4, Lessor shall have
the right, at FBC's sole cost and expense, to dismantle or cause to be
dismantled, and deliver or cause to be delivered the Items or any Part thereof
in accordance with the terms of this section. Following the transfer of control
and as provided in clause (ii) of the first sentence of this Section 4.4(a) at
the end of the Storage Period all risks of loss, duty to insure, and maintenance
shall become the responsibility of Lessor or its designee.
(b) On the date which is the earlier of (x) 90 days following the
Termination Date and (y) the date the Items are sold by Lessor (which sale date
shall not be prior to the Termination Date and shall be with at least 5 days
prior notice to FBC) ('End of Term Adjustment Date'):
(i) if no sale of the Items has occurred prior to or on the End of
Term Adjustment Date, FBC shall make a Final Rent payment equal to the
Adjustment Percentage times the Lessor's Cost of the Items subject to this
Agreement at the end of the Term;
(ii) if a sale of the Items has occurred prior to or on the End of the
Term Adjustment Date and the Net Proceeds (as defined below) of such sale
exceeds the Purchase Price Percentage times the Lessor's Cost of such
Items, an amount of the Net Proceeds equal to the Purchase Price Percentage
times the Lessor's Cost of such Items shall be retained by Lessor and the
balance of the Net Proceeds shall be paid to FBC as an adjustment to Rent
previously paid hereunder; and
(iii) if a sale of the Items has occurred prior to or on the End of
Term Adjustment Date and the Net Proceeds of the sale are less than the
Purchase Price Percentage times the Lessor's Cost of such Items, Lessor
shall retain such Net Proceeds and FBC shall pay to Lessor as a Final Rent
payment the difference between the Net Proceeds and an amount equal to the
Purchase Price Percentage times the Lessor's Cost of such Items; provided
in no event shall the amount paid by FBC under this clause (iii) with
respect to such deficiency exceed the product of the Adjustment Percentage
times the Lessor's Cost of such Items.
If the Items are sold by Lessor after the End of Term Adjustment Date,
and after FBC has paid the final Rent payment as contemplated in this
Section 4.4(b), the Net Proceeds of the Items shall be first applied by
paying therefrom to Lessor an amount up to the product of Lessor's Risk
Percentage (defined below) times the Lessor's Cost of the Items, and any
Net Proceeds of the sale in excess of such amount shall be paid to FBC.
Following receipt of FBC's notice that it has elected Option 2 and
conditioned upon FBC's having complied in all material respects with its
obligation under this Agreement, including its duty to return or transfer
control of the Equipment to Lessor, Lessor shall in good faith attempt to
sell or lease the Equipment in a commercially reasonable manner.
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'Net Proceeds' shall mean the proceeds of any sale or lease of the
Items after deducting all reasonable costs and expenses or commissions
incurred by Lessor in transporting, reconditioning, protecting, storing or
insuring the Equipment pending sale, and after deducting and paying to
Lessor interest on Lessor's unrecovered loan balance, calculated at the
rate of interest announced by PNC Bank, National Association from time to
time as its 'prime' rate, for the period from the Termination Date until
the date of the receipt of the proceeds of the sale.
'Lessor's Risk Percentage' shall mean the difference between the
Purchase Price Percentage and the Adjustment Percentage.
Section 4.5 Cooperation with Sale. (i) If FBC exercises Options 2 and
(ii) during an Event of Default, FBC shall (during the last 120 days of the
Term in the case of (i) and at any time requested in the case of (ii)
cooperate in all reasonable respects with efforts of Lessor to lease or
sell the Items or any Part thereof. Such cooperation will include aiding
potential lessees or buyers to inspect and test the Items or any Part
thereof (subject to FBC's established safety regulations), providing full
and complete access to, and, to the extent reasonable, necessary and at the
expense of Lessor in the case of (i) and the expense of FBC in the case of
(ii), copies of, all records, plans and specifications and manuals required
to be maintained by FBC pursuant to Section 2.9 hereof, at a time or times
reasonably convenient to FBC and, subject to confidentiality agreements;
provided that FBC shall not be required for such purpose to materially
interfere (or to permit any such material interference) with the lease,
operations or maintenance of the Items or any Part thereof or the normal
conduct of FBC's business or to incur material out-of-pocket expenses for
which it is not reimbursed; provided further, that Lessor shall give FBC at
least five (5) days notice prior to its disclosure to any prospective
lessee or purchase of the Items or any Part thereof of any information
furnished by FBC to Lessor which has been designated as 'confidential' by
FBC.
4.6 Option to Renew.
(a) Option and Exercise; Term. Upon expiration of the Base Term, so long as
no Event of Default has occurred and is continuing, FBC shall have the option
(the 'Renewal Option') to extend the term of this Agreement with respect to all
(but not less than all) of the remaining Items for an Extended Term. The
'Extended Term' shall commence on October 16, 1997 and continue until one of the
following dates selected by FBC in its discretion: (i) April 15, 2000, or (ii)
October 15, 1998. In the event FBC desires to extend the term of this Agreement,
FBC shall provide written notice (the 'Extension Notice') to Lessor not less
than 120 days prior to the expiration of the Base Term, which notice shall
specify the applicable term selected by FBC; provided, in the event Lessor or
the Participants existing on the Closing Date (in their reasonable opinion)
determine that FBC's financial condition has changed in a materially adverse
manner from the date of this Agreement, Lessor or such Participants may, by
written notice within 15 days after its receipt of the Extension Notice, prevent
FBC's exercise of the Renewal Option; provided, FBC may, during the 30 day
period commencing upon its receipt of such notice preventing its exercise of the
Renewal Option, exercise one of the options set forth in Section 4.1.
(b) Extended Term Rent. If FBC elects to exercise its option to extend the
term of this Agreement pursuant to Section 4.6(a) above, FBC agrees to pay in
arrears, on each Payment Date during the Extended Term, Extended Term Rent to
Lessor for each Item. 'Extended Term Rent' shall mean, as to any Payment Date
during the Extended Term, the sum of (i) the product of (A) Lessor's Cost for
each Item then subject to this Agreement, and (B) the percentage listed in
Column 1 of the Extension Schedule hereto with respect to such Payment Date, and
(ii) the product of (A) Lessor's Cost for each Item then subject to this
Agreement, (B) the percentage listed in Column 2 of the Extension Schedule
hereto with respect to such Payment Date, and (C) the fraction, the numerator of
which is the Extended Term Percentage Rental Factor plus the LIBO Rate, and the
denominator of which is 4. 'Extended Term Percentage Rental Factor' shall mean
1.55%.
(c) Other Provisions. All other provisions of this Agreement shall be and
remain in effect during the Extended Term.
4.7 Termination For Obsolete Items.
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(a) General. Subject to Section 4.7(d) at any time any Item is determined
in good faith by FBC to be obsolete, uneconomic or surplus to the needs of FBC
for any reason (each Item as to which such a determination has been made being
an 'Obsolete Item'), FBC may elect to terminate this Agreement with respect to
such Obsolete Item upon satisfaction of all of the requirements of this Section
4.7; provided that as a condition to such termination, the Obsolete Item must be
sold to a person (who shall not be FBC, an affiliate of FBC or any person acting
as buyer for FBC or an affiliate of FBC); and provided further that FBC shall
deliver to Lessor a certificate executed by an Authorized Officer setting forth
the basis for such obsolescence. Upon the satisfaction of the requirements of
this Section 4.7 for a termination of this Agreement with respect to an Item
(including the payments under 4.6 hereof), the Base Rent and Extended Term Rent
for such Obsolete Item shall cease to accrue and the Term for such Obsolete Item
shall terminate.
(b) Notice of Termination. To exercise its right to terminate this
Agreement with respect to any Obsolete Item as provided in this Section 4.7, FBC
shall provide Lessor with (i) notice in writing at least 30 days prior to the
Payment Date on which FBC elects to terminate this Agreement with respect to
such Obsolete Item (the 'Obsolescence Date'), such notice to specify the
Obsolescence Date and (ii) an officer's certificate of FBC as to the
determinations referred to in Section 4.7(a). It shall be a condition to the
right to terminate this Agreement as described in this Section 4.7 that, on the
date of the notice described in the preceding section, no Material Default or
Event of Default exists. FBC may, at its option by written notice to Lessor,
revoke any such notice of termination, in which event this Agreement shall not
terminate and FBC shall bear the reasonable out-of-pocket expenses incurred by
Lessor in connection therewith.
(c) Payments. As a condition to the sale of any Obsolete Item hereunder and
termination of this Agreement with respect to such Obsolete Item, FBC shall pay
on the Obsolescence Date to Lessor in immediately available funds (without
duplication), (A) an amount equal to the Termination Value for such Obsolete
Item as of the Obsolescence Date, (B) all Rent due and owing on or prior to the
Obsolescence Date, and (C) an amount equal to the reasonable fees and expenses
of Lessor incurred, if any, in connection with such sale. Upon payment to Lessor
of such amounts, in immediately available funds, Lessor shall sell all right,
title and interest of Lessor in and to the Obsolete Item to such Person
designated by FBC free and clear of Participant Liens and this Agreement and the
obligations (other than those set forth in Sections 2.2 and 2.4) with respect to
such Obsolete Item hereunder shall terminate concurrently with such sale. On the
Obsolescence Date, Lessor shall execute and deliver to such Person a bill of
sale and such other instruments and documents as such Person or FBC may
reasonably request to evidence the valid consummation of such transfer.
(d) Limitations. If immediately after any termination of this Agreement in
accordance with this Section 4.7 with respect to any Item, (i) the Items then
subject to this Agreement would constitute less than one-third of the Items
subject to this Agreement on the date of this Agreement (based upon the Lessor's
cost thereof) or (ii) the Items then subject to this Agreement would not be
capable of operating together to manufacture plastic bags in the manner in which
such Items were used prior to the termination without the addition of additional
material item(s) of equipment, then FBC shall, in connection with the
termination under this Section 4.7, either (A) terminate this Agreement with
respect to all Items subject to this Agreement (which termination will be
permitted) or (B) deliver to Lessor an irrevocable notice and election to
purchase on the Termination Date (which date need not be specified in such
notice) all of the Items then subject to this Agreement in accordance with the
terms hereof.
4.8 Early Termination.
(a) General. Upon at least 30 days notice, on the Payment Date on or next
following the second and third anniversaries of this Agreement (each, an 'Early
Termination Date'), FBC may elect to terminate this Agreement, and repurchase
all (but not less than all) of the Equipment. Upon satisfaction of the
requirements of this Section 4.8, the Base Rent and Extended Term Rent for the
Equipment shall cease to accrue and the Term for the Equipment shall terminate.
(b) Payments. As a condition to the termination of this Agreement and
repurchase of the Equipment, on an Early Termination Date, FBC shall pay to
Lessor in immediately available funds (without duplication) (A) an amount equal
to the Termination Value for the Items as of such Early
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Termination Date, (B) all Rent (including, without limitation, any Break Costs)
due and owing on or prior to such Early Termination Date, and (C) an amount
equal to the reasonable fees and expenses of Lessor incurred, if any, in
connection with such purchase. Upon payment to Lessor of such amounts, the
Participants shall sell all right, title and interest in and to the Equipment to
FBC (or another Person designated by FBC) free and clear of all Participant
Liens, and this Agreement and the obligations (other than those set forth in
Section 2.2 and 2.4 hereof) shall terminate concurrently with such sale. On such
Early Termination Date, Lessor shall execute and deliver FBC (or another Person
designated by FBC) a bill of sale and such other instruments and documents as
such Person may reasonably request to evidence the valid consummation of such
transfer.
ARTICLE V
ASSIGNMENT AND SUBLEASE
5.1 Sublease and Assignment. So long as no Material Default or Event of
Default has occurred and is continuing, FBC may, without the consent of Lessor,
assign all (but not less than all) and sublease all or any portion of its rights
under this Agreement with respect to any Item or Items; provided, however, that
(i) FBC remains principally liable under this Agreement, and the other Operative
Documents remain in full force and effect (the obligations of FBC being those of
a principal and not as a guarantor or surety for such sublessee's or assignee's
performance); (ii) FBC gives Lessor written notice of such sublease within 30
days prior to such sublease; (iii) to the extent the location of any Item or
Part is changed, such change is made in compliance with Section 2.11; (iv) the
sublessee or assignee expressly agrees in writing that the sublessee or assignee
is subject to and subordinated to the terms of this Agreement and shall not
extend past the Termination Date, (v) FBC shall deliver to Lessor a copy of the
sublease or assignment agreements and (vi) FBC grants Lessor a collateral
assignment of any sublease and delivers the original of such sublease to Lessor;
provided that FBC shall have the rights with respect to the sublease or
assignment except upon the occurrence and during the continuance of an Event of
Default.
5.2 Special Assignment. So long as no Default or Event of Default has
occurred and is continuing (unless such Default or Event of Default is cured in
connection therewith), FBC may, in addition to assignments permitted under
Section 5.1 hereof, with the prior consent of Lessor (which consent will not be
unreasonably withheld), assign all or any of its rights under this Agreement
with respect to the Items.
5.3 Transfers
(a) Restrictions on Transfer. Without the prior written consent of FBC,
Lessor shall not assign, convey or otherwise transfer (whether by consolidation,
merger, sale of assets or otherwise) any of its interest in the Equipment or
this Agreement or any other Operative Document except as and to the extent
permitted by, and in accordance with the terms and conditions of, Section
5.3(b); provided that Section 5.3(c), and not Section 5.3(b), shall govern with
respect to the sale of a participation interest in Lessor's interests hereunder.
Each Participation Agreement shall provide that any transfer by a Participant
shall only be made in accordance with Section 5.3(c).
(b) Lessor Permitted Transfers. Subject to subsection (e), Lessor may,
without the consent of FBC, transfer any portion of its interest in the
Equipment and this Agreement to any Person (a 'Transferee') only in compliance
with and upon satisfaction of the following conditions:
(i) The Transferee shall be (A) a financial institution, corporation,
leasing company or other institutional investor whose net worth (calculated
in accordance with GAAP) at the time is at least $50,000,000 (or the
obligations of which are guaranteed by an institutional investor whose net
worth (calculated in accordance with GAAP) at the time is at least
$50,000,000 pursuant to a guarantee in form and substance reasonably
satisfactory to FBC), or (B) (1) an Affiliate of Lessor, which Affiliate
shall be a corporation and (2) either (x) Lessor shall guarantee the
obligations of such Affiliate as Lessor under the Operative Documents
pursuant to a guarantee in form and substance reasonably satisfactory to
FBC or (y) such Affiliate shall have a net worth (calculated in accordance
with GAAP) at the time of such transfer of at least $50,000,000.
(ii) No such transfer shall violate any provision of, or create a
relationship which would be in violation of, any Applicable Law, including,
without limitation, applicable securities laws, any
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agreement to which the Transferee is a party or by which it or any or its
property is bound, and no such transfer shall involve, directly or
indirectly, the assets of any pension plan.
(iii) No such transfer shall be made to any Person if such Person or
any Affiliate thereof is a Competitor.
(iv) FBC shall receive at least 10 days prior written notice of such
transfer, which notice shall specify (A) such information and evidence as
shall be reasonably necessary to establish compliance with this Section
5.3, (B) the extent of the interest to be transferred, and (C) the name and
address (for the purpose of giving notice as contemplated by the Operative
Documents) of the Transferee.
(v) Lessor or the Transferee shall pay all reasonable fees, expenses,
disbursements and costs (including legal and other professional fees and
expenses) incurred by FBC in connection with any transfer pursuant to this
Section 5.3.
(vi) Lessor or the Transferee shall have delivered to FBC an opinion
of counsel in form and substance reasonably satisfactory to it, as to: the
due authorization, execution and delivery of the agreements contemplated by
this Section 5.3; the enforceability of the Operative Documents against the
Transferee; and as to the matters referred to in Section 5.3(b)(ii).
(c) Participation Interests. Subject to subsection (e), (i) Lessor may,
without the consent of FBC, grant a participation interest in any portion of its
interest in the Equipment and this Agreement to any Person (a 'New Participant')
and (ii) any Participant existing on the Closing Date may, without the consent
of FBC, transfer all or part of its interest in the Equipment and this Agreement
to any Person (also a 'New Participant'), in each case only in compliance with
and upon satisfaction of the following conditions:
(i) The New Participant shall be (A) a financial institution,
corporation, leasing company or other institutional investor whose net
worth (calculated in accordance with GAAP) at the time is at least
$50,000,000 (or the obligations of which are guaranteed by an institutional
investor whose net worth (calculated in accordance with GAAP) at the time
is at least $50,000,000 pursuant to a guarantee in form and substance
reasonably satisfactory to FBC), or (B) (1) an Affiliate of Lessor or such
Participant (as applicable), which Affiliate shall be a corporation and (2)
either (x) Lessor or such Participant (as applicable) shall guarantee the
obligations of such Affiliate as Lessor or such Participant (as applicable)
under the Operative Documents pursuant to a guarantee in form and substance
reasonably satisfactory to FBC or (y) such Affiliate shall have a net worth
(calculated in accordance with GAAP) at the time of such transfer of at
least $50,000,000, or (C) such other Person as is consented to by FBC, such
consent not to be unreasonably withheld.
(ii) No such transfer shall be made to any Person if such Person or
any Affiliate thereof is a Competitor.
(iii) FBC shall receive at least 10 days prior written notice of such
transfer, which notice shall specify (A) such information and evidence as
shall be reasonably necessary to establish compliance with this Section
5.3, (B) the extent of the interest to be transferred, and (C) the name and
address (for the purpose of giving notice as contemplated by the Operative
Documents) of the Transferee.
(d) Effect of Transfer. From and after any transfer effected in
accordance with this Section 5.3, the transferring party shall be released,
to the extent of the obligations assumed by the Transferee or New
Participant, as the case may be, from its liability hereunder and under the
other Operative Documents to which it is or will be a party in respect of
obligations to be performed on or after the date of such transfer. Upon any
transfer by Lessor in accordance with this Section 5.3(b), the Transferee
shall be deemed the 'Lessor' for all purposes of the Operative Documents,
shall have all rights and obligations under such Operative Documents, from
the date of the transfer. Notwithstanding the foregoing, in no event shall
the obligations of FBC be increased or FBC's rights decreased and the
obligations of FBC to such transferring party under Sections 2.2 and 2.4 of
this Agreement shall survive in full.
(e) No Partial Transfer; Number of Transferees. Except for the sale of
participation interests in accordance with Section 5.3(c), Lessor shall not
transfer less than all of its interest in the Equipment or this Agreement.
