<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from _______ to _______
Commission File Number
0-17157
Novellus Systems, Inc.
(Exact name of Registrant as specified in its charter)
California 77-0024666
(State or other jurisdiction (I.R.S. Employer
of incorporation of Identification
organization) Number)
3970 North First Street
San Jose, California
(Address of principal 95134
executive offices) (Zip Code)
Registrant's telephone number, including area code:
(408) 943-9700
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
As of September 27, 1997 33,673,824 shares of the Registrant's common stock, no
par value, were issued and outstanding (this amount gives effect to the
two-for-one split announced on September 22, 1997).
<PAGE> 2
NOVELLUS SYSTEMS, INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 27, 1997
INDEX
<TABLE>
<CAPTION>
Part I: Financial Information
Item 1: Condensed Consolidated Financial Statements Page
<S> <C> <C> <C>
Condensed Consolidated Balance Sheets at
September 27, 1997 and December 31, 1996. 3
Condensed Consolidated Statements of Income
for the three and nine months ended September 27, 1997
and September 30, 1996. 4
Condensed Consolidated Statements of Cash Flows for
the nine months ended September 27, 1997
and September 30, 1996. 5
Notes to Condensed Consolidated Financial
Statements. 6
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
Part II: Other Information
Item 6: Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE> 3
NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Assets September 27, December 31,
1997 1996(1)
(unaudited)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 38,604 $ 65,762
Short-term investments 28,976 110,906
Accounts receivable, net 141,704 119,710
Inventories 88,143 55,448
Deferred income taxes 16,299 18,058
Prepaid and other current assets 29,037 4,085
---------------------
Total current assets 342,763 373,969
Property and equipment:
Machinery and equipment 62,697 60,240
Furniture and fixtures 17,716 4,660
Leasehold improvements 45,642 36,309
---------------------
126,055 101,209
Less accumulated depreciation and amortization 41,448 34,991
---------------------
84,607 66,218
Deferred income taxes 24,674 --
Other assets 30,414 19,600
---------------------
$482,458 $459,787
=====================
Liabilities and Shareholders' Equity
- ------------------------------------------------------------------------------------
Current liabilities:
Current obligations under lines of credit $12,270 $13,153
Accounts payable 26,749 26,047
Accrued payroll and related expenses 17,604 17,404
Accrued warranty 36,513 18,566
Other accrued liabilities 44,954 10,210
Income taxes payable -- 771
----------------------
Total current liabilities 138,090 86,151
Long-term debt 65,000 --
Commitments and contingencies
Shareholders' equity:
Common stock 152,800 128,751
Cumulative translation adjustment (204) (81)
Retained earnings 126,772 244,966
----------------------
Total shareholders' equity 279,368 373,636
----------------------
$482,458 $459,787
======================
</TABLE>
See accompanying notes.
(1) Derived from the December 31, 1996 audited financial statements.
3
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NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ------------------
(in thousands, except per share data) Three Months Ended Nine Months Ended
(unaudited) Sept. 27, Sept. 30, Sept. 27, Sept. 30,
1997 1996 1997 1996
- ----------------------------------------------------------------- --------------------
<S> <C> <C> <C> <C>
Net sales $155,080 $121,597 $371,174 $357,129
Cost of sales 72,888 52,281 170,130 151,130
------------------- --------------------
Gross profit 82,192 69,316 201,044 205,999
Operating expenses
Research and development 25,199 13,591 61,696 38,337
Selling, general and administrative 25,991 19,540 62,117 55,029
In-process research and development -- -- 119,246 --
Restructuring and other costs -- -- 14,243 --
Litigation settlement and related legal costs -- -- 84,021 --
Bad debt write-off -- -- 17,700 --
------------------- --------------------
Total operating expenses 51,190 33,131 359,023 93,366
------------------- --------------------
Operating income (loss) 31,002 36,185 (157,979) 112,633
Interest income, net (580) 2,489 2,923 6,062
------------------- --------------------
Income (loss) before income taxes 30,422 38,674 (155,056) 118,695
Provision (benefit) for income taxes 10,343 13,536 (37,008) 41,544
------------------- --------------------
Net income (loss) $20,079 $25,138 ($118,048) $77,151
=================== ====================
Net income (loss) per share $.57 $.77 ($3.57) $2.34
=================== ====================
Shares used in per share calculations (1) 35,276 32,834 33,108 32,970
=================== ====================
</TABLE>
See accompanying notes.
(1) Net income (loss) per share amounts reflect the 2 for 1 split. See footnote
10.
4
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NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
(in thousands) Nine Months Ended
(unaudited) Sept. 27, Sept. 30,
1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows provided by operating activities:
Net income (loss) ($118,048) $77,151
Adjustments to reconcile net income to net cash
provided by operating activities:
In-process research & development 119,246 --
Restructuring & other costs 14,243 --
Bad debt write-off 17,700 --
Deferred income taxes (24,674) --
Depreciation and amortization 12,807 7,950
Changes in operating assets and liabilities
Accounts receivable (25,878) (4,102)
Inventories (8,585) (27,554)
Prepaid taxes and other current assets (7,868) (4,269)
Accounts payable (5,210) (10,342)
Accrued payroll and related expenses (2,251) (798)
Accrued warranty 2,028 2,487
Other accrued liabilities 13,856 3,052
Income taxes payable / refundable (7,334) (4,173)
---------------------
Total adjustments 98,080 (37,749)
---------------------
Net cash provided by (used in) operating activities (19,968) 39,402
---------------------
Cash flows from investing activities:
Maturities and sale (purchases) of Available-For-Sale
Debt Securities, net 81,930 (32,285)
Purchase of the net assets of the Thin Film Systems
business of Varian Associates (148,325) --
Capital expenditures (22,266) (17,555)
(Increase)decrease in other assets 1,792 (7,821)
---------------------
Net cash used for investing activities (86,869) (57,661)
---------------------
Cash flows from financing activities:
Proceeds (payments)on lines of credit, net (883) 6,280
Borrowings under long-term debt 65,000 --
Repurchase of common stock (145) (2,971)
Proceeds from sale of common stock 15,707 4,910
---------------------
Net cash provided by financing activities 79,679 8,219
---------------------
Net decrease in cash and cash equivalents (27,158) (10,040)
Cash and cash equivalents at the beginning of the period 65,762 60,114
---------------------
Cash and cash equivalents at the end of the period $38,604 $50,074
=====================
Supplemental Disclosures Cash paid during the period for:
Interest $568 $254
Income taxes $0 $45,411
Other noncash charges:
Income tax benefits from employee stock plans $4,053 $1,442
See accompanying notes.
</TABLE>
5
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NOVELLUS SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 27, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1996.
2. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Sept. 27, 1997 Dec. 31, 1996
- ----------------------------------------------------------------
<S> <C> <C>
Purchased parts $54,581 $40,211
Work-in-process 29,064 11,347
Finished goods 4,498 3,890
------- -------
$88,143 $55,448
======= =======
</TABLE>
3. LINES OF CREDIT
The Company has lines of credit with four banks under which the Company can
borrow up to $14,270,000 at the banks' prime rate which expire at various dates
through June 1998. A portion of this facility ($12,270,000) is available to the
Company's Japanese subsidiary, Nippon Novellus Systems K.K. Borrowings by the
subsidiary are at the banks' offshore reference rate. At September 27, 1997
there were no borrowings by the parent company, and $12,270,000 by the
subsidiary.
4. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is based on weighted average common and dilutive
common equivalent shares outstanding during the period. Stock options are
considered common stock equivalents and are included in the weighted average
computation using the treasury stock method. Stock options were not included in
the computation of loss per share for the nine months ended September 27, 1997
as their effect was antidilutive.
In February 1997, the Financial Accounting Standards Board issued the Statement
on Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share,"
which is required to be adopted on December 31, 1997. At that time, the Company
will be required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements, primary
earnings per share will be replaced by basic earnings per share. The difference
between primary earning per share and basic earnings per share is the dilutive
effect of stock options is excluded from
6
<PAGE> 7
basic earnings per share. The impact is expected to result in an increase in
calculated earnings (loss) per share for the third quarter ended September 27,
1997 and September 30, 1996 of $0.03 and $0.01 per share, respectively and for
the 9 months ended September 27, 1997 and September 30, 1996 of $0.00 and $0.06
per share, respectively. The impact of SFAS 128 on the calculation of fully
diluted earnings per share for these quarters is not expected to be material.
5. LITIGATION
On May 4, 1997, the Company entered into a comprehensive global settlement of
all of its ongoing legal disputes, to that date, with Applied Materials, Inc.
("Applied"). The Company recorded an expense of $84.0 million relating to the
settlement, consisting of a cash payment of $80.0 million to Applied and $4.0
million primarily related to legal costs associated with the settlement.
6. ACQUISITION OF THE THIN FILM SYSTEMS BUSINESS OF VARIAN ASSOCIATES
On June 20, 1997, the Company completed the acquisition of the Thin Film Systems
business("TFS") of Varian Associates ("Varian"). TFS manufactures and markets
equipment for physical vapor deposition ("PVD"), a critical technology in the
production of advanced semiconductor logic and memory devices. The acquisition
has been accounted for under the purchase method of accounting, and accordingly,
the accompanying financial statements include the results of operations of TFS
subsequent to the acquisition date.
The currently estimated total purchase price of $148.3 million, consisted of a
cash payment of $145.5 million to Varian and $2.8 million of related acquisition
expenses. The purchase price is preliminary and is dependent on the review of
the final audit of the financial statements of TFS. Acquired assets and
liabilities were recorded at their estimated fair values at the date of the
acquisition. The aggregate purchase price, plus related acquisition expenses,
have been allocated to the assets and liabilities acquired based on independent
valuations. Amounts allocated to in-process research and development of
approximately $119.2 million were written-off at the acquisition date,
representing an estimated value (using risk-adjusted cash flows, discounted at
35%) of development programs that have not yet reached technological
feasibility. Amounts allocated to developed technology, $11.7 million and
workforce in place, $1.0 million are amortized on a straight line basis over
periods of seven and three years, respectively.
7
<PAGE> 8
As a result of the acquisition of TFS the Company recorded restructuring costs
of $14.2 million comprised primarily of write-offs of duplicative assets and
exiting certain facilities. The Company expects that primarily all of these
actions will be completed in the year ended December 31, 1997, with the
exception of certain lease commitments. The components of the restructuring
charge are summarized as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
June 28, Used Sept. 27,
1997 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Duplicative machinery and equipment $9,039 $8,005 $1,034
Lease commitments and leasehold improvements 3,143 1,355 1,788
Other exiting costs 2,061 912 1,149
------- ------- ------
$14,243 $10,272 $3,971
======= ======= ======
</TABLE>
7. LONG-TERM DEBT
In June 1997, the Company entered into a five year $125 million Senior Credit
Facility structured as an unsecured revolving credit line. The borrowings, at
the option of the Company bear interest at either a base rate plus a margin or
the London Interbank Offering Rate ("LIBOR") plus a margin for interest periods
of one to six months. As of September 27, 1997, total borrowings under the
revolving credit line were $65 million with a weighted average interest rate of
approximately 6.5%. The Senior Credit facility requires the Company maintain
compliance with certain financial covenants. At September 27, 1997, the Company
was in compliance with these financial covenants. The Senior Credit Facility
currently prohibits the Company from paying dividends.
8. BAD DEBT WRITE-OFF
In June 1997, the Company determined that due to the financial difficulties
facing one of its customers and lack of a satisfactory response from the
customer during the quarter, the outstanding accounts receivable balance was at
risk for collection. Accordingly, the Company recorded a write-off of $17.7
million, representing the outstanding accounts receivable balance and other
related expenses for the repossession of its equipment.
9. COMMITMENTS
Subsequent to the end of the quarter, the Company entered into four new lease
agreements adding three buildings and 6.4 acres of undeveloped land to the seven
existing buildings and 4.4 acres of undeveloped land leased by the Company at
June 28, 1997. The agreements are for five years each at an interest rate that
approximates LIBOR. At current interest rates the annual lease payments total
approximately $7.7 million. During the term of the lease, the Company may elect
to purchase the properties for an amount that approximates the lessor's cost of
the property and any current rent due and payable. The subsequent guaranteed
residual amount under the lease agreements is approximately $119.2 million.
The Company's facilities leases contain certain restrictive financial covenants.
At September 27, 1997, the Company was in compliance with these covenants.
8
<PAGE> 9
10. STOCK SPLIT
On September 22, 1997 the Company announced that its Board of Directors had
approved a two-for-one split of Novellus' stock. Each shareholder of record as
of the close of business on Monday, September 29, 1997 has received one
additional share of common stock for every share held. Net income (loss) per
share amounts and number of shares used in the computations, presented in this
filing, give effect to the 2-for-1 split.
9
<PAGE> 10
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the three months ended September 27,1997 were $155.1 million,
compared with $121.6 million for the comparable year-ago quarter, and $114.5
million for the immediately preceding quarter. Net sales for the nine months
ended September 27, 1997 were $371.2 million as compared with $357.1 million for
the comparable period a year ago. The increase in net sales from the immediately
preceding quarter reflects the impact of the acquisition of TFS which was
completed on June 20, 1997, increasing shipments of the Company's Concept Two
product line (which has a higher average selling price than the Concept One
product) and an overall increase in demand for semiconductor equipment. The
Company continues to see strong demand for its Concept Two product line.
Bookings for the third quarter of 1997 were greater than a 1:1 ratio.
International net sales (including export sales) for the three and nine months
ended September 27, 1997, were 40% and 41%, respectively, as a percentage of
total net sales, which compares to the prior year periods of 65% and 66%,
respectively. The decrease relates primarily to increased sales in the U.S.
offsetting the slow down in Japan, for which net sales as a percentage of
revenue have decreased to 15% and 12% for the three and nine months ended
September 27, 1997, from 23% and 29% for the comparable year-ago periods. The
Company's international system sales are primarily made directly to its
customers.
Gross profit as a percentage of net sales for the three and nine months ended
September 27,1997 were 53% and 54%, compared with 58% and 57% for the comparable
year-ago periods and 55% for the immediately preceding quarter. The decrease in
gross profit percentage is mainly due to the shipment of older PVD systems which
have lower margins than the CVD systems business. The Company expects continued
pressure on gross margins in the fourth quarter of fiscal 1997 due to the
continued change in product sales mix as a result of the TFS acquisition.
Research and development expenses for the three and nine months ended September
27, 1997 were $25.2 million and $61.7 million respectively, an increase of $11.6
million and $23.4 million when compared with comparable periods last year and an
increase of $5.5 million when compared with the immediately preceding quarter.
Research and development expenses as a percentage of net sales for the three and
nine months ended September 27,1997 represented 16.2% and 16.6% respectively,
compared with 11.2% and 10.7% for the comparable year-ago periods, and 17.2% for
the immediately preceding quarter due to the impact of the acquisition of TFS.
Absolute dollar levels of research and development expenses increased
significantly in the reported periods reflecting the Company's increasing
commitment to research and development spending on new product development
particularly in the development of 300mm product lines.
Selling, general, and administrative expenses for the three and nine months
ended September 27, 1997 were $26 million and $61.7 million respectively and an
increase of $7.4 million when compared to the immediately preceding quarter.
Selling, general, and administrative expenses as a percentage of net sales for
the three and nine months ended September 27,1997 were 16.8% and 16.7%
respectively, compared with 16.1% and 15.4% for the comparable year-ago periods
and 16.2% for the immediately preceding quarter. The increase in selling,
general, and administrative expenses as a percentage of sales from the year ago
periods and the immediately preceding period is due to the impact
10
<PAGE> 11
of the acquisition of TFS. In connection with the acquisition, the Company
recorded pre tax charges of $133.5 million during the second quarter ended June
28, 1997. These charges included $119.3 million for in-process research and
development and $14.2 million attributed to restructuring charges, relating
primarily to write-offs of duplicative assets and facilities at the Company.
The Company recorded one time charges of $84.0 million and $17.7 million related
to the settlement of the TEOS patent litigation and a customer account
write-off, respectively, in the second quarter ended June 28, 1997.
Net interest income decreased by $3.1 million for the three and nine months
ended September 27, 1997 respectively, compared with the comparable year-ago
periods, and $2.0 million for the immediately preceding quarter. The decreases
from the year-ago periods and the immediately preceding period is due to lower
cash balances, as a result of the payment of $80 million to Applied Materials,
for the settlement of the TEOS patent suit and the payment to Varian for the
acquisition of TFS.
The Company's effective tax rate for the three and nine months ended September
27,1997 was 34% and 23.9% compared with 35% for the comparable year-ago periods
and 26.5% for the immediately preceding period. The difference is primarily
attributable to the valuation reserve established in the second quarter of 1997
against a portion of the deferred tax asset arising from the write-off of the
purchased in-process research & development. The Company expects that taxable
income in future periods will be sufficient to realize all the benefits of the
recorded net deferred tax assets. The effective tax rate for the remainder of
fiscal 1997 is anticipated to be 34%.
Net income (loss) for the three and nine months ended September 27,1997 was
$20.1 million or $0.57 per share and $(118.0) million or $(3.57) per share
respectively, compared with $25.1 million or $0.77 per share and $77.2 million
or $2.34 per share for the comparable year-ago periods, and $(153.7) million or
$(4.66) per share for the immediately preceding quarter. The change to a net
loss from a net income for the nine months ended September 27, 1997, is
attributable to the impact of the charges of $119.2 million related to the
in-process research and development and $14.2 million attributed to
restructuring charges, in connection with the acquisition of TFS, and charges of
$84.0 million and $17.7 million related to the settlement of the TEOS patent
litigation and a customer account write-off, respectively. Without giving effect
to these charges the Company's operating results reflected net income for the
nine months ended September 27, 1997 of $52.9 million or $3.05 per share.
The number of shares used in the per share calculations for the three and nine
months ended September 27,1997 was 35.2 million and 33.2 million respectively,
compared with 32.8 million and 33.0 million respectively, for the comparable
year-ago periods and 33.0 million for the immediately preceding period. The
increase in shares used compared to the immediately preceding quarter is the
impact of the inclusion of common stock equivalents for the three months ended
June 30, 1997 as they are antidilutive to loss periods. In addition, shares used
for the nine months ended September 27, 1997 excluded common stock equivalents
as they are antidilutive.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations and capital resources
through cash flow from operations, sales of equity securities, and borrowings.
The Company's primary sources of funds at September 27, 1997 consisted of $67.6
million of cash, cash equivalents and short term investments. This
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amount represents a decrease of $109.1 million from the December 31, 1996
balance of $176.7 million. During the second quarter of 1997, the Company
entered into a five year $125 million Senior Credit Facility structured as an
unsecured revolving credit line. The borrowings, at the option of the Company
bear interest at either a base rate plus a margin or LIBOR plus a margin for
interest periods of one to six months. As of September 27, 1997, total
borrowings under the Senior Credit Facility were $65 million with a weighted
average interest rate of approximately 6.5%. The Senior Credit facility requires
the Company to be in compliance with certain financial covenants. At September
27, 1997, the Company was in compliance with these financial covenants. The
Senior Credit Facility currently prohibits the Company from paying dividends. In
addition at September 27, 1997, there was $14.3 million available under bank
lines of credit that expire at various dates through June 1998. At September 27,
1997 approximately $12.3 million was outstanding under these bank lines of
credit which bear interest at the banks' prime lending rates or offshore
reference rates.
During the nine months ended September 27, 1997, the Company's cash and cash
equivalents decreased $27.2 million to $38.6 million from $65.8 million at
December 31, 1996. Net cash used by operating activities during the first nine
months of 1997 was ($20) million due primarily to a net loss of $118 million,
increases in accounts receivable and inventories of $25.9 million and $8.6
million respectively, income taxes payable / refundable of $7.3 million, and the
impact of recording the deferred income tax asset of $24.7 million. These
amounts were partially offset by non-cash charges of $119.2 million, $14.2
million and $17.7 million, relating to the write-off of in-process research and
development, restructuring costs and a bad debt write-off, respectively. The
increase in accounts receivable was due to the increased level of sales for the
quarter ended September 27, 1997 as compared to the quarter ended December 31,
1996.
Net cash flows from investing activities used $86.9 million during the first
nine months of 1997. During this period, the Company paid $148.3 million for the
purchase of TFS and had capital expenditures of $22.3 million, which was offset
by the net sales of Available-For-Sale Debt Securities which generated $81.9
million.
During the first nine months of 1997, net cash provided by financing activities
was $79.7 million, due primarily to the drawing down of $65 million on the $125
million Senior Credit Facility. Additionally, the Company has received proceeds
from common stock option exercises of $15.7 million. The Company believes that
its current cash position and cash generated through operations, if any, will be
sufficient to meet the Company's needs through at least the next twelve months.
The Company expects investment in property and equipment in the current fiscal
year to approximate $42 million of which $22.3 million has been incurred as of
September 27, 1997. The Company intends to finance these investments from
existing cash balances and cash flows from operations.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: The statements regarding the Company continuing to see strong demand for
its Concept Two product line, the statement regarding the Company's increasing
commitment to research and development spending on new product development. The
statement regarding the Company's cash needs over the next twelve months, the
statement regarding the Company's expectation that gross margins will be under
continued pressure in fourth quarter of fiscal 1997, the statement regarding the
Company's expectation that taxable income in future periods will be sufficient
to realize the benefits of the recorded net deferred tax assets, the statement
regarding the effective tax rate for the
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<PAGE> 13
remainder of fiscal 1997 is anticipated to be 34%, and the statements as to the
Company's anticipated investments in property and equipment in the current
fiscal year and the Company's intentions as to the source of financing for these
investments, except for any historical data, are forward-looking statements. The
forward-looking statements involve risks and uncertainties including, but not
limited to, economic conditions, product demand and industry capacity,
competitive products and pricing, manufacturing efficiencies, new product
development, ability to enforce patents, the outcome of availability of raw
materials and critical manufacturing equipment, new plant startups, the
regulatory and trade environment, and other risks indicated in filings with the
Securities and Exchange Commission (SEC). Actual results may differ materially.
Novellus assumes no obligation to update this information. For more details,
please refer to other SEC filings, including the Company's most recent Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q.
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PART II OTHER INFORMATION
ITEM 6
Exhibits and Reports on Form 8-K
a)
10.1 Participation Agreement by and among Lease Plan North America, Inc. the
Company and ABN AMRO Bank, N.V., as agent for the participations named
therein, dated June 9, 1997.
10.1.1. Letter Amendment, dated June 20, 1997, to the Participation Agreement
by and among Lease Plan North America, Inc., the Company and ABN AMRO Bank,
N.V., as agent for the participants named therein, dated June 9, 1997.
10.1.2 Amendment no. 1, dated August 28, 1997, to the Participation Agreement
by and among Lease Plan North America, Inc., the Company and ABN AMRO Bank,
N.V., as agent for the participants named therein, dated June 9, 1997.
10.1.3 Amendment no. 2, dated September 26, 1997, to the Participation
Agreement by and among Lease Plan North America, Inc., the Company and ABN
AMRO Bank, N.V., as agent for the participants named therein, dated June 9,
1997.
10.2 Amendment no. 1, dated August 28, 1997, to the Facility 2 Lease
Agreement, Construction Deed of Trust With Assignment of Rents, Security
Agreement and Fixture Filing by and between Lease Plan North America, Inc.
and the Company dated June 9, 1997.
10.2.1 Amendment no. 2, dated September 26, 1997, to the Facility 2 Lease
Agreement, Construction Deed of Trust With Assignment of Rents, Security
Agreement and Fixture Filing by and between Lease Plan North America, Inc.
and the Company dated June 9, 1997.
10.3 Amendment no. 1, dated September 26, 1997, to the Facility 1 Lease
Agreement, Deed of Trust With Assignment of Rents, Security Agreement and
Fixture Filing by and between Lease Plan North America, Inc. and the Company
dated June 9, 1997.
10.4 Participation Agreement by and among Lease Plan U.S.A., Inc., the
Company and ABN AMRO Bank, N.V., as agent for the participants named therein,
dated October 15, 1997.
10.5 Facility 1 Lease Agreement, Deed of Trust With Assignment of Rents,
Security Agreement and Fixture Filing by and between Lease Plan U.S.A., Inc.
and the Company dated October 15, 1997.
10.6 Facility 2 Lease Agreement, Construction Deed of Trust With Assignment
of Rents, Security Agreement and Fixture Filing by and between Lease Plan
U.S.A., Inc. and the Company dated October 15, 1997.
27.1 Financial Data Schedule
b)i) Report on Form 8-K (No. 000 17157) was filed by the Company on July 7, 1997
with respect to the Company's purchase of the Thin Film Systems Business of
Varian Associates, Inc. as described in item 2 of the Form 8-K.
ii) Report on Form 8-K/A (No. 000 17157) was filed by the Company on September
5, 1997 with respect to the financial statements of the Thin Film Business
acquired from Varian Associates, Inc. as described in item 2 of the Form 8-K/A.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOVELLUS SYSTEMS, INC.
-------------------------------------------
REGISTRANT
/s/ Robert H. Smith
-------------------------------------------
Robert H. Smith
Executive Vice President
Finance and Administration
(Principal Financial and Accounting Officer)
November 7, 1997
-------------------------------------------
Date
15
<PAGE> 16
INDEX TO EXHIBITS
10.1 Participation Agreement by and among Lease Plan North America, Inc. the
Company and ABN AMRO Bank, N.V., as agent for the participations named
therein, dated June 9, 1997.
10.1.1. Letter Amendment, dated June 20, 1997, to the Participation Agreement
by and among Lease Plan North America, Inc., the Company and ABN AMRO Bank,
N.V., as agent for the participants named therein, dated June 9, 1997.
10.1.2 Amendment no. 1, dated August 28, 1997, to the Participation Agreement
by and among Lease Plan North America, Inc., the Company and ABN AMRO Bank,
N.V., as agent for the participants named therein, dated June 9, 1997.
10.1.3 Amendment no. 2, dated September 26, 1997, to the Participation
Agreement by and among Lease Plan North America, Inc., the Company and ABN
AMRO Bank, N.V., as agent for the participants named therein, dated June 9,
1997.
10.2 Amendment no. 1, dated August 28, 1997, to the Facility 2 Lease
Agreement, Construction Deed of Trust With Assignment of Rents, Security
Agreement and Fixture Filing by and between Lease Plan North America, Inc.
and the Company dated June 9, 1997.
10.2.1 Amendment no. 2, dated September 26, 1997, to the Facility 2 Lease
Agreement, Construction Deed of Trust With Assignment of Rents, Security
Agreement and Fixture Filing by and between Lease Plan North America, Inc.
and the Company dated June 9, 1997.
10.3 Amendment no. 1, dated September 26, 1997, to the Facility 1 Lease
Agreement, Deed of Trust With Assignment of Rents, Security Agreement and
Fixture Filing by and between Lease Plan North America, Inc. and the Company
dated June 9, 1997.
10.4 Participation Agreement by and among Lease Plan U.S.A., Inc., the
Company and ABN AMRO Bank, N.V., as agent for the participants named therein,
dated October 15, 1997.
10.5 Facility 1 Lease Agreement, Deed of Trust With Assignment of Rents,
Security Agreement and Fixture Filing by and between Lease Plan U.S.A., Inc.
and the Company dated October 15, 1997.
10.6 Facility 2 Lease Agreement, Construction Deed of Trust With Assignment
of Rents, Security Agreement and Fixture Filing by and between Lease Plan
U.S.A., Inc. and the Company dated October 15, 1997.
27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
================================================================================
PARTICIPATION AGREEMENT
AMONG
NOVELLUS SYSTEMS, INC.
AND
LEASE PLAN NORTH AMERICA, INC.
AND
THE PARTICIPANTS NAMED HEREIN
AND
ABN AMRO BANK N.V.,
as Agent for the Participants
June 9, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION I. INTERPRETATION 2
1.01. Definitions. 2
1.02. Rules of Construction. 2
SECTION II. LEASE FACILITIES. 2
2.01. Acquisition, Lease, Etc. 2
2.02. Participation Agreement 5
2.03. Advance Requests. 6
2.04. Fees. 7
2.05. Funding of Advances. 8
2.06. Sharing of Payments. 10
2.07. Other Payment Terms. 12
2.08. Commitment Reductions. 14
2.09. Extensions. 14
2.10. Nature of the Transactions 16
2.11. Security 17
2.12. Change of Circumstances. 19
2.13. Taxes on Payments. 22
2.14. Funding Loss Indemnification. 23
2.15. Replacement of Participants. 24
SECTION III. CONDITIONS PRECEDENT. 25
3.01. Initial Acquisition Advance. 25
3.02. Each Acquisition Advance. 25
3.03. Improvement/Expense Advances. 25
3.04. Other Conditions Precedent 25
3.05. Covenant to Deliver. 26
SECTION IV. REPRESENTATIONS AND WARRANTIES 26
4.01. Lessee's Representations and Warranties. 26
4.02. Lessor's Representations and Warranties 32
4.03. Participants' Representations and Warranties. 34
SECTION V. COVENANTS. 35
5.01. Lessee's Affirmative Covenants. 35
5.02. Lessee's Negative Covenants 39
5.03. Lessee's Financial Covenants. 46
5.04. Lessor's Covenants 48
5.05. Participants' Covenants 49
SECTION VI. LESSOR, AGENT AND THEIR RELATIONS WITH PARTICIPANTS. 49
6.01. Appointment of Agent. 49
6.02. Powers and Immunities 49
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
6.03. Reliance. 49
6.04. Defaults 50
6.05. Indemnification. 50
6.06. Non-Reliance 51
6.07. Resignation or Removal of Agent. 51
6.08. Authorization 52
6.09. Lessor and Agent in their Individual Capacities. 52
SECTION VII. MISCELLANEOUS 52
7.01. Notices. 52
7.02. Expenses. 53
7.03. Indemnification. 54
7.04. Waivers; Amendments. 54
7.05. Successors and Assigns 55
7.06. Setoff. 59
7.07. No Third Party Rights 60
7.08. Partial Invalidity. 60
7.09. JURY TRIAL 60
7.10. Counterparts 60
7.11. No Joint Venture, Etc 60
7.12. Usury Savings Clause 61
7.13. Confidentiality 61
</TABLE>
<PAGE> 4
SCHEDULES
<TABLE>
<S> <C>
I Participants (Preamble, 7.01, Schedule 1.01)
II Pricing Grid (Schedule 3.01)
1.01 Definitions
1.02 Rules of Construction
3.01 Initial Conditions Precedent
3.02 Conditions Precedent to each Acquisition Advance
4.01(g) Litigation
4.01(q) Subsidiaries
4.01(t) Individual Property Representations
5.02(a) Existing Indebtedness
5.02(b) Existing Liens
5.02(e) Existing Investments
EXHIBITS
A Land (2.01(a))
B(1) Facility 1 Lease Agreement (2.01(a))
B(2) Facility 2 Lease Agreement (2.01(b))
C(1) Facility 1 Purchase Agreement (2.01(a))
C(2) Facility 2 Purchase Agreement (2.01(b))
D Facility 2 Construction Agency Agreement (2.01(b))
E Acquisition Request (2.03(a))
F Improvement/Expense Advance Request (2.03(b))
G(1) 364-Day Commitment Extension Request (2.09(a))
G(2) Lease Extension Request (2.09(b))
H Assignment of Construction Agreements (2.11(a))
I Cash Collateral Agreement (2.11(a))
J Assignment of Lease (2.11(b))
K Lessor Deed of Trust (2.11(b))
L Lessor Security Agreement (2.11(b))
M Assignment Agreement (7.05(b))
</TABLE>
<PAGE> 5
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT (this "Agreement" herein), dated as of
June 9, 1997, is entered into by and among:
(1) NOVELLUS SYSTEMS, INC., a California corporation ("Lessee");
(2) LEASE PLAN NORTH AMERICA, INC., an Illinois corporation
("Lessor");
(3) Each of the financial institutions from time to time listed
in Schedule I hereto, as amended from time to time (such financial
institutions to be referred to collectively as the "Participants");
and
(4) ABN AMRO BANK N.V., acting through its San Francisco
International Branch, as agent for the Participants (in such capacity,
"Agent").
RECITALS
A. Lessee has requested Lessor and the Participants to provide to
Lessee two lease facilities as follows:
(1) Pursuant to the first facility ("Facility 1"), Lessor would
(a) purchase certain land designated by Lessee, (b) lease such land to
Lessee, (c) make advances to finance certain related expenses and (d)
grant to Lessee the right to purchase such property.
(2) Pursuant to the second facility ("Facility 2"), Lessor would
(a) purchase certain land, improvements (including improvements to the
land under Facility 1) and other property designated by Lessee, (b)
lease such property to Lessee, (c) appoint Lessee as Lessor's agent to
make certain improvements to such property and to the land under
Facility 1, (d) make advances to finance such improvements and to pay
certain related expenses and (e) grant to Lessee the right to purchase
such property.
(3) The Participants would participate in such lease facilities
by (a) funding the purchase prices and other advances to be made by
Lessor and (b) acquiring participation interests in the rental and
certain other payments to be made by Lessee.
B. Lessor and the Participants are willing to provide such lease
facilities upon the terms and subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
<PAGE> 6
SECTION I. INTERPRETATION.
1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Operative Document, each term set forth in Schedule 1.01, when used in
this Agreement or any other Operative Document, shall have the respective
meaning given to that term in Schedule 1.01 or in the provision of this
Agreement or other document, instrument or agreement referenced in Schedule
1.01.
1.02. Rules of Construction. Unless otherwise indicated in this
Agreement or any other Operative Document, the rules of construction set forth
in Schedule 1.02 shall apply to this Agreement and the other Operative
Documents.
SECTION II. LEASE FACILITIES.
2.01. Acquisition, Lease, Etc.
(a) Facility 1. Subject to the terms and conditions of this
Agreement (including the limitations set forth in Subparagraph 2.01(c)):
(i) Lessor shall, at the request of Lessee from time to time
during the period beginning on the date of this Agreement and
ending on December 31, 1997, purchase (with funds provided by the
Participants) the Tracts of land described in Exhibit A as the
Tract 2 Land, the Tract 3 Land and the Tract 4 Land and such
other Tracts of Land as are to be included in Facility 1 pursuant
to Subparagraph 2.01(d) (as more fully defined in Schedule 1.01,
the "Facility 1 Land"), together with any Appurtenant Rights
thereto;
(ii) Immediately upon the purchase by Lessor of the initial
Tract of Land under Facility 1, Lessor and Lessee shall execute
(i) a Facility 1 Lease Agreement in the form of Exhibit B(1) (the
"Facility 1 Lease Agreement"), pursuant to which Lessor will
lease to Lessee such land and (ii) a Facility 1 Purchase
Agreement in the form of Exhibit C(1) (the "Facility 1 Purchase
Agreement"), pursuant to which Lessor grants to Lessee the right
to purchase such land; and
(iii) Immediately upon the purchase by Lessor of each
additional Tract of land under Facility 1, Lessor and Lessee
shall execute amendments to the Facility 1 Lease Agreement and
the Facility 1 Purchase Agreement to the extent necessary to add
such land to the land covered thereby.
(b) Facility 2. Subject to the terms and conditions of this
Agreement (including the limitations set forth in Subparagraph 2.01(c)):
(i) Lessor shall, at the request of Lessee from time to time
during the period beginning on the date of this Agreement and
ending on December 31, 1997, purchase (with funds provided by the
Participants)(A) the Tracts of land described in Exhibit A as
the Tract 1 Land and such other Tracts of Land as are to
<PAGE> 7
be included in Facility 2 pursuant to Subparagraph 2.01(d) (as
more fully defined in Schedule 1.01, the "Facility 2 Land"),
together with any Appurtenant Rights thereto; (B) all
Improvements to the Facility 1 Land and to the Facility 2 Land;
and (C) other related property;
(ii) Immediately upon the purchase by Lessor of the initial
property under Facility 2, Lessor and Lessee shall execute (i) a
Facility 2 Lease Agreement in the form of Exhibit B(2) (the
"Facility 2 Lease Agreement"), pursuant to which Lessor will
lease to Lessee such property, (ii) a Facility 2 Purchase
Agreement in the form of Exhibit C(2) (the "Facility 2 Purchase
Agreement"), pursuant to which Lessor grants to Lessee the right
to purchase such property and (iii) a Facility 2 Construction
Agency Agreement in the form of Exhibit D (the "Facility 2
Construction Agency Agreement"), pursuant to which Lessee agrees
to construct certain improvements to the Tract 1 Land and the
Tract 2 Land;
(iii) Immediately upon the purchase by Lessor of each
additional Tract of Property under Facility 2, Lessor and Lessee
shall execute amendments to the Facility 2 Lease Agreement, the
Facility 2 Purchase Agreement and the Facility 2 Construction
Agency Agreement to the extent necessary to add such Tract of
land to the land covered thereby; and
(iv) During the period beginning on the Acquisition Date for
each Tract of Property under Facility 2 and ending on the first
Business Day of the first full calendar month immediately
succeeding the earliest of (A) June 9, 1999 (the "Outside
Completion Date"), (B) the Completion Date and (C) the date on
which the Unused Total Commitment is $0 (such first Business Day
to be referred to as the "Commitment Termination Date"), Lessor
shall, at the request of Lessee, make additional advances (with
funds provided by the Participants) to pay Permitted Improvement
Costs and Permitted Transaction Expenses for such Tract under
Facility 2 ("Improvement/Expense Advances").
(c) Advance Limitations. The advances made by Lessor to purchase
property under the Facilities (collectively, the "Acquisition Advances")
and the Improvement/Expense Advances made by Lessor under Facility 2
(the Acquisition Advances and the Improvement/Expense Advances to be
referred to collectively as the "Advances") shall be subject to the
following limitations:
(i) The aggregate amount of all Acquisition Advances made by
Lessor under Facility 1 on account of all Facility 1 Property
shall not exceed the sum of all Facility 1 Expiration Date
Appraisals for such property;
(ii) The aggregate amount of all Advances made by Lessor
under Facility 2 on account of all Facility 2 Property shall not
exceed the sum of all Facility 2 Expiration Date Appraisals for
such property;
(iii) The aggregate amount of all Acquisition Advances made by
Lessor under Facility 1 on account of the Tract 2 Property, the
Tract 3 Property and the Tract 4 Property acquired by Lessor
under Facility 1 shall not exceed $20,500,000;
<PAGE> 8
(iv) The aggregate amount of all Advances made by Lessor
under Facility 2 on account of the Tract 1 Property and the
Facility 2 Property located on the Tract 2 Land, the Tract 3 Land
and the Tract 4 Land acquired by Lessor under Facility 2 shall
not exceed $77,500,000;
(v) The aggregate amount of all Advances made during the
period commencing on the date of this Agreement and ending on the
date 364 days thereafter (the "364-Day Commitment Termination
Date") shall not exceed One Hundred Twenty-Five Million Dollars
($125,000,000) (the "364-Day Commitment"); and
(vi) The aggregate amount of all Advances made during the
period commencing on the date of this Agreement and ending on the
Commitment Termination Date (such period to be referred to as the
"Commitment Period") shall not exceed One Hundred Twenty-Five
Million Dollars ($125,000,000) (the "Total Commitment").
Of the Total Commitment, Zero Dollars ($0) (the "Two-Year Commitment")
is available at any time during the entire Commitment Period. Each
Advance under Facility 2 shall consist of a Tranche A Portion and a
Tranche B Portion.
(d) Future Allocation Between Facility 1 and Facility 2. The
Tract 5 Property, Tract 6 Property and Tract 7 Property shall be
allocated between Facility 1 and Facility 2 when acquired as agreed by
Lessee, Lessor and Agent.
2.02. Participation Agreement.
(a) Advances. Each Participant severally, unconditionally and
irrevocably agrees with Lessor to participate in each Advance made by
Lessor in an amount equal to such Participant's Proportionate Share of
such Advance; provided, however, that the aggregate amount of each
Participant's Proportionate Share of all Advances shall not exceed such
Participant's Commitment. Each Participant shall fund its Proportionate
Share of each Advance as provided in Subparagraph 2.05(a). Each
Participant's Proportionate Share of each Advance under Facility 2 shall
consist of such Participant's Tranche A Portion and Tranche B Portion of
such Advance.
(b) Payments. In consideration of each Participant's
participation in each Advance made by Lessor, such Participant shall
participate in the payments made by Lessee under this Agreement and the
other Operative Documents as provided in Paragraph 2.06.
(c) Other Rights of Participants and Agent.
(i) Until all amounts payable to Agent and Participants
under this Agreement and the other Operative Documents are paid
in full, Lessee shall deliver all notices for Lessor under this
Agreement and the other Operative Documents to Agent at the
office or facsimile number and during the hours
<PAGE> 9
specified in Paragraph 7.01. Agent shall promptly furnish to
Lessor and each Participant copies of each such notice and, in
the case of each request for an Advance, shall notify each
Participant of the amount of such Participant's Proportionate
Share of the Advance requested thereby.
(ii) Lessor is not an agent for Participants or Agent and may
exercise or refrain from exercising its rights under this
Agreement and the other Operative Documents in its discretion;
provided, however that, until all amounts payable to Agent and
Participants under this Agreement and the other Operative
Documents are paid in full, (A) Lessor shall, subject to the
limitations set forth in Section VI, be required to act or to
refrain from acting upon instructions of the Required
Participants as provided in Paragraph 6.03 and (B) Agent may
exercise any or all of the rights and remedies of Lessor, and
shall be entitled to the other benefits afforded Lessor, under
this Agreement and the other Operative Documents.
(iii) Neither Agent nor any Participant shall have any right,
title or interest in the Property except for the Lien therein
granted to Agent, for the benefit of the Participants, in the
Lessor Deed of Trust and the Lessor Security Agreement.
2.03. Advance Requests.
(a) Acquisition Requests. Lessee shall request Lessor to make
each purchase of property under this Agreement by delivering to Agent an
irrevocable written request in the form of Exhibit E, appropriately
completed (an "Acquisition Request"), which specifies, among other
things:
(i) The Facility under which such purchase is to be made;
(ii) The Tract of land and Appurtenant Rights thereto to be
purchased, if such purchase is under Facility 1, or the Tract of
land and Appurtenant Rights thereto and/or the Improvements to be
purchased if such purchase is under Facility 2;
(iii) The amount of the requested Acquisition Advance to be
made for such property, including the amount of the Acquisition
Price for such property and the Permitted Transaction Expenses
included in such Acquisition Advance; and
(iv) The Acquisition Date for such property, which shall be a
Business Day.
(b) Improvement/Expense Advance Requests. Lessee shall request
Lessor to make each Improvement/Expense Advance under Facility 2 by
delivering to Lessor:
(i) An irrevocable written request in the form of Exhibit F,
appropriately completed (an "Improvement/Expense Advance
Request"), which specifies, among other things:
(A) The Tract of Property for which such Advance is
to be used;
<PAGE> 10
(B) The amount of such Advance, which shall be an
integral multiple of $10,000;
(C) The date of such Advance, which shall be the
Closing Date or the first Business Day of a month; and
(D) The Permitted Improvement Costs and Permitted
Transaction Expenses to be paid by such Advance; and
(ii) If the proceeds of such Advance are to be used to
purchase Related Goods:
(A) A Supplement to Exhibit B to the Facility 2
Lease Agreement in the form of Exhibit B(1) to the Lease
Agreement (an "Exhibit B Supplement"), which contains a
detailed description of such Related Goods; and
(B) Bills of sale for all such Related Goods
showing Lessor as the purchaser.
Lessee shall not request more than one (1) Improvement/Expense Advance
for each Tract in any calendar month.
(c) Delivery of Advance Requests. Etc. Lessee shall deliver each
Acquisition Request for each Acquisition Advance (other than the
Acquisition Request for the first Acquisition Advance to be made on the
Closing Date) to Lessor at least fifteenE(15) Business Days before the
requested Acquisition Date. Lessee shall deliver each
Improvement/Expense Advance Request to Lessor at least three (3)
Business Days before the date of such Advance. The Acquisition Requests
and Improvement/Expense Advance Requests (collectively, "Advance
Requests") shall be delivered by first-class mail or facsimile as
required by Subparagraph 2.02(c) and Paragraph 7.01; provided, however,
that Lessee shall promptly deliver to Lessor the original of any Advance
Request initially delivered by facsimile.
(d) Capitalization of Base Rent During Commitment Period. On each
Scheduled Rent Payment Date occurring under Facility 2 during the
Commitment Period, the Base Rent due under the Facility 2 Lease
Agreement on such Scheduled Rent Payment Date and attributable to the
Improvements to Tract 4 shall be capitalized by automatically treating
the amount of such Base Rent as an Improvement/Expense Advance made
under Facility 2 on such Scheduled Rent Payment Date. Agent shall notify
Lessor and each Participant of the amount of the Base Rent due on each
such Scheduled Rent Payment Date and so treated as an
Improvement/Expense Advance. Each such Improvement/Expense Advance shall
be allocated to the Improvements to Tract 4.
2.04. Fees.
(a) Agent's Fees. Lessee shall pay to Agent, for its own account,
agent's fees in the amounts and at the times set forth in the Agent's
Fee Letter (the "Agent's Fees").
<PAGE> 11
(b) Commitment Fees. Lessee shall pay to Agent, for the ratable
benefit of the Participants as provided in clause (ii) of Subparagraph
2.06(c), commitment fees (the "Commitment Fees") as follows:
(i) Lessee shall pay Commitment Fees of fifteen hundredths
of one percent (0.15%) per annum on the daily average Unused
364-Day Commitment for the period beginning on the earlier of
June 16, 1997 and the Closing Date and ending on the 364-Day
Commitment Termination Date.
(ii) Lessee shall pay Commitment Fees of twenty-five
hundredths of one percent (0.25%) per annum on the daily average
Unused Two-Year Commitment for the period beginning on the
earlier of June 16, 1997 and the Closing Date and ending on the
Commitment Termination Date.
Lessee shall pay the Commitment Fees in arrears on the first Business
Day in each January, April, July and October (commencing July 1, 1997)
and on the Commitment Termination Date (or if the Total Commitment is
cancelled on a date prior to such day, on such prior date).
(c) 364-Day Commitment Extension Fee. If Lessor and the
Participants consent to any extension of the 364-Day Commitment
Termination Date requested by Lessee pursuant to Subparagraph 2.09(a),
Lessee shall pay to Agent, for the ratable benefit of the Participants
as provided in clause (iii) of Subparagraph 2.06(c), an extension fee
(the "364-Day Commitment Extension Fee") equal to ten hundredths of one
percent (0.10%) of the Unused 364-Day Commitment on the date Lessee is
notified by Agent of such consent. Lessee shall pay the 364-Day
Commitment Extension Fee on or prior to the Business Day immediately
preceding the original 364-Day Commitment Termination Date.
2.05. Funding of Advances.
(a) Participant Funding and Disbursement. Each Participant shall,
before 11:00 a.m. on the date of each Advance, make available to Agent
at its office specified in Paragraph 7.01, in same day or immediately
available funds, such Participant's Proportionate Share of such Advance.
After Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Section III, Agent will promptly
disburse such funds on behalf of Lessor, in same day or immediately
available funds, as follows:
(i) Agent shall disburse each Acquisition Advance on the
applicable Acquisition Date to an escrow or other account
established for payment of the applicable Acquisition Price and
any related Permitted Transaction Expenses pursuant to the
applicable Acquisition Agreement or otherwise as directed by
Lessee in the Advance Request for such Acquisition Advance to pay
such amounts.
(ii) Agent shall disburse each Improvement/Expense Advance as
directed by Lessee in the Advance Request for such
Improvement/Expense Advance.
<PAGE> 12
Unless otherwise directed by Lessee, all Advances made prior to the
364-Day Commitment Termination Date shall be allocated first to the
364-Day Commitment and, after the 364-Day Commitment is reduced to zero,
to the Two-Year Commitment. All Advances made after the 364-Day
Commitment Termination Date shall be allocated to the Two-Year
Commitment, whether or not the 364-Day Commitment has been reduced to
zero.
(b) Participant Failure to Fund. Unless Agent shall have received
notice from a Participant prior to the date of any Advance that such
Participant will not make available to Agent such Participant's
Proportionate Share of such Advance, Agent may assume that such
Participant has made such portion available to Agent on the date of such
Advance in accordance with Subparagraph 2.05(a), and Agent may, in
reliance upon such assumption, disburse the full amount of such Advance
on such date; provided, however, that neither Agent nor Lessor shall
have any obligation to make an Advance requested hereunder in an amount
which exceeds the aggregate amount of funds actually received by Agent
from the Participants on account of their respective Proportionate
Shares of such Advance. If any Participant does not make the amount of
its Proportionate Share of any Advance available to Agent on or prior to
the date such Advance is made, such Participant shall pay to Agent, on
demand, interest which shall accrue on such amount until made available
to Agent at rates equal to (i) the daily Federal Funds Rate during the
period from the date of such Advance through the third Business Day
thereafter and (ii) the Base Rate plus two percent (2.0%) thereafter. A
certificate of Agent submitted to any Participant with respect to any
amounts owing under this Subparagraph 2.05(b) shall be conclusive absent
manifest error. If any Participant's Proportionate Share of any Advance
is not in fact made available to Agent by such Participant within three
(3) Business Days after the date of such Advance, Lessee shall pay to
Agent, on demand, an amount equal to such Proportionate Share together
with interest thereon, for each day from the date such amount was made
available to Lessee until the date such amount is repaid to Agent, at a
per annum rate equal to the Base Rate plus two percent (2.0%).
(c) Participants' Obligations Several. The failure of any
Participant to fund its Proportionate Share of any Advance shall not
relieve any other Participant of its obligation hereunder to fund its
Proportionate Share of such Advance, and no Participant shall be
responsible for the failure of any other Participant to fund its
Proportionate Share of any Advance on the date of such Advance.
2.06. Sharing of Payments.
(a) Outstanding Lease Amount. Payments applied to reduce the
Outstanding Lease Amount under each Facility shall be shared as follows:
(i) Facility 1. Each payment of the Outstanding Lease
Amount under Facility 1 shall be shared by the Participants pro
rata according to their respective Outstanding Participation
Amounts under Facility 1 at the time of such payment.
(ii) Facility 2.
<PAGE> 13
(A) Each payment of the Outstanding Lease Amount
under Facility 2 derived from the purchase price paid by
Lessee to purchase the Facility 2 Property pursuant to the
Facility 2 Purchase Agreement shall be shared by the
Participants pro rata according to their respective
Outstanding Participation Amounts under Facility 2 at the
time of such payment.
(B) Each payment of the Outstanding Lease Amount
under Facility 2 derived from the Residual Value Guaranty
Amount paid by Lessee pursuant to the Facility 2 Purchase
Agreement shall be shared first by the Tranche A
Participants pro rata according to their respective
Outstanding Tranche A Participation Amounts at the time of
such payment and second, if any amounts remain after all
Outstanding Tranche A Participation Amounts are paid in
full, by the Tranche B Participants pro rata according to
their respective Outstanding Tranche B Participation
Amounts at the time of such payment.
(C) Each payment of the Outstanding Lease Amount
under Facility 2 derived from:
(1) the purchase price paid by a Designated
Purchaser to purchase the Facility 2 Property
pursuant to the Facility 2 Purchase Agreement;
(2) the Indemnity Amount paid by Lessee
pursuant to the Facility 2 Purchase Agreement;
(3) Casualty Proceeds or Condemnation
Proceeds related to any of the Facility 2
Property; or
(4) the purchase price paid by any other
Person to purchase the Facility 2 Property (whether
after the retention of the Facility 2 Property by
Lessor following the Facility 2 Expiration Date,
upon foreclosure or otherwise);
Shall be shared first by the Tranche B Participants pro
rata according to their respective Outstanding Tranche B
Participation Amounts at the time of such payment and
second, if any amounts remain after all Outstanding
Tranche B Participation Amounts are paid in full, by the
Tranche A Participants pro rata according to their
respective Outstanding Tranche A Participation Amounts at
the time of such payment.
(b) Base Rent. Each payment applied to Base Rent under either
Facility shall be shared by the Participants which funded the
Outstanding Lease Amount under such Facility pro rata according to (i)
the respective Outstanding Participation Amounts so funded by such
Participants and (ii) the dates on which such Participants so funded
such amounts.
<PAGE> 14
(c) Supplemental Rent. Each payment applied to Supplemental Rent
under either Facility shall be shared by the Lessor Parties as follows:
(i) Each payment applied to Agent's Fees shall be solely
for the account of Agent.
(ii) Each payment applied to Commitment Fees shall be shared
by the Participants pro rata according to (A) their respective
Proportionate Shares and (B) in the case of each Participant
which becomes a Participant hereunder after the date hereof, the
date upon which such Participant so became a Participant.
(iii) Each payment applied to the 364-Day Commitment Extension
Fee shall be shared by the Participants pro rata according to
their respective Proportionate Shares on the date of such
payment.
(iv) Each payment applied to reimburse any Lessor Party for
any fees, costs and expenses incurred by such Lessor Party shall
be solely for the account of such Lessor Party.
(v) Each payment of interest (other than Base Rent) shall be
shared among the Lessor Parties owed the amount upon which such
interest accrues pro rata according to (A) the respective amounts
so owed such Lessor Parties and (B) the dates on which such
amounts became owing to such Lessor Parties.
(vi) All other payments under this Agreement and the other
Operative Documents shall be for the benefit of the Person or
Persons specified.
(d) Disproportionate Payments, Etc. If any Participant shall
obtain any payment (whether voluntary, involuntary, through the exercise
of any right of setoff, or otherwise) on account of amounts owed to it
in excess of its ratable share of payments on account of such amounts
obtained by all Participants entitled to such payments, such Participant
shall forthwith purchase from the other Participants such participations
in the payments to be made under the Operative Documents as shall be
necessary to cause such purchasing Participant to share the excess
payment ratably with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such
purchasing Participant, such purchase shall be rescinded and each other
Participant shall repay to the purchasing Participant the purchase price
to the extent of such recovery together with an amount equal to such
other Participant's ratable share (according to the proportion of (i)
the amount of such other Participant's required repayment to (ii) the
total amount so recovered from the purchasing Participant) of any
interest or other amount paid or payable by the purchasing Participant
in respect of the total amount so recovered. Lessee agrees that any
Participant so purchasing a participation from another Participant
pursuant to this Subparagraph 2.06(d) may, to the fullest extent
permitted by law, exercise all its rights of payment (including the
right of setoff) with respect to such participation as fully as if such
Participant were the direct creditor of Lessee in the amount of such
participation.
2.07. Other Payment Terms.
<PAGE> 15
(a) Place and Manner of Payments by Lessee. Lessee shall make all
payments due to any Lessor Party under this Agreement and the other
Operative Documents by payments to Agent, for the account of such
Person, at Agent's office, located at the address specified in Paragraph
7.01, with each payment due to a Participant to be for the account of
such Participant's Applicable Participating Office. Lessee shall make
all payments in lawful money of the United States and in same day or
immediately available funds not later than 11:00 a.m. on the date due.
Agent shall promptly disburse to the appropriate Person each such
payment received by Agent for such Person.
(b) Date. Whenever any payment due under this Agreement or any
other Operative Document shall fall due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day, and
such extension of time shall be included in the computation of Rent,
interest or fees, as the case may be.
(c) Late Payments. If any amounts required to be paid by Lessee
under this Agreement or any other Operative Document (including Rent,
interest, fees or other amounts) remain unpaid after such amounts are
due, Lessee shall pay interest on the aggregate, outstanding balance of
such amounts from the date due until those amounts are paid in full at a
per annum rate equal to the Base Rate plus two percent (2.0%), such rate
to change from time to time as the Base Rate shall change.
(d) Application of Payments. All payments under this Agreement
and the other Operative Documents on account of either Facility shall be
applied first to unpaid fees, costs and expenses then due and payable
under this Agreement or any other Operative Document on account of such
Facility, second to the accrued Base Rent then due and payable under
this Agreement or any other Operative Document on account of such
Facility and finally to reduce the Outstanding Lease Amount under such
Facility. If any payments are not clearly on account of either Facility,
Lessor may apply such payments to either Facility in its discretion;
provided, however, that Lessee may direct Lessor to apply such payments
to the Facility designated by Lessee if no Default has occurred and is
continuing.
(e) Failure to Pay Agent. Unless Agent shall have received notice
from Lessee at least one (1) Business Day prior to the date on which any
payment is due to Lessor or the Participants under this Agreement or the
other Operative Documents that Lessee will not make such payment in
full, Agent may assume that Lessee has made such payment in full to
Agent on such date and Agent may, in reliance upon such assumption,
cause to be distributed to the appropriate Persons on such due date an
amount equal to the amount then due such Persons. If and to the extent
Lessee shall not have so made such payment in full to Agent, each such
Person shall repay to Agent forthwith on demand such amount distributed
to such Person together with interest thereon, for each day from the
date such amount is distributed to such Person until the date such
Person repays such amount to Agent, at (i) the Federal Funds Rate for
the first three (3) days and (ii) the Base Rate plus two percent (2.0%)
thereafter, such rate to change from time to time as the Base Rate shall
change. A certificate of Agent submitted to any Person with respect to
any amounts owing by such Person under this Subparagraph 2.07(e) shall
be conclusive absent manifest error.
<PAGE> 16
2.08. Commitment Reductions.
(a) Reduction or Cancellation of Commitments. Lessee may, at any
time prior to the 364-Day Commitment Termination Date in the case of the
364-Day Commitment or the Commitment Termination Date in the case of the
Two-Year Commitment, upon five (5) Business Days written notice to
Lessor, permanently reduce the 364-Day Commitment or Two-Year Commitment
by the amount of Five Million Dollars ($5,000,000) or an integral
multiple of One Million Dollars ($1,000,000) in excess thereof or cancel
the 364-Day Commitment or Two-Year Commitment in its entirety. Any
reduction of the 364-Day Commitment or Two-Year Commitment shall result
in a corresponding reduction of the Total Commitment.
(b) Effect of Commitment Reductions. From the effective date of
any reduction of the 364-Day Commitment or Two-Year Commitment, the
Commitment Fees shall be computed on the basis of the 364-Day Commitment
or Two-Year Commitment as so reduced. Once reduced or cancelled, the
364-Day Commitment, the Two-Year Commitment and the Total Commitment may
not be increased or reinstated without the prior written consent of
Lessor and all Participants. Any reduction of the 364-Day Commitment,
Two-Year Commitment or Total Commitment pursuant to this Paragraph 2.08
shall be applied ratably to reduce each Participant's Commitment pro
rata in accordance with its Proportionate Share.
2.09. Extensions.
(a) 364-Day Commitment Extension. Lessee may request Lessor to
extend the 364-Day Commitment Termination Date for an additional period
of six (6) months by appropriately completing, executing and delivering
to Agent a written request in the form of Exhibit G(1) (a "364-Day
Commitment Extension Request"). Lessee shall deliver the 364-Day
Commitment Extension Request to Agent not more than three (3) months and
not less than two (2) months before the original 364-Day Commitment
Termination Date. Agent shall promptly deliver to Lessor and each
Participant three (3) copies of each 364-Day Commitment Extension
Request received by Agent. If Lessor or a Participant, in its sole and
absolute discretion, consents to the 364-Day Commitment Extension
Request, such Person shall evidence such consent by executing and
returning two (2) copies of the 364-Day Commitment Extension Request to
Agent not later than the last Business Day which is not less than twelve
(12) Business Days prior to the original 364-Day Commitment Termination
Date. Any failure by Lessor or any Participant so to execute and return
a 364-Day Commitment Extension Request shall be deemed a denial thereof.
If Lessee shall deliver a 364-Day Commitment Extension Request to Lessor
pursuant to the first sentence of this Subparagraph 2.09(a), then not
later than ten (10) Business Days prior to the original 364-Day
Commitment Termination Date, Agent shall notify Lessee, Lessor and the
Participants in writing whether (i) Agent has received a copy of the
364-Day Commitment Extension Request executed by Lessor and each
Participant, in which case the definition of "364-Day Commitment
Termination Date" set forth in Subparagraph 2.01(i) of this Agreement
shall be deemed extended to the date which is sixE(6) months after the
original 364-Day Commitment Termination Date (subject to receipt by
Agent of the 364-Day Commitment Extension Fee), or (ii) Agent has not
received a copy of the 364-Day Commitment Extension Request executed by
Lessor and
<PAGE> 17
each Participant, in which case such 364-Day Commitment Extension
Request shall be deemed denied. Lessee acknowledges that neither Lessor
nor any Participant has promised (either expressly or implicitly), or
has any obligation or commitment, to extend or consent to the extension
of the 364-Day Commitment Termination Date at any time.
(b) Lease Extension. Lessee may request Lessor to extend the
original Scheduled Expiration Date of each Lease Agreement for an
additional period of three (3) years by appropriately completing,
executing and delivering to Agent a written request in the form of
Exhibit G(2), together with an attachment thereto setting forth the
terms upon which Lessee would propose for the requested extension (a
"Lease Extension Request"). Lessee shall deliver each Lease Extension
Request to Agent not more than twelve (12) months and not less than nine
(9) months before the original Scheduled Expiration Date. Agent shall
promptly deliver to Lessor and each Participant three (3) copies of each
Lease Extension Request received by Agent. If Lessor or a Participant,
in its sole and absolute discretion, consents to a Lease Extension
Request, such Person shall evidence such consent by executing and
returning two (2) copies of such Lease Extension Request to Agent not
later than the last Business Day which is not less than seven (7) months
prior to the original Scheduled Expiration Date for the applicable Lease
Agreement. Any failure by Lessor or any Participant so to execute and
return a Lease Extension Request shall be deemed a denial thereof. If
Lessee shall deliver a Lease Extension Request to Lessor pursuant to the
first sentence of this Subparagraph 2.09(b), then not later than the
last Business Day which is not less than six (6) months prior to the
original Scheduled Expiration Date for the applicable Lease Agreement,
Agent shall notify Lessee, Lessor and the Participants in writing
whether (i) Agent has received a copy of the Lease Extension Request
executed by Lessor and each Participant, in which case the definition of
"Scheduled Expiration Date" set forth in Subparagraph 2.02(a) of the
applicable Lease Agreement shall be deemed extended to the date which is
three (3) years after the original Scheduled Expiration Date (subject to
the receipt by Agent of any amounts payable by Lessee in connection with
such extension), or (ii) Agent has not received a copy of the Lease
Extension Request executed by Lessor and each Participant, in which case
such Lease Extension Request shall be deemed denied. Lessee acknowledges
that neither Lessor nor any Participant has promised (either expressly
or implicitly), or has any obligation or commitment, to extend or
consent to the extension of the Scheduled Expiration Date for either
Lease Agreement at any time.