In no event shall Lessor sell participations to more than two New
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Participants nor shall any Participant existing on the Closing Date
transfer any portion of its interest to more than two New Participants (it
being understood that there will never be more than 8 Participants (in
addition to the Lessor)); provided that each Participant and Lessor shall
at all times hold an interest in this Lease Agreement of at least
$5,000,000. New Participants shall in no event be entitled to transfer
their interests unless Lessor and the Participants enter into an agreement
(reasonably satisfactory to FBC) that provides that there will be no more
then 8 Participants (in addition to the Lessor) at any one time and all
Participants and Lessor will at all times hold an interest in this Lease
Agreement of at least $5,000,000.
(f) Cooperation. FBC agrees that it shall, to the extent reasonably so
requested by Lessor or a Participant, use reasonable best efforts to assist
such Lessor or Participant in effecting any transfer in accordance with
this Section 5.3. FBC shall, upon the written request of Lessor or a
Participant in connection with a proposed transfer, specify (i) whether any
proposed Transferee or New Participant is a Competitor and (ii) the basis
therefor; provided that if FBC does not respond to such request within 10
days following receipt of such request, such proposed Transferee or New
Participant will not be deemed a Competitor for purposes of Section 5.3(b)
or 5.3(c) with respect to such proposed transfer.
ARTICLE VI
EVENTS OF DEFAULT
6.1 Event of Default. Any of the following occurrences or acts shall
constitute an event of default (an 'Event of Default') under this Agreement:
(a) FBC shall fail to pay any Base Rent or Extended Term Rent as and
when due hereunder, and such failure shall continue for 10 days after the
date such payment is due; or
(b) FBC shall fail to pay any Supplemental Rent as and when due
hereunder, and such failure shall continue for 10 days after the date such
payment is due; or
(c) FBC shall fail to maintain the insurance specified in this
Agreement; or
(d) FBC shall fail to observe or perform any other material term,
provision or covenant herein or in the other Operative Documents, except if
such failure will not materially adversely affect the value, utility,
remaining useful life and estimated residual value of the Items and such
failure shall continue for 60 days (the 'cure period') after the earlier of
written notice to FBC of such failure or knowledge by FBC of such failure;
provided, however, that if any such failure cannot reasonably be cured by
the payment of money and cannot with diligent efforts be cured within the
cure period, if FBC commences promptly to cure the same and thereafter
prosecutes such cure with diligent efforts and if Lessor consents (which
consent shall not be unreasonably withheld), the cure period shall be
extended for one or, with the consent of Lessor (which consent will not be
unreasonably withheld), more additional 30-day periods of time as may be
necessary for such cure; or
(e) if any representation or warranty of FBC contained in any
Operative Documents or set forth in any certificate required under the
Operative Documents to be delivered by FBC to Lessor shall prove to be
incorrect or misleading as of the time when the same shall have been made;
provided, however, that if the representation or warranty was originally
given by FBC in good faith, an Event of Default shall not be deemed to
exist unless the inaccurate representation or warranty remains material to
Lessor at the time such inaccuracy is discovered and, if capable of being
cured, remains uncured for a period of 30 days after receipt by FBC of a
written notice from Lessor advising FBC of such inaccuracy; or
(f) if FBC files a petition in bankruptcy or for reorganization or for
an arrangement pursuant to any federal or state bankruptcy law or any
similar federal or state law, or is adjudicated a bankrupt or becomes
insolvent or makes an assignment for the benefit of creditors or admits in
writing its inability to pay its debts generally as they become due, or if
a petition or answer proposing the adjudication of FBC as a bankrupt or its
reorganization pursuant to any federal or state bankruptcy law or any
similar federal or state law is filed in any court and FBC consents to or
acquiesces in the filing thereof or such petition or answer is not
discharged or denied within 90 days after the filing thereof; or
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(g) if FBC shall (A) default in the payment of principal of or
interest on any of its Credit Agreement Indebtedness or (B) default in the
observance or performance of any other agreement or condition relating to
any Credit Agreement Indebtedness, or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist thereunder, and the effect of such default
described in (A) or (B) is to cause such Credit Agreement Indebtedness to
become due prior to its stated maturity pursuant to an automatic
acceleration thereunder or pursuant to an acceleration upon actions of the
lenders thereunder. 'Credit Agreement Indebtedness' means money borrowed
pursuant to the Amended and Restated Credit Agreement, dated as of
September 20, 1991, among FBC, Manufacturers Hanover Trust Company and the
several lenders parties thereto, as the same may be amended, modified,
restated or supplemented and any replacement credit facilities thereof (it
being understood that neither this Agreement nor any other Operative
Document shall give Lessor or any Participant the right to consent to any
such amendment, modification, restatement, supplement or replacement); or
(h) if a receiver, trustee or liquidator of FBC or of all or
substantially all of the assets of FBC or of the Items or FBC's estate
therein is appointed in any proceeding brought by FBC, or if any such
receiver, trustee or liquidator is appointed in any proceeding brought
against FBC and is not discharged within 90 days of such appointment.
6.2 Remedies. Upon the occurrence of any Event of Default and at any time
thereafter so long as the same shall be continuing, Lessor may, at its option,
declare this Agreement to be in default by giving written notice to FBC; and at
any time thereafter, Lessor may do one or more of the following with respect to
the Equipment as Lessor in its sole discretion shall elect, to the extent
permitted by, and subject to compliance with any mandatory requirements of,
applicable law then in effect:
(a) In connection with its exercise of the remedies set forth in (b),
demand that FBC, and FBC shall upon prior written demand of Lessor and at
FBC's expense, promptly surrender possession of the Equipment to Lessor in
the manner and condition required by, and otherwise in accordance with
Section 4.4; or Lessor, at its option, may enter upon the location where
the Equipment may be found and take immediate possession thereof by summary
proceedings or otherwise, and all without liability to Lessor for or by
reason of such entry or taking of possession.
(b) Sell any Item or any Part thereof to an unaffiliated party in an
arms length transaction at such times and in such manner as Lessor shall in
good faith determine maximizes the value of any Item or any Part thereof,
subject, however, to FBC's right to pay Termination Value and acquire
Lessor's interest in the Items prior to Lessor entering into a written
commitment with respect to any sale of any such Item or Parts thereof.
(c) By written notice to FBC designating a payment date which shall be
a Payment Date not earlier than 10 days from the date of such notice (the
'Designated Payment Date'), demand that FBC pay to Lessor, and FBC shall
pay to Lessor, on the Designated Payment Date, as liquidated damages and
not as a penalty (in lieu of the Base Rent and Extended Term Rent for the
Items due for periods beginning on and after the Designated Payment Date),
an amount equal to (without duplication) (i) Termination Value computed as
of the Designated Payment Date, (ii) interest at the Stipulated Interest
Rate on the amount specified in (i) from the Designated Payment Date until
the date of actual payment, (iii) any unpaid Base Rent and Extended Term
Rent through such Payment Date, (iv) any costs, fees (including reasonable
attorney fees), expenses and liabilities incurred by Lessor and (v) all
other amounts then due and payable by FBC hereunder (including, without
limitation, any Supplemental Rent). Upon such payments to Lessor, the
Lessor shall transfer, at the sole cost and expense of FBC, to FBC, the
Lessor's interests in the Items as contemplated in Section 4.2(b).
(d) In the event Lessor, pursuant to clause (b), shall have sold the
Items or any Part thereof or interest therein, in lieu of exercising its
rights under clause (c) with respect thereto, if Lessor shall so elect,
Lessor may demand that FBC pay to Lessor and FBC shall pay to Lessor as
liquidated damages, and not as a penalty (in lieu of the Base Rent and
Extended Term Rent due for all periods beginning on and after the Payment
Date next following the date on which such sale occurs) on the Payment Date
next following such sale (provided FBC shall be given at least 10 days
notice), (i) any unpaid Base Rent and Extended Term Rent though such
Payment Date, (ii) the
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amount of the excess, if any, of (A) the Termination Value over (B) the net
proceeds (after payment of all out-of-pocket expenses of Lessor) of the
sale, (iii) interest at the Stipulated Interest Rate on the amount
specified in (ii) from the Payment Date until the date of actual payment
and (iv) all other amounts due and payable by FBC hereunder (including,
without limitation, any Supplemental Rent).
(e) Subject to FBC's right to pay Termination Value and acquire
Lessor's interest in the Items, Lessor may, in lieu of exercising its
rights under clause (c) or (d) with respect to any Item, by written notice
to FBC designating a payment date (also a 'Designated Payment Date') which
shall be a Payment Date not earlier than 10 days from the date of the
determination of Fair Market Sales Value (in accordance with the Appraisal
Procedure) of such Item, demand that FBC pay to Lessor, and FBC shall pay
to Lessor, on the Designated Payment Date, as liquidated damages and not as
a penalty (in lieu of the Base Rent and Extended Term Rent for such Item
due for periods beginning on and after the Designated Payment Date), an
amount equal to (without duplication) (i) the excess of Termination value
of such Item computed as of the Designated Payment Date over the Fair
Market Value of such Item (as determined by the Appraisal Procedure), (ii)
any unpaid Base Rent and Extended Term Rent through such Payment Date,
(iii) any costs, fees (including reasonable attorney's fees), expenses and
liabilities incurred by Lessor and (iv) all other amounts then due and
payable by FBC hereunder (including, without limitation, any Supplemental
Rent); provided that the remedy specified in this clause (e) shall only be
exercisable to the extent Termination Value equals or exceeds Fair Market
Sales Value. On such Designated Payment Date, FBC shall deliver such Item
(if Lessor shall not have otherwise taken possession thereof) to Lessor in
accordance with Section 4.4.
(f) Demand (without duplication of any payment made pursuant to (a)
through (e) above) that FBC compensate Lessor and the Participants for any
actual damages suffered by and expenses incurred by Lessor or such
Participant arising from FBC's default under this Agreement.
(g) Exercise any other right or remedy which may be available to it
under applicable law or proceed by appropriate court action to enforce the
provisions hereof or to recover damages for the breach hereof or to rescind
or terminate this Agreement.
In addition, FBC shall be liable, except as otherwise provided above, for any
and all unpaid Rent due hereunder before or during the exercise of any of the
foregoing remedies and for all legal fees and other costs and expenses incurred
by reason of the occurrence of any Event of Default or the exercise of Lessor's
remedies with respect thereto. Upon Lessor's exercise of the foregoing remedies
and the payment in full of all amounts provided therein (without duplication)
and all amounts set forth in the preceding sentence, FBC's obligation to pay
Base Rent and Extended Term Rent shall terminate.
Notwithstanding anything to the contrary contained in this Section 6.2,
Lessor shall not, in connection with the exercise of its remedies, be entitled
to receive or retain amounts (whether from the sale of Items or Parts, payment
of Rent, payment of amounts specified above or otherwise) in excess of the sum
of the following: (x) any costs, expenses or liabilities (including reasonable
legal fees and expenses) incurred by Lessor or any Participant as a result of,
and in connection with, such Event of Default or the exercise by Lessor of its
remedies hereunder; (y) Termination Value; and (z) (without duplication) any
unpaid Rent. In the event that Lessor receives amounts in excess of the amounts
contemplated by the preceding sentence, Lessor shall promptly pay such excess to
FBC.
6.3 Additional Rights of Lessor.
(a) Waivers. Except as otherwise expressly provided herein, no remedy
referred to in this Agreement is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to Lessor at law or in equity; and the exercise or beginning of
exercise by Lessor of any one or more of such remedies shall not preclude the
simultaneous or later exercise by Lessor of any or of all such remedies. No
express or implied waiver by Lessor of any Event of Default shall in any way be,
or be construed to be, a waiver of any future or subsequent Event of Default. No
failure by Lessor to insist upon the strict performance of any term hereof or to
exercise any right, power or remedy consequent upon a breach thereof, and no
acceptance of full or partial Rent during the continuance of such breach, shall
constitute a waiver of any such
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breach or of any such term. No waiver of any breach shall affect or alter this
Agreement, which shall continue in full force and effect, or the rights of
Lessor with respect to any other then existing or subsequent breach. Each right,
power and remedy of Lessor provided for in this Agreement or now or hereafter
existing at law or in equity or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power or remedy
provided for in this Agreement or now or hereafter existing at law or in equity
or by statute or otherwise. To the extent permitted by Applicable Law, FBC
hereby waives any right of redemption, reentry or prepossession and the benefits
of any laws now or hereafter in force exempting property from liability for rent
or for debt. Nothing herein shall be deemed to affect the right of Lessor to
indemnification for liabilities pursuant to Sections 2.2 and 2.4. No expiration
or termination of this Agreement, and no exercise of any remedy pursuant to this
Agreement, and no repossession of any Item or any Part thereof pursuant to this
Agreement or otherwise, shall relieve FBC of its liabilities and obligations
under Sections 2.4 or 2.2, all of which shall survive such expiration,
termination or repossession.
(b) Performance by Lessor. If FBC fails to make any payment of Rent
required to be made by it hereunder or fails to perform or comply with any of
its agreements contained herein, Lessor may (but without any obligation to do
so), with written notice to but without demand upon FBC and without waiving any
Default or Event of Default or releasing FBC from any obligation, itself make
such payment or perform or comply with such agreement, and the amount of such
payment and the amount of the reasonable expenses of Lessor incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, shall be deemed Supplemental Rent, payable by FBC
in accordance with Section 1.4(d).
ARTICLE VII
FINANCIAL INFORMATION; FURTHER ASSURANCES
7.1 Financial and Other Information. FBC shall deliver to Lessor and the
Participants the following financial and other information:
(a) Promptly (and in no event later than 15 days after the filing thereof)
copies of all regular, periodic and special reports filed by FBC with the
Securities and Exchange Commission (or any successor authority) pursuant to the
rules and regulations promulgated under the Securities Exchange Act or any
successor statute; or
(b) At such time as FBC no longer is subject to such reporting requirements
of the Securities and Exchange Commission as referred to in subsection (a)
above, FBC shall deliver to the Participants:
(i) within 120 days of the end of FBC's fiscal year, annual financial
statements (including a balance sheet and related statements of income and
cash flows) of FBC and its consolidated subsidiaries, audited by a
nationally recognized independent accounting firm; and
(ii) within 90 days of the end of each fiscal quarter, quarterly
financial statements (including a balance sheet and related statements of
income and cash flows) of FBC and its consolidated subsidiaries certified
as being rendered in conformance with GAAP by FBC's chief financial
officer; and
(c) within 120 days after the end of each fiscal year of FBC a certificate
executed by a duly authorized officer of FBC to the effect that the signatory
has reviewed, or caused to be reviewed by individuals under his or her
supervision, this Agreement and has made, or caused to be made under his or her
supervision, a review of the transactions contemplated hereby, and such review
has not disclosed the existence during such fiscal year, nor does such signatory
have knowledge of the existence as at the date of such certificate, of any
condition or event that constitutes a Default or Event of Default, or, if any
such condition or event existed or exists, specifying the nature and period of
existence thereof and any action FBC has taken, is taking or proposes to take
with respect thereto.
7.2 Further Assurances. FBC, at its sole cost and expense, will promptly
and duly execute and deliver to Lessor such further documents and assurances and
take such further actions as Lessor from time to time may reasonably request,
including without limitation, the filing of protective UCC financing statements
in the jurisdictions in which the Equipment is located, in order to carry out
more effectively the intent and purpose of this Agreement and to establish and
protect the Lessor interest in the
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Equipment. FBC, at its sole cost and expense, will further duly file and record
all periodic continuation statements with respect to all UCC financing statement
filings (including precautionary filings) as and when required by Applicable Law
or at any earlier legally effective time requested by Lessor and refile and
rerecord any of the foregoing as may be necessary. FBC, at its sole cost and
expense, will also file the necessary UCC financing statements prior to any
change in name or address of FBC's executive offices. FBC, at its sole cost and
expense, will furnish to Lessor with certificates or other evidences of the
filings and recordings or deposits and refilings and rerecordings or redeposits
referred to in this Section.
ARTICLE VIII
CHARACTERIZATION
8.1 Characterization. It is intended and agreed that, for all legal
purposes, including for Federal, state and local income tax purposes, the
transactions contemplated hereby relating to this Agreement shall be treated as
a loan by Lessor and each Participant to FBC, and that FBC will be treated as
the owner of the Items and Parts thereof (the 'Intended Characterization') and
will be the party entitled to claim the tax benefits (including, but not limited
to, depreciation) associated with ownership of the Items and Parts thereof. Each
of the parties hereto hereby agree that for Federal income tax purposes relating
to the Items and Parts thereof it will, in completing, executing, filing or
delivering any tax form, tax return, tax statement or other document, and in any
tax proceeding, treat such transactions consistently with the Intended
Characterization and otherwise will act, for all Federal, state and local income
tax purposes relating to the Items and Parts thereof in a manner consistent with
the Intended Characterization.
Each party hereto acknowledges that it intends this Agreement to be deemed
to be a contract to make a loan or extend other debt financing to FBC as
provided in Section 365 of the United States Bankruptcy Code (or any successor
statute). FBC acknowledges that it has made its own analysis of the Intended
Characterization and neither Lessor nor any Participant has made any
representations regarding the accounting or tax treatment of the transactions
contemplated hereby.
The parties agree that for Uniform Commercial Code purposes, this Agreement
shall be deemed to create a loan to FBC and a security interest in the Equipment
and FBC hereby grants Lessor a security interest in the Equipment, all additions
and attachments thereto, and replacements and substitutions therefor, and all
proceeds (including proceeds of insurance) of the foregoing.
ARTICLE IX
FBC REPRESENTATIONS AND WARRANTIES.
9.1 FBC Representations and Warranties. FBC represents and warrants to
Lessor and each Participant that:
(a) Organization. FBC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, has the corporate
power and authority to enter into and perform its obligations under each of the
Operative Documents to which it is or will be a party and is duly qualified to
do business as a foreign corporation in good standing in each state in which the
Equipment is located. FBC has not failed to qualify or to be in good standing in
any other jurisdiction where the failure to qualify or to be in good standing
would have a material adverse effect on the business or financial condition of
FBC or the ability of FBC to perform its obligations under the Operative
Document.
(b) No Violation. FBC is not in violation of any term or provision of its
charter documents or bylaws, or of any indenture, mortgage, lease, agreement,
instrument, judgment, decree, franchise, permit, order, statute or governmental
rule or regulation applicable to it or its property, except violations which
would not materially impair its ability to perform its obligations under the
Operative Documents.
(c) Authority. The execution, delivery and performance by FBC of each of
the Operative Documents and the other agreements or documents referred to herein
or in any other Operative document, in each case to which it is or will be a
party, have been duly authorized by all necessary corporate action on the part
of FBC and will be duly executed and delivered, do not require any approval or
consent of FBC, or any trustee or holders of any indebtedness or obligations of
FBC except
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those which have been duly obtained or, by the Closing Date, will have been duly
obtained, and the execution, delivery and performance by FBC of each of the
Operative Documents and such other agreements and documents does not contravene
any Applicable Law, or contravene any provision of, or constitute a default
under any indenture, mortgage, contract or other agreement to which FBC is a
party or by which it or its properties may be bound or affected, or contravene
or result in any breach of, or constitute any default under, or result in the
creation of any Lien upon any of its property under its charter documents or
bylaws or any agreement or instrument to which it or any of its subsidiaries, or
any of its or their respective properties, may be bound or affected, except such
of the foregoing as would not have a material adverse effect on FBC or the
transactions contemplated by this Agreement.
(d) Consents. There are no Governmental Actions or other approvals or
consents relating to FBC, the Plant or the Equipment required for the
consummation of the transactions contemplated by the Operative Documents or for
the transactions contemplated by the Operative Documents or for the performance
or observance of the obligations of FBC to be performed or observed under the
Operative Documents.
(e) Enforceability. Each of the Operative Documents and the other
agreements or documents referred to herein or in any other Operative Document,
in each case to which FBC is or will be a party, when executed and delivered,
will constitute legal, valid and binding obligations of FBC, enforceable against
FBC in accordance with the respective terms thereof, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity.
(f) Litigation. There are no suits or proceedings pending or, to the
knowledge of FBC, threatened against or affecting FBC or the Equipment before
any Governmental Authority which (i) question the legality, validity or
enforceability of this Agreement or any other Operative Document or any other
agreements or documents referred to herein or in any other Operative Document,
in each case to which FBC is or will be a party or (ii) in the aggregate, could
materially adversely affect FBC's financial condition, business or operations or
FBC's ability to perform its obligations under the Operative Documents to which
it is a party.
(g) Chief Executive Office. The chief executive office (as such term is
used in Article 9 of the Uniform Commercial Code) of FBC is located at 83
Wooster Heights, Danbury, Connecticut 06813-1911.
(h) Governmental Action. All Governmental Actions required for the
execution, delivery and performance by FBC of the Operative Documents and the
other agreements or documents referred to herein or in any other Operative
Document, in each case to which FBC is or will be a party, have been obtained or
made or, by the Closing Date, will be obtained or made, and are or, by the
Closing Date, will be in full force and effect and no such Governmental Actions
are subject to any pending or threatened suit, action, inquiry, investigation,
proceeding or appeal (administrative, judicial or otherwise).
(i) Installation. The Equipment is properly installed in a workmanlike
manner in accordance with Applicable Law in all material respects and in
substantial accordance with the plans and specifications therefor, contains no
material (or otherwise significant) structural or systemic defects, is in good
operating condition and is fit for its intended use as contemplated in the
Appraisal. No improvements, modifications or additions to the Equipment are
required in order to render the Equipment complete for its intended use by
Lessor as specified in this Agreement, nor is FBC lacking or in violation of any
material Governmental Action from a Governmental Authority required for the
maintenance and operation of the Equipment. Except as set forth on Schedule
9.1(i) hereof, each Item is located in Rogers, Arkansas as of the Closing Date.
(j) Description of Equipment. The description of the Equipment set forth in
Schedule 9.1(j) is a true and correct description of the Equipment and describes
with sufficient accuracy and in sufficient detail for the purposes of
conveyancing, recording, filing and perfecting security interest in and liens
upon, the Equipment. The description of the Items set forth in Schedule 9.1(j)
sets forth all of the material components necessary to operate the Items as
contemplated by the Appraisal. After giving
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effect to the transactions contemplated hereby, Lessor will hold a first
perfected security interest in and to the Equipment, subject only to Permitted
Liens.
(k) Environmental Matters. Except as set forth in Part I to Schedule
9.1(k), FBC has, to its knowledge, complied and is now complying with all
Environmental Laws and the requirements of any Governmental Actions issued under
such Environmental Laws, as such Government Actions and Environmental Laws
relate to any Equipment. To FBC's knowledge, there are no circumstances that
would reasonably be expected to prevent or interfere with FBC's ability to
operate and maintain the Equipment (as opposed to the Plant generally) (A) as
contemplated by the Operative Documents and (B) in compliance in all material
respects with all applicable Environmental Laws and Governmental Actions. All
known Governmental Actions required under Environmental Laws to operate and
maintain the Equipment (A) are set forth in Part II to Schedule 9.1(k), (B) have
been duly obtained, (C) are in full force and effect and (D) will, upon request
of Lessor, be furnished to Lessor. To the knowledge of FBC, there are no past or
pending or threatened Environmental Claims against FBC with respect to the
Equipment, except as set forth in Part III to Schedule 9.1(k). To the knowledge
of FBC, and except as set forth in Part III to Schedule 9.1(k), there are no
present or past actions, activities, circumstances, conditions, events or
incidents arising from the use, operation or maintenance of the Equipment,
including, without limitation, the release, emission, discharge, presence or
disposal of Hazardous Materials that would reasonably be expected to form the
basis of an Environmental Claim against FBC with respect to the Equipment.
(l) Financial Statements. FBC's balance sheet and related statements of
income and cash flow contained in its Annual Report on Form 10-K for the fiscal
year ended June 30, 1993, copies of which have been furnished to Lessor, present
fairly the financial position of FBC at such date and the results of its
operations or cash flows for the period then ended. All such financial
statements and reports, including the related schedules and notes thereto, have
been prepared in accordance with generally accepted accounting principles
consistently applied (except as otherwise disclosed therein).
(m) Taxes. FBC has paid all taxes due with respect of the Equipment, the
Operative Documents and the transactions contemplated therein. FBC has filed all
Federal, state and local tax returns which are required to be filed by it and
has paid (prior to their delinquency dates) all taxes which have become due
pursuant to such returns or pursuant to any assessment received by it (other
than taxes and assessments the payment of which are being contested in the
manner set forth in Section 2.6 hereof), and FBC has no knowledge of any actual
or proposed deficiency or additional assessment in connection therewith which,
either in any case or in the aggregate, would be materially adverse to the
financial condition of FBC. The charges, accruals and reserves on the books of
FBC with respect to Federal, state and local taxes for all open years, and for
the current fiscal year, make adequate provision for all unpaid tax liabilities
for such periods.
(n) No Default. FBC is not in default in the performance or fulfillment of
any material obligation, covenant or condition contained in any bond, note or
other evidence of indebtedness, or in any mortgage, deed of trust, indenture or
loan agreement to which it is a party or by which its property is bound, except
defaults which would not have a material adverse effect on the financial
condition, operations or business of FBC.
(o) No Lease Defaults. No event or condition has occurred and is continuing
which constitutes a Default, Event of Default or Event of Loss.
(p) Margin Rules. None of the transactions contemplated by the Operative
Documents will violate or result in a violation of Section 7 of the Securities
and Exchange Act of 1934, as amended, or any regulations issued pursuant
thereto, including, without limitation, Regulations, G, T, U and X of the Board
of Governors of the Federal Reserve system (12 C.F.R., Chapter II, as amended).
(q) ERISA. The transactions contemplated by this Agreement and the other
Operative Documents will not involve any 'prohibited transaction,' as such term
is defined in Section 4975 of the Code or the Employee Retirement Income
Security Act of 1974, as amended.
(r) No Offer or Solicitation. FBC has not offered any interest in the
Equipment to, or solicited any offer to acquire the Equipment from, any Person
in violation of Section 5 of the Securities Act of 1933, as amended, nor has it
authorized any Person to take any such action, and FBC has not taken any
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action which would subject any interest in the Equipment to the registration
requirements of Section 5 of the Securities Act of 1933, as amended.
(s) No Regulation. Neither FBC, Lessor, the Participants or any of their
respective Affiliates shall, by reason of (i) the Lessor's interest in the
Equipment or (ii) the lease of the Equipment to FBC under this Agreement or
(iii) any other transaction contemplated by the Operative Documents, be or
become subject to regulation as a regulated entity under any Applicable Law;
provided that this representation and warranty shall not include any regulation
imposed on Lessor, the Participants or their Affiliates due to any special
status of such Persons.
(t) Patents and Licenses. Schedule 9.1(t) attached hereto lists all Patents
owned by FBC that relate to the Equipment or its operation, and all instruments,
if any, granting to FBC any Related Technological Rights ('Proprietary
Instruments'). FBC is the owner of the Patents listed in Schedule 9.1(t)
attached hereto and has legal power to extend the rights granted to Lessor under
the License, which grant is valid and binding on FBC. None of the Patents listed
in Schedule 9.1(t) has lapsed and none of the patent applications listed in
Schedule 9.1(t) has become abandoned. Except for the License or as otherwise
indicated on Schedule 9.1(t), none of the Patents listed in Schedule 9.1(t)
hereto is the subject of any licensing agreement. To FBC's knowledge, (i) no
holding, decision or judgment has been rendered by any court or administrative
agency or other tribunal which would limit, cancel or question the validity of,
and (ii) no action or proceeding is pending seeking to limit, cancel or question
the validity of, any Patents or Proprietary Instruments listed in Schedule
9.1(t). FBC is not aware of any determination by any court, administrative
agency or other tribunal that the Equipment or its operation infringes any
patent owned by, or other proprietary rights of, a third party, nor is FBC aware
of any pending or threatened action or proceeding in which such infringement is
alleged.
(u) Appraisal. All written information supplied by FBC to the Appraiser was
accurate and complete when given and remains accurate and complete and, after
reviewing the Appraisal, FBC has no reason to believe that the Appraiser relied
on incorrect, misleading or incomplete information, whether oral or written.
(v) Real Estate. The real property on which the Equipment is located is
owned by FBC and there are no third parties which have a mortgage or other
similar interest in such real property.
(w) Brokers Fees. No broker's, finder's or similar fee shall be incurred by
or on behalf of FBC in connection with the origin, negotiation, execution or
performance of this Agreement or the transactions contemplated hereby for which
FBC shall have any liability.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF LESSOR
10.1 Representations and Warranties of Lessor. Lessor represents and
warrants to FBC as follows:
(a) Organization. Lessor is a corporation duly organized and validly
existing and in good standing under the laws of the state of its incorporation,
is duly qualified to transact business in all states where the failure to so
qualify should have a materially adverse effect on its business, and has the
corporate power and authority to enter into and perform its obligations under
this Agreement and the other Operative Documents to which it is a party.
(b) Authorization. This Agreement and the other Operative Documents to
which Lessor is a party have been duly authorized by all necessary corporate
action on its part, do not require any approval or consent of any trustee or
holders of any of its indebtedness or obligations, and have been duly executed
and delivered by Lessor, and neither the execution and delivery thereof, nor the
consummation of the transactions contemplated thereby, nor the compliance by
Lessor with any of the terms and provisions hereof or thereof will contravene
any Applicable Law, or result in any breach of or constitute any default under
any indenture, mortgage, contract, or other material agreement to which Lessor
is a party or by which it or its properties may be bound or affected except such
of the foregoing as would not have a material adverse effect on Lessor or the
transactions contemplated by this Agreement, except that no representation or
warranty is made as to any Applicable Law to which Lessor may be subject because
of the activities of FBC.
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(c) Enforceability. Each of this Agreement and the other Operative
Documents to which Lessor is a party constitutes a legal, valid and binding
obligation of Lessor enforceable against Lessor in accordance with the terms
thereof, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity.
(d) Consents. No authorization, approval or other action by, and no notice
to or filing with, any Governmental Authority is required for the due execution,
delivery, or performance by Lessor of this Agreement or the other Operative
Documents to which it is a party.
(e) Participant Liens. There are no Participant Liens on the Equipment
which relate to the Lessor (as opposed to the Participants), and the execution,
delivery and performance by any Participant of the Operative Documents to which
Lessor is a party will not subject the Equipment to any Participant Liens as a
result thereof.
(f) Litigation. There are no suits or proceedings pending or, to the
knowledge of Lessor, threatened against or affecting Lessor before any
Governmental Authority which question the legality, validity or enforceability
of this Agreement or any other Operative Documents.
ARTICLE XI
CONDITIONS PRECEDENT TO LESSOR'S OBLIGATIONS ON THE CLOSING DATE
11.1 Conditions Precedent to Lessor's Obligations on the Closing Date. The
obligations of Lessor to pay FBC the Lessor's Cost for the Items and to lease
the Equipment to FBC pursuant to the terms of this Agreement on the Closing Date
are subject to the fulfillment to the satisfaction of, or waiver by Lessor prior
to or on the Closing Date of, the following conditions precedent:
(a) Operative Documents. Each of the Operative Documents shall have been
duly authorized, executed and delivered by all of the respective parties
thereto, shall be in substantially the form thereof set forth as an Exhibit
hereto (or if not in such form or not an Exhibit hereto shall be satisfactory in
form and substance to Lessor), and shall be in full force and effect; and no
Default or Event of Default shall exist. Lessor shall have received an executed
counterpart of each of the Operative Documents executed and delivered on or
prior to the Closing Date.
(b) Uniform Commercial Code Statements. Uniform Commercial Code protective
financing statements covering the Equipment (and describing this Agreement) (or
amendments to existing Uniform Commercial Code financing statements, in form and
substance reasonably satisfactory to Lessor) shall have been executed by FBC and
delivered to Lessor with respect to each jurisdiction designated by Lessor prior
to the Closing Date.
(c) Evidence of Authority. All corporate and other proceedings by FBC in
connection with the consummation of the transactions contemplated by the
Operative Documents and all documents and instruments incidental hereto and
thereto, shall be satisfactory in form and substance to Lessor and its special
counsel, and Lessor shall have received such counterpart originals or certified
or other copies of all such documents and instruments and of all records of
corporate proceedings in connection with such transactions as it may reasonably
request, which shall include (i) a copy of the Certificate of Incorporation of
FBC certified by the Secretary of State of the State of Delaware as of a recent
date and copies of the Bylaws of FBC and of resolutions of FBC's board of
directors or appropriate committee of the board, certified by the Secretary or
an Assistant Secretary of FBC as of the Closing Date, duly authorizing: (A) the
execution, delivery and performance by FBC of this Agreement, the other
Operative Documents and each other document or instrument required to be
executed and delivered by FBC in connection herewith, (B) the transactions
contemplated herein and by the other Operative Documents and (C) compliance by
FBC with the conditions set forth herein, and (ii) an incumbency certificate as
to the person or persons authorized to execute and deliver such documents on
behalf of FBC and as to the signature of such person or persons.
(d) Opinion. Lessor shall have received an opinion from Kirkland & Ellis,
special counsel to FBC and the Rose Firm, special local counsel to FBC, in the
form attached as Exhibit B and Exhibit B-1, respectively dated the Closing Date.
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(e) Appraisal. Lessor shall have received an opinion addressed to it dated
the Closing Date from Marshall and Stevens Incorporated, independent appraisers,
in form and substance reasonably satisfactory to Lessor (the 'Appraisal').
(f) FBC Representations and Warranties. The representations and warranties
of FBC contained herein shall be true and accurate on and as of the Closing Date
with the same effect as though made on and as of the Closing Date except to the
extent that such representations and warranties specifically relate solely to an
earlier date (in which event such representations and warranties shall have been
true and accurate on and as of such earlier date).
(g) Certificates. Lessor shall have received a certificate of FBC, signed
by an Authorized Officer of FBC, dated the Closing Date, addressed to Lessor and
certifying as to the matters stated in Section 11.1(f) and that FBC has
performed in all material respects the covenants required to be performed by FBC
prior to the Closing Date under this Agreement.
(h) No Litigation or Governmental Action. On the Closing Date, the purchase
by Lessor of the Equipment, and any and all other transactions contemplated by
the Operative Documents shall neither be prohibited by any Governmental Action
nor subject to Lessor to any penalty or other onerous condition under or
pursuant to any Governmental Action. No action or proceeding shall have been
instituted, nor shall any action, proceeding or Governmental Action be
threatened before any court or Governmental Authority, in each case at the time
of the Closing Date, to set aside, restrain, enjoin or prevent the completion
and consummation of the transactions contemplated by this Agreement and the
other Operative Documents or the use and operation of the Equipment for its
intended purposes or otherwise have a material adverse effect on the financial
condition, business or operations of FBC.
(i) No Violation of Applicable Law. The transactions contemplated by the
Operative Documents shall not violate any Applicable Law.
(j) Consents and Approvals. All Governmental Actions and other approvals
and consents relating to FBC, the Plant or the Equipment required for the
consummation of the transactions contemplated by the Operative Documents for the
use and operation of the Equipment for its intended purposes or for the
performance or observance of the obligations of FBC to be performed or observed
hereunder and under the other Operative Documents shall have been obtained in
proper form and be in full force and effect on the Closing Date.
(k) Insurance. FBC shall be in compliance with the provisions of Section
3.2 hereof, all such policies shall be in full force and effect and Lessor shall
have received a certificate in the form of Exhibit C.1 attached hereto relating
to all of the Equipment completed and signed by the insurer or Marsh & McLennan
(or another nationally recognized independent insurance broker acceptable to
Lessor) and an officer's certificate in the form of Exhibit C.2 attached hereto
signed by an authorized officer of FBC.
(l) No Material Adverse Change. There shall not have occurred any material
adverse change of FBC's financial condition since the date of FBC's most recent
report on Form 10-K and there shall not have occurred any change in tax law or
regulations that, in the opinion on Lessor, shall adversely affect the economics
of Lessor in this transaction.
(m) Requisition of Use. No Requisition of Use with respect to the Equipment
shall have occurred which would give FBC the right to terminate this Agreement
and no taking or condemnation not constituting a Requisition of Use shall have
occurred or be threatened with respect to the facility at which the Equipment is
presently located which could give FBC a right to terminate this Agreement.
(n) Original Lease. The Original Lease (and those documents reasonably
designated by Lessor relating thereto) shall have been terminated.
(o) Participants Funding. The Participants shall have executed and
delivered to Lessor the Participation Agreements and made available to the
Lessor the amounts set forth on Schedule 11.1(o).
All certificates, opinions and other documents to be delivered on the
Closing Date by any person other than Lessor, the Participants or their counsel,
and all other matters to be accomplished prior to or on the Closing Date, shall
be satisfactory to Lessor and its counsel. In the event the conditions precedent
specified in this Article XI shall not have been fulfilled (or waived by Lessor)
on or prior to
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the Closing Date, Lessor may terminate this Agreement and the other Operative
Documents, in which case such agreements will be of no further force and effect.