2.10. Nature of the Transactions. Lessee and the Lessor Parties intend
that the transactions evidenced by this Agreement and the other Operative
Documents constitute operating leases for accounting purposes and loans secured
by the Property for all other purposes, including federal, state and local
income tax purposes and commercial, real estate and bankruptcy law purposes. To
the extent that this Agreement and the other Operative Documents reflect the
lease form alone, they do so for convenience only. Lessee and the Lessor Parties
intend that the Operative Documents have the dual form referred to in the first
sentence of this paragraph, notwithstanding the use of the lease form alone.
(a) Tax Treatment. For purposes of all income, franchise and
other taxes imposed upon or measured by income, Lessee and Lessor
Parties intend that the transactions evidenced by the Operative
Documents shall be treated as loans by the Participants (through Lessor)
to Lessee secured by the Property, with Lessee as owner of
<PAGE> 18
the Property. Lessee and the Lessor Parties may only take deductions,
credits, allowances and other reporting positions on their respective
returns, reports and statements which are consistent with such
treatment, unless required to do otherwise by an appropriate taxing
authority or after a clearly applicable change in applicable
Governmental Rules; provided, however, that if an appropriate taxing
authority or a clearly applicable change in applicable Governmental
Rules requires any Lessor Party to take such an inconsistent position,
such Lessor Party shall promptly notify Lessee.
(b) Other Legal Treatment. For purposes of commercial law, real
property law, bankruptcy law and other applicable laws, Lessee and
Lessor Parties also intend that the transactions evidenced by the
Operative Documents shall be treated as loans by the Participants
(through Lessor) to Lessee secured by the Property, with Lessee as owner
of the Property. Consistent with such treatment, Lessee and the Lessor
Parties intend that, among other things for such purposes, (i) the
Advances be treated as loans to Lessee by the Participants (through
Lessor); (ii) the Advances be secured by the Property and the Lessor
Parties have the rights and remedies of secured lenders; (iii) Base Rent
be treated as interest on the Advances; (iv) Lessee be required to pay
on the applicable Expiration Date only the Residual Value Guaranty
Amount, the Indemnity Amount and the other amounts required by
Subparagraph 4.06(b) of the applicable Purchase Agreement (or
Subparagraph 4.06(c) if Lessor is retaining the Property) if Lessee
exercises the Marketing Option in accordance with the applicable
Purchase Agreement; and (v) Lessee be required to pay on the applicable
Expiration Date the applicable Outstanding Lease Amount and all other
amounts outstanding under this Agreement and the other Operative
Documents (including amounts required by Subparagraph 4.06(a) of the
applicable Purchase Agreement) if the applicable Lease Agreement is
terminated prior to its Scheduled Expiration Date after an Event of
Default occurs under such Lease Agreement or if Lessee fails to or is
otherwise not entitled to exercise the Marketing Option in accordance
with the applicable Purchase Agreement.
(c) No Reliance by Lessee. Lessee acknowledges and agrees that no
Lessor Party has made any representations or warranties to Lessee
concerning the tax, accounting or legal characteristics of the Operative
Documents and that Lessee has obtained and relied upon such tax,
accounting and legal advice concerning the Operative Documents as it
deems appropriate.
2.11. Security.
(a) Lessee Obligations.
(i) To the extent that the transaction evidenced by the
Lease Agreement, Purchase Agreement and other Operative Documents
for either Facility is treated as a loan by the Participants
(through Lessor) to Lessee secured by the Property for such
Facility, with Lessee as owner of such Property pursuant to
Paragraph 2.10, the Lessee Obligations under such Facility shall
be secured by such Property and the other Real Property
Collateral for such Facility and, in the case of Facility 2,
Personal Property Collateral for such Facility (collectively, the
"Property Collateral") as provided in Subparagraphs 2.07(a) and
2.07(b) of the applicable Lease Agreement and, in the case of
Facility 2, in an Assignment of Construction
<PAGE> 19
Agreements in the form of Exhibit H, duly executed by Lessee
(the "Assignment of Construction Agreements").
(ii) In addition to the Property Collateral, the Lessee
Obligations may be secured, at Lessee's election, by a Cash
Collateral Agreement in the form of Exhibit I, duly executed by
Lessee (the "Cash Collateral Agreement"), and Cash Collateral
delivered to Agent or Participants pursuant to the Cash
Collateral Agreement. If Lessee elects to deliver any Cash
Collateral pursuant to the Cash Collateral Agreement to decrease
the Applicable Margin for the LIBOR Rental Rate, Lessee shall
deliver to Agent, five (5) Business Days' prior to the delivery
of such Cash Collateral, notice of such election and an opinion
of its counsel in form and substance reasonably satisfactory to
Lessor regarding the Cash Collateral Agreement and such Cash
Collateral and shall deliver such Cash Collateral only on a
Scheduled Rent Payment Date. Lessee may withdraw any Cash
Collateral held pursuant to the Cash Collateral Agreement only as
provided in the Cash Collateral Agreement.
(iii) Lessee shall deliver to Lessor and Agent such additional
mortgages, deeds of trust, security agreements, pledge
agreements, lessor consents and estoppels (containing appropriate
mortgagee and lender protection language) and other instruments,
agreements, certificates, opinions and documents (including
Uniform Commercial Code financing statements and fixture filings
and landlord waivers) as Lessor or Agent may reasonably request
to (A) grant, perfect, maintain, protect and evidence security
interests in favor of Lessor or Agent in the Property Collateral
and Cash Collateral prior to the Liens or other interests of any
Person, except in the case of the Property Collateral for
Permitted Property Liens; and (B) otherwise establish, maintain,
protect and evidence the rights provided to Lessor and Agent in
the Property Collateral and Cash Collateral. Lessee shall fully
cooperate with Lessor and Agent and perform all additional acts
reasonably requested by Lessor or Agent to effect the purposes of
this Subparagraph 2.11(a).
(b) Lessor Obligations.
(i) The Lessor Obligations shall be secured by the
following:
(A) An Assignment of Lease Agreement and Purchase
Agreement in the form of Exhibit J, duly executed by
Lessor (the "Assignment of Lease");
(B) A Construction Deed of Trust with Assignment of
Rents, Security Agreement and Fixture Filing in the form
of Exhibit K, duly executed by Lessor (the "Lessor Deed of
Trust"); and
(C) A Security Agreement in the form of Exhibit L,
duly executed by Lessor (the "Lessor Security Agreement").
(ii) Lessor shall deliver to Agent such additional mortgages,
deeds of trust, security agreements, pledge agreements, lessor
consents and estoppels (containing
<PAGE> 20
appropriate mortgagee and lender protection language) and other
instruments, agreements, certificates, opinions and documents
(including Uniform Commercial Code financing statements and
fixture filings and landlord waivers) as Agent may reasonably
request to (A) grant, perfect, maintain, protect and evidence
security interests in favor of Agent in Lessor's rights in the
Property Collateral and Cash Collateral; and (B) otherwise
establish, maintain, protect and evidence the rights provided to
Agent in the Property Collateral and Cash Collateral. Lessor
shall fully cooperate with Agent and perform all additional acts
reasonably requested by Agent to effect the purposes of this
Subparagraph 2.11(b).
(iii) Lessee hereby consents to the Assignment of Lease, the
Lessor Deed of Trust and the Lessor Security Agreement; the Liens
granted to Agent therein; and all other Liens granted to Agent in
any of the Operative Documents and the Property to secure the
Lessor Obligations.
2.12. Change of Circumstances.
(a) Inability to Determine Rates. If, on or before the first day
of any Rental Period, (i) any Participant shall advise Agent that the
LIBOR Rental Rate for such Rental Period cannot be adequately and
reasonably determined due to the unavailability of funds in or other
circumstances affecting the London interbank market or (ii) any
Participant shall advise Agent that the LIBOR Rental Rate for such
Rental Period does not adequately and fairly reflect the cost to such
Participant of funding its portion of the Outstanding Lease Amount under
the applicable Facility, Agent shall immediately give notice of such
condition to Lessee, Lessor and the other Participants. After the giving
of any such notice (and until Agent shall otherwise notify Lessee and
Lessor that the circumstances giving rise to such condition no longer
exist), the LIBOR Rental Rate shall be unavailable and the Rental Rate
for each Rental Period shall be the Alternate Rental Rate.
(b) Illegality. If, after the date of this Agreement, the
adoption of any Governmental Rule, any change in any Governmental Rule
or the application or requirements thereof (whether such change occurs
in accordance with the terms of such Governmental Rule as enacted, as a
result of amendment or otherwise), any change in the interpretation or
administration of any Governmental Rule by any Governmental Authority,
or compliance by Lessor or any Participant with any request or directive
(whether or not having the force of law) of any Governmental Authority
(a "Change of Law") shall make it unlawful or impossible for any
Participant to fund or maintain its portion of the Outstanding Lease
Amount under either Facility at the LIBOR Rental Rate, such Participant
shall immediately notify Agent and Agent shall immediately notify
Lessee, Lessor and the other Participants of such Change of Law. After
the giving of any such notice (and until Agent shall otherwise notify
Lessee and Lessor that such Change of Law is no longer in effect), the
LIBOR Rental Rate shall be unavailable and the Rental Rate under both
Facilities for each Rental Period shall be the Alternate Rental Rate.
(c) Increased Costs. If, after the date of this Agreement, any
Change of Law:
<PAGE> 21
(i) Shall subject Lessor or any Participant to any tax,
duty or other charge with respect to the Outstanding Lease Amount
under either Facility, or shall change the basis of taxation of
Base Rent payments by Lessee to Lessor or any Participant under
this Agreement or any other Operative Document (except for
changes in the rate of taxation on the overall net income of
Lessor or any Participant imposed by its jurisdiction of
incorporation, the jurisdiction in which its principal executive
office is located or, in the case of any Participant, the
jurisdiction in which its Applicable Participating Office is
located); or
(ii) Shall impose, modify or hold applicable any reserve
(excluding any Reserve Requirement or other reserve to the extent
included in the calculation of the LIBOR Rental Rate), special
deposit or similar requirement against assets held by, deposits
or other liabilities in or for the account of, advances or loans
by, or any other acquisition of funds by Lessor or any
Participant for its portion of the Outstanding Lease Amount under
either Facility; or
(iii) Shall impose on Lessor or any Participant any other
condition related to the Outstanding Lease Amount under either
Facility, Base Rent under either Facility or Lessor's or such
Participant's commitments hereunder;
And the effect of any of the foregoing is to increase the cost to Lessor
or such Participant of funding or maintaining its portion of the
Outstanding Lease Amount under either Facility or commitments or to
reduce any amount receivable by Lessor or such Participant hereunder;
then Lessee shall from time to time within five (5) Business Days after
demand by Lessor or such Participant, pay to Lessor or such Participant
additional amounts sufficient to reimburse Lessor or such Participant
for such increased costs or to compensate Lessor or such Participant for
such reduced amounts. A certificate as to the amount of such increased
costs or reduced amounts, submitted by Lessor or such Participant to
Lessee shall, in the absence of manifest error, be conclusive and
binding on Lessee for all purposes. The obligations of Lessee under this
Subparagraph 2.12(c) shall survive the payment and performance of the
Lessee Obligations and the termination of this Agreement.
(d) Capital Requirements. If, after the date of this Agreement,
Lessor or any Participant determines that (i) any Change of Law affects
the amount of capital required or expected to be maintained by such
Person or any other Person controlling such Person (a "Capital Adequacy
Requirement") and (ii) the amount of capital maintained by such Person
or such other Person which is attributable to or based upon the
Advances, the commitments or this Agreement must be increased as a
result of such Capital Adequacy Requirement (taking into account such
Person's or such other Person's policies with respect to capital
adequacy), Lessee shall pay to such Person or such other Person, within
five (5) Business Days after demand of such Person, such amounts as such
Person or such other Person shall determine are necessary to compensate
such Person or such other Person for the increased costs to such Person
or such other Person of such increased capital. A certificate of Lessor
or any Participant setting forth in reasonable detail the computation of
any such increased costs, delivered by such Person to Lessee shall, in
the absence of manifest error, be conclusive and binding on Lessee for
all purposes. The
<PAGE> 22
obligations of Lessee under this Subparagraph 2.12(d) shall survive
the payment and performance of the Lessee Obligations and the
termination of this Agreement.
(e) Mitigation. If Lessor or any Participant becomes aware of (i)
any Change of Law which will make it unlawful or impossible for such
Person to fund or maintain its portion of the Outstanding Lease Amount
under either Facility at the LIBOR Rental Rate or (ii) any Change of Law
or other event or condition which will obligate Lessee to pay any amount
pursuant to Subparagraph 2.12(c) or Subparagraph 2.12(d), such Person
shall notify Lessee and Agent thereof as promptly as practical. If any
Person has given notice of any such Change of Law or other event or
condition and thereafter becomes aware that such Change of Law or other
event or condition has ceased to exist, such Person shall notify Lessee
and Agent thereof as promptly as practical. Each Person affected by any
Change of Law which makes it unlawful or impossible for such Person to
fund or maintain its portion of the Outstanding Lease Amount under
either Facility at the LIBOR Rental Rate or to which Lessee is obligated
to pay any amount pursuant to Subparagraph 2.12(c) or Subparagraph
2.12(d) shall use reasonable commercial efforts (including changing the
jurisdiction of its Applicable Participating Office) to avoid the effect
of such Change of Law or to avoid or materially reduce any amounts which
Lessee is obligated to pay pursuant to Subparagraph 2.12(c) or
Subparagraph 2.12(d) if, in the reasonable opinion of such Person, such
efforts would not be disadvantageous to such Person or contrary to such
Person's normal banking practices.
2.13. Taxes on Payments.
(a) Payments Free of Taxes. All payments made by Lessee under
this Agreement and the other Operative Documents shall be made free and
clear of, and without deduction or withholding for or on account of, any
present or future Indemnified Taxes, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority. If any
Indemnified Taxes are required to be withheld from any amounts payable
to any Lessor Party hereunder or under the other Operative Documents,
the amounts so payable to such Lessor Party shall be increased to the
extent necessary to yield to such Lessor Party (after payment of all
Indemnified Taxes) the Base Rent or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and
the other Operative Documents. Whenever any Indemnified Taxes are
payable by Lessee, as promptly as possible thereafter, Lessee shall send
to Agent for its own account or for the account of Lessor or such
Participant, as the case may be, a certified copy of an original
official receipt received by Lessee showing payment thereof. If Lessee
fails to pay any Indemnified Taxes when due to the appropriate taxing
authority or fails to remit to Agent the required receipts or other
required documentary evidence, Lessee shall indemnify the Lessor Parties
for any incremental taxes, interest or penalties that may become payable
by the Lessor Parties as a result of any such failure. The obligations
of Lessee under this Subparagraph 2.13(a) shall survive the payment and
performance of the Lessee Obligations and the termination of this
Agreement.
(b) Withholding Exemption Certificates. On or prior to the
Closing Date or, if such date does not occur within thirty (30) days
after the date of this Agreement, by the end of such 30-day period,
Lessor, if it is not incorporated under
<PAGE> 23
the laws of the United States of America or a state thereof, and each
Participant which is not incorporated under the laws of the United
States of America or a state thereof shall deliver to Lessee and Agent
two duly completed copies of United States Internal Revenue Service Form
1001 or 4224 (or successor applicable form), as the case may be,
certifying in each case that Lessor or such Participant, as the case may
be, is entitled to receive payments under this Agreement and the other
Operative Documents without deduction or withholding of any United
States federal income taxes. Each Person which delivers to Lessee and
Agent a Form 1001 or 4224 pursuant to the immediately preceding sentence
further undertakes to deliver to Lessee and Agent two further copies of
Form 1001 or 4224 (or successor applicable forms), or other manner of
certification or procedure, as the case may be, on or before the date
that any such form expires or becomes obsolete or after the occurrence
of any event requiring a change in the most recent form previously
delivered by it to Lessee and Agent, and such extensions or renewals
thereof as may reasonably be requested by Lessee or Agent, certifying in
the case of a Form 1001 or 4224 that such Person is entitled to receive
payments under this Agreement and the other Operative Documents without
deduction or withholding of any United States federal income taxes,
unless in any such cases an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on
which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent Lessor or a Participant
from duly completing and delivering any such form with respect to it and
Lessor or such Participant advises Lessee and Agent that it is not
capable of receiving payments without any deduction or withholding of
United States federal income tax.
(c) Mitigation. If any Lessor Party claims any additional amounts
to be payable to it pursuant to this Paragraph 2.13, such Lessor Party
shall use reasonable commercial efforts to file any certificate or
document requested in writing by Lessee (including copies of Internal
Revenue Service Form 1001 (or successor forms) reflecting a reduced rate
of withholding) or to change the jurisdiction of its Applicable
Participating Office if the making of such a filing or such change in
the jurisdiction of its Applicable Participating Office would avoid the
need for or materially reduce the amount of any such additional amounts
which may thereafter accrue and if, in the reasonable opinion of a
Participant, in the case of a change in the jurisdiction of its
Applicable Participating Office, such change would not be
disadvantageous to such Person or contrary to such Person's normal
banking practices.
(d) Tax Returns. Nothing contained in this Paragraph 2.13 shall
require any Lessor Party to make available any of its tax returns (or
any other information relating to its taxes which it deems to be
confidential).
2.14. Funding Loss Indemnification. If Lessee shall (a) pay any portion
of the Outstanding Lease Amount under either Facility on any day other than the
last day of a Rental Period (whether an optional payment, a mandatory payment or
otherwise) or (b) cancel or otherwise fail to consummate any Advance Request
which has been delivered to Agent (whether as a result of the failure to satisfy
any applicable conditions or otherwise), Lessee shall, upon demand by Lessor or
any Participant, reimburse such Person for and hold such Person harmless from
all costs and losses incurred by such Person as a result of such payment,
cancellation or failure. Lessee understands that such costs and losses may
include, without limitation, losses incurred by Lessor or a Participant as a
result of funding and other contracts entered into by such Person to fund its
portion of the Outstanding Lease Amount under the applicable Facility. Each
<PAGE> 24
Person demanding payment under this Paragraph 2.14 shall deliver to Lessee, with
a copy to Agent, a certificate setting forth the amount of costs and losses for
which demand is made, which certificate shall set forth in reasonable detail the
calculation of the amount demanded. Such a certificate so delivered to Lessee
shall constitute prima facie evidence of such costs and losses. The obligations
of Lessee under this Paragraph 2.14 shall survive the payment and performance of
the Lessee Obligations and the termination of this Agreement.
2.15. Replacement of Participants. If any Participant shall (a) become a
Defaulting Participant more than two (2) times in a period of twelve (12)
consecutive months, (b) continue as a Defaulting Participant for more than five
(5) Business Days at any time, (c) deliver, pursuant to Subparagraph 2.12(b), a
notice of a Change of Law which does not affect Required Participants, or (d)
demand any payment under Subparagraph 2.12(c), 2.12(d) or 2.13(a) for a reason
which is not applicable to Required Participants, then Agent may (or upon the
written request of Lessee if no Event of Default has occurred and is continuing,
shall) replace such Participant (the "affected Participant"), or cause such
affected Participant to be replaced, with another financial institution (the
"replacement Participant") satisfying the requirements of an Eligible Assignee
under Subparagraph 7.05(b), by having the affected Participant sell and assign
all of its rights and obligations under this Agreement and the other Operative
Documents to the replacement Participant pursuant to Subparagraph 7.05(b);
provided, however, that if Lessee seeks to exercise such right, it must do so
within sixty (60) days after it first knows or should have known of the
occurrence of the event or events giving rise to such right, and no Lessor Party
shall have any obligation to identify or locate a replacement Participant for
Lessee. Upon receipt by any affected Participant of a written notice from Agent
stating that Agent is exercising the replacement right set forth in this
Paragraph 2.15, such affected Participant shall sell and assign all of its
rights and obligations under this Agreement and the other Operative Documents to
the replacement Participant pursuant to an Assignment Agreement and Subparagraph
7.05(b) for a purchase price equal to the sum of its portion of the Outstanding
Lease Amount, the accrued and unpaid portion of the Base Rent relating to such
portion and its ratable share of all fees to which it is entitled.
SECTION III. CONDITIONS PRECEDENT.
3.01. Initial Acquisition Advance. The obligation of Lessor to make the
initial Acquisition Advance (and the obligations of the Participants to fund
their respective Proportionate Shares of the Acquisition Advance) is (are)
subject to receipt by Agent, on or prior to the Closing Date, of each item
listed in Schedule 3.01, each in form and substance satisfactory to Lessor,
Agent and each Participant, and with sufficient copies for, Lessor, Agent and
each Participant.
3.02. Each Acquisition Advance. The obligation of Lessor to make each
Acquisition Advance (including the initial Acquisition Advance) for each Tract
of Property (and the obligations of the Participants to fund their respective
Proportionate Shares of each such Acquisition Advance) is (are) subject to (a)
satisfaction of the conditions set forth in Paragraph 3.01; and (b) receipt by
Agent, on or prior to the applicable Acquisition Date, of each item listed in
Schedule 3.02 for such Tract, each in form and substance satisfactory to Lessor,
Agent and each Participant, and with sufficient copies for, Lessor, Agent and
each Participant.
<PAGE> 25
3.03. Improvement/Expense Advances. The obligation of Lessor to make
each Improvement/Expense Advance for each Tract of Property (and the obligations
of the Participants to fund their respective Proportionate Shares of such
Advance) is (are) subject to (a) satisfaction of the conditions set forth in
Paragraph 3.01; (b) satisfaction of the conditions set forth in Paragraph 3.02
for such Tract; (c) receipt by Agent pursuant to Paragraph 2.03 of the Advance
Request for such Advance, appropriately completed and duly executed by Lessee;
and (d) receipt by Agent of date-down endorsements to Agent's and Lessor's title
insurance policies covering such Tract or binders acceptable to Agent and
Lessor.
3.04. Other Conditions Precedent. The occurrence of each Credit Event
(including the making of each Advance by Lessor and the funding of each Advance
by the Participants) is subject to the further conditions that, on the date such
Credit Event is to occur and after giving effect to such Credit Event, the
following shall be true and correct:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 and in the other Operative Documents are true and correct
in all material respects as if made on such date (except for
representations and warranties expressly made as of a specified date,
which shall be true as of such date);
(b) No Default has occurred and is continuing or will result from
such Credit Event; and
(c) All of the Operative Documents are in full force and effect.
The submission by Lessee to Lessor and Agent of each Advance Request, each
Notice of Rental Period Selection and a Notice of Marketing Option Exercise
shall be deemed to be a representation and warranty by Lessee that each of the
statements set forth above in this Paragraph 3.04 is true and correct as of the
date of such request and notice.
3.05. Covenant to Deliver. Lessee agrees (not as a condition but as a
covenant) to deliver to Lessor and Agent each item required to be delivered to
Lessor and Agent as a condition to each Advance if such Advance is made. Lessee
expressly agrees that the making of any Advance prior to the receipt by Lessor
and Agent of any such item shall not constitute a waiver by Lessor, Agent or any
Participant of Lessee's obligation to deliver such item, unless expressly waived
in writing.
SECTION IV. REPRESENTATIONS AND WARRANTIES.
4.01. Lessee's Representations and Warranties. In order to induce the
Lessor Parties to enter into this Agreement and the other Operative Documents to
which they are parties, Lessee hereby represents and warranties to the Lessor
Parties as follows:
(a) Due Incorporation, Qualification, etc. Each of Lessee and
Lessee's Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of its state of
incorporation; (ii) has the power and authority to own, lease and
operate its properties and carry on its business as now conducted; and
(iii) is duly qualified, licensed to do business and in good standing as
a foreign corporation in each
<PAGE> 26
jurisdiction where the failure to be so qualified or licensed is
reasonably likely to have a Material Adverse Effect.
(b) Authority. The execution, delivery and performance by Lessee
of each Operative Document executed, or to be executed, by Lessee and
the consummation of the transactions contemplated thereby (i) are within
the power of Lessee and (ii) have been duly authorized by all necessary
actions on the part of Lessee.
(c) Enforceability. Each Operative Document executed, or to be
executed, by Lessee has been, or will be, duly executed and delivered by
Lessee and constitutes, or will constitute, a legal, valid and binding
obligation of Lessee, enforceable against Lessee in accordance with its
terms, except as limited by bankruptcy, insolvency or other laws of
general application relating to or affecting the enforcement of
creditors' rights generally and general principles of equity.
(d) Non-Contravention. The execution and delivery by Lessee of
the Operative Documents executed by Lessee and the performance and
consummation of the transactions contemplated thereby do not (i) violate
any Requirement of Law applicable to Lessee; (ii) violate any provision
of, or result in the breach or the acceleration of, or entitle any other
Person to accelerate (whether after the giving of notice or lapse of
time or both), any Contractual Obligation of Lessee; or (iii) result in
the creation or imposition of any Lien (or the obligation to create or
impose any Lien) upon any property, asset or revenue of Lessee (except
such Liens as may be created in favor of Lessor or Agent pursuant to
this Agreement or the other Operative Documents).
(e) Approvals. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Authority
or other Person (including, without limitation, the shareholders of any
Person) is required in connection with the execution and delivery of the
Operative Documents executed by Lessee and the performance and
consummation by Lessee of the transactions contemplated thereby, except
such as have been made or obtained and are in full force and effect.
(f) No Violation or Default. Neither Lessee nor any of its
Subsidiaries is in violation of or in default with respect to (i) any
Requirement of Law applicable to such Person; (ii) any Contractual
Obligation of such Person (nor is there any waiver in effect which, if
not in effect, would result in such a violation or default), where, in
each case, such violation or default is reasonably likely to have a
Material Adverse Effect. Without limiting the generality of the
foregoing, neither Lessee nor any of its Subsidiaries (A) has violated
any Environmental Laws, (B) has any liability under any Environmental
Laws or (C) has received notice or other communication of an
investigation or is under investigation by any Governmental Authority
having authority to enforce Environmental Laws, where such violation,
liability or investigation is reasonably likely to have a Material
Adverse Effect. No Default has occurred and is continuing.
(g) Litigation. Except as set forth (with estimates of the dollar
amounts involved) in Schedule 4.01(g), no actions (including, without
limitation, derivative actions), suits, proceedings or investigations
are pending or, to the knowledge of Lessee,
<PAGE> 27
threatened against Lessee or any of its Subsidiaries at law or in equity
in any court or before any other Governmental Authority which (i) is
reasonably likely (alone or in the aggregate) to have a Material Adverse
Effect or (ii) seeks to enjoin, either directly or indirectly, the
execution, delivery or performance by Lessee of the Operative Documents
or the transactions contemplated thereby.
(h) Title; Possession Under Leases. Lessee and its Subsidiaries
own and have good and marketable title, or a valid leasehold interest
in, all their respective properties and assets as reflected in the most
recent Financial Statements delivered to Agent (except those assets and
properties disposed of in the ordinary course of business or otherwise
in compliance with this Agreement since the date of such Financial
Statements) and all respective assets and properties acquired by Lessee
and its Subsidiaries since such date (except those disposed of in the
ordinary course of business or otherwise in compliance with this
Agreement), except in any case where the failure so to own or to have
such title is not reasonably likely to have a Material Adverse Effect.
Such assets and properties are subject to no Lien, except for Permitted
Liens. Each of Lessee and its Subsidiaries has complied with all
material obligations under all material leases to which it is a party
and all such leases are in full force and effect. Each of Lessee and its
Subsidiaries enjoys peaceful and undisturbed possession under such
leases.
(i) Financial Statements. The Financial Statements of Lessee and
its Subsidiaries which have been delivered to Agent, (i) are in
accordance with the books and records of Lessee and its Subsidiaries,
which have been maintained in accordance with good business practice;
(ii) have been prepared in conformity with GAAP; and (iii) fairly
present the financial conditions and results of operations of Lessee and
its Subsidiaries as of the date thereof and for the period covered
thereby. Neither Lessee nor any of its Subsidiaries has any Contingent
Obligations, liability for taxes or other outstanding obligations which
are material in the aggregate, except as disclosed in the audited
Financial Statements dated December 31, 1996, furnished by Lessee to
Agent prior to the date hereof, or in the Financial Statements delivered
to Agent pursuant to clause (i) or (ii) of Subparagraph 5.01(a).
(j) Equity Securities. All outstanding Equity Securities of
Lessee are duly authorized, validly issued, fully paid and
non-assessable. All Equity Securities of Lessee have been offered and
sold in compliance with all federal and state securities laws and all
other Requirements of Law.
(k) No Agreements to Sell Assets; Etc. Neither Lessee nor any of
its Subsidiaries has any legal obligation, absolute or contingent, to
any Person to sell the assets of Lessee or any of its Subsidiaries
(other than sales in the ordinary course of business), or to effect any
merger, consolidation or other reorganization of Lessee or any of its
Subsidiaries or to enter into any agreement with respect thereto, except
for sales permitted by Subparagraph 5.02(c).
(l) Employee Benefit Plans.
(i) Based on the latest valuation of each Employee Benefit
Plan that either Lessee or any ERISA Affiliate maintains or
contributes to, or has any
<PAGE> 28
obligation under (which occurred within twelve months of the
date of this representation), the aggregate benefit liabilities
of such plan within the meaning of ss. 4001 of ERISA did not
exceed the aggregate value of the assets of such plan. Neither
Lessee nor any ERISA Affiliate has any liability with respect to
any post-retirement benefit under any Employee Benefit Plan
which is a welfare plan (as defined in section 3(1) of ERISA),
other than liability for health plan continuation coverage
described in Part 6 of Title I(B) of ERISA, which liability for
health plan contribution coverage is not reasonably likely to
have a Material Adverse Effect.
(ii) Each Employee Benefit Plan complies, in both form and
operation, in all material respects, with its terms, ERISA and
the IRC, and no condition exists or event has occurred with
respect to any such plan which would result in the incurrence by
either Lessee or any ERISA Affiliate of any material liability,
fine or penalty. Each Employee Benefit Plan, related trust
agreement, arrangement and commitment of Lessee or any ERISA
Affiliate is legally valid and binding and in full force and
effect. No Employee Benefit Plan is being audited or investigated
by any government agency or is subject to any pending or
threatened claim or suit. Neither Lessee nor any ERISA Affiliate
nor any fiduciary of any Employee Benefit Plan has engaged in a
prohibited transaction under section 406 of ERISA or section 4975
of the IRC.
(iii) Neither Lessee nor any ERISA Affiliate contributes to or
has any material contingent obligations to any Multiemployer
Plan. Neither Lessee nor any ERISA Affiliate has incurred any
material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under Section 4201 of
ERISA or as a result of a sale of assets described in
Section 4204 of ERISA. Neither Lessee nor any ERISA Affiliate has
been notified that any Multiemployer Plan is in reorganization or
insolvent under and within the meaning of Section 4241 or
Section 4245 of ERISA or that any Multiemployer Plan intends to
terminate or has been terminated under Section 4041A of ERISA.
(m) Other Regulations. Lessee is not subject to regulation under
the Investment Company Act of 1940, the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act, any
state public utilities code or to any other Governmental Rule limiting
its ability to incur indebtedness.
(n) Patent and Other Rights. Lessee and its Subsidiaries own,
license or otherwise have the right to use, under validly existing
agreements, all patents, licenses, trademarks, trade names, trade
secrets, service marks, copyrights and all rights with respect thereto,
which are required to conduct their businesses as now conducted.
(o) Governmental Charges. Lessee and its Subsidiaries have filed
or caused to be filed all tax returns which are required to be filed by
them. Lessee and its Subsidiaries have paid, or made provision for the
payment of, all taxes and other Governmental Charges which have or may
have become due pursuant to said returns or otherwise and all other
indebtedness, except such Governmental Charges or indebtedness,
<PAGE> 29
if any, which are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided or
which are not reasonably likely to have a Material Adverse Effect if
unpaid.
(p) Margin Stock. Lessee owns no Margin Stock which, in the
aggregate, would constitute a substantial part of the assets of Lessee,
and no proceeds of any Loan will be used to purchase or carry, directly
or indirectly, any Margin Stock or to extend credit, directly or
indirectly, to any Person for the purpose of purchasing or carrying any
Margin Stock.
(q) Subsidiaries, etc. Set forth in Schedule 4.01(q) (as
supplemented by Lessee from time to time in a written notice to Agent)
is a complete list of all of Lessee's Subsidiaries, the jurisdiction of
incorporation of each, the classes of Equity Securities of each and the
number of shares and percentages of shares of each such class owned
directly or indirectly by Lessee. Except for such Subsidiaries, Lessee
has no Subsidiaries, is not a partner in any partnership or a joint
venturer in any joint venture.
(r) Catastrophic Events. Neither Lessee nor any of its
Subsidiaries and none of their properties is or has been affected by any
fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or other casualty
that is reasonably likely to have a Material Adverse Effect. There are
no disputes presently subject to grievance procedure, arbitration or
litigation under any of the collective bargaining agreements, employment
contracts or employee welfare or incentive plans to which Lessee or any
of its Subsidiaries is a party, and there are no strikes, lockouts, work
stoppages or slowdowns, or, to the best knowledge of Lessee,
jurisdictional disputes or organizing activities occurring or threatened
which alone or in the aggregate are reasonably likely to have a Material
Adverse Effect.
(s) No Material Adverse Effect. No event has occurred and is
continuing and no condition exists which is reasonably likely to have a
Material Adverse Effect.
(t) The Property. The representations and warranties relating to
each Tract set forth in Parts 1 - 6 of Schedule 4.01(t) are true and
correct. The following representations and warranties apply to all of
the Property:
(i) All of the Property complies and will comply at all
times (whether before commencement of any construction, during
any construction or after completion of construction of any New
Improvements) with all applicable Governmental Rules (including
Title III of the Americans with Disabilities Act; Environmental
Laws; and zoning, land use, building, planning and fire laws,
rules, regulations and codes) and Insurance Requirements, except
for violations which are not reasonably likely to have a Material
Adverse Effect. None of the Property is or has been a site for
the use, generation, manufacture, storage, treatment, release,
discharge, disposal or transportation of any Hazardous Materials,
and no Hazardous Materials (except as set forth in Schedule 1 to
each Lease Agreement) are located on any of the Property. There
are no claims or actions pending or, to Lessee's knowledge,
threatened against any of the Property by any Governmental
Authority or any other Person relating to Hazardous Materials or
pursuant to any Environmental Laws.
<PAGE> 30
(ii) None of the Improvements (whether before commencement of
any construction, during any construction or after completion of
construction of any New Improvements) encroach or will at any
time encroach in any manner onto any adjoining land, except as
permitted by express written and recorded encroachment agreements
approved by Agent or as affirmatively insured against by
appropriate title insurance.
(iii) All licenses, approvals, authorizations, consents,
permits, easements and rights-of-way required for the use of any
of the Property have been obtained or, if not yet required, will
be obtained before required.
(iv) After the purchase of each Tract of Property on the
Acquisition Date therefor, Lessor will have good and valid fee
simple title to such Property, subject to no Liens except for
Permitted Property Liens.
(u) Chief Place of Business. Lessee's chief place of business is
located at 3970 North First Street, San Jose, California.
(v) Accuracy of Information Furnished. None of the Operative
Documents and none of the other certificates, statements or information
furnished to Lessor, Agent or any Participant by or on behalf of Lessee
or any of its Subsidiaries in connection with the Operative Documents or
the transactions contemplated thereby contains or will contain any
untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Lessee shall be deemed to have reaffirmed, for the benefit of the Lessor
Parties, each representation and warranty contained in this Paragraph 4.01 on
and as of the date of each Credit Event (except for representations and
warranties expressly made as of a specified date, which shall be true as of such
date).
4.02. Lessor's Representations and Warranties. In order to induce
Lessee, Agent and the Participants to enter into this Agreement and the other
Operative Documents to which they are parties, Lessor hereby represents and
warranties to Lessee, Agent and the Participants as follows:
(a) Due Incorporation, Qualification, etc. Lessor (i) is a
corporation duly organized, validly existing and in good standing under
the laws of its state of incorporation and (ii) has the power and
authority to own, lease and operate its properties and carry on its
business as now conducted. Lessor is an indirect, wholly-owned
Subsidiary of ABN AMRO.
(b) Authority. The execution, delivery and performance by Lessor
of each Operative Document executed, or to be executed, by Lessor and
the consummation of the transactions contemplated thereby (i) are within
the power of Lessor and (ii) have been duly authorized by all necessary
actions on the part of Lessor.
<PAGE> 31
(c) Enforceability. Each Operative Document executed, or to be
executed, by Lessor has been, or will be, duly executed and delivered by
Lessor and constitutes, or will constitute, a legal, valid and binding
obligation of Lessor, enforceable against Lessor in accordance with its
terms, except as limited by bankruptcy, insolvency or other laws of
general application relating to or affecting the enforcement of
creditors' rights generally and general principles of equity.
(d) Non-Contravention. The execution and delivery by Lessor of
the Operative Documents executed by Lessor and the performance and
consummation of the transactions contemplated thereby do not (i) violate
any Requirement of Law applicable to Lessor; (ii) violate any provision
of, or result in the breach or the acceleration of, or entitle any other
Person to accelerate (whether after the giving of notice or lapse of
time or both), any Contractual Obligation of Lessor; or (iii) result in
the creation or imposition of any Lien (or the obligation to create or
impose any Lien) upon any property, asset or revenue of Lessor (except
such Liens as may be created in favor of Agent pursuant to this
Agreement or the other Operative Documents).
(e) Approvals. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Authority
or other Person (including, without limitation, the shareholders of any
Person) is required in connection with the execution and delivery of the
Operative Documents executed by Lessor and the performance and
consummation of the transactions contemplated thereby, except such as
have been made or obtained and are in full force and effect.
(f) Litigation. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending
or, to the knowledge of Lessor, threatened against Lessor at law or in
equity in any court or before any other Governmental Authority which (i)
is reasonably likely (alone or in the aggregate) to materially and
adversely affect the ability of Lessor to perform its obligations under
the Operative Documents to which it is a party or (ii) seeks to enjoin,
either directly or indirectly, the execution, delivery or performance by
Lessor of the Operative Documents or the transactions contemplated
thereby.
(g) Other Regulations. Lessor is not subject to regulation under
the Investment Company Act of 1940, the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act, any
state public utilities code or to any other Governmental Rule limiting
its ability to incur indebtedness.
(h) Chief Place of Business. Lessor's chief place of business is
located at 135 South LaSalle Street, Chicago, Illinois.
4.03. Participants' Representations and Warranties. In order to induce
Lessee, Lessor and Agent to enter into this Agreement and the other Operative
Documents to which they are parties, each Participant hereby represents and
warranties to Lessee, Lessor and Agent as follows:
(a) Due Incorporation, Qualification, etc. Such Participant (i)
is a corporation duly organized, validly existing and in good standing
under the laws of its state of
<PAGE> 32
incorporation and (ii) has the power and authority to own, lease and
operate its properties and carry on its business as now conducted.
(b) Authority. The execution, delivery and performance by such
Participant of each Operative Document executed, or to be executed, by
such Participant and the consummation of the transactions contemplated
thereby (i) are within the power of such Participant and (ii) have been
duly authorized by all necessary actions on the part of such
Participant.
(c) Enforceability. Each Operative Document executed, or to be
executed, by such Participant has been, or will be, duly executed and
delivered by such Participant and constitutes, or will constitute, a
legal, valid and binding obligation of such Participant, enforceable
against such Participant in accordance with its terms, except as limited
by bankruptcy, insolvency or other laws of general application relating
to or affecting the enforcement of creditors' rights generally and
general principles of equity.
(d) Non-Contravention. The execution and delivery by such
Participant of the Operative Documents executed by such Participant and
the performance and consummation of the transactions contemplated
thereby do not (i) violate any Requirement of Law applicable to such
Participant; (ii) violate any provision of, or result in the breach or
the acceleration of, or entitle any other Person to accelerate (whether
after the giving of notice or lapse of time or both), any Contractual
Obligation of such Participant; or (iii) result in the creation or
imposition of any Lien (or the obligation to create or impose any Lien)
upon any property, asset or revenue of such Participant (except such
Liens as may be created in favor of Lessor or Agent pursuant to this
Agreement or the other Operative Documents).
(e) Approvals. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Authority
or other Person (including, without limitation, the shareholders of any
Person) is required in connection with the execution and delivery of the
Operative Documents executed by such Participant and the performance and
consummation of the transactions contemplated thereby, except such as
have been made or obtained and are in full force and effect.
(f) Litigation. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending
or, to the knowledge of such Participant, threatened against such
Participant at law or in equity in any court or before any other
Governmental Authority which (i) is reasonably likely (alone or in the
aggregate) to materially and adversely affect the ability of such
Participant to perform its obligations under the Operative Documents to
which it is a party or (ii) seeks to enjoin, either directly or
indirectly, the execution, delivery or performance by such Participant
of the Operative Documents or the transactions contemplated thereby.
(g) Own Account. Such Participant is acquiring its participation
interest hereunder for its own account for investment and not with a
view to any distribution (as such term is used in Section 2(11) of the
Securities Act of 1933) thereof, and, if in the future it should decide
to dispose of its participation interest, it understands that it may do
<PAGE> 33
so only in compliance with the Securities Act of 1933 and the rules and
regulations of the Securities and Exchange Commission thereunder and any
applicable state securities laws.
SECTION V. COVENANTS.
5.01. Lessee's Affirmative Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following affirmative
covenants, unless Lessor and Required Participants shall otherwise consent in
writing:
(a) Financial Statements, Reports, etc. Lessee shall furnish to
Agent, with sufficient copies for Lessor and each Participant, the
following, each in such form and such detail as Agent, Lessor or the
Required Participants shall reasonably request:
(i) As soon as available and in no event later than fifty
(50) days after the last day of each fiscal quarter of Lessee
(other than the last quarter in any fiscal year), a copy of the
Financial Statements of Lessee and its Subsidiaries (prepared on
a consolidated basis) for such quarter and for the fiscal year to
date, certified by the president or chief financial officer of
Lessee to present fairly the financial condition, results of
operations and other information reflected therein and to have
been prepared in accordance with GAAP (subject to normal year-end
audit adjustments);
(ii) As soon as available and in no event later than one
hundred (100) days after the close of each fiscal year of Lessee,
(A) copies of the audited Financial Statements of Lessee and its
Subsidiaries (prepared on a consolidated basis) for such year,
prepared by Ernst & Young or by other independent certified
public accountants of recognized national standing acceptable to
Agent, (B) copies of the unqualified opinions (or qualified
opinions reasonably acceptable to Required Participants) and
management letters delivered by such accountants in connection
with all such Financial Statements and (C) certificates of such
accountants to Agent stating that in making the examination
necessary for their opinion they have reviewed this Agreement and
have obtained no knowledge of any Default which has occurred and
is continuing, or if, in the opinion of such accountants, a
Default has occurred and is continuing, a statement as to the
nature thereof;
(iii) Contemporaneously with the quarterly and year-end
Financial Statements required by the foregoing clauses (i) and
(ii), a compliance certificate of the president or chief
financial officer of Lessee which (A) states that no Default has
occurred and is continuing, or, if any such Default has occurred
and is continuing, a statement as to the nature thereof and what
action Lessee proposes to take with respect thereto and (B) sets
forth, for the quarter or year covered by such Financial
Statements or as of the last day of such quarter or year (as the
case may be), the calculation of the financial ratios and tests
provided in Paragraph 5.03;
(iv) As soon as available and in no event later than fifty
(50) days after the last day of each fiscal quarter of Lessee, a
certificate of the chief financial officer of
<PAGE> 34
Lessee which sets forth the calculation of the Funded
Indebtedness/EBITDA Ratio for the consecutive four-quarter
period ending on such day;
(v) As soon as possible and in no event later than five (5)
Business Days after any Senior Officer of Lessee knows of the
occurrence or existence of (A) any Reportable Event under any
Employee Benefit Plan or Multiemployer Plan; (B) any actual or
threatened litigation, suits, claims or disputes against Lessee
or any of its Subsidiaries involving potential monetary damages
payable by Lessee or its Subsidiaries of $2,500,000 or more
(alone or in the aggregate); (C) any other event or condition
which is reasonably likely to have a Material Adverse Effect; or
(D) any Default; the statement of the president or chief
financial officer of Lessee setting forth details of such event,
condition or Default and the action which Lessee proposes to take
with respect thereto;
(vi) As soon as available and in no event later than five (5)
Business Days after they are sent, made available or filed,
copies of (A) all registration statements and reports filed by
Lessee or any of its Subsidiaries with any securities exchange or
the Securities and Exchange Commission (including, without
limitation, all 10-Q, 10-K and 8-Q reports); (B) all reports,
proxy statements and financial statements sent or made available
by Lessee or any of its Subsidiaries to its security holders; and
(C) all press releases and other similar public concerning any
material developments in the business of Lessee or any of its
Subsidiaries made available by Lessee or any of its Subsidiaries
to the public generally;
(vii) As soon as available and in no event later than five (5)
Business Days after they are filed, copies of all IRS Form 5500
reports for all Employee Benefit Plans required to file such
form;
(viii) As soon as available and in no event later than ten (10)
days before the first day of each fiscal year of Lessee, the
consolidated plan and forecast of Lessee and its Subsidiaries for
such fiscal year, including quarterly cash flow projections and
quarterly projections of Lessee's compliance with each of the
covenants set forth in Paragraph 5.03;
(ix) As soon as possible and in no event later than (A) ten
(10) days prior to the acquisition by Lessee or any of its
Subsidiaries of any new Subsidiary or all or substantially all of
the assets of any other Person, written notice thereof; and
(x) Such other instruments, agreements, certificates,
opinions, statements, documents and information relating to the
operations or condition (financial or otherwise) of Lessee or its
Subsidiaries, and compliance by Lessee with the terms of this
Agreement and the other Operative Documents as Lessor or Agent
may from time to time reasonably request.
For the purposes of this Subparagraph 5.01(a), (1) the timely delivery
by Lessee to Agent pursuant to clause (vi) of a copy of the Form 10-Q
report filed by Lessee with the Securities and Exchange Commission for
any quarter shall satisfy the requirements of clause (i) for such
quarter and (2) the timely delivery by Lessee to Agent pursuant to
<PAGE> 35
clause (vi) of a copy of the Form 10-K report filed by Lessee with the
Securities and Exchange Commission for any year shall satisfy the
requirements of clause (ii)(A) for such year, provided that such reports
are required to contain the same information as required by clause (i)
and clause (ii)(A), respectively.
(b) Books and Records. Lessee and its Subsidiaries shall at all
times keep proper books of record and account in which full, true and
correct entries will be made of their transactions in accordance with
GAAP.
(c) Inspections. Lessee and its Subsidiaries shall permit any
Person designated by any Participant, upon reasonable notice and during
normal business hours, to visit and inspect any of the properties and
offices of Lessee and its Subsidiaries, to examine the books and records
of Lessee and its Subsidiaries and make copies thereof and to discuss
the affairs, finances and business of Lessee and its Subsidiaries with,
and to be advised as to the same by, their officers, auditors and
accountants, all at such times and intervals as any Participant may
reasonably request.
(d) Insurance. In addition to the insurance requirements set
forth in the Lease Agreement with respect to the property, Lessee and
its Subsidiaries shall:
(i) Carry and maintain insurance of the types and in the
amounts customarily carried from time to time during the term of
this Agreement by others engaged in substantially the same
business as such Person and operating in the same geographic area
as such Person, including, but not limited to, fire, public
liability, property damage and worker's compensation; and
(ii) Carry and maintain each policy for such insurance with
financially sound insurers.
(e) Governmental Charges and Other Indebtedness. Lessee and its
Subsidiaries shall promptly pay and discharge when due (i) all taxes and
other Governmental Charges prior to the date upon which penalties accrue
thereon, (ii) all indebtedness which, if unpaid, could become a Lien
upon the property of Lessee or its Subsidiaries and (iii) subject to any
subordination provisions applicable thereto, all other Indebtedness
which, if unpaid, is reasonably likely to have a Material Adverse
Effect, except such Indebtedness as may in good faith be contested or
disputed, or for which arrangements for deferred payment have been made,
provided that in each such case appropriate reserves as required by GAAP
are maintained.
(f) Use of Proceeds. Lessee shall not use any part of the
proceeds of any Advance, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock or for the purpose of purchasing
or carrying or trading in any securities under such circumstances as to
involve Lessee or any Lessor Party in a violation of Regulations G, T, U
or X issued by the Federal Reserve Board.
(g) General Business Operations. Each of Lessee and its
Subsidiaries shall (i) preserve and maintain its corporate existence and
all of its rights, privileges and franchises reasonably necessary to the
conduct of its business, (ii) conduct its business
<PAGE> 36
activities in compliance with all Requirements of Law and Contractual
Obligations applicable to such Person, the violation of which is
reasonably likely to have a Material Adverse Effect and (iii) keep all
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted; provided, however, that
Lessee and its Subsidiaries may dissolve or liquidate any Subsidiary if
such Subsidiary is not a Material Subsidiary and such dissolution or
liquidation is not reasonably likely to have a Material Adverse Effect.
Lessee shallEmaintain its chief executive office and principal place of
business in the United States and shall not relocate its chief executive
office or principal place of business outside of California except upon
not less than thirty (30) days prior written notice to Agent.
5.02. Lessee's Negative Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following negative
covenants, unless Lessor and Required Participants shall otherwise consent in
writing:
(a) Indebtedness. Neither Lessee nor any of its Subsidiaries
shall create, incur, assume or permit to exist any Indebtedness except
for the following ("Permitted Indebtedness"):
(i) The Lessee Obligations under the Operative Documents;
(ii) The Related Credit Obligations;
(iii) Indebtedness of Lessee and its Subsidiaries listed in
Schedule 5.02(a) and existing on the date of this Agreement;
(iv) Indebtedness of Lessee and its Subsidiaries arising from
the endorsement of instruments for collection in the ordinary
course of Lessee's or a Subsidiary's business;
(v) Indebtedness of Lessee and its Subsidiaries for trade
accounts payable, provided that (A) such accounts arise in the
ordinary course of business and (B) no material part of any such
account is more than ninety (90) days past due (unless subject to
a bona fide dispute and for which adequate reserves as required
by GAAP have been established);
(vi) Indebtedness of Lessee and its Subsidiaries under Rate
Contracts, provided that all such Rate Contracts are entered into
in connection with bona fide hedging operations and not for
speculation;
(vii) Indebtedness of Lessee and its Subsidiaries under
purchase money loans and Capital Leases incurred by Lessee or any
of its Subsidiaries to finance the acquisition by such Person of
real property, fixtures or equipment provided that in each case,
(A) such Indebtedness is incurred by such Person at the time of,
or not later than thirty (30) days after, the acquisition by such
Person of the property so financed, (B) such Indebtedness does
not exceed the purchase price of the property so financed, and
(C) no Default has occurred and is continuing at the
<PAGE> 37
time such Indebtedness is incurred or will occur after giving
effect to such Indebtedness;
(viii) Indebtedness of Lessee and its Subsidiaries under
initial or successive refinancings of any Indebtedness permitted
by clause (iii) above, provided that (A) the principal amount of
any such refinancing does not exceed the principal amount of the
Indebtedness being refinanced (except to the extent otherwise
permitted by clause (x) below) and (B) the material terms and
provisions of any such refinancing (including maturity,
redemption, prepayment, default and subordination provisions) are
no less favorable to the Participants than the Indebtedness being
refinanced;
(ix) Indebtedness of Lessee and its Subsidiaries with respect
to surety, appeal, indemnity, performance or other similar bonds
in the ordinary course of business; and
(x) Other Indebtedness of Lessee and its Subsidiaries,
provided that the aggregate principal amount of all such other
Indebtedness does not exceed $25,000,000 at any time.
(b) Liens. Neither Lessee nor any of its Subsidiaries shall
create, incur, assume or permit to exist any Lien on or with respect to
any of its assets or property of any character, whether now owned or
hereafter acquired, except for the following ("Permitted Liens"):
(i) Liens in favor of Lessor, Agent or any Participant
securing the Lessee Obligations;
(ii) Liens in favor of Agent or any Participant securing the
Related Credit Obligations;
(iii) Liens listed in Schedule 5.02(b) and existing on the
date of this Agreement;
(iv) Liens for taxes or other Governmental Charges not at the
time delinquent or thereafter payable without penalty or being
contested in good faith, provided that adequate reserves for the
payment thereof as required by GAAP have been established;
(v) Liens of carriers, warehousemen, mechanics, materialmen,
vendors, and landlords and other similar Liens imposed by law
incurred in the ordinary course of business for sums not overdue
or being contested in good faith, provided that adequate reserves
for the payment thereof as required by GAAP have been
established;
(vi) Deposits under workers' compensation, unemployment
insurance and social security laws or to secure the performance
of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, or to secure statutory
<PAGE> 38
obligations of surety or appeal bonds or to secure indemnity,
performance or other similar bonds in the ordinary course of
business;
(vii) Zoning restrictions, easements, rights-of-way, title
irregularities and other similar encumbrances, which alone or in
the aggregate are not substantial in amount and do not materially
detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of Lessee or
any of its Subsidiaries;
(viii) Banker's Liens and similar Liens (including set-off
rights) in respect of bank deposits;
(ix) Liens on property or assets of any corporation which
becomes a Subsidiary of Lessee or on any property or assets
acquired by Lessee or any of its Subsidiaries after the date of
this Agreement, provided that (A) such Liens exist at the time
the stock of such corporation or such assets or property is or
are acquired by Lessee and (B) such Liens were not created in
contemplation of such acquisition by Lessee;
(x) Judgement Liens, provided that such Liens do not have a
value in excess of $2,500,000 or such Liens are released, stayed,
vacated or otherwise dismissed within twenty (20) days after
issue or levy and, if so stayed, such stay is not thereafter
removed;
(xi) Rights of vendors or lessors under conditional sale
agreements, Capital Leases or other title retention agreements,
provided that, in each case, (A) such rights secure or otherwise
relate to Permitted Indebtedness, (B) such rights do not extend
to any property other than property acquired with the proceeds of
such Permitted Indebtedness and (C) such rights do not secure any
Indebtedness other than such Permitted Indebtedness;
(xii) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties
and in connection with the importation of goods in the ordinary
course of Lessee's and its Subsidiaries' businesses;
(xiii) Liens securing Indebtedness which constitutes Permitted
Indebtedness under clause (vii) of Subparagraph 5.02(a) provided
that, in each case, such Lien (A) covers only those assets, the
acquisition of which was financed by such Permitted Indebtedness,
and (B) secures only such Permitted Indebtedness;
(xiv) Liens on the property or assets of any Subsidiary of
Lessee in favor of Lessee or any other Subsidiary of Lessee;
(xv) Liens incurred in connection with the extension, renewal
or refinancing of the Indebtedness secured by the Liens described
in clause (iii) above, provided that any extension, renewal or
replacement Lien (A) is limited to the property covered by the
existing Lien and (B) secures Indebtedness which is no greater in
<PAGE> 39
amount and has material terms no less favorable to the
Participants than the Indebtedness secured by the existing Lien;
(xvi) Liens on insurance proceeds in favor of insurance
companies with respect to the financing of insurance premiums;
(xvii) Permitted Property Liens in the Property; and
(xviii) Other Liens on the property of Lessee and its
Subsidiaries, provided that the aggregate principal amount of all
Indebtedness secured by such other Liens does not exceed at any
time ten percent (10%) of the consolidated total assets of Lessee
and its Subsidiaries at such time.
(c) Asset Dispositions. Neither Lessee nor any of its
Subsidiaries shall sell, lease, transfer or otherwise dispose of any of
its assets or property, whether now owned or hereafter acquired, except
for the following:
(i) Sales of inventory by Lessee and its Subsidiaries in the
ordinary course of their businesses;
(ii) Sales of surplus, damaged, worn or obsolete equipment or
inventory for not less than fair market value;
(iii) Sales or other dispositions of Investments permitted by
clauses (i) and (iii) of Subparagraph 5.02(e) for not less than
fair market value;
(iv) Sales or assignments of defaulted receivables to a
collection agency in the ordinary course of business;
(v) Licenses by Lessee or its Subsidiaries of its patents,
copyrights, trademarks, trade names and service marks in the
ordinary course of its business provided that, in each case, the
terms of the transaction are terms which then would prevail in
the market for similar transactions between unaffiliated parties
dealing at arm's length;
(vi) Sales or other dispositions of assets and property by
Lessee to any of Lessee's Subsidiaries or by any of Lessee's
Subsidiaries to Lessee or any of its other Subsidiaries, provided
that the terms of any such sales or other dispositions by or to
Lessee are terms which are no less favorable to Lessee then would
prevail in the market for similar transactions between
unaffiliated parties dealing at arm's length;
(vii) Sales of accounts receivable of Lessee and its
Subsidiaries, provided that (A) each such sale is (1) for not
less than fair market value and (2) for cash, and (B) the
aggregate book value of all such accounts receivable so sold in
any consecutive four-quarter period does not exceed ten percent
(10%) of the consolidated total accounts receivable of Lessee and
its Subsidiaries on the last day immediately preceding such
four-quarter period; and
<PAGE> 40
(viii) Other sales, leases, transfers and disposals of assets
and property for not less than fair market value, provided that
the aggregate book value of all such assets and property so sold,
leased, transferred or otherwise disposed of in any consecutive
four-quarter period does not exceed five percent (5%) of the
consolidated total assets of Lessee and its Subsidiaries on the
last day immediately preceding such four-quarter period.
(d) Mergers, Acquisitions, Etc. Neither Lessee nor any of its
Subsidiaries shall consolidate with or merge into any other Person or
permit any other Person to merge into it, establish any new Subsidiary,
acquire any Person as a new Subsidiary or acquire all or substantially
all of the assets of any other Person, except for the following:
(i) Any Subsidiary of Lessee may merge or consolidate with
any other Subsidiary of Lessee;
(ii) Any Subsidiary of Lessee may merge or consolidate with
Lessee, provided that Lessee is the surviving corporation; and
(iii) Lessee may merge or consolidate with any other
corporation, establish a new Subsidiary, acquire any Person as a
new Subsidiary or acquire all or substantially all of the assets
of any other Person, provided that:
(A) In the case of any merger or consolidation,
either (1) Lessee is the surviving corporation or (2) the
surviving corporation (y) is a Solvent United States
corporation with a financial condition equal to or better
than the financial condition of Lessee immediately prior
to such merger or consolidation and (z) assumes all of the
Lessee Obligations in a manner reasonably acceptable to
the Required Participants;
(B) No Default has occurred and is continuing at
the time of such merger, consolidation, establishment or
acquisition or will occur after giving effect to such
merger, consolidation or acquisition; and
(C) The aggregate cost of any such merger,
consolidation, establishment or acquisition does not
exceed the amounts permitted under Subparagraph
5.02(e)(iv).
(e) Investments. Neither Lessee nor any of its Subsidiaries shall
make any Investment except for Investments in the following:
(i) Investments of Lessee and its Subsidiaries in Cash
Equivalents;
(ii) Any transaction permitted by Subparagraph 5.02(a);
(iii) Money market mutual funds registered with the Securities
and Exchange Commission, meeting the requirements of Rule 2a-7
promulgated under the Investment Company Act of 1940;
<PAGE> 41
(iii) Investments listed in Schedule 5.02(e) existing on the
date of this Agreement; and
(iv) Other Investments, provided that the aggregate amount of
such other Investments plus the aggregate cost of all mergers and
consolidations consummated, Subsidiaries established and
Subsidiaries and assets acquired by Lessee pursuant to
Subparagraph 5.02(d) does not exceed in any fiscal year
(A)$100,000,000 for any amounts paid in cash and
(B)$500,000,000 for any amounts paid with shares of common stock
of Lessee (as determined according to the stock price of such
shares on the date of transfer) and accounted for on a pooling
basis in accordance with GAAP.
(f) Dividends, Redemptions, Etc. Neither Lessee nor any of its
Subsidiaries shallEpay any dividends or make any distributions on its
Equity Securities; purchase, redeem, retire, defease or otherwise
acquire for value any of its Equity Securities; return any capital to
any holder of its Equity Securities as such; make any distribution of
assets, Equity Securities, obligations or securities to any holder of
its Equity Securities as such; or set apart any sum for any such
purpose; except as follows:
(i) Either Lessee or any of its Subsidiaries may pay
dividends on its capital stock payable solely in such Person's
own capital stock;
(ii) Any Subsidiary of Lessee may pay dividends to Lessee;
(iii) Lessee may purchase shares of its capital stock for its
employee stock option plans, provided that (A) the aggregate
amount of such purchases does not exceed $50,000,000 in any
fiscal year and (B) no Default has occurred and is continuing at
the time of such purchase or will occur after giving effect to
such purchase; and
(iv) Lessee may purchase shares of its capital stock with the
proceeds received by it from a substantially concurrent issue of
new shares of its capital stock
(g) Change in Business. Neither Lessee nor any of its
Subsidiaries shall engage, either directly or indirectly through
Affiliates, in any material line of business other than the
semiconductor capital equipment business and other businesses incidental
or reasonably related thereto.