ARTICLE XII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF FBC.
12.1 Conditions Precedent to FBC's Obligations. The obligations of FBC to
transfer the interests in the Items contemplated hereunder to the Lessor and to
lease the Equipment from Lessor hereunder are all subject to the fulfillment to
the satisfaction of or waiver by FBC prior to or on the Closing Date of the
following conditions precedent:
(a) Operative Documents. Each of the Operative Document shall have been
duly authorized, executed and delivered by all of the respective parties
thereto, shall be in substantially the form thereof set forth as an Exhibit
hereto (or if not in such form or not an Exhibit hereto shall be satisfactory in
form and substance to FBC), and shall be in full force and effect on the Closing
Date, and an executed original counterpart of each of such Operative Documents
shall have been delivered to FBC.
(b) Representations and Warranties. The representations and warranties of
Lessor contained in this Agreement and of the Participants in the Participation
Agreement shall be true and accurate in all material respects on and as of the
Closing Date with the same effect as though made on and as of the Closing Date
except to the extent that such representations and warranties specifically
relate solely to an earlier date (in which event such representations and
warranties shall have been true and accurate in all material respects on and as
of such earlier date).
(c) Governmental Action. No action or proceeding shall have been instituted
nor shall any Governmental Action be threatened before any court or Governmental
Authority, nor shall any order, judgment or decree have been issued or proposed
to be issued by any court or Governmental Authority at the time of Closing Date
to set aside, restrain, enjoin or prevent the completion and consummation of the
transactions contemplated by this Agreement or the other Operative Documents.
(d) Appraisal. FBC shall have received a copy of the Appraisal, which
Appraisal shall be in form and substance reasonably satisfactory to FBC.
(e) Original Lease. The Original Lease (and those documents reasonably
specified by FBC relating thereto) shall have been terminated.
All certificates, opinions and other documents to be delivered on the
Closing Date by any Person other than FBC, and all other matters to be
accomplished prior to or at the Closing, shall be satisfactory to FBC and its
counsel. In the event the conditions precedent specified in this Article XII
shall not have been fulfilled (or waived by FBC) on or prior to the Closing
Date, FBC may terminate this Agreement and the other Operative Documents in
which case such agreements will be of no further force and effect.
ARTICLE XIII
MISCELLANEOUS
13.1 Notices and Other Instruments. All notices, offers, consents and other
communications (collectively 'Notices') given pursuant to this Agreement shall
be in writing, and such Notices and any other instruments given pursuant to this
Agreement shall be validly given when hand delivered or sent by courier or
express service guaranteeing overnight delivery, and shall be effective upon
receipt, (a) if to the Participants, addressed to the Participant, at its
address as provided in the Participation Agreement and (b) if to FBC, addressed
to FBC at its address set forth above, attention: Treasurer, with a copy to the
General Counsel. FBC, Lessor and each Participant each may from time to time
specify, by giving 15 days' notice to each other party, (i) any other address in
the United States as its address for purposes of this Agreement and (ii) any
other person or entity in the United States to receive copies of Notices and
other instruments hereunder.
13.2 Separability; Binding Effect; Participation Agreements; Governing Law.
Each provision hereof shall be separate and independent and the breach of any
provision by Lessor shall not discharge or relieve FBC from any of its
obligations hereunder, except to the extent the FBC has duly performed any such
obligations of FBC. Each provision hereof shall be valid and shall be
enforceable to the extent not
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prohibited by Applicable Law. If any provision hereof or the application thereof
to any person or circumstance shall be invalid or unenforceable, the remaining
provisions hereof, or the application of such provisions to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby. Lessor shall not have any liability hereunder for any
obligations or representations of any Participant (including, without
limitation, Section 1.2(c) hereof), all of which shall be several obligations of
the Participants. Each Participation Agreement shall (i) contain representations
and warranties of the Participant substantially similar to those of the Lessor
hereunder, (ii) provide that the Participant shall not take any action which
would violate the provisions of this Agreement (including, without limitation,
the incurrence of Participant Liens or any transfer in violation of Section 5.3)
and (iii) provide that FBC may take action directly against any Participant in
connection with breaches of items (i) and (ii). All provisions contained in this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the permitted successors and assigns of Lessor to the same extent as if each
such successor and assign was named as a party hereto. All provisions contained
in this Agreement shall be binding upon the successors and assigns of FBC and
shall inure to the benefit of and be enforceable by the permitted successors and
assigns of FBC in each case to the same extent as if each such successor and
assign were named as a party hereto. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS OF CONFLICT)
OF THE STATE OF NEW YORK.
13.3 Table of Contents and Headings. The table of contents and the headings
of the sections and Schedules of this Agreement have been inserted for reference
only and shall not modify the express terms and provisions of this Agreement.
13.4 Counterparts. This Agreement may be executed in two or more
counterparts and shall be deemed to have become effective when one or more of
such counterparts shall have been signed by or on behalf of each of the parties
hereto (although it shall not be necessary that any single counterpart be signed
by or on behalf of each of the parties hereto, and all such counterparts shall
be deemed to constitute but one and the same instrument), and shall have been
delivered by each of the parties to the other.
13.5 Jurisdiction. Each of the parties hereto:
(i) hereby irrevocably and unconditionally submits itself and its
property, to the non-exclusive jurisdiction of the United States District
Court for the State of New York and Pennsylvania and to the non-exclusive
jurisdiction of the State of New York and Pennsylvania, for the purposes of
any suit, action or other proceeding arising out of or relating to this
Agreement or any other Operative Document, the subject matter of any
thereof or any of the transactions contemplated hereby or thereby brought
by any party or parties thereto, or their successors or assigns, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined and shall be
brought by each party hereto in such State of New York or Pennsylvania
court or, to the extent permitted by law, in such Federal Court. The
consent of the parties to the jurisdiction of a State of New York and
Pennsylvania court shall not preclude the right of any party to remove such
action to the United States District Court for the State of New York or
Pennsylvania (or other United States District Court as may be permitted by
Applicable Law) should such removal be permitted under Applicable Law. Each
of the parties hereto agrees that a final judgment after exhausting all
appeals and rendered by a court of competent jurisdiction in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law;
(ii) hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, (A) any objection which it may
now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other
Operative Documents in any State of New York or Pennsylvania or federal
court, and (B) the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court;
(iii) irrevocably agrees that lawful service of process in the State
of New York or Pennsylvania for any action or proceeding (whether in
Federal or state court in and for the State of New York or Pennsylvania)
arising out of or in connection with this Agreement or any of the other
Operative
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Documents may be made by mailing by certified mail, return receipt
requested, such papers as may be necessary for such service of process to
such party at its notice address designated in or pursuant to Section 12.1
hereof; and
(iv) hereby irrevocably and unconditionally waives, to the fullest
extent permitted by law, the right to a jury trial in any suit, action or
proceeding arising out of or relating to this Agreement or the other
Operative Documents, and for any counterclaim therein.
13.6 Amendments and Waivers. Lessor and FBC may, from time to time,
enter into written amendments, supplements or modifications hereto for the
purpose of adding any provisions to the Operative Documents or changing in
any manner the rights of Lessor and the other Participants or FBC, and
Lessor the other Participants) may execute and deliver to FBC a written
instrument waiving any of the requirements of the Operative Documents or
any Default or Event of Default and its consequences. Nothing set forth in
the Participation Agreements or any other agreement shall require the
consent of more than those parties (including the Lessor) holding a
interests in a majority of the Lessor's Cost in connection with any action
by Lessor hereunder (including, without limitation, any waiver, consent or
amendment), except that the following actions may require more than
majority consent:
(1) the reduction of any Rent payment;
(2) the deferment or postponement of the due date for any Rent
payment;
(3) the release of any Collateral (as defined in the Participation
Agreement) except as required under the terms of this Agreement;
(4) the amendment of Sections 13.6, 2.2, 2.4 or 6.1;
(5) the approval of any assignment or sublease of the Collateral by
the Lessee pursuant to Section 5.2 of the Lease;
(6) the extension of the Base Term or Extended Term of the Lease or
the amendment of the definition of the terms Purchase Price Percentage or
Adjustment Percentage; and
(7) the declaration of an Event of Default, the acceleration of Rent
or the election of remedies.
Any such waiver and any such amendment, supplement or modification shall be
binding upon FBC, Lessor, each Participant, and all future Transferees and New
Participants. In the case of any waiver, FBC, Lessor and the Participants shall
be restored to their former positions and rights under the Operative Documents,
and any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent Default or Event
of Default, or impair any right consequent thereon. Notwithstanding the
foregoing, (a) any right herein specifically conferred on a Participant may not
be modified without such Participant's consent and (b) any action of Lessor
under Article IV and any amendment of Section 3.2 shall require the approval of
a majority in number of the Lessor and the Participants existing on the Closing
Date (for so long as there are at least two such Participants).
13.7 Knowledge. To the extent that this Agreement refers to knowledge of
FBC as of the Closing Date, it shall be deemed to be knowledge of (i) Leonard A.
DeCecchis, Treasurer, (ii) J. Bruce Ipe, Vice President and General Counsel, and
(iii) Richard J. Mosback, Manager-Finance, after due inquiry of other
appropriate employees of FBC.
13.8 Confidential Documents. Except as otherwise expressly permitted in the
Operative Documents, FBC may require the execution and delivery of a
confidentiality agreement reasonably acceptable to FBC prior to the release of
or allowance of access to any documents, agreements or information relating to
FBC, that are reasonably designated by FBC as confidential or proprietary;
provided, however, that nothing herein or in any such confidentiality agreement
shall prevent or be construed to prevent Lessor or the Participants from
disclosing any such document, agreement or information (a) to any Affiliate of
such Person or to any transferee of such Person (or prospective transferee of
such Person) that agrees to be similarly bound or, at the option of FBC, to
execute and deliver an appropriate confidentiality agreement, (b) upon the order
of any court of law or Governmental Authority having jurisdiction and authority
to issue such order, (c) upon the request or
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demand (if such request or demand shall have the force of law) of, or in
connection with any investigation or audit by, any Governmental Authority, or by
any Governmental Authority regulating the business of banking, (d) that is in
the public domain other than through any violation hereof or of any such
confidentiality agreement or through any other action by such Person, (e) that
has been obtained from any Person that is not a party to this Agreement or an
Affiliate of any such party and who was not similarly bound so far as Lessor or
such Participant was aware, (f) in connection with the exercise of any remedy
hereunder or under any other Operative Document, (g) as expressly contemplated
by this Agreement or any other Operative Document, (h) to any prospective
purchaser or lessee of any Equipment or the Lessor's interest therein, provided
that such purchaser or lessee shall have agreed in writing to be bound by the
provisions of this Section, (i) to the auditors or attorneys of such Person, (j)
in connection with the exercise of remedies upon the occurrence of an Event of
Default, or (k) in connection with the sale or rerental of the Equipment
pursuant to Article IV or Article VI of this Agreement. In the case of
disclosure under clause (b) or (c) of the preceding sentence of this Section, if
permitted by such Governmental Authority, Lessor or such Participant, before
making such disclosure, shall use reasonable efforts to notify FBC.
13.9 Costs. FBC shall reimburse Lessor for all reasonable out-of-pocket
costs and disbursements incurred by Lessor in connection with the transactions
contemplated by this Agreement, including reasonable fees and disbursements of
Tucker Arensberg, P.C. (outside counsel to Lessor) upon the consummation of the
transactions contemplated by this Agreement.
* * * * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
FIRST BRANDS CORPORATION
By: /s/ Leonard A. DeCecchis
.................................
Title: /s/ Treasurer
..............................
PNC LEASING CORP
By: /s/ Douglas Bickmore
.................................
Title: /s/ Vice President
..............................
PNC's account for payment of Rent:
Account of: PNC Bank, National Association
ABA #043000096
Account Number: 1089182
Attention: Edward Wesolek
(412) 762-2786
39
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APPENDIX A
DEFINITIONS
SECTION 1. As used in the Equipment Lease Agreement, dated as of October
15, 1993, between Lessor and FBC (the 'Agreement'), the terms listed below have
the following definitions:
'Adjustment Percentage' shall mean 45.5% or, in the case of a sale at the
end of an Extended Term, the Adjustment Percentage set forth on the Extension
Schedule.
'Affiliate' means, with respect to any Person, any Person or group of
Persons acting in concert in respect of the Person in question that, directly or
indirectly, controls or is controlled by or is under common control with such
Person. 'Control' (including, with correlative meanings, the terms 'controlled
by' and 'under common control'), as used with respect to any Person or group of
Persons, shall mean the possession (directly or indirectly), of the power to
direct or cause the direction of the management and policies of such person,
whether through the ownership of stock or by contract or otherwise.
'Applicable Law' means all applicable laws, Environmental Laws, statutes,
treaties, rules, codes, ordinances, regulations, certificates, orders,
interpretations, licenses and permits of any Governmental Authority and
judgments, decrees, injunctions, writs, orders or like action of any court,
arbitrator or other administrative, judicial or quasi-judicial tribunal or
agency of competent jurisdiction.
'Appraisal Procedure' means a procedure whereby the Fair Market Sales Value
shall be established. FBC and Lessor shall first attempt to agree upon the Fair
Market Sales Value. If FBC and Lessor shall not be able to agree on the Fair
Market Sales Value within 30 days, the Appraiser shall establish the Fair Market
Sales Value. The decision of the Appraiser shall be final and binding on FBC and
Lessor. The cost of the Appraiser shall be shared equally by FBC and Lessor.
'Appraiser' means Marshall and Stevens Incorporated; provided that if
Marshall and Stevens Incorporated does not consent to be the Appraiser, then
Lessor and FBC shall mutually agree upon an Appraiser.
'Authorized Officer' means any officer of FBC who shall be duly authorized
by appropriate corporate action to execute any Operative Document or, for
purposes of executing any certificate required under the Agreement, the
Chairman, President, Treasurer, Chief Financial Officer or any Vice President or
person holding an office equivalent to the foregoing.
'Business Day' means any day other than a Saturday or Sunday on which
commercial banks are required or authorized to close in Pittsburgh,
Pennsylvania.
'Closing Date' means October 15, 1993.
'Code' means the Internal Revenue Code of 1986, as amended from time to
time and, and the rules promulgated thereunder.
'Competitor' means any Person or Affiliate thereof which manufactures or
sells products that are competitive with products that FBC currently or in the
future manufactures or sells.
'Consolidated Net Worth' at any date shall mean the total consolidated
stockholders equity of FBC, as would, in conformity with GAAP, be set forth on a
consolidated balance sheet of FBC and its Consolidated Subsidiaries.
'Consolidated Subsidiary' means a subsidiary of FBC whose accounts are
consolidated with those of FBC for financial reporting purposes in accordance
with GAAP.
'Default' means any event or condition which after the giving of notice or
lapse of time or both would become an Event of Default.
'Environmental Claim' means any claim of liability under, or notice of
noncompliance with or violation of, any Environmental Law.
'Environmental Laws' means all permits, laws, regulations, ordinances,
standards and judicial and administrative decrees, rulings, judgments and orders
of Federal, state and local governmental bodies having jurisdiction thereof, in
each case as amended, which relate to the regulation and protection of human
health, safety (including workers' safety), the environment and natural
resources (including
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without limitation ambient air, surface water, groundwater, wetlands, land,
surface or subsurface strata, wildlife, aquatic species and vegetation), or
indoor air or indoor environment, including without limitation all such laws and
regulations relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, discharge, release, transport or handling of
Hazardous Materials. 'Environmental Laws' includes, but is not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(CERCLA), 42 U.S.C. 9601 et seq., Resource Conservation and Recovery Act (RCRA),
42 U.S.C. 6901, et seq., Toxic Substances Control Act (TSCA), 15 U.S.C. 2601 et
seq., Emergency Planning and Community Right-to-Know Act (EPCRA), 42 U.S.C.
11001 et seq., Clean Air Act, 42 U.S.C. 7401 et seq., Clean Water Act, 33 U.S.C.
1251, et seq., Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), 7
U.S.C. 136 et seq., Oil Pollution Act of 1990 (OPA), 33 U.S.C. 2701 et seq.,
Occupational Safety and Health Act (OSHA), 29 U.S.C. 651 et seq., and Safe
Drinking Water Act (SDWA), 42 U.S.C. 300f et seq., and any and all analogous
state statutes, as the same may be amended, modified or supplemented.
'Equipment' means (a) all of the equipment set forth on Schedule 9.1(j) to
the Agreement, and (b) any equipment substituted for or in replacement of any
Equipment in accordance with the Agreement.
'Event of Loss,' with respect to any Item means any of the following events
with respect to such Item: (a) the loss of a substantial portion of all such
Item or the use thereof due to the destruction of or damage to such Item which
renders repair of such Item uneconomic (in the sole opinion of FBC); (b) any
damage or destruction to such Item which results in an insurance settlement with
respect to such Item, on the basis of a total loss, or a constructive or
compromised total loss; (c) the theft, disappearance, confiscation or seizure
of, or taking of title to, such Item which shall have resulted in the loss of
possession or use of such Item by FBC for a period that extends beyond the Term;
(d) the Requisition of Use of such Item; or (e) the inability to operate such
Item for its intended purpose due to the absence of necessary Patents or Related
Technological Rights.
'Extension Schedule' means the schedule 1.4(a) hereto and which corresponds
to the Extended Term selected by FBC pursuant to Section 4.6(b) of the
Agreement.
'Fair Market Sales Value' means, with respect to any Item, the value, which
shall not in any event be less than zero, that would be obtained in an arm's
length transaction for cash between an informed and willing purchaser and an
informed and willing seller, neither of whom is under any compulsion to purchase
or sell, respectively, for the ownership of such Item.
'GAAP' means generally accepted accounting principles in the United States
of America as in effect at the date of the Agreement, unless another date is
specified.
'Governmental Action' means all permits, authorizations, registrations,
consents, approvals, waivers, exceptions, variances, licenses or exemptions that
are required by any Applicable Law for the full use and operation of the
Equipment.
'Governmental Authority' means any Federal, state, county, municipal or
other United States Federal, state or local governmental authority or judicial
or regulatory agency, board, body, commission, instrumentality, court or
quasi-governmental authority from time to time having jurisdiction over the
Equipment or any Person that is a party to any Operative Document.
'Hazardous Materials' means any materials, wastes or substances subject to
regulation or the release of which could create liability under any
Environmental Law, including, without limitation, a material defined as a
hazardous substance under CERCLA or a comparable state or local law or
regulation, any material or waste subject to regulation or the release of which
could create liability under RCRA, TSCA, EPCRA, FIFRA or the SDWA (as such
abbreviations are defined in 'Environmental Laws' above) or crude oil, petroleum
or a petroleum product.
'Indemnified Party' means Lessor and the Participants, and their
successors, assigns, officers, directors, employees, agents, shareholders and
any Affiliate of Lessor and the Participants and their successors and assigns.
'Item' means the items referred to as Items on Schedule 9.1(j) to the
Agreement and any substitutions or replacements thereto or therefor.
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'Lessor's Cost' of an Item means the amount set forth opposite such Item on
Schedule 9.1(j) to the Agreement, such amount to be (a) substantiated by the
Appraisal, and (b) in no event aggregate to an amount in excess of $58,620,000.
'LIBO Period' means a period of three, six, nine or twelve months, as
selected by FBC as provided in Section 1.4(c) of the Agreement.
'LIBO Rate' means, with respect to each payment of Base Rent or Extended
Term Rent on a Payment Date, an interest rate per annum equal to the rate per
annum obtained by dividing (a) the rate of interest per annum as determined by
Lessor to be the rate per annum (rounded upward to the nearest whole multiple of
1/16 of 1% per annum) at which deposits in United States dollars are offered to
PNC Bank, National Association, in the London interbank Eurodollar market at
11:00 A.M. (Pittsburgh, Pennsylvania time), in each case three Business Days
before such Payment Date, in an amount substantially equal to the outstanding
principal amount of Base Rent or Extended Term Rent for which the LIBO Rate is
then being determined and the applicable LIBO Period by (b) a percentage equal
to 100% minus the LIBO Rate Reserve Percentage for such Payment Period.
'LIBO Rate Reserve Percentage' means, for each payment of Base Rent or
Extended Term Rent on a Payment Date, the reserve percentage, if any such
reserve percentage is actually imposed on PNC Bank, National Association,
applicable to PNC Bank, National Association, three Business Days before payment
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) with respect to a member bank of the Federal
Reserve System with respect to liabilities or assets consisting of or including
Eurocurrency liabilities (or with respect to any other category of liabilities
which includes deposits by reference to which interest rates on LIBO loans are
determined) having a term equal to the three month period for which such LIBO
Rate Reserve Percentage is determined (provided, FBC, upon written notice five
days prior to each Payment Date, may elect (in its sole discretion) to calculate
such LIBO Rate based on a period equal to 180 days, 270 days or 360 days);
provided that prior to the application of the LIBO Rate Reserve Percentage the
Lessor shall deliver to FBC a certificate of an appropriate officer setting
forth such requirements, which certificate shall be conclusive absent manifest
error.
'License' means the License, dated October 15, 1993, between FBC and
Lessor, as such agreement may be modified, amended or supplemented from time to
time in accordance with its terms.
'Lien' means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien, easement, servitude or charge of any kind, including, without
limitation, any irrevocable license, conditional sale or other title retention
agreement, any lease in the nature thereof, or any other right of or arrangement
with any creditor to have its claim satisfied out of any specified property or
asset with the proceeds therefrom prior to the satisfaction of the claims of the
general creditors of the owner thereof, whether or not filed or recorded.
'Material Default' means a Default of the type described in Sections
6.1(a), 6.1(b), 6.1(e), 6.1(f) or 6.1(h) of the Agreement.
'Modification' means any addition, alteration, improvement or modification
to any Item, other than original or replacement Parts of such Item.
'Operative Documents' means the (a) the Agreement; (b) the Bill of Sale;
(c) the License; (d) the Assignment of Warranty Rights; and (e) Site Lease
Agreement.
'Participant' means the Persons set forth on Schedule 11.1(o) of the
Agreement, together with such other New Participants permitted by Section 5.3 of
the Agreement.
'Participant Lien' means any Lien arising as a result of (a) any claim
against Lessor or any Participant resulting from the transactions contemplated
by the Operative Documents or the Participation Agreements, (b) any act or
omission of Lessor or any Participant which is not required by the Operative
Documents or is in violation of any of the terms of the Operative Documents, (c)
any claim against Lessor or any Participant with respect to Taxes which FBC is
not required to indemnify Lessor or any Participant pursuant to the Agreement or
(d) any claim against Lessor or any Participant
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arising out of any transfer by Lessor or any Participant of all or any portion
of the respective interests of Lessor or any Participant in the Equipment or the
Operative Documents other than the transfer of title to or possession of any
Equipment by Lessor or any Participants pursuant to and in accordance with the
Agreement; provided, however, that during the term of the Agreement, prior to
the transfer of title to FBC, a Participant Lien shall not include a Lien which
does not (i) pose a significant risk of the sale, foreclosure or loss of any
Item or Part thereof, or (ii) interfere in any way with the quiet enjoyment of
the Item by FBC and, in each case, Lessor or a Participant is diligently
contesting by appropriate proceedings.
'Participation Agreement' means those Participation Agreements dated as of
October 15, 1993 between Lessor and each Participant, and each Participation
Agreement executed by a New Participant.
'Parts' means all appliances, parts, instruments, appurtenances,
accessories, furnishings, spare parts furnished with the Items and other
equipment or property of whatever nature which may from time to time be
incorporated into or installed on any Item. To the extent an Item contains one
or more individual items of Equipment, all such Equipment shall constitute a
Part.
'Patents' means all patents and patent applications listed on Schedule
9.1(t) to the Agreement.
'Payment Date' shall mean the 15th day of each of July, October, January
and April commencing on January 15, 1994.
'Permitted Lien' means any Lien referred to in clauses (i) through (vii) of
Section 2.3 of the Agreement.
'Person' means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Authority or any other entity.
'Plant' means the building(s) and other improvements and property (other
than the Equipment) at the Rogers, Arkansas site at which the Equipment shall be
initially located.
'Purchase Date' means the Termination Date; provided that if any such date
is not a Business Day, then the Purchase Date shall be the next following
Business Day.
'Purchase Price Percentage' shall mean 58% or, in the case of a purchase at
the end of an Extended Term, the Purchase Price Percentage set forth on the
Extension Schedule.
'Related Technological Rights' means all trade secrets, inventions,
formulations, know-how and other proprietary information (other than Patents)
owned or used by FBC that relate to the Equipment or any Part thereof or their
operation.
'Rent' means the Base Rent, Extended Term Rent and Supplemental Rent,
collectively.
'Requisition of Use' means any circumstance or event in consequence of
which the use of any Item shall be requisitioned or taken by any Governmental
Authority or other Person under power of eminent domain or otherwise for a
period of time (i) extending beyond the Term, or (ii) of more than six
consecutive months.
'Scheduled Liens' means those Liens set forth on Schedule 2.3 to the
Agreement.
'Site Lease' shall mean that Site Lease Agreement dated as of September 30,
1987 between FBC and Lessor as amended from time to time.
'Stipulated Interest Rate' means the rate of interest announced by PNC
Bank, National Association, from time to time as its 'prime' rate of interest,
plus 2%.
'Supplemental Rent' means all amounts, liabilities and obligations (other
than Base Rent and Extended Term Rent) which FBC assumes or agrees to pay to
Lessor under the Agreement, including, without limitation, payments of
Termination Value.
'Term' shall mean Base Term or Extended Term, as appropriate.
'Termination Date' means the Base Termination Date or, if the Term has been
extended in accordance with Section 4.6, the last day of the Extended Term.
'Termination Percentage' means the percentage set forth opposite the
applicable payment date in Column 3 in Schedule 1.4(a) or Schedule 4.6 to the
Agreement (as the case may be).
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'Termination Value' means the sum of (a) the product of (i) the Termination
Percentage and (ii) Lessor's Cost for the Item for which Termination Value is
being calculated, and (b) all unpaid and accrued Rent (including, but not
limited to, all Taxes due and payable under Section 2.2 of the Agreement as a
result of the termination of the Agreement or the transfer of any Item or Part
thereof); provided that the payments specified in clause (b) shall not be
duplicated.
'UCC' means the Uniform Commercial Code as the same may from time to time
be in effect in the State of New York or any other applicable jurisdiction.
SECTION 2. As used in the Agreement, the terms listed below have the
meanings set forth in the applicable cross-referenced sections of the Agreement.
<TABLE>
<CAPTION>
TERMS SECTIONS
- -------------------------------------- ---------
<S> <C>
'Appraisal' 10.1(e)
'Base Rent' 1.4(a)
'Base Term' 1.3
'Base Term Commencement Date' 1.
'Base Term Percentage Rental Factor' 1.4(a)
'Base Termination Date' 1.3
'Break Costs' 1.4
'Canadian Taxes' 2.2(b)
'Credit Agreement Indebtedness' 6.1(g)
'Designated Payment Date' 6.2(c)
'Early Termination Date' 4.8
'Event of Default' 6.1
'Event of Loss Payment Date' 3.1(a)
'Extended Term' 4.6(a)
'Extended Term Percentage Rental
Factor' 4.6(b)
'Extended Term Rent' 4.6(b)
'Extension Notice' 4.6(a)
'FBC Modifications' 2.8
'Intended Characterization' 8.1
'Liability' 2.4
'Liability Amount' 3.2(d)
'Moody's' 1.4
'Net Proceeds' 4.4(b)
'New Taxing Authority' 2.2(a)
'Notices' 12.1
'Obsolescence Date' 4.7(b)
'Obsolete Item' 4.7(a)
'Option 1' 4.1(a)
'Option 2' 4.1(b)
'Property Amount' 3.2(d)
'Proprietary Instruments' 9.1(t)
'Renewal Option' 4.6(a)
'Required Consent'
'Return' 2.2(d)
'S&P' 1.4(a)
'Sales Expenses' 4.3(a)
'Tax Counsel' 2.2(e)
'Taxes' 2.2
'Taxing Authority' 2.2(a)
'Transferee' 12.6
</TABLE>
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EXHIBIT 10.18 (c)
AMENDMENT NO. 1 TO POOLING
AND SERVICING AGREEMENT
THIS AMENDMENT NO. 1 TO POOLING AND SERVICING AGREEMENT is made as of
December 22, 1993 to the Pooling and Servicing Agreement, dated as of May 21,
1992 (the 'Pooling Agreement'), between First Brands Funding Inc ('FBFI'), First
Brands Corporation ('FBC') and Chemical Bank, as trustee (the 'Trustee'). All
capitalized terms used but not defined herein shall have the meanings given to
them in the Pooling Agreement.
1. The first sentence of Section 8.04 of the Pooling Agreement is hereby
amended to read in its entirety as follows:
The Servicer shall indemnify and hold harmless the Trustee (and each
of its directors, officers, employees and agents) and the Trust, for the
benefit of the Certificateholders and the CP Issuer, from and against any
loss, liability, expense, damage or injury suffered or sustained by reason
of any acts, omissions or alleged acts or omissions arising out of
activities of the Trustee or the Trust pursuant to this Agreement or any
Supplement, including those arising from acts or omissions of the Servicer
pursuant to this Agreement or any Supplement, or otherwise arising out of
this Agreement or any Supplement, including but not limited to any
judgment, award, settlement, reasonable attorneys' fees and other costs or
expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim; provided, however, that the
Servicer shall not indemnify the Trustee or the Trust to the extent such
acts, omissions or alleged acts or omissions constitute fraud, negligence,
breach of fiduciary duty or willful misconduct by the Trustee; and
provided, further, that the Servicer shall not indemnify the Trust, the
Investor Certificateholders or the CP Issuer (x) for any liabilities, costs
or expenses of the Trust with respect to any action taken by the Trustee at
the request of any Investor Certificateholder or the Holder of the Variable
Funding certificate or (y) with respect to any federal, state or local
income or franchise taxes or any other taxes imposed on or measured by
income (or any interest or penalties or additions with respect thereto)
required to be paid by the Trust or the Investor Certificateholders or the
Holder of the Variable Funding Certificate in connection herewith to any
taxing authority, or (z) with respect to any liabilities, losses, costs or
expenses incurred by any Certificateholder in the Investor Certificates of
any Series or, in the case of the CP Issuer, the Variable Funding
Certificate as a result of defaults or other losses (including, without
limitation, Investor Charge-Offs and Issuer Default Carryover Amounts) with
respect to the Receivables not specifically indemnified or represented to
hereunder arising out of or based on the arrangement created by this
Agreement or any Supplement.
* * * * * * * *
IN WITNESS WHEREOF, this Amendment No. 1 to the Pooling and Servicing
Agreement has been duly executed as of the date set forth above.
FIRST BRANDS FUNDING INC
By: /s/ Donald A. DeSantis
Its: Vice President
FIRST BRANDS CORPORATION
By: /s/ Leonard A. DeCecchis
Its: Vice President
<PAGE>
CHEMICAL BANK, as Trustee
By: /s/ James Foley
Its: Assistant Vice President
<PAGE>
CONFORMED COPY
FIRST BRANDS FUNDING MASTER TRUST
------------------------
AMENDED AND RESTATED
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
------------------------
Dated as of December 2, 1993
amending and restating the
Letter of Credit Reimbursement Agreement,
dated as of May 21, 1992
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS......................................................................... 2
Section 1.01 Definitions......................................................................... 2
ARTICLE II ISSUANCE OF LOC; REIMBURSEMENT OBLIGATION........................................... 2
Section 2.01 Issuance of LOC; Substitute LOCs; Extensions of the LOC............................. 2
Section 2.02 LOC Draws........................................................................... 4
Section 2.03 Reimbursement....................................................................... 5
Section 2.04 No Recourse; Obligations Absolute................................................... 6
Section 2.05 Facility Fees....................................................................... 7
Section 2.06 Liability of LOC Issuer............................................................. 8
Section 2.07 Surrender of LOC.................................................................... 8
Section 2.08 Conditions Precedent................................................................ 9
Section 2.09 Increased Costs and Taxes........................................................... 10
Section 2.10 Reserved............................................................................ 12
Section 2.11 Events of Default................................................................... 12
Section 2.12 Conflicting Instructions from the Trustee........................................... 14
Section 2.13 Limited Recourse to Servicer and Trust.............................................. 15
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS........................................... 15
Section 3.01 Representations..................................................................... 15
Section 3.02 Additional Representations.......................................................... 17
Section 3.03 Covenants........................................................................... 18
ARTICLE IV MISCELLANEOUS....................................................................... 20
Section 4.01 Method and Place of Payments and Net Payments....................................... 20
Section 4.02 Expenses............................................................................ 20
Section 4.03 Indemnity........................................................................... 20
Section 4.04 Notices............................................................................. 22
Section 4.05 Governing Law....................................................................... 23
Section 4.06 Waivers, etc........................................................................ 23
Section 4.07 Severability........................................................................ 24
Section 4.08 Term................................................................................ 24
Section 4.09 Successors and Assigns.............................................................. 24
Section 4.10 Counterparts........................................................................ 25
Section 4.11 Further Assurances.................................................................. 25
Section 4.12 Captions............................................................................ 25
Section 4.13 Representations, Warranties and Covenants of the LOC Issuer......................... 25
Section 4.14 Survival of Representations, Indemnities, Warranties and Agreements................. 27
Section 4.15 Tax Forms........................................................................... 27
Section 4.16 Jurisdiction........................................................................ 28
Section 4.17 Limited Recourse to Transferor...................................................... 28
Section 4.18 Limitation of Liability and Trustee's Obligations................................... 28
EXHIBIT A FORM OF IRREVOCABLE LETTER OF CREDIT
ANNEX 1 FORM OF CERTIFICATE FOR DRAWING
ANNEX 2 FORM OF CERTIFICATE FOR SPECIAL DRAWING
ANNEX 3 FORM OF CERTIFICATE FOR TERMINATION
ANNEX 4 FORM OF TRANSFER CERTIFICATE
ANNEX X Definitions
</TABLE>
AMENDED AND RESTATED
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
AMENDED AND RESTATED LETTER OF CREDIT REIMBURSEMENT AGREEMENT dated as of
December 2, 1993, among WESTDEUTSCHE LANDESBANK GIROZENTRALE, acting through its
New York Branch (the 'LOC Issuer'), FIRST BRANDS FUNDING INC (the 'Transferor'),
FIRST BRANDS CORPORATION (the 'Servicer') and FIRST BRANDS FUNDING MASTER TRUST
(the 'Trust'), a trust formed under the Pooling and Servicing Agreement and the
Variable Funding Supplement thereto (the 'Supplement') each dated May 21, 1992
(together, the
<PAGE>
'Pooling and Servicing Agreement') among the Transferor, the Servicer and
Chemical Bank, as Trustee (the 'Trustee')and THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, acting through its New York Branch, as administrative agent (the
'Administrative Agent', which amends and restates the Letter of Credit
Reimbursement Agreement originally dated as of May 21, 1992 (the 'Original
Reimbursement Agreement').
WITNESSETH:
WHEREAS, the Servicer, the Transferor and the Trustee have entered into the
Pooling and Servicing Agreement in order to issue the Variable Funding
Certificate;
WHEREAS, the Servicer, the Transferor and the Trustee have requested the
LOC Issuer to issue the LOC substantially in the form of Exhibit A hereto to
replace the letter of credit (the 'Original LOC') originally issued by The
Long-Term Credit Bank of Japan, Limited, ('LTCB') in support of the Variable
Funding Certificate;
WHEREAS, LTCB, as issuer of the Original LOC, has assigned to the LOC
Issuer all of its rights and benefits under the Original Reimbursement Agreement
and the other Loan Documents occurring on and after the date hereof.
WHEREAS, the LOC Issuer, the Transferor, the Servicer and the Trust, acting
through the Trustee, desire to amend and restate the Original Reimbursement
Agreement as set forth below, and the LOC Issuer is willing to issue the LOC on
the terms and conditions herein contained;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. As used in this Letter of Credit Reimbursement
Agreement and unless the context requires a different meaning, capitalized terms
used herein and not otherwise defined have the meanings assigned to such terms
in Annex X hereto which is incorporated by reference herein and shall include in
the singular number the plural and in the plural number the singular.
'Agreement' shall mean this Letter of Credit Reimbursement Agreement as it
may from time to time be amended, supplemented or otherwise modified in
accordance with the terms hereof.
'Replacement Date' shall mean the date on which the LOC is issued by the
LOC Issuer pursuant to this Letter of Credit Reimbursement Agreement in
replacement of the Original LOC.