(h) ERISA. Neither Lessee nor any ERISA Affiliate shall (i)adopt
or institute any Employee Benefit Plan that is an employee pension
benefit plan within the meaning of Section 3(2) of ERISA, (ii)take any
action which will result in the partial or complete withdrawal, within
the meanings of sections 4203 and 4205 of ERISA, from a Multiemployer
Plan, (iii)engage or permit any Person to engage in any transaction
prohibited by section 406 of ERISA or section 4975 of the IRC involving
any Employee Benefit Plan or Multiemployer Plan which would subject
either Lessee or any ERISA Affiliate to any tax, penalty or other
liability including a liability to indemnify, (iv)incur or allow to
exist any accumulated funding deficiency (within the meaning of
<PAGE> 42
section 412 of the IRC or section 302 of ERISA), (v) fail to make full
payment when due of all amounts due as contributions to any Employee
Benefit Plan or Multiemployer Plan, (vi) fail to comply with the
requirements of section 4980B of the IRC or Part 6 of Title I(B) of
ERISA, or (vii) adopt any amendment to any Employee Benefit Plan which
would require the posting of security pursuant to section 401(a)(29) of
the IRC, where singly or cumulatively, the above would have a Material
Adverse Effect.
(i) Transactions With Affiliates. Neither Lessee nor any of its
Subsidiaries shall enter into any Contractual Obligation with any
Affiliate or engage in any other transaction with any Affiliate except
upon terms at least as favorable to Lessee or such Subsidiary as an
arms-length transaction with unaffiliated Persons.
(j) Accounting Changes. Neither Lessee nor any of its
Subsidiaries shall change (i) its fiscal year (currently January 1
through December 31) or (ii) its accounting practices except as
permitted by GAAP.
5.03. Lessee's Financial Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following financial
covenants, unless Lessor and Required Participants shall otherwise consent in
writing:
(a) Funded Indebtedness/Capital Ratio. Lessee shall not permit
its Funded Indebtedness/Capital Ratio on any day set forth below to be
greater than the ratio set forth opposite such day below:
June 30, 1997;
September 30, 1997 0.55 to 1.00;
December 31, 1997;
March 31, 1998;
June 30, 1998 0.50 to 1.00;
September 30, 1998;
December 31, 1998
March 31, 1999
June 30, 1999 0.45 to 1.00;
The last day of each
fiscal quarter thereafter 0.40 to 1.00.
(b) Quick Ratio. Lessee shall not permit its Quick Ratio to be
less than 1.50 to 1.00 on the last day of any fiscal quarter.
(c) Debt Service Coverage Ratio. Lessee shall not permit its Debt
Service Coverage Ratio for any fiscal quarter ending on any day set
forth below to be less than the ratio set forth opposite such day below:
June 30, 1997;
<PAGE> 43
September 30, 1997;
December 31, 1997;
March 31, 1998;
June 30, 1998;
September 30, 1998 2.50 to 1.00;
December 31, 1998;
March 31, 1999 3.50 to 1.00;
The last day of each
fiscal quarter thereafter 4.50 to 1.00.
(d) Tangible Net Worth. Lessee shall not permit its Tangible Net
Worth on the last day of any fiscal quarter (such date to be referred to
herein as a "determination date") which occurs after June 30, 1997 (such
date to be referred to herein as the "base date") to be less than the
sum on such determination date of the following:
(i) Ninety percent (90%) of the Tangible Net Worth of Lessee
and its Subsidiaries on the base date;
plus
(ii) Seventy-five percent (75%) of the sum of Lessee's
consolidated quarterly net income (ignoring any quarterly losses)
for each fiscal quarter after the base date through and including
the fiscal quarter ending on the determination date;
plus
(iii) One hundred percent (100%) of the Net Proceeds of all
Equity Securities issued by Lessee and its Subsidiaries (to
Persons other than Lessee or its Subsidiaries) during the period
commencing on the base date and ending on the determination date;
plus
(iv) One hundred percent (100%) of the principal amount of
all debt securities of Lessee and its Subsidiaries converted into
Equity Securities of Lessee and its Subsidiaries during the
period commencing on the base date and ending on the
determination date;
minus
(v) The lesser of (A) the sum of all non-recurring, non-cash
charges taken by Lessee and its Subsidiaries during the period
commencing on the base date and ending on the earlier of the
determination date and December 31, 1997 and (B) $40,000,000.
<PAGE> 44
5.04. Lessor's Covenants. Until the termination of this Agreement and
the satisfaction in full by Lessee of all Lessor Obligations, Lessor will
comply, and will cause compliance, with the following covenants, unless Lessee
and Required Participants shall otherwise consent in writing:
(a) Use of Proceeds. Lessor shall use the proceeds of all amounts
delivered to Lessor by Participants pursuant to Subparagraph 2.05(a)
solely to fund Advances.
(b) Lessor Liens. Lessor shall not create, incur, assume or
permit to exist any Lessor Lien and shall promptly discharge, at its
sole cost and expense, any Lessor Lien on the Property; provided,
however, that Lessor shall not be required so to discharge any such
Lessor Lien if (i) the same is being contested in good faith by
appropriate proceedings diligently prosecuted and (ii) any such contest
is completed and all Lessor Liens are discharged on or prior to the
Expiration Date.
(c) Property Disposition. Lessor shall not sell, lease, transfer
or otherwise dispose of its right, title and interest in the Property
and the Operative Documents except as provided in Subparagraph 2.11(b)
or Subparagraph 7.05(d) or after retaining the Property following the
Expiration Date.
(d) Chief Place of Business. Lessor shall not change its chief
place of business without giving Agent prompt written notice.
5.05. Participants' Covenants. Each Participant covenants that it will
not fund its portion of any Advance with the assets of any "employee benefit
plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA
or any "plan" (as defined in Section 4975(e)(1) of the IRC.
SECTION VI. LESSOR, AGENT AND THEIR RELATIONS WITH PARTICIPANTS.
6.01. Appointment of Agent. Each Participant hereby appoints and
authorizes Agent to act as its agent hereunder and under the other Operative
Documents with such powers as are expressly delegated to Agent by the terms of
this Agreement and the other Operative Documents, together with such other
powers as are reasonably incidental thereto. Lessor is not an agent for the
Participants or Agent, and neither this Agreement nor any other Operative
Document shall be construed to constitute or evidence a partnership among the
Lessor Parties or otherwise to impose upon Lessor or Agent any fiduciary duty.
6.02. Powers and Immunities. Neither Lessor nor Agent shall have any
duties or responsibilities except those expressly set forth in this Agreement or
in any other Operative Document, be a trustee for any Participant or have any
fiduciary duty to any Participant. Notwithstanding anything to the contrary
contained herein, neither Lessor nor Agent shall be required to take any action
which is contrary to this Agreement or any other Operative Document or any
applicable Governmental Rule. Neither Lessor nor Agent nor any Participant shall
be responsible to any Participant for any recitals, statements, representations
or warranties made by Lessee or any of its Subsidiaries contained in this
Agreement or in any other Operative
<PAGE> 45
Document, for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Operative Document or for any failure
by Lessee or any of its Subsidiaries to perform their respective obligations
hereunder or thereunder. Lessor and Agent may employ agents and
attorneys-in-fact and shall not be responsible to any Participant for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care. Neither Lessor nor Agent nor any of their respective
directors, officers, employees, agents or advisors shall be responsible to any
Participant for any action taken or omitted to be taken by it or them hereunder
or under any other Operative Document or in connection herewith or therewith,
except for its or their own gross negligence or willful misconduct. Except as
otherwise provided under this Agreement, Lessor and Agent shall take such action
with respect to the Operative Documents as shall be directed by the Required
Participants.
6.03. Reliance. Lessor or Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, facsimile
or telex) believed by it in good faith to be genuine and correct and to have
been signed or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants and other
experts selected by Lessor or Agent with reasonable care. As to any other
matters not expressly provided for by this Agreement, neither Lessor nor Agent
shall be required to take any action or exercise any discretion, but shall be
required to act or to refrain from acting upon instructions of the Required
Participants and shall in all cases be fully protected by the Participants in
acting, or in refraining from acting, hereunder or under any other Operative
Document in accordance with the instructions of the Required Participants, and
such instructions of the Required Participants and any action taken or failure
to act pursuant thereto shall be binding on all of the Participants.
6.04. Defaults. Neither Lessor nor Agent shall be deemed to have
knowledge or notice of the occurrence of any Default unless Lessor and Agent
have received a written notice from a Participant or Lessee, referring to this
Agreement, describing such Default and stating that such notice is a "Notice of
Default". If Lessor and Agent receive such a notice of the occurrence of a
Default, Agent shall give prompt notice thereof to the Participants. Lessor and
Agent shall take such action with respect to such Default as shall be reasonably
directed by the Required Participants; provided, however, that until Lessor and
Agent shall have received such directions, Lessor or Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interest of the
Participants.
6.05. Indemnification. Without limiting the Obligations of Lessee
hereunder, each Participant agrees to indemnify Lessor and Agent, ratably in
accordance with such Participant's Proportionate Share, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may at
any time be imposed on, incurred by or asserted against Lessor or Agent in any
way relating to or arising out of this Agreement or any documents contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby or the enforcement of any of the terms hereof or thereof; provided,
however, that no Participant shall be liable for any of the foregoing to the
extent they arise from Lessor's or Agent's gross negligence or willful
misconduct. Lessor or Agent shall be fully justified in refusing to take or in
continuing to take any action hereunder unless it shall first be indemnified to
its satisfaction by the Participants against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The obligations of each Participant under this Paragraph 6.05 shall
survive the
<PAGE> 46
payment and performance of the Lessee Obligations, the termination
of this Agreement and any Participant ceasing to be a party to this Agreement
(with respect to events which occurred prior to the time such Participant ceased
to be a Participant hereunder).
6.06. Non-Reliance. Each Participant represents that it has,
independently and without reliance on Lessor, Agent, or any other Participant,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of the business, prospects, management, financial condition
and affairs of Lessee and the Subsidiaries and its own decision to enter into
this Agreement and agrees that it will, independently and without reliance upon
Lessor, Agent or any other Participant, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
appraisals and decisions in taking or not taking action under this Agreement or
any other Operative Document. Neither Lessor nor Agent nor any of their
respective affiliates nor any of their respective directors, officers,
employees, agents or advisors shall (a) be required to keep any Participant
informed as to the performance or observance by Lessee or any of its
Subsidiaries of the obligations under this Agreement or any other document
referred to or provided for herein or to make inquiry of, or to inspect the
properties or books of Lessee or any of its Subsidiaries; (b) have any duty or
responsibility to provide any Participant with any credit or other information
concerning Lessee or any of its Subsidiaries which may come into the possession
of Lessor or Agent, except for notices, reports and other documents and
information expressly required to be furnished to the Participants by Lessor or
Agent hereunder; or (c) be responsible to any Participant for (i) any recital,
statement, representation or warranty made by Lessee or any officer, employee or
agent of Lessee in this Agreement or in any of the other Operative Documents,
(ii) the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any Operative Document, (iii) the value or
sufficiency of the Property or the validity or perfection of any of the liens or
security interests intended to be created by the Operative Documents, or (iv)
any failure by Lessee to perform its obligations under this Agreement or any
other Operative Document.
6.07. Resignation or Removal of Agent. Agent may resign at any time by
giving thirty (30) days prior written notice thereof to Lessee and the
Participants, and Agent may be removed at any time with or without cause by the
Required Participants; provided, however, that Agent shall not resign and may
not be removed without cause prior to the Commitment Termination Date without
the consent of Lessee unless a Change of Law makes it unlawful or unreasonably
burdensome for Agent to continue to act in such capacity. Upon any such
resignation or removal, the Required Participants shall have the right to
appoint a successor Agent, which Agent, if not a Participant, shall be
reasonably acceptable to Lessee; provided, however, that Lessee shall have no
right to approve a successor Agent if a Default has occurred and is continuing.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from the duties and obligations thereafter arising
hereunder. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Section VI and any other provision of this Agreement or
any other Operative Document which by its terms survives the termination of this
Agreement shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
6.08. Authorization. Agent is hereby authorized by the Participants to
execute, deliver and perform, each of the Operative Documents to which Agent is
or is intended to be a party and
<PAGE> 47
each Participant agrees to be bound by all of the agreements of Agent contained
in the Operative Documents.
6.09. Lessor and Agent in their Individual Capacities. Lessor, Agent and
their respective affiliates may make loans to, accept deposits from and
generally engage in any kind of banking or other business with Lessee and its
Subsidiaries and affiliates as though Lessor were not Lessor hereunder and Agent
were not Agent hereunder. With respect to Advances, if any, made by Agent in its
capacity as a Participant, Agent in its capacity as a Participant shall have the
same rights and powers under this Agreement and the other Operative Documents as
any other Participant and may exercise the same as though it were not Agent, and
the terms "Participant" or "Participants" shall include Agent in its capacity as
a Participant.
SECTION VII. MISCELLANEOUS
7.01. Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lessor, Lessee, any Participant or Agent under this Agreement or the other
Operative Documents shall be in writing and faxed, mailed or delivered, if to
Lessor, Lessee or Agent, at its respective facsimile number or address set forth
below or, if to any Participant, at the address or facsimile number specified
beneath the heading "Address for Notices" under the name of such Participant in
Part B of Schedule I (or to such other facsimile number or address for any party
as indicated in any notice given by that party to the other parties). All such
notices and communications shall be effective (a) when sent by Federal Express
or other overnight service of recognized standing, on the Business Day following
the deposit with such service; (b) when mailed, first class postage prepaid and
addressed as aforesaid through the United States Postal Service, upon receipt;
(c) when delivered by hand, upon delivery; and (d) when faxed, upon confirmation
of receipt; provided, however, that any Advance Request, Notice of Rental Period
Selection, Extension Request, Notice of Term Purchase Option Exercise, Notice of
Marketing Option Exercise or Notice of Expiration Date Purchase Option Exercise
delivered to Lessor or Agent shall not be effective until received by Lessor or
Agent.
Lessee:Novellus Systems, Inc.
3970 North First Street
San Jose, CA 95134
Attn: Chief Financial Officer
Telephone: (408) 943-3460
Fax No: (408) 943-3422
Lessor:Lease Plan North America, Inc.
135 South LaSalle Street, Suite 711
Chicago, IL 60603
Attn: David M. Shipley
Telephone: (312) 904-2183
Fax No: (312) 904-6217
Agent: ABN AMRO Bank N.V.
ABN AMRO Bank North America, Inc.
<PAGE> 48
Capital Markets-Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
Telephone: (212) 314-1724
Fax: (212) 314-1709
With a copy to:
ABN AMRO Bank N.V.
ABN AMRO Bank North America, Inc.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Robin Yim
Telephone: (415) 984-3712
Fax: (415) 362-3524
Each Advance Request, Notice of Rental Period Selection, Extension Request,
Notice of Term Purchase Option Exercise, Notice of Marketing Option Exercise and
Notice of Expiration Date Purchase Option Exercise shall be given by Lessee to
Agent's office located at its address referred to above during its normal
business hours; provided, however, that any such notice received by Agent after
10:00 a.m. on any Business Day shall be deemed received by Agent on the next
Business Day. In any case where this Agreement authorizes notices, requests,
demands or other communications by Lessee to any Lessor Party to be made by
telephone or facsimile, any Lessor Party may conclusively presume that anyone
purporting to be a person designated in any incumbency certificate or other
similar document received by such Lessor Party is such a person.
7.02. Expenses. Lessee shall pay on demand, whether or not any Advance
is made hereunder, (a) all reasonable fees and expenses, including reasonable
attorneys' fees and expenses, incurred by Lessor and Agent in connection with
the preparation, negotiation, execution and delivery of, the consummation of the
transactions contemplated by and the exercise of their duties under, this
Agreement and the other Operative Documents, and the preparation, negotiation,
execution and delivery of amendments and waivers hereunder and thereunder and
(b) all reasonable fees and expenses, including reasonable attorneys' fees and
expenses, incurred by the Lessor Parties in the enforcement or attempted
enforcement of any of the Lessee Obligations or in preserving any of the Lessor
Parties' rights and remedies (including all such fees and expenses incurred in
connection with any "workout" or restructuring affecting the Operative Documents
or the Lessee Obligations or any bankruptcy or similar proceeding involving
Lessee or any of its Subsidiaries). As used herein, the term "reasonable
attorneys' fees and expenses" shall include, without limitation, allocable costs
and expenses of Agent's and Participants' in-house legal counsel and staff. The
obligations of Lessee under this Paragraph 7.02 shall survive the payment and
performance of the Lessee Obligations and the termination of this Agreement.
7.03. Indemnification. To the fullest extent permitted by law, Lessee
agrees to protect, indemnify, defend and hold harmless, on an after-tax basis,
the Lessor Parties and the other Indemnitees from and against any and all
liabilities, losses, damages or expenses of any kind or
<PAGE> 49
nature (including Indemnified Taxes) and from any suits, claims or demands
(including in respect of or for reasonable attorney's fees and other expenses)
arising on account of or in connection with any matter or thing or action or
failure to act by Indemnitees, or any of them, arising out of or relating to the
Operative Documents, any transaction contemplated thereby or the Property
(including any use by Lessee of the Property or the Advances), except to the
extent such liability arises from the willful misconduct or gross negligence of
such Indemnitee. Upon receiving knowledge of any suit, claim or demand asserted
by a third party that any Lessor Party believes is covered by this indemnity,
such Lessor Party promptly shall give Lessee notice of the matter and an
opportunity to defend it, at Lessee's sole cost and expense, with legal counsel
reasonably satisfactory to such Lessor Party. Such Lessor Parties may also
require Lessee to defend the matter. Any failure or delay of any Lessor Party to
notify Lessee of any such suit, claim or demand shall not relieve Lessee of its
obligations under this Paragraph 7.03. The obligations of Lessee under this
Paragraph 7.03 shall survive the payment and performance of the Lessee
Obligations and the termination of this Agreement.
7.04. Waivers; Amendments. Any term, covenant, agreement or condition of
this Agreement or any other Operative Document may be amended or waived if such
amendment or waiver is in writing and is signed by Lessor, Lessee and the
Required Participants; provided, however that:
(a) Any amendment, waiver or consent which (i) increases the
364-Day Commitment, Two-Year Commitment or Total Commitment, (ii)
extends the Scheduled Expiration Date, (iii) reduces the Rental Rate or
any fees or other amounts payable for the account of the Participants
hereunder, (iv) postpones any date scheduled for any payment of Base
Rent or any fees or other amounts payable for the account of the
Participants hereunder or thereunder, (v) amends this Paragraph 7.04,
(vi) amends the definition of Required Participants or (vii) releases
Lessor's interest in any substantial part of the Property, must be in
writing and signed or approved in writing by all Participants;
(b) Any amendment, waiver or consent which increases or decreases
the Proportionate Share of any Participant must be in writing and signed
by such Participant; and
(c) Any amendment, waiver or consent which affects the rights or
obligations of Agent must be in writing and signed by Agent.
No failure or delay by any Lessor Party in exercising any right hereunder shall
operate as a waiver thereof or of any other right nor shall any single or
partial exercise of any such right preclude any other further exercise thereof
or of any other right. Unless otherwise specified in such waiver or consent, a
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.
7.05. Successors and Assigns.
(a) Binding Effect. This Agreement and the other Operative
Documents shall be binding upon and inure to the benefit of Lessee,
Lessor, the Participants, Agent and their respective permitted
successors and assigns. All references in this Agreement to any Person
shall be deemed to include all successors and assigns of such Person.
<PAGE> 50
(b) Participant Assignments.
(i) Any Participant may, at any time, sell and assign to
any other Participant or any Eligible Assignee (individually, an
"Assignee Participant") all or a portion of its rights and
obligations under this Agreement and the other Operative
Documents (such a sale and assignment to be referred to herein as
an "Assignment") pursuant to an assignment agreement in the form
of Exhibit M (an "Assignment Agreement"), executed by each
Assignee Participant and such assignor Participant (an "Assignor
Participant") and delivered to Agent for its acceptance and
recording in the Register; provided, however, that:
(A) Without the written consent of Lessor, Agent
and, if no Default has occurred and is continuing, Lessee
(which consent of Lessor, Agent and Lessee shall not be
unreasonably withheld), no Participant may make any
Assignment to any Assignee Participant which is not,
immediately prior to such Assignment, a Participant
hereunder or an Affiliate thereof; or
(B) Without the written consent of Lessor, Agent
and, if no Default has occurred and is continuing, Lessee
(which consent of Lessor, Agent and Lessee shall not be
unreasonably withheld), no Participant may make any
Assignment to any Assignee Participant if, after giving
effect to such Assignment, the Commitment of such
Participant or such Assignee Participant would be less
than Ten Million Dollars ($10,000,000) (except that a
Participant may make an Assignment which reduces its
Commitment to zero without the written consent of Lessor,
Agent or Lessee); or
(C) Without the written consent of Lessor, Agent
and, if no Default has occurred and is continuing, Lessee
(which consent of Lessor, Agent and Lessee shall not be
unreasonably withheld), no Participant may make any
Assignment which does not assign and delegate an equal pro
rata interest in (1) such Participant's Outstanding
Participation Amount under each Facility, (2) such
Participant's Commitment, (3) such Participant's other
rights, duties and obligations under this Agreement and
the other Operative Documents and (4) such Participant's
rights, duties and obligations under the Related Credit
Documents.
Upon such execution, delivery, acceptance and recording of each
Assignment Agreement, from and after the Assignment Effective
Date determined pursuant to such Assignment Agreement, (y) each
Assignee Participant thereunder shall be a Participant hereunder
with a Proportionate Share as set forth on Attachment 1 to such
Assignment Agreement (under the caption "Proportionate Share
After Assignment") and shall have the rights, duties and
obligations of such a Participant under this Agreement and the
other Operative Documents, and (z) the Assignor Participant
thereunder shall be a Participant with a Proportionate Share as
set forth on Attachment 1 to such Assignment Agreement (under the
caption
<PAGE> 51
"Proportionate Share After Assignment"), or, if the
Proportionate Share of the Assignor Participant has been reduced
to 0%, the Assignor Participant shall cease to be a Participant
and to have any obligation to fund any portion of any Advance;
provided, however, that any such Assignor Participant which
ceases to be a Participant shall continue to be entitled to the
benefits of any provision of this Agreement which by its terms
survives the termination of this Agreement. Each Assignment
Agreement shall be deemed to amend Schedule I to the extent, and
only to the extent, necessary to reflect the addition of each
Assignee Participant, the deletion of each Assignor Participant
which reduces its Proportionate Share to 0% and the resulting
adjustment of Proportionate Shares arising from the purchase by
each Assignee Participant of all or a portion of the rights and
obligations of an Assignor Participant under this Agreement and
the other Operative Documents. Each Assignee Participant which
was not previously a Participant hereunder and which is not
incorporated under the laws of the United States of America or a
state thereof shall, within three (3) Business Days of becoming
a Participant, deliver to Lessee and Agent two duly completed
copies of United States Internal Revenue Service Form 1001 or
4224 (or successor applicable form), as the case may be,
certifying in each case that such Participant is entitled to
receive payments under this Agreement without deduction or
withholding of any United States federal income taxes. (Without
limiting the generality of any of the preceding provisions of
this clause (i) of Subparagraph 7.05(b), no Participant may, if
Lessee shall object in writing, make any Assignment to any
Assignee Participant that, at the time of such Assignment, (1)
has a basis for demanding any payment under Subparagraph 2.12(c)
or Subparagraph 2.12(d) in excess of the pro rata amount that
then could be demanded thereunder by the Participant proposing
to make such Assignment or (2) would require Borrower to make
any payment under Subparagraph 2.13(a) on account of payments to
such Assignee Participant in excess of the pro rata amount that
Lessee was then required to make thereunder on account of
payments to the Participant proposing to make such Assignment.)
(ii) Agent shall maintain at its address referred to in
Paragraph 7.01 a copy of each Assignment Agreement delivered to
it and a register (the "Register") for the recordation of the
names and addresses of the Participants and the Proportionate
Share of each Participant from time to time. The entries in the
Register shall be conclusive in the absence of manifest error,
and Lessee, Agent and the Participants may treat each Person
whose name is recorded in the Register as the owner of the
interests recorded therein for all purposes of this Agreement.
The Register shall be available for inspection by Lessee or any
Participant at any reasonable time and from time to time upon
reasonable prior notice.
(iii) Upon its receipt of an Assignment Agreement executed by
an Assignor Participant and an Assignee Participant (and, to the
extent required by clause (i) of this Subparagraph 7.05(b), by
Lessor, Agent and Lessee), together with payment to Agent by
Assignor Participant of a registration and processing fee of
$2,500, Agent shall (A) promptly accept such Assignment Agreement
and (B) on the Assignment Effective Date determined pursuant
thereto record the information contained therein in the Register
and give notice of such acceptance
<PAGE> 52
and recordation to Lessor, the Participants and Lessee. Agent
may, from time to time at its election, prepare and deliver to
Lessor, the Participants and Lessee a revised ScheduleEI
reflecting the names, addresses and respective Proportionate
Shares of all Participants then parties hereto.
(iv) Subject to Subparagraph 7.13(g), the Lessor Parties may
disclose the Operative Documents and any financial or other
information relating to Lessee or any Subsidiary to each other or
to any potential Assignee Participant.
(c) Participant Subparticipations. Any Participant may at any
time sell to one or more banks or other financial institutions
("Subparticipants") subparticipation interests in the rights and
interests of such Participant under this Agreement and the other
Operative Documents. In the event of any such sale by a Participant of
subparticipation interests, such Participant's obligations under this
Agreement and the other Operative Documents shall remain unchanged, such
Participant shall remain solely responsible for the performance thereof
and Lessee and the other Lessor Parties shall continue to deal solely
and directly with such Participant in connection with such Participant's
rights and obligations under this Agreement. Any agreement pursuant to
which any such sale is effected may require the selling Participant to
obtain the consent of the Subparticipant in order for such Participant
to agree in writing to any amendment, waiver or consent of a type
specified in clause (i), (ii), (iii) or (iv) of Subparagraph 7.04(a) but
may not otherwise require the selling Participant to obtain the consent
of such Subparticipant to any other amendment, waiver or consent
hereunder. Lessee agrees that any Participant which has transferred any
subparticipation interest shall, notwithstanding any such transfer, be
entitled to the full benefits accorded such Participant under Paragraph
2.12, Paragraph 2.13, and Paragraph 2.14, as if such Participant had not
made such transfer.
(d) Lessor Assignments. Lessor may, upon one (1) month's prior
written notice to Lessee and Agent, sell and assign all of its right,
title and interest in the Property and its rights, powers, privileges,
duties and obligations under this Agreement and the other Operative
Documents, provided that:
(i) If such sale and assignment is effected after either (A)
the occurrence of a Change of Law which makes it unlawful or
unreasonably burdensome for Lessor to hold legal or beneficial
title to the Property or to perform its obligations and duties
under this Agreement and the other Operative Documents or (B) the
resignation or removal of the Agent which was the Agent at the
time Lessor became the Lessor, the purchaser/assignee (the
"successor Lessor") shall be either (1) a Participant or an
Eligible Assignee that is a multi-asset Person having substantial
assets beyond its interest in the Property and the Operative
Documents or (2) a Person approved as provided in clause (ii)
below; or
(ii) If such sale and assignment is effected in any other
circumstance, the successor Lessor shall be approved in writing
by Agent, Required Participants and, if no Default has occurred
and is continuing, Lessee (which consents of Agent, Required
Participants and Lessee shall not be unreasonably withheld),
provided that Lessee shall have no obligation to consent to any
such sale and assignment prior to the Commitment Termination
Date; and
<PAGE> 53
(iii) The successor Lessor executes such documents,
instruments and agreements as may reasonably be necessary to
evidence its agreement to assume all of the obligations and
duties of the Lessor under this Agreement and the other Operative
Documents.
Upon the consummation of any such sale and assignment, (A) the successor
Lessor shall become the "Lessor" and shall succeed to and become vested
with all the rights, powers, privileges, duties and obligations of the
Lessor under this Agreement and the other Operative Documents and (B)
the retiring Lessor shall be discharged from the duties and obligations
of the Lessor thereafter arising under this Agreement and the other
Operative Documents. After any retiring Lessor's discharge as the
Lessor, the provisions of Section VI and any other provision of this
Agreement or any other Operative Document which by its terms survives
the termination of this Agreement shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Lessor. Unless a sale and assignment by
Lessor of its right, title and interest in the Property under this
subparagraph is made by Lessor pursuant to clause (i) above, Lessor
shall pay any real property transfer taxes payable as a result of such
sale and assignment.
7.06. Setoff. In addition to any rights and remedies of the Participants
provided by law, each Participant shall have the right, with the prior written
consent of Agent, but without prior notice to or consent of Lessee, any such
notice and consent being expressly waived by Lessee to the extent permitted by
applicable law, upon the occurrence and during the continuance of an Event of
Default, to set-off and apply against the Lessee Obligations, whether matured or
unmatured, any amount owing from such Participant to Lessee, at or at any time
after, the occurrence of such Event of Default. The aforesaid right of set-off
may be exercised by such Participant against Lessee or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receiver or execution, judgment or attachment creditor of Lessee or against
anyone else claiming through or against Lessee or such trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, receiver, or
execution, judgment or attachment creditor, notwithstanding the fact that such
right of set-off shall not have been exercised by such Participant prior to the
occurrence of an Event of Default. Each Participant agrees promptly to notify
Lessee after any such set-off and application made by such Participant, provided
that the failure to give such notice shall not affect the validity of such
set-off and application.
7.07. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the parties hereto and their permitted successors and assigns
hereunder, any benefit or legal or equitable right, remedy or claim under or by
virtue of this Agreement or under or by virtue of any provision herein.
7.08. Partial Invalidity. If at any time any provision of this Agreement
or any other Operative Document is or becomes illegal, invalid or unenforceable
in any respect under the law or any jurisdiction, neither the legality, validity
or enforceability of the remaining provisions of this Agreement or the other
Operative Documents nor the legality, validity or enforceability of such
provision under the law of any other jurisdiction shall in any way be affected
or impaired thereby.
<PAGE> 54
7.09. JURY TRIAL. EACH OF LESSEE AND THE LESSOR PARTIES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY AS TO ANY ISSUE RELATING TO THE OPERATIVE DOCUMENTS IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OPERATIVE
DOCUMENT.
7.10. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
7.11. No Joint Venture, Etc. Neither this Agreement nor any other
Operative Document nor any transaction contemplated hereby or thereby shall be
construed to (a) constitute a partnership or joint venture between Lessee and
any Lessor Party or (b) impose upon any Lessor Party any agency relationship
with or fiduciary duty to Lessee.
7.12. Usury Savings Clause. Nothing contained in this Agreement or any
other Operative Documents shall be deemed to require the payment of interest or
other charges by Lessee in excess of the amount the applicable Lessor Parties
may lawfully charge under applicable usury laws. In the event any Lessor Party
shall collect monies which are deemed to constitute interest which would
increase the effective interest rate to a rate in excess of that permitted to be
charged by applicable law, all such sums deemed to constitute excess interest
shall, upon such determination, at the option of Lessor, be returned to Lessee
or credited against other Lessee Obligations.
7.13. Confidentiality. No Lessor Party shall disclose to any Person any
information with respect to Lessee or any of its Subsidiaries which is furnished
pursuant to this Agreement or under the other Operative Documents, except that
any Lessor Party may disclose any such information (a) to its own directors,
officers, employees, auditors, counsel and other advisors and to its Affiliates;
(b) to any other Lessor Party; (c) which is otherwise available to the public;
(d) if required or appropriate in any report, statement or testimony submitted
to any Governmental Authority having or claiming to have jurisdiction over such
Lessor Party; (e) if required or appropriate in response to any summons or
subpoena or in connection with any litigation; (f) to comply with any
Requirement of Law applicable to such Lessor Party; (g) to any Assignee
Participant or Subparticipant or any prospective Assignee Participant or
Subparticipant, provided that such Assignee Participant or Subparticipant or
prospective Assignee Participant or Subparticipant agrees to be bound by this
Paragraph 7.13; or (h) otherwise with the prior consent of Lessee; provided,
however, that any disclosure made in violation of this Agreement shall not
affect the obligations of Lessee and its Subsidiaries under this Agreement and
the other Operative Documents.
[The first signature page follows.]
<PAGE> 55
IN WITNESS WHEREOF, Lessee, Lessor, the Participants and Agent have
caused this Agreement to be executed as of the day and year first above written.
LESSEE: NOVELLUS SYSTEMS, INC.
By:___________________________
Name:______________________
Title:_____________________
LESSOR: LEASE PLAN NORTH AMERICA, INC.
By:___________________________
Name:______________________
Title:_____________________
AGENT: ABN AMRO BANK N.V.
By:___________________________
Name:______________________
Title:_____________________
By:___________________________
Name:______________________
Title:_____________________
PARTICIPANTS: ABN AMRO BANK N.V.
By:___________________________
Name:______________________
Title:_____________________
By:___________________________
Name:______________________
Title:_____________________
<PAGE> 1
EXHIBIT 10.1.1
ABN AMRO Bank N.V.
as Agent for the Lenders and the Participants
June 20, 1997
Page 1
[NOVELLUS LETTERHEAD]
June 20, 1997
ABN AMRO Bank N.V.,
as Agent for the Lenders and the Participants
101 California Street, Suite 4550
San Francisco, CA 94111-5813
Attn: Robin Yim
Reference is made to the following:
(1) The Credit Agreement dated as of June 9, 1997 (the "Credit
Agreement") among Novellus Systems, Inc, ("Novellus"), ABN AMRO Bank
N.V. ("ABN AMRO") and ABN AMRO Bank N.V., as agent for each "Lender"
under the Credit Agreement (in such capacity, the "Credit Agreement
Agent"); and
(2) The Participation Agreement dated as of June 9, 1997 (the
"Participation Agreement") among Novellus Systems, Inc, ("Novellus"),
Lease Plan North America, Inc.("Lease Plan"), ABN AMRO and ABN AMRO Bank
N.V., as agent for each "Participant" under the Participation Agreement
(in such capacity, the "Participation Agent") (the Credit Agreement
Agent and the Participation Agent, collectively referred to as "Agent").
Novellus is hereby providing written notice to Agent that Novellus has
received written notice from Varian Associates, Inc. ("Varian") that Applied
Materials, Inc. ("Applied") filed a complaint (the "Complaint") captioned
Applied Materials, Inc. v. Varian Associates, Inc., Case No. C-97 20523 RMW, on
June 13, 1997 in the U.S. District Court for the Northern District of
California, San Jose Division (the "Action"). In addition to the Complaint,
Applied has also threatened to file suit against Varian as to certain other
claims set forth in a letter, dated June 6, 1997 from Applied to Varian. The
Complaint and the threatened suit against Varian alleges the infringement of the
following specific United States Patents: (1) No. 5,496,455; (2) No. 5,171,412;
(3) No. 5,186,718; (4) No. 5,540,821; (5) No. 5,607,776; and (6) No. 5,427,666
(collectively, the "Applied Patents"). The patent infringement claimed or
threatened by Applied allegedly involves Varian technology and intellectual
property that Varian has agreed to sell and Novellus has agreed to buy pursuant
to the terms of the Asset Purchase Agreement dated as of May 7, 1997 (the
"Varian Purchase Agreement"). Upon consummation of the transactions set forth in
the Varian Purchase Agreement, Applied may bring suit against Novellus (or join
Novellus in the Action) based on some or all of the same facts and circumstances
concerning the Applied Patents. Applied's threatened and current claims against
Varian, Novellus or their respective affiliates or subsidiaries, as they relate
to the Applied Patents shall be referred to collectively as the "Applied
Dispute."
<PAGE> 2
ABN AMRO Bank N.V.
as Agent for the Lenders and the Participants
June 20, 1997
Page 2
Novellus and Varian have entered into a First Amendment to Asset
Purchase Agreement dated as of June 20, 1997 (the "First Amendment"), a
Litigation Expense and Indemnification Agreement dated as of June 20, 1997 (the
"Litigation Indemnification"), and a Joint Defense Agreement dated as of June
10, 1997 ("Joint Defense Agreement") to address the parties obligations and the
allocation of costs regarding the Applied Dispute. Novellus represents and
warrants that true, correct and fully signed copies of the Varian Purchase
Agreement, the First Amendment, the Litigation Indemnification, and the Joint
Defense Agreement are attached to this letter.
The Credit Agreement and the Participation Agreement each require, as a
condition precedent to ABN AMRO's obligation to advance any funds under the
respective agreement, that all of the representations and warranties set forth
in Section 4.01 of the Credit Agreement and Section 4.01 of the Participation
Agreement, as applicable, shall be true and correct in all material respects.
The representations and warranties include, without limitation, statements by
Novellus as to litigation (Section 4.01(g)), patents and other rights (Section
4.01(n)), and that there not exist any event or condition which is reasonably
likely to have a Material Adverse Effect (Section 4.01(s) (as defined in the
Credit Agreement and in the Participation Agreement, as applicable).
In order to induce ABN AMRO to proceed with an advance of funds under
the Credit Agreement as requested by Novellus in its Notice of Borrowing to ABN
AMRO dated June 17, 1997 (the "Notice"), Novellus hereby represents and warrants
to Agent on behalf of itself and the Lenders and the Participants that, based on
opinion of counsel, Novellus has adequate defenses based on noninfringement
and/or invalidity, to all of the claims of the Applied Patents. Novellus further
represents and warrants that the opinion of counsel will be an adequate defense
to willful infringement for any future infringement by the Inova product line.
Agent on behalf of itself and the Lenders and the Participants hereby
acknowledges and agrees that it has received notice of the Complaint, the Action
and the Applied Dispute. Agent on behalf of itself and the Lenders and the
Participants hereby acknowledges and agrees that the Litigation Indemnification
shall be subject to the confidentiality provisions of Section 8.11 of the Credit
Agreement and Section 7.13 of the Participation Agreement.
In light of the Applied Dispute, Novellus also wishes to update certain
representations and warranties set forth in Section 4.01 of the Credit Agreement
and Section 4.01 of the Participation Agreement. Specifically, the following
representations and warranties are hereby modified to reflect, as if originally
set forth therein, the Applied Dispute as described above concerning the Applied
Patents:
Credit Agreement: Section 4.01(g) (Litigation)
Section 4.01(h) (Title;
Section 4.01(n) (Patent and
Other Rights)
Section 4.01(s) (No Material
<PAGE> 3
ABN AMRO Bank N.V.
as Agent for the Lenders and the Participants
June 20, 1997
Page 3
Section 4.01(t) (Accuracy of
Participation Agreement: Section 4.01(g) (Litigation)
Section 4.01(h) (Title;
Section 4.01(n) (Patent and
Section 4.01(s) (No Material
Section 4.01(v) (Accuracy of
Novellus acknowledges and agrees that if any of the representations or
warranties made by Novellus in this letter agreement is subsequently determined
by Agent to be false, incorrect, incomplete or misleading in any material
respect, such determination shall constitute an "Event of Default" (as defined
in the Credit Agreement and in the Participation Agreement, as applicable).
This letter agreement may be executed in any number of identical
counterparts, any set of which signed by all the parties hereto shall be deemed
to constitute a complete, executed original for all purposes.
This letter agreement shall constitute an amendment to the Credit
Agreement and the Participation Agreement only as to the specific matters set
forth herein. All references to the Credit Agreement or the Participation
Agreement, in any document, shall mean the Credit Agreement or the Participation
Agreement, as applicable, as amended hereby.
This letter agreement shall be governed by the laws of the State of
California, without reference to the conflicts of law rules thereof. This letter
agreement shall survive the execution of the Credit Agreement, Participation
Agreement and all related documents, notwithstanding any integration clause in
any such document, and shall constitute a "Credit Document" under the
<PAGE> 4
ABN AMRO Bank N.V.
as Agent for the Lenders and the Participants
June 20, 1997
Page 4
Credit Agreement and an "Operative Document" under the Participation Agreement.
Very truly yours,
Novellus Systems, Inc.
By:________________________________
Name:__________________________
Title:_________________________
ABN AMRO, in its capacity as Lender, Participant, Credit Agreement
Agent, and Participation Agent hereby agree to waive any default or Event of
Default which may have occurred under the Credit Agreement or in the
Participation Agreement only as it may relate to the Applied Dispute concerning
the Applied Patents subject to the terms and provisions set forth in this letter
agreement.
AGENT:
ABN AMRO Bank N.V.
By: ______________________
Name: ________________
Title: _______________
By: ______________________
Name: ________________
Title: _______________
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE> 5
ABN AMRO Bank N.V.
as Agent for the Lenders and the Participants
June 20, 1997
Page 5
PARTICIPANT:
ABN AMRO BANK N.V.
By: ______________________
Name: ________________
Title: _______________
By: ______________________
Name: ________________
Title: _______________
AGENT:
ABN AMRO Bank N.V.
By: ______________________
Name: ________________
Title: _______________
By: ______________________
Name: ________________
Title: _______________
LENDER:
ABN AMRO BANK N.V.
By: ______________________
Name: ________________
Title: _______________
By: ______________________
Name: ________________
Title: _______________
<PAGE> 1
EXHIBIT 10.1.2
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT (this "Amendment"),
dated as of August 28, 1997, is entered into by and among:
(1) NOVELLUS SYSTEMS, INC., a California corporation ("Lessee");
(2) LEASE PLAN NORTH AMERICA, INC., an Illinois corporation
("Lessor");
(3) Each of the financial institutions listed in Schedule I to
the Participation Agreement referred to in Recital A below
(collectively, the "Participants"); and
(4) ABN AMRO BANK, N.V., acting through its San Francisco
International Branch, as agent for the Participants (in such capacity,
"Agent").
RECITALS
A. Lessee, Lessor, the Participants and Agent are parties to a
Participation Agreement dated as of June 9, 1997, as amended by a letter
agreement dated as of June 20, 1997 (as so amended, the "Participation
Agreement").
B. Lessee has requested Lessor to acquire the Tract 7 Property under
Facility 2. Lessee also has requested Lessor, the Participants and Agent to
amend the Participation Agreement in certain respects and to waive an Event of
Default that has occurred under the Participation Agreement.
C. Lessor is willing so to acquire the Tract 7 Property under Facility 2
and Lessor, the Participants and Agent are willing so to amend the Participation
Agreement and to waive such Event of Default, in each case upon the terms and
subject to the conditions set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Lessee, the Participants and Agent hereby agree as follows:
1. DEFINITIONS, INTERPRETATION. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless otherwise
defined herein, all other capitalized terms used herein shall have the
respective meanings given to those terms in the
<PAGE> 2
Participation Agreement, as amended by this Amendment. The rules of construction
set forth in Schedule 1.02 to the Participation Agreement shall, to the extent
not inconsistent with the terms of this Amendment, apply to this Amendment and
are hereby incorporated by reference.
2. AMENDMENTS TO PARTICIPATION AGREEMENT. Subject to the satisfaction of
the conditions set forth in paragraph 5 below, the Participation Agreement is
hereby amended as follows:
(a) Subparagraph 2.03(d) is amended to read in its entirety as
follows:
(d) Capitalization of Base Rent During Commitment Period.
On each Scheduled Rent Payment Date occurring under Facility 2
during the Commitment Period, the Base Rent due under the
Facility 2 Lease Agreement on such Scheduled Rent Payment Date
and attributable to the Improvements to Tract 4 and Tract 7 shall
be capitalized by automatically treating the amount of such Base
Rent as an Improvement/Expense Advance made under Facility 2 on
such Scheduled Rent Payment Date. Agent shall notify Lessor and
each Participant of the amount of the Base Rent due on each such
Scheduled Rent Payment Date and so treated as an
Improvement/Expense Advance. Each such Improvement/Expense
Advance shall be allocated to the Improvements to Tract 4 or
Tract 7, as appropriate.
(b) Subparagraph 5.01(a) is amended by changing clause (iv)
thereof to read in its entirety as follows:
(iv) As soon as available and in no event later than fifty
(50) days after the last day of each fiscal quarter of Lessee, a
certificate of the chief financial officer of Lessee which sets
forth the calculation of the annualized Funded
Indebtedness/EBITDA Ratio for the consecutive two-quarter period
ending on such day;
(c) Subparagraph 5.03(b) is amended to read in its entirety as
follows:
(b) Quick Ratio. Lessee shall not permit its Quick Ratio
on any day set forth below to be less than the ratio set forth
opposite such day below:
June 30, 1997;
September 30, 1997;
December 31, 1997...................1.00 to 1.00;
March 31, 1998;
June 30, 1998;
September 30, 1998..................1.25 to 1.00;
The last day of each
fiscal quarter thereafter...........1.50 to 1.00.
2
<PAGE> 3
(d) Subparagraph 5.03(d) is amended by changing clause (v)
thereof to read in its entirety as follows:
(v) The lesser of (A) the sum of all non-recurring,
non-cash charges taken by Lessee and its Subsidiaries during the
period commencing on the date of this Agreement and ending on the
earlier of the determination date and December 31, 1997 and (B)
$40,000,000.
(e) Subparagraph 7.05(b) is amended by changing clauses (i)(B)
and (i)(C) thereof to read in their entirety as follows:
(B) Without the written consent of Lessor, Agent and, if
no Default has occurred and is continuing, Lessee (which consent
of Lessor, Agent and Lessee shall not be unreasonably withheld),
no Participant may make any Assignment to any Assignee
Participant unless (1) pursuant to such Assignment, such
Participant assigns and delegates to the Assignee Participant an
equal pro rata interest in (x) such Participant's Outstanding
Participation Amount under each Facility, (y) such Participant's
Commitment, and (z) such Participant's other rights, duties and
obligations under this Agreement and the other Operative
Documents and (B) simultaneously with such Assignment, such
Participant assigns and delegates to such Assignee Participant
the same pro rata interest in the "Commitment" of such
Participant under the Related Credit Documents and the other
rights, duties and obligations of such Participant under the
Related Credit Documents.
(C) Without the written consent of Lessor, Agent and, if
no Default has occurred and is continuing, Lessee (which consent
of Lessor, Agent and Lessee shall not be unreasonably withheld),
no Participant may make any Assignment to any Assignee
Participant if, after giving effect to such Assignment and the
simultaneous assignment and delegation of such Participant's
rights, duties and obligations under the Related Credit Documents
as required by clause (B) above, (1) the Commitment of such
Participant or such Assignee Participant hereunder would be less
than Five Million Dollars ($5,000,000.00) or (2) the sum of (y)
the Commitment of such Participant or such Assignee Participant
hereunder and (z) the "Commitment" of such Participant or such
Assignee Participant, as the case may be, under the Related
Credit Agreement would be less than Eight Million, Seven Hundred
Eighty-Seven Thousand, Eight Hundred Seventy-Eight Dollars and
Seventy-Nine Cents ($8,787,878.79); provided, however, that a
Participant may, without the written consent of Lessor, Lessee
and Agent, make an Assignment hereunder that reduces its
Commitment hereunder to zero if the required simultaneous
assignment and delegation under the Related Credit Documents also
reduces its "Commitment" thereunder to zero.
(f) Schedule 1.01 is amended by changing the definition of Funded
Indebtedness/EBITDA Ratio set forth therein to read in its entirety as
follows:
3
<PAGE> 4
"Funded Indebtedness/EBITDA Ratio" shall mean, with
respect to Lessee for any period, the ratio, determined on a
consolidated basis in accordance with GAAP, of:
(a) The Funded Indebtedness of Lessee and its
Subsidiaries on the last day of such period;
to
(b) The EBITDA of Lessee and its Subsidiaries for
such period.
3. WAIVER. Subject to the satisfaction of the conditions set forth in
paragraph 5 below, Lessor, the Participants and Agent hereby waive any Event of
Default arising as a result of Lessee's failure to comply with Subparagraph
5.03(b) on June 30, 1997, provided that Lessee's Quick Ratio on such day was
1.00 to 1.00 or greater.
4. REPRESENTATIONS AND WARRANTIES. Lessee hereby represents and warrants
to Agent and the Participants that the following are true and correct on the
date of this Amendment and that, after giving effect to the amendments set forth
in paragraph 2 above and the waiver set forth in paragraph 3 above, the
following will be true and correct on the Effective Date (as defined below):
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other Operative
Documents are true and correct in all material respects as if made on
such date (except for representations and warranties expressly made as
of a specified date, which shall be true as of such date);
(b) No Default has occurred and is continuing; and
(c) All of the Operative Documents are in full force and effect.
(Without limiting the scope of the term "Operative Documents," Lessee expressly
acknowledges in making the representations and warranties set forth in this
paragraph 4 that, on and after the date hereof, such term includes this
Amendment.)
5. EFFECTIVE DATE. The amendments effected by paragraph 2 above and the
waiver granted in paragraph 3 above shall become effective on August 28, 1997
(the "Effective Date"), subject to receipt by Lessor, Agent and the Participants
on or prior to the Effective Date of the following, each in form and substance
satisfactory to Agent, the Participants and their respective counsel:
(a) This Amendment duly executed by Lessor, Lessee, each
Participant and Agent;
4
<PAGE> 5
(b) All amendments to the Operative Documents and all other
instruments, agreements, certificates, opinions and other documents to
be delivered pursuant Paragraph 3.02 and Schedule 3.02 of the
Participation Agreement as conditions to the Acquisition Advance for the
Tract 7 Property;
(c) Such other evidence as Agent or any Participant may
reasonably request to establish the accuracy and completeness of the
representations and warranties and the compliance with the terms and
conditions contained in this Amendment and the other Operative
Documents.
6. EFFECT OF THIS AMENDMENT. On and after the Effective Date, each
reference in the Participation Agreement and the other Operative Documents to
the Participation Agreement shall mean the Participation Agreement as amended
hereby. Except as specifically amended above, (a) the Participation Agreement
and the other Operative Documents shall remain in full force and effect and are
hereby ratified and affirmed and (b) the execution, delivery and effectiveness
of this Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power, or remedy of the Participants or Agent, nor
constitute a waiver of any provision of the Participation Agreement or any other
Operative Document.
7. MISCELLANEOUS.
(a) Counterparts. This Amendment may be executed in any number of
identical counterparts, any set of which signed by all the parties
hereto shall be deemed to constitute a complete, executed original for
all purposes.
(b) Headings. Headings in this Amendment are for convenience of
reference only and are not part of the substance hereof.
(c) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules.
[The signature page follows.]
5
<PAGE> 6
IN WITNESS WHEREOF, Lessee, Lessor, Agent and the Participants have
caused this Amendment to be executed as of the day and year first above written.
LESSEE: NOVELLUS SYSTEMS, INC.
By:_________________________________
Name:____________________________
Title:_____________________________
LESSOR: LEASE PLAN NORTH AMERICA, INC.
By:_________________________________
Name:____________________________
Title:_____________________________
AGENT: ABN AMRO BANK, N.V.,
By:_________________________________
Name:____________________________
Title:_____________________________
By:_________________________________
Name:____________________________
Title:_____________________________
PARTICIPANT: ABN AMRO BANK, N.V.,
By:_________________________________
Name:____________________________
Title:_____________________________
By:_________________________________
Name:____________________________
Title:_____________________________
6
<PAGE> 1
EXHIBIT 10.1.3
SECOND AMENDMENT TO PARTICIPATION AGREEMENT
THIS SECOND AMENDMENT TO PARTICIPATION AGREEMENT (this "Amendment"),
dated as of September 26, 1997, is entered into by and among:
(1) NOVELLUS SYSTEMS, INC., a California corporation ("Lessee");
(2) LEASE PLAN NORTH AMERICA, INC., an Illinois corporation
("Lessor");
(3) Each of the financial institutions listed in Schedule I to
the Participation Agreement referred to in Recital A below
(collectively, the "Participants"); and
(4) ABN AMRO BANK, N.V., acting through its San Francisco
International Branch, as agent for the Participants (in such capacity,
"Agent").
RECITALS
A. Lessee, Lessor, the Participants and Agent are parties to a
Participation Agreement dated as of June 9, 1997, as amended by a letter
agreement dated as of June 20, 1997 and a First Amendment to Participation
Agreement dated as of August 28, 1997 (as so amended, the "Participation
Agreement").
B. Lessee has requested Lessor, the Participants and Agent to amend the
Participation Agreement to increase the 364-Day Commitment and the Total
Commitment and to make certain other changes.
C. Lessor, the Participants and Agent are willing so to amend the
Participation Agreement upon the terms and subject to the conditions set forth
below.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Lessee, Lessor, the Participants and Agent hereby agree as
follows:
1. DEFINITIONS, INTERPRETATION. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless otherwise
defined herein, all other capitalized terms used herein shall have the
respective meanings given to those terms in Schedule 1.01 to the Participation
Agreement, as amended by this Amendment. The rules of
<PAGE> 2
construction set forth in Schedule 1.02 to the Participation Agreement shall, to
the extent not inconsistent with the terms of this Amendment, apply to this
Amendment and are hereby incorporated by reference.
2. AMENDMENTS TO PARTICIPATION AGREEMENT. Subject to the satisfaction of
the conditions set forth in paragraph 4 below, the Participation Agreement is
hereby amended as follows:
(a) Subparagraph 2.01(b) is amended by changing the date
"June 9, 1999" appearing in clause (iv)(A) thereof to "June 7,
1998".
(b) Subparagraph 2.01(c) is amended in its entirety as
ollows:
(c) Advance Limitations. The advances made by Lessor to
purchase property under the Facilities (collectively, the
"Acquisition Advances") and the Improvement/Expense Advances made
by Lessor under Facility 2 (the Acquisition Advances and the
Improvement/Expense Advances to be referred to collectively as
the "Advances") shall be subject to the following limitations:
(i) The aggregate amount of all Acquisition
Advances made by Lessor under Facility 1 on account of all
Facility 1 Property shall not exceed the sum of all
Facility 1 Expiration Date Appraisals for such property;
(ii) The aggregate amount of all Advances made by
Lessor under Facility 2 on account of all Facility 2
Property shall not exceed the sum of all Facility 2
Expiration Date Appraisals for such property;
(iii) The aggregate amount of all Acquisition
Advances made by Lessor under Facility 1 on account of all
Facility 1 Property shall not exceed $25,000,000;
(iv) The aggregate amount of all Advances made by
Lessor under Facility 2 on account of all Facility 2
Property shall not exceed $145,000,000;
(v) The aggregate amount of all Advances made
during the period commencing on the date of this Agreement
and ending on the date 364 days thereafter (the "364-Day
Commitment Termination Date") shall not exceed One Hundred
Sixty-Five Million Dollars ($165,000,000) (the "364-Day
Commitment"); and
(vi) The aggregate amount of all Advances made
during the period commencing on the date of this Agreement
and ending on the Commitment Termination Date (such period
to be referred to as the
2
<PAGE> 3
"Commitment Period") shall not exceed One Hundred
Sixty-Five Million Dollars ($165,000,000) (the "Total
Commitment").
Of the Total Commitment, Zero Dollars ($0) (the "Two-Year
Commitment") is available after the 364-Day Commitment
Termination Date. Each Advance under Facility 2 shall consist of
a Tranche A Portion and a Tranche B Portion.
(c) Subparagraph 2.11(a) is amended by changing clause (ii)
thereof to read in its entirety as follows:
(ii) In addition to the Property Collateral for each
Facility, the Lessee Obligations under each Facility may be
secured, at Lessee's election, by a Cash Collateral Agreement in
the form of Exhibit I, duly executed by Lessee (the "Cash
Collateral Agreement") , and Cash Collateral delivered to Agent
or Participants pursuant to the Cash Collateral Agreement. If
Lessee elects to deliver any Cash Collateral pursuant to the Cash
Collateral Agreement to decrease the Applicable Margin for the
LIBOR Rental Rate under a Lease Agreement, Lessee shall deliver
to Agent, five (5) Business Days' prior to the delivery of such
Cash Collateral, notice of such election and an opinion of its
counsel in form and substance reasonably satisfactory to Lessor
regarding the Cash Collateral Agreement and such Cash Collateral
and shall deliver such Cash Collateral only on a Scheduled Rent
Payment Date under the applicable Lease Agreement. Lessee may
withdraw any Cash Collateral held pursuant to the Cash Collateral
Agreement only as provided in the Cash Collateral Agreement.
(d) Subparagraph 4.03(a) is amended by changing the word "state"
appearing in clause (i) thereof to "jurisdiction".
(e) Schedule II is amended to read in its entirety as set forth
in Attachment 1 hereto.
(f) Schedule 1.01 is amended by changing the definitions of
"Applicable Margin" and "Cash Collateral" set forth therein to read in
their entirety as follows:
"Applicable Margin" shall mean, with respect to either Facility:
(a) No Cash Collateral. During any period when Agent does
not have, in accordance with the Cash Collateral Agreement, a
first priority perfected security interest in any Cash Collateral
securing the Lessee Obligations under such Facility:
(i) The per annum margin which is determined
pursuant to the Pricing Grid and added to the LIBO Rate
with respect to the LIBOR Rental Rate under the applicable
Lease Agreement; or
3
<PAGE> 4
(ii) Zero percent (0%) per annum with respect to
the Alternate Rental Rate under the applicable Lease
Agreement;
(b) Full Cash Collateral. During any period when Agent
has, in accordance with the Cash Collateral Agreement, a first
priority perfected security interest in Cash Collateral that
secures the Lessee Obligations under such Facility and has a
value equal to or greater than the full Outstanding Lease Amount
under such Facility:
(i) Twenty-five hundredths of one percent (0.25%)
per annum with respect to the LIBOR Rental Rate under the
applicable Lease Agreement; or
(ii) Zero percent (0%) per annum with respect to
the Alternate Rental Rate under the applicable Lease
Agreement; or
(c) Partial Cash Collateral. During any period when Agent
has, in accordance with the Cash Collateral Agreement, a first
priority perfected security interest in Cash Collateral that
secures the Lessee Obligations under such Facility but has a
value less than the full Outstanding Lease Amount under such
Facility:
(i) The per annum margin equal to the sum of the
following with respect to the LIBOR Rental Rate under the
applicable Lease Agreement:
(A) The product of (1) the per annum margin
that would apply pursuant to clause (a)(i) above
times (2) a fraction, the numerator of which is the
remainder of the Outstanding Lease Amount under
such Facility minus the value of the Cash
Collateral for such Facility and the denominator of
which is the Outstanding Lease Amount under such
Facility; plus
(B) The product of (1) the per annum margin
that would apply pursuant to clause (b)(i) above
times (2) a fraction, the numerator of which is the
value of the Cash Collateral for such Facility and
the denominator of which is the Outstanding Lease
Amount under such Facility; or
(ii) Zero percent (0%) per annum with respect to
the Alternate Rental Rate under the applicable Lease
Agreement;
provided, however, that each Applicable Margin set forth in
subparagraphs (a), (b) and (c) of this definition shall be
increased by two percent (2.0%) on the date an Event of Default
occurs and shall continue at such increased rate unless and until
such Event of Default is waived in accordance with the Operative
Documents.
4
<PAGE> 5
"Cash Collateral" shall mean United States Treasury
Securities and deposit accounts held or maintained by Agent and
Participants to the extent such securities and accounts are held
and maintained in accordance with the Cash Collateral Agreement
and Lessor has a first priority perfected security interest
therein securing the Lessee Obligations under one of the
Facilities.
3. REPRESENTATIONS AND WARRANTIES. Lessee hereby represents and warrants
to Agent and the Participants that the following are true and correct on the
date of this Amendment and that, after giving effect to the amendments set forth
in paragraph 2 above, the following will be true and correct on the Effective
Date (as defined below):
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other Operative
Documents are true and correct in all material respects as if made on
such date (except for representations and warranties expressly made as
of a specified date, which shall be true as of such date);
(b) No Default has occurred and is continuing; and
(c) All of the Operative Documents are in full force and effect.
(Without limiting the scope of the term "Operative Documents," Lessee expressly
acknowledges in making the representations and warranties set forth in this
paragraph 3 that, on and after the date hereof, such term includes this
Amendment.)
4. EFFECTIVE DATE. The amendments effected by paragraph 2 above shall
become effective on September 26, 1997 (the "Effective Date"), subject to
receipt by Lessor, Agent and the Participants on or prior to the Effective Date
of the following, each in form and substance satisfactory to Agent, the
Participants and their respective counsel:
(a) This Amendment duly executed by Lessor, Lessee, each
Participant and Agent;
(b) A First Amendment to Cash Collateral Agreement in the form of
Attachment 2 hereto, dated the Effective Date and duly executed by
Lessee, Lessor and Agent;
(c) A favorable written opinion of Morrison & Foerster, counsel
to Lessee, dated the Effective Date, addressed to Lessor and Agent, for
the benefit of Agent and the Participants, and covering such legal
matters as Agent may reasonably request;
(d) An appropriately completed Assignment Agreement that provides
for (i) the assignment by ABN AMRO as the Assignor Participant to
Assignee Participants acceptable to ABN AMRO of Proportionate Shares
totaling not less than eighty-eight percent (88%) and (ii) an Assignment
Effective
5
<PAGE> 6
Date that is the same date as the Effective Date, duly executed by ABN
AMRO, each such Assignee Participant, Lessee, Lessor and Agent;
(e) An appropriately completed "Assignment Agreement" under the
Related Credit Agreement that provides for comparable assignments under
the Related Credit Agreement to the same Assignee Participants, duly
executed by the appropriate parties;
(f) Funding by each such Assignee Participant of its required pro
rata share under both the Participation Agreement and the Related Credit
Agreement on the Effective Date; and
(g) Such other evidence as Lessor, Agent or any Participant may
reasonably request to establish the accuracy and completeness of the
representations and warranties and the compliance with the terms and
conditions contained in this Amendment and the other Operative
Documents.
5. EFFECT OF THIS AMENDMENT. On and after the Effective Date, each
reference in the Participation Agreement and the other Operative Documents to
the Participation Agreement shall mean the Participation Agreement as amended
hereby. Except as specifically amended above, (a) the Participation Agreement
and the other Operative Documents shall remain in full force and effect and are
hereby ratified and affirmed and (b) the execution, delivery and effectiveness
of this Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power, or remedy of Lessor, the Participants or Agent, nor
constitute a waiver of any provision of the Participation Agreement or any other
Operative Document.
6. MISCELLANEOUS.
(a) Counterparts. This Amendment may be executed in any number of
identical counterparts, any set of which signed by all the parties
hereto shall be deemed to constitute a complete, executed original for
all purposes.
(b) Headings. Headings in this Amendment are for convenience of
reference only and are not part of the substance hereof.
(c) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules.
[The signature page follows.]
6
<PAGE> 7
IN WITNESS WHEREOF, Lessee, Lessor, Agent and the Participants have
caused this Amendment to be executed as of the day and year first above written.
LESSEE: NOVELLUS SYSTEMS, INC.
By:_________________________________
Name:____________________________
Title:_____________________________
LESSOR: LEASE PLAN NORTH AMERICA, INC.
By:_________________________________
Name:____________________________
Title:_____________________________
AGENT: ABN AMRO BANK, N.V.
By:_________________________________
Name:____________________________
Title:_____________________________
By:_________________________________
Name:____________________________
Title:_____________________________
PARTICIPANT: ABN AMRO BANK, N.V.
By:_________________________________
Name:____________________________
Title:_____________________________
By:_________________________________
Name:____________________________
Title:_____________________________
7
<PAGE> 8
ATTACHMENT 1
SCHEDULE II
PRICING GRID
(For LIBOR Rental Rate under each Facility, when no Cash Collateral for such
Facility)
<TABLE>
<CAPTION>
FUNDED
INDEBTEDNESS/ PRICING APPLICABLE MARGIN
EBITDA PERIOD FOR
RATIO 1/ LEVEL LIBOR RENTAL RATE
------------ ------- -----------------
<S> <C> <C>
</=0.90 1 0.550%
>0.90,
<1.40 2 0.750%
>/=1.40 3 0.950%
</TABLE>
1/ For a consecutive two-quarter period, annualized.
EXPLANATION
1. During any period when Agent does not have, in accordance with the Cash
Collateral Agreement, a first priority perfected security interest in
any Cash Collateral for a Facility, the Applicable Margin with respect
to the LIBOR Rental Rate for such Facility will be set for each Pricing
Period and will vary depending upon whether such period is a Level 1
Period, a Level 2 Period, or a Level 3 Period.
2. The first Pricing Period, which commences on the date of this Agreement
and ends on March 31, 1998, will be a Level 2 Period.
3. The second pricing period, which commences on April 1, 1998 and ends on
May 31, 1998, will be a Level 1 Period, a Level 2 Period, or a Level 3
Period depending upon Lessee's annualized Funded Indebtedness/EBITDA
Ratio for the consecutive two-fiscal quarter period ending on December
31, 1997.
4. Each Pricing Period thereafter will be a Level 1 Period, a Level 2
Period, or a Level 3 Period depending upon Lessee's annualized Funded
Indebtedness/EBITDA Ratio for the most recent consecutive two-fiscal
quarter period ending prior to the first day of such Pricing Period.
5. Examples:
1-1
<PAGE> 9
(a) Lessee's annualized Funded Indebtedness/EBITDA Ratio is 1.75 for
the consecutive two-fiscal quarter period ending on December 31,
1997. The Pricing Period of April 1, 1998 - May 31, 1998 will be
a Level 3 Period.
(b) Lessee's annualized Funded Indebtedness/EBITDA Ratio is 0.75 for
the consecutive two-fiscal quarter period ending on March 31,
1998. The Pricing Period of June 1, 1998 - August 31, 1998 will
be a Level 1 Period.
1-2
<PAGE> 10
ATTACHMENT 2
FIRST AMENDMENT TO CASH COLLATERAL AGREEMENT
THIS FIRST AMENDMENT TO CASH COLLATERAL AGREEMENT (this "Amendment"),
dated as of September 26, 1997, is entered into by and among:
(1) NOVELLUS SYSTEMS, INC., a California corporation ("Lessee");
(2) LEASE PLAN NORTH AMERICA, INC., an Illinois corporation
("Lessor"); AND
(3) ABN AMRO BANK N.V., acting through its San Francisco
International Branch, as agent for the Participants under the
Participation Agreement referred to in Recital A below (in such
capacity, "Agent").
RECITALS
A. Lessee, Lessor, the Participants and Agent are parties to a
Participation Agreement dated as of June 9, 1997, as amended by a letter
agreement dated as of June 20, 1997 and a First Amendment to Participation
Agreement dated as of August 28, 1997 (as so amended, the "Participation
Agreement"). In connection with the Participation Agreement, Lessee, Lessor and
Agent executed, among other agreements, a Cash Collateral Agreement dated as of
June 9, 1997 (the "Cash Collateral Agreement.)
B. Lessee has requested Lessor, the Participants and Agent to amend the
Participation Agreement to increase the 364-Day Commitment and the Total
Commitment and to make certain other changes to the Participation Agreement and
the Cash Collateral Agreement.
C. Pursuant to a Second Amendment to Participation Agreement dated as of
September 26, 1997 (the "Second Amendment to Participation Agreement"), Lessor,
the Participants and Agent have agreed so to amend the Participation Agreement
upon the terms and subject to the conditions set forth in the Second Amendment,
including the execution and delivery by Lessee of this Amendment amending the
Cash Collateral Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Lessor, Lessee, the Participants and Agent hereby agree as
follows:
1. DEFINITIONS, INTERPRETATION. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless otherwise
defined herein, all other
2-1
<PAGE> 11
capitalized terms used herein shall have the respective meanings given to those
terms in Schedule 1.01 to the Participation Agreement, as amended by this
Amendment. The rules of construction set forth in Schedule 1.02 to the
Participation Agreement shall, to the extent not inconsistent with the terms of
this Amendment, apply to this Amendment and are hereby incorporated by
reference.
2. AMENDMENTS TO CASH COLLATERAL AGREEMENT. Subject to the satisfaction
of the conditions set forth in paragraph 4 of the Second Amendment to
Participation Agreement, the Participation Agreement is hereby amended as
follows:
(a) Paragraph 2.01 is amended to read in its entirety as follows:
2.01. Grant of Security Interest. As security for the
Lessee Obligations, Lessee hereby pledges and assigns to Lessor
(for the ratable benefit of the Lessor Parties) and grants to
Lessor (for the ratable benefit of the Lessor Parties) a security
interest in all right, title and interest of Lessee in and to the
following property, whether now owned or hereafter acquired
(collectively and severally, the "Cash Collateral"):
(a) Securities Accounts. All securities accounts
established by Lessee with any Depositary Bank or
maintained by any Depositary Bank for the account or
credit of Lessee (including without limitation all such
accounts described in each Notice of Security Interest in
the form of Exhibit B (a "Notice of Security Interest")
delivered by Lessee and Lessor to a Depositary Bank); all
securities (including United States Treasury Securities)
maintained in or credited to such accounts; all other
financial assets and property maintained in or credited to
such accounts; all documents, instruments and agreements
evidencing the foregoing; all extensions, renewals,
modifications and replacements of the foregoing; all
interest and other amounts payable in connection
therewith; and all security entitlements and other rights
of Lessee with respect to the foregoing (collectively, the
"Securities Accounts");
(b) Deposit Accounts. All deposit accounts
established by Lessee with any Depositary Bank or
maintained by any Depositary Bank for the account or
credit of Lessee (including without limitation all such
accounts described in each Notice of Security Interest
delivered by Lessee and Lessor to a Depositary Bank); all
certificates of deposit issued by any Depositary Bank for
the account or credit of Lessee (including without
limitation all such certificates of deposit described in
each Notice of Security Interest delivered by Lessee and
Lessor to a Depositary Bank); all cash and other property
maintained in or credited to such accounts and
certificates of deposit; all documents, instruments and
agreements evidencing the foregoing; all extensions,
renewals, modifications and replacements of the foregoing;
all interest and other
2-2
<PAGE> 12
amounts payable in connection therewith; and all other
rights of Lessee with respect to the foregoing
(collectively, the "Deposit Accounts");
(c) Proceeds. All proceeds of the foregoing
(including, without limitation, whatever is receivable or
received when Cash Collateral or proceeds is sold,
collected, exchanged, returned, substituted or otherwise
disposed of, whether such disposition is voluntary or
involuntary, including rights to payment and return
premiums and insurance proceeds under insurance with
respect to any Cash Collateral, and all rights to payment
with respect to any cause of action affecting or relating
to the Cash Collateral);
Provided, however, that (i) Securities Accounts and Deposit
Accounts designated in the Notice(s) of Security Interest
therefor as security for Facility 1 and all Cash Collateral
relating to such Securities Accounts and Deposit Accounts shall
secure only the Lessee Obligations under Facility 1 and (ii)
Securities Accounts and Deposit Accounts designated in the
Notice(s) of Security Interest therefor as security for Facility
2 and all Cash Collateral relating to such Securities Accounts
and Deposit Accounts shall secure only the Lessee Obligations
under Facility 2. The parties hereto do not intend for the Cash
Collateral to constitute advance payment of any of the Lessee
Obligations or liquidated damages nor do the parties intend for
the Cash Collateral to increase the Lessee Obligations. Without
limiting the generality of the foregoing, the parties acknowledge
and agree that, upon the exercise by Lessee of the Marketing
Option in accordance with the Purchase Agreements, the Lessee
Obligations thereunder shall be limited as provided therein.
(b) Paragraph 2.03 is amended to read in its entirety as follows:
2.03. Delivery and Maintenance of Cash Collateral. Lessee
shall deliver and maintain Cash Collateral with Depositary Banks
as required by Subparagraph 3.02(l) of the applicable Purchase
Agreement, as a condition to Lessee's exercise of the Marketing
Option following acceleration of the Expiration Date under a
Lease Agreement based upon a Non-Marketing Option Event of
Default thereunder, or at its election pursuant to clause (ii) of
Subparagraph 2.11(a) of the Participation Agreement, subject in
both cases to the following terms and conditions:
(a) Selection of Depositary Banks. Lessee shall
deliver all Cash Collateral to and maintain all Cash
Collateral with Agent as the Depositary Bank, except that,
at the request of any Participant, Lessee shall deliver to
and maintain with such Participant a portion of all Cash
Collateral in a principal amount which does not exceed
such Participant's Proportionate Share of all Cash
Collateral; provided, however, that, if any such
Participant fails to satisfy the requirements of a
Depositary
2-4
<PAGE> 13
Bank under Paragraph 2.02 or otherwise fails to comply
with its obligations hereunder, such Participant's
Proportionate Share of the Cash Collateral shall be
delivered to and maintained with Agent.
(b) Notice to Lessor. Lessee shall deliver to
Lessor, at least five (5) Business Days prior to Lessee's
delivery of any Cash Collateral, a written notice of its
intention to deliver such Cash Collateral, in a form
reasonably acceptable to Lessor, setting forth, among
other things, (i) the total amount of such Cash Collateral
to be delivered, (ii) the Depositary Banks to which such
Cash Collateral is to be delivered and the amount to be
delivered to each, (iii) the proposed date of delivery,
which shall be a Scheduled Rent Payment Date unless such
Cash Collateral is being delivered pursuant to
Subparagraph 3.02(l) of a Purchase Agreement, (iv) the
form in which such Cash Collateral is to be delivered, and
(v) the Facility to be secured by such Cash Collateral.
Each such notice shall be delivered as required by
Subparagraph 2.02(c) and Paragraph 7.01 of the
Participation Agreement; provided, however, that Lessee
shall promptly deliver to Lessor the original of any such
notice initially delivered by facsimile.
(c) Notice of Security Interest. No Depositary Bank
may maintain Cash Collateral unless, at or prior to the
time such Depositary Bank receives Cash Collateral:
(i) Lessee and Lessor have completed,
executed and delivered to such Depositary Bank a
Notice of Security Interest which specifically
identifies each Securities Account and Deposit
Account to be maintained by such Depositary Bank
and the Facility to be secured thereby; and
(ii) Such Depositary Bank has executed the
Acknowledgement and Agreement at the end of such
Notice of Security Interest and returned the same
to Lessor.
(d) Control of Accounts. Lessee may not withdraw
any Cash Collateral from the Depositary Banks holding the
same except as provided in Paragraph 2.04. If no Default
has occurred and is continuing, Lessee may direct each
Depositary Bank maintaining Cash Collateral to hold such
Cash Collateral in the form of United States Treasury
Securities or time deposit accounts of such Depositary
Bank and may elect the term of each such investment;
provided, however, that no term of any United States
Treasury Security or time deposit account may exceed
twelve (12) months. If a Default has occurred and is
continuing, (i) all new Cash Collateral delivered to any
Depositary Bank shall be maintained in time deposit
accounts with terms not exceeding
2-4
<PAGE> 14
one (1) week and (ii) any existing Cash Collateral
shall, at the end of the current terms of all
investments thereof, be maintained in time deposit
accounts with terms not exceeding one (1) week. If
Lessee fails to provide instructions to any Depositary
Bank hereunder for any Cash Collateral, such Cash
Collateral shall, at the end of the current terms of all
investments thereof, be maintained in time deposit
accounts with terms not exceeding one (1) week.
(e) Segregation of Cash Collateral. Each Depositary
Bank shall maintain separate Securities Accounts and
Deposit Accounts for each Facility and otherwise shall
maintain the Cash Collateral securing the Lessee
Obligations under Facility 1 separate and apart from the
Cash Collateral securing the Lessee Obligations under
Facility 2.
(c) Exhibit B is amended to read in its entirety as set forth
in Attachment 1 hereto.
3. EFFECTIVE DATE. The amendments effected by paragraph 2 above shall
become effective on the Effective Date, as defined in the Second Amendment to
the Participation Agreement.
4. EFFECT OF THIS AMENDMENT. On and after the Effective Date, each
reference in the Participation Agreement and the other Operative Documents to
the Cash Collateral Agreement shall mean the Cash Collateral Agreement as
amended hereby. Except as specifically amended above, (a) the Cash Collateral
Agreement and the other Operative Documents shall remain in full force and
effect and are hereby ratified and affirmed and (b) the execution, delivery and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power, or remedy of Lessor, the Participants
or Agent, nor constitute a waiver of any provision of the Cash Collateral
Agreement or any other Operative Document.
5. MISCELLANEOUS.
(a) Counterparts. This Amendment may be executed in any number of
identical counterparts, any set of which signed by all the parties
hereto shall be deemed to constitute a complete, executed original for
all purposes.
(b) Headings. Headings in this Amendment are for convenience of
reference only and are not part of the substance hereof.
(c) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules.
[The signature page follows.]
2-5
<PAGE> 15
IN WITNESS WHEREOF, Lessee, Lessor and Agent have caused this Amendment
to be executed as of the day and year first above written.
LESSEE: NOVELLUS SYSTEMS, INC.
By:___________________________
Name:______________________
Title:_____________________
LESSOR: LEASE PLAN NORTH AMERICA, INC.
By:___________________________
Name:______________________
Title:_____________________
AGENT: ABN AMRO BANK N.V.
By:___________________________
Name:______________________
Title:_____________________
By:___________________________
Name:______________________
Title:_____________________
2-6
<PAGE> 16
ATTACHMENT 1
EXHIBIT B
NOTICE OF SECURITY INTEREST
[Date]
[-----------, ----]
[Name of Depositary Bank]
[Address of Depositary Bank]
- -----------------------------
- -----------------------------
1. Reference is made to:
(a) The Participation Agreement, dated as of June 9, 1997 (the
"Participation Agreement"), among Novellus Systems, Inc. ("Lessee"),
Lease Plan North America, Inc. ("Lessor"), the financial institutions
listed in Schedule I to the Participation Agreement (the "Participants")
and ABN AMRO Bank N.V., as agent for the Participants (in such capacity,
"Agent"); and
(b) The Cash Collateral Agreement dated as of June 9, 1997 (the
"Cash Collateral Agreement") among Lessee, Lessor, Agent and the
financial institutions which have become parties thereto.
Unless otherwise defined herein, all capitalized terms used in this Supplement
have the respective meanings given to those terms in the Participation
Agreement.
2. Lessee has informed Lessor that Lessee has established with the
addressee of this Notice (the "Depositary Bank") the following account(s)
[describe each account separately by type (i.e., securities account, deposit
account, certificate of deposit, etc.), account office and account number] as
security for the Lessee Obligations under the Facility indicated:
<TABLE>
<CAPTION>
Account Account Facility
Type Office Account Number Secured
<S> <C> <C> <C> <C>
1. __________ ______________ _____________________ ________
2. __________ ______________ _____________________ ________
3. __________ ______________ _____________________ ________
4. __________ ______________ _____________________ ________
</TABLE>
2(1)-1
<PAGE> 17
Lessee has further informed Lessor that Lessee intends to maintain Cash
Collateral in the aggregate principal amount of [$_____________ in such Cash
Collateral Account][$_____________ in Cash Collateral Account 1 above;
$_____________ in Cash Collateral Account 2 above; $_____________ in Cash
Collateral Account 3 above; and $_____________ in Cash Collateral Account 4
above].
3. Lessee and Lessor hereby notify Depositary Bank that, pursuant to the
Cash Collateral Agreement, Lessee has granted to Lessor (for the ratable benefit
of the Lessor Parties) as security for the Lessee Obligations under the Facility
indicated for each account above, a security interest in all Cash Collateral
held or maintained by Depositary Bank, including the securities accounts,
deposit accounts and/or certificates of deposit described in paragraph 2 above.
4. In furtherance of such grant, Lessee and Lessor hereby authorize and
direct Depositary Bank to:
(a) Comply with all notifications communicated to it by Lessor
directing it to transfer or redeem any or all Cash Collateral held or
maintained by it without further consent from Lessee;
(b) Upon receipt of notice from Lessor that an Event of Default
has occurred, to transfer and deliver to Lessor or its nominee, together
with all necessary endorsements, all or such portion of the Cash
Collateral as Lessor shall direct;
(c) Hold all Cash Collateral and other Cash Collateral received
by it for Lessor and as Lessor's bailee and make a notation in its books
and records of Lessor's interest in the Cash Collateral held by such
Depositary Bank; and
(d) Prior to its receipt of any Cash Collateral to be held or
maintained by it, to take, and cause Lessee to take, all steps necessary
to perfect Lessor's security interest in such Cash Collateral, including
any such steps that may be required under any applicable laws of the
jurisdiction in which the office at which such Depositary Bank will hold
or maintain such Cash Collateral is located.
5. Lessee and Lessor agree that (a) the possession by Depositary Bank of
all money, instruments, chattel paper and other property constituting Cash
Collateral shall be deemed to be possession by Lessor or a person designated by
Lessor, for purposes of perfecting the security interest granted to Lessor under
the Cash Collateral Agreement, and (b) notifications to Depositary Bank by other
Persons holding any such property, and acknowledgements, receipts or
confirmations from such Persons delivered to Depositary Bank, shall be deemed
notifications to, or acknowledgements, receipts or confirmations from, financial
intermediaries, bailees or agents (as applicable) of the Depositary Bank for the
benefit of Lessor for the purposes of perfecting such security interests under
applicable law.
6. Please acknowledge Depositary Bank's receipt of this notice,
acknowledge that Depositary Bank will hold the Cash Collateral for Lessor,
confirm that Depositary Bank will
2(1)-2
<PAGE> 18
comply with the other authorizations and directions set forth herein and confirm
the representations and warranties set forth in the Cash Collateral Agreement by
executing the attached copy of this letter in the space provided and returning
it to Lessor. The authorizations and directions set forth herein may not be
revoked or modified without the written consent of Lessor.
NOVELLUS SYSTEMS, INC.
By: _____________________________
Name: _______________________
Title: ________________________
LEASE PLAN NORTH AMERICA, INC.
By: _____________________________
Name: _______________________
Title: ________________________
2(1)-3
<PAGE> 19
ACKNOWLEDGEMENT AND AGREEMENT
OF DEPOSITARY BANK
Depositary Bank hereby acknowledges receipt of the above notice,
acknowledges that it will hold the Cash Collateral for Lessor, agrees to comply
with the authorizations and directions set forth above and represents to Lessee,
Lessor, the Participants and Agent as follows:
(a) Each of the representations and warranties set forth in the
Supplement to Cash Collateral Agreement previously delivered by
Depositary Bank to Lessee and Lessor are true and correct on the date
hereof.
(b) The information set forth above regarding the Cash Collateral
Account(s) is accurate. Such Cash Collateral Account(s) is (are)
currently open and Depositary Bank has no prior notice of any other
security interest, Lien or interest in such Cash Collateral Account(s).
(c) All steps necessary to perfect the security interest of
Lessor in such Cash Collateral Account(s) (including any such steps that
may be required under any applicable laws of the jurisdiction in which
the office at which Depositary Bank will hold or maintain such Cash
Collateral is located) have been taken.
[--------------------------]
By: ________________________
Name: __________________
Title: ___________________
[Date]
2(1)-4
<PAGE> 1
EXHIBIT 10.2
RECORDING REQUESTED BY
AND WHEN RECORDED, RETURN TO:
Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, CA 94111
Attn: James W. Miller, Esq.
- -------------------------------------------------------------------------------
FIRST AMENDMENT TO FACILITY 2 LEASE AGREEMENT,
CONSTRUCTION DEED OF TRUST
WITH ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS FIRST AMENDMENT TO FACILITY 2 LEASE AGREEMENT, CONSTRUCTION DEED OF
TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING (this
"Amendment"), dated as of August 28, 1997, is entered into by and between:
(1) NOVELLUS SYSTEMS, INC., a California corporation ("Lessee"); and
(2) LEASE PLAN NORTH AMERICA, INC., an Illinois corporation ("Lessor").
RECITALS
A. Lessee, Lessor, each of the financial institutions listed in Schedule
I to the Participation Agreement (referred to below) (collectively, the
"Participants"), and ABN AMRO BANK, N.V., acting through its San Francisco
International Branch, as agent for the Participants (in such capacity, "Agent"),
are parties to a Participation Agreement dated as of June 9, 1997, as amended by
a letter agreement dated June 20, 1997 (as so amended, the "Participation
Agreement").
B. Lessee and Lessor are parties to that certain Facility 2 Lease
Agreement, Construction Deed of Trust with Assignment of Rents, Security
Agreement and Fixture Filing dated as of June 9, 1997, and recorded on June 10,
1997, in the Official Records of Santa Clara County, California, as Document No.
13735220 (the "Facility 2 Lease Agreement").
C. Pursuant to the terms of the Participation Agreement, Lessee has
requested that Lessor acquire that certain real property described in Exhibit A
attached hereto (the "Tract 7 Land") and made a part hereof.
D. Lessee and Lessor now desire to amend the Facility 2 Lease Agreement
to add the Tract 7 Land to the property under the Facility 2 Lease Agreement and
to make certain other changes.
<PAGE> 2
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Lessee and Lessor hereby agree as follows:
1. DEFINITIONS, INTERPRETATION. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless otherwise
defined herein, all other capitalized terms used herein shall have the
respective meanings given to those terms in Schedule 1.01 to the Participation
Agreement. The rules of construction set forth in Schedule 1.02 to the
Participation Agreement shall, to the extent not inconsistent with the terms of
this Amendment, apply to this Amendment and are hereby incorporated by
reference.
2. AMENDMENTS TO THE FACILITY 2 LEASE AGREEMENT. The Facility 2 Lease
Agreement is hereby amended as follows:
(a) Subparagraph 3.03(a) is amended by changing clause (ii)
thereof to read in its entirety as follows:
(ii) At all times during the Term, property insurance
covering loss or damage by fire, flood, earthquake and other
risks in an amount not less than the then current replacement
cost of the Improvements on the Facility 2 Property, provided
that any property insurance for fire, flood and other risks shall
not be required to cover the cost of foundations and underground
improvements but any earthquake policy or coverage shall cover
foundations and underground improvements. Earthquake insurance
shall be required only if it is commercially reasonably
available, as reasonably determined by Lessor and Required
Participants. The amount of earthquake insurance coverage shall
be the lesser of $50,000,000 or 37.5% of the value of the
Improvements. Lessee shall obtain and provide to Lessor and the
Agent evidence of such earthquake insurance within thirty (30)
days after the Closing Date.
(b) Exhibit A(1) is amended by adding thereto the property
description set forth in Exhibit A to this Amendment. Without limiting
the effect of such addition, Lessee and Lessor specifically acknowledge
and agree that, on and after the date hereof, (i) the lien of the
Facility 2 Lease Agreement includes all of Lessee's right, title and
interest in and to the Tract 7 Land and (ii) the term "Facility 2 Land"
as defined in the Facility 2 Lease Agreement includes the Tract 7 Land.
3. EFFECT OF THIS AMENDMENT. On and after the date of this Amendment,
each reference in the Facility 2 Lease Agreement and the other Operative
Documents to the Facility 2 Lease Agreement shall mean the Facility 2 Lease
Agreement as amended hereby. Except as specifically amended above, (a) the
Facility 2 Lease Agreement and the other Operative Documents shall remain in
full force and effect and are hereby ratified and affirmed and (b) the
execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power, or remedy of
Lessor, the Participants or Agent,
2
<PAGE> 3
nor constitute a waiver of any provision of the Facility 2 Lease Agreement or
any other Operative Document.
4. MISCELLANEOUS.
(a) Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument. The
signature page and acknowledgment of any counterpart may be removed
therefrom and attached to any other counterpart to evidence execution
thereof by all of the parties hereto without affecting the validity
thereof.
(b) Headings. Headings in this Amendment are for convenience of
reference only and are not part of the substance hereof.
(c) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules.
[The signature page follows.]
3
<PAGE> 4
IN WITNESS WHEREOF, Lessee and Lessor have caused this Amendment to be
executed as of the day and year first above written.
LESSEE: NOVELLUS SYSTEMS, INC.
By:_________________________________
Name:____________________________
Title:_____________________________
LESSOR: LEASE PLAN NORTH AMERICA, INC.
By:_________________________________
Name:____________________________
Title:_____________________________
4
<PAGE> 1
EXHIBIT 10.2.1
RECORDING REQUESTED BY
AND WHEN RECORDED, RETURN TO:
Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, CA 94111
Attn: James W. Miller, Esq.
- -------------------------------------------------------------------------------
SECOND AMENDMENT TO FACILITY 2 LEASE AGREEMENT,
CONSTRUCTION DEED OF TRUST
WITH ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS SECOND AMENDMENT TO FACILITY 2 LEASE AGREEMENT, CONSTRUCTION DEED
OF TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING (this
"Amendment"), dated as of September 26, 1997, is entered into by and between:
(1) NOVELLUS SYSTEMS, INC., a California corporation ("Lessee"); and
(2) LEASE PLAN NORTH AMERICA, INC., an Illinois corporation ("Lessor").
RECITALS
A. Lessee, Lessor, each of the financial institutions listed in Schedule
I to the Participation Agreement (referred to below) (collectively, the
"Participants"), and ABN AMRO BANK, N.V., acting through its San Francisco
International Branch, as agent for the Participants (in such capacity, "Agent"),
are parties to a Participation Agreement dated as of June 9, 1997, as amended by
a letter agreement dated June 20, 1997, a First Amendment to Participation
Agreement dated as of August 28, 1997, and a Second Amendment to Participation
Agreement dated as of September 26, 1997 (as so amended, the "Participation
Agreement").
B. Lessee and Lessor are parties to that certain Facility 2 Lease
Agreement, Construction Deed of Trust with Assignment of Rents, Security
Agreement and Fixture Filing dated as of June 9, 1997, and recorded on June 10,
1997, in the Official Records of Santa Clara County, California, as Document No.
13735220, as amended by that certain First Amendment to Facility 2 Lease
Agreement, Construction Deed of Trust with Assignment of Rents, Security
Agreement and Fixture Filing dated as of August 28, 1997, and recorded on August
29, 1997, in the Official Records of Santa Clara County, California, as Document
No. 13835198 (as so amended, the "Facility 2 Lease Agreement").
C. Pursuant to the terms of the Participation Agreement, Lessee has
requested that Lessor acquire those certain real properties described in Exhibit
A attached hereto (respectively, the "Tract 5 Land" and the "Tract 6 Land"), and
all Improvements thereon.
<PAGE> 2
D. Lessee and Lessor now desire to amend the Facility 2 Lease Agreement
to add the Tract 5 Land and the Improvements on the Tract 5 Land and the
Improvements on the Tract 6 Land to the property under the Facility 2 Lease
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Lessee and Lessor hereby agree as follows:
1. DEFINITIONS, INTERPRETATION. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless
otherwise defined herein, all other capitalized terms used herein shall
have the respective meanings given to those terms in Schedule 1.01 to
the Participation Agreement. The rules of construction set forth in
Schedule 1.02 to the Participation Agreement shall, to the extent not
inconsistent with the terms of this Amendment, apply to this Amendment
and are hereby incorporated by reference.
2. AMENDMENTS TO THE FACILITY 2 LEASE AGREEMENT. The Facility 2 Lease
Agreement is hereby amended as follows:
(a) Exhibit A(1) of the Facility 2 Lease Agreement is hereby
amended by adding thereto the property description of Tract 5 as set
forth in Exhibit A to this Amendment. Without limiting the effect of
such addition, Lessee and Lessor specifically acknowledge and agree
that, on and after the date hereof, (i) the lien of the Facility 2 Lease
Agreement includes all of Lessee's right, title and interest in and to
the Tract 5 Land and all the Improvements on the Tract 5 Land, and (ii)
the term "Facility 2 Land" as defined in the Facility 2 Lease Agreement
includes the Tract 5 Land.
(b) Exhibit A(2) of the Facility 2 Lease Agreement is hereby
amended by adding thereto the property description of Tract 6 as set
forth in Exhibit A to this Amendment. Without limiting the effect of
such addition, Lessee and Lessor specifically acknowledge and agree
that, on and after the date hereof, (i) the lien of the Facility 2 Lease
Agreement includes all of Lessee's right, title and interest in and to
all the Improvements on the Tract 6 Land, and (ii) the term "Facility 1
Land" as defined in the Facility 2 Lease Agreement includes the Tract 6
Land.
3. EFFECT OF THIS AMENDMENT. On and after the date of this Amendment,
each reference in the Facility 2 Lease Agreement and the other Operative
Documents to the Facility 2 Lease Agreement shall mean the Facility 2 Lease
Agreement as amended hereby. Except as specifically amended above, (a) the
Facility 2 Lease Agreement and the other Operative Documents shall remain in
full force and effect and are hereby ratified and affirmed and (b) the
execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power, or remedy of
Lessor, the Participants or Agent, nor constitute a waiver of any provision of
the Facility 2 Lease Agreement or any other Operative Document.
2
<PAGE> 3
4. MISCELLANEOUS.
(a) Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument. The
signature page and acknowledgment of any counterpart may be removed
therefrom and attached to any other counterpart to evidence execution
thereof by all of the parties hereto without affecting the validity
thereof.
(b) Headings. Headings in this Amendment are for convenience of
reference only and are not part of the substance hereof.
(c) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules.
[The signature page follows.]
3
<PAGE> 4
IN WITNESS WHEREOF, Lessee and Lessor have caused this Amendment to be
executed as of the day and year first above written.
LESSEE: NOVELLUS SYSTEMS, INC.
By:_________________________________
Name:____________________________
Title:_____________________________
LESSOR: LEASE PLAN NORTH AMERICA, INC.
By:_________________________________
Name:____________________________
Title:_____________________________
4
<PAGE> 1
EXHIBIT 10.3
RECORDING REQUESTED BY
AND WHEN RECORDED, RETURN TO:
Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, CA 94111
Attn: James W. Miller, Esq.
- ------------------------------------------------------------------------------
FIRST AMENDMENT TO FACILITY 1 LEASE AGREEMENT,
CONSTRUCTION DEED OF TRUST
WITH ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS FIRST AMENDMENT TO FACILITY 1 LEASE AGREEMENT, CONSTRUCTION DEED OF
TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING (this
"Amendment"), dated as of September 26, 1997, is entered into by and between:
(1) NOVELLUS SYSTEMS, INC., a California corporation ("Lessee"); and
(2) LEASE PLAN NORTH AMERICA, INC., an Illinois corporation ("Lessor").
RECITALS
A. Lessee, Lessor, each of the financial institutions listed in Schedule
I to the Participation Agreement (referred to below) (collectively, the
"Participants"), and ABN AMRO BANK, N.V., acting through its San Francisco
International Branch, as agent for the Participants (in such capacity, "Agent"),
are parties to a Participation Agreement dated as of June 9, 1997, as amended by
a letter agreement dated June 20, 1997, a First Amendment to Participation
Agreement dated as of August 28, 1997, and a Second Amendment to Participation
Agreement dated as of September 26, 1997 (as so amended, the "Participation
Agreement").
B. Lessee and Lessor are parties to that certain Facility 1 Lease
Agreement, Construction Deed of Trust with Assignment of Rents, Security
Agreement and Fixture Filing dated as of June 9, 1997, and recorded on June 10,
1997, in the Official Records of Santa Clara County, California, as Document No.
13735219 (the "Facility 1 Lease Agreement").
C. Pursuant to the terms of the Participation Agreement, Lessee has
requested that Lessor acquire, among other properties, that certain real
property described in Exhibit A attached hereto (the "Tract 6 Land") and made a
part hereof.
D. Lessee and Lessor now desire to amend the Facility 1 Lease Agreement
to add the Tract 6 Land to the property under the Facility 1 Lease Agreement.
<PAGE> 2
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Lessee and Lessor hereby agree as follows:
1. DEFINITIONS, INTERPRETATION. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless
otherwise defined herein, all other capitalized terms used herein shall
have the respective meanings given to those terms in Schedule 1.01 to
the Participation Agreement. The rules of construction set forth in
Schedule 1.02 to the Participation Agreement shall, to the extent not
inconsistent with the terms of this Amendment, apply to this Amendment
and are hereby incorporated by reference.
2. AMENDMENT TO THE FACILITY 1 LEASE AGREEMENT. The Facility 1 Lease
Agreement is hereby amended as follows:
Exhibit A of the Facility 1 Lease Agreement is hereby amended by
adding thereto the property description of the Tract 6 Land as set forth
in Exhibit A to this Amendment. Without limiting the effect of such
addition, Lessee and Lessor specifically acknowledge and agree that, on
and after the date hereof, (i) the lien of the Facility 1 Lease
Agreement includes all of Lessee's right, title and interest in and to
the Tract 6 Land, and (ii) the term "Facility 1 Land" as defined in the
Facility 1 Lease Agreement includes the Tract 6 Land.
3. EFFECT OF THIS AMENDMENT. On and after the date of this Amendment,
each reference in the Facility 1 Lease Agreement and the other Operative
Documents to the Facility 1 Lease Agreement shall mean the Facility 1 Lease
Agreement as amended hereby. Except as specifically amended above, (a) the
Facility 1 Lease Agreement and the other Operative Documents shall remain in
full force and effect and are hereby ratified and affirmed and (b) the
execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power, or remedy of
Lessor, the Participants or Agent, nor constitute a waiver of any provision of
the Facility 1 Lease Agreement or any other Operative Document.
4. MISCELLANEOUS.
(a) Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument. The
signature page and acknowledgment of any counterpart may be removed
therefrom and attached to any other counterpart to evidence execution
thereof by all of the parties hereto without affecting the validity
thereof.
(b) Headings. Headings in this Amendment are for convenience of
reference only and are not part of the substance hereof.
2
<PAGE> 3
(c) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules.
[The signature page follows.]
3
<PAGE> 4
IN WITNESS WHEREOF, Lessee and Lessor have caused this Amendment to be
executed as of the day and year first above written.
LESSEE: NOVELLUS SYSTEMS, INC.
By:_________________________________
Name:____________________________
Title:_____________________________
LESSOR: LEASE PLAN NORTH AMERICA, INC.
By:_________________________________
Name:____________________________
Title:_____________________________
4
<PAGE> 1
EXHIBIT 10.4
================================================================================
PARTICIPATION AGREEMENT
AMONG
NOVELLUS SYSTEMS, INC.
AND
LEASE PLAN U.S.A., INC.
AND
THE PARTICIPANTS NAMED HEREIN
AND
ABN AMRO BANK N.V.,
AS AGENT FOR THE PARTICIPANTS
OCTOBER 15, 1997
==============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. INTERPRETATION......................................................2
1.01 Definitions.........................................................2
1.02 Rules of Construction...............................................2
SECTION 2. LEASE FACILITIES....................................................2
2.01 Acquisition, Lease, Etc.............................................2
2.02 Participation Agreement.............................................3
2.03 Advance Requests....................................................4
2.04 Fees................................................................6
2.05 Funding of Advances.................................................6
2.06 Sharing of Payments.................................................7
2.07 Other Payment Terms................................................10
2.08 Commitment Reductions..............................................11
2.09 Extensions.........................................................11
2.10 Nature of the Transactions.........................................13
2.11 Security...........................................................14
2.12 Change of Circumstances............................................15
2.13 Taxes on Payments..................................................18
2.14 Funding Loss Indemnification.......................................19
2.15 Replacement of Participants........................................19
SECTION 3. CONDITIONS PRECEDENT...............................................20
3.01 Acquisition Advances...............................................20
3.02 Improvement/Expense Advances.......................................20
3.03 Other Conditions Precedent.........................................20
3.04 Covenant to Deliver................................................21
SECTION 4. REPRESENTATIONS AND WARRANTIES.....................................21
4.01 Lessee's Representations and Warranties............................21
4.02 Lessor's Representations and Warranties............................26
4.03 Participants' Representations and Warranties.......................27
SECTION 5. COVENANTS..........................................................28
5.01 Lessee's Affirmative Covenants.....................................28
5.02 Lessee's Negative Covenants........................................32
5.03 Lessee's Financial Covenants.......................................38
5.04 Lessor's Covenants.................................................40
5.05 Participants' Covenants............................................41
SECTION 6. LESSOR, AGENT AND THEIR RELATIONS WITH PARTICIPANTS................41
6.01 Appointment of Agent...............................................41
6.02 Powers and Immunities..............................................41
6.03 Reliance...........................................................41
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
6.04 Defaults...........................................................42
6.05 Indemnification....................................................42
6.06 Non-Reliance.......................................................42
6.07 Resignation or Removal of Agent....................................43
6.08 Authorization......................................................43
6.09 Lessor and Agent in their Individual Capacities....................43
SECTION 7. MISCELLANEOUS......................................................43
7.01. Notices............................................................43
7.02. Expenses...........................................................45
7.03. Indemnification....................................................45
7.04. Waivers; Amendments................................................46
7.05. Successors and Assigns.............................................46
7.06. Setoff.............................................................51
7.07. No Third Party Rights..............................................51
7.08. Partial Invalidity.................................................51
7.09. JURY TRIAL.........................................................51
7.10. Counterparts.......................................................51
7.11. No Joint Venture, Etc..............................................51
7.12. Usury Savings Clause...............................................51
7.13. Confidentiality....................................................52
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
I Participants (Preamble, 7.01, Schedule 1.01)
II Pricing Grid (Schedule 3.01)
1.01 Definitions
1.02 Rules of Construction
3.01 Initial Conditions Precedent
4.01(g) Litigation
4.01(q) Subsidiaries
4.01(t) Individual Property Representations
5.02(a) Existing Indebtedness
5.02(b) Existing Liens
5.02(e) Existing Investments
EXHIBITS
A Land (2.01(a))
B(1) Facility 1 Lease Agreement (2.01(a))
B(2) Facility 2 Lease Agreement (2.01(b))
C(1) Facility 1 Purchase Agreement (2.01(a))
C(2) Facility 2 Purchase Agreement (2.01(b))
D Facility 2 Construction Agency Agreement (2.01(b))
E Acquisition Request (2.03(a))
F Improvement/Expense Advance Request (2.03(b))
G(1) Commitment Extension Request (2.09(a))
G(2) Lease Extension Request (2.09(b))
H Assignment of Construction Agreements (2.11(a))
I Cash Collateral Agreement (2.11(a))
J Assignment of Lease (2.11(b))
K Lessor Deed of Trust (2.11(b))
L Lessor Security Agreement (2.11(b))
M Assignment Agreement (7.05(b))
</TABLE>
-iii-
<PAGE> 5
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
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<PAGE> 6
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT (this "Agreement" herein), dated as of
October 15, 1997, is entered into by and among:
(1) NOVELLUS SYSTEMS, INC., a California corporation
("Lessee");
(2) LEASE PLAN U.S.A., INC., a Georgia corporation
("Lessor");
(3) Each of the Persons from time to time listed in
Schedule 1 hereto, as amended from time to time (such Persons to be
referred to collectively as the "Participants"); and
(4) ABN AMRO BANK N.V., acting through its San Francisco
International Branch, as agent for the Participants (in such
capacity, "Agent").
RECITALS
A. Lessee has requested Lessor and the Participants to provide to
Lessee two lease facilities as follows:
(1) Pursuant to the first facility ("Facility 1"), Lessor
would (a) purchase certain land designated by Lessee, (b) lease such
land to Lessee, (c) make advances to finance certain related expenses
and (d) grant to Lessee the right to purchase such property.
(2) Pursuant to the second facility ("Facility 2"), Lessor
would (a) purchase the improvements to the Facility 1 Land and other
property designated by Lessee, (b) lease such property to Lessee, (c)
appoint Lessee as Lessor's agent to make certain improvements to such
property and certain of the Facility 1 Land, (d) make advances to
finance such improvements and to pay certain related expenses and (e)
grant to Lessee the right to purchase such property.
(3) The Participants would participate in such lease
facilities by (a) funding the purchase prices and other advances to
be made by Lessor and (b) acquiring participation interests in the
rental and certain other payments to be made by Lessee.
B. Lessor and the Participants are willing to provide such lease
facilities upon the terms and subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
<PAGE> 7
SECTION 1. INTERPRETATION.
1.01. Definitions. Unless otherwise indicated in this Agreement or
any other Operative Document, each term set forth in Schedule 1.01, when used in
this Agreement or any other Operative Document, shall have the respective
meaning given to that term in Schedule 1.01 or in the provision of this
Agreement or other document, instrument or agreement referenced in Schedule
1.01.
1.02. Rules of Construction. Unless otherwise indicated in this
Agreement or any other Operative Document, the rules of construction set forth
in Schedule 1.02 shall apply to this Agreement and the other Operative
Documents.
SECTION 2. LEASE FACILITIES.
2.01. Acquisition, Lease, Etc.
(a) Facility 1. Subject to the terms and conditions of this
Agreement (including the limitations set forth in Subparagraph
2.01(c)):
(i) Lessor shall, on the Closing Date, purchase
(with funds provided by the Participants) the Tracts of
land described in Exhibit A as the Tract 1 Land and the
Tract 2 Land (as more fully defined in Schedule 1.01, the
"Facility 1 Land"), together with any Appurtenant Rights
thereto; and
(ii) Immediately upon the purchase by Lessor of
the Facility 1 Land on the Closing Date, Lessor and Lessee
shall execute (A) a Facility 1 Lease Agreement in the form
of Exhibit B(1) (the "Facility 1 Lease Agreement"),
pursuant to which Lessor will lease to Lessee such property
and (B) a Facility 1 Purchase Agreement in the form of
Exhibit C(1) (the "Facility 1 Purchase Agreement"),
pursuant to which Lessor grants to Lessee the right to
purchase such property.
(b) Facility 2. Subject to the terms and conditions of this
Agreement (including the limitations set forth in Subparagraph
2.01(c)):
(i) Lessor shall, on the Closing Date, purchase
(with funds provided by the Participants) (A) the
Improvements to the Facility 1 Land (as more fully defined
in Schedule 1.01, the "Facility 2 Improvements"), together
with any Appurtenant Rights thereto and any other related
property;
(ii) Immediately upon the purchase by Lessor of
the Facility 2 Improvements on the Closing Date, Lessor and
Lessee shall execute (A) a Facility 2 Lease Agreement in
the form of Exhibit B(2) (the "Facility 2 Lease
Agreement"), pursuant to which Lessor will lease to Lessee
such property, (B) a Facility 2 Purchase Agreement in the
form of Exhibit C(2) (the "Facility 2 Purchase Agreement"),
pursuant to which Lessor grants to Lessee the right to
2
<PAGE> 8
purchase such property and (C) a Facility 2 Construction
Agency Agreement in the form of Exhibit D (the "Facility 2
Construction Agency Agreement"), pursuant to which Lessee
agrees to construct certain improvements to the Facility 2
Improvements; and
(iii) During the period beginning on the Closing
Date and ending on the first Business Day of the first full
calendar month immediately succeeding the earliest of (A)
September 30, 1998 (the "Outside Completion Date"), (B) the
Completion Date and (C) the date on which the Unused Total
Commitment is $0 (such first Business Day to be referred to
as the "Commitment Termination Date"), Lessor shall, at the
request of Lessee, make additional advances (with funds
provided by the Participants) to pay Permitted Improvement
Costs and Permitted Transaction Expenses under Facility 2
("Improvement/Expense Advances").
(c) Advance Limitations. The advances made by Lessor to
purchase property under the Facilities (collectively, the
"Acquisition Advances") and the Improvement/Expense Advances made by
Lessor under Facility 2 (the Acquisition Advances and the
Improvement/Expense Advances to be referred to collectively as the
"Advances") shall be made during the period commencing on the date of
this Agreement and ending on the Commitment Termination Date (such
period to be referred to as the "Commitment Period") and shall be
subject to the following limitations:
(i) The aggregate amount of all Advances made
by Lessor under Facility 1 shall not exceed $23,000,000;
(ii) The aggregate amount of all Advances made
by Lessor under Facility 2 shall not exceed $30,000,000;
and
(iii) The aggregate amount of all Advances made
by Lessor under both Facilities shall not exceed Fifty
Million Dollars ($50,000,000) (the "Total Commitment").
Each Advance shall consist of a Tranche A Portion, a Tranche B
Portion and a Tranche C Portion. For accounting purposes, the Tranche
A Portion and Tranche B Portion of each Advance shall constitute debt
and the Tranche C Portion shall constitute equity.
2.02. Participation Agreement.
(a) Advances. Each Participant severally, unconditionally
and irrevocably agrees with Lessor to participate in each Advance
made by Lessor in an amount equal to such Participant's Proportionate
Share of such Advance; provided, however, that the aggregate amount
of each Participant's Proportionate Share of all Advances shall not
exceed such Participant's Commitment. Each Participant shall fund its
Proportionate Share of each Advance as provided in Subparagraph
2.05(a). Each Participant's
3
<PAGE> 9
Proportionate Share of each Advance shall consist of such
Participant's Tranche A Portion, Tranche B Portion and Tranche C
Portion of such Advance.
(b) Payments. In consideration of each Participant's
participation in each Advance made by Lessor, such Participant shall
participate in the payments made by Lessee under this Agreement and
the other Operative Documents as provided in Paragraph 2.06.
(c) Other Rights of Participants and Agent.
(i) Until all amounts payable to Agent and
Participants under this Agreement and the other Operative
Documents are paid in full, Lessee shall deliver all
notices for Lessor under this Agreement and the other
Operative Documents to Agent at the office or facsimile
number and during the hours specified in Paragraph 7.01.
Agent shall promptly furnish to Lessor and each Participant
copies of each such notice and, in the case of each request
for an Advance, shall notify each Participant of the amount
of such Participant's Proportionate Share of the Advance
requested thereby.
(ii) Lessor is not an agent for Participants or
Agent and may exercise or refrain from exercising its
rights under this Agreement and the other Operative
Documents in its discretion; provided, however that, until
all amounts payable to Agent and Participants under this
Agreement and the other Operative Documents are paid in
full, (A) Lessor shall, subject to the limitations set
forth in Section VI, be required to act or to refrain from
acting upon instructions of the Required Participants as
provided in Paragraph 6.03 and (B) Agent may exercise any
or all of the rights and remedies of Lessor, and shall be
entitled to the other benefits afforded Lessor, under this
Agreement and the other Operative Documents.
(iii) Neither Agent nor any Participant shall
have any right, title or interest in the Property except
for the Lien therein granted to Agent, for the benefit of
the Participants, in the Lessor Deed of Trust and the
Lessor Security Agreement.
2.03. Advance Requests.
(a) Acquisition Requests. Lessee shall request Lessor to
make each purchase of property under this Agreement by delivering to
Agent an irrevocable written request in the form of Exhibit E,
appropriately completed (an "Acquisition Request"), which specifies,
among other things:
(i) The Facility under which such purchase is
to be made;
(ii) The Property to be purchased;
4
<PAGE> 10
(iii) The amount of the requested Acquisition
Advance to be made for such property, including the amount
of the Acquisition Price for such property and the
Permitted Transaction Expenses included in such Acquisition
Advance; and
(iv) The Acquisition Date for such property,
which shall be a Business Day not later than October 31,
1997. (The Facility 1 Land and Facility 2 Improvements
shall be acquired on the same Acquisition Date.)
(b) Improvement/Expense Advance Requests. Lessee shall
request Lessor to make each Improvement/Expense Advance under
Facility 2 by delivering to Lessor:
(i) An irrevocable written request in the form of
Exhibit F, appropriately completed (an "Improvement/Expense
Advance Request"), which specifies, among other things:
(A) The amount of such Advance, which
shall be an integral multiple of $10,000;
(B) The date of such Advance, which
shall be the Closing Date or the first Business
Day of a month; and
(C) The Permitted Improvement Costs
and Permitted Transaction Expenses to be paid by
such Advance; and
(ii) If the proceeds of such Advance are to be
used to purchase Related Goods:
(A) A Supplement to Exhibit B to the
Facility 2 Lease Agreement in the form of Exhibit
B(1) to the Lease Agreement (an "Exhibit B
Supplement"), which contains a detailed
description of such Related Goods; and
(B) Bills of sale for all such Related
Goods showing Lessor as the purchaser.
Lessee shall not request more than one (1) Improvement/Expense
Advance in any calendar month.
(c) Delivery of Advance Requests. Etc. Lessee shall deliver
each Acquisition Request for each Acquisition Advance to Lessor at
least one (1) Business Days before the Closing Date. Lessee shall
deliver each Improvement/Expense Advance Request to Lessor at least
three (3) Business Days before the date of such Advance. The
Acquisition Requests and Improvement/Expense Advance Requests
(collectively, "Advance Requests") shall be delivered by first-class
mail or facsimile as required by Subparagraph
5
<PAGE> 11
2.02(c) and Paragraph 7.01; provided, however, that Lessee shall
promptly deliver to Lessor the original of any Advance Request
initially delivered by facsimile.
(d) Capitalization of Base Rent During Commitment Period.
On each Scheduled Rent Payment Date occurring under Facility 2 during
the Commitment Period, the Base Rent due under the Facility 2 Lease
Agreement on such Scheduled Rent Payment Date shall be capitalized by
automatically treating the amount of such Base Rent as an
Improvement/Expense Advance made under Facility 2 on such Scheduled
Rent Payment Date. Agent shall notify Lessor and each Participant of
the amount of the Base Rent due on each such Scheduled Rent Payment
Date and so treated as an Improvement/Expense Advance. Each such
Improvement/Expense Advance shall be allocated to the Improvements to
Tract 2.
2.04. Fees.
(a) Agent's Fees. Lessee shall pay to Agent, for its own
account, agent's fees in the amounts and at the times set forth in
the Agent's Fee Letter (the "Agent's Fees").
(b) Commitment Fees. Lessee shall pay to Agent, for the
ratable benefit of the Participants as provided in clause (ii) of
Subparagraph 2.06(c), commitment fees (the "Commitment Fees") of
fifteen hundredths of one percent (0.15%) per annum on the daily
average Unused Total Commitment for the period beginning on the
Closing Date and ending on the Commitment Termination Date. Lessee
shall pay the Commitment Fees in arrears on the first Business Day in
each January, April, July and October (commencing January 1, 1998)
and on the Commitment Termination Date (or if the Total Commitment is
cancelled on a date prior to such day, on such prior date).
(c) Commitment Extension Fee. If Lessor and the
Participants consent to any extension of the Commitment Termination
Date requested by Lessee pursuant to Subparagraph 2.09(a), Lessee
shall pay to Agent, for the ratable benefit of the Participants as
provided in clause (iii) of Subparagraph 2.06(c), an extension fee
(the "Commitment Extension Fee") equal to ten hundredths of one
percent (0.10%) of the Unused Total Commitment on the date Lessee is
notified by Agent of such consent. Lessee shall pay the Commitment
Extension Fee on or prior to the Business Day immediately preceding
the original Commitment Termination Date.
2.05. Funding of Advances.
(a) Participant Funding and Disbursement. Each Participant
shall, before 11:00 a.m. on the date of each Advance, make available
to Agent at its office specified in Paragraph 7.01, in same day or
immediately available funds, such Participant's Proportionate Share
of such Advance. After Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Section III,
Agent will promptly disburse such funds on behalf of Lessor, in same
day or immediately available funds, as follows:
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<PAGE> 12
(i) Agent shall disburse each Acquisition Advance on
the Closing Date to an escrow or other account established
for payment of the applicable Acquisition Price and any
related Permitted Transaction Expenses pursuant to the
applicable Acquisition Agreement or otherwise as directed by
Lessee in the Advance Request for such Acquisition Advance
to pay such amounts.
(ii) Agent shall disburse each Improvement/Expense
Advance as directed by Lessee in the Advance Request for
such Improvement/Expense Advance.
(b) Participant Failure to Fund. Unless Agent shall have
received notice from a Participant prior to the date of any Advance
that such Participant will not make available to Agent such
Participant's Proportionate Share of such Advance, Agent may assume
that such Participant has made such portion available to Agent on the
date of such Advance in accordance with Subparagraph 2.05(a), and
Agent may, in reliance upon such assumption, disburse the full amount
of such Advance on such date; provided, however, that neither Agent
nor Lessor shall have any obligation to make an Advance requested
hereunder in an amount which exceeds the aggregate amount of funds
actually received by Agent from the Participants on account of their
respective Proportionate Shares of such Advance. If any Participant
does not make the amount of its Proportionate Share of any Advance
available to Agent on or prior to the date such Advance is made, such
Participant shall pay to Agent, on demand, interest which shall
accrue on such amount until made available to Agent at rates equal to
(i) the daily Federal Funds Rate during the period from the date of
such Advance through the third Business Day thereafter and (ii) the
Base Rate plus two percent (2.0%) thereafter. A certificate of Agent
submitted to any Participant with respect to any amounts owing under
this Subparagraph 2.05(b) shall be conclusive absent manifest error.
If any Participant's Proportionate Share of any Advance is not in
fact made available to Agent by such Participant within three (3)
Business Days after the date of such Advance, Lessee shall pay to
Agent, on demand, an amount equal to such Proportionate Share
together with interest thereon, for each day from the date such
amount was made available to Lessee until the date such amount is
repaid to Agent, at a per annum rate equal to the Base Rate plus two
percent (2.0%).
(c) Participants' Obligations Several. The failure of any
Participant to fund its Proportionate Share of any Advance shall not
relieve any other Participant of its obligation hereunder to fund its
Proportionate Share of such Advance, and no Participant shall be
responsible for the failure of any other Participant to fund its
Proportionate Share of any Advance on the date of such Advance.
2.06. Sharing of Payments.
(a) Outstanding Lease Amount. Payments applied to reduce
the Outstanding Lease Amount under each Facility shall be shared as
follows:
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(i) Each payment of the Outstanding Lease Amount under
a Facility derived from the purchase price paid by Lessee to
purchase the Property under such Facility pursuant to the
Purchase Agreement for such Facility shall be shared by the
Participants pro rata according to their respective
Outstanding Participation Amounts under such Facility at the
time of such payment.
(ii) Each payment of the Outstanding Lease Amount under
a Facility derived from:
(A) The Residual Value Guaranty Amount paid by
Lessee pursuant to the Purchase Agreement for such
Facility; or
(B) The Principal Component of Base Rent;
Shall be shared first by the Tranche A Participants pro rata
according to their respective Outstanding Tranche A
Participation Amounts at the time of such payment; second,
if any amounts remain after all Outstanding Tranche A
Participation Amounts are paid in full, by the Tranche B
Participants pro rata according to their respective
Outstanding Tranche B Participation Amounts at the time of
such payment; and third, if any amounts remain after all
Outstanding Tranche A Participation Amounts and all
Outstanding Tranche B Participation Amounts are paid in
full, by the Tranche C Participants pro rata according to
their respective Outstanding Tranche C Participation Amounts
at the time of such payment.
(iii) Each payment of the Outstanding Lease Amount
under a Facility derived from:
(A) the purchase price paid by a
Designated Purchaser to purchase the Property
under such Facility pursuant to the Purchase
Agreement for such Facility;
(B) the Indemnity Amount paid by
Lessee pursuant to the Purchase Agreement for
such Facility; or
(C) Casualty Proceeds or Condemnation
Proceeds related to any of the Property under
such Facility;
Shall be shared first by the Tranche B Participants pro
rata according to their respective Outstanding Tranche B
Participation Amounts at the time of such payment; second,
if any amounts remain after all Outstanding Tranche B
Participation Amounts are paid in full, by the Tranche C
Participants pro rata according to their respective
Outstanding Tranche C Participation Amounts at the time of
such payment; and third, if any amounts remain after all
Outstanding Tranche B Participation Amounts and all
Outstanding Tranche C Participation
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<PAGE> 14
Amounts are paid in full, by the Tranche A Participants
pro rata according to their respective Outstanding Tranche
A Participation Amounts at the time of such payment.
(iv) Each payment of the Outstanding Lease Amount
under a Facility derived from the purchase price paid by
any other Person to purchase the Property under such
Facility (whether after the retention of such Property by
Lessor following the Expiration Date of the Lease Agreement
for such Facility, upon foreclosure or otherwise) shall be
shared first by the Tranche B Participants pro rata
according to their respective Outstanding Tranche B
Participation Amounts at the time of such payment; second,
if any amounts remain after all Outstanding Tranche B
Participation Amounts are paid in full, by the Tranche A
Participants pro rata according to their respective
Outstanding Tranche A Participation Amounts at the time of
such payment; and third, if any amounts remain after all
Outstanding Tranche B Participation Amounts and all
Outstanding Tranche A Participation Amounts are paid in
full, by the Tranche C Participants pro rata according to
their respective Outstanding Tranche C Participation
Amounts at the time of such payment.
(b) Interest Component of Base Rent.
(i) Each payment applied to the Interest
Component of Base Rent under either Facility and
attributable to the Outstanding Tranche A Amount and
Outstanding Tranche B Amount under such Facility shall be
shared by the Tranche A Participants and Tranche B
Participants which funded such Outstanding Tranche A Amount
and Outstanding Tranche B Amounts pro rata according to (i)
the respective Outstanding Tranche A Participation Amounts
and Outstanding Tranche B Participation Amounts of such
Participants and (ii) the dates on which such Participants
so funded such amounts.
(ii) Each payment applied to the Interest
Component of Base Rent under either Facility and
attributable to the Outstanding Tranche C Amount under such
Facility shall be shared by the Tranche C Participants
which funded such Outstanding Tranche C Amount pro rata
according to (i) the respective Outstanding Tranche C
Participation Amounts of such Participants and (ii) the
dates on which such Participants so funded such amounts.
(c) Supplemental Rent. Each payment applied to Supplemental
Rent under either Facility shall be shared by the Lessor Parties as
follows:
(i) Each payment applied to Agent's Fees shall be
solely for the account of Agent.
(ii) Each payment applied to Commitment Fees shall
be shared by the Participants pro rata according to (A)
their respective Proportionate Shares and
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<PAGE> 15
(B) in the case of each Participant which becomes a
Participant hereunder after the date hereof, the date upon
which such Participant so became a Participant.
(iii) Each payment applied to the Commitment
Extension Fee shall be shared by the Participants pro rata
according to their respective Proportionate Shares on the
date of such payment.
(iv) Each payment applied to reimburse any Lessor
Party for any fees, costs and expenses incurred by such
Lessor Party shall be solely for the account of such Lessor
Party.
(v) Each payment of interest (other than Base Rent)
shall be shared among the Lessor Parties owed the amount
upon which such interest accrues pro rata according to (A)
the respective amounts so owed such Lessor Parties and (B)
the dates on which such amounts became owing to such Lessor
Parties.
(vi) All other payments under this Agreement and
the other Operative Documents shall be for the benefit of
the Person or Persons specified.
(d) Disproportionate Payments, Etc. If any Participant
shall obtain any payment (whether voluntary, involuntary, through the
exercise of any right of setoff, or otherwise) on account of amounts
owed to it in excess of its ratable share of payments on account of
such amounts obtained by all Participants entitled to such payments,
such Participant shall forthwith purchase from the other Participants
such participations in the payments to be made under the Operative
Documents as shall be necessary to cause such purchasing Participant
to share the excess payment ratably with each of them; provided,
however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Participant, such purchase
shall be rescinded and each other Participant shall repay to the
purchasing Participant the purchase price to the extent of such
recovery together with an amount equal to such other Participant's
ratable share (according to the proportion of (i) the amount of such
other Participant's required repayment to (ii) the total amount so
recovered from the purchasing Participant) of any interest or other
amount paid or payable by the purchasing Participant in respect of
the total amount so recovered. Lessee agrees that any Participant so
purchasing a participation from another Participant pursuant to this
Subparagraph 2.06(d) may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of setoff)
with respect to such participation as fully as if such Participant
were the direct creditor of Lessee in the amount of such
participation.
2.07. Other Payment Terms.
(a) Place and Manner of Payments by Lessee. Lessee shall
make all payments due to any Lessor Party under this Agreement and
the other Operative Documents by payments to Agent, for the account
of such Person, at Agent's office, located at the address specified
in Paragraph 7.01, with each payment due to a Participant to be for
the
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<PAGE> 16
account of such Participant's Applicable Participating Office. Lessee
shall make all payments in lawful money of the United States and in
same day or immediately available funds not later than 11:00 a.m. on
the date due. Agent shall promptly disburse to the appropriate Person
each such payment received by Agent for such Person.