ARTICLE II
ISSUANCE OF LOC;
REIMBURSEMENT OBLIGATION
Section 2.01 Issuance of LOC; Substitute LOCs; Extensions of the LOC. (a)
The LOC Issuer hereby agrees, on the terms and subject to the conditions
hereinafter set forth, to issue to the Trustee for the benefit of the Holder of
the Variable Funding Certificate, on the Replacement Date its irrevocable letter
of credit (including any letter of credit issued by the LOC Issuer in
replacement thereof and as such letter of credit may be supplemented, amended,
or modified from time to time, the 'LOC') in the form of Exhibit A hereto,
completed in accordance with such form and the terms of this Section 2.01. The
LOC shall be dated its date of issuance and shall be issued by the LOC Issuer in
an initial stated amount equal to $10,000,000 (the 'LOC Commitment') on the date
of issuance for a term expiring on May 21, 1995, subject to extension as set
forth in Section 2.01(c) (the 'LOC Expiration Date') and early termination as
set forth in the LOC and shall be applicable to draws required under Section
4.05 of the Pooling and Servicing Agreement with respect to the Variable Funding
Certificate and Section 4.10 of the Pooling and Servicing Agreement with respect
to the Variable Funding Certificate.
(b) Promptly following the appointment and qualification of any successor
to the Trustee in accordance with the terms of the Pooling and Servicing
Agreement, the LOC Issuer shall deliver to such successor trustee, in exchange
for the outstanding LOC held by the predecessor Trustee, a substitute
<PAGE>
letter of credit substantially in the form of Exhibit A hereto, having terms
identical to the then outstanding LOC but in favor of such successor trustee.
(c) No later than August 21, 1994 or nine months prior to any subsequent
LOC Expiration Date, the Transferor may request the LOC Issuer to extend the LOC
Expiration Date for a period of one additional year. Within 90 days after
receipt of any notice from the Servicer under this Section 2.01(c), the LOC
Issuer shall notify the Transferor and the Trustee whether or not it agrees to
extend the LOC Expiration Date. If the LOC Issuer elects, in its sole discretion
to extend the LOC Expiration Date, the LOC Expiration Date shall be extended for
one additional year and the LOC Issuer shall either (i) issue to the Trustee in
exchange for the then outstanding LOC a substitute letter of credit having terms
identical to those of the then outstanding LOC but expiring on the LOC
Expiration Date, as so extended, or (ii) deliver to the Trustee an amendment to
the then outstanding LOC to reflect such extension of the LOC Expiration Date.
If the LOC Issuer decides not to extend the Expiration Date, the Transferor may
obtain and deliver to the Trustee a replacement letter of credit or written
notification that other arrangements acceptable to the Rating Agencies have been
obtained to replace the expiring LOC. In the event that the Trustee has not
received an amendment to extend the LOC Expiration Date as provided in this
Section or a replacement letter of credit or other arrangement in lieu of a
replacement letter of credit which each Rating Agency confirms would not cause a
reduction or withdrawal of the then current rating of the Commercial Paper and
which is acceptable to the Required Banks on or prior to the 90th day preceding
the LOC Expiration Date, the LOC Issuer or the Trustee shall give notice to such
effect to the Transferor and the Servicer and the Administrative Agent that an
Event of Termination under Section 9.02 of the Pooling and Servicing Agreement
has occurred, and in such event the LOC Expiration Date shall be extended by the
LOC Issuer until thirteen months after such LOC Expiration Date and in such
event, the LOC Issuer shall deliver either a substitute letter of credit in
exchange for the then outstanding LOC which expires on the LOC Expiration Date
or an amendment to the then outstanding LOC to reflect such extension of the LOC
Expiration Date; provided, however, that in any event the LOC Expiration Date
shall occur no later than the date on which the Variable Funding Certificate has
been paid in full or the Trust has been terminated.
Section 2.02 LOC Draws. (a) Pursuant to Section 4.05(a), (c), (d), (g),
(k), (m) or (n) of the Pooling and Servicing Agreement, at or before 4:00 p.m.
(New York City time) on the Business Day immediately preceding the applicable
Payment Date on which a draw is to be made, the Trustee has agreed in the
Pooling and Servicing Agreement to make a drawing under the LOC in the amount
identified in such Servicer's instructions with respect to the Variable Funding
Certificate by delivering to the LOC Issuer and to the Administrative Agent a
duly completed drawing certificate (a 'Drawing Certificate') in the form
attached as Annex 1 to the LOC. Upon receipt of a duly completed Drawing
Certificate from the Trustee by 4:00 p.m. New York City time, the LOC Issuer
shall make a payment to the Trustee by 9:30 a.m. (New York City time) on the
Business Day succeeding the day of such drawing, and the Trustee has agreed in
the Pooling and Servicing Agreement to pay to the Holder of the Variable Funding
Certificate pursuant to Section 4.05(a), (c), (d), (g), (k), (m) or (n) of the
Pooling and Servicing Agreement the amount received from the LOC Issuer in
respect of such drawing.
(b) The LOC Issuer shall, promptly following its receipt thereof, examine
all documents purporting to represent a demand by the Trustee for an LOC
Disbursement to ascertain that the same appear on their face to be in conformity
with the terms and conditions of the LOC. If, after examination, the LOC Issuer
shall have determined that a demand for an LOC Disbursement does not conform to
the terms and conditions of the LOC, then the LOC Issuer shall, without delay,
give notice to the Transferor, the Trustee and the Administrative Agent to the
effect that the demand was not in accordance with the terms and conditions of
the LOC, stating the reasons therefor and that the relevant documents are being
held at the disposal of the Trustee or are being returned to the Trustee, as the
LOC Issuer may elect. The Trustee may attempt to correct any such non-conforming
demand for payment under the LOC on or before the LOC Expiration Date.
(c) It is understood and agreed that in making any payment under the LOC,
the LOC Issuer's exclusive reliance on the documents presented or otherwise
delivered to it under the LOC as to any and all matters set forth therein,
including, without limitation, reliance on the amount of any draft presented
under the LOC, whether or not the amount due to the beneficiary equals the
amount of such draft and whether or not any document presented pursuant to the
LOC proves to be insufficient in any respect, if such document on its face
appears to be in order, and whether or not any other statement or any other
<PAGE>
document presented pursuant to the LOC proves to be forged or invalid or any
statement therein proves to be inaccurate or untrue in any respect whatsoever,
shall not be deemed wilful misconduct or gross negligence of the LOC Issuer.
(d) If a Responsible Officer of the Trustee obtains knowledge that the
short-term debt rating of the LOC Issuer will be reduced, suspended or
withdrawn, the Trustee shall promptly make a draw of the Available LOC Amount (a
'Special Drawing') under the LOC and deposit the funds of such Special Drawing
into the LOC Escrow Account (as defined in Section 4.11 of the Pooling and
Servicing Agreement) unless the Rating Agencies confirm that the then current
rating of the Commercial Paper will not be reduced, suspended or withdrawn by
such Rating Agencies because of such reduction, suspension or withdrawal of the
short-term debt rating of the LOC Issuer. In the event a replacement letter of
credit or other arrangement in lieu of a replacement letter of credit which each
Rating Agency confirms would not cause a reduction or withdrawal of the then
current rating of the Commercial Paper is delivered subsequent to such Special
Drawing, this Agreement and the LOC shall terminate and the Trustee shall
surrender the LOC to the LOC Issuer for cancellation; provided, however, that
any reimbursement obligation pursuant to Section 2.03 hereof and Section 4.11 of
the Pooling and Servicing Agreement shall survive such termination.
Section 2.03 Reimbursement. (a) In order to provide for reimbursement to
the LOC Issuer for any disbursement made under the LOC or any funds otherwise
made available by the LOC Issuer pursuant to the LOC (including a Special
Drawing pursuant to Section 4.10 of the Pooling and Servicing Agreement),
including interest thereon (an 'LOC Disbursement'), and the payment of certain
other amounts due hereunder, the Servicer agrees to perform on a timely basis
each of its obligations set forth in the Pooling and Servicing Agreement in
accordance with its terms. The Servicer and the Transferor acknowledge and agree
that the LOC Issuer shall be reimbursed for LOC Disbursements, the LOC Fee and
all other amounts due to the LOC Issuer hereunder in accordance with Section
4.05(f), (h), (p) and (q) and Section 4.11 of the Pooling and Servicing
Agreement. Each LOC Disbursement made by the LOC Issuer not repaid in full prior
to 3:00 P.M. (New York City time), on the date when made, any LOC Fee not paid
within two Business Days of the due date thereof, and any other amount payable
to the LOC Issuer under this Agreement not paid by the 30th day after the date
notice thereof is given by the LOC Issuer to the Trustee, shall bear interest
from and including the date of the making thereof until paid in full (but
excluding the date of repayment) on the unpaid amount thereof from time to time
outstanding at a rate per annum (computed on the basis of the actual days
elapsed and a year of 360 days) equal to the prime rate of the LOC Issuer plus
2% per annum (such rate being referred to herein as the 'Unreimbursed
Disbursement Rate').
(b) Interest on each LOC Disbursement not repaid in full on the date made
shall be payable together with the principal amount of such LOC Disbursement
pursuant to the Variable Funding Supplement.
(c) All payments to be made hereunder (except as provided elsewhere in this
Agreement) shall be made to the LOC Issuer at the account specified on the
signature page hereof (or at such other account as the LOC Issuer may have
specified for such purpose in a written notice to the Trustee, the Transferor
and the Administrative Agent) in immediately available funds. All payments
hereunder shall be made not later than 3:00 P.M. (New York City time) on the
date due, and funds received after that hour shall be deemed to have been
received by the LOC Issuer on the next succeeding Business Day.
(d) Upon reimbursement of the LOC Issuer for any LOC Disbursement to the
extent of such reimbursement (to the extent such reimbursement is applied to
reimburse the LOC Issuer for the principal amount of an LOC Disbursement)
pursuant to the provisions of this Agreement and the Pooling and Servicing
Agreement, such amount shall be reinstated immediately in the Available LOC
Amount. All payments made to the LOC Issuer pursuant to this Agreement other
than the LOC Fee shall be allocated and paid to the LOC Issuer in accordance
with Sections 4.05(f) and (p) of the Pooling and Servicing Agreement.
Section 2.04 No Recourse; Obligations Absolute. Each of the LOC Issuer and
the Administrative Agent agrees that it shall have no right of set-off or
banker's lien against the Transferor with respect to any LOC Disbursement, the
Trustee or any Affiliate, officer or director of any of them. Subject to and
without limiting the foregoing provisions of this Section 2.04, the obligations
of the Transferor under Section 2.03 hereof and the right of the LOC Issuer to
be paid the LOC Disbursement and all other amounts payable to the LOC Issuer
under this Agreement in full shall be absolute, unconditional and
<PAGE>
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, irrespective of any of the following circumstances (except as
expressly provided to the contrary below):
(a) any lack of validity or enforceability of this Agreement, the LOC or
the Pooling and Servicing Agreement;
(b) any amendment or waiver of, or consent to or departure from, the LOC,
this Agreement or the Pooling and Servicing Agreement;
(c) the existence of any claim, set-off, defense or other rights which the
Servicer or the Transferor may have at any time against the Trustee, any
beneficiary or any transferee of the LOC (or any persons or entities for whom
the Trustee, any such beneficiary or any such transferee may be acting), the LOC
Issuer, the Administrative Agent or any other person or entity, whether in
connection with the LOC, this Agreement, the Pooling and Servicing Agreement or
any unrelated transactions;
(d) any statement or any document presented under the LOC proving to be
forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect whatsoever, provided the LOC
Issuer's reliance on such statement or documents shall not have constituted
gross negligence or wilful misconduct of the LOC Issuer;
(e) payment by the LOC Issuer under the LOC against presentation of a
Drawing Certificate or other draft or document which does not comply with the
terms of the LOC or this Agreement; provided such payment shall not have
constituted gross negligence or willful misconduct of the LOC Issuer;
(f) the bankruptcy or insolvency of the Transferor or the Servicer; and
(g) any other circumstances or happening whatsoever, whether or not similar
to any of the foregoing; provided that the same shall not have constituted gross
negligence or wilful misconduct of the LOC Issuer.
Section 2.05 Facility Fees. (a) The LOC Issuer hereby acknowledges and
agrees that it shall not be entitled to receive from the Transferor or the
Servicer any arrangement fee with respect to the issuance of the LOC.
(b) The Servicer hereby agrees to pay, on behalf of the Trust, to the LOC
Issuer, a letter of credit commission (the 'LOC Fee') for the period from and
including the Replacement Date to and including the LOC Expiration Date,
computed at a rate equal to 1.25% per annum, calculated on the LOC Commitment.
The LOC Fee shall be payable quarterly in arrears on the third, sixth, ninth and
twelfth Settlement Dates of each year and on the LOC Expiration Date, and shall
be payable to the Administrative Agent for the account of the LOC Issuer at its
account specified on the signature page hereof.
(c) The LOC Fee shall be calculated on the basis of actual days elapsed and
a year of 360 days.
Section 2.06 Liability of LOC Issuer. None of the LOC Issuer or the
Administrative Agent nor any of their respective officers or directors shall be
liable or responsible for: (a) the use which may be made of the LOC or any acts
or omissions of the Transferor or the Trustee or any transferee in connection
therewith; (b) the validity, sufficiency or genuineness of documents (other than
the LOC), or of any endorsement thereon, even if such documents should prove to
be in any or all respects invalid, insufficient, fraudulent or forged; (c)
payment by the LOC Issuer against presentation of documents which do not comply
with the terms of the LOC, including failure of any documents to bear any
reference or adequate reference to the LOC; or (d) any other circumstances
whatsoever in making or failing to make payment under the LOC; provided, that
the Transferor and the Trustee shall have a claim against the LOC Issuer, and
the LOC Issuer shall be liable to the Transferor and the Trustee, to the extent
of any direct, as opposed to consequential, damages suffered by the Transferor
or the Trustee that were caused by (i) the LOC Issuer's wilful misconduct or
gross negligence in determining whether documents presented under the LOC comply
with the terms of the LOC or (ii) the LOC Issuer's gross negligence in failing
to make or wilful failure to make lawful payment under the LOC after the timely
presentation to the LOC Issuer by the Trustee of a Drawing Certificate strictly
complying with the terms and conditions of the LOC. In furtherance and not in
limitation of the foregoing, the LOC Issuer may accept documents that appear on
their face to be in order, without responsibility for further investigation;
provided, that the LOC Issuer shall not be excused from its wilful misconduct or
gross negligence in determining whether documents presented under the LOC comply
with the terms of the LOC.
<PAGE>
Section 2.07 Surrender of LOC. Provided that the LOC Issuer is not then in
default under the LOC by reason of its having wrongfully failed to honor a
demand for payment previously made by the Trustee under the LOC, the Trustee
shall surrender the LOC to the LOC Issuer promptly following the earlier of (i)
the LOC Expiration Date and (ii) the termination of the Trust.
Section 2.08 Conditions Precedent. The following constitute conditions
precedent to the obligation of the LOC Issuer to issue the LOC on the
Replacement Date:
(a) The LOC Issuer shall have received fully executed copies of the Pooling
and Servicing Agreement, the Supplement, the Purchase Agreement, the Liquidity
Agreement and all related documents, and such agreements shall be in form and
substance satisfactory to the LOC Issuer.
(b) On the date of issuance of the LOC, all representations and warranties
of the Servicer and the Transferor contained in this Agreement and the Pooling
and Servicing Agreement shall be true and correct, and the LOC Issuer shall have
received a certificate from each of the Servicer and the Transferor to such
effect.
(c) On the date of issuance of the LOC, the Transferor and the Servicer
shall not be in default of any obligation under the Pooling and Servicing
Agreement, this Agreement or the Purchase Agreement.
(d) The LOC Issuer shall have received the favorable written opinion of
counsel to First Brands Corporation (who may be an employee of the Servicer) and
the Transferor, dated the Replacement Date, with respect to the matters
reasonably requested by the LOC Issuer.
(e) The LOC Issuer shall have received (i) a copy of the resolutions of the
Board of Directors of the Servicer, certified as of the Replacement Date by the
Secretary or Assistant Secretary thereof, authorizing the execution, delivery
and performance of the Pooling and Servicing Agreement and this Agreement and
the procurement of the LOC, (ii) copies of the Charter and By-laws of the
Servicer, (iii) an incumbency certificate of the Servicer with respect to its
officers authorized to execute the Pooling and Servicing Agreement, this
Agreement and the documents required hereby, (iv) a copy of the resolutions of
the Board of Directors of the Transferor, certified as of the Replacement Date
by the Secretary or Assistant Secretary thereof, authorizing the execution,
delivery and performance of the Pooling and Servicing Agreement and this
Agreement, (v) copies of the Charter and By-laws of the Transferor and (vi) an
incumbency certificate of the Transferor with respect to its officers authorized
to execute the Pooling and Servicing Agreement, this Agreement and the documents
required hereby.
(f) The Pooling and Servicing Agreement shall be in full force and effect
and the Variable Funding Certificate shall have been validly issued.
(g) The LOC Issuer shall have received such other documents, certificates,
instruments, approvals and opinions as the LOC Issuer may reasonably request.
Section 2.09 Increased Costs and Taxes. (a) Increased Costs. Subject to
Section 2.13, if after the date hereof, the adoption of any law or guideline or
any amendment or change in the administration, interpretation or application of
any existing or future law or guideline by any Official Body charged with the
administration, interpretation or application thereof, or the compliance with
any request or directive of any Official Body (whether or not having the force
of law):
(i) shall subject the LOC Issuer to any tax, duty or other charge with
respect to this Agreement or any payments made hereunder, or shall change
the basis of taxation of payments to the LOC Issuer of any amounts due
under this Agreement (except for changes in the rate of tax on the overall
net income of the LOC Issuer imposed by the jurisdiction in which such LOC
Issuer's principal executive office is located); or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board) against assets of, deposits with or for
the account of, or credit extended by, the LOC Issuer or shall impose on
the LOC Issuer or on the United States market for certificates of deposit
or the London interbank market any other condition affecting this
Agreement; or
(iii) imposes upon the LOC Issuer any other condition or expense
(including, without limitation, (i) loss of margin and (ii) reasonable
attorneys' fees and expenses, and expenses of litigation or preparation
therefor in contesting any of the foregoing) with respect to this Agreement
or any payments made hereunder, and the result of any of the foregoing is
to increase the cost to
<PAGE>
the LOC Issuer of maintaining the LOC, or to reduce the amount of any sum
received or receivable by the LOC Issuer under this Agreement, by an amount
deemed by the LOC Issuer to be material, then the Trustee, in accordance
with Sections 4.05(f)(iii) and 4.05(p)(iii) of the Pooling and Servicing
Agreement, shall pay to the LOC Issuer such additional amount or amounts as
will compensate the LOC Issuer for such increased cost or reduction. If the
LOC Issuer becomes entitled to claim any additional amounts pursuant to
this Section 2.09, it shall promptly notify the Trustee of the event by
reason of which it has become so entitled. A certificate as to any
additional amounts payable pursuant to this Section submitted by an officer
of the LOC Issuer to the Trustee shall be conclusive, in the absence of
manifest error. This covenant shall survive the termination of this
Agreement and the payment of all amounts payable hereunder.