(b) Date. Whenever any payment due under this Agreement or
any other Operative Document shall fall due on a day other than a
Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the
computation of Rent, interest or fees, as the case may be.
(c) Late Payments. If any amounts required to be paid by
Lessee under this Agreement or any other Operative Document
(including Rent, interest, fees or other amounts) remain unpaid after
such amounts are due, Lessee shall pay interest on the aggregate,
outstanding balance of such amounts from the date due until those
amounts are paid in full at a per annum rate equal to the Base Rate
plus two percent (2.0%), such rate to change from time to time as the
Base Rate shall change.
(d) Application of Payments. All payments under this
Agreement and the other Operative Documents on account of either
Facility shall be applied first to unpaid fees, costs and expenses
then due and payable under this Agreement or any other Operative
Document on account of such Facility, second to the accrued Interest
Component of Base Rent then due and payable under this Agreement or
any other Operative Document on account of such Facility and finally
to the Principal Component of Base Rent or otherwise to reduce the
Outstanding Lease Amount under such Facility. If any payments are not
clearly on account of either Facility, Lessor may apply such payments
to either Facility in its discretion; provided, however, that Lessee
may direct Lessor to apply such payments to the Facility designated
by Lessee if no Default has occurred and is continuing.
(e) Failure to Pay Agent. Unless Agent shall have received
notice from Lessee at least one (1) Business Day prior to the date on
which any payment is due to Lessor or the Participants under this
Agreement or the other Operative Documents that Lessee will not make
such payment in full, Agent may assume that Lessee has made such
payment in full to Agent on such date and Agent may, in reliance upon
such assumption, cause to be distributed to the appropriate Persons
on such due date an amount equal to the amount then due such Persons.
If and to the extent Lessee shall not have so made such payment in
full to Agent, each such Person shall repay to Agent forthwith on
demand such amount distributed to such Person together with interest
thereon, for each day from the date such amount is distributed to
such Person until the date such Person repays such amount to Agent,
at (i) the Federal Funds Rate for the first three (3) days and (ii)
the Base Rate plus two percent (2.0%) thereafter, such rate to change
from time to time as the Base Rate shall change. A certificate of
Agent submitted to any Person with respect to any amounts owing by
such Person under this Subparagraph 2.07(e) shall be conclusive
absent manifest error.
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2.08. Commitment Reductions.
(a) Reduction or Cancellation of Commitments. Lessee may,
at any time prior to the Commitment Termination Date, upon five (5)
Business Days written notice to Lessor, permanently reduce the Total
Commitment by the amount of Five Million Dollars ($5,000,000) or an
integral multiple of One Million Dollars ($1,000,000) in excess
thereof or cancel the Total Commitment in its entirety.
(b) Effect of Commitment Reductions. From the effective
date of any reduction of the Total Commitment, the Commitment Fees
shall be computed on the basis of the Total Commitment as so reduced.
Once reduced or cancelled, the Total Commitment may not be increased
or reinstated without the prior written consent of Lessor and all
Participants. Any reduction of the Total Commitment pursuant to this
Paragraph 2.08 shall be applied ratably to reduce each Participant's
Commitment pro rata in accordance with its Proportionate Share.
2.09. Extensions.
(a) Commitment Extension. Lessee may request Lessor to
extend the Commitment Termination Date for an additional period of
six (6) months by appropriately completing, executing and delivering
to Agent a written request in the form of Exhibit G(1) (a "Commitment
Extension Request"). Lessee shall deliver the Commitment Extension
Request to Agent not more than three (3) months and not less than two
(2) months before the original Commitment Termination Date. Agent
shall promptly deliver to Lessor and each Participant three (3)
copies of each Commitment Extension Request received by Agent. If
Lessor or a Participant, in its sole and absolute discretion,
consents to the Commitment Extension Request, such Person shall
evidence such consent by executing and returning two (2) copies of
the Commitment Extension Request to Agent not later than the last
Business Day which is not less than twelve (12) Business Days prior
to the original Commitment Termination Date. Any failure by Lessor or
any Participant so to execute and return a Commitment Extension
Request shall be deemed a denial thereof. If Lessee shall deliver a
Commitment Extension Request to Lessor pursuant to the first sentence
of this Subparagraph 2.09(a), then not later than ten (10) Business
Days prior to the original Commitment Termination Date, Agent shall
notify Lessee, Lessor and the Participants in writing whether (i)
Agent has received a copy of the Commitment Extension Request
executed by Lessor and each Participant, in which case the definition
of "Commitment Termination Date" set forth in Subparagraph 2.01(i) of
this Agreement shall be deemed extended to the date which is six (6)
months after the original Commitment Termination Date (subject to
receipt by Agent of the Commitment Extension Fee), or (ii) Agent has
not received a copy of the Commitment Extension Request executed by
Lessor and each Participant, in which case such Commitment Extension
Request shall be deemed denied. Lessee acknowledges that neither
Lessor nor any Participant has promised (either expressly or
implicitly), or has any obligation or commitment, to extend or
consent to the extension of the Commitment Termination Date at any
time.
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<PAGE> 18
(b) Lease Extension. Lessee may request Lessor to extend
the original Scheduled Expiration Date of each Lease Agreement for an
additional period of three (3) years by appropriately completing,
executing and delivering to Agent a written request in the form of
Exhibit G(2), together with an attachment thereto setting forth the
terms upon which Lessee would propose for the requested extension (a
"Lease Extension Request"). Lessee shall deliver each Lease Extension
Request to Agent not more than twelve (12) months and not less than
nine (9) months before the original Scheduled Expiration Date. Agent
shall promptly deliver to Lessor and each Participant three (3)
copies of each Lease Extension Request received by Agent. If Lessor
or a Participant, in its sole and absolute discretion, consents to a
Lease Extension Request, such Person shall evidence such consent by
executing and returning two (2) copies of such Lease Extension
Request to Agent not later than the last Business Day which is not
less than seven (7) months prior to the original Scheduled Expiration
Date for the applicable Lease Agreement. Any failure by Lessor or any
Participant so to execute and return a Lease Extension Request shall
be deemed a denial thereof. If Lessee shall deliver a Lease Extension
Request to Lessor pursuant to the first sentence of this Subparagraph
2.09(b), then not later than the last Business Day which is not less
than six (6) months prior to the original Scheduled Expiration Date
for the applicable Lease Agreement, Agent shall notify Lessee, Lessor
and the Participants in writing whether (i) Agent has received a copy
of the Lease Extension Request executed by Lessor and each
Participant, in which case the definition of "Scheduled Expiration
Date" set forth in Subparagraph 2.02(a) of the applicable Lease
Agreement shall be deemed extended to the date which is three (3)
years after the original Scheduled Expiration Date (subject to the
receipt by Agent of any amounts payable by Lessee in connection with
such extension), or (ii) Agent has not received a copy of the Lease
Extension Request executed by Lessor and each Participant, in which
case such Lease Extension Request shall be deemed denied. Lessee
acknowledges that neither Lessor nor any Participant has promised
(either expressly or implicitly), or has any obligation or
commitment, to extend or consent to the extension of the Scheduled
Expiration Date for either Lease Agreement at any time.
2.10. Nature of the Transactions. Lessee and the Lessor Parties
intend that the transactions evidenced by this Agreement and the other Operative
Documents constitute operating leases for accounting purposes and loans secured
by the Property for all other purposes, including federal, state and local
income tax purposes and commercial, real estate and bankruptcy law purposes. To
the extent that this Agreement and the other Operative Documents reflect the
lease form alone, they do so for convenience only. Lessee and the Lessor Parties
intend that the Operative Documents have the dual form referred to in the first
sentence of this paragraph, notwithstanding the use of the lease form alone.
(a) Tax Treatment. For purposes of all income, franchise
and other taxes imposed upon or measured by income, Lessee and Lessor
Parties intend that the transactions evidenced by the Operative
Documents shall be treated as loans by the Participants (through
Lessor) to Lessee secured by the Property, with Lessee as owner of
the Property. Lessee and the Lessor Parties may only take deductions,
credits, allowances
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and other reporting positions on their respective returns, reports and
statements which are consistent with such treatment, unless required
to do otherwise by an appropriate taxing authority or after a clearly
applicable change in applicable Governmental Rules; provided, however,
that if an appropriate taxing authority or a clearly applicable change
in applicable Governmental Rules requires any Lessor Party to take
such an inconsistent position, such Lessor Party shall promptly notify
Lessee.
(b) Other Legal Treatment. For purposes of commercial law,
real property law, bankruptcy law and other applicable laws, Lessee
and Lessor Parties also intend that the transactions evidenced by the
Operative Documents shall be treated as loans by the Participants
(through Lessor) to Lessee secured by the Property, with Lessee as
owner of the Property. Consistent with such treatment, Lessee and the
Lessor Parties intend that, among other things for such purposes, (i)
the Advances be treated as loans to Lessee by the Participants
(through Lessor); (ii) the Advances be secured by the Property and
the Lessor Parties have the rights and remedies of secured lenders;
(iii) Base Rent be treated as interest on the Advances; (iv) Lessee
be required to pay on the applicable Expiration Date only the
Residual Value Guaranty Amount, the Indemnity Amount and the other
amounts required by Subparagraph 4.06(b) of the applicable Purchase
Agreement (or Subparagraph 4.06(c) if Lessor is retaining the
Property) if Lessee exercises the Marketing Option in accordance with
the applicable Purchase Agreement; and (v) Lessee be required to pay
on the applicable Expiration Date the applicable Outstanding Lease
Amount and all other amounts outstanding under this Agreement and the
other Operative Documents (including amounts required by Subparagraph
4.06(a) of the applicable Purchase Agreement) if the applicable Lease
Agreement is terminated prior to its Scheduled Expiration Date after
an Event of Default occurs under such Lease Agreement or if Lessee
fails to or is otherwise not entitled to exercise the Marketing
Option in accordance with the applicable Purchase Agreement.
(c) No Reliance by Lessee. Lessee acknowledges and agrees
that no Lessor Party has made any representations or warranties to
Lessee concerning the tax, accounting or legal characteristics of the
Operative Documents and that Lessee has obtained and relied upon such
tax, accounting and legal advice concerning the Operative Documents
as it deems appropriate.
2.11. Security.
(a) Lessee Obligations.
(i) To the extent that the transaction evidenced by the
Lease Agreement, Purchase Agreement and other Operative
Documents for either Facility is treated as a loan by the
Participants (through Lessor) to Lessee secured by the
Property for such Facility, with Lessee as owner of such
Property pursuant to Paragraph 2.10, the Lessee Obligations
under such Facility shall be secured by such Property and
the other Real Property Collateral for such Facility and, in
the case of Facility 2, Personal Property Collateral for
such Facility (collectively, the
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<PAGE> 20
"Property Collateral") as provided in Subparagraphs 2.07(a)
and 2.07(b) of the applicable Lease Agreement and, in the
case of Facility 2, in an Assignment of Construction
Agreements in the form of Exhibit H, duly executed by Lessee
(the "Assignment of Construction Agreements").
(ii) In addition to the Property Collateral for each
Facility, the Lessee Obligations under each Facility may be
secured, at Lessee's election, by a Cash Collateral
Agreement in the form of Exhibit I, duly executed by Lessee
(the "Cash Collateral Agreement") , and Cash Collateral
delivered to Agent or Participants pursuant to the Cash
Collateral Agreement. If Lessee elects to deliver any Cash
Collateral pursuant to the Cash Collateral Agreement to
decrease the Applicable Margin for the LIBOR Rental Rate
under a Lease Agreement, Lessee shall deliver to Agent, five
(5) Business Days' prior to the delivery of such Cash
Collateral, notice of such election and an opinion of its
counsel in form and substance reasonably satisfactory to
Lessor regarding the Cash Collateral Agreement and such Cash
Collateral and shall deliver such Cash Collateral only on a
Scheduled Rent Payment Date under the applicable Lease
Agreement. Lessee may withdraw any Cash Collateral held
pursuant to the Cash Collateral Agreement only as provided
in the Cash Collateral Agreement.
(iii) Lessee shall deliver to Lessor and Agent such
additional mortgages, deeds of trust, security agreements,
pledge agreements, lessor consents and estoppels (containing
appropriate mortgagee and lender protection language) and
other instruments, agreements, certificates, opinions and
documents (including Uniform Commercial Code financing
statements and fixture filings and landlord waivers) as
Lessor or Agent may reasonably request to (A) grant,
perfect, maintain, protect and evidence security interests
in favor of Lessor or Agent in the Property Collateral and
Cash Collateral prior to the Liens or other interests of any
Person, except in the case of the Property Collateral for
Permitted Property Liens; and (B) otherwise establish,
maintain, protect and evidence the rights provided to Lessor
and Agent in the Property Collateral and Cash Collateral.
Lessee shall fully cooperate with Lessor and Agent and
perform all additional acts reasonably requested by Lessor
or Agent to effect the purposes of this Subparagraph
2.11(a).
(b) Lessor Obligations.
(i) The Lessor Obligations shall be secured by the
following:
(A) An Assignment of Lease Agreement and Purchase
Agreement in the form of Exhibit J, duly executed by
Lessor (the "Assignment of Lease");
(B) A Construction Deed of Trust with Assignment
of Rents, Security Agreement and Fixture Filing in the
form of Exhibit K, duly executed by Lessor (the "Lessor
Deed of Trust"); and
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<PAGE> 21
(C) A Security Agreement in the form of Exhibit L,
duly executed by Lessor (the "Lessor Security
Agreement").
(ii) Lessor shall deliver to Agent such additional
mortgages, deeds of trust, security agreements, pledge
agreements, lessor consents and estoppels (containing
appropriate mortgagee and lender protection language) and
other instruments, agreements, certificates, opinions and
documents (including Uniform Commercial Code financing
statements and fixture filings and landlord waivers) as
Agent may reasonably request to (A) grant, perfect,
maintain, protect and evidence security interests in favor
of Agent in Lessor's rights in the Property Collateral and
Cash Collateral; and (B) otherwise establish, maintain,
protect and evidence the rights provided to Agent in the
Property Collateral and Cash Collateral. Lessor shall fully
cooperate with Agent and perform all additional acts
reasonably requested by Agent to effect the purposes of this
Subparagraph 2.11(b).
(iii) Lessee hereby consents to the Assignment of
Lease, the Lessor Deed of Trust and the Lessor Security
Agreement; the Liens granted to Agent therein; and all other
Liens granted to Agent in any of the Operative Documents and
the Property to secure the Lessor Obligations.
2.12. Change of Circumstances.
(a) Inability to Determine Rates. If, on or before the
first day of any Rental Period, (i) any Participant shall advise
Agent that the LIBOR Rental Rate for such Rental Period cannot be
adequately and reasonably determined due to the unavailability of
funds in or other circumstances affecting the London interbank market
or (ii) any Participant shall advise Agent that the LIBOR Rental Rate
for such Rental Period does not adequately and fairly reflect the
cost to such Participant of funding its portion of the Outstanding
Lease Amount under the applicable Facility, Agent shall immediately
give notice of such condition to Lessee, Lessor and the other
Participants. After the giving of any such notice (and until Agent
shall otherwise notify Lessee and Lessor that the circumstances
giving rise to such condition no longer exist), the LIBOR Rental Rate
shall be unavailable and the Rental Rate for each Rental Period shall
be the Alternate Rental Rate.
(b) Illegality. If, after the date of this Agreement, the
adoption of any Governmental Rule, any change in any Governmental
Rule or the application or requirements thereof (whether such change
occurs in accordance with the terms of such Governmental Rule as
enacted, as a result of amendment or otherwise), any change in the
interpretation or administration of any Governmental Rule by any
Governmental Authority, or compliance by Lessor or any Participant
with any request or directive (whether or not having the force of
law) of any Governmental Authority (a "Change of Law") shall make it
unlawful or impossible for any Participant to fund or maintain its
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<PAGE> 22
portion of the Outstanding Lease Amount under either Facility at the
LIBOR Rental Rate, such Participant shall immediately notify Agent
and Agent shall immediately notify Lessee, Lessor and the other
Participants of such Change of Law. After the giving of any such
notice (and until Agent shall otherwise notify Lessee and Lessor that
such Change of Law is no longer in effect), the LIBOR Rental Rate
shall be unavailable and the Rental Rate under both Facilities for
each Rental Period shall be the Alternate Rental Rate.
(c) Increased Costs. If, after the date of this Agreement,
any Change of Law:
(i) Shall subject Lessor or any Participant to any tax,
duty or other charge with respect to the Outstanding Lease
Amount under either Facility, or shall change the basis of
taxation of Base Rent payments by Lessee to Lessor or any
Participant under this Agreement or any other Operative
Document (except for changes in the rate of taxation on the
overall net income of Lessor or any Participant imposed by
its jurisdiction of incorporation, the jurisdiction in which
its principal executive office is located or, in the case of
any Participant, the jurisdiction in which its Applicable
Participating Office is located); or
(ii) Shall impose, modify or hold applicable any
reserve (excluding any Reserve Requirement or other reserve
to the extent included in the calculation of the LIBOR
Rental Rate), special deposit or similar requirement against
assets held by, deposits or other liabilities in or for the
account of, advances or loans by, or any other acquisition
of funds by Lessor or any Participant for its portion of the
Outstanding Lease Amount under either Facility; or
(iii) Shall impose on Lessor or any Participant any
other condition related to the Outstanding Lease Amount
under either Facility, Base Rent under either Facility or
Lessor's or such Participant's commitments hereunder;
And the effect of any of the foregoing is to increase the cost to
Lessor or such Participant of funding or maintaining its portion of
the Outstanding Lease Amount under either Facility or commitments or
to reduce any amount receivable by Lessor or such Participant
hereunder; then Lessee shall from time to time within five (5)
Business Days after demand by Lessor or such Participant, pay to
Lessor or such Participant additional amounts sufficient to reimburse
Lessor or such Participant for such increased costs or to compensate
Lessor or such Participant for such reduced amounts. A certificate as
to the amount of such increased costs or reduced amounts, submitted
by Lessor or such Participant to Lessee shall, in the absence of
manifest error, be conclusive and binding on Lessee for all purposes.
The obligations of Lessee under this Subparagraph 2.12(c) shall
survive the payment and performance of the Lessee Obligations and the
termination of this Agreement.
(d) Capital Requirements. If, after the date of this
Agreement, Lessor or any Participant determines that (i) any Change
of Law affects the amount of capital required or expected to be
maintained by such Person or any other Person controlling such Person
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(a "Capital Adequacy Requirement") and (ii) the amount of capital
maintained by such Person or such other Person which is attributable
to or based upon the Advances, the commitments or this Agreement must
be increased as a result of such Capital Adequacy Requirement (taking
into account such Person's or such other Person's policies with
respect to capital adequacy), Lessee shall pay to such Person or such
other Person, within five (5) Business Days after demand of such
Person, such amounts as such Person or such other Person shall
determine are necessary to compensate such Person or such other
Person for the increased costs to such Person or such other Person of
such increased capital. A certificate of Lessor or any Participant
setting forth in reasonable detail the computation of any such
increased costs, delivered by such Person to Lessee shall, in the
absence of manifest error, be conclusive and binding on Lessee for
all purposes. The obligations of Lessee under this Subparagraph
2.12(d) shall survive the payment and performance of the Lessee
Obligations and the termination of this Agreement.
(e) Mitigation. If Lessor or any Participant becomes aware
of (i) any Change of Law which will make it unlawful or impossible
for such Person to fund or maintain its portion of the Outstanding
Lease Amount under either Facility at the LIBOR Rental Rate or (ii)
any Change of Law or other event or condition which will obligate
Lessee to pay any amount pursuant to Subparagraph 2.12(c) or
Subparagraph 2.12(d), such Person shall notify Lessee and Agent
thereof as promptly as practical. If any Person has given notice of
any such Change of Law or other event or condition and thereafter
becomes aware that such Change of Law or other event or condition has
ceased to exist, such Person shall notify Lessee and Agent thereof as
promptly as practical. Each Person affected by any Change of Law
which makes it unlawful or impossible for such Person to fund or
maintain its portion of the Outstanding Lease Amount under either
Facility at the LIBOR Rental Rate or to which Lessee is obligated to
pay any amount pursuant to Subparagraph 2.12(c) or Subparagraph
2.12(d) shall use reasonable commercial efforts (including changing
the jurisdiction of its Applicable Participating Office) to avoid the
effect of such Change of Law or to avoid or materially reduce any
amounts which Lessee is obligated to pay pursuant to Subparagraph
2.12(c) or Subparagraph 2.12(d) if, in the reasonable opinion of such
Person, such efforts would not be disadvantageous to such Person or
contrary to such Person's normal banking practices.
2.13. Taxes on Payments.
(a) Payments Free of Taxes. All payments made by Lessee
under this Agreement and the other Operative Documents shall be made
free and clear of, and without deduction or withholding for or on
account of, any present or future Indemnified Taxes, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental
Authority. If any Indemnified Taxes are required to be withheld from
any amounts payable to any Lessor Party hereunder or under the other
Operative Documents, the amounts so payable to such Lessor Party
shall be increased to the extent necessary to yield to such Lessor
Party (after payment of all Indemnified Taxes) the Base Rent or any
such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the other Operative Documents.
Whenever any Indemnified Taxes are
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payable by Lessee, as promptly as possible thereafter, Lessee shall
send to Agent for its own account or for the account of Lessor or
such Participant, as the case may be, a certified copy of an original
official receipt received by Lessee showing payment thereof. If
Lessee fails to pay any Indemnified Taxes when due to the appropriate
taxing authority or fails to remit to Agent the required receipts or
other required documentary evidence, Lessee shall indemnify the
Lessor Parties for any incremental taxes, interest or penalties that
may become payable by the Lessor Parties as a result of any such
failure. The obligations of Lessee under this Subparagraph 2.13(a)
shall survive the payment and performance of the Lessee Obligations
and the termination of this Agreement.
(b) Withholding Exemption Certificates. On or prior to the
Closing Date or, if such date does not occur within thirty (30) days
after the date of this Agreement, by the end of such 30-day period,
Lessor, if it is not incorporated under the laws of the United States
of America or a state thereof, and each Participant which is not
incorporated under the laws of the United States of America or a
state thereof shall deliver to Lessee and Agent two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224
(or successor applicable form), as the case may be, certifying in
each case that Lessor or such Participant, as the case may be, is
entitled to receive payments under this Agreement and the other
Operative Documents without deduction or withholding of any United
States federal income taxes. Each Person which delivers to Lessee and
Agent a Form 1001 or 4224 pursuant to the immediately preceding
sentence further undertakes to deliver to Lessee and Agent two
further copies of Form 1001 or 4224 (or successor applicable forms),
or other manner of certification or procedure, as the case may be, on
or before the date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most
recent form previously delivered by it to Lessee and Agent, and such
extensions or renewals thereof as may reasonably be requested by
Lessee or Agent, certifying in the case of a Form 1001 or 4224 that
such Person is entitled to receive payments under this Agreement and
the other Operative Documents without deduction or withholding of any
United States federal income taxes, unless in any such cases an event
(including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery
would otherwise be required which renders all such forms inapplicable
or which would prevent Lessor or a Participant from duly completing
and delivering any such form with respect to it and Lessor or such
Participant advises Lessee and Agent that it is not capable of
receiving payments without any deduction or withholding of United
States federal income tax.
(c) Mitigation. If any Lessor Party claims any additional
amounts to be payable to it pursuant to this Paragraph 2.13, such
Lessor Party shall use reasonable commercial efforts to file any
certificate or document requested in writing by Lessee (including
copies of Internal Revenue Service Form 1001 (or successor forms)
reflecting a reduced rate of withholding) or to change the
jurisdiction of its Applicable Participating Office if the making of
such a filing or such change in the jurisdiction of its Applicable
Participating Office would avoid the need for or materially reduce
the amount of any such additional amounts which may thereafter accrue
and if, in the reasonable opinion of a Participant, in the case of a
change in the jurisdiction of its Applicable Participating
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Office, such change would not be disadvantageous to such Person or
contrary to such Person's normal banking practices.
(d) Tax Returns. Nothing contained in this Paragraph 2.13
shall require any Lessor Party to make available any of its tax
returns (or any other information relating to its taxes which it
deems to be confidential).
2.14. Funding Loss Indemnification. If Lessee shall (a) pay any
portion of the Outstanding Lease Amount under either Facility on any day other
than the last day of a Rental Period (whether an optional payment, a mandatory
payment or otherwise) or (b) cancel or otherwise fail to consummate any Advance
Request which has been delivered to Agent (whether as a result of the failure to
satisfy any applicable conditions or otherwise), Lessee shall, upon demand by
Lessor or any Participant, reimburse such Person for and hold such Person
harmless from all costs and losses incurred by such Person as a result of such
payment, cancellation or failure. Lessee understands that such costs and losses
may include, without limitation, losses incurred by Lessor or a Participant as a
result of funding and other contracts entered into by such Person to fund its
portion of the Outstanding Lease Amount under the applicable Facility. Each
Person demanding payment under this Paragraph 2.14 shall deliver to Lessee, with
a copy to Agent, a certificate setting forth the amount of costs and losses for
which demand is made, which certificate shall set forth in reasonable detail the
calculation of the amount demanded. Such a certificate so delivered to Lessee
shall constitute prima facie evidence of such costs and losses. The obligations
of Lessee under this Paragraph 2.14 shall survive the payment and performance of
the Lessee Obligations and the termination of this Agreement.
2.15. Replacement of Participants. If any Participant shall (a)
become a Defaulting Participant more than two (2) times in a period of twelve
(12) consecutive months, (b) continue as a Defaulting Participant for more than
five (5) Business Days at any time, (c) deliver, pursuant to Subparagraph
2.12(b), a notice of a Change of Law which does not affect Required
Participants, or (d) demand any payment under Subparagraph 2.12(c), 2.12(d) or
2.13(a) for a reason which is not applicable to Required Participants, then
Agent may (or upon the written request of Lessee if no Event of Default has
occurred and is continuing, shall) replace such Participant (the "affected
Participant"), or cause such affected Participant to be replaced, with another
Person (the "replacement Participant") satisfying the requirements of an
Eligible Assignee under Subparagraph 7.05(b), by having the affected Participant
sell and assign all of its rights and obligations under this Agreement and the
other Operative Documents to the replacement Participant pursuant to
Subparagraph 7.05(b); provided, however, that if Lessee seeks to exercise such
right, it must do so within sixty (60) days after it first knows or should have
known of the occurrence of the event or events giving rise to such right, and no
Lessor Party shall have any obligation to identify or locate a replacement
Participant for Lessee. Upon receipt by any affected Participant of a written
notice from Agent stating that Agent is exercising the replacement right set
forth in this Paragraph 2.15, such affected Participant shall sell and assign
all of its rights and obligations under this Agreement and the other Operative
Documents to the replacement Participant pursuant to an Assignment Agreement and
Subparagraph 7.05(b) for a purchase price equal to the sum of its portion of the
Outstanding Lease Amount, the accrued
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<PAGE> 26
and unpaid portion of the Base Rent relating to such portion and its ratable
share of all fees to which it is entitled.
SECTION 3. CONDITIONS PRECEDENT
3.01. Acquisition Advances. The obligation of Lessor to make the
Acquisition Advances (and the obligations of the Participants to fund their
respective Proportionate Shares of the Acquisition Advances) on the Closing Date
is (are) subject to receipt by Agent, on or prior to the Closing Date, of each
item listed in Schedule 3.01, each in form and substance satisfactory to Lessor,
Agent and each Participant, and with sufficient copies for, Lessor, Agent and
each Participant.
3.02. Improvement/Expense Advances. The obligation of Lessor to make
each Improvement/Expense Advance for each Tract of Property (and the obligations
of the Participants to fund their respective Proportionate Shares of such
Advance) is (are) subject to (a) satisfaction of the conditions set forth in
Paragraph 3.01; (b) receipt by Agent pursuant to Paragraph 2.03 of the Advance
Request for such Advance, appropriately completed and duly executed by Lessee;
and (c) receipt by Agent of date-down endorsements to Agent's and Lessor's title
insurance policies covering such Tract or binders acceptable to Agent and
Lessor.
3.03. Other Conditions Precedent. The occurrence of each Credit Event
(including the making of each Advance by Lessor and the funding of each Advance
by the Participants) is subject to the further conditions that, on the date such
Credit Event is to occur and after giving effect to such Credit Event, the
following shall be true and correct:
(a) The representations and warranties of Lessee set forth
in Paragraph 4.01 and in the other Operative Documents are true and
correct in all material respects as if made on such date (except for
representations and warranties expressly made as of a specified date,
which shall be true as of such date);
(b) No Default has occurred and is continuing or will
result from such Credit Event; and
(c) All of the Operative Documents are in full force and
effect.
The submission by Lessee to Lessor and Agent of each Advance Request, each
Notice of Rental Period Selection and a Notice of Marketing Option Exercise
shall be deemed to be a representation and warranty by Lessee that each of the
statements set forth above in this Paragraph 3.03 is true and correct as of the
date of such request and notice.
3.04. Covenant to Deliver. Lessee agrees (not as a condition but as a
covenant) to deliver to Lessor and Agent each item required to be delivered to
Lessor and Agent as a condition to each Advance if such Advance is made. Lessee
expressly agrees that the making of any Advance prior to the receipt by Lessor
and Agent of any such item shall not constitute a
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waiver by Lessor, Agent or any Participant of Lessee's obligation to deliver
such item, unless expressly waived in writing.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.01. Lessee's Representations and Warranties. In order to induce the
Lessor Parties to enter into this Agreement and the other Operative Documents to
which they are parties, Lessee hereby represents and warranties to the Lessor
Parties as follows:
(a) Due Incorporation, Qualification, etc. Each of Lessee
and Lessee's Subsidiaries (i) is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation; (ii) has the power and authority to own, lease and
operate its properties and carry on its business as now conducted;
and (iii) is duly qualified, licensed to do business and in good
standing as a foreign corporation in each jurisdiction where the
failure to be so qualified or licensed is reasonably likely to have a
Material Adverse Effect.
(b) Authority. The execution, delivery and performance by
Lessee of each Operative Document executed, or to be executed, by
Lessee and the consummation of the transactions contemplated thereby
(i) are within the power of Lessee and (ii) have been duly authorized
by all necessary actions on the part of Lessee.
(c) Enforceability. Each Operative Document executed, or to
be executed, by Lessee has been, or will be, duly executed and
delivered by Lessee and constitutes, or will constitute, a legal,
valid and binding obligation of Lessee, enforceable against Lessee in
accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and general
principles of equity.
(d) Non-Contravention. The execution and delivery by Lessee
of the Operative Documents executed by Lessee and the performance and
consummation of the transactions contemplated thereby do not (i)
violate any Requirement of Law applicable to Lessee; (ii) violate any
provision of, or result in the breach or the acceleration of, or
entitle any other Person to accelerate (whether after the giving of
notice or lapse of time or both), any Contractual Obligation of
Lessee; or (iii) result in the creation or imposition of any Lien (or
the obligation to create or impose any Lien) upon any property, asset
or revenue of Lessee (except such Liens as may be created in favor of
Lessor or Agent pursuant to this Agreement or the other Operative
Documents).
(e) Approvals. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Authority or other Person (including, without limitation, the
shareholders of any Person) is required in connection with the
execution and delivery of the Operative Documents executed by Lessee
and the performance and consummation by Lessee of the transactions
contemplated thereby, except such as have been made or obtained and
are in full force and effect.
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(f) No Violation or Default. Neither Lessee nor any of its
Subsidiaries is in violation of or in default with respect to (i) any
Requirement of Law applicable to such Person; (ii) any Contractual
Obligation of such Person (nor is there any waiver in effect which,
if not in effect, would result in such a violation or default),
where, in each case, such violation or default is reasonably likely
to have a Material Adverse Effect. Without limiting the generality of
the foregoing, neither Lessee nor any of its Subsidiaries (A) has
violated any Environmental Laws, (B) has any liability under any
Environmental Laws or (C) has received notice or other communication
of an investigation or is under investigation by any Governmental
Authority having authority to enforce Environmental Laws, where such
violation, liability or investigation is reasonably likely to have a
Material Adverse Effect. No Default has occurred and is continuing.
(g) Litigation. Except as set forth in Schedule 4.01(g), no
actions (including, without limitation, derivative actions), suits,
proceedings or investigations are pending or, to the knowledge of
Lessee, threatened against Lessee or any of its Subsidiaries at law
or in equity in any court or before any other Governmental Authority
which (i) is reasonably likely (alone or in the aggregate) to have a
Material Adverse Effect or (ii) seeks to enjoin, either directly or
indirectly, the execution, delivery or performance by Lessee of the
Operative Documents or the transactions contemplated thereby. The
representations and warranties set forth in Schedule 4.01(g) are true
and correct.
(h) Title; Possession Under Leases. Except as set forth in
Schedule 4.01(g), Lessee and its Subsidiaries own and have good and
marketable title, or a valid leasehold interest in, all their
respective properties and assets as reflected in the most recent
Financial Statements delivered to Agent (except those assets and
properties disposed of in the ordinary course of business or
otherwise in compliance with this Agreement since the date of such
Financial Statements) and all respective assets and properties
acquired by Lessee and its Subsidiaries since such date (except those
disposed of in the ordinary course of business or otherwise in
compliance with this Agreement), except in any case where the failure
so to own or to have such title is not reasonably likely to have a
Material Adverse Effect. Such assets and properties are subject to no
Lien, except for Permitted Liens. Each of Lessee and its Subsidiaries
has complied with all material obligations under all material leases
to which it is a party and all such leases are in full force and
effect. Each of Lessee and its Subsidiaries enjoys peaceful and
undisturbed possession under such leases.
(i) Financial Statements. The Financial Statements of
Lessee and its Subsidiaries which have been delivered to Agent, (i)
are in accordance with the books and records of Lessee and its
Subsidiaries, which have been maintained in accordance with good
business practice; (ii) have been prepared in conformity with GAAP;
and (iii) fairly present the financial conditions and results of
operations of Lessee and its Subsidiaries as of the date thereof and
for the period covered thereby. Neither Lessee nor any of its
Subsidiaries has any Contingent Obligations, liability for taxes or
other outstanding obligations which are material in the aggregate,
except as disclosed in the audited
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Financial Statements dated December 31, 1996, furnished by Lessee to
Agent prior to the date hereof, or in the Financial Statements
delivered to Agent pursuant to clause (i) or (ii) of Subparagraph
5.01(a).
(j) Equity Securities. All outstanding Equity Securities of
Lessee are duly authorized, validly issued, fully paid and
non-assessable. All Equity Securities of Lessee have been offered and
sold in compliance with all federal and state securities laws and all
other Requirements of Law.
(k) No Agreements to Sell Assets; Etc. Neither Lessee nor
any of its Subsidiaries has any legal obligation, absolute or
contingent, to any Person to sell the assets of Lessee or any of its
Subsidiaries (other than sales in the ordinary course of business),
or to effect any merger, consolidation or other reorganization of
Lessee or any of its Subsidiaries or to enter into any agreement with
respect thereto, except for sales permitted by Subparagraph 5.02(c).
(l) Employee Benefit Plans.
(i) Based on the latest valuation of each
Employee Benefit Plan that either Lessee or any ERISA
Affiliate maintains or contributes to, or has any
obligation under (which occurred within twelve months of
the date of this representation), the aggregate benefit
liabilities of such plan within the meaning of Section 4001
of ERISA did not exceed the aggregate value of the assets
of such plan. Neither Lessee nor any ERISA Affiliate has
any liability with respect to any post-retirement benefit
under any Employee Benefit Plan which is a welfare plan (as
defined in section 3(1) of ERISA), other than liability for
health plan continuation coverage described in Part 6 of
Title I(B) of ERISA, which liability for health plan
contribution coverage is not reasonably likely to have a
Material Adverse Effect.
(ii) Each Employee Benefit Plan complies, in both
form and operation, in all material respects, with its
terms, ERISA and the IRC, and no condition exists or event
has occurred with respect to any such plan which would
result in the incurrence by either Lessee or any ERISA
Affiliate of any material liability, fine or penalty. Each
Employee Benefit Plan, related trust agreement, arrangement
and commitment of Lessee or any ERISA Affiliate is legally
valid and binding and in full force and effect. No Employee
Benefit Plan is being audited or investigated by any
government agency or is subject to any pending or
threatened claim or suit. Neither Lessee nor any ERISA
Affiliate nor any fiduciary of any Employee Benefit Plan
has engaged in a prohibited transaction under section 406
of ERISA or section 4975 of the IRC.
(iii) Neither Lessee nor any ERISA Affiliate
contributes to or has any material contingent obligations
to any Multiemployer Plan. Neither Lessee nor any ERISA
Affiliate has incurred any material liability (including
secondary
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liability) to any Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer
Plan under Section 4201 of ERISA or as a result of a sale
of assets described in Section 4204 of ERISA. Neither
Lessee nor any ERISA Affiliate has been notified that any
Multiemployer Plan is in reorganization or insolvent under
and within the meaning of Section 4241 or Section 4245 of
ERISA or that any Multiemployer Plan intends to terminate
or has been terminated under Section 4041A of ERISA.
(m) Other Regulations. Lessee is not subject to regulation
under the Investment Company Act of 1940, the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce
Act, any state public utilities code or to any other Governmental
Rule limiting its ability to incur indebtedness.
(n) Patent and Other Rights. Except as set forth in
Schedule 4.01(g), Lessee and its Subsidiaries own, license or
otherwise have the right to use, under validly existing agreements,
all patents, licenses, trademarks, trade names, trade secrets,
service marks, copyrights and all rights with respect thereto, which
are required to conduct their businesses as now conducted.
(o) Governmental Charges. Lessee and its Subsidiaries have
filed or caused to be filed all tax returns which are required to be
filed by them. Lessee and its Subsidiaries have paid, or made
provision for the payment of, all taxes and other Governmental
Charges which have or may have become due pursuant to said returns or
otherwise and all other indebtedness, except such Governmental
Charges or indebtedness, if any, which are being contested in good
faith and as to which adequate reserves (determined in accordance
with GAAP) have been provided or which are not reasonably likely to
have a Material Adverse Effect if unpaid.
(p) Margin Stock. Lessee owns no Margin Stock which, in the
aggregate, would constitute a substantial part of the assets of
Lessee, and no proceeds of any Loan will be used to purchase or
carry, directly or indirectly, any Margin Stock or to extend credit,
directly or indirectly, to any Person for the purpose of purchasing
or carrying any Margin Stock.
(q) Subsidiaries, etc. Set forth in Schedule 4.01(q) (as
supplemented by Lessee from time to time in a written notice to
Agent) is a complete list of all of Lessee's Subsidiaries, the
jurisdiction of incorporation of each, the classes of Equity
Securities of each and the number of shares and percentages of shares
of each such class owned directly or indirectly by Lessee. Except for
such Subsidiaries, Lessee has no Subsidiaries, is not a partner in
any partnership or a joint venturer in any joint venture.
(r) Catastrophic Events. Neither Lessee nor any of its
Subsidiaries and none of their properties is or has been affected by
any fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or
other casualty that is reasonably likely to have a Material Adverse
Effect. There are no
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disputes presently subject to grievance procedure, arbitration or
litigation under any of the collective bargaining agreements,
employment contracts or employee welfare or incentive plans to which
Lessee or any of its Subsidiaries is a party, and there are no
strikes, lockouts, work stoppages or slowdowns, or, to the best
knowledge of Lessee, jurisdictional disputes or organizing activities
occurring or threatened which alone or in the aggregate are
reasonably likely to have a Material Adverse Effect.
(s) No Material Adverse Effect. No event has occurred and
is continuing and no condition exists which is reasonably likely to
have a Material Adverse Effect.
(t) The Property. The representations and warranties
relating to each Tract set forth in Parts 1 and 2 of Schedule 4.01(t)
are true and correct. The following representations and warranties
apply to all of the Property:
(i) All of the Property complies and will comply
at all times (whether before commencement of any
construction, during any construction or after completion
of construction of any New Improvements) with all
applicable Governmental Rules (including Title III of the
Americans with Disabilities Act; Environmental Laws; and
zoning, land use, building, planning and fire laws, rules,
regulations and codes) and Insurance Requirements, except
for violations which are not reasonably likely to have a
Material Adverse Effect. None of the Property is or has
been a site for the use, generation, manufacture, storage,
treatment, release, discharge, disposal or transportation
of any Hazardous Materials, and no Hazardous Materials
(except as set forth in Schedule 1 to each Lease Agreement)
are located on any of the Property. There are no claims or
actions pending or, to Lessee's knowledge, threatened
against any of the Property by any Governmental Authority
or any other Person relating to Hazardous Materials or
pursuant to any Environmental Laws.
(ii) None of the Improvements (whether before
commencement of any construction, during any construction
or after completion of construction of any New
Improvements) encroach or will at any time encroach in any
manner onto any adjoining land, except as permitted by
express written and recorded encroachment agreements
approved by Agent or as affirmatively insured against by
appropriate title insurance.
(iii) All licenses, approvals, authorizations,
consents, permits, easements and rights-of-way required for
the use of any of the Property have been obtained or, if
not yet required, will be obtained before required.
(iv) After the purchase of each Tract of Property
on the Acquisition Date therefor, Lessor will have good and
valid fee simple title to such Property, subject to no
Liens except for Permitted Property Liens.
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(u) Chief Place of Business. Lessee's chief place of
business is located at 3970 North First Street, San Jose, California.
(v) Accuracy of Information Furnished. None of the
Operative Documents and none of the other certificates, statements or
information furnished to Lessor, Agent or any Participant by or on
behalf of Lessee or any of its Subsidiaries in connection with the
Operative Documents or the transactions contemplated thereby contains
or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
Lessee shall be deemed to have reaffirmed, for the benefit of the Lessor
Parties, each representation and warranty contained in this Paragraph 4.01 on
and as of the date of each Credit Event (except for representations and
warranties expressly made as of a specified date, which shall be true as of such
date).
4.02. Lessor's Representations and Warranties. In order to induce
Lessee, Agent and the Participants to enter into this Agreement and the other
Operative Documents to which they are parties, Lessor hereby represents and
warranties to Lessee, Agent and the Participants as follows:
(a) Due Incorporation, Qualification, etc. Lessor (i) is a
corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation and (ii) has the power
and authority to own, lease and operate its properties and carry on
its business as now conducted.
(b) Authority. The execution, delivery and performance by
Lessor of each Operative Document executed, or to be executed, by
Lessor and the consummation of the transactions contemplated thereby
(i) are within the power of Lessor and (ii) have been duly authorized
by all necessary actions on the part of Lessor.
(c) Enforceability. Each Operative Document executed, or to
be executed, by Lessor has been, or will be, duly executed and
delivered by Lessor and constitutes, or will constitute, a legal,
valid and binding obligation of Lessor, enforceable against Lessor in
accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and general
principles of equity.
(d) Non-Contravention. The execution and delivery by Lessor
of the Operative Documents executed by Lessor and the performance and
consummation of the transactions contemplated thereby do not (i)
violate any Requirement of Law applicable to Lessor; (ii) violate any
provision of, or result in the breach or the acceleration of, or
entitle any other Person to accelerate (whether after the giving of
notice or lapse of time or both), any Contractual Obligation of
Lessor; or (iii) result in the creation or imposition of any Lien (or
the obligation to create or impose any Lien) upon any property, asset
or
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revenue of Lessor (except such Liens as may be created in favor of
Agent pursuant to this Agreement or the other Operative Documents).
(e) Approvals. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Authority or other Person (including, without limitation, the
shareholders of any Person) is required in connection with the
execution and delivery of the Operative Documents executed by Lessor
and the performance and consummation of the transactions contemplated
thereby, except such as have been made or obtained and are in full
force and effect.
(f) Litigation. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending
or, to the knowledge of Lessor, threatened against Lessor at law or
in equity in any court or before any other Governmental Authority
which (i) is reasonably likely (alone or in the aggregate) to
materially and adversely affect the ability of Lessor to perform its
obligations under the Operative Documents to which it is a party or
(ii) seeks to enjoin, either directly or indirectly, the execution,
delivery or performance by Lessor of the Operative Documents or the
transactions contemplated thereby.
(g) Other Regulations. Lessor is not subject to regulation
under the Investment Company Act of 1940, the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce
Act, any state public utilities code or to any other Governmental
Rule limiting its ability to incur indebtedness.
(h) Chief Place of Business. Lessor's chief place of
business is located at 180 Interstate Parkway North, Atlanta, Georgia
30339.
4.03. Participants' Representations and Warranties. In order to
induce Lessee, Lessor and Agent to enter into this Agreement and the other
Operative Documents to which they are parties, each Participant hereby
represents and warranties to Lessee, Lessor and Agent as follows:
(a) Due Incorporation, Qualification, etc. Such Participant
(i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and (ii)
has the power and authority to own, lease and operate its properties
and carry on its business as now conducted.
(b) Authority. The execution, delivery and performance by
such Participant of each Operative Document executed, or to be
executed, by such Participant and the consummation of the
transactions contemplated thereby (i) are within the power of such
Participant and (ii) have been duly authorized by all necessary
actions on the part of such Participant.
(c) Enforceability. Each Operative Document executed, or to
be executed, by such Participant has been, or will be, duly executed
and delivered by such Participant and
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constitutes, or will constitute, a legal, valid and binding
obligation of such Participant, enforceable against such Participant
in accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and general
principles of equity.
(d) Non-Contravention. The execution and delivery by such
Participant of the Operative Documents executed by such Participant
and the performance and consummation of the transactions contemplated
thereby do not (i) violate any Requirement of Law applicable to such
Participant; (ii) violate any provision of, or result in the breach
or the acceleration of, or entitle any other Person to accelerate
(whether after the giving of notice or lapse of time or both), any
Contractual Obligation of such Participant; or (iii) result in the
creation or imposition of any Lien (or the obligation to create or
impose any Lien) upon any property, asset or revenue of such
Participant (except such Liens as may be created in favor of Lessor
or Agent pursuant to this Agreement or the other Operative
Documents).
(e) Approvals. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Authority or other Person (including, without limitation, the
shareholders of any Person) is required in connection with the
execution and delivery of the Operative Documents executed by such
Participant and the performance and consummation of the transactions
contemplated thereby, except such as have been made or obtained and
are in full force and effect.
(f) Litigation. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending
or, to the knowledge of such Participant, threatened against such
Participant at law or in equity in any court or before any other
Governmental Authority which (i) is reasonably likely (alone or in
the aggregate) to materially and adversely affect the ability of such
Participant to perform its obligations under the Operative Documents
to which it is a party or (ii) seeks to enjoin, either directly or
indirectly, the execution, delivery or performance by such
Participant of the Operative Documents or the transactions
contemplated thereby.
(g) Own Account. Such Participant is acquiring its
participation interest hereunder for its own account for investment
and not with a view to any distribution (as such term is used in
Section 2(11) of the Securities Act of 1933) thereof, and, if in the
future it should decide to dispose of its participation interest, it
understands that it may do so only in compliance with the Securities
Act of 1933 and the rules and regulations of the Securities and
Exchange Commission thereunder and any applicable state securities
laws.
SECTION 5. COVENANTS
5.01. Lessee's Affirmative Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following affirmative
covenants, unless Lessor and Required Participants shall otherwise consent in
writing:
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(a) Financial Statements, Reports, etc. Lessee shall
furnish to Agent, with sufficient copies for Lessor and each
Participant, the following, each in such form and such detail as
Agent, Lessor or the Required Participants shall reasonably request:
(i) As soon as available and in no event later
than fifty (50) days after the last day of each fiscal
quarter of Lessee (other than the last quarter in any
fiscal year), a copy of the Financial Statements of Lessee
and its Subsidiaries (prepared on a consolidated basis) for
such quarter and for the fiscal year to date, certified by
the president or chief financial officer of Lessee to
present fairly the financial condition, results of
operations and other information reflected therein and to
have been prepared in accordance with GAAP (subject to
normal year-end audit adjustments);
(ii) As soon as available and in no event later
than one hundred (100) days after the close of each fiscal
year of Lessee, (A) copies of the audited Financial
Statements of Lessee and its Subsidiaries (prepared on a
consolidated basis) for such year, prepared by Ernst &
Young or by other independent certified public accountants
of recognized national standing acceptable to Agent, (B)
copies of the unqualified opinions (or qualified opinions
reasonably acceptable to Required Participants) and
management letters delivered by such accountants in
connection with all such Financial Statements and (C)
certificates of such accountants to Agent stating that in
making the examination necessary for their opinion they
have reviewed this Agreement and have obtained no knowledge
of any Default which has occurred and is continuing, or if,
in the opinion of such accountants, a Default has occurred
and is continuing, a statement as to the nature thereof;
(iii) Contemporaneously with the quarterly and
year-end Financial Statements required by the foregoing
clauses (i) and (ii), a compliance certificate of the
president or chief financial officer of Lessee which (A)
states that no Default has occurred and is continuing, or,
if any such Default has occurred and is continuing, a
statement as to the nature thereof and what action Lessee
proposes to take with respect thereto and (B) sets forth,
for the quarter or year covered by such Financial
Statements or as of the last day of such quarter or year
(as the case may be), the calculation of the financial
ratios and tests provided in Paragraph 5.03;
(iv) As soon as available and in no event later
than fifty (50) days after the last day of each fiscal
quarter of Lessee, a certificate of the chief financial
officer of Lessee which sets forth the calculation of the
annualized Funded Indebtedness/EBITDA Ratio for the
consecutive two-quarter period ending on such day;
(v) As soon as possible and in no event later
than five (5) Business Days after any Senior Officer of
Lessee knows of the occurrence or existence of
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(A) any Reportable Event under any Employee Benefit Plan
or Multiemployer Plan; (B) any actual or threatened
litigation, suits, claims or disputes against Lessee or
any of its Subsidiaries involving potential monetary
damages payable by Lessee or its Subsidiaries of
$2,500,000 or more (alone or in the aggregate); (C) any
other event or condition which is reasonably likely to
have a Material Adverse Effect; or (D) any Default; the
statement of the president or chief financial officer of
Lessee setting forth details of such event, condition or
Default and the action which Lessee proposes to take with
respect thereto;
(vi) As soon as available and in no event later
than five (5) Business Days after they are sent, made
available or filed, copies of (A) all registration
statements and reports filed by Lessee or any of its
Subsidiaries with any securities exchange or the Securities
and Exchange Commission (including, without limitation, all
10-Q, 10-K and 8-Q reports); (B) all reports, proxy
statements and financial statements sent or made available
by Lessee or any of its Subsidiaries to its security
holders; and (C) all press releases and other similar
public concerning any material developments in the business
of Lessee or any of its Subsidiaries made available by
Lessee or any of its Subsidiaries to the public generally;
(vii) As soon as available and in no event later
than five (5) Business Days after they are filed, copies of
all IRS Form 5500 reports for all Employee Benefit Plans
required to file such form;
(viii) As soon as available and in no event later
than ten (10) days before the first day of each fiscal year
of Lessee, the consolidated plan and forecast of Lessee and
its Subsidiaries for such fiscal year, including quarterly
cash flow projections and quarterly projections of Lessee's
compliance with each of the covenants set forth in
Paragraph 5.03;
(ix) As soon as possible and in no event later
than (A) ten (10) days prior to the acquisition by Lessee
or any of its Subsidiaries of any new Subsidiary or all or
substantially all of the assets of any other Person,
written notice thereof; and
(x) Such other instruments, agreements,
certificates, opinions, statements, documents and
information relating to the operations or condition
(financial or otherwise) of Lessee or its Subsidiaries, and
compliance by Lessee with the terms of this Agreement and
the other Operative Documents as Lessor or Agent may from
time to time reasonably request.
For the purposes of this Subparagraph 5.01(a), (1) the timely
delivery by Lessee to Agent pursuant to clause (vi) of a copy of the
Form 10-Q report filed by Lessee with the Securities and Exchange
Commission for any quarter shall satisfy the requirements of clause
(i) for such quarter and (2) the timely delivery by Lessee to Agent
pursuant to
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clause (vi) of a copy of the Form 10-K report filed by Lessee with
the Securities and Exchange Commission for any year shall satisfy the
requirements of clause (ii)(A) for such year, provided that such
reports are required to contain the same information as required by
clause (i) and clause (ii)(A), respectively.
(b) Books and Records. Lessee and its Subsidiaries shall at
all times keep proper books of record and account in which full, true
and correct entries will be made of their transactions in accordance
with GAAP.
(c) Inspections. Lessee and its Subsidiaries shall permit
any Person designated by any Participant, upon reasonable notice and
during normal business hours, to visit and inspect any of the
properties and offices of Lessee and its Subsidiaries, to examine the
books and records of Lessee and its Subsidiaries and make copies
thereof and to discuss the affairs, finances and business of Lessee
and its Subsidiaries with, and to be advised as to the same by, their
officers, auditors and accountants, all at such times and intervals
as any Participant may reasonably request.
(d) Insurance. In addition to the insurance requirements
set forth in the Lease Agreement with respect to the property, Lessee
and its Subsidiaries shall:
(i) Carry and maintain insurance of the types and
in the amounts customarily carried from time to time during
the term of this Agreement by others engaged in
substantially the same business as such Person and
operating in the same geographic area as such Person,
including, but not limited to, fire, public liability,
property damage and worker's compensation; and
(ii) Carry and maintain each policy for such
insurance with financially sound insurers.
(e) Governmental Charges and Other Indebtedness. Lessee and
its Subsidiaries shall promptly pay and discharge when due (i) all
taxes and other Governmental Charges prior to the date upon which
penalties accrue thereon, (ii) all indebtedness which, if unpaid,
could become a Lien upon the property of Lessee or its Subsidiaries
and (iii) subject to any subordination provisions applicable thereto,
all other Indebtedness which, if unpaid, is reasonably likely to have
a Material Adverse Effect, except such Indebtedness as may in good
faith be contested or disputed, or for which arrangements for
deferred payment have been made, provided that in each such case
appropriate reserves as required by GAAP are maintained.
(f) Use of Proceeds. Lessee shall not use any part of the
proceeds of any Advance, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock or for the purpose of
purchasing or carrying or trading in any securities under such
circumstances as to involve Lessee or any Lessor Party in a violation
of Regulations G, T, U or X issued by the Federal Reserve Board.
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(g) General Business Operations. Each of Lessee and its
Subsidiaries shall (i) preserve and maintain its corporate existence
and all of its rights, privileges and franchises reasonably necessary
to the conduct of its business, (ii) conduct its business activities
in compliance with all Requirements of Law and Contractual
Obligations applicable to such Person, the violation of which is
reasonably likely to have a Material Adverse Effect and (iii) keep
all property useful and necessary in its business in good working
order and condition, ordinary wear and tear excepted; provided,
however, that Lessee and its Subsidiaries may dissolve or liquidate
any Subsidiary if such Subsidiary is not a Material Subsidiary and
such dissolution or liquidation is not reasonably likely to have a
Material Adverse Effect. Lessee shall maintain its chief executive
office and principal place of business in the United States and shall
not relocate its chief executive office or principal place of
business outside of California except upon not less than thirty (30)
days prior written notice to Agent.
5.02. Lessee's Negative Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following negative
covenants, unless Lessor and Required Participants shall otherwise consent in
writing:
(a) Indebtedness. Neither Lessee nor any of its
Subsidiaries shall create, incur, assume or permit to exist any
Indebtedness except for the following ("Permitted Indebtedness"):
(i) The Lessee Obligations under the Operative
Documents;
(ii) The Related Credit Obligations and Related
Lease Obligations;
(iii) Indebtedness of Lessee and its Subsidiaries
listed in Schedule 5.02(a) and existing on the date of this
Agreement;
(iv) Indebtedness of Lessee and its Subsidiaries
arising from the endorsement of instruments for collection
in the ordinary course of Lessee's or a Subsidiary's
business;
(v) Indebtedness of Lessee and its Subsidiaries
for trade accounts payable, provided that (A) such accounts
arise in the ordinary course of business and (B) no
material part of any such account is more than ninety (90)
days past due (unless subject to a bona fide dispute and
for which adequate reserves as required by GAAP have been
established);
(vi) Indebtedness of Lessee and its Subsidiaries
under Rate Contracts, provided that all such Rate Contracts
are entered into in connection with bona fide hedging
operations and not for speculation;
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(vii) Indebtedness of Lessee and its Subsidiaries
under purchase money loans and Capital Leases incurred by
Lessee or any of its Subsidiaries to finance the
acquisition by such Person of real property, fixtures or
equipment provided that in each case, (A) such Indebtedness
is incurred by such Person at the time of, or not later
than thirty (30) days after, the acquisition by such Person
of the property so financed, (B) such Indebtedness does not
exceed the purchase price of the property so financed, and
(C) no Default has occurred and is continuing at the time
such Indebtedness is incurred or will occur after giving
effect to such Indebtedness;
(viii) Indebtedness of Lessee and its
Subsidiaries under initial or successive refinancings of
any Indebtedness permitted by clause (iii) above, provided
that (A) the principal amount of any such refinancing does
not exceed the principal amount of the Indebtedness being
refinanced (except to the extent otherwise permitted by
clause (x) below) and (B) the material terms and provisions
of any such refinancing (including maturity, redemption,
prepayment, default and subordination provisions) are no
less favorable to the Participants than the Indebtedness
being refinanced;
(ix) Indebtedness of Lessee and its Subsidiaries
with respect to surety, appeal, indemnity, performance or
other similar bonds in the ordinary course of business; and
(x) Other Indebtedness of Lessee and its
Subsidiaries, provided that the aggregate principal amount
of all such other Indebtedness does not exceed $25,000,000
at any time.
(b) Liens. Neither Lessee nor any of its Subsidiaries shall
create, incur, assume or permit to exist any Lien on or with respect
to any of its assets or property of any character, whether now owned
or hereafter acquired, except for the following ("Permitted Liens"):
(i) Liens in favor of Lessor, Agent or any
Participant securing the Lessee Obligations;
(ii) Liens in favor of Agent or any Participant
securing the Related Credit Obligations or Related Lease
Obligations;
(iii) Liens listed in Schedule 5.02(b) and
existing on the date of this Agreement;
(iv) Liens for taxes or other Governmental
Charges not at the time delinquent or thereafter payable
without penalty or being contested in good faith, provided
that adequate reserves for the payment thereof as required
by GAAP have been established;
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(v) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords and other similar Liens
imposed by law incurred in the ordinary course of business
for sums not overdue or being contested in good faith,
provided that adequate reserves for the payment thereof as
required by GAAP have been established;
(vi) Deposits under workers' compensation,
unemployment insurance and social security laws or to
secure the performance of bids, tenders, contracts (other
than for the repayment of borrowed money) or leases, or to
secure statutory obligations of surety or appeal bonds or
to secure indemnity, performance or other similar bonds in
the ordinary course of business;
(vii) Zoning restrictions, easements,
rights-of-way, title irregularities and other similar
encumbrances, which alone or in the aggregate are not
substantial in amount and do not materially detract from
the value of the property subject thereto or interfere with
the ordinary conduct of the business of Lessee or any of
its Subsidiaries;
(viii) Banker's Liens and similar Liens (including
set-off rights) in respect of bank deposits;
(ix) Liens on property or assets of any
corporation which becomes a Subsidiary of Lessee or on any
property or assets acquired by Lessee or any of its
Subsidiaries after the date of this Agreement, provided
that (A) such Liens exist at the time the stock of such
corporation or such assets or property is or are acquired
by Lessee and (B) such Liens were not created in
contemplation of such acquisition by Lessee;
(x) Judgement Liens, provided that such Liens do
not have a value in excess of $2,500,000 or such Liens are
released, stayed, vacated or otherwise dismissed within
twenty (20) days after issue or levy and, if so stayed,
such stay is not thereafter removed;
(xi) Rights of vendors or lessors under
conditional sale agreements, Capital Leases or other title
retention agreements, provided that, in each case, (A) such
rights secure or otherwise relate to Permitted
Indebtedness, (B) such rights do not extend to any property
other than property acquired with the proceeds of such
Permitted Indebtedness and (C) such rights do not secure
any Indebtedness other than such Permitted Indebtedness;
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(xii) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of
customs duties and in connection with the importation of
goods in the ordinary course of Lessee's and its
Subsidiaries' businesses;
(xiii) Liens securing Indebtedness which
constitutes Permitted Indebtedness under clause (vii) of
Subparagraph 5.02(a) provided that, in each case, such Lien
(A) covers only those assets, the acquisition of which was
financed by such Permitted Indebtedness, and (B) secures
only such Permitted Indebtedness;
(xiv) Liens on the property or assets of any
Subsidiary of Lessee in favor of Lessee or any other
Subsidiary of Lessee;
(xv) Liens incurred in connection with the
extension, renewal or refinancing of the Indebtedness
secured by the Liens described in clause (iii) above,
provided that any extension, renewal or replacement Lien
(A) is limited to the property covered by the existing Lien
and (B) secures Indebtedness which is no greater in amount
and has material terms no less favorable to the
Participants than the Indebtedness secured by the existing
Lien;
(xvi) Liens on insurance proceeds in favor of
insurance companies with respect to the financing of
insurance premiums;
(xvii) Permitted Property Liens in the Property;
and
(xviii) Other Liens on the property of Lessee and
its Subsidiaries, provided that the aggregate principal
amount of all Indebtedness secured by such other Liens does
not exceed at any time ten percent (10%) of the
consolidated total assets of Lessee and its Subsidiaries at
such time.
(c) Asset Dispositions. Neither Lessee nor any of its
Subsidiaries shall sell, lease, transfer or otherwise dispose of any
of its assets or property, whether now owned or hereafter acquired,
except for the following:
(i) Sales of inventory by Lessee and its
Subsidiaries in the ordinary course of their businesses;
(ii) Sales of surplus, damaged, worn or obsolete
equipment or inventory for not less than fair market value;
(iii) Sales or other dispositions of Investments
permitted by clauses (i) and (iii) of Subparagraph 5.02(e)
for not less than fair market value;
(iv) Sales or assignments of defaulted
receivables to a collection agency in the ordinary course
of business;
(v) Licenses by Lessee or its Subsidiaries of its
patents, copyrights, trademarks, trade names and service
marks in the ordinary course of its business
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provided that, in each case, the terms of the transaction
are terms which then would prevail in the market for similar
transactions between unaffiliated parties dealing at arm's
length;
(vi) Sales or other dispositions of assets and
property by Lessee to any of Lessee's Subsidiaries or by
any of Lessee's Subsidiaries to Lessee or any of its other
Subsidiaries, provided that the terms of any such sales or
other dispositions by or to Lessee are terms which are no
less favorable to Lessee then would prevail in the market
for similar transactions between unaffiliated parties
dealing at arm's length;
(vii) Sales of accounts receivable of Lessee and
its Subsidiaries, provided that (A) each such sale is (1)
for not less than fair market value and (2) for cash, and
(B) the aggregate book value of all such accounts
receivable so sold in any consecutive four-quarter period
does not exceed ten percent (10%) of the consolidated total
accounts receivable of Lessee and its Subsidiaries on the
last day immediately preceding such four-quarter period;
and
(viii) Other sales, leases, transfers and
disposals of assets and property for not less than fair
market value, provided that the aggregate book value of all
such assets and property so sold, leased, transferred or
otherwise disposed of in any consecutive four-quarter
period does not exceed five percent (5%) of the
consolidated total assets of Lessee and its Subsidiaries on
the last day immediately preceding such four-quarter
period.
(d) Mergers, Acquisitions, Etc. Neither Lessee nor any of
its Subsidiaries shall consolidate with or merge into any other
Person or permit any other Person to merge into it, establish any new
Subsidiary, acquire any Person as a new Subsidiary or acquire all or
substantially all of the assets of any other Person, except for the
following:
(i) Any Subsidiary of Lessee may merge or
consolidate with any other Subsidiary of Lessee;
(ii) Any Subsidiary of Lessee may merge or
consolidate with Lessee, provided that Lessee is the
surviving corporation; and
(iii) Lessee may merge or consolidate with any
other corporation, establish a new Subsidiary, acquire any
Person as a new Subsidiary or acquire all or substantially
all of the assets of any other Person, provided that:
(A) In the case of any merger or
consolidation, either (1) Lessee is the surviving
corporation or (2) the surviving corporation (y)
is a Solvent United States corporation with a
financial condition equal to or better than the
financial condition of Lessee immediately prior to
such
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merger or consolidation and (z) assumes all of the
Lessee Obligations in a manner reasonably
acceptable to the Required Participants;
(B) No Default has occurred and is
continuing at the time of such merger,
consolidation, establishment or acquisition or
will occur after giving effect to such merger,
consolidation or acquisition; and
(C) The aggregate cost of any such
merger, consolidation, establishment or
acquisition does not exceed the amounts permitted
under Subparagraph 5.02(e)(iv).
(e) Investments. Neither Lessee nor any of its Subsidiaries
shall make any Investment except for Investments in the following:
(i) Investments of Lessee and its Subsidiaries
in Cash Equivalents;
(ii) Any transaction permitted by Subparagraph
5.02(a);
(iii) Money market mutual funds registered with
the Securities and Exchange Commission, meeting the
requirements of Rule 2a-7 promulgated under the Investment
Company Act of 1940;
(iv) Investments listed in Schedule 5.02(e)
existing on the date of this Agreement; and
(v) Other Investments, provided that the
aggregate amount of such other Investments plus the
aggregate cost of all mergers and consolidations
consummated, Subsidiaries established and Subsidiaries and
assets acquired by Lessee pursuant to Subparagraph 5.02(d)
does not exceed in any fiscal year (A) $100,000,000 for any
amounts paid in cash and (B) $500,000,000 for any amounts
paid with shares of common stock of Lessee (as determined
according to the stock price of such shares on the date of
transfer) and accounted for on a pooling basis in
accordance with GAAP.
(f) Dividends, Redemptions, Etc. Neither Lessee nor any of
its Subsidiaries shall pay any dividends or make any distributions on
its Equity Securities; purchase, redeem, retire, defease or otherwise
acquire for value any of its Equity Securities; return any capital to
any holder of its Equity Securities as such; make any distribution of
assets, Equity Securities, obligations or securities to any holder of
its Equity Securities as such; or set apart any sum for any such
purpose; except as follows:
(i) Either Lessee or any of its Subsidiaries may
pay dividends on its capital stock payable solely in such
Person's own capital stock;
(ii) Any Subsidiary of Lessee may pay dividends to
Lessee;
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(iii) Lessee may purchase shares of its capital
stock for its employee stock option plans, provided that
(A) the aggregate amount of such purchases does not exceed
$50,000,000 in any fiscal year and (B) no Default has
occurred and is continuing at the time of such purchase or
will occur after giving effect to such purchase; and
(iv) Lessee may purchase shares of its capital
stock with the proceeds received by it from a substantially
concurrent issue of new shares of its capital stock
(g) Change in Business. Neither Lessee nor any of its
Subsidiaries shall engage, either directly or indirectly through
Affiliates, in any material line of business other than the
semiconductor capital equipment business and other businesses
incidental or reasonably related thereto.
(h) ERISA. Neither Lessee nor any ERISA Affiliate shall (i)
adopt or institute any Employee Benefit Plan that is an employee
pension benefit plan within the meaning of Section 3(2) of ERISA,
(ii) take any action which will result in the partial or complete
withdrawal, within the meanings of sections 4203 and 4205 of ERISA,
from a Multiemployer Plan, (iii) engage or permit any Person to
engage in any transaction prohibited by section 406 of ERISA or
section 4975 of the IRC involving any Employee Benefit Plan or
Multiemployer Plan which would subject either Lessee or any ERISA
Affiliate to any tax, penalty or other liability including a
liability to indemnify, (iv) incur or allow to exist any accumulated
funding deficiency (within the meaning of section 412 of the IRC or
section 302 of ERISA), (v) fail to make full payment when due of all
amounts due as contributions to any Employee Benefit Plan or
Multiemployer Plan, (vi) fail to comply with the requirements of
section 4980B of the IRC or Part 6 of Title I(B) of ERISA, or (vii)
adopt any amendment to any Employee Benefit Plan which would require
the posting of security pursuant to section 401(a)(29) of the IRC,
where singly or cumulatively, the above would have a Material Adverse
Effect.
(i) Transactions With Affiliates. Neither Lessee nor any of
its Subsidiaries shall enter into any Contractual Obligation with any
Affiliate or engage in any other transaction with any Affiliate
except upon terms at least as favorable to Lessee or such Subsidiary
as an arms-length transaction with unaffiliated Persons.
(j) Accounting Changes. Neither Lessee nor any of its
Subsidiaries shall change (i) its fiscal year (currently January 1
through December 31) or (ii) its accounting practices except as
permitted by GAAP.
5.03. Lessee's Financial Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following financial
covenants, unless Lessor and Required Participants shall otherwise consent in
writing:
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<PAGE> 45
(a) Funded Indebtedness/Capital Ratio. Lessee shall not
permit its Funded Indebtedness/Capital Ratio on any day set forth
below to be greater than the ratio set forth opposite such day below:
<TABLE>
<S> <C> <C>
June 30, 1997;
September 30, 1997................................................0.55 to 1.00;
December 31, 1997;
March 31, 1998;
June 30, 1998.....................................................0.50 to 1.00;
September 30, 1998;
December 31, 1998
March 31, 1999
June 30, 1999.....................................................0.45 to 1.00;
The last day of each
fiscal quarter thereafter.........................................0.40 to 1.00.
(b) Quick Ratio. Lessee shall not permit its Quick Ratio on
any day set forth below to be less than the ratio set forth opposite
such day below:
June 30, 1997;
September 30, 1997;
December 31, 1997...................................1.00 to 1.00;
March 31, 1998;
June 30, 1998;
September 30, 1998..................................1.25 to 1.00;
The last day of each
fiscal quarter thereafter...........................1.50 to 1.00.
(c) Debt Service Coverage Ratio. Lessee shall not permit
its Debt Service Coverage Ratio for any fiscal quarter ending on any
day set forth below to be less than the ratio set forth opposite such
day below:
June 30, 1997;
September 30, 1997;
December 31, 1997;
March 31, 1998;
June 30, 1998;
September 30, 1998......................................2.50 to 1.00;
December 31, 1998;
</TABLE>
40
<PAGE> 46
<TABLE>
<S> <C> <C>
March 31, 1999..........................................3.50 to 1.00;
The last day of each
fiscal quarter thereafter...........................4.50 to 1.00.
</TABLE>
(d) Tangible Net Worth. Lessee shall not permit its
Tangible Net Worth on the last day of any fiscal quarter (such date
to be referred to herein as a "determination date") which occurs
after June 30, 1997 (such date to be referred to herein as the "base
date") to be less than the sum on such determination date of the
following:
(i) Ninety percent (90%) of the Tangible Net Worth
of Lessee and its Subsidiaries on the base date;
plus
(ii) Seventy-five percent (75%) of the sum of
Lessee's consolidated quarterly net income (ignoring any
quarterly losses) for each fiscal quarter after the base
date through and including the fiscal quarter ending on the
determination date;
plus
(iii) One hundred percent (100%) of the Net
Proceeds of all Equity Securities issued by Lessee and its
Subsidiaries (to Persons other than Lessee or its
Subsidiaries) during the period commencing on the base date
and ending on the determination date;
plus
(iv) One hundred percent (100%) of the principal
amount of all debt securities of Lessee and its
Subsidiaries converted into Equity Securities of Lessee and
its Subsidiaries during the period commencing on the base
date and ending on the determination date;
minus
(v) The lesser of (A) the sum of all
non-recurring, non-cash charges taken by Lessee and its
Subsidiaries during the period commencing on the date of
this Agreement and ending on the earlier of the
determination date and December 31, 1997 and (B)
$40,000,000.
5.04. Lessor's Covenants. Until the termination of this Agreement and
the satisfaction in full by Lessee of all Lessor Obligations, Lessor will
comply, and will cause compliance, with the following covenants, unless Lessee
and Required Participants shall otherwise consent in writing:
41
<PAGE> 47
(a) Use of Proceeds. Lessor shall use the proceeds of all
amounts delivered to Lessor by Participants pursuant to Subparagraph
2.05(a) solely to fund Advances.
(b) Lessor Liens. Lessor shall not create, incur, assume or
permit to exist any Lessor Lien and shall promptly discharge, at its
sole cost and expense, any Lessor Lien on the Property; provided,
however, that Lessor shall not be required so to discharge any such
Lessor Lien if (i) the same is being contested in good faith by
appropriate proceedings diligently prosecuted and (ii) any such
contest is completed and all Lessor Liens are discharged on or prior
to the Expiration Date.
(c) Property Disposition. Lessor shall not sell, lease,
transfer or otherwise dispose of its right, title and interest in the
Property and the Operative Documents except as provided in
Subparagraph 2.11(b) or Subparagraph 7.05(d) or after retaining the
Property following the Expiration Date.
(d) Chief Place of Business. Lessor shall not change its
chief place of business without giving Agent prompt written notice.
5.05. Participants' Covenants. Each Participant covenants that it
will not fund its portion of any Advance with the assets of any "employee
benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I
of ERISA or any "plan" (as defined in Section 4975(e)(1) of the IRC.
SECTION 6. LESSOR, AGENT AND THEIR RELATIONS WITH PARTICIPANTS
6.01. Appointment of Agent. Each Participant hereby appoints and
authorizes Agent to act as its agent hereunder and under the other Operative
Documents with such powers as are expressly delegated to Agent by the terms of
this Agreement and the other Operative Documents, together with such other
powers as are reasonably incidental thereto. Lessor is not an agent for the
Participants or Agent, and neither this Agreement nor any other Operative
Document shall be construed to constitute or evidence a partnership among the
Lessor Parties or otherwise to impose upon Lessor or Agent any fiduciary duty.
6.02. Powers and Immunities. Neither Lessor nor Agent shall have any
duties or responsibilities except those expressly set forth in this Agreement or
in any other Operative Document, be a trustee for any Participant or have any
fiduciary duty to any Participant. Notwithstanding anything to the contrary
contained herein, neither Lessor nor Agent shall be required to take any action
which is contrary to this Agreement or any other Operative Document or any
applicable Governmental Rule. Neither Lessor nor Agent nor any Participant shall
be responsible to any Participant for any recitals, statements, representations
or warranties made by Lessee or any of its Subsidiaries contained in this
Agreement or in any other Operative Document, for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Operative Document or for any failure by Lessee or any of its
Subsidiaries to perform their respective obligations hereunder or thereunder.
Lessor and Agent may employ agents and attorneys-in-fact and shall not be
responsible to any Participant for the
42
<PAGE> 48
negligence or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care. Neither Lessor nor Agent nor any of their respective
directors, officers, employees, agents or advisors shall be responsible to any
Participant for any action taken or omitted to be taken by it or them hereunder
or under any other Operative Document or in connection herewith or therewith,
except for its or their own gross negligence or willful misconduct. Except as
otherwise provided under this Agreement, Lessor and Agent shall take such action
with respect to the Operative Documents as shall be directed by the Required
Participants.
6.03. Reliance. Lessor or Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, facsimile
or telex) believed by it in good faith to be genuine and correct and to have
been signed or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants and other
experts selected by Lessor or Agent with reasonable care. As to any other
matters not expressly provided for by this Agreement, neither Lessor nor Agent
shall be required to take any action or exercise any discretion, but shall be
required to act or to refrain from acting upon instructions of the Required
Participants and shall in all cases be fully protected by the Participants in
acting, or in refraining from acting, hereunder or under any other Operative
Document in accordance with the instructions of the Required Participants, and
such instructions of the Required Participants and any action taken or failure
to act pursuant thereto shall be binding on all of the Participants.
6.04. Defaults. Neither Lessor nor Agent shall be deemed to have
knowledge or notice of the occurrence of any Default unless Lessor and Agent
have received a written notice from a Participant or Lessee, referring to this
Agreement, describing such Default and stating that such notice is a "Notice of
Default". If Lessor and Agent receive such a notice of the occurrence of a
Default, Agent shall give prompt notice thereof to the Participants. Lessor and
Agent shall take such action with respect to such Default as shall be reasonably
directed by the Required Participants; provided, however, that until Lessor and
Agent shall have received such directions, Lessor or Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interest of the
Participants.
6.05. Indemnification. Without limiting the Obligations of Lessee
hereunder, each Participant agrees to indemnify Lessor and Agent, ratably in
accordance with such Participant's Proportionate Share, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may at
any time be imposed on, incurred by or asserted against Lessor or Agent in any
way relating to or arising out of this Agreement or any documents contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby or the enforcement of any of the terms hereof or thereof; provided,
however, that no Participant shall be liable for any of the foregoing to the
extent they arise from Lessor's or Agent's gross negligence or willful
misconduct. Lessor or Agent shall be fully justified in refusing to take or in
continuing to take any action hereunder unless it shall first be indemnified to
its satisfaction by the Participants against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The obligations of each Participant under this Paragraph 6.05 shall
survive the payment and performance of the Lessee Obligations, the termination
of this Agreement and any
43
<PAGE> 49
Participant ceasing to be a party to this Agreement (with respect to events
which occurred prior to the time such Participant ceased to be a Participant
hereunder).
6.06. Non-Reliance. Each Participant represents that it has,
independently and without reliance on Lessor, Agent, or any other Participant,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of the business, prospects, management, financial condition
and affairs of Lessee and the Subsidiaries and its own decision to enter into
this Agreement and agrees that it will, independently and without reliance upon
Lessor, Agent or any other Participant, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
appraisals and decisions in taking or not taking action under this Agreement or
any other Operative Document. Neither Lessor nor Agent nor any of their
respective affiliates nor any of their respective directors, officers,
employees, agents or advisors shall (a) be required to keep any Participant
informed as to the performance or observance by Lessee or any of its
Subsidiaries of the obligations under this Agreement or any other document
referred to or provided for herein or to make inquiry of, or to inspect the
properties or books of Lessee or any of its Subsidiaries; (b) have any duty or
responsibility to provide any Participant with any credit or other information
concerning Lessee or any of its Subsidiaries which may come into the possession
of Lessor or Agent, except for notices, reports and other documents and
information expressly required to be furnished to the Participants by Lessor or
Agent hereunder; or (c) be responsible to any Participant for (i) any recital,
statement, representation or warranty made by Lessee or any officer, employee or
agent of Lessee in this Agreement or in any of the other Operative Documents,
(ii) the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any Operative Document, (iii) the value or
sufficiency of the Property or the validity or perfection of any of the liens or
security interests intended to be created by the Operative Documents, or (iv)
any failure by Lessee to perform its obligations under this Agreement or any
other Operative Document.
6.07. Resignation or Removal of Agent. Agent may resign at any time
by giving thirty (30) days prior written notice thereof to Lessee and the
Participants, and Agent may be removed at any time with or without cause by the
Required Participants; provided, however, that Agent shall not resign and may
not be removed without cause prior to the Commitment Termination Date without
the consent of Lessee unless a Change of Law makes it unlawful or unreasonably
burdensome for Agent to continue to act in such capacity. Upon any such
resignation or removal, the Required Participants shall have the right to
appoint a successor Agent, which Agent, if not a Participant, shall be
reasonably acceptable to Lessee; provided, however, that Lessee shall have no
right to approve a successor Agent if a Default has occurred and is continuing.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from the duties and obligations thereafter arising
hereunder. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Section VI and any other provision of this Agreement or
any other Operative Document which by its terms survives the termination of this
Agreement shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
44
<PAGE> 50
6.08. Authorization. Agent is hereby authorized by the Participants
to execute, deliver and perform, each of the Operative Documents to which Agent
is or is intended to be a party and each Participant agrees to be bound by all
of the agreements of Agent contained in the Operative Documents.
6.09. Lessor and Agent in their Individual Capacities. Lessor, Agent
and their respective affiliates may make loans to, accept deposits from and
generally engage in any kind of banking or other business with Lessee and its
Subsidiaries and affiliates as though Lessor were not Lessor hereunder and Agent
were not Agent hereunder. With respect to Advances, if any, made by Agent in its
capacity as a Participant, Agent in its capacity as a Participant shall have the
same rights and powers under this Agreement and the other Operative Documents as
any other Participant and may exercise the same as though it were not Agent, and
the terms "Participant" or "Participants" shall include Agent in its capacity as
a Participant.
SECTION 7. MISCELLANEOUS
7.01. Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lessor, Lessee, any Participant or Agent under this Agreement or the other
Operative Documents shall be in writing and faxed, mailed or delivered, if to
Lessor, Lessee or Agent, at its respective facsimile number or address set forth
below or, if to any Participant, at the address or facsimile number specified
beneath the heading "Address for Notices" under the name of such Participant in
Part B of Schedule I (or to such other facsimile number or address for any party
as indicated in any notice given by that party to the other parties). All such
notices and communications shall be effective (a) when sent by Federal Express
or other overnight service of recognized standing, on the Business Day following
the deposit with such service; (b) when mailed, first class postage prepaid and
addressed as aforesaid through the United States Postal Service, upon receipt;
(c) when delivered by hand, upon delivery; and (d) when faxed, upon confirmation
of receipt; provided, however, that any Advance Request, Notice of Rental Period
Selection, Extension Request, Notice of Term Purchase Option Exercise, Notice of
Marketing Option Exercise or Notice of Expiration Date Purchase Option Exercise
delivered to Lessor or Agent shall not be effective until received by Lessor or
Agent.
Lessee: Novellus Systems, Inc.
3970 North First Street
San Jose, CA 95134
Attn: Chief Financial Officer
Telephone: (408) 943-3460
Fax No: (408) 943-3422
Lessor: Lease Plan U.S.A., Inc.
c/o ABN AMRO Bank N.V.
135 South LaSalle Street, Suite 711
Chicago, IL 60603
Attn: David M. Shipley
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<PAGE> 51
Telephone: (312) 904-2183
Fax No: (312) 904-6217
Agent: ABN AMRO Bank N.V.
ABN AMRO Bank North America, Inc.
Capital Markets-Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
Telephone: (212) 314-1724
Fax: (212) 314-1709
With a copy to:
ABN AMRO Bank N.V.
ABN AMRO Bank North America, Inc.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Robin Yim
Telephone: (415) 984-3712
Fax: (415) 362-3524
Each Advance Request, Notice of Rental Period Selection, Extension Request,
Notice of Term Purchase Option Exercise, Notice of Marketing Option Exercise and
Notice of Expiration Date Purchase Option Exercise shall be given by Lessee to
Agent's office located at its address referred to above during its normal
business hours; provided, however, that any such notice received by Agent after
10:00 a.m. on any Business Day shall be deemed received by Agent on the next
Business Day. In any case where this Agreement authorizes notices, requests,
demands or other communications by Lessee to any Lessor Party to be made by
telephone or facsimile, any Lessor Party may conclusively presume that anyone
purporting to be a person designated in any incumbency certificate or other
similar document received by such Lessor Party is such a person.
7.02. Expenses. Lessee shall pay on demand, whether or not any
Advance is made hereunder, (a) all reasonable fees and expenses, including
reasonable attorneys' fees and expenses, incurred by Lessor and Agent in
connection with the preparation, negotiation, execution and delivery of, the
consummation of the transactions contemplated by and the exercise of their
duties under, this Agreement and the other Operative Documents, and the
preparation, negotiation, execution and delivery of amendments and waivers
hereunder and thereunder and (b) all reasonable fees and expenses, including
reasonable attorneys' fees and expenses, incurred by the Lessor Parties in the
enforcement or attempted enforcement of any of the Lessee Obligations or in
preserving any of the Lessor Parties' rights and remedies (including all such
fees and expenses incurred in connection with any "workout" or restructuring
affecting
47
<PAGE> 52
the Operative Documents or the Lessee Obligations or any bankruptcy or
similar proceeding involving Lessee or any of its Subsidiaries). As used herein,
the term "reasonable attorneys' fees and expenses" shall include, without
limitation, allocable costs and expenses of Agent's and Participants' in-house
legal counsel and staff. The obligations of Lessee under this Paragraph 7.02
shall survive the payment and performance of the Lessee Obligations and the
termination of this Agreement.
7.03. Indemnification. To the fullest extent permitted by law, Lessee
agrees to protect, indemnify, defend and hold harmless, on an after-tax basis,
the Lessor Parties and the other Indemnitees from and against any and all
liabilities, losses, damages or expenses of any kind or nature (including
Indemnified Taxes) and from any suits, claims or demands (including in respect
of or for reasonable attorney's fees and other expenses) arising on account of
or in connection with any matter or thing or action or failure to act by
Indemnitees, or any of them, arising out of or relating to the Operative
Documents, any transaction contemplated thereby or the Property (including any
use by Lessee of the Property or the Advances), except to the extent such
liability arises from the willful misconduct or gross negligence of such
Indemnitee. Upon receiving knowledge of any suit, claim or demand asserted by a
third party that any Lessor Party believes is covered by this indemnity, such
Lessor Party promptly shall give Lessee notice of the matter and an opportunity
to defend it, at Lessee's sole cost and expense, with legal counsel reasonably
satisfactory to such Lessor Party. Such Lessor Parties may also require Lessee
to defend the matter. Any failure or delay of any Lessor Party to notify Lessee
of any such suit, claim or demand shall not relieve Lessee of its obligations
under this Paragraph 7.03. The obligations of Lessee under this Paragraph 7.03
shall survive the payment and performance of the Lessee Obligations and the
termination of this Agreement.
7.04. Waivers; Amendments. Any term, covenant, agreement or condition
of this Agreement or any other Operative Document may be amended or waived if
such amendment or waiver is in writing and is signed by Lessor, Lessee and the
Required Participants; provided, however that:
(a) Any amendment, waiver or consent which (i) increases
the Total Commitment, (ii) extends the Scheduled Expiration Date,
(iii) reduces the Rental Rate or any fees or other amounts payable
for the account of the Participants hereunder, (iv) postpones any
date scheduled for any payment of Base Rent or any fees or other
amounts payable for the account of the Participants hereunder or
thereunder, (v) amends this Paragraph 7.04, (vi) amends the
definition of Required Participants or (vii) releases Lessor's
interest in any substantial part of the Property, must be in writing
and signed or approved in writing by all Participants;
(b) Any amendment, waiver or consent which amends Paragraph
2.06 and adversely affects the Tranche A Participants, the Tranche B
Participants or the Tranche C Participants as a group must be in
writing and signed by each Participant that is a member of such
group;
47
<PAGE> 53
(c) Any amendment, waiver or consent which increases or
decreases the Proportionate Share of any Participant must be in
writing and signed by such Participant; and
(d) Any amendment, waiver or consent which affects the
rights or obligations of Agent must be in writing and signed by
Agent.
No failure or delay by any Lessor Party in exercising any right hereunder shall
operate as a waiver thereof or of any other right nor shall any single or
partial exercise of any such right preclude any other further exercise thereof
or of any other right. Unless otherwise specified in such waiver or consent, a
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.
7.05. Successors and Assigns.
(a) Binding Effect. This Agreement and the other Operative
Documents shall be binding upon and inure to the benefit of Lessee,
Lessor, the Participants, Agent and their respective permitted
successors and assigns. All references in this Agreement to any
Person shall be deemed to include all successors and assigns of such
Person.
(b) Participant Assignments.
(i) Any Participant may, at any time, sell and
assign to any other Participant or any Eligible Assignee
(individually, an "Assignee Participant") all or a portion
of its rights and obligations under this Agreement and the
other Operative Documents (such a sale and assignment to be
referred to herein as an "Assignment") pursuant to an
assignment agreement in the form of Exhibit M (an
"Assignment Agreement"), executed by each Assignee
Participant and such assignor Participant (an "Assignor
Participant") and delivered to Agent for its acceptance and
recording in the Register; provided, however, that:
(A) Without the written consent of
Lessor, Agent and, if no Default has occurred and
is continuing, Lessee (which consent of Lessor,
Agent and Lessee shall not be unreasonably
withheld), no Participant may make any Assignment
to any Assignee Participant which is not,
immediately prior to such Assignment, a
Participant hereunder or an Affiliate thereof; or
(B) Without the written consent of
Lessor, Agent and, if no Default has occurred and
is continuing, Lessee (which consent of Lessor,
Agent and Lessee shall not be unreasonably
withheld), no Participant may make any Assignment
of its Outstanding Tranche A Participation Amount
or its Outstanding Tranche B Participation Amount
under either Facility which does not assign and
delegate an equal pro rata interest in (1) such
Participant's Outstanding Tranche A Participation
Amount and its
48
<PAGE> 54
Outstanding Tranche B Participation Amount under
both Facilities, (2) such Participant's Tranche A
Percentage and its Tranche B Percentage under both
Facilities, and (3) such Participant's other
rights, duties and obligations relating to the
Tranche A Portion and the Tranche B Portion of
both Facilities under this Agreement and the other
Operative Documents; or
(C) Without the written consent of
Lessor, Agent and, if no Default has occurred and
is continuing, Lessee (which consent of Lessor,
Agent and Lessee shall not be unreasonably
withheld), no Tranche C Participant may make any
Assignment of its Outstanding Tranche C
Participation Amount under either Facility which
does not assign and delegate an equal pro rata
interest in (1) such Participant's Outstanding
Tranche C Participation Amount under both
Facilities, (2) such Participant's Tranche C
Percentage under both Facilities, and (3) such
Participant's other rights, duties and
obligations relating to the Tranche C Portion of
both Facilities under this Agreement and the
other Operative Documents; or
(D) Without the written consent of
Lessor, Agent and, if no Default has occurred and
is continuing, Lessee (which consent of Lessor,
Agent and Lessee shall not be unreasonably
withheld), no Participant may make any Assignment
to any Assignee Participant if, after giving
effect to such Assignment, the Commitment of such
Participant or such Assignee Participant
hereunder would be less than Five Million Dollars
($5,000,000.00); provided, however, that a
Participant may, without the written consent of
Lessor, Lessee and Agent, make an Assignment
hereunder that reduces its Commitment hereunder
to zero.
Upon such execution, delivery, acceptance and
recording of each Assignment Agreement, from and after the
Assignment Effective Date determined pursuant to such
Assignment Agreement, (y) each Assignee Participant
thereunder shall be a Participant hereunder with a Tranche
A Percentage, Tranche B Percentage, Tranche C Percentage
and Proportionate Share under each Facility as set forth on
Attachment 1 to such Assignment Agreement (under the
caption "Tranche Percentages and Proportionate Shares After
Assignment") and shall have the rights, duties and
obligations of such a Participant under this Agreement and
the other Operative Documents, and (z) the Assignor
Participant thereunder shall be a Participant with a
Tranche A Percentage, Tranche B Percentage, Tranche C
Percentage and Proportionate Share under each Facility as
set forth on Attachment 1 to such Assignment Agreement
(under the caption "Tranche Percentages and Proportionate
Shares After Assignment") , or, if the Proportionate Share
of the Assignor Participant has been reduced to 0%, the
Assignor Participant shall cease to be a Participant and to
have any obligation to fund any portion of any Advance;
provided, however, that any such Assignor Participant which
ceases to be a
49
<PAGE> 55
Participant shall continue to be entitled to the benefits of
any provision of this Agreement which by its terms survives
the termination of this Agreement. Each Assignment Agreement
shall be deemed to amend Schedule I to the extent, and only
to the extent, necessary to reflect the addition of each
Assignee Participant, the deletion of each Assignor
Participant which reduces its Proportionate Share to 0% and
the resulting adjustment of Tranche A Percentages, Tranche B
Percentages, Tranche C Percentages and Proportionate Shares
arising from the purchase by each Assignee Participant of
all or a portion of the rights and obligations of an
Assignor Participant under this Agreement and the other
Operative Documents. Each Assignee Participant which was not
previously a Participant hereunder and which is not
incorporated under the laws of the United States of America
or a state thereof shall, within three (3) Business Days of
becoming a Participant, deliver to Lessee and Agent two duly
completed copies of United States Internal Revenue Service
Form 1001 or 4224 (or successor applicable form), as the
case may be, certifying in each case that such Participant
is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income
taxes. (Without limiting the generality of any of the
preceding provisions of this clause (i) of Subparagraph
7.05(b), no Participant may, if Lessee shall object in
writing, make any Assignment to any Assignee Participant
that, at the time of such Assignment, (1) has a basis for
demanding any payment under Subparagraph 2.12(c) or
Subparagraph 2.12(d) in excess of the pro rata amount that
then could be demanded thereunder by the Participant
proposing to make such Assignment or (2) would require
Borrower to make any payment under Subparagraph 2.13(a) on
account of payments to such Assignee Participant in excess
of the pro rata amount that Lessee was then required to make
thereunder on account of payments to the Participant
proposing to make such Assignment.)
(ii) Agent shall maintain at its address referred
to in Paragraph 7.01 a copy of each Assignment Agreement
delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Participants
and the Tranche A Percentage, Tranche B Percentage, Tranche
C Percentage and Proportionate Share of each Participant
under each Facility from time to time. The entries in the
Register shall be conclusive in the absence of manifest
error, and Lessee, Agent and the Participants may treat each
Person whose name is recorded in the Register as the owner
of the interests recorded therein for all purposes of this
Agreement. The Register shall be available for inspection by
Lessee or any Participant at any reasonable time and from
time to time upon reasonable prior notice.
(iii) Upon its receipt of an Assignment Agreement
executed by an Assignor Participant and an Assignee
Participant (and, to the extent required by clause (i) of
this Subparagraph 7.05(b), by Lessor, Agent and Lessee),
together with payment to Agent by Assignor Participant of a
registration and processing fee of $2,500, Agent shall (A)
promptly accept such Assignment Agreement and (B) on the
Assignment Effective Date determined pursuant thereto record
the
51
<PAGE> 56
information contained therein in the Register and give
notice of such acceptance and recordation to Lessor, the
Participants and Lessee. Agent may, from time to time at its
election, prepare and deliver to Lessor, the Participants
and Lessee a revised Schedule I reflecting the names,
addresses and respective Proportionate Shares of all
Participants then parties hereto.
(iv) Subject to Subparagraph 7.13(g), the Lessor
Parties may disclose the Operative Documents and any
financial or other information relating to Lessee or any
Subsidiary to each other or to any potential Assignee
Participant.
(c) Participant Subparticipations. Any Participant may at
any time sell to one or more Persons ("Subparticipants")
subparticipation interests in the rights and interests of such
Participant under this Agreement and the other Operative Documents.
In the event of any such sale by a Participant of subparticipation
interests, such Participant's obligations under this Agreement and
the other Operative Documents shall remain unchanged, such
Participant shall remain solely responsible for the performance
thereof and Lessee and the other Lessor Parties shall continue to
deal solely and directly with such Participant in connection with
such Participant's rights and obligations under this Agreement. Any
agreement pursuant to which any such sale is effected may require the
selling Participant to obtain the consent of the Subparticipant in
order for such Participant to agree in writing to any amendment,
waiver or consent of a type specified in clause (i), (ii), (iii) or
(iv) of Subparagraph 7.04(a) but may not otherwise require the
selling Participant to obtain the consent of such Subparticipant to
any other amendment, waiver or consent hereunder. Lessee agrees that
any Participant which has transferred any subparticipation interest
shall, notwithstanding any such transfer, be entitled to the full
benefits accorded such Participant under Paragraph 2.12, Paragraph
2.13, and Paragraph 2.14, as if such Participant had not made such
transfer.
(d) Lessor Assignments. Lessor may, upon one (1) month's
prior written notice to Lessee and Agent, sell and assign all of its
right, title and interest in the Property and its rights, powers,
privileges, duties and obligations under this Agreement and the other
Operative Documents, provided that:
(i) If such sale and assignment is effected after
either (A) the occurrence of a Change of Law which makes it
unlawful or unreasonably burdensome for Lessor to hold legal
or beneficial title to the Property or to perform its
obligations and duties under this Agreement and the other
Operative Documents or (B) the resignation or removal of the
Agent which was the Agent at the time Lessor became the
Lessor, the purchaser/assignee (the "successor Lessor")
shall be either (1) a Participant or an Eligible Assignee
that is a multi-asset Person having substantial assets
beyond its interest in the Property and the Operative
Documents or (2) a Person approved as provided in clause
(ii) below; or
51
<PAGE> 57
(ii) If such sale and assignment is effected in
any other circumstance, the successor Lessor shall be
approved in writing by Agent, Required Participants and, if
no Default has occurred and is continuing, Lessee (which
consents of Agent, Required Participants and Lessee shall
not be unreasonably withheld), provided that Lessee shall
have no obligation to consent to any such sale and
assignment prior to the Commitment Termination Date; and
(iii) The successor Lessor executes such
documents, instruments and agreements as may reasonably be
necessary to evidence its agreement to assume all of the
obligations and duties of the Lessor under this Agreement
and the other Operative Documents.
Upon the consummation of any such sale and assignment, (A) the
successor Lessor shall become the "Lessor" and shall succeed to and
become vested with all the rights, powers, privileges, duties and
obligations of the Lessor under this Agreement and the other
Operative Documents and (B) the retiring Lessor shall be discharged
from the duties and obligations of the Lessor thereafter arising
under this Agreement and the other Operative Documents. After any
retiring Lessor's discharge as the Lessor, the provisions of Section
VI and any other provision of this Agreement or any other Operative
Document which by its terms survives the termination of this
Agreement shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the
Lessor. Unless a sale and assignment by Lessor of its right, title
and interest in the Property under this subparagraph is made by
Lessor pursuant to clause (i) above, Lessor shall pay any real
property transfer taxes payable as a result of such sale and
assignment.
7.06. Setoff. In addition to any rights and remedies of the
Participants provided by law, each Participant shall have the right, with the
prior written consent of Agent, but without prior notice to or consent of
Lessee, any such notice and consent being expressly waived by Lessee to the
extent permitted by applicable law, upon the occurrence and during the
continuance of an Event of Default, to set-off and apply against the Lessee
Obligations, whether matured or unmatured, any amount owing from such
Participant to Lessee, at or at any time after, the occurrence of such Event of
Default. The aforesaid right of set-off may be exercised by such Participant
against Lessee or against any trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, receiver or execution, judgment or
attachment creditor of Lessee or against anyone else claiming through or against
Lessee or such trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Participant prior to the occurrence of an Event of Default.
Each Participant agrees promptly to notify Lessee after any such set-off and
application made by such Participant, provided that the failure to give such
notice shall not affect the validity of such set-off and application.
7.07. No Third Party Rights. Nothing expressed in or to be implied
from this Agreement is intended to give, or shall be construed to give, any
Person, other than the parties hereto and their permitted successors and assigns
hereunder, any benefit or legal or equitable
52
<PAGE> 58
right, remedy or claim under or by virtue of this Agreement or under or by
virtue of any provision herein.
7.08. Partial Invalidity. If at any time any provision of this
Agreement or any other Operative Document is or becomes illegal, invalid or
unenforceable in any respect under the law or any jurisdiction, neither the
legality, validity or enforceability of the remaining provisions of this
Agreement or the other Operative Documents nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
7.09. JURY TRIAL. EACH OF LESSEE AND THE LESSOR PARTIES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY AS TO ANY ISSUE RELATING TO THE OPERATIVE DOCUMENTS IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OPERATIVE
DOCUMENT.
7.10. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
7.11. No Joint Venture, Etc. Neither this Agreement nor any other
Operative Document nor any transaction contemplated hereby or thereby shall be
construed to (a) constitute a partnership or joint venture between Lessee and
any Lessor Party or (b) impose upon any Lessor Party any agency relationship
with or fiduciary duty to Lessee.
7.12. Usury Savings Clause. Nothing contained in this Agreement or
any other Operative Documents shall be deemed to require the payment of interest
or other charges by Lessee in excess of the amount the applicable Lessor Parties
may lawfully charge under applicable usury laws. In the event any Lessor Party
shall collect monies which are deemed to constitute interest which would
increase the effective interest rate to a rate in excess of that permitted to be
charged by applicable law, all such sums deemed to constitute excess interest
shall, upon such determination, at the option of Lessor, be returned to Lessee
or credited against other Lessee Obligations.
7.13. Confidentiality. No Lessor Party shall disclose to any Person
any information with respect to Lessee or any of its Subsidiaries which is
furnished pursuant to this Agreement or under the other Operative Documents,
except that any Lessor Party may disclose any such information (a) to its own
directors, officers, employees, auditors, counsel and other advisors and to its
Affiliates; (b) to any other Lessor Party; (c) which is otherwise available to
the public; (d) if required or appropriate in any report, statement or testimony
submitted to any Governmental Authority having or claiming to have jurisdiction
over such Lessor Party; (e) if required or appropriate in response to any
summons or subpoena or in connection with any litigation; (f) to comply with any
Requirement of Law applicable to such Lessor Party; (g) to any Assignee
Participant or Subparticipant or any prospective Assignee Participant or
Subparticipant, provided that such Assignee Participant or Subparticipant or
prospective Assignee Participant or Subparticipant agrees to be bound by this
Paragraph 7.13; or (h) otherwise with the prior consent
53
<PAGE> 59
of Lessee; provided, however, that any disclosure made in violation of this
Agreement shall not affect the obligations of Lessee and its Subsidiaries under
this Agreement and the other Operative Documents.
[The first signature page follows.]
54
<PAGE> 60
IN WITNESS WHEREOF, Lessee, Lessor, the Participants and Agent have
caused this Agreement to be executed as of the day and year first above written.
LESSEE: NOVELLUS SYSTEMS, INC.
By:_____________________________
Name:________________________
Title:_______________________
LESSOR: LEASE PLAN U.S.A., INC.
By:_____________________________
Name:________________________
Title:_______________________
AGENT: ABN AMRO BANK N.V.
By:______________________________
Name:_________________________
Title:________________________
By:___________________________
Name:_________________________
Title:________________________
PARTICIPANTS: ABN AMRO BANK N.V.
By:______________________________
Name:_________________________
Title:________________________
By:______________________________
Name:_________________________
Title:________________________
55
55
<PAGE> 61
PARTICIPANTS: LEASE PLAN NORTH AMERICA, INC.
By:_____________________________
Name:________________________
Title:_______________________
56
<PAGE> 1
EXHIBIT 10.5
Recording requested by and when recorded return to:
Thomas Y. Coleman, Esq.
Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
============================================================================
FACILITY 1 LEASE AGREEMENT
DEED OF TRUST WITH ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
BETWEEN
NOVELLUS SYSTEMS, INC.
AND
LEASE PLAN U.S.A., INC.
OCTOBER 15, 1997
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. INTERPRETATION............................................................2
1.01. Definitions..................................................................2
1.02. Rules of Construction........................................................2
SECTION 2. BASIC PROVISIONS..........................................................2
2.01. Lease of the Facility 1 Property.............................................2
2.02. Term.........................................................................2
2.03. Rent.........................................................................3
2.04. Use..........................................................................5
2.05. As Is Lease..................................................................5
2.06. Nature of Transaction........................................................5
2.07. Security, Etc................................................................6
SECTION 3. OTHER LESSEE AND LESSOR RIGHTS AND OBLIGATIONS............................8
3.01. Maintenance, Repair, Etc.....................................................8
3.02. Risk of Loss.................................................................8
3.03. Insurance....................................................................8
3.04. Casualty and Condemnation...................................................11
3.05. Taxes.......................................................................14
3.06. Environmental Matters.......................................................14
3.07. Liens, Easements, Etc.......................................................16
3.08. Subletting..................................................................17
3.09. Utility Charges.............................................................17
3.10. Removal of Facility 1 Property..............................................17
3.11. Compliance with Governmental Rules and Insurance Requirements...............17
3.12. Permitted Contests..........................................................18
3.13. Lessor Obligations; Right to Perform Lessee Obligations.....................18
3.14. Inspection Rights...........................................................18
SECTION 4. EXPIRATION DATE..........................................................19
4.01. Termination by Lessee Prior to Scheduled Expiration Date....................19
4.02. Surrender of Facility 1 Property............................................19
4.03. Holding Over................................................................19
SECTION 5. DEFAULT..................................................................19
5.01. Events of Default...........................................................19
5.02. General Remedies............................................................22
5.03. Lease Remedies..............................................................22
5.04. Loan Remedies...............................................................23
5.05. Remedies Cumulative.........................................................26
5.06. No Cure or Waiver...........................................................26
5.07. Exercise of Rights and Remedies.............................................27
SECTION 6. MISCELLANEOUS............................................................27
6.01. Notices.....................................................................27
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.02. Waivers; Amendments.........................................................27
6.03. Successors and Assigns......................................................27
6.04. No Third Party Rights.......................................................27
6.05. Partial Invalidity..........................................................27
6.06. Governing Law...............................................................27
6.07. Counterparts................................................................28
6.08. Nature of Lessee's Obligations..............................................28
EXHIBITS
A Facility 1 Land (2.01(a))
</TABLE>
-ii-
<PAGE> 4
FACILITY 1 LEASE AGREEMENT
DEED OF TRUST WITH ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS FACILITY 1 LEASE AGREEMENT, CONSTRUCTION DEED OF TRUST WITH
ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING (this "Agreement"
herein), dated as of October 15, 1997 is entered into by and between:
(1) NOVELLUS SYSTEMS, INC., a California corporation ("Lessee");
and
(2) LEASE PLAN U.S.A., INC., a Georgia corporation ("Lessor").
RECITALS
A. Lessee has requested Lessor and the Persons which are "Participants"
under the Participation Agreement referred to in Recital B below (such Persons
to be referred to collectively as the "Participants") to provide to Lessee a
certain lease facility pursuant to which:
(1) Lessor would (a) purchase certain parcels of land designated
by Lessee, (b) lease such property to Lessee as and when acquired by
Lessor, (c) make advances to finance certain related expenses, and (d)
grant to Lessee the right to purchase such parcels of property; and
(2) The Participants would participate in such lease facility by
(a) funding the purchase prices and other advances to be made by Lessor
and (b) acquiring participation interests in the rental and certain
other payments to be made by Lessee.
B. Pursuant to a Participation Agreement dated of even date herewith
(the "Participation Agreement") among Lessee, Lessor, the Participants and ABN
AMRO Bank N.V., as agent for the Participants (in such capacity, "Agent"),
Lessor and the Participants have agreed to provide such lease facility upon the
terms and subject to the conditions set forth therein, including without
limitation the execution and delivery of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
<PAGE> 5
SECTION 1. INTERPRETATION.
1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Operative Document, each term set forth in Schedule 1.01 to the
Participation Agreement, when used in this Agreement or any other Operative
Document, shall have the respective meaning given to that term in such Schedule
1.01 or in the provision of this Agreement or other document, instrument or
agreement referenced in such Schedule 1.01.
1.02. Rules of Construction. Unless otherwise indicated in this
Agreement or any other Operative Document, the rules of construction set forth
in Schedule 1.02 to the Participation Agreement shall apply to this Agreement
and the other Operative Documents.
SECTION 2. BASIC PROVISIONS.
2.01. Lease of the Facility 1 Property. Subject to the acquisition
thereof by Lessor pursuant to the Participation Agreement and applicable
Acquisition Agreements, Lessor agrees to lease to Lessee and Lessee agrees to
lease from Lessor the following property (the "Facility 1 Property") to the
extent of Lessor's estate, right, title and interest therein, thereto or
thereunder:
(a) All lots, pieces, tracts and parcels of land described in
Exhibit A (the "Facility 1 Land"), but excluding the Improvements
thereto;
(b) All Appurtenant Rights;
(c) All Related Permits and Related Agreements; and
(d) All accessions and accretions to and replacements and
substitutions for the foregoing.
2.02. Term.
(a) Original Term. The original term of this Agreement shall
commence on the Closing Date (the "Commencement Date") and shall end on
the first Business Day of October, 2002 (such date as it may be extended
pursuant to Subparagraph 2.02(b) to be referred to as the "Scheduled
Expiration Date").
(b) Extensions. Lessee may request Lessor to extend the
Scheduled Expiration Date in effect at any time for an additional period
of three (3) years, as provided in Subparagraph 2.09(b) of the
Participation Agreement. If Lessor and each Participant consents to such
a request in accordance with such provision, the definition of
"Scheduled Expiration Date" set forth in Subparagraph 2.02(a) shall be
deemed extended to the date which is the first business day of October,
2005. Lessee acknowledges that neither Lessor nor any Participant has
any obligation or commitment (either express or
2
<PAGE> 6
implied) to extend, or consent to the extension of, the Scheduled
Expiration Date at any time.
2.03. Rent.
(a) Base Rent.
(i) Lessee shall pay as base rent hereunder ("Base
Rent") for each Rental Period (or portion thereof) an amount
equal to the sum of the Interest Component and Principal
Component for such Rental Period determined as follows:
(A) "Interest Component" shall mean, with
respect to any Rental Period, the sum of the following:
(1) The product of (x) the Rental Rate
for such Rental Period, times (y) the
Outstanding Lease Amount under Facility 1 on the
first day of such Rental Period (which shall
include any Advance under Facility 1 made on the
first day of such Rental Period), times (z) a
fraction, the numerator of which is the number
of days in such Rental Period and the
denominator of which is 360; and
(2) If Lessor makes an Advance under
Facility 1(other than any Advance on the Closing
Date) during such Rental Period on any day other
than the first day of such Rental Period, the
product of (x) the LIBOR Rental Rate for the
Stub Period if the Stub Period is greater than
seven (7) days or the Alternate Rental Period
for the Stub Period if the Stub Period is Seven
(7) days or less, times (y) the amount of such
Advance, times (z) a fraction, the numerator of
which is the number of days in such Stub Period
and the denominator of which is 360.
If the Rental Rate shall change during any Rental
Period, the Rental Rate for such Rental Period shall be
the weighted average of the Rental Rates in effect from
time to time during such Rental Period.
(B) "Principal Component" shall mean, with
respect to any Rental Period, zero Dollars ($0.00).
(ii) The Term shall consist of the following rental
periods (individually, a "Rental Period"):
(A) The period which begins on the Commencement
Date and ends on the first Business Day in the first
calendar month immediately following the month in which
the Commencement Date occurs;
3
<PAGE> 7
(B) Each successive period thereafter which
begins on the last day of the immediately preceding
Rental Period and ends one (1) month thereafter on the
first Business Day of a calendar month through and
including the Commitment Termination Date; and
(C) Each successive period thereafter which
begins on the last day of the immediately preceding
Rental Period and ends one (1), two (2), three (3) or
six (6) months thereafter, as determined in accordance
with this clause (ii), on the first Business Day of a
calendar month through and including the Scheduled
Expiration Date.
Lessee may select a Rental Period of one (1), two (2), three (3)
or six (6) months for the Rental Period which begins on the
Commitment Termination Date or for any Rental Period thereafter
by delivering to Lessor, at least three (3) Business Days prior
to the first day of such Rental Period, a written notice of such
selection (a "Notice of Rental Period Selection"); provided,
however, that (1) each Rental Period shall begin and end on the
first Business Day of a calendar month, (2) no Rental Period
shall end after the Scheduled Expiration Date, (3) no Rental
Period shall be longer than one (1) month if a Default has
occurred and is continuing on the date three (3) Business Days
prior to the first day of such Rental Period and (4) each Rental
Period for which Lessee fails to make a selection in accordance
with this clause (ii) shall be one (1) month. Each Notice of
Rental Period Selection shall be delivered by first-class mail or
facsimile as required by Subparagraph 2.02(a) and Paragraph 7.01
of the Participation Agreement; provided, however, that Lessee
shall promptly deliver the original of any Notice of Rental
Period Selection initially delivered by facsimile.
(iii) The rental rate for each Rental Period ("Rental
Rate") shall be the LIBOR Rental Rate for such Rental Period,
except as follows:
(A) If the Commencement Date is not the first
Business Day of a month, the Rental Rate for the first
Rental Period (which begins on the Commencement Date)
shall be the LIBOR Rental Rate for the Stub Period for
the Acquisition Advance made on the Commencement Date if
such Stub Period is greater than seven (7) days or the
Alternate Rental Rate for such Stub Period if such Stub
Period is seven (7) days or less;
(B) The Rental Rate applicable during any Stub
Period to that portion of the Outstanding Lease Amount
under Facility 1 equal to the Acquisition Advance made
on the first day of such Stub Period shall be the LIBOR
Rental Rate for such Stub Period if such Stub Period is
greater than seven (7) days or the Alternate Rental Rate
for such Stub Period if such Stub Period is seven (7)
days or less: and
4
<PAGE> 8
(C) The Rental Rate for any Rental Period (or
portion thereof) during which the LIBOR Rental Rate is
unavailable pursuant to Subparagraph 2.12(a) or
Subparagraph 2.12(b) of the Participation Agreement
shall be the Alternate Rental Rate.
(iv) Lessee shall pay Base Rent in arrears on (A) the
last day of each Rental Period and, in the case of any Rental
Period which exceeds three (3) months, each day occurring every
three (3) months after the first day of such Rental Period
(individually, a "Scheduled Rent Payment Date") and (B) the
Expiration Date.
(b) Supplemental Rent. Lessee shall pay as supplemental rent
hereunder ("Supplemental Rent") all amounts (other than Base Rent, the
purchase price payable by Lessee for any purchase of the Facility 1
Property by Lessee pursuant to the Facility 1 Purchase Agreement and the
Residual Value Guaranty Amount payable under the Facility 1 Purchase
Agreement) payable by Lessee under this Agreement and the other
Operative Documents. Lessee shall pay all Supplemental Rent amounts on
the dates specified in this Agreement and the other Operative Documents
for the payment of such amounts or, if no date is specified for the
payment of any such amount, upon the demand of Lessor or any other
Person to whom such amount is payable.
2.04. Use. Lessee may use the Facility 1 Property for office, research
and development, warehouse and manufacturing purposes, and for any other purpose
which is in compliance with applicable zoning laws and ordinances for the
Facility 1 Property.
2.05. As Is Lease. Lessee has conducted, or will conduct from time to
time with regard to property that may be added hereto after the date hereof, all
due diligence which it deems appropriate regarding the Facility 1 Property and
agrees that no Lessor Party has any obligation to conduct any such due
diligence. Lessee is leasing the Facility 1 Property "as is, with all faults"
without any representation, warranty, indemnity or undertaking by any Lessor
Party regarding any aspect of the Facility 1 Property, including (a) the
condition of the Facility 1 Property; (b) title to the Facility 1 Property
(including possession of the Facility 1 Property by any Person or the existence
of any Lien or any other right, title or interest in or to any of the Facility 1
Property in favor of any Person); (c) the value, habitability, usability,
design, operation or fitness for use of the Facility 1 Property; (d) the
availability or adequacy of utilities and other services to the Facility 1
Property; (e) any latent, hidden or patent defect in the Facility 1 Property;
(f) the zoning or status of the Facility 1 Property or any other restrictions on
the use of the Facility 1 Property; (g) the economics of the Facility 1
Property; (h) any Casualty or Condemnation; or (i) the compliance of the
Facility 1 Property with any applicable Governmental Rule or Insurance
Requirement; provided, however, that Lessor shall be obligated to remove Lessor
Liens to the extent required in Subparagraph 5.04(b) of the Participation
Agreement. Without limiting the generality of the foregoing, Lessee specifically
waives any covenant of quiet enjoyment except as otherwise provided in
Subparagraph 5.04(b) of the Participation Agreement.
5
<PAGE> 9
2.06. Nature of Transaction. As more fully provided in Paragraph 2.10 of
the Participation Agreement, Lessee and the Lessor Parties intend that the
transaction evidenced by this Agreement and the other Operative Documents
constitute an operating lease for accounting purposes and a loan secured by the
Facility 1 Property for all other purposes, including federal, state and local
income tax purposes and commercial, real estate and bankruptcy law purposes.
2.07. Security, Etc. In order to secure the Lessee Obligations and
otherwise to assure the Lessor Parties the benefits hereof in the event that the
transaction evidenced by this Agreement and the other Operative Documents is,
pursuant to the intent of Lessee and the Lessor Parties, treated as a loan for
certain purposes, Lessee hereby makes the following grants and agrees as
follows:
(a) Real Property Security. As security for the Lessee
Obligations, Lessee hereby irrevocably and unconditionally grants,
conveys, transfers and assigns to Lessor, in trust for the benefit of
the Lessor Parties, with power of sale and right of entry and
possession, all estate, right, title and interest of Lessee in the
following property, whether now owned or hereafter acquired,
(collectively, the "Real Property Collateral"):
(i) The Facility 1 Land and all Appurtenant Rights, but
excluding, all Improvements to the Facility 1 Land;
(ii) All Subleases and Issues and Profits to the extent
such property constitutes real property;
(iii) All Related Agreements and Related Permits to the
extent such property constitutes real property;
(iv) All other Facility 1 Property to the extent such
property constitutes real property; and
(v) All proceeds of the foregoing, including Casualty
and Condemnation Proceeds.
(b) Personal Property Security. As security for the Lessee
Obligations, Lessee hereby irrevocably and unconditionally assigns and
grants to Lessor, for the benefit of the Lessor Parties, a security
interest in all estate, right, title and interest of Lessee in the
following property, whether now owned or hereafter acquired,
(collectively, the "Personal Property Collateral"):
(i) All Subleases and Issues and Profits to the extent
such property constitutes personal property;
(ii) All Related Agreements and Related Permits to the
extent such property constitutes personal property;
6
<PAGE> 10
(iii) All deposit accounts, instruments, investment
property and monies held by any Lessor Party in connection with
this Agreement or any other Operative Document (including any
Repair and Restoration Account but excluding Cash Collateral
held by any Lessor Party pursuant to the Cash Collateral
Agreement);
(iv) All other Facility 1 Property to the extent such
property constitutes personal property;
(v) All proceeds of the foregoing, including Casualty
and Condemnation Proceeds.
(Cash Collateral held by Lessor Parties pursuant to the Cash Collateral
Agreement secures only the Lessee Obligations under the Purchase
Agreement.)
(c) Absolute Assignment of Subleases, Issues and Profits. Lessee
hereby irrevocably assigns to Lessor, for the benefit of the Lessor
Parties, all of Lessee's estate, right, title and interest in, to and
under the Subleases and the Issues and Profits, whether now owned or
hereafter acquired. This is a present and absolute assignment, not an
assignment for security purposes only, and Lessor's right to the
Subleases and Issues and Profits is not contingent upon, and may be
exercised without possession of, the Facility 1 Property.
(i) Until the occurrence of an Event of Default, Lessee
shall have a revocable license to collect and retain the Issues
and Profits as they become due. Upon the occurrence of an Event
of Default, such license shall automatically terminate, and
Lessor may collect and apply the Issues and Profits pursuant to
Subparagraph 5.02(d) without further notice to Lessee or any
other party and without taking possession of the Facility 1
Property. All Issues and Profits thereafter collected by Lessee
shall be held by Lessee as trustee in a constructive trust for
the benefit of Lessor. Lessee hereby irrevocably authorizes and
directs the sublessees under the Subleases, without any need on
their part to inquire as to whether an Event of Default has
actually occurred or is then existing, to rely upon and comply
with any notice or demand by Lessor for the payment to Lessor of
any rental or other sums which may become due under the Subleases
or for the performance of any of the sublessees' undertakings
under the Subleases. Collection of any Issues and Profits by
Lessor shall not cure or waive any default or notice of default
hereunder or invalidate any acts done pursuant to such notice.
(ii) The foregoing irrevocable assignment shall not cause
any Lessor Party to be (A) a mortgagee in possession; (B)
responsible or liable for (1) the control, care, management or
repair of the Facility 1 Property or for performing any of
Lessee's obligations or duties under the Subleases, (2) any waste
committed on the Facility 1 Property by the sublessees under any
of the Subleases or by any other Persons, (3) any dangerous or
defective condition of the Facility 1 Property, or (4) any
negligence in the management, upkeep, repair or control of
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the Facility 1 Property resulting in loss or injury or death to
any sublessee, licensee, employee, invitee or other Person; or
(C) responsible for or impose upon any Lessor Party any duty to
produce rents or profits. No Lessor Party, in the absence of
gross negligence or willful disregard on its part, shall be
liable to Lessee as a consequence of (y) the exercise or failure
to exercise any of the rights, remedies or powers granted to
Lessor hereunder or (z) the failure or refusal of Lessor to
perform or discharge any obligation, duty or liability of Lessee
arising under the Subleases.
SECTION 3. OTHER LESSEE AND LESSOR RIGHTS AND OBLIGATIONS.
3.01. Maintenance, Repair, Etc.
(a) General. Lessee shall not permit any waste of the Facility 1
Property, except for ordinary wear and tear, and shall, at its sole cost
and expense, maintain the Facility 1 Property in accordance with all
applicable Governmental Rules and Insurance Requirements and on a basis
consistent with the operation and maintenance of commercial properties
comparable in type and location to the Facility 1 Property and in
compliance with prudent industry practice.
(b) Abandonment. Lessee shall not abandon the Facility 1
Property or any material portion thereof for any period in excess of
thirty (30) consecutive days during the term hereof, except as a part of
any New Improvements or Modifications as permitted herein.
(c) Maintenance. Lessee shall maintain the Facility 1 Property
and each material portion thereof in a manner consistent with other
similar properties in the San Jose area, except as a part of any New
Improvements undertaken pursuant to the Facility 2 Lease.
3.02. Risk of Loss. Lessee assumes all risks of loss arising from any
Casualty or Condemnation which arises or occurs prior to the Expiration Date or
while Lessee is in possession of the Facility 1 Property and all liability for
all personal injuries and deaths and damages to property suffered by any Person
on or in connection with the Facility 1 Property which arises or occurs prior to
the Expiration Date or while Lessee is in possession of the Facility 1 Property,
except in each case to the extent any such loss or liability is primarily caused
by the gross negligence or willful misconduct of a Lessor Party. Lessee hereby
waives the provisions of California Civil Code Sections 1932(1), 1932(2) and
1933(4), and any and all other applicable existing or future Governmental Rules
permitting the termination of this Agreement as a result of any Casualty or
Condemnation, and Lessor shall in no event be answerable or accountable for any
risk of loss of or decrease in the enjoyment and beneficial use of the Facility
1 Property as a result of any such event.
3.03. Insurance.
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(a) Coverage. Lessee, at its sole cost and expense, shall carry
and maintain the following insurance coverage:
(i) At all times during the Term, commercial liability
insurance covering claims for injuries or death sustained by
persons or damage to property while on the Facility 1 Property,
and workers' compensation insurance; and
(ii) At all times during the Term as appropriate, such
other insurance of the types customarily carried by a reasonably
prudent Person owning or operating properties similar to the
Facility 1 Property in the same geographic area as the Facility
1 Property.
Except as otherwise specifically required above, such insurance shall be
in amounts, in a form and with deductibles approved by Lessor, which
approval shall not be unreasonably withheld.
(b) Carriers. Any insurance carried and maintained by Lessee
pursuant to this Paragraph 3.03 shall be underwritten by an insurance
company which (i) has, at the time such insurance is placed and at the
time of each renewal thereof, a general policyholder rating of "A" and a
financial rating of at least 8 from A.M. Best and Company or any
successor thereto (or if there is none, an organization having a similar
national reputation) or (ii) is otherwise approved by Lessor and
Required Participants.
(c) Terms. Each insurance policy maintained by Lessee pursuant
to this Paragraph 3.03 shall provide as follows, whether through
endorsements or otherwise:
(i) Lessor and the Agent shall be named as additional
insured, in the case of each policy of liability insurance, or
additional loss payee, in the case of each policy of property
insurance.
(ii) In respect of the interests of Lessor in the
policy, the insurance shall not be invalidated by any action or
by inaction of Lessee or by any Person having temporary
possession of the Facility 1 Property while under contract with
Lessee to perform maintenance, repair, alteration or similar
work on the Facility 1 Property, and shall insure the interests
of Lessor regardless of any breach or violation of any warranty,
declaration or condition contained in the insurance policy by
Lessee, Lessor or any other additional insured (other than by
such additional insured, as to such additional insured);
provided, however, that the foregoing shall not be deemed to (A)
cause such insurance policies to cover matters otherwise
excluded from coverage by the terms of such policies or (B)
require any insurance to remain in force notwithstanding
non-payment of premiums except as provided in clause (iii)
below.