(b) If the LOC Issuer shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Official Body, or any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
Official Body, has or would have the effect of reducing the rate of return on
capital of the LOC Issuer (or its parent) as a consequence of the LOC or the LOC
Issuer's obligations hereunder to a level below that which the LOC (or its
parent) could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by the LOC Issuer to be material, then from time to time, the
Trustee, in accordance with Sections 4.05(f)(iii) and 4.05(p)(iii) of the
Pooling and Servicing Agreement, shall pay to the LOC Issuer such additional
amount or amounts as will compensate the LOC Issuer (or its parent) for such
reduction.
(c) The LOC Issuer shall promptly notify the Trustee and the Transferor of
any event of which it has knowledge, occurring after the date hereof, which will
entitle the LOC Issuer to compensation pursuant to this Section. A certificate
of the LOC Issuer claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, the LOC Issuer may
use any reasonable averaging and attributing methods.
(d) Taxes. (A) All payments made under this Agreement shall be made free
and clear of, and without reduction for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority excluding, in the case of the LOC Issuer,
net income and franchise taxes based upon net income imposed on the LOC Issuer
by the jurisdiction under the laws of which it is organized or in which is
located any office from or at which the LOC Issuer is honoring any Drawing
Certificate or any political subdivision or taxing authority thereof or therein
(all such non-excluded taxes, levies, imposts, duties, charges, fees, deductions
and withholdings being hereinafter called 'Taxes'). If any Taxes are required to
be withheld from any amounts payable to the LOC Issuer hereunder, the amounts so
payable to the LOC Issuer shall be increased to the extent necessary to yield to
the LOC Issuer (after payment of all Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement.
Whenever any Taxes are payable by the Trustee, as promptly as possible
thereafter the Trustee shall send to the LOC Issuer a certified copy of the
original official receipt, if any, received by the Trustee showing payment
thereof.
(e) If the Trustee fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the LOC Issuer the required receipts or
other required documentary evidence, the Trustee shall indemnify the LOC Issuer
for any incremental taxes, interest or penalties that may become payable by the
LOC Issuer as a result of any such failure. The agreements in this subsection
shall survive the termination of this Agreement and the payment of all amounts
payable hereunder.
Section 2.10 Reserved
Section 2.11 Events of Default. Upon the occurrence of any of the following
events (each an 'Event of Default'), and so long as such Event of Default shall
continue unremedied:
(a) (i) failure of any LOC Disbursement, including interest thereon, to be
paid when due, (ii) failure of any LOC Fee to be paid within 2 Business Days
following the due date thereof and (iii) failure of any other payment under this
Agreement to be paid within 2 Business Days following the due date thereof;
provided that amounts specified in item (iii) shall not be deemed due until the
30th day after notice thereof has been given to the Trustee; or
<PAGE>
(b) Representations. Any representation or warranty or statement made by
the Servicer in this Agreement or in the Pooling and Servicing Agreement shall
prove to have been incorrect in any material respect when made, which continues
to be incorrect in any material respect for a period of 60 days after the date
on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by the Trustee or the LOC Issuer; or
(c) Covenants. Failure by the Servicer to observe or perform in any
material respect any covenant or agreement contained herein or in the Pooling
and Servicing Agreement and not constituting an Event of Default under any other
clause of this Section 2.11 which continues unremedied for a period of 60 days
after the earlier of actual knowledge or the date on which written notice of
such failure shall have been given; or
(d) Voluntary Bankruptcy Proceedings of the Servicer or the Transferor.
Either (i) an order for relief under Title 11 of the United States Code shall be
entered in a case in which the Servicer or the Transferor is a debtor, or the
Servicer or the Transferor shall become insolvent or generally fail to pay, or
admit in writing its inability to pay, its debts as they become due, or shall
voluntarily commence any proceeding or file any petition under any bankruptcy,
insolvency or similar law or seeking dissolution or reorganization or the
appointment of a receiver, trustee, custodian or liquidator for itself or a
substantial portion of its property, assets or business or to effect a plan or
other arrangement with its creditors, or shall file any answer admitting the
jurisdiction of the court and the material allegations of an involuntary
petition filed against it in any bankruptcy, insolvency or similar proceeding,
or shall be adjudicated bankrupt, or shall make a general assignment for the
benefit of creditors, or shall consent to, or acquiesce in the appointment of, a
receiver, trustee, custodian or liquidator for itself or a substantial portion
of its property, assets or business or (ii) corporate action shall be taken by
the Servicer or the Transferor for the purpose of effectuating any of the
foregoing; or
(e) Involuntary Bankruptcy Proceedings against the Servicer or the
Transferor. Involuntary proceedings or an involuntary petition shall be
commenced or filed against the Servicer or the Transferor under any bankruptcy,
insolvency or similar law or seeking the dissolution or reorganization of the
Servicer or the Transferor or the appointment of a receiver, trustee, custodian
or liquidator for the Servicer or the Transferor or of a substantial part of the
property, assets or business of the Servicer, or any writ, order, judgment,
warrant of attachment, execution or similar process shall be issued or levied
against a substantial part of the property, assets or business of the Servicer
or the Transferor, and such proceeding or petition shall not be dismissed, or
such writ, order, judgment, warrant of attachment, execution or similar process
shall not be released, vacated or fully bonded, within 60 days after
commencement, filing or levy, as the case may be; or
(f) No Valid Agreement. This Agreement or the Pooling and Servicing
Agreement shall, at any time after its execution and delivery, for any reason
cease to be in full force and effect (unless such occurrence is in accordance
with its terms) or shall be declared to be null and void, or the validity or
enforceability thereof shall be contested by the Servicer or the Servicer shall
deny that it has any or further liability or obligation thereunder;
(g) Matured Default. A Matured Default under the Liquidity Agreement shall
have occurred, if any;
(h) Other Agreements. The Liquidity Agreement (or any provision thereof
material to the Holders of the Variable Funding Certificate) shall fail to be in
full force and effect, enforceable in accordance with its terms, or the security
interest purported to be created by the Security Agreement shall fail to be a
valid and enforceable perfected first priority security interest in favor of the
Collateral Agent in any of the Collateral; or
(i) Servicer Default. A Servicer Default shall have occurred and be
continuing or the Servicer shall be changed from First Brands (or any successor
Servicer to which the LOC Issuer has consented) without the consent of the LOC
Issuer;
then and in any such event, the LOC Issuer may (i) give notice to the Servicer
of the occurrence of the Event of Default which becomes an Event of Termination
under Section 9.02 of the Pooling and Servicing Agreement, and (ii) pursue, to
the extent permitted by applicable law, any other remedy available at law or in
equity, including, without limitation, the remedy of specific performance of any
covenant or agreement herein contained (any such Event of Default followed by
the notice specified in item (i) above, a 'Matured Default').
<PAGE>
Section 2.12 Conflicting Instructions from the Trustee. Notwithstanding any
other provision of this Agreement, in the event the LOC Issuer (i) receives a
demand for a drawing to be made under the LOC and (ii) receives any
communication purportedly from the Trustee or any of its officers, employees or
agents which communication indicates that such demand is not in order, the LOC
may defer honoring such demand until it receives further written instructions
from the Trustee as to the disposition of such demand.
Section 2.13 Limited Recourse to Servicer and Trust. The LOC Issuer agrees
that the obligations of the Trust and the Servicer hereunder, including, with
respect to the Trust the obligations under Sections 2.09 and 4.03 hereof, and
with respect to the Servicer solely in respect of its obligations to cause to be
paid amounts due and owing to the LOC Issuer pursuant to Sections 4.05(f) and
(p) of the Pooling and Servicing Agreement shall be payable solely from
available Issuer Imputed Yield Collections in the Collection Account pursuant to
Sections 4.05(f) and (p) of the Pooling and Servicing Agreement (subject to all
prior claims thereon specified in the Pooling and Servicing Agreement) and that
the LOC Issuer shall not look to any other property or assets of the Servicer or
the Trust in respect of such obligations and that such obligations shall not
constitute a claim against the Servicer or the Trust in the event that the
assets of the Servicer or the Trust which are available pursuant to Sections
4.05(f) and (p) are insufficient to pay in full such obligations, provided that
notwithstanding the foregoing, the obligations of the Servicer under Section
2.05(b) shall be recourse obligations of the Servicer, collectible out of its
assets, to the extent it has received such amounts from the Trustee pursuant to
the Pooling and Servicing Agreement, whether or not the Servicer still has
possession or control of such amounts. The Trustee is not acting in an
individual capacity under this Agreement, but solely as trustee of the Trust.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01 Representations. The Servicer hereby represents, warrants and
covenants that:
(a) The Servicer is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation, and has full
corporate power, authority and legal right to execute, deliver and perform
its obligations under this Agreement and the Pooling and Servicing
Agreement and, in all material respects, to own its property and conduct
its business as such properties are presently owned and as such business is
presently conducted.
(b) The Servicer is duly qualified to do business and is in good
standing as a foreign corporation (or is exempt from such requirements),
and has obtained all necessary licenses and approvals in each jurisdiction
in which the failure to obtain such license or approval would have a
material adverse effect upon the Certificateholders or upon the ability of
the Servicer to perform its obligations under this Agreement or the Pooling
and Servicing Agreement.
(c) The execution, delivery and performance of this Agreement and the
Pooling and Servicing Agreement, and the consummation of the transactions
provided in this Agreement and the Pooling and Servicing Agreement, have
been duly authorized by the Servicer by all necessary corporate action on
the part of the Servicer.
(d) This Agreement and the Pooling and Servicing Agreement constitute
legal, valid and binding obligations of the Servicer, enforceable in
accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereinafter in effect, relating to the enforcement of
creditors' rights in general and, with respect to any Successor Servicer
which is a national banking association, the rights of creditors of
national banks under United States law and except as such enforceability
may be limited by general principles of equity (whether considered in a
proceeding at law or in equity).
(e) The execution and delivery of this Agreement and the Pooling and
Servicing Agreement by the Servicer, and the performance of the
transactions contemplated by this Agreement and the Pooling and Servicing
Agreement and the fulfillment of the terms hereof applicable to the
Servicer, will not conflict with, violate, result in any breach of any of
the material terms and provisions of, or constitute (with or without notice
or lapse of time or both) a default under, or require any consent, approval
or registration under, any Requirement of Law applicable to the Servicer or
any
<PAGE>
indenture, contract, agreement, mortgage, deed of trust or other instrument
to which the Servicer is a party or by which it is bound.
(f) There are no proceedings or investigations, pending or, to the
best knowledge of the Servicer, threatened against the Servicer before any
court, regulatory body, administrative agency or other tribunal or
governmental instrumentality (i) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated by
this Agreement or the Pooling and Servicing Agreement, (ii) seeking any
determination or ruling that, in the reasonable judgment of the Servicer,
would materially and adversely affect the performance by the Servicer of
its obligations under this Agreement or the Pooling and Servicing
Agreement, or (iii) seeking any determination or ruling that would
materially and adversely affect the validity or enforceability of this
Agreement or the Pooling and Servicing Agreement.
(g) All approvals, authorizations, consents, orders or other actions
of any Person or of any governmental body or official required in
connection with the execution and delivery by the Servicer of this
Agreement, the performance by the Servicer of this Agreement, the
performance by the Servicer of the transactions contemplated by this
Agreement and the fulfillment by the Servicer of the terms hereof, have
been obtained.
(h) No Event of Default under this Agreement, no Event of Termination,
no Servicer Default, no Event of Default under the Liquidity Agreement, and
no event, which with lapse of time or notice or both would become any of
such events has occurred and is continuing.
(i) Neither the Servicer nor the Transferor nor any of their
respective subsidiaries is an 'investment company' as that term is defined
in, or is otherwise subject to regulation under, the Investment Company Act
of 1940, as amended.
(j) Neither the Servicer nor the Transferor nor any of their
respective subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of
purchasing or carrying any Margin Stock, and no part of the proceeds of the
credits extended hereby or under the Pooling and Servicing Agreement will
be used to purchase or carry any such Margin Stock or to extend credit to
others for the purpose of purchasing or carrying such margin Stock if such
action would violate, or be inconsistent with, any rules or regulations of
the Federal Reserve Board, including without limitation, any provisions of
Regulation G, T, U or X.
Section 3.02 Additional Representations. The Transferor and the Servicer
represent and warrant that the representations and warranties made by them in
Sections 2.03, 2.04 and 3.03 of the Pooling and Servicing Agreement are true and
correct as of the dates there so made.
Section 3.03 Covenants. The Servicer covenants and agrees that, so long as
the LOC shall remain in effect or any monetary obligation arising hereunder or
under the Pooling and Servicing Agreement shall remain unpaid, unless the LOC
Issuer shall otherwise consent in writing, it shall:
(a) for the benefit of the LOC Issuer and for so long as this
Agreement shall be in effect, perform and comply with each of its
respective agreements, warranties and indemnities contained in this
Agreement and the Pooling and Servicing Agreement; provided that the remedy
for the breach of this clause (a) as to warranties of the Servicer in the
Pooling and Servicing Agreement, shall, to the extent that the remedy for
such breach is limited in the Pooling and Servicing Agreement, be so
limited herein;
(b) Neither the Servicer nor the Transferor shall, without the consent
of the LOC Issuer, amend or waive or consent to any amendment to or waiver
of (i) Article IV of the Pooling and Servicing Agreement as it relates to
the Variable Funding Supplement (including such portions of Article IV
which may be restated in the Variable Funding Supplement) or any definition
to the extent used therein, (ii) the definition of Discount Factor in a
manner which cause a reduction thereof, (iii) Section 9.02 of the Pooling
and Servicing Agreement or (iv) any other provision of the Pooling and
Servicing Agreement or any other Facilities Document to the extent the LOC
Issuer would be materially adversely affected thereby; provided that the
addition of a Supplement for a Series will not in and of itself cause a
material adverse effect on the LOC Issuer.
(c) deliver to the LOC Issuer and the Administrative Agent a copy of
each amendment or supplement to the Pooling and Servicing Agreement or of
the Liquidity Agreement, any Supplement, the Purchase Agreement or any of
the other agreements contemplated hereby;
<PAGE>
(d) execute and deliver to the LOC Issuer and the Administrative Agent
all such documents and instruments and do all such other acts and things as
may be necessary or reasonably required by the LOC Issuer or the Trustee to
enable the Trustee,on behalf of the Trust, or the LOC Issuer to exercise
and enforce their respective rights under this Agreement and the Pooling
and Servicing Agreement and to realize thereon, and record and file and
rerecord and refile all such documents and instruments, at such time or
times in such manner and at such place or places, all as may be necessary
or reasonably required by the Trustee or the LOC Issuer to validate,
preserve and protect the position of the Trust and the LOC Issuer under
this Agreement and the Pooling and Servicing Agreement;
(e) not sell all or substantially all of its property and assets to,
or consolidate with or merge into, any other corporation, without the
consent of the LOC Issuer;
(f) furnish to the LOC Issuer and the Administrative Agent a copy of
each certificate, report, statement, notice or other communication (other
than investment instructions) furnished by or on behalf of First Brands
Funding Inc, as Transferor, or the Servicer, to Certificateholders, the
Trustee or the Rating Agencies concurrently therewith and furnish to the
LOC Issuer promptly after receipt thereof, a copy of each notice, demand or
other communication received by First Brands Funding Inc, as Transferor, or
the Servicer from the Trustee, the Certificateholders or the Rating
Agencies with respect to the Variable Funding Certificate, the LOC, this
Agreement or the Pooling and Servicing Agreement; and furnish such other
information as the LOC Issuer or the Administrative Agent may reasonably
request;
(g) promptly advise the LOC Issuer and the Administrative Agent of the
occurrence of any Event of Termination or Servicer Default under the
Pooling and Servicing Agreement;
(h) with respect to the Receivables, promptly notify the LOC Issuer of
any material changes in the Credit and Collection Policy, and in any event
will not, except as required by law, make any material change to the Credit
and Collection Policy which could reasonably be expected to have a material
adverse effect on the collectibility of the Receivables, taken as a whole
or on the rights of the LOC Issuer;
(i) upon reasonable written notice from the LOC Issuer or the
Administrative Agent, allow employees and agents of the LOC Issuer or the
Administrative Agent, during the Servicer's normal business hours, to audit
the Servicer's books and records concerning the Receivables, and the
servicing thereof; provided, however, that such audit is performed without
unreasonable disruption of the Servicer's operations; and provided,
further, that such audit may be conducted at the Servicer's expense only
once each calendar year, and all costs and expenses of any audit after the
first in any calendar year shall be paid by the LOC Issuer.
(j) perform on a timely basis all of its obligations under the Pooling
and Servicing Agreement.
ARTICLE IV
MISCELLANEOUS
Section 4.01 Method and Place of Payments and Net Payments. (a) Unless
otherwise specified herein, all payments to the LOC Issuer hereunder shall be
made in lawful currency of the United States and in immediately available funds
prior to 3:00 P.M. (New York City time) on the date such payment is due by wire
transfer to the account of the LOC Issuer, at The Long-Term Credit Bank of
Japan, Limited or to such other office or account maintained by the LOC Issuer
as the LOC Issuer may direct.
(b) Whenever any payment under this Agreement shall be stated to be due on
a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in computing interest, commissions or fees, if any, in connection with
such payment.
Section 4.02 Expenses. Subject to Section 2.13 the Servicer agrees, and
shall instruct the Trustee, to pay all reasonable out-of-pocket costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses), if any, incurred by the LOC Issuer in connection with the amendment,
modification, waiver and enforcement of this Agreement, the Pooling and
Servicing Agreement and any other document delivered in connection herewith or
therewith.