(iii) If the insurance policy is canceled for any reason
whatsoever, or substantial change is made in the coverage that
affects the interests of Lessor, or if the insurance coverage is
allowed to lapse for non-payment of premium, such
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cancellation, change or lapse shall not be effective as to
Lessor for thirty (30) days after receipt by Lessor of written
notice from the insurers of such cancellation, change or lapse.
(iv) No Lessor Party shall have any obligation or
liability for premiums, commissions, assessments, or calls in
connection with the insurance.
(v) The insurer shall waive any rights of set-off or
counterclaim or any other deduction, whether by attachment or
otherwise, that it may have against any Lessor Party.
(vi) The insurance shall be primary without right of
contribution from any other insurance that may be carried by any
Lessor Party with respect to its interest in the Facility 1
Property.
(vii) The insurer shall waive any right of subrogation
against any Lessor Party.
(viii) All provisions of the insurance, except the
limits of liability, shall operate in the same manner as if
there were a separate policy covering each insured party.
(ix) The insurance shall not be invalidated should
Lessee or any Lessor Party waive, in writing, prior to a loss,
any or all rights of recovery against any Person for losses
covered by such policy, nor shall the insurance in favor of any
Lessor Party or Lessee, as the case may be, or their respective
rights under and interests in said policies be invalidated or
reduced by any act or omission or negligence of any Lessee Party
or Lessor, as the case may be, or any other Person having any
interest in the Facility 1 Property.
(x) All insurance proceeds in respect of any loss or
occurrence with a value of less than two million five hundred
thousand dollars ($2,500,000) shall be paid to and adjusted
solely by Lessee. All other losses shall be adjusted jointly by
Lessor and Lessee with all proceeds for losses in excess of two
million five hundred thousand dollars ($2,500,000) paid to
Lessor, subject to the applicable provisions of the Operative
Documents, except from and after the date on which the insurer
receives written notice from Lessor that an Event of Default
exists (and unless and until such insurer receives written
notice from Lessor that all Events of Default have been cured),
all losses shall be adjusted solely by, and all insurance
proceeds shall be paid solely to, Lessor.
(xi) Each policy shall contain a standard form mortgage
endorsement in favor of Lessor.
(d) Evidence of Insurance. Lessee, at its sole cost and expense,
shall furnish to Lessor from time to time upon the request of Lessor
such certificates or other
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documents as Lessor may reasonably request to evidence Lessee's
compliance with the insurance requirements set forth in this Paragraph
3.03.
(e) Release of Lessor Parties. Lessee hereby waives, releases and
discharges each Lessor Party and its directors, officers, employees,
agents and advisors from all claims whatsoever arising out of any loss,
claim, expense or damage to or destruction covered or coverable by
insurance required under this Paragraph 3.03 notwithstanding that such
loss, claim, expense or damage may have been caused by any such Person,
and, as among Lessee and such Persons, Lessee agrees to look to the
insurance coverage only in the event of such loss.
3.04. Casualty and Condemnation.
(a) Notice. Lessee shall give Lessor prompt written notice of
the occurrence of any Casualty affecting, or the institution of any
proceedings for the Condemnation of, the Facility 1 Property or any
portion thereof.
(b) Repair or Purchase Option. After the occurrence of any
Casualty or Condemnation affecting the Facility 1 Property or any
portion thereof, Lessee shall either (i) repair and restore the Facility
1 Property as required by Subparagraph 3.04(c) or (ii) exercise the Term
Purchase Option and purchase the Facility 1 Property pursuant to the
Purchase Agreement; provided, however, that Lessee may not elect to
repair and restore the Facility 1 Property if an Event of Default has
occurred and is continuing unless Lessor and the Required Participants
shall consent in writing. Not later than one (1) month after the
occurrence of any Casualty or Condemnation, Lessee shall deliver to
Lessor a written notice indicating whether it elects to repair and
restore or purchase the Facility 1 Property
(c) Repair and Restoration. If Lessee elects to repair and
restore the Facility 1 Property following any Casualty or Condemnation,
Lessee shall diligently proceed to repair and restore the Facility 1
Property to the condition in which it existed immediately prior to such
Casualty or Condemnation and shall complete all such repairs and
restoration not later than the earlier of (y) one (1) year after the
occurrence of the Casualty or Condemnation, and (z) six (6) months prior
to the Scheduled Expiration Date. Lessee shall use its own funds to make
such repairs and restoration, except to the extent any Casualty and
Condemnation Proceeds are available and are released to Lessee for such
purpose pursuant to Subparagraph 3.04(f). Lessee's exercise of the
repair and restoration option shall, if Lessor or Required Participants
direct, be subject to the following conditions:
(i) Deposit in a deposit account acceptable to and
controlled by Lessor (a "Repair and Restoration Account") of
funds (including any Casualty and Condemnation Proceeds which
are available and are released to Lessee pursuant to
Subparagraph 3.04(f)) in the amount which Lessor determines is
needed to complete and fully pay all costs of the repair or
restoration (including taxes, financing charges, insurance and
rent during the repair period);
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(ii) The establishment of an arrangement for lien
releases and disbursement of funds acceptable to Lessor and in a
manner and upon such terms and conditions as would be required
by a prudent interim construction lender; and
(iii) The delivery to Lessor of the following, each in
form and substance acceptable to Lessor within ninety (90) days
of the occurrence of such Casualty of Condemnation;:
(A) Evidence that the Facility 1 Property can,
in Lessor's reasonable judgment, with diligent
restoration or repair, be returned to a condition at
least equal to the condition thereof that existed prior
to the Casualty or partial Condemnation causing the loss
or damage within the earlier to occur of (A) one (1)
year after the Casualty and Condemnation, and (B) six
(6) months prior to the Scheduled Expiration Date;
(B) Evidence that all necessary governmental
approvals can be timely obtained to allow the rebuilding
and reoccupancy of the Facility 1 Property;
(C) Copies of all plans and specifications for
the work;
(D) Copies of all contracts for the work, signed
by a contractor reasonably acceptable to Lessor;
(E) A cost breakdown for the work;
(F) A payment and performance bond for the work
or other security satisfactory to Lender;
(G) Evidence that, upon completion of the work,
the size, capacity and total value of the Facility 1
Property will be at least as great as it was before the
Casualty or Condemnation occurred; and
(H) Evidence of satisfaction of any additional
conditions that Lessor or Required Participants may
reasonably establish to protect their rights under this
Agreement and the other Operative Documents.
All plans and specifications for the work must be reasonably
acceptable to Lessor, except that Lessor's approval shall not be
required if the restoration work is based on the same plans and
specifications as were originally used to construct the Facility
1 Property. To the extent that the funds in a Repair and
Restoration Account include both Casualty and Condemnation
Proceeds and other funds deposited by Lessee, the other funds
deposited by Lessee shall be used first. Lessee acknowledges
that the specific conditions described above are reasonable.
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(d) Prosecution of Claims for Casualty and Condemnation Proceeds.
Lessee shall proceed promptly and diligently to prosecute in good faith
the settlement or compromise of any and all claims for Casualty and
Condemnation Proceeds; provided, however, that any settlement or
compromise of any such claim shall, except as otherwise provided in
Section 3.03(c)(x), be subject to the written consent of Lessor and
Required Participants, which consents shall not be unreasonably
withheld. Lessor may participate in any proceedings relating to such
claims, and, after the occurrence and during the continuance of any
Event of Default, Lessor is hereby authorized, in its own name or in
Lessee's name, to adjust any loss covered by insurance or any Casualty
or Condemnation claim or cause of action, and to settle or compromise
any claim or cause of action in connection therewith, and Lessee shall
from time to time deliver to Lessor any and all further assignments and
other instruments required to permit such participation.
(e) Assignment of Casualty and Condemnation Proceeds. Lessee
hereby absolutely and irrevocably assigns to Lessor all Casualty and
Condemnation Proceeds and all claims relating thereto and agrees that
all Casualty and Condemnation Proceeds are to be paid to Lessor, except
as otherwise provided in Section 3.03(c)(x). Except as otherwise
provided in Section 3.03(c)(x), Lessee hereby authorizes and directs any
insurer, Governmental Authority or other Person responsible for paying
any Casualty and Condemnation Proceeds to make payment thereof directly
to Lessor alone, and not to Lessor and Lessee jointly. If Lessee
receives any Casualty and Condemnation Proceeds, Lessee shall promptly
pay over such Casualty and Condemnation Proceeds to Lessor. Lessee
hereby covenants that until such Casualty and Condemnation Proceeds are
so paid over to Lessor, Lessee shall hold such Casualty and Condemnation
Proceeds in trust for the benefit of Lessor and shall not commingle such
Casualty and Condemnation Proceeds with any other funds or assets of
Lessee or any other Person. Lessor may commence, appear in, defend or
prosecute any assigned right, claim or action, and may adjust,
compromise, settle and collect all rights, claims and actions assigned
to Lessor, but shall not be responsible for any failure to collect any
such right, claim or action, regardless of the cause of the failure.
(f) Use of Casualty and Condemnation Proceeds.
(i) If (A) no Event of Default has occurred and is
continuing, (B) Lessee exercises the repair and restoration
option pursuant to Subparagraphs 3.04(b) and 3.04(c) and (C)
Lessee complies with any conditions imposed pursuant to
Subparagraph 3.04(c); then Lessor shall release any Casualty and
Condemnation Proceeds to Lessee for repair or restoration of the
Facility 1 Property, but may condition such release and use of
the Casualty and Condemnation Proceeds upon deposit of the
Casualty and Condemnation Proceeds in a Repair and Restoration
Account. Lessor shall have the option, upon the completion of
such restoration of the Facility 1 Property, to apply any surplus
Casualty and Condemnation Proceeds remaining after the completion
of such restoration to the payment of Rent and/or the reduction
of the Outstanding Lease Amount, notwithstanding that such
amounts are not then due and payable or that such amounts are
otherwise adequately secured.
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(ii) If (A) an Event of Default has occurred and is
continuing, (B) Lessee fails to or is unable to comply with any
conditions imposed pursuant to Subparagraph 3.04(c) or (C) Lessee
elects to exercise the Term Purchase Option and purchase the
Facility 1 Property pursuant to the Purchase Agreement; then, at
the absolute discretion of Lessor and the Required Participants,
regardless of any impairment of security or lack of impairment of
security, but subject to applicable Governmental Rules governing
use of Casualty and Condemnation Proceeds, if any, Lessor may (1)
apply all or any of the Casualty and Condemnation Proceeds it
receives to the expenses of Lessor Parties in obtaining such
proceeds; (2) apply the balance to the payment of Rent and/or the
reduction of the Outstanding Lease Amount, notwithstanding that
such amounts are not then due and payable or that such amounts
are otherwise adequately secured and/or (3) release all or any
part of such proceeds to Lessee upon any conditions Lessor and
the Required Participants may elect.
(iii) Lessor shall apply any Casualty and Condemnation
Proceeds which are to be used to reduce the Outstanding Lease
Amount only on the last day of a Rental Period unless a Default
has occurred and is continuing.
(iv) Application of all or any portion of the Casualty
and Condemnation Proceeds, or the release thereof to Lessee,
shall not cure or waive any Default or notice of default or
invalidate any acts done pursuant to such notice.
3.05. Taxes. Subject to Paragraph 3.12 relating to permitted contests,
Lessee shall promptly pay when due all Indemnified Taxes imposed on or payable
by Lessee or any Lessor Party in connection with the Facility 1 Property, this
Agreement or any of the other Operative Documents, or any of the transactions
contemplated hereby or thereby. Whenever any such taxes or other Governmental
Charges are payable by Lessee pursuant to the immediately preceding sentence, as
promptly as possible thereafter, Lessee shall send to Lessor for the account of
the applicable Lessor Party a certified copy of an original official receipt
received by Lessee showing payment thereof. If Lessee fails to pay any such
Indemnified Taxes when due to the appropriate taxing authority or fails to remit
to Lessor the required receipts or other required documentary evidence, Lessee
shall indemnify the Lessor Parties for any incremental taxes, interest or
penalties that may become payable by the Lessor Parties as a result of any such
failure. The obligations of Lessee under this Paragraph 3.05 shall survive the
payment and performance of the Lessee Obligations and the termination of this
Agreement.
3.06. Environmental Matters.
(a) Lessee's Covenants. Lessee shall not cause or permit the
Facility 1 Property to be used as a site for the use, generation,
manufacture, storage, treatment, release, discharge, disposal,
transportation or presence of any Hazardous Materials; provided that
Lessee has disclosed to Lessor that Lessee shall use on the Facility 1
Property from time to time the Hazardous Materials described in Schedule
1 attached
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hereto. Notwithstanding the disclosure provided in Schedule 1, Lessee
shall comply and cause the Facility 1 Property to comply with all
Environmental Laws. Lessee shall immediately notify Lessor in writing of
(i) the discovery of any Hazardous Materials on, under or about the
Facility 1 Property (except for those described in Schedule 1, which are
used, stored, maintained and disposed of in accordance with all
Environmental Laws); (ii) any knowledge by Lessee that the Facility 1
Property does not comply with any Environmental Laws; (iii) any claims
against Lessee or the Facility 1 Property relating to Hazardous
Materials or pursuant to Environmental Laws; and (iv) the discovery of
any occurrence or condition on any real property adjoining or in the
vicinity of the Facility 1 Property that could cause the Facility 1
Property or any part thereof to be designated as "border zone property"
under the provisions of California Health and Safety Code Sections 25220
et seq. or any regulation adopted in accordance therewith. In response
to the presence of any Hazardous Materials on, under or about the
Facility 1 Property, Lessee shall immediately take, at Lessee's sole
expense, all remedial action required by any Environmental Laws or any
judgment, consent decree, settlement or compromise in respect to any
claim based thereon.
(b) Inspection By Lessor. Upon reasonable prior notice to
Lessee, Lessor, its employees and agents, may from time to time (whether
before or after the commencement of a nonjudicial or judicial
foreclosure proceeding), enter and inspect the Facility 1 Property for
the purpose of determining the existence, location, nature and magnitude
of any past or present release or threatened release of any Hazardous
Materials into, onto, beneath or from the Facility 1 Property.
(c) Indemnity. Without in any way limiting any other indemnity
contained in this Agreement or any other Operative Document, Lessee
agrees to defend, indemnify and hold harmless the Lessor Parties and the
other Indemnitees from and against any claim, loss, damage, cost,
expense or liability directly or indirectly arising out of (i) the use,
generation, manufacture, storage, treatment, release, threatened
release, discharge, disposal, transportation or presence of any
Hazardous Materials which are found in, on, under or about the Facility
1 Property or (ii) the breach of any covenant, representation or
warranty of Lessee relating to Hazardous Materials or Environmental Laws
contained in this Agreement or any Operative Document. This indemnity
shall include (A) the costs, whether foreseeable or unforeseeable, of
any investigation, repair, cleanup or detoxification of the Facility 1
Property which is required by any Governmental Authority or is otherwise
necessary to render the Facility 1 Property in compliance with all
Environmental Laws; (B) all other direct or indirect consequential
damages (including any third party claims, claims by any Governmental
Authority, or any fines or penalties against the Indemnitees; and (C)
all court costs and attorneys' fees (including expert witness fees and
the cost of any consultants) paid or incurred by the Indemnitees. Lessee
shall pay immediately upon Lessor's demand any amounts owing under this
indemnity. Lessee shall use legal counsel reasonably acceptable to
Lessor in any action or proceeding arising under this indemnity. The
obligations of Lessee under this Subparagraph 3.06(c) shall survive the
payment and performance of the Lessee Obligations and the termination of
this Agreement.
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(d) Legal Effect of Section. Lessee and Lessor agree that (i)
this Paragraph 3.06 and clause (i) of Subparagraph 4.01(t) of the
Participation Agreement is intended as Lessor's written request for
information (and Lessee's response) concerning the environmental
condition of the real property security as required by California Code
of Civil Procedure Section 726.5 and (ii) each representation and
warranty and covenant herein and therein (together with any indemnity
applicable to a breach of any such representation and warranty) with
respect to the environmental condition of the Facility 1 Property is
intended by Lessor and Lessee to be an "environmental provision" for
purposes of California Code of Civil Procedure Section 736.
3.07. Liens, Easements, Etc.
(a) Lessee's Covenants. Subject to Paragraph 3.12 relating to
permitted contests, Lessee shall not create, incur, assume or permit to
exist any Lien or easement on or with respect to any of the Facility 1
Property of any character, whether now owned or hereafter acquired,
except for the following ("Permitted Property Liens"):
(i) Liens in favor of a Lessor Party securing the Lessee
Obligations;
(ii) Liens and easements in existence on the
Commencement Date to the extent reflected in the title insurance
policy delivered to Agent pursuant to Paragraph 3.02 of and
Schedule 3.02 to the Participation Agreement and approved by
Lessor;
(iii) Liens and easements approved by Lessor and
reflected in the title insurance policy or policies or binders
to be delivered in connection with any Facility 1 Land added
hereto after the date hereof;
(iv) Liens for taxes or other Governmental Charges not
at the time delinquent or thereafter payable without penalty;
(v) Liens of carriers, warehousemen, mechanics,
materialmen and vendors and other similar Liens imposed by law
incurred in the ordinary course of business for sums not
overdue; and
(vi) Lessor Liens or any other Liens approved by Lessor.
Subject to Paragraph 3.12 relating to permitted contests, Lessee shall
promptly (A) pay all Indebtedness and other obligations prior to the
time the non-payment thereof would give rise to a Lien on the Facility 1
Property and (B) discharge, at its sole cost and expense, any Lien on
the Facility 1 Property which is not a Permitted Facility 1 Property
Lien.
(b) No Consents. Nothing contained in this Agreement shall be
construed as constituting the consent or request of any Lessor Party,
express or implied, to or for the performance by any contractor,
mechanic, laborer, materialman, supplier or vendor of
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any labor or services or for the furnishing of any materials for any
construction, alteration, addition, repair or demolition of or to the
Facility 1 Property or any part thereof. NOTICE IS HEREBY GIVEN THAT NO
LESSOR PARTY IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS
FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING THE
PROPERTY OR ANY PART THEREOF THROUGH OR UNDER LESSEE, AND THAT NO
MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS
SHALL ATTACH TO OR AFFECT THE INTEREST OF ANY LESSOR PARTY IN AND TO THE
PROPERTY.
3.08. Subletting. Lessee may, in the ordinary course of business,
sublease the Facility 1 Property or any portion thereof to any Person, provided,
that (a) Lessee remains directly and primarily liable for performing its
obligations under this Agreement and all other Lessee Obligations; (b) each
sublease is subject to and subordinated to this Agreement; (c) each sublease
expressly provides for the surrender of the Facility 1 Property (or portion
thereof) by the sublessee on the Expiration Date; (d) each sublease has a term
which expires on or prior to the Scheduled Expiration Date (or, if longer,
includes a provision that the sublease terminates on the Expiration Date if such
Expiration Date occurs prior to the Scheduled Expiration Date unless Lessee
purchases the Facility 1 Property on the Expiration Date pursuant to the
Purchase Agreement); (e) each sublease prohibits the sublessee from engaging in
any activities on the Facility 1 Property other than those permitted by
Paragraph 2.04; and (f) no sublease has a Material Adverse Effect. Any sublease
which does not satisfy each of the requirements of the immediately preceding
sentence shall be null and void as to the Lessor Parties and their successor and
assigns. Except for such permitted subleases, Lessee shall not assign any of its
rights or interests under this Agreement to any other Person.
3.09. Utility Charges. Lessee shall pay all charges for electricity,
power, gas, oil, water, telephone, sanitary sewer service and all other
utilities and services to, on or in connection with the Facility 1 Property
during the Term.
3.10. Removal of Facility 1 Property. Lessee shall not remove any
Improvements from the Facility 1 Land or any other Facility 1 Property from the
Facility 1 Land or Improvements, except that, during the Term, Lessee may remove
any Modification or any trade fixture, machinery, equipment, inventory or other
personal property if such Modification or property (a) was not financed by an
Advance, (b) is not required by any applicable Governmental Rule or Insurance
Requirement and (c) is readily removable without impairing the value, utility or
remaining useful life of the Facility 1 Property.
3.11. Compliance with Governmental Rules and Insurance Requirements.
Lessee, at its sole cost and expense, shall, unless its failure is not
reasonably likely to have a Material Adverse Effect, (a) comply, and cause its
agents, sublessees, assignees, employees, invitees, licensees, contractors and
tenants, and the Facility 1 Property to comply, with all Governmental Rules and
Insurance Requirements relating to the Facility 1 Property (including the
construction, use, operation, maintenance, repair and restoration thereof,
whether or not compliance therewith shall require structural or extraordinary
changes in the Improvements or interfere with the use and enjoyment of the
Facility 1 Property), and (b) procure, maintain and comply with all licenses,
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permits, orders, approvals, consents and other authorizations required for the
construction, use, maintenance and operation of the Facility 1 Property and for
the use, operation, maintenance, repair and restoration of the Improvements
3.12. Permitted Contests. Lessee, at its sole cost and expense, may
contest any alleged Lien or easement on any of the Facility 1 Property or any
alleged Governmental Charge, Indebtedness or other obligation which is payable
by Lessee hereunder to Persons other than the Lessor Parties or which, if
unpaid, would give rise to a Lien on any of the Facility 1 Property, provided
that (a) each such contest is diligently pursued in good faith by appropriate
proceedings; (b) the commencement and continuation of such proceedings suspends
the enforcement of such Lien or easement or the collection of such Governmental
Charge, Indebtedness or obligation; (c) Lessee has established adequate reserves
for the discharge of such Lien or easement or the payment of such Governmental
Charge, Indebtedness or obligation in accordance with GAAP and, if the failure
to discharge such Lien or easement or the failure to pay such Governmental
Charge, Indebtedness or obligation might result in any civil liability for any
Lessor Party, Lessee has provided to such Lessor Party a bond or other security
satisfactory to such Lessor Party; (d) the failure to discharge such Lien or
easement or the failure to pay such Governmental Charge, Indebtedness or
obligation could not result in any criminal liability for any Lessor Party; (e)
the failure to discharge such Lien or easement or the failure to pay such
Governmental Charge, Indebtedness or obligation is not otherwise reasonably
likely to have a Material Adverse Effect; and (f) any such contest is completed
and such Lien or easement is discharged (either pursuant to such proceedings or
otherwise) or such Governmental Charge, Indebtedness or obligation is declared
invalid, paid or otherwise satisfied not later than six (6) months prior to the
Scheduled Expiration Date; provided, however, in the event that Lessee shall
have exercised either the Term Purchase Option or the Expiration Purchase Option
the foregoing six (6) month limitation shall not be applicable.
3.13. Lessor Obligations; Right to Perform Lessee Obligations. No Lessor
Party shall have any obligation to (a) maintain, repair or make any improvements
to the Facility 1 Property, (b) maintain any insurance on the Facility 1
Property, (c) perform any other obligation of Lessee under this Agreement or any
other Lessee Obligation, (d) make any expenditure on account of the Facility 1
Property (except to make Advances as required by the Participation Agreement) or
(e) take any other action in connection with the Facility 1 Property, this
Agreement or any other Operative Document, except as expressly provided herein
or in another Operative Document; provided however, that Lessor may, in its sole
discretion and without any obligation to do so, after written notice to Lessee,
perform any Lessee Obligation not performed by Lessee when required. Lessor may
enter the Facility 1 Property or exercise any other right of Lessee under this
Agreement or any other Operative Document to the extent Lessor determines in
good faith that such entry or exercise is reasonably necessary for Lessor to
perform any such Lessee Obligation not performed by Lessee when required. Lessee
shall reimburse Lessor and the other Lessor Parties, within five (5) business
days after demand, for all fees, costs and expenses incurred by them in
performing any such obligation or curing any Default.
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3.14. Inspection Rights. During the Term, Lessee shall permit any Person
designated by Lessor, upon reasonable notice and during normal business hours,
to visit and inspect any of the Facility 1 Property.
SECTION 4. EXPIRATION DATE.
4.01. Termination by Lessee Prior to Scheduled Expiration Date. Subject
to the terms and conditions of the Purchase Agreement, Lessee may, at any time
prior to the Scheduled Expiration Date, terminate this Agreement and purchase
the Facility 1 Property pursuant to Section II of the Purchase Agreement. Lessee
shall notify Lessor of Lessee's election so to terminate this Agreement and
purchase the Facility 1 Property by delivering to Agent a Notice of Term
Purchase Option Exercise pursuant to and in accordance with the provisions of
Paragraph 2.02 of the Purchase Agreement.
4.02. Surrender of Facility 1 Property. Unless Lessee purchases the
Facility 1 Property on the Expiration Date pursuant to the Purchase Agreement,
Lessee shall vacate and surrender the Facility 1 Property to Lessor on the
Expiration Date in its then-current condition, subject to compliance by Lessee
on or prior to such date of its obligations under this Agreement and the other
Operative Documents (including, without limitation, the completion of all
permitted contests and the removal of all Liens which are not Permitted Property
Liens).
4.03. Holding Over. If Lessee does not purchase the Facility 1 Property
on the Expiration Date pursuant to the Purchase Agreement but continues in
possession of any portion of the Facility 1 Property after the Expiration Date,
Lessee shall pay rent for each day it so continues in possession, payable upon
demand of Lessor, at a per annum rate equal to the Alternate Rental Rate plus
two percent (2%) and shall pay and perform all of its other Lessee Obligations
under this Agreement and the other Operative Documents in the same manner as
though the Term had not ended; provided, however, that this Paragraph 4.03 shall
not be interpreted to permit such holding over or to limit any right or remedy
of Lessor for such holding over.
SECTION 5. DEFAULT.
5.01. Events of Default. The occurrence or existence of any one or more
of the following shall constitute an "Event of Default" hereunder:
(a) Non-Payment. Lessee shall (i) fail to pay on the Expiration
Date any amount payable by Lessee under this Agreement or any other
Operative Document on such date, (ii) fail to pay within five (5)
business days after any Scheduled Rent Payment Date any Base Rent
payable on such Scheduled Rent Payment Date (other than the Base Rent
payable on the Expiration Date) or (iii) fail to pay within five (5)
business days after the same becomes due, any Supplemental Rent or other
amount required under the terms of this Agreement or any other Operative
Document (other than any such amount payable on the Expiration Date or
Base Rent); or
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(b) Specific Defaults. Lessee or any of its Subsidiaries shall
fail to observe or perform any covenant, obligation, condition or
agreement set forth in Subparagraph 3.01(b), Paragraph 3.03 or
Subparagraph 3.07(a) hereof or in Paragraph 5.02 or Paragraph 5.03 of
the Participation Agreement; or
(c) Other Defaults. Lessee or any of its Subsidiaries shall fail
to observe or perform any other covenant, obligation, condition or
agreement contained in this Agreement or any other Operative Document
(except for those covenants described in Paragraph 5.01(d) below) and
such failure shall continue for a period of thirty (30) days after
written notice thereof from Lessor, provided, however, that in the event
that such failure cannot reasonably be cured within such thirty (30) day
period, such failure shall not constitute an Event of Default hereunder
so long as Lessee shall have commenced to cure such failure within such
thirty (30) day period and shall thereafter diligently pursue such cure
to completion, provided further that such failure shall in all events be
cured by the earlier of (i) the Expiration Date, if Lessee is exercising
the Marketing Option, (provided that if the Purchase Option is
consummated in accordance with the terms of the Purchase Agreement all
outstanding Defaults shall be deemed waived), or (ii) one hundred and
eighty days (180) days after Lessor's notice thereof; or
(d) Representations and Warranties. Any representation, warranty,
certificate, information or other statement (financial or otherwise)
made or furnished by or on behalf of Lessee or any of its Subsidiaries
to any Lessor Party in or in connection with this Agreement or any other
Operative Document, or as an inducement to any Lessor Party to enter
into this Agreement or any other Operative Document, shall be false,
incorrect, incomplete or misleading in any material respect when made or
furnished and Lessee shall not have cured the facts or circumstances
causing such representation, warranty, certificate or other statement to
be false, incorrect, incomplete or misleading within thirty (30) days of
notice thereof from Lessor; or
(e) Cross-Default. (i) Lessee or any of its Subsidiaries shall
fail to make any payment when due on account of any Indebtedness of such
Person (other than the Lessee Obligations) and such failure shall
continue beyond any period of grace provided with respect thereto, if
the amount of such Indebtedness exceeds $2,500,000 or the effect of such
failure is to cause, or permit the holder or holders thereof to cause,
Indebtedness of Lessee and its Subsidiaries (other than the Lessee
Obligations) in an aggregate amount exceeding $2,500,000 to become due
or (ii) Lessee or any of its Subsidiaries shall otherwise fail to
observe or perform any agreement, term or condition contained in any
agreement or instrument relating to any Indebtedness of such Person
(other than the Lessee Obligations), or any other event shall occur or
condition shall exist, if the effect of such failure, event or condition
is to cause, or permit the holder or holders thereof to cause,
Indebtedness of Lessee and its Subsidiaries (other than the Lessee
Obligations) in an aggregate amount exceeding $2,500,000 to become due
(and/or to be secured by cash collateral); or
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<PAGE> 24
(f) Insolvency, Voluntary Proceedings. Lessee or any of its
Material Subsidiaries shall (i) apply for or consent to the appointment
of a receiver, trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) be unable, or admit in writing
its inability, to pay its debts generally as they mature, (iii) make a
general assignment for the benefit of its or any of its creditors, (iv)
be dissolved or liquidated in full or in part, (v) become insolvent (as
such term may be defined or interpreted under any applicable statute),
(vi) commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or consent to any such relief or to the appointment of or taking
possession of its property by any official in an involuntary case or
other proceeding commenced against it, or (vi) take any action for the
purpose of effecting any of the foregoing; or
(g) Involuntary Proceedings. Proceedings for the appointment of a
receiver, trustee, liquidator or custodian of Lessee or any of its
Material Subsidiaries or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to Lessee or
any of its Material Subsidiaries or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect
shall be commenced and an order for relief entered or such proceeding
shall not be dismissed or discharged within thirty (30) days of
commencement; or
(h) Judgments. (i) One or more judgments, orders, decrees or
arbitration awards requiring Lessee and/or its Subsidiaries to pay an
aggregate amount of $2,500,000 or more (exclusive of amounts covered by
insurance issued by an insurer not an Affiliate of Lessee and otherwise
satisfying the requirements set forth in Subparagraph 3.03(b)) shall be
rendered against Lessee and/or any of its Subsidiaries in connection
with any single or related series of transactions, incidents or
circumstances and the same shall not be satisfied, vacated or stayed for
a period of thirty (30) consecutive days after the issue or levy; (ii)
any judgment, writ, assessment, warrant of attachment, tax lien or
execution or similar process shall be issued or levied against a
substantial part of the property of Lessee or any of its Subsidiaries
and the same shall not be released, stayed, vacated or otherwise
dismissed within thirty (30) days after issue or levy; or (iii) any
other judgments, orders, decrees, arbitration awards, writs,
assessments, warrants of attachment, tax liens or executions or similar
processes which, alone or in the aggregate, are reasonably likely to
have a Material Adverse Effect are rendered, issued or levied; or
(i) Operative Documents. Any Operative Document or any material
term thereof shall cease to be, or be asserted by Lessee or any of its
Subsidiaries not to be, a legal, valid and binding obligation of Lessee
or any of its Subsidiaries enforceable in accordance with its terms; or
(j) ERISA. Any Reportable Event which constitutes grounds for
the termination of any Employee Benefit Plan by the PBGC or for the
appointment of a trustee by the PBGC to administer any Employee Benefit
Plan shall occur, or any
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Employee Benefit Plan shall be terminated within the meaning of
Title IV of ERISA or a trustee shall be appointed by the PBGC to
administer any Employee Benefit Plan; or
(k) Change of Control. Any Change of Control shall occur; or
(l) Material Adverse Effect. Any event(s) or condition(s) which
is(are) reasonably likely to have a Material Adverse Effect shall occur
and be continuing or exist.
5.02. General Remedies. In all cases, upon the occurrence or existence
of any Event of Default and at any time thereafter unless such Event of Default
is waived, Lessor may, with the consent of the Required Participants, or shall,
upon instructions from the Required Participants, exercise any one or more of
the following rights and remedies (except that the remedy set forth in the first
sentence of Subparagraph 5.02(a) shall be automatic):
(a) Termination of Commitments. If such Event of Default is an
Event of Default of the type described in Subparagraph 5.01(f) or
Subparagraph 5.01(g) affecting Lessee, immediately and without notice
the obligation of Lessor to make Advances and the obligations of the
Participants to fund Advances shall automatically terminate. If such
Event of Default is any other Event of Default, Lessor may by written
notice to Lessee, terminate the obligation of Lessor to make Advances
and the obligations of the Participants to fund Advances.
(b) Appointment of a Receiver. Lessor may apply to any court of
competent jurisdiction for, and obtain appointment of, a receiver for
the Facility 1 Property.
(c) Specific Performance. Lessor may bring an action in any
court of competent jurisdiction to obtain specific enforcement of any of
the covenants or agreements of Lessee in this Agreement or any of the
other Operative Documents.
(d) Collection of Issues and Profits. Lessor may collect Issues
and Profits as provided in Subparagraph 2.07(c) and apply the proceeds
to pay Lessee Obligations.
(e) Protection of Facility 1 Property. Lessor may enter, take
possession of, manage and operate all or any part of the Facility 1
Property or take any other actions which it reasonably determines are
necessary to protect the Facility 1 Property and the rights and remedies
of the Lessor Parties under this Agreement and the other Operative
Documents, including (i) taking and possessing all of Lessee's books and
records relating to the Facility 1 Property; (ii) entering into,
enforcing, modifying, or canceling subleases on such terms and
conditions as Lessor may consider proper; (iii) obtaining and evicting
tenants; (iv) fixing or modifying sublease rents; (v) collecting and
receiving any payment of money owing to Lessee; (vi) completing any
unfinished Improvements; and/or (vii) contracting for and making repairs
and alterations.
(f) Other Rights and Remedies. In addition to the specific
rights and remedies set forth above in this Paragraph 5.02 and in
Paragraph 5.03 and Paragraph
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5.04, Lessor may exercise any other right, power or remedy permitted to
it by any applicable Governmental Rule, either by suit in equity or by
action at law, or both.
5.03. Lease Remedies. If the transaction evidenced by this Agreement and
the other Operative Documents is treated as a lease, upon the occurrence or
existence of any Event of Default and at any time thereafter unless such Event
of Default is waived, Lessor may, with the consent of the Required Participants,
or shall, upon instructions from the Required Participants, exercise any one or
more of the following rights and remedies in addition to those rights and
remedies set forth in Paragraph 5.02 provided that prior to exercising any
remedies provided by this Section 5.03, Lessor shall give Lessee not less than
three (3) business days notice during which time Lessee may exercise the
Purchase Option, and provided the Purchase Option is thereafter consummated in
accordance with the terms of the Purchase Agreement, Lessor shall not exercise
any of the remedies under this Section 5.03:
(a) Termination of Lease. Lessor may, by written notice to
Lessee, terminate this Agreement on a Termination Date which is prior to
the Scheduled Expiration Date, subject to Subparagraph 3.02(1) of the
Purchase Agreement. Such Termination Date shall be the last day of a
Rental Period unless Required Participants shall otherwise direct. On
such Termination Date (which shall then be the Expiration Date), Lessee
shall pay all unpaid Base Rent accrued through such date, all
Supplemental Rent due and payable on or prior to such date and all other
amounts payable by Lessee on the Expiration Date pursuant to this
Agreement and the other Operative Documents. Lessee also shall pay to
Lessor, in addition to all accrued Base Rent, the worth at the time of
such payment of the amount by which the unpaid Base Rent through the
Scheduled Expiration Date exceeds the amount of such rental loss for the
same period that Lessee proves could reasonably be avoided.
(b) Continuation of Lease. Lessor may exercise the rights and
remedies provided by California Civil Code Section 1951.4, including the
right to continue this Agreement in effect after Lessee's breach and
abandonment and recover Rent as it becomes due. Acts of maintenance or
preservation, efforts to relet the Facility 1 Property, the appointment
of a receiver upon Lessor's initiative to protect its interest under
this Agreement or withholding consent to or terminating a sublease shall
not of themselves constitute a termination of Lessee's right to
possession.
(c) Removal and Storage of Facility 1 Property. Lessor may enter
the Facility 1 Property and remove therefrom all Persons and property,
store such property in a public warehouse or elsewhere at the cost of
and for the account of Lessee and sell such property and apply the
proceeds therefrom pursuant to applicable California law.
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5.04. Loan Remedies. If the transaction evidenced by this Agreement and
the other Operative Documents is treated as a loan, upon the occurrence or
existence of any Event of Default and at any time thereafter unless such Event
of Default is waived, Lessor may, with the consent of the Required Participants,
or shall, upon instructions from the Required Participants, exercise any one or
more of the following rights and remedies in addition to those rights and
remedies set forth in Paragraph 5.02:
(a) Acceleration of Lessee Obligations. Lessor may, by written
notice to Lessee, terminate this Agreement on a Termination Date which
is prior to the Scheduled Expiration Date, subject to Subparagraph
3.02(1) of the Purchase Agreement, and declare all unpaid Lessee
Obligations due and payable on such Termination Date. Such Termination
Date shall be the last day of a Rental Period unless Required
Participants shall otherwise direct. On such Termination Date (which
shall then be the Expiration Date), Lessee shall pay all unpaid Base
Rent accrued through such date, all Supplemental Rent due and payable on
or prior to such date and all other amounts payable by Lessee on the
Expiration Date pursuant to this Agreement and the other Operative
Documents.
(b) Uniform Commercial Code Remedies. Lessor may exercise any or
all of the remedies granted to a secured party under the California
Uniform Commercial Code.
(c) Judicial Foreclosure. Lessor may bring an action in any
court of competent jurisdiction to foreclose the security interest in
the Facility 1 Property granted to Lessor by this Agreement or any of
the other Operative Documents.
(d) Power of Sale. Lessor may cause some or all of the Facility
1 Property, including any Personal Property Collateral, to be sold or
otherwise disposed of in any combination and in any manner permitted by
applicable Governmental Rules.
(i) Sales of Personal Property. Lessor may dispose of any
Personal Property Collateral separately from the sale of Real
Property Collateral, in any manner permitted by Division 9 of the
California Uniform Commercial Code, including any public or
private sale, or in any manner permitted by any other applicable
Governmental Rule. Any proceeds of any such disposition shall not
cure any Event of Default or reinstate any Lessee Obligation for
purposes of Section 2924c of the California Civil Code. In
connection with any such sale or other disposition, Lessee agrees
that the following procedures constitute a commercially
reasonable sale:
(A) Lessor shall mail written notice of the sale
to Lessee not later than thirty (30) days prior to such
sale.
(B) Once per week during the three weeks
immediately preceding such sale, Lessor will publish
notice of the sale in a local daily newspaper of general
circulation.
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(C) Upon receipt of any written request, Lessor
will make the Facility 1 Property available to any bona
fide prospective purchaser for inspection during
reasonable business hours.
(D) Notwithstanding, Lessor shall be under no
obligation to consummate a sale if, in its judgment,
none of the offers received by it equals the fair value
of the Facility 1 Property offered for sale.
(E) If Lessor so requests, Lessee shall assemble
all of the Personal Property Collateral and make it
available to Lessor at the site of the Facility 1 Land.
Regardless of any provision of this Agreement or any
other Operative Document, Lessor shall not be considered
to have accepted any property other than cash or
immediately available funds in satisfaction of any
Lessee Obligation, unless Lessor has given express
written notice of its election of that remedy in
accordance with California Uniform Commercial Code
Section 9505.
The foregoing procedures do not constitute the only procedures
that may be commercially reasonable.
(ii) Lessor's Sales of Real Property or Mixed Collateral.
Lessor may choose to dispose of some or all of the Facility 1
Property which consists solely of Real Property Collateral in any
manner then permitted by applicable Governmental Rules, including
without limitation a nonjudicial trustee's sale pursuant to
California Civil Code ss.ss. 2924 et seq. In its discretion,
Lessor may also or alternatively choose to dispose of some or all
of the Facility 1 Property, in any combination consisting of both
Real Property Collateral and Personal Property Collateral,
together in one sale to be held in accordance with the law and
procedures applicable to real property, as permitted by Section
9501(4) of the California Uniform Commercial Code. Lessee agrees
that such a sale of Personal Property Collateral together with
Real Property Collateral constitutes a commercially reasonable
sale of the Personal Property Collateral. (For purposes of this
power of sale, either a sale of Real Property Collateral alone,
or a sale of both Real Property Collateral and Personal Property
Collateral together in accordance with California Uniform
Commercial Code Section 9501(4), will sometimes be referred to as
a "Lessor's Sale.")
(A) Before any Lessor's Sale, Lessor shall give
such notice of default and election to sell as may then
be required by applicable Governmental Rules.
(B) When all time periods then legally mandated
have expired, and after such notice of sale as may then
be legally required has been given, Lessor shall sell
the property being sold at a public auction to be held
at the time and place specified in the notice of sale.
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(C) Neither Lessor nor Agent shall have any
obligation to make demand on Lessee before any Lessor's
Sale.
(D) From time to time in accordance with then
applicable law, Lessor may postpone any Lessor's Sale by
public announcement at the time and place noticed for
that sale.
(E) At any Lessor's Sale, Lessor shall sell to
the highest bidder at public auction for cash in lawful
money of the United States.
(F) Lessor shall execute and deliver to the
purchaser(s) a deed or deeds conveying the Facility 1
Property being sold without any covenant or warranty
whatsoever, express or implied. The recitals in any such
deed of any matters or facts, including any facts
bearing upon the regularity or validity of any Lessor's
Sale, shall be conclusive proof of their truthfulness.
Any such deed shall be conclusive against all Persons as
to the facts recited in it.
(e) Foreclosure Sales.
(i) Single or Multiple. If the Facility 1 Property
consists of more than one lot, parcel or item of property,
Lessor may:
(A) Designate the order in which the lots,
parcels and/or items shall be sold or disposed of or
offered for sale or disposition; and
(B) Elect to dispose of the lots, parcels and/or
items through a single consolidated sale or disposition
to be held or made under the power of sale granted in
Subparagraph 5.04(d), or in connection with judicial
proceedings, or by virtue of a judgment and decree of
foreclosure and sale; or through two or more such sales
or dispositions; or in any other manner Lessor may deem
to be in its best interests (any such sale or
disposition, a "Foreclosure Sale;" any two or more,
"Foreclosure Sales").
If Lessor chooses to have more than one Foreclosure Sale, Lessor
at its option may cause the Foreclosure Sales to be held
simultaneously or successively, on the same day, or on such
different days and at such different times and in such order as
it may deem to be in its best interests. No Foreclosure Sale
shall terminate or affect the security interests granted to
Lessor in the Facility 1 Property by this Agreement on any part
of the Facility 1 Property which has not been sold, until all of
the Lessee Obligations have been paid in full.
(ii) Credit Bids. At any Foreclosure Sale, any Person or
any Lessor Party, may bid for and acquire the Facility 1
Property or any part of it to the extent permitted by then
applicable Governmental Rules. Instead of paying cash for that
property, Lessor may settle for the purchase price by crediting
the sales
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price of the Facility 1 Property against the Lessee Obligations
in any order and proportions as Lessor in its sole discretion
may choose.
5.05. Remedies Cumulative. The rights and remedies of Lessor under this
Agreement and the other Operative Documents are cumulative and may be exercised
singularly, successively, or together.
5.06. No Cure or Waiver. Neither the performance by Lessor of any of
Lessee's obligations pursuant to Paragraph 3.13 nor the exercise by Lessor of
any of its other rights and remedies under this Agreement or any other Operative
Document (including the collection of Issues and Profits and the application
thereof to the Lessee Obligations) shall constitute a cure or waiver of any
Default or nullify the effect of any notice of default or sale, unless and until
all Lessee Obligations are paid in full.
5.07. Exercise of Rights and Remedies. The rights and remedies provided
to Lessor under this Agreement may be exercised by Lessor itself, by Agent
pursuant to Subparagraph 2.02(c) of the Participation Agreement, by a
court-appointed receiver or by any other Person appointed by any of the
foregoing to act on its behalf. All of the benefits afforded to Lessor under
this Agreement and the other Operative Documents shall accrue to the benefit of
Agent to the extent provided in Subparagraph 2.02(c) of the Participation
Agreement.
SECTION 6. MISCELLANEOUS.
6.01. Notices. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lessee or Lessor under this Agreement shall be given as provided in Subparagraph
2.02(c) and Paragraph 7.01 of the Participation Agreement.
6.02. Waivers; Amendments. Any term, covenant, agreement or condition of
this Agreement may be amended or waived only as provided in the Participation
Agreement. No failure or delay by any Lessor Party in exercising any right
hereunder shall operate as a waiver thereof or of any other right nor shall any
single or partial exercise of any such right preclude any other further exercise
thereof or of any other right. Unless otherwise specified in any such waiver or
consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
6.03. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Lessor Parties and Lessee and their permitted
successors and assigns; provided, however, that the Lessor Parties and Lessee
shall not sell, assign or delegate their respective rights and obligations
hereunder except as provided in the Participation Agreement.
6.04. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the Lessor Parties and Lessee and their permitted successors and
assigns, any benefit or legal or equitable
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<PAGE> 31
right, remedy or claim under or by virtue of this Agreement or under or by
virtue of any provision herein.
6.05. Partial Invalidity. If at any time any provision of this Agreement
is or becomes illegal, invalid or unenforceable in any respect under the law or
any jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
6.06. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without reference to
conflicts of law rules.
6.07. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
6.08. Nature of Lessee's Obligations.
(a) Independent Obligation. The obligation of Lessee to pay the
amounts payable by Lessee under this Agreement and the other Operative
Documents and to perform the other Lessee Obligation are absolute,
unconditional and irrevocable obligations which are separate and
independent of the obligations of the Lessor Parties under this
Agreement and the other Operative Documents and all other events and
circumstances, including the events and circumstances set forth in
Subparagraph 6.08(c).
(b) No Termination or Abatement. This Agreement and the other
Operative Documents and Lessee's obligation to pay Rent and to pay and
perform all other Lessee Obligations shall continue in full force and
effect without abatement notwithstanding the occurrence or existence of
any event or circumstance, including any event or circumstance set forth
in Subparagraph 6.08(c).
(c) Full Payment and Performance. Lessee shall make all payments
under this Agreement and the other Operative Documents in the full
amounts and at the times required by the terms of this Agreement and the
other Operative Documents without setoff, deduction or reduction of any
kind and shall perform all other Lessee Obligations as and when
required, without regard to any event or circumstances whatsoever,
including (i) the condition of the Facility 1 Property (including any
Improvements to the Facility 1 Property made prior to the Commencement
Date or during the Term); (ii) title to the Facility 1 Property
(including possession of the Facility 1 Property by any Person or the
existence of any Lien or any other right, title or interest in or to any
of the Facility 1 Property in favor of any Person); (iii) the value,
habitability, usability, design, operation or fitness for use of the
Facility 1 Property; (iv) the availability or adequacy of utilities and
other services to the Facility 1 Property; (v) any latent, hidden or
patent defect in the Facility 1 Property; (vi) the zoning or status of
the Facility 1 Property or any other restrictions on the use of the
Facility 1 Property; (g) the economics of the Facility 1 Property; (vii)
any Casualty or Condemnation; (viii) the compliance of the Facility 1
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<PAGE> 32
Property with any applicable Governmental Rule or Insurance Requirement;
(ix) any failure by any Lessor Party to perform any of its obligations
under this Agreement or any other Operative Document; or (x) the
exercise by any Lessor Party of any of its remedies under this Agreement
or any other Operative Document; provided, however, that this Paragraph
7.08 shall not abrogate any right which Lessee may have to recover
damages from any Lessor Party for any material breach by such Lessor
Party of its obligations under this Agreement or any other Operative
Document to the extent permitted hereunder or thereunder.
[The signature page follows.]
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<PAGE> 33
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be
executed as of the day and year first above written.
LESSEE: NOVELLUS SYSTEMS, INC.
By:_______________________________
Name:________________________
Title:_______________________
LESSOR: LEASE PLAN U.S.A., INC.
By:_______________________________
Name:________________________
Title:_______________________
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<PAGE> 1
EXHIBIT 10.6
Recording requested by and when recorded return to:
Thomas Y. Coleman, Esq.
Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
===============================================================================
FACILITY 2 LEASE AGREEMENT
CONSTRUCTION DEED OF TRUST WITH ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
BETWEEN
NOVELLUS SYSTEMS, INC.
AND
LEASE PLAN U.S.A., INC.
OCTOBER 15, 1997
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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SECTION 1. INTERPRETATION............................................................2
1.01. Definitions..................................................................2
1.02. Rules of Construction........................................................2
SECTION 2. BASIC PROVISIONS..........................................................2
2.01. Lease of the Facility 1 Property.............................................2
2.02. Term.........................................................................2
2.03. Rent.........................................................................3
2.04. Use..........................................................................5
2.05. As Is Lease..................................................................5
2.06. Nature of Transaction........................................................5
2.07. Security, Etc................................................................6
SECTION 3. OTHER LESSEE AND LESSOR RIGHTS AND OBLIGATIONS............................8
3.01. Maintenance, Repair, Etc.....................................................8
3.02. Risk of Loss.................................................................8
3.03. Insurance....................................................................8
3.04. Casualty and Condemnation...................................................11
3.05. Taxes.......................................................................14
3.06. Environmental Matters.......................................................14
3.07. Liens, Easements, Etc.......................................................16
3.08. Subletting..................................................................17
3.09. Utility Charges.............................................................17
3.10. Removal of Facility 1 Property..............................................17
3.11. Compliance with Governmental Rules and Insurance Requirements...............17
3.12. Permitted Contests..........................................................18
3.13. Lessor Obligations; Right to Perform Lessee Obligations.....................18
3.14. Inspection Rights...........................................................18
SECTION 4. EXPIRATION DATE..........................................................19
4.01. Termination by Lessee Prior to Scheduled Expiration Date....................19
4.02. Surrender of Facility 1 Property............................................19
4.03. Holding Over................................................................19
SECTION 5. DEFAULT..................................................................19
5.01. Events of Default...........................................................19
5.02. General Remedies............................................................22
5.03. Lease Remedies..............................................................22
5.04. Loan Remedies...............................................................23
5.05. Remedies Cumulative.........................................................26
5.06. No Cure or Waiver...........................................................26
5.07. Exercise of Rights and Remedies.............................................27
i
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 6. MISCELLANEOUS............................................................27
6.01. Notices.....................................................................27
6.02. Waivers; Amendments.........................................................27
6.03. Successors and Assigns......................................................27
6.04. No Third Party Rights.......................................................27
6.05. Partial Invalidity..........................................................27
6.06. Governing Law...............................................................27
6.07. Counterparts................................................................28
6.08. Nature of Lessee's Obligations..............................................28
</TABLE>
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FACILITY 2 LEASE AGREEMENT
CONSTRUCTION DEED OF TRUST WITH ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS LEASE AGREEMENT, CONSTRUCTION DEED OF TRUST WITH ASSIGNMENT OF
RENTS, SECURITY AGREEMENT AND FIXTURE FILING (this "Agreement" herein), dated as
of October 15, 1997 is entered into by and between:
(1) NOVELLUS SYSTEMS, INC., a California corporation ("Lessee");
and
(2) LEASE PLAN U.S.A., INC., a Georgia corporation ("Lessor").
RECITALS
A. Lessee has requested Lessor and the Persons which are "Participants"
under the Participation Agreement referred to in Recital B below (such Persons
to be referred to collectively as the "Participants") to provide to Lessee a
certain lease facility pursuant to which:
(1) Lessor would (a) purchase the improvements to certain land
and certain personal property designated by Lessee, (b) lease such
property to Lessee as and when acquired by Lessor, (c) appoint Lessee as
Lessor's agent to make certain improvements to such property, (d) make
advances to finance such improvements and to pay certain related
expenses and (e) grant to Lessee the right to purchase such parcels of
property; and
(2) The Participants would participate in such lease facility by
(a) funding the purchase prices and other advances to be made by Lessor
and (b) acquiring participation interests in the rental and certain
other payments to be made by Lessee.
B. Pursuant to a Participation Agreement dated of even date herewith
(the "Participation Agreement") among Lessee, Lessor, the Participants and ABN
AMRO Bank N.V., as agent for the Participants (in such capacity, "Agent"),
Lessor and the Participants have agreed to provide such lease facility upon the
terms and subject to the conditions set forth therein, including without
limitation the execution and delivery of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
<PAGE> 5
SECTION 1. INTERPRETATION.
1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Operative Document, each term set forth in Schedule 1.01 to the
Participation Agreement, when used in this Agreement or any other Operative
Document, shall have the respective meaning given to that term in such Schedule
1.01 or in the provision of this Agreement or other document, instrument or
agreement referenced in such Schedule 1.01.
1.02. Rules of Construction. Unless otherwise indicated in this
Agreement or any other Operative Document, the rules of construction set forth
in Schedule 1.02 to the Participation Agreement shall apply to this Agreement
and the other Operative Documents.
SECTION 2. BASIC PROVISIONS.
2.01. Lease of the Facility 2 Property. Subject to the acquisition
thereof by Lessor pursuant to the Participation Agreement and applicable
Acquisition Agreements, Lessor agrees to lease to Lessee and Lessee agrees to
lease from Lessor the following property (the "Facility 2 Property") to the
extent of Lessor's estate, right, title and interest therein, thereto or
thereunder:
(a) All Improvements to the lots, pieces, tracts and parcels of
land described in Exhibit A (the "Facility 2 Improvements"), but
excluding such land;
(b) All Appurtenant Rights;
(c) All Related Goods (including those described in Exhibit B
and in each Exhibit B Supplement), Related Permits and Related
Agreements; and
(d) All accessions and accretions to and replacements and
substitutions for the foregoing.
2.02. Term.
(a) Original Term. The original term of this Agreement shall
commence on the Closing Date (the "Commencement Date") and shall end on
the first Business Day of October, 2002 (such date as it may be extended
pursuant to Subparagraph 2.02(b) to be referred to as the "Scheduled
Expiration Date").
(b) Extensions. Lessee may request Lessor to extend the
Scheduled Expiration Date in effect at any time for an additional period
of three (3) years, as provided in Subparagraph 2.09(b) of the
Participation Agreement. If Lessor and each Participant consents to such
a request in accordance with such provision, the definition of
"Scheduled Expiration Date" set forth in Subparagraph 2.02(a) shall be
deemed extended to the date which is the first business day of October,
2005. Lessee acknowledges that neither Lessor nor any Participant has
any obligation or commitment (either express or implied) to extend, or
consent to the extension of, the Scheduled Expiration Date at any time.
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2.03. Rent.
(a) Base Rent.
(i) Lessee shall pay as base rent hereunder ("Base
Rent") for each Rental Period (or portion thereof) an amount
equal to the sum of the Interest Component and Principal
Component for such Rental Period determined as follows:
(A) "Interest Component" shall mean, with
respect to any Rental Period, the sum of the following:
(1) The product of (x) the Rental Rate
for such Rental Period, times (y) the
Outstanding Lease Amount under Facility 2 on the
first day of such Rental Period (which shall
include any Advance under Facility 1 made on the
first day of such Rental Period), times (z) a
fraction, the numerator of which is the number
of days in such Rental Period and the
denominator of which is 360; and
(2) If Lessor makes an Advance under
Facility 2 (other than any Advance on the
Closing Date) during such Rental Period on any
day other than the first day of such Rental
Period, the product of (x) the LIBOR Rental Rate
for the Stub Period if the Stub Period is
greater than seven (7) days or the Alternate
Rental Period for the Stub Period if the Stub
Period is Seven (7) days or less, times (y) the
amount of such Advance, times (z) a fraction,
the numerator of which is the number of days in
such Stub Period and the denominator of which is
360.
If the Rental Rate shall change during any Rental
Period, the Rental Rate for such Rental Period shall be
the weighted average of the Rental Rates in effect from
time to time during such Rental Period.
(B) "Principal Component" shall mean:
(1) With respect to each Rental Period
ending on or prior to the Commitment Termination
Date, zero Dollars ($0.00); and
(2) With respect to each Rental Period
beginning on or after the Commitment Termination
Date, an amount equal to the product of (y)
$90,208.33 times (z) the number of months (or
fraction thereof) in such Rental Period
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(ii) The Term shall consist of the following
rental periods (individually, a "Rental Period"):
(A) The period which begins on the
Commencement Date and ends on the first Business
Day in the first calendar month immediately
following the month in which the Commencement
Date occurs;
(B) Each successive period thereafter
which begins on the last day of the immediately
preceding Rental Period and ends one (1) month
thereafter on the first Business Day of a
calendar month through and including the
Commitment Termination Date; and
(C) Each successive period thereafter
which begins on the last day of the immediately
preceding Rental Period and ends one (1), two
(2), three (3) or six (6) months thereafter, as
determined in accordance with this clause (ii),
on the first Business Day of a calendar month
through and including the Scheduled Expiration
Date.
Lessee may select a Rental Period of one (1), two (2),
three (3) or six (6) months for the Rental Period which
begins on the Commitment Termination Date or for any
Rental Period thereafter by delivering to Lessor, at
least three (3) Business Days prior to the first day of
such Rental Period, a written notice of such selection
(a "Notice of Rental Period Selection"); provided,
however, that (1) each Rental Period shall begin and end
on the first Business Day of a calendar month, (2) no
Rental Period shall end after the Scheduled Expiration
Date, (3) no Rental Period shall be longer than one (1)
month if a Default has occurred and is continuing on the
date three (3) Business Days prior to the first day of
such Rental Period and (4) each Rental Period for which
Lessee fails to make a selection in accordance with this
clause (ii) shall be one (1) month. Each Notice of
Rental Period Selection shall be delivered by
first-class mail or facsimile as required by
Subparagraph 2.02(a) and Paragraph 7.01 of the
Participation Agreement; provided, however, that Lessee
shall promptly deliver the original of any Notice of
Rental Period Selection initially delivered by
facsimile.
(iii) The rental rate for each Rental Period
("Rental Rate") shall be the LIBOR Rental Rate for such
Rental Period, except as follows:
(A) If the Commencement Date is not the
first Business Day of a month, the Rental Rate
for the first Rental Period (which begins on the
Commencement Date) shall be the LIBOR Rental
Rate for the Stub Period for the Acquisition
Advance made on the Commencement Date if such
Stub Period is greater than seven (7) days or
the Alternate Rental Rate for such Stub Period
if such Stub Period is seven (7) days or less;
(B) The Rental Rate applicable during
any Stub Period to that portion of the
Outstanding Lease Amount under Facility 2 equal
to the
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Acquisition Advance made on the first day of
such Stub Period shall be the LIBOR Rental Rate
for such Stub Period if such Stub Period is
greater than seven (7) days or the Alternate
Rental Rate for such Stub Period if such Stub
Period is seven (7) days or less: and
(C) The Rental Rate for any Rental
Period (or portion thereof) during which the
LIBOR Rental Rate is unavailable pursuant to
Subparagraph 2.12(a) or Subparagraph 2.12(b) of
the Participation Agreement shall be the
Alternate Rental Rate.
(iv) Lessee shall pay Base Rent in arrears on
(A) the last day of each Rental Period and, in the case
of any Rental Period which exceeds three (3) months,
each day occurring every three (3) months after the
first day of such Rental Period (individually, a
"Scheduled Rent Payment Date") and (B) the Expiration
Date.
(b) Supplemental Rent. Lessee shall pay as supplemental
rent hereunder ("Supplemental Rent") all amounts (other than
Base Rent, the purchase price payable by Lessee for any purchase
of the Facility 2 Property by Lessee pursuant to the Facility 2
Purchase Agreement and the Residual Value Guaranty Amount and
Indemnity Amount payable under the Facility 2 Purchase
Agreement) payable by Lessee under this Agreement and the other
Operative Documents. Lessee shall pay all Supplemental Rent
amounts on the dates specified in this Agreement and the other
Operative Documents for the payment of such amounts or, if no
date is specified for the payment of any such amount, upon the
demand of Lessor or any other Person to whom such amount is
payable.
2.04. Use. Lessee may use the Facility 2 Property for office, research
and development, warehouse and manufacturing purposes, and for any other purpose
which is in compliance with applicable zoning laws and ordinances for the
Facility 2 Property.
2.05. As Is Lease. Lessee has conducted, or will conduct from time to
time with regard to Facility 2 Property that may be added hereto after the date
hereof, all due diligence which it deems appropriate regarding the Facility 2
Property and agrees that no Lessor Party has any obligation to conduct any such
due diligence. Lessee is leasing the Facility 2 Property "as is, with all
faults" without any representation, warranty, indemnity or undertaking by any
Lessor Party regarding any aspect of the Facility 2 Property, including (a) the
condition of the Facility 2 Property (including any Improvements to the Facility
2 Property made prior to the Commencement Date or during the Term); (b) title to
the Facility 2 Property (including possession of the Facility 2 Property by any
Person or the existence of any Lien or any other right, title or interest in or
to any of the Facility 2 Property in favor of any Person); (c) the value,
habitability, usability, design, operation or fitness for use of the Facility 2
Property; (d) the availability or adequacy of utilities and other services to
the Facility 2 Property; (e) any latent, hidden or patent defect in the Facility
2 Property; (f) the zoning or status of the Facility 2 Property or any other
restrictions on the use of the Facility 2 Property; (g) the economics of the
Facility 2 Property; (h) any Casualty or Condemnation; or (i) the compliance of
the Facility 2 Property with any applicable Governmental Rule or Insurance
Requirement; provided, however,
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that Lessor shall be obligated to remove Lessor Liens to the extent required in
Subparagraph 5.04(b) of the Participation Agreement. Without limiting the
generality of the foregoing, Lessee specifically waives any covenant of quiet
enjoyment except as otherwise provided in Subparagraph 5.04(b) of the
Participation Agreement.