<PAGE>
Section 4.03 Indemnity. (a) Subject to Section 2.13, the Transferor agrees
to indemnify and hold harmless the LOC Issuer and the Administrative Agent and
their respective officers, directors, employees and agents (the LOC Issuer, the
Administrative Agent, their officers, directors, employees and agents shall be
individually referred to herein as an 'Indemnitee') from and against any and all
claims, damages, losses, liabilities, costs or expenses whatsoever which any
such Indemnitee may incur (or which may be claimed against any such Indemnitee)
by reason of or in connection with the execution and delivery or assignment of,
or payment under, the LOC or this Agreement or any transactions contemplated
hereby or by the Pooling and Servicing Agreement, or by reason of any default in
the reimbursement of any LOC Disbursement except to the extent that any such
claim, damage, loss, liability, cost or expense is caused by the willful
misconduct or gross negligence of any such Indemnitee. In the event of a LOC
Disbursement pursuant to Sections 4.05(d) or (n) of the Pooling and Servicing
Agreement as a result of the failure of the Transferor to reimburse the Trust
for credits, the Transferor shall indemnify, and pay, to the LOC Issuer the
amount of such credits to the extent of the unreimbursed LOC Disbursement. The
foregoing indemnity shall include any claims, damages, losses, liabilities,
costs and expenses to which the LOC Issuer may become subject under the
Securities Act of 1933, as amended (the 'Act'), the Securities Exchange Act of
1934, as amended, or other federal or state law or regulation. This covenant
shall survive the termination of this Agreement and the expiration of the LOC.
(b) The Servicer shall not assign (whether voluntarily or as a result of a
Servicer Default) any of its rights or obligations hereunder or under the
Pooling and Servicing Agreement (except as permitted by Section 8.07 of the
Pooling and Servicing Agreement) to any Person unless (i) the prior written
consent of the LOC Issuer shall have been obtained, and (ii) prior to the
effective date of such assignment, such Person shall have executed and delivered
to the LOC Issuer a written agreement in form and substance reasonably
satisfactory to the LOC Issuer in which such Person agrees to be bound by the
terms, covenants and conditions contained herein and in the Pooling and
Servicing Agreement applicable to the Servicer as Servicer, and subject to the
duties and obligations of the Servicer hereunder after the effective date of its
appointment and shall agree to indemnify and hold harmless the LOC Issuer from
and against any and all claims, damages, losses, liabilities, costs or expenses
whatsoever which the LOC Issuer may incur (or which may be claimed against the
LOC Issuer) by reason of the gross negligence or wilful misconduct of the
successor Servicer in exercising its powers and carrying out its obligations
herein and under the Pooling and Servicing Agreement. Any Successor Servicer
appointed pursuant to the Pooling and Servicing Agreement shall likewise agree
to the terms set forth in clause (ii). As of the date of its acceptance, such
Successor Servicer shall be deemed to have made with respect to itself the
representations and warranties made by the Servicer in Sections 3.01 and 3.02.
Following the effective date of appointment, the Servicer shall be released from
all duties and liabilities as Servicer hereunder, but such release shall not
affect any obligations of the Servicer that arose prior to such date or the
obligations of the Servicer under Section 2.05, 4.03 or 3.03(f) (in the case of
Section 3.03(f), excluding any documents received by the Successor Servicer from
anyone other than the Servicer and also excluding any documents received by the
Servicer from the Successor Servicer) or 3.03(i) (to the extent the Servicer
retains the records referred to therein) of this Agreement, whether arising
before or after such date.
Section 4.04 Notices. Except where telephonic instructions or notices are
authorized herein to be given, all notices, demands, instructions and other
communication required or permitted to be given to or made upon any party hereto
shall be in writing and shall be personally delivered or sent by registered,
certified or express mail, postage prepaid, return receipt requested, or by
prepaid Telex, TWX, facsimile or telegram (with messenger delivery specified in
the case of a telegram) (any notice sent by telex, TWX, facsimile or telegram
will be confirmed by mail as provided herein) and shall be deemed to be given
for purposes of this Agreement on the day that such writing is delivered or sent
to the intended recipient thereof in accordance with the provisions of this
Section 4.04. Unless otherwise specified in a notice sent or delivered in
accordance with the foregoing provision of this Section 4.04, notices, demands,
instructions and other communications shall be given to or made upon the
respective parties hereto at their respective addresses (or to their respective
Telex, facsimile or TWX numbers) indicated below:
<PAGE>
<TABLE>
<S> <C>
If to the LOC Westdeutsche Landesbank Girozentrale
Issuer: New York Branch
1211 Avenue of the Americas
New York, New York 10036
Attention: Trade Services Group
Sharon M. Maharg
Telephone: (212) 852-6343
Telecopier: (212) 768-4659
If to the The Long-Term Credit Bank of Japan, Limited
Administrative 165 Broadway
Agent: New York, New York 10006
Attention: Business Administration Department
Mr. Robert Pacifici
Telephone: 212-335-4801
Telecopy: 212-608-3452
If to the Trust: First Brands Funding Master Trust
c/o Chemical Bank, as Trustee
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Corporate Trustee Administration Department
Telephone: (212) 971-3347
Telecopy: (212) 613-7800
If to the Servicer: First Brands Corporation
83 Wooster Heights Road
Danbury, Connecticut 06813-1911
Attention: Treasurer
Telephone: (203) 731-2487
If to the First Brands Funding Inc
Transferor: 1013 Centre Road
Suite 350
Wilmington, Delaware 19805
with a copy to:
First Brands Funding Inc
83 Wooster Heights Road
Danbury, Connecticut 06813-1911
Attention: Treasurer
Telephone: 203-731-2487
Telecopy: 203-731-2395
</TABLE>
Section 4.05 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
Section 4.06 Waivers, etc. Neither any failure nor any delay on the part of
the LOC Issuer in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other of further exercise or the exercise of any other right, power
or privilege. No provision of this Agreement shall be waived, amended or
supplemented except by a written instrument executed by the parties hereto.
Notwithstanding the foregoing, no amendment or waiver of any provision of this
Agreement, nor consent to any departure by the Servicer or Transferor therefrom
to this Agreement shall be effective unless a written statement is obtained from
each of the Rating Agencies that the rating of the Commercial Paper will not be
downgraded or withdrawn solely as result of such amendment. The Servicer or
Transferor shall provide each Rating Agency with at least ten days' prior notice
of each amendment, waiver or consent to this Agreement and the Servicer or
Transferor shall furnish each Rating Agency with a copy of each amendment,
waiver or consent to this Agreement no later than the effective date thereof.
Section 4.07 Severability. Any provisions of this Agreement which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceable without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
<PAGE>
Section 4.08 Term. This Agreement shall remain in full force and effect
until the later to occur of (a) the payment of the LOC Disbursements and any and
all other amounts payable hereunder, notwithstanding the earlier termination of
the LOC or (b) the termination of the LOC. The provisions of Sections 2.03,
2.09, 4.02 and 4.03 hereof shall survive termination of this Agreement.
Section 4.09 Successors and Assigns. (a) This Agreement shall be binding
upon the LOC Issuer, the Administrative Agent, the Trust, the Transferor and the
Servicer and their respective successors and assigns; provided that the LOC
Issuer may not assign any of its obligations under this Agreement or the LOC.
Notwithstanding the foregoing, the LOC Issuer and any Participant (as defined
below), may, at any time grant participations to any other person, firm or
corporation (a 'Participant') in all or part of its rights under this Agreement
except that the Trust shall not be obligated to any Participant for amounts
under Section 2.09 hereof in excess of such amounts which would have been owing
to the LOC Issuer thereunder had such participation not been effected unless the
Trust has given its prior written consent to the transfer to such Participant;
provided, however, that the amount of any participation of the LOC Issuer shall
not be less than $5,000,000 (unless the Transferor shall otherwise agree in
writing). The LOC Issuer hereby acknowledges and agrees that any such
disposition will not alter or affect the LOC Issuer's direct obligations to the
Trustee, and that neither the Servicer nor the Trustee shall have any obligation
to communicate with or maintain a relationship with any Participant in order to
enforce such obligations of the LOC Issuer hereunder and under the LOC. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement.
Section 4.10 Counterparts. This Agreement may be executed in any number of
copies, and by the different parties hereto on the same or separate
counterparts, each of which shall be deemed to be an original instrument.
Section 4.11 Further Assurances. The Servicer agrees to do such further
acts and things and to execute and deliver to the LOC Issuer or the Trustee such
additional assignments, agreements, powers and instruments as are required by
the LOC Issuer or the Trustee to carry into effect the purposes of this
Agreement or to better assure and confirm unto the LOC Issuer or the Trustee its
rights, powers and remedies hereunder.
Section 4.12 Captions. The various captions (including, without limitation,
the table of contents) in this Agreement are included for convenience only and
shall not affect the meaning or interpretation of any provision of this
Agreement.
Section 4.13 Representations, Warranties and Covenants of the LOC Issuer.
The LOC Issuer hereby represents, warrants and covenants to the Servicer, the
Trustee and the Transferor that:
(a) (i) it is duly authorized to enter into and perform this Agreement
and the LOC, and has duly executed and delivered this Agreement, and upon
the issuance and delivery thereof in accordance with Section 2.01, the LOC
will be duly executed and delivered;
(ii) this Agreement constitutes and, upon the issuance thereof, the
LOC will constitute, the legal, valid and binding obligations of the LOC
Issuer, enforceable in accordance with their respective terms (subject to
applicable bankruptcy and insolvency laws and other similar laws affecting
the enforcement of creditors' rights generally); and
(iii) no registration with or consent or approval of or other action
by any state or local government authority or regulatory body having
jurisdiction over the LOC Issuer is required in connection with the
execution, delivery or performance by it of this Agreement or the LOC other
than as may be required under the blue sky laws of any state.
(b) The LOC Issuer covenants and agrees that:
(i) on the Replacement Date, it will provide to the Trustee, the
Liquidity Agents, the Liquidity Banks and the Servicer the favorable
written opinion of Kaye, Scholer, Fierman, Hays & Handler (as to federal
law and New York law) and of Members of the Central Legal Department of the
LOC Issuer (as to German law), to the effect that the LOC has been duly
authorized, executed and delivered and will constitute, the legal, valid
and binding obligations of the LOC Issuer, enforceable against it in
accordance with its respective terms (subject, as to the enforcement of
remedies in case of the insolvency of the LOC Issuer, to applicable
bankruptcy, reorganization, insolvency and similar laws and to moratorium
laws and other similar laws affecting creditors' rights generally from time
to time in effect and to general equitable principles); and
<PAGE>
(ii) all knowledge of information, practices, books, correspondence
and records provided to it or any Participant contemplated in Section 4.09
of this Agreement by or with respect to the Servicer or the Trust Assets is
to be regarded as confidential information, and accordingly (x) the LOC
Issuer shall retain in strict confidence and shall use its best efforts to
ensure that its representatives retain in strict confidence and will not
disclose without the prior written consent of the Servicer any or all of
such information, practices, books, correspondence and records furnished to
them except to the extent necessary in connection with any proposed
participation and then only after the proposed participant has executed a
writing in favor of the Transferor agreeing to be bound by this Section
4.13; and except in connection with an examination by its auditors,
pursuant to government regulations or by order of court, and (y) that it
will not, and will use its best efforts to ensure that its representatives
will not, make any use whatsoever (other than for the purposes contemplated
by this Agreement and the Pooling and Servicing Agreement) of any of such
information, practices, books, correspondence and records without the prior
written consent of the Servicer, except (A) to the extent that such
information is generally available to the public or is required by law to
be disclosed to a governmental agency, (B) pursuant to orders of courts of
competent jurisdiction, (C) in pursuance of any procedure for discovery of
documents in any proceeding before any such court after seeking such
protective orders or other relief as it would ordinarily use for the
protection of its own confidential information, and (D) pursuant to any law
or regulation or compliance with a request or requirement of any
Governmental Authority whose requests and requirements are customarily
complied with after seeking such protective orders or other relief as it
would ordinarily use for the protection of its own confidential
information.
Section 4.14 Survival of Representations, Indemnities, Warranties and
Agreements. All agreements, representations, indemnities and warranties made
herein shall survive the execution and delivery of this Agreement.
Section 4.15 Tax Forms. The LOC Issuer agrees to provide the Transferor
(with a copy to the Servicer) with (i) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224 or successor applicable form,
as the case may be, and (ii) an Internal Revenue Service Form W-8 or W-9 or
successor applicable forms or other manner of certification, 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 the Servicer, and such extensions or renewals
thereof as may reasonably be requested by the Servicer or the Transferor. The
LOC Issuer shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless in any such case
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 the LOC Issuer from duly completing and delivering any such form with
respect to it and the LOC Issuer advises the Servicer that it is not capable of
so receiving payments without any deduction or withholding, and (ii) in the case
of a Form W-8 or W-9, that it is entitled to an exemption from United States
backup withholding tax. If the LOC Issuer grants a participation pursuant to
Section 4.09 hereof, the LOC Issuer shall obtain from its Participant and shall
furnish to the Servicer (with a copy to Transferor and the Trustee) the form
described in this Section 4.15.
Section 4.16 Jurisdiction. Each of the Servicer and the Transferor hereby
submits to the nonexclusive jurisdiction of the Supreme Court of the State of
New York, County of New York and the United States District Court for the
Southern District of New York (collectively, the 'Subject Courts') in respect of
any suit, action or proceeding arising out of this Agreement, the Pooling and
Servicing Agreement and the other agreements contemplated hereby and thereby.
Each of the Servicer and the Transferor hereby waives any objection it may have
to the laying of venue of any such suit, action or proceeding in any of the
Subject Courts, and to the fullest extent permitted by applicable law, any claim
that any such suit, action or proceeding brought in any of the Subject Courts
has been brought in an inconvenient forum. Each of the Servicer and the
Transferor agrees that service of all writs, process and summonses in any suit,
action or proceeding may be delivered by the mailing thereof by first-class
mail, postage prepaid, to the Servicer or the Transferor, respectively, at its
address set forth in Section 4.04 hereof.
Section 4.17 Limited Recourse to Transferor. Each of the LOC Issuer, the
Trust and the Transferor agrees that any obligations of the Transferor to the
LOC Issuer, the Trust or the Servicer hereunder
<PAGE>
shall not constitute a claim against the Transferor in the event that the Trust
Assets or the assets of the Transferor are insufficient to pay in full such
obligations.
Section 4.18 Limitation of Liability and Trustee's Obligations. It is
expressly understood and agreed by the parties hereto that this Agreement is
executed by Chemical Bank not in its corporate and individual capacity but
solely on behalf of the Trust as Trustee under the Pooling and Servicing
Agreement in the exercise of the power and authority conferred and vested in it
as such Trustee. It is further understood and agreed that Chemical Bank shall
not be personally liable for any breach of any representation, warranty or
covenant of the Trust, or the Trustee on behalf of the Trust, contained herein
or in any of the certificates, notices or agreements delivered hereunder and
nothing herein contained shall be construed as creating any liability on
Chemical Bank in its corporate and individual capacity to make any payment or to
perform any covenant, agreement or undertaking contained herein, all such
liability being expressly waived by each of the parties hereto, and that the
parties hereto shall look solely to the properties and assets of the Trust and
the Trust Assets for the payment of any amounts due and payable on account of
the LOC and for the payment, performance or other satisfaction of this Agreement
and any claim against the Trust or the Trustee by reason of the transactions
contemplated hereby.
<PAGE>
Please signify your agreement and acceptance of the foregoing by executing
this Agreement in the space provided below.
<TABLE>
<S> <C>
FIRST BRANDS CORPORATION, as Servicer
Account for Payment: By: /s/ J. Bruce Ipe
...........................................
FIRST BRANDS FUNDING INC, as Transferor
By: /s/ Donald A. DeSantis
...........................................
Account for Payment: WESTDEUTSCHE LANDESBANK GIROZENTRALE, New York
Branch
as LOC Issuer
By: /s/ Elie B. Khoury
...........................................
Authorized Signatory By: /s/ Roland W. Chalons-Browne
Account for Payment: THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, New
York Branch, as Administrative Agent
By: /s/ Fumihiko Kamoshida
...........................................
FIRST BRANDS FUNDING MASTER TRUST
By: CHEMICAL BANK, as Trustee
By: /s/ James Foley
...................................................
Authorized Signatory
</TABLE>
<PAGE>
ANNEX X
'Business Day' shall mean any day other than (a) a Saturday or a Sunday,
(b) another day on which First Brands is closed, as set forth on the list
furnished by the Servicer pursuant to Section 3.03(n) of the Pooling and
Servicing Agreement or (c) another day on which banking institutions or trust
companies in the State of New York generally or The City of New York, New York,
are authorized or obligated by law, executive order or governmental decree to be
closed.
'CP Issuer' shall mean First Brands Commercial Inc, a Delaware corporation,
or any other holder of the Variable Funding Certificate.
'Determination Date' shall mean, with respect to any Settlement Period, the
seventh day of the next calendar month or if such day is not a Business Day, the
next succeeding Business Day. The first Determination Date shall be July 10,
1992.
'Payment Date' shall mean with respect to any Series or the Variable
Funding Certificate the date specified as such in the applicable Supplement.
'Pooling and Servicing Agreement' shall mean the Pooling and Servicing
Agreement, dated as of May 21, 1992, by and among First Brands Funding Inc, as
Transferor, First Brands Corporation, as Servicer, and Chemical Bank, as
Trustee, and all amendments thereof and supplements thereto, including any
Supplement.
'Servicer' shall initially mean First Brands Corporation and thereafter any
Person appointed as successor as provided in the Pooling and Servicing Agreement
to service the Receivables.
'Settlement Period' shall mean a calendar month; provided, however, that in
the case of the initial Settlement Period, 'Settlement Period' shall mean the
period from and including the date of issuance of this LOC to and including the
last day of the calendar month in which Commercial Paper is initially issued
under the Pooling and Servicing Agreement.
'Supplement' shall mean with respect to the Variable Funding Certificate, a
supplement to the Pooling and Servicing Agreement complying with the terms of
Section 6.09 thereof.
'Transferor' shall mean First Brands Funding Inc, a Delaware corporation.
'Variable Funding Certificate' shall mean a certificate issued pursuant to
Section 6.09 to the Pooling and Servicing Agreement, held by the CP Issuer and
substantially in the form of Exhibit B to the Pooling and Servicing Agreement.
<PAGE>
EXHIBIT 15
ACCOUNTANTS' ACKNOWLEDGEMENT
FIRST BRANDS CORPORATION
83 Wooster Heights Road
Danbury, CT 06813-1911
Gentlemen:
Re: Form S-8 Registration Statements No. 33-35770 and No. 33-56992
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our reports dated November 8, 1993 and February
1, 1994 related to our review of interim financial information.
Pursuant to Rule 436 (c) under the Securities Act of 1933, such reports are
not considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
Very truly yours,
/s/ KPMG PEAT MARWICK
KPMG PEAT MARWICK
New York, New York
February 1, 1994