2.06. Nature of Transaction. As more fully provided in Paragraph 2.10 of
the Participation Agreement, Lessee and the Lessor Parties intend that the
transaction evidenced by this Agreement and the other Operative Documents
constitute an operating lease for accounting purposes and a loan secured by the
Facility 2 Property for all other purposes, including federal, state and local
income tax purposes and commercial, real estate and bankruptcy law purposes.
2.07. Security, Etc. In order to secure the Lessee Obligations and
otherwise to assure the Lessor Parties the benefits hereof in the event that the
transaction evidenced by this Agreement and the other Operative Documents is,
pursuant to the intent of Lessee and the Lessor Parties, treated as a loan for
certain purposes, Lessee hereby makes the following grants and agrees as
follows:
(a) Real Property Security. As security for the Lessee
Obligations, Lessee hereby irrevocably and unconditionally grants,
conveys, transfers and assigns to Lessor, in trust for the benefit of
the Lessor Parties, with power of sale and right of entry and
possession, all estate, right, title and interest of Lessee in the
following Facility 2 Property, whether now owned or hereafter acquired,
(collectively, the "Real Property Collateral"):
(i) The Facility 2 Improvements;
(ii) All Subleases and Issues and Profits to the extent
that such Subleases and Issues and Profits constitute real
property;
(iii) All Related Goods, Related Agreements and Related
Permits to the extent that such Related Goods, Related
Agreements and Related Permits constitute real property;
(iv) All other Facility 2 Property to the extent such
property constitutes real Property; and
(v) All proceeds of the foregoing, including Casualty
and Condemnation Proceeds.
(b) Personal Property Security. As security for the Lessee
Obligations, Lessee hereby irrevocably and unconditionally assigns and
grants to Lessor, for the benefit of the Lessor Parties, a security
interest in all estate, right, title and interest of Lessee in the
following Property, whether now owned or hereafter acquired,
(collectively, the "Personal Property Collateral"):
(i) All Subleases and Issues and Profits to the extent
such Subleases and Issues and Profits constitute personal
property;
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(ii) All Related Goods, Related Agreements and Related
Permits to the extent such Related Goods, Related Agreements and
Related Permits constitutes personal property;
(iii) All deposit accounts, instruments, investment
Facility 2 Property and monies held by any Lessor Party in
connection with this Agreement or any other Operative Document
(including any Repair and Restoration Account but excluding Cash
Collateral held by any Lessor Party pursuant to the Cash
Collateral Agreement);
(iv) All other Facility 2 Property to the extent such
Facility 2 Property constitutes personal property;
(v) All proceeds of the foregoing, including Casualty
and Condemnation Proceeds.
(Cash Collateral held by Lessor Parties pursuant to the Cash Collateral
Agreement secures only the Lessee Obligations under the Purchase Agreement.)
This Agreement constitutes a fixture filing for purposes of the California
Commercial Code with respect to the Related Goods which are or are to become
fixtures on the Facility 1 Land or Facility 2 Improvements.
(c) Absolute Assignment of Subleases, Issues and Profits. Lessee hereby
irrevocably assigns to Lessor, for the benefit of the Lessor Parties, all of
Lessee's estate, right, title and interest in, to and under the Subleases and
the Issues and Profits, whether now owned or hereafter acquired. This is a
present and absolute assignment, not an assignment for security purposes only,
and Lessor's right to the Subleases and Issues and Profits is not contingent
upon, and may be exercised without possession of, the Facility 2 Property.
(i) Until the occurrence of an Event of Default, Lessee shall
have a revocable license to collect and retain the Issues and Profits as
they become due. Upon the occurrence of an Event of Default, such
license shall automatically terminate, and Lessor may collect and apply
the Issues and Profits pursuant to Subparagraph 5.02(d) without further
notice to Lessee or any other party and without taking possession of the
Facility 2 Property. All Issues and Profits thereafter collected by
Lessee shall be held by Lessee as trustee in a constructive trust for
the benefit of Lessor. Lessee hereby irrevocably authorizes and directs
the sublessees under the Subleases, without any need on their part to
inquire as to whether an Event of Default has actually occurred or is
then existing, to rely upon and comply with any notice or demand by
Lessor for the payment to Lessor of any rental or other sums which may
become due under the Subleases or for the performance of any of the
sublessees' undertakings under the Subleases. Collection of any Issues
and Profits by Lessor shall not cure or waive any default or notice of
default hereunder or invalidate any acts done pursuant to such notice.
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(ii) The foregoing irrevocable assignment shall not cause any
Lessor Party to be (A) a mortgagee in possession; (B) responsible or
liable for (1) the control, care, management or repair of the Facility 2
Property or for performing any of Lessee's obligations or duties under
the Subleases, (2) any waste committed on the Facility 2 Property by the
sublessees under any of the Subleases or by any other Persons, (3) any
dangerous or defective condition of the Facility 2 Property, or (4) any
negligence in the management, upkeep, repair or control of the Facility
2 Property resulting in loss or injury or death to any sublessee,
licensee, employee, invitee or other Person; or (C) responsible for or
impose upon any Lessor Party any duty to produce rents or profits. No
Lessor Party, in the absence of gross negligence or willful disregard on
its part, shall be liable to Lessee as a consequence of (y) the exercise
or failure to exercise any of the rights, remedies or powers granted to
Lessor hereunder or (z) the failure or refusal of Lessor to perform or
discharge any obligation, duty or liability of Lessee arising under the
Subleases.
SECTION 3. OTHER LESSEE AND LESSOR RIGHTS AND OBLIGATIONS.
3.01. Maintenance, Repair, Etc.
(a) General. Lessee shall not permit any waste of the Facility 2
Property, except for ordinary wear and tear, and shall, at its sole cost
and expense, maintain the Facility 2 Property in good working order,
mechanical condition and repair and make all necessary repairs thereto,
of every kind and nature whatsoever, whether interior or exterior,
ordinary or extraordinary, structural or nonstructural or foreseen or
unforeseen, in each case as required by all applicable Governmental
Rules and Insurance Requirements and on a basis consistent with the
operation and maintenance of commercial properties comparable in type
and location to the Facility 2 Property and in compliance with prudent
industry practice.
(b) New Improvements. Lessee shall make or cause to be made all
of the New Improvements authorized and required by the Construction
Agency Agreement in accordance with the Construction Agency Agreement.
(c) Other Modifications. Lessee, at its sole cost and expense,
may from time to time make alterations, renovations, improvements and
additions to the Facility 2 Property and substitutions and replacements
therefor (collectively, "Modifications") in addition to the New
Improvements; provided that:
(i) No Modification impairs the value, utility or useful
life of the Facility 2 Property or any part thereof from that
which existed immediately prior to such Modification;
(ii) All Modifications are made expeditiously and, in
all cases, completed not later than six (6) months prior to the
Scheduled Expiration Date;
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provided, however, in the event that Lessee shall have exercised
either the Term Purchase Option or the Expiration Purchase
Option the foregoing six (6) month limitation shall not be
applicable;
(iii) All Modifications are made in a good and
workmanlike manner and in compliance with all applicable
Governmental Rules and Insurance Requirements;
(iv) Subject to Paragraph 3.12 relating to permitted
contests, Lessee pays all costs and expenses and discharges (or
cause to be insured or bonded over) any Liens arising in
connection with any Modification not later than the earlier of
(A) sixty (60) days after the same shall be filed (or otherwise
becomes effective) and (B) six (6) months prior to the Scheduled
Expiration Date; provided, however, in the event that Lessee
shall have exercised either the Term Purchase Option or the
Expiration Purchase Option the foregoing six (6) month limitation
shall not be applicable;
(v) At least one (1) month prior to the commencement of
(y) any Modifications which are anticipated to cost $1,000,000
or more in the aggregate, or (z) any Modifications which cause
the total of all Modifications undertaken during the previous
twelve month period to exceed an aggregate cost of $2,500,000,
Lessee shall deliver to Lessor, with sufficient copies for Agent
and each Participant, a brief written description of such
Modifications; and
(vi) All Modifications otherwise comply with this
Agreement and the other Operative Documents.
(d) Abandonment. Lessee shall not abandon the Facility 2
Property or any material portion thereof for any period in excess of
thirty (30) consecutive days during the term hereof, except as a part of
any New Improvements or Modifications as permitted herein.
(e) Maintenance. Lessee shall maintain the Facility 2 Property
and each material portion thereof in a manner consistent with other
similar properties in the San Jose area, except as a part of any New
Improvements or Modifications as permitted herein
3.02. Risk of Loss. Lessee assumes all risks of loss arising from any
Casualty or Condemnation which arises or occurs prior to the Expiration Date or
while Lessee is in possession of the Facility 2 Property and all liability for
all personal injuries and deaths and damages to Facility 2 Property suffered by
any Person on or in connection with the Facility 2 Property which arises or
occurs prior to the Expiration Date or while Lessee is in possession of the
Facility 2 Property, except in each case to the extent any such loss or
liability is primarily caused by the gross negligence or willful misconduct of a
Lessor Party. Lessee hereby waives the provisions of California Civil Code
Sections 1932(1), 1932(2) and 1933(4), and any and all other applicable existing
or future Governmental Rules permitting the termination of this
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Agreement as a result of any Casualty or Condemnation, and Lessor shall in no
event be answerable or accountable for any risk of loss of or decrease in the
enjoyment and beneficial use of the Facility 2 Property as a result of any such
event.
3.03. Insurance.
(a) Coverage. Lessee, at its sole cost and expense, shall carry
and maintain the following insurance coverage:
(i) At all times during the Term, commercial liability
insurance covering claims for injuries or death sustained by
persons or damage to Facility 2 Property while on the Facility 2
Property, and workers' compensation insurance;
(ii) At all times during the Term, property insurance
covering loss or damage by fire, flood, earthquake and other
risks in an amount not less than the then current replacement
cost of the Improvements on the Facility 2 Property, provided
that any property insurance for fire, flood and other risks shall
not be required to cover the cost of foundations and underground
improvements but any earthquake policy or coverage shall cover
foundations and underground improvements. Earthquake insurance
shall be required only if it is commercially reasonably
available, as reasonably determined by Lessor and Required
Participants. The amount of earthquake insurance coverage shall
be 37.5% of the value of the Improvements. Lessee shall obtain
and provide to Lessor and the Agent evidence of such earthquake
insurance within thirty (30) days after the Closing Date.
(iii) During the construction of any Improvements,
builders' risk insurance covering fire, flood, earthquake and
other normal insured risks; and
(iv) At all times during the Term as appropriate, such
other insurance of the types customarily carried by a reasonably
prudent Person owning or operating properties similar to the
Facility 2 Property in the same geographic area as the Facility
2 Property.
Except as otherwise specifically required above, such insurance shall be
in amounts, in a form and with deductibles approved by Lessor, which approval
shall not be unreasonably withheld.
(b) Carriers. Any insurance carried and maintained by Lessee pursuant to
this Paragraph 3.03 shall be underwritten by an insurance company which (i) has,
at the time such insurance is placed and at the time of each renewal thereof, a
general policyholder rating of "A" and a financial rating of at least 8 from
A.M. Best and Company or any successor thereto (or if there is none, an
organization having a similar national reputation) or (ii) is otherwise approved
by Lessor and Required Participants.
(c) Terms. Each insurance policy maintained by Lessee pursuant to this
Paragraph 3.03 shall provide as follows, whether through endorsements or
otherwise:
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(i) Lessor and the Agent shall be named as additional insured,
in the case of each policy of liability insurance, or additional loss
payee, in the case of each policy of Facility 2 Property insurance.
(ii) In respect of the interests of Lessor in the policy, the
insurance shall not be invalidated by any action or by inaction of
Lessee or by any Person having temporary possession of the Facility 2
Property while under contract with Lessee to perform maintenance,
repair, alteration or similar work on the Facility 2 Property, and shall
insure the interests of Lessor regardless of any breach or violation of
any warranty, declaration or condition contained in the insurance policy
by Lessee, Lessor or any other additional insured (other than by such
additional insured, as to such additional insured); provided, however,
that the foregoing shall not be deemed to (A) cause such insurance
policies to cover matters otherwise excluded from coverage by the terms
of such policies or (B) require any insurance to remain in force
notwithstanding non-payment of premiums except as provided in clause
(iii) below.
(iii) If the insurance policy is canceled for any reason
whatsoever, or substantial change is made in the coverage that affects
the interests of Lessor, or if the insurance coverage is allowed to
lapse for non-payment of premium, such cancellation, change or lapse
shall not be effective as to Lessor for thirty (30) days after receipt
by Lessor of written notice from the insurers of such cancellation,
change or lapse.
(iv) No Lessor Party shall have any obligation or liability for
premiums, commissions, assessments, or calls in connection with the
insurance.
(v) The insurer shall waive any rights of set-off or
counterclaim or any other deduction, whether by attachment or otherwise,
that it may have against any Lessor Party.
(vi) The insurance shall be primary without right of
contribution from any other insurance that may be carried by any Lessor
Party with respect to its interest in the Facility 2 Property.
(vii) The insurer shall waive any right of subrogation against
any Lessor Party.
(viii) All provisions of the insurance, except the limits of
liability, shall operate in the same manner as if there were a separate
policy covering each insured party.
(ix) The insurance shall not be invalidated should Lessee or any
Lessor Party waive, in writing, prior to a loss, any or all rights of
recovery against any Person for losses covered by such policy, nor shall
the insurance in favor of any
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Lessor Party or Lessee, as the case may be, or their respective rights
under and interests in said policies be invalidated or reduced by any
act or omission or negligence of any Lessee Party or Lessor, as the case
may be, or any other Person having any interest in the Facility 2
Property.
(x) All insurance proceeds in respect of any loss or occurrence
with a value of less than two million five hundred thousand dollars
($2,500,000) shall be paid to and adjusted solely by Lessee. All other
losses shall be adjusted jointly by Lessor and Lessee with all proceeds
for losses in excess of two million five hundred thousand dollars
($2,500,000) paid to Lessor, subject to the applicable provisions of the
Operative Documents, except from and after the date on which the insurer
receives written notice from Lessor that an Event of Default exists (and
unless and until such insurer receives written notice from Lessor that
all Events of Default have been cured), all losses shall be adjusted
solely by, and all insurance proceeds shall be paid solely to, Lessor.
(xi) Each policy shall contain a standard form mortgage
endorsement in favor of Lessor.
(d) Evidence of Insurance. Lessee, at its sole cost and expense, shall
furnish to Lessor from time to time upon the request of Lessor such certificates
or other documents as Lessor may reasonably request to evidence Lessee's
compliance with the insurance requirements set forth in this Paragraph 3.03.
(e) Release of Lessor Parties. Lessee hereby waives, releases and
discharges each Lessor Party and its directors, officers, employees, agents and
advisors from all claims whatsoever arising out of any loss, claim, expense or
damage to or destruction covered or coverable by insurance required under this
Paragraph 3.03 notwithstanding that such loss, claim, expense or damage may have
been caused by any such Person, and, as among Lessee and such Persons, Lessee
agrees to look to the insurance coverage only in the event of such loss.
3.04. Casualty and Condemnation.
(a) Notice. Lessee shall give Lessor prompt written notice of the
occurrence of any Casualty affecting, or the institution of any proceedings for
the Condemnation of, the Facility 2 Property or any portion thereof.
(b) Repair or Purchase Option. After the occurrence of any Casualty or
Condemnation affecting the Facility 2 Property or any portion thereof, Lessee
shall either (i) repair and restore the Facility 2 Property as required by
Subparagraph 3.04(c) or (ii) exercise the Term Purchase Option and purchase the
Facility 2 Property pursuant to the Purchase Agreement; provided, however, that
Lessee may not elect to repair and restore the Facility 2 Property if an Event
of Default has occurred and is continuing unless Lessor and the Required
Participants shall consent in writing. Not later than one (1) month after the
occurrence of any Casualty or Condemnation, Lessee shall deliver to
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Lessor a written notice indicating whether it elects to repair and restore or
purchase the Facility 2 Property
(c) Repair and Restoration. If Lessee elects to repair and restore the
Facility 2 Property following any Casualty or Condemnation, Lessee shall
diligently proceed to repair and restore the Facility 2 Property to the
condition in which it existed immediately prior to such Casualty or Condemnation
and shall complete all such repairs and restoration not later than the earlier
of (y) one (1) year after the occurrence of the Casualty or Condemnation, and
(z) six (6) months prior to the Scheduled Expiration Date. Lessee shall use its
own funds to make such repairs and restoration, except to the extent any
Casualty and Condemnation Proceeds are available and are released to Lessee for
such purpose pursuant to Subparagraph 3.04(f). Lessee's exercise of the repair
and restoration option shall, if Lessor or Required Participants direct, be
subject to the following conditions:
(i) Deposit in a deposit account acceptable to and controlled by
Lessor (a "Repair and Restoration Account") of funds (including any
Casualty and Condemnation Proceeds which are available and are released
to Lessee pursuant to Subparagraph 3.04(f)) in the amount which Lessor
determines is needed to complete and fully pay all costs of the repair
or restoration (including taxes, financing charges, insurance and rent
during the repair period);
(ii) The establishment of an arrangement for lien releases and
disbursement of funds acceptable to Lessor and in a manner and upon such
terms and conditions as would be required by a prudent interim
construction lender; and
(iii) The delivery to Lessor of the following within ninety (90)
days after the occurrence of such Casualty or Condemnation, each in form
and substance acceptable to Lessor:
(A) Evidence that the Facility 2 Property can, in
Lessor's reasonable judgment, with diligent restoration or
repair, be returned to a condition at least equal to the
condition thereof that existed prior to the Casualty or partial
Condemnation causing the loss or damage within the earlier to
occur of (A) one (1) year after the Casualty and Condemnation,
and (B) six (6) months prior to the Scheduled Expiration Date;
(B) Evidence that all necessary governmental approvals
can be timely obtained to allow the rebuilding and reoccupancy
of the Facility 2 Property;
(C) Copies of all plans and specifications for the work;
(D) Copies of all contracts for the work, signed by a
contractor reasonably acceptable to Lessor;
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(E) A cost breakdown for the work;
(F) A payment and performance bond for the work or other
security satisfactory to Lender;
(G) Evidence that, upon completion of the work, the
size, capacity and total value of the Facility 2 Property will
be at least as great as it was before the Casualty or
Condemnation occurred; and
(H) Evidence of satisfaction of any additional
conditions that Lessor or Required Participants may reasonably
establish to protect their rights under this Agreement and the
other Operative Documents.
All plans and specifications for the work must be reasonably
acceptable to Lessor, except that Lessor's approval shall not be
required if the restoration work is based on the same plans and
specifications as were originally used to construct the Facility
2 Property. To the extent that the funds in a Repair and
Restoration Account include both Casualty and Condemnation
Proceeds and other funds deposited by Lessee, the other funds
deposited by Lessee shall be used first. Lessee acknowledges
that the specific conditions described above are reasonable.
(d) Prosecution of Claims for Casualty and Condemnation Proceeds.
Lessee shall proceed promptly and diligently to prosecute in good faith
the settlement or compromise of any and all claims for Casualty and
Condemnation Proceeds; provided, however, that any settlement or
compromise of any such claim shall, except as otherwise provided in
Section 3.03(c)(x), be subject to the written consent of Lessor and
Required Participants, which consents shall not be unreasonably
withheld. Lessor may participate in any proceedings relating to such
claims, and, after the occurrence and during the continuance of any
Event of Default, Lessor is hereby authorized, in its own name or in
Lessee's name, to adjust any loss covered by insurance or any Casualty
or Condemnation claim or cause of action, and to settle or compromise
any claim or cause of action in connection therewith, and Lessee shall
from time to time deliver to Lessor any and all further assignments and
other instruments required to permit such participation.
(e) Assignment of Casualty and Condemnation Proceeds. Lessee
hereby absolutely and irrevocably assigns to Lessor all Casualty and
Condemnation Proceeds and all claims relating thereto and agrees that
all Casualty and Condemnation Proceeds are to be paid to Lessor, except
as otherwise provided in Section 3.03(c)(x). Except as otherwise
provided in Section 3.03(c)(x), Lessee hereby authorizes and directs any
insurer, Governmental Authority or other Person responsible for paying
any Casualty and Condemnation Proceeds to make payment thereof directly
to Lessor alone, and not to Lessor and Lessee jointly. If Lessee
receives any Casualty and Condemnation Proceeds, Lessee shall promptly
pay over such Casualty and Condemnation Proceeds to Lessor. Lessee
hereby covenants that until such Casualty and Condemnation Proceeds are
so paid over to Lessor, Lessee shall hold such Casualty and Condemnation
Proceeds in trust for the benefit of Lessor and shall not commingle such
Casualty and Condemnation Proceeds
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with any other funds or assets of Lessee or any other Person. Lessor may
commence, appear in, defend or prosecute any assigned right, claim or
action, and may adjust, compromise, settle and collect all rights,
claims and actions assigned to Lessor, but shall not be responsible for
any failure to collect any such right, claim or action, regardless of
the cause of the failure.
(f) Use of Casualty and Condemnation Proceeds.
(i) If (A) no Event of Default has occurred and is
continuing, (B) Lessee exercises the repair and restoration
option pursuant to Subparagraphs 3.04(b) and 3.04(c) and (C)
Lessee complies with any conditions imposed pursuant to
Subparagraph 3.04(c); then Lessor shall release any Casualty and
Condemnation Proceeds to Lessee for repair or restoration of the
Facility 2 Property, but may condition such release and use of
the Casualty and Condemnation Proceeds upon deposit of the
Casualty and Condemnation Proceeds in a Repair and Restoration
Account. Lessor shall have the option, upon the completion of
such restoration of the Facility 2 Property, to apply any surplus
Casualty and Condemnation Proceeds remaining after the completion
of such restoration to the payment of Rent and/or the reduction
of the Outstanding Lease Amount, notwithstanding that such
amounts are not then due and payable or that such amounts are
otherwise adequately secured.
(ii) If (A) an Event of Default has occurred and is
continuing, (B) Lessee fails to or is unable to comply with any
conditions imposed pursuant to Subparagraph 3.04(c) or (C) Lessee
elects to exercise the Term Purchase Option and purchase the
Facility 2 Property pursuant to the Purchase Agreement; then, at
the absolute discretion of Lessor and the Required Participants,
regardless of any impairment of security or lack of impairment of
security, but subject to applicable Governmental Rules governing
use of Casualty and Condemnation Proceeds, if any, Lessor may (1)
apply all or any of the Casualty and Condemnation Proceeds it
receives to the expenses of Lessor Parties in obtaining such
proceeds; (2) apply the balance to the payment of Rent and/or the
reduction of the Outstanding Lease Amount, notwithstanding that
such amounts are not then due and payable or that such amounts
are otherwise adequately secured and/or (3) release all or any
part of such proceeds to Lessee upon any conditions Lessor and
the Required Participants may elect.
(iii) Lessor shall apply any Casualty and Condemnation
Proceeds which are to be used to reduce the Outstanding Lease
Amount only on the last day of a Rental Period unless a Default
has occurred and is continuing.
(iv) Application of all or any portion of the Casualty
and Condemnation Proceeds, or the release thereof to Lessee,
shall not cure or waive any Default or notice of default or
invalidate any acts done pursuant to such notice.
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3.05. Taxes. Subject to Paragraph 3.12 relating to permitted contests,
Lessee shall promptly pay when due all Indemnified Taxes imposed on or payable
by Lessee or any Lessor Party in connection with the Facility 2 Property, this
Agreement or any of the other Operative Documents, or any of the transactions
contemplated hereby or thereby. Whenever any such taxes or other Governmental
Charges are payable by Lessee pursuant to the immediately preceding sentence, as
promptly as possible thereafter, Lessee shall send to Lessor for the account of
the applicable Lessor Party a certified copy of an original official receipt
received by Lessee showing payment thereof. If Lessee fails to pay any such
Indemnified Taxes when due to the appropriate taxing authority or fails to remit
to Lessor the required receipts or other required documentary evidence, Lessee
shall indemnify the Lessor Parties for any incremental taxes, interest or
penalties that may become payable by the Lessor Parties as a result of any such
failure. The obligations of Lessee under this Paragraph 3.05 shall survive the
payment and performance of the Lessee Obligations and the termination of this
Agreement.
3.06. Environmental Matters.
(a) Lessee's Covenants. Lessee shall not cause or permit the
Facility 2 Property to be used as a site for the use, generation,
manufacture, storage, treatment, release, discharge, disposal,
transportation or presence of any Hazardous Materials; provided that
Lessee has disclosed to Lessor that Lessee shall use on the Facility 2
Property from time to time the Hazardous Materials described in Schedule
1 attached hereto. Notwithstanding the disclosure provided in Schedule
1, Lessee shall comply and cause the Facility 2 Property to comply with
all Environmental Laws. Lessee shall immediately notify Lessor in
writing of (i) the discovery of any Hazardous Materials on, under or
about the Facility 2 Property (except for those described in Schedule 1,
which are used, stored, maintained and disposed of in accordance with
all Environmental Laws); (ii) any knowledge by Lessee that the Facility
2 Property does not comply with any Environmental Laws; (iii) any claims
against Lessee or the Facility 2 Property relating to Hazardous
Materials or pursuant to Environmental Laws; and (iv) the discovery of
any occurrence or condition on any real property adjoining or in the
vicinity of the Facility 2 Property that could cause the Facility 2
Property or any part thereof to be designated as "border zone Facility 2
Property" under the provisions of California Health and Safety Code
Sections 25220 et seq. or any regulation adopted in accordance
therewith. In response to the presence of any Hazardous Materials on,
under or about the Facility 2 Property, Lessee shall immediately take,
at Lessee's sole expense, all remedial action required by any
Environmental Laws or any judgment, consent decree, settlement or
compromise in respect to any claim based thereon.
(b) Inspection By Lessor. Upon reasonable prior notice to
Lessee, Lessor, its employees and agents, may from time to time (whether
before or after the commencement of a nonjudicial or judicial
foreclosure proceeding), enter and inspect the Facility 2 Property for
the purpose of determining the existence, location, nature and magnitude
of any past or present release or threatened release of any Hazardous
Materials into, onto, beneath or from the Facility 2 Property.
(c) Indemnity. Without in any way limiting any other indemnity
contained in this Agreement or any other Operative Document, Lessee
agrees to defend, indemnify
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and hold harmless the Lessor Parties and the other Indemnitees from and
against any claim, loss, damage, cost, expense or liability directly or
indirectly arising out of (i) the use, generation, manufacture, storage,
treatment, release, threatened release, discharge, disposal,
transportation or presence of any Hazardous Materials which are found
in, on, under or about the Facility 2 Property or (ii) the breach of any
covenant, representation or warranty of Lessee relating to Hazardous
Materials or Environmental Laws contained in this Agreement or any
Operative Document. This indemnity shall include (A) the costs, whether
foreseeable or unforeseeable, of any investigation, repair, cleanup or
detoxification of the Facility 2 Property which is required by any
Governmental Authority or is otherwise necessary to render the Facility
2 Property in compliance with all Environmental Laws; (B) all other
direct or indirect consequential damages (including any third party
claims, claims by any Governmental Authority, or any fines or penalties
against the Indemnitees; and (C) all court costs and attorneys' fees
(including expert witness fees and the cost of any consultants) paid or
incurred by the Indemnitees. Lessee shall pay immediately upon Lessor's
demand any amounts owing under this indemnity. Lessee shall use legal
counsel reasonably acceptable to Lessor in any action or proceeding
arising under this indemnity. The obligations of Lessee under this
Subparagraph 3.06(c) shall survive the payment and performance of the
Lessee Obligations and the termination of this Agreement.
(d) Legal Effect of Section. Lessee and Lessor agree that (i)
this Paragraph 3.06 and clause (i) of Subparagraph 4.01(t) of the
Participation Agreement is intended as Lessor's written request for
information (and Lessee's response) concerning the environmental
condition of the real Facility 2 Property security as required by
California Code of Civil Procedure Section 726.5 and (ii) each
representation and warranty and covenant herein and therein (together
with any indemnity applicable to a breach of any such representation and
warranty) with respect to the environmental condition of the Facility 2
Property is intended by Lessor and Lessee to be an "environmental
provision" for purposes of California Code of Civil Procedure Section
736.
3.07. Liens, Easements, Etc.
(a) Lessee's Covenants. Subject to Paragraph 3.12 relating to
permitted contests, Lessee shall not create, incur, assume or permit to
exist any Lien or easement on or with respect to any of the Facility 2
Property of any character, whether now owned or hereafter acquired,
except for the following ("Permitted Property Liens"):
(i) Liens in favor of a Lessor Party securing the Lessee
Obligations;
(ii) Liens and easements in existence on the
Commencement Date to the extent reflected in the title insurance
policy delivered to Agent pursuant to Paragraph 3.02 of and
Schedule 3.02 to the Participation Agreement and approved by
Lessor;
(iii) Liens and easements approved by Lessor and
reflected in the title insurance policy or policies or binders
to be delivered in connection with any Facility 2 Property added
hereto after the date hereof;
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(iv) Liens for taxes or other Governmental Charges not
at the time delinquent or thereafter payable without penalty;
(v) Liens of carriers, warehousemen, mechanics,
materialmen and vendors and other similar Liens imposed by law
incurred in the ordinary course of business for sums not
overdue; and
(vi) Lessor Liens or any other Liens approved by Lessor.
Subject to Paragraph 3.12 relating to permitted contests, Lessee shall
promptly (A) pay all Indebtedness and other obligations prior to the
time the non-payment thereof would give rise to a Lien on the Facility 2
Property and (B) discharge, at its sole cost and expense, any Lien on
the Facility 2 Property which is not a Permitted Property Lien.
(b) No Consents. Nothing contained in this Agreement shall be
construed as constituting the consent or request of any Lessor Party,
express or implied, to or for the performance by any contractor,
mechanic, laborer, materialman, supplier or vendor of any labor or
services or for the furnishing of any materials for any construction,
alteration, addition, repair or demolition of or to the Facility 2
Property or any part thereof. NOTICE IS HEREBY GIVEN THAT NO LESSOR
PARTY IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS
FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING THE
FACILITY 2 PROPERTY OR ANY PART THEREOF THROUGH OR UNDER LESSEE, AND
THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR
MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF ANY LESSOR PARTY IN
AND TO THE FACILITY 2 PROPERTY.
3.08. Subletting. Lessee may, in the ordinary course of business,
sublease the Facility 2 Property or any portion thereof to any Person, provided,
that (a) Lessee remains directly and primarily liable for performing its
obligations under this Agreement and all other Lessee Obligations; (b) each
sublease is subject to and subordinated to this Agreement; (c) each sublease
expressly provides for the surrender of the Facility 2 Property (or portion
thereof) by the sublessee on the Expiration Date; (d) each sublease has a term
which expires on or prior to the Scheduled Expiration Date (or, if longer,
includes a provision that the sublease terminates on the Expiration Date if such
Expiration Date occurs prior to the Scheduled Expiration Date unless Lessee
purchases the Facility 2 Property on the Expiration Date pursuant to the
Purchase Agreement); (e) each sublease prohibits the sublessee from engaging in
any activities on the Facility 2 Property other than those permitted by
Paragraph 2.04; and (f) no sublease has a Material Adverse Effect. Any sublease
which does not satisfy each of the requirements of the immediately preceding
sentence shall be null and void as to the Lessor Parties and their successor and
assigns. Except for such permitted subleases, Lessee shall not assign any of its
rights or interests under this Agreement to any other Person.
3.09. Utility Charges. Lessee shall pay all charges for electricity,
power, gas, oil, water, telephone, sanitary sewer service and all other
utilities and services to, on or in connection with the Facility 2 Property
during the Term.
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3.10. Removal of Facility 2 Property. Lessee shall not remove any
Improvements from the Facility 1 Land or any other Facility 2 Property from the
Facility 1 Land or Improvements, except that, during the Term, Lessee may remove
any Modification or any trade fixture, machinery, equipment, inventory or other
personal Facility 2 Property if such Modification or Facility 2 Property (a) was
not financed by an Advance, (b) is not required by any applicable Governmental
Rule or Insurance Requirement and (c) is readily removable without impairing the
value, utility or remaining useful life of the Facility 2 Property.
3.11. Compliance with Governmental Rules and Insurance Requirements.
Lessee, at its sole cost and expense, shall, unless its failure is not
reasonably likely to have a Material Adverse Effect, (a) comply, and cause its
agents, sublessees, assignees, employees, invitees, licensees, contractors and
tenants, and the Facility 2 Property to comply, with all Governmental Rules and
Insurance Requirements relating to the Facility 2 Property (including the
construction, use, operation, maintenance, repair and restoration thereof,
whether or not compliance therewith shall require structural or extraordinary
changes in the Improvements or interfere with the use and enjoyment of the
Facility 2 Property), and (b) procure, maintain and comply with all licenses,
permits, orders, approvals, consents and other authorizations required for the
construction, use, maintenance and operation of the Facility 2 Property and for
the use, operation, maintenance, repair and restoration of the Improvements
3.12. Permitted Contests. Lessee, at its sole cost and expense, may
contest any alleged Lien or easement on any of the Facility 2 Property or any
alleged Governmental Charge, Indebtedness or other obligation which is payable
by Lessee hereunder to Persons other than the Lessor Parties or which, if
unpaid, would give rise to a Lien on any of the Facility 2 Property, provided
that (a) each such contest is diligently pursued in good faith by appropriate
proceedings; (b) the commencement and continuation of such proceedings suspends
the enforcement of such Lien or easement or the collection of such Governmental
Charge, Indebtedness or obligation; (c) Lessee has established adequate reserves
for the discharge of such Lien or easement or the payment of such Governmental
Charge, Indebtedness or obligation in accordance with GAAP and, if the failure
to discharge such Lien or easement or the failure to pay such Governmental
Charge, Indebtedness or obligation might result in any civil liability for any
Lessor Party, Lessee has provided to such Lessor Party a bond or other security
satisfactory to such Lessor Party; (d) the failure to discharge such Lien or
easement or the failure to pay such Governmental Charge, Indebtedness or
obligation could not result in any criminal liability for any Lessor Party; (e)
the failure to discharge such Lien or easement or the failure to pay such
Governmental Charge, Indebtedness or obligation is not otherwise reasonably
likely to have a Material Adverse Effect; and (f) any such contest is completed
and such Lien or easement is discharged (either pursuant to such proceedings or
otherwise) or such Governmental Charge, Indebtedness or obligation is declared
invalid, paid or otherwise satisfied not later than six (6) months prior to the
Scheduled Expiration Date; provided, however, in the event that Lessee shall
have exercised either the Term Purchase Option or the Expiration Purchase Option
the foregoing six (6) month limitation shall not be applicable.
3.13. Lessor Obligations; Right to Perform Lessee Obligations. No Lessor
Party shall have any obligation to (a) maintain, repair or make any improvements
to the Facility 2 Property, (b) maintain any insurance on the Facility 2
Property, (c) perform any other obligation of Lessee under this Agreement or any
other Lessee Obligation, (d) make any expenditure on account of
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the Facility 2 Property (except to make Advances as required by the
Participation Agreement) or (e) take any other action in connection with the
Facility 2 Property, this Agreement or any other Operative Document, except as
expressly provided herein or in another Operative Document; provided however,
that Lessor may, in its sole discretion and without any obligation to do so,
after written notice to Lessee, perform any Lessee Obligation not performed by
Lessee when required. Lessor may enter the Facility 2 Property or exercise any
other right of Lessee under this Agreement or any other Operative Document to
the extent Lessor determines in good faith that such entry or exercise is
reasonably necessary for Lessor to perform any such Lessee Obligation not
performed by Lessee when required. Lessee shall reimburse Lessor and the other
Lessor Parties, within five (5) business days after demand, for all fees, costs
and expenses incurred by them in performing any such obligation or curing any
Default.
3.14. Inspection Rights. During the Term, Lessee shall permit any Person
designated by Lessor, upon reasonable notice and during normal business hours,
to visit and inspect any of the Facility 2 Property.
SECTION 4. EXPIRATION DATE.
4.01. Termination by Lessee Prior to Scheduled Expiration Date. Subject
to the terms and conditions of the Purchase Agreement, Lessee may, at any time
prior to the Scheduled Expiration Date, terminate this Agreement and purchase
the Facility 2 Property pursuant to Section II of the Purchase Agreement. Lessee
shall notify Lessor of Lessee's election so to terminate this Agreement and
purchase the Facility 2 Property by delivering to Agent a Notice of Term
Purchase Option Exercise pursuant to and in accordance with the provisions of
Paragraph 2.02 of the Purchase Agreement.
4.02. Surrender of Facility 2 Property. Unless Lessee purchases the
Facility 2 Property on the Expiration Date pursuant to the Purchase Agreement,
Lessee shall vacate and surrender the Facility 2 Property to Lessor on the
Expiration Date in its then-current condition, subject to compliance by Lessee
on or prior to such date of its obligations under this Agreement and the other
Operative Documents (including the completion of the New Improvements and all
Modifications, the completion of all permitted contests and the removal of all
Liens which are not Permitted Facility 2 Property Liens).
4.03. Holding Over. If Lessee does not purchase the Facility 2 Property
on the Expiration Date pursuant to the Purchase Agreement but continues in
possession of any portion of the Facility 2 Property after the Expiration Date,
Lessee shall pay rent for each day it so continues in possession, payable upon
demand of Lessor, at a per annum rate equal to the Alternate Rental Rate plus
two percent (2%) and shall pay and perform all of its other Lessee Obligations
under this Agreement and the other Operative Documents in the same manner as
though the Term had not ended; provided, however, that this Paragraph 4.03 shall
not be interpreted to permit such holding over or to limit any right or remedy
of Lessor for such holding over.
SECTION 5. DEFAULT.
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5.01. Events of Default. The occurrence or existence of any one or more
of the following shall constitute an "Event of Default" hereunder:
(a) Non-Payment. Lessee shall (i) fail to pay on the Expiration
Date any amount payable by Lessee under this Agreement or any other
Operative Document on such date, (ii) fail to pay within five (5)
business days after any Scheduled Rent Payment Date any Base Rent
payable on such Scheduled Rent Payment Date (other than the Base Rent
payable on the Expiration Date) or (iii) fail to pay within five (5)
business days after the same becomes due, any Supplemental Rent or other
amount required under the terms of this Agreement or any other Operative
Document (other than any such amount payable on the Expiration Date or
Base Rent); or
(b) Specific Defaults. Lessee or any of its Subsidiaries shall
fail to observe or perform any covenant, obligation, condition or
agreement set forth in Subparagraph 3.01(d), Paragraph 3.03 or
Subparagraph 3.07(a) hereof or in Paragraph 5.02 or Paragraph 5.03 of
the Participation Agreement ; or
(c) Other Defaults. Lessee or any of its Subsidiaries shall fail
to observe or perform any other covenant, obligation, condition or
agreement contained in this Agreement or any other Operative Document
(except for those covenants described in Paragraph 5.01(d) below) and
such failure shall continue for a period of thirty (30) days after
written notice thereof from Lessor, provided, however, that in the event
that such failure cannot reasonably be cured within such thirty (30) day
period, such failure shall not constitute an Event of Default hereunder
so long as Lessee shall have commenced to cure such failure within such
thirty (30) day period and shall thereafter diligently pursue such cure
to completion, provided further that such failure shall in all events be
cured by the earlier of (i) the Expiration Date, if Lessee is exercising
the Marketing Option, (provided that if the Purchase Option is
consummated in accordance with the terms of the Purchase Agreement all
outstanding Defaults shall be deemed waived), or (ii) one hundred and
eighty days (180) days after Lessor's notice thereof; or
(d) Representations and Warranties. Any representation, warranty,
certificate, information or other statement (financial or otherwise)
made or furnished by or on behalf of Lessee or any of its Subsidiaries
to any Lessor Party in or in connection with this Agreement or any other
Operative Document, or as an inducement to any Lessor Party to enter
into this Agreement or any other Operative Document, shall be false,
incorrect, incomplete or misleading in any material respect when made or
furnished and Lessee shall not have cured the facts or circumstances
causing such representation, warranty, certificate or other statement to
be false, incorrect, incomplete or misleading within thirty (30) days of
notice thereof from Lessor; or
(e) Cross-Default. (i) Lessee or any of its Subsidiaries shall
fail to make any payment when due on account of any Indebtedness of such
Person (other than the Lessee Obligations) and such failure shall
continue beyond any period of grace provided with respect thereto, if
the amount of such Indebtedness exceeds $2,500,000 or the effect of such
failure is to cause, or permit the holder or holders thereof to cause,
Indebtedness of Lessee and its Subsidiaries (other than the Lessee
Obligations) in an aggregate amount
21
<PAGE> 25
exceeding $2,500,000 to become due or (ii) Lessee or any of its
Subsidiaries shall otherwise fail to observe or perform any agreement,
term or condition contained in any agreement or instrument relating to
any Indebtedness of such Person (other than the Lessee Obligations), or
any other event shall occur or condition shall exist, if the effect of
such failure, event or condition is to cause, or permit the holder or
holders thereof to cause, Indebtedness of Lessee and its Subsidiaries
(other than the Lessee Obligations) in an aggregate amount exceeding
$2,500,000 to become due (and/or to be secured by cash collateral); or
(f) Insolvency, Voluntary Proceedings. Lessee or any of its
Material Subsidiaries shall (i) apply for or consent to the appointment
of a receiver, trustee, liquidator or custodian of itself or of all or a
substantial part of its Facility 2 Property, (ii) be unable, or admit in
writing its inability, to pay its debts generally as they mature, (iii)
make a general assignment for the benefit of its or any of its
creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its Facility 2 Property by any
official in an involuntary case or other proceeding commenced against
it, or (vi) take any action for the purpose of effecting any of the
foregoing; or
(g) Involuntary Proceedings. Proceedings for the appointment of a
receiver, trustee, liquidator or custodian of Lessee or any of its
Material Subsidiaries or of all or a substantial part of the Facility 2
Property thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to Lessee or
any of its Material Subsidiaries or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect
shall be commenced and an order for relief entered or such proceeding
shall not be dismissed or discharged within thirty (30) days of
commencement; or
(h) Judgments. (i) One or more judgments, orders, decrees or
arbitration awards requiring Lessee and/or its Subsidiaries to pay an
aggregate amount of $2,500,000 or more (exclusive of amounts covered by
insurance issued by an insurer not an Affiliate of Lessee and otherwise
satisfying the requirements set forth in Subparagraph 3.03(b)) shall be
rendered against Lessee and/or any of its Subsidiaries in connection
with any single or related series of transactions, incidents or
circumstances and the same shall not be satisfied, vacated or stayed for
a period of thirty (30) consecutive days after the issue or levy; (ii)
any judgment, writ, assessment, warrant of attachment, tax lien or
execution or similar process shall be issued or levied against a
substantial part of the Facility 2 Property of Lessee or any of its
Subsidiaries and the same shall not be released, stayed, vacated or
otherwise dismissed within thirty (30) days after issue or levy; or
(iii) any other judgments, orders, decrees, arbitration awards, writs,
assessments, warrants of attachment, tax liens or executions or similar
processes which, alone or in the aggregate, are reasonably likely to
have a Material Adverse Effect are rendered, issued or levied; or
22
<PAGE> 26
(i) Operative Documents. Any Operative Document or any material
term thereof shall cease to be, or be asserted by Lessee or any of its
Subsidiaries not to be, a legal, valid and binding obligation of Lessee
or any of its Subsidiaries enforceable in accordance with its terms; or
(j) ERISA. Any Reportable Event which constitutes grounds for
the termination of any Employee Benefit Plan by the PBGC or for the
appointment of a trustee by the PBGC to administer any Employee Benefit
Plan shall occur, or any Employee Benefit Plan shall be terminated
within the meaning of Title IV of ERISA or a trustee shall be appointed
by the PBGC to administer any Employee Benefit Plan; or
(k) Change of Control. Any Change of Control shall occur; or
(l) Material Adverse Effect. Any event(s) or condition(s) which
is(are) reasonably likely to have a Material Adverse Effect shall occur
and be continuing or exist.
5.02. General Remedies. In all cases, upon the occurrence or existence
of any Event of Default and at any time thereafter unless such Event of Default
is waived, Lessor may, with the consent of the Required Participants, or shall,
upon instructions from the Required Participants, exercise any one or more of
the following rights and remedies (except that the remedy set forth in the first
sentence of Subparagraph 5.02(a) shall be automatic):
(a) Termination of Commitments. If such Event of Default is an
Event of Default of the type described in Subparagraph 5.01(f) or
Subparagraph 5.01(g) affecting Lessee, immediately and without notice
the obligation of Lessor to make Advances and the obligations of the
Participants to fund Advances shall automatically terminate. If such
Event of Default is any other Event of Default, Lessor may by written
notice to Lessee, terminate the obligation of Lessor to make Advances
and the obligations of the Participants to fund Advances.
(b) Appointment of a Receiver. Lessor may apply to any court of
competent jurisdiction for, and obtain appointment of, a receiver for
the Facility 2 Property.
(c) Specific Performance. Lessor may bring an action in any
court of competent jurisdiction to obtain specific enforcement of any of
the covenants or agreements of Lessee in this Agreement or any of the
other Operative Documents.
(d) Collection of Issues and Profits. Lessor may collect Issues
and Profits as provided in Subparagraph 2.07(c) and apply the proceeds
to pay Lessee Obligations.
(e) Protection of Facility 2 Property. Lessor may enter, take
possession of, manage and operate all or any part of the Facility 2
Property or take any other actions which it reasonably determines are
necessary to protect the Facility 2 Property and the rights and remedies
of the Lessor Parties under this Agreement and the other Operative
Documents, including (i) taking and possessing all of Lessee's books and
records relating to the Facility 2 Property; (ii) entering into,
enforcing, modifying, or canceling subleases
23
<PAGE> 27
on such terms and conditions as Lessor may consider proper; (iii)
obtaining and evicting tenants; (iv) fixing or modifying sublease rents;
(v) collecting and receiving any payment of money owing to Lessee; (vi)
completing any unfinished Improvements; and/or (vii) contracting for and
making repairs and alterations.
(f) Other Rights and Remedies. In addition to the specific
rights and remedies set forth above in this Paragraph 5.02 and in
Paragraph 5.03 and Paragraph 5.04, Lessor may exercise any other right,
power or remedy permitted to it by any applicable Governmental Rule,
either by suit in equity or by action at law, or both.
5.03. Lease Remedies. If the transaction evidenced by this Agreement and
the other Operative Documents is treated as a lease, upon the occurrence or
existence of any Event of Default and at any time thereafter unless such Event
of Default is waived, Lessor may, with the consent of the Required Participants,
or shall, upon instructions from the Required Participants, exercise any one or
more of the following rights and remedies in addition to those rights and
remedies set forth in Paragraph 5.02, provided that prior to exercising any
remedies provided by this Section 5.03, Lessor shall give Lessee not less than
three (3) business days notice during which time Lessee may exercise the
Purchase Option and provided the Purchase Option is consummated in accordance
with the terms of the Purchase Agreement, Lessor shall not exercise any of the
remedies under this Section 5.03:
(a) Termination of Lease. Lessor may, by written notice to
Lessee, terminate this Agreement on a Termination Date which is prior to
the Scheduled Expiration Date, subject to Subparagraph 3.02(1) of the
Purchase Agreement. Such Termination Date shall be the last day of a
Rental Period unless Required Participants shall otherwise direct. On
such Termination Date (which shall then be the Expiration Date), Lessee
shall pay all unpaid Base Rent accrued through such date, all
Supplemental Rent due and payable on or prior to such date and all other
amounts payable by Lessee on the Expiration Date pursuant to this
Agreement and the other Operative Documents. Lessee also shall pay to
Lessor, in addition to all accrued Base Rent, the worth at the time of
such payment of the amount by which the unpaid Base Rent through the
Scheduled Expiration Date exceeds the amount of such rental loss for the
same period that Lessee proves could reasonably be avoided.
(b) Continuation of Lease. Lessor may exercise the rights and
remedies provided by California Civil Code Section 1951.4, including the
right to continue this Agreement in effect after Lessee's breach and
abandonment and recover Rent as it becomes due. Acts of maintenance or
preservation, efforts to relet the Facility 2 Property, the appointment
of a receiver upon Lessor's initiative to protect its interest under
this Agreement or withholding consent to or terminating a sublease shall
not of themselves constitute a termination of Lessee's right to
possession.
(c) Removal and Storage of Facility 2 Property. Lessor may enter
the Facility 2 Property and remove therefrom all Persons and Facility 2
Property, store such Facility 2 Property in a public warehouse or
elsewhere at the cost of and for the account of Lessee and sell such
Facility 2 Property and apply the proceeds therefrom pursuant to
applicable California law.
24
<PAGE> 28
5.04. Loan Remedies. If the transaction evidenced by this Agreement and
the other Operative Documents is treated as a loan, upon the occurrence or
existence of any Event of Default and at any time thereafter unless such Event
of Default is waived, Lessor may, with the consent of the Required Participants,
or shall, upon instructions from the Required Participants, exercise any one or
more of the following rights and remedies in addition to those rights and
remedies set forth in Paragraph 5.02:
(a) Acceleration of Lessee Obligations. Lessor may, by written
notice to Lessee, terminate this Agreement on a Termination Date which
is prior to the Scheduled Expiration Date, subject to Subparagraph
3.02(1) of the Purchase Agreement, and declare all unpaid Lessee
Obligations due and payable on such Termination Date. Such Termination
Date shall be the last day of a Rental Period unless Required
Participants shall otherwise direct. On such Termination Date (which
shall then be the Expiration Date), Lessee shall pay all unpaid Base
Rent accrued through such date, all Supplemental Rent due and payable on
or prior to such date and all other amounts payable by Lessee on the
Expiration Date pursuant to this Agreement and the other Operative
Documents.
(b) Uniform Commercial Code Remedies. Lessor may exercise any or
all of the remedies granted to a secured party under the California
Uniform Commercial Code.
(c) Judicial Foreclosure. Lessor may bring an action in any
court of competent jurisdiction to foreclose the security interest in
the Facility 2 Property granted to Lessor by this Agreement or any of
the other Operative Documents.
(d) Power of Sale. Lessor may cause some or all of the Facility
2 Property, including any Personal Property Collateral, to be sold or
otherwise disposed of in any combination and in any manner permitted by
applicable Governmental Rules.
(i) Sales of Personal Property. Lessor may dispose of any
Personal Property Collateral separately from the sale of Real
Property Collateral, in any manner permitted by Division 9 of the
California Uniform Commercial Code, including any public or
private sale, or in any manner permitted by any other applicable
Governmental Rule. Any proceeds of any such disposition shall not
cure any Event of Default or reinstate any Lessee Obligation for
purposes of Section 2924c of the California Civil Code. In
connection with any such sale or other disposition, Lessee agrees
that the following procedures constitute a commercially
reasonable sale:
(A) Lessor shall mail written notice of the sale
to Lessee not later than thirty (30) days prior to such
sale.
(B) Once per week during the three weeks
immediately preceding such sale, Lessor will publish
notice of the sale in a local daily newspaper of general
circulation.
25
<PAGE> 29
(C) Upon receipt of any written request, Lessor
will make the Facility 2 Property available to any bona
fide prospective purchaser for inspection during
reasonable business hours.
(D) Notwithstanding, Lessor shall be under no
obligation to consummate a sale if, in its judgment,
none of the offers received by it equals the fair value
of the Facility 2 Property offered for sale.
(E) If Lessor so requests, Lessee shall assemble
all of the Personal Property Collateral and make it
available to Lessor at the site of the Facility 1 Land.
Regardless of any provision of this Agreement or any
other Operative Document, Lessor shall not be considered
to have accepted any Facility 2 Property other than cash
or immediately available funds in satisfaction of any
Lessee Obligation, unless Lessor has given express
written notice of its election of that remedy in
accordance with California Uniform Commercial Code
Section 9505.
The foregoing procedures do not constitute the only procedures
that may be commercially reasonable.
(ii) Lessor's Sales of Real Property or Mixed Collateral.
Lessor may choose to dispose of some or all of the Facility 2
Property which consists solely of Real Property Collateral in any
manner then permitted by applicable Governmental Rules, including
without limitation a nonjudicial trustee's sale pursuant to
California Civil Code ss.ss. 2924 et seq. In its discretion,
Lessor may also or alternatively choose to dispose of some or all
of the Facility 2 Property, in any combination consisting of both
Real Property Collateral and Personal Property Collateral,
together in one sale to be held in accordance with the law and
procedures applicable to real Facility 2 Property, as permitted
by Section 9501(4) of the California Uniform Commercial Code.
Lessee agrees that such a sale of Personal Property Collateral
together with Real Property Collateral constitutes a commercially
reasonable sale of the Personal Property Collateral. (For
purposes of this power of sale, either a sale of Real Property
Collateral alone, or a sale of both Real Property Collateral and
Personal Property Collateral together in accordance with
California Uniform Commercial Code Section 9501(4), will
sometimes be referred to as a "Lessor's Sale.")
(A) Before any Lessor's Sale, Lessor shall give
such notice of default and election to sell as may then
be required by applicable Governmental Rules.
(B) When all time periods then legally mandated
have expired, and after such notice of sale as may then
be legally required has been given, Lessor shall sell
the Facility 2 Property being sold at a public auction
to be held at the time and place specified in the notice
of sale.
26
<PAGE> 30
(C) Neither Lessor nor Agent shall have any
obligation to make demand on Lessee before any Lessor's
Sale.
(D) From time to time in accordance with then
applicable law, Lessor may postpone any Lessor's Sale by
public announcement at the time and place noticed for
that sale.
(E) At any Lessor's Sale, Lessor shall sell to
the highest bidder at public auction for cash in lawful
money of the United States.
(F) Lessor shall execute and deliver to the
purchaser(s) a deed or deeds conveying the Facility 2
Property being sold without any covenant or warranty
whatsoever, express or implied. The recitals in any such
deed of any matters or facts, including any facts
bearing upon the regularity or validity of any Lessor's
Sale, shall be conclusive proof of their truthfulness.
Any such deed shall be conclusive against all Persons as
to the facts recited in it.
(e) Foreclosure Sales.
(i) Single or Multiple. If the Facility 2 Property
consists of more than one lot, parcel or item of Facility 2
Property, Lessor may:
(A) Designate the order in which the lots,
parcels and/or items shall be sold or disposed of or
offered for sale or disposition; and
(B) Elect to dispose of the lots, parcels and/or
items through a single consolidated sale or disposition
to be held or made under the power of sale granted in
Subparagraph 5.04(d), or in connection with judicial
proceedings, or by virtue of a judgment and decree of
foreclosure and sale; or through two or more such sales
or dispositions; or in any other manner Lessor may deem
to be in its best interests (any such sale or
disposition, a "Foreclosure Sale;" any two or more, "
Foreclosure Sales").
If Lessor chooses to have more than one Foreclosure Sale, Lessor
at its option may cause the Foreclosure Sales to be held
simultaneously or successively, on the same day, or on such
different days and at such different times and in such order as
it may deem to be in its best interests. No Foreclosure Sale
shall terminate or affect the security interests granted to
Lessor in the Facility 2 Property by this Agreement on any part
of the Facility 2 Property which has not been sold, until all of
the Lessee Obligations have been paid in full.
(ii) Credit Bids. At any Foreclosure Sale, any
Person or any Lessor Party, may bid for and acquire the
Facility 2 Property or any part of it to the extent
permitted by then applicable Governmental Rules. Instead
of paying cash for that Facility 2 Property, Lessor may
settle for the purchase price by crediting
27
<PAGE> 31
the sales price of the Facility 2 Property against the
Lessee Obligations in any order and proportions as
Lessor in its sole discretion may choose.
5.05. Remedies Cumulative. The rights and remedies of Lessor under this
Agreement and the other Operative Documents are cumulative and may be exercised
singularly, successively, or together.
5.06. No Cure or Waiver. Neither the performance by Lessor of any of
Lessee's obligations pursuant to Paragraph 3.13 nor the exercise by Lessor of
any of its other rights and remedies under this Agreement or any other Operative
Document (including the collection of Issues and Profits and the application
thereof to the Lessee Obligations) shall constitute a cure or waiver of any
Default or nullify the effect of any notice of default or sale, unless and until
all Lessee Obligations are paid in full.
5.07. Exercise of Rights and Remedies. The rights and remedies provided
to Lessor under this Agreement may be exercised by Lessor itself, by Agent
pursuant to Subparagraph 2.02(c) of the Participation Agreement, by a
court-appointed receiver or by any other Person appointed by any of the
foregoing to act on its behalf. All of the benefits afforded to Lessor under
this Agreement and the other Operative Documents shall accrue to the benefit of
Agent to the extent provided in Subparagraph 2.02(c) of the Participation
Agreement.
SECTION 6. MISCELLANEOUS.
6.01. Notices. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lessee or Lessor under this Agreement shall be given as provided in Subparagraph
2.02(c) and Paragraph 7.01 of the Participation Agreement.
6.02. Waivers; Amendments. Any term, covenant, agreement or condition of
this Agreement may be amended or waived only as provided in the Participation
Agreement. No failure or delay by any Lessor Party in exercising any right
hereunder shall operate as a waiver thereof or of any other right nor shall any
single or partial exercise of any such right preclude any other further exercise
thereof or of any other right. Unless otherwise specified in any such waiver or
consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
6.03. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Lessor Parties and Lessee and their permitted
successors and assigns; provided, however, that the Lessor Parties and Lessee
shall not sell, assign or delegate their respective rights and obligations
hereunder except as provided in the Participation Agreement.
6.04. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the Lessor Parties and Lessee and their permitted successors and
assigns, any benefit or legal or equitable right, remedy or claim under or by
virtue of this Agreement or under or by virtue of any provision herein.
28
<PAGE> 32
6.05. Partial Invalidity. If at any time any provision of this Agreement
is or becomes illegal, invalid or unenforceable in any respect under the law or
any jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
6.06. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without reference to
conflicts of law rules.
6.07. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
6.08. Nature of Lessee's Obligations.
(a) Independent Obligation. The obligation of Lessee to pay the
amounts payable by Lessee under this Agreement and the other Operative
Documents and to perform the other Lessee Obligation are absolute,
unconditional and irrevocable obligations which are separate and
independent of the obligations of the Lessor Parties under this
Agreement and the other Operative Documents and all other events and
circumstances, including the events and circumstances set forth in
Subparagraph 6.08(c).
(b) No Termination or Abatement. This Agreement and the other
Operative Documents and Lessee's obligation to pay Rent and to pay and
perform all other Lessee Obligations shall continue in full force and
effect without abatement notwithstanding the occurrence or existence of
any event or circumstance, including any event or circumstance set forth
in Subparagraph 6.08(c).
(c) Full Payment and Performance. Lessee shall make all payments
under this Agreement and the other Operative Documents in the full
amounts and at the times required by the terms of this Agreement and the
other Operative Documents without setoff, deduction or reduction of any
kind and shall perform all other Lessee Obligations as and when
required, without regard to any event or circumstances whatsoever,
including (i) the condition of the Facility 2 Property (including any
Improvements to the Facility 2 Property made prior to the Commencement
Date or during the Term); (ii) title to the Facility 2 Property
(including possession of the Facility 2 Property by any Person or the
existence of any Lien or any other right, title or interest in or to any
of the Facility 2 Property in favor of any Person); (iii) the value,
habitability, usability, design, operation or fitness for use of the
Facility 2 Property; (iv) the availability or adequacy of utilities and
other services to the Facility 2 Property; (v) any latent, hidden or
patent defect in the Facility 2 Property; (vi) the zoning or status of
the Facility 2 Property or any other restrictions on the use of the
Facility 2 Property; (g) the economics of the Facility 2 Property; (vii)
any Casualty or Condemnation; (viii) the compliance of the Facility 2
Property with any applicable Governmental Rule or Insurance Requirement;
(ix) any failure by any Lessor Party to perform any of its obligations
under this Agreement or any other Operative Document; or (x) the
exercise by any Lessor Party of any of its remedies under this Agreement
or any other Operative Document; provided, however, that this
29
<PAGE> 33
Paragraph 7.08 shall not abrogate any right which Lessee may have to
recover damages from any Lessor Party for any material breach by such
Lessor Party of its obligations under this Agreement or any other
Operative Document to the extent permitted hereunder or thereunder.
[The signature page follows.]
30
<PAGE> 34
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be
executed as of the day and year first above written.
LESSEE: NOVELLUS SYSTEMS, INC.
By: ___________________________________
Name: __________________________
Title: _________________________
LESSOR: LEASE PLAN U.S.A., INC.
By: ___________________________________
Name:___________________________
Title:__________________________
31
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-27-1997
<CASH> 38,604
<SECURITIES> 28,976
<RECEIVABLES> 145,317
<ALLOWANCES> 3,613
<INVENTORY> 88,143
<CURRENT-ASSETS> 342,763
<PP&E> 126,055
<DEPRECIATION> 41,448
<TOTAL-ASSETS> 482,458
<CURRENT-LIABILITIES> 138,090
<BONDS> 65,000
0
0
<COMMON> 152,800
<OTHER-SE> 126,568
<TOTAL-LIABILITY-AND-EQUITY> 482,458
<SALES> 371,174
<TOTAL-REVENUES> 371,174
<CGS> 170,130
<TOTAL-COSTS> 170,130
<OTHER-EXPENSES> 359,023
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,923
<INCOME-PRETAX> (155,056)
<INCOME-TAX> (37,008)
<INCOME-CONTINUING> (118,048)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (118,048)
<EPS-PRIMARY> (3.57)
<EPS-DILUTED> (3.57)
</TABLE>
